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The Goldbugg Report – March 30, 2010

March 30, 2010

Post CFTC Hearing interview with GATA’s Whistle Blower: http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/30_Andrew_Maguire_%26_Adrian_Douglass.html

-Why Silver Will Keep Shining.

-Adrian Ash: The Case for Silver.

GOLD

-Five reasons Jeff Nichols thinks gold is a steal. Despite reports to the contrary, Jeff Nichols maintains a bullish view of gold and believes it will again hit its record high of $1,227 by mid-year and, $1,500 by year-end

This is the view of Jeffrey Nichols, Senior Economic Advisor to Rosland Capital and Managing Director of American Precious Metals Advisors. In a recent report, Nichols states that while this view remains intact he does expect “continued volatility with big swings in both directions around an upward trend this year and beyond”

Part of the reason for this belief he says is that “we think the best of the economic news is now behind us, certainly with regard to U.S. inflation rates, consumer spending, and industrial production, is now behind us and that indicators in March, April, and May will begin painting a gloomier picture of the economy. But, the five main reasons for likelihood that gold will continue its upward trend are:

Inflationary U.S. monetary and fiscal policies-According to Nichols, “the single-most important factor promising higher U.S. dollar-denominated gold prices are inflationary U.S. monetary and fiscal policies”. These he says will be characterized by an unprecedented provision of liquidity into the financial system, an extended period of super-low interest rates, huge Federal budget deficits and accumulated debt in both absolute terms and as a percentage of GDP, and “a dysfunctional government that remains incapable of dealing effectively with these immense issues”.

An inherently unstable European currency-Nichols says divergent fiscal policies across the continent threaten the future of the euro and the European Union as it now exists. “Gold’s recent rally to record highs in euro and sterling is a sign of the metal’s broadening appeal to European investors in the face of European sovereign debt fears. Some investors selling the euro have chosen gold in addition to or in place of the greenback as an alternative,” he says.

Expanding investor interest in gold-Nichols says that more people and institutions globally are looking ever more closely at gold as an investment option. And, the variety of new investment channels, such as ETFs make this process significantly easier than in previous eras.

Rising central bank and sovereign accumulation-As a fourth reason, Nichols points to the shift in attitude of central banks towards gold, which is now become a significant net buyer of gold after “two decades in which central banks as a group sold on average some 400 tons a year”.

Declining world gold-mine production-”Even in the face of sharply rising prices,” Nichols says, “global gold-mine will continue falling for at least another few years as existing mines are depleted, ore grades drop, operating depths fall, and the costs of developing new mines rise. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=101189&sn;=Detail&pid;=1

-Hold gold because the next crisis is brewing. Investors should continue to hold gold because it will take a crisis of considerable magnitude before the UK government is forced on to the path of fiscal sustainability, warns SocGen analyst Dylan Grice. He says the outlook will continue to look favourable for the precious metal while concerns about the long-term solvency of developed market governments remain.

Previous periods of uncontrolled inflation, from ancient Rome, through revolutionary France, the US and Weimar Germany, have all been caused by overleveraged governments resorting to printing money as a get-out clause to avoid an explicit default.

‘It’s all very well for economists to point out that the cure for runaway inflation is simply a contraction of the money supply,’ Grice says. ‘It’s just that when you look at inflationary episodes you find that such monetary contractions haven’t been politically viable courses of action.’

As an example, Grice points to the Reichsbank president Rudolf von Havenstein in 1930s Germany. Although knowing the risks of printing more money, he was more fearful of the social consequences that rising would result from unemployment and falling output.

‘The agonising dilemma he faced, identical in principle if not in magnitude to that faced by policy-makers today, is as old as money itself,’ Grice adds. Today, the UK government would have cut spending by close to 11% a year to bring its debt ratios down to 2007 levels and by almost 6% over 10 years.

‘Governments aren’t ready to take that step at the moment. Indeed, the pressing fear among policy-makers today remains that stimulus might be removed too soon,’ he says. ‘But they will face up to these problems one day, because they must.’ Read more here-http://www.citywire.co.uk/personal/-/news/money-property-and-tax/content.aspx?ID=389674

-Gold’s current consolidation phase to continue as the market looks for new direction. Investors like China and Japan continue to switch out of dollars and into gold. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=101262&sn;=Detail&pid;=33

-Clive Maund gold market update. Read more here-http://news.goldseek.com/CliveMaund/1269200178.php

-Dennis Gartman: Don’t Fight the Trend on Gold. Read and watch more here-http://www.thestreet.com/_yahoo/story/10706318/1/dennis-gartman-dont-fight-the-trend-on-gold.html?cm_ven=YAHOO&cm;_cat=FREE&cm;_ite=NA

-Are we still on the road to $5,000 gold? Dr. Marc Faber recently suggested that $1,000 gold might be seen as similar for investors to the Dow crossing 1,000 in 1982. Bring on the 1.3 billion potential Chinese gold bugs. China’s gold reserves amount to 1,054 tons, ranking fifth in the world. China is the largest gold producer in the world, with more than 300 tons of gold produced annually, all of it consumed locally.

China consumes over 400 tons of gold a year, second only to India. And there are more than 3,000 tons of gold in private hands in China. Indeed it was only at the start of last year that China suddenly announced to the IMF that it had doubled its official gold reserves to 1,054 tons from 2003. Nobody knew anything about it before then.

China has clearly been increasing its official gold reserves steadily for a decade and has benefited from the quadrupling of gold prices over that period. But never mind the central bank, surely the surging private gold and silver holdings are the thing to watch.

When 1.3 billion Chinese become gold bugs then $5,000 an ounce gold will be seen as far too conservative and $200 silver will also be history. In the meantime how will you be saving to beat inflation and low interest rates? Read more here-http://news.goldseek.com/PeterCooper/1268978700.php

-King World News interview with John Hathaway portfolio manager of the Tocqueville Gold Fund. John believes that gold’s run is no more than half over and he expects a major upward revaluation of gold as investors realize that currencies and government bonds offer only devaluation. Listen here-http://www.gata.org/node/8445

-Is It Better To Buy Gold Bullion Or Gold Shares? Read more here-http://news.goldseek.com/GoldForecaster/1269219600.php

-Asian buyers to support gold price as balance of power shifts. While it is likely to be rather becalmed in the short term, gold is in for significant changes in the longer term as the West begins to live more within its means and the East starts spending a little. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=101473&sn;=Detail&pid;=1

-Explain why you sold Britain’s gold, Gordon Brown told. Gordon Brown has been ordered to release information before the general election about his controversial decision to sell Britain’s gold reserves. Read more here-http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7511589/Explain-why-you-sold-Britains-gold-Gordon-Brown-told.html

-Gold ‘Panic’ Buying Ends, Reducing Austrian Coin Sales by 80%. Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid;=alkB2RgF2eCI

-Metals trade limits would hurt U.S., financial execs say. Read more here-http://www.gata.org/node/8464 and http://www.gata.org/node/8463

-Zero Hedge throws itself into the fight against gold price suppression. Read more here-http://www.gata.org/node/8460

SILVER

Gold to silver ratio at 80 to 1 with gold at $1,500 the silver price would be $18.75

Gold to silver ratio at 70 to 1 with gold at $1,500 the silver price would be $21.43

Gold to silver ratio at 60 to 1 with gold at $1,500 the silver price would be $25.00

Gold to silver ratio at 50 to 1 with gold at $1,500 the silver price would be $30.00

Gold to silver ratio at 40 to 1 with gold at $1,500 the silver price would be $37.50

Gold to silver ratio at 30 to 1 with gold at $1,500 the silver price would be $50.00

Gold to silver ratio at 20 to 1 with gold at $1,500 the silver price would be $75.00

Gold to silver ratio at 15 to 1 with gold at $1,500 the silver price would be $100.00

-Why Silver Will Keep Shining. Silver a star performer over the past several weeks, still has plenty of room to shine. Analysts say demand for silver should remain strong as a result of both investment interest and increased use in electronics and other products as the economy recovers.

“Silver benefits from a split personality,” says Bart Melek, commodity strategist with BMO Capital Markets. “One is gold-like, and another is it is very much an industrial metal.” As with gold, investors often snap up silver as a safe haven at times of dollar weakness, financial-market uncertainty, inflation or geopolitical tensions.

“Silver is poor man’s gold, and people have been buying silver coins,” says Frank Holmes, CEO and chief investment officer with U.S. Global Investors, which manages a number of mutual funds, including the Gold and Precious Metals Fund. With gold more than $1,100 an ounce, a single coin of gold can buy dozens of silver coins. Melek says some 54% of silver’s demand is industrial.

This part of the market was hurt by the economic slowdown in 2008 and 2009. “Once the global economy starts recovering, and we are seeing good evidence of that, we are going to get a big rebound in industrial demand for silver,” Melek says. Melek looks for silver industrial demand, excluding photography, to rise 19% this year after a 17% drop last year.

CPM Group’s comparable estimate is for a 5.8% rise this year. Silver is used to conduct electricity in products such as laptop computers and cellphones, since it takes up less room and needs less cooling than other metals. It also has health-care uses because of antibacterial qualities.

Silver jewelry demand may pick up as discretionary income improves with the economy, especially if consumers view it as more affordable than gold, Melek says. Parikh looks for silver to average $17.24 this year, up 17.4% from 2009. It could peak in the $19 to $20 area, he says. Melek calls for silver to average $20 in 2010 and 2011, with it likely to outperform gold. Read more here-

http://online.barrons.com/article/SB126843798928661257.html

-Waiting for silver’s big break. Patience and bravery are key to reaping the metal’s rewards. When it comes to silver, patience is golden or so some analysts hope. Not too long ago, analysts were cheering the metal’s prospects in the face of a recovering global economy and strong prices for gold, but the metal has so far failed to perform as well as many expected.

Silver “has the most potential of the metals and will outperform gold but it will take time,” said Julian Phillips, an editor at SilverForecaster.com. Analysts remain upbeat about the longer-term potential, but warn that the short-term journey will continue to be rough.

“Silver, like all investments, will reward those who are patient and who have a long-term view,” said Mark O’Byrne, a director at GoldCore, an international bullion dealer. That patience has already been sorely tested.

Late last year, analysts were touting the metal’s promise as a much cheaper investment alternative to gold that was poised to see higher industrial demand. Some even predicted a price climb above $20 an ounce by the end of 2009, but instead, prices dipped below $15 in February. See previous Commodities Corner on poor man’s gold.

“The overall demand for silver is down compared to gold,” said David Beahm, a vice president at precious metals retailer Blanchard & Co. “Since silver’s price is driven much more strongly by global industrial demand rather than investor demand, it has underperformed as compared to gold.”

The bigger picture shows that silver’s up over 133% in the last five years smaller than gold’s more than 155% climb, according to data from GoldCore. Silver has “underperformed significantly over the long term,” said O’Byrne. But “this under performance will be rectified in the coming months and silver will also reach the record highs that gold has reached.”

In the meantime, silver’s short-term performance hasn’t been too shabby. O’Byrne pointed out that in the past year, silver prices have climbed more than 31%, much larger than gold’s more than 19% rise, and while gold prices fell almost 1% in the past month, the price of silver rose 1.7%.

“The fundamentals for silver are better than gold but the ‘dips’ for silver prices could be frighteningly fast and large still,” Julian Phillips and Peter Spina, editors at SilverForecaster.com, said in a recent report. On the other hand, “silver will outrun gold on the rise,” and potentially offer a considerably larger profit.

“This metal is for the brave, for sure,” they said, noting that now’s the time for “‘buying the dips’ and cautiously watching for the right opportunity.” Mark O’Byrne says silver is “one of the most undervalued commodities and assets in the world and merits a small allocation by nearly all investors,” he said.

And given that the metal is “notoriously difficult to speculate in and make money trading in it should be personally owned or stored with a secure counter party. Read more here-http://www.marketwatch.com/story/story/print?guid=904816AE-6A1E-4E5A-8A06-0392BAF9C4CF

-Adrian Ash: The Case for Silver. Read more here-http://news.silverseek.com/SilverSeek/1269469187.php

-Morgan not aggressively adding to shorts, Butler tells King World News. Listen here-http://www.gata.org/node/8444

-Clive Maund silver market update. Read more here-http://news.silverseek.com/CliveMaund/1269199764.php

-BMO forecasts gold, silver, and PGMs to do ‘very well’ next few years. BMO Global Commodity Strategist Bark Melek says global growth is reigniting industrial metals, as silver and PGMs are expected to outperform firm and stable gold. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=101098&sn;=Detail&pid;=34

-Jeff Nielson: Precious metals and rigged markets. Read more here-http://www.gata.org/node/8447

-Having your gold, and drinking it too! A Mexican distillery is counting on the beauty and digestibility of gold and silver to drive sales for a special edition of tequila. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=101260&sn;=Detail&pid;=34

CHARTS OF THE WEEK-QUOTES-QUICK HITS

-Chart of the day: See Where The V-Shaped Recovery Has Already Died. In February 2010, total U.S. industrial production rose +1.7% year over year according to the Federal Reserve. While there was continued expansion, production growth fell from Q4 2009’s +6.6% rate and Q3 2009’s +6.4% growth. Still, overall industrial production kept growing in February.

But diving into a breakdown of different products by market shows that some U.S. industries have already experienced sharp reversals of fortune. As shown below, U.S. industrial production contracted sharply in February (orange bars) for Home Electronics, Appliances & Furniture, Paper Products, and Industrial Business Equipment.

This came after strong growth in Q4 (blue bars). Thus for some the recovery already feels like it’s over. Read more here-http://www.businessinsider.com/chart-of-the-day-industrial-production–selected-industries-2010-3

Source: chartoftheday.com

-As Chart 1 illustrates, a record-low 6.2% of Americans buy into the recovery story and it looks as if this picture is already in the process of double-dipping. Rarely, if ever, has the perception gap between Wall Street and Main Street been so wide as it is today. David Rosenberg-Gluskin/Sheff

-Since hitting decade lows in early March of last year, the S&P; 500, Dow Jones Industrial Average, and NASDAQ have rebounded by an astonishing 73.6%, 66.3%, and 90.4%, respectively. And even though stocks are only back to the levels they were a little more than ten years ago, there’s evidence which suggests most of the stocks out there are fully (if not over) valued and returns from these stocks won’t justify the risks going forward in the short to medium-term.

The chart below could help make the case that U.S. markets have been overvalued since about 1995, when the market capitalization of the New York Stock Exchange and the NASDAQ hit 90% of GDP, which is about 30 percentage points above the historical average of 62%. Read more here-http://www.ritholtz.com/blog/2010/03/market-cap-of-nyse-nasdaq-as-a-gdp/

-“Sending lawyers to oversee capital markets professionals is like sending chickens to chase foxes.” Harry Markopolos-Bio here-http://en.wikipedia.org/wiki/Harry_Markopolos

-If you’re holding paper currency, you have to have some kind of trust that the country that issued it is not just going to print its way out of its problems. That’s a real concern right now. Gold, on the other hand, has real intrinsic value, unlike a paper currency which can be debased by its government. Sacha Tihanyi, currency strategist, Scotia Capital

-I believe we will see gold hitting a minimum of $6,500 an ounce as the U.S. dollar collapses. I also believe that the silver/gold ratio will go back to its 15-to-1 (15 ounces of silver to buy 1 ounce of gold) benchmark. As this happens silver will be roughly $400 an ounce. ($6,500 /15 = $433.00). Greg McCoach-Read more here-http://news.goldseek.com/GoldSeek/1269460713.php

-”The important thing to understand is we’re going through a phase in which people are gradually losing faith in conventional assets. Gold is not something to get rich quick on. The real story is that if you already have wealth and want to preserve it, then you should have a percentage in it. It’s an asset for the prudent and the paranoid.” Donald Coxe-Read more here-http://articles.moneycentral.msn.com/Investing/MutualFunds/what-happened-to-2000-gold.aspx

-Gold is quietly, at the edge, becoming the world’s second reservable currency, supplanting the euro and rivaling the dollar. [This] trend shall continue months, if not years, into the future. – Dennis Gartman, The Gartman Letter, 18 March 2010

-Gold will trade at $1650 and above. About that I have no doubt. If you recall back at $529.40 my advice was to cease trading gold. It was at that point the price had entered into a runaway. That advice remains intact. Jim Sinclair

-There is no way the debt disaster is going away. There is no way that the US dollar is a store house of value. The US and Great Britain have the most serious debt problems and it is still growing. Gold will trade at $1650 and above.

According to Martin Armstrong the action of the gold price is a perfect setup cycle wise for a major April October rally. Seasonality does not now exist in gold, but it does exist in gold trader’s minds. Jim Sinclair

-If we hadn’t left the gold standard on 8/15/71 we wouldn’t be in the fix we are in today. We do not have that standard, but after all else has collapsed we will then again regain that standard. We no longer have free markets and continued injections of liquidity will not work, only purging the system will work and its time is fast drawing to such a conclusion. Bob Chapman-Read more here-

http://news.goldseek.com/InternationalForecaster/1269442800.php and http://news.goldseek.com/InternationalForecaster/1269187200.php

-Really big suckers can last for months and even years and gain 50 to 100+ per cent from the lows. It is usually during really big suckers that the pundits declare the bear is dead and that we have entered a new great bull market that will go on for many years. David Chapman-Read more here-http://news.goldseek.com/UnionSecurities/1269545500.php

-First, we see from the latest Investors Intelligence poll that bullish sentiment is now running at 46.2% versus 21.3% for the bears. You don’t have to be a very big contrarian to be nervous about that ratio. David Rosenberg-Gluskin/Sheff

-The credit crunch continues unabated with the FDIC eating seven more failed banks last Friday, bringing the year-to-date tally to 37. Last year, 140 banks failed, so at the current pace, we are talking about at least 160.

And, some of the recent closures were biggies like Utah-based Advanta at $1.6 billion in total assets and $1.5 billion in total deposits; and Georgia-based Appalachian with $1 billion in total assets. David Rosenberg-Gluskin/Sheff

-Thank the lord for the investor class for it is the one helping underpin activity in the residential real estate market as the natural first-time homebuyer who needs a mortgage is all but dormant. According to the National Association of Realtors, more than one in four housing transactions is now all-cash deals.

From November to January, a separate survey found that the share of buyers who consider themselves “investors” jumped to 17% from 12%. What are they doing with these units? Renting them out. There is a literal glut of apartment units on the market and rents are a critical part of the deflation/disinflation pattern evident in the CPI. David Rosenberg-Gluskin/Sheff

-Americans know a thing or two about bubbles so when we see articles like this show up in the Saturday NYT, it likely pays to pay heed (Up North, Real Estate Is Booming, Seriously). Then, go have a read of the paper by Alexandre Pestov for the Schulich School of Business (The Elusive Canadian Housing Bubble February 2010) and draw your own conclusions.

The combination of extremely lax CMHC guidelines over the past three years coupled with ultra-low interest rates have triggered a housing mania in Canada that rivals what we saw state-side from 2003 to 2007.

Now the Bank of Canada is on the precipice of raising rates, and if the consensus and money markets are correct, then the wave of borrowers that opted for short-term mortgages are going to be paying the proverbial piper in coming quarters. David Rosenberg-Gluskin/Sheff

-As for U.S. home prices, we have a total of over 20 months’ supply of total housing inventory overhanging the residential real estate market when all the shadow inventory is accounted for; therefore, it is hard to believe that we have hit bottom in the home price deflation cycle.

And, the demand for homes, as we can see in the continued negative year-over-year readings in mortgage applications for new purchases and the receding new traffic index in the NAHB survey, is dormant at best. Meanwhile, a wave of new supply is coming from strategic defaults, which now account for 35% of all defaults according to research published by the University of Chicago. David Rosenberg-Gluskin/Sheff

-Federal Reserve Chairman Ben S. Bernanke said the U.S. economy still needs low interest rates and that the central bank will be ready to tighten credit “at the appropriate time.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=atA4aK8D24_c&pos;=1

-The Fed’s New Vice Chairman Janet Yellen Implies No Fed Rate Hike Until 2013. Read more here-http://www.zerohedge.com/article/feds-new-vice-chairman-janet-yellen-implies-no-fed-rate-hike-until-2013 and http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=askizRCWdj2Q

-The Taylor Rule: A Tool for Predicting Fed Policy. Read more here-http://news.goldseek.com/GoldSeek/1269024389.php

-Greenspan Says Fed, Regulators ‘Failed’ During Financial Crisis. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aUMG21drp2fM&pos;=1

-Bill Gross, manager of the world’s biggest mutual fund at Pacific Investment Management Co., said bonds may have seen their best days and he’s making an argument for investors to own fewer. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aBgdtQr3KDNc

-David Tice Says Stock Market Decline Potential Is ‘Huge’. Watch video here-http://www.bloomberg.com/avp/avp.htm?N=adviser&T;=David%20Tice%20Says%20Stock%20Market%20Decline%20Potential%20Is%20%60Huge%27&clipSRC;=mms://media2.bloomberg.com/cache/v1Ntn_oRJubc.asf

-Rick Rule: Systemic Shock Will Kill Sucker Stock Rally. Read more here-http://www.theaureport.com/pub/na/5818

-Americans Say They Missed 73% Rise in S&P; 500 as Economy Surged. By an almost 2-to-1 margin Americans believe the economy has worsened rather than improved during the past year, according to a Bloomberg National Poll conducted March 19-22. Among those who own stocks, bonds or mutual funds, only three of 10 people say the value of their portfolio has risen since a year ago. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aTp.Sf7cvYvU

-Martin Armstrong’s monthly financial commentary. Read more here-http://www.scribd.com/doc/28513873/Armstrong-From-the-Hole-3910-1-from-the-Hole

-James Turk: Don’t count on the U.S. consumer to bailout the economy by spending. Read more here-http://www.fgmr.com/do-not-count-on-the-consumer.html

-China’s yuan is destined to become a global reserve currency rivalling the dollar and the euro, as the nation’s economic power increases the currency’s allure, said Jim O’Neill, chief economist at Goldman Sachs Group Inc. Read more here-http://www.businessweek.com/news/2010-03-18/yuan-poised-to-become-reserve-currency-goldman-s-o-neill-says.html

-China warns US against sanctions over currency. Read more here-http://finance.yahoo.com/news/China-warns-US-against-apf-2448997968.html?x=0&sec;=topStories&pos;=7&asset;=&ccode;

-Obama Pays More Than Buffett as U.S. Risks AAA Rating. The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama. Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aYUeBnitz7nU

-Portugal’s Debt Rating Lowered by Fitch on Finances. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=azuaDHkQHKp8&pos;=3

-Quarter of adults out of work, official figures show. More than one in four adults in Britain are not working, after a record number left the workforce in recent months, official figures indicated. Read more here-http://www.telegraph.co.uk/finance/jobs/7465199/Quarter-of-adults-out-of-work-official-figures-show.html

-Oil reserves ‘exaggerated by one third’. The world’s oil reserves have been exaggerated by up to a third, according to Sir David King, the Government’s former chief scientist, who has warned of shortages and price spikes within years. Read more here-http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7500669/Oil-reserves-exaggerated-by-one-third.html

-NY Fed illegally warehoused junk for Lehman, examiner finds. As Lehman Brothers careened toward bankruptcy in 2008, the New York Federal Reserve Bank came to its rescue, sopping up junk loans that the investment bank couldn’t sell in the market, according to a report from court-appointed examiner Anton R. Valukas.

The New York Fed, under the direction of now-Treasury Secretary Tim Geithner, knowingly allowed itself to be used as a “warehouse” for junk loans, the report says, even though Fed guidelines say it can accept only investment grade bonds.

Meanwhile, the Fed and Geithner both strongly oppose a congressional measure to authorize an independent audit of the central bank and its lending facilities. The provision passed the House but is under attack in the Senate, where Banking Committee Chairman Chris Dodd, D-Conn., says he hopes to stop it.

Without an audit, the Fed is able to conceal the specifics of what it holds on its balance sheet. If the Lehman deal is any indication, the Fed is hiding billions of dollars in toxic loans on its books. Read more here-http://www.gata.org/node/8449

-In May 2008, former Lehman Senior Vice President Matthew Lee wrote a letter to senior management warning that the New York securities firm may have been masking the true risks on its balance sheet. A month later, he had been ousted.

His warning was revealed for the first time in a report by a U.S. bankruptcy-court examiner and showed that Lehman’s auditors knew of potential accounting irregularities and allegedly failed to raise the issue with Lehman’s board. Here is the letter that placed the little-known Lehman executive at the center of allegations that Lehman manipulated its numbers and misled investors. Read more here-http://blogs.wsj.com/deals/2010/03/19/breaking-news-here-is-the-letter-at-the-center-of-the-lehman-report/

-Blank stares, disdain and tears. Harry Markopolos encountered all three during his nine-year struggle to convince the Securities and Exchange Commission that Bernard Madoff’s returns were mathematically impossible.

SEC officers didn’t grasp the numbers until the Ponzi scheme had swelled to $65 billion, as Markopolos shows in “No One Would Listen,” a disturbing firsthand account of his quest to expose one of the most powerful men on Wall Street.

Markopolos, a self-described “proud Greek geek,” is a former chief investment officer at Rampart Investment Management in Boston. His investigation began in 1999, when a colleague learned of Madoff’s investment returns and urged Markopolos to replicate his strategy, he writes. Markopolos soon concluded that the numbers didn’t add up, he writes. Read more here-http://www.bloomberg.com/apps/news?pid=20601088&sid;=a9Aa_FFITv00

-Wall Street Despised in Poll Showing Majority Want Regulation. Most people interviewed in the Bloomberg National Poll say they don’t like Wall Street, banks or insurance companies and favor letting the government punish bankers who helped cause the worst financial crisis since the Great Depression. Read more here-http://www.bloomberg.com/apps/news?pid=20601010&sid;=a4nQoiYaj2ag

-Saudi Arabia said on Wednesday it had arrested 113 al Qaeda militants including suicide bombers who had been planning attacks on energy facilities in the world’s top oil exporter. Read more here-http://www.alertnet.org/thenews/newsdesk/LDE62N1S1.htm

-Al-Qaeda leader Osama Bin Laden warned that more Americans would be killed if the self- proclaimed mastermind behind the Sept. 11 attacks is executed, according to an audio tape aired by al-Jazeera. “The day America will take such a decision it will have taken a decision to execute whomever we capture,” Bin Laden said on the audio tape.

Khalid Sheikh Mohammed and four accused conspirators are to go on trial in the U.S. and the government intends to seek the death penalty. In the recording, the al-Qaeda leader also warned President Barack Obama of further attacks on U.S. soil if the Palestinian “situation” isn’t resolved. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a0Mbk.qF3_UQ&pos;=8

WWW.RARECOLOREDDIAMONDS.COM

-The Rare Colored Diamonds Historical Value Tracker system is the perfect tool for investors to view the potential future value of a rare colored diamond based on the current market trend of a particular type of diamond. Track the potential future value of colored diamonds here-http://www.rarecoloreddiamonds.com/HistoricalPriceTrackingsystem.html

-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.rarecoloreddiamonds.com/watchnow.html and

http://www.b-tv.com/features/watch-now.html?id=326

-Sotheby’s Spring Sale Offers Superb Color Stones. Sotheby’s will hold an April sale of Magnificent Jewels and a single owner auction, “Always in Style: 150 Years of Artistic Jewels,” in New York on April 20, 2010.

A highlight of the colored diamonds on offer is provided by a rare fancy intense, pinkish-orange diamond ring set with a 7.67-carat, type IIa, cut-cornered rectangular modified, brilliant-cut stone that is the largest flawless or internally flawless diamond of this hue to be graded by the GIA to date. Its presales estimate ranges from $2.5 million to $3.5 million.

Another superb example is a magnificent, fancy vivid yellow diamond necklace (pictured), which features 42 GIA-certified, fancy vivid yellow diamonds weighing a total of 100.17 carats and set in a graduated riviere style. This necklace boasts a presale estimate of $2 million to $3 million and Sotheby’s has contended that it will be the first of its kind set entirely with fancy vivid yellow diamonds to appear in auction. Read more here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=30318

-The De Beers Millennium Blue Diamond, a magnificent 5.16-carat pear-shaped internally flawless fancy vivid blue diamond, will be a highlight at the upcoming Magnificent Jewels & Jadeite sale April 7 in Hong Kong. The high estimate of the rare blue diamond is $5.8 million, making it among the most expensive diamonds Sotheby’s has ever sold in Hong Kong. Read more here-http://www.idexonline.com/portal_FullNews.asp?id=33852

-Christie’s New York will present two exceptional jewels the Emperor Maximilian Diamond and the Catherine the Great Emerald and Diamond Brooch to highlight the first major jewellery sale of the year on April 22, 2010. Both pieces have fascinating histories.

The Emperor Maximilian Diamond of 39.55 carats (estimate: $1 million to $1.5 million) is one of two large diamonds the Archduke Maximilian acquired in Brazil in 1860, in the years just before he was named Emperor of Mexico at Napoleon’s urging. In 1866, under pressure from the United States, Napoleon backed away from financial and military support for Maximilian, effectively abandoning him.

Soon thereafter, republican forces captured and court-marshalled the young emperor and sent him before the firing squad. Legend holds that Maximilian was wearing the Emperor Maximilian Diamond in a small satchel tied around his neck when he was executed.

The diamond was returned to his wife, Princess Charlotte of Belgium, who later sold the jewel. Its whereabouts remained unknown until 1919 when it was purchased by a Chicago gem dealer who kept the diamond until 1946.

The cushion-shaped diamond appeared at auction at Christie’s in July 1982, where it was purchased by London jeweller Laurence Graff after an intense round of bidding. The winning bid was $726,000 more than twice the estimated price of $330,000.

The following year, Graff sold the Emperor Maximilian Diamond together with two other important diamonds, to Madame Imelda Marcos, wife of the president of the Philippines. Subsequent private transactions followed, until it was acquired by the present owner. The upcoming auction marks the first public viewing of this historically significant diamond since 1982. Read more here-

http://www.diamonds.net/news/NewsItem.aspx?ArticleID=30243

REGULATORS SHUT 7 MORE BANKS IN FIVE STATES-37 CLOSED THIS YEAR

-Regulators on Friday shut down seven banks in five states, bringing to 37 the number of bank failures in the U.S. so far this year. The closings follow the 140 that succumbed in 2009 to mounting loan defaults and the recession.

The Federal Deposit Insurance Corp. took over First Lowndes Bank, in Fort Deposit, Ala.; Appalachian Community Bank in Ellijay, Ga.; Bank of Hiawassee, in Hiawassee, Ga.; and Century Security Bank in Duluth, Ga. The agency also closed down State Bank of Aurora, in Aurora, Minn.; Advanta Bank Corp., based in Draper, Utah; and American National Bank of Parma, Ohio.

The FDIC was unable to find a buyer for Advanta Bank, which had $1.6 billion in assets and $1.5 billion in deposits. The regulatory agency approved the payout of the bank’s insured deposits and it said checks to depositors for their insured funds will be mailed on Monday.

The failure of Advanta Bank is expected to cost the federal deposit insurance fund $635.6 million. Read more here-http://finance.yahoo.com/news/Regulators-shut-7-banks-in-5-apf-2660571978.html?x=0&.v=10 and http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=amWAIsJeBd2Q

-Federal Reserve Must Disclose Bank Bailout Records. The Federal Reserve Board must disclose documents identifying financial firms that might have collapsed without the largest U.S. government bailout ever, a federal appeals court said.

The U.S. Court of Appeals in Manhattan ruled today that the Fed must release records of the unprecedented $2 trillion U.S. loan program launched primarily after the 2008 collapse of Lehman Brothers Holdings Inc. The ruling upholds a decision of a lower-court judge, who in August ordered that the information be released. Read more here-http://www.bloomberg.com/apps/news?pid=20601010&sid;=azmztIRQLqq8

-Hoenig Says Big Banks Must Either Add $210 Billion In New Capital Or Reduce Total Assets By $3 Trillion; Bank Capital Raises Imminent. Read more here-http://www.zerohedge.com/article/hoenig-says-big-banks-must-either-add-210-billion-new-capital-or-reduce-total-assets-3-trill and Fed’s Hoenig Endorses Volcker Rule, Leverage Limits

GLOBAL-U.S. DEBT CRISIS

-Lipsky Says ‘Acute’ Debt Challenges Face Advanced Economies. Advanced economies face “acute” challenges in tackling high public debt, and unwinding existing stimulus measures will not come close to bringing deficits back to prudent levels, said John Lipsky, first deputy managing director of the International Monetary Fund.

All G7 countries, except Canada and Germany, will have debt-to-GDP ratios close to or exceeding 100 percent by 2014, Lipsky said in a speech yesterday at the China Development Forum in Beijing. Already this year, the average ratio in advanced economies is expected to reach the levels seen in 1950, after World War II, he said. The government debt ratio in some emerging-market nations has also reached a “worrisome level,” he said.

“This surge in government debt is occurring at a time when pressure from rising health and pension spending is building up,” Lipsky said. Stimulus measures account for about one-tenth of the projected debt increase, and rolling them back won’t be enough to bring deficits and debt ratios back to prudent levels.

Rising public debt could lead governments to seek to eliminate it through inflation or even default if they fail to carry out fiscal measures in time, Mohamed A. El-Erian, co-chief investment officer at Pacific Investment Management Co. warned earlier this month. Nassim Nicholas Taleb, author of “The Black Swan,” a book arguing that unforeseen events can roil markets, said March 12 he is concerned about hyperinflation as governments around the world take on more debt and print money.

The U.S. budget deficit widened to a record in February as the government spent more to help revive the economy. The gap grew to $221 billion after a shortfall of $194 billion in February 2009, the Treasury Department said on March 10. The figures indicate the deficit this year will probably surpass the record $1.4 trillion in the fiscal year that ended in September. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aa84GdC5eSN0

-U.S. Debt Clock here-http://www.usdebtclock.org/

-Gross Says Health Care Reform to Raise Liabilities. Bill Gross, manager of the world’s biggest mutual fund at Pacific Investment Management Co., said health-care reform will add to, rather than subtract from, U.S. deficits and unfunded liabilities.

“Long-term bondholders beware,” Gross wrote in a monthly investment outlook posted on Newport Beach, California-based Pimco’s Web site today. “No investment vigilante worth their salt or outrageous annual bonus would dare argue that current legislation is a deficit reducer. It will add $562 billion to the deficit over the next decade.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aALDMVlTVn68

-Bud Conrad: Battle for the Budget. Read more here-http://news.goldseek.com/GoldSeek/1269374946.php

-James Turk: Debtor Nation. Only a few decades ago, the United States was the world’s largest creditor nation. American capital spanned the globe financing all types of investments in virtually every country. But that dominance began to erode in the 1960s because growth in consumption in the United States was starting to outpace new production. Wealth built up over generations was being consumed.

To compensate for the resulting decline in living standards, the nation turned to debt, rather than hard work and savings. This trend continued through the next decade. A focus on consumption and a seemingly unstoppable reliance on debt at all levels of American society had become the dominant force in economic activity.

By the 1980s, the inevitable happened. As generations of accumulated wealth disappeared, a line was crossed. America now owed more to the rest of the world than the world owed to it. The United States had become a debtor nation, and it has continued to run up the tab in the decades since.

The mindset of policymakers today continues to be one of debt and consumption instead of savings, investment and production. We see this way of thinking in their pronouncements and actions. Worryingly, the tipping point appears to have been reached. Not only is the United States living beyond its means, it is now borrowing beyond its means, as graphically illustrated in the following chart prepared by Nathan Martin.

Here’s is how Mr. Martin explains the crucial message from this chart. “This is a very simple chart. It takes the change in GDP and divides it by the change in Debt. What it shows is how much productivity is gained by infusing $1 of debt into our debt backed money system.

Back in the early 1960s a dollar of new debt added almost a dollar to the nation’s output of goods and services. As more debt enters the system the productivity gained by new debt diminishes but now total income can no longer support total debt.

In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!” The US is digging itself into a hole, and if the message in the above chart was not clear enough, another bell tolled last week.

Moody’s warned that the triple-A credit rating of the United States is at risk of being downgraded if the nation fails to come to grips with its growing debt. It warned: “Preserving debt affordability at levels consistent with Aaa ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion.” [Emphasis added]

It is an unusually stark assessment with profound implications that require thoughtful attention. Debt has always been and will always be a two-edged sword. Iceland now knows that lesson well. So do Dubai and Greece. Other nations including the United States are about to learn that lesson too.

As I see it, a lot of the federal government’s promises are about to be broken. The collapse of the once almighty dollar is rapidly approaching. Read more here-http://www.fgmr.com/debtor-nation.html

-The U.S. government is currently creating one of the most colossal monuments in the history of the world. It is the U.S. national debt, and it threatens to literally destroy the American way of life. For decades now, this generation has been recklessly spending the money of future generations and has been convinced that they have been getting away with it.

Americans have been enjoying an obscenely high standard of living, but the party is almost over and the day of reckoning is fast approaching. It has been a great party, but it was fuelled by the biggest mountain of debt in the history of the world. Read more here-http://www.businessinsider.com/facts-about-the-deficit-2010-3

1) As of December 1st, 2009, the official debt of the United States government was approximately 12.1 trillion dollars.

2) To pay this 12.1 trillion dollar debt would require approximately $40,000 from every single person living in the United States.

3) The $1.9 trillion cap increase recently passed by the House amounts to another $6,000 for every living American.

4) The U.S. government’s debt ceiling has been raised six times since the beginning of 2006.

5) If we spent a dollar a second, it would take more than 31,000 years to spend a trillion dollars.

6) When Ronald Reagan took office, the U.S. national debt was only about 1 trillion dollars.

7) The U.S. national debt has more than doubled since the year 2000.

Barack Obama’s latest budget anticipates $5.08 trillion in deficits over the next 5 years.

9) The U.S. national debt on January 1st, 1791 was just $75 million dollars. Today, the U.S. national debt rises by that amount about once an hour.

10) The U.S. national debt rises at an average of approximately $3.8 billion per day.

11) In 2010, the U.S. government is projected to issue almost as much new debt as the rest of the governments of the world combined.

12) The majority of U.S. debt is purchased by the Federal Reserve. Talk about a Ponzi scheme!

13) A trillion $10 bills, if they were taped end to end, would wrap around the globe more than 380 times. That’s still less than the national debt.

14) Counting social security and medicare, the U.S. government is committed to future payment in excess of 65 TRILLION dollars.

INFLATION-HYPERINFLATION

-U.S. Hyperinflation Possible By Year 2015. NIA believes the real rate of U.S. inflation to already be approximately 5%. If the Federal Reserve doesn’t raise the federal funds rate to above 5% in the short-term, in our opinion, an outbreak of double-digit inflation is inevitable.

By 2014, it is possible the Federal Reserve will be forced to raise the federal funds rate up to above 10% and the public portion of our national debt could exceed $15 trillion. Therefore, in 2014 we could see the interest payments on our national debt reach $1.5 trillion, about triple what is currently being projected and 43% of the government’s projected tax receipts that year of $3.455 trillion.

NIA believes hyperinflation is possible by the year 2015. Besides the rising interest payments on our national debt, another major catalyst for hyperinflation will be social security payments, which adjust to the CPI-index. As the government’s CPI-index rises, so will the social security payments that it owes.

This could cause a death-spiral in the U.S. dollar. Inflation is still the last thing on the minds of most Americans, but soon it will be their primary concern. Read more here-http://inflation.us/hyperinflation2015.html

-My Inflation Nightmare. Am I crazy, or is the commentariat ignoring our biggest economic threat? Read more here-http://www.theatlantic.com/magazine/archive/2010/04/my-inflation-nightmare/7995

-The Road to Hyperinflation. Read more here-http://173.203.164.51/editorials/petrov/2010/0316.html

-Healthcare Bill to Cause U.S. Hyperinflation By 2015. Read more here-http://inflation.us/hyperinflation2015.html

-BOE’s Sentance Says Global Recovery Poses a Risk of Inflation. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=ajdmHmlCy7cs

60 MINUTES-MICHAEL LEWIS ON WALL STREETS DELUSION AND COLLAPSE

-Michael Lewis’s new book, called “The Big Short: Inside the Doomsday Machine,” comes out this week and it explains how some of Wall Street’s finest minds managed to destroy $1.75 trillion of wealth in the subprime mortgage markets.

“60 Minutes” and correspondent Steve Kroft spent two days debriefing Lewis at his home in California. “This was an episode where capitalism was almost destroyed, just by the capitalists. And, in the most sensational way, they were sort of destroyed by their own folly,” Lewis told Kroft.

Asked what happened, Lewis said, “The incentives for people on Wall Street got so screwed up, that the people who worked there became blinded to their own long term interests. And because the short term interests were so overpowering. And so they behaved in ways that were antithetical to their own long term interests.” Read and watch more here-http://www.cbsnews.com/stories/2010/03/12/60minutes/main6292458.shtml?tag=contentMain;contentBody

-”Wall Street is able to delude itself because it’s paid to delude itself. I mean one of the lessons of this story is that people see what they’re incentivized to see. If you pay someone not to see the truth, they will not see the truth. And, Wall Street organized itself so people were paid to see something other than the truth. And that’s one of the central messages of this story.

You have to be very careful how you incentivize people, ’cause they will respond to the incentives,” Lewis explained. According to Lewis, “all” of the people who made these terrible decisions left with a lot of money. “I didn’t run across a single character who didn’t get rich. Anybody above a certain level in all these firms made huge sums of money by any standard.

And the people who were, I mean, this is where it gets a little creepy, the people who were most instrumental in building the subprime mortgage machine also happened to be the ones who had the most detailed understanding now of the securities in the rubble,” he told Kroft. “And they’re being paid all over again to sort through the mess because they’re the experts.

That is an age-old trick on Wall Street, ’cause generally speaking, people who create disasters make a lotta money cleaning up the disaster because they’re the ones who know about the disaster,” he added. What about the CEOs? “Stan O’Neal at Merrill Lynch, and Chuck Prince at Citigroup are the most obvious examples. But they were paid not tens, but into the hundreds of millions of dollars to run their firms into the ground,” Lewis said.

Asked if he sees anything happening to reform the system, Lewis said, “There are several things that obviously should be done that have not been done. And you can’t explain to my mother why they haven’t been done. Only a really smart person on Wall Street could explain why they haven’t been done.

Lewis believes the financial industry is living in a world so disconnected from American life that it cannot be sustained. He thinks it may take a while, but he believes Wall Street as we know it, has done itself in.

“The leaders on Wall Street completely lost any sense of their responsibility to the society,” Lewis said. “And if you know you’re gonna blow up AIG by putting $20 billion of bad subprime mortgage risk into it even though it’s gonna be very profitable for you, you should stop and say this shouldn’t be done.”

WALL STREET SEQUEL AN OMEN OF STOCK COLLAPSE?

-Yes, Oliver Stone is suddenly America’s hottest market timer, as well as the voice of the inner “American Soul,” warning investors of a collapse. Remember the Crash of 1987? One-day 23% drop. Happened just before his 1987 “Wall Street” film hit the theatres.

He says he can’t predict the future. Don’t believe him: Even if he’s unaware of his “source,” it’s stirring again, rising from deep in what Carl Jung would call the “collective unconscious” of the “American Soul,” warning us again of a collapse, using Stone as a stock trader’s “alert.”

Wake up Wall Street: You’re getting the biggest market timing signal of 2010! Seriously, why now? Why after 23 years, did Stone decide to update the message of his famous 1987 movie. Great question: The interviewer was Michael Lewis, former Salomon trader, author of “Liar’s Poker,” a guy who understands Wall Street’s soul.

Stone’s answer is in “Greed Never Left,” Lewis’ Vanity Fair review of Stone’s new movie, “Wall Street: Money Never Sleeps.” Stone had to think about it: “Why did I go back?” Why? “Because it’s important. It’s the collapse of capitalism and the collapse of our society. It is. Our way of life is going to change.”

The collapse of capitalism? Not just a stock market crash. He’s predicting the “collapse of our society.” Worse, Stone’s predicting: “Our way of life is going to change.” Is this really a market-timing signal? Hey, it was in 1987. Will history repeat? The odds say yes.

Remember Stone’s predictions when you see the sequel, “Wall Street: Money Never Sleeps.” Lewis says Stone’s goal is not just to entertain you for a couple hours then send you back home to continue denying everything Wall Street’s fat-cat bankers, the real Gordon Gekkos, are doing every day to destroy capitalism, destroy democracy, destroy your retirement portfolio. Read more here-http://www.marketwatch.com/story/story/print?guid=75B6904A-8B10-48B3-9AB6-9A82C430F90D

REAL ESTATE-MORTGAGES-FORECLOSURES

-Sales of New U.S. Homes Dropped to Lowest on Record. Sales of new homes in the U.S. unexpectedly fell in February to a record low as blizzards, unemployment and foreclosures depressed the market. Purchases decreased 2.2 percent to an annual pace of 308,000, figures from the Commerce Department showed today in Washington. The median sales price climbed by the most in more than two years.

New-home sales are vying with foreclosure-induced declines in prices for existing homes in an economy where unemployment is forecast to average 9.6 percent this year, close to a 26-year high. Treasury Secretary Timothy F. Geithner yesterday said it would take a “long time” to repair the market as the administration takes steps to overhaul real-estate financing and regulation.

“Americans remain downbeat on the housing market,” said David Semmens, an economist at Standard Chartered Bank in New York, who forecast a 300,000 sales pace. “We expect the continuation of poor sales to lead to a resumption of downward price pressure.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aGCXFE1N36xc&pos;=1

-Existing U.S. Home Sales Fall for Third Month. Sales of existing U.S. homes fell in February for a third month, and the number of properties on the market climbed by the most in almost two years, casting a pall over the prospects for a recovery.

Purchases dropped 0.6 percent to a 5.02 million annual rate, the lowest level in eight months, figures from the National Association of Realtors showed today in Washington. There were 3.59 million houses for sale, a 312,000 increase from January that marked the biggest gain since April 2008.

“The housing market is trying to heal, but it’s still choking on inventory,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. The figures showed the extension and expansion of a federal tax credit that helped stabilize housing in 2009 has yet to spark sales this year. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aP5DPzk0mAvo&pos;=1

-More than half of U.S. borrowers who received loan modifications on delinquent mortgages defaulted again after nine months, according to a federal report. The re-default rate of loans modified in the first quarter of 2009 was 51.5 percent by the end of the year, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a joint report today.

The figure, which measures payments at least 30 days late, climbed to 57.9 percent for changes made in the prior 12 months. U.S. homeowners are struggling to make payments as depressed housing prices leave them owing more than their properties are worth. About 24 percent of properties with a mortgage were underwater in the fourth quarter, First American CoreLogic said last month.

The median price of a U.S. home was $165,100 in February, down 28 percent from its peak in July 2006, according to the National Association of Realtors. Modifications are “clearly not working well and it’s not a surprise,” said Sam Khater, a senior economist at First American CoreLogic in Tysons Corner, Virginia. “It’s pointless to rewrite these loans because they’re underwater.”

The number of homes with mortgage payments at least 60 days late climbed 2.39 million in the fourth quarter, up 13.1 percent from the prior three months and 49.6 percent from the year earlier period, the quarterly Mortgage Metrics report said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aVYxPZ56vjys&pos;=5

-Microcosm of Housing Crisis on an Arizona Street. Read more here-http://www.nytimes.com/2010/03/23/business/23lend.html?source=patrick.net

-Whistle-Blower: Banks Give Homeowners the Runaround. 800-Numbers Lead to Runaround as Banks Refuse to Modify Mortgages. Read and watch more here-http://abcnews.go.com/WN/saving-middle-class-whistle-blower-banks-helping-americans/story?id=10178938

The Goldbugg Report – March 30, 2010
Posted by Worldwide Precious Metals on Tuesday, March 30, 2010

The Week in Review

March 26, 2010

The Week in Review

The Health Care Reform bill passed Congress and was signed in to law by President Obama this week after months of wrangling among the Democrats and Republicans. In a show of just how “bi-partisan” Obama truly is, he dared Republicans to try to repeal the new law. Snuck into the bill at the last minute, and having absolutely zero to do with health care, was a government takeover of the student loan program. Two of the largest US manufacturers, Deere and Caterpillar, said they were expecting a combined $250 million in charges this year as a result of changes brought about by the new law.

On Thursday, the CFTC finally held its meeting to discuss position limits on precious metals. The event was available as a dial in, listen only conference call, and also broadcast on the Internet. Bill Murphy, chairman of the Gold Anti-Trust Action committee, among others, presented evidence of the long rumored manipulation of the gold and silver markets by JPMorgan Chase and HSBC. Just as Mr. Murphy was called to speak, the video feed to the internet was mysteriously cut off. Luckily the telephone conference call audio continued uninterrupted.

First time filings for unemployment were down again last week, but now with the passage of the health bill a reality, some employers are holding off on any hiring until they can fully determine how the new legislation affects them. This means that despite a recent slowdown in layoffs, hiring does not appear to be increasing in the near future. Congress is also preparing to take a two week recess without extending the jobless programs that are due to expire in just a few days.

Europe finally seems to have reached some sort of agreement on Greece’s debt problems. The proposal is a joint agreement between the IMF and the euro zone that would provide loans from other countries using the euro as well as money from the IMF if Greece faced severe difficulties.

Adding to the woes in the European Union that were begun by Greece’s debt problems, Fitch downgraded Portugal on Thursday. The move has been expected for quite some time. Coming at the end of a long struggle to resolve Greece’s problems, this may well fan the flames of anger regarding sovereign debt in the EU once again.

Crude oil prices struggled to stay above 81 this week on an extremely large inventory increase reported by the US.

The dollar rose to a 10 month high against the euro on the news coming out of the summit in the European Union to determine what to do about Greece. Once the EU announced the details of the plan they agreed upon, the dollar began weakening against the euro once again.

Sales of new US homes hit a record low in February, falling for the fourth straight month. A report by the Mortgage Bankers Association showed mortgage applications declining for the second week in a row and refinancing fell to its lowest level in a month as interest rates began rising. This data just reinforces that the housing industry, long touted to be the road out of this recession, appears to be far from any sort of recovery.

US GDP grew less than expected and after-tax corporate profits were lower than expected as well. Consumer sentiment remained unchanged from last month as people waited to see what Congress was going to do with the health care bill.

Friday to Friday Close

	Mar. 19th	Mar. 26th	Net Change
Gold	$1108.00	$1104.00	(4.00) – 0.36%
Silver	$17.03	$16.90	(0.13) – 0.76%
Platinum	$1615.00	$1595.00	(20.00) – 1.24%
Palladium	$472.00	$455.00	(17.00) – 3.60%

Here are your Short Term Support and Resistance Levels for the upcoming week.

	Gold	Silver
Support	1080/1060/1050	16.50/16.00/15.80
Resistance	1100/1110/1130	17.00/17.20/17.50

	Platinum	Palladium
Support	1575/1550/1500	450/440/420
Resistance	1610/1650/1700	460/480/500

Volatility should be expected to continue. The cat is out of the bag regarding manipulation of the precious metals markets by JPMorgan and HSBC. Two days before the March 25^th meeting of the CFTC to discuss position limits, a metals trader in London by the name of Andrew Maguire supplied copies of e-mail communications between himself and several highly placed officials at the CFTC to GATA. These communications took place in January and February and outlined, with remarkable detail, how the silver market (and the gold market) would be manipulated in the days following the communications. The market manipulation occurred exactly as outlined in Mr. Maguire’s e-mails to the CFTC on the dates he predicted. We’ll leave you with a quote from Maguire’s February 9^th e-mail to the CFTC, which was copied to Chairman Gary Gensler: “You will note that the huge footprints left by the two concentrated large shorts were obvious and easily identifiable. You have the data. The signals I identified ahead of the intended short selling event were clear. The ‘live’ action I sent you 41 minutes after the trigger event predicting the next imminent move also played out within minutes and exactly as I outlined. Surely you must at least be somewhat mystified that a market move could be forecast with such accuracy if it was free trading.” The market manipulation scenario played out in Mr. Maguire’s e-mails to the CFTC is playing out once again, just one day after the CFTC meeting. Pay attention to the news coming out of the CFTC. Should they begin taking steps to curtail the obvious manipulation brought about by the massively concentrated short positions by a handful of banks it may be a perfect time to add to, or begin, your precious metals portfolio. Remember, the key to profitability through the ownership of physical precious metals is to actually own the physical product and hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

The Week in Review
Posted by Worldwide Precious Metals on Friday, March 26, 2010

The Goldbugg Report – March 23, 2010

March 23, 2010

The Week in Review

Through a series of maneuverings this week, it appears that the Democrat controlled congress will be successful in ramming through the “Obamacare” health care reform. The bill is expected to pass this coming Sunday despite opposition by the Republican members of Congress.

In a poll released Wednesday by the Wall Street Journal and NBC only 17% said they approved of the job Congress is doing. A full 50% said they would vote to defeat every single member of Congress, including their own representative.

Weekly jobless claims were down for the third week in a row. Obama signed the Jobs Bill on Thursday. The bill provides tax breaks for businesses who hire those that have been unemployed. If the health care reform bill passes this weekend, those tax breaks may disappear in a slew of increased taxes and costs as businesses are forced to adjust to the new rules and regulations in the bill.

Marc Faber, author of the Gloom, Boom and Doom Report said on Thursday “I think we already have now a gold standard…created by the market place. We have the (exchange traded funds) that have proliferated and we have more and more physical buying of gold.”

In the continuing saga that is the Greece debt debacle, Greece Prime Minister George Papandreou said this week that if the Eurozone does not come through with a bailout that he would have to seek help from the International Monetary Fund in April. Chancellor Angela Merkel, of Germany went so far as to suggest changing EU legislation that currently restricts members from leaving the EU so that countries that “do not fulfill the conditions again and again in the long-term” could be “ejected” from the Eurozone.

US crude oil prices stayed above $82 a barrel for most of the week, buoyed up by demand forecasts by the International Energy Agency. Late evening rumors on Thursday that the Fed may be considering raising the discount rate again (they last raised it back on February 18) sent prices back down towards $80 on Friday.

The flare up of Greece’s debt problems once again drove the euro down. Both the yen and the dollar moved up on the news.

On Tuesday, the Fed once again reiterated their pledge to keep rates low for “an extended period”.

Applications for US home loans were down last week in spite of mortgage rates that are at their lowest in more than three months. The federal tax credit for home buyers

will soon be expiring and the fact that housing demand has not increased as a result of the extension of that credit is concerning to those who are watching the beleaguered housing market. Meredith Whitney said “The housing market surely will double dip.” Here comment appears to be based on the fact that loan modifications, which have kept some houses off the market, are failing at an increasing rate due to continuing unemployment problems. When the smoke clears, those failed loan modifications may result in a glut of supply on the housing market, once again driving prices down.

As we discussed in our March 12 memo, a judge in Milan leveled charges of fraud against four international banks and ordered 11 bankers and two former municipal employees to stand trial. The four banks involved are Deutsche Bank, Depfa, UBS and JPMorgan. As we’ve discussed many times in the past, JPMorgan has long been accused of manipulating the silver market by holding massively concentrated short positions on the Comex that cannot possibly be covered. At the upcoming CFTC meeting to discuss position limits in the precious metals market on March 25^th, Bill Murphy, chairman of the Gold Anti-Trust Action Committee has been invited to speak regarding this very issue. Ted Butler, who has been railing against this market manipulation for close to 25 years, has been asked by the CFTC to submit his evidence and work with them directly regarding position limits. Hopefully all of this activity means that the time of precious metals market manipulation by a handful of banks is coming to an end.

Friday to Friday Close

Here are your Short Term Support and Resistance Levels for the upcoming week.

Volatility should be expected to continue. Gold, despite recent gains by the dollar, has maintained its price above $1000 an ounce. Gold has also recently hit record highs in other currencies, specifically the euro and British pound. Sovereign debt concerns across the world have investors spooked and it would appear that those spooked investors are turning to precious metals to alleviate their concerns. Bullman Investment Management Managing Director Nick Bullman said: “Long-term investors are beginning to realize that gold is the only thing that is going to protect you from governments who decide that the way out of this problem is to borrow more.” Increasing demand for a limited resource usually means only one thing, an explosive increase in prices. Remember, the key to profitability through the ownership of physical precious metals is to actually own the physical product and hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

GOLD

-Central Bank Gold Holdings Expand at Fastest Pace Since 1964. Central banks added the most gold to their reserves since 1964 last year amid the longest rally in bullion prices in at least nine decades, data compiled by the World Gold Council show.

Combined holdings rose 425.4 metric tons to 30,116.9 tons, an increase worth $13.3 billion at last year’s average price, according to the data. India, Russia and China said last year they added to reserves. The expansion was the first since 1988, the data from the London-based council show.

Central banks, holding about 18 percent of all gold ever mined, are expanding their holdings for the first time in a generation as investors in exchange-traded funds amass bullion as an alternative to currencies. Holdings in the SPDR Gold Trust, the biggest ETF backed by the metal, are at 1,115.5 tons, more than the holdings of Switzerland.

“There’s clearly been a renaissance of gold in central bankers’ minds,” said Nick Moore, an analyst at Royal Bank of Scotland Group Plc in London. “It’s not just been central banks taking on gold, but a general shift for physical gold in the investment sector.”

Official reserves of central banks and governments may expand by another 187 to 218 tons this year, CPM Group forecast last month. The council’s data also includes the holdings of the International Monetary Fund, European Central Bank and other international and regional bodies.

Gold climbed 24 percent last year, reaching a record $1,226.56 an ounce in December. World holdings rose 527 tons in 1964 and climbed 832.7 tons the year before that, according to the London-based industry group.

“Gold is quietly, at the edge, becoming the world’s second reservable currency, supplanting the euro and rivaling the dollar,” Dennis Gartman, a Suffolk, Virginia-based economist and hedge-fund manager, said in his Gartman Letter today. “The trend shall continue months, if not years, into the future.” Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=amBRPzwyB9SY

-WGC sees gold demand recovering in 2010. Read more here-http://www.reuters.com/article/idAFLDE62H14E20100318?rpc=44

-America, The King Of Gold, China, The Pauper. Read more here-http://www.businessinsider.com/america-the-king-of-gold-china-the-pauper-2010-3

-McEwen still positive on $2,000 gold this year and $5,000 ahead. In an interview at last week’s PDAC, Rob McEwen restated his forecast that gold will hit $2,000 this year and $5,000 longer term. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=100972&sn;=Detail&pid;=1

-Barratt Says Gold Price May Surpass $1,200 by Year End. Read and watch more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aWyb2npP0.FQ

-$1,000 gold now more floor than ceiling. The price that was once an invisible ceiling, is now more likely to be the level at which a fall in the gold price bottoms out. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=100933&sn;=Detail&pid;=1

-Marc Faber: We Have a New Gold Standard. The markets have created their own gold standard because of uncertainties regarding other asset classes, Marc Faber, author of “The Gloom, Boom and Doom Report,” told CNBC Thursday.

“I think we already have now a gold standard created by the market place,” Faber told “Squawk Box Europe.” “We have the (exchange traded funds) that have proliferated and we have more and more physical buying of gold,” he said. Read and watch more here-http://www.cnbc.com/id/35912043

-Gold’s $1140 Hurdle. Gold has been stopped time and again in its decade-long bull market by recurring hurdles that appear at an ever-higher price. During these encounters, several things happen, most notable of which is the growing bearish sentiment in the face of a seemingly insurmountable price barrier. We are seeing that pattern repeat with gold’s inability to climb above $1140.

It is curious that this pattern repeats. It suggests that few learn from it, and more to the point, that somehow the fundamental outlook for gold has changed each time one of these barriers is hit. It hasn’t. The same factors driving gold higher all decade continue to drive it, mainly the ongoing debasement of national currencies by governments and central banks.

It is also worth noting that the same factors stopping gold at these recurring hurdles, or to put it into technical terms, “resistance levels”, have not changed. It is central bank intervention aimed at capping the gold price. At each of these key resistance points, central banks succeed for awhile. But eventually the demand for physical gold overpowers their ability or willingness to deliver gold at the then prevailing price.

Consequently, central banks retreat and ‘circle the wagons’ at a higher price, which is a phrase I have used as far back as 2001 to describe the actions taken by the gold cartel. Despite the formidable resistance central banks have displayed in recent months above $1140, I expect that they will be forced to retreat again, as indicated by the following chart.

Gold is moving higher from a huge base, illustrated by the “V” pattern in purple lines. Note also the “head & shoulders” pattern within this base formed from 2007-to-2009, the importance of which I highlighted in April 2009. After the break-out from the base, gold jumped all the way to $1200, but has since been correcting.

Importantly, note how strong gold has been throughout this correction. The price did not retreat to the $1000 neckline of the H&S; pattern or even to its 200-day moving average. This strength, though subtle, is very significant because it signals the power of the underlying demand for physical metal. It is this demand that I expect will soon send gold hurdling above $1140 and to overhead resistance around $1200. James Turk-Read more here-http://www.fgmr.com/golds-usd1140-hurdle.html

-Further currency woes bode well for gold. The yellow metal is relooking at all time highs in euros but, continues to track largely sideways in dollar terms. Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page31?oid=100989&sn;=Detail&pid;=31

-The evolution of gold. Record highs in euro and sterling terms are indicative of the yellow metal’s broadening appeal as insurance. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=101009&sn;=Detail&pid;=1

-Gold is Money. Gold is money because it cannot be created out of thin air by government decree. Unlike bonds, gold does not represent someone else’s liability and, unlike stocks, gold does not rely on someone else’s promise of performance. Gold is money because, unlike currencies, impatient monetary policymakers cannot change its value.

The rising gold prices we have experienced for the last eight years do not signal a bull market in precious metals, but rather a vote of decreasing confidence in the future value of paper currencies. Currency-denominated financial assets are a disaster waiting to happen. The current economic rebound is a mirage, being entirely dependent on something artificial and unsustainable: massive government spending.

A new crisis is building out of unprecedented fiscal and monetary mismanagement. Fortunately, smart investors can protect their wealth from the coming storm. The true level of risk has not been priced into the markets. The time to shelter your wealth from the storm is now. And there is no safer investment on earth than bullion, because bullion is and always will be money. Forty years ago it took 66 ounces of gold to buy a compact car.

Today it takes only 14 ounces. If you had put your money in gold instead of dollars, the same car would actually be 79 percent cheaper, because gold keeps its value. Houses, stocks and virtually every other asset on earth would also be cheaper if bought with physical gold. The more investors learn about bullion, the better for their portfolios.

If you are already a bullion investor, now is the time to add to your portfolio. If you are new to investing in bullion, now is the time to start dollar-cost-averaging into bullion. I encourage investors to learn as much as they can about bullion and about the markets in general. Nick Barisheff-Read more here-http://news.goldseek.com/GoldSeek/1268756265.php

-The bottom line is the US Mint’s latest bullion-coin sales data reveals very strong American retail investment demand for physical gold and physical silver. High sustained gold Eagle and silver Eagle production shows physical demand in 2009 was the highest yet seen by far in this secular bull.

The ranks of gold and silver investors are growing as news of their bulls spreads, which is a very bullish omen. More investors drive up prices which entice in still more investors, creating a self-feeding circle. Adam Hamilton-Read more here-http://www.321gold.com/editorials/hamilton/hamilton031210.html

-Gold production in South Africa fell 5.8 percent in 2009 from a year earlier, making the nation the fourth-biggest producer after China, Australia and the U.S., an industry body said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aodBnmyGa8HA

-Jim Rickards talks to King World News about China’s plans for gold. Listen here-http://www.gata.org/node/8424

-King World News interviews Jim Rogers on gold and commodities. Listen here-http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/13_Jim_Rogers.html

-Rob Kirby: Smoke, mirrors, SDRs, and gold why central banks cannot tell the truth. Read more here-http://www.gata.org/node/8439

-Gold miners bullish; hedges out of favor. Read more here-http://in.reuters.com/article/businessNews/idINIndia-46911920100315

-Gold Global Hedge Book down to just 236 tonnes. At just under five weeks’ world mine production the global hedge book is far cry from its peak of 2,064 tonnes at its peak in 2000. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=101003&sn;=Detail&pid;=1

-Eric Sprott commentary, It’s Déjà Voodoo Economics All Over Again. Read more here-http://www.sprott.com/Docs/MarketsataGlance/03_10%20Deja%20Voodoo%20Economics.pdf

-Murray Pollitt commentary, Bananaland. Read more here-http://www.gata.org/node/8431

-David Ranson: Who ‘owns’ the bullion in a precious metal ETF? Read more here-http://www.gata.org/node/8433

SILVER

Gold to silver ratio at 80 to 1 with gold at $1,400 the silver price would be $17.50

Gold to silver ratio at 70 to 1 with gold at $1,400 the silver price would be $20.00

Gold to silver ratio at 60 to 1 with gold at $1,400 the silver price would be $23.33

Gold to silver ratio at 50 to 1 with gold at $1,400 the silver price would be $28.00

Gold to silver ratio at 40 to 1 with gold at $1,400 the silver price would be $35.00

Gold to silver ratio at 30 to 1 with gold at $1,400 the silver price would be $46.67

Gold to silver ratio at 20 to 1 with gold at $1,400 the silver price would be $70.00

Gold to silver ratio at 15 to 1 with gold at $1,400 the silver price would be $93.33

-Silver ‘Struggles’ at $17.63, Barclays Says: Technical Analysis. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=afxIllCJwhd8

-Idaho Bill Permits State Taxes Be Paid With Silver. Idaho lawmakers are backing a plan that would allow state tax bills to be paid down with silver medallions instead of cash. Read more here-http://www.thestreet.com/story/10703026/1/idaho-bill-permits-state-taxes-be-paid-with-silver.html

-Ted Butler silver commentary. Read more here-http://www.gata.org/node/8422

-Ted Butler: It’s the message, not the messenger. Read more here-http://www.gata.org/node/8440

-Morgan not building shorts in silver, Butler tells King World News. Listen here-http://www.gata.org/node/8423

-Got Gold Report COMEX Commercials Halt Silver Advance. Read more here-http://news.silverseek.com/SilverSeek/1268838249.php

-Record demand pushes US Mint silver coin sales up over 40% so far this year. Silver sales hit 3.59 million ounces in January, a record in the history of the Mint’s bullion programme. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=100096&sn;=Detail&pid;=32

-Jon Matonis: Hunt Brothers demanded physical delivery too. Read more here-http://www.gata.org/node/8432

-CFTC invites GATA to speak at March 25 hearing on metals trading. Read more here-http://www.gata.org/node/8427

-GATA Chairman Murphy’s planned testimony to CFTC. Read more here-http://www.gata.org/node/8441

-Peter Grandich: Time to support GATA financially. Read more here-http://www.gata.org/node/8435

-Change needed as Argentina coin shortage grows. The Argentina coin shortage is growing as inflation makes a coin’s metal worth more than its face value. Read more here-http://www.csmonitor.com/World/Global-News/2010/0315/Change-needed-as-Argentina-coin-shortage-grows

CHARTS OF THE WEEK-QUOTES-QUICK HITS

-Chart of the week: How The Fed Backed Itself Into A Corner, And Is Doomed To Pumping Cheap Money Forever. Foreign governments are finally slowing down their purchases of US treasuries, but it’s okay because banks are well-known to be putting their money into treasuries, rather than loans. That’s what the chart below shows.

But as David Goldman brilliantly explains, it also means the Federal Reserve has backed itself into a corner: Most of this reflects use of the carry trade by foreign banks, or hedge funds, who are doing exactly what the American banks are doing: borrowing at 0.25% from central banks and lending it back to the US government at 1% or 2%, depending how far out the curve they go.

The demand isn’t not coming from the oil exporters, who appear to be net sellers. On a geographic basis, the main buyers are “United Kingdom” and the “Caribbean,” that is, banks and hedge funds.

Raise rates and the carry trade comes crashing down. And so does the Treasury market and the mortgage market and the US economy. The Fed is stuck with loose money just as the Bank of Japan was during the 1990s, and for the same reasons. Read more here-http://www.businessinsider.com/chart-of-the-day-securities-vs-commercial-and-industrial-loans-2010-3

Source: chartoftheday.com

Today’s chart illustrates how the recent rise in earnings has impacted the current valuation of the stock market as measured by the price to earnings ratio (PE ratio). Generally speaking, when the PE ratio is high, stocks are considered to be expensive. When the PE ratio is low, stocks are considered to be inexpensive.

From 1936 into the early 1990s, the PE ratio tended to peak in the low 20s (red line) and trough somewhere around seven (green line). The price investors were willing to pay for a dollar of earnings increased during the dot-com boom (late 1990s), surged even higher during the dot-com bust (early 2000s), and spiked to nosebleed levels during the financial crisis (late 2000s).

Currently, with 99% of US corporations having reported for Q4 2009, the PE ratio stands at 22 which is at the high end of a range that existed from the mid-1930s up until the early 1990s. Read more here-http://www.chartoftheday.com/20100312.htm?T

Source: chartoftheday.com

-U.S. Debt Crisis, National Debt Up $2 Trillion on Obama’s Watch-Read more here-http://www.cbsnews.com/8301-503544_162-20000576-503544.html and http://news.goldseek.com/MillenniumWaveAdvisors/1268578800.php

-We are spending more money than we have ever spent before, and it does not work. After eight years, we have just as much unemployment as when we started and an enormous debt to boot. U.S. Treasury Secretary Henry Morgenthau May 1939

-From the Russell standpoint, there is only one item that I consider a long-term holding. And that is gold. I note a lot of publicity regarding gold, some of it bullish and some of it cautionary. I am shocked, shocked at some of the ignorant pronouncements by supposed highly-intelligent analysts and investors. They seem to be completely in the dark about the meaning of gold and its history. They fail to understand that only gold is timeless money. In fact, they fail to understand that gold IS money. Richard Russell

-As far as precious metals are concerned, gold and silver are trying to build a base. It is worth noting that precious metals are in the seasonally strong time of the year and a spring rally is still possible. As George Soros stated in Davos, “with near-zero interest-rates, gold is the ultimate asset bubble”. We agree with his assessment and believe that monetary inflation together with the massive debt overhang in the West will propel gold and silver to new highs. Puru Saxena-Read more here-http://www.321gold.com/editorials/saxena/saxena031710.html

-Remember, the equity market at any given moment of time is one part reality and three parts perception. This is a market being driven by few buyers, no sellers, a lack of fundamentals and technicals. David Rosenberg-Gluskin/Sheff

-The Dow in the 1930s saw no fewer than 30,000 rally points that would get investors periodically juiced up that the post-bubble economy was heading back on track from the New Deal stimulus. But go back and you will see that the next bull market did not begin until 1954 even if the ultimate lows in the Dow were turned in 22 years earlier. It was a multi-year tumultuous period that was racked by volatility and manic market performance. David Rosenberg-Gluskin/Sheff

-S&P; 500: The median and average of 12 models we run point to fair value around 970 (the range of model results is from 850 to 1,100). With the S&P; 500 currently at around 1,150, these models suggest that the U.S. equity market is overvalued by about 20%.

Another metric we follow is the Shiller P/E ratio, which goes back to the early 1880s. We took a quick look at Shiller’s latest data point for March and, at 20.6x versus the long-term average of 16.4x, this ratio continues to suggest that the market is overvalued by about 25%. David Rosenberg-Gluskin/Sheff

-S&P;/TSX Composite Index: The median and average of the fair value models are around 11,100 and 11,000, respectively, with values ranging from 10,700 and 11,300. The TSX is currently trading just under 12,000 and so on aggregate our work suggests that Canadian equities are overvalued by 8-9%. David Rosenberg-Gluskin/Sheff

-Michael Panzner, who writes the blog Financial Armageddon, say bulls are “blind to the worsening economic reality all around them,” and in danger of getting hurt again by falling asset prices.

Headwinds are plentiful, Panzner says.

There has been little improvement in bank lending or credit availability, he says. The “long-term unemployment situation is getting worse” and economic data, which had been pointing up, have flattened out recently, suggesting a growing risk of a double dip, or economic relapse, he says.

The banking system also remains weak, as is the financial position of sovereign states such as Greece as well as states such as California. He predicts a not-too-pretty fallout. “In my view, the effect will be, at the least, a retest of what we saw last March,” Panzner says. “At worst, much lower lows. It may not happen in 2010. However, it could be over the next couple of years.” Read more here-http://www.usatoday.com/money/markets/2010-03-09-bullanniversary09_CV_N.htm

-”You can’t rule out a drop of 20% now or ever,” says Michael Farr, president of money management firm Farr Miller & Washington. Risks to the economic outlook remain, Farr stresses. He points out that Federal Reserve Chairman Ben Bernanke said recently that the “recovery is not yet self-sustaining.”

Farr worries that it will be tough to get a consumer-led expansion going with so many people saddled with high debt and job insecurity. Consumers are key to a revival because they account for roughly two-thirds of economic activity in the U.S. “This is a wait-and-see period for the economy,” Farr says.

“The main cliffhanger is whether the ample supply of government dollars will find traction and, in time, lead to renewed growth and hiring. Markets are plenty vulnerable to shock and disappointment right now. Investors are undecided. Yell ‘Boo!’ and they may all run for the door at once.” Read more here-http://www.usatoday.com/money/markets/2010-03-09-bullanniversary09_CV_N.htm

-So far, the market has been able to digest California, Dubai, and Greece, but what about China? That could be the next shoe to drop (before Iran have a look at Israel and the Crisis with Obama on page A21 of the WSJ) specifically the new spat between the U.S. and China over currency policy.

Make no mistake, if China does not make a move away from the peg with the U.S. dollar over the next few weeks, there is a very good chance that trade sanctions are going to come our way. April 15 looms large as that is the day when the U.S. Treasury could well declare the Renmimbi as being “manipulated”.

Gold will be a very nice safe haven in this environment (also have a look at Martin Wolf’s article today on page 9 of the FT China and Germany Unite to Weaken the World Economy). Also see Prompted by Economy, Lawmakers Press China to Address Value Of Its Currency on page B3 of the NYT. David Rosenberg-Gluskin/Sheff

-The U.S. (not counting contingent liabilities) is within a year of seeing is debt-to-GDP ratio pierce the 100% threshold (it is estimated to rise to 94% this year from 84% last year), the deficit is well over 10% of GDP (7% on a cyclically-adjusted basis) and so is the ratio of debt-service payments to revenues.

This trifecta in the past were the harbingers of credit downgrades. These numbers, by the way, are not at all far off and in some cases worse than in Greece, Spain, Portugal, Ireland, Italy or the U.K. David Rosenberg-Gluskin/Sheff

-In a nutshell, Corporate America has managed to only delay an inevitable refinancing spree that is expected to commence in 2012 when $700 billion of high-yield corporate debt comes due, and this rollover process is expected to last three years (compare that to the miniscule $21 billion in refinancing requirements this year). David Rosenberg-Gluskin/Sheff

-Fed Pledges to Keep Rate Low for ‘Extended Period’. Federal Reserve officials repeated their pledge to keep the main interest rate near zero for an “extended period” and confirmed that emergency measures to prop up the housing market will end as planned this month.

While the economy has “continued to strengthen,” policy makers noted that “housing starts have been flat at depressed levels” and “employers remain reluctant to add to payrolls.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aznK2HwZgBoM

-Loonie May Revisit Record High, SocGen Says: Technical Analysis. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aHzbNDZdylaQ

-U.S. employers won’t hire enough workers this year to lower the jobless rate much below the level of 9.7 percent reached in February, three Obama administration economic officials said today. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aXaMufrB.FA0

-How a New Jobless Era Will Transform America. The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults.

It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come. Read more here-http://www.theatlantic.com/magazine/archive/2010/03/how-a-new-jobless-era-will-transform-america/7919/

-U.S. states: Running with the PIIGS. Read more here-http://money.cnn.com/2010/03/15/news/international/greece_debt.fortune/index.htm

The Domestic Pigs

Source:
(1) Pew Center
(2) Realty Trac
(3) Bureau of Labor Statistics

-States may hold onto tax refunds for months. Residents eager to get their state tax refunds may have a long wait this year: The recession has tied up cash and caused officials in half a dozen states to consider freezing refunds, in one case for as long as five months.

States from New York to Hawaii that have been hard-hit by the economic downturn say they have either delayed refunds or are considering doing so because of budget shortfalls. “It’s an indicator of how bad it is,” says Scott Pattison, executive director of the National Association of State Budget Officers. “You know things are bad when you have to do that.”

New York, hit with a $9 billion deficit, may delay $500 million in refunds to keep the state from running out of cash, says Gov. David Paterson. Read more here-http://www.usatoday.com/news/nation/2010-03-11-tax-refunds_N.htm?csp=34

-State tax collections drop; Louisiana Gov. Bobby Jindal plans for more budget cuts. An unexpected drop in state tax collections has created a mid-year budget deficit that could be as high as $400 million, adding dark new clouds to the state’s bleak financial forecast as lawmakers prepare for the start of their annual session in two weeks. Read more here-http://www.nola.com/politics/index.ssf/2010/03/state_tax_collections_drop_gov.html

-44 of 172 Detroit schools slated to close in June. Read more here-http://www.breitbart.com/article.php?id=D9EGGS680&show;_article=1

-Pink slips sent to thousands of Calif. teachers. Read more here-http://www.sfgate.com/cgi-bin/article.cgi?file=/n/a/2010/03/15/state/n131126D27.DTL

-Regulators shut LibertyPointe Bank in NYC. Regulators on Thursday shut down LibertyPointe Bank in New York City, boosting to 27 the number of bank failures in the U.S. so far this year following the 140 brought down in 2009 by mounting loan defaults and the recession. Read more here-http://www.google.com/hostednews/ap/article/ALeqM5hThvm2HJ4hbMZVWIHSErop-reTbgD9ECPH680

-AIG Was Unprepared for Crisis, Former Top Lawyer Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=adhwKOUDjy_U&pos;=1

-Lehman Shows Auditors Fail Investors After Reforms. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aMsBaD8UZJz4

-Deutsche Bank AG, JPMorgan Chase & Co., UBS AG and Hypo Real Estate Holding AG’s Depfa Bank Plc unit were charged with fraud linked to the sale of derivatives to the City of Milan. Judge Simone Luerti scheduled the trial of the four firms, 11 bankers and two former city officials for May 6, Prosecutor Alfredo Robledo said after a hearing in Milan today.

The banks allegedly misled the city over swaps that adjusted interest payments on 1.7 billion euros ($2.3 billion) of bonds sold in 2005. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aC.ZO2bOdS2A&pos;=3

-Is China’s Politburo spoiling for a showdown with America? The long-simmering clash between the world’s two great powers is coming to a head, with dangerous implications for the international system. Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7442926/Is-Chinas-Politburo-spoiling-for-a-showdown-with-America.html

-China is in the midst of “the greatest bubble in history,” said James Rickards, former general counsel of hedge fund Long-Term Capital Management LP. The Chinese central bank’s balance sheet resembles that of a hedge fund buying dollars and short-selling the yuan, said Rickards, now the senior managing director for market intelligence at McLean, Virginia-based consulting firm Omnis Inc.

“As I see it, it is the greatest bubble in history with the most massive misallocation of wealth,” Rickards said at the Asset Allocation Summit Asia 2010 organized by Terrapinn Pte in Hong Kong yesterday. China “is a bubble waiting to burst.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aNZe4JWeV1aw

-China, Japan Reduced Holdings of U.S. Treasury Debt in January. Read more here-http://www.bloomberg.com/apps/news?pid=email_en&sid;=avsB.BdWGdIE

-China’s Wen Rebuffs U.S. Calls for Stronger Currency. Read more here-http://www.bloomberg.com/apps/news?pid=20601010&sid;=adgSFPqllr68

-Europe’s banks brace for UK debt crisis. UniCredit has alerted investors in a client note that Britain is at serious risk of a bond market and sterling debacle and faces even more intractable budget woes than Greece. Read more here-http://www.telegraph.co.uk/finance/economics/7423138/Europes-banks-brace-for-UK-debt-crisis.html

-Pound Bears Bet More Than When George Soros Beat BOE. Wagers on the pound weakening against the dollar outnumber futures that profit on a rise by eight times more than when George Soros made $1 billion betting against the currency in 1992, the year Prime Minister John Major’s Conservative government was forced to withdraw from the European Exchange Rate Mechanism. Sterling fell 19 percent that year. Read more here-http://www.bloomberg.com/apps/news?pid=20601010&sid;=anZYsKwNSuiY

-U.S., U.K. Move Closer to Losing Rating, Moody’s Says. The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=a8c_1vtVGzD8

-Eurozone could risk ’sovereign debt explosion’. Europe’s governments are at increasing risk of an interest rate shock this year as the lingering effects of the Great Recession drive debt issuance to record levels and saturate bond markets, according to Standard & Poor’s. Read more here-http://www.telegraph.co.uk/finance/economics/7424555/Eurozone-could-risk-sovereign-debt-explosion.html

-Moody’s fears social unrest as AAA states implement austerity plans. The world’s five biggest AAA-rated states are all at risk of soaring debt costs and will have to implement austerity plans that threaten “social cohnesion”, according to a report on sovereign debt by Moody’s. Read more here-http://www.telegraph.co.uk/finance/economics/7450468/Moodys-fears-social-unrest-as-AAA-states-implement-austerity-plans.html

-Almost 39 million Americans received food stamps in December, the most ever, as the jobless rate hovered near a 26- year high, the government said. Recipients of the subsidies for food purchases climbed 23 percent from a year earlier and rose 2.1 percent from November, the U. S. Department of Agriculture said Thursday in a statement on its Web site. The number receiving the benefit has set records for 13 straight months.

Food aid climbed as the national unemployment rate reached 10.1 percent in October, the highest since June 1983, and remained at 10 percent through December before easing to 9.7 percent in January. An average of 40.5 million people will get food stamps each month in the federal fiscal year that began Oct. 1, Agriculture Secretary Tom Vilsack said last week. The figure is projected to rise to 43.3 million in 2011.

Nevada had the biggest increase in the percentage of the population receiving the coupons, up 49 percent from December, USDA figures show. Texas had the most recipients, at 3.31 million, topping California’s 3.11 million. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1268586000.php and http://news.goldseek.com/InternationalForecaster/1268838000.php

-Hundreds of powerful US “bunker-buster” bombs are being shipped from California to the British island of Diego Garcia in the Indian Ocean in preparation for a possible attack on Iran. The Sunday Herald can reveal that the US government signed a contract in January to transport 10 ammunition containers to the island. According to a cargo manifest from the US navy, this included 387 “Blu” bombs used for blasting hardened or underground structures.

Experts say that they are being put in place for an assault on Iran’s controversial nuclear facilities. There has long been speculation that the US military is preparing for such an attack, should diplomacy fail to persuade Iran not to make nuclear weapons. Read more here-http://www.heraldscotland.com/news/world-news/final-destination-iran-1.1013151

-Tehran aiding al Qaeda links, Petraeus says. Iran is assisting al Qaeda by facilitating links between senior terrorist leaders and affiliate groups, the commander of U.S. forces in the Middle East told Congress on Tuesday.

Army Gen. David H. Petraeus, commander of the U.S. Central Command, also said Iran’s nuclear program is facing problems, and as a result, Tehran is not expected to emerge with a nuclear weapon this year.

The exact details of when U.S. intelligence agencies estimate Iran will have a nuclear bomb are classified, but the timeline for developing a nuclear device has “thankfully slid to the right a bit,” he said. Read more here-http://www.washingtontimes.com/news/2010/mar/17/tehran-aiding-al-qaeda-links-petraeus-says//print/

-Bin Laden Unlikely to Be Captured Alive, Holder Tells Lawmakers. Al-Qaeda leader Osama bin Laden is unlikely to face trial because he probably would be killed before being captured, said Attorney General Eric Holder. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ahdptnIoG7Ak&pos;=9

-Nigerian prince still wants your money. Internet fraud cases surged by 22% in 2009, and financial losses doubled compared to the year before as scammers took advantage of Americans rendered desperate by the recession. Read more here-http://money.cnn.com/2010/03/16/news/economy/internet_fraud_fbi/index.htm

-‘Historic Flooding’ Possible in U.S., NOAA Says. One-third of the U.S. faces the possibility of “historic flooding” in coming weeks, especially the upper Midwest states of North Dakota, South Dakota, Minnesota and Iowa, government forecasters said.

“Once again we are delivering an urgent message to get ready,” John Hayes, director of the National Weather Service, said in a conference call today. “The flood risk is above- average over one-third of the country.”

The flood potential is driven in part by El Nino, a warming in the Pacific Ocean, which steered storms that have left the ground saturated from record rains and heavy snows. The area designated for above-average risk stretches from New Mexico in the west to Maine in the east, federal maps show.

“We are looking at potentially historic flooding in some parts of the country this spring,” Jane Lubchenco, administrator for the National Oceanic and Atmospheric Administration, said in the conference call. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aom6bk2Uy6U0

-Bentley Fetches Top Price at $1.5 Million Classic-Car Auction. The 1956 S1 Continental Sports Saloon made 166,500 pounds, against an estimate of 150,000 pounds to 180,000 pounds. The 120 mph car had wind-tunnel-developed fastback coachwork by H.J. Mulliner and was bought by a U.K. collector bidding by phone, said auction house Bonhams, which held the sale in Oxford. Read more here-http://www.bloomberg.com/apps/news?pid=20601096&sid;=ahzIkTDH7OVc

-Christie’s puts record price tag on “key” Picasso. “Portrait of Angel Fernandez de Soto (The Absinthe Drinker),” dated 1903, is expected to fetch 30-40 million pounds ($45-60 million), the highest pre-sale estimate for any work of art offered at auction in Europe.

The June 23 auction follows a February sale at rival Sotheby’s where a Giacometti sculpture went under the hammer for $104.3 million, just beating the previous record for another Picasso that sold for $104.2 million in New York in 2004.

Wednesday’s announcement of the June sale underlines growing confidence in the art market after a sharp contraction during the financial crisis. The Picasso, featuring a seated man with a glass of absinthe and a pipe, the smoke curling upwards, is being offered by composer Andrew Lloyd Webber, and the proceeds will go to his foundation which promotes arts and culture in Britain. Read more here-http://www.reuters.com/article/idUSTRE62G17A20100317

WWW.RARECOLOREDDIAMONDS.COM

-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.rarecoloreddiamonds.com/watchnow.html and

http://www.b-tv.com/features/watch-now.html?id=326

-Sotheby’s Jewels Sales Brings in Over $1.75 Million. The second highest-selling item, a fancy intense pink diamond and diamond necklace, more-than doubled its lowest sales estimate of 14,000-18,000 GBP when it was sold at the hammer price of 30,000 GBP ($45,843). The necklace is of negligée design with a fancy intense pink pear-shaped diamond weighing 0.91 carats and another similarly shaped near-colourless stone weighing 0.98 carats. Read more here-http://www.idexonline.com/portal_FullNews.asp?id=33831

-Rare Jewels Set to Shine at Upcoming Auction. Up to three and a half million dollars that’s how much a rare pinkish orange diamond ring is expected to fetch at the Magnificent Jewels Auction in New York. It’s one of more than a hundred pieces of spectacular diamond and colored stone jewels at the collection previewed in London.

Victoria Major of Sotheby’s said the Gemological Institute of America’s grading confirms this ring’s rarity. Victoria Major, V.P, Jewelry Department, Sotheby’s said “As of September 2009, it was the largest such diamond ever to be graded by the GIA (Gemological Institute of America).

It is exceptionally rare. The GIA actually just supplied us with a letter attesting to how rare it is and that this orange color, which is the dominant color in the stone, is one that is a miracle of nature, it really is a true miracle.”

The other major highlight is a magnificent vivid yellow diamond necklace set with 42 GIA certified diamonds weighing just over 100 carats. The necklace is expected to sell for between two to three million dollars.

After the London preview, the jewels will travel to Hong Kong and California for further auction previews until they are finally sold off in New York on April 20. Read and watch more here-http://english.ntdtv.com/ntdtv_en/ns_europe/2010-03-17/234161149173.html

-Sotheby’s picks Hong Kong for blue diamond ring auction. Hong Kong’s rising status as an international centre for fine jewellery auctions has received a boost from Sotheby’s decision to put a 5.16-carat blue diamond ring on sale in the Chinese territory instead of in one of its more traditional markets.

The sale of the pear-shaped stone, estimated to fetch up to $5.8m (£3.8m, €4.3m) at auction, will add momentum to the diamond trade in Hong Kong, which now rivals that in New York and Geneva. Hong Kong has benefited from the proximity of wealthy Chinese buyers and their growing purchases of diamonds , platinum and sapphires.

But Patti Wong, chairman of Sotheby’s Asia, said the auctioneer had persuaded the unidentified private owner to sell the diamond in Hong Kong because of the city’s increasingly wide appeal to jewellery buyers. “In the past, people thought Hong Kong could only attract Asian buyers. It is totally not true. We have been drawing intense interest from international collectors as some of the best items are offered here,” said Ms Wong.

At Sotheby’s, Hong Kong’s share of international jewellery sales has jumped from 19 per cent in 1998 to 34 per cent in 2008, overtaking New York to be its second-biggest market after Geneva. For rival Christie’s, Hong Kong was the second-largest jewellery market last year, just after New York.

Last December, Christie’s sold a ring with a five-carat pink diamond in Hong Kong for $10.7m, or $2.1m per carat, which set a record per-carat price for any gemstone. The auctioneer said it had advised the US-based collector to sell the stone in Hong Kong, which boosts a large number of Chinese buyers.

The previous record belongs to a 7.03-carat stone Star of Josephine brought by Joseph Lau, the Hong Kong tycoon, for $9.48m, or $1.35m per carat, in May 2009 in Geneva. “When we sold the pink diamond, the buyer was Chinese, the under bidder was Chinese, the under under bidder was Chinese,” said François Curiel, Asia president.

Hong Kong, the world’s third largest auction market after New York and London, is also becoming a centre of wine sales for auction houses. Last year, Sotheby’s fetched $14.3m from wine sales in Hong Kong, just shy of London’s $14.7m but ahead of New York’s 12.7m. Asian collectors accounted for more than half of global wine sales in 2009.

In January, Sotheby’s held the first stand-alone wine auction in Hong Kong, which realised $6.8m, or the highest total achieved by the auctioneer for a single day wine sale. The blue diamond will be one of the top lots offered by Sotheby’s at its five-day spring auction in April, which is expected to fetch more than $128m. Read more here-http://www.ft.com/cms/s/0/eb58cd1e-2277-11df-a93d-00144feab49a.html

THE BLACK SWAN WORRIED ABOUT HYPERINFLATION

-Nassim Nicholas Taleb, author of “The Black Swan” about how unforeseen events can roil markets, said he is concerned about hyperinflation as governments around the world take on more debt and print money.

“We are facing an environment with a huge amount of debt,” he said in a speech in New Delhi today. “The next mistake is going to be overprint, which is going to be the way out for them, which is why I fear hyperinflation.”

Taleb joins Mohamed A. El-Erian, co-chief investment officer at Pacific Investment Management Co., in warning governments about rising public debt. Failing to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, El-Erian said yesterday.

“Why is the state converting private debt into public debt?” said Taleb, who advises Universa Investments LP, a $6 billion fund that bets on extreme market moves. It’s “because public debt is permanent.”

THE 2 TRILLION HOLE

-Promised pensions benefits for public-sector employees represent a massive overhang that threatens the financial future of many cities and states. Like a California wildfire, populist rage burns over bloated executive compensation and unrepentant avarice on Wall Street.

Deserving as these targets may or may not be, most Americans have ignored at their own peril a far bigger pocket of privilege the lush pensions that the 23 million active and retired state and local public employees, from cops and garbage collectors to city managers and teachers, have wangled from taxpayers.

Some 80% of these public employees are beneficiaries of defined-benefit plans under which monthly pension payments are guaranteed, no matter how stocks and other volatile assets backing the retirement plans perform. In contrast, most of the taxpayers footing the bill for these public-employee benefits (participants’ contributions to these plans are typically modest) have been pushed by their employers into far less munificent defined-contribution plans and suffered the additional indignity of seeing their 401(k) accounts shrivel in the recent bear market in stocks.

And defined-contribution plans, unlike public pensions, have no protection against inflation. It’s just too bad: Maybe some seniors will have to switch from filet mignon to dog food. Most public employees, if they hang around to retirement, can count on pensions equal to 75% to 90% of their pay in their highest-earning years.

And many public employees earn even more in retirement than their best year’s base compensation as a result of “spiking” their last year’s income by working ferocious amounts of overtime and rolling in years of unused sick and vacation days into their final-year pay computation.

A survey by the watchdog group California Foundation for Fiscal Responsibility found that some 15,000 Golden State public employees are knocking down $100,000 or more, while some 200, mostly police and fire chiefs and school administrators, are members of the $200,000-a-year-and-up club. Read more here-http://online.barrons.com/article/SB126843815871861303.html?mod=BOL_hps_emr#articleTabs_panel_article%3D1

REAL ESTATE-FORECLOSURES-MORTGAGES

-More homeowners are opting for ’strategic defaults’. Underwater on their mortgages and angry at banks, more borrowers are choosing to hand over the keys, even if they can afford the payments. Read more here-http://www.latimes.com/business/la-fi-walkaway17-2010mar17,0,2149033,full.story

-Homeowners take ‘cash for keys’ to escape debt. Borrower loses house, but gets fresh start without black mark on credit. Jon Daurio, chief executive officer of mortgage investor Kondaur Capital Corp., recently offered a $4,000 check to Barry Culver for the deed to his Bryan, Ohio, house.

With the exchange, and a pay-off to a second-lien holder, Culver was freed of $120,000 in crushing mortgage debt on the house, said Daurio, who had bought the right to cut the deal when he purchased the mortgage months earlier. The house, after repairs, is now on the market for $47,500. Read more here-http://www.msnbc.msn.com/id/35839839/ns/business-real_estate/?source=patrick.net

-New round of foreclosures threatens housing market. The housing market is facing swelling ranks of homeowners who are seriously delinquent but have yet to lose their homes, and this is threatening a new wave of foreclosures that could hit just as the real estate market has begun to stabilize.

About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some economists project it could take nearly three years before all these homes have been put on the market and purchased by new owners. And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can’t obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete.

As these foreclosed properties add to the supply of homes for sale, they could undercut housing prices, which have increased modestly through December, according to the most recent figures in the S&P;/Case-Shiller home prices index. That rise partly reflected a slowdown in the flow of foreclosed homes onto the market.

The rate at which J.P. Morgan Chase seized properties, for example, peaked in the middle of 2008 and fell steadily last year, according to a February investor report. But the bank expects repossessions to increase this year, nearly doubling to 45,000 by the fourth quarter.

“Some of the positive housing data may not be signaling a true turning point, as many servicers are holding back on foreclosures and the related houses are not yet being offered for sale,” said Diane Westerback, a managing director at Standard & Poor’s. Westerback said it could take 33 months to clear the backlog.

Data released Thursday by RealtyTrac illustrate the dynamic. While banks repossessed fewer homes in February than a month earlier, borrowers continued to fall behind on their payments, adding to the inventory of properties headed toward foreclosure that have yet to be put on the market, said Daren Blomquist, RealtyTrac’s spokesman.

“Just looking at the numbers, we would expect there to be a bigger percentage of properties” repossessed by banks by now, he said. This “shadow market” reflects the increasing lag between defaults and foreclosures. Many lenders are struggling to keep up with the overwhelming number of borrowers who can’t make their payments, and they’re reluctant to rush repossessed homes onto the market when prices are depressed. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2010/03/11/AR2010031104866_pf.html

-972 Foreclosure Filings in Hawaii in February. The figure reported Thursday by foreclosure listing firm RealtyTrac represents an 81 percent increase over 537 filings in February 2009. Read more here-http://www.nytimes.com/aponline/2010/03/11/business/AP-US-Hawaii-Foreclosures.html?_r=3&source;=patrick.net

The Goldbugg Report – March 23, 2010
Posted by Worldwide Precious Metals on Tuesday, March 23, 2010

The Goldbugg Report – March 16, 2010

March 16, 2010

Special Memo to All Retail Dealers

For many weeks, in multiple memos, we have been discussing the upcoming meeting on March 25^th of the US Commodity Futures Trading Commission. This meeting is for the sole purpose of examining and discussing position limits for the trading of futures and options in the precious and base metals markets. The meeting will be open to the public and will be webcast via the Internet and also available as a listen-only conference call as outlined in this CFTC press release:

http://www.cftc.gov/newsroom/generalpressreleases/2010/pr5782-10.html

For years there have been accusations that a handful of banks, namely JPMorgan Chase and HSBC, have been manipulating the prices of precious metals. This has been achieved by the ability of these banks to hold massively concentrated short positions on the New York Commodities Exchange (Comex) that cannot possibly be covered. In January 1999 the Gold Anti-Trust Action Committee (GATA) was formed to expose this manipulation, particularly regarding the price of gold. For more than a year now, GATA has also been investigating manipulation in the silver market as well. Those involved in the manipulation scheme have tirelessly tried to marginalize GATA and question their findings.

In the light of the financial meltdown that nearly sent the entire world into a depression (a meltdown that still appears to be far from over) a pattern has emerged. The same bank names appear almost daily in the news regarding manipulative and surreptitious deals which helped not only to create the conditions that led to the meltdown, but are now helping to extend it. Goldman Sachs has been exposed for helping Greece hide the severity of its debt all the way back to 2001. Entire towns in Iceland were bankrupted by deals backed by worthless mortgages which were set up by US banks. As discussed in our March 12^th memo, Italy is now suing several banks for fraud over questionable deals and one of those banks is JPMorgan Chase.

Under an administration clamoring for more transparency, the reporting on gold and silver markets has become even more opaque, specifically the Commitment of Traders report and the monthly Bank Participation reports. In February, 2009, the CFTC “determined that where the number of banks in each reporting category is particularly small, fewer than four banks, there exists the potential to extrapolate both the identity of individual banks and the banks’ positions. As a result, as of December 2009 the CFTC no longer names the number of banks when it is less than four.” This merely illustrates that the massive number of short positions on the Comex are held by FEWER than four banks.

Bill Murphy, chairman of GATA, has been invited by the CFTC to speak at their March 25^th meeting regarding the evidence that GATA has amassed over the years on precious metals price manipulation by JPMorgan Chase and HSBC. The public nature of the CFTC’s March 25^th meeting will allow the manipulation of the precious metals markets to be exposed to the light of day. This should be viewed as positive news, possibly signaling the “beginning of the end” of price suppression tactics by these two institutions which could lead to incredibly positive upside price activity on the prices of these products. In our February 5^th memo, we quoted James Turk, a consultant to GATA as saying “Every once in a great while, the market offers a unique opportunity to buy precious metals “on the cheap”. I believe today is one of those moments.”

The time to help your customers establish, or add to, their precious metals portfolios is BEFORE prices explode to the upside and this certainly appears to be the time for you to take action. Precious metals prices have increased on an overall basis for years and if you’ve sat idly by as both you and your customers have watched the prices climb year after year, then you have missed tremendous opportunities to make you, and your customers, a profit. We do not feel that this is the time for you and your customers to sit idle, but rather is the time to get aggressive. As Mr. Turk says “Every once in a great while, the market offers a unique opportunity to buy precious metals “on the cheap”. I believe today is one of those moments.” Always remember, the key to profitability through the ownership of physical precious metals is to actually own the physical products and hold them for the long term. Your customers should never over-extend their ability to maintain ownership of their product over the long term.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

GOLD

-Rob McEwen sticks with $2,000/oz gold by year-end. Goldcorp founder Rob McEwen is standing by his forecast that the price of gold will reach $2,000/oz by the end of 2010, he said on Monday.

While it may still seem a stretch from current levels of around $1,100/oz, it should be noted that McEwen has been making the prediction since at least March 2006. At that time, prices for the yellow metal had not topped $600/oz since January 1980.

“I have been saying for over five years: by the end of this year, we will be at $2,000 and, when the game is over for gold, it will be over $5,000 an ounce,” he said in an interview on the sidelines of the Prospectors and Developers Association of Canada’s annual convention. Read and watch more here-http://www.miningweekly.com/article/mcewen-sticks-with-2-000oz-gold-by-year-end-2010-03-09

-Buy Gold While Supplies Last, Says Fund Manager. Lost in the headlines over the dollar’s resurgence in 2010 is the fact gold is still rising in most worldwide currencies. It is also still faring well in dollar terms. Frank Holmes, CEO and CIO of U.S. Global Investors, a long time gold bull sees no reason for this trend to end.

He tells Aaron in the accompanying clip, “there are many compelling factors both from a supply side and then from the demand side that looks like gold will trade higher.” Holmes’ reasons to bullish on gold:

-Massive federal deficits and low interest rates in the United States and elsewhere will raise inflation risks and keep downward pressure on currencies.

-Rising incomes in Asia, where affinity for gold runs deep, will have a sizable positive impact on demand; Holmes tells Aaron that China is now the largest producer of gold in the world but that won’t drive down prices because the government is “using it as a reserve currency for themselves.” However, bulls should note China’s chief for exchange official said this morning they would limit their purchases.

-Peak Gold? Gold production from mines is not adequate to meet demand. Production is dropping around the world. Holmes notes worldwide production ell 10% in 2008 and is especially dramatic in South Africa the world’s largest producer.

Holmes, however, does have a few words of caution for those looking to get rich on gold. He only recommends a 10% allocation in gold that would be divided evenly between bullion and stocks. Read and watch more here-http://news.goldseek.com/GoldSeek/1268152754.php

-As Confidence Returns, Gold Will Rise-John Embry. Sprott Asset Management’s Chief Investment Strategist believes gold could gain another 30% this year this year as a greater proportion of the public realizes the degree of difficulty that sovereign debt is in. Interview with the Gold Report.

The Gold Report: John, in Investors Digest of Canada you recently said you’re expecting gold to gain another 30% this year.

John Embry: I would say at least 30%. I said that I thought it would be the best year to date. We’ve had nine years consecutive higher year-end prices and the best year in that span for a year’s return was 31%. I think this will be the year that we exceed it in this, the 10th year of the bull market.

TGR: What’s driving this? Why is this year going to be the best year?

JE: I think we’re getting very close to the point when a greater proportion of the public realizes the degree of difficulty that sovereign debt is in. And at that point, when you can’t depend on your government paper as a safe haven, I think that fact puts gold in a much better light in more people’s eyes.

TGR: You might say the first leg down were the individuals who couldn’t pay their mortgages and that caused part of the ‘08 collapse. And now it looks like it’s the government’s.

JE: It’s very simple, actually. Private demand, as you know, was so weak that governments had to step in to maintain order in the economy and in so doing, they spent an enormous amount of money, at the same time that revenue streams fell because of the weakness in the private sector. Governments spent dramatically more money and the results are a budget deficit I never thought I’d see in my life. I’m shocked at the numbers in many places.

TGR: I read that the IMF is going to be selling some gold and India stepped up earlier. What are your thoughts on that?

JE: The whole thing irritates me. The IMF has announced the sale of this gold 500 times and every time with the express purpose of knocking the price of gold down. It was interesting the last time when the Indians actually relieved them of over 200 tons because that was what basically vaulted the market from about $1,045, which the Indians paid, up to $1,225 in the space of less than a month. That has been followed by the third significant correction in the last three or four years.

I think we’ve seen the vast proportion of the correction and I think what may be one of the factors that could get this thing going again is when somebody does relieve the IMF of the gold, the 191 tons to be exact. There’s speculation that India might be prepared to go to the plate again because the Chinese have been reluctant to step up. Number one, I don’t think they want to be seen publicly doing it.

They’d probably rather do it more clandestinely because they’ve got so much money to convert into hard assets. And, secondly, as somebody pointed out, the Chinese at least have a domestic supply of gold. They can buy all their domestic to augment their reserves, where the Indians really don’t have that. So I think the Indians conceivably have a bigger vested interest here in taking that IMF gold.

And there’s also sort of the suggestion that the Chinese wouldn’t want to be seen to be paying more than the Indians did, so they’re reluctant to step up with the gold price $50 higher currently than the Indians paid. If it was really a free market, if they were really prepared to sell it to anybody, I think I could name any number of institutions, organizations, individuals that would be more than glad to relieve them of it. It’s not much money. It’s $6 billion. They throw it around as if it’s a big deal. Heck, given the budget deficits in some of these countries, $6 billion is literally a piss in the ocean.

GR: That’s right. What do you think when Soros came out and said that gold was a bubble?

JE: I wrote about that and I got it right. I was very pleased about that because some people got all upset. The people that were negative on gold thought this was great, brilliant George Soros doesn’t like gold. But if you read between the lines, if you read really what he said, he said gold is the ultimate bubble, but he didn’t say gold is currently the ultimate bubble.

I believe that it will be the ultimate bubble. I think the gold price is going to go crazy and at that point I’d be worried about. And then it came out after the fact that Soros had been a major buyer of gold for his funds in the fourth quarter. So who knows what he was doing. The fact is, depending how you interpreted his remark, he was speaking at Davos, which is a very mainstream event, and he said something that can be interpreted any number of ways.

TGR: Right. And, again, I think the financial talking heads used it as the negative.

JE: Absolutely. The mainstream guys were all over it. The guys who have never like gold have been wrong all the way up and said, oh, my god, George Soros doesn’t like gold. But I think George Soros’ remarks were misinterpreted and if you saw what he was doing, not what he was saying, he was buying gold.

TGR: All right. Any last comments?

JE: The only comment I’d make is I really think things are sufficiently serious here in a financial or monetary debasement sense that everybody-and I have never been a table pounder-but I think every single person with a serious portfolio has got to have a reasonably significant exposure to precious metals. This isn’t something that’s just insurance for those who’ve got cold feet. This is something I think is a mainstream thing that people must have.

TGR: When you say a significant portion, what percentages are you thinking?

JE: I used to say 5% to 10% when it was just an insurance thing and the market was pretty sanguine. I say at least 20% now. I see the other assets as being less attractive. I wouldn’t buy a bond if you gifted me with the money to do it.

TGR: John, once again, I appreciate it. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=100633&sn;=Detail

-John Embry February commentary. Read more here-http://www.sprott.com/Docs/InvestorsDigest/2010/MPLID_022610_pg45Emb.pdf

-The bottom line is the new record highs in euro gold prove this secular gold bull is even healthier than today’s admittedly-impressive dollar-gold prices indicate. Euro gold effectively filters the wild dollar volatility out of the gold chart, leaving a cleaner dollar-neutral view.

And today this is showing gold continuing to power higher in its fourth major Stage Two upleg despite its consolidation in dollar terms. And as the dollar’s latest bear-market rally rolls over, this international strength should soon spill into dollar gold as well.

As American investment buying is added back on top of European investment buying, we ought to see some really impressive gold gains in the coming months. Investors would do well to keep an eye on euro gold, as it offers an important perspective that a myopic dollar-only view cannot. Read more here-http://www.321gold.com/editorials/hamilton/hamilton030810.html

-Forget US Stocks Buy Gold Every Month ‘Forever’: Faber. Investors should buy some gold every month “forever” or look to emerging market stocks rather than US shares, Marc Faber, editor of The Gloom, Boom & Doom Report, told CNBC.

“(Gold’s) quantity cannot increase at the same rate as you can print money, which will eventually weaken the US dollar,” Faber said on Thursday in a live interview. “I’m not saying that the dollar will go straight away down because other currencies like the euro are even worse at the present time,” he added. “But eventually if you print money, the purchasing power will lose [value].” Read and watch more here-http://www.cnbc.com//id/35707348

-Gold is decade’s best performing investment. Gold has proved to be the best value investment over the last 10 years, new research has disclosed. Read more here-http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7375415/Gold-is-decades-best-performing-investment.html

-Gold is the standard! Midas Letter publisher James West believes gold is the store of value everybody resorts to when times are rough. Interview with The Gold Report. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=100271&sn;=Detail&pid;=1

-Gold: setting up for its next move to the upside? Expansionary monetary policies, exploding national debt and global currency devaluations, are creating a very favorable scenario for the price of gold. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=100539&sn;=Detail&pid;=1

-Reflation, Supply Restraint Lend Support to Gold: Dundee Wealth’s Murenbeeld. Read more here-http://www.kitco.com/reports/KitcoNewsPDAC20100308B.html

-Gold on the move again? Commentary: Gold bugs are bullish, citing sovereign debt concerns. Read more here-http://www.marketwatch.com/story/story/print?guid=61B285CC-4CE6-48EF-A5BB-A0E8E2A5A84F

-”Embrace Inflation”: How to Profit and Protect Your Wealth. Buy Gold. Read more here-http://finance.yahoo.com/tech-ticker/article/434044/%22Embrace-Inflation%22:-How-to-Profit-and-Protect-Your-Wealth

-Seven reasons to invest in gold. Read more here-http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7394180/Seven-reasons-to-invest-in-gold.html

-Four reasons gold will remain firm and strengthen. Blanchard Chairman, Donald Doyle sees numerous reasons that point to gold’s nine-year bull run continuing in both the near and long term. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=100776&sn;=Detail&pid;=1

-Keeping 5% of portfolio in gold isn’t a bad idea as a hedge. Read more here-http://www.usatoday.com/money/perfi/columnist/waggon/2010-03-05-investing05_ST_N.htm

-China assesses its gold strategy. Read more here-http://www.atimes.com/atimes/China_Business/LC11Cb01.html

-China will be prudent in buying gold: official. Read more here-http://www.reuters.com/article/idUSTRE6280XR20100309

-China says committed to U.S. debt, wary on gold. “The U.S. Treasury market is the world’s largest government bond market. Our foreign exchange reserves are huge, so you can imagine that the U.S. Treasury market is an important one to us,” Yi Gang, head of the State Administration of Foreign Exchange (SAFE), told a news conference. Read more here-http://www.reuters.com/article/idUSTRE6280K720100309 or http://www.marketwatch.com/story/story/print?guid=0F69966C-E18F-489A-9927-7C6649D7CD95 or http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7404287/China-says-gold-is-unlikely-to-be-primary-investment.html

-1.5bn Potential Chinese Gold Bugs a New Demand Factor. Read more here-http://news.goldseek.com/PeterCooper/1268231177.php

-Venezuelan central bank to increase gold purchases. Read more here-http://www.gata.org/node/8400 and http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=100263&sn;=Detail&pid;=34

-GATA Claims To Have Evidence Of “Massive Physical Short Gold And Silver Positions That Can Not Be Covered”. Read more here-http://www.zerohedge.com/article/gata-claims-have-evidence-massive-physical-short-gold-and-silver-positions-can-not-be-covere

SILVER

Gold to silver ratio at 80 to 1 with gold at $1,300 the silver price would be $16.25

Gold to silver ratio at 70 to 1 with gold at $1,300 the silver price would be $18.57

Gold to silver ratio at 60 to 1 with gold at $1,300 the silver price would be $21.67

Gold to silver ratio at 50 to 1 with gold at $1,300 the silver price would be $26.00

Gold to silver ratio at 40 to 1 with gold at $1,300 the silver price would be $32.50

Gold to silver ratio at 30 to 1 with gold at $1,300 the silver price would be $43.33

Gold to silver ratio at 20 to 1 with gold at $1,300 the silver price would be $65.00

Gold to silver ratio at 15 to 1 with gold at $1,300 the silver price would be $86.67

-Gold-Silver Ratio Slumps to Six-Week Low as Risk Appetite Grows. Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid;=ajXqH3MmMVjg

-When you factor in inflation and devaluation of the U.S. dollar, $850 gold in 1980 is $2,500 an ounce in today’s dollars. In other words, gold might be at 50% at $1,200, which is the highest of highs. Could there be a run to $2,500?

Your personal answer to that question will depend upon how confident you are in Fed Chairman Ben Bernanke, President Obama, and Wall Street. If you have faith in our leaders of commerce, don’t buy gold. If you do not have faith in them, maybe you should buy gold or silver.

If the dead cat bounce dies and the Dow drops to 5,000 in 2010, as I predict, then the price of gold and silver may die with the dead cat of the Dow, as investors cling to cash. The next question you need to answer is, “If the Dow dies and the price of gold and silver drop, what should you invest in at the bottom…stocks, gold and silver, or cash?”

I know what I will do. I will buy more gold and silver. Why? The answer is because I trust gold and silver more than Central bankers, the Oval Office, and Wall Street. Gold and silver have been real money for thousands of years. Robert Kiyosaki-Read more here-http://finance.yahoo.com/expert/article/richricher/221388

-In 1980 the historic ‘70s gold bull market finally topped out at $850. After adjusting for inflation, to merely equal what it did in 1980, gold would have to go (only) to $2,300, and silver topped out at $50 in 1980. After adjusting for inflation since then, to merely make a new high, silver would have to go over $125 and gold to $2,300!

Silver is the poor man’s gold. Think of gold as large denomination money, and silver as small bills. A one-ounce gold coin is now worth more than $1000, but you can buy a roll of pre-1965, ninety percent silver dimes for under $60 a roll. Partly because it is so much cheaper, the potential buying pool is much larger, and industrial use is so much greater, silver will be more profitable than gold by at least one hundred percent!

Silver is by far the more important industrial metal. There are more than two thousand silver industrial applications, and Uncle Sam has zero stockpiles of silver. It can be polished to be more reflective than any other metal, which is why it is used as backing for glass to make mirrors. It has thousands of essential uses in industry. It is an essential component for the manufacture of all audio and videotape, and all film. But above all, it is routinely accepted as money, especially in India, China, and the Middle East.

And remember, silver went from under $2 to $50 in the last bull market, when the consensus was that there was many times more silver than gold above the ground. Now the ratio is reversed. There is five times more gold above ground than silver. Howard Ruff-Read more here-http://www.kitco.com/ind/Ruff/ruff_mar052010.html

-Silver may break previous high of $50 within 3 years, and at current levels it looks totally undervalued, Lakeshore Trading precious metals analyst David Levenstein said on Thursday.

“For this reason, I suggest every single investor should own some silver,” said Levenstein. Read more here-http://www.busrep.co.za/index.php?fArticleId=5378328&fSectionId;=615&fSetId;=662

-Is it Time for Silver to Outshine? Read more here-http://sovereignsociety.com/2010/03/05/%E2%80%9Cgold-should-get-ready-to-take-a-back-seat%E2%80%A6%E2%80%9D/

-Morgan not yet going short again against metals rally, Butler tells King. Listen here-http://www.gata.org/node/8401

-Once world’s richest man, Bunker Hunt has ‘no regrets’ 29 years after silver collapse. Read more here- http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/032209dnprobunkerhunt.3d93ff8.html

-Gold investor and mining company operator Jim Sinclair has just given another interview to Eric King of King World News, discussing the Hunt Brothers’ famous corner on silver in the 1970s and the use of credit default swaps to attack and destroy currencies today. Listen here for parts 1 and 2-http://www.kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/3/8_King_World_News__Bunker_Hunt_%26_Jim_Sinclair.html

-Altered landscape riles commodity boom-and-bust cycle. Emerging economies, exchange-traded funds help paint the backdrop. Read more here-http://www.marketwatch.com/story/story/print?guid=DDA0E3AB-81C6-4290-BA9E-E9E251FAD145

CHARTS OF THE WEEK-QUOTES-QUICK HITS

-75 Years of Funny Money-http://www.financialpost.com/news-sectors/economy/story.html?id=2668127

Source: www.chartoftheday.com

-Chart of the week: The Scariest Job Chart Ever. We can debate whether today’s jobs number was good or not, but this much is clear, compared to other recessions, the job losses, and lack of job gains, are truly unprecedented. Read more here-http://www.businessinsider.com/chart-of-the-day-the-scariest-job-chart-ever-2010-3

-Chart of the week: Why You Still Don’t Have A Job. The latest DiscoverCard small business sentiment numbers came out today, and showed that confidence actually dipped in February from January. That’s one reason you don’t have a job yet.

Here’s another nugget from the report: the number of businesses with cash-flow issues is still elevated. Yes, it’s improved a little bit, but at any other time, we’re looking at unprecedented heights.

If we put together a few more months of improvement, then we might really see some job creation again. Read more here-http://www.businessinsider.com/chart-of-the-day-small-business-owners-with-cash-flow-issues-2010-3

Source: www.chartoftheday.com

-Hockey fans flush with pride. City’s water use spikes during breaks in gold-medal game. Read more here-http://www.edmontonjournal.com/sports/Hockey+fans+flush+with+pride/2660726/story.html

-”You cannot escape the responsibility of tomorrow by evading it today.” Abraham Lincoln

-“Credit-default swaps, where you insure your neighbour’s house just to destroy it and make money from it, that’s exactly what we have to curb.” Angela Merkel-German Chancellor

-JPMorgan Chase & Co. and Citigroup Inc. helped cause the illiquidity that led to the collapse of Lehman Brothers Holding Inc., the bankrupt bank’s examiner said today in a report filed in Manhattan federal court.

Lehman tumbled into its $639 billion bankruptcy, the biggest in U.S. history, because it didn’t have enough liquidity and lost the confidence of its counterparties, according to a 2,200-page report from Anton Valukas, the U.S. Trustee-appointed examiner.

By changing guarantee agreements and making new demands for collateral, JPMorgan and Citigroup helped to precipitate the liquidity crisis that doomed Lehman, Valukas said. Read more here-

http://www.gata.org/node/8420

-If all the issuers of paper money want to see their currencies depreciate, then the only answer is to own an asset that central banks cannot debase namely, gold. Part of bullion’s rise to more than $1,200 an ounce this year must be attributed to the conviction that governments will inflate away their debts. The Economist, March 4, 2010

-If the global economy recovers, I think gold demand will pick up. There is no new supply of gold available so the gold price will rise. If things continue to worsen, then I think that gold as a non-default, hard asset will be an asset of choice in a world where credit risk is the dominant theme. So I think gold is in a win-win position. Kevin Maclean-Read more here-http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/kevin-maclean-sees-more-gains-for-gold/article1473370/

-If there is a lesson learned from the Japanese experience, it is that recessions or “double dips” come faster than you think. After going nearly 20 years without a recession at all, Japan then went on to endure one in every four years after its credit bubble burst two decades ago. David Rosenberg-Gluskin/Sheff

-The propaganda campaign by the US government is trying to mask the fact that the economic recovery plan is failing and that America is rapidly losing confidence in Team Obama. You cannot have a sustained recovery without changing the underlying conditions that caused the failure in the first place.

In addition to the media blitz dissected by Yves Smith in the essay excerpted, I have never seen such a load of rubbish being put forward with regard to the markets in US financial assets and commodities, and I have seen quite a bit in the last twenty years. In particular, the campaigns against gold and silver in particular are heavy-handed, obvious, and reaching the point of hysteria. Read more here-http://jessescrossroadscafe.blogspot.com/2010/03/propaganda-campaign-attempts-to-mask.html

• More than five million homes are behind on their mortgage.

• There are over six million Americans who have been unemployed for at least six months, a record 40% of the ranks of the joblessness.

• Roughly 30% of manufacturing capacity is sitting idle.

• Nearly 19 million residential housing units or about 15% of the stock is vacant.

• One in six Americans are either unemployed or underemployed.

• Commercial real estate values are down 30% over the past year.

• The average American worker has seen his/her level of wealth plunge $100,000 over the last two years even with the recovery in equity markets this past year.

• Bank credit is contracting at an unprecedented 15% annual rate so far this year as lenders sit on a record $1.3 trillion of cash.

• Unit labour costs are down an unprecedented 4.7% over the past year and what has replenished household coffers has been the federal government as transfer payments from Uncle Sam now make up a record 18% of personal income (and the Senate just passed yet another jobless benefit extension bill!). David Rosenberg-Gluskin/Sheff

-At 3.6%, equity cash ratios are back to where they were in September 2007, just as the stock market was hitting its peak. By way of comparison, bond fund managers have 6.4% cash ratios. David Rosenberg-Gluskin/Sheff

-S&P; Rally Slowed by Fastest Cash Depletion Since 1991. Equity mutual funds are burning through cash at the fastest rate in 18 years, leaving them with the smallest reserves since 2007 in a sign that gains for the Standard & Poor’s 500 Index may slow.

Cash dropped to 3.6 percent of assets from 5.7 percent in January 2009, leaving managers with $172 billion in the quickest decrease since 1991, Investment Company Institute data show. The last time stock managers held such a small proportion was September 2007, a month before the S&P; 500 began a 57 percent drop, according to data compiled by Bloomberg. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aPidmY6Nga30

-Emerging-Market Stocks May Retreat 15%, Aberdeen’s Kaloo Says. Emerging-market stocks will drop as much as 15 percent this year as earnings miss estimates and global growth slows, said Devan Kaloo, who oversees $22 billion at Aberdeen Asset Management Plc. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aHMvgOKxsm0c

-Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. who pays the company for postage and personal phone calls, received a $100,000 salary for a 29th straight year as he arranged a $27 billion acquisition. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aBlND9A1hUwk&pos;=4

-Sir John Templeton’s Last Testament: Financial Chaos Will Last Many Years. Read more here-http://newsmax.com/Ruddy/john-templeton-John-Templeton/2010/03/09/id/352142

-It is difficult to figure out what the equity market is really telling us. Since the market bottomed last March, the economy has shed 3.3mln jobs we have never seen the S&P; rally 50%+ with Nonfarm payrolls falling 3.33mln. David Rosenberg-Gluskin/Sheff

-The question must be asked: wasn’t the reach for yield one of the factors that caused the great credit crisis of 2007-08? It is amazing how so many investors have switched from fear to greed despite the fact that we are still writing chapters in this post-bubble-credit collapse book; so many people still do not realize Return of Capital is more important than Return on Capital.

It is almost a given that we will return to this theme at some point and likely sooner rather than later. The economy is not in some sort of equilibrium state it has been fuelled by high-octane government stimulus in all parts of the planet, especially in the U.S.A., the U.K. and China.

So we have today, as per the latest Investors Intelligence poll, 44.9% bulls versus 23.6% bears; the number of optimists doubles the number of pessimists. Nearly 70% of the investing public has also given up on the idea that we will see a correction over the near-term. Investor complacency is running at a dangerously high level. David Rosenberg-Gluskin/Sheff

-There is this illusion that we are in a sustainable recovery, but instead what has happened is that the government fooled the public by printing massive amounts of money and expanded the Fed’s balance sheet to levels nobody ever thought could be possible.

Meanwhile, all the problems in State budgets are being ignored, as are the huge numbers of either empty houses or houses where the owners are not paying their mortgages, not to mention the changes in some basic accounting rules to help banks hide their losses. David Rosenberg-Gluskin/Sheff

-When the balance sheets of US banks are maintained by suspending accounting rules and when banks hold financial derivatives liabilities greater than world GDP, both the stability and credibility of the banks is questionable.

When US economic data consistently seems to reflect a Pollyanna bias and the US federal budget contains unrealistic projections of GDP growth and tax revenues, while public debt and government liabilities (which now include unlimited bailouts for government sponsored entities Fannie Mae and Freddie Mac) are obviously unworkable and the US government’s own central bank is already a major buyer of US Treasuries, the federal government’s credibility is questionable. Ron Hera-Hera Research-Read more here-http://www.321gold.com/editorials/hera/hera031010.html

-Sovereign debt hangs like an albatross around the necks of too many countries. There are 17 medium-size to large countries that are close to, or are bankrupt. Many are being kept solvent by using two sets of books and by marking to model.

As you know we expect these bankruptcies to take place by the end of 2011. That will be accomplished at meetings such as we saw in the 1970s at the Smithsonian, the Plaza Accord of 1985 and the Louvre Accord of 1987. There will be a realignment of currencies. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1267988400.php or http://news.goldseek.com/InternationalForecaster/1268237004.php

-On the same day that the U.S. government ran up its largest monthly deficit ever, at $221 billion, the Senate approved a $138 billion measure that would extend unemployment benefits and provide additional aid to States in lawmakers’ second major effort this year to boost the economy (but don’t call it stimulus package #3). David Rosenberg-Gluskin/Sheff

-In one month, the U.S. government turned in a deficit that in other times in the not-too-distant past, was what was incurred in a full year (1990, 1991, 1992, 1993, 2002, 2003, 2004, 2005 all come to mind). The fiscal year is a mere five months’ old and already we have seen Washington rack up $652 billion of red ink.

The chamber voted 62-36 for the legislation, which would also extend dozens of expiring tax cuts, ease corporate-pension requirements and heads off cuts in Medicare reimbursements to doctors. It begs the question, if things are so great, why the need for this additional stimulus? David Rosenberg-Gluskin/Sheff

-To be sure, almost without debate, all the financial world has turned to crisis mode. One can safely describe the norm to be crisis proliferation. This theme will clearly continue for the full year in progress. The signs are everywhere. The evidence is compelling. The criticism of remedy is replete with denials. The US Govt officials grow more desperate with each passing week.

The Dubai and Greek debt woes seemed to have opened Pandora’s Box. Review a scattering of distress signals, sit back and tell yourself that all is under control. It is only if you live in a Fantasy Land. Since September 2008, the fantasy has blossomed in full bloom.

The list of distress signals is certain to grow, not reduce. Never in my lifetime have so many loud signals simultaneously been flashing. Forgive me if a few dozen other distress signals were overlooked or omitted. Jim Willie CB-Read more here-http://news.goldseek.com/GoldenJackass/1268253673.php

-Oh yes, and in a green shoot of epic proportions, the media today is treating the news that there were “only” 30 States with rising unemployment in January as a really good thing because it was down from 43 the month before (never mind that five states, including some biggies like Florida and California, reported new highs for their jobless rates); and that home foreclosures (as per RealtyTrac) were “just” 6% above year-ago levels, which was the slowest pace in four years.

This slower rate of foreclosures (nobody discusses the fact that the actual level of foreclosure filings, at 308,424 in February, is absolutely alarming) is NOT a sign that fewer homeowners are in distress but that the long arm of the law from prevention programs, to modification plans, to outright bans have managed to not only cap the number at these horrendous levels but also limit the new supply hitting the market.

If the government goes the “short sale” route of paying off the servicer, the holder of the second lien and the distressed homeowner (to vacate the premises) in order to allow the market to clear, then the amount of supply that will hit the market will very likely trigger another huge round of house price deflation. (Wouldn’t it be nice to at least go to a point where we will finally see price discovery in residential real estate again?) David Rosenberg-Gluskin/Sheff

-Volcker Says Too Soon to Cut U.S. Monetary, Fiscal Stimulus. White House adviser Paul Volcker said it’s too soon for U.S. policy makers to withdraw the stimulus measures and interest-rate cuts used to fight the worst slump since the Great Depression.

“This is not the time to take aggressive tightening action, either fiscally or monetary-wise,” said Volcker in an interview in Berlin yesterday, pointing to “high” unemployment. “So I think we have to, as best as we can, maintain the expectation that it will be taken care of in a timely way.” Read more here-http://www.businessweek.com/news/2010-03-06/volcker-says-too-soon-to-cut-u-s-monetary-fiscal-stimulus.html

-Fed’s Evans Says Low Rates Needed for ‘Some Time’. Federal Reserve Bank of Chicago President Charles Evans said low interest rates are likely to be needed “for some time” as high unemployment lingers and inflation stays below his goal.

“With the unemployment rate at 9.7 percent and inflation significantly under my benchmark for price stability, there is no conflict between our policy goals,” Evans said in the text of a speech in Arlington, Virginia. Weakness in the job market, including long-term unemployment, means that “This accommodation will likely be appropriate for some time.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aoeTgCeNT.bY

-Spence Says U.S. Recovery Will Take ‘Several Years’. The U.S. faces an extended recovery from the recession even after the government infusion of cash into stimulus programs and the banking system, said Andrew Michael Spence, a Nobel laureate in economics.

“Right now the expectations are that somehow the government can magically restore the economy to balance,” Spence said in an interview today on Bloomberg Radio. “A more realistic view is it’s going to take several years.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a_yKsEoR3464

-Collapse of the American Empire: swift, silent, certain. Commentary: Historians warning of a sudden ‘thief at night,’ an ‘accelerating car crash’. “One of the disturbing facts of history is that so many civilizations collapse,” warns anthropologist Jared Diamond in “Collapse: How Societies Choose to Fail or Succeed.”

Many “civilizations share a sharp curve of decline. Indeed, a society’s demise may begin only a decade or two after it reaches its peak population, wealth and power.” Now, Harvard’s Niall Ferguson, one of the world’s leading financial historians, echoes Diamond’s warning: “Imperial collapse may come much more suddenly than many historians imagine.

A combination of fiscal deficits and military overstretch suggests that the United States may be the next empire on the precipice.” Yes, America is on the edge. Read more here-http://www.marketwatch.com/story/story/print?guid=A785423B-4D00-4800-B6F0-815BB41065FA

-Mohamed A. El-Erian, whose company runs the world’s biggest mutual fund, said deteriorating public finances may affect the global economy more than is currently realized. “The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,” El-Erian, co-chief investment officer at Pacific Investment Management Co., wrote in an article on the Financial Times Web site.

The potential damage from increased government borrowings is “at present being viewed primarily and excessively through the narrow prism of Greece.” Governments may have to raise taxes and slash spending to cope with swelling deficits after borrowing unprecedented amounts to stave off the global financial crisis, said El-Erian, 51, who shares his job title with Bill Gross.

A failure to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aloE06VqioYM&pos;=4

-Greek tragedy may be dress rehearsal for bigger crisis. Read more here-http://www.thestandard.com.hk/news_detail.asp?we_cat=16&art;_id=95404&sid;=27324052&con;_type=1&d;_str=&fc;=1

-Foreign versions of our coming crisis. Greece and the United Kingdom are suffering a dire funding problem that is headed for US shores. Read more here-http://articles.moneycentral.msn.com/Investing/currency/foreign-versions-of-our-coming-crisis.aspx?page=all

-Countries compete to weaken their currencies. Read more here-http://www.economist.com/business-finance/PrinterFriendly.cfm?story_id=15606339

-’It’s Going to Be Inflation Everywhere:’ Deputy ‘Doom’. The global economy is entering a next “supercycle” phase that will generate inflation necessary for recovery, a strategist and protege of noted economist Nouriel Roubini told CNBC.

Arun Motianey, director of fixed income strategy at Roubini’s RBG Capital, said the supercycles feature periods of commodity booms followed by busts, and the US economy is on the verge of an inflationary period that will generate a sharp rise in prices.

“We’re heading into a world of inflation because we are highly indebted and we are indebted here in the US economy in the household sector and in the financial sector,” said Motianey, author of the book “SuperCycles.” Read more here-http://www.cnbc.com/id/35795076

-Chinese Foreign Minister Yang Jiechi said on Sunday that relations with the United States had been “seriously disrupted,” after a rise in friction between the two big powers. “The responsibility does not lie with China,” said Yang, speaking at a news conference on the sidelines of the annual session of China’s parliament.

Beijing and Washington have recently gone through a rough patch, with quarrels in January and February over Chinese Internet censorship, trade disputes, U.S. arms sales to Taiwan, and President Barack Obama’s meeting with the Dalai Lama, the exiled Tibetan leader.

The United States “must respect China’s core interests” on Taiwan and Tibet, Yang added. “I believe the United States understands very well China’s core interests and major concerns. Read more here-http://www.reuters.com/article/idUSTRE62605720100307?feedType=RSS&feedName;=topNews&rpc;=22&sp;=true

-Cyberwar declared as China hunts for the West’s intelligence secrets. Read more here-http://technology.timesonline.co.uk/tol/news/tech_and_web/article7053254.ece

-Iran’s Ahmadinejad calls Sept 11 “big fabrication”. Read more here-http://www.reuters.com/article/idUSTRE6251AO20100306

-Iranian President Mahmoud Ahmadinejad warned Gulf countries on Thursday against the U.S. presence in the region, saying Washington aimed to dominate their energy resources in the name of fighting terrorism. Read more here-http://www.reuters.com/article/idUSTRE62A1BM20100311

-Mexico’s Carlos Slim beat Bill Gates and Warren Buffett for the top spot on Forbes magazine’s annual list of billionaires, becoming the first person from outside the U.S. to lead the rankings in 16 years. The net worth of Slim, 70, who built a telecommunications empire after buying Mexico’s state-run phone monopoly two decades ago, rose $18.5 billion to $53.5 billion.

Gates, 54, chairman of Microsoft Corp., fell to second as his net worth increased $13 billion to $53 billion. Buffett, 79, chairman of Berkshire Hathaway Inc., was third with $47 billion, a rise of $10 billion.

Slim is the first person other than Gates, last year’s richest person, or Buffett to top the list since 1994, which was also the last time a billionaire from outside the U.S. led the ranking: Japanese real estate tycoon Yoshiaki Tsutsumi. “We’ve been watching Slim for a while and kind of wondered when the stars would align and he would take over,” Forbes senior editor Luisa Kroll said in an interview today.

More than 80 percent of Slim’s holdings are held in five public stocks, she said. “His net worth really reflects how well those stocks are doing. Everything that he owns has done very, very well this year.” Read more here-http://www.bloomberg.com/apps/news?pid=20601108&sid;=aLMWiIhR31KI

-U.S. Millionaires’ Ranks Rose 16% in 2009, Study Says. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aqmrqS4E3H1Y or http://www.bloomberg.com/apps/news?pid=20603037&sid;=aqmrqS4E3H1Y

-43% have less than $10k for retirement. The percentage of American workers with virtually no retirement savings grew for the third straight year, according to a survey released Tuesday. The percentage of workers who said they have less than $10,000 in savings grew to 43% in 2010, from 39% in 2009, according to the Employee Benefit Research Institute’s annual Retirement Confidence Survey.

That excludes the value of primary homes and defined-benefit pension plans. Workers who said they had less than $1,000 jumped to 27%, from 20% in 2009. Confidence in ability to save enough for a comfortable retirement hovered at 16% of respondents, the second lowest point in the 20-year history of the survey. Read more here-http://money.cnn.com/2010/03/09/pf/retirement_confidence/index.htm

-Household wealth in the U.S. grew in the fourth quarter at a slower pace, limited by a drop in home values that indicates the recovery in consumer spending will take time to gain speed. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=al2hTofSgDiQ&pos;=3

-Global box-office sales increased 7.6 percent to a record $29.9 billion last year, helped by 3-D movies and “Transformers: Revenge of the Fallen.” Ticket sales outside the U.S. and Canada rose 6.3 percent to $19.3 billion, the Motion Picture Association of America said today in an e-mailed statement. U.S. box-office sales increased 10.1 percent to a record $10.6 billion, the MPAA said.

3-D movies boosted U.S. ticket sales last year, accounting for 11 percent of total box-office revenue, up from 2 percent in 2008. Hollywood studios are turning to 3-D films to bolster attendance and ticket sales, underscored by the record box- office success of “Avatar,” James Cameron’s 3-D epic. Cinemas on average charge about $3 more per ticket for a 3-D film. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=aJk5vJMRVaDA

-Agatha Christie Trunk Bought for $150 Reveals Secrets, Sun Says. A leather trunk once owned by thriller-writer Agatha Christie, bought at auction for 100 pounds ($150) three years ago, contained a secret stash of the author’s gold and diamond jewelry which may be worth as much as 100,000 pounds, the Sun reported, citing the owner.

Jennifer Grant, who described herself as a fan of the creator of the Hercule Poirot and Miss Marple mysteries, heard itemns rattling around in the box but didn’t open it as she had no key; after three years a friend forced it for her and inside was another locked box, containing 50 gold coins, a buckle-shaped brooch, and a diamond engagement ring, the newspaper said.

Valuers said the discovery was worth 100,000 pounds but could be worth five times as much because of the Christie connection, the Sun said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aQqTqt29US1Y

WWW.RARECOLOREDDIAMONDS.COM

-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.rarecoloreddiamonds.com/watchnow.html and

http://www.b-tv.com/features/watch-now.html?id=326

-Colored diamonds at the Oscars. Kate Winslet-Tiffany & Co. yellow diamond necklace created exclusively for her by Tiffany & Co., $2.5 million; yellow diamond bracelets; yellow diamond drop earrings, 10 carats.

Mo’Nique-Chopard princess-cut yellow diamond tennis bracelet; radiant-cut light yellow diamond line bracelet, 46 carats; radiant-cut fancy yellow diamond and white diamond earrings, 17 carats.

-Color Rules Diamonds. Nilesh Sheth, president of Nice Diamonds, New York City, said the reason the color diamond market is strong is because of big auction results. Pinks, browns and blues have shot up in price by 50 percent to 70 percent. Sheth sees an uptick in clients looking to invest in larger stones. “The way the dollar is devaluating, consumers want to hedge their investment in tangible assets, like gold and color diamonds.”

Sampat Poddar, president of Byrex Gems Inc., in Toronto, Canada, reported a buyer’s market for yellow diamonds, which he said have soared in popularity during this down economy because of their price advantage. He said consumers can invest $60,000 to $100,000 in a 4-carat white diamond, versus $25,000 to $40,000 in a 4-carat fancy yellow.

In fact, David Goldstein of Goldstein Diamonds in Scottsdale, Arizona, concurred that yellow diamonds are selling well not just because they are a good value, but because they’re undervalued. Read more here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=30033

-How diamonds are regaining their sparkle. They’ve been seen as a symbol of enduring love since the 16th Century and long been described as a girl’s best friend. But it is only recently that investors have taken a shine to diamonds. Now people are not only buying the world’s most precious stones to wear, but are also investing, just as they would do with stocks and shares.

While the clarity of diamonds has always been treasured, the multi-billion dollar industry has historically been one of the world’s most opaque, which has been seen as off-putting to potential investors. Paris-based jeweller Alexandre Murat says diamonds are a “paradox”.

“There is emotional implication from the customer as they are bought for happy occasions such as weddings, births and birthdays,” he says. Yet recently, Murat, CEO of Adamence, has had clients clamouring to invest in diamonds. “We have had some clients saying they would like to buy five or ten diamonds. They have explained that because of the financial downturn, they would prefer to invest in diamonds,” he told RFI.

Peter Temple, author of the Handbook of Alternative Assets, says that in a financial downturn people look to invest in assets that they can see, as they lose trust in stocks and bonds. He says this is why gold prices keep breaking records, and diamond prices are set to rise.

Temple says there are various similarities between gold and diamonds. “There’s the scarcity aspect, and both are priced in dollars. And they’re both portable,” he says. “Gold in particular is seen as a store of value, something that will protect your cash at times of high inflation. With diamonds, there is an extreme shortage of supply of high quality stones.”

He says that while gold has already benefitted from this recession, diamonds have some catching up to do. This is because diamond dealers typically rely on loans and credit, which were hard to obtain last year, so diamonds didn’t benefit as quickly as other alternative commodities such as gold, art or wine. He predicts that diamond prices may rise up to 15 per cent this year. Read more here-http://www.english.rfi.fr/print/18140?print=now

-Sotheby’s to sell rare blue diamond in Hong Kong. Sotheby’s said Friday it would auction a rare 5.16-carat blue diamond in Hong Kong to capitalise on the growing appetite for fine jewellery among buyers in China and other Asian countries.

The auction house said the pear-shaped blue diamond from a private collector was expected to fetch up to 5.8 million US dollars at its April sale in Hong Kong, which now rivals Geneva and New York as an international auction hub for rare gemstones.

Sotheby’s said its Hong Kong share of international jewellery sales jumped from 19 percent in 1998 to 34 percent in 2008, overtaking New York to be its second biggest market after Geneva. Terry Chu, deputy head of Sotheby’s jewellery department for China and Southeast Asia, said diamonds were particularly appealing to new Asian buyers because of stable prices and assured quality.

“There have been a lot of new diamond buyers from mainland China, Hong Kong, Singapore, Taiwan and elsewhere in the region,” Chu told AFP. “I think after the financial crisis, the Asian buyers realised that the prices of diamond are relatively stable compared to other types of auction items,” she said.

In December, a five-carat chickpea-sized vivid pink diamond set a per-carat world record price for a diamond after it fetched 10.8 million dollars at an auction held by Christie’s in Hong Kong. The price beat a Hong Kong property tycoon’s 10.5 million dollar winning bid for a seven-carat blue diamond in Geneva in May last year.

Both Sotheby’s and Christie’s said last year that the city had overtaken New York and London as the largest wine market, spurred by China’s economic boom and a rapidly growing demand from deep-pocketed Chinese businessmen for top wine. Read more here-http://www.google.com/hostednews/afp/article/ALeqM5iITB9Zpkp00YfaqHn_hhBakZz6rQ

U.S. DEBT CRISIS

-The U.S. budget deficit widened to a record in February as the government boosted spending to help revive the economy. The excess of spending over revenue increased to $221 billion last month, compared with a shortfall of $194 billion in February 2009, according to Treasury Department figures released today in Washington.

The figures show the deficit this year will likely surpass the record $1.4 trillion in the fiscal year that ended in September. Mounting deficits underscore the challenges facing President Barack Obama and Congress as they seek to preserve the recovery, spur job growth and overhaul the health-care system.

The loss of 8.4 million jobs in the last two years has been limiting tax revenue, while stimulus efforts such as the first- time homebuyer credit have added to expenses. “The Obama administration really has its work cut out for it,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The budget deficit numbers are truly frightening.

This deficit is caused not just by over-spending. The receipts side of the budget ledger is suffering from a monumental recessionary hangover.” The February deficit was in line with the $222 billion economists anticipated, based on the median of 31 estimates in a Bloomberg News survey.

Projections ranged from shortfalls of $180 billion to $225 billion. The non-partisan Congressional Budget Office, in a report issued March 5, projected a deficit of $223 billion for February. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=atTyMe8LTqFo&pos;=2

-CBO: $10 trillion jump in debt under Obama budget. If President Obama’s 2011 budget were put into effect as proposed, the U.S. federal government would add an estimated $9.8 trillion to the country’s accrued debt over the next decade, according to a preliminary analysis from the Congressional Budget Office.

Of that amount, an estimated $5.6 trillion will be in interest alone. By 2020, the agency estimates debt held by the public would reach $20.3 trillion, or 90% of GDP. That’s up from 53% of GDP in 2009. Research done by economists Kenneth Rogoff and Carmen Reinhart has shown that such high levels of debt can cause a drag on economic growth.

The CBO cited two big contributors to the jump in debt. Read more here-http://money.cnn.com/2010/03/05/news/economy/cbo_obama_budget/index.htm or http://www.bloomberg.com/apps/news?pid=20601087&sid;=aVDEHvI9WH_Q&pos;=8

-Long-Term U.S. Budget Gap Threat to Borrowing, Economists Say. Annual budget deficits in excess of $1 trillion will, over time, hamper the U.S.’s ability to borrow, and more government stimulus isn’t needed, a survey by the National Association for Business Economics showed.

Budget shortfalls and rising debt relative to gross domestic product will become a bigger problem as entitlement payments grow, according to the poll taken Feb. 4 to Feb. 22. Eighty percent of economists surveyed said a growing deficit will result in higher borrowing costs for the nation.

“The running of large budget deficits and the fiscal stimulus are a natural consequence of a deep recession, but this is definitely a concern in the intermediate and long run,” said Lynn Reaser, president of NABE and chief economist for Point Loma Nazarene University. “It means higher interest rates that will slow potential growth.” Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=adN1GpAzKgr8

-Casey Research Chief Economist Bud Conrad argues interest rates will rise as the U.S. fails to pay down debt. Watch more here-http://www.caseyresearch.com/articles/3261/economist-on-outlook-for-u.s.-debt-/ and http://www.caseyresearch.com/displayCdd.php?id=365

U.S. BANKING CRISIS

-Regulators on Friday shuttered banks in Florida, Illinois, Maryland and Utah, boosting to 26 the number of bank failures in the U.S. so far this year following the 140 brought down in 2009 by mounting loan defaults and the recession.

The Federal Deposit Insurance Corp. took over Sun American Bank, based in Boca Raton, Fla., with $535.7 million in assets and $443.5 million in deposits. Also seized were Bank of Illinois of Normal, Ill., with $211.7 million in assets and $198.5 million in deposits; Waterfield Bank in Germantown, Md., with $155.6 million in assets and $156.4 million in deposits; and Centennial Bank in Ogden, Utah, with $215.2 million in assets and $205.1 million in deposits. Read more here-http://finance.yahoo.com/news/Banks-shuttered-in-Fla-Ill-Md-apf-2958911227.html?x=0

-‘On the Edge’ Banks Facing Writedowns After FDIC Loan Auctions. A Federal Deposit Insurance Corp. plan to auction more than $1 billion in assets seized from failed banks next month, including a loan to build a W Hotel in Atlanta, may trigger writedowns that weaken lenders nationwide.

Almost half of the loans were originated by Silverton Bank N.A., whose collapse last May was the biggest in Georgia history. Community banks that joined Silverton in providing $80 million for the 237-room hotel and condominium complex, as well as backing for 39 other projects, could be forced to write down their stakes to reflect sale prices.

The auctions may have wider repercussions. Of the $41 billion in assets seized from failed banks held by the FDIC as of the end of January, $15.6 billion are real estate loans and about 4 percent of those involve participations by other lenders, according to agency spokesman Andrew Gray.

“These banks can’t believe that the regulator they pay to protect them is going to sell these loans to someone who can flip them and cause them serious losses,” said Robert Reynolds, a lawyer at Reynolds Reynolds & Duncan LLC in Tuscaloosa, Alabama, who represents 25 lenders that took part in financing the W Hotel. “Our banks just cannot believe they’re being treated in a way that ultimately hurts the FDIC’s insurance fund, because some of them are right on the edge.” Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=axnpzq.OM0BY

-Ailing Banks May Require More Aid to Keep Solvent. Some of the nation’s large banks, according to economists and other finance experts, are like dead men walking. A sober assessment of the growing mountain of losses from bad bets, measured in today’s marketplace, would overwhelm the value of the banks’ assets, they say. The banks, in their view, are insolvent.

None of the experts’ research focuses on individual banks, and there are certainly exceptions among the 50 largest banks in the country. Nor do consumers and businesses need to fret about their deposits, which are federally insured. And even banks that might technically be insolvent can continue operating for a long time, and could recover their financial health when the economy improves.

But without a cure for the problem of bad assets, the credit crisis that is dragging down the economy will linger, as banks cannot resume the ample lending needed to restart the wheels of commerce. The answer, say the economists and experts, is a larger, more direct government role than in the Treasury Department’s plan outlined this week. Read more here-http://www.nytimes.com/2009/02/13/business/economy/13insolvent.html?_r=3&emc;=eta1&pagewanted;=print

-Failed Banks May Get Pension-Fund Backing as FDIC Seeks Cash. The Federal Deposit Insurance Corp. is trying to encourage public retirement funds that control more than $2 trillion to buy all or part of failed lenders, taking a more direct role in propping up the banking system, said people briefed on the matter. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aDuLDy3OUFmg

U.S. STATES AND CITIES IN FINANCIAL CRISIS

-States’ Payrolls Lag as U.S. Austerity Sets In: Chart of Day. U.S. state and local governments are likely to keep cutting jobs even as the broader labor market shows signs of emerging from the worst slump since World War II, economists said.

The chart of the day shows combined employment by state and local governments fell for eight straight months through February. The streak of losses was the longest since two years of declines ending in 1983. State and local governments, which account for about 13 percent of gross domestic product, have so far cut a total of 192,000 jobs since August 2008, when employment peaked at 19.8 million.

“There’s a lot of state and local government cutbacks still coming ahead,” David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto, said in a Bloomberg Radio interview today. State and local governments are scaling back as a decline in property values erodes their tax base. Forty-nine of the fifty states are legally bound to balance their budgets. Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a0AJDADVP_N8

-State Tax Revenues Plummet By $87 Billion, Biggest Year Over Year Decline In History; Record State Tax Hikes In Progress. Read more here-http://www.zerohedge.com/article/state-tax-revenues-plummet-87-billion-biggest-year-over-year-decline-history-record-state-ta

-This year, more Americans and businesses may be asking: Where’s my tax refund? That’s because cash-strapped states such as North Carolina, Alabama and Hawaii have been forced to slow down issuing income tax refunds to individuals and businesses because of a lack of funds in their budget.

Kansas has hinted that a delay might be possible, and processing paper refunds in Iowa has slowed because the state doesn’t haven’t enough employees to get them processed faster. Another state, New York, is still considering whether they’ll follow the likes of Hawaii and delay refund payments.

“States typically do this when they are tight and they don’t have a budget in place,” said Karla Dennis, CEO of Cohesive, a nationwide tax preparation firm. Things are dire at many states: forty-one states are expected to have mid-year budget gaps totaling $37.7 billion, according to the Center on Budget and Policy Priorities.

Delaying the refund, Dennis says, “gives the state funds to work with in the interim to fill a gap in their revenues.” Hawaii’s Department of Taxation announced last month that it will delay income tax refunds until July 1, when processing and payments will resume on a “first-in-first-out basis,” according to a news release.

The state is delaying the funds to alleviate a $721 million revenue shortfall for the fiscal year ending June 30, 2010. Read more here-http://finance.yahoo.com/news/CashStrapped-States-Delay-cnbc-3787752102.html?x=0&.v=1

-IL Needs $4.7 Billion Loan to Stay Afloat. Read more here-http://www.chicagotribune.com/news/elections/ct-met-quinn-state-budget-0310-20100309,0,4279309.story

-Virginia Hands Out 6996 Traffic Tickets In One Weekend In An Effort To Raise Revenue For The State Government. Read more here-http://theeconomiccollapseblog.com/archives/virginia-hands-out-6996-traffic-tickets-in-one-weekend-in-an-effort-to-raise-revenue-for-the-state-government

-Detroit, the largest U.S. city whose debt is rated below investment grade, will ask investors today to buy $250 million of its debt without having filed annual financial reports on time for five years.

The city, which warned investors in its preliminary official statement of the possibility of filing for Chapter 9 bankruptcy protection, is providing a June 30, 2008, financial statement, its most recent, to investors.

A fiscal 2009 report is expected to be complete by May 31, said city spokesman Dan Lijana, in an e-mail. “This issue is not for the faint of heart,” said Richard Ciccarone, chief research officer of Oak Brook, Illinois-based McDonnell Investment Management, which oversees $6.8 billion of municipal debt. “It certainly raises eyebrows.” Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a0Fn11eGgZIo

-Detroit looks at downsizing to save city. Detroit, the very symbol of American industrial might for most of the 20th century, is drawing up a radical renewal plan that calls for turning large swaths of this now-blighted, rusted-out city back into the fields and farmland that existed before the automobile.

Operating on a scale never before attempted in this country, the city would demolish houses in some of the most desolate sections of Detroit and move residents into stronger neighborhoods. Roughly a quarter of the 139-square-mile city could go from urban to semi-rural.

Near downtown, fruit trees and vegetable farms would replace neighborhoods that are an eerie landscape of empty buildings and vacant lots. Suburban commuters heading into the city center might pass through what looks like the countryside to get there. Surviving neighborhoods in the birthplace of the auto industry would become pockets in expanses of green.

Detroit officials first raised the idea in the 1990s, when blight was spreading. Now, with the recession plunging the city deeper into ruin, a decision on how to move forward is approaching. Mayor Dave Bing, who took office last year, is expected to unveil some details in his state-of-the-city address this month.

“Things that were unthinkable are now becoming thinkable,” said James W. Hughes, dean of the School of Planning and Public Policy at Rutgers University, who is among the urban experts watching the experiment with interest. “There is now a realization that past glories are never going to be recaptured. Some people probably don’t accept that, but that is the reality.” Read more here-http://www.washingtontimes.com/news/2010/mar/09/detroit-looks-at-downsizing-to-save-city//print/

-Michigan public schools will lay off thousands of employees and more than 100 districts could be insolvent if the state doesn’t find a way to plug a $400-per-pupil funding shortfall in funding next year. Read more here-http://www.freep.com/article/201003081206/NEWS06/100308030

-Facing potential bankruptcy, the board that governs the once flush-with-cash Kansas City school district is taking the unusual and contentious step of shuttering almost half its schools. Administrators say the closures are necessary to keep the district from plowing through what little is left of the $2 billion it received as part of a groundbreaking desegregation case.

The Kansas City school board narrowly approved the plan to close 29 out of 61 schools Wednesday night at a meeting packed with angry parents. Although other districts nationwide are considering closures as the recession ravages their budgets, Kansas City’s plan is striking.

In rapidly shrinking Detroit, 29 schools closed before classes began this fall, but that still left the district with 172 schools. Most other districts are closing just one or two schools. Read more here-http://apnews.myway.com/article/20100311/D9ECADAG0.html

-Detroit homes sell for $1 amid mortgage and car industry crisis. One in five houses left empty as foreclosures mount and property prices drop by 80%. Read more here-http://www.guardian.co.uk/business/2010/mar/02/detroit-homes-mortgage-foreclosures-80

U.S. UNEMPLOYMENT CRISIS

-Unemployment rises in 30 states in January. Unemployment rose in 30 states in January, the Labor Department said Wednesday, evidence that jobs remain scarce in most regions of the country.

The data is somewhat better than December, when 43 states reported higher unemployment rates, but worse than November, when rates fell in most states.

Still, five states reported record-high joblessness in January: California, at 12.5 percent; South Carolina, 12.6 percent; Florida, 11.9 percent; North Carolina, 11.1 percent; and Georgia, 10.4 percent.

Michigan’s unemployment rate is still the nation’s highest, at 14.3 percent, followed by Nevada, with 13 percent and Rhode Island at 12.7 percent. South Carolina and California round out the top five. Read more here-http://www.breitbart.com/article.php?id=D9EBTPKO0&show;_article=1 and http://www.bloomberg.com/apps/news?pid=20601110&sid;=aLnS6JIz3joo

-Unemployment tops 20% in eight California counties. The state’s jobless rate of 12.5% in January was its worst on record and fifth-highest in the nation. Read more here-http://www.latimes.com/business/la-fi-cal-jobs11-2010mar11,0,3667613.story

-All of this noise obscures the big picture of what the labour market “should” be doing in the context of all the stimulus in the system and where we are in the economic cycle. If this was a normal post-recession recovery phase, which it clearly is not, we would be seeing over 100,000 in terms of job creation.

(In fact, in the eight months following a bottoming in output, employment normally rises by a million it is down by that amount this time around.) That is actually understating the situation. If this was a normal monetary policy cycle, then we would be creating 150,000 jobs by now because that is what we usually get 2½ years after the Fed begins to ease. David Rosenberg-Gluskin/Sheff

-Most American job losses in recent decades were due to outsourcing to more competitive economies, because of the harmful effects of our domestic government policies. Big spending by government now is unlikely to cure this deleterious situation. The only realistic solution is to shrink government and remove subsidies and guarantees to big business.

The United States must become fundamentally competitive once again by unleashing the power of the entrepreneurial spirit. Otherwise, the “giant sucking sound” of good jobs heading overseas, as Ross Perot famously described it, will only grow louder. John Browne Senior Market Strategist Euro Pacific Capital, Inc-Read more here-http://www.321gold.com/editorials/browne/browne031010.html

-Are unemployment benefits no longer temporary? Millions of Americans have been forced to rely on unemployment payments for extended periods as the nation struggles through its longest period of high joblessness in a generation, and critics are taking aim, saying that the Depression-era program created as a temporary bridge for laid-off workers is turning into an expensive entitlement.

About 11.4 million out-of-work people now collect unemployment compensation, at a cost of $10 billion a month. Half of them have been receiving payments for more than six months, the usual insurance limit. But under multiple extensions enacted by the federal government in response to the downturn, workers can collect the payments for as long as 99 weeks in states with the highest unemployment rates the longest period since the program’s inception.

The unemployed say extensions help to tide them over in unusually difficult times when jobs are hard to come by. Although unemployment held steady at 9.7 percent in February, millions of jobs have been lost in the downturn, particularly in the hardest-hit sectors including real estate, construction, manufacturing and financial services. Those jobs are unlikely to return even when the economy recovers, many experts say. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2010/03/08/AR2010030804927_pf.html

U.K. FINANCIAL CRISIS

-UK ‘would still be recession’ without £200bn Bank of England cash injection. Britain would still be in recession if the Bank of England’s quantitative easing programme had not been introduced, economists said on Thursday, as the Bank’s Monetary Policy Committee (MPC) voted against extending the scheme on the anniversary of its inception. Read more here-http://www.telegraph.co.uk/finance/economics/7370220/UK-would-still-be-recession-without-200bn-Bank-of-England-cash-injection.html

-Fitch warns Britain and questions Greek rescue as sovereign risks grow. Fitch Ratings has delivered a serious blow to the credibility of the Government’s budget plans, warning that Britain risks a loss of investor confidence and erosion of its AAA rating unless it maps out clear austerity measures. Read more here-http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7407663/Fitch-warns-Britain-and-questions-Greek-rescue-as-sovereign-risks-grow.html

-Iceland’s citizens voted “no” in a referendum Saturday on repaying Britain and the Netherlands $5 billion in losses that their governments incurred by repaying account holders after the collapse of the Icesave bank. Read more here-http://www.france24.com/en/20100307-iceland-votes-down-deal-pay-bank-collapse-bill-icesave-referendum

CANADIAN DOLLAR HEADING TO PAR

-The Canadian dollar, or loonie as it is affectionately called here, is likely to soar above parity with the US greenback this year, experts at a Canadian bank said Wednesday. Canadian Imperial Bank of Canada (CIBC) chief economist Avery Shenfeld said the Canadian dollar had already gained several cents in recent weeks as the market firms up expectations of an interest rate hike in July.

If as expected, the central bank “is out in front of the US Federal Reserve by a couple of quarters” in raising interest rates, the Canadian dollar could reach 1.02 dollars versus the US dollar by September, before dipping back to 0.97 dollars by year end,” Shenfeld said.

The Bank of Canada has maintained its key lending rate at a historic low of 0.25 percent since April 2009 to help bolster a fragile economic recovery, but is widely expected to review its position mid-year. CIBC said other factors were also aligning to push up the value of Canada’s currency such as increased demand for oil, minerals and fertilizers; resurgent capital markets; and global debt fears.

“If the capital markets finally get an appetite for M&A; (mergers and acquisitions) then Canada could be one of the first places to see the benefit of foreign inflows,” said CIBC analyst Zafar Bhatti. Or “if the investing world starts looking for a place to park capital in the wake of deteriorating sovereign credits then Canada would look very attractive,” Bhatti said in a report.

Since the beginning of the year, the Canadian dollar has appreciated 2.5 percent against the US dollar and more than seven percent against the euro. The loonie last achieved parity with the US greenback in 2008, and previously hit a record 1.10 dollars in 2007. Read more here-http://news.yahoo.com/s/afp/20100310/wl_canada_afp/canadaeconomyforexus_20100310191857

REAL ESTATE-MORTGAGES-FORECLOSURES

-U.S. home prices fell 13 percent last year to a median of $172,500, the largest annual drop since the 1930s, according to the National Association of Realtors. The decline followed a 9.5 percent drop in 2008, NAR said. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aHh4J2rgAp4o

-Home prices continued to weaken in many U.S. markets during January as the impact of government tax credits on housing demand lost momentum, real estate Website Zillow.com said on Tuesday.

Nationally, while the annualized appreciation rate continued to rise, increasing from negative 5.5 percent in December to negative 4.8 percent in January, home values fell 0.33 percent from the prior month, a slightly larger monthly depreciation than the 0.27 percent recorded in December, according to Stan Humphries, chief economist at Zillow. Read more here-http://www.reuters.com/article/idUSN0924758020100309

-Commercial real estate owners are walking away from properties that have become untenable as investments, just as homeowners have walked away from houses they can no longer afford to pay off or sell. The latest commercial property owner to do this is Vornado Realty Trust (VNO), the $13 billion real estate investment trust, which warned last week that it would walk away from two loans totaling $235 million.

The trend is likely to escalate in coming months as more loans mature and refinancing remains difficult and costly. As with residential properties, there is less incentive for owners to hold on to properties when the buildings are worth less than what is owed on their mortgages.

“Frankly, I am surprised that we have not seen a lot more,” said Rob Little, chief investment officer of Cornerstone Real Estate Advisers LLC, with $32 billion under his management. Read more here-http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201003100949dowjonesdjonline000431&title;=commercial-real-estate-owners-beginning-to-walk-away-from-properties

-U.S. foreclosure filings rose at the slowest pace in four years in February as the government sought to reduce record bank seizures, RealtyTrac Inc. said. A total of 308,524 properties received a notice of default, auction or seizure last month, or one in 418 households, the Irvine, California-based seller of default data said today in a statement.

Filings rose 6 percent from a year earlier, the smallest increase since RealtyTrac began tracking annual changes in January 2006. They declined 2 percent from January. The Obama administration’s main effort to keep people in their homes resulted in more than 830,000 trial loan modifications for delinquent borrowers through January, according to the Treasury Department.

Still, filings were up for the 50th straight month in February on an annual basis and topped 300,000 for the 12th consecutive month, RealtyTrac said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aG9baTTb6F.E&pos;=3

-Program Will Pay Homeowners to Sell at a Loss. In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery the last thing it wants in an election year. Read more here-http://www.nytimes.com/2010/03/08/business/08short.html?emc=eta1

-Vineyard Defaults Surge as Lost Land Values Undermine Napa Wine. In California’s Napa Valley, producer of the most expensive U.S. wines, 2010 may be a vintage year for foreclosures as the industry is squeezed by falling land values and a consumer shift to cheaper brands.

As many as 10 wineries and vineyards in Napa will change hands in distressed sales or foreclosures this year and next, up from none in 2008, according to Silicon Valley Bank. In a bank survey of vintners, 7 percent called their finances “very weak” or “on life support.”

“We have 250 vintner clients saying this downturn is the worst in 20 years,” Bill Stevens, manager of the bank’s wine division in St. Helena, California, said in an interview. “Anybody who was late to the party won’t have staying power.”

Land values in Napa, home to about 400 producers, have fallen 15 percent from the 2007 peak, driven in part by slumping demand for high-end wine, said Robert Nicholson, principal at International Wine Associates, a consulting and financing firm in Healdsburg, California. The decline makes it harder for owners to refinance mortgages, especially if the property is worth less than the loan. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=a07OY80yg4Rs

-Hard times for British expats in the Florida sun. Florida’s once-booming housing market is at the heart of America’s financial crisis. In 2006, an average family home was $248,000; by 2009, that had fallen to $142,000. Read more here-http://www.guardian.co.uk/business/2010/mar/08/florida-property-slump-british-expats

The Goldbugg Report – March 16, 2010
Posted by Worldwide Precious Metals on Tuesday, March 16, 2010

The Week in Review

March 12, 2010

The Week in Review

As the drama unfolds and the investigations continue into how Goldman Sachs may have helped Greece hide the size of its deficit through complex derivative trades back in 2001, Europe remains a looming issue on the financial front. Media outlets have come up with the clever acronym PIGS (Portugal, Ireland, Greece and Spain) when referring to the European debt crisis. They may need to add another I to their acronym in the near future. Almost 500 small and large Italian cities are facing mark-to-market losses of 2.5 billion euros on complex derivative contracts, according to the Bank of Italy. Several cities in Italy are trying to get out of the contracts and are trying to sue the banks that put those contracts together. A judge in Milan will soon decide whether to try 13 people and four banks for aggravated fraud over the deals. The banks involved are UBS, Deutsche Bank, Depfa and JPMorgan Chase.

Initial claims for unemployment dropped again this past week, but it was less than expected. The four-week moving average of new claims, which is supposed to smooth out week-to-week volatility, rose to its highest level since last November.

Negotiations between US Congressmen Chris Dodd and Bob Corker on new financial regulations broke down Thursday. Dodd announced that he would be introducing his own version of a financial reform bill saying “It’s not a reflection of something breaking down, the process is moving along very well.” His reasons for breaking off negotiations and submitting his own bill? Apparently it was because there is “not a lot of time left” to get such a complicated piece of legislation passed during an election year. Dodd went on to say “We need to move along, the clock has become a rather demanding member [of Congress]”. This is politics at its finest – rather than proceed with negotiations that appeared to be on the verge of successfully working out a highly complicated piece of legislation that was thoroughly analyzed and debated, Dodd apparently opted to shortcut things so that Congress can dispense with all of this “will of the people” nonsense, which is apparently keeping them from getting out on the campaign trail faster.

Retail sales were up 0.3 percent in February, compared to an expected slip of 0.2 percent. Friday’s announcement seemed to help push stocks higher and lead media outlets to declare “The Consumer is Back!” ignoring the fact that January’s data was revised down to a mere 0.1 percent rise from an original 0.5 percent rise. Consumer sentiment, announced later Friday, came in weaker than expected and dampened the enthusiasm somewhat.

US crude oil prices were above $82 a barrel on demand forecasts by the International Energy Agency.

The US Dollar fell to a 3 week low against the euro apparently on news out of Europe that Greece’s problems are contained.

Anton Valukas, chairman of Jenner & Block reported the results of that law firm’s more than year-long investigation into who could be blamed for Lehman Brothers collapse. The report said that Lehman could have claims against JPMorgan Chase and Citigroup for helping to accelerate the collapse by modifying guarantee agreements and demanding more collateral.

Finally, as we discussed in our February 26th memo, the time is drawing near for the March 25th meeting of the CFTC to discuss position limits in the precious metals markets. It has long been speculated that the precious metals markets are being manipulated by large bullion banks, primarily JPMorgan and HSBC. With the sheer amount of bad press regarding possible wrongdoing by these very banks (not only in the US, but across the entire planet), the CFTC would look like a hero if they could not only show evidence of this manipulation, but begin putting steps in place to finally shut it down. The CFTC is under tremendous scrutiny and is receiving hundreds of letters from industry participants demanding this market manipulation be brought to a halt. Some being so bold as to make statements to the CFTC that they are either too ignorant to recognize the manipulation tactics of these major banks or they are knowingly a part of it.

Friday to Friday Close

	Mar. 5th	Mar. 12th	Net Change
Gold	$1135.00	$1101.00	(34.00) – 3.00%
Silver	$17.35	$17.02	(0.33) – 1.90%
Platinum	$1575.00	$1605.00	30.00 + 1.90%
Palladium	$475.00	$462.00	(13.00) – 2.74%

Here are your Short Term Support and Resistance Levels for the upcoming week.

	Gold	Silver
Support	1095/1080/1060	16.90/16.65/16.50
Resistance	1120/1130/1150	17.40/17.80/18.00

	Platinum	Palladium
Support	1600/1575/1550	460/450/425
Resistance	1630/1650/1700	470/475/500

Volatility should be expected to continue. China is reporting that inflation is on the rise and that they may have to begin raising interest rates. It is becoming more and more evident that the US Congress is worried more about campaigning than actually reading and debating the legislation that is being put forth. Rushing through and hastily signing into law any type of legislation is never a good idea, especially when those legislative items are as complex as the financial reform and health care bills. As the debt crisis fallout continues in Europe the large banks are taking even more damage to their already battered reputations. Should the CFTC conclude that there is sufficient evidence of market manipulation by those very same banks at their March 25th meeting, it may signal the end of such manipulation and the “free” market will finally be free to determine what prices should be instead of a handful of banks. Remember, the key to profitability through the ownership of physical precious metals is to actually own the physical product and hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

The Week in Review
Posted by Worldwide Precious Metals on Friday, March 12, 2010

The Goldbugg Report – March 9, 2010

March 9, 2010

March 5, 2010

The Week in Review

“Forget US Stocks – Buy Gold Every Month ‘Forever’: Faber”. That was the largest, and leading, headline on CNBC’s website for most of the morning and afternoon on Thursday. Marc Faber, editor of The Gloom, Boom & Doom Report said these exact words in an interview with CNBC on Thursday morning. When asked why he would say such a thing, he had this to say: “[Gold’s] quantity cannot increase at the same rate as you can print money, which will eventually weaken the US dollar. I’m not saying that the dollar will go straight away down, because other currencies like the euro are even worse at the present time, but eventually, if you print money, the purchasing power will lose [value].”

Initial claims for unemployment dropped for the first time in three weeks last week. Continuing claims for unemployment also fell, but this number has been skewed by the sheer number of people who have exhausted their benefits and are now on either extended benefits, or simply no longer qualify for benefits. The number of people receiving extended benefits, in the week ended February 13 (the latest data available), increased to 5.9 million people.

Europe continues to be embroiled in its debt crisis. The British Pound had its largest one-day fall against the dollar in more than a year on Monday. The euro continued its slide, fueled by further fears that Greece is not the only country in need of bailing out and that the situation is continuing to deteriorate. Several Germans have gone so far as to suggest that Greece sell off some of its islands in order to pay off its debt. Ashok Shah, CIO of London & Capital said Wednesday that “there’s a risk of a double dip recession round the corner. Given the sovereign debt crisis that is going around the Mediterranean countries, this is going to put a lot of pressure on Europe.”

Pending home sales dropped 7.6% in January. This figure counts those homes that actually have signed contracts in place on them. Many blame the decline on the weather but with the deadline for the extended home buyer tax credit fast approaching next month, the weather really should have had minimal impact on those looking to take advantage of the credit. The general feeling is that the housing market continues to be plagued by weakness.

US crude oil inventories rose more than expected last week however the price stayed fairly steady at just over $80 a barrel.

After a confusing “setup for disappointment” earlier in the week by Lawrence Summers, economic advisor to president Obama, the jobs numbers came in better than expected. Summers came out early in the week hinting that Friday’s numbers may be horrible due to the recent severe weather experienced across the US. The numbers, when they were released Friday, showed unemployment remains steady at 9.7 % and fewer jobs than expected were cut by US employers. Interestingly, the stock market, the US dollar and commodities all rose on the news.

We consider our February 5^th memo to have been a major buy signal. In that memo we quoted James Turk as saying “Every once in a great while, the market offers a unique opportunity to buy precious metals ‘on the cheap’. I believe today is one of those moments.” To those of you who read that quote and took advantage of prices at the time to add to, or start your precious metals portfolios, congratulations! As you can see in the table below, your decision has served you well.

Volatility should be expected to continue. The situation with Greece and the rest of the eurozone has yet to resolve itself. Germany’s chancellor said Thursday that there would be no aid coming as far as Germany was concerned. The US Congress, apparently ignoring the will of the people of the US, appears to have every intention of pushing through the unpopular health care bill using any means necessary. Deficits around the world continue to skyrocket. Central banks around the world, their hands tied by a global recovery that continues to be sluggish, are keeping policies in place that are increasing the supply of currencies in the world. More money supply in the world means less buying power, which means inflation. We continue to see new precious metals ETF’s coming to the marketplace and although we feel such ETF’s do not properly represent physical ownership of product since a share in one of these funds is only a paper representation of a fractional portion of physical product, it certainly shows that more and more people are trying to capitalize on upward moving prices. Increasing interest in precious metals as an investment means an increase in demand of a finite product. Supply and demand rules would suggest that prices, under those conditions, should increase remarkably. Remember, the key to profitability through the ownership of physical precious metals is to actually own the physical product and hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

GOLD

-Implications for Currencies and Gold: http://beforeitsnews.com/news/22664/Sovereign_Debt_-_The_Implications_for_Currencies_and_Gold.html

-Marc Faber: Buy Some Gold Every Month “Forever.” “Gold is not the liability of someone else its quantity cannot increase at the same rate as you can print money, which will eventually weaken the US dollar,” Faber told CNBC on Thursday in a live interview.

“I’m not saying that the dollar will go straight away down because other currencies apparently like the euro are even worse than the U.S. dollar at the present time,” he added. “But eventually if you print money, the purchasing power of money will lose value. Read more here-http://wallstreetpit.com/18613-marc-faber-buy-some-gold-every-month-forever

-China Gold Buy Would Be No Surprise: Analysts. Read more here-http://www.kitco.com/reports/KitcoNews20100226.html

-J.S. Kim: Why China’s purchase of IMF gold would be huge. Read more here-http://www.gata.org/node/8379

-George Soros is helping drive up gold prices by doubling his bet in a market even he considers a “bubble” as Goldman Sachs Group Inc., Barclays Capital and HSBC Holdings Plc predict more gains before it bursts.

Soros Fund Management LLC, which manages about $25 billion, increased its investment in SPDR Gold Trust, the world’s largest exchange-traded fund for the metal, by 152 percent in the fourth quarter, a Feb. 16 Securities and Exchange Commission filing shows.

While prices have fallen 9.2 percent since reaching a record on Dec. 3, 15 of 22 analysts in a Bloomberg survey say gold will reach a new high, with the median forecast predicting a 17 percent advance to as much as $1,300 an ounce this year.

“When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment,” Soros said at the World Economic Forum’s annual meeting in Davos, Switzerland, in January. “The ultimate asset bubble is gold,” he said.

In a Jan. 28 Bloomberg Television interview, the 79-year old billionaire recalled that former Federal Reserve Chairman Alan Greenspan warned of “irrational exuberance” in financial markets three years before the technology bubble burst in 2000. The Standard & Poor’s 500 Index rose 89 percent in the period. Buying at the start of a bubble is “rational,” Soros said.

Gold’s fourfold rally since the end of 2000 has also attracted money managers John Paulson, Paul Tudor Jones and David Einhorn. Paulson’s Credit Opportunities Fund soared almost sixfold in 2007 by betting that subprime mortgages would plummet. Einhorn said in October that his Greenlight Capital Inc. bought gold to bet against the dollar.

Investment demand, including in bars and coins, doubled to 1,820 tons last year as investors sought a refuge from the global recession, according to GFMS Ltd. That exceeded jewelry demand for the first time in three decades, the London-based research firm said Jan. 13. Prices reached the record $1,226.56 a decade after the metal fell to a 20-year low of $251.95 amid sales by central banks.

“Perhaps Soros thinks gold is going to bubble but the bubble is going to last for a while and he wants to profit from it,” said Jeffrey Nichols, managing director of American Precious Metals Advisors and an adviser to central banks and mining companies. “We could have a bubble but gold can reach $2,000 or $3,000 before it’s over.”

Goldman predicts gold will reach $1,235 in three months and $1,380 in 12 months. Barclays Capital says the metal will average $1,235 in the fourth quarter. HSBC says it may peak at $1,300 this year. “I absolutely believe it’s heading into a bubble, but that’s why you buy it,” said Charles Morris, who manages $2.5 billion at HSBC Global Asset Management’s Absolute Return Fund in London. “A bubble is good,” he said, forecasting the metal may rise to $5,000 in five years to explain why 11 percent of his fund is in gold.

“Gold makes sense as an investment,” said Jeffrey Christian, the managing director of CPM Group. “Just because the price of gold is going up for the 10th year doesn’t mean it’s a bubble.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=avsz5zUl.3yo

-Parsing 200 years of gold trades. Commentary: What is the gold chart saying about the future price? Read more here-http://www.marketwatch.com/story/story/print?guid=E250F4EA-4AD2-4D2F-A8C4-0A529AB94006

-Adrian Douglas: Alarming trend in Comex gold and silver inventory data. Having examined six months of delivery and inventory data from the gold and silver divisions of the New York Commodity Exchange, GATA board member Adrian Douglas has discovered that bullion dealer inventory appears to be reducing dramatically and is not being replaced. Douglas, publisher of the Market Force Analysis letter, concludes that this likely indicates a worsening shortage of gold and silver bullion. Read more here-http://www.gata.org/node/8373

-Gold rise linked to sovereign credit bonds: BMO’s Coxe. Sovereign credit bonds are as significant in fueling gold’s current rise as is a lack of supply, Don Coxe, Strategy Advisor for BMO Capital Markets, said Wednesday. Coxe told the BMO Capital Markets Annual Global Metals and Mining Conference in Florida that the amount of new mined gold has been falling year-over-year, but gold’s rise is not solely attributable to this.

“The fascinating thing about gold is that it peaked past the magic $1,000 mark at a time when the two biggest end-use consumers of gold the jewelry industry worldwide and brides in India were buying much less of it because the price was so high,” Coxe said in his keynote address. “So here you had the two biggest users of the product cutting back drastically on their purchases and yet gold goes to $1,100 an ounce, why?” he questioned.

Coxe said in his answer that the printing of money story is only is part of the equation. “What has happened with gold is that it is a beneficiary of the deteriorating position of another asset class which is seemingly unrelated to it sovereign credit bonds,” he said.

“Investors are looking to what is happening to what were considered the securest assets, government bonds. What they are saying is, ‘what is the long-term store of value?’ Nobody knows what inflation is going to be in two years, five years or 10 years from now. The other thing is we don’t know what currency is going to do because the only major currency of the world that has powerful underlying strength is the Renminbi of China,” said Coxe.

According to Coxe, Gold is gradually becoming the shadow currency . “As opposed to just setting one currency against the other in a classic George Soros style people are saying maybe all the currencies are going to turn out to be bad.” Read more here-http://www.kitco.com/reports/KitcoNews20100303A.html

-Gold to reach $1,500 by year end, continue decoupling from dollar Jeff Nichols. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=99961&sn;=Detail&pid;=1

-Gold entering period of rising prices as currencies depreciate. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=100027&sn;=Detail&pid;=33

-Global Gold Supply. Read more here-http://www.321gold.com/editorials/wright/wright022610.html

-Gold breaks the rules. Precious metal and U.S. dollar start to trade in tandem, but for how long? Read more here-http://www.marketwatch.com/story/story/print?guid=145628E9-3CB7-4E1B-97DA-803477831BA3

-The golden slope of hope. Commentary: Gold timers increasingly see glass as half full. Read more here-http://www.marketwatch.com/story/story/print?guid=6FD64FA2-A74C-4B3B-863F-8E6D273CA876

-Do we really want $5,000 gold? What does $5,000 gold really mean? Perhaps social chaos and, if so, who really wants that? Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=99713&sn;=Detail&pid;=33

-Usher in credit cards backed by gold bullion. Read more here-http://www.commodityonline.com/news/Usher-in-credit-cards-backed-by-gold-bullion-26099-3-1.html

-Peter Grandich challenges the Tokyo Rose of the gold market. Read more here-http://www.gata.org/node/8394

-Grandich increases challenge to gold perma-bears. Agoracom market analyst Peter Grandich reports that he has doubled his $50,000 offer of a wager to gold perma-bears that gold’s next milestone will be $1,200 and not $1,000. But with the bet now standing at $100,000, Grandich has gotten no takers. Read more here-http://www.gata.org/node/8377

SILVER

Gold to silver ratio at 80 to 1 with gold at $1,200 the silver price would be $15.00

Gold to silver ratio at 70 to 1 with gold at $1,200 the silver price would be $17.14

Gold to silver ratio at 60 to 1 with gold at $1,200 the silver price would be $20.00

Gold to silver ratio at 50 to 1 with gold at $1,200 the silver price would be $24.00

Gold to silver ratio at 40 to 1 with gold at $1,200 the silver price would be $30.00

Gold to silver ratio at 30 to 1 with gold at $1,200 the silver price would be $40.00

Gold to silver ratio at 20 to 1 with gold at $1,200 the silver price would be $60.00

Gold to silver ratio at 15 to 1 with gold at $1,200 the silver price would be $80.00

-There is a lot made of the silver-gold ratio. Silver probably will reach what I call the classic, or the monetary ratio, which is 16:1. It could even get down to the natural ratio, which at this time is about 10:1, but I don’t see it getting to any better ratio than that. Of course, this implies that silver is undervalued relative to gold.

We have a 10-year bull market behind us and in my view we have several more years to go. What happens is at the end of these great bull markets is you get into the euphoric or manic stage and this happens in almost all markets. You’ve seen it in the technology sector, when people were buying dot-com stocks that had no business plan and no equity, just an idea.

I think we’ll see the biggest run up of all time in gold and silver, especially the equities, a euphoric state of panic buying driven by fear and greed. I’ll probably face a lynch mob me when I say “sell,” because no one will want to trade physical metal for paper currency and I don’t blame them. Anticipating this, I’ve already planned some techniques to use to preserve our physical metal and still allow us to sell to a strong market, but those are days ahead.

When the panic hits, gold probably will go up to $2,000 and beyond the average person will wake up thinking, “Oh, I’ve got to get gold equities; I listened to my friends and I thought they were idiots and now I see the light.” Many will turn to silver because it’ll still affordable relative to gold.

Significant money will move in to the metals. And because silver is cheaper than gold, a lot of it will go silver, which will cause the ratio to spike relative to gold. You’ll see the ratio drop from 60:1 to 50:1 to 40:1 to 35:1 to 20:1, maybe to 16:1 or 10:1 because there’ll be more money, relatively speaking, moving into silver than in the past. And since silver is such a small market, any small increase in buying power will send the price far higher. David Morgan-Read more here-http://news.silverseek.com/SilverInvestor/1267220221.php

-David Morgan Gives his Predictions for Future Silver Prices. Listen here-http://www.kitco.com/ind/kitcoradio/index.html

-Gene Arensberg: Investors fancy silver in 2010. Read more here-http://www.gata.org/node/8392

-Ted Butler reports at King World News on gold, silver COT. Listen here-http://www.gata.org/node/8383

-Silver Supply Crisis Looms, Part 1. Read more here-http://www.thestreet.com/story/10691881/1/silver-supply-crisis-looms-part-1.html

-Silver Supply Crisis Looms, Part 2. Read more here-http://www.thestreet.com/_catholic/story/10693050/1/silver-supply-crisis-looms-part-2.html

-Chinese Government to Citizens: Buy Gold and Silver. Read more here-http://news.goldseek.com/GoldSeek/1267715760.php

-Brien Lundin: Gold Looking Good; Silver Even Better. Read more here-http://news.silverseek.com/SilverSeek/1267665330.php

-RBC says silver demand will continue to outpace new mine supply. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=99957&sn;=Detail&pid;=32

-Q4 Silver news from the Silver Institute. Read more here-http://www.silverinstitute.org/images/pdfs/4q09.pdf

-What is an Olympic Gold Medal Worth? Read more here-http://news.goldseek.com/GoldSeek/1267123200.php

U.S. DEBT CRISIS

-America’s hidden debt bombs. America’s total debt load is on pace to top $13 trillion this year, and $22 trillion by 2020 and that’s just the debt we’re counting. What’s not being counted: potential debt bombs that don’t get factored into most budget analysis.

When anyone talks about U.S. debt, they typically refer to two numbers. The first is the debt held by the public. That’s money owed to those who have bought U.S. Treasurys, most notably big bond mutual funds and foreign governments. Debt held by the public today is roughly $8 trillion and rising.

The second number is the money the federal government owes to government trust funds, such as those for Medicare and Social Security. The government has used revenue collected for those programs to cover other outlays. Currently, the debt to the trust funds is approaching $5 trillion.

The two combined is the total gross debt that’s accounted for. But deficit hawks also worry about what’s not on the books. Here is just a sampling of the unseen or underplayed obligations that could worsen the debt outlook. Read more here-http://money.cnn.com/2010/03/01/news/economy/budget_debt/index.htm

-Rogoff: America Has Defaulted Before And It Will Run Into Trouble Again. Read more here-http://www.businessinsider.com/rogoff-america-has-defaulted-and-we-will-run-into-trouble-again-2010-2

-Bernanke delivers blunt warning on U.S. debt. Read more here-http://www.washingtontimes.com/news/2010/feb/25/bernanke-delivers-warning-on-us-debt//print/

-California is a greater risk than Greece, warns JP Morgan chief. Jamie Dimon, chairman of JP Morgan Chase, has warned American investors should be more worried about the risk of default of the state of California than of Greece’s current debt woes. Read more here-http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7326772/California-is-a-greater-risk-than-Greece-warns-JP-Morgan-chief.html

-City of Angels on brink of abyss. Los Angeles, the second-largest US city, is facing a crisis of funding not seen since the darkest days of the Great Depression. Read more here-http://www.guardian.co.uk/commentisfree/cifamerica/2010/feb/25/financial-crisis-useconomy

-Barack Obama’s home state of Illinois is near the point of fiscal disintegration. “The state is in utter crisis,” said Representative Suzie Bassi. “We are next to bankruptcy. We have a $13bn hole in a $28bn budget.” Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7338857/Dont-go-wobbly-on-us-now-Ben-Bernanke.html

-Bill Gross: Markets Will Soon Discover How Sovereign Nations Can Go Bust Just Like Companies. Read more here-http://www.businessinsider.com/gross-markets-will-soon-discover-how-sovereign-nations-can-go-bust-just-like-companies-2010-3 or

CHARTS OF THE WEEK-QUOTES-QUICK HITS

-Failed Banks get Pension-Fund backing. FDIC needs money.- http://www.businessweek.com/news/2010-03-08/failed-banks-may-get-pension-fund-backing-as-fdic-seeks-cash.html

-Charts of the week: Actually, Gold Is On A Tear, And Near All-Time Highs. Disappointed that gold isn’t regularly busting to new highs like it did last year? You’re just looking at it wrong.

In Euros, a currency that’s come under serious pressure, gold is basically at an all-time high.

In other words, it’s not gold that’s gone up or down, it’s changing attitudes towards underlying currencies that has changed. When gold sells off against all the currencies because investors suddenly have a new found love of paper money that will be a story. Read more here-http://www.businessinsider.com/chart-of-the-day-gold-price-euro-per-ounce-2010-3

Source: www.chartoftheday.com

-Chart of the week: Why This Market Needs Cheap Money To Keep On Rallying. The key story of the moment is the beginning of the Fed’s tightening cycle, a topic on which Morgan Stanley

analysts recently dedicated a major report. In it, the company explored the historical connection between cheap money. As you would expect, the market likes it. A lot.

As the below chart shows, the S&P; 500 has been nicely correlated with excess credit growth or the change in non-financial credit. This latest rally was no exception. When the Fed does close the spigot, watch out below. Read more here-http://www.businessinsider.com/chart-of-the-day-sp-500-vs-excess-credit-2010-3

Source: www.chartoftheday.com

-Charts of the week: For some long-term perspective, today’s chart illustrates the Dow adjusted for inflation since 1925. There are several points of interest. For one, when adjusted for inflation, the bear market that concluded in the early 1980s was almost as severe as the one that concluded in the early 1930s.

Also, the inflation-adjusted Dow is a little more than double where it was at its 1929 peak and trades 54% above its 1966 peak not that spectacular of a performance considering the time frames involved. It is also interesting to note that the Dow is up 57% from its March 9, 2009 low which is actually slightly more than what the inflation-adjusted Dow gained from its 1966 peak to today. Read more here-http://www.chartoftheday.com/20100226.htm?T

Source: www.chartoftheday.com

-”You have to trust in something: your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.” Steve Jobs

-”All you have to do is know where you’re going. The answers will come to you of their own accord.” Earl Nightingale

-”Let others lead small lives, but not you. Let others argue over small things, but not you. Let others cry over small hurts, but not you. Let others leave their future in someone else’s hands, but not you.” Jim Rohn

-I hope we can find a way of resurrecting the subprime market, because it was working well until those mortgages were widely securitized. Alan Greenspan, Bloomberg, February 23, 2010

-“Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavour to move away from paper currencies. What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment.” Alan Greenspan, 9 September 2009

-Gold is “just an asset that, like everything else in life, has its time and place. And now is that time,” Paul Tudor Jones said in an October letter to clients. Bloomberg

-Gold makes sense as an investment. Just because the price of gold is going up for the 10th year doesn’t mean it’s a bubble. Jeffrey Christian, CPM Group, Bloomberg, 01 March 2010

-“Gold is going to become the currency of choice as people lose faith in fiat currencies,” said Matt Zeman, a trader at LaSalle Futures Group in Chicago. “These countries continue to write checks that they can’t cash.” Bloomberg

-“There are hopes that the Greek deficit cuts will stem the tide of the declining euro,” GoldCore Ltd., a broker in Dublin, said in a report. “Concerns that the austerity measures being taken in Greece may soon have to be undertaken in other European economies and in the U.K. should lead to continuing safe-haven demand for gold.” Bloomberg

-Russia’s central bank wants to increase the proportion of its international reserves held in gold, First Deputy Chairman Alexei Ulyukayev said in an interview published in Izvestia today. His comments were confirmed by a Bank Rossii official. The bank added 100,000 ounces to its reserves in January. Bloomberg

-“We expect stronger willingness by emerging-market central banks to buy and hold more strategic gold reserves for diversification purposes, due to lost confidence in the dollar,” Bayram Dincer, a commodity analyst at LGT Capital Management in Pfaeffikon, Switzerland, said in a report. Gold may average $1,150 this year as the metal enters a “second golden decade,” he said. Bloomberg

-I believe the most important event at our Toronto CIGA meeting was the testimony of two attendees. Two men spoke independently. One is a Canadian resident from Russia and the other from Poland. Both said the same thing, “All the signs that preceded our inflation of more than 100% per year are here now in the West.” What more do you need to know? Jim Sinclair

-Overall investment in gold was 7% higher in 2009 than 2008. This is significant when you consider that demand in the fourth quarter of 2008 during one of the worst financial meltdowns in history was so great that shortages of physical metal abounded everywhere.

And yet investors bought more gold in 2009 when investor fear about global financial uncertainty was subdued. Further, 2009 total funds invested in all forms of gold exceeded 2008 by 20%, and the average price was 11.6% higher.

In other words, investors were buying gold even though the price wasn’t necessarily “low.” To be sure, that’s a broad statement. But the fact remains that year-on-year, more gold was purchased at higher prices when the markets were less scary, than when the price was lower. Casey Daily Dispatch

-Despite the run up in stocks that took place during 2009, the Dow Jones Industrial Average and the S&P; 500 Index are still down about 30% from the highs of 2007. Casey Daily Dispatch

-The fair value of the S&P; 500 is 850, 23 percent below today’s 1105, said Jeremy Grantham. He arrives at that valuation by assuming a long-term average price-to-earnings ratio of about 15 for U.S. stocks and applying it to a long-term average for profit margins.

Jeremy Grantham warned in January 2000 that U.S. equities were “more overpriced than at any time in the last 70 years due to the massive overpricing of technology and especially dot-com stocks.” Bloomberg-Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=ai6GqIOSEWhk

-Bullish sentiment gets more bullish. The latest Investors Intelligence poll shows that the bulls are at 42.1%, up from 41.1% last week; and the bear camp was trimmed back to 22.7% from 23.3%. So the widening in the bull/bear spread is a modest negative for those who are constructive on the market. All the more so with the VIX index now south of 19. Complacency reigns. David Rosenberg-Gluskin/Sheff

-Personal bankruptcies in the U.S. jumped 9% in February and is 14% higher than last year’s already extremely high levels. David Rosenberg-Gluskin/Sheff

-The bottom line is that the U.S. economy is currently about 12 million jobs shy of being at full employment and as such it will likely take anywhere from 5 to 10 years to get back to the prior pre-recession peak in the employment-to-population ratio. David Rosenberg-Gluskin/Sheff

-The Bureau of Labor Statistics reports that total private employment has decreased by 8.5 million jobs and fallen 7.4% from 2007 highs. Real unemployment as reported by John Williams’ Shadow Government Statistics (SGS) is running at 21.2%.

While 21.2% unemployment might raise questions in terms of a comparison with the purported peak unemployment in the Great Depression (1933) of 25%, the SGS level likely is about as bad as the peak unemployment seen in the 1973 to 1975 recession.

The Great Depression unemployment rate was estimated well after the fact, with 27% of those employed working on farms. Today, less than 2% work on farms. Accordingly, for purposes of a Great Depression comparison, I would look at the estimated peak nonfarm unemployment rate in 1933 of 34% to 35%. John Williams

-Over the next four years $1.5 trillion or more in commercial real estate loans will come due. About 50% are in deep trouble. From the top in 2007 their values are off 35% to 40%, so they only have 30% to 35% to go. Losses could be as high as $700 billion. The fallout will affect all banks big and small. The reality of losses will be devastating.

Lenders, mostly banks, already broke, are going to get hit very hard and many will go under. All debt in real estate is in serious trouble. That is why we believe more than 2,000 banks will go out of business over the next 1-1/2% to 2 years.

That is why you should have no CDs and only three months expenses in the bank for operating and 6 months for businesses. That money should be in gold and silver related assets. Read more here-

http://news.goldseek.com/InternationalForecaster/1267632300.php or http://news.goldseek.com/InternationalForecaster/1267370379.php

-The renewed downturn in home prices may be weighing on consumer sentiment too. We just got the latest Zillow data and they showed that final sales prices in February came in 2.8% below the latest asking price in January.

This followed a 2.7% cut from the listing price in December and 2.6% in November so make no mistake, this is still very much a buyer’s market and there is a ton of supply that will continue to weigh in real estate values for the foreseeable future.

The steepest discounts remain in Florida. A must-read, by the way, is Banks Warn on Rates and House Prices on page 4 of the FT “Mortgage rates will rise, home prices will fall and the supply of credit will diminish when the US Federal Reserve and other central banks wind down emergency programmes, a group of global banks warned yesterday.” David Rosenberg-Gluskin/Sheff

-When you read articles like When It’s OK to Walk Away from Your Home in the WSJ and you see websites being constructed that show distressed homeowners how to not pay their mortgage and still stay in their house strategic defaults that allow people to switch from paying their mortgage to vacations in Disney World then all you know for sure is that we have reached a point where freeing up debt means freeing up cash flow for other purposes.

The reason why this was not the Great Depression was because back in the 1930s there was still a certain shame in not meeting your payments there is no longer any stigma in defaulting and the bank-bashing by the Obama team, not to mention foreclosure moratoria by edict and recently, musings from the White House that foreclosures will be practically outlawed entirely, has reinforced this mentality that being delinquent only carries consequences for lenders and their shareholders.

So at the margin, what we have are a growing number of Americans living for free in homes they never could afford to begin with during the bubble era, and the repercussions lie with the lender in today’s populist backdrop, not the borrower. As the banks and the taxpayer foot the bill, retail sales get underpinned even as credit contracts because the debt is either being written off by the banks or socialized by Uncle Sam.

In the meantime, the debtor is enjoying the benefits of living for free with the complicity of a government finding it easy to point the finger at the banks for creating the mess we are still in today. This is why the banks were forced to charge off 2.9 % of their loan book at the end of 2009 the highest rate since the FDIC began keeping records in 1934; not to mention the fact that 5.4% of all bank loans were at least 90 days late at the end of last year.

Meanwhile, the FDIC ate two more banks on Friday, bringing the total number of failures so far this year to 22 compared to 16 this time in 2009 when everyone thought the Battle of Megiddo was days away. As the WSJ concluded, “whether we like it nor not, walking away from debt is as American as apple pie.”

One has to wonder what the implications of all this will be on credit activity in the future. What financial institution will ever want to lend again without the ability for recourse, as is the case in Canada (where for some reason, the default experience turned out to be totally different than was the case state-side). David Rosenberg-Gluskin/Sheff

-Retail sales are down 5.5% from 2007 highs. Meanwhile, corporate earnings have picked up a bit, though sales are still swirling around the toilet bowl. But the kicker is that total household and government debt outstanding is at a new all-time high and has grown 21% over the past three years (and more than doubled in the past ten). In other words, we’re still in the thick of it. And we expect it could get much worse before it gets better. Casey Daily Dispatch

-A possible relapse in home prices that had Fed policy makers concerned late last year may now be coming to pass, underscoring forecasts by economists such as Jan Hatzius that an interest-rate increase is a long way off. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aYZxJTQI3w74

-Canada Keeps Lending Rate 0.25%, Cites Faster Prices. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aqo3FufkOC7o

-ECB Keeps Key Rate at 1% as It Weighs Greek Crisis. The European Central Bank left its benchmark interest rate at a record low as policy makers weigh the risks of withdrawing emergency lending measures amid Greece’s fiscal crisis. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=adMQdResWgC8

-Man who broke the Bank of England, George Soros, ‘at centre of hedge funds plot to cash in on fall of the euro’. Read more here-http://www.dailymail.co.uk/news/worldnews/article-1253791/Is-man-broke-Bank-England-George-Soros-centre-hedge-funds-betting-crisis-hit-euro.html

-Webster Tarpley: Bankers in slump plot against euro to save dollar. Watch here-http://www.youtube.com/watch?v=8XRFII9AiQc&feature;=player_embedded

-The BOE kept interest rates at a record low of 0.5 percent Thursday and made no increase to its unprecedented asset-buying scheme. Read more here-http://www.reuters.com/article/idUSLAC00566120100304

-While the eyes of the world focus on Greece’s debt crisis, investors in Edinburgh are busy preparing for the U.K. to be next. Turcan Connell, which caters to rich families, expects the pound to lose between 20 percent and 30 percent against the dollar once investors turn their sights on Britain as the government sells a record amount of debt.

“Alarm bells were ringing in Greece for a long time and when it happened, it happened very quickly,” Haig Bathgate, head of strategy at Turcan Connell, said at the company’s offices in the Scottish capital. “The U.K. is in a similar predicament. It could be hit very hard.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aJhONJ3Sdkqw

-CLSA’s Chris Wood “In Five Years The US Dollar Paper Standard Will Collapse.” Read more here-http://www.zerohedge.com/article/clsas-chris-wood-five-years-us-dollar-paper-standard-will-collapse-due-persistent-taxpayer-f

-Central bank report tells South Korea to prepare for dollar’s fade. Read more here-http://www.gata.org/node/8385

-Why the Fed won’t stop printing money. Ben Bernanke can talk tough, but the economy would sputter if the cash stopped flowing. Also: The inflation or stagflation that’s probably in our future. Read more here-http://articles.moneycentral.msn.com/Investing/currency/why-the-fed-wont-stop-printing-money.aspx

-James Turk-US Dollar Money Supply Is Underreported. Read more here-http://www.fgmr.com/us-dollar-money-supply-is-underreported.html

-Will The US Devalue the Dollar? Read more here-http://news.goldseek.com/GoldSeek/1267632000.php

-James Turk: What are banks doing with their depositors’ money? Read more here-http://www.gata.org/node/8381

-Head of IMF Proposes New Reserve Currency. IMF’s Strauss-Kahn suggests IMF may one day provide global reserve asset. Read more here-http://abcnews.go.com/Business/wireStory?id=9958995

-It is astounding how many economists, government officials, and Wall Street strategists construe the current economic conditions as evidence of a bona fide recovery. It is a testament to the power of the rose colored glasses handed out by our nation’s leading universities that such a feeling could be widely held despite the clear and present danger that compounds daily.

The myopia leads us to enact policies that actually exacerbate our problems. The “remedies” are postponing, perhaps indefinitely, a true recovery. The only possible way consumers can spend is if the government gives them the money. However, since the government cannot legitimately give money to one American without first taking it from another, the most likely means of doling out cash will be to run it off the printing presses.

That, in a nutshell, is our government’s plan for economic recovery. Print a bunch of money and give it to consumers to spend. This is not a plan for recovery but a recipe for disaster. Those betting that this program can succeed in putting together a healthy and sustainable economy simply do not understand the nature of their wager. The smart money is going the other way. Peter Schiff-Read more here-http://www.321gold.com/editorials/schiff/schiff030210.html or http://www.321gold.com/editorials/browne/browne030110.html or http://www.321gold.com/editorials/browne/browne030510.html

-Economists Warn Another Financial Crisis on the Way. Nonpartisan Group Led by Nobel Winner Calls for Stronger Financial Reforms. Read more here-http://abcnews.go.com/Business/economists-warn-financial-us-economy/story?id=9990828

-US senator warns of ‘financial meltdown’ risk. The US is heading for a debt-driven “financial meltdown” within five to seven years, according to Judd Gregg, the outgoing Republican senator for New Hampshire. In a robust and at times testy video interview for the Financial Times’s View from DC series, Mr Gregg also complimented China for showing rising alarm about the US’s mounting levels of public debt.

“We have had China say that they are looking for other places to put their reserves and that is probably a smart decision on their part,” said Mr Gregg, who will not seek re-election in November. “So the warning signs are pretty clear and the path is unsustainable and, at this point, unless we take different actions, unavoidable.” Read and watch more here-http://www.ft.com/cms/s/0/d618a9a4-225b-11df-a93d-00144feab49a.html or http://www.infowars.com/us-senator-warns-of-financial-meltdown-risk/

-Fannie Seeks $15.3 Billion in Aid After 10th Loss. Fannie Mae will seek $15.3 billion in U.S. aid, bringing the total owed under a government lifeline to $76.2 billion, after its 10th consecutive quarterly loss. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aEYsPfLirnuU&pos;=2

-American reliance on government at all-time high. The so-called “Great Recession” has left Americans depending on the government dole like never before. Without record levels of welfare, unemployment and other government benefits as well as tax cuts last year, the income of U.S. households would have plunged by an astonishing $723 billion more than four times the record $167 billion drop reported last month by the Commerce Department.

Moreover, for the first time since the Great Depression, Americans took more aid from the government than they paid in taxes. The figures show the devastating results of the massive job losses last year and indicate that the economic recovery that began last summer is tenuous and has a long way to go before many Americans resume life as normal, analysts said. Read more here-

http://www.washingtontimes.com/news/2010/mar/01/americans-reliance-on-government-at-all-time-high//print/

-Who is Paying Taxes in the U.S.? Read more here-http://www.mint.com/blog/trends/who-is-paying-taxes/?display=wide

-More consumers file for bankruptcy protection. The economic recovery effort has not slowed consumer bankruptcy filings. They surged 14% in February compared with a year earlier, according to the American Bankruptcy Institute. The 111,693 cases filed last month also represented a 9% increase from January, the report said. Read more here-http://www.usatoday.com/money/economy/2010-03-03-bankruptcy03_ST_N.htm

-Blockbuster to Shut 500 U.S. Stores, Restructure Debt. Blockbuster Inc., the largest U.S. movie-rental chain, will close at least 500 U.S. stores and is exploring ways to restructure debt. Blockbuster is working with Rothschild Inc. on financing and strategy, the Dallas-based company said today in a statement.

The company has total debt of $963.9 million, including leases, according to the statement. The company closed 253 stores in January as more consumers turned to Coinstar Inc.’s Redbox movie vending machines, and mail-order and online rental services such as Netflix Inc. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=axyx0rAJ922o

-The Flu Season That Fizzled. Cases of H1N1 Have Dwindled, Seasonal Flu Has Been a No-Show and Doctors Wonder Why. Read more here-http://online.wsj.com/article/SB10001424052748703429304575095743102260012.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsSecond

-China, Russia Urge More Iran Talks as France Seeks Sanctions. China and Russia said negotiations with Iran remain the best way to resolve the dispute over the purpose of its nuclear program, after a French envoy said the time has come to adopt tougher United Nations sanctions. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aOLRz4Tjnhyc

-China should build the world’s strongest military and move swiftly to topple the United States as the global “champion,” a senior Chinese PLA officer says in a new book reflecting swelling nationalist ambitions. Read more here-http://www.reuters.com/article/idUSTRE6200P620100301

-Batman comic book beats Superman at auction, sets record. The Dark Knight may be Superman’s next greatest nemesis, after Lex Luthor. Just three days after auction site ComicConnect.com claimed to break world records when it sold an original Superman comic for $1 million, Batman stole his thunder.

A rare, high-quality copy of Detective Comics #27, which marked the first appearance of Batman in 1939, sold for $1,075,500 on Thursday. Heritage Auctions of Dallas sold the comic book to an unnamed bidder on behalf of an anonymous collector.

Seven bidders from three countries participated in the combination live and online auction, taking about eight minutes to decide on a final price — an “eternity” in auction time, said Heritage Auctions president Greg Rohan. Read more here-http://money.cnn.com/2010/02/26/news/economy/batman_comic/index.htm

WWW.RARECOLOREDDIAMONDS.COM

-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.rarecoloreddiamonds.com/watchnow.html

-Rare blue De Beers diamond expected to fetch £4million. A rare flawless blue diamond that was once part of the De Beers Millennium collection is expected to fetch almost £4 million at auction. The 5.16 carat, pear-shaped internally flawless Fancy Vivid Blue gem is the first diamond of its kind to appear at an auction from the collection that De Beers, the world’s largest diamond producer, presented in 2000 to celebrate the Millennium.

It is being put up for sale by a private collector and is the star lot at Sotheby’s Hong Kong jewels and jadeite 2010 spring sale on April 7 and bidding is expected to reach the £3.8 million ($5.8 million) estimate price. The De Beers Millennium collection comprised 12 rare gems and took decades to assemble. “The diamond’s high and even saturation of brilliant sky-blue colour, internally flawless clarity and classic pear shape will undoubtedly spur intense bidding amongst discerning collectors from around the world,” the auction house said in a statement.

The auction’s location is not surprising: China is one of the world’s largest and fastest growing diamond markets, with jewellers forecasting it will be the next big purchaser of rare jewels as its economy surges as the rest of the world still grapples with the fallout from the global financial meltdown. Blue diamonds are among the rarest of all gems and owe their natural blue colour to the presence of the chemical element boron during the stone’s formation.

In May 2009, a 7.03 carat, cushion-shaped internally flawless fancy vivid blue diamond set the world record price per carat for any gemstone at a Sotheby’s Geneva auction when it was bought by a Hong Kong collector for £6.4 million ($9.4 million). Read more here-http://www.telegraph.co.uk/news/worldnews/asia/hongkong/7344676/Rare-blue-De-Beers-diamond-expected-to-fetch-4million.html

-World’s most famous ‘unseen’ blue diamond. Read more here-http://news.bbc.co.uk/2/hi/americas/8488183.stm

-Diamond the size of a ‘chicken’s egg’ sells for record $35.3 million. A 507½-carat gem discovered in South Africa last year has become most expensive rough diamond ever sold. Hong Kong’s Chow Tai Fook Jewellery Company bought the Cullinan Heritage stone for $35.3m, Petra Diamonds announced on Friday.

Petra recovered the gem, the 19th largest ever found described as the size of a chicken’s egg, from its Cullinan mine near Pretoria in South Africa in September last year . Read more here-http://www.telegraph.co.uk/finance/newsbysector/industry/mining/7325663/Diamond-the-size-of-a-chickens-egg-sells-for-record-35.3-million.html

TWO MORE U.S. BANKS FAIL

-FDIC shuts down banks in Nevada and Washington. Regulators shut down banks in Nevada and Washington on Friday, marking the 21st and 22nd failures this year of federally insured banks. The Federal Deposit Insurance Corp. was appointed receiver of Carson River Community Bank, based in Carson City, Nev. and Rainier Pacific Bank in Tacoma, Wash.

Carson River Community Bank had $51.1 million in assets and $50 million in deposits as of Dec. 31. Rainier Pacific Bank had $717.8 million in assets and $446.2 million in deposits as of Dec. 31. The FDIC said that Carson River’s deposits will be assumed by Reno, Nev.-based Heritage Bank of Nevada. Carson River’s lone branch will reopen Monday as an office of Heritage Bank.

Heritage Bank will purchase $38 million of the assets. The FDIC and Heritage Bank agreed to a loss-share agreement on $28.5 million of Carson River Community Bank’s assets. Rainier Pacific’s deposits will be assumed by Umpqua Bank in Roseburg, Ore. Rainier Pacific’s 14 branches will reopen during normal business hours as offices of Umpqua Bank.

Umpqua Bank will purchase $670.1 million of Rainier Pacific’s assets. The FDIC will retain the rest. The FDIC and Umpqua Bank agreed to a loss-share agreement on $578.1 million of Rainier Pacific’s assets. The pace of bank seizures this year is likely to accelerate in coming months, FDIC officials said this week. Read more here-http://finance.yahoo.com/news/FDIC-shuts-down-banks-in-apf-509896487.html?x=0

RBS PAID 1.3 BILLION BONUSES ON PROFIT OF 1 BILLION

-RBS paid £1.3bn bonuses on profit of just £1bn. Royal Bank of Scotland paid its investment bankers £1.3bn in bonuses for making just £1bn in profit last year, not the record £5.7bn declared last week. The state-backed lender’s results show that £4.7bn of the investment bank’s worst losses were hived off to the “non-core” division being wound down. Although the bank’s split into “core” and “non-core” units has been well explained, the separation generously flattered the investment bank’s numbers and allowed management to present it as a record year for the division.

Stephen Hester, chief executive, used the performance to justify the £1.3bn bonuses paid to investment bankers, at least 100 of which received more than £1m. RBS’s numbers show that impairments in the “core” investment bank totalled just £640m, helping it produce £5.7bn of the £8.3bn of profits made by the bank’s ongoing businesses. By contrast, investment banking impairments dumped in the “non-core” bank totalled £4.7bn.

No other UK bank separates out its “toxic” legacy debt. Barclays’ investment bank, Barclays Capital, suffered £2.6bn of impairments last year, cutting profits to £2.46bn. However, analysts point out that RBS, now 84pc owned by the state, has taken more conservative marks on its assets than peers, which contributed to the size of the “non-core” writedowns.

Few rivals have removed the “toxic” assets from their investment bank. Credit Suisse has hived assets off but is linking bonus payments to the performance of the portfolio. Last week, Commerzbank, the German lender that was rescued by Berlin, said it was not paying any bonuses at all in its investment bank. Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7340087/RBS-paid-1.3bn-bonuses-on-profit-of-just-1bn.html

REAL ESTATE-FORECLOSURES-MORTGAGES

-U.S. Economy: Sales of Previously Owned Homes Fall. Sales of previously owned U.S. homes unexpectedly dropped 7.2 percent in January to a seven-month low, indicating a lack of job growth is undermining government incentives to bolster the housing market.

The decline to an annual pace of 5.05 million, reported today by the National Association of Realtors in Washington, was the second-largest on record after December’s 16.2 percent plunge. A separate report showed the economy grew at a 5.9 percent pace last quarter, faster than initially estimated. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a1WCoPgGSmlg&pos;=1

-Pending Sales of U.S. Existing Homes Fell 7.6% in January. The number of contracts to buy previously owned U.S. homes unexpectedly fell in January, showing the extension of a tax credit is sparking little interest.

The index of purchase agreements, or pending home sales, dropped 7.6 percent after a revised 0.8 percent increase in December, the National Association of Realtors announced in Washington. In November, pending home sales slumped 13.7 percent. Snowstorms in February probably limited contract signings and sales that month as well, the group said.

The renewal of a government incentive to first-time buyers, originally due to expire at the end of November, and its expansion to include current owners has yet to lure buyers back into the market after helping boost sales last year. A lack of jobs and mounting foreclosures have depressed confidence, indicating housing will take time to rebound. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aeXJoqa_E6YI

-Buffett Says U.S. Housing Will Recover by Next Year. Billionaire Warren Buffett said the U.S. residential real estate slump will end by about 2011, predicting that’s how long it will take demand for homes to catch up with the supply.

“Within a year or so, residential housing problems should largely be behind us,” Buffett wrote Feb. 27 in his annual letter to shareholders of his Berkshire Hathaway Inc. “Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits.”

The worst housing decline since the Great Depression has left one in five U.S. mortgage holders owing more than their houses are worth. Record foreclosures last year flooded a real estate market already glutted with unsold property, causing new construction to fall to the lowest in at least 50 years. The fall in homebuilding is the only fix unless the U.S. decides to “blow up a lot of houses,” Buffett joked.

“People thought it was good news a few years back when housing starts the supply side of the picture were running about two million annually,” said Buffett, the chairman and chief executive officer of Omaha, Nebraska-based Berkshire. “But household formations the demand side only amounted to about 1.2 million.” Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aIDoMVA9jD_Y

-China risks property bubble as prices rise 20pc a month. Property prices in Britain may be back on a downward trajectory, but there is one market where they are still white hot China. Read more here-http://www.telegraph.co.uk/finance/china-business/7339669/China-risks-property-bubble-as-prices-rise-20pc-a-month.html

The Goldbugg Report – March 9, 2010
Posted by Worldwide Precious Metals on Tuesday, March 9, 2010

The Goldbugg Report – March 02, 2010

March 2, 2010

February 26, 2010

The Week in Review

There was a new twist on the Greece situation this week. Not only did major banks, including Goldman Sachs and JP Morgan, help hide the fact that Greece’s debt was growing out of control, it turns out that they’ve been betting on the fact that they might very well default on that debt as well. Goldman Sachs, JP Morgan and about a dozen other banks created an index (based on credit default swaps and started before Greece’s debt problems became public knowledge), that allowed traders to bet on whether Greece and other EU countries would default on their debt. If the term “credit default swaps” sounds familiar to you, you might recall that they were the same financial voodoo that nearly bankrupted AIG. You may also recall that there was a bank that made tremendous amounts of profit betting on AIG’s default: that would be Goldman Sachs. The Fed has issued a statement that it will be investigating the matter.

Initial unemployment claims rose again last week, climbing by 22,000 and defying analyst’s expectations that they would fall. The unemployment numbers helped move the stock market lower, coming right on the heels of a report that home sales hit record lows in January. On Wednesday, the Senate approved a $15 billion dollar package of tax breaks and highway spending aimed to bring down unemployment.

Data out of Europe this week showed the overall economic recovery may be faltering. Household and business confidence dropped unexpectedly and bank loans to the private sector fell for the fifth straight month. Julian Callow, chief European economist at Barclays Capital in London said “Europe is where we see the biggest risk of a double dip at the global level, Europe has been lagging and we’ve continued to see better numbers in Asia and now the U.S.” Standard and Poors announced that it may downgrade Greece one more time as it continues to struggle with its debt crisis.

Data out of Asia was markedly better than what was coming out of Europe. India’s finance minister announced that its economy may grow 10 percent. According to Finmarket, a Russian news agency, China has announced that it will bid on the remaining 191.3 tons of IMF gold at an open auction. While this news has not been confirmed by Chinese officials, China has long been assumed to be looking to purchase more gold to diversify its reserves further.

Existing home sales dropped 7.2% in January. While some of that decline can probably be attributed to massive amounts of snow that have been falling across the US, the general consensus is that the housing sector is much worse off than previously expected.

Crude oil prices touched $80 a barrel before retreating back below that level on weak data out of the US and another wave of heavy winter storms.

The euro touched a one year low against the yen as the fears in Greece continue. The US dollar, after showing some recent strength against the yen, retreated against that currency after fears of an impending rate hike by the Fed subsided. Revised GDP numbers that were worse than expected also helped drive the dollar lower.

Here are your Short Term Support and Resistance Levels for the upcoming week.

Volatility should be expected to continue. Adrian Douglas, publisher of the Market Force Analysis newsletter, analyzed 6 months worth of daily delivery notices and inventory data from COMEX. His analysis led him to conclude that there is an increasing shortage of gold and silver. The CFTC announced this week that it would host a public meeting in late March to discuss speculation limits in the US metal futures. Bart Chilton, a CFTC commissioner, said “I’m not suggesting they [those who think banks are conspiring to keep precious metals too cheap] have a legitimate argument. I looked at it carefully and I became convinced that it’s something we should investigate.” The pressure is on the large banks including JP Morgan, Goldman Sachs, et al. to stop manipulating the precious metals market. These large banks have been abandoning their short positions in precious metals left and right, as reflected on the weekly Commitments of Traders (COT) report put out by the CFTC. The COT reports provide a breakdown of each Tuseday’s open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. China and India may soon be competing with each other over the IMF’s remaining gold for sale. The situation in the EU is rapidly devolving, with Greece beginning to lash out at those that control the purse strings for the bailout it so desperately needs. The term “double dip recession” is popping up more and more in the media and there seems to be quite a bit of fear that the recovery may be slowing down, this time led by the EU. The global financial market seems to be teetering on the edge of a tipping point, and it looks like that tip won’t be for the positive. Starting, or adding to your existing, precious metals portfolio may well be an excellent way to ride out the avalanche of turmoil if that tip occurs. Remember, the key to profitability through the ownership of physical precious metals is to own them and hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

GOLD

-CFTC to Hold Public Meeting to Examine Futures and Options Trading in the Metals Markets,

http://www.cftc.gov/newsroom/generalpressreleases/2010/pr5782-10.html

-Citi: China Sold Their Treasuries Because They Want To Buy Tons Of Gold. Read more here-http://www.businessinsider.com/citi-theres-no-problem-for-gold-2010-2

-China will bid on IMF’s remaining gold offer, Russian news agency says. China has confirmed its intention to purchase 191.3 tons of gold from the International Monetary Fund at an open auction, Finmarket news agency said.

World central banks started to increase their gold reserves after prices on gold began to climb in 2001. The IMF sells gold within the scope of a program to diversify sources of income and achieve an increase in lending.

The IMF announced an intention to sell 403.3 tons of gold in accordance with the adequate decision made by the board of directors of the fund in September of 2009. India, Mauritius, and Sri Lanka purchased about 212 tons of the amount at the end of 2009. India purchased most, 200 tons.

China’s interest in international trade is connected with the development of the nation’s economy, as well as with the growing consumer demand in the country. “Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market.

China is interested in the development of the domestic consumer market,” the agency reports. Most of Chinese citizens believe that investing in gold jewelry is a good way to avoid inflation, Rough & Polished agency said.

The IMF has received the profit of $7.2 billion from gold sales. A part of the funds is to be used for crediting poor countries. Read more here-http://www.gata.org/node/8372

-Will she won’t she? China’s gold dance. First the rumours are that China won’t buy the IMF gold, then there are equally strong rumours that it will. If China or India, the other rumoured buyer, don’t cough up does it really matter? Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=99671&sn;=Detail&pid;=1

-Dominic Frisby: Ignore the IMF sales Soros is right about gold. Read more here-http://www.gata.org/node/8367

-Gold Production Has Peaked: CEO. The world’s supply of new gold is shrinking as the major producers are finding less of the precious metal and the days of big open-pit mines are fading, Dave Paxton, CEO of Vatukoula Gold Mines, told CNBC Friday.

“Gold production has peaked; I think the highest production I saw was in 1999 and it has declined since then,” Paxton said. Production is coming down in all of the key producing counties of South Africa, America and Australia, the former mining analyst added.

“The big open-pit mines, which were these massive units that produced lots of gold are coming to the end of their lives,” Paxton said. “We’re not finding any more of the large open-pit gold mines. We’re going back to more the underground mines, which are the long-term producers, but they are much higher costs,” he added. Read more here-http://www.cnbc.com//id/35475766

-Peak gold theory gains impressive adherents. In his latest Basic Points analysis, global market strategist Don Coxe suggests investors maintain a high exposure to gold and gold miners whose production comes from politically secure areas.

Global market strategist Don Coxe, chairman of Coxe Advisors, said he believes in “a hitherto-undiscovered erogenous zone in gold bugs: peak gold-which could be the latest Big Thing since peak oil.” In his latest Basic Points, Hard Rocks and Hard Shocks, Coxe credits “Aaron Regent, Barrick’s market-savvy new CEO” for “fueling the flames of desire” through the concept of peak gold.

Regent has noted “that new mined production of gold has been declining for a decade,” suggesting this could prove to be the equivalent of peak oil, the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline.

Much of the recent commentary on gold, Coxe said “is that Obama’s deficits, coupled with Bernanke’s money-printing, could produce either a Depression or runaway inflation. To us, this is an argument investors really should take seriously.” Coxe advised that “a holding of gold and gold stocks offers excellent protection under both extremes, and attractive potential under a regime of moderate inflation and modest recovery.”

In his analysis, Coxe noted that a “big boost in bullion prices has not meant a big jump in gold production-but was actually accompanied by declining output. Rather, he adds, “the kinds of mining companies in which you should invest are those that recognize that each ton of ore taken out of ground brings the mine closer to closure.” Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=99054&sn;=Detail&pid;=1

-Strong start to 2010 gold demand in China, India WGC. The WGC says India’s jewellery sector has been buying regularly while tighter monetary policy in China has not affected buying. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=99636&sn;=Detail&pid;=1

-Credit Suisse Says Charts Show Gold Is Poised To Jump Higher. Watch video here-http://www.businessinsider.com/credit-suisse-says-charts-show-gold-is-poised-to-jump-higher-2010-2

-Gold: A picture tells a thousand words. The net long dollar position on Inter continental exchange is 150 times the six-year average; CME Euro is heavily oversold. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=99654&sn;=Detail&pid;=1

-Gold: Long-Term Fundamentals Remain Promising. Read more here-http://news.goldseek.com/GoldSeek/1267043375.php

-Redburn Partners On The Coming Gold War: “Gold Is Money And Nothing Else”. Gold price will reach at least US$1,500/oz: we are raising our long-term gold price estimate to US$1,500/oz (from US$900/oz) with the possibility of a spike to US$4,000-5,000/oz. Read more here-http://www.zerohedge.com/article/redburn-partners-coming-gold-war-gold-money-and-nothing-else

-Peter Grandich: Perma-gold bears hitting new lows. Read more here-http://www.gata.org/node/8362

-I.M. Vronsky, I knew I should have bought gold. Read more here-http://www.gold-eagle.com/gold_digest_08/vronsky021610.html

-Listen to GATA Chairman Murphy’s interview on Liddy radio show. Listen here-http://www.gata.org/node/8370

-Gary North: Fed’s secrecy aims mainly to hide gold’s disposition. Read more here-http://www.gata.org/node/8357

SILVER

Gold to silver ratio at 80 to 1 with gold at $1,100 the silver price would be $13.75

Gold to silver ratio at 70 to 1 with gold at $1,100 the silver price would be $15.71

Gold to silver ratio at 60 to 1 with gold at $1,100 the silver price would be $18.33

Gold to silver ratio at 50 to 1 with gold at $1,100 the silver price would be $22.00

Gold to silver ratio at 40 to 1 with gold at $1,100 the silver price would be $27.50

Gold to silver ratio at 30 to 1 with gold at $1,100 the silver price would be $36.67

Gold to silver ratio at 20 to 1 with gold at $1,100 the silver price would be $55.00

Gold to silver ratio at 15 to 1 with gold at $1,100 the silver price would be $73.33

-Silver Can Hit $1,500. Mike Maloney, author of Rich Dad’s Guide to Investing in Gold and Silver, predicted $15,000 gold but think silver offers more upside over the long term. Watch video here-

http://www.thestreet.com/video/10675784/silver-can-hit-1500.html#65406945001

-A long-term look at Silver. Read more here-http://www.321gold.com/editorials/roy_byrne/roy_byrne022310.html

-Butler tells King World News metals are ‘locked and loaded’ for rally. Listen here-http://www.gata.org/node/8351

-Howard Ruff-Think Outside the Box: Maverick Investing in the Age of Obamanomics. Your investment program should be based in coins and bullion. Invest at least one-third of your assets in gold and silver coins or bars. Read more here-http://www.kitco.com/ind/Ruff/ruff_feb242010.html

-Cash for metals not a sign of a market top. Read more here-http://news.goldseek.com/PeterCooper/1266933660.php

-New COMEX Rule: Another Reason to Fear Metals ETFs. Read more here-http://www.kitco.com/ind/Lewis/feb172010.html

-CFTC to examine trading in metals markets. The U.S. Commodity Futures Trading Commission said on Tuesday it will hold a public meeting on March 25 to examine whether position limits are needed for gold, silver, and copper futures markets.

The CFTC, the top regulator for futures markets, has long enforced position limits for grains trading, and is now mulling similar restrictions on the number of contracts speculators can hold for other markets. Read more here-http://www.gata.org/node/8364

-Financial Times notes Butler’s and GATA’s clamour to CFTC. Read more here-http://www.gata.org/node/8368

CHARTS OF THE WEEK-QUOTES-QUICK HITS

-Chart of the week: History Shows Why Another Sovereign Debt Crisis Is Right Around The Corner. This chart from Gerard Minack at Morgan Stanley, inspired by the research of Harvard professor Ken Rogoff, shows how, surprisingly, sovereign debt crises are pretty common from a historical perspective.

The developed world has gone through many cycles of debt accumulation followed by sharp and sudden corrections of debt imbalances via sovereign debt crises of some form as shown below. The blue line indicates the percentage of nations either in default or restructuring their debt each year.

You can see that individual national crises tend to clump together and happen in waves. The last wave was around 1990, while the 2000’s were characterized by a lull in overt sovereign debt problems.

Which means that a new wave of sovereign debt defaults could be just around the corner and would be perfectly normal historically speaking; since as Morgan Stanley said in their recent related report, ‘this time will probably not be different.’ Read more here-http://www.businessinsider.com/chart-of-the-day-sovereign-external-debt-1800-2006-2010-2

Source: chartoftheday.com

-Chart of the week: Bankers Getting Paid A Lot To Sit On Their Hands And Do Jack Squat. Yesterday we pointed you to the latest data from the St. Louis Fed showing that bank lending continues to plunge.

Rather than ply businesses with loans, banks are instead opting to hoard cash and buy Treasuries. And yet despite the lending shutdown, bonuses are back up, per fresh data out today from the New York Comptroller.

In other words, sitting on your hands and doing nothing is a pretty lucrative gig. Read more here-http://www.businessinsider.com/chart-of-the-day-wall-street-bonuses-vs-bank-lending-2010-2

Source: chartoftheday.com

-Chart of the week: Banks Continue To Pull The Rug Out From Under The Economy. Can the economy revive if banks don’t start to lend again? Let’s hope so. Today the St. Louis Fed released its latest monthly look at commercial and industrial loans at major banks a measure that some would say represents the essence of the US banking system.

As you can see, this measure is still falling like a knife a bad sign for the ongoing health of the economy. (And also not what we were promised when we bailed out the banks.) Read more here-http://www.businessinsider.com/chart-of-the-day-commercial-and-industrial-loans-at-all-commercial-banks-2010-2

Source: chartoftheday.com

-Chart of the week: Wall Street’s Gravy Train Is About To Hit A Brick Wall. The major banks are loving the uber-steep yield curve that allows them to borrow money on the cheap, and then lend it back to the government at a fat yield.

Well, that’s just about over. Bernanke has signalled the beginning of the rate-hike cycle (driving up the cost of short-term borrowing) and as this historical chart of the 2year-10-year yield spread (via Waverly Advisors) indicates, the curve just can’t get any steeper. In fact if history is any guide, it’s about to collapse big time. Read more here-http://www.businessinsider.com/chart-of-the-day-2y10y-yield-spread-2010-2

Source: chartoftheday.com

-The economy is so bad that…I ordered a burger at McDonald’s and the kid behind the counter asked, “Can you afford fries with that?” Anonymous

-As we all know, the global economic crisis started neither in Greece, nor in Russia, nor in Europe. It came to us from across the ocean. Russian Prime Minister Vladimir Putin, 16 February 2010

-The Bank of England may still have to restart its asset-buying programme if the economic outlook worsens, and things are not looking good in the euro zone, Governor Mervyn King said Tuesday. Read more here-http://www.nytimes.com/reuters/2010/02/23/business/business-uk-britain-bank-qe.html?_r=3

-The Federal Deposit Insurance Corporation is bracing for a new wave of bank failures that could cost the agency many billions of dollars and further strain its finances. Read more here-

http://www.nytimes.com/2010/02/24/business/24fdic.html?ref=business

-It’s truly amazing that there are still economists out there who think we don’t need emergency interest rates. What a laugh! David Rosenberg-Gluskin/Sheff

-The dollar rally will soon end and speculators should begin to take short positions. All the good news for the dollar is out. For the moment it is the best of a bad lot. Then only real money is gold and silver.

In the future more and more people worldwide will realize that and eventually there will be a stampede into the two precious metals. America will produce a debt to GDP ratio or 95% to 100% this year. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1267024590.php or http://news.goldseek.com/InternationalForecaster/1266783816.php

-Those who were unemployed/underemployed, to little surprise, spend 36% less, on average, than those who have a job ($48 per day versus $75 per day for a 36% gap). Fully 56% of the unemployed-underemployed reported that they have enough money to cover basic necessities and that compares to 86% for the ranks of the employed.

Things are so tight for these 30 million folks that we see in the NYT that applications for federal help on heating bills (LIHEAP) have risen 15% this year (from 8.8 million households). David Rosenberg-Gluskin/Sheff-Read more here-http://www.gallup.com/poll/125960/Underemployed-Report-Spending-Less-Employed.aspx

-I believe the short-term problems in Europe are being overblown and the potential demise of the euro highly exaggerated. For those who can connect the dots however, the Greek drama throws some much needed light on the far more daunting problems unfolding within our own U.S. fiscal house. Peter Schiff-Read more here-http://www.321gold.com/editorials/schiff/schiff022410.html

-There is no doubt that on a technical level the Euro is massively oversold but on a more fundamental basis, the questions over its sustainability are not likely to subside any time soon. That is where most of the contagion risk is located when it comes to the PIGS (Portugal, Italy, Greece and Spain) and their pig-like fiscal financial picture.

As per Morgan Stanley data, 51% of Portugal’s debt ($165bln) is owned by Spanish banks. Fully 32% of Spain’s debt ($748bln) is held by German banks, and 25% of that is owned by French banks. According to Commerzbank, 60% of new Greek bond issuance in recent years was gobbled up by non-Greece European borrowers.

So, any restructuring of Eurozone debt is going to fall squarely on the region’s banks, which would likely have to take massive writeoffs. Even a move by the rating agencies to cut the debt rankings of any European country would translate immediately into rating changes for the banks as well as higher capital charges (the Economist had a good take on this a few weeks ago).

As an aside, we see today on our Bloomberg screen that Ken Rogoff (co-author of “This Time is Different” and who is not prone to hyperbole) expects ballooning deficits and public sector debts to trigger a “bunch” of sovereign defaults. David Rosenberg-Gluskin/Sheff

-Nice to see the credit crunch is over. The FDIC was a hungry beast on Friday and ate up four more regional banks, with La Jolla being a big catch at $3 billion of assets. This brings the number of U.S. banks that have failed so far this year to 20 and that compares to 13 at this same stage a year ago when practically everyone feared the world was coming to an end (but before Geithner and Bernanke declared that any bank that was thought too big to fail would not be allowed to). David Rosenberg-Gluskin/Sheff

-Goldman Sachs is among the biggest contributors in the financial industry. Over twenty years, it has given $31,462,375 to politicians that’s an average of $1,573,199 per year. Casey’s Daily Dispatch-Read more here-http://www.caseyresearch.com/displayCdd.php?id=355

-House Republicans are pushing the Obama administration to add Fannie Mae and Freddie Mac’s $1.6 trillion in outstanding debt to the federal budget in legislation to be introduced today. Representatives Scott Garrett, Spencer Bachus and other Republicans on the House Financial Services Committee will propose subjecting the companies’ unsecured debt to the $14.3 trillion public debt ceiling and accounting for their other liabilities and assets similar to federal loan programs.

“Now that they have been placed in conservatorship, the distinction between Fannie Mae and Freddie Mac being government sponsored, rather than government operated, has been eliminated,” Garrett of New Jersey said in a background memo on the bill circulated in Washington yesterday. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aqUsQss37UJc

-Home prices are already double dipping. According to Zillow.com, home prices are now deflating in 21% of the 143 markets it tracks; and the average discount amounts to 11% from the original listing price. One in five homeowners, as per the Zillow database, is under water on their mortgage in the fourth quarter.

Moreover, we also see from RealtyTrac that 2010 will be a big payback from all the government-imposed moratoria because an estimated 4.5 million foreclosure filings is slated for this year compared to 2.8 million in 2009.

Meanwhile, the Mortgage Bankers Association, to little media attention, released its Q4 data, which found that a record 15.02% of housing loans were either in foreclosure or behind on at least one payment on Q4. About 3.9 million Americans are more than 90 days behind on their payments, which is triple triple! the level of two-years ago. David Rosenberg-Gluskin/Sheff

-The Secretary of the Treasury, in coordination with the Director of the Office of Management and Budget, is required annually to submit financial statements for the U.S. government to the President and the Congress.

Since 1997, the Government Accountability Office (GAO) has been required to audit these statements. And it’s my understanding that the government has failed each and every such audit. The most recent report, covering 2008, marks the 12th year in a row in which the government’s consolidated audit statement received a judgement of “no comment” from auditors. Porter Stansberry Read more here-http://www.caseyresearch.com/displayCdd.php?id=354

-U.S. double-dip recession possible: Shiller. The U.S. housing market showed early signs of stabilization in December, but that may not mean a recovery is at hand. In fact, Yale economics professor Robert Shiller tells BNN home prices could fall further and a double-dip recession is possible. Watch video here-http://www.bnn.ca/news/15894.html

-Bernanke Says ‘Nascent’ Recovery Requires Low Rates. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aJDZb0jjJyL0&pos;=2

-Fed Won’t Lift Target in 2010, Pimco’s Clarida Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=apSZLR4rKxXE&pos;=4

-Greenspan Says Crisis ‘By Far’ Worst, Recovery Uneven. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a4lpUmEdbebw

-Yellen Says U.S. Economy Will Perform Below Potential. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aPLqIw9VZgjg

-Harvard’s Rogoff Sees Sovereign Defaults, ‘Painful’ Austerity. Ballooning debt is likely to force several countries to default and the U.S. to cut spending, according to Harvard University Professor Kenneth Rogoff, who in 2008 predicted the failure of big American banks.

Following banking crises, “we usually see a bunch of sovereign defaults, say in a few years,” Rogoff, a former chief economist at the International Monetary Fund, said at a forum in Tokyo yesterday. “I predict we will again.”

The U.S. is likely to tighten monetary policy before cutting government spending, sending “shockwaves” through financial markets, Rogoff said in an interview after the speech. Fiscal policy won’t be curbed until soaring bond yields trigger “very painful” tax increases and spending cuts, he said.

Global scrutiny of sovereign debt has risen after budget shortfalls of countries including Greece swelled in the wake of the worst global financial meltdown since the 1930s. The U.S. is facing an unprecedented $1.6 trillion budget deficit in the year ending Sept. 30, the government has forecast.

“Most countries have reached a point where it would be much wiser to phase out fiscal stimulus,” said Rogoff, who co-wrote a history of financial crises published in 2009. It would be better “to keep monetary policy soft and start gradually tightening fiscal policy even if it meant some inflation.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aI8fxn.J_Fs4&pos;=5

-Economist Rogoff Who Predicted The U.S. Crisis And A European One, Now Predicts A China Collapse. Read more here-http://www.businessinsider.com/economist-rogoff-who-predicted-the-us-crisis-and-predicts-a-european-one-now-predicts-a-china-collapse-2010-2 or http://www.bloomberg.com/apps/news?pid=20601087&sid;=aMfBJ1pwuKgw&pos;=4

-Record U.S. Debt Hampers Fiscal, Monetary Policies: Analysis. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aJdsMXW4DFrE

-U.S. Stocks to Fall, Faber Says; Wood Doubts Recovery. U.S. stocks will probably fall this year, according to investor Marc Faber, and the country’s economy won’t face a “normal” recovery as job cuts dent consumer spending, said CLSA Asia-Pacific Markets’ Christopher Wood. Read more here- http://www.bloomberg.com/apps/news?pid=20601110&sid;=a5O3DHxpH2II

-Matt Taibbi-Wall Street’s Bailout Hustle. Goldman Sachs and other big banks aren’t just pocketing the trillions we gave them to rescue the economy they’re re-creating the conditions for another crash. Read more here-http://www.rollingstone.com/politics/story/32255149/wall_streets_bailout_hustle/print

-Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ax3yON_uNe7I

-SEC Votes 3-2 to Curb Short-Sale, Disappointing Goldman Sachs. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aLZZMYHxmtDw

-Millions of Unemployed Face Years Without Jobs. Read more here-http://www.nytimes.com/2010/02/21/business/economy/21unemployed.html

-States had to borrow $31B for jobless pay. South Carolina and other cash-strapped states borrowed a total of about $31 billion from the federal government over the last two years to provide their unemployed workers with benefit checks, and now as the country climbs out of recession the states must find a way to pay it back.

John Rainey, South Carolina’s chief economic adviser, said the state needs to take calculated steps to repay its $800 million debt while some others hold out hope that the federal government will forgive the loans.

Rainey said the federal government should have no place in erasing the debt that will largely be the responsibility of the business community to pay back. Read more here-http://www.postandcourier.com/news/2010/feb/22/states-had-to-borrow-31b-for-jobless-pay/

-The number of Americans filing first-time claims for unemployment insurance unexpectedly increased last week, a sign that the economic recovery will be uneven as the labor market struggles to rebound. Initial jobless applications rose by 22,000 to 496,000 in the week ended Feb. 20, the highest level in three months, Labor Department figures showed today in Washington.

The total number of people receiving unemployment insurance gained and the four- week moving average of weekly claims jumped close to a three- month high. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a94m9InQxJjM&pos;=3

-US Jan mass layoffs edge up on weak manufacturing. Read more here-http://www.reuters.com/article/idUSN239866720100223?type=marketsNews

-Ferguson: We’re One Downgrade Away From The End Of American Empire. Niall Ferguson is candidly calling time on the American Empire, or at least pointing to the combination of factors that will soon lead to its demise, in the latest issue of Foreign Affairs.

Ferguson, who has become one of the leading intellectuals of the deficit hawk camp, theorizes that empires don’t decline in the slow, cyclical process long assumed. Instead it is dramatic events that push them over the edge to oblivion. Read more here-http://www.businessinsider.com/ferguson-were-one-write-down-away-from-the-end-of-american-empire-2010-2

-California One Step Closer To Insolvency After State Cancels $2 Billion General Obligation Bond Sale. Read more here-http://www.zerohedge.com/article/california-one-step-closer-insolvency-after-state-cancels-2-billion-general-obligation-bond-

-Doomsday is here for the state of Illinois. To become solvent, the state must enact the largest tax-increase package in Illinois history, whack another $2 billion from already starved government programs and wrest major financial concessions from the state’s unionized work force, a nonpartisan government watchdog contends. Read more here-http://www.suntimes.com/news/maxedout/2062132,CST-NWS-doomsday22.article

-Citigroup Warns Customers It May Refuse To Allow Withdrawals. The image of banks locking their doors to keep customers from making withdrawals during a bank run is what immediately came to mind when we heard that Citigroup was telling customers it has the right to prevent any withdrawals from checking accounts for seven days.

“Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change,” Citigroup said on statements received by customers all over the country. Read more here-

http://www.businessinsider.com/citigroup-warns-customers-it-may-refuse-to-allow-withdrawals-2010-2

-Slump in Tax Revenue Creates State of Siege. U.S. states face a “lost decade,” says Raymond Scheppach, head of the National Governors Association. The problem is a broken fiscal model exposed by the recession, and likely to extend the pain beyond the downturn’s official conclusion. Read more here-http://online.wsj.com/article/SB10001424052748703315004575073403314799286.html?mod=WSJ_Markets_section_Heard

-Muni Defaults May Rise Amid ‘Unprecedented Stress’ on Finances. Defaults by issuers of municipal bonds will rise as the worst recession since the 1930s leaves governments facing “unprecedented stress” on their finances into next year, according to Moody’s Investors Service. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a50udaSCFULE

-How long can the U.S. dollar defy gravity? Read more here-http://www.reuters.com/article/idUSTRE61M3MI20100223

-South Carolina Rep. Mike Pitts has introduced legislation that would mandate that gold and silver coins replace federal currency as legal tender in his state. Read more here-http://www.cbsnews.com/blogs/2010/02/17/politics/politicalhotsheet/entry6217403.shtml

-A Madoff in-law has filed for a name change, hoping to rid herself of the notorious moniker that has become synonymous with swindle. Stephanie Madoff, daughter-in-law of the imprisoned Bernard Madoff, filed for a name change with the New York Supreme Court in Manhattan, citing death threats against her family. Read more here-http://money.cnn.com/2010/02/25/news/companies/madoff_name_change/index.htm

-Swine Flu Protection Added to Seasonal Flu Vaccine. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a0uX494vslsk

-It’s a bird, it’s a plane it’s a $1 million comic book. Since he started selling comic books at age 16, Vincent Zurzolo had only dreamt of selling a million-dollar comic book. Monday was his lucky day. That was the day that Superman hit the jackpot.

“It is the single most important event in comic book history,” said Zurzolo, who co-owns auction site ComicConnect.com with founder Stephen Fishler. Zurzolo and Fishler posted a rare copy of Action Comics #1 on their site Monday morning. It was the issue where the Man of Steel made his debut in 1938. They were selling it on behalf of an unnamed collector. Within one minute, Zurzolo said, another unnamed collector bought it for $1 million.

That price is more than three times the previous record, set last year by a lesser-quality version of Action Comics #1, which ComicConnect sold for $317,200. Monday’s $1 million sale was for a very rare edition, because it was in much better condition. Only about 100 copies of Action Comics #1 are known to exist, and of those, only two are in such good shape, Zurzolo said. Read more here-http://money.cnn.com/2010/02/22/news/companies/superman_comic/index.htm

WWW.RARECOLOREDDIAMONDS.COM

-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.rarecoloreddiamonds.com/watchnow.html

-“I think diamonds could end up being thought of like they once were an emergency escape mechanism. The Jews sewed them into their hems and used them for safe passage. We’re all worried about the Banks and how we would ‘get out of Dodge’ if we had to.” Trend expert Faith Popcorn

-Bear Stearns and Lehman Brothers have disappeared and the Big Three and Citigroup hover on the edge of vanishing a diamond is forever. From Adam Hanft article De Beers: Diamonds Are a Recession’s Best Friend

-If more people bought diamonds instead of credit-default swaps, we’d be just fine now. From Adam Hanft article De Beers: Diamonds Are a Recession’s Best Friend

-Diamonds Hold Allure as Gem of an Investment. Despite the financial meltdown, luxury assets such as wine and art are drawing strong interest from rich buyers, some looking at the goods as investments. Now, promoters of diamonds are hoping to add the precious stones to the investment mix.

The ‘Vivid Pink’ sold in Hong Kong for $10.8 million. Record sales at recent auctions, set by Asian bidders, is spurring talk of a surge in high-end diamond demand. Several investment funds focusing solely on diamonds have launched or are in the works and are hoping to take advantage.

Asian bidders, especially from mainland China, represent a growing presence at auctions, says Patti Wong, chairwoman of Sotheby’s Asia. At a Sotheby’s auction in New York City earlier this month, five of the top 10 buyers were Asian.

The most expensive item a 30.48 carat oval diamond went to a buyer from mainland China for approximately $4.11 million. At a Christie’s auction in Hong Kong this month, a colored diamond, called “The Vivid Pink,” sold for $10.8 million, setting a record for a gemstone of its kind.

It’s unclear if the buyers were after the rocks for investment purposes or simply to enjoy. But proponents are hoping to turn diamonds traditionally seen as ornaments into wealth-accumulating vehicles. Read more here-http://online.wsj.com/article/SB126099490068094349.html

20 U.S. BANKS HAVE FAILED IN 2010-BANKS AT RISK OF GOING BUST TOPS 700

-Banks in Calif., Ill., Fla., Texas are shut down. Regulators shut banks in Calif., Ill., Fla., Texas, putting US bank failures at 20 for year. Read more here-http://finance.yahoo.com/news/Banks-in-Calif-Ill-Fla-Texas-apf-1195100471.html?x=0&.v=12 or http://finance.yahoo.com/news/Banks-in-Calif-Ill-Fla-Texas-apf-1195100471.html?x=0&.v=12

-Banks at risk of going bust tops 700. More than 700 banks, or nearly one out of every 11, are at risk of going under, according to a government report published Tuesday. The Federal Deposit Insurance Corp. said that the number of banks on its so-called “problem list” climbed to 702, its highest level since June 1993.

The number of banks under scrutiny by regulators has moved steadily higher since the recession began. Just 76 financial institutions were on the list in the fourth quarter of 2007. Banks that end up on the problem list are considered the most likely to fail because of difficulties with their finances, operations or management. Read more here-http://money.cnn.com/2010/02/23/news/companies/fdic_list/index.htm

-U.S. ‘Problem’ Banks Soar 27%, Fund Deficit Widens, FDIC Says. U.S. “problem” banks climbed to the highest level in 17 years, signaling failures may accelerate in 2010, the Federal Deposit Insurance Corp. said. Bank lending had the biggest retreat in more than six decades.

The FDIC included 702 banks with $402.8 billion in assets on the confidential list as of Dec. 31, a 27 percent increase from 552 banks with $345.9 billion in assets at the end of the third quarter, the regulator said today in a quarterly report. “Problem” banks account for 8.7 percent of all U.S. lenders.

“The growth in the number and assets of institutions on the problem list points to a likely rise in the number of failures,” FDIC Chairman Sheila Bair said today at a Washington news conference. “Both the problem list and bank failures tend to lag behind economic recovery.”

Regulators are closing banks at the fastest pace since 1992, seizing 20 lenders through seven weeks this year after shutting 140 institutions in 2009 amid loan losses stemming from the collapse of the home and commercial mortgage market. A total of 28 banks failed in 2007 and 2008 combined.

“The pace is going to pick up this year and is going to exceed where we were last year,” Bair told reporters. Banks showed “incremental” improvement in the fourth quarter, Bair said. Overall profit was $914 million, compared with a $38 billion loss in the year-earlier period. Net charge offs slowed for a third consecutive quarter, the agency said.

“It’s not that this was a strong quarter,” Bair said. “It’s simply that everything was so bad last year.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aoYm3JlMWLkY&pos;=3

-Sick banks may mean feeble recovery. The rot in the U.S. banking system threatens to warp an already weak economic recovery. The dynamics that made 2009 such a downer for banks are still in place, the Federal Deposit Insurance Corp.’s quarterly banking review showed Tuesday.

FDIC chief Sheila Bair said she expects bank failures in 2010 to surpass last year’s 140, as institutions still struggling with mortgage losses gird for a massive commercial real estate bust.Read more here-http://money.cnn.com/2010/02/23/news/economy/banks.sick.fortune/index.htm

-Banker sees U.S. failed bank tally hitting 1,000. About 1,000 U.S. banks could fail as a result of the recent banking crisis that saddled financial institutions with large portfolios of bad loans, a leading investment banking executive said on Thursday.

James Dunne, senior managing principal of Sandler O’Neill, said 300 to 400 banks could be seized this year, especially as institutions start to deal with deteriorating commercial real estate loans.

“This is going to be a very slow recovery,” Dunne said in an interview with Reuters.

Regulators have seized 185 banks since January 2008. The Federal Deposit Insurance Corp has said the pace of failures is expected to peak this year. The agency said earlier this week that its “problem” bank list jumped 27 percent during the fourth quarter to 702.

Historically, less than 15 percent of the banks on that list end up failing. Read more here-http://www.reuters.com/article/idUSTRE61O6J120100225

MEREDITH WHITNEY-INVESTORS DONT REALIZE WHATS ABOUT TO HIT THE BANKING SECTOR

-Meredith Whitney spoke with Maria Bartiromo on the floor of the NYSE. She predicts big-cap banks will be down some 15%, because investors still aren’t pricing in the risks ahead. Here are some things that will hit the sector: Populism, Government taking away the punchbowl, The end of the re-equitization cycle (all those fees!). Watch more here-http://www.businessinsider.com/meredith-whitney-investors-dont-realize-whats-about-to-hit-the-banking-sector-2010-2

CHARLIE MUNGER-ITS OVER FOR THE U.S. ECONOMY

-A parable about how one nation came to financial ruin. As it worked out, the politicians ignored the Good Father one more time, and the Basicland banks were allowed to open bucket shops and to finance the purchase and carry of real securities with extreme financial leverage.

A couple of economic messes followed, during which every constituency tried to avoid hardship by deflecting it to others. Much counterproductive governmental action was taken, and the country’s credit was reduced to tatters. Basicland is now under new management, using a new governmental system. It also has a new nickname: Sorrowland. Read more here-http://www.slate.com/id/2245328/pagenum/all/#p2 or http://www.therightperspective.org/2010/02/24/its-over-for-us-economy-buffett-partner/

JAMES TURK-HYPERINFLATION WATCH

-The US Treasury has taken another step on the road leading to hyperinflation. It announced that it will borrow $200 billion and leave this money on deposit with the Federal Reserve. The announcement was made with bald disinformation aimed at camouflaging the true impact of this step.

The Wall Street Journal dutifully reported that taking this step “will make it easier for the Fed to raise interest rates when the time comes.” This red herring is obviously intended to make the Treasury’s overt dollar debasement appear reasonable. The WSJ statement itself is nonsensical. How can raising interest rates be made “easier” than it already is? All the Fed needs to do is pull the trigger and interest rates go up.

The Fed of course is lacking the will to do that. It may also be lacking the insight that the system is broken, but I doubt that point. The Fed must know the system is broken, but because it is a captive of vested interests who benefit enormously from the situation at present (anyone mention banker bonuses recently?), it works solely to keep the system from falling apart.

So the Fed is fanning inflation by creating more dollar currency, and easy money always leads to inflation. The US is now so far down the inflation road, having travelled it for decades, that it is hurtling pedal-to-the-metal toward hyperinflation. Read more here-http://www.fgmr.com/us-treasury-takes-another-step-on-the-road-to-hyperinflation.html

CONSUMER CONFIDENCE AT RECESSION LEVELS

-Confidence among U.S. consumers fell in February to the lowest level in 10 months, a sign that concern about job prospects may hold back the spending needed to sustain the recovery. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aZu.flR6PChM&pos;=1

BRITAIN AT RISK OF WORSE DEFICIT THAN GREECE

-Britain is at risk of a Government deficit crisis worse than that of Greece, sparking serious fears over the economic stability of the country. Economists said that the scale of the shortfall in the budget could this year mount to above £180 billion higher than even the Chancellor’s forecast of a record £178 billion.

Such a deficit would, at 12.8 per cent of British gross domestic product, be even greater than the deficit faced in Greece, which is facing a full-scale fiscal crisis and may need to be bailed out by fellow euro nations or the International Monetary Fund. Read more here-http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7266097/Britain-at-risk-of-worse-deficit-crisis-than-Greece.html

-Jim Rogers: The U.K. Will Lose Its AAA-Rating THIS YEAR For Sure. Read more here-http://www.businessinsider.com/indias-biggest-threat-water-2010-2

ROGERS-CHINA WILL CONTINUE TO SELL U.S. TREASURIES

-China’s move to reduce its holding of US debt is likely to continue in the long term while the “euro scare” may last a while, legendary investor Jim Rogers told CNBC.com Wednesday. On Tuesday, government figures showed that foreign demand for Treasurys fell by the largest amount on record in December.

China cut its holdings by $34.2 billion to $755.4 billion, losing the top spot in terms of foreign ownership of Treasuries to Japan. Japan also cut exposure, cutting ownership of Treasurys by $11.5 billion to $768.8 billion, a much slower pace than China.

“I am surprised China has not dropped more,” Rogers told CNBC.com. Asked if the US should be worried about this trend, Rogers, who does not hold US Treasurys, said: “Of course. The US should be worried about everyone lightening up not just China.” Read more here-http://www.cnbc.com/id/35438488

-Concerns grow over China’s sale of US bonds. Evidence is mounting that Chinese sales of US Treasury bonds over recent months are intended as a warning shot to Washington over escalating political disputes rather than being part of a routine portfolio shift as thought at first. Read more here-http://www.telegraph.co.uk/finance/currency/7300770/Concerns-grow-over-Chinas-sale-of-US-bonds.html

REAL ESTATE-FORECLOSURES-MORTGAGES

-Home Prices in U.S. Drop 1.2%, Smallest Decline in Two Years. U.S. home prices fell 1.2 percent in the fourth quarter from a year earlier, the smallest loss in two years, as a federal tax credit for homebuyers boosted demand.

Prices were down 0.1 percent from the third quarter, the Federal Housing Finance Agency said today in a report. The year- over-year drop was the smallest since a 1.1 percent decline in 2007’s fourth quarter, the Washington-based agency said.

Government stimulus programs including the homebuyer tax credit and a Federal Reserve program to buy mortgage-backed bonds lifted the real estate market in the closing months of 2009. A sustained recovery in housing faces hurdles that include mounting foreclosures and a weak labor market, said Thomas Lawler, a former economist with Fannie Mae who now is an independent housing consultant in Leesburg, Virginia.

“The government programs have helped to stabilize housing, but the market is still unbelievably fragile,” Lawler said in an interview. “Nobody knows what’s going to happen to all those properties in the foreclosure process.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aAyeLAKZ9DuU&pos;=7

-Home Prices in 20 U.S. Cities Rose for Seventh Month. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=azNrZPIn0GXg or http://money.cnn.com/2010/02/23/real_estate/2009_Case-Shiller_report/index.htm

-U.S. New-Home Sales Unexpectedly Fell to Record Low. Sales of new homes in the U.S. unexpectedly fell in January to the lowest level on record, a sign that an extension of a government tax credit may not be enough to rekindle demand.

Purchases declined 11 percent to an annual pace of 309,000, figures from the Commerce Department showed today in Washington. The median sales price dropped 2.4 percent from January 2009 and the supply of unsold homes increased.

The report underscores Federal Reserve Chairman Ben S. Bernanke’s comments today that the economy is in a “nascent” recovery still in need of low interest rates. Homebuilders face competition from foreclosed properties that have driven down prices at the same time companies are reluctant to create jobs.

“The foreclosure flow is robbing demand from the new-homes market, and that process seems to be strengthening,” said Julia Coronado, a senior economist at BNP Paribas in New York. “The new-homes market just can’t get off the floor. If new homes suffer, construction suffers and jobs suffer.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=acWCYvHlWvs8&pos;=1

-U.S. Mortgage Foreclosures Rose in Fourth Quarter. A record number of Americans were in danger of losing their homes in the fourth quarter, even as new delinquencies declined, the Mortgage Bankers Association said.

Loans in foreclosure rose to 4.58 percent of all mortgages, while those more than 90 days overdue the point at which lenders usually begin the process of seizing a property climbed to 5.09 percent, the Washington-based trade group said in a report today.

“We have a hard-core block of unemployed who have been out of jobs for a long time, and that’s keeping the long-term delinquencies high,” Jay Brinkmann, the association’s chief economist, said in an interview. Read more here-http://www.bloomberg.com/apps/news?pid=20601214&sid;=aHLH3zOdh4ro

-Nearly 25% of all mortgages are underwater. More bad news on the housing bust front: Nearly 25% of all mortgage borrowers were underwater, meaning they owe more on their loans than their homes are worth.

First American CoreLogic, the research firm that monitors housing equity, reported Tuesday that 11.3 million homeowners or 24% of all homes with mortgages were underwater as of the end of 2009. That’s up from 23% and 10.7 million borrowers three month earlier.

Nevada was the state with the worst record at 70% of all mortgaged properties underwater. That was followed by Arizona (51%), Florida (48%), Michigan (39%) and California (35%). Read more here-http://money.cnn.com/2010/02/23/real_estate/underwater_rates_rise/index.htm

-If bankers get their way, Floridians facing foreclosure could be kicked out of their homes in as little as three months. Read more here-http://www.tampabay.com/news/business/realestate/florida-bankers-move-to-dramatically-speed-up-the-foreclosure-process/1069024

-Commercial Mortgage Default Rate in U.S. More Than Doubles. The default rate for commercial property mortgages held by U.S. banks more than doubled in the fourth quarter and may reach a peak of 5.4 percent at the end of next year, according to Real Capital Analytics Inc.

The default rate for loans on office, retail, hotel and industrial properties surged to 3.8 percent from 1.6 percent a year earlier, the New York-based real estate research firm said yesterday in a report. The default rate for loans on apartment buildings climbed to 4.4 percent from 1.8 percent. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aj9Yttz_UYxg

-More generations living under same roof. More generations are living under the same roof and the trend will deepen as families grappling with near double-digit unemployment share expenses, a study showed on Monday. Read more here-http://www.reuters.com/article/idUSTRE61L1WR20100222

GEOPOLITICAL NEWS

-Iran to ‘hide nuclear plants inside mountains’. Iran said on Monday it is considering plans to build two new uranium enrichment plants concealed inside mountains to avert air strikes, drawing condemnation from the United States.

The announcement from Iran’s atomic chief Ali Akbar Salehi came soon after top US General David Petraeus warned that Washington would now pursue a “pressure track” against Iran to thwart its galloping nuclear programme. Read more here-http://news.yahoo.com/s/afp/20100222/wl_mideast_afp/irannuclearpolitics

-Israel unveils new drone fleet that can reach Iran. Israel’s air force on Sunday introduced a fleet of huge pilotless planes that can remain in the air for a full day and could fly as far as the Persian Gulf, putting rival Iran within its range. Read more here-http://apnews.myway.com/article/20100221/D9E0PR5G0.html

-Russia warns West against “crippling” Iran sanctions. Read more here-http://news.yahoo.com/s/nm/20100224/wl_nm/us_nuclear_iran_russia

The Goldbugg Report – March 02, 2010
Posted by Worldwide Precious Metals on Tuesday, March 2, 2010

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