Newsroom

The World Financial Report – June 26th, 2012

June 26, 2012

Gold
Silver
Charts of the Week-Quotes-Quick Hits
RareColoredDiamonds.com
QE-FED
Sovereign Debt
U.S. Debt-Deficit
Jobs
Real Estate
Geopolitical

GOLD

-”A senior officer in the London Fire Rescue Service was quoted as saying, ‘When people die in fires, it is not because of panic, it is more likely to be the lack of panic.’ The reality is that people generally look to their peers, waiting until the group panics, and by then it is too late. While it may not quite be time to panic just yet, the survivors, and those who will prosper at the end of this great historic period in our financial affairs, should quietly be moving toward the exits and the safety of hard assets such as gold and silver.” Robert Fitzwilson

-”Gold is on the verge of a major breakout here. I agree with James Turk that this summer we could see a major move starting. I could see a 12 month rise of major magnitude. Gold will reflect the destruction of the world economy.” Egon von Greyerz

-”We may be seeing a pullback, but the price of gold will be in the thousands of dollars going forward. So investors need to keep their eye on the big picture during these types of declines.” Egon von Greyerz

-”Gold rose about 70 percent as the Federal Reserve bought $2.3 trillion of debt in two rounds of quantitative easing, or QE, ending in June 2011.” Bloomberg

-“In this environment, gold is fine to buy anywhere near these levels. The long-term story for gold remains absolutely intact. We have a lack of confidence in the economic management and in that environment gold is ‘King.’ One should not worry about these short-term moves down in the price of gold. This happens virtually every time a central banker is speaking. In the end it just creates a buying opportunity.” Caesar Bryan

-”It is clear that China intends to be the world center for buying and selling gold. The plus in all this for Americans is that the price of gold will be out of the grip and manipulations of the Federal Reserve and the Comex.” Richard Russell

-”The bullish target (for gold) is to get over 1650 and then to 1700. But plenty of sellers and short sellers at 1650 by those who want to stop gold dead. But I believe gold is in a primary bull market, and the bull market will be stronger than any group of gold bears.” Richard Russell

-CHART OF THE WEEK: SocGen’s Entire Bearish Investment Strategy In One Big Bubble Chart. Read more here-http://read.bi/MhRvrh

-CHART OF THE WEEK: SocGen, Gold Could Surge Over 500%. Societe Generale is “enthusiastic on gold” so much so that in their latest cross-asset strategy report, they call “buy gold ahead of QE3″ their number one strategy, saying it’s “the perfect asset to benefit” from additional loose monetary policy. In the report, SocGen discusses the historical relationship between the price of gold and the U.S. monetary base.

The SocGen team writes that “if gold catches up with the increase in the monetary base since 1920 (as it did in the early 80s), its price would rise to USD 8500/Oz,” adding that just “to close the gap with the monetary base increase since July 2007, gold would have to rise to $1,900/oz, assuming full transmission from the monetary base increase to the gold price.” Here is the chart showing the relationship between the price of gold and the monetary base.

SocGen’s gold call: Buy gold, while hedging the implicit USD exposure. Gold is back to the lower band of the trading range of the past year. It is also the commodity that benefits most from the Fed’s unconventional monetary policies. As a result, we are strong overweight gold ahead of QE3 and expect its price to challenge $1,800 before the end of the year. Timeline of the call: 3-6 months. Read more here-http://read.bi/MtA3AF

-Dan Norcini: Wild Trading After Fed Release, What to Expect Next. The Fed took the safest, most conservative route they could at this stage of the game. Some of us have argued that it was a little early for the Fed to pull out their big gun of QE3. By going with this type of increase in Operation Twist, it leaves the Fed with more room if we are right back where we are now in a few months. Initially there was disappointment on the part of traders who were expecting QE to be imminent. They dumped equities, bonds had a rally off the lows, and gold and silver were hit. But at the end of the day we’re right back to where we were before, where everyone is expecting QE3 at a later date. Read more here-http://bit.ly/KX0AG0

-James Turk: Gold & Stocks Smashed, Expect Massive Spike In Fear. So while the Lehman Brothers (event) was bad, it was just a warm-up for a much worse financial catastrophe coming down the road. We still have a long way to go. We’re just getting started in terms of a fear event.

If you work with the premise that I have been working with, that ultimately fiat currencies are going to collapse, that this 40 year experiment with fiat currencies is going to end and it’s not going to be pretty when it does, you have to come up with an alternative form of money.

So if you accept the notion that gold has been money for 5,000 years, as this experiment with fiat currency continues to unravel, more and more people are going to go into gold. Individuals have to take the long-term point of view, accumulate gold and silver and view it as savings. Focus on what is an uncertain future and protect yourself and your family by owning a tangible asset outside of the financial system.” Read more here-http://bit.ly/NZTpCy

-James Turk: Gold Will Shock Investors By Soaring This Summer. For a few weeks now I have been saying that we are headed into a fear event. There has been no change in my thinking. That means that I am still looking for gold to shock market participants by soaring this summer. This will also pull the silver price higher as well. Read more here-http://bit.ly/MDo7Kk

-Gerald Celente: Expect A Tidal Wave Entrance Into Gold. I believe a tidal wave entrance into gold will happen when there’s a real collapse and catastrophe that they can’t paper over anymore. So when does the crash point happen? No one can tell, but all of the cards are in place for the house of cards to collapse. Read more here-http://bit.ly/LIRtwB

-John Mauldin: The Real End Game, We’re Coming To The End. Read more here-http://bit.ly/O02dIB

-Alena Mikhan and Jeff Clark: Does Gold Keep Up In Hyperinflation? Inflation is a natural consequence of loose government monetary policy. If those policies get too loose, hyperinflation can occur. As gold investors, we’d like to know if the precious metals would keep pace in this extreme scenario. Read more here-http://bit.ly/Ml7Uev

-Shivom Seth: China’s growing middle class continues to dip itself in gold. As China’s middle class grows, and luxury items become the norm, gold will continue to be consumed voraciously, say analysts. Read more here-http://bit.ly/Lm808z

-Jordan Roy-Byrne: Comparing the 2012 Gold Bottom to Past Bottoms. Read more here-http://bit.ly/KBesJ7

-Vin Maru: Gold Becomes a Tier 1 Asset Class for Banks. Read more here-http://bit.ly/PBprBP

-Clive Maund: Gold Market Update. Read more here-http://bit.ly/L8d63E

-Mary Anne Aden and Pamela Aden: Summer Lows At Hand? Read more here-http://bit.ly/NoKmsh

-John Hathaway: Gold, gold mining shares, and QE. Read more here-http://www.gata.org/node/11477

-Peter Grant: Plunge in family net worth supports gold diversification. Read more here-http://bit.ly/LmkuNp

-India’s government seeks to dissuade people from investing in gold. Read more here-http://www.gata.org/node/11479

-Are gold investors wising up to cash settlement? Read more here-http://www.gata.org/node/11475

-Banks urge Turks to exchange their gold for pretty certificates. Read more here-http://www.gata.org/node/11484

-Former Assistant Treasury Secretary Paul Craig Roberts discusses gold price suppression. Watch more here-http://www.gata.org/node/11478

-Hong Kong buyer plans to crack metal delivery bottlenecks at LME. Read more here-http://www.gata.org/node/11481

SILVER

Gold to silver ratio at 60 to 1 with gold at $2,000 the silver price would be $33.33

Gold to silver ratio at 50 to 1 with gold at $2,000 the silver price would be $40.00

Gold to silver ratio at 40 to 1 with gold at $2,000 the silver price would be $50.00

Gold to silver ratio at 30 to 1 with gold at $2,000 the silver price would be $66.67

Gold to silver ratio at 20 to 1 with gold at $2,000 the silver price would be $100.00

Gold to silver ratio at 15 to 1 with gold at $2,000 the silver price would be $133.33

Gold to silver ratio at 60 to 1 with gold at $2,500 the silver price would be $41.67

Gold to silver ratio at 50 to 1 with gold at $2,500 the silver price would be $50.00

Gold to silver ratio at 40 to 1 with gold at $2,500 the silver price would be $62.50

Gold to silver ratio at 30 to 1 with gold at $2,500 the silver price would be $83.33

Gold to silver ratio at 20 to 1 with gold at $2,500 the silver price would be $125.00

Gold to silver ratio at 15 to 1 with gold at $2,500 the silver price would be $166.67

-CHART OF THE WEEK: Silver Seasonality. Read more here-http://bit.ly/Mm8k4r

-”My technical work indicates that it could be late 2012 before the silver price really makes a dramatic move higher. At that point I expect it to begin to outperform gold dramatically. At all prices under $30, silver is a strong buy.” Morris Hubbartt

-”Japan is just now putting in 3.2 gigawatts of solar. Now 3.2 gigawatts of solar is not a lot, but that small amount of solar requires about 400 tons of silver. That is just the first step in Japan. You know China will be coming in behind the Japanese with heavy solar use. What you are talking about here is shortages of silver over the next 5 to 10 years, massive shortages. Stephen Leeb

-Chris Waltzek: The True Fireworks are Reserved for Silver.” Listen here-http://bit.ly/MlVwhk

-Peter Cooper: Back to the fundamentals of investing in silver. Read more here-http://bit.ly/MxZ8dv

-Lawrence Williams: Gold/silver ratio path not necessarily bullish for silver investors. Although the historic Gold/Silver ratio may be around 16:1 current patterns do not suggest any likely return to this level indeed the ratio may yet get worse for silver investors. Read more here-http://bit.ly/Mysp7U

-Clive Maund: Silver Market Update. Read more here-http://bit.ly/KntptF

-Clive Maund: Heads A Deflationary Implosion, Tails A Hyperinflationary Depression. Read more here-http://bit.ly/MkXhZe

-Ted Butler realizes that silver market rig is U.S. government operation. Read more here-http://www.gata.org/node/11474

CHARTS OF THE WEEK-QUOTES-QUICK HITS

-CHART OF THE WEEK: David Rosenberg, These 3 Charts Prove We’re Living In A Modern-Day Depression. Read more here-http://read.bi/LBs0C7

-CHART OF THE WEEK: David Rosenberg, 51 Signs The Economy Is A Total Disaster. Read more here-http://read.bi/N94sDi

-CHART OF THE WEEK: The ‘Skyscraper Index’ Is Warning That The Global Economy Could Soon Collapse. Read more here-http://read.bi/MiDauT

www.chartoftheday.com

-CHART OF THE WEEK: Slump Makes U.S. Beer Drinkers Reach for Cans. The frosty can of beer is making a comeback in the U.S. as the recession and proliferation of smaller breweries drives demand away from bottles and draft. Read more here-http://bloom.bg/MtIETL

-”The stock market is down 80% against gold over the last ten years, and it’s likely to decline at least another 90% against gold. That will be disaster for most investors. Richard Russell, of Dow Theory Letters, said a long time ago, and he experienced the last depression in the 1930s, ‘When this starts, everyone will suffer, it’s just a question of who suffers the least.’ Sadly, that’s going to be the case.” Egon von Greyerz

-”The longer the Fed waits, the bigger the QE to infinity program will be. The USA economy is getting ready to fall off a cliff.” Jim Sinclair

-”Operation Twist is just kicking the can down the road. The Fed felt it had to do something, but it’s getting so close to the election that I think they decided not to do QE at this time. The other thing is they are probably saving QE for another major crisis, whether it’s a bank failure, a derivative blowup or something of that nature.” James Turk

-”So Bernanke has taken a half-step towards doing something aggressive. The Fed has extended Operation Twist and left the door open for more. Maybe they didn’t do more because they are hoping things are going to get better here economically or because they are waiting to see what happens in Europe and they want to save some bullets. If you think they are saving some bullets, that would mean they might be smart enough to plan in advance, which they really don’t seem to be able to do. What’s happened is they were wrong in their assessment of the economy once again. They thought it was getting better. It wasn’t. Going forward, the economic data is not going to be very good, and the uncertainty through the election is not going to be helpful. So I think Bernanke will be forced to act again before the fall.” Bill Fleckenstein

-”I will say this, at least Bernanke admitted today that the Fed was wrong regarding the economy. That’s something the egomaniac Greenspan never did. I don’t think Bernanke is a bad guy in the same way Greenspan is, I just think he’s misguided. Greenspan was just a duplicitous and incompetent egomaniac.” Bill Fleckenstein

-”These markets are no longer functioning as efficient allocators of capital. Investments aren’t even entering into the equation anymore. The markets have instead become a casino, where the roulette wheel is spun and traders place their bets wherever they think the ball is going to fall. That’s what we’ve deteriorated into. As we move forward through history and people look back on this period, they will marvel at how the investment community could have degenerated into a bunch of Pavlovian dogs.” Dan Norcini

-IMF Sees Euro Crisis at Critical Stage, Sees Bank Stress. The euro area crisis has reached a “critical stage” and member nations must make a “strong commitment” to the shared currency to stop the plunge in investor confidence, the International Monetary Fund said in a report that recommended issuing common debt as one solution.

“Despite extraordinary policy actions, bank and sovereign markets in many parts of the euro area remain under acute stress, raising questions about the viability of the monetary union itself,” the Washington-based organization said in a report today. “The financial and economic environment continues to deteriorate. Investors are withholding funding from member states most in need, moving capital to safe havens and driving risk premiums to new records.”

Europe’s monetary system needs a closer union of its banks and more fiscal integration to “arrest the decline in confidence engulfing the region,” the IMF said. A “strong commitment” to the monetary union would restore faith in the shared currency, the organization said. Read more here-http://bloom.bg/KofiEn

-US Investors Cling to Cash to Guard Against Euro Fallout. Cash isn’t just king. For some money managers, it has become jack, queen and ace, too. With the Greek election failing to eliminate fears about the euro zone’s stability and the Chinese and U.S. economies providing little reason for greater optimism, some major investors and their advisers have decided there is only one place to be cash. Charles Biderman, founder and CEO of independent research provider TrimTabs Investment Research, has been advising big institutional clients, including hedge funds, to be exposed “100 percent in cash” since June 11. Read more here-http://bit.ly/NKXGJM

-Prepare for Lehmans re-run, Bank official warns. Banks and traders must prepare for a devastating market seizure as governments grapple with the escalating economic crisis in Europe, a Bank of England policymaker has warned.

Cheap and ready access to the liquid assets that oil the financial markets are under threat from both state-imposed capital controls and flagging confidence in the euro, Robert Jenkins, a member of the Bank’s Financial Policy Committee, told the Global Alternative Investment Management conference in Monaco. Without easy access to liquidity, markets could seize in a re-run of the credit crunch after the collapse of Lehman Brothers, he warned. Read more here-http://bit.ly/Mlc1Y8

-China’s Central Bank Willing To Share $3 Trillion. Brazil, Russia, India and China, the BRIC countries, are back to talking about creating a unified financial system where they can avoid euro and dollar volatility. This time, a pooling of Central Bank dollars from the countries in case liquidity dried up as the world tracks the West’s crisis momentum.

Regardless of the amount of difficulty involved, the big four emerging markets plus South Africa said earlier this week they were considering setting up a foreign-exchange reserve pool and a currency-swap arrangement in an effort to avoid any credit crisis stemming from the advanced economies. Read more here-http://onforb.es/MzZM8h

-Fiscal-Cliff Concerns Hurting Economy as Companies Hold Back. Companies are starting to delay hiring and spending out of concern that Congress won’t reach a compromise in time to avoid automatic tax increases and budget cuts that would pull billions of dollars of purchasing power out of the economy.

Faced with a so-called fiscal cliff of more than $600 billion in higher taxes and reductions in defense and other government programs in 2013, U.S. companies are pulling back, though the deadline for congressional action is more than six months away.

The best strategy for companies to follow when confronted with such uncertainty ahead of Dec. 31 is to “stay lean and keep your inventories taut,” Sandy Cutler, chief executive officer of industrial equipment-maker Eaton Corp. in Cleveland. Read more here-http://bloom.bg/MnTNpg

-The Problem With Henry May Derail U.S. Recovery. Mac McKay entered this year ready to spend after sales at his flower shop in Arlington, Virginia, rebounded. He planned to take his first vacation since the recession and start a $30,000 kitchen renovation. Those plans are dead. “We’ve cut back on a lot of things we used to do,” said McKay, 62, who watched revenue at Garden City Florist sink 15 percent this year. “You can see people tightening. They were more free with their money last year.” McKay is what retail consultants call a Henry: High Earner Not Rich Yet. Read more here-http://bloom.bg/NEVQdq

-Net Worth Implosion: It’s Not Just Housing. Americans’ net worth collapsed in recent years, but don’t blame the housing market for it all. A CNNMoney analysis of new Census Bureau data shows that if you strip out the effects of the housing collapse, median household net worth still fell by 25% between 2005 and 2010.

The decline was driven largely by the plummeting stock market, which devastated Americans’ portfolios and retirement accounts. Overall, median household net worth declined 35% to $66,740 in 2010. The median worth of stock and mutual fund portfolios fell 33%, while the median home equity value dropped 28%.

“One of the significant factors is housing, of course, but it’s not that alone” said Alfred Gottschalck, an economist with the Census Bureau. “It’s how business conditions affect stock and retirement accounts.” The estimates are generally in line with what other government reports have found. Last week, the Federal Reserve released its triennial study that showed median family net worth overall dropped nearly 40%, between 2007 and 2010. Read more here-http://yhoo.it/MCOHHq

-Mark Cuban on His Facebook Shares: ‘I Took a Beating.’ Read more here-http://bit.ly/NGV9QN

-New Details On How Wall Street Stuffed Facebook Stock Into Small Investor Accounts While Smart Money Ran For The Hills. Read more here-http://read.bi/KzX9bw

-Why Doesn’t The Stock Market Reflect The Imminent Global Depression? Read more here-http://read.bi/M5EItp

-Credit Suisse Cut 3 Levels as Moody’s Downgrades Biggest Banks. Credit Suisse Group AG’s credit rating was cut three levels by Moody’s Investors Service, Morgan Stanley was reduced two levels and 13 other banks were downgraded in moves that may shake up competition among Wall Street’s biggest firms. Read more here-http://bloom.bg/LJbzXA

-JPMorgan Has Sold Off Majority of Losing Position. JPMorgan Chase has sold off most of the losing corporate-credit position put on by a trader nicknamed the London Whale, say people familiar with the matter, marking a significant step toward putting an embarrassing chapter behind it. Read more here-http://bit.ly/Mh6Yuy

-Here’s How The London Whale Got Away With Murder At JP Morgan London. One of the biggest questions that people have been asking ever since JP Morgan announced that a trader in its London Chief Investment Office was on the other side of a $2 billion trade is: How did this guy get away with these humongous positions? Read more here-http://read.bi/PvtZcW

-JPMorgan Hedges Were Really Prop Trades, Whitney Says. JPMorgan Chase & Co. $2 billion trading loss stemmed from profit-seeking bets rather than hedges meant to mitigate loan losses, as Chief Executive Officer Jamie Dimon has described them, banking analyst Meredith Whitney said. Read more here-http://bloom.bg/MqpRJ8

-Jamie Dimon Is Not Alone: These Fed-Connected Banks Got More Than $4 Trillion in Loans After The Crisis. “During the financial crisis, at least 18 former and current directors from Federal Reserve Banks worked in banks and corporations that collectively received over $4 trillion in low-interest loans from the Federal Reserve.” Read more here-http://read.bi/LEcQug

-CFTC aims to define high-frequency trading so it might be regulated. Read more here-http://www.gata.org/node/11486

-Saudi Arabia’s Largest Oil Field Has Entered Inescapable Decline. Read more here-http://read.bi/KvqDXY

-China increases shipments of oil from Iran. Customs data indicated that China added 133,902 barrels per day to its crude shipments from Iran in May, increasing its Iranian oil purchase by 34.5 percent from the level of 388,034 barrels per day in April, Reuters reported on Thursday. Read more here-http://bit.ly/MmnF4Z

-India clears rupee for Iranian oil. With US-led sanction making it difficult to route the payment for Iranian oil supplies, New Delhi and Tehran Have started its much delayed payment mechanism for its crude supplies which will bypass international sanctions against Tehran. India will make payment to Tehran through UCO bank which will be equivalent of the value raised for the next oil payment. Read more here-http://bit.ly/KBOdCs

-This Indian Pharmaceutical Tycoon Is Exploiting A Patent Loophole To Cut The Costs Of Cancer Drugs By 75%. Read more here-http://read.bi/NPZDUa

-Olympic Tickets Sell for 20 Times Face Value on Secondary Market. Read more here-http://bloom.bg/MtOxjK

-Original 1976 Apple computer sells for $375,000. Read more here-http://cnnmon.ie/LSLFjN

-Bentley Unveils its Fastest-Ever Car With $237,600 Speed Model. Read more here-http://bloom.bg/MuBe2y

-Sotheby’s Sold This Patek Phillipe Wrist Watch For A Record $3 Million. Read more here-http://read.bi/KUi6L3

-Larry Ellison Just Bought 98% Of This Pristine Island In Hawaii. Read more here-http://read.bi/KA8Qz5

-Forstmann’s Manhattan Penthouse Sells for $40 Million. Read more here-http://bloom.bg/KQdN87

-The Coolest Things Bought By Rich People This Year. Read more here-http://read.bi/Mtz7y2

-Hong Kong’s Wealth Gap Widens Amid Aging Population, Inflation. Hong Kong’s wealth gap, the biggest in Asia, widened in the decade to 2011 as the city’s population aged and employers demanded more high-skilled workers. Read more here-http://bloom.bg/NIdLjz

-Asia’s Millionaire Count Passes North America’s. Last year, for the first time ever, Asia had more millionaires than North America, according to a new study. According to the World Wealth Report from Capgemini and RBC Wealth Management, North America’s millionaire population declined slightly to 3.4 million in 2011 while Asia’s grew by 1.6 percent, giving them slightly more than 3.4 million. Globally, there are now about 11 million individuals with investible assets of $1 million or more (not including their primary residence). Read more here-http://bit.ly/M40rUX

-iPad Boom Strains Lithium Supplies After Prices Triple. Investors from JPMorgan Chase & Co. to BlackRock Inc. are trying to make money from the exploding popularity of iPads and increasing sales of hybrid cars by investing in producers of lithium for batteries. Read more here-http://bloom.bg/NOztlU

-Dan Dorfman, Market-Moving Financial Journalist, Dies at 80. Dan Dorfman, a journalist whose stock reports were once so market-moving that U.S. exchanges imposed regulations to limit the resulting price swings, has died at the age of 80. Read more here-http://bloom.bg/MH6HwH

-Deadly Bird Flu May Be Five Steps From Pandemic, Study Finds. Five genetic tweaks made a deadly strain of bird flu that can infect humans spread more easily, according to a study that the U.S. government had first sought to censor on concerns it could be used by bioterrorists. Read more here-http://bloom.bg/LIG6Vr

RARECOLOREDDIAMONDS.COM

-Rarecoloreddiamonds.com Featured Diamond of the Week. This week’s Diamond is a 25+ Carat Cushion Cut Fancy Intense Yellow Diamond. Harold Seigel-See video of the Featured Diamond here-http://bit.ly/LIsp98

-”There are only so many diamond mines, and the population of the world is wanting ever-more diamonds, people are consuming diamonds more than they are being mined.” Clifford Elphick, CEO Gem Diamonds

-The Coolest Things Bought By Rich People This Year. Read more here-http://read.bi/Mtz7y2

QE-FED

-Bernanke Signals More Easing Likely if Job Growth Wanes. Chairman Ben S. Bernanke is signaling the Federal Reserve will probably add to its record stimulus should the economy fail to make sufficient progress in creating jobs for 12.7 million unemployed Americans. Read more here-http://bloom.bg/MlObhB

-Fed Expands Operation Twist by $267 Billion Through 2012. The Federal Reserve will expand its Operation Twist program to extend the maturities of assets on its balance sheet and said it stands ready to take further action to put unemployed Americans back to work.

The central bank will prolong the program through the end of the year, selling $267 billion of shorter-term securities and buying the same amount of longer-term debt in a bid to reduce borrowing costs and spur the economy. “If we don’t see continued improvement in the labor market, we’ll be prepared to take additional steps if appropriate,” Fed Chairman Ben S. Bernanke said at a news conference. Read more here-http://bloom.bg/NSVYpN

-Fed Officials Sees Lower U.S. Growth, Slow Progress on Jobs. Federal Reserve officials cut their estimates for 2012 growth after last month’s slowdown in hiring and see little progress on unemployment during the rest of the year. Fed officials lowered their central tendency estimate for U.S. 2012 gross domestic product growth to 1.9 percent to 2.4 percent from 2.4 percent to 2.9 percent in April. Estimates for 2013 centered around 2.2 percent to 2.8 percent, compared with 2.7 percent to 3.1 percent in the previous forecast. Read more here-http://bloom.bg/MuoyZG

-EL-ERIAN: The Fed’s New Policy Is Causing ‘Distortions That Will Take Years To Resolve.’ On Tuesday’s FOMC announcement that Operation Twist will be extended through year end, Mohamed El-Erian, CEO of PIMCO, says that “all the Fed will do is buy some time,” and that in the interim, “collateral damage will mount, making the next policy steps even more excruciating.” Read more here-http://read.bi/M8booq

SOVEREIGN DEBT

-CHART OF THE WEEK: The Incredible Collapse Of Greek Bank Deposits. People have been pulling money from Greek banks since 2009. And in the run up to the elections this past weekend, Greek deposit outflows gathered steam. Some of this deposit flight has been attributed to companies withdrawing their money. Some has been funneled abroad by Greeks, some are dipping into their savings out of desperation, while some households are just hoarding their cash. Read more here-http://read.bi/L4Cya9

-Likelihood of Grexit Still 50-75%: Citi. The likelihood of Greece exiting the euro zone over the next 12 to 18 months remains between 50 and 75 percent even after pro-bailout parties that plan to stick to European Union-imposed austerity won a victory in Sunday’s elections, analysts at Citigroup Global Markets, the brokerage and securities arm of Citigroup, said. Read more here-http://bit.ly/MhLkWr

-Joe Weisenthal: I said early on when I got here (Greece) that my biggest initial surprise was the extent to which people blamed their problems not on the flawed structure of the Eurozone, or the ECB, or the IMF, or the Troika, or Angela Merkel, but rather their own government, which is comprised of a seemingly corrupt political class, and a massively bloated bureaucracy. Folks across the whole political spectrum seem to feel some version of this sentiment, from businessmen to hardcore leftists. Read more here-http://read.bi/KvvTuH

-Spain’s Banks Need Up to $78 Billion, Assessors’ Report Says. Spain’s banks would need up to 62 billion euros ($78 billion) in capital to withstand a worst-case economic scenario, according to two consulting firms hired by the government to conduct stress tests on the lenders. Read more here-http://bloom.bg/Mw4iZp

-Willem Buiter: Spain And Italy Will Both Need Sovereign Bailouts. Read more here-read.bi/NTBWM4

-Italy, Spain Heading for Full Bailouts, Fidelity’s Stuttard Says. Italy and Spain, which account for more than a quarter of the euro-area economy, are heading for sovereign bailouts in the next 12 months that will send shockwaves through the global economy, Fidelity Investments’s Jamie Stuttard said. Read more here-http://bloom.bg/Mv792Z

-Irish Tell Spain to Imagine the Worst in Banking Bailout. Ireland has this banking advice for Spain: imagine the worst and double it. Like Ireland, Spain sought a bank bailout after being felled by a real-estate crash. Now, just as the Irish did, the Spanish are awaiting the results of outside stress tests gauging the size of the hole in the banking system. Read more here-http://bloom.bg/LIpyLS

-Cyprus Said to Face Europe Pressure for $13 Billion Aid. European authorities are pushing Cyprus to take a full bailout package worth as much as 10 billion euros ($12.7 billion), resisting the country’s attempt to limit any aid to its banking system, two officials said. Read more here-http://bloom.bg/NMyToV

-Cohn Says Europe Needs Lehman-Like Moment to Spur Action. European policy makers are unlikely to solve the region’s sovereign-debt problem unless they have a crisis “moment” like Lehman Brothers Holdings Inc.’s 2008 bankruptcy, said Gary D. Cohn, Goldman Sachs Group Inc.’s president and chief operating officer. Read more here-http://bloom.bg/PwawIY

-RBS’s Hester Says Europe Crisis Resolution to Take Years. Royal Bank of Scotland Group Plc Chief Executive Officer Stephen Hester said it may take years before Europe finds a solution to the debt crisis as economies in the region struggle to implement reforms. Read more here-http://bloom.bg/NPvaXx

-Ex-Soros Adviser Fujimaki Says Japan May Default by 2017. Investors should buy assets in U.S. dollars and other currencies of strong developed nations because Japan may default within five years, said Takeshi Fujimaki, former adviser to billionaire investor George Soros. Read more here-http://bloom.bg/MtpU8I

U.S. DEBT-DEFICIT

-CHART OF THE WEEK: ‘U.S. Per Person Debt to Increase 7 Times Faster than Italian Debt.’ Read more here-http://bit.ly/MM6R5X

-Foreign holdings of US debt hit record high. Foreign demand for U.S. Treasury securities rose to a record high in April. China, the largest buyer of Treasury debt, increased its holdings slightly after trimming them for two straight months. The Treasury Department said that total foreign holdings rose 0.4 percent to $5.16 trillion. It was the fourth consecutive monthly increase. Demand for U.S. debt is rising largely because investors are worried about Europe’s worsening debt crisis. Read more here-http://buswk.co/LgM94a

-CHART OF THE WEEK: Funding gap for state retirement benefits rises to $1.4 trillion. A pension plan is considered healthy if it is 80 percent funded. A new Pew report finds many are not. Read more here-http://on-msn.com/NL5GJF

-Study: State pension shortfall ballooned in 2010. Recession-plagued states diverted scarce money away from pensions to pay for more immediate concerns, leaving a $757 billion hole in the retirement funds covering millions of public employees, according to a study released.

The Pew Center on the States found 34 states failed to maintain safe levels of money in the pension funds, which most experts agree is about 80 percent of long-term obligations. Four states Connecticut, Illinois, Kentucky and Rhode Island didn’t even have 55 percent of the money they’ll need in the long run.

The total gap between the money states had available and what they’ll have to pay out in the decades ahead reached $757 billion in 2010, the most recent year for which figures are available. That was up 9 percent from the year before, according to the study entitled “The Widening Gap Update.” Read more here-http://yhoo.it/M6Rxow and http://read.bi/N5kQVr

-Public Sector Workers Digging in to Save Pensions Under Assault. Leaders of the largest U.S. union of public-sector workers are vowing to fight efforts by state and local governments to balance their budgets with cuts to employee benefits even as voters have sided with that strategy. Read more here-http://bloom.bg/NM66k9

-California’s Bad Bet Makes JPMorgan’s Look Minor. Congress ordered JPMorgan Chase & Co. chief executive officer, Jamie Dimon, to testify about $2 billion that his bank lost on an investment bet. Worrisome as that gamble was after all, the banking crisis was largely due to bad bets by banks it is unfortunate that Congress has never called hearings on a far bigger bet, one that has had more catastrophic consequences for millions of taxpayers.

The one I’m referring to was made by California legislators on Sept. 10, 1999. They decided that investment gains would cover 100 percent of the cost of retroactive pension increases they granted that day to hundreds of thousands of state workers. The politicians made the wrong bet and the result has been a penalty to California’s budget that has averaged $2 billion a year ever since and that will cost the state billions more for decades to come. Read more here-http://bloom.bg/N6ZlHi

JOBS

-More Americans Than Forecast File for Jobless Benefits. More Americans than forecast filed applications for unemployment benefits last week, indicating the labor market continues to struggle. Jobless claims decreased by 2,000 to 387,000 in the week ended June 16, Labor Department figures showed in Washington. Read more here-http://bloom.bg/Lm28Mh

-Job Openings in U.S. Decrease by Most in Almost Four Years. Job openings in the U.S. decreased in April by the most in almost four years, the latest sign that the labor market is cooling. The number of open positions dropped by 325,000, the biggest decline since September 2008, to 3.42 million from 3.74 million the prior month, the Labor Department said in Washington. Hiring slowed from the prior month and firings climbed. Read more here-http://bloom.bg/MpxcZx

-Only 1 in 10 long-term unemployed find work. In the first few weeks after losing their jobs, about 3 in 10 people are able to find work. But after about a year of being out of work, the chances of landing a job fall to just 1 in 10 per month. Read more here-http://cnnmon.ie/LnKnsL

-Los Angeles County courts begin downsizing. The Los Angeles County court system began handing out layoff notices Friday as plunging budgets set in motion major reductions. Officials said the cutbacks in the court system will affect 431 employees and 56 courtrooms in a county that’s home to nearly 10 million people.

Presiding Judge Lee Smalley Edmon said it was one of the saddest days in the history of the Los Angeles Superior Court. She expressed concerns for the people laid off as well as consumers who will face a slowdown in resolving civil cases. “Could we be heading toward five year delays getting to trial?” Edmon asked. “I certainly think so.” Read more here-http://bit.ly/KaunJv

-L.A. teachers approve deal that reduces pay, shortens school year. Members of United Teachers Los Angeles have approved a one-year labor contract that would shorten the school year and reduce pay in exchange for the preservation of more than 4,000 jobs. Read more here-http://lat.ms/KRALFh

-Lost in Recession, Toll on Underemployed and Underpaid. Throughout the Great Recession and the not-so-great recovery, the most commonly discussed measure of misery has been unemployment. Read more here-http://bit.ly/Mbfon5

REAL ESTATE

-Canada’s Flaherty Tightens Mortgage Rules to Avert Bubble. Canadian Finance Minister Jim Flaherty said he will tighten mortgage terms as the Group of Seven country with the soundest government finances tries to avert a household debt crisis. The government will shorten the maximum amortization period on mortgages the government insures to 25 years from 30 years, and lower the maximum amount homeowners can borrow against the value of their homes to 80 percent from 85 percent, Flaherty said in a statement delivered in Ottawa. Read more here-http://bloom.bg/NddCi5

-Sales of Existing U.S. Homes Fell in May to 4.55 Million. Sales of previously owned U.S. homes declined in May, showing an uneven recovery in residential real estate. Purchases of existing properties dropped 1.5 percent to a 4.55 million annual rate last month, figures from the National Association of Realtors showed in Washington. Read more here-http://bloom.bg/LDSHq1

-CHART OF THE WEEK: Foreclosure activity jumps in troubling sign for housing recovery. Read more here-http://on-msn.com/M88wrH

-Housing Starts in U.S. Fall 4.8% in May on Apartments. Builders broke ground on more single-family houses for a third consecutive month in May and rising construction permits pointed to further gains, showing the residential real-estate market is weathering the U.S. economic slowdown. Read more here-http://bloom.bg/MpbZyG

-China Home Prices Fall in More Than Half Cities Tracked. China’s home values fell in a record 54 of 70 cities tracked by the government in May as developers cut prices to boost sales amid housing curbs. Read more here-http://bloom.bg/N7Bl6Q

GEOPOLITICAL

-Israel Is Lining Up Tanks Along The Egyptian Border. Israel has begun deploying tanks along the frontier with Egypt, according to the Telegraph. Read more here-http://read.bi/M7VQkr

-Syria, Iran, Russia and China plan joint war games, Iranian news agency says. Largest exercise in Mideast history set to take place within a month; Syrian official denies report. ran, Syria, Russia and China are planning the “biggest-ever war games in the Middle East,” according to an unconfirmed report on the semi-official Iranian news site Fars News. A Syrian official denied the claims.

According to the article, the four countries are preparing 90,000 troops, 400 aircraft and 1,000 tanks for the massive joint maneuvers, which are to take place along the Syrian coast within a month. The report states that Russian “atomic submarines and warships, aircraft carriers and mine-clearing destroyers as well as Iranian battleships and submarines will also arrive in Syria” and that Egypt has agreed to let 12 Chinese warships cross the Suez Canal for the exercises. Read more here-http://bit.ly/KJi1OO

-Russia Is Reportedly Filling Two Of These Assault Ships With Marines And Rushing Them To Syria. Fearing for its naval base and citizens on the ground in the conflict ridden nation, Russia is reportedly sending two amphibious assault ships to Syria. Read more here-http://read.bi/LgKJXt

-U.S., Israel developed Flame computer virus to slow Iranian nuclear efforts, officials say. The United States and Israel jointly developed a sophisticated computer virus nicknamed Flame that collected intelligence in preparation for cyber-sabotage aimed at slowing Iran’s ability to develop a nuclear weapon, according to Western officials with knowledge of the effort.

The massive piece of malware secretly mapped and monitored Iran’s computer networks, sending back a steady stream of intelligence to prepare for a cyberwarfare campaign, according to the officials. The effort, involving the National Security Agency, the CIA and Israel’s military, has included the use of destructive software such as the Stuxnet virus to cause malfunctions in Iran’s nuclear-enrichment equipment. The emerging details about Flame provide new clues to what is thought to be the first sustained campaign of cyber-sabotage against an adversary of the United States. Read more here-http://wapo.st/M4FsRM

The World Financial Report – June 26th, 2012
Posted by Worldwide Precious Metals on Tuesday, June 26, 2012

The World Financial Report – June 19th, 2012

GOLD

-”I’m not sure that gold has been that volatile especially when you compare it to other asset classes. Yes, it has its periods of up and down, but they’re relatively speaking quite tight and if you look at the long-term map, it’s actually quite an impressive rise that you see in gold over that period and I think that’s going to continue.” Michael Power

-”Quantitative easing is the big buzzword these days. People forget that, from 1999 to March of 2007, gold went from $250 to $1,000, and quantitative easing wasn’t even a known term in the English language. Do we need quantitative easing for gold to go higher? I would say not. Will we get more QE? We probably will.” John Hathaway Read more here-http://bit.ly/LnngzX

-”We still hold the same view on gold both technically and from a big picture perspective. We think gold held some very good levels down in the low $1,500s. It still looks like a triangle consolidation where we had a weekly reversal at the lows. We’re still looking at the key levels at around $1,720, and then at $1,790 for the breakout on gold. This should propel gold to $2,015, and we still believe gold will hit $2,400 on this move. So we still believe we are going to see significantly higher levels over the course of this year.” Tom Fitzpatrick

-”Gold and silver stood their ground today. We are seeing signs that individuals and governments are reacquiring massive quantities of gold as well as silver. We continue to hope for a positive outcome from the current chaos, but individuals need to convert paper wealth into some form of real wealth as soon as possible.” Robert Fitzwilson

-”I believe the elites for a long, long time have regarded gold as irrelevant and a nuisance, but what is interesting is that despite that, these countries didn’t dispose of their gold and in fact central banks have been nibbling away at adding to their reserves. One way or another I think gold is going to be more important a year from now than it is today. I’d like to see that people share in that.” Don Coxe

-”Investors will reach a point where they no longer feel safe in these bond markets because of the reaction to these high debt levels, and to the slowing global economy, is going to be further monetary accommodation. This is exactly why investors have to be positioned in gold because gold is nobody else’s liability, it can’t be printed, and it’s always liquid.” Caesar Bryan

-”There is so much financial uncertainty prevailing today, people are increasingly questioning the reliability of all financial assets. All national currencies are suspect, as is sovereign debt for nearly every major country in the world. Almost every day banks or countries are being downgraded by the credit rating agencies, which is never a good sign for financial assets.

Continue to accumulate gold and silver on a regular cost-averaging program as your savings. Everybody needs savings, but it doesn’t make sense to save in fiat currency because the low interest rate available does not compensate you for the risk.” James Turk

-”When global financial crisis II hits, I think it could be more unpleasant than the first one. That’s one of the reasons I’m very enthusiastic about gold and silver because they are the true safe havens. Somehow that truth has been obscured quite well by all of these paper raids on both of them. But I think that will be overcome in global financial crisis II.” John Embry

-John Embry: Despite Rally, Global Financial Crisis II Is Imminent. Embry had to say about the Egon von Greyerz prediction of a massive global bailout: “I believe that’s very realistic. They will go down the path of trying to continually bail this system out to prevent a collapse. Nobody wants to be at the helm when the ship goes down, so they will try to move heaven and earth to prevent that.”

“The only way they can do that is with exactly what Egon (von Greyerz) suggested, and that is with a massive, global bailout. I think it’s absolutely essential that the listeners be aware of the depth of the problem, and not listen to the mainstream media which glosses over everything and tells you to be in the conventional assets and that everything is going to work out fine. I don’t believe that’s going to be the case. I see one of two outcomes.

Basically you have a debt-logged world economy. “If you subscribe to the tenets of Austrian economics, like I do, once you reach this state, you cannot grow because you can’t take on anymore debt. You need more and more debt creation, at this stage, to get real GDP growth. I think that’s what we’re seeing all over the Western world. So far the BRIC’s have maintained a fairly good growth pattern, but almost without exception they are all weakening too.

I don’t see any letup in this for the simple reason that there is no palatable outcome to this (scenario). Either you take the debt clean-out right away, and that means a very hard deflationary depression, or you do what I suspect they will try to do and that is keep pumping money into the system to keep the whole banking (system), derivatives and economies afloat.

That will lead to some sort of monetary distress that could end in hyperinflation. I think that’s the worst outcome, but there is no good outcome. Basically you have a set of circumstances, that past events have created, which leads to no good avenue going forward.” Read more here-http://bit.ly/OsOKW2

-Eric Sprott & Shree Kargutkar: Gold Alert. There have been key developments in the physical gold market over the last few weeks which we feel are worth highlighting.

1) The Chinese gold imports from Hong Kong in April, 2012 surged almost 1300% on a YoY basis. Total gross imports for the month of April were 103.6 tonnes and the net imports were 66.3 tonnes1. It is not the data for April alone which has caught our eye. There has been a stunning increase of gold imports through Hong Kong for export into China over the past 2 years. Between May 2010 and April 2011, China imported a net 66 tonnes of physical gold through Hong Kong. Between May 2011 and April 2012, that number jumped to 489 tonnes. This represents an increase of 640%.

2) Central banks from around the world bought over 70 tonnes of gold in April, 2012. Data from the IMF showed developing countries such as the Philippines, Turkey, Mexico and Sri Lanka were significant buyers of gold as prices dipped.

3) Iran purchased $1.2B worth of gold in April, 2012 through Turkey. As the developed nations continue devaluing their currency at the expense of developing nations, countries such as Iran, China and Mexico are forced to look at alternative stores of value.

4) After twenty years of lackluster returns and stagnant bond yields, Japanese pension funds have finally discovered the value of investing in gold. The $500M Okayama Metal and Machinery pension fund placed 1.5% of its assets into gold bullion-backed ETFs in April in order to “escape sovereign risk” Read more here-http://bit.ly/LySqXQ

-Charles Oliver: Euro Debt Crisis is Good for Gold and Silver. I had expected that the money from the European version of quantitative easing would start to get into circulation and, with the continuing debasement of currencies, be very positive for gold and other asset classes. However, I miscalculated how weak the banks of Europe actually are; most have very weak balance sheets.

Indeed, they took most of that money to try and prop themselves up and keep afloat. Having said that, I maintain my long-term thesis, which is that the governments of Europe are going to continue to print money. The things that are going on in Europe, China and the U.S. lead me to believe that there is going to be significant printing down the road, which ultimately will lead to higher gold and silver prices. Read more here-http://bit.ly/ODppsA

-$125bn Spanish bank bailout sets gold up for $2,000 and silver $60 this autumn. Read more here-http://bit.ly/LGBaQy

-London Trader: Staggering 515 Tons of Gold Sold in 4 Hours. “China has purchased hundreds of tons of gold in the last couple of months. China is not disclosing what their true reserves are. Russia is delaying disclosure and so is Iran. We saw record gold imports of over 100 tons through Hong Kong to China in April, as reported by the mainstream media, but what has been reported is just the tip of the iceberg.”

“What we’ve seen is a dramatic acceleration of physical gold purchases as the price has been drawn down. Staggering amounts of physical gold are being purchased. The acceleration of physical purchases, at these lower levels, is the reason why gold has been holding firm and building such a nice base. I want to be very clear about this, in addition to what is being reported by the mainstream media, we have seen hundreds of tons of additional physical gold being purchased by China over the last three months.” Read more here-http://bit.ly/LtvQ2R

-Gold-Investment Demand in China to Advance 10%, ICBC Says. Gold-investment demand in China may gain more than 10 percent this year as buyers seek a haven from Europe’s debt crisis and the prospect of weakening currencies, according to the country’s largest bullion bank. “Investors here want to hold part of their assets in gold to hedge for the risks, especially now that the financial crisis has evolved into a sovereign crisis,” Zheng Zhiguang, general manager of the precious-metals department at Industrial and Commercial Bank of China Ltd., said in an interview in Shanghai. Read more here-http://bloom.bg/LgUlfr

-Do Asian central banks hold enough gold? Read more here-http://reut.rs/KpZVBn

-Kazakhstan to put 20% of its foreign currency reserves into gold. Read more here-http://www.gata.org/node/11468

-Sinclair sees U.S., gold banks battling central banks that need more gold and less paper. Read more here-http://www.gata.org/node/11465

-This may do wonders for inflation and gold in Argentina. Read more here-http://www.gata.org/node/11466

-Egon von Greyerz: Worldwide Package Coming From Fed, ECB & IMF. Bernanke, don’t believe a word of what he is saying. He’s a politician, like everybody else, and he used this speech to put pressure on Congress to reduce the deficit, but of course they won’t. So the burden will be back on Bernanke to print more money. That (money printing) is imminent.

Ben (Bernanke) talked about the eurozone. He said he’s prepared to take action if needed. Well, I can tell him that action is needed now. That action we will see very soon. There will be a worldwide package. There will be a massive worldwide package coming out between the Fed, the ECB, the IMF and other central banks.” Read more here-http://bit.ly/Lfi7bx

-Dan Norcini: European Crisis & Bullion Banks Capping Gold. Read more here-http://bit.ly/KxdCyq

-Dan Norcini: Global Markets In Extraordinarily Dangerous Situation. Read more here-http://bit.ly/LhX760

-Stephen Leeb: This Is Exactly What Will Move Key Markets Going Forward. Read more here-http://bit.ly/NaKj5m

-Peter Schiff: World is Headed Off the Edge of the Fiscal Cliff. Read more here-http://bit.ly/LErwIq

-Richard Russell: Financial Knockout, Gold & Zuckerberg. Read more here-http://bit.ly/Ll8atg

-Goldman Sees a 29% Return From Commodities Over 12 Months. Goldman Sachs Group Inc. predicted a 29 percent return over the next year from the Standard & Poor’s GSCI Enhanced Commodity Index, led by energy and industrial-metals investments. Crude, gas, copper, aluminum and gold are the bank’s top picks, according to the latest report. Read more here-http://bloom.bg/LCQrSq

-Alasdair Macleod: Gold data hints at possible market upswing. Read more here-http://www.gata.org/node/11460

-Brodsky and Quaintance: Solution is asset monetization, starting with gold revaluation. Read more here-http://www.gata.org/node/11457

-Eric Reguly: A golden idea to save (or doom) the euro. Read more here-http://www.gata.org/node/11459

-Felix de la Cova: The real cost of not owning gold. Read more here-http://www.gata.org/node/11458

-Pakistan frenzy over ‘gold‘ rupee coins. How much is a one rupee coin worth? Up to 2500 rupees if you believe the rumours sweeping Pakistan that the humble coin had inadvertently been made with gold instead of the usual tiny percentage of copper. Read more here-http://bit.ly/M8l3Yw

-GoldSeek Radio interviews GATA Chairman Bill Murphy. Listen here-http://www.gata.org/node/11455