Gold Gains as Weaker Dollar Spurs Buying; Silver Advances Gold gained in London as the dollar weakened against the euro, bolstering the metal's appeal as an alternative investment to U.S. stocks and bonds. The dollar retreated from the highest in almost two weeks against the euro on speculation U.S. reports on manufacturing and home sales will add to evidence a housing recession is crimping economic growth. Some investors buy gold, denominated in dollars, as a hedge against further declines in the U.S. currency. ``Continued weakness'' of the dollar ``is certainly supportive for gold prices,'' Suki Cooper, an analyst at Barclays Capital in London, said in an interview today. Gold also climbed after Turkish Prime Minister Recep Tayyip Erdogan said his country's forces may attack Kurdish fighters in Iraq in the next several days if the U.S. and Iraq fail to rein the rebels in.
Evans Says Fed Must Guard Against 'Cost' of Bigger Housing Drop Federal Reserve Bank of Chicago President Charles L. Evans said policy makers must shield the economy from ``high cost'' events such a worsening housing slump ``I do not see this extreme outcome as likely,'' Evans said yesterday in his first speech on the economy as a policy maker. Still, ``it is one of those high cost outcomes that we should guard against,'' while closely monitoring inflation, he said at the University of Chicago's Graduate School of Business. Evans, who votes on interest rates this year, stressed the importance of ``risk management'' in determining Fed policy and noted that ``uncertainty'' about the impact of financial volatility has increased in the past week. Traders anticipate the Fed will lower rates for a second time on Oct. 31, and Evans didn't rebuff those expectations.
Alan Greenspan Admits Subprime Crisis Was ‘Waiting to Happen’ In the meantime, we pass along this from Julian H. Robertson, one of the smartest people in the hedge fund industry. The economy is headed for one “doozy of a recession”, says he. Colleague Steve Sarnoff adds his two cents on the latest market happenings, saying, “Stocks slipped sharply on Friday and this morning, as disappointment, worry, and fear over housing, credit, currency, recession, and inflation spread like southern California wildfire. The financial media fans investors’ fear through the markets like Santa Ana winds funneling fire through dried out coastal sage and chaparral canyons. Here’s our old Fed chief, Alan Greenspan, commenting on the effects of the credit bubble that he, more than anyone, created: How to build a bailout Wall Street leaders were urged recently by Treasury Secretary Hank Paulson to work together on a solution to the credit crisis. The topics: what to do about growing defaults in the mortgage business, a weakening currency, higher costs of financing, problem loans, write-offs and dangerous off-balance-sheet entities that had been used to buy debt generated mostly by the world's biggest financial-services conglomerate. Everyone has brought something to the conversation. Paulson, Federal Reserve Chairman Ben Bernanke, Ken Lewis of Bank of America Corp., G. Kennedy Thompson at Wachovia Corp., Citigroup Inc.'s Chuck Prince and J.P. Morgan Chase & Co.'s Jamie Dimon -- even Lloyd Blankfein, chief executive of Goldman Sachs Group Inc.
Paulson keeps up pressure on China's yuan Treasury Secretary Henry Paulson reiterated that China should let its currency strengthen on Tuesday, following weekend meetings during which the world's seven richest nations stepped up their pressure on Beijing over the yuan. That pressure, however, was met by a shrug from Chinese authorities, and the yuan was even allowed to sink a little in Monday trading. In remarks prepared for delivery to a conference, Paulson also said China should speed up market reforms and open its economy to more international competition. He also singled out protectionism and slow reform in China as "the greatest risk to China's long-term economic security."
China shrugs off G7, IMF pressure on yuan The global financial community took aim at China's yuan over the weekend -- and China didn't blink. As widely expected, the communiqué from the Group of Seven industrialized nations called for China to accelerate the pace of the yuan's appreciation, and refrained from even mentioning recent dollar weakness or euro strength. And also as expected, Chinese officials uttered the diplomatic version of a shrug, and even allowed the currency to sink a little in local trading Monday. "While Beijing might allow faster yuan appreciation moving forward, Chinese officials emphasize that it will continue to reform its exchange rate gradually, on its own initiative, and by all indications prefers to avoid being seen as caving in to foreign pressure," wrote Action Economics analyst David Cohen.
'Sell all your mutual funds!' (Yes, all!) No, I'm not kidding. That's the advice one of America's biggest financial advisers is telling his clients about "the lies that are placing your financial security in jeopardy." Who's lying? Everyone involved with mutual funds, says Ric Edelman in his new book "The Lies About Money: Achieving Financial Security and True Wealth by Avoiding the Lies Others Tell Us, and the Lies We Tell Ourselves." Ouch, that hurts! His indictment is brutal: "There's no greater pitfall than the one created by the retail mutual fund industry. [They] are ripping you off. You are incurring greater risks, lower returns and higher fees than you realize, and as a result you are in danger of not achieving your financial goals.
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