The Common Man's Sovereign Wealth Fund The streetTRACKS Gold Shares ETF "tonnes in the trust" rose by more than 12 tonnes yesterday as the price of gold gained another $17 per ounce in London. The trust now has 615 tonnes in allocated storage, now well clear of China and the ECB, an organization that is believed to have sold some of their reserves recently. Netherlands - look out, you're next and then it's on to Japan. This is turning into kind of a "common man's" sovereign wealth fund, in some ways similar to the giant funds run by China and some Middle Eastern oil exporting nations. Just like these big countries that are looking for something to do with their huge piles of quickly depreciating U.S. dollars, it seems that many individuals are also accumulating way too much paper money and they too are looking for something to do with it all.
Import prices rise 2.7%, the most in 17 years Driven by a weaker dollar and much higher prices for petroleum and natural gas, import prices surged 2.7% in November, the largest monthly increase in 17 years, the Labor Department reported Wednesday. Even excluding fuels, import prices rose 0.5%. Import prices have now risen 11.4% in the past year, the largest gain in the 25-year history of the import price index. Import prices increased a downwardly revised 1.4% in October. The report comes one day after the Federal Reserve cut its overnight interest rate target by a quarter percentage point, citing slower economic growth. However, the Fed also said some inflationary pressures remain, which could be an argument against cutting rates further.
Trade gap widens in October on high oil prices The U.S. trade deficit widened in October, suggesting the trade sector will subtract from economic growth in the fourth quarter. The fourth quarter could use all the help it can get. Before the report, many economists were expected fourth-quarter GDP growth to dive below a 1.0% annual rate from the strong 4.9% growth rate in the third quarter. A narrowing trade deficit has boosted growth in three of the past four quarters. The nation's trade deficit widened 1.2% in October to $57.8 billion from a revised $57.1 billion in September, the Commerce Department said. This is the biggest trade gap since July. The lion's share of the deterioration in the trade gap was due to sharp increases in the quantity and price of petroleum imports.
Fed set to revamp liquidity support The Federal Reserve is set to overhaul the way it provides liquidity support to financial markets, following a negative reaction to Tuesday’s interest rate cut. US stocks fell sharply after the central bank cut rates by only 25 basis points to 4.25 per cent and failed to offer a clear signal of more to come. The overhaul, which could be announced as early as Wednesday, is likely to take the shape of a new liquidity facility that will auction loans to banks. This would allow the Fed to provide liquidity directly to a large number of financial institutions against a wide range of collateral without the stigma of its existing discount window loans.The idea is that this would ease severe strains in the market for interbank loans, and help restore more normal conditions in credit markets generally.
Morgan Stanley issues full US recession alert Morgan Stanley has issued a full recession alert for the US economy, warning of a sharp slowdown in business investment and a "perfect storm" for consumers as the housing slump spreads. In a report "Recession Coming" released today, the bank's US team said the credit crunch had started to inflict serious damage on US companies. "Slipping sales and tightening credit are pushing companies into liquidation mode, especially in motor vehicles," it said. "Three-month dollar Libor spreads have jumped by 60 to 80 basis points over the last month. High yield spreads have widened even more significantly. The absolute cost of borrowing is higher than in June."
Greenspan: subprime "accident waiting to happen" The U.S. subprime mortgage crisis was an "accident waiting to happen" as a period of unprecedented global growth seduced investors into underpricing risk, former Federal Reserve Chairman Alan Greenspan argued in an article published by The Wall Street Journal on Wednesday. While acknowledging the low U.S. interest rates set under his leadership may have contributed to the bubble in U.S. home prices, Greenspan said he felt the roots of the subprime mortgage crisis actually lie with global economic expansion. "The root of the current crisis, as I see it, lies back in the aftermath of the Cold War, when...market capitalism quietly, but rapidly, displaced much of the discredited central planning that was so prevalent in the Third World," Greenspan wrote.
Bank of America sees disappointing fourth quarter Bank of America Corp expects its fourth-quarter results to be disappointing due to write-downs and lower trading revenue, Chief Executive Ken Lewis said on Wednesday. The company is likely to be profitable in the quarter but expects to set aside $3.3 billion for losses and write-downs, Lewis said at a conference. "While we do not make a practice of forecasting quarterly earnings, I think you certainly can assume results will again be quite disappointing," Lewis said. He said he personally would have preferred a half-point rate cut by the Federal Reserve on Tuesday "because the capital markets are still so fragile." The Fed cut the fed funds rate by a quarter point.
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