Gold traded within 1.1 percent of a 27-year high on speculation the Federal Reserve will cut interest rates, boosting bullion's appeal as an alternative investment. The dollar fell to a record low against the euro as traders bet the Fed will reduce its benchmark interest rate by a quarter- percentage point, dimming the allure of U.S. assets. Gold has had a correlation of 0.79 against the euro-dollar exchange rate this month. A figure of 1 would indicate the two move in lockstep. ``If they move interest rates lower, the scope for the dollar to move higher would be limited and that would help gold,'' Michael Widmer, head of metals research at Calyon in London, said in an interview today.
Precious metals trading company Hinde Capital has launched a hedge fund which will solely invest in gold and gold related securities, because it believes gold is one of the most deeply undervalued assets. Although gold in London yesterday hit a high of US$794.4 an ounce, co-fund manager Ben Davies explained that while the asset is high on a nominal closing basis, on an inflation adjusted basis it should really be around US$1,800 to US$2,000. He added that on this basis gold is not as high as it was, for example, in the late 1970s and US$2,500 is not an unrealistic level for the metal to reach. Davies, a former head of London trading at RBS Greenwich, points out that the gold sector is much smaller than the equity sector, with a total market cap of only about £200bn. The sector is likely to grow as investors reallocate to the asset amid credit concerns and to protect against rising inflation.
GORDON Brown has cost the taxpayer more than £3billion by selling off half of Britain’s bullion reserves just before the price of gold rocketed. As Chancellor, he sold 400 tons of gold between 1999 and 2001, raising £2.3billion to fund his lavish spending plans. This week, as bullion drew near a 28-year high price, experts calculated the loss to the Treasury resulting from his decision at £3.1billion. The massive shortfall is only £2million less than £3.3billion lost under John Major during Black Wednesday in 1992. With analysts forecasting that the price of gold will continue to rise until at least the end of the decade, Mr Brown’s decision could turn out to be one of the most costly failed gambles in Treasury history.
If you've listened recently to some prominent Wall Street economists, the U.S. economy in the next two quarters is going to slip from the jaws of the credit crunch, hurdle the tiger-trap of the housing slowdown, swing across boiling oil prices, and land on its feet having narrowly escaped a recession. But many economists are skeptical. They say that this scenario of the economy as swashbuckling hero from a classic B movie isn't very realistic. Instead, they are seriously concerned that the economy soon could slip into a recession. Economists are advising investors to ignore all festivities planned after the third-quarter gross domestic product report is released on Wednesday morning. That report is expected to show growth over 3% in the July-September quarter.
As analysts ponder the U.S. Federal Reserve's next move on interest rates, currency investors ponder the likely market reaction, and the consensus for both is that it's a matter of degree, not direction. Just as no one is expecting an interest rate hike Wednesday, no one is betting on a sustained dollar rally this quarter, either. And just as bad economic or corporate headlines -- or even record-high crude oil prices -- rarely seem to derail stock market rallies these days, nothing the Fed delivers is likely to halt the greenback's slide. Whether the Fed cuts its benchmark a quarter percentage point, as expected, or a half-point --or even not at all -- the dollar is likely to bear the near-term brunt of the market's kneejerk reaction either way, and then move in one direction: down.
China's worst fuel crisis in two years spread to the capital and other inland areas by Wednesday, and one man was killed in a brawl at a petrol station queue, upping pressure on the government to intervene. Diesel shortages in China's political heart, which escaped previous supply crunches unscathed, highlight tensions between the government and its increasingly independent oil firms about who should pay for the country's generous fuel subsidies. Top refiner Sinopec on Wednesday pledged more supplies and bought additional diesel fuel abroad, but it may fall to Beijing to end the stand-off by raising domestic prices, easing taxes, promising another year-end pay-off -- or simply strong-arming suppliers into selling more fuel at a loss.
The reviews are in on GOP presidential candidate Ron Paul’s appearance on the Tonight Show. Posters at LewRockwell.com and DailyPaul.com write that the show was a success for Ron Paul. He was relaxed, humorous and apparently in his element. Jay Leno was prepped, courteous and interested. From a campaign standpoint, Ron Paul’s appearance on national programs such as the Tonight Show are most important to the campaign which still needs to establish name recognition for Jeffersonian conservative candidate. Fund-raising apparently receives a considerable boost following such appearances. According to thestressblog.com, the line of people hoping for a ticket to see Ron Paul was the longest "in recent memory." A video of the program can be seen at thestressblog.com, along with a succinct summary of some of the highlights.
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Gold prices slipped today, but were seen supported by a weak dollar and high oil prices ahead of a crucial decision on interest rates from the US Federal Reserve. In early trade spot gold was down at $784,15/784,75 a troy ounce from $788,90/789,70 late in New York yesterday when it rallied to $794,40 an ounce, its highest since January 1980. Traders said profit-taking was part of the reason for gold’s losses, but they think the mood is bullish because of the dollar’s recent tumble to record lows against the euro and a basket of currencies. A lower US currency makes dollar-denominated commodities cheaper for investors in other currencies, while gold is seen as a hedge against inflation, often triggered by rising oil prices.
Gold could fetch over 1,000 usd per ounce by 2010, said Credit Suisse, which upped its price forecasts, citing a cocktail of supportive factors for bullion looking ahead. The company now sees gold averaging 770 usd in the final quarter of this year, 694 usd in the whole of 2007, 838 usd in 2008, 950 usd in 2009 and 1,050 usd in 2010. Those are up from price estimates made last year of 680 usd, 665 usd, 700 usd, 741 usd and 800 usd per ounce, respectively. "In the current environment, upward pressure on the price of gold is likely being driven by the economic environment surrounding the US economy, in particular the strength of the US dollar, the oil and commodity prices and a change in the dynamics surrounding gold supply and demand," said precious metals analyst at Credit Suisse, David Davis, who added he expects the same factors to continue supporting gold in the longer term.
As of last Friday, gold closed at $783.50 and silver at $14.17. Gold is now more than 9% above its last major high of $717.10 of the 11th May 2006 but silver was still 4% below its closing high of $14.78 of the same day in 2006. That is a 13% differential so what gives with the theory about silver outperforming gold? The chart below shows why this is to be expected and why you should regard it as a last opportunity to get on the silver train before is bullets out of the station. In fact, if silver makes no new high, there can be no gold bull market! We have had two highs in the silver bull market so far - expect one more.
Many economists believe the Federal Reserve will cut its policy interest-rate target by a quarter-percentage point to 4.5% on Wednesday to contain the risks that financial market turmoil could continue, possibly leading to a recession. "The risk of a financial-market disruption spilling over into real economic activity is too serious for the Fed to ignore," said Kevin Logan, U.S. economist at Dresdner Kleinwort, in a note to clients. "Not easing at this juncture runs the risk of a financial market catastrophe and a possible recession." Simply put, economists said the debt crisis is not over, and the danger exists that banks won't be able to make loans and mortgages, even to buyers with good credit history and high income.
UBS, the world's biggest money manager, has given warning that the impact of the credit crunch could linger into the new year. While confirming that its investment banking division is unlikely to break even for the rest of the year, Marcel Rohner, the Swiss bank’s new chief executive, said that even in the first quarter 2008, the bank's performance "will depend on where we end with the US housing market". As it reported heavy third-quarter losses, UBS repeated warnings of further writedowns. Mr Rohner refused to provide detailed forecasts, however. He said: "The range of possible outcomes is widening". UBS should return to profitability at group level during the final quarter, he said.
Businessmen or manufacturers can either be genuine free enterprisers or statists; they can either make their way on the free market or seek special government favors and privileges. They choose according to their individual preferences and values. But bankers are inherently inclined toward statism.Commercial bankers, engaged as they are in unsound fractional reserve credit, are, in the free market, always teetering on the edge of bankruptcy. Hence they are always reaching for government aid and bailout. Investment bankers do much of their business underwriting government bonds, in the United States and abroad. Therefore, they have a vested interest in promoting deficits and in forcing taxpayers to redeem government debt.
The head of the Wall Street investment bank Merrill Lynch was last night negotiating a severance package tipped to be as high as $159m (£77m) after a risky strategy of betting billions on American mortgage-backed securities came disastrously unstuck. Stan O'Neal, chief executive of Merrill, has told friends that he intends to resign after losing the confidence of his boardroom colleagues following the biggest loss in the bank's 93-year history. Nicknamed the "thundering herd" for its bull logo, Merrill has estimated its liabilities at $7.9bn from the summer's global financial volatility and analysts believe the figure could increase to $12bn.
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Mon 10.29.2007
Gold futures probing $800 level Gold futures traded close to the psychologically important $800-an-ounce level on Monday, gaining just days before a U.S. interest-rate decision as traders stepped forward to buy the popular inflation hedge. With the dollar at a new record low against the euro and a 33-year swoon against the Canadian dollar, gold futures rose as high as $798.30 an ounce, a new 27-year high. Gold has climbed sharply from the $650-an-ounce level back in mid-August. "This positive trend is primarily due to the persisting weakness of the U.S. dollar," said Eugen Weinberg, an analyst at Commerzbank. Expectations are growing that the Federal Reserve will cut interest rates by at least a quarter of a percentage point on Wednesday, which has been weighing on the greenback of late.
At the current rate of increase gold will be at $950 by year-end While my own opinion - and that of a number of others - is that the movement of the gold price is primarily inversely related to the strength of the US dollar, commodity aspects also come into play on the margins. In other words, should jewellery demand in particular dry up, the gold price will suffer, but should jewellery demand remain strong, or increase, the additional marginal impact will help push the bullion price up sharply in times where other sources of supply may actually be on the wane, or at best pretty well static.And the latter is what appears to be happening at the moment. Worries that higher prices might dampen jewellery demand in India, where sales at this time of year tend to be particularly strong due to the Diwali festival and the traditional wedding season, are not yet apparent with price currently having little impact on sales.
US Dollar’s Days Numbered as Gold Price, Oil Show Continued Strength The Money Migration is turning into a Money Stampede. How can you avoid getting trampled? There is one simple way to explain the movement in global currency and commodity markets. A number of smart investors (including Jim Rogers, Marc Faber and others) hit on it a few years ago. What was it? That the US dollar was a dangerously flawed currency, the unbacked liability of a vastly over-extended government, and that the days of doing the world’s business in America’s currency were numbered. The trouble in a world of managed exchanged rates—a "dirty float" not a "free float"—is that all currency values are relative. The US dollar is weak against everything. The Aussie dollar is strong against most other currencies.
Fed likely to cut rates despite stellar growth In a delicious bit of timing, the Federal Reserve is poised to cut its overnight lending rate on Wednesday, just hours after the government is expected to report a second straight quarter of robust economic growth. Rate cuts and strong growth don't typically go together, but that just shows how odd the economic situation is. And it shows that the Fed is reacting more to what might happen than to what has already happened. The Federal Open Market Committee meeting and the first estimate for third-quarter growth aren't even the main events on the economic calendar for the week. That honor would go to the October payroll report, which will be released on Friday.
Oil Rises to Record Above $93 a Barrel Oil prices hit a new trading high above $93 a barrel Monday before falling back, propelled by news that Mexico's state oil company was suspending about a fifth of its oil production due to a storm. The news that Petroleos Mexicanos, or Pemex, was to stop as much as 600,000 barrels of daily crude production came amid political tensions in the Mideast, a weak U.S. dollar and a tight supply outlook that had already pushed crude oil to record prices. The Pemex shut-in "is the one that has pushed prices above $93," said Victor Shum, a Singapore-based energy analyst with Purvin & Gertz. "This is on top of what has already been simmering." In addition, Vienna's PVM Oil Associates noted that "more bad weather could hit the region in the form of Tropical Storm Noel."
Which is worse: foreclosure or bankruptcy? Based on our mail, the financial squeeze that’s left millions of Americans falling behind on their mortgage payments doesn’t seem to be letting up. For some, that presents a stark choice: is it better to lose your house to foreclosure or file for bankruptcy protection? What is better on your credit report - foreclosure or bankruptcy? Neither option is going to be easy. Generally, a foreclosure will remain on your credit report for 7 years, while a bankruptcy remains for 10 years. But that doesn’t mean foreclosure is necessarily the better option, according to Ray Hooper, Education and Housing Director for the Consumer Credit Counseling Service of Greater Dallas, a non-profit agency that tries to help people facing foreclosure keep their homes.
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Fri 10.26.2007
Gold Climbs to Highest Since 1980 on Record Oil, Weak Dollar Gold rose to a 27-year high in London as the dollar slumped to a record low against the euro and oil traded at an all-time high, boosting bullion's appeal as a hedge. Gold has had a correlation of 0.8 against the euro-dollar exchange rate in the past month. A figure of 1 would indicate the two moved in lockstep. Some investors view dollar-denominated gold as a hedge against further declines in the currency and inflation when energy prices surge. ``You can't be anything but bullish on gold,'' James Moore, an analyst with London-based TheBullionDesk.com, said in an interview today. ``The dollar isn't doing particularly well, oil prices are firm and there's political tension with Iran.''
Crude rallies past $92 to new record Crude-oil futures rallied to a new record high on Friday, with worries about U.S. inventories and tensions in the Middle East combining to send the benchmark energy contract past $92 a barrel. Crude oil for December delivery rose $1.35 at $91.81 a barrel on the New York Mercantile Exchange. Earlier Friday, the contract rose to a new record high of $92.22 a barrel in electronic trading, a day after the U.S. slapped new economic sanctions on Iran. The gains were also driven by worries about potential conflict between Turkey and the Kurds in the north of Iraq. "Continued concerns of insufficient supplies for the northern hemisphere's winter heating season combined with signals from OPEC that it is unlikely to boost supply further has underpinned oil," said analysts at Action Economics.
Dollar Falls to Record Low Versus Euro as Bets on Fed Cut Mount The dollar fell to a record low against the euro as oil rose above $92 a barrel and speculation that U.S. consumer confidence is waning bolstered the case for the Federal Reserve to cut interest rates. The U.S. currency headed for a third weekly decline versus the euro as an unexpected drop in U.S. durable goods orders yesterday combined with rising speculation about corporate losses linked to the housing slump. American International Group Inc. fell the most in 12 weeks in New York on concern it will write down assets linked to the subprime-mortgage market collapse. ``The dollar is suffering from fading yield support at a time when the market thinks the Fed will have to cut rates again,'' said Kamal Sharma, a currency strategist at Bank of America Corp. in London. ``The bias is for continued dollar weakness,'' which may trade between $1.42 and $1.45 for the rest of the year, Sharma said.
Henry Paulson presses for aid to sub-prime lenders Henry Paulson, the US Treasury Secretary, is seeking to persuade the White House to offer financial compensation to American mortgage lenders that try to help troubled homeowners by renegotiating the terms of their loans. The Times has learnt that Mr Paulson is lobbying President Bush to provide funds so that mortgage lenders can reduce the loss that they would incur from either reducing the rate of an adjustable home loan or extending the life of the mortgage to make it cheaper for the property owner. It is understood that Mr Paulson’s proposals are meeting significant resistance within Washington, where it is perceived that such a move would be a bank bail-out scheme.
AIG may take $9.8 bln subprime hit, analyst says American International Group could take a $9.8 billion hit from its exposure to subprime mortgages, Friedman, Billings, Ramsey analyst Bijan Moazami estimated on Thursday. The write-downs will be big, but manageable for one of the world's largest insurers with $104 billion in shareholders equity and the ability to generate third-quarter earnings of $4.4 billion, the analyst wrote in a note to clients. AIG has the largest subprime exposure of any insurers he covers, Moazami noted. Shares of the company fell 3.2% to $61.79 on Thursday amid speculation it could be hit by big write-downs. Spokesman Chris Winans said the company doesn't comment on market rumors. "Considering the recent write-downs at Merrill Lynch, we believe it is appropriate to evaluate the potential charges that AIG could be facing in light of the continued meltdown in subprime," the analyst wrote.
Another “Realistic” View of the Housing Market Below is another, what I consider, realistic view of the housing market. Being an optimist or a pessimist about the housing market is not the issue. The issue about the housing market is to be a realist. Thank goodness the financial press is beginning to state where we are at. My dad used to tell me, "you can't get to some place unless you know where you are at". Text in bold is my emphasis. The housing market is just getting worse. Home resales tumbled 8% in September to the lowest levels in this decade, prompting the obvious question: When will it all end? The honest answer is no one knows. Optimists have been saying for more than a year that the worst is behind us, while the pessimists have been saying recovery is still a year, or years, away.
Subprime-Mortgage Defaults Rose Last Month, ABX Data Suggests Late payments and defaults among subprime mortgages packaged into bonds rose last month as higher loan rates and weaker home prices pushed homeowners to the brink, according to data for loans underlying ABX derivative indexes. After September mortgage payments, 21.3 percent of the loan balances from 20 deals created in the first half of 2006 were at least 60 days late, in foreclosure, subject to borrower bankruptcy or already turned into seized property, up from 19.7 percent a month earlier, according to a report yesterday from UBS AG. Prepayments on mortgages also slowed, suggesting it's more difficult for borrowers to sell their homes or refinance out of adjustable-rate loans amid a ``shutdown'' of the subprime market, the New York-based UBS analysts led by Thomas Zimmerman wrote.
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Thurs 10.25.2007
Gold, Silver Climb on Slumping Dollar, Higher Energy Costs Gold and silver rose after a drop in the dollar against the euro and higher energy costs sparked demand for the precious metals as an investment. Gold has gained 21 percent this year, reaching the highest in 27 years, as crude oil surged to a record and the dollar fell to the lowest ever against the euro. Investment demand in the StreetTracks Gold Trust, an exchange-traded fund backed by bullion, has increased 31 percent this year to a record 594 metric tons. ``The old combination of a sharp spike in crude-oil prices and a further slide in the dollar prompted a good rise in gold prices,'' said Jon Nadler, an analyst at Kitco Minerals & Metals Co. in Montreal.
Buffett sees dollar weakness Billionaire investor Warren Buffett said on Thursday he expected the dollar to weaken further, adding that South Korean stocks offered better value than other world markets. Buffett, worth $52 billion according to Forbes magazine in March, said his Berkshire Hathaway company is still on the hunt for bargains as the U.S. subprime mortgage crisis plays out."We are still negative on the dollar. We bought stocks in companies that are earning their money in other currencies," he told reporters during a visit to Berkshire's Korean cutting tool maker subsidiary, TaeguTec. "We are gaining foreign currency exposure that we like," said the veteran investor, known as the "Oracle of Omaha" for his astute investments.
Roots of credit crisis laid at Fed's door In the wake of the financial market turmoil that arose over the summer and even now threatens to push the U.S. into recession, there has been a remarkable lack of finger-pointing so far over the cause of the crisis. But one observer, Tom Schlesinger, the founder and executive director of the Financial Markets Center, a think tank that has followed the Federal Reserve closely for the past decade, believes the blame for the crisis falls squarely on the Fed and accuses the central bank of "regulatory foot-dragging" that has harmed the public. Schlesinger maintains the Fed's prevailing regulatory philosophy has shifted from that of 20 or 25 years ago, which in essence was "here is the line between right and wrong, don't cross it," to a current underlying policy that "anything and everything that might be called financial innovation ought to be embraced."
Orders for durable goods fall for second straight month Demand for defense goods tumbled in September, pushing down orders for durable goods for a second month in a row, the Commerce Department reported Thursday. Total orders fell 1.7% in September after a revised 5.3% decline in August. Economists surveyed by MarketWatch were expecting orders to rise 1.1%. "These are modest gains, but in an environment when businesses are worried by the economic outlook and possible credit crunch, we still see private orders gaining," said Stephen Gallagher, economist for Societe Generale. "The results do not much alter expectations that growth will be at 3.0% to 3.3% in the third quarter when reported next week."
New-home sales rise 4.8% in September Sales of new homes rebounded in September from summer sales levels that were much weaker than previously reported, the Commerce Department reported Thursday. Sales increased 4.8% to a seasonally adjusted annual rate of 770,000 from a revised 735,000 in August, an 11-year low. Previously, August's sales had been reported at a 795,000 pace. September's sales were slightly higher than the 758,000 pace expected by economists surveyed by MarketWatch. The three previous months were revised sharply lower, which means the housing market was much weaker in the middle of the year than previous believed, and no one believed it was strong. "The crash continues," wrote Ian Shepherdson, chief economist for High Frequency Economics. Sales fell at a 35% annualized pace in the third quarter, he said.
China says economy still growing rapidly China's fast-growing economy slowed slightly in the third quarter in a sign that tightening measures were taking effect, the government said Tuesday, and economists said the peak of the latest boom may have passed. The 11.5 percent jump in economic output for the three months through September kept China on track to surpass Germany as the world's third-largest economy by early 2008. The growth figure, a decline from the 11.9 percent rate reported for the previous quarter, suggests China's expansion has peaked, economists said. They said growth is expected to slow further but stay above 10 percent next year. "Due to macro-economic controls, we have turned the economy from being an overheating one to being one of speedy growth," a spokesman for the National Bureau of Statistics, Li Xiaochao, said at a news conference to announce the growth figures.
China beats Germany to take world trade crown China has surged ahead of Germany for the first time to become the world's top exporter, prompting ever louder demands from the United States and Europe to revalue the yuan. Data from the World Trade Organization show that the country vaulted past the US at the beginning of this year and has since moved at lightning speed to eclipse Germany's once indomitable export machine. It shipped $111bn (£54bn) worth of goods in August, up 55pc from a year earlier. Now boasting 8pc of global exports – three times the Britain's dwindling share – China has jumped up the technology ladder. Machinery, equipment and cars now make up 46pc of total exports, while textiles are fading from the picture.
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Wed 10.24.2007
Merrill swings to loss on huge mortgage hit Merrill Lynch, the nation's largest broker, reported a loss Wednesday for the third quarter and said its write-downs for bad mortgage loans and related securities was almost $8 billion, well above the firm's own previous estimate from just a few weeks ago. "These losses are relatively larger than those reported previously by other broker dealers and universal banks that have already reported," DBRS analysts said in a report Wednesday. "Merrill appears to have been much more exposed in its securitization businesses." Merrill holds the leading position in CDO securitization. The company reported a loss of $2.24 billion, or $2.82 a share, compared with a year-earlier profit of $3.05 billion, or $3.17 a share.
Home sales crater on credit squeeze Sales of existing homes and condos fell 8% in September to the lowest level in at least eight years, further evidence that the credit squeeze in mortgage markets is hurting home sales, the National Association of Realtors reported Wednesday. Sales of existing homes and condos fell to a seasonally adjusted annual rate of 5.04 million, the lowest since 1999, when the real estate group began tracking combined single-family and condo sales. The 8% drop was the largest monthly percentage decline in that period. Nationwide, sales of existing homes were down 19.1% in September compared with September 2006. Sales were much weaker than the 5.22 million pace expected by economists surveyed by MarketWatch.
Housing horror could hang around for years The bigger problems brought on by the mortgage meltdown may linger, if earlier price plunges in Texas, Los Angeles and Boston are any indicator. Lately I've been getting that déjà vu feeling. If you lived in Texas through the savings-and-loan debacle of the late 1980s, you probably have, too. If you didn't, listen up. What happened to houses in Texas back then may be the template for what happens across the country as the housing bubble pops today.Though the national index figures reflect the illusion we most favor -- a steady and virtually guaranteed rise in home prices -- a very different picture emerges when you examine price indexes by state or metropolitan area. Here are some examples.
Jim Rogers Shifts Assets Out of Dollar to Buy Yuan Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency. ``I'm in the process of -- I hope in the next few months -- getting all of my assets out of U.S. dollars,'' said Rogers, 65, who correctly predicted the commodities rally in 1999. ``I'm that pessimistic about what's happening in the U.S.'' Rogers, delivering a presentation late yesterday at an investors' meeting organized by ABN Amro Markets in Amsterdam, said he expects the Chinese currency to quadruple in the next decade and that he is holding on to commodities such as platinum, gold, silver and palladium.
Bush is the biggest spender since LBJ George W. Bush, despite all his recent bravado about being an apostle of small government and budget-slashing, is the biggest spending president since Lyndon B. Johnson. In fact, he's arguably an even bigger spender than LBJ. “He’s a big government guy,” said Stephen Slivinski, the director of budget studies at Cato Institute, a libertarian research group. The numbers are clear, credible and conclusive, added David Keating, the executive director of the Club for Growth, a budget-watchdog group. “He’s a big spender,” Keating said. “No question about it.” Take almost any yardstick and Bush generally exceeds the spending of his predecessors.
Iraq, Afghan wars could cost US 2.4 trillion: report The total cost, including debt servicing, of the US wars in Iraq and Afghanistan could reach 2.4 trillion dollars by 2017, a report by the Congressional Budget Office found Wednesday. The report, by the body which provides non-partisan budget analysis for Congress, said higher estimates for spending for the wars could top out at 1.7 trillion dollars by the end of the next ten year period. Under the most intense scenarios of US military activity, a further 705 billion dollars could be added to the cost by interest payments, assuming the wars continue to be largely financed by government borrowing, the report said. The estimate contains estimated costs up to 2007 for military and diplomatic operations in Iraq and Afghanistan and other war on terror spending.
Turkish Planes Bomb Rebel Positions Turkish warplanes and helicopter gunships reportedly attacked positions of Kurdish rebels along its rugged border with Iraq on Wednesday, as Turkey's military stepped up its anti-rebel operations. Several F-16 warplanes loaded with bombs took off from an air base in southeastern city of Diyarbakir, private Dogan news agency and local reporters said. The warplanes and helicopter gunships bombed mountain paths in Turkey used by rebels to infiltrate from neighboring Iraq, Anatolia reported. On Sunday, Turkish helicopter gunships have penetrated into Iraqi territory and troops have shelled suspected Kurdish rebel positions across the border in Iraq, a government official said Wednesday.
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Tues 10.23.2007
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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Mon 10.22.2007
China may import more gold Sources familiar with the gold industry predict imports to China to rise, according to today's China Business News. Zhang Weixing, an industry expert said gold in the Chinese market will be scarce next year due to investment and collection fever. "It is possible more gold will be imported from overseas," he said. He made the remarks in an investment forum held in Beijing on October 20. Zhang predicted the general civil gold reserve has reached 4,000 tons, while reserves at People's Bank of China total about 600 tons. Zhang said the price of gold has been pushed higher by a weakened US dollar, geopolitical concerns, and record high price. In China, more people are shifting to buying gold products on news of rising CPI and stock fever.
Gold Falls From 27-Year High as Stock Market Rout Spurs Selling Gold declined in London from the highest level since January 1980 as a decline in Asian and European stock markets spurred some investors to sell bullion. Silver also fell. European stocks slumped, following a drop in Asian and U.S. markets, after the Group of Seven finance ministers and central bankers said credit market turmoil will slow economic growth. Some investors ``are selling gold to pay margins on their equities,'' Bernard Sin, chief gold trader at MKS Finance, one of Switzerland's four precious-metals refiners, said in an interview from Geneva today. Imports of bullion by India, which uses more gold than the U.S. and China combined, traditionally peak in the fourth quarter as the local wedding season drives demand. Gold has gained every final quarter since 2002. Fed's Kroszner: Some credit markets still broken The markets from some complex derivatives remain broken and may recover only gradually, said Randall Kroszner, a governor of Federal Reserve Board on Monday. "I would suggest that....the recovery may be a relatively gradual process and these markets may not look the same when they re-emerge," Kroszner said in a speech to the Institute of International Bankers. Trading in some derivatives, such as collateralized loan obligations, or CLOs, and collateralized debt obligations, known as CDOs, has ground to a virtual halt since August. Some of these structured credit products packaged pools of subprime mortgages loans. As problems in the subprime mortgage market became more apparent over the summer, investors shunned these products and also became unwilling to purchase products that could have any exposure to housing-related assets and other structured products more generally.
Greenspan Says Dollar Drop May Reflect Falling U.S. Debt Demand Former Federal Reserve Chairman Alan Greenspan said the dollar's decline may reflect a growing unwillingness among foreigners to buy U.S. securities. ``Obviously there is a limit to the extent that obligations to foreigners can reach,'' Greenspan said in a speech in Washington yesterday. The dollar's decline to its lowest since 1997 may be ``an indication America is approaching this limit.'' Greenspan's warning came after the U.S. Treasury reported last week that international investors sold a record amount of U.S. stocks, bonds and other financial assets in August. Central banks and private funds are turning to currencies including the euro as financial markets outside the U.S. expand. Total overseas holdings of U.S. equities, notes and bonds fell a net $69.3 billion in August after an increase of $19.2 billion in July.
Money "Paul Robinson, one of [Barclays Bank's] strategists, said: 'We're dollar bears. The dollar is coming up for an important few weeks. We expect it to get quite a bit weaker.' The bank fears that the dollar could fall to as low as $1.50 against the euro." "The dollar may 'plunge' in 2008, prompting the U.S. , the European Union and Japan to intervene in foreign exchange markets, said Eisuke Sakakibara , Japan 's former top currency official." Could any prediction be more credible and certain today than the prediction of a falling dollar? Not that a falling dollar is anything new. When the Federal Reserve was unconstitutionally created in 1913, one dollar was worth, by law, one-twentieth of an ounce of gold (more precisely, the ratio was $20.67 per ounce). Is it Meltdown Time for the US Economy? On Friday the 19 October the Dow Jones industrial average plummeted by over 360 points. This immediately sent alarm bells ringing throughout the financial community -- along with nightmares of October 1929 when the Dow Jones dropped from 400 to 145 in November. This dramatic fall in share prices was not confined to America. From March 1929 to June 1931 the prices of Dutch shares dived by 60 per cent; for Germany it was 61.7 per cent from April 1927 to June 1931, and French share prices dropped by 55.7 per cent from February to June 1931. Unfortunately the somewhat limited world of the share market is not noted for its historical perspective. To begin with, most observers missed the fact that America was definitely sliding into recession in July 1929
Bankers Warn of Inflation Global economic leaders warned of inflation risks in advanced countries on the eve of the first World Bank meetings since Robert Zoellick took charge of an institution shaken by internal divisions and scandal. The International Monetary Fund's policy-setting committee on Saturday noted rising food and oil prices and other indications of inflation in urging finance ministers and central bankers to stay focused on achieving price stability as well as on smoothing global financial market turbulence. With meetings of the IMF and the Group of 7 industrialized countries over, attention turned to Sunday's meeting of the IMF's sister organization, the World Bank, and its policy-setting committee.
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Fri 10.19.2007
Gold prices hit 27-year high (login required - free) Gold prices rose to a 27-year high after the dollar hit record lows, boosting the appeal of the metal as an alternative investment. The price of gold is up 20% this year, heading for its seventh straight annual gain. The dollar fell Thursday to record lows against the euro and against a weighted basket of six major currencies, including the Japanese yen and British pound. Five of the last six bear markets for the U.S. currency sent gold higher in dollar terms. "It's hard to keep gold down when the dollar is getting crushed," said Carlos Perez-Santalla, gold trader and president of Hudson River Futures in New York. Gold futures for December delivery rose $6.40, or 0.8%, to $768.70 an ounce on the Comex division of the New York Mercantile Exchange, marking the highest closing price for the most actively traded futures contract since Jan. 22, 1980, the day after gold reached a record $873 an ounce.
Gold Rises to 27-Year High on Dollar Outlook; Silver Also Gains Gold rose to a 27-year high in London for a second consecutive day on speculation the U.S. Federal Reserve will cut interest rates this month, spurring demand for the metal as an alternative investment to the dollar. Gold yesterday rose the most in six weeks after the dollar fell to a record against the euro. Traders increased bets the Fed will cut borrowing costs on Oct. 31 after a government report showed housing starts fell to a 14-year low. ``The Fed would rather have economic growth by cutting rates at the expense of the dollar, and a weak dollar is usually good for gold,'' said Mario Innecco, a futures broker specializing in precious metals at MF Global Ltd. in London.
For every $100,000 your house has appreciated your son or daughter is now another $100,000 in debt Mr Henry Paulson the Treasury Secretary and ex CEO of Goldman Sachs said the following today, and I quote. "Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy," Paulson said in a speech delivered at Georgetown University's law school. "The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth." In his most somber assessment of the crisis to date, Paulson said that the housing correction is "not ending as quickly" as it had appeared it would and that "it now looks like it will continue to adversely impact our economy, our capital markets and many homeowners for some time yet."
Crude backs off after hitting $90 for first time Crude oil futures retreated Friday after hitting $90 a barrel for the first time overnight as continued weakness in the dollar and worries over supply security helped drive prices higher. The November light-crude contract peaked at $90.02 a barrel before slipping back to trade down $1.07 at $88.40. The dollar held close to the all-time low it set against the euro on Thursday. The European currency changed hands at $1.4286, having broken through the $1.43 barrier in the previous session. Along with continued fears over supply disruption in Iraq, the news of a bomb attack against former Pakistani Prime Minister Benazir Bhutto, which reportedly left at least 130 people dead, added to upward pressure on crude prices late in the previous session, said Edward Meir at MF Global.
Chinese growth 'to overtake US' For the first time in modern history, China will next year contribute more to global economic growth than the United States. The landmark moment was predicted yesterday by the International Monetary Fund and is the latest illustration of the fast-growing Asian country's importance to the world economy. While China's economy is still far smaller than America's, it has overtaken the UK as the world's fourth biggest economy. With the IMF projecting 10pc growth this year, the country will pump more new money into the global system next year than the US, which is expected to grow by just 1.9pc. If the forecasts spelled out in the IMF's World Economic Outlook prove correct (and the institution did not foresee the recent credit crunch), China's continued resilience will come at just the right time for the global economy, as the developed world enters a period of slower growth.
Wishful Thinking on the Housing Mess Just when a majority of strategists thought it was safe to go back in the water the proposed bailout of the SIVs once again threw the spotlight on the fragility of the credit markets. SIVs are the investment vehicles, known as "conduits" and 'structured investment vehicles" that are designed to operate separately from the banks and off their balance sheets, It’s one thing to learn that that someone is taking action on a dangerous problem that was known for some time. But to suddenly hear that a problem hardly anyone was aware of as recently as two months ago was about to blow up is more likely to raise the question as to what else is out there that we still don’t know about.
It’s Time for the Banks to Face the Hangman Officials in the Treasury Department — working with their colleagues at Citigroup, J.P. Morgan and Bank of America — have concocted a scheme to rescue the banks from their massive losses in mortgage-backed securities. The group is planning to set up a $100 billion emergency fund that will purchase non-performing assets for short-term debt. In truth, the fund is a bailout that provides the financial giants with an excuse for not reporting their enormous losses from bad bets. “The high stakes plan to RESCUE BANKS FROM LOSSES on mortgage securities amounts to a big bet that a consortium of financial giants — AT THE PRODDING OF THE US GOVERNMENT — can PERSUADE INVESTORS TO POUR MORE MONEY INTO THE TROUBLED CREDIT MARKET.”
Is the U.S. Government Sneaking Gold Out of Fort Knox? Is the U.S. government sneaking gold out of Fort Knox? This may be exactly the case, as evidenced by a very curious change in U. S. Treasury reporting on gold supplies. Up until April 27th of this year, the U. S. Treasury reported on a weekly basis its international reserve position on this form: On this form, the gold supply (valued at the old fixed price of $42.22 per ounce) is reported as $11,041 million. The following week, the Treasury changed the form and, as first spotted by Bill Rummel and reported in the Free Market Gold and Money Report, the new form has a change to its reporting of the gold supply. No longer is the gold supply listed as simply 'gold stock', it is now reported as "gold stock including gold deposits and, if appropriate, gold swapped” (our emphasis).
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Thur 10.18.2007
Gold Rises to 27-Year High in London on Dollar; Silver Gains Gold rose to a 27-year high in London on speculation that a decline in the dollar will prompt investors to buy the precious metal as an alternative investment. Silver also increased. Assets in the StreetTracks Gold Fund, the biggest exchange traded fund backed by gold, reached a record 585.53 metric tons, after gaining 12 percent last month, figures from the World Gold Council show. Gold is up 17 percent this year, while the dollar has declined 7 percent against the euro to a record low. ``If you look at the chart, gold and the euro look very similar,'' said Wolfgang Wrzesniok-Rossbach, head of sales and marketing at Heraeus Holding GmbH, a precious metals refiner in Hanau, Germany.
Leeb's Advice to Investors: Put Money in Gold Stephen Leeb is worried about inflation, but not the way you or I or Ben Bernanke worries about inflation. He views escalating prices as the inevitable consequence of an oncoming clash of civilizations."I'm not very bullish on the world," Mr. Leeb says, "but I hope I'm wrong."Mr. Leeb heads up the Leeb Group, which manages money for high net worth clients and which publishes a newsletter called the Complete Investor. Since Mr. Leeb was early — too early, according to his publisher — in popping the tech bubble in 1999 in a book called "Defying the Market: Profiting in the Turbulent Post-Technology Market," and also in loading up on energy stocks a few years ago, his views are of interest. That, certainly, is the opinion of the 60,000 people who subscribe to his newsletter, and presumably the reason he has successfully published several books.
Gold And Silver Fundamentals Have Changed Both gold and silver have had attractive and improving supply and demand fundamentals for many years running. Demand for gold jewelry has exceeded mine supply with Central Bankers making up the shortfall with what is by far their most precious reserve asset. The stated reason was to achieve higher income, while the real reason was to suppress the price. If you believe their stated reason then you also probably believe that the reason the Fed stopped reporting the M3 money supply numbers in 2006 was to save money as they explained. Silver, likewise, has lopsided supply and demand with the shortfall on the supply side. The total depletion of a 60 year US stockpile is bringing the situation to a head. These favorable supply demand statistics alone have been enough to ignite a precious metal bull market which is now in its seventh year.
Foreclosure Filings Nearly Double Foreclosure filings across the U.S. nearly doubled last month compared with September 2006, as financially strapped homeowners already behind on mortgage payments defaulted on their loans or came closer to losing their homes to foreclosure, a real estate information company said Thursday. A total of 223,538 foreclosure filings were reported in September, up from 112,210 in the same month a year ago, according to Irvine-based RealtyTrac Inc. The number of filings in September was down 8 percent from August's 243,947, the firm said. Despite the sequential decline, the September figure represents the second-highest total for filings in a single month since the company began tracking monthly filings two years ago. Few buyers for foreclosures in O.C. I visited a foreclosure auction at the Santa Ana courthouse steps on Oct. 3, as part of my ongoing effort to learn more about why foreclosures are rising and how they may impact local neighborhoods. Out of 34 properties auctioned that day, all but one went back to the bank because no one bid. I don’t know why there was only one bidder that day. However, buying at an auction entails risks, including other claims on the property aside from the lender’s as well as potential property damage from an unhappy homeowner. I selected 10 of the properties in different cities and looked on the web site ForeclosureRadar to see how many foreclosure filings exist around each one. This provides a rough idea of what areas are seeing foreclosures ramp up.
Demonstrations Held Outside Countrywide Branches The community activist group ACORN, or Association of Community Organizations for Reform Now, demonstrated outside several Countrywide branches on Tuesday, claiming the beleaguered lender was doing little to help homeowners avoid foreclosure. At a branch in San Bruno, CA, protestors armed with signs marked, “Save Homes, Stop Foreclosures” chanted “Predatory Lender” as they picketed outside. At one point, the demonstrators knocked on the door to confront employees, but the doors had been locked, and there was no response from staff within. One former Countrywide customer who was part of the group claimed that the interest rate on the subprime loan she was given three years ago had spiked from 6.5 to 12 percent today, leaving her with few options aside from foreclosure.
Retailers post worse-than-expected monthly sales U.S. retailers reported poorer-than-expected September same-store sales Thursday, hurt by warm weather and declining housing-market conditions and consumer confidence, and a handful -- from Target Corp. to J.C. Penney Co. -- cut their profit forecasts. Retailers across discount, department-store, apparel and teen sectors all missed analysts' forecasts, according to Thomson Financial. What ranked as the eighth warmest September in 113 years had hurt demand for cold weather merchandise, according to Weather Trends International. Higher gasoline prices and housing and credit-market worries also tightened shoppers' budgets, analysts said.
Gold advance continues on back of weak dollar Gold advanced further on Wednesday, as the dollar continued to weaken. Gold for November delivery was up $7.0, or 0.9%, at $750.10 an ounce. "Bullion is higher on the back of renewed dollar weakening and a pickup in oil prices," analysts at Action Economics said in a note. "Both make gold more attractive as a hedge against inflation, and a weaker dollar also makes the precious metal cheaper for foreign investors." The dollar index, which measures the dollar against a basket of major currencies, was down 0.4%. The U.S. currency fell on Tuesday, after minutes from the Federal Reserve's September 18 meeting failed to dispel expectations of more rate cuts later this year.
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Wed 10.17.2007
Japan's grannies drive up gold prices Gold has soared to a fresh 28-year high of $760 an ounce on fears of global currency disorder and a surge of buying by Japanese investors using exotic trading signals. Traders report a sudden burst of activity on the TOCOM gold futures markets in Tokyo as the price breaks through the psychological barrier of 3,000 yen (£12.52) per gramme, the measure used by the Japanese to trade gold. The country's irrepressible grannies rely heavily on Ichimoku "cloud charts", multi-faceted indicators designed to give support/resistance levels in various markets, which have issued a powerful buy signal in recent days. John Reade, head of precious metals at UBS, said the Japan can be a major driver of the gold price. "Japanese buying can come out of the blue, but it is too soon yet to tell whether they are about to take over the gold market," he said. "When the Japanese public move in with reckless abandon, everybody else gets out of the way.
Dow 22,000 vs Gold $1,500 Remember a few years ago when several books were published with titles, like, Dow 40,000, Dow 22,000, Dow 36,000, Dow 39,000. This was in late 1999 and early 2000 at the then top of the internet bubble and with the Nasdaq and the Dow hitting highs. Exuberance was everywhere. At that time, many of us dismissed these forecast as they were largely based upon a growing U.S. economy propelled by the demographics of the coming baby boomer generation. The theme was the peak would arrive in 2009 or so.What then seemed like a 'fantasy' or pipe dream forecast of a Dow at 22,000, much less 40,000 is now becoming a more realistic projection but for perhaps different reasons. It's all about the U.S. dollar. We don't recall those forecasting a Dow 22,000 envisioning a declining U.S. dollar.
Inflation heats up on food, energy U.S. consumer prices increased 0.3% in September on higher food and energy prices, but core inflation remained more moderate, rising 0.2% for the fourth month in a row, the Labor Department reported Wednesday. The 0.3% increase in the consumer price index was the biggest since May. The figures came in exactly as expected by economists surveyed by MarketWatch. The CPI figure is used by the Social Security Administration to set next year's cost-of-living adjustment for benefits received by about 50 million Americans. COLA will rise 2.3% in January to match the gain in the CPI for workers over the past four quarters. The core CPI rate, which excludes food and energy prices to provide a better look at inflationary trends, has risen 2.1% in the past year, close to the Federal Reserve's unofficial comfort zone.
September housing starts fall to lowest level in 14 years U.S. home builders continued to cut back in September, starting construction on the lowest number of new homes in more than 14 years, the Commerce Department reported Wednesday. Housing starts fell 10.2% to a seasonally adjusted annual rate of 1.19 million, the lowest since 1.32 million in March 1993. The decline was larger than expected. Meanwhile, building permits dropped 7.3% in September to a seasonally adjusted annual rate of 1.23 million, the lowest since July 1993 and less than the 1.28 million pace expected by economists surveyed by MarketWatch. "There is no end in sight to the drop," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. He noted that housing starts fell 66% from 1978 to 1981. "This episode will likely be worse. The housing hit is intensifying," Shepherdson said.
Housing slump on for another year The Mortgage Bankers Association predicts the housing recession will last until the end of the third quarter next year. And if confidence isn't restored in the credit markets, the wait could extend until 2009, the group's chief economist said. In the meantime, the slowdown in housing has become a primary cause in the slowing of the national economy, said Doug Duncan, chief economist of the group. "Tough times," he said, after sharing the group's loan production estimates during a briefing with reporters on Tuesday. Tough times indeed. Local real-estate markets will vary, but overall there's a great deal of housing inventory that needs to diminish before housing recovers, Duncan said. "Anyway you look at it, there are massive supplies of homes that have to be worked off the marketplace before we return to an increase in activity, and certainly in terms of construction," he said.
Retail motor fuel prices ready to catch up with oil With crude-oil prices at their highest levels ever, consumers are starting wonder why retail fuel prices have been slow to catch up. The short answer would be lower fuel demand, but the long answer is that it'll come in time. "Consumers have been fortunate the last two months because fuel prices have remained stable in the face of rising crude-oil prices," said Geoff Sundstrom, a spokesman for motorist group AAA. Crude for November delivery climbed past $88 a barrel during Tuesday's trading session on the New York Mercantile Exchange. That's a level a front-month contract has never seen before. But the relatively stable average national price for gasoline won't likely last long. "Refiners will eventually have to pass on the higher cost of crude oil to consumers," Sundstrom said. Japan and China lead flight from the dollar Japan and China led a record withdrawl of foreign funds from the United States in August, heightening fears of a fresh slide in the dollar and a spike in US bond yields. Data from the US Treasury showed outflows of $163bn (£80bn) from all forms of US investments. "These numbers are absolutely stunning," said Marc Ostwald, an economist at Insinger de Beaufort. Asian investors dumped $52bn worth of US Treasury bonds alone, led by Japan ($23bn), China ($14.2bn) and Taiwan ($5bn). It is the first time since 1998 that foreigners have, on balance, sold Treasuries. Mr Ostwald warned that US bond yields could start to rise again unless the outflows reverse quickly. "Woe betide US Treasuries if inflation does not remain benign," he said. Gold Rises to 27-Year High on Record Oil Price; Silver Advances Gold gained to a 27-year high in London as rising prices for commodities such as crude oil spurred investors to increase their holdings of the metal. The Reuters-Jeffries/CRB Index of 19 commodities yesterday closed at a 14-month high. Crude oil extended gains today to a record $87.13 a barrel. Investors have bought 2.7 million ounces of gold through exchange traded funds, or ETFs, in the past five weeks, half the increase for all of 2007, according to estimates by South Africa's Macquarie First South. ``The ETFs are actually driving the gold price because there's so much money going into ETFs,'' said David Hall, an analyst at the brokerage in Johannesburg. ``If oil goes up, then you often see the gold price go up.''
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Tues 10.16.2007
Gold Rises to 27-Year High on Record Oil Price; Silver Advances Gold gained to a 27-year high in London as rising prices for commodities such as crude oil spurred investors to increase their holdings of the metal. The Reuters-Jeffries/CRB Index of 19 commodities yesterday closed at a 14-month high. Crude oil extended gains today to a record $87.13 a barrel. Investors have bought 2.7 million ounces of gold through exchange traded funds, or ETFs, in the past five weeks, half the increase for all of 2007, according to estimates by South Africa's Macquarie First South. ``The ETFs are actually driving the gold price because there's so much money going into ETFs,'' said David Hall, an analyst at the brokerage in Johannesburg. ``If oil goes up, then you often see the gold price go up.''
Gold could hit $3 000 in 10 yrs Madison Avenue Research Group on Tuesday said its outlook for gold remains "extremely bullish". In its 2007 update and 2008 gold price forecast, it said its outlook as articulated seven months ago was shared with Louise Yamada, managing director of Yamada Technical Research Advisors in New York. The former head of technical research at Citigroup, Yamada predicted that gold would surpass US$730 on its way to US$3 000 within a decade. "Gold is the purest play against the dollar," Yamada was quoted as saying. Regarding its 2008 gold price forecast, Madison Avenue Research Group said its near-term prognostication on gold echoes that of Robin Wilkin, technical analyst at JP Morgan, who said he was bullish on the metals complex and bearish on the dollar.
Capital flows to U.S. dive in August In a reflection of the financial turmoil that marked the month, capital flows to the U.S. dropped off dramatically in August, falling by $163 billion, the Treasury Department reported Tuesday. The monthly number includes the change in banks' dollar-denominated liabilities, which made up most of the loss. Those liabilities plummeted by $111.4 billion in August, a reversal after having risen by $40.9 billion during July. The monthly loss marks the lowest level since March 2001. At the same time, investors bought $21 billion in Treasury bills in August. Analysts had expected a flight into short-term assets as the credit and stock markets took a beating.
Oil price reaches new highs on fears of Kurdish conflict Oil prices burst through $86 a barrel to reach new highs yesterday on the back of growing energy demand forecasts and fears that escalating conflict between Turkey and Kurds in northern Iraq could hit supplies in the Mediterranean. Crude ended at a record level on Friday but has since gone on to hit even greater peaks of $86.13 as the Organisation of Petroleum Exporting Countries (Opec) said demand for its products would average 31.43m barrels a day in the fourth quarter of 2007, up 100,000 barrels a day on previous estimates. Soaring oil prices helped push gold to a 28-year high yesterday as investors were attracted to precious metals because of global uncertainty and the falling dollar. Platinum also swept to record highs on concerns about supply as demand remains strong.
Bernanke Says Housing to Remain `Drag' on U.S. Growth Into 2008 Federal Reserve Chairman Ben S. Bernanke said the housing industry's contraction will be a ``significant drag'' on U.S. growth into next year, though evidence of a broader impact on spending is limited. ``It remains too early to assess the extent to which household and business spending will be affected,'' Bernanke said in a speech to the Economic Club of New York late yesterday. The Fed ``will continue to watch the situation closely and will act as needed to support efficient market functioning and to foster sustainable economic growth and price stability,'' he added. Bernanke, as Vice Chairman Donald Kohn did two weeks ago, pointed out risks to both growth and inflation, declining to signal whether he favors lower interest-rates. Investors pared expectations for a cut this month after retail sales and jobs increased in September, suggesting consumers are weathering the worst housing slump since 1991 and reduced access to credit.
First boomer applies for Social Security The baby boomers' stampede for Social Security benefits has begun. The nation's "first" baby boomer, a retired teacher from New Jersey, applied for Social Security benefits Monday, signaling the start of an expected avalanche of applications from the post World War II generation. Social Security Commissioner Michael Astrue called it "America's silver tsunami." Kathleen Casey-Kirschling applied for benefits over the Internet at an event hosted by Astrue. Casey-Kirschling was born one second after midnight on Jan. 1, 1946, gaining her recognition as the first baby boomer — a generation of nearly 80 million born from 1946 to 1964, Astrue said.
Chinese bank seeks Bear stake China could be taking a bite out of Bear Stearns China Citic Group, the investment arm of China's cabinet, said it is bidding for a stake of the U.S. bank. China Banking Regulatory Commission Vice Chairman Jiang Dingzhi made the announcement during a meeting at the Communist Party Congress. He did not give details about the size of the stake or how much Citic would pay. "At the moment, Bear Stearns is a bargain," Arthur Lau, money manager at JF Asset Management in Hong Kong, told Bloomberg News. "For China, it's important to have a platform to learn what investment banking is." Bear Stearns has been rumored to be seeking a partner after the investment bank was slammed by the mortgage troubles this summer and the bank reported a 61% drop in profit for the third quarter.
Gold futures top $760 to trade near a 28-year high Gold futures climbed more than $6 an ounce in electronic trading Monday, sending the December contract to the highest level a front-month futures contract has seen since 1980. Analysts attributed the gains to everything from investors diversifying assets to safe-haven buying against a backdrop of tension between Turkey and Iraq. Gold for December delivery touched $760.80 at its peak in electronic trading as of 4 a.m. U.S. Eastern. That was the highest intraday price a front-month contract has seen in almost 28 years. "We are now seeing channels of buying interest," said Frederic Panizzutti, senior vice president at Swiss-based MKS, one of the world's largest precious metals traders and refiners.
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Mon 10.15.2007
Gold futures top $760 to trade near a 28-year high Gold futures climbed more than $6 an ounce in electronic trading Monday, sending the December contract to the highest level a front-month futures contract has seen since 1980. Analysts attributed the gains to everything from investors diversifying assets to safe-haven buying against a backdrop of tension between Turkey and Iraq. Gold for December delivery touched $760.80 at its peak in electronic trading as of 4 a.m. U.S. Eastern. That was the highest intraday price a front-month contract has seen in almost 28 years. "We are now seeing channels of buying interest," said Frederic Panizzutti, senior vice president at Swiss-based MKS, one of the world's largest precious metals traders and refiners.
Technically Precious with Merv Gold moved into new highs this week but not with any amount of enthusiasm. 15,312,000 ounces of gold sold short. Is that true? Boy, if someone had to cover that short there would be an upside explosion. But that's only dreaming, I think. I've mentioned volume often but have not gotten into the topic of open interest. A discussion of open interest could be quite lengthy so I am only going to present, in as simple of a manner as I can, the open interest situation in gold at the present time. In futures trading open interest is the number of outstanding contracts. The open interest in gold (COMEX Gold on the NYMEX) stands at 475,644 contracts as of the Thursday close. Since each contract represents 100 troy ounces of gold that means that the 6 week open interest increase represents 15,312,000 ounces of gold (or at Friday's gold price, $11.6 Billion). Still you say, so what?
Oil soars to new record above $85 Oil zoomed to an all-time high above $85 a barrel on Monday, propelled by robust demand from booming commodity markets and fresh geopolitical worries. Oil has remained above $80 for most of the past month, fuelled by supply concerns ahead of winter when demand peaks and record lows for the U.S. dollar. U.S. crude was $1.15 higher at $84.84 a barrel by 9:03 a.m. EDT, off a new record high of $85.19 -- its fifth straight session of gains. London Brent crude was $1.08 higher at $81.63, off its record high of $81.93. "A run at $90 is now seen as reasonable," Citigroup analysts said in a note. Oil's rally comes at a time when commodities are surging on strong demand from emerging markets such as China and India. Gold struck a 28-year high on Monday, while platinum hit a record high. Copper, lead and nickel were also firm.
Banks agree to prop up credit market Bank of America, J.P. Morgan Chase & Co. and Citigroup said Monday they've agreed to create a special fund to help guarantee liquidity in the commercial-paper markets. The fund could be up and running within 90 days, according to a statement issued by Bank of America. The amount of the fund wasn't specified, but published reports have put it as high as $100 billion. Talks between the banks were initiated by the Treasury Department, which issued a statement Monday welcoming the move. "The joint efforts of domestic and international financial institutions, broker-dealers and investors have resulted in a potential structure to improve liquidity in the asset-backed commercial-paper markets," Treasury said in a statement.
Why the US Central Bank Wants to Create Inflation, Destroy US Dollar It’s the end of the world as we know it…and we feel fine!India is booming. China is booming. The latest news from the Middle Kingdom tells us that its trade surplus is rising at a 56% annual rate.Heck, even Argentina is booming. Its economy has been growing about three times faster than the US model for the last five years. Last week, your editor and his old friend Doug Casey were invited to lunch at the American Club in downtown Buenos Aires. Our hosts were mostly men who have been living and doing business in Argentina for decades. They’ve seen it all – corruption, hyperinflation, defaults, chaos, riots, depression…you name it. “What’s the real story down here?” we wanted to know.
Treasury Sales May Rise 50% as Deficit Suddenly Grows Sales of Treasuries may increase for the first time since 2004 as the U.S. federal budget deficit expands, jeopardizing the biggest bond rally in five years. Government auctions of bills, notes and bonds in the fiscal year that started this month may rise more than 50 percent to $220 billion, according to UBS Securities LLC, one of the 21 primary dealers that underwrite Treasury auctions. The first decline in corporate tax revenue since 2003 increased the shortfall by 12 percent to $162.8 billion for the year ended in September, from $144.8 billion in the 12 months through April. With the Federal Reserve cutting interest rates to keep the economy from falling into recession and inflation slowing, an increase in net sales would mar an otherwise bullish outlook for U.S. government debt, which has returned 4.3 percent this year, Merrill Lynch & Co. index data show.
The O.C. Mortgage Bust After more than two decades in the mortgage business, Tony Ventimiglio got his big break in 2001 when he accepted a managerial job with a lender here in the heart of Orange County for $225,000 a year -- more than double what he had made in each of the previous four years. Ventimiglio nearly doubled his salary again two years later, this time at the now-defunct Homefield Financial, where he supervised 100 workers, including salespeople who routinely made $25,000 a month in commission. "When I started working there in 2003, I was embarrassed because I was driving a Cadillac and the young office clerks were all driving Mercedes and BMWs," said Ventimiglio, 49. "There were a lot of people who knew nothing about mortgages. They were simply in the right place at the right time."
U.S. Producer Price Index Rises, Spurred by Oil Costs Prices paid to U.S. producers rose in September as oil costs climbed, while core inflation was less than forecast. The 1.1 percent increase in total producer prices followed a 1.4 percent decline in August, the Labor Department said today in Washington. The core measure, which excludes fuel and food costs, rose 0.1 percent after a 0.2 percent gain in August. Federal Reserve officials have said they continue to monitor inflation "carefully" after they cut interest rates for the first time in four years last month. They said in their Sept. 18 statement that the latest figures had "improved modestly.'' "The stronger-than-expected PPI report should add some upside risks to next week's headline CPI number,'' said Zach Pandl, economist at Lehman Brothers Holdings Inc. The Labor Department next week reports on the consumer price index.
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