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Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.

News Provided by the Free-Market News Network

Fri 11.30.2007

Gold & Silver Prepare To Back Up The Truck!
The pull-back we are seeing in gold and silver is nothing more than some high-volume backing and filling, within the major uptrend. The annual Christmas rally which started in August has a lot of life in it yet. The sub-prime mortgage debacle is nowhere near solved, and we can count on the central banks to do what they do with every problem they run into: print more money. Nova-Gold just made headlines with news about a problem that most miners are all too aware off: It's costing more and more dollars to build a mine. The majority of exploration companies even if they find gold, never build a mine! It either costs too much, or it is located in an area that is too remote, or the area is no longer safe.

Bernanke: Upcoming data may tell the tale on rates
Federal Reserve Chairman Ben Bernanke said that economic data to be released over the next eight days may contain the answer to the key question: whether to hold rates steady or lower them for the third straight meeting. He neither ruled a rate cut in, nor ruled one out. "We will be receiving a good deal of relevant information in the coming days. In making its policy decision, the FOMC will have to judge whether the outlook for the economy or the balance of risks has shifted materially," he said. Many economists now argue that circumstances have changed, as credit markets have frozen over the past few weeks in an eerie replay of the turmoil in August.

U.S. incomes fall, spending flat in October
Growth in U.S. consumer spending ground to a halt in October, while inflation eroded households' modest gains in income, the Commerce Department reported Friday. Nominal incomes rose just 0.2% last month despite strong job growth. But after accounting for a 0.3% rise in prices, October's real after-tax incomes fell 0.1%. Meanwhile, consumer spending increased 0.2% in nominal terms and was flat after adjusting for inflation. Spending was the weakest since March. Both incomes and spending were slightly weaker than expected by Wall Street. The weak report will put further pressure on the Federal Reserve to cut interest rates for a third time this year when policymakers sit down for their Dec. 11 meeting.

U.S. government, banks finalizing rate-freeze plan
The U.S. Federal government and leading financial institutions are finalizing details of a plan that would extend low introductory rates offered to some borrowers who took out adjustable rate mortgages, according to reports. The plan, being hammered out between the Treasury Department and a number of large mortgage lenders, would include subprime mortgage borrowers, the Wall Street Journal reported Friday, citing unnamed sources familiar with the negotiations. The report said the gist of the plan was to extend the low introductory rates on home loans made to borrowers who will have trouble meeting higher reset rates. Under one scenario, the extension of lower rates could run as long as seven years, the report said. About two million adjustable rate mortgages are scheduled to reset to higher levels over the next two years.

Losing faith in the greenback
THE long-run value of all paper currencies is zero. That is a fond saying of Bill Bonner, goldbug and publisher of the Daily Reckoning, a contrarian financial newsletter. So why should the dollar be any different? Mahmoud Ahmadinejad, Iran's president, seems to think the long run is now: two weeks ago he decried the dollar as a "worthless piece of paper". And Jim Rogers, a famously shrewd investor, asks why anyone would buy dollars. America's currency has been infected by the sense of crisis that bedevils its economy and financial markets. Speculative selling of the dollar is close to an all-time high, reckons Stephen Jen at Morgan Stanley.

Off-balance-sheet debt
Conduits and special investment vehicles (SIVs) allow companies and banks to take on off-balance-sheet debt. These vehicles usually hold highly rated, short-term debt that offers a higher yielding alternative to ultra-safe Treasury debt. Banks use the low-cost proceeds to buy longer-term debt such as auto-loans, credit card loans, or mortgages to profit from their high cash flow. Banks that have stakes in the conduits have provided ''liquidity back-stops'', promises that the vehicles’ debts will be paid by the banks when they come due even if the vehicles are not able to pay them. Banks are reluctant to consolidate the distressed vehicles because it would have to put the liabilities on bank balance sheets, thus restricting lending.

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Thur 11.29.2007

Anticipated Fed interest rate cut could help gold price
If the Fed decides to lower interest rates again, as one of its top officials signaled Wednesday, the action could be part of a catalyst that helps gold prices maintain their strong position until yearend. National Bank Financial recently suggested that lower U.S. interest rates will "continue to weigh the greenback down and that in conjunction with the high oil price will continue to keep the gold price elevated."In addition, metals analyst Tanya Jakucsonek and associates Farooq Hamed and Joanne van Ballegooie assert that continued investment demand through gold ETFs and speculative positions will also drive demand for gold. With the gold price hovering near the $800/oz mark, NBF expects to see gold ETF holdings continue to grow as the fourth quarter closes out.

Richard Russell On Gold
This most interesting chart below is from BullandBearWise. The black line follows gold from 1975 through 1980 and a few years beyond. Note that gold accelerated upwards starting in late-1978, and by 1979 gold was rising almost vertically in a parabolic pattern. In other words, during 1979 gold was literally "blowing its top" in a vertical rise. The red line tracks gold during a comparable period during the present gold bull market. Note that unlike 1979, gold has been rising gradually and systematically. There are no signs yet of acceleration or a parabolic (vertical) rise. Ultimately, I believe there is a chance that gold will go into a parabolic rise, but that may take place a year or many years into the future.

Continuing jobless claims rise to two-year high
In a possible sign of a weakening labor market, the number of Americans receiving state jobless benefits rose to a nearly two-year high in the latest week, the government said Thursday. Continuing jobless claims rose by 112,000 in the week ending Nov. 17, to 2.66 million, the highest mark since Dec. 24, 2005, the Labor Department said. Initial jobless claims also shot up in the latest week, the data show. Those claims rose by 23,000 to 352,000 during the week ending Nov. 24, their highest level since Feb. 10. The four-week moving averages for both initial claims and continuing claims also edged up in the latest surveys. Initial claims represent job destruction, while the level of continuing claims show how hard or easy it is for displaced workers to find new jobs.

The slowdown has arrived, Beige Book finds
The economic slowdown has begun, according to the Federal Reserve's latest report on conditions across the country released Wednesday. The economy continued to grow, but at a reduced pace, according to the report, known informally as the Beige Book for the color of its cover. The report is a collection of anecdotal reports from the 12 Fed Bank districts. It is designed to give Fed officials a flavor of economic conditions on the ground as they prepare for their next interest-rate setting meeting on Dec. 11. Seven of the 12 districts reported a slower pace of growth, with the remainder describing conditions as moderate or mixed. Conditions in the real estate sector continued to deteriorate, with only a few signs of stabilization amid the gloom.

Lower rates could hurt dollar, fuel inflation
The Federal Reserve needs to be careful about lowering interest rates too much, Dallas Federal Reserve President Richard Fisher said Wednesday, according to media reports. Fisher, who is not a voting member of the Federal Open Market Committee this year but will be next year, told a community group in Amarillo, Texas, that a recession is unlikely and that inflationary pressures remain. Lower rates could further erode the value of the dollar, he said. Fisher's comments show resistance to a rate cut on Dec. 11. Earlier, Fed Vice Chairman Donald Kohn boosted the markets' hopes of a cut by saying the Fed must be "nimble" in a time of uncertainty.

USFED Behind the Curve
The US Federal Reserve is behind the curve. Great consequences have resulted and are likely to continue to result. Many words can be used to describe this group. What come to mind are inept, compromised, corrupted, distracted, ill-trained, but also clueless, deceptive, myopic, overly cautious, and off the market in their focus. When they remain transfixed on economic growth versus price inflation, they are stuck in the past, in a world that no longer exists. The corrupt spew of fraudulent mortgage bonds disseminated throughout the investment community has both crippled the banking system from profound distrust, and inhibited the USEconomy from credit supply fraught with obstacles.

As credit dries up in U.S., concerns mount about recession
Credit flowing to American companies is drying up at a pace not seen in decades, threatening the creation of new jobs and the expansion of businesses, while intensifying worries that the economy may be headed for recession.The combined value of two major sources of credit - outstanding commercial and industrial bank loans, and short-term loans known as commercial paper - peaked at about $3.3 trillion in August, according to data from the Federal Reserve. By mid-November, such credit was down to $3 trillion, a drop of nearly 9 percent. Not once in the years since the Fed began tracking such numbers in 1973 have these arteries of finance constricted so rapidly. Smaller declines preceded three recessions going back to 1975.

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Wed 11.28.2007

Wells sets aside $1.4 bln to cover loan losses
Wells Fargo & Co., the second-largest U.S. mortgage lender, said late Tuesday that it would set aside $1.4 billion during the fourth quarter to cover higher losses on home-equity loans caused by deterioration in the real-estate market. The special reserve covers an $11.9 billion portfolio of loans that the bank originated or acquired through indirect sources such as mortgage brokers, it said. That portfolio will be sold off under the guidance of a dedicated management team, Wells added. "What is particularly disappointing about this incident is that observers of this company never expected Wells to be making these types of loans in the first place," Punk Ziegel analyst Dick Bove said Wednesday.

Rate policy must be nimble, Fed's Kohn says
Federal Reserve monetary policy must be nimble, pragmatic and flexible in light of uncertainties over how renewed turmoil in financial markets will affect lending to consumers and businesses, according to Fed Vice-Chairman Donald Kohn. "Uncertainties about the economic outlook are unusually high right now. In my view, these uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago," Kohn said in a Wednesday speech to the Council on Foreign Relations. Some Fed watchers believe that "nimble" policy would allow the U.S. central bank to cut rates when it next meets Dec. 11, despite the fact that Fed policymakers moved to a "neutral" stance on rates after their last meeting at the end of October.

Weakness in high-tech sinks durable orders in Oct.
With demand for high-technology goods weakening, orders for U.S.-made durable goods fell for the third straight month in October, falling 0.4%, the Commerce Department reported Wednesday. The report was in line with the 0.5% drop expected by economists surveyed by MarketWatch. Durable-goods orders fell a revised 1.4% in September. The details of the report were worse than the headline number suggested, as orders for volatile defense capital goods rose 16.1%, led by demand for military ships. Military ships and planes are extremely expensive and orders tend to swing up and down month by month. Excluding defense goods, orders dropped 0.9%.

Selling the US by the dollar
Precisely as I have been predicting since mid-August, foreign state-owned investment pools, sovereign wealth funds (SWVs), have now commenced the process of riding to the rescue of the poor, weakened, self-mutilated US financial system. I hate to be smug and tell you "I told you so." Ah, come on, who am I trying to kid? I absolutely love to be able to say that, just as much as the next boorish preening pundit. It was announced prior to the opening of trading on Tuesday that the Abu Dhabi Investment Authority, the world's largest SWF, was paying US$7.5 billion to buy a 4.9% stake in Citigroup, the largest financial institution in the United States. Citigroup, facing what the markets fear may amount to a $30 billion or more hit on its capital base due to its problems with subprime mortgages

The Economics of Ron Paul
Congressman Ron Paul has been working for decades to bring economics to the forefront of political life. In doing so, he has raised topics that nearly everyone else in public life wants buried. But isn't economics a dull topic, interesting only to Wall Street traders and government bureaucrats? Isn't it just about math and graphs Not in Ron's view. He has an intensity of passion for the discipline of economics that follows up on what Ludwig von Mises believed. Economics is the pith of material life. It is the core body of knowledge that seeks an explanation for all material phenomena as it is affected by human choice. Economics is as unavoidable in politics as gravity is in the natural world. It is a ubiquitous reality whether we speak about it openly or not.

Recession in the air as US house prices tumble
US house prices have suffered their worst plunge for two decades as defaults on sub-prime mortgages have shattered homebuyers' confidence and battered lenders have withdrawn cheap loan deals.According to the key Standard & Poor's housing index, released yesterday, third-quarter US prices were down 4.5% on 2006 and were 1.7% lower than the second quarter of this year - the sharpest drop in the study's 21-year history. The figures, released on the same day as research revealing a collapse in consumer confidence, showed that a once patchy economic downturn has become a nationwide phenomenon. The investment bank Goldman Sachs warned yesterday that the chances of a recession had risen to between 40% and 45%.

Housing crunch's hardest-hit cities
Because of foreclosures, metro areas across the United States will feel the squeeze of lost jobs, taxes and spending power in 2008, a new study reports.Rising foreclosures will lead to billions of dollars in lost economic activity next year in the nation's major metropolitan areas, according to a report compiled for the U.S. Conference of Mayors. The lost spending power, declines in tax collections and loss of jobs will have an impact of more than $10 billion in New York City, the report says. The report was released today ahead of a meeting of mayors from across the country in Detroit, where they hope to create policy recommendations to help address the nation's housing crisis.

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Tues 11.27.2007

Goldman ups U.S. '08 recession probability to 43% from 30%
Goldman Sachs economists on Tuesday said they now expect the U.S. Federal Open Market Committee to cut interest rates to 3% by mid-2008, down from its earlier forecast of 4%. "The main reason is that the worsening housing downturn has pushed the risk of a U.S. recession in 2008 to 40%-45%, from around 30% previously," Goldman said.

Home prices falling everywhere: S&P
U.S. home prices were falling in every region of the country in September, according to a closely watched index of home prices released Tuesday. Home prices fell in September in all 20 major cities covered by the Case-Shiller price index, even in cities that had been holding up, Standard & Poor's reported. For the national Case-Shiller home price index, prices fell 1.7% in the third quarter compared with the second quarter, and were down a record 4.5% in the past year. It was the largest quarter-to-quarter price decline in the 20 years covered by the index. In the 20-city index, prices fell a record 4.9% year-over-year. Prices were down 5.5% year-over-year in the original 10-city index, the largest drop in the 10-city index since 1991.

Citigroup gets $7.5 billion infusion from Abu Dhabi
Citigroup said it has received a $7.5 billion injection from the Abu Dhabi Investment Authority, a much-needed shot in the arm as the banking giant weighs massive job cuts and slashing the value of debt securities on its balance sheet. "This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business," said Win Bischoff, acting CEO. Citigroup in a statement issued late Monday, said the "long-term" investor will receive no more than 4.9% of its capital and won't get a seat on the board. This holding would exceed the 3.6% controlled by Prince Alwaleed bin Talal bin Abdul Aziz al Saud of Saudi Arabia.

The cost of Christmas: $19,507
The price tag rises for gold rings and geese, and minimum-wage milkmaids get a pay increase, as an annual 'Twelve Days' index rises 3.1% over 2006 prices. The cost of Christmas climbed 3.1% this year, spurred in part by the soaring price of gold, which has been trading north of $840 an ounce recently.The price of five 14-karat gold rings now totals $395, a 21.5% increase over 2006's $325 (although it's still nowhere close to 1989 prices, when the rings hit an all-time high of $750). The cost of maids a-milking also rose this year, as unskilled laborers got a 13.6% increase in the federally mandated minimum wage. The cost of an hour of work from eight milkmaids -- who hadn't gotten a raise since 1997 -- rose to $46.80.

China's economic plan: Blame U.S.
Beijing knows it needs to rein in runaway growth for the good of the nation's long-term health. And pinning economic problems on foreigners might actually make it politically palatable. Is China planning to use a slowdown in the U.S. economy as an excuse to slow its own economy in 2008? Sure looks like it: Nov. 15 gave investors the first clue of how China would justify the kind of economic pain it needs to inflict on its people in order to stop runaway inflation and financial speculation. The solution? Blame a U.S. economic slowdown for a plunge in Chinese export growth that will put an end to China's double-digit economic growth. Certainly, putting the blame overseas is a whole lot easier politically than taking the heat for deciding the economy has to slow in the short term for China's long-term health.

HSBC's bailout puts pressure on Citi, 'superfund'
HSBC Holdings' $35 billion bailout of its structured investment vehicles puts pressure on a group of rival banks that are working on a broader solution to one of the major sources of this year's global credit crisis. The SIV market, a roughly $300 billion business, is at the center of the current credit crisis. The vehicles borrow money short term and use the cash to buy longer-term debt. The longer-term assets usually pay higher interest rates than the short-term debt, and money is made on the difference. As defaults surged on subprime mortgages this year, confidence in these products wilted, and SIVs struggled to refinance short-term debt.

Foreclosures to Hit Metro Areas
Rising foreclosures will lead to billions of dollars in lost economic activity next year in the nation's major metropolitan areas, but homeowners and financial institutions have the ability to work together to contain the effects, according to a report compiled for the U.S. Conference of Mayors. The report was released Tuesday ahead of a meeting of mayors from across the country in Detroit, where they hope to create policy recommendations to help address the nation's housing crisis. Prepared by forecasting and consulting firm Global Insight, the report said weak residential investment, lower spending and income in the construction industry and curtailed consumer spending because of falling home values will combine to hold back the nation's economic activity.

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Mon 11.26.2007

Gold futures rise on dollar weakness
Gold futures traded higher early Monday, as weakness in the U.S. dollar underpinned demand for the precious metal. Gold for December delivery rose $5.80 at $830.50 an ounce on the New York Mercantile Exchange. On Friday, gold futures finished with strong gains, rallying $26 to $824.70 an ounce. Gold is trading higher Monday "as dollar weakness and high oil prices again prove supporting for the precious metals," said James Moore, an analyst at TheBullionDesk.com, in a research note. "Given the oil/dollar scenario and the likelihood for further credit related fall-out, the outlook for gold still remains bullish, with $850 still the clear target before year-end

Why Gold market is getting lots of global attention
The US Dollar crossed the $1.48 line to the Euro this week, heading for $1.50 after the US markets closed for Thanksgiving. The greenback then bounced after the London market opened on Friday, but should we do expect a bounce to last long? Not as the secondary phase of the global monetary crisis comes into play. What crisis, you may well ask? It is the sub-prime crisis...credit crunch...and Dollar crisis all rolled into one. And it is spreading into the global economy, as well as inside the United States. The onset of this crisis brought smoothing words to calm global markets, but to no avail. The second phase is when there is public recognition that there is indeed a crisis, followed by everyone involved coming together to give the impression that the crisis is being resolved.

Recession Fears Weigh Heavily On the Markets
Battered stock and bond markets are sending an increasingly ominous signal that a U.S. recession could be near. The markets, however, haven't swayed Federal Reserve officials and most private economists from their view that the nation's economy can escape a downturn and get back on a steadier course. The disparity between those two views of the economy -- one growing bleaker, the other remaining sanguine -- stood out starkly last week. Though it rose during Friday's shortened trading day, the Dow Jones Industrial Average -- at 12980.88 -- is 8.4% below its all-time high, set in October. Safe-haven Treasurys, meanwhile, have rallied as investors have lost confidence in a quick resolution of the U.S. housing slump and mortgage crisis, which are behind many of today's economic worries in both the U.S. and Europe.

HSBC to provide $35 billion in funding to SIVs
HSBC Holdings on Monday said it would move two of its structured investment vehicles onto its balance sheet and provide up to $35 billion in funding, saying it doesn't expect a near-term resolution of the funding problems faced by the vehicles that it and other banks hold. In a structured investment vehicle, short-term commercial paper is issued, with the bank then re-investing the proceeds in higher-yielding, and longer-maturity debt. Because of the spillover from the U.S. subprime mortgage lending crisis, investors have been reluctant to buy the commercial paper that these vehicles depend on. But the banking giant insists earnings won't be materially impacted, because existing investors will continue to bear all economic risk from actual losses.

Bank of America Takes Lead in Backing `SuperSIV' Fund
Bank of America Corp., the nation's second-largest bank, will lead efforts by Citigroup Inc. and JPMorgan Chase & Co. to convince smaller competitors to help finance an $80 billion bailout of short-term debt markets. The campaign starts this week with New York-based Citigroup and JPMorgan in supporting roles to Charlotte, North Carolina- based Bank of America, said two people with knowledge of the matter, who didn't want to comment publicly before the plan is formally announced. The ``SuperSIV'' fund, backed by U.S. Treasury Secretary Henry Paulson, would buy assets from so-called structured investment vehicles, whose $300 billion of holdings include corporate and mortgage debt in danger of default.

Banks as vulture investors
Vulture restructuring is a purging cure for a malignant debt cancer. The reckoning of systemic debt presents regulators with a choice of facing the cancer frontally and honestly by excising the invasive malignancy immediately or let it metastasize through the entire financial system over the painful course of several quarters or even years and decades by feeding it with more dilapidating debt. But the strategy of being your own vulture started with Goldman Sachs, the star Wall Street firm known for its prowess in alternative asset management, producing spectacular profits by manipulating debt coming and going amid unfathomable market anomalies and contradictions during years of liquidity boom.

Housing woes have domino effect
If you haven't yet felt the impact of the nation's credit crisis, just wait. Chances are, you won't have to wait long. So far, the turmoil may feel a bit remote for average people: Failed mortgage lenders. Gargantuan write-downs by banks. Foreclosures for people who couldn't really afford the mortgages they got. What about the rest of us? Are we in danger? No one knows for sure, but quite likely, yes.As the credit crisis seeps into farther-flung corners of the economy, more of us will find it harder — and costlier — to borrow money. The value of the funds in our retirement accounts could shrink. People with subpar credit will likely find it more difficult to qualify for auto and home-equity loans. Even consumers who make the cut may need higher credit scores and more documentation.

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Wed 11.21.2007

Gold Climbs in London as Crude Oil at Record Encourages Hedging
Gold rose in London for a second day as crude oil traded above $99 a barrel for the first time ever, spurring buying of the metal as a hedge against inflation. The dollar touched a record low against the euro for a second day, also prompting some investors to turn to gold as an alternative to the U.S. currency. Crude rose to within 71 cents of $100 a barrel on speculation the Federal Reserve will cut interest rates to try to prevent a housing slump spreading. ``Given the movements of both oil and the euro and the renewed concerns about the financial markets it does look as if gold is on course to re-challenge $850,'' James Moore, an analyst at TheBullionDesk.com, said in an e-mailed note.

Why gold's going straight to $1,000
Gold is about to soar to new highs, and here are four compelling reasons why. Take a look at four gold-mining stocks that could make your portfolio gleam. Gold beat a hasty retreat after setting records by trading north of $840 an ounce earlier this month, but don't be fooled. It's only taking a breather before it climbs past $1,000. So this is a good time to get exposure to the metal. I'd buy shares of four well-positioned gold producers favored by two of the top-performing money managers in the sector, which I'll detail in a moment. Here are four reasons why these two gold bugs and other experts think the metal could see fresh highs soon.

Dollar Sets a New Record Low
The dollar sank to a new low against the euro Wednesday on pessimism about the American economy and speculation Washington will soon cut interest rates again. The euro spiked to $1.4855 before retreating slightly to $1.4787 in morning European trading. It broke the $1.48 mark for the first time on Tuesday, settling at $1.4815 late in New York. The dollar also hit a two-year low against the Japanese yen, falling to purchase as little as 108.81 yen before rising slightly to 109.19 yen -- compared with 109.69 yen in New York on Tuesday. It was last lower when it purchased 108.76 yen on Sept. 5, 2005. The euro, the pound and other currencies have been climbing steadily against the dollar since August amid fears for the health of the U.S. economy, stoked by the subprime credit crisis.

Eyes back on Fed for emergency rate cut
United States stock markets were lifted on Tuesday on speculation that Federal Reserve chairman Ben Bernanke will call an emergency meeting of the Fed to further cut interest rates, contrary to warnings by policy makers in the past two weeks. The speculation was fueled by the Fed's first set of quarterly economic forecasts, a product of the new regime recently instituted by Bernanke. The degree of "uncertainty'' about the growth outlook is greater than that for inflation, Fed officials said on Tuesday. While they expressed confidence price increases will ease, they viewed markets as "still fragile and were concerned that an adverse shock'' would worsen economic risks.

Feds' budget tricks hide trillions in debt
Every year, tens or even hundreds of billions of dollars are quietly added to the national debt -- on top of the deficits that we hear about. What's going on here? When it comes to financial magic, the government of the United States takes the prize. Sleights of hand and clever distractions by purveyors of line-of-credit mortgages, living-benefit variable annuities and equity-indexed life insurance are clumsy parlor tricks compared with the Big Magic of American politicians.Consider the proud trumpeting that came from Washington at the close of fiscal 2007. The deficit for the unified budget was, politicians crowed, down to a mere $162.8 billion. In fact, our government is overspending at a far greater rate. The total federal debt actually increased by $497.1 billion over the same period.

Countrywide says it has ample liquidity and capital
Countrywide Financial Corp. said Tuesday that it believes it has ample capital and liquidity to stay in business, and it expects to benefit from ongoing consolidation in the industry. "Countrywide Bank, the Company's primary operating entity, has sufficient liquidity available to meet its projected operating and growth needs and has accumulated significant contingent liquidity in response to evolving market conditions," the firm said in a statement. "Countrywide Home Loans is expected to service debt maturities beyond 2008 without additional debt issuance," the company said. Earlier Tuesday a Countrywide representative told The Wall Street Journal that speculation the company may file for bankruptcy is "absolutely false."

Persian Gulf states ponder their dollar pegs
The Federal Reserve's policy meeting next month isn't the only meeting that could determine the dollar's near-term direction -- investors will be closely watching the Gulf Cooperation Council's meeting for clues about the future of its member countries' currency pegs to the greenback. The GCC is an economic group of six Gulf Arab oil producers, and has a stated goal of creating a common currency by 2010. The group will meet in Doha on Dec. 3 and 4, and investors will keenly watch for signs that any members will change their currencies' respective relationships with the dollar. Five GCC countries -- Saudi Arabia, the United Arab Emirates, Qatar, Oman and Bahrain -- peg their currencies to the dollar, setting an official reference rate at which central banks buy and sell. In May, Kuwait abandoned its peg and now links to a currency basket which includes the dollar, euro, yen and sterling.

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Tues 11.20.2007

Dollar Falls to Record Low Against Euro, Swiss Franc on Rates
The dollar fell to a record low against the euro and Swiss franc on concern credit-market losses will slow economic growth, prompting the Federal Reserve to lower interest rates again this year. Currencies in New Zealand, the U.K., Australia and Norway gained on speculation a group of six Arab nations will change their fixed exchange rates from the U.S. currency. Freddie Mac, the second-biggest buyer of U.S. mortgages, posted its largest- ever quarterly loss and said it may cut its dividend to weather ``significant deterioration'' in the housing market. ``There are lots of forces working against the dollar,'' said Robert Fullem, vice president of U.S. corporate currency sales at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``The market sentiment toward the dollar is very negative. You are going to see further declines in the dollar.''

Freddie's quarterly loss more than doubles
Freddie Mac's third-quarter loss more than doubled as mortgage prices collapsed and credit tightened, sparking additions to loss provisions and leading to consideration of cutting the company's dividend in half, financial results showed Tuesday. "Weakening house prices and deteriorating credit have hurt Freddie Mac's results, as well as those of other participants in the mortgage market," said Buddy Piszel, chief financial officer, in a press release. "You can see the impact of these trends in our credit results and throughout our financial statements." It will take time for the mortgage market to turn around and improve, according to Freddie.

Citigroup, Bank Credit Swaps Rise on Subprime Concern
The risk that banks and brokerages from Citigroup Inc. to Bear Stearns Cos. will default on their debt is accelerating as analysts increase their estimates of losses from subprime mortgages, credit-default swaps show. Contracts on New York-based Citigroup, the largest U.S. bank by assets, rose 16 basis points to 95 basis points over the past two days, according to broker Phoenix Partners Group, setting a record today for the seventh time this month. Contracts on New York-based Bear Stearns have climbed 24 basis points the past two days to 174 basis points, about a six-year high. A rise signals investors are less confident in a company's creditworthiness.

The dollar's decline: from symbol of hegemony to shunned currency
The decline of the dollar, symbol of US global hegemony for the best part of a century, may have become so entrenched that some experts now fear it is irreversible. After months of huge and sustained turmoil on the money markets, lack of confidence in the world's totemic currency has become so widespread that an increasing number of international traders are transferring their wealth to stronger currencies such as the euro, which recently hit its highest level against the dollar."An American businessman over here who is given the choice would take anything but the dollar," David Buik of Cantor Index said yesterday. "I would want to be paid in yen, and if not yen then the euro or sterling."

Ron Paul and the Money Question
GOP presidential candidate Ron Paul of Texas is calling for the return of sound money, i.e., an eventual restoration of the gold standard. With the U.S. dollar’s purchasing power falling on foreign exchange markets, Dr. Paul has diagnosed the greenback’s condition correctly; the Federal Reserve is debasing the nation’s monetary unit. All the other candidates have not addressed the money issue because they either do not understand how the Federal Reserve’s policies are causing the dollar to depreciate, or they have been told by the financial elites not to talk about the FED. It is astonishing that as the dollar has lost more than 50% of its value against the Euro in the past four years, the silence is deafening in the presidential debates, except for the insightful statements by Dr. Paul about our nation’s monetary system. Dr. Paul has pointed out time and time again how the FED manipulates interest rates by injecting new money into the economy fueling the unsustainable boom that inevitably ends in a bust.

OPEC ministers eye dollar weakness
OPEC's finance ministers will discuss the effect of the weak U.S. dollar on oil revenues before the next meeting of the Organization of Petroleum Exporting Countries' energy ministers in December. The falling U.S. dollar came up as a topic at OPEC's heads of state summit meeting in Riyadh, Saudi Arabia, this weekend, when a proposal by Iran and Venezuela to price oil against a basket of currencies, rather than the dollar, failed, according to media reports. Still, the issue of the weak dollar and its effect on oil producers' revenues remains of key interest, because oil is priced in dollars. The finance ministers will discuss the U.S. dollar and other issues at their next meeting, to take place before OPEC's energy ministers meet in Abu Dhabi, United Arab Emirates, in December.

Mortgage meltdown seen spreading to credit cards
As shares of Citigroup Inc. tumbled on Monday, analysts pointed to signs that the mortgage meltdown could be spreading to the banking giant and other major credit card players. "We're starting to see signs within the industry that credit quality is dropping," said Justin McHenry, research director at market tracker IndexCreditCards.com. "That's causing major credit card companies to at least consider taking out larger reserves to protect themselves against more people defaulting in the future." But he also forecast an erosion in Citigroup's credit card business. Tanona says he foresees "deteriorating consumer credit trends and higher corresponding provisions and charge-offs" for the company in the future.

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Mon 11.19.2007

‘Gold may easily rise to $1,000’
Gold may ‘’easily’’ rise to a record $1,000 an ounce next year as the dollar weakens and Asian central banks diversify their reserves, said Marc Faber, who advised investors to acquire the metal at the start of a six-year rally. A ‘’continued’’ weakening of the US currency may help gold to climb above its all-time high of $850 traded in January 1980, said Faber, managing director of Marc Faber Ltd. and publisher of the Gloom, Boom & Doom Report. ‘’That’s baked in the cake in my opinion,’’ he said in an interview. ‘’Gold is still relatively cheap. It hasn’t risen as much as nickel, or oil.’’ The metal has climbed 18% in more than two months as the dollar slid to a record low against the euro amid concerns of the economic impact of US subprime-mortgage defaults.

Arabs' Dollar Losses Increase Pressure to Sever Pegs
When central bankers in the Middle East say they have no plans to end their fixed exchange rates to the dollar, the currency market hears the opposite. Merrill Lynch & Co. predicts either the United Arab Emirates or Qatar will cut their dollar peg within half a year. Standard Chartered Plc says the six Gulf Cooperation Council nations need to raise the value of their currencies 20 percent. The difference between the price of the Saudi Arabian riyal and the cost of buying it in a year using forward contracts has widened 10-fold since October as traders bet the kingdom will sever its 21-year-old link to the dollar, according to data compiled by Bloomberg.

Opec unites behind higher prices
Opec leaders meeting at the weekend summit in Saudi Arabia have differed sharply over the group strategy and purpose, but have united in defence of high oil prices.Hugo Chávez, the left-wing president of Venezuela, opened the summit welcoming oil prices at close to $100 a barrel, describing them as "fair". He called for the group to be "an Opec for geo-politics, an Opec for revolution", adding "Opec was born as a geo-political actor, not as an economic or technocratic bloc." He also reiterated his warning that oil could hit $200 a barrel if the US attacked Iran. King Abdullah of Saudi Arabia, the summit’s host, gave a very different view of Opec’s objectives, saying it was intended to protect both its members’ interests and the world economy, and praising the group for acting in a "moderate and wise manner".

Bond Market to Fed: Recession Threat Means More Cuts
The headline in the financial futures market these days says Federal Reserve Chairman Ben S. Bernanke is withholding some vital information: The economy is so bad the central bank will have to lower interest rates at least three-quarters of a percentage point to avoid a recession. Bernanke's two rate cuts since September failed to reassure the bond market, where volatility has risen four of the past five weeks, according to Merrill Lynch & Co.'s MOVE Index. Yields on Treasury bills, the haven for bond investors in times of turmoil, are near their lows of August, when losses on securities backed by subprime mortgages froze credit markets. While the record low dollar and the fastest inflation in 14 months give policy makers reasons to keep the target rate for overnight loans between banks at 4.5 percent, traders expect 3.75 percent early in 2008.

Fed Transparency and Other Illusions
On November 14, Ben Bernanke delivered a speech to the Cato Institute’s 25th annual monetary conference. Cato is a well-known Washington Beltway free market think tank. I find it fascinating that Cato invited the Chairman of the Board of Governors of the organization that is by far the most powerful government-created monopoly on earth – the antithesis of the free market – to deliver the keynote address. I suppose it is good to hear what your mortal enemy has to say, but to provide a forum for him to say it is, in my view, bizarre. It is as if a 1962 anti-Communist rally invited Nikita Khrushchev to deliver the keynote address. It gets headlines, but at a high cost. It sends a message: "We have at long last entered the mainstream. We are now part of the loyal opposition."

Wall Street Plans $38 Billion of Bonuses as Shareholders Lose
Shareholders in the securities industry are having their worst year since 2002, losing $74 billion of their equity. That won't prevent Wall Street from paying record bonuses, totaling almost $38 billion. That money, split among about 186,000 workers at Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns Cos., equates to an average of $201,500 per person, according to data compiled by Bloomberg. The five biggest U.S. securities firms paid $36 billion to employees last year. The bigger bonus pool derives from a record $9 billion of fees for arranging acquisitions and $5 billion for underwriting initial public offerings and sales of junk bonds, the most lucrative securities, Bloomberg data show.

$100 fill-up coming to a pump near you
Motorists in many parts of the country are paying the highest post-Labor Day prices ever this November. With speculators running up the price of a barrel of oil to the $100 range, there can be little doubt that the average price of a gallon of regular gasoline is headed for $3.50, and maybe even $4, before there's any sort of fallback.While such price increases will pressure new-vehicle buyers to look for more-fuel-efficient vehicles, there's a real sticker shock awaiting those who need or want a big sport-utility vehicle or pickup. Those vehicles are among the thirstiest gas guzzlers, delivering an average of 14 to 16 miles per gallon in combined city-highway driving if a driver is judicious with the gas pedal.

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Fri 11.16.2007

A perfect storm for gold as mines left empty
The era of 'peak gold' has arrived. Try as they might, miners cannot find enough ore at viable costs to replace their fast-depleting reserves, even if they dig miles into the centre of the earth. "There's not much gold out there," said Gregory Wilkins, chief executive of top producer Barrick Gold. "Global mine supply is going to decrease at a much faster rate than people generally believe. Many of the new mines that people are anticipating will never come into production," he told the RBC Capital Markets gold conference in London."There is a great disparity between the money spent on exploration and success. It's hard to say where the price of gold is going because we're in uncharted waters. I would say it could easily move to $900, $1,000, or beyond. It could happen very quickly," he said.

Gold Gains in London on Speculation Jewelry Demand to Increase
Gold gained in London on speculation that jewelers, the biggest users, will use the metal's decline from a 27-year high to replenish inventories. Silver also rose. Gold traded on Nov. 7 at its highest since 1980 as the dollar slid to a record low against the euro, making bullion more attractive as an alternative investment. The metal has slumped 7 percent since then as some investors deemed the rally overdone and the dollar recovered some its earlier losses. Bullion demand typically gains in the fourth quarter as the wedding and festival seasons get under way in India, the world's biggest gold buyer. ``Strong fabrication demand'' may push precious metals to new highs in 2008, Deutsche Bank AG analysts including Michael Lewis said in a report today.

China's scorching factory investment a 'worry'
China's investment in factories, land and other assets in urban areas surged 27% in the first 10 months of the year, adding to concerns of a looming bubble in industrial spending and raising pressure on the government to rein in investment. Investment in fixed urban assets totaled 8.9 trillion yuan ($1.2 trillion) in the January to October period, the statistics bureau reported on Friday. The data cap a busy week of October statistics that showed surging retail spending, robust industrial production and inflation nudging 11-year highs. Economists said Friday's scorching factory-investment figures raised concerns the economy could be heading for a deflationary bust if external demand fails to soak up the capacity due to come online over the next few years.

A profile of buyers and sellers
The second half of 2006 and the first half of this year weren't so bad for first-time buyers, but tighter lending standards are currently reducing the number of those able to finance their first home, the National Association of Realtors' chief economist said this week. Between July 2006 and June 2007, 39% of all home purchases were made by first-time buyers, according to the group's annual Profile of Home Buyers and Sellers. That's up from 36% in last year's report. But consider this: 45% of first-time buyers bought with no money down, and the median down payment of a first-time buyer was 2%. Lending standards tightened considerably with the mortgage crisis in the summer, making no-down-payment financing much more difficult to come by.

Greenspan `Mess' Risks U.S. Recession, Stiglitz Says
Joseph Stiglitz, a Nobel-prize winning economist, said the U.S. economy risks tumbling into recession because of the subprime crisis and a ``mess'' left by former Federal Reserve Chairman Alan Greenspan. ``I'm very pessimistic,'' Stiglitz said in an interview in London today. ``Alan Greenspan really made a mess of all this. He pushed out too much liquidity at the wrong time. He supported the tax cut in 2001, which is the beginning of these problems. He encouraged people to take out variable-rate mortgages.'' Stiglitz said there is a 50 percent chance of a recession in the U.S. and that growth will certainly slow to less than half its 3 percent potential. A worldwide jump in credit costs following the collapse of the subprime mortgage market is choking off finance to American consumers.

Asian markets drop after Wells Fargo warning
Asian markets followed Wall Street down today, after Wells Fargo, America's fifth largest mortgage lender, said that the US housing market was in its worst shape since the Great Depression. John Stumpf, Wells Fargo's chief executive, said: "We have not seen a nationwide decline in housing like this since the Great Depression." The news drove Asian banking stocks further down, while Japanese exporters were hit by the strength of the yen and fears for the US economy. The decline was accelerated when Toshiro Muto, deputy governor of the Bank of Japan, the country's central bank, warned that growth could be threatened if problems in the US housing market spread further.

Goldman Sees Subprime Cutting $2 Trillion in Lending
The slump in global credit markets is likely to force banks, brokerages and hedge funds to cut lending by $2 trillion, triggering the risk of a ``substantial recession'' in the U.S., according to Goldman Sachs Group Inc. Losses related to record U.S. home foreclosures using a ``back-of-the-envelope'' calculation may be as high as $400 billion for financial companies, Jan Hatzius, chief economist at Goldman in New York wrote in a report dated yesterday. The effects may be amplified tenfold as companies that borrowed to finance their investments scale back lending, the report said. ``The likely mortgage credit losses pose a significantly bigger macroeconomic risk than generally recognized,'' Hatzius wrote. ``It is easy to see how such a shock could produce a substantial recession'' or ``a long period of very sluggish growth,'' he wrote.

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Thur 11.15.2007

Barrick Says Gold Supply to Fall Faster Than Expected
Barrick Gold Corp., the world's largest gold producer, said supply will fall faster than expected as it gets harder to extract the precious metal from deeper and older mines. ``Global mine supply is going to fall at a much faster rate than people generally believe,'' Chief Executive Officer Greg Wilkins said today at a conference in London organized by RBC Capital Markets. ``Many of the mines that people are anticipating bringing into production will either not come into production or will be on a much longer timeframe.'' Gold mining companies are trying to boost output after bullion climbed to within 0.5 percent of a record last week. Strikes, stoppages and the difficulties of mining farther underground are hampering operations in South Africa, the world's largest producer. Demand is rising as consumption increases in China, India and the Middle East, RBC Capital Markets said yesterday.

Gold, Ron Paul and Prosperity
Candidate Ron Paul understands inflation as the creation of money out of thin air. While this view depicts a disturbing state of affairs and has a distinguished history, it is not in the least popular. For one thing, it tends to incriminate the money creators. If inflation is defined as price increases, by coincidence the guilt falls on those who raise prices. So it is no surprise that inflation is widely defined as an increase in the level of prices. How is this "price level" measured? The Department of Labor’s Bureau of Labor Statistics ( BLS ) produces a statistic called the Consumer Price Index ( CPI ) that’s supposed to give us a handle on prices and therefore inflation.

Central Banks and Gold: Manipulation or Money Management?
Gold has had a great run lately. As I have indicated previously, if you look at the long term monthly chart of gold, $700 provides major resistance, as gold has never stayed above $700 for over a month in its entire history - neither in 1980 nor in 2006, until now. This is the main reason why it had taken over a year to overcome it, and the reason of the current explosive upward movement. Now we have expanded the chart upward beyond the $700 line into the new, uncharted territory, gold will possibly never go below $700 again. Fundamentally, from a pure demand and supply point of view, as described nicely by Sun Valley Gold hedge fund, gold has "the elasticity of a positively sloped investment demand function that overwhelms the inelasticity of supply." That is exactly what has happened during last 6 years of gold's bull market.

U.A.E. May Peg to Currency Basket, Al-Suwaidi Says
The United Arab Emirates may end the dirham's 30-year-old peg to the dollar and link it instead to a basket of currencies, central bank Governor Sultan Bin Nasser al- Suwaidi said. The falling dollar will trigger a ``review'' of the U.A.E.'s dollar peg, al-Suwaidi said in an interview in Gwacheon, South Korea today, signaling for the first time that the U.A.E. may drop the dirham's link to the U.S. currency in the near future. A switch by the U.A.E. would follow Kuwait, which ended the fixed exchange rate for the dinar in May. The dollar has fallen 10 percent against euro this year, making imports for the Gulf Arab states more expensive and helping push inflation in the U.A.E. to the second-highest in the region.

Jim Rogers Urges People to Sell U.S. Dollar Holdings
Investor Jim Rogers urged people to get out of the dollar and says he expects to be rid of all his U.S. currency assets by summer next year. ``If you have dollars, I urge you to get out,'' Rogers said in an interview from Singapore. He is chairman of New York-based Rogers Holdings, formerly known as Beeland Interests Inc. ``That's not a currency to own.'' The dollar fell 9.5 percent this year against a basket of six major currencies as a housing slump slowed the economy and losses stemming from subprime mortgage defaults spread among U.S. banks. Rogers, who said last month he was shifting out of all his dollar assets, plans to buy commodities, Japan's yen, the Chinese yuan and the Swiss franc.

Is China Really Dumping the Dollar? US TIC Flows Will Tell Us on Friday
After Thursday’s US CPI report, Friday’s event risk may not seem like such a big deal. However, quite the opposite is true as it will be very important to see if net long-term TIC flows can turn positive after plummeting $69.3 billion in August. Indeed, Japan, China and Taiwan sold US Treasuries at the fastest pace in at least five years in August as losses linked to US subprime mortgages sparked a global credit crunch and serious bout of risk aversion.The widespread flight away from Treasuries only exacerbated the biggest sell-off in US financial assets since Russia defaulted in 1998, sparking a massive slump in the greenback to record lows against the Euro.

HSBC writes off $38m a day in US loans and says it could get worse
HSBC is writing off loans to struggling Americans at the rate of $38 million (£18.5 million) a day, it revealed yesterday, shareholders were told that the pace of souring loans could worsen if house prices in the United States fall further. Defaults and late payments on US sub-prime mortgages and credit cards increased in the third quarter, leading the world’s second-biggest bank to take a provision of $3.4 billion against American consumer debt. It wrote down $925 million from unsuccessful trading in credit securities and on leveraged buyout loans that it has extended but been unable to syndicate because of the credit crunch.

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Wed 11.14.2007

Gold rises sharply, boosted by weaker dollar
Gold futures rallied on Wednesday, breaking a two-session losing streak, as dollar weakness and rising crude-oil prices bolstered demand for the precious metal. Gold for December delivery rose $15.20, or 2%, to stand at $814.20 an ounce on the New York Mercantile Exchange. "The bulls were back in charge in the gold markets overnight, as an easing in the U.S. dollar, a bounce in oil and a recovery in equities prompted fresh buying," said Jon Nadler, an analyst at Kitco Bullion Dealers, in a research note. "I would use this and future moves like this for accumulation of positions ahead of what I see as another upcoming wave of buying," Oxman said.

HSBC warns of fresh sub-prime defaults
HSBC, Europe's biggest bank, revealed this morning that it had suffered $3.4 billion (£1.6 billion) in bad debts linked to the sub-prime lending crisis in the third quarter. Charges related to bad debts rose by nearly 30 per cent in the third quarter and the bank warned that it may deteriorate further. But HSBC said its profit for the period was still ahead of expectations. HSBC said the US loan impairment charge was $1.4 billion more than the trend for the first half. That total included $700 million related to mortgages, with the remainder owing to branch unsecured loans and card portfolios. Stephen Green, the bank's chief executive, said nobody was sure how likely a deterioration was. He said: "I wouldn't want to put a percentage on it. It depends on the housing market and the overall US economy."

Goldman Sachs bets credit crisis will worsen
Goldman Sachs, the feted investment bank and the only major Wall Street firm to have avoided giant losses from the credit crisis, is betting that the chaos in the American mortgage market will continue to get worse. As some of the finance industry's most powerful executives gathered for an industry conference in Manhattan, Lloyd Blankfein, the chief executive of Goldman Sachs, said his firm was still holding to its lucrative bets that the value of mortgage-backed securities will fall. And at the same conference, an executive from its smaller rival Bank of America announced that it would probably be writing down the value of its mortgage portfolio by a further $3bn (£1.45bn) at the end of the year.

What the 'Subprime' Mess Is Really About
It’s about the international fiat monetary regime’s denouement, and of course the Ron Paul presidential campaign.Even the popular name of this "crisis" – implying that the whole problem is "subprime" borrowers with sketchy credit histories – is really just more disinformation. Shaky American borrowers defaulting on their home loans are indeed a great danger, but in the same way that a free press is a danger to despotic government. It is the danger of exposure. It is the end of plausible deniability. If the "markets" of the world perceive – finally – that the emperor has no clothes, the nearly century old game may be over. First, a little background. Forgive all the quotation marks, but it’s important to maintain a healthy skepticism when considering this subject.

Subprime Mortgages Lead to Subprime Currency
Mr Bernanke told Congress he would support raising the limit on the size of the individual loans eligible for securitisation by the government-sponsored mortgage finance entities from $417,000 to $1m (€680,000, £475,000) on a temporary basis. He suggested that Fannie and Freddie could pay insurance premiums on these loans to the federal government, which would "act as guarantor" by taking on some of the credit risk.Charles Schumer, the Democratic chairman of the Joint Economic Committee, enthusiastically welcomed the idea and said he would try to insert it into legislation already before Congress. It came as Mr Bernanke told Congress that estimates that set the total losses from subprime mortgages at about $150bn were probably "in the ballpark".

Beauty deals a beastly blow to the US dollar
The saga of the declining dollar has turned from a drama into a crisis. We’ve got used to having Chinese officials hinting darkly that they might diversify their foreign exchange reserves out of the US currency, as they did again last week. We can even take it when Bill Gross, the world’s most influential bond investor, tells the public, as he did, also last week, that their investment strategy should consist of not buying anything that has a dollar sign attached to it. But when Gisele Bündchen, the Brazilian supermodel, trashes your currency by insisting that she wants to be paid in euros, not dollars, it really hurts. Since the dollar began its long decline against the world’s currencies in early 2002, the mantra from financial pundits has been that as long as the decline was orderly, everything should be all right.

IS CHINA BLACKMAILING AMERICA?
China, which is feeling the sharp bite of product recalls from US vendors, is striking back at the merchant princes of America in the manner they warned the US State and Treasury Departments they might in October. They are once again threatening to dump the dollar. As they signaled their intent to follow through on what they call their "nuclear option" a week ago, the dollar plummeted like a stone swan with an anchor around its neck. And gold rose like an eagle soaring on an upward draft. America attempts to force its costly manufacturing standards on China that the People's Republic of China would be forced to exercise what they called their "nuclear option"—dumping its $1.33 trillion in foreign reserves and collapsing the dollar.

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Tues 11.13.2007

Gold futures edge higher after sharp decline
Gold futures edged higher on Tuesday, after falling sharply in the previous session, as renewed weakness in the dollar underpinned demand for the precious metal. Gold for December delivery gained $1.10 at $808.80 an ounce on the New York Mercantile Exchange. Prices for precious metals might be due for a rebound, but the consolidation process isn't over yet, said Peter Fertig, analyst at Dresdner Kleinwort, in a research note. "The sell-off is likely to be sharp but shallow," said Mark O'Byrne, director at Gold & Silver Investments Ltd., in a research note. "Fears that we may experience something akin to the sell-off in May 2006, which saw gold fall from $730 to $560, are likely to be unfounded,"

Gold's hot streak brings back bad '80s memories
BULL markets are supposed to make investors feel good. But the latest surge in the price of gold has an aura of dread about it. It is nearing a lofty $US850 ($949) an ounce, a height not seen for 28 years. That has triggered some primal fears on Wall Street. If investors are turning back to one of the most ancient forms of money, one implication is that they are losing faith in modern finance. Indeed, the higher gold goes, Bill Roberts, 55, of Westchester, California, said he could not help but see a deepening message of doom. The dollar is sinking, banks are reeling from mortgage defaults and the stockmarket is tumbling anew, with the Dow Jones index falling 552 points last week.

'Sub-prime black hole is getting scarier'
Blackstone's president warned that the sub-prime crisis on Wall Street was getting "deeper, darker and scarier" yesterday as the US private equity firm posted a loss for the third quarter, hit by a fall in real-estate revenues and charges related to its initial public offering. Shares in Blackstone fell 8.3 per cent as it revealed a net loss of $113m (£55m) for the three months to the end of September, under the impact of $803m of non-cash charges related to its IPO on the New York Stock Exchange in June. Blackstone's group president and chief operating officer, Hamilton James, told investors that sub-prime woes were getting worse. "The sub-prime black hole is appearing deeper, darker and scarier than they [investment banks] thought." While he estimated that banks were about halfway through offloading the leveraged debt backlog on their books, he added that only 15 per cent of bank losses were related to leveraged loans rather than the sub-prime market.

Where's it all going?
Pakistan in chaos, the US continuing to run massive current account deficits, the dollar suddenly rallying, the stock market shaky, US banks reeling in the face of huge subprime losses, the war in Iraq in its sixth year, presidential contenders battling each other, Fed Chief Bernanke pressed against the wall, Notre Dame's football team with one win and nine losses -- where's it all going? Is the US or even the world at the brink? I read about the individual problems and there are a slew of them, but taken all together they are too much for me. I can't grasp the full meaning of what is happening.

Saudi oil minister rejects Opec raise
Saudi Arabia on Monday made clear Opec would not announce a production increase at this weekend’s Riyadh summit. In an interview with the Financial Times, Ali Naimi, the Saudi oil minister, said "there will be absolutely no discussion" by heads of states or their oil ministers on short-term supply and demand at the organisation’s summit, which will concentrate on with longer-term strategies of producers. But with prices close to $100 a barrel, Mr Naimi left the door open to action when the oil cartel meets in Abu Dhabi next month, signalling the group was "watching" the market very carefully and Saudi Arabia would "look at all the information available".

Pump price to jump 20 cents next 2-3 weeks: government
U.S. consumers could pay record gasoline prices for the upcoming Thanksgiving holiday with pump costs expected to climb another 20 cents over the next two to three weeks, the government's top energy forecaster warned on Monday. Guy Caruso, who heads the U.S. Energy Information Administration, said not all of the recent jump in crude oil prices has been reflected in motor fuel costs which now top $3 a gallon in many parts of the country, about 80 cents more than a year ago. "We haven't seen the full pass-through (of high oil prices) yet," Caruso told reporters at a briefing on oil market conditions held at Energy Department headquarters. "I would say what's in the pipe right now (for gasoline) is about another 20 cents."

Iraq, Afghan War Costs Are $1.6 Trillion
The economic costs of the wars in Iraq and Afghanistan are estimated to total $1.6 trillion—roughly double the amount the White House has requested thus far, according to a new report by Congress' Joint Economic Committee. The report, obtained by The Associated Press and scheduled to be released Tuesday, attempted to put a price tag on the two conflicts, including "hidden" costs such as interest payments on the money borrowed to pay for the wars, lost investment, the expense of long- term health care for injured veterans and the cost of oil market disruptions. The $1.6 trillion figure, for the period from 2002 to 2008, translates into a cost of $20,900 for a family of four, the report said. The Bush administration has requested $804 billion for the Iraq and Afghanistan wars combined, the report stated.

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Mon 11.12.2007

Gold Declines as Investors Judge Rally Overdone; Silver Drops
Gold declined in London as investors judged a five-week rally that took the metal to within 0.5 percent of a record was overdone. Silver also dropped. ``Any bull market doesn't go in a straight line,'' Robert Rasbach, a director of Ambrian Asset Management, said in an interview in London. Ambrian manages the $37 million Golden Prospect Precious Metals fund. ``With bull markets, you progress and then come off, and then progress again.'' Should bullion breach the $850 record, the next ``target'' would be $1,000, Rasbach said. ``It's all coming together for gold,'' he said. ``The dollar is looking weak, jewelry demand is healthy and China is talking about diversifying its foreign reserves.''

Citi downgrades E-Trade to sell rating
E-Trade Financial Corp. shares faced more selling pressure Monday morning, reflecting a Citigroup warning that the online broker could face bankruptcy following its latest earnings warning. The shares fell in late trading Friday and weakened further before the bell, precipitated by the company backing off an earnings forecast made less than a month ago because the value of its asset-backed securities portfolio dropped further. "The continued negative news flow about charges resulting from its mortgage and CDO exposure, an SEC inquiry, and continued deterioration in its financial condition, all increase the likelihood of significant client attrition," Citi analysts said Sunday.

Countrywide warns on credit ratings
Embattled mortgage lender Countrywide Financial Corp. in a regulatory filing conceded that if its credit ratings fall below investment grade, its access to the public corporate-debt markets "could be severely limited." Additionally, ratings agencies cutting its debt to junk status would lead to higher rates when the company renegotiates its financing arrangements beyond current maturity dates. "Our ability to place custodial deposit accounts on deposit with our bank subsidiary could be affected if our credit ratings were reduced below investment grade," The three ratings agencies -- Moody's, Standard & Poor's and Fitch -- currently have investment-grade ratings on Countrywide, but they all have affixed the ratings with some form of negative outlook, Countrywide said.

Citigroup, Banks Agree on `Super-SIV,' Person Says
Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., the three largest U.S. banks, reached an agreement on the structure of an $80 billion fund to help revive the market for short-term debt, a person familiar with the talks said yesterday. Bankers working on the deal met at Bank of America's offices in New York on Nov. 9 and settled on a simpler plan than initially proposed last month, according to the person, who declined to be named because the agreement isn't public. Under the original initiative brokered by Treasury Secretary Henry Paulson, the fund would buy some of the $320 billion in assets held by so-called structured-investment vehicles, known as SIVs.

Subprime Losses May Reach $400 Billion, Analysts Say
Losses from the falling value of subprime mortgage assets may reach $300 billion to $400 billion worldwide, Deutsche Bank AG analysts said. Wall Street's largest banks and brokers will be forced to write down as much as $130 billion because of the slump in subprime-related debt, according to a report today by Mike Mayo, a New York-based analyst. The rest of the losses will come from smaller banks and investors in mortgage-related securities. Citigroup Inc., Merrill Lynch & Co. and Morgan Stanley led more than $40 billion of writedowns of assets as record U.S. foreclosures plundered asset prices. About $1.2 trillion of the $10 trillion of outstanding U.S. home loans are considered to be subprime, Mayo said in the note. ``We're not out of the woods yet,'' said Mondher Bettaieb- Loriot, who helps manage the equivalent of about $58 billion at Swisscanto Asset Management in Zurich.

Talk of Worst Recession Since the 1930s
After what Los Angeles money manager Arnold Silver called "a brutal three days," the question is: What now for the market?A Wall Street superstar this year who runs Balestra Capital Partners, Jim Melcher, says he's "worried about a recession. Not a normal one, but a very bad one. The worst since the 1930s. I expect we'll see clear signs of it in six months with a dramatic slowdown in the gross domestic product."Balestra Capital, a $350 million New York hedge fund, was up 3% for the past three market sessions, when the Dow Jones Industrials, spearheaded by widespread declines in financial stocks and fears of more billion-dollar-plus asset write-downs, tumbled more than 677 points, or about 4.5%. The Nasdaq fared worse, skidding about 7%, triggered by across-the-board declines in those fast-stepping technology stocks.

Could California be in recession?
California is on the edge of recession, economists say. Or perhaps the nation's most populous state is already in one. "California seems to be sliding into recession," wrote Jan Hatzius, chief economist for Goldman Sachs, in a research note earlier this week. Hatzius based his appraisal on the sharp increase in the unemployment rate in the state from 4.7% in November 2006 to 5.6% in September 2007. While a 5.6% jobless rate may seem low, the important thing is how much it's risen. Hatzius said any increase of more than 0.6 percentage points in California's unemployment rate has always been associated with a national recession. "Together with the regional recessions already under visible in Florida and Nevada, a California recession would mean that the housing bust has pushed an area responsible for 20% of U.S. gross domestic product into an outright downturn," Hatzius said in a research note.

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Fri 11.09.2007

Russell On Gold Bull
The great primary bull market in gold is finally beginning to heat up. In fact, gold is now straining against its boundaries of resistance. This morning gold was selling for as much as 843, or within easy "shooting distance" of its 1980 record high of 850. This may be the time to repeat the words of W.D. Gann. Mr. Gann is considered by many professionals to have been one of the greatest commodity and stock traders (and thinkers) of all time. Here are Gann's words (courtesy of my old New York friend, Ron Rosen). Russell Comment -- If gold can close above its 1980 peak price of 850 -- it will have overcome a resistance level that has held it back for 27 years! Thus, a decisive closing about 850 could bring about at least a doubling of the current dollar price for gold.

Investors Shred Bernanke's `Balanced' Outlook, Bet on Rate Cut
Federal Reserve Chairman Ben S. Bernanke failed to convince investors that there's no need for further interest-rate cuts soon. Bernanke told lawmakers in Washington yesterday that officials already expect the economy to ``slow noticeably'' this quarter, and warned of ``upside risks'' to inflation. Futures traders focused on his growth comments, increasing the odds of a quarter-point cut in the benchmark rate on Dec. 11 to about 90 percent, from 70 percent a day earlier. The speculation may complicate Fed decision making, raising the risk of a sell-off in stocks and bonds should officials keep the main rate at 4.5 percent. Bernanke and his colleagues may try to reinforce their message of a neutral stance on borrowing costs between now and their next meeting, economists said.

The Dollar Crisis
No matter how many warnings have been issued, an economic crisis always takes a country by surprise. The most urgent task is to somehow prevent policymakers from doing evil things to "correct" the crisis. Every form of intervention can only make matters worse. The best policy is to adopt a laissez-faire policy through regulatory cuts, sound money, and eliminating legal restrictions on trade. The liquidation must be allowed to happen on its own to provide a suitable foundation for a future recovery. How can we help this happen? One way is to make sure that the right books are front and center. We might start by reviewing the great event that still inspires today's most fallacious countercyclical policies: the Great Depression.

The American empire is falling with the dollar
The US dollar is still officially the world's reserve currency, but it cannot purchase the services of Brazilian super model Gisele Bundchen. Gisele required the $30 million she earned during the first half of this year to be paid in euros.Gisele is not alone in her forecast of the dollar's fate. The First Post (UK) reports that Jim Rogers, a former partner of billionaire George Soros, is selling his home and all possessions in order to convert all his wealth into Chinese yuan.Meanwhile, American economists continue to preach that offshoring is good for the US economy and that Bush's war spending is keeping the economy going. The practitioners of supply and demand have yet to figure out that the dollar's supply is sinking the dollar's price and along with it American power.

Oil's long tail
Let the consumer beware: Costs are going up on almost everything the average American family consumes. Blame it on crude oil. The rocketing price of crude oil is not only sharply hiking the costs of fueling the car and heating the home, but is bidding up prices on the raw materials that go into goods from produce to perfume. At the same time, the push to develop ethanol as an alternative fuel through corn and similar products is inflating the cost of feed for cows, pigs and other farm animals - and that also increases the prices consumers pay. "Oil affects everything from top to bottom," said Phil Flynn, energy analyst at Alaron Trading. "Most people wear crude oil every day."

U.S. Oct. import prices up 1.8% on higher oil prices
Prices that U.S. residents paid for imported goods rose 1.8% in October, the biggest increase since May 2006, the Labor Department reported Friday. Imported petroleum prices rose 6.9%, but prices of other goods rose a more moderate 0.5%. Excluding all fuels, import prices rose 0.3%. Meanwhile, export prices jumped 0.9% in October, including a 3.9% rise in agricultural prices. Excluding agriculture, export prices rose 0.5% in October. In the past year, import prices are up 9.6%, including a 41.4% increase in petroleum prices. Excluding petroleum, import prices are up 3.2%. Fed officials are watching import prices closely to see if the weaker dollar is fueling U.S. inflation.

Wachovia warns of more bad loans
Stocks plunge after the banking giant says that it lost another $1.1 billion in October. Barclays denies a rumor of a $10 billion write-down. Merck will pay nearly $5 billion to settle Vioxx suits. Wachovia sent more jitters through the markets this morning. The bank said that it suffered a $1.1 billion pre-tax loss in October because of the continued problems within the credit markets. The company reported in a filing with the Securities and Exchange Commission that it is setting aside between $500 million and $600 million to cover losses in the fourth quarter. "It's Wachovia's turn. This is something that is going to continue to happen with a lot of banking institutions," Matt Zeman, LaSalle Futures Group trader, said on CNBC this morning.

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Thurs 11.08.2007

Gold eyes all-time high on currency crisis
Gold has surged to $846 an ounce on fears of a dollar collapse and signs of spreading credit crisis in the United States, coming within a whisker of the all-time high seen at the end of the 1970s inflation era. Warnings by a top Chinese official that the Beijing intends to switch part of its $1,430bn reserves from dollars to "stronger currencies" appears to have lit the fuse under an explosive mix of record oil prices, rising global inflation, and mounting concerns that the world financial system is coming unglued. "We're seeing a loss of confidence in all paper currencies, but above all in the dollar," said Hans Redeker, currency chief at BNP Paribas. The apparent failure of the US Treasury's $75bn rescue plan for sub-prime mortgage securities and the risk of mass downgrades on US bond insurers has caused a rush for safe-haven investments

Gold Bull Market Just Beginning as Gold Price Surges Towards $2,000
Should you do like Jim Rogers and sell your house in order to buy yuan? Or sell all your dollar investments in order to buy the euro…or gold? Well, maybe…Our guess is that the dollar has further to go…down. And gold has further to go…up. "Unless there’s some new Paul Volcker waiting in the wings," said old friend Marty Weiss over dinner last night, "it’s hard to see what could save the dollar." "Is there some new Paul Volcker warming up somewhere?" we asked rhetorically. "No…" Volcker saved the US dollar in the early ’80s…by putting up interest rates and tightening credit. He barely got away with it then. Now, it would be impossible. Even with the Fed’s current ‘open bar’ policy, a lot of people are drying out, sobering up, and getting cranky.

Investors will drive silver prices higher
SILVER prices, which touched a 27-year high of $16.19/oz on Wednesday, will be driven higher by additional investment inflows into the metal, GFMS said in its interim Silver Market Review. Precious metals consultancy GFMS said silver will trade in a range of $13.20 to $16.50 over the next 12 months because of fresh investment inflows. The silver price has caught a ride on the coattails of gold in recent weeks. The gold price has shot up to 28-year highs and is hovering under the all-time high of $850/oz. The spot gold price hit a high of $845.50 on Wednesday. "It's a one-way street at the moment. Strong oil prices, a weaker dollar, subprime issues and a rush into safe-haven -- everything is supporting," Jeremy East, global head of metals trading at Standard Chartered Bank is quoted as saying by Reuters.

China's hint of diversifying reserves keeps dollar falling
The dollar continued its free fall Wednesday after Chinese officials signaled plans to diversify the nation's $1.43 trillion of foreign exchange reserves. "The dollar sell-off was sparked by concern that foreign central banks' diversification away from dollar assets may accelerate," said Paresh Upadhyaya, who helps manage currency assets at Putnam Investments in Boston. "The momentum to sell the dollar still persists, and I expect further dollar weakness before year's end." The dollar is "losing its status as the world currency," Xu Jian, a central bank vice director, told a conference in Beijing. "We will favor stronger currencies over weaker ones, and will readjust accordingly," Cheng Siwei, vice chairman of China's National People's Congress

Morgan Stanley reports new subprime-related hit
Investment bank Morgan Stanley reported late Wednesday that it was taking a new $3.7 billion hit from exposure to subprime-mortgage securities, the latest sign that the global credit crisis hasn't subsided. Morgan Stanley said that it had $12.3 billion of subprime-related exposure on its balance sheet at the end of August. That left the firm capable of losing $10.4 billion if all those securities defaulted, leaving nothing left. Its potential losses -- or its net exposure -- related to these securities declined at the end of October to $6 billion, Morgan added. In the two months since the end of August, the fair value of the investment bank's subprime-related exposures has dropped further, cutting revenue by $3.7 billion, Morgan Stanley announced after the markets closed.

AIG quarterly net falls 27% as subprime crisis bites
American International Group reported a 27% drop in third-quarter net income late Wednesday as the subprime mortgage crisis pushed the insurance giant's results below Wall Street expectations. The company's shares fell 2.8% to $56.28 during late-trading. That extended losses of 6.5% during regular action, before the insurer reported results. The stock is now trading at its lowest level since July 2006. AIG said net income came in at $3.09 billion, or $1.19 a share, vs. $4.22 billion, or $1.61 a share, a year earlier. Adjusted net income, which excludes net realized investment gains and losses and other items, was $3.49 billion, or $1.35 a share, the company reported.

Fed policymaker promises FOMC won't raise rates in December
It will take years for the subprime mortgage market to recover, but other financial markets are already showing signs of healing from the paralysis of August, said St. Louis Federal Reserve President William Poole on Wednesday. "Recent weeks show clear progress," he said. The Fed's rate cuts have helped the healing process by restoring investor confidence, but no one can be certain whether the Fed will need to cut rates again, he said. The strength of consumer spending will be a determining factor. Only one thing is certain: The Fed won't raise rates at its next meeting in December, he said, an unusually bold statement for a Fed policymaker to make. Poole is a voting member of the Federal Open Market Committee this year.

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Wed 11.07.2007

Crude oil, gold surge amid dollar 'reserve' worry
Crude oil topped $98 a barrel and gold futures rose as high as $848 an ounce Wednesday after comments from a senior Chinese official suggesting China should consider diversifying some of its foreign reserve holdings sent the dollar to fresh lows. Gold prices spiked to multi-decade highs on safe-haven buying amid concerns that higher oil prices and dollar weakness could lead to inflation. The front-month contract for bullion leapt $20.03 to $843.70 an ounce in recent London trading, adding to the $12.60 rise Tuesday that took bullion to its highest close since 1980. Oil for December delivery touched $98.46 a barrel in electronic trading, before easing to $98.19, up $1.49 from the New York close.

Dollar Slumps to Record on China's Plans to Diversify Reserves
The dollar fell the most since September against the currencies of its six biggest trading partners after Chinese officials signaled plans to diversify the nation's $1.43 trillion of foreign exchange reserves. The dollar fell against all 16 of the most-active currencies, declining to the weakest versus the Canadian dollar since the end of a fixed exchange rate in 1950, a 26-year low against the pound and a 23-year low versus the Australian dollar. The New York Board of Trade's dollar index dropped to 75.21 today, the lowest since the gauge started in March 1973. ``Further weakening of the dollar is very likely,'' said Teis Knuthsen, the Copenhagen-based head of foreign-exchange, fixed-income and derivative research at Danske Bank A/S, the Nordic region's second-biggest lender. China may ``diversify out of dollar holdings.''

Did China just fire warning shot at the Fed?
The full faith and credit of the United States are under a lot of stress these days, so much so that the public comments of an obscure Chinese official -- obscure to most Americans, at least -- are enough to spark big jumps in commodities, and equally big slides in stocks and the dollar to boot. Cheng Siwei, vice chairman of the standing committee of the National People's Congress, reportedly suggested Wednesday that China might need to diversify its $1 trillion-plus holdings of foreign reserves because of the precipitous slide in the value of the dollar. It's hard to know what Siwei, a UCLA-educated economist, hoped to accomplish by choosing this particular juncture to make his comments.

Gold out of the box as price rise accelerates
A whole batch of positive news for gold sent the yellow metal soaring again yesterday and overnight with $850 in sight possibly today and well over $900 by the year end unless something external happens to halt the rise. Key yet again in the rise of the metal has been the dollar decline - which correspondent Alf Field described as being in a death spiral in his recent article published on Mineweb last week. Field also made the point that the recent gold price runup, which started in mid August, has at last really made the market realise that the metal price is in a major bull phase which should last at least through the end of the year.Writing here a couple of days earlier, I noted - perhaps slightly tongue in cheek at the time - that if the current rate of gold price increase continues we could well see $950 gold by the year end

Dollar stumbles to new lows on call for China sales
The U.S. dollar stumbled to new lows on Wednesday after a top Chinese official called for the country to shift more of its huge foreign exchange stockpiles out of the beleaguered greenback. Cheng Siwei, vice chairman of the Standing Committee of the National People's Congress, was quoted by wire services as saying China should shift more of its $1.43 trillion of currency reserves into "stronger currencies," such as the euro, to offset "weak" currencies like the dollar. He also said a rapid appreciation of the yuan -- as Washington and increasingly Europe are requesting -- is not necessarily the right move, though Cheng insisted the country wasn't actively seeking a major trade surplus.

General Motors records $39 billion loss on tax hit
General Motors on Wednesday said its loss widened to a massive $39 billion during the third quarter, with Detroit's top automaker getting hammered by an accounting move on expectations of the loss of tax benefits. GM shares dropped more than 4% in pre-open trading to $34.55. In the last year the stock has traded in the range of $28.49 to $43.20. Most of the loss -- $38.6 billion, to be precise -- was explained by the largest U.S. automaker in a statement late Tuesday. It expects to lose deferred tax assets in the U.S., Canada and Germany. To qualify for deferred tax assets, a company must be reasonably confident it will have taxable income. GM said that confidence has been shaken by sluggish earnings growth in its core North American automotive market and setbacks at GMAC Financial Services, its lending business.

Iran: 3,000 centrifuges fully working
Iran has achieved a landmark with 3,000 centrifuges fully working in its controversial uranium enrichment program, President Mahmoud Ahmadinejad said Wednesday. Ahmadinejad has in the past claimed Iran succeede

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