Gold Soars to One-Month High as Bernanke and Buffett Square Off on the Economy Gold surged nearly 4% yesterday (Wednesday), as the U.S. Federal Reserve appears hesitant to raise lending rates despite signs of severely escalating inflation. The price of gold jumped $30.30 to trade at $915 an ounce as of 11:45 a.m. EDT, its highest level since May. "The Fed said that inflation is a major concern, but they’re not going to do anything about it, which made gold go ballistic,” Leonard Kaplan, the president of Prospector Asset Management, told Bloomberg News. "The dollar is going to get slammed again."
Oil jumps to new above $142 as equities wilt Oil leapt to a new record high above $142 a barrel on Friday, extending gains after surging nearly 4 percent in the previous session, as tumbling global stock markets helped to trigger a wider commodities rally. U.S. light crude for August delivery was $1.70 up at $141.34 a barrel by 8:12 a.m. EDT, off a record high of $142.26. London Brent crude was $1.39 up at $141.22, off a record high of $142.13. World stocks fell to a three-month low as a fast deteriorating global inflation picture intensified concerns over the outlook for corporate profits, hastening the rush of investors' funds into commodities. Oil and Gold Soar Anew as Stocks Drop $$ In a sign that any pause is little more than a chance to catch its breath, commodities markets surged, with crude-oil futures reaching yet another record and gold making its largest one-day move in 23 years. "The consensus is that this market is not able to be pushed down," says Raymond Carbone, a floor trader with Paramount Options Inc. at the New York Mercantile Exchange. Soaring prices for raw materials and crops have confounded Washington, prompting lawmakers to summon regulators, oil traders and economists to testify in recent weeks about whether, beyond the challenge of meeting relentless world-wide demand, speculative trading is causing a price bubble. So far, attempts to prick the bubble, if it exists, have failed, and a wide gap exists between those who claim the hundreds of billions of dollars in relatively new commodities investments in recent years is bound to propel prices and those who say financial players merely help a market function better by increasing buyers and sellers.
Fed aided Wall Street to avert "contagion" Fed: Emergency help for Wall Street was necessary to avert "contagion" of financial system The Federal Reserve was scrambling to prevent a "contagion" from infecting the nation's financial system when it took unprecedented actions to back a Bear Stearns rescue package and provide emergency loans to big Wall Street firms. The Federal Reserve released documents Friday providing insights into its private deliberations in March that led to those controversial decisions. The Fed's actions came when credit and financial problems were intensifying, threatening to paralyze the entire financial system and plunge the economy into a recession.
Buffett vs. Bernanke: The inflation showdown The billionaire investor says inflation is 'exploding,' but the Fed believes commodity price shocks should subside. Even Warren Buffett is wrong some of the time. Federal Reserve chairman Ben Bernanke is hoping this is one of them. Buffett, the billionaire investor behind Berkshire Hathaway, fingered "exploding" inflation Wednesday as the biggest risk to the economy. "I think inflation is really picking up," Buffett said on CNBC. "It's huge right now, whether it's steel or oil," he continued. "We see it everywhere." Indeed, the prices of gasoline and milk have shot past $4 a gallon, and Dow Chemical has announced twice in the past month that it's raising prices to offset soaring commodity costs.
Japan inflation at 10-year high Soaring oil and commodities drive up Japan's core inflation, sap household spending Soaring oil and commodity prices hit Japan's economy with a one-two punch in May, thrusting up inflation, driving consumers to tighten their pocketbooks and threatening to derail the country's modestly growing economy. Japan's core inflation excluding volatile fresh food prices rose 1.5 percent in May from a year earlier, the quickest pace since a consumption tax hike in March 1998, the government said Friday. Household spending in May, meanwhile, sank 3.2 percent from the previous year, according to the Ministry of Internal Affairs and Communications. That was worse than a market forecast for a 2 percent decline and marked the deepest slump since September 2006.
The Bank of America Housing Bailout Bill The new housing bailout bill would let mortgage lenders off the hook for sour mortgages, as it would let the Federal Housing Administration assume the risk for these bad debts, shifting the burden to taxpayers and bond investors, though the program could help bond investors who bought securities backed by bad mortgages if it stops borrowers from going into foreclosure, putting those bonds into default. The legislation would help borrowers unload tens of billions of dollars worth of bad mortgages, getting their debt forgiven and letting them use federal loan guarantees to get cheaper mortgages via refinancings at lower rates. However, two “discussion documents” about a potential housing bailout bill, both of which are stamped “confidential and proprietary” that Bank of America authored and circulated among Congress, shows that the legislation now making its way through the corridors of Washington, DC is almost word for word what Bank of America wanted. The first Bank of America document is dated February 11, and is entitled "Federal Homeownership Preservation Corp." The second is dated March 11, 2008, and is entitled "FHA Housing Stabilization and Homeownership Retention Act of 2008."
Consumers extremely gloomy, UMich survey says. U.S. consumers grew more pessimistic in June, according to a survey released Friday by the University of Michigan and Reuters. The consumer sentiment index fell to 56.4 in June from 59.6 in May and 56.6 in mid-June. It's the lowest since 1980 and the third-lowest reading in the 56-year history of the survey. More consumers said their own finances had worsened than ever before. Nine of 10 said the economy was in recession, citing high energy prices, lost jobs, slow growth and the credit crunch. Two-thirds expect the slump to last several years. Consumers' expectations for inflation over the next year climbed to the highest level in more than 20 years. Fed May Give Private Equity - More Leeway to Help Banks $$ The Federal Reserve may soon make it easier for private-equity firms and others to invest in the nation's ailing banks, according to people familiar with the matter. With bank stocks crumbling and the second quarter drawing to a close Monday, the changes could offer a lifeline to cash-strapped lenders desperate to secure capital. "This would be a bit of a sea change for the Fed," said Gregory Lyons, head of the financial-services practice at law firm Goodwin Procter LLP. "A number of banks would love to access the private-equity pool. It's a clean slug of money."
Disappearing now: $6 trillion in housing wealth A Washington think tank is warning that housing prices are falling at an accelerating level, destroying wealth at a pace that will cost the average homeowner $85,000 in lost wealth this year alone. The projections by the Center for Economic and Policy Research are based on the numbers in Tuesday's Case-Shiller home price index, which showed accelerating price declines in most big cities. GM drops to 53-year low, Goldman urges "sell" Shares of General Motors Corp hit their lowest level since 1955 and dragged down the auto sector on Thursday after Goldman Sachs cut the struggling U.S. industry's largest manufacturer to a "sell" rating and warned it would have to raise capital. The panicky slide in GM shares caps a period of growing concern about liquidity risks to U.S. automakers and suppliers from a domestic auto market reeling from record gas prices and the impact of a housing slump and tighter credit.
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