U.S. mint suspends gold coin sales; futures price is a fiction 12:25a ET Friday, August 15, 2008 The U.S. Mint has suspended sales of American eagle gold coins and is refusing orders from dealers, two coin and bullion dealers confirmed Thursday. The mint's suspension of gold coin sales follows its tight rationing of sales of silver eagle coins, begun in May, when sales to the public were terminated and sales to the mint's 13 authorized dealers were tightly limited. Word of the mint's suspension of gold coin sales came from the American Precious Metals Exchange in Edmond, Oklahoma, (http://apmexdealer.blogspot.com/2008/08/news-alert-us-mint-suspends-sales-of.html) and from Centennial Precious Metals in Denver, Colorado. The suspension is overwhelming evidence that the futures contract price of gold on the commodities exchanges is substantially below the physical market price and that, indeed, the commodities exchanges are being used as GATA long has maintained -- as part of a massive scheme of manipulation of the precious metals, currency, and bond markets.
Gold, Oil Slump, Leading Commodities Drop on Dollar, Growth Gold plunged below $800 an ounce, platinum posted the biggest drop in almost seven years and oil, corn and copper slumped as the dollar's rebound reduced the appeal of commodities after a six-year boom. Crude fell as much as 2 percent to $112.75 a barrel, and coffee and wheat declined as the dollar headed for its longest winning streak in more than two years and on concern a spreading economic slowdown will reduce demand for raw materials. Commodities, measured by the Standard & Poor's GSCI index, have tumbled 21 percent from their record July 3, descending into a bear market. Declining raw-materials prices may help ease global inflationary pressures. Consumer prices accelerated 5.6 percent in the U.S. during the year to July, the biggest jump in 17 years.
Dollar rally triggers rout in commodities A rebound in the dollar Friday pushed gold prices below $800 an ounce, while silver dropped as much as 12 percent and corn and copper slumped. Crude oil prices slid more than 1 percent as the dollar hit a six-month high versus the euro following a bigger-than-expected rise in U.S. inflation and as the outlook for economies in Europe and Asia deteriorated. "The bears are back in town," said an MF Global analyst, Edward Meir. "They are here in full force and doing lots of damage. It's going to be a pretty ugly Friday and Monday." "The root causes are many, but beyond the macro-economic triggers, the immediate reason for the slide is the dollar."
Wall Street's Jobless Try Cupcakes, Cheap Haircuts, Maybe Omaha Jessica Walter didn't go to Harvard University to study cupcakes, but they're what she does since losing her job as a vice president in credit strategy at Bear Stearns Cos. "I want to teach kids to cook," said Walter, 27, who founded Cupcake Kids! in New York to provide birthday parties and cooking classes for children. "The goal is to have this be my full-time job and make enough to live." Wall Street professionals are trying new careers, and fetching smaller salaries, amid the elimination of 76,670 investment jobs in the Americas following the global credit crunch that started a year ago, according to data compiled by Bloomberg.
'Banking sector may see tough days ahead' After taking a hit on their bottomlines in the first quarter of this fiscal, the Indian banks are likely to remain in tough terrains in the face of the tightening macro-economic environment, analysts say. Bottomlines of banks in the first quarter of financial year 2009 were hit by higher than expected mark-to-market (MTM) losses and lower treasury incomes, as per an earnings review "Most of the banks under our coverage witnessed margin pressures during the quarter, in line with the recent rate hikes announced by the RBI. Further, a weaker treasury performance on account of the higher bond yields, the downturn in the equity markets and the high base of the last year added to the woes of banks," the Sharekhan report said.
Soaring Consumer Prices and Mounting Foreclosures Threaten 2008 Economic Growth Consumer prices rose sharply in July even as home foreclosures spiked, making it increasingly likely the economy will stall in the year’s last half under the weight of soaring unemployment, declining home values and accelerating inflation. Banks foreclosed on 77,295 homes in July, 8% more than a month prior, and 183% more than a year ago, RealtyTrac reported. More than 680,000 homes have been repossessed since the beginning of August 2007. The Consumer Price Index (CPI) jumped 0.8% in July, the Commerce Department said yesterday (Thursday). On a year-over-year basis, the consumer prices climbed 5.6%, their biggest surge since 1991.
Dollar rally picks up steam he dollar extended its rally Friday, hitting a nearly 2-year high against the pound and gaining further against the euro, amid troubling signs about the European economy. The 15-nation euro slid to $1.4721 in New York from $1.4803 late Thursday. It has fallen more than 13 cents from its high of $1.6038 set on July 15. The pound hit its lowest level in nearly two years against the dollar. The British currency fell to $1.8589 from $1.8685 the previous session.
Oil falls below $114 on slowing economies Oil drops below $114 as slowing economies spark worry about global demand Signs of anemic growth for the world's largest economies and a strengthening dollar drove oil prices below $114 a barrel Friday. Light, sweet crude for September delivery fell $1.60 to $113.41 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe.The contract fell 99 cents overnight to settle at $115.01 a barrel. "Worries about an economic slowdown in the U.S. and Europe, and even Japan, are weighing on the oil market," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. Gross domestic product in Germany, France and Italy all contracted in the second quarter. Japan said this week its economy also shrank in the April-June period. The U.S. Energy Information Administration reported earlier this week a bigger-than-expected drop in gasoline supplies, but also said U.S. demand for refined fuel products continues to fall.
Commodities Continue to Plunge, While Stocks and Dollar Move Up $$ Metals and oil futures prices tumbled and the dollar continued to gain ground against other currencies Friday, helping push stock futures moderately higher. About half an hour before the bell, Dow Jones Industrial Average futures were roughly 32 points higher. S&P 500 and Nasdaq 100 futures posted single-point gains. Changes in futures do not always accurately predict early market moves after the opening bell. Stocks gained some traction from a report showing an improvement in factory activity in the state of New York. But most of the action was concentrated in the commodities pits, where the bottom is dropping out of several markets.
Russia's Conflict Worries Wall Street When Prime Minister Vladmir V. Putin of Russia wiped $6 billion in shareholder value from a Russian steel company last month with a few choice words, even risk-taking investors in Russia took notice. Now, as a military conflict between Russia and Georgia ends its first week, a number of big Wall Street banks are beginning to reassess the stability of their businesses in the oil-rich nation. And while they are not planning to reverse their investments soon, they are increasingly nervous that Russia’s high-risk, high-reward environment is becoming too much about the risk.
Banks promoted American debt culture "Live Richly." That catchy slogan, dreamed up by the Fallon Worldwide advertising agency, was pitched in 1999 to executives at Citicorp who were looking for a way to lure Americans to financial products like home equity loans. But some in the room did not like it. They worried the phrase would encourage people to live exorbitantly, says Stephen A. Cone, a top Citi marketer at the time. Still, "Live Richly" won out. The advertising campaign, which cost some $1 billion from 2001 to 2006, urged people to lighten up about money and helped persuade hundreds of thousands of Citi customers to take out home equity loans — that is, to borrow against their homes. As one of the ads proclaimed: "There’s got to be at least $25,000 hidden in your house. We can help you find it."
J.C. Penney's 2Q profits fall 36 percent J.C. Penney Co. reported a 36 percent decline in second-quarter profit Friday and issued a profit outlook for the current quarter that falls short of Wall Street estimates amid a tough economy. The Plano, Texas-based department store chain said net income for the three-month period ended Aug. 2 was $117 million, or 52 cents per share, compared with $182 million, or 81 cents per share, in the year-ago period.
Retail Sales Down as Unemployment Rises and Home Values Decline Retail sales fell 0.1% in July, as home values declined, unemployment rose, and consumers cut back on big-ticket spending. The decline was the first drop in five months and followed a 0.3% up-tick in June, the Commerce Department reported yesterday (Wednesday). Sales at dealerships and parts stores were at the forefront of losses dropping 2.4%. Excluding automobiles, retail sales rose 0.4%. Automobile sales have been steadily worn down over the past year by the steep escalation in gas prices. Americans drove 12.2 billion fewer miles, or 4.7% less, than they did in June 2007, the Department of Transportation reported yesterday. U.S. driving levels have dropped in every month since November of last year.
Inflation Climbs to 17-Year High Americans paid more last month not only for gas and food but also for a variety of goods and services, including clothes, shoes, hotels and air travel, as inflation unexpectedly jumped to a 17-year high. The consumer price index climbed 0.8 percent in July, the Labor Department said yesterday, twice as much as Wall Street anticipated. It was the third straight month of high inflation, and the 5.6 percent year-over-year change was the highest since January 1991, when the economy was in recession.
Economists Bet on Aid for Fannie, Freddie $$ Chances are better than even that U.S. government money will be used to prop up Fannie Mae and Freddie Mac, according to economists in the latest Wall Street Journal forecasting survey, in which a sizable minority said the institutions should be nationalized. When Treasury Secretary Henry Paulson went to Congress last month to defend his plan to extend credit to Fannie and Freddie or to purchase stock in the government-sponsored enterprises, if necessary, he made it clear that the proposal is a "backup facility [that] hopefully would never be used." However, sharp losses the two companies reported this month and continued concerns about the U.S. credit market have increased the chance that government funds would be needed.
Sir Alan's Follies The Maestro just can't get the hang of this retirement thing. You'd think at 82, with a celebrated career behind him and a bank account stuffed with speaking fees and book advances, Alan Greenspan might be spending lazy summer days fly-fishing in Scotland, perfecting his watercolor technique on Cape Ann or wagering on the ponies from the Saratoga clubhouse. But here he is, writing op-ed pieces for the Financial Times, giving interviews to the Wall Street Journal and CNBC and adding a new chapter to his recent best-seller in what looks like a desperate attempt to buff up his legacy in the face of rather compelling evidence that . . . well, that he screwed up big time. It's been nearly a decade since Greenspan's stock hit its all-time high with the now-famous Time magazine cover during the Asian financial crisis -- the one that featured Sir Alan, Bob Rubin and Larry Summers as "The Committee to Save the World." Since the committee disbanded, however, its members haven't fared so well. Summers managed to get himself hired and fired as Harvard's president, Rubin helped to steer Citigroup into the ditch, and Greenspan laid the foundation for the worst financial crisis since the Great Depression.
Detroit can't do business as usual "This is Detroit," City Council President Pro Tem Monica Conyers observed Thursday, dismissing concerns that yelling and name-calling by the city's lawmakers might be a tad problematic. "This is just how we are. We don't mean anything by it. You say what you say and move on." Guess the same standard applies for embattled Mayor Kwame Kilpatrick, beset with 10 felony counts and facing a preliminary hearing on assault charges today in a Detroit courtroom: Do what you do and then move on, hoping that a grand deal or a legal technicality will a) keep you in office or b) keep you in the style to which you've become accustomed. Or not. This may be Detroit, but that excuse doesn't go as far as it used to. Judging by the amassing evidence, the Detroit way is no longer acceptable, even to its alleged friends in the Democratic Party who'd sooner make excuses for the circus than pass judgment. Not anymore, not when the transgressions morph from rumors to the Kryptonite of felony indictments.
Inflation Versus Deflation: The Debate Continues Two very good posts I suggest you read immediately: one by Michael Shedlock, "Implications of the Slowing Global Economy" which at its close makes the case for deflation, and a rebuttal from Steve Waldman, "Why Inflation". Both are thoughtful, and as much as Waldman has the stronger argument, I suspect he will not be proven correct, at least near term. Central bankers know in overlevered economies to break glass and print money. Bernanke has written at length as to how damaging even modest deflation is to borrowers and how it impedes investment and growth. He has famously observed that a determined central bank can always reflate, and hews to the conventional wisdom that Japan is in the mess it's in due to not cutting rates fast enough when the bubble economy started imploding. Mortgage Insurers' Losses Mount Problems Feed Fears That Squeeze on Loans Could Worsen Large mortgage insurers have reported $2.6 billion in losses so far this year, sparking concerns that rising foreclosure rates could force the industry into a money crunch and ultimately make the home-buying process even more difficult. These insurers make up a critical part of the mortgage industry, taking on the risk when borrowers make small down payments. They are facing record delinquency rates that have sent them scrambling to stem losses and to improve their capital reserves. Those losses have also dinged their relationships with mortgage-financing giants Fannie Mae and Freddie Mac, which the insurers depend on for business
Mortgage Rates Steady on Fed Target Mortgage rates have held mostly steady for the second week in a row, as the market continued to digest mixed economic news and became comfortable with the Fed's rate target, which isn't likely to move any time soon. Government-backed mortgage buyer Freddie Mac said Thursday that long-term rates were mostly unchanged, with adjustable rates falling slightly. Freddie's chief economist, Frank Nothaft, attributed the stability to "offsetting economic data" that showed strong growth in consumer credit, but weak retail sales, indicating that Americans may be simply holding back on purchases, even if they are able to spend more. Housing Recovery Act Depends on Banks to Refinance Mortgages First-time homebuyers, veterans, senior citizens and delinquent mortgage holders may benefit from the newly enacted housing bill. How well it will work may depend on regulators and your bank. The Housing and Economic Recovery Act, intended to stem home foreclosures and spark sales, offers first-time buyers a tax credit of up to $7,500. It also extends protection to veterans facing foreclosure. As many as 400,000 borrowers on the brink of losing their homes may be eligible for a more affordable loan backed by the Federal Housing Administration.
Housing Rebound in Cleveland Means Bad News for U.S. The good news in the worst housing slump since the Great Depression is that the market in Cleveland is recovering. That's also the bad news. The Cleveland area led the nation for home price gains in April and May with an 18 percent jump in the lowest price tier of the S&P/Case-Shiller home price index after values fell to levels last seen in 2000. The median home price was $117,500 in the second quarter, 15 percent higher than the prior three months, the National Association of Realtors said in a report today. A housing revival in this city of 438,000 on the shore of Lake Erie may portend deeper drops in U.S. markets. Prices for entry level homes in Cleveland had to tumble 37 percent from a September 2005 peak to an almost 11-year low in March before enticing first- time buyers. That may be a sign that U.S. markets with the biggest price increases during the 2000 to 2005 boom have much further to fall before stabilizing, said David Blitzer, chairman of Standard & Poor's Index Committee.
Home prices fall in majority of cities nationwide Median home prices fell in more than three-quarters of U.S. cities in the second quarter, the latest sign of the breadth of the housing market decline, according to new data Thursday. Nevertheless, home sales rose in areas where the market is flooded with foreclosures, indicating that borrowers are taking advantage of steep discounts. Nevada and California, battered by a housing market bust, were the only states to show sales gains in the second quarter compared with a year earlier, according to a report by the National Association of Realtors. Home heating crisis looms Home heating bills are expected to soar this winter and Americans, already struggling with high gas and food prices, are bracing for more financial hardship. On average, consumers are expected to pay $1,182 to heat their homes this year, up 20% from last year, according to recent estimates from the Energy Information Administration (EIA). the outlook for the Northeast, where 8 million households depend on heating oil, is even more worrisome. Homeowners in the region are expected to spend an average of $2,725 on heating oil this winter.
Don't Let Foreclosure Destroy Your Mind The foreclosure filings piling up across the country are taking a toll not just on banks and Americans' personal finances, but on their mental state as well. Nearly 1.7 million homes have been foreclosed upon so far this year, and the pace has accelerated. RealtyTrac reported on Thursday that there were 55% more foreclosure notices issued in July than a year earlier. The related stress can lead to an increase in unhealthy behavior, like not eating or sleeping properly, self-medicating with alcohol or drugs, and damaging personal relationships or employment. Some have even taken their own lives.
Weak Exports and Domestic Spending Declines Push Eurozone to the Recessionary Brink The Eurozone economy recorded its first decline in more than a decade as slowdowns in the European Union’s largest economies dragged on gross domestic product (GDP). The Eurozone economy, which covers the 15 nations that share the euro currency, contracted 0.2% in the second quarter, as a 0.5% decline in Germany and a 0.3% decline in France offset gains in the smaller economies of Austria, Portugal and Spain, Eurostat, the European Union’s official statistics office, announced yesterday (Thursday). Russia and China Both Hate Democracy, but Their Economies Are Different Our guest Philip Pan, a foreign correspondent for The Washington Post, is jumping from one frying pan into another: As Beijing bureau chief from 2000-2007, Pan witnessed China's "economic miracle" firsthand. Now, with his upcoming new assignment for the Post in Moscow, he'll be immersed in a culture far less inclined to foreign investment. Pan, author of the new book Out of Mao’s Shadow, says China and Russia are more different than they are alike, despite the fact that both still cling to authoritarian rule that's likely to inhibit sustained economic growth over time. Nevertheless, in parts one and two of our discussion, Pan argues that free-market capitalism in these superpowers isn't about to wither away in the absence of democracy. Russia Condemns Missile-Shield Deal Between U.S. and Poland Russia condemned an agreement between the U.S. and Poland under which American missile interceptors are to be stationed on Polish territory. "We can only regret that at this very difficult time, the U.S. side is further aggravating relations between the U.S. and Russia," Anatoly Nogovitsyn, deputy chief of Russia's General Staff, said at news conference in Moscow today. Talks on locating part of the planned missile-defense shield in Poland made headway after Russia's attacks on Georgia highlighted the vulnerability of former Soviet republics and satellite states in eastern Europe. Russia has in the past threatened to point ballistic missiles at missile shield sites the U.S. plans to build in Poland and the Czech Republic.
Russia Angry Over Poland Missile Deal The United States and Poland reached a long-stalled deal on Thursday to place an American missile defense base on Polish territory, in the strongest reaction so far to Russia’s military operation in Georgia. Russia reacted angrily, saying that the move would worsen relations with the United States that have already been strained severely in the week since Russian troops entered separatist enclaves in Georgia, a close American ally. At a news conference on Friday, a senior Russian defense official, Colonel General Anatoly Nogovitsyn, suggested that Poland was making itself a target by agreeing to serve as host for the anti-missile system. Such an action “cannot go unpunished,” he said.
Bush, Decrying 'Bullying,' Calls for Russia to Leave Georgia Condemning as unacceptable what he called Russia's "bullying and intimidation," President Bush on Friday said Russia must withdraw its troops from all of Georgian territory and said the United States would stand with Georgia in the conflict. "Georgia’s sovereignty and territorial integrity must be respected," he said. Tensions have risen sharply in the last 24 hours, as the Russian president and foreign minister made it clear they would support separatist efforts by two breakaway Georgian territories and as the specter of a resurgent Russia helped persuade Poland to agree to a long-stalled deal on an American missile defense system.
After Georgia What a more aggressive Russia means for world energy markets. Russia's conflict with Georgia has sparked worries over the small country's ability to provide a secure energy transit route for the West. Georgia contends that Russia targeted the 3-year-old Baku-Tbilisi-Ceyhan pipeline, and a Wall Street Journal reporter saw large bomb craters in a plain near the pipeline. (Russia has denied targeting it.) The B.T.C. pipeline, operated by BP, was the first to bring Caspian oil to market while bypassing Russia. It carries 850,000 barrels of oil a day, or about 1 percent of the world's crude oil supply, from Azerbaijan through Georgia and Turkey. Portfolio.com asked Kent Moors of Duquesne University, who is also an energy and risk-management consultant specializing in the Caspian region, about the prospects of a more aggressive Russia on global energy markets.
Russian Relations In Doubt, Gates Says U.S. Assessing Need For Aid in Georgia Russian behavior in Georgia has "called into question the entire premise" of relations between Washington and Moscow, Defense Secretary Robert M. Gates said yesterday, even as the Bush administration appeared willing to let Russia take its time removing its forces from disputed areas inside the former Soviet republic. Gates reported a sharp drop in Russian military activities and said troops seemed to be positioning themselves to depart Georgia proper, toward the separatist, pro-Russian enclaves of South Ossetia and Abkhazia. He said a U.S. military humanitarian-assessment team that arrived Wednesday will take 48 hours to determine how best to distribute aid.
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