Money, Banking
& Fed Reserve

Archives

October 2007
November 2007
December 2007
January 2008
February 2008
March 2008

National Debt Clock

Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.

News Provided by the Free-Market News Network

Fri 02.29.2008

Gold ends up, posts a weekly gain of more than $27
Gold futures finished with gains Friday, having hit a record high of $978.50 an ounce overnight, as the metal continues to draw support from weakness in the U.S. dollar and rising investment flows into commodities. Gold for April delivery ended up $7.50 at $975 an ounce on the New York Mercantile Exchange after earlier surging to a record of $978.50. Gold posted a weekly gain of $27.20 from last Friday's closing level of $947.80. The metal surged 5% in February and is up over 15% year-to-date. With the U.S. dollar tumbling and inflation surging, gold continues to break record highs and many analysts believe that it might surpass the psychologically key $1,000 level before the end of March.

Gold futures poised to soon top $1,000 an ounce
Analysts say it may be a matter of days before prices hit key psychological level With the U.S. dollar tumbling and inflation surging, gold continues to break record highs and might surpass the psychologically key $1,000 level before the end of March. Gold futures for April delivery ended with strong gains Thursday, surging to a record high of $975 an ounce in after-hours trading, only $25 away from the $1,000 mark. The contract finished regular trading at $967.50 an ounce. See Metals Stocks. Gold prices have surged some 16% in the past two months and 22% in the past three months.

Impact from credit crunch will be huge, study says
The economic impact of the mortgage crisis and credit crunch will be huge, and it has barely begun, a new study prepared by several prominent economists and released Friday has concluded. "Feedback from the financial market turmoil to the real economy could be substantial," it said. Unless they can quickly recapitalize, banks are likely to cut back their lending to consumers and businesses by more than $1 trillion, cutting economic growth by more than a percentage point over the next 12 months. The report was released at a forum on U.S. monetary policy in New York in which several senior Federal Reserve officials and economists were participating.

Spending Eroded by Inflation, Chicago Index Drops
Inflation eroded gains in U.S. consumer spending and a gauge of business sentiment fell to the lowest level in more than six years, pushing the economy toward a recession. While purchases rose 0.4 percent in January, the Federal Reserve's preferred measure of inflation climbed 0.3 percent, the most in four months, the Commerce Department said today in Washington. The National Association of Purchasing Management- Chicago said its index of business activity tumbled to 44.5 in February. Readings below 50 signal a contraction.

Consumer Spending Stalls
Consumer Spending Stalls As Confidence Plunges Due to Rising Inflation and Falling Home Prices
Consumer spending is threatening to stall out while consumer confidence, battered by soaring energy costs and falling home prices, has taken a steep nose dive. Analysts said the two new reports Friday were just the latest danger signals that the country was edging perilously close to a recession. The Commerce Department reported that spending posted a 0.4 percent rise in January, better than economists had been expecting. However, all of that gain came from a surge in inflation during the month.

Paulson: No Taxpayer Bailout for Wall Street
As politicians begin to react to the rising threat of mass foreclosures across the country, the White House is digging in. Treasury Secretary Henry Paulson, who has been working to convince the banks themselves to dig out mortgage borrowers, told The Wall Street Journal, in effect, that Congress should back off and let the markets work. He called the various Congressional plans being discussed as nothing more than bailouts for misbehaving speculators and reckless lenders.

More Americans using credit cards to stay afloat
Seven years in the credit-counseling business didn't prepare Ann Estes for the alarming trend she began noticing last fall: As her clients' mortgage bills became unaffordable, a growing number of them began paying their credit card bills before — and sometimes instead of — their mortgages. "We've never seen anything like this," says Estes, who counsels clients by phone from her office in Richmond, Va. "Their homes are at risk, and they know it. But people say, 'I don't want to let my credit cards go because that's my cash flow.' "

Deutsche Bkank sees oil at $150/barrel in 2010 amid concerns over supply growth
NEW YORK, Feb 28, 2008 --Deutsche Bank said it sees a peak nominal oil price of $150 a barrel in 2010, as raising supply is expected to become increasingly difficult as demand growth continues. Analyst Paul Sankey said oil demand can easily exceed 100 million barrels a day by 2015, but said increasing supply to 100 mb/d will be very difficult. Assuming current production decline rates of 5%, Sankey said sustaining a 100 mb/d oil market would require new annual supply growth of 8 mb/d, "a level that has never been reached." Sankey also said he didn't think $100 a barrel oil is not the price level that will break demand -- "we can go higher."

Gold and Silver Shine Brighter
Gold has reached new levels of glitz as the dollar continues to fade.
The precious metal is rapidly approaching $1000 per ounce and is likely to hit that new level sometime this year. Gold hit a record price when it rose $7.60 to $975.10 after having traded as high as $978.50 in New York. It has risen 16% in 2008 on the top of a 32% increase in 2007. Gold is not the only metal that has been shining more brightly of late. Silver hit its highest point in more than 25 years when it hit $19.92 an ounce before falling to $19.74 and palladium was up to a new six-year high of $582 an ounce before falling to $560.00. Platinum rose to a high of $2,161. The price of precious metals is being driven up by a weakening dollar; the U.S. currency fell .6% on Friday to $73.82 on the dollar index which measures the buck against six other currencies, as well as rising costs of gold production due to aging mines and depletion of product.

Stocks Dive on New Signs of Economic Chill
In a painful year for Wall Street, even the shortest month couldn’t end soon enough. Stock markets sank on Friday — Leap Day — after a new round of credit woes and a painful dose of weak economic reports reignited fears that a recession may be imminent. The Dow Jones industrials plunged 315 points, and every major index shed more than 2.5 percent. The Standard & Poor’s 500-stock index is off to its worst start to a year since 1941. "The drumbeat of economic news has been unrelentingly bad," said Edward Yardeni, an investment strategist. "The recession scenario is looking more and more credible."

Facing Default, Some Walk Out on New Homes
When Raymond Zulueta went into default on his mortgage last year, he did what a lot of people do. He worried. In a declining housing market, he owed more than the house was worth, and his mortgage payments, even on an interest-only loan, had shot up to $2,600, more than he could afford. “I was terrified,” said Mr. Zulueta, who services automated teller machines for an armored car company in the San Francisco area. Then in January he learned about a new company in San Diego called You Walk Away that does just what its name says. For $995, it helps people walk away from their homes, ceding them to the banks in foreclosure.

Buffett’s State of the World: There’s Folly in Wonderland
The billionaire investor Warren E. Buffett disclosed Friday that he had earned profits for shareholders of Berkshire Hathaway by speculating in the Brazilian currency, the real, and by buying a large stake in a French pharmaceutical company, Sanofi-Aventis. He also complained that many other companies were overstating earnings, and he expressed puzzlement that their auditors let them get away with it. Mr. Buffett’s annual letter to shareholders, which was released Friday, has become something of a business institution, with the certainty that he will offer caustic comments and the hope that he will shed light on his investments.

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Thur 02.28.2008

Gold futures edge up as dollar falls sharply
Gold futures edged higher to trade near $964 an ounce Thursday, getting a boost from weakness in the U.S. dollar and surging crude-oil futures. Gold for April delivery gained $2.30 at $963.30 an ounce on the New York Mercantile Exchange. "The recent string of U.S. data has been appalling and this is putting significant pressure on the dollar and supporting gold," said Mark O'Byrne, executive director at Gold and Silver Investments Ltd., in a note. Weakness in the U.S. dollar boosted gold's investment appeal. Gold, like many commodities, is denominated in dollars, and a lower U.S. currency makes it more affordable in other currencies.

Silver Now Outperforming Gold
As readers may know, silver has put in a sterling performance this week and has outperformed gold into the bargain. The prediction that silver will eventually outperform gold as the precious metal bull market reaches a new zenith point is being fulfilled before our very eyes. In my last article, I pointed out that the net short commercials may well begin to feel the heat and begin their third capitulation of this 5 year old silver bull market. Indeed, if they haven't began to cover at cents below $20 an ounce, the sense of urgency brought on by mounting financial losses must be as loud as a roaring silver bull bellowing right into their ear holes.

GDP's unrevised at 0.6% growth for fourth quarter
The U.S. economy slowed sharply in the fourth quarter, growing at a 0.6% annual rate, unrevised from last month's estimate, the Commerce Department reported Thursday. For all of 2007, the economy grew at the weakest pace in five years, rising at an inflation-adjusted 2.2% after a 2.9% gain in 2006. Many -- but not all -- economists believe a recession has now begun, based on data showing declining employment, incomes and industrial production. For the current quarter, economists are predicting no growth. Gross domestic purchases -- the total value of goods and services bought by U.S. residents -- fell 0.3% in the fourth quarter, the first decline since the last recession quarter in 2001. The revision to fourth-quarter gross domestic product was a tick lower than the 0.7% growth expected by economists surveyed by MarketWatch.

Initial jobless claims rise 19,000 to 373,000
First-time claims for state unemployment benefits rose 19,000 last week, reaching the highest level since late January, the government reported Thursday. The number of initial claims in the week ended Feb. 23 gained 19,000 to 373,000, according to the Labor Department. The four-week average of initial claims fell 1,250 to 360,500. "The level of claims this week now matches the four-week average recorded at the end of February 2001, immediately before the recession began in March," wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics. Recipients of state jobless benefits rose 21,000 to 2.81 million in the week ended Feb. 16, reaching the highest level since October 2005. The four-week moving average of continuing claims rose 24,250 to 2.78 million, also reaching the highest level since October 2005, when Hurricane Katrina flooded the jobless rolls.

Stop Fed Intervention
Price controls are almost universally reviled by economists. The negative economic consequences of price floors or price ceilings are numerous and well-documented. Our current series of hearings have been called to discuss the most important, but least understood, price manipulation in the world today: the manipulation of the interest rate. By setting the federal funds rate, the rate at which banks in the Federal Reserve System loan funds to each other, the Federal Reserve inhibits the actions of market participants coming together to determine a market interest rate. The Federal Reserve and the federal government do not deign to interfere in setting the price of houses, the interest rate on mortgages, or the prices of wood and steel. The Fed’s actions in setting the federal funds rate however, because it reflects the price of money to a borrower and thus affects demand for money, affects prices throughout the economy in a manner less pervasive but just as damaging as direct price controls.

As economy struggles, ‘stagflation’ threat looms
It's a toxic economic mix the nation hasn't seen in three decades: Prices are speeding upward at the fastest pace in a quarter century, even as the economy loses steam. Economists call the disease "stagflation," and they're worried it might be coming back. Already, paychecks aren't stretching as far, and jobs are harder to find, threatening to set off a vicious cycle that could make things even worse. The economy nearly stalled in the final three months of last year and probably is barely growing or even shrinking now. That's the "stagnation" part of the ailment. Typically, that slowdown should slow inflation as well — the second part of the diagnosis — but prices are still marching higher.

FDIC to Add Staff as Bank Failures Loom
The Federal Deposit Insurance Corp. is taking steps to brace for an increase in failed financial institutions as the nation's housing and credit markets continue to worsen. The FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships. Many of these agency veterans likely worked for the FDIC during the late 1980s and early 1990s, when more than 1,000 financial institutions failed amid the savings-and-loan crisis. FDIC spokesman Andrew Gray said the agency was looking to bulk up "for preparedness purposes." The division now has 223 employees, mostly based in Dallas. The agency, which insures accounts at more than 8,000 financial institutions, is also seeking to hire an outside firm that would help manage mortgages and other assets at insolvent banks, according to a newspaper advertisement.

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Wed 02.27.2008

Gold Rises to Record; Silver at 27-Year High on Dollar's Slump
Gold rose to records in London and New York and silver gained to a 27-year high as the dollar's all- time low spurred demand for precious metals as a hedge against inflation. Palladium rose to the highest since 2001. Gold is up 15 percent this year as a U.S. housing slump and turmoil in credit markets led the Federal Reserve to lower interest rates when commodities were rising to records. The dollar declined on speculation Fed Chairman Ben S. Bernanke will signal more rate cuts in testimony to Congress today. ``With a weaker dollar, imports become more expensive and that can import inflation into a country,'' said Ben Davies, chief executive officer of Hinde Capital Ltd. in London who helps manage the Hinde Gold Fund. ``The Fed wants to inflate their way out of the problems of a huge deficit and a banking system that's at the point of imploding.''

Dollar Index to Fall to Record, Bank of America Says
-- The dollar will fall to a record low against the currencies of its trading partners ``within weeks'' as the Federal Reserve cuts interest rates to prevent a recession, according to Bank of America Corp. The U.S. currency, which slid to a record low of $1.5047 per euro earlier today, will trade below $1.50 for the next few weeks, Robert Sinche, head of global currency strategy, wrote in a report. The dollar index traded on ICE Futures in New York, which tracks the currency against six counterparts, fell 0.2 percent to 74.639 at 2:47 p.m. in Tokyo. It reached 74.484 on Nov. 23., the lowest since the gauge started in 1973. ``The dollar will continue its weak trend for the time being,'' said Tomoko Fujii, head of Japan economics and strategy at Bank of America in Tokyo, confirming a research report dated today. ``For the foreseeable future, the Fed will favor supporting the economy more than fighting inflation.''

Business investment weakens in January
Demand for durable goods fell back in January after a burst of orders in December, the Commerce Department reported Wednesday, another sign that the economy is slowing. New orders for durable goods fell 5.3% in January, close to the 5.1% drop anticipated by economists surveyed by MarketWatch. Much of the decline in January was due to the unwinding of the flood of orders for aircraft in December. Declining demand was seen in almost every industry in January, however, despite reports of higher exports. Orders for core capital equipment -- nondefense, nonaircraft capital goods -- fell 1.4% in January after a 5.2% rise in December.

Fannie Mae swings to losses for quarter and year
Mortgage-finance giant Fannie Mae on Wednesday posted losses for the fourth quarter and for all of 2007, citing the continuing drag in the housing and mortgage markets and disruptions in the credit markets. For the quarter, Fannie swung to a loss of $3.80 a share from profit of 49 cents in the year-earlier period. Chief Executive Daniel Mudd said the company is pleased that demand for its mortgage guaranty business has surged in response to the market's need for liquidity. But he said that "this positive trend has been far outweighed by the negative financial impacts of rising mortgage defaults, falling home prices and extraordinary disruptions in the credit markets." Looking ahead, the company sees home prices falling 5% to 7% across the country this year.

Oil hits a high; some in U.S. see $4 gas by spring
Gasoline prices, which for months lagged the big run-up in the price of oil, are suddenly rising quickly, with some experts fearing they could hit $4 a gallon by spring. Diesel is hitting new records daily and oil closed at an all-time high on Tuesday of $100.88 a barrel. The increases could not come at a worse time for the economy. With growth slowing, high energy prices that were once easily absorbed by consumers are now more likely to act as a drag on household budgets, leaving people with less money to spend elsewhere. These costs could exacerbate the nation's economic woes, piling a fresh energy shock on top of the turmoil in credit and housing."The effect of high oil prices today could be the difference between having a recession and not having a recession," said Kenneth Rogoff, a Harvard University economist.

Americans no longer able to support world’s biggest economy
Alan Greenspan, the former chairman of the US Federal Reserve System, is certain that it is nearly impossible to rapidly retrieve the economic growth in the USA. "As of right now US economic growth is at zero. We are at stall speed," Greenspan said during an investment conference in Saudi Arabia. According to Greenspan, the US recession may last longer than expected against such a background. Wall Street giants – Goldman Sachs and Merrill Lynch – share a similar point of view. Experts of both firms say that the US economy will continue to decline in 2008. According to estimates from the FRS, the growth in 2008 will make up from 1.3 to 2 percent.

Wheat prices hit record high
Dressed in his white apron and baker's hat, Jose Espinal puts the finishing touches on a chicken pot pie that will be sold to customers of Cucina & Co. later in the day. He carefully places a crust on the pie and crimps the top and bottom together. But to make the dough for about 300 pies, Mr. Espinal, the pastry chef, used 22 pounds of flour – an item that the store knows will soon be rising in price. "I'm expecting it this week," says Michael Salmon, director of operations of Cucina, which is in Macy's in Manhattan. "Maybe 20 or 30 percent." Why the increase? The prime ingredient in flour is wheat, which these days is acting more like oil – rising sharply on commodities exchanges. On Monday, the price of March spring wheat on the Minneapolis Grain Exchange shot up to $24 a bushel, the highest price ever.

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Tues 02.26.2008

Gold, gold - you're making me old
"Gold, gold -- you're making me old." That was my old refrain as we lived through correction after correction in the early stages of a gold bull market that never seemed clear or easy. But that has changed. Over recent years it's become obvious that gold is in a powerful bull market. And all our earlier worries and anxieties now appear to have been worth it, as the power of the great bull market becomes evident and indisputable. The chart below traces the more recent path of gold as it advances, consolidates, corrects, and then advances again. The most recent move is a breakout on the P&F chart to the 955 box.

Drop dollar peg, ex-Fed chair tells Arabs
Former Federal Reserve chairman Alan Greenspan said on Monday near-record Gulf Arab inflation would fall "significantly" if oil producers dropped their dollar pegs, in contradiction to Saudi policy. The pegs restrict the Gulf's ability to fight inflation by forcing them to shadow U.S. monetary policy at a time when the Fed is cutting rates to ward off recession and gulf economies are surging on a near fivefold jump in oil prices since 2002. Rifts are growing across the world's top oil-exporting region on how to tackle inflation which hit a 27-year peak of seven per cent in Saudi Arabia in January and a 19-year peak of 9.3 per cent in the United Arab Emirates in 2006, the most recent figure.

Energy, food push January's PPI 1% higher
Producer prices soared in January, pushed higher by energy prices and the biggest increase in food prices in more than three years, government data showed Tuesday. The producer price index climbed by 1% last month, the Labor Department reported. The closely followed PPI, which measures the rate of inflation at the wholesale level, had fallen 0.3% in December after having registered a jump of 2.6% in November. January's core PPI, which excludes food and energy prices, rose 0.4%, driven by higher drug and car prices. Year over year, the PPI is up 7.4% -- the fastest pace since 1981. Also on an annualized basis, the core PPI is up 2.3%.

Home prices fall 8.9% in 2007
Home values in the United States fell 8.9% in 2007, the largest decline in at least 20 years, Standard & Poor's reported Tuesday. The Case-Shiller national home price index fell 5.4% in the fourth quarter alone, S&P said. Prices in 17 of 20 major cities were lower at the end of 2007 than at the beginning, with eight cities falling in double-digits. Prices fell in all 20 cities in December compared with November. The biggest declines were seen in the former bubble areas in Florida and the Southwest. Home prices in Miami were down 17.5% in the past year, while prices fell 15.3% in Phoenix and Las Vegas. The 20-city index fell 2.1% in December and 9.1% for the year. The 10-city index fell 2.3% in December and 9.8% for the year. Phoenix had the largest decline in December, falling 3.5%, followed by San Diego at 3.4% and San Francisco at 3.2%

Foreclosures up 57 percent in the past year
The number of homes facing foreclosure jumped 57 percent in January compared to a year ago, with lenders increasingly forced to take possession of homes they couldn’t unload at auctions, a mortgage research firm said Monday. Nationwide, some 233,001 homes received at least one notice from lenders last month related to overdue payments, compared with 148,425 a year earlier, according to Irvine, Calif.-based RealtyTrac Inc. Nearly half of the total involved first-time default notices. The worsening situation came despite ongoing efforts by lenders to help borrowers manage their payments by modifying loan terms, working out long-term repayment plans and other actions "You have more people going into default and a higher percentage of the properties going back to the banks," said Rick Sharga, RealtyTrac’s vice president of marketing.

Home Depot off 27%; industry outlook 'challenging'
Home Depot Inc. said Tuesday that fourth-quarter profit fell a sharper-than-expected 27% after the declining housing market hurt demand for its building and home goods supplies and the outlook for 2008 remains "challenging." Shares of Home Depot, the largest U.S. home-improvement retailer, fell 1.5% in pre-market trading. Net income in the quarter ended Feb. 3 fell to $671 million, or 40 cents a share, from $925 million, or 46 cents, a year earlier, Home Depot, part of the Dow Jones Industrial Average, said. Shares outstanding fell 16% to 1.68 billion. Sales increased 1.5% to $17.66 billion, helped by an extra week compared with the year-earlier quarter. Excluding that, sales would have declined 4.7%, the Atlanta-based company said Tuesday.

Health care spending to top $4 trillion by 2017
By 2017, consumers and taxpayers will spend more than $4 trillion on health care, accounting for one of every $5 spent, the federal government projects. The 6.7 percent annual increase in spending — nearly three times the rate of inflation— will be largely driven by higher prices and an increased demand for care, the Centers for Medicare and Medicaid Services said Monday. But other factors in the mix include a growing and aging population. The first wave of baby boomers become eligible for Medicare beginning in 2011. With the aging population, the federal government will be picking up the tab for a growing share of the nation’s medical expenses. Overall, federal and state governments accounted for about 46 percent of health expenditures in 2006. That percentage will increase to 49 percent over the next decade.

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Mon 02.25.2008

The dollar versus gold? No contest
In the early 1950s I was reading history at Balliol College, Oxford. I learnt a good deal from my tutors, whom I remember with gratitude, but even more from my contemporaries, such as Dick Taverne or Bernard Williams, the philosopher. There was, even then, no doubt who was the most erudite undergraduate, with, as it seemed, total recall of the whole corpus of European literature. It was George Steiner, the polymath whose encyclopaedic learning has been creating envy in academic circles ever since. In the mid-1960s, I was visiting New York and met George's father, a quiet Jewish banker, who, like the great Siegmund Warburg, had been trained in the tradition of European banking of the pre-Nazi era.

Gold Fields May Cut 6,900 Jobs on Power Restrictions
Gold Fields Ltd., Africa's second- biggest gold producer, will eliminate as many as 6,900 jobs, or 13 percent of its South African workforce, as the state-run utility fails to provide enough power for the company's mines. The cuts are the first by a South African mining company since utility Eskom Holdings Ltd. said power shortages will last for four years. Gold Fields will close part of its operations at Driefontein, Africa's largest gold mine, and redesign its South Deep mine, the company said today. Production may fall as much as 20 percent, at a time when gold prices have never been higher. The rand has slumped 12 percent against the dollar in 2008 because of declining confidence in an economy where 25.5 percent are unemployed, the highest level among 64 countries monitored by Bloomberg.

Lenders cut off the home-equity tap
Thousands of homeowners are getting notices that their lines of credit have been frozen, and it's harder to get new second mortgages. Here's what your bank is doing and whether you're at risk. For more than a decade, banks encouraged homeowners to tap their equity for everything from paying off credit cards to covering college tuition. Now lenders are abruptly shutting off the spigot. More than 100,000 homeowners at one lender already have been told that their home-equity lines of credit have been frozen and that they can't use them to borrow more money. Others have seen their credit limits abruptly lowered. Meanwhile, lenders are tightening standards so that getting a home-equity loan in many markets is more difficult, even when the value of your home is still well above what you owe on it.

Shoppers warned bigger bills on way
When William Lapp, of US-based consultancy Advanced Economic Solutions, took the podium at the annual US Department of Agriculture conference, the sentiment was already bullish for agricultural commodities boosted by demand from the biofuels industry and emerging countries. He added a twist – that rising agricultural raw material prices would translate this year into sharply higher food inflation. "I hope you enjoy your meal," Mr Lapp told delegates during a luncheon. "It is the cheapest one you are going to have at this forum for a while." His warning that a strong wave of food inflation is heading towards the world economy was met by nods from agriculture traders, food industry executives and western’s government officials at the USDA’s annual Agricultural Outlook Forum.

The ultimate sell signal
The resignation of America's unheeded and under-funded chief accountant and watchdog, along with the billion-dollar bullhorn he's been given, are the ultimate sell signals for America's stock investors. David Walker, comptroller general of the General Accountability Office (GAO) has since 1998 been the objectively informed and outspoken critic of America's balance sheet. He has criticized supporting Iraq's dysfunctional government, pork barrel spending by Congress, unrealistic "universal health care plans" we can ill-afford or support, the escalating risks of huge deficits, fiscal vulnerability to hostile foreign governments, and a lack of will to reform our government.

Who's stuck with $400 billion in losses?
Wall Street sometimes calls the subprime mortgage packages and other risky investments troubling the world's financial system "toxic waste." Analysts estimate foreigners own a quarter to a third of this dangerous stuff. Losses on subprime-related investments alone could reach $400 billion, the finance ministers of the Group of Seven leading industrial nations were told earlier this month at a meeting in Tokyo. If so, banks and other investors in Europe and elsewhere participating in the global financial market could suffer losses of perhaps $100 billion to $133 billion. Often these investments had been characterized as AAA, or quite safe, by the leading American agencies that rate bonds and more complicated investments known as derivatives and asset-backed securities.

After subprime debacle, U.S. wrestles with question of bank bailouts
Over the past two decades, few industries have lobbied more ferociously or effectively than banks to get the government out of its business and to obtain freer rein for "financial innovation." But as losses from bad mortgages and mortgage-backed securities climb past $200 billion, talk among banking executives about a major government rescue plan is suddenly coming into fashion. A confidential proposal that Bank of America circulated earlier this month to members of Congress provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government, now that it is in trouble. The proposal warns that as much as $739 billion in mortgages is at "moderate to high risk" of default over the next five years and that millions of families could lose their homes.

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Fri 02.22.2008

Gold Heads for Biggest Weekly Gain in 19 Months; Platinum Drops
Gold, little changed in London, headed for its biggest weekly advance in 19 months as lower U.S. interest rates may revive investor demand for the metal as an alternative to the dollar. Platinum dropped from a record. The dollar traded near a three-week low against the euro on speculation U.S. economic growth will slow, forcing the Federal Reserve to lower interest rates. Gold has climbed 45 percent since the Fed in August announced a policy shift to contain the subprime mortgage collapse. ``It's been six months this week since the Fed started cutting interest rates and gold has gone nuts,'' said Adrian Ash, head of research of London-based BullionVault, a gold dealer that holds about six tons of gold for customers in vaults in London, Zurich and New York. ``The more the Fed promises cheaper money, the more people will choose an alternative to the dollar.''

Ouch! This Gold Trend is Relentless
Time to ‘fess up. I’ve been horribly, horribly wrong on gold. So much so that now I’m afraid of being labeled a contrarian indicator! So let’s see, in December I thought I saw a tentative double top in gold… which didn’t materialize. Instead, gold paused by trading sideways for a month and then continued blazing higher and higher: To be fair, a double top formation is only triggered when the neckline (the dotted line on the graph above) is pierced. Since that didn’t happen, we didn’t officially have a double top, at least according to the widely accepted definition within technical analysis. That doesn’t absolve me as I’ve been skeptical of a continuing gold bull market. And I’ve been wrong, wrong, wrong. Gold’s climb has been unrelenting. Just yesterday it closed at $949.20 on the Merc, taking it within a nugget’s throw of $1000.

Demand for gold up by 26 per cent as China becomes second-biggest market
With the start of the Year of the Rat, Chinese have been forming queues across the country to buy solid gold rodents. Last year they queued to buy solid gold pigs. The surging desire for the precious metal from increasingly well-off Chinese fuelled a 26 per cent increase in demand in 2007. The soaring price of gold, which hit a record $948.60 an ounce yesterday, has failed to dim the Chinese rush. China's demand climbed to 326.1 tonnes, supplanting the United States as the world's second-largest gold consumer and exceeded only by India. Of the total, 302.2 tonnes were bought for jewellery, the World Gold Council said, marking the first time that jewellery demand in China had exceeded the 300-tonne mark.

Rescues for Homeowners in Debt Weighed
Prodded in part by some of the nation’s biggest banks, the Bush administration and Congress are considering costly new proposals for the government to rescue hundreds of thousands of homeowners whose mortgages are higher than the value of their houses. Not since the Depression has a larger share of Americans owed more on their homes than they are worth. With the collapse of the housing boom, nearly 8.8 million homeowners, or 10.3 percent of the total, are underwater. That is more than double the percentage just a year ago, according to a new estimate of the damage by Moody’s Economy.com. Administration officials say they still oppose any taxpayer bailout for either people who borrowed more than they could afford or banks that made foolish loans during the height of the speculative bubble in housing.

Philly Fed continues to weaken in Feb.
Factory activity in the Philadelphia region continued to weaken in February, and the outlook for future activity hit its lowest level in 28 years, the Philadelphia Federal Reserve said Thursday. The Philly Fed index fell to -24 in February from -20.9 in January. This is the lowest level since February 2001, shortly before the last recession. Readings below zero in the diffusion index indicate contraction in the region's factories. A larger negative number means that contraction is gaining momentum. Economists expected the index to rebound to about -10. The index had plunged in January from 1.6 in December and analysts believed the drop was overstated.

Goldman Sachs likely to cut about 1,500 jobs
Goldman Sachs Group will likely cut about 1,500 jobs this year, an unusually high number for the investment firm, The Wall Street Journal reported Thursday on its Web site, citing executives, former partners and executive recruiters. The newspaper reported the cuts, which began a few weeks ago and will continue through early March, are an aggressive response to mounting troubles in the firm's leveraged lending and investing portfolios.

It's Time to Dump the Federal Reserve
The credit storm which began in July when two Bear Stearns hedge funds were forced to liquidate, has continued to intensify and roil the markets. Last week the noose tightened around auction-rate securities, a little-known part of the market that requires short-term funding to set rates for long-term municipal bonds. The $330 billion ARS market has dried up overnight pushing up rates as high as 20% on some bonds – a new benchmark for short-term debt. Auction-rate securities are now headed for extinction just like the other previously-vital parts of the structured finance paradigm. The $2 trillion market for collateralized debt obligations (CDOs), the multi-trillion-dollar mortgage-backed securities market (MBSs) and the $1.3 asset-backed commercial paper (ABCP) market have all shut down, draining a small ocean of capital from the financial system and pushing many of the banks and hedge funds closer to default.

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Thur 02.21.2008

Gold Hits Record on Oil Rally
Gold surged to a record in aftermarket trading Wednesday after oil rallied above $100 a barrel and investors bet the Federal Reserve will again slash interest rates — boosting the metal's appeal as a hedge against inflation. Other precious metals traded mixed, with silver also touching a record-high and platinum retreating from historic levels. Gold has risen more than 12 percent this year, driven mainly by oil's ascent to $100 and steep declines in the U.S. dollar. Gold for April delivery jumped as high as $949.20 an ounce in electronic trading on the New York Mercantile Exchange — the highest ever and within striking distance of the psychologically important $1,000 barrier. Earlier Wednesday, gold settled $8 higher at $937.80. "I would point to oil as the primary driver. Oil and gold seem to be in lockstep right now," said Jon Nadler, senior analyst of Kitco Bullion Dealers Montreal.

Ron Paul Introduces ‘Tax-Free Gold Act of 2008′
While Congressman Ron Paul [R-TX] is running for President, he is also attempting to create new law. On February 13, 2008, Mr. Paul introduced a bill titled, the Tax-Free Gold Act of 2008. Should the bill become law, it would eliminate taxes and fees on certain coins and bullion. Although coin collectors and bullion investors would certainly relish the bill’s passage and subsequent signing into law, it would not be a good idea for anyone to hold their breadth on the matter. The odds of the bill moving forward would appear to be as likely as Mr. Paul’s current chances of becoming the Republican Presidential nominee.

World Poised to Hit Gold Panic Button
Whenever bullion swoons $20 or more, as it did yesterday for the umpteenth time, we need to remind ourselves that it’s only a game, one who’s sole purpose is to keep gold bulls from making easy money on the most one-sided bet since Secratariat all but lapped the field in the ’73 Derby. Who on earth could possibly think gold is a sale here? (other than Kudlow, of course. Some may recall that, years ago, he went on record in the Wall Street Journal with an op-ed piece purporting to explain why $300 was the "correct" equilibrium price for bullion.) Anyone eager to unload gold at these levels -- or even more stupidly, to short it -- must necessarily believe that currencies are about to strengthen.

Bottomless Financial Pits
With gold again having a try at $1000, speculators aside, one wonders how far that has to go? Well, for one thing, Central Banks have posted about only $2trillion worth of financial injections and bailouts since only August 07 to combat the credit collapse. In recent weeks, the German banking crisis had its latest manifestation. German banks are again in crisis mode, and needing more bailouts. When the credit crisis exploded last year, German bankers stated that it was the worst crisis since the 1930’s, when German banks collapsed headlong and caused a European banking crisis amidst the Great Depression. The German government has had to bail out state-owned banks with taxpayers' money after their managements recklessly gambled away billions on subprime investments. But if a state-owned bank were to go under, the consequences could be disastrous for the whole economy.

Credit crisis turmoil claims new victims
Losses resulting from the credit market turmoil – until now largely limited to the world's biggest investment banks – are starting to be felt much more widely, by wealthy individuals, local government and even sports teams, presaging a new and potentially litigious phase in the crisis. Regulators in at least two US states are investigating whether there were any abuses in the auction-rate securities market, it emerged yesterday, while rumours of a wave of selling in complex credit derivatives sent the cost of protection against bond defaults soaring to a record level. The auction-rate securities market has been the latest domino to fall as fears have spread about the creditworthiness of all kinds of complicated fixed-income investments. Such securities are long-term debt whose interest rates are reset at a weekly or monthly auction, typically earning them a higher value and a lower interest rate.

U.S. Jan. leading economic indicators index falls 0.1%
The index of leading U.S. economic indicators dropped by 0.1% in January, the Conference Board reported Thursday, as weaker stock prices and housing data drove the index's fourth consecutive decline. At the same time, the coincident economic indicator index rose 0.1% in January, the business research organization said. That index measures where the economy is now. The group's labor economist said the rise in the coincident index shows that the economy wasn't in recession in January but that weak growth can be expected in the future.

The coming student loan crunch
If you're counting on borrowing money for college next semester, get your paperwork going now. Lenders are backing away fast. College students heading off to campus in the fall will face a radically different student loan situation than they did just a year ago.The credit crunch that rattled mortgage lenders has spread to the education lending market, with dramatic results. If the situation doesn't ease in coming months, student lending experts say, borrowers can expect: Higher loan costs. Fewer lenders, which could mean tens of thousands of college students scrambling at the last minute to find money. Tougher standards that could prevent some students from borrowing at all. "It's a very different situation from last year," when lenders were falling over each other to compete for students' business, said Kevin Walker

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Wed 02.20.2008

US inflation may stall rate cuts
US consumer prices rose by 0.4% in January, official figures show, more than many analysts had forecast. According to the US Labor Department, the main drivers of the price growth were food and energy costs. The figures come as the US Federal Reserve has been slashing interest rates in an effort to kick-start slowing economic growth.

Consumer Prices Rise Again in January
Consumer Prices Post Another Big Gain in January As Food and Health Care Costs Jump
WASHINGTON (AP) -- Consumer prices rose by a bigger-than-expected amount in January, reflecting big increases in the cost of food and health care, the government reported Wednesday. The Labor Department said that its closely watched Consumer Price Index posted a gain of 0.4 percent last month, matching the December increase and was higher than economists had expected. Core inflation, which excludes food and energy, showed an increase of 0.3 percent, the biggest jump in this measure in seven months. The cost of clothing, education, lodging and tobacco also moved higher.

China's inflation hits 11-year high
Food shortages cause prices to jump, analysts warn bigger increases to come.
China's inflation rose to its highest level in more than 11 years in January after devastating snowstorms worsened food shortages, according to data reported Tuesday, and analysts warned there might be sharper increases to come. Consumer prices in January climbed 7.1% from the same month last year, driven by an 18.2% rise in costs, the National Bureau of Statistics reported. Economists warned that despite efforts to ease food shortages, China faces pressure for prices to rise across the board due to higher wages and costs for coal, iron ore and other industrial materials. February inflation "is likely to be much higher than 7%, and might even get close to double-digit levels," said Goldman Sachs economists Yu Song and Hong Liang in a report to clients. "Inflation is likely to have further legs to run."

More Bank Losses to Come
Just in case you thought the loan losses were over and we would be back to normal by summer, it looks like there are more loans losses to come from areas outside of mortgages. When a bank's problem is loan losses, dropping interest rates really is not going to help much. Lower rates makes it cheaper for banks to borrow, but the loan losses will cause the banks to restrict lending no matter how favorable the rates. Looks like this credit crunch could last a while. Wall Street banks are bracing for another wave of multibillion-dollar losses as the crisis that began with subprime mortgages spreads through the credit markets.

The next bubble is about to crash
We just can't keep away from those asset bubbles. Now it is treasuries....
U.S. government bonds and emerging market equities have benefited as investors have sought refuge from the housing and credit crises, but the surge in popularity of the two asset classes is inflating a dangerous bubble that is likely to burst.

Platinum Still Climbing, Hits 14th Straight High
Platinum set a lifetime high for the 14th straight day on Tuesday on strong speculative buying on the back of severe output problems in top producer South Africa. Other precious metals also advanced, with palladium hitting a 6-1/2-year high, gold rising more than 1.5 percent to trade near a record high and silver gaining nearly 2 percent.

Bernanke's Rate Cuts Force Asia Back to Price Limits, Subsidies
Ben S. Bernanke, the champion of free markets, is driving Asia's governments back to controlled economies. Under Bernanke's chairmanship, the Federal Reserve's steepest interest-rate cuts since 1990 are limiting his Asian counterparts' options to curb inflation. Instead of raising their own borrowing costs or letting their currencies appreciate faster, governments are resorting to regulating meat and egg prices in China, stockpiling cooking oil in Malaysia and subsidizing utility bills in Indonesia and the Philippines.

Fed's Lower Rates Pressure China to Strengthen Yuan
Like it or not, China has no choice other than to let the yuan appreciate against the dollar. The combination of the world's fastest economic growth, the highest inflation rate in 11 years and the rising cost of intervention will force gains in the yuan to accelerate, even as policy makers in Beijing resist calls from the West to let the currency appreciate at a faster pace, say Pacific Investment Management Co. and Pictet & Cie., Switzerland's largest closely held private bank.

Stocks Slide After Weak Economic Reports
Stocks Decline As Investors Grow Uneasy About Rising Consumer Prices, Weak Housing Figures
NEW YORK (AP) -- Stocks fell Wednesday after a rise in consumer prices and lackluster readings on home construction touched off further concerns about the health of the economy. The uptick in consumer prices following a record finish for oil Tuesday stirred concerns that the Federal Reserve will have less room to lower interest rates in the coming months. Lowering rates can increase inflationary pressures. Investors are hoping for some insights on the Fed's thinking with the expected release Wednesday afternoon of minutes from the last meeting of the central bank's rate-setting committee.

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Tues 02.19.2008

In China and India, consumers unfazed by high gold prices
Sky-high gold prices did little to curb demand for jewelry in India, China and some other Asia countries in 2007, suggesting that buyers recovered from initial shocks sparked by persistent rallies in bullion.Gold surged more than 30 percent last year, peaking at a 28-year high of about $845 an ounce in November. The rally continued into 2008 to touch historic highs of $936 in early this month."There seems to be renewed demand for gold among the jewelers and consumers over the last 15 to 20 days," said Ajay Mitra, managing director of the World Gold Council in India."They have to some extent consented to the fact that gold in the short term is not going to be falling below $900," he told Reuters by telephone from Mumbai.

Top steelmakers agree 65% iron ore price rise while platinum hits record level
Commodity prices were on another high last night after a 65% increase in iron ore costs was agreed by top steel makers. The ground-breaking iron ore contract was won by Vale of Brazil after tough negotiations with Japanese and Korean steel companies including Nippon, Sumitomo and Posco. The new prices will be introduced from April 1 and is likely to lead to higher car, ship and building costs. "The magnitude of the price increase for 2008 reflects the continuity of very tight conditions still prevailing in the global iron ore market," explained Vale, whose shares rose more than 5% on the Sao Paulo exchange. Iron ore values are being driven by huge demand in China, where the economy grew by over 11% last year - its highest rate in 13 years - and the rest of Asia.

US banks borrow $50bn via new Fed facility
US banks have been quietly borrowing massive amounts of money from the Federal Reserve in recent weeks by using a new measure the Fed introduced two months ago to help ease the credit crunch. The use of the Fed’s Term Auction Facility, which allows banks to borrow at relatively attractive rates against a wider range of their assets than previously permitted, saw borrowing of nearly $50bn of one-month funds from the Fed by mid-February. US officials say the trend shows that financial authorities have become far more adept at channelling liquidity into the banking system to alleviate financial stress, after failing to calm money markets last year However, the move has sparked unease among some analysts about the stress developing in opaque corners of the US banking system and the banks’ growing reliance on indirect forms of government support.

Wall St. Banks Confront a String of Write-Downs
Wall Street banks are bracing for another wave of multibillion-dollar losses as the crisis that began with subprime mortgages spreads through the credit markets.In recent weeks one part of the debt market after another has buckled. High-risk loans used to finance corporate buyouts have plummeted in value. Securities backed by commercial real estate mortgages and student loans have fallen sharply. Even auction-rate securities, arcane investments usually considered as safe as cash, have stumbled. The breadth and scale of the declines mean more pain for major banks, which have already written off more than $120 billion of losses stemming from bad mortgage-related investments.

US Credit Markets Are Collapsing! - Last Chance to Defend Your Portfolio!
Martin Weiss writes: The U.S. credit markets, the giant growth engine that powers the American economy, are collapsing ... with few credit sectors spared from damage, few investors escaping losses, and little hope of federal action that's quick or strong enough to make a major difference. Here's what's happening ... First and Foremost, the Fall of The Nation's Three Largest Bond Insurers Is Accelerating This is the " Great Ratings Debacle " I highlighted last year. And now, the critical watershed event that I said would trigger the next phase — the collapse of the bond insurers' triple-A ratings — is here in aces and spades. Without the triple-A rating, their whole reason to exist falls by the wayside: They cannot enhance the credit of bond issuers. They cannot do more business. They may as well close their doors and go home.

Bond Insurer Split Threatens $580 Billion of Notes
Credit ratings on more than $580 billion of asset-backed securities may be cut, sparking writedowns by banks, under New York regulator Eric Dinallo's plan to break up bond insurers. New York Insurance Department superintendent Dinallo proposed splitting the companies' municipal insurance units from their unprofitable businesses of guaranteeing debt linked to subprime mortgages. A separation may preserve AAA rankings for securities sold by local governments and agencies, while allowing asset-backed securities to slide. ``This is one of the worst possible outcomes for the market,'' Gregory Peters, head of credit strategy at Morgan Stanley in New York, said in a telephone interview. Lower ratings would force banks that own the mortgage-backed debt to write down the value of the securities by as much as $35 billion, he estimated.

Signs Point To Banking Crisis Getting Much Worse
The evidence comes in in pieces. One bit of bad news here and one there. Today, the FT reported that US banks had tapped the Fed’s Term Auction Facility for over $50 billion in the last few weeks. As one analyst pointed out "The TAF ... allows the banks to borrow money against all sort of dodgy collateral," says Christopher Wood, analyst at CLSA. "The banks are increasingly giving the Fed the garbage collateral nobody else wants to take ... [this] suggests a perilous condition for America’s banking system." The news that Credit Suisse had "found" $2.85 billion in write-downs for asset-backed paper was not terribly encouraging. It is certainly an indication that banks are still having substantial problems valuing assets which are based on a weakening housing market and do not trade because of a locked-up credit markets. The banks can guess at the value of what they hold, but have no way to know for certain.

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Fri 02.15.2008

Metals - Gold firms as prospect of Fed rate cuts pressures dollar
Gold firmed in early trade after the US dollar weakened overnight following comments from Federal Reserve chairman Ben Bernanke that suggested a further cut in US interest rates could be in the offing. The greenback softened further against the euro this morning after the release of euro zone trade data, further boosting the precious metal's appeal as an alternative investment. A softer dollar also makes gold, which is denominated in the US currency, cheaper for holders of other currencies. The dollar initially edged down yesterday after Bernanke told the US Senate that there were significant risks that the economic slowdown could deepen.In his testimony, Bernanke said the Fed is prepared if necessary to "act in a timely manner as needed to support growth and provide adequate insurance against downside risks",

Countrywide says foreclosure rate at new record
Countrywide Financial Corp, the largest U.S. mortgage lender, said on Friday foreclosures and late payments rose in January to the highest on record, reflecting the nation's deepening housing and credit crunch.The foreclosure rate for the 9.02 million mortgages on which Countrywide collects and processes payments roughly doubled to 1.48 percent from 0.77 percent a year earlier, and rose from December's 1.44 percent.Delinquencies rose to 7.47 percent of unpaid balances from 4.32 percent a year earlier, and 7.20 percent in December. Countrywide services $1.48 trillion of home loans.Countrywide also said it funded $21.9 billion of home loans in January, down 41 percent from $37.1 billion a year earlier, and 6 percent from December's $23.4 billion.

Empire State survey shows N.Y. activity slump
Data out from the Federal Reserve Bank of New York on Friday showed that regional manufacturing activity for February fell to the weakest levels seen in close to three years. The Empire State index tracking general business conditions tumbled nearly 21 points to a negative 11.7 reading, falling below the zero for the first time since May 2005. New orders and shipments indexes also dropped into negative territory, the New York Fed said. The prices paid index rose for a second consecutive month, to its highest level in considerably more than a year, while the prices received index remained elevated but close to January's level. The data helped knock U.S. stock futures, sent yields on two-year Treasury bonds higher, and hurt the U.S. dollar.

Citigroup halts withdrawals from hedge fund
Citigroup Inc. has halted withdrawals from one of its hedge funds after investors holding around 30% of the $500 million fund asked for their money back, according to a report in The Wall Street Journal. Citigroup injected around $100 million into CSO Partners, a fund that specializes in corporate debt, last month in an effort to stabilize it after it lost 11% in 2007, the newspaper said. Investors have been asking to withdraw their money after complaining that the fund's longtime manager John Pickett put too much money into a single investment that went bad. Pickett recently left the fund after a dispute with Citigroup executives and the investor complaints, the report added.

Oil prices approach 100 dollars per barrel
World oil prices advanced on Friday towards 100 dollars per barrel, briefly topping 96 dollars, as geopolitical jitters stemming from Nigeria and Venezuela stoked global supply concerns, traders said. Those market fears overshadowed a gloomy warning from Federal Reserve chairman Ben Bernanke, who predicted "a period of sluggish growth" ahead for the energy-hungry US economy. New York's main contract, light sweet crude for delivery in March, won 43 cents to 95.89 dollars a barrel, after rising as high as 96.05 dollars -- which was last seen on January 9. Brent North Sea crude for March delivery gained 19 cents to 95.35 dollars. "Oil prices have continued their upwards march," said Barclays Capital analyst Kevin Norrish.

Bloomberg Rips Government Over Failing Economy
Mayor Michael Bloomberg has unleashed another flurry of jabs on Washington, ridiculing the federal government's rebate checks as being "like giving a drink to an alcoholic" on Thursday, and said the presidential candidates are looking for easy solutions to complex economic problems. The billionaire and potential independent presidential candidate also said the nation "has a balance sheet that's starting to look more and more like a third-world country." President Bush signed legislation Wednesday that will result in cash rebates ranging from $300 to $1,200 for more than 130 million people. The federal checks are the centerpiece of the government's emergency effort to stimulate the economy, under the theory that most people will spend the money right away.

Let's Legalize Competing Currencies
I rise to speak on the concept of competing currencies. Currency, or money, is what allows civilization to flourish. In the absence of money, barter is the name of the game; if the farmer needs shoes, he must trade his eggs and milk to the cobbler and hope that the cobbler needs eggs and milk. Money makes the transaction process far easier. Rather than having to search for someone with reciprocal wants, the farmer can exchange his milk and eggs for an agreed-upon medium of exchange with which he can then purchase shoes. This medium of exchange should satisfy certain properties: it should be durable, that is to say, it does not wear out easily; it should be portable, that is, easily carried; it should be divisible into units usable for everyday transactions; it should be recognizable and uniform, so that one unit of money has the same properties as every other unit;

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Thur 02.14.2008

Platinum Trades Above $2,000 for 2nd Day in London; Gold Gains
Platinum rose to a record in London, trading above $2,000 an ounce for a second day, as power cuts in South Africa, the biggest producer of the metal, curbed output. Gold also advanced. Impala Platinum Holdings Ltd., the world's second-biggest platinum producer, today forecast output will drop because of power shortages. The Johannesburg-based company said it may lose 40,000 ounces of production, equal to more than two days of global supply. ``How high can platinum go?'' James Moore, an analyst at London-based TheBullionDesk.com, said by telephone today. ``It will depend on how quickly South Africa can improve its power supply.''

S.Africa power restriction lasting until 2012
South Africa's state-owned power utility will not be able to supply mines and other industrial customers with more than 90 percent of their electricity needs until 2012, Bloomberg reported on Wednesday.Eskom, which supplies most of the nation's power, said last month it could not guarantee electricity to industry, prompting many large mines to shut for five days. The utility has since agreed to provide 90 percent supply to industrial customers.In an interview with Bloomberg on Tuesday, Eskom Finance Director Bongani Nqwababa said the restrictions were unlikely to be lifted until the first new coal-fired power plants start up in 2012.Eskom officials were not immediately available for comment.

UBS sees tough `08, confirms $13.7 bln write-down
Swiss banking giant UBS on Thursday said it still has significant exposure to the troubled U.S. mortgage market, raising fears of further write-downs, as it confirmed a $13.7 billion charge had sent its bottom line plunging into the red. Breaking down the charges, UBS said $10.8 billion was linked to subprime mortgages, $2 billion was from its exposure to Alt-A mortgages, and $871 million related to credit protection it had bought from bond insurers. Even after these charges, however, the bank said it still has significant exposure to U.S. mortgage assets. UBS said its net subprime exposure fell to $27.6 billion from $38.8 billion in September. But it also revealed several other positions that could lead to further write-downs, including around $26.6 billion of exposure to Alt-A mortgages -- which are riskier than prime mortgages but not as risky as subprime -- and around $3.6 billion of exposure to bond insurers.

Solvency Worries Stalk Credit-Derivatives Market
Suppose you lent money to Morgan Stanley back in the mists of 2004, paying a bit more than 99 percent of face value for a chunk of the bank's $4 billion of 4.75 percent bonds repayable in April 2014. According to Feb. 12 prices on the Trace reporting system, the bonds are now worth about 97 percent of face. According to your gut instincts, there may be worse to come. Rather than sell at a loss, you decide to buy insurance in the derivatives market. You call your friendly credit-default swap broker, who happens to work for Merrill Lynch & Co. He quotes a price of 160 basis points, which means an annual cost of $160,000 to insure $10 million of debt for five years. If Morgan Stanley's creditworthiness slumps, the value of that swap will rise, delivering a profit to offset further losses on your bonds.

Totally spent
We're sliding into recession, or worse, and Washington is turning to the normal remedies for economic downturns. But the normal remedies are not likely to work this time, because this isn't a normal downturn.The problem lies deeper. It is the culmination of three decades during which American consumers have spent beyond their means. That era is now coming to an end. Consumers have run out of ways to keep the spending binge going. The only lasting remedy, other than for Americans to accept a lower standard of living and for businesses to adjust to a smaller economy, is to give middle- and lower-income Americans more buying power. And not just temporarily.

Bye bye American Pie: students become the next victims of the credit crunch
American students borrowing money to go to college could be the next victims of the global credit crunch as investors back away from traditionally low-risk securities backed by student loans. A state lending agency has suspended loans under a programme serving students at some 100 colleges and universities. Experts fear that others could follow. The Michigan higher education student loans authority cited "current and unprecedented capital markets disruption" for its decision to axe its alternative loans programme. Student loans are typically packaged into securities that have a floating interest rate determined through regular auctions - called the auction-rate securities market, worth an estimated $360bn (£183bn). In recent weeks, many of these bonds have been left unsold.

Wait till 2009
The housing market will not stabilize until late in 2008 at best, with sales, starts and prices continuing their slide through most of the year, economists attending the International Builders Show here said Wednesday. Housing starts, which fell 30% in 2007, could drop nearly that much again in 2008, said David Seiders, chief economist for the National Association of Home Builders. His forecast calls for new-home sales to fall to a 25-year low of 632,000 units in 2008, down more than 20%. Existing-home sales will drop as well, to a 20-year low, of 4.33 million units. And while home-price trends will vary across the country, the national median price is projected to drop again in 2008.

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Wed 02.13.2008

Venezuela halts oil supplies to Exxon Mobil
Venezuela halted oil supplies to Exxon Mobil, the latest move by the country's president, Hugo Chavez, in an increasingly bitter dispute over the country's seizure of the company's stake in two oil ventures. Chavez, who had threatened to cut off all oil shipments to the United States, instead on Tuesday opted to cut off oil supplies to Exxon Mobil. Exxon and Venezuela have been fighting over the country's move in the summer to seize Exxon's stake in two ventures. The company won a judgment last week that froze more than $12 billion in assets belonging to the state-held Petroleos de Venezuela. PdVSA said its move won't affect cooperation overseas, a reference to a refinery in Chalmette, La. that converts 180,000 barrels a day of oil.

Retail sales rise on autos and gas in Jan.
U.S. retail sales were better-than-expected in January, pushed higher by a surprise gain in auto sales and the rising cost of gasoline, the Commerce Department reported Wednesday. Retail sales rose 0.3 % in January after sinking 0.4% in December. Excluding autos and gas, sales were flat in the month. Gasoline station sales rose 2.0% in January after remaining unchanged in December. Excluding gasoline, retail sales rose 0.1%. Over the past year, gasoline sales are up 23%. Motor vehicle sales rose 0.6% by dollar value. This is the biggest gain since September. Excluding autos, retail sales rose 0.3% This was in-line with expectations.

Detroit Had Top Foreclosure Rate in '07
The Detroit area, hit hard by the double-whammy of unemployment and a slumping housing market, had the highest foreclosure rate in the nation last year, with several cities in California ranked close behind, an analysis of foreclosure activity in the country's largest 100 metropolitan areas shows. Some 4.9 percent of the households in the Detroit metro area were in some stage of foreclosure in 2007 -- 4.8 times the national average, according to the study being released Wednesday by mortgage research company RealtyTrac Inc. Stockton, Calif., ranked second with about 4.8 percent of its households in some stage of foreclosure, while the Las Vegas metro area was third with a 4.2 percent rate.

Crumbling Bedrock of U.S. Security
During the War of Independence, America learned the painful lesson of reliance on foreign nations. The newborn United States had to rely on France and the Netherlands to supply everything from iron and gunpowder to blankets and clothing, and Britain routinely cut America’s supply lines. Seeing this weakness, America’s founders implemented a national strategy promoting industrial and military self-sufficiency in order to establish the nation’s security. It seems America has forgotten that lesson. One specific example is in mineral production. America’s leaders have allowed the nation’s once formidable mining industry to erode. Many minerals—including some that are strategically important for the military—are no longer produced in the United States at all. Due to lack of investment, radical environmental activism, and low-cost foreign competition, many of America’s former mining giants have turned off the drills, closed the refineries and sent the workers home, or have chosen to develop new production outside the U.S.

The grim repo: 1,28m US homes threatened by bailiffs
The sheer scale of the misery wreaked by the United States sub-prime mortgage crisis became clear on Tuesday in research showing that more than 1% of Ameri- can households were hit with some stage of repossession proceedings last year. About 2,2-million foreclosure documents -- including default notices, auction sale notices and repossession papers -- were filed on 1,28-million properties last year, according to RealtyTrac, a company that specialises in marketing seized properties. The figures emerged as the biggest US mortgage lender, Countrywide Financial, slumped to a $704-million loss for 2007 as its customers found themselves unable to meet repayments on high-risk mortgages. Countrywide, which blamed an "unprecedented worldwide financial crisis", was accused of precipitating the crisis by making irresponsible loans to low-income households.

Add another trillion
Christopher Ketcham, in his essay "Trends for Downsizing the US: The Bright Side of the Panic of '08", notes former Central Intelligence Agency consultant Chalmers Johnson addressing the "folly" of "military Keynesianism", which is defined as "devotion to militarism, weapons and warfare as fiscal stimulus". I bring this up not because I, as a gun-nut, gold-bug, paranoid lunatic have spent a fortune on weapons but yet am still outgunned by the local police and the US military, all thanks to the government's capriciously arbitrary, unwritten "rule" that citizens cannot own nuclear weapons for "home defense", but because President George W Bush has unveiled his new budget, which is a whopping US$3.1 trillion, has $400 billion of deficits from the get-go, and sports some big increases in its purchases of military ordnance.

Mortgage insurer MGIC lost almost $1.5B in 4Q, looks for more capital
Mortgage insurer MGIC Investment Corp. said Wednesday it lost almost $1.5 billion for the last three months of 2007 on higher home delinquencies and payouts. It also said it is looking for ways to boost its capital. Chairman and chief executive Curt S. Culver said the company still doesn't see making money this year, if delinquencies and losses continue to rise and fewer homeowners get back on track with payments. The company said it has hired an advisor to assist it in exploring alternatives for increasing its capital, though Culver said MGIC has enough money to pay claims. The company announced late last month that it could pay $2 billion in claims this year, up from previous estimates of up to $1.5 billion. It finished 2007 paying out $870 million in claims, up from $611 million in 2006.

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Tues 02.12.2008

GM Posts Biggest Annual US Auto Loss
General Motors Corp. reported a $38.7 billion loss for 2007 on Tuesday, the largest annual loss ever for an automotive company, and said it is making a new round of buyout offers to U.S. hourly workers in hopes of replacing some of them with lower-paid help. The earnings report and buyout offer came as GM struggles to turn around its North American business as the economy weakens. But GM Chairman and Chief Executive Rick Wagoner said that the company made significant progress in 2007, reducing structural costs in North America, negotiating a historic labor agreement and growing aggressively in Latin America and Asia. The Detroit-based automaker said it was offering a new round of buyouts to all 74,000 of its U.S. hourly workers who are represented by the United Auto Workers.

Home builders, in survival mode
These are dark days for home builders, many of whom are desperately trying to sell off excess housing inventory. Prospective buyers, concerned that prices will drop even more than they already have -- not to mention jittery about the prospect of a recession -- aren't showing up at models and information centers as they once were. And while mortgage interest rates are low, stricter standards to be eligible for those loans are keeping some buyers sidelined. In the meantime, new homes are facing competition from the many existing homes on the market as well as a growing number of foreclosures. All of this serves as a dismal backdrop for the annual International Builders' Show, being held in Orlando this week.

Global inflation climbs to historic levels
While the world frets about a possible U.S. recession, global inflation has quietly climbed to historic levels, confronting policy makers with tough choices that could end up hurting the euro and lifting Asian currencies. The dollar, meanwhile, could stabilize after two consecutive years of steep declines, caught between strength against European currencies and weakness versus Asia. The dollar's descent accelerated, particularly against the euro, in the second half of 2007 as falling housing prices, volatile equity markets and slack consumer spending pointed to a possible recession in the United States. Now, concerns about growth have moved across the Atlantic. The euro fell 2 percent against the dollar last week, the biggest fall since June 2006, as markets began betting that the European Central Bank would have to cut its own borrowing costs, even with euro-zone inflation at unprecedented levels.

Auctioneers bring down hammer on America's broken dreams
Bellowing a quick-fire patter of garbled numbers, the auctioneer brings down his hammer - bang! A pianist lets rip with a jaunty snippet of easy-listening music on an electric keyboard, then another Californian home goes on the block.In the ballroom of a tourist hotel outside the gates of Los Angeles' Disneyland resort, some 250 bank-owned properties were sold this weekend in rapid succession. The deals are noisy, no-nonsense and decisive - each takes barely three minutes. This is the bargain basement of America's sub-prime mortgage crisis. The houses and flats offloaded by specialist auctioneer Hudson & Marshall are all properties repossessed by lenders from people unable to keep up the payments on homeloans.

U.S. mortgage crisis spreads past subprime loans
The credit crisis is no longer just a subprime mortgage problem. As U.S. home prices fall and banks tighten lending standards, people with good, or prime, credit histories are falling behind on their payments for home loans, auto loans and credit cards at a quickening pace, according to industry data and economists.The rise in prime delinquencies, while less severe than the one in the subprime market, nonetheless poses a threat to the battered U.S. housing market and weakening economy, which some specialists say is in a recession or headed for one.Until recently, people with good credit, who tend to pay their bills on time and manage their finances well, were viewed as a bulwark against the economic strains posed by rising defaults among borrowers with blemished, or subprime, credit. "This collapse in housing value is sucking in all borrowers," said Mark Zandi, chief economist at Moody's Economy.com.

AIG warns of $4.8bn sub-prime writedown
American International Group (AIG), the world’s largest insurance company, gave warning yesterday that it would need to write down the value of investments in sub-prime mortgages by about $4.88 billion (£2.5 billion) for October and November. The group, which predicted as recently as December that the write-down for those two months would be $1.1 billion, said the increase related to a change in the way it calculated the value of investments in its sub-prime mortgage derivatives portfolio. AIG gave warning that its auditor, PricewaterhouseCoopers, had found a "material weakness" in the way the company values its portfolio of credit swaps and said that it had not yet determined the decline for December.

U.S. Banks, Paulson Plan New Bid to Cut Mortgage Foreclosures
Bank of America Corp., Citigroup Inc. and four other U.S. lenders will announce new steps today to help some borrowers in danger of default stay in their homes, according to three people familiar with the plans. Encouraged by Treasury Secretary Henry Paulson, the banks will offer a 30-day freeze on foreclosures while loan modifications are considered, two people said on condition of anonymity. The initiative, which follows a week of talks with Bush administration officials, will apply to customers who are at least three months late on payments and include prime borrowers, as well as those with poorer credit histories. Paulson, who as recently as last month opposed a moratorium on foreclosures, is pushing lenders to go beyond earlier pledges to freeze subprime interest rates for five years. The deepest housing slump in a generation is threatening consumer spending and the job market, pushing the economy to the verge of a recession.

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Mon 02.11.2008

Gold bugs believe bears lost last shot to keep price down
Gold dodged a bullet this past week. Gold bugs think this might have been the bears' last shot, and the path to $1,000 is now clear. On Feb. 1, gold was hit with massive waves of selling. By Tuesday's close it had lost over $40, taking it below $890. The technical damage was serious. The Gartman Letter was spooked out of 40% of its gold holdings on Tuesday, and started talking of gold going down to $800. Then gold counter-attacked. "In the three trading days since Feb. 5, it reversed and stormed upward by $U.S. 32.50, closing (spot future basis) on Friday, Feb.8 $918.40 ... the gold price fell below both 10 and 20-day moving averages this week only to turn right around and move above them again by the end of the week. The shorter term moving average remains above its longer term counterpart."

Chavez threatens to cut off U.S. oil supply
President Hugo Chavez on Sunday threatened to cut off oil sales to the United States in an "economic war" if Exxon Mobil Corp. wins court judgments to seize billions of dollars in Venezuelan assets, according to a media report. Chavez repeatedly threatened to cut off oil shipments to the U.S., which is Venezuela's No. 1 client, if Washington tries to oust him, Associated Press reported. Chavez's warnings on Sunday appeared to extend that threat to attempts by oil companies to challenge his government's nationalization drive through lawsuits, according to the report. Venezuela, is the fourth-largest crude-oil supplier to the U.S. In November, the latest month for which figures are available, the 1.23 million barrels a day from Venezuela accounted for about 12 percent of U.S. imports in November, AP said.

Dozens of U.S. banks will fail by 2010
Dozens of U.S. banks will fail in the next two years as losses from soured loans mount and regulators crack down on lenders that take too much risk, especially in real estate and construction, an analyst said. The surge would follow a placid 3-1/2 year period in which just four banks collapsed, all in the last year, RBC Capital Markets analyst Gerard Cassidy said in a Friday interview. Between 50 and 150 U.S. banks -- as many as one in 57 -- could fail by early 2010, mostly those with no more than a couple of billion dollars of assets, Cassidy said. That rate of failure would be the highest in at least 15 years, or since the winding down of the savings-and-loan debacle. "The initial round of failures will come from smaller banks with limited access to capital and overexposure to commercial real estate," Cassidy said.

Anxious time ahead for markets as G7 hints at worsening global gloom
Traders in the City of London are steeling themselves for extreme market volatility after a meeting of the Group of Seven finance ministers at the weekend hinted at a worsening outlook for the global economy and even more sub-prime banking losses. Currencies, equities and bonds are all tipped for at least a month of turmoil after the G7 meeting ended on Saturday with only weak prospects of a coordinated response to the market crisis. Henry Paulson, the US Treasury Secretary, directly raised the prospect of worse instability to come, giving warning that markets "should expect continued volatility as risk is repriced". The meeting, held in Tokyo, may even trigger a phase of turbulence in the price of gold, which ended last week trading at $923 an ounce, close to a record high.

The Bush Financial Bust of 2008
On January 14, 2008 the FDIC web site began posting the rules for reimbursing depositors in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC) is required to "determine the total insured amount for each depositor....as of the day of the failure" and return their money as quickly as possible. The agency is "modernizing its current business processes and procedures for determining deposit insurance coverage in the event of a failure of one of the largest insured depository institutions." The implication is clear, the FDIC has begun the "death watch" on the many banks which are currently drowning in their own red ink. The problem for the FDIC is that it has never supervised a bank failure which exceeded 175,000 accounts.

Bank of America blindsiding cardholders?
The nation's biggest bank is doubling interest rates for some of its most responsible credit card customers. Credit card issuers have drawn fire for jacking up interest rates on cardholders who aren't behind on payments but whose credit scores have fallen for other reasons. Now, some consumers complain, Bank of America is increasing rates based on no apparent deterioration in their credit scores at all. The major credit card lender in mid-January sent letters notifying some responsible cardholders that it would more than double their rates to as high as 28%, without giving explanations for the increases, according to copies of five letters obtained by BusinessWeek.

Fed's Big Dilemma: What If Rate Cuts Don't Work?
As the Federal Reserve tries to head off a recession, it's facing the troubling reality that its primary weapon--interest rate cuts--may not matter anymore. Despite several rate cuts--including a 1.25 point decline in January alone--the moves have done little more than give the stock market a temporary bounce. Meanwhile, recession worries continue to grow--even among Fed officials themselves. The problem, analysts, say, is that the rate cuts haven't encouraged banks to start lending again. After billions of dollars of losses from subprime debt, banks are still reluctant to put money into the cash-starved economy. As a result, doubts are growing that the Fed can do much of anything to get the economy--and the markets--back on solid footing.

- - - - - - - - - - - - - - - -
Archived Page Link
- - - - - - - - - - - - - - - -

Fri 02.08.2008

Gold Rises, Set for Weekly Gain, on South African Supply Curbs
Gold advanced in London, adding to a weekly gain, on concern South African power shortages will curb output in the world's second-biggest miner of the metal. Platinum jumped to a record. Gold rose for a third straight day after AngloGold Ashanti Ltd., the world's third-largest miner of the metal, yesterday said output this year may be 400,000 ounces lower than earlier forecast because of the electricity cuts. The company last month lost 200,000 ounces of production because of outages. South Africa generates about 11 percent of world gold production. ``South African power cuts'' are ``causing production to fall below planned levels,'' John Meyer, head of mining stocks at London-based Fairfax I.S. Plc in London, said in an e-mailed note today.

Surrender of the Silver Shorts
One major theme that unites a lot of silver investors is the matter of the major short sellers of silver. To be more precise, the well known fact is that the class of silver traders known as the commercials has been net short silver for literally decades. The chart below demonstrates this fact quite readily. The silver price is in green and the net commercial position in black (a negative number indicates a collective short position) For the last 21 years and presumably longer, the net position of the commercial traders has been short on silver. Note this is the "net" commercial position on silver. Commercial traders do go long silver as well but the number of times they have taken the short side of a contract has consistently outweighed their long side on other contracts over a span of three decades or more.

Dollar daze
To earn a 22% gain on your money last year, all you had to do was open a checking account in Canada. A year later, your Canadian dollar-based account would buy 22% more U.S. dollars. The message is loud and clear: When the U.S. dollar is falling in value, don't invest in dollar-denominated investments if you can avoid them. Last year, the best and easiest way to make money may have been to invest in foreign currency. The U.S. eagle has been trampled by loons, kangaroos and even French poodles. The Canadian dollar (decorated with the loon and called the "loonie"), the Australian dollar and the euro all posted double-digit returns over the greenback in the past 12 months.

U.S. widens probe, seeks Merrill information
Federal prosecutors, expanding their look into Wall Street firms' mortgage businesses, have asked the Securities and Exchange Commission for information that the agency has collected on Merrill Lynch & Co., The Wall Street Journal reported Friday. The Journal, citing people familiar with the situation, called the Justice Department's interest "preliminary" but said sources told the newspaper that the U.S. attorney's office request could be a precursor to a criminal investigation. The Justice Department's move comes after the SEC has upgraded its own investigation into a formal probe, the paper reported. Moreover, the FBI is looking into dealings at 14 different firms and the way they did mortgage business.

Congress passes $152 billion stimulus plan
Congress on Thursday passed a $152 billion economic stimulus package designed to provide a timely, targeted and temporary boost to the flagging U.S. economy. One day after Republicans successfully filibustered a broader plan favored by the Senate Finance Committee, the Senate approved the Republican-backed measure, nearly identical to one passed by the House last week, on an 81-16 vote. The House approved the measure hours later on a 380-34 vote. President Bush is expected to sign the legislation quickly. "This plan is robust, broad-based, timely, and it will be effective," Bush said in a statement released by the White House. "This bill will help to stimulate consumer spending and accelerate needed business investment."

Meet the Weimar Dollar
Where is this $150,000,000,000.00 "economic stimulus package" coming from? Let’s make this really clear. The United States government does not have any money. On the contrary, the national debt now stands at $9.2 trillion dollars, which is more than 61 times more than the "package." So, as they don’t have the money to give, those $600 checks they plan to mail out this spring will literally comprise just printing money. In order to hand out a mass of cash they don’t have, therefore, they have to borrow it. Consequently, this week Bloomberg reported that rates were going up for long-term treasury notes. There it is, this deeply-indebted entity – the US Government – is borrowing an additional $150 billion on top of that $9.2 trillion they already owe, then

Previous Posts

Archives