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By David Bradshaw ~updated hourly~ email ~ links ~ wisdom
Editor, Real Money Perspectives ~ weekly email ~ daily email
Mar 31, 2009 ~ features ~ ((podcast)) ~ gold fraud alert!
Tuesday gold prices rose on a weaker dollar as Wall St. rallied amid month-end bargain hunting. Gold closed in NY up $2.20 to $918.00/oz., silver fell $.09 to $12.97/oz.
* "In an environment where the reserve currency of the world could become shunned, gold could do extraordinarily well," said John Reade, UBS metals strategist to Bloomberg. Gold is heading for a second straight quarterly gain, on speculation that a weaker dollar will boost the metal’s appeal as an alternative asset.
* "Gold will trade as high as $1,080 through the first half of 2009." Will gold lose safe-haven investors to U.S. Treasurys? Not if they're sharp-eyed. "T-bills are really deferred dollars and it's impossible to know what those dollars will be worth in 20 years. You know what commodities are worth now, and you'll know what they're worth then," said BlackRock managing director Evy Hambro reports CNBC.
* Gold ended the month down 2%, but remains up over 4% year to date in 2009. Silver slipped 1% in March, but is up 12% ytd. Despite extreme volatility precious metals remain the world's ultimate store of value. A strong bear market rally pushed stock prices up from decade lows in March on mixed economic news, sweeping government bailouts and fiscal rule "changes".
* "U.S. stocks pared their gains Tuesday as a rally in the financial and technology sectors petered out. The Dow ended up 8% for the month, but off by 12% in the first three months of the year, bringing the benchmark's losing skid to six quarters - its longest string of quarterly declines since the six quarters ending June 30, 1970," reports MW.
* "Gold is a resilient commodity and we are saw that on Monday. Oil prices were down over 7% on the day, while gold prices fell only 0.7%. The news creates some risk that the recession could be worse than expected," said Aaron Fennell, commodity broker at MF Global to CEPNews.
* "Russia would favor the inclusion of gold bullion in the basket-weighting of a new world currency based on Special Drawing Rights issued by the International Monetary Fund. Chinese and Russian leaders both plan to open debate on an SDR-based reserve currency as an alternative to the US dollar at the G20 summit in London this week," reports Telegraph.
* "China's recent call to replace the US dollar with a new global currency is gaining traction within the international community. A reserve currency system based on an IMF unit instead of the US dollar could be phased in within a year, said Joseph Stiglitz, a Columbia University economics professor who heads a United Nations expert panel," reports ChinaDaily.
* "Another tumultuous quarter for investors draws to a close. Top financial news includes; record decreases are reported in U.S. home values, consumer confidence moved up from record low and job worries persist," reports MW.
* "World stock markets slid Monday amid renewed fears about the fate of the U.S. auto industry and the global banking sector as well as mounting pessimism surrounding this week's G-20 meeting of leaders. TARP still has $135 billion left in it, said Tim Geithner but a second batch of money might be needed, despite public frustration with the already allocated money," reports AP.
* "President Obama asserted unprecedented government control over the auto industry Monday, rejecting turnaround plans from General Motors and Chrysler and raising the prospect of controlled bankruptcy for either ailing auto giant. Eager to reassure consumers, Obama also announced the federal government would immediately begin backing the warranties that new car buyers receive," reports CNBC.
* "U.S. stocks closed sharply lower Monday after the White House said bankruptcy was a possibility for General Motors Corp. and Chrysler. The DJIA closed down 3.25% at 7,522. Shares of GM, a Dow component, slumped 25% to $2.70 a share," reports MW.
* The national debt is now above $11 trillion, pushing "YOUR Family Share" to nearly $100,000, and rising daily. Historically government bills, notes and bonds have been considered a "safe" because they have a guaranteed rate of return, based on faith in future US tax revenues, but as new trillions are being added weekly many experts believe a day of reckoning is fast approaching.
* "Against the metric of gold, it is highly possible those economies in a permanent downward spiral - Europe, Japan and large parts of the US - simply do not have the fundamental strength to pull off the debt-fueled rallies being considered now. America can no more pull off a $3 trillion deficit than the old Soviet Union could pull off the stunt of keeping the ruble on parity with the US dollar," reports AisaTimes.
* "Time is of the essence as we move into the next trading phase for gold and silver. From 2001 to 2008 phase one showed us remarkable returns. The next phase should show us wider trading ranges in precious metals and much higher prices," reports Roger Wiegand, Editor of Trader Tracks Newsletter at GoldBlog.
March 27th news & views ~ Stocks dead cat bounce
* "U.S. stocks dropped on Friday, with figures showing declining consumer spending and income, dampening some of the enthusiasm that has given an 6% pop to equities this week," reports MW.
* What's Left of TARP? Treasury Stays Mum: "It appears that Treasury has, at most, $52.6 billion left in its rescue fund, based on Dow Jones Newswires' reporting and calculations. That would mean about 92% is already committed. The Treasury promised "a new era of accountability, transparency and conditions." But the Treasury isn't answering a key question: How much is left in the rescue fund?" reports WSJ.
* G20 summit: Geithner calls for global regulation: The issue of systemic risk will be central to the debate at the G-20 summit in London next Thursday. "Our hope is that we can work with Europe on a global framework, a global infrastructure which has appropriate global oversight," said Treasury sectretary Tim Geitner reports Telegraph.
"America’s energy resources can do more than just fuel our cars and heat our homes, they can also help power the engine of economic recovery — without requiring the government to write more checks that the Treasury can’t cash. This Administration has given every indication that it plans to make domestic oil exploration as difficult and expensive as possible," reports IER.
* "Stocks rallied to the finish line as investors were encouraged by demand fof a $24 billion auction of seven-year Treasury notes and some better-than-expected earnings. The Nasdaq is now up 0.6% since the new year began, while the Dow is down 9.7% and the S&P is off 7.8%. Economic news still painted a bleak picture of the economy with fourth-quarter GDP falling 6.3%," reports CNBC.
* New rules for the Wall Street game: "Treasury Secretary Tim Geithner unveiled sweeping new "rules of the game" for Wall Street during Congressional testimony Thursday. Geithner's proposals -- most of which will likely require new legislation -- would extend federal regulation of derivatives trade and place tighter controls over hedge funds and require them to hold more capital as a buffer against losses," reports MW.
* "Treasury Secretary Tim Geithner said the U.S. is "open" to China's proposal for a new global currency to replace the dollar by the governor of the central bank. The continued use of the dollar as a reserve currency, "depends..on how effective we are in the United States...at getting our fiscal system back to the point where people judge it as sustainable over time." reports Politico.
* "The big picture is that the U.S. government is putting more liquidity into the system and that will eventually weaken the dollar and help gold," said Frank McGhee, head dealer at Integrated Brokerage Services LLC in Chicago, reports TheAge.
* "We are headed for a massive dollar devaluation, regardless of the means -- whether it is accomplished by central banks, or by the markets reacting to huge government money printing that force the devaluation. Unlike during the Great Depression, we are no longer on the gold standard. Currencies are free to float and can be manipulated by central banks or politicians and moved by markets. In fact, I believe that one or both has already begun. I expect the dollar to gradually lose its luster until either the central bankers, or the markets, push it off the cliff," reports Forbes.
* "The Euro region will get stuck with massive deflation as the U.S. and China try to inflate their way out of the global financial crisis, together. Within two to three years from now, China, the U.S. and Europe will get together under a new G-20 series of meetings, and a new, single world currency will be born. Like it or not, it's coming," reports Money&Markets.
* China calls for new reserve currency: The goal would be to create a reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies. "This is a clear sign that China is concerned about the potential inflationary risk of the US Federal Reserve printing money," said Qu Hongbin, chief China economist for HSBC to FTimes.
* A world currency moves nearer after Tim Geithner's slip: "China's plan suggests a resource currency along the lines of the "Bancor" floated by Keynes at Bretton Woods. This was anchored on 30 commodities, giving it a broader base than the Gold Standard. Such a currency would prevent the "credit-based" debauchery of today's fiat system, says Mr Zhou. True, but this would be jumping from frying pan to fire. If the world is running out of oil, metals, freshwater, and arable land – as many believe – then the price of commodities must rise over time," writes Ambrose Evans-Pritchard at Telegraph.
* U.S. stocks rose, then fell then rose again at the close Wednesday, as the president of the San Francisco Federal Reserve, Janet Yellen, said that deflation will represent greater risks than inflation for some time.
* On the brighter side ... February durable goods orders showed a surprise 3.4% increase, which marks the first time in six months that orders were up. Also, new home sales for February increased 4.7% month-over-month to an annualized rate of 337,000, which is far better than the 2.9% monthly decline that was widely expected by economists.
* "Make no mistake, this rally has bear market written all over it. There is no ebb and flow, just a massive push higher where participants are forced to buy in on more panic than anything else. Because the market has been moving lower for so long, traders are afraid that they will miss a chance to make money on the upside. Normal, healthy rallies are interjected with periods of doubt to shake out weak hands," reports VRTrader.
* Save the Big Banks, Trash the Dollar: "The 'new economics' of the Bernanke era (since September 2008) is based on one gigantic bailout after another, either by the Federal Reserve or the Treasury. It also rests on a perpetual bailout offered by the People's Bank of China. How realistic are these assumptions? Not very. Yet they are the foundation of the investors' recent hope of a new bull market in stocks," reports LewRockwell.
* Are We Near a Low in the Stock Decline?: "The market has made quite a trek back toward normal valuations, but if you look at these multiples in terms of book value, we are at 4 times. It has to go down to 2 times to get back into the box, and we are getting there on the bond yield/stock yield ratio which means that the dividend payout is rising somewhat to catch up with borrowing costs. And because the S&P is down 45%, of course, the dividend payout as a percentage has gone up. But there is a problem there. If you're reading the newspapers, you know that companies have been cutting dividends. In fact, they've been cutting them at the fastest rate in half a century. So it is going to be difficult for values to get back to a normal valuation range. So the stock market has quite a bit lower to go in order to catch up with normal values, and this suggests that real estate may have the same sort of trend going on," writes Robert Prechter, author and renowned market analyst at FallSt.
* "Gold will rise to $1,050 within one month and $1,100 in three months," said UBS AG analyst John Reade. "Gold will probably continue to follow inflation expectations in the near term, although it remains vulnerable to improved risk-asset sentiment. Other central banks may also announce credit easing, and this could help sentiment toward gold," reports Bloomberg.
* "The world's major central banks, which hold more than 15% of global gold stockpiles, are expected to reduce their sales or lending of their bullion reserves this year, potentially restricting supplies and putting a floor under gold prices," reports MW.
* "The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy. The government at present has the authority to seize only banks," reports WashPost.
* "The U.S. government plan to rid banks of toxic assets will rob American taxpayers by exposing them to too much risk and is unlikely to work as long as the economy remains weak, Nobel Prize-winning economist Joseph Stiglitz said on Tuesday," reports MoneyNews.
* The U.S. government hopes to purge banks of up to $1 trillion in toxic assets to help pull the economy out of a deep recession. Concerns about the inflationary impact of allowing Obama, the Fed and Treasury to create over $4-5 trillion in new debt is steadily growing in the private sector.
* "The Treasury Department detailed a plan designed to help investors purchase $500 billion worth of toxic assets that remain on bank balance sheets Monday. The program will use $75 billion to $100 billion in capital from TARP, and capital from private investors," reports MW.
* Bear market rally or new bull market?: "In bear markets, corrections against the primary direction tend to arrive without warning and are very rapid, often recovering in a week the bear market damage of a few months. Part of the attraction of a bear market rally [correction] is the speed of the advance. This makes the rally doubly attractive and allows those still in the market the fantasy of recouping their losses in short order," said Richard Russell, editor of Dow Theory Letters reports MW.
* "Wall Street is getting the good news it wants on the economy's biggest problems: banks and housing. Investors cheered the government's plan to help banks remove bad assets from their books as well as a report showing a surprising increase in home sales. Major stock indicators jumped more than 7% including the DJIA, which surged nearly 500 points," reports AP.
* "Equity markets and industrial commodities such as copper and oil rallied as markets tried to price in the possibility the crisis engulfing financial markets could at last be coming to an end," reports Reuters.
* America, brace for inflation: "In the past, the Fed has pumped billions through low-interest loans, thus creating the "dot-com" bubble, the stock market bubble, the housing bubble and now the Treasury bubble as people seek safety. Once Treasuries burst, the recipient of the pumping will be commodities. However this time the bubble will not burst for unlike paper markets there is an actual commodity. Gold, oil, wheat, steel, copper, corn etc. cannot be created out of thin air. They are real. Their price movement will be a reflection of supply and demand," writes Swiss America CEO Craig R. Smith.
* "Money is being pushed into the system and that’s creating the inflationary threats that the markets are contemplating. Commodities are a decent way to hedge against that potential threat," said Daniel Brebner, director of commodity research at UBS AG in London," reports Telegraph - video Ambrose Evans-Pritchard on gold.
March 20th News & Views: Tangibles rally on inflation fears
* On Wall Street: "Financials give back the week's advance; major stock indexes close lower, but end the week with gains for second week. The market failed to regain momentum lost amid concerns about the Fed's plan to buy government debt. The U.S. dollar rebounded Friday but ended the week with a huge weekly loss," reports MW.
* "President Barack Obama's budget would generate deficits averaging almost $1 trillion a year over the next decade, according to the latest congressional estimates. Obama's budget will produce $9.3 trillion worth of red ink over 2010-2019. That's $2.3 trillion worse than the White House predicted in its budget," reports Reuters.
* "A weakened dollar and evidence that OPEC has significantly slowed production sent oil prices soaring to new highs for the year Thursday. "I think we'll see higher oil prices for a while," said Michael Lynch, president of Strategic Energy & Economic Research. "There's an expectation the market has bottomed out," reports AP.
* The Fed's decision to invest $300 billion in Treasurys drove stocks and gold up sharply Wednesday and sent the U.S. dollar into a tailspin. Thursday the U.S. dollar traded at its lowest level in nearly two months versus the euro on diminished safe-haven appeal.
* The Fed's announcement to create yet another trillion dollars out of thin air marks the official end of the buck's "safe haven" rally and the return to its historic inverse relationship with gold prices. Gold's ability to rally in the face of a stronger dollar over the last six months illustrates gold's fundamental strength. Gold prices are ready to rocket as inflation and money supply take flight. "Helicopter Ben" is living up to his name.
* "The Fed is financing our deficit by buying the debt issued by the Treasury. Common sense should tell us all that you can't reinflate a burst bubble. The only option is to create a new inflationary bubble -- like the Fed is doing -- probably in commodities. In response, gold prices are set to blast up to $1,200/oz. short-term and above $2,000 longer-term," said Swiss America CEO Craig R. Smith.
* A U.N. panel will next week recommend that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar," reports Reuters.
* "The Fed said it will buy up to $300 billion in long-term Treasurys over next six months. The purchases of mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac will push the maximum to as $1.25 trillion, up from the previous $750 billion. The Fed also said it would increase the size of its potential purchases of the mortgage giants' debt to $200 billion from $100 billion," reports WSJ.
* "Owning gold coins should be viewed much as an insurance policy against an uncertain economic future. Most Americans have car insurance, health insurance, life insurance, etc., and hope they'll never need them, but they offer peace of mind in case of a crisis. Gold is the ultimate wealth insurance," Swiss America CEO Craig Smith recently told HarvestTV.
* Real gold vs. 'Bernie Maddoff' gold?: The physical gold coin (or bar) market represents economic reality. In 2009, U.S. gold coin prices have moved higher, rather than the sideways movement of Wall St. gold bullion substitutes. For example, while bullion prices are up 7% ytd, U.S. American Eagle and historic $20 gold pieces are up 25-30%! In 2008, gold bullion was up just 5%, but $20 gold pieces rose 20-30%. Which would you rather own; real gold or 'Bernie Maddoff' gold certificates?
* Gold safer than cash: "Gold can be considered a currency, unique in that it is not directly tied to any country's economy. With a global recession that is bound to continue to shake up the purchasing power of all foreign currencies, gold is safer than cash from political and economic instability. Like any financial market, the gold market is susceptible to manipulation," reports TIME.
* Gold’s About To Burst Out Of Its Recent Range: "Would a break of gold's price uptrend worry me? Not much. I believe that a pullback is fine - a normal and necessary part of any bull market. Take a look at this monthly chart of gold prices. Gold has a long way to go before testing its longer-term monthly uptrend," reports DailyMkts.
* Consumer prices rising despite recession: "With energy prices rising at the fastest rate in seven months, U.S. consumer prices increased a seasonally adjusted 0.4% in February, the Labor Department reported Wednesday. The 0.4% gain in the consumer price index was the second increase in a row and the largest since July. In January, the CPI rose 0.3%," reports MW.
* Stocks Slide Ahead of AIG and Fed: "Stocks opened lower Wednesday, retracing the previous session's rally, as investors were jittery ahead of the AIG CEO's appearance on Capitol Hill today and the Federal Reserve's statement after a two-day meeting. It would be nice to see a statement about any Fed plans for "quantitative easing" and buying Treasurys but it appears in the last few weeks there is something holding them back," reports CNBC.
* Financial Journalists Fail Upward: "The reasons the financial-entertainment biz failed us are many and complex, but they ultimately come down to this: In the marketplace to describe the marketplace itself, there is precious little competition. There is a single, standard product that comes in packaging that is alternately sultry, energetic or fun -- bitter, brainy or Cramer "crazy" -- but which rarely strays beyond certain ideological boundaries. Adversarial voices are few. Criticism is sacrificed for access. Advice sometimes shades over into simple propaganda. And the small investors whom the personal-financial industry claims so much to adore remain bystanders in a drama they neither understand nor control," reports WSJ.
* Russia's "supranational reserve currency" dreams: "The Kremlin published its priorities for an upcoming meeting of the G20, calling for the creation of a supranational reserve currency to be issued by international institutions as part of a reform of the global financial system. Both President Dmitry Medvedev and Prime Minister Vladimir Putin have repeatedly called for the ruble to be used as a regional reserve currency, although the idea has received little support outside of Russia.reports," reports MosTimes.
* New Treasury "counselor", 'Blind leading the blind': "Citigroup Inc.'s chief economist Lewis Alexander is leaving the company to become a counselor to Treasury Secretary Timothy Geithner, according to an internal Citigroup memo. Mr. Alexander's optimistic economic forecasts colored executives' views that the U.S. was unlikely to face a prolonged slump. "I think that's not going to spill over more broadly into the economy, and so I think we're going to have a normal kind of housing cycle that's going to last through the middle of this year," Mr. Alexander said in a 2007 interview on PBS. In the past five quarters, Citigroup has booked a total of more than $37 billion in net losses, largely stemming from the company's overexposure to the U.S. real-estate sector," reports WSJ.
* "The eye-popping national debt surpassed $11 trillion this week, the largest in U.S. history.The debt includes the cumulative amount of money the government owes, hit $10.9 trillion last Friday. The whopping number has major ramifications for President Barack Obama, who is trying to push through a raft of big-ticket bills on health care, energy, education and climate change — while also attempting to stabilize the swooning economy," reports Politico.
* Obama's $1.5 trillion health care overhaul: "Guaranteeing health insurance for all Americans may cost about $1.5 trillion over the next decade, health experts say. That's more than double the $634 billion 'down payment' President Barack Obama set aside for health reform in his budget, raising the prospect of sticker shock at a time of record federal spending," reports AP.
* Anger Over AIG Depletes Obama's Political Capital: "President Obama's apparent inability to block executive bonuses at insurance giant AIG has dealt a sharp blow to his young administration and is threatening to derail both public and congressional support for his ambitious political agenda," reports WashPost.
* Fresh lipstick for the biggest porker in history: "The Obama Administration wants Americans to believe their plan for economic recovery will magically work, simply by presenting carefully worded statements by respected authorities over and over again. Welcome to Orwell's 1984 -- 25 years later than George first imagined" writes Swiss America CEO Craig R. Smith ( more...).
* IMF poised to print billions, swelling inflation: "The International Monetary Fund is poised to embark on what analysts have described as "global quantitative easing" by printing billions of dollars worth of a global "super-currency" in an unprecedented new effort to address the economic crisis. However, economists warned that the scheme could cause a major swell of inflation around the world as the newly-created money filters through the system," reports Telegraph.
* "Improved appetite for risk sparked an uptick in the equity markets and dented interest in precious metals as a safe haven. However, firm investment demand in the precious metal demonstrated by a fresh rise in exchange-traded fund holdings last week was supporting prices. Currency traders are looking ahead to Federal Reserve and Bank of Japan policy meetings this week," analysts said to Globe&Mail.
* "Today's economic crises have caused many to look to government for financial solutions, but experts warn that borrowing trillions will result in higher inflation and less money in your pocket. But true wealth is built on a solid foundation of gold," says Swiss America client and spokesperson Pat Boone - video.
* "Mints around the world say demand for gold coins has risen sharply as interest in the precious metal soars on the back of financial instability and concerns over the inflation outlook. "The demand for gold and silver has been unprecedented," the U.S. Mint told Reuters.
* "Gold prices are buoyed by ETF demand. The metal should benefit further in the coming sessions by renewed investment demand as the economic and financial sector outlook deteriorates further," said James Moore, a precious metals analyst at TheBullionDesk.com to MW.
* The gold rush: Is it too late?: "Gold is the ultimate safe haven from governments' attempts to debase their various currencies, and will become the asset of choice for many investors wishing to protect themselves. The stage is now set for gold to rise to $3,000 an ounce or higher as a wave of freshly printed liquidity sparks a renewed global surge into the only asset that investors will trust in these circumstances," said Ian Williams, chairman of Charteris Treasury Portfolio Managers to Telegraph.
* "While last week's rally was impressive, it was sparked by some very good news. However, if you believe as I do that we're still in a bear market, such a phenomenon is called the 'Slope of Hope', i.e, we decline, bounce on good news and then resume the decline. It is the mirror image of the infamous 'Wall of Worry'. To get a real bull market, we need to be able to rally on bad news, not just good news," writes VRTrader.
March 13th News & Views: Stocks bounce 10%
* Last week gold prices slipped about 1% while silver prices held steady. Despite gold's recent sell-off, prices are up 3% ytd, silver is up 11%. Since 2001 gold has consistently been the 'trade of the decade', see The Big Picture.
* "Stocks went four for four Friday in a dramatic win that delivered stocks their best week since November. The DJIA gained more than 50 points, bringing its four-day total to nearly 700 points, or more than 10%. The S&P 500 gained 0.8% and Nasdaq added 0.4%," reports CNBC.
* "Forceful comments from China's Premier Wen Jiabao expressing concern about the outlook for the U.S. and the safety of its Treasury bonds -- helped depress the U.S. dollar and prices of U.S. Treasurys Friday," reports WSJ.
* "U.S. consumers' mood rose slightly in March as confidence in government economic policy improved, but sentiment remained anemic overall and close to a record low, a survey showed on Friday," reports CNBC.
* The equity illusion: "Even after its recent decline, the U.S. equity market does not look especially “cheap” or “undervalued” when viewed over time; the bear market has simply brought valuations back into line with long-term trends. Share valuations may rise from current levels, but higher credit costs and a lower share of profits in GDP will almost certainly ensure valuations do not regain their previously elevated level," reports Reuters.
* "Gold is still an exceptional buy. Traders will start looking at more traditional relationships like future inflation, government spending and devaluing of currencies," said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago to Bloomberg.
* Swiss bank currency sale spooks market: Gold jumped higher as the Swiss National Bank sold francs against the euro and raised the specter of a race to devalue major currencies. "If all currencies are being devalued against each other then gold is a currency which is going to profit from it," Commerzbank analyst Eugen Weinberg said to Reuters.
March 12th News & Views: Dow reclaims 7,000
* "Thursday stocks rallied into third straight day with major U.S. indexes up 3%-4%. Gains in the financial sector help stocks hit their highest levels in two weeks. Dow reclaims psychological level of 7,000. The pace of home foreclosures remains at flood stage, reports MW.
* "Stock markets drew strength from hopes for a change in mark-to-market accounting rules. The chairman of the Financial Accounting Standards Board pledged at a Congressional hearing to offer more guidance on the rule in three weeks. Treasury Secretary Geithner said suspending mark-to-market rules could lead to an erosion of the market's ability to assess risks at banks. Many traders remained on guard," reports WSJ.
* Nobel-prize winner backs world currency: "Kazakh President Nursultan Nazarbayev has won backing for his plan for a single world currency from an intellectual architect of the euro currency, Nobel-prize winner Professor Robert Mundell. Nazarbayev, speaking at an economic forum, defended his proposal for the "acmetal" world currency (combines the Greek word "acme," meaning peak or best, and "capital")," reports TheAustralian.
March 11th News & Views: Wall St. rally fades
* "Investors watched Wall Street's biggest rally this year fade into Wednesday's lackluster performance. Double-digit moves in either direction are to be expected in a bear market. Meanwhile, Freddie Mac asked the government for $30 billion in extra support late Wednesday after reporting a fourth-quarter net loss of $23.9 billion, or $7.37 a share," reports MW.
* U.S. stocks rebounded over 5% Tuesday after troubled Citigroup said it operated at a profit during the first two months of the year. Meanwhile, Fed Chairman Ben Bernanke called for a revamp of the country's financial regulatory system.
* Some investment pros are skeptical that the banking giant — or the market itself — had turned the corner. "I've lost count of how many of these rallies we've seen over the last year and a half and I don't suspect we'll see anything different here," Mike Larson, analyst with Weiss Research, told CNBC. "Would I be chasing this? No."
* Too big to fail? 5 biggest banks are 'dead men walking': "America's five largest banks, which already have received $145 billion in taxpayer bailout dollars, still face potentially catastrophic losses from exotic investments if economic conditions substantially worsen. Citibank, Bank of America , HSBC Bank USA , Wells Fargo Bank and J.P. Morgan Chase reported that their "current" net loss risks from derivatives surged to $587 billion as of Dec. 31," reports Mcclatchy.
* Top 10 headlines that could signal a stock market bottom: 1) A significant (more than 10%) one- or two-day drop in the market. 2) Timothy Geithner is replaced with Paul Volcker. 3) The 100th day of a bankruptcy by GM. 4) Gold at $2,000 an ounce. 5) The DJIA changes more than two names at the same time..." reports MW.
* "As the economy continues to flounder, consumer and investor confidence continue to hit record lows. Fifty-four percent (54%) of investors and 53% of non-investors say it is likely the country will slip into a serious depression," reports a RasmussenPoll.
* Credit Cards the Next Credit Crunch: "My revised estimates are that over $2 trillion of credit-card lines will be cut inside of 2009, and $2.7 trillion by the end of 2010. Inevitably, credit lines will continue to be reduced, but the velocity at which it is already occurring will result in unintended consequences for consumer confidence, spending and the overall economy," reports WSJ.
* "Oil rose to near $48 a barrel Tuesday after OPEC signaled it will likely announce another production cut within days, adding to large supply reductions the cartel has already implemented. A disruption of oil shipments in Nigeria and a weaker U.S. dollar also were seen supporting higher oil prices," reports AP.
* "The outlook for gold remains bullish as no quick fix to the global problems is likely. We feel gold will remain highly sought after regardless of whether we see deflation or inflation. Silver is seen as a cheaper way into the precious metals market and because it is a smaller market, moves tend to be exaggerated. Since the lows in October 2008, silver has climbed 71% compared to gold's 48%," ScotiaMocatta noted in its March 2009 issue of Metal Matters reports Mineweb.
March 9th News & Views: Dow 5,000? ... $2,000 gold?
* "Disappointment in the political landscape and worries about insurance companies should boost gold prices, as traders migrate toward investments that are not only less volatile, but also are seen as holding their value,” said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago. Gold and oil will be the best-performing commodities this year, according to a survey of investors by Barclays Capital," reports Bloomberg.
* Gold Rally to Continue: "Peter McGuire, managing director at Commodity Warrants Australia, tells CNBC that he sees a continued uptrend for gold," reports CNBC.
* "In the next 12 months a gold price of $2,000 an ounce is quite likely. If you saw the dollar resume its fall and maybe toward the end of this year, you started seeing people worried about the inflationary consequences of U.S. government policies, then gold prices could move up very sharply," reports Reuters.
* "Monday stocks retreated in a yo-yo session as an earlier advance in energy and big-cap technology companies dissipated. But banks held gains as investors hoped for more clarity on the government plan to firm up the financial system, with Fed Chairman Beranke meeting with President Obama today," reports CNBC.
* Dow 5000?: "Just how low can stocks go? Despite Friday's small gain, the Dow marked its fourth consecutive week of losses as it tumbled through the 7000-point mark and spiraled to new 12-year lows. The S& P 500 index is trading below 700 for the first time since 1996. As earnings are ratcheted down and hopes for a quick economic fix fade, the once-inconceivable notion of Dow 5000 or S&P 500 at 500 looks less far-fetched," reports WSJ.
* Global Financial Assets Lost $50 Trillion Last Year: "This crisis is the first truly universal one in the history of humanity," former IMF Director Michel Camdessus said at an ADB forum in Manila today. "No country escapes from it. It has not yet bottomed out." Growth in 2009 may drop by half in developing and emerging countries, and a recovery in the global economy may only begin late this year or in early 2010," reports Bloomberb.
* World stocks sink: "Investors continued to shun banks on worries the financial sector still hasn't raised enough capital to make up for its massive losses on bad assets. Heavyweight lender HSBC, Europe's largest bank, plunged over 24% in Hong Kong trade, and Lloyds Banking Group tumbled more than 10% in Britain," reports AP.
* "Debt and deflation are a deadly mix. The errors that led to our current predicament are well-known. A small army of economists – Austrians, Monetarists, and Keynesians – warned that central banks were playing with fire by fixing the price of credit too low and ignoring asset bubbles. The $6.7 trillion in reserve accumulation by China, Japan, and the petro-powers drove bond yields too low for safety. Those who say this is nothing like the Great Depression are complacent. Household debt is higher today, and UK banks are in worse shape," reports Telegraph.
March 6th news & views ~ Wall St. fears Obamanomics
* "A late bounce Friday pared heavy losses on the stock market for the week as bargain hunters came in to help General Electric recover some of its losses. Fears that some iconic companies would have to seek yet more government assistance continue to rise: General Motors fell 22% to $1.45; Citigroup traded for $1.03. The Dow closed up 32.50 points at 6626.94, but is off 6.1% on the week," reports MW.
* Dow's Blue Chips Are Akin to Penny Stocks: "After months of breathtaking declines, this is what Wall Street has come to: Blue-chip companies, once considered safe investments and cornerstones of the economy, are akin to penny stocks. The bear market is tightening its grip, despite efforts by the government to support the economy and some of its biggest companies," reports CNBC.
* "Last Friday the U.S. unemployment rate bolted to 8.1 percent in February, the highest since late 1983, as cost-cutting employers slashed 651,000 jobs amid a deepening recession," reports AP.
* Bankruptcy home loan bill passes House: "A plan to give debt-strapped homeowners a chance to lower their mortgage payments through bankruptcy courts won House approval Thursday as a report revealed that foreclosures and past-due home loans hit a record 5.4 million last year," reports AP.
* "Some economists say the worst may be over for consumer spending. "Consumers put away their credit cards. As we get past the shock, they will start spending. There's pent up demand. Whether it is long lasting is another story," reports CNBC.
* "Investors are buying gold due to financial-market fears," said Jeffrey Christian, a managing director at CPM Group in New York. "We continue to think investors should own gold as a hedge against the increased riskiness of other assets," analysts at Jefferies Group Inc. said to Bloomberg.
* ‘Obama Bear Market’ Punishes Investors: "President Barack Obama now has the distinction of presiding over his own bear market. The Dow fell 20% since Inauguration Day, the fastest drop under a new president in at least 90 years. More than $1.6 trillion has been erased from U.S. equities since Jan. 20 as mounting bank losses and rising unemployment convinced investors the recession is getting worse," reports Bloomberg.
* "Thursday investors fled Wall Street as fear grew about the stability of the nation's largest banks and worries mounted about General Motors. The major stock indexes resumed their slide Thursday, falling 4% after a one-day rally, to levels not seen in more than a decade as investors contended with more disheartening economic data," reports AP.
* BRAIN-TRUST BUST: "If you really want to understand why the markets have been tanking, why the smart money is sitting in cash and gold - well, just study the policy, or lack of it, that these guys have come up with to address economic ills not seen since the Great Depression," reports NYPost.
* The Obama Economy: "Team Obama is creating more uncertainty and less confidence -- and thus a longer period of recession or subpar growth. Americans have welcomed the Obama era in the same spirit of hope the President campaigned on. But after five weeks in office, it's become clear that Mr. Obama's policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery. From punishing business to squandering scarce national public resources," reports WSJ.
* "Wall Street's verdict on Obamanomics has been quick and sharp. The stock market's reaction doesn't bode well. The Dow has fallen 18% since the last trading day of Bush's term. Clearly, Wall Street thinks that Obama's tax, spend, and regulate policies will be a disaster. Despite the dire headlines, the world is not coming to an end, we are not headed into another Great Depression, and free-market capitalism has not breathed its last breath," reports CSMonitor.
* Federal Reserve Insists on Bank Secrecy: "The Fed refused yesterday to disclose the names of the borrowers and the loans of more than $1.9 trillion of emergency credit from U.S. taxpayers and the assets the central bank is accepting as collateral, alleging that it would cast “a stigma” on recipients," reports bloomberg.
* "This is a Depression… with a capital D… not a recession. It’s a depression because it requires a perestroika of the economy… a restructuring, not just a breather and bailouts. America could be creeping back towards a 10% savings rate. Economists call it the ‘paradox of savings.’ Savings are good for the individual, but when savings rates go up, spending goes down. The economy suffers. Then, people lose jobs and income, further depressing economic growth," reports DailyReckoning
* Odds of a Depression?: "The odds are roughly one-in-five that the current recession will snowball into a depression with the hallmark of a per-person GDP or consumption decline of 10% or more. The bright side of a 20% depression probability is the 80% chance of avoiding a depression. The U.S. had stock-market crashes in 2000-02 (by 42%) and 1973-74 (49%) and, in each case, experienced only mild recessions," reports WSJ.
* Rush challenges Obama to 1-on-1 debate: "With Democrats targeting talk-show host Rush Limbaugh as the de facto head of the Republican Party, the radio giant is now inviting President Barack Obama on his show for a face-to-face debate about policies important to America's future. "I am offering President Obama to come on this program without staffers, without a teleprompter, without note cards to debate me on the issues," Limbaugh said on his program today reports WND.
* U.S. rescue efforts may risk double-dip recession: "U.S. companies, consumers and communities may grow so addicted to government financial help that cutting them off could trigger another recession soon after the current one ends. Warren Buffett wrote in his annual letter to shareholders. "Weaning these entities from the public teat will be a political challenge. They won't leave willingly," reports Reuters.
* "A new lending program from the Federal Reserve and the Treasury Department could generate up to $1 trillion in loans to small businesses and consumers, the government announced Tuesday. The Term Asset-Backed Securities Loan Facility, or TALF, will provide its first loans March 25," reports MW.
* Technical analyst Louise Yamada sees a clear 10 year double-top in U.S. stock indexes and suggests we probably have further to fall. "Now that the 2002 lows have given way we have further to go," she says. "The first targets are 6,000 in the Dow and 600 in the S&P and the second target, I hate to say it, could be 4,000 and 400," reports CNBC - video.
Americans save money, buy gold
* "U.S. savings rates rose 5% last month, the biggest advance since 1995. So despite a deepening recession people are doing the right things; reducing spending, paying down debt, saving and diversifying into gold. The average guy has it right," writes Swiss America CEO Craig R. Smith.
* "Demand for gold increased by 64% in 2008, with most investors preferring gold bars or coins, according to the World Gold Council. The most striking trend has been the reawakening of investor interest in holding physical gold, with demand for bars and coins rising 87% last year," reports FundStrategy.
* "Gold is likely to more than triple from the current level to $3,500 in 2010. It’s the only form of money or credit not contaminated by the credit system - and the fact it’s still money is that central banks still own a lot of it, the global paper currency system will steadily deteriorate, eastern and central Europe will face a currency collapse, putting huge pressure on western Europe," said Equity Strategist Christipher Wood to BusIntel.
* "Gold is something you buy if you have something to lose," says Adrian Ash at BullionVault. What links today’s gold fever with the 1970s rush is negative real deposit rates. Many savers now prefer a claim on gold in a vault to one on cash in the bank. There is less risk that a counterparty blows up," reports Economist.
* "Major emerging economies are seeking to raise their central banks' gold reserve holdings as fears of a sharp depreciation in the U.S. dollar mount, senior industry officials said on Monday. Investors have been piling into gold as a safe haven as the the world's worst financial crisis since the 1930s depression sent global stock markets crashing," reports Reuters.
* Era of big government: "This budget pulls off the mask Obama wears. The Obama plan will raise taxes, reduce deductions for home mortgage interest and substantially reduce the tax breaks for those of us who believe charitable giving should be voluntary. I understand a socialist wanting to take from the rich – but from charities? He detests helping anybody in any way unless the government is involved in the process. He is putting his trust in a broken system that has proven to be the most inefficient and wasteful purveyor of spending the world has ever seen – short of Paris Hilton, of course," writes Craig R. Smith at WND.
March 3rd News & Views: Wall Street yo-yo
* "Stocks ended a yo-yo session lower Tuesday, with the S&P ending a few points below the 700 mark as as investors remained on edge. Bernanke said that economic prospects remain uncertain and said more action will be necessary to jolt the economy out of this rut. Treasury Secretary Tim Geithner vigorously defended tax hikes in the administration's $3.6 trillion budget during testimony before a House panel today," reports CNBC.
* "The S& P 500 has now fallen below the levels that prevailed on Dec. 5, 1996, when Alan Greenspan, then the chairman of the Fed, inquired in a speech, "How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?" It was a question that has been answered over the last 17 months," reports NYTimes.
March 2nd News & Views: Wall Street searches for bottom
* "Gold slipped 1.5% Monday as global stock markets plummeted, forcing some investors to sell the precious metal to meet margin calls. Heavy inflows into gold ETFs at the beginning of the year were a key factor in pushing prices higher, but these stalled after the metal broke through $1,000 an ounce last month," reports G&M. * Investors' despair about financial companies and the recession have sent the Dow to 6,763 on Monday, the lowest level since May 1997. The DJIA has now been slashed more than half from a record high over 14,000 in October 2007.
* "As bad as things are, they can still get worse, and get a lot worse," said Bill Strazzullo, chief market strategist for Bell Curve Trading. Strazzullo said he believes there's a significant chance the S&P 500 and the Dow will fall back to their 1995 levels of 500 and 5,000, respectively," reports AP.
* "There’s a real panic in the markets. People have lost hope," said Peter Sorrentino, of Huntington Asset Advisors Inc. in Cincinnati. "The bear market has only begun. I don’t see the clear weather yet," Robert Prechter, the founder of Elliott Wave International who is famous for predicting the 1987 stock market crash, said to Bloomberg.
* "As ordinary citizens with no power over the levers of policy, we watch from the sidelines, and weep. The whole global economy has tipped into a downward spiral. Trade and output are contracting at rates that outstrip the leisurely depression of the 1930s. Fiscal stimulus is reaching its global limits. The lowest interest rates in history are failing to gain traction. The Fed seems paralyzed," reports Telegraph.
* AIG May Get $30 Billion: "The government has accepted all the downside with little chance of upside. They are trying to protect the global financial system from a complete meltdown," said Phillip Phan, professor of management at the Johns Hopkins Carey Business School in Baltimore reports Bloomberg.
* "The leaders of the European Union gathered Sunday in Brussels for an emergency summit meeting designed to tamp down the centrifugal forces unleashed by the global economic crisis that threaten to spin the bloc - and its single currency - apart. The deep global contraction is stimulating nationalism, not consensus," reports Guardian.
February Wrap Up: Gold shines amid new era of irresponsibility
* After rising as much as 9% over the last two weeks, gold prices ended February with a 1.5% gain -- and up 6.5% ytd in 2009. Gold is now up over $200/oz. since Barack Obama was elected Nov. 5, 2008. Meanwhile the DJIA closed the month with nearly a 12% decline, falling from 8,200 to 7,062, for the worst February drop since 1933.
* "It is critical to assess the damage to your financial house over the last 5 to 10 years. Investor portfolios typically include; stocks, bonds, real estate, commodities and cash. Let’s compare a $10,000 investment into each of these five asset classes since 2004. As our nation faces very challenging economic times --- may we all learn from history how critical it is to own a golden life preserver to protect our future," said Craig R. Smith (video) on Harvest TV.
* "U.S. stocks closed down on Friday, with the DJIA down for a sixth consecutive month, as the recession and ailing financial system had investors fleeing stocks. Fourth quarter GDP fell 6.4%, the worst quarter since 1982, while consumer spending fell 4.3%," reports MW.
* "Citigroup and the U.S. have reached an agreement in which the government will substantially increase its stake in the bank to 36% and will demand boardroom changes in return. Citigroup said it will offer to convert as much as $27.5 billion in preferred stock to common stock," reports WSJ.
* "Citigroup set a record for the most shares traded in a single day in the U.S., beating the mark set by WorldCom Inc. in 2002. Citigroup stock fell to $1.50 a share, the lowest closing price since November 1990. The U.S. doesn’t immediately intend to inject additional money after channeling $45 billion to Citigroup last year," reports Bloomberg.
* "The economy's downhill slide at the end of last year was likely much steeper than the government thought and it is probably doing just as poorly now - if not worse - as a relentless slew of negative forces feed on each other, pushing the country deeper into recession. American consumers - spooked by vanishing jobs, sinking home values and shrinking investment portfolios have cut back. In turn, companies are slashing production and payrolls," reports AP.
* Speculative profit taking by large funds pushed gold prices back below $1,000 this week, after running prices up $100/oz. over the previous two weeks. Nevertheless, gold is a perfect example of a healthy bull market; two steps forward, one step back. Long-term investors have consistently bought the dips over the last eight years, helping to crown gold as the best performing asset of 21st century.
* "Gold had been on a rocket ride this year, rising from $808 an ounce in mid-January as anxiety deepened about the global economy and financial markets.Gold already has been widely labeled "the next bubble." Investors who jumped aboard other bubbles just before they burst -- say, tech stocks in 1999 or real estate in 2006 -- must be thinking, "You won’t fool me this time," reports LATimes.
* "As gold heads out the window and down the path, with great media attention, there are whispers of a bubble. Was not gold at $1,000 a year ago? In the past decade, gold has risen steadily but not dramatically -- showing nothing like the drama in the rise and fall of oil, housing and tech stocks. Given world instability, this is hardly a bubble," reports GATA.
* "The rush by retail investors into bullion coins is creating shortages as mints across the world struggle to meet the surge in demand, dealers and mint officials say. The US Mint has sold 193,500 American Eagle gold coins in the first seven weeks of this year, the same amount it shipped during the whole of 2007," reports FT.
* "The departure of gold prices from their past inverse correlation with the dollar is just another example of the commodities market's ability to surprise and often flummox investors. It's also presented a trading opportunity for the prescient investors that bought into gold as an asset that often moves to its own beat," reports MW.
* "Gold is the most favored investment this year ahead of investment-grade bonds and other assets, according to a survey of investment advisers, the producer-funded World Gold Council said to Bloomberg.
* "As gold inevitably moves higher in price, and stock prices and the dollar fall further, the politicians of envy will speak out against the hoarders of gold and silver. They may not confiscate your gold, but they might dump Treasury gold on the market, or tax it heavily. Smart gold bugs buy their silver dollars and American eagles privately, and store it away secretly," reports MarkSkousen.
* "With all due respect Mr. President, your "Era of New Responsibility" is nothing more than a continuation of the Bush administration Era of Irresponsibility. Mr. President, we hoped for more and deserved more. Yet, behind the charade of campaign messages of hope and change, we essentially see the same fiscal irresponsibility and misguided policies as before," writes GEA-Mish.
* "President Obama's $3.6 TRILLION budget for next year (fiscal year begins October 1, 2009) works out to Ten Billion Dollars a day, $417 Million an hour. $6.9 Million per minute. $115,000 per second. Every second. Starting at one second after Midnight on October 1, 2009," reports CNS.
* 'Living within our means': Obama speech in Peoria, Ill... "We've gotta spend some money now to pull us out of this recession. But as soon as we're out of this recession we've gotta get serious about living within our means instead of leaving debt for our children and grandchildren and our great-grandchildren. That's not the responsible way. That's not how folks here in Peoria operate in their own lives, and they should expect the government is equally responsible." If Obama acknowledges what we all know to be the truth, that his economic gimmicky is simply making our children, grandchildren and great-grandchildren responsible for our problems, why is he doing it? How is that moral?" writes Joseph Farah at WND.
* Who said you can't legislate morality?: John Adams, a principal crafter and architect of our hallowed Constitution, and later our second president, declared, "Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other." This being true, any and all just laws must be based on moral considerations. If this republic is to endure, our elected representatives are ever bound to legislate morality. To fail that responsibility is to ensure we will be ruled by immorality," writes Pat Boone at WND.
* Charity tax limits upset many: "Democrats and Republicans poured cold water on President Obama's budget plan to cut down on wealthy taxpayers' charitable giving tax deductions, the second of his ambitious cost-savings plans to earn lawmakers' scorn, and underscoring the legislative minefield he is entering," reports WashTimes.