China selloff impacts stocks and commodities ... Better Than Gold Bullion?
"Metals: Trade of the decade!" -Listen ... 18 Means for Living Below Your Means
BY DAVID BRADSHAW ~ Editor, Real Money Perspectives
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Aug 31, 2009 ~ ((M-F podcast)) ~ gold fraud alert!
Monday gold prices held near $950/oz. on a weaker dollar as stocks declined on a China selloff. Gold last traded down $5.00 to $950.60/oz., silver rose $.08 to $14.88/oz.
* "Over the past four decades, September has been the best time for gold in terms of its month-over-month price appreciation. In a typical year, the price of gold in September rises 2.5% above its August price. The gold price has risen in 16 of the 20 Septembers since 1989, by far the best success ratio of any month of the year," reports Kitco.
* "Holding physical gold has both maintained and increased buying power over the last half century. Therefore, the simplest solution to protecting your time, labor and your family's nest egg is by converting a portion (10%-25%) of your wealth, which is being held in unstable dollars, into the most stable currency in the world: gold," said Craig R. Smith Swiss America Chairman.
* "A $1,000 - $1,500 gold price, which does seem to be a not unreasonable possibility over the next year or so would largely represent a serious decline in the value of the U.S. dollar against many other major currencies, and while this would be uncomfortable for many in dollar areas, although not for exporters, it might not prove to be quite so socially disastrous," reports Mineweb.
* "Wall Street’s best August in nearly a decade came to a disappointing end on Monday as plunging Chinese stocks and tumbling oil prices sent the Dow to a rare two-day losing streak. Monday’s selling began overseas as China’s Shanghai Composite plunged 6.7% overnight to a three-month low. The index, which had led the world higher earlier this year, has plummeted 21% this month, its steepest monthly tumble in 15 years," reports FoxBus.
* "It's too early to put all this behind us. There was more breadth to the global downturn than we've ever seen, so it's going to be very difficult to re-start the broader global economy," said Stephen Roach, chairman of Morgan Stanley Asia Ltd., said in an interview on Bloomberg. "China’s economy isn’t sustainable and the Shanghai Composite should be 2,000 or less," said former Morgan Stanley Asian economist Andy Xie.
* Our quarter-century penance is just starting: "Never in modern times has there been such a flat contradiction between the euphoria of markets and the stern warnings of officialdom at central banks and financial watchdogs. An army of baby-boomers have seen their old age plans shattered by the housing bust. Their nightmare is here. They will have to spend less, and save more," reports Telegraph.
* "Last Friday, the dollar again fell against major currencies. The effect of the weak dollar is again pushing oil prices higher in the face of little demand for energy and huge surpluses of crude. Since March, the dollar index has fallen nearly 12% while crude prices jumped 81%," reports AP.
* Fed Seeks Delay Emergency Lending Disclosure: "The Fed and U.S. banks would suffer irreparable harm if details of the loan programs were made public, according to the central bank’s senior counsel," reports Bloomberg.
* "Gold's 'breaking out' to a higher level as imminent. We will see the market move through the bull market highs of $1,040 very, very quickly," Chris Locke, managing director at Oystertrade.com Management, told CNBC Wednesday. Other analysts have said the precious metal could shine again as inflation fears resurface.
* "Gold's broader appeal certainly stems from its spectacular price climb. Prices in the spot market are roughly 270% higher than a decade ago. Contrast that with an equal investment in the Dow back in August 1999. Without dividends from their 30 blue-chip stocks, Dow investors would have lost money. Even with dividends, something gold doesn't pay, the Dow has returned only a 9.3% gain, which amounts to less than 1% per year over a decade," reports ChicagoTrib
* "Debt undermines faith in the dollar": "Economists, worried about the effects of growing U.S. debt, say the huge liabilities the U.S. is taking on to dig its way out of the crisis could ultimately undermine faith in the dollar. That, in turn, could erode its privileged role as the main currency in which the world's central banks hold their reserves," reports WSJ.
* "The international exodus of the dollar has begun. I suggest savvy investors do the same," commented Swiss America Chairman Craig R. Smith regarding China's growing fear about U.S. debt, the dollar and the inflation outlook.
* Stocks down on sentiment data: "Mixed signals about U.S. consumers' ability to spend kept U.S. stocks in check Friday, but the technology sector benefited from upbeat remarks from two of its bellwethers. Data shows flat personal incomes, consumer spending up 0.2%. Crude oil prices rose above $73 a barrel," reports Marketwatch.
* "The US banking system will lose some 1,000 institutions over the next two years, said John Kanas, whose private equity firm bought BankUnited of Florida in May. We’ve already lost 81 this year. The numbers are climbing every day," reports CNBC.
* "The federal government faces exploding deficits and mounting debt over the next decade, White House officials predicted Tuesday. the White House budget office foresee a cumulative $9 trillion deficit from 2010-2019, $2 trillion more than the administration estimated in May. The new numbers come as Obama prods Congress to enact a major overhaul of the health care system that could cost $1 trillion or more over 10 years," reports AP
* Moral Hazard and its Effect on Gold: "Given the country’s current debt and unfunded liabilities of $75,000,000,000,000, an amount growing by at least $5,000,000,000,000 per year, it will be statistically impossible for the United States to pay its obligations unless it repudiates them in large measure, or the dollar is sacrificed on the altar of searing, society-altering inflation. Tomorrow’s billionaires will be those who prepare today for the coming, inevitable monetary paradigm shift. Those who acquire gold now, while it is still available and inexpensive, will create for themselves a future that is secure, free and rich with opportunity," reports GoldSeek.
* Gold will surge to next leg to $1,300/oz.: "The price of gold year-over-year was 2% lower. Demand was up 38%. The price of gold, in relation to the increased demand, should be at $1,273/oz., and I suspect it will get there. I like to keep between 10% and 15% in physical gold," said Victor Gonçalves, producer of Equities & Economics Report to TheGoldReport.
* Court Orders Fed Disclose Emergency Loan Details: "The Federal Reserve must for the first time identify the companies in its emergency lending programs after losing a Freedom of Information Act lawsuit. The Fed has refused to name the financial firms it lent to or disclose the amounts or the assets put up as collateral under 11 programs, saying that doing so might set off a run by depositors and unsettle shareholders. 'The public deserves to know what’s being done with the money', reports Bloomberg.
* "The rally on Wall Street began to fade Monday, with the Dow and Nasdaq turning negative, after a global rally that had spilled over into U.S. trading this morning. Stocks finished on Friday at their highest levels since last October, with all three major indexes on course for another monthly gain in August," reports CNBC.
* "The Administration quickly and fairly quietly raised its budget deficit forecast for the next ten years to $9 trillion from $7.1 trillion, an astonishing 27% increase. The new estimate is much closer to the number that the Congressional Budget Office posted earlier this year. One of the reasons for the change is that tax receipts are running below estimates due to the recession. The Administration believed unemployment would peak at 8%. The shortfall in government revenue could continue for another year or more," reports 247WallSt.
* "The recovery is likely to be anemic and below trend in advanced economies and there is a big risk of a double-dip recession. Large budget deficits will push bond market vigilantes to punish policymakers. Then, inflationary expectations will increase, long-term government bond yields would rise and borrowing rates will go up sharply, leading to stagflation," reports FT.
* 18 Means for Living Below Your Means: "Live a comfortable life, not a wasteful one. Do not spend to impress others. Do not live life trying to fool yourself into thinking wealth is measured in material objects. Manage your money wisely so your money does not manage you. Always live well below your means," reports Marcandangel.
* American capitalism gone with a whimper: "The American decent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple. Should it be any surprise to discover that the Democratically controlled Congress of America is working on passing a new regulation that would give the American Treasury department the power to set "fair" maximum salaries, evaluate performance, and control how private companies give out pay raises and bonuses?" opines Russian-based Pravda-Ru.
* "The dollar slipped to a fresh one-month low against the yen and two-week low against the euro on Friday. Analysts said the market was looking ahead to U.S. existing home sales data and a speech from Federal Reserve Chairman Ben Bernanke on lessons of the financial crisis," reports Reuters.
* "China reduced its holdings of US government debt by 3% in June, the largest margin in nearly nine years, according to data from the US Treasury. China has said it would like to establish an alternative to the US dollar as the world's favored currency for foreign exchange reserves," reports BBC.
* "Oil prices touched a high for this year above $74 a barrel on Friday ahead of further pointers on the economic health of the United States and as the dollar flagged against a stronger euro," reports FoxBus.
* "We saved the world..." -Bernanke: "The global economy is now beginning to emerge from its worst crisis in generations, but the downturn might have been much worse if central banks hadn't acted so forcefully last fall, Federal Reserve Chairman Ben Bernanke said Friday," reports Marketwatch.
* "The number of U.S. workers filing new claims for jobless benefits unexpectedly rose 15,000 last week, a government report showed Thursday, fanning worries of an anemic recovery from the worst recession in 70 years. Initial claims for state unemployment insurance benefits rose to 576,000 in the week ended Aug. 15," reports CNBC.
* "Stocks held onto gains Thursday after a slew of economic data, including an encouraging report on manufacturing. Bank of America and JPMorgan led the Dow. Stocks had initially opened lower, after a surprise jump in jobless claims. World stock markets rose, with China erasing its troubling 5% drop from the previous day," reports CNBC.
* "Zimbabwe's central bank governor Gideon Gono on Thursday proposed the introduction of a gold-backed local currency, which was destroyed by hyperinflation and replaced by multiple foreign currencies in January. 'I am calling for is the guarded reintroduction of the Zimbabwe dollar where such a new currency will be fully backed by credible, tangible and locally available assets, such as gold, diamonds or platinum," reports Reuters.
* Slow Growth and The Greenback Effect: "Unchecked greenback emissions will certainly cause the purchasing power of currency to melt says billionaire Warren Buffet in NYTimes. "The United States is spewing a potentially damaging substance into our economy — greenback emissions. The U.S. economy is now out of the emergency room and appears to be on a slow path to recovery. But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. Washington’s printing presses will need to work overtime."
* The Morality Hazard of the Fed: "Because the creation of fiat money is a moral issue more than an economic issue, it is for this reason that the people have lost trust in their government, trust in the banks, trust in business, trust in themselves, and that we are a nation of distrust," writes Cong. Ron Paul in his upcoming book "End The Fed". "This is the ultimate moral consequence of the Federal Reserve System: We have become a nation of distrust. Until we regain that trust, the future looks bleak," reports BullnotBull.
* Pimco Says Dollar to Weaken: "The world’s biggest manager of bond funds said the dollar will weaken as the U.S. pumps massive amounts of money into the economy. 'The dollar will drop the most against emerging-market counterparts. The greenback is losing its status as the world’s reserve currency, writes Curtis A. Mewbourne, a Pimco portfolio manager," reports Bloomberg.
* U.S. stock shed early Wednesday losses to shift into positive territory, with energy shares pacing the gains as the price of crude-oil pulled above $72 a barrel after the government reported a drop in energy supplies. Concerns that the pace of economic stimulus cannot be sustained, the Shanghai index fell another 4.3% and is now down 19.8% from two weeks ago," reports Marketwatch.
* "The global recession is now over and a recovery has begun, Olivier Blanchard, the top economist for the International Monetary Fund, said Tuesday. The global recession has not been typical, and the recovery won't be either, he said. "One should not expect very high growth rates in the recovery," reports Marketwatch.
* Bull Market Delusions In Recovery: "It is the height of idiocy to take a 5-month snap-shot of market activity and contend that big new bull market is born, especially when the 5-year snapshot (2002-2007) turned out to be little more than an unsustainable cyclical bull fueled by unprecedented asset/credit bubbles. Given the potentially transient and/or unsustainable forces uniting to stabilize the U.S. economy, common sense leads to one conclusion: today’s rally is a cyclical bull inside of a secular bear," reports FallStreet.
* "Anyone who did what Wall Street analysts advised last March has only losses after the biggest stock market rally in seven decades. An investor who used $10,000 to buy companies in the highest-rated industries and bet on declines in the lowest since March 9, 2009 lost everything and would owe as much as $6,000 to cover bearish trades," reports Bloomberg.
* Investment demand for gold remained very strong in the second quarter of 2009, rising 46% on year earlier levels as investors continued a flight to quality. Overall demand for gold fell back from recent high levels as weak economic conditions and high gold prices combined to impact demand, according to the Q2'09 Gold Demand Trends report published today by World Gold Council," reports Mineweb.
* TANGIBLES ARE "IN": "Tangibles are growing in strength. From the metals, natural resources, energy and food, these markets are rebounding strongly and they’re poised to continue rising in the years ahead. Demand is the driving force, making commodities a powerful market. The Chinese are astute investors. They’re buying up lots of hard assets and commodities for infrastructure, and they’re using their dollar reserves to buy these goods," report Aden Sisters.
* "Uncertainty over the world economic outlook is changing Middle East gold buying behavior, with individuals seeking bars and coins as a buffer against hard times. 'People's confidence in the stock market went down with the financial crisis. Investing in gold right now is a no brainer'," said Ahmed Bin Sulayem, executive chairman of the Dubai Multi Commodity Center to Reuters.
* "Stocks bounced back Tuesday after a sharp selloff Monday but gains were modest after a disappointing housing report. Housing starts fell 1% in July after an upwardly-revised 6.5% jump in June. The market has been buzzing with talk of a correction after the runup since the March lows, that finally started to materialize Monday" reports CNBC.
* "A broad selloff in Asian and European markets, particularly in China, pushed U.S. stocks sharply lower Monday. China's benchmark Shanghai Composite index plunged 5.8% overnight, its worst percentage drop since November, as commodities and economy-sensitive Chinese companies took the brunt of the sell off," reports Foxbus.
* "Markets will drop 25 to 50 percent and it will happen abruptly. There’s no basic foundation for the run-up we’ve had, been far too rapid. It continues to run up on what’s normally considered bad news," said Dan Deighan, founder of Deighan Financial Advisors to CNBC.
* U.S. stocks ready for intermission: "After a near six-month ascent, the U.S. stock market is more than likely headed for a pause as investors waited for signals to continue a rally that many now view as overdone in light of the still-shaky economy. "We've had a great run here, but here's five reasons to be concerned going into the fall," said Art Hogan, chief market strategist, Jefferies & Co.," reports Marketwatch.
* Obama ready to drop 'public option': "Bowing to Republican pressure, President Barack Obama's administration signaled on Sunday it is ready to abandon the idea of giving Americans the option of government-run insurance as part of a new U.S. health care system. The White House would be open to co-ops, she said, a sign that Democrats want a compromise so they can declare a victory," reports AP.
* "US Dollar in the Crosshairs: Not Much to Like Long-Term The verdict appears to be in for the US dollar, and it's not looking good long-term.CNBC.
* "Dollar’s Replacement Is Just 6,700 Miles Away If those investors returning from hibernation looked at the U.S.’s balance sheet, they would label it a developing economy and perhaps steer clear," reports Bloomberg.
* "Gold is fast becoming an asset class in virtually every fund manager's investment portfolio, which is going to take the gold price to the next level. People are not even talking about getting a return. What they're asking is how they can save their capital, that's why they're going into gold, said Gold Fields CEO Nick Holland to MiningWkly.
* "U.S. employers cut 247,000 jobs in July, far less than expected and the least in any month since last August, according to a government report on Friday that provided the clearest evidence yet that the economy was turning around. The unemployment rate eased to 9.4% in July from 9.5% the prior month, the first time the jobless rate had fallen since April 2008," reports AP.
* "If the jobs report is seen as bullish for the economy, we could be off to the races again to the upside, and this two day pullback will once again frustrate those waiting for a larger pullback to add market exposure," reports VRtrader.
* "We could well be in the midst of the biggest bear market rally of all time!The S&P 500 has priced in 30% profit growth next year. We were priced for Armageddon and now we’re priced for nirvana but the truth is probably somewhere in between," reports economist David Rosenberg to CNBC.
* The Grand Illusion: "Fundamentally nothing has changed and technically the long-term trend of stocks remains down, the dollar has re-established and triggered a new down trend, gold once again appears to be the major benefactor. The talking heads tell us one thing, but common sense, the numbers and the overall trends tell us that the stock, bond and real estate market rallies are nothing but a grand illusion," reports Jim Carrillo, Sr. broker at Swiss America.
* "If you are thinking about investing in gold, it is worth giving the same consideration to your purchase as you would to any other investment. Demand for gold is widely spread around the world. And people are buying gold like never before following the recession. Gold investment can take many forms, and some investors may choose to combine two or more of these for flexibility," reports CommOnline.
"Gold is performing strongly at the same time the stock market is making a mild rally and as the dollar continues to stay at a level that we consider to be inordinately high. Typically, gold would be declining - but that's not happening, and there are solid reasons why. If the Fed fails to keep foreign capital interested in financing its twin deficits, the U.S. dollar could spiral downward, providing strong support to commodity prices. The weaker dollar will then help gold break through to new record price levels of $1,200-$1,500 per ounce," reports Mineweb.
* U.S. Dollar: No Long-Term Bottom: "Bottom line: We do not believe the conditions for a major low in the dollar are in place yet. The dollar is not undervalued and due to the weak cyclical state of the economy, continued U.S. policy reflation should see the trade-weighted dollar index overshoot to new lows in the months ahead. Stay strategically short dollars," reports BCA.
* "It is being expected that by year 2010 the gold prices are likely to surge by another 15-20%. With investment options such as real estate and construction turning bleak owing to economic slowdown, investment in gold has proved to be a safe haven for the investors," reports TimesofIndia.
* "Our love of gold shows no sign of abating. Bullion dealers have sold coins, gold bars and Krugerrands by the bucket load, while people have invested in gold exchange-traded funds in record numbers. When you own physical gold yourself there is no 'counterparty risk' – your investment does not rely on someone else keeping their promises or remaining in business," reports Telegraph.
* "Stocks pulled back Thursday after a higher open as Cisco dragged on the Dow. Earlier, the drop in jobless claims had spurred optimism about the recovery. Jobs are at the forefront of traders' minds as Friday brings the government's employment report. Economists expect it to show 320,000 jobs were dropped from nonfarm payrolls in July, following a loss of 467,000 in June," reports CNBC.
* "Stocks closed lower Wednesday after a report today showed that the U.S. service industries contracted more than forecast in July. The economy already has lost 6.5 million jobs since the recession began in December 2007, the most of any economic slump since the 1930s. Consumer spending will remain weak, especially as we head towards double-digit figures in unemployment," reports Bloomberg.
* "The world economy cannot sustain any further rise in the oil price, the International Energy Agency’s chief economist warned as oil prices rose toward a record high for the year. Prices higher than about $70 could dampen a world economic recovery," reports FT.
* "Politicians will tell you that the federal debt is around $11 trillion. That sounds bad enough—but it gets even worse. Together with unfunded liabilities our nation is in the hole for nearly $72 trillion dollars. That's more than $200,000 for every man, woman, and child in America, and it's growing every day," reports Truthin08.org.
* "The dollar hit its lowest level of the year against a basket of currencies Monday, after a U.S. manufacturing shrank in July but at a slower pace than in June... stung by buoyant risk demand as stocks rallied on the back of solid bank earnings and surprisingly strong manufacturing sector data from Europe," reports CNBC.
* End the Fed? A not-so-crazy idea: "Congressman Ron Paul's bill to audit the Fed may never pass, but history suggests the US economy would be better off without the Federal Reserve. By granting monopoly privileges to the Federal Reserve banks, [The Federal Reserve Act of 1913] allowed them to inflate recklessly: By 1919, the US inflation rate, which had cleaved close to zero ever since the Civil War, was close to 20 percent! Yet the Fed was also capable of failing to supply enough money to avert crises. The first downturn over which it presided – that of 1921 – was among the sharpest in US history," reports CSMonitor.
* Stocks Cross Key Milestones: "Strong bank profits and hopes for rising demand in raw materials lifted stocks Monday. The Dow closed above the 9200 mark for the first time since November. It was helped by solid gains in all its commodity-producing components. The S&P 500 crossed 1000 for the first time since November. The Nasdaq closed at 2008, the highest since October 2000," reports WSJ.
* "Crumbling commercial mortgages may wipe out what's left of the financial sector. It's been on the lips of analysts, investors and bankers for months: commercial real estate. There are more than $2 trillion in commercial mortgages coming due before the end of 2013, most of them owned by banks and insurance companies," reports Forbes.
* The U.S. dollar is on the same trajectory as Obama's approval ratings. Obama's approval rating fell 32% in July -- from 65% to 48% -- the lowest level since the election. Meanwhile, the dollar index has dropped 11% ytd, from 88 to 77 and is down 35% since 2001!
* The recession is over! Let the jobless recovery begin! "Could our long national nightmare be over? The economic contraction, this Great Recession, began in December 2007, and there's no apparent end in sight. Without the tailwind of cheap money and a housing boom, it's difficult to see — as it always is at the beginning of expansions — what is going to produce large-scale jobs growth," reports Newsweek.
* "President Barack Obama's treasury secretary said Sunday he cannot rule out higher taxes to help tame an exploding budget deficit, and his chief economic adviser would not dismiss raising them on middle-class Americans as part of a health care overhaul," reports AP.
* "Tax receipts are on pace to drop 18% this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion. If the economy doesn't recover soon, it doesn't matter what your social, economic and political agenda is. There's not going to be any revenue to pay for it," reports AP.
* In July; The Dow had the best month since 2002, rising 8.6%, US$ down 2%, Gold and oil up 3%. "Stocks closed mixed on Friday, helped by data showing a slower pace of contraction in the U.S. economy than expected. 'Regarding the economy, we're in this transition from hope and expectation to reality. I don't know if I'd rush out to buy stocks right now, but I wouldn't mind owning them," said Alfred Kugel, chief investment strategist at Atlantic Trust, reports WSJ.
* Investors say gold may hit $2,000: "Gold is the ultimate currency, performing best when economies are at extremes, whether inflationary or deflationary. Private investors are buying because they believe that in the long term, the price of bullion reaching $2,000 an ounce is a significant possibility ," reports Thisismoney.
* "The U.S. economy contracted at a slower-than-expected pace in the second quarter, government data showed on Friday, but a sharp drop in consumer spending fanned fears that recovery would be sluggish. Gross domestic product fell at a 1.0% annual rate, the Commerce Department said, after tumbling 6.4% in the first quarter. It was previously reported as a 5.5% drop," reports CNBC.
* Recession Worse Than Estimates: "The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed. The world’s largest economy contracted 1.9% from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8% drop previously on the books, the Commerce Department said today," reports Bloomberg.
* "The dollar slipped against six major currencies after data released last Friday showed the U.S. economy contracted at a slower pace in the second quarter, which analysts said backs views the recession is winding down. The personal consumption data wasn't good. Inflation is not there yet, that would weigh on gold," reports Reuters.
* "What we get from massive government expansions of the money supply is inflation in prices and a destroyed economy, which is why gold, silver and oil are the only obvious investment choices! Whee! This investing stuff is easy!" reports SafeHaven.
Disclaimer: All of the facts and information is believed to be true, however errors are possible. All investments have risk and past performance is no guarantee of future performance.