October: a very scary month
Stocks and commodities: worst month in 25 years
"New economic world order" summit Nov. 15 ~ Better than bullion?!
Special Report on Wall St. slide ~ NEW REPORT: Surviving the Storm
Today's top financial stories ~ October ~ economic calender
By David Bradshaw ~ updated hourly ~ email ~ links ~ wisdom
Editor, Real Money Perspectives ~ weekly email ~ daily email
Oct 31, 2008 ~ features ~ offers ~ (podcast) ~ gold fraud alert!
* GOLD prices fell 1.5% Friday as the dollar rose, oil prices moved up, the economy shrunk and stocks rose. Spot gold closed off $12.00 to $723.70/oz., silver rose $.13 to $9.86/oz.
* Smart money is buying physical gold on price dips and speculative sell-offs. This is a rare opportunity for long-term investors to buy gold at last year's price. The dollar's 20% rally will soon top as Fed monetary inflation destroys its store of value.
* Gold ended October with a 20% decline as the dollar rocketed to 2-year highs. "Speculative paper players using huge leverage continue to exit positions for the relative safety of cash due to margin calls on other bets," said Mark O'Byrne, executive director at Gold and Silver Investments.
* "The charts illustrate that while gold bullion prices are now down 8.5% year-over year, Mint-State 63 $20 Liberty gold coins are up 50%. So in addition to offering safety, liquidity and growth potential equal to bullion, historic Mint-State $20 gold pieces also offer 100% privacy of ownership and excellent growth over the last year," according to Swiss America CEO Craig R. Smith.
* "Despite government moves around the world to allay the financial meltdown, it's not over yet, and in the meantime, gold and silver may offer the best bets for capital protection," reports Mineweb.
* "Here is a financial scorecard since the turn of the 21st century (2000 -2008). Eight years invested in these markets, your money is...
* Dow Jones DOWN 25% (This even factors in that 5 of the 30 Dow Stocks did so poorly they were replaced!)
* S&P 500 DOWN 45% (Many of the 500 have now gone bankrupt and have been replaced with others!)
* U.S. Dollar DOWN 30% (Mass creation after 9/11 created a free fall, what will a larger mass creation do now?)
* Gold UP 260% (Has NO DEBT, NO liabilities and can NEVER go bankrupt)," says a new special report.
* "Safe-haven investors are on a shopping spree for precious metals, snapping up gold and silver as an antidote to topsy-turvy markets -- if they can find any. 'Virtually every mint in the world is sold out of product and as fast as we can produce it there is more demand,' said David Madge of Royal Canadian Mint," reports CNS.
Sell stock rallies, buy gold dips
* "Sell the rallies in stocks. Buy the dips in gold. That has been our formula for this entire decade.
It still seems to be working," writes Bill Bonner at DailyReckoning.
* "Gold alone protects assets from economic crises because it's the world's ultimate store of value -- which restores confidence in contrast to paper assets which entirely depend on confidence. The #1 reason to own gold today is safety, #2 liquidity, #3 growth, " said Mr. Smith.
* "The fact that bullion dealers are paying and charging premiums to the spot price for gold is clear evidence that the spot price published each day is no longer an accurate representation of the price of gold, and its continuing publication as such must soon be identified as fraudulent, and corrected. The likelihood of that happening, however, is contingent upon the admission by various U.S. government entities that they have participated in the suppression of the gold price," reports MidasLetter.
* "In a stagflationary environment, stocks, bonds, and real estate are likely to underperform commodities and gold. This is the lesson of the stagflationary 1970s, when gold and energy outperformed all other asset classes and all other commodities. I have every reason to believe that the coming decade will be a repeat of the 1970s," reports FinSense.
* "The onset of a global recession and falling stock markets have triggered a stampede for gold – the traditional safe haven during times of uncertainty. Investors have rushed to buy gold bars and bought exchange traded funds, worth $2.8 billion – the biggest inflow on record," reports Telegraph.
Today on Wall St.
* "U.S. stocks advanced Friday, on track for solid weekly gains but the worst month in decades, as investors bypassed generally bleak economic data to focus on improvement in the troubled credit markets," reports MW.
* "Wall Street felt more upbeat Thursday after a government report showed the economy contracted in the third quarter by .3%, less than expected, and after the Fed's second interest rate cut in a month. The overall back-and-forth moves on Wall Street have been enormous for more than a month," reports AP.
* "Federal Reserve policymakers cut key interest rates by a half-point, as expected, pushing the federal funds rate down to 1%, a four-year low. The worst financial crisis in 70 years has forced the Fed to employ all the weapons in its arsenal to try to keep the country from plunging into a deep recession," reports CNBC.
* "After all the hope and prayer implied in yesterday's stock-market surge, the market literally saw a ghost: Just in the final 12 minutes of trading — from today's post-rate-cut high to the closing bell — the Dow nosedived an alarming 372 points! Not exactly a polite 'thank you' note to Mr. Bernanke for his half-point rate cut," reports M&M.
* "Apparently more cheap easy money is in our future. The very strategy that caused the mortgage and credit mess is now being employed to try to fix the mess. The result will be a cut in the long-term value of the dollar," wrote Craig Smith to his brokers.
* "China and Norway kicked off the latest round of global interest rate cuts, lifting stock markets for much of the day but analysts said any recovery would be short-lived given that a sharp economic downturn was already in progress. 'Enjoy the party while you can,' said David Buik at Cantor Index in London," reports Reuters.
* "Stocks gave up most of the session's gains Wednesday afternoon after the Fed cut a key short-term interest rate by a half-percentage point. The Commerce Department reported that durable goods orders unexpectedly rose 0.8% in September, but was revised lower in August," reports CNN.
* Oil prices shot up 9% to $68 a barrel Wednesday on a lower dollar despite weakening global demand and building U.S. inventory -- following last week's decision by the OPEC cartel to cut production quotas by 1.5 million barrels a day starting in November.
* "Wounded by the financial crisis, U.S. consumer confidence plunged in October, reaching an all-time low in its 41-year existence, the Conference Board said Tuesday," reports MW.
* The Case-Shiller survey says home prices in 20 major U.S. cities are down a record 16.6% in the past year. Prices are "clearly nowhere near bottom yet," wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics.
* "U.S. stocks blasted higher Tuesday afternoon, wiping away a week's worth of steep losses, as the Dow jumped nearly 900 points - its second biggest daily point gain ever - as bargain hunters flooded the market," reports MW.
* "With financial markets around the world collapsing, about the only thing that still glitters is gold. Now, the market may start to shine. The yellow metal, which breached $1,000 an ounce in March during the Bear Stearns debacle, could well return to that level and head toward $2,500 as investors scramble for safety," reports Barrons.
* "Neither one of the men running for president can do anything to magically fix the mess we are in, unless one of them can find a way to create an atmosphere in where we will all once again believe in each other and the greatness of America. We don't need government programs, higher taxes, bailouts or cash injections into the system. We need a giant dose of confidence," comments Craig R. Smith at WND.
New financial world order summit ahead
* The United States will host a summit of the G-20 leaders on November 15 in Washington to discuss the underlying causes of the credit crisis and start developing principles of reform for financial regulators and institutions.
* "France’s president Nicholas Sarkozy is trying to organize a New World Financial Order... based on something other than the dollar. Perhaps the biggest delusion of the financial world now is that the dollar... and dollar-based Treasury obligations... are a safe refuge. In an emergency, the government can always just print up the money. But that’s the problem. An emergency is coming," reports DailyReckoning.
* "The International Monetary Fund may soon lack the money to bail out an ever growing list of countries crumbling across Eastern Europe, Latin America, Africa, and parts of Asia, raising concerns that it will have to tap taxpayers in Western countries for a capital infusion or resort to the nuclear option of printing its own money," reports Telegraph.
* "Asian and European countries should banish the U.S. dollar from their direct trade relations, relying only on their own currencies, said a front-page commentary in the People's Daily. A meeting between Asian and European leaders, starting on Friday in Beijing, presented the perfect opportunity to begin building a new international financial order," reports Reuters.
* "This crisis is global in reach -- and addressing it will require agreeing on common principles to reform regulators which is essential to preventing another disaster," said President Bush last Saturday.
* Question: How can the nations of the world agree on "common principles to reform" given the wide diversity of worldviews each nation represents? This global credit meltdown appears to be pushing the U.S. toward an "Economic New World Order" which seeks to replace free market principles with socialistic principles.
* "Former Fed Chairman Alan Greenspan said last week the financial crisis will get worse before it gets better. Accused of contributing to the meltdown, but denying it was his fault, Greenspan told a House panel the crisis left him -- an unabashed free-market advocate -- in a "state of shocked disbelief," reports AP.
* "This disaster shows the fallacy of former Fed chief Alan Greenspan's belief in not preventing bubbles and instead working to clean up the aftermath. As everyone who lived through the 1920s learned, bubbles should be avoided at all costs. Bubbles cannot be fixed. They can only be prevented," reports MSN.
Bears running Wall St. down
* "U.S. stocks closed sharply lower Monday after multiple fits and starts, with a September rebound in new-home sales failing to stem ongoing fears of a worldwide recession," reports MW.
* Japanese stocks tumbled to 26-year lows and European markets fell heavily in chaotic trade Monday. Little that officials said could convince panicky investors that governments can stem the fast-spreading crisis that is menacing financial markets, economic growth and company earnings. Meanwhile, U.S. banks lined up for government cash," reports CNBC.
* The Hang Seng index is down 66 percent this year, the Nikkei is down 81%, Russian RTS is down over 80%, Saudi TASI down 55%, Dubai down 55%. By comparison, the Dow is only down 40% so far. The Fed sold all of this massive bloated debt to unsuspecting wealthy 'emerging market' countries, then let it collapse in order to 'rescue' it for next to nothing. The next phase is the mass creation of currency. When this dollar panic buying reverses, so will the gold panic selling," reports Jim Carrillo, Sr. broker at Swiss America.
* "World stock markets tumbled last week on growing alarm that a global recession will ravage corporate profits and push smaller developing economies to the brink of collapse. Periods of panic punctuated by occasional calm appears to be the manner of things for now," reports AP.
* "The Chicago Mercantile Exchange's circuit-breaker rules went into effect last Friday as plunging S&P 500 and Nasdaq 100 futures contracts reached pre-specified limits. The CME limits the S&P 500 to a drop of a 60 points and the Nasdaq to a drop of 85 points," reports MW.
* "You date the recession all the way back to December 2007 because that's when the slip began," says Robert Brusca, chief economist at Fact And Opinion Economics. If so, this recession will be one of the longest in modern times. The question is how nasty," asks CNBC.
* "Investors pumped a record $44.5 billion into money market funds last week as tracked by Boston-based fund tracker EPFR. There remains a huge amount of cash sitting on the sidelines in money market funds. The net inflows this year so far are over $200 billion among the money market funds we track, which collectively hold $2.3 trillion," said Cameron Brandt, global markets analyst at EPFR, reports MoneyNews.
And the next bubble is...
* "Every bubble expands until it finds its pin. Real bear markets last 10...15...20 years. And judging by the meltdown in the financial sector...we have a real bear market on our hands. This bear market actually began in January 2000 when the tech sector crashed. But it was reversed when the feds opened a Hoover dam of liquidity, beginning in 2001-2002," reports Bill Bonner at DailyReckoning.
* "The fundamentals for commodities were not affected by government policies that are propagating inflation. Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke should resign for keeping alive 'zombie banks' that should be allowed to fail, said Jim Rogers, CEO of Rogers Holdings, told CNBC Wednesday.
* "Ignore the negative press on gold, and recognize the current price weakness for what it is: the last time you’ll see gold this cheap in a long time, and therefore a huge opportunity. The massive repatriation of US Dollars as a result of de-leveraging globally is making the US Dollar look strong, while the gold manipulation cartel is exerting its utmost effort to keep the spot price of gold low through concentrated short positions on COMEX. The price of gold will emerge from this negative influence on the next leg down and the economy goes into a broader paralysis instead of being limited as it is now to real estate and financials," reports MidasLetter.
*"Gold, the king of stability, is still subject to volatility given the huge hedge fund liquidations in all areas of commodities. Well over one trillion dollars along with an unprecedented worldwide rate cuts have done little to sure up confidence, in fact, may be causing a loss of confidence," commented Craig R. Smith.
* "The search of a market bottom likely will continue through the rest of the year and into 2009, as signs begin to emerge that a turning point is near but not yet upon Wall Street. Market analysts have been racing to call a market bottom in recent weeks as stocks have shed more than 30% of their value from the highs of a year ago this month," reports CNBC.
* "The U.S. dollar surged to a 2-year peak versus a basket of currencies last week due to strong demand from financial institutions seeking a safe-haven despite a moderation in interbank rates and growing momentum for a second stimulus plan," reports Reuters.
* The dollar has served as the world’s reserve currency for more than 60 years, but never in history has the guardian of the world's reserve currency also been the world's biggest debtor. Those who've placed 100% faith in dollar-denominated assets still need a life jacket. Here are six tips to help you make smarter choices with your time, energy and money to thrive during tough times ahead.
* "All the currencies will slowly debase themselves against gold and keep the dollar as the currency for global trade. It appears we are now going through that inflection point moving from deflationary forces to an inflationary cycle," says Frank Holmes, CEO of U. S. Global Investors to AUReport.
* "As the world loses its faith in most investments, gold provides a primeval sense of security. As stocks and shares tumble, house prices crash and previously unassailable institutions crumble into dust, the sight of several thousand 28lb bars of 24-carat gold stored in the Bank of England's massive underground vaults is hugely reassuring. Securities and dodgy loans are turning out to be as solid as wet cardboard, but good old-fashioned gold has come back into fashion as never before," reports DailyMail.
* "What we are likely in for is an unprecedented period of price inflation, economic depression, and high unemployment, i.e., 'depflation' (inflationary depression). Purchasing power declines as prices for consumer goods increase faster than wages. Taxes increase when nominal incomes rise. Interest rates increase, hurts investments in capital goods, stocks and bonds," reports SafeHaven.
* "A second economic stimulus package gained sudden momentum after Fed Chairman Ben Bernanke urged Congress to consider a new plan and the White House said President Bush was 'open' to the idea. Any stimulus package would need to kick in quickly to entice people and businesses to boost spending," reports CNBC.
* "Ben Bernanke apparently wants four more years as Fed Chairman. Mr. Bernanke all but submitted his job application to Barack Obama yesterday by endorsing the Democratic version of fiscal "stimulus." Mr. Bernanke certainly knows that Mr. Obama and Democrats on Capitol Hill are talking about some $300 billion in new "stimulus" spending, while President Bush and Republicans are resisting," reports WSJ.
* "The economy's health improved for the first time in five months in September as supplier deliveries and new orders strengthened, a private research group said Monday. 'The trend is downwards, and October's index will plunge, consistent with recession, it has not hit bottom yet,'" reports AP.
* "With little question the U.S. is in the grips of a recession, investors this week will lean on a stream of earnings and economic reports to help determine exactly how prolonged and painful the downturn might be," reports CNN.
* "The world stole prosperity from the future for year after year, with the full collusion of governments, regulators, and central banks. Now the future has arrived. The commodity and emerging market booms are breaking in unison, leaving no more bubbles left to burst," reports Telegraph.
* "'Follow the money and own more gold', is my best advice to investor's whose confidence in banks, the Fed, and the Treasury has been shaken to its foundation. There is presently a quiet gold run in process as demand swamps supply of U.S. gold coins. Let's hope it's not a precursor to a U.S. bank run, as dollar supply swamps demand, in response to multi-trillion bailouts," said Swiss America CEO Craig R. Smith.
* "The dollar rose against the euro as Fed Chairman Ben Bernanke endorsed additional fiscal stimulus. The greenback advanced on speculation U.S. government and central-bank efforts will help the world's largest economy recover from a recession before the rest of the world," reports Bloomberg.
* "A tri-polar global currency system is developing between Asia, Europe and the U.S. and that he's skeptical the U.S. dollar's centrality can be revived. European governments have pledged at least $1.7 trillion to guarantee loans and take stakes in lenders," said European Central Bank council member Ewald Nowotny to Bloomberg.
* "The roller-coaster ride in equity markets continued last week, as President Bush discussed efforts to rescue the embattled financial system in the face of global recession and as the U.S. reported new-home building fell to a 17-year low. Stock indexes erased late-Friday gains to close lower as profit-takers stepped in. The Dow ended up 4.7% on the week," reports MW.
* "It was an erratic week on Wall Street, with the Dow soaring 936 points on Monday, slipping moderately Tuesday, sinking 733 points Wednesday, and then rallying 401 Thursday. The volatility is not providing investors with much relief, but it is a welcome change from last week's relentless plunge, with the Dow logging its worst week ever and Wall Street lost about $2.4 trillion in shareholder wealth," reports AP.
* "The Fed's report shows commercial banks averaged a record $99.7 billion in daily borrowing over the past week. That surpassed the old record — a daily average of $75 billion — from the prior week. The Fed report also showed that over the last week $129.6 billion worth of loans were made to money market mutual funds," reports AP.
* "Ominous talk of big names and big sums continues to haunt global markets, thwarting efforts by the US and European authorities to unlock inter-bank lending. AIG - now nationalized - says it will need another $38bn from the US government, on top of the $85bn bail-out. Those on the wrong side of these Lehman debt contracts - known as credit default swaps (CDS) - must come up with the money by Tuesday, the next D-Day in the credit markets," reports Telegraph.
* "What we're seeing now is massive financial market turmoil and significant Monetary Inflation. As a store of value, you're going to see more people rush to gold, which will reach $1,000 an ounce before the end of this year," said Joe Conway, CEO of Gold Mining company Iamgold, to Bloomberg TV.
* "So far, attempts to slow the foreclosure epidemic at the center of the crisis have had little impact. Despite "voluntary" industrywide efforts to rework troubled mortgages, the numbers continue to soar. In 2008 some 1.69 million homeowners will lose their houses — double the rate of two years ago," reports BusWeek.
* "Construction of new homes dwindled to the second-lowest level in 50 years last month, as home builders sought to reduce the number of unsold inventories in an elusive quest to find the bottom of the historic housing collapse, according to government data Friday," reports MW.
* "The cost of borrowing dollars in London fell, capping the first weekly decline since July, after central banks around the world pumped unprecedented amounts of cash into money markets and governments backed loans. The Libor rate for three- month loans in dollars dropped for a fifth day, sliding 8 basis points to 4.42%," reports Bloomberg.
* "A broad commodities sell-off hit the markets last Thursday, with oil and gold both declining notably. Oil plummeted to a 14-month low under the $70 level after the government reported a bigger-than-expected jump in crude inventories," reports FoxBus.
* "The jobs and retail inflation data was somewhat better than expected. Initial jobless claims hit 461,000 in the most recent week, down 16,000 from the previous week, while the government's Consumer Price index was unchanged in September," reports CNBC.
* "Wholesale inflation took an unexpected turn for the worse, while retail sales slumped again in September, complicating the Federal Reserve's interest rate policy in the coming months. The core PPI came in at 0.4%, higher than the 0.2% consensus forecast, while retail sales fell 1.2%," reports CNBC.
* Fed Chairman Ben Bernanke on Wednesday kept the door open to further interest rate cuts, saying "We will not stand down until we have achieved our goals of repairing and reforming our financial system and restoring prosperity," reports WSJ.
* "Nothing looks as good as gold in this financial-market mess. Some believe the yellow metal is heading toward $2,500. But buy the metal, not the miners. Unlike just about every other asset, gold has risen 14% in the past year," reports Barrons.
* "Right now, we are experiencing two forces to fight with each other: the physical gold market and the paper gold market. The paper market is the short term market and the physical market is the long term market. Unfortunately, it is a paper market which is very vulnerable for manipulation and it does not reflect the real market which takes place in physical supply and demand," reports SeekAlpha.
* "The U.S. government is expected to take stakes in nine of the nation's top financial institutions as part of a new plan to restore confidence to the battered U.S. banking system," reports WSJ.
* "Joe the Plumber is America. And on Election Day, I suspect many Joe the Plumbers will show up at the polls and do the right thing. Then the padded room reserved for Chris Matthews and Keith Olbermann will be put to good use," writes Craig R. Smith at WND.
* "Sens. John McCain and Barack Obama clashed sharply over economics, health care, abortion and the harsh tone of the presidential campaign during the final presidential debate that sought the vote of millions of Americans-and "Joe the plumber," reports WSJ.
* "I think when you spread the wealth around, it's good for everybody," said democratic presidential nominee Barack Obama to a plumber in Toledo, Ohio. John McCain is reportedly considering a broad, simple capital gains tax cut. An across-the-board cut would be a real middle-class rescue, focused on generating new private sector employment — the proven way of "spreading the wealth around," reports IBDEditorials.
* "Under Obama, Instead of trickle-down economics, we’ll have trickle-up poverty. The business owners in this country who drive the economy will be put to work by being forced to pay crushing taxes that will fund gold-plated healthcare for illegal aliens and welfare cases. Private enterprise may not actually be made illegal, but so many businesses will die under an Obama administration that the same goal will be accomplished," writes talk show host Michael Savage.
* "An ugly recession is coming, as debt leverage kicks into reverse. The purge will be slow and punishing. Some 12 million Americans are already trapped in negative equity, but at least they can see where this might end. After much drama, the US institutions have risen to the challenge. The Fed, the Treasury, and Congress have managed to take some sort of coherent action. The jury is out on Europe, where the hurricane is now smashing the banking system. Who will bailout the euro?" reports Telegraph.
* "Sweeping measures to bailout the financial system will probably fail. The proposed $250 billion infusion into financials is meaningless -- merely a drop of water on a hot stove. These measures do not address the fundamental problem of overleveraging, said Marc Faber, editor & publisher of the Gloom, Boom and Doom Report, to CNBC.
* "How can companies founded on a free market business model now survive, no less flourish, under government-controlled financial socialism? They can't. And most honest economists know it. But the citizens of the world don't want to face the truth behind the systemic problems. They want and demand unbridled, uninterrupted growth and accumulation of personal wealth," writes Swiss America CEO Craig R. Smith.
* "Why are governments interfering? It is the pathological fear of the 1930s. Recessions are normal things. They are the market’s fire breaks for stupidity, resetting behavior and encouraging sense. But they have, apparently, been banned, particularly in America. The longer-term implications look clear to me. Inflation and stupidity are here to stay," reports Telegraph.
* "This is a GLOBAL race to inflate. We will no longer be able to define the dollar's weakness by its exchange rate with the Euro, Yen, or any other foreign currency. Instead, we have to look at their purchasing power relative to tangible assets," reports Bloomberg.
* "Money market rates slipped Monday after central banks unveiled new steps to rescue a wounded global financial system in a bid to prevent a worldwide recession. Counterparties will be able to borrow any amount they wish against the appropriate collateral in each jurisdiction," the Fed said in a statement reports CNBC.
* "The current rescue plans, which will force governments to issue more debt, print money and flood the markets with liquidity, will flare up inflation after the crisis is over and will create worse problems, said Jim Rogers to CNBC
* "Investors pile into gold during a crisis because it tends to hold its own when other investments are performing miserably. So it's like an insurance policy for your portfolio. It's also particularly attractive at the moment because there is no credit or default risk when you buy gold," said Rozanna Wozniak, investment research manager at the World Gold Council to Herald.
* "A top Treasury official on Monday outlined the government's multi-prong effort to bail out the United States financial system and resuscitate the economy, though he offered few details on how the plan will be carried out," reports CNN.
* "The G-7 statement endorsed a program to prevent the failure of major banks in each of the countries, unfreeze credit and money markets, bolster capital and deposit insurance programs and get the battered mortgage financing system operating more normally," reports AP.
* "History teaches us that asset deflation usually follows asset inflation in the historical boom-bust credit cycle. The bigger the boom, the bigger the bust. This is just common sense. Millions of investors are now looking for alternatives to the U.S. stock and housing markets. Many are now rushing into cash, thinking the U.S. dollar is (and will remain) "king", Bailout Nation, Swiss America special report.
Last week's news...
* "As of Oct. 10th all major commodity houses are now requiring a 'cash and carry' market in major commodities, including gold. This is why you're seeing the wild price swings in gold bullion. Hold on to your seats, this is the buying signal of all buying signals," said Swiss America CEO Craig R. Smith.
* The Dow fell below 8,000 during the first ten minutes of trading last Friday, recovered, then fell back, recovered, then closed down 128 points. The Dow ended the day at 8,451 -- down 25% in the past eight sessions -- and down 40% or 5,747 points -- from the all time high of 14,198 hit one year ago yesterday.
* "I think no one knows where the bottom is and the market hasn't yet seen the kind of trading that indicates capitulation. The stock market will eventually bounce back, but there are no signs of it yet as fear still dominates market talk, said Blackrock Vice Chairman Robert Doll on CNBC.
* "It’s a market massacre. From shares to oil and from Tokyo to London, markets have suffered massive falls. Only gold has bucked the trend. The immediate cause is panic about liquidity and banks. Investors are deleveraging – cutting debt – and forecasts for company earnings are being slashed," reports Telegraph.
* "This is not the end of the world. As American corporations and citizens alike start to de-leverage, profits will drop and spending will slow. This will mean stocks, bonds, real estate and various other assets will soften until at least the second or third quarter of 2009. Then we will see, just as we have in the past, America start to expand again and prosperity will return," writes Craig R. Smith in Bailout Nation: Truth AND Consequences.
* "Panic shot through stock markets around the world Friday, suggesting that drastic actions by central banks have failed to calm investors. Russia, Austria and Indonesia suspended their stock exchanges for the day on fears that the panic would increase," reports Times.
* "The financial market's rapid decline is a shocking reminder of the Scripture's warning against trusting in 'treasures on Earth, where moth and rust destroy, and where thieves break in and steal. While the market conditions can be devastating to the portfolios of Americans, history has also shown that these times are also times when there is a revival of faith. In uncertain times we are reminded that we can trust in the certainty of God," reports Statesman
* "With aggregate losses now reaching deeper into the trillions, U.S. stocks suffer another brutal open, picking up from Thursday's Wall Street bloodbath — and the waves of selling that predictably ensued around the globe," reports MW.
* The credit crisis has shattered U.S. consumers' faith in financial institutions, including the Federal Reserve, and that is likely to trigger the biggest drop in consumer spending in more than three decades and a deep recession, according to a survey released Friday," reports Reuters.
* "The coordinated central bank effort seems to have failed to quell money market rates so cash is still king and may prompt further bouts of liquidation across commodities. But certainly across the quarter we'll be up and I wouldn't be surprised to see gold challenge $1,000/oz.," said James Moore, an analyst at TheBullionDesk.com in London to Bloomberg.
* "No one knows for certain now what they can rely on," said Hironobu Hagi, deputy general manager at Shinsei Bank. The dollar slumped on Wednesday below 100 yen for the first time in six months, with investors flocking to the Japanese currency as a safe haven," reports AFP.
* "The action of central bankers globally is going to do two things for investors. It will debase the value of currency; and unleash — eventually — inflation. Not next month, not next quarter, but we think inflation is coming back. With world gold production down 10% from its year 2000 peak, the precious metal will hit $1,000 over the next six months, and $2,000 over the next few years," writes Rob Lutts CIO of Cabot Money Management, reports CNBC.
* "There is one area of the global financial machine revving up - gold. When times are bad, investors have traditionally sought refuge in this precious metal. With bullion dealers reporting a surge in business, it seems history is repeating itself," reports BBC.
* "Unprecedented demand for precious metals and volatile markets forced the U.S. Mint to cease production of the half-ounce and quarter-ounce popular American Eagle gold coins for the rest of this year and to supply other bullion coins on an allocation basis," reports Reuters.
* "Central banks have all but stopped lending gold to commercial and investment banks and other participants in the precious metals market, in a move that on Tuesday sent the cost of borrowing bullion for one-month to more than twenty times its usual level," reports FT.
* Gold prices are now up over 20% year-over-year despite a brutal "credit crisis" unwinding that has caused investors to lose trillions worldwide. For example the DJIA is now down over 30% year-over-year, and has lost over 40% from the market top of 14,000 last November.
Wall St. searches for bottom
* "The Bush administration is considering taking ownership stakes in certain U.S. banks. The $700 billion rescue package passed by Congress last week allows the Treasury Department to inject fresh capital into financial institutions and get ownership shares in return to help deal with the biggest upheavals on Wall Street in seven decades and continues to roil global markets," reports AP.
* "Addressing the underlying foreclosure crisis will be critical to resolving the broader financial crisis in the coming months. And simply buying bad mortgage-backed securities and loans from the banks and others who hold them won't be enough if average Joes keep losing their homes. But still more explanation will be needed if John McCain's proposal is going to be taken seriously and not simply as fodder for a debate," reports BusWeek.
* "The US economy is facing its biggest crisis since the Great Depression, one that will require considerable sacrifice to solve. But politicians are talking the other way and promising more goodies. The dollar is the fallback plan. Printing money spreads the pain for all dollar holders, and many are foreigners. This is the last tool that the US has to not pay the full cost on. Eventually, foreigners will realize this and run. When the dollar goes into free-fall, America will finally have to wake up to reality," reports CIBmag.
* "Central banks around the world Wednesday cut interest rates in a coordinated move amid mounting losses on global stock markets, as the credit crunch continued to seize up lending. The Fed lowered its federal funds rate a half a point to 1.50%. It also lowered its discount rate by half a point. Central banks in the UK, European Union, Switzerland, Sweden, and Canada also trimmed lending rates," reports CNBC.
* "Traders are not buying into the deflationary scenario. While everyone is talking deflation, from collapsing equity and commodity values, gold is signaling inflation. Fundamentals have acquiesced to fear, emotion not reality is ruling the markets," wrote Craig Smith in an email to clients.
Oil prices fell nearly $3 on Wednesday after U.S. government data showed a big increase in crude stocks and a big drop in demand, underlining expectations economic weakness will erode fuel consumption.
Fed to the rescue!?
* "The Fed announced Tuesday a radical plan to buy massive amounts of short-term debts in a dramatic effort to break through a credit clog that is imperiling the economy," reports AP.
* "The entire complex of commodities and emerging market stocks, bonds, and currencies is now in free-fall as the economic crisis spreads like brushfire, threatening to draw every corner of the globe into the vortex of recession. The unsettling reality that the euro is no healthier than the dollar, and perhaps sicker, boosted gold," reports Telegraph.
* "Now that the the Fed has decided to save the economy, it might as well go whole hog. According to The New York Times, "Under its plan, the central bank would buy unsecured commercial paper, essentially short-term i.o.u.’s issued by banks, businesses and municipalities," reports 247WallSt.
* "A coordinated rate cut will do little to fix the underlying problem of restoring trust to the banking industry," Harry Ida, senior analyst at Thomson Reuters, said to CNBC.
* "The rescue package and other bailout efforts for Fannie Mae, Freddie Mac, AIG and the auto industry, escalating operating deficits, compounding interest and other factors are likely to boost the tab to $56 trillion or more by the end of this calendar year," writes former U.S Comptroller General David Walker at CNN.
* "The Dow briefly lost as much as 800 points and plunged below the 10,000 mark for the first time in nearly four years Monday as nervousness over the credit crisis spread. The $700 billion bailout last week and interventions in Europe over the weekend only seemed to add to investor anxiety," reports MW.
* "We face extreme danger. Unless there is immediate intervention on every front by all the major powers acting in concert, we risk a disintegration of global finance within days. Nobody will be spared, unless they own gold bars," reports Telegraph.
* "World markets suffered massive losses Monday, striking four-year lows, as panic-stricken investors doubted whether a Wall Street bailout package would stem the global financial crisis. London, Frankfurt and Paris all tumbled more than 6% approaching the half-way mark while a 15% dive in Moscow forced a halt to Russian trading," reports AFP.
* "The markets have come to the sobering realization that the Bush administration's rescue plan won't work quickly to unfreeze the credit markets, and that many banks are still having difficulty gaining access to cash. That's caused investors to exit stocks and move money into the relative safety of government debt," reports AP.
* "The Bush Administration and the Federal Reserve said Monday they are moving "with substantial force on a number of fronts" to shore up confidence in, and protect, the financial system. Treasury Secretary Henry Paulson announced Neel Kashkari, a close advisor and former banker at Goldman Sachs, has been tapped to lead the $700 billion mortgage rescue effort", reports MW.
* "The Committee on Oversight and Government Reform started today in the Rayburn building with the usual dose of grandstanding and class warfare. As we move down this road of 'reform' and 'oversight' we best be careful for what we wish. Do we really want to know just how bad the problems are when we bring $516 trillion of derivative risk into the discussion? A problem that may be as large as $100 trillion," writes Craig R. Smith.
* "The leaders of Europe's wealthiest countries have agreed to work together to support battered financial institutions, but have stopped short of forming a joint bailout fund," reports RBL.
* "There is talk on the street that there will be an emergency meeting of the G-8 to discuss a coordinated global interest rate cut. The credit markets are still frozen and now the Central Banks are faced with a worldwide 1929-style depression. It may be too late for rate cuts to have any affect, but they are going to try everything that might work. Stocks have rallied a bit of the lows as a result," said Swiss America CEO Craig Smith in an emailed note to clients on Monday.
Bailouts won't stop market cycles
* "The final $800b bailout plan pushes Washington's potential tab to $1.8 trillion, to absorb bad mortgages and other toxic assets from bank or other institution balance sheets to keep the financial system from "collapsing", according to "Bailout Nation".
* "Unless we want to inflate our way out with additional government spending of money we do not have, which will require taking on more and massive amounts of debt to be passed on to future generations, this is the time to just say no. If we are serious about adopting the changes necessary to make this economic contraction produce long-term positive effects on the market we must:
1. Reduce government spending by 15% across the board over the next four years.
2. Reduce corporate taxes from 35% (world's 2nd highest) to 25% with targeted incentives to create new, high paying jobs.
3. Freeze personal income taxes at current levels so proper tax planning can occur.
4. Have a capital gains tax holiday for any company or individual who purchases distressed real estate from a lender to clean up the lender's balance sheet.
5. Ease the "mark to market" rules now in place to provide breathing room for lenders.
6. Ease the capital requirement currently in place at the banks.
Not one of these suggestions requires a dime of tax dollars and thus doesn't have a snowball's chance in Phoenix to be implemented," writes Craig R. Smith.
* "Rep. Ron Paul of Texas, who correctly predicted in 2003 that taxpayers would be "forced to bail out investors," said in a speech on the House floor that the legislation would "only further harm the economy" and was actually worse than the previous version," reports CNET.
* Goodies for everyone: "U.S. taxpayers, small-business owners and savers may find plenty to cheer about in the final financial-rescue plan, which goes beyond injecting liquidity into the nation's financial markets to offer tax and other perks," reports MW.
* "The $700 billion rescue bill that Congress finally passed will limit panic in the markets, but the economy is still in precarious shape, and unrealistic expectations about the bailout could end up disappointing consumers hoping for some kind of immediate relief," reports USNews.
* Meanwhile, California Gov. Arnold Schwarzenegger warned Treasury Secretary Paulson the state might need "an emergency loan of as much as $7 billion from the federal government within weeks due to the ongoing national financial crisis," reports LATimes.
* "Even before the latest squeeze in the credit markets, the U.S. economy had slipped into what could be a relatively lengthy recession, economists say. The latest data, covering activity in August and September, make it all but certain that economists will eventually declare that the economy is in a recession," reports MW.
* "U.S. jobless claims last week hit 497,000, the highest since Sept. 29, 2001 and above Wall Street economists' forecasts. Meanwhile, factory orders plunged by the largest amount in nearly two years as the credit strains are hitting manufacturing with full force," reports CNBC.
* "The banking crisis is upending American dominance of the financial markets and world politics. The industrialized countries are sliding into recession, the era of turbo-capitalism is coming to an end and US military might is ebbing. Still, this is no tim