Metals shine in July
Buck at 2009 lows, tracking Obama's polls ... Stocks fly to '09 high
"Metals: Trade of the decade!" -Listen ... 5 lost freedoms in health care reform
BY DAVID BRADSHAW Editor, Real Money Perspectives
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July 31, 2009 ~ ((daily podcast)) ~ gold fraud alert!

Friday gold prices shot up 2% as the dollar slid over 1% while investors digested GDP data. Gold closed the week up $20.80 to $954.50/oz., silver rose $.44 to $13.91/oz.

* For the month; 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 on 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.

* "The dollar dropped most against the pound of its 16 major counterparts Thursday after a report showed U.K. house prices rose for a third month and a rally in stocks spurred investor appetite for riskier assets," reports Bloomberg.

* "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.

* The U.S. dollar is on the same trajectory as Obama's approval ratings. Since Jan. 21st Obama's approval rating has fallen 32% -- from 65% to 48% -- the lowest level since the election. Meanwhile, the dollar index has dropped 11% ytd, from 88 to 79 and is down 35% since 2001!

* "Oil prices rebounded on Thursday, leading a strong recovery across commodity markets after China’s central bank pledged to maintain loose monetary policy. Fears that China might clamp down on bank lending prompted a sell-off in the previous session. However, the combination of reassuring comments from China and renewed dollar weakness ignited a broad rally," reports FT.

* "Stocks rallied Thursday after two days of losses thanks to upbeat weekly jobless claims and as second-quarter earnings continued to top estimates. The DJIA gained 83.74 points, or 0.9%, to 9154.46 -- the highest close since Nov. 4. The benchmark is up 40% from its 12-year closing low of 6547.05 hit on March 9," reports WSJ.

* "The U.S. Treasury sold $39 billion in five-year debt Wednesday in an auction that drew poor demand, raising worries over the cost of financing the government's burgeoning budget deficit. It was the second lackluster showing in as many days, convincing analysts the stellar results of debt auctions a few weeks ago were a fluke," reports CNBC.

* "Weak durable goods numbers versus stronger home sales: which indicator should investors believe? The U.S. dollar is the critical factor to watch this week. If the dollar makes a pronounced move up, we may see weakness in stocks, oil and other commodities," said Art Cashin of UBS Financial Services to CNBC.

* "Gold prices are ignoring dwindling inflows into bullion-backed exchange-traded funds, with prices supported as investors switch their interest to the U.S. futures market and outright purchases of physical metal. Investors are increasingly embracing riskier assets like stocks, leaving less of an impulse to hoard gold as a hedge against the unknown, lending support to its appeal as a buffer to dollar weakness and future inflation," reports Reuters.

* 5 freedoms you'd lose in health care reform: 1. Freedom to choose what's in your plan ... 2. Freedom to be rewarded for healthy living, or pay your real costs... 3. Freedom to choose high-deductible coverage ... 4. Freedom to keep your existing plan ... 5. Freedom to choose your doctors ... The best solution is to move to a let-freedom-ring regime of high deductibles, no community rating, no standard benefits, and cross-state shopping for bargains," reports Fortune.

* "Stocks closed lower Wednesday after a report showed a much sharper drop in durable-goods orders than expected. Plus, a sharp selloff in China dragged on oil prices, which also weighed on the market. Today's economic news poured more water on recovery hopes: Orders for durable goods, big-ticket items such as refrigerators and cars, fell 2.5% in June," reports CNBC.

* "In the aftermath of the financial-market crisis, investors are leaving Wall Street to sign on with independent investment advisers. The four major Wall Street brokerage firms saw an outflow of $8 billion in 2008. Investors seeking to repair their damaged nest eggs say the chief lure of independent advisers is more-objective guidance," reports WSJ.

* Health Care Co-Op Gaining Support: "Senate Democratic leaders appeared open to establishing a non-government cooperative as part of a U.S. health-care overhaul. Senate Majority Leader Harry Reid and Sen. Charles Schumer said they were amenable to considering a cooperative -- perhaps in lieu of a government-run insurance plan -- to compete with private insurers as part of the effort to reduce the country's health-care costs and expand coverage to uninsured Americans," reports USelectionatlas. What is Co-Op? -FOXvideo.

* "U.S. consumer confidence fell more than expected in July, recording its second consecutive decline, as sentiment remained hampered by a difficult job market the Conference board said Tuesday. The index of consumer attitudes slid to 46.6 in July from 49.3 in June," reports CNBC.

* "Tuesday stocks ended mixed as falling oil prices weighed on the energy sector but other industries idled amid mixed earnings and economic reports. The energy sector of the S&P 500 was down about 1.6% as oil prices slid. The front-month crude-oil futures contract fell more to around $67 a barrel," reports WSJ.

* "Owning precious metals creates a solid foundation of confidence, so vital in today's untrustworthy financial world. It’s time we stopped looking at the day-to-day market movements and instead focus on a decade-to-decade perspective," says Swiss America Chairman Craig R. Smith.

* "Right now, investors should be concerned about stagflation. When prices are going up but don’t have demand and economic growth, you have a period of stagflation," said Carrie Coghill Kuntz, president and co-founder of D.B. Root & Company. Kuntz said investors could prepare their portfolios by focusing more on real assets commodities, reports CNBC.

* "Obamanomics Won’t Work. The neo-Keynesian deficit-spending 'stimulus' approach, which began with Henry Paulson and the Bush administration, is the exact opposite of what the economy needs. There is nothing in economic history to support the belief that the agenda currently being pursued in Washington will lead to real recovery. Jimmy Carter-style 'stagflation' is a much more likely result," reports HotAir.

* "Goldman Sachs, under fire for reaping record trading profits in the teeth of the financial crisis, is now fighting to defend one of its major sources of revenue -- commodities trading -- as regulators consider setting limits on Wall Street speculators," reports Marketwatch.

* Why Worry About Inflation Now?: "The national debt is now $160,000 per person. The annual interest alone is $8,000 per person and growing rapidly. For policymakers, (not for taxpayers or investors) inflation solves a lot of problems, and Bernanke was right – if there is a printing press and a will to use it, the Fed can create inflation," reports SafeHaven.

* "The dollar traded near the lowest level this year against the currencies of six major U.S. trading partners Monday on speculation the global economy is shaking off the worst recession since World War II. The dollar fell even after Fed Chairman Bernanke said he supports the Treasury’s 'strong dollar policy,' in a town-hall-style meeting taped in Kansas City, Missouri for broadcast on PBS television this week," reports Bloomberg.

* Stocks end flat despite cheery housing news: "New U.S. home sales rose by the largest amount in more than eight years last month, in another sign the housing market is finally bouncing back from the worst downturn in decades. The Commerce Department said Monday that sales rose 11% in June to a seasonally adjusted annual rate of 384,000," reports CNBC.

"Markets are in the mother of all 'fallies,' (short-term stock rallies based on fallacies). Investors should be watching the economic data coming out to see whether this rally could be sustained," said Kirby Daley, senior strategist at the Newedge Group, to CNBC.

* China tells U.S. to manage flood of dollars: "A top Chinese official said on Tuesday the United States should be careful about flooding global markets with dollars while the world struggles to restore economic stability and get growth back on track. China, now the world's No. 3 economy with huge reserves of foreign currency, is ready to spur more domestic demand but specified they want the U.S. to allow more exports of high-technology goods to China," reports Reuters.

* "China is bringing 150 senior officials to the U.S. this week for talks whose symbolic value is likely to trump concrete achievements. The U.S. will call on China to liberalize exchange rates so the yuan currency appreciates and China's exports stop undercutting competitors. What is reasonable to expect is a broad statement that there needs to be a rebalancing of the trade," reports Reuters.

* "Western nations fret that China is engaged in a grand strategy as it snaps up natural resource assets around the world -- that it is seeking to control the supply of raw materials and dominate manufacturing processes. It might be that the Chinese just love hard assets. Real assets in general, and commodities in particular, are clearly the way to play inflation. The resource buying frenzy comes from an opportunistic view that commodity prices are recovering and holding natural resources is in any case a sensible strategy for the long run," reports Reuters.

* "Commodities are in a bullish mode. We’re seeing more money flow into commodities and we’re seeing the gradual erosion of the dollar. These will continue to be driving forces for these prices, along with the evidence that the global economy is bottoming. We’ll see commodities rally 10 to 12 percent by year- end," said William O’Neill, Logic Advisors partner to Bloomberg.

* Meltdown 101: A weak dollar and the economy: "Those greenbacks in your wallet have been losing their punch for months, thanks to a weaker economy and the government's aggressive attempts to fix it. For Americans traveling overseas, the pain of the waning dollar couldn't be clearer, and economists say it may soon hit a little closer to home. In some cases, it already has. Companies that do business with a weaker currency will have to pay more for the same products. Those added costs usually get passed on to the consumer," reports AP.

* "Bank power is shifting east. THIS IS A MAJOR POINT IN THE PARADIGM SHIFT UNDERWAY. The old game is over. The new accountable system is being constructed outside the US-UK shadows of control, with an intolerance for future criminal abuse. The Paradigm Shift continues. With it comes clear movement in the financial structure underpinning away from the US Dollar and toward hard assets," reports FinSense.

* You Can't Print Production and Prosperity: "NY Tmies columnist Paul Krugman is now worried about the 'paradox of thrift,' the theory that, when consumers save too much en masse, the economy is worse off because there is not enough consumption. But as economist Frank Shostak explains, it is savings — not demand — that enables the expansion of production of goods and services. 'No effective demand can take place without prior production,' Shostak writes. In other words, you can't print production and prosperity, much as the Fed may try," reports Mises.

July 20-24 News & Views
* "Stocks skidded Friday as a drop in consumer sentiment exacerbated losses triggered by a disappointing earnings from American Express, Amazon and Microsoft. U.S. consumer confidence waned in July to its lowest ebb since April on growing pessimism about the long-term economic outlook, especially about income and jobs," reports CNBC.

* Consumers unable to lead economy forward: "The over-indebted U.S. consumer -- whose deleveraging process yet has to start -- will likely continue to put the brakes on consumption, while the savings rate continues to creep up," said economist Nouriel Roubini. 'Job insecurity, together with declines in home values and tight credit, is likely to limit consumer spending,' Fed Chairman Bernanke told Congress earlier this week," reports Marketwatch.

* The Next Five Years: The U.S. stock market will probably stay in a trading range of between 6,000 and 12,000 on the Dow for a decade or more. Inflation is coming back. Commodities will go much higher. The U.S. dollar is going down and so will most other currencies. Your Solution: Do not use leverage. Diversify assets. Own some gold and silver and have it nearby in physical form..." writes Ken Gerbino.

* "How high can gold rise? Last July I suggested that $2,000 an ounce on a two to three-year view was possible, as this would bring gold back up to its historical peak in real terms (constant dollars) last seen in 1980. This could now turn out to be a substantial underestimate as 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, writes Ian Williams, Chairman of Charteris Treasury Portfolio Managers in Telegraph. [Ian is one of 75 experts who all agree "Gold's Future is Bright!"]

* "The IMF is now on the verge of taking a big leap towards a new currency system, with a proposal to increase the supply of SDRs by eightfold (special drawing rights, are basically a bundle of several currencies including the dollar, yen, sterling, and the euro). The IMF will vote on the measure August 7th and would start issuing the new currency by the end of the month. If it passes, this would be the first time the IMF would have increased the number of SDRs since 1981 – a pretty substantial shift. The world is taking a big step away from the dollar as the de-facto global reserve currency," reports Newsweek.

* "From North Korea to Pakistan, Afghanistan, Iran and Honduras, and from the economy to health care to carbon emissions, things are not going Obama's way. He is 10 points below where Nixon was after a full year, and on economic issues – unemployment, the deficit, spending – he is under 50 percent. This presidency is not yet in trouble, but it is sure headed that way," reports WND.

* "President Obama showed great fluency in the intricate details of health policy at his news conference on Wednesday night, but experts said some of his points were debatable. Mr. Obama said doctors, nurses, hospitals, drug companies and AARP had supported efforts to overhaul health care. Far from supporting this proposal, the American Hospital Association is urging hospital executives to lobby against it," reports NYtimes.

* Healthy debate: "A major legislative overhaul of U.S. healthcare seemed to be a sure thing just weeks ago, and some sort of change remains likely. But as details emerge and costs become apparent, industry groups and moderate Democrats are starting to balk. Conservatives argue that such a public plan threatens the existence of private insurers by creating an unlevel playing field where the government acts as both competitor and industry regulator. Studies show as many as two-thirds of customers may lose their private insurance as companies try to compete with the government," reports Worldmag.

* "Health care is turning into a major test of Obama's leadership. One Republican senator says if the party can stop Obama on health care, it will break him. 'No one wants to tell the speaker (Nancy Pelosi) that she's moving too fast and they damn sure don't want to tell the president,' said Rep. Charles Rangel, D-N.Y.," reports AP.

* "When Charles Hummel wrote his classic essay "The Tyranny of the Urgent," in 1967, he identified the telephone as among the worst offenders against our peace and complacency. The issue, Hummel said, is not so much a shortage of time as a problem of priorities. Or, as a cotton mill manager once told him, "Your greatest danger is letting the urgent things crowd out the important," reports ANS.

* "Stocks rallied Thursday as investors shrugged off a rise in jobless claims and focused on encouraging earnings from Ford and 3M. A third straight rise in home sales also buoyed the market, helping propel the DJIA above the 9,000 mark for the first time since January. Existing-home sales rose 0.3%, " reports CNBC.

* "Another flood of earnings reports left major stock-market benchmarks mixed on Wednesday as bank stocks fell but some technology and consumer stocks rose. Financial stocks were mostly lower after a wave of quarterly reports from banks. Morgan Stanley dropped 5.1% after earnings dropped sharply," reports WSJ.

* "This is nothing but a relief rally in a secular bear market and we’ll be in a secular bear market for another 10 to 15 years," said David Hefty, principal of Cornerstone Wealth Management. "Right now, being bearish is nothing more than being realistic with what’s going on around us," Hefty told CNBC.

* "As new trillions of dollars are created by the Fed, the dollar is under 'stealth devaluation.' In the choice between deflation and dollar-devaluation, the Fed has clearly chosen the path of dollar devaluation. The investor's defense against the Fed's decision -- gold," reports Richard Russell at DailyCrux.

* "Gold prices will be pushed up next year by a weaker dollar and inflation concerns, even though bullion's appeal as a less risky asset may be waning as the economic outlook improves. The two primary drivers pushing gold higher are a weaker dollar and massive injections by central banks of liquidity to support economic growth," reports Reuters.

* Prepare for 'Age of Turbulence': "Businesses have to go back to thinking longer-term, but they also have to adjust to new realities. The old-style economic cycle, with several years of growth followed by a recession is not likely to be repeating itself because of the volatility brought on by globalization. We've been pushing for short-term profitability and too short-term growth. In the new, more turbulent environment, unemployment at 9% in the U.S. may become the norm, compared with the previous level of 4%," John Caslione, founder and CEO of GCS Business Capital and author of "Chaotics" told CNBC.

* "Fed Chairman Ben Bernanke faced his second day of grilling Wednesday from members of Congress upset that spending over a trillion in bank bailouts and stimulus plans is still going to end up with an unemployment rate heading above 10%," reports Marketwatch. "The central bank is fending off attacks on many fronts from critics who want to rein in its power and autonomy. Rallying one charge is Ron Paul, an iconoclastic Texas Republican who wants to abolish the central bank entirely," reports WSJ.

* The Fed’s Exit Strategy : "The Fed's accommodative policies will likely be warranted for an extended period. At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem. The Federal Open Market Committee has devoted considerable time to issues relating to an exit strategy. We are confident we have the necessary tools to withdraw policy accommodation in a smooth and timely manner," writes Ben Bernanke in WSJ.

* Who will win the battle for the soul of the Federal Reserve?: "America's 96-year-old central bank is considered too independent by those who want it under tighter government control. It is shaping up to be a ferocious fight. Ranged on one side is the entire Republican membership of the US House of Representatives. On the other are many of the most influential economists in the land. The irony is that both sides are fighting for the same ultimate goal: the suppression of inflation," reports Independent.

* White House puts off budget update: "The White House is being forced to acknowledge the wide gap between its once-upbeat predictions about the economy and today's bleak landscape. The administration's annual midsummer budget update is sure to show higher deficits and unemployment and slower growth than projected. 'Instead of a dream, this routine report could be a nightmare,' said Tony Fratto, a former Bush Treasury Department official and White House spokesman," reports AP.

* In over his head: "It was a novel idea. Hire a young, energetic 47-year-old man offering a message of hope and change – a hip, cool cat with a swagger in his step and power in his oration and a man with a clear vision to change America. It all sounded good. But now that 1,000-page bills are being passed without being read, those that give us cap and trade and an entirely new government -based health care system, people are getting a bit nervous. This 'one party rule system' is starting to frighten me. Mr. Obama wants, Congress gives and the American people are handed the bill," reports Swiss America CEO Craig R. Smith at WND. [As covered Monday on Your World w/Neil Cavuto]

* Bailouts could cost U.S. $23 trillion: "A series of bailouts, bank rescues and other economic lifelines could end up costing the federal government as much as $23 trillion, the U.S. government’s watchdog over the effort says – a staggering amount that is nearly double the nation’s $13 trillion economic output for a year and more than the federal government has spent on any single effort in American history," reports Politico.

July 13-17th News & Views
* Gold rallies above $950: "There is a combination of both a weaker dollar (and) appetite for commodities coming back with the hope of an economic recovery," said Alexander Zumpfe, a trader at precious metals house Heraeus," reports Globe&Mail.

* U.S. Mint gold, silver coin sales 'temporarily suspended' - again: "Unprecedented demand, a shortage of blanks, and restrictive policies and regulations continue to exacerbate what is almost becoming a chronic shortage of gold and silver coins authorized by the U.S. Mint," reports Mineweb.

* "U.S. lender CIT Group Inc has agreed $3 billion in rescue financing from bondholders, sources say, aiming to avoid becoming the latest victim of a recession which a survey on Monday said the United States has yet to shake off," reports FoxBiz.

* "Commodities are cheap today relative to this secular bull, and even cheaper relative to decades of real price history. Yet world demand will only continue to rise in the coming decades, necessitating massive investment in production infrastructure. The only thing that can drive this is much higher prices. And rest assured they are coming, commodities’ secular bull is less than half over," reports Goldseek.

* "The worst period of the financial crisis is over, but the three phases of the crisis — the crisis itself, the worst economic recession since World War II and the highest inflation since the 1980s, have not reached an end," according to Tao Dong, chief economist for Asia at Credit Suisse First Boston," Understanding Economic Supercycles.

* Socialist America sinking: "China saves, invests and grows at 8 percent. America, awash in debt, has a shrinking economy, a huge trade deficit, a gutted industrial base, an unemployment rate surging toward 10 percent and a money supply that's swollen to double its size in a year. The 20th century may have been the American Century. The 21st shows another pattern," reports WND.

* "Under current law, the federal budget is on an unsustainable path, because federal debt will continue to grow much faster than the economy. Rising costs for health care and the aging of the population will cause federal spending to increase rapidly under any plausible scenario for current law. Unless revenues increase just as rapidly, the rise in spending will produce; growing budget deficits, reduces national saving and depress economic growth in the U.S.," reports CBO.

* "Sorry to break to the news, but the financial crisis is not over. You’ve got plenty more writeoffs of bad paper to come. 75 percent of the world’s economies today are still contracting and the biggest piece on the demand side of the global economy is the American consumer, who is dead in the water," said Stephen Roach, chairman at Morgan Stanley Asia to CNBC.

* "Unless the Democrat-supported health care plan becomes law the nation will go bankrupt. The only way to avoid that fate is for the government to spend more money," Vice President Joe Biden told people attending an AARP town hall meeting reports CNS.

* "The most trusted man in America is gone. Walter Cronkite, who personified television journalism for more than a generation as anchor and managing editor of the "CBS Evening News," died last Friday. Known for his steady and straightforward delivery, his trim moustache, and his iconic sign-off line -"That’s the way it is", reports CBSNews.

* Stocks snapped a 4-week losing streak last week, closing up slightly Friday. "Bank of America's second-quarter income fell 5.5% on merger charges and continued credit woes.Citigroup swung to a profit, but only because of a gain from splitting off its brokerage operations. General Electric's Q2 earnings dropped 47% on continued woes at its financial operations," reports WSJ.

* "Treasury prices advanced Thursday, pushing yields down for the first day in four, as markets remain jittery that lender CIT group may need to file for bankruptcy protection. Treasurys extended gains after the Labor Department said initial claims for jobless benefits fell down 47,000 to 522,000 in the week ended July 11," reports Marketwatch.

* Inflation, Not Default, Is Risk for Treasury Bonds: "The headlines are scary. Standard and Poor's warns that UK gilts (British Treasury bonds) may lose their AAA rating and indicates that U.S. government bonds may also be downgraded. Bill Gross, PIMCO's "bond king," says emphatically that the U.S. will eventually lose its AAA rating. Is it possible for the U.S. government to default on its own debt? Technically, the answer is "no." The government can always print the money to pay its obligations. But from an economic standpoint, the answer is "yes," since printing money causes inflation and pays off bondholders with depreciated dollars," reports YahooFin.

* "The decline in the dollar is very important. It means that investors are beginning to feel safe again and are coming to their senses. They see that this year’s budget deficit is going to reach about $2 trillion and the dollar can’t hold up under the weight of this large debt. Investors know that all of this easy money is going to result in inflation. The bottom line... we’d continue buying gold," report The Aden Sisters.

* "U.S. consumer prices rose at a faster-than-expected 0.7% pace in June, but the bulk of the increase was due to soaring gasoline prices and the core measure of inflation remained relatively tame, government data showed," reports CNBC.

* "Stocks were little changed Thursday morning after the previous session's big rally, as investors welcomed better-than-expected earnings from J.P. Morgan Chase but fears over a potential CIT Group bankruptcy curbed gains. Crude-oil futures were down 57 cents at $60.97. The dollar was weaker against the Japanese currency," reports WSJ.

* "U.S. stocks on Wednesday ended strongly higher, with financials pacing the gains, with investors heartened by tech bellwether Intel Corp.'s better-than-expected results and new data showing credit card delinquency rates fell in June," reports Marketwatch.

* "House Democrats today unveiled legislation totaling about $1 trillion that would expand health care to millions of Americans over the next decade by raising taxes on the wealthiest households. The Senate has yet to agree on a bill as Democratic lawmakers struggle to get Republican support. White House Chief of Staff Rahm Emanuel offered a definition of bipartisanship based not on roll-call votes but on whether Democrats have accepted Republican ideas during the process of negotiations," reports Bloomberg. [Republicans unveil chart depicting projected bureaucratic maze]

* "China said its gold reserves were unchanged in June compared with April, according to a statement from the central bank. China has boosted its gold reserves by 76% since 2003 and has the world’s fifth-largest holding by country China’s foreign-exchange reserves topped $2 trillion for the first time, the central bank said to Bloomberg.

* Secular (or long-term) bull-bear market cycles for stocks and commodities last for decades and are more powerful than government stimulus plans. Gold has been the top performing asset because it's both a commodity and a currency. So it's not "too late" to diversify into gold for safety and growth, here's why ...

* The Bernanke Market: "The $1 trillion federal deficit is crowding out private investment and the porky $787 billion stimulus hasn't translated into growth. Only one thing has worked -- flooding the market with dollars. By buying U.S. Treasuries and mortgages to increase the monetary base by $1 trillion, Fed Chairman Ben Bernanke didn't put money directly into the stock market but he didn't have to. With nowhere else to go, except maybe commodities, inflows into the stock market have been on a tear. Stock and bond funds saw net inflows of close to $150 billion since January. The dollars he cranked out didn't go into the hard economy, but instead into tradable assets. In other words, Ben Bernanke has been the market," reports WSJ.

* "The federal deficit has topped $1 trillion for the first time ever and could grow to nearly $2 trillion by this fall, intensifying fears about higher interest rates, inflation and the strength of the dollar. There is growing talk among some Obama administration officials that a second round of stimulus may eventually be necessary.That has many Republicans and deficit hawks worried that the U.S. could be setting itself up for more financial pain down the road if interest rates and inflation surge. They also are raising alarms about additional spending the administration is proposing, including its plan to reform health care," reports AP.

* "Stocks mustered only tiny gains Tuesday, despite strong earnings from Wall Street bellwether Goldman Sachs Group and better-than-expected retail sales data. 'From a consumer standpoint, this is going to be a longer recovery,' said Kent Croft, chief investment officer for Croft Funds. 'People are hunkered down and they're going to stay that way for a while'," reports WSJ.

* "Greenlight Capital Inc., the $5 billion hedge-fund firm run by David Einhorn, told investors it switched all of its holdings in a gold exchange-traded fund into bullion during the second quarter. 'At a minimum this will provide some savings as the costs of storing gold are less than the fees' for the SPDR Gold Trust," reports Bloomberg.

* "Stocks rallied Monday as investors welcomed a retreat in energy prices and snapped up bank stocks ahead of a wave of earnings reports from Wall Street bellwethers. Stocks have been in a rut in recent weeks due to worries about the economy, chart-based selling, and weak volumes. The Dow is on a four-week losing streak," reports WSJ.

* "Unemployment is likely to rise to 13% or higher and will weigh on the economy for several years, countering government efforts to stabilize the banking industry. We underestimate how much the whole economy is dependent on the mortgage industry. This is what happens when you delay the inevitable. We're buying time here, but we're not restructuring the economy," said analyst Meredith Whitney to CNBC.

* High Loan-to-Value + Trigger Event (Unemployment) = Default: "With the decline of recent weeks, the market has cleared away the short-term overbought condition it established in June. The percentage of stocks above their respective 50-day averages, for example, has retreated from a disturbingly high 92% to a slightly but not profoundly oversold level of 32% here. Investors have predictably been staring at the “green shoots” and have noticed a conspicuous absence of root formations so far. From our standpoint, the next several weeks look as if they may be critical in either offering evidence that something deeper is taking hold, or pulling those shoots up as weeds," reports Hussman.

* CIT in talks to secure liquidity: "Lender reportedly says its collapse could bring down 760 manufacturers and precipitate a crisis for up to 300,000 retailers. CIT officials were scrambling to improve the group's funding position amid fears that nervous customers could start withdrawing their funds and as Treasury Secretary Geithner said he's closely following the saga," reports Marketwatch.

* Japan Should Diversify Reserves: "Japan should consider shifting its $1 trillion of foreign reserves away from the dollar and buying International Monetary Fund bonds," said Masaharu Nakagawa, head of the nation's opposition party, leading in polls ahead of next month’s election, reports Bloomberg.

* Europe digs its economic grave while the ECB answers to no one: "Without a radical change of strategy, the ECB risks pushing the weakest states into a debt-compound spiral that can only end in bond crises and/or the disintegration of Europe's monetary union – whichever comes first. ECB experts think eurozone banks will have to write down a further €203bn by the end of next year. Yet ECB policy-makers seem unwilling to face the implications," reports Telegraph.

* "Should we be surprised when the U.S. Senate blocked a bill last week to audit the Federal Reserve? Tis true! Rep. Ron Paul and more than half of the House cosponsored the Federal Reserve Transparency Act, HR 1207, which they hope to have hearings on soon. On the Senate side, however, Sens. Jim DeMint, Mike Crapo and David Vitter cosponsored S 604, companion legislation introduced by Bernie Sanders. But it was stopped cold before even being introduced on the floor on "procedural grounds," reports WND.

* "Republicans called Obama's $787 billion spending plan a 'flop' and said it hasn't fulfilled its hype. Republicans lined up in opposition to a second economic stimulus package in a rare demonstration of unity from an out-of-power political party in search of a rallying cry against President Barack Obama. They criticized the White House for increasing the federal deficit and doing little to combat an unemployment rate that hit 9.5 percent in June. 'The reality is it hasn't helped yet,' said Sen. Jon Kyl, R-Ariz," reports AP.

July 6-10th News & Views
* "Russian President Dmitry Medvedev illustrated his call for a supranational currency to replace the dollar by pulling from his pocket a sample coin of a united future world currency. 'Here it is. You can see it and touch it.' The coin, which bears the words 'unity in diversity,' was minted in Belgium and presented to the heads of G-8 delegations, Medvedev said," reports Bloomberg.

* "The coins are called 'eurodollars,' in a symbolic call for a common currency to unite Europe and the U.S. were made by Belgian Luc Luycx. They have a value of $3,900 and were produced by the United Future World Currency, a group pushing the idea of a global currency. [If this is a one ounce coin, can we assume the price of gold coins should be around $3,900," reports Solari.

* "Even if Russia's call for a global currency failed to gain much traction at a G8 summit, President Dmitry Medvedev took home a coin meant to symbolize that the dream may one day come true. Russia, China and France have been vocal proponents of diversifying the global currency system away from the dollar," reports AFP.

* "We should have a better system for reserve currency issuance and regulation, so that we can maintain relative stability of major reserve currencies exchange rates and promote a diversified and rational international reserve currency system," said Mr. Dai Bingguo, who is standing in for the Chinese president Hu Jintao at the G8 meetings, reports Telegraph.

* Catching The Gold Bug: "People used to laugh at me for buying gold. They don’t anymore," says Dr. Scott Van Steyn, a 45-year-old orthopedic surgeon in Columbus, Ohio. Worried about a harrowing, inflation-ridden future, Dr. Van Steyn has found the answer in a batch of glittering one-ounce gold coins," reports WSJ.

* "Silver is set to outperform gold, argued Citigroup in a note published Thursday, with the broker saying investment flows into gold are moderating while the outlook for silver is improving. The ratio of gold-to-silver prices should return to its historical norm between 55 and 60 from the current 69," reports MarketWatch.

* "On track for its first four-week losing streak since March, Wall Street kicked off Friday in negative territory as GM's speedy emergence from bankruptcy court was overshadowed by continued earnings jitters, including Chevron's profit warning. Retail stocks fell Friday after consumer sentiment fell more than expected," reports FoxBus.

* Congress warned on meddling in Fed's affairs: "Any substantial erosion of the Federal Reserve's monetary independence likely would lead to higher long-term interest rates as investors begin to fear future inflation," said Fed Vice Chairman Donald Kohn. A bill put forward by Representative Ron Paul, a Texas Republican, would expose the Fed's decisions on monetary policy and emergency lending to audits by the Government Accountability Office. It has won support from a majority in the House of Representatives," reports Reuters.

* "Stocks squeaked out a small gain Thursday as investors were encouraged by Alcoa's beat and a drop in jobless claims but pharmaceutical and retail stocks dragged. Initial jobless claims plunged by 52,000 last week to a much lower-than-expected 565,000 mostly because of fewer-than-expected auto layoffs and continuing claims surged to another record — 6.883 million," reports CNBC.

* "Increasing distrust in the stock market is accelerating investors into Treasurys, even as the government floods the market with billions in debt with no end in sight. After suffering through several lackluster auctions, recent Treasury offerings have sparked strong investor interest," reports CNBC.

* G8: New Dollar Gap Opens: "The world's richest and its largest developing economies made a little progress in bridging the gaps that divide them Thursday, agreeing on the ultimate goal for climate change negotiations. But new gaps are opening up, not least a brewing disagreement over the role that the U.S. dollar and other currencies should play in the international monetary system. That may prove just as thorny and insoluble as trade and climate change have been over the past decade," reports WSJ.

* "Morgan Stanley's chief economist Richard Berner is not optimistic about the economy. 'America’s long-awaited fiscal train wreck is now under way. By 'train wreck,' he means out-of-control federal budget deficits that he’s sure will finally drag the economy under," reports Politico.

* "Tuesday's stock plunge appears to have broken the market's neck. I'm referring to the neckline of the stock market's head-and-shoulders formation -- a very popular technical chart pattern that Peter Eliades, editor of the Stockmarket Cycles newsletter, believes was "convincingly" broken on Tuesday," reports MarketWatch.

* "The gold bull market has been running with an annual performance of 16% since 2001. Gold closed the year 2008 with the eighth annual increase in a row. Even the collapsing oil price or the rallying US dollar failed to put a lid on the gold price. Gold outperformed most other investments both in absolute and in particular in relative terms," reports Mineweb.

* "The best way to protect a portfolio against stagflation in future years is to buy commodities, particularly agricultural products, a U.S.-based fund manager said on Monday. Adam Robinson, director of commodities at Armored Wolf, said the massive amounts of money flooding into the global economy from central banks and governments may have set the world up for rampant inflation within a couple of years," reports Reuters.

* "The U.S. should consider drafting a second stimulus package focusing on infrastructure projects, because the $787 billion approved in February was 'a bit too small,' The current plan will have a positive effect, but the real economy is a sicker patient," said Laura Tyson, an adviser to President Barack Obama.reports Bloomberg.

*Secular (or long-term) bull-bear market cycles for stocks and commodities appear to be more powerful than government stimulus plans. Art Cashin told CNBC this morning that he feels we are about half way through an 18-year average bear market cycle in stocks which began in 2001. Gold has been the top performing asset since 2001 because it is both a commodity and currency. Those who fear they are "too late" to diversify into gold for safety and growth should have strong reasons to reconsider.

* Halfway Through Bear Cycle: "The stock market is still in danger of breaking through its March lows as the economy continues to struggle. Additional government stimulus is likely to have little more impact than 'cushioning the blow' of unemployment that will 'easily' break the post-World War II high of 10.8% in 1982," said David Rosenberg, chief economist and strategist at Gluskin Sheff, reports CNBC.

* Crisis Focus: The Halfway Point: "The worst period of the financial crisis is over, but the three phases of the crisis — the crisis itself, the worst economic recession since World War II and the highest inflation since the 1980s, have not reached an end," according to Tao Dong, chief economist for Asia at Credit Suisse First Boston reports bjreview.

* "World stock markets fell Monday as oil prices slumped below $64 a barrel amid concerns that any recovery in the global economy will be a long, hard slog following disappointing U.S. jobs data last week," reports AP.

* "A slump in the energy sector and worries about the upcoming earnings season weighed on U.S. stocks Monday. The consensus on Wall Street was that the global economy would begin a rebound in the second half of the year. But now that the second half is here, there is little evidence of such a comeback. The dollar stuck to narrow ranges, losing ground to the yen but edging higher against the euro ahead of this week's Group of Eight meeting," reports MarketWatch.

"California’s credit rating was cut for the second time in as many weeks by Fitch Ratings after a stalemate over how to close a $26 billion budget deficit forced the most-populous U.S. state to pay some bills with IOUs. Fitch lowered its rating of California’s general obligation bonds by two steps to BBB from A-, placing the debt two ranks about so-called high-yield, high-risk junk ratings, and said the state may be cut further," reports Bloomberg.

* "More than 2,000 tea parties from coast to coast attracted hundreds of thousands tax and Big Government protesters on Independence Day – perhaps the biggest July 4 political event in America since the proclamation of the Declaration of Independence. Americans had their say about bailouts, cap-and-trade bills and new federal spending programs that they believe are mortgaging their children's futures and robbing them of personal freedom," reports WND.

* G8 Dollar discomfort: "Leaders from the Western economic powers and Russia meet in Italy on Wednesday and are joined the day after by leaders from China, India, Brazil and others to discuss global challenges World leaders are bound to express the hope that the worst of the global economic crisis is passing, but they are now under pressure, too, to manage a Chinese challenge to dollar supremacy," reports Reuters.

June 29-July 3rd News & Views
* Last week U.S. stocks fell after a report showed more jobs were lost last month than expected. Employers slashed 467,000 jobs from nonfarm payrolls in June and the unemployment rate ticked up one-tenth of a percent to 9.5%. 'Much like we saw with the Depression, attitudes change, and so consumers and investors will now become conservative savers as opposed to spenders,' said Pimco's Bill Gross" reports CNBC.

* "After two stimulus packages, $168 Billion-Bush and $787billion-Obama, we are still hemorrhaging jobs at a rate of over 450,000 a month -- over six million since the start of this recession and no end is in sight. It is time to cut taxes, reduce the size of government and allow free markets to do what they do best: create jobs and prosperity. Government can create nothing but wasteful spending and red tape," said Craig R. Smith, CEO of Swiss America.

* The Great American Bubble Machine: "From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression -- and they're about to do it again. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity," reports Rolling Stone.

* Since 2002 gold prices are now up 230%. Meanwhile, classic U.S. $20 Liberty and Saint Gaudens gold coins are up between 295% and 375% -- rising 30%-60% faster than bullion! (See charts). Gold prices ended June with a 5% decline, but a 2% rise in the second quarter and 6% rise in the first half of 2009.

* "U.S. consumer confidence took an unexpectedly steep slide in June, figures released on Tuesday showed, suggesting the 18-month-long recession had yet to loosen its grip on the economy. 'As markets revive, fear of inflation will drive up interest rates, which will choke off recovery,' said George Soros," reports Reuters.

* "Companies in the U.S. cut more jobs than forecast in June, showing the labor market will be slow to improve even as other parts of the economy indicate the recession is abating according to ADP," reports Bloomberg.

* Ron Paul Wins Support to Audit Fed Reserve: "As of Tuesday, Ron Paul has won 245 co-sponsors to a bill that would require a full-fledged audit of the Federal Reserve by the end of 2010. The bill has been sitting in the House Financial Services Committee, which is chaired by Barney Frank, D-Mass, gathering co-sponsors, since Paul introduced it in late February," reports FOX.

* "Gold and economic freedom are inseparable. In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights," wrote Alan Greenspan back in 1966.

* "Wal-Mart, the world's largest retailer, said on Tuesday that it supports President Barack Obama's push to require large employers to offer health insurance to workers. Wal-Mart has drawn criticism from labor groups, who have accused it of mistreating employees and not offering adequate health care coverage," reports Reuters.

* "Obama's plan is a job killer, at a time when America cannot afford to lose any more jobs," said Swiss America CEO Craig R. Smith to FOX Your World.

* As Calif goes, so goes the nation? "California is preparing to issue IOUs to its creditors this week as it grapples with an unprecedented cash crunch and prepares to begin its new fiscal year deep in the red. Once the US’s richest state, California now has the dubious distinction of having the worst credit rating in the country. It is facing a budget deficit of $24B," reports FT.

* "From my work I see the green shoots of hyperinflation. When a government is determined enough to debase its currency it can distort the measurement of economic value such that nominal prices rise while the value in real terms is falling. This is likely to be the case with the stock market," writes Adrian Douglas of MarketForce.

* "China and Brazil are working on a currency arrangement to allow exporters and importers to settle deals in their local currencies, bypassing the U.S. dollar, the countries' central banks said on Sunday. On Friday the Chinese central bank renewed its call for the creation of a super-sovereign reserve currency, saying dollar dominance has worsened the financial crisis," reports Reuters.

* "Gold Prices Seen Trending Higher, said Peter McGuire, MD of Commodity Warrants Australia, reports CNBC video. Expect to see a softer U.S. dollar over the course of this week," predicts Stephen Roberts, chief economist at Nomura.

* "Financial products should be treated like medicines and sold to consumers only when they are certified safe to prevent a repeat of last year's financial meltdown, the world's central bankers said on Monday. The 150 year sentence of Bernard Madoff serves as a reminder of market excess and oversight flaws that led to the worst downturn since the Great Depression," reports Reuters.

* "Let's connect the dots: The Fed prints money at the speed of light. President Obama spends money at the speed of sound. And Americans pay trillions for it all over multiple generations! Yet Warren Buffett says much more stimulus is needed! You cannot stop this train wreck, but you can hop off the train! The imperative question is; Are you ready for inflation?," reports GoldNewsDaily.

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