$10B/day budget! ... Investors flee the Citi ... Goodbye Dow 7k
Best performing asset of 21st century! ~ Four-digit gold signals...
Surviving & Thriving the Financial Storm ~ Gold IRA's +15% in '09!
By David Bradshaw ~updated hourly~ email ~ links ~ wisdom
Editor, Real Money Perspectives ~ weekly email ~ daily email
Feb 28, 2009 ~ features ~ ((podcast)) ~ gold fraud alert!
Gold prices ended February at $940/oz. after fund profit taking pushed prices down 6% from $1,000/oz. Gold closed down $5.90 to $939.60/oz., silver fell $.01 to $13.11/oz.
* After rising as much as 9% over the last two weeks, gold prices ended the month with a 1.5% gain -- and up 6.5% ytd in 2009. Gold is now up over $200/oz. since Barack Obama was elected Nov. 5, 2008. Meanwhile the DJIA closed the month with nearly a 12% decline, falling from 8,200 to 7,062, for the worst February drop since 1933.
* "It is critical to assess the damage to your financial house over the last 5 to 10 years. Investor portfolios typically include; stocks, bonds, real estate, commodities and cash. Let’s compare a $10,000 investment into each of these five asset classes since 2004. As our nation faces very challenging economic times --- may we all learn from history how critical it is to own a golden life preserver to protect our future," said Craig R. Smith (video) on Harvest TV.
* "U.S. stocks closed down on Friday, with the DJIA down for a sixth consecutive month, as the recession and ailing financial system had investors fleeing stocks. Fourth quarter GDP fell 6.4%, the worst quarter since 1982, while consumer spending fell 4.3%," reports MW.
* "Citigroup and the U.S. have reached an agreement in which the government will substantially increase its stake in the bank to 36% and will demand boardroom changes in return. Citigroup said it will offer to convert as much as $27.5 billion in preferred stock to common stock," reports WSJ.
* "Citigroup set a record for the most shares traded in a single day in the U.S., beating the mark set by WorldCom Inc. in 2002. Citigroup stock fell to $1.50 a share, the lowest closing price since November 1990. The U.S. doesn’t immediately intend to inject additional money after channeling $45 billion to Citigroup last year," reports Bloomberg.
* "The economy's downhill slide at the end of last year was likely much steeper than the government thought and it is probably doing just as poorly now - if not worse - as a relentless slew of negative forces feed on each other, pushing the country deeper into recession. American consumers - spooked by vanishing jobs, sinking home values and shrinking investment portfolios have cut back. In turn, companies are slashing production and payrolls," reports AP.
* Speculative profit taking by large funds pushed gold prices back below $1,000 this week, after running prices up $100/oz. over the previous two weeks. Nevertheless, gold is a perfect example of a healthy bull market; two steps forward, one step back. Long-term investors have consistently bought the dips over the last eight years, helping to crown gold as the best performing asset of 21st century.
* "Gold had been on a rocket ride this year, rising from $808 an ounce in mid-January as anxiety deepened about the global economy and financial markets.Gold already has been widely labeled "the next bubble." Investors who jumped aboard other bubbles just before they burst -- say, tech stocks in 1999 or real estate in 2006 -- must be thinking, "You won’t fool me this time," reports LATimes.
* "As gold heads out the window and down the path, with great media attention, there are whispers of a bubble. Was not gold at $1,000 a year ago? In the past decade, gold has risen steadily but not dramatically -- showing nothing like the drama in the rise and fall of oil, housing and tech stocks. Given world instability, this is hardly a bubble," reports GATA.
* "The rush by retail investors into bullion coins is creating shortages as mints across the world struggle to meet the surge in demand, dealers and mint officials say. The US Mint has sold 193,500 American Eagle gold coins in the first seven weeks of this year, the same amount it shipped during the whole of 2007," reports FT.
* "The departure of gold prices from their past inverse correlation with the dollar is just another example of the commodities market's ability to surprise and often flummox investors. It's also presented a trading opportunity for the prescient investors that bought into gold as an asset that often moves to its own beat," reports MW.
* "Gold is the most favored investment this year ahead of investment-grade bonds and other assets, according to a survey of investment advisers, the producer-funded World Gold Council said to Bloomberg.
* "As gold inevitably moves higher in price, and stock prices and the dollar fall further, the politicians of envy will speak out against the hoarders of gold and silver. They may not confiscate your gold, but they might dump Treasury gold on the market, or tax it heavily. Smart gold bugs buy their silver dollars and American eagles privately, and store it away secretly," reports MarkSkousen.
* "With all due respect Mr. President, your "Era of New Responsibility" is nothing more than a continuation of the Bush administration Era of Irresponsibility. Mr. President, we hoped for more and deserved more. Yet, behind the charade of campaign messages of hope and change, we essentially see the same fiscal irresponsibility and misguided policies as before," writes GEA-Mish.
* "President Obama's $3.6 TRILLION budget for next year (fiscal year begins October 1, 2009) works out to Ten Billion Dollars a day, $417 Million an hour. $6.9 Million per minute. $115,000 per second. Every second. Starting at one second after Midnight on October 1, 2009," reports CNS.
* 'Living within our means': Obama speech in Peoria, Ill... "We've gotta spend some money now to pull us out of this recession. But as soon as we're out of this recession we've gotta get serious about living within our means instead of leaving debt for our children and grandchildren and our great-grandchildren. That's not the responsible way. That's not how folks here in Peoria operate in their own lives, and they should expect the government is equally responsible." If Obama acknowledges what we all know to be the truth, that his economic gimmicky is simply making our children, grandchildren and great-grandchildren responsible for our problems, why is he doing it? How is that moral?" writes Joseph Farah at WND.
* Who said you can't legislate morality?: John Adams, a principal crafter and architect of our hallowed Constitution, and later our second president, declared, "Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other." This being true, any and all just laws must be based on moral considerations. If this republic is to endure, our elected representatives are ever bound to legislate morality. To fail that responsibility is to ensure we will be ruled by immorality," writes Pat Boone at WND.
* Charity tax limits upset many: "Democrats and Republicans poured cold water on President Obama's budget plan to cut down on wealthy taxpayers' charitable giving tax deductions, the second of his ambitious cost-savings plans to earn lawmakers' scorn, and underscoring the legislative minefield he is entering," reports WashTimes.
Feb. 26th News & Views - Statism vs. free market
* "Stocks ended lower Thursday as declines in health-care and consumer stocks offset gains in some financials. A pair of dismal economic reports made a dent in gains. New jobless claims jumped by 36,000 to 667,000, the highest since 1982, last week. Continuing claims popped over the 5 million mark to a record 5.11 million," reports CNBC.
* Bill Gross declares the death of equities: "Stocks are dead for the rest of your life. That's the gist of my interview with the head of PIMCO Total Return -- the biggest bond fund you've never heard of. But you should know PIMCO because its chief, Bill Gross, is one of the world's most powerful bond investors," reports DailyFin.
* "President Obama is sending Congress a budget Thursday that projects the government's deficit for this year will soar to $1.75 trillion, reflecting efforts to pull the nation out of a deep recession and a severe financial crisis. Obama's $3 trillion-plus spending blueprint also asks Congress to raise taxes on the wealthy in 2011 and cut Medicare costs to provide health care for the uninsured," reports AP.
* "President Obama will propose a combined $634 billion in upper-income tax increases and cuts to government health spending over 10 years to fund a new program aimed at getting health coverage to all Americans, a senior administration official said Wednesday," reports WSJ.
* The Problem With 'Nationalization': "The real issue is what to do with a subset of the largest financial institutions which are feared to be headed toward insolvency. There are no good options and certainly nothing resembling a free-market solution. The government has put the taxpayer on the hook in a myriad of ways," reports CATO.
* "Twelve years of success in reducing the welfare rolls have been wiped out by this massive so-called stimulus plan which is really nothing more than a gigantic return to and expansion of the welfare state. No country has ever spent its way out of debt and into prosperity. Debt creation simply shifts the burden of fiscal irresponsibility from the shoulders of the current generation to the shoulders of generations yet unborn," reports Crosswalk.
* Capitalism, Socialism, Statism or Communism: "Statism is defined by Webster as; "Concentration of economic controls and planning in the hands of a highly centralized government often extending to government ownership of industry." This sounds eerily close to Obama's agenda. If you are for Capitalism and the Constitution - for freedom and prosperity - for letting businesses fail when they no longer make a profit - for entrepreneurs guiding this great country with Capitalistic innovation, then please make your voice heard today," reports AFTC.
* "Benjamin Netanyahu plans to apply the same small-government policies when he becomes Israel’s prime minister as he did six years ago as finance minister. Then, his tax and spending cuts helped lift the economy out of recession," reports Bloomberg.
Feb. 25th News & Views - Wall St. roller coaster
* "Stocks pared their losses Wednesday after Fed Chairman Ben Bernanke assuaged concerns about nationalization of major banks. In his second day of testimony on Capitol Hill, Bernanke said there was no plan to nationalize troubled U.S. bank Citigroup. Wall Street took little solace from President Obama's speech to Congress last night," reports CNBC.
* "President Barack Obama promised a nation shuddering in economic crisis Tuesday night that he would lead it from a dire "day of reckoning" to a brighter future, summoning politicians and public alike to shoulder responsibility for hard choices and shared sacrifice. "The time to take charge of our future is here," Obama declared, delivering his first address to a joint session of Congress," reports AP.
* Existing-home sales slump 5.3% in January: "Realtors' lead economist says buyers held back as they awaited word on stimulus plan's incentive for purchases, while nearly half of the deals that did occur involved distressed properties," reports MW.
* "Gold's ongoing rise that started last November is the strongest in this bull market and the strongest since 1999. If gold reaches a new record high above $1004, it will most likely be embarking on the start of a great bull market rise, jumping to the $1200 level as its next target," report the Aden Sisters at SafeHaven.
* "As governments print more money to pull the global economy out of a recession, gold may spike to $3,000 a troy ounce as a result," says Hans Goetti, CIO of LGT Bank in Liechtenstein reports CNBC.
* "The government's arrest of David Copeland Reed caught a lot of the gold world's attention Tuesday. Reed was the gold world's Bernie Madoff. No, he didn't make off with $50 billion, and he surely didn't turn himself in, but Reed in just a few months allegedly bilked investors out of $12.8 million using nothing more than a computer, some fast talking and, oh yes, the glitter of gold," reports MW. (Avoiding Investment Gold Scams.
* U.S. Consumer Confidence Collapsed to Record Low: "Just when you think confidence can’t go any lower, the bottom falls out of it, and you can be sure the rest of the economy is not far behind," said Chris Rupkey, chief economist at Bank of Tokyo-Mitsubishi in New York. "If consumers’ spending matches their flagging spirits, this recession is going longer and deeper," reports Bloomberg.
Feb. 24th News & Views - Confidence in Wall St. rebounds
* "Tuesday energy and financials led the stock market's strong rebound from another beating during the prior session, which had stocks nearing 12-year lows. Mr. Bernanke delivered a simple message to Congress: Fix banks first and growth will follow.The administration will begin Wednesday a new series of "stress tests" for the nation's major banks. The government may demand a greater ownership stake in the institutions," reports MW.
* "Prices of single-family homes plunged 18.5% in December from a year earlier as the monthly pace accelerated, according to a Standard & Poor's/Case-Shiller home price index on Tuesday. There are very few, if any, pockets of turnaround in the data. Most of the nation appears to remain on a downward path," reports CNBC.
* Treasury's Unreality Show: "Yesterday's statement continued the Obama Treasury's pattern of promising undefined "help" at a time when people are as frightened of the government as they are of anything else. Amid the continuing gloom, the message that investors hear when all five regulators line up as a phalanx is: Uh, oh, things must be worse than we thought. All the more so when those same regulators still aren't offering any specific plans for moving ahead, much less any vision for where they want the financial system to end up," reports WSJ.
* Gold's 'Perfect Storm' Rages On: "Gold's eight-year bull market may have at least a few more years to run and could carry the precious metal beyond an inflation-adjusted record north of $2,000 an ounce, managers of precious-metals and natural-resource mutual funds say," reports WSJ.
Feb. 23th News & Views - Four-digit gold signals...
* "Four-digit gold signals investors are losing confidence in paper currencies, the U.S. government and Wall Street. The commodity super-cycle has already swept gold prices up nearly fourfold since 2001 as the ultimate safe haven," says Craig R. Smith, Swiss America CEO and author.
* Major stock market indexes fall to 1997 levels: "People left and right are throwing in the towel. The biggest thing I see here is the incredible pessimism. The government is doing a lousy job of alleviating fears," said Keith Springer, president of Capital Financial Advisory Services to AP.
* "Some analysts feel that silver, the 'poor man’s gold,' is a good complement to gold exposure, as well. Gold is rapidly becoming more expensive again; a signal to investors that silver could be poised for an even bigger price bump," reports CNBC.
* A nation of broken promises: "Honoring a contract or a vow was always the glue that held us together as a nation. If we neglect to rapidly return to that glue, the pain has only just begun. Experts are now telling us the answer to the current crisis is the write down of the principle of millions of mortgages and to offer lower interest rates for borrowers who never paid in the first place. Of course, the original answer was to get Americans to borrow more money and spend their way back to prosperity. Frankly, I don't think the Ph.D.s on Capitol Hill have a clue what to do. To them, doing something, even if it is wrong, is better than doing nothing. I disagree," writes Mr. Smith at WND.
* "Citigroup is in talks with federal officials that could result in the U.S. government substantially expanding its ownership of the struggling bank, according to people familiar with the situation. While the discussions could fall apart, the government could wind up holding as much as 40% of Citigroup's common stock. Bank executives hope the stake will be closer to 25%," reports WSJ.
Feb. 20th News & Views - Gold strikes $1,000, what next?
* "Investors around the world sold stocks last week as worries about the possible nationalization of top U.S. banks swept trading floors. Major indexes closed lower again after bouncing off their earlier intraday lows as banking executives and Obama administration officials tried to beat back chatter about a government takeover of struggling lenders. The Dow fell 100 points to 7366, down 6% for the week" reports WSJ.
* "Bank of America and Citigroup shares plummeted for a sixth straight day last Friday, hammered by fears that the U.S. government could nationalize the banks, wiping out shareholders. Bank of America shares were down 19% to $3.20, their lowest level since 1984, while Citigroup shares fell 20% to $2, their lowest price since the early 1990s," reports Reuters.
"Gold surpassed $1,000 an ounce in New York for the first time in almost a year as investors, hurt by plunging stocks and a deepening recession, sought to protect their wealth. Gold futures rose $25.70 to $1,002.20 an ounce on the New York Mercantile Exchange’s Comex division. Gold has rallied annually since 2000 and is up 13% this year," reports Bloomberg.
* "There really is no other place to go but to gold. People are scared," says Leonard Kaplan, president of Prospector Asset Management.
* "There is a risk here of a panic sell-off in stock markets and the next leg down in the stock bear market looks imminent, as the ills of the global financial system virulently infect the global economy," said Mark O'Byrne, executive director at Gold and Silver Investments Limited," reports MW.
* In Europe, Depression Has Begun: "I think there are two outcomes to this crisis. Either the central banks of the world succeed in reflating, in which case inflation’s going to take off and then gold will do very well — or they fail, in which case the institutional structure that we’ve know for the post-war era will start to unravel, in which case gold will also rocket. I think it’s going to be one or the other, and both seem to me to be favorable to gold," said Ambrose Evans-Pritchard, international business editor for the Daily Telegraph to MoneyNews-print-audio.
* "It is a good idea to own gold over the long term as a portfolio hedge against inflation and another thing to jump on the bandwagon and buy gold because it is rising. Many top economic analysts believe that current monetary policy will be highly inflationary and that view has led to widespread purchases of gold. "Not only is there no modern precedent for this wholesale money printing, but, also, so far as we know, there is no theory," writes Jim Grant in Grant's Interest Rate Observer," reports FinPost.
* "Inflation at the wholesale level surged unexpectedly in January, reflecting sharply higher prices for gasoline and other energy products. The Labor Department reported that wholesale prices increased by 0.8% last month, the biggest gain since last July and well above the 0.2% increase that economists had expected," reports AP.
* "U.S. stocks closed down on Thursday, with the Dow falling below 7,500 -- a six-year low -- as traders reacted to economic data and Hewlett-Packard's downbeat guidance trying to recover from three-month lows earlier in the week," reports MW.
* "The number of Americans collecting unemployment benefits jumped to 4.99 million, breaking a record for a fourth straight time, signaling the job market is still deteriorating. Total benefit rolls surged by 170,000 in the week ended Feb. 7, the Labor Department reported today," reports Bloomberg.
* Rick Santelli's Chicago Tea Party: "The government is promoting bad behavior... do we really want to subsidize the losers' mortgages... This is America! How many of you people want to pay for your neighbor's mortgage? President Obama are you listening? How about we all stop paying our mortgage! It's a moral hazard," said CNBC commentator Rick Santelli.
* Confidence shift: from gov to gold: "We are witnessing a shift in leadership today; from We the People trust in government to We the People trust in gold. Physical gold ownership offers investors the best protection from government-induced inflation which always follows massive money creation. The latest $787 billion stimulus (read: spending) package will not work. I expect Obama will push for another $180-$250 billion stimulus plan by this Fall." said Swiss America CEO to RingsidePolitics.
* "President Barack Obama pledged $275 billion to a program that will cut mortgage payments for as many as 9 million struggling homeowners and expand the role of Fannie Mae and Freddie Mac in curbing record foreclosures. “It will give millions of families resigned to financial ruin a chance to rebuild,” Obama said in Mesa, Arizona, reports Bloomberg.
* Dukes of Moral Hazard: "President Obama yesterday announced his plan to prevent home foreclosures, saying he wanted to be "very clear about what this plan will not do: It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans . . . And it will not reward folks who bought homes they knew from the beginning they would never be able to afford." We wish he were right. In fact, the details released suggest the President's plan will do all of the above," reports WSJ.
* "Extraordinary times call for extraordinary measures," said Fed chairman Ben Bernanke Wednesday. "The credit risk associated with our nontraditional policies is exceptionally low, and, by carefully monitoring our balance sheet ... we will ensure that policy accommodation can be reversed at the appropriate time to avoid risks of future inflation." He repeated promises made in recent congressional testimony to provide more transparency, reports USAToday.
* "The euro rebounded Wednesday after falling to 2-1/2 month lows against the dollar the previous day. Gold also traded higher, above $970 an ounce, as investors steered clear of stocks on global economy worries. Experts tell CNBC the euro has further to fall, while gold could retest $1,000.
* "Americans must prepare themselves for a massive collapse in the dollar as investors around the world dump their US assets, says Willem Buiter a former Bank of England policymaker. The warning comes despite the dollar having strengthened significantly against other major currencies, including sterling and the euro, after hitting historic lows last year," reports Telegraph.
Investors rush for safety
* "Sustained investor interest in gold over the course of 2008 against a backdrop of the worst year on record for global stock markets and many other asset classes, helped push dollar demand for the safe haven asset to $102 billion, a 29% increase on year earlier levels," reports WGC.
* "Gold hit a fresh seven-month high on Tuesday after weak U.S. manufacturing data fueled fears over the economic outlook, boosting investment in bullion as a safe store of value. Frank Holmes, U.S. Global Investors CEO told CNBC "This is a global debauchery of currencies. There is a race among all nations to see who will get the gold metal for printing the most money."
* Is gold the only salvation from this financial Armageddon? "Indications are that the global financial situation could yet get far worse before it starts getting better - particularly in Europe - and gold may again prove to be the only real way of protecting wealth in a continuing global financial meltdown," reports Mineweb.
* "My product traditionally does well when people's confidence is waning. They know if they hold an ounce of gold in their hands Bernie Madoff is not going to run off with it," said Craig Smith, Swiss America CEO, CNBC: How to Invest When Stocks Are Going Nowhere
* "Investors expecting years of inflation and global economic instability are pouring money into securities backed by gold bullion, helping turn a simple safe haven into a mainstream asset class. SPDR Gold Trust, popularly known as GLD, said the gold bullion it owned rose by more than 100 tons to 970 tons as of Thursday, which marked the biggest weekly gain in the history of the gold-backed exchange-traded fund," reports CNBC.
* Where do the gold ETFs really get their bullion?: "I think people own an ETF of derivatives, not of gold. If I am correct then there is no clearinghouse guarantee for the OTC derivative to function. Like so many other surprises of the last two years, the gold ETF shareholder may actually have no gold at all," reports GATA.
* "Widespread fears that U.S. efforts to revive the economy and stabilize banks may prove insufficient drove investors into safe havens like gold and bonds last week, and pushed world stock markets lower," reports Reuters.
Can Obama stimulate Main St., if not Wall St.?
* President Barack Obama signed the sprawling $787 billion economic stimulus package into law on Tuesday, saying it will help the struggling U.S. economy but warning that the recovery process will be challenging. "Today does not mark the end of our economic troubles. Nor does it constitute all of what we must do to turn our economy around," reports MW.
* "Handing the new administration a big win, House Democrats passed President Obama's $787 billion plan to resuscitate the economy on Friday despite a wall of Republican opposition. The bill was approved 246-183 and sent to the Senate, where a vote was scheduled late Friday afternoon," reports AP.
* Dear Congress: Leave us alone! "If government really wants to help, it can stop wasting money, reduce the tax burden on the people and reduce the size of its bloated bureaucracy. They can encourage private capital to come back to the market without the fear of being demonized. Capitalism works when it is accompanied with strict enforcement of the laws currently on the books."
* "No legislation in the world will ever repeal the law of basic mathematics. While Congress would like to think it is a group of miracle workers, it is not. They are men and women who have made some very foolish decisions that have caused much more pain than necessary. There is no magic wand or silver bullet. Therefore, leave us alone. Signed, The free market," reports WND.
* "The compromise economic stimulus plan is short on incentives to get consumers spending again and long on social goals that won't stimulate economic activity, according to a range of respected economists. "I think (doing) nothing would have been better," said Ed Yardeni, an investment analyst who's usually an optimist," reports McClatchyDC.
Four-digit gold ahead
* Two global gold-price forecasters sense a $2,300/oz. long-term gold price. "Central bankers have got religion again. They've seen the mess that they got themselves into, and I don't think they're going to have quite as negative a view on gold as they have had in the past, says Dundee Wealth chief economist Martin Murenbeeld, reports MiningWeek.
* "Gold speculators have increased their bets this year by 24% that prices will reach $1,000 an ounce by April. Gold above $1,000 is a warning signal to central banks that people have already lost faith in currencies," said Philip Gotthelf, the president of Equidex to Bloomberg.
* "Goldcorp Inc. founder Rob McEwen said he expects gold to top $5,000 an ounce as governments increase the money supply to combat recession. Bullion will more than double to $2,000 an ounce by the end of next year before rising to $5,000 by the end of the cycle, which could take an additional four years," reports Bloomberg.
* "Investors are buying record amounts of gold bars and coins, shunning risky assets for the relative safety of bullion amid renewed fears about the health of the global financial system. The US Mint sold 92,000 ounces of its popular American Eagle coin last month, almost four times that which it sold a year ago and more than it shipped during the whole of the first half of 2007," reports FT.
* Precious metals ended the first week of February mixed, with gold falling 1.7%, while silver prices rose 3.6%. In January gold rose 5% while silver gained 10%.
* "Gold is the most obvious hiding place from the nightmarish scenario of vanishing trust in fiat money, or paper currency not based on a hard asset. Indeed, its latest jump was triggered in part by massive government debt issuance, which some say threatens to undermine the value of the paper it is printed on," reports Reuters.
* "The Gold Standard is the friend and protector of the worker and of the investor, as well as the basis for harmonious relations between the nations of the world. The current financial disaster in the US is directly attributable to Nixon's decision to 'close the gold window', because a monetary system based on gold is an obstacle to the criminal credit expansion perpetrated by the bankers. Gold based money puts shackles on bankers, forcing them to be careful," reports Plata.
* "Goldman Sachs lifted its three-month gold forecast to $1,000 an ounce from $700 an ounce, citing safe-haven demand for gold. The recent strong demand for gold has not been irrational, but rather pretty much in line with the probabilities of financial and sovereign default," reports Reuters
* "While the output from mines is falling globally, preference for gold as a safe asset is growing. The dollar and gold are both showing strength as safety assets, which is a unique phenomenon. Many economists caution that it is only matter of time before the dollar falls, considering the faltering U.S. economy and the amount of dollars it is to print. Hence, gold, which central banks around the world can't print, is emerging as the only safe investment tool," reports KoreaTimes.
* "In a world of currency devaluations and instability, zero-percent money market rates, and soon, massive central bank monetization of government bonds, gold has emerged as a safe-haven for preserving wealth," reports SafeHaven.
* "Gold prices may hit $1,500 an ounce in the next 12 to 15 months. With confidence in currencies shaken to the core, the yellow metal is increasingly assuming the role of 'the most trusted currency'. We have never seen such a rush to buy gold. It's bringing in security and it's still affordable," said Gary Dugan, the Chief Investment Officer of Merrill Lynch reports Business24-7.
* "Gold prices will stay high, and might even move up further, despite weak demand for the physical metal. Eugen Weinberg from Commerzbank explains why gold has been trading the way it has and gives his outlook for the commodity which is now functioning as a worldwide currency to CNBC ~ video.
* "Analysts expect the gold price to remain high this year amid continuing uncertainty about the prospects for the global economy and concern over bank liquidity. Gold investors now hold more of the precious metal than either Japan or Switzerland as volatility in the financial markets has prompted a flight to safety," reports Times.
* Investors have scrambled for the safety of gold and bullion-backed exchange-traded funds so far in 2009, sending gold prices up 5% and silver up over 10% in January.
* "Gold is poised to go above $1,000 soon. If we continue to see bad economic conditions and deterioration in the financial markets, I think we could see that next month," said Carlos Sanchez, a precious metals analyst at New York-based specialty commodities firm CPM Group to CNN.
Feb. 13th News & Views - Stimulus? Dems: Yes! Economists: No!
* "U.S. stocks on Friday closed down on the week, with financial shares pacing the declines, as investors retreated in the face of a long weekend and uncertainty over how much the government would help ailing banks. The DJIA fell 5.2%, S&P 500 shed 4.8%," reports MW.
* Capitalism Needs a Sound-Money Foundation: "Let's go back to the gold standard. If the very idea seems at odds with what is currently happening in our country -- with Congress preparing to pass a massive economic stimulus bill that will push the fiscal deficit to triple the size of last year's record budget gap -- it's because a gold standard stands in the way of runaway government spending," reports WSJ.
* We Are All Socialists Now: "The Obama administration is caught in a paradox. It must borrow and spend to fix a crisis created by too much borrowing and spending. In the short run, since neither consumers nor business is likely to do it, the government will have to stimulate the economy. And in the long run, an aging population and global warming and higher energy costs will demand more government taxing and spending," reports Newsweek.
Feb. 12th News & Views - Investors buy safety, sell risk
"The privilege of creating and issuing money is not only the supreme prerogative of Government, but is the Government's greatest creative opportunity." -Abe Lincoln
* "Sales at U.S. retailers unexpectedly rebounded in January, government data showed on Thursday, likely boosted by post-holiday discounts and providing a glimmer of hope for the recession-hit economy," reports CNBC.
* "Unknown value of bank assets a drag on stocks: With Washington moving on a stimulus package to jump start the economy, the measure does little to address the persistent weight dragging the stock market down: placing a value on the toxic assets held by financial institutions," reports MW.
* "Congress and the Obama administration reached a deal Wednesday on a $789 billion economic stimulus package that would mix tax cuts and new government spending to rescue the faltering US economy. Senators said more than one-third of the bill was dedicated to middle class tax cuts, and it would create 3.5 million jobs," reports CNBC.
* "The single best tonic for our economy is not tax cuts or tax increases, not housing or unemployment subsidies, not heavy spending or China jawboning, but a far humbler Washington that simply does nothing. Left alone, there’s nothing individuals working free of government oversight can’t achieve," reports RCM.
* "After decades of borrowing, spending and consuming most Americans now want to produce, earn and save. However the current leadership in Washington wants the people to consume, borrow and spend our way out of the current financial trouble. And that's a formula history has established will not succeed," reports WND.
* "This 'porkulus' package is a full-fledged attack on capitalism. If people are just left alone, a recession cannot happen in and of itself," said talk-radio giant Rush Limbaugh on Wednesday. "The whole point of people engaging in commerce is growth. Recessions are caused by intervention, obstruction, you name it. If left alone, economies do not go into recession," reports WND.
* "Barack Obama’s head is filled with myths and lies, not only about FDR and the New Deal, but also about the government’s power to repair the existing economic problems. With this model in his head, he can only do evil. This must change. Nothing is inevitable. He can turn on a dime. The main message: do not repeat the actions of FDR, lest you destroy what is left of American liberty and prosperity," reports LewRockwell.
Feb. 10th News & Views - Wall St. slides on "Stability Plan"
* "U.S. stocks plunged and the Dow fell by nearly 400 points after Treasury Secretary Geithner did little to slake traders' thirst for details on the U.S.'s plans to aid ailing financial institutions. Treasury yields, which had reached their highest levels in months on Monday, dropped after Geithner spoke, indicating a flight to safety," reports MW.
* "Wall Street's message to the Obama administration was clear Tuesday, even if the plan to save the banking industry wasn't. Unhappy with a lack of clarity in Treasury Secretary Timothy Geithner's new financial rescue plan, investors launched a massive stock selloff, raising further questions about when confidence would be restored to the market," reports CNBC.
* The renamed "Financial Stability Plan," was rolled out by Treasury Secretary Timothy Geithner at the Treasury Tuesday. The Plan revamps the financial rescue plan to cleanse up to $500 billion in spoiled assets from banks' books and support $1 trillion in new lending through an expanded Federal Reserve program," reports CNBC.
* Geithner's speech on bank plan: "This comprehensive strategy will cost money, involve risk, and take time.We will have to adapt it as conditions change. We will have to try things we've never tried before. We will make mistakes. We will go through periods in which things get worse and progress is uneven or interrupted. But we will be guided by the principles of transparency and accountability," reports Reuters.
* "The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages. The Fed, Treasury and FDIC have lent or spent almost $3 trillion over the past two years and pledged to provide up to $5.7 trillion more if needed," reports Bloomberg.
* "More than 1,000 U.S. banks, or one in eight lenders, may fail in the next three to five years as commercial loan losses rise, compounding problems from record mortgage delinquencies and soaring home equity loan defaults, RBC Capital Markets said to Reuters.
Feb. 9th News & Views - Wall St. fears stimulus not enough
* "Most U.S. stocks fell on Monday, snapping a two-day gain, as concern President Barack Obama’s stimulus package won’t be enough to pull the nation out of a recession outweighed a rally in financial and industrial shares. ," reports Bloomberg.
* Bond market calls Fed's bluff as global economy falls apart: "The yield on 10-year US Treasury bonds – the world's benchmark cost of capital – has jumped from 2% to 3% since Christmas despite efforts to talk the rate down. This level will asphyxiate the US economy if allowed to persist, as Fed chair Ben Bernanke must know," reports Telegraph.
* "The government's increased intervention in the economy is likely to slow down economic growth because history shows that every time the private sector shrinks to make way for the government sector, the economy suffers. Asked whether the US risked being faced with 200% inflation, Mark Faber answered: "Well, not yet. Not yet. But I think eventually," reports CNBC.
* "President Obama's economic recovery package will actually hurt the economy more in the long run than if he were to do nothing, the nonpartisan Congressional Budget Office said. The $900b stimulus plan would result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower GDP over the next 10 years," reports WashTimes.
* "Soon it will become your responsibility to 'share the wealth', not by "old" free market concepts like private charity, but by federal government mandates negotiated by the charismatic, F.D.R.-like, President Obama. We the People are being pushed toward a 'New Financial World Order' which seeks to replace free market principles with socialistic principles," says Swiss America CEO Craig R. Smith.
Feb. 6th News & Views - Spending our way to Inflation
* "The fury of the recession intensified in January, as the unemployment rate jumped to 7.6% while nonfarm payrolls fell by 598,000 in January the largest amount in 34 years, the Labor Department reported Friday," reports MW.
* "Stocks surged Friday when the deepest monthly cut in payrolls in 34 years gave investors hope that the crumbling economy would spur Washington to approve an economic stimulus package soon. The major indexes rose about 2 percent," reports AP.
* "This is a classic case of the market taking this dismal data in hopes that Washington will be motivated to do more. Deep pessimism remains over whether Washington can do anything to fix the economy. The market is closely watching for details next week on the good bank-bad bank plan to get toxic assets from banks' books, as well as the stimulus plan," reports CNBC.
* "If you every doubted that the stock market is being manipulated, this is the time for a reality check, i.e., large trades are being initiated to trigger buy and sell stops and force market moves. There are crooks in the trading pits, crooks in Obama's cabinet, crooks running Ponzi schemes, crooks at the Fed, crooks at the major financial institutions, crooks at the companies who have failed still receiving bonuses and, of course, crooks in Congress," reports VRtrader.
* President Barack Obama says: "In Washington these days, everyone's an economist — or thinks they are." Reader Comment: "Sounds like everyone's an alarmist to me," reports AP.
* "As Congress blithely ushers its trillion dollar "stimulus" package toward law and the U.S. Treasury prepares to begin writing checks on this vast new appropriation, it might be wise to ask a simple question: Who's going to finance it? There is only one answer. The Obama administration and Congress will call on Ben Bernanke at the Fed to demand that he create more dollars -- lots and lots of them. If the Fed finances federal deficits in a moribund economy, it can create more money than the economy can use. The result is "stagflation," reports WSJ.
Feb. 5th News & Views - Trillion $ stimulus to stunt growth
* "The number of new claims for state unemployment benefits surged to their highest level since 1982, according to official data released Thursday, a sign that the U.S. labor market is deteriorating at a rapid rate. Initial jobless claims rose 35,000 to a seasonally adjusted 626,000 in the week ended Jan. 31," reports MW.
* "The stock market is likely to retest the November bottom — and probably sooner than later, many market pros think. "Despite me thinking that we've already seen the belly of the beast, I still would not be surprised to see the lows breached and some more fear coming into the market," says Jordan Kimmel, fund manager at Magnet Investing, reports CNBC.
* Obama paints a bleak picture if lawmakers do nothing, saying: "This recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse," Obama wrote in the newspaper piece titled, "The Action Americans Need," reports AP.
* "President Barack Obama said the recession will turn into "a catastrophe" if the economic stimulus is not passed quickly, lobbying anew for the plan as its price tag climbed above $900 billion and drew more criticism," reports AP.
Feb. 4th News & Views - Nation divided on 'stimulus' plan'
* "A plurality of Americans now oppose the stimulus package (37-43%) according to new Rasmussen survey data. Two weeks ago support for the legislation stood at 45-34%. There is now greater support for a plan that includes tax cuts only than for the Democratic package. And fully 50% of those polled say the plan that emerges from Congress may end up doing more harm than good," reports WeeklyStand.
* "President Obama has taken office as our country stands at a crossroads where the laws enacted in the next few weeks could lead our country to prosperity or to ruin. Whose steps will he follow? Warren Harding got government out of the way of business in 1920 to unleash the market economy and launch the Roaring Twenties. FDR tripled taxes, regulated business, and massively expanded the role of government in our lives resulting in the longest and deepest recession this country has ever experienced," reports RCP.
* "President Barack Obama is struggling to get a handle on a series of embarrassing disclosures involving top appointees who are testing the limits of his pledge to end business as usual in Washington," reports Reuters.
* "The European Union warned the U.S. yesterday against plunging the world into depression by adopting a planned “Buy American” policy, intensifying fears of a trade war. The EU threatened to retaliate if the US Congress went ahead with sweeping measures in its $800 billion stimulus plan to restrict spending to American goods and services," reports Times.
* The dollar index rose above 85 on Wednesday. Why? As the stock market falls, money is pulled back from risky investments in the U.S. and overseas and being put in safe cash accounts denominated in dollars.
* "The U.S. is at the beginning of an economic depression that will help gold prices more than double. Bullion may top $2,000 an ounce in coming years amid a series of financial catastrophes," said Eric Sprott, the Canadian money manager who last year predicted banking stocks would collapse reports Bloomberg.
Feb. 3rd News & Views - New Deal agenda hopes 'Daschled'
* "The New Deal is an early 20th century idea that has been accused of lengthening the Depression by 7 years. Now the Dems want to do it again. I don’t know about you, but I’m not down with that soup line scene. It’s time we produce positive solutions and ideas and act on them. Show them who’s right. Lead by example. Actions speak louder than words," reports BigHollywood.
* "Tom Daschle withdrew his nomination to be President Obama's Health and Human Services secretary on Tuesday, dealing potential blows to both speedy health care reform and Obama's hopes for a smoother start as president. "Now we must move forward," Obama said in a written statement accepting "with sadness and regret" Daschle's withdrawal. A day earlier, Obama had said he "absolutely" stood by Daschle in the face of problems over back taxes and potential conflicts of interest," reports AP.
* Wall Street investors are voting against the Obama "stimulus" plan with both feet. The Dow started the month by falling below 8,000 after losing 9% in January, while the S&P fell 8.8% and the Nasdaq slipped 6.5%.
Feb. 2nd News & Views - 'Stimulus' plan vs. Free Market
* "Stocks ended mixed on Monday after the worst January on record,with investors braced for more disappointing earnings results, layoffs and dismal economic data. "There was a lot going on last week, earnings, company projections layoff announcements, housing numbers, economic numbers, and bailout announcements, and not a glimmer of hope among them," reports MW.
* "The massive stimulus bill backed by President Obama and congressional Democrats could go down to defeat if it's not stripped of unnecessary spending and focused more on housing issues and tax cut, said Senate Republican leader Mitch McConnell reports AP.
* "We cannot spend our way back to prosperity on borrowed money. We must all tighten our belts, reduce our expenses and exercise patience as the economy recovers. Companies are cutting back. Citizens are cutting back, and so must the government. Government is not the answer to the problem. Americans equipped with the truth are the answer. We hold the solution," writes Craig R. Smith at WND.
* "Consumers continued to retrench in December, capping off the worst year for consumer spending since 1961, according to a government report released Monday. Consumers posted a savings rate of 3.6%. The American savings rate had been near zero for quite some time, but has been creeping up since the summer as consumers curtailed their spending. "The savings rate's positive attributes may not be all that positive, it probably means folks may just not have any money left to spend," reports CNN.
* Swiss America CEO Craig R. Smith told CNNRadio Tuesday: "The shrinkage of consumer spending is one of the real dilemmas in the economy today. In 2009, most people want to cut back spending and save, something we have not done as a nation for three decades. But if we save too much we will end up in a depression given that 2/3 of the economy is driven by consumer spending.
* Mr. Smith explains: "Regarding comparisons between 2009 and 1929: Today's economic downturn drastically differs from 1929.
1) In '29 We the People were savers -- in '09 we are spenders.
2) In '29 We the People were producers -- in '09 we are consumers.
3) In '29 We the People shunned debt -- in '09 we live on debt/credit.
4) In '29 We the People trusted government -- in '09 we distrust government & Wall St.
5) In '29 We the People had a real money standard -- in '09 we have a money-substitute standard -- which explains why investors are moving back onto a gold standard."
* "Savings — contrary to common logic — can be a curse for an economy in recession. There might be nothing irrational about households cutting back on spending in times of uncertainty, just as companies are nowadays retrenching workers and hoarding cash. But since one man’s spending is another’s income — which translates into further rounds of spending and income generation — the cumulative effect of rational individual caution is a collective contractionary spiral," reports BusLine.
* "For the first time since Genesis, consumers are doing everything backward. During the expansion from 2002 through 2007, our savings rate fell rather than rose. In mid-2005 it even went negative, and it mostly stayed below 1% until late last year. Then, as the recession really took hold, we again did the opposite: We increased our saving. As the economy shrinks, our savings rate has climbed to almost 3%," reports Fortune.
* "The Government should allow every distressed bank to go bankrupt and set up a fresh banking system under temporary state control rather than cripple the country by propping up a corrupt edifice, according to Joseph Stiglitz, the Nobel Prize-winning economist reports Telegraph.
* "More investors are coming around to the notion that the precious metal may be the best option to protect against a possible economic catastrophe. Among the surprise new buyers? Star hedge fund manager David Einhorn. He writes, "Our guess is that if the chairman of the Fed is determined to debase the currency, he will succeed. Our instinct is that gold will do well either way: deflation will lead to further steps to debase the currency, while inflation speaks for itself," reports BusWeek.