Oldtent Archives 2007 - 2008

quoted JS gems was a line I have tried several times on family members who doubt  about the PM market.  The line you quoted from JS was:  “How do I know this?  I have connections in the highest places that have told me and have now allowed me to talk about it”.

Its an amazing coincidence that I too,  with no impact on doubting family members I may add, have tried a similar line, something like:  “You ask me how I am so sure about the PMs?  I have connections like ment17 and JS who have told me”.  [g]

But the eyes of my relatives just stare me out when I try this line on them.  But I’ll keep trying.  Cheers.  Equiz. 

Is he really Indiana Jones???

www.mitchell-hedges.com/category/the-crystal-skull/

en.wikipedia.org/wiki/Crystal_skull#Mitchell-Hedges_skull

On May 22, 2008, the Bank for International Settlements released its regular semi-annual report on the over-the-counter derivatives of major banks and dealers in the G-10 countries and Switzerland for the six months ending December 31, 2007. The total notional value of all gold derivatives climbed from $426 billion at mid-year to $595 billion at year-end. Gross market values increased from $47 to $70 billion over the same period, while gold prices rose from $651 to $837 (London PM).
www.goldensextant.com/commentary34.html#anchor11230

..Looks like they may be a group of Goldbugs in hiding…look at how they react to a Heicopter..I guess they thought it was Bernanke trying to dump some Fiat on them ….hehe

said it rained about 17 inches. all services are cut off but said to tell everyone he is o k. just like our fearless leader; take a leap of faith and grow wings on the way down. my son and i will be going to belize on the 13th to assist.

rno

no combines running around here yet. haven’t received any reports from anywhere close. will keep you posted.

rno

HUMANOID”

A couple of years, ago, a poster started coming to the GE Forum late at night. His arrival was marked with upbeat posts that were usually posted in all “caps.” Shortly thereafter, this gentleman contacted me at my e-mail contact at the bottom of my editorial. “Humanoid” was a retired healthcare professional who was dedicated to taking care of a loved one in need. David also had some serious problems of his own- only to discover recently that his problems were more serious than he knew. You really had to know David, but even in the face of a battle for his life his attitude never changed one iota. He showed a positive attitude at all times, and he constantly worried about others rather than about himself. This editorial is dedicated to David in this Memorial time period. Hopefully, all of us will find some of David’s courage as these troubled times continue into the future. David, our thoughts and prayers are with you, and if I ever get down to that warm sandy beach for a “cold one”- I’ll be looking for you.

Now at $787.31, GOLD’s 300 DMA keeps proving that the biggest risk in this market is being out of it.

Yep, another All Time High!

JBI

21,647,241 . . . . . . . . . . .

…glad to see Lemet leading in the Poll…after NOBODY that is

On another front, the European Union is showing serious new strains. The interest-rate spread between German and Italian bonds, for example, is ballooning. Why is this important? It is important because the Euro is the single currency of a hodgepodge of nations which all have different economies. As this article (The Problem with the Euro2) points out, it is impossible for a country to go bankrupt if its debt is issued in its own currency as it can always print new currency to retire its old debt (even if that damages the value of its currency). In the case of the European Union, however, the ECB is dominated by inflation-fixated Germans. Weaker countries like Spain, France, Greece and Italy have issued billions of Euro-denominated debt to finance their deficits but these debtor-nations don’t have the option of printing more money to settle their obligations. It is now starting to dawn on investors that this debt is not default-proof and they are demanding higher interest rates to compensate for the extra risk.

One interesting twist that the article highlights is that there is an obscure accounting rule that permits European banks to assume that sovereign debt of any OECD country will never default. This has led untold numbers of banks to issue unknown amounts of credit default swaps that insure against default of the debt of countries like Greece and Italy. This allowed the banks to immediately book the profits of the insurance without tying up ANY capital. Investors then bought these bonds in the belief that the default risk was zero because of the insurance. Does this sound at all familiar?

Anyway, with spreads widening, the already-issued default insurance swaps are becoming big money-losers and are rebounding back to hit the earnings of the issuing banks. As losses on the default insurance swaps impact bank earnings, the supply of insurance available to bond buyers will undoubtedly decrease. This will in turn contribute to widening the spread between German bonds and the weaker nations’ debt, which will in turn lead to higher interest rates and greater bank losses, which will… A vicious cycle has started that will cut to the heart of Eurobond stability and the Euro’s own long-term viability. It is not waiting for summer to pass before it becomes a destabilizing issue.

Still another element to consider this summer is China. How the Olympics will turn out is anyone’s guess, but the games certainly have the potential to produce surprises beyond the athletic stadiums. More certain is that much of China’s attention will also be turned to rebuilding its devastated Sichuan Province. Rebuilding on such a large scale will require huge amounts of money and materials. Will China use its immense currency reserves to finance the rebuilding? If they do, there will undoubtedly be far-reaching effects in the currency and commodity markets. A recent jump in the value of India’s currency may be a harbinger of upcoming currency realignments.

All in all, there are plenty of possibilities for a hot summer in the gold market. In fact, that is what I expect. Those who are looking for July and August 2008 to again be a shopper’s paradise for precious metals may be very disappointed.

Best wishes,
Peter R.
www.pandacollector.com

June 2 (Bloomberg) — Bo Diddley, the rock ‘n’ roll originator with the rectangular guitar whose signature beat influenced musicians from Buddy Holly to the Rolling Stones, the Grateful Dead and Bruce Springsteen, has died. He was 79.

Diddley died at his home in Archer, Florida, early today, according to his publicist, Susan Clary. The cause was heart failure. In May 2007, he suffered a stroke during a performance in Council Bluffs, Iowa.

He scored only a few hits in more than 40 years of recording, yet Diddley’s impact on the development of rock ‘n’ roll places him in a pantheon with Chuck Berry and Little Richard. The maracas-fueled sound he introduced in 1955 on the song “Bo Diddley” evolved into what Rolling Stone magazine called “the most plagiarized rhythm of the 20th century.”

http://www.youtube.com/watch?v=jiYWrvsuONk

http://www.youtube.com/watch?v=sgzn7VyoqEw

Ironically, the low traffic, lack of interest, “give-up” mentality maybe……is music to my ears. Yesterday’s low of 23,000 seems to be just the opposite of what we saw March 16-17. Let’s see what happens. Looking forward to when we’re buzzing again at 23,000/hour and higher! Thanks a mil for keeping us posted.

Cheers!

JBI

Economic Report Summary: Home Prices, Consumer Confidence Continue to Plunge

by: Tim Iacono posted on: June 01, 2008 Font Size: PrintEmail Falling home prices, plunging consumer confidence,and a modest upward revision to first quarter real economic growth highlighted the week’s economic reports. Stocks and bonds ended with the S&P 500 Index up 1.8 percent to 1,400, now down 4.6 percent for the year, and the yield of the 10-year U.S. Treasury note rose 21 basis points to 4.06 percent.

New Home Sales: Sales of new homes rose modestly in April, up 3.3 percent from a downwardly revised annualized rate of 509,000 in March to 526,000. From the unrevised rate in March, sales volume was flat and on a year-over-year basis, sales are down 42 percent, the steepest annual decline since the early 1980s.

Though it is always difficult to discern the true sales price after factoring in builder incentives, the reported median sales price rose 9.1 percent for the month, posting a surprising increase of 1.5 percent from year ago levels.

The inventory of unsold homes remains quite high, down slightly from 11.1 months in March to 10.6 months in April and, as noted on many occasions before, this sales rate/inventory combination is the most important metric to be considered regarding the future direction of home prices. Until inventory comes down, there will continue to be pressure on prices.

The S&P Case-Shiller Home Price Index was released last week showing even bigger declines in property values (see Home prices: How low can you go?). The 20-city index dropped 2.6 percent from February to March, now down a whopping 14.4 percent from year ago levels. Six former housing bubble hot-spots showed year-over-year price declines of more than 20 percent - Las Vegas, Miami, Phoenix, Los Angeles, San Diego, and San Francisco - with only Charlotte, North Carolina posting an annual gain of a modest 0.8 percent.

While home sales may form a bottom in 2008, there is a near unanimous consensus that home prices will continue to decline throughout the year and probably well into 2009, perhaps beyond.

Durable Goods Orders: Orders for durable goods fell 0.5 percent in April after a decline of 0.3 percent in March. Excluding the always volatile transportation sector, new orders rose 2.5 percent paced by a 28 percent increase in electrical equipment. Within the transportation group, new orders fell 24 percent for nondefense aircraft and 3.3 percent for autos.

From year-ago levels, durable goods orders are down 3.4 percent - a clear indication of continuing weakness in manufacturing.

Gross Domestic Product: It appears as though government reported “inflation adjusted” economic growth will remain positive during the first quarter of 2008 as the “preliminary” estimate of real GDP (the second of three estimates for Q1) came in at an annualized rate of 0.9 percent.

This is an improvement on the 0.6 percent rate reported a month ago, and on a year-over-year basis, real GDP now stands at 2.5 percent. The “final” estimate will be released at the end of June and then the “advance” estimate of economic activity in the second quarter will be reported at the end of July.

The improvement in the headline number reflects a narrower trade deficit and higher levels of inventory than first estimated. As has been seen in the monthly reports on international trade, lower imports (despite higher oil prices) have been the driving force for the trade gap narrowing.

The first quarter GDP price index was unchanged at an annualized rate of 2.6 percent - this is the dubious “GDP deflator” responsible for transforming “nominal” growth to “real” growth through a rather complex calculation. PCE inflation came in at 3.5 percent, which is mostly in line with the Consumer Price Index over the same period, though both of these measures of “inflation” are increasingly suspect as well.

Current estimates for second quarter growth are mostly in positive territory, largely a result of an improved trade deficit and steady government spending. Masked somewhat by rising gasoline prices, growth in consumer spending is declining but it remains positive - this holds the key to future economic activity in the U.S. as many are now expecting the consumer retrenchment to gain pace.

Consumer Confidence/Sentiment: Both the Conference Board’s consumer confidence survey and the Reuters/University of Michigan consumer sentiment survey continue to indicate major distress amongst consumers, the former falling to a 16-year low and the latter visiting levels last seen in 1980.

In its latest reading, consumer confidence fell five points from 62.3 in April to 57.2 in May and one-year inflation expectations rose to a shocking 7.7 percent. Those saying that jobs are plentiful fell to 16.3 percent while those saying they are hard to get rose to 28.0 percent.

The consumer sentiment survey confirmed a mid-month reading of two weeks ago, falling almost three points from 62.6 in April to 59.8 in May with a similarly elevated outlook for inflation over the next year of 5.2 percent.

Note that the two readings on “inflation expectations” contained in these two surveys have always been off by a couple percentage points or more, but they have tracked each other reasonably well over time. Along with the difference in yields between U.S. Treasuries and “inflation-protected” Treasuries [TIPS], these survey responses are a major source of the Federal Reserve’s “inflation expectations” metric, a key consideration when they deliberate on monetary policy.

For many years these measures were in the two to four percent range with only a temporary move upward after the 2005 hurricanes pushed energy prices sky high. The recent move, however, driven by both energy and food, has been much more pronounced and sustained. The Fed is understandably concerned about these statistics as “anchoring” inflation expectations has been an integral part of monetary policy for some time. It is significant that consumer “inflation expectations” are now two to four percentage points higher than the Fed’s inflation estimates.

Summary: Due to the size and nature of the upward revision to GDP - less imports and rising inventory - it’s hard to get too excited about economic growth in the first quarter particularly when considering how big a role the inflation statistics play in determining whether the final number is positive or negative. Previously, most analysts were projecting at least one quarter of negative real growth in the first half of the year, now it appears that there will be none - annualized growth of between 0 and 1 percent is now the consensus for the second quarter.

Meanwhile, home prices continue to plunge along with consumer confidence. As the mood of the consumer is highly correlated with gasoline prices, unless home prices head back up and prices at the pump head back down (both of which seem very unlikely, at least in the near-term), there will likely be continuing pressure on the consumer sector that will show up during the second half of the year, a time when many economists are forecasting a rebound.

As the election season heats up, it will be interesting to see how the role the consumer is framed in the expected debate over the health and the future of the U.S. economy.

The Week Ahead: The coming week will be highlighted by the ISM manufacturing report on Monday and the labor report on Friday. Also scheduled for release are reports on construction spending on Monday, three reports on Wednesday - ADP employment, productivity/costs, and ISM nonmanufacturing, ending the week with a report on consumer credit on Friday.

agorafinancial.com

June 2, 2008

FDIC kicks into action with fourth bank failure of 2008…

why this could be just the beginning
Meanwhile, banks cash up to cover future losses — only to fall further behind
How one U.K. earnings report this morning has the world on edge
Oil pulls back, pundits declare oil bull dead… Kevin Kerr’s dose of reality
Ed Bugos also “parts with the consensus” on gold
Plus… Greenspan’s grand plan for American renaissance? A reader’s take, in free verse

Another FDIC-insured bank has failed — the fourth this year.

First Integrity Bank — an ironically named Minnesota institution — was shut down by the FDIC over the weekend. A series of bad bets and “unsound practices,” according to the FDIC, put the bank’s core capital ratio at negative 0.2%.

We write a lot about banks here in The 5… and not just because that’s where the money is. Back in the 1930s, during the last serious credit crisis facing the global economy, some 10,000 banks failed in the U.S. alone. Failed banks were the harbinger of bad things to come in the economy, on the political landscape and beyond. That period also gave us the FDIC.

When he became seriously ill, Dr. Kurt Richebacher was in the process of documenting a “balance sheet” recession among banks in the U.S., one he feared could lead to an all-out depression if not handled correctly by regulators. History, he believed, was repeating itself right before our eyes, despite oversight by the Feds.

The number of banks on the FDIC’s “problem list” — like First Integrity — rose nearly 20% in the first quarter, to 90 banks. That’s up 70% year over year.

The combined profits of all FDIC-insured banks plunged 46% in the first quarter. Banks in the U.S. made $14 billion less last quarter than they did the year before.

Here’s what makes that stat remarkable. FDIC banks had “voluntarily” set aside $37 billion by the end of the first quarter to cover losses they expect in the near future — a 20-year high. But even in spite of these cash cushions, the banking industry’s “coverage ratio” — the percentage of troubled loans that could be rescued by such reserves — is at a 15-year low.

“This is a worrisome trend,” admitted FDIC chairwoman Sheila Bair. “It’s the kind of thing that gives regulators heartburn.”

Yeah… your editors, too.

Wachovia axed its CEO, Ken Thompson,

this morning. If you haven’t been keeping track, there’s hardly a CEO on Wall Street who has kept his job during the mortgage meltdown. Citi, Merrill Lynch, Bear Stearns, UBS and now Wachovia have all put their CEOs out to pasture in the past year.

Like those before him, however, Thompson walks away unscathed toting a severance package worth nearly $9 million.

Banks in the U.K. are giving investors around the world a rash this morning too.

Bradford & Bingley,

the U.K.’s biggest buy-to-let lender, announced its profits fell 48% and its mortgage-related write-downs quadrupled. The bank also announced it had sold 23% of its assets to Texas-based private equity group TPG.

A “tougher economic environment will continue to push arrears beyond the current level,” added B&B spokespeople encouragingly.

European investors reacted to the news by hitting the panic button. B&B stock plunged 30%. Banks all across the U.K. got punished: Barclays, HBOS, Royal Bank of Scotland and Lloyd’s all fell.

When the dust settled, nearly every major euro-zone stock index fell at least 1%.

In response to the global angst over mortgage-related banking crises, the federal government has also started handing out “stimulus” checks, hoping to keep consumers from freezing up the way banks are.

This morning, half of U.S. citizens have been stimulated. The program has passed the $50 billion mark… the unofficial halfway point in this stimulating program of $600 handouts.

When the stimulus plan was finalized in February, gas was less than $3 a gallon. At the time, the National Retail Federation estimated 12 million rebate recipients would spend their check on gasoline.

Today, with gas a balding man’s wispy comb over away from $4 a gallon, approximately 17 million Americans say they’ll spend all their stimulus on gas — up 40% in three months.

Similarly, surveys by the International Council of Shopping Centers say 51% of respondents will use their checks to pay down debt — up 10% from February.

The U.S. consumer hasn’t been this worried about inflation in 26 years. But according to Friday’s Reuters/U. of Michigan consumer sentiment index, the average consumer expects prices to rise more than 5% over the next year.

Long-term inflation expectations are at a 13-year high, too. Consumers expect the dollar to lose value at an annual rate 3.4% annually for the next 10 years… the highest inflation forecasts since 1995.

That’s up 17% just from March, when the same group of polled consumers expected the money in their pockets to lose value at the much slower rate of 2.9% per year.

And no wonder, U.S. drivers can expect to pay record-high gasoline prices for the 25th consecutive day today. The national average crept up to $3.97 this morning. Twelve states now feature statewide averages over $4 a gallon.

The U.S. manufacturing industry remains in contraction, reports the Institute for Supply Management today. The ISM’s measure actually improved from April to May, up 1 point. But at a score of 49, the index is still below the 50/50 line that marks the difference between growth and contraction.

If you listen to the media, you’d think oil was getting cheap again. Light sweet crude did trend down after Friday’s U.S. close, but it still rings in around $125 this morning.

“Let’s be serious,” writes Kevin Kerr. “Oil has pulled back to $125, not $60.

“Think about the parabolic rise in oil we have seen in just the last six months. It’s incredible, and it’s overdue for a correction. But that doesn’t mean that this is the end of the longer-term bull market or global demand — not by a long shot. The idea that this was some kind of a bubble — with oil really worth $40 — is a pipe dream.

“The simple reason is that we are using more and more fuel and finding much less. Peak Oil is here, and it doesn’t feel good.

“Still, Congress can’t let it go. There is no ‘evildoer’ in the oil market, no cartel of traders that manipulated the oil markets to get us to this price. The Commodity Futures Trading Commission is even getting a new mandate and a lot of power.

“If they continue on their latest witch hunt to find the traders responsible, it won’t matter. Those funds will simply flee into new oil markets springing up in Dubai and elsewhere.”

There is “no quick fix” for high oil prices, Treasury Secretary Hank Paulson today admitted today. “I don’t think this is about financial investors,” Paulson said while entertaining a band of reporters following him around the Middle East, “I think this is about long-term supply and demand.”

“I don’t see a lot of short-term answers,” he added, slightly less glum than our Maniac Trader.

The dollar index held onto 73 over the weekend.

The Bradford & Bingley crisis did wonders for the pound this morning, kicking a cent and a half off the top in overseas trading today, to $1.96. The euro’s holding steady after last week’s profit-taking… $1.55 this morning. The yen’s at 104.

Gold managed a decent gain over the weekend and this morning … the precious metal’s up $20 from Friday’s low to $890 as we write. Still, the growing consensus among financial commentators is that gold’s run might be running out of steam.

“That news is so old I’m feeling young again,” says our own gold adviser Ed Bugos. “Given the still largely overlooked inflationary fundamentals, I have to part with the consensus. One insight we could draw from the oil experience is that it has gone beyond the wildest predictions anyone could muster a few years ago. If you had called oil at $200, or even $130, back in 2000, you would have been fired. You would have been so far out on the fringe they’d have to make a new club for you.

“With the Nasdaq tech bubble, the real estate bubble that followed and now the oil bubble (relative to gold), bull markets have a way of going higher than anybody expects.

“The commodity bull market is not about economic growth or the finiteness of commodity stocks. It is about money and inflation. It is about gold. It is about the viability of a fiat currency monetary and fractional reserve banking system.

“When the market realizes this, the gold market will no longer obey the consensus. That is, it won’t trade so rationally, if you will. You won’t see the healthy corrections that you are seeing now.”

“By what I’ve gathered from the posts from readers,” writes a reader, “Alan Greenspan is considered the sole cause of our current economic malaise. While his poor choices and deliberate manipulations did enable our current financial drama, Alan Greenspan and is just a symptom of an underlying illness in our society — corruption.

“The only purpose of the Federal Reserve Bank is to serve as a control mechanism for the political classes to extract unearned wealth from the working classes. It is one of many such mechanisms.

“We can’t say we weren’t warned. Our Founders, through the U.S. Constitution, clearly spelled out the need to use ONLY gold and silver as legal tender and outlawed a private central bank. Once the nation and our elected officials began accepting violations of our founding laws, a collapse of order is the inevitable result. Don’t put all the blame on Mr. Greenspan.

“The problem started back in 1913.”

“Why all the Greenspan bashing?” asks our last reader. We must admit, this is the first reader response we’ve received scripted as a freestyle poem:

“After reading Ayn Rand’s works twice
And Alan Greenspan’s early writings,
It is obvious to the most casual observer
That what Alan did to the dollar
Was well thought out and done on purpose
So he could see Ayn’s prediction of the collapse
Of the dollar as well the demise of the U.S.
Happen in his lifetime… he has probably done us
All a favor (in the long run) to expedite the collapse
Of our fiat currency. I will bet you $100 to a donut
That he is sitting on gold and laughing his ass off!
If you have been taking Agora Financial’s advice over the years,
You’ll be just fine.
Will there be blood in the streets? You bet!
Will it hurt? You bet!
In the long run, will we be better off? You bet!

“A favorite quote of mine from Bucky Fuller:
‘You never change anything by fighting the existing reality.
To change something, build a new model
and make the existing model obsolete.’

“Greenspan should go in the history books as a hero
That shaved decades off the collapse of the dollar!”

Cheers,

Addison Wiggin
The 5 Min. Forecast

yesterday we only had 23K hits, which was a low not seen here for many months.  Everybody out and enjoying some good sunshine I hope.  Notice that the last two month’s traffic really bailed…wimps

we also got removed from google’s search index after the default theme was hacked; need to reapply.  So another reason for less traffic.  The red bars representing data spiked due to the hack, which has been fixed now.