Tuesday, April 8, 2008
MBIA Loses AAA Insurer Rating From Fitch Over Capital
April 4 (Bloomberg) -- Fitch Ratings cut MBIA Inc.'s insurance unit to AA from AAA, saying the bond insurer no longer has enough capital to warrant the top ranking.
MBIA, the world's largest financial guarantor, would need as much as $3.8 billion more in capital to deserve an AAA, New York-based Fitch said today in a report. The outlook is negative, Fitch said.
Fitch Ratings, Moody's Investors Service, and Standard & Poor's are at the root of the sub prime blowup and the ensuing credit crisis. It was these three "ratings agencies" that carelessly hung AAA ratings on the toxic Mortgage Backed Securities that were sold to naive investors around the globe. This news slipped through the cracks Friday as it flies in the face of the "this is the bottom" nonsense that has hypnotized the equity markets for the moment. Fitch's downgrade of MBIA's insurance unit now casts a darker shadow on the bond markets. Uninsured toxic waste...when you see the flash, duck and cover.
Gold futures drop as IMF announces gold sales
NEW YORK (MarketWatch) -- Gold futures dropped Tuesday, as the dollar strengthened against other major currencies and the International Monetary Fund said it would sell more than 14.2 million ounces of its gold reserves.
Um,...didn't we all agree weeks ago the FIRST time we heard this "news" that IMF Gold sales are "bullish" for Gold. And here we are, same story, different day, and the media is using it AGAIN as reason to dump your Gold. LOOOOOOOOOOOL! Bring it on! 14 million ounce of Gold will be sucked up quicker in this market than a Hoover sucking up dog pooh on the rug.
The IMF gold sales "would come in handy for the gold market -- and I say that as a gold bull," wrote Ross Norman, joint managing director at FastMarkets Ltd., in a research note.
"Gold mine production is failing to keep up with burgeoning investment demand and the supply deficit has already seen a quadrupling of prices since Gordon Brown, former U.K. chancellor, sold precisely the same tonnage in 2001," Norman said.
"Given that the sales would happen over some years and within the CBGA [Central Bank Gold Agreement], this amount -- if approved -- would be readily absorbed by the investment and jewelry quarter," he said.
Fed Officials Saw Contraction in Economy `Likely'
April 8 (Bloomberg) -- Federal Reserve officials anticipated that the economy would shrink in the first half of the year, with some concerned about ``a prolonged and severe economic downturn.''
``Many participants thought some contraction in economic activity in the first half of 2008 now appeared likely,'' the Fed said in minutes of the March 18 Federal Open Market Committee meeting released in Washington today.
Policy makers also found little sign that housing markets have reached a bottom, the minutes showed.
The minutes encompass a period when Chairman Ben S. Bernanke invoked rarely used authority to provide emergency financing for investment banks and rescued Bear Stearns Cos. from bankruptcy. Officials are seeking to limit the impact on the broader economy of what former Fed chief Alan Greenspan today termed the worst credit crisis in 50 years.
The Bear Stearns financing took the Fed ``to the very edge of its lawful and implied powers, transcending in the process certain long-embedded central banking principles,'' Paul Volcker, chairman of the Fed from 1979 to 1987, told the Economic Club of New York today.
...And the Dollar closed up today and Gold closed down? "Toto, I have a feeling we're not in Kansas any more." "We must be over the rainbow."
Ex-NYMEX director pleads guilty to fraud
NEW YORK (Reuters) - A former New York Mercantile Exchange board member pleaded guilty to defrauding customers and tampering with evidence on Tuesday in exchange for serving 5 months in prison and paying $850,000 in fines and penalties.
The head of NYMEX, James Newsome, said in a statement: "Today's action should serve as an unmistakable notice to our market participants that NYMEX will not hesitate to work with law enforcement authorities, or take whatever steps are otherwise necessary, to protect the integrity of our markets."
I only have two words for that statement: "YEAH, RIGHT."
GOLDEN GUT CHECK
Why gold is likely to keep moving higher over the long run
Gold Fields Mineral Services (GFMS), the industry's most reliable source for gold supply-demand statistics, reports a total mine supply of 2447 tonnes for 2007, but that number is problematic. When you account for the dedicated Chinese and Russian production, the projected central bank quota shortfall, the curtailment of sales from South Africa, and the potential for accelerated producer buy backs, a different picture emerges -- one not of copious supply but of shortages. The fundamentals lead us to the conclusion that there has been real substance to the gold rally of the past two years -- a rally which has taken the price 75% higher. Those who have called gold's up trend the latest in a string of speculative bubbles do so from a lack of perspective and understanding. Likewise, the fundamentals hold out promise for the future in that none of the trends in place are likely to reverse anytime soon. We are left with the impression that the gold bull market is likely to stay on course in 2008, even if we experience a short-term correction or two.
This is an excellent essay by Michael J. Kosares. I highly recommend reading it in its entirety. Mr. Kosares makes a terrific fundamental case for owning Gold by virtue of an underestimated actual bullion shortage that may exist in the Gold market today.
I cannot remember a time when the fundamentals have lined up more favorably for gold. The factors which have driven the price up over 75% over the past few years remain in place and in fact seem to be intensifying. The past, in this respect, could very well serve as prologue. Great forces, mostly benevolent, are at work in the gold market. Demand, as reported copiously by the mainstream financial press, continues to grow steadily on a global basis. It is on the supply side of the equation, however, where we now find the strongest arguments for resumption of the bull market. To come to the point, fundamental trends suggest that the gold market may be moving from a period of general scarcity to outright shortages. Unless some formidable source for gold is suddenly found, the period of shortages could come to full flower as early as 2008.
Gold and Silver remain on sale today. Try not to get too frustrated with the market here. The action nonetheless, is very constructive in building a new base in the Precious Metals to launch them higher. Particularly in Silver. We are watching the charts closely for a developing Head & Shoulders bottom in Silver.
Wednesday's crude oil inventories will be released at 10:30AM est. These numbers, if they are bad enough, could be the catalyst that launches Oil quickly to a new high. The key will be gasoline inventories. European Monetary Union GDP numbers come out at 5AM. Strength here would be very good for the Euro and very grave for the Dollar. Weak Eurozone GDP would force selling in the Euro, and probably put a bid under the Dollar. I know, I ask myself everyday why anybody would buy that piece of ass wipe... But I would have to believe that weak GDP in Euroland would encourage Europeans to run to Gold instead of the fecal Dollar. Of course, lately none of the markets seem to be doing what they should be doing, so I guess it would be foolish to make predictions one way or the other. So I will close today by saying, "Whatever!"