Fed Head Lays An Egg

MBIA Posts 4Q Loss of $2.3 Billion on Derivatives Write-Down, Growing Loss Reserves
NEW YORK (AP) -- MBIA Inc. reported write-downs of $3.5 billion on souring credit derivatives in the fourth quarter Thursday, raising the possibility that the world's largest bond insurer could lose its top credit rating.
http://biz.yahoo.com/ap/080131/earns_mbia.html


GDP slows to 0.6% in fourth quarter, U.S. says
Housing investments fall at fastest pace in 26 years; core inflation higher

WASHINGTON (MarketWatch) - The U.S. economy barely grew in the fourth quarter, pulled down by a worsening slump in housing and heightened caution by consumers and businesses, the Commerce Department reported Wednesday.

The 0.6% annualized growth rate in gross domestic product was lower than the 1.1% expected by economists surveyed by MarketWatch. The drag from inventories was larger than expected.
"The GDP hit stall speed," wrote Joseph Brusuelas, chief U.S. economist at IDEAglobal.

GDP hadn't been any slower since the end of 2002, when the economy was struggling to recover from the recession a year earlier.
http://www.marketwatch.com/news/story/us-economy-slows-06-growth/story.aspx?guid=%7B9C5A0518-549D-4A8D-8666-881C32657085%7D


And so the story goes...or should we say grows? Big Ben and his cadre of financial knuckleheads gave the financial markets what they wanted yesterday, a fat 50 point Fed Funds interest rate cut. There was Euphoria first [the rush of getting your junkie fix] by Wall Street wizards. But this was low grade "stuff" and the high crashed quickly. What you saw in the stock market yesterday was a classic short squeeze. Those that bet the Fed would only cut 25 points and the market would tank on the news were short going into the announcement. They were tripping over themselves to cover their asses in the minutes following the 50 point cut anouncement. Once their new short plays were covered there were NO buyers left, and the market rush stalled and fell quickly back to earth.

Perhaps the realization that things aren't as "under control" in the credit markets as the Fed would like everbody to believe is beginning to scare people out of the stock market....and eventually into the safe and welcoming arms of Gold. There is a Gold investment tsunami, building on the sea of liquidity that these monetary mudheads at the Fed has unleashed, that is going to lift Gold to unimaginable heights in 2008.

O.6% growth in 4th quarter GDP? Imagine that number if the US Government wasn't involved in rigging it. The US has already slipped into a recession. To suggest otherwise is purely delusional. Many of the elements "normally" associated with the "end" of a recession are occuring now at the begining: rising unemployment, bankruptcy, foreclosure. We are ONLY entering a recession, and these elements are already hogging the headlines. Imagine then for a moment, how bad things are going to get before we see the "end" of this recession. We'll be lucky if all we get is a recession.

The 50 point cut yesterday proved that the Fed is not out to save the stock market as much as they are out to save their banking buddies. Despite Capt. Bernanke's assurances back in May 2006 that the subprime "issue" was contained and would not be a threat to the whole economy, things are begining to look pretty dark for the banks. MBIA news this morning is certainly not going to result in any high fives in the accounting offices of banks holding stacks of decaying mortgage securities. The entire corporate and municipal bond market is now at risk of imploding and bringing down the investors holding a lot of what will soon be deemed "junk" because of the insures inability to back these bonds up. What a catastrophe.

What is really at the root of all the peril on Wall Street and in the financial world today? One word: GREED. It was greed that destroyed the Roman Empire. And it is greed that has, is, and will destroy our once great nation America. Don't blame, or allow anybody in Washington to blame, the Chinese. It was American business that went to China to build things cheaper, to fatten their margins, and enrich their shareholders that destroyed America's manufacturing base. It was those backing NAFTA, that cost Americans jobs. It was Alan Greenspan that suggested everybody take out an adjustable rate loan and that "derivatives were good" because they helped spread the risk around. Yeah they certainly do...right around the neck of America like a hangmans noose. Wasn't it Lenin who once said, "American capitalists will hang themselves one day, and we'll supply them the rope."?

There was also a short Squeeze in Gold and Silver yesterday following the Fed's Folly. Some were dumb enough to bet the Fed would dissappoint. Even if the Fed had ONLY cut 25 points, it still would have been Gold positive. As a matter of fact, there has probably NEVER been a more positive environment to own Gold, in any of our lifetimes, than there is today. Gold is STILL cheap at $930 an ounce. Silver is cheaper than cheap at $16.70 an ounce. It may be safe to say now that "the sky is the limit"...at the very least anyways. The Moon is still up there.

Gold and Silver have performed in stunning fashion this January. Both our at or near our interim tops [ +/- 20 at 950 Gold and 17.43 Silver ]. February is seasonally a neutral month for the Precious Metals, and a bit of consolidation soon would be good for the Bulls going forward. I would not rule out another visit to the 50 day moving average, quite possibly in the next six weeks. Always remember, NO market goes straight up, or down. However, that being said, the real risk in Precious Metals now, is being OUT of the market. If you must trade, ALWAYS, maintain a "core" position for those days certain to come when you sit there wishing you were in when you're sitting on the sidelines empty handed.

...Ain't No Doubt About It

The Time For Gold Is Now!

“Dobbs: Our leaders have squandered our wealth” “President Bush's assurances that we'll all be "just fine" if he and Congress can work out an economic stimulus package seem a little hollow this morning. Much like Federal Reserve Board Chairman Ben Bernanke's assurances last May that the subprime mortgage meltdown would be contained and not affect the broader economy.” cnn.com, 1-23-2008

Lou, you mean…you mean we're really in deep financial doo doo? I thought the US had the perfect economy and could never fail. So, Lou, what do we do now?

“The irresponsible fiscal policies of the past decade have led to a national debt that amounts to $9 trillion. The irresponsible so-called free trade policies of Democratic and Republican administrations over the past three decades have produced a trade debt that now amounts to more than $6 trillion, and that debt is rising faster than our national debt. All of which is contributing to the plunge in the value of the U.S. dollar.” cnn.com, 1-23-2008

OK, OK. I’ve got the message. Our economy is in deep and very serious trouble. So what conclusion do we come to?

“All Americans will soon have to face a bitter and now obvious truth: Our national, political and economic leaders have squandered this nation's wealth, and the price of this profligacy has just come due for us all.” cnn.com, 1-23-2008

--David N. Vaughn, Gold Letter, Inc.
http://news.goldseek.com/GoldLetter/1201623659.php


Half of gold in central banks gone?

U.S. central banks may have less than half the gold they claim to possess in their vaults, charges a watchdog group in an ad scheduled for publication in the Wall Street Journal this week.

As WND reported, the Gold Anti-Trust Action Committee, or GATA, claims the Federal Reserve and the U.S. Treasury are surreptitiously manipulating the country's gold reserves by participating in undisclosed leases, according to an advance copy WND obtained of the ad running in Thursday's edition of the Journal.

GATA believes much of the borrowed gold out on lease will never be returned to the central banks.

"With the demand for gold so strong worldwide, it has become impossible to return much of the leased gold without driving the price to the moon," said GATA's chairman, William J. Murphy III.

"Most observers calculate central bank reserves are supposed to have about 30,000 tons of gold worldwide in their vaults, but we believe the amount of gold actually there may be more like 15,000 tons," Murphy said. "The rest of the gold is gone."

"Gold's recent rise toward $900 per ounce shows that the price suppression scheme is faltering," GATA says. "When it is widely understood how central banks have been suppressing gold, its price may rise to $3,000 or $5,000 an ounce or more."
http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=59935


Consumer-price inflation in the United States was last pegged at 4.1% per year, leaving US bond yields wildly negative – a strong incentive for money to continue flowing into rare, tangible assets such as Gold, as investors seek a reliable store of value.

"A lot of stops were being triggered when the Gold Price broke $925," said William Kwan, a gold dealer in Singapore for Phillip Futures, to Reuters earlier.

"In the spot market I am looking at $945 for the upside.

"Looking ahead, "we may see some sell-off after the Fed's announcement," reckons Ronald Leung of Lee Cheong Gold Dealers in Hong Kong. "Gold may consolidate after that."
http://news.goldseek.com/GoldSeek/1201609770.php


And so we all wait on the edge of our seats for the Great and All Powerful "Fed" to make their magical announcement regarding interest rates. If they cut 50 points, then the message is, "America is on the edge of economic calamity". If they cut but 25 points, then the message is, "We wanted to cut a full ONE point last week, but we didn't want to send the wrong message and make things worse." If there is no interest rate cut announced, then the Fed wasted 75 points last week because the stock market will drop like a brick in the ocean. I just can't help laughing at the whole situation. If the only thing holding the stock market above water is Fed Funds interest rate cuts, then we have already passed the point of no return and the only thing left to hear is the "thud" when we hit bottom. Of course, since we have quite a ways to fall yet, it could be some time before we hear that "thud".

I don't really care what the Fed does. Gold, and Silver, will be going a lot higher in the weeks, months, and years ahead. If for whatever reason the price of Gold, and Silver, goes down...buy more. There will plenty of folks queuing up to buy some that wished they'd bought it last month.

It's a Bull Market folks...ain't no doubt about it.

State Of The Union

"She's listing Captain."

A word to the wise: you can’t really make people wealthy by resorting to “Zimbabwe economics.” A society grows rich by producing things...and saving money. There is no other way. Cheaper credit won’t do it. More consumption won’t help. Printing money – and dumping it from helicopters – is a losing proposition.

But we hope our financial authorities continue. At least it’s fun to watch.

--Bill Bonner The Daily Reckoning

I know I am enjoying watching the prices of Precious Metals rise. The only thing more enjoyable? Seeing dem Rat Bastids on the NY COMEX burning at the stake.

"Shot down in flames. Ain't it a shame to be shot down in flames." --AC/DC

The Dow, the S&P 500 and the Nasdaq have, in the first four weeks of 2008, lost all of their gains from 2007 and then some. They are all well into red ink when compared to their 12/29/06 levels. By contrast, since 12/29/06, spot gold has gained 43.16%, spot silver has gained 26.14%, the XAU has gained 30.43% and the HUI has gained 36.44%.

Now here are your fundamentals: the credit markets are frozen, the real estate markets are virtually dead with record levels of inventory, much of it vacant, continuing to deteriorate, ARM and pick-a-pay mortgage payments on hundreds of billions in mortgages are about to adjust to unaffordable levels for millions of borrowers, defaults on all types of debt are starting to skyrocket including prime customers, consumer spending and confidence are both decreasing rapidly as hyper-stagflation begins its reign of terror, state budgets are running massive deficits and some are near bankruptcy, inflation is over 11% (officially 4.1%), M3 is about 16% (officially unpublished), unemployment is 15% (officially 5%) and growing as free trade, globalization, off-shoring and out-sourcing continue to decimate our better-paying job sectors, banks are writing off or writing down tens of billions soon to become hundreds of billions in subprime losses and bad mortgages and loans, a looming multi-tens-of-trillions mountain of potential derivative losses continues to threaten markets with a nightmarish thermonuclear meltdown,...

...would anyone in their right mind invest in any of the general stock sectors with this kind of data and fundamentals? Does not this scenario sound like a poster advertisement for buying gold and silver? Could the fundamentals for precious metals possibly be more bullish than they are now? Buy gold and silver, or prepare to get reamed!!!

--Bob Chapman, The International Forecaster

http://news.goldseek.com/InternationalForecaster/1201503840.php

Thank you Bob! You are definitely a breath of fresh air. Why do I doubt President Bush will be as honest this evening as he addresses the nation. Can you say hot air? Jeez, who would want this guys job. Many will try and blame him for for the nation's eventual demise, but it is his successor that will field the most pain. Who was it that first said, "Easier said than done?" Good luck Mr. President and good luck America.

State Your Purpose

Often, while looking for answers, you end up learning about something you weren't even looking for. The "something I learned, while looking up something else" syndrome. This often goes a long ways towards our daily goal of "learning something new every day". Today I was led to Wikipedia in search of the "purpose of the Federal Reserve". As interesting as the Fed's "rare" inter meeting 3/4 Fed Funds rate cut was Wednesday morning, and the U.S. and World financial market's reactions to it, it left me curious as to why they really did it. I was not aware that the Federal Reserve was in the business of, or supposed to be in the business of "Saving The Stock Market". This is what we learned:


Purpose:


The primary motivation for creating the Federal Reserve was to address banking panics (bank runs). The Federal Reserve briefly describes the circumstances that led to its creation, the purpose for creating it, and functions of the system in The Federal Reserve in Plain English[22]:

"Just before the founding of the Federal Reserve, the nation was plagued with financial crises. At times, these crises led to “panics,” in which people raced to their banks to withdraw their deposits. A particularly severe panic in 1907 resulted in bank runs that wreaked havoc on the fragile banking system and ultimately led Congress in 1913 to write the Federal Reserve Act. Initially created to address these banking panics, the Federal Reserve is now charged with a number of broader responsibilities, including fostering a sound banking system and a healthy economy."

The purpose of the Federal Reserve System is formally stated in the Federal Reserve Act[23]:

"To provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes."

The purpose and functions of the Federal Reserve include[22][24]:

• to address banking panics (bank runs)
• to serve as the central bank for the United States
• to strike a balance between private interests of banks and the centralized responsibility of government

- supervising and regulating banking institutions
- protect the credit rights of consumers

• to manage the nation's money supply through monetary policy

- maximum employment
- stable prices
- moderate long-term interest rates

• maintain the stability of the financial system and containing systemic risk in financial markets
• providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system
• national functions

- facilitate the exchange of payments among regions
- strengthen U.S. standing in the world economy

• regional functions within the nation

-to be responsive to local liquidity needs

http://en.wikipedia.org/wiki/Federal_reserve

Fascinating discovery. The page has a great historical representation of the Federal Reserve at the link above as well. Did you know that the present Federal Reserve is the THIRD central bank of the United States? Neither did I.

Now nowhere in that description above does it say that the Fed is supposed to save the stock markets. It perhaps could be construed by the supposed mandate, "maintain the stability of the financial system and containing systemic risk in financial markets" that the Fed should rescue the stock market, but one continues to wonder.

You may ask why I have all these questions. "Well, shouldn't you as well?" I might reply. But I began to wonder if the Fed would also cut interest rates at their big pow-wow this week. I'm convinced that if they fail to cut rates again on the 30th, then there inter meeting cut was purely in an effort to stave off a crash in the stock markets. And if they do cut rates some more on Wednesday, the situation in the credit markets is far-far worse than we've been led to believe or could imagine.

At the end of the day I found it disturbingly amusing that the only thing holding up the stock markets are Fed rate cuts and the hopes for more. Gary North covers this thought with great insight in his recent essay At the Edge of the Abyss:

We appear to be in the early phase of a financial earthquake that will get into the history textbooks. The volatility of the American stock market indicates something severe, yet at present is being contained. Contained by what? By rumors and hope. http://news.goldseek.com/LewRockwell/1201461355.php

A Trillion Is A Million Millions.

Investors are finally waking up to the "value" of Gold. Adjusted for inflation, Gold prices today are still at a discounted discount. The conservative inflation adjusted value of Gold today has been pegged by many around $2200. [That is if you use the US Government's convoluted inflation statistics.] To keep this simple, we'll stick with that estimate. With Gold priced this morning at $920, we have the "mother of all Blue Light Specials" screaming "BUY NOW!". Gold is presently selling at a 140% discount. Heck, at these prices, with that kind of discount, you'd think they were giving the stuff away and paying you to take it. Imagine the line outside of Starbucks if their coffee was on sale at a 140% discount...free coffee and a $1.20 rebate!

The Gold, and Silver, story of 2008 is going to be "Investment Demand". Unfortunately for most American investors, they will wind up playing catchup to the rest of the world in the Gold investment arena. The whole world is on the outside looking in at the US as their currency implodes. Gold is now rising in ALL currencies around the globe as foreigners watch the world's "reserve currency" go down toilet. Americans will be the last to wake up to the Dollars demise as they are lead to the financial slaughterhouse by the greedy thieves on Wall Street and inside their corrupt, and now bankrupt, Federal Government.

Jim Willie CB, GoldenJackass.com does some pretty eye opening math in his recent essay Gold & Math on a Napkin. I have paraphrased below, please read his entire essay here: http://news.goldseek.com/GoldenJackass/1201201098.php

Bankers, Wall Street hucksters, financial network commentators, and floating analysts seem to have flunked basic arithmetic in grand fashion. Maybe they only expose the next link in a long chain of deception, their apparent expertise. One hears estimates of $200 billion on total mortgage bond losses from the Secy of Inflation Ben Bernanke. One witnesses the series of bond writedowns by Wall Street banks. One can read of Wall Street economists like Jan Hatzius of Goldman Sachs, who cites $400 billion in potential bond losses, a favorite figure cited by other bankers. One is subjected to press anchors and their simplistic echoes of bond losses. One is endlessly lectured by highbrow analysts of the extent of bond damage. The trouble is, they all cannot do simple arithmetic and observe the billboards on mortgage bond indexes, fully available.

The total of all US$-based mortgage bonds is $10.4 trillion. A conservative estimate of the prime mortgages within this giant mass is $7 trillion. The ‘AAA’ mortgage bond index has lost a whopping 30%, a fact that continuously eludes the big bankers and their legion of obsequious monitoring mavens. Simple math, within the grasp of a 9-year old kid, results in prime mortgage losses amount to at least $2.1 trillion.

The size of the subprime mortgages in the United States is estimated at $1.4 trillion. The ‘BBB’ mortgage bond index has lost 80% of its value. So subprime mortgage bonds have lost over $1.1 trillion.

PRIME MORTGAGE BOND LOSSES AT LEAST $2 TRILLION
SUBPRIME MORTGAGE BOND LOSSES TOTAL OVER $1 TRILLION
THE TOTAL MORTGAGE BOND LOSSES ARE OVER $3 TRILLION
THE OFFICIAL ESTIMATES ARE WRONG BY A FACTOR OF 10 !!!

GOLD WILL SKYROCKET WHEN THESE NUMBERS ARE FINALLY REPORTED

So why are all the so-called experts spouting about $200 billion in total bond losses? Why are Wall Street economists talking about $400 billion in extensive losses? A simple conclusion is that they prefer to lie and deceive, as they defend their industry. Their message has become simple. "Do not panic, wait it out, because we are desperately trying to sell from our cratering portfolios."

The USGovt stimulus package at $150 billion is being floated, replete with minor tax cuts, and a puny amount of money doled to each households. This is peanuts. Ben Bernanke is a bit late in living up to his name of ‘Helicopter Ben’ actually. The name ‘B-52 Ben’ is in no way deserved, not yet. Questions are asked if the USGovt fiscal plan is enough. Of course not! The stimulus is ten times smaller than required, because the estimated size of the problem is ten times smaller than reality. Unless and until the authorities in charge of this implosion of financially engineered tinkertoys get serious, when a rescue package and resolution platform are designed and put into action valued in the trillion$, they are urinating on raging bonfires.

Folks, $150Billion dollars in a $15Trillion dollar economy is ONLY 1%! If my math is correct...damn a trillion is a lot of zeros...in a $15Trillion economy $40Billion moves through the system each day. That being the case, $150Billion would "stimulate" the economy for 3 1/2 days? LOOOOOOOOOOOOOOOL! Red my lips Mr. President: "It ain't gonna work!" But hey, I'll take the money, and buy some Silver. Of course by the time I get my cut, Silver will probably have gone up 50%. Maybe I'll just use the chump change to buy beer then.

You Ain't Seen Nothin' Yet

Is This the Beginning of a Worldwide Depression?

If the U.S. and world economy fail to grow exponentially, then the banking elite temporarily lower interest rates to “stimulate” the economy. Under low interest rates, people are more willing to borrow, and more money is created to slosh around in the economy. If the economy still does not grow, then the effect of the extra money will noticed immediately as increases in prices of products and services. Because wages never increase as fast or as high as the price increases, society must accept ever increasing prices of all products and services and a decreasing standard of living.

If money cannot be pumped into the system fast enough or the people receiving the money cannot be encouraged to spent it in ways that support and maintain economic growth, then the money will not get distributed around the economy in a way that permits all borrows to pay their debts. Then, big trouble begins. When people fail to make payments, mortgages fail, and banks fail; when banks fail, the money supply contracts; when the money supply contracts, wages and Government tax receipts fall; when wages and tax receipts fall, both Government and people can pay even less. So, a vicious reinforcing cycle develops. Yes, the details on how this scenario can be triggered and progress can be mind-numbingly complex. Suffice it to say, a “Great Depression” is very bad.

One way the Federal Reserve can expand the U.S. money supply is to lower interest rates. That is why the Fed just announced an emergency 0.75% interest rate cut, today January 22, 2008. That move cut short what was shaping up to be a 400+ day drop in the Dow Index. What they did not say was than any tangible effect of a rate cut will not be felt in the economy for six months. The move was purely psychological. If the bleeding does not stop, more cuts will come, and the Fed will use other tricks as well. But, rest assured that the Fed will fight tooth and nail to prevent a contraction in the money supply. Ben Bernanke arrogantly believes the Fed has all the tools and methods today needed to always successfully increase the money supply and avoid depression. He might be right. Then again, he might not. The Titanic was unsinkable until it sank.

If the bankers succeed in preventing depression, there will be inflation, and lots of it. Gold and silver will be excellent investments. And, the horrible monetary/banking system will continue until world population growth and resource exploitation can no longer be maintained. Then, the mother of all crashes will occur.
http://www.opednews.com:80/maxwrite/diarypage.php?did=5751

The dust has almost settled on recent "events". Hopefully, many of the "weak hands" in the Precious Metals have been finally washed away. In tomorrow's post we will take a look at where we've been, and where we may be going soon. Support at $850 Gold and $15 Silver look set now. Is the sky the limit?

US DOLLAR TO BE SMASHED TO SMITHEREENS?

The Recession That Never Was

by Howard S. Katz

Currently the stock market is being hammered down by propaganda about the coming recession. Of course, when the propaganda is successful and Bernanke completes his easing, this will make stocks go up. Those who listen to the recession propaganda and sell will sell near the bottom. It was precisely to deal with situations like this that the old timers made the rule, buy when there is blood in the streets. However, the rule should have been, buy when there is blood in the media because what is happening is not happening in reality, only in people’s minds. Again, in deciding on a massive easing at a time when the dollar was very weak anyway, Bernanke essentially threw the dollar out the window. The U.S. central bank has made the decision to trash its own currency. I don’t have to tell you that this means BUY GOLD. Unfortunately, most of our sources of information in this society are full of lies. Their purpose is to make the banks and their other vested interests rich, and to do this they have to make you poor. Believe the lies, and you are a loser.

http://news.goldseek.com/GoldSeek/1200665220.php

Please read the entire essay. Mr Katz explains how economics really work with regard to "growth" and "recession" and proceeds to explain the lie that is being told to the public in an all out effort to bail out the banks and Wall Street at the expense of the average American.

The damage the Fed has done, is doing, and will do to this nation could never be surpassed by any fledgling terrorist. Those "in charge" are doing plenty to destroy the nation from within. Terrorism is the cover they have used to steal this nation's wealth.

By this time next week, Gold may have supplanted the US Dollar as the World's "currency of choice". I just hope the lights still come on in the morning.

A Golden Chours

Cutting interest rates below inflation, Bernanke & Co. believe they're somehow going to help both workers and business. Quite how remains unclear; devaluing money so no one can trust it seems an odd way to fix the economy.

-- Adrian Ash BullionVault

Gold cannot be printed and mining output is 9% lower than a year ago. The Bernanke Fed is playing Russian roulette with the greenback, and a serious breakdown of the fiat (paper) currency system might only be a Fed rate cut or two away.

-- Gary Dorsch, Editor, Global Money Trends

This problem of derivative failure is far from over. It has bankrupted the major international institutions who have been saved only by selling their souls to anyone anywhere with cash willing to buy them.

The system has gone broke and the meltdown has only so far hit credit derivatives. There is much, much more to come because of the present recession and the fact that more than 50% of major international banks and investment companies are heavily into derivative creation.

The financial groups are now facing plummeting earnings, restricted capital positions and super-sized litigation against which there is no defense.

If you do not have gold for insurance you are naïve.

-- Jim Sinclair http://www.jsmineset.com/home.asp

There was considerable fanfare some days back when gold broke out above its nominal highs of early 1980, but this was actually a fairly meaningless event given that the money supply has expended enormously and the dollar has been savaged in the years that have followed, so that if gold were just to attain its 1980 value in real terms, it would have to ascend to something like $4000 an ounce. Thus it is clear that there is still plenty of upside potential, especially as the world financial system is in a much more fragile state than it was back in 1980.

-- Clive Maund

The music in the background is “Glory Days” by the boss Bruce Springsteen, played for GOLD and its numerous investment trombones.

-- Jim Willie CB, GoldenJackass.com

Attention Gold Shoppers...

Stocks Set to Plunge on Intel Shortfall - AP - Wall Street stocks readied for a second straight day of losses Wednesday after technology leader Intel Corp. announced disappointing earnings and a dim outlook.

Oil Prices Continue Decline in Europe - AP - Oil prices continued to fall Wednesday amid a growing belief that a faltering U.S. economy will lower energy demand. Prices were also slipping on expectations that a U.S. government report, due out later Wednesday, will show a rise in domestic gasoline stockpiles.

JPMorgan Posts 34 Percent 4Q Profit Drop - AP - JPMorgan Chase & Co. said Wednesday its fourth-quarter profit fell 34 percent after its exposure to subprime mortgages -- though much smaller than at banking peers like Citigroup Inc. -- devalued its portfolio by $1.3 billion.

Dollar Sinks to 2 1/2-Year Low Vs Yen

TOKYO (AP) -- The dollar sank to a 2 1/2- year low against the yen Wednesday in Asia as investors sold the greenback due to concerns over the U.S. economy and financial system.

http://biz.yahoo.com/ap/080116/asia_dollar.html?.v=1

We've seen it before... As the selling of equities accelerates around the globe, Precious Metals often get caught in the carnage. But only briefly! Recall the world stockmarket sell-off in late February 2007. Gold fell for five straight days and then rose higher for the next five weeks. The American Economy has much more than a cold, and as world investors sell their paper, they will seek to buy Gold. There's a blue light in the Gold aisle...when you see the flash, BUY!

Chinese Calvary To Conquer COMEX Crooks?

The Gold Bull is raging and looks relentless in it's pursuit of higher prices. I have urged caution in buying at these prices and continue to do so...if you're a "trader". But if you are looking to "invest" in Gold, then no time is a bad time to buy a ticket to "infinity and beyond"...well to the Moon anyways. Investors across the globe have begun a wave of buying in the Precious Metals that over time will almost certainly turn into a tsunami that will overwhelm the markets.

It should not be overlooked that on January 9 the Chinese opened a Gold Futures Exchange in Shanghai. Gold has quickly risen 6% since then, to a new all-time high of 914. The Chinese are notoriously big Gold Bugs, and this new "trading vehicle" now available to them could become a considerable adversary to the Criminals on the NY COMEX. Step back in time to November 2005. This is when the Dubai Gold Exchange opened. Gold demand in the Middle East has existed for centuries...and now they had a Gold Supermarket right in the middle of town. The record is pretty clear what followed the debut of that exchange...Gold rose almost $300 over the following six months. Could the new Chinese exchange have a similar effect on the Gold market going forward? Well, there's over one billion reasons to consider it.

Big economic data day today. Producer prices and retail sales numbers for December will appear. Couple this data with the news about Citibank write-offs and layoffs and it could be a wacky day.

A quick note about the charts and RSI. RSI stands for Relative Strength Index. It gives some indication as to when prices are overvalued and undervalued. As a measure of value then, prices do not necessarily have to drop, or even drop significantly to show value. Value in price can develop as a result of time. Prices can move sideways, and consolidate, as the RSI falls. Nobody knows when prices will tank, or rocket higher, but when looking to buy, it's always best to look for value before you do. Nobody wants to pay more than they have to for their metal. RSI is an indicator best used by traders to help them "buy low, and sell high".

Bush lodging oil price complaint with Saudi hosts

RIYADH, Jan 15 (Reuters) - U.S. President George W. Bush complained in Saudi Arabia on Tuesday that soaring oil prices were threatening the U.S. economy, raising pressure on the world's top oil exporter to help ease prices.

"I would hope, as OPEC considers different production levels, that they understand that if their -- one of their biggest consumers' economy suffers, it will mean less purchases, less oil and gas sold," he said.

OPEC, source of more than a third of the world's oil, has repeatedly said it is pumping enough crude to meet demand and blames speculation, a weak dollar and geopolitical tensions, such as fears of war with Iran, for record high oil prices.

http://www.reuters.com/article/latestCrisis/idUSN15451903

And OPEC has hit it right on the head too. George Bush will never get it. If he did, he'd have to tell the American public the real reason why Oil prices are so high. The value of the US Dollar is falling through the floor. The American Public has been trained to believe that pumping more Oil will bring prices down... good luck that.

Largest Saudi bank urges government to cut dollar exposure

RIYADH, Saudi Arabia -- Saudi Arabia's largest state bank urged the government to reduce the kingdom's exposure to the dollar by investing more assets outside the United states and gradually changing the riyal's peg to the weak U.S. currency.

National Commercial Bank, Saudi Arabia's biggest by assets, said the world's largest oil exporter should set up a sovereign wealth fund to invest surplus revenues, now partly managed by the central bank, which has $285 billion in foreign assets.

http://gata.org/node/5923

Mr. Bush might want to discuss this matter with the Saudis instead of Oil production. The Saudis get it, why doesn't he? The Saudis could have limitless supplies of Oil, but as long as the Dollar continues to swirl in the toilet bowl, Oil prices will remain higher than they maybe should be.

Fudamentally Euphoric -- Technically Cautious

Dollar Falls to 7-Week Low on Bets Fed Rate to Fall Below ECB's

Jan. 14 (Bloomberg) -- The dollar fell to a seven-week low against the euro as investors bet U.S. interest rates will fall below those of the 15 nations that share the euro for the first time in three years.

The dollar declined for a third week as Federal Reserve officials including Chairman Ben S. Bernanke signaled they favor greater ``insurance'' against an economic slowdown amid the slump in the housing market. European Central Bank council member Klaus Liebscher said he sees ``significant'' upside risks to inflation.

``In terms of the subprime crisis, the U.S. has been the centre of the storm and it will have to pay,'' said Bilal Hafeez, global head of currency strategy in London at Deutsche Bank AG, the world's largest foreign currency trader. ``The euro will continue going higher'' and may trade at $1.55 by the end of the first quarter.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a_KT4SaedZgM&refer=home

Fed pledges to act to counter market turmoil

NEW YORK (Reuters) - Federal Reserve officials on Friday said falling home prices and financial market turmoil are big risks to the U.S. economy but pledged that the central bank would not shrink from taking bold steps to support growth.
At a symposium in New York, Fed Governor Frederic Mishkin said the central bank "has been acting and will continue to act decisively" to counter rapidly deteriorating financial market conditions.

"The disruption in financial markets poses a substantial downside risk to the outlook for economic growth, and adverse economic or financial news has the potential to cause further strains," Mishkin said.

http://www.reuters.com/article/businessNews/idUSN1130392420080111

US November trade deficit up 9.3 pct to 63.1 bln usd

WASHINGTON, Jan. 11, 2008 (Thomson Financial delivered by Newstex) -- The US trade deficit shot up unexpectedly in November, driven by record high oil prices and a slump in the aircraft exports which usually offset rising imports.The Commerce Department reported a 5.4 bln usd, or 9.3 pct increase in the November trade gap to 63.1 bln usd from the unchanged 57.8 bln usd deficit in October.That was well above the small expected increase to 58.6 bln usd and it was the biggest trade gap in more than a year. 'It reverses the positive trend in the current account improvement and suggests Q4 GDP will struggle to rise by 0.5 pct,' said Jeoff Hall at Thomson IFR Markets.

http://money.cnn.com/news/newsfeeds/articles/newstex/AFX-0013-22197767.htm

Escalating Losses Force Citigroup to Seek More Foreign Investment

January 12, 2008 Citigroup is turning to cash-rich foreign investors for a second time as it confronts mounting losses on mortgage-related investments.
The financial giant is in talks to sell a large stake to a Chinese bank and several other investors, including foreign governments, in a deal that could raise $10 billion, people briefed on the plan said Friday.

The China Development Bank, which is controlled by the Chinese government, is expected to invest at least $2 billion, these people said. Citigroup is also in talks with the Government of Singapore Investment Corporation and the Kuwait Investment Authority.

http://www.nytimes.com/2008/01/12/business/12citi.html?_r=1&ref=business&oref=slogin

Merrill Lynch to write down another $15 billion in subprime losses

Analysts expected Merrill Lynch (NYSE: MER) to write down about $12 billion more in losses from its mortgage investments, but The New York Times reports this morning that it will actually write down $15 billion, or $3 billion more than anticipated when it reports earnings next week. That's in addition to the $8.4 billion write down in the third quarter for a total of $23.4 billion in losses from its mortgage fiasco.

http://www.bloggingstocks.com/2008/01/11/merril-lynch-to-write-down-15-billion-more-thanks-to-subprime-m/

On Tuesday, January 8, 2008, the gold train left the station while the stock markets crossed the Rubicon. Gold has now shattered all nominal price records while the stock markets have just moved substantially past the 10% correction level. Let the golden age of gold begin while the stock markets cross the point of no return as the bloodbath in equities begins. The cartel, showing you once again that gold suppression is JOB ONE at the Fed, has risked all the equity markets in a bid to suppress gold and to keep the resource stock indexes such as the XAU and HUI from setting all-time highs and confirming gold's rise...the US economy, drops into the big financial toilet bowl and gets a "swirly" the likes of which it is never going to forget...The economy and our entire financial system are going into the tank and if the cartel makes any further moves to put the kibosh on gold it is "Good night, Irene" for the stock markets. The cartel's efforts are now fruitless and futile as they attempt to hit gold by manipulating oil prices down and orchestrating phony dollar rally with their central bank buddies. The system is broke and it is not fixable, no matter what the Fed does. As we have said, either they let gold explode, or all the equity markets will implode. Without a weak yen and a strong carry trade, the stock markets are toast and the Republicans can do some yoga by bending over and kissing their derrieres goodbye! And that will give gold the rocket propellant it needs to blast off into outer space!

--Bob Chapman, The International Forecaster

http://news.goldseek.com/InternationalForecaster/1199948580.php

AMERICATHON

Citigroup Gains on WSJ Report of Foreign Investment

Jan. 10 (Bloomberg) -- Citigroup Inc. rose in New York trading after the Wall Street Journal reported that the biggest U.S. bank is seeking as much as $10 billion from foreign investors as mortgage-related losses deepen.

Merrill Lynch & Co., the largest brokerage, also is in talks with investors and may get $3 billion to $4 billion, the Journal said earlier today, without citing any sources. Citigroup has already received about $7.5 billion from Abu Dhabi and Merrill said last month that it's raising as much as $6.2 billion from Singapore's Temasek Holdings Pte. and New York-based money manager Davis Selected Advisors LP.

Citigroup may post $18.7 billion of fourth-quarter writedowns for mortgages and bad loans and cut its dividend by 40 percent, while Merrill may report $11.5 billion of writedowns, according to Goldman Sachs Group Inc. analyst William Tanona. Citigroup and Merrill lost almost 50 percent of their market value in the past 12 months and the companies replaced their chief executive officers.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aPCSJbroYIKg&refer=home#

Bank of America in advanced talks to buy Countrywide Financial

NEW YORK (Thomson Financial) - Shares of Countrywide Financial shares rallied Thursday, adding as much a 74% in intraday trading moments after a report said Bank of America is in advanced talks to buy the embattled mortgage lender.

The Wall Street Journal reported that it isn't clear how quickly a deal might be struck, citing two people familiar with the matter, who said it 'could occur very soon.' The report also said an agreement could be delayed or fall apart altogether.

In August, Bank of America bought $2 billion of preferred shares convertible into a stake of about 16% in the lender. Bank of America, Charlotte, N.C., has first right of refusal in any sale of Countrywide, and Bank of America has a long history of opportunistic takeovers of banks facing distress, according to the report.

http://www.hemscott.com/news/latest-news/item.do?newsId=57266947023732

Shanghai Futures Exchange to Introduce Gold Contract on Jan. 9

Dec. 31 (Bloomberg) -- The Shanghai Futures Exchange, China's biggest commodity bourse by value, will introduce gold futures on Jan. 9, underscoring the increased sophistication of the nation's financial markets and rising investor interest in the metal.
Each contract will represent 1 kilogram of gold, with the minimum margin requirement set at 7 percent, the exchange said in a statement on its Web site on Dec. 29.

Gold Jumps Once More as Chinese Investors Pile in

In Asia today, China's new gold futures market leapt 14% on its debut, breaking through the Shanghai Futures Exchange's daily price-limit on turnover worth $2.75 billion.The contract size of these new gold futures was earlier set at 1,000 grams – three times greater than first planned – in a bid to deter smaller investors. But one Shanghai futures brokerage told the People's Daily this morning that private individuals have made "mounting enquiries" to enter the Gold Market regardless.The China Securities Journal also reports people queuing up to open brokerage accounts in the east of Zhejiang Province.

--London Gold Market Report from Adrian Ash BullionVault

And so it has begun: The Battle Royale. The Chinese investor vs The PPT. Good bye Plunge Protection Team! Gold and Silver have once again lept higher this evening as the Asian markets open for trading. The Asians have got to love these clowns at the PPT. The COMEX crooks mark the Metal down while the Asians are asleep, and the Asians buy up all they can while the PPT catches it breath. Can you say up the creek without a paddle?

“The Federal Reserve is totally out of it. They’re destroying the currency and driving up inflation, which will result in higher interest rates and a worse economy. We now know the Fed doesn’t understand markets or economics, but is just trying to bail out its friends on Wall Street at the expense of 300 million Americans, nay, of the whole world.”
- Investment Guru Jim Rogers

Gold is no longer “dirt” cheap but it’s not even fairly priced, let alone expensive. I think we’re only in the fourth or fifth inning of at least a nine-inning secular bull market. The difference this year versus this time last year is that we’re likely going to see a change in the leadership of factors. Physical demand and a declining U.S. dollar are likely to take a back seat to geopolitical concerns and the absolute death march of the group or groups who have manipulated the gold price over the years. But make no mistake about it: all four should continue to help drive gold to a four-digit price in 2008.

--Peter GrandichThe Grandich Letter, Grandich Publications, LLC

Please read Peter Grandich's entire essay 2007 Review and Outlook for 2008 here:

http://news.goldseek.com/Grandich/1199895504.php

It's quite insightful.

“We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system”.
- Fed Chairman Ben Bernanke May 17, 2007

Nice call Ben. The saddest part of that statement is that there were actually people that believed him when he said it. This man should be being picked apart DAILY for uttering this nonsense. George Bush and Henry Paulson had the nerve, the audacity, to stand up in public this week and "declare" the US Economy "fundamentally sound". If the US Economy really was fundamentally sound, do you think the President AND the Treasury Secretary would have to get up in public and declare it so? I wonder how many fools believe their folly this time. The US Economy is driving over a cliff, and the engineers are content to sit back and enjoy the ride. Weeeeeeeeeeeeee! Shock and awe? We ain't seen nothin yet...

The Officials Said:

Oil Futures Fall on Economic Concerns - AP - Oil futures fell sharply Monday, extending their retreat from $100 as investors sold on concerns that a cooling economy will curb demand for oil and gasoline.

Paulson: No Easy Answer to Mortgage Woes - AP - The Bush administration is working to combat the country's severe housing crisis but there is no simple solution, Treasury Secretary Henry Paulson said Monday, adding that a correction in the housing market is "inevitable and necessary."

US F-18 fighter jets crash in Persian Gulf - CNN International - The US Navy did not immediately know the cause of the F-18 crash. There is no indication of hostile fire action, the officials said.

US-Iran naval confrontation in Gulf raises tensions - Christian Science Monitor - Five Iranian fast boats confronted a small flotilla of US Navy ships in the Persian Gulf in a "careless, reckless and potentially hostile" incident Sunday, Pentagon officials said.


Henry Paulson and President Bush both delivered speeches Monday declaring the economy is fundamentally sound. Boy, I feel better already. Where is that credit card offer I got in the mail last week? Things must be getting REALLY BAD if the Treasury Secretary AND the President both have to make speeches to assure us the the economy is A-OK. I guess that means the price of Oil can go back up.

Speaking of the price of Oil. How many times have we seen a "dip" in the price of Oil blamed on the "potential" of an economic slowdown and the subsequent effects that "potential" slowdown will have on demand? Who could keep count? And wonder of wonders...the price of Oil continues to go UP, in spite of all these "worries" over an economic slowdown. As if the entire "World's" insatiable demand for Oil is going to vanish because the USA's Economy catches a cold. Puh-leeeeeze! America may use 25% of the World's Oil today, but the rest of the World is catching up fast. They would love to get their hands on any Oil we won't need because of a recession.

Gold and Silver were adrift today primarily because of a "dip" in Oil prices. However I suspect that very soon, Precious Metals will not be led around by energy costs much longer. Precious Metals, and commodities in general, are all beginning to breakout to new,and often all-time,highs in many currencies now. Gold is becoming recognized as a safe-haven by investors around the World now and will soon become the "currency of choice" as the growing World banking crisis spirals ever further down the toilet.

Today the US Dollar was "up" for only the second day in the last 10. Weeeeeeeeeeeeeeeeee! And it hit it's head on it's steeply descending 50 day moving average and quickly retreated. The NEXT low for the Dollar will be 72 as Gold breaches $900, and Silver nears $17.

Reading Is Fundamental

Folks, you can never read enough. Posted below are some excellent essays that I perused over the weekend. If you have not done so already, take the time to read them. Each has an insight of it's own into where Gold and Silver may be heading in 2008. If anything these essays will strenghten your convictions.

The possibility for a quick reaction in the Precious Metals this week is better than 50%. Don't get shaken out of you posistion. The potential for a much more "profitable", and tradeable, interim high should present itself as February arrives.


Flight to gold as investors lose faith in money
Telegraph.co.uk, United Kingdom 05-Jan-Sat
Mining bosses complain that the earth's crust is yielding less gold. Output in South Africa has fallen to the lowest since 1932. Canada has passed peak output. Gregory Wilkins, head of Barrick Gold, says: "Global mine supply is going to decrease at a much faster rate than people generally believe."


Fed: $60 Bil More Into Economy
Saturday, January 05, 2008 - FreeMarketNews.com
The Federal Reserve will increase the size of two scheduled auctions of emergency loans by 50 percent to $30 billion as part of a global attempt by central bankers to restore faith in the money markets.
http://www.freemarketnews.com/WorldNews.asp?nid=53368


When the Dollar Crashes, All That Glitters Will Be Gold
by Lee Thomas
It is not a matter of “if” the demise of the U.S. dollar is going to happen, but a matter of “when”. We have seen signs of its weakening in the last couple of years and it does not look like it will recover any time soon. The actions of a number of other countries are adding fuel to the fire and can only confirm that the best U.S. dollar hedge is gold.
http://seekingalpha.com/article/59106-when-the-dollar-crashes-all-that-glitters-will-be-gold?source=d_email


Bullish on bullion
By Javier Blas
Analysts diverge on whether prices will test $1,000 an ounce or remain flat, although at elevated levels, in the medium term. But either way, behind this secular change that is keeping prices high is sustained interest by investors in owning gold.
http://www.ft.com/cms/s/0/67e2a9b4-ba69-11dc-abcb-0000779fd2ac.html?nclick_check=1


Into The Abyss
By: Alf Field
The world is dealing with a Sub-Prime crisis, an Evaporation of Credit crisis, a Banking Solvency crisis, a US Dollar crisis and an International Monetary crisis. These roll into one to produce the “Mother of All Crises”, the “Perfect Storm” crisis.


Eyes Wide Shut
By: Peter Schiff, Euro Pacific Capital
As our economic ship continues to spring leaks, the goldilocks crowd still clings to the false belief that the Fed can easily keep us afloat with a few more rate cuts. This comfort has sustained many upbeat forecasts despite overwhelming evidence of an unfolding economic and monetary catastrophe of historic proportions.


Enter 2008: The System Breaks
By: Jim Willie CB, Golden Jackass
The year 2008 will be the year that THINGS JUST PLAIN BREAK. It will be a truly deadly year, unavoidably lethal to the US Economy and especially to the US banking sector. Nothing has been repaired.


Manipulation / Management: Controlling the Gold Price
By: Julian Phillips, Gold Forecaster
Manipulation / Management of market prices is an integral part of the structure of all markets all institutions and all nations. The system demands it. But eventually market forces will and do overcome all but the most stringent of actions by government and when they impose such stringency, eventually they do pay a heavy price. The path of the gold price over the last three years and more are proof positive of this.

Change Is Coming To America

Iowa voters gave Senator Obama a strong start on the long road that could lead to the Democratic presidential nomination, with around 38 percent of the total projected vote. New York Senator Hillary Clinton, who spent much of last year trying to convince voters that she was the inevitable choice for the party, was left in a close race for second place with former North Carolina Senator John Edwards.

Coming before reporters after the preliminary results had been broadcast by major news organizations, Senator Obama focused on the message he will bring forward to the next contests.

"We are choosing hope over fear, we are choosing unity over division and sending a powerful message that change is coming to America," he said.

Yes, change IS coming to America. Unfortunately that "change" will have little if anything to do with who sits in the White House, and quite frankly, I don't think Americans are going to like the "change" at all. America is going broke, LOL...America IS bankrupt, and NOBODY wants to admit it or talk about it. Yup, a lot is going to change: $5 loaf of bread, $6 gallon of gas, $8 gallon of milk, 10%+ unemployment, a lot more "street people", and worst of all: NO MORE CREDIT CARD OFFERS IN THE MAIL.

What happens to a country that for years has "bought now and paid later" is no longer able to do so? It falls into KAOS as the Have-nots and the Haves go to war. The 60s race riots will look like a picnic compared to the disillusion this country will begin to face in 2009 - 2012. Americans today take WAY TOO MUCH for granted, and soon will wake up to a "world turned upside down" and the "life as we know it" will be just a memory. Can't happen? LOL, remember Rome? Of course the Mexicans will be blamed, so I suggest they hit the road in a hurry.

On a serious note: Today is Non-farm Payrolls Day! Weeeeeeeeee. This is the day, each month, where the government creates jobs out of thin air. December is a notoriously slow month for jobs creation. Why would a company take on new hires as the year ends if they want to make their budget? They don't. Of course the government's hugely FLAWED Birth/Death model will surely help them conjure up some nonexistant jobs. Unfortunately I doubt it will be very many, and Wall Street has finally come to the realization that these jobs numbers are a JOKE anyways. So I don't expect much of a benefit to the woeful Dollar today from any of the bogus econmic data released at 8:30AM.

The Asians appeared to lighten their load a bit into the close today as the week ended there...that is not unusual. In London, Gold appears to be treading water ahead of the revevered payrolls number. Gold opens just before the payrolls number is released and we shouldn't be surprised to see the Crooks on the COMEX try and push Gold down out of the box today as they did yesterday. What an utter failure that was yesterday...

The investment theme for 2008, judging by action so far in the new year, appears to be a big instutional push into commodities. That is a big wall of money coming our way. And money that is looking for a home, and not a park bench, to hang out in. This "investment" money should go a long way towards putting a strong floor under the Precious Metals. This type of "big money" usually rushes the market for the first couple weeks of the new year as it stakes it's position. Expect a small quick "reaction" in prices towards the end of next week. This dip will be a risk to short... A more tradeble interim high should present itself early in February. Feruary tends to be a "slow" month for metals. Be prepared to take some profits then, and begin to look for opportunity that will take us over $1000 Gold deep into Spring. Silver will be riding shotgun for Gold throughout, don't be surprised though if it often takes the point as both move higher. There is always downside risk in the Precious Metals, but it should be limited though the first half of 2008. Gold appears to now have support around 830 and Silver at 14.70.

When The Leeve Breaks

Bang! Boom! And their off... Gold +23.40, Silver +.38, Oil +3.64, Wheat +.30 [daily limit up], Corn -- The price reached $4.695 yesterday, the highest for a most-active contract since June 1996, Soybeans -- The price yesterday reached $12.64, the highest for a most-active contract since June 1973. O yeah, and the Dollar tanked...

What does it all mean? Well, if you like tofu, you're going to need a second job to pay for your mealy habit. The price of food isn't going to be getting cheaper anytime soon. Your commute to work is going to get even more expensive. Your Gold and Silver portfolio is leaving orbit and has it's sights set squarely on the Moon...yep, it's still up there. And lastly, it means NONE of these clowns that covet the big chair at the White House have even a clue of what they're all angling to get themselves into. [I heard a rumor there was an election this Fall]

At the time I heard this rumor a small factoid was dropped on the listeners: It has been 80 years since a Presidential election last featured two candidates where neither nominee was an incumbent President or Vice-President. In 1928, Herbert Hoover won in a Landslide. In his acceptance speech a week after the Republican convention ended, Secretary Hoover said: "We in America today are nearer to the final triumph over poverty than ever before in the history of this land... We shall soon with the help of God be in sight of the day when poverty will be banished from this land." History has documented well the eventual futility of that statement. History calls it The Great Depression. Be vary wary this year of candidates "promising" to fix things and make them better...


Word Of Gold Rush Spreading
by Sean Brodrick

Gold logged big gains in 2007 — up about 30% for the year. I believe the yellow metal should do even better in 2008. I wouldn't be surprised to see gold crack the $1,100 barrier in 2008, and probably go higher than that. Let's look at a few reasons why ...

Force #1: Tightening Supply-Demand Outlook For Gold. Gold comes from a bunch of sources. Mines are one. There's also central bank selling and sales of gold scrap. Another source is hedging, or forward selling of gold production by miners — that's different from regular production in that it locks in future sales of mine production at a set price and helps price stability.


Taken together, these make up the total supply of gold. And despite soaring prices, the total supply of gold is barely keeping up with demand.

Force #2: New Demand From Gold Investment Vehicles. Worldwide demand for gold as an investment rose to 138 metric tonnes in the third quarter, up a stunning 618% from the 19.2 tonnes in the year-earlier period!


Exchange-traded funds that hold physical gold — GLD and IAU in the U.S., GOLD in Australia, GLD in Johannesburg, GBS in France and Britain — held approximately 741 metric tonnes of gold at the end of November — up from just 39.4 tonnes in 2003.

The huge rush of gold buying by the ETFs is helping drive the market — the easier it is for investors to buy gold, the more they buy, and the higher the price goes.

Force #3: Global Mine Output Is Falling. Global gold production was down a full 3.1% in 2006 and was nearly flat in 2007.


Barrick Gold CEO Gregory Wilkins recently told the press:

"There's not much gold out there."

In fact, Barrick expects gold production will fall 10-15% below market expectations over the next three to five years!
http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=1330


Wall St start to new year worst in 25 years
US blue-chip stocks on Wednesday suffered the worst start to a new year in 25 years after an index of manufacturing fell sharply, raising fears that the US economy is slowing more than expected.

Energy stocks were a lone bright spot as crude oil prices touched $100 a barrel, but the spike in crude accentuated selling of a broad range of transport and industrial companies. Technology stocks were particularly weak after an analyst downgraded several semiconductor companies.
http://biz.yahoo.com/ft/080102/fto010220081725270407.html?.v=2

What about mining stocks? The HUI INDEX was up 6.29% and the XAU INDEX was up 6.35%. This is all the proof I need that Gold and Silver remain ignored investment vehicles by the "media". We all know this will be changing soon, but when the average investor finally shows up, Precious Metals are going to be very expensive. These sale prices we've been experiencing won't be lasting much longer. To be sure, there will be many "sales" during our trip to the Moon, take advantage and buy more!


COMMODITIES-Oil hits $100 as 2008 starts with investment binge
Forbes - By Alden Bentley NEW YORK (Reuters) - Crude oil surged to $100 a barrel for the first time on Wednesday, and gold bullion broke above its 1980 high as the first taste of investor sentiment suggested commodities were the flavor of the new year.


CNBCFed Officials Lowered Growth Outlook at Last Meeting (Update4)Bloomberg - By Scott Lanman Jan. 2 (Bloomberg) -- Federal Reserve officials said economic growth in 2008 will fall short of their own forecasts, reflecting weaker consumer spending and a deeper housing slump.


"And when the levee breaks, have no place to stay." Page, Plant, Bonham, Jones

You've got that right boys. That is unless of course you've had the forsight to invest in Gold and Silver. Save yourself, save your loved ones, and ditch your dog. Buy Gold and Silver NOW!

Happy New Year !

As the calender rolls from 2007 to 2008, one wonders if what we have just witnessed over the last half of 2007 was the "end of the beginning", and as 2008 dawns, will we bear witness to the "beginning of the end"? The "end" of what you ask? The end of "our way of life"...the end of "buy now pay later", ...the end of "livin' large", ...the end of the "American Empire".

The US Fed and US Treasury have finally been exposed as the fraud that they are, the "Great Monetary Swindle" they unleashed upon the globe in 1971 has come full circle to bite the hand that feeds. The US Dollar is now only months away from a permanent home in the dustbin of history as Gold, like a phoenix, begins it's ascent to regain it's rightful place upon the monetary throne. Gold, the Truthsayer, now invites investors from across the globe to protect their wealth and profit from the demise of the US Dollar by investing in the "cold hard truth of Gold".

Gold – What’s Driving It Higher?

By: Julian D. W. Phillips, Gold/Silver Forecaster

There is no doubt that during 2007 the gold market has evolved from one suffering persistent undermining attack by global monetary authorities over the last 25 years [through sales and accelerated supply] began to fade noticeably, as the credibility of its replacement, the U.S. $ began to decay visibly, to one that garnered a new respect, if only amongst both private and fund investors. And by funds, we are not referring to the short-term speculators but to long-term holders, primarily of gold Exchange Traded Fund shares. It is primarily Investor demand that will drive the demand for gold in 2008 because of the enviable position it holds, which we describe below.

Add to the above the meteoric rise of the oil price and we saw gold beginning to act as a counter for dropping confidence in the monetary system attracting more investment demand.

More than a confidence crisis!
“Many $ holders, including central banks and sovereign wealth funds as well as private investors, clearly want to diversify into other currencies. Since foreign $ holdings total at least $20,000 billion, even a modest realization of these desires could produce a free fall of the U.S. currency and huge disruptions to markets and the world economy. Fears of such an outcome have risen sharply in both official circles and the markets.

However, none of the countries into whose currencies the diversification would take place want to receive these inflows. The Eurozone, the UK, Canada, and Australia among others believe that their exchange rates are already substantially overvalued. But China and most of the other Asian countries continue to intervene heavily to keep their currencies from rising significantly. Hence, further large shifts out of the $ could indeed push the floating currencies far above their equilibrium levels, generating new imbalances and a possibly severe slowdown in global growth.”

This is the atmosphere that has driven investment demand for gold and in turn the gold price. We expect that in the year ahead, this climate will deteriorate substantially driving investment demand to new record levels. But let’s be clear about this, we are not talking of a simple rising of investment demand, we believe we will see a large acceleration in that demand taking it well through four figures in tonnage terms as well as in price terms.

At each stage of its growth it will attract bigger players as the liquidity of these shares gives comfort to the larger players. Indeed, the total holdings of such funds are already equal to the holding of the top echelon of Central Bank holdings, even above that of China having moved into the equivalent of seventh place and likely to move into sixth place next year ahead of Switzerland.

We have said in the past that a level of 3,000 tonnes holdings by the gold E.T.F.’s is possible and will attract the biggest players. At the time many thought it was far fetched, but as total holdings by such funds [including the Canadian equivalent] crosses the 860 tonne level, such forecasts are proving more than credible.

Bear in mind that the huge financial power of the Mutual / Pension etc funds is now able to invest almost directly in gold [via these shares]. This buying power was just not present before the creation of the gold E.T.F.’s. Each day this demand grows as new gold Investors come into this market and there is a massive amount out there still to come in. Funds before the Exchange Traded Fund concept were just not permitted to hold gold. The nearest they could come to that was to own gold shares with all their inherent risks. Now that investing power is unleashed needing only the education that gold in share form is now available to them. It is this power that is becoming the main driving force behind the rise in gold.

Clearly then it is investment demand that will soon be, if not already, driving the price of Gold higher. Couple that will a falling Gold supply, the rising cost of Oil, an imminent implosion of the entire bond market, runaway inflation, geopolitical unrest, and drought...and we have all the fuel we need to ride Gold to the Moon...perhaps even beyond.

According to John Williams of Shadow Government Statistics $850 gold in 1980 is now equivalent to over $4,000. People! Gold is still cheap! But it won't be cheap forever. Golds breakout from it's Pennant Formation [discussed here Dec 13, 2007] at 807 has Gold on the fast track to $963. It is possible that we could see Gold reach this level by the middle of February. It is notable too that Silver closed December at a new monthly high of 14.77, and is on the verge of breaking a large ascending triangle on the monthly chart that projects to an interim high of $19.98. Silver is colossally cheap relative to Gold. There is roughly 16 times as much Silver in the World as their is Gold. Back of the napkin math then reveals that at today's "nominal" price of Gold at $835, Silver should be selling for ---- $52 an ounce. If Gold were at $4000, then Silver, using the same math, would be at $250! Silver IS the Investment Of A Lifetime. BUY BOTH NOW WHILE SUPPLIES LAST.