Putting a more positive spin on commodities’ fall from grace, Frank Holmes (US Global Investors) said: “This commodities sell-off, which began in July and has continued into August, also corresponds to the long-term seasonal cycle in which prices for many commodities tend to bottom out in late summer before rebounding in the fall.”
IMPORTANT NEW NOTICE: Due to market volatility and higher demand in the entire industry, we are anticipating delays in supply of all bullion products. Please note that you can continue to place orders and prices will be guaranteed; however, cancellation fees will still be applicable regardless of the length of the delay. Consequently once inventory is received there may also be delays in processing and shipping by our vaults.
http://www.kitco.com/market/
http://www.kitco.com/market/
This notice was on the top of the Kitco Metals Prices page. This sounds like there is a SHORTAGE of physical bullion to me. Bubbles DO NOT burst during supply shortages. I am beginning to suspect that the "paper market" may be facing a default, and that prices have been driven lower to allow the massive shorts in these markets to escape before they are forced to deliver bullion that is unavailable. A default in the paper markets on the CRIMEX would be devastating for the criminals that operate there, and send "physical" Gold and Silver to the outer reaches of the universe. Both metals are ridiculously oversold, particularly Silver. The US Mint is currently rationing Silver Eagles and has suspended sales of 2008 Gold Eagles. Physical Silver in any size under 1000oz bars is almost impossible to locate and purchase for immediate delivery from most distributors and manufactures.
Something is going on, none of what we've witnessed makes a damn bit of sense in a "free market". This Dollar rally is the most bogus rally ever witnessed by investors/speculators. Currency intervention aided by the sale of foreign equities by American Investors is driving the Dollar now, but doubtful for long. American Investors selling their foreign investments have to buy Dollars to bring their money home...thus creating demand for Dollars. Couple that with central bank currency intervention, and a squeeze of the Dollar shorts develops. There are NO real buyers of Dollars, this is a fleeting rally in a doomed currency that will end as quickly as it began.
The theory that the Fed is going to raise interest rates because inflation is "getting worse" is a load of crap. In my post August 6, 2008 Fed Powerless To Stop Rise in Gold Bumbling Ben and the Fed made it clear that the Fed would stand still on interest rates well into 2009. The stock market, cheered by the prospects of continued low rates, rose 300 points that day. This past Thursday we see inflation rising at a 17 year high, and all of a sudden the Fed is going to change their mind and raise rates. LOL. There is not a snow ball's chance in hell the fed is going to be raising interest rates, PERIOD. IF Inflation was so bad and IF the Fed were going to begin to raise rates soon, why then are Treasury prices rising and not falling? As long as the blind keep running to Treasuries as a "safe-haven" interest rates will NOT rise. Only when global investors begin to dump Treasuries and "force" interest rates higher, will the Fed even consider raising interest rates. A dumping of US Treasuries on the markets will crush the Dollar.
The Fed is absolutely desperate to keep Treasury prices from collapsing. They are also desperate to keep asset prices from collapsing. This can only be achieved, or rather be attempted, by printing, printing, and printing more money. And printing that much money will only devalue the Dollar more, and send Gold and Silver prices screaming higher. As I suggested the other day, something more is going on than meets the eye. This financial mess is a lot, A LOT, worse than "they" are letting on. This wholesale take down of commodities, and Precious Metals in particular, has been contrived in an effort to bring the market in for the Big Money to steal your positions and profit from them in their never ending greed as this financial mess implodes across the globe and destroys ALL fiat currency.
The bounce in Precious Metals, and ALL commodities hard and soft, we are soon to bare witness to, is going to be magnificent and extremely volatile. Roll the video tape. History is going to look back on this period with shock and awe, and refer to it often as The Beginning Of The End Of The US Dollar.
A light bulb always burns brightest, before it burns out.
Oil: Demand Destruction Overdone?
Much ado has been made of ‘demand destruction’, an economic term that refers to declining demand for a good due to high prices. The past month or so the mainstream US press has latched onto demand destruction as a reason for the decline in oil prices much in the same way they blamed speculators for high oil prices just a few weeks earlier.
Also, when talking about demand destruction, they will refer to US numbers only; conveniently forgetting the rest of the world. The mindset here is still that the US is the top dog and the rest of the globe is irrelevant. So let’s indulge them in their narrow-mindedness for a minute and look only at US consumption as presented by the Energy Information Administration.
Overall oil consumption in the United States has actually been on the rise for the past 3 weeks during this period of unprecedented ‘demand destruction’. This is supported by the EIA’s own numbers.
The Endgame Nears For Fannie and Freddie
IT MAY BE CURTAINS SOON FOR THE MANAGEMENTS and shareholders of beleaguered housing giants Fannie Mae and Freddie Mac. It is growing increasingly likely that the Treasury will recapitalize Fannie and Freddie in the months ahead on the taxpayer's dime, availing itself of powers granted it under the new housing bill signed into law last month. Such a move almost certainly would wipe out existing holders of the agencies' common stock, with preferred shareholders and even holders of the two entities' $19 billion of subordinated debt also suffering losses. Barron's first raised the possibility of a government takeover of Fannie and Freddie in a March 10 cover story, "Is Fannie Mae Toast?"
Heaven knows, the two government-sponsored enterprises, or GSEs, both need resuscitation. Soaring mortgage delinquencies and foreclosures have led the companies to gush red ink for the past four quarters, and their managements concede the outlook is even grimmer well into next year. Shares of Fannie Mae (ticker: FNM) and Freddie Mac (FRE) have lost around 90% of their value in the past year, with Fannie now trading at $7.91, and Freddie at $5.88.
Similarly, the balance sheets of both companies have been destroyed. On a fair-value basis, in which the value of assets and liabilities is marked to immediate-liquidation value, Freddie would have had a negative net worth of $5.6 billion as of June 30, while Fannie's equity eroded to $12.5 billion from a fair value of $36 billion at the end of last year. That $12.5 billion isn't much of a cushion for a $2.8 trillion book of owned or guaranteed mortgage assets.
Times Online: Why the Russia-Georgia conflict matters to the West
“It would be a serious mistake for the international community to regard the dramatic escalation of violence in Georgia as just another flare-up in the Caucasus.
“The names of the flashpoints may be unfamiliar, the territory remote and the dispute parochial, but the battle under way will have important repercussions beyond the region.
“The outcome of the struggle will determine the course of Russia’s relations with its neighbours, will shape Dmitri Medvedev’s presidency, could alter the relationship between the Kremlin and the West and crucially could decide the fate of Caspian basin energy supplies.
“It was known that a serious confrontation had been building up. British Intelligence predicted this year that a war in the Caucasus was probable. The focus was Georgia, the West’s main ally in the region and the only export route for Caspian oil and gas outside Kremlin control.
“Part of the responsibility must lie with President Saakashvili. The US-educated Geogian leader has rightly been praised for turning around his country’s dire economy, transforming the Soviet-style army into a modern Western force and standing up to the Kremlin.
“On paper the small Georgian military is no match for the might of Russia. But Mr Saakashvili has calculated that his friends in the West, notably America and Britain, will protect him.
“… Russia has made clear in word and deed that it will do anything to prevent Nato’s expansion on its western and southern flanks.
“America and Britain are closely involved in providing military assistance to the Georgians in the form of arms and training. The support is aimed at encouraging the rise of Georgia as an independent, sovereign state.
“But the help is also partly a means of protecting the oil pipeline across Georgia that carries crude from the Caspian to the Black Sea, the only export route that bypasses Russia’s stranglehold on energy exports from the region.”
Source: Richard Beeston, Times Online, August 8, 2008.
Source: Richard Beeston, Times Online, August 8, 2008.
Richard Russell (Dow Theory Letters): Danger of deflation
“We’ve recently seen the greatest expansion of credit in history. It was a product of Asian and Mid-Eastern countries holding down the value of their currency by creating more of their own money and buying dollars. The Fed got into the act in 2003 when it held down Fed Funds to 1% for month after month. It was a wild expansion of money and credit. Now the party is over.
“The US and the economies of the free world run on credit. In the US it now takes six dollars in credit to produce one dollar in Gross National Product. Maybe the biggest problem today is that the banking system has become so traumatized that it is restricting credit. Today ‘nobody can get a loan’, the complete opposite of the situation which existed prior to the housing bust. The danger – constricting credit will impact heavily on the nation’s GDP. If that happens, say hello to a blistering recession.
“With credit being restricted, a second and very serious danger surfaces. That danger is asset deflation. The very thought of asset deflation sends chills of fear up Fed chief Ben Bernanke’s spine. Credit contraction, asset deflation – shades of the Great Depression.
“What’s the antidote for deflation? It’s print, print, print. What would gold’s reaction be to ‘print, print, print’? Gold’s reaction would be – rise, rise, rise.”
Source: Richard Russell, Dow Theory Letters, August 13, 2008.
Source: Richard Russell, Dow Theory Letters, August 13, 2008.
Mike Lenhoff (Brewin Dolphin): US exports to come under pressure
“The chart below shows the year-on-year growth rate for US GDP over the past 40 years along with the contribution from net exports in goods and services. The message is not that each cyclical downturn has been associated with a rise in the contribution from net exports but that, whatever its contribution, net exports have never prevented the US economy from sliding into a recession. The contribution from net exports today is greater than at any time in the past four decades but will this make a difference? Probably not!
“US GDP grew by 1.8% year-on-year in the second quarter of 2008. Yet 1.5% of this growth came from net exports. Less than a third of a percent came from domestic demand. The domestic economy has lost pretty well all momentum. So imports have been curbed but US exports have been holding up well, thanks to a competitive exchange rate and the strength, at least until now, of the developing economies. The contribution from net exports is just about all that is holding up US growth, but this is now likely to give.”
Click here for the full report.
Bill King (The King Report): US dollar an unattractive haven
“After over-levered dollar shorts/euro longs cover those positions much of the world will realize that the exploding US budget deficit and further financial system problems make the dollar an unattractive haven. So with the euro and pound no longer safe havens from the dollar, the yen and gold should rally.
“With international tensions reaching a new level of intensity and the global financial system still under historic duress, we’d guess that the dollar rally could continue but it is a temporary technical reaction.
“Soon the fundamentals, especially an already record US budget deficit that should greatly escalate, will re-emerge and instigate a very, very painful re-connection with economic and financial realities.”
Source: Bill King, The King Report, August 11, 2008.
Source: Bill King, The King Report, August 11, 2008.
Financial Times: China to overtake US as largest manufacturer
“China is set to overtake the US next year as the world’s largest producer of manufactured goods, four years earlier than expected, as a result of the rapidly weakening US economy.
“The great leap is revealed in forecasts for the Financial Times by Global Insight, a US economics consultancy. According to the estimates, next year China will account for 17% of manufacturing value-added output of $11,783 billion and the US will make 16%.
“Last year the US was still easily in the top slot and accounted for a fifth of the total. China was second with 13.2%.
“John Engler, president of the National Association of Manufacturers, a Washington-based trade group, played down the effect of the projections. It was ‘inevitable’ that China would take over on account of its size, he said. ‘This should be a wholesome development for the US, for it promises both political stability for the world’s largest country and continuing opportunities for the US to export to, and invest in, the world’s fastest-growing economy.’”
“The expected change will end more than a 100 years of US dominance. It returns China to a position it occupied, according to economic historians, for some 1,800 years up to about 1840, when Britain became the world’s biggest manufacturer after its Industrial Revolution.”
Source: Peter Marsh, Financial Times, August 10, 2008.
Source: Peter Marsh, Financial Times, August 10, 2008.
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