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Friday 01.27.2012

Gold Bulls Ascendant Amid Best Start to Year in Three Decades: Commodities
By Nicholas Larkin - Bloomberg.com
Gold traders are bullish for a fourth consecutive week, betting that theFederal Reserve’s pledge to keep interest rates low until late 2014 will extend the metal’s best start to a year in more than three decades.
Nine of 15 surveyed by Bloomberg expect prices to gain next week. The value of gold held in exchange-traded products jumped $3.9 billion on Jan. 25, the most since October, as the central bank laid the groundwork for a possible third round of asset purchases, data compiled by Bloomberg show. Lower interest rates increase the appeal of bullion because it generally earns investors returns only through price gains.

Gold, silver rally sharply
in wake of Federal Reserve FOMC statement
LONDON (Commodity Online): Comex Gold and Silverfutures are posting solid rallies and have hit fresh six-week highs in the aftermath of the release of the Federal Reserve's FOMC statement following the committee's meeting Wednesday.
While the FOMC statement was mostly unchanged from the previous meeting's statement, the U.S. dollar index did sell off modestly and Crude Oil prices rallied following the report. The FOMC statement did hint to the market place that the Federal Reserve will continue its very accommodative monetary policy for quite some time to come--at least through 2014, said the Fed.

Gold Surges Past $1700 On FOMC,
As Bernanke Says QE3 Still An Option
By Agustino Fontevecchia, Forbes Staff
The latest FOMC statementsurprised many, suggesting the economic outlook faces significant downside risks and announcing interest rates would remain zero-bound for even longer than before, until at least late-2014. Gold, which jumped on the news, is poised to benefit from additional easing and the possibility of further monetary stimulus in the form of QE3.
Gold, which had traded in negative territory through most of the session, surged on the Fed’s statement. While few expected Chairman Bernanke to give markets a third round of quantitative easing, several asset classes responded to what can be seen as additional easing.

Chinese New Year 2012: Year of Dragon Said to Boost Gold
By Roland Li | IBTimes.co.uk
The Chinese New Year celebration is expected to increase strong demand for gold in Asia, according to industry experts.
"Gold is traditionally bought as a gift during the Chinese New Year, and 2012 looks set to be a strong year for demand" said Albert Cheng, managing director, Far East, of the World Gold Council, in a statement. "We see this as part of a longer-term trend."

Volcker confirms central bank need to suppress gold
to stabilize exchange rates at 'critical point'
By: Chris Powell, Secretary/Treasurer, GATA - GoldSeek.com
Former Federal Reserve Chairman Paul Volcker today defended government intervention in the gold market to counter "exchange rate instability at a critical point."
Volcker's comments came in response to inquiry from the German freelance journalist Lars Schall, who noted GATA's reference to Volcker's expression of regret, recorded in his memoirs, about the failure of Western central banks to intervene to suppress gold prices during a currency revaluation in 1973. Volcker's support of gold price suppression was cited by your secretary/treasurer in his address to the Vancouver Resource Investment Conference last Saturday:

Continued soft U.S. monetary policy
already factored into gold prices
LONDON (Commodity Online): Continued soft U.S. monetary policy may have limited impact on Gold since it’s already factored into the market, said HSBC in a research note.
Members of the Federal Open Market Committee, which concludes a two-day meeting Wednesday, are expected to start releasing each member’s projections of the appropriate federal-funds rate at the end of 2012, 2013 and 2014, as well as what year the first rate hike should occur.

Bullish technical signals support silver and gold prices
By Dr Jeffrey Lewis - CommodityOnline.com
Several closely watched technical factors played a substantial role in precious metals trading last week as traders noted that increasingly bullish signals of an impending rally accumulated strength.
It is our conviction that ultimately the physical market will trump paper and drive technical traders, which in term will set-off the algorithm-funds, leading to significant moves higher or as we like to frame: a return to real equilibrium.

Gold Bonds: Averting Financial Armageddon
by Keith Weiner - Guest Post on ZeroHedge.com
After the near-collapse of the financial system in 2008, a growing number of people have come to realize that our monetary disease is terminal. It is that group to whom I address this paper. I sincerely hope that this group includes leaders in business, finance, and government.
I do not believe that my proposal herein is necessarily “realistic” (i.e. pragmatic). There are many interest groups that may oppose it for various reasons, based on their short-sighted desire to try to continue the status quo yet a while longer. Nevertheless, I feel that I must write and publish this paper. To say nothing in the face of the greatest financial calamity would go against everything I believe.

The Federal Reserve on gold and silver
By Nigam Arora - MarketWatch.com
The Federal Reserve does not directly comment on gold and silver. But for the first time in the living memory, the Fed sent a clear signal in a message about interest rates to sell them both.
However, market participants did not listen and ran the two up. After the 12:30 pm EST announcement from the Fed, the SPDR Gold Trust ETF and iShares Silver Trust, the Market Vectors Gold Miners ETF and popular miner stocks such as Newmont Mining Corp. , Barrick Gold Corp. Silver Wheaton Corp. saw explosive buying.

Has Bernanke Become A Gold Bug's Best Friend?
Submitted by Tyler Durden - ZeroHedge.com
Below we present the indexed return of ES (or stocks) and of gold over the past 24 hours since the Bernanke announcement of virtually infinite ZIRP, and the latent threat of QE3 any time the Russell 2000 has a downtick. It is unnecessary to point out just when Bernanke made it all too clear that the Fed has nothing left up its sleeve, expect to directly compete with the ECB over "whose (balance sheet) is bigger," as it is quite obvious. What is not so obvious, is that for all intents and purposes, Bernanke may have unwillingly, become a gold bug's best friend, as gold (and implicitly silver) has benefited substantially more that general risk. Much more. So for the sake of all gold bugs out there, could the Fed perhaps add a few more FOMC statements and press conferences? At this rate gold should be at well over $2000 by the June 20 FOMC meeting.

I Stand By $140 Silver In 2012
By Hubert Moolman - SilverSeek.com
There is a well-established relationship between how silver and gold trade. They often trade similar in the same time period, but also at similar milestones, although those milestones are sometimes reached at different times. This can cause silver or gold to be the leading indicator, depending on the particular milestone.

Broken Dollar
By Toby Connor, GoldScents - GoldSeek.com
It has been my theory that this year we would see one of the worst performances by the stock market since 2008. However that has always been dependent on Bernanke not being able to break the dollar's rally out of its three year cycle low. As of this morning the dollar has printed a failed daily cycle. More often than not a failed daily cycle is an indication that an intermediate degree decline has begun.

Angela Merkel casts doubt
on saving Greece from financial meltdown
German chancellor speaks candidly to the Guardian and five other leading European newspapers as part of a unique collaboration to explore the EU's predicament
By Ian Traynor - Guardian.co.uk
Angela Merkel has cast doubt for the first time on Europe's chances of saving Greece from financial meltdown and sovereign default, conceding that Europe's first ever multibillion euro bailout coupled with savage austerity was not working after a two-year crisis that has brought the single currency to the brink of unravelling.
In an interview with the Guardian and five other leading European newspapers, the German chancellor also insisted – against widespread resistance elsewhere in the eurozone and in the UK – that the European court of justice (ECJ) be empowered to police public spending and budget policies of the 17 countries in the euro.

Investors fear mounting losses
in Portugal as second rescue looms
Portugal is fighting a losing battle to contain its public debt and may be forced to impose haircuts of up to 50pc on private creditors, according to a top German institute.
By Ambrose Evans-Pritchard - Telegraph.co.uk
A report for the Kiel Institute for the World Economy said Portugal would have to run a primary budget surplus of over 11pc of GDP a year to prevent debt dynamics spiralling out of control, even in a benign scenario of 2pc annual growth.
"Portugal's debt is unsustainable. That is the only possible conclusion," said David Bencek, the co-author, warning that no country can achieve a primary budget surplus above 5pc for long.

How Will the Euro Crisis End?
Europe Can Beat This Crisis but Maybe Not the Next
By Clive Crook - Bloomberg.com
How gloomy should we be about the European Union? Are its problems manageable, or is it headed for systemic collapse? My answer is yes -- the problems are manageable, and the EU’s leaders are behaving so recklessly that collapse is all too possible. I don’t know whether that makes me an optimist or a pessimist.
The Peterson Institute for International Economics just hosted a debate about Europe’s prognosis. Four well-known economists, all deserving to be taken seriously, argued for and against the doomsday scenario. Let’s review their positions.

At Euro Talks, a Calm Arm-Twister From the U.S.
By ANNIE LOWREY - NYTimes.com
WASHINGTON — The world’s financiers and finance ministers have descended on the annual forum in Davos, Switzerland, at another perilous moment, with the sovereign debt woes in Europe sapping strength from emerging markets and threatening global growth.
Every nation’s rebound is at risk, including that of the United States — a particular concern for President Obama, who wants to trumpet the country’s renewed strength during his re-election campaign.

Between Various Rocks and Various Hard Places
BY CHARLES HUGH SMITH - FinancialSense.com
The U.S. and European economies are firmly between various rocks and various hard places.
Having stipulated that "Forecasting Is Not Humanity's Strength," I will not make any foolish forecasts that will assuredly be proven wrong, but it is undoubtedly true that the U.S. and Europe are both entering a "crunch time" politically and financially.
In essence, both economies are between multiple rocks and multiple hard places. Eventually, this ceases to be an academic question and becomes one of actual financial impact on people via higher taxes, smaller checks, lower purchasing power, etc.

Republicans Demand Block Of US IMF Funding
To Bail Out Europe
Submitted by Tyler Durden - ZeroHedge.com
In an odd coincidence, we were just updating the notional amount of FX swaps that the Fed has conducted with Europe in the past week, when we noticed that the GOP has finally made it an issue to fill in the gray area void of whether or not the US will be required to fund the IMF bailout of Europe. Tangentially, the Fed's USD swaps - an indicator of dollar-denominated last resort liquidity - just hit a 2012 high of $84.5 billion, increasing by $2 billion from the $82.5 billion in the prior week which makes us scratch our heads just how is it that Europe is "getting better" if instead of declining, usage of USD swaps is increasing confirming interbank liquidity is non-existence. This merely confirms that 4 weeks after peaking at a multi-year high of $85.4 billion in the last week of December, the European liquidity situation has once again started to deteriorate. It also means that the "self-reported" to the BBA 3M USD (but it's 'declining') is and continues to be about as worthless as any data out of the NAR.

QE3 May Be Preferred
Over Fed’s QE2 for Asia Economies Facing Export Slump
By Shamim Adam and Karl Lester M. Yap - Bloomberg.com
U.S. monetary stimulus, blamed in 2010 for spurring speculative capital flows to emerging markets, may find less opposition this time round in Asia as the region’s focus shifts to supporting economic growth.
Fed Chairman Ben S. Bernanke laid the groundwork for a third round of quantitative easing through asset purchases, a so-called QE3, saying two days ago the Fed is prepared for further "accommodation." Officials from China to South Korea were among those who criticized QE2, when they were raising interest rates in part to stem property and stock price surges.

America Has A $16.4 Trillion Debt Ceiling
In 52-44 Senate Vote
Submitted by Tyler Durden - ZeroHedge.com
Update: the Senate has failed to reject a bid to stop the debt ceiling hike with a simple 52 vote majority all of it along party lines. The US now has $16.4 trillion in debt capacity as of Friday. Since roughly $100 billion was plundered from Pension Funds in the past month, The US will have about $15.4 trillion in debt with the Monday DTS. The question then is how long will the $1 trillion in debt capacity last: at $125 billion/month it won't be enough to carry the US past the election without another massive debt ceiling spectacle.

Stephen Roach Explains
How The Fed Is Pulling The Wool Over Our Eyes
Submitted by Tyler Durden - ZeroHedge.com
"Bernanke is betting the ranch on open-ended QE and zero interest rates and it worries me" is how Stephen Roach of Morgan Stanley starts this must-see reality-check interview with Bloomberg TV's Tom Keene. The reason for his concern is simple, the current Fed modus operandi is a framework for rescuing economies in crisis but does little to sustain economic recovery. Roach agrees with Cal's Eichengreen that the European and US central banks are indeed in a policy trap, committed to a path of action that has to be perpetually ante'd up to maintain the dream. With Europe in recession already in his view, Roach does not expect the tough structural action until we see greater social unrest or overwhelming unemployment and reminds us of how close we got when Greece threatened the referendum in the late summer.

How much more spending was due to inflated prices...?
US growth expectations cemented by company spending
An increase in spending by US companies last month has cemented expectations that the world's largest economy accelerated in the final quarter of 2011.
By Richard Blackden - Telegraph.co.uk
Economists forecast that figures released on Friday will show US gross domestic product expanded at a 3pc annual rate in the fourth quarter, up from 1.8pc in the third.
Confidence in that prediction was lifted after a report torday showed that orders for durable goods, which include aircraft and computers, jumped a better-than-expected 3pc in December.

A Really Bad Plan for Reviving the Housing Market
Submitted by RickAckerman - ZeroHedge.com
For breathtakingly stupid political ideas and catastrophic “solutions” to America’s biggest problems, it’s hard to beat the New York Times op-ed page. There, joined by such jihadists of the Left as Frank Rich and Maureen Dowd, resides the peerlessly wrong-headed economist Paul Krugman, whose Nobel Prize was as well-deserved as the one Yasser Arafat received for helping to bring Peace to the world. Until yesterday, we might have thought Krugman had cornered the market for the absolute worst ideas on how to revive the economy. Here’s a guy who actually seems to believe, in his heart of hearts, that the reason this has not yet occurred is that the central banks of Europe, the U.S. and Japan have not thrown enough money at the problem. We stopped counting stimulus dollars and guarantees ourselves when the total hit $15 trillion a couple of years ago. That was long after we’d become convinced that deficit spending in such cosmic quantities, far from reviving the economy, would ultimately bury the U.S. in debt. As it has. Such concerns pose no problem for Krugman, however, since he simply avoids using the word “debt” in his Martian-friendly economic essays.

No More Résumés, Say Some Firms
By RACHEL EMMA SILVERMAN - WSJ.com
Union Square Ventures recently posted an opening for an investment analyst.
Instead of asking for résumés, the New York venture-capital firm—which has invested in Twitter, Foursquare, Zynga and other technology companies—asked applicants to send links representing their "Web presence," such as a Twitter account or Tumblr blog. Applicants also had to submit short videos demonstrating their interest in the position.
Union Square says its process nets better-quality candidates —especially for a venture-capital operation that invests heavily in the Internet and social-media—and the firm plans to use it going forward to fill analyst positions and other jobs.

Obama Plans to Propose
Corporate Tax System Overhaul Next Month
By Steven Sloan - Bloomberg.com
President Barack Obama will propose an overhaul of the U.S. corporate tax system in February, his economic advisers said.
The proposal will be released at about the same time as the administration’s fiscal 2013 budget plan, which is scheduled to be sent to Congress on Feb. 13. The administration isn’t releasing details of the comprehensive proposal, such as whether it will include a target for the top corporate tax rate.

Newt Gingrich: Our Bill Clinton
By R. Emmett Tyrrell - PatriotPost.us
WASHINGTON -- How long have I been saying it? At least for 15 years, but in private, I have been aware of it longer. Newt Gingrich is conservatism's Bill Clinton, but without the charm. He has acquired wit, but he has all the charm of barbed wire.
Newt and Bill are, of course, 1960s-generation narcissists, and they share the same problems: waywardness and deviancy. Newt, like Bill, has a proclivity for girl-hopping. It's not as egregious as Bill's, but then Newt is not as drop-dead beautiful. His public record is already besmeared with tawdry divorces, and there are private encounters with the fair sex that doubtless will come out. If I have heard of some, you can be sure the Democrats have heard of more.

Old mortgages rise from the dead, haunt homeowners
By Michelle Conlin
(Reuters) - In July 2009, Roy and Sheila Bowers refinanced the mortgage on their suburban ranch home in Topeka, Kansas. The couple wanted to take advantage of the low interest rates that were all the rage at the time.
Roy, a truck driver, and Sheila, a former hotel housekeeping supervisor, knew their new loan from Wells Fargo would enable them to save $198.86 a month - a nice chunk to help with gas and groceries.

Subprime Debt Insured by FHA Climbs
in Bet on Housing Recovery: Mortgages
By Kathleen M. Howley - Bloomberg.com
In Honolulu, on the southern coast of the island of Oahu, there’s a four-bedroom home priced at $785,000 that has views of the sun setting over the Pacific Ocean. The beaches of Waikiki are 15 minutes away.
Starting this month, the property is available to buyers with a subprime credit score, limited cash reserves and a 3.5 percent down payment using a loan backed by the Federal Housing Administration. Without the agency, a buyer would need a 20 percent down payment and an unblemished financial history for a jumbo mortgage.

Why Home Prices Have Much Further to Fall
BY LANCE ROBERTS - FinancialSense.com
There has been a deluge of articles recently about the upticks in the housing data. The consensus is that these data points are surely pointing, finally, to a bottom in the depressing decline of real estate. Let me acknowledge that I do not dispute the improvement in the data regarding home starts, permits, pending sales, etc., however, let's be clear that all of these data points are still mired at very depressed levels. So, while optimism is certainly always a welcome thing, for the average American, the world is quite different.

FBI to step up monitoring of social media sites
amid privacy concerns
Agency to build app that will constantly monitor Twitter and Facebook, following law enforcement trend of increased reliance
By Dominic Rushe in New York - Guardian.co.uk
The FBI plans to step up the monitoring of social networks like Facebook and Twitter, and has asked for help building an app to constantly monitor the sites.
Earlier this month the FBI quietly published a request for information (RFI) looking for companies that might help it build a new social network monitoring system looking at "publicly available" information. Contractors have until 10 February to suggest solutions.

Corruption scandal shakes Vatican as internal letters leaked
By Philip Pullella
(Reuters) - The Vatican was shaken by a corruption scandal Thursday after an Italian television investigation said a former top official had been transferred against his will after complaining about irregularities in awarding contracts.
The show "The Untouchables" on the respected private television network La 7 Wednesday night showed what it said were several letters that Archbishop Carlo Maria Vigano, who was then deputy-governor of Vatican City, sent to superiors, including Pope Benedict, in 2011 about the corruption.

Is Now The Time To Move Away From Major U.S. Cities?
EndOfTheAmericanDream.com
As the U.S. economy falls apart and as the world becomes increasingly unstable, more Americans than ever are becoming "preppers". It is estimated that there are at least two million preppers in the United States today, but nobody really knows. The truth is that it is hard to take a poll because a lot of preppers simply do not talk about their preparations. Your neighbor could be storing up food in the garage or in an extra bedroom and you might never even know it. An increasing number of Americans are convinced that we are on the verge of some really bad things happening. But will just storing up some extra food and supplies be enough? What is going to happen if we see widespread rioting in major U.S. cities like George Soros is predicting? What is going to happen if the economy totally falls to pieces and our city centers descend into anarchy like we saw in New Orleans during the aftermath of Hurricane Katrina? In some major U.S. cities such as Detroit, looting is already rampant. There are some sections of Detroit where entire blocks of houses are being slowly dismantled by thieves and stripped of anything valuable. Sadly, the economy is going to get a lot worse than it is at the moment. So is now the time to move away from major U.S. cities? Should preppers be seeking safer locations for themselves and their families? Those are legitimate questions.

Knowing Your Role as an Obedient Citizen
Joel Bowman - SilverBearCafe.com
Buenos Aires, Argentina – We can see them there, huddled under cover of night, assembled in the darkened corners of dimly-lit bars, conversing in hushed tones, eyes darting nervously, wondering who among them might turn coat. Which man here conceals a Ministry badge? Do I hide one myself? Dare I even ask?
How their hands do tremble. How their voices quiver, knowing that a second of free expression might cost the author his life. How shall we ever find our way home again, to the land of the free?

Weapons 'R' Us
By William J Astore - ATimes.com
Perhaps you've heard of Makin' Thunderbirds, a hard-bitten rock and roll song by Bob Seger that I listened to 30 years ago while in college. It's about auto workers back in 1955 who were "young and proud" to be making Ford Thunderbirds.
But in the early 1980s, Seger sings, "The plants have changed and you're lucky if you work." Seger caught the reality of an American manufacturing infrastructure that was seriously eroding as skilled and good-paying union jobs were cut or sent overseas, rarely to be seen again in these parts.

Do Israeli Leaders Really Think Iran Is an Existential Threat?
By Robert Wright - TheAtlantic.com
This Sunday's New York Times Magazine will feature a big piece, already available online, by the Israeli journalist Ronen Bergman called "Will Israel Attack Iran?" The first paragraph sets a dramatic scene featuring Israel's defense minister, Ehud Barak. As Sabbath eve approached two weeks ago, and Barak "gazed out at the lights of Tel Aviv," he said to Bergman, "This is not about some abstract concept, but a genuine concern. The Iranians are, after all, a nation whose leaders have set themselves a strategic goal of wiping Israel off the map."

Israel Senses Bluffing in Iran’s Threats of Retaliation
By ETHAN BRONNER - NYTimes.com
JERUSALEM — Israeli intelligence estimates, backed by academic studies, have cast doubt on the widespread assumption that a military strike on Iranian nuclear facilities would set off a catastrophic set of events like a regional conflagration, widespread acts of terrorism and sky-high oil prices.
The estimates, which have been largely adopted by the country’s most senior officials, conclude that the threat of Iranian retaliation is partly bluff. They are playing an important role inIsrael’s calculation of whether ultimately to strike Iran, or to try to persuade the United States to do so, even as Tehran faces tough new economic sanctions from the West.

US-Iran: A long game with pitfalls
By Kaveh L Afrasiabi - ATimes.com
A new report on United States-Iran strategic competition by the Washington think-tank Center For Strategic and International Studies (CSIS), focuses on the pros and cons of a "long game" between the two countries, centered on sanctions, arms control and regime change. [1]
Penned by Anthony Cordesman and Bradley Bosserman, the report provides useful information on the Iranian energy sector, presently subjected to tightening Western sanctions, predicting that despite the mounting pressures, Iran will not forfeit its controversial nuclear program for national security reasons. In fact, it has a decent chance of success in a protracted "long game", in light of similar successes by countries such as Pakistan, North Korea and India.

Sanctions aimed at averting wider conflict
By Barbara Slavin - ATimes.com
WASHINGTON - European countries are imposing unprecedented sanctions against Iran in part in hopes of preventing an Israeli attack on Iranian nuclear installations that could further destabilize the Middle East and wreak havoc on the global economy.
The decision on Monday by the European Union to phase out purchases of Iranian oil by July 1 is timed to US legislation that has the same deadline for sanctions against foreign banks that continue to do business with the Iranian central bank. However, European and US experts on Iran cite the fear of a new war as a key reason for the EU decision.

U.S. outrage as Egypt bars Americans from leaving
By Patrick Werr and Tom Perry
(Reuters) - Six Americans working for publicly funded U.S. organizations promoting democracy in Egypt have been barred from leaving the country, provoking angry demands in Washington that Cairo's new military rulers stop "endangering American lives".
Among those hit by travel bans - one of those targeted called it "de facto detention" - is a son of U.S. Transportation Secretary Ray LaHood, as well as other foreign staffers of the International Republican Institute and National Democratic Institute, officials at the two organizations said.

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