Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Fri 11.30.2007
Gold & Silver Prepare To Back Up The Truck! The pull-back we are seeing in gold and silver is nothing more than some high-volume backing and filling, within the major uptrend. The annual Christmas rally which started in August has a lot of life in it yet. The sub-prime mortgage debacle is nowhere near solved, and we can count on the central banks to do what they do with every problem they run into: print more money. Nova-Gold just made headlines with news about a problem that most miners are all too aware off: It's costing more and more dollars to build a mine. The majority of exploration companies even if they find gold, never build a mine! It either costs too much, or it is located in an area that is too remote, or the area is no longer safe.
Bernanke: Upcoming data may tell the tale on rates Federal Reserve Chairman Ben Bernanke said that economic data to be released over the next eight days may contain the answer to the key question: whether to hold rates steady or lower them for the third straight meeting. He neither ruled a rate cut in, nor ruled one out. "We will be receiving a good deal of relevant information in the coming days. In making its policy decision, the FOMC will have to judge whether the outlook for the economy or the balance of risks has shifted materially," he said. Many economists now argue that circumstances have changed, as credit markets have frozen over the past few weeks in an eerie replay of the turmoil in August.
U.S. incomes fall, spending flat in October Growth in U.S. consumer spending ground to a halt in October, while inflation eroded households' modest gains in income, the Commerce Department reported Friday. Nominal incomes rose just 0.2% last month despite strong job growth. But after accounting for a 0.3% rise in prices, October's real after-tax incomes fell 0.1%. Meanwhile, consumer spending increased 0.2% in nominal terms and was flat after adjusting for inflation. Spending was the weakest since March. Both incomes and spending were slightly weaker than expected by Wall Street. The weak report will put further pressure on the Federal Reserve to cut interest rates for a third time this year when policymakers sit down for their Dec. 11 meeting.
U.S. government, banks finalizing rate-freeze plan The U.S. Federal government and leading financial institutions are finalizing details of a plan that would extend low introductory rates offered to some borrowers who took out adjustable rate mortgages, according to reports. The plan, being hammered out between the Treasury Department and a number of large mortgage lenders, would include subprime mortgage borrowers, the Wall Street Journal reported Friday, citing unnamed sources familiar with the negotiations. The report said the gist of the plan was to extend the low introductory rates on home loans made to borrowers who will have trouble meeting higher reset rates. Under one scenario, the extension of lower rates could run as long as seven years, the report said. About two million adjustable rate mortgages are scheduled to reset to higher levels over the next two years.
Losing faith in the greenback THE long-run value of all paper currencies is zero. That is a fond saying of Bill Bonner, goldbug and publisher of the Daily Reckoning, a contrarian financial newsletter. So why should the dollar be any different? Mahmoud Ahmadinejad, Iran's president, seems to think the long run is now: two weeks ago he decried the dollar as a "worthless piece of paper". And Jim Rogers, a famously shrewd investor, asks why anyone would buy dollars. America's currency has been infected by the sense of crisis that bedevils its economy and financial markets. Speculative selling of the dollar is close to an all-time high, reckons Stephen Jen at Morgan Stanley.
Off-balance-sheet debt Conduits and special investment vehicles (SIVs) allow companies and banks to take on off-balance-sheet debt. These vehicles usually hold highly rated, short-term debt that offers a higher yielding alternative to ultra-safe Treasury debt. Banks use the low-cost proceeds to buy longer-term debt such as auto-loans, credit card loans, or mortgages to profit from their high cash flow. Banks that have stakes in the conduits have provided ''liquidity back-stops'', promises that the vehicles’ debts will be paid by the banks when they come due even if the vehicles are not able to pay them. Banks are reluctant to consolidate the distressed vehicles because it would have to put the liabilities on bank balance sheets, thus restricting lending.
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