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Financial fears, soaring inflation hit Wall St

Oil rises as dollar falls

WellCare shares jump on probe payment

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By Jan Dahinten

SINGAPORE (Reuters) - The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world’s biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said on Tuesday.

“The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say ‘the worst is to come’,” he told a financial conference.

“We’re not just going to see mid-sized banks go under in the next few months, we’re going to see a whopper, we’re going to see a big one, one of the big investment banks or big banks,” said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund’s chief economist from 2001 to 2004.

“We have to see more consolidation

Bob Moriarty, gives us his no-holds-barred opinions to The Gold Report on where the economy is headed, the demise of the dollar, and which mining companies are worth taking a look at. Bob travels to dozens of mining projects a year. He was one of the first analysts to write about NovaGold, Northern Dynasty, Silver Standard, Running Fox and YGC Resources among others. Prior to his Internet career, Bob was a Marine F-4B pilot at the age of 20 and a veteran of over 820 missions in Viet Nam. Becoming a Captain in the Marines at 22, he was one of the most highly decorated pilots in the war.

TGR: Where do you see the markets going between now and the end of the year?

RM: My opinion is that we’re headed for a major crash. I think the market will top in August and we will have a repeat of 1929. I believe in 1929 the very top was on September 5th. It declined into October and then crashed at the end of October. We are going to have a market crash between now and October. Reality is setting in; the smart money is bailing out of stocks.

TGR: Well, that‘s pretty dramatic. How do you view gold playing out in the same time period?

RM: First of all, gold is the ultimate money. It’s portable; it’s divisible; it’s rare; and it’s transferable. It’s the only asset that has no obligation whatsoever to anyone. If you pick up a $100 bill, you may think of it as an asset, but it’s actually a liability on the government. Gold has no liabilities; it is the safest of safe havens; it’s been that way for 5,000 years, and in my opinion, it’s going to be that way for the next three, five or twenty years.

TGR: Do you want to put a number on where you see gold going in October?

RM: That’s a trap that everybody falls into, and it’s a bad question. When you’re talking about the price of gold, you’re talking about two commodities—gold and the dollar.

Now, everybody thinks that gold has run up from $251, but it actually hasn’t gone up; the dollar’s gone down. So, the real question should be how much of a crash do you think there could be in the dollar. So, the real answer is there

$5bn loss adds to Merrill’s woes

Where next for sub-prime losses?

US bank Merrill Lynch has posted a $4.89bn (£2.49bn) loss in the three months to June due to heavy exposure to the sub-prime mortgage market.

It was the fourth quarterly loss in a row for Wall Street’s third-largest investment bank and was far bigger than analysts had expected.

Merrill announced it would write-down $9.4bn because of US mortgage market and other high risk investments.

It must now sell billions of dollars of assets to shore up its finances.

The new charges come on top of nearly $29bn in write-downs that the brokerage had already taken because of tightening credit markets.

In April, Merrill announced it would cut about 4,000 jobs worldwide.

Global banks and brokerages have been forced to take some $300bn of write-downs in the past year. Please, Run for safety and hedge your dollars by making GOLD your portfolio’s BEST FRIEND. Call The Superior Gold Group at 888-969-6465 and take physical possesion of your precious metals NOW!

Analysts were surprised by the quarterly loss which compares with a profit of $2bn the period last year.

Chief executive John Thain called the quarter “difficult and disappointing.”

The financial group also said it had agreed to sell its 20% stake in news and data provider Bloomberg for $4.43bn and selling its controlling stake in Financial Data S

Iran withdraws $75 billion from Europe: report

Mon Jun 16, 2008 4:58am EDT

TEHRAN (Reuters) - Iran has withdrawn around $75 billion from Europe to prevent the assets from being blocked under threatened new sanctions over Tehran’s disputed nuclear ambitions, an Iranian weekly said.

Western powers are warning the Islamic Republic of more punitive measures if it rejects an incentives offer and presses on with sensitive nuclear work, but the world’s fourth-largest oil exporter is showing no sign of backing down.

“Part of Iran’s assets in European banks have been converted to gold and shares and another part has been transferred to Asian banks,” Mohsen Talaie, deputy foreign minister in charge of economic affairs, was quoted as saying.That is why smart money investor’s are purchasing and transitioning their assets and personal wealth into protection now by securing GOLD and precious metals in their portfolio. Call The Superior Gold Group now and inquire as to how you can do the same by Building Wealth You can touch with People you can Trust at 888-969-6465.

Iranian officials were not immediately available to comment on the report in Shahrvand-e Emrouz, a moderate weekly, which did not specify the time period for the withdrawals which it said were ordered by President Mahmoud Ahmadinejad.

“About $75 billion of Iran’s foreign assets which were under threat of being blocked were wired back to Iran based on Ahmadinejad’s order,” the weekly said.

Iran’s Etemad-e Melli newspaper, also quoting Talai, last week also reported the country was withdrawing assets from European banks but did not give any figures.

On Saturday, Iran again ruled out suspending uranium enrichment despite the offer by six world powers of help in developing a civilian nuclear program if it stopped activities the United States and others suspect are designed to make bombs.

The offer — agreed last month by the United States, Britain, Russia, China, Germany and France — is a revised version of one rejected by Tehran two years ago.

Iran’s refusal to suspend nuclear enrichment, which can provide fuel for power plants or material for weapons if refined much more, has drawn three rounds of U.N. sanctions since 2006. Tehran says it aims only to generate electricity.

Jun 3 2008 10:22AM

Gold

What is the biggest mistake you can make with your money in 2008? Ignoring gold, silver and their related inflation hedges can lose you more money than all the other mistakes you can make put together, except for playing the roulette table in Vegas.

Once in a lifetime, there comes a chance to turn a relatively small amount of money into a fortune, and this is one of them. We are in the early stages of a massive multi-year bull market in the metals. The supply-demand situation beggars belief. This is as close to riskless as anything I have ever recommended in 31 years of publishing The Ruff Times.  When the wind blows, even the turkeys fly. Of course you can make lot more money picking the sheep from the goats, and that is what the Ruff Times is for, separating the biggest winners from the holes in the ground surrounded by liars. Call The Superior Gold Group and start Building Wealth You can TOUCH with People You CAN TRUST at 888-969-6465 and get started with your precious metals purchase today.

A word of caution: all my words of advice are for the long term only. In the short term, gold and silver can do anything, go anywhere. In the last bull market of the ‘70s-‘80s gold went from $120 to $850,

What Comes After A Trillion?
By Eric J. Fry
The supply of newly-minted dollars bills has doubled since George W. Bush took his first oath of office. The world’s known supply of crude oil has decreased by about 13% over the same timeframe. These two data points are part of a new macroeconomic equation that equals soaring oil prices.
Before the human race began sinking oil wells into the ground 150 years ago, the planet’s total geological inheritance of crude oil totaled about 2 trillion barrels. But mankind has already burned up about one trillion of those barrels. So we’ve only got one trillion left. By contrast, during those same 150 years, America’s total government liabilities exploded from $75 million to $54.6 trillion as of today.
As the planet’s supply of oil slips below one trillion barrels, and America’s pile of liabilities soars above 54 trillion dollars, crazy things might start to happen – crazy things like $200 oil.
“Net of all accounting gimmicks, the actual federal budget deficit is running at an unsustainable, system-dooming pace,” warns John Williams, founder of Shadow Government Statistics. “The consolidated statements show that the actual annual federal deficit for the fiscal year ended September 30, 2006 was $4.6 trillion, up from $3.5 trillion in 2005. Total federal obligations at year-end were $54.6 trillion, up from $50.0 trillion in 2005.”
[Editor’s Note: The 2006 GAAP statement can be found on the Treasury’s Web site, under Financial Management Services at: http://www.fms.treas.gov/fr/index.html ]

America’s fiscal condition, says Williams,

NEW YORK (Reuters) - Citigroup Inc, Merrill Lynch & Co and Wachovia Corp this week announced 12,400 job cuts, and the number of pink slips is likely to rise as losses mount and the economy works its way out of its malaise.

So far this year, 36,000 job cuts have been announced in the U.S. financial services sector, according to job placement consultancy Challenger, Gray & Christmas, Inc. The figure does not include Citi’s announcement on Friday to cut another 9,000 jobs.

Job losses will surge well beyond the current level, given that the latest data does not account for widely expected cuts among the 14,000 employees at Bear Stearns Cos following the investment bank’s pending takeover by JPMorgan Chase & Co.

The cuts will have an oversized impact on New York City, whose fortunes are closely tied to Wall Street. Everything from Manhattan real estate prices to high-end restaurants and private car services could come under severe pressure, as highly paid investment bankers and traders face job losses.

The securities industry accounts for almost 35 percent of all salaries and wages in the city. Many bankers and brokers earn a base salary of $200,000 or more, and get even bigger bonuses.

“It is almost inevitable that we are going to see significant layoffs,” said Octavio Marenzi of financial consulting firm Celent.

Citigroup’s latest job cuts, as it posted a $5.11 billion quarterly loss on Friday after taking billions of dollars of write-downs related to mortgages and turmoil in the credit markets, follow

Ride The Tide

One day, gold will be sold off and given up for dead. Analysts will warn that longs are cashing in, soon to be followed by a mass liquidation that will send gold back down to the low $800s.

And yet the next day, gold rallies back upward as investors somewhere, for various reasons, pile back into the yellow metal.

If it sometimes seems as if gold is simply bouncing around like a cork amidst the waves, it’s understandable. Many investors feel the same way.

But it’s a mistake. Because — just as those who focus too closely on the bobbing cork can overlook the rising tide — investors who see only gold’s daily gyrations can miss seeing the rising ocean of money that is lifting the metal ever higher.

Buyers Still Stepping Up

Frankly, the recent surges in gold demand seem to be physical in origin, as a growing number of investors/savers appear to view the metal at current prices as a relative bargain. Premiums in India, for example, show that buying there has been fairly robust on the recent price dips.

In addition, some of the dramatic rebounds we’ve seen recently have come even while the dollar has been rising. These price surges, which point toward big, deep-pocketed buyers rushing into the market, appear to represent both a large degree of short covering, as well as hedge buy-backs by major gold producers.

In fact, Buenaventura has announced that it closed out its entire hedge book with a payment of US$434 million to release 782,000 ounces committed for years 2010 to 2012. The news release gave no indication of the timing of the transaction, but a reference to a smaller hedge closeout announced in a filing on January 24 would indicate that this last, very large transaction occurred early in February.

It may have been an important factor behind the latest rebound, but it wouldn’t have been the only one.

The escalating credit crisis, the growing evidence of a U.S. recession, the Federal Reserve’s apparent willingness to lower rates and open monetary floodgates at Wall Street’s beck and call — all this and more make a very compelling argument for gold investment right now.

As if that weren’t enough, these economic arguments are boosting gold demand at the precise time than new supply constraints are limiting gold supplies from both mines and central bank coffers.

More specifically…

•The power crisis in South Africa is dramatically reducing gold production, and there is no quick solution in sight. After a brief shutdown of major African gold mines, most importantly those of AngloGold Ashanti, Gold Fields and Harmony, the crisis was thought to have passed as Eskom, the South African power monopoly, promised 90% of normal operating power.

But hopes of maintaining near-normal gold production were quickly dashed. Rolling blackouts have led some mines to shutter operations entirely, rather than risk stranding miners far underground. Gold Fields states that even at 90% power, they would lose 20% of their production. AngloGold Ashanti reports that the power crisis has already cost 400,000 ounces of production, and going forward at 90% would cost 200,000 ounces annually.

Mar 19 2008 11:51AM

Balancing a Portfolio with Commodities

With all of the volatility we’re seeing in 2008, this is one of those times when investors really value assets that are not correlated to the broader markets.

That explains much of the current interest in commodities – investors are looking for ways to protect themselves through diversification.

Investments in commodities are expected to exceed $200 billion this year, according to Barclays Capital. That compares to $178 billion in 2007.

Barclays surveyed 260 institutional investors at a conference last week and found that about a third of them plan to have more than 10 percent of their portfolios in commodities in the next three years, despite prices that are at or near record levels. That number is up from about 20 percent in 2007.

More than half of these institutional investors say portfolio diversification is their main interest in commodities.

The results of Barclays’ survey track with the news that CalPERS, the giant California public pension fund, may increase its commodities exposure to as much as $7.2 billion through 2010.

Several years ago, we wrote an article explaining the role that hard assets can play in portfolio diversification. Hard assets increased overall returns while lowering or maintaining volatility in several sample portfolios. And we recommended giving investment portfolios a proper weighting in hard assets and rebalancing at regular intervals.

That article cited a study by Ibbotson & Associates that found very low correlation between hard assets and four other asset classes from 1970 to 1998 – U.S. large-cap stocks, U.S. small-cap stocks, international stocks and Treasury bonds.

Table 1

We looked at the same asset classes for the past 10 years, and as you can see on Table 1 above, the story really hasn’t changed much.

As you read across the line for hard assets (as measured by the S&P GSCI Index), you can see that there is virtually no correlation with large-cap stocks (S&P 500 Index) and Treasury bonds (Merrill Lynch U.S. Government Index). And for small-cap stocks (Russell 2000 Index) and international stocks (MSCI EAFE Index), the correlation is very low.

By comparison, look at the high correlation between large-caps and international stocks – these two asset classes moved in the same direction 82 percent of the time during the past 10 years. International stocks and small-caps correlated 73 percent of the time, and large- and small-caps moved together 75 percent of the time. Thus, a portfolio split between these three asset classes offered relatively little diversification to protect investors from market risk.

For the 1970-1998 period, commodities had a compounded annual return of 8.6 percent, according to Ibbotson. This was 4 to 5 percentage points below the annualized return for all three of the equity asset classes.

Hard assets, however, turned in a much stronger performance – both in absolute and relative terms - for the latest 10 - year period, as you can see in Table 2 below.

Table 2

Commodities as an asset class have handily outperformed the other four asset classes during this latest 10-year period, posting a compound annual return of 11.4 percent. Large-cap U.S. stocks lagged hard assets by more than 7 percentage points on average; the difference was more than 6 percentage points for small-caps and nearly 5 percentage points for international stocks.

Mar 14 2008 12:01PM

The Other Reason to Own Gold

Everybody knows that gold is an inflation hedge. That’s why most people buy it. They know from experience that the purchasing power of all national currencies is being constantly eroded by inflation. But they also know that their purchasing power is preserved by owning gold.

For example, the price of crude oil has been rising for decades when viewed in terms of dollars or any national currency. But when the cost of a barrel of crude oil is viewed in terms of ounces or grams of gold, its price is essentially unchanged. In other words, the dollar price of crude oil and the dollar price of gold are both rising more or less lockstep.By owning gold instead of US dollars, you can today purchase basically the same amount of crude oil as at any other time since 1945.

In other words, gold is an inflation hedge. But that is only one of gold’s advantages. There is also another valuable reason to own gold, and significantly, this other reason is becoming increasingly important.

Gold is also a catastrophe hedge. Gold enables us to protect our wealth from a financial meltdown because it does not have counterparty risk.

I wrote about counterparty risk last August in an article entitled “As Financial Tremors Reverberate, Focus on Counterparty Risk”. I recommend re-reading that article for a refresher course on the nature of counterparty risk and how it arises. It is I think important to recognize that the financial tremors are indeed reverberating, and are doing so with growing ferocity. http://www.kitco.com/ind/Turk/turk_aug102007.html

The monetary and financial system is rapidly spinning out of control. We are witnessing the unwinding of decades of reckless credit expansion. Borrowers – corporations, hedge funds, homeowners, etc. – who no longer have the financial capacity to repay their debts are defaulting on their obligations in increasing numbers. In that environment, the safety of one’s wealth becomes paramount, to protect against the catastrophe of default in all types of financial assets.

In short, promises are being broken, so in an environment in which financial assets are becoming increasingly doubted, one needs to own tangible assets. Own things instead of promises, and there is only one money that is not dependent upon someone’s promise and that’s gold. So buy gold; it is the best catastrophe hedge. But also buy gold because it remains the best inflation hedge.

For example, gold was $670 on August 10, 2007 when my article on counterparty risk was published, and crude oil was $71.50 per barrel. When viewed in terms of gold, crude oil was 3.3 goldgrams per barrel.

Gold today is $992, and crude oil is $109. So both prices have risen considerably in dollar terms, but the price of crude oil today is 3.4 goldgrams per barrel, essentially unchanged from last August. Gold performed as expected, being a nearly perfect hedge against inflation.

So when considering all of its advantages, gold provides what everyone wants – peace of mind knowing that the portion of your wealth placed in gold is safe.

by James Turk