The problem is especially pronounced in the current economic climate with so many countries having dramatically increased their spending as part of their respective stimulus efforts. However, when the recession got underway, many of these countries were already carrying potentially heavy and expensive debt burdens.
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A report in London’s Evening Standard newspaper notes that many in the finance industry see proposals by President Barack Obama and British Prime Minister Gordon Brown as unnecessary and potentially burdensome to the industry.

One executive was quoted as saying that if the proposed rules, which in the UK include a tax on all financial market transactions, turn out not to work, the results could fall somewhere between stifled growth and “another crisis.”

Overall, such criticism is reflective of the general uncertainty and unease that surrounds the economic recovery, which in the U.S. has so far been a slow and jobless one. There is also concern that a double dip recession could become apparent in the coming months, largely due to factors like the unemployment situation.
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A report in Business Week notes that the Commodities Futures Trading Commission is expected to propose caps regulating how much a single investor can hold in a given commodity future, largely in response to the price swings that characterized the oil market in 2008.

The magazine quoted Bart Chilton, a CFTC commissioner, as saying that the proposal would aim to prevent any individual or company from “controlling too much of a given market,” while discouraging these markets from becoming “a private jungle gym for speculators.”

More…The article noted that there will be a public comment period before the proposal is implemented, although it could be in place as early as springtime.

While the new year is still in its earliest days, there have been growing signs of investor interest so far in commodities like gold and silver, as well as other precious metals. This is due to factors like a shaky dollar and concern about the prospects for an economic recovery in the long term.

Contact The Superior Gold Group and learn how to get on the gold standard at www.gold101.com or Call (888) 374-4032.

With that in mind, a report on the India Times’ Economic Times website gives silver and gold dealers, as well as commodity traders in general, a reason for optimism about the coming year.

The article cites statistics predicting that commodities such as gold and palladium could rise as much as 17 percent in the coming year, with one estimate from Goldman Sachs reportedly predicting a 17.5 percent average gain across 24 different commodities that could outpace expected gains in the Standard and Poor’s 500 Index.

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Editor’s Note: It was the worst thing to happen to the U.S. since Fort Sumter. October, 1929. Wall Street crashed and helped drive the country into the Great Depression—a deep economic and spiritual wound that has afflicted three generations of Americans. Eighty years later, as the country struggles through the harsh aftermath of another crash, two Sunday Journal contributors mark a grim anniversary and weigh the question that haunts everyone: “Is this the 1930s all over again?”

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Gold, Not so Golden in 2008

Posted by David Gaffen

It’s been a terrible year for most major asset classes — stocks, real estate, hedge funds, and commodities. One of the assets that investors might have expected to do a bit better in such an environment, when the vast majority fled to higher ground, was gold. But gold’s performance this year has been a disappointment.

As of Wednesday, gold closed at $847.10 per troy ounce, up 1.5% on the year. Compared with a 40% decline in the Standard & Poor’s 500-stock index and a 60% drop in crude oil, that’s just fine — it is, after all, a return of capital. But analysts say gold failed to capitalize during market turmoil because for much of the year, gold was as much a part of the craze as any other asset.

“We weren’t necessarily seeing the rush to safety of this safe-haven market that gold has been in the past,” says Darin Newsom, DTN senior commodities analyst. “We were seeing a get-me-out effect in all commodities, and there was no belief that the gold market was any more sustainable than any other commodity.”

The yellow metal settled at a record $1003.20 on March 18 and has lost nearly 16% since. The gains were fueled by much the same activity that boosted grain commodities such as wheat or corn, as well as energy-related commodities — an abundance of liquidity seeking undervalued investments.

With inflation anticipated to rise, gold was a beneficiary. This run, however, increased gold’s correlation with other assets such as oil and stocks, and when those assets started to falter later in the year, gold, by virtue of its already lofty position, failed to respond positively.

“This was the perfect storm for every prediction ever made for gold to come and vindicate its safe-haven attribute, but it’s largely falling victim to deflationary pressures,” says Jon Nadler, senior analyst at Kitco.

In the late summer, renewed strength in the dollar added to pressure on gold, and caused it to decline further as investors worried more about deflation. Only more recently, as the dollar has declined, has gold regained a bit of luster, rising 9.4% in December, to $774.60 to $847.10.

“It just keeps your buying ability intact as opposed to giving you much of an advance,” says Dennis Lamson, registered investment advisor at CobyLamson Capital Management in Medford, Ore. He says that the declining availability of coins suggest that demand for physical gold still exists as a hedge against various factors, including rising inflation. Of course this is bias when in fact Gold is up over 150% since 2001. Call The Superior Gold Group and get the facts, “Liars go figure—Figures never LIE! Call 888-969-6465 and get your free portfolio analysis NOW!

Should the Federal Reserve and other central banks achieve success and re-inflate the economy, that could be a tailwind for gold. For now, investors will have to contend with the fact that it was one of the few assets that did not lose anyone money.

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What`s wrong with breaking even as gold has done?

It sure is alot better than losing your ass in the stockmarket,as was the case.

Comment by clockhunt - December 26, 2008 at 12:51 pm

The far eastern markets will be a sign in the New year of the prospects for gold in 2009 and watch for early signs of buying pressure from this (more…)

The ratio, developed in 1969 by Nobel Prize-winning economist James Tobin, shows the Standard & Poor’s 500 Index is still too expensive relative to the cost of replacing assets, said Napier. While the 39 percent drop in the index this year pushed equity prices below replacement cost, history suggests the ratio must sink further as deflation sets in, he said. The S&P may plunge another 55 percent to 400 by 2014, Napier said.

“The Q has come down to its average, however it’s not always stopped at the average,” said Napier, Institutional Investor’s top-ranked Asia strategist from 1997-1999. “It has tended to go significantly below that in long bear markets.”

Shares have fallen this year as the worst financial crisis since the Great Depression caused almost $1 trillion of bank losses and dragged the world’s largest economies into recessions. The MSCI World Index has tumbled 44 percent in 2008, set for the biggest annual decline in its four-decade history.

The S&P 500 increased 0.1 percent to 889.28 as of 2:08 p.m. today in New York, erasing a 2.2 percent rally.

Bear-Market Scholar

Napier, who teaches at Edinburgh Business School and advised clients to buy oil in 2002 before it tripled, based his S&P 500 forecast on the Q ratio for U.S. equities as well as the 10-year cyclically adjusted price-to-earnings ratio, another measure of long-term value.

Before the trough in 2014, investors are likely to see a so- called bear market rally for the next two years as central bank actions delay the onset of deflation, Napier said.

“In the long run, stocks will become even cheaper,” said Brian Shepardson, who helps manage $1.9 billion at Xenia, Ohio- based James Investment Research. The firm’s James Balanced Golden Rainbow Fund beat 98 percent of similar funds this year. “There’s a likelihood of some type of rally and further pullback surpassing the lows we’ve already set.”

The Q ratio on U.S. equities has dropped to 0.7 from a peak of 2.9 in 1999, and reaching 0.3 has always signaled the end of a bear market, said Napier, 44, the author of “Anatomy of the Bear,” a study of how business cycles change course. The Q ratio for U.S. equities has fluctuated between 0.3 and 3 in the past 130 years.

When the gauge is more than one, it indicates the market is overvaluing company assets, while a Q ratio of less than one signifies shares are undervalued because it is cheaper to buy companies than to build them from the ground up.

Previous Bottoms

At the end of the four largest U.S. bear markets in 1921, 1932, 1949 and 1982, the Q ratio fell to 0.3 or lower, and history is likely to (more…)

The debate continues over bailing out the auto industry. What do you think? If a bailout occurs it will only be the first in a never ending line of industries seeking help. The world is now quickly changing and moving with a determined force we have not witnessed in our generation or the generation before.

Any of you out there have teenagers? Wow! For years when my own were young I wondered what was the big deal? What human being could change so dramatically in just a very short period of time? But childhood is followed by puberty and puberty is followed by hell (the teenage years.) It is frustrating because we see the same mistakes we made at their age. And we want to warn them and to prepare them but for the most part they want to experience the true rewards of failure themselves. They just don’t want to listen to anyone once that magical age of 13 is reached. Their minds become as hard to crack as turtle shells. And inside is only mush and toxic waste. Failed derivatives. Oh, do I have a teenager? Watching the financial world disintegrate before my eyes is often easier than trying to understand a simple teen.

I just heard a financial commentator on CNBC state that the “buy & hold “ strategy does not always work because many stocks now are less than they were 10 years ago. I actually heard the man say that there may be times when it is appropriate to sell. I understand the President elect is negotiating to keep and to continue using his Blackberry. An ABC blogger voiced the following opinion.

“If he follows through on some of the things he is talking about, I am liking this guy more every day.” “I for one am willing to give the guy a chance to succeed or fail on the merits of his plan and his staff.” Blogger, ABC

Well, unfortunately, with the US debt now rising by vast multiples there just may not be anything left soon to continue to manage. We’re all going to the poor house.

“The Fed is basically printing money.”

I hear that quote repeated continuously on the news cable stations. 7 new trillion newly pressed American US dollars. At least the reality of the monetary rescue plan is being grasped. All printed new money with nothing backing it. The mortgage rate dropped a full half a point last week. So what does this matter to someone who has lost his job? Or totally become overwhelmed with a debt load that has become totally unmanageable? A little money is being spent out there in market land. I bought a 32 inch Samsung for a great give away price. This brand has the little big button on the bottom and in the middle of the TV. The button makes this model a definite buy.

Paul Volcker - “What this crisis reveals is a broken financial system like no other in my lifetime…” “Normal monetary policy is not able to get money flowing.” “The Empire State index of manufacturing dropped to minus 24.6 in October, the lowest ever recorded. Paul Ashworth, US economist at Capital Economics, said business spending was now going into “meltdown”, compounding the collapse in consumer spending that is already under way.” “Mr Volcker…warned that it is already too late to avoid a severe downturn even if the credit markets stabilize over coming months.” “I don’t think anybody thinks we’re going to get through this recession in a hurry…” “There has been leveraging in the economy beyond imagination…” telegraph.co.uk/finance/economics/3474683/Volcker-issues-dire-warning-on-slump.html, 11-17-2008

I get tired of the big 3 automotive industries blaming the American auto worker for their financial problems. If this argument is allowed to run its course the inevitability of wage price caps will become middle class reality. Kind of reminds me of how economic problems were attempted to be settled as the Roman Empire sank into near bankruptcy in the 3rd century. Their proposal was to force all work to become hereditary. What your daddy did you will do also. So much for ambition. And the only way out was to become a monk and join a Monastery. And remember in 1971 when then President Nixon imposed his much applauded (then) wage and price controls? An abject failure. Let’s first talk about these over paid bonuses the executives are getting for poor and failing performance.

“In a move widely applauded by the public and a fair number of (but by no means all) economists, President Nixon imposed wage and price controls.” “The initial attempt to dampen inflation by calming inflationary expectations was a monumental failure.” econreview.com/events/wageprice1971b.htm

Events we have become accustomed to for 30 years are (more…)

Joe Average
November 2008

Global Panic Spreads

The largest debt bubble in the history of mankind is on the verge of deflating and collapsing as world leaders and central bankers fly around the globe to one crisis meeting after another. No sooner is one panic quelled or some hasty band-aid fix slapped into place to stop a financial collapse, then another breaks out somewhere else. The bad news just keeps on coming;

• ICELAND…Bankrupt…Oct.2008 nationalises banks; turns to International Monetary Fund for help.
• BALTIC DRY INDEX…Down 90%… a leading indicator of shipping rates & global trade.
• JAPAN (NIKKEI)…Down 81%… from all time high of 38,957 on December 29th 1989.
• RUSSIA (RTS & MICEX)…Down 77%… exchanges shut down several days to stem panic.
• CHINA (SSE)…Down 72%… from all time high of 6,029 0n October 16th 2007.
• KOREA (KSE)…Down 68%… from high in May 2007.
• ARGENTINA (MERVAL)…Down 64%… moves to take over $30 billion in private pension funds.
• INDIA (BSE)…Down 60%… since January 2008.
• TURKEY (ISE)…Down 59%… from high in November 2007.
• HONG KONG (HANG SENG)…Down 55%… past 12 months.
• ITALY…Down 53%… past 12 months.
• BRAZIL (BOVESPA)…Down 52%… from May 2008 peak. Trading suspended 5 times in 3 weeks.
• FRANCE (CAC)…Down 50%… from June 2007.
• GERMANY (DAX)…Down 50%… year to date.
• GREAT BRITAIN (FTSE)…Down 47%…from all time high of 6,930; now �officially� in recession.
• MEXICO (IPC)…Down 47%…since June this year.
• AUSTRALIA (ASX)…Down 45%… from all time high of 6,829 on November 1st 2007.
• U.S.A (DJIA)… Down 46%… to 8154 on Oct.10th 2008 from 14,198 on Oct.11th 2007. Interesting that the American market (where this crisis all began) is down less than so many others…but not surprising really with the U.S. Fed prepared to monetise as much debt as necessary to avert a Financial Armageddon.
• OIL…Down 54%… after peaking at $139 in June 2008. OPEC Nations hastily cut supply.
• COPPER…Down 50% from July 2008 high.
• NICKEL…Down 62% year to date.
• GOLD…Down 26% +… from high of $1,010 on March 17th 2008.

The statistics speak for themselves. The world is undoubtedly experiencing what Alan �I made a mistake� Greenspan described as a �once in a century event�… thanks for that Mr. Greenspan.

The only question now is how long might it last?

Most observers have now resigned themselves to the realisation that we are most unlikely to have a �V� shaped recovery (i.e. a short, sharp recession lasting only six months or so). Many believe the extent of damage that has been inflicted on world markets ensures that we will have to endure at least a �U shaped recovery� that will not see an end to hard times for at least two years (i.e. a recovery sometime in 2010). Some arch-bears (like NYU Professor Nouriel Roubini) are warning that what may be coming our way is an �L shaped recovery� meaning we will flat-line along the bottom in a recession/depression for many years to come before we emerge out the other end.

A Dash to Cash…and Unintended Consequences

Following the lead of other world banks, the Australian Government acted quickly to guarantee the savings deposited in its banks (even though the top four Australian banks are included in the top safest 20 banks world-wide with a AA+ rating).

Rather than ensuring calm among nervous investors it triggered a mad scramble for the safety of government-guaranteed deposits that resulted in a deluge of withdrawal requests from investors outside this safety umbrella. The unintended consequence of this was that mortgage trusts and other non-bank funds were swamped with withdrawal requests and were forced to freeze all withdrawals.

So this nation of just under 22 million found itself with more than 250,000 Australians with their funds frozen in accounts valued at $25 billion.

Many of these investors are retirees. One distressed elderly gent, in tears, was featured on the T.V. news complaining that he didn�t even have enough cash at hand to take his wife out to lunch at the local seniors club. Another retiree described how he couldn�t sleep nights and kept waking at three in the morning worrying about how he and his wife would manage in the future.

The only consolation and advice forthcoming from Australia�s Treasurer was for them to head down to their local welfare office to find out if they might be eligible for a government handout until this problem was sorted out… not exactly what they had planned for and counted on in their retirement! Call The Superior Gold Group and learn how to preserve your hard earned capital and start preserving your WEALTH with Precious Metals. Call 888-969-6465 NOW!

Similar concerns have been raised by Martin Weiss Ph.D. of Weiss Research Inc who goes so far as to suggest that massive, erratic flows of �Hot Money� from deposits around the globe may result in some kind of international bank holiday having to be declared. Meanwhile, Prof. Roubini predicts hundreds of hedge funds will go bust and that many more stock markets will be forced to shut…perhaps for up to a week. Also, Charles Wendel (Financial Institutions Consulting) fears that of the 8,000 plus banks in America�s fragmented banking system…up to 1,000 will disappear within two years.

The message seems to be… have some cash on hand…ideally enough to cover your living expenses for a couple of months or three if possible.

Australians certainly seem to be doing so according to Alexander Symonds (Australian Financial Review October 29th 2008)… � CASH IS BACK UNDER BEDS…There�s a run on $100 notes but the Reserve Bank of Australia�s message is…don�t panic. Armaguard had advised small businesses it was short of $100 bills and expected to be for some time…wealthy people (are blamed for) walking into bank branches and withdrawing all their cash �to the point where we now have a $100 note shortage in Australia�.

Killed by Debt

As the world economies stumble from one crisis to another, it is sobering to hear how horribly the global debt bubble is destroying the lives of some poor, naive, unsophisticated individuals in (more…)

COMEX gold continues to stink up the room after sharp falls in recent days as the dollar has strengthened considerably and oil prices fallen sharply. The technical damage sustained to COMEX gold has been severe and chart watchers are now tentatively looking to support at $750/oz. 

Meanwhile the COMEX gold price is becoming less important to the setting of the physical gold bullion price internationally as shortages lead to much higher premiums being paid (both by buyers and sellers as retailers and wholesalers desperately try to incentivise sellers to sell to them so as to replenish their depleted inventories).COMEX gold has now given up all of the gains of the last year and is back trading at levels last seen in October 2007. However, gold’s safe haven attributes have clearly been seen since the start of the credit crunch with the FTSE and the S&P 500 both down by more than 34% in the period and gold (in dollar terms) up by more than 16% despite considerable dollar strength.The dollar is now extremely overbought especially given that the debacle on Wall Street is now likely to lead to a sharp recession in the US. The bailout of much of the US banking system and massive money creation is classic debasement of the currency and is very bearish for US bonds and the US dollar. Despite this, sentiment towards the precious metals on Wall Street and in the media is bearish right now. There is simplistic reporting and constant references to how gold has fallen 25% from its ‘peak’ and failure to point out however that gold remains up by more than 16% (even in dollar terms) since the start of the credit crisis - unlike the vast majority of other asset classes. It is worth remembering that gold was trading at just $650/oz in August 2007 when Bear Stearns collapsed and remains up by more than 115%  (in dollar terms) in the last 5 years.

Gold’s performance in euro and pounds has been even more impressive since the start of the credit crisis. Gold prices in pounds have risen from £330/oz to £461/oz for a return of over 39% in the period. Gold prices in euro have risen from €475/oz to €586/oz for a return of more than 23%.The bearish media reportage and commentary is likely a good contrarian indicator  (more…)