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***PAL - I'm resurrecting this string, if it breaks $2 - It could be in play again, I see Palladium and Platinum turning the corner this morning while gold and silver are still down. Recent news out of China favors environmentally-friendlier cars which creates demand for what PAL produces...
lee - I know you don't tend to hold trades long, but is the gameplan today geared more towards the short or long side? I see a healthy gap-up opening shaping up but I'm unsure it can sustain itself until the close... hmmmm....
Nevermind they both expire the same day, the U's have some sort of dividend attached, but I don't see how that's important into January expiration, I don't think the next dividend is due until March... hmmmm... what a strange stock or should I say "ETF"...
Keep in mind it lost 50% of its value last year in the worst housing market in U.S. history, I think it would be wise to only use it as a trading vehicle, am I correct?
Hi frenchee, got my eye out on this one, can you or anyone tell me why this has 2 different symbols for option trading on many popular strikes?
http://finance.yahoo.com/q/op?s=SRS&m=2009-01?s=SRSAR.X
Nevermind - Figured it out, U's expire end of the month!!!
If you want stability, look to gold, while silver is more volatile and more of a swing-trade vehicle. At this point in time, silver is very cheap vs. gold based on historical valuations though. If you're ready to make a serious move, you got to do your own due dilligence!
Keep in mind, gold has gone up every year since 2000.
***TBT 41.52 - SSKILLZ1 - Great trade! Do you think that with a doji today on the 10-year and FOMC minutes tomorrow at 2 PM, that TBT could potentially see a short-term top (either already today or tomorrow)?
I think you could be on the right track after seeing today's action, plus the USD index could get short-term support from rising yields... (now that they stole free money for themselves at 0%)...
***ENG 3.70 - moves on easy volume... profitable small-cap play:
***GMO 1.37 - Very strong volume and buying interest lately on the heels of insider buying the past few months...
Where do you see an insider buying form filed today? I see a "Confidential treatment order" - WTF is that? That's not insider buying, I know that much...
+.06 = 2.74 => held up better than I thought, for sure thought 2.60's before close...
Sheer size? How important is that to evaluations? If that's the case, why even invest here? Why not go with GE or BRKA?
Or how about David and Goliath, did sheer size really matter? For it was Goliath who fell the hardest... remember that...
The volume doesn't confirm today's move in HL so I actually took her short at 2.80 with a stop-loss at 2.83... #msg-34583419
Congrats on your trading day, just don't forget to lock them in...
I know I'm crazy but I just took HL short at 2.80 instead of long... volume extremely low and unconvincing, HL only green component of HUI and volume not even half of average daily yet... stop loss at 2.83. Intraday target somewhere in the 2.60's...
Given today's action from the go, and now banging on the hod of 2.80 - gotta' wonder if second to last paragraph from #msg-34571831 is coming to fruition, guess I'll be more convinced at the close, gold/silver now at an intraday resistance/fibonacci point... stocks showing superior resilience post-lunch here...
Volume is still extremely low, not even at half the average daily volume here... that's what is leaving me unconvinced and is evidence a lot of money is being kept on the sidelines or just plain indecisive today...
***HL is the only green component in the HUI which is currently down close to 3%, very interesting!***
Ok, gap 2.75 resistance was certainly beaten, but blown by? Not exactly, the volume isn't exactly thrilling today, and any time I see resistance get beat between 12-1 o'clock new york time (lunch time), I don't put much into it...
Also, I have the low of the day based on the charts and time & sales at 2.50, what chart are you looking at shows a 2.49 tick, please screenshot and post if you can, or show me the link!!!
Otherwise, how can you say the gap was filled when the gap is at 2.49, not 2.50?
Just trying to understand your rationale. As far as gold stocks today, sure they're outperforming gold, but at the same time, the S&P 500 is slightly in the green, and for many market traders, it's the first trading day of 2009, so perhaps some short-sales are being closed out? On a side note, the volume isn't exactly thrilling me... yet at least... shows lots of folks on the sidelines...
Techically, no it doesn't. And now we're seeing the upward gap of $2.75 acting as resistance.
Given the pressure on gold and silver today, I would expect the gap on HL to fill later this week, I thought it would today...
Of course, gold and silver rallying at any time this week could create a curve-ball for the gap to be filled, but odds favor it being filled this week imo.
Good luck!
HL streak is going to come to an end today, 14 straight sessions where the intraday low was as good or higher as the previous day.
I couldn't tell you the last stock I've seen that did that... It was a great run, I wonder if the gap will fill today?
2.51 x 2.55 in pre-market after closing at 2.77 Friday. The gap sits between 2.49-2.55...
Wonder if a major fund will come in and try to gather support for HL at 2.49 and play the call options, the profitability potential is enormous if support kicks in at the options 2.50 level and they're able to drive the price up to 3(+) before expiration...
On the other hand, the USD Index has rallied sharply, the sharpest I've perhaps ever seen or at least seen in a while to start the week off, but the thing is - It's right back at resistance!
Looks like the USD Index is still the decider, even with oil up, the USD Index trumps and sends gold and silver crashing to start Monday off... Looking for GLD next support at 82.60-82.63 since the 200 day moving average broke!
***$GOLD 859.00 (-15.90) & $ILVER 11.04 (-.49)***
*USD Index up big rallying towards its 200 day moving average and the gap located just above it... 82.57 (+1.23)...
*See previous post and keep an eye on GLD support at its 200 day moving average (84.50) which could coincide with the resistance at the USD Indexes 200 day moving average...
NEM 40.33 bucked up against 200 day MA (40.87) -
All eyes on NEM - The golden child of the S&P 500...
Will it break as "Wall Street" returns back to "work?"
4 hours 44 minutes
***GLD 86.23 - $GOLD TRADING VEHICLE***
GLD Resistance - 87-87.10
GLD Support - 85.84-85.95
200 Day M.A - 84.50
GLD Support - 82.60-82.63
Fed, ECB prepare to tackle deflation head-on
*Interesting headline - "tackle 'deflation'" head-on...
***Perhaps it should read 'Fed, ECB plans to manufacture inflation?'
The Federal Reserve Building in Washington while the Fed is inside meeting, October 29, 2008.
Fed, ECB prepare to tackle deflation head-on
Mon Jan 5, 2009 1:04am GMT
By Ros Krasny and Alister Bull
SAN FRANCISCO (Reuters) - Officials from the Federal Reserve and the European Central Bank on Sunday vowed to fight the damaging effects of deflation as the global economy suffers a deep and lengthy recession.
In just a few months, central bankers' concerns have flipped from fighting inflation to staving off possible deflation -- a condition in which falling prices cause consumers and businesses to delay purchases, resulting in an even steeper economic downturn.
Both Janet Yellen, president of the San Francisco Federal Reserve Bank, and Lucas Papademos, vice president of the ECB, highlighted the risks of deflation at the annual meeting of the American Economics Association.
"It is increasingly likely that inflation will fall to undesirably low levels," Yellen said at the meeting in San Francisco.
She said the Fed would likely expand its raft of unconventional monetary policy measures now that its cycle of interest rate cuts has hit rock-bottom.
She also urged an aggressive spending program by the administration of President-elect Barack Obama, as she gave a dismal assessment of the economy. Yellen appeared to discount some current forecasts that U.S. growth would start to recover in the second half of 2009.
"The financial and economic firestorm we face today poses a serious risk of an extended period of stagnation -- a very grim outcome," she said. "Even with vigorous Fed action to restore credit flows, an extended period of economic weakness is likely."
"I'm strongly supportive of a substantial fiscal stimulus package," Yellen said. "If ever, in my professional career, there was a time for active, discretionary fiscal stimulus, it is now."
The ECB's Papademos, meanwhile, said that more ECB interest rate cuts may be needed to support the euro zone economy and keep deflation at bay.
"We will do what is necessary, in terms of the timing and in terms of the size (of interest rate policy action) to ensure that price stability is preserved," he said.
Unlike the Fed, which in December reached the zero-bound on interest rates and is pushing headlong into a type of "quantitative easing" to support U.S. growth, the ECB still has some arrows left in its rate-cutting quiver.
The ECB has cut its benchmark interest rate by 1.75 percentage points in the past two months, to 2.5 percent. Markets now expect another 50 basis point cut at the bank's next policy meeting, on Jan 15.
SUPPORT FOR STIMULUS
Yellen was the second Fed official this weekend to urge aggressive fiscal measures to complement the central bank's ongoing monetary policies.
On Saturday, Chicago Fed President Charles Evans said that programs to support growth "must be large in order to be effective and to instill badly needed confidence," given the severity of the downturn.
Yellen and Evans are both voting members of the Federal Open Market Committee in 2009.
Obama has said that signing a major economic stimulus package will be his first priority when he takes office, with a goal of creating or saving 3 million jobs over two years.
Democratic lawmakers say the plan now under consideration in Congress will cost about $775 billion, but Republicans predict a tab of up to $1 trillion.
Renowned economist Martin Feldstein, former head of the National Bureau of Economic Research, said on an AEA panel that stimulus of some $300 billion to $400 billion in both 2009 and 2010 was warranted. He forecast that the U.S. downturn would probably be judged the worst since the Great Depression, and the United States would be "lucky" to return to growth in 2009.
"Speed of the outlays is an important concern," Feldstein said. "One that spends quickly and then finishes is ideal."
VICIOUS CYCLE
Papademos told reporters that the ECB will not let inflation fall "significantly below 2 percent for a protracted period of time," adding that he did not expect such an outcome based on present analysis.
Cutting interest rates to low levels has long-term implications for price stability, he said. Still, on a panel discussion Papademos said that inflation would weaken sharply in the coming months.
In the United States, Yellen referred to the vicious cycle, whereby weakness in the U.S. economy intensifies distress in the financial sector, and vice versa.
In both speeches on Sunday Yellen's highlighted a risk that, as inflation expectations fall and benchmark rates are held near zero, "real" interest rates will actually rise, at the worst possible time.
"A decline in inflationary expectations when economic conditions are weak is pernicious ... because any downdrift in inflation expectations leads to an updrift in real interest rates and a tightening of financial conditions," she said.
(Editing by Leslie Adler)
LINK: http://uk.reuters.com/article/burningIssues/idUKN0331900720090105
Not even a debate - they basically already do -
That's why sales are down, what they don't tell you, is those same people are now getting their news from independent sources!
***AAPL 90.75 - SHORT-TERM BULLISH?***
*MID TO LONG-TERM BEARISH?*
*Market makers have been accumulating positions here since October for what I predict to be the 'January effect' which will propel AAPL up more then 30-33% in a short period of time.
*Ride the wave, but by February options expiration, phase into selling positions at and above [120-123(+) (RESISTANCE)] ->
It's the gift that keeps on giving as oil-rich countries are rumored to be in talks about a common gold-backed currency. Those petro-dollars need a home as dollar depreciation continues with Federal Reserve Bank interest rates floating between nothing and 0.25%.
If you think GOOG is cheap here, how about AAPL?
Here's some comparisons between GOOG and AAPL...
Stock 1 - P/E - 19.40
Stock 2 - P/E - 16.94
Stock 1 - P/S - 4.63
Stock 2 - P/S - 2.34
Stock 1 - Quarterly Earnings Growth (year/year) - 20.60%
Stock 2 - Quarterly Earnings Growth (year/year) - 25.70%
Both companies have no debt... what company looks more attractive, GOOG or AAPL, you wanted earnings growth, but did you pick the right company for the 'January effect?'
Stock 1 or Stock 2?
Using GLD - Tight range ->
*Resistance 87-87.10
*Support 85.84-85.95 -
- 200 day MA at 84.50 -
*Strong support 82.60
*Chart is bullish till proven otherwise >>>
>>> 50 day moving average trending up with price above the 200 day moving average >>>
***$GOLD 874.20 (-0.70) & $ILVER 11.56 (+.03)***
*Expect sideways action this week until $ GOLD $ decides whether to break 860 to the downside or $891 to the upside first.
*I'm bullish since $ GOLD $ successfully retested the 200 day moving average recently and bounced off. I also expect $ GOLD $ to attract more buyers with money flooding out of longer-term bonds which yield only 3 or 4%.
*I'm expecting $ILVER to retest resistance at 14 the ounce - At least into the high 13's as the 200 day moving average is fast approaching once it becomes cleaer that $ GOLD $ wants to run and retest 1,000 before winter is through.
See #msg-34487719 - I'm looking for a potential run to about $410-$450 (maybe the 200 day MA), but once it gets there, it's going to head lower yet again. Traders currently believe there's a 31% chance of a depression in 2009, I don't expect Google to show any kind of immunity to such a contraction in the nation's economy. So I'd expect at the very least that low of $247 to be tested some time in '09, if not the $100's coming into play as I said earlier.
Sure Google is a goliath when it comes to revenues and earnings. Those earnings and revenues aren't immune to a recession as we've seen already from the drop of $747 down to $247. We're rebounding now, but it has yet to show the characteristics that it's going to last, it's simply a bull-rally within a larger bear-market.
Good luck, just my opinion.
And there's nothing special about a trailing P/E of 19.4 and a P/S 4.63 when earnings and revenues have frozen like they have currently!
~~~~~~~COMPX 1/5/2008~~~~~~~
Previous Close 1632.21 +55.18
1653 FinancialAdvisor
1607 SSKILLZ1
The latest news occurred on Saturday with the markets closed.
It seems serious since an emergency meeting is scheduled for Monday to discuss the Russia/Ukraine/Eastern Europe pipeline and to perhaps come up with a new agreement.
And of course, this is already on top of what is happening in Israel.
Israel Seeks Heavier Blow to Hamas Armed Wing in Gaza (Update1)
*Without wars, what would happen to the #1 thing the United States of America actually does produce? WMD...?
Israel Seeks Heavier Blow to Hamas Armed Wing in Gaza (Update1)
By Gwen Ackerman and Saud Abu Ramadan
Jan. 4 (Bloomberg) -- Israel said its nine-day offensive in the Gaza Strip hasn’t yet done enough damage to the military wing of Hamas, as its soldiers clashed with gunmen from the Islamic group that controls the Palestinian territory.
“The political wing of Hamas has absorbed a serious blow, but the military wing has not been hit as hard as we would like,” Cabinet Secretary Oved Yehezkel told reporters today. “The goal is to deal a serious blow to the terrorist infrastructure of the Hamas.”
Israel suffered its first combat death when a soldier was killed by Hamas gunfire today, the army said. Four other Israelis have died since the operation began on Dec. 27. Yehezkel said “hundreds” of Hamas gunmen have been killed.
Israel last night launched a ground offensive as it broadened what started as an aerial campaign aimed at stopping cross-border rocket attacks at its southern towns and cities. International reaction to the land invasion was mixed, with much of it focusing on the humanitarian crisis in Gaza.
Yehezkel put the total Palestinian death toll in Gaza at as many as 470, with 12 percent being civilians. The United Nations Relief and Works Agency put civilian deaths at 25 percent, UNRWA spokesman Chris Gunness said by phone. At least 35 Palestinians have been killed since the land incursion began, bringing the total to 493, the Palestinian emergency services department in Gaza said.
‘Intensive’ Diplomacy
Foreign Minister Tzipi Livni told the Cabinet that the “intensive diplomatic activity in recent days is aimed at deflecting the pressure for a cease-fire to allow enough time for the operation to achieve its goals,” according to an e- mailed statement from her office.
Egyptian President Hosni Mubarak called on the United Nations Security Council and the so-called Quartet -- the EU, U.S., Russia and the UN -- “to confront the humanitarian consequence of this aggression of the Palestinian people in Gaza.”
French Foreign Minister Bernard Kouchner criticized Israel’s decision to send in ground forces and United Nations Secretary-General Ban Ki-moon said he is “deeply concerned over the serious further escalation.”
U.K. Prime Minister Gordon Brown called for an immediate cease-fire contingent on guarantees to Israel that arms shipments to Gaza will be stopped and rocket attacks on Israeli towns halted.
Aid Halted
The European Union called for the “facilitation” of aid to Gaza and Jordan’s King Abdullah said the humanitarian situation in Gaza had deteriorated to the point where “silence is unacceptable.”
Yehezkel denied there was a humanitarian crisis in Gaza, where Israel has allowed in 400 trucks with aid since the conflict began. Today, borders were sealed, Defense Ministry spokesman Maj. Peter Lerner said, due to the “instability” of the situation.
The army says one goal of the operation is to take control of areas used to launch rockets. Israeli military censorship barred many of the details of the operation from being reported; local Palestinian journalists were hindered by lack of electricity and the constant fighting.
Israeli troops cut off northern Gaza, from which rockets are fired, from the rest of the Hamas-controlled territory, the daily Haaretz said, citing unidentified Palestinian sources. Gaza City was also cut off, the newspaper added.
Rocket Fire
At least 32 rockets fired from Gaza hit Israel today after the troops went in, one scoring a direct hit on a house in Sderot, causing no injuries, police spokesman Micky Rosenfeld said by phone.
“We see that the rocket fire is less than we saw at first, but Hamas still has the means to continue to fire at Israel. The operation at this point is not expected to stop the fire, but we expect that it will be reduced,” Yehezkel said.
New York City Mayor Michael Bloomberg today visited the southern Israel city of Ashkelon that has come under rocket fire. “New Yorkers know what terrorism is all about,” Bloomberg said. “If we were threatened in New York, we would do everything in our power to protect our citizens.”
The mayor is a founder and majority owner of Bloomberg News parent company Bloomberg LP.
Israel’s benchmark TA-25 stocks index climbed to the highest in two weeks, rising 14.09 or 2.1 percent, to 681.48 at 2:42 p.m. in Tel Aviv.
Hamas Threats
Hamas, deemed a terrorist organization by the U.S. and the EU, said yesterday it planned to send suicide bombers to Israeli cities and kidnap Israeli soldiers. One soldier, Corporal Gilad Shalit, has been held captive in Gaza for more than two years.
Ground fighting is likely to increase casualties on both sides, with Israel running the risk of finding itself with no easy exit.
“There’s a bigger strategic opportunity here to undermine Hamas and, by extension, all the forces throughout the region that are supported by Iran,” Mark Heller, principal research associate at the National Institute Of Strategic Studies in Tel Aviv, said in a telephone interview.
“It’s a gamble though, because, if the operation goes bad, or international intervention spurred by heart-rending pictures from Gaza forces Israel to cut the operation short without achieving its aims, it will boomerang and end up undermining Israel’s deterrent credibility.”
U.S. Briefed
President George W. Bush was briefed on the Israeli offensive in Gaza and Admiral Mike Mullen, chairman of the U.S. Joint Chiefs of Staff, was notified by his Israeli counterpart of the ground attack, according to spokesmen.
President-elect Barack Obama “is closely monitoring global events, including the situation in Gaza,” Brooke Anderson, his chief national security spokeswoman, said in a statement.
Israel began the campaign to halt rocket attacks by Islamic militants after a six-month cease-fire with Hamas expired Dec. 19. Militants have launched more than 3,000 rockets and mortar shells at Israel since the beginning of 2008, the Israeli army said. Hamas refused to renew the cease-fire because it said Israel had not eased its economic blockade of Gaza. It fired 70 rockets at Israel the day before it ended.
“This will not be easy. It will not be short,” Defense Minister Ehud Barak said yesterday. He warned the Shiite Muslim Hezbollah in south Lebanon, with which Israel fought a monthlong war in 2006, that Israel would retaliate if fired on.
Hezbollah Call
Hezbollah leader Sheik Hassan Nasrallah urged Hamas to inflict maximum losses on the Israeli forces in remarks to the militia’s Al-Manar television. Hezbollah spokesman Hussein Rahhal said by phone that Nasrallah has called on his militiamen “to stand ready to resist any Israeli aggression on Lebanon.”
Hamas denies Israel’s right to exist and condemns Palestinian Authority President Mahmoud Abbas as a stooge for conducting peace talks over the past year. Hamas seized control of Gaza in 2007 after a brief power-sharing arrangement with Abbas, of the rival Fatah movement. The Palestinian Authority said it was halting peace talks because of Israel’s offensive.
About 1.4 million people live in Gaza, a strip that is about 40 kilometers (25 miles) by 14 kilometers.
To contact the reporters on this story: Gwen Ackerman in Jerusalem at gackermanbloomberg.net; Saud Abu Ramadan in Gaza City through the Tel Aviv newsroomt .
Last Updated: January 4, 2009 10:38 EST
LINK: http://www.bloomberg.com/apps/news?pid=20601087&sid=a.m9wP5M9Vq4&refer=home
Russian Gas Embargo on Ukraine Is Felt In E. Europe
*Wow BRIG_88 - I think your call was a solid 6 months too early...! Just like Rawnoc telling me not to buy $GOLD at $700 the ounce... where do you guys come from, you are the same people who didn't embrace Ron Paul's message of smaller government and restoring the constitution, you big government types disgust me! Maybe in 2012... I hope you guys wake up by than...
Russian Gas Embargo on Ukraine Is Felt In E. Europe
By Philip P. Pan
Washington Post Foreign Service
Sunday, January 4, 2009; Page A12
MOSCOW, Jan. 3 -- The impact of Russia's natural gas embargo against Ukraine spread to several Eastern European countries Saturday, as a senior Ukrainian official warned of serious fuel disruptions across the continent in as little as 10 days if Russia refused to resume shipments.
Poland, Romania, Bulgaria and Hungary reported drops in the gas they receive from Russia via Ukrainian pipelines but said consumers had not yet been affected because of reserve supplies and extra Russian deliveries through other countries.
The European Union -- which gets a quarter of its gas from Russia, most of it through pipelines that cross Ukraine -- said it planned to call an emergency meeting as soon as Monday to discuss the crisis and urged "an immediate resumption of full gas deliveries" to the E.U. member states.
A similar Russian embargo against Ukraine in 2006 lasted three days, but chances for an early breakthrough this time appeared remote as Russia and Ukraine continued to accuse each other of engaging in energy blackmail and refusing to return to talks to resolve the politically tinged standoff.
Poland reported an 11 percent drop in gas deliveries from Russia via Ukraine, while Bulgaria experienced a decline of as much as 15 percent and Romania said shipments had slipped by as much as 30 percent, according to news agencies. Hungary said gas pressure had recovered somewhat after a fall of about 25 percent.
Gazprom, the Russian gas monopoly, cut off deliveries to Ukraine on Thursday, saying the former Soviet republic had failed to pay $2.1 billion in gas debts. Ukraine said it paid $1.5 billion but was disputing more than $600 million in late fees.
The two countries, hit hard by the global financial crisis, are also deadlocked over how much Ukraine should pay for gas this year, with Russia insisting on a sharp price increase and Ukraine countering with a demand that Moscow pay more to use its pipelines to send fuel to other European customers.
Delegations from both countries traveled across Europe seeking support Saturday. Russia, in particular, was working to fight the impression left by the 2006 embargo -- and by its war with Georgia in August -- of a bully trying to weaken the pro-Western government of a smaller neighbor.
"It is not us but Ukraine that is using blackmail, towards Russia and Europe," Alexander Medvedev, Gazprom's deputy chairman, told reporters after a meeting with officials in the Czech Republic, which holds the rotating E.U. presidency. "Instead of thinking about their own country, they are just playing political games, using the gas crisis for political purposes."
Medvedev blamed the gas shortfalls in Eastern Europe on Ukraine, saying it was stealing supplies meant to be delivered onward. He said that Gazprom had increased shipments using routes through Belarus and Turkey but that those pipelines did not have the capacity to make up the difference.
In a separate statement, Gazprom's chief executive, Alexei Miller, said the company would file a lawsuit with the arbitration court in Stockholm over the interrupted deliveries. He suggested European customers sue Ukraine as well.
Oleh Dubyna, head of Ukraine's state energy firm, Naftogaz, has acknowledged siphoning gas from shipments meant for Russia's other customers to maintain pressure in its pipelines. But another senior Ukrainian energy official, Bohdan Sokolovsky, on Saturday blamed the European shortfalls on Gazprom, saying the firm was sending less fuel.
Speaking to reporters in Kiev, Ukraine's capital, Sokolovsky said that if Russia continued to withhold gas from Ukraine, falling pressure in the pipeline system could trigger an automatic shutdown. He said Ukraine was already using its own gas reserves to maintain minimum pressure levels.
"In such conditions and in January temperatures, the system will automatically stop renewing pressure," he said, predicting "serious disruptions" in 10 to 15 days.
"It is obvious that this is political pressure on Ukraine," he added. "This is pure politics."
In a statement Saturday, Naftogaz offered to accept gas from Russia in exchange for the use of its pipelines to deliver supplies to the rest of Europe. But Gazprom immediately rejected the proposal, saying it was based on an unreasonably low fuel price.
Russia has refused to pay more to use Ukraine's pipelines, saying fees were fixed in an agreement that remains in effect until 2010. Ukraine has denied any such agreement exists.
LINK: http://www.washingtonpost.com/wp-dyn/content/article/2009/01/03/AR2009010301738.html
Based on the news so far this weekend... gold will be up huge come Monday...
Natural gas disruptions between Russia, Ukraine, and Europe.
Heightened violence in the middle east...
And let's not forget Obama's trillion dollar inflation package...
U.S. Debt Expected To Soar This Year
U.S. Debt Expected To Soar This Year
$2 Trillion Increase May Test Federal Ability to Borrow
By Lori Montgomery
Washington Post Staff Writer
Saturday, January 3, 2009; Page A01
With President-elect Barack Obama and congressional Democrats considering a massive spending package aimed at pulling the nation out of recession, the national debt is projected to jump by as much as $2 trillion this year, an unprecedented increase that could test the world's appetite for financing U.S. government spending.
For now, investors are frantically stuffing money into the relative safety of the U.S. Treasury, which has come to serve as the world's mattress in troubled times. Interest rates on Treasury bills have plummeted to historic lows, with some short-term investors literally giving the government money for free.
But about 40 percent of the debt held by private investors will mature in a year or less, according to Treasury officials. When those loans come due, the Treasury will have to borrow more money to repay them, even as it launches perhaps the most aggressive expansion of U.S. debt in modern history.
With the government planning to roll over its short-term loans into more stable, long-term securities, experts say investors are likely to demand a greater return on their money, saddling taxpayers with huge new interest payments for years to come. Some analysts also worry that foreign investors, the largest U.S. creditors, may prove unable to absorb the skyrocketing debt, undermining confidence in the United States as the bedrock of the global financial system.
While the current market for Treasurys is booming, it's unclear whether demand for debt can be sustained, said Lou Crandall, chief economist at Wrightson ICAP, which analyzes Treasury financing trends.
"There's a time bomb in there somewhere," Crandall said, "but we don't know exactly where on the calendar it's planted."
The government's hunger for cash began growing exponentially as the nation slipped into recession in the wake of a housing foreclosure crisis a year ago. Washington has since approved $168 billion in spending to stimulate economic activity, $700 billion to prevent the collapse of the U.S. financial system, and multibillion-dollar bailouts for a variety of financial institutions, including insurance giant American International Group and mortgage financiers Fannie Mae and Freddie Mac.
Despite those actions, the economic outlook has continued to darken. Now, Obama and congressional Democrats are debating as much as $850 billion in new federal spending and tax cuts to create or preserve jobs and slow the grim, upward march of unemployment, which stood in November at 6.7 percent.
Congress is not planning to raise taxes or cut spending to cover the cost of those programs, because economists say doing so would further slow economic activity. That means the government has to borrow the money.
Some of the borrowing was done during the fiscal year that ended in September, when the Treasury added nearly $720 billion to the national debt. But the big borrowing binge will come during the current fiscal year, when the cost of the bailouts plus another stimulus package combined with slowing tax revenues will force the government to increase the debt by as much as $2 trillion to finance its obligations, according to a Treasury survey of bond dealers and other market analysts.
As of yesterday, the debt stood at nearly $10.7 trillion, of which about $4.3 trillion is owed to other government institutions, such as the Social Security trust fund. Debt held by private investors totals nearly $6.4 trillion, or a little over 40 percent of gross domestic product.
According to the most recent figures, foreign investors held about $3 trillion in U.S. debt at the end of October. China, which in October replaced Japan as the United States' largest creditor, has increased its holdings by 42 percent over the past year; Britain and the Caribbean banking countries more than doubled their holdings.
Economists from across the political spectrum have endorsed the idea of going deeper into debt to combat what many call the most dangerous economic conditions since the Great Depression. The United States is in relatively good financial shape compared with other industrial nations, such as Japan, where the public debt equaled 182 percent of GDP in 2007, or Germany, where the debt was 65 percent of GDP, according to a forthcoming report by Scott Lilly, a senior fellow at the Center for American Progress.
Even a $2 trillion increase would push the U.S. debt to about 53 percent of the overall economy, "only a few percentage points above where it was in the early 1990s," Lilly writes, noting that plummeting interest rates show that "much of the world seems not only willing but anxious to invest in U.S. Treasurys, which are seen as the safest security that an investor can own in a risky world economy."
Still, some analysts are concerned that the deepening global recession will force some of the largest U.S. creditors to divert cash to domestic needs, such as investing in their own banks and economies. Even if demand for U.S. debt keeps pace with supply, investors are likely to demand higher interest rates, these analysts said, driving up debt-service payments, which last year stood at $250 billion.
"When you accumulate this amount of debt that we're moving into, it's not a given that our foreign friends are going to continue on the path they've been on," said G. William Hoagland, a longtime Republican budget analyst who now serves as vice president for public policy at the health insurer Cigna. "There's going to come a time when we can't even pay the interest on the money we've borrowed. That's default."
Others say those fears are overblown. The market for U.S. Treasurys is by far the largest and most liquid bond market in the world, and big institutional investors have few other places to safely invest large sums of reserve cash.
Despite their growing domestic needs, "China and the oil countries are going to continue running large surpluses," said C. Fred Bergsten, director of the Peterson Institute for International Economics. "They certainly will be using money elsewhere, but I don't think that means they won't give it to us."
As for the specter of default, Steven Hess, lead U.S. analyst for Moody's Investors Service, said even a $2 trillion increase in borrowing would not greatly diminish the U.S. financial condition. "It's not alarmingly high by our AAA standards," he said. "So we don't think there's pressure on the rating yet."
But that could change, Hess said. Nearly a year ago, Moody's raised an alarm about the skyrocketing costs of Social Security and Medicare as the baby-boom generation retires, saying the resulting budget deficits could endanger the U.S. bond rating. Even as the nation sinks deeper into debt to finance its own economic recovery, several analysts said it will be critical for Obama to begin to address the looming costs of the entitlement programs and signal that he has no intention of letting the debt spiral out of control.
Failure to do so, Bergsten said, would "create dangers . . . in market psychology and continued confidence in the dollar."
LINK: http://www.washingtonpost.com/wp-dyn/content/article/2009/01/02/AR2009010202322.html?nav=hcmodule
More money, less Gold to push gold price to $2000
More money, less Gold to push gold price to $2000
2009-01-02 10:55:00
Commodity Online
Is more money chasing less and less gold every day? Yes, it is true. And that should be one reason why gold prices could zoom to a record $2000 levels in 2009!
According to a 2009 forecast from Mumbai-based Commtrendz Risk Management Services, all over the world broad money supplies in developed nations generally have an average growth rate of around 7% annually, while world gold supplies have hardly gone up by 1-2% over years.
In 2008, central banks around the world have acted in concert to lower interest rates to such levels that low interest rates themselves start to stimulate economies. The ECB, BOE has cut short-term interest rates by 0.75% to 2.5%, 1% to 2% respectively of late.
Japan and the US Interest rates are just about at zero. The fiscal spending programs of US could expand into multi trillions
of dollars. The above efforts coupled with monetary stimulations in the form of direct injections into the money system, if happen to get the world out of deflationary grip could leave explosive inflationary situation on the back of high crude oil prices.
Nominal paper money increase will lead to inflationary push to whole commodities complex and crude oil should not escape from it.
Higher input cost amid longer term positive demand forces could see oil prices testing earlier highs in coming years and which will only support gold prices as gold too shares a good correlation with energy.
Money supplies in developed nations generally have an average growth rate of around 7% annually, while world gold supplies have hardly gone up by 1-2% over years.
So what we get in simple terms is more money chasing less gold day by day, which is a perfect recipe for high inflation and higher gold prices.
Gold has not made a new high in real terms (inflation adjusted) yet. Gold is trading nowhere near new ‘REAL’ highs these days. In order to do so gold should be trading above $2000 levels.
US Dollar Weakness:
The US has unknowingly engineered a deep protracted trouble in an effort to come out of its financial crisis, which could take years to repair investment community’s sentiment and in the process could take a toll on its currency in the form of losing the reserve currency status.
Gold trades inversely with the US dollar, which historically has explained a very high correlation. Over previous few months though the correlation has weakened due to many other factors like investor’s struggle for liquidity, which made them sell even their gold positions.
However as USD’s recent strength amid deleveraging of the "carry trades” seems to have come to an end, historical drivers of currency movements like rate differentials and current account balances should help dictate Gold’s correlation. Both of these drivers are dollar negative.
As severity of the economic crisis as an aftermath of credit crisis has become apparent with the a slew of extreme weak economic indicators being reported around the world, the continued efforts by US could leave itself bleeding from negative real rates, Inflated Money supply, high service cost of public debt. Same could also be the case for other economies in the form of higher monetary expansion, hence loss of the value of currency.
All the above factors are supportive for Gold prices.
LINK: http://www.commodityonline.com/news/More-money-less-Gold-to-push-gold-price-to-$2000-13796-3-1.html
U.S. Economy: Manufacturing Shrinks as Orders Plunge (Update1)
U.S. Economy: Manufacturing Shrinks as Orders Plunge (Update1)
By Shobhana Chandra
Jan. 2 (Bloomberg) -- The decline in U.S. manufacturing deepened in December as demand for such products as cars, appliances and furniture reached the lowest level since at least 1948, signaling further cutbacks in factory jobs and production this year.
The Institute for Supply Management’s factory index fell to 32.4, below economists’ forecasts and the lowest level since 1980, from 36.2 the prior month. Readings less than 50 signal contraction. The group’s new-orders measure reached the lowest level on record and prices slid the most since 1949.
“Every component suggests that the weakness is going to carry over into 2009,” Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina, said in a Bloomberg Television interview. “There’s just not a whole lot of new business coming in,” and companies will have a “painful adjustment” as consumers shun spending.
Today’s figures underscore that, with private demand collapsing, manufacturers’ best hope for new business this year may be President-elect Barack Obama’s plans for an unprecedented stimulus package. Obama has pledged an investment program in roads, schools and the U.S. energy network akin to the 1950s-era interstate highway construction boom.
Stocks climbed to a two-month high on the first day of trading in 2009, following the market’s worst annual drop since the Great Depression, as General Motors Corp. got its first cash infusion from the government and rising oil prices lifted energy shares. The Standard & Poor’s 500 Index rose 3.2 percent to close at 931.8. Benchmark 10-year Treasury yields rose to 2.39 percent at 4:41 p.m. in New York from 2.22 percent late Dec. 31.
Global Slump
The report also showed the impact of recessions abroad: the Tempe, Arizona-based ISM’s measure of exports fell to the lowest level since that series began in 1988.
Separate figures today showed business at European factories contracted in December by the most on record. Manufacturing declined in China for a fifth month in December, for an eighth month in the U.K., for a seventh month in Australia and at the fastest pace in at least 14 years in Sweden.
The figures “confirm a sharp contraction in global investment, output and trade activity, consistent with the deepest global recession since at least the early 1980s,” said Lena Komileva, head of market economics in London at Tullet Prebon Plc.
Economists’ Forecasts
The ISM’s gauge, which covers about 12 percent of the economy, was projected to drop to 35.4, according to the median estimate of 57 economists surveyed by Bloomberg News. Forecasts ranged from 34 to 40 and the measure averaged 51.1 in 2007.
Clogged credit markets, the collapse in housing and mounting job losses have hurt demand for everything from furniture and appliances to automobiles, driving General Motors Corp. and Chrysler LLC to the brink of bankruptcy.
The ISM’s employment index decreased to 29.9 from 34.2 in November. The gauge of prices paid fell to 18, reflecting the drop in commodity costs. Economists had projected that the measure, which averaged 65 in 2007, would drop to 20.
Automakers have been among the hardest hit as November sales plunged to the lowest level in a quarter century, according to industry figures. President George W. Bush announced Dec. 19 that General Motors and Chrysler will get $13.4 billion in initial government loans to keep operating while they restructure operations to return to profitability.
Automakers Hit
The carmakers last month expanded their traditional holiday shutdowns to clear out unwanted stock. Chrysler idled all 30 of its assembly plants on Dec. 17 for at least a month, while GM announced output cuts Dec. 12 that affected 20 plants.
The closings will extend into this month. Ford Motor Co. said 9 of 15 North American factories would shut for the first week in January.
The U.S. Treasury this week issued broad guidelines for aid to the auto industry, opening the door to using taxpayer money to finance a wider array of companies, such as GM’s bankrupt former parts unit Delphi Corp.
The factory slump has spread well beyond autos as demand from abroad also weakens. Ingersoll-Rand Co., the maker of Thermo King and Hussmann refrigeration equipment, said last month that profit will fall short of fourth-quarter and full- year estimates after demand declined “sharply” in North America and Western Europe.
“Probably the U.S. and developed world are in recession,” General Electric Co. Chief Executive Officer Jeffrey Immelt said in his annual outlook address on Dec. 16. “The environment is still the toughest, for people of my generation, that we’ve ever seen.”
U.S. exports dropped in October for a third straight month, leading to an unexpected widening in the trade gap, figures from the Commerce Department last month showed. The drop indicated the economy was sinking even faster than previously estimated.
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
Last Updated: January 2, 2009 16:44 EST
LINK: http://www.bloomberg.com/apps/news?pid=20601068&sid=aboOgI5Fyjg0&refer=home
Diagnosing depression
*Did you know...? Intrade.com currently lists the chance of the United States of America going into a Depression as 31% in 2009...
Economics focus
Diagnosing depression
Dec 30th 2008
From The Economist print edition
What is the difference between a recession and a depression?
THE word “depression” is popping up more often than at any time in the past 60 years, but what exactly does it mean? The popular rule of thumb for a recession is two consecutive quarters of falling GDP. America’s National Bureau of Economic Research has officially declared a recession based on a more rigorous analysis of a range of economic indicators. But there is no widely accepted definition of depression. So how severe does this current slump have to get before it warrants the “D” word?
A search on the internet suggests two principal criteria for distinguishing a depression from a recession: a decline in real GDP that exceeds 10%, or one that lasts more than three years. America’s Great Depression qualifies on both counts, with GDP falling by around 30% between 1929 and 1933. Output also fell by 13% during 1937 and 1938. The Great Depression was America’s deepest economic slump (excluding those related to wars), but at 43 months it was not the longest: that dubious honour goes to the one in 1873-79, which lasted 65 months.
Japan’s “lost decade” in the 1990s was not a depression, according to these criteria, because the largest peak-to-trough decline in real GDP was only 3.4%, over the two years to March 1999. Since the second world war, only one developed economy has suffered a drop in GDP of more than 10%: Finland’s contracted by 11% during the three years to 1993, mainly thanks to the collapse of the Soviet Union, then its biggest trading partner.
Emerging economies, however, have been much more depression-prone. Among the 25 emerging economies covered each week in the back pages of The Economist, there have been no fewer than 13 instances in the past 30 years of a decline in real GDP of more than 10%. Argentina and Poland were afflicted twice. Indonesia, Malaysia and Thailand all suffered double-digit drops in output during the Asian crisis of 1997-98, and Russia’s GDP shrank by a shocking 45% between 1990 and 1998.
The left-hand chart shows The Economist’s ranking of slumps in developed and emerging economies over the past century. It excludes those during wartime (both Germany and Japan, for example, saw output plunge by 50% or more after 1944). The depressions in Germany and France in the 1930s make it into the top 12, but not that in Britain, where GDP fell by a relatively modest 6%.
Before the 1930s all economic downturns were commonly called depressions. The term “recession” was coined later to avoid stirring up nasty memories. Even before the Great Depression, downturns were typically much deeper and longer than they are today (see right-hand chart). One reason why recessions have become milder is higher government spending. In recessions governments, unlike firms, do not slash spending and jobs, so they help to stabilise the economy; and income taxes automatically fall and unemployment benefits rise, helping to support incomes. Another reason is that in the late 19th and early 20th centuries, when countries were on the gold standard, the money supply usually shrank during recessions, exacerbating the downturn. Waves of bank failures also often made things worse.
But a recent analysis by Saul Eslake, chief economist at ANZ bank, concludes that the difference between a recession and a depression is more than simply one of size or duration. The cause of the downturn also matters. A standard recession usually follows a period of tight monetary policy, but a depression is the result of a bursting asset and credit bubble, a contraction in credit, and a decline in the general price level. In the Great Depression average prices in America fell by one-quarter, and nominal GDP ended up shrinking by almost half. America’s worst recessions before the second world war were all associated with financial panics and falling prices: in both 1893-94 and 1907-08 real GDP declined by almost 10%; in 1919-21, it fell by 13%.
The economic slumps that followed the collapse of the Soviet Union and those during the Asian crisis were not really depressions, argues Mr Eslake, because inflation increased sharply. On the other hand, Japan’s experience in the late 1990s, when nominal GDP shrank for several years, may qualify. A depression, suggests Mr Eslake, does not have to be “Great” in the 1930s sense. On his definition, depressions, like recessions, can be mild or severe.
Another important implication of this distinction between a recession and a depression is that they call for different policy responses. A recession triggered by tight monetary policy can be cured by lower interest rates, but fiscal policy tends to be less effective because of the lags involved. By contrast, in a depression caused by falling asset prices, a credit crunch and deflation, conventional monetary policy is much less potent than fiscal policy.
Yes, we have no bananas
Where does that leave us today? America’s GDP may have fallen by an annualised 6% in the fourth quarter of 2008, but most economists dismiss the likelihood of a 1930s-style depression or a repeat of Japan in the 1990s, because policymakers are unlikely to repeat the mistakes of the past. In the Great Depression, the Fed let hundreds of banks fail and the money supply shrink by one-third, while the government tried to balance its budget by cutting spending and raising taxes. America’s monetary and fiscal easing this time has been more aggressive than Japan’s in the 1990s.
However, these reassurances come from many of the same economists who said that a nationwide fall in American house prices was impossible and that financial innovation had made the financial system more resilient. Hopefully, they will be right this time. But this crisis was caused by the largest asset-price and credit bubble in history—even bigger than that in Japan in the late 1980s or America in the late 1920s. Policymakers will not make the same mistakes as in the 1930s, but they may make new ones.
In 1978 Alfred Kahn, one of Jimmy Carter’s economic advisers, was chided by the president for scaring people by warning of a looming depression. Mr Kahn, in his next speech, simply replaced the offending word, saying “We’re in danger of having the worst banana in 45 years.” America’s economy once again has a distinct whiff of bananas.
LINK: http://www.economist.com/finance/displaystory.cfm?story_id=12852043