Replies to post #5463 on GOLDBUGS AMEX Goldbugs Index (GOLD)

[RBKissMyAs]

Yup, something IS different and it might be the following. Notice it's was conveniently released on a Holiday after the Fed pumped the market on Thursday. Isn't it strange the DOW didn't sell off even a little bit up to the close?? Hee hee.

Goldman, Lehman outlooks cut to "negative" by S&P
Fri Mar 21, 2008 12:14pm EDT

NEW YORK (Reuters) - Goldman Sachs Group Inc's and Lehman Brothers Holdings Inc's credit rating outlooks were cut on Friday to "negative" from "stable" by Standard & Poor's, which cited the potential for larger profit declines from capital markets activities.

S&P rates Goldman's long-term credit "AA-minus," its fourth-highest investment grade, and Lehman's "A-plus," its fifth highest. The outlook revision suggests conditions that may result in a downgrade within two years. Lower credit ratings can result in higher borrowing costs.

The credit rating agency said Goldman has been Wall Street's profit leader for several years and has very strong liquidity, but that its emphasis on trading and "aggressive" risk appetite expose it to potential for "major missteps."

Meanwhile, S&P said Lehman has a stable base of funding and strong fundamentals, but "could suffer severely if there was an adverse change in market perceptions, however ill-founded."

Goldman and Lehman representatives did not immediately return calls seeking comment.

Goldman is Wall Street's biggest bank by market value and Lehman is Wall Street's fourth largest bank.

S&P said volatile market conditions and this month's "virtual collapse" of Bear Stearns Cos highlight the exposure to vagaries in capital markets that Wall Street investment banks have.

The credit rating agency said net revenue may decline 20 percent to 30 percent this year for investment banks.

It warned that if market turmoil persists and the economy weakens sharply, then "financial performance could deteriorate significantly more than we now assume, which would call the current ratings into question."

Bear Stearns agreed on Sunday to be acquired by JPMorgan Chase & Co for about $236 million, or $2 per share, nearly 99 percent less than it was worth a year earlier.

S&P also said it may still downgrade Morgan Stanley's "AA-minus" rating, while it retained a negative outlook on Merrill Lynch & Co's "A-plus" rating.

(Reporting by Jonathan Stempel; Editing by Leslie Adler)

[bob3]

How the Liquidity Crises Affect the Junior Explorers

By Neville Maycock
17 Mar 2008 at 12:22 PM GMT-04:00


ORLANDO (ResourceInvestor.com) -- The U.S. Federal Reserve right now is scrambling to deal with many issues within the markets. They are currently dealing with a housing crisis, a liquidity crisis and a mounting national debt.

The markets have seen multiple rate cuts by the Federal Reserve, liquidity injections by other major banks, and an economic stimulus package by the U.S. government. All of these were done in order to stimulate the faltering U.S. economy. World central banks have also helped out by pumping trillions of dollars into the market as well. The end result has been the markets going into a deeper panic, as no one truly knows how far these credit crises have gone.




The Federal Reserve’s hope is to stop a recession from occurring. Thru all of their manipulation of free market forces, they have not been able to stop the current downturn in the markets. Meanwhile the U.S. National Debt keeps rising at an alarming rate and the value of the dollar has reached all-time lows.

An Associated Press report on Friday discussed how Ben Bernanke vowed to help distressed homeowners. Bernanke said the Federal Reserved is "strongly committed to fully employing our authority, expertise and resources to help alleviate their distress." My question to Mr. Bernanke is how do you plan on saving these homeowners, while keeping the dollar afloat while bailing out these homeowners and their associated mortgage banks as well?

Next Bear Stearns, the fifth largest investment bank of the world essentially being bought out for US$236.2 million by JP Morgan because their leverage in a deteriorating sub-prime mortgage market. How can anyone feel comfortable with the state of the markets?

Now some will say in this kind of market environment, the best move will be to put your money into safe havens such as precious metals and their associated stocks. My opinion is while long-term gold and silver will greatly benefit from the devaluing of currency, the associated stocks will not benefit at this point. The reason behind this is that stock investors will be running to the exits trying to take whatever money they have in the markets out of it.

This will include some of the outperforming precious metal stocks. A serious downturn in the world markets all at once will take all the great stocks perform just as poorly as the bad stocks.

Another interesting twist to the liquidity crisis is the junior mining explorers will have a more difficult time obtaining financing for their projects. Banks as well has institutional investors will be very selective in their lending practices and will most likely structure deals that will almost guarantee that they will not lose money on their investment. In this environment marginal projects will not get financed.

Therefore, these junior mining explorers may have to turn to the senior producers, who have plenty of reserve cash, to be their finance partner for their development projects. Again these deals will be greatly skewed to benefit the senior producers.

Thus, junior mining explorers, who have big capital expenditure projects in the bankable feasibility stage, might be delayed a long time in obtaining financing. This will drive supply of the associated metal down. Now will the demand be there by the time these companies obtain financing? These junior companies and their shareholders certainly hope so.

Even though the sub-prime market issues might make all the precious metals bulls finally seem correct in their predictions, the associated mining sector might take a hit as the financing won’t be there to develop these major projects.

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