Gold closes at another record level/silver regains former strength rising to$ 42.43
Harvey Organ's - The Daily Gold and Silver Report - 10 hours ago
Good morning Ladies and Gentlemen: Before commencing with my commentary, I would like to introduce to you 4 new members into our banking morgue. Two of the banks, Lydian Private Bank of Palm Beach Florida and Public Savings Bank of Huntingdon Valley PA got a good headstart by failing Thursday night. Last night we lost another two banks: 1. First Choice , Geneva, Illinois 2. First Southern
Charting The Upcoming Recession, And Is Goldman Really Predicting A 2012 Year End S&P Range Of 700 - 900?
In
his weekly chart packet, Goldman's high frequency strategist, David
Kostin, who now changes his year end S&P targets almost as
frequently as the firm's economic team changes its GDP forecast, once
again gets decidedly fatalistic (very much like Citigroup did yesterday,
and Morgan Stanley last week), and is now openly contemplating
downside cases to his EPS forecast. And with 2012 EPS numbers thrown
around like $91 based on what is certainly an upcoming (but for now
still hypothetical) margin contraction, $82 based on a 2% drop (almost
guaranteed) in GDP Y/Y, and $75 based on historical earnings plunges in
a recession, it may be time to listen up, because apply a traditional
contractionary multiple of about 9-10x, and you have yourself a tidy
little range of 700 - 910 on the S&P in about a year, absent yet
another round of fiscal and/or monetary stimulus.Sprott Describes The Greatest Trade Of All Time
On its way to becoming the world’s greatest superpower, the United States pulled off some truly remarkable trades. Two notable transactions come to mind and were both outstanding bargains: 1) The Louisiana Purchase (purchased from the French); 2) Alaska (purchased from the Russians). For a mere $15 million, America instantly doubled its size with the 1803 purchase of the Louisiana territory.1 Sixty-fouryears later, oil-and mineral-rich Alaska was obtained for a paltry $7.2 million.2 Even adjusting for inflation, the combined value of these deals in today’s dollars would be very small. However, these two transactions pale in comparison to the greatest trade of all time, one which remains ongoing. This particular trade has allowed the US to exchange more than $8 trillion worth of paper for an unbelievably enormous amount of real goods and services over 36 straight years. We’re referring, of course, to the United States trade deficit. As Chart 1 shows, imports have exceeded exports every year since 1975. For much of the past decade, America’s annual trade deficit has soared past the $600 billion mark, while the accumulated trade deficit has moved relentlessly higher.Goldman Cuts Q3 Growth Forecast In Half, Sees Q3, Q4 GDP At 1.0%, 1.5%, Presents Jackson Hole Event Walk Thru
Sorry Goldman, in the race to downgrade the US to 0.0001% above contraction, you are still well behind The Fonz
in coolness. Frankly, following your December 2010 report you are not
even cool enough to pass off for Richie Cunningham. But your third
downgrade of US GDP in a month, this time slashing Q3 and Q4 GDP is
surely a valiant attempt at regaining some of the Fonz pre-Jersey Shore
panache. Keep at it. Another year of being just thiiiiis much behind
the curve, and atoning for your shark jumping adventures,
and you may be cool again. From a just released report by recent
addition to the Goldman economics team (supposedly Jan was too busy
elsewhere) Zach Pandl: "In light of the downshift in the data this week,
we are cutting our second-half growth forecasts further. We now expect
GDP growth of 1.0% in Q3 and 1.5% in Q4, both down from 2.0%
previously. These changes reduce our forecasts for full-year 2011 GDP growth to 1.5% from 1.7%. Exhibit 1 shows the details."
Now: who will join Zero Hedge in calling for negative GDP in Q3 and
most likely Q4 (absent QE3; with QE3 the BEA will mysteriously find
another 4-5 GDP percent hidden under the carpet). Far more importantly,
Goldman once again explains what to expect at next week's Jackson Hole.
We say importantly, because while Goldman is about as clueless at most
at predicting the future, when it comes to monetary policy, Goldman
determines it. So it is always useful to pay attention: after all
Hatzius "predicted" the QE2 announcement roughly about a year ago to the dot.
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I'm PayPal Verified Market Commentary From Monty Guild
August 19, 2011, at 5:33 pm
by Monty Guild in the category Guild Investment | Print This Post Print This Post | Email This Post Email This Post
Investor Risk Perceptions Shifting
A major shift in perception is spreading throughout the global investing community — from institutions to individuals. Increasingly, investors are carefully weighing which countries’ bonds, stocks, and currencies are more risky or less risky? The shift has gathered momentum since the end of June when the Fed stopped buying U.S. bonds under its second quantitative easing program, known as QE2 for short.
To better understand what’s going on, let’s step back to 2008, the year of historic financial and market blowups. At that time, markets in emerging countries fell the most precipitously despite the fact that their economic fundamentals were superior to those of the larger, more developed countries. Worldwide investors perceived the traditional markets in Europe and the U.S., with longer histories of stability, as much safer than emerging markets.
No longer! That perception of stability has been eroding for years and now has pretty much been shaken to the core.
Globally, many observers — Guild Investment Management among them — have long pointed out the unwise fiscal behavior taking place in Europe and the U.S. Finally, the investing community at large has grasped the degree of mismanagement at the highest levels in the developed world. Country-specific fundamentals seem to be reasserting themselves. Confidence, hard to win, can be easily lost, and is much harder to win back.
Recently, market volatility has driven some money out of equities and currencies into bonds as a short term alternative. Longer term, we believe that a portion of the money will move into foreign currencies of faster-growing, medium-sized countries and into gold. Equity investors are starting to shun the U.S. and Europe, just as they have been shunning Japan for years. Over the long run, desertion from the dollar and euro will substantially elevate some currencies of smaller, faster-growing countries.
We have identified three levels of risk in the current market:
• Least risky
Emerging countries that are lenders to the developed world.
• Moderately risky
The once venerable U.S. is trading like a country in decline.
• Most risky
Western European nations that do not have the flexibility to lower the value of their currency by printing money (members of the Eurozone).
Eurozone = High Risk Zone
Several European countries recently banned short-selling of financial stocks. The U.S. did the same thing in the summer of calamitous 2008. Financial stocks collapsed even further shortly afterward.
Expect to see a poorly re-engineered rerun with new actors but the same plot and the same ugly final act. In the original, American taxpayers paid for the profligacy of bankers and politicians. Now European taxpayers will foot the bill.
The next few weeks will tell the tale. So far we see some small movements from Italy to balance its budget in 2013. We’ll see if the Italians are using the correct growth rates and the parliament agrees to what the ministers propose.
As the heads of the French and German government consult one another, they both realize that their constituents want neither a pan European debt market nor a larger European Financial Stability Fund (EFSF). This week the official debates about the EFSF get underway in the Netherlands and Dutch support for expanding the EFSF is far from guaranteed.
In our opinion, if European parliaments intend to pass an EFSF expansion that has a chance to be successful in saving sovereign debt markets and their banking systems, they should try to pass a fund that is in the 1.3 trillion Euro range rather than the proposed 440 billion fund.
Enter the Cash-Rich Chinese Bargain Hunters
You may be wondering what is happening in China during all the fiscal drama in the West. To be sure, the Chinese have their own internal challenges, but we believe the situation is containable at the present time.
The Chinese economy suffers from high inflation and a still undervalued Yuan even though the government has been letting its currency rise in recent months. Fixed investment is too high a percentage of the GDP. To address this problem Beijing is encouraging prosperous citizens and companies to begin a long-term program of investing abroad. The Chinese are smart investors and they know a bargain when they see one, so we expect this activity to manifest in a number of ways:
● a wave of Chinese money headed for the U.S. and European real estate markets. Indeed, Chinese real estate investors are already on a spending spree in New York.
● a continued flow of money into world commodities markets.
● exploitation of the current market decline by purchasing U.S. stocks.
● far less investment in the U.S. bond market. The Chinese will be net sellers of U.S. dollar denominated treasuries as they diversify their huge foreign exchange portfolio.
Hoenig Retiring from the Fed
Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, is retiring soon as he reaches the mandatory retirement age. For more than a decade, Mr. Hoenig repeatedly called for the breakup of the large banks that were “too big to succeed.” Had his voice been heeded, the crisis of 2008 would have been much less devastating to the U.S. and world economies. As he told Gretchen Morgenson of the New York Times recently, “extremely powerful financial institutions, both financially and politically, undermine the long-term strength of our system and make us look like a financial oligarchy.”
Excessive risk was taken on by American banks in the years leading up to 2008. Clearly the influence of the financial industry and the lack of wisdom by many in the U.S. Congress — for instance, those who voted to extend loans through Fannie Mae and Freddie Mac to borrowers with low odds of repaying them — are big reasons why this happened. Taxpayers have been paying the bills ever since for the over-speculation, and that’s a travesty.
Mr. Hoenig’s voice will be missed.
Job Growth That is Hurting The U.S. Economy
An article by John Merlene in this past Tuesday’s Investor’s Business Daily discusses the rapid growth in employment among federal government regulatory agencies in recent years.
The article says that while the U.S. private sector employment shrank 5.6%, federal regulatory agencies have seen their combined budgets grow a healthy 16%, and their employment rolls are up 13%.
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What are all these new employees doing? The article says they have been churning out new rules. The Federal Register, a proxy of regulatory activity, saw its page number grow by 18% in 2010 alone. According to the article, 379 new rules were imposed last month alone…and another 4,200 are in the pipeline.
This is weighing heavily on the U.S. economy, and hurting its competitiveness. Business owners see an increasing regulatory burden as a deterrent to starting new businesses, expanding, and hiring employees.
The reality is that business owners and entrepreneurs have better chance to create long-term employment opportunities than does the government. However, apparently some in government have a different viewpoint. The article ends with a quote from an Environmental Protection Agency (EPA) document this past February stating that "in periods of high unemployment, an increase in labor demand due to regulation may have a stimulative effect that results in a net increase in overall employment."
A net increase in overall employment? Really?
Our Current Positions and Recommendations
Cash Balances
Guild Investment Management, Inc., is holding a large allocation of cash. We have avoided the suffering of the past two weeks and will have ample funds available as stocks, currencies, commodities, gold, and other attractive options fall into good buy ranges.
Gold
Long-term holders of gold concerned about political upheaval should continue to hold their core positions. Those who prefer to trade gold should take partial profits on spikes, but remember to also buy the dips.
Currencies
Use any strength in the dollar to purchase currencies of better-managed countries.
Stocks
Keep a close eye on world markets. Much uncertainty and volatility exist. We expect a huge quantitative easing and bond-buying program to be instituted in the next few months by Europe, Japan, and the U.S. jointly. China may also join in. This development will signal to us a big move up in gold, stocks, oil, commodities and other investment areas that benefit from inflation.
To request information about Guild Investment Management services and offerings please call (310) 826-8600 or email guild@guildinvestment.com.
Three Charts Explaining the Financial Crisis
08/20/2011 - 05:09
08/20/2011 - 09:48
Obama Agriculture Secretary: Food Stamps Create Jobs. Thinking The Unthinkable: Sell US Treasuries
Moody's Lowers Economic Growth Outlook
Former Obama Whitehouse Economist: Unemployment Won’t Drop Below 8% Before End of 2012
US Economy Has Young Americans Downsizing Their Dreams
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