World Financial Report – December 30th, 2011

Radio Show Newsletter

• Charts of the Week-Quotes-Quick Hits
• RareColoredDiamonds.com
• Gold
• Silver
• Sovereign Debt
• U.S. Debt-Deficit
• Real Estate
• Geopolitical

CHARTS OF THE WEEK-QUOTES-QUICK HITS

-CHART OF THE WEEK: Minimum Wage in U.S. Fails to Beat Inflation. Workers in the U.S. earning the minimum wage are worse off now than they were four decades ago. The chart shows that after adjusting for inflation, the federal minimum wage dropped 20 percent from 1967 to 2010, even as the nominal figure climbed to $7.25 an hour from $1.40, a 418 percent gain. Read more here-http://tinyurl.com/c8d23p9

-CHART OF THE WEEK: China Stocks to Drop on ‘Pretty Bleak’ Economy. China stocks, trading at their biggest discount to global equities in more than five years, may extend the world’s worst two-year loss into 2012 as economic growth slows and money supply tightens. Read more here-http://tinyurl.com/cxwbkol

-”Political priorities run the Western world. If you really believe that QE is not and will not occur to infinity you are an ostrich with your head stuck in the ground. If you think there is willingness to address the debt problem via austerity anywhere in the Western world you are in for a shock.” Jim Sinclair

-“My own feeling is that we’re just repeating the housing bubble in a different form. We’ve substituted an unsustainable buildup of government debt for what is an unsustainable buildup of consumer debt. This one really feels worse to me and more dangerous. I think we’re living in a time of false prosperity.” Robert Goldfarb-Sequoia Fund

-John Williams of ShadowStats.com, using GAAP-Based 2011 U.S. Financial Data, The Actual 2011 Federal Deficit Topped $5.0 Trillion, U.S. Government Debt and Obligations Top $80 Trillion, and Long-Term U.S. Insolvency/Hyperinflation Remain Virtual Certainty. Read more here-http://tinyurl.com/dxcr9ha

-John Williams: The US Has $100 Trillion in Debts & Obligations. Read more here-http://tinyurl.com/c5ywx6x

-”With the economy, I’m cautious. I don’t expect a boom in consumer spending over the next two or three years. People don’t have the wherewithal to spend a lot more, and in today’s world, they don’t have the confidence. Confidence can change overnight, but wherewithal cannot.” John Bogle

-”If you’re investing in stocks with the idea of a one-year outcome, you should not invest. You can lose a lot. If you invest in stocks with a five-year outlook, I would think it is highly debatable if you should do that. You have to think about more than just the probabilities of a market crash. You have to consider the consequences for your savings, and whether you’d be decimated.” John Bogle

-Analyst: The Stock Market Is About To Crash. United-ICAP senior technical analyst Walter Zimmerman says the S&P 500 could rally a little further into January before beginning a “traumatic decline” for the rest of 2012, dragged down by weakness in Europe. How traumatic? You might want to sit down for this one.

He thinks the index will reach its 2012 peak in the 1293-1311 zone, then start a “sharp and sustained drop” until December. His downside target is around 579.57. 579.57! The index would have to wipe out the March 2009 lows and fall by more than 50% current levels to reach that target.

And the last time the S&P 500 traded below 600 was in the mid 1990s, when the Backstreet Boys burst on the scene and bell-bottom jeans were making a comeback. Zimmerman’s reasoning is Europe is in an even worse shape now than it was at the beginning of the year.

“If the history of debt tells us anything it is that one cannot solve a debt crisis by lending more money to the bankrupt and the insolvent,” Zimmerman says. He expects 2012′s price action will mirror what the S&P 500 did from its Oct 2007 peak until it bottomed in March 2009.

“The technical patterns suggest that 2012 will be a terrible year for holding stocks. Even if by some miracle the euro zone hangs together, it is already falling into a deep and enduring recession,” says Zimmerman. “We expect this recession will drag down both the USA and China.” Read more here-http://tinyurl.com/cdmph3s

-Gillian Tett: Flash crash threatens to return with a vengeance. Think about it for a moment. A full 18 months have passed since the strange episode that caused the Dow Jones to tumble 650 points in half an hour, wiping $850-billion (U.S.) off share prices, before rebounding. Since then, the issue has faded from view amid the euro zone drama.

But to this day, nobody has fully explained what really happened on May 6. Nor is there any evidence that the fundamental problems that caused the flash crash have been resolved. That leaves some scientists fearing that not only is a repeat of that flash crash possible, but it is probable and next time round, it could be even more damaging. Read more here-http://tinyurl.com/buxw744

-Milk Outshines Gold as Top Commodity Performer. Watch more here-http://tinyurl.com/crubye9

-Avery Goodman: Euro zone gets vast bond monetization through the back door. Read more here-http://www.gata.org/node/10814

-Gerald P. O’Driscoll Jr: The Fed’s covert bailout of Europe. Read more here-http://www.gata.org/node/10825

-Gillian Tett: Ties Between Sovereigns and Banks Set to Deepen. Welcome to a key theme of 2012. During the past four decades, it was widely assumed in the Western world that the main role of banks and asset managers was to provide funding to the private sector, rather than act as a piggy bank for the state. But now that assumption like so many of the other ideas that dominated before 2007 is quietly crumbling. And not just in Japan. Read more here-http://www.gata.org/node/10828

-ECB Has More Scope to Cut Rates. The European Central Bank has more room to cut interest rates to a record low early next year after reports showed the sovereign debt crisis is damping inflation pressures. Read more here-http://tinyurl.com/cq5658q

-U.S. State, Local Pensions Drop 8.5 Percent. U.S. public pension-fund assets fell in the third quarter by the most since 2008 as stocks sank amid concern that Europe’s debt crisis would curb economic growth, Census Bureau data showed.

Assets of the 100 largest public-worker plans decreased $237 billion, or 8.5 percent, from the prior quarter to $2.53 trillion by Sept. 30, the bureau said in a report. It marks the first decline since the second quarter of 2010 and the biggest since the last three months of 2008, when holdings slid 13 percent during Wall Street’s credit crisis.

The setback may strain state and local governments that have set aside more money to cover retirement benefits. That’s pressured governments already coping with diminished tax collections and has propelled efforts to reduce benefit costs.

The asset decline was driven by losses in stock holdings, which slipped $134.7 billion to $769.6 billion, the Census Bureau said. The value of holdings of corporate bonds, U.S. treasuries, and international securities also fell. The third-quarter (SPC) rout pushed the pensions’ assets back to where they were during the last three months of 2010, wiping out gains this year. Read more here-http://tinyurl.com/c9yphau

-U.S. Retail Sales Rose 4.5% Before Christmas. Sales at U.S. retailers rose 4.5 percent last week from a year earlier, as shoppers snapped up last-minute purchases for Christmas and took advantage of some chains extending hours. Read more here-http://tinyurl.com/7lwdlbv

-U.S. Stores Ramp Up Bargains as Sales Lag. Read more here-http://tinyurl.com/7zc4weh

-Austerity Fuels Worst Christmas in 10 Years for Italy’s Retailers. Italian retailers had the worst Christmas in 10 years, consumer group Codacons said, as austerity measures to combat the sovereign debt crisis prompted households to cut spending. Read more here-http://tinyurl.com/c8v2v8c

-Sears Tumbles After Retailer Plans to Close 120 Stores Amid Weak Economy. Read more here-http://tinyurl.com/7e9weza

-BRIC Decade Ends as Growth Peaked. In the past decade, mutual funds poured almost $70 billion into Brazil, Russia, India and China, stocks more than quadrupled gains in the Standard & Poor’s 500 Index and the economies grew four times faster than America’s. Now Goldman Sachs Group Inc. which coined the term BRIC, says the best is over for the largest emerging markets. Read more here-http://tinyurl.com/7xraxn5

-Brazil overtakes UK as sixth biggest economy as Britain falls behind a South American nation for the first time. Read more here-http://tinyurl.com/7vsdyss

-Women Beating Men to Japanese Service Jobs. Read more here-http://tinyurl.com/c3yvzat

-China, Japan to back direct trade of currencies, sidestepping dollar. Japan and China will promote direct trading of yen and yuan without using dollars and will encourage the development of a market for the exchange, to cut costs for companies, the Japanese government said. Japan will also apply to buy Chinese bonds next year, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing. Read more here-http://www.gata.org/node/10818

-Japan, India Seal $15 Billion Currency Deal. Japan agreed to make $15 billion available to India in a currency swap arrangement as Europe’s deepening debt crisis threatens to curtail developing Asia’s access to dollar funding. Read more here-http://tinyurl.com/cyq73wn

-U.S. Seeks RMB Gains; Avoids ‘Manipulator’ Talk. The Obama administration said it will press for further appreciation of the yuan and called the currency undervalued, while declining to brand China a manipulator of its exchange rate. Read more here-http://tinyurl.com/c25moqd

-Jim Rickards sees ‘Currency Wars’ destroying dollar. Read more here-http://www.gata.org/node/10819

-French Nov jobless total hits 12-year high. The number of jobless people in France hit a 12-year high in November in the latest sign the French job market is deteriorating ahead of the April-May presidential election. Read more here-http://tinyurl.com/cpjop8n

-Alberta Oil Makes Canada Energy Superpower. Alberta, one of only two land-locked Canadian provinces, is turning a farming and cowboy image on its head as the booming energy sector attracts global attention to its oil sands. Read more here-http://tinyurl.com/7l44rlk

-Getting Worse: 40 Undeniable Pieces Of Evidence That Show That America Is In Decline. Read more here-http://tinyurl.com/cbkvytw

-Doug Kass’s 15 Surprises For 2012. Read more here-http://tinyurl.com/cznmfbj

-U.S. Congress Is Getting Richer. A new analysis from The New York Times shows that members of Congress have gotten richer during the financial crisis, while the people they represent have seen their incomes decline. The median congressional net worth rose from $800,000 in 2004 to $1.2 million in 2010, while that of the general public declined from $108,000 to $100,000. Read more here-http://tinyurl.com/c5yobzy

-U.S. Congress Insider Trading Run Amok: When They’re Not Trading On Private Information, They’re Selling It! Read and watch more here-http://tinyurl.com/76qzflb

-Wendy’s Adds Foie Gras Burger in Japan Return. Wendy’s Co., the third-biggest U.S. fast-food chain, added goose-liver pate and truffles to burgers as it invests as much as $200 million on a return to Japan two years after leaving the country. Read more here-http://tinyurl.com/d4f5d2k

-Stress-Medication Sales Hold Up as Economy Gives Heartburn to U.S. Jobless. If you think the economy is giving you heartburn, you may not be alone. Use of acid reflux medications showed a 93 percent correlation with the U.S. unemployment rate over the last five years, according to a study by Bloomberg Rankings. Drugs for high blood pressure and antidepressants had correlation rates of 92 percent and 85 percent respectively, the data show. Read more here-http://tinyurl.com/7af242x

-Infographic: The Truth About 95% Of So-Called ‘Green’ Products. See more here-http://tinyurl.com/d32e3kh

-Allen Stanford’s Bid to Delay Trial Denied. R. Allen Stanford’s request for more time to prepare to face charges he led a $7 billion investment fraud scheme was denied by the judge who declared him mentally fit for trial. Jury selection will begin in Houston federal court on Jan. 23.

“This case needs to be tried,” U.S. District Judge David Hittner said in an eight-page ruling. “This trial will decide not just whether Stanford is guilty of the criminal charges, but also whether hundreds of millions of dollars of investor funds currently frozen may be forfeited and returned to his alleged victims.” Read more here-http://tinyurl.com/ckyedgs

-Madoff Son Must Face Suit in Bankruptcy Court. Bernard Madoff’s son Andrew must submit to a bankruptcy judge’s decision to permit a $198 million lawsuit to go forward because he sought that court’s protection when he filed a claim against his father’s estate, a federal judge said. Read more here-http://tinyurl.com/bp4omku

-China Punishes Officials Over Fatal Rail Crash. China punished 54 officials and ordered the railway ministry to improve management of its high- speed rail system after a government investigation found a fatal train crash was caused by mismanagement and design flaws. Read more here-http://tinyurl.com/dy7yex4

-America’s Dirty Little Housing Secret Is Rocking The Suburbs. For years, the food pantry in Crystal Lake, Ill., a bedroom community 50 miles west of Chicago, has catered to the suburban area’s poor, homeless and unemployed. But Cate Williams, the head of the pantry, has noticed a striking change in the makeup of the needy in the past year or two. Some families that once pulled down six-figure incomes and drove flashy cars are now turning to the pantry for help. Read more here-http://tinyurl.com/79aadrs

-Cruise recreating Titanic’s fateful voyage is sold out. Read more here-http://tinyurl.com/czh3wj3

-The 19 Smartest People The World Has Ever Seen. Read more here-http://tinyurl.com/c29ujww

-Nothing Predicted Happened in 2011. Rampaging natural catastrophes, global financial calamities, the deaths of despots and desperados, the passing of America’s greatest modern technical innovator and roiling protests that shook the Arab world and occupied Wall Street they made 2011 a year that will be remembered for its almost unrelenting turmoil. Read more here-http://tinyurl.com/c7qom76

-2011: A Year of Firsts Remembered. Read more here-http://tinyurl.com/cc2cnbx

-Year of Misfortune: Top 12 Billion-Dollar U.S. Disasters. Read more here-http://tinyurl.com/czr39v4

-7 Famous Works Of Art That Are Stashed In The Collections Of The Super Rich. Read more here-http://tinyurl.com/cb43jbc

-Jan. 1 Giants-Cowboys Tickets Hit $2,500. The New York Giants’ postseason fate rides on winning this weekend’s regular-season finale against the Dallas Cowboys, driving ticket prices up more than 56 percent to an average of $481. The most paid so far is $2,500 for a field-level spot behind the Giants’ bench, and ticket resellers said prices are matching those usually attached to postseason games. Read more here-http://tinyurl.com/cmujtm2

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RARECOLOREDDIAMONDS.COM

-The Rare Colored Diamonds Historical Value Tracker system is the perfect tool for investors to view the potential future value of a rare colored diamond based on the current market trend of a particular type of diamond. Track the potential future value of colored diamonds here-http://tinyurl.com/6l4thaf

-Rarecoloreddiamonds.com Featured Diamond of the Week. This week’s Diamond is a 1.81ct fancy intense, internally flawless, cushion cut Yellow. The color of this diamond is amazing and it’s proportions make it appear much larger than its actual size. Harold Seigel-See video of the Featured Diamond here-http://tinyurl.com/c39eqss

-Diamonds to Outpace Gold on Asian Spending. Diamond prices are poised to rise for the next four years, outpacing gold, as increased spending on luxury goods in China, India and the Middle East outpaces supplies of the precious stone, analysts said.

Demand for diamonds may grow at double the pace of supply through 2020 because of an expanding middle class in China and India, Bain & Co. said this month in a report. The two countries, and the Middle East, will account for 40 percent of global diamond consumption by 2015, up from about 8 percent in 2005, according to Anglo American Plc, which controls De Beers, the world’s largest diamond miner.

“We expect emerging nations, first and foremost India and China, to drive demand for diamonds in the upcoming years, while consumption among developed nations is likely to moderate,” said Vladimir Sergievskiy, an analyst at Moscow-based Finam Investment. “On the supply side, the commissioning of new mines should be largely offset by depletion of mature ones.”

Global demand for diamonds will probably outstrip supply by 7 million carats in 2016, compared with a shortage of 1 million carats this year, Sergievskiy said. Rough diamonds have advanced 24 percent this year, according to an index compiled by PolishedPrices.com. Read more here-http://tinyurl.com/d6jgx3f

-Australia’s Diamond Production -6% in FY1Q. Australia’s diamond production fell by 6 percent year on year to 2.335 million carats during the first fiscal quarter that ended on September 30, 2011. The largest diamond mine in the country is Rio Tinto’s Argyle mine, where production fell 5 percent to 2.302 million carats during the period, according to Rio Tinto data. Other significant mines include the Ellendale mine operated by Gem Diamonds. Read more here-http://tinyurl.com/bpsd54z

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GOLD

-CHART OF THE WEEK: Check Out The Correlation Between Market Volatility And Google Searches For ‘Gold.’ his chart from The Economist shows just how correlated popular interest in gold and market craziness are. A great reminder that market data has a broad definition and comes from diverse sources.

-”Be careful about thinking you can outsmart the gold bull. Prices decline in every market, at times. This gold market has been hit with selling and fear, but it is a necessary cleansing process that puts gold into stronger hands. No gold investor enjoys this process, but gold should make new highs, many more times before this bull market ends.

Gold is the ultimate long term winner in any debt crisis, and selling out because Europe’s debt woes are growing simply makes no sense at all. All signals look good to see gold $2330 in 2012 and likely by mid-year.” Morris Hubbartt

-”Technically and fundamentally, there is no damage to gold when you view the long-term trends. This decline appears to be nothing more than a healthy digestion or consolidation of gains. This movement should actually prolong the long-term trend as it builds a new support area.” James Carrillo-Swiss America Trading Corporation

-“The ‘cash is king’ crowd is at the heights of its popularity, investors have been selling precious metals, hoarding cash and Treasurys instead. That will change. Already, the European Central Bank is literally seducing troubled financial institutions, dangling newly printed money before their waiting eyes. Essentially, the ECB has inflated their books by 20% and this may only be the beginning as the moribund European economy will probably require further oxygen.” Jeb Handwerger-GoldStockTrades.com

-Gold has outrun the Dow pretty handily over the last few years. Over the last two years, prices of gold futures are up roughly 41% versus a total return of 22% for the Dow industrials. And over the last 10 years? Gold futures are up 465%, versus 54% total return for the Dow, according to data from FactSet. WSJ

-“Gold is going to go higher, but it’s not going to go in a straight line. Gold has given positive returns, but it doesn’t necessarily do it in the way that gives comfort, and that makes people nervous.” Martin Murenbeeld-DundeeWealth

-“The bubble is in paper currency creation, not in physical gold. Calls for a top in the market are premature.” Ben Davies-Hinde Gold Fund

-“The longer-term trends, mainly government fiscal and monetary policies, haven’t changed. Gold has that preservation-of-wealth role and was probably used quite a bit in the last several weeks.” Tom Winmill-Midas Funds

-”The drop in gold may spur more buying from central banks, putting a floor under prices. The banks may add 600 tons to reserves next year, the most since at least 1970, according to Goldman Sachs. Adrian Day-Adrian Day Asset Management

-”Gold and oil are likely to suffer in this intense deflationary environment, until it becomes clear that the big honchos do not intend to lose control to deflation, and will print their currencies into oblivion. Then gold will soar (or, more accurately, retain its purchasing power while fiat currencies become worthless). If the massive asset deflation strikes before the November 2012 elections, it probably will affect the outcome of the elections; and if before August, the selection of the Republican presidential candidate.” Nick Chase

-”Let me tell you that when this year is over, the only hands left holding physical gold and gold shares are the strongest hands on the planet. Every possible weak hand has been shaken out. Every person with emotions even latently capable of overwhelming their intellect, overwhelming their judgement, will have already been overwhelmed. The people who are left are people who will never give up their positions.” James Sinclair

-Jim Sinclair: A Modest $1700-$2100 Gold Price In 2012. Listen here-http://tinyurl.com/cdyb6bz

-China central bank researcher says gold is only safe haven now. China should further diversify its foreign-exchange portfolio and make more gold purchases when the metal’s price dips but is still at a relatively high level, a senior central bank official said.

“The Chinese government should not only be cautious of the imported risk caused by rising global inflation, but also further optimize its foreign-exchange portfolio and purchase gold assets when the gold price shows a favorable fluctuation,” said Zhang Jianhua, director of the research bureau affiliated with the People’s Bank of China (PBOC).

He made the remarks in an article in the Beijing-based Financial News, a newspaper run by the PBOC. Zhang said bleak economic conditions, increasing international liquidity as countries turned to monetary easing, and the resulting high inflation had dampened investors’ confidence. He said that gold had become the only “safe haven” for risk-averse investors. “No asset is safe now. The only choice to hedge risks is to hold hard currency gold.” Read more here-http://www.gata.org/node/10821

-Free market in gold starts scaring China too. Gold exchanges in China outside of two in Shanghai are to be banned, authorities said in a statement released. Read more here-http://www.gata.org/node/10823

-2012 Outlook: Gold Is Battered, Bruised, But Not Beaten. Like a prizefighter who has taken a few upper cut blows, gold might be a bit woozy, but the metal’s longer-term uptrend is hardly on the ropes. As in many financial sectors, gold’s price direction has been guided by headlines, particularly out of Europe on the sovereign debt situation, and the volatility caused by swiftly changing news has made many markets a bit punch-drunk.

The December price break for gold came as several events aligned. First, the market was never able to retest its all-time nominal high in August of $1,923.70 an ounce. Second, gold was one of the few star performers this year and when equity and other markets soured, money managers needed to raise cash to meet margin calls and shore up positions elsewhere.

Third, with investors spooked by the continued inability for eurozone leaders to convincingly shore up their union, these investors sought safety in the most liquid vehicle available cash again pulling profits from gold. Gold might be down about 16% from the August highs, but it’s still up roughly 10% from the 2010 settlement of $1,421.40, basis the nearby futures, which still makes it one of the best performers this year.

The yellow metal may be in a consolidation mode for the time being, resting and building a base to rally again, just like that prizefighter whose corner man keeps him in shape to go the distance. Read more here-http://tinyurl.com/bm76azu

- Myra P. Saefong: New year offers gold another shot at $2,000. “This year was about liquidation when portfolios were falling and participants needed capital, they turned to selling off precious metals that came off a solid first half,” said “Precious Metals Investing for Dummies” author Paul Mladjenovic.

“In other words, precious metals were over bought in the first 6 months and oversold in the last 6 months.” “2,000 gold can be delayed in the short term, but the fundamentals will carry it there sooner or later,” Mladjenovic said. “2012 has very bullish conditions so higher gold prices are more plausible.” Read more here-http://tinyurl.com/caa2w5y

-James Turk: What to Expect from Gold & Silver in 2012. When asked what investors in gold and silver should expect in 2012, Turk stated, “Yeah, I think the big theme in 2012, is going to be the continuing problems here in Europe. Not only with the sovereign debts, but I think you are going to see increasing focus on the insolvency in the banks themselves. That’s going to be the big story in 2012.”

“The major drivers for the metals have been banking and financial problems worldwide. So, I see no reason to suspect that the metals are going to do anything except go higher next year. As we speak, gold is up 17% (for this year), so if we finish around here that will be the eleventh year gold has traded higher. The average annual rate of appreciation over those eleven years is just about 17% per annum.

But I’m actually looking for something much better than average next year, simply because people are increasingly understanding that Europe is spinning out of control. The US government’s own financial condition is (also) spinning out of control, Japan is spinning out of control, the UK is spinning out of control, there are no safe havens, except the precious metals.”

When asked about the recent smash in both gold and silver, Turk responded, “You know, Eric, we’ve seen so many of these takedowns over the past ten years and they are so contrived.  They basically go to the various technical points that cause people to sell and you get all of the gurus on television saying the bull market (in gold) is over and we are starting a new bear market.

But you have to ask yourself, ‘What fundamentally has changed to make me want to sell my precious metals?’ If anything the fundamentals have become even better than they were at the beginning of the year, given the fact there are so many problems out there that haven’t been solved.

Given the fact that when you own physical gold or physical silver you don’t have counterparty risk, that’s going to become an increasing issue in 2012 as well. The last couple of weeks are no different than what we’ve seen many, many times before and to me, even if you look at it from a technical perspective, gold is still in an uptrend.

(Also), that flag formation on silver is still forming very, very nicely.  When we break out of that flag, I think you are going to see the price of silver double in (roughly) three months. So, $70 silver by the end of March, is that realistic? Yes, I think so. Gold over $2,000 in 2012, probably in the first quarter, yeah.

That’s very realistic as well because the things which have been driving the metals are still very much in place.  So forget about a downdraft here and there, just see it as a buying opportunity. View gold and silver as a form of savings and when is all said and done a few years from now, you are going to be very, very happy acquiring the precious metals at these prices.

I think the insights the ‘London Trader’ discussed with you are truly remarkable and I really recommend that everybody read that interview a couple of times to make sure all of the points he is making sink in. Yes there is tightness (in the physical market) and you see it in the interest rates.

There is nothing I can see out there that’s bearish for gold at the moment. In fact, the way I look at it is everything I see is very bullish and we are down to the level that you are starting to see that huge physical demand. That’s usually been a good sign you are at a major low and likely to go higher.” Read more here-http://tinyurl.com/c8tlcj3

-Paul Brodsky: Gold Could See Five Digits in 2012. When asked about his outlook for the gold price in 2012, Brodsky stated, “My partner Lee Quaintance and I are bullish on the price of gold and silver in currency terms. We think precious metals are going to appreciate as central banks in Europe, and the Fed as well, are going to be forced to print more money and dilute their currencies.

There’s just no way around it, we have to deleverage the global financial system. As far as price goes, certainly over $2,000 (for gold).  It’s not out of the question that it could get to $10,000 if there’s a formal devaluation.” Read more here-http://tinyurl.com/7h46non

-John Embry: Physical Gold & Silver Tight Because of Eastern Buying. When asked about the action in gold, Embry said, “It’s disappointing in the sense that it shouldn’t be happening. I can’t say that I’m totally surprised, you are in the quietest period of the year. These guys (manipulators) are sociopaths.

They’ve basically taken the opportunity here to just take gold and silver to the cleaners in the paper market in an extraordinarily quiet period.” I think it’s clear the economic decay will accelerate and as a result, given the debt overload in the system, the only way that it can be supported without a total collapse, is by massive amounts of quantitative easing.

This latest thing in Europe where they trotted out 480 billion euros, call it what you will, that was pure quantitative easing. I just think we’ll see more of that going forward. The physical markets for both gold and silver are tight because of Eastern buying. What it underwrites, for sure, is the greatest percentage gains in this bull market for 2012.

I would be very surprised if gold weren’t up at least 60% from current levels. Silver will be more explosive. What they have done to silver is astounding. In the longer-run it just ensures even greater physical shortages and when that manifests itself, I think the silver price will easily double.

So I think it will be a big year next year. These (metals) are both as sold out as I can remember and the sentiment gets worse and worse, if that’s possible. These are all precursors to a major move and I think it could get started quite quickly. Read more here-http://tinyurl.com/bl56obq

-Hathaway: Central Banks to Begin Dumping Dollars for Gold. “The action is what you would expect in a thin market like this, the moves are exaggerated. The people that have shorts on, which has been the right trade for the last several months, they are just pushing it to the limit (on the downside) to make their year. Obviously it’s uncomfortable to see this kind of action, but, to some extent, you have to look at the context in which you see it.”

So I look for next year to be turbulent financial markets that will be contentious on the political front. Probably anemic economic activity and it looks to me like Europe and Japan are heading into recession. You wonder what kind of feedback that will have for the US.  All of this will end up with mobs of people screaming for money printing and I think that’s going to be the flash point for gold.

Obviously the gold price has to make a stand at some point, but I do think we are seeing panic liquidation. I think we’re at the point where you’re going to see central banks start dumping dollars for gold. The dollar really isn’t strong, it’s just relatively strong to the euro, but ultimately the dollar is caught up in the same mess. I think the ones that will start driving the price of gold substantially higher will be central banks who start worrying about all of their dollar reserve assets that are being overtly debased.” Read more here-http://tinyurl.com/bpenj2a

-Egon Von Greyerz: Gold Will Trade $3,000-$5,000 in 2012. “Well, I’m not really surprised because last time I talked to you I did say gold could go down to $1,550 support and maybe even $1,420.  In my view that would be quite normal in a very thin market and I said that would probably happen by the year end.”

“But this is all a thin paper market, we have not seen one single physical seller of gold or silver at these prices. So it’s just manipulation and panic in a paper market at the year end. Of course, it’s easy for anyone who wants to intervene to push the price down even further in a thin market. So I think that’s what’s happening and I wouldn’t worry the slightest bit.

Gold is up for the year in all currencies and 2012 will be another fantastic year. I could see the first three to five months (of 2012) being dramatic. You know the financing requirements worldwide are just mind-boggling. We’re talking about trillions here if you combine sovereign, corporate and bank requirements. The requirements are so high they just have to start printing money and they will.

The combination of strong buyers (physical) at these lower levels and the fact that we will see massive money printing, starting next year, will lift gold and silver very quickly in my view. When asked where he sees gold heading in 2012, von Greyerz responded, “I wouldn’t be surprised to see several thousand dollars (for gold), let’s say between $3,000 and $5,000 next year.  I see that as the next move and fundamentally everything supports that.” Read more here-http://tinyurl.com/bs8xgk5

-James West: Don’t Let Short-Term Volatility Inform Investment Decisions. I have unrestrained bullishness for the future of the gold price. I look at the 10-year picture: Gold has increased every year by 21%, and 2011 is no exception. Let’s take the well-known pundit Dennis Gartman, who said on CNBC this week that he has completely exited his gold positions because he thinks gold is going to $1,450 an ounce (oz).

If you were to look at all of the times that he has gone on CNBC and said that anytime I hear Dennis Gartman say it’s time to sell, that’s when I start buying gold again! When he says he’s bullish on gold, he’s trying to catch a falling knife. He has done that repeatedly in the five years that I’ve been tracking those statements. He must have very bloody hands and no fingers left because he is consistently wrong. Read more here-http://tinyurl.com/c2g2fct

-Peter Schiff: 2012 Will Be the Year of Reckoning. The price of gold should move quite a bit higher next year. We should decisively take out $2,000. It’s hard to say how high gold will go, but it should trade above $2,500. I think gold will have an even better year in 2013. Read more here-http://tinyurl.com/8769e9j

-Pento: Here is Why Gold Price Will Stay Strong & Not Retreat. Read more here-http://tinyurl.com/7ws29xq

-Simon Black: Here’s Why Gold Would Work In A Deflationary Environment. Read more here-http://tinyurl.com/brec8n9

-Alasdair Macleod: Gold price set for hyperbolic increase. Read more here-http://tinyurl.com/c87j9ls

-Peter Grant: Gold near-term outlook 2012. Read more here-http://www.gata.org/node/10830

-Martin Armstrong: Gold Update. Read more here-http://tinyurl.com/c5pxdbm

-WSJ: Gold left some investors in the dust. Read more here-http://www.gata.org/node/10826

-Turkey sharply increases its gold reserves. Turkey lifted its gold reserves by a hefty 1.328 million troy ounces, or 30 percent, last month as central banks around the world maintained their positions as net buyers of the precious metal. Read more here-http://www.gata.org/node/10815

-Roman Baudzus: Iranians flee to gold. Following the US and European Union’s decision to tighten sanctions against Iran, the Iranian rial has started depreciating dramatically. Many Iranians fear that the rial will continue to lose value. Last week Iranian television showed images of people camping overnight at the doors of the national banks in order to recover their savings. Large sums of these savings are flowing into the US dollar and into gold. Read more here-http://tinyurl.com/bq2uktz

-U.S. Mint says has enough gold, silver Eagles coins. The United States Mint said it has enough American Eagle gold and silver bullion coins to meet demand and does not expect to allocate them in early 2012. Sales of the U.S. gold and silver bullion coins have slowed in the fourth quarter as precious metals prices retreated from record highs, bucking a trend earlier this year when investors flocked to physical gold and silver as safe havens. Read more here-http://tinyurl.com/cn5ft2z

-J.S. Kim: Did bankers crash MF Global to crash gold and silver? Read more here-http://www.gata.org/node/10822

-The weekly precious metals review at King World News. Listen here-http://www.gata.org/node/10816

-Resource Clips does comprehensive interview with GATA Chairman Murphy. Read more here-http://www.gata.org/node/10827

-John Lee: Fire sale on the rich man’s gold. Read more here-http://www.gata.org/node/10831

-A beauty secret worth its weight in gold: New cream contains 23 carat of the precious metal. It is the beauty secret that really could be worth its weight in gold. According to scientists, using the precious metal on the skin can slow the ageing process and brighten the complexion. Read more here-http://tinyurl.com/bsbpw2r

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SILVER

Gold to silver ratio at 50 to 1 with gold at $2,000 the silver price would be $40.00

Gold to silver ratio at 40 to 1 with gold at $2,000 the silver price would be $50.00

Gold to silver ratio at 30 to 1 with gold at $2,000 the silver price would be $66.67

Gold to silver ratio at 20 to 1 with gold at $2,000 the silver price would be $100.00

Gold to silver ratio at 15 to 1 with gold at $2,000 the silver price would be $133.33

Gold to silver ratio at 50 to 1 with gold at $2,500 the silver price would be $50.00

Gold to silver ratio at 40 to 1 with gold at $2,500 the silver price would be $62.50

Gold to silver ratio at 30 to 1 with gold at $2,500 the silver price would be $83.33

Gold to silver ratio at 20 to 1 with gold at $2,500 the silver price would be $125.00

Gold to silver ratio at 15 to 1 with gold at $2,500 the silver price would be $166.67

-”It’s no fun for silver investors to have to live through the current slam down in prices. Knowing that the sell-off is intentional makes the pain more acute. The sell-off this week, in particular, has taken on the characteristics of an historic bottom. Since the predominance of the evidence indicates that silver is oversold on an absolute basis and relative to just about everything else, the most logical investment approach is to treat it as a bottom. A deliberately created bottom, but a bottom nevertheless. That means holding or buying, not selling.” Ted Butler via Ed Steer-Casey Research-Read more here-http://tinyurl.com/cxa5kx9

-”The silver bottom may very well be in, but if it’s not, the chart gives a clear indication of where the bottom will likely be found. I continue to see the likelihood that silver is ready to begin its next ascent, but the 61.8% Fibonacci retracement line sits near $25, and that is a key buying area, if it happens. If it does happen, my plan is to dramatically enlarge my already-large silver position. I am holding most of my silver for triple digit targets (more than $100 per ounce).” Morris Hubbartt

-”Its price is going to be one-sixteenth of the gold price so it’s already undervalued by at least two-thirds. Gold and silver are both going to continue to appreciate. I agree with Eric Sprott when he says that silver is going to outperform gold.” James West

-”Every company that produces silver should hold it on the balance sheet as opposed to cash. It’s the smart thing to do. If you subscribe to the ideas that the gold:silver price is going to be 16:1 and precious metals have nowhere to go but up because of the debasement of currencies in growing numbers of sovereign jurisdictions, it makes perfect sense.” James West

-Got Gold Report: Trader positions in silver most bullish in 10 years. The Got Gold Report’s Gene Arensberg reports that the largest commercial traders have brought their short position in silver down by 44 percent, the smallest it has been in 10 years, a situation Arensberg describes as extremely bullish, at least for the medium and long term. Read more here-http://www.gata.org/node/10824

-Peter Cooper: Why we are sticking with silver as our top pick for 2012. Read more here-http://tinyurl.com/brarkur

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SOVEREIGN DEBT

-ECB Balance Sheet Increases to a Record $3.55 Trillion on Loans to Banks. The European Central Bank’s balance sheet soared to a record 2.73 trillion euros ($3.55 trillion) after it lent financial institutions more money last week to keep credit flowing to the economy during the debt crisis.

Lending to euro-area banks jumped 214 billion euros to 879 billion euros in the week ended Dec. 23, the Frankfurt-based ECB said in a statement. The balance sheet increased by 239 billion euros in the week and was 553 billion euros higher than three months ago. Read more here-http://tinyurl.com/d2bybcm

-Zerohedge: Flowcharting The True Cause Of The Eurozone Crisis. Read more here-http://tinyurl.com/ce38vx4

-Forget Europe, Japan Is Still The Biggest Debt Crisis In The World. Read more here-http://tinyurl.com/d9fxt42

-Max Keiser: The Shocking Real Debt To GDP Ratio Of Britain. Read and watch more here-http://tinyurl.com/cwaetu9

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U.S. DEBT-DEFICIT

-CHART OF THE WEEK: 2011’s Great News For Government Spending. Republicans were swept into office in 2010 with a mandate to eliminate “out of control” spending in Washington DC. And of course the deficit is a salient political issue. But as we learned in the debt ceiling fight, the Super-Committee flop, and the recent payroll tax imbroglio, there just isn’t the political will to do any real deficit cutting, whether it be through higher taxes or lower spending.

As the Washington Post’s Ezra Klein notes, while summarizing Obama’s 2011: The government did not shut down not once and the deal Democrats cut to keep it from shutting down ended up being a nothingburger. The $38.5 billion in cuts ended up being more like $20-$25 billion, with less than $400 million falling in 2011. Some people are disgusted by all this, but it’s actually a good thing, since the last thing the US economy needs is deficit cutting at a time when the private sector is deleveraging and cutting back.

And really, the situation is probably going to repeat itself. If you can’t even get a decrease in government spending, and the most anti-deficits year in a long time, when is it going to happen? Expect lots more years like this: Lots of bluster that in the end result in “nothingburgers.” Here’s a look at quarterly federal government spending through the end of Q3. Sure Q3 is down a hair, but it’s obvious which way the trend is still going. Read more here-http://tinyurl.com/c3kv9zb

source: http://www.chartoftheday.com

-Obama to ask for debt limit hike: Treasury official. The White House plans to ask Congress by the end of the week for an increase in the government’s debt ceiling to allow the United States to pay its bills on time, according to a senior Treasury Department official. The approval is expected to go through without a challenge, given that Congress is in recess until later in January and the request is in line with an agreement to keep the U.S. government funded into 2013.

The debt is projected to fall within $100 billion of the current cap by December 30, when the United States has $82 billion in interest on its debt and payments such as Social Security coming due. President Barack Obama is expected to ask for authority to increase the borrowing limit by $1.2 trillion, part of the spending authority that was negotiated between Congress and the White House this summer. The debt limit currently stands at $15.194 trillion and would increase to $16.394 trillion with the request. Read more here-http://tinyurl.com/czlu2e7

-Net liabilities hit $14.8 trillion in FY11: Treasury. The U.S. government fell deeper into the red in fiscal 2011 with net liabilities swelling more than $1 trillion as commitments on government debt and federal benefits rose, a U.S. Treasury report showed. The Financial Report of the United States, which applies corporate-style accrual accounting methods to Washington, showed the government’s liabilities exceeded assets by $14.785 trillion. That compared with a $13.473 trillion gap a year earlier. Read more here-http://tinyurl.com/6mvkt2q

-Fed Once-Secret Loan Crisis Data Compiled by Bloomberg Released to Public. Bloomberg News released spreadsheets showing daily borrowing totals for 407 banks and companies that tapped Federal Reserve emergency programs during the 2007 to 2009 financial crisis. It’s the first time such data have been publicly available in this form. Read more here-http://tinyurl.com/6qyxdce

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REAL ESTATE

-CHART OF THE WEEK: Home Prices Are Still Falling. The October Case-Shiller 20-city home price index missed economists’ expectations, falling 3.4% year-over-year. Only two cities saw prices increase: Detroit and Washington. Month-over-month, the 20-city index fell 0.7% on a seasonally adjusted basis. This too was worse than the 0.4% decline forecasted by economists. So, although home prices seem like they’re forming a bottom, they’re still not in the clear. Read more here-http://tinyurl.com/cussu8w

source: http://www.chartoftheday.com

-Sales of New Homes in November Rise. Sales of new U.S. homes rose in November to a seven-month high, adding to evidence of stabilization in the housing market. Purchases of single-family properties increased 1.6 percent to a 315,000 annual pace, figures from the Commerce Department showed in Washington. The gain pushed the number of new homes on the market to a record low. Read more here-http://tinyurl.com/couqghb

-Home Sales in U.S. Beat Forecasts. The number of Americans signing contracts to buy previously owned homes rose more than forecast in November as falling prices and low borrowing costs boosted demand. The index of pending home sales increased 7.3 percent to the highest level since April 2010 after climbing 10.4 percent the prior month, figures from the National Association of Realtors showed today in Washington. Read more here-http://tinyurl.com/ctsemlq

-U.S. Home Prices Fell 2.8% in October From Prior Year, FHFA Says. U.S. home prices fell 2.8 percent in October from a year earlier, the Federal Housing Finance Agency said, as foreclosures continued to depress real estate values. The slump was led by the regions that include Nevada and Arizona, and California and Washington, which both had a 5.5 percent decrease, the agency said  in a report from Washington. The region that includes Illinois and Ohio had the second-largest decline of 3.9 percent.

The U.S. housing market must absorb more than 14 million distressed properties before the foreclosure crisis eases, according to RealtyTrac Inc. The total includes 1.5 million homes in the foreclosure process, 3.5 million with delinquent mortgages and at least 10 million in which the borrower is “underwater,” or owes more than the house is worth, data from the Irvine, California-based researcher show. Distressed properties sell at a discount and undermine real estate values. Read more here-http://tinyurl.com/blp8od2

-Foreclosure free ride: 3 years, no payments. Delinquent borrowers facing foreclosure are learning that they can stay in their homes for years, as long as they’re willing to put up a fight. Among the tactics: Challenging the bank’s actions, waiting to file paperwork right up until the deadline, requesting the lender dig up original paperwork or, in some extreme cases, declaring bankruptcy.

Nationwide, the average time it takes to process a foreclosure from the first missed payment to the final foreclosure auction has climbed to 674 days from 253 days just four years ago, according to LPS Applied Analytics. It takes much longer than that in Florida, where the process averages 1,027 days, nearly 3 years. In D.C., foreclosure averages 1,053 days and delinquent borrowers in New York often stay in their homes for an average of 906 days. Read more here-http://tinyurl.com/6rqtjfe

-U.S. rental demand lifts housing sector. Brian Keith is busier than ever as the architecture firm he works for rushes to wrap up work on a 300-unit apartment complex in Dallas. The project is one of dozens the firm, JHP Architecture, has on its hands a surge of business driven by a rise in demand in the United States for rental properties. Read more here-http://tinyurl.com/bqd4rad

-Spanish Mortgages Decline for the 18th Straight Month as Bad Loans Surged. Spanish residential mortgages decreased for an 18th month in October as banks reined in lending amid a surge in borrowing costs and bad loans. The number of home loans fell 43.6 percent from a year earlier after a 42 percent drop in September, the Madrid-based National Statistics Institute said in an statement. Total capital lent on all mortgages fell 40.6 percent, it said. Spain is struggling to digest a glut of 700,000 unsold new homes since the collapse of the building boom that has pushed the unemployment rate to 23 percent. Read more here-http://tinyurl.com/br6e9ra

-U.K. House prices ‘will slump by 3% as they drop in 2012 for the fifth year running’. Read more here-http://tinyurl.com/cynvl3d

-Chinese Bloggers Have Discovered Another Abandoned Luxury Housing Development. Read more here-http://tinyurl.com/7px6yyw

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GEOPOLITICAL

-U.S., Israel Discuss Triggers for Bombing Iran’s Nuclear Infrastructure. The Obama administration is trying to assure Israel privately that it would strike Iran militarily if Tehran’s nuclear program crosses certain “red lines” while attempting to dissuade the Israelis from acting unilaterally. Read more here-http://tinyurl.com/cq6u5af

-Iran to Block Oil Through Hormuz If Sanctioned, IRNA Reports. Iran will block oil shipments through the Strait of Hormuz if sanctions are imposed on its crude exports, the official Islamic Republic News Agency reported, citing Vice President Mohammad Reza Rahimi. “We are not interested in any hostility and our motto is friendship and brotherhood, but westerners are not willing to abandon their plots,” IRNA cited Rahimi as saying.

About 15.5 million barrels of oil a day, or a sixth of global consumption, flows through the waterway between Iran and Oman at the mouth of the Persian Gulf, according to the U.S. Department of Energy. Iran’s navy started a 10-day exercise east of the passage that involved the use of submarines, ground-to- sea missile systems and torpedoes, Press TV said. Read more here-http://tinyurl.com/cvvse8c

-U.S. Fifth Fleet says won’t allow Hormuz disruption. The U.S. Fifth Fleet said it would not allow any disruption of traffic in the Strait of Hormuz, after Iran threatened to stop ships moving through the world’s most important oil route. “Anyone who threatens to disrupt freedom of navigation in an international strait is clearly outside the community of nations; any disruption will not be tolerated,” the Bahrain-based fleet said in an e-mail. Read more here-http://tinyurl.com/c3xjusc

-Iran Regime Profiting From Currency Decline, U.S. Treasury Says. The Obama administration is accusing the elite of Iran’s regime and the Islamic Revolutionary Guard Corps of profiting “on the back of the average Iranian” as the nation’s currency plunges under pressure from international sanctions. Read more here-http://tinyurl.com/chtbdca

-Israel Didn’t Know High-Tech Gear Was Sent to Iran. The clandestine arrangement worked smoothly for years. The Israeli company shipped its Internet- monitoring equipment to a distributor in Denmark. Once there, workers stripped away the packaging and removed the labels. Then they sent it to a man named “Hossein” in Iran, an amiable technology distributor known to them only by his first name and impeccable English, say his partners in Israel and Denmark. Read more here-http://tinyurl.com/d7cky9a

-Putin Promises Fair Election as ‘New Year’s Gift.’ Russian Prime Minister Vladimir Putin promised fair presidential elections in March as a poll showed that 44 percent of people support recent protests over alleged voter fraud.

“Honest presidential elections in 2012,” Putin told reporters in Moscow, when asked what he can offer to Russians as a New Year’s gift. The premier said he was ready for dialogue with the country’s opposition groups, though they need to articulate a coherent platform.

Putin, 59, is facing the biggest demonstrations since he came to power more than a decade ago over accusations of ballot-rigging in Dec. 4 parliamentary elections. He’s seeking to return to the presidency in March 4 polls after pushing aside his protege, President Dmitry Medvedev. Read more here-http://tinyurl.com/boeply8

-Chavez: U.S. May Be Behind S. America Leaders’ Cancer. Venezuelan President Hugo Chavez hinted that the U.S. may be behind a “very strange” bout of cancer affecting several leaders aligned with him in South America. Read more here-http://tinyurl.com/co4ro76

-Intelligence Service Stratfor Suffered A Devastating Hacking Attack On Christmas Eve. Read more here-http://tinyurl.com/cehbxlt

-Hackers could shut down train lines: expert. Hackers who have shut down websites by overwhelming them with Web traffic could use the same approach to shut down the computers that control train switching systems, a security expert said at a hacking conference in Berlin. Read more here-http://tinyurl.com/d548vrg

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World Financial Report – December 30th, 2011
posted by Rare Colored Diamonds on Friday, December 30, 2011