Saturday, April 17, 2010

The Economist April 17th - April 23rd 2010

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Sprott Speaks Out

Why Are Silver Sales Soaring?

The U.S. Mint just reported another record, but this time it wasn’t for gold. The Mint sold more Silver Eagles in March and in the first quarter of the year than ever before. A total of 9,023,500 American Silver Eagles were purchased in Q110, the highest amount since the coin debuted in 1986.

While this is certainly bullish, there’s something potentially more potent developing in the background. Namely, how this matches up with U.S. silver production. Like gold, the U.S. Mint only manufactures Eagles from domestic production. And U.S. mine production for silver is about 40 million ounces. In other words, we just reached the point where virtually all U.S. silver production is going toward the manufacturing of Silver Eagles.


This is especially explosive when you consider that roughly 40% of all silver is used for industrial applications, 30% for jewelry, 20% for photography and other uses, and only 5% or so for coins and medals. (more)

Morgan Stanley fears German exit from EMU

"The backstop package for Greece and the ECB's climb-down on its collateral rules set a bad precedent for other euro area states and make it more likely that the euro area degenerates into a zone of fiscal profligacy, currency weakness, and higher inflationary pressures over time," said Joachim Fels, head of research, in a note to clients.

The US bank said a bail-out for Greece may be necessary to avoid a crisis for Europe's financial system, but warned that it also "sows the seeds for potentially even bigger problems further down the road".

Mr Fels said weak states cannot easily leave EMU because they would pay a stiff penalty in higher rates, would be stuck with euro debt contracts, and might need controls to stem capital flight. It is a different calculus for Germany, which would see lower rates and might view EMU exit as the only way to ensure monetary stability. (more)

U.S. Cities In Free Fall

Economic indicators in these metros have gone from bad to worse, with no sign of recovery.

Miami boasts a popular South Beach club scene, Art Deco Architecture, and perhaps the best Cuban food in the country. But residents don't have much else to celebrate.

More than three years after the economy started its downward slide, the Miami metro area, like a handful of Sun Belt cities, still hasn't begun to recover. Median home prices in Miami have fallen 38% since its market peaked in the second quarter of 2007; the city's 11% unemployment rate is above the national average and has grown more than most of the 40 cities we surveyed. (more)

US News & World Report - May 2010

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U.S. Accuses Goldman Sachs of Fraud in Mortgage Deal

Goldman Sachs, the Wall Street powerhouse, was accused of securities fraud in a civil lawsuit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly intended to fail.

The move was the first time that regulators had taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market.

The suit also named Fabrice Tourre, a vice president at Goldman who helped create and sell the investment.

In a statement, Goldman called the commission’s accusations “completely unfounded in law and fact” and said it would “vigorously contest them and defend the firm and its reputation.” (more)

Business Week - April, 25 2010

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World Financial Report, April 16, 2010

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Gold in Major Currencies

Gold is clinging for dear life to the $1,150 mark. And it may be headed to its first down week in a month.

But the longer-term trend remains in place, says U.S. Global Research chief and perennial Vancouver favorite Frank Holmes. “We continue to be encouraged by the price action of gold in the face of a strengthening U.S. dollar,” Frank says, confirming a trend we’ve been tracking since February.

“Typically, gold and the dollar move in opposite directions, but so far this year, gold is up more than 6%, reaching a year-to-date high on Monday. At the same time, the dollar has appreciated about 4%.

“Gold has also been appreciating against other major currencies in the developed world, as the chart above shows. The eurozone, Britain and Japan are all struggling with rising fiscal deficits and the aftereffects of the global financial crisis.

“In our view, this gold breakout against the world’s primary paper currencies highlights gold’s growing allure as a store of value against further currency debasement caused by governments spending with little restraint. Gold appears to be reassuming its role as an alternative currency unencumbered by political liabilities.”

Chart of the Day