Saturday, September 19, 2009

The U.S. Balance Sheet: Households See Net Worth Down by $12 Trillion Since Peak and Total Debt Floating in the Market of $33 Trillion.

The Federal Flow of Funds report was released on Thursday with an expected jump in household net worth. When we did our last report, we stated that with the $13.89 trillion in wealth that evaporated to the trough, we would expect a jump in net worth to come from the massive stock market rally. The report shows this paper wealth gain that started at the end of Q1. Household net worth increased by $2 trillion from the first quarter to the end of the second quarter of 2009. Much of the increase came from the $1.36 trillion increase in corporate equities and mutual funds. Real estate grew by $139 billion. Yet this increase is merely a reflection of all the liquidity being flushed into the equity markets by the Federal Reserve. (more)

The Stealth Gold Bull Market is Back

Silver Stock Report
by Jason Hommel, September 17th, 2009

One trouble with Americans is that we think we are the center of the world. We do have about 5% of the world's population, and use up about 25% of the resources. That's mostly a function of being significantly "wealthier" than the rest of the world. But that's mostly paper wealth. Will it last? Only if we buy at least 25% of the world's silver and gold. Do we? Not in gold, but we do in silver! Let's get to the facts.

Worldwide, the world buys about 80 times as much gold as silver, for investment. The world annually purchases gold worth $80 billion (about 80 million oz., or 3500 tonnes). If American-led Central bank selling did not help meet demand and add to mine supply, then the gold price would go up faster than it already has. Remember, central bank selling is a manipulative and unsustainable supply source.

The annual silver investment market is only $1 billion. Annual production is about 600 million oz., but only about 50-100 million oz. is purchased for investment.

These figures show that the world is buying 80 times as much gold as silver, for investment. (more)

Economic Duplicity: Recession and Record Profits

In December 14, 2008, in his interview on the CBS sixty minutes show, Whitney Tilson an investment fund manager predicted that the subprime collapse was only half way of the total real estate bubble, and that the second half will begin take place around 2010 and will continue until about the year 2013. Tilson also discussed the two fancy Wall Street terms for bad mortgages namely Alt-A (Alternative-A paper) and option arms mortgages. These loans lured borrowers with teaser rates that will begin to reset this year.

Tilson has also predicted that seventy percent of these loans will eventually default, based on existing evidence of pre-reset default rates [1]. (more)

The Economist (September 19th - September 25th 2009)

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42 states lose jobs in August, up from 29 in July

Forty-two states lost jobs last month, up from 29 in July, with the biggest net payroll cuts coming in Texas, Michigan, Georgia and Ohio.

The Labor Department also reported Friday that 27 states saw their unemployment rates increase in August, and 14 states and Washington D.C., reported unemployment rates of 10 percent or above.

The report shows jobs remain scarce even as most analysts believe the economy is pulling out of the worst recession since the 1930s. Federal Reserve Chairman Ben Bernanke said earlier this week that the recovery isn't likely to be rapid enough to reduce unemployment for some time.

The jobless rate nationwide is expected to peak above 10 percent next year, from its current 9.7 percent. (more)

Business Week (28/09/2009)

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Taylor: Rates May Rise Early in 2010

The Federal Reserve may hike up interest rates to combat inflation as early as the beginning of next year, says Stanford University Professor John Taylor.

Interest rates have hovered at a very low target range of zero to 0.25 percent since December, as monetary policymakers have worked to get the country out of the recession.

Lower lending rates can eventually lead to rising consumer prices.

The government, meanwhile, has earmarked $787 billion in stimulus spending programs that should inflate the country's budget deficit, which can also fuel inflation, Taylor told Bloomberg News.

The Congressional Budget Office predicts the budget deficit will widen to $1.6 trillion this year. (more)

Peter Schiff: Americans must prepare for deepening unemployment, inflation