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Pressure Builds On U.S. Dollar

I don’t know about you, but I’m noticing more concern overseas these days about the greenback. From Bloomberg’s Mark Deen today:

Suresh Tendulkar, economic adviser to Indian’s Prime Minister Manmohan Singh, is urging the government to diversify its foreign exchange reserves and hold fewer dollars, he said today.

“The major part of Indian reserves are in dollars — that is something that’s a problem for us,” Tendulkar said in an interview in Aix-en-Provence, France today.

He also said that world currencies need to adjust to reflect trade imbalances.

India’s neighbor, China, also continues to exert pressure on the U.S. currency. From the staff over at the Business Intelligence Middle East website today:

China requested that a new global currency be discussed at next week’s G8 meeting in Italy. The news sent the dollar into a downward spiral and the price of gold rallied, confirming its status as a currency hedge.

Wednesday’s sharp rebound in Gold Prices to US$945 faded overnight after a Beijing official refuted claims that China wanted discuss a new global reserve currency at next week’s G8 meeting of political leaders in L’Aquila, Italy…

Specifically, the People’s Bank of China said the IMF should manage part of members’ foreign-exchange reserves.

“To prevent the deficiencies in the main reserve currency, there’s a need to create a new currency that’s delinked from the economies of the issuers,” the People’s Bank of China (PBOC) said in a review of the economy in 2008 released today. In March, the PBOC had urged the IMF to expand operations of its Special Drawing Rights currency (SDRs) and move toward a “super-sovereign reserve currency.”

The PBOC statement comes after a top Communist Party research chief said that China should buy gold and US real estate rather than Treasurys.

Former Chinese Vice Premier Zeng Peiyan highlighted the nation’s concern at the risks posed by a global financial system dominated by the dollar, urging more oversight of countries issuing reserve currencies.

“There should be a system to maintain the stability of the major reserve currencies,” said Zeng, the head of a research center under the government’s top economic planning agency. Fiscal and current-account deficits must be supervised as “your currency is likely to become my problem,” he said in a speech in Beijing today.

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The Russians haven’t kept quiet on the issue either. Bloomberg’s Mark Deen and Isabelle Mas wrote this afternoon:

Russian President Dmitry Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the dollar’s future as a global reserve currency. Russia’s proposals for the Group of 20 major developed and developing nations summit in London in April included the creation of a supranational currency.

“We will resume” talks on the supranational currency proposal at the G-8 summit in L’Aquila on July 8-10, Medvedev aide Sergei Prikhodko told reporters in Moscow today.

Sources:

“India’s Tendulkar Says Govt Should Diversify Forex Reserves”
Mark Deen
Bloomberg, July 3, 2009

“Gold’s investment credentials boosted by China’s quest for new global currency”
MI-ME Staff
Business Intelligence Middle East, July 3, 2009

“India Joins Russia, China in Questioning U.S. Dollar Dominance”
Mark Deen, Isabelle Mas
Bloomberg, July 3, 2009

Gold Investment Demand Triples Year-Over-Year

A recent report shows that investment demand for gold is more than making up for a drop in jewelry and industrial demand. From MarketWatch’s Morning Zhou yesterday:

Gold investment demand in the first quarter more than tripled from a year ago to a record level as investors piled into gold exchange-traded funds to hedge against the global economic downturn, according a report released early Wednesday by an industry group.

A drop in jewelry and industrial demand partly offset the jump in investment demand, the report said. Meanwhile, gold supply also surged in the first quarter as high prices encouraged record levels of recycling, which in turn curbed the rally in prices. Gold prices made a modest 4.3% gain during the first quarter.

Investment demand totaled 595.9 metric tons in the first three months of the year, up from 171.3 metric tons a year ago, the miner-sponsored World Gold Council said. Among them, demand for gold exchange-traded funds such as the SPDR Gold Trust (GLD 90.96, +0.60, +0.66%) hit 465.1 metric tons, up sharply from 72.7 metric tons a year ago.

Total gold demand, however, marked a more modest increase, as jewelry and industrial consumption declined. Overall, gold consumption hit 1,015.5 metric tons in the first quarter, up 38% from a year ago.

Zhou talked some more about the surge in investor demand. From the piece:

ETF investment accounted for nearly 80% of total investment demand in the first quarter, surpassing bars and coins to become the most important tool for gold investors, the WGC report showed. It accounted for 45% of total gold demand.

At 465.1 metric tons, ETF demand also topped jewelry consumption for the first time ever. Jewelry demand stood at 339.4 metric tons in the first quarter, down 24% from a year ago.

The bulk of ETF demand was from the SPDR Gold Trust (GLD 90.96, +0.60, +0.66%), the biggest gold ETF. Investment inflows in the ETF totaled 347.21 metric tons in the first quarter.

“Safe haven flows continued to spur investor interest [in gold] in the first quarter,” the WGC said in the report. “While jewelry and industrial demand are likely to continue to struggle in this environment, investment demand should remain well underpinned.”

Source:

“Gold investment hits record as recession triggers demand”
Morning Zhou
MarketWatch, May 20, 2009

Hedge Funds Increase Gold Investments

“Don’t you invest in that just because you think it’s a good idea. I’m warning you.

It’s gold — that so-called safe haven for your assets — and if you’re considering it today, let me explain why you need to bypass it and move on. Although gold may well be one of your favorite items in the vault, as a long-term investment, it is just plain lousy.”

-Nick Kapur, The Motley Fool, May 11, 2009

A growing number of hedge fund managers might disagree with Mr. Kapur’s assessment of the yellow metal. The Dow Jones Newswires’ Joseph Checkler wrote the following on the SmartMoney website last night:

Hedge fund firms Paulson & Co. and Lone Pine Capital made big bets on gold during the first quarter, becoming the No. 1 and No. 2 shareholders, respectively, in the SPDR Gold Trust (GLD) exchange-traded fund, according to regulatory filings.

Paulson & Co. – run by John Paulson, who had already been beefing up his exposure to gold companies – bought 31.5 million shares of the ETF during the first quarter, according to its mandatory end-of-first-quarter holdings report with the Securities and Exchange Commission. That stake would be worth more than $2.8 billion if Paulson still holds all those shares at present.

Stephen Mandel’s Lone Pine bought 26.5 million shares of the ETF, which would be worth $2.4 billion if it still holds those shares. Lone Pine didn’t immediately return a message seeking comment.

Many hedge fund managers have been increasing their gold investments lately. More than 28% of the SPDR Gold Trust ETF’s outstanding stock was owned by hedge funds as of the end of the first quarter, according to Factset Research Systems.

The increased bets on gold come as the price of the yellow metal have remained high, above $900 an ounce. Funds also see hard assets as insurance against further turmoil in the financial system, including a decline in the value of paper currency.

Source:

“Hedge Funds Making Big Bets on Gold”
Joseph Checkler
SmartMoney, May 18, 2009

China Critical Of Dollar, Global Currency System

Chinese officials continue their assault on the U.S. currency and “flawed” international monetary system. From the Agence France-Presse yesterday:

China called Sunday for reform of the global currency system, dominated by the dollar, which it said is the root cause of the global financial crisis.

“We should attach great importance to reform of the international monetary system,” Chinese Vice Finance Minister Li Yong told the spring IMF/World Bank Development Committee meeting in Washington.

A “flawed international monetary system is the institutional root cause of the crisis and a major defect in the current international economic governance structure,” Li said, according to a statement.

“Accordingly, we should improve the regulatory mechanism for reserve currency issuance, maintain the relative stability of exchange rates of major reserve currencies and promote a diverse and sound international currency system.”

As the world’s main reserve currency, US dollars account for most governments’ foreign exchange reserves and are used to set international market prices for oil, gold and other currencies.

As the issuer of the key reserve currency, the United States also pays less for products and can borrow more easily.

Li did not name the dollar but in late March the People’s Bank of China Governor Zhou Xiaochuan said he wanted to replace the US unit which has served as the world’s reserve currency since World War II.

“The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system,” Zhou said, suggesting the International Monetary Fund could play a greater role.

Zhou’s remarks sparked uproar and concern since China has the world’s largest forex reserves at 1.9 trillion dollars. China became the world’s top holder of US Treasury bonds last September, and currently holds around 800 billion dollars, according to official US data.

Beijing has voiced increasing concern over its massive exposure to the US dollar as the global crisis has steadily deepened but after some tense exchanges, the issue appears to have eased in recent weeks.

Then again, maybe not.

Settle it over ping pong?

And what’s China been doing with all those foreign-exchange reserves? Buying hard assets, including gold, of course. From MarketWatch’s Chris Oliver last Friday:

China has boosted its gold reserves to 1,054 metric tons, according to a Friday report by Xinhua News Agency, which cited Hu Xiaolian, head of the State Administration of Foreign Exchange.

The increase makes China the world’s fifth-largest holder of gold, just ahead of Switzerland, and among the six nations plus the International Monetary Fund that have reserves of more than 1,000 metric tons.

Hu said that China’s gold reserves had risen by 454 metric tons since 2003 and that the total was being reported to the IMF per the organization’s rules.

The comments are China’s first public acknowledgement in more than five years that its gold reserves had increased.

The new figure is 76% higher than the 600 metric tons reported at the end of March, a level that had been unchanged since December 2002.

It is thought the latest gold acquisitions came from domestic sources. From the piece:

Analysts said China’s bullion buying reflects efforts to diversify its nearly $2 trillion stockpile of foreign-exchange reserves.

“Chinese officials have been increasingly vocal about their concern on the U.S. dollar and the U.S. bailout policies of late, and have actively been seeking to diversify into other assets, especially commodities,” said Martin Hennecke, an associate director with Tyche Group in Hong Kong.

Traders in Hong Kong said that some of the additional reserves were likely acquired on the Shanghai gold market during January and February. The physical market remained well-bid by an unknown buyer despite bullion prices spiking to levels that normally cooled demand, they said.

Purchases were made in Shanghai, traders said, in an effort to absorb domestic production and lessen the impact of bullion prices on global markets…

Traders also say the gold was accumulated systematically over a number of years.

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Sources:

“China calls for reform of global monetary system”
Agence France-Presse, April 26, 2009

Guns Are Booming In More Ways Than One

Some time ago, I was watching the CNBC show “Fast Money” when one of the show’s hosts started making fun of people who bought and kept physical gold within their homes. He told viewers that if things ever got really bad, he was going to pay these people a visit and take their gold away from them by force.

Knowing that there are 85 million Americans who own firearms, with a number of owners the very same people he was referring to, it would be interesting to watch Mr. “Expert Trader” try and take away their gold.

I just hope this guy has good health insurance. And possibly something with a substantial death benefit too. He’ll likely need it when a gun-toting, gold-owning, homeowner “pops a cap” in his butt.

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As regular readers of Boom2Bust.com already know, the number of gun owners in the United States is on the rise. And the boom in the sales of firearms isn’t being ignored by the mainstream media either. Sean Gregory wrote on TIME’s website yesterday:

Americans are afraid of this economy. As a result, they’re getting locked and loaded. To wit: Jacquita Baker is soft-spoken single mother from Kentwood, Michigan, near Grand Rapids. She works as an administrative assistant at the Grand Rapids Urban League, and is studying criminal justice at a local university. As of Monday, she’s also the proud owner of a shotgun. Why bear arms right now? “The economy played a large part in my decision,” says Baker, 27. “When people don’t have jobs, they might go breaking into people’s homes. I want to be safe in my home.”

According to the SportsOneSource, a research firm that tracks the sports goods industry, firearms sales in large retail outlets are up 39% this year. Shops across the country are reporting ammunition shortages since stores can’t meet demand for bullets. Data from the FBI’s National Instant Criminal Background Check System, which the industry uses as a proxy for overall firearms sales, is also revealing. From November 2008 through March 2009, FBI background checks, which are required every time a federally licensed gun dealer makes a sale, rose 29.3% over the same period a year ago. In November alone checks jumped 42%, to 1,529,635, the largest monthly total in the decade the system has been in place. “Consumer demand is unprecedented,” says Larry Keane, general counsel for the National Shooting Sports Foundation, a trade association for the firearms and ammunition industry.

Two factors are fueling the rise. The first is political — it’s no coincidence that a record number of background checks occurred in November, the same month Barack Obama was elected president and the Democrats took control of Congress. People grew anxious that the Obama Administration might ban semiautomatic weapons, so they rushed to buy guns before legislation could be passed. In a December survey by research firm Southwick Associates, nearly 80% of active hunters and target shooters said they believed firearm purchases would “become more difficult” under the new Administration and a Democratic Congress. “Everybody is waiting for when the next foot is going to fall in taking away the right to bear arms,” says Doug VanderWoude, owner of Silver Bullet Firearms in Wyoming, Michigan, near Grand Rapids. He estimates that business is up 50% in 2009.

The last Democratic President, Bill Clinton, put into law an assault weapons ban in 1994. President Bush allowed that ban to expire, but last month Obama’s Attorney General, Eric Holder, said the Administration wanted to reinstitute Clinton’s ban. “The gun culture is hypersensitive,” says Miles Hall, an Oklahoma City gun shop owner. “If someone sneezes in Washington, we hear it and get nervous. There’s a lot of anxiety out there.”

A new market of gun buyers is emerging — Hall estimates that some 80% of his sales since the election have been to first- and second-time gun purchasers, many nervous that this may be their last chance. “Thus far, the Obama Administration has done what they set out to do,” says Joe Keffer, who owns a shop in New Holland, Pa. “And therein lies the concern.”

The recession has also played a role in the sales jump. Guns are expensive: Baker, for example, paid $200 for her shotgun. Yet, fear trumps the cost of a weapon for people worried that the economic crisis will lead to more crime. “Protection of the family, protection of the home, is utmost on people’s minds,” says Keffer…

Perhaps a little too much on some minds

Source:

“Boom in Gun Sales Fueled by Politics and the Economy”
Sean Gregory
TIME, April 8, 2009

What Next For Gold?

“Gold is just a piece of metal.”

-Recent comment on a Wall Street Journal blog

Gold has been in the news a lot more lately— but not because of rising prices. From MarketWatch’s Morning Zhou this afternoon:

Gold futures fell Thursday ahead of the three-day holiday weekend, marking a third weekly loss as upbeat results from Wells Fargo & Co. boosted investor interest in stocks, reducing gold’s appeal as a safe asset…

Gold for April delivery fell $2.60, or 0.3%, to end at $882.20 an ounce on the New York Mercantile Exchange. The front-month contract lost 1.5% this week. The more active June contract also fell Thursday, down 0.3% to $883.30 an ounce.

Should gold investors be worried this might be the beginning of some longer down-trend in the price of the precious metal? Maybe not, according to some long-time gold observers that MarketWatch’s Peter Brimelow spoke to. He wrote this morning:

Gold gives ground, but the bugs respond with calm.

Yesterday, Harry Schultz’s Gold Charts R Us service offered technical reasons for a rebound. Looking at the weekly gold chart, it said it saw:

“A one-year reverse Head and Shoulders development, with $879.40 left shoulder support (being tested as we write) — that also coincides with a 50% retracement of the October rally-leg. If bullion manages to hold around this level, the odds for shorter, higher highs will remain intact via the formation of a possible right shoulder and a fourth attempt to breach the psychological $1,000 resistance.”

GCRU added that, if this doesn’t work out, it expects “July 2005 uptrend line support, currently around $750.”

GCRU concluded cheerfully: “Don’t let this gold dip dishearten you. Our patience and discipline will soon be rewarded by a new golden sunrise.”

By the way, Schultz happens to be the world’s highest paid investment consultant, in case you didn’t know. Brimelow continued:

The underlying reason for this cheerfulness is not technical but fundamental. There is disturbingly universal expectation among gold-watchers that Federal Reserve monetary expansion must blow off into inflation.

The Pamela and Mary Anne Aden’s Aden Forecast is typical, commenting recently:

“Gold is the ultimate inflation hedge, and there’s no telling where it’ll end up, at least well into the thousands of dollars in the years ahead, and maybe sooner. … Remember, gold’s peak in 1980 at $850 is now the equivalent of about $2,200 in today’s dollars. Gold has not even approached that level yet. Once the dollar declines again and inflation kicks in, it’ll be another story.”

And how many thousands of dollars? The Aden sisters write: “Using the gains in the 1970s as an example to forecast where gold could end up … $5,800 would be the equivalent upside target.”

Brimelow pointed out that non-gold bugs are also bullish about the prospects for the yellow metal. He added:

This optimism is no longer confined to the investment letter fringe. John Reade, the respected non-gold bug London-based chief metals strategist for UBS, wrote:

“Based on the conversations we continue to have across our client base, gold remains something that investors are looking at with unprecedented interest, although participation levels remain lower than the interest would suggest.”

“But the reasons why investors bought gold — fears of longer-term inflation and currency debasement — remain intact, and we see no reason why investors will not buy gold in very good quantities at some point. … once the correction has run its course and gold has stabilized, we expect bottom-fishers to begin the next cycle of investment.”

Some piece of metal…

(Note: The author disclaims any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

Sources:

“Gold falls to mark third weekly loss amid optimism”
Morning Zhou
MarketWatch.com, April 9, 2009

“Gold bugs calm short-term, buoyant long-term”
Peter Brimelow
MarketWatch, April 9, 2009

Does Fort Knox Have Any Gold Left?

I’ve heard the conspiracy theory before myself. There’s little, or no gold left, inside Fort Knox. I’m not surprised a tale such as this exists, since no independent audit has been conducted on the purported gold holdings for almost fifty years. Well, efforts are being made to find out once and for all how much, if any, gold is stored at the U.S. Army post in Kentucky. Chris Ayres of The Times (UK) wrote this past weekend:

It is said to be the most impregnable vault on Earth: built out of granite, sealed behind a 22-tonne door, located on a US military base and watched over day and night by army units with tanks, heavy artillery and Apache helicopter gunships at their disposal.

Since its construction in 1937 the treasures locked inside Fort Knox have included the US Declaration of Independence, the Gettysburg Address, three volumes of the Gutenberg Bible and Magna Carta.

For several prominent investors and at least one senior US congressman it is not the security of the facility in Kentucky that is a cause of concern: it is the matter of how much gold remains stored there – and who owns it.

They are worried that no independent auditors appear to have had access to the reported $137 billion (£96 billion) stockpile of brick-shaped gold bars in Fort Knox since the era of President Eisenhower. After the risky trading activities at supposedly safe institutions such as AIG they want to be reassured that the gold reserves are still the exclusive property of the US and have not been used to fund risky transactions.

In other words, they want to be certain that the bullion has not been rendered as valueless as if a real-life Goldfinger had stolen it.

“It has been several decades since the gold in Fort Knox was independently audited or properly accounted for,” said Ron Paul, the Texas Congressman and former Republican presidential candidate, in an e-mail interview with The Times. “The American people deserve to know the truth.”

Mr Paul has so far attracted 21 co-sponsors for a Bill to conduct an independent audit of the Federal Reserve System – including its claims to Fort Knox gold – but an organisation named the Gold Anti-Trust Action Committee (GATA) is taking a different approach.

It has hired the Virginia law firm William J. Olson, PC, to test President Obama’s promise to bring “an unprecedented level of openness” to the Government and next month it will file several Freedom of Information requests for a full disclosure of US gold ownership and trading activities.

“We’re taking the President at his word,” said Chris Powell, of GATA. “If you go online you can find out how to build a nuclear weapon but you won’t find any detailed records on central gold reserves.”

One reason why such a push is being made almost half-a-century after the last independent audit of the gold took place is that a growing number of people, particularly gold investors, suspect the federal government and the Federal Reserve may have been, or are still using, Fort Knox gold to keep the price of the precious metal low, thereby lessening its attractiveness as an alternative to the U.S. dollar. Ayres wrote:

Many gold investors suspect that the US has periodically attempted to flood the market with Fort Knox gold to keep prices low and the dollar high – perhaps through international swap agreements with other central banks – but facts remain scarce and the US Treasury denies that any such meddling has gone on for at least the past decade.

Pressure for more openness is mounting after the collapse of the global banking system and renewed interest in a return to the simpler era of the gold standard – a subject that is likely to be raised at the G20 summit next week. China and Russia are calling for the creation of a new world reserve currency amid fears that the Federal Reserve’s quantitative easing policy – essentially printing money – might cause hyperinflation, then collapse.

A spokesman for the US Treasury told The Times that US gold holdings are audited every year by the Department of Treasury’s Office of Inspector General. He confirmed that although independent auditors oversee the process they are not given access to the Fort Knox vault.

The website of the US Mint says that the 147.3 million troy ounces of gold in Fort Knox “is held as an asset of the US”. It does not elaborate.

I’ll be sure to keep everyone up-to-date regarding the latest developments in this intriguing story.

Source:

“Is there any gold inside Fort Knox, the world’s most secure vault?”
Chris Ayres
The Times (UK), March 28, 2009

More Gold Nuggets

Speaking about digging for gold, I happened to catch the following Associated Press story from March 19:

Bismarck police say a man reported his brother accidentally threw out more than $10,000 in gold coins he had kept in a basement.

Police Sgt. Dwight Offerman says Kris Lengenfelder reported the coins were tossed when his brother cleaned out a storage area last month. He said 13 1-ounce gold coins were in a bag.

Lengenfelder said he figures the coins are in the Bismarck landfill by now.

But for anyone thinking of digging for them, Offerman says a city ordinance prohibits scavenging at the landfill.

No word on whether or not anyone has found the buried stash yet.

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And how about this nugget coming out of Salt Lake City. According to the Denver Post this weekend:

Police and a St. George bank are trying to locate a woman who cashed in 14 rare gold coins at face value to pay for groceries.

The Double Eagle coins have a face value of $20 each but are actually worth 50 times that just based on the current price of gold. The oldest of the coins was minted in 1875, the newest in 1927…

Zions Bank’s executive vice president for marketing and communications, Rob Brough, said banks deal only in face-value transactions, so a teller paid the woman $280 in the March 16 exchange. The woman told the teller she had groceries waiting at a nearby Wal-Mart, which had refused the coins as payment.

Brough said the bank wants to return the coins to their owner. A bank surveillance video shows a woman with short, dark hair who may be in her 20s or 30s.

Sources:

“Landfill may have gold coins”
Associated Press, March 19, 2009

“Bank seeks owner of gold coins cashed for face value”
Denver Post, March 29, 2009

Gold Diggers Making A Comeback

Yeah, I know what you were thinking. This post isn’t about THOSE gold diggers— although I wouldn’t be surprised if they’re out in force these days too. I’m talking about gold prospectors. Terry McCarthy, reporting for the ABC News show “Good Morning America,” wrote Sunday:

The 1849 Gold Rush on California drew unprecedented numbers of prospectors to the American West. Now, 160 years later, as the recession bites across the state, there is still gold in them thar hills – and new treasure hunters have joined the chase. With the precious metal trading at almost $1,000 an ounce, it’s a gamble that, for the lucky ones, could really pan out.

From Downieville in the north to Modesto and the Mojave desert outside Los Angeles, the state is seeing prospectors in growing numbers. Pat Keene, who runs a mining equipment store in the Chatsworth area of L.A., says his customer base doubled this year. “I know a lot of people who have lost their jobs who are out prospecting for gold,” he says.

Unlike the gold prospectors of the 19th century, today’s diggers have the benefit of sophisticated metal detectors that can help them zero in on nuggets hidden in the clay. But apart from that, the methods have changed little in a century and a half. In river beds they use sieves and on dry land they use small shovels and pickaxes ı which makes for thirsty work under the California sun. Many prospectors join clubs that go out together for a weekend, digging for gold by day and sitting around campfires swapping stories by night.

You can view the accompanying 2 minute ABC News video segment here.

Source:

“California Sees Modern-Day Gold Rush”
Terry McCarthy
ABC News, March 29, 2009

Trends Expert Says The “Greatest Depression” Is Upon Us

We’ve already experienced one blast from the past in David M. Walker today. How about one more, for good measure? Does anyone remember me talking about Gerald Celente some time ago? Like Walker, he’s in the headlines these days too. This is what I wrote about Celente on November 26, 2007:

Not surprisingly, the following story wasn’t picked up by the mainstream financial media. Back on November 19, UPI reported that Gerald Celente, trends researcher and director of the Trends Research Institute, told the Hudson Valley Business Journal (NY) that the United States is headed towards “The Panic of 2008,” where a financial crisis will send the U.S. dollar tumbling as much as 90% and the price of an ounce of gold soaring to $2,000. Celente told the paper:

We are going to see economic times the likes of which no living person has seen… The bigger they are, the harder they’ll fall.

Celente, who correctly forecast the subprime mortgage crisis, the dollar’s decline, and gold’s rise, said that the subprime fiasco was just the first “small, high-risk segment of the market” to collapse. He predicts that derivative dealers, hedge funds, buyout firms and other market players will also unravel. Massive corporate losses will also be an integral part of the “Panic,” which will result in a lower U.S. standard of living.

Okay, so Celente was wrong about a dollar crash and gold skyrocketing (at least in 2008), but he’s off to a good start with the remainder of his forecast.

So what’s the trends researcher saying these days? Plenty. He wrote on HoweStreet.com Monday:

The “Greatest Depression” that the Trends Research Institute forecast, well before Wall Street or Washington would acknowledge recession, is upon us.

The global financial markets are collapsing. All the pundit’s cautious predictions and business media’s hopeful expectations at the New Year for an economic turn around and imminent market bottom were dead wrong. There will be no turn around in the second quarter of 2009 or 2010 or 2011 … America and much of the world has entered the “Greatest Depression.”

The global financial system, built on endless supplies of cheap money, rampant speculation, fraud, greed, and delusion is terminally ill and will not be coaxed into remission by stimulus packages nor restored to health by government buyouts and bailouts.

There is no stock market bottom in sight. The only figure that can be forecast with confidence is that the Dow won’t reach zero!

As the crisis worsens, governments will take draconian measures to prevent total economic collapse and public panic. We have cautioned the likelihood of such measures before. But the rapidity and severity of the economic unraveling now demands immediate attention.

Expect massive bank failures, runs on banks, and bank holidays. Even if deposits are FDIC insured, quick access to money is by no means assured. At minimum, have reserves on hand for emergencies.

Trendpost: When the ship is sinking there are very few options: Life boats, life rafts, life preservers … and for the late to act, possibly a few pieces of floating debris to cling to.

We are trend forecasters, not certified financial advisors legally empowered to provide such advice. Although gold prices declined today some $15 to $925 per ounce, we forecast that gold will be one of the few life saving investments that will continue to increase in value, reaching $2,000 per ounce and beyond.

Buy gold online – quickly, safely and at low prices

Source:

“The ‘Greatest Depression’ Under Way”
Gerald Celente
HoweStreet.com, March 2, 2009

What The World’s Highest-Paid Investment Adviser Thinks

On February 4, MarketWatch’s Peter Brimelow talked about what Harry Schultz, the highest-paid investment consultant in the world, thinks is in store for us next. Brimelow wrote:

I’m particularly interested in International Harry Schultz Letter. Despite its appalling and paradoxical portfolio performance, I named it 2008 Letter of the Year because of its extraordinary prescience in predicting, more than a year early, an imminent “financial tsunami.”

Schultz’ latest issue just arrived. It’s full of cheerful items such as how to guard against an anticipated rise in home invasion robberies and technologically-enhanced government surveillance (”make sure kids don’t become victims of Facebook/ My Space craze by splashing their personal info on Internet.”)

But in the short run, Schultz writes: “gold is a bit overbought, stocks are a bit oversold. Overlay Dow Jones Industrial Average of 1929-1940 vs. 2000-2008 and you see a rally due.”

He continues to hold to a 20-year “V-formation” forecast, with not just stocks but investor “buying power” declining and the rebounding, interspersed with 1-2 year counter-trends. He advises: “Hold approx half of your assets in Swiss/French/German/Dutch (or other First world non-U.S. dollar) government bonds, and approximately half in a mix of blue-chip gold shares and physical gold bullion (best bought and stored in Switzerland, Canada, Australia, Hong Kong or Singapore).”

Schultz has been particularly alert to the possibility of deflation. He now says: “I seem to see deflation getting a stronger grip in early 2009, partly due to the consumer buyer’s strike, despite a possible upside breakout in commodities, rising gold and slipping bonds. It will in any case probably gradually morph toward high or hyperinflation later in ‘09. 2010 looms as a mega inflate-year. Only if deflation gets out of control in early ‘09 due to government failure to increase money supply enough, and/or business/ bank sectors collapse in a sea of bankruptcies and lawsuits, will inflation be delayed.”

On gold, he writes: “Mathematically it will need a U.S. $2,300 gold price to equal the $800 gold peak of 1980. So, gold is cheap today, is well under half its 1980 worth in inflation-adjusted dollars.”

He cites one technical indicator: “Basis on French Curve chart projection, gold will reach $3,500 by 2012, then fall to $2,500 (29%), then rise to $10,000. There are a lot of projections around by some able technicians. If we go into Weimar inflation, the sky is the limit. But, we will play it a stage at a time, by the charts, because being overconfident about any future prices has been the undoing of many souls.”

Source:

“A great month for gloom-and-doomers”
Peter Brimelow
MarketWatch, February 4, 2009

(Note: The author disclaims any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

Quotes For The Week

First off, a brace from Dr. Doom, Marc Faber, last week (source: Fleet Street Daily):

I’m not optimistic about the global economy. The next Madoff case – the next Ponzi scheme – is the US government. It will go bust. It is only a question of time.

FREE VIDEO: How to Ponzi Proof Your Portfolio

The Swiss-born money manager who warned his clients to get out of U.S. stocks a week before the October 1987 crash also predicted:

One day the price of gold will be higher than the Dow Jones.

U.S. Senator Claire McCaskill (D-MO) also had some kind words for Wall Street the other day. Speaking on the Senate floor:

We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer. They don’t get it. These people are idiots. You can’t use taxpayer money to pay out $18 billion in bonuses.

Peter Schiff Warns Of Coming Dollar Collapse

Last week, Russia Today’s Marina Portnaya spoke to Peter Schiff, president of Euro Pacific Capital and author of Crash Proof: How to Profit From the Coming Economic Collapse (Lynn Sonberg Books) and The Little Book of Bull Moves in Bear Markets: How to Keep Your Portfolio Up When the Market is Down (Little Books. Big Profits), about his outlook for the U.S. economy. Notable excerpts from the exchange included:

The politicians don’t want to listen to my advice, because my advice is that they get out of the way, and they let the recession run its course. That Americans have to have some discipline, on their spending and their consumption. That what we need in this country is more savings, and less borrowing. We need more production, and less consumption. But everything the government is doing now, all the economic stimuli, all the bailouts, they’re all designed to perpetuate the problem, to get us deeper into debt, and all they’re doing is throwing gasoline on a fire…

I think we’re on the verge of another major crisis, that’s far greater than the one the government is trying to deal with now, and that is the coming collapse in the value of the U.S. dollar. I think we’re going to have a run on our currency. I think the dollar is going to completely fall through the floor. And that’s going to unleash problems much greater than the ones we have now, because it’s going to send both interest rates, and consumer prices, up into the stratosphere in this country…

We are on a collision course for massive inflation.

Portnaya asked Schiff how people should prepare for the “doom and gloom.” He replied:

What individual Americans need to understand, is if they’ve got dollars invested in government bonds, in municipal bonds, in Treasuries. If they’ve got insurance, if they’ve got cash value accounts, they’ve got bank accounts, they’ve got CDs— all that wealth is going to be wiped out, unless they act quickly to get out of U.S. dollars and to move their wealth into foreign currencies, and to bonds issued by foreign governments or foreign corporations. They could buy stocks, common stocks, traded in foreign markets, but where the income and dividends are paid in foreign currencies. They can buy precious metals, they can buy gold and silver, they can buy other commodities. But people need to act quickly to get out of U.S. dollars before the dollars lose their value.

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Related Post

It’s not often you see a “crash prophet” criticize another prophet’s investment style. From our sister blog Investorazzi.com tonight:

“Mark Faber: Forget Warren Buffett Aproach, This Is A Traders’ Market”

“I think The Warren Buffett approach is dead, and it’s been dead for ten years, and it’s going to be dead for another ten years. We’re moving into very high volatility, big swings in all markets.”