The world’s most powerful investors have been advised to buy farmland, stock up on gold and prepare for a “dirty war” by Marc Faber, the notoriously bearish market pundit, who predicted the 1987 stock market crash.

The bleak warning of social and financial meltdown, delivered today in Tokyo at a gathering of 700 pension and sovereign wealth fund managers.

Dr Faber, who advised his audience to pull out of American stocks one week before the 1987 crash and was among a handful who predicted the more recent financial crisis, vies with the Nouriel Roubini, the economist, as a rival claimant for the nickname Dr Doom.

Speaking today, Dr Faber said that investors, who control billions of dollars of assets, should start considering the effects of more disruptive events than mere market volatility.

“The next war will be a dirty war,” he told fund managers: "What are you going to do when your mobile phone gets shut down or the internet stops working or the city water supplies get poisoned?”

His investment advice, which was the first keynote speech of CLSA’s annual investment forum in Tokyo, included a suggestion that fund managers buy houses in the countryside because it was more likely that violence, biological attack and other acts of a “dirty war” would happen in cities.

He also said that they should consider holding part of their wealth in the form of precious metals “because they can be carried”.

One London-based hedge fund manager described Mr Faber’s address as “excellent, chilling stuff: good at putting you off lunch, but not something I can tell clients asking me about quarterly returns at the end of March”.

Dr Faber did offer a few more traditional investment tips, although their theme fitted his general mode of pessimism.

In Asia, particularly, he said, stock pickers should play on future food and water shortages by buying into companies with exposure to agriculture and water treatment technologies.

One of Dr Faber’s darker scenarios involves growing military tension between China and the United States over access to limited oil resources.

Today the US has a considerable advantage over China because it has free access to oceans on both coasts, and has potential energy suppliers to the north and south in Canada and Mexico.

It also commands an 11-strong fleet of aircraft carriers that could, if necessary, secure supply routes in a conflict situation.

China and emerging Asia, meanwhile, face the uncertainty of supplies that must travel from the Middle East through winding sea lanes and the Malacca bottleneck.

American military presence in Central Asia, Dr Faber said, may add to the level of concern in Beijing.

“When I tell people to prepare themselves for a dirty war, they ask me: “America against whom?” I tell them that for sure they will find someone.”

At the heart of Dr Faber’s argument is a fundamentally gloomy view on the US economy and its capacity to service a growing mountain of debt.

His belief, fund managers were told, is that the US is going to go bankrupt.

Under President Obama, he said, the country’s annual fiscal deficit will not drop below $1 trillion and could rise beyond that figure.

Arch bears have predicted that US debt repayments could hit 35 per cent of tax revenues within ten years.

Dr Faber believes that the ratio could easily hit 50 per cent in the same time frame.

source HERE

Posted by Mr Thx Wednesday, February 24, 2010 0 comments

The image of banks locking their doors to keep customers from making withdrawals during a bank run is what immediately came to mind when we heard that Citigroup was telling customers it has the right to prevent any withdrawals from checking accounts for seven days.

"Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change," Citigroup said on statements received by customers all over the country.

What's going on? It seems that this is something of an error. The seven day notice policy only applies to customers in Texas, Ira Stoll reports at The Future of Capitalism. It was accidentally included on customer statements nationwide.

"Whatever the explanation, it doesn't exactly inspire confidence in Citi," Stoll writes. "But it's hard to believe a bank would be sending out a notice like that on its statements."

UPDATE: According to Stoll, Citi issued a statement saying that it has been required to make this change by Federal regulations--and it no longer sounds like it's limited to Texas:

Update: Citibank has now released the following statement by way of explanation: "When Citibank moved to unlimited FDIC coverage in 2009, we had to reclassify many checking accounts to allow for immediate withdrawals in order to ensure all customers qualified for the additional coverage. When we moved back to standard FDIC coverage with most major banks in 2010, Citibank decided to reclassify those accounts back to make them eligible again for promotional incentives. To do so, Federal Reserve Reg D requires these accounts, called NOW accounts, to reserve the right to require a 7-day notice of withdrawal. We recently communicated this technical requirement to our customers. However, we have never exercised this right and have no plans to do so in the future."

source HERE

Posted by Mr Thx 0 comments

Today is the day to tell your wife that you love her.
Today is the day to call your mother and chat with her for an hour.
Today is the day to send your dad a note.
Today is the day to get in touch with that friend you haven’t talked to in a while.
Today is the day to call up a special person and set up a date.
Today is the day to stop by your grandmother’s house with a sack full of groceries and make dinner for her.
Today is the day to visit that old family friend who helped you so much when you were younger.

Not Valentine’s Day. Not Mother’s Day. Not Father’s Day. Not someone’s birthday. Not Christmas.

The value a person has in your life is never really shown on a “special” day marked on a calendar and observed with a greeting card and a slickly-wrapped present. It’s shown with a few minutes (or an hour or two) of your time on a day when they don’t expect it. On a day when they’re merely in your thoughts.

Build those relationships now before the chance is gone.
Build those relationships now and they’ll pay dividends for the rest of your life.
Build those relationships now so that you can have someone to always share every exciting moment and success in your life with.
Build those relationships now when times are good so they’ll still be there when the times are bad.

I’m stopping right now so you can take the few moments you might have spent reading a longer post to instead do something to build a valuable relationship in your life, because it will often be those very relationships that are there for you when the chips are down.

source HERE

Posted by Mr Thx Tuesday, February 23, 2010 0 comments

The Daily Crux: Chris, in March of last year, you told your readers to load up on positions in stocks, precious metals, and cash. Those who did caught almost all of 2009's incredible rally, and ended up having an unbelievable year. Now we've heard you've become more cautious. Can you update us on your thoughts on the markets?

Chris Weber: Well, we did do several things right last year. As you mentioned, we had our positions one-third each in stocks, metals, and cash.

Of the 22 investments we held for most or all of last year, 21 of them were up and just one of them was down, and by only 3.5%. We had several stocks with triple-digit gains, and ended up with a 69% average gain, compared to the Dow being up about 19% and the S&P 500 up 24%.

So yes, we did very well last year.

That said, it's actually been almost too good. I believe most of the gains last year in all areas were the result of huge infusions of new money and credit surging into every asset except the real economy, and I said late last year that I didn't expect 2010 to be as great for us. In fact, I suspected it could be quite brutal.

The rally that started last March has always seemed to be a bear market rally to me, and they can stop as quickly as they start. This one may be over now.

As I look out at the global stock indices, I see only very toppy behavior.

I've been very concerned that the markets across the board would fall during 2010. January's action saw this happen – across the globe and across all asset classes.

China has fallen almost 10% since the end of 2009. Japan is down about 3%. India, Australia, the U.K., and Germany all fell about 6%. The U.S. actually did relatively better: It was down only about 3.5% or 4% for the Dow and S&P 500.

All of the major currencies fell against the U.S. dollar in January. The euro, Aussie dollar, Canadian dollar, and the Swiss franc were all down about 3%.

Gold fell too, down a little over 1% in U.S. dollar terms, but that means it actually rose in terms of all the other currencies I just mentioned. In fact, gold has outperformed all the major stock markets and currencies, except the U.S. dollar. So you've got a situation where practically everything has been falling against the dollar and gold.

It's a bit contrarian, but I still think that deflation remains a great danger, and I think what we've seen from the markets so far this year validates this point. And not just assets have fallen. Interest yields continue to fall or remain relatively low as well.

We may not be going into deflation, but pretty much every major market and indicator – at least so far this year – says we will. And I don't like to be on the opposite side of a major market trend.

I decided late last year that I would not expect to make huge profits this year, but instead would focus on keeping what I have – on not losing money. And I continue to approach the markets this way.

Crux: Assuming these trends continue, what do you like right now? Where do you suggest readers put their money?

Weber: Well, it may sound extreme, but I think that almost all new money should go into a combination of cash and precious metals held physically.

I'm of the view that you can't have too much cash right now.

My choice has been the U.S. dollar for 90% of my cash holdings. That's mostly because I'm living in the U.S. again, but I think we could still see more dollar strength versus all the other "cash" in the world.

The important idea is that most people should be concentrating on losing as little as possible, rather than gaining as much as possible, and right now that means holding a significant amount of cash.

As far as the metals go, I recommend physical gold, silver, and platinum, in that order.

We still own some stocks, but they are either precious metals stocks held at no risk – meaning we've already sold enough to protect our original investment – or stocks that we bought last year in March that we've been holding with relatively tight trailing stops.

Over the last few months, I haven't wanted to make any new recommendations, because I've been worried that we're going into a period where nearly everything will fall in value.

So at this time, I'm not interested in acquiring new positions in anything but more cash and more metals.

I know that probably sounds absurd to a lot of people, but I don't see any other great buys right now. I think it's important to be patient and not to trade just for the sake of trading.

Not only do you run the risk of losing money, but you miss out on a fantastic opportunity. It's typically during these times of inactivity that many of my best ideas have come to me.

Crux: That's great advice, Chris.

You mentioned you believe most assets will fall in value, but you're still recommending buying more physical gold and silver. Can you explain your reasoning here? Do you see gold or silver bucking this trend?

Weber: Well, first let me say that I still believe the precious metals are in a major bull market that started in 2001. That has not changed in my mind.

But we have seen a correction in precious metals so far this year – along with most asset classes – and it's possible there's still more downside. They had gone up so far, so fast in the past year that I was expecting to see a correction or a period of consolidation early this year.

How long this correction will last or how far it will go is anyone's guess. Gold and silver will fall to a sufficient extent that many people will panic and sell them, and some of the excitement we've seen build in the sector will fade.

I actually expected the correction in gold that started in March 2008 – the first time it rose over $1,000 – to be much worse than it turned out to be.

We only have the big bull market of the 1970s to compare to, but during one 18-month period in 1975 and 1976, gold lost 50%.

By comparison, the correction in March 2008 bottomed after just seven months, and fell only about 30%. After that, gold bounced strongly back to over $1,200 relatively quickly.

This means that so far in this bull market we haven't seen anything like the big correction of the '70s, a decade that saw gold rise overall from $35 to $850 – over 2,000%.

So this may be just another short rest like many others we've seen, or it might be longer and take gold back below $1,000.

Gold could easily go back below $1,000 and still be in a bull market. Unfortunately, we can't know for sure if it will get there, which is why I don't recommend waiting for this to happen before buying.

Trying to time purchases is very difficult. We may have already seen the lows.

My advice is to take advantage of the recent 10% discount from the peak and buy some, if you don't already have it.

Today, gold is trading above $1,100, so that means it's actually up against even the U.S. dollar since the start of the year. Since the U.S. dollar is up so much against the other major currencies, you can imagine how well gold is doing in those currencies as well.

Gold is up about 5% so far this year against the euro.

It just goes to show you that even during what most people are considering to be a gold correction, gold is actually doing pretty well.

So again, I don't recommend you try to time your buying.

Just start accumulating gold, and think about it in terms of how many ounces or grams – rather than how many dollars worth – you own.

Crux: Do you feel similarly about silver?

Weber: Well, silver is trickier than gold.

I first recommended physical silver about six years ago, in January 2004. We had owned silver stocks, but I was waiting for silver to fall a bit to get a better price – exactly what I just told you not to do.

Well, as I said it's very difficult to time your purchases, and we never got that better price. In early 2004, silver really began to take off, and I didn't want my readers to miss out on any more of the move, so I officially recommended it.

We got in around $6. It then jumped up to $8, fell back to $6, then back to $8 where it stayed for a couple of years before starting another big rally.

So you can see just how volatile silver can be. Moving from $6 to $8 is more than a 30% gain in just a few weeks, and falling from $8 to $6 is a 25% drop in even less time. This is a great example of the long periods of flat prices that are common in silver, too.

Since that time, I've been looking for silver to eventually make the move back up to test the 50% level of its big decline from 1980 to 2001, which would be in the $26 range.

Obviously, it hasn't made it there yet, but we're still holding. I'm willing to give silver much more room than gold because it's just so volatile.

I still believe that when silver eventually soars, it will rise very quickly and go much higher than anyone believes is possible.

Back in 2006, I estimated if silver could break above $25, it could make it to $50 in 2010, which is where it peaked in 1980. Of course, in inflation adjusted terms it would have to hit $130 to equal that peak, but I think we're a long way from seeing those kinds of prices.

So, first I want to see how silver acts when it hits the 50% level. Silver has fallen hard so far this year, but hitting this level as soon as this year is not out of the question.

Your readers may be familiar with the gold-to-silver ratio, which is simply how many ounces of silver it takes to buy one ounce of gold. Historically, this ratio has averaged around 16:1, meaning 16 ounces of silver for one ounce of gold.

So far, in this bull market, silver has not gotten below about 45:1, back in 2006.

At the end of last year, the ratio was 65:1. I wouldn't be surprised to see silver rise to a 16:1 ratio again, but I learned long ago not to make strong predictions when it comes to silver.

The way to best invest in silver is just to buy it and wait, but be prepared for some serious volatility.

Don't buy so much that you can't sleep or try to sell it every time silver falls. That's what silver does in a bull market.

My best advice is to buy it and just try to forget about it entirely. You'll sleep much more comfortably.

Crux: More great advice, Chris. You also mentioned holding cash now, specifically the U.S. dollar. This is in pretty stark contrast to many advisors suggesting everything from continued dollar debasement to complete currency collapse. What's your reasoning here?

Weber: Well, it's true that many people are calling for the dollar's demise, but I have to disagree, at least over the short term. There are a few reasons for this.

First, when you hear someone say the dollar will fall, you have to ask, "Against what?"

If it's other currencies, I would disagree. No other currency wants to appreciate right now. Many countries are actively printing more of their own currency to buy U.S. dollars to keep it from falling more. Some are devaluing their currency directly, like Vietnam just did.

If you look at a chart of the U.S. dollar Index, you'll see that despite its big decline since last year, it never traded below its bottom in the spring of 2008.

On a similar note, many of the currencies that did well in the past year have not taken out their old highs.

So here I look primarily at the charts. If the dollar were to break down to new lows versus other currencies, I would sit up and take notice.

But so far, it has held above the lows of 2008. Until or unless this level is violated, I will continue to hold my U.S. dollars.

I'm not saying the U.S. dollar is a healthy currency; I'm only saying that the other countries don't want it to fall more, and are willing to inflate or do whatever else they can to stop this from happening.

Of course, the main reason to be in cash is for liquidity and a degree of safety, so I generally advise readers to be primarily in their own currency, as well as another one which usually rises when yours falls.

For me, this is the U.S. dollar.

Crux: What do you say to the argument that the U.S. cannot hope to pay off its debts, and will be forced to either default or inflate its way out? Won't that cause a dollar crash?

Weber: Well, I agree. I personally can't see the debt ever being repaid. We crossed that bridge a long time ago. And I agree that at some point the only two options are to default or inflate, and either way taxes are going to have to go up and spending will have to go down. This means the standard of living for the average American is going to fall.

But the key here is timing.

The U.S. has no reason to default on debt as long as foreigners will still accept U.S. dollars in payment on the interest of it.

Today, because most other countries are dealing with the same credit-related problems as the U.S., the world needs cash, and for now the market is content with the 3%-4% interest rates on long-term U.S. debt.

Of course, at some point the world could – and likely will – realize that the U.S. cannot repay its debts or lose all faith in the U.S. dollar as you suggested.

That would be a serious problem, and it could quickly deteriorate into a downward spiral of the dollar falling and interest rates rising.

But we're not there yet, and it's possible that we may never get there.

Of course, I'm not willing to bet everything on that scenario, which is why we're holding precious metals.

I don't want to give the impression I'm a long-term dollar bull.

Ultimately, I think the place to be is in the precious metals. The key is to have enough cash on hand to get you through the inevitable corrections without having to liquidate your precious metals holdings to meet other expenses. So far, we're in good shape.

At some point, we'll get out of cash. But again, it's a matter of timing.

Right now, the big factors saving the U.S. from default are the global recession and the fact that there's just so much global debt and so little cash to service it. This makes cash more valuable. There also isn't really any alternative to the U.S. dollar as the global reserve currency at this point.

No other country is able or willing to have its currency take that place.

China needs a cheap currency, so it continues to tie it to the U.S. dollar, and the euro is obviously in no position to take its place.

You could object and suggest that all world currencies could be debased versus real assets simultaneously, but this is why we hold precious metals as well.

Ultimately, I think gold will come to serve as money again. I think the next decade will be the decade of gold.

Crux: Great stuff, Chris. Any closing thoughts?

Weber: We've been hearing a lot of talk about an economic recovery from the government and the media, but I have to wonder what they're talking about.

Are they suggesting that things are going to go back to the way they were in recent years, with people living above their means, buying houses and cars and more that they can't afford with little or nothing down?

I just don't see this happening.

Most of the developed world went through an insane period of debt creation, and I see these same countries working to reduce these levels for the foreseeable future.

Just look at Japan. They've had to deal with similar circumstance for two decades now.

It was at the end of 1989 – over 20 years ago – when Japanese stocks reached record highs. Even with all the inflation and crazy schemes they tried to get things going again, it just hasn't worked.

The decade that just ended has already become known as the lost decade in stocks. I wish I could say we're on the other side of these problems, but I just can't.

You can look at any of the developed Western countries, and you'll see stocks are much lower than they were 10 years ago.

Even markets like Hong Kong and Singapore have only risen slightly.

Only China and India are up big, but even they have not done as well as gold.

We're in a correction in gold right now, but it's only a matter of time before the rally continues. I still believe that gold and silver are in the midst of bull markets that will be historic in nature.

As you know, I've been making my living as an investor for close to 40 years now, having started when I was just 16.

And the only way to survive that long is to never take a big loss. You have to position yourself so that you won't panic when things don't go according to plan – and eventually they won't – and you won't be wiped out if you're wrong.

You also want to try to cover for all potential scenarios. Today, for me, this means sitting mostly in precious metals and cash.

Posted by Mr Thx Monday, February 22, 2010 0 comments

Should You Speculate in Stocks?

Perhaps the number one precaution to take at the start of a deflationary crash is to make sure that your investment capital is not invested “long” in stocks, stock mutual funds, stock index futures, stock options or any other equity-based investment or speculation. That advice alone should be worth the time you spent to read this book….

Short Selling Stocks and Trading in Futures and Options

Short selling is a great idea at the onset of a deflationary depression, at least from a timing standpoint. Shares of vulnerable banks and other financial companies in particular are a great downside bet….

Unfortunately, there could well be structural risks in dealing with stocks and associated derivatives during a major retrenchment. Trading stocks, options and futures could be extremely problematic during a stock market panic. Trading systems tend to break down when volume surges and the system’s operators become emotional. When the exchange floor became a hurricane of paper in 1929, it would sometimes take days to sort out who had bought and sold what and then determine whether investors and traders could afford to pay for their positions. You can experience the turmoil vicariously in any good history of the 1929 crash. To give you a flavor of what goes on, read this description, from one of my subscribers, of the tumult during a comparatively mild panic [50] years ago:

"I worked for Merrill Lynch in New York in 1962 during the collapse. I well recall the failure of the teletype in our office and inexperienced clerks calling in the orders to the main office. I recall many of the screw-ups: buys called in as sells and vice versa. Some stocks had nicknames like Bessie (Bethlehem Steel), Peggy (Public Service Electric and Gas), and I recall the clerks calling in the orders by the stocks’ nicknames and the person on the other end not knowing what the hell they were talking about. All the while, the market was collapsing."

Do you think investors and brokers will behave differently now that so much stock trading is done on-line? I don’t. Do you think the experience will be “smoother” because modern computers are involved? I don’t. In fact, today’s system — much improved, to be sure — is nevertheless a recipe for an even bigger mess during a panic. Investors will be so nervous that they will screw up their orders. Huge volume will clog website servers, disrupting orders entered on-line. Orders may go in, but confirmations may not come out. A trader might not know if his sale or purchase went through. Is he in or out? Quote systems will falter at just the wrong time. Phone lines from you to the broker and from the broker to the floor will be jammed, and some will go down. Computer technicians will be working overtime while being distracted worrying about their own investments. Brokers will be operating on little sleep and at peak agitation, since most brokers are themselves bullish speculators. They will enter orders incorrectly. Firms will begin to enact and enforce tighter restrictions on trading and margin. Price gaps will trigger stops at prices beyond the ability of some account holders to pay.

You, the wise short seller, could survive all these problems only to discover that your broker has gone bankrupt or has been shut down by the SEC or that its associated bank has had a computer breakdown or that its assets are depleted or frozen.

Unless you are prepared for such an environment, don’t get suckered into this maelstrom thinking that the bear market will be business as usual, just in the other direction. If you want to try making a killing being short in the collapse, make sure that you are not overexposed. Make sure that if the system locks up for days or weeks, you will not be in a panic yourself. Make sure that in a worst-case scenario, the funds you place at risk are funds you could lose.

source HERE

Posted by Mr Thx Sunday, February 21, 2010 0 comments

In a rare interview, one of the Street’s most influential strategists sounded the alarm about the next leg down.

And the trouble will likely start overseas, that’s according to Marc Faber, author of the “The Gloom Boom & Doom Report"

You may know Dr Faber by his moniker of "Dr. Doom", and when this man talks, markets listen. He correctly identified the tech bubble, and now he's setting his sights on China.

Specifically, Dr. Faber is concerned about the way in which Beijing’s decided to slam the brakes on growth -- via a sharp reduction in lending.

That he says, will drag down any and every company that soared higher during the recent China boom.

"I would not buy Chinese stocks here," Faber tells the Fast Money desk.

If you agree with Faber’s thesis you might want to short ACH [ACH 23.32 -0.79 (-3.28%) ] or some of the refineries in China, adds Tim Seymour.

But it's not just China-based companies that will get hit.

"I would be careful of any asset that benefited greatly from the China boom in 2009 because (their earnings) are not sustainable," he tells Fast Money.

That includes a slew of US multi-nationals.

And to make matters worse, Faber thinks as growth slows in China "we will see a lot of excess capacities," and as a result the market could be flooded with excess supply. "Industrial commodities have become quite vulnerable."

Faber expects to see the Dow and S&P “fall 20% from the January highs” in the near-term and perhaps more than that as developments unfold.

source HERE

Posted by Mr Thx Friday, February 19, 2010 0 comments

LONDON (Commodity Online): Global investing guru and publisher of the famous Gloom, Boom and Doom report Marc Faber says gold price may continue to drop as low as $950 to $1,050 an ounce, but that is not any reason to sell gold. “The dip in gold price is a correction and this should be taken as a great buying opportunity,” Faber said.

As gold price has surged to touch historic highs in the last few months, Faber, a gold bug, has been telling investing public that the yellow metal is cheap at $1,100 per ounce and it will be prudent if they buy the yellow metal at this rate or below so that they can reap rich dividends in 2010.

According to Faber, gold price has been falling in the last few weeks thanks to a temporary surge in the US dollar. “But the weakness that gold has shown recently is no reason for investors to get out of gold investments. I still believe gold should continue to be part of every investor’s wise investment portfolio,” he said.

Recently, Faber stated that gold price wouldn't drop below the $1,000 an ounce mark ever again. A renowned investor that he is, Faber feels that it is the right time to buy gold at these current levels, rather than dumping gold.

”There is no doubt the printing of money from central banks around the world is generating inflation, and it will increase going forward. That alone is a good enough reason to have gold in your investment portfolio,” Faber said.

Faber foresees the second half of 2010 when gold price will boom.

Last month, Faber had said that the most interesting currency that people should invest now is gold as the US dollar is on a bearish run.

”Gold remains the best bet as a currency these days because of the fact that the yellow metal supply is extremely limited,” he said.

Faber says gold price should be treated in the same way that a company’s stock is being treated by investors. “A company’s stock could be less expensive at $100 than when it was selling for $10, because earnings growth has outpaced the appreciation of the shares and therefore its P/E has declined, gold could be cheaper at the current price than when it was at less than $300 because of the explosion of foreign exchange reserves in the world, zero interest rates, the huge debt overhang, and the expectation of further money printing,” he said.

According to Faber, global reserves of gold have grown from about $1 trillion in 1995 to over $7 trillion.

”Therefore, the share of gold in the world’s official reserves has declined from 32.7 per cent in 1989 to a current record low of 10.3 per cent,” he pointed out.

Faber said that he is still puzzled by the deflationists, who cannot understand that the explosion in foreign exchange reserves over the last 15 years is a symptom of a massive monetary inflation. “Ergo, I could argue that gold is now actually less expensive than when it sold for around $300 per ounce,” he said.

Faber said that central banks in emerging economies keep only a tiny fraction of their reserves in gold. “Eventually, I would expect them to follow the example of the Reserve Bank of India (RBI), which recently bought 200 tonnes from the IMF for $6.7 billion,” Faber pointed out.

”Now, just consider what the impact would be if China were to increase its gold holdings from presently less than 2 per cent of its $2.2 trillion reserves to 6 per cent or 10 per cent. Each 1 per cent increase in gold weighting would mean gold purchases of more than $20 billion, or nearly 600 tonnes,” he said.

Faber said that gold’s value may go from $1,100 per fine ounce to $1,500 or $5,000.

But he added that he “would not invest more than a sliver” of his wealth “into something without intrinsic value, something whose positive value is based on nothing more than a set of self-confirming beliefs”.

Faber said that he is not a perennial gold bug. “But, when governments spend far more than they collect in taxes (large fiscal deficits), and when central bankers engage in reckless monetary policies and, instead of treating the causes of the problems (excessive debt growth), treat the symptoms (deflationary forces), gold as a currency does make a lot of sense,” he added.

source HERE

Posted by Mr Thx Wednesday, February 17, 2010 0 comments

Many countries have started to see a rebound from last year's economic recession. But will it last? Economists at the World Economic Forum in Davos warn that paying down massive public debt will be "very, very painful." Deep spending cuts and significant tax hikes may be unavoidable.

For those now in their 30s, Kenneth Rogoff has bad news. "It will be terrible for you," the Harvard University economics professor told a young German at the World Economic Forum in Davos. "Germany's debt is exploding, the population is aging," he said. "And to be honest, I think your country is going to have average growth of just 1 percent in the coming years." Rogoff went on to say that, should Germany wish to begin making inroads into its mountain of debt, there is no way around strict savings measures and significant tax increases. "It will be very, very painful," Rogoff said, adding that it will take at least a decade, and possibly many more, for Germany to pay down its debt.

He wasn't the only one in Davos with a dark vision of the future. Many countries could be stricken with the "Japan illness," Robert Shiller, a behavioral economist at Yale University, told SPIEGEL ONLINE. Following a financial crisis in the 1980s, Japan's economy remained in the doldrums for years as trust in the economy's ability to recover evaporated. Few were willing to take risks, sapping the Japanese economy of its life blood, said Shiller. "Such a situation could take hold in many regions of the world."

Such prognoses raise questions about the recent global economic recovery, modest though it may be. Is a second recession just around the corner, part two of what some warn could be a "double dip?" In the fourth quarter of 2009, the US economy grew by an impressive 5.7 percent -- but how durable are such gains?

'Historically Exceptional'

One thing is clear: 2010 presents steep challenges to the world economy. "There is an illusion of normalcy," Rogoff warns. But that illusion, he points out, comes largely as a result of the immense amount of money pumped into the economy by governments around the world. The result -- massive public debt across the globe -- is "historically exceptional," Rogoff says. The only comparable situation can be found during the Great Depression, he points out.

The question now is when to shift priorities. When can one begin focusing on paying down public debt without immediately stifling the fragile recovery? And, of course, will taxpayers play along?

"In the US, for example, any politician who tries to significantly raise taxes would be gone immediately," Rogoff is convinced. "We haven't had to tighten our belts for 50 years." Shiller says he can already sense a widespread feeling of anger among his compatriots -- a degree of anger, he said, that hasn't been felt among the America populace since the Vietnam War.

The situation isn't much different in many other countries in the industrialized world.

Conducive for the Rumor Mill

It is the situation in Greece, however, that shows just how dangerous the situation has become. The country is facing public debt that is 110 percent of its GDP -- a state of affairs which has proven conducive for the rumor mill. Last week, it was said that Greece was looking for money from China; others reported that Athens might extract itself from the common European currency, the euro; still others said that Germany and other EU countries were preparing a bailout package for Greece.

Denials from the Greek government did little to help. Greece saw its borrowing costs rise sharply amid a hike in interest rates. "Such stories frighten investors," says Shiller.

It might only be a matter of time until similar stories destroy investor confidence in other countries too. "Currently, the world is still keen to lend us money," said Rogoff referring to the US. "But that will not continue forever."

In Europe there are already warnings that a domino effect could spread from Greece. The finances of countries like Ireland, Spain and Portugal are in a similarly sorry state.

Stress Test for the Euro

The Greek crisis is also a dangerous stress test for the euro, as it presents the rest of the euro-zone members with a tricky dilemma. If they were to help out Greece financially, it would set a risky precedent -- other countries with shaky finances could in the future rely on being bailed out in an emergency. The financial markets would suddenly require risk premiums for bonds even from countries like Germany, because of the possibility that they might have to rescue their weak neighbors.

But if the euro-zone members were to leave Greece to its own devices and the state went bankrupt, the impact on the single currency would be disastrous. "The euro is getting more and more important as a reserve currency," says Shiller. "People believe that euro-denominated debt is safe." A state bankruptcy would profoundly shake that confidence, Shiller warns.

There are also those who are spreading cautious optimism and drawing attention to glimmers of hope. The head of the International Monetary Fund, Dominique Strauss-Kahn, said in Davos that growth was returning faster than expected. He pointed to the fact that Asia has already almost completely recovered from the crisis, with the Chinese economy growing by 8.7 percent last year.

Industry in Turmoil

It seems that 2010 will be the decisive year. As well as showing whether the recovery is sustainable, this will also be the year when the international community finally puts concrete proposals on the table regarding the implementation of the G-20's much-discussed goals.

Barack Obama's recent proposals to separate traditional commercial and investment banks and to stop banks from engaging in so-called proprietary trading with their own money, have added plenty of fuel to the debate. The international financial services industry is in turmoil as a result of the plan.

Few bankers have responded to the ideas as calmly as Martin Blessing, the head of Germany's Commerzbank, who told the Frankfurter Allgemeine Sonntagszeitung that "the basic idea is reasonable." "We have seen over the last two years that the current system has flaws and we can not just return to normalcy."

At the beginning of the summit, Deutsche Bank CEO Josef Ackermann had warned against Obama's plan. "In the end, we could all be losers if we no longer have efficient markets," he said.

'No Impact on Policy'

On Saturday in Davos, Ackermann and other financial representatives met behind closed doors with politicians such as French Finance Minister Christine Lagarde, her British counterpart Alistair Darling, EU Economic Affairs Commissioner Joaquin Almunia, ECB President Jean-Claude Trichet and IMF Managing Director Dominique Strauss-Kahn.

However, it appears that little agreement was reached. American Congressman Barney Frank, who heads the House Financial Services Committee, said after the meeting that the Obama administration was determined to push through "tough, sensible regulation." "It is very important to tell the banks and hedge funds what we will do," he added. Asked about the reaction from the financial world, Frank answered: "It doesn't concern me. That has no impact on policy."

However, Rogoff is skeptical about the degree to which Obama's proposals can be put into practice or if they can serve as an example for the rest of the world. "Obama has already made many good speeches," he says. The question is whether he will obtain the necessary majorities to make his ideas reality.

source HERE

Posted by Mr Thx Monday, February 15, 2010 0 comments

The fiscal crisis in Greece is fascinating political theater, in part because the Balkan nation is a leading indicator for what will probably happen in many other countries. The most puzzling feature of the crisis is the assumption in other European capitals, discussed in the BBC article below, that a Greek default is the worst possible result. It certainly would not be good news, especially for investors who thought it was safe to lend money to the government, but there are several reasons why the long-term pain resulting from a bailout would be even worse.

1. Bailing out Greece will reward over-spending politicians and make future fiscal crises more likely. In a four-year period between 2005 and 2009, Greek politicians expanded the burden of government spending from an already excessive level of 43.8 percent of GDP to an even more excessive level of 51.3 percent of GDP. Subsidies are rampant, the public sector is bloated, civil service pay is way too high, and entitlements are wildly unsustainable. A fiscal crisis - with no escape options - is probably the only hope of reversing these disastrous policies. So why, then, would it make sense for Germany and other nations to provide an escape option?

2. Bailing out Greece will reward greedy and short-sighted interest groups, particularly overpaid government workers. Greece is in trouble because the the people riding in society's wagon assumed that there would always be enough chumps to pull the wagon. In reality, Greece is turning into a real-world version of Atlas Shrugged. Government has become such a burden that the job creators and wealth generators have given up and/or moved their money out of the country. Should taxpayers in other nations reward the greed and narcissism of Greece's interest groups by being forced to pull the wagon instead?

3. Bailing out Greece will encourage profligacy in Spain, Italy, and other nations. The hot acronym in public finance circles is PIIGS, which is shorthand for Portugal, Ireland, Italy, Greece, and Spain. Greece is getting all the attention now, but these other countries have the same problems of excessive spending, bloated and dysfunctional public sectors, and unsustainable finances. What happens in Greece will send a very clear signal to the politicians in these nations, much as a parent who lets the oldest child run rampant is sending signals the younger siblings. Does anybody doubt that a bailout of Greece will discourage the other PIIGS from undertaking needed reforms?

4. Bailing out Greece is not necessary to save the euro. This is the most puzzling feature of this Greek tragedy (sorry, I couldn't resist). There is a pervasive assumption that a default somehow would cripple the common currency of most European Union nations. But why would a default in Greece undermine the euro? If California went under, after all, that would not cripple the US dollar. There are unpleasant things that would probably happen following a Greek default, but the stability and strength of a currency is a function of central bank behavior. And so long as the European Central Bank does not crank up the proverbial printing press to monetize Greece's debt, the euro should be fine.

In my darker moments, I have sometimes warned audiences of what will happen when a majority of voters in a country or a state become dependent on government. In such an environment, it obviously becomes much more difficult to put together an electoral coalition that will lead to fiscal changes that shrink the burden of government and curtail the predatory state. This is what has happened to Greece, and what is soon going to happen in other European nations (and, barring reform, what will eventually happen in the United States). The irony of this situation is that even the folks riding in the wagon should favor reform. After all, a parasite needs a healthy host.

For background info, here's an excerpt from the BBC article:

Despite heavy rain, there have been rallies across Greece throughout the day, with thousands of striking workers and pensioners gathering in the capital, Athens. Several thousand people were also reported to have protested in Greece's second city, Thessaloniki. The rallies have been mainly peaceful, but in one incident police fired tear gas at rubbish collectors who tried to drive through a police cordon. ...

The unions regard the austerity programme as a declaration of war against the working and middle classes, the BBC's Malcolm Brabant reports from the capital. He says their resolve is strengthened by their belief that this crisis has been engineered by external forces, such as international speculators and European central bankers. "It's a war against workers and we will answer with war, with constant struggles until this policy is overturned," said Christos Katsiotis, a union member affiliated to the Communist Party, at the Athens rally. ...On Tuesday, Prime Minister George Papandreou's socialist government announced that it intends to raise the average retirement age from 61 to 63 by 2015 in a bid to save the cash-strapped pensions system. ...

Mr Papandreou has already faced down a three-week protest by farmers demanding higher government subsidies. ...The markets remain sceptical that Greece will be able to pay its debts and many investors believe the country will have to be bailed out. The uncertainty has recently buffeted the euro and the problems have extended to Spain and Portugal, which are also struggling with their deficits.

The possibility of Greece or one of the other stricken countries being unable to pay its debts - and either needing an EU bailout or having to abandon the euro - has been called the biggest threat yet to the single currency. Ahead of the talks between EU leaders in Brussels on Thursday, some business media reported that Germany is preparing to lead a possible bail-out, supported by France and other eurozone members.

source HERE

Posted by Mr Thx 0 comments

LONDON (Commodity Online): In the last few months, we have been reading predictions and forecasts from bullion analysts who insisted and argued that gold price is booming to touch $2,000, $3,000, $5,000, $10,000 per ounce in the coming years.

These forecasts have caught people’s attention who have been pouring money into gold and other precious metals all these months. But after the big surge of gold price to $1,227 per ounce some two months back, the yellow metal has been climbing down the ladder of speculation.

Despite speculators going on the 'boom-in-gold-price predictions', the yellow metal price has been sinking in the last two months. "If the gold price fall continues like this way, it is certain to touch down to $1,000 per ounce or below this level in the next one month," says bullion analyst Mark Robinson.

Robinson, who is not a great bull on gold, says even if gold price falls to $900 or $800 per ounce, people should not complain. "For those who have invested in gold some years back, even $900 or $800 per ounce is a great price tag. So, there is no room for complaints even if gold price falls to realistic levels," he said.

Robinson, a keen bullion watcher focusing on China, says that the Chinese government wants gold price to plunge to $800 per ounce level. "China's biggest ambition these days is to build up gold reserves. For this, the best thing that China wants is a big fall in gold price so that it can buy more gold from IMF, gold miners and from the physical bullion market," argues Robinson.

It is not just Robinson who is a bear in gold price forecast. On Monday, a senior analyst with Citigroup came out with purely bearish prediction on gold. Citigroup bullion analyst Alan Heap said that gold prices could sink to $820 an ounce by 2014.

Here is that interesting article that published on the bearish prediction on gold:

"NEW YORK (TheStreet) -- gold prices could sink to $820 an ounce by 2014, in the absence of inflation or strong demand from China, says a Citigroup analyst

Alan Heap, an analyst at Citi Investment Research, adds a bearish voice to a crowded debate over where the precious metal is headed. Billionaire investor James Rogers and perma-bear David Tice say gold will hit $2,500. James Turk , Author of GoldMoney, predicts $8,000, while author Mike Maloney is betting on $15,000.

Over the last decade, gold prices have soared from $250 an ounce to an all-time high of $1,227 an ounce, with many analysts believing that gold is in a continued bull market despite short-term pullbacks. Heap broke with this bull view by saying in a research analysis, "Gold: Paper Problems," that prices will sink to $820 by June of 2014 and head lower long term to $700 an ounce.

As global economies print more money and lower interest rates to survive financial crises, gold becomes popular to own. As paper money loses value, investors turn to gold as an alternative safe haven asset.

As gold prices hit a record high of $1,227 an ounce, the U.S. dollar started to move towards its all-time low of $71.40. As the dollar loses value, commodities become cheaper to buy in other currencies. Many analysts expect low interest rates, President Obama's $3.8 trillion budget plan, a raised deficit ceiling and money printing pressure the dollar and buoy gold prices.

Over the last 10 years, investors have been diversifying into gold more than any other asset class. You no longer have to be a doom and gloom analyst or store gold bars in a bank in order to own the precious metal. Average institutional investors and world central banks have been increasing their gold holdings supporting high prices. Helping investors buy gold is the emergence of gold ETFs. There are now three physically backed ETFs available SPDR Gold Shares(GLD Quote), iShares Comex Gold(IAU Quote) and ETFS Gold Trust(SGOL Quote).

Central banks have become one of the biggest buyers of gold. Countries increase their gold reserves on a percentage basis, usually irrespective of the spot price. In the past year, countries like China, India and Russia have transitioned from being net sellers of gold to net buyers. Portugal holds 90% of its reserves in gold, while the U.S. has 70%. China currently only holds 1,054 tons of its reserves in gold, which is less than 2%.

The biggest threat to rising gold prices is a substantial decrease in long positions in paper markets, Heap writes in his report. "Positions held by money managers and broader non-commercial positions have fallen since November 2009 when the USD strengthened. Non-commercial net long positions are at 5x the average levels seen over the last 17 years."

The Euro reached a seven-month low against the U.S. dollar Friday, as sovereign debt fears in Spain, Portugal and Greece continued to devalue the currency. The dollar is playing the role of safe haven asset for investors jolted by global economic recovery fears lead them out of riskier commodities. There is also an expectation that the Federal Reserve might raise its key interest rate target sooner than expected, which would also support the currency.

The most popular physically backed ETF SPDR Gold Shares(GLD Quote) has seen a decline in tonnage since the beginning of 2010 from 1,128.74 to 1,104.54. Heap noted that ETF holdings are high, but stable. As long as worries over a global banking crisis subside, holdings should remain flat.

A big driver for gold prices in 2009 was pent up demand from China. The country has recently increased its gold reserves to 1,054 tons from 600 tons and is expected to continue diversifying. However, recently the Chinese government ordered banks to increase their reserve ratio by 50 basis points and has encouraged them to restrict lending. China is targeting an 8% growth rate for 2010 instead of the 11% analysts had anticipated.

China's emerging middle class has also unleashed significant gold buying in the physical market. According to the Citi report, from September 2008 to September 2009, China retail demand grew 20 tons out of 260 tons globally. There are worries that the country's $585 billion stimulus program is slowing down, which would curb gold demand from retail investors as well as central banks Gold is typically seen as a hedge against inflation as investors buy the precious metal as an alternative asset. But Heap argues that it's not actual inflation that correlates to gold prices, but inflationary expectations. According to the figure above in 2009, the U.S. Consumer Price Index dipped into negative territory, which means no inflation at all. However, gold prices kept rising. Heap thinks that inflationary expectations would have to skyrocket to boost gold; just a pick-up in inflation wouldn't be the big mover in prices many analysts anticipate."

source HERE

Posted by Mr Thx Sunday, February 14, 2010 0 comments

Here, in a chart, is why Britain can’t afford to be complacent about the plight of Portugal, Ireland, Italy, Greece and Spain. UK banks are exposed to these countries to the tune of 16 per cent of gross domestic product, according to this chart from Stephen Jen of BlueGold Capital Management (the figures themselves are Bank for International Settlement numbers).

By my reckoning that’s just under £250bn of exposure, so if these economies topple, we can’t afford to smirk and be smug about the fact that we avoided joining the euro. We would be engulfed in a nasty, nasty financial crisis of our own.

Look, too, at Switzerland: it faces a 21pc of GDP exposure to these struggling nations. It is an important point ahead of tomorrow’s crunch European Council meeting tomorrow, at which leaders are expected to agree on some sort of bail-out package. At the moment, it looks as if the eurozone members (mainly France and Germany) will provide cash for a “firewall” bail-out designed to prevent these countries from toppling, but there are some whispers that Britain may have to make a contribution. These figures might help explain why. But in that case, one would also expect Switzerland to get involved, no?

In fact, the more one considers it, the more barmy it is that the eurozone ministers have pretty much vowed not to allow the IMF in for a bail-out. This is what the UK has been advising behind the scenes, but the euro ministers realise that this would be seen as an admission of the project’s failure. I also like Stephanie Flanders’ point that, of course, Nicolas Sarkozy is also determined not to let his future presidential opponent IMF chief Dominique Strauss Kahn swoop in and “save the euro”.

Anyway, there’ll be much more of this in tomorrow’s paper, where Ambrose Evans-Pritchard will explain all, and I have a run-down of the issues in my 0p-ed. So stay tuned.

PS Yes, I know we’re not supposed to call them PIIGS but the acronym is just too irresistible. However, one decent alternative I heard today is Club O’Med. Kudos to whoever dreamt that one up.

source HERE

Posted by Mr Thx Thursday, February 11, 2010 0 comments

NEW YORK (AP): The stock market managed to steady itself after hearing Federal Reserve Chairman Ben Bernanke's plans to dismantle the central bank's supports for the U.S. economy.

The Dow Jones industrial average closed with a loss of 20 points after falling nearly 100 in early trading. Treasury prices fell as demand for safe havens eased.

Bernanke revealed the Fed's thinking on how to wean the market from massive emergency supports put in place to keep the economy afloat. He said the Fed will likely start tightening credit by boosting the interest rate it pays banks on deposits with the central bank.

The talk of a smaller role for the Fed in U.S. markets came as investors looked for the opposite overseas. Investors are hoping European Union countries will extend a bailout to Greece. The country is facing big budget gaps. There is concern that financial woes in Greece as well as in Portugal, Ireland and Spain could spread and threaten a global economic recovery.

"We're in a messy transition period," said Paul Ballew, chief economist at Nationwide Insurance in Columbus, Ohio. "While you see policymakers back off in some areas you're going to continue to see them intervene in other areas."

Officials said the EU member nations have made no decisions about how to help Greece.

The debt problems are the latest setback in the past four weeks that has halted a 10-month advance in stocks. Investors have also been concerned about China's plans to curtail economic growth to avoid speculative bubbles and President Barack Obama's calls to restrict trading at large financial institutions.

The prospect of more restrained Fed shook the markets at first, even though it wasn't a surprise.

Bernanke said in a statement that the Fed likely will begin tightening credit by raising the interest rate it pays to banks on the money they have deposited at the Fed. That would lead to an increase in borrowing rates for consumers and businesses. The Fed chief said the central bank is not yet ready to boost interest rates, which stand at record lows.

Craig Kaufman, co-founder and head of capital markets at Kaufman Bros. L.P. in New York, said the Fed's plan is reasonable and didn't represent a shift in policy.

"We're sort of in this fake world and we need to show that we're moving back to a normalized process," Kaufman said, referring to the record-low interest rates.

The Dow fell 20.26, or 0.2 percent, to 10,038.38 a day after jumping 150 points as hope of a Greece bailout grew.

The broader Standard & Poor's 500 index fell 2.39, or 0.2 percent, to 1,068.13, while Nasdaq composite index fell 3.00, or 0.1 percent, to 2,147.87.

Bond prices slid for a second day after an auction of 10-year Treasury notes brought only modest demand. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.69 percent from 3.65 percent late Tuesday.

The dollar fell against most other currencies. Gold also slid.

Crude oil rose 77 cents to $74.52 per barrel on the New York Mercantile Exchange.

Financial stocks rose after Legg Mason Inc. said its assets under management are higher than last year. The stock rose $1.37, or 5.5 percent, to $26.45.

Among companies reporting earnings, Dean Foods Co. fell $2.45, or 13.9 percent, to $15.19, after the dairy company said higher operating costs hurt its fourth-quarter earnings. The company's profit forecasts also fell short of analysts' expectations.

Shares of The Walt Disney Co. edged up 12 cents to $29.96 after the company's fiscal first-quarter earnings were about the same as a year earlier but above what analysts had predicted.

Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where volume came to 1 billion shares compared with 1.2 billion Tuesday. Analysts said volume was light in part because heavy snow along the East Coast kept some traders out of the market.

source HERE

Posted by Mr Thx 0 comments

1. Venezuela

CPD: 56.26%

S&P Credit Ratings:
Foreign Long Term: BB-
Foreign Short Term: B

Credit Watch/Outlook: Negative

2. Ukraine

CPD: 52.91%

S&P Credit Ratings:
Foreign Long Term: CCC+
Foreign Short Term: C

Credit Watch/Outlook: Stable

3. Argentina

CPD: 46.06%

S&P Credit Ratings:
Foreign Long Term: B-
Foreign Short Term: C

Credit Watch/Outlook: Stable

4. Pakistan

CPD: 38.11%

S&P Credit Ratings:
Foreign Long Term: B-
Foreign Short Term: C

Credit Watch/Outlook: Stable

5. Republic of Latvia

CPD: 30.47%

S&P Credit Ratings:
Foreign Long Term: BB
Foreign Short Term: B

Credit Watch/Outlook: Negative

6. Dubai, UAE

CPD: 25.71%

S&P Credit Rating: *
Foreign Long Term: BB+
Local Long Term: BB+

Credit Watch/Outlook: Negative

7. Iceland

CPD: 24.66%

S&P Credit Ratings:
Foreign Long Term: BBB-
Foreign Short Term: A-3

Credit Watch/Outlook: Negative

8. Lithuania

CPD: 19.11%

S&P Credit Ratings:
Foreign Long Term: BBB
Foreign Short Term: A-3

Credit Watch/Outlook: Negative

9. California, USA

CPD: 18.97%

Moody's Credit Ratings:
Senior-most tax backed: Baa1
Senior-most revenue backed: Baa1

Outlook: Stable

10. Greece

CPD: 18.67%

Fitch/Moody's Credit Rating:

source HERE

Posted by Mr Thx 0 comments

The governments of every developed economy will eventually default on their sovereign debts, including the US, the UK and Western Europe, Marc Faber, editor of the Gloom, Boom & Doom report, told CNBC.

"In the developed world we have huge debt to GDP, in terms of government debt to GDP and unfunded liabilities that will come due," Faber said in a live interview via telephone. "These unfunded liabilities are so huge that eventually these governments will all have to print money before they default."

Faber said that emerging economies are much more financially sound on this basis than the developed world, with the exception of Singapore, which has a limited amount of debt and huge reserves.

His comments come amid talks of a bailout for struggling Euro zone member Greece, which needs to borrow 53 billion euros, or $73 billion, to cover its deficit and refinance debt that is coming due.

Faber added that the global stock markets — which have mostly fallen about 10 to 20 percent from their peaks — have begun a correction phase that he expects to continue.

He said he thinks the new resistance level for the S&P 500 will be 1,100, though an oversold market could cause a relief rally over the next ten days.

Still, he said he is "relatively optimistic" about stocks going up, referring to them and precious metals as two of the best safe havens.

source HERE

Posted by Mr Thx 0 comments

1. Ireland - 1,267%

External debt (as % of GDP): 1,267%
External debt per capita: $567,805

Gross external debt: $2.386 trillion (2009 Q2)
2008 GDP (est): $188.4 billion

2. Switzerland - 422.7%

External debt (as % of GDP): 422.7%
External debt per capita: $176,045

Gross external debt: $1.338 trillion (2009 Q2)
2008 GDP (est): $316.7 billion

3. United Kingdom - 408.3%

External debt (as % of GDP): 408.3%
External debt per capita: $148,702

Gross external debt: $9.087 trillion (2009 Q2)
2008 GDP (est): $2.226 trillion

4. Netherlands - 365%

External debt (as % of GDP): 365%
External debt per capita: $146,703

Gross external debt: $2.452 trillion (2009 Q2)
2008 GDP (est): $672 billion

5. Belgium - 320.2%

External debt (as % of GDP): 320.2%
External debt per capita: $119,681

Gross external debt: $1.246 trillion (2009 Q1)
2008 GDP (est): $389 billion

6. Denmark - 298.3%

External debt (as % of GDP): 298.3%
External debt per capita: $110,422

Gross external debt: $607.38 billion (2009 Q2)
2008 GDP (est): $203.6 billion

7. Austria - 252.6%

External debt (as % of GDP): 252.6%
External debt per capita: $101,387

Gross external debt: $832.42 billion (2009 Q2)
2008 GDP (est): $329.5 billion

8. France - 236%

External debt (as % of GDP): 236%
External debt per capita: $78,387

Gross external debt: $5.021 trillion (2009 Q2)
2008 GDP (est): $2.128 trillion

9. Portugal - 214.4%

External debt (as % of GDP): 214.4%
External debt per capita: $47,348

Gross external debt: $507 billion (2009 Q2)
2008 GDP (est): $236.5 billion

10. Hong Kong - 205.8%

External debt (as % of GDP): 205.8%
External debt per capita: $89,457

Gross external debt: $631.13 billion (2009 Q2)
2008 GDP (est): $306.6 billion

11. Norway - 199%

External debt (as % of GDP): 199%
External debt per capita: $117,604

Gross external debt: $548.1 billion (2009 Q2)
2008 GDP (est): $275.4 billion

12. Sweden - 194.3%

External debt (as % of GDP): 194.3%
External debt per capita: $73,854

Gross external debt: $669.1 billion (2009 Q2)
2008 GDP (est): $344.3 billion

13. Finland - 188.5%

External debt (as % of GDP): 188.5%
External debt per capita: $69,491

Gross external debt: $364.85 billion (2009 Q2)
2008 GDP (est): $193.5 billion

14. Germany - 178.5%

External debt (as % of GDP): 178.5%
External debt per capita: $63,263

Gross external debt: $5.208 trillion (2009 Q2)
2008 GDP (est): $2.918 trillion

15. Spain - 171.7%

External debt (as % of GDP): 171.7%
External debt per capita: $59,457

Gross external debt: $2.409 trillion (2009 Q2)
2008 GDP (est): $1.403 trillion

16. Greece - 161.1%

External debt (as % of GDP): 161.1%
External debt per capita: $51,483

Gross external debt: $552.8 billion (2009 Q2)
2008 GDP (est): $343 billion

17. Italy - 126.7%

External debt (as % of GDP): 126.7%
External debt per capita: $39,741

Gross external debt: $2.310 trillion (2009 Q1)
2008 GDP (est): $ 1.823 trillion

18. Australia - 111.3%

External debt (as % of GDP): 111.3%
External debt per capita: $41,916

Gross external debt: $891.26 billion (2009 Q2)
2008 GDP (est): $800.2 billion

19. Hungary - 105.7%

External debt (as % of GDP): 105.7%
External debt per capita: $20,990

Gross external debt: $207.92 billion (2009 Q1)
2008 GDP (est): $196.6 billion

20. United States - 94.3%

External debt (as % of GDP): 94.3%
External debt per capita: $43,793

Gross external debt: $13.454 trillion (2009 Q2)
2008 GDP (est): $14.26 trillion

source HERE

Posted by Mr Thx 0 comments

Feb. 9 (Bloomberg) -- Greek Finance Minister George Papaconstantinou said he can’t call for outside aid as his government struggles to cut the European Union’s largest budget deficit.

“The worst possible signal which we could send out is one calling for outside help,” he said in an interview with Bloomberg Television in Athens yesterday. “We will tackle the deficit,” he said, adding that tax revenues in January exceeded forecasts “by some percentage points.”

Papaconstantinou has so far failed to convince investors that Greece can push the deficit below the EU’s ceiling of 3 percent of gross domestic product. With European leaders meeting on Feb. 11 to discuss the economic outlook, Greek two-year bond yields have surged to the highest in almost a decade and concerns about budget sustainability are spreading to Spain and Portugal.

“The current state of the markets suggests Greece may need conditional support from the key European institutions and governments,” said Janet Henry, chief European economist at HSBC Holdings Plc, in an e-mailed note.

European finance officials are for now sticking to their line that Greece, which has a deficit of 12.7 percent of GDP, won’t need outside help. European Central Bank President Jean- Claude Trichet said Feb. 4 he’s “confident” measures announced by Greece will work and EU Monetary Affairs Commissioner Joaquin Almunia says there’s no “plan B” for Greece.

Woes Overshadow

Greece’s budget woes threaten to overshadow a summit of European Union leaders that compelled Trichet to shorten his trip to a Reserve Bank of Australia symposium in Sydney by one day. The EU meeting was called to lay the groundwork for a 10- year economic program to strengthen the region’s competitiveness.

Nobel Prize-winning economist Joseph E. Stiglitz said in an interview with Sky News yesterday that Greece has been the target of a “speculative attack” and doesn’t need a bailout.

Papaconstantinou said yesterday that Greece’s budget plan will get the “green light” from European finance ministers. He may this week unveil an overhaul of Greece’s tax system that imposes the top 40 percent levy on Greeks earning less than the current threshold of 75,000 euros per year.

Investors are turning a deaf ear to EU officials as Greece’s fiscal woes focus their attention on gaping budget deficits across the euro region’s southern fringe. Credit- default swaps on Spain and Portugal rose to a record yesterday.

Raise Concern

“Greece, Portugal and Spain have the most challenging fundamentals but Italy and Belgium could also start to raise some concerns,” said HSBC’s Henry.

Italian Finance Ministry Undersecretary Luigi Casero told Sky TG24 yesterday his government must “maintain a policy of fiscal rigor” to avoid “difficulties.”

Trichet’s efforts to shore up confidence in the euro region as a whole are also being ignored. While the ECB president said on Feb. 4 the bloc’s combined budget deficit may be lower than those of the U.S. and Japan this year, the euro fell the next day, extending its slide since the start of December to almost 10 percent.

source HERE

Posted by Mr Thx Tuesday, February 9, 2010 0 comments

KUALA LUMPUR, Jan. 26 (Xinhua) -- The Malaysian Institute of Economic Research (MIER), an independent body undertaking research on economic issues, expects Malaysia's budget deficit to shrink to 5.6 percent of the gross domestic product (GDP) this year.

Its executive director Zakariah Abdul Rashid told reporters after the MIER National Economic Outlook Conference here on Tuesday that the reduction was made through the cut in the country 's expenditure.

Zakariah said that the cut in expenditure was expected to be much larger than the reduction in revenue this year, resulting in a smaller budget deficit.

He pointed out that in 2009, the Malaysian government expenditure was so high that the deficit was estimated at around 7. 4 percent of the GDP.

On growing concern over inflation, Zakariah said the inflation rate was quite stable in the meantime and should not be too much a concern to the consumers as the main focus laid within the economic growth.

Meanwhile, Zakariah stressed that liberalization of the country 's economy was necessary since it would attract private sector, deemed the main driver of the country's economy, to participate in the economic activities.

A sector must be made competitive before it was appealing to the investors, said Zakariah.

The MIER is an independent, non-profit organization devoted to economic, financial and business research that serves as a think- tank for the Malaysian government and the private sector.

Its research activities cover four divisions, namely Macroeconomic Surveillance and Forecasting, Policy Studies, Industry Studies, as well as Area Studies.

source HERE

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Malaysia's 2010 budget deficit will be lower than this year as the government will cut its operating expenditure by 15 percent, Second Finance Minister Ahmad Husni Hanadzlah said on Tuesday.

Malaysia is readying its 2010 budget after a year in which the government projects the economy will shrink by 5 percent, its first big recession since the 1998 Asian financial crisis. The budget deficit is expected to balloon to 7.6 percent of gross domestic product this year.

The International Monetary Fund last week urged the government to introduce a goods and services tax to boost revenues and the Fund forecast the deficit would hit 7.7 percent of GDP this year and only decline slightly to 7.1 percent of GDP in 2010.

"We are looking at it (GST) seriously," Husni told a press conference, although he added that: "The government does not want to cause any pain to the people".

Malaysia's budget deficit excluding oil revenues will be 11 percent of GDP, according to the IMF, and with lower oil prices in 2009 than in 2008, the income from oil will shrink in 2010 as it is based on 2009 prices.

Malaysia may however introduce changes to its fuel subsidy regime as early as next year and switch to a means tested formula, Husni said.

PUTRAJAYA, Malaysia, Aug 18 (Reuters)

source HERE

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Written by Lara Crigger
February 05, 2010 9:42 AM EST

It's a hard time to be a gold bug. At $1,049/oz, the yellow metal is currently trading way off its lofty highs of December 2009. And it could have even further to fall, says Brian Nick.

Nick is an investment strategist with Barclays Wealth, a leading global wealth management firm with more than $220 billion in assets under management worldwide. In its latest investment call, the firm took a decidedly bearish view on gold, advising investors to short the metal, which had become "significantly overvalued relative to fundamentals."

Recently HAI Associate Editor Lara Crigger chatted with Nick about the bearish outlook for gold, including how ETFs have changed the metal's demand picture, why we're not headed toward inflation and what's gold's real fair value.

Lara Crigger, associate editor, (Crigger): In a recent investment call, you advised investors to short gold. Why?

Brian Nick, investment strategist, Barclays Wealth (Nick): Now is a good time to short gold, but probably a better time to short gold would have been back in November, when it was $200/oz higher.

We think that the run-up in gold was overstated, and we don't think the reasons for it were sound. We think that a lot of the fear driving people to invest in gold has to do with the devaluation of the U.S. dollar, interest rates in the U.S. staying too low for too long, worries about inflation and the U.S. debt, and so on. With all that tied together, people flocked to gold as a store of value. But when you look at the fundamentals, this doesn't seem like an environment where gold should do well.

Crigger: How so?

Nick: If you look at inflation, you see inflation's actually quite low; core inflation is actually decreasing. So we don't have an inflation problem here. Plus, we have 10 percent unemployment and a large output gap still in the economy. So those three things taken together would dictate that the Federal Reserve should be cutting rates to well below zero, probably something like -4 or -5 percent, which obviously they can't do.

So the fact that they're at zero, as contradictory as this may sound, that's actually a relatively restrictive stance at the moment. That's one of the reasons why they took extra measures: because they knew that they had a lower bound of zero, and they needed to do other things to increase the money supply, to get economic activity moving again.

Crigger: That's contrary to a lot of what you hear, with people saying these extra low interest rates are very bad for the economy, even a setup for future inflation. So are we facing inflation in the future?

Nick: No, we don't think we are. Look at virtually any other market where you'd see signs that people were worried about inflation, and they don't exist anywhere except the gold market. Look at TIPS, for example, which should tend to outperform by quite a bit when people are worried about inflation, as breakevens between them and Treasurys rise. But you aren't really seeing that. Today you're seeing a sharp contraction in breakevens. They've been pretty stable for the past three or four months, and they're really only at average levels historically. So there's no inflation premium in that market.

If you look at the U.S. Treasury market, the 10-year rate is now at 3.6 percent, which is extraordinarily low. If there were really concerns about inflation on the horizon, we think the bond market would be reacting. But as it stands, it seems only gold is really pricing in a severe inflation scenario.

Frankly, if you were worried about inflation, there are cheaper ways to express that view, whether by buying TIPS or shorting a Treasury. It's cheaper than entering the gold market right now.

Crigger: On average, gold prices have gone up for the past nine years. Will this trend continue in 2010?

Nick: We certainly don't see it going up in 2010, just because of the significant overvalue relative to where it should be and where its historical average is.

One of the reasons gold tends to go up has to do with the credibility of monetary policy, and the credibility of the Federal Reserve. For a lot of the past 10 years, as you hear a lot of critics saying these days, the Fed kept interest rates fairly low, probably lower than they absolutely needed to, especially in 2003-2004. That's credited with a lot of the bubble in asset prices that we saw pop in 2008.

So we would expect gold to do well if the Fed were being overly accommodating, which, probably for most of the past decade, we think it was. But right now, we don't think it is. So we would have expected to see a sharp reversal in the gold price back down somewhere below its long-term average, between $700-800/oz. But instead we saw the opposite: We saw gold continue to appreciate. And we think that is the result of a misunderstanding or misinterpretation of signals we're seeing from the Federal Reserve, signals we're seeing from economic data. It's due for a correction.

Crigger: Is gold's long-term average of $700-800/oz a fair value for the metal?

Nick: Yes. In fact, if the Fed is a little more restrictive than normal - which we think it is - it should actually be a little below that number. But as we see interest rates start to normalize, and the economy start to improve, I think that's going to work itself out. So a return to an equilibrium price somewhere in that range is what we expect. We don't necessarily have a target date or time horizon, but we think gold will trend lower overall.

Crigger: How does investment demand from ETFs make a difference in gold's demand picture?

Nick: The gold market has really changed, as far as the makeup in where demand is coming from. One of the reasons why I think you've seen such a sharp, dramatic run-up is that it's become a lot easier for the mom-and-pop investors to invest in gold. There are ETFs now, like GLD, that you can buy through your online trading account that hold gold directly in the fund, and you don't have to find a way to store the physical. So it's a lot easier to buy and sell, and it's a much more liquid market than it was.

As a result of that, and as a result of the recession we just came out of, investment demand has really swamped demand coming from end-users of gold, whether they're jewelry makers or industrial users. We've really seen investment demand take over the market.

That worries us, because as quickly as that demand ramped up, it could also unwind. And so you have the potential for so much gold coming on to the market, as people are selling out of their positions, but there's very little demand to soak up the supply. So we think, if the correction starts to happen, it could happen very quickly, because there's close to a decade worth of industrial demand already sitting out there in the gold market. There's no way end-users of gold can absorb all the supply out there without taking much lower prices for it.

Crigger: So bottom line, we're not going to be seeing $2000/oz gold prices anytime soon.

Nick: No, but obviously, it's a very volatile market. Over a long-term picture, being two-three years at least, we think it will trend lower, but there's always the potential to spike.

There's a lot of policy risk out there. A lot of the trepidation around gold, I think, surrounds some of the policies that the Obama administration has tried to push through. I think it's caused a lot of fear about the long-term sustainability of the national debt, and the short-term fiscal deficit.

For example, when the Massachusetts Senate election happened and the democrats went from 60 to 59 in the Senate, the day after that was a very bad day for gold, because it dimmed the prospects for serious, comprehensive health care reform. Rightly or wrongly, I think that was one of the major drivers of gold. There were a lot of individual investors who were worried.

Crigger: You don't really think about the health care debate as driving gold prices.

Nick: No, but I think it's part of the larger picture of people just being uncertain about whether the U.S. will spend itself into a death spiral. I think that was one piece of the puzzle. I don't think health care was necessarily the largest piece - obviously we have some structural problems too. But in the long run, I think there was just a heightened sense of fear that drove a lot of people to gold, part of which was the prospect of having to deal with larger government.

source HERE

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