Save Your ASSets First: Gold World News Flash

Gold World News Flash

California is barrelling towards "fiscal meltdown"
Your employer could be stealing from your 401k
Monetary Targets: A Fresh Take
Wells Fargo chief admits who's really going to pay for the bank reforms
"Barney Frank just lied straight to the faces of every American..."
Why you should own the No. 1 natural gas producer in the U.S.
The Fed Flashes the Nuclear QE Trump Card
Fed's Bullard Throws Cold Water: Low Interest for 'Extended Period' Is a Sign of Failure
Sign of Another Bubble: Swap Rates Lower Than Treasuries
Daily Highlights: 7.30.10
Spain Reports 20%+ Unemployment, a Structural Problem That May Persist For Some Time
Here Is What To Watch Out For Today In Addition To GDP (Consensus At 2.6%, Range 1.0%-4.0%)
Friday Morning Links
Wall Street Breakfast: Must-Know News
This Week in Financial Sarcasm: Goldman Sachs, Charles Schwab, Formula Capital & the SEC
Is Now a Good Time to Buy Gold?
Gold Pattern
Is the Gold Trade “Crowded”?
More Clueless Mainstream Commentary on Gold
Time to Board the Gold Stocks Train?
A Little Gold Trickles Out of the Trust at GLD
Gold closes out Q2 on the plus side
Central Banks Push Up the Gold Price
Gold Selling Off Like Everything Else This Morning
For the Last Time, Is Gold in a Bubble?
Market Commentary From Monty Guild
Crude Oil Rises on Bargain Buying, Gold’s Fate In the Hands of Investors
Current Comments on the Companies I Cover: Q3 2010
Daily Dispatch: Words from the Wise
Grandich Client Update – Silver Quest Resources Continues to Grow The Capoose Resourc
Gold Promises and Currency Lies
Gold Technicals for July 29th
Jim?s Mailbox
Hourly Action In Gold From Trader Dan
In The News Today
Unorthodox Leverage Ideas for Physical Metals
For the Fed, Inflation is a Positive
'Tis But a Scratch!
Slicing the Salami
UK Stagflation - Now It Begins... Inflation - India's Turn
Is the Future of U.S. Oil Really Secure?
The gold investment fund that doesn't invest in gold
Housing Bubble will Not be Reblown; Foreclosures Increase…
Understanding negative lease rates
Deciphering the BIS Gold Swap
Pre-Crime, Future Crime [Updated]
Top Trader Warns Of Hyperinflation
Inflation Scorecard: Currencies Extend Gains vs. Gold
Gold - The Battle Is Already Won
Three Reasons Silver Is Likely to Sparkle

California is barrelling towards "fiscal meltdown"

Posted: 30 Jul 2010 02:02 AM PDT

From Bloomberg:

California Governor Arnold Schwarzenegger ordered more than 150,000 state workers to take three days of mandatory unpaid time off to conserve cash.

The executive order, effective Aug. 1, stipulates that the furloughs will end when a budget for the fiscal year that began July 1 is enacted, the governor's press secretary, Aaron McLear, said in an e-mail. It comes after government workers endured furloughs over almost 12 months that ended June 30.

California began its fiscal year without a spending plan after Schwarzenegger and Democrats remained deadlocked over how to fill a $19.1 billion deficit. Controller John Chiang has warned he may again need to issue IOUs to pay bills if the impasse continues into September.

"Every day of delay brings California closer to a fiscal meltdown," Schwarzenegger said in a statement today. "Our cash situation leaves me no choice but to once again furlough state workers until the Legislature produces a budget I can sign."

About 37,000 state workers, including highway patrol officers, forest firefighters, and psychiatric technicians, are exempt from the furloughs because their unions struck labor contracts with Schwarzenegger that included cuts in pensions he sought.

To contact the reporters on this story: Michael B. Marois in Sacramento, California, at mmarois@bloomberg.net.

More on California:

Why Texas is booming... while California is mired in socialist disaster

California bond debacle: State forced to pay higher and higher yields to borrow

Shocking figures show California gov't workers are making unbelievably high salaries

Your employer could be stealing from your 401k

Posted: 30 Jul 2010 02:00 AM PDT

From The Daily Crux:

Lawsuits are popping up across the U.S. accusing employers of "improperly transferring, lending, or using plan assets." This month alone, over 150 million Americans received notice that their 401k contributions never actually went to their 401k.

Many small- and mid-sized businesses have been hit hard by the recession and are using employees' money to pay bills. This article from MarketWatch explains the signs to look for if you think your 401k could be missing money.

Read full article...

More on saving money:

The No. 1 strategy for getting out of debt fast

More great ways to make money without a job

You may be owed thousands... and have no idea

Monetary Targets: A Fresh Take

Posted: 30 Jul 2010 01:46 AM PDT

John M. Mason submits:

The morning papers contain articles on the newly released paper on monetary policy by James Bullard, the President of the Federal Reserve Bank of St. Louis. The basic thrust of the paper is that the Fed’s efforts to keep interest rates so low and for “an extended period” of time may eventually backfire and result in a Japan-like dilemma of stagnation and price deflation.

The “appropriate tool” in the present situation, Bullard contends, is the use of “quantitative easing.” More specifically, he argues that the Federal Reserve needs to be willing to buy longer-term Treasury issues to expand the amount of Federal Reserve Credit outstanding in spite of the fact that there are more than $1.0 trillion in excess reserves currently in the banking system.

Complete Story »

Wells Fargo chief admits who's really going to pay for the bank reforms

Posted: 30 Jul 2010 01:46 AM PDT

From Bloomberg:

Wells Fargo & Co. Chief Executive Officer John Stumpf said customers, not just the bank, will bear the financial burden for U.S. regulations that cover services ranging from home loans to credit cards.

"I can’t guarantee that we won’t pass on some of those costs," Stumpf, 56, said in an interview at his San Francisco office. "We'll try to tighten our belt and absorb some of the costs of compliance, but some costs may change and customers might pay for their financial services in new ways."

Stumpf's comments add to evidence that new rules mean new expenses for consumers as banks make up for lost revenue and increased costs. JPMorgan Chase & Co. CEO Jamie Dimon said July 15 the legislation may translate into higher fees and credit-card rates, and Bank of America Corp.'s Brian T. Moynihan told shareholders a day later he's looking for ways to soften the impact on annual revenue, which the lender said could be $2.3 billion.

Wells Fargo, with the biggest U.S. branch network, is already passing on costs by charging for checking accounts and raising interest rates on credit cards and loans, said Richard Bove, a banking analyst at Rochdale Securities LLC. The bank ended free checking last month by adding a $5 monthly fee for customers who don't meet certain conditions.

"This bank does not intend to sit there and get nailed," said Bove, who recently upgraded Wells Fargo shares to a "buy." "Wells Fargo has moved well ahead of the crowd, and everyone will follow."

New Rules

President Barack Obama signed into law last week a 2,300- page overhaul of financial regulation that gives the government authority to unwind failing financial firms, imposes new rules on derivatives markets and creates a consumer-protection agency to monitor loans and services. Stumpf said it's too early to judge the costs for Wells Fargo, in part because the bank is looking for ways to offset expenses and lost revenue.

Even with the bill's shortcomings, Congress got many parts of it right, Stumpf said in the July 22 interview. The creation of a systemic risk regulator will prevent another crisis from being sparked by the collapse of a large financial firm, he said. The Financial Stability Oversight Council, a super- regulator, will monitor Wall Street's largest firms and other market participants to spot emerging systemic risks.

"Too-big-to-fail has been dealt with," said Stumpf, whose bank holds $1.2 trillion of assets. "Regulators needed a way to understand risk at the top of the house and opine on that risk. They did it in a way that makes a lot of sense."

Not Enough

Some of the new consumer protections don't go far enough because they contain too many exemptions, Stumpf said. Auto dealers and banks with less than $10 billion in assets may be exempt from some curbs.

Consistent consumer protection rules are "good for Americans and it's good for us as providers because we know the playing field is level," Stumpf said. "Does it become less level because the consumer-protection agency has direct involvement with certain companies and not others, and will rely on other regulators to do it? I don’t know. That’s where the trickiness comes up."

Wells Fargo, which ranks fourth by assets and third by deposits among U.S. banks, has dropped 20 percent since the middle of 2007 when credit markets began to falter, compared with 17 percent through yesterday for New York-based JPMorgan and 71 percent for Bank of America, based in Charlotte, North Carolina. New York’s Citigroup Inc. slid 92 percent.

Wells Fargo rose 18 cents to $28.25 at 9:35 a.m. in New York Stock Exchange composite trading. The biggest stakeholder is Berkshire Hathaway Inc., the insurance and holding company controlled by billionaire Warren Buffett.

Durbin Amendment

Stumpf singled out new curbs on debit interchange fees for criticism. Under the so-called Durbin amendment, the Federal Reserve gets authority to limit interchange, or “swipe” fees, that merchants pay for each debit-card transaction. The measure pushed by Senator Richard Durbin lets retailers refuse credit cards for purchases of less than $10 and offer discounts based on the form of payment.

"That is a dispute between banks and merchants and it somehow found its way into regulatory reform," Stumpf said. He told analysts on July 21, "I don't see how debit card fees between banks and merchants had anything to do with what happened in the last couple of years."

Stumpf isn't the only financial leader voicing displeasure. Card industry executives say the legislation amounts to price controls, and American Express Co. Vice Chairman Ed Gilligan said June 15, before the language was finalized, that the Durbin amendment "provides no benefit to consumers." The largest payment networks, Visa Inc. and MasterCard Inc., also opposed the amendment.

Derivatives

New rules on derivatives will mandate that swaps between banks and major users like hedge funds and asset managers be backed by clearinghouses. Stumpf said moving those trades to clearinghouses would help show the true size of the derivatives market, but doesn't address what happens when a borrower doesn't pay or a member of the clearinghouse collapses, he said.

"Somebody's got to take the credit risk," Stumpf said. His concern was echoed by Joel Telpner, a partner with the law firm Jones Day in New York, who spoke in a July 26 interview.

"Maybe we are creating new entities that are too big to fail and setting up a scenario in the future where we're going to be arguing and anguishing about bailing out the clearinghouses," Telpner said.

To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net.

More on banks:

Star analyst Whitney: Avoid banks "at all costs"

Bank analyst Bove: Financial reform bill is a "disaster"

Ten things you must know about offshore bank accounts

"Barney Frank just lied straight to the faces of every American..."

Posted: 30 Jul 2010 01:39 AM PDT

From Green Faucet:

I'm sitting here in amazement as I watch Barney Frank, THE chief architect of the housing bubble, lying through his teeth on virtually every economic subject known to man.

I always say: I wish fiscal conservatives had someone as good at him with the gift of gab.

In what must have been a 15-minute CNBC interview a few moments ago, Barney Frank said that the idea of a VAT tax is as "dead as a doornail." I'm sure he means that sincerely – for this year...

Read full article...

More on taxes:

Tax horror: Healthcare bill to create an IRS "army"

Tax horror: Congress could triple dividend tax rates

Astonishing chart shows how high taxes could surge

Why you should own the No. 1 natural gas producer in the U.S.

Posted: 30 Jul 2010 01:37 AM PDT

From Dan Ferris in the S&A Digest:

For the second quarter of 2010, Extreme Value World Dominator pick ExxonMobil reported a 91% increase in earnings over last year's second quarter. Everyone complains ExxonMobil bought back stock and piled up cash for years and years and didn't build reserves. I recently showed my Extreme Value subscribers why this viewpoint is incorrect.

You don't have to be a genius to know that ExxonMobil using its stock to buy XTO Energy's 45 trillion cubic feet of reserves for less than $1 per thousand cubic feet was a great idea. Poof! Everyone who said ExxonMobil wasn't growing reserves, or wasn't growing them fast enough, is proved instantly wrong, due to a single transaction... a transaction that made ExxonMobil the "mac daddy," low-cost, largest producer of natural gas in the United States.

What investors have failed to grasp is cash in ExxonMobil's hands is like cash in Warren Buffett's hands. Exxon is a brilliant capital allocator and a brilliant manager of its own capital structure. It knows what to do with the cash it generates. What's it doing now that the XTO deal is complete? Paying back XTO debt, of course. It just announced the repayment of another $2 billion in XTO bonds. ExxonMobil knows when to spend, when to refrain from spending, and how to keep itself in excellent financial condition. It refrained from spending during the boom years, buying back shares and building up cash. It bought XTO Energy with these shares after the crash.

I understand if you're bored by big-cap stocks like ExxonMobil. But I promise you that's a foolish viewpoint, since you're unlikely to make much money anywhere else for the next five to seven years...

Our World Dominator buy list, which includes ExxonMobil, is solely for subscribers to Extreme Value. Four World Dominators are selling below their maximum buy prices today.

Crux Note: To access the full list of World Dominators along with weekly updates telling you which ones are in buying range, click here.

More from Dan Ferris:

Dan Ferris: The only investment you never have to worry about

Dan Ferris: A one-of-a-kind farmland investment anyone can buy

"This could be the safest, cheapest stock in the world right now..."

The Fed Flashes the Nuclear QE Trump Card

Posted: 30 Jul 2010 01:11 AM PDT

Gary Dorsch (Global Money Trends) submits:

Of ten people who hear the same story or speech, each one might understand it differently. Perhaps, only one of them will understand it correctly. On July 21st, Federal Reserve chief Ben Bernanke was speaking in riddles, as central bankers are apt to do, while delivering his testimony before Congress. Each word that’s uttered by the Fed chief is scrutinized by anxious speculators, who try to interpret the message correctly, before quickly placing bets in the marketplace.

Bernanke is the captain of a ship that is sailing through some very stormy seas, and is desperately trying to steer the economy away from its worst downturn since the Great Depression. The US-housing market is under-water, and putting enormous financial stress on vast numbers of Americans. A record 270,000 US-homes were seized from delinquent owners in the second quarter, and bankers are on pace to claim more than 1-million properties by the end of 2010. Small businesses, the engine of job creation, - are largely cut-off from credit, and are sputtering.

Complete Story »

Fed's Bullard Throws Cold Water: Low Interest for 'Extended Period' Is a Sign of Failure

Posted: 30 Jul 2010 01:05 AM PDT

Niklas Blanchard submits:

James Bullard:

Again, the data in this Figure do not mix at all— it’s boxes on the right [US] and circles on the left [Japan]. But the most recent observation for the U.S., the solid box labelled “May 2010,”is about as close as the U.S. has been in recent times to the low nominal interest rate steady state. It is below the rate at which policy turns passive in the diagram. In addition, the FOMC has pledged to keep the policy rate low for an “extended period.”This pledge is meant to push in‡ation back toward target— certainly higher than where it is today— thus moving to the right in the Figure. Still, as the Figure makes clear, pledging to keep the policy rate near zero for such a long time would also be consistent with the low nominal interest rate steady state in which in‡ation does not return to target but instead both actual and expected in‡ation turn negative and remain there. Furthermore, we have an example of an important economy which appears to be in just this situation.

Complete Story »

Sign of Another Bubble: Swap Rates Lower Than Treasuries

Posted: 30 Jul 2010 01:00 AM PDT

As reported by FT, long-term dollar swap rates dropped below yields of treasuries with same maturity this week. The last time this happened was in March and it ended in April. We know what happened shortly afterward.

In a nutshell, this is probably what happened. Some fund managers (no doubt the type who only care about relative performance, meaning their bonus/jobs are safe if they lose 10% when the market drops 10%) came to TBTF banks and begged them to sell some bonds. TBTFs said "heck, why not, as long as rates are low." So they sold over $7B of it last week, at very low rates, probably using it to roll over maturing debt sold in past years at much higher coupons. Since a bank's revenue is generally tied to short-term interest rates, it's standard practice for banks to swap a large portion of their fixed-rate liability (bonds) to floating rates. Large buying of the fixed leg of interest rate swaps drives down the swap rate.

Complete Story »

Daily Highlights: 7.30.10

Posted: 30 Jul 2010 12:21 AM PDT

Asian stocks lower on Friday ahead of fresh growth numbers from the US.
Japan's industrial prodn unexpectedly fell 1.5% in June on expectations of lower exports.
US close to Japan-style deflation, Bullard, a voting member of the Fed Reserve says.
Alcatel-Lucent swings to Q2 loss of €184M on a 2.4% decline in revs to €3.8B.
American Apparel shares fall as much as 25% after auditors, Deloitte & Touche, resign.
Anglo American's H1 profit falls 31% to $2.06B, despite 35% jump in revs at $15.02B.
Bayer cuts full-year forecasts at two of three units as profit declines
British Airways' Q1 loss widens to GBP122M following strikes. Revs fell 2.3%.
Citigroup pays $75M to settle charges for providing inadequate information to investors.
Consortium led by Li Ka-shing to buy EDF's U.K. assets for $9.05B.
DBS posts surprise 2Q loss on $747M impairment charge
Disney selling Miramax to Tutor and Colony Capital for more than $660M
EADS raises forecast as revenue creeps up
Eastman Chem beats by $0.40, beats on revs; guides Q3, FY10 EPS above consensus.
Exxon Mobil Corp.'s Q2 earnings jumped 91%, helped by higher commodities prices.
First Solar Inc.'s Q2 profit falls 11.9% to $159M, despite 12% rise in revs to $587.9M.
India's Reliance ADA in talks with Universal Studios to build a $1.5B theme park in India.
Kellogg lowers 2010 profit forecast on cereal recall
Kia Motors' Q2 profit jumped 61% at $470.2M on 23% rise in sales.
Lafarge SA said its Q2 profit dropped 15% to €329M despite 2% rise in revs.
Macquarie warns of lower profits in major units.
MetLife swings to better-than-expected Q2 profit, but revs fell short of expectation.
Michelin swung to H1 profit of €504M as sales rose 17% to €8.35B.
Mitsubishi Corp's Q1 net more than doubled to $1.61B, helped by gains from asset sales.
Mizuho returns to profit as bad loans decline in Japan & bond trading rise
Motorola posts Q2 profit of $162M as revs fell slightly to $5.41B.
Shareholder protests at Charles River Lab, leads to cancellation of merger with WuXi.
Toyota recalls 480,000 vehicles for steering fix.

Economic Calendar: Data on GDP, Employment Cost Index, Chicago PMI to be released.

Earnings Calendar: ACI, AEP, ALU, AON, AXL, BWA, CVX, HMC, KT, MCK, MDC, MRK, PPC, TOT, TPL, WY.
RECENT RATING ACTIONS
SCHOLASTIC CORP (SCHL)
BALL CORP (BLL)
ACCO BRANDS CORP (ABD)
AVERY DENNISON CORP (AVY)
COLGATE-PALMOLIVE CO (CL)
CONOCOPHILLIPS (COP)
AMAZON.COM INC (AMZN)
TITAN INTERNATIONAL INC (TWI)
PRAXAIR INC (PX)
EASTMAN KODAK CO (EK)
PENTAIR INC (PNR)
INTERNATIONAL PAPER CO (IP)

Data courtesy of Egan Jones Ratings and Analytics

Spain Reports 20%+ Unemployment, a Structural Problem That May Persist For Some Time

Posted: 30 Jul 2010 12:19 AM PDT

As I have warned ad nauseum, the problems in Europe are being signicantly underestimated. From CNBC: Spain Jobless Rate up to 20.09 Percent

Spain’s unemployment rate rose to a 13-year high of 20.09 percent in the second quarter, the government said Friday, as the job market lagged behind an economy that has barely managed to break out of recession. Though the rate increased from 20.05 percent in the first three months of the year, the National Statistics Institute (external link) said the number of people working actually increased. Still, the overall unemployment rate rose to its highest level since 1997 because of a large increase in the work force. Spain crawled out of recession in the first quarter of this year after nearly two years of economic contraction and has been a focus of concern in recent months, as investors fretted that its bloated deficit and troubled banking sector could necessitate a Greek-style bailout. The statistics institute said in Friday’s report that there are now 4.645 million unemployed people in Spain, more than half a million higher than a year ago.

Proposed austerity measures on top of a collapsed bubble in the real estate market and banks that are playing hide the sausage with NPAs are not going to help the unemployment rate any. From our proprietary report on Spain’s public finances, Spain public finances projections_033010 (click here to subscribe):

01:39 Spain struggles with staggering unemployment after reak estate bubble pops January 2009

02:43 Spain economy hit by unemployment

The effects of the real estate bust from just 3 weeks ago, and a realistic query to the IMF!

As a result, we feel that there is also over-optimism in regards to the health of the Spanish banks – particularly those with heavy exposure to the consumer and to real estate. We first sounded the alarm in January of 2009 with BBVA, and the alarm over here keeps ringing. Reference Reggie Middleton on the New Global Macro – the Forensic Analysis of a Spanish Bank, Tuesday, January 27th, 2009:

In Spain, BBVA, the second largest domestic bank, could see a massive deterioration in its real estate and consumer loan portfolio. The Spanish real estate sector is making a high horsepower a U-turn after years of a massive housing bubble that has burst – culminating in an unemployment rate that has risen to an outrageous 13.4% level. The power skid is showing no signs of reaching an inflection point, and we believe is only in the beginning throes of a sharp downturn. In addition, the banks‘ other key growth areas including Mexico, the U.S and South America are witnessing a slowdown in economic activity, restricting BBVA’s growth prospectus amid the current turbulent environment. With increasingly challenging economic conditions in each of these economies, BBVA’s asset quality has deteriorated sharply with non-performing loans rising to 36% of its tangible equity without corresponding (equal) increase in provisions. As the bank deals with these tough times ahead, we expect BBVA’s bottom line growth to remain subdued due to a slower credit off-take and higher provisions in the coming quarters.

Key Highlights

Sharp slowdown seen in Europe - According to the European Commission forecasts, the European economy is expected to contract 1.9% in 2009 with a modest recovery in 2010. Spain, in particular, is expected to be one of the worst hit due to the humbling of its housing sector which had, for several years, been a significant contributor to the country’s economic growth. This will impact BBVA by slowing down its credit and loan growth in addition to significantly deteriorating the credit quality of its loan portfolio.

BBVA’s asset quality is set to deteriorate rapidly as Spain enters recession - Problems in Spain are more pronounced than in most of its European counterparts. The Spain’s budgetary deficit has already crossed the 3% threshold limit set by the European Commission and is expected to cross 6% by 2009, only behind Ireland. The unemployment has reached a 12-year high of 13.4% in November 2008, the highest in the Euro zone, while the real estate sector bubble (particularly residential vacation homes purchased by foreigners), the pillar of economic growth engine, has burst. BBVA, with nearly 40% of its total loan exposure tied to real estate & construction loans and individual loans in Spain could see massive deterioration in its asset quality.

Besides Spain the bank has to deal with other challenging economies including Mexico and the U.S - In 3Q2008, U.S and Mexico contributed nearly 29% and 16% of total revenues, respectively. The downturn in the U.S economy is showing no signs of stabilization, with an unabated fall in housing prices and frozen credit markets continuing to shatter consumer confidence. Recession in the U.S has also led to a sharp slowdown in Mexico which is highly dependent on US for exports and remittances. The slowdown in both of BBVA’s key markets will not only impact the pace of BBVA’s growth but also augment the risk profile for the bank as it now has to deal with vagaries of these economies to navigate itself in these turbulent times.

I reiterated the warning again back in January of 2010 with “The Spanish Inquisition is About to Begin…“:

Now, it is time to see if fundamentals return to the market. From Bloomberg: BBVA Fourth-Quarter Profit Plunges 94% to $44 Million on Asset Writedowns

Jan. 27 (Bloomberg) — Banco Bilbao Vizcaya Argentaria SA said fourth-quarter profit slumped to 31 million euros from 519 million euros a year earlier as the lender wrote down the value of some assets. BBVA fell the most in eight months in Madrid trading after saying net income fell to 31 million euros ($43.6 million) from 519 million euros a year earlier, the Bilbao, Spain-based bank said in a filing today. That missed the 1.05 billion-euro median estimate in a Bloomberg survey of nine analysts as the bank took a 704 million-euro writedown for its U.S. franchise. BBVA said it took the writedowns after analyzing its “most problematic portfolios” as it prepares for a tough year with recessions in its biggest markets of Spain and Mexico. [Emphasis added]

This is what those trades in the respective months of January looked like…

As I said, the situation in Spain, and particularly the Spanish banks, are worse than popularly publicized. Subscribers are welcome to review the following bank research:
A Review of the Spanish Banks from a Sovereign Risk Perspective – retail.pdf
A Review of the Spanish Banks from a Soverein Risk Perspective – professional

Don’t be surprised if the contagion moves into the insurance sector as well:

Euro Bank Soveregn Debt Exposure Final -Retail

Euro Bank Soveregn Debt Exposure Final – Pro & Institutional

Sovereign Debt Exposure of European Insurers and Reinsurers (Empty 2010-05-19 01:56:52)

And, of course I am expecting financial and economic contagion to ensue, quite possibly before year end. See Introducing The BoomBustBlog Sovereign Contagion Model: Thus far, it has been right on the money for 5 months straight!

Click here to look into subscribing to our research services! The entire Pan-European Sovereign Debt Crisis series is available for free by clicking here. I will attempt to push out a detailed preview of a retail short and an technology company stratey and business model report by the end of the day. Cheers!

Here Is What To Watch Out For Today In Addition To GDP (Consensus At 2.6%, Range 1.0%-4.0%)

Posted: 30 Jul 2010 12:18 AM PDT

With everyone focusing on today's GDP, it is easy to ignore the other relevant economic data to be released in the one and a half hour block before 10am. In order of appearance, they are: Q2 GDP,the employment cost index, the Chicago PMI, and the final UMichigan consumer sentiment. Below is a summary from a rather bearish Goldman Sachs (which expects a 2.0% GDP print in 15 minutes) on each of these data points.

8:30: GDP for Q2….slower growth and a deeper recession? The first cut on second-quarter growth should show further slowing from the 2.7% rate now on record for the first quarter, though with significant increases in both residential and nonresidential investment (the former due to the transitory effects of the homebuyer tax credit). Trade should be a big drag.

The report comes alongside annual revisions to the past three years that make us less confident in the second quarter call than on most others, because figures for the first quarter will also change. The gap that developed between real GDP and real gross domestic income (GDI) during the recession suggests that the revision to real GDP will most likely show a deeper peak-to-trough setback than the 3.8% now on record.

On GDP, GS: +2.0%; median forecast (of 81): +2.6%, ranging from +1.0% to +4.0%; last (Q1 third estimate) +2.7%.
On the GDP price index, GS: +1.0%; median forecast (of 42): +1.1%, ranging from +0.4% to +1.5%: +1.1%.
On the PCE core index: GS: +1.0%; median forecast (of 20): +1.0%, ranging from +0.3% to +1.4%; last: +0.7%.

8:30: Employment cost index for Q2…a return to smaller gains? Figures for the first quarter were skewed to the high side by a large increase in benefits. We expect the second-quarter data to be more consistent with the moderating trend that had been evident before this latest report.

GS: +0.4%; median forecast (of 54): +0.5%, ranging from +0.3% to +0.7%; last +0.6%.

9:45: Chicago purchasing managers’ index for July…slowing? Virtually all surveys for July show a slowing in industrial momentum. (Yesterday’s Kansas City Fed index was an exception.) We and most other forecasters expect slower activity in the Chicago area as well, though recovery in the auto sector should keep the index from dropping sharply.

GS: 57.5; median forecast (of 53): 56, ranging from 50 to 60; last 59.1.

10:00 (9:55 to subscribers): Reuters/University of Michigan consumer sentiment for July (final)…confirming that sharp decline? The preliminary results for July showed a sharp setback in confidence. Normally, the final index does not move much from the preliminary, and this is reflected in a median forecast that is only ½ point above the preliminary reading (after a 9.5-point drop). For what they are worth, other indexes (Conference Board, ABC) have both deteriorated in the two weeks since the preliminary Michigan survey was taken. The median expectation for inflation five to ten years ahead ticked up to 2.9% in the preliminary report from 2.8% previously.

Median forecast (of 58): 67, ranging from 57.5 to 73; last 66.5 (July prelim).

Friday Morning Links

Posted: 30 Jul 2010 12:16 AM PDT

MUST READS
China overtakes Japan as No.2 economy – Reuters
Fed's Bullard Calls for 'Significant' Easing Plan – CNBC
Economists Expect Slower Growth in Second Half – NY Times
Americans Buy IPads While Broke in New Abnormal Economy – Bloomberg
Taleb: Government Deficits Could Be the Next 'Black Swan' – BusinessWeek
Administration's Housing Bailout: The Big Disconnect – Olick, CNBC
What's so scary about Elizabeth Warren? – CNN/Money
Trillions for Wall Street – Whitney, Counterpunch
Fetters of gold and paper – voxeu

MARKETS/INVESTING
Oil falls below $78 as global stocks drop – AP
Gold holds steady ahead of U.S. growth data – Reuters
Top Hedge Funds That Dodged Crash Turn Gloomy – Bloomberg
Do You Believe in Technicals or Fundamentals? – Barron's
Marc Faber Questions if Dow Could Hit 1,000 – CNBC
Deciphering the BIS Gold Swap – Turk, Kitco

ECONOMY/WORLD/HOUSING/BANKING
Deflation Risks – Krugman, NY Times
Economic Growth May Show Consumer Spending Cooled – Bloomberg
Euro-zone jobless rate steady, inflation picks up – MarketWatch
Aussie house prices fall 0.7% in June 2010 – Debt Deflation
UBS ponders the UK's quiet CPI calibration – FT Alphaville
Popular 'Zero Down' Mortgage Program Makes Comeback – WSJ
Housing policy must be set on sustainable basis – Paulson, Washington Post
Hank Paulson: Blame it on FHA/GSEs – The Big Picture
Fed officials clash on need for more stimulus – Reuters
Deflation shot across market's bow – MarketWatch

Wall Street Breakfast: Must-Know News

Posted: 29 Jul 2010 11:09 PM PDT

Charles River, Wuxi call off merger. Charles River Laboratories (CRL) and Wuxi PharmaTech (WX) called off their merger agreement following continued opposition from investors and proxy advisory firms. The $1.6B deal would have been the largest foreign takeover of a Chinese company, and would have allowed Charles River to expand in China, where revenue from drug-testing services is growing as much as 30% annually. Instead, Charles River will pay a $30M breakup fee to Wuxi and will begin a new $500M share buyback program. Premarket: CRL +6.4% (7:00 ET).
EDF sells U.K. unit for $9.1B. A group led by Hong Kong's Cheung Kong Infrastructure Holdings (CHEUY.PK) is buying Electricite de France's (ECIFF.PK) U.K. power networks unit for &ound;5.8B ($9.1B). EDF is selling the unit as part of its plans to reduce its debt, while Cheung Kong Infrastructure is working to increase its overseas investments because of difficulties in expanding in Hong Kong's mature market.
Disney offloads Miramax. At long last, Disney (DIS) announced it's selling its Miramax film studio. Filmyard Holdings, whose partners include construction tycoon Ron Tutor and investment firm Colony Capital, will buy the studio for $660M, ending months of talks with various bidders. Disney agreed to the plan after Tutor and his investment partners paid a nonrefundable $40M deposit and presented a financing plan.
Life insurers face fraud probe. New York Attorney General Andrew Cuomo has subpoenaed Prudential (PRU) and MetLife (MET) as part of a "major fraud" investigation into life insurers. The probe is focused on whether the firms misled military families into placing benefits in insurer-controlled, low-yield, potentially risky accounts which "reaped millions of secret profits for the insurers." Six other firms, including Genworth Financial (GNW) and Unum Group (UNM), have reportedly been subpoenaed as well.
DoJ sues Oracle. The Justice Department has joined an existing whistle-blower lawsuit against Oracle (ORCL), alleging the firm defrauded the federal government on a software contract in effect from 1998 to 2006 that involved hundreds of millions of dollars in sales. According to the suit, Oracle misrepresented its commercial sales practices, causing government customers to receive deals that were inferior to those Oracle gave its commercial customers. Oracle closed down 2.4% yesterday.
Google calls China blackout a miscalculation. Google (GOOG) said yesterday that its search and advertising services were being blocked in China for the first time since the company reached a compromise with Chinese regulators earlier in the month. However, Google later said the blockage was because of its own miscalculation: "Because of the way we measure accessibility in China, it’s possible that our machines could overestimate the level of blockage. That seems to be what happened last night when there was a relatively small blockage. It appears now that users in China are accessing our properties normally.”
Visa may face antitrust suit. Visa (V) disclosed it may face an antitrust suit from the Justice Department over its policy of prohibiting merchants from charging customers extra for credit card transactions. CEO Joseph Saunders said the company is "currently engaged in constructive negotiations with the department to resolve its concerns as it relates to Visa without litigation or payment of monetary damages.” Merchants already have a pending antitrust suit against both Visa and MasterCard (MA). In yesterday's trading, Visa closed down 4.3%.
Fed sees paper profit on Bear, AIG. The Federal Reserve now has a paper profit on the toxic assets it's holding from Bear Stearns and AIG (AIG). The assets are presently worth $69.1B, around $2B more than last quarter, with the unrealized gains on the Maiden Lane portfolios standing at $10.8B.
Vale buys Brazilian copper firm. Vale (VALE), the world’s largest iron-ore producer, said it plans to buy Brazilian copper producer Paranapanema for about 2B reais ($1.14B) as it seeks to diversify its metals output. The company will pay 6.30 reais per share to buy all of Paranapanema’s voting stock in a Sept. 1 auction. Vale aims to become one of the world’s largest copper producers in the medium term, rivaling companies like Xstrata (XSRAF.PK) and Anglo American Plc (AAUKY.PK).
Citigroup settles subprime charge. Citigroup (C) agreed to pay $75M to settle regulatory charges that it failed to disclose $40B in subprime exposure to investors during 2007. Gary Crittenden, Citigroup's former CFO, agreed to pay $100,000 as part of the settlement. Arthur Tildesley, a former head of investor relations, agreed to pay $80,000.
Reliance, Universal discuss theme park in India. India's Reliance ADA Group is reportedly in early stage talks with Universal Studios, a unit of GE's (GE) NBC Universal, to build a $1.5B theme park and resort in India, a move that would capitalize on rising demand for entertainment in one of the world's fastest-growing markets. A deal would help Reliance in its efforts to become a global media giant, while allowing Universal to extend its brand to a new market. (Comcast (CMCSA) is in the midst of seeking regulatory approval to buy control of NBC Universal.)
IMF: U.S. financial system at risk. Though the U.S. financial system is "slowly recovering," the IMF said it remains vulnerable to crisis, partly because lawmakers have failed to streamline the regulatory system or take bolder action. The IMF also conducted stress tests on the 53 largest banks in the U.S. and found that 12 banks, nearly all of them small or regional, would need to raise more capital.

Earnings: Friday Before Open

Aon Corporation (AON): Q2 EPS of $0.81 beats by $0.06. Revenue of $1.89B (+0.9%) vs. $1.87B. (PR)
CapitalSource Inc. (CSE): Q2 EPS of $0.06 beats by $0.07. (PR)
Newell Rubbermaid (NWL): Q2 EPS of $0.51 beats by $0.07. (PR)

Earnings: Thursday After Close

Acme Packet (APKT): Q2 EPS of $0.18 beats by $0.01. Revenue of $53.3M (+62%) vs. $52.5M. Shares -13.7% AH. (PR)
Amgen (AMGN): Q2 EPS of $1.38 beats by $0.08. Revenue of $3.8B (+2.5%) vs. $3.7B. Shares -0.2% AH. (PR, earnings call transcript)
Coinstar (CSTR): Q2 EPS of $0.39 beats by $0.06. Revenue of $342M (+34.8%) vs. $381M. Shares -7.5% AH. (PR)
DTE Energy Company (DTE): Q2 EPS of $0.51 misses by $0.09. Revenue of $1.8B (+6.2%) vs. $1.7B. Shares -0.3% AH. (PR)
Eastman Chemical Company (EMN): Q2 EPS of $2.05 beats by $0.40. Revenue of $1.7M (+37.6%) vs. $1.6M. Shares +6.3% AH. (PR)
Expedia (EXPE): Q2 EPS of $0.44 beats by $0.02. Revenue of $834M (+8.3%) vs. $846M. Shares +2.9% AH. (PR, earnings call transcript)
First Solar (FSLR): Q2 EPS of $1.84 beats by $0.23. Revenue of $588M (+11.8%) vs. $543M. Shares -3.9% AH. (PR, earnings call transcript)
Genworth Financial (GNW): Q2 EPS of $0.24 may not be comparable to consensus of $0.28. Shares -4.8% AH. (PR)
Ingram Micro (IM): Q2 EPS of $.41 beats by $0.04. Revenue of $8.2B (+24%) vs. $7.9B. Shares -0.7% AH. (PR, earnings call transcript)
KLA-Tencor (KLAC): FQ4 EPS of $0.70 beats by $0.10. Revenue of $559M (+98.2%) vs. $558M. Shares -0.4% AH. (PR, earnings call transcript)
Maxim Integrated Products (MXIM): FQ4 EPS of $0.33 beats by $0.02. Revenue of $566M (+43.5%) vs. $562M. Shares +3.3% AH. (PR)
McAfee (MFE): Q2 EPS of $0.63 beats by $0.03. Revenue of $495M (+5.7%) vs. $507M. Shares +0.6% AH. (PR, earnings call transcript)
MEMC Electronic Materials (WFR): Q2 EPS of $0.06 misses by $0.03. Revenue of $448M (+58.5%) vs. $466M. Shares -7.1% AH. (PR, earnings call transcript)
MetLife (MET): Q2 EPS of $1.23 beats by $0.23. Revenue of $12.8B (+4.8%) vs. $13B. Shares +3.2% AH. (PR)
Monster Worldwide, Inc. (MWW): Q2 EPS of $0.00 beats by $0.04. Revenue of $215M (-4%) vs. $216M. Shares +0.2% AH. (PR, earnings call transcript)
Pactiv (PTV): Q2 EPS of $0.56 beats by $0.01. Revenue of $973M (+8%) vs. $1010M. Shares -0.9% AH. (PR)
Regal Entertainment Group (RGC): Q2 EPS of $0.03 may not be comparable to consensus of $0.17. Revenue of $731M (-7.4%) vs. $757M. Shares -0.5% AH. (PR)
Republic Services (RSG): Q2 EPS of $0.43 beats by $0.01. Revenue of $2.1B in-line. Shares +0.8% AH. (PR, earnings call transcript)
Rovi Corporation (ROVI): Q2 EPS of $0.55 beats by $0.09. Revenue of $135M (+12.8%) vs. $129M. Shares +3.4% AH. (PR)
Sunoco (SUN): Q2 EPS of $1.31 beats by $0.54. Revenue of $9.6B (+31.4%) vs. $8.3B. Shares +3.2% AH. (PR, earnings call transcript)

Today's Markets

In Asia, Japan -1.6% to 9537.3. Hong Kong -0.3% to 21030. "China Shanghai Co" -0.4% to 2638. India -0.7% to 17868.
In Europe, at midday, London -0.6%. Paris -0.5%. Frankfurt -0.8%.
Futures: Dow -0.2%. S&P -0.3%. Nasdaq -0.4%. Crude -0.6% to $77.90. Gold +0.1% to $1172.80.

Friday's Economic Calendar

8:30 GDP Q2
8:30 Employment Cost Index
8:30 ISM New York Business Index
9:45 Chicago PMI
9:55 Reuters/UofM Consumer Sentiment
3:00 PM USDA Ag. Prices
Notable earnings before Friday's open: ACI, AEP, AIV, AON, BPO, BWA, CSE, CVH, CVX, ENDP, FO, ITT, LPX, MCK, MRK, NWL, PEG, SPG, UFS, UPL, WY

Seeking Alpha's Market Currents team contributed to this post.

Goldman Sachs issued a new corporate policy banning the use of all swear words and even the use of bleeped swear words such as f***k and s**t from corporate emails and texts sent on corporate issued cell phones. The new policy comes on the heels of recent embarrassing leaks of profanity-laced emails that were made public in Congressional testimony including Goldman executive Tom Montag’s email that stated about a then current $600 million Goldman issuance of Timberwolf CDOs: “Boy, that Timberwolf was one shitty deal.” Within three weeks of selling Australian hedge fund Basis Capital $78 million of Timberwolf CDOs and assuring Basis Capital that the market for CDOs had stabilized, Goldman Sachs began making significant margin calls on these very securities. Next up for consideration, Goldman CEO Lloyd Blankfein stated that he will be considering banning lying, cheating and stealing from Goldman activities as well.

In other news, the Obama administration’s record of “yes” means “no” and “more transparency” really means “less transparency” continues. Upon its passing, President Obama lauded the Frank-Dodd Financial Reform Bill and stated that the bill would “increase transparency in financial dealings.” A closer look at the bill has revealed that the bill actually increases secrecy by exempting the SEC from disclosing records or information derived from "surveillance, risk assessments, or other regulatory and oversight activities”, including all requests filed through the Freedom of Information Act. This provision covers almost every action by the agency, lawyers have stated. As a result of the new financial reform bill, the SEC stated that the American public no longer has a right to know how many hours a day its employees are watching porn instead of performing their regulatory duties.

Charles Schwab’s Chief Investment Strategist Liz Ann Sonders stated that given the “pretty good” fundamentals of US markets, and “absolutely fantastic” earnings of US corporations this earnings season, investors need to take advantage of current volatility by buying into the market now and sticking to a “long term” strategy as any short-term activities like taking profits from short-term trades or placing puts on the S&P500 as a hedge against a likely imminent large fall would be at “their [investors’] peril”. Despite the fact that this last rally in the US markets has been obviously rigged and manufactured and non-existent trading volume has spawned 1%+ up and down days in recent months with frightening regularity, Sonders states that her personal CCI is at least three deviations above the rest of America's CCI because as an investment authority, it's quite easy to hypnotize the masses with b.s. propaganda.

Finally James Altucher, Managing Director of Formula Capital, also joined the “now is the best time ever to buy US stocks” bandwagon by warning investors not to buy gold despite the ongoing buying opportunity this dip presents, because, as he so wisely claims, gold is nothing but a “rock”. And of course, all Westerners already know that you can not eat a rock and a rock does not pay interest. Altucher claims investors should load up on US stocks because they are trading at the lowest point in five decades right now in terms of “earnings yield versus interest rates”.

In response to all this recent affliction of insanity among US investment strategists and advisers, the Barnum & Bailey Circus announced that they will be increasing annual salaries for their clowns to $250,000 with 5 weeks paid vacation in addition to allowing them to freely cuss anytime they want in emails and in texts (as long as the texts are not sent to children). A Barnum & Bailey spokesperson stated that the main reason for the significant salary increase was a direct response to the commercial investment industry's offering of high priced salaries for registered clowns and a renewed commitment of the circus to the retention of their most excellent and talented clowns.

P.S. We'll be back with a substantive, non-satirical piece soon regarding our current monetary crisis.

Is Now a Good Time to Buy Gold?

Posted: 29 Jul 2010 10:33 PM PDT

By Jeff Clark, Senior Editor, Casey's Gold & Resource Report While we're convinced gold and gold stocks are destined for much higher levels, buying when prices are low can mean the difference between a double or triple and a ten-bagger… a week in Malibu vs. a week in [...]

Gold Pattern

Posted: 29 Jul 2010 10:33 PM PDT

GLD – Gold ETF Price Action Gold continues to pull back from the June highs. It looks as though it could form an ABC retrace pattern if the July 7th low is broken. If $1085 is broken we should see gold drop to $1065-75 level. On the GLD etf that [...]

Is the Gold Trade “Crowded”?

Posted: 29 Jul 2010 10:33 PM PDT

Jeff Clark, Senior Editor, Casey's Gold & Resource Report It's true that GLD's assets just passed the $50 billion mark, and that it's the second largest U.S. ETF. Yes, mints had difficulty filling orders when the Greek crisis broke. And yes, the gold price is up nine years in [...]

More Clueless Mainstream Commentary on Gold

Posted: 29 Jul 2010 10:33 PM PDT

By Jordan Roy-Byrne, CMT Once again we see another bearish piece on Gold in the WSJ. Rather than attack the author personally, we want to illustrate how the article is another example of the lack of any quality gold commentary both in general and in mainstream publications. First, its important to note why you won't [...]

Time to Board the Gold Stocks Train?

Posted: 29 Jul 2010 10:33 PM PDT

By Jeff Clark, Senior Editor, Casey's Gold & Resource Report One of the big hints that gold stocks will be ready for take-off is when they stop following the broader markets and strictly track gold, particularly if the market falls and gold stocks don't. We now have data [...]

A Little Gold Trickles Out of the Trust at GLD

Posted: 29 Jul 2010 10:33 PM PDT

Tim Iacono It's still just a tiny trickle, but, for the third straight day, a little gold bullion exited the trust at the SPDR Gold Shares ETF (NYSE:GLD), a total of 4 tonnes in all as shown below. Of course, the trust added a total of 190 tonnes in April, May, and June, so, [...]

Gold closes out Q2 on the plus side

Posted: 29 Jul 2010 10:33 PM PDT

The gold market has had a lot of publicity and been under intense scrutiny lately as investors, both conservative (Glenn Beck) and liberal (George Soros), are weighing in and recommending a position in gold. Click The Chart to view the video

Central Banks Push Up the Gold Price

Posted: 29 Jul 2010 10:33 PM PDT

By David Galland, Managing Director, Casey Research For some years now, Doug Casey has gone on record with his view that we'll know the gold bull market is really picking up steam when central banks stop selling their reserves of gold and begin buying the stuff. The following excerpt [...]

Gold Selling Off Like Everything Else This Morning

Posted: 29 Jul 2010 10:33 PM PDT

Money Game Gold continues to be stuck, violently darting in a range from around $1230 to $1260, waiting for a major move. Today gold is selling off amid the flight to the dollar, though we wouldn't be shocked to see it turn on a dime at any point during the day.

For the Last Time, Is Gold in a Bubble?

Posted: 29 Jul 2010 10:33 PM PDT

Jeff Clark, Senior Editor, Casey's Gold & Resource Report While a few mainstream outlets are coming around to at least acknowledging gold's stellar run, most remain skeptical or outright bearish. And the blasphemy they purport is that gold is in a bubble. Let's settle it, right now, and [...]

Market Commentary From Monty Guild

Posted: 29 Jul 2010 10:30 PM PDT

View the original post at jsmineset.com... July 29, 2010 03:05 PM Dear Monty, China knows the evil of over the counter derivatives. They handle substantial financial fraud as a capital crime. Going forward, listed derivatives with a clearinghouse function, margin requirements and standardized contract points can exist without endangering either China or the world. China has no significant backlog of the OTC type weapons of mass financial destruction. The Western World is overhung by $1.4 quadrillion dollars of notional value OTC derivatives before the BIS went to the cartoon value of "value to maturity," the ultimate Pollyanna computer fabrication. The size of the OTC weapons of mass financial destruction has grown during the crisis that they are in fact responsible for. China, who considers major white collar crimes as capital crimes ( punishable by death), will not screw up themselves and the world in their version of the credit default LISTED derivatives. Asia and Africa is...

Crude Oil Rises on Bargain Buying, Gold’s Fate In the Hands of Investors

Posted: 29 Jul 2010 10:30 PM PDT

courtesy of DailyFX.com July 29, 2010 08:02 PM A very interesting week with regard to commodities saw crude oil inventories surge to levels just shy of 10-year highs and gold ETF holdings plummet 500,000 troy ounces. Nevertheless, the near-term outlook for both commodities is highly uncertain. Commodities - Energy Crude Oil Rises on Bargain Buying Crude Oil (WTI) $78.12 -$0.24 -0.28% Commentary: Oil rose $1.37, or 1.78% on Thursday, as traders used the recent sell-off as an opportunity to buy. After the bearish inventory report on Wednesday, prices may find it hard to advance further. A bit of consolidation is possible under the recent double top resistance area. In the event next week’s report is bullish or at the very least neutral, prices should approach $80; but that remains to be seen. Technical Outlook: Prices found support at $75.81, the 23.6% Fibonacci retracement of the 5/20-6/28 upswing. Near-term resistance lines up in the $79.38-80.00...

Current Comments on the Companies I Cover: Q3 2010

Posted: 29 Jul 2010 10:30 PM PDT

A Monday Morning Musing from Mickey the Mercenary Geologist [EMAIL="Contact@MercenaryGeologist.com"]Contact@MercenaryGeologist.com[/EMAIL] July 26, 2010 I provide many updates of the companies I cover in written, audio, and video interviews and in periodic workshops during various investment conferences called "Q and A on Junior Resource Stocks". However, until today I have not posted written updates in the Mercenary Musing format. The following is the first in what will be a periodic series of general musings that review recent progress, upcoming catalysts, share price history, and give an updated opinion of each sponsor company and one site affiliate. The junior resource speculation game is dynamic, markets go up and down, company fortunes ebb and flow, and my opinions change to reflect the current situation and future outlook. Before we examine individual companies, let's review my trading philosophy as recently explained in a musing called "The Power ...