December 2008

* Gold prices closed 2008 at $880/oz. Wednesday on year-end positioning despite a stronger dollar. Gold closed in NY up $7.20 to $880.80/oz., rising 5.5% for the year, while silver rose $.40 to $11.32/oz. ending 2008 down 25%.

* "Stocks gained ground in light trading Wednesday, the final session of 2008, as investors took stock of the worst year for the U.S. market since 1931 and some staked out fresh positions in battered financial stocks. "Good riddance to 2008," said Kim Rupert, analyst at Action Economics," reports MW.

* MarketWatch 2008: The Year in Markets

U.S. stock indexes
DJIA -34%
S&P 500 -39%
Nasdaq -40%
Dow Jones Financials -55%
Amex Oil Index -38%
International indexes
Germany DAX -40%
FTSE 100 -31%
Japan Nikkei 225 -42%
China Shanghai -65%
Mexico IPC -24%
Russia RTS -72%
Currencies/commodities
Gold +5.5%
Crude -54%
Dollar index +6%

* "Gold remains the best performing metal for 2008. All roads point to gold continuing its ascent in 2009," said Jonathan Barratt, of Commodity Broking Services in Sydney, reports Bloomberg.

* Gold prices rose 14% in December on safe haven buying and recent developments in the Middle East, where Palestinian militants attacked southern Israel with rockets igniting a new war. "The Israel Air Force on Tuesday evening unleashed a massive strike on a network of Hamas-dug tunnels in the southern Gaza Strip, according to Haaretz.

* In 2008 gold prices rose for an amazing eighth straight year, topping $1,000/oz in March then bottoming at $710 in November. Gold is the best performing asset of the 21st century!

* "Flight-to-safety will still be the main driver of gold prices as the US fiscal and trade deficits get unmanageable, the weaker dollar could help gold break through $1,200 an ounce," reports Miningmx.

* "Gold is the only commodity that did not give up over 70% of it's value in this recent commodity debacle. Gold retraced only 30% of its value. This is very impressive given the fact that deflation on a world wide basis is occurring. History shows gold as the ultimate and longest lasting store of value - not worthless fiat currency. Remember that! I want to be long on the day when gold gaps up $500 an ounce and you can't buy it at any price," reports Vrtrader.com.

* "International demand for gold coins has picked up as people strive to take charge of their own financial destinies in an uncertain investment world. In addition, the recent credit crunch has led to a further uptick in demand for coins across the world," reports Mineweb.

* "This chart is the distillation of all global supply and demand for gold since 2001.There is not another investment that can even approach such performance in the incredibly chaotic markets we’ve witnessed over the last 7 years. Gold is already in an elite class of its own," reports Zeal.

* "On the euro's tenth birthday, eurozone's single currency is an unquestioned part of daily life for 330 million people. Market eagerness to push the euro to sterling parity, and to defiant highs against the dollar, yuan, ruble, and rupee, is an undeniable stamp of confidence. But success is bitter-sweet. The eurozone itself is in deep recession. A currency surge at this juncture is a cruel blow for export industry," reports Telegraph.

* "The market's swoon this year will cement 2008's place in history by at least one measure: eviscerated wealth. A record $7.3 trillion of stock market value has been obliterated this year, according to the Dow Jones Wilshire 5000 index, the broadest measure of U.S. equity performance," reports Reuters.

* Home prices are back to their March 2004 levels, having dropped in 20 major U.S. cities by a record 18% from the previous year, according to the Case-Shiller price index published Tuesday by Standard & Poor's.

* "Gold may climb to $935 an ounce by the end of next week on demand in the Middle East for the metal as a haven, and from investors who consider gold a better alternative to Treasuries, according to James Moore, an analyst at TheBullionDesk.com" reports Bloomberg.

* "Speculation the recession will deepen in 2009 is boosting gold's appeal as a store of value. Gold has outperformed stocks and most commodities this year as simultaneous recessions in the U.S., Japan and Europe reduced demand for raw materials and triggered a decline in asset values," reports Bloomberg.

* "U.S. stocks erased early gains on Monday, as rising crude oil prices pressured consumer-related stocks and after news that Kuwait scrapped plans for a $17.4 billion joint venture with Dow Chemical. Fund managers and other investors were also selling some of this year's most battered stocks to reduce tax-liability next year," reports MW.

* "Iran issued a religious decree to Muslims around the world, ordering them to defend Palestinians in Gaza against Israeli attacks "in any way possible". Ayatollah Khamenei declared Monday a day of public mourning in Iran after Israel killed over 280 Palestinians in two days of air strikes on Gaza," reports Reuters.

* "The dollar's sharp turn weaker into the end of the year is threatening to reshuffle winners and losers in global trade amid the toughest economic conditions in decades. few countries want to be the last one standing with a strong currency. Some economists worry that countries could actively seek to weaken their currencies in an effort to gain an advantage over their trading partners," reports WSJ.

* "By borrowing more than it can ever pay back, the government will guarantee higher inflation for years to come, thereby diminishing the value of all that Americans have saved and acquired. For now the inflationary tide is being held back by the countervailing pressures of bursting asset bubbles in real estate and stocks, forced liquidations in commodities, and troubled retailers slashing prices. But when the dust settles, trillions of new dollars will remain, chasing a diminished supply of goods." reports WSJ.

* "America was a land forged by rugged individualism, hard work and personal responsibility. Our strength was our ability to take care of ourselves and limit government to the very basics of protecting the nation. In 2008 that changed radically, and now it is all about big brother, Uncle Sam, taking over our lives. Most people are not only embracing it, they are demanding it," reports WND.

* "Near record low mortgage rates sent mortgage applications shooting 48% higher last week, especially for refinances, according to an industry report," reports CNN.

* "U.S. stocks rose in light pre-holiday trading Wednesday, gaining ground as data on consumer spending and durable goods for November came in better than expected. Consumer spending declined 0.6% in November, though economists expected a 0.7% slip. Durable goods orders fell 1% last month, less than the 3% drop forecast," reports MW.

* "Get Ready for a Lost Decade: Bad times don't produce good policy. Mr. Obama's troops palpitate with excitement at the prospect of $1 trillion in "stimulus," though any net benefit to the economy likely will be incidental. Politics is in charge -- in a way that makes a lost decade of subpar prosperity more likely than not," reports WSJ.

* "The U.S. economy shrank at a 0.5% annual pace in the third quarter, the steepest decline since Q3 2001, after consumers and businesses cut spending and the country's recession gathered steam, government data showed on Tuesday," reports CNBC.

* "Sales of previously owned homes in the U.S. fell 8.6% in November and prices dropped by the most on record,indicating the real estate slump will extend into a fourth year and worsen the recession," reports Bloomberg.

* "The Christmas week is typically a bullish one, known for its Santa Claus rally, but clearly after four negative closes that rally has become a bit elusive. Santa has every reason not to reward Wall Street this year. Being 'naughty' hardly scratches the surface of the skullduggery and ruthlessness of those in charge," reports Vrtrader.com.

* "Is the Medicine Worse Than the Illness? The world ran out of trust in 2008 -- but there is no shortage of money because the Fed is printing like mad. It's the wrong approach, with potentially dire consequences, says James Grant," at WSJ.

* "While virtually no one is raising prices in today's depressed economy, all this Fed liquidity will soon become an accident looking for a place to happen. The trick then, for the Fed, is to drain this excess liquidity before it turns into inflation," reports MW.

* "After receiving billions in aid from U.S. taxpayers, the nation's largest banks say they can't track exactly how they're spending the money or they simply refuse to discuss it," reports CNBC. WATCH: Show Me the Money -ABCNews.

* "We’re seeing a more statist world economy, says Ken Rogoff, former chief economist at the International Monetary Fund and now a professor at Harvard University in Cambridge, Mass. "That’s not good for growth in the longer run. It’s not good for stocks either," reports Bloomberg.

* "The euro rose on Monday, recovering against the dollar in holiday-thinned trade, while the yen fell after the U.S. bailout plan for automakers quelled some extreme risk aversion," reports Reuters.

* "Money market funds will need to raise fees or close to new money to remain profitable as yields hover at near-zero, according to industry managers. The funds are reeling from frozen credit markets, subprime exposure and a crisis of confidence triggered by one fund 'breaking the buck', or returning investors less than they paid in," reports FT.

* "Oil prices fell to 4 1/2-year lows as persistent investor pessimism over global crude demand outweighed the news of OPEC's largest-ever production cut on Thursday," reports AP.

* "President Bush stepping in Friday to keep America's auto industry afloat, announcing a $17.4 billion bailout for car manufacturers, with the terms of the loans requiring that the firms become profitable soon. "If we were to allow the free market to take its course now, it would almost certainly to disorderly bankruptcy and liquidation for the automakers," Bush said," reports Politico.

* "Ford Motor Co. said Friday it would not need a short-term loan from the government, but lauded the Bush administration's decision to extend aid to its cash-strapped competitors and renewed a request for a nine billion dollar line of credit," reports AFP.

* "Stocks opened higher Friday after Bush announced details of a rescue plan for auto makers. The DJIA was up about 100 points in the first few minutes of trading, after sliding more than 300 points in the past two sessions," reports CNBC.

* "On average the market bottomed five months before the end of the recession. Therefore, the odds are that unless the economy starts to recover five months from the November 2008 bottom, the market decline is not over, although a bear market rally is always a possibility between now and the eventual low," reports Comstock.

* "Wall Street has changed forever. That model just doesn't work because it's at the mercy of rumors," said Alan Greenberg, the former Bear Stearns Cos. chief executive officer approaching his 61st year on Wall Street. The investment-banking model he helped pioneer is defunct," reports Bloomberg.

* "As the world loses more and more confidence in all paper currencies, the price of gold and other commodities will rise. Keep in mind that the DJIA took a quarter century (1929-1954) to recover from the last major liquidity crisis," reports WND.

* "The Federal Reserve's massive program to spark the economy and credit markets risks igniting serious inflation. They're embarking on massive reserve creation that will in time lead to massive money creation," says Former St. Louis Fed President William Poole reports MoneyNews.

* "Don't own bonds. Invest in inflation hedges like gold, silver and commodities," says Hans Goetti, CIO of LGT Bank in Liechtenstein, reports CNBCvideo.

* "Obama to appoint Gary Gensler to lead Commodities Futures Trading Commission -- AP." Gensler is a former undersecretary of the treasury and assistant secretary of the treasury. Gensler is a Goldman Sachs alum and a Treasury man. Obama is putting one of the key figures in the Gold Cartel scheme into the top role at the CFTC. Talk about the fox guarding the henhouse! But the bad news might be good news," reports GATA.org.

* "Pentagon resources and U.S. troops may be used if needed to quell protests and bank runs during an economic crisis, the U.S. Army War College's Strategic Institute reported. "Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security," the study states," reports WND.

* "Beware! If you currently own gold through an ETF it may not be safe. With one little stroke of the President's pen, it can be confiscated by the US Treasury for so-called national security purposes. The government officials will claim they are out to protect US citizens from speculators whom they blame for the dollar collapsing, but in reality their policies that will force Americans, who actually want to save, to flee the dollar," reports Goldseek.

* "The consequences of the dollar's strength in the second half of 2008 will be seen throughout the first half of 2009. The prior strength of the dollar will eat into the profit margins of many U.S. companies that are doing business abroad," said Kathy Lien, director of currency research at GFT in New York," reports MW.

* "The trigger for the gold price to rise again could come from a much weaker dollar, making gold cheaper for holders of other currencies, and a renewed aversion to paper assets as governments and central banks pump large amounts of cash into the economy, stoking inflation," reports Mineweb.

* "Faced with the threat of deflation, the Fed may be trying to drive the dollar lower to spur inflation. As policy makers don't want home prices to deteriorate further, an alternative is to inflate the prices of all other goods and services: as a result, the relative prices of homes would be less expensive," reports MERK.

* "Gold is the smart investor's asset of first resort when the government becomes the consumer of last resort. The dollar will NOT be king in a protracted recession or lite depression as there is nothing to back it up. The Treasury's willingness to print money in order to satisfy the need created by huge government spending programs virtually assures a lower dollar," Swiss America CEO Craig Smith writes at WND.

* As investors pound the pavement looking for financial safety with some possibility of growth in 2009 the prospects are few. A global recession, off-the-chart corporate scandals and failed government bailouts are just a few of the factors fueling the next stage of the gold rush. All major investment roads are blocked, except for gold. Here's why...

* "Stocks opened lower on Wednesday as exhilaration faded over record low interest rates and investors mulled disappointing results from securities firm Morgan Stanley," reports MW.

* "There are some severe dangers in the Fed's new course of action," says Uwe Parpart, chief economist & strategist, Asia at Cantor Fitzgerald. He tells CNBC it could undermine the value of the dollar and create a bond market bubble."

* "The Fed now is trying to make rates so low that banks will be forced to lend. Yet here is the kicker. A bank would rather have a 0% rate of return than a certain loss to a bad borrower. I mourn for the U.S. Dollar primarily. It is a very tough time to be a saver with our current Fed and U.S. Treasury destined to annihilate our once mighty greenback," reports MB360.

* "U.S. stocks shot to session highs Tuesday after the Fed cut interest rates by a range of 75 to 100 basis points and said that it would buy large quantities of debt and securities, in a bid to flood the financial system with money," reports MW.

* The dollar hit a 10-week low against the euro and a basket of currencies on Tuesday following the Fed's action. "The euro has been advancing against the dollar since early December, reversing losses from the previous four months, as financial markets focus on the expanding U.S. debt level and how that may hurt the U.S. currency," reports WSJ.

* Robin Griffiths, technical analyst at Cazenove Capital, told CNBC he sees gold heading toward $1,500 in the next 12 months. "Cash doesn't give you a return, at the moment not one worth having, so the negative about gold has gone away. It does traditionally preserve value both in panicky inflationary times and deflationary times."

* "U.S. crude rose more than $3 a barrel in early Monday to top $50 then fell back near $45 -- still far from the "fair" price of $75 a barrel identified by Saudi Arabia, the world's biggest crude exporter. OPEC ministers could make their deepest oil supply cut ever when they meet on Wednesday," reports Reuters.

* "U.S. stocks fell on Monday, with financial shares weighing on the broader market as firms detailed their exposure to the alleged $50 billion fraud by Bernard Madoff. "What's amazing is the magnitude of bad news that we've had to digest during the last two weeks," reports MW.

* "When the Federal Reserve policymakers decide on interest rates Tuesday, investors will probably look one step beyond their decision, to gauge how much money will the Fed be willing to print once it is out of rate ammunition. Rates won't likely hit zero Tuesday, but this could be unavoidable in the near future, according to strategists and market experts," reports CNBC.

* "Almost a third of hedge funds will shut or merge after the $1.5 trillion industry posted its worst ever performance this year, according to IGS Group, which advises hedge funds on raising money," reports Bloomberg.

* "U.S. stocks erased losses and shot higher Friday as insurer Hartford led a rally in the financial sector by hiking its earning forecast for the year. Hartford news helped pull focus from the 553,000 drop in payrolls last month in another bleak illustration of the economy's ongoing unraveling. "The reality is setting in that this is a deep recession and it's going to result in a very poor employment picture," said Owen Fitzpatrick, head of U.S. equity group at Deutsche Bank," reports MW.

* "The government would order a major restructuring of Detroit's struggling Big Three auto companies in exchange for a multibillion-dollar bailout under a plan circulating in Congress. Skeptical lawmakers are weighing whether to dole out as much as $34 billion in aid to the automakers as the once-mighty companies," reports AP.

* "We’d be buying some gold for our Christmas stocking and Hanukkah gifts," J.P. Morgan analysts John Bridges and Steve Shepard recently advised. "Gold does diverge from its relationship with the dollar when the supply demand fundamentals for gold overcome the prevailing relationship," reports Mineweb.

* "The laws of Supply & Demand have not gone away. Yet we have grand disparities to pressure price structures.
A) The supply of US Treasury Bonds is huge, yet yields are low and price is high. That is ass backwards.
B) The creation of truly vast sums of US Dollars is huge, needed to pay for the bond swaps, bailouts, stimulus packages, and nationalizations. Yet the US Dollar index rises, due to liquidations and payouts. That is ass backwards.
C) The demand for physical gold and silver is huge, motivated by crisis, yet their prices are determined by corrupt paper pricing systems. That is ass backwards. Soon, all three stresses on price structures will be addressed," reports FinSense.

* "Wall Street Journal reported that the Treasury is considering a plan that would lower mortgage rates, possibly bringing newly issued loans to as low as 4.5%. Meanwhile, the U.S. private sector shed 250,000 jobs in November, the biggest job loss in seven years, according to the ADP," reports MW.

* "China has begun to devalue the yuan for the first time in over a decade, raising fears that it will set off a 1930s-style race to the bottom and tip the global economy into an even deeper slump. "If they play this beggar-thy-neighbour game, it will cause a deflationary shock for the whole world," said Hans Redeker, currency head at BNP Paribas reports Telegraph.

* "Argentina's leftist government has seemingly found a novel way to find the money to stay afloat: cracking open the piggybank of the nation's private pension system. Argentina's President The government proposed to nationalize the private pensions, which would provide it with much of the cash it needs to meet debt payments and avoid a second default this decade," reports WSJ.

* "The price of gold is set to rally to $2,000 per ounce next year as an improvement in the economic outlook causes fear of inflation and currency debasement, Philip Manduca, head of investment from ECU Group, told CNBC on Wednesday.

* How much is $8.5 Trillion? About $100,000 per U.S. household -- which added to the existing $10 trillion official U.S. national debt -- brings the total to nearly $200,000 per household!

* "61% of Americans oppose a bailout of the troubled U.S. auto industry, according to a CNN/Opinion Research Corp poll released Wednesday.

* "The U.S. government still does not seem to have a coherent strategy for easing the financial crisis, despite the billions it has already spent in that effort, according to the head of a new congressional panel set up to monitor the gigantic bailout," reports IHT.

* "Mortgage applications in the U.S. surged by a record last week as lending rates plunged after the Fed pledged to buy mortgage-backed debt. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan jumped 112%, the highest since March," reports Bloomberg.

* "The price of key industrial metals has fallen further over the last four months than occurred during the worst years of Great Depression between 1929 and 1933. The average fall in the price of copper, lead, and zinc has been roughly 60% since the peak in July according to Barclays Capital", reports Telegraph.

*Gold prices have fallen 22% from their 2008 peak, but are down just 2% year over year. This is remarkable given the market volatility and short-term dollar strength. Silver prices are down over 50% from their peak near $20/oz.

* "U.S. stocks rose Tuesday, rebounding from the market’s worst tumble since October, on speculation global central banks will step up efforts to stem a deepening recession. Citigroup rallied 10% after Fed Chairman Bernanke said he may use less-conventional policies to revive the economy. General Electric jumped 9.5% on plans to maintain its dividend," reports Bloomberg.

* "President-elect Barack Obama pledged quick work Tuesday on an economic recovery plan to include tax cuts and increased federal spending, and told the nation's governors he wants their advice in designing it. "We intend to put tax cuts into the pockets of hard-pressed middle class families, and we intend to make a down payment on the investments we need to build a strong economy for years to come," Obama said reports CNBC.

* U.S. recession officially started Dec. 2007: "The Business Cycle Dating Committee of the National Bureau of Economic Research has identified December 2007 as the peak month, after determining that the subsequent decline in economic activity was large enough to qualify as a recession," reports NBER.

* "Renewed uncertainty and weakness in stock markets could result in short-term weakness in gold, but gold [should] continue to see a flight to safety in the medium and long-term," said Mark O'Byrne, Gold and Silver Investments executive director to MW.

* "World markets slumped Monday after a raft of weak economic data renewed fears that the global economy is slowing sharply. On Wall Street, after five straight days of gains, the DJIA slid 400 points while the broader Standard & Poor's 500 index was down 49 points," reports AP.

* The U.S. economy is under "considerable stress", the outlook is "unusually uncertain" and is likely to remain weak for some time, Fed Chairman Ben Bernanke said Monday.

* "Oil fell below $50 a barrel on Monday after OPEC decided to wait until mid-December to make another cut in output to try to defend sagging prices. 'The markets are discounting OPEC's decision to stand pat by selling off,' said Edward Meir, analyst at broker MF Global," reports CNBC.

* American shoppers spent $41 billion, an average of $372.00 each, over the weekend as retailers pulled out all the stops to lure shoppers into their stores on "Black Friday", the day which historically marks break even for retailers. On Wall Street the DJIA closed November with gains for the day and week, but shed 6% for the month.

* "Hard assets for hard times," reckons Frank McGhee at Gold Futures dealer Integrated Brokerage Services in Chicago. "Even with all the money central banks have thrown at the financial system, it's not enough to stop systemic risk. People are looking for something that's going to go up, and that's gold," reports Goldseek.

* "Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity, according to an internal client note from the US bank Citigroup," reports Telegraph.

* "Gold's path higher will not be a straight line. I expect some corrections that could knock the yellow metal right on its shiny butt. But that's short term. Longer term, gold should march higher. The way things are going in Washington, I like physical gold, and silver, too. Gold is the gift you don't have to make excuses for," reports Money&Markets.

* "A blank gold disc was converted into an ultra-high-relief replica of the classic $20 gold piece at U.S. Mint this week. The double eagle is still generally considered the most beautiful American coin ever made. Today, the 1907 ultra-high relief $20 gold pieces are highly prized by collectors, not only for their beauty but also for their rarity. Fewer than two dozen survive, and they command six- and seven-figure prices," reports NYTimes.

* "The dollar is doomed, thanks to Washington. U.S. government leaders have got it backwards, and their policies risk the dollar’s long-term role in the world economy. They think that if you drive down the value of your money, it makes you more competitive, now that has never worked in history in the long term," says commodities bull Jim Rogers, reports MoneyNews.

* "The dollar is not secured by anything. The country's foreign debt has grown like an avalanche, even though in the early 1980s there was no debt. By 1998 it had exceeded $2 trillion. Now it is more than $11 trillion. This is a pyramid that can only collapse," said Professor Igor Panarin in an interview with the respected Russian daily IZVESTIA reports Drudge.

* "The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year. If you mark to market today, the banking system is bankrupt," reports Bloomberg.

* "The latest total for the Fed and Treasury bailout plan pushes Washington's potential tab to $7.4 trillion, to absorb bad mortgages and other toxic assets from bank or other institution balance sheets to keep the financial system from collapsing, according to "Bailout Nation".

* "Unless we want to inflate our way out with additional government spending of money we do not have, which will require taking on more and massive amounts of debt to be passed on to future generations, this is the time to just say no. If we are serious about adopting the changes necessary to make this economic contraction produce long-term positive effects on the market we must:

1. Reduce government spending by 15% across the board over the next four years.
2. Reduce corporate taxes from 35% (world's 2nd highest) to 25% with targeted incentives to create new, high paying jobs.
3. Freeze personal income taxes at current levels so proper tax planning can occur.
4. Have a capital gains tax holiday for any company or individual who purchases distressed real estate from a lender to clean up the lender's balance sheet.
5. Ease the "mark to market" rules now in place to provide breathing room for lenders.
6. Ease the capital requirement currently in place at the banks.

Not one of these suggestions requires a dime of tax dollars and thus doesn't have a snowball's chance in Phoenix to be implemented," writes Craig R. Smith.