Capital Gold Group Report: Gold Heads for Record Eighth Annual Gain on Dollar, Recession

By Stuart Wallace

Dec. 31 (Bloomberg) — Gold headed for a record eighth annual gain in London on expectations that the dollar and global economies will weaken, bolstering demand for the metal as a hedge against further declines in the currency and as a haven.

Gold rose 3 percent this year, preserving investors’ money as $30 trillion was wiped off equities and the Reuters/Jeffries CRB Index of 19 raw materials headed for its worst year in a half-century. The dollar index, measuring the currency against six counterparts, fell this month after the Federal Reserve cut its benchmark interest rate to a range of zero to 0.25 percent.

“What’s really driving gold at the moment is pressure on the dollar from the Fed lowering interest rates relative to other foreign currencies and other central banks,” David Meger, a senior analyst at Alaron Trading Corp., said from Chicago, predicting that bullion will trade at $840 to $880 an ounce in the first quarter of 2009.

The metal is the second-best performer in the UBS Bloomberg CMCI Index of 26 commodities this year, behind cocoa. The gains attracted money from investors seeking to diversify their portfolios. Gold in the SPDR Gold Trust, the largest exchange- traded fund backed by bullion, reached a record, overtaking Japan as the world’s seventh-largest gold holding.

Gold for immediate delivery fell $14.61, or 1.7 percent, to $859.09 an ounce as of 1:41 p.m. in London. This year’s advance would be the smallest since 2001. Futures for February fell $10.40, or 1.2 percent, to $859.60 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.

Gold Producers

Priced in pounds, gold reached a record yesterday, and in euros the metal has advanced about 8.2 percent this year. . .

“Gold remains the best performing metal for 2008,” Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said in an e-mailed note today. “All roads point to gold continuing its ascent in 2009.”

Among other metals for immediate delivery, silver dropped 18 cents, or 1.6 percent, to $10.78 an ounce, extending its annual decline to 27 percent. That’s its worst performance since 1984.

Platinum fell $9.50, or 1 percent, to $907.50 an ounce, for an annual decline of 41 percent, the worst loss since at least 1988. Palladium declined $1.25, or 0.7 percent, to $184 an ounce, dropping 50 percent this year, the steepest plunge since 2001.

Platinum and palladium prices fell after a collapse in car sales. The metals are used in autocatalysts that remove noxious fumes from exhausts.

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Capital Gold Group Report: DOLLAR PLUNGES TO 13 1/2 YEAR LOW ON YEN AS EURO RISES

WALL STREET JOURNAL – NEW YORK — The dollar sold off sharply versus major rivals a day after the Federal Reserve cut its target interest rate to between 0% and 0.25%.

In effectively reducing interest rates to zero, the Fed undercut any advantage to holding the dollar versus another currency. The central bank also signaled it would use “quantitative easing” as a main policy tool, which means it will flush the system with more dollars, essentially decreasing the currency’s underlying value.

That combination portends “significant dollar weakness going forward,” said Tom Fitzpatrick, global head of currency strategy at Citigroup Inc. in New York.

Markets Data

Track moves in the foreign-exchange markets

The dollar selloff began Tuesday and extended into Wednesday morning. Low liquidity levels ahead of the year-end holidays exacerbated the moves.

Currency analysts said that after investors unwound bets in riskier trades over the past several months on global economic uncertainty, and with the amount of global trade decreasing, there is less liquidity in the foreign-exchange market. Fewer participants often leads to wild swings.

As the dollar consecutively broke through key levels, more traders piled on the trend. Also, many traders were caught on the wrong side of the market because the euro had been declining against the dollar from August to the beginning of this month. They were scrambling Wednesday to change or hedge those positions.

In a matter of two hours Wednesday morning, the euro advanced from $1.4058 to an 11½-week high of $1.4440, while the dollar fell to more than a 13-year low of 87.13 yen from 88.42 yen. The U.K. pound also rose to a five-week high of $1.5721, but gave back those gains.

Late in New York, the euro was at $1.4390 from $1.4128 late Tuesday, while the dollar was at 87.40 from 88.78 yen. The euro was at 125.78 yen from 125.43 yen. The U.K. pound was at $1.5499 from $1.5629, and the dollar was at 1.0745 Swiss francs from 1.1178 francs late Tuesday.

The fall of crude-oil futures to near $40 a barrel Wednesday — usually a euro negative — had limited effect on the currency market as investors focused on the implications of the Fed decision.

Citigroup’s Mr. Fitzpatrick expects the weak dollar trend to hold through the end of December. It is unclear whether the euro will lose ground in the new year, when some suggest the euro zone’s economic woes could grab the spotlight.

“At this point in time, it’s difficult to say when would be the end of this move,” he said. In this volatile market, “January is very far away.”

Elsewhere, Russia’s central bank allowed the ruble to weaken Wednesday for the second time this week and seventh time since early November. Russia has been under pressure to allow the ruble to depreciate due to the plunge in crude-oil prices and an exodus of capital from the country.

Traders in Russia said the central bank allowed for a slide slightly greater than the previous 1% increments. Traders suggested regulators may be capitalizing on the weakening of the dollar. The ruble’s exchange rate is fixed by the central bank to a basket composed of 55% dollars and 45% euros.

Meanwhile, the Ukrainian hryvnia fell to a historical low versus the dollar, despite intervention by the country’s central bank. The Ukrainian currency has shed nearly half its purchasing power since late summer.

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Capital Gold Group Report: Gold Rises as U.S. Dollar Falls Sharply

NEW YORK (MarketWatch) — Gold futures rallied Wednesday, with most other metals also posting gains, as the U.S. dollar fell sharply against other major currencies.

Silver futures rallied more than 7%.

Gold for February delivery surged $30.20, or 4%, to $872.90 an ounce in electronic trading on Globex. Earlier, the contract hit an intraday high of $873.20 an ounce.

Gold gained on the back of sharp weakness in the U.S. dollar.

The greenback fell sharply against all its major rivals Wednesday, a day after the Federal Reserve decided to cut interest rates to historic lows and expand a program of extraordinary lending and other measures to attempt to lift the U.S. economy out of recession.

The dollar index, measure of the U.S. dollar against a trade-weighted basket of six currencies, fell 1.8% to 78.54, down from 79.921 in North American activity late Tuesday.

“Note how rising risk aversion continues to fail in propping the dollar as was the case since the beginning of the market turmoil,” said Ashraf Laidi, chief market strategist at CMC Markets.

“Considering the Fed’s yield assault on the dollar, foreign exchange traders are no longer focusing on the woes of a bankrupt U.S. auto industry,” Laidi said in a note.

On Tuesday, gold ended up $6.20, or 0.7%, at $842.70 an ounce on the New York Mercantile Exchange.

After the close of gold trading Tuesday, the Federal Reserve established its target range for the federal funds rate of 0 to 0.25%, effectively cutting its key rate for overnight lending to banks by between 0.75% and 1%.

“The Federal Reserve has embraced ‘Helicopter Bernanke’s’ inflate or die massive reserve and money creation academic theories in an attempt to prevent deflation,” said Mark O’Byrne, executive director at Gold and Silver Investments Ltd., referring to Fed Chairman Ben Bernanke.

“Markets realize that this will lead to a lower dollar and higher gold prices in the medium and long term,” O’Byrne said in a research note.

Also on the Globex, March silver futures rose 77 cents, or 7%, to $11.45 an ounce, and January platinum futures gained $17.50, or 2%, to $867 an ounce.

March palladium futures rose $2.95 to $180.50 an ounce, while March copper futures fell 3 cents to $1.35 a pound.

Elsewhere in the commodity markets, crude futures were little changed at $43.67 a barrel, as traders awaited an official announcement on a production cut from the Organization of Petroleum Exporting Countries.

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Capital Gold Group Report: Deflation strikes hard! What to do…

by Martin D. Weiss, Ph.D., 12-15-08

The deflation we’ve been warning you about is here, and it’s striking hard.

Last week, the Fed released a report that sent chills down the spine of economists all over the world, revealing a sweeping destruction of wealth in America.

Just in the third quarter alone, U.S. households lost $647 billion in real estate; $922 billion in stocks; $523 billion in mutual funds; $653 billion in life insurance and pension fund reserves; plus $128 billion in private business interests.

Total destruction of household wealth in the third quarter: $2.8 trillion, the worst in recorded history. That’s four times more than the government’s entire $700 billion bailout package (TARP).

Total destruction of household wealth in the last year: $7.2 trillion or over TEN times more than the $700 billion TARP package.

Meanwhile, the Treasury reports that only $330 billion of the TARP funds have been committed so far. Worse, most of the funds that have reached the banks are sitting idle in their coffers. If as much as $30 billion has trickled down to households, I’d consider it a minor miracle.

See the contrast? The destruction of wealth is large and swift; the government rescues, relatively small and slow.

Yes, the White House may decide to shift some of the TARP money to cover General Motors and Chrysler’s cash needs for the next few weeks; they don’t want the auto giants going down on their watch.

But even if they can somehow save GM and Chrysler for now, they cannot save the countless smaller and medium-sized companies that are going bankrupt. They cannot save the thousands of municipalities and states that are running out of money. They certainly cannot make whole the millions of households that have gotten smacked with the $7.2 trillion in losses.

More evidence of deflation:

1. U.S. consumer prices falling at an annual rate of 12%!
2. U.S. producer prices falling at an annual rate of 26.4%!
3. Commodity prices slammed by as much as 70% from their peak!

My friend, these are not numbers that denote less inflation. They are hard evidence of deflation!
Your Next Steps

The critical question of our time: Will this deflation be less severe, equally severe or more severe than the 1929-1932 deflation?

If I were you, and you’ve got your portfolio or your 401k in stocks or stock mutual funds, I wouldn’t stick around for the answer.

Yet that’s what most Wall Street experts are telling you to do. Two full years after the first obvious signs of a housing industry collapse, most people who give advice about investing are still in denial.

Wall Street cheerleaders refuse to admit that an obviously massive deflation can lead to an equally massive collapse in the nation’s economy.

They’ve repeatedly sworn on a stack of Bibles that the deflation in housing would “soon end,” the crisis would be “contained” and everything would be “just fine.” They’ve tried to persuade nearly every investor to stay the course, keep their money in the stock market, or even buy more.

But as 2008 comes to a close, no one can possibly deny that the U.S. economy is in deep trouble. Anyone can see the evidence — the sharpest declines in the economy since the 1970s, the worst debt crisis in a lifetime, the largest financial failures and bailouts in history.

Everyone can also agree on the likely causes — the economic blunders of Washington, the financial greed of Wall Street, the big debts and bets by almost everyone. And no one could dispute the probable consequences — surging unemployment and potentially years of hardship for millions of Americans.

Yet despite this widespread agreement, nearly every authority still tries to persuade you to keep your money in the stock market.

Financial experts on NBC Nightly News tell millions of viewers that, as long as they’ve got plenty of years to live and recoup losses, they should continue investing most of their 401k or IRA in stocks.

Suze Orman on Oprah advises millions more to continue socking away their retirement money in stocks regardless of any market decline.

In Time Magazine, the New York Times, the Wall Street Journal and virtually every newspaper in the country, similar advice is liberally dispensed.

Their unwavering message: Don’t sell. Stick with it. Buy more.

It’s not a symptom of conspiracy and, in most cases, it’s not a sign of intellectual dishonesty. The majority of pundits sincerely believe in what they are advising you, and many follow the same strategy with their own money. But that does not make it good advice.

Consider Dad’s tale of the average investor’s woes in America’s First Great Depression, and you’ll understand what I mean:

“I was a young broker in 1930, and the advice my senior colleagues gave out used to make me cry inside. ‘Just hang on to your stocks for the long term and ride out the storm,’ they said.

“The results were devastating for their clients.

“If you bought the average stock in 1929 and held on until 1932, you wound up with about 10 cents on the dollar. And that’s if you bought the good stocks — the ones that survived. If you bought the bad stocks — in bankrupt companies — you’d be left with nothing, a big fat zero.

“Then, even if all of your companies survived, it wasn’t until 1954 — 25 years later — that you could finally recoup your original investment, provided you could stick it out that long.

“Unfortunately, most people couldn’t. They lost their jobs. They risked losing their house. So they were forced to cash in their stocks with huge losses. For them, the idea of ‘holding on for the long term’ was a joke, an insult, or both. They didn’t have that choice. Later, when the market eventually recovered, they never got the chance to recoup their losses.”

Even if you don’t believe that the late 2000s was comparable to the early 1930s, there is ample reason to exit the stock market. Just consider these facts and connect the dots:

Fact #1. Between 1965 and 1980, America suffered through a long dead zone punctuated by periodic debt troubles, credit crunches, financial failures, housing market declines, recessions and bear markets. For a decade and a half, most investors lost money in the stock market.

Fact #2. The financial crisis that has struck America in 2008 is evidently far worse than anything we experienced during that 1965-1980 dead zone. The debt problems are far bigger. The bankruptcies make earlier episodes look small by comparison. And the nationwide bust in housing is much deeper than anything experienced in history. So it’s reasonable to assume that the experience of investors could be at least as bad as, and possibly worse than, that experienced in the 1960s and 1970s.

Fact #3. A decline in the second largest economy of the modern world, Japan, began in 1990; has lasted for 18 long years; has taken the Nikkei Average down 82%; and, as of this writing, is still not over. Now consider this: The crisis that struck Japan in the early 1990s was ALSO less severe than the global crisis striking us right now.

What About This Time?

No one knows how far stocks will fall, how long they will stay down, or how soon they will recover.

No one knows how many banks, insurance companies, brokerage firms, or manufacturing corporations will go bankrupt.

No one can say if the government bailouts will make things better, just keep things from getting worse, or cause even more serious troubles.

All we do know with relative certainty is this: As long we have a financial crisis, recession or depression, the risk of loss is greater than the opportunity for profit — especially in the stock market!

If you’re a gambler, if you don’t mind betting against the odds, and if you have plenty of extra cash to play with, that may be a risk-reward you can overcome with trading acumen and good luck. But if you want to build a nest egg for your retirement or your kids’ education, if you want to sleep nights during topsy-turvy stock market gyrations, if your net worth has been diminished by real estate losses, if you’re worried about losing some or all of your income in a recession or depression, then staying invested in the stock market during a financial crisis is absolutely, positively nuts!

We are obviously living in risky times. So why would you want to double the whammy by putting your money in obviously risky investments? Yes, I know. Your broker, your financial planner — even some of your best friends — are cajoling you to stay in the market.

My view: If they fooled you once, shame on them. If they fool you again, shame on you!

Certainly, you are well aware of the catastrophic events that have already happened. You must realize that these events are likely to lead to further economic declines. And if the economy falls, it should be clear that nearly all of us, yourself included, will be affected in some way.

You also must know by now that the same old assurances from Washington and Wall Street — that “all is fine,” that they will soon “lick the problem,” that the latest, biggest bailout is “finally working” — have been proven wrong over and over again. You must be able to conclude, without my help or anyone else’s, that if ever there was a time when stock market investing is too risky, this is it.

If your goal is to save money for the future purchase of a home, retire in dignity, give you children and grandchildren educational opportunities or have enough money to cover your long-term care, and you still own stocks or stock market mutual funds, then get your money out of danger before it’s too late! Start selling!

Naturally, precisely when and how much you should sell will depend on actual market conditions. But as a rule of thumb …

• If the stock market is rallying and up significantly, sell everything. Just call your broker and say: “Sell all my stocks at the market.”
• If the stock market is falling and already down sharply, tell your broker to sell half as soon as possible. Then sell the balance on any rally.
• If the market is in a panicked frenzy, overrun by an uncontrollable crowd of sellers and virtually devoid of all buyers, wait. Don’t sell immediately. As soon as the panic subsides, then sell half. And as soon as there’s a decent rally, then sell the balance.
• If you own stocks you are unable or unwilling to sell, as an alternative, consider buying hedges, such as inverse ETFs, that can help offset your losses. And …
• If you work with a money manager, ask him about investment programs designed specifically for bear markets, along with their performance track record during both up and down markets. If it’s solid, you can use a bear market program as a vehicle for either protection or profit.

No matter what approach you use, this is no time for complacency. Act boldly but prudently. Then get your money to safety.

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Capital Gold Group Report: Gold hits two-month high as dollar falls, oil surges

By Moming Zhou, MarketWatch

Last update: 11:12 a.m. EST Dec. 15, 2008

NEW YORK (MarketWatch) — Gold futures rallied more than 2% Monday to their highest level in two months as a falling U.S. dollar increased the metal’s appeal as an alternative investment and as surging crude-oil prices raised gold’s value as a hedge against rising prices.

Gold for February delivery jumped $22.50, or 2.7%, to $843 an ounce on the Comex division of the New York Mercantile Exchange, the highest since Oct. 15.

Monday’s gain in gold followed its 9% advance in the past week.

The front-month December contract, which expires on Dec. 29, rose 2.3% to $838.10 an ounce. Open interest, or the number of outstanding contracts of the December contract, stood at 811 as of Friday, or 81,100 ounces, according to Comex data.

Gold inventories held by the Comex for futures delivery stood at 2,846,513 ounces as of Friday, down 90,915 ounces from a day ago, according to the latest data from the exchange.

“A weaker dollar coupled with firmer energy prices ahead of the OPEC meeting” boosted gold values, said Edward Meir, a metals analyst at MF Global.

In currencies trading, the dollar moved lower against its major rivals. The dollar index which tracks the value of the greenback against other major currencies, lot 1.4%.

Gold prices, denominated in dollars, tend to move in the opposite direction of the greenback.

Crude oil rallied more than 8% to above $50 on expectations that the Organization of Petroleum Exporting Countries will cut its output at Wednesday’s meeting.

In gold spot trading, the London afternoon gold-fixing price — a benchmark for gold traded directly between big institutions — stood at $827.50 an ounce Monday morning, up $1 from Friday afternoon.

In other metals, March silver futures rose 1.1% to $10.345 an ounce. January platinum gained 1.6% to $835.20 an ounce and March palladium added 0.4% to $175.65 an ounce.

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Capital Gold Group Report: Outlook Darkens as Recession Deepens

Outlook Darkens as Recession Deepens

By Phil Izzo

The current recession may turn out to be the longest and most painful downturn since the Great Depression, according to economists in the latest Wall Street Journal economic-forecasting survey.

“For the household sector, this will be the worst event we’ve had in the post-World War II period,” said Bruce Kasman of J.P. Morgan Chase & Co.

The 54 economists who participate in the survey, on average, forecast quarterly contractions in gross domestic product for the current quarter and the first two periods of 2009. The Commerce Department’s preliminary estimate showed a 0.5% decline in quarterly GDP for the third quarter. If the economists’ predictions bear out, it would mark the first time GDP has contracted in four consecutive quarters during the postwar period.

On average, economists expect the downturn to conclude in June 2009. Last week, the National Bureau of Economic Research dated the start of recession in December 2007. That puts the downturn at 18 months, the longest period of decline since the Great Depression. The recessions of 1973-75 and 1981-82 both lasted 16 months.

“The downturn would be deeper still, in our view, were it not for an ultra-aggressive combination of monetary and fiscal stimulus that will soon move into high gear,” Morgan Stanley economists Richard Berner and David Greenlaw said in a research note. “Authorities are pulling out all the stops: Quantitative easing by the Fed and the largest-ever fiscal stimulus package likely will promote stability in the economy late in 2009 and a moderate recovery in 2010.”

Many economists cited a major expected fiscal-stimulus package as the key to pulling the U.S. out of recession. Details about the government intervention remain unclear. “The precise date is likely to depend on timing of the stimulus package,” said Lou Crandall of Wrightson ICAP.

Even with specifics of the stimulus uncertain, the economists expressed confidence in U.S. President-elect Barack Obama’s economic team. Nearly half of respondents said the incoming policy makers are significantly better than their counterparts in the Bush administration, and a quarter said the new team is slightly better. Just 10% favored the departing officials.

About the Survey

The Wall Street Journal surveys a group of 55 economists throughout the year. Broad surveys on more than 10 major economic indicators are conducted every month. Once a year, economists are ranked on how well their forecasts have fared. For prior installments of the surveys, see: WSJ.com/Economist.

The lack of confidence was clear in the economists’ grades for Treasury Secretary Henry Paulson, whose marks fell to a 60, the lowest level during his tenure. More than half of respondents gave the Treasury secretary a grade equivalent to a D or F. Federal Reserve Chairman Ben Bernanke’s average grade rose slightly to a 72, but 26% gave him the equivalent of a D or F. More than half of economists put his grade in the A or B range.

The length of a downturn can be measured against earlier recessions, but its intensity is harder to quantify and compare. “History never really repeats itself,” said Stuart Hoffman of PNC Financial Services Group. “It’s difficult to say that this is the worst recession in the postwar period.”

Adding in the economists’ forecasts, a tally of the change in GDP from the beginning to the end of the recession puts the decline at slightly more than 1% overall. Periods of growth in early 2008 offset some of the expected weakness this year and next. That makes the current recession deeper than those in the 1990s and early this century, but it doesn’t reach lows seen in the 1970s and 1980s.

“Recessions that tended to be the deepest were sparked by events that caught the business sector off guard,” said Mr. Kasman, who notes that corporate profits aren’t likely to be hit as hard as past recessions. “This event had a prelude. Therefore, the intensity of the event is being smoothed out over a longer period of time.”

This recession has centered not on businesses but consumers, who are being hit by dwindling home prices and job losses. The economists on average said the unemployment rate will peak at 8.4% in response to this recession. While that actual rate was surpassed in both the 1970s and 1980s, it would mark a four-percentage-point increase from the low of 4.4% in March 2007. Only the 1973-75 recession, with a 4.1-percentage-point increase, had a larger jump in the postwar period.

Adding to consumers’ pain is that the end of the recession isn’t likely to mark the end of job losses. In past recessions, labor-market contraction continued for months after a downturn’s official end. So, while economists, on average, expect the unemployment rate to top out at 8.4%, they forecast an 8.1% rate for December 2009 as job cuts continue into 2010.

“The job market is ugly and is going to stay that way,” said Allen Sinai at Decision Economics. “The economy is going through the heart of reductions in the work force now.”

This scenario creates problems for the Fed, as it seeks to fulfill part of its dual mandate to control inflation and support growth. The challenge is compounded by a federal-funds rate that is moving closer to 0%, offering the central bank little room to utilize its most powerful policy tool. The rate now stands at 1%, and economists expect a half-percentage-point cut to 0.5% at next week’s rate-setting meeting. On average, they expect the rate to stay at 0.5% through June 2009.

That doesn’t mean the Fed is out of options. When asked what the Fed’s most useful remaining tool is, more than one in four economists said the central bank should target long-term interest rates, by actions such as buying Treasurys. Among the economists, 23% said the Fed should backstop specific markets, similar to its moves in commercial paper. Thirteen percent said the Fed should expand lending facilities further, and 8% said the central bank should commit to keeping rates low for an extended period. However, the plurality of the economists chose “other” — with most saying the Fed needs to use a combination of the options.

One concern that has moved to the wayside is inflation — the other part of the central bank’s mandate. The economists expect consumer prices to be flat on a year-over-year basis in June 2009, before rising slightly to a 1.2% annual gain by next December. “Unless the Fed turns the tide fast, inflation is not a concern,” Mr. Kasman said.

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Capital Gold Group Report: Gold Rises on Dollar’s Drop, Commodity Rally; Silver Gains

By Pham-Duy Nguyen

Dec. 10 (Bloomberg) — Gold futures rose for the third consecutive day on speculation a weaker dollar and higher commodity costs will boost demand for the precious metal as a hedge against inflation. Silver also gained.

The dollar fell for the second time in three days against a weighted basket of six major currencies. The Reuters/Jefferies CRB Index of 19 raw materials climbed as much as 0.8 percent. Gold reached a record in March as the CRB headed to an all-time high in July and the dollar fell to a record against the euro.

“People are getting more concerned about inflation down the road,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “If the government keeps on spending and interest rates stay low, it’s going to come back and bite us. If the dollar heads lower, that’ll be the stimulus gold needs to put together a nice run.”

Gold futures for February delivery rose $28.20, or 3.6 percent, to $802.40 an ounce at 9:10 a.m. on the Comex division of the New York Mercantile Exchange. The price gained 2.9 percent in the previous two days.

Silver futures for March delivery climbed 34 cents, or 3.5 percent, to $10.19 an ounce.

Before today, gold dropped 7.6 percent this year, while silver was down 34 percent. Gold climbed to a record $1,033.90 on March 17.

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Capital Gold Group Report: Mortgage Delinquencies, Foreclosures Rise to Record

By Kathleen M. HowleyDec. 5 (Bloomberg) — One in 10 Americans fell behind on their mortgage payments or were in foreclosure during the third quarter as the world’s largest economy shed jobs and real estate prices tumbled.

The share of mortgages 30 days or more overdue rose to a seasonally adjusted 6.99 percent while loans already in foreclosure rose to 2.97 percent, both all-time highs in a survey that goes back 29 years, the Mortgage Bankers Association said in a report today. The gain in delinquencies was driven by an increase of loans with payments 90 days or more overdue.

“Until we see a turnaround in the job situation, we’re not going to see these numbers improve,” said Jay Brinkmann, chief economist of the Washington-based bankers group, in an interview. “We’re seeing more loans build up in the 90-days bucket as lenders work to modify loans and states put in place programs that delay foreclosures.”

The U.S. economy has shed 1.91 million jobs this year, while falling home prices have made it difficult for people who can’t pay their mortgages to sell their property. Payrolls declined in each month of 2008 through November, the Labor Department said today in Washington.

New foreclosures fell to 1.07 percent from 1.08 percent in the second quarter as some states enacted laws to temporarily stop home repossessions and lenders increased efforts to modify the terms of loans, Brinkmann said.

Home Sales Sink

“Some servicers keep a loan in a delinquent state until they see customers carrying through on their agreements, and then they’ll switch it to performing,” Brinkmann said.

U.S. home sales and prices began to tumble in 2006 after a five-year boom, dragging the economy into a recession that began in December 2007, according to the National Bureau of Economic Research.

The median home price in the fourth quarter probably will be $190,300, down 19 percent from the record $226,800 in 2006’s second quarter, according to a Nov. 24 forecast by Fannie Mae, the world’s largest mortgage buyer.

Purchases of existing homes in October slid to an annual rate of 4.98 million, lower than forecast, the National Association of Realtors said in a Nov. 24 report. The median price fell 11.3 percent from a year earlier, the most since the group began collecting data in 1968.

Federal Reserve Chairman Ben S. Bernanke yesterday urged using more taxpayer funds for new efforts to prevent home foreclosures, saying the private sector is incapable of coping with the crisis on its own.

Bernanke’s Plans

The Fed chief outlined four possible options, including buying delinquent mortgages and providing bigger incentives for refinancing loans. He called for addressing the “apparent market failure” where lenders aren’t modifying mortgages even in cases where it’s in their own economic interest to do so.

Bernanke’s proposed changes would go beyond those announced last month by Housing and Urban Development Secretary Steve Preston, who oversees the FHA. The agency will change the amount of the loan a lender must forgive and allow banks to extend the payback time of a mortgage.

The bankers’ report cites percentages without providing the number of mortgages. The U.S. had $11.3 trillion of outstanding home loans at the end of June, according to Federal Reserve data. Mortgage lending fell to $80.8 billion in the second quarter, down from $764 billion a year earlier, the Fed said.

The Mortgage Bankers report is based on a survey of 45.5 million loans by mortgage companies, commercial banks, thrifts, credit unions and other financial institutions.

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Capital Gold Group Report: US Job Losses Reach 34 Year High as Recession Deepens

Employers Eliminate 533,000 Jobs, Most Since 1974

By Bob Willis and Rich Miller

Dec. 5 (Bloomberg) — U.S. companies slashed payrolls last month at the fastest pace in 34 years as the economy headed for its deepest and longest recession since World War II.

Employers cut 533,000 jobs, bringing losses so far this year to 1.91 million, the Labor Department said today in Washington. November’s drop exceeded all 73 forecasts in a Bloomberg News survey. The unemployment rate rose to 6.7 percent, the highest level since 1993.

“It’s unbelievable,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts. “We’re well on our way to the worst recession of the postwar period.”

The plunge may spur incoming President Barack Obama to come up with an even bigger fiscal stimulus package than economists’ projections of about $700 billion. Today’s figures also will add to pressure on the Federal Reserve to take radical steps to revive credit markets and on lawmakers to bail out the auto companies.

“This is a huge downshift, much larger than we thought,” said Jared Bernstein, an economist at the Economic Policy Institute in Washington, who will be Vice President-elect Joe Biden’s chief economist in the new administration. “The upper bound on a stimulus package is going up, not down. As the hole gets larger, the amount you need to fill it gets larger.”

Company Plans

Payrolls are likely to keep sliding into next year as the collapse in credit and slump in spending hurt companies from General Motors Corp. to Citigroup Inc. and AT&T Inc. Legg Mason Inc., a Baltimore-based fund manager, said today it will eliminate 8 percent of its workforce.

Obama said in a statement the job loss demonstrates the “urgent” need for a recovery plan and offers an “opportunity to transform our economy” through investments in infrastructure and alternative energy technology. He aims to save or create 2.5 million jobs over two years.

Stocks sank. The Standard & Poor’s 500 index lost 2.3 percent to 825.51 at 10:11 a.m. in New York.

Payrolls were forecast to drop by 335,000, according to the median estimate in the Bloomberg survey. The jobless rate was projected to rise to 6.8 percent.

Revisions for September and October increased job losses by 199,000. The October figure was revised to 320,000 from the previous estimate of 240,000. November was the 11th consecutive drop in payrolls.

‘Very Fearful’

“You are seeing the impact of the lack of credit feeding through to a lot of companies, who are very fearful,” said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, and a former congressional staff economist. “Personal income numbers will be awful. It is going to be a difficult winter for a lot of people.”

Fed Chairman Ben S. Bernanke this week outlined unorthodox policy action that officials can take beyond lowering interest rates. One option would be to purchase longer-term Treasuries on the open market to inject more cash into the financial system.

The central bank may also cut its benchmark rate from 1 percent at its meeting Dec. 15-16 in Washington. HSBC Holdings Inc. economists today forecast the Fed will reduce it to zero, emulating the Bank of Japan’s efforts to defeat deflation earlier this decade.

Factory payrolls fell 85,000 after decreasing 104,000 in October, the Labor Department said. The slide would have been even worse without the return of 27,000 striking machinists at Boeing Co. Economists had forecast a decline of 100,000 manufacturing jobs. The decrease included a loss of 13,100 jobs in auto manufacturing and parts industries.

Carmaker Woes

U.S. automakers have been particularly hard hit as sales last month dropped to the lowest level in 26 years. The top executives of General Motors, Ford Motor Co. and Chrysler LLC this week appealed to Congress for as much as $34 billion in government assistance.

The Ann Arbor, Michigan-based Center for Automotive Research projects that a collapse of GM would lead to job losses totaling 2.5 million, including 1.4 million people in industries not directly tied to manufacturing. Chrysler yesterday announced it had cut 5,000 jobs last week.

Today’s report also reflected the housing slump and the worst credit crisis in seven decades. Payrolls at builders dropped 82,000 after decreasing 64,000. Financial firms decreased payrolls by 32,000, after a loss of 31,000 jobs the prior month.

“We don’t get the job losses stopping until 2010,” Kurt Karl, chief U.S. economist at Swiss Re in New York, said in a Bloomberg Television interview.

Retailer Rout

Service industries, which include banks, insurance companies, restaurants and retailers, cut 370,000 workers after reducing 153,000 in the previous month. Professional and business services, a category that includes temporary workers, eliminated 136,000 jobs. Retail payrolls decreased by 91,300 after a decline of 62,200.

AT&T, the largest U.S. phone company, will eliminate 12,000 jobs, striving to trim expenses as the U.S. economy falters, the Dallas-based company said in a statement yesterday. Citigroup said last month it plans to eliminate 52,000 jobs.

Education and health services industries added 52,000 jobs and government payrolls increased by 7,000.

The employment slump was a key factor in determining the start of the recession. The National Bureau of Economic Research, the arbiter of U.S. business cycles, announced this week that a contraction began in December 2007, the month payrolls peaked.

At 12 months, the recession is already the longest since the 16-month slump that ended in November 1982.

Weakest Since ‘64

The average work week shortened to 33.5 hours, the shortest since records started in 1964, from 33.6 hours, today’s report showed.

Workers’ average hourly wages rose 0.4 percent from October, to $18.30. Hourly earnings were 3.7 percent higher than a year before. Economists had forecast a 0.2 percent increase from October and a 3.4 percent gain for the 12-month period.

“Almost all businesses are in survival mode,” Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, said in a Bloomberg Television interview. “Policy makers from the Federal Reserve to Congress and the new administration are going to have to be very aggressive.”

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Capital Gold Group Report: NATIONAL BUREAU OF ECONOMIC RESEARCH STATES RECESSION OFFICIALLY STARTED IN DECEMBER, 2007

December 1, 2008, 12:13 pm

NBER Makes It Official: Recession Started in December 2007

Official recession watchers at the NBER said today that the U.S. is recession, and it began in December 2007. Here is the text of their statement.

The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.

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