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Fannie, Freddie 'Insolvent' and Lehman Brothers May be Next Bear Stearns

Stock-Markets / Credit Crisis 2008 Jul 11, 2008 - 10:19 AM GMT

By: Mark_OByrne

Stock-Markets Gold finished trading in New York yesterday at $9 40.20 , up $ 13.90 and s ilver was up to $1 8. 24 , up 17 cents . Gold rose again in the New York Globex electronic market before trading sideways in trading in Asia and it has risen sharply again in early European trading to above $950 per ounce .


Gold continues to rally on the surging oil price (which is back near record highs), surging commodities and renewed weakness in the dollar. Not too mention safe haven buying on geopolitical risk in Iran. Oil is up nearly 2% this again this morning after yesterday's nearly 4% surge. Yesterday oil rallied from a low of $135.58 to a high of $142 a barrel and today it is up to $144.04 so far today <Light Sweet Crude Oil Future  - AUG08>.

A possible oil strike in Brazil, contiuing tensions in Nigeria and further missile tests in Iran all contributed to the latest spike in oil prices which brings oil back close to it's recent record high of $145.68. The CFTC statement that they found no evidence of manipulation in the oil market also contributed to the oil surge. Indeed much of the specualtion is on the short side in the oil, gold and silver markets.

This is sure to lead to further inflation hedging allocations to gold especially as other commodity prices in particular the base metals are surging again.

Fannie, Freddie 'Insolvent' and Lehman Brothers May be Next Bear Stearns
There is also heightened financial and systemic risk as posed by the possible insolvency of Lehman Brothers, Fannie Mae and Freddie Mac.

Mortgage lenders Fannie Mae and Freddie Mac are "insolvent" and may need a U.S. government bailout, former St. Louis Federal Reserve President William Poole was quoted as saying in an interview with Bloomberg. "Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer," Poole was quoted as saying in an interview held on Wednesday. Chances are increasing that the government may need to bail out the two mortgage companies, Poole was quoted as saying.

L ehman Brothers shares plunged again and nervous investors are concerned about regulators' statements that they would not bail out all financial institutions. Lehman fell 12 percent, to $17.30. This year, it has lost 70 percent of its value. The cost of insuring Lehman's senior unsecured debt, a barometer keenly watched by traders, reached its highest levels on Thursday since the Bear Stearns collapse in March.

Rumors are running rampant that a major US institutional investor , PIMCO,  has cut trading limits with one of the major investment banks , Lehman . A variation of the rumor is that they have cut limits with a number of prime brokers. This is helping  create weakness in  the  dollar and leading to safe haven buying of gold.

Today's Data and Influences
T he market will turn its attention to today's US trade balance and the University of Michigan Consumer Confidence report released at 1.30pm and 3pm respectively.

Disappointing figures from General Electric could also affect markets.

Silver
Silver is trading at $1 8. 37 /1 8. 40 per ounce (1 1 0 0 GMT).

Pegs

Platinum is trading at $ 19 80 / 19 90 per ounce (1 1 0 0 GMT).
Palladium is trading at $4 4 5 /4 50 per ounce (1 1 0 0  GMT).

By Mark O'Byrne, Executive Director

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
Fax  +353 1 6619664
Email info@gold.ie
Web www.gold.ie
Gold and Silver Investments Limited
No. 1 Cornhill
London,
EC3V 3ND
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708
Email info@www.goldassets.co.uk
Web www.goldassets.co.uk

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

Mission Statement
Gold and Silver Investments Limited hope to inform our clientele of important financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth.
We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

Financial Regulation: Gold & Silver Investments Limited trading as Gold Investments is regulated by the Financial Regulator as a multi-agency intermediary. Our Financial Regulator Reference Number is 39656. Gold Investments is registered in the Companies Registration Office under Company number 377252 . Registered for VAT under number 6397252A . Codes of Conduct are imposed by the Financial Regulator and can be accessed at www.financialregulator.ie or from the Financial Regulator at PO Box 9138, College Green, Dublin 2, Ireland. Property, Commodities and Precious Metals are not regulated by the Financial Regulator

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Mark O'Byrne Archive

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