Merrill Lynch says rich turning to gold bars for safety
Merrill Lynch has revealed that some of its richest clients are so alarmed by the state of the financial system and signs of political instability around the world that they are now insisting on the purchase of gold bars, shunning derivatives or "paper" proxies.
By Ambrose Evans-Pritchard
Last Updated: 10:32AM GMT 09 Jan 2009
Rich investors are spurning gold exchange traded funds in favour of krugerrands.
Gary Dugan, the chief investment officer for the US bank, said there has been a remarkable change in sentiment. "People are genuinely worried about what the world is going to look like in 2009. It is amazing how many clients want physical gold, not ETFs," he said, referring to exchange trade funds listed in London, New York, and other bourses.
"They are so worried they want a portable asset in their house. I never thought I would be getting calls from clients saying they want a box of krugerrands," he said.
Merrill predicted that gold would soon blast through its all time-high of $1,030 an ounce, and would hit $1,150 by June.
The metal should do well whatever happens. If deflation sets in and rocks the economic system it will serve as a safe-haven, but if massive monetary stimulus gains traction and sets off inflation once again it will also come into its own as a store of value. "It's win-win either way," said Mr Dugan.
He added that deflation may prove the greater risk in coming months. "It's very difficult to get the deflation psychology out of the human brain once prices start falling. People stop buying things because they think it will be cheaper if they wait."
Merrill expects global inflation to hover near zero, with rates of minus 1pc in the industrial economies. This means that yields on AAA sovereign bonds now at 3pc will offer a real return of 4pc a year, which is stellar in this grim climate. "Don't start selling your government bonds," Mr Dugan said, dismissing talk of a bond bubble as misguided.
He warned that the eurozone was likely to come under strain this year as slump deepens. "There is going to be friction as governments in the south start talking politically about coming out of the euro.
I don't see the tensions in Greece as a one-off. It is a sign of social strain in countries that have lost competitiveness."
http://www.telegraph.co.uk/finance/fina ... afety.html
The flying car
The fantasy of spy novels and science fiction films is at last becoming reality with a vehicle that can turn from car to aircraft in 15 seconds
It is the ultimate off-roader and it is coming to an airstrip near you. The flying car has been talked about for almost as long as cars have existed, and now a prototype built by a small American company is finally ready to make the idea a reality.
The Terrafugia Transition is a two-seater plane that at the touch of a button converts into a road-legal car. It takes its maiden flight next month and is scheduled to hit the showrooms by next year. You can’t help but wonder whether, if Bob Nardelli and Rick Wagoner, of Chrysler and General Motors respectively, had been forward-thinking enough to fly into Washington DC in swept-wing Dodge Vipers and Cadillac Escalades instead of corporate jets when they were seeking bailout cash, they would have been showered with government money, downturn or no downturn.
“It’s like a little Transformer,” says Carl Dietrich, the Terrafugia boss, proudly. “This is the first really integrated design where the wings fold up automatically and all the parts are in one vehicle. All we have is one simple folding wing, and that means the Transition takes just 15 seconds to switch between flying and driving.”
Dietrich has a well-rehearsed list of reasons why “roadable aircraft” make financial sense. They promise to be quicker than cars for intercity commuting, fit into a normal garage (saving hangar fees) and even run on plain old premium unleaded. However, he’s missing the real reason the Transition is causing such a stir in the automotive as well as the aviation world: flying cars are cool. They’re James Bond. They’re Blade Runner. They’re Back to the Future.
The prototype Transition has been made at Terrafugia’s small workshop in Woburn, Massachusetts, by a team of young engineers recruited from MIT and Nasa. The ungainly vehicle has a single engine — a 100bhp petrol motor that drives either the wheels or a rear-facing propeller. As a car, it has a normal steering wheel, accelerator and brake pedals, but no gearstick (the Transition has a continuously variable transmission).
With its wings deployed and the propeller spinning, the Transition can take off from any airfield, although not from roads — it’s illegal everywhere in the US except in sparsely populated Alaska. It can fly up to 500 miles on a single tank of petrol at a cruising speed of about 115mph. That’s the plan, at least. Though it has reached 90mph in test drives, the prototype Transition’s wheels have yet to leave the ground.
That’s not for technical reasons; it’s because the various road and aircraft licensing authorities have been wondering how to classify it. “It took six months just to get our \plate,” says Dick Gersh, a former lawyer with the car insurance industry and now a vice-president at Terrafugia. “The government, insurance companies and lawyers have never contemplated a flying car. I wanted a car that could fly and drive but you couldn’t do either because you couldn’t get insured.” Gersh is confident that he will be able to insure the Transition once it makes a successful test flight — and a safe landing. The Transition has a safety cage and crumple zones, although it will not have to pack the latest safety features or undergo a crash test before it takes to the air.
“There are already exemption policies for low-volume manufacturers like Lamborghini,” says Dietrich. “We can’t afford the huge amounts of research and development for motion-sensing airbags, and we certainly can’t afford to crash-test our only prototype. If it makes you feel safer, Boeing doesn’t crash-test its big jets either.”
Terrafugia hopes to deliver the first production flying car by the middle of next year. The company already has orders for 40 aircraft. “The majority of our customers are retired or near-retired couples who want a fun vehicle to putter around the country in. They’ve worked hard their whole lives and now they can have a flying car, a technology that they’ve been promised in films and TV since they were a kid,” says Dietrich. “We even have a couple of orders from people who are not pilots but will learn because of this vehicle. They’re willing to put money down on a vehicle that they can’t fly yet.”
Terrafugia’s Transition will set them back a cool $200,000 (£132,000). “For an airplane, that’s very reasonable, but for a car, that’s very much at the high end,” Dietrich admits. “It’s got to start there. You can’t make a $10,000 flying car yet. This is not going to change overnight and it won’t become a mass-market item any time in the near future. But in the long term we have the potential to make air travel practical for individuals at a price that would meet or beat driving, with huge time savings. And that could be a real game-changer for aviation as well as driving.”
The flying car has been technically possible for years but the legal runway was cleared for take-off only four years ago. The American Federal Aviation Authority created a new category of plane called light sports aircraft. These planes are subject to fewer rules and regulations than traditional passenger aircraft and can be flown by pilots after just 20 hours of training, half the normal American requirement.
At the same time, advances in avionics (the systems that allow you to pilot the plane) have made flying much simpler. Gone are the days when a plane’s cockpit was a kaleidoscope of flashing buttons and switchgear. Instead, new technology means that the inside of a cockpit is little different from that of a luxury car. Navigation can be taken care of by GPS, weather patterns can be displayed on a simple colour screen and automatic throttles help to keep control of the aircraft.
So the next time you remind the passengers in your car to fasten their seatbelts, it might be in preparation for take-off.
Blue-sky thinking: the rivals
PARAJET SKYCAR
What is it?
A lightweight two-seater buggy that uses a giant fan mounted on the back and a paraglide-style chute to keep it airborne.
Are they serious?
It seems so. The Skycar is due to take off on Tuesday on its maiden flight. It has been developed by British engineers, who are proving its worth by flying and driving it 3,730 miles from London to Timbuktu. On the road it has a top speed of 110mph; in fly mode it can reach 80mph with a range of 180 miles. The wing takes about three minutes to deploy manually and the Skycar can take off in only 200 yards. If the trip is successful, the team aims to put the design into production, with prices from £40,000 for a basic model up to £60,000 for a sports version.
A5 ICON AIRCRAFT
What is it?
The world’s first multi-purpose recreational flying vehicle.
Are they serious?
Yes. The A5 has made several test flights and the Los Angeles company plans to bring it to market this year. Not strictly speaking a flying car, the A5 requires a trailer to transport it to its take-off point. This is made possible by the fact that it has folding wings, meaning it can also be housed in a garage. The A5 is also amphibious and so doesn’t need a runway to get airborne — a lake or river will do. It comes complete with parachute to lower the plane to the ground (or water). The engine runs on ordinary unleaded fuel and Icon says the A5 will cost $139,000 (£92,000).
PAL-V EUROPE BV
What is it?
A three-wheeled girocopter, capable of vertical take-off and landing.
Are they serious?
Possibly. After six years of concept work, the project has entered the final phase of development: building the first commercial prototype to prove all the technologies work. The Dutch company hopes to begin marketing the vehicle this year and customers can sign up to buy one, although prices are yet to be decided. On the road it has the agility of a motorbike, and the single rotor and propeller fold away. Airborne, the PAL-V flies below 4,000ft, so pilots don’t need to log a flight plan to use it, and it has a top speed of about 125mph. http://www.timesonline.co.uk/tol/driving/features/article5483226.ece
Somali pirates drown with ransom
MOGADISHU, Somalia (AP) — Five of the pirates who hijacked a Saudi supertanker drowned with their share of a $3 million ransom, a relative said Saturday, the day after the bundle of cash was apparently dropped by parachute onto the deck of the
Somalia's lawless coastline borders one of the world's busiest shipping lanes, which links the Mediterranean Sea and the Red Sea to the Indian Ocean. Attacks have continued despite the patrols by warships from France, Germany, Britain, America, India and China.
The naval coalition has been closely monitoring both the Sirius Star and the Faina, a Ukrainian ship loaded with military tanks that has been held since September. The seizure of the Sirius Star on Nov. 15 prompted fears that the pirates might release some of the cargo of crude oil into the ocean, causing an environmental disaster as a way of pressuring negotiators. At the time, the oil was valued at $100 million.
Aubkar Haji, uncle of one of the dead pirates, blamed the naval surveillance for the accident that killed his pirate nephew Saturday.
"The boat the pirates were traveling in capsized because it was running at high speed because the pirates were afraid of an attack from the warships patrolling around," he said.
"There has been human and monetary loss but what makes us feel sad is that we don't still have the dead bodies of our relatives. Four are still missing and one washed up on the shore."
Pirate Daud Nure said three of the eight passengers had managed to swim to shore after the boat overturned in rough seas. He was not part of the pirate operation but knew those involved.
"Here in Haradhere the news is grim, relatives are looking for their dead," he said.
The tanker had left Somali territorial waters and was on its way home Saturday, said Saudi Arabian oil minister Ali Naimi. A Saudi Oil Ministry official said the ship was headed for Dammam, on the country's Gulf coast, but gave no estimated time of arrival. The official spoke on condition of anonymity because he was not authorized to speak to the press.
The U.S. Navy, which announced this week it will head a new anti-piracy task force, released photos Friday showing a parachute, carrying what was described as "an apparent payment," floating down toward the tanker.
The Liberian-flagged ship is owned by Vela International Marine Ltd., a subsidiary of Saudi oil company Aramco. Neither commented on the reported ransom drop.
"All the crewmembers are safe and I am glad to say that they are all in good health and high spirits," said a statement by Saleh K'aki, president and CEO of Vela. "Throughout this ordeal, our sole objective was the safe and timely release of the crew. That has been achieved today."
But over a dozen ships and around 300 crewmembers are still being held. The capture of the Sirius Star has already demonstrated the pirates' ability to strike high value targets hundreds of miles offshore.
On the same day the Saudi ship was freed, pirates released a captured Iranian-chartered cargo ship, Iran's state television reported Saturday. The ship Delight was carrying 36 tons of wheat when it was attacked in the Gulf of Aden Nov. 18 and seized by pirates. All 25 crew are in good health and the vessel is sailing toward Iran, the TV report said. It did not say if a ransom was paid.
http://www.usatoday.com/news/world/2009-01-09-piracy_N.htm
The outcry is muted, but the food crisis is getting worse
The financial debacle has drowned out coverage of food shortages. Where are the billion-dollar bailouts for the hungry?
Just a few months ago, we were being told that this is a period of stark, unprecedented and unfolding food crisis, with looming shortages and huge global imbalances between demand and supply. Everyone who matters - from officials in international organisations to leaders of rich and poor countries - warned us of the terrible social, political and nutritional consequences of doing nothing, of the millions who would go hungry and the riots that would occur if the imbalances persisted or increased.
But now the whole problem has disappeared from the international radar, relegated to the inside pages of newspapers and perfunctory afterthoughts in politicians' speeches. So what happened? Was it not such a problem, after all?
No, the "silent tsunami" has simply been overwhelmed in public awareness by the much noisier tsunami in the world of international finance, with the giant sucking sounds of possible bank collapses and enormous bail-outs grabbing all the attention. Yet the global food crisis is far from over, and is even likely to intensify in the near future.
One reason why many analysts decided that the food crisis may not be so intense is the global decline in crop prices that began sometime in the middle of last year. For about two years before that, commodity prices, including both food and non-food crops, had been increasing, and in the first few months of 2008 they soared. But in early June last year the prices of both oil and food crops fell, so that they are now lower than they were even a year ago.
When food prices were rising, there was much talk of the shifts in demand that were causing this trend. President Bush joined those who decided that this reflected the increased demand from China and India as their per capita incomes grew. This was a ludicrous argument because food consumption has actually declined in both countries. Both economies have shown even sharper declines in per capita food intake despite the continued presence of widespread hunger, because of increased income inequalities within these countries. In any case, that argument about more food demand from China and India quickly collapsed along with the fall in global prices. Now it is more than evident that the wild swings that have been observed in food and several commodity markets over this year have been the result of speculative forces, rather than any real changes in global demand and supply.
But despite this volatility and the recent price decline, the food crisis remains. And it does indeed reflect patterns of demand and supply - but not the ones that have been talked about. The basic problem now is not even one of absolute shortage so much as the inability to pay for food, and this problem will get worse for many developing countries and their poorer citizens.
Three problems now dominate the global food scenario. First, there is a crisis of cultivation, especially in the developing world. This is the result of two decades of policy neglect: falling public investment in agricultural research, extension and support; aggressive trade liberalisation that exposed southern farmers to heavily subsidised marketing by northern agribusinesses; financial liberalisation that reduced cultivators' access to credit and made them prey to speculative forces that also affected prices. As a result, cultivation costs have increased even in years when crop prices are falling, and cultivation is becoming unviable in many countries.
Second, this has been associated with a depression in wages in developing countries, which means that mass purchasing power did not increase even when the economies were growing. So demand for food has not gone up, simply because the poor do not have the incomes to pay for it.
Third, there has been an increasing concentration of firms operating in global agriculture, with a few large agribusinesses coming to dominate both input and output markets. These companies are also the ones who benefit from government subsidies promoting ethanol, which divert land meant for food to the paradoxically more energy-intensive production of fuel for cars. This concentration is reflected in recent food-price trends: while world prices have fallen sharply in the past four months, retail prices of food in most developing countries have not fallen.
Unfortunately, each of these negative processes is likely to intensify. The financial crisis will reduce the ability of developing country governments to increase much-needed investment in agriculture or enlarge the distribution of affordable food. It will adversely affect wage incomes, reducing purchasing power further. And it will add to pressures for concentration in industry, including agribusiness.
In the middle of last year, we had a global outcry about the perilous state of billions of people in developing countries whose governments could not afford to provide enough food for them and who could not themselves earn enough to buy food at prevailing prices. These problems are now worse, but the global outcry is all about the multinational banks that are under threat. And several multiples of the money that could not be found to provide food for the hungry are quickly being delivered to bail out irresponsible finance.
http://www.guardian.co.uk/commentisfree/2009/jan/09/food-shortages-coverage-jayati-ghosh
Chavez Threatens to Expel U.S. Embassy Personnel in Caracas
By Matthew Walter Jan. 10 (Bloomberg) -- Venezuelan President Hugo Chavez said he’s investigating whether representatives from the U.S. Embassy in Caracas met with leaders of the political opposition, and said he may expel them from the country. Chavez said he knows a group of opposition leaders recently flew to Puerto Rico to meet with “U.S. advisers” to discuss strategies to defeat the president’s proposal to eliminate his term limits in a referendum this year. Chavez said U.S. Embassy representatives may have been present. “If I can confirm this, I’ll throw them out of the country,” Chavez said at ceremony in Caracas commemorating the launch of Venezuela’s first satellite. The socialist Venezuelan leader expelled the U.S. ambassador in Caracas in September and has repeatedly accused President George W. Bush of supporting opposition groups in Venezuela. Venezuela is the fourth-biggest supplier of foreign crude oil to the U.S. Jennifer Rahimi, the deputy press secretary at the U.S. Embassy in Caracas, said the accusations that U.S. diplomats met with opposition leaders are “completely false.” The U.S. and Venezuela maintain diplomatic ties despite U.S. Ambassador Patrick Duddy’s expulsion, and the U.S. Embassy in Caracas remains open.
http://www.bloomberg.com/apps/news?pid=20601086&sid=aTz9EuUBrCms&refer=latin_america
Back at their old ways, won't they ever learn? We have at least four years of this childhood nonsense. We are in an economic mess and they want to spend and 16 billion on stealing land from honest folks.
Senate to consider expanding wilderness protection
WASHINGTON (AP) — Congress is considering whether to set aside more than 2 million acres in nine states as wilderness in an early showdown that threatens to derail pledges by Senate leaders to work cooperatively as a new administration takes office.
The largest expansion of wilderness protection in 25 years has bipartisan support and would include California's Sierra Nevada mountain range, Oregon's Mount Hood, Rocky Mountain National Park in Colorado and parts of the Jefferson National Forest in Virginia.
The bill was scuttled last year after objections from Sen. Tom Coburn, R-Okla., who said spending in the bill was excessive — nearly $4 billion over five years. Now Senate Majority Leader Harry Reid is seeking a rare Sunday vote in an apparent effort to punish Coburn and antagonize his GOP colleagues.
The scheduled Sunday session would try to limit GOP stalling tactics and move the bill forward.
Sen. Jeff Bingaman, D-N.M., chairman of the Senate Energy and Natural Resources Committee, said the measure represents years of work by lawmakers from many states and both parties. The legislation combines about 160 bills covering nearly every state.
Besides new wilderness designations — the highest level of government protection for public lands — the bill would designate the childhood home of former President Bill Clinton in Hope, Ark., as a national historic site and expand protections for dozens of national parks, rivers and water resources. In a statement, Coburn said the "earmark-laden" measure "makes a mockery of voters' hopes for change."
For example, Coburn said, the bill includes $3 million for a "road to nowhere" through the Izembek National Wildlife Refuge in Alaska; $460 million for a water project designed to save 500 salmon in California; and $3.5 million to help celebrate the 450th birthday of St. Augustine, Fla., in 2015.
Environmental groups also oppose the Alaska road. The rest of the bill, they say, would be a huge accomplishment for Congress.
http://www.usatoday.com/news/washington/2009-01-11-senate-wilderness_N.htm
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