Analysts attributed the continuing weakness to anxiety among traders over what finance ministers and central bankers from the Group of Seven nations gathering in Washington may say regarding their countries’ reserves.

Officials from the G7 met yesterday afternoon ahead of the weekend spring meetings of the IMF and World Bank. The G7 gathering will be followed by a meeting of the broader G20, which includes China and other powerful emerging economies.

At issue will be discussions with Chinese officials over calls by China’s central bank chief for replacement of the U.S. dollar as the world’s premier reserve currency by IMF special drawing rights.

The day’s hard numbers came in weak. The Commerce Department reported that durable goods orders fell 0.8% in March, marking the seventh decline in the past eight months.

Inventories fell 1.1%, a sign that manufacturers are bringing supplies of unsold goods in line with demand. But shipments fell faster than inventories did, suggesting that production will need to be reduced further.

Separately, Commerce reported that new home sales fell 0.6% in March, but added that sales in the first two months of the year were stronger than initially reported.

Source: Dollar Slides Again

Platinum peaked in Hong Kong at $1070, drifted lower through most of the Comex, then rallied a bit at the end of the day to end at $1061/oz., down $7. For the week, platinum was the big winner, at 6% higher.

Silver fared better than gold, falling as low as $13.25 in the first hour in New York, but then rallying strongly straight through the rest of the day and closing at $13.67/oz., up 17 cents. For the week, silver tacked on 4.2%. (Click here for charts)

It was a mixed day for the precious metals, with gold and platinum continuing to consolidate their positions, but silver showing surprisingly more strength than its more lustrous sisters.

Gold’s performance was particularly disappointing, as it should have received solid support from both rising oil prices and a declining dollar, but didn’t.

The Hightower Report’s take on the day’s action: “Given that the gold market managed a low to high pulse this week of almost $65.00 an ounce it wasn’t surprising to see prices forge at least a modest correction setback early Friday morning. While some weakness in the Dollar might have provided some support to gold in the past, the Dollar action today didn’t seem to be of that much interest to the trade. It certainly seemed like the anticipated passage of the US stimulus package, the potential for US mortgage assistance and the weekend G7 meeting all served to knock down the flight to quality interest in the gold market. In fact, talk of coordinated G7 easing is usually something that serves to tamp down macro economic anxiety.”

Meanwhile, SPDR Gold Trust (NYSE:GLD), the largest bullion-backed ETF, continued its gangbusters accumulation of metal. GLD’s holdings jumped again, as it pushes toward 1,000 metric tons. The ETF’s vaults now contain 970.57 tons, or 31.2 million ounces! It rose 1.125 million ounces in one day and has increased nearly 5.8 million ounces in a month.

With all of that activity, some analysts are beginning to wonder where all that bullion is coming from. It’s not from the Comex nor, apparently, from central bank sales. Mints across the globe are stamping out coins with every ounce they can lay hands on. So, where are they getting it? We’d love to know. Anyone with an answer, please drop us a line at dr@caseyresearch.com. Thanks.

Source: Gold Hit With Mild Profit Taking

You’ll recall that one of the fairest of the Bubble Era’s revelers was the idea that, over the long run, you would make money in stocks. All you had to do was ‘buy and hold.’ Who didn’t like her? She seemed so easy…so willing…so fetching and attractive.

Yesterday, the Dow lost another 203 points. Investors are down 44% so far this year. Worldwide, they’ve lost $10 trillion this month – far worse than the crash of ‘29.

The most successful economy of the 20th century was the United States of America. The second was probably Japan. It rose from the bombed-out ruins of WWII to become a worldwide export powerhouse, dominating the auto and electronic equipment industries.

But yesterday, stock prices in Japan fell to more than a quarter-century low. Investors in Japanese stocks – including your editor (who is better at giving advice than taking it) – have made nothing in 26 years.

Here’s the press report:

“Tokyo’s Nikkei 225 index closed down 6.4 percent to 7,162.90 – the lowest since October 1982 – with exporters like Toyota Motor Corp. and Sony Corp hit hard. The losses came despite a report that the government was considering massive capital injection into struggling banks in a bid to calm jittery financial markets.”

“Decades of pain and still no relief,” adds the Financial Times, noting that investors in Japan have been waiting for a recovery for the last 18 years.

With the mask off, stocks in Japan are giving investors a Halloween fright.

But what other masks are coming off?

How about the sweet mask worn by housing? ‘Housing always goes up.’ And, ‘you can’t lose money in property.’ Remember those beauties? Those masks hit the floor a year ago. Since then, the whole world has looked at the property market and gasped in horror. How could houses be so ugly, homeowners have wondered; they look like they just woke up.

Oh and there’s oil…down to $63 yesterday. Oil was supposed to go up forever. At least, that was one of the favorite masks of the late Bubble Era.

But there are still a few Bubble Era masks that have not yet come off. In fact, the belle of the ball is the mask on ‘progress.’ People still believe that the world grows and improves – if not steadily, at least episodically. It’s certainly true that long periods of history show what appears to be economic progress. Things get better. But occasionally, something terrible happens – plagues, wars, revolutions, Great Depressions and Dark Ages. Then, the world turns backward. The bull market in progress turns into a bear market of progress turns into a bear market of backsliding.

Today, people are losing faith in stocks and housing…but they still have faith in progress. Just a few months ago, they thought capitalism would make them rich. But wicked capitalism has disappointed them badly; it didn’t guarantee rising asset prices after all. So, now they turn their sad eyes to the feds. ‘Oh ye all-knowing, all-seeing, all-powerful ones…hear us. Save us – from capitalism!

They figure the feds will do the trick… And sure enough, all over the world the federales are playing along. The G7, the IMF, the central banks, the finance ministers and Treasury Secretaries – all have put on their own masks…strutting around, pretending to know what they are talking about. Curiously, France’s president Nicholas Sarkozy is a leading strutter. He’s trying to organize a New World Financial Order…based on something other than the dollar.

These poseurs don’t look too bad – as long as they leave the masks on. Take them off, of course, and you will see the same silly clowns who CAUSED the crisis in the first place.

That is what is so amusing about this stage in the collapse of Western Civilization. You see, most of the world’s financial press has come around; they see things much the way we do. They see, for example, that the U.S. Fed erred – big time – by fixing the price of credit too low for far too long.

Of course, there’s nothing in the Manual of Capitalism that allows the feds to fix the price of credit or support the housing market. This was the government at work, not the market. With the misleading signal coming from the credit markets, the capitalists just did what they always do – they overdid it.

Still, the world’s press, pundits and politicians have convinced themselves that the fault lies not in themselves…but in capitalism. And now, they expect the feds to do something about it.

But that’s just the way it works…one hallucination gives way to another. One delusion on the way up; another on the way down.

*** Even star mutual fund managers are getting walloped by this market. Chris Mayer offers us a few examples:

“Managers with great track records are faring poorly, and it may help you feel better about how you are doing. Jean-Marie Eveillard, for example, has been running money for 50 years. He’s beaten the market handily for a long time. He is a cautious type. He likes gold stocks. He likes Japan. He’s down 27% this year. Robert Rodriguez, another cautious money manager who holds a lot of cash and runs FPA Capital, is down 29%. These are among the best of the best, as the market is down more than 40% this year. William Fries at Thornburg is down 43%. David Winters at Wintergreen is down 37%. Wally Weitz at Weitz Value is down 39%. The list goes on and on…

“So you see, nothing is really working well in this market right now – at least not for investors in stocks. However, there are a lot of cheap stocks out there, bargains I haven’t seen in a long time. Unless the world comes to an end, which it has a habit of not doing, future investors will be a happy lot. Count me a cautious buyer of stocks.”

Caution is the name of the game here…and if you’d like to see what Chris has been thoughtfully recommending to his Capital & Crisis subscribers, see here.

And the bargain hunters were abound this morning, setting up a rally worldwide in the markets.

Also boosting the markets is the anticipation of the Fed’s two-day meeting, that begins today. It is widely believed that the Fed will cut rates…but it remains to be seen what, if any, lasting effect it will have on the markets.

Lurking behind this rally is this unsurprising tidbit: consumer confidence in the United States hit an all-time low in October. The Conference Board reported that expectations have turned “significantly pessimistic with the percentage of consumers expecting business condition to worsen over the next 6 months rising to 36.6% from 21% and those expecting fewer jobs rising to 41.5% from 26.9%”

*** Perhaps the biggest delusion of the financial world now is that the dollar…and dollar-based Treasury obligations…are a safe refuge. In a sense, of course, they are. The U.S. government is in no danger of defaulting on its loans. In an emergency, it can always just print up the money. But that’s the problem. An emergency is coming. More on this when we get a chance to think about it…

*** “I’ll be all right down here,” said our old friend Doug Casey. Doug has bought a place in Cafayate, a town that reminds us of Santa Fe or Aspen, before they were ruined by rich people. He’s building a world-class resort – complete with golf course, riding trails, tennis, health spa, library…everything he wants.

Cafayate also has several things going for it that Aspen and Santa Fe did not. First, it is prettier and the weather is better. It is always sunny, with pleasant temperatures. Wherever you look, you see beautiful mountains. What’s more, it produces some of the world’s best wine.

Doug’s place is right in the middle of a vineyard. In fact, he’s got it set up so that revenue from the vines pays much of the operating costs of running a golf course and so forth.

“Another big plus,” says Doug, “is that this place isn’t going to suffer too much from the credit crisis. Nobody down here had any credit.”

*** Doug is not completely right about Argentina’s credit situation. Believe it or not, there were lenders – mostly big banks – who were foolish enough to extend the nation credit. Naturally, the Argentine government treats these angels like taxi drivers in Buenos Aires treat other foreigners.

Almost every time we go to the airport, the taxi driver tries to pull a fast one. “My meter is broken,” said one, “the standard fare is 200 pesos.” (It is really about 70 pesos.) “We crossed into another zone,” said another, “so I have to add another 50 pesos.” “It’s night time,” came another invention, “after dark you have to pay a surcharge.”

It’s all good fun. The taxi drivers are merely establishing the going rate. The price for a run to the airport is much higher for naïve foreigners, but why shouldn’t it be?

So is the price for lending to the Argentine government.

This from MoneyWeek:

“In December 2001 [Argentina] reneged on its $95bn of sovereign debt.

“At the time, that was the biggest default in world history, though these days such a number looks like chicken feed compared with what the world’s bankers have recently managed to mislay. Only in 2005 did Argentina sort the final details, with a ‘take-it-or-leave-it’ 70% ‘haircut’ on face value, again the largest sovereign debt markdown ever.

“Three years later, it’s back to square one. Inflation is rocketing (some estimates put it at 20% annualized) and the government is once again running out of cash. Argentina’s borrowing needs will swell to as much as $14bn next year from $7bn in 2008, says RBC Capital Markets. And any confidence that the country will be able to repay what it owes is fast flying out of the window.

“Argentina’s 8.28% government bonds are due to be redeemed in 2033. Fat chance of that, the way things are looking right now. Now priced at 22 cents on the dollar, they currently yield 31%, as against ‘just’ 12% a month ago. And still no one wants them.

“What’s more, the price of credit default swaps – market insurance that investors can buy to protect themselves against default (Read: All you need to know about credit default swaps for more) – covering the country’s sovereign debt has more than quadrupled over the past month. These CDS now stand at more than three times the Icelandic level, and suggest there’s almost a 2:1 chance that Argentina will go bust this year.”

Does this worry your editor – who has substantial (for him) investments in Argentina? Not at all. As a dear reader pointed out, the average Buenos Aires taxi driver knows more about financial crises than Bernanke, Paulson and Greenspan put together. The Argentines know how to get through a crisis, in other words, and still put steak on the table and wine in their glasses.

We’re going to learn from them.

*** Finally, another dear reader sends a news item explaining why there was a bagpiper in front of our neighborhood church last Sunday.

It was the “kirking of the tartans,” said the headline. Turns out, the local Scottish Argentine society does this every year…a kind of blessing of the clans, performed by the local priest. “Kirk” in Scottish means church.

Source: The Masquerade is Over

In the currency market, the dollar firmed some more against the euro. Late Friday, the euro was trading at $1.5804 vs. $1.5895 on Thursday.

The buck shot up after Citi, the largest U.S. bank, reported not only its $5.1 billion quarterly loss, but also more than $6 billion in pre-tax writedowns and billions in other downward adjustments caused by the subprime debacle.

And this is the good news.

Nevertheless, a real rebound in the shaky dollar is a distinct possibility. Jean-Claude Juncker, Luxembourg premier and chair of eurozone financiers, told the Luxembourg press that he had been invited to the White House last week just before the G7 meeting, at the personal request of President Bush.

The two leaders discussed the dangers to Europe’s economy of the cratering dollar, and rising calls for protectionism on the continent. Mr. Juncker flat out warned that matters could quickly spin out of control if the U.S. doesn’t take steps to defend its currency.

“I don’t have the impression that financial markets and other actors have correctly and entirely understood the message of the G7 meeting,” Juncker said.

Good day… And a Marvelous Monday to you! St. Pete was gorgeous, and it has been rainy, dreary, and cold here in St. Louis, since I returned. UGH! Front and center this morning, we’ve got to get to the G-7 meeting this past weekend, in which, the finance ministers expressed a concern with the falling dollar. This has led to some very strong selling in the overnight market of the euro (EUR) and other currencies.

What was it that the G-7 said anyway? Well… I’m glad you asked, because from what I saw of the communiqué, it must have been in some secret language. Here’s the communiqué…

“We reaffirm our shared interest in a strong and stable international financial system. Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability.”

So… Where did they single out the dollar? Oh! The dollar has lost quite a bit of ground since the last G-7 meeting… But so have pound sterling (GBP), South African rand (ZAR), and Icelandic krona (ISK)! I guess the emphasis for G-7 was “major currencies”. And… I guess they have forgotten about China, because they fell off the G-7 radar screen!

I would expect dollar shorts to be covered today, which would drive the dollar higher on this news… But, fundamentally, what has changed? The trade deficit rose to $62 billion in the last report, instead of falling to $58 billion! And… The U. of Michigan Confidence report crashed and burned on Friday! The confidence index fell to its lowest reading since 1982! (Which on a side note was a good year, as the Cardinals won the World Series and my oldest son, Andrew was born!)

So… The dollar bulls are going to be dancing in the streets today… And most likely tomorrow… That is unless the markets stop and take notice of U.S. retail sales, which are to print this morning. The G-7 communiqué came as a surprise, as these guys normally can’t agree on anything… And, I find it interesting that China has basically fallen off the radar screen.

I guess these knuckleheads finally took notice of the rot on the dollar’s vine. OK… This could mean a monumental swing… Or, it could be just a short-term sell off of the currencies. I’m thinking it is the latter of the two, but I could be wrong, eh?

This morning, we’ll see the latest retail sales data in the United States, which is expected to be very soft. The “experts” have forecast a “flat” report. In checking with the BHI (Butler Household Index) I have to go back to March, when I was gone most of the month – so the BHI is not sending me a clear signal. Chain store sales (sales of stores open 12 months or more) unexpectedly collapsed in March, by -0.5% year-on-year, with the consensus at 0.9%. The decline is the third largest on record… So I would think that retail sales would be weak, and probably on the negative side of the ledger.

That should keep the dollar bulls from celebrating too loudly!

There was another piece of data on Friday that flew under the radar screens of the mass media… Import prices soared in March, spiking to +14.8%! This means we’re importing other countries’ inflation… Great! That’s just great! As if we didn’t already have our own! See what the weak dollar will do to your purchasing power? Makes you kind of wonder why any country would seek out a weaker currency, doesn’t it?

I mean… No country has ever debased their currency to prosperity… So, why did we think we could do it now? Oh, I know, I know, it must have been that disastrous saying: “This time it will be different.”

So… Unfortunately, all the fundamentals will be forgotten today. We need to batten down the hatches, and withstand the prevailing storm caused by G-7. However, in my mind, I’m thinking that the words of G-7 might not carry much weight, and they will need to be backed up with intervention from the United States and ECB to really change this weak dollar trend… And even then, if the dollar bears still want to fight, it could be a long difficult battle.

OK… Now this might sound strange to you all… But I’m writing at one o’clock in the morning. I just got home from having to drive 100 miles to pick up my son, Andrew, and his friend, Rachel. They had a very unfortunate automobile accident this afternoon, and they were in the hospital, and all that, before I went down to get them to bring them home. So… OH! They’re OK, really hurting all over, and Andrew looks like he got into a fight with a bear!

So… As I was saying, the currency prices are as of 1:00 AM. I’m going to bed now… Talk later.

Currencies today 4/14/08: A$ .9215, kiwi .7875, C$ .9760, euro 1.5715, sterling 1.9710, Swiss .9960, ISK 73.50, rand 7.8250, krone 5.0590, SEK 5.9920, forint 160.60, zloty 2.18, koruna 15.85, yen 100.90, baht 31.60, sing 1.36, HKD 7.7915, INR 40, China 6.9960, pesos 10.52, BRL 1.6895, dollar index 72.15, Oil $109.60, Silver $17.34, and Gold… $920.30

That’s it for today… Retail sales are the headline data today… Get ready to rumble! I’m back in the saddle this week for the whole week! I have a two-day jaunt to Jacksonville next week, and then the Las Vegas Money Show the second week of May! This Las Vegas Money Show is HUGE! It’s held at the Mandalay Bay Hotel… You should check it out, if you think it sounds interesting! That’s all for me, I’m going to bed! I hope you have a Marvelous Monday! Batten down those hatches today!

P.S. To get The Daily Reckoning sent directly to your inbox, sign up for our free email newsletter, or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.

Editor’s Note: Chuck Butler is the senior vice president of EverBank World Markets. He oversees the trading desk and operations for over 12,000 individual and corporate clients, both in the United States and abroad, who look to EverBank for FDIC-insured World Currency Deposit Accounts, and Single-Currency and Index CDs .

Chuck is the author of The Daily Pfennig, which is reposted here at The Daily Reckoning. His respected analysis is frequently quoted in or referenced by: the Wall Street Journal, U.S. News and World Report, CBS Market Watch, USA Today, CNNfn, the Chicago Tribune and many other publications.

— Here’s a cheery way to start your week: More than two-thirds of American Gen Xers — those aged 27-42 — don’t think they will ever be able to stop working. And don’t think they’ll ever see a dime from Social Security or Medicare.

“The Gen X group is the most anxious about their finances,” Chris Moloney of Scottrade told Reuters last week.

Of the 1,000 people they talked to who were 18 and older, nearly 40% percent said they had saved less than $25,000 for retirement. Conventional wisdom suggests if you want to live for 20 years on about $50,000 per year — whatever that will be worth at that the time — you’ll need to have $1 million stashed away.

“Gen X is in the middle of a ‘retirement perfect storm’ of very high expectations, low retirement savings and massive concern about the future of Social Security,” Moloney says.

Thirty seven percent said they would like to have between $1-5 million saved for retirement — even if their ability to save this money leaves such sums in the realm of wishful thinking.

Not that we want to reignite the debate among readers about which generation is “to blame” for the state of things, but we also note that 64% of baby boomers say they’re ready to retire — and aren’t worried.

Take that.

Worth the paper it’s printed on…

— Retail sales were up in March…but mostly because gasoline keeps costing more.

The Commerce Department says retail sales rose 0.2% in March, a tad more than the flat reading analysts were expecting. But throw gasoline out of the equation, and they were ruler flat, indeed.

If the figures took inflation into account, which they don’t, the outlook for retailers would be even more discouraging. Still, a 0.2% increase in March looks better than, say, the revised 0.4% decline in February…

— U.S. stock markets began the week moving sideways, taking a breather after GE’s earnings disappointment Friday and before Citi and Merrill reveal whatever they’re going to reveal later this week.

But Goldman Sachs isn’t waiting to make its call: Earnings season has had an “awful” start and stocks will head downward this spring.

“Early signs are awful,” says a Goldman report out today. “We expect generally disappointing results and a swath of lowered profit guidance that will drive the Standard & Poor’s 500 Index lower in coming weeks,” perhaps as low as 1,160, before a rebound by year’s end to around 1,380 — which would put the S&P down 6% for the year.

That’s a remarkably gloomy call for David Kostin, Goldman’s new chief forecaster — at least compared to his predecessor, the ever-optimistic Abby Joseph Cohen.

— Wachovia needs cash, and quickly. Ho-hum. The bank plans to float $7 billion in new shares and slash its dividend by 41%. It’s the second time Wachovia’s had to scramble for capital just this year.

Wachovia jumped into the adjustable-rate mortgage pool with both feet at the most frothy stage of the bubble in 2006 by purchasing Golden West — whose business was focused on one of the most airheaded states, California.

— But that’s just the beginning of the financials’ pain this week, as many of the top firms reveal first-quarter earnings… and probably more write-downs, too. Citigroup will likely write down $10 billion in debt this week…which would add up to a first-quarter loss of $3 billion. Merrill Lynch will likely write down another $5 billion, for a loss of $2.7 billion.

That’s still a drop in the bucket given that write-downs industrywide total $250 billion to date…and that everyone from George Soros to the International Monetary Fund is forecasting $1 trillion, give or take, by the time all is said and done.

— Citi’s announcement last week that it will unload about $12 billion in debt onto private equity at 90 cents on the dollar highlights another problem — one that’s “entirely separate from subprime mortgage lending,” writes Strategic Short Report’s Dan Amoss. “It’s another symptom of the credit bubble disease.”

The $12 billion is money Citi hoped to raise in the credit markets to finance leveraged buyouts. But when the credit markets seized up last summer, Citi had to take the deals onto its own books.

“Investment banks are stuck with an estimated $250 billion worth of this buyout debt on their balance sheets,” says Dan, “or in off-balance sheet entities for which they’ve made guarantees. Until they get rid of it, credit will remain fairly tight.

“Financial stock bulls point to this $12 billion sale as evidence that the leveraged loan sector of the credit markets is thawing. But I remain a financial stock bear, because this sale is only a tiny part of the market and only one of the many other credit-related problems plaguing investment banks.” For ways to play Dan’s skepticism, see the Strategic Short Report.

— Asian stock markets tanked overnight, fearing the worst from U.S. financials this week. Shanghai was down 5.6%, Hong Kong 3.5%, the Nikkei 3%.

Platinum had an up and down day, ending at $2008/oz., down $18. For the week, platinum lost half a percent.

Silver took a big hit between the New York open and mid-morning, falling as low as $17.44, but made up a bit of lost ground as the day wore on, closing at $17.74, down 21 cents. For the week, silver dropped a quarter of a percent.
(Click here for charts)

A lackluster day for the precious metals closed a lackluster week, which had to be a bit disappointing given the dollar’s weakness.

But the tug of war continues, as on the one hand those convinced that the woeful economy, highlighted yesterday by GE’s sagging profits, will send many investors on a flight to quality, while on the other hand there are those who don’t believe a high gold price can be sustained in the face of economic disintegration.

Also factoring in was caution ahead of the G7 meetings. There is a small but real possibility that the G7 nations might make a surprise move in support of the dollar, which would be negative for gold.

“Gold made its run, and now it’s stalled,” said Ron Goodis, of Equidex Brokerage Group in Closter, New Jersey, whose words typify the bearish viewpoint. “I don’t see a reason to be in gold. A bull market has to be spoon-fed news every day, and the risk appetite just isn’t there for gold. Gold may go to sleep for a couple of months.”

But Peter Grandich, editor of the Grandich Letter, writes that gold “Appears to be building a base after a massive rally this past Winter. While seasonal factors come into play in a couple of months, worldwide economic and political concerns should keep us from seeing any sharp corrections.”

And considering how closely gold has been tracking the dollar, Grandich’s medium-term currency prediction is notable: “So long as economic weakness persists, rallies should be just bear market corrections. Somewhere down the road, when … the inflation genie is out of the bottle to all, then we could see a significant dollar rally as interest rates rise sharply. But that is more likely at the minimum, 12-24 months from now, if not longer.”