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ARCHIVED DISCUSSION FROM 6/23/2001 All times are U.S. Mountain Time (Yesterday's Discussion.) Peter Asher (06/23/01; 23:35:58MT - usagold.com msg#: 56723) Better read this !! http://www.gold-eagle.com/gold_digest_01/hein062501pv.html The Economic Significance of "NO" Black Blade (06/23/01; 22:21:46MT - usagold.com msg#: 56722) Today, Nortel. Tomorrow... http://www.businessweek.com/bwdaily/dnflash/jun2001/nf20010622_893.htm Snippit:Multibillion-dollar write-downs of ill-fated acquisitions will spread beyond tech and telecom. new accounting rules are going into effect Jan. 1 that will force companies to be more rigorous about writing down the value of these assets. Many companies are facing the abyss, contemplating huge charges in the next six months. "It's going to be a bloodbath," says Bob Willens, an accounting and tax analyst at Lehman Brothers Inc.Black Blade: It is going to get ugly over the next few weeks. For a good look t a sampling of companies in the "Danger Zone," check out the table at the bottom of the page. Pay particular attention to the value column for market cap and the column for potential write downs. Very telling. Wall Street is headed into "Interesting Times." ORO (06/23/01; 21:43:51MT - usagold.com msg#: 56721) Ol Yeller - Kasriel's problem http://www.northerntrust.com/library/econ_research/weekly/us/010621.html Kasriel did modifications to the Economist calculations to show how low dollar savings are by disregarding the fact that the income tax rate differential on capital gains vs. dividends (which are counted by Kasriel as income) caused companies to give out cash flow from operations through the purchase of stock off the market. Furthermore, this ignores the fact that much income is not recorded in the national accounts because of the poor accounting for stock option compensation. At the end of last year, up to nearly 20% of market capitalization was within stock option compensation programs. About 4% of capitalization is given away to employees and directors of public companies. When stock values produce no gain on the options, they are routinely repriced, more are issued, or replaced with cash compensation.On this count too, Kasriel misses the boat. If the recent study he quotes (a very short discussion of it is available in Business Week for 6.25.01 on the yellow page) shows anything it is that since the 1992 "recovery" the lower end of the labor market has gained sufficiently to resume saving at its normal rate, however, the upper income people are widely known to be doing much better yet their savings have fallen. Does that not indicate that the savings vehicles and the income sources are being missed by the statisticians?The Flow of Funds reports indicate that corporations were shelling out at peak over $400 bil. to buy back stock (either their own or another company's, which rewards the other company's shareholders), now the rate is around $300 billion. This would increase income among shareholders (top 50% of households) by over 10% over reported income in 99 and 8% in 2000, easily covering their "savings deficit". Black Blade (06/23/01; 21:24:24MT - usagold.com msg#: 56720) RE: Camel - "The Slow Burn" I have heard time and again that the CAFÉ standards must be raised. I would think that the market forces will eventually do just that. As in the 1970's during the oil shocks, we saw a move away from production of US muscle cars to imports of Japanese Rice-Grinders. "Necessity is the Mother of Invention." Many who propose the enforcement of differing CAFÉ standards also live in regions where Mass Transportation is available. Yet most people will still drive solo on fume-choked freeways such as in LA, NY, SF, etc. Of course sustained higher prices for oil could very well lead to production of oil from tar sands, shales, heavy oils, etc. People will probably be willing to pay higher prices for the freedom of the open road.The drilling boom that you speak of was an effort to become energy self sufficient. It actually began under Nixon and lasted for several years and it included the development of the Strategic Petroleum Reserve (SPR) for national defense purposes. Production did increase though not enough to meet growing demand. The North American oil peak was reached in 1970 (as per M. King Hubbert model) as the major large NA oil fields were in various stages of decline. Even so, at this time the oil shales were under development in Utah and Colorado, and the Athabasca tar sands in Canada were soon under expanded development. OPEC eventually opened the oil spigot and the market collapsed as oil prices retreated. The end result was that oil imports began in earnest and oil and gas rigs were soon scrapped and destroyed. The Pemex oil fields in Mexico were mismanaged from day one (typical for socialist states like Mexico). The North Sea oil fields have already peaked and are in various stages of decline. Oil and gas will continue to be a vital part of the economy. The real issue that must be addressed in the short term is not oil and distillates, but rather electricity and natural gas. Electricity and natural gas are more fundamentally pervasive throughout the economy and yet are not as immediately visible to the average person as is a sharp price rise at the gas pump. That is why I address this issue as "The Slow Burn." Drill rig capacity is maxed out, and production isn't keeping up with demand. Yet another 300 or so NG-fired power plants are scheduled to come on line. Also there is more interest in fuel cell technology and here again the hydrogen is cracked from methane CH4 more easily than from water H2O (very little net energy gain). Looks like the US economy is at risk due to the end of "Cheap Energy." BTW, Julia Butterfly's tree is no more. After being struck by lightening after she left, someone toppled it with a chainsaw. Even while she hung out in the tree, logging continued all around her - nothing accomplished. During that time another anti-logging protester stood in the path of a falling tree and was crushed to death. Dying for ones beliefs is one thing, but I would wonder if this is a possible candidate for the "Darwin Awards?" Cheers!- Black Blade auspec (6/23/01; 21:14:59MT - usagold.com msg#: 56719) TiF/Rich JPM/C/BarAnglo/GS ALL in a pickle, ALL tools of the same folks. BarAnglo announces hedge agreement, proceeds of same goes to JPM/C, overseen/guaranteed by ESF/USTreas, loss of US gold in process. Some paper, some physical workout. Some soon, some down the road. Some 'donations' to the cause by CBs. Multiple tools available. What happens to GS, the Clinton HenchCo? Do they survive or get what they all deserve? Does Bush administration have any allegiance whatsoever to GS? Answer, yes, likely so, but well down the list. Watch GS very carefully for signs of what is coming. The lot of them can only pull this off with a higher POG!Please consider all this as my speculation only. They will do exactly what you or I do when in a bind. Piece the solution together from as many viable angles as possible, chip away at it, ultimately working the Bailout quite similar to LTCM. Directed responsibilities and obfuscation, very little to no transparency.Rich-- "How can prices not rise?" You got me, man!BC BN BDGATA Pressure! Camel (6/23/01; 20:28:34MT - usagold.com msg#: 56718) Slow Burn Black Blade. Thanks again for all your energy commentary.Those of us who have decried the big gas guzzlers all these years are feeling a bit of elation that the 20 year opposition to the CAFE standards seems to finally be crumbling, . Too little too late? Probably, but at least a step in the right direction.One recent article stated that a target of 55 mpg by the year 2020 was being consisdered.Again an admirable goal but so tragic that the momentum from the 70's wasn't continued. Perhaps we would have been prepared by now. I was a bit stunned that the momentum seems to be shifting away from an agressive drilling program so I guess that seperates me from a lot of my Green bretheren .If I were more of a partisan I wouldn't be here , but up in a tree somewhere with Julia Butterfly. I must say however that my view as to what is best for the country at this point is a stratagy to switch as rapidly as possible to more fuel efficiant vehicles.These are where the greatest gains can be made the fastest.. Just hypothetically.if this country could increse the fuel efficiancy in its fleet of vehicles from the present 24mpg to 32 mpg that would be a 25% increase or roughly the equivalent of adding 25% new productive capasity to our oil supplies and refining capasity. Of course the markets will do much of the work .As the price of gas raises over the next ten years. everyone will have great incentive to purchase fuel efficiant vehicles. There is however tremendous inertia as well as out right resistance to this solution and the government can play a constructive role with a combination of coersion of the industry to produce more efficiant cars as well as tax incentives for buyers to purchase them. Probably one of the most potent tools is the "bully pulpit". Bush or maybe Cheany needs to be out there every few weeks exhorting the Ameican people to prepare for a crisis ahead.Of course all of this is anthema to some groups and they have been succesful for 20 years in preventing the country from taking these steps.Hopefully their day is drawing to an end, and I suspect that history will not look kindly on them. My view is that the equivalent of a 25% increase in oil production that could be achieved this way is not possible to achieve through any amount of increased domestic drilling , because the resourse base is simply gone. Others might disagree here and maybe you might be able to supply better information . Wasn't there something that has become known as "the great drilling boom of the early 1980's". This is sort of a blank for me but I believe it was a Reagan inspired attempt to secure a domestic sourse of oil and at the peak of this boom there were as many as 4000 rigs in operation compared to about 1200 now. Maybe you can provide a differant point of view, but wasn't the final result of all that only a very modest increases in supply and in fact the overall production of domestic oil has continued its steady decline.Another unknown is the situation in Mexico which is one of our biggest suppliers of crude. Isn't their main field in the Yucatan Gulf having serious problems .,and they are now undertaking a 9 billion dollar project of "injecting" the field to keep up the pressure in the wells? Also isn't the big North Sea Field projected to peak this year.These will be the two benchmark guides to watch to see if the more pessimistic scenarios outlined by Campbell actually begin to come to pass .Of course there are the tar sands in Canada and the very heavy pitch type deposits in Venezuala, but the price at which these can be extracted and the scale of the infrastructure that will be necesary to replace conventional oil will be very great., not to mention the increased amounts of energy required to extract it. R Powell (6/23/01; 19:19:24MT - usagold.com msg#: 56717) Chinese silver supply From Merrill Lynch & Co. commodity outlook on silver dated 6/8/01 concerning China. "Most of the 10 companies that received 2001 export quotas from the Chinese government have used up most of them and have asked for extra quotas to continue exports in the second half of the year. If granted, this could serve as a major drag on silver prices." Merrill has been bearish on gold and silver for a long time calling now for a silver trading range between $4.30 and $4.60 basis July Comex. This is from a Mr. O'Neill. I have e-mailed him to ask for more information on Chinese and all aboveground supply. I have never tried to contact anyone there before so (other than the expected sales call) I'll see if we get a response. Hey, auspec! You're not really Mr. O'Neill are you? Rich Tree in the Forest (6/23/01; 18:51:59MT - usagold.com msg#: 56716) auspec - JPM/CBarrickAnglogold If the "merger" of these 4 companies/banks/mines/hedge funds, or whatever you want to call them comes off, then it's bailout for sure. In that case, you were right and I was wrong. I never expected that move! But what are they going to do, give them 10 years to pull enough au out of the ground to satisfy all creditors? Put 4 incompetently run companies in a barrel for 10 years and what do you get? One helluva sour pickle! R Powell (6/23/01; 18:32:54MT - usagold.com msg#: 56715) JMB Offtopic I've been dansing with power trowels for many years but usually only on large commercial floors. Residential work (houses and garages) we trowel by hand. Great fun! Randy (@ The Tower) (6/23/01; 18:16:55MT - usagold.com msg#: 56714) Notable quote from Old Yeller's article... ---"Have you noticed the increased frequency of financial market crises since the mid 1980s? Mexico/the oil patch/Continental Bank, the US stock market, banks and S&Ls, Mexico again, Asia, Russia, Brazil, Long-Term Capital Management, the US stock market again, Turkey, Argentina. What's the trigger for the next financial market crisis? The bursting of the housing market bubble? And have you noticed what the palliative for these crises has been? The Fed cuts interest rates, which encourages the creation of even more credit.+Deflation is anathema to debtors. Inflation is music to debtors' ears. There are more voters who are debtors than who are creditors. As a result, expect increased political pressure for the Fed to keep inflating."---Tower's bottom line: You can't "fight the Fed" (in a different manner of speaking) because you can't fight the majority. Market force alsways wins in the end. Buy gold to have a form of savings protected from human nature. Old Yeller (6/23/01; 18:02:18MT - usagold.com msg#: 56713) The state of the nation... http://www.northerntrust.com/library/econ_research/weekly/us/010621.html Paul Kasriel does an excellent job in refuting the Ecomomist's recent downplaying of the perceived negative savings rate in the US.The last graph sure looks promising for gold's future. Randy (@ The Tower) (6/23/01; 17:36:03MT - usagold.com msg#: 56712) When(!) it begins to rain, it shall likely pour. http://www.brecorder.com/story/000000/200106/20010624/200106240109.shtml?Top~Stories Read, and draw your own conclusions as countries reevaluate their dollar-dominated reserve structure.(Short on time now, but hopefully tomorrow will allow me to offer several responses to comments from the past several days.) JMB (6/23/01; 17:28:49MT - usagold.com msg#: 56711) R POWELL An off topic inquiry Have you ever used a power trowel in your trade? R Powell (6/23/01; 17:05:47MT - usagold.com msg#: 56710) Belgian/ auspec Thanks for the T.A. numbers. Someone at GE forum keeps laughing at the small up-down POG moves and has repeatedly stated that the $293 level must be cleared before gold can fly. What resistance do you see after POG closes convincingly above $323? Your technical work may tell us where fund placed buy orders are hiding. Sometimes very useful information. Midas reports 10% of yearly production bought in a short (two months?) period of time. You translated this into 250 tonnes for us. How much more will they buy while they can? considering short estimates anywhere from 5,000 to 15,000 tonnes built up over many years. So, now this year's supply estimate goes down from 2500 tonnes plus X number of tonnes from leased and sold into market To the 2500 tonnes of mining supply minus whatever has been and will be secretly bought back directly from mine supply. This directly bought is repaying previously sold (but still owed back as leased) so this directly bought is not satisfying any of this year's normal demand which is about to become abnormal demand (with irrational exuborant buying). If the reports are true, and given that supply and demand pressures still influence price, and assuming less intentional control (surpression of POG) or (better yet!) loss of price control, how can prices not rise?? Also, if 250 tonnes have gone for leased payback, this is still only 5% of the lowest estimates of gold owed from years of leasing. Apparently they are going to try to repay what they can in physical. Futures positions might ease their financial pain for the rest IF they are allowed to settle if currency. ?? Those that are owed may have no choice but to accept whatever they can. "So sorry, but I haven't got your ounce of gold. Will you accept 350 pounds of copper instead? Or perhaps some stock in Dot be Gone?" BC BN Bdirect Rich Centennial Precious Metals, Inc. / USAGOLD (6/23/01; 16:56:59MT - usagold.com msg#: 56709) Hard assets... Easy access! http://www.usagold.com/onlinestore/special.html
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