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ARCHIVED DISCUSSION FROM 1/1/1999
All times are U.S. Mountain Time
USAGOLD
(1/1/99; 20:12:54MDT - Msg ID:1592)
Comments.....
Redtail...Interesting that ANOTHER would become a subject of discussion at the San Francisco gold conference.
SteveH...Admirable post. Admirable prediction. But who is PC??
On ANOTHER note: If they truly want to have a national college football championship, they need to have a game between numbers one and two after the bowl games, not before. From what I've seen there's not doubt that Ohio St. is the best team in the college game -- one man's opinion. Yet its going to get down to Tennessee or Florida St. from what I've been able to gather.
SteveH
(1/1/99; 19:35:58MDT - Msg ID:1591)
***GC9G Prediction $308.20
The POG will hit the $308.20 because of the following:
EU will announce 30% gold backing.
Drudge will announce his breakneck news.
SA will announce it will only accept Euros for oil.
PC will resign.
Other than that I can't think of anything.
redtail
(1/1/99; 17:54:52MDT - Msg ID:1590)
POG
Thanks for the invite to post. It's hard to see what will make the POG rise short of a collapse scenario. The fed has a lot of muscle and will use it to keep things afloat. I wee no evidence that the hedge funds are being forced to cover 'leased' gold, by the fed in order to reduce the overall risk to world markets. In fact they seem to have plenty of lattitude to keep the scam going. That leads me to believe that we need to see lower prices before higher ones will come. If any sort of organized covering comes it will drive prices up in a hurry, so I believe that any attempt at this will begin from lower levels, so as to be able to safely cover under $300. I don't think any sustained rally is possible until CBs pull the plug on 'leasing' ,or they lose control. I'll take a stab at 282.50 for next Fri.
That said, I'm optimistic that after one more stab at support around 278( while the dow makes a triple top) we'll get to higher prices when the markets crack open. It's over when the internet mania ends, but it may go quite a bit higher first. I see a distinct chance that gold may see 250 before 300
On another note, I had a chance to hear Frank Veneroso speak at the recent SF mining show. He went on at length about the gold shortfall and how gold must eventually rise. Eventually is not quantifiable however so no help in the short term. He was asked if he was familiar with the postings of Another. While not knowing of Another he was familiar with the ideas, and it was his opinion that these were ideas from the far fringes of reality (my paraphrase, not his words), and not likely to be based on reality.
Good signs of life today in some of my favorite stocks like NSU, FOM, MIQ and even KRY!
Gandalf the White
(1/1/99; 16:48:54MDT - Msg ID:1589)
*** Feb Gold Contract Close (GC9G)
My reason is that the PPT and other powers unknown shall be attempting to hold the markets from falling until the US Senate determines the fate of the President. After all, a crash would not make his popularity rating make good press, would it ? GC9G close = $290.50
<;-)
USAGOLD
(1/1/99; 13:54:29MDT - Msg ID:1588)
Oil and Gold...Who's Doing What to Whom?
"Now that system broke down -- Bretton Woods broke down -- because eventually, after the inflation caused by three wars, the price of gold at $35 an ounce was repressed;
monetary discipline breaks down under the exigencies of war. It became too low in real terms, and when the U.S. ceased feeding the private market, the price of gold went up to its natural level. The price went higher in the 1970s and early 1980s than expected because in 1975 American citizens were, after 30 years of prohibition, allowed to have gold. But gold hasn't done anything different from oil. About 10 to 14 barrels of oil still exchange for an ounce of gold as they have throughout most of the 20th century. That ratio, the real ratio, has been fairly stable. What has been unstable is that the currencies have come down against gold, oil, silver, platinum, copper etc. just as there are two types of fixed exchange rate systems, there are two types of gold standard. There is the type of gold standard where you simply stabilize the price of gold and not allow fluctuations in gold reserves to have an impact on monetary policy, sterilizing gold movements and preventing any impact
on bank reserves. The other type is a completely automatic system where gold policy becomes monetary policy and open market operations are dispensed with (except possibly to supplement gold with credit in the growth process)...."
Robert Mundell, Columbia University, Professor of Economics
Speech delivered May 17, 1983
USAGOLD comment: At present it takes 25 barrels of oil to purchase an ounce of gold. In effect, the oil producing states have borne the brunt of monetary inflation and stability in the West. Recently there was talk of Saudi Arabia being forced to devalue the ryal. This state of affairs could signal a clean break with the dollar over a very short period of time making the events of the mid-1970s a command/repeat performance.
Mundell's complete speech is worth a bookmark and study for students of monetary economics. Mundell favors a gold standard.
www.polyconomics.com/searchbase/12-18-98.html
USAGOLD
(1/1/99; 11:55:04MDT - Msg ID:1587)
Contest....To All...
My last message was for PH and all...
While we're at it...All first time posters between now and Sunday midnight will get the usual choice of book: The ABCs of Gold Investing or In the Footsteps of Giants. It has to be a good, solid post. Just post it, e-mail us a heads-up and the book's out the door to you.
I'll check e-mail from time to time for newbies.
All are welcome.
USAGOLD
(1/1/99; 11:36:15MDT - Msg ID:1586)
Contest...
I think I did that....."The reasons why must also be stated or no prize!" I had the same thought you did and tried to cover it. Let's make it "at least" 25 words. Any other ideas out there before we get rolling??
PH in LA
(1/1/99; 11:30:35MDT - Msg ID:1585)
Contest suggestion:
Michael:
Is it too late to make a suggestion for the new contest? Your proposal of guessing the POG for Friday is more like gambling than prediction and thereby tends to erode the character of participants rather build it by encouraging thought. Why not insist that each poster include a reason and/or reasons why he/she thinks the closing price will be so (in 25 words or less?). That way, the rest of us can profit from the winning thinking as we allow the marketplace to define which "thought" was correct.
USAGOLD
(1/1/99; 11:27:07MDT - Msg ID:1584)
Turbo....
If you continue to have a problem, call the office Monday and we'll send you a copy.
USAGOLD
(1/1/99; 11:19:50MDT - Msg ID:1583)
Greenspan, Derivatives....
PH....Mr. Parks get's right to the point doesn't he. "Reckless" describes it. I've always wondered why Greenspan always clams up and get's real evasive when the subject of derivative's comes up at those Congressional hearings. You would think that he might have a problem with tools that so warp and distort the free market process. Instead he not only looks the other way, he applauds their use.
Happy New Year...PH. I appreciate and gain from you consistently strong and well-considered posts, as do we all.
turbohawg
(1/1/99; 11:07:02MDT - Msg ID:1582)
Re: Tom Rose
yeah, this is straight out of the Austrian handbook. Thanks go to you for making it available.
I still don't think I'm receiving it all ... the problem must be on my end, most likely caused by AO(HEL)L.
PH in LA
(1/1/99; 11:06:04MDT - Msg ID:1581)
from: "What Drives the Price of Gold?"
by Lawrence M. Parks
http://www.FAME.org/famennews/ART-007.HTM
Question: How reckless and irresponsible do banking practices need become before Mr. Greenspan considers them so? As of this writing, the banking system has outstanding more than $60 trillion worth of derivative bets. Is that "reckless and irresponsible?" (When I was growing up, these are numbers that were reserved for astronomy.) How about when the amount reaches $100 trillion, or $500 trillion? Perhaps he will one day share with us his criteria for "reckless and irresponsible practices." Also, maybe he will tell us why taxpayers should provide a safety net/subsidy to the banking system so that it may engage in this kind of gambling.
In the meanwhile, it appears to this writer that Mr. Greenspan is telling us, albeit in an obtuse fashion, that there is substantial systemic risk. The only way that risk can be adequately hedged, it seems to me, is with gold.
A Question of Justice
Gold people can help the nation and help themselves by emphasizing the injustice of our present fiat money system. It unjustly empowers the banking system, a small cartel of private companies, to create money out of nothing and get the interest on it. It constitutes stealing from savers who are mostly working people and seniors. It compels taxpayers to subsidize the banking systemıs derivative and currency trading bets and to bail out the banks when they lose their bets (but if they win, they keep the winnings). It puts all of us at fantastic and unwarranted risk that the entire monetary edifice will come crashing on our heads as with the Great Depression. It is not fair.
This does not mean that you should not act to protect yourself and your families. While you may not be able to protect your purchasing power, you can preserve wealth. You can buy gold and encourage others to do the same.
When should you buy gold?
Better five years too early than a day late!
USAGOLD
(1/1/99; 10:41:01MDT - Msg ID:1580)
Replies....
Turbo.....It's there. Towards the end just before the last section. What's your take on Tom Rose's thinking? On the inflationary consequences of the Asian problem, I see it as very consistent with Austrian analysis.
Steve H......I'll tell you what big guy: I will give you or anybody else a one tenth ounce gold coin who can guess the exact close on the February contract next Friday -- the end of the first week of the big year -- 1999. You get one guess and it has to be on the board by Sunday midnight so that all the technicians out there have the time to get their slide rules out and make an accurate assessment. The reasons why must also be stated or no prize. The price has to be exact! Please indicate your entry by putting three stars in the subject box to start (***). Good luck fellow meisters.
(We need something to do today between football games.)
mcphx.....Welcome aboard.
turbohawg
(1/1/99; 09:01:34MDT - Msg ID:1579)
Re: Tom Rose article
Hey Michael, the excerpt from the piece written by Tom Rose that you quoted on the Daily Market Report is not in the text of the actual post. Is some of the post missing ??
SteveH
(1/1/99; 07:28:27MDT - Msg ID:1578)
Hey Mike...
Does the first poster of the year get a gold double eagle?
Steve
SteveH
(1/1/99; 07:26:43MDT - Msg ID:1577)
Derivatives
I posted this on the Stockman forum, but felt it had relevence here.
But first, the Vancouver mining and general index were up in spaces yesterday. The Vancouver index was up almost 4%. The DOW was down about 1%, Oil service stocks were up. Gold finished the day higher but I believe from last year within a percent lower, I believe.
Anyway here it is:
Leroy,
Derivatives are important to understand, yet they are the least understood of all financial instruments because they take futures, options, and swaps and add a layer of additional complexity. Their primary purpose is to increase or reduce risk. My opinion is that risk can never be eliminated. After studying the below material I find myself less assured that even the most astute derivative manager can fully understand let alone control a derivative transaction. I will let you come to your own conclusion. I am certain that the list of derivatives listed below are not comprehensive. As we find ourselves in the new year, two years away from the millenium (2001), derivatives will likely cause more pain than gain. This may be a timely article that gives each of us a deeper understanding of a complex topic AND one that may have significant impact on our future.
SteveH
The following is borrowed material. A bank investment officer wrote it in 1994:
What is a derivative instrument?
Derivatives are financial contracts or exchange agreements, the value of which is linked to, or derived from, the value of an underlying asset or reference rate, such as commodities, equities, interest rates, exchange rates, or other indices. Derivatives can be privately negotiated (OTC) domestic or global transactions. They also include standardized forwards, futures, options, options on futures, and swap contracts that are actively traded on organized exchanges. Hybrid combinations of these contracts form more sophisticated derivative instruments such as caps, floors, collars, and swaptions. Debt instruments that (1) have forward or option characteristics reflecting embedded derivatives or (2) are created by "stripping" particular components of other instruments, such as principal or interest payments, also fall under the general derivatives umbrella.
Who are the Major Players in the Derivatives Market?
Participants in the derivatives market can be divided into two groups -- end users and dealers. end users consist of corporations, government entities, institutional and individual inves6tors, and financial institutions. Dealers include banks, securities firms, and insurance companies. An institution may be involved in derivative instrument activities both as an end user and dealer. For example, a moneycenter bank acts as an end user when it uses derivatives to take positions as part of its proprietary trading or for hedging part of its asset and liability management. It acts as a dealer when it quotes bids and offers and commits capital to satisfy customers' demands for derivative instruments.
Why Are Derivative Instruments Used?
Derivatives are used primarily to help dealers and end users identify and manage fundamental financial market risks. These include interest rate, currency, credit, legal, market, and operational risks. However, they are also used by end users to take market positions, exploit inefficiencies between markets, lower funding costs, enhance yields, and diversify sources of funding.
What is [our] policy on the use of Derivative Instruments?
Derivative instruments are used [to] "cover" cash positions held in the various funds in order to maintain a fully invested position and to quickly and efficiently raise/lower exposure of an asset class in a cost effective manner when making asset allocation moves. Derivative securities are not used in speculative manner,nor to leverage the exposure to the financial markets in the funds.
Derivative Instruments:
Derivative: Forwards. Market: OTC market for customized contracts. Definitions: Forwards and futures obligate the holder to buy or sell a specific amount or value of an underlying asset, reference rate or index at a specified price on a specified future date. Example: U.S. importer promises to buy machinery at a future date for a price quoted in German marks and wishes to fix cost of converting to German marks at that future date.
Derivative: Futures. Market: Organized exchanges primarily for standardized contracts. Same definition and Example as Forwards above.
Derivative: Options. Market: OTC market and organized exchanges. Definition: Option contracts grant their purchasers the right but not the obligation to buy or sell a specific amount of the underlying asset, reference rate or index at a particular price within a specified period. Example: A mutual fund buys an option on a given amount of Treasury bills. The fund will benefit if the price of the Treasury bills moves in a favorable direction. if the price moves in an unfavorable direction, the fund will not recover the option's price.
Derivative: Swaps. Market: OTC market. Definition: Swaps are agreements between counterparties to make periodic payments to each other for a specified period on a notional amount of principle. Example: In an[sic] simple interest rate swap, one party makes payments based on a fixed interest rate, while the counterparty makes payments based on variable rate.
Derivative: Floating Rate Notes. Market: OTC market. Definition: Obligates the issuer to pay an interest rate on borrowed funds at a specified rate above or below or based on the relationship between more than one market rate, index, or reference rate. Example: Mutual fund buys a floating rate instrument that pays the yield on 91-day Treasure bills plus 25 basis points and is reset weekly.
Derivative: Mortgage-Backed Securities. Market: OTC market. Definition: Debt security that is secured by a pool of mortgages. Also known as a pass-through security. Example: Mutual fund buys mortgage-backed security issued by GNMA, FHLMC, FNMA or private issuer (bank or S&L) and receives interest and partial principle payments and the right to receive par value at the end of the life of the security.
Permission to reprint is hereby granted where the USAGOLD name is cited along with our web address, mailing address and phone number. For electronic reproductions, citing the post heading and the http://www.usagold.com/cpmforum/ website address as the source is sufficient.
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Centennial Precious Metals Gold coins & bullion since 1973 Denver, Colorado 80246-0009 We educate first-time investors! |
for quotes and purchase information.
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