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ARCHIVED DISCUSSION FROM 4/29/1999 All times are U.S. Mountain Time View Yesterday's Discussion. Al Fulchino (4/29/99; 23:00:18MDT - Msg ID:5364) Aristotle ,Arizona &Boewulf Boe, Yes I rememebr when I was a boy and first understood that the special klink of a pre- 65 coin meant value beyondthe surface. It was enlightning and enticing. As I get older and have made purchases of physical I see something different. I now see protection. Now that is a curious thought. I also see my previous work for profit placed in storage. And in times where moral fixed principles are challenged (such as in today's environment) you cannot place all your assets in the popular currency. Thank goodness for gold.Now this leads me to Aristotle and Arizona: Thank you for your erudite and coherent posts. And to Aristotle, I say that I am currently preserving all excess business cash in physical posession. I made that decision over the last few months and although my cash flow is tightened up some, I do not fear upcoming inflation deteriorating the value of my hard earned profits. Now you challenged me by querying why would I want to consider paper posession when I could choose physical. I hope I paraphrased correctly. If not, I will gladly accept your correction. I offer this: as Arizona said, and again I paraphrase that the last time I looked gas stations etc were still accepting fiat. Now I, like all of you here, wish we would return to a currency backed by precious metals. But as I learned when I was a boy, you sometimes walked into a different neighborhood and they often had some quirky rules when a game was bing played on "their* diamond, court, rink etc. Isn't this the way we should see the fiat, the options and any other paper products? This is why I bring up options and how to handle them especially with y2k as a factor. I am very curious about strategies. I do realize the quite natural inclination of this wonderful group to be very partial to steering away from anything but physical. In fact, I would state that most here have a moralreason for their views on posession. And I have immense respect for that.I end by asking about strategies, and does anyone see a correlation to using paper, whether it be currency, options or pm stocks, to that of a duel, a contest of some sort with the unbelievers? Whereby, you acknowledge their house rules and play the game. Or is fundamentally against your belief systems if you will.Thank you for your time and patience.BTW, follow the Oils and IMHO participate for the foreseeable future. JA (4/29/99; 22:27:01MDT - Msg ID:5363) Turbohawg I think you have named the available options for getting 401K distributions, loans, hardship, termination, retire or (death which I am not recommending). If you are eligible for retirement from your company or age 591/2, you can avoid the 10% penalty. I am not aware of any tricks to getting money out, but I will check with my people tomorrow to see if they are aware of some other creative approach. My company has 10,000 employees and so they deal with 401K distributions every day. If something creative is out there, we probably have an employee that has attempted it. Christine (4/29/99; 22:05:28MDT - Msg ID:5362) Arizona Hiker I could take offense. I bad mouth everyone equally. Also, I have owned gold for a long time, long before I ever got on the internet few months ago. I do own more now. But it is based on my own thinking, no one else's. If I am wrong, I can only blame myself. I read tons of things--what I think and believe is my choice. The Stranger (4/29/99; 21:57:40MDT - Msg ID:5361) "The Stranger" Hey, Arizona, my wife just showed me our "The Stranger" CD. Apparently my daughter gave it to me for my birthday (51st) five weeks ago. (You see why I don't trade options?). Anyway.... good luck to us all. SteveH (4/29/99; 20:56:24MDT - Msg ID:5359) JA Thanks for the nice comments.l'Or de Juin maintenant c'est $286.90. Probably wait till 5-7:00 am EST to make its next move (up or down).JA, it is ironic that the purpose of the 401K is long-term appreciation but investors want instant access to account information. What struck me was "why would anyone want instant access to their 401k account?" Answer: "Because they want to trade it for the hotest fund, because they want to borrow from it, move it around, switch it." You see before yesterday, I always thought that the 401k account was smaller, more stagnant, and less dependent on the market. Now I know it is bigger, highly visible (politically sensitive to downturns), and highly dependent on the market's success. That visibility is its achilles heal. tlc (4/29/99; 20:44:51MDT - Msg ID:5358) questions for anyone, 6 week reader 1st time poster. Where can I find open interest figures on gold on the comex? I am new to the internet too. Also in FOA post 525 on 28th he states " If the US wants to protect its remaining dollar reserve viability (...) it now must allow it to depreciate against gold to provide liquidity. How does that provide liquidity? Can't the fed provide liquidity in other ways? Thanks. The Stranger (4/29/99; 20:36:23MDT - Msg ID:5357) Arizona Hiker Arizona- I like Billy Joel, alright, but I don't place the song. So you're telling me it has been a year since you were a 38 year-old broker. Doesn't it worry you that, after only two posts, you got IDd that easily? The Stranger (4/29/99; 20:26:04MDT - Msg ID:5356) Richard, Oregon Richard, incase your question has not been answered yet, a pound, which is, slangily, a "quid", is made up of 100 pennies(pence) and is presently worth about $1.60. The shilling, slangily "bob", was done away with some years back. Tomcat (4/29/99; 20:18:40MDT - Msg ID:5355) USAGOLD and your remarks about Senator Bennett The problem with Senator Bennett is that his is sincere, a man of integrity, and I don't believe he is for sale. Despite these flaws, he has my vote because he would probably be pro-gold if he realized it was for the good of the country. Beowulf (4/29/99; 20:17:59MDT - Msg ID:5354) Scratchy Itchy Feeling http://biz.yahoo.com/rf/990429/b0l.html I'm a new poster here at this table, but I've been reading this board since August. Anyway, I found this little tidbitof news. Any coincidence this news is related to the IMF failed attempt to sell gold?I'm just curious..does anyone here listen to Rush Limbagh (sp?).I took off for lunch one day last week and tuned him in to hear his opinion on the Kosovo incident when one of his commercials caught my attention. It mentioned Gold and conserving your wealth. That just brought a smile to me for the rest of the day, seeing as I've already converted my bank account into the lovely yellow metal. Any chance we can get someone from GATA in a discussion with Rush on his show?I just wanted to say..everyone here is right. Holding this metal in your hand changes you. I feel more in control and content. I just wish the price will stay where it is for the rest of the week. Why is it the price always goes up the day before I get paid? I was hoping the news about the IMF sales being a non event would have come out on Monday instead. Oh, well...It's been a long time coming UP UP AND AWAY IN MY YELLOW BALLOON!!GOLD..I GOT ME SOME Arizona Hiker (4/29/99; 20:14:17MDT - Msg ID:5353) Continuing the conversation with the Stranger Hello again...BTW, I love the Billy Joel album by that name... you?Anyway... you are very close on the age. I will be 40 in September. I was a retail broker for 8 years. During the last few years of that stint, though, I worked in training and development. About a year ago I left the securities industry and now work in the training department of an aerospace company.I find that futures and options are like any other speculation... you have to know the rules of the road, how to put the odds in your favor as much as possible and have a good money management system. (The third point, some will argue, is the key).Most people lose money in options market for the same reason that they lose money on the craps table -- they make high risk bets, with the odds against them. This is because folks want to hit home runs, with a minimum of capital.They go deep out of the money and they give themselves very little time. Your success rate goes up dramatically to the extent that you use in (or at) the money options and buy a lot of time. You must also use stops -- very mechanically, to take the emotion out of cutting losses.There are many other things I could go into for anyone interested. Suffice to say that if you do these things, you can win more often than you lose and have very handsome returns on this risk capital. Notice I said risk capital -- not the grocery money...not the IRA money.As super trader Ed Seykota says, "Many are called; few are chosen." Most lose money on options because they lack the knowledge or discipline necessary to succeed at it. This can be said of any pursuit under the sun.Yet there is Paul Tudor Jones. There is Monroe Trout. There is George Soros. Somebody is making a lot of money in those markets. We can reject the opportunity out of hand, like the ostrich. Or we can learn how to be like them.No offense taken. take care. Tomcat (4/29/99; 20:11:18MDT - Msg ID:5352) Who is in charge? http://www.nytimes.com/yr/mo/day/news/financial/hedge-funds.html OK, the government started an investigation of the big boys today. And the POG in on the rise. If this is going to be a real investigation of the finance boys on top then it implies that the politicos hold the power. But I thought the finance guys were in charge; really! Is the Chairman of some committee going to say, "Hey guys, these billions that you have leveraged into trillions just isn't going to cut it? The party is over. Cash in your chips." I am honestly confused about who is in charge. I thought it was the big boys that control who actually get into office and who actually chair the committiees. Is it possible that the boys on top are not that coordinated and that the ten or so big finance houses actually do what they please and get away with whatever they can and are only marginally controlled by themselves? Sure shoots the hell out of conspiracy arguments. Anyone who can shed more light on this will be much appreciated. The Stranger (4/29/99; 19:55:17MDT - Msg ID:5351) Arizona Hiker Arizona, you shouldn't have wasted your breath on an idiot like me. I tried to read Graham and Dodd once and got bogged down before I ever even got out of the library.You certainly don't need my advice, but, obviously, if you asked, I would say don't get cute. Stay the course. The market will do whatever it has to do to make sure the smallest possible number of people ride this all the way to the end. Judging by the sophistication in your posts, I suspect you know that as well as I do. Still, if you are using options, I know that is another story. I hope I didn't insult you (I've already insulted just about everybody else in here) by asking if you are a 38 year-old broker. But, my God man, you shouldn't leave me in suspense. [The reason I asked, by the way, is because I used to be a 38 year-old broker, and that is the last time I burned myself trading options. After years of trying, I finally decided I wasn't smart enough. Since then I haven't even used margin.] turbohawg (4/29/99; 19:33:08MDT - Msg ID:5350) JA and SteveH Your discussion is timely. I stopped making contributions to my 401k nearly a year ago. It had been my impression all along that I could take my money and run at any time under penalty. Having learned that that is not the case, I borrowed the maximum out of it, but the problem with that is that I'm forced to pay myself back through payroll deductions. One can still get access to his money by applying for a hardship case (buying a home, going to school, medical expenses) but the deal has to already be done and the paperwork provided as proof. So my only option for getting my hands on the balance, which is parked in a money market fund, is to quit ... it wouldn't hurt my feelings to be laid off about now. JA, as an insider, do you know any, uh, special tricks one could use to pry his remaining funds away without quitting his job ??Thanks USAGOLD (4/29/99; 19:19:54MDT - Msg ID:5349) Stupid Question.... I'm sitting here watching Bill Bennett on the Larry King show. Question: Why doesn't this man run for president? Isn't this the combination of intelligence, experience, wisdom, sensitivity and level-headedness that we are looking for?Just askin'. Gandalf the White (4/29/99; 19:05:54MDT - Msg ID:5348) THX-1138's Question The worry is that "The RUSSIANS are coming !!" and Plat is showing concern.<;-) Arizona Hiker (4/29/99; 19:00:40MDT - Msg ID:5347) Response to the Stranger Good Evening, Stranger...where is it that I am supposed to be going?BTW... I own a certain amount of physical gold, silver and palladium. I consider it an insurance policy. I put it in the same category as my term life insurance policy and some farmland I own. But I don't have a religious fervor about any of the insurance.It's all about assessment of risk and then trying to minimize it... but no type of insurance is perfect or a sure thing -- including ownership of precious metals. Any number of events could unfold to limit or eliminate the worth of our precious metals hoard -- it could be confiscated, it could be stolen. If they find a way to extract gold from sea water one day, what does the value of gold become?My purpose is not to argue that these events will happen or that they are even remotely probable... rather, that we can never be entirely sure of what is down the road.If it all truly does "fall apart", my guess is that of the three "insurance" policies I have, the farmland will prove most useful. And if during that crisis you want to trade me some gold for my fruit and vegetables, I will politely decline your kind offer.I am reminded of the book by Graham and Dodd, "Security Analysis"... the bible of value investors like Warren Buffet. In that book the authors say (to paraphrase) "investment is nothing more than speculation, which in hindsight worked."There is a great deal of truth to that. Whether your speculation of choice is precious metals, futures and options, real estate, stocks -- or like me, a combination of the above. It is speculation. And the key is trying to learn how to best exploit these speculative opportunities, rather than rejecting them out of hand.Have a good night. Christine (4/29/99; 17:59:32MDT - Msg ID:5346) Thanks, you guys have answered my question from this morning Per FOA, "THIS TIME THE MAJOR GOVERNMENTS WILL BEBEHIND THE MOVE."FOA (My caps.)What could this be referring to.And now you've answered it, at least the first piece. They'll start by abandoning the big boys. Brilliant sleuthing. The Stranger (4/29/99; 17:42:42MDT - Msg ID:5345) JA Yeah, JA. I think he is right, too. By the way, as an adjunct to your prior post: I have a good friend who is a home appraiser. He told me last year that most of his business was doing refinancings. A lot of those "refis" were being done to raise money to buy stocks. (Note - I feel fortunate to be old enough to have a long memory.) THX-1138 (4/29/99; 17:39:34MDT - Msg ID:5344) What's up with Platinum? With all the talk about Gold short and missing 8000 to 12000 tons, is there any Platinum shorting going on? The price of Platinum has been going down drastically for the past couple of days. I was just wondering if bullion banks are loaning out Platinum (if they have any). JA (4/29/99; 17:34:47MDT - Msg ID:5343) Stranger http://www.stocksite.com/index.ssj Recently you commented on the fact the CPI numbers didn't seem to jive. Bill Fleckenstein seems to share your opinion."Anybody who thinks government numbers are going to show anything untoward doesn't really understand the present administration, as the economic data is so massaged. If you look at the CPI calculations and the way that they're calculated, there's no way we'll ever see inflation because price hikes are always adjusted for "improvements." "These people have an agenda not to show any inflation. That's not to say we have a whole lot now as generalized CPI inflation is not raging, but it's certainly not as low as the government makes it out to be - just ask anybody who writes checks for things. Having said all that, the last place anybody's going to see it is in the employment cost index, because everybody's getting paid with stock options. " JA (4/29/99; 17:28:18MDT - Msg ID:5342) Steve H I found your comments on the 401K seminar of interest, since I have some responsibility for my company's 401K plan. You are also a quick study, you have come up with conclusions that are similar to thoughts I have had for several years. The typical US citizen, if he or she has any equity, it is likely in a home or 401K plan. That 401K piece has appreciated significantly in recent years and the perception is that it will continue to do so indefinitely. I believe many people have leveraged their homes with these home equity loans of 125% of value with the though that they still have this 401K equity sitting out there. When the stock market bubble pops, the 401K equity will be significantly reduced. Should we go into another recession where property values drop, people will filing bankruptcy because they will not want to continue to pay on loans that are way above the value of their properties. And like you said, our employees can either call (or look it up on the Internet), on a daily basis and get 401K account balances. However, the accounts are valued daily and money is transferred between funds only at the end of the day. So for example if the market drops 500 points in a day, participant transfers occur at the end of the day so they absorb all of that days losses. If they don't make the call before the markets close, then they can't get out until the end of the following day. I know that most of our employees do not check their account balances on a daily basis. A possible scenario would be as follows. We have a day when the market drops 500 points, the employees goes home and hears it on the news, and makes a determination to transfer funds the next day. The employee calls to have funds moved but the market drops another 500 points for the second day in a row resulting in the employee getting out with the market being 1000 points lower before he was able to affect a change.The manager of my employer's 401K plans happens to works for me, so I thought that as a follow-up to your post I would to ask her a few questions:Are you getting any calls from employees on Y2k issues?Not much, we had a number of calls, November and December of last year, people wondering if they should try to borrow their money out, but those calls have for the most part discontinued. (The company that administers our 401K has told us they are Y2k compliant)Where do most employees have their money?Much more into equities now than in the past several years. Where do you have your money?In the most aggressive funds offered.I kind of think we are sitting on a huge stock market bubble, what do you think?Your probably right but I am going to leave money there for now anyway.That basically was the extent of the conversationBy the way the rules on loans say you can borrow 50% or your 401K-account balance up to a maximum of $50,000. If I were as confident on what the price of gold will do over the next little bit as FOA seems to be, I would borrow 50,000 in my 401K and invest it all in gold.In summary if the stock market drops significantly it will impact millions of people in this country through their 401K accounts. I believe the general populace has been conditioned to think if it drops, don't worry it will come right back up as it has in the past. The Stranger (4/29/99; 17:25:36MDT - Msg ID:5341) Arizona Hiker Goodbye, Arizona Hiker. Sad to see you go. (And you seemed so smart, too.) Let me guess: you are 38 years old, and you are a broker. CoBra(too) (4/29/99; 17:16:26MDT - Msg ID:5340) feeling a sense of urgency in markets-... as I've posted yesterday - well I'm not sure how to interpret today`s action. The .com's took another beating with Amazon's great gains in revenues multiplying into red ink in real earnings, I can only speculate on increasing analphabetism. I am absolutely sure it can't have anything to do with a fundamental flaw in their business concept. No way, it would never trade in double digit billion $ market cap, though it may have to do with today's mounting disease of another form of analphabetism; The inability to read balance sheets! Warren Buffett recently called the phenomenon creative accounting. More to the point, POG was spiking smartly for the first time in a loooong time in its effort to catch up with the XAU and other GM indices (indexes?). Nothing really confirmed at this stage, but my sense of urgency reconfirmed, no, reinstated. May it be Jim Saxton's press release re IMF gold (courtesy of Bill Murphy), short covering of commercials and/or spec's, or the imminent turn of monetary, better fundamental currency and economic policies as foreseen by A&FoA (great call- but not the new era they're envisioning "yet", only a dawning of turning tides),anyway the urgency is palpable.... and GS will go public on monday! Let's watch RR's resignation on $ constipation together. No, sorry, let's watch the new precious era together, yes? USAGOLD (4/29/99; 16:58:36MDT - Msg ID:5339) FOA's Post Yesterday. You did it to me again, old friend. We come to the end of a most interesting day in the gold market. It is difficult to ignore the connection between gold's rise and the sudden turnaround in Washington on the hedge fund question. It looks like LTCM is in deep trouble.I was searching my memory all afternoon trying to remember where I read something about the gold shorts being thrown to the wolves and couldn't recall where I had seen it. Then I remembered it was FOA and went back to yesterday's discussion to find it. It was his post #5259 excerpted below. Most at this illustrious table know how I feel about FOA and Another. Time and again I am amazed at their insights (or prior knowledge of breaking events.) Thanks FOA for the following:"Watch the open interest on comex, over the next monthS, it should start a rise that will blow people away! 400,000 OI+ will be the result of small shorts trying to hedge by going long. Notice I said hedge, not cover,as covering is out of the question as the IMF and Swiss gold will never hit the streets! Also notice I said "small shorts", as the big players are now "politically shut out" and will eventually be liquidated with cash settlement in a "going out of business sale"!"I especially would like to direct the attention of my fellow knights and ladies to the use of the phrase "the big players are now 'politically shut out'" -- published here 24 hours before both the Democrat Clinton administration and Republican Congress announced they were going after the hedge funds.I have found over the time I have known Another and FOA that I have to read their posts very carefully and then go back at times and read them again to gain full understanding. There is a great deal packed into a small space each time either one posts.All I can say after reading #5259 is that you've done it to me again, old friend. Arizona Hiker (4/29/99; 16:48:02MDT - Msg ID:5338) Other thoughts re: futures and options on futures Hi, Aristotle...another perspective...one of the key advantages that options on futures provide is that they limit your risk to the amount of the premium. You advise simply going long the future, but this results in open-ended risk.if the commodity makes a series of limit moves against you, then what? You avoid this possibility with the option.A second potential benefit in the use of options on futures is selling calls against your physical position -- thus minimizing or eliminating your storage and delivery costs and perhaps creating a dividend on your metals holdings.I know... the metal might get called away. you can create a spread position, long deeper out of the money options that would give you back that upside... or let it get called away at a strike price you find attractive.I know many here are horrified by the prospects of having even a portion of your hoard called away... I don't share that fear.your line about only having paper profits cracks me up... last time I went to the gas station and grocery store, they were still taking cash. The money I have made recently on equity call options is very real indeed, I assure you.BTW...FWIW... if the gold stocks show strength again tomorrow, I will begin lightening up. I have already begun to take profits on the call options. My technical work suggests that the rally is getting overdone (at least in the short term) and some consolidation will be necessary...at minimum.Good luck all. Peter Asher (4/29/99; 16:10:49MDT - Msg ID:5337) Stranger I'd say your mouse is safe from winding up on your dinner plate. I had the same reaction this morning when I saw that item on LTCM & antitrust. Its like the floodlights snapped on and someone yelled "Stop thief". Earlier, I said I'd have to see a close over $286 (Spot) to be a believer again, well $285.90 is close enough!Aragorn! How abought lightning in the afternoon? @ 17:24 NY, GCM9 is 70 bid @ 286.9 & 10 asked @ 287.00.If memory serves, the last time we had a move like this of +$3.70, was in early December. Aristotle (4/29/99; 15:48:57MDT - Msg ID:5336) Howdy Stranger--Actually, I'm always working...never sleeping! And its taking its toll. Glad you found the futures 'lesson' of interest, but the Million Dollar Question is: Did it help our friend Al Fulchino at all, or did it merely wear out scroll buttons across the globe? ---Aristotle TownCrier (4/29/99; 15:42:40MDT - Msg ID:5335) Firms' Y2K projects could backfire http://www.expressnews.com/pantheon/news-bus/computer/2801emcb.shtml If it's not one thing, it's another. I hadn't thought about THIS risk before. The Stranger (4/29/99; 15:36:35MDT - Msg ID:5334) How 'bout "MONSIEUR" Aristotle? Hey, Ari, thanks for a great brush-up on futures and options. Maybe you are a college professor. That would explain why you never seem to go to work.(Note to other forums(fori?)....Aristotles, get you one!) Christine (4/29/99; 15:32:13MDT - Msg ID:5333) @Stranger Veeery interesting theory indeed. TownCrier (4/29/99; 15:21:00MDT - Msg ID:5332) Joint Economic Committee PRESS RELEASE--IMF Gold Sales--April 28, 1999 WASHINGTON, D.C. – The sizable expansion of proposed gold sales by the International Monetary Fund (IMF) will intensify congressional opposition to the idea, Vice Chairman Jim Saxton of the Joint Economic Committee (JEC) said today. Over several months, advocates of gold sales have increased the proposed level of such sales from 3.5 million and 5 million ounces to 10 million ounces. According to the latest news reports, there is now a new proposal to sell over 10 million ounces of IMF gold. The gold sales would purportedly be used for debt relief, but the lack of details and transparency typical of IMF policy initiatives makes it unclear exactly what is being proposed to Congress. "The recent statements presuming that gold sales will definitely take place ignores the fact that the U.S. government has made no commitment and can do so only with congressional approval," Saxton said. "The Administration is supporting this proposal, but there are serious bipartisan reservations in both the House and the Senate. This bipartisan concern guarantees that this proposal will face tough congressional scrutiny. Majority Leader Dick Armey has asked me and my staff at the JEC 'to carefully examine the economic and financial issues involved,' and our review is already well underway. "IMF gold sales are not the proverbial free lunch that some may think. The gold held by the IMF must be reviewed in the context of IMF finances and loan policies. The IMF itself has acknowledged that its gold holdings add strength to its balance sheet. With about 25 percent of its outstanding credits owed by Russia, it is reasonable to ask whether further erosion of the IMF's balance sheet now is desirable. Furthermore, other borrowers, apart from HIPC, may seek debt relief through expanded gold sales in the future. "There are a number of available alternatives to gold sales. An end to the IMF's policy of deeply subsidized interest rates is one alternative that should be given a high priority. The IMF's current standard loan interest rate of 3.5 percent is indefensible on economic grounds. This rate is far below the interest rates available in international financial markets to creditworthy borrowers. It is also far below the interest paid by U.S. taxpayers on their mortgages, car loans, and credit cards. "An end to IMF interest rate subsidies would provide much more resources for debt relief than would the proposed gold sales. Furthermore, if Congress were to approve the gold sales, this could be viewed as sanctioning the current IMF policy of interest rate subsidies. Instead, the IMF should be forced to explain why it insists on using inefficient, costly, and counterproductive interest rate subsidies. "In conclusion, the congressional reforms passed last year mandated increased IMF transparency and use of market interest rates in IMF bailouts. It is not yet clear whether the IMF intends to fully comply with these reforms, and Congress must ensure that its actions facilitate IMF compliance with U.S. law, " Saxton said. For more information on the IMF, please visit the JEC website at www.house/gov/jec/. The Stranger (4/29/99; 15:17:29MDT - Msg ID:5331) What Really Caused Bullion's Sudden Burst Today Town Crier, I always read and appreciate your closing remarks, but it amazes me how short today's report comes up. Gold suddenly spurted because of what was recommended by Congressman Leach, as reported in my post 5323. If not, I'll eat my mouse!I don't know if the GATA effort had anything to do with this, but it wouldn't surprise me. Whatever, it is the best fundamental news we bugs have had for awhile, and, given the developing reinflation theme on Wall Street, it comes at a WONDERFUL time! TownCrier (4/29/99; 15:09:32MDT - Msg ID:5330) Bridge NY Precious Metals Review: Silver, gold, jump in late rally By Melanie Lovatt, Bridge News New York--Apr 29--After climbing throughout the day, COMEX gold and silverfutures suddenly extended their earlier gains in a steep rally right before thesessions closed. Jly silver settled up 14.7c at $5.413 after jumping to a2-month high of $5.42, while Jun gold settled up $3.20, or 1.1%, at $287.30after climbing to a 6-week high of $287.90. Silver was initially the strongest of the two, managing to get extra mileageout of Wednesday's over-the-counter option expiry. By contrast, the late sessionrally was gold-led, said traders, noting that it was mainly driven by largevolume buying from one New York trade house, spurring fund-short covering. Thefund short-covering was evident in both gold and silver, although wasparticularly heavy in gold, said traders. "The strength in natural resource companies reinforced the strength in theunderlying physical commodity," commented James Steel, analyst at Refco. Goldequities jumped higher, with Newmont shares last seen up 9/16, or 2.42%, at 2313/16; Barrick was up 7/16, or 2.15%, at 20 3/4 and Homestake rose 1/2, or5.44%, to end at 9 11/16. Silver mining companies also climbed, with Hecla up1/4, or 8.51% at 3 3/16 and Coeur d'Alene up 3/8, or 8.45%, at 4 13/16. Silver, which is an industrial metal, has also gained momentum from strengthin base metal prices as the London Metal Exchange complex continued to build onrecent strong gains and COMEX copper futures also finished stronger. Option traders explained that $5.25-silver calls had been capping the spotprice recently as grantors protected their exposure and tried to prevent theoptions being exercised. However, after the expiry funds were turning theirattention to end-of-month book squaring. (Story .2270) Unlike gold, silver is "not faced by IMF and central bank selling," notedGeorge Gero, senior vice-president of investments at Prudential Securities,referring to gold's recent price slide on proposals for International MonetaryFund sales of gold. "Every time it goes up open interest seems to go down, so it is probablyshort-covering rather than buying," Gero commented. Traders noted that in late trade, Jly silver gathered momentum as it managedto push through buy-stops clustered at $5.38. In gold, Jun's push through $285triggered the rally, traders noted. They said that Jly silver will have troublemoving convincingly over $5.40 resistance while $290 will be a strong barrierfor Jun gold. "Precious metals are tighter than anyone thinks, but I don't know if it'stight enough to merit further rallies," said Steel, noting that producer sellingtends to flood into gold at the $290 level, while silver sees "tough resistance"at $5.40-5.50.London--Apr 29--Germany's Commerzbank has acquired a 35% interest inArgor-Heraeus SA, a Swiss gold refinery with an annual refining capacity of 400tonnes and a production capacity for cast ingots of 2.5 million per year."The acquisition has made Commerzbank into one of the few banks worldwidewhich are directly involved not only in precious metals trading but also inpurchasing unmarketable physical gold, thus covering the whole spectrum ofprecious-metals transactions," a press release issued today said. Reprinted at USAGOLD with permission. For details please go to:http://www.crbindex.com/No further reproduction without written permission TownCrier (4/29/99; 15:00:31MDT - Msg ID:5329) Russia, South Africa To Boost Ties http://dailynews.yahoo.com/headlines/ap/international/story.html?s=v/ap/19990429/wl/russia_safrica_1.html It's the gold. They make no bones about it. TownCrier (4/29/99; 14:49:04MDT - Msg ID:5328) IMM currency futures end mixed in light trade http://biz.yahoo.com/rf/990429/bkv.html Your daily glance at the tea leaves. Aristotle (4/29/99; 14:46:19MDT - Msg ID:5327) A slim chance...but no need being reckless. If in fact we have a registered poster named Plato, my apologies for implying that you might want or need the beginner's course, when in fact you may be a wizard of finance. Socrates is dead, and you (if you exist) came readily to mind. Maybe that in itself mitigates the damage, eh?Maybe I should include the same waiver used at the end of movies that say all characters and events are fictional, any resemblance to persons living or dead is purely coincidental, blah blah blah...etc.Gold. Get you some. ---Aristotle Aristotle (4/29/99; 13:38:45MDT - Msg ID:5326) From yesterday -- "Mr."?! C'mon guys, its ME!! Alright Stranger and beesting, cut that out, else you'll make my visits feel more like work and less like fun. I guess I wouldn't have given it a second thought, but they came almost back-to-back and accompanyied by Stranger's divination that I "come across as a banking executive with an independent streak." The independence I'll claim. The rest makes me wonder whether I shouldn't be trying harder to lighten things up. BUT...you can only know Gold as well as you know money, so in that vein I shall press on...with comments to A. F. that are way too serious for casual reading. Anyone into Gold for the right reasons would do well to skip to the next post.Al Fulchino ---Looks like it's just you and me, but I will keep this very basic in case my simple friend Plato shows up. Options. You wanted to know about precious metal options. "Are there opportunites? How would you take advantage of them? Does y2k fears relegate us to take posession only?"OK, this won't be fun for either one of us, so I will try to keep it as brief as possible while still covering the bases well enough to be meaningful.First, there are soooooo many ways to make paper money, it pains me to see someone come so close and then miss it by that much (*holding thumb and forefinger a paperwidth apart*). I guess I would like to think that when someone has stumbled into the realm of Gold, it is because they have already found a way to make paper money, and they are now embarking upon a journey to change it into REAL money. If that is your situation, then ignore Gold futures contracts and options entirely. The spot market is here today to serve your needs, and will serve them well.Futures markets theoretically are the domain of price hedgers...producers and fabricators seeking a means to avoid pricing uncertainty by locking in a known price for the future delivery (or receipt) of Gold, despite what the actual price might be upon that future date. One side comes out ahead, the other side behind, but they both 'win' in that they mitigate the uncertainty, making it easier to plan and engage in other business operations. But given all that, it is the participation of the speculators that make the market what it is ("a volatile shambles!" at times influencing the market direction, though some people will argue otherwise), gambling on price directions by taking out a contract with the hope of cashing out at a paper profit when the price moves in their favor.Engaging in this speculation is more popular in the futures markets than with Real Gold on the spot market because it allows them two advantages. The first tiny advantage is that they never need to hassle with Gold storage. The PRIMARY reason is the leverage they can obtain, putting down only a fraction of the contract's value, thereby gaining control of the entire contract value, and with it the obligation to honor the future price agreement upon expiration day or trade it away for a cash settlement based on the going price difference.So, you can clearly see that there is little point for the average Joe to buy futures contracts unless they want the leverage and a cash settlement.Here's a quick example. A Gold contract is 100 troy ounces. Say today's spot price is $283, while today's price on a June contract is $285. To purchace a full contract worth of Gold would cost $28,300 at spot today, or $28,500 (plus brokers commissions) upon expiration of the June contract, regardless the spot price at that time. If you only have $10,000, clearly you are not going to be taking delivery on this contract now or later 'cause you can't afford it. If you put down the required margin, say 10%, for the June contract, for the next two months you essentially control 100 ounces of Gold for only $2,850. Because there is no way you can actually afford to 'make good' on your contract obligation, you are planning to sell the contract prior to expiration. Your profit or loss is whatever the price differential is between $285 and the current price, multiplied times 100 ounces. You can make a bundle or lose a bundle, but it is all paper. Again, if you want Gold, you can buy that today, and you can sell it whenever you choose. No expiration date to worry about. That is what kills most traders...their thought was good but timing was bad, and upon expiration they found themselves at a loss.Options are completely worthless (though some would argue otherwise) except for one case...as insurance, which I shall explain in a bit. Buying an option is like buying a 'right' to buy a futures contract if a particular price is reached. Why pay for a right when you are born with that right free of charge? Meaning, if the real price reaches the strike price of the option, you could have bought the beast on the open mnarket as easily right then and there. I guess you could say that options give you a chance to 'test the waters' for a price. While you do have an expiry deadline by which you may choose to exercise your option, you don't have an OBLIGATION to do so. You can watch the price continue onward past the strike price, and then exercise your option knowing with confidence that you are in the money. So now you are faced with the same decision as explained about...honor the contract or trade it for a cash settlement. If you honor it, I ask the question, why not instead pick your target price, and buy it outright on the spot market if/when it arrives? It will save you option premiums, and high commodity broker commissions. If your target/strike price doesn't materialize, the option expires worthless and you have nothing to show for your lost premium.The only time options might do you some good is as an insurance policy. Say you buy on the spot market 100 ounces of Gold, but are suddenly gripped with the terror that it may have been too soon and the price might fall with no hope for a turnaround in the near future. As an insurance policy against unacceptable price declines, you could buy an option for the right to sell a futures contract at a strike price somewhat below your purchase price. While you certainly could have freely sold your Gold at this same "I've-had-enough-and-I-want-out" price, the option gives you a span of time to test the waters, as I indicated above. You can see if the price drops further, before you commit to selling at that pre-established floor level. But again, you've got to operate within the time prior to expiry, and that's the tough part. Gold hitting the moon in July does you no good if you have a June contract, during which time it might briefly drop in for tea with the devil.I will admit that in my descriptions I put more emphasis on the long/purchase side, but you can reason out how this would work on the short/selling side. It may be my character flaw, but I feel there is something morally bankrupt about selling goods you don't currently have to sell.Al, I think the long and the short of futures and options is this...options are a complete waste of your time and money, unless you are willing to pay for a chance to "test the waters," as I like to put it. And the futures are good only if you want to mitigate price uncertainty by locking in now using only a fraction of the final price, for full payment to be made later; or they are good if you really think you have the timing down to a sure thing, and you want the benefit of leverage, and will be happy with cash instead of Gold in the end. Sorry this was so long, but your question was wide open, and with Plato tagging along I had to keep it basic. If, within this framework, you have a specific question, fire away and I'm sure someone (maybe me) will specifically engage in dialog. In hindsight, I wish I would have asked you for your specific point of interest. As it is, I've given you a very large piece of the pie, and you probably don't like crust. Oh well, I'll post this anyway. Thankfully I turned everyone else away three pages ago. Scroll, scroll, scroll... ---Aristotle TownCrier (4/29/99; 13:34:52MDT - Msg ID:5325) FWN Closing N.Y. Metals: Mostly Higher; Gold Up on Short Covering New York-April 29-FWN--Gold futures surged late todayon technically-inspired short covering, while silvercontinued to rise on fund buying and palladium firmed onprofit taking on short positions. June gold was around $284.50 late in the day, beforesuddenly spiking to a session high of $287.90 and settlingwith a $2.10 gain to $286.20. "I think it was more of a technical situation than afundamental one," said Dave Meger, metals analyst withAlaron Trading. He reminded that gold has had to absorb a fair amountof bearish news lately, including early this week when U.S.,U.K. and Japanese finance officials all suggested sales ofInternational Monetary Fund gold reserves--to provide debtrelief to poor countries--should be around 10 millionounces. This was toward the higher end of the market'sexpectations. "That issue is becoming more and more factored in,"said Meger. "As the market absorbs that bearish news, youhave that much more potential to see some sort of atechnical short-covering rally, and that's what you'reseeing." He pointed out that the market held support aroundroughly $282--dipping as far as $281.60 but recovering--earlier this week. "As short as the market was, I didn't think you weregoing to see any more aggressive selling below $282," hecontinued. "I think the shorts were going to feel veryuncomfortable with those prices. "So off of that, you saw this short-coveringrally." The move also could be termed a "lack-of-selling"rally, added Meger. It is well known in the market that the funds have beenheavily short. Friday's Commitment of Traders report showedthat the large non-commercial category--which includesfunds--had reduced their net short exposure, butnevertheless the data still showed this caategory short85,765 and long only 12,075. Meger put support for the June gold at $284, then $282.The market moved through initial resistance around $286, andthe next levels are seen at $288 and $292.(c) Copyright 1999 FWN Reprinted at USAGOLD with permission. For details please go to:http://www.futuresource.com/internet.shtmlNo further reproduction without written permission from FWN The Stranger (4/29/99; 13:08:55MDT - Msg ID:5324) Omission The House Banking Committee Chairman is James Leach (R-Iowa). The Stranger (4/29/99; 13:06:48MDT - Msg ID:5323) LTCM Divestiture House Banking Committee Chairman, today, said he wants to force the major investment banks to divest the LTCM holdings because the current arrangement constitutes an "antitrust violation".He also said that he wants to impose reporting requirements upon hedge funds because their trading constitutes "systemic risk to the macro-economy". Christine (4/29/99; 12:47:22MDT - Msg ID:5322) Timing (Timely topic as XAU is in liftoff) I have been reviewing recent posts now that head clearer. FOA on 4-25 @20:15"Timing? Now! We should not see the gold price falling again (five or six dollars up or down is no more than fluctuation). Pressureis coming to bear that should see it climbing through the rest of the year and on. Another did not predicate this on a possible shortcovering rally caused by the loss of CB sales ( as stated a while back). THIS TIME THE MAJOR GOVERNMENTS WILL BE BEHIND THE MOVE."FOA (My caps.)What could this be referring to. SteveH (4/29/99; 12:17:03MDT - Msg ID:5321) June gold now going ballistic... $286.++++.You folks watching this? Tomcat (4/29/99; 12:09:52MDT - Msg ID:5320) jinx44 Well said. And it is getting to the point that chastisement is of questionable worth, as we have seen with our president. Tomcat (4/29/99; 12:06:51MDT - Msg ID:5319) Goldfly I regret that we can't all be singing together holding our mugs high as we all chant, in timely unison, "Trustbusters!". SteveH (4/29/99; 11:59:31MDT - Msg ID:5318) June gold now travelling up again. Upper bollinger struck and streched now. $285.10. turbohawg (4/29/99; 11:24:05MDT - Msg ID:5317) Aragorn and Christine Aragorn, thanks for weighing in. I hope the day comes when we stand together atop central bank rubble. As things stand now, this person is working towards extricating himself from the system, not unlike Sadus.Christine, now I know you know this, but they'll only have won when we think they have. Keep your eyez on the prize ... jinx44 (4/29/99; 10:52:14MDT - Msg ID:5316) Tomcat and more scrutiny Somehow, I think that more scrutiny and regulation is not going to make anyone more careful about leverage--just more careful about getting caught! Why can't these big boys take their lumps like the rest of us ignorant and useless eaters. Systemic risk? It is inherent in the unstable madness that is democracy. Voting for money and favors taken by force from one group and given to another more "deserving" group causes great systemic risk. Painful lessons are not remembered by forgiveness, they are remembered by chastisement. This country needs a lot of it. Peter Asher (4/29/99; 9:43:37MDT - Msg ID:5315) FOA, you said When the asset shift begins it will be of a "historic proportion" and require long hours ofdiscussion on this forum. Or, maybe only each of us saying "I told you so"Steve, I missed it. Just as well, I won't be a believer again until spot closews above $286. USAGOLD (4/29/99; 8:59:19MDT - Msg ID:5314) Today's Gold Market Report MARKET UPDATE (4/29/99): Gold inched higher this morning on reports that the IMF meeting in Washington ended on less than a cordial note with major G-7 countries -- particularly the U.S., Germany and Japan -- sniping at each other. The sniping jeopardized talks of emerging country bailouts which would have included gold sales. Further clouding the picture Joint Economic Committee Chairman Jim Saxton said today that gold sales proposed by the Clinton administration will prompt greater Congressional opposition to the idea. Saxton took particular exception to the fact that the gold sale promoters have taken the number from 3.5 million to 5 million ounces, and now ten million ounces. As it stands now, the gold question has been tabled by world financial leaders until the Fall IMF meeting. Nevertheless, there is strong resistance to the upside at the $285 level (spot) and the market will have to traverse that rugged ground before we can talk about a breakout. Gold's support in this range is being fueled by two sources: strong physical buying whenever it drops (the Middle East has been identified in several reports as buyers) and short covering (the hedge funds are dangerously short at record contract volumes). Standard Charter lists strong physical support for the yellow metal in the $280 range and strong resistance at $285 for the time being. ORDER FORM or call Marie at 1-800-869-5115 for a Free Copy of News & Views -- our widely read monthly newsletter -- and introductory packet on gold ownership. Buena Fe (4/29/99; 8:57:24MDT - Msg ID:5313) IMF (tax payers) Gold All this chatter in the press about IMF gold sales is laughable. I believe that it is/will be irrelevant to the price of gold if, as and when it happens because "IT IS THE UNDISCLOSED BUYERS OF ALL THIS GOLD THAT ARE PRESSING FOR IT TO HAPPEN ASAP!!!!". In fact it may be that the sooner the sale is made the sooner the price of gold will break out.The question that I would like to ask all those politicians who all chorusing together about this sale of the publics gold is "Who are the prearranged buyers waiting in the wings to scoop up this gold?"There are a few other questions that I would also ask, but I'll let the situation ripen a little longer.Keep Well All! AEL (4/29/99; 8:30:19MDT - Msg ID:5312) Goldheart Help Needed The Greenspun board (my favorite Y2K message board) has an interesting new thread that begins thusly (see below). I do believe that inputs from USAGold residents would be useful. You also might be interested in the exchange. Check out this URL...http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=000lh7Post-Y2K economy discussionI'm wondering if Y2k might give the government an opportunity to develope a currency backed by a gold standard. Here's my thinking..........(go to url) TownCrier (4/29/99; 8:15:16MDT - Msg ID:5311) Colorado, Camels and Straws http://www.polyconomics.com/searchbase/04-27-99.html Commentary on Money, Gold, and Mankind's Morality. Goldfly (4/29/99; 8:04:03MDT - Msg ID:5310) FOA!!! It's been good to have you around.... Your words and your confidence are encouraging........ Looks like the POG may have stabilized here....... I'm feeling good! In fact- I feel like singing!! Remember Ghostbusters?LTCM is in your neighborhoodWho you gonna call?Trustbusters!Alan Greenspan don't do what he shouldWho you gonna call?Trustbusters!I ain't afraid of no shortsI ain't afraid of no shortsThe price of Gold is running in the redWho can you call?Trustbusters!And Martin Armstrong? Don't like what he saidOh, who you gonna call?Trustbusters!I ain't afraid of no shortsI ain't afraid of no shortsWho you gonna call?Trustbusters!Is it a no-interest loan? Then grab the phoneAnd callTrustbusters!I ain't afraid of no shortsI hear they don't like the GoldI ain't afraid of no shortsYeah, yeah, yeah, yeahWho you gonna call?Trustbusters!If you've had a dose of Gold-sale votesYou'd better callTrustbusters!Let me tell you somethingGoing long makes me feel goodI ain't afraid of no shortsI ain't afraid of no shortsDon't make a Gold loan, oh no!Trustbusters!When the price of gold hits the floorAfter you buy some moreI think you better callTrustbusters!Ow!Write a naked call?Trustbusters!{Repeat to fade} TownCrier (4/29/99; 7:56:02MDT - Msg ID:5309) Dollar opens US narrowly mixed, Kosovo tension props http://biz.yahoo.com/rf/990429/t3.html See which currencies traders are buying, and why. JCTex (4/29/99; 6:41:37MDT - Msg ID:5308) SteveH Oops, they just corrected my quote machine to 285.40. TownCrier (4/29/99; 6:38:11MDT - Msg ID:5307) Hear ye! Hear ye! The long-awaited Weekly Gold Market Commentary is now in from WGC http://www.usagold.com/wgc.html Commentary from The World Gold Council's George Milling-Stanley has just arrived, and is now posted at USAGOLD's "This Week in Gold" Page for your reading pleasure.And NOW--by popular demand--"This Week in Gold" includes a one-week archive, holding the prior week over for our knights upon errantry that happen to miss a week now and then. You shall not be left in the dark! Enjoy! JCTex (4/29/99; 6:27:08MDT - Msg ID:5306) SteveH I don't know if Peter saw it or not, but I did. Try 285.60. FOA (4/29/99; 6:05:32MDT - Msg ID:5305) Oil http://www.usagold.com/FifthHorseman.html Michael Kosares (Usagold), I just read your "The Fifth Horseman" piece on the Gilded Opinion page. Very nice write-up, indeed! With crude rising some $.60 yesterday, it looks as though we are beginning a new era of commodity pricing. I think that most people have completely forgotten just what an impact oil prices can have on inflation. Just as you write, " This Fifth Horseman could very well be the most intimidating of them all", also I add, so will it be an intimidation on the dollar! Another fine point is also made with " What makes the current situation more dangerous than the 1970s, as shown in Chart 2, is that during the 1970s the United States imported roughly 20% of its oil. We now import nearly 60%". The pricing changes, that such a percentage disparity suggests, will deflate many portfolios. When the asset shift begins it will be of a "historic proportion" and require long hours of discussion on this forum. FOA Tomcat (4/29/99; 4:20:23MDT - Msg ID:5304) Steve H and your post on 401K investments Very interesting. It was clear that this investment firm really had their two staff members grooved in on the company line regarding y2k. They said they expected y2k to be a non-event. Of course, if they said otherwise, they would lose their customers. One thing for sure. When the market starts to go down many of these folks are not going to get the chance to go to cash. Tomcat (4/29/99; 4:07:48MDT - Msg ID:5303) More Scrutiny Is Sought for Firms That Run Hedge Funds http://www.nytimes.com/yr/mo/day/news/financial/hedge-funds.html Snip:The regulators called the amount of money that Long-Term Capital borrowed "extraordinary" and complained that many of the best known banks and securities companies adopted "excessively liberal" lending policies. But they said the problem went well beyond Long-Term Capital. "The LTCM episode illustrates the need for all participants in our financial system, not only hedge funds, to face constraints in the amount of leverage they can assume," the report says. "Some of the same weaknesses thatpermitted LTCM to achieve its extraordinary market leverage were evident in other market participants." The report uses strong language to describe the increasing tendency of financial companies to leverage their bets on financial markets with borrowed money. It says, for example, that leading securities firms use even more borrowed money relative to their capital than Long-Term Capital did. The ratios of borrowed money to capital at the top five investment banks average 27 to 1, the report says, a bit higher than Long-Term Capital.End Snip SteveH (4/29/99; 3:39:25MDT - Msg ID:5302) Peter, are you watching? June gold now $285.10! Click Here to view yesterday's discussion.
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