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ARCHIVED DISCUSSION FROM 6/30/2004
All times are U.S. Mountain Time
(Yesterday's Discussion.)
Black Blade
(6/30/04; 23:16:33MT - usagold.com msg#: 122676)
Market Wrap Up - Hartman
http://www.financialsense.com/Market/wrapup.htm
Snippit:
We saw increasing pressures for inflation on Monday when the Commerce Department reported the Personal Consumption Expenditures Index having its largest increase in 14 years. In the Chicago PMI data released today, the inflationary expectations were confirmed as the Chicago group's Index of Prices Paid rose to 84.5 this month from 80 in May. This is a huge month over month increase of 5.6%, which means the Fed has to raise rates by a quarter-point to remain credible on fighting inflation. They can't raise more than the quarter-point because the two biggest weaknesses in the PMI report came from the drop-off in production and new orders. The big drop in the PMI has been attributed to slowing vehicle sales, and the Midwest region builds roughly 40% of U.S. motor vehicles.
We are coming off an extended period of massive monetary and fiscal stimulus with easy and inexpensive credit supporting pumped-up consumer and government spending. Low interest rates have allowed automobile manufacturers to sell new cars with 0% financing, and now Chicago is seeing a big slowdown BEFORE we see rates move significantly higher. As financing costs move up, it will become increasingly difficult for auto dealers to sell their product. Add to that the glut of good quality used cars on the market, and I don't think we will be seeing good year over year comparisons for auto sales moving forward. The economy is slowing down on its own, and will be helped along with the higher cost of credit. We do so many thing in this country on credit, how could higher rates possibly do this market any good? Even for fixed-income investors that need higher rates to generate interest income, the increases won't be enough in the near-term to keep up with inflation…therefore the returns will be bigger, but in reality smaller when adjusted for inflation.
A big portion of the monetary stimulus has come from consumers extracting equity from their homes. In fact, with all the refinancing activity in the last couple years, how many households do you suppose used some of their cash-out home equity to buy some of those new cars racing around our freeways? The Mortgage Bankers Association said again today that overall mortgage applications dropped by 4.4%, with the purchase index falling 4.2% and the refinancing index falling by 4.7%. The 30-year fixed rate remained the same as last week at 6.21%, but the economy is clearly losing stimulus from the housing sector.
Black Blade: Damn straight!!! Today a couple things not noted in the mainstream financial press - 1) medical costs (pharmacueticals mainly) have risien 3% since December - that's 3X the "official" inflation rate and since the announcement of the Medicare pharma program to be implemented; and 2) tuition costs at US universities are actually increasing at a faster rate that the already hair-raising increases seen over the last few years. Meanwhile other commodities we supposedly do not need like food, clothing, and shelter are rising much faster than the government's "official" inflation rate. This is going to get ugly as reality sets in and tapped out consumers owing on mortgage refis "to keep up with the Jone's" are feeling the pinch in spite of the supposedly "low inflation rate". God help those poor souls with ARMs as rates rise and medium-level jobs fail to materialize and down-sizing/out-sourcing to offshore sites continue to rise at a rapid pace - no slow down of this at all and the government has the gall to say this is good for the US economy. Guess what? High end and low end jobs are increasing but not the medium-level jobs.
Look out for that inflation steam-roller coming down the road. Get prepapred - get out of debt now and stay out of debt, stash enough emergency cash for several months expenses, accumulate Gold and Silver portfolio insurance now while on the "cheap", and start a storage program of nonperishable food and basic necessities. Remember - equities are only high now because of seasonal low trading volumes with only major investment houses and some mandatory pension/IRA input to rip the equities markets along - well at least until late August when trading picks up as Gold and Silver do too - especially with a good monsoon season and potentially excellent harvests in central and SE Asia leading to higher PM demand. "Buy low sell high" is the Wall Street mantra of course, but do get prepared.
A little secret here - I used to buy NatGas plays in mid-summer for a song and sell in January-February for a nice double, triple, quadruple etc. like clockwork every year. Not anymore as energy prices are not coming down as low as in previous years - in fact they are even higher than in last winter as we run short of energy (mostly bottlenecks in refining-pipeline capacity, drilling moratoriums - lack of government owned land, etc. Oh yeah, a "surprise announcement of lower oil inventory" for last month made the rounds. I was not surprised - why would a refinery buy oil at high prices that they can't refine fast enough and even as some antiquated refineries are closing down. The fun is only just beginning!!! Well, OK the real fun begins after the elections in November. The curtain will remain closed at least until then as long as no one peeks. ;-)
Druid
(6/30/04; 22:49:50MT - usagold.com msg#: 122675)
(No Subject)
Druid: Interesting action by the Fed today. Tapping on the brakes and pedal all in 24 hours. I can't think of a clearer signal. I wonder at what price this bargain; quality, pristine type of credit is going to converge at? What a deal, let's take a "measured" approach in raising short term rates in 1/4 point increments spread out over time. This will at least for a little while longer maintain the illusion of some sort of legitimate credit market while, at the same time, allow the Fed to buy out everyone that's bailing out on the long end.
Excellent call TC.
slingshot
(6/30/04; 18:47:42MT - usagold.com msg#: 122674)
The Prophecy of Oro
Gandalf, listened to Sir Misetich and what he told him carried his full attention. Long before those who banded together to free gold, evil men met under darkness with plans to place all in servatude to them. One by one they found each other and became stronger by lies and misleadings to get many to join their ranks. Sir Misetich spoke of many things that made Gandalf send smoke rings into the inn's air. Cougar and Bandit did not recognise the very beginings. Only when the story told of the fall of two castles and the town, did their thoughts coincide.
Then Sir Misetich said, " I have not the end to the story". The look on Cougars and Bandits faces were one of disappointment.
"No ending? You have come so far to tell us this?", said Cougar in a harsh voice.
"There is an ending, only I do not have it", said Sir Misetich.
"Who then has it?" asked Bandit.
"Sir Oro" Gandalf said in a low loice.
" That is right, Gandalf!" Sir Misetich being surprised.
"Where can we find, Sir Oro, asked Bandit.
"It has been a long night and we need to get some sleep. We must go to Hammerton in the morning" said Gandalf.
The group retire to their rooms to get what sleep they could.
As they slept, another solidified his new position.
Looking again over the railing, down upon his armies, the
once Castle Lord spoke to them.Raising his arms, he said.
"I am Cyrus! I come here to lead you to Victory"
Cyrus, Cyrus, Cyrus, Cyrus was echoed in the mountain tops.
Slingshot-----------------<>
Noble1
(6/30/04; 16:18:17MT - usagold.com msg#: 122673)
?!
It seems the new euphamism for "draft" is "involuntarily mobilized". See the news. Methinks the more that we need to "mobilize" citizens in this fashion => Instability/Failing policy => Price of gold.
Remember:
Truth is the trial of itself
And needs no other touch
And purer than the purest gold,
Refine ne'er so much.
On Truth (1616) Stanza I Ben Johnson
Boilermaker
(6/30/04; 16:01:54MT - usagold.com msg#: 122672)
Goldless Heathen (no more)
Excellent decision. Your parrot and I appreciate your sacrifice of current consumption for insurance for your and our future.
Goldless Heathen
(6/30/04; 15:25:56MT - usagold.com msg#: 122671)
Soon I will just be a Heathen
In the ongoing saga of what to do with my recent small windfall the Parrot won; I canceled the Apple laptop order and just got done placing my first ever order for GOLD. Soon I will be the happy owner of the value of my Aunt's last gift to me manifest in solid, physical reality. I cannot wait. Thanks for all the insight offered here. Have a good Fourth of July.
Federal_Reserves
(6/30/04; 13:43:52MT - usagold.com msg#: 122670)
Why ROME FELL
http://www.cato.org/pubs/journal/cjv14n2-7.html
"As early as the rule of Nero (54-68 A.D.) there is evidence that the demand for
revenue led to debasement of the coinage. Revenue was needed to pay the
increasing costs of defense and a growing bureaucracy. However, rather than
raise taxes, Nero and subsequent emperors preferred to debase the currency by
reducing the precious metal content of coins. This was, of course, a form of
taxation; in this case, a tax on cash balances"
"the fall of Rome was fundamentally due to economic deterioration resulting from
excessive taxation, inflation, and over-regulation. Higher and higher taxes failed
to raise additional revenues because wealthier taxpayers could evade such taxes while
the middle class--and its taxpaying capacity--were exterminated."
USAGOLD Daily Market Report
(6/30/04; 13:38:04MT - usagold.com msg#: 122669)
Page Update!
http://www.usagold.com/DailyQuotes.html
The Daily Gold Market Report has been
updated.
If you are considering investments in gold we invite you to
request our free
introductory information packet detailing the products and services offered
by USAGOLD ~ Centennial Precious Metals. We welcome your inquiry and look
forward to working with you.
(market close excerpts)
June 30 (CBS.MW) - Gold futures moved higher in after-hours trading Wednesday, and metals indexes continued higher after the Federal Reserve, announced the first increase in interest rates in four years....
"The most 'telegraphed' Fed action has occurred, and while Friday's economic results could surprise, I believe gold's sell off on Tuesday has basically priced in this news," said Peter Grandich, editor of The Grandich Letter...
Concerns over instability in the Middle East and elsewhere "will move to the forefront again, and be the lead factor in gold's rally to new highs," he said.
In after-hours trading, August gold climbed as high as $394.70. It was last at $393.60 ounce, up 60 cents.
For the regular session, gold for August delivery closed at $393 an ounce, up 20 cents on the New York Mercantile Exchange. For the month, the contract is down $1.80 from the close of $394.80 on May 28.
Wednesday's modest climb was a "technical rebound from [Tuesday's] sell-off," said Grandich. Prices were also lifted by strength in the euro, he said. Gold traders also looked ahead to a meeting of the European Central Bank on Thursday, during which a decision on eurozone interest rates will be announced...
----(see url for access to full news, 24-hr headlines)-----
Snapshot of current headlines:
COMEX gold ends firm ahead of Fed rate hike -- Borsa Italiana - News
Metals indexes, gold up on expected Fed move -- ample.com
Negative dollar impact as Fed vows 'measured' pace -- ample.com
FOREX-Dollar falls after Fed raises rates -- UBS Warburg
Dollar slips against euro after Fed rate rise -- UBS Warburg
Brazilian Central Bank raises inflation forecast -- Anchorage Daily News
Mexican Peso Falls for Fourth Day on Expectation U.S. to Boost Rates Today -- Bloomberg - Latin America
CFTC Brings Fraud Charges Against 5 Forex Trading Firms -- Dow Jones Newswires
TownCrier
(6/30/04; 12:23:13MT - usagold.com msg#: 122668)
FOMC statement -- raises rate target 25 bp to 1.25%; Board follows suit, lifts discount rate same to 2.25%
http://www.federalreserve.gov/boarddocs/press/monetary/2004/20040630/default.htm
Federal Reserve Press Release
June 30, 2004 -- The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 1-1/4 percent.
The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. The evidence accumulated over the intermeeting period indicates that output is continuing to expand at a solid pace and labor market conditions have improved. Although incoming inflation data are somewhat elevated, a portion of the increase in recent months appears to have been due to transitory factors.
The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters are roughly equal. With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.
Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Thomas M. Hoenig; Donald L. Kohn; Cathy E. Minehan; Mark W. Olson; Sandra Pianalto; and William Poole.
In a related action, the Board of Governors approved a 25 basis point increase in the discount rate to 2-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco.
TownCrier
(6/30/04; 12:02:01MT - usagold.com msg#: 122667)
Open market undercurrents
Ofttimes the Federal Reserve refrains from intervention on days the FOMC is scheduled to make a policy announcement, but that was not the case today.
The fed funds market was trading tightly this morning at 1.5 percent, and subsequently the Fed's NY Trading Desk, through a round of overnight RPs, injected $4.5 billion in fresh money to bolster the reserves of the nation's banking system.
Of this, $0.5 billion was collaterallized by Treasury securities accepted at 1.3 percent, $2.5 billion was collaterallized by Agencies accepted at 1.54 percent, and $1.5 billion was through mortgage-backed collateral accepted at 1.79 percent.
Those tea leaves are all over the cup, but to the extent that NY might anticipate the latest FOMC directive (to be released in approx 20 minutes), the rate on Treasury collateral would be the best indicator. Prediction: a 25 basis point hike. (made with frying pan and salt at the ready to eat any egg that may find its way onto my face)
R.
Aristotle
(6/30/04; 11:15:55MT - usagold.com msg#: 122666)
Knallgold -- got up on the wrong side of the bed?
My comments were offered in the same spirit as if hearing the good news of your newborn son, Knallgold Jr.
I raise a glass and toast "Long live Knallgold Jr.," even though he has not yet grown into the man/person he was born to be.
Gold. Get you some. --- Arisotle
Cometose
(6/30/04; 10:42:57MT - usagold.com msg#: 122665)
The shadow knows........
For markets anticipating a Fed Rate Hike ,
the gold market, the Canadian , and the Japanese haven't been paying much heed ...........
All denture wearers indentify with the plight facing the
Fed......
Knallgold
(6/30/04; 09:21:39MT - usagold.com msg#: 122664)
FreeGold?
"Long live (euro-styled) fiat! Long live FreeGold!"-Aristotle
Long live Freegold?Wake up men,it has not even started-and I do read the newspaper everyday and I never saw a proclamation like "Gold is free!By ECB." (those 3 words sound like dynamite...)
Up until then I will continue to buy cheap Gold.But I will tell you when the FreeGold(embryo) has been born,I promise! ;-)
On Another issue:just saw the "Day after tomorrow",and I'm using the oilglasses the Belgian suggested here:I can't help but this Globalwarming/CO2(!!) topic has probably more to do with the (early) managment of dwindling/more expensive oilreserves than with environment reasons!
Cavan Man
(6/30/04; 07:09:50MT - usagold.com msg#: 122663)
EU ZONE STATISTICS....
I read a nice report in last week's Economist the other day (OK, I'm a slow reader) that outlined the Eurozone's economy and compared it with the U.S.... I know a lot of you are laughing... But the report did something that I relate to... It said what would the Eurozone's economy look like without Germany bringing it down? Well, why not? They take food and energy out of the inflation index in the U.S.... They don't count the unemployed after their benefits run out either... So... Anyway, it showed a nice comparison to the U.S.... And to follow that up, there was a report last night that France's GDP will probably hit 2.3% this year... That's a full percentage above Germany's GDP! So, anyway, there's some fun there...
Excerpted from:
Everbank's Daily Pfenning
Author: Chuck Butler
mikal
(6/30/04; 01:00:34MT - usagold.com msg#: 122662)
Re: Posted excerpts from CBSMarketWatch and Mikal's comments
I have not posted the entire story as found in the private, nonprofit GATA letter, due to copyright law pertaining to
"for profit" commercial use of the material.
Also, my comments are (sloppily) posted in brackets [ ]
following each of the CBS snippits.
Thanks.
mikal
(6/30/04; 00:50:44MT - usagold.com msg#: 122661)
URL
http://www.marketwatch.com/news/yhoo/story.asp?
source=blq/yhoo&siteid=yhoo&dist=yhoo&guid=%7B12E497F6%2DBEB9%2D4DEF%
2D8697%2D8629275E932C%7D
Correct Link
mikal
(6/30/04; 00:47:16MT - usagold.com msg#: 122660)
Derivatives dagnabbit!
http://www.marketwatch.com/news/yhoo/story.asp?
source=blq/yhoo&siteid=yhoo&dist=yhoo&guid=%7B12E497F6%2DBEB9%2D4DEF%
2D8697%2D8629275E932C%7D
gata@yahoogroups.com Subject: [GATA] Unregulated derivatives very profitable for big banks but carry systemic risk
Derivatives markets outstrip regulation;
Favorite tool of hedge funds
is now a $140 trillion industry
By Tom Bemis
Commentary Editor
CBS.MarketWatch.com
Tuesday, June 29, 2004
Excerpts:
"Like an unruly, rambunctious, and fast-growing
teenager, the global market in over-the-counter
derivatives is starting to give its parents some
really big headaches to worry about. These poorly understood financial instruments
have been at the center of most of the financial
debacles of the past decade -- Barings, Orange
County, Long Term Capital, and, of course,
Enron. They've been called financial "weapons of mass
destruction" by no less an investment sage than
Warren Buffett. Moreover, a huge portion of these financial transactions exists in a netherworld of little or no
regulation, making them the polar opposite of what
is meant by open and transparent markets."
[It's the contagion
Yet their use grows by an estimated 30 percent
a year from already stunning levels."
['stunning' but understated levels]
"There's a reckless way to regulate them and
there's a good way to regulate them. And right
now we're definitely on the reckless side," said
Randall Dodd, executive director of the Financial
Policy Forum, a think tank in Washington.
What troubles Dodd, among others, is the
possibility that one of the major banks or
broker-dealers at the heart of the derivatives trade
could run into a problem that cascades into a
full-fledged global financial
crisis. "Those dealers are central to the market and they're also a central part of our financial system,"
Dodd said. "So if some big bank like Citigroup or
Bank of America fails, then the whole payments
and settlements system in the economy is
arrested."
Central bankers take the matter seriously, given
the potent mix of conditions: Derivative
instruments have no reporting requirements, and
global hedge funds make abundant use of them."
["take the matter seriously"- It's about time bankers do!]
On Monday, Bank of England officials warned that
hedge funds pose a threat to financial stability as
they continue to seek higher yields with enormous
amounts of money in play."
[Greenspan, Trichet and other bank officials join chorus]
Options contracts are the most familiar type of
derivative because their use is so widespread. In a
classic example, an option can be used to hedge
against the decline in value of an asset can't be
sold at the moment -- soybeans or corn growing
in a field, for example. As interest rates remained low and debt underwriting jumped, brokerage firms made
millions of dollars selling specialized derivative
products to protect debt issuers from things like
swings in interest rates or fluctuating currencies.
In a rising rate environment, however, at some
point underwriting volumes will decline, and the
derivatives business may not be as profitable."
["protect debt issuers"- Business as usual]
Gandalf the White
(6/30/04; 00:04:58MT - usagold.com msg#: 122659)
KNOT to worry ! The P&F chart has three little "RED" "O"'s ---
http://stockcharts.com/def/servlet/SC.pnf?chart=$GOLD,PLTIDANRBO[P][D][F1!3!!!2!20]&pref=G
"UPTREND" is STILL in place !!
<;-)
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