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ARCHIVED DISCUSSION FROM 7/3/1999
All times are U.S. Mountain Time
View Yesterday's Discussion.
Peter Asher
(7/3/99; 21:58:24MDT - Msg ID:8377)
Steve
Thanks ; .Along with, >>If the world feels like one giant stop-loss, it may be because that is exactly what it is:<<
The following exerpt is a key obsevation.
>>Occasional spikes higher keep the dreams of riches alive in the popular media, but in reality, no one is getting quite as rich,quite as quickly, or quite as easily as they were before April 8th.<<
I also loved this tidbit from Bill Fleckenstein's (who is an avowed sort selling hedger) StockSite yesterday.
>>Investing in the real thing... I would like to make one interesting point. Steve Case from AOL has chosen to buy 41 percent of Maui Land and Pineapple, kind of an asset-rich company that owns what you might think it would own. I have been waiting for more people to try to turn what is arguably a lot of very valuable paper that contains no intrinsic value, for some of the good, old, hard tangible assets.
It will be interesting to see if more people follow
Steve Case's lead and try to monetize some of their Internet paper for some real honest-to-goodness assets. Of course, that's part of what you've seen in home prices, as bidding wars have erupted in cities where Internet millionaires are located. It's a process that may be starting along the lines of more of an inflationary bias.<<
------ --------
I have this picture of someone blowing up a very large and strong balloon at a party and everyone holding their ears knowing that the bigger it gets before it bursts, the louder the bang will be. --- There will be a double meaning to the expression "Stock market 'boom'.
SteveH
(7/3/99; 21:09:59MDT - Msg ID:8376)
Peter
http://www.pei-intl.com/TOPICS/CONFU614.htm
Site did seem down for a bit or buuuusssy.
Check out the above site. Here is a snippet to wet the appetite:
"After having studied these models for over 25-years, we do not remember another period quite this complicated to decipher. Usually one would see many more cross-market similarities – much more of a cross-market macro-rhythm. What we see instead is a global financial system that already is disjointed and likely to become more so in the weeks to come. If the world feels like one giant stop-loss, it may be because that is exactly what it is: hedge funds continue to net liquidate positions right and left and retreat one by one to the sidelines."
FOA, you watching?
AEL
(7/3/99; 20:31:54MDT - Msg ID:8375)
international trade (Y2K risks)
http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=000Yis
See above link for some good ideas and lists of the many items for which we are dependent on overseas sources. Some interesting and novel ideas for hard-asset investments can be found. Ball bearings, anyone?
AEL
(7/3/99; 20:31:24MDT - Msg ID:8374)
international trade (Y2K risks)
http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=000Yis
See above link for some good ideas and lists of the many items for which we are dependent on overseas sources. Some interesting and novel ideas for hard-asset investments can be found. Ball bearings, anyone?
Technician
(7/3/99; 19:37:36MDT - Msg ID:8373)
Site Down
Everyone is waiting for 11:00 English. BOE u know. Yes, they are all off to play;)
Peter Asher
(7/3/99; 19:14:40MDT - Msg ID:8372)
TEST
Site down or everyone at play?
jinx44
(7/3/99; 11:19:06MDT - Msg ID:8371)
Does the USTreasury really have any gold left?
This makes for interesting reading. Given the contempt that elected and non-elected govt. 'officials' have for the citizenry, it may have a ring of truth to it also.
************************************************************
Copyright 1994, 1999 by Freemarket Gold & Money Report. All Rights Reserved. First published on April 25, 1994 in FGMR Letter #143
Over the past few years I have become acquainted with a wealthy, retired American industrialist who has an interesting story to tell. To preserve his privacy, I will call him Andrew which is not his real name.
Andrew was born in New York before the First World War to wealthy Jewish parents who had only recently emigrated to the United States. He was educated in both the United States and Europe, speaks several languages fluently, and is as comfortable in any European capital as he is in any American city. He has three homes in the United States, and two or three more in Europe.
Andrew is a 'man of the world' in the positive sense in which that phrase can be used. That is, this phrase reflects his vast knowledge and keen perception of world affairs, and over the years, I have come to deeply respect his wisdom.
Andrew is also well connected. His library is full of photographs taken of him meeting world leaders. Seeing this gallery is like viewing a who's who in government and business. One immediately understands from these photo's that here is a man who was close to world events for decades.
Interestingly, the photo's stop in the mid-1960's, but it is here that his story begins. Andrew sold all of his business interests and retired around age 55. As he explains it, he felt that he could no longer devote sufficient time to manage his diverse businesses. The changes being inflicted on the United States by President Lyndon Johnson meant that Andrew would now need to spend all of his time managing the wealth he had been able to accumulate. In his view, the economic and monetary order by 1965 was changing, and he would have to change as well.
The transition was made within a few years. He sold his business interests and most of his stock portfolio. By the late-1960's, real estate in Europe and the United States and investments in Gold mining companies became the two pillars of his investment portfolio. In the mid-1970's, he also started buying Gold bullion. It was during this period that Andrew had the occasion to meet Edward Durrell, one of those legendary figures in the 'sound money movement' protesting, even rebelling, against American government policies that were destroying the purchasing power of the Dollar.
Ed Durrell believed that the Federal government was not being honest with the American people. He believed that substantially all of the Gold held by the US Treasury had been dishoarded, and he began to make his views widely known in the 1970's. He contended that the US Gold Reserve (which is presently reported to be 262 million ounces) was vastly overstated, and that this deception was being perpetrated on the American people by successive US administrations either ignorant of the truth or afraid to tell the truth.
Ed Durrell's evidence was largely circumstantial, but nevertheless part of it was also somewhat compelling. For example, he noted that the Gold disposed by the US government by auction in the late 1970's was 'coin melt' quality, i.e., the Gold that had been confiscated in the 1933 seizure by FDR and 'melted' into bars less than 99.9% pure. Ed Durrell believed this lower grade Gold was sold because the pure bars were missing.
There were other examples. Ed Durrell noted how the Financial Times of London had unceremoniously and inexplicably fired its long-standing business and economics reporter, W. Gordon Tether, once he reported in that paper the allegations that the US Gold Reserve had been surreptitiously dishoarded. Ed Durrell's point was that a cabal in the US government did not want the truth to emerge about the missing Gold, for obvious reasons. Most persuasive, however, was his argument about auditing.
The US government had not undertaken a proper audit of the Gold since President Eisenhower was in the White House in the 1950's. Ed Durrell's argument was simple. If the Gold was truly there, then commission an external firm to properly audit the Gold to prove that it exists. His argument sounds logical and simple enough, but curiously, the US government always refused. Moreover, the excuses given were not credible.
The excuse most often used by the US government was that an audit was too expensive, which is really no excuse at all. First of all, even if the audit had cost several million dollars, this amount is insignificant compared to all the money spent each day by the government (much of which we all know from reports of the Grace Commission is routinely wasted).
Further, isn't a few million dollars a reasonable amount of money to spend to ensure that the US government's most important monetary asset is secure and intact? Besides, wasn't it worth spending a few million dollars to complete the audit just to rebuke Ed Durrell and to prove him wrong so that he would no longer be a thorn in their side?
When viewed in this way, the candor of the US government makes one wonder. Was the US Government being obstinate, or did it really have something to hide?
Andrew thinks the US government did, and still has, plenty to hide. He thinks that Ed Durrell was right and that most of the Gold is missing. Here is how Andrew tells it.
In his view, Lyndon Johnson was absolutely the worst President that this country ever had the misfortune to elect. Andrew believes that Johnson was a man with no scruples or conscience, and little sense of right or wrong. This disparaging view is similar to that portrayed in some of Johnson's less known biographies. To Johnson, power was the only truth. But as Andrew explains, not only was Johnson despotic, he was stupid.
Although he can't prove it (and nobody can until a proper audit of the US Gold Reserve is once again completed), Andrew believes that Johnson was the victim of his own megalomania and the dupe of some conniving people who were advising him at the time. To understand his argument, you have to appreciate and understand the circumstances prevailing in late 1967 and early 1968.
The Vietnam War had rapidly escalated, and the protests had already begun. Johnson's credibility was being questioned not only on foreign policy, but domestically as well. The US government's commitment to maintain the Gold Standard then in effect was suspect, and the Gold reserve had declined from 442 million ounces in December 1964 to 370 million ounces by November 1967 in response to the growing demand for redemption’s at the $35 rate of exchange then in place. In short, the environment by the end of 1967 was fractious, and Johnson's grip on power was dwindling. Because power was his life, Johnson was forced to act.
Understanding these circumstances as well as Johnson's weaknesses, one or more people with access to Johnson's ear (if Andrew knows who they are, he hasn't told me) presented Johnson with a scheme. They told him how he could 'defend' the Dollar as the grand deed to bolster his flagging popularity and win back the support of the American people.
All he needed to do was 'flood' the London market with Gold, thereby more than satisfying the growing demand for redemptions of the Dollar. They led Johnson to believe that once everyone realized how much Gold was available, the demand for Dollar redemptions would decline, and everyone would be satisfied holding Dollars again instead of Gold.
According to Andrew, Johnson then concocted a secret plot. The entire US Gold Reserve, then over 400 million ounces (excluding the 15-20 million ounces of 'coin melt' Gold which could be determined to be Gold from US reserves), would be shipped to the Federal Reserve in New York and the Bank of England in London to be 'dumped' on the market to teach a lesson to the speculators. Not only would there be more than enough Gold to meet the growing demand for Dollar redemptions, the Gold price would drop. The Federal Reserve and the Bank of England would not immediately sell Dollars and buy Gold, thereby 'allowing' the Gold price to fall momentarily below $35. Once the speculators were 'crushed' in this way, the Federal Reserve and the Bank of England would step back in to buy the Gold under $35 per ounce and then surreptitiously return it to the US Treasury with no one being any the wiser. Only it didn't work out that way.
Over a period of several weeks in early 1968, the Gold was secretly transferred and 'dumped' on the market, but to President Johnson's shock and horror, the market absorbed it all. He had been duped. The people who concocted this plan knew that their group had more than $14 billion of resources (400 million ounces times $35 per ounce). They therefore willingly exchanged their Dollars for the Gold 'dumped' on the market. The rest of the story is already well known.
In March 1968, the international monetary system in effect since the 1944 Bretton Woods Agreement was abruptly ended and replaced by the "two-tiered" Gold system. There would now be a free-market Gold price, higher than the $35 "official" rate. Further, the US government would no longer redeem Dollars for Gold because as Andrew explains, the US Gold Reserve had been depleted by Johnson's insane folly. There no longer was enough Gold to make redemptions.
The so-called speculators, and their friends who 'advised' the President, had made a fool of Johnson. The $14 billion they invested in Gold immediately rose in value as its price climbed above $35 per ounce.
It is also known that shortly after the March 1968 meeting establishing the two-tiered Gold price, President Johnson surprised the world by announcing that he would not run for a second term. André ˘elieves this humiliation over the Gold to be the real reason President Johnson decided to step down from the pinnacle of power. Subsequent administrations unwilling or afraid to deal with the truth, have continued the cover-up.
It's a great story, but is it true? Before dismissing it out-of-hand, consider this. We all know now that President Johnson lied about the Gulf of Tonkin Incident. It has been proven to be a phoney event, staged by the US government to justify greater involvement in Vietnam. If Johnson lied about that, who's to say he didn't lie about the US Gold Reserve?
I suppose the only answer lies with an audit. The US government says that the GAO has inspected the Gold in the US Gold Reserve, but an inspection is not the same as a full audit. Until a full and independent audit is completed, we will never know whether the Gold is there or not. The few million Dollars that it would cost for the audit seems a small price to pay for the peace of mind knowing that the Gold is there. And if this essential monetary resource isn't there, I would rather not think the unthinkable.
To contact Mr. Turk: James Turk jamesturk@fgmr.com
SteveH
(7/3/99; 7:20:21MDT - Msg ID:8370)
GATA
11:55p EDT Friday, July 2, 1999
Dear Friend of GATA and Gold:
The exchange between Professor von Braun and
Martin Armstrong of Princeton Economics International
continues here, with the professor's reply to Martin.
Enjoy.
CHRIS POWELL, Secretary
Gold Anti-Trust Action Committee Inc.
* * *
July 2, 1999
Dear Mr. Armstrong:
Thank you for taking the time to comment on the
article entitled "The Gold Market Mystery -- Fact or
Fiction?," which appeared at Bill Murphy's web site,
www.lemetropolecafe.com.
Let me first say that the Rocket School of Economics
recognizes the expertise that Princeton Economics
International provides in its forecasting services
and appreciates the effort that has gone into
establishing your data bases, as well as the very
good information you provide to the market via your
well-read websites.
I have reread your essay, "Gold Manipulation or
Exaggeration?," as well as reviewed your response to
Philip Skarshaug.
There are several issues that arise.
The first is that the activities of central banks,
regardless of who they are, must be regarded as
being part of the free-market concept, since it is
difficult to imagine more than one free market and
even more difficult to imagine the existence of both
a free market and a controlled market at the same
time. Although as you note, this has been tried
before.
I do not believe that central banks are involved in
manipulating the price of gold to the downside any
more than I believe that politicians have the best
interests of their constituents in mind when they
make decisions on monetary policy. But I would say
that the actions of central banks have to be
regarded as an aspect of the free-market system,
since it seems impossible to have both systems. The
element of control the central banks assume they
have may be as much a myth as the unicorn.
Whether the European Central Bank changes the
classification of gold from an asset-backing entity
to a currency does not change that gold is gold.
The price of gold is set in London by members of the
LBMA. This fixing is in U.S. dollars. Regardless of
who holds gold and regardless of how they describe
that gold holding, the value of that holding is
determined by market participants.
The market factors are of course supply and demand,
the one buyer/one seller principle. But at present
the published supply/demand numbers do not make
sense. If these numbers are correct (and I agree
that this is a big "if") there is a shortfall of
gold.
I do not agree with your assumption that this
shortfall is being met by Central Bank selling. We
may be talking 4,200 tonnes over the last three
years, which is an amount that would have to have
been reported eventually, and this has not happened.
I would concur with the concept of a policy of
demonetization best described as an international
policy that has not been publicly expressed in terms
of central banks and their gold "reserves."
While this policy of demonetization has not been
publicly expressed, I am sure that discussions about
it have been held with the member banks of central
banks, formally or informally. And shame on them.
It is our belief that mining companies' forward
sales account for, at most, only half the gold that
has been leased/loaned (and consequently sold
into the market), and it may not be correct to
describe the mining companies as the primary
borrowers. This certainly was the case from 1985
through 1995, but we believe that a shift took place
late 1995 and early 1996 and that it coincided with
the current decline in the gold price, which began
in February 1996.
The last three years have seen an increase in the
leasing or mobilizing of central bank gold reserves.
Just who the primary borrowers are is a difficult
question. Whether they are bullion banks, investment
banks, hedge funds, or Arab sheiks, the borrowing is
not being done under the watchful eyes of the
regulators you refer to. Perhaps a "nudge, nudge,
wink, wink" policy may be at work here.
A paper contract for delivery of physical metal at a
future date is not the same thing as owning the
physical metal itself, and we believe that too many
contacts have been written that are good only as
long as the music continues; when it stops and the
market turns, there will be a scramble to obtain
physical metal.
You imply that the Bank of England was being up-
front about its intention to sell a large part of
its gold reserves and decided that it would be
"jolly decent" of them to let everybody know in
advance of the sale. We do know that the sale
was opposed by the bank itself and was a political
decision, if a very costly one. We agree that
politicians are on average "stupid" and that they
have short memories and even shorter attention
spans.
But I would not jump to the conclusion that the Bank
of England's timing was coincidental, since "stupid
is as stupid does." Before concluding mere
coincidence here, we will watch the activity over
the next few weeks to see whether it happens again.
What may be occurring is the beginning of a shortage
of physical metal itself, which would be a good sign
for the gold bulls but not good for the shorts.
Not all central banks hold the view that gold should
be sold, and the European central bankers have
longer memories than their U.S. counterparts. Your
own comments about the shortcomings and dangers of
floating exchange rates and their, something you
have been warning about for some time, and the
potential for a return to a fixed exchange rate
system are views that have not been overlooked by
the central banks.
Of course returning to the gold standard is a lot
easier if you have some gold -- a point that the
Germans and the French have not missed, I think.
Neither have the Americans.
Gold loans/leases to mining companies are of course
covered by reserves in the ground that can be used
to repay the commitment; we have no problem with
that. But gold that has been loaned/leased to any
other entity apart from a gold owner that has been
sold into the marke place with the proceeds used for
some other form of investment are at risk if
repayment depends on gold's being purchased as
opposed to newly created (mined).
Which brings us back to the shortfall in supply and
demand numbers from the World Gold Council and GFMS.
Something smells a bit here.
Gold is, of recent times, always the fallback
position when things go wrong with paper currencies,
and yes, it is easily transported and
internationally recognized. Indeed, it is a good
hedge against political whims, errors, and plain bad
policy.
We agree with your comments about the International
Monetary Fund, an organization that is well past its
user date and should be replaced. The odds do favor
IMF gold sales simply for the reasons you have
stated. They don't have any money left and their
liquid reserves are gold. How a U.S. politician can
stop this event from happening is a mystery to me.
Politicians' resolve can disappear in seconds and
I'm sure that some "goody" is being kept for this
purpose by the Clinton administration.
You say your models point toward a major shift back
to commodities that could materialize next year or
by the year 2003. We agree and suggest that it may
have already started. Certainly the energy market,
along with sugar, hogs, and now copper, appear to be
coming off historic lows.
We do NOT disagree with a final low for gold in the
$200 area, which could see the start of a new bull
market for the metals.
But we respectfully point out that highs and lows
each contain their respective peculiar
characteristics, and that the presence of
absurdities associated with each is a requirement.
Overselling to obtain a profit has happened before
and this may simply be the case with gold.
But having knowledge of an intent by central banks
that may not be available to the public and then
acting on such knowledge has no place in a free
market, and I believe that that is GATA's complaint.
Any anti-trust action is brought about as a result
of an identifiable attempt to give direction to a
market that is based on either a control
practice, as in Microsoft, or a collusion of market
participants. Certainly the gold market has the
potential for this.
The secretive nature if the major players, along
with the London factor, something you pointed out in
your response to Phillip Skarshaug, in your comments
about insider trading in commodities, and in your
comment about the lack of reporting in Britain,
equally apply to gold.
Keep in mind that Watergate may have gone away if it
had not been for the efforts of just two Washington
newspaper reporters. Whether GATA is a two-man army
or not, its complaint may have some merit, and I
would not regard it as a group of gold bulls trying
to justify their wrong investment decision.
Not everybody has the desires to follow the trend.
Market participants do have the right to know what's
going on, and it is good that there are people who
stay with their chosen field and are prepared to get
vocal if they see market activity they don't
understand. Otherwise we would have very one-sided
markets. Once again your comments to Mr. Skarshaug
about the silver market come to mind.
Once again thank you for your response.
Professor von Braun
AEL
(7/3/99; 4:55:33MDT - Msg ID:8369)
BIS/Y2K
http://biz.yahoo.com/rf/990701/rw.html
Financial markets are not ready for
Year 2000-BIS
BASLE, Switzerland, July 1 (Reuters) - The world's financial
markets are still not ready for the Year 2000 change and much
work still needs to be accomplished, the Joint Year 2000 Council
at the Bank for International Settlements said on Thursday. . .
Click Here to view yesterday's discussion.
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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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