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ARCHIVED DISCUSSION FROM 3/3/2004
All times are U.S. Mountain Time

(Yesterday's Discussion.)

slingshot (03/03/04; 23:43:06MT - usagold.com msg#: 118009)
Insight into the mind of a bullion dealer.
If all the indications are that gold is going higher, why do I see dealers out of gold or very little left in their displays? In one discussion I was asked, If your think gold is going so high, why don't you take out a loan on your house? Being very conservative, I found it repulsive to mortage something I had worked hard to pay off.
But it had a sombering effect on my conviction. I have often said, Nothing Ventured, Nothing Gain.
But how does the business man calculate the risks?
Slingshot------------<>

slingshot (03/03/04; 23:11:28MT - usagold.com msg#: 118008)
Stupid
I can handle most instances whereby people are ignorant of the fact and especialy on the subject of economics. Being no expert, I only cast small stones. That is pointing out inconsistantcies in the government proclamations and laying all the cards on the table.
At this time I see no major turn to the purchase of Gold by the average person, only a small increase by those who have been doing all along. Exceptions being large purchases jumping in on pullbacks. What I look for for is the increase in small purchases to confirm STINTS entering the market.
But as far as STUPID goes.

If your going to be STUPID, You gotta be Tough!
Slingshot-----------<>


Black Blade (03/03/04; 22:54:44MT - usagold.com msg#: 118007)
Dollar Higher But Pulling Back
http://story.news.yahoo.com/news?tmpl=story&cid=580&ncid=580&e=3&u=/nm/20040303/bs_nm/markets_forex_dc

Snippit:

NEW YORK (Reuters) - The dollar hit a new peak for this year against the euro, yen and Swiss franc on Wednesday, with gains triggered by rising optimism over U.S. job growth and expectations this could mean higher U.S. interest rates. But the U.S. currency pared gains in the wake of the Federal Reserve's beige book summary of economic conditions across the nation, because the Fed report said employment grew slowly in most areas of the country. The U.S. labor market remains a major consideration for currency traders as they place their bets on the strength and durability of the economy's growth.

"People are taking profits" as caution takes hold in advance of Friday's widely watched U.S. employment report, said Brian Taylor, managing director of forex trading at Manufacturers and Traders Bank in Buffalo, New York. "I think they are cautious and the move (the dollar's rally) might have been overplayed," Taylor said.

In February's U.S. employment report for release on Friday, economists' median forecast is for a rise of 125,000 non-farm jobs and a jobless rate holding unchanged at 5.6 percent. "There has been a lot of talk about how more jobs had been added. But the number would have to come in a very big surprise on the upside ... for the dollar to rally right now," said Taylor, of Manufacturers and Traders Bank.

The dollar's surge this week is partly the result of Monday's Institute for Supply Management manufacturing report that showed a bigger-than-expected rise in the employment component. The dollar effectively shrugged off an ISM service sector report on Wednesday that showed expansion but at a slower-than-expected pace. The employment component of that survey also showed a decline in the pace of expansion.


Black Blade: Probably explains why the PPI was not released last month. The boyz and girlz at the BLS must be burning the midnight oil devising more "filters" to "massage" the data and come up with some spin on the numbers to explain some mysterious "anomoly". Then again they might just not release the data at all - it would be like pulling back the curtain exposing the "Wizard" pushing buttons and creating slight of hand trickery. As far as the unemployment data is concerned - we must see an addition of between 210,000 and 230,000 new jobs added last month just to keep up appearances of job growth. I just don't see it happening without a little help from the Labor Dept. data massagers (that includes the supposed new younder entrants into the labor market who are usually the lower paid employees).


Black Blade (03/03/04; 22:28:13MT - usagold.com msg#: 118006)
Market Wrap Up - Hartman
http://www.financialsense.com/Market/wrapup.htm

Snippit:

The constant mantra from our top officials says there is no inflation, or very little at best. I'm not sure how they can believe we are all so stupid. It is so very obvious the statistics are manipulated to imply low inflation. Additionally, they continue to refer to consumer inflation that is hedonically adjusted lower and doesn't include the things we need and use every day. First of all, the inflation has already taken place with the government inflating the supply of money. It's already in the pipeline. The next place it shows up should be in raw materials and finally to consumer goods.

Two weeks ago the Labor Department failed to release the Producer Price Index. Why? To put it bluntly, they didn't like the number, so they have to "adjust it" before they publish the number to prove there is no inflation. Check your grocery bill, your monthly utility bill, medical expenses, and what you pay at the gas pumps…we're not as dumb as they think! One very telling statistic that proves there is big inflation at the producer level came in the ISM Manufacturing Report on Monday. These are the "things" manufacturers need before they can produce their products. In the report, the Prices Paid Index rose from 75.5 to 81.5, a nine-year high for the index and an increase of 8% from just one month earlier. Add to that the obvious increases in commodity prices, and you can quickly see why the dollar is getting a big bounce this week. The bond market should be reacting violently to the downside, but interest rates remain at rock bottom levels. I think the confusion for the bond traders has to do with the conflict between inflation (should push rates higher) vs. what they know is a weak economy and weak labor market (would keep money in bonds holding interest rates down). Those two market forces also have to deal with intervention in the currency and bond arena. Normal market relationships are distorted when Asian central banks dump their currency to support a failing dollar.


Black Blade: Pretty much hits the nail on the head although I think that most Americans are that "stupid" when it comes to economic issues. Unfortunately they do tend to believe just about anything government agencies and Wall Street says(hope over hype?). The truth is that the US dollar is fundamentally weak (as are most major currencies) and will inevitably crumble further. It doesn't look very promising. The dollar must weaken because the US budget and current account deficits are clearly unsustainable and the printing presses are running flat out. On the bright side the current lower Gold and Silver prices are buying opportunities.

On a side note, the new Indian Gold scam (as pointed out by Townie in an earlier post) will likely be doomed to failure. It has been tried before and the tepid response led the Indian banks to throw up their hands and admit defeat. The last such scam fell apart a couple of years ago. Getting a "tradable note" for Gold on deposit defeats the whole purpose of why most Indian Gold owners buy it in the first place. - "Possession is nine-tenths of the law".


1340cc (03/03/04; 20:57:04MT - usagold.com msg#: 118005)
Bar Jokes
Sic'em Boss Man. "No Subject" didn't have anything to do with Gold or the economy. But then some of us can do that.

Toolie (03/03/04; 20:38:51MT - usagold.com msg#: 118004)
(No Subject)
My dog ate it.
It blew out the window.
I left my homework in the locker over the weekend, it's jammed.
My sister took it ‘cause she hates my guts.
My brother colored dirty pictures on it.
My house caught on fire, then the firemen drenched it.
I was busy helpin’ old ladies cross the street.
My mom put it in the bottom of the birdcage by accident.
Robbers took it.
ytheppiislate



Toolie (03/03/04; 20:38:15MT - usagold.com msg#: 118003)
(No Subject)
My dog ate it.
It blew out the window.
I left my homework in the locker over the weekend, it's jammed.
My sister took it ‘cause she hates my guts.
My brother colored dirty pictures on it.
My house caught on fire, then the firemen drenched it.
I was busy helpin’ old ladies cross the street.
My mom put it in the bottom of the birdcage by accident.
Robbers took it.

ytheppiislate



Bizkit (03/03/04; 20:13:33MT - usagold.com msg#: 118002)
Bernanke's Speech
I'm currently translating Rothbard's "America's Great Depression" to my mother language. After reading Bernanke's speech I've just had another confirmation that this man is totally clueless.

His deliberate attack to the Gold Standard is just pathetic since it comes (no, it's no coincidence, I'd bet) with the aim to stop the gold bull that's just awakening out there.

In summary The Alchimist (#2) of the Printing Press has clearly shown us, one more time, that the current establishment still misunderstands the causes of the Great Depression and will bring again the the US economy to another collapse which will be even bigger-than-the-last-great-depression.

Reading suggestions to better understand all Bernanke's fallacies:

The case for 100% gold dollar
What has government has done to our money
and of course America's Great Depression.
all by Rothbard






Chris Powell (03/03/04; 19:14:07MT - usagold.com msg#: 118001)
More admissions that central banks rig the gold market
http://groups.yahoo.com/group/gata/message/1932
Latest GATA dispatch.


To subscribe to GATA's dispatches, send an e-mail to:

gata-subscribe@yahoogroups.com

Socrates964 (03/03/04; 19:08:34MT - usagold.com msg#: 118000)
P&F
Actually, need to update model projections.

Downside: Normally 2 or 3 x horiz count.

We should have bottomed around 388-92, although today's close below 388.00 does make it possible that we make an ultimate low in the 372.00-76.00 range, although this tends not to happen.

Upside: 3 box reversal will be signalled by spot trading above 404.00. This then sets up possible rally to target in the 448.00-451.99 range.

Support at 376. Resistance at 404 and 412. A trade over 416 is very bullish.

Socrates964 (03/03/04; 19:00:00MT - usagold.com msg#: 117999)
RP
I think that the whole point about Fib numbers is that they represent the limit of an additive process (i.e. if you take any 2 numbers, say a and b, and add them to get a + b, and then add that to the previous term, to get 2a + b, and so on, you'll find that ratios of successive terms converge to the golden mean regardless of your starting numbers. In financial markets this process of summation corresponds to the net outcome of everyone second guessing everyone else. This may be a real process of summing second guesses, or may be a simulated process (i.e. charts are painted), but the fact remains that certain prices do act as attractors, because expectations are built in to them.

I haven't researched it in detail, but it seems that this behavior has been 'learned' over time, since I couldn't find Fib patterns in 18th century stock data (but I digress...)

Anyway,

-I agree that good MMs are usually very good at TA, since they have to know where the market expects a turn.

-I don't use EW since I don't believe in torturing price data on a procrustean bed until it fits a preconceived pattern of wave counts. I just project Fib levels and look for a few high probability patterns and the data either fits or it doesn't. It's really as simple as that.

-P&F, which is another related measure of 'potential energy', has given good price predictions, particularly on the upside - it usually tells you how far a stock can go. E.g. the model called the top on gold at $430 when it was at $390.



R Powell (03/03/04; 18:04:22MT - usagold.com msg#: 117998)
Socrates 964
Perhaps those Fib numbers work (when they do) simply because enough people believe they will. Especially in markets like currencies which are almost exclusively traded on technical considerations, as opposed to markets like grains which are closely watching exports, domestic use and the upcoming South American harvest, all fundamental factors which are reported daily (weather) or weekly (sales, domestic disappearance and exports).

If enough long side traders have been stopped out of a long euro position and are looking for a place to re-enter long, they'll place buy orders at Fib. number points. If enough buy at one of these points..bingo.. the market turns. Then, with this positive evidence that the "system" works, the belief is strengthened, no? But hey, if it works, it works. If not, well, we know there are no foolproof systems. The e-wavers simply recount their 1s, 2s, 3s, 4s and 5s and the smaller a-b-c waves to refit whatever the price chart gives them. And when it does work.. more reinforcement of belief, no?

But, I believe you've increased the probabilities as the currencies respond well to technicals. Not so markets like soybeans this year, which have blown through resistence levels and been "overbought" for months. The fundamentals have overwhelmed the technical boys. And silver? She confounds the best fundamental and technical analysts so much that few analysts even have the nerve to suggest any positions! Quite a lady, that silver! Not quite responding with gold, nor opposite the dollar, nor moving on any supply/demand reports or speculations, nor any technicals (that I can discern) other than resistence levels only seen in hindsight, nor.... So what moves the lady?? Any thoughts??
rich



steady (03/03/04; 18:00:46MT - usagold.com msg#: 117997)
STUFF
if we could break that 6 dollar ruel , which will happen within these 40 days, the pressure is to great and regardless of attempting to de steam the double bubbling golden caldera by letting other commodities run up in order to soak up the excess fiat, gold is no longer a commodity so that trick aint working, sorry charluie , the worlds populace is to smart for that ponzia saving desperado move tried to be executed while being suave and triplle talking out his mouth to misdirect everyone buut those who has there eye firmly glued to the bouncing golden ball, which has now dribbled itself into the currency area pronouncing intonely, i am king, all who want to follow me, jump on this bandwagon i can carry all of you on this planet, you others.... step over there and lets have it out in the pits one session in a time, one after another consecutivly, 24/7 365 if u want , one after another , all of you at once if u dare, i take on all comers big orr small,as steady would add, yall will fall london , austrailia, newy york, argentian, russia, canada, and any other exchange you want to battle it out on, i take on all paper commers, and have no fear as silver has my back and i its, an indubious dignifyed dynamic superhero duo that will be the hit of o4. take a few min and think deep about your choice as im not going away not now, not a for a while, the way things are being percieved now. Paper is not god, i am not god but i am the king the king of currency on this blue planet.
GOLD/SILVER
honest money
for
honest people!

knotakare (03/03/04; 15:29:41MT - usagold.com msg#: 117996)
@Camel
Camel, it is difficult to state real facts, when dealing with central banking authorities. But I can assure you, that Sir Allan works primarily for internationalist, socialist bankers. And their primary centers are in the EU, especially the BIS.

I have read a detailed report, that the Rochschild empire could actuaully approach 50 trillion dollars. They were not diminished by WW2, they were enriched by it, and the subsequent Marshall Plan.

The Rockefellers are the poor cousins to their european counterparts. I believe Chase Manhatten has been bankrupt for many years. But their true owners, have very deep pockets. And so the franchise still generates profits.

America has been essentially bankrupted by foriegn influences. The people in this country just don't know it yet. If it were not so, we would see very diferent policies out of our government. That's why a person must save in silver and gold.

No use aiding and abetting tyranny against the American people.

TownCrier (03/03/04; 14:03:24MT - usagold.com msg#: 117995)
'Cenral Bank Insider' -- an Update!
http://www.usagold.com/centralbank/current.html
Once again, we are pleased to be able to provide you with this intimate look at central banking events, policies, and staff; dealing, in the words of this publication, "with aspects of central banking that are frequently neglected." The source commentary is reprinted at USAGOLD with permission and by the courtesy of Central Banking Publications Ltd.

(March 3rd excerpts -- see url for full report)

NEW INDIAN GOLD SCHEME AIRED

Here we go again. The Reserve Bank of India is considering a proposal from the government to launch yet another new gold deposit scheme that is designed to both curb the demand for physical gold and satisfy investors who favour gold as protection against unforeseen circumstances. The fact that all such schemes in the past have had little success does not seem to put the government off.

The central bank held a meeting with leading banks, commodity exchanges and bullion associations to canvass their views on the scheme. Under the scheme, investors will be given certificates stating their ownership of the amount of gold that they have paid for. These certificates will be tradable on the commodity exchanges so that investors can buy and sell the commodity without incurring the associated transaction and storage costs.
That's the theory. The trouble is, investors prefer real gold to paper promises.


HAPPY BIRTHDAY ALAN!

Alan Greenspan is 78 on Saturday, and although he is expected to be reconfirmed as the chairman this summer, his term as a governor will end Jan. 31, 2006, and he cannot serve again. Now is his last chance to stamp his imprint on history. Signs are, he is seizing that chance.

Since when did he make so many comments on so many subjects as in the last few days? Since when was he so clear in the messages he wants to get across?

The scope of his comments is breathtaking. On Monday, Greenspan discussed the drawbacks of 30-year fixed-rate mortgages. The next day he told Congress to regulate Fannie Mae and Freddie Mac - or, better still, privatize them. On Wednesday he said that Social Security benefits should be cut for future old age pensioners. All these were highly controversial. Then on Saturday in a speech at Stanford University he questioned the current legislation on intellectual property rights: "How appropriate is our current system - developed for a world in which physical assets predominated - for an economy in which value is increasingly embodied in ideas?"

Alfred A. DelliBovi, the president of the Federal Home Loan Bank of New York, interviewed in The American Banker, pointed out Greenspan had less than 24 months left: "In that context, I think someone whose life has been devoted to influencing public policy would quite naturally want to make sure his messages were delivered loud and clear."

"It's as if he has renewed vigour," said Oliver Ireland, a partner with the Morrison & Foerster, who was a Fed associate general counsel for 13 years under Mr. Greenspan. "He's feeling like he can speak his mind. He doesn't have to be circumspect for political reasons. He senses the end of his reign."

Bill Seidman, a former Federal Deposit Insurance Corp. chairman and now a CNBC commentator, told The American Banker that it had not always been Greenspan's style to voluntarily inject himself into politically charged matters. Mr. Seidman recalled interviewing Mr. Greenspan in the 1970s for a job in the Ford White House.

"He told me without a doubt that he was only an economist and would never participate in the political process. Either that was a little white lie, or he's learned a lot. In any event, he's an important player, and he sees himself in a position where he can say things other people can't say."


GREENSPAN ACCUSED OF FOLLOWING A PARTISAN AGENDA

Today Paul Krugman, columnist on the New York Times and well-known economist, issues a searing indictment of Alan Greenspan for having used his office to promote a right-wing partisan agenda over many years:

"Last week Mr. Greenspan warned of the dangers posed by budget deficits. But even though the main cause of deficits is plunging revenue - the federal government's tax take is now at its lowest level as a share of the economy since 1950 - he opposes any effort to restore recent revenue losses. Instead, he supports the Bush administration's plan to make its tax cuts permanent, and calls for cuts in Social Security benefits."

Krugman points out that three years ago Greenspan urged Congress to cut taxes and that he assured Congress that those tax cuts would not endanger future social security benefits. And last year he declined to stand in the way of another round of deficit-creating tax cuts.

"The Bush White House has made it clear that it will destroy the careers of scientists, budget experts, intelligence operatives and even military officers who don't toe the line. But Mr. Greenspan should have been immune to such pressures, and he should have understood that the peculiarity of his position as an unelected official who wields immense power carries with it an obligation to stand above the fray. By using his office to promote a partisan agenda, he has betrayed his institution, and the nation."

-----(see url for more)-----

From the first story, the Indian people (as oposed to their bankers) seem to have uniquely discovered wherein can be found the singular benefits of gold, namely, in PHYSICAL ownership. Anything short of that is basically another link in a long daisy-chain of derivatives, and at some point these people have realized astutely that SOMETHING is needed to anchor the chain.

R.

Socrates964 (03/03/04; 13:41:23MT - usagold.com msg#: 117994)
Mikal
Sounds far too complex for me. The Fib numbers should give you the net effect of all these different factors - as they represent lowest potential energy levels and thus quantize price - i.e. a price tends to a certain level, and may or may not jump to the next level. As with all TA, however, it becomes a black art - the key skill lying in determining when a level has been broken. I just use a rule of thumb of about 1.5% for a short-term level and 5% for a long-term level. In the case of Euro, I'd thus take 1.5c, and decide that a genuine bounce had occurred off 1.2080 if it traded over 1.2230, and that the level had broken for a trade under 1.1930.

Some day I'll sit down and work out the underlying theory. Or if someone can tell me of anyone who's already done it, I'd be most grateful, since I'm very lazy about this kind of thing!

Camel (03/03/04; 13:14:20MT - usagold.com msg#: 117993)
Knotakare- Rothschilds

It is my understanding that the Rockefeller banking group (Chase- Manhattan )is the primary owner of the FED with 53% and the Rothschilds and some of the other European Banks own a much smaller percentage.

Maybe when it was first founded, the FED was more heavily controlled by the Roths, but you have to remember that the Rothschild empire and power was greatly diminished by the destruction of WW I and II.

My view is that they are on the other side of the issue. It is the Rothschilds , among others , who are behind the Euro and the increase in the price of gold, and that they are the Giants to which Another always referred.

TownCrier (03/03/04; 13:08:00MT - usagold.com msg#: 117992)
Revisiting the recent topic of interest rates vs. blunted market forces
http://biz.yahoo.com/rf/040303/markets_fed_2.html
Yesterday, in a speech to the New York Economic Club, Fed Chairman Greenspan reiterated this point that currency market exchange rates are informing us more reliably than their interest rates:

"Some have argued that purchases of U.S. Treasuries by Asian officials are holding down interest rates on these instruments, and therefore U.S. interest rates are likely to rise as intervention by Asian monetary authorities slows, ceases, or even turns to net sales. While there are obvious reasons to be concerned about such an outcome, the effect of a reduction in the scale of intervention, or even net sales, on U.S. financial markets would likely be small. The reason is that central bank reserves are heavily concentrated in short-term maturities; moreover, the overall market in short-term dollar assets, combining both public and private instruments, is huge relative to the size of asset holdings of Asian monetary authorities. And because these issues are short-term and hence capable of only limited price change, realized capital losses, if any, would be small. Accordingly, any incentive for monetary authorities to sell dollars, in order to preserve market value, would be muted."

Left here unsaid, but not to be ignored, is the Federal Reserve's power through open market operations in the implementation of monetary policy (target rate of 1% for fed funds) to influence the short end of the spectrum on interest rates. And because the Fed also has the power to buy longer-dated notes, the official influence on far-end market rates should not be entirely dismissed.

For example, today the Federal Reserve intervened in both areas, despited the fact that the market rate on overnight fed funds was trading nicely at the Fed's target rate. In the short-end operation the Federal Reserve effectively added $7.75 billion in overnight money to the banking system through repurchase agreements.

No real issue there as they do it all the time. However, we seem to be seeing with greater frequency these days the Fed engaged in outright buying of longer dated Treasuries for its own account, thus adding "permanent" reserves to the nation's banking system while incrementally absorbing some market supply of the Treasuries in question. In today's coupon pass, the Fed intervened to the tune of $779.2 million, a bit larger than the coupon pass last week in which the Fed bought $660 million in Treasuries dated from 2012 to 2026.

R.

Federal_Reserves (03/03/04; 12:13:10MT - usagold.com msg#: 117991)
A good jobs report with rising wages
will now force the FED to raise rates in some increment. The dollar, bonds, gold all acting like something is coming.

If not 25bps maybe 5,10,or 15bps.

2:00pm 03/03/04 U.S. ECONOMY EXPANDING MODERATELY, BEIGE BOOK SAYS

2:00pm 03/03/04 U.S. EMPLOYMENT, PRICES UP SLIGHTLY, FED SAYS

2:00pm 03/03/04 BEIGE BOOK: CONSUMER SALES UP IN 11 OF 12 DISTRICTS

2:00pm 03/03/04 BEIGE BOOK: MANUFACTURING UP IN 11 OF 12 DISTRICTS


USAGOLD / Centennial Precious Metals, Inc. (3/3/04; 11:51:35MT - usagold.com msg#: 117990)
Wading through fact and fiction, separating illusion from reality
http://www.usagold.com/Order_Form.html





mikal (3/3/04; 11:26:43MT - usagold.com msg#: 117989)
@Socrates
The Fibonacci numbers can certainly be a part of an objective look at relative currency strength. Asian purchases of dollar proxies in waves of export-oriented political maneuvering are only temporary policies.
Other market fundamentals, including the use of modern derivatives and market manipulation produce unprecedented complexity. Add to this the youth of the euro with it's inexperienced traders and shallow history. It's a formula for instability, predisposed to volatility and exploitation. Exacerbated by instant hyper-linked cell phones, laptops, PDA's etc.

Socrates964 (3/3/04; 10:02:17MT - usagold.com msg#: 117988)
Euro
Can anyone remind me what the high was on Euro spot.

I think it was around 1.2885. On this basis, if we draw the Fib numbers from the 1.0780 low, we get:

.382 @ 120.80
.486 @ 118.62
.618 @ 115.84

Normally, a bounce off the .382 is considered as very bullish, and would indicate a 2nd leg equal in length to the first leg, i.e. 1.2080 + (1.2885-1.0780) = 1.42.

Let's see. Predictably, the usual shills have crawled out of the woodwork and are announcing the end of the dollar's decline. As if.

Druid (3/3/04; 08:58:56MT - usagold.com msg#: 117987)
Correction

Druid: That is "(Greenspan)".

Druid (3/3/04; 08:56:58MT - usagold.com msg#: 117986)
The Curious Greenspan and the GSEs
http://www.prudentbear.com/creditbubblebulletin.asp
"The GSEs ended 1998 with outstanding debt approaching $1.3 Trillion, so it is not credible to argue that they until recently "weren't large enough and they didn't create a potential significant problem." The GSEs have played such prominent roles in a series of Fed-orchestrated "reliquefications" that they have operated as virtual central banking partners. For years, the Greenspan Fed has acquiesced to risky GSE expansion, and, for years, GSE and Fed interests have been in harmony. Perhaps Dr. Greenspan's newfound resolve is related to ECB and foreign central bank demure. It would, after all, be reasonable that some might appreciate that the GSEs are the fountainhead for much of the destabilizing dollar liquidity inundating the global financial system. I can imagine the ECB's Dr. Issing protesting that the explosion in GSE borrowings was a leading source of unsound money and Credit – fostering financial and economic imbalances.



I will further conjecture that the true scope of the GSE problem became apparent to the Fed (and others) this past summer and fall. A strengthening economy set the stage for what would typically be an imminent tightening by the Federal Reserve. Between July and August, 10-year interest rate futures yields surged 120 basis points, while measures of bond market volatility exploded. The MBS market was being pummeled, the cost of hedging was skyrocketing, interest-rate markets were rapidly moving toward dislocation and the fledgling reflation/recovery was in serious jeopardy. The GSEs had relied on interest rate derivatives to hedge their ballooning balance sheets, but they had effectively become too large to hedge (the market can't hedge itself!). And much complicating matters, the leveraged speculator community was heavily exposed, also seeking to reduce exposure to rising rates."

Druid: He's (Greesnspan) is penned in between the ECB and the GSE's. He needs!!!the ECB to lower rates to absorb the continuous inflation that is being created. If he raises rates the GSE's implode. INCREDIBLE.



knotakare (3/3/04; 07:42:18MT - usagold.com msg#: 117985)
Safe haven
I think in the short term the yen and Euro are safe haven currencies. But in the long run, the only safe haven property, will be gold.

This is due to the massive wars, most likely directly ahead of us. The fight for global resources will only get nastier. Any debt obligation, is subject to massive devaluation. The Chess pieces keep moving, and there will be surprises.

The dollar was in a free fall, so even the EU had to be cautious. Greenspan is like a bank teller, he smiles and takes the public's money. The attention paid to him by the business press, is a smokescreen. He is not keeping the US afloat, he is just managing the distribution out of financial assets. This distribution is for his private shareholders; of the Rothschild Banking dynasty.

Socrates964 (3/3/04; 06:36:42MT - usagold.com msg#: 117984)
Venezuela-Ag
A Brazilian friend of mine once described Venezuelan politics as:

'Two groups of completely useless xxxholes fighting over who gets to run the state oil company'.

In these kinds of countries, it is very hard to get a united front for the kind of action you describe. Imaginary scenario: Chavez stops the oil flowing and all the food disappears from the shops because the supermarket chains claim they can't get any gas to power their truck fleet. He then claims that the supermarket owners are deliberately witholding supplies in order to bring down the government and sends out his supporters to picket them. Looting breaks out and someone in the army decides that he might manage to seize the crown from Chavez as the restorer of law and order. These kind of things soon spiral out of control.

I don't have a high regard for Chavez, but I think he's smart enough to know that he's only in power because the opposition screwed up their coup attempt. Hence, what's his strategy? To make hostile noises but do nothing, and whenever people demand results, he declares 'I am full of plans for the Bolivarian Republic but all my energies are consumed hunting down imperialist conspiracies, etc., etc.'

On the other side, it seems to me that Bush has given the Cuban-Americans a great deal of influence over LatAm affairs, and yet there seems to have been no attempt to push for military intervention in the Caribbean/LatAm à la pro-Israel lobby in the Middle East. I hence conclude that the only issue in Venezuela is who gets to keep the oil revenue. From the buyer's perspective this is not particularly important, since either way, you get your oil, and from the seller's perspective, it's very simple: No oil revenue, no power!


Socrates964 (3/3/04; 05:55:30MT - usagold.com msg#: 117983)
Belgian/JM
A number of points:

Looks to me that the dollar is behaving like the Nasdaq in 2000-01. A bear trend punctuated by vicious countertrends.

Why should the $ appreciate. As a follower of William of Ockham, I don't want to get sidetracked into conspiracy theory mindgames about the Fed engineering markets to help Bush/hinder Bush, when there is a simpler explanation: lots of fast money was in a dollar carry trade in the belief it was a free lunch and is now getting shaken out of its positions, hence the apparent freefall of the Euro. How far does the dollar rise? There are supports at 1.2060, 1.1910 and so on down to 1.1565. I'd bet that the euro will bounce off the higher ones of these rather than the lower ones, since with every decline the number of old trades hitting stop losses falls and the number of new trades betting on the rebound rises.

Belgian - I'm not as pessimistic as you on gold. I see strong support in the 380s, mainly because 380 was the old .786 retracement on the 415 to 255 downtrend - remember? In addition, gold stocks are diverging bullishly from POG, most of them are higher at POG 393 than they were at the January low of POG 405. Then we have the strange case of silver....

JM - the mark to market of the Euro turning from asset to liability? Frankly, I think you're 2 steps ahead of the game (and from my experience, it's only financially rewarding to be one step ahead). With this kind of geopolitical analysis, it's usually very easy to identify the factors at work and excruciatingly difficult to determine their timing.

Two points here:

-first, the MtoM is serving increasingly effectively as a currency hedge as Euroland reduces its foreign currency reserves, so this reduces rather than increases volatility.

-second, if you look at the portfolios of Asian/LatAm central banks, you'll no doubt find that the dollar is massively overweighted relative to its importance as trading partner for the relevant country. Hence, while your point could become a live issue, I think that there are still lots of Euros to be bought before it does.

Hence, I think that right now, the trade balance/inflation issues arising from a weak euro dwarf the MtoM issue.




Belgian (3/3/04; 05:23:52MT - usagold.com msg#: 117982)
@Ned
Where do you see "safe-haven"-dollar flight ? Is there a change - reverse, in dollar exchange rate trend ?

I only see position liquidation in the short term dollar-decline hedges. Because long term dollar hedges do have a high price and eat into the already meager profitability.

Dollar decline will most probably resume,...at 1,15...1,08 (€/$ exch.rate) ?

Belgian (3/3/04; 05:11:05MT - usagold.com msg#: 117981)
@Jacob M.
You are summing up the many different, self-serving stratego's, that are being played, worldwide. A complicated business, isn't it Sir ? But more (most) important is : WHO (wich oil-alliance) is is going to price the remaining oil-reserves in WHAT (currency)!!!-??? On this fundamental (oil-pricing), the further evolving, global stratego-plays are based.

Oilprice-oilflow-oil availabilities-oil compensations-oil consumption,...oelala, what an amount of parameters are having their say in this gigantic equation(s). I can only sit and watch the events happening and "guess" in what direction(s) the balance will tilt. Most probably, further away from the dollar-system and closer to the euro-Gold-system !?

Then I refer to Ag-mountain's excellent post and Bernanke's lecture (03/'04). Note how Bernanke stipulates 1980 (Gold's ATH) as a pivotal date ! Why is he talking (thinking) again about that old gold-standard ? Understandably, he is not saying (suggesting) a word about the US-$'s global oil-offensive. Bernanke (and Greenspan) are expressing that they are thinking about the dollar-system, rather than about the dollar-currency.

So are the EU, Russia, China, India, Middle East...thinking about that same global dollar-system and asking themselves WHY they can't share in the globe's prosperity, under that dollar-system. We have the Gold-Oil-working ants,...and the US($) has the prosperity !!!-??? How come ?

In other words,...what is so "super" on the superpower US and its dollar-management ? Is this super-status sustainable (still workable) for the good of all ?

It is against this background that the global maneuvering is happening.


We keep on watching this all together, Sir. And we regulary
polish our respective, biased crystal ball. Thanks for posting.

Ned (03/03/04; 04:10:13MT - usagold.com msg#: 117980)
Looks like the same old, same old...........
Am I correct in noticing that the markets are sensing a drop in global economic activity?

If this is the case, the market is once again fleeing to the 'safe haven' of choice, the US dollar. Why is this happening again?



Belgian (03/03/04; 02:31:40MT - usagold.com msg#: 117979)
@Socrates - @ Jacob Marley
Wawww, Bravo with your EU-insights (again). Thought you were our man in Brasil ?
Trichet/Duisenberg : correct !
"Petro-euro" or/and "euro on probation" ??? : Of course we keep those question marks, up until we have the "facts". That's why I emphasized FOA's vision on the "dollar-system", again, yesterday. The global oil-matters are increasingly included (embedded) in the dollar-system since 1971 and therefore overlap with Jacob's thoughts.

TA (TI)on €/$/POO/POG/IRs, presently suggest that it is still "business as usual" around the dollar-system. On the surface of things, there is no reason to suspect that the dollar-system is being challenged. But,...
I'll add a recent event to Marley's oil-geopolitico survey : The Macedonian President was killed in a plane crash, when his prime minister went to Ireland for presenting the candidature for EMU-entry (remember Anna Lindh-Sweden). Question : Is there enough evidence for the dollar-system, being challenged !? Yes, there is.

Is the Petro-euro a given ? Arabian oil "is" linking with Venezuela as it is with Russia !

Expect everything imaginable as to further "discredit" the whole euro-system and the building oil-alliances.

That's why we will see financials moving in a "technical" behavior mode for small intervals of time, up until the underlying fundamentals take over and crash the technical price-logics once again in moving countertrend. That's a tricky situation, isn't it Sirs ?

Dollar up, euro down, POG down (370$-support), IRs heading up, Dow down,...and $-€-POO = the great unknown, for the time being !?

@Jacob : more about your thoughts/insights, later. Thanks

Ag Mountain (03/03/04; 02:02:01MT - usagold.com msg#: 117978)
specie-man, ok now I see more of the gist of it
Now I see why you said to borrow dollars to begin with, to tide the country over during the period of no oil-sale revenue.

It's true that everyone who ever borrows a money is basically shorting that money, but also playing against the house which is factored in the form of the interest rate on the different moneys like the various odds handicapping different horses running in a same race.

I'm saying the value is in the oil and everything else is just math, unless it's pursuing a politcal agenda, too. So are you simply saying it's better to get a payoff stack in the end that's twice as big, even if only because the notes are worth half as much?

It would be a big gamble to play in isolation because what's to say another oil producer like swing-capacity Saudi Arabia wouldn't step into the market breach during the brief time that Venezuela manages to stop selling oil northward to the U.S.?

There's no easy game to get rich unless you're able to tap into one of the rare moments that a longterm creeping systemic dislocation is about to come undone. Like gold will one of these days. Other than that, getting rich (better said, building wealth) is basically a long grinding process of consuming less than you produce while toiling at extracting natural value and manufacturing or refining added value as a speciality, and then exchanging your excess with other people for the excess of their specialties.

If you have oil to begin with, the markets in the middle can't really make you substantially richer than you are to begin with unless you're talking about pursuing and added profession as an arbitrageur of its inefficiencies. Basically, there's a substantial difference between 1) grabbing what you're calling "a big profit" measured in dollars and 2) actually becoming more wealthy.

specie-man (03/03/04; 01:17:00MT - usagold.com msg#: 117977)
Venezuela's Revenge - @ Ag Mountain
Suppose you are an oil-producing country like Venezuela. You need a constant flow of money coming into the country from outside. If you shut off the oil spigot, the money flow stops. But you want to shut off the spigot (at least part way for a while) to drive up the price of oil. What do you do ?

You could borrow the Dollars you need to tide you over. Then you exchange the Dollars for Euros or whatever goods you'll need. Next, you start to restrict the oil flow to the US. You are now essentially short the US Dollar and long oil. But by taking these actions, you drastically improve your odds of making a big profit - because it is likely to cause the Dollar to go down and oil to go up.



Ag Mountain (03/03/04; 00:40:57MT - usagold.com msg#: 117976)
goldquest: "Gee, it sounds like Bernanke doesn't like gold!"
http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm
Well, there you have it. Proof that 4 eyes provide 2 views. I came away from it with a completely different conclusion. To me he sounded a lot like FOA, Aristotle and Belgian. I can't say he sounds like he doesn't like gold. Far from it. More like he's openly recognizing once and for all the insurmountable problems of using fixed gold convertibility as a stardard basis of the monetary system.

Maybe this is a good official sign of the U.S. turning around its wrong-headedness. Maybe it will help the world inch us a bit closer to real free-gold.



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