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ARCHIVED DISCUSSION FROM 5/4/2002
All times are U.S. Mountain Time
(Yesterday's Discussion.)
Waverider
(05/04/02; 22:44:47MT - usagold.com msg#: 74918)
Argentina Seeks Loan to Avert Default on World Bank
http://quote.bloomberg.com/fgcgi.cgi?touch=1&btitle=Top%20News&T=sa_content.ht&s=APNLpHRUvQXJnZW50&ao=4141079
Snippit:
"Argentina asked foreign governments and lending agencies for a 30-day loan to avoid defaulting on $800 million due to the World Bank mid-month, Economy Minister Roberto Lavagna said.
A loan would keep a Latin American country from joining Afghanistan, Sudan, Liberia, Somalia, and Zimbabwe as countries that have fallen into arrears with the World Bank and IMF. Negotiating 30-day credit will be difficult because Argentina's tax revenue has plunged, the country remains in default with bondholders, and banks are seeking government assistance to overcome insolvency caused by January's devaluation, analysts said."
Waverider: More tears for Argentina as it appears there are no immediate solutions to their economic dilemma.
~Black Blade - you recommended a few books a while ago but didn't give the authors. The titles are "Green Monday" and "Hubbert's Peak". Actually I found "Hubbert's Peak: The Impending World Oil Shortage" by KS Deffeyes - is that the one? Do you have the author for "Green Monday"? TIA!
~Slingshot - Sounds as though you had a great vacation. Your observation of others reactions to the Gold bar is interesting - Gold seems to captivate those who lay eyes on it. I've been thinking that it may be easier to engage people in discussion about Gold by having it readily visible, so I'm having a Maple Leaf coin made into a pendant. As Aristotle said - "do your part to free it from the banking system - tell a friend". Well, I try to talk to friends and colleagues about Gold and it usually goes right over their heads...not even a passing interest regardless of the approach I take. I've never been one for jewellery but maybe a Gold coin will catch attention and open the door to discussion. We'll see... Cheers!
Black Blade
(05/04/02; 19:55:21MT - usagold.com msg#: 74917)
O'Neill Protests, Markets Scent Shift
http://biz.yahoo.com/rb/020504/economy_oneill_1.html
Snippit:
U.S. Treasury Secretary Paul O'Neill told Congress on Wednesday he did not want to signal a change in currency policy. But that is exactly what markets saw -- a shift away from the long-standing "strong dollar" policy. With the dollar already under pressure, the shift may be a timely one. It would allow policymakers to gradually weaken the currency to address growing concerns about how to finance both the huge U.S. current account deficit and the newly returned U.S. budget deficit. The United States has run a trade imbalance for years, but signs global demand for U.S. assets, needed to fund the trade gap, is waning has heightened concerns about deficits.
Black Blade: The weaker US Dollar is a given. The USD must be weakened in face of record trade deficits over the last several months with no end in sight. The upside is that the US Dollar denominated POG should strengthen further.
USAGOLD
(05/04/02; 19:53:23MT - usagold.com msg#: 74916)
Black Blade and ALL. . ..
This is an incredible statement from one of America's top money men and one who has made his money in the securities' business:
Munger went further: "To say derivative accounting in America is in the sewer is an insult to sewage."
____________________
Black Blade
(05/04/02; 19:46:08MT - usagold.com msg#: 74915)
Dollar Has Biggest Drop Since January on U.S. Jobs Report
http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=ad_right1_topfin&bt=ad_position1_topfin&middle=ad_frame2_topfin&s=APNLFdxOrRG9sbGFy
Snippit:
New York, May 3 (Bloomberg) -- The dollar had its biggest drop against the euro since January after a report showed the U.S. jobless rate reached a 7 1/2-year high in April, fueling concern an economic rebound may be slower than projected. The Standard & Poor's 500 Index dropped to a six-month low this week on skepticism about the strength of the U.S. expansion, which also reduced demand for dollars needed to buy shares.
Black Blade: Let's see, first the financial media Trolls brush off the rising unemployment rate as a backward looking indicator, and now they are concerned that it is leading to a drop in the US Dollar? I got news for the Trolls; the unemployment picture is going to get much worse. Especially so as the costs of energy rise in the face of declining petroleum production and the loss of consumer confidence as stocks decline to match historical values (not to mention the lack of growing corporate profits).
Black Blade
(05/04/02; 19:44:48MT - usagold.com msg#: 74914)
'Locust Cycle' May Bug Street for Years
http://biz.yahoo.com/rb/020504/column_stocks_week_1.html
Snippit:
NEW YORK (Reuters) - The stock market may be in the early stages of the "Locust Cycle," a plague that brings investors years of unappealing returns before the good times start to roll again. If this is the market's destiny, then people should abandon their deeply ingrained belief that stocks always bounce back. In other words, the "buy on dip" mentality may not be the smartest strategy.
Indeed, one of the biggest fictions on Wall Street is the market always comes back. It's a mindset formed during the 1990s when stocks were the great wealth spinners. "That's what happens during bull markets -- the market always rebounds, that is, until it ends," says Ray DeVoe, veteran Wall Streeter and publisher of the DeVoe Report. "This is most investors' only experience in the stock market during the 18 years of rising prices."
He believes that investors, itching for a return of the bull market that hung on from 1982 to 2000, may instead be faced with a profit drought that could last for years. It's called the "Locust Cycle," in which the crop-ravaging insect lies dormant for 17 years and then awakens for 17 years of activity. "People do not realize that there can be long periods when the market goes nowhere or acts poorly," DeVoe says.
It happened after the crash of 1929 and again at the conclusion of the "Nifty 50" market in the 1970s. After the 1929 bloodbath, the Dow Jones industrial average went into a head-spinning plunge of 82 percent by the summer of 1932. Then, it took the Dow 25 years to return to its pre-crash high, says DeVoe, who was born the year after the 1929 debacle.
Black Blade: Locust Cycle? A Grasshopper of a different stripe. The markets have had their run, and now that the American consumer has come face to face with reality after years of complacency, environmental brain washing and in general a life in "Fairy Land". They are about to wake up to the realization that goods just don't magically appear at the supermarkets, gasoline from gas pumps, and electricity from the socket in the wall. Now that those costs are rising, they will be less likely to put cash intro the stock markets. The smart ones will be paying off debt and preparing for rough times.
Black Blade
(05/04/02; 19:41:59MT - usagold.com msg#: 74913)
Buffett Tells Fans About Investing, Fraud
http://biz.yahoo.com/rb/020504/financial_berkshire_1.html
Snippit:
OMAHA, Neb. (Reuters) - Omaha's Civic Auditorium was packed to the rafters on Saturday to hear Warren Buffett and his business partner Charlie Munger describe their unique approach to long-term investing and slam fraudulent practices hurting U.S. companies. "Many of the crooks look like crooks," said Buffett. "They have a smell about them." "Wall Street loves them as long as they are pushing out securities," he added.
Turning to the troubled area of corporate accounting, Buffett predicted that derivatives -- a major business for failed Enron Corp. -- would trip up other firms in the future. "There's no place with as much potential for phony numbers as derivatives," said Buffett. Munger went further: "To say derivative accounting in America is in the sewer is an insult to sewage."
Black Blade: I guess he won't be investing in JP Morgan Chase, Bank of America, or most any other investment bank anytime soon.
slingshot
(05/04/02; 18:33:46MT - usagold.com msg#: 74912)
Flight to Quality
Put a Smile on your Face
Just came home from a cruise in the West Caribbean and made a stop at Conzumel. At this port of call the touristas were buying loose precious and semi precious stones, Gold and silver jewelry to the max. The stores along the waterfront were full. Five cruise ships pulled in at one time. For some there purchases would be duty free and no tax.Yes sir those GREENGO DOLLARS were moving fast. Silver one ounce rounds were going for $25.00 US. So the US Silver Eagle is a real bargain.
The touristas are getting close. All they need to do is switch to bullion AND AWAY WE GO!
So what else could be better? Went to Mel Fishers museum
to see the Riches Of The Atocha. There I was able to hold a 74 oz. bar of Gold form the treasure. Now I'm telling you if that does not make you a Goldbug, you don't have a pulse.
Yepper,everyone wanted to put there grubby little hands on that bar. Just made me smile. Too bad they did not realize that they could have their own gold in hand.
So be positive. Time is on my side. Yes it is. Love them Rolling Stones.
Slingshot--------------------<>
Golden Bear
(05/04/02; 17:38:36MT - usagold.com msg#: 74911)
Just waiting for that gust of wind to blow down the American financial house of cards....
Link on previous post
When discussing derivatives, Alan Greenspan often uses the terminology "the unbundling of risk." Recently (April 22, 2002) he remarked, "New financial products have enabled risk to be dispersed more effectively to those willing, and presumably able, to bear it. Shocks to the overall economic system are accordingly less likely to create cascading credit failure." We take the exact opposite view: Derivatives and "financial engineering" generally isolate, extract, and specifically "Bundle" risk (interest rate, Credit, currency, equity, gold, etc.). And this is not some arcane intellectual debate, as it is our view that this "Bundling" has now set the stage for precisely the types of "cascading credit failure" and inevitable "shock to the overall economic system" that Greenspan apparently believes are "less likely." Despite assurances otherwise, there is no doubt that "unguarded" Credit excess has created unprecedented risk that is increasingly concentrated with the GSEs, Credit insurers, and within the murky realm of global derivative markets. Furthermore, this "Bundling" reached new extremes last year, as financial intermediaries lent aggressively while issuing liabilities amounting to about $900 billion of new broad money supply. There was also unprecedented growth in the Credit derivatives market. We believe the Credit issue is now becoming critical, as recent developments have witnessed a dramatic escalation of the unfolding telecom and U.S. corporate bond market dislocation. We see indications of a serious developing problem with the "Bundling" of Credit risk – a dislocation in the global Credit derivatives area.
Golden Bear
(5/4/02; 17:06:41MT - usagold.com msg#: 74910)
Excellent as always from Doug Noland
http://www.prudentbear.com/archive_comm_article.asp?category=Credit+Bubble+Bulletin&content_idx=11330
snippit:
In light of the abrupt change in dollar fortunes, the Treasury's monthly report of "Foreign Purchases and Sales of U.S. Long-Term Securities" takes on considerable relevance. February's report certainly makes for interesting reading. While two months do not a trend make, February data confirms January's marked slowdown of foreign flows after the fourth-quarter's boom. Net monthly inflows into U.S. securities averaged $53.6 billion during the fourth quarter and $42 billion for all of 2001. For the first two months of 2002, net flows have ebbed markedly to $14.6 billion. After being net monthly buyers of $12.7 billion Treasuries during the fourth quarter (avg. $1.5 billion buyers for 2001), foreigners have turned sellers to the tune of $8.5 billion. During 2001, foreign-sourced purchases accounted for a monthly average of $13.8 billion of agency bonds and $19.7 billion of U.S. corporates. So far for 2002, these average monthly inflows have dropped to $5.1 billion and $11.4 billion. Foreigners purchased a net $2.4 billion of stocks each month last year, but have averaged only $638 million so far this year.
During the fourth quarter, the financial centers of the U.K, Japan, and the Cayman Islands combined to average $25.6 billion of monthly long-term U.S. security purchases (48% of total global purchases). During the first two months of 2001, these flows have declined precipitously to average only $3.0 billion (21% of total). After averaging $8.6 billion in monthly net purchases of agency bonds during the fourth quarter, January and February purchases have averaged just $270 million. This is despite the Cayman Islands averaging about $130 billion, or 57%, of total average monthly agency trading volume. Is there a relationship between the abrupt decline in flows from the three major financial centers and escalating corporate Credit problems?
----------------------------------------------------------
The foreigners don't like the stench of Corporate America...
Aristotle
(5/4/02; 16:40:06MT - usagold.com msg#: 74909)
Don't miss this one from the Globe and Mail! "Is U.S. dollar losing its currency?"
http://www.globeandmail.com/servlet/RTGAMArticleHTMLTemplate/B/20020504/wusus?hub=businessBN&tf=tgam%252Frealtime%252Ffullstory_Bus.html&cf=tgam/realtime/config-neutral&vg=BigAdVariableGenerator&slug=wusus&date=20020504&archive=RTGAM&site=Business&ad_page
Here's the flavorful beginnings of this monetary feast served up in today's paper:
---START---
The U.S. dollar, the most successful brand name in monetary history, lost yet more ground to other brands yesterday, raising questions about whether it has traded on its name too long.
It hit six-month lows against some its major competitors, notably the euro, which could someday challenge it as a world currency. This time it did not take its Canadian counterpart down with it.
In Chicago, economist Paul Kasriel noted that the dollar's popularity has allowed the United States to import and consume more than it makes and exports, and to run up almost immeasurable external debts.
"The rest of the world advances the U.S. more than $1-billion [U.S.] a day and has been doing so for some time now, and perhaps it is looking at the return that it's been getting on those advanced funds," he said an interview.
----END----
He goes on to make a good point for the benefit of the general public which is old stuff for us, pointing out a situation that is merely an extension (maybe "parallel is a better word) of the same reality faced by the bullion banks. Through this great forum we've been beating that idea into people's heads for many years now. Here's what Kasriel says, picking things up later in the article.
---START---
"In some senses, the U.S. is like a banker to the world."
There is always a danger of a run on the bank, he said, although the United States is blessed in a way that financially crippled Argentina, for example, is not.
"Argentina had a lot of debt denominated in dollars — not nearly as much, of course, as we do, but nevertheless a lot of debt. Not the only difference, but one difference,between the U.S. and Argentina is that the U.S. can print those dollars. Argentina could not."
----END----
And neither can the bullion bankers print their way out of a real run on their bullion-denominated business. The best they can do is reallocate the Gold on hand to maintain the illusion, and try to cover everything over with a blanket of paper Gold proxies to bewilder the marketplace in the hopes of buying enough time to survive the run. Much of the evolutionary history of money and banking has been driven by the marketplace (both the banking institutions and its customers together) coming to terms with the ebb and flow of runs survived and runs failed.
From the old days of local banks through to state and national banking systems, we all know where we now stand -- with an international network (Association) of bullion banking operations that are of necessity now bound together in a shared fate whose motto could easily be "All for one and one for all!" The strains of a Gold run (brought about by nothing more sinister than a continuation of the current physical demand) will either be withstood by the bullion banking system as a whole, or it will collapse them all. Like dominoes.
I think the healthiest way of looking at the 1999 "Washington Agreement" (Central Bank Agreement on Gold) is like this, but first you've got to accept the notion that "central bankers are indeed among the best and the brightest minds of the banking world." And if that is so hard for you to swallow, then I'll add this qualifier "-- insofar as the Big Picture is concerned."
The central bankers put their heads together and saw, coming down the pike -- sooner or later, the Mother of all Bank Runs -- in Gold! They knew that unless something changed, it would fall upon them to step into the breach as Lender of Last Resort. However, like Argentina, knowing that they couldn't print the necessary item, they would ultimately fail in the effort, and in the process would have succeeded only in squandering away much of the national Treasure, Gold.
The Washington Agreement is our national banking officials saying to the commercial bullion bankers, "In the interest of the financial system, we'll give a little to buy you guys out of your immediate jam, but we are also putting you on notice that this is where it ends. We have politically tied our hands in a very public way, and we won't be so easily handing over our remaining National Gold. Start concluding your operations in bullion, or face the next round of music alone, with no chairs left to sit on."
And in fact, we DO see a trend in year-over-year declines in LBMA volume, and a number of fledgling bullion operations shut down their trading desks in the wake of the warning shot served by the 1999 Central Bank Gold agreement.
I don't see how anyone could say that this is ultimately, somehow, interfering in the ongoing evolution toward a free market in Gold. (You see, we've never actually had one outside of antiquity, but by God we're getting closer!!!) Ever since Gold got dragged into the banking realm, there's been a non-stop series of legislation and regulation geared toward preventing the damage done to the System and its operators and users (that's you and me, pal) by the ever-present potential for a bank run on the Gold.
As a result, once we were well into use of the System, we (us and our political representatives) could never let the true value of Gold be exposed to the light of day. It has always been clouded over by the growing money supply made up of ledger entries that, to the layman, were "as good as Gold." Well of course they aren't. They are different. In some ways better, and in some ways worse. The modern drive toward economic efficiency being what it is -- an unstoppable commercial force within any market system -- it was inevitable that we would reach the point where we find ourselves largely today, and about to take the final conclusive step. That is, using the ledger system of notional bank money for those few uses that it does best, and using a real property system of Gold to fill the financial void where our needs for liquid Wealth Inviolate isn't met through notional money.
Surely as the sun will rise tomorrow, some child might already be heard saying, "But I WANNA use my Gold in the banking system! It's an infringement on my rights if I can't."
Look, Sonny, there need not be an artificial violation of rights, or strong-arm tactics, or whatever you want to call it for us to see the arrival one day of a Gold Market, resplendent in the utter absence of any involvement in illusory fractional banking usage. If a market gets nipped in the chin by a big dog (bullion banking), we can expect it to WILLINGLY exercise due caution in the future. Perhaps through avoidance? And if history shows that many nips haven't quite been enough incentive to keep us away from this dangerous plaything (or maybe we can only move away one step at a time), then we must at least admit that our style of interaction has in fact changed notably in many obvious ways. But to the extent that the old dog remains in striking distance, our decision not to play this way again may be made once and for all if we find to our horror one fine day that he's got our whole damned head in his maw. Once extricated, we will run fast and free, never to look back. And glad of it.
OK, enough of my banter. Here's the last bit from the article I'd like to call your attention to, in case you chose not to visit the link I've provided.
---START---
For the United States, the big question is whether foreigners will forever want to own vast numbers of dollars, both in the form of stocks, bonds, factories and real estate in the United States and the form of crumpled greenbacks in mattresses, fruit jars and black-market cash boxes everywhere else. One day, they may decide they own too many. Nobody knows how far the dollar would fall then.
"The day of reckoning is certainly coming," said Louis Crandall, chief economist at Wrightson Associates LLC, a New York bond market research firm. "Like a lot of other people, I've been looking for it for quite some time."
----END----
A final note occus to me, in conclusion of my previous comments for anyone afraid of a Free Gold Market: I've yet to hear of a Rembrandt that's had its free market value stifled, somehow, because it wasn't being used as currency.
Gold. Do your part to free it from the banking system, tell a friend. And don't forget: Get you some. --- Aristotle
Gauntlet-Runner2("GR2")
(5/4/02; 15:27:44MT - usagold.com msg#: 74908)
Almost no one's charts go back to 1979............................
A interesting scenario is setting up. Tom Calandra is beginning to hype gold but to say the metal should eclipse the shares in the next move. (technically correct but a little premature). The metal will outperform the shares eventually because of the greed of the mining companies with their interest to issue more shares and dilute their floats (# of outstanding shares). Hey, what is paper to do, but act like paper. First it goes up then it goes sideways and down. ECO and NEM ARE ISSUING more stock right now. Sure looks good at $29.95. Sort of lousy performance for an unhedged major miner wouldn't you say? Major miner and minor midget means nothing. What matters is supply and demand. Unlimited supply means the rallies are rigged. They let it come up when they want it to. So expect the same thing to hit the others eventually. "Yes, we will get more reserves"........they will issue more shares and pay too much for reserves just to look good on paper. It's a paper game. The bank in the monopoly game has unlimited funds. ALL paper games have rules the players use against the house but seem to catch the masses. Perception becomes reality in the mania-matic papergold world. The small traders scared themselves into the shares on Friday while relieving all the underwater positions of everyone else. Now they are all bought in with goldfunds seeking to take some early profits off the table. To the average proficient chartist the looks of an overextension are apparent. The cabal has only one card left to play. They will attack the shares and attempt to "teach these defectors a lesson". The short attack already started and will continue until the leading issues get knocked down. (I suspect) Then once the initial setback occurs, they'll cover with the panicked longs fodder. Then the next wave of shorters are the ones to get trapped. The most important thing for the next rally is to have shorts trapped overnight with major news hitting afterhours. "Those who observe lying vanities forsake their own mercy." And the greed of men was terrible in those days.
The more they fall back, the better. We need shorts to get shorter on the Comex and in the shares. I fully believe this will happen because the shorter's mentality has been so well reinforced from profits from the falling Nasdaq. The lemmings are all in short mode and it would make no sense to go long with extended patterns like we have in the shares.
"General Custer.......you go down there!" But what our reverse barometer scout said was the simple truth. He will go down there shorting into his own slaughter.
Like Pavlovs dogs after puppy chow being captured for financial experimentation.
The whole rally is only 1/4 to 1/3 over. Tom Calandra already has shorting recommendations out on Barrick and Placer. The bulldozing over the longs at these high levels will continue and then after they hit the main gas line its all going to blow up.
The national debt with a falling dollar and falling tax revenues with a trade deficit that won't quit..........sounds like the summer of 79. This movie begins showing June 28.
The Chinese say put time in your favor so you can win through non-action. That is how the Russians beat the Germans in WW2, they simply let the Germans in by retreating and then let the coldness of winter wipe them out. We let the shorts in and the fundamentals are going to wipe them out. Actually we don't have a choice. If you have an extension for your snorkel you may need it if your stuff goes underwater. Just hang in there as we're all going to be looking at the fish. But when the gold shorting Egyptians are found dead on the shores the Red Sea will have already have parted. You cried before so you get to laugh. They laughed before so soon they'll cry.
Black Blade
(5/4/02; 15:14:28MT - usagold.com msg#: 74907)
Gold expected to rise to US$320 this month
http://www.nationalpost.com/home/story.html?f=/stories/20020504/119952.html
Snippit:
"The increased buying of gold in Japan has raised the visibility of gold as an investment," said Brian Kennedy, president and chief executive of Meridian Gold Inc., a Reno, Nev.-based gold miner. Gold will probably climb to "at least US$320" this month, said Tim Mercer, general manager of Clinton Properties, a Hong Kong investment management firm.
Black Blade: Sounds good.
Nice day so far - Off to fish for another limit.
compwiz4u
(5/4/02; 12:58:43MT - usagold.com msg#: 74906)
Parabolic Move
I think Gold's starting to go parabolic.
The corrections are short and the rebounds powerful, while the trendlines are getting steeper.
Friday' surge was a killer as it just blew through resistance.
$325 Gold isn't that far away now.
If we hit it by the end of May, it'll really show that we're accelerating.
If that occurs, then I'd say we could see $350-400 in short order.
A bullish Barron's interview today with Price Headley supports my view. Headley has a new technical tool called an "Acceleration Band," which spots big parabolic moves. He recommends GOLD(GFI), AEM & NEM in that order.
He says, "If Gold holds above $300, there's potential for a real explosion up."
We're there now, so enjoy the ride as this could be fun.
YGM
(5/4/02; 11:39:32MT - usagold.com msg#: 74905)
Malaysia & Gold Dinar....
http://biz.thestar.com.my/news/story.asp?file=/2002/5/2/business/din1&newspage=Search
This could very well signal an end to US dollar hedgemony, especially when one considers the ramification for OIL if all Islamic nations follow suit and do business in Gold backed Dinars.....Gold backed paper or 'Airy Nothing'.... Chances are we'd see gov't intervention over Western citizens aquiring banking services in Islamic Banks alot faster than we'd see any Gold Confiscation of private hoards.....
Mr Gresham
(5/4/02; 11:31:31MT - usagold.com msg#: 74904)
I-Bonds and Savings
http://www.savingsbond.gov/sav/sbirate2.htm
Savers get another kick in the rump. I-Bond rates have fallen from nearly 6% a year ago, and 4.15 (I think it was) during the past 6 months, to 2.57% now. Oh yes, inflation (at .56%) has been vanquished; you needn't worry, says the keeper of the gov stats. (snarf, snarf)
From all sides, savers are being funneled and driven toward they-know-not-what destination. Anyone got a clue, for those-who-would-be-savers?
Most of the time, maybe even most of one's lifetime, one seeks out productive or growing asset vehicles, denominated in the reliable currency of the time. Most of the time.
Then there is a point in the cycle where one's aspirations must pull back -- both from the vehicles and the currency medium -- and await the implosion of both.
I don't spit into the wind, and I don't paddle my canoe up the rapids. And once I figure out which way the tide is going, I'm on it.
Cavan Man
(5/4/02; 09:56:47MT - usagold.com msg#: 74903)
Captain your own vessel.
Top Financial News
05/04 10:44
Treasuries Maturing in 5 Years or More May Fall: Bond Outlook
By Vivianne Rodrigues
New York, May 4 (Bloomberg) -- U.S. Treasuries maturing in five years or more may fall next week as the biggest quarterly government debt auction since 1999 swells the supply of the notes.
The Treasury plans to sell $22 billion in five-year notes on Tuesday and $11 billion in 10-year notes on Wednesday, part of an increase in sales needed to finance the first budget deficit in five years.
``The weak state of the government's finances shows that borrowing is set to soar,'' said Chris Rupkey, senior economist at Bank of Tokyo-Mitusbishi Ltd. The additional debt supply may ``help push Treasury prices down.''
Analysts say the Federal Reserve will indicate at a policy meeting Tuesday that it doesn't plan to raise interest rates for several months, sparking gains in notes maturing in two years.
The 3 1/2 percent note maturing in 2006 gained for the fifth week in six this week, trimming its yield 1 basis point to 4.36 percent. Its yield has fallen 46 basis points since March 22 as investors have pared bets on the Fed raising rates in the next few months. The 4 7/8 percent note maturing in February 2012 was little changed this week, leaving its yield at 5.06 percent.
Analysts expect the Fed next week to say the country's economic recovery remains fragile, indicating it won't start reversing last year's rate rises until the second half of the year. The Fed will leave the benchmark overnight rate at its 40- year low of 1.75 percent at Tuesday's meeting, according to all 20 primary dealers, banks that trade with the Fed, surveyed by Bloomberg News.
`No Way'
``There's no way the Fed will start rising interest rates as long as unemployment remains high,'' said David Kotok, who manages about $500 million in bonds at Cumberland Advisors Inc., in Vineland, New Jersey. ``Investors will have to keep in mind that short-term interest rates will be very low for the remainder of this year and that inflation is next year's problem.''
A government report this week showed the jobless rate rose to a seven-year high of 6 percent in April, fueling a rally in two- year notes, as the recovery prompted people to enter the labor force in search of work.
The 3 3/8 percent note due April 2004 -- the most sensitive to Fed rate changes -- gained 1/8 Friday to 100 13/32, cutting its yield 6 basis points to 3.15 percent, its lowest since Feb. 28.
``If the Fed delays raising interest rates until August, short-term and intermediate Treasuries will have a good breather,'' said Mike Mullaney, who manages $2 billion in government and corporate bonds at Fiduciary Trust Co.
Economic Reports
The yield on the August federal funds futures contract, a gauge of expectations for the average overnight rate for that month, fell 6 basis points Friday to 1.885 percent. That's 1.5 basis points below the level that suggests traders fully expect a quarter-point increase at the Fed's Aug. 13 meeting.
Economic reports next week are expected to show inflation, running at an annual 1.5 percent, will remain tame.
The Labor Department is expected to report productivity in the U.S. grew at a faster pace in the first quarter, a sign the economy has room to recover without triggering higher prices. The Labor Department's measure of how much work an employee performs in an hour probably rose at a 7 percent annual rate in the first three months of the year, compared with a 5.2 percent rate in the last quarter of 2002, according to those surveyed.
On Friday, the Labor Department is also expected to say prices paid to U.S. factories, farmers and other producers rose 0.4 percent in April, down from a 1 percent increase in March.
``Inflation is nowhere to be seen and I doubt it will be a serious problem this year,'' said Anthony Karydakis, senior economist at Banc One Capital Markets Inc. ``The manufacturing sector is under pressure to keep costs down and with productivity at such high levels, it will take some time until we see prices really picking up.''
Cavan Man
(5/4/02; 09:55:05MT - usagold.com msg#: 74902)
Note comment about Yen
Top Financial News
05/04 11:07
Dollar's 6 1/2-Month Low May Spur Hedging: Currency Outlook
By Geraldine Ryerson-Cruz
New York, May 4 (Bloomberg) -- The dollar's drop to a 6 1/2- month low signals it's time for foreign investors in U.S. securities to hedge against more losses in the currency, say strategists at Merrill Lynch & Co.
Mounting evidence that a recovery is losing pace in the world's largest economy has cooled demand for U.S. assets and pushed the dollar down for five weeks against the euro, the longest slide in almost nine months. The dollar fell to its weakest level since Oct. 10 at 91.78 U.S. cents per euro.
The decline is probably the start of an extended drop in the dollar's value, and poses a ``risk to foreign holders of U.S. bonds'' in particular, said Thomas Sowanick, chief global fixed- income strategist at Merrill Lynch, the world's biggest securities firm by capital. He recommends placing hedges against a 5 percent decline in the dollar.
The U.S. currency has already lost 5 percent of its value against the euro and 4.3 percent against the yen this quarter. While most U.S. Treasuries climbed this week, yields on the benchmark 10-year note are at 5.06 percent, lower than 10-year German bonds, which yield 5.12 percent.
``If money just stops coming into the U.S. it would be very negative for the dollar, as well as for the financial markets,'' Sowanick said. Fixed-income investors are ``looking at alternatives away from the U.S. and starting to sharpen their pencils, whereas the currency managers are already starting to'' sell dollars in anticipation of further declines, he said.
U.S. Employment
The currency also fell a fifth week in six against the yen, to its lowest level since March 7 at 126.86 yen per dollar. Against an index of the euro, yen, British pound, Swiss franc, Swedish krona and Canadian dollar, the dollar sank to its lowest level since mid-October.
The dollar's losses accelerated after the government said the U.S. unemployment rate reached a 7 1/2-year high of 6 percent in April, adding to evidence an economic rebound may be slower than projected. Separate reports showed declines in consumer confidence and weaker-than-expected manufacturing.
Although a government report Monday showed U.S. gross domestic product gained at a 5.8 percent rate in the first quarter, growth will likely taper to a 2.5 percent rate for the year, according to the Organization for Economic Cooperation and Development.
That would put the U.S. growth rate closer to the dozen- nation euro economy, which the OECD estimates will grow 1.8 percent this year.
German Strike
``People are starting to have doubts about the strength and sustainability of the U.S. and global recovery, and that's hurting the dollar,'' said Larry Kantor, head of global foreign-exchange research at J.P. Morgan Chase & Co., the second-biggest U.S. bank. ``Right now there's significant momentum to sell the dollar.''
Two of the three major U.S. stock indexes fell this week, taking the Nasdaq Composite Index 3 percent lower following a 7.4 percent drop the previous week.
``The combination of a weak economy, U.S. asset markets not performing very well and the Federal Reserve on the sidelines is a bad recipe for the dollar,'' Kantor said. Still, J.P. Morgan isn't changing its forecasts -- for 90 cents per euro and 127 yen by the end of the month -- until there are more economic statistics to confirm growth is ebbing.
An expected strike next week by Germany's second-largest labor union, IG Metall, may fuel concern about prospects for economic recovery in Europe and damp some demand for its currency, economists said.
Too Fast?
Some traders and analysts said the dollar may pause from its losing streak against the euro in coming days as one measure of the currency's weakness, the relative strength index, signals dollar sales won't maintain their recent pace.
The index calculates the degree daily losses outpace daily gains in order to identify possible turning points in a currency's price. The dollar-euro exchange rate fell to 25.53 on the index, its lowest since the euro began trading in January 1999. Readings between 20 and 30 imply the momentum of the currency's decline will stall, according to analysts.
In another indication expectations may have overshot the need to sell dollars, speculators have amassed a record amount of futures bets that the currency will fall further. That means fewer speculative traders are left to sell dollars.
Record Bets
Data from the Commodities Futures Trading Commission shows speculators held 31,472 long euro futures contracts in the week ended April 30. Those contracts would gain in value as the dollar declines.
Some traders also said declines against the yen will subside because Japanese officials may step in to weaken their currency. Japan's authorities have encouraged a weaker yen to boost profits exporters earn on overseas sales, as the country struggles to emerge from its worst post-war recession, analysts said.
Mazda Motor Corp., which exports two-thirds of its products, in April said it gained 32.5 billion yen more in the fiscal year ended March 31 than the previous year, because the yen was on average 13 percent weaker against the dollar.
Haruhiko Kuroda, Japan's vice finance minister for international affairs, said Thursday that while there was no change in currency policy, Japan will watch foreign-exchange markets closely.
``There is no need for the yen to strengthen,'' said Kuroda, according to Nikkei English News.
Econoclast
(5/4/02; 09:18:17MT - usagold.com msg#: 74901)
Great Postings by everyone yesterday!
Thanks so much to everyone involved.
USAGold is "the place to be".
Have a Golden Day!
mikal
(5/4/02; 08:35:47MT - usagold.com msg#: 74900)
Gold's role
Another way in which the world's common interests are revealed and improved- Gold. Its growing, visible place as a wealth preserver from Europe to Russia with its Chervonet and trade coins back in circulation, China and its exchanges, central bank purchases, and age-old investment demand, India, Far East, Middle East (Near East) to Latin America, Africa, North America, Australia, and all Islands and points between. A renassaince of gold and its reputation would naturally benefit the people of the euro, dollar, dinar, ruble, yuan, yen, rand, peso, etc.
mikal
(5/4/02; 08:14:34MT - usagold.com msg#: 74899)
@Hipplebeck
Appreciate your observations. I agree that the world is polarizing in some ways. Politically and economically. But it seems to be a fallout stage in a cycle of great change, with a positive outcome essential for survival and progress. There are increasing competitive trade barriers, subsidies, and tariffs/duties on imports, currency devaluations, repatriation of investment dollars, foreign policy stalemates, unilateral wars on "terrorists", etc. Solutions will appear from every direction, some new, some old. But the world's common interests are revealed and improved by the internet, cultural and scholarly exchanges, and coexistence in the face of human and environmental mismanagement, hatred, and an overgrown military/industrial complex.
Hipplebeck
(5/4/02; 07:28:08MT - usagold.com msg#: 74898)
gold
It is natural that gold be the instrument that destroys the present paper system.
It is it's role. It has done so over and over through out history.
Can The New World Order boys pull victory from defeat?
I don't think the've got a chance, but I am sure they are going to make everyone suffer.
The world is becoming more polarized, not more consolidated.
Economic power is shifting east.
Hipplebeck
(5/4/02; 06:58:11MT - usagold.com msg#: 74897)
(No Subject)
I have been struck lately that the way the economy works these days reminds me of that bridge in Washington some years back that got into harmonic resonance because of the wind and tore itself to pieces.
I believe a slower and stable rate of growth through the gold standard would solve this, but it is very hard to be patient with slower growth.
I sometimes wonder of mankind itself will ever become mature enough to solve these social problems.
Topaz
(5/4/02; 05:45:04MT - usagold.com msg#: 74896)
Towny re: Cockerill
Randy, it's as if Mr C has been reading/posting here for several years - all good stuff EXCEPT the industry sponsored "certificates".
I don't doubt his good intentions but the entire article could be viewed as touting soon to be announced Industrial Gold paper as a primary driver of higher POG... I hope he's right and we sail off into the sunset under a steadily increasing paper Gold price to live happily ever after......but imho, it aint gonna happen!
Waverider
(5/4/02; 01:35:22MT - usagold.com msg#: 74895)
MZM Growth Plummets
http://www.zealllc.com/2002/mzm.htm
Snippit:
"All throughout 2001 the rate of growth in the crucial MZM money supply was rocketing northward. The year-over-year MZM growth rate exploded from 7.7% at the dawn of 2001 to an almost unbelievable 22.0% in early December 2001!
Even though today the rate of growth of MZM is finally plunging from December's stratospheric heights, MZM is still growing far faster than it has in recent history. Over the past 20 years the average US MZM growth rate has been 9.4%, seemingly quite high in light of US economic growth but still low compared to the latest weekly MZM year-over-year growth reading of 13.1%."
Waverider: Following a review of the seven primary daily datapoints for current financial events, Adam Hamilton provides an overview of money growth trends and economic implications thereof. A good read!
Also, a BIG thank you to each and every poster here. I've been away on business and have particularly appreciated accessing cutting-edge information just by scanning the forum. Kudos to everyone for your great work.
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