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Welcome to the USAGOLD Gold Discussion Archives. The archives of this gold discussion forum are a treasure trove of information to educate investors about protecting their wealth through portfolio diversification with private gold ownership. The discussion forum also covers the wider issues of the past, present, and future role of gold in international monetary policy and the dynamics of the modern gold markets...   (Discussion Forum Hall of Fame) (The Gold Trail) ("Thoughts!" by ANOTHER)   The opinions posted by all guests are expressly their own and do not necessarily represent the views of the management or staff of USAGOLD - Centennial Precious Metals. The hosting of the public discussion shall therefore not be construed as an endorsement by USAGOLD - Centennial Precious Metals of any of the opinions posted here.

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ARCHIVED DISCUSSION FROM 1/5/2001
All times are U.S. Mountain Time

(Yesterday's Discussion.)

SHIFTY (01/05/01; 23:45:10MT - usagold.com msg#: 45142)
Mr Gresham
Mr. Rogers' job
Mr. Greenspin my have some competition for Mr.Rogers job . I heard last week there was talk of Billy Clinton getting a TV show.
Then again CNBC may have a large time slot opening up in the next few weeks! They can both have TV shows if they play their cards right!
LOL

$hifty


Mr Gresham (01/05/01; 23:10:18MT - usagold.com msg#: 45141)
I Don't Think I've Ever Read it So Clearly Put Before
http://quote.bloomberg.com/fgcgi.cgi?T=special_news2.ht&s=AOlOyFRSOVS5TLiBF
Washington, Jan. 3 (Bloomberg) -- Federal Reserve policy- makers cut the benchmark U.S. interest rate a half point to 6 percent in a surprise move aimed at preserving the record economic expansion.

``It's a loud and clear message that there's not going to be a recession,'' said Stephen Slifer, chief economist at Lehman Brothers in New York. ``The Fed stands ready to do whatever's necessary to make sure nothing bad happens."

And I thought that that's what sleeping with a nite light on was supposed to do. (I wonder if they have a brand with Alan G's face on them? Hey, isn't Mr. Rogers' job open now? Kids, wouldn't you like Mr. Greenspin's neighborhood on your TV?)

Christian (01/05/01; 22:06:02MT - usagold.com msg#: 45140)
(No Subject)
To Silvercollector - -gold manipulation
I found out from somebody that works at the Bank of England that credit creation gold price is $3000+ and from BIS that USA trade deficit settlement price is over $500. The low commodity gold price is being used to take gold out of circulation and then used for credit creation to feed the stock market and real estate boom. The boom and bust cycle is made possible by using gold for credit creation to create credit until everything is mortgaged to the hilt and then forclosed on. This has been going on ever since the discovery of paper money. I wrote to many elected officials and asked what 1- what price does credit creation gold change hands and 2- what price gold is the USA trade deficit settled at BIS? I must be on to something because my place was searched and my webtv unit disabled. Some of the elected officials are asking questions and getting different information. Many of these elected officials have heard of the ESF but have no idea what it does. Ever since I posted this on GE I have been unable to post again. You should see some of the response I get from the elected officials- they must be in on it for many of these officials like Hillary Clinton, Jon Corizone (SP) are making millions on this scam. I have mailed every month for the last 5 months to over 40 elected officials and some of them are seeing what I see. I got a letter today that said that "money is credit-imaginary demand-inflation-seigniorage. He stated that to get elected you have to be in on it in order to raise funds to run. Most elected officials make at least $50,000 per speech at the commodity exchange which are shown as profits made on betting on a lower gold price. I hope more people will ask the same two questions. Our future freedom is at stake. We the people are to blind to ask the obvious.. There is no transparancy to the gold market.

SHIFTY (01/05/01; 21:46:25MT - usagold.com msg#: 45139)
Canuck
CNBC
I was watching CNBC on and off today. You are correct about a look of panic.
I think I will pick up a tape for the VCR and tape CNBC this next week. It could be historic. Plus if gold decides to do a moon shot I want to have the Larry Kudlow reaction on tape.

$hifty

Canuck (01/05/01; 20:55:05MT - usagold.com msg#: 45138)
CNBC
I watched CNBC for most of the day today (had the day off) and was both alarmed and in awe with the blatant and treacherous financial coverage it had to offer.

I began to watch at about 9:00 (eastern), just to get into the 'swing' before the markets opened. Larry Kudlow made the boneheaded spiel about inflation shortly after 9:00 (inflation is not rising because gold is not rising?), Maria did her 'on the floor' freak out show at 9:20 and then hell broke loose shortly after 9:30. Bank of America did not open and red alert warnings came out that there was rumours of 'derivative' problems. The CNBC desk was set afire with speculations and theories. For a full 20 minutes, until near 10:00 they were falling over each other with reasoning why the stock never opened. The PANIC was on the CNBC newsdesk. The anchor dude (sorry, I don't recall his name) made the statement, to the effect of, " the public deserves to know the possibilites, and one possibility is that the Bank of America may be in trouble, it may be derivative exposure that has gone bad on them."

The desk hushed and they stammered and stumped for several minutes until the BAC announcement. Then they cut back to the floor and Maria did her hyperbole freak show routine that BAC had made the announcement that everything was okay in 'derivative land', the stock was set to open any moment and it was going to open only a couple bucks down.

Sure enough, BAC opened soon after, an hour late I might add, the DOW briefly retraced and the 'pundits' gathered themselves and everything was okay in 'goldilocks' land.

HOWEVER, this is what I saw. For a couple fleeting minutes, maybe from 10:00 or so, there was horror at the desk. There was a genuine concern, a feeling that all hell was going to break out, a major sell-off. There was, for a minute or two a feeling of PANIC on the astute CNBC. It was there, crystal clear.

These clowns know what is going to happen. They are 'actors'
playing the bull game and now even the actors know the outcome. They know 'meltdown' is so very, very close. Mr. Greenspan's PANIC rate cut this week is being scutinized over and over this week and no one is able to justify his rash, abrupt decision other than he HAD to, he is on emergency damage control. The 'January effect' was clear and evident from Tuesday 9:30 until noon Wednesday, freefall was in the cards. He didn't want to prematurely cut rates but after a day and a half of mayhem he had no choice.

The house of cards (paper) is burning.

RossL (01/05/01; 20:11:48MT - usagold.com msg#: 45137)
Chart of the crashing ¥ and soaring €
http://home.columbus.rr.com/rossl/gold.htm

Drastic measures by the US fed do not even show up on this chart. I will be looking for derivatives to be making their mark soon.

Happy 2001 !

silvercollector (01/05/01; 20:07:44MT - usagold.com msg#: 45136)
Christian
Have followed you very closely over at G-E.

You mentioned a few weeks ago that the heat was on, you had to leave.

Can you elaborate?

beesting (01/05/01; 19:36:33MT - usagold.com msg#: 45135)
Hi Sir Belgian # 45130
Thanks for the response, it brings up a lot of points for further discussion.
It's my opinion the jewelry business here in the U.S. is not affected very much by the spot POG simply because there is a huge mark up in jewelry anyway, most is 10,12,14 & 18 carat, according to my wife. That may be much different in India, Thailand,UAE, and other locations where jewelry is closer to 24 carat.

Lets look at POG @ 200 per ounce from a producers viewpoint.
If a producer of anything spends more to produce his/her finished product than they can sell or trade for it, how long will they continue to produce?
Answer...not very long!
There are a lot of factors slowly coming into play right now, one of them is; Euroland is valuing 15% of their digital currency(Gold) at market prices. It would not be in their best interests (they are trying keep a strong currency) if the POG went to $200 per ounce.

I look for the POG to be priced in Euro's and dollars very soon.
Currently POG in Euro's is around $280+ per ounce. Our old friend ANOTHER said long ago this($280) was a significant number for POG in U.S.dollars, it may also be in Euro's.($280 per ounce Gold = about $9.00 per gram or close to $9,000,000 per metric tonne,1000 kilograms)

One other misconception I think people may have is, if POG starts to climb buyers may disappear, I believe quite the contrary, buyers will slowly come out of the woodwork as the POG rises. That's what happened in the middle 1970's in jumps and hops till 1980's when the $850 spike happened. At $850 per ounce Gold some were BUYING!

Well enough said for now...We watch Together....beesting.


justamereBear (01/05/01; 16:57:57MT - usagold.com msg#: 45134)
Peter Asher

UASG dated 01/05/10 11;59 MDT (message # 1059772)

I can't remember who said it, maybe Alan Greenspan, or more likely Bill Clinton, but one of the more famous quotes of the day was "I will return, reincarnated, to rescue the country from this mess caused by the Bush crowd. The good times will roll again".

Sorry Peter, not as good as yours.

j'Bear



Randy (@ The Tower) (01/05/01; 16:55:46MT - usagold.com msg#: 45133)
ECB board member Tommaso Padoa-Schioppa sees good year ahead for euro
http://biz.yahoo.com/rf/010105/l05252766.html
In an interview on Italian state television, P-S said telling in the wake of the U.S. rate cut, "Today in Europe there is a great European currency. Our moves are not towed along by U.S. moves but are based on European economic conditions."

In case you haven't noticed, many things are not as before. Act now to position yourself accordingly.

Christian (01/05/01; 16:46:58MT - usagold.com msg#: 45132)
Money and Power

Mail message


  Money is accepted in exchange for
wealth until wealth expropriation
consumes most of production and the
public begins to starve. Easy credit
made possible by credit creation $3000+
gold along with the lower interest rates guarantee future correction. Money
creation is a check written without a
bank balance (deposit) or collateral.
What is stoping the central bank from
using the credit creation gold priced at $3000+ over and over. Much of the US
private sector debt is collateralised by equity and real estate holdings. Today
the main economic function of money is
expropriation of wealth. Asset
valuations can only be driven higher at
the expense of the real economy.
Inflation can not be controlled. We the
people have been fooled into believing
gold price is $270 when trade settlement trade gold goes for $526 and credit
creation gold goes for $3,000 and that
same gold is used over and over at least 10 times. I dare anyone on this forum
ask 1-At what price does credit creation gold change hands? 2-At what gold price
does the USA settle its trade deficit?
Retaining the god-given right to
distribute one's own wealth is the only
guarantee of freedom from tyranny and we do not even have the right to sell gold
at its true value. Money accepted as a
medium of echange subjects people to the influence of its creator. It is hard to
believe that the FED and the Bullion
Dealers have been and are trading with
wealth in under-ground free markets. Nobody has the guts to
ask the real questions and demand a real answere. I tried but found it dangerous
to my physical and financial health. I
am just a dumb farmer and I wish some of you smart people get answeres to 1+2
above. In our so called free markets
there are many losers and few winners.
The money that the many losers lost went to the few. It did't vanish; it changed
owners. Most of us on this earth are on
this earth to be financially wiped out
by the few and we just can't seem to get wiped out enough.


Randy (@ The Tower) (01/05/01; 16:20:15MT - usagold.com msg#: 45131)
HEADLINE: Daily forex trading shrinks by a quarter
http://straitstimes.asia1.com.sg/money/story/0,1870,15466,00.html?
Globally, the volume is down a quarter, while in Asian trading centers specifically, the volume is down nearly two-thirds.

A good excerpt from the article:

"Lower currency flows can also be attributed to 'an unprecedented convergence of global interest rates' in the past five years, wrote Mr Leven. The narrowing differential on yields dampened demand for 'carry trades', where investors borrow money at a low interest rate and deposit it in countries with higher returns, he said.
+
Lehman expects trading volume to pick up again this year, as the bank forecasts the US dollar will decline against the euro and yen."

Belgian (01/05/01; 16:17:37MT - usagold.com msg#: 45130)
@ Beesting - Hedging :
20 yrs ago, when South Africa, dominated the gold-production...hedging wasn't even considered. They did not have the difficulty to impose discipline. The only pirate was Russia.
I thingk that hedging accelerated, when CB's, started the sell signal. Strong and Rich mines had their specific reasons to hedge and weak and poor mines, had other reasons.
Running a big mine-complex is not the same as running a candy-shop. You can't close a mine in full progress. Once you have taken the descission to develop the mine, you are at the mercy of POG. But things got out of hand. Who could or still can answer the question : for how long is POG going to remain weak ? Goldmines have relied to long on the advanced techniques to mine and extract gold from the different ores. In their panic of CB's gold selling, they took the hedging-silver-plate as an opportunity to survive or expand and fight for supremacy. You and I would have reacted the same way.

But, once you started taking the hedge - drug, it is very difficult to re-adjust. Especially for the weak and poor mines. As a shareholder, I would choose for a care and maintainance strategy. But, then you give the others the opportunity to profit on an increasing POG. So, a cartel formation seemed and still seems to be impossible. It is the same circus seen at OPEC for many years. How many shareholders have the courage to consider their mine as an inactive-underground-gold-holding ? They want dividends and growth. Employees can't be put aside with a fingerclip.
Management can't go, unpaid, on a long vacation, whilst POG is adjusting to offer/demand. and the gold-producers are still ignoring GATA, openly.

As I said before : big - strong - rich miners, never panicked or showed any signs of panic. They found different ways to survive and kept on mining. And they are not going to explain us, their reasons for the choosen strategies.
Post factum, we are experiencing the effects on POG. But in the future, the hedge-choice, will work for POG as a later catalyst. An increasing POG will have a negative effect on jewelry-consumption. The production will be in a simultane declining phase and offer/demand will balance positively.

A few years from now...hedging will be remembered as a bad dream. It also took quite a long time, before OPEC, was ably to discipline itself. Gold producers will have learned their lesson. At 270$, time, is Gold's best friend.
The longer it takes...the costlier the lesson.

After all...it is the wrong hedging choice that contributes to the opportunity of physical gold buyers to acquire the metal at rock-bottom prices. A once in a lifetime opportunity.

Sorry to repeat my wish of a POG collapse to under 200$.
Such an event, would be a true eye-opener. It would be the short-pain-trigger, to act upon the fact. Gold producers would go bancrupt and Goldsellers would decide to stop selling and massive gold accumulation would start immediately. Now, I have the impression we are sitting in between two chairs. Not high enough to live and not low enough to die. Cruel, isn't it ?

POG-pattern from 2/96 - 414$ decline is a five (5) Wave affair. Best to be seen on a P&F chart. We are still in the last Wave V (five) down. The 253$ low on 9/99 was the end of Wave III (down)and the WAG spike was Wave IV (up).
We can discard this scenario, when 350$ has been breached without any doubt. I hate to say it...but...as long as 350$ hasn't been broken...we are still down-trending. This is a very good reason to put all emotions on the shelf for the time being. This scenario does not exclude an unexpected and explosive turnaround. NIA !!!

Cavan Man (01/05/01; 15:47:15MT - usagold.com msg#: 45129)
USAGOLD #44982 1-3-01
Sorry, couldn't resist.
"I expect a down day tomorrow for that reason and, if that happens, a minor rout of the DOW Index to ensue..."

Cavan Man



Randy (@ The Tower) (01/05/01; 15:35:18MT - usagold.com msg#: 45128)
Hall of Fame...good for weekend reading...now includes latest nomination of commmentary by Holtzman
http://www.usagold.com/halloffame.html
This special archive really does a fantastic service to encapsulate the intricacies of the gold market and philosophies behind personal gold ownership.

On another note...a plea to I.V. Holtzman: over the months I have derived considerable personal satisfaction reading your contributions. The exceptional even-handed treatment of your subject matter continues to strike me as nothing short of profound. Do you happen to have a list of your prior commentaries, and if so, would it be at all convenient for you provide it to me? I am otherwise daunted by the notion of prospecting the vast wealth of the archives to unearth your collective text. I should like to have an index of them, and perhaps make it similarly available for the benefit of new and future visitors.

In the early days you had e-mailed your commentaries to Michael to be posted on your behalf. Given his busy schedule and the e-mail traffic he receives, I can imagine that in his priority to attend to the business side of things it is possible that a commentary intended for the forum did not make it there. If so, and if you still have the text not rendered obsolete by the passage of time, I would be eager to receive it for proper inclusion in this index. Again, I request this only if it is quite convenient for you, sir.

And I thank you.

Peter Asher (01/05/01; 15:27:01MT - usagold.com msg#: 45127)
J-Bear
How'bout,

"If I had KNOWN she was a hemophiliac, I wouldn't have bit her on the lip."

Gold Trail Update (01/05/01; 14:20:41MDT - Msg ID:45126)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.

justamereBear (01/05/01; 14:11:23MT - usagold.com msg#: 45125)
All re 2 rate cuts in 2 days

This dead fish has officially become VERY VERY smelly to my nose. It became VERY smelly at the unseemly haste of the passage of the HR4541(?), the derivatives bill cooperated on by all political parties at a during the pre election fever, when no trick is on the opposition is to lowly to contemplate.

Hoo boy, anyone that does not read the writing on the wall, can't read. The BIG question is, will teflon Bill survive the next 16 days unscathed?

I think we should start a contest. Best one liners by the condemned facing the firing squad. A little Gallows humor. Winner to enter the CLEHOF. Any takers?

May God bless us all, each and every one.

j'Bear



auspec (01/05/01; 13:17:24MT - usagold.com msg#: 45124)
Friday Again
The Boyz have survived another week of extremely short gold positions. Maybe they actually THRIVED this week by selling "fools gold" to some fool, knowing full well their shorts will be bailed later as per the "free money" theories taught at this establishment. Regardless, the vigil continues. Can they succeed in causing a panic low from here? We're certainly properly set up for it. MK, you probably should install a few more phone lines to handle all the orders that would come with $205 "fools gold" pricing. I am ready! Can I put in a pre-order in case the spike down is short lived, as it surely will be? Will you have enough to go around? Will a divergence of price between "fools gold" and physical crop up and spoil our insightful plans? Who can predict this dollar price of the divergence point accurately? Any guesses?
Waiting patiently. Got enough physical, got GATA???

beesting (01/05/01; 13:09:28MT - usagold.com msg#: 45123)
Gold Mine Hedging!
Black Blade # 45078 Hedging Scams and RossL # 45099...Excellent Posts...

<<The question is, why do some producers continue to hedge???>>

I have thought long and hard about this for a long time now and this is what I come up with:

Everyone knows shareholders are the true owners of companies and management is supposed to do what the holder of the "MAJORITY" of shares vote to have done concerning company policy. Well I follow many of the Gold mining companies reports and releases and South African Gold mines used to release the top ten owners by shares of the mining company. The top 8 to 10 shareholders are always some type of bank or financial institution.(I've had trouble getting that information recently)
Now, I submit, controlling interest in "Hedged" Gold mines is made up of the same group that has controlling interest in the "Bullion Banks" that offer the miners cash or the equivalent for unmined Gold,hedges.(Future Gold Production)

Therefore the real "Majority" owners of the mines are and have been making much more profit dealing in the hedging business of Gold than the actual sale of the product produced.(GOLD) Management of these mines are told to hedge.
This seems to answer the question for me, "Why do some producers continue to hedge?"

On Ashanti...Thoughts Only...Some of the "Minority" shareholders have started a legal action against the company.I don't think any share holders want to stop current and future Gold production, however if current Gold production is stopped for a period of time the existing and future hedges may become almost worthless(Read go down in percieved value) as no Gold is being delivered at all or at the time specified,to be delivered. If that scenario ""Did"" happen in the not to distant future wouldn't holders of those hedging(paper contracts) try to sell(dump)them at any price and couldn't that action "Depress" the spot price of Gold irregardless of whats happening in the other financial markets?
Thanks for Reading...beesting.





Randy (@ The Tower) (01/05/01; 13:07:21MT - usagold.com msg#: 45122)
The Fed adds $5.5 billion to banking reserves today
Using over-the-weekend repurchase agreements with the standard spectrum of collateral, the Fed has helped to temporarily boost banking system reserves by five and a half billion dollars.

Fed funds were trading at 5-7/8ths percent, which is below the target rate. Almost makes one wonder how many of the demand-side borrowers are opting for the Fed's direct discount window (and with it the better rate) instead...

Randy (@ The Tower) (01/05/01; 13:00:22MT - usagold.com msg#: 45121)
I suggested this Wednesday, now you can see it in media print
http://biz.yahoo.com/rf/010105/l0578108_2.html
From Reuters with the HEADLINE: Europe welcomes Fed discount move, frets about banks

Excerpts:

"LONDON, Jan 5 (Reuters) - A second unexpected rate cut by the U.S. Federal Reserve in as many days was welcomed by European analysts and investors on Friday, but some cautioned the move could indicate distress in the banking system."

"...underscored growing concern about credit woes among major U.S. lenders.
``The discount rate is technical but it may suggest that there is some financial distress,'' said Bill O'Neill global strategist at HSBC Investment Bank in London.
``There has been talk that (the Fed) know of a particular bank in distress.''

``Banks don't often do it because they can borrow elsewhere more cheaply,'' said Paul Horne of Schroder Salomon Smith Barney in London.
``If they use it it is a signal to the Fed that banks are having difficulty and may be having trouble on the open market.''
``There has been concern because the Fed has acted so precipitously and indeed without precedent. It will get the market worried that there is some kind of specific problem out there that the market doesn't know about.''

"Most U.S. banks have had to set aside chests of money to protect against commercial loan defaults, analysts said."

``The Fed is the borrower of last resort and it could well be the case that they are trying to improve liquidity conditions for U.S. banks,'' said Matt Wickens, global economist at ABN Amro in London.
-------------
The Bank of America is said to have missed fourth-qauarter earnings projections due in part from $1.2 billion in bad loans.

Where do you run to protect your wealth (or should I say buying power) currently represented as currency when you know the Fed will do whatever liquidation (inflating) necessary to prevent a domino effect among a strapped banking system? You run to gold, of course. Call Centennial today and let them help you chart a safe course. Life may be hard without an "economics owners manual"; gold makes it just a bit easier.

Artie Farkle (01/05/01; 12:56:02MT - usagold.com msg#: 45120)
Salomon Smith Barney Recomends Gold in 2001
http://www.minesite.com/brokers.htm
They state that "almost all gold equity prices should improve dramaticly."
It is nice to hear words of encouragement but, what about all of those hedge books out there?


Zenidea (01/05/01; 11:35:50MT - usagold.com msg#: 45119)
jittery BOA
http://finance.yahoo.com/q?s=bac&d=t
text books flying in the office?

SHIFTY (01/05/01; 11:26:46MT - usagold.com msg#: 45118)
I forgot
Only GOLD is aloud to go down.

$hifty

SHIFTY (01/05/01; 11:23:54MT - usagold.com msg#: 45117)
Mr Gresham
I just got back in the house. Did they stop Bank of America?

$hifty

Mr Gresham (01/05/01; 11:08:50MT - usagold.com msg#: 45116)
Just for fun
http://www.etrade.com/cgi-bin/gx.cgi/AppLogic+ResearchStock?prod=BAC:NYSE:EQ&cmenu=Chrt&etstyle=1d
and future preparation, let's see what a trading halt in a stock looks like

SHIFTY (1/5/2001; 9:31:48MT - usagold.com msg#: 45115)
Kitco chart
ZOOM ZOOM ZOOM

ORO (1/5/2001; 9:30:24MT - usagold.com msg#: 45114)
Zombie - Dead body or walking corpse
I did a little calculation regarding the confluence of a couple of dead bodies recently departed, and the walking dead of the California energy markets and their creditors.

Cal governor Davis had met with Greenspan a day or two before the Fed's panic easing. Davis was probably told to raise rates or face responsibility for a credit market debacle as they file for bankruptcy just when Wards, LTV steel and Benderly (sp?) went belly up and Xerox is facing a cash crunch in recycling its debt and has exhausted its bank credit lines.

The Wards and LTV deaths are going to create a $3 billion (Ward's depends on how much they raise in their going out of business sale) hole in banking, but Xerox and the Cal utils are on the order of $8 billion EACH.

The two zombies needed to have their credit costs cut, and their bank creditors needed to lower their cost of funds. Furthermore, construction borrowing has fallen as short term construction loans have risen by 1/3 while labor costs continued upwards by 10% by my reckoning, thus eliminating the "Spec" construction, now 40% more expensive to hold. This factor and the new competition at the low end of the car market from Korean makers (lowering the dollar value of car sales and loans and shifting them away from US makers) has caused a drop in the overall volume of sales and loan originations for short term lending by banks. That meant that it was possible to have up to $20 billion in defaults coming due this quarter, with no prospect of short term money being created quickly enough to replace it.

At 5% capital adequacy, a $20 billion loss would require an additional $400 billion credit expansion to replace the lost capital, on top of that needed to cover losses of junk debt, which has put some leeraged LTCM style players in danger. This figure was way outside the realm of the possible at current rates, even with Treasury buybacks and Fed monetary injections at near record levels.

Davis must have cut a deal with Greenspan that would bring credit costs down, while Davis would act to increase the util's revenue.

That is the most probable panic cause, otherwise the rate would have been lowered following an ordinary meeting.



Black Blade (1/5/2001; 9:13:28MT - usagold.com msg#: 45113)
Stocks Slump, Led by Financials
http://biz.yahoo.com/rb/010105/bj.html

NEW YORK (Reuters) - Stocks fell in early morning trading on Friday, led by financial shares, as investors worried that the surprise interest-rate cuts by the U.S. Federal Reserve may signal distress in the banking system. Meanwhile, monthly jobs numbers that added to more signs of an economic slowdown before the opening, just two days after the Fed lowered key interest rates in a move that sparked an explosive rally in stocks. ``It's hard to make the case that an interest rate cut is to the solution to all problems, it should help consumer sentiment somewhat,'' said Bill Meehan, chief market analyst at Cantor Fitzgerald & Co. ``Right now the concerns are what kind of economy are we looking at, how long will it take for the Fed rate cuts to have an impact.

Black Blade: That's more than enough fun for me today, I see some ducks down by the creek. I gotta go Whack some Ducks! Only 2 more weeks left in the season.


Black Blade (1/5/2001; 8:54:03MT - usagold.com msg#: 45112)
Bank Of America Dn 8% On Talk Of More Credit Problems
Updated: Friday, January 5, 2001 10:36 AM ET
By Tara Siegel
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Bank of America Corp. (BAC, news, msgs) said it has not experienced any significant losses in derivatives or other trading activities, putting the rumors that pervaded the market earlier to rest. "We know of no basis to support speculative rumors about our operations," said a Bank of America spokesman. "We are conducting business as usual." He also said the company remains comfortable with its guidance for credit quality in 2001 as provided to investors last month. Trading was halted on Bank of America's stock and has not yet resumed.









SHIFTY (1/5/2001; 8:34:58MT - usagold.com msg#: 45111)
Black Blade
PPT
I was just going to say something about them being very active today.

$hifty

Black Blade (1/5/2001; 8:22:08MT - usagold.com msg#: 45110)
U.S. stocks weaken as warnings pour in
http://www.quicken.com/investments/cbswatch/market_snapshot/?column=P0DST

http://cbs.marketwatch.com/news/newsroom.htx?dist=intutextBy Julie Rannazzisi, CBS.MarketWatch.com
Updated: 9:50 AM ET January 5, 2001 Printer-friendly version

Excerpt:

NEW YORK (CBS.MW) - Stocks retreated across the board Friday as investors processed an employment report that revealed slowing job growth and pondered another slew of profit warnings. Weakness was widespread in the hardware, software, Internet, retail, financial, biotech and chemical sectors with only natural gas, gold, drug and oil service issues showing some signs of strength.


Black Blade: Looks like the "Working Groups on Financial Markets" aka PPT have stepped in as market indices are recovering. It doesn't take much now to rile the markets does it?


Black Blade (1/5/2001; 8:17:42MT - usagold.com msg#: 45109)
RE: RossL - This can be fun! The gold world's version of "Survivor"
The problem of hedging over the last 4 to 5 years is that once the prices have been beaten down, there is little benefit to hedging. Eventually the spot price and futures prices converge to a point where there is no net benefit. Most hedged mining companies are working off hedged positions from years ago; however, any new hedges (forward sales) are not likely to yield much. With an explosive rise in the price of gold, many hedged miners will have the same unpleasant experiences as Ashanti Gold and Cambior. The next few months could get very interesting indeed. We will have to see who survives the shakeout. Cheers!

RossL (1/5/2001; 8:04:53MT - usagold.com msg#: 45108)
Mr Gresham - msg#: 45083 - So Clear is the Mises Outlook
http://www.mises.org/fullstory.asp?control=581&FS=The

Thanks for the link.

-snip-
"Prices are determined by real and monetary factors. Consequently it can occur that if the real factors are pulling things in an opposite direction to monetary factors, there may be no visible change in prices. While money growth is buoyant, prices may not increase. The crux therefore, is not rises in the CPI, or relative increases in money supply versus rises in goods, but the fact that money supply is rising. It is this increase in money that matters, for it is this increase that sets in motion an exchange of nothing for something."
-snip-

This is one of those situations. The money supply is rising, and the dollar price of gold is not. To take advantage of the situation, I will exchange some FRN nothings for some physical somethings!!!


RossL (1/5/2001; 8:04:17MT - usagold.com msg#: 45107)
Black Blade

The use of hedging could be a beneficial tool if used in a prudent manner, just like a credit card for a consumer. Agreed, it has long since passed that stage and is now a recipe for disaster...


Black Blade (1/5/2001; 8:00:07MT - usagold.com msg#: 45106)
Could be another fun day on Wall Street!
DOW –214 and DUCK –90! This is interesting. Givin it all back I see! So much for rate cuts, soft landings, and stimulating the market. Don't walk on the sidewalks as those brokers splatter when they hit pavement!

Canuck (1/5/2001; 7:59:55MT - usagold.com msg#: 45105)
CNBC freaking
"We don't know what's going on, DON'T PANIC"

"We don't want to be irresponsible, DON'T PANIC"

Dow down 220, NASDAQ melting near -4%.

Canuck (1/5/2001; 7:56:39MT - usagold.com msg#: 45104)
Correction
Bank of America did not open. News pending. Derivative problems/debt rumours.

Dow beaten, down 200 pts., Nasdaq -3%

Canuck (1/5/2001; 7:52:05MT - usagold.com msg#: 45103)
Bank of America halted 09:45
Rumours of derivative/debt problems. News pending.

Can you say devirative meltdown!!

Black Blade (1/5/2001; 7:45:55MT - usagold.com msg#: 45102)
RE: RossL
Unfortunately, forward sales only hurt the gold industry as a whole by flooding the market with gold, albeit leased physical gold (actually sold) and paper gold. This in effect drives the POG down as it is interpreted by the market as a huge supply of gold will soon appear in the market (the so-called "over-hang"). These forward sales and leasing programs have helped to bring the gold market to where it is today. Although I don't mind the bargain basement prices as I am accumulating both physical and shares of extremely profitable unhedged gold miners. But I call a spade a spade.

R Powell (1/5/2001; 7:41:36MT - usagold.com msg#: 45101)
Morning thoughts

Mr. Canuck, I also saw Larry Kudlow explain on CNBC that there is no inflation and proof of this is that POG has not moved higher. At least he confirms that POG should move higher if there is inflation. My first thought was, like yours, to report this to the Stranger.

LeSin (45091), thanks for reporting Cage Rattler's thoughts on the Yen. I believe he used to post here and identified himself once as a currency trader. I've read other opinions that the Japanese currency may weaken.

A reporter on CNBC reported this morning that the Fed. does get the important numbers (like the unemployment number this morning) but only one day early. His sources, he said, were those who used to have access to the Fed. meetings. If this is still true, then the unemployment number was still unknown on Wed. when the Fed. lowered rates. Whether true or not, the employment number doesn't strike me as being noteworthy enough to cause Fed. concern. Is ORO's "Dead Body" (44964) yet to reveal itself??

Is the market euphoria over lower interest rates all spent now? Will the Dow, Duck and S+P find the line of least resistence is down. I shorted the S+P by buying a Put overnight on the globex thinking that something is still out there that caused enough fear to cause the rate lowering between meetings. I hope the stench from the "Dead Body" reveals itself soon. This is, of course, not investment advice. My investment decisions are however often humorous. Feel free to laugh.
Rich

Black Blade (1/5/2001; 7:37:30MT - usagold.com msg#: 45100)
Clinton unveiling historic forest rule
http://www.msnbc.com/msn/511867.asp

Roads, logging, oil drilling to be banned on 58.5 million acres. Clinton is still searching for a legacy, other than the legacy of leachery. A fight in Congress is ensured, and lawsuits are going to be inevitable.


RossL (1/5/2001; 7:10:27MT - usagold.com msg#: 45099)
Black Blade - msg#: 45078 - Hedging Scams

Black Blade said:
"The major gold hedge fund producers in this example, do not provide much value if any to the shareholders. The question is why do some producers continue to hedge and depress the price of gold? It would appear that they are too deep into debt and in the clutches of their banker overlords."

Hedging does provide cash flow, which may be essential to keep the mine open and the bills paid. Obviously, this cannot go on forever, selling anticipated production increasingly, on and on, out into the future.


Black Blade (1/5/2001; 6:35:39MT - usagold.com msg#: 45098)
Palladium continues to hover at $1000/oz level
http://www.bday.co.za/bday/content/direct/1,3523,768109-6094-0,00.html

PALLADIUM hovered near the 1000/oz level yesterday for a second consecutive day, but failed to convincingly break through the barrier because of a paucity of buyers in the market. The higher metals prices meant good news for platinum shares and for diamond producer De Beers. The magical $1000/oz level has been regarded as an important barrier for some time, as Russian shipments of the platinum group metals have not been forthcoming. The metal was bid at levels above the 1000 mark, but analysts said this was more a testing of the waters rather than a serious offer. UBS Warburg said in its report on the precious metal market that "the PGM (platinum group metals) market remains becalmed with very little interest. Although there are few sellers around, few buyers appear willing to pay up for all but immediate requirements."

Platinum did not fare any worse, being dragged higher by the high palladium price. Platinum was fixed in London in the afternoon at $632/oz, compared with $638/oz in the morning, a 13-year high. Palladium's price was fixed at $991/oz, compared with $993/oz in the morning and 987/oz the previous afternoon. UBS Warburg said Russian shipments would continue to dominate price movements over the next few months. "If shipments do not resume within the next week or two, then the price could head much higher. Although both metals should remain firm through 2001, it is hard to see the current levels maintained (especially palladium) once this temporary delay in Russian shipments resumes." The higher prices had a knock-on effect on the platinum shares on the JSE Securities Exchange SA, which continued to outperform most of the market.

Anglo Platinum, the largest of the producers, managed to add R12,20 a share to end at R342 a share, while its smaller rival, Impala Platinum, was up R10 a share to R362 a share. Northam Platinum gained 85c to end the day at R14,80 a share.

Platinum's firmness was attributed also to the fact that the US, thanks to a cut in rates, would not show as severe a slowdown as expected initially. This meant that car sales -- platinum and palladium are used as car exhaust catalysts -- would slow down less than presumed, while jewellery sales (about 50% of platinum is used in jewellery) also would be affected less than initially thought. It was not only the platinum sector that was running ahead thanks to the higher prices. The resources index managed to gain 314 points or 5% to 6502, buoyed by the interest rate cuts in the US overnight and the climbing platinum index, which gained 910 points to end at 25472.

On the broader resources side, Anglo American's share price gained R31,60 to R443,60 and De Beers rose R13,80 to R210,40. This was despite figures from jewellery retailer Tiffany overnight showing flat retail numbers for the December holiday period, although comparable numbers were difficult to assess because of the millennium rush at the end of last year Tiffany said. Tiffany reported an overall increase of 2% for the period from November 1 to December 31, up from $474m to $482,5m. US retail sales fell 1%, with comparable store sales down 3%, following a 27% rise last year due to millennium madness.

Black Blade: Russian deliveries of Palladium were to begin the first week of January. Guess what?


Black Blade (1/5/2001; 6:20:58MT - usagold.com msg#: 45097)
Euro rises on dollar to highest since June
http://biz.yahoo.com/rf/010105/tau024081.html


0726 GMT -- Euro rose to 95.95 cents , fresh six-month high against dollar.-- U.S. operators aggressively bidding up euro against dollar, dealers said.-- Euro/yen quoted at 111.49/62 yen, off intraday high of 111.77 yen.-- Euro attracting demand as investors turn increasingly wary of outlook for both U.S. and Japanese economies.

Black Blade: Listen to the swoosh of cash flowing out of the US and back to Europe!


Canuck (1/5/2001; 6:16:14MT - usagold.com msg#: 45096)
@ Stranger
Here's a good one for you, hope it starts your day on the right note.

Watching CNBC, Larry, Joe, David and the boys jabbering about inflation.

"There's no inflation..."

"Inflation is a threat..."

"There is no inflation...look at the numbers.."

"Why do you think there is no inflation Larry?"

Larry, " ..because the price of gold has not budged.."

LOL!!!!!!!! Is this a comedy show or what!!

Have a nice day.

Canuck.


Black Blade (1/5/2001; 6:12:29MT - usagold.com msg#: 45095)
Russia to Default Again!
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3CPDASKHC&live=true&tagid=ZZZGXV4R00C
As Yogi Berra said - It's Deja Vu all over again. Now that the US markets are crashing, companies issue earnings warnings, and unemployment is climbling, etc. The last thing we need is to bail out the Russians again. Let the games begin!

Topaz (1/5/2001; 5:59:10MT - usagold.com msg#: 45094)
Physical de-couple
All: Great postings of late.
It's occurred to me, given recent events, that the A/FOA position on Gold market meltdown and subsequent Phoenix like rise of physical, is all the more plausable when one considers the "big-picture".
Under a $US world reserve Fiat situation as exists, the ONE threat to upset the Applecart has been Gold - and as we are well aware, through countless disappointments, the mechanisms for "control" of the POG are well and truely in place.
Now, through bad luck/management this $US is under seige from OTHER directions - BUT! the Au control mechanisms (designed to discredit Au vis-a-vis $US) are still in place.
No matter what the Dollar does, POG will not rise against it until the Physical de-couples. IMHO

silvercollector (1/5/2001; 5:10:50MT - usagold.com msg#: 45093)
Niagara Falls and Redemption of USD
PH in LA (#45071)

I visualize Mr. Greenspan has fallen over Niagara Falls in a barrel after blazing down the river for the past few weeks. After fearing the flight for a while, the actual event has caused him to panic. Take note that the fear of SM investors escalating upwards through brokers, bankers, etc. has now reached the top. When #1 is sh*tting his drawers it is confirmation that the jig is up.

It is not a co-incidence that this coincides with Mr. Strangers boyish glee. (#45073)


All,

Several posters has asked how to convert dollars to Euro and European currency. This line of posting has increased dramatically in the past few weeks. If this escalation (at the individual level) is a sign, imagine what is going through the minds of the big money.

Money ALWAYS flows to the vehicle yielding the highest ROI;
and as apparent over the past couple months or so it is not in US demoninated currency.

This also co-incides with Mr. Strangers inflation warnings,
imagine US banks stuffed full of greenbacks with more coming in. Dilution of a currency is inflationary.

SC



Black Blade (1/5/2001; 4:51:48MT - usagold.com msg#: 45092)
RE: Bonedaddy
Bonedaddy

I know where you're coming from. I have to deal with the BLM on occasion and the permits are always being reviewed. Meanwhile, I have guys who are out of work while some government leech (bureaucrat) is working on getting his ass the same shape as the seat of his chair. A couple of my friends in Sheridan and Buffalo not working right now, probably due to weather. They hope to get back to drilling soon. I would guess that when the situation turns critical and votes are at risk, then activity will pick up significantly. When voters are freezing in the dark, anything can be accomplished ;-) I was just thinking how those of us in the industry were able to predict these events long ago. Fortunately I have profited nicely from government inaction and consumer (Grasshopper) complacency. I hope to do as well or better with my PM holdings. Take care.

- Black Blade


LeSin (1/5/2001; 4:44:25MT - usagold.com msg#: 45091)
Rumour - "YEN To 140 = 1.00USD
from Kitco Forum
Date: Fri Jan 05 2001 00:16
Cage Rattler (The Yen) ID#33155:
There are events going on behind the scenes that will cause the yen to significantly devalue with some explosive moves. Initially levels of 140 versus the dollar are being talked about. Be careful out there...

Zenidea (1/5/2001; 4:20:13MT - usagold.com msg#: 45090)
,msg 45061
Indeed :)

Mr Gresham (1/5/2001; 3:40:52MT - usagold.com msg#: 45089)
Mutual Fund Outflows -- Janus $12B
http://www.amgdata.com/scripts/runisa.dll?AMGWEB.1770228:PGBANNER:406045
Don't you guys ever sleep?

Bonedaddy (1/5/2001; 3:33:12MT - usagold.com msg#: 45088)
Hello again, Black Blade
I've been away for a while, but have managed to check in on occasion. It is good to see that your informative posts are still as timely as ever. Actually the high price of NG is the reason I have not had time to access the forum for several weeks. Activity is so furious out here in the Powder River Basin that many of the guys I know have visibly lost weight in the last several months. 14-18 hour work days are the norm. As I'm sure you are aware from your vantage point, we are also having an "old fashioned winter" too.
From my point of view, it is time for the producers to refuse further investment until government gives some assurance that we will not be molested any further by the enviros. For instance it takes six months to APPLY for an air quality permit from Wyoming DEQ. All the units are basically the same, each application is largely the same except for location and horsepower. The actual testing and application takes about five days. No reason to drag out the process. But it has to lay in some looter's in-basket until it turns the right shade of yellow so he\she can not miss a coffee break. Let the bastards freeze in the dark! I have to each and every day, just for the priveledge of keeping the left coast on the grid.


Black Blade (1/5/2001; 3:15:27MT - usagold.com msg#: 45087)
LA Times: Rate cut sparked by Calif energy crunch?
Far Ranging Ramifications Here!


Thursday, January 4, 2001 Effect of State's Energy Crisis on Economy May Have Worried Fed

By JAMES FLANIGAN, Times Senior Economics Editor


The California energy debacle is rapidly growing into a financial crisis that could trigger bank failures, disrupt funds available for lending to businesses and consumers and spark general chaos in global markets for corporate bonds, financial experts fear. Such fears may well have been a factor in prompting the Federal Reserve to dramatically lower interest rates Wednesday, analysts suggested. The energy crisis poses a spreading threat to the whole banking system, given that the crisis is occurring against a backdrop of a sharply slowing economy and fears that more corporations may default on their debts, analysts said. A lowering of interest rates doesn't solve the energy problem, but it would ease the plight of California's embattled utilities by reducing their borrowing costs. That in turn would reduce pressure on banks and other participants in global markets that provide credit to those utilities as well as other businesses.

Also, whether intentional or not, the Fed action in effect sends a signal to financial markets that the central bank will support attempts by California's utilities and political leaders to work out a solution to the companies' credit problems, analysts said. But though Fed action inspired a rise in the general stock market, initial action by the California Public Utilities Commission had the opposite effect Wednesday on the state's major utilities, Southern California Edison and Pacific Gas & Electric. The PUC staff issued an initial ruling giving the utilities a temporary 7% rate hike to alleviate their problem of uncollectable costs and rising borrowings. Financial markets evidently saw that as too little, and investors send stocks of both companies into steep declines. To be sure, the Fed's lowering of interest rates was prompted by many factors related to the slowing of the economy. But several experts suggested that California's crisis was a factor, noting that Fed Chairman Alan Greenspan held a highly unusual public meeting in Washington on Dec. 27 with Gov. Gray Davis to discuss the California energy situation. Davis also met with President Clinton during the same trip. Until recently, the plight of Edison and PG&E to finance purchases of electricity at higher prices than they could charge their customers was thought of as an energy problem largely confined to California. But as the utilities' borrowings from banks and in corporate money markets have mounted, to an estimated total of more than $10 billion, the dangers of defaults, bankruptcies and withdrawals of credit have escalated.

As such, the California energy crisis draws parallels to the Russian currency crisis of 1998. Fears that a Russian financial collapse could trigger a global financial crisis prompted the Fed to lower rates suddenly that year, just as it did Wednesday. The problems of Edison and PG&E have multiplied as costs have risen for the electricity the utilities must purchase from generating companies. The utilities cannot pass on such costs to consumers because of a rate freeze dating to California's electricity deregulation in 1998. The utilities' loans from banks and financial markets have grown to such an extent that credit-rating agencies such as Moody's and Standard & Poor's are threatening to downgrade their credit ratings. "It will be hard to refinance those loans," given the utilities' worsening credit situation, said Joan Payden, president of Payden & Rygel, a Los Angeles investment firm. "If their debts are downgraded, we could have illiquidity in the markets."

The companies face the prospect of seeking protection from creditors under Chapter 11 of the Bankruptcy Code, which allows firms to operate under court supervision while terms are worked out with creditors. If the debts of Edison and PG&E were downgraded to a category of less than investment grade--equivalent to "junk" bonds--the consequences for the financial system would be severe, as would the consequences of bankruptcy. Many pension funds and other investing institutions could no longer hold the utilities' bonds if they were not investment grade. The sums involved are enormous. Like all utilities, Edison and PG&E must borrow heavily to purchase and maintain equipment for providing electricity. The total of the two firms' long-term bonds is more than $20 billion, all held by pension funds and institutions worldwide. If such institutions were forced to sell those bonds, the result would be major disruptions in financial markets.

If the utilities were forced into bankruptcy, the effect would be devastating on banks, including giants such as Bank of America as well as smaller banks, and on the commercial paper markets, where companies borrow and lend to each other, said William Gross, chief bond manager for Pacific Investment Management Co., a Newport Beach firm. This could lead to some bank failures and other problems in the banking system, analysts said. At the very least, loans to small businesses and mortgages for consumers would be reduced. The specter of such trouble was a major factor leading the Fed to lower rates Wednesday, said economist William Rhodes of Williams Capital, a New York-based investment bank.

Since the Fed's open market committee last met Dec. 19 and declined to lower interest rates, there have been several continuing indicators of worsening trouble in the economy. Notably, consumer confidence was reported to be falling in the latest study from the Conference Board on Friday, manufacturing slowed sharply, and the debt problems of California's utilities have mounted. The Fed's action sends a powerful signal of support, but a lot still hinges on action by the state's PUC.

The PUC issues a final ruling today on the rise in electricity rates it will allow Edison and PG&E, so they may recover some of their short-term under-collections on electricity purchases. Standard & Poor's and Moody's have said they are watching the PUC decision closely to determine whether they will downgrade the utilities' debts.

But prospects are not hopeful. The PUC staff's initial ruling Wednesday was for a lower rate increase than financial markets were looking for, said security analyst Brian Youngberg of Edward Jones & Co., a St. Louis-based brokerage firm. Edison stock fell 18% and PG&E stock fell 13% after the PUC initial ruling was announced.



Bonedaddy (1/5/2001; 3:08:37MT - usagold.com msg#: 45086)
Thank You J-Bear and John Doe
This is exactly the kind of information I was seeking!



Black Blade (1/5/2001; 3:03:41MT - usagold.com msg#: 45085)
Natural Gas Crisis is Taking its Toll
America is about to get a wake-up call on Natural Gas. Sure, we have been hammered as the bills arrive in the mail box, but the Grasshoppers in California are about to get a real shock, as rolling blackouts become the norm. Moodys has relegated the bonds of California's utilities to "Junk" status. The Grasshoppers are getting very angry and blame the utes rather than their own stupid NIMBY attitude that put them there ion the first place. The misguided environmentalism is a big contributor to the problem. These problems are expanding eastward now, as Grasshoppers everywhere are about to feel the bite of old man winter. Matt Simmons of Simmons and Company International and industry researcher says to get ready for a decade long problem. The crisis is potentially worse than the 1973 and 1979 oil shocks. 53% of American homes are heated with NG, and NG currently generates 16% of the country's power. Government convinced many to use NG and yet did not provide incentives for producing adequate amounts. During the recent low oil prices, there was virtually no incentive to explore or produce NG or oil. The result is that there is not enough domestic NG to meet demand, and the shortfall is made up from Canadian resources. Adding to this problem is the majority of possible NG targets are on land owned by the US government. The US Forest Service and the Bureau of Land Management control most of the west's public lands. Over the last several years, these two agencies have sided with environmental groups that are opposed to drilling. Another problem is that coal and oil are considered "dirty" fuels, and power generating facilities that use "dirty" fuels have to use carbon credits provided under the EPA's Clean Air Act. That means that by year end, these facilities are closed down as their credits have been used. This ads more pressure to NG-fired power generating facilities. Over 90% of all new facilities under construction are NG-fired power plants. The economy is already in a severe downturn, yet soaring energy costs will only accelerate the market crash. The time is now for wealth preservation, and gold and silver are just the ticket. It will get a lot worse before it gets any better. The whole process of building power facilities and reviving the economy could take years.

- Black Blade


LeSin (1/5/2001; 2:39:58MT - usagold.com msg#: 45084)
Salomon Smith Barney - Recommends GOLD in 2001
http://www.minesite.com/brokers.htm

MAJOR BROKER RECOMMENDS GOLD AS AN INVESTMENT IN 2001

For the first time in a very long time a major broker, Salomon Smith Barney, is recommending gold as an investment. And it is not one of the subsidiary offices which is taking this stance, but the big boys in New York via the Global research department.

The message from New York is short and to the point. "Gold bulls....don't give up....you're time will come," so plead the precious metals team in their GYRUS Update 2000. "Long-suffering gold investors have all but given up. We think they shouldn't. The last 18 months have been unusual for the industry as gold has lagged rather than led the commodity price cycle.

The consensus bear case is well established and a record-high US dollar masks the trend. We believe gold has found a protracted bottom. Our longstanding bull thesis on gold is predicated on a massive deficit of 1,000 metric tonnes, or 24% of the market.

Amongst all of the doom and gloom that is battering the global equity markets, it appears that gold may again, (for the first time since '96), be rediscovering it's sparkle."

You cannot say fairer than that, and the share recommendations from SSB's Australian office are also interesting. Newcrest as its best absolute recommendation, Normandy for liquidity and Hill 50 in the mid caps. They go on to say that if the thesis is correct and gold is indeed coming off the bottom then almost all gold equity prices should improve dramatically.

In the US the top large cap gold producer is considered to be Newmont Mining.

5 January 2001


Mr Gresham (1/5/2001; 2:34:48MT - usagold.com msg#: 45083)
So Clear is the Mises Outlook
http://www.mises.org/fullstory.asp?control=581&FS=The
If it really is any more complex than this, somebody got a lot of 'splaining to do.

Mr Gresham (1/5/2001; 2:16:00MT - usagold.com msg#: 45082)
Debt as Money: Break-a-Buck
We monetize our future labors ("I'll work to pay that back") by borrowing for current consumption. And if you lost your job for too long a time, well, you might have defaulted on your debt.

What has changed is the solidity of intention to do that paying back. I would say the psychology today is: "I'll pay that back if my stocks go up, as we all agree they must."

In a market crash, people will find it hard to service those debts, EVEN IF they keep their jobs. And many more of them will lose their jobs, to boot.

So the quality of the debt as debt money was compromised from the start. That is why it was offloaded to offshore funding corps, much of it, and slipped into money market funds, where one and all -- savers and debtors both -- might be fleeced of their cash balances.


Mr Gresham (1/5/2001; 2:08:45MT - usagold.com msg#: 45081)
Oro: Catching up
Oro #44964: "The "Dead Body" ... was still missing from public view. Needless to say, there must have been one and the corpse must have given off quite a heavy stench at the Fed's undertaking facilities. " I love it when you let the gallows humor just roll off your keyboard. It's timed so well after the output of little-known facts and numeric surmisals you provide us. Thanks, again.

Tar sands, yes. I had a housemate in the early '80s, PhD in math I think, who had done a stint for the Trilats in Toronto researching and cataloging all the mineral resources in Canada. Wholly-owned subsidiary of USA in a pinch, eh? Just as the CFRs in the 30s strategized the Grand Areas roping off of the Pacific vs Japan that led to Pearl Harbor?

Oro, what institutions among the TBTF are likely to also be TBTR (Rescue) if too many TBTFs line up with hands outstretched? In other words, there must be a decision process going on now of prioritizing the rescues, so that stronger balance sheet financial firms (like the S&L crunch) buy up the weakers. Who do you think is on each side of the list?

Further thought, this really might be a test of the question of the unified financial "syndicate" theory, whether there is consensus on loading the debts onto a few poor beasts and delivering a bullet to their skulls, vs. any and all struggling tooth and nail to survive at the expense of one and all.

AG's priority is, as it was in 1987, to protect the system of payments clearing, so that insolvencies do not happen to institutions merely because of seize-ups in clearing payments due from other mostly-solvent counterparties. That is where the Fed interposes with liquidity.

Herstatt risk. That's like saying "BOO!" in the dark to a central banker.

Hmmm, I was going to put more in this post, but the winds outside have a high probability of blowing my power out, so I'll get out of here now. It's been quite a day.





Peter Asher (1/5/2001; 1:21:56MT - usagold.com msg#: 45080)
Michael, Stranger

If the Fed is loaning money to the specialists, then right, that's new money supply. ALL of the money supply is created by being loaned into existence. But, it's not a gift, it must be returned with interest. When the specialists have squared their books, that money should be back in the hanger. Seems to be it would be like those overnight infusions.

Regarding that fellow who said the market is part of the money supply: He would be correct if he recognized it as a PERCEIVED money supply. In fact, as I said two years ago (The fifth currency post), stocks function much more as a currency then as a certificate of ownership because their share price is so far out on the limb of future anticipation.

I had gotten as far as writing "-Money spent on stocks is money supply that has changed hands, period!" But Stranger has already stated it perfectly in two posts this evening.

Black Blade (1/5/2001; 0:49:20MT - usagold.com msg#: 45079)
The non-relationship between the US dollar and gold
http://m1.mny.co.za/MGGold.nsf/Current/4225685F0043D1B2852569C9003F9C15?OpenDocument
Interesting. The recent decline of the POG in the face of a weakening USD makes one wonder if this is possible, or if the malign forces of price manipulation are at work. Never-the-less, an interesting read.

Black Blade (1/5/2001; 0:43:32MT - usagold.com msg#: 45078)
Hedging Scams and Other Nefarious Activities!
Hedging: Investment or Scam?

Recently some posters have inquired about gold mining stocks. I am not going to debate the stock vs. physical question here. What I do wish to examine is the reason for buying gold stocks, and why one is better than another. This of course would require that we look into the forward sales issue. This debate has raged here and on other gold forums. There is also the debate over marketing gold as a hard asset for currency reserves vs. jewelry, and the amount of funding by the gold industry for marketing purposes.

To Hedge or not to Hedge:

Hedging strategies such as forward sales were primarily used to fund acquisitions or to expand mining operations. Now that has moved beyond a survival strategy to a hedge fund strategy consistent with the so-called "gold carry trade." Occasionally these strategies go terribly wrong as evidenced by the near insolvency of Ashanti Gold (ASL) and Cambior (CBJ). When the Washington Agreement called for the restriction of gold leasing and forward sales by EU member banks in 1999, the price of gold rocketed higher. These two hedge fund gold miners found themselves kneeling before the boards of their overlord bankers with hat in hand begging for mercy. The question is whether forward sales are really even necessary. Some gold producers are true gold producers that have a stated policy of providing a leveraged exposure to the gold price, thereby benefiting from a rise in the price of gold. Other hedge fund gold miners prefer to be at the mercy of a rising gold price, thereby reflecting a no-confidence vote in the very product that they produce.

Gold prices have appear to have bottomed out. Now is not the time to hold heavily hedged positions. Many producers are eating out of their hedge books and are not replacing reserves in spite of an annual gold supply deficit of nearly 1400 tons. Many producers have been high-grading their reserves in order to survive the low gold prices. This situation can not continue much longer and several producers are going to start taking huge write-offs and begin closing mines in the very near future. Some producers have borrowed to the hilt in order to survive, and by doing so they have taken on untenable hedge positions. Many banks have demanded that producers hedge future production to reduce risk. Newmont Mining (NEM) at the behest of banker/broker Goldman Sachs was forced into hedge positions in order to maintain their bond rating. Unfortunately, days later the Washington Agreement was made public and Newmont suffered. As with most of these hedging strategies, it is the shareholder who has to forfeit future returns to pay the banks "low-risk" funding. Unfortunately, some corporate officers tend to use these strategies and no real benefit is realized by the shareholder. Take Barrick (ABX) as an example. The shareholders of Barrick get no return and a pitiful dividend of 1.2%. The only beneficiaries so far have been Barrick's corporate officers who enjoy fat bonuses. Alternatively Harmony is more generous with their dividends while proudly and publicly stating their "No-Hedging" policy in their most recent annual report.

So the question is whether hedging is really necessary or is it an obstacle to a rising gold price? Heavily hedged miner certainly do not want higher gold prices as evidenced by Ashanti Gold (ASL) and Cambior (CBJ). When Jay Taylor, CEO of Placer Dome Gold (PDG) declared that his company was reducing its hedged position, Barrick's management was very quick to declare that they were not. Not surprisingly, after the Placer Dome announcement, gold prices rose dramatically, however, when Barrick made their announcement, the price of gold cratered. Why was that? Why is Barrick afraid of a higher gold price? Simple answer, look at what happened to Ashanti Gold and Cambior when gold prices increased. Barrick also was quick to buy 10 million ounces worth of calls shortly after their announcement. Obviously, Barrick and other hedge fund miners simply cannot survive if the price of gold rises dramatically.

I have looked at the value of holding both hedged and unhedged gold mining shares. Of the 6 largest gold miners I have culled information from 2 unhedged gold producers - Harmony Mining (HGMCY), and Goldfields (GOLD), and 2 hedged gold producers – Barrick (ABX) and AngloGold (AU).

HGMCY: PE – 7.3, PEG – 0.243, and Growth Rate – 30%

GOLD: PE – 15.9, PEG – 1.06, and Growth Rate 15%

ABX: PE 20.2, PEG – 3.36, and Growth Rate 6%

AU: PE – 9.6, PEG – 1.14, and Growth Rate 8.4%

*PE – Price Earning ratio and PEG – Price Earnings/Growth ratio.

Obviously hedging gold production is not necessary nor does it appear to add value to the company. HGMCY is arguably the most profitable gold company. It is unhedged, pays a good dividend, and is growing dramatically. The major gold hedge fund producers in this example, do not provide much value if any to the shareholders. The question is why do some producers continue to hedge and depress the price of gold? It would appear that they are too deep into debt and in the clutches of their banker overlords. They appear to be trapped and that is the reason why every time the price of gold rises dramatically, they are there to talk down the price of gold and discourage any would be investors. Even so, some unhedged producers are light on their feet and can profit even as others denigrate their product.

Marketing Gold:

Most of us know that gold is undervalued and will rise in the future. Timing the market is a fool's game. Some miners even prefer to pay a dividend to their shareholders as a reward while awaiting the inevitable rise in the price of gold. Some miners even participate in the marketing of gold and some even have their own bullion and jewelry concerns.

The gold industry has done a miserable job as a marketer of its product. However, unlike other mining businesses, gold mining highly fragmented as there are over 300 gold mining companies providing gold on the world market. For example, the PGM industry has 4 companies that provide over 87% of the world's supply of platinum. The 13 largest gold producers provide a mere 39% of the world's supply of gold. Am I proposing a gold cartel as with oil or diamonds? Of course not. What I am saying that the marketing of the gold could be a concerted effort by the industry as a whole with at least a modest amount of support by the world's miners.

The World Gold Council has recently doubled their expenditures to promote gold. AngloGold (AU) has also combined with PAMP of Switzerland, and JP Morgan to provide various gold products and services. Harmony Gold (HGMCY) even sells its own branded gold to clients in India and Europe. Of course, Harmony is also the world's only producer that refines its own gold at the mine-site. However, the marketing campaigns are too few and fall short of similar campaigns in other industries. The diamond industry spends about 3% of its annual sales on marketing. The consumer industry spends about 4% of its annual sales on marketing its products. The gold industry spends a miserly 1% with the gold producers contributing about a 10% of that. Even De Beers, the diamond producer and marketer has the famous slogan – "A Diamond is Forever." What does gold have as a slogan? Sure, Harmony Gold has a marketing slogan – "Think Gold, Think Harmony Gold." But why are there no marketing slogans about gold as a product? What about marketing gold as a symbol of status and financial security? Unfortunately the gold industry has fallen short.

- Black Blade

Sources:

Harmony Mining annual report 2000

Placer Dome Gold annual report 1999

http://www.Quicken.com

http://www.gold.org

http://www.Zacks.com

Other: Various news reports, internet sources relating to gold, gold investments, and equities research.





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