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Ho! Ho! Ho!
by Professor von Braun
December 14th, 1999
The new millennium, (whatever that actually is) fast approaches as we proceed, at great pace it seems, through the month of December. The Internet boom continues and stock markets around the world continue to reach record levels. One could assume that indeed all is well and that Santa will be very generous this year, delivering lofty valuations in stock portfolios to all and sundry. With at least one notable exception, holders of gold stocks, although even they may get a brief respite from a down trending index over the next few weeks.
The question is of course who is playing Santa Claus this year? Once that is ascertained the next question has to be, and why? Working on the premise that there is no such thing as a free lunch, one also could ask -- who is going to pay for this overly generous, widely spread dissemination of new age wealth?
Who is paying Santa Claus this year? Is it Alan Greenspan, or Bill Clinton (trying to help out his current VP), Robert Rubin delivering his Xmas present to Wall Street, the American public caught up in the Internet based get rich quick "ponzi" scheme, rewarding themselves? We would lean towards Alan Greenspan as the lead contender for this year's Santa Claus.
Liquidity seems to be the name of the game as the rollover date for Y2K fast approaches. So much liquidity in fact that it is likely that a lot of Xmas stockings will have a soggy feel to them. My cup runneth over, so does my Xmas stocking? Oh well.
Preventing a banker's nightmare, a run on banks, may be more Greenspan's concern than what we realize. His beloved banking system, having written more loans than what was once considered prudent, and already at imprudent levels of cash and quickly convertible securities, would be at risk here if the perception that Y2K was indeed a problem took hold. Especially if people decided to get some cash for a week, or two, or three. Think of the potential panic if the banking system actually ran out of cash. What a blast that would be! A good old fashioned run on banks, people lining up outside, all trying to get enough cash for the next few weeks and the bank does not have any. This would not look could on CNBC at all. What would Maria say? I can hear the shriek from here. Would not look good on worldwide television either. Certain Asian and South American countries would think it a hell of a joke watching America come to a sudden halt.
No, the risk, perceived or otherwise, may have been too much for Mr. Greenspan to handle and turning on the spigot may have been the only option. The other possibility is that he is taking orders from on high. Perhaps Slick Willie saw a chance to make a few strategic investments in preparation for his retirement, and faking fear of an internal meltdown, ordered Rubin (yes I know he is retired, but he still knows how to use the phone), to get Greenspan to "make with the ready's" as they say.
Maybe it was Hillary who saw the opportunity. She was good on pork bellies I seem to recall. But Greenspan, Big Al, Al.com, Easy Al, whatever name one uses, sure looks like the lead contender for Santa Claus, 1999. Whether it's voluntary or not, by default, or even some sort of de-facto situation, he seems to be the logical candidate.
And if he is, the next question is what happens after the Xmas party, the New Years party, the "New Millennium" bash, and the potential realization -- as we "enter" the new whatever it is, that Y2K was not an issue, that we have a surplus of soggy Xmas stockings, that nobody did any internet shopping, and that the new era we have heard so much about, may have failed to actually arrive. (Perhaps it got left at the North Pole).
Meanwhile, back in the gold market the great gold rally of 1999 seems to have died an unnatural death, possibly connected to official Y2K fears and it looks like the writers of paper contracts are, with some help from on high, having their way once again. A lack of activity could see the price rise over the next few weeks as market participants celebrate the festive season, the thought of healthy bonuses and the satisfaction that comes from rescuing themselves in the "Nick" of time. Merry Xmas.
The Prof can be contacted by email at firstname.lastname@example.org
Copyright by Professor von Braun. All Rights Reserved. Reprinted at USAGOLD by permission.
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