Thai Guru's Gold und Silber ... (Informationen und Vermutungen)

While gold was trashed, silver balked at going lower all session long and the gold/silver shares held much of their early gains until late in the day.

Meanwhile, the dollar, which weakened on the jobs report, soared in one of the more obvious market manipulations in years. For reasons I will get into, the subtle evidence reveals a US power structure apparently going into a bit of a panic mode. As an example of increasing desperation, the Bush Administration trotted out Charlie McCarthy Snow again with his standard recorded message, timed almost perfectly to coincide with the dollar rally:

US wants to support strong dollar, cut deficit-Snow

WASHINGTON, Jan 7 (Reuters) - The United States supports a strong dollar and wants to "do things", including cutting its deficit, to support the currency's strength, Treasury Secretary John Snow said on Friday.

"Our policy is a strong dollar, we support the strong dollar, a strong dollar is in our national interest. We want to do things to sustain the strength of the dollar, among them is going to the Congress to work on the deficit, to bring the deficit down," Snow told CNBC television.

"By doing that we generate more savings in the United States, and that will help us deal with the fundamentals of the economy in a way that is beneficial," Snow said, adding that making tax cuts permanent was also necessary to keep the economy on a strong growth path.

-END-

Right on cue Snow comes out with the same laughable presentation he repeats over and over again. The only action the US has taken so far to support its strong dollar policy is rig the gold price – their ole standby. Curiously, apart from this covert activity, the prospects for US economic and stock market health is deteriorating, which should stunt the US dollar from going too much higher.

For weeks my focus has been on the big picture; that the situation in Iraq would disintegrate so badly it would have a significant impact on the US financial markets, and when it became apparent the US would make little, if any, progress on solving our US deficit problems, the dollar would resume its downtrend and break its 1995 lows - perhaps creating some chaotic market conditions.

If this is so, the US stock market should be belted and gold ought to take off again, this time for a myriad of reasons, with The Gold Cartel gradually losing control of their rig as gold rallies on more than on just dollar weakness.

The scorecard on this sort of analysis improved substantially this week, despite the orchestrated drop in the price of gold:

The US is in DEEP trouble in Iraq. Nine US soldiers alone killed yesterday. As mentioned often in December and as the Iraqi elections draw closer, the failure of our efforts there will become apparent to all. The Denialists will have to take a hike.

This is just what is occurring:

January 7, 2005

MILITARY POLICY

Rumsfeld Seeks Broad Review of Iraq Policy
By ERIC SCHMITT and THOM SHANKER

WASHINGTON, Jan. 6 - The Pentagon is sending a retired four-star Army general to Iraq next week to conduct an unusual "open-ended" review of the military's entire Iraq policy, including troop levels, training programs for Iraqi security forces and the strategy for fighting the insurgency, senior Defense Department officials said Thursday.

The extraordinary leeway given to the highly regarded officer, Gen. Gary E. Luck, a former head of American forces in South Korea and currently a senior adviser to the military's Joint Forces Command, underscores the deep concern by senior Pentagon officials and top American commanders over the direction that the operation in Iraq is taking, and its broad ramifications for the military, said some members of Congress and military analysts.

In another sign that the Iraq campaign is forcing reassessments of Pentagon policies, Army officials are now considering whether to request that the temporary increase of 30,000 soldiers approved by Congress be made permanent. One senior Army official said Thursday that the increase is likely to be needed on a permanent basis if the service is to meet its global commitments - despite the additional cost of $3 billion per year….

-END-

If this is what the Bush Administration and neo-cons are forced to put out for public consumption, you have to wonder what is really going on behind the scenes. My bet is the US military is near mutiny because so many of their troops are being killed and wounded with no end in sight and with a good number wondering why they are there in the first place. Not mutiny in the classic sense, but with so many of the troops part-time warriors, the dissent must be boiling in the military bureaucracy, most significantly among a fair percentage of highly regarded generals. Who can help but reflect on the fact that those in the Bush Administration who challenged the President and neo-cons over the cost of the war and amount of troops needed to achieve strategic objectives were FIRED? Yet, they were right. Those who challenged the notion of going to war so quickly because of doubts about Iraq’s WMDs were ignored too. They were right on that score also. Now we are stuck over there with no easy, or graceful, way out.

When it comes to the economy, the manipulation of the truth is just as egregious. This is what the Labor Department came out with this morning:

08:30 Nov. nonfarm payrolls revised to +137K from +112K
* * * * *

08:30 Dec. nonfarm payrolls reported 157K vs. consensus +175K; unemployment rate 5.4% vs. consensus 5.4%
* * * * *

On closer inspection, the real numbers are remarkably different. From the ever vigilant Jesse:

Net out, we lost about 180,000 jobs in December

If one looks at the link you can see one of the tables from the 'back of the book' of the BLS.

Take a look at just the top line, labeled "Total Non-farm." You have to look at the dates above carefully. Under non-seasonal, look at December 2004 and November 2004. You can see that in November there were 133,207 (in millions) and in December there were 133,027. That's a loss of 180,000 jobs.

Ok, so we made it up in seasonality which is where the headline number came from. But if you look at what they did for seasonality for last year, it doesn't make any sense because last year the adjustment was mildly down.

The rest of it is hard to figure out just from this one table and they don't make it easy to find the non-seasonalized data for comparison. In another table I found that they went back and adjusted every month in 2003 DOWN, on average, about 100,000 jobs!

Can you believe these guys?

http://www.bls.gov/news.release/empsit.t14.htm-

-END-

If all that weren’t bad enough, the US wage picture deteriorated:

08:30 Dec. avg. hourly earnings +0.1% vs. consensus 0.2%
Average weekly hours 33.8, in-line with consensus.
* * * * *

This is important as more and more stories are surfacing how the US consumer is beginning to wilt as he/she is falling further behind due to real US inflation. Pile on top of that a consumer who is tapped out debt-wise, and you have a recipe for a major economic slowdown in 2005.

Has it started?

U.S. economy gauge fell in latest week

NEW YORK, Jan 7 (Reuters) - A leading index of the U.S. economy fell in the latest week, due to higher jobless claims and rising bond yields. The decline was partly offset by higher stock prices.

The Economic Cycle Research Institute, an independent forecasting group, said its weekly leading index (WLI) fell to to 131.4 in the week ended Dec. 31 compared with an upwardly revised 133.8 in the previous week….

-END-

More evidence the US consumer is hitting the wall:

WASHINGTON (Dow Jones)--U.S. consumers unexpectedly scaled back their borrowing in November by the biggest amount ever, the first decline in consumer credit outstanding in a year, the Federal Reserve said Friday. Consumer credit outstanding fell by a record $8.7 billion in November to $2.085 trillion. That follows a revised $9.5 billion rise in October to $2.094 trillion, originally reported as a $7.7 billion increase. The November consumer credit drop was unexpected by Wall Street economists, who had forecast a $6.0 billion rise in consumer credit in November. Consumer credit data tend to be highly volatile from month to month and are frequently revised.

-END-

The following is an excerpt from an article in today's Asia Times which offers a more sophisticated, in-depth look at what problems the US is facing, ones which the power structure wants to be kept as quiet as possible:

THE NAKED HEGEMON Part 1: Why the emperor has no clothes
By Andre Gunder Frank

Uncle Sam has reneged and defaulted on up to 40% of its trillion-dollar foreign debt, and nobody has said a word except for a line in The Economist. In plain English that means Uncle Sam runs a worldwide confidence racket with his self-made dollar based on the confidence that he has elicited and received from others around the world, and he is a also a deadbeat in that he does not honor and return the money he has received.

http://www.atimes.com/atimes/Global_Economy/GA06Dj01.html

-END-

Then, we have another motive for the flagrant propping up of the dollar and trashing of the price of gold. From a fellow Café member:

hi bill-
yes the mkt. is miserable. i'm wondering if it has anything to do with the upcoming meeting in feb. of the G7.

to qoute the Privateer:

"France's Finance Minister Gaymard said the fall of the US Dollar could become "catastrophic" in world terms. Mr Gaymard said the US now "absolutely" had to understand that at the G-7 meeting of Finance Ministers which takes place in February, "coordinated" international management was needed. France has drawn a line in the sand. It would not have done so without global backing.

The Bush Administration has until February and that G-7 meeting - or - the world takes the money away."

maybe you have heard something in this regard.
rwh

MARKET ACTION MAKES MARKET COMMENTARY. This old tried and true saying reveals its right-on colors once again. Since there is little of meaningful substance the US can do to about our fiscal problems in the short-term, it clearly reverted to what it does best these days, MANAGE the markets. Years ago now, gold broke HIGHER before the dollar followed suit on the downside. It was trading just below 120 at the time. This time gold broke lower first, followed by the dollar moving up. The US is going all out to change the perception about the dollar ahead of this meeting, doing what it can to diffuse the issue prior to its convening.

The degree of the manipulation today was confirmed by the bond action. If the wimpish jobs report was so dollar friendly and bullish for the US economy, why did bond yields not rise after a turbulent session? March 30-year bonds finished the day basically unchanged at 112 1/8:

http://futures.tradingcharts.com/chart/TR/35

The gold open interest continues to disappear, falling another 4652 contracts to 290,090.

The COT report released after the close revealed a 30,000 contract swing commercial reduction in their net short positions, sizeable, but not as much as I expected. With gold tanking three sessions since then, we have probably had another 20,000+ reduction added.

The silver open interest gained 331 contracts to 96,857.

Here is some good cheer. The silver stocks fell a fair amount for the second day in a row, to the tune of 449,670 ounces to 102,890,317. If silver is as tight around the world as our sources are reporting, this is just what should occur. A move below 100 million ounces would be significant.

The inflation/versus deflation discussion continues to make the rounds. The CRB is trading plus or minus 280, off its 291+ high. Can’t see commodity inflation topping out anytime soon. Oil was over $46 per barrel at one point today and the grain/soybean complex looks like it is completing a massive base.

It could not be clearer that the lynchpin of the US strong dollar policy is to aggressively rig and suppress the price of gold. On November 23rd the euro was 130.79, which is just where it is today. Gold on that date was $449.

Then, if you look at the bond, dollar and S&P charts, you will find the bond and stock markets are in the midst of broad sideways patterns (virtually going nowhere on a net basis over the past many weeks/months) and dollar mid-range to its activity over that period of time. ONLY GOLD has moved sharply in one direction on a net basis, that being down, WAY DOWN.

The dollar, up .36 to 83.72
http://futures.tradingcharts.com/chart/US/35

Continuous gold chart
http://jessel.100megsfree3.com/GoldPF.jpg

March S&P
http://futures.tradingcharts.com/chart/SP/35

The John Brimelow Report

Huge Comex liquidation = Selling climax?

Friday, January 07, 2005

Indian ex-duty premiums: AM $7.24, PM $7.15, with world gold at $422.50 and $423. Ample for legal imports. Both the rupee and the Bombay Stock Exchange elected to close the week on an uptick: the former was quite volatile today, making the task of Indian arbitrage operators difficult.

Shanghai Gold Exchange premiums continued high: over $3 on relatively heavy volume. Reuters reports that

"In our time zone, we are seeing good physical demand," said Bruce Ikemizu, head of bullion trading at Mitsui and Co in Tokyo.
TOCOM today traded the equivalent of 33,346 Comex lots (+55%), with world gold edging up 90c from NY to go out at $421.40. Open interest rose the equivalent of 866 Comex lots. Mitsubishi yesterday, (belatedly available) reported that the general public long had risen some 12 tonnes this week, so maybe there is some accumulation on this exchange.

Comex yesterday traded a heavy 73,327 contracts, with open interest falling again, by 4,561 contracts (14.47 tonnes) to 290, 091. Since peaking on December 28 Comex has shed 126.4 tonnes of open interest – 40,629 contracts. Even making the implausible assumption that there has been no short selling (which of course bolsters open interest) there has been a furious and unsustainable selling pace set in the past few days. Largely because of this, both The Gartman Letter and Mitsui’s Andy Smith, in different ways key spokesmen for the Bears, were envisaging an up day today.

Perhaps the most salient observation to be made about today’s action is that gold in Euros has stopped going down. So maybe we have seen the zenith of the ambitions of the Bears.

In a piece this morning on CBSMarketWatch, Mark Hulbert remarked:

"As of Thursday night's close, the HGNSI stood at negative 23.2%, which means that the average gold timer in this group is actually net short the market….over the past month, the gold market exposure of the average gold timing newsletter has dropped by more than 100 percentage points. That's more than just an orderly retreat. That's a veritable rush to the exits…the average gold timing newsletter that the HFD tracks is now more bearish than at any time since late 1997, more than seven years ago."

See
http://cbs.marketwatch.com/new…4%7D&dist=rss&siteid=mktw

As with the physical market premiums, one can only note this is not the behaviour of a cresting gold market.

JB

CARTEL CAPITULATION WATCH

The DOW fell late, dropping 19 to 10,603. The DOG also fell late, but only lost 1 to 2088. A couple of points to highlight:

*The US stock market could not hold gains all week long; not good.
*For the first week of the year, the market performance over the last five trading sessions is very disappointing to the bulls.

The constructive news and administrative moves to boost the market are long-gone to fading fast. What lies ahead is ugly. If the US takes the necessary steps to respond to foreign nation's insistence we get our financial house in order for them to continue to finance our deficits, the US economy will be jolted. If the US refuses to comply, the dollar will really tank. Once the momentum crowd turns aggressively on this market, look out below!

Here is a bit of a shocker:

"For the first time ever, the U.S. does not rank among the world's 10 freest economies in the Index of Economic Freedom, published annually by The Heritage Foundation and The Wall Street Journal." http://www.accountingweb.com/cgi-bin/item.cgi?id=100330

Freedom's Top 10

AccountingWEB.com - Jan-6-2005 - For the first time ever, the U.S. does not rank among the world's 10 freest economies in the Index of Economic Freedom, published annually by The Heritage Foundation and The Wall Street Journal.

The U.S.' score in the 2005 Index did not change from 2004. But improvements in the economies of Chile, Australia and Iceland enabled all three to surpass the U. S., leaving it in a tie for 12th with Switzerland and out of the top 10 for the first time in the 11-year history of the Index.

"The United States is resting on its laurels while innovative countries around the world are changing their approaches and reducing their roadblocks," said Marc Miles, a co-editor of the book, along with Ed Feulner and Mary Anastasia O'Grady. "The U.S. is eating the dust of countries that have thrown off the 20th-century shackles of big government spending and massive federal programs."…

-END-

Can you imagine where the US would rank if the Heritage Foundation knew the degree to which the US is actually manipulating our financial markets in Orwellian fashion? Our ranking would sink to level of the Communist Chinese.

Rhody on jewelry and gold:

Hi Bill:
You asked yesterday if walking out of Tiffany's with high fashion gold jewelry, the stuff lost 40% of its value. I have kicked around in this field a bit so I can comfortably say that if you tried to re-sell gold jewelry priced retail at Tiffany's, you would receive only 10 to 20% of the gold melt value. High end jewelry retails sell their gold at 10 to 12 times melt. Downtown jewelers have mark ups of 8 times and low end retailers mark up about 4 to 6 times.

Your best buy is estate jewelry from antique dealers who used to mark up 3 times over melt but more recently one can find material at double melt, a real steal compared to your local jeweler. On occasion one can find an estate dealer who flips gold jewelry at a 7% spread, which is the same as most bullion dealers. I go to a coin dealer who sells me the stuff at spot. I have picked up $2500 gold watches for a few hundred dollars. One caution:

stay away from the 9 and 10 K stuff. It's so low grade it is no longer considered gold. One of the signs of increasing shortage in the gold market is the wholesale switch to low carat gold in the jewelry industry. Most retailers don't carry 14 ct or above gold anymore. Picking up gold and silver at scrap prices or below is sort of a hobby with me.

I agree with your sentiment here. Gold is money, not an industrial grade ornament. Debasing gold from money to an industrial commodity is one of the strategies of the CABAL. I might add, that jewelry fabricators provide underlying support for the entire leasing market in gold and silver, which makes sense given the high markups for jewelry. With threshold demand provided by these industrial consumers of gold, the lease market is made available for the CABAL's use during interventions.
Regards, Rhody.

-END-

The gold shares sold off again late, like they do almost every day. The XAU only rose .38 to 93.39, while the HUI rose 1.04 to 202.73. One positive is the shares have stopped retreating versus bullion. Gold was battered the past two days and the shares took it all in stride. Odds are they have bottomed.

There is no denying the technical damage done to gold has been extraordinary. The Gold Cartel’s efforts to bury gold holders and deflect investor interest in the West have worked. It will take some time to repair this damage if history is any judge. However, the market is extremely oversold. Both gold and silver are due for healthy bounces. Silver could keep on going.

GATA BE IN IT TO WIN IT!

MIDAS

Dear Mr Murphy,
I must say you and the GATA folks are doing a great job! By assembling some of the smartest people in the industry under gata you are doing a wonderful thing! I have followed you for over a year now and along with Mr Sinclair yours are the two columns I read daily. You have fire and passion about gold and the economic freedom which comes with it. I share this passion and I sent some $ for gata a month ago because I believe in the cause. What people have to understand is that this economic mess called the U.S. economy is for REAL! The Debt is real! The economic consequences we face I believe have the power to "take us out" in regards to our standards of living, and anyone whom has any savings should be in gold and silver now whilst it is still cheap! In the future it will not matter if we bought it at $6.50 or $8.00, it will matter that we have it as a store of wealth. People forget the lessons of our broke forefathers whom came to north america with a mistrust of banks because they lost their money. They knew to keep their money buried in tobacco cans in the backyard. They did this because they could trust themselves but not the banks. Trust physical metal, not the banks.

I just want to encourage you in your fight, and I am sure Washington, Jefferson and others would be on our team today if they were around! I am with you and mr Sinclair in holding fast as their is no other alternative with the debt levels and fundamentals so terrible in the big picture. I only sell 1/3 of my position into strength if I do at all and by golly I will not leave my position without a fight, they will have to pry my fully paid shares from me. Maybe we should ask everyone to take delivery of their shares personally?

Again, you are inspirational and a good man for what you are doing with Gata. We are winning, the lows in silver and gold are continually getting higher and higher! I have the cup and handle picture from Mr sinclair's site beside me on a bulletin board. Time is on our side.
Regards, Chris

A big thanks to Dennis Oliver, who sent Café members a helpful recap:

Gold Jan.6, 05

- Gold now in oversold position as of today, Jan 6.

- Funds are selling on weakness and buying on strength. Redemptions come in as market declines.

- Gold and silver stocks corrected in 04 although gold rose 5% and silver 13%. Shares affected by currencies (Africa), increased costs, lower grades. Still in a long term bull market.

- Gold needed a decline stage in order to provide the necessary ingredients for the next power up phase and cause gold to rally in the face of all stronger currencies.

- Despite massive manipulation, (phantom supply and demand) gold and silver have appreciated for four straight years with gold going from $255 in 01 to $438 in 04. Oddly, during those years few analysts called for gold to do anything but move down every year.

- Gold will continue to benefit from the pressure on the US $ and its vulnerable status as the world’s reserve currency. Gold is rare; a store of value that is no one’s debt and it cannot printed. It is benchmark against which other things are valued, especially currencies.

- Several unnatural variables are in play which affect share prices because of the staggering contrast between the usual market dynamics and their charts, versus the dramatic changes caused by manipulation, i.e.: silver shares plunged long before the bullion takedown on Dec. 2nd. This reveals the two pronged attack method against shares and bullion.

- The evidence of the presence of the ETF (US Exchange Stabilization Fund created under Reagan, reports only to the Pres., Gov. of the Fed, Greenspin, and Sec. Of the Treasury, Snow, is obvious. Congress is out to lunch on this. Gols is sold, manipulated at will.

- The evidence of collusive manipulation for profit is unequivocal, but ignored. Government sanctioned lawlessness. (Selling short via bullion banks Goldman Sachs, JP Morgan, Deutsche Bank, Citicorp, Merrill Lynch since early 1990’s). With the US Gov. as a backstop, anyone could make money shorting gold.

- There are 13,000+ tonnes of gold loans/swaps still out there, other than those of the hedgers, which have not been called in. Most of those were put on with gold trading around $300, plus or minus. These loans, representing commercial interests, are enormous losers on someone’s books. (Murphy)

- Lawsuit filed by US bullion dealer Blanchard and Co. against JP Morgan and Barrick begins in April 05, attempting to prove and expose illegalities of the bullion bank covert operations.

- Recent gold bashing by the gold manipulators has most gold investors completely demoralized. Storng hands want the weak hands shares. End of limit for manipulators is at hand.

- Huge new short positions added on Jan. 4, plus long liquidation.

- John Brimelow reports on Jan. 4th that physical demand has gone crazy! Especially India, Turkey, China, Indonesia, Russia and mid east.

- Very little press/media coverage on gold fundamentals with drivel gold market commentary common. Inane noise about why it moves up and down as per cycles, technicals, US $, all without understanding, or wanting to understand, the true nature of demand, size of the bullion bank short positions, yearly supply/demand deficits, Gold Cartel price suppression.

- Gold mine supply is declining. Expect the present supply of 2,500 tons/year to decline to 2000 tons or less in 5 years. For every 100 tons taken out of the market, add $7.50 can be added to the price (Pierre Lassond).

- In Q3 supply contracted sharply by 22.4% at 828t versus 1066t in third Q of 03. (World Gold Council Nov. 25th)

- Current funding of exploration will not replace reserves. Production is relying on discoveries made many years ago. Many producers are reporting declining reserves (Anglogold, Ashanti, Harmony, SA, Aust., Peru, Barrick, Cambior) Even if gold was $1,000/ounce; it still takes 4 to 7 years to open a mine.

- Central banks scour for supply to suppress price, as world gold demand soars.

- Key point is not what the US $ does but what the real strong physical buying of gold does to the paper price suppression and derivative pressures on price.

- Dec 1 gold closed at $453.50, dollar at 81.56. Jan. 4 dollar at 81.34 and gold down $25? Totally out of whack.

- Expect short term price below $430 for several days. Turnaround soon and accelerating by end of month. Short-term dollar rally to end, see below.

- Goldman Sachs and World Gold Council GLD gold ETF were major short covering buying on Jan. 5. 15 tons sold out of the GLD on Dec. 7th now covered for a $10 million profit. (all backed by U.S. Gov. ETF)

- Urgent attempt now in force to keep gold down. The central banks (Germany, Italy) attitude is changing with respect to selling gold. This means less swapping and lending to sell into markets.

- No time table has been given for the renewed central bank gold sales agreement to proceed for 5 years.at made the big bucks between 1978 and 80 when gold went to $800 plus.

- Gold for years now capped at $6 constantly on the upside, allowed freefall on downside.

- Bank of Italy confirms manipulation of Gold Cartel and IMF gold deception. Swaps go back to 97. Reveals 13,000 tons not accounted for in official central bank statistics.

- Unprecedented takedown of $10 plus in four weeks reveals desperation to negate perception of mounting U.S. financial market problems. Attention must not gravitate away from markets to gold shares, bullion.

- Strong fundamentals for bullion: supply/demand deficit, US budget deficit, trade and current account deficits. Russia, China, Japan diversifying reserves away from US$, global geopolitical problems.

- Germany declares negative sentiment towards (Washington Agreement/04) gold bullion sales, reducing estimates of when and how much to sell into markets.

- India, China, Russia, Turkey, Middle East gold demand up, up and growing; Turkey up 129% Dec. 04 over Dec. 03 in spite of higher prices.

-The international investment banks will be the driving force for gold. They were responsible for the dramatic rise in gold from 1978 to 1980 at over $800.

- What is an ounce of gold worth?

A man’s suit, shoes and belt at $1,000?
At its previous high in 1980 of $850, in inflation-adjusted terms, today, it would be $2,000 plus/oz.
An ounce of gold used to by the DOW. $10, 500 today?
- Gold: a medium of exchange, a store of value, It is durable, homogeneous, divisible, a luxury always in demand, and portable.

It has been the international standard of exchange since before WWI. It was a tangible asset that could back debt.
Fiat dollars (debt) can be printed out of nothing, increasing the supply of a country’s claims far beyond it’s tangible assets
Gold stands in the way of deficit spending, which is a scheme for the hidden confiscation of wealth. "It stands as a protector of property rights." (Greenspan; Gold and Economic Freedom, 1966).
Sprott Report, John Embry and Andrew Hepburn. August 04.

Central Banks intervened surreptitiously in the gold market in the late nineties to prevent a gold derivatives crisis that threatened the global financial system. This appears to have started around the time of the Long-Term Capital Management crisis (bail out of huge short 300-400 ton short gold position by Fed. orchestration) and commenced in earnest after the post-Washington Agreement gold price explosion in 1999.
- So much gold was borrowed from the central banks at low interest rates and sold into the market that an uncoverable short position developed.
Price manipulation exists to this day. See report at Sprott Asset Management.

Gold Shares

- 20 year bear market over. 2004 consolidation. $17 billion in restructuring, refinancing and mergers in 04 versus $3B in 03, drew funds away from chasing prices up in a small market sector. Important factor in a secular bull market. Those who have already made profits have a nice head start.

- Tremendous leverage is now in juniors that have good resources/reserves, and management.

- A spectacular rise is expected as the nearly four-year bull market resumes its up trend.

Juniors have lost 30% to 50% of their value since last year. Secondary corrections can be brutal. Markets are thin, volatile and emotionally driven. Many stocks are acutely oversold.

- Shorting now has added insult to tax loss selling in 04. Also, some profits are being taken now in 05, as they are not taxable for 14 months.

- A number of stocks have had great gains due to positive advancement of their discoveries and should shortly emerge as leaders of the next price advance.

- Juniors make 75% of all discoveries. With the majors facing declining reserves, they will have to go after and bid up the juniors.

- New, strict, US SEC rules require all market makers to close out all naked short positions by Jan. 3/05. Starting Jan. 10th, the SEC will publicize all stocks where the market makers in each stock have not complied and where traded shares have not been accounted for, forcing them to buy shares of the Naked short, or just plain short the company’s shares.

Misc.

- Newmont CEO Pierre Lassonde, member of Pres. Bush’s economic advisory council, sold $40 million of his stock at much higher prices in Nov. Who knew what was coming?

-Intervention of US Gov. in oil, bonds, gold, gold stocks, dollar, silver, Dow, stats on CPI, PPI, inflation, etc. Time frame is growing rapidly shorter.

US $ Index at critical juncture
US T bond at critical supports of $111.5 and then $106,
DOW critical support at 1075, then 10430, and then 9800.
Crude oil must break above $46 then $50.
Gold must move above $433 then break above $446.
Expect strong downwards correction in bonds and equities.

U.S Economy

- War, Tsunami’s, debt crisis, credit crisis, pension crisis, dollar crisis, Fannie May mortgage crisis.

- DRAMATIC NEWS: Jan 4th, US treasury notes fell on release of news from Dec. 14th Fed. Reserve meeting re concerns on inflation. The US Fed is admitting that inflation is much worse than cooked up Gov. figures have reported over the last year. Bond bearish!

- Crude oil jumped to $43.91 a barrel. 18 months ago $43 was considered to be a disastrous price for the economy.

- Insider sales in 04 were highest since bursting of the Internet Bubble in 2000.

- Credit driven asset bubbles due for severe correction. Underwritten since 1996 by short selling of 17,000 tons of gold gone from central banks, but still on books as reserve. This debt has yet to be paid.

- Runaway asset inflation of stocks, bonds, homes, US $. Based on artificially low interest rates and rampant excess credit due to Greenspan.

- Moderate consumer and producer price inflation. Fuzzy stats. What exactly do "core" rates have to do with reality?

- Goldman Sachs forecasts growing deficit net foreign investment income 05.

US fiscal deficits will no longer be supported by foreigners buying US paper.

- The US must launch severe spending cuts or raise taxes or both. This will halt economic and employment growth. Dollar collapse or recession is inevitable.

- Debt levels are untenable and foreign central banks will not continue to support the US debt.

- On November 19th, congress raised the Treasury debt ceiling to over $8 trillion in order to continue to finance the deficits. Annual interest on that is over $320 billion per year. More income must be put aside to pay interest and dividends to foreigners, and US must pay higher interest rates to keep creditors lending.

- The US Gov. spends $400 billion more than it takes in, which is 4.2% of GDP.

- The current account deficit is the largest in history at 6% of GDP.

- With the US citizen nearly zero percent savings, the US sucks up 80% of the world’s savings.

- The aggregate current account deficit and budget shortfalls account for over 10% of GDP which is at a tipping point for the $ to collapse.

- Add to this the household debt and the growing corporate financial leverage.

- The structural damage done to the economy over the last 20 years is probably irreversible. It has been seriously harmed by the diversion of capital funds to frivolous expenditures on housing and faster ways to apply for mortgages.

- Fannie May is in serious trouble as we speak. The SEC ruled that their derivative accounting did not meet with FAS 133 accordance and that they restate earnings to the tune of $9 billion (loss).

- Private investors are less eager to finance America’s huge debt. America’s debt service payments will increase sharply if the deficit remains so large ($165 billion for the third quarter or 5.6% of GDP.) As interest rates rise, refinancing will become more difficult.

- Asian banks collectively hold over 2 trillion in American obligations and are suffering billion dollar losses in purchasing power. Investors in Russia, India and the Middle East are now selling dollar obligations.

- Globally, foreign banks hold $9 trillion of U.S. paper assets (treasuries, agencies and corporate bonds) and they are suffering losses as the dollar falls. How long will they continue to prop up the US?

- US bond markets have been defying the $ weakness and the 4 interest rate hikes.

- US consumer is tapped out after keeping the economy afloat via inordinate tax cuts and ultra cheap credit (ultra low interest rates) leading to sharply slower growth for this year. - Consumer spending accounts for 89% of real GDP. The economic recovery has been passed by. The stimulus is spent.

- Disposable personal income is down by 4.8% in the second half of 04. In the third quarter private household-spending rose by $139 billion while earnings went up only $81 billion.

- Taxes and inflation went up.

- New "net birth/death" computer generated employment statistics from the BLS (US Bureau of Labor Statistics) are suspect as compared to actual surveys.

- Continuous rate hikes will prick the housing bubble.

- Three credit bubbles existing in housing, carry trade and bonds will burst.

- Afghanistan and Iraq are huge, long term drains on the economy with no relief in sight.

- China is invading Canadian oil fields. Canada is the largest supplier to US. China is also active in Venezuela, Russia, Iran and mid east.

- News just out that Bush will change social security benefit payments as per inflation rates (CPI, PPI) rather than wage increases (as they tend to rise faster). Expect fudging of CPI and PPI stats to continue.

* Excerpt:

Consumers Begin to Feel Inflation's Pinch
Wednesday January 5, 3:19 pm ET
By Marc Levy, Associated Press Writer
Consumers Begin to Feel Pain of Inflation As Cost of Many Products and Services Marches Higher

"HARRISBURG, Pa. (AP) -- After a decade of relatively tame prices, consumers are starting to feel the "ouch" of inflation as the cost of everything from coffee, candy and home appliances is marching higher.

It's not a sharp pain yet, and some call it hardly noticeable. But with companies such as Procter & Gamble Co., Hershey Foods Corp. and Whirlpool Corp. passing along the higher prices they pay for raw materials to their customers, it's beginning to get attention from people who shop in grocery, appliance and department stores.

It's also getting noticed by officials of the Federal Reserve, and that could mean higher costs for everything from car loans to home mortgages.

Minutes of the Fed's Dec. 14 meeting released on Tuesday suggest that central bankers' worries about rising prices could prompt them to continue bumping up short-term interest rates -- which they raised five times in 2004 -- to keep inflation in check."