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CARTEL CAPITULATION WATCH
The US financial markets remain in lockdown/prop up mode. Serious volatility has disappeared. Treasury bonds were up 5, the DOW rose 3 to 10,318, the DOG gained 5 to 1915, gold was capped and the dollar was little changed. You can almost hear the PPT counting down the days until the November US elections.
The geopolitical/financial market news stinks:
08:30 Aug. Retail Sales reported (0.3%) vs. consensus (0.1%); ex-Autos reported 0.2% vs. consensus 0.2%
Prior Retail sales revised to 0.8% from 0.7%; ex-Autos revised to 0.3% from 0.2%.
* * * * *
NEW YORK, Sept 14 (Reuters) - Confidence in the U.S. economy weakened slightly, according to a survey on Tuesday that also indicated some consumers are beginning to question whether the government's economic policies are working,
Investor's Business Daily and TechnoMetrica Market Intelligence said their economic optimism index fell in September to 54.3 from 57.7 in August. A reading above 50 indicates optimism. –END-
The situation in Iraq continues to deteriorate in almost every way imaginable. No one seems to care what is really going on in our economy, or in their country.
9/14 KIRKUK, Iraq - Saboteurs blew up a junction where multiple oil pipelines cross the Tigris River in northern Iraq (news - web sites) on Tuesday, setting off a chain reaction in power generation systems that left the entire country without power, officials said.
http://story.news.yahoo.com/ne…4/ap_on_re_mi_ea/iraq_oil
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Crude oil is all over the place, due to Hurricane Ivan and the Iraq mess. After being crushed on Friday, it rallied back to finish the day at $44.65 per barrel.
GATA’s Mike Bolser:
Hi Bill:
The Fed added $6.75 Billion in temps today Sept 13th 2004, an action that pushed the repo pool up to $60.564Billion. The pool keeps setting new highs and the DOW is being dragged kicking and screaming up with it. If we look closely at the DOW 30-day ma we can see it turning up from a recent low. Look back to the last time the pool was at a peak high (Dec 2003). The DOW was running at 10, 300 and the red pool ma was $40B, but today the pool's moving average is far higher at $50 and the DOW still hasn't reacted well. This shows us that the DOW is sluggish and unresponsive to support mechanisms that produced results in the past.
A savvy observer who called yesterday thinks that the DOW (with its repo support) may make it back up to 10,750 but run into HEAVY selling at that level which will prevent any further rises. Time will tell but this view may be the one to watch. A DOW launch to its previous high (11,750) would have to be fuelled by some kind of HUGELY positive event and I don't yet see one on the horizon.
Washington Agreement Shrimpfest
Make no mistake about the Italian Central Bank "NO GOLD SALE" development, it is VERY big and IF it holds through the WA formal announcement, the Fed will be hard-pressed (as Bill M has so faithfully reported) to replace the lost Swiss bullion WA contribution. It seems that Italy has been infected by the Bundesbank's gold retention disease. The Fed wants the world to believe that only diseased madmen would want to keep their gold. We ALL should be so afflicted. Watch closely in the coming days for signs of Fed frustration, a stray comment here...an angry reaction there. They will be detected...but
only by the very observant, closely watching the primary dealers and their media marionettes.
DIVG
My metric has turned temporarily flat as noted last week from its August 17th low but may be running higher. I'll get a better look at NOON but so far things are steady with a very low probability of a turn back down for gold. More later...
Ivan and His Departed Friends
The effects of Hurricanes on tourism in Florida have been devastating. The now moribund cruise season, the theme park desertion and the European no-shows at Florida's beaches have contributed to a bleak economic "soft spot". Draconian security barriers and surly customs officials serve to inhibit visitors here and everywhere else in the US. On the other hand, plywood and generator sales are booming. Even with the storm raging on a forecast track to the West of Tampa, resting easy is VERY difficult until the monster is well NORTH of us.
Offshore Banking
Cayman Island was crushed with sustained 120MPH winds and there are many international banks there with huge offshore daily transaction capacity that is idle at the moment. Even if their generators are running the bank operators live in dwellings away from their offices and the damage to those dwellings must be severe. We can only guess as to the effect on Cayman-based derivatives operations. In the aftermath of 911 the banking system was badly hurt by the lack of aircraft cancelled check deliveries. The Fed's repo machine was on high output to compensate. Will they do it again? So far today the repo add was predictable and not too large.
Finally the oil and gas platform operations are all but 100% curtailed in the Gulf of Mexico with no gas or oil flowing as of the close yesterday. This WILL have an effect on the oil and gas inventories going forward. We can estimate that a minimum of one week's energy losses will be recorded.
Ivan and his evil ancestors have already dented the US economy. A BIG clue to the seriousness of the impact is the ABSENCE of commentary on it in the mainstream Wall Street press.
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The Russian preparations for Beslan retaliations continue and they remain livid over the West's harboring of Chechen terrorists. Expect a bombing and or commando run into Georgia soon.
Tuesday, September 14, 2004
By Any Means Necessary
By Pavel Felgenhauer
http://www.themoscowtimes.com/…2004/09/14/008-print.html
After a meeting in Moscow last week with NATO's supreme commander in Europe, General James Jones, chief of the General Staff General Yury Baluyevsky said that Russia was ready to carry out preemptive strikes against terrorist bases "anywhere in the world."
But Ivanov and Baluyevsky are clearly contemplating a different scenario. In the past, Russia has frequently bombed Georgia without admitting responsibility, meanwhile accusing Georgia of harboring Chechen terrorists.
END
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The outlook for gold is very bullish looking only at my metrics and factoring in the Washington Agreement apparent developments. Things can change and we must always be ready for ambushes but the time to make a move is now.
Mike
From a fellow Café member:
"I also attended the LV Gold show. While it's true that the Sprott Report (and the Blanchard suit!) were not the hot topics one would hope, the Sprott report did come up in more than one conversation. Oddly enough, it seemed like the geologist, techie types were the best informed."
Actually, I am not surprised. When GATA was first formed, many geologists were without work because of the price suppression scheme. Exploration was a no-no back then because of the low gold prices. A few of the early members of the Café were geologists who wanted to understand what was really going on and why they were out of work. Most were quick studies and realized in short order that GATA was correct. This also gave them hope they wouldn’t be unemployed forever, as we explained why we were all so bullish and why.
Chuck checked in last evening:
Sorry for my lack of input. My job has taken up so much energy that I haven't had a chance to really think things out and convey them to you. I really admire your perseverance day in and out. It takes a real Don Quixote to stay so focused. And you are a modern day Don.
Just read your Midas. Contrarily, I found the report from Las Vegas very encouraging. If everyone is so complacent, we must be here. I am not at all surprised by the lack of interest in the Sprott work. Remember, as far as I know, there is only Ron Paul who has an interest among the lawmakers in DC. We are living in comatose times just as in 1929 when no one saw it coming. The autopsies were performed much later. Today, many are being done beforehand as in Midas.
The notable thing is that this time it's much more obvious and there is so much more evidence. But everyone wants the party to continue and the music never to end, so they refuse to consider anything other than the banal take on the economy and everything related to it. That is why even the gold people don't consider the GATA and Sprott position. It's easier being fed through a tube. We're America! How can anything ever go wrong? It will happen and it will change the world's landscape forever. Thanks for your zeal for truth and justice. Your friend, Chuck
Canada’s Wall Street Journal came out with a front page business section article on John Embry and the Sprott Special Report, "NOT FREE, NOT FAIR: The Long-Term Manipulation of the Gold Price", which was circulated in toto this morning by email to Café members:
Price of Gold Manipulated, Embry Says;
Central Banks Dumping; Sprott Manager
Ruffling Feathers on Bay Street Again
Drew Hasselback
Financial Post (National Post), Toronto
Tuesday, September 14, 2004
John Embry, one of Canada's best known gold bugs, is ruffling some feathers again in the otherwise staid corridors of Bay Street.
A couple of weeks ago he started circulating a report that details his belief the gold market is manipulated. It's a remarkable paper, given that it's rare to see any veteran member of Canada's investing establishment go public with such a potentially controversial position….
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For the entire article:
http://www.canada.com/national…inancialpost/investing/st
ory.html?id=b7c0524a-f822-4d75-a02f-4edf7c80daba&page=1
-END-
While this article was a pleasant one, I was looking for something like the Wall Street Journal might do on something so significant and groundbreaking – like 10 times more extensive than this story and a review which covered the features of the report in great detail, including those with opposite points of view, accompanied with their reasoning and supporting facts.
Dennis Gartman, who is widely followed by many financial institutions, returned from the LBMA Conference held in Shanghai. His latest this morning in regards to the Sprott Report and GATA:
ON GOLD BUGS AND NET
SHORTS:
The gold bugs are a strange lot, really.
They see conspiracies everywhere and at all times. If the government is not conspiring against the public, then business is conspiring against the government, or business AND the government are conspiring against the public, and if not that, then all three are conspiring against ghostly, foreign forces that are set to wage some sort of economic war against the country. We see this as a wondrous waste of time and money as they try to prove the merits of gold ownership based upon conspiracies, far and near, visible and invisible. However, as long as they do no damage and stay within their small sphere of influence, they have the absolute right to make their case and move on [Ed. Note: That having been said, we are always concerned when we write about the gold bugs because in the past we have gotten some of the most disconcerting threats from them... including phone calls at odd hours; e-mails threatening harm; name calling, et al. We trust today's article will draw nothing more.].
Having been taken to task rather often by the gold bugs, we thought we'd take the time to read a report put out by Sprott Asset Management of Toronto, Ontario, that has been much in the news amongst the gold bugs of late for having "proved" the case that GATA puts forth. GATA, as our clients should know, argues that there is a vast conspiracy amongst the gold bullion dealers, the Wall Street trading houses and the various governments of the West to keep gold prices down.
The Sprott paper is rather weighty, and we decided to take it with us on our long flight to Shanghai recently in order to read it cover-to-cover. We did, and we took notes at length.
We disagree with this report in its entirety, although we do admire the sheer volume of the work done. Under normal circumstances we would call this yeoman's work and applaud the endeavour, but this is not a normal circumstance. We could, time permitting, site passage after passage with which we disagree. However, our major point of contention is simply this: it is odd that the major analysts supporting GATA's thesis are really rather few, and they include Mr. Frank Veneroso, Mr. Reg Howe, Mr. James Turk and Mr. Bill Murphy, GATA's founder and guiding spirit. These are fine, educated, deeply intelligent men who have done stunning amounts of work on the details of the gold market. We are especially fond of the work done by Mr. Veneroso and we do indeed rather like Mr. Murphy, for he is a wonderful conversationalist and Renaissance man. What we find odd is that Sprott, having taken GATA's position that there is indeed a conspiracy amongst the leading central banks, broking and trading firms, relies almost solely upon these other analysts who hold to the same thesis to prove the thesis. Page after page, footnote after footnote, textual citing after textual citing is done ontologically; each cites the other; each uses the other's facts and figures; each believes the other is right and each "proves" each others proof by the proofs of the other. We had hoped to see independence amongst the citations used in Sprott's paper, for in using independent sources we might well have been willing to listen and to accept their analysis. However, in 68 pages of text, Mr. Veneroso, Mr. Howe, GATA and Mr. Turk are cited a total of 87 times [Ed. Note: Due to some minor printing errors in the text we used, some of the notations were garbled and so we may be off perhaps 2-3 citations in either direction... a variance which we think shall make little if any difference to our case.] .
Further, we take issue with the manner in which this report always seems to use the terms "may" or "might" while making its case. For instance, on p. 58, the report notes that
As James Turk suggested in Behind Closed Doors,
the leasing of gold by another nation may in fact
be directed by the United States [Ed. Note:
emphasis ours.]
"May... be" and "is" are materially different of course (unless you are William Jefferson Clinton) and the Sprott report seems always to pile on the references to possible machinations taken by the US government, the sheer weight of which it hopes shall make its case. It does not. Further, the Report consistently tries to make the case that the US Government has lied regarding the use of the Exchange Stabilisation Fund, where it believes that the government hid gold and used it for market manipulation. It cites a statement by US Treasury Sec'y O'Neill that the Treasury Department
intensively monitors foreign exchange markets
and maintains continuing monitoring of gold
markets and related developments.
GATA and Sprott will argue that "monitoring" equates to manipulation. We shall maintain that "monitoring" is precisely that: monitoring... watching... learning from the markets what the market is saying to Treasury and the Fed concerning policies that are either in place, or may be put into place. But "monitoring" need not be real action, and likely is not.
We've not the time to go on this morning, and although our case is perhaps not made with the same sheer volume that the Sprott report has weighed in with, we trust it is made. Conspiracies rarely exist, and when they do, they are far more often than not exposed. GATA's followers are legion and very often they are wise. Would that they spent their collective wisdom on worthier efforts. There are times when it is appropriate to be bullish of gold; there are times when it is not. To GATA and the gold bugs, it is always time to be so. To us, gold is merely another asset bidding for our capital, and it is there that they fail.
-END-
Dennis Gartman is to be commended for reading the report, which is more than most gold producer CEO’s have done as far as I can tell from the feedback I am receiving. And, also to his credit, he is willing to put his thoughts down in writing. However, the content of his response to John Embry and Andrew Hepburn’s brilliant report is sorely lacking. I am sure he would expect nothing less than this sort of response from me:
