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CARTEL CAPITULATION WATCH
The US stock market keeps going on its merry way. The DOW gained 12, rallying late once again, to close at 10,472, up 12, while the DOG leaped 17 to 2050.
The good news:
April 23 (Bloomberg) -- U.S. orders for durable goods rose 3.4 percent in March, almost five times economists' forecast, led by bookings for autos, metals and business equipment, a government report showed.
Orders for items made to last at least three years increased to $192.7 billion after rising 3.8 percent in February, the Commerce Department said in Washington. Excluding transportation equipment, orders increased 3.3 percent, the biggest rise since April 2002, following a 1.1 percent gain. The government revised both of the February figures higher.
The bad news:
Gateway to cut jobs to achieve profits
Houston Chronicle - Consumer electronics and personal computer maker Gateway is considering a plan to cut its work force in half as it tries to return to profitability, a source said Wednesday.
The source said one possibility being studied involves eliminating 2,000 jobs, or about half the company's work force. Others include consolidating some facilities, changing product lineups and altering the management structure, the source said.
CHICAGO (Reuters) - Healthcare products maker Baxter International Inc. said Thursday it will cut up to 4,000 jobs to control costs as it reported a first-quarter profit that fell 13 percent from a year earlier.
The Deerfield, Ill.-based company, which named a new chief executive officer earlier this week, also said it plans to cut production of its plasma products in a bid to shore up earnings growth, despite stabilizing prices in that key market.
GATA’s Mike Bolser:
Hi Bill:
The Fed added $8 Billion in temporary repurchase agreements today April 23rd 2004, an action that moved the repo pool up to $34.58 Billion. They also issued a notice that there will be a permanent open market operation delivered on Monday. More support for the DOW is on the way.
We can now see that the DOW 30-day ma (green line) has leveled off as the repo pool's ma (red line) is still slanting upwards. This pattern will provide the necessary support to keep the DOW moving back up from its recent dip. As we move through May the DOW will regain 10,600 and possibly 10,800. This will continue to confound the TA adherents who imagine the index will fall. But the rising DOW is false wealth.
There are two bull markets, one in the DOW and one in commodities. One artificial and one real. The temptation is to ride the artificial DOW and then switch to say, precious metals in the real bull market. This thinking only adds to the risk. Pick the real investment and get on at an opportune moment.
If one were thinking of such a switch, now would be the time due mainly to the clear, unambiguous signal from the DIVG 200-day moving average:
http://www.pbase.com/gmbolser/interventional_analysis
That tells us the gold cartel's retreat is in full flower. They move the daily price of the MCDI and gold in order to produce the yellow trace.
Today's huge discount in gold is but a temporary illusion. The solid linear yellow line of the DIVG 200-day ma is no illusion. It is the ledger sheet of a defeated opponent who has decided he can no longer fight and is withdrawing, throwing tantrums and hurling threats of massive gold sales.
Don't be distracted by the many smoke screen tactics thrown up by the cartel. There is much going on behind the scenes and the gold buyers of the world are on the move.
Gold is headed higher.
Mike
Chuck checked in last evening:
Bill:
I have been pondering the sell off in the gold and silver markets over the past couple of weeks and have come up with some thoughts. First, since I am not in the inflationary camp, it didn't surprise me to see some breaks in the exponential moves in many of the commodities, silver included. The weakness in the gold shares especially the smaller ones have surprised me in their intensity. I didn't expect it because of the dumping day in and out of the shares. It has been a rare day when the XAU didn't decline either on the opening or intraday at least 1%, but sometimes more than 3%. Contrast that to the miniscule volatility in the stock market and the recurring pattern of gap ups and not ever being filled and you have an entirely different feel to these markets.
Then I looked at the early summer break in the gold complex back in 2002. If you look at the HUI chart you will find a very similar pattern. There was the top and then a failure to exceed it bringing a selling avalanche to the gold shares. In fact, the HUI, by my count sold off over 33% in 2002. If we had a similar decline now it would put this current bottom at about 175. Also, during that period gold, itself, only sold off by about $20 or so. Also, the stock market had a severe decline along with the gold shares.
What I am saying is that this decline differs so far because the gold shares have gone down independent of the stock market. I think that what we are seeing is a technical flushing out of the shares as we did back then. This time the owners of the small companies that will be the biggest winners in the gold bull have suffered the most. When I read that Andy Smith and Morgan are throwing on the dirt on the dead bull and the FT planted that story, I am certain that this sell off will not last much longer. If we repeat the last flushing out, we had a very good bounce followed by a test a few months later and then an excellent run to 250 on the HUI.
Unless there is an overwhelming deflationary disaster that will usher in a financial panic soon, there is no reason why this is just another flush out. I would imagine that your sentiment indicator must be almost negative. We are certainly in the most extraordinary of times. Your friend, Chuck
Richard Russell has this one nailed:
“Gold's erratic action is understandable when you consider that the world "central bank establishment" will always do all it can to discourage people from buying and holding gold.”
Dave Lewis with some words on The Chairman:
Bill,
The following is from yesterday's publication:
Yesterday, after reading the Chairman's expressed sense of the economic state of the nation and his admission that inflation just might be a concern it struck me that he, once again, is betting on symbolism rather than a holistic cure. As an aside, I wonder if he thinks just how silly he would sound to the average American if they cared and were willing to wend their way through the jargon: "what are you stupid, boy, prices have been rising for a while now."
What I mean by betting on symbolism rather than a holistic cure is that taken together, the notion that the Fed will eventually have to tighten and that the banks profitability won't be hurt because they will raise lending rates but keep deposit rates low is that the Fed isn't planning to truly cure the inflation problem, but they do plan to make a show of it. That is, the Fed may tighten but they won't invert the curve, i.e. raise short rates like the 3M rate above long rates, like the 10Y rate. In the past, curing inflation required just such a yield curve (link to graph)as that configuration hurts the banks profitability, reduces incentives to "grow out" of their problems and makes them clean out their bad debts. Given that the current spread is roughly a positive 340 basis points (3.4%) short rates would have to move up dramatically to invert the curve. Unless easy Al is prepared to take on the banking sector, rather than make token gestures, inflation, now, in my view, reasonably well entrenched will only continue to grow.
In other words, tightening per se won't stop this runaway train.
Regards
Dave Lewis
http://www.chaos-onomics.com
Sounds like the nails story of last evening:
Hi Bill,
The company I work for is in the process of building a 23,000 sq. ft. building to move into by August. Last week, the contractor informed my employer that he couldn't obtain trusses for the roof, and completion of the building would be postponed for 4-6 weeks. It's not a question of price; there are simply no trusses available. Even if we throw in a little incompetence factor on the contractor's part for not sourcing what he needed, that is one big delay.
–Ray
Some feedback to ponder:
Excellent write-up last nite!
Two comments based on last night's update:
1) as per the DC-based homebuilder. I've been spending a lot of time in DC the last 3 months and the market is indeed on fire. I will say, however, I believe it is the result of the Fed/Congress wanting to keep things exuberant in their own backyard. It is a fact in the Denver area, where I live, and in other regions west of the Mississippi River, that there is a growing glut of new middle income homes. So the DC example is certainly not anecdotal of the the whole country.
2) Regarding the Nasdog analogy to the metals market, I have been making that analogy for 2 years now. and the person is absolutely correct. Having actively day-traded the techies back then, the stocks went thru several severe pullbacks on the way to naz 5000. I would expect the mining stocks to be even MORE volatile because they are much less liquid than the tech stocks are.
Dave Kranzler
And:
Hi Again Bill,
Sorry to bug you at your busy time, but I wanted to say this. I started in the brokerage business in March of 1980, I was looking for some older broker to help me learn the ropes, a mentor. They were not very helpful. So I started reading the great books on the markets, that Richard Russell and others recommended going back to the 1920's.
But what really stuck me was after gold went from $35 to $800 and oil from $3 a barrel to plus $35, how few people made any money in the previous years. No one talked about the great wins in the commodity boom of the 70's. I guess most people bought at a top and sold at the bottom, or traded for $1 moves on the way up, only to continue to make a $1on up days and lose $3 on the corrections, until they finally buy and hold at the top.
I think it may be the same again this time, as you have stated many times, only the real precious metals bulls will win the day.
Best regards
John C. Newell
Some notes on Barrick and their hedge book:
Hedge book change costs Barrick US$32.4M br> Chopped 800,000 ounces
Drew Hasselback
Financial Post
Friday, April 23, 2004
…Barrick left US$32.4-million in potential revenue on the table when it chopped its hedge book by 5% or 800,000 ounces.
By the end of the March 31 quarter, Barrick's hedge book stood at 14.7 million ounces. That means Barrick has locked in a price for 17% of the gold reserves it has yet to mine.
According to notes in the company's quarterly report, in most cases the hedging contracts give Barrick until 2013 to sell gold at a fixed price. That fixed price averages US$397 an ounce, giving Barrick a significant degree of theoretical exposure.
On March 31, for example, the spot price of gold was US$427 an ounce. The mark-to-market loss of the contracts -- that is, the theoretical loss Barrick would incur if it had to close its gold hedgebook on that day -- would have been a stunning US$1.8-billion.
Assuming all other variables would remain constant, Barrick's says the spot price would have to drop to US$303 for the company to break even. Given the prevailing view that gold prices are in a new bull phase, that should provide cause for concern.
Yet the size of the potential liability doesn't phase Mr. Wilkins. He figures Barrick will have ample opportunity to close out its hedge positions over the next nine years. By the end of the year, for example, Barrick expects to chop yet another 700,000 ounces from the hedgebook, cutting its exposure to 16% of current stated reserves....
-END-
The gold shares continue to stink up the place. The XAU sank 1.42 to 88.12 and the HUI fell 2.15 to 195.05. The Gold Cartel’s antics have more and more investors running from the gold and silver shares. I wouldn’t put it past the cretins that they have orchestrated this too. AND, are waiting in the wings to load the boat themselves once they have most investors convinced there is little reason to be long the gold and silver shares.
We shall see. You know where I stand!
GATA BE IN IT TO WIN IT!
MIDAS
Appendix
From Robert G:
Hi Bill - I assumed you'd be getting some flak over the recent drop in PMs. As GATA grows and more people become aware of the gold manipulation, you have to expect more and more subscribers looking for a 'quick fix'. They probably still have that 'turkey looking into a bottle' stare from watching CNBC for years.
Well, I want you to know that I've been relaxed as can be over this. I've been following you for 4.5 years now. I know what to expect, though not when to expect it. I'm up so much (on your advice) that this pull-back doesn't bother me. I used it to dump more money into my ROTH. Thanks for your good work. Many, many people are behind you and realize what you do - interpret current conditions and try to explain them to the best of your ability.
Here's something that goes along with Ken Knight's letter. I got this on the back of a ticket for the Flying W Ranch near Colorado Springs CO. A friend was entering the AF Academy in 1969. I drove him out there from Wisconsin. We went to the ranch for dinner one night. I have carried it on my person for 35 years now. This is why I can bite Cartel in the ankle and hang on for as long as it takes for some of the heavy hitters to bring them down - it's in my blood as an American...
MY CREED By Dean Alfange
"I do not choose to be a common man. It is my right to be uncommon. I seek opportunity to develop whatever talents God gave me -- not security. I do not wish to be a kept citizen, humbled and dulled by having the state look after me. I want to take the calculated risk; to dream and to build, to fail and to succeed. I refuse to barter incentive for a dole. I prefer the challenges of life to the guaranteed existence; the thrill of fulfillment to the stale calm of utopia. I will not trade freedom for beneficence nor my dignity for a handout. I will never cower before any earthly master nor bend to any threat. It is my heritage to stand erect, proud and unafraid; to think and act myself, enjoy the benefit of my creations and to face the world boldly and say -- 'This, with God's help I have done.' all this is what it means to be an American."
***
Hi Bill - Someone sent this to me and I thought I would pass it on to you. Regards, Mark.
This poem, written by Joe Bryant, an Australian can be likewise applied to the US and other western nations.
THE GHOST FROM FLANDERS FIELD by Joe Bryant
(Adapted from a poem by Douglas Walker)
I had a dream the other night, I'd like you to underst and,
A figure walking through the mist, with 30-03 in hand.
His clothes were torn and dirty, as he stood there by my bed,
He took off his slouch hat, and speaking low he said:
We fought at Gallipoli, and other horrific places to secure liberty,
We valued our Federation, as a shield from tyranny.
For future generations, this legacy we gave,
To this Australia, the land of the free and home of the brave.
The freedom we secured for you, we hoped you'd always keep,
But tyrants laboured endlessly while your parents were asleep.
Your freedom gone -your courage lost -you're no more than a slave,
In this Australia, the land of the free and the home of the brave.
You buy permits for everything, permits to own a gun,
Permits to start a business, or to build a place for one.
On land that you believe you own, you pay a yearly rent,
Although you have no voice in choosing how the money's spent.
Your children must attend a school that doesn't educate,
Your moral values can't be taught, according to the state.
You read about the current news, in a very biased press,
You pay a tax you do not owe, to please the parliament.
Your money is no longer made, of silver or of gold,
You trade your wealth for paper, so your life can be controlled.
You pay for crimes that make our Nation turn from God to shame,
You've taken Satan's number, as you've traded in your name.
You've given total control, to those who do you harm,
So they can destroy your place of work, and steal the family farm.
And keep our country deep in debt, and put good men in jail,
Harass your fellow countryman, while corrupted courts prevail.
Your public servants don't uphold the solemn oath they're sworn,
Your daughters visit doctors so children won't be born.
Your leaders ship men and guns to foreign shores,
and send your sons to slaughter, fighting other people's wars.
Can you regain your Freedom, for which we fought and died?
Or don't you have the courage, or the faith to stand with pride?
Are there no real values for which you'll fight to save?
Or do you wish your children, live in fear and be as slaves?
Sons and daughters of Australia, arise and take a stand!
Demand a fresh constitution, as the Supreme Law of the Land!
Preserve our Federation, and each God-given right!
And pray to God to keep the torch of freedom burning bright!
As I awoke he vanished, in the mist from whence he came,
His words were true, we are not free, and we have ourselves to blame.
For even now as tyrants trample on each God-given right,
We only watch and tremble -- too afraid to stand and fight.
If this Aussie stood by your bedside, in a dream while you're asleep,
And wondered, what remained of your rights, he fought to keep.
What would your answer be, if he called you from the grave?
asking, is this still the land of the free and home of the brave?
Lest we forget. Joe Bryant
