Beiträge von Schwabenpfeil

One of our Gata supporters, Linux Gold Corp, came out with an interesting technical report today -

http://news.goldseek.com/GoldSeek/1101835353.php

Hank got back to me with:

Bill,
People like Clive Johnson, Chris Thompson and the executives at Newmont dislike you because you make them look bad. That the gold market is rigged comes as no surprise to them, but they just want to let it pass and have nothing said about the matter. By constantly publicizing the rigging, you make them look like the moral cowards they really are. They are morally inferior to you and they know it. Thus, the hostility.

As far as Bema goes, every quarter they are losing $10-15 million because the price of gold is rising! Feel free to use this.

Just one thing to keep in mind. You are right that gold stocks are the investment of a life time. In all markets knowledge and information is what separates winners from people who lose their money. The key to the gold market is that it is rigged, and that crime will soon come to an end. The irony is that if Johnson, Thompson and the DOW JONES gold reporter had the courage to speak up, the fraud would have ended a long time ago and there would be no opportunity in gold stocks. In the end, the moral cowardice of gold mining executives and financial journalists will make members of the GATA Army a lot of money. I've sent two letter to Johnson which he didn't answer. He is a creep.
Hank

On Bema:

Hi Bill,
In the past you've discussed Bema Gold, not always in a happy way. Bema’s third quarter financial report (as of Sept 30) just arrived. The following is under the caption Derivative gains and losses:

"During the quarter ended September 30, 2004, the Company recorded a realized derivative gain of $14.4 million (Q3 - $1.6 million) and an unrealized derivative loss of $25.5 million (Q3 2004 - $13.7 million) on derivative instruments. The net derivative loss of $11.1 million was a result of the increase in the spot price from $396 per ounce at June 30, 2004 to $416 per ounce at the end of September 2004 and the strengthening of the rand…" (emphasis added)

Because of its hedging program, Bema lost $12.l million in 3rd quarter 2003 and $11.1 million in Q3 2004. These are staggering sums given its quarterly revenue averages about $24m. Bema keeps going because it is able to float additional stock, thereby diluting out existing shareholders. Good to see Clive Johnson is earning his stock options.
Hank

Yep Hank, I have nothing nice to say about BEMA because their CEO has privately dissed GATA for years. Then I ended up right next to him at a lunch a few years ago in Vancouver. Learning who he was, I introduced myself. A half-hour later he got up and left, not saying a word. Classy guy!

Note the comment on Argentina in this article:

Indian buyers ignore gold price rise

http://www.business-standard.c…rypage.php?&autono=174028

Our Commodities Bureau / Mumbai December 01, 2004

Indian consumers seem to be undeterred by the rising gold prices, if the consumer demand data released by the World Gold Council (WGC) for the July - September 2004 quarter is to be believed.

However, WGC has said that jewellery demand in the October - December quarter in India would inevitably be affected by the rise in the prices in November.

Overall, year on year growth rate may not be too greatly reduced since price volatility deterred purchasing towards the end of 2003 as well, WGC added.

According to WGC data, the net consumer demand was higher by 16 per cent in tonnage terms and 28 per cent higher in rupee terms than during the same period in 2003.

For the nine month period from January - September 2004, gold consumption in India increased 9.5 per cent in tonnage terms and 20 per cent in rupee terms.

Commenting on the recent figures, managing director, Indian sub-continent, WGC, Sanjeev Agarwal, said, "The upward trend in the price during the quarter does not seem to have deterred jewellery purchasers in India. Indeed, the reports from the main consuming markets indicate that buyers are not only accustomed to prices in excess of $400 per ounce, but also that they are prepared for possible further price rises."…..

Jewellery demand in Turkey outstripped last year’s record…...

There was a 74 per cent year-on-year rise in net retail investment in Japan as well, with increased buying of the Senryobako treasure boxes, a wooden box filled with 10 kilo bars or gold coins, which have become a major investment success….

On the supply front, the overall supply of gold to the market in July - September 2004 was sharply reduced at 828 tonne, 22 per cent below the levels in the corresponding period last year. Identified net central bank selling was 42 per cent below last year with sales partly offset by continued buying from Argentina.

-END-

This article by Tim Wood on Pierre Lassonde befuddles me. Forty percent of the money traded on Comex going to the new US gold fund in the years to come? What is Pierre L smoking?

Tim Wood
Lassonde Sees Trade Switching to US Gold Fund

http://www.resourceinvestor.com/pebble.asp?relid=7206

-END-

An alert from Mahendra who told me yesterday that we could get a short correction:

Dear Members,
We are very near of ending short term correction in metals.

Don't short gold and silver because they can go up very strongly.

YOU CAN PARTLY BOOK PROFIT IN CURRENCIES BUT DON'T SHORT CURRENCIES AGAINST DOLLAR because few weeks back I said "Will Saturn be able to fulfil my predicted dream price of Japanese Yen to reach 80 (predicted when it was 135 and now is at 105.50), Euro 1.38 (predicted when it was 0.83 and now at 1.29) and Pound 2.10 (predicted when it was 1.38 and now it is 1.855)?

Thanks & GOD Bless
Mahendra
http://www.mahendraprophecy.com/

A favor asked from a GATA friend in the Netherlands:

Since the summer of 2004 market manipulation on the Dow Jones is suspected.
Frequently we can witness very limited daily gains, due to a late rally, on the Dow Jones.
I am looking for a list with the closing gains and loses for each day in the
last year.
Can not find the data on internet and hope a Gata-soldier out there has a complete list to share. I will use the information for a Dutch TV program and column.
thanks in advance...

Willem Middelkoop
willem.middelkoop@wxs.nl

Well, I lost it after writing this and called Gavin up at Dow Jones. He was courteous and listened to my agitated harangue, which covered the following:

*He has been contacted re what GATA has had to say and evidence of our findings for half a decade and has refused to even mention our existence.

*Why is it that the Russian Central Bank would cite GATA in a major presentation and Dow Jones won’t allow us to be mentioned?

*Had he heard of the Sprott Asset Management report on gold? He said, "yes." I asked why he never gave it the time of day? Silence.

*Gavin said that he was citing US demand being weak, not world demand for gold, and that he was told this by one of the largest US coin dealers. I did not disagree about US demand. However, I said his article did not come across that way and gave the perception gold demand overall was weak, which couldn’t be further from the truth.

*I went into the fact that most all his Wall Street sources failed to call this gold move up for three years. Most ALL have been neutral to bearish the entire way up, and are still neutral to bearish. The Morgans and Goldmans have no credibility when it comes to gold. The GATA camp does. We said what was going to happen to the price and why - and have been right for years now. I suggested Gavin check this out and query the Wall Streeters how they could get it so wrong while GATA got it so right.

Still trying to calm down. Having kissed the butts of the press for six years with a nowhere result, I could care less what they think these days. Being helpful, informative and courteous was a complete waste of time. That goes for the WSJ, the Washington Post and the rest of the mainstream phonies who cover gold and the financial markets.

-END-

Is that the best sophisticated Morgan Stanley can come up with?

Now let us go to the beat reporter. Dow Jones’ Gavin Maguire has been contacted no less than 100 times over the years on various bits of what GATA has uncovered. He refuses to even print our name. His lack of effort to present what really is going on gold market-wise is evident in his latest piece which may be read at:

http://sg.biz.yahoo.com/041129/15/3owoq.html

Some excerpts of

All That Glitters is Gold, Not the Dollar

(With my comments in parentheses):

By Steven Vames and Gavin Maguire
Dow Jones Newswires
Monday, November 29, 2004

But despite the fact that the inverse lockstep has held up so well, it's not a certainty that it will continue to guide markets. As both the dollar's selloff and gold's rally reach new extents, differences are emerging in just how far out on the limb speculators have gotten in each respective market and just how much more they can stomach.

Since the beginning of 2002, gold prices have climbed more than 50 percent from around $285 an ounce. The primary driver behind that has been the dollar's cross-currency spiral lower, particularly the 50 percent the dollar has lost since the euro traded below $0.89 at the beginning of 2002.

Sporadic periods of uncertainty relating to terrorism fears and the war in Iraq, as well as concerns about the potential for a return of inflation, have also steadily drawn buyers to gold and away from the dollar.

Following such huge market moves, however, the profiles of each market don't necessarily look the same. On one side are the gold bugs, whose recent bout of love for the yellow metal has been nothing short of speculative, given that physical supply and demand for gold haven't changed substantially to justify the price rally….

(What horse manure. For the last three months we have reported how demand for gold has been soaring around the world. The Indian premiums have barely backed off once all the way up, indicating roaring demand in that country alone. What are these blind reporters talking about? Even the World Gold Council just reported gold demand is way up. This is clear cut evidence of purposeful disinformation by the Wall Street establishment crowd. Either that or Gavin is just a dumb Irishman with an Australian accent)

But in contrast to the purely speculative gold rally, the dollar's declines have been based on the fundamental concern that foreigners will become less willing to fund the enormous U.S. current account deficit…..

(The jaded authors of this piece won’t quit. They infer the dollar move down is based on warranted fundamental weakness in the dollar, but the gold move up is based on a bunch of unwarranted speculation)

While much of the dollar selling has been speculative, a large portion has been due to so-called "real money" segments of the markets -- asset managers and non-U.S.corporations -- that are making longer-term decisions to allocate out of dollars or repatriate dollar-based earnings before the dollar falls even further…..

(Versus your phony dollars which have been stupid enough to bet on gold the last $200 up)

For both markets, some degree of profit-taking is to be expected as funds cash in their chips for year-end reporting and profit distributions. But such a move could pose a bigger risk to gold than for the dollar, since gains based purely on speculation would be more susceptible than gains made on an combination of speculation and ongoing real-money flows.

(More of the same nonsense)

***

From The King Report last evening:

The Aussie dollar is down because Australian retail sales unexpectedly declined 0.7% in October. A 0.7% gain was expected. But the Australian numbers are worse than the headline figure suggests. Just like in the US, increased spending on soaring gasoline prices perverts the retail sales figure. Australian department store sales fell 2.3% in October, while clothing sales fell 1.6% and supermarket sales fell 1.1%...For Q3, retail sales are +0.9%, the smallest increase in almost 2 years. –END-

The Aussie dollar continued its weakness in New York trading to finish the day at 77.20, down 1.16.

A pet peeve of mine over the years, especially of late, is the nauseating gold market reporting coming from all quarters by those who cover our market – from the beat reporter to the sophisticated analyst sitting in his or her Park Avenue office. It is not only dreadful, most of it is actually disinformation. Incredibly, as bad as it was with gold in the weeds years ago, it actually is worsening as the gold price rises. My only explanation is that there is a greater need to tone down what is really happening gold-wise around the world.

Last week’s Citigroup’s gold commentary was beyond asinine. Now Morgan Stanley has come out with commentary which doesn’t qualify more than what a sixth grader could write. Most every Café member could have come up with material of more significance than this simplistic drivel, which can be reviewed here:

Morgan Stanley
Gold: As The USD Declines

http://www.thebulliondesk.com/…orts/temp/Goldexcerpt.pdf

-END-

CARTEL CAPITULATION WATCH

US economic news was very mixed:

09:57 Chicago PMI reported 65.2 vs. consensus 62 -- Reuters
* * * * *

09:54 Consumer confidence 90.5 in November vs 96.0 consensus
* * * * *

08:30 Q3 prelim. GDP reported 3.9% vs. consensus 3.7%; Price Deflator 1.3% vs. consensus 1.3%
Prior reading was 3.7% and 1.3%, respectively. Personal Consumption reported 5.1% vs. consensus 4.7%.
* * * * *

08:56 Redbook chain store sales index (0.5%) in Nov thru 11/27 week vs Oct
The index deteriorated from last week's +0.1% reading, consistent with the weakness evident in the UBS index.
* * * * *

Currency related economic news:

Nov. 30 (Bloomberg) -- Japanese factory production unexpectedly fell in October, households cut spending and the unemployment rate rose, suggesting that a recovery in the world's second-largest economy is faltering.

Industrial production fell 1.6 percent, seasonally adjusted, from September, the Ministry of Economy, Trade and Industry said today in Tokyo, the largest drop since February. The median forecast of 33 economists surveyed by Bloomberg News was for a 0.1 percent gain. Spending by households headed by a salaried worker dropped 1.2 percent, and unemployment rose to 4.7 percent, separate government reports said. –END-

John Brimelow Report

JB: Gold: It's an eight Giraffe market

Tuesday, November 30, 2004

Indian ex-duty premiums: AM $8.69, PM $8.25, with world gold at $450.95 and $451.85. Lavish for legal imports. The Indian rupee surged to a new high today, with only minor Reserve Bank activity. Consequently local Indian gold prices fell and Indian demand was strong.

With astonishing timing, the WGC’s Gold Demand Trends was released on Thanksgiving Day. It reported that Indian bullion demand (by weight) last quarter was 16% higher than Q3 ’03. This indicates important resilience, since rupee gold was some 10% higher.

Subsequent to the Indian close, the rupee has firmed further, and there can be little doubt that the Bears’ resounding failure to start a rout in NY was due to Indian buying.

The primary reason for this powerful support is the classical Venerosian classical wealth effect: India is booming. The process is being accentuated by an unprecedented inflow of foreign portfolio investment funds, bolstering the rupee.

The Bombay Stock Exchange closed at an all-time high today. Last week the inflow of funds for the year passed the total for last year (a record), overcoming the drought which followed the May elections. There seems no immediate reason for this to stop.

An article in today’s FT entitled "Marriage madness grips India middle class" discusses the fantastic conspicuous consumption this wedding season (without mentioning gold):

"One much-publicised Punjabi wedding last week had South Africa as the motif - the parents of the bride actually transported eight giraffes from Africa to add that authentic touch."

(Paying clients will please note that on this basis I am in for 24 giraffes.)

TOCOM has started liquidating. Faced with yen gold at 12 year highs today, TOCOM volume jumped 120% to equal 30,901 Comex lots and open interest fell 1,127 Comex equivalent, to 105,412 Comex. The active contract closed up 7 yen and gold was only down $1.05 from NY at the close, but world gold tested $450 during the Japanese morning. The inflection point caused by India starting up around 11 AM NY time is becoming quite familiar. (Yesterday in NY gold traded 151,541 contracts. Open interest rose 3,146 lots.)

Mitsubishi reports a 10 tonne drop in the implied "general public" long to 77.4 tonnes. I am told Mitsui, which apparently reckons these things differently, saw a 7 tonne drop to 37 tonnes. It will be recalled this was seen previously, in the summer. The point is that at this pace it cannot last long.

An article in the Shanghai People’s Daily (via thebulliondesk) quotes the general manager of the Gold Exchange to the effect that he hopes for Central Bank approval for foreign participation on the Exchange, currently confined to Chinese.

He also asserts:

"Domestic gold prices don't move fully in line with international prices,"

This is not really true: the Shanghai price is kept very close to world gold, probably by the Central Bank. Interestingly, Shanghai prices have just moved to a small premium after some weeks of being at a discount. This is, no doubt not by coincidence, precisely the reverse of what should happen if locals seriously entertained the idea of a Yuan revaluation.

With the exception of JP Morgan’s Technical Commentary, every Establishment commentator is bearish. Today’s unsuccessful effort to break down gold will require some explaining.

I still think we might see $500 by Christmas. After all, gold was under $420 on November 1.

JB

November 30 – Gold $451 down $2.40 – Silver $7.70 down 4 cents

Gold Cartel’s Blatant Assault On Gold Fails Again

The dictionary is the only place that success comes before work. Hard work is the price we must pay for success. I think you can accomplish anything if you're willing to pay the price...Vince Lombardi

GO GATA!!!

There are certain days when you just don’t want to watch the tape (written at 7:45 CST with gold down 30 cents). This is one of them for me. The Gold Cartel went into action as soon as Asian trading began in earnest. When I packed it in for the night, gold was down $2.60. That set the tone for today.

Even though the pound soared and both the euro and yen were higher as we opened trading in New York, the cabal kept the pressure on bullion – EVEN THOUGH the cash market was on fire, as per the Indian premiums. The bums were in action to keep gold from taking out a short-term double top at $455 and to prevent it from breaking out in foreign currency terms.

***

Reporting in again and see gold is now down over $4, confirming for the day the recent crummy action in the shares. Most of the gold world is looking for a correction and The Gold Cartel is happy to oblige. Course the question is how will this all-out attack succeed? My best guess is it won’t for more than a day or two because the physical market is so firm.

If you expected a rant from me after today’s blatantly ludicrous cabal gold mugging, you are correct. What is most disgusting is you will hear nothing of this from the wimps in the gold world. They will sit back like they always do and let the crooks get away with their manipulative interventions. Not going to happen here. A blind squirrel could find acorns before the establishment will deal with the reality of the gold market.

ONCE AGAIN, The Gold Cartel timed their attack following the London Fix of $453.40, which put gold at the unchanged level from yesterday’s Comex close. This Fix confirmed how strong the cash market really is. Therefore, the crooks waited until the world’s buying was priced before they attacked the derivatives paper market on the Comex. Over and over and over we have seen this same modus operandi implemented by the gold price managers over the years, yet the mentally challenged powder-puffs in the establishment gold world never say a word.

For a picture of the timing of today’s obvious attack on gold by cabal forces, go to:

http://www.kitco.com/

Let us get into some of the obvious reasons for the gold sell-off in New York after the PM Fix in London:

*The strength in the pound, which rose to $191.15.
*The strength in the euro which flew to 133.35 and yen which reached 102.42.
*The weakness in the dollar which sank to 81.60.
*The strength in allied markets such as copper which made it to $1.4535.
*The strength in crude oil which hit $50.40 per barrel.
*The strength in the CRB.
*The strength in the physical market (see JB).
*The weakness in the US stock market.
*The weakening bond market.
*Evidence of growing inflation in the US:
10:03 Chicago Prices Paid index reported 89.8 vs. 84.1
* * * * *

The point is the reasons for the price of gold to soar this morning were unanimously BULLISH, yet even with all these outside market factors totally in its favor, The Gold Cartel capped the price at the unchanged level. CLEARLY, they had an agenda, one which began last night, to take gold down. Yes, some of these extremely favorable outside market factors cooled off a tad later, but only AFTER gold was clobbered by the bums.

One more time. For the ninnies in gold world as to what is actually going on here, we only need to refer to what Paul Volker said in his memoirs. Alan Greenspan is going all out to not make the so-called “same mistake.” Why is it so difficult for gold market commentators to deal with the truth?

"…..Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake."

"Through March, the price of gold rose rapidly, and that knocked the psychological props out from under the dollar."

The above is what today’s assault was all about, pure and simple. The Gold Cartel and elitist allies in New York and Washington are going all out to eliminate a soaring gold price from accelerating the coming dollar disappearing act fiasco. The big bad wolf has his huff and puff machine in high gear.

Now for the good news. Their blatantly aggressive attempt to bury gold didn’t work very well. Having taken gold down to $447.40, they couldn’t even close bullion below the key psychological $450 level. Gold CLOSED closer to its highs of the session than to its lows.

BAD NEWS for the GOLD BEARS from a technical standpoint:

Gold’s monthly performance will not go unnoticed in the big money world. These types of buyers will want IN on dips for some time now:

http://futures.tradingcharts.com/chart/GD/M

The Comex floor reported month-end buying which supported the price late. What a change from years past when we could count on gold tanking at the end of the month as the hedge funds dressed up their short positions. Taking it a step further, many funds put new funds to work at the beginning of each month. This could enhance gold buying tomorrow.

UBS delivered a one-two punch today:

*First:

07:06 NEM downgraded to neutral from buy at UBS (49.21)
While the long-term trend for gold is positive, near-term gold may be ahead of itself. NEM is up 22% in the last four months and is highly leveraged to gold prices. The target is unchanged at $54.25.
* * * * *

*Then they were spotted as a major seller of bullion.

First notice day today on the Comex produced 7,638 Gold contracts and 1,391 Silver contracts for delivery. If they are gobbled up by longs, it will be bullish. If the majority are retendered, it is either a non-event or slightly bearish. HSBC and Bank of Nova Scotia, both heavy hitters in the physical precious metals world, were the largest deliverers.

Gold market related closes:

*The pound: 190.86, up 1.61
*The euro: 132.92, up .16.
*The yen: 102.96, down slightly on the day
*The dollar: 81.82, down .14
*Dec copper: $1.4335, off its highs and down slightly
*WTI crude oil: $49.13, down 63 cents
*The CRB: 290.95, down .15.
*The strength in the physical market: STOUT
*The US stock market: The DOW made new lows late, finishing at 10,428, down 48. The DOG also made lows on the close at 2097, down 11.
*The DEC 30-year bond: 111 2/32, down 13/32. It broke 111 support, dropping to 110/3/4 before recovering. Could have a waterfall coming here.

The Gold Cartel went all out today in a concerted effort to teach gold bulls a lesson. They failed. Perhaps they will win tomorrow, but with so many short-term gold bears out there, the likelihood for the price of gold to take off from here is more likely than getting a meaningful correction.

Noch einmal kurz und letztmalig aus meiner Sicht zu den Texten aus dem Le Metropole:

Jederzeit können einzelne Informationen weggelassen werden, wenn hierzu Einigkeit im Board besteht. Bisher gab es aber in diese Richtung keinerlei konkrete Anregungen, so dass hierüber auch noch nicht diskutiert werden kann.

Natürlich sind deutsche Texte für uns alle leichter lesbar. Aber vergleichbare Inhalte auf Deutsch sind nicht verfügbar; jedenfalls postet Sie hier keiner. Mehrfach wurde nach freiwilligen für Übersetzungen gefragt. Bis dato hat sich aber leider niemand gemeldet.

Es läuft noch eine Auswertung bzw. Abfrage von option63 über den Ort der Veröffentlichung dieser Texte (hier im Thread oder eigener GATA Thread). So weit ich dem folgen konnte, war die Mehrheit für hier. Aber warten wir einfach die Auswertung von option63 ab.

Prinzipiell können die Texte auch leicht ganz weggelassen werden. Dem steht aber entgegen, dass sich doch einige User sehr für die Texte interessieren und die Information nicht missen mögen. Insoweit ist von den anderen Usern eben etwas Toleranz gefragt. Scrollen ist ja nicht allzu schwer ...

Gruß
Schwabenpfeil

Hallo Spancer,

danke für Deine Glückwünsche ! Versuchst wohl weiter mit Gewalt Zwietracht hier im Board zu schüren ???

Ich denke es ist besser, wenn ich mich eines persönlichen Kommentares enthalte. Dein Verhalten spricht für sich selber ...

Gruß
Schwabenpfeil

Zitat

Original von HORSTWALTER
So, wie angekündigt heute mein Silbertipp.

Mit einem Stand von 7,77 US-$ endet der Handel in NY dieses Jahr vermutlich.

Hoffentlich habe ich keinem einen Strich durch seinen Tipp gemacht, bitte mit einem Cent Unterschied tippen, damit wir hier keine Verteilungskämpfe austragen müssen

Hallo HORSTWALTER,

uups. Das kommt meinem Gefühl aber verdammt nahe. Geh ich nun einen Cent drüber oder drunter ???

Ok, 7,76 US-$ lautet mein Tip !!!

Gruß
Schwabenpfeil

Zitat

Original von Lancelot

Ein US-Broker bietet sich wirklich an, weil Ihr dort fast alle kanadischen Explorer als OTC BB kaufen könnt. Bei deutschen Banken macht das oft Probleme. Erstens hohe Gebühren (siehe oben), dann unwillige oder unfähige Berater oder schlicht keine WKN.

Hallo Lancelot,

interessanter Gedanke. Kann man wirklich alle kanadischen Explorer für den genannten Preis als OTC BB kaufen ??? Wäre für vertiefende Informationen dankbar !

Viele Grüße
Schwabenpfeil

Nov 29, 2004

Morgan Stanley:

<>Global: The World?s Biggest Excess

Stephen Roach (New York)

Global rebalancing has quickly turned into the global blame game. "It’s the other guy," exclaim Asians, Europeans, and Americans, when the issue of responsibility comes up. America’s Bush Administration views the rest of the world as suffering from a growth deficiency, largely brought about by under-consumption and excess saving. Conversely, Asians and Europeans view the United States as suffering from a saving deficiency brought about by over-consumption and government budget deficits. Who’s got it right?

The truth is, they probably all do. There can be no mistaking the extraordinary disparities in the global consumption dynamic in recent years. Over the 1996 to 2004 period, annual growth in US personal consumption expenditures averaged 3.9% -- nearly double the 2.2% pace recorded elsewhere in the so-called advanced world. Americans, for their part, have spent well beyond their means -- as those means are delineated by the US economy’s internal income generating capacity. Over the 1996 to 2004 period, annual growth in real disposable personal income averaged 3.4% -- fully 0.5 percentage point slower than average growth in consumer demand. As a result, the personal saving rate plunged from an already-depressed 4.6% level in 1995 to just 0.2% in September 2004. At the same time, the consumption share of US GDP surged to a record 71% by mid-2002 -- an extraordinary breakout from the 67% share that prevailed, on average, over the 25 years from 1975 to 2000. Never before has an advanced economy taken consumerism to such excess.

There’s no deep secret as to how the American consumer pulled it off. It’s all about the emerging power of the asset economy -- namely, how US consumers have turned increasingly from income generation to wealth creation in order to sustain current consumption. At work since 1995 has been the strongest and most sustained surge of above-trend growth in real household sector net worth of the modern-day, post-World War II era. American consumers were quick to make use of this windfall as an increasingly important supplemental source of purchasing power.

Moreover, there has been an important shift in the asset economy that took the US consumption dynamic to excess in recent years. The first wave came from the stock market, as household equity holdings surged from about 13% of total assets in 1991 to 35% at the peak in 2000. During the final stages of the equity bubble, individual stock portfolios supplanted real estate as the US household sector’s most important asset. By early 2000, residential property had fallen to less than 25% of total household sector assets, more than ten percentage points below the equity portion. It was only after the equity bubble popped that the asset economy took its most extraordinary twist. The increasingly wealth-dependent American consumer never skipped a beat. In large part, that was because the equity bubble immediately morphed into an even more powerful strain of asset appreciation -- a sustained burst of US house price appreciation that has continued to this very day. As a result, the real-estate share of total household assets rose back to 30% -- recapturing its role as the consumer’s leading asset class. According to Alan Greenspan, American households currently own some $14 trillion in real estate -- almost double their total equity holdings (see his February 23, 2004 speech, "Understanding Household Debt Obligations," at the Credit Union National Association 2004 Governmental Affairs Conference, Washington, D.C.).

This multi-bubble syndrome was largely an outgrowth of the Federal Reserve’s aggressive post-equity-bubble damage containment tactics -- some 550 bp of monetary easing from early 2001 through mid-2003. Housing markets benefited handsomely from the support of 45-year lows in interest rates. And consumers, who had first discovered the joys of asset-driven wealth effects during the stock market bubble of the late 1990s, quickly put their newfound skills to work in reaping the gains of the housing bubble. Not only did they benefit from the psychology of feeling wealthier, but US homeowners were aggressive in taking advantage of breakthroughs in the technology of home mortgage refinancing. It wasn’t just the reduction in interest expenses, but the so-called cash-outs from rapidly appreciating housing assets enabled consumers to uncover a new and important source of incremental purchasing power. Freddie Mac puts the peak rate of equity extraction and second mortgages from residential property at $224 billion in 2003 -- almost 3% of the total value of home equity investments. Over the 2001-04, annual cash-outs appeared to average around 2% of aggregate home equity -- suggesting that households may have liquidated as much as 8% of their equity in real estate in order to fund current consumption. For an aging US society that needs to build saving in order to fund the not-so-distant retirement of some 77 million baby-boomers, even this partial liquidation of asset-based saving is disturbing, to say the least.

The asset economy does not just have its origins in America. It is very much a by-product of support from global investors and policy makers. One of the outgrowths of an increasingly asset-dependent economy is a shortfall in income-based national saving. America has taken this shortfall to an unprecedented extreme. The net national saving rate -- the combined saving of consumers, businesses, and the government sector after deducting for the depreciation of worn-out capacity -- fell to a record low in the 1-2% range in 2003-04. Lacking in domestic saving, American has had to import foreign saving from abroad -- and run massive current account deficits to attract that capital.

This is where the global enablers enter the equation. First, it was private investors seeking to share in the returns of the world’s greatest productivity story. Then, when doubts surfaced on that front, foreign central banks rushed in to fill the void. Over the 12 months ending September 2004, the "official sector" accounted for 28% of total purchases of long-term US securities -- nearly double the 15% share over the prior 12 months and about four times the portion during the 2000-02 period. This was only the latest chapter in a foreign-inspired dollar-support campaign. Dollar-denominated official foreign exchange reserves surged from $1.1 trillion to $2.1 trillion over the 1998 to 2003 period (as estimated by the BIS at constant exchange rates). That left dollar-based assets with approximately a 70% weight in official reserve portfolios -- more than double America’s 30% share in the world economy and, quite possibly, the biggest overweight in world financial markets today.

Nor is it difficult to discern the motive behind this foreign dollar-buying binge. It’s all about the lack of internal demand in Asia and Europe and the related need to draw support from export-oriented growth strategies. And, of course, central to such growth tactics are cheap currencies that underwrite export competitiveness. Asia has led the way in that regard -- with hard currency pegs in China, Hong Kong, and Malaysia and soft currency pegs in Japan, Korea, India, Taiwan, Thailand, and Indonesia. Asia’s official foreign exchange reserves surged to $2.2 trillion by mid-2004 -- more than double the holdings of early 2000. With the bulk of that incremental surge going into dollars, Americans enjoy a subsidy to domestic interest rates that is very much made in Asia. It’s hard to quantify the exact magnitude of that subsidy but my guess is anywhere from 100 to 150 bp at the intermediate and long portions of the yield curve. That means, in the absence of this foreign support campaign, yields on 10-year Treasuries would have been in the 5 to 5.5% zone -- implying a rate structure that would have been far more problematic in providing valuation support to US asset markets and concomitant wealth-driven support to America’s asset-dependent consumer. With the dollar appreciating over most of the past decade, this was a win-win strategy for Asia -- providing the region with competitive currencies, as well as portfolio gains on dollar holdings. Now that the dollar is going the other way, that calculus suddenly looks very problematic.

As the world now grapples with the imperatives of rebalancing, it is important that all parties understand the roles they have played -- both in creating the problem and in forging the solution. Asset-dependent Americans truly have an excess consumption problem. It is still astonishing to me that the bursting of the equity bubble didn’t spawn a culture of prudence that weaned US consumers from the perils of an all too fickle wealth effect. With US house price inflation now at a 25-year high of 8.8% and with 15 states now experiencing double-digit house price inflation, this voracious appetite for risk is all the more

The gold shares continue to stink up the place. The higher gold goes, the more investors want to dump their shares, figuring the rally cannot last. The XAU only went up .14 to 110.01, while the pitiful HUI lost .46 to 242.93. It can’t wait to take out 240 on the downside again.

The lack of interest in the gold/silver shares will prove to be inane in the months to come. The gold and silver producers are cleaning up this quarter due to the metals’ high prices. The explorations are going to take off as the investment world realizes the need to find gold and silver in the ground AND FAST!!!

To win in the end you:

GATA BE IN IT TO WIN IT!

MIDAS

Is The Gold Cartel in control or on the way out? From Adrian on Saturday:

Bill,
The quote in the Midas from Standard London got me thinking:

"There is a possibility of a short term correction from these higher levels ($455) on Monday when the U.S. markets return and MAY ATTEMPT TO RESUME CONTROL CLOSER TO TUESDAY'S LOWER CLOSE."

This is very significant. It was interpreted by the Café member as the Cartel will be making a counter-attack on Monday…perhaps the long expected "ambush". What I read into this is that the Cartel has LOST control. They are dead. The "Commercial Signal Failure" is here and now. We have long conditioned our thinking that the death of the Cartel would be the explosion of the market and the derivatives neutron bomb going off. I think that may not be the true symptoms of the death of the Cartel but the symptoms of the realization of market participants that the Cartel is dead.

The Modus Operandi of the Cartel is not to control the market themselves but to work on the margins of the market and stampede the sheep. So what happens when the Cartel is defeated? The bulls gingerly buy expecting to be bushwhacked. They buy more still expecting to be bushwhacked. The Cartel Groupies sell short because they "know" what always happens…but yet it doesn’t. The market keeps advancing slowly because both sides are not fully convinced. This looks like the market is being "capped" which reinforces the notion that the Cartel are still controlling the market, but they are not! We are now at $22 above the $430 line in the sand. $22 above the breakout of the beautiful 10 year cup and handle formation. The analysts are all expecting a correction. I don’t think they are so much expecting one as hoping for one. The dollar closed on Friday at 0.8181 on the USDX…that was below the very, very important 1995 low and the dollar has broken below the neckline of a huge head and shoulders formation. Do the Gold bears still think the Cavalry is coming???!!!!!! Greenspan’s speech last week prompted me to write "Something Big is about to happen" at the Little Bear Table. Greenspan said very clearly "the cavalry is not coming" but only a few were listening. Andy Smith’s comments that gold was like snake oil, could certainly be expected from a soldier of the besieged Bear regiment…the Indians are all around, there is no ammo left and the cavalry still hasn’t come. As the water runs out, delirium from heat exposure sets in and incoherent mutterings are made.

I think what we are seeing is the immediate aftermath of the death of the Cartel. The explosion of the gold price will happen when the non-Cartel Bears realize the Cartel is dead and that the Cavalry is not on its way. I think we may see the obituary of the Cartel in the market next week.

R.I.P. Gold Cartel.
Adrian

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