|
|
|
|
|
|
|
|
|
|
|
|
|
|
 |
ARTICLES
“BUBBLES, BUBBLES TOIL AND TROUBLES”October 2006Dear Clients & Other Friends – Some have called and asked where I’ve been. Actually, I have taken four trips this summer, but that’s not why you haven’t heard from me. That reason is because there’s been nothing about which to write you. I suspected that the decline in precious metals was going to last longer than most “analysts,” so have been keeping my “powder” dry, and yours as well. Now there is reason to believe that this very normal bull market “dip” is just about over, thus the timing of this newsletter, the title of which comes from the following article by friend, Aubie Baltin. In his excellent article, he shows you that there are more than enough fundamental reasons to be heavily invested in gold coins and stocks. So, I’m starting this newsletter by saying that I’m writing you at this particular time because it’s my opinion, based upon my 40+ years in gold investments, that we are within 3 weeks of the beginning of the next major up-leg in the gold and silver bull markets. Many gold coins salesmen say you should buy gold coins when you have the money. I’ve always said clients should buy when they have some money – AND when the timing seems propitious! I believe we are at one of those special times – NOW. I strongly suspect that the current all-time high in the DJIA has been provided by the Plunge Protection Team (PPT) due to the up-coming election. At the same time, they have provided lots of pressure on the normal and very constructive dip in the precious metals prices. Gold and silver would probably have begun to rise several weeks ago, had it not been for their actions. But, once next months election factor is eliminated, I predict that both markets (industrial stocks and precious metals) will reverse themselves. During the next 3 weeks, gold may make its final bottom between $525 and $550, but from here ($565) that’s somewhere between 2.6% and 5.5%. Any time you can buy any investment within 10% of a bottom, you have made an excellent one! I suggest that you will be very pleased, very soon, if you call me during the next 3 weeks to begin, or add to your coin holdings. Now, read Dr. Baltin’s comments to see some of his excellent insights as to why you need to act. “Bubbles, Bubbles, Toil and Troubles” "There's the housing bubble and the commercial office space bubble. There's the Bond-market bubble and its two progenies, the junk-bond market bubble and the emerging market-debt bubble. There's the nearly $3.00 a gallon price you see at the pump, which has all the markings of an oil bubble. And the premiums being paid for all those corporate mergers and acquisitions are always coincident with the top of a stock-market bubble. In fact, nearly every asset market you can think of is showing signs of bubble like behavior. The reasons for this behavior are quite clear: The global economy is awash in excess cash cash that has been "created out of thin air." There is a tremendous amount of excess liquidity liquidity around, and it is proving very hard to get rid of it and the possibility of a bursting liquidity bubble around the world should be of serious concern but nobody seems to have noticed or if they have noticed they don't seem to care. To many analysts, this excess liquidity is exactly what some of them erroneously expect is the savings of the giant baby boomer generation as they reach their peak earnings years and begin to save more and more for their retirement. But the truth of the matter is; that the average retiree has less than $3000 in the bank on the day of his retirement. They are all mostly relying upon the government and if they are lucky, their corporate pensions. The governments "cradle to grave campaign promises" mentality has been bought hook line and sinker by a "something for nothing" gullible populace. The fact that the Government cannot possibly meet all its promises has been demagogued out of existence. More assuredly the major part of the story is the ultra stimulative monetary policies of the central banks around the world. Ever since the Asian financial crisis in 1998, the Bank of Japan has been pumping out cheap money in an attempt to revive the Japanese economy in a vain attempt to slay the Deflation Dragon. But before you can defeat anything you must first learn who or what your enemy is. In the United States, the short-term interest rates that the Federal Reserve controls have been below the inflation rate for more than four years; that's four years of getting paid to borrow money. The FED message is loud and clear, "go forth and speculate." The biggest culprit is probably the central bank of China, which, in its effort to prevent the appreciation of the Chinese currency, has had its printing presses working overtime to churn out all the Yuan's needed to buy up all those dollars earned through exports. China is a Communist government trying to run a Fascist economy of immense proportions with absolutely no experience and without the built in signals that a free market has. The un-fulfillable promises that an enormous population has grown to expect will come home to roost and the results will not be pretty. “FED maestro Alan Greenspan has argued that nobody can really identify a financial bubble until after it has popped, which was his reason why the Fed did little to try to stop the stock market bubble from getting out of hand in the late 1990s. That sophistry was recently exposed when transcripts of Fed meetings from 1999 were released showing that Fed officials, including Greenspan, were well aware that they were dealing with a bubble of immense proportions. That is now belied, as it was then, by any number of objective indicators of the widening gap between the economic and market value of various asset classes. Greenspan and Bernanke’s seventeen successive discount rate increases, is their attempt to engineer a soft landing, this time around, before the bubbles inevitably pop, unlike the complete lack of action in the late 1990’s. Hopefully they both learned something and its not too late. “Recently one Real Estate Guru, issued a report showing how the gap between the monthly out-of-pocket cost of buying a home vs. renting it, has been widening to an unsustainable 50% in the country’s hottest markets; Nationally, the gap on average is now only 40 percent more expensive to buy than to rent, while in hot markets like South Florida, San Diego and San Francisco it is more than 55 percent. In Washington , it’s 65 percent more expensive to own than to rent. If that is not a sign of a Real Estate Bubble living in the Greater Fool Theory phase then what is? “The housing market was so hot recently that in some of the hottest markets we even had the equivalent of day traders. In a drive to the Miami airport recently, all the driver would talk about was the million-dollar condos that were being flipped several times before construction was even completed. Six years ago, the talk was all about Dot.Com companies. David Berson, the chief economist at Fannie Mae, bemoans the sharp increases in the number of homes being purchased solely for investment purposes – up to 30 percent in some markets. One study by the National Association of Realtors estimated that 40 percent of homes in 2005 were purchased primarily for speculation. The downtown office-building market is also red hot, even though, nationally, there has been little or no increase in rents. Most of the price escalation can be explained only by an expectation that price appreciation will continue at its current pace. This is another perfect example of the “Greater Fool Theory” since a normal positive return on capital cannot be achieved through Buying and then Renting. “Phil Verleger, an energy expert, brings a similar analysis to the recent run-up in oil prices, which he said is being driven less by fundamentals (supply, demand and the cost of replacing reserves) than it is by the upward pull of future’s markets. He said OPEC and its silent partners, the major oil companies, know that they make the most profit when oil inventories are lean, and the best way to keep them lean is to keep spot prices higher than futures prices. Now that every hedge fund and college endowment is invested heavily in the futures market placing bets on higher prices, spot prices were following suit. BUT we have just witnessed what always happens when a speculative bubble bursts and an over extended genius looses $5 billion, or 60% of his Hedge Fund assets virtually over night. “The current bond-market bubble was attested to by no less an authority than Greenspan himself, when he admitted he was puzzled by long-term interest rates that have failed to respond to the 4 1/4 -percentage-points increase in short rates that he has engineered. Greenspan called it a “conundrum.” I call it a speculative market driven by a world awash in cash, irrational exuberance and herd...In my opinion, what happened in the Natural Gas pits will also happen to the rest of the Bubbles. “Another very important reason and one you rarely hear mentioned is a flight to quality by the super rich, who are more interested in protecting their assets than they are in how much more money they can make; especially given today’s valuations and risk reward ratios. “Perhaps worst of all is the fact that the FED has lost control of the money supply, since most of the new “out of thin air” money is being created outside the American banking system. “Is it too much of a stretch to argue that stock prices have again entered bubble territory. Certainly as a multiple of earnings, today’s prices are higher than they have ever been except for the three years 1999 – 2001. But how strong are earnings if most of them are coming from massive cost cutting, layoffs and share buy-backs but zero or even negative top line growth. There is a strong sense of “deja vu” in seeing Banks and Wall Street investment houses tripping all over one another to provide gobs of money on easy terms to companies and private equity funds engaged in bidding wars for overvalued companies. “I also assign some significance to the fact that Warren Buffet, who correctly identified the last bubble, now has $40+ billion sitting in the bank, and except for the odd beaten down utilities is unable to find acquisitions at reasonable prices in the USA . (Some knowledgeable people suspect he was pressured to sell his silver hoard.) “I don’t know whether the FED was right or wrong in not raising interest rates more than a quarter of a point at a time and in sticking to its promise of “measured” increases in the future while at the same time running an easy money policy. But what I do know, is that it is silly and down right dishonest for the FED to continue to ignore the condition of assets and financial markets, in supplying inflation data and then making decisions on erroneous data and not explaining them to the public. Does the fact that gold has risen from $255 to $725 mean nothing and therefore not worth discussing? Rest assured Gold’s sell-off to $550 is only a normal pull-back in its ongoing major bull market. "Irrational exuberance" is the most-widely quoted phrase ever uttered by a central banker. It's usually repeated in a way that makes Mr. Greenspan sound like the “Oracle Who Knew Better”, who warned investors that the stock market bubble would burst. This is a bunch of B.S. He never gave such a warning. As for what Mr. Greenspan DID say about the 1990s stock market, here's a far more definitive remark -- especially for him -- which has long since vanished down the memory hole: "It has become increasingly difficult to deny that something profoundly different from the typical postwar business cycle has emerged in recent years. Not only has the expansion reached record length, but it has done so with far stronger-than-expected economic growth.... The process of capital reallocation across the economy has been assisted by a significant unbundling of risks in capital markets made possible by the development of innovative financial products… There are few, if any, indications in the marketplace that the reallocation process, pushed forward by financial markets, is slowing ." “The time was April 5, 2000 ; the occasion was "The White House Conference on the New Economy." Yes, Alan Greenspan had purchased a first-class ticket on the "New Economy" train, right as it was about to go off the tracks. Because "the expansion" had "reached record length," he assumed that it wouldn't derail. He was mistaken. Why bring this up now? Because, once again, Mr. Greenspan has issued a decree on one of the most important economic issues of the day, to the Council on Foreign Relations: "A number of analysts have conjectured that the extended period of low interest rates is spawning a bubble in housing prices in the United States that will, at some point, implode...But a destabilizing contraction in nationwide house prices does not seem the most probable outcome.... And even should more-than-average price weakness occur, the increase in home equity as a consequence of the recent sharp rise in prices should buffer the vast majority of homeowners ." Now, in that last sentence, substitute "stock values" for "home equity," and "investors" for "homeowners." Does it now have a familiar ring -- sort of like what investors were telling themselves as their NASDAQ-based "growth funds" were losing 80% of their value. PRODUCTIVITY : don’t get me started on the huge productivity gains of the 90’s that didn’t really exist that were used to justify widely overvalued markets. ANALYSTS : Now days all you need to become a high priced analyst is to be gullible, have no life experience, and an MBA from Harvard or such, but with not more than two elementary economic courses. That’s tantamount to becoming a top lawyer the day you pass the Bar’s. It takes working through at least one complete cycle (one bear and one bull market) before you can even dream of being a qualified analyst. WHERE TO NOW : Since the next phase of the BEAR MARKET will be a Elliott Wave 3 or a Wave C of a giant irregular top for most markets and possibly only a first wave if the DJIA breaks out to a new all time high, which is a strong possibility, sometime over the next week or two. That would set the stage for the biggest BULL TRAP in history, as all caution is thrown to the winds, as the official NEW PARADIGM is proclaimed; just in time for all of the Bubbles to reach their inevitable bursting points. Every measure of investor sentiment will have reached all time extremes that are off the charts, which is exactly what is required to usher in thebiggest bear market in history. Unfortunately we all no longer have much time left to think about it and prepare to take the very difficult action that must to taken. I been warning you in advance that “it takes a great deal of courage to stand alone” which is exactly what is necessary to first read the signs and then ACT contrary to all you friends and the advice of your brokers and financial advisors. By that time what ever credibility is left of the perennial Bears like Prechter Fleckenstein et al will have been cast asunder: Hopefully, the soon to be rocketing price of Gold will have saved a little bit of mine.” Thank you Dr. Baltin! We all know of the old “saw,” “buy low, sell high.” But, lest you haven’t applied it to our current markets, let me share my thoughts explicitly. Between now and the 11/7 election I expect you are seeing a major top in the industrial stock market (mainly in the DJIA) and a significant low in the gold and silver markets. If you’ve been smarter than I and have benefited from the past 5 years in the stock market (although I’ve not done too badly in my precious metals holdings during these 5 years), please remember that you don’t make money in any investment until you sell! Paper “profits” don’t even get taxed by the IRS until you do. Wouldn’t if make sense to take your profits in the over-priced industrials and put those proceeds into this normal, beneficial dip in the precious metals? You may not get out of your stock at the exact top (pretty close, I bet), and we may not get in gold and silver coins at the exact bottom, but 5 years from now, I’ll bet you’ll be glad you tried. Call me today so we can make arrangements to get you some excellent prices. I look forward to your call. If you feel you already hold sufficient gold and silver coins, perhaps it’s time to tell close friends that they might benefit from reading my website: www.goldeneagleenterprises.net and then calling me. And, feel free to share copies of this newsletter with anyone you care about. Cordially,
THE DOLLAR IS DOOMED…and It's Fate Will Be Sealed Later This Month… Dear Clients and Other Friends:
The total destruction of the US Dollar is nearer now than at any time in our lives. And, that's kind of like saying that my death is closer than at any time in the past. Both are equally true, because no frail human has ever lived forever and NO unbacked paper currency in the entire history of mankind, has EVER survived. The mortality rate is 100% in both cases. Perhaps you don't wish to think about either case, but you better - in both cases! If you aren't ready to leave your mortal body, we need to talk. If you aren't ready to face the fact that the US Dollar is nearing the end of well over 200 years of its life, you are going to experience some terrible consequences financially - and this newsletter contains many of the reasons why I know the end is near. The next few paragraphs may bore you, but a little history can help you understand the future. In 1945, our country was the strongest military power, with the strongest economy and with the strongest gold-backed currency that the world had ever known. Because of this, and the fact that the US would redeem our dollars for gold to Central Banks, our leaders were able to convince these banks to establish the US Dollar as the reserve currency of the world. And, since the US had more gold than nearly all the gold held by all these Central Banks combined, it seemed that this was a sure thing, so they formed to the Bretton Woods Agreement in 1945. But, this "sure thing" only lasted for 26 years, because in 1971, President Nixon announced the default (actually the bankruptcy) of the US Dollar, declaring that those Central Banks could no longer redeem their US Dollars for gold. As you may recall, that was when the price of gold left the launching pad of about $42/oz, rising to $197.50 in late 1974. This same type of abrupt rise is again staring us in the face - right now! As it became clearer and clearer that the US would not be able to buy back its dollars for gold, in 1972-73 our government made an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for their accepting only US Dollars for their oil, and the rest of OPEC was to follow suit. Therefore, since the entire world had to buy oil from the Arab oil countries, it had good reason to hold dollars as payment for their oil. This was the case because even though those dollars could no longer be exchanged for gold, they could be exchanged for oil. This is the only reason why the US Dollar has been able to maintain its domination of the world currencies and stay in its place as the reserve currency of the world. However, this is about to change - THIS MONTH!!! You may be asking, "How do you know that?" Read on. Here's the title of an article published by "LEAP/E2020," on 2/11/2006 - "The End of the Western World we have known since 1945." The article is 5 ½ pages long, and here are the first five paragraphs: "The Laboratoire European d'Anticipation Politique Europe 2020, LEAP/E2020, now estimates to over 80%, the probability that the week of March 20-26, 2006 will be the beginning of the most significant political crisis the world has known since the Fall of the Iron Curtain in 1989, together with an economic and financial crisis of a scope comparable with that of 1929. This last week of March 2006 will be the turning-point of a number of critical developments, resulting in an acceleration of all the factors leading to a major crisis, disregard(ing) any American or Israeli military intervention against Iran. In case such an intervention is conducted, the probability of a major crisis to start, rises to 100%, according to LEAP/E2020. "An Alarm based on 2 verifiable events.
"These two decisions constitute altogether the indicators, the causes and the consequences of the historical transition in progress between the order created after WW II and the new international equilibrium in gestation since the collapse of the USSR. Their magnitude, as much as their simultaneity, will catalyze all the tensions, weaknesses and imbalances accumulated since more than a decade throughout the international system." Later quotes include: "This double development will thus head in the same direction, i.e. a very significant reduction of the importance of the Dollar as the International reserve currency, and therefore a significant and sustainable weakening of the American currency…LEAP/E2020 estimates that the American decision to stop publishing M3 (money supply figures) aims at hiding, as long as possible, the monetization of the US debt." In other words, our government will simply print enough paper dollars to pay off our countries debts, and in the process destroy the remaining purchasing power of our dollars. This process will probably result in a two-tier dollar currency, namely an overseas US dollar, and a domestic dollar. I wrote an article about this probability about three years ago. And, guess which one will be worth less? Near the end of this article, this paragraph leaps off the page: "LEAP/E2020 anticipates that these two non-official decisions will involve the United States and the world in a monetary, financial, and soon economic crisis without precedent on a planetary scale. The monetization of the US debt is indeed a very technical term describing a catastrophically simple reality: the United States will undertake to not refund their debt, or more exactly to refund it in "monkey currency." LEAP/E2020 also anticipates that the process will accelerate at the end of March, in coincidence with the launching of the Iranian Oil Bourse, which can only precipitate the sales of US Treasury Bonds by their non-American holders." My reader friend, THIS IS SERIOUS! Whether you ever buy another gold or silver coin from yours truly or not, PLEASE get your savings out of US paper currency and other US dollar denominated assets, such as CD's, bonds, savings accounts, etc!! In another insightful article "The Proposed Iranian Oil Bourse," Dr. Krassimir Petrov states: "…this represents a much greater threat to the hegemony of the dollar than Saddam's, because it will allow anyone willing either to buy or to sell oil for Euro's, to be able to transact on the (Iranian Oil Bourse), thus circumventing the US dollar altogether, meaning: 1. The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead pay with their own currencies. The adoption of the Euro for oil transactions will provide the European currency with a reserve status that will benefit the European at the expense of the Americans: 2. The Chinese and the Japanese will be especially eager to adopt the new exchange because it will allow them to drastically lower their enormous dollar reserves and diversify with Euros: 3. The Russians have inherent economic interest in adopting the Euro - the bulk of their trade is with European countries: 4. The Arab oil-exporting countries will eagerly adopt the Euro as a means of diversifying against rising mountains of depreciating dollars…At any rate…should the Iranian Oil Bourse accelerate, the interests that matter - those of Europeans, Chinese, Japanese, Russians, and Arabs - will eagerly adopt the Euro, thus sealing the fate of the dollar. Americans cannot allow this to happen, and if necessary, will use a vast array of strategies to halt or hobble the operation's exchange, by: 1. sabotaging the Exchange; 2. negotiating acceptable terms and limitations; 3. joint U.N. War Resolutions; 4. unilateral nuclear strikes; or 5. unilateral total war…Whatever the strategic choice…it will precipitate the demise of the dollar…(the) ultimate accomplishment will be the hyperinflationary destruction of the American currency and from its ashes will rise the next reserve currency of the world - that barbarous relic - GOLD." Trust me friend - THE US DOLLAR IS DOOMED!!!!!!!!! That's the dark side. If you think we've seen inflation in this country in our lifetime (the 3-cent stamp of our childhood is now 42 cents) has been bad, "you ain't seen nothin' yet." The bright side is that gold is destined to shine more brightly than it ever has! This quote was taken from an article about gold by one of the top gold fund managers in the business, John Hathaway. He manages the Tocqueville Gold Fund. Simply put, Hathaway believes "…the bull market in gold has just begun, but 2006 will contain wild swings in the gold price…and these swings will offer good buy spots (like I believe we are presently seeing)." Gold cleared $570 an ounce three weeks ago -- for the first time in over 26 years, and has been as low as $538 in the meantime. Wild price swings are here with more to come. And, continues Mr. Hathaway, "Four digits no longer seems like a stretch to me…Rather, it would seem that gold would be correctly priced at $1,000, just to catch up to other commodities like oil, base metals, natural gas, and platinum." The way Hathaway sees it, "…you can divide a bull market into four phases: 1. The beginning, 2. The end of the beginning, 3. The beginning of the end, and 4. The end. Right now, we are starting 2. The end of the beginning phase. The 'beginning' phase is now over. In phase 2., the market moves higher, but no one really knows why, so the press doesn't really discuss it, and the public at large doesn't notice. More people are talking about gold these days. Media awareness has increased. And the attention is attracting new money into gold. These are the hallmarks of the 'end of the beginning' phase. The big moves are still ahead of us." As the price advance continues, the reasons for the bull market become more apparent. That will be the third phase, the beginning of the end. The money on the sidelines turns bullish. Finally, when it's obvious why gold is advancing and all the fundamental explanations can be summed up in a banner headline in your local newspaper, you know you've reached the final days of the bull market. In Hathaway's opinion, "…those days are still well ahead of us, both in terms of time that must elapse and the magnitude of price appreciation." After reading Hathaway's article, my advice to you is still the same: Hold as much gold (and silver) as you can possibly afford - especially as you see the deterioration of the US dollar as described in the early part of this newsletter. But beware, as the gold price rises, so will the volatility. Don't let it shake you out of your position. In terms of the US Dollar, gold is still dirt cheap - and silver is an even better bargain! I hope you have enough to survive what's coming, because it won't be pretty! There is hope for those who don't insist upon holding depreciating paper dollar assets. Excuse me for repeating a paraphrase from Richard Russell, who writes the Dow Theory Letter, but in case you missed it before, he contends that, "As gold and the Dow Jones Industrial Average met at the same price in 1980 (850), they will again reach the same level in this gold bull market, somewhere between 2500 and 3500." This will result in a disaster for those who continue to hold most industrial type stocks, and will allow those who see the wisdom of his newsletter to survive the difficult times ahead. I hope you're in the gold group. If you already hold sufficient gold and silver coins, perhaps it's time to tell close friends that they might benefit from reading my website: www.goldeneagleenterprises.net and then calling me. And, feel free to make copies of this newsletter for anyone you care about. Cordially,
HERE WE GO!!!Dear Clients and Other Friends - Well, two more days like yesterday (11/16 - gold up $10) and today (11/17 - gold up $7) and we'll have gold above the long awaited price of $500! And, whether it takes two days or two months is immaterial. Gold is going over $500, then $600, then $700 and then up to the old high in 1980 of $850. After a significant pull-back from that old high, we'll see gold eventually reach several thousands of dollars per ounce. If you think this is a pipe dream, consider this. In 1971, the author of the Dow Theory Letter, Richard Russell, predicted that gold and the Dow Jones Industrial Average would meet at the same level some day. At that time the price of gold was about $40/oz and the DJIA was near 200. They met at 800 in 1980. Now, Russell is predicting that they will again meet, this time between 2500 and 3500. If you're in most industrial type stocks this means a serious decline in value. If you're in gold this means a serious increase in value is coming. The primary "reason" given for this beginning of the move in the precious metals comes from the CPI (Consumer Price Index) being up 1.2% in September and another 2% in October - and we all know that this index is massaged downward and is realistically double those figures when you consider the daily essentials that are not included in the index. The secondary "real reason" for the current strength in gold and silver (silver was up 33 cents yesterday and today) is that both the Russian and Argentinean Central Banks have announced their intentions to double their official gold reserves! Folks, that's IMPORTANT, and in my opinion, just the beginning of many similar announcements to come from other central banks. The move from paper to gold is underway! Most of you don't appreciate what's ahead because you haven't studied the history of unbacked paper currencies, but there has never been ONE, in the entire history of mankind, that has ever survived! Admittedly, the US paper dollar has lasted longer than any other unbacked paper currency, but folks, its days are numbered! When the central banks of the world divest the US dollar of its reserve currency status, it will be all over. And, it's not a matter of IF, it's simply WHEN. This is a prediction of the future of our worthless dollars based upon historical facts, not some pipe dream. And, you know I'm right. But you need to do something to protect your savings from the eventual demise of the dollar. Historically, gold, silver and real estate have proven to be the best answers - and I recommend all of them to you, although real estate seems considerably overpriced at this time in many parts of our country. Call my toll free number shown below if you would like me to help you select some appropriate gold and silver coins for your family. Cordially, Feel free to share this newsletter with anyone whose financial future you care about.
GOLD ALERT July 2005Dear Clients and other Friends – For clients, this will seem like a strange newsletter; certainly different than any I can remember ever writing in the past. Normally I wait to publish a newsletter until gold seems to be at a buy spot and ready to move up, so that if you have funds available, you can acquire gold and silver coins at that time and watch them rise. That’s not the case at this moment, in my opinion. Based upon the cycles I follow and the comments from other knowledgeable gold analysts with whom I’m in contact, it is my current analysis that gold has about a 40% chance of pushing above $460 this summer, but a 60% chance of dropping to the $375 level by about Labor Day. The reason I’m expecting a 40% chance of the long term bull market to resume from here is that just last week; “Thirty-nine, or 78 percent, of 50 traders and investors surveyed from Sydney to New York on June 16 and June 17 forecast a rise in gold, which gained $10.70 to $440 an ounce last week in New York. It was the most bullish consensus since the survey began April 2004. Nine respondents forecast a decline and two expect little change. European central banks, which agreed to limit gold sales to 500 tons a year through September, shed 346 tons as of April 1, or about 13 tons a week, London-based researcher GFMS Ltd. estimates. If that rate was maintained, central banks that accounted for most of a 23 percent rise in gold supply in the first quarter will reach their sales target this week. `They cannot keep selling at this rate,’ said Ian MacDonald, managing director of precious metals trading in New York for Inter-national Assets Holding Corp. `We should really be asking where the gold is going to come from to meet growing investor demand.’'' When the “consensus” is so strong in favor of an up market, I’m suspicious!Therefore, for clients who have 25% of their assets already in precious metals, it’s a time to wait before adding to your holdings – until gold either breaks above the December high at $456, or drops below $400, hopefully to about $375 where the major support line lies. Due to the Central Bank announcement, it’s fairly likely gold will rise from here, but I’m not willing to bet your money on it. But, if gold drops below the recent low at $412 for three business days, I’ll anticipate it will go all the way to the major support at $375, at which time I’ll fill the buy orders you place with me in the meantime. If, however, gold closes above $456 for three business days, it will mean that we aren’t going to see a nice dip in the price, so I’ll fill your orders at that time. I suggest that this will be a good strategy for adding to your existing account. However, if you don’t hold any gold and/or silver coins presently, then I would suggest that you commit half of whatever amount you intend to invest RIGHT NOW, and hold the other half until gold either reaches $375 or $456. Call me with your questions and/or orders. Incidentally, if you haven’t read my website (www.goldeneagleenterprises.net) article, “Real Estate – Boon or Boom?” I’d suggest that you do so. In case you don’t have access to the web, here’s an important passage from that article which was written in early 2003: “We moved to this modest home 13 years ago, paying $155,000 for it. Due to the condition of the economy at the time, I was concerned that we might lose the $10,000 we made as a down payment. But, lo and behold, when we had it appraised a few months ago, it came in at $279,000. So, now we have a $250,000 mortgage costing us about $1,800/mo (of which $1,300 is tax deductible interest) and a lot more gold coins. In Scottsdale , AZ , you can’t rent a house of this value at anywhere near that $1,800 (none of which would be tax deductible). So, we have our home, a tax-deductible expense and more gold coins. While I don’t pretend to be the shiniest coin in the stack, the way I see it (after being in the investment business for 45 years) is that we’ve simply moved about $100,000 from where it was saving us 5.5% per year in interest by being tied up as home equity, to gold coins where they have the potential of making many times that amount each year for the next several years. When the coins we hold appreciate to where we expect them to, we’ll sell them and pay off the mortgage, if we decide that’s best for us. “Now, if my suspicion is incorrect and we actually have a healthy real estate market for the next four or five years, then I guess I’ll just refinance again or sell this place at a higher price than it is today, and invest the additional profits into something else. If, however, my analysis of the current real estate market is right and the property values are about to nose-dive, our mortgage contract says that if we stop making the payments, the bank gets the house. Well, we originally put up $10,000, but have taken out well over $100,000 by refinancing, so I don’t think we’ll miss the current equity of about $30,000 if we lose this house by legally defaulting. And, let’s face it, the system that has put us in the financial mess our country now faces, is the one that established the contracts that allows us to default, if we find it necessary or to our advantage to do so. Additionally, if the current real estate bubble does go “boom” in the next few years, I suspect we’ll be able to find a comparable home (in the then depressed market) for about half what this one is appraised at today. “And, if the real estate market gets as weak as I think it might, perhaps the banks will have to repossess so many houses that they’ll find it will be to their advantage to pay us to stay here, so this house won’t be vacant and subject to vandals and normal deterioration. A friend (who used to be a V.P. of a large national bank – now a coin dealer, at my instigation) tells me that this is very similar to what occurred to many folks during the great depression of the ‘30’s. I can think of other interesting possibilities, too – and all of them favor our holding a large mortgage at this time in the real estate cycle. And especially with interest rates at the current levels, it simply makes a lot of sense to me. It not only makes a lot of sense, but I predict that if gold and gold coins do what I expect them to, it will make us a lot of dollars, too. “Of course, most folks refinance their homes in order to buy something (present consumption) or pay off their credit cards (past consumption), so the are simply incurring more debt on their home to save the higher interest rates required by the credit card company (and that’s not a bad idea). While that may be admirable, what I’m doing is simply moving dollars tied up in equity in our home (costing us about 5% in interest per year) to an investment in gold that has the potential (and a past real track record) of over 200% per year. If you do the math here’s what happened between 1970 and 1980: gold rose from $35 to the closing high on 1/21/80 of $825/oz (the interday high was $875). This means that in ten years, gold rose 2,257% (on a closing price basis). You do the rest of the arithmetic if it’s important to you to determine an exact annual rate of return, because I don’t know how to figure compound interest rates. But it doesn’t take a masters degree in mathematics to figure that it’s going to be a lot more than what one needs to pay in interest for a larger mortgage on their home now.” That was about 2 ½ years ago. As of 05/05/05 , we have again been pleasantly surprised to learn that the mortgage company calculates that our home is worth more -- $190,000 more, or a total appraised value of $470,000. Since they’re in the business of lending money and I’m in the business of investing money, I’ve just agreed to let them give me some more ($132,000) money to invest into gold. Even though the current interest rate is nearly 6%, it’s all tax deductible and the capital gains tax on coins is very low – when, as, or if I ever sell them. To recap, 15 years ago we bought this place for $155,000 with a down payment of $10,000. The recent appraisal said this property is now worth $470,000, and so far, we have withdrawn over $230,000 in cash and invested it into more gold coins and stocks. If real estate continues to appreciate (how much further can they blow this “bubble?”), I guess we’ll just have to sell or refinance it at more profit in a few years. If real estate drops from this hyper-inflated level, I guess we’ll either give it back to the mortgage company, or renegotiate the terms of the loan. Either way, all we can figure is that refinancing was a WIN-WIN situation. Meanwhile, I strongly suspect that our gold coins and stocks will do rather well for us. Perhaps you might find it beneficial to consider freeing up some of your real estate equity for such a purpose. Call me if you’d like additional insights.
ROAD MAP ON THE MINING STOCKS “Gold and commodities are going higher in this decade. The graph below shows how commodity prices are relatively priced versus the cost of living. Two important things about the chart is that commodity prices the last four years have already risen by 50%, but from a historic perspective the move looks as if it is just beginning a new and prolonged trend. The inflation adjusted price level today is the same as 1932 at the depth of the U.S. depression when commodity prices had collapsed. “Scarce resources such as beachfront property or certain metals are a function of Mother Nature, not man. Men can make machines to make millions of widgets and influence the price by overproduction, but certain metals, and other natural things like oil take billions of years to form and are not subject to the laws of oversupply unless these commodities are found in abundance. In the case of metals and natural occurring commodities, the supply is limited. “But populations grow continually over time generally increasing demand. This, plus inflation from money supply increases will add to upward price pressures. The graph above states the obvious, that the commodity decline from the 80's and 90's is over. A prolonged and strong across the board increase in many commodity prices is under way. This will influence inflation rates and move the price of precious metals higher in the years to come. The above graph is your road map.”
DING DONG - WHO DO THEY THINK THEY ARE FOOLING? “For the first time I believe that we are seeing the street (in the currency markets) say that both the Dollar and the Euro are "Junk!" This is a very important point to understand because it also should be the signal that the next leg of the gold bull is about to be unleashed. After all what do they have left for an alternative? I have said before that the time will come when all currencies fall at the same time because of the lack of faith in paper and debt, and gold will be the last resort.”
BULLION, THE GOLD METAL PRICE “In early 2001, gold put in a low of $265, although the continuous contract chart built in a slight premium at the time, over the cash market gold price. In December 2004, gold registered a high of $456. My forecast stated at a Chicago gold conference in October 2004 was $455, in friendly opposition to Jim Turk's $485 forecasted target (and plenty of witnesses). That means we had a $190 rise in the major Elliott Wave #1 upleg. Typically, the EW3 third upleg is 50% to 60% larger than the EW1 upleg. That translates to $285 to $305 of potential power in the virtuous major EW3 upleg, to a level bounded by $700 to $720 per ounce. Let it be known that the textbook three impulse moves up seem more like five here over the past three years. Let's not quibble, and instead employ some pro-forma asterisks in honor of gold cartel ambushes. The textbook two impulse moves down might have been completed, unsure actually. The $415 level might prove to be the starting point for the major EW3 wave. Its start might instead turn out to be in the $390 to $400 range. Regardless, the next major upleg is foretold by the following charts related to stocks, which are much clearer along textbook lines. We appear to be headed to a $700 gold price in US$ terms in the future.”
A Process of Elimination: A Speculation on Gold and the Credit Cycle “The dollar price of gold bullion is trading within 3% of a seventeen year high, despite negative sentiment. Over the past five years, the dollar gold price has increased 50% versus a 16% decline in the S&P 500 and an 18% decline for the trade weighted dollar. Swooning sentiment while gold trades within a few percentage points away from a seventeen-year high? Sounds like a bull market to us. It is the nature of every bull market to take along as few as possible. The recent shakeout, which began in earnest in early March, has done an excellent job of chilling investment sentiment. The early stages of all bull markets are characterized by widespread skepticism. Gold remains in a multiyear bull market that will last another decade. The deflowering of the euro represents a major milestone along the way…Those who feel able to predict the precise moment when foreign central banks turn their backs on the dollar should wait until then to position gold. All others are advised to start now. “Convenient though government sponsored currencies such as the dollar and the euro may be, they are first and foremost tools of government policy…The dichotomy of monetary interest between the public and private sector will be exposed as the current secular credit contraction runs its course. It will culminate in a grass roots mandate for sound money, and will be expressed as a dollar gold price well into four digits.” (emphasis added) Based upon what these and many other knowledgeable gold observers are saying, don’t you agree that it would be smart for you to make decisions regarding which coins you should purchase and how many? All we need to do then is let the price action on gold bullion tell us when to place those orders. Simply call me now and I’ll help you decide which coins will be the best buys for you, when that time arrives. Remember, successful investors buy the significant dips in a bull market – which, by definition, we now are in, in the gold market. Cordially,
WHY?On April 15th (interestingly, our tax day), NM Rothschild announced its withdrawal from the London Gold Pool, which has "fixed" the price of gold twice a day since that organization created the gold pool in 1919. Many of us are puzzled and are asking WHY? The conclusion drawn by one wag was that: "Gold is on its way out as an investment and a reserve asset. Three cheers for that." I've been personally involved in gold for over 44 years and I don't think, "gold is on its way out…" - quite the opposite! I'm convinced that there is something both imminent and eminent relative to gold - thus this article that contains information I've not seen on "gold-eagle." The official justification for the Rothschild withdrawal was that: "Our income from commodities trading in London, including gold, has fallen as a percentage of our total income in each of the past five years. Following a strategic review of our activities we have concluded that this is no longer a core area of activity and have, therefore, decided to withdraw from the market." As Mr. Warren Pollock of "The Macroeconomic Newsletter," in an article titled, Something Significant at Rothschild, commented, "…we should consider that the cover story Rothschild provided regarding profitability concerns are absurd." Well, if the announcement is "absurd," what is (are) the real reason? Obviously, we can only speculate - hopefully intelligently. It's been over two weeks since these items appeared and I've been thinking about them ever since. Yes, I know I'm a little slow and several other articles have appeared since, but none that I've seen cover several items that I consider extremely important. I don't pretend to be able to comprehend everything I read, so I called long time friend Frank (rehabilitated graduate from the school of organized crime for gentlemen - namely fractional reserve banking) to get his slant on these extremely important items. Since Frank's been following gold nearly as long as I have, he's also qualified to make an educated analysis of the matter. The following is an amalgamation of our thoughts. First, there have been numerous "guesses" regarding WHY Rothschild's has withdrawn from the London Gold Pool. They range from the potential of significant derivatives market problems, to the unfounded perception that Central Bankers don't believe that gold has a function in the world's finances anymore, to the probability of problems in the Central Banks deceptive gold leasing program, to potential lack of liquidity between Central Banks, to Rothschild intelligence that it would have among their extensive banking connections concerning geopolitical threats that may include a more extensive Middle East war, and on and on. Friend Jason Hommel stated in his April 30th newsletter: "In the press release, it says the Rothschild's are getting 'out of the gold business.' People will assume they are thus selling gold. This is probably exactly the opposite assumption one should make, just as everyone made the wrong assumptions about what Nathan Rothschild was doing after the battle of Waterloo, namely a pretense of selling British consols (the T-bonds of their day), just prior to the announcement of the British victory at Waterloo hit the London Stock Exchange (see: google.com article, "rothschild waterloo napoleon"). Reading a bit closer, you can see that the Rothschild's are getting out of the gold leasing business." www.goldismoney.com/ssr/SS32.html But, we can be certain that whatever the reason(s), it must have been of major significance, not some blather about falling income! You don't create, oversee and virtually control the world price of gold for 85 years and then just withdraw because it was "the sound thing to do," according to Baron David de Rothschild. Our guess is that there is something very significant about to occur in the international gold market that is going to cause major disruptions of global importance, in which the Rothschild's don't wish to be involved. When? Your guess is as good as ours, but the following comments may hold a timing clue. On January 23rd of last year, Jim Sinclair wrote an extensive and insightful paper for his email readers. The title was "Gold to be Remonitized: First by the 'Malaysian Dinar' in June of 2003 followed by the 'US Dollar' in June of 2004. The Gold Price Will Continue to Float." At that time, I'm quite certain that Mr. Sinclair had no inkling that NM Rothschild would ever bow out of the London Gold Pool, which it founded. Frank and I are convinced that there's a connection between what Mr. Sinclair wrote 16 months ago and the Rothschild's action - but what could it be? Brief excerpts of Mr. Sinclair's email are quoted here for your consideration. Early in his 6½-page article, Mr. Sinclair indirectly inferred the number one economic rule: everything is political. He pointed out that, "June 2004 is when the Bush re-election campaign will make its push for the November elections…You must see the 18-month (at that time, January 2003 to June 2004) time line that the economic stimulation tax plan has for those that will fund the 2004 Bush Campaign." Was the Rothschild withdrawal done in anticipation of something really significant to occur between June and November of this year? We think so. This article gives some insight as to how this may happen, namely, an international accord to stabilize the paper currencies of the world. But, to continue with the salient points in Mr. Sinclair's article, a lengthy quote is necessary: "Gold will not be set in price as there is no way anything monetary can be fixed at this time...It is enough that we know what is planned and how it will occur. I disagree entirely with the author (a Mr. Murenbeeld) of the National Post article on the basis of Chairman Greenspan and Governor Bernanke's statements that the goal for gold is $350 and it will be fixed at that price. That simply will not and cannot happen in today's floating exchange world. "The (National Post) article did not approach the means by which gold would re-enter the system but only said it would. Convertibility is out of the question in light of the profuse use of dollars as the primary international settlement mechanism. (Frank points out that the majority of dollars are "computer blips" for which the Fed has zero responsibility.) Gold is headed back into the system by a modernized and revitalized Federal Reserve Gold Certificate Ratio tied to the expansion of M3 (the broad monetary aggregate figure). The value of Treasury gold (if there is any) on the day of enactment will be considered to be that value which is required to have (for) that size M3. From that point forward, more gold, (and) or a higher price for gold will be required in order to expand the broad based monetary aggregate (M3) beyond a modest percentage. The Treasury could simply benefit from a higher price or could buy gold in the open market to effect a higher price (does such an increase in our central bank buying of gold lead you to believe that the gold price would go down?) should the need arise to expand beyond the present level in M3, beyond a predetermined expansion of (say) 3% per year." (highlighting and underlining added) Upon reading these two paragraphs 16 months ago, friend Frank said, "Very interesting! If the open market price of gold 18 months hence will be the criteria, look for our M3 to be greatly expanded between now and then." Since then, M3 has risen from $8.5 to nearly $9 trillion, or about 6%. This would be much more dynamic if it weren't for the numerous deflationary factors such as bankruptcies and business failures of the past year. If Mr. Sinclair is correct, and the new Federal Reserve Gold Certificate Ratio is to be introduced in an effort to stabilize the dollar and government bond market and get President Bush reelected, here are some figures to consider. The euro currency has risen (because it's inversely related to the US$) from a low of a bit over 80 to a recent high of about 127, and is currently about 119 due to the recent rally in the US$. One of the primary reasons for this rise in the euro is that it's backed by 15% in gold (WHY, if it has no monetary value?). At $390 spot gold, the US$ has approximately a 13% gold ratio to currency-in-circulation. Problem: as gold rises in price, the euro will exceed that 15% ratio and the US will need to either increase its holdings of gold or reduce the currency in international circulation (not likely). Solution: block US domestic currency, removing it from the equation thus rendering it valueless outside the US; as history shows other nations have done from time to time (likely). Result: 1. domestic inflation, as the domestic gold price goes ballistic in terms of the domestic currency (almost a given), and 2. US living standard plummets! (almost certain) If the same ratios are applied to the M3 money supply, there are two probable scenarios: 1. with M3 divided by the (supposed) US gold holdings of 260,000,000 ounces, this would equate to a per ounce gold price of approximately $34,600. If a 15% "Gold Cover Clause" were to apply (ala the euro percentage), the gold price would equate to approximately $5,190, and 2. currency-in-circulation if divided by the 260,000,000 ounces of gold that is supposed to be in the US Treasury assets, gold would compute to a per ounce price of approximately $2,600. All other aspects of the money supply are simply "computer blip money," fiction, made possible by the fractional reserve banking system. M3 is approximately 13 times the currency-in-circulation, the majority of which is held in foreign hands. It seems likely that some combination of 1) and 2) will be required to give meaning and credibility to a new gold cover index; the Fed lacking sufficient control of M3, even with their control of the short term interest rates. WHY? Obviously, the point of this article is an attempt to tie the Rothschild's announcement and the Sinclair article in with the present action in the precious metals markets. If friend Frank and I are correct, there is an excellent likelihood of a major increase in the price of gold when the dust settles. But, whether this scenario is correct or not, we can certainly rest assured that there is some connection between the Rothschild withdrawal from the London Gold Pool that they created, and the perilous gold derivatives market. It's my opinion that they are expecting counter-party derivatives failures in the gold market (and probably silver) in the very near future, and they don't wish to be a victim of the ensuing pandemonium. If (since?) there will be a gold clause tied to the paper currencies of the world, it will mean that either: 1. the world-wide money supplies will be kept stagnant -- not a chance!, 2. the price of gold will increase -- VERY likely (in conjunction with the increase in the money supply of the respective countries), and/or 3. some, if not all, central banks will need to increase their holdings of gold (to meet or maintain the currency/gold ratio, at whatever level it may be set) - which will obviously put upward pressure on the price of gold -- ultimately. For those of us who hold gold (especially coins), this would be GOOD news! However, it may very well mean that one of my fears for several years now, will come true -- nationalization of the gold mining industry, because our government will need every ounce of gold they can acquire (paid for with paper), by whatever means! Also, keep in mind that every Central Bank in the world, but especially OPEC, Europe, China & Japan would welcome such a gold-backed program for world currencies with open arms! The recent collapse of the gold and silver prices couldn't have been better "timed," if Sinclair's pre-election scenario is accurate. Gold dropped from it's interday high of about $440 to an interday low of about $380, and silver from it's high of about $8.50 to $5.63. Now that speculators and weak holders have been washed out of these metals (especially silver), we can have a period sideways movement (accumulation time for the "big-boys"), and then the real reason for the Rothschild's withdrawal from the London Gold Pool can become apparent, where there may be a short position slaughter of illiquid counter-parties. Is it just possible that, after several generations (since Meyer Amschel Rothschild began his financial enterprises in 1770 - see The Rise of the House of Rothschild by Count Egon Caesar Corti, Western Islands, 1972) of creating the "leading edge" of the financial world, the Rothschild's are anticipating (or perhaps causing?) some financial maneuvering in the monetary world that will cause a dynamic gold market - and they don't wish to be selling anymore to anyone (including Central Banks), in the meantime? Perhaps they need this present time frame in which to buy more, and were precluded from doing so by being members of the London Gold Pool. We'll probably never be privy to the exact answer to such questions, but the next few weeks or months might prove to be very exciting to those of us who are prescient enough to add to our gold assets during this "quiet before the storm." Frank and I firmly believe that we are presently in the "eye" of a financial hurricane, and since the backside is always the more destructive, it seems that the worst is yet to come. I trust that you have enough physical gold "insurance" to weather the turbulence ahead. To date, we've been correct in anticipating a rising gold price as the dollar falls. Under a Gold Cover Clause we could expect a rising gold price concurrent with a stable dollar -- not guaranteed, but reasonable. And not insignificantly, the US$ index had dropped from it's 2002 high of about 124 to a recent low of 85, and is currently about 91 with major resistance at 92. To stop the downward spiral of the US$, something must be done to stabilize it and regain some semblance of long-term faith in that paper asset, or it could trigger a collapse of all paper currencies. A "Sincliar" described "Gold Cover Clause" would fill the bill -- to say nothing of stabilizing all currencies, especially of gold-holding nations. In addition it would reduce animosity between trading nations and buy some urgently needed time for a world currently toying with a systemic fiat-money credit collapse. Should it ever happen, life would become too ugly to write about. Are we approaching a crisis in the financial world? It would seem that we are, based upon the foregoing items. Should we panic? I believe it would be more appropriate to remember the meaning of the Chinese word for crisis, which is composed of two characters: one represents "danger," and the other represents "opportunity." I see the current dip in the precious metals prices as just that - an opportunity. I sincerely trust that you have enough gold to weather the extremely interesting turbulence just ahead. I leave you with a recent comment by renowned author of The Dow Theory Letter, Richard Russell, who said this about the recent dip in the gold price: "Personally, I'm going to hold my gold. Holding the metal doesn't worry me. I still have gold that I've carried from the '70s. Gold is the only real money. I don't care, inflation, deflation, boom or bust -- gold is money, and I can't say that about any paper currency. I'm holding all my gold. In the long run, I believe both gold and gold shares will win. But a lot can happen between now and "the long run." Personally, I've decided that I'm going to sit with my gold-share position. But if I do anything additional in the gold area, it will be to buy more coins." Jack Weber
THE PLOT
|
