Vieserre: My 1998 forecast for the DJIA -- at least down to 1500 sometime before yearend 1998. That's based on expected economic conditions, current dividend yields, and present book values.

THE FEDERAL RESERVE SYSTEM CREATES MONEY OUT OF "THIN AIR"

Lets take for example the most recent account of the "thin air" paper money production  the new $100 bills. The Federal Government placed
$485 billion of the new $100 bills into circulation, but they only removed $400 billion of the old ones. This is a decrease in power of the $100 bill by 21%.

This has happened many times since the incorporation of the Federal Reserve System in 1914. Since its inception, the Federal Reserve has been
creating money as debt, which in return creates money out of thin air. This is achieved with ink and paper only. This act is inaugurated when this branch of the government extends an advance to the government, banks, businesses, or to individuals. This liability money is the money on hand that is used for cash flow, which creates money out of thin air!

Presently, the Federal Government is only paying the Bureau of Engraving an estimated $23 for printing 1,000 notes. [This price is all inclusive.]
Consequently, the Federal Reserve is only paying $230 for each 10,000 lot of notes that is generated. This is $230 for 10,000 of any denomination.
Moreover, they must obtain a guarantee of collateral equal to the face value of the notes. Lets take a look at this. Before the Federal Reserve
ordered $100 notes into existence, they sent a request to the U.S. Bureau of Engraving for 10,000 notes. [Remember, this was a total cost of $230.]
Then the Bureau of Engraving acquires a guarantee from the Federal Government of collateral equivalent to the face value. This guarantee is made to the Reserve by Congress. Now, here comes the part that should concern you  the consumer. The collateral that Congress "pawned" against this guarantee is the land, labor, and assets of the American people. Is this THE type of representative government that we want to support? The Federal Reserve System thinks liabilities are wealth!

In general, the banking institutions generate currency by monetizing debt. The Federal Reserve System thinks liabilities are wealth! This would make your debts and my debts extremely prosperous if we were to abide by this interpretation. However, for the most part, we have no way of monetizing our debts. As usual, a government procedure is absolutely useless to the general public.

BUY GOLD and SILVER!

Eldorado: Regarding your 21:20. Yes, there has been very little discussion about inflation/deflation. I'm not sure what to make of it. Maybe you're right. Maybe most people don't understand the difference between money, credit, receipts, and the like. If so, I don't think further discussion would really be useful.

The point of the questions was to get to the point where we were all talking on the same wavelength. Eldorado, by your prior comments I know you understand these subjects, but I'm not sure others do. And it seems, as much as I try, I fail to convey to others the differences in these areas.

Mike @ 20:23: Excellent, excellent posting!!!!

Eldorado and WW: In a broad sense, people like you are called libertarians -- social liberals and fiscal conservatives. I am libertarian also. I shudder at the platforms of both the Republicans and Democrats.

ALL: When you have massive debt the monetary creation is not inflationary because of supply/demand. The ever increasing debt slows demand but as long as the ever increasing credit overcomes this everything is ok. The salutory effect of the liberal bankruptcy laws can not be overlooked. Since there is now an acceptance of high debt levels ( because of their availability ) and bankruptcy is ok ( as it should be given bank advertising ) the situation has gone beyond anything previously recorded. The end is near because final demand and thus earnings can only go down. Unless they can run the cos. by firing all!! HaHa!!

WW: As a form of courtesy, please refrain from lumping us into categories. I realize that many, including myself in the past, have been equally insensitive to your position by including your views in the socialist camp. For the times that I have been guilty of the same offense; I apologize.

I don't think there is a person on this site that advocates the buttering of our bread in halls of congress by means of force of law. It's abhorrent both philosophically and practically.

If the people who do routinely use the rule of law, to better themselves at the expense of their rivals or Americans in general, are to be labelled as "Conservatives"; I think it's fair to say that none of us are included in that camp. If you will do an honest appraisal of opinion expressed on this channel, I don't think you will find even one post that even hints in that direction. ie, more govt control of the other guy.

The label of conservative is abhorrent to me personally as it would if I were labeled a socialist. Many others probably feel the same. If we do not share your views on specific govt programs, we should not be stuck with a label anymore than you should for your specific views.

Damn, anything to put that political crap to rest!

STEVE:I do not want to get into politics but you made a comment about my positions.

1 ) I am not a Liberaterian/ I do not like what they believe in!!
2 ) I am an economic pro-social liberal in a Roosevelt/Kennedy/Lbj sense!!
3 ) I am a social conservative in the Roman Catholic Church sense. I am in somewhat agreement with the Christian Coalition on social matters but in disagreement on economic matters ( for the most part ) .

Peace to all!!

WW: In your recent postings, you referred to credit-expansions and bankruptcies. Do you agree that inflation is the credit-expansion, and bankruptcy is a symptom of a credit-expansion????

WW: Sorry. I did mis-lable you. Our politics are different.

Vieserre June 21 @ 18:02 : Yes, I see a material significance to this.
I suggest, that War had not ended after the WW II conflict. I expect,
that many 10's of thousands died, each and every year, since the end of
WW II. Approximately 40 conflicts have occured each year. Yes, this is
Inflationary, in a slow methodical manner.

I suspect, that the world has had enough of the commie, pinko, red
scare tactic, the world is tired of war. The world industrial complex,
is operating at an average 60 % to 70 % capacity.Maybe less, at 50 %

Consider, war causes shortages, should the world industrial complex
operate at full capacity, ( 100 % ) were will prices go, up or down ? obviously, the world Elite, have a peace time deflation problem now.
( 1997 ) I expect, and hope, I have given an appropriate reply.

Small Trader @23:59: Congrats on your former success. Perhaps, you noticed, there was a sign obove the entry door. It read: " Abandon all hope, ye who enter here". The astute observer will soon recognize that a large faction of the "Stopped Clock" school of investing has secured quarters here. Fully in the belief, that as day follows dreary day, our hour is finally at hand. Perhaps you have also noticed, that the hour of our redemption coninues to elude us.

Fear not fellow investor. Lay aside your heavily laden purse and join us in our quest for profitable rectitude in an imperfect world. Your sudden change of allegiance, from paper to stuff, may be a harbinger of greater things to come. Perhaps you are but the vanguard of legions. ...... In the meantime: It ain't wise to go bottom fishing. Ya just lose a lotta' rigs that way.

Mr. Owen: In general, I thought your 23:33 posting was great. The only point I will agrue on is this: How can you conclude that government credit-instruments will collapse in value, and in the next sentence say that we will have a hyper-inflation? Won't the holders of those collapsing credit-instruments have LESS money after the instruments have collapsed in value?

For those who refer to the hyper-inflations of Germany in the 1920s and in Latin America in the 1970s, do you understand the differnce between a monetary system the is CURRENCY-BASED and one that is CREDIT-BASED???

CURRENCY-BASED monetary systems do end with hyper-inflation. But, CREDIT-BASED systems eventually collapse with deflation of the credit. In other words, the credit becomes worthless.

STEVE: I view the current credit expansion as deflationary. Using future funds for current purchases. Obviously this will have a domino effect on the current over leveraged economy. The stories about all the "good" jobs ( I believe the crappy jobs exist ) might better have been authored by Leverentia Beria in Russia under Stalin or J. Goebbels under Hitler in Germany 1935. Goebbels always said the bigger the lie the more it will be believed. As mentioned in an earlier post I am acquainted with well qualified young people with college degrees who can only get hamburger flipper type jobs. Advancement is based on who you know not how good you are. The seeds for the demise of this PAST great American Capitalism have been planted. SO BE IT!!!

New Goldbug: By your 00:03 posting, I see that you understand the credit system we presently operate under. Congratulations!!!

Puetz: You're the first person I have ever seen draw that explicit and vital distinction between currency systems. The distinction is probably common knowledge to most but, until now, it wasn't to me. Thanks, it helps clear some contradictions I've always held in such matters.

"Greenspan, inflate! But don't make it look like
you are inflating!"

WW: The seeds are indeed sown and will likely bear a bitter harvest. .... but like it or not the "Suits and the big cigars" will escape the end result.

By way of example, today's Oregonian had an article on the merger of US Bank and Norwest. The ceo of US Bank will receive $24 million, plus tax relief, plus $1 million per year in lieu of pension benefits, plus another million or so in salary until retirement in 1998. It was also reported that 4000 jobs would be cut in order to save $400 million. ... The only source of comfort may be if he invests it all in US debt but I doubt it.

EARL: Congrats for your analysis and even bringing up this sort of issue.
Ask yourself WHO ARE THE REAL GREEDY IN THIS SOCIETY!!?? ANS: THE PERSON MENTIONED IN YOUR BANK MERGER STORY IS TYPICAL!! Why should these no talent bureaucrat fat corporate slugs get any honor when they have done violence to American workers and their families ( so much for family values when they conflict with corporate stk option profitability ) . Stk Mkt Crash = Justice under the Lord!!
If YOU are beginning to see it things are changing and I think for the better at least politically. Again we are becoming a society of WHO YOU KNOW and NOT HOW GOOD YOU ARE!! and RUSH IS A HYPOCRIT for trying to intimate otherwise and pass on the patently false prosperity theology!!

WW June 22 @ 01:32 : JUSTICE UNDER THE LORD !! Soooo, the no talent
Bureaucrat, fat corporate slugs, are not also GOD'S Children, EH !

Night all: It's been another interesting day at Kitco!

6 pak, who are you?

Something has been bothering me about last weeks CNBC's all
week special about "California's Quiet Boom".....If anyone else on
Kitco thought it strange I would like to hear your comments. From
my point of view ( and those at my local watering hole ) it was pure
propaganda. Why? Who is gaining from such a charade? It
bothers me a great deal that a national network is trying to
brainwash, why?

WW...Enjoyed your posts Sat.-Sun., agree with 90% of your
philosophy but can not understand why you are for a flat "broad
based" tax when you know the super rich are stealing everyone's
lunch.

Reb: They ( the CB's ) will try to get their loaned-out
gold pronto; regardless of the rules of the game. Once
this intention becomes known; the lid on the gold price
will crumble. Those who initially sold the borrowed gold
will pay heavily.

In 5 days, we will know if BT is real or not.

Good-by all KITCOITES!....Time for a ROAD TRIP!....Tarnished: Call me Bubba behind me back...will ya!...I won't forget that....BYE!

When a government pays interest to borrow its own
currency and taxes its own citizens to pay the interest
it is doomed to failure.
Think of the prosperity it would create for its people.
WW, think of all the people-users that you could place
behind bars, while the present types of crimes will be a
thing of the past.

When a government pays interest to borrow its own
currency and taxes its own citizens to pay the interest
it is doomed to failure.
Think of the prosperity it would create for its people,
if this money were used to create businesses or used in
proper investments. ( Not today's DOW )
WW, think of all the people-users, the userer's, that you
could place behind bars, while the present types of
crimes will be a thing of the past.

TED---Have a good road trip!---Bluto

First they push up the dolars value so that they may send
us their Lexus', their Mercedes,, their Toyota,s the
Bema's and Volvo's, not to mention about five other
brands that sell in greater numbers.
This proves that he dollar is better than gold.
Then they cash in those dollar, which are relatively
higher than their own currencies. So they get more of
their own currency. As a result we get our dollars which
are worth less and which are used to respike the economy,
that suffered when we imported all that stuff. Then we
start the circle, all over again. NO QUESTION ABOUT IT,
THE DOLLAR IS BETTER THAN GOLD.

HYPER INFLATION, & Mr. Puetz's question do we understand the difference between monetary expansion and credit expansion.

It's always a little annoying to me when I speak to a non-entity, like HYPER INFLATION. Where sir, or madam, did you get your facts about the german hyperinflation of the early twenties and their causes?

Mr. Puetz why don't you be kind enough and tell us what is, in your opinion the difference between monetary and credit inflation, or expansion?

Now I feel better. Have a good one y'all.

CURRENCY-BASED monetary systems do end with hyper-inflation. But, CREDIT-BASED systems
eventually collapse with deflation of the credit. In other words, the credit becomes worthless.

Mr. Puetz, this was picked from your reply to Mr. Owen. Can you tell me the difference? When credit becomes worthless, or fiat becomes worthless,
where's the difference?

CURRENCY-BASED monetary systems do end with hyper-inflation. But, CREDIT-BASED systems
eventually collapse with deflation of the credit. In other words, the credit becomes worthless.

Mr. Puetz, this was picked from your reply to Mr. Owen. Can you tell me the difference? When credit becomes worthless, or fiat becomes worthless,
where's the difference? This has been the reason why I have stated on a number of occasions, that what I believe we're in for, is an inflationary depression, as contradictory as that may sound.

Puetz -- My reference to the 'short interest business', relates to the record short interest levels on all stock exchanges. I cannot believe that these are all 'bear' positions'! If they are, then the bears have a lot more money than the Bulls! Think of it, the short interest levels are rising with the market. The higher the market goes, the deeper under water the short position goes. If these positions are 'covered', they result in market rallies, hence, sucking more money from the sidelines. When the last bear has been killed, watch out!

I tend to think that some of those short positions are hedges put in place by those who fear a market decline. The positions may or may not be taken off periodically, hence, the rallies? There is no question that the bears have been trying! Many bears are badly wounded. I've been a little luckier than some, but I did get stupid on one position. Oh well, you can't bat a thousand, but you can try. As for a fall in the markets? No predictions, but when it comes, it'll be a fast sharp drop. How much, say you? I haven't got a clue. This is one powerful Bull, for whatever reason! Get in front of it at the peril of your finances! As long as the 'dippies' keep on buying.....

The real question is this, when will the under $50K/year income group collapse? Or, when will the over $50K/year income group be 'blown out' in the stock market? One group, basically spends everything that they earn ( no savings ) and the other dumps a good chunk of their 'spare' cash in to the stock market and using their credit card to finance everyday life. Here's a question for you, ask people from either group if they have more than fifty Dollars cash in their wallet or purse. I'll bet you the answer is no, but they will have plenty of credit/debit cards! Hell, look at gas stations. More and more people are putting their cards in to the pump or waving some damn thing-a-ma-bob at the pump in leiu of cash payment. More credit expansion!

Reify -- How about inflationary collapse? A situation where a business can't tell if it's making or losing money, because the purchasing power of the money changes on a moment to moment basis. The question for the business is, "What is my cost and what will the market bear for price?" When you cannot determine your cost, the price issue becomes moot, because of the other question which cannot be answered, "What is my profit?"

Be Back Later..........

Here is the bad news guys. Unfortunatly in early 1995 we were conducting an experiment which was to lead to a greater understanding of the true nature of nothingness. We wound up our particle accelerator to 2000 GeV
which then produced a collision between a proton and an antiproton. This
is where it gets interesting. Instead of producing quarks and strings of
gluons we produced a piece of antimatter which we now call a DJ track.
This has been named so because of the way it mimicks the angle of diffraction since Jan 95 of the DJIA. Bad news guys is the track stops
dead and does not reappear. Hope us messing around with the Grand
Unification Theory hasnt produced a monster on your side of the world.

Cheers. One elated scientist.

BERNIE: The hype about California is to keep CONFIDENCE UBER ALLES. Clearly leaders at the G-7 summit were miffed by Clinton's chest thumping. I love what Chirac said "We French should import the optimism of your media" ( he knows this economy is a low wage and benefit Hamburger flipper service economy ) . Beautiful, as I posted yesterday I know from many sources that the job mkt is abysmal. The reason for the Cal. propaganda on CNBC is also to keep a consistency with the rising stk mkt. This is in the interest of CNBC WAll St sponsors thus you have propaganda with almost old Soviet flair in its polyannish patent absurdity to anyone familiar with the situations.

AS I have heard said "THE JOB MKT IS BOOMING ON ALL FRONT PAGES"!!

US NOW 13th in std of living down from 1st twenty years ago. Below France Germany and Japan as well the other "non-competitive" countries. If the propaganda wasnt serious it would be down right funny.
I think Chirac finds it properly funny.

QUANTUM MECHANIC: May I thus infer from your experiment that not only has the business cycle been repealed, but the DOW is about to be as well? By the way, I have a lot to say about the nature of nothingness.

PANDA- actually you're not far off the mark, no pun intended.
Once there's a collapse in the monetary system, the government has
to find a solution, this is where a gold related, backed, currency
will then be created, otherwise, bartering will be needed.
If you've ever lived through a period, like hyperinflation, and
not many have, you would understand the masses eventually lose
faith in money.
In the present situation, I lean more towards the George S. Cole's
theory, that we're headed for a major bear, and it'll last some
years. If a crash period will come, it'll probably be at the beginning
or the end of the down move.
Progressive administrations, both democrats and republicans, not to mention many other nations, have spent our future generation's wealth.
As the oracle article,on the gold eagle site, states, we are behaving as
though our natural capital resources and enviroment, is infinite, it
is clearly not, and we aren't replacing, nor rationing what we use,
again,we're stealing from our offspring.

Is it just me, or does anyone else get the feeling
something big is about to happen?

STEVE PUETZ, ALL: The proper definition of INFLATION is the issuance of currency with no corresponding increase in specie ( gold, silver, etc ) behind the notes. Any note issued without a commodity metal backing ( specie ) is fraudulent, and is, by definition, a component of an inflation. This is, essentially, monetary fraud. A paper note was only, and is only, a receipt for gold on deposit in a bank or similar private repository. That gold was confiscated by government. Government now issues paper notes against its own debt. I have been advised that this is constitutionally illegal ( so what else is new? ) . Every new note issued, and every government bond created and predicated upon the surrender of a particular sum of currency in the future, is a component of inflation. There is at present, in every monetary, currency, and credit system of the world, ONLY inflation. Rising prices, in and of themselves, are not "inflation." Rising prices may be due to normal or abnormal supply and demand market factors. However, all things being equal, inflation invariably leads to rising prices eventually, and chronically.
Sweeping technological changes and homogenization of world labor markets have been masking the EFFECTS of the ongoing, and massive inflation. As these factors reach equilibrium, prices will begin to rise. Labor seeking higher wages is NOT "inflation" or "inflationary." It is merely a normal market phenomenon that may or may not be successful, and may or may not lead to higher production costs, demand wages, and rising prices. But it is NOT "inflation." The press, and the financial community has swallowed government's line about inflation being caused by greedy producers and pushy labor unions. These are lies. There is only one source of inflation. It is government itself. It is a crime, like any other form of fraud and theft, and for that reason alone it must be ended, and civilization returned to a specie standard. This will happen eventually.

We watch the dow soar ever higher and gold pushed ever lower. The imputed value of worthless paper seems to grow daily. The economy appears to grow without an end in sight. However it appears to me that all the requisite fundamental preconditions of an economic depression seem to be currently present.

o Record debt at all levels of society

o Financial mania ( far exceeding that of 1929 )

o New era sentiment rife

o Manufacturing plants rapidly moving to foreign land.

o Millions of workers becoming unemployable in this country

o Distribution of wealth reaching extremes

o Pervasive political corruption, dishonesty and deception

o Gross overconsumption of goods and services

Ben Wanghneer: You're right; calling a bottom in a major bear market or a top in a huge bull market is very difficult. As Panda points out, bottom fishing is dangerous. I do expect a new gold bull to begin this summer, but could be wrong.

I have just a small position in gold mutuals now and will not buy more until there is solid technical evidence of a change in trend. In order to be pretty sure that things have finally turned, I am waiting for bullion and the gold stock indexes to penetrate key resistance levels on heavy volume and KEEP MOST OF THESE GAINS. That will indicate serious investor demand, not just another brief short-covering rally. I also want to see gold consistently ignore bad news and respond to good news. Until these things happen, the trend will remain bearish.

I am heavily invested in the gold sector which has been unlucky for any gold fans. However, luck may be changing, this morning I awoke and just checked the newspaper and I hit 5 out of 6 nos., in the state lottery for over 1k. The odds of this are 1/30000+. Can gold be much further behind as good and bad luck seem to run in streaks.

Noticed last week that gold and silver rose on higher volume and rising open interest on Thursday. I havent seen that in a long time.

Super-bull Ralph Accompura on CNBC some days ago called for Greenspan to hike rates as soon as possible to get the bad news out of the way. He had not the slightest doubt the market would continue to shrug off Fed rate hikes. Talk about new era psychology!

Mike Sheller, repeal might be a bit strong a word for it. But I will
certainly be having a word to my colleagues at NASA. Maybe they can
power their next mission on the juice or is that BS that has powered
the DOW rocket to these heights.
We are looking for a 6600 DOW by November which would give it room to
hit 8000 by December 98. But if the O-rings dont fail it looks like
10000 late next year.

With all due respect, Frustrated Rocket Scientist.

Before this massive bubble developed, many of us wondered how investors could have so stupid and greeedy in 1929. Now we know. A relentlessly rising market sucks in money like a vacuum cleaner. And as the market continues to surge, "new era" theories sprout like weeds to rationalize absurd price levels. It happened in 1929. It is happening today. And it probably will happen again 20-30 years fron now to yet another generation of investors.

The gov't issues currency and bonds for the same reason a bottle manufacturer sells bottles; and the effect is the same... lower prices for both "things".

However, there is a difference, one trades values the other threats of force.

The word counterfiter applies to the gov't.

WW: Re: your question ( which I interpreted to be not so rhetorical ) as to "whether the authorities have the power to reverse the decline" ( in a financial catastrophe ) . I would volunteer that the "authorities" only have the power to create the problems that lead to catastrophe and decline. The markets, being markets, will have to be left to their own devices to sort themselves out. Otherwise would be to sow the seeds of an ongoing or repeat crisis. As for the subject of deteriorating job relevance in today's society, this is certainly a problem related directly to the technology and demands of the citizen/consumer. I need not elucidate the innovations that have made most middle mangers obsolete, and the world-wide labor pool that has had its partitions removed by man's ability to move and communicate more freely than ever before. These are not things that are proper or wise to interfere with if one believes in the innate human rights of every individual, in every corner of the Earth. So there is not much that can be "done" in the face of these changes in a regulatory sense, that makes sense at all. We are in uncharted ground as far as this civilization is concerned, and while I agree that this turn of events is intensely problematic for many citizens, it is of the utmost importance that we assess our own life priorities before we lash out against others for redress of this greivous development. "Western" consumers may wish to take stock of the untold billions, nay trillions, they waste on frivolity, empty and violent entertainments, and garbage being passed off as "food." This while their children go uneducated, their health deteriorates, and their financial futures stand at the brink of evaporation. Perhaps a renaissance in cultural values and the basics of civilized and progressive living may be necessary before responsible and responsive citizens can reconstruct their institutions for better human service. This would perforce have to be a private effort for suitable radical and effective vision and standards to be effective.There is certainly no leadership in this direction forthcoming from any of the "authorities." Hope they have a can of humongous band-aids.

Steve Peutz: Regarding your 23:50, I may have mispelled your name, for which I apologize, but I have not been any lurker using it.

George S. Cole -- I think the conditions for a 'selling climax' in the PM ( precious metals ) stock group is here, now. We have been in an eighteen month +/- bear market, and gold has broken support at the $340 level. The decline of the PM stocks has been too orderly, we need a 'throwing in of the towel' event. I think we need to test the 1993 lows. The, "Stox market", is the place to be! Or so it seems. We have wild predictions of Dow 10,000 to 60,000 in the next year to twenty years out! There is no bad news for stocks anymore! Gold is viewed as a pathetic relic of the past, and this view is being reinforced by the media, financial community, and governments.

A logical conclusion to all of this is a downdraft in gold 'prices'. The fierce selling of PM stocks because, "Gold is dead." Things to come. A further rise in stox. Then some some problems with PM mines closing, further hurting the gold mining group. Rising bullion prices due to acute shortages of this stuff that nobody wants ( just like palladium/platinum :- ) ) . Finally, an accident of some sort in the financial markets. This could be a fraud of some type, such as a swindle in a large brokerage firm or a fraudulent technology company stock blowing up in everybodies face, just like Bre-X.

It will be interesting to see what happens to the weekly bond chart in the next two to four weeks! Does the rally in bonds continue? Or, do we do an about face in the next few weeks? Will the triangle hold? Stay tuned for the next episode of, "As the worm turns."

PANDA gets my vote this week. Great charts & to the point.
STEVE PUETZ - why don't you put your Red Alert Points on Gold Eagle as one article. Your May Newsletter needs updating.
BEYOND 2000: I had a fascinating conversation today with the head of Western Australia's Rural Industry Body about colleagues his age ( 50's + ) not really looking forward to the decade/s post year 2000. There is nothing much to look forward to, except a lot of problems to handle when these baby boomers turn 65+. Being in my 30's, I hadn't picked up this trend feeling. However, mulling it over, I think he might be right. Which makes me wonder what is driving the Dow currently? FEAR of financial poverty if they don't get in? The lack of confidence is of great concern.
The feed on the M2 money supply was spot on. Up & up. However it is not taking away the growing fear. My finance broker colleague has also noted that people are becoming much more short tempered, and less loyal in their business dealings lately. Some are becoming downright terrible.
DOW PREDICTION: Will definitely be 200,000 DJIND in the year 3000!!!!

STEVE PUETZ: By the way - a tip of the astrological turban to you on your expression "meltup" describing the recent stox rally. I find the entire Kitco experience becoming increasingly poetic. SMALL TRADER: Start making the switch NOW. "Take profits" in the stox you have been blessed to hold and appreciate for you, and start repatriating them into real money - gold bullion coins. Some gold stock shares wouldn't hurt either. It is imperative that you take advantage of these soft gold prices by buying physical gold. Maple Leafs make it simple and a no-brainer. If you institute a program of "dollar cost averaging" bullion now, over the next 8 months you will have a nice position at very nice prices. If you are a long-term investor, learn when to sell something that has had a spectacular rise, and buy something valuable that is temporarily in the gutter. Here's your moment to BEGIN that transition. DO NOT WAIT.

Hi BOB M! Good to see you on the Kitco again. We need someone to
keep George S. Cole on his toes.

Panda Your Sat 2235 post about typo's HAS happened. During the 1980's
a key punch operator at one of the big NY banks or investment banking firm made a data entry error in her firms closing cash balances. The error needlessly required the frim to borrow several billion dollars from the FED. This unexpected surge in borrowing ( the overnite fed funds mrkt )
caused interest rates to jump 1/2 % overnight!! The error was corrected the next day. Later, Greenspan while testifing before congress, said that his "one" worry was the problems that could arise from false computer data. All dirivitives values are calculated and kept by computers so a problem there could be "big touble" ( BT ) .

Reify: Here are the classical definitions:

MONEY -- A store-of-value, a measure-of-value, and a medium-of-exchange. Nothing perfectly fits these characteristics. However, gold and silver have closest to meeting these monetary criteria. Besides the precious metals, no other commodities or things have come close to meeting these criteria -- especially the store-of-value characteristic of money. By definition, a massive monetary expansion is impossible. It is a contradiction of terms. If it can be expanded rapidly, then it's not money.

CREDIT -- is the giving of a loan by a lender, and the receiving of a loan by a borrower. Giving credit is expansionary. Paying off a loan is deflationary. All loans must eventually be repaid. When they are, deflation takes over. In the US, we are operating on a credit-based pseudo-monetary system.

CURRENCY -- In the old days, currency was a receipt for gold. It had the same inflationary and deflationay effects as credit. When currency was issued, the economy inflated. When the currency receipts were turned in for gold, the economy deflated.

FIAT CURRENCY -- In modern times, currency is no receipt at all. It's an IOU nothing. It's used as a medium-of-exchange, but it's not a store-of-value, and sometimes it's not a good measure-of-value. A fiat currency can inflate indefinitely -- there is nothing to constrain it. Individuals may refuse to accept a fiat currency, but it keeps inflating all the time it is used. It never deflates. People just stop accepting the fiat currency.

Steve ( Perth - Western Australia ) -- All these numbers confuse me! Is 200,000 bigger than a bazillion? LOL :- ) ) :- ) ) :- ) )

You are right on about the 'fear' factor seeming to be the driving force behind this bull market in equities. Most of the late twenty to forty somethings that I talk to ( I'm one of them ) , don't believe in Social Security 'supporting' them. I do not wish to delve in to that morass again! The crux of the matter is this, because of the FEAR of abject poverty in retirement, investing in stocks is perceived as the solution. Thus the mania is born of an irrational fear.

I always ask one question of these 'investors', "IF you make your 1, 2, 5 million or more Dollars, at what rate do you think that money will be taxed at when you withdraw it?" Not a one has thought this far ahead! All they know, is that they are not paying taxes on their gains NOW. They claim to be, "LONG term investors." But are they? Do they even know themselves? This is a bad mix for investing. I've always lost when investing on an emotional basis. That is what separates good traders from the bad.

Be Back Later....

An interesting Chart on The Privateer Web Pages
http://www.the-privateer.com/chart/twogold.html

Been away for the past two days at the farm. Something is brewing, even
things appear quiet. Out there in Main Street however, people are not picking up the news feeds re: CB's & Gold revaluations etc. The general media have NOT been reporting these VERY important developments. So the public remains very ignorant, apart from becoming aware that the stock market is quite high. Keep up the great work mates!!!!

Panda: The record short-interest on the NYSE is somewhat misleading these days. There are stocks included in these totals which really aren't short-sales in the traditional sense. It's better to look at short sales as hedged and un-hedged. Most NYSE short-sales these days a hedged short-sales.

Examples of hedged short-sales: An index arbitrage firm is long S&P futures and short the 500 S&P stocks on the NYSE. 2 companies about to merge via either a cash settlement or a stock swap at fixed ratios are grave for arbitrage firms the buy the cheap company and sell-short the high-priced company. Also, some hedge funds have 1/2 of the portfolio long stocks, the other 1/2 short stocks.

In all of these strategies, the arbitrager is only trying to make a meager profit -- sometimes as small as 1/2 of 1%. But there is usually very little risk in some of these strategies.

Most of these things weren't done 30 years ago. That's why short-interest totals look so high today. The unhedged short-position on the NYSE is rather small.

ssssssssssss ( ddddddddddddddd ) -- I think this happened to me last Friday.

Steve: I'm in the process of doing as you suggested. Will put the 20 points in the gold-eage digest.

QUANTUM MECHANIC: So you need to be a Rocket Scientist after all! At least it's not brain surgery. The predictions from the lab are as sound as any. I am still watching the 30 Year Bond. It's current mini-rally has been carrying this stox advance. Sort of the tail wagging the dog, or Mercury eclipsing Jupiter, if you will. The leverage this small move in bonds has had on the stock market is magnified by investor end-stage frenzy and the high numbers of the Dow ( a sense of proportionality is needed here ) . Nevertheless, we are in vertical liftoff at this stage, and not many price charts have survived such G's for long. If the September Bond cannot convincingly knife thru 113.50 at this point, we may have hit exhaustion in the bond market, and stox will not be TOO far behind. Could carry a while tho, that's for sure. If the Bond leaps past 113, then the stock market may surprise us all. With gold looking like it wants to spike down Monday ( and hopefully reverse and close at or above 337 ) I might guess that bonds are about to go soft and gold is in the process of an intermediate bottom.

Mr. Puetz, Re: your June 21 10:53
Very good question you proposed, as to what is inflation or deflation.
Having been thru Argentina in 10% per day inflation, and presently living in another country with 100% ( and incredibly, with a fixed exchange rate! ) , I have seen the color of this beast. Inlation and deflation are the same, they have they same stripes. It is not the actual numeral that is important....that is just a matter of semantics. Whether your
$300,000 increased in value to $500,000 in fifteen years would appear to be inflationary to most, but if the real inflation rate was 9% per year, I would consider your now $500,000 house to be selling in a deflationary mode. The ONLY way to really define inflation or deflation, is to define a certain basket of staples ( stuff ) , from various
countries, and average them out. Then see how much of this basket could purchase in relation to your $500,000. Then, compare the then price of these same staples, and compare that to your $300,000 house when you bought it. This is the only true way to define inflation or deflation.

As a corrollary, most people would consider deflationary if the market crashed and brought your $300,000 house to $150,000 in value. But these same people fail to see that if all other goods also fell by 50%, this is NOT really deflation. The supposed deflation is felt by the person hold the morgage, who would probably get stuck with the house. But with further examination, you will note that the amount of moragage will
also buy twice as much stuff as before, and thus is not necessarily damaged by discounting their morgage 50%, even though they would be howling with derision.

Look at Brazil, every few years they just simply added another ZERO to their currency, and wallah! Is this inflationary? Not really. Stuff went up just the same.

The question of inflation or deflation is really a question of how persons who have large outstanding loans will handle the absolute numerals; if they are to be to their short term
advantage or disadvantage. Take the following exaple: I puchased a vacation house in Florida a couple of weeks ago for $300,000. This house came on the market at $480,000 a year ago, which is in line with comparable houses. After a year on the market, the owner decided that it was in her interest to sell in for $300,000, even though she paid
$285,000 for it 14 years ago. I would not call this $15,000 difference inflationary, but would consider it extremely deflationary as 14 years ago $285,000 would have purchased $600,000 worth of stuff at todays value. Deflation, disguised as inflation, is here now. As my concern is further deflation, and its effect on the future value of this house, like any true gold bug, I financed it to keep the cash in gold, to offset any effects of deflation.

Interestingly, our gold, one of the most real STUFFS that exist, has been artificially pushed down in value as compared to our basket. We are living in very interesting times....I dont believe that we will see this again ever in our lifetimes. Ihave'nt posted the last few months, present gold price is just against every grain of logic, as is the DOW, and I cannot deal with the irrationality...too confusing. ( Or my premises have been wrong )

Bill Buckler ( Jun 20 - 17:58 ) Re: Gold Breaks out in $A.
Looking at the chart Bill provided us with looks very interesting and "Could" be the first signs of life in the Gold market. But I read something this weekend that seems to be worth adding here. According to CRU Precious Metals Monitor June97 issue Pg. 3 Paragraph titled "Producers Look to Sell Forward" ... "In Australia there is a growing concern about margins and producers want to put more hedges in place. A number are looking to sell forward in the A$450 - A$475/oz range." After looking at Bill's Point & Figure chart one will see that Gold hit A$460 and then turned south, so it does seem that producers are infact selling in this range. I would think that a weekly close ABOVE A$475 will be a significant event and "Could" be a more telling sign that gold has infact bottomed ( At least temporarily ) .

I would like to thank Bill Buckler from the Privateer for his analysis and I truely enjoy his work. It is also evident that he has but alot of effort into it. I am not tring to put his work down, rather I am just adding to it.

ENJOY!!

PANDA: In Australia, they tax us stupid...so much so that they are having to start looking at implementing a Goods & Services Tax, like in the US & UK. Our 401k plans are taxed now. No serious tax relief for savers.
One of the reasons I am not so concerned about "retirement" is that apart from Ill Health, I do not believe that you do actually "retire". You just slow down, more & more. But the reality is, if you do NOT spend your summer holidays in France, you don't really need much to exist on during retirement. Get 1 to 5 acres of land, with water to grow fruit & veges on, & you are half way there. You can't eat paper or gold. You must eat food & drink water. Basic stuff I know, but in our manic push towards high technology, we are forgetting the foundations of life, both spiritually & physically. Remember this: The LOVE of money is the root of ALL evil, & that Jesus said "The poor you will have with you ALWAYS". If you are poor, the secret is working out HOW to live.

Puetz -- So, there are not many buyers of last resort left. Hmmm, reminds me of Wiley Coyote chasing after the Road Runner, right off the cliff. Suddenly, Wiley realizes.... There's no ground beneath him... ( :-0
Steve, care to bet on the Long bond chart? Does the triangle hold or not? ;- )
If it bounces up from here, the target appears to be 7.2% by October. The markets would love that. :- ) )

Short sellers tend to 'cushion' falls because they 'cover' their positions at lower prices, thus slowing the fall ( just for those who don't understand this mechanism. )

Really gone now, Be Back Later.....

NEW GOLDBUG, STEVE PUETZ: Monetization of Debt, as the term is freely used, is not entirely clear to me. At one time governments used to print money directly for governmental growth. Now some economists quip they print bonds and then print money. As the FED issues new money based on such a governmental guarantee, it would seem the guarantee should be a debt or liability on the governmental balance sheet, which should be accounted for like any other governmental debt. Therefore, do you know whether the government must issue bonds to "print this money"? And if not why not? It also seems to me that a clear distinct should be made between printing money and monetary expansion by the FED in the purchase of Treasury Securities.

This past week the XAU has finally traded down to the gap area at 97. To ignore or dismiss a weekly gap that is opposite to the major trend of a market when trying to forcast future price movement can do serious damage to your financial health. This gap is proving itself as a natural place for the market to find support on this corrective pullback. To fill the gap entirely the xau needs to go to 96.65. The 50 week bollinger band is at 94 and should be the low end. That's the good news. The bad news is this correction may have been a B wave with a sharp C wave up to follow, after which a move to new lows later this year or next. I plan on buying xau calls somewhere between 97-94. ABX is back down to its long term trend line where I bought earlier this year at 22 sold at 26. Buy at 22-1/4 sell close only stop at 21. GCQ7 - I recieved a few e-mails from people stating I had lost my marbles buying at 340. I may lose a few of my marbles in this trade but I see it as a low risk trade with a great risk reward ratio 10:1. The lower trend line fri was at 339.5 ( fri low ) five waves or an abcde wedge is complete and the bears are all over the place and I think the xau is ready to turn and lead the metals up. We will see.

VIESERRE: If you would be so kind as to permit my interjection, there is, I suppose, a distinction between printing money by governments and giving the freshly created funds to specific institutions, corporations, or individuals, and expanding the monetary base. But it is barely a technical one.. Out and out printing of money has generally been more traditional in times of emergency such as wars and financial panics. Sometimes these injections are considered "loans," and the public is led to believe they will be repaid. Sometimes this is done along with the retailing of bonds to the public, and the issuance of institutional size quantities of government debt.
The "expansion of the monetary base" as a goal in itself is usually, to my understanding, undertaken to affect the economy in general - invariably to expand its activities and thus provide a larger and healthier base to plunder for special interests and programs in current political favor. This is usually done in a more "legitimate" fashion than simply printing gobs of cash or filling up coffers with funds. Debt financing is one paper method, but given a total debt free equilibrium in government expenditures and government revenues, expansion of the monetary base can be effected by making more, or cheaper credit available to banks in the central banking system. This money gets retailed as loans, etc, and because it is plentiful, and thus inexpensive, it encourages more activity than would have been the case. Usually, this activity proves to be wasteful and frivolous, and stupid. If this process goes on long enough, you get a society that worships Madonna, Michael Jackson, and Arnold Schwarzenegger, while their kids grow up without a culture. But at least they carry beepers, and can get to the mall through any kind of suburban weather in their 4x4's, the price of which could buy a little house for a small family in many parts of the USA, or the world for that matter. I know I haven't told you anything new, but it seems the distinction is very fine here, and the end result equally unfortunate.

APH: You technical view echoes mine, tho mine is astrologically derived. Sparing everyone the bizarre details, suffice it to say my "indicators" are suggesting a rally into midsummer/early fall, and a further decline by winter to similar lows currently being experienced. At around 330ish, gold is at the major long term support line connecting the '85 and '92 lows. IF stox were JUST now taking off, and gold broke below that support, I would have to be fearful of a major decline in gold prices. But when I see gold at what must hold as absolute rock bottom support, while stox go into a vertical spike, I have to conclude it's time to buy some bullion. Last chance to load up at similar favorable prices will be in winter '97. Then, the shares can be bought with abandon, and longterm futures as well. The interim rally is getting a bit late ( as though I'm right and the market is not ) so it might possibly be a sharp one, and unduly excite gold bulls.

EB-DUDE: thanks for the reply ( info ) STEVE PERTH: well said; it's 11:49 APH: I totally agree. GEORGE S COLE: in the event of major bear ( stox ) ; what will happen to the price of Indiana farm land?

Mike Sheller - My longer term projections are very close to yours. A rally in the bullion should reach 355-360 on the low end and 390-395 on the high end. This rally would fail and prices will trade back to 325 by June/July 1998. 325/6-98 is the place where the 1x1 gann lines cross based on the 1976 lows. This area if achieved would launch a new bull leg up.

APH: I assume that in the event of a financial crash your 6/98 @ 325 would be subject to revision ( perhaps radical revision ) , yes?

A conservative government is an organized hypocrisy.

Savage - The crossing of the Gann lines at 325 6/98 represent the point when time and price come into perfect harmony. A financial crash in itself wouldn't change anything, a monthly close above 400 reguardless of the event would.

MIKE SHELLER: Thanks for responding. I am pleased you post as I always find your comments of interest, and I particularly appreciate your courteous presentations. I am not trained in economics, nor have I had an interest in it until recently. This is bad and good, the bad is my ignorance, the good is I do not have preconceived ideas based on outdated professorial views.

Having said this, and trying to keep the issues as sharp as possible owing to the constraints of this mode of communication. If the dollar is an irredeemable currency based on a "promise to pay" , which is a contradiction in terms, than any currency issued must be debt and accounted as such on the governmental ledger. And must be accounted for in total govenmental debt. The first question I have, is this so. And if not why not.

I also wish to address the expansion of money supply, whether it causes inflation and some common apparent misconceptions. First with regard to inflation, I have always assumed because of "it being the common view" that an increase in money supply leads to inflation, brought about by our "fractional reserve" money base. I recall reading almost daily accounts how the FED was watching money growth to set economic policty. And growth in M2 was attributed to daily stock market action and the like. But this is now given little weight. The modern view apparently is that although inflation is always a monetary phenomenon, it is price rises that cause an increase in the supply of money, not the other way around. The current belief is that M2 doesn't cause inflation - and it doesn't drive GDP growth, and in any event there is little the FED can do about it as explained below. And this is attributed to why Alan and other economists apparently pay little heed to it.

Also, contrary to common dicta, I read the FED is not proactive but reactive in increasing money supply. That is, the Fed expands the money supply by reacting to the increased need for debt. If prices and wages are rising, then businesses will need to borrow that much more more in order to meet their obligations. The Fed accommodates this need by facilitating the creation of more money.

Moreover, ignoring for this discussion the effect of discount and funds rates, the FED has substantial imitations. It can only do it by the use of buying or selling treasury securities. But banks on the other hand have an unlimited means of creating money with their ability to expand money merely based on a deposit of an IOU. So even if M2 did affect inflation, there is little the FED can do about it, except make the cost of borrowing more difficult. In addition, the FED's Treasury Security portfolio represents a very small portion of the amount outstanding. Thus I wonder how much the FED can really do to control inflation. And how much undeserved blame they get by some for expansion of money supply.

As to the other points raised in your posts, I appreciate your enlightenment. Your admirable humanity is apparent by your continual references to social injustices in your posts. And, although present economics certainly contributes to it, it seems to me more of a consequence than the cause.

Panda: Agree that a selling climax in the PM stocks probably has begun. These usually last just a few days. I concur with APH that a big reversal is coming quite soon ( probably next week ) from levels not far below where we stand now.

Many have speculated about the precise manner in which the current bull market will end. I had originally thought that a sharp fall in the dollar/yen would end the bull by pushing bond prices down sharply. Well the dollar/yen has plunged, but bond prices have gone up, not down, taking stocks with them.

My suspicion now is that the bull will end for no apparent reason. Just the smart money concluding that prices aren't going up much more and then starting to bail out. The bad news will come out AFTER the market has declined steeply. Also think that when the bull ends for REAL, gold prices will be moving up, not down.

Mike Sheller: Your ( 09:46 ) was an excellent piece of
work, but its still the credit moguls who profit at the
expense of goverments ( people of the specific countries
being damned ) . There used to be usery laws.

Cole, et al.: The American bull will be eaten by the bear when the investors lose confidence in the market or their government. My guess is that the trigger is already in most bookstores in the U.S. ( the author claims "almost all bookstores and most supermarkets" ) . The book is THE DOWNING OF TWA FLIGHT 800, by James Sanders, ISBN 0-8217-5829-2, ( New York: Zebra, April 1997 ) . The author, "an ex-cop turned investigative reporter" and husband of a TWA flight attendant trainer, makes a compelling case that TWA 800 was shot down by a U.S. Navy missile, and that Clinton orchestrated the coverup, beginning less than eight hours after the crash. There is a good chance that the revelations around this massive coverup will shake the confidence of Americans, and the foundation of their government. My prediction is that the coverage of this book in the reluctant media will be a leading indicator for the crash of the market and the explosion of gold prices.

Investing in this gold market and this investment climate reminds me of the following story:

While crossing the US-Mexican border on his bicycle, the man was stopped
by a guard who pointed to two sacks the man had on his shoulders.

"What's in the bags?"

"Sand," said the cyclist.

"Get them off - we'll take a look," said the guard.

The Cyclist did as he was told, emptied the bags, and proving they
contained nothing but sand, reloaded the bags, put them on his
shoulders and continued across the border.

Two weeks later, the same thing happened. Again the guard demanded to
see the two bags, which again contained nothing but sand. This went on
every week for six months, until one day the cyclist with the sand
bags failed to appear. A few days later, the gaurd happened to meet the
cyclist downtown.

"Say friend, you sure had us crazy", said the guard.

"We knew you were smuggling something across the border. I won't say a
word - but what is it you were smuggling?"

"Bicycles!"

Tortfeasor -- So very true!

DocDuke -- Didn't the airline industry make a 'contribution' to the Democratic party just prior to the release of some 'guidelines' for airline safety? I believe these were related to the TWA 800 'incident'.
Let's not forget the Gore commisions airline safety report, and it's re-write just after some keys recommendations were released. The recommendations were chaff dispensors and anti-missle ( ECM ) systems for airliners that were deemed, 'high risk' flights and ECM ( electronic counter measures ) systems for ground based operations ( airports ) in certain areas. There really is nothing wrong folks, honest! :- ) )

To Steve Puetz, re your comment on short interest. Much short interest comes from big investors who have made their money on a stock and instead of selling and paying taxes they short against the box. Because they hold a short against an existing position, they may borrow 90% of the value of the long. These investors will eliminate both positions if interest rates go up considerably because they have to pay interest on the money they borrow.

I don't think this has been mentioned. Last week, 6-17-97, the S&P commercials were net short 4%. The last time they were short was 3-11-97 at 2% short. Commercials were at their longest 4-15-97 at 16% long. Only been graphing this since 1-21-97. Also, noticed a modest correlation between copper and stocks since last October? Copper slipped a little last Friday.

VIESERRE: Forgive the rushed reply - gotta pick up my wife @ train station ( these RE people work on Sunday, y'know ) In my ignorance I cannot speak of the labyrinthine formulas of government accounting. I suppose there are SOME mysteroies we weren't meant to fathom. Traditionally, tho, currency is theoretically a debt, or note, against a quantity of commodity metal, or specie. The confiscation of gold created a fiction which defies definition today. So I myself cannot be so sanguine about unravelling this aspect of the case, beyond a certain point. If you pardon the pun, I don't think it "pays." I would like to point out that the banks derive their "unlimited means of creating money due to fractional reserve banking and the largesse of the central bank. If there were no central banking system ( the true culprit ) banks would have to COMPETE with each other for the soundness of their notes. Banks which backed their notes with a commodity metal, or a specific quantity of another asset, would draw the business away from those banks who went on merilly creating paper and "investing it" by buying other people's stuff, or loaning it to other people to buy other other people's stuff. You know which banks would survive, and which wouldn't.

TO ALL

A deflationary spiral will probably end the present bull market in stocks.
Greed and Fear propel financial markets. Inordinate greed has prompted inordinate investment into companies that produce goods and services. The more money pumped into goods and services the more goods and services are produced until more goods and services are produced than the consumer is able to purchase. When too much and too many goods and services hit the market, then the producers can only lower prices to compete. There is a glut, prices come down, and corporations make less money or go bankrupt. Such has been the history of financial markets throughout recorded history.

At some point the holder of the stock becomes fearful that his stock does not have a bright future. Selling begins, the market goes down, and then a panic begins and the stock market crashes. The higher the market in terms of price earnings and other valuations, the deeper will be the crash. The higher the market the more money a corporation must make to justify its price.

The above is the most likely scenario but there are other circumstances that can bring down a highly inflated market. Now greed is rampant and fear is on the wane. One of the following can happen to cause fear to bring down the stock market. In no way am I hoping for any of the following. But human nature being what it is any of the following can occur:

1. Civil war in Mexico. The people of Mexico are treated shamefully and civil war is always a possibility. Every state in Mexico has some armed resistance.
2. An assassination of an important political figure.
3. An indictment or impeachment of the President of the United States. More and more editorials are noticing the many scandals in Washington.
4. The explosion of a terrorist atomic bomb in a major city. Many believe that such suitcase bombs have already been sold by the Russian Mafia.
5. A failure of the Cocaine crop.
6. War in the Middle East.
7. War in Korea.
8. The stock market runs on herd mentality. Who knows when the herd will turn direction for no apparent reason.
9. A simple cure for cancer. Can one imagine what this would do to hospitals and pharmaceuticals in the short run?
10. Plague either natural or planted by terrorists.
11. A cornering of the precious metals markets such has occurred with the Hunt brothers.
12. The political dissolution of a major government such as happened in the Soviet Union.
13. Some great natural catastrophe.

The point is that the herd perceives the present situation as totally safe. The world is never a safe place and if fear grips the world, the stock market will crash. When people feel fear they actively seek safety and that is when gold becomes important.

YES

Panda 19:19. I admit that I have to agree with you somewhat, about stocks continuing to rally. Friends are aware that I know the markets and they keep asking what to invest in. Many are people who never touched a share in their life, and are now drawn into the market by all the hype. All I can tell them is to stay away until a major correction, but I suspect many are buying mutual funds anyway.
Im sure that this scene plays out thousands of times a day, and its this
mania that is fueling the market. Theres probably a good chance of the Dow going higher, but companies earnings are not keeping up with the market valuations that increase 20 to 100% a year - they can't.
Steve P. went through all the numbers and they speak for themselves.
As more money pours into the Stock market, the dangers increase exponetially - it will be impossible for the funds to cash out and pay
investors when mass panic hits the markets and everyone wants out
at the same time.
This is human nature, and it has repeated itself countless times. Don't believe the analysts that this time is any different. It is just taking longer,
and will be more severe.
Meanwhile, the casino is still open and taking bets.....

MoreGold -- The vacuum cleaner known as Wall Street, can smell a Dollar bill in a person pocket half a world away.

To All -- A few news stories about this'n that, not in any particular order. France upset with Germany, the usual stuff :- ) ) EMU :- ) ) ;

http://biz.yahoo.com/finance/97/06/22/z0009_456.html

http://biz.yahoo.com/finance/97/06/22/z0009_521.html

http://biz.yahoo.com/finance/97/06/22/z0009_523.html

The story on the Russian minister being filmed with 'naked women', he should of called Buba for advice......... :- ) )

YES

DOCDUKE: Many books have come out over the last 30 years citing strong evidence that President Kennedy was assassinated by the mob with connivance of some elements in the CIA. Surveys have repeatedly shown that most American do not believe the official line that Kennedy was assassinated by a lone gunman. Yet this has had no impact on the financial markets.

I think the theory that the TWA flight was brought down by an errant navy missile probably is correct. Yet I doubt this will have much market impact even if widely publicized. During the 1970s an Italian airliner went down off shore and many credibly argued that it too was shot down by an errant U.S. missile. The U.S. denied it, of course, and the story died.

Of course it could be different this time. But don't count on it.

The dominant media firms are completely in bed with the Administration and the financial elite. They will do all they can to kill or appropriately "spin" any news story that threatens to upset the apple cart.

As long as I've been associated with this group I have yet to hear anybody talk about. The Great Tortfeaser has only made a few jokes about it. Ernie Els and Jeff Maggert are on CBS playin' it. ( Ernie is on fire ) Yes, I'm talking about GOLF.

Or... is this subject TABOO.

AWAY!

EB

ps I heart Golf

Now tell me, does anybody REALLY want to fight this thing? OK, it is going parabolic, but so what? It's a 'new era'. Just think, there's another week to go before this month is finished out. We could be up another million points or so :- ) )

Yes, this is a monthly chart of the DOW 30. If only my finances grew like this!

What's this? Bears on the Globex? Hasn't anyone told them about the Bull market yet? ( :-0

But the evening has only just begun!

George S. Cole: Regarding JFK, TWA 800 and the media: when I was young and stupid I thought people who said such things were kooks or paranoid. The more I know about the world the more I realize that paranoids and conspiricy nuts don't know the half of it! What really amazes me, though is how controlled US media realy is - even compared to say the British press operating in a much more restrictive legal framework.

The following quote says it all:


"There is no such thing, at this date of the world's history, in America, as an independent press. You know it and I know it. There is not one of you who dares to write your honest opinions, and if you did, you know beforehand that it would never appear in print.

"I am paid weekly for keeping my honest opinion out of the paper I am connected with. Others of you are paid similar salaries for similar things, and any of you who would be so foolish as to write honest opinions would be out on the streets looking for another job. If I allowed my honest opinions to appear in one issue of my paper, before twenty-four hours my occupation would be gone.

"The business of the journalists is to destroy the truth, to lie outright, to pervert, to vilify, to fawn at the feet of mammon, and to sell his country and his race for his daily bread. You know it and I know it, and what folly is this toasting an independent press?

"We are the tools and vassals of rich men behind the scenes. We are the jumping jacks, they pull the strings and we dance. Our talents, our possibilities and our lives are all the property of other men.

"We are intellectual prostitutes."

John Swinton
Chief of Staff, New York Times
( considered "the Dean of his Profession" by his peers )
When asked to give a toast at the New York Press Club in 1953

Guys...could anyone enlighten me about exactly what happened to derail the Hunt bros. attempt to corner the silver mkt? I've heard a couple thumbnail explanations that just don't seem to answer the questions..... I think someone recently made the assumption that it was still in the realm of possibility.

While informed circles accept that a naval missle likely brought down TWA 800, the real question is WHOSE navy did it - The US navy or a middle eastern terrorist "navy":

http://www.aci.net/kalliste/twaboat.htm

as part of a larger program of "influence":

http://www.aci.net/kalliste/twa800.htm

FSAGX has consistently outperformed FDPMX as this chart shows for the last 10 years.

I am just totally amazed at how money is pouring in to the equity markets like there is no tommorrow. When does the well go dry? At some point everyone has to sell and in order to accomplish that task, someone has to buy. Who will be left at that point? It makes me wonder if the trade deal with China has some secret provision to get the Chinese people into the market as they begin to earn their piece of the pie. It only makes sense that there must be some provision to attempt to bail this thing out. Of course the government holds the ultimate card as they have not taxed that money yet ( or at least the vast majority of it in equities ) . Maybe thats why the Fed has continued on their borrowing binge figuring that the 401K and IRAs are the collateral. It truly is incredible to look at a stock graph and see how the money is pouring in. But truly, this could last for many more years if no major wars break out.

Bob M Re: Mutual funds. You say that a some point everybody will have to sell. Maybe. But won't the majority slowly sell in retirement. Or even leave it to their wife in most cases and they will sell even more slowly. Just because the money seems to be flowing in in a short period of time I see no reason that it all must be sold in a short period of time. If many of the boomers think all gov programs will be broke by the time they line up at the window won't they "invest for the long term" Some of course will get scared and pull out when things finally correct but no one that I know thinks they will all sell out at the same time just because they have begun to invest heavily at the same time.

Interesting article in todays Boston Globe's financial page on New Era theorists' view that there's no stopping current bull market stampede. In
dissenting view, Stephen S. Roach, chief economist with Morgan Stanley, says, "The policies of austerity are on the way out." He adds,
"Workers hurt by foreign competition, corporate restructuring, and anti-
inflationary policies are beginning to demand higher wages and to vote in political leaders who are more sympathetic, as they did recently in France." Whatever ways workers are eventually satisfied Roach said, the solution "could well sow the seeds of investor angst."

BobM:

The money is not pouring into the stock market except to the extent that new shares are being issued, in excess of those that are being bought back. Every other transaction is simply a transfer of money from buyer to seller. There is no net change to the amount of money within the class of stock owners, simply a redistribution. This is the scary part. When stock prices are marked down rapidly, those folks that have a large portion of their savings denominated in these assets will lose a correspondingly large portion of their net worth quite quickly. This apparent loss of wealth will cause them to alter their consumption habits and may bring declining or negative economic growth.

One need only look towards Albania for an extreme example of rapid wealth redistribution, namely from the hands of most people to the pockets of the few Ponzi scheme operators. This is the risk that the FED faces. To have allowed our version of this to have carried to this level of extreme strikes me as extraordinarly irresponsible. It is state sanctioned gaming at its worst.

GEORGE S. COLE; In the event of major bear ( STOX ) ; IYO, what will happen to the price of Indiana farm land? ALSO: can anyone answer my previous question about Hunt bros. failure to capture silver mkt?

When Steve ( Perth ) says Australian taxation is bad, he forgot to mention that the government takes 7% of interest earned on your bank account directly from the bank each month - presumably as advanced taxes. We hvae an Australian visitor with us this weekend. She just moved over from Canada seven months ago and is appalled at the tax system.

Savage: The biggest problem the Hunts had was they bought way too much silver with leverage. They borrowed billions of dollars to buy silver on the CBOT futures market. They took dilvery on much of it. As silver went up, mom and pop sold the silverware to dealers who melted it and delivered it to the Hunts. All of this cash silver being dumped onto the market broke the price. As silver prices fell, the Hunts got one margin call after another. As silver kept falling it finally bankrupted them.

Move ahead 17 year, rename the Hunts -- call them Boomer Mutual-Fund Buyer -- and you have the identical situation. Lots of leverage, and over-valued market. All we need now is a crash.

Indiana farmland will collapse in a stock market crash and deflation.

EBN Gold down .35 and silver down .01 .... U.S dollar weaker against the mark , franc , pound. Ted would have wanted it this way!!! Ha Ha Ha
I bet it's driving him crazy!!!!

For everyones information: On May 23, 1997, Federal Reserve Board member Lawrence Meyer said the U.S. economy "is too good to even worry about economic downturns." I guess the business cycle has been repealed.

VIESERRE: The following was written on the back of an envelope while I waited for my wife's train: I just wanted to add that "Central Banking" is a construction meant to monopolize the note issue in a nation. "Advantages" are purported to be a single universally accepted currency with "government" guarantee, and the ability of a central social resource to supply same in an "emergency," wherever and whenever needed. The true motive is government control of the free market by parasitical despot wanna-be's. Not to mention fleecing the citizen blind. If a uniform resource was necessary to bail out banking institutions, then the requisite amounts of gold could be transferred by note just as easily. State monopoly of note issue is an attempt by some to manage and control the lives and activities of others, while skimming off the top. This is done in the name of the "common good" But the question arises "Why does any market need a democratically elected, or appointed, official to decide the supply and demand situation of anything???" We do not elect a representative to form a committee to decide that Microsoft will rise $2 today, or that IBM will decline $4. We do that by each voting our dollars and choices in the free exchange market. Why then is such a "democratic" process necessary to decide how much "money" will enter the banking system, and at what cost? Such an assessment can not only occur automatically with a gold backed currency, but such would insure a far greater measure of monetary and financial integrity than "fictional reserve banking." The very excesses and hubris of this CB construction has lead to the exaggerated boom in stocks. The collapse in prices can now only be assuaged by the CB with a huge infusion of the Hair of the Dog that will inevitably bite us.

"Economy too good to turn down" "No stopping the stox stampede" ( Bull market ) "could last for years."
I think the wishful thinking index is in overbought territory right now. GFD, GEORGE S. COLE: Re conspiracy theories, etc, we at Kitco may be sexy, and sometimes a bit sluttish, but we are not intellectual prostitutes! Long live the internet! Long Live Kitco! Long live FREE SPEECH!

13 ( COT ) : Here's the full story -- going back to 1983 -- when speculators get long S&P futures. 12 out of the 13 times they got long, you would have made money if you had shorted the S&P immediately. Here's the record:

. DATE ..... DOW INDST ... NEXT LOW DATE ... DOW LOW
----------------------------------------------------
12-31-83 ...... 1259 ........ 6-15-84 ........ 1087
Aug 84-Sept 85 ( this was only time they were right )
3-31-86 ...... 1822 ......... 4-4-86 ........ 1739
8-31-87 ...... 2700 ........ 12-4-87 ........ 1767
7-31-88 ...... 2129 ........ 8-19-88 ........ 2016
1-31-89 ...... 2323 ........ 2-24-89 ........ 2245
7-31-89 ...... 2635 ....... 10-13-89 ........ 2569
1-31-92 ...... 3223 ........ 10-9-92 ........ 3136
12-15-95 ...... 5177 ........ 1-12-96 ........ 5061
2-16-96 ...... 5503 ......... 3-8-96 ........ 5470
12-6-96 ...... 6382 ....... 12-16-96 ........ 6268
6-20-97 ...... 7797 ......... ???????????????????

Remember, these sell signals happened during a bull market. That's a powerful indicator to give 12 out 13 correct sell signals in a bull market.

Savage - re. the Hunt Bros failure. They did not fail because of the scrap silver coming to the market. The rules were changed on them. As I recall, six of the seven members of the Board of Govenors of the Comex were short silver in their accounts. The rules were changed so that only bonafide hedgers could sell silver and you could only buy with very little margin. It is interesting to note that just befor these rules went into effect that Hunts had contracted with PhiBro to buy a huge sum of silver at $35 per oz and then that after the rules were changed, Armand Hammer sold short a huge future position ( alledgedly from mines he controlled for which his partners sued him to no avail ) . No, my friend, the Hunts failed only because the had enough people hurt to force them to change the rules. This should be a lesson for us all, but unless someone tells it, no one would ever know!

Mike Sheller: Resistance is futile. Freedom is irrelevant.

Alright, alright! I was just rattling my tin cup along the prison bars. What, me give up my gold, silver, platinum, osmium, rhodium, technetium, seaborgium - ( W. Churchill more: Never! We shall fight you on the beaches, in the streets, from our Macintosh System 8s ) . Obviously this rise in the Stock market is FALSE - based on nothing but the perception of the Boomers that it is their retirement salvation - even though they KNOW the rise is not based on tangible product, growth or profit - but merely a bleed'n INDEX being chased! Extradinary delusion of the asses ... er masses indeed!. It will be marked by Gen-Y'ers as perhaps the greatest con of this century - the Political Class cabal's last, desperate scheme to hang onto to power by piping inflation into the market. But attend: there can be no soft landing. The DOW will soar to the penultimate heights of delusion ... then the reckoning - suddenly - like too much La Madeline creame brule. All must play in the game - no one allowed to cash their chips in and take the winnings home.

We are not the same people we were in 1929. There was then still a belief in the old values, family, country - even if the Lords in Boston and New York laughed at our quaint & outdated beliefs. Now they will find themselves surrounded by the fruition of their amoral, dumbed-down city masses - people who have the same amoral perspective as they themselves. Who will heed calls to patriotism, calm, sacrifice then? The Nike generation? The Taco-Bell neck injury crowd?

( This apocalyptic vision brought to you by Liberalism - if you earned it, we've got a right to it. )

Spud

ALL: No news that I know of, but something big is happening to the stock market. After the 4:00 pm NYSE close on Friday, S&P futures fell about 4.50 points. In over-night trading tonight, S&P futures are down another 1.85 points. Based on this action, the S&P cash index should open tomorrow down more than 6 full points. That means the Dow Industrials will open down 50-to-60 points tomorrow.

If you haven't aready done so, read my bulletin just posted today on Gold Eagle's Gold Digest -- The Steve Puetz Letter -- 20 reasons to sell stocks immediately.

Arden:

This is why Tiger fund has worked the physical markets and the OTC markets in Pa. They know when push comes to shove that the goods have to be offshore and out of the perview of exchanges. I suspect that when the next silver run is engineered it will mostly happen outside of the exchanges. Once the external metal has been collected then they will go to work on the Comex.

Arden: What you said is true. The CBOT did change the rules and the margin requirements. But the Hunts would have failed regardless of what the CBOT. The truth is the Hunts were way over their heads in debt. Even if silver would have gone to $70 or $100, and then finally broke the Hunts still would have gotten massacred. Their problem was they kept buying more silver on margin with the profits they made on their earlier trades. This method of leveraging up profits is extremely dangerous and is nearly 100% sure to break anyone that plays the futures market that way -- unless you happen to have a good broker like Hillary did.

Panda - Have enjoyed your posts greatly. However, your post of June 21 @16:30 re SPXIT at a price of $113 is in error. I checked the prices and found that option is the Sept 800 call. The symbol for 900 call is SXBIT, which had a price Friday of 37.75. Given Friday's close at 898.70, the breakeven-point is a 4.3% gain in three months, or 18.5% at an annual rate. This may be slightly high, but is in line with recent experience. Personally, I would prefer to sell this option for $19K rather than be a buyer, IF I could afford the margin.

D.A. - Did you notice the perfect expiry for SN7 at 832 noon Friday, as predicted?

Now Puetz, you know and I know and most of the people woh read this forum also know that there was NO WAY that Hillary simply has a good commodity broker ( is that an oxymoron? ) . She was simply taking a bribe through this kind of conduit. As far as the Hunts are concerned, yes they would have failed due to their extreme leverage ( in futures and otherwise ) , BUT had not the rules been changed, they would have taken down a lot of the 'establishment'.

D.A. - so, if you must control the supply of a commodity physically, before you assault the Comex, then what is going on with gold? It would seem to me that during all of this pessimism that it would be an oppurtune time for some smart traders or investors or CB's to accumulate the physical metal during dips in the market and then, at some future time, to assault the comex or hedge funds or ? My personal suspicion is that China has been accumulating the gold sold by European CB's with the excess US dollars from trade and that eventually, this will be obvious to everyone. I can not believe that the Chinese will follow the example of Japan and buy US bonds with the excess trade surplus. This will only continue to grow, as will their desire for gold. They do not have to assault comex, it will happen when the shorts realize where to physical metal is, and yes, it is offshore!

Arden - At the end of any given day, a floor trader has X number of winning trades, and X number of losers. The winners were funneled to Hilary, the losers to Tyson Foods. This practice is more common than some may think. Since the floor trader is the one primarily responsible for the fills, Hillary had very good "plausible deniability." I think if the records were closely scrutinized, Hillarys amazing stretch of good luck corresponded to an identical run of bad luck for Tyson.

Arden: I have been involved with the futures industry for 25 years. At the time Hillary was trading with Revco, Revco was notorious in the industry for putting in lump-sum trades for multiple accounts, then they waited to see if the trade went in their favor or not. If it was a winning trade, they gave it to their preferred customers. If it lost, they gave it to regular discretionary accounts. I agree, Hillary made her money in this way. It was buying political favor on Revco's part.

I believe Hillary's broker was Refco -- not Revco.

RJ: You used the term I was looking for -- bucketing the trade.

Hi everyone!! Well, I'm back up on the net and all moved into my new location ( complete with spanking new P-II-266 computer ) in the Rocky Mountains! It's taken about a week to become "send capable", but it's sure been fun lurking! It's nice to see all the old regulars ( George C; Ted; Tarnished; BT ( sic ) ; Earl; and Cherokee. And it is nice to see all the new faces with new ideas!

As for me, I've been quietly buying bullion ( eagles ) and boosting up my gold mutual fund on every dip down. We've been "at the bottom" for some time now. So I am just as eager as everyone to see a move in our direction. Summer? What happened to the Japanese banking crash some of you predicted for right about now? Oh well.....risk management at its finest!! Cheers to all!!!

I noticed that you just noticed that the gummit is printing an excess of $100 bills. Don't forget the 50's, 20's, 10's, 5's and a whole boatload ( or two ) of 1's. That one of reasons it's called inflation. And one of the reasons a whole bunch of folks like to hang out here!! :- ) )

Harry C -- What exchange is the SXBIT option traded on? CBOE doesn't list it. Schwabees website does give a quote for this option as you stated. I can't seem to find the exchange that trades it though. Nothing like standardization ( did I spell that right? ) . All in all, what's a hundred Dollars on the the strike price anyhow? :- ) )

I haven't seen Deaner and his Prudent Trader since I got back up on line. Is he still around? Anyone know his URL??

Scotty -- A P-II-266? Wow! Now if you could get a Fiber optic hookup to a T3 provider.... Never mind, it wouldn't make the gold market move any faster! :- ) )

Have fun with that screamer PC.

Panda - Sorry, don't know why it's not listed with the SPX's. Keeping up with the letter changes is a real problem for stock indexes option traders in this bull run. I like the futures symbols much better, they use numbers one can count on.

Any comments or info on the recent decline in Comex silver stocks? After a slight build we've come off 17MM oz in less than two weeks to a 1997 low of 186MM. If you net out the "bookeeping entry" from Delaware on Jan 1, we're at multi -year ( 10+ ) lows. The recent decline while not gigantic, comes a week before delivery for July, when we normally build. Thanks

ARDEN; PUETZ: Thank you...is there a book on this subject? D.A.: Do you think Tiger may try? ALL: Where will the price of good real estate go ( 1 ) after a crash of stox; ( 2 ) during a bear? Will cash or physicals be king?

Puetz and RJ - thanks to both of you for expressing exactly what I suspected happened with Hillary. If we know, why doesn't the rest of the world understand?

Sources said the central bank's action is aimed directly at Soros 
with the ultimate aim of wiping him out and extracting a costly
revenge.

Reported by The Nation, 23-06-97


( Oh, what they do! )

Speculation worked on a pure short-run profit motive. "It does not
care what might happen to the targeted country as the result of
greedy action. It is an evil factor hidden in the name of 'free market
forces'. Therefore, it cannot be respected as the work of true market
mechanisms."

-- Bangkok Bank Chairman on currency speculators

Panda: nice to see you again! And I love your graphics! Yup, I'm sittin' here with a 266, 64MB, and more bells and whistles than I know what to do with. As a matter of fact, the bells and whistles came with their own bells and whistles!! T-3 line? You're right -- it won't be moving the gold market. I guess I'll have to just get by with my T-1 FDDI backbone.

So, how about that Hong Kong?? :- ) )

Golden glow, Golden age 1920's. Before the crisis of 1929 the 33,000,000
wage earners in the USofA received an average of $25.00 per week. More
then half of the country's workers fell below the average and less than
one tenth were earning as much as $40.00 per week. As for women workers
thirteen states surveyed was $16.36, and lowest was $8.29 in Mississippi.

Hoover Committee on Recent Economic Changes, reported speed up and new
machinery had increased productivity per worker by 53.5 % in eight years
ending in 1927 in manufacturing and by 17 % on railroads. A work week
was 54.6 hours in steel and 53.4 hours in textile, and 60 hours in
street labouring. During the great prosperity, there were 4,000,000
unemployed.

But the age was golden, mighty golden, for investment bankers. A total
of $2,928,000,000 in profits from speculation on Wall Street was recorded
for 1928 in tax returns. Most of it went to the one-tenth of one per cent
of the population which was getting richer, the remainder to a stock
buying middle class which was then in the process of being taken.

To the plucked the ways of the great seemed the ways of the con man. But
a really artistic criminal is so crooked that he believes he is honest,
and so it was with the Mitchells and the Whitneys, the Morgan partners
and the representatives of the National City Company, Dillion Read, Lee,
Higginson, and Chase Securities as they testified before the Senate
Committee on Banking and Currency in 1933 and 1934.

"The public never had a chance" wrote Ferdinand Pecora, council for the Senate Committee, in his book "Wall Street Under Oath."

Mr. Baker and his associates in the banking fraternity, there was nothing
wrong in their business transactions. It seemed only the normal funct-
ioning of private enterprise. Was it their concern if bonds were
defaulted or stock market prices collapsed and millions of "suckers" not
"in the know" were ruined? Their function was to float loans, from pools,
drive securities up and make a killing.

The Kolster Radio Corporation, in 1928 was on the verge of bankruptcy,
its earnings virtually nil. Rudolph Spreckels, chairman of the company
and a sound businessman, saw his failure as a golden opportunity if
handled according to Wall Street standards. He called in George Breen,
"the hero of a hundred pools" and a figure of great respectability, who
by a few simple routine moves cheated the public of millions of dollars
while handing Spreckles a profit of $19,000,000 on its sale of
worthless stock.

Mr. Breen, testifying before the Senate Committee, was very modest. He
really hadn't done anything that everybody didn't do and it was really
a very minor transaction scarcely worth the Senate's interest.

Savage - yeah there is a book, and you are reading it! I have been a member of this group almost from the beginning and I will tell you, it doesn't get any better than this! No one member has any answer for everything or everyone, but the collective wisdom of this group and the spin-offs it has generated is as good as there is. We all have our own ex[eriences which are freely shared with others. Sometimes if we have nothing to say, we say nothing at all, we only lurk. Personally, I try to check in with this group twice per day, depending on my work load. It is an absolutely great source of information and opinion.

Time to watch the REAL news, er, Babylon 5. I think the show is much closer to reality than the news or the wire services. ;- ) ) Space aliens seem, somehow, more friendly than the gold market. Good night all... And Scotty, stay away from those graphics! Not to get too techno geekish here, but I'm running a slow P-90 with 64 Meg RAM under NT 4.0. Funny thing though, it doesn't get my broker to their job betterer. Yes D.A., Regal does have a better deal, but this is almost comical with Schwabee. ALMOST....

Gents and ladies, it looks like gold and silver are inching down yet a bit more. I suspect that this next week will tell many tells as to the direction of things. I must confess that I did not think that gold would fall below 340 for very long. I still don't but may think my position. I'll bet Ted is having withdrawal pains already from not inputting data at this site.

Actually I ment tell many tales.

Bema expects offers on Chile project soon

Reuters Story - June 20, 1997 19:50

VANCOUVER, British Columbia, June 20 ( Reuter ) - Bema Gold Corp, which claims its Cerro Casale property in Chile is the
world's biggest undeveloped gold project, said Friday it
expects a major mining company to propose a deal on the
project by the end of the summer.
Bema owns 49 percent of Cerro Casale and Arizona Star
Resource Corp has 51 percent. Bema owns 33 percent of
Arizona Star.
Bema president Clive Johnson told the company's annual
meeting on Friday that 20 major mining companies are looking
at the project and 12 have visited the site. "Some of them are at a very advanced stage of due diligence," he said.
"What I think is that in the next two to three months we
are going to get into some serious offers. In fact it could
happen very shortly," he said.
Johnson told Reuters after the meeting that Bema would
probably give the mining companies until the end of August to
submit their offers.
Bema's preference would be for a mining company to make a
takeover bid for Arizona Star.
Bema would be able to influence that deal by refusing to
tender its stake in Arizona Star unless the bidder offers a
favorable price, is willing to arrange financing for a mine at
Cerro Casale and is a compatible partner for future
operations, Johnson said.
He reiterated that Bema would not sell its stake in
Arizona Star unless it was part of a takeover of the entire company.
Even if such a deal does not materialize, Bema will push
ahead with development plans for the property which is so far
estimated to contain 27.4 million ounces of gold and 7.6
billion pounds of copper.
"Cerro Casale is today the largest undeveloped gold
project in the world. We believe it is the best," Johnson said.
Bema plans to release detailed engineering analysis on the
project in the next 10 days. Johnson said it was likely to put
the cost of building a mine there at US$1.2 billion.
Production would be 800,000 ounces of gold and 250 million
pounds of copper a year over 18 years.
Based on projections of US$375 an ounce for gold and US$1
a pound for copper, proceeds from the copper would defray all
the costs of producing the gold, Johnson said.
When the capital cost is included, the cost of producing
the gold would be about US$100 an ounce. "This is a phenomenal
project," he said.
Another alternative for developing the project in the
absence of a deal with a major mining company would be for a
major Japanese copper producer to invest in the project in
exchange for a 30 percent stake. Bema would then propose a
merger with Arizona Star, Johnson said.
Johnson said Bema's Refugio mine in Chile was not likely
to meet its expected production of 250,000 ounces of gold this
year because of mechanical problems at the site. It is likely
to produce "in the lower 200s," Johnson said.
Nevertheless he said exploration success at the property
may ultimately enable production to be expanded to as much as
400,000 to 500,000 ounces a year.
At the meeting, Bema announced it was dropping a plan to
authorize the issuance of up to 11 million stock options as
incentives to staff because of complaints from shareholders.
-- Cynthia Osterman ( ( Reuters Vancouver Bureau ( 604 ) 664-7314 ) )

Scotty here's Deaner's URL
http://www.geocities.com/WallStreet/8139/