Gold Discussion for Investors and Market Analysts

Kitco Inc. does not exercise any editorial control over the content of this discussion group and therefore does not necessarily endorse any statements that are made or assert the truthfulness or reliability of the information provided.

(Sat Jul 26 1997 00:03)
Savage - Yes, GCZ7 at 326, that price should be good until at Wed. next week.

(Sat Jul 26 1997 00:08)

Regards the increasing prices of stuff, in Dallas office rents have increased 20%.

The value of office buildings have skyrocketed.

(Sat Jul 26 1997 00:12)
ACW!APH! Wow! Like the good old days. I wonder why??????

(Sat Jul 26 1997 00:43)
As a matter of discussion I would like to offer the following factors as a basis for accepting that a significant trading bottom is in place in the precious metals group.

1. On 6-19 CDE formed a classic hammer pattern with a significant volume climax.

2. Many gold stocks are in the process of forming hammers for the month of July. This pattern on a monthly basis is nearly fool proof for intermediate bottoms.

3. The lows established during the last of June have held very strongly, and while this range may have the lower end retested there is widespread similarity among the North Americans ( the SA stocks have not shown the same strength ) .

4. I track a 26 week average of actual buying activity within the major industry groups ( easily obtained from Barron's ) . After using a number of methods, I have found an approach which accurately tracks the turning points of net flows into and out of each sector. The precious metal group turned positive the last week in June.

Very often this tracking indicator will turn positive well before the market will show obvious indications of a trend for an industry. As an example, the current move in the airline sector was shown by this indicator at least two months before the last move up was apparent ( this sector turned negative again last week after 3 months of positive market flow ) .

5. There is a weighted moving average indicator that was published by Donaghue in the late 80's ( apparently long forgotten ) . This moving average utilizes a 26 week weighted average of all national money market rates compiled by Donaghue ( again in Barron's ) . I began using this average in 1988 and it has been 100% accurate in tracking the interest rate trend since that year. The weighting smooths out the month to month corrections, and even in 1990-1991 when everyone was sure that a trend change was in place ( to higher rates ) this indicator remained positive ( indicating that the low range would hold ) .

This indicator went negative on May 5.

Discussion appreciated.

(Sat Jul 26 1997 01:37)
PNEUMA.....Enjoyed your post. I have a Web Page
that uses regression analysis to switch between funds.
found it interesting that the Air Transportation
sector was #1 for week after week, but as of today
fell off the list. Which seems to confirm your result.
Do you feel that the buying activity you track has
an advantage over tracking the same sector by price ( NAV ) ?
Also do you find the weighted moving average is more
sensitive than the exponential moving average?
The above Email works, if you would like to chat offline.
Best Regards.....Schippi

(Sat Jul 26 1997 01:41)
@always bullish(what's a bear?)
Monthly long term XAU w/trendlines.....take your pick; I like red!

John Disney
(Sat Jul 26 1997 03:31)
for nomercy
Loved the article on ERPM. This "profitable" mine has lost money
in every year that I have info on back to 1991 ( except for a brief
flutter in 1994 ) . The article also fails to mention that the mine
commenced in 1908 - ( I hope I live that long ) . It's about the size of
Buffels -300,000 oz/year. It should have been closed several years
ago, but I believe it has one or two profitable shafts which another
comapany will probably buy out.

the wizard
(Sat Jul 26 1997 03:40)
@ oz
why does the S&P 500 look so tired & exhausted
or is it just me?

why does the weekly chart, 30-yr. bond....stuck, below previous highs
conflict with the weekly S&P 500, so dramatically ?

why is a most basic 'commodity' -- sugar
breaking-out, and -up, resiliently ?

why is the 'dog' of foreign currencies, the 'DM'
arresting it's descent ?

is something about the U.S. dollar
severly.....'bent' ?!

what if the 'Dow' -- the 'Holy Cow'
is about to be 'milked'
for the last time ?


(Sat Jul 26 1997 05:19)
OLIVER: The Business Week article focuses on the state of the ECONOMY. It ignores the state of the FINANCIAL markets. Shortly, the weakness in financials will collapse the economy. Watch Korea this next week for clues. Watch all of Asia for currency failures. Failures there will infect the system worldwide.

(Sat Jul 26 1997 05:46)
Good morning ALL...Current conditions: Heavy FOG.....

(Sat Jul 26 1997 05:47)
NJ: You and Mr. Roach are correct. The politicians will win and the money supply will be pumped up accordingly as cited in the two paragraphs you clipped.

My point is that it does not matter. Deflation will happen anyway. The money they print will not be a problem for thirty years, in 2025, or beyond. To make my point I cite 1933. The politicians won then and the Fed printed accordingly. Gold was changed from $20 to $35 allowing the Monetary Base to nearly DOUBLE. That is big time printing of money. It did not matter to the economy. It stayed in the tank. The new money piled up in the banks. The banks were afraid to lend it to those who needed it the most. Those who didn't need it were terrified to borrow. Most of those who had good credit, had sidestepped the stock market crash and could have borrowed money to buy whole city blocks for 10c on the dollar were frozen by fear. The money that was printed in 1933 STAYED in the banks until the early sixties. It was only then that the generation who had been most affected by the depression had passed away. The new generation had no fears like their parents. It was the new generation who tapped the bank reserves and started exponential credit creation that peaked in 1980 with the inflationary spike that brought gold to $850. That generation is now your government and your captains of industry. Deflation and depression is something they have never experienced. They do not understand it or fear it because it never happened to them. They are the geniuses who have brought us to this "New Era". We'll see.

(Sat Jul 26 1997 06:04)
TED: I envied you your good weather and sunny day kayak trip. All that time we had rain and drizzle. You deserve the fog you are getting. It is going to be perfect here, not a cloud in the sky, low humidity, and I am off on my bike to pick up Barron's if it is in yet.

Mike Sheller
(Sat Jul 26 1997 06:23)
first things first
POORBOYS: Only the body turns to dust. The Self is immortal. The body is a vehicle we take on each time we return to this dream. We have made it mortal and vulnerable by our thoughts. We will all find the way back someday, each in their own time. Do not become a gambler. Become a finder and walker of the Way. It is good to be overwhelmed spiritually by this great mystery once and a while. Otherwise we would continue as fools in our foolish conceits. The Great Investor once said "What does it profit a man if he gains the world, but loses his soul?"

(Sat Jul 26 1997 06:25)
@Great Depression

Donald - you are probably correct regarding your analysis of the effects of increasing the money supply in the 1930's via the devaluation of the dollar relative to gold. However, I do not believe that it is valid to compare the current situation with 1920s and 30s. Two important differences are : 1 ) The monetary system was diametrically opposite to what we have now, and 2 ) 40% of the US civil workforce was employed in agriculture in the 1930s ( I'm not sure what the current percentage is, but it would certainly be less than 3% ) .

Because the differences are so great an argument could be made that the end result of a credit expansion today will in fact be the exact opposite of what happened in the 1930s.

Regards, Milhouse

(Sat Jul 26 1997 06:29)
Mornin Donald!...Tryin ta rub it it's supposed to clear this morning and we really need rain as it hasn't rained in about a month...but since we have a house guest comming Sunday night,the forcast is for showers Monday-Wednesday....TYPICAL!...Where do you live??..I see we have ANOTHER common interest as Barrons is Saturday to me...

Mike Sheller
(Sat Jul 26 1997 06:34)
second things second
WSF, GFD: I too have pondered over what gives with Alan Greenspan in my many years of Greenspan-watching. I realize it is unfair to judge motivations in another person, but I suspect this is a classic case of a person with a vision and an ideology who accepted public life, and the compromises every adult must make therein, to contribute as much balance as he could to the socioeconomic equation. The way to do that is to be a PART of the system, rather than a strident purist OUTSIDE the system. Naturally, over time, one takes on some of the qualities of the system and the many other, less ideologically pure folk one has to interact with. They don't call it "politics" for nothing. Perhaps in some important crisis, with too much to lose on a single move, he will one day be forced to clearly proclaim, in the end, like a character in an Ayn Rand novel, which side he is on. Actually, he has always, diplomatically and properly, made his views known in testimony before our elected representatives. Many are just too dense to understand what the hell he's talking about. I read Atlas Shrugged a long time ago, so I don't remember Robert Statler, but I am sure Ayn Rand accounted for what may be happening to AG in one of her novels. Alas, we are all human. What would WE do in such a situation? I believe that in the end the man has done us all a great service, and has done the best job he could within this system.

Mike Sheller
(Sat Jul 26 1997 06:37)
(we are watching)
SCHIPPI: Stop asking so many questions about the Fed. We wouldn't want to lose you ( ;- ) )

(Sat Jul 26 1997 06:42)
Zinc hit a seven year high yesterday in london....Mornin Mike S....

(Sat Jul 26 1997 06:49)
MILHOUSE: I think the agricultural sector is 2% here in the US. I don't get the connection to the depression though. I expect that this will be a white collar event in the US relative to the losses in assets. The blue collar will suffer but they have less to lose and great skills for survival that white collar lacks. I concede that the monetary system is different. There is no gold backing to double. They can print at will. But collateral will still be required to borrow. That requires unencumbered assets. The generation that is in charge now has been fighting an inflation battle. They have skillfully borrowed to the max and stayed fully leveraged so they can rollover their loans, tap the inflated equity they generated, and maxxed out again, and again, and again. Deflation, which absolutely no one expects, will wipe out the equity this time. Rollovers will not happen. Only those who are FULLY out of debt can be expected to recover for the next cycle. It will be worse than the 30's because of the monetary system changes you cite. The generals of this generation are still fighting the last war, inflation. With the collapse of Russia that war ended because the justification for the inflation was to fight Communisim. We don't need to do that now. Now our former military enemy is a low cost producer. He has turned into an economic enemy, not in my eyes but in the eyes of our government and our industrial leaders. They are mobilizing for a new war by making the western world a low cost competitor. Thus we have downsizing and all the situations cited by Mr. Roach. The result of that mobilization will be DEFLATION.

(Sat Jul 26 1997 06:55)
TED: I live in Eastern Connecticut on Long Island Sound. Barron's was not in at 6:20. I will try again in a half hour.

(Sat Jul 26 1997 07:15)
Donald: My roots are not far away....Bronxville New York....and the fog is lifting and I'm off to get my weekly fix...The business section of the Globe And Mail ( Toronto ) ...Barrons ( in print ) not available here...

(Sat Jul 26 1997 07:21)

Donald - I'd be interested to know your thinking on when this deflation will take place. I see the credit expansion ultimately ending in some form of economic collapse, either massive deflation brought on by widespread debt defaults or hyper-inflation which renders the national currency useless as money. However, I don't think this will occur for several years. In the mean time it is possible for the politicians and their CBs to postpone this reckoning through the injection of liquidity.

The expansion in the money supply that we are witnessing at the moment is the result of extensive bank lending to the private sector. As you point out, this increase can only be sustained through the continued escalation of the price of assets which are used to secure the bank loans. However, should this source of supply dry up due to, for example, a significant down turn in the US stock market, then the Fed can take over and flood the system with dollars. This would probably be done via the Fed's re-purchase and monetisation of Government debt .

Regards, Milhouse

(Sat Jul 26 1997 07:26)

Donald - I forgot to mention that the reason I cited the % of the workforce involved in agriculture as an important difference between the 1930's and now is that the Great Depression was amplified by a terrible drought throughout the Mid West which effectively made 25% of the total workforce unemployed.

Regards, Milhouse

(Sat Jul 26 1997 07:27)
JOHN DISNEY: I appreciate your many informative posts on RSA mining costs, and in return, I am responding to your request for Barrick.s "missing profits".

In 1996 Barrick's "Cash Operating Cost"/oz of production was $193US ( now substantially less, its principal US property at 156/oz ) . If one adds on all other costs except depreciation, corporate G&A, exploration, interest, and write offs, operating cost was 220/oz. Add to that Depreciation at 58/oz, Corporate Administration at 10/oz, Exploration at 21/oz, Interest at 3/oz and Exploration Write Off at 14/oz- it comes to 326/oz for all costs before income taxes. Net Profits of 0.60/sh. "Cash Operating Costs" means: All "site" costs for mining ( excluding deferred stripping costs ) processing and administrative but are exclusive of royalties, production taxes, depreciation, reclamation, financing costs, capital costs and exploration.

I know little about RSA miners and only that which I read in the media which reports RSA costs are the highest in the world, except for Australia recently due to currency adjustments. And the reason purportedly is due to the deep mines with water and heat to contend with as well as on-going capital expenditures. Moreover, I continue to read how RSA will suffer because of mine closures if the gold price does not respond and how production has fallen off due to mine closures due to high costs. Some of the major mining houses have announced mine closures or expected closures. And I have recently seen the very sharp drop in price the last few months in such stocks as Buffels, Harmony, and Durban Deep. Do the costs that you recently posted include all costs exclusive of taxes, or just cash costs. What costs, if any, are omitted.

It would appear No. Am. Miners spend more on exploration to promote growth than RSA miners, which may account for the absorbtion of profits that you were searching for. These exploration activities are one reason given for their higher valuation, and apparently why Ashanti claims it should be distinguished from other African Miners and afforded a higher valuation based on No. Am. standards.

As to whether one should invest in NA or RSA miners, although earnings and dividends are important as you have stressed, personally, I pay more attention to cash flow and what the company is doing with the cash to promote growth. I know RSA miners promote dividends and that European investors expect dividends, but that is not why I invest in stocks. Of course, I will be the first to admit, that my views are not necessarily right. It seems RSA miners are more of a play on gold as a commodity, and an interesting speculation on price in view of the powerful leverage they provide.

(Sat Jul 26 1997 08:07)
MILHOUSE: When it will happen is the key question. I have been predicting this event for so long that I am ashamed of myself. The end requires fear somewhere in the world so great that it telegraphs a warning to everyone that the party is over. That could be a stock market crash. But even a crash at this point will only be conceived by most as a buying opportunity. After all, 1987 was an opportunity, Alan Greenspan and Robert Rubin said they are ready to keep it going. President Clinton said we are going to keep prosperity around for a long time to balance the budget etc. The next dip of greater than 10% will not be a buying opportunity in my opinion. If we had a 30% dip I could see my way to going long stocks for the very short term, quickly taking even small profits.

I used to look at M2 divided by the Monetary Base, for a ratio which was a great measure of leverage in the system. That ratio failed me in 1989 when Soviet Russia collapsed and US currency began circulating freely in Eastrn Europe. As of Dec 31, 1994 that amounted to $233 billion by Fed estimates. Now it is greater, no one knows how much. So I don't think the M2/MB ratio is valid anymore.

I have fallen back to the Dow/Gold ratio for a clue. It shows fear and greed without the need to account for inflation. It is too much to expect anyone to pick the exact date. You can only say to yourself that stocks and paper assets have had a 17 year run. Adjusted for inflation as measured by gold we are not yet back to 1966 but we are close. The risk at this point vs the reward in paper assets is too great for me. I will stick with silver, gold and cash. There are plenty of stocks to short and every once in a while a small short in a Dell or a Compaq should pay off. Even though they are great companies the prices are outrageous. The Rydex Ursa will not bring you any margin calls so I am using that too.

(Sat Jul 26 1997 08:16)

Skylark - re your post to John Disney on Barrick. Thanks for the info. One of the big problems in comparing the reported costs per ounce between NA, RSA and Aust is the differing standards which are used. Australia's largest gold mining company, Normandy Mining, recently reported cash costs of US$240 per ounce for the June quarter. However, the reported cost per ounce using North American standards would be US$215.

The thing which is difficult for me to grasp is the share market valuation of ABX. If this company was Australian and was listed on the ASX, with everything else being equal, it would be selling at around $10 per share.

Regards, Milhouse

George Cole
(Sat Jul 26 1997 08:23)
Wizard: You make some very significant points that support my contention that big trend changes are due very soon. I would add the following:

Why does the gold sector appear to be bottoming despite a booming stock market, a strong dollar, and an unprecedented propaganda barrage pronouncing it "dead and buried"?

I view the inflation/deflation debate as interesting, but not that germane for gold investors. Once the current financial and economic paradigm is broken -- regardless of cause and direction -- gold will begin an unprecedented bull run.

(Sat Jul 26 1997 08:49)
good Asia
Aside the currencies devaluations taking place, what do you make of China-Us posturing re Taiwan
I've been following stoties published in the "South China morning Post" and they, daily have stories relating to military activities, their buildup, Taiwan etc. Below is a sample ( link ) relating to these reports.
With China taking more of centre stage, as an economic power, and now militarily, what do you envision occurring given that their trade surplus with the US keeps on growing and with the annexation of Hong Kong, they probably hold more US Debt than any other country ( not sure of the numbers ) .
This has the making of a "different cold war" with a twist. Malasia's has recently pointed their finger toward the west ( Soros ) but implying that "others" had given the green light to these currency speculators destabilize the Asean developing economies.
Is it possible that Malasia's accusations are true? And for what purpose? How would the "others" gain?
It is certain a scenario, that deserves more attention that is being given ( perhaps not imminent, as we are in Phase l, but as it unravels... ) Gold is certain to benefit from ANY possible scenario, other than the status quo.
Your comments are valued.

(Sat Jul 26 1997 08:57)
Re Currencies. I think you'll find this article of interest
Asia's bankers bolster

(Sat Jul 26 1997 09:09)
Donald,Milhouse: The deflation argument always requires an external event trigger it, whereas the inflation argument is a logical and natural outcome of previous actions. The deflationists are always awaiting a Credit Anstalt or the collapse of a currency or economy to spread system wide, world wide. Or a collapse of confidence as in a presidential scandal or great corruption being uncovered.
Inflation is the outcome of currency debasement and easy money and is as predictable as night and day. Part of the current problem is that we focus on the actions of the Federal Reserve when in fact they are no longer the main engine of credit and money. That function has been usurped by the market through all the fabulous new financing schemes.
Deflation is always possible of being triggered by adverse events during tight money regimes such as existed from the 18th century bubble bursting until 1933. When money flows freely and has no value anchor, there can be no deflation, only inexorable inflation which ebbs and flows a bit. The ebbing we have experienced from 1981 to 1993. The inflation horse was brought to a trot from a gallop. It's itching to run.

(Sat Jul 26 1997 09:10)
Milhouse: Thanks for the reply, I recognize the difference in standards. That is why I am reluctant to invest in mines where I do not get all the necessary information. In addition, obviously, there is more than costs to consider when investing in a mining company. Quality and time-length of reserves, new production on stream, exploration potential, cash-flow and the like are all obviously important and may distinguish why one miner has a substantially higher valuation than another. But even at this, Barrick does enjoy a super-rich valuation, even by NA standards. Perhaps because of this, funds are not carrying it as much as they used to in their portfolio and are switching to Newmont and others. But Barrick is still a quality house, has excellent cash flow, a safe hedge position, new mines in progress and a healthy appetite for acquisitions, which lends itself to a secure LT gold investment. The street values it accordingly.

(Sat Jul 26 1997 09:11)
"What goes around comes around," comments about Malasia's bank role in their currency raids in early 90's
The market
knows that
they were big
speculators of
mainly G7
[Group of

(Sat Jul 26 1997 09:16)

Your chat with PNEUMA off-line is just the thing I would have wanted to see ON-LINE. Can you re-post your discusions please?


(Sat Jul 26 1997 09:21)
Excellent article on the reason of the baht devaluation & continued expected weakness ( talking about "fudged" economic numbers )

(Sat Jul 26 1997 09:32)
Nomercy: Bank Negara was to currencies what the central bank of Brasil was to gold. Whenever gold would drop $2 to $3 from 1994-97 and i would ask my trading contacts who was selling, the answer was always "The
Brasilian." There may be some truth to the Malaysian PM's suspicions, but more likely it is simply the overextended growth and building craze which weakened the ringgit.
My guess is that there are many other central banks like Brasil who remain quite short in the gold market in their continuing efforts to be a profit center for their goverments. They may think they are trading down the slope of the bear market, but in effect they are net short in size. Just as the currency chickens are coming home to roost, so too will the golden ones when someone gets a little bit of a handle on them and starts to run the shorts. Ah, there will be joy at Kitco....

Mike Sheller
(Sat Jul 26 1997 09:44)
@the charts under Blue Skies
With October Platinum neatly thru400-410 congestion, we go to 435 before next resistance. Sugar, however, is a very interesting clue for gold here. Longterm charts will disclose to the observant that sugar and gold invariably move together. If sugar is torpid but gold is bulling, sugar will follow down the line, and vice versa. The sweet stuff is now in a clearly beautiful up pattern, and it must be surmised that gold cannot be too far behind.

(Sat Jul 26 1997 09:45)
Mike Sheller - Thank You for your profound insight.Happy Trails

Mike Sheller
(Sat Jul 26 1997 09:49)
@ Donald
DONALD: While I must admit that if put up against the wall with a mutual fund portfolio to my head I would have to say that my bet is on INflation rather than DEflation, your arguments for DEflation this morning ( and all the time ) are very cogent and comprehensive. It must be the salutory vapors off the Long Island Sound.

(Sat Jul 26 1997 09:52)
"Exchange crisis in Thailand is over"
From a Brazilian paper," Gazeta Mercantil Newspaper"
Thailand's Vice Minister, delivers a "whole load" during his visit to Brazil.
Exchange crisis in Thailand is over, says Assistant Foreign Minister

BRASLIA, 07/25/97 - The exchange crisis in Thailand has ended and there is no risk of a new attack on the local currency, the
baht, said Pitak Intrawityanut, Vice Minister of Foreign Relations of Thailand. The official is currently on a visit to Brazil. ( SB )

(Sat Jul 26 1997 10:02)
fieq rwer[q arowe[jr-97rrerwe90uqiq

I sometimes wonder who these politicians think they are talking to; if it's the voters they are wasting everyone's time, if it's the hedgers,scared money or speculators it's a waste of their time.

(Sat Jul 26 1997 10:04)
Gazeta Mercantil
Nomercy: Would you please tell us the URL of the Brazilian News site. Thx

(Sat Jul 26 1997 10:04)
Gold opened up around $325.00 on friday just like it should have. As I reported on Thursday night the drop below 325.00 to 324.00 was more of a manipulation than anything and the market being bigger than any one person corrected itself. The trader in question seems to have been around for awhile, as everyone I talk to knows him but for what ever reason hasn't been on the floor since I got there. This was the first time anything like that happened. As far as the integrety of COMEX I wouldn't worry. Traders were very prepared for any repeat of Thursday's action on the close Friday ( This was the reason there was NO sell off on the close! ) and I have a feeling the next time he tries it people are going to buy gold from him at 324.0 and then the next trade will be back at "325.00 bid"!

The market is very confussed and both the long and shorts are somewhat scared. Expect more volitility this week as both the longs and shorts press there case and both have big well financed traders behind them. The market is bigger than any one entity and the market shall move to true value where ever that shall be. Personnally I'm long Dec calls and I'm scared too, but to be short here would be even more scary.
That's all I have for now, again my e-mail address is changing from


(Sat Jul 26 1997 10:04)

Barrons is now a fee based subscription, bundled with WSJ for $49/yr. Two week free trial. Comments?

(Sat Jul 26 1997 10:07)
The battle of words starts. It's not my fault. It was the dog that ate my homework!

Mahathir blames George Soros for attack on ringgit

`He ( Soros ) was also known as the man who...tried to use his financial clout in the United States to...

(Sat Jul 26 1997 10:11)
Russia's woes continue as they wrestle to convert their economic system...
"There is no need to be afraid," he said. "Bankruptcy is
not death for an enterprise but primarily a mechanism for replacing ineffective management."

(Sat Jul 26 1997 10:15)
Here's the link to the Gazeta ( just press cancel a few times, when prompt for user & password ) .

(Sat Jul 26 1997 10:23)
Q/. What do you do when the markets are closed?
A/. You go Internet Gambling like me and win US$200 playing blackjack.

Not bad for a risk of US$40, whilst in Australia playing at Las Vegas.

(Sat Jul 26 1997 10:25)
The CB's hold about 1/3 of above ground supply. The vast remainder is in private hands and a considerable portion of this must be in coins or in jewelry, but there also must be a very large amount in commercial or investment hands to justify the enormous LBMA daily turnover. Yet no attention is given to this private investment stock on the influence of price. I read of price being driven by CB and speculative selling, but nothing in regard to the impact of private investors buying or selling their "private stock". Is there a statistical base for the amount of gold held in bar-form by investors. Can anyone explain why this "private stock" should not have more influence on price than CB stock or speculative selling.

(Sat Jul 26 1997 10:26)
VRONSKY: Here is another one for Gazeta Mercantil

(Sat Jul 26 1997 10:36)
silver and film
bw........I agree with your view on digital cameras and the silver market. I just don't see a rush to buy an $800 camera and leaving film by the wayside. As someone else put it so well, for every techno-geek who not only understands the technology AND shells out the bucks for the camera AND has the PC infrastructure to support it; there will be 100 folks like my mom who will buy a $5 camera and drop it by the 1 hour developer.

Did you say maybe in 10 years? Isn't that what they said 10 years ago? I have a couple 100 oz silver bars that are coming up on their 10th anniversary. I have yet to see a price rise to where I can make a decent profit. The only reason I don't sell it and move on to something else is I like to remind myself that sometimes not all the investments go your way. Or the way of the experts of the day.

(Sat Jul 26 1997 10:37)
Mike Sheller: Many thx for calling our attention to the relationship between sugar and gold. Allow I have traded sugar futures quite successfully in the past, I never realized the correlation. Eye-ball checking my log-term charts, I see a general correlation from 1983 through 1993 ) . And they indeed ran in close tandem during the big up swing in gold in early 1993. While Gold rose from $331 to $410 ( +24% ) in about 5 months ( April 2 to August 2 ) , Sugar soared from 8.0 to 13.25 cents ( +66% ) in about 4 months ( February to May ) . Again sugar led the advance.

(Sat Jul 26 1997 10:37)
MIKE SHELLER: We are at a very low tide point right now, not only on Long Island Sound ( we are at the clean end ) . I will be out for several hours. Catch you all later.

(Sat Jul 26 1997 10:39)
staff philosopher......
Bart...........I'm glad you are following the majority of your "client's" wishes. I'm all for free speech, but nothing is accomplished by posts directed at another person for the sake of meanness. I applaud your decision. I know it was a tough one for you.

By way of a little philosophy: this site is wonderful when it comes to seeing all the views. I have noticed that the bulls are a little easier on the bears these days ( compared to about 8 months ago ) . As long as an opinion is succinctly put, and backed up with facts/figures/theories as required or as requested, any view is welcome here -- IMHO. Shoot, if someone had the data to back up the fact that tomorrow the sun was going to come up in the west, I'd certainly listen and offer a counter argument using my facts and figures.

As a personal confession, I was pretty cynical with Mike Sheller's predictions and views based on astrology. I don't put much faith into that system - but Mike always backs up his posts with historical data and other pertinent and logical info. He will even intelligently and politely counter arguments by others why his views are correct. Most importantly, he is CONSISTENT. That gets my respect every time! I don't think he will win me over to the stars and the moon, but I enjoy reading his posts and at least try to understand where he is going. Who knows, he may be the only sane one on this channel........

For those that just can't stand an opposing view, I offer of this suggestion: take that view and save it somewhere on your computer. If it looks like you were right all along, dig that view up 6 months from now and POLITELY bring it up. I don't think anyone will have a problem dissecting what was and using that to start the next round of what will be. Conversely, if that view turns out to be correct, then post it anyway and congratulate the owner.

See, it's all so very easy. I like to use the analogy of baseball: It's a very simple game - you catch the ball, you hit the ball, and you throw the ball.

(Sat Jul 26 1997 10:46)
I made the following statements last night as part of a post:
"Now comes the payback. The enormous money flows will switch from paper to real assets as demand for stuff and demand for wages increases. It needn't all fly at once. It could be a very gradual process..... What usually happens politically in this ( new ) emerging period is that the authorities begin to try to loosen monetary policy to accomodate the worker/voters without damping economic growth. In the process they worsen the inflationary trends already starting."
I have been asked about the use of the word "damping" and how it fits this scenario.
My answer is this: "What I was trying to say was that instead of tightening when inflationary demands begin and slowing the economy, they bow to the pressure of the wage demands and actually loosen instead. This then acccentuates tthe inflationary push. In essence the Fed can tighten
only when labor is not very aggressive and worried about losing their
jobs. Greenspan has been hinting rather loudly about this for some
time now."
Nearly every public statement by Greenspan or Fed release in the past year has mentioned the possibility of labor getting more aggressive. Nearly everyone has taken this as a sign of Fed resolve to resist it. But I think the history of the FED shows that they do not. I think Greenspan is warning us theat inflation will return ( has returned ) and its measure IS labor demands.

(Sat Jul 26 1997 10:52)
Sovereignty and Money: Past, Present and Future
Glyn Davies, Prof Emeritus of Economics, University of Wales, ( UK ) , paints fascinating chronicle of moneys evolution from Jesus to Dostoevsky. Engrossing read of a great scholar:

Lan Man
(Sat Jul 26 1997 10:56)
@Closing Bell July 25, 1997
COMEX and NYMEX precious metals futures ended higher across the
board Friday, on moderate volumes, with nearby active September
palladium registering a new contract high.

"Gold and silver are choppy, with influential speculators going
long in the morning and taking profits in the afternoon this week,"
PaineWebber analyst Bernard Savaiko said. "I wouldn't start
thinking about getting short down here, but my gut feeling is gold
is going to go down and test the lows and maybe break them by a
small margin, as it's first notice day in August gold next week,
and the contract may get a good hit in that time frame, " he said.
"Gold may still be oversold, but the question is where is it going
to go on the upside with stocks, bonds and dollar still strong."

Sharply lower gold prices have resulted in South Africa's Free
State Consolidated Gold Mines, a division of Anglo American Corp,
warning of pit closures this week, while Canada's Echo Bay Mines
Ltd is reported to have cut back on processing low grade

"This will reduce worldwide production at a time when total
industrial and jewelry usage has been increasing substantially,
thus raising the annual deficit between ( mining ) supply and
demand," said Steven Jon Kaplan, editor of the "Gold Mining

Meanwhile, COMEX September silver ended up 4.0 cents at $4.315 an
ounce, with the September/December backing up to 6.5 cents, from
6.2 cents Thursday. September silver remains trapped in its
$4.20-4.40 range, after spot silver saw three year lows earlier
this month.

Platinum group metals ( PGM ) prices continued to recover steadily
from the two month lows seen in early July, despite the resumption
of Russian exports in the past week. Japanese traders said the
first Russian platinum shipments in six months arrived at Narita
Airport in Tokyo late Thursday. The first palladium shipments
arrived last week.

But the PGM forward price curves remain highly backwardated, with
palladium sponge at around a $10.00 an ounce premium to Zurich
ingot, traders said.

"PGMs supplies are still critically tight and the question is
whether Russia will be able to meet the demand," Paine Webber's
Savaiko said. "The consensus is whatever the Russians ship this
year will be less than year ago levels, and the fact that the
Russians are going back into the spot market this week suggests
they may be bypassing contractual obligations to get the highest
price, which could be indication they may not have a lot to sell,
especially in case of platinum."

For the full text story, see

COMEX - 100 troy oz _ dollars per troy oz.

Aug97 324.80 328.00 324.30 326.50 +2.70 414.50 314.60
Oct97 326.30 329.30 326.00 328.30 +2.80 426.50 316.80
Dec97 328.50 331.10 327.50 330.00 +2.90 456.50 318.50
Feb98 331.00 332.00 330.40 332.10 +2.90 424.00 322.50
Est. Sales 89289

COMEX - 5,000 troy oz. _ cents per troy oz.
Jul97 431.00 431.00 431.00 429.70 +4.30 631.00 418.50
Sep97 430.00 435.00 429.00 432.00 +4.00 576.00 418.00
Dec97 436.50 441.00 436.00 438.20 +4.00 701.90 424.00
Mar98 443.00 445.00 443.00 444.40 +4.00 573.00 432.00
Est. Sales 17929

NYMEX - 100 troy oz _ dollars per troy oz
Sep97 190.00 194.00 186.25 189.65 +4.15 192.00 128.75
Dec97 180.00 183.50 176.00 181.65 +3.15 182.50 120.25
Est. Sales 985

COMEX - 50 troy oz _ dollars per troy oz.
Jul97 428.00 430.50 427.50 431.70 +4.50 473.80 353.50
Oct97 414.00 417.00 411.50 416.70 +4.50 429.00 355.50
Jan98 397.00 405.50 397.00 404.70 +4.50 424.00 360.00
Est. Sales 2774

(Sat Jul 26 1997 11:02)
The quick ans is , "for the same reason the NYMEX crude oil contract sets the oil price and not the oil companies."

The comex is the place where "outside money" can easily enter the gold market and call a bluff.

(Sat Jul 26 1997 11:22)
Bridge ( 10:04 ) I already subscribe to the WSJ...does that mean I get Barrons for free???? When I tried Barrons earlier I only got last week's too busy ta try again....gotta hit the ocean as it's a spectacular day and hot ( 80 degrees ) for here day....BBL!!!!

(Sat Jul 26 1997 11:33)
Robert Pringle, Head of World Gold Council strongly criticizes Aussie Central Bank ( RBA ) FOLLY in sale of 2/3s of its gold. Following RBA sale, Aussie Gold Reserves lose $3 billion!!!

(Sat Jul 26 1997 11:38)
jfl.... Your point is well-taken. I suppose the gold market today is not unlike the currency markets. There, like gold, speculators are accused of driving the price of a currency down for their own monetary gain and but for the speculation, the currency would not have been devalued. But also, like gold, the speculators would not have sold the currency unless there were fundamental reasons to justify the devaluation.

(Sat Jul 26 1997 11:45)
Something To Think About
The recent FED study concluded that if the FED sold all of its gold, gold would be valued at 340 and if all the CB's sold their gold, it would fall to only 309. Therefore, if the study has validity, is not gold currently under-valued.

(Sat Jul 26 1997 12:46)

that is the main reason that gov't officals don't like free markets.
In the US look at the controls that politicians want to and have placed on medicine

George Cole
(Sat Jul 26 1997 12:51)
JSE Gold Index
John Disney; Thanks for your myriad posts re: the SA gold mining industry!

In past gold bulls, the SA golds have always posted the largest percentage increases. Do you expect this to be true again when bullion begins a new uptrend? How much might the JSE gold index advance if bullion was to rally to $375 by year-end? I say about 60%. Is this in accord with your thinking?

(Sat Jul 26 1997 13:10)
What a week!
What a week! I see we have lost Hepcat. But the real story is the US stock market, and Alan G.

This week just about everyone who came into my office said something like, "Thank God for Greenspan", or "He really knows something, not like the politicians", or "that Green span is a great genius, look at that stock market, by golly! there has never been one like him since Issac Newton, or maybe Plato, even." Most impressive of all was the gentlemen who told me that for years all he did was worry about his portfolio performance, but now "with Greenspan I can relax, I don't have to worry anymore."

I wish Alan would retire so people would become afraid of the market again.


(Sat Jul 26 1997 13:24)
Greenspan's nightmare: The 100s part3
Greenspan is working on his third gin and water, the phone rings. "Was it a standard pallet ( of iranian 100's ) ?" Yes sir the usual quarter billion worth. "Where did we pick it up?" Bismarck, Bismarck North Dakota Sir. Bismarck are you kidding Smith? They are really shoving it in our face now, are they not?"

Greenspans stomach contracts as if stabbed. His brain races and his mind fights to keep up. The demon comes home to roost, in damn North Dakota no less. I told the bastards, now we are there. How easy it was to print the money out of thin air. Just print it they said. What a joy when you can crush all other counterfeiters with impunity. Just crush em they said. And hell on earth when the counterfeiters can ship their garbage to Bismarck North Dakota. YOU crush em says I.

Alan thinks back to the lessons taught by the women in black and white, the lessons he learned so well in the third grade. Now Alan what do you do if you find a wallet stuffed with money on your way to school, do you stop at the candy store? "No Sister Anne." But Alan you could buy candy for all your friends. "It would not be right to spend money that was not mine." God how right I was, he thinks. The Iranians were now into their terminate phase. It had been bad enough buying their phoney 100s from the Europeans. At first the Europeans had taken the 100s we had printed in exchange for their Iranian 100s. We would print the 100s here, ship them to Europe, exchange the 100s we had printed for the phoney 100s the Iranians had printed, ship the Iranian 100s to a secure incinerator and burn em. All this was a lot of trouble but it cost us very little. Oh the external supply of "good" 100s was increased. What was the abject lie told by the treasury about the offshore currency supply, that it consisted of some hundreds of billions. Alan smiled, the bigger the lie the more believable. Alan hated to consider how many trillions it actually was. But that mattered very little. It would never be allowed back in the usa. But when the volume got to be in the several hundreds of billions we together with the Europeans had decided perhaps tbonds would be better ( and much easier to print ) . This cost much more because it cost something ( intrest ) .

But the phoney currency coming to North Dakota was even worse. Its cost was huge. The pampas are beatiful this time of year Alan thinks. ( to be continued )

(Sat Jul 26 1997 13:29)
SCENARIO: Australian gold sales are actually 'masked' FED gold sales to Japan and Korea.
CAUSE: Currency instability, military instability in region.
QUESTION: Can the FED sell the metal on the QT ?
QUESTION: Can the FED be the big short seller in the market ?

Who Cares?
(Sat Jul 26 1997 13:33)

Depression / Agricultural workforce

Empirical evidence supports Donald. Two events have to occur to
make a stable system, based on history. Work week has to shrink
by 15-20 % and land prices have to drop 25-50%.

In the post-Civil war period, the total work eventually dropped
from 60 hours per week to 48 hours, regardless of the number of
argicultural workers. Likewise, the 1930s decreased the average
work week from 48 to 40 hours, regardless of agricultural workers.

In order to be able to afford the products of their own laber,
workers have to be able to purchase and USE those products. As more
stuff is produced in a smaller time period, leisure time has to
increase. Eventually.

It's already happening in Germany. At the moment, the process is
creating the appearance of a two-tier system, but I believe this
will pass. For instance, among professional white collar workers,
a great number work, in reality, a 30-35 hour week. I used to. My
father did, during his last 4-5 years of working.

Land prices have to fall, so that income is freed up to allow
the purchase of manufactured goods & services. You can see the
initial start of this process, too, in places like CA.

We won't have a stable system until both events take place.

(Sat Jul 26 1997 13:39)
in sack-o-tomatoes
I was talking to a friend in San Francisco last night who made what I think is an interesting point. The Dow was at 3800 when Republicans took control of both Houses of Congress in November, 1994. Now it is more than twice that. How much of that runup is attributable to the Republican Revolution, or to the euphoria surrounding it, is debatable. Conservatives often claim that most of it is while liberals counter none of it is. My guess is that the truth is somewhere in between. In any case, the Republicans are now in complete disarray and the Republican Revolution has faltered. So, to the extent that the Republicans had *anything* to do with this bull market, their present state of disorder and total lack of direction must be viewed as bearish for the Dow and bullish for gold. But, he added, he's not convinced enough by the argument that he'll be shorting the S&P anytime soon, or going long gold. It's just one more nail in the Dow's coffin.

(Sat Jul 26 1997 13:41)
IS 1929 BEING REPLAYED THIS YEAR? - by Guest Guru Ure
There is an uncanny similarity between the DOW from January 1920 to April 1930 AND TODAYS DOW track record. Avoid reading this study at your own peril - GUEST GURU URE:

international bank insider
(Sat Jul 26 1997 13:50)
pillbrain: Ref: "QUESTION: Can the FED be the big short seller in the market?" There is NO question that the FRB, possibly in cahoots with the World Bank & UBS are - AND HAVE BEEN - shorting gold right along. However, as others have pointed out in this august forum, these banks are just compressing the 'gold spring' that much more. When released, the gold price will surge forward.

(Sat Jul 26 1997 14:01)
N Korea famine
Uh-oh. North Korea's kids are starving in bigger numbers than before:

North Korean famine serious
Saturday 26 July, 1997 ( 11:41am AEST )
The charity organisation, World Vision, says the level of famine in North Korea is far greater than first thought by the west.

A team from the agency has just returned from a tour of five regions in North Korea, and says 40 per cent of the country's children are starving.

World Vision spokesman Allan Austin says the organisation believes conditions are probably even more desperate in the western provinces where food rationing was halted last month.

Mr Austin says the situation is extremely serious.

World Vision has established a hotline aimed at raising $1-million to buy food for the country's children.

 1996 Australian Broadcasting Corporation

(Sat Jul 26 1997 14:03)
gold really is intrinsic
Here's an interesting blurb from a URL posted yesterday. This backs up what I have been saying that gold will always have an intrinsic value. GenX'ers beware!!

"The net shortfall between total demand and total supply over the past eight years has been filled by net official sales. It is not easy to connect this line to the current levels of media hysteria on the subject of official sales, or to the negative view taken by speculators over the metal in New York.

Compared with the amount of about 2 100 tons of net sales of official gold holdings over the past 10 years, an amount of almost 6 900 tons has been bought by Asian countries in the same period, placing the metal in hands where it is most certainly seen as a store of value." Full story at:

(Sat Jul 26 1997 14:18)

Ron ( 13:39 ) No doubt that the Rebublican Revolution brought a semblance of confidence to the USofA as an investment medium, meaning ( US Treasuries and Stocks ) which together halted gold from rising to its true level, that is by the huge amount of foreign money entering those investments.
It certainly helped Bubba and Spotted Al, as now they can say -look what the Dem's accomplished.
To sum it up; it's a one party system controlled by B/C interests.
When IBM and their like complain about international earnings, maybe the ( $ ) buck will fall? Then the Rebulicans may look better.
This back and forth treachery being placed on the American people will lead to hell for us all.

bold aurizons
(Sat Jul 26 1997 14:28)
Skylark -
Do you have a URL for the FED study about CBs selling all their gold?
If not, how could I obtain it?

(Sat Jul 26 1997 14:38)
If we had some of Will Rogers's wisdom today, wonder if Will wouldn't
be saying something like, "If I'm understanding the situation correctly,
we've got these dollars backed by two cents worth of gold. Then we've
these shares backed by several ounces of gold in the ground. My friend,
if it's going to be some kind of long horse race between 'em, I think
you better put some money on shares."

bb fisher
(Sat Jul 26 1997 14:45)

i will post the gold to dow 30 ratio from 1901-1997 tommorrow
do ya wanna see it in semi log scale or arithmetic scale?

it is too big for 1 chart so it will be in 2.

(Sat Jul 26 1997 14:55)
New Store of Value
Maybe Americans could back their dollar with these instead of gold. CBs should look into it.

(Sat Jul 26 1997 14:55)
John Disney; Fri Jul 25 1997 08:20; thanks for informing us; you wrote: WD was due to treating more high grade mined material and less low grade surface material; sometime they must work off low grade material and costs will rise again, or is this a mistake? you are still thinking, WD is the best SA-AU-investment? There is a recommendation of germans paper boerse online to buy Avgold ( last time, they have had a golden nose with their recommendations ) . What do you think after the accident this week, will this increase the risk? One more question: Implats seems to be weak compared with high platin-price and rustenberg-shares. Any thoughts why?

Bart: I understand your decision about John H., but I don`t understand many people in this forum why they couldn`t ignore him. Another point: the agreement with kitko2 seems to be not so great, when comparing the number of posters with kitko1; Gold-price and gold-shares coulden`t be divided, much of info`s about shares makes this forum so great ( John Disney`s information and many more ) . Would it be not be better to lay those two parts together?

German stockmarket: It is amazing, there are only three themes in newspapers: Tour de france, high tide and stock-market: In TV there are special telecasts, share-newspapers double their circulation, shares explodes ( short time DAX had been over 4500 ) . Surely vonsky and other people are right, german stocks are overvalued. BUT: we have another situation in germany: Until 1 year ago, the people had no interest in stocks, only 10 % owned shares ( compared to around 50 % in USA, when my information-source is right ) . This is going to change, every day mory people are deciding to put their money in, this will continue for next 3-6 month, because there is still a lot of people just watching, getting greedy, loosing their head and putting their money in. DAX at 5000 this year is not far away ( and 3000 in 1998:- ) ) . Regards SJJ

(Sat Jul 26 1997 15:00)
@ Back In The Library
bb: log will be fine with me. Any chance you have a "forward remote viewing chart" for gold. ( i.e.- next weeks prices would even do ) : ) ) ) ) )

(Sat Jul 26 1997 15:01)
@...BB Fisher
semi-log please

(Sat Jul 26 1997 15:03)
Reading Guest Guru URE, we have had the shooting wars, a Cold War, with the marketplace now being the new battlefield are we in for a GOLD WAR? It certainly seems to me that SOmeone has managed to polarise the ASEAN in a time of foggy economic uncetainty as trigger. If the participating nations spent 10% GDP on gold market fighting what would happen to the price of gold I wonder?

(Sat Jul 26 1997 15:20)
BYRON: Here are instructions on how to create your own forward looking chart for gold. Take a piece of plain paper. On the left hand side place a small dot. Mark it 6000 BC. On the right hand side make a similar dot. Mark it any future date you wish. Connect the two dots by using a ruler to draw a straight, level line. Your future chart for gold prices is now complete. The hard part is where to put the dots to indicate the prices of all the things you can buy with gold. They keep bobbing all over the place.

John N.
(Sat Jul 26 1997 15:23)
Retiarivs. Felix delenda est.

SJJ: thank you for a post providing a reading of sentiment from the German press. That is most welcome, we need the dimension you provide; Germany is the engine of Europe.

(Sat Jul 26 1997 15:29)
Mike the man...can there be a GIANT among GIANTS? now I want to Surf standing on your shoulders...
with regards to the poorboys conversations...and thank you poorboys for ALL your comments.

"Many Receive advice, few profit from it"...Publilius Syrus

and another of my favorites...

"Wise men profit more from fools than fools from wise men; for the wise men shun the mistakes of fools, but fools do not imitate the successes of the wise"...Cato the Elder ( Marcus Cato )

Anyway, Platinum thru 400-410 congestion in the face of the Russian delivery is quite promising indeed ( although I do feel for their not too rosey situation over there, it is good for the longs ) . Next week or next month should be interesting.

I'm looking at the SUGAR/GOLD charts now. Thanks Bro ( genius I tell ya' ) . I can't understand why I haven't seen the correlation before as I am always on the lookout for these things...if you read or recall my FCOJ/GOLD correlation what do you think. I know, more of a coincidence but it's fun nonetheless. Both ( daily ) charts have been doing the same thing - divergence, triangles, wedges, etc. I guess this is just the typical base building processes. I am w/w OJ very closely and am long a little too. I will be looonger soon enough. OJ Has been acting like gold somewhat. The fundamentals have "biggest crops EVER" but the volatility is sill WAY high ( someone could have made some good money selling calls here, but I don't have the B*lls to play like that in a thin market-and those guys in the nyce pits are ruthless ) and the prices remain above the '93 crop ( inflation? ) . Now there is one of the biggest med-fly infestations since the California scare. Much news is bullish but look at the prices...Gold is feeling the same sting, no? Who knows...thanks for reading my post, anyway if you have gotten this far.

Back to volatility ( with the same rambling style ) . Sugar volatility has been low but lately it has picked up well...and NOW look at SI, GC, JO... they got to the top of the heap quicklike...what will happen indeed...I would like Gold to travel sideways for a while ( and I think it might ) to lower some of this volatility and make prices more attractive...on either side ( call/put ) ...we'll see.

Thanks Mike for ALL your posts past and in advance. Time to go clean the house...the woman just called from the salon and she is on her way home...oh no!



(Sat Jul 26 1997 15:35)
Ron...and you wonder...
How I got so much Platinum for my Levi's... the garage full


(Sat Jul 26 1997 15:37)
Free trade economics:
Here is how free trade works for some software hours. In this country some software hours are billed at about 100 dollars/hr by several large corporations. The usa employee generating these billable hours receives about 70,000 in direct yearly salry with about another 30,000 or so in indirect costs ( health, pensions, ect ) . He/she receives about half the billable dollars. Ship the job to India. The Indian programmer receives about 5000 dollars yearly direct salry and 3000 indirect salry. Now you say the billable hours should cost about 20 dollars or so. Wrong. The cost is less than 100 but not much, perhaps on the order of 60-80. Who gets all this cash if not the worker who generates the income?

The consumer buying the end product pays 80 instead or 100. The worker doing the work gets 8000 instead of 100,000. Perhaps that is why all the foreign ( and domestic ) money is bribing our boys in dc.

(Sat Jul 26 1997 15:43)
RON: Republican Revolution? Here is the Republican Revolution that bothers me. During Ronald Reagan's 8 year term we ADDED to the National Debt an amount that equaled and exceeded all of the debt created during the term of every president since George Washington. He blamed it on the Democratic Congress but HE SIGNED OFF ON IT. I will believe that there is a real revolution when corporate America stops backing up their trucks to the US Treasury for corporate welfare payments. Water, Timber, GOLD, silver, broadcast bandwith, Export/Import payments, Sugar, tobacco, peanuts, you name it.

Girlfriend of EB
(Sat Jul 26 1997 15:44)
@ EB
You are a very bad boy! Look at the lawn, dishwasher, washing machine, they haven't changed since I left...shame on you! the dog house!

EB's girlfriend

(Sat Jul 26 1997 15:46)
@ Personality Type 8.
Aurophile: Enjoyed your post of 23:48 of yesterday. Now that the "flux of chaos" has vanished from the Kitco site, it is good to see the return of "rhyme and reason".

Your mention of "Control. Overarching institutional control." in your comments again reminds me of the description of the personality type 8 as described by Don Riso in his 1987 and recently updated ( 1997 ) book titled "Personality Types". I will quote just a very short section from a very long description of this type 8 personality:

"Average Eights at this stage have an innate sense of the use of power, and they do not hesitate to wield it. "Power people," they excise power in whatever form is at their disposal. They understand that power is not a thing but the ability to get things done, to shape events, and to make the enviorment conform to their vision. Power is not something which can be enjoyed in the abstract: it must be continually used if it is to be maintained."

And another section: "A typical way of demonstrating their importance is their "edifice" complex. The epic scal appeals to them, both literally and figuratively. They enjoy building, whether a house or a financial empire, as long as it reflects themselves. In their private lives, average Eights would like to be monarchs ruling a large and powerful family dynasty which perpetuates their influence for generations. The wider their influence, the more they can have an impact upon the environment and ensure themselve of immorality, a goal which in various forms average Eights begin to seek."

Again, these two short paragraphs are only a small part of a 10,000 plus word description of the type 8 personality in which Riso is describing the movement of the psych of one type from healthty, average to an unhealty position.

I sometimes like to think of the movement of events in socity as the dominance of one particular type of psych over another. Right now and from the end of the cold war the dominate psych appears to be that of the type 8. "We have won the cold war and now we are taking our peragatives, our spoils."
However this appears to have gone to extremes as Mr. Roach describes in his article. The political changes in England and France might be symptoms of the change from dominance by the 8 type personality back to ones that dominated in the 60's and 70's. That is the more social orientated types. Whether this will lead back to the negatives aspects of the 60' and 70's I can not say. But just a thought.

Hope this throws some small light on the "Control. Overarching Institutional Control" senario.

(Sat Jul 26 1997 15:47)
Leland: I believe the great american comedien Will Rogers was paraphrasing the legendary Irish critic and playwright, George Bernard Shaw who said of the English paper currency:

If you must choose between placing your trust in government or placing your trust in gold, then gentlemen, I strongly advise you to place your trust in gold.

( :- ) )

Mike Sheller
(Sat Jul 26 1997 16:12)
bw: A couple of nights ago I awoke around 2:30 am, couldn't fall back to sleep, & went downstairs and put on the TV. There was Greenspan on CSPAN, in the tape of the day's trestimony. "Surely this," I said excitedly to Pepi, the family Pomeranian, "will put us both to sleep right quick." Well, Pepi did finally nod off at my blanketed feet on the couch ( I think it was Barney Frank that did it ) but daddy kept his ears perked up - especially when AG was asked perhaps the most pertinent question of all - HE WAS ASKED WHAT WAS IMPLIED BY THE FACT THAT FOREIGN NATIONS HAD SUDDENLY BECOME NET SELLERS OF US TREASURY OBLIGATIONS, AND THAT THE FED HAD BECOME THE BUYER. Alan hemmed, hawed, Pepi's ears wiggled briefly, and then some other "representative" of the people waved the questioner off brusquely as though this was recondite and esoteric economics and of no concern to the American people. Did anyone else catch this. Sorry I can't remember the person who brought up the indelicate subject. It was during Tuesday's testimony.
The first half, by the way, sounded a bit like Greenspan had been reading "The Aquarian Imperative" at The Astrological Investor at Gold Eagle. Hmmm

(Sat Jul 26 1997 16:15)
Donald: Do you think that because as you put it Reagan "signed off" on the big deficit budgets the Democratic Congress was blameless? It took two to tango my friend. And yes, I too think Reagan could have fought the deficts with a few vetoes, as Big Bill does! I wish there was more difference between the two major parties. That is why I am becomming more of a Libertarian every day.

(Sat Jul 26 1997 16:32)
BOLD ARIZONS: Sorry but I do not have it. The study was announced by Reuters on June 12 The study was authored by Fed economist Dale Henderson, Massachusetts Institute of Technology student John Irons, University of Michigan professor Stephen Salant and Sebastian Thomas, a research analyst. I believe John Irons may have a web site under his name. You may also try the FED site.

(Sat Jul 26 1997 16:42)
Found It
BOLD ARIZONS: The paper can be found at ( ) .

(Sat Jul 26 1997 16:46)
HOT HERE!!!!!!!!!!!!!!
HEY TED....Saw your post this AM...80 degrees, huh ???Heat index here today is 105-115..!! How is that for hot ??? I can bring that bottle when I come...

(Sat Jul 26 1997 16:46)
GOLDBUG23: I voted for Harry Browne this time around. His book that I read in 1978? The devaluation etc. made me a lot of money. I figured I owed him one.

(Sat Jul 26 1997 16:48)
Heard the following speculative opinion last night.
Clinton, Rubin and Greenspan know how overvalued the market is but want the party to continue till 1999. Why? In 1999 they will be able to blame the crash on problems related to Year 2000 bug. Unexpectedly high costs of fixing the problem, investor pullback, etc. All they are trying to do is to buy time, 1.5 to 2 years. Plausible?

(Sat Jul 26 1997 17:00)
VRONSKY: Best Will Rogers' humor was when he spent a few days in
hospital. He locked the door to his room. Directly, there was a
knock. Inside, Will said, "Friend or enema?"

(Sat Jul 26 1997 17:07)
YETANOTHERLURKER: No. Not plausable to me. I think things will happen much faster than that. Weeks and months, not years. Too many things all over the globe are going wrong at the same time.

(Sat Jul 26 1997 17:08)
"Deflation? What deflation?" In a short and sweet front page piece in his 21 July 1997 issue of Freemarket Gold & Money, James Turk reports on his own survey of prices and comments on the current deflation mania:
"So my conclusion is quite simple. There's no deflation. But the government and everyone else who has a vested interest in making believe that the Federal Reserve is not pumping up the money supply ( and therefore the stock market ) has mnade sure most everyone believe that deflation, and not inflation is the worry today....
If there were deflation today, the money supply would be shrinking like it did in the 1930's ( but M3 grew by 7.1% in the latest 12 month period ) , and stock prices would again be collapsing like the 1930's, instead of booming.
I think we are witnessing a popular delusion. There is a wide-spread mystical belief in a non-existent deflation............."

I had not read this when I posted my peice last night and my followup this morning, but I believe it fits well into my notion that that we are being set up for opening the spigots rather than turning them off. What Greenspam has been hinting at for months is that rising worker demands for increased wages WILL bring inflation back and that politics will demand that they be accomodated. My studies show conclusively that the FED actually works to reinforce the prevailing inflation/disinflation cycle rather than moderate it.
Last year I posted a great deal on Antal Fekete's great discovery that the burgeoning government bond market is what accentuates and prolongs economic downturns, and the FED is a close second in that action. Then when inflation does restart, as it has, they twiddle their thumbs and eventually ease since they fear that worker demands and price increases will otherwise choke off the boom. This while the full coffer government starts spending all that largesse of the expansion instead of reducing expenditures.
I am mentioning all this again because I sense that even at Kitco, home of the gold bug, the disinflation/deflation scenario rules at the moment. I do not expect to make converts. I remember all too well the same arguments of the 1960's and 1970's and know that some who were deflationists then are so still today. Nevertheless, prices are several hundreds of percent higher today for many items than they were then and considerably higher than they were at the start of the so-called disinflationary period in 1982. Inflation has never stopped, it is just that the spinmeisters and money folk have directed attention from it. Don't be fooled.

(Sat Jul 26 1997 17:13)
GLENN in the pit
The beginning of the Gold War. "...the market is very confused...both long and shorts are scared...both have big well financed traders behind them..." Whenever have big well financed traders been on opposite sides?

Reminds of the nursery rhyme....
"Georgie porgie pudding and pie,
kissed the girls and made them cry,
when the BIG boys came out to play,
georgie porgie ran away."

Time to "cut and run" cowboy Georgie.

Mike Sheller
(Sat Jul 26 1997 17:27)
AUROPHILE, & all: The phenomenon of the DEflation scenario taking a powerful holds of Kitcoites recently may be the psychological ramifications of the dipping gold price. Goldbugs tend to be manic when gold is rising, naturally ascribing it to the smart money tipping us off that inflation is finally taking hold and the demise of civilization is near. During gold's declines, and disappointing reactions as it builds THE monster base for the end /turn of century run to $2400 by 2003, goldbugs, like all other humans are susceptible to demoralizing delusions. Now please don't anyone accuse me of dissing goldbugs. I am one myself. And I DO leave room open for reasoned, and potent DEflation arguments, as brother & sister Kitcoites have been making quite impressively these days. But the TECHNICAL TRUTH ( sorry for shouting ) of the matter is, there has only BEEN inflation since 1934, and there can only BE, so long as the money supply is increased chronically, year after year, without tie to specie. This also being the FIRST Kondratieff Wave 60ish year cycle wherein this condition obtains, even a collapse of stock prices may not necessarily create a general deflationary trend. It may be counted only as a crisis, which will be met with measures of liquidity unseen in human history. There is a lot to consider now. We are truly in a "new era." One in which inflation cannot and will not stop until a full specie or commodity money standard is returned to.

(Sat Jul 26 1997 17:31)
AUROPHILE.....You can't imagine how good about 2 years of that 12% inflation of the late 70s would be to my pocketbook....Would cause a lot of pain in some places though when you try to make a "soft landing"....

(Sat Jul 26 1997 17:34)
MIKE SHELLER: "Amen," he shouted form the back pew, and then in a quieter voice added, "but may I suggest that's it's always only the 54th year in the K wave since the last similar time..." ( 8^ ) ) ) ) ) ) !!

(Sat Jul 26 1997 17:35)
form=from in aurospeak.

(Sat Jul 26 1997 17:36)
AUROPHILE: When I predicted Deflation this morning I meant that that is what I expect the next and immediate future will bring. I am talking about the aftermath of a stock market crash or a series of bank runs in Asia spreading around the globe or what have you. I shop too, I agree that we have a small inflation now. I absolutely do not expect that this small inflation will creep up year by year to 5%, 10%, 15% etc. The trend is deflation, it started in 1980 and will continue at a swifter pace "soon" Regarding the M2 money supply. There was 10 Billion drop this week on a seasonally adjusted basis. Not seasonally adjusted it was down 18 Billion.

(Sat Jul 26 1997 17:38)
AUROPHILE: When I predicted Deflation this morning I meant that that is what I expect the next and immediate future will bring. I am talking about the aftermath of a stock market crash or a series of bank runs in Asia spreading around the globe or what have you. I shop too, I agree that we have a small inflation now. I absolutely do not expect that this small inflation will creep up year by year to 5%, 10%, 15% etc. The trend is deflation, it started in 1980 and will continue at a swifter pace "soon" Regarding the M2 money supply. There was 10 Billion drop this week on a seasonally adjusted basis. Not seasonally adjusted it was down 18 Billion.

(Sat Jul 26 1997 17:51)
@ The Good Old Days:
Talking about the 60's and 70's, anybody for a good old bike ride in sunny and foggy San Francisco.

(Sat Jul 26 1997 17:57)
AUROPHILE: Your Friday 23:48 post included the following:
"In essence what we have seen is that both corporations AND government have strengthened
their balance sheets at the expense of the individual. This is all well and good, but in any
society it is not sustainable, least of all in a democracy."

You have raised a key point. In spite of some improvement however, both governments and corporations were far better situated in 1929 than they are today. The US government was rock solid in 1929. General Motors had an acid ratio of $2.64? vs: about 16c now. During the recent years of since the Savings & Loan disaster the Fed has engineered interest rates to bail out the remaining banks. Savers were the suckers for too long. Tired of 2% on their savings they have flocked to stocks out of desperation. Thousands, millions? were downsized, NAFTA, etc more jobs lost. The 4% unemployment number is a joke. It ignores the underemployed, those highly skilled people who flip hamburgers now. These people are not complaining now because their stocks are up and they feel rich because their IRA makes them millionaires even after downsizing. How will they react after a market crash? Not well I am afraid.

(Sat Jul 26 1997 18:06)
The Albuquerque Journal ran a political cartoon yesterday or the day before whcih I found to be pretty insightful. It portrayed a hot air balloon in the shape of a large bloated pig which was coming apart at the seams. The balloon was titled "the stock market". Below it were observers in the gandola of the balloon remarking, "What inflation?" "I don't see any inflation." When the Albuquerque Journal becomes that insightful, one must wonder if the truth is in the cartoon after all.

(Sat Jul 26 1997 18:12)
Fidelity Select American Gold & Precious metals Charts
5 Years, 30 day and hourly charts at:
Click on Gold Sectors

(Sat Jul 26 1997 18:15)
Bottoms up
I said it at $350, gold is not going substantially lower. I was wrong then but I'll say it again, gold is not going substantially below $325. Inflation or not, the intrinsic value of the metals is substantially above the present market price. I have been amazed that inflation has not manifest itself in consumer prices to the extent it should have at this point. When all those dollars buzzing around wall street like flies around fresh droppings turn away from the investments and to consumer goods that is when inflation will pick up like gangbusters. As confidence in the economy weakens and the profitability of investing in stocks declines that is the scenario which I see. My feeling is that we as a country has been incredibly lucky to have the prosperity we now enjoy. What will cause a reversal? Any of a number of things might derail the train.

(Sat Jul 26 1997 18:17)
TORTFEASOR: The Hartford Courant ran a cartoon showing the mobile rover on the surface of Mars. It's periscope is pointed at an Up Arrow marked "Dow Jones Average" piercing the Mars crust and pointing toward the Mars sky. The only caption is a question mark over the rover as it wonders what it is looking at.

(Sat Jul 26 1997 18:26)
Donald: I heartily agree that in many cases corporate balance sheets are worse as the game has been to "realize shareholder value", which has meant in many older firms ( GM ,IBM, etc. ) esentially converting balance sheet assets to earnings in order to run the P/E up. This is the Gerstner Game. These companies are on the Woolworth/Montgomery Ward path. ( How many firms from the 19th century are still in business and trading? There is always corporate death as well as birth. ) The deflationist goldbug's best hope is a crash after which gold flies. But I do not see a crash happening. Studies I have seen recently do not see P/E ratios as high as those of prior years and in no event are they as high as Japan in 1990, not that P/E ratios are in any way the whole story. I see a "normal" bear market ( say 15-25% ) as inflationary expectations rise ( like 1946-49 ) and then a continution of the bull market which began in 1982. The continuation will be more fitful as inflation gradually increases over the next few decades. There will be more frequent and deeper bear markets, but the DJIA will be substantially higher than it is now in nearly any timeframe you wish to consider. Whether it will be so after adjustment for inflation is another matter.
Obviously this is just my opinion and not a guarantee, but I think it fits the current facts and the situation better. 1929-32 was the ultimate ( =last ) act of the ancien regime of the gold standard which ran approximately from when Isaac Newton fixed gold in 1720 until Roosevelt, and later Nixon, "unfixed" it. That regime was marked by frequent crashes and panics and relatively stable prices. That was then and this is now.
Anyway, I've "marked my territory" as it were. Now I'll try to sit back and sniff and see what I can learn from others...:- ) Keep your good reports coming.

Ron Jett
(Sat Jul 26 1997 18:28)
Just a short note for those that visit my page that I have placed the lates Gold/Silver reading from Barrons on there now if you care to view.

Thanks to all

(Sat Jul 26 1997 18:31)
Several articles on Greenspan, including recent testimony & speeches,1199,,00.html?dest_url=www%2Ewashingtonpost%2Ecom%2Fwp%2Dsrv%2Fbusiness%2Fdaily%2Fmarch%2F23%2Fgreenspa%2Ehtm%0D

(Sat Jul 26 1997 18:32)
Tortfeasor: Maybe Albuquerque should invite Greenie to be the grand marshall for the balloon festival this fall....:- )

(Sat Jul 26 1997 18:32)
its a warm one today
George Cole. Omitted from your post of Friday, July 25th at 16:25 "The Ides of August" was Iraq attacking Kuwait on August 2, 1990.

(Sat Jul 26 1997 18:46)
Your chat with PNEUMA off-line is just the thing I would have wanted to see ON-LINE.

Send your Email address to the above and I will
forward you the reply. Best Regards ... Schippi

(Sat Jul 26 1997 18:47)
Nomercy: Thanks for the reference to the Greenie pieces. I never knew much about his personal life but always suspected, from his occasional grins, that he had a little Walter Matthau in him. Jazz musician eh?

(Sat Jul 26 1997 18:51)
Nomercy: Thanks for the reference to the Greenie pieces. I never knew much about his personal life but always suspected, from his occasional grins, that he had a little Walter Matthau in him. Jazz musician eh?

(Sat Jul 26 1997 18:52)
in sack-o-tomatoes
7/26/97 -- 2:53 PM

Malaysian leader names U.S. billionaire behind currency attacks

KUALA LUMPUR, Malaysia ( AP ) - Malaysia's prime minister named George Soros on Saturday as the American businessman he
considers responsible for the plunge in the value of Southeast Asian currencies.

Prime Minister Mahathir Mohamad said the billionaire is behind a recent wave of speculative attacks.

``We have worked 20 to 40 years to develop our countries to this level and along comes the man with a few billion U.S. dollars and
within a period of two weeks, he has undone almost ( all ) the work we have done,'' Mahathir said.

Media reports had said Soros was clearly the target of accusations Mahathir had made earlier in the week. Mahathir blamed an
American billionaire for the currency instability - but didn't identify Soros by name until now.

Mahathir said Soros was using his financial might to hurt countries in the Association of Southeast Asian Nations and keep them from
admitting Burma as a member because of its human rights record, Mahathir said.

Soros has denied that his Open Society Institute and Soros Foundations, philanthropic groups that have sought to promote democracy in
Burma and elsewhere, have any connection or influence on his financial dealings.

In New York, calls placed to the Soros Fund Management, his investment group, went unanswered Saturday.

Burma was admitted to ASEAN on Wednesday over the objections of the United States and some European countries, which believe
the Burmese government should be isolated to pressure it to improve its human rights record.

In recent weeks, several Southeast Asian currencies have been propelled to new lows by a series of speculative selling attacks. The
selling was originally prompted by economic problems in Thailand.

Responsibility for the declines, however, is hard to pinpoint because local banks as well as outsiders have been involved in the selling.

ASEAN foreign ministers, meeting in Kuala Lumpur, expressed strong concern Friday about the currency instability and said they would
cooperate in fighting the speculation.

Mahathir said the declines hurt poor people the most.

``These are the people that have to be protected from George Soros, who has so much money and power but is totally thoughtless,'' he

Not all ASEAN officials agree the plunges were caused by a deliberate political attack.

Philippine Foreign Secretary Domingo Siazon said he believes fund managers - mostly Westerners - have been targeting ASEAN
currencies to make profits.

Secretary of State Madeleine Albright is expected to discuss Burma with the ASEAN foreign ministers this week. It was unclear whether
Malaysia would bring up the currency issue with her.

``I can't speak for George Soros,'' State Department spokesman Nicholas Burns said Saturday. ``But I don't think there's any conspiracy
at work here.''

The Open Society Institute finances the Burma Project, a 3-year-old operation that seeks to publicize human rights abuses in Burma and
support opposition groups.

Soros was dubbed the ``Man Who Broke the Bank of England'' in 1993, after he gambled about $10 billion that Britain would be forced
to devalue the pound. Faced with a wave of speculators selling the currency, the bank gave in. Soros walked away with an estimated $1

(Sat Jul 26 1997 19:04)
in sack-o-tomatoes
All: Sorry, someone just pointed out Panda's posting earlier today.

Donald: 'Ya won't find me defending Republicans!

Byron: Were you in the ride yesterday?

(Sat Jul 26 1997 19:06)
on cowboys 'n ASEANs
ZORO's to the rescue?

(Sat Jul 26 1997 19:10)
kiwi: LOL!!! and a soros is what you get from being in the saddle too long...:- )

(Sat Jul 26 1997 19:11)
AUROPHILE: As I am sure you are aware, there are a respectable group of economists who believe we're entering a prolonged period of price stability. These include Philip Braverman and former Federal Reserve Alan Blinder who contend this is due to the end of the cold war opening up a competive labor pool and market and the absence of supply shocks. And that each inflation/deflation cycle continues to dampen rather than accentuate inflation. Moreover, the most recent Livingston Survey as well as the Survey of Professional Forecasters predict low inflation for the foreseeable future.

This view of continued low inflation is supported by the current long term disinflationary trend where global inflation is at a 25 year low - with a remarkable reduction in inflation even in previous high inflation countries such as in Latin America where inflation has gone from over 300% to 7% in just six years.

In in view of this, I would be interested in reading how your studies conclude that the FED actually works to reinforce the prevailing flation/disinflation cycle rather than moderate it.

(Sat Jul 26 1997 19:28)
Vieserre: I am being advised by my wife that I must get ready for Saturday night festivities, so I must be brief. The quickest, but not best, way to put it is that the business cycle did not cease in 1913 when the FED was born. ( Nor in 1997 when Clinton and the financial and academic community announced that the business cycle was dead. )
Rampant inflation occurred in 1935-36 and in 1973-74 when the FED pushed hard on the accelerator instead of the brake. While the FED does not issue bonds, the Treasury does, and there is no question that the massive quantities of bonds issued in the 1930's and 1980's sucked money out of the economy and worsened the declines in both instances. Now the stock market is sucking funds from everywhere, but in this case economies are growing. As soon as money has second thoughts about where to go, the economies will roar and so will prices. Oh sure the FED will pay lip service to stability, but it will fiddle so as not to rock the good ship boom.
I apologize for this totally inadequate reply to your question.

(Sat Jul 26 1997 19:30)
Byron -- I am curious about your Schwab 'experience'. Do you use their on-line trading software or do you talk to a live broker? If Schwab has changed the margin requirements, no one has told me yet!

(Sat Jul 26 1997 19:36)
aurophile -- I'm a default inflationist! :- ) )

But I do see a good case made by the deflationists. Thing is, gold isn't a factor in fiat money ( ? ) anymore. Prior to the removal of gold as 'money', deflation did occur. This was the primary reason for leaving the 'gold' standard, so 'we' could 'fix' the 'recessions', which used to be called 'depressions'. See, we fixed'em! :- ) )

(Sat Jul 26 1997 19:46)
@ The Schwab Button:
95% of the time I trade using the telebroker system although I do have the option to trade on-line using the internet I have not choosen to do so at this time. Information about the change in margin requirements came in the last set of monthly statements ( which the broker at Schwab was quickly to remind me. ) So if you have a margin account with shares under $10.00 you might want to give them a call before any surprises come you way like I experienced. How many people will be effected by these changes I don't know and will probably know of after the facts via the newspapers. It will be interesting to see if there is any type of sell off especially at the opening on Monday for those shares $10.00 and under.

(Sat Jul 26 1997 19:47)
@ The Rack:
Ron: Plead "Not Guilty." I was about 60-70 miles away up here in Santa Rosa. :+ )

(Sat Jul 26 1997 19:50)
inflation v.s. deflation
Cmax ( Deflation? I think not. ) :

It seems to me that most are missing some key points that should be
considered, for those that feel we are headed for deflation. The principal catalyst for the deflation event would be the inability of the general public to pay realestate loans. These properties would
go to forclosure ( barring any defered bankrupcy decrees a la 1930's ) , but that does not necessarily mean that they will be auctioned off at 50% or less of their value, this time around.

Lets consider the worst....stock market crashes.....millions of people lose their jobs......massive amounts of mortgages go unpaid......banks go belly up......boom!, we have a supposed deflation scenario as contended by its theorists......

but lets not stop just there.......... the banks that are belly up will be taken over by the varios
institutions designed for this event, like the FDIC. The realestate mortgage are then channelled back into the fannie maes/macs, and they in turn channel the liquidation of these debts back to the retail level ( Im not exactly up on the names of the varios gov departments involved, but this would be the general idea ) .

*IF* they were to allow a huge volume of properties to be sold substantially under the owed amount, two things would happen:
1. This difference in price ultimately must be compensated by the printing of more paper ( inflationary ) . The morgagee sure wont have any more to give.
2. Each and every property liquidated below present market values, would only add to deflation of the market and need for printing even more paper, thus creating the proverbial vicious circle, which is something that they will avoid at all costs.

It seems to me that the gov will be forced to NOT liquidate these properties too low, and will try to prop them up by papering and printing everything over, such as offering certain incentives and
deferences for buyers to purchase at present levels, thus avoiding our
dreaded deflation. In Venezuela I witnessed a total monetary collapse, as
95% of all banks were taken over by the goverment, who were simultaneously printing UNGODLY amounts of money. In a year, the exchange shot from 90:1 to 500:1.....but none of the banks' properties were liquidated at cheap prices. The goverment just sat on them....creating in itself a massive inflation. And the real estate market STOPPED dead in the water for 2 years, but no deflation occured ( not even after the devalued exchange compared to the dollar ) .

As with the U.S. goverment, nothing short of a total monetary collapse will change this same course of events. Whether they liquidate at prices
much lower than todays market, or sit and wait, of give incentives and
deferences......ALL of these tactics spell h-y-p-e-r-i-n-f-l-a-t-i-o-n.

Something else that most deflationists like to banty around, is the example set in the 1930s. Todays world has NOTHING in common with the
1930s, which were on the gold standard, which prevented a goverment to
inject liquidity ( print cash fast ) into the economy, until that fatefull day when gold possesion was outlawed. Today, they can and
do print at will, without restraints and in a manner unprecedented, and they WILL again, because this time they don't have their "meaningless" golden chaparone to restrict them. This time, they will "give" out welfare benefits to quite down an incredibly large and hungry mob, so they can fill their bellies. There will simply be no other choice. They will again law the possesion of gold, out of logical expedience. But this time, I believe it will be too late, as the mainstream thought ( with events running their course up to this point ) will reject the confiscation of their gold, which will boomerang and create a black market that will send the price even higher. As they said in that
dinosaur movie: Life will always find a way". Free markets are as natural as life itself.

No matter how you cut it, I seems to me that, in the event of a real market crash, hyper-inflation will take over this time.....not deflation. Those who want to use the deflation Tokyo properties as an example, must also bear in mind that the game is not over until its over, meaning that a provincial example is not comparable to an implosion of the worlds reserve currency.....the U.S. dollar. As long as there is a stable reserve currency to fall back on ( in todays political mindset ) we can have some deflation......but without this stable reserve currency ( or when it implodes ) , HYPER-INFLATION will definitely take the helm.

An opinion from a connesuier of common sense; rock throwing by rational
thinkers solicited.

(Sat Jul 26 1997 19:56)
@ I'm Neutral:
Either deflation or inflation: I intend to ride the waves. : )

(Sat Jul 26 1997 20:06)
@ The P.L.
Place Your Bets: Just noticed the search function states: Coming August l997.

(Sat Jul 26 1997 20:18)
Cmax: Sounds like a Nobel Prize for economics is in your future...:- ) ) ) IMHO... really gone for night.///byron: i'm still digesting your post/// cheers!

(Sat Jul 26 1997 20:19)
AUROPHILE. Thanks for the learned reply which I believe has merit and is important to keep in mind. What I personally find hard to square with the consensus outlook of low inflation is the reported low inventories of some important industrial raw materials, ie aluminum, in face of a rising global GDP where these materials should come into substantially greater demand. As you pointed out, there is no monetary anchor to retain the price of these materials in the absence of a gold standard.

And if wages were to accelerate in conjunction with an increase in industrial raw materials, as would appear likely with higher employment, the rate of inflation should, it would seem, significantly increase.

In addition, the consensus view, and the stock market as well, apparently does not take into account any adverse economic or financial surprises, which could be reasonably expected to occur.

(Sat Jul 26 1997 20:34)
CMAX: Most banks now pass through their mortgages to a Federal Agency as soon as they are written so little paper work needs to be done in the event of default. The US government already owns the houses of America. Lets assume that the Depression is worse than the 30's. Unemployment goes to 35%, another large segment part-timed with reductions in salaries. The housing market shuts down. You say the government will issue bonds and the Fed will print the money. Who will buy the bonds? Where in this world are you going to find a voluntary customer under those circumstances? Those who already have bonds will sell in a panic. They could do what France did in 1968? Force some of those who remained employed to buy bonds by payroll deduction. That was deflationary in France and would be the same here. Is the system different in Venezuela? Can money be printed outside the authority of a Central Bank? I do not think people will be forced from their homes. Payments will be allowed to be delayed. Terms will be stretched over a longer period. Pension plans that rely on mortgage payments to pay pensioners will be forced to reduce pension payments. Kids will move back with their parents, families will double up.

(Sat Jul 26 1997 20:36)
@ Post Digestion:
Aurophile: Hope digesting of my post does not ruin you evening festivities or dinner.

George Cole
(Sat Jul 26 1997 20:37)
stock market
YETANOTHERTLURKER; The suggested scenario is not plausible to me either. If if were in Greenspan's and Rubin's shoes, I would try to engineer a stock market correction in the near future; certainly by year-end 1997 at the latest. That way, there is a good chance the market will be running up again when the next election rolls around. If the big drop is delayed to 1999 there is a much smaller chance the market will be booming again in the year 2000.

(Sat Jul 26 1997 20:39)
@ Once Again:
Posted this Weekly Gold/XAU Ratio chart a few days ago. Does any one have any commentary of the current wide gap between the Ratio and the XAU lines. Looks like a rubber band is about to snap. But which direction?

This certaintly appears to be the widest gap for the lenght of period shown on the chart.

(Sat Jul 26 1997 20:39)
Auro your comparison of now to1929 is apt and your distinction as things are better now b/c then was the end of the gold std is interesting. I propose that things are much worse now at least for the US and non resource rich developed countries which own dollars and that this heralds the end of the dollar std which augurs for a financial meltdown of epoch proportions.
Just think Japanese own mostly dollars and have almost no natural resources...HMMMM. Russia has no economy but does have undeveloped natural resources. HMM Who really is richer. Yeltsin sees the importance of gold but I guess it is his experience that makes him so. If Russia buys/owns gold they can tell IMF/USA financial people to take a hike!! Act One comming to a CNN or CNBC near you stay tuned!!

bold aurizons
(Sat Jul 26 1997 20:42)
found it!
Thanks for the Fed URL. Found the paper.

(Sat Jul 26 1997 20:48)
BYRON: Interesting chart. It seems that in the past when the XAU was below the ratio it worked eventually up to meet it. That would seem to say that gold stocks are due for an immediate rally. How do you read it?

(Sat Jul 26 1997 20:50)
@ New Margin Requirements
Just looking at the new margin requirements information slip I received from Schwab. One thing I noticed is that for U.S.Treasury Strips the Currently Requirement was : Not Marginable. The New Requirement: Maintenance requirement is 10% of the face value.

I read this to mean that Schwab has now made it easier to purchase U.S. Treasury Strips. Well, I guess they have to make it easier for us to buy Bonds. China and Japan don't want them anymore.

There are also changes in the purchases of U.S. Treasuries.

(Sat Jul 26 1997 20:53)
"The Role of a Central Bank in a Bubble Economy" (Section - III)
Professor Miller of New York University - describes the dire economic and financial consequences subsequent to Japans own excessive and IRRATIONAL EXHUBERANCE: The Bubble Bursts: 1990-91

George Cole
(Sat Jul 26 1997 20:53)
CMAX: Agree that long-term deflation is virtually impossible. We could have declining prices for a year or two if the stock market crashes. The Fed will pump like mad, but prices could head south for awhile before the excess liquidity is able to turn things around.

That is why I argue that any shift in the ongoing investment paradigm is bound to energize the yellow in a big way.

Bottom line -- we can have deflation for a year or two, but the aftermath will be a much higher rate of inflation; this goes double if the dollar tanks.

(Sat Jul 26 1997 20:58)
@ Hope Spring Eternal:
I believe that we getting closer to an up move in gold and gold shares according to my technical indicators. But as the car commercial on radio states "perception is not alway reality."

Several months ago I pointed out to everyone that during the 1993 and 1994 period we had 4 times in which the "green met the red" and an immediate reaction when that occurred. The reaction was downward. Someone ( I forget who ) gave a well thought out explanation of the reaction when the red merged with the green.

Anyway that situation is not present now but the next time they merge again, I'M GOING TO BE READY.

Library closes in 3 minutes. Everyone have a great remaining weekend.

George Cole
(Sat Jul 26 1997 21:02)
One article in today's Barron's argues that we stand on the brink of deflation and the Fed better CUT rates soon. Another focuses on the strength in cyclical stocks. Who is kidding who?

(Sat Jul 26 1997 21:04)
More from Korea, different slant, old news.

Presidential Candidates Urge
Gov't to Rescue Kia

07/25 18:43

Presidential candidates of the ruling and opposition parties yesterday
urged the government to rescue the troubled Kia but the government
made it clear that it will maintain a hands-off policy regarding the fate of
individual private companies.

The clash between political candidates and policymakers is expected to
deepen as the presidential election approaches. Presidential candidates, in
attempts to win sympathy from voters, are likely to continue to pressure
the government to rescue Kia.

But policymakers said that there are limits in extending a helping hand to
individual companies like Kia.

The Kim Young-sam administration is in a dilemma over helping the 11th
largest group. Its financial assistance to Kia would invite trouble from the
World Trade Organization, which strictly bans subsidies to private

Government aid, be it direct or indirect, will antagonize US and European
car makers, who might then impose penalty duties on Korean cars.

However, presidential candidates and their parties sing a different song as
they head toward the election in December.

Lee Hoi-chang, candidate of the ruling New Korea Party, got a briefing
on the details of Kia's financial health from Deputy Premier and
Finance-Economy Minister Kang Kyong-shik Thursday. He let his
deputies speak out in support of Kia.

Kim Dae-jung, president of the first opposition National Congress for
New Politics, and his deputies held talks with representatives of the
subcontra tors supplying parts to the nation's third largest auto maker.

The party said it is necessary for the central bank to extend emergency
funds to Kia through its creditor banks. Kim Jong-pil of the United Liberal
Democrats has also visited Kia factories.

In an Assembly interpellation yesterday, Rep. Lee Woo-Jae of the ruling
NKP, criticized the government's lukewarm attitude over Kia, saying that
the government should adopt special measures to bail out the automaker.
He said Kia's problems are not limited to one individual company, in view
of its enormous effect on the economy.

Rep. Chang Che-shik of the first opposition NCNP, blamed the
government for its ``easy-going'' attitude over Kia.

NKP's Rep. Kim Ki-jae said the government should take special steps to
assist Kia, to show that it has a moral duty to rescue ``a model company''
in trouble, warning that Kia's collapse will have a domino effect on the

NCNP's Lee Seok-hyun said the United States provided 1,500 million
dollars to Chrysler when it was in trouble in 1989, justifying government
support for a core national industry.

Rep. Chung Seh-kyun of NCNP noted that massive layoffs and financial
market turmoil will follow unless Kia is saved. He noted that there appears
to be a systematic plot to turn over Kia to Samsung.

But Deputy Premier Kang said the government must be neutral in its
economic policy, saying that creditor banks will be responsible for the
future of the automaker.

(Sat Jul 26 1997 21:07)
GEORGE COLE: I read that story in Barron's twice. I am still confused about the merits of his argument, even though I think I agree with his bottom line. I need a PhD in gobbleygook I guess.

George Cole
(Sat Jul 26 1997 21:09)

(Sat Jul 26 1997 21:18)
Cmax ( Deflation? I think not ) : Magnificently insightful analysis of where the US is heading. Your hypothsis is very well substantiated. In support of your opinion of what are the ramifications of a looming hyper-inflation, may I suggest for Kitco readers the following book ( 1980 ) : "THE PENNILESS BILLIONAIRES" by Max Shapiro. It is a fascinating exploration of four great Inflationary Eras of the past. Why they arose - Who and what caused them - How family fortunes sruvived or WERE DESTROYED - And what were the cardinal warnings of each SUPERINFLATION.

(Sat Jul 26 1997 21:24)
VRONSKY: Per you suggestion I obtained "Money Meltdown" by Judy Shelton. I am reading it now. I had to order it as it is not on the shelves here.
She knows her stuff and says it well.

(Sat Jul 26 1997 21:44)
Nazi gold on A+E....

(Sat Jul 26 1997 21:51)
jopdj ]are u]
In the July 1997 ed. of a magazine called __The Intellectual Activist ( TIA ) __ there was an interview with Richard Salsman ( RS ) Senior VicePresident of Wainwright Econometrics that had a question on the Fed.

TIA: Why are false doctrines still accepted at the Fed today, when its Chairman is Alan Greenspan? He used to know better---he wrote in __The Objectivists__ in the 1960s defending free banking and the gold standard. What happened? What are his ideas now?

RS: First, the Fed is not some scientific monetary institute. Central banks are a statist device to finance the welfare state. Second, Mr Greenspan is the Dr. Robert Stadler of Atlas Shrugged. He is fully aware of the truth, in this case about monetary affairs, yet leads and promotes the government agency destructive of objective money.

As to his motivation, I leave it to others who know him personally. For myself, I would not even trust his private pronouncements. What some people call "Potomac Fever," Ayn Rand used to call power lust.

But his public record is very clear. It involves a series of intellectual cave-ins for the sake of maintaining political standing. He was President Ford's top economic advisor in 1974 and 1975, when the "Whip Inflation Now" campaign--complete with "WIN" buttons --was launched, blaming inflation on business and labor. He fought Reagan's tax cuts and supported Bush and Clinton's tax hikes. He claims budget deficits should be closed at all costs, even though result from excessive
spending , not insufficient taxes. In 1981, he scared Ronald Reagan and his advisors from returning to the gold standard by resorting to bogus arguments.. He headed the Social Security Commission in 1983 and recommended huge hikes in the payroll tax, even though partial privatization options were available. When the banking system collapsed in the late 1980s, he refused to blame the Fed or regulation or the socialist deposit insurance system. He always argued for more Fed powers.

His tenure at the Fed has included the 1987 stock market crash, the banking collapse of 1988 through 1990, the recession in 1990, the huge gyrations in the foreign exchange value of the dollar. He rejects sound stock market advances as "irrational exuberance," echoing Keynes. And he
endorses the Phillips Curve.

His reputation for delivering low inflation rate exists only because his predecessors were sop bad. But inflation rates under Greenspan are still twice as high as they were in the 1960s.

He has become notorious for speaking in a vague and eclectic manner and has himself joked about being proud of it. He promulgates no standards. He is not an Objectivist, but a pragmatist-statist. He is less an economist than a bureaucrat. He does not work in a statist government to rationally reform it; he works in because he prizes the power it assigns him.

This magazine's addrss is:

(Sat Jul 26 1997 21:52)
DONALD: Glad to hear Harry Browne is close to your heart. He would have been 10 times the President either Bill or Bob could be. I acutally am a full blooded Libertarian and support them with my wallet as well as votes. The are maybe just educators now but....

(Sat Jul 26 1997 22:15)
George S. Cole...and this is a serious question.
You said a few weeks ago that "everyone" ( and I remember when many said that ) wants gold to go to $250 so it will most likely go there, and then many at this site jumped on that and agreed. Now you say ( as do others ) that this could be the end of the Bear and we'll have an explosive upside. What do you think attributed to the change in outlook or the possible rally? We aren't really even close to $250 or even $300. Is anyone still talking about $250?

semi-demi-goldbug...teetering gently to and fro...


EB you have a bone ( golf joke ) to throw my way??

I usually play in the mid to low 70's...if it gets any hotter I don't go out. yuk, yuk

(Sat Jul 26 1997 22:23)
EB: Good one....

(Sat Jul 26 1997 22:27)
Reply to Donald

Thanks for the first rock....but I ducked.
Your response: .......the housing market shuts down. You say the government will issue bonds and the Fed will print the money. Who will buy the bonds? Where in this world are you going to find a voluntary customer under those circumstances?

My response: After the stock crash and subsequent mass real estate forclosure ......who says that the Fed will need to sell bonds to print money, even if no one will buy it?????? The Feds will simply print the money ANYWAY. Inflation.

Can money be printed outside the authority of a Central Bank? Of course they can...they can, and will, and HAVE. Who says that the Central Bank would not recieve direct Presidential decree to do it?

But no, the gov would not force persons from their homes in a mass forclosure situation.....this too would be very control the raging masses.
Remember that the base root of all taxation and re-distribution of wealth in a democratic or socialistic society is to appease and control the masses, no more, no less.

Aurophile and Vronsky: thanks for the support.


Fireplug Guy
(Sat Jul 26 1997 22:33)

Kommissar in Moscov. Zay Inflation/Deflation not mak any difference.


Gold go up and shorts lose more dan skirt.

For Kommisar KGB,
Fireplug Agent, Kalifornia

(Sat Jul 26 1997 22:52)
@Federal Reserve
Schippi, you wrote:

[[1 ) The Federal Reserve act ( 1913 ) was unconstitutional.
2 ) The Federal reserve is not federal. ( But private )
3 ) the Federal reserve is not a reserve.]]

I can't comment on #1 as I don't believe anyone has taken that argument to the Supreme Court. But I believe you are correct about #2 and #3. An interesting ( and scary ) book is: "Secrets of the Temple; How the Federal Reserve Runs the Country" by William Greider. If anyone wants a serious primer on fractionalization, this is the place to go!

(Sat Jul 26 1997 22:54)
Donald's Deflation
Donald..........I'm on your deflation bandwagon. Maybe not a 94db cheering supporter, but I agree with many of your principles. Regarding Thailand and the rest - I think those dikes are starting to leak. And for now, there are enough fingers to put in the dike. However, I recall the hysteria a few years ago when the Thailand ( et al ) mutual funds starting gearing up - and then Thailand enjoyed a 25% per year growth spurt for a few years. Their day of reckoning is at hand. What is interesting is the vast American/Canadian/European interest in the Pacific Rim. You can bet that Joe Average is going to start pulling his money out of there. Perhaps they already have and have sunk it into the Dow. That might explain the rise past 7500.

George Cole
(Sat Jul 26 1997 23:19)
$250 on hold

I said and still say that powerful financial interests in the west want to push gold down to the $250 area and will continue to do all they can towards this end.

But the fact that gold refuses to buckle despite these well-financed efforts to take it much lower, almost universal bearishness in the financial community, a strong dollar, and a still booming stock market shows that powerful financial interests are coming in on the bull side of the equation as Glenn indicated in his last post.. That in itself marks a radical shift in a market the bears have dominated completely for the past 18 months.

I am not predicting an explosive upside move in gold near-term, although such an outcome is possible given the huge short position I am saying the tide is shifting and a new bull is likely to COMMENCE soon. Unless the shorts panic more easily than I expect, it may be slow going for a while with little in the way of upside fireworks until perhaps early 1998.

(Sat Jul 26 1997 23:20)
for the sun
Hello from Ukiah!! I do a lot of cycling - mostly road bike. I like to see the countryside rolling by.

(Sat Jul 26 1997 23:28)
DEFLATION: I was not impressed with the deflation article in Barron's today. Most people continue to ignore the real reason to expect deflation -- the inability of borrowers to repay loans. The rising bankruptcy rate is all of the evidence anyone needs to confidently predict deflation.