|Depression2.tv - Michael Nystrom Editor|
|3-25-2002||What Goes Up Must Come Down|
Dear Friend of GATA and Gold:
This Reuters story is a few days old but it indicates that
a big fight is brewing in Congress over regulation of
derivatives in the over-the-counter metals markets. How
fascinating that Fed Chairman Alan Greenspan, Treasury
Secretary Paul O'Neill, Senate Banking Committee
ranking member Phil Gramm, and Gramm's wife, Wendy,
former chairman of the Commodities Futures Trading
Commission and a member of the board of directors of
Enron, don't want a public examination of the metals
derivatives markets. And how fun that a liberal Democrat,
California Sen. Dianne Feinstein, should want just the
sort of greater transparency already advocated by Texas
Rep. Ron Paul with his legislation to bring the Exchange
Stabilization Fund to heel before Congress.
Something big may be going on here.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Feinstein Rejects Changes to Energy Derivatives Bill
STORY TEXT FOLLOWS:
WASHINGTON, March 18 (Reuters) -- California Sen. Dianne
Feinstein said Monday she would push ahead with legislation
to regulate energy and metals derivatives like those traded
by Enron Corp in the multi-billion dollar over-the-counter
Feinstein, a Democrat, said she rejected a request from
Texas Sen. Phil Gramm, the top Republican on the
Senate Banking Committee, to exempt metals derivatives
and to drop price-transparency requirements from the
measure. The proposed legislation would give the U.S.
Commodity Futures Trading Commission regulatory
oversight of all energy and metals derivatives to better
track large trades in the highly secret over-the-counter
market and to respond faster to any illegal activity in the
The measure, which Feinstein will try to add to a broad
energy policy bill before the Senate, was delayed for
several days while she unsuccessfully negotiated with
Gramm's wife, Wendy, is the former chairman of the
CFTC and a member of Enron's board of directors.
Under Feinstein's plan, the Senate would repeal a
congressional exemption that allows firms to buy and
sell electricity, natural gas, oil, gasoline, and metals
in the OTC market without disclosing information on such
deals to the Commodity Futures Trading Commission.
The energy OTC market is traded privately among
companies and other institutional investors, not on
regulated exchanges such as the New York Mercantile
Exchange. The trades that Enron carried out in the OTC
market have been blamed for pushing up electricity and
natural gas prices in the West last year.
The Feinstein proposal is opposed by Federal Reserve
Chairman Alan Greenspan and U.S. Treasury Secretary
Paul O'Neill, who have expressed "serious concerns"
about it. Greenspan and O'Neill said putting the OTC
market under government oversight would cause legal
uncertainties over the transactions entered into by the
Feinstein said she rejected Gramm's request to exempt
energy swaps from CFTC anti-fraud authority, to delete
all public price transparency requirements, and to drop
metals derivatives from the bill. She also refused to
exempt all electronic exchanges from requirements that
they maintain sufficient capital to carry out their
Please visit my GATA action page.
|3-19-2002||Of Course! End of the Quarter!|
Semiconductor book to bill came in: Showed growth over last month, but down over last year. Boo hoo. A non-event. Not like back in the day, when the book to bill would really move the market. Keep your eye on the SOX, anyway. The Dow is at a new 9 month high.
It hit me today, the missing piece from the Sweeps Week article I wrote yesterday. My general feeling is that stocks will rally pretty hard into earnings, then fall off the cliff once the news starts coming out. What is it that will be the catalyst for rising prices? The end of the quarter, of course! We all know that the market is really moved by the big players - the mutual fund managers who are under pressure to look good. Apparently they've been bearish and have a lot of cash on hand, and they'll want to put that to work before the end of the quarter! Look for the pop & drop into earnings season! Pop now, drop during sweeps week.
The Fed left rates alone today, but now the worry is that the economy is heating up too fast. Now they're saying 4% growth for this year. Dream on. We might get a sharp increase this quarter, but that'll likely only lead us to the double-dip recession. The V recovery becomes the W recession. And what letter comes next? X, as in no recovery, after all.
|3-18-2002||Sweeps Week Coming Soon|
The market never makes its intentions clear. In the XAU chart above, we either have a giant flag in progress, which would imply a move to about 80, OR the standard sawtooth, grinding slowdeath. Today's move in the gold stocks was sharp and violent, but it didn't break out of the channel.
Meanwhile, the SPX is bumping up against resistance here. The markets have been hanging around the highs, with not much activity. Winding up like a spring, waiting to move. What will be the catalyst? Elsewhere in the site, we speculate on the possible impact that Sweeps Week will have on the market. We've seen the pop, once the news is out we may see the drop.
The XAU still looks like it'll be heading lower. That's fine. We're long-term bullish on gold, so accumulate on dips. The SPX/Market in general is tough to read in the short term. Long term, we're quite bearish, and expect declines to begin no later than April.
We got the break on the XAU - down, likely headed back to support around 53. Long term bullish. Remember markets don't go straight up or down. Be patient.
Look at the ten year yield - moving up sharply. Minimum target is 5.8% this year. Oil is moving up also. Pundits think the bonds & oil are signalling the recovery from the recession that wasn't. Depression2 has a different take. Oil moving up is a sign that war in the Middle East is inevitable, and disruptions in oil supply are likely. Rising interest rates mean the world is finally getting wise to America's print and spend tactics with the dollar.
It doesn't look like the next week or so will be much fun for the gold bugs, so lets take a little time out to check out the future of war in the information age.
First, check out the 3-d talking image of Cameron Diaz, imploring the youth of today to conserve. "Thank you thank you thank you. You so rock!" she begins. "...America has only 3% of the worlds' oil reserves, but we consume over 25% of the crude. Kinda crazy, huh?" she continues."
Cameron Diaz for Natural Resources Defense Council
But more crazy is how I got to that page. From kazaa. Kaaza is making inroads into the market that Morpheus / Music City dominated. And Morpheus/Music city took the crown from Napster.
Nobody uses Napster any more. Passe, dude. Napster had to cozy up with the big record companies, and that killed them. No one will pay money for music on the web if it is available for free. So who is looking at these sites, where you can trade free music (and in the case of Morpheus, images-can anyone say porn? - , software, and documents)? Young people. The young, the curious, and those with lots of time to kill on the web.
Two million downloads per week of the kaaza software. The new Morpheus had 11 million downloads in the first week of its availability!
If none of this makes any sense to you, read the article here:
Music city is being sued by music companies because they are suffering a loss of revenue. HOWEVER, BY MY INTERPRETATION OF THE LAW, MUSIC CITY IS NOT IN VIOLATION.
If you buy a music CD at the store, you can loan it to your brother, and he can make a tape of it for his own use. This is part of the fair use you acquire when you purchase the music. You can loan your CD to as many of your friends as you want, for them to listen to and enjoy. They can all make copies if they want. This is straightforward, and this fair under the law.
Morpheus is the exact same thing, only your network of friends and brothers has multiplied into the millions. But you are still only sharing your music with one user at a time. If you want a particular song, you can query your 71 million friends and find a version which he is willing to share. This is fair under the law. The law speaks not to how many you may share with, only that you may not SELL / DISTRIBUTE for profit. Which you're not. No one pays anyone on the Morpheus network for sharing what belongs to them.
The definition of ownership is in question with the lawsuit. Will anyone own anything in the information economy? Or will corporations own everything? If you are running Windows XP, you don't own it. Microsoft does. As such, they may somehow decide to raise the rent. In what manner, I don't know, but I'd rather retain ownership of my tools, which is why I still run Windows 2000.
Keep your eyes peeled.
Because if you read the CNNFN article above, you see that a familiar story is being played out: WAR. Kaaza and Grokster shut out Morpheus with an electronic attack. See the future of war as it unfolds.
|3-06-2002||Which Way the Break?|
Both the XAU and HUI are consolidating at the top - a good sign. Gold is holding up well after the BOE auction yesterday (see below). But is that a diamond we spy in the HUI? If I dare, I'd say it's a sign of the bear...The XAU is consolidating just under resistance. The markets are winding up for the pitch, but which way the break?
The Dow is still climbing, but it looks to be getting tired. The Transports made a new high, but couldn't hold it...Sweeps Week (April Earnings Season) is just around the corner. Oracle is an early reporter and it got killed when it said its November-quarter earnings will fall below expectations of $0.11 per share as sales decline from year-ago results for the first time in 10 years. A taste of things to come in April? They slammed ORCLE, but the rest of the market continued on its merry ejaculation
|3-5-2002||Gold firm in wake of BOE Auction|
NEW YORK, March 5 (Reuters) -- COMEX gold gained
ground despite more supply laid on the market by the
Bank of England's latest and last auction of gold
reserves, and traders said they now expect gold to be
able to climb higher.
Immediately following the bank's 20-tonne gold sale,
there was almost no reaction in the London bullion
market, which was said to have been mildly
disappointed in the results.
But the auction was oversubscribed by a healthy 3.7
times compared with 1.4 times at the prior auction in
January. The sale price was $296.50, off 10 cents
from the London morning fixing, though the highest
of any of the bank's 17 gold sales.
"I don't see it as disappointing. I think there was a lot
of anticipation that producers might have been
buyers, buying back hedges on the auction, and
that we would see a greater amount of
oversubscription than we saw," said a COMEX
"Everyone used a rough gauge of 4.0 times
oversubscription as a measure for a good auction.
So that was disappointing. But there are no more
auctions looming over us," he added.
Bottom line, he said, "The price of gold is holding
up, because the auction did not knock it down."
COMEX April gold traded $1.40 higher at $298.50
an ounce, below its early peak of $299.40.
New York traders said they saw scope to $300 an
ounce, possibly even on Tuesday. Others said they
see $302 as a next target some time this week.
Spot gold reached up to $297.90/8.40 an ounce,
from $296.60/7.10 late Monday. London's fix was
set at $297.80.
Tuesday's auction completed the Bank of
England's intention to reduce gold reserves from
715 tonnes to the remaining 320 tonnes after a series
of 17 auctions begun in July 1999.
The sales were estimated to have raised $3.3 billion
for the UK treasury. At the current seven percent of
gross reserves, the UK's gold holdings is the lowest
among leading nations of the European union, the
World Gold Council said.
Fund buyers in London and New York markets
jumped in to prop gold up after the auction, though it
fell short of the critical $300 level.
|3-4-2002||Sky rockets in sight...afternoon delight!|
|3-3-2002||More on Ron Paul|
Note: I lifted the below from an posting at the Free Republic. For the full text, please click here:
Congressman Paul told me Thursday that Greenspan is used to these out-of-the-box questions from him that cast doubt on the very legitimacy of the Federal Reserve. "My questions are always on the same subject. If I don't bring up the issue of hard money vs. fiat money, Greenspan himself does."
But at the same time, Paul says that he wasn't satisfied with Greenspan's answer. "I got what I expected: a nonanswer. He never gets into anything of substance, but, he does have a lingering doubt - he's not sure the system will work. He's a gold-standard person, but he's talked himself into believing he's the best manager in the world, and I just disagree with that."
Paul is a die-hard libertarian, who won't vote for any bill before the House - no matter how worthy it may seem - if he can't find a specific provision in the U.S. Constitution that empowers Congress to do what the bill proposes. And in that spirit, he thinks that the Federal Reserve has no right to exist in the first place. Paul told me, "All we'd have to do is support the Constitution and we'd abolish the Fed. The Federal Reserve Act is unconstitutional - nowhere in the Constitution does it say that Congress can create a central bank."
What would we do for money? Paul says, "Get the government out of money. Let the market determine it. Let American Express extend credit and decide what they want to back it with. But that's sort of idealism...so if the government is going to be involved, then government should just maintain the integrity of the monetary unit. Government should define the dollar as a weight in gold and maintain it. If I'm the secretary of treasury, I shouldn't issue the currency unless I've got the gold."
Paul puts his legislation where his mouth is. Following a bill to abolish the federal income tax, his latest effort is a law that would forbid the president, the Treasury or the Federal Reserve from engaging in any transactions in gold without specific authorization from Congress. Paul believes that the world's central banks, including the Federal Reserve, manipulate the price of gold to keep it deliberately low, to mask the inevitable inflation of their paper money.
He says, "They readily admit that foreign governments have loaned tons of gold, and Britain is outright selling gold. Our government denies it, and I don't know the answer. Right now they are sticking with the story that they do not deal in gold. I received a letter from [Treasury Secretary] Paul O'Neill stating clearly that they are not dealing in gold. This legislation is merely an attempt to open up the debate, make certain they aren't dealing in gold, or if they are that Congress knows about it."
It's hard to get radical ideas like this listened to - even if you're a congressman. I asked Paul whether he was taken seriously by his colleagues. "I think at times I'm a nuisance to them. They are so entrenched in the system. Those who do understand it would not like to rock the boat. It's no coincidence that we have a paper money system when we have a Congress that likes to spend a lot of money."
But Paul continues to fight his fight, and suspects that somewhere in Greenspan's heart of hearts, the Fed chairman may secretly be on his side. "There was a very special article he wrote in 1966 in The Objectivist Newsletter," he told me, referring to "Gold and Economic Freedom," a powerful plea for the gold standard published by radical capitalist Ayn Rand, then a close friend of Greenspan's. "I have an original copy and Greenspan signed it for me. I asked him if he still believes it, and he said he 'wouldn't change a single word.' Maybe deep down inside he's having a few doubts."
|2-27-2002|| Ron Paul Calls Greenspan on the Carpet!|
To be honest, I have only heard of Ron Paul in the last few weeks, and only in connection with GATA. I don't know what his politics are outside of this area. What I do know is that this morning I saw him, live on CNBC, calling our entire fiat money system into question. I cried. He called the Untouchable, Alan Greenspan, right down on the carpet, asking if he sees any similarities between the Federal Reserve's management of money to Enron's shennanigans. He spoke the truth in the rarified air of the House Committee testimony.
He began by making reference to Greenspan's flip comments a few weeks ago about how if fiat money fails, we can always go back to seashells and oxen. That the discount window would stand ready with an adequete supply of oxen.
Following is a transcript of the exchange:
"Chairman, if we get to this point (of the collapse of the dollar), which I suspect we will someday, I ask that we have hearings to debate the issue of what medium exhange we will have before the Fed starts using oxen as a medium of exchange...
"I feel that it is an important point, and I want to relate that to the Enron issue. In many ways I feel that the system you have been asked to manage is similar to being asked to manage an Enron system. Because Congress is notoriously in favor of deficit spending. We are currently expanding the national debt at $250 billion per year, and we have nearly a $6 trillion debt*. Now we create that debt by buying votes. We spend alot of money.
"Now, the Federal Reserve comes in and they buy that debt in order to maintain the interest rate that they think is the right interest rate. And they take that and use it as an asset. You put it in the bank, you call this debt that we created an asset, and you use it as collateral for our Federal Reserve Notes.
"So that's a pretty good scheme, and I think in the moral terms, as well as the economic terms, it is very similar to how Enron operates. I'm not convinced that this system works very well because alot of people here praise you for the adequate amount of liqidity, and that's what inflation is - you create more money, lower interest rates. Every time you ask for liquidity, every time you ask for lower interest rates, you're asking for inflation of the money supply. And I think what we fail to ever do is ask about the cost.
"Do we ever concern ourselves about the people who have had 2/3 of their income removed because they happen to be savers, and living off interest? We gouge them with interest, inflation, a loss of purchasing power, as well as taxing that. And a lot of people in this country have suffered from that particular system.
"Now the analogy that I would like to draw is something that you said in your testimony on page 13. And you have mentioned several times now that Enron may be a good lesson. And I think it is. And I'm not for more of this regulation by the SEC. I think you're correct that derivatives provide a market tool that is worthwhile. But you said the Enron decline is the effective illustration of the vulnerability of a firm who's market value largely rests on capitalized reputation, with very little if no physical assets.
"That's exactly what our monetary system is all about. And that's why I believe that the dollar is vulnerable. We in Congress do not have a responsibility to run Enron. Some other government has the responsibility to deal with fraud. We have a responsibility to the dollar. And I think that's what we fail so often to address around here.
"And you said that Enron provides the encouragement that the force of market discipline can be counted on over time to foster a much greater transparency. That's exactly what the market does with money. If you look at the rapid and sudden devaluations of the fiat currencies around the world, if you look at what happened to us in '79 and '80, that was the market coming in and enforcing vulnerability & transparency on us.
"Now, gold gives you a hint as to what's happening. Gold has sent a mild message in this past year, in spite of the fact that central banks and other continually sell and loan out gold to push the price of gold down. But there is a message there.
"So I would ask you, can you see any correlation between what you're asked to do in running our monetary system to that which Enron was involved in?"
"I hope there are fundamental differences.....er...ar...I mean there are… ...it's ....ah,.. first, dealing with a fiat currency, what it essentially is that we are doing is that the currency is granted value by fiat of the sovereign, as it is said in the text books. The issue there is that..uh...in years past..uh..there have been, there's been considerable evidence.. that fiat currencies have been mismanaged in general and that inflation has been too often the result.
"What I was mentioning in the speech that you were referring to was the fact that there is some evidence that we're learning that lesson…learning how to manage fiat currency..ah...ah...I've always had some considerable skepticism about whether that in a long run can succeed, but I must say to you the evidence..errr...of recent decades is that it has been succeeding. Whether that continues is a forecast which I can't really ...er....project on.
"The Enron situation is essentially one in which..ah..there was an endeavor to imply that earnings were much greater than they really were. That increasing debt was hidden. I can think of no reason to have done what they did with their off-balance sheet transactions, other than to obscure the extent of the debt that they had, and what was essentially squandered in that process was the reputational capital, which they had succeeded in achieving over a period of time...and I don't perceive that …er….that anything that we are doing as a central bank..ah.. involves anything related to that..I hope that ….uh…where we need to be transparent and indicate what we are doing, we do so and we do so except in those areas where it - as I mentioned to you previously- ah…inhibits the ability to actually function as a central bank. But as I say in summary I hope your analogy is inappropriate."
Paul's last word:
"I'll keep hoping."
Watch the video: C-SPAN House Financial Services Committee Testimony - 2/27/2002. The Ron Paul Rumble comes at 1:20:48
I have set up a new GATA resource page. It is a work in progress, but there is a sample letter which you can send to your representative, and I enourage you to send it to the press as well, as GATA is getting snubbed. The story is apparently not entertaining enough. In fact, I watched the above exchange on CNBC, and they broke away before Greenspan's remarks! Broke away to check in on more titty-tainment from the Enron he-said, she-said story.
*By the way, America's national debt surpassed $6,000,000,000,000 yesterday, to finish the day at: $6,002,734,772,404.52. SEE FOR YOURSELF
More news you won't hear on CNN: This is well over the statutory debt ceiling set by Congress at $5.95 trillion. The government is operating outside the bounds of the law. But what else is new?
Where is your money going? 2003 Budget
|Check out the 2002 predictions & other articles in the archives|
Some products to help you anticipate the changing landscape: