I dont think I like your attitude. The fact that you

are right makes it that much worse.

For DJ - You asked what I thought about a lot of

things involving some kind of conspiracy invoving the

Group of 30 and lots of other spooky people trying to

control the gold market or something like that.

I am actually a member of the group of five.

This group comprises myself, my wife, one Golden Retriever,

a Ridgeback, and a Mixed Breed. The dogs ( using majority

voting and DOGS RIGHTS ) have taken over the group. We are

now actively persuing a corner on South African dog food.

Boyoboyoboy - I think all our problems have been

caused by Bernatz' gold from dirt machine - He must

have gotten the thing working.

Personally, I'm still trying to figure out how the conspiracy benefits from allowing one of the Group of 30 members, Yamaichi, to go under. Give me time. It will come to me.

http://www.usagold.com/Daily Quotes

1. Conspirators: Rothschilds, Soros, Tiger Fund, Group of 30.

2. A wide and growing body of evidence indicates their strategy is to drive down market prices, gain control of as much metal a possible, above and below ground, at bargain basement prices from panicy producers/sellers, then allow the prices to rise, profiting from the gain.

3. Fact: One of Rothschild's banks and Goldaman Sachs ( member of Group of 30 ) were the major purchasers of Stillwater's palladium, at $135/ounce and much of their platinum.

4. Many other suspicious links have been brought to light by other Kitco contributors between Group 30 members and PM related activities such as the OZ gold sale, Swiss rumors, etc.

As RSA is still the major supplier of gold and platinum, for this theory to hold up, there must be much activity in RSA from this group. I would suspect that the Rothschilds long have been major players in RSA, and perhaps are the majority stockholders in many of the mines.

Lately we have heard rumors of much forward selling by RSA mines. Questions:

1. What do you know of Rothschild ownership of some of the major RSA producers?

2. Can you confirm recent increased forward selling?

3. Is there any way to tell who the buyers are?

4. Do you know of any connections of the Group of 30 in RSA? I don't see any of people related to RSA organizations on the list. http:\\www.group30.org/g30_mem.htm

BTW - Group of 30 may soon need a new name: Group of 29. Mr. Shijuro Ogata, Senior Advisor for Yamaichi Securities Co., Ltd. may no longer be a member. This raises interesting questions in itself.

I would be much more interested in you opinion WHY gold don’t react any more positive way?!

JMHO - Miro

I think the US market drop tomorrow will be significant. I wonder how many times the options markets will lock up?

That is inevitable given the current human condition.

I think the ultimate test of AG's accomplishments will be in what will

unfold in the next six months. Can he ( and others ) keep that Kondratiev wave from breaking on its way down?

If anybody has some deep inside what’s happening to markets and what the heck is the trend? I would appreciate it. In between, I just hang in there, and hope that in a long run things turn the way they used to work.

BTW, don’t bet on Japan crashing tonight. They did the most courageous thing - no matter what political impact it’ll have they let it fall. Wonder if any of our fearless leaders would have a courage to do the same when the things turn bad.

For those anticipating a short squeeze for silver, it might pay to take a look at what happened to palladium and platinum when they experienced this type of squeeze. A rough rule of thumb might be that the price will temporarily shoot beyond the channel boundary by an amount roughly equal to the channel width.

One other factor I am watching. The spread between platinum and palladium has rarely dropped below $200. It now stands at $183. Only twice since 1978 has the spread dropped below $200. Once in 1978 and once around the end of 1984. Both times the spread got down to a minimum of $140 and remained below $200 for a period of a few months. Although palladium has not yet broken out of its long term upward-trending channel, platinum has, and is now apparently is in a downward trending channel. Obviously palladium cannot continue up independent of platinum forever, the question is, What is going to change, and when?. With gold languishing, platinum seems to have lost momentum. One possibility is that palladium will finally break it's long term support line, and enter a downward trending channel. I have shown this possibility via dotted lines. As palladium is reaching the apex of a wedge pattern, it must break one way or the other within a very few days. My guess is that it will break downward. If not, we may well see another test of the $140 spread within a very few months. Any comments on this prediction?

This is the imminent immediate threat to the world -- and I think what ANOTHER is really alluding to.

In my opinion, I am very relieved to have someone as competent as Alan Greenspan at the helm -- at a time that is probably the most challenging for any Federal Reserve director in the history of the United States. If he gets us through this critical period with the world's financial system essentially intact, he should go down in history as our greatest Fed Chairman. The stock markets are a secondary issue, since there can be no stock market without an intact medium of exchange.

Right now, his skills are more critical to the world than the skills of our president.

SDRer: I revisited the IMF site, and noted some stuff about the SDR. The official explanation seems to be that the SDR is a backup resource currency for access to additional reserves, but is not intended to replace any other currencies ( such as the dollar ) . My guess is that this reason alone is sufficient -- to maintain financial links if the dollar turmoil gets too high. I wonder - is the SDR exchange physically separate from the dollar excahnges? It does bother me that the currency weights are only changed every five years. That seem excessively long.

The web site is ( just in case you dont have it ) :

http://www.imf.org/external/pubs/ft/survey/sup0996/10sdr.htm

If you go to the table of contents you can downlead a 360k PDF file on the function os the SDR as well.

First time since the poll,they say they are sellers.

I trust them not,for their records are poor,

So wrong for so long,so I must ignore.

But wait friends,wait,is there value here now,

They've been wrong the XAU,and wrong on the DOW.

A contrary indicator for those who believe,

Lest another bank has one up it's sleeve.

Copywrite@HepMeMoney_Hmm

I'll try him tomorrow. I think it's quite important to get hold of Hepcat's old posts.

Hello SDRer!

Well, Paul...28, good-looking and charming..!!

I'm still trying to get him together with his siblings, so that the others in the same situation can benefit from your and others posts and family discussion! Not an easy task! Thanks for asking.

Re Your SDR trail..

Mentioned this to an acquaintance, who has someone in his office who'd be very interested in hearing more. With [Very]limited knowledge on my part,I am loath to explain, and would appreciate some basics from you?

Nick has my e-mail address, so if you can?

Thanks and regards.

Does anyone have a record of Hepcat's posts from inception[Oct I think?]?

There is something I want to check out.

Thanks in advance.

Regards.

Part 1

Speech by Richard M. Pomboy

at the Grant's Fall Investment Conference

16 October 1997

I assume that I will be the only speaker to use a four letter word today, GOLD.

Actually, this four letter word is less welcome in polite society than its more commonly used

counterparts. I have found that when I talk about gold, some people walk out, some take out

their newspapers, others wonder about what is for lunch.

In short, it is not politically correct to have anything good to say about gold.

We live in a world where everything is just about right and gold seems to have the power to

speak up and say, wait a minute, if I'm still around, maybe there is some risk out there. So

gold must be denigrated, denounced, discarded, disowned and at the very least disliked.

We also live in a world of new era and revisionist thinking to insure that there can be no

negative thoughts.

The Holocaust did not happen.

The Japanese were victimized in WorId War II by U.S. imperialism.

Bear markets are over forever.

Traditional share valuation methods are obsolete.

Inflation is dead and buried.

There can be no systemic banking crisis.

Foreigners will continue to buy, or at least hold, U.S. treasuries forever.

EMU is a certainty.

To make the fantasy complete we need only add that gold, the traditional store of value

which people have used as currency since civilization began and to buy their way out of

danger, is now obsolete, demonetized and a relic. It has been replaced by paper, and if you

are such a heretic as to believe that paper may have a slight risk to it, all risk can be

eliminated through derivatives, which are, of course, more paper. The paper asset mania

requires that the principal alternative, gold, be thoroughly discredited. Whether you call it

greed, irrational exuberance or whatever, there have been few times in history where at

least the temporary accumulation of wealth has been this easy and where risk has been so

disregarded. These few times are well chronicled in the book Extraordinary Popular

Delusions and the Madness of Crowds.

I only mention the wonders of paper to offer an explanation as to why gold is in the

doghouse.

The sirens call to the financial markets are irresistible until fear sets in and then things

change rapidly as we all know that fear generates behavioral change faster than greed.

ActualIy, the gold story is compelling even without the catalyst of fear.

This is the shabby secret of the welfare statists’ tirades against

gold. Deficit spending is simply a scheme for the ‘hidden’

confiscation of wealth. Gold stands in the way of this insidious

process. It stands as a protector of property rights. If one grasps

this, one has no difficulty in understanding the statists’ antagonism

toward the gold standard.

Alan Greenspan ( 1966 )

You have to choose [as a voter] between trusting to the natural

stability of gold and the natural stability and intelligence of the

members of the government. And with due respect to these

gentlemen, I advise you, as long as the capitalist system lasts, to

vote for gold.

George Bernard Shaw ( 1856-1950 )

I got interested in gold about five or six years ago when I looked at the basic supply/demand

equation, that is jewelry and industrial demand versus mine supply.

It was evident then, as it is now, that billions of Asians with rapidly rising discretionary

incomes and a history of purchasing gold and gold jewelry as a form of savings would

accelerate the demand for gold. It was also obvious that mine supply, due to environmental

constraints, capital intensiveness and long lead times between finding a deposit and actually

producing gold, would grow at a much slower rate than demand. This has proven to be true

and a substantial deficit exists in the market today.

The basic supply/demand equation is extremely bullish with a gap between supply and

demand of around 800 or 900 tonnes per year last year and much larger this year.

Projected Deficit ( tonnes ) in Gold Market

1996

Growth

Rate

2000

Physical Demand

3,850

5.5%

5,032

Mine Supply

3,850

3.0%

2,701

Scrap

3,850

5.5%

810

Total Supply

3,850

3.5%

3,511

Deficit

900

1,520

Producers cannot replace their reserves in line with production. The industry needs to find

100 million ounces per year which is about equal to the total reserves of Barrick, Newmont

and Homestake. The only chance of doing this, even once, was through Bre-X whose 100

million ounces turned out to be a complete fraud. Mine supply is growing slowly without

considering any impact from the depressed price of gold. At current prices many projects

have been delayed, especially in view of the difficulty in obtaining the necessary financing at

the current gold price. In addition, there have been a significant number of mine closures

announced with Barrick recently announcing the closing of five mines. Finally, in South

Africa, where the average full cost of producing gold is now above the spot price, the mining

industry is in crisis.

Current Gold Price Will Lead to

Production Cutbacks

At $320/oz., 50% of the western world's gold production is

unprofitable on a full cost basis.

At $320/oz., 25% of the western world's gold production is

unprofitable on a cash cost basis.

At $320/oz., only 5 of 19 of South Africa's major mines could

show a profit.

As you can see, at the current gold price 25% of the western world's gold production is

unprofitable on a cash basis. On a full cost basis, 50% are unprofitable.

The demand side continues to be extremely robust with fabrication, i.e. jewelry demand,

growing at 13% in the latest quarter. For the six months ended June 30, Goldfields Mineral

Services reports gold demand up 18%, with fabrication demand up 15% and bar hoarding

up 67%. On the supply side, mine output rose just 1.4% and gold scrap declined 27%.

Goldfields Mineral Services supply/demand numbers show a large deficit of about 600

tonnes for just the first six months of 1997. This was with gold at an average price of $347,

about a $40 drop from the beginning of the year. With gold now at $325 price elasticity plus

seasonality should result in an even larger deficit in the second half. The deficit will also

expand in the second half due to mine closures. Thus a deficit estimate for 1997 of a record

1,200-1,500 tonnes is reasonable. With producers heavily hedged and shorts having large

positions which have already pushed up lease rates, that is the cost of borrowing the gold

they sell short, it is likely that neither of these groups will have a significant impact on filling

the deficit going forward. That means that gross central bank sales of probably 1,500 tonnes

or more are needed to keep gold at the current low level. This is highly unlikely especially

since central bank net sales for the past decade only averaged 250 tonnes per year, and

even if it were to occur it would quickly bring us to the end of central bank net sales.

Actually the market may be able to absorb even more than 1,500 tonnes of central bank

sales since the deficit does not fully reflect Chinese purchases. In China there is huge latent

demand which goes unsatisfied because of the extremely limited number of jewelry outlets

and also due to the significant premium above the spot price which the government charges

the public. Nevertheless, surveys in China show that the wish list among Chinese is first a

refrigerator, second a television set and third, gold jewelry. We believe that the official gold

consumption numbers used for China may be much too low as they are out of line with

other countries having comparable GDP per capita. It is likely that the high state markup and

limited distribution system results in unofficial sales. This could mean that the overall

deficit is actually 200 or 300 tonnes higher.

Nevertheless, while the basic market structure is in a record deficit, gold differs from other

commodities in the magnitude of the above ground supplies and in the ability of short sellers

to borrow the gold they need to deliver against their short.

The basic question then is to what degree above ground sellers will be able to fill the deficit.

Let's look first at the central banks. While potential gold investors are paralyzed by the fear

of the central banks aggressively selling their holdings, the reality is quite different.

In fact in 1996, 19 central banks bought gold while 16 sold and of the 16 who sold, only 5

sold 10 tonnes or more. Furthermore, over the past decade, over 70% of all central bank

sales came from just three central banks: Belgium, Netherlands and Canada. That means

that all the other central banks combined sold only a minor amount of gold each year.

Nevertheless, there is a perception and some reality to the concept that many central banks

are mobilizing their reserves.

Over the past year there has been much discussion about sales and mobilization of

Western central bank gold reserves. Mobilization is the lending of reserves to enable

producers to sell future production into the market today, effectively a short sale, and to

provide actual short sellers with the bullion to deliver to the purchaser of their short sales. I

should also mention that we suspect that dealers and others are using this mechanism as a

form of financing, i.e. borrow gold at a low rate, sell it and use the proceeds for whatever.

We are also told that there is a carry trade in gold where gold is borrowed, sold and the

proceeds invested in government bonds. The currency risk of borrowing in yen and buying

U.S. bonds has been partially replaced by the obviously less risky program of being short

gold, which according to most observers, can only go down. For the risk of lending out their

gold these central banks typically receive about 1.5% interest per annum.

As I have mentioned, a large and growing deficit exists between the supply of gold from

mines and demand, which in the absence of central bank sales and lending would result in

a much higher gold price, perhaps over $500 per ounce. In an attempt to earn a small return

on a portion of their gold, central banks have, in fact, lost hundreds of billions of dollars in the

reduced value of their gold holdings and have caused losses far in excess of that amount to

gold investors worldwide.

Just as an example, which is probably not far from the actual figures, assume that Western

central banks last year sold 500 tonnes of gold, loaned 500 tonnes to facilitate producer

forward sales and loaned 500 tonnes through dealers to short sellers. Assuming that they

earned 6% on the proceeds of the gold sold and 1.5% on the gold loaned, the centraI banks

would have earned about $500 million on their gold sales and loans.

But central banks and official agencies own 33,000 tonnes of gold, the price of which has

declined 20% from its recent highs entirely due to central bank activity. This has resulted in

a decline of approximately $80 billion in the value of their gold holdings. In addition, if one

believes that without these sales and loans of gold, the price of gold would be over

$500/ounce due to the imbalance of basic supply and demand, then the central banks have

given up an additional $90 billion. In sum, they have earned $500 million and lost $170 billion

in the process. How's that for shooting yourself in the foot?

Furthermore, as the central banks lend out more and more of their gold, they are effectively

allowing a reserve asset, which is the only asset that is no one else's liability, to be replaced

by a note from a dealer. In addition, the loaned gold ends up being sold into the marketplace

by the dealer on behalf of short sellers, producers, etc. and much of it is fabricated into

jewelry. The loaned gold has, in large part, permanently disappeared. If one central bank

wants its gold back, the dealer can borrow gold from another central bank. But if many or

most of the central banks want their gold back, for whatever reason, then lease rates would

skyrocket, there would probably be a default and gold would go into backwardation where

the spot price was higher than the future. This would wreak havoc with producers who sold

forward, short sellers and dealers, all of whom could suffer huge losses. There is increasing

evidence that the amount of gold on loan is much greater than generalIy thought and thus

the risks in the market are increasing. Nevertheless, certain bullion dealers with their

chicken little story of the sky is falling have been successful in spreading the fear story that

the central banks will sell all their gold. This has brought them the producer and short seller

business since the declining gold price is enough verification of the story and the facts are

ignored. The producers and short sellers selling at today's prices are probably the weakest

and most gullible of the lot. This will enable the brokers to fulfil the old axiom which says,

client's money and broker's experience soon becomes broker's money and client's

experience.

As a result of all this borrowed gold the risks in the gold market are very real. No one

anticipated the palladium market going into backwardation as the Russians were expected

to continuously supply metal to the market. This key assumption failed which could happen

in the gold market where the key assumptions are that central banks will continue to lend

their gold, and in such amounts that lending rates remain at low enough levels to keep the

market in contango. If lending central banks withdrew from this activity or if physical demand

for gold is substantially increased by other central banks or investors becoming aggressive

buyers then lease rates would become so high that the market would go into backwardation

and the spot price would rise dramatically as in the case of palladium. Lease rates have

recently soared, perhaps indicating that the limits of gold lending are being reached.

We have not touched on yet another form of central bank gold mobilization which is the sale

of calls. These calls are sold by central banks, primarily to dealers who then delta hedge the

call with short sales. This is unmeasurable but probably a significant factor. Since the

decision to selI calls is probably made by a trader at a central bank, it is unlikely that the

same trader would have the authority to deliver the national gold reserves in case the gold

price rose and the call was exercised. Most likely the call would be repurchased adding fuel

to a rising market.

On the positive side, however, are the central banks who have been buying gold and the

huge underweighting of gold among Asian central banks due to the enormous increase in

their holdings of U.S. dollars.

With only 5 or 6% of their reserves in gold Asian central banks need to buy $6 billion worth

of gold for each 1% increase in gold reserves. Thus, even a small increase of a few percent

would overwhelm the gold market. In discussing central bank purchases of gold during the

first half, Gold Fields comments: But a larger element appears to reflect several institutions

diversifying their reserves away from what they perceive to be an excessive reliance on the

dollar, an asset which under certain circumstances could conceivably be open to political

interference from the U.S. authorities.

The chart on shows that central bank net sales and producer net forward sales are really

not so great relative to the market deficit. The additional gold needed to fill the deficit and

keep gold from rising comes from short sellers. There are estimates of producer forward

sales being in the 2,000 tonne range and outright shorts possibly equal to that. These

figures are in line with estimates of borrowed gold in the 3,000-5,000 tonne range. The key

point, of course, is that with the market in deficit, above ground sales must continue at these

high levels to prevent gold from rising since without above ground sales the deficit would

result in a much higher price for gold.

Now I run through a little recent history of the gold market to show how we got to the current

point and a possible future scenario. An acceleration in producer hedging was followed by

some central bank sales. The weakness created by these two selling groups encouraged

outright shorting of gold.

Anatomy of a Gold Cycle

1. ABX starts hedging concept.

2. Other producers join in hedging.

3. Physical demand absorbs increased hedging.

4. Hedging accelerates, but physical demand still supports

gold price.

5. Central banks join in by making sales.

6. Gold looks shaky and starts to decline.

7. Producers sell more as price declines.

8. Short sellers join in and break market.

9. Sentiment at lowest levels, shares collapse.

NOW:

Central banks have sold much of what they want to sell.

Producers are heavily hedged and have huge gains.

Shorts are in record short position.

Sentiment at worst levels.

TO COME:

Evidence of central bank buying.

Evidence of producer hedge reversals.

Evidence of short covering.

POSSIBLE CATALYSTS FOR INVESTMENT DEMAND:

EMU problems.

Paper markets falter.

Commodity resurgence.

Removal of theoretical central bank overhang.

Evidence of significant Asian central bank purchases.

Current State of the Gold Market

1. Large and expanding deficit.

2. Producer forward sales, speculator shorts and some

central bank sales fill the deficit.

3. Overwhelmingly bearish sentiment promoted by bullion

dealers in an attempt to capture flow from producers, short

sellers and central banks.

Their bear story:

A. Central banks 'will sell all their gold.

B. Producers should sell forward at any level as the gold price

is going lower.

4. In fact:

A. In 1996, 19 central banks bought gold versus 16 that sold.

Of the 16, only 5 sold more than 10 tonnes.

B. Mines are closing and many projects are being deferred at

the current gold price, further expanding the deficit.

Now, producers have large gains on their forward position. Barrick has a $600 million

unrealized gain and Normandy, the largest gold company in Australia, has an $800 million

unrealized gain. It is now much more likely that forward positions will be bought back rather

than additional shorts initiated by producers since hedging at current levels for many

producers would just lock in a loss. By the way, while these producer hedges in retrospect

seem wise as industry hedge gains are probably $2-3 billion, the market capitalization of the

gold companies was reduced by $15-20 billion in part due to the effect of their forward sales

on the gold price. Producers are also good at shooting themselves in the foot.

When gold looks as if it has made a solid bottom, it is likely that a flurry of acquisitions will

take place as virtually all the majors must make acquisitions to replace reserves since

exploration will not find the reserves fast enough, if at all. An important asset in these

acquisitions would be the unrealized gains many companies have on their hedge positions.

For example, Barrick could acquire Normandy for cash, raising all the needed money from

the reversal of both company's hedges. In the process they would have to buy back 13

million ounces which would initiate a breakout to the upside in the gold price.

We believe that in addition to producer hedge reversals we will soon see evidence of

significant central bank buying. If borrowed gold is 5,000 tonnes or more, someone has

been buying all this gold and rumors of Asian central bank purchases will probably be

verified.

Finally, we expect investment demand to pick up as paper markets falter, the Asian

currency crisis spreads, EMU has problems or there is a clean up of any central bank

overhang.

http://www.gold.org/Pages/Gedt1.htm

U.S. bonds fell amid concern Japanese government institutions will sell Treasury securities to bolster ailing banks and

brokerages after Yamaichi Securities Co. decided to close down. Japanese investors are the biggest foreign holders of U.S.

debt, and held a record $321.2 billion as of Aug. 31. Bank of Japan Gov. Yasuo Matsushita said that the central bank is

prepared to use its foreign currency holdings to provide funds for Japanese financial institutions overseas, which raised concern

it might sell the Treasuries.

markets remain in turmoil, US Treasuries will benefit increasingly as a safe haven alternative for

increasingly skittish global investors. With the crisis now escalating to include Korea and Japan, this

fear factor looms all the greater in shaping the outlook for long-term interest rates. In such a climate of

deepening crisis and fear, I continue to believe that the flight to quality rally is perfectly capable of

taking yields on 30-year Treasuries through the cycle low of 5.78% that was hit in October 1993.

US: Why Stay Bearish on Bonds?

It's one thing having a contrarian view on the bond market. It's another thing altogether when you're

billed as America's sole surviving bond bear -- the tag that has been pinned on me many times in the

past several weeks. While such a depiction is obviously an exaggeration, it certainly does make the

point. With the world widely perceived to be teetering on the brink of a deflationary slowdown and

Treasuries benefiting handsomely from a powerful flight to quality rally, what could possibly prompt a

major back-up in bond yields?

Before attempting to answer that question, let me clarify one critical caveat about my own bearish

view on bonds: I am the first to concede that there will be no correction whatsoever while the global

currency crisis persists. As I have stressed repeatedly in recent weeks, as long as world financial

markets remain in turmoil, US Treasuries will benefit increasingly as a safe haven alternative for

increasingly skittish global investors. With the crisis now escalating to include Korea and Japan, this

fear factor looms all the greater in shaping the outlook for long-term interest rates. In such a climate of

deepening crisis and fear, I continue to believe that the flight to quality rally is perfectly capable of

taking yields on 30-year Treasuries through the cycle low of 5.78% that was hit in October 1993.

But the bear in me would still call this a temporary trading rally that depicts a world on the brink of

crisis. And I remain hopeful that this crisis is about to be resolved by the decisive action of global

policy makers ( see my November 21 comment, The Only Way Out ) . Call it naiveté or unbridled

optimism, but I am convinced that the wise men of the world are students of history, if nothing else,

and are not about to let the world lapse into the sinkhole of competitive devaluations and deflation that

led to global depression in the 1930s. And yet barring concerted action to deal with the potentially

lethal interplay between the ASEAN countries, Korea, China, and Japan, there is no longer any

reason to be confident in any natural healing process. At this point, I believe that crisis containment

requires an aggressive global policy response, and we are basing our macro views on precisely such

an outcome.

Under those circumstances, the safe haven bid for Treasuries should turn out to be temporary, and

then it will quickly be back to fundamentals. If that's the case, I believe that there will be three

compelling reasons to look for a subsequent sell-off in the bond market. First, another slowdown bet

will be disappointed. Many are now banking on the Asian crisis to lead to a year of sub-2.5% growth

in the US economy; by contrast, we continue to look for 3.2% growth in 1998. But even if we're

wrong and the economy expands by just 2%, that pace would follow on the heels of two years of

3.5% growth; significantly, such a downshift, in that context, would not be sufficient to take the

economy out of the inflation-danger zone as defined by a conventional output gap analysis. In other

words, the idea that the Asian crisis buys some more time for this great bull market, flies in the face

of the conventional macro-analytics of inflation risk.

Second, the fixed income markets are now priced for the next move of the Fed to be an easing -- an

outcome that we believe will not occur in the crisis-containment scenario that we are embracing. By

contrast, we continue to believe that the Fed will act to raise interest rates by at least 100 basis point

in 1998. Third, we still maintain that actual inflation will exceed the optimistic expectations that are

embedded in fixed income markets. Based on the implied premium in the TIPS market, investors are

now looking for inflation to average just 2.3% over the next ten years, fully 100 basis points below

that which was expected just seven months ago; our forecast, on the other hand continues to look for

a modest cyclical acceleration to 3.1% inflation in 1998, hardly a threat to secular disinflation but well

in excess of the optimistic expectations now built into the markets.

In short, the fixed income markets are now priced for perfection -- a sharp slowdown in the real

economy, a Fed easing, and the death of inflation. Under the key assumption that the world currency

crisis is about to be contained, I continue to believe that the realities of 1998 will turn out to be quite

different from the heroic assumptions now embedded in the price of securities. Remember, it doesn't

take bad news to prompt a correction when expectations are this bullish. The news simply has to be

less good. That remains key to our call that yields on 30-year Treasuries are still headed back into

the 7% to 7.5% range in the first half of 1998.

Stephen Roach ( New York )

The US$ is the place to be ...again when there is crisis around the globe...hmmmmmmmmmm....Damn CONfederate WORTHless Crap!!!

away...to fly to my quality job

Éßringinggoodnewstoall...oh my!

I am always puzzled regarding how well the USA comes out debtwise in the data put out by The Economist when we are compared to France, Germany, England, Italy, Belgium, etc. But, as I recall, we would still flunk the current ECU entry requirments.

away...to search for more positive news

Éßreporting

Yamaichi losses hidden in Cayman Islands

http://www.afr.com.au/content/971125/world/world1.html

Yamaichi was rescued before in 1965

http://www.afr.com.au/content/971125/world/world2.html

Japan rouses from do nothing spell

http://www.afr.com.au/content/971125/feature/feature1.html

Mahathir lashes excess as crisis reaches Japan

http://www.smh.com.au/daily/content/971125/pageone/pageone9.html

Mahathir widens his guilty list

http://www.afr.com.au/content/971125/world/world4.html

Chinese Sinkhole?

http://www.smh.com.au/daily/content/971125/world/world5.html

Normandy Boss says Asian Crisis presents GOLDEN opportunity

http://www.afr.com.au/content/971125/invest/invest6.html

Aussie Resource Stocks - the lowest of the low

http://www.afr.com.au/content/971125/market/markets3.html

Aussie Airlines in $150m attack on Y2K Bug

http://www.afr.com.au/content/971125/news/news7.html

Risky Business as Japanese Finance Sector Unravels

http://www.afr.com.au/content/971124/world/wtokyo.html

There’s nowhere to hide

http://www.afr.com.au/content/971124/market/markets4.html

Delta Gold/Placer Dome stake possibly first round of Gold Industry Rationalisation

http://www.smh.com.au/daily/content/971122/business/business2.html

A quick history lesson shows that booms do bust - The Maverick

http://www.afr.com.au/content/971122/market/markets2.html

Beijing calls for urgent overhaul

http://www.smh.com.au/daily/content/971122/world/world4.html

Recovery in Korea or Japan Not Close, Says Westpac Inv. Manager

http://www.smh.com.au/daily/content/971122/business/business1.html

Korea casts long shadow over Australian economy

http://www.smh.com.au/daily/content/971122/business/business5.html

Korea & Japan going under may spell Global Deflation

http://www.afr.com.au/content/971122/perspective/perspective4.html

Asia Doomsayers emerge in the US ( Ed Yardini/Henry Kaufman )

http://www.afr.com.au/content/971122/world/world2.html

Wake Up! This shock is Global!

http://www.afr.com.au/content/971122/world/world3.html

Yamaichi Turmoil ahead this week

http://www.smh.com.au/daily/content/971124/business/business1.html

CS First Boston's US-based economist, Dr Albert Wojnilower, told Business Sunday that a meltdown in the Japanese financial system would cause a depression there.

It's the world's chief threat because there is, I'm afraid, a possibility of the Japanese financial system melting down in the way that would prompt a depression of the 1930s' US-character in Japan.

Sat Nov 8 1997 10:17

JTF: Seeing as you mentioned watching Japan more closely, I took a look at its national horoscope. You may want to consider the following: The major outer planets are of course a background situation, and we can guess what that background signifies as possibility and actuality. However, Mars is interesting to watch as it moves fairly quickly, and its aspects very often coincide with short-term triggers for major background events. In this light, transiting Mars will square ( ordinarily stressful 90 degree angle ) Japan's Mercury in the 2nd House on November 24, 25 ( Mon & Tues ) . Mars will be at 11 Capricorn, with Japan's Natal Mercury at 11 Aries. Mars will also be moving into opposition with the Moon in the Yen's First Trade futures chart at 13 Cancer.

2 - 4 - 2 - 5 !!! ( with apologies to the late, not lamented cat ) Take that you damn Heliocentrists! Have a great day all.

in the middle of the day, the Federal Reserve did

what's called a coupon pass, which means it put

permanent liquidity into the banking system by buying

Treasury securities owned by banks.

The amount was $1.44 billion, a little more than the

coupon pass on Thursday. For the week, the

estimates are that the Fed took $5 billion to $6 billion

of securities off banks' hands in exchange for cash.

DON'T LOOK NOW, BUT

MONEY SUPPLY IS UP

By JOHN CRUDELE

THE Federal Reserve has been neutral in its monetary

policy lately - not raising or lowering interest rates.

Right?

Well, that's true in one sense. But wrong in another.

Each month or so, the Fed's Open Market Committee

meets and soon afterwards, an announcement comes

out that Alan Greenspan and the rest of the Central

Bank governors have decided to keep the Fed funds

rate at the current level.

Whew! says the world, and we all go back to our

business.

But some people are wondering why the money

supply is growing more rapidly than the Federal

Reserve intended, and whether this indicates that

Greenspan isn't as neutral as he lets on and is really

flooding the monetary system with liquidity.

I'm afraid I won't have the answers on this one, only

questions. Mr. Greenspan hasn't confided in me on his

secret moves in many, many ... well, actually, it's been

never.

Friday was a good example of what's been going on.

The bond market was getting hurt because the U.S.

trade deficit was bigger than expected. Then suddenly,

in the middle of the day, the Federal Reserve did

what's called a coupon pass, which means it put

permanent liquidity into the banking system by buying

Treasury securities owned by banks.

The amount was $1.44 billion, a little more than the

coupon pass on Thursday. For the week, the

estimates are that the Fed took $5 billion to $6 billion

of securities off banks' hands in exchange for cash.

Why is the Fed throwing money at banks? Is it

because banks, like Chase Manhattan, lost a lot of

dough trading derivatives during the Asian market

turmoil? Or is the Fed secretly trying to get banks to

lend that money to consumers and companies so that

the economy picks up? This would, in effect, be a

substitute for lowering interest rates.

If the Fed is jamming money into the banking system

through these repurchase agreements, it would be, in

essence, a loosening of monetary policy and not the

neutral policy the Fed's public statements would

indicate.

And if the Fed wanted banks to have a lot of cash on

hand, that would explain the very unusual action in the

nation's money supply of late. Even with a big drop on

Thursday, compared to this time last year, the broad

money supply figure known as M3 has grown by

nearly 9 percent. The Fed's target growth is believed

to be only between 2 percent and 6 percent.

When financial markets were rational, back in the old

days, people used to live and die by money supply

figures. Lucky for Alan Greenspan nobody pays

attention anymore.

Whatever happened to that proposal a few months

back that we invest Social Security money in the stock

market?

It was given lots of publicity when a commission made

the suggestion, but nothing has been heard since. It

was a stupid idea, of course, because investing in the

bubble market is the surest way to make sure we all

end up working until we are 100. But dumb ideas

have been carried forward by Washington before, so

I'm surprised this one died such a quiet death.

Alan Greenspan talked again last week about

reforming the Social Security system, which is destined

for bankruptcy about two days after I start collecting.

But Irrational Exuberance Alan never once

suggested that the reform include risking Social

Security money in the stock market.

Strange, why is the stock market a good idea for my

401K money but not for my Social Security funds.

Alan, give me a call.

in the middle of the day, the Federal Reserve did

what's called a coupon pass, which means it put

permanent liquidity into the banking system by buying

Treasury securities owned by banks.

The amount was $1.44 billion, a little more than the

coupon pass on Thursday. For the week, the

estimates are that the Fed took $5 billion to $6 billion

of securities off banks' hands in exchange for cash.

Why is the Fed throwing money at banks? Is it

because banks, like Chase Manhattan, lost a lot of

dough trading derivatives during the Asian market

turmoil? Or is the Fed secretly trying to get banks to

lend that money to consumers and companies so that

the economy picks up? This would, in effect, be a

substitute for lowering interest rates.

http://www.nypostonline.com/business/1122.htm

Random thoughts and a few numbers - please check if

wrong.

One ton of gold = 10 Million$ ( 300*32*1000 +or- )

Above ground gold = 85000 tons = 850 billion$

CB Holdings = 25000 tons = 250 Billion$

Skorea Bailout = 100 Billion ( seems low )

Yamaichi unsecured loan ( ) = 190 Billion

Total = 290 billion - more gold equivalent that

ALL CB hold - GeeWhiz

OK now its nice to have RESERVES in perilous times

like these - But guess what - the US debt instrument

reserves are NOT really reserves since ( wait for it )

you cant SELL THEM - IF you do, US gets mad and rates

go up and economy will stop. It was fun kidding yourself

for years that these bits of paper that the US printed

( and then printed the interest on ) were working

reserves - but REALLY now how do you EXPECT a

RESERVE to yield interest since you dont lend it

to anybody

So what next - where does the money come from

OK SELL the gold - that covers SKOREA and Yamaichi.

Now what will we do next week If I were a

central banker, I'd move to another country

Random thoughts and a few numbers - please check if

wrong.

One ton of gold = 10 Million$ ( 300*32*1000 +or- )

Above ground gold = 85000 tons = 850 billion$

CB Holdings = 25000 tons = 250 Billion$

Skorea Bailout = 100 Billion ( seems low )

Yamaichi unsecured loan ( ) = 190 Billion

Total = 290 billion - more gold equivalent that

ALL CB hold - GeeWhiz

OK now its nice to have RESERVES in perilous times

like these - But guess what - the US debt instrument

reserves are NOT really reserves since ( wait for it )

you cant SELL THEM - IF you do, US gets mad and rates

go up and economy will stop. It was fun kidding yourself

for years that these bits of paper that the US printed

( and then printed the interest on ) were working

reserves - but REALLY now how do you EXPECT a

RESERVE to yield interest since you dont lend it

to anybody

So what next - where does the money come from

OK SELL the gold - that covers SKOREA and Yamaichi.

Now what will we do next week If I were a

central banker, I'd move to another country.

start of the breakdown of North American stocks first bearleg down till end of January.Bullion gold and silver should hit 335 and 7 .

Deflation worldwide will bring precious metals down to a low of

280 gold around April.That will be the time to load up.

start of the breakdown of North American stocks first bearleg down till end of January.Bullion gold and silver should hit 335 and 7 .

Deflation worldwide will bring precious metals down to a low of

280 gold around April.That will be the time to load up.

away...to question this statement

Éßewildered