One other item is that Israel is abuzz over the situation in Iraq. I saw one post that expects US action with Iraq this month. Another stated that the US expects Israel not to retaliate if attacked

( for obvious reasons ) . Another post stated that Iraq has about 40 missles, but that deaths from an Iraqi gas attack would be minimal if the public had time to don gas masks. This may be in reference to the less deadly WMD that Saddam has. I don't know if this is accurate.

It is interesting that our CIA director George Tenet just testified in front of the Senate Select Commitee on Intelligence ( 1/28/98 ) and stated that Iraq could return to production of weapons of mass destruction ( WMA ) if the inspections ceased. Also, he expressed the concern that Saddam is eroding the effectiveness of the sanctions. George Tenet also mentioned that Russia has sent SA-10 air defense batteries to Cyprus ( I think I have this right ) , so Greek-Turkish conflict in the Aegean is reaching a higher level of uncertainty.

I don't know what to think about all this, except that Israel is taking the Iraq situation very seriously.

I think the big problem is not Iraq, but the Greek/Turkey situation, and hardening of Arab positions against Israel, with an apparent alliance between Syria, Iraq, Iran, and Egypt. I don't think the US can effectively be the policeman in that situation -- if it unravels.

Interesting times we live in -- trouble brewing -- and Iraq is only part of it.

http://www.vheadline.com/9802/3702.htm

I was wondering why the commodity price index was so persistently rising. I must admit I can see nothing to counter your argument. Since the Euro is not an immediate threat to the dollar, I would guess that the most obvious effect will be a general rise in the price of all dollar-based items. Real estate, oil, gold etc, will do well. It is entirely possible that taking your statement to the next logical step, the US markets may well rally for the rest of 1998, barring some surprise external to the markets.

Here is a question for you. If you were Alan Greenspan, would you let the US market bubble rise, knowing full well that it may pop later? I don't know. Certainly first priority was preventing SEAsian catastrophe.

I wonder -- if AG thinks the SEAsian crisis is behind us, will he try to control the US bull market?

a ) A 'me,too rally' to follow SEAsia rally?

b ) A 'flight to safety'?

A 2% rise in US markets could just be a me, too rally. Did you all notice that the Dollar went down today? That does not sound like flight to safety, but rather that foreign investors may have been selling today.

If this was a me, too rally, the US market rally will falter very soon. Otherwise, fasten your seat belts!

Now, just how long will the SEAsian rally last? Has Hashimoto actually slain the dying $24 billion/day bank dragon? Where is the news for the banking reform? If not, the SEAsian rally will be short-term only.

I hope we do not throw the first stone and trigger the escalation process. I guess there is one good thing about what is happening. I don't think Saddam has much of an offensive force left. But if that is so -- why all the commotion? We should be much more worried about Syria, Iran and Egypt joining in if Israel gets aggressive. Who do we fight then?

And the US market is rallying? Could intense emotions in one part of the world reflect intense emotions in another? It works both ways, and the US markets could go down equally quickly ( or quicker ) if the mood swings the other way.

My guess is that for now -- the mood is an international 'flight to safety' in the US. What would you do if you were a SEAsian or European investor and you saw trouble ahead? And 17% unemployment in France, etc. with Russia near collapse? The last time something comparable to this happened was around 1993 when there was much uncertainty in the EURO, and the UK had to bail out. Gold and the American dollar both soared for a time. I think it will take a major reversal of some kind to stop the US rally -- an Iraq related mishap, or AG puts on the brakes to prevent an unstable expansion of the market bubble.

This is very much like what happened in the 20's. Around 1925 ( 1927? ) , the depression hit the world outside the US. The USs markets rallied ( flight to safety ) generally all the way to Oct 1929 when the US market bubble collapsed, expanded in part by the desperate Europeans who felt they had no other place for their money. And -- we all know that around 1927 those leaders of the European banks asked the Americans to inflate the dollar -- so that 'gold could move back to Europe'.

Things are different now -- but parallels do exist with the 20's, don't they? Is AG's inflating the dollar to aid SEAsia in the late 90's like inflating the dollar to aid the Euopeans in the late 20's? Perhaps.

Frankly, I don't think they're a major threat ( relative to some europeans or certainly to the US ) to price stability. We shall see.

Total SEAsian claims reported to the BIS were $260 billion ( USdollars ) , from South Korea, Thailand, Indonesia, and Malaysia. ( not Japan, Hong Kong or China ) . This was on June 30, 1997, so it is not current. Also there are losses included from non-reporting Asian banks that skew this data. More than 1/3 were apparently loans from European banks. Approximately 20 European banks had 85-90% of the exposure, and their total was more like 110-130 billion according to S&P data. I don't know how serious this is, but it is clearly not trivial.

As I recall American bank exposure is mainly to South America, not SEAsia. The table on this post indicates US exposure is only 21 billion, but Japanese exposure is 95 billion.

Also, how about the 300 billion or so in SOE's in China, the losses in Hong Kong, and losses in Japan?

However, I am learning about one thing -- this is old news, market wise. But -- it may give us a clue regarding which banks in Europe will have to declare losses on their quarterly reports, or experience downgraded ratings. It may be that has not been fully factored in yet.

What I find fascinating is that the Fibonacci series/Elliot wave stuff is due to the movements of the masses who buy and sell stocks. Something external to the markets drives some of this, but I still have not been able to get my finger on it. Also, wavelet analysis is the way to go to decompose this analytically, but I have not had time to identify the appropriate wavelet set. The Daubuchet ( sp? ) wavelet series is great for decomposition and identification of the Fibonaccie series in the markets, but it is no better than fourier analysis for prediction -- lousy!

I will look for another wavelet series when work permits.

I was watching the gold markets so intently, I did not spot the bottom in the SEAsia markets.

Tain't it amazin how a country can be broke one week, and it's markets go up 70% the next. Someones gotta teach me that trick. Hummmm!!!

You see...Mr. Munk really does care!

By the way, I have noticed that during last 100 years, during the time of the most rapid rise in sunspot activity, commodity prices tend to rise. I have no solid etiology for this -- just a correlation. And -- that is what is happening right now. I am a little rusty on historical price trends on the commodity price index, but I think we have been in a long-term plateau for some time. As I recall, a long term commodites bull market should be coming soon -- good for gold.

What I really find confusing is how to factor in the effect of SEAsia. I don't know it that is bullish or bearish for commodities. I would be interested in your comments.

Sunshine Mining ( SSC.N )

Coeur d'Alene Mines ( CDE.N )

Hecla Mining ( HL.N )

Prime Resources ( PRU.T )

Pan American Silver ( PAA.T )

Silver Standard Resources ( SSO.V )

The investor in the dow looks for every reason to buy, the investor , producer, and everyone involved with metals looks for every reason to sell, gonna be wrong this time.

You need to tell us how you make your predictions -- by thinking about that you may get even better.

Now, if you mean 'value' in the sense of a precious metals trader such as RJ who knows how to ride the metals market equally well up or down, that is a different matter altogether. I have discovered that people such as RJ have much better insight than conventional fundamental type investors, or technical types. I think the bottom line is that you must be equally at home with all of these approaches if you want to be good at making money in the markets. That takes time -- I know I am not there yet, but should be before I retire. How else will I survive during retirement, except by investing?

Regardless, from what I know now, the CB's are not going to sell gold anymore, except if they are forced to due to risk of liquidation. Gold fundamentals have bottomed. If you are new at this -- don't take my word for it. I have lost a bundle of money in taking other people's advice. Eventually you will know what you need to know. By the way, this site is an excellent source of news -- you just need to lurk on it until you figure out how to invest by using it. That is not easy, since most of the Kitcoites are perpetual bulls.

G'Nite all!

F Veneroso did say that the SEAsia currencies were oversold, didn't he? I guess the rally may continue for a while, unless a major negative event occurs. We should all be on the lookout for an explanation, such as perhaps Hashimoto has gotten approval to reform the Japanese banks. That would do it, I think. I would like some good news right now. That would also make precious metal investing alot simpler.

Do you know anything about FV's success rate? Was he no better than most of us on Kitco?

But -- eventually the belief system shifts anyway. Perhaps this is why bull markets and popular presidents tend to go together -- same belief system? 'Politician beware' if the belief system fades for any reason -- then the public sees the shady ones for what they are. Even great presidents can suffer -- but if they are in their second term, they may be able to do great things even if they are not popular.

I wish we had a great leader right now -- it would be easier to fix our problems, than later when more damage is done. But that is not how history works -- the crisis occurs first, and then the great leaders come to the fore. We must be patient, and hope for the best.

Interesting, isn't it? Kitco news does not correlate with current market events. I have learned to be cautious about jumping right from Kitco news into the market -- Kitco always seems to be months ahead. If you are careful -- this can be very helpful.