COST OF LIVING INFLATION -- Apr 23

Tech Stocks Rise on Profit Reports -Bloomberg

Stocks Rise on Profit Reports -Bloomberg April 23 (Bloomberg) -- U.S. computer-related stocks advanced after Microsoft Corp. and Corning Inc. said profit exceeded expectations. A stronger-than-forecast reading on durable goods orders raised concern interest rates may increase, pushing the Standard & Poor's 500 Index lower.

``Certainly earnings are coming in stronger than the consensus numbers,'' said Michael Santelli, who helps manage $3 billion for National City Investment Management Co. in Cleveland. ``But the stock market is a forward-looking mechanism and looking forward from here, there are definitely some headwinds, starting off with interest rates.''

The Nasdaq Composite Index, which gets 40 percent of its value from technology shares, gained 9.19, or 0.5 percent, to 2042.10 as of 2:20 p.m. in New York. Microsoft's stock headed for its biggest increase in more than a year. The S&P 500 shed 1.17, or 0.1 percent, to 1138.76. The Dow Jones Industrial Average lost 12.49, or 0.1 percent, to 10,448.71.

The Nasdaq has gained 2.3 percent since last Friday, while the Dow is little changed. The S&P 500 has risen 0.4 percent this week and is up 24 percent over the past year.

Seven stocks fell for every three that rose on the New York Stock Exchange today. Some 936 million shares changed hands on the Big Board, 5.8 percent less than the same time a week ago.

Federal Reserve Chairman Alan Greenspan this week said deflation is no longer an issue for the U.S. His comments prompted some investors to say interest rates may rise earlier than they had expected.

``The market is in a confusing state,'' said Peter Mancuso, a New York Stock Exchange trader with Performance Specialists Group. ``The earnings and estimates are better, the job market is better and the economy as a whole is much better, but the anticipation of a rise in interest rates is affecting investor sentiment.''

http://www.bloomberg.com

Greenspan Tells Congress Rates Will Rise -AP

Apr 21, 2004

By JEANNINE AVERSA

(AP) IMAGE: Federal Reserve Chairman Alan Greenspan, left, testifies on Capitol Hill Tuesday, April 20, 2004,...

WASHINGTON (AP) - Federal Reserve Chairman Alan Greenspan told Congress on Wednesday that America's economic recovery has good momentum and that low, short-term interest rates will have to rise at some point, though he didn't say when.

"Looking forward, the prospects for sustaining solid economic growth in the period ahead are good," Greenspan said in prepared testimony to the Joint Economic Committee.

Greenspan, in striking an upbeat tone about the economy, noted a much-awaited improvement in the hiring climate after a long period in which an uneven economic recovery had failed to produce significant increases in the nation's payrolls.

But with the rebound in the economy, some companies are finding it easier to raise their prices, Greenspan said. He also noted that the fall in the value of the U.S. dollar and a strengthening global economy were adding to pricing pressures at home.

While stressing that inflation currently remains low, he said it was the job of the Federal Reserve to be stay on the alert for an unwelcome flare-up in inflation.

"As I have noted previously, the federal funds rate must rise at some point to prevent pressures on price inflation from eventually emerging," Greenspan said. "As yet, the protracted period of monetary accommodation has not fostered an environment in which broad based inflation pressures appear to be building."

Since last June, Greenspan and his colleagues have held the federal funds rate - a key short-term interest rate - at 1 percent, the lowest since 1958. Most economists believe the Fed will leave rates at that level at its next meeting on May 4.

Looking ahead, some economists predict the Fed will begin to push rates higher later this year. But others believe rates might stay where they are into 2005.

Greenspan's comments marked the second signal in two days that the Fed was beginning to edge closer to raising interest rates. Greenspan's remarks before the Senate Banking Committee on Tuesday sent stocks tumbling as Wall Street investors feared a rate increase would come sooner rather than later.

"The Federal Reserve recognizes that sustained prosperity requires the maintenance of price stability and will act, as necessary, to ensure that outcome," Greenspan said in his testimony Wednesday.

http://www.ap.org

Gold up, Fed put kibosh on bulls' parade -CBSMW
By Myra P. Saefong, CBS.MarketWatch.com
April 22, 2004

SAN FRANCISCO (CBS.MW) -- Gold futures edged higher Thursday morning for the first time in four sessions, sending metal mining shares up.

Prices are higher after Wednesday's "massive metals sector liquidation," said John Person, editor of The Bottom Line newsletter.

"The threat that interest rates will be adjusted higher by the Fed put the kibosh on the bulls' parade," he said.

But he insists that's only a temporary situation. Thursday's producer price index showed a modest uptick in inflation, which Person believes is "one reason why gold bulls have not abandoned their positions."

June gold tacked on $1.40 to trade at $392.80 an ounce on the New York Mercantile Exchange. It closed Wednesday at $391.40, its lowest closing level since Nov. 11. Prices lost more than $10 in three sessions.

http://www.cbs.marketwatch.com

US warned to prepare for interest rate rises -FT
By Andrew Balls in Washington and Javier Blas in London
April 18 2004

The US Federal Reserve must prepare the world economy for higher interest rates to "avoid financial market disruption both domestically and abroad", the International Monetary Fund will warn this week.

But the IMF repeats its advice that the European Central Bank should consider cutting rates owing to the eurozone's poor economic performance.

Japan's recovery, the IMF says, has continued to "substantially exceed expectations". However, "a key question is whether Japan's recovery can be sustained or whether, as with earlier recoveries in the post-bubble period, it will prove to be another false dawn".

Surging growth in China has helped to boost regional growth, it adds, but "signs of incipient overheating" call for tighter macroeconomic policy. This risk means "it remains in China' s interest to move gradually to greater exchange rate flexibility".

The IMF's World Economic Outlook, to be published on Wednesday, will coincide with eagerly awaited testimony by Alan Greenspan, the Fed chairman, on the US economy.

While noting that the Fed has "leeway to maintain a very accommodative monetary stance", the IMF warns that "the ground should continue to be prepared for future monetary tightening", given the "buoyant short-term outlook and the need to avoid financial market disruption both domestically and abroad".

http://www.ft.com

Gasoline prices hit record high -CNNFn
Motorists paying $1.80 a gallon, AAA reports
April 18, 2004

NEW YORK - The average retail price for a gallon of regular gasoline in the United States has hit a record $1.80, the U.S. motorists group AAA said over the weekend.

With six weeks to go until the start of the peak U.S. summer driving season and gasoline futures trading at all-time highs this week, the government has warned that the nation's 200 million drivers will soon be paying even more.

The AAA said the national average for self-serve regular rose to $1.803 per gallon, which is about 22 cents higher than they were this time last year.

The U.S. Energy Information Administration has said the highest prices this year are likely to be seen later in April or in May. The EIA said that in addition, the U.S. gasoline supply system remains susceptible to "severe" sudden price spikes if refineries or pipeline have problems this summer.

http://www.cnnfn.com

Economic Data for April 19 - 23 - 2004:
---------------------------------------------
MONDAY April 19:
Leading Indicators Index for March (10 am ET)
Treasury auctions 3&6-month bills
---------------------------------------------
TUESDAY, April 20:
Weekly Chain Store Sales (9 am ET)
Fed Chairman Greenspan testimony (2:30 pm ET)
---------------------------------------------
WEDNESDAY, April 21:
Fed Chairman Greenspan testimony (10 am ET)
Fed releases Beige Book (2 pm ET)
---------------------------------------------
THURSDAY, April 22:
Weekly Initial Jobless Claims (8:30 am ET)
Weekly Money Supply (4:30 pm ET)
---------------------------------------------
FRIDAY, April 23:
Durable Goods Orders for March (8:30 am ET)
---------------------------------------------

COMMENTARY

COST OF LIVING INFLATION -Craig R. Smith, SATC
Apr 19, 2003

"The best way to destroy the capitalist system is to debauch the currency. The process of inflation engages all of the hidden forces of economic law on the side of destruction, in a manner that not one man in a million is able to diagnose."
-Lenin

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value."
-Alan Greenspan, Gold and Economic Freedom

In a letter to Thomas Jefferson in l787, John Adams wrote: "All the perplexities confusion and distress in America arise not from defects of the Constitution, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation."

What was true then... is even more true today.

Last week the news hit that our cost of living is again on the rise. It was no big surprise to most Americans who have been paying more for almost every type of commodity for the last few years. But now it is again making headlines in New York Times, and local papers around the country.

For example, in my local paper, The Arizona Republic is a headline story about the 200%+ increase in lumber prices in the last year! Notice that the blame is placed on ... "Drought conditions, forest fires and selective cutting because of environmental issues have contributed to a decreased supply of lumber, even as demand has risen." But rarely is it explained that the drop in the dollar value is a major contributing factor.

Where is the Presidential candidate(s) who are trying to explain and solve the growing problem of cost of living inflation -- and the fact that it is squeezing the middle class, just like Lenin said it would?

Confusion surrounds the very meaning of the words; money, dollar, wealth, inflation, and credit. Add to this, widespread public ignorance and confusion concerning tax laws, and you have a system designed to control and enslave the population.

The money system operates in a way that would astound most Americans if they only knew how it worked. A dishonest money system is at the very heart of America's economic and social problems. The degree to which the money system is corrupt is the degree to which all other areas of society are corrupted.

Money is the builder or destroyer of society. An honest money system brings prosperity to all citizens - willing to work. A dishonest one enriches a few at the expense of everyone else - regardless of how hard they work.

If a group of men were able to gain control over the money system of a nation, would they not be masters of that nation? If they had unlimited power to create unlimited amounts of money, could they not direct the course of society and all of its institutions? If their alliance encompassed the length and breadth of the globe, would they not be masters of the world?

On November 22, 1910, the nation's leading bankers left by train at night from Hoboken, New Jersey on a secret mission to Jekyll Island, Georgia. Their mission-to create what was to become the Federal Reserve System.

The essence of psychological warfare is to confuse the meaning of words, and infiltrate the mind with conflicting concepts.

Use of the word "Federal" in the name "Federal Reserve" leads the public to believe that the Federal Reserve is a government institution. Contrary to this misleading use of language, the FED (as it is commonly called) is a private corporation owned by foreign and domesticbanks and operated for profit - no more Federal than Federal Express.

The FED controls the nation's money supply and interest rates, and thereby manipulates the entire economy, in violation of Article 1, Section 8 of the United States Constitution that expressly charges Congress with "Power to coin money and regulate the value thereof." Article 1, Section 10 of the Constitution says: "No State shall make any Thing but gold and silver Coin a Tender in Payment of debts."

Under the FED's direction, gold and silver coin were taken out of circulation between 1933 and 1965 - removed as the backing for our currency and replaced with monetized debt - in other words, credit.

"Today the entire world is out of balance because of credit and debt abuse and central bankers are now between the devil and the deep blue sea," John Mauldin summarizes. The FED cannot raise interest rates because it would throw the economy into recession. I expect the dollar to fall to new lows this year. According to John Mauldin's new book to be released this week, "Bulls Eye Investing," "Slow growth and inflation? Recessions? We have seen this movie before -- it is called 'Stagflation: The Return of the 70s' Only this time Alan Greenspan will be a scapegoat."

BOTTOM LINE: The only way to protect your assets from cost of living increases in the future is to offset the increases by owning gold and silver. As interest rates begin to creep up and money comes out of stocks, I expect that the next price jump this secular bull market in precious metals. The time to be positioned is now, while the political pressure to keep rates low still exists ... after November 3, 2004 ... all bets are off!

Learn more about the FED, read or listen to The History of Your Money #2 - THE FEDERAL RESERVE

Trying to Duck Inflation's Punch -NYT
By LOUIS UCHITELLE, New York Times
April 17, 2004

The inflation rate, barely noticeable for years, is picking up again in the United States. And even if many American families have yet to curtail their spending, they are certainly annoyed.

Ask Katie O'Malley, 18, and her mother, Amy. While shopping in Bloomingdale's in Manhattan on Thursday they discovered that a gown for Katie's senior prom would be $100 more than they paid last year in the same store for a comparable dress for her junior prom. Having traveled to New York from their home in Newark, Del., to take advantage of the greater selection, they finally settled on a $320 gown at Saks - still $40 more than they paid last year.

"We were a little shocked," Mrs. O'Malley said.

Inflation seems to be back. Americans are definitely noticing, and they are beginning to take evasive action. As grocery prices rise, some families are shifting to Sam's Clubs and other warehouse operations offering lower prices than neighborhood supermarkets. Others are spending more time in search of gasoline at less than $2 a gallon, sometimes visiting three or four service stations before finally making a purchase. Still others are ordering prescription drugs from Canada to avoid rising pharmaceutical prices within the United States.

No one is yet talking about the sort of double-digit inflation that plagued the economy in the late 1970's and much of the 1980's. And economists are far from certain that the surprisingly sharp increase in the Consumer Price Index so far this year - 5.1 percent on an annualized basis - will continue. But the price squeeze now being felt by people like the O'Malleys, after more than a decade of persistently low inflation, adds a new source of worry for a consumer economy already plagued by a weak job market and stagnant wages.

"The real danger is that you get the inflation but not the corresponding wage increases," said Dean Baker, a senior economist at the Center for Economic and Policy Research. "As purchasing power declines, people will either buy less, hurting the recovery, or go deeper into debt."

The concern about inflation shows up in interviews with consumers and in various surveys, including the latest reading from the University of Michigan's surveys of consumer. The March survey picked up a growing concern about inflation. Most of the worry was among low-income families. The April survey, released yesterday, showed that families with incomes above $50,000 - like the O'Malleys - were also beginning to notice.

FULL STORY

SILVER DOWN, MORGAN DOLLARS UP? - David Bradshaw, Editor, RMP
Apr 19, 2004

Last week the precious metals drifted lower, a 5% correction for gold (from $420 to $400) and a 12% correction for silver ($8.00 to $7.12). Most analysts agree the correction was yet another vivid illustration of how a healthy bull market works.

FYI a new bull market in silver began in mid-2003, which has driven the price of silver bullion from a low of $4.50 per ounce to a high of over $8.00 per ounce -- a rise of 77%. But here's an interesting fact you WON'T hear on CNN: MORGANS MOVED UP 3.2% LAST WEEK, DESPITE A 12% DECLINE IN SILVER! Why?

Well, for the answer I turned to the most respected author and collector of Morgan Silver Dollars, Wayne Miller of Helena, MT. His classic book, "The Morgan and Peace Dollar Textbook" has helped brings tens of thousands of readers to appreciate the unique history, beauty and profitability of Morgan Dollars.

The interview below will be included in the brand new 16-page Research Report going to print next week for Swiss America. This Swiss America Special investment-grade Morgan Silver Dollars, their amazing history, growing popularity and viability for portfolio diversification and long-term growth.

DAVID BRADSHAW: WAYNE, AS ONE OF THE FOREMOST EXPERTS ON INVESTMENT-GRADE MORGAN SILVER DOLLARS, WHERE IS THE MARKET RIGHT NOW?

WAYNE MILLER: Silver dollars are stronger now than ever. The key dates are just on fire. Even the generic date dollars are getting hard to find and are selling for 12-15 year highs. I look for continued interest in Morgan and Peace dollars because they are big and beautiful. They are the biggest silver coin we’ve made and were well designed. There is a really interesting mix of common date and key date interest, so you can start with the common dates and there’s still a lot of challenge if you really want to go at it in a serious way. When I started my Silver dollar collection, I gave myself 15 years to finish the set. I started in 1968, it was completed in 1983 and I sold it in 1984. The new owner put the collection an auction in Beverly Hills in January of 1986. The 1878-S was purchased by Swiss America President Craig Smith and I believe he still has it.

DB: YES HE DOES, AND HE PLANS TO KEEP IT...

WM: I remember it sold for $37,400 in the auction, which at the time amazed me since and I paid just $14.00 for it back in 1973.

DB: WOW!

WM: I remember there was 1895-O and an 1886-O that both sold for $71,000 -- and 3 years ago the 1886-O was on the market at $675,000 and the 1895-O was on the market at $750,000. So, the rare date Morgans have really risen, even though $70,000 seemed like a lot of money back in 1986, now they are ten times that amount!

DB: YES, THAT IS FANTASTIC GROWTH, BUT WHAT ABOUT THE FUTURE AND WHAT ABOUT INVESTORS OR COLLECTORS THAT DON'T HAVE THAT KIND OF MONEY TO SINK INTO A SINGLE COIN?

WM: I look for Morgan dollars to continue to be strong. There was an article in Coin World magazine about ten years ago that featured a major survey among the collecting audience of which coin series was their favorite among 150 different U.S. coin series and 37 % of the people listed Morgan or Peace dollars as their number one collectible choice. Morgan dollar are one of the few Mint-Condition U.S. rare coins dated in the 1800's that you can still buy today that is dated for under $100!

DB: I KNOW. SO, DO YOU SEE MORGANS AS A GREAT OPPORTUNITY FOR THE LITTLE GUY, SO TO SPEAK?

WM: Yes, from the little guy to the top guy, Morgans are a good investment for everybody!

DB: IN THE CYCLE OF RARE COIN PRICES, DO YOU THINK WE ARE IN THE EARLY STAGES OF A BULL MARKET, IN THE MIDDLE, OR DOES IT DEPEND ON THE COIN SERIES?

WM: I’m a student of economic and market cycles, so I’ve looked at this market for many years and asked myself, "How can I make money for my customers -- even in a declining coin market like we had during much of the 1990s. For 10 or 15 years the coin market was driven largely by investors. Investors basically don’t know anything about coins, they just saw a financial trend that looks up and so they’ll buy it. But during the 1990's the trends just seemed to keep going down, so the investors gradually got out of the market and prices drifted lower. What is different now is that for the last couple of years the serious coin collector has come back into the market. From my perspective the collector is the one who really makes this market move, because they’re not buying coins because someone else told them to buy, they’re buying because they’re looking at their collection and they need to fill an empty slot to complete a collection, so they know that they're going to have to pay a little extra to get a really nice coin. This growth of collector interest is happening across the board -- from pennies to $20 gold pieces -- and that also includes Morgan dollars. For example, Carson City Morgans are up well over 100% over the last couple of years. So, everything is looking pretty strong and this new bull market has a good collector base, which is what you want to have, given that many investors are fickle and fearful. It is the more serious coin collectors that have an emotional involvement, or connection with their collection because they’ve put a lot of themselves into it. Unlike investors, collectors are not as prone to sell their coins out as soon as they see a short term price drop, instead they’re just going to sit tight and keep building their collection for the long term. I think that the reemergence of the collector as the prime driving market force in the coins is the healthiest thing I’ve seen in two decades.

DB: THANKS FOR SHARING YOUR THOUGHTS WAYNE, WE WILL PASS THEM ON TO OUR READERS.

Read Part I of the MORGAN SILVER DOLLAR SPECIAL REPORT

THE BIG LIE OF THE 21ST CENTURY - Bill Bonner, DR
Apr 19, 2004

Dead men tell no lies. But living men are full of them.

The big lie of the early 21st century has been that people can live beyond their means - forever. People would not admit that they wanted 'something for nothing,' but hardly anyone expected anything less.

And when the correction of 2000-2002 threatened to undermine the lie, new lies were brought out to shore it up.

Alan Greenspan told people not to worry about a correction. Too much debt? Don't bother yourself about it... we'll give you more E-Z credit!

Not enough money in your pocket? Heck, we'll cut taxes, said George W. Bush. And we'll increase spending, too!

But lies have a way of catching you up. George W. Bush has to finance his spending somehow. And since Americans save little money, he has to look to Asian lenders to cover his deficits. This puts him in an uncomfortable position. America may be the world's only superpower... but never before has a U.S. administration been so beholden to foreigners. If the Japanese and Chinese want Bush out of office... all they have to do is sell their U.S. bonds. Interest rates would soar and the phony 'recovery' would be over.

"A Nation Chained to Rates," says a Washington Post headline. And foreigners have the key.

In ancient times, a leader would have been torn apart by a mob of citizens for having put them in such a vulnerable position. We don't know exactly what he did wrong, but according to Mrs. Oliphant's history, one of the early Doges of Venice, Pietro Candiano, so aggravated his people in 976 that they killed him and his infant son and burnt down half the city.

Those were the good old days. Politicians thought twice before lying. Today, they lie twice... and never think at all.

Even without Asian selling, long-term interest rates are inching up. Alan "Bubbles" Greenspan is squirming a bit, too. While telling the public that there was nothing to worry about, he pushed short rates down to emergency levels and left them there for almost a year. People borrowed, spent, and went deeper into the hole.

And now that they're more vulnerable to rising rates than ever before... guess what? Rates are rising.

Greenspan chained himself and the nation, like galley slaves, to an unnatural 1% short-term rate. Now, all risk going down with the ship.

Inflation seems to be flooding in. Economists are calling on Greenspan to pump up rates.

"It's time to End Super Low Interest Rates," says Floyd Norris in the New York Times.

But what can poor Mr. Greenspan do? He's lured consumers deeper into debt with unnaturally low interest rates. Now inflation has shown itself. He'll have to raise rates now, say economists, maybe even before the elections.

But what would happen if rates rose? Where would the 'something' in 'something for nothing' come from if E-Z credit were not so E-Z anymore? What would the lumpen do if they actually had to pay their debts - at higher rates of interest? Would they thank Misters Greenspan and Bush for giving them more credit when they really didn't need it? Or will they want to lynch them both?

We don't know. But we think it will be fun to find out.

DailyReckoning

BULL'S EYE INVESTING -John Mauldin, FrontlineThoughts
Alice in Wonderland Markets
Which Way to Go?
The Focus on Absolute Returns
Field of Dreams

April 16, 2004

This week, I am going to depart from the regular format, as my book, "Bull's Eye Investing: Targeting Real Returns in a Smoke and Mirrors Market" is in the trucks on the way to a bookstore near you, as well as Amazon.com and Barnes and Noble.com. I have arranged for a nice 30% discount on the book for you courtesy of Barnes and Noble.com, a different and excellent source for bulk orders and I launch a special letter just for readers of my book.

Today, we are going to look at some of the content in the book. Yes, a lot of the book has been in these pages over the last year. But my guess is that at least half of the book is new material, and the 50 plus graphs and charts really add to the usefulness. The chapters on actual investment strategies have not graced this weekly letter and I hope are of great value. Being able to make a thoughtful and logical case, step-by-step, for the future direction of the economy, rather than piecemeal in this weekly letter will give you a much better understanding of the problems and opportunities confronting us.

As I look through the 435 some-odd pages of the book, I find that it is very relevant to today's markets and economy. Too often by the time a book is published, it is out of date. I must admit that has been a concern. I feel I have dodged that bullet. The book speaks to the very issues confronting investors today, and much of the research and material I use will be of use years from now. As long-time readers know, I believe in backing up your beliefs with solid research. There are 14 pages of footnotes and bibliography. You can disagree with my thinking (and many do!), but you better do your homework.

The early reviews (my publisher sent out lots of manuscripts for publicity and comments) have been more than kind. While I am proud of the book and feel that it can stand on its own, it is always nice to read kind words from your peers (and superiors!) and readers. (I post a few comments below.)

This book will surprise many of my long time readers. After making what I feel is an extremely strong case that we are in the first innings of a secular bear market, I spend three very full chapters telling you how and why to buy stocks. Ironically, in a secular bear market, the little guy has a big advantage over the larger institutions and funds. I show you the sorting screens and give you access to the research which will guide you to successful investing in stocks. If you own stocks or mutual funds, these three chapters will give you a new and unique view of the stock market. Oh, to have had this when I was just starting out in the investment world. This is a book many of you will want to get for your young adult (and even older!) kids to read.

You can order the book by going to BarnesandNoble.com. They have it at a 30% discount. I am told it will ship as soon as it gets there, even though the website says April 29.

http://www.frontlinethoughts.com

David M. Bradshaw is Editor of Real Money Perspectives, publisher of Rediscovering Gold in the 21st Century: The Complete Guide to the Next Gold Rush (7/01) and has been an economic commentator since 1987, when he produced the World Economic Perspectives radio show. In 1997, he produced a one-hour TV documentary, "Preparing Wisely for the Next Millennium," which was distributed free of charge at Blockbuster Video nationally. In 1999, he produced a one-hour radio special, "The Big Picture: The Shape of Things to Come" discussing geopolitical, economic and spiritual trends in the 21st Century. MORE...