THE FACES OF HOPE GLEAM

Sep 19, 2003


->FED leaves 1% rate...confronts "Jobless Recovery" ->Rock beats paper: gold up 32.8% since 9/11/01 ->Silver & gold news, but what's beneath the gleam? ->Stocks zizzag... Grasso gone, who's next? ->Fortress America "Losing Liberty" says Pat Boone. ->Jobless Clue #1...$.11 of every $1.00 spent is borrowed.


MARKET NEWS DIGEST


Grasso Quits NYSE After Furor Over $140 Mln Pay - Bloomberg

Sept. 17 (Bloomberg) -- Richard Grasso resigned as chairman of the New York Stock Exchange, ending a 36-year career that unraveled in less than a month after the disclosure of his $140 million pay package, the Wall Street Journal reported in its online edition.

The board pushed out Grasso, 57, a day after the three biggest institutional investors in the country said the size of his paycheck compromised his ability as a regulator. Today, he lost the support of the heads of Goldman Sachs Group Inc. and Merrill Lynch & Co., whose chairmen are on the board.

``The word excessive doesn't do it justice,'' said Cynthia Richson, the first corporate governance officer for the $53 billion Ohio Public Employees Retirement System in Columbus, Ohio. ``The NYSE sorely needs to look around at its own corporate governance. The board is way too chummy.''

http://www.bloomberg.com


Fed Policy Makers Confront Jobless Recovery - Bloomberg

Sept. 16 (Bloomberg) -- Glenn McQueen says he's never seen an economic expansion quite like this one. The Federal Reserve says the U.S. economy is growing. The lines in McQueen's North Carolina Employment Security Commission office suggest otherwise.

McQueen's Fayetteville-based staff meets with 500 to 800 people a day in search of jobs, state and federal aid, food stamps or career counseling because their unemployment benefits have run out. On peak days, that's about twice as many as two years ago. Next month, he will fire eight members of his 38- person staff because of state budget cuts.

Some of them ``will take their place in line'' among the unemployed, he said. ``I keep reminding myself the economy is getting better.''

Economists expect the gross domestic product to grow at a 4.5 percent annual rate in the third quarter, according to a Bloomberg News survey. Fed policy makers today unanimously voted to keep interest rates unchanged from a 45-year low of 1 percent to give the expansion more time to accelerate and possibly create more jobs.

``The evidence accumulated over the intermeeting period confirms that spending is firming, although the labor market has been weakening,'' committee members said in a statement following the meeting.

New Fed Focus

What has changed is the Fed policy makers' focus, with job destruction now an increasing risk to both the economic expansion and stable prices.

The current recovery has been characterized by disinflation, or a slowdown in price increases, rather than inflation. That means businesses aren't able to boost profits by raising prices, making them reluctant to hire.

More evidence of companies' lack of pricing power came today, when the Labor Department said consumer prices excluding food and energy rose 1.3 percent for the 12 months through August, the smallest year-over-year gain since 1966.

FULL STORY


U.S. stocks power to new highs - CBSMW
Investors shrug off Grasso, Isabel
By Steve Gelsi, Sept. 18, 2003

NEW YORK (CBS.MW) -- The Dow Jones Industrial Average rallied to a 15-month high and the Nasdaq crested above 1,900 as positive reports on the economy helped offset concern over the impact of Hurricane Isabel and NYSE Chairman Dick Grasso's resignation.

The Dow Jones Industrial Average broke through to triple-digit gains, rising 113 points, or 1.2 percent, to close at 9,659.

The Nasdaq rallied 26 points, or 1.4 percent, to 1,909, the first time it broke through the 1,900 level since March, 2002.

The S&P 500 rose 13 points, or 1.3 percent, to 1,039, its highest level since June, 2002.

Stocks opened flat but turned higher after positive economic data and a dip in mortgage rates for the second week in a row. The index of leading economic indicators rose 0.4 percent in August after climbing 0.6 percent in July, according to the Conference Board. The index, which has risen four months in a row, hit Wall Street's target.

"The data was good -- the jobs number was a pleasant upside surprise and that helps," said Art Hogan, market strategist with Jefferies & Co. "The path of least resistance in this market has been higher. Today's gains are momentum-driven."

Meanwhile, jobless claims came in a little better than expected. The four-week average for first-time claims for state unemployment benefits rose for a fourth straight week, climbing by 2,000 to 410,750. It's the highest reading since mid-July.

http://www.cbs. marketwatch.com


Gold May Rise Near 8-Year High by End of 2003 - Bloomberg

Sept. 17 (Bloomberg) -- Gold prices may reach $400 an ounce by the end of 2003, the highest in almost eight years, because of higher demand from investors seeking a haven, a London-based consultant said.

Demand from investors in North America and Europe jumped an estimated 55 percent in the first half from a year earlier, to 140 metric tons, Gold Fields Mineral Services Ltd. said in a report.

``There's a definite, if still modest, pick up in longer term interest from people seeking a hedge against current insecurities,'' Philip Klapwijk, Gold Fields managing director, said in a faxed statement. ``Stocks are looking shaky, the dollar's probably heading south and the political situation doesn't seem to show much signs of calming down.''

Gold climbed 25 percent last year, its biggest gain since 1979. A gold fund, the Merrill Lynch Gold & General Fund, was the U.K.'s top-performing unit trust. Two U.S.-led wars since the Sept. 11, 2001, terrorist attacks in New York and Washington may have spurred interest in the metal.

The weakening of the U.S. dollar also has made dollar- denominated gold cheaper for holders of other currencies. The euro gained 18 percent against the dollar last year while the British pound climbed 11 percent.

http://www.bloomberg.com


Hope, but few jobs - CNNfn
Economists, small business owners grow more optimistic, but jobs, inflation picture still muddy.
September 15, 2003: By Mark Gongloff

NEW YORK (CNN/Money) - Economists and small-business owners are increasingly optimistic about the strength of the economy, but they're still uncertain about job growth and inflation, according to two surveys released Monday.

Thirty-five economic forecasters surveyed by the National Association for Business Economics in its quarterly outlook said they expected the economy to grow at a 2.6 percent pace in 2003 and at a 4 percent pace in 2004. That's up from average forecasts of 2.3 percent and 3.6 percent, respectively, last May.

"Our ... panel of forecasters expects this upswing to continue through the remainder of this year and next, as the impacts from the waves of shocks that hit the economy finally subside," Duncan Meldrum, NABE president-elect and chief economist of Air Products and Chemicals Inc., said in a statement.

Meldrum cited rock-bottom interest rates after the Federal Reserve's rate-cutting campaign and tax cuts as helping to boost growth.

http://www.cnnfn.com


Leibovit Files - Friday, September 19, 2003

Opening Comments

NOTICE:

Due to my appearance on The Nightly Business Report this evening, regularly scheduled updates intra-day today will be limited. Check your local PBS station for time in your area. It is usually a short interview (4-5 minutes), but goes very quickly.

Yesterday the bulls shined as early September highs were exceeded accompanied by positive volume and breadth and all in the face of Hurricane Isabel and Dick Grasso's resignation as well as three more American deaths in Iraq. We know the market it cold-hearted and ruthless and that fact keeps being rubbed in our faces. And, frankly, enriching people's wallets is more important to them than any of these external events. A sad commentary on our world and our country.

Apprehension over Tuesday's FOMC meeting and today's quadruple option expiration were merely unimportant distractions. Once the market 'train' is moving, there is apparently nothing that can stop it.

But, don't forget it's September and though we could run into early October, we're approaching the edge of the cliff!

Gold and gold shares is still the place to be. It's my number one play and has served me well. Yes, we're probably going to blow off here temporarily, but if the XAU can get to 110 first, who cares. A correction back to the high 80s would present a long opportunity.
* * *
Thursday, September 18, 2003

Opening Comments

"SAN FRANCISCO (CBS.MW) -- A fivefold increase in margin debt at Nasdaq member firms prompted market data provider TrimTabs.com to warn Wednesday that "the bubble is back" in U.S. stocks. Margin debt rose to $26 billion at July 31 from $5.1 billion at Dec. 31 -- adding $19 billion in June and July alone. That figure represents 15 percent of the total outstanding, compared to 7.1 percent in March 2000. TrimTabs' warning follows regulatory agency NASD's investor alert Monday that trading "on margin" is up 25 percent year-to-date and many investors may underestimate the risks. The NASD alert suggests that Nasdaq members are being required to tighten margin rules after a period of relaxation, TrimTabs said. "When a loosening becomes a tightening, the affected stocks collapse. That is in part what happened in early 2000 when the Nasdaq tightened margin requirements on some of the more aggressive stocks."

http://www.vrtrader.com


Consumer sentiment sours unexpectedly - USA TODAY
Sept. 12, 2003

NEW YORK (Reuters) — Consumer sentiment crumbled unexpectedly in early September, a survey showed, as wariness lingers over the jobless recovery and unemployment remains stubbornly high, market sources said Friday.

The University of Michigan's closely-watched gauge of consumer confidence fell to a preliminary 88.2 in September, from August's final 89.3, the sources said.

Economists polled by Reuters had expected a preliminary median September reading of 90.0.

The survey's index on consumers' current view of the economy fell to 98.9 in September from 99.7 in August, while the index of consumers' future expectations fell to 81.3 from August's final reading of 82.5.

Confidence took a severe beating earlier in the year in the build-up to the U.S.-led war in Iraq, but its steady recovery appears to have stalled as unemployment is stuck near nine- year highs and consumers are worried about job security.

http://www.usatoday.com


Silver on upside with other precious metals - Reuters
By Kevin Morrison, September 12, 2003

Silver increased on Friday to its highest price in London since February 2000 at $5.31 a troy ounce. The move may not prompt people to sell their cutlery, candlesticks and rings as they did in the silver bubble of 1980, but the price has nevertheless exceeded expectations.

Silver joined other precious metals in the spotlight this week as gold flirted with seven-year highs of more than $380 a troy ounce and platinum returned to 23-year peaks of $714 a troy ounce. Like its peers, silver is benefiting from strong investment flows into precious metals futures on Comex, part of the New York Mercantile Exchange.

"Silver reflects the interest in precious metals and base metals because it has characteristics of both groups," said Ingrid Sternby, metals analyst at Barclays Capital.

http://www.reuters.com


China Development Bank Sells $500 Mln Bonds Friday - Bloomberg

Sept. 15 (Bloomberg) -- China Development Bank will sell $500 million of dollar-denominated bonds on Friday, the nation's first foreign-currency debt sale to domestic investors, said a publication run by the Chinese central bank.

Beijing-based China Development Bank, the nation's second- largest bond seller after the finance ministry, will use the proceeds to lend to local companies, letting them use low-cost foreign-currency loans to repay higher-interest borrowings, said the Financial News.

``The bond sale will help release some of the U.S. dollars held by Chinese companies, and test rules for letting dollar- denominated assets be traded in China,'' said Zhong Zhilun, a bond analyst at Haitong Securities Co. in Shanghai.

http://www.bloomberg.com


LAUGH OF THE WEEK

TV's $1 billion give-a-way - UPI

ORLANDO, Fla., Sept. 13 (UPI) -- A monkey could give away $1 billion dollars, in a live, two-hour broadcast originating from Orlando, Fla., with Drew Carey as host. Someone is guaranteed $1 million and has a 1,000-to-one chance at the $1 billion haul. In order to win, the contestants have to pick the same six-digit number that Kendall the chimpanzee picks.


PICTURE OF THE WEEK

SMILING FROM THE WOMB

Pioneering scanning techniques have

produced astonishing images from inside

the womb which show babies

apparently smiling and crying.


COMMENTARY


LOOK BENEATH THE GOLDEN GLEAM - Tim Lee, Financial Times
September 14, 2003

Optimism is stirring in financial markets and the U.S. economy. Recent indicators have suggested that enormous fiscal and monetary stimulus is having an impact.

Stock markets have held on to substantial gains and bond yields have risen as forecasts for growth have been revised upwards. Supply-side arguments revolving round strong productivity trends are back in vogue, as is a tendency among analysts and market participants to ignore the implications of persisting global imbalances.

However, there is at least one warning sign that all is not well and that problems lie ahead for financial markets and the global economy.

This is the underlying strength of the gold markets, both bullion itself and gold mining shares. The gold price has risen from lows of close to $250 an ounce early in 2001 to almost $380 now. The increase has been prolonged enough to suggest the end of the previous long downward trend.

The increase in the price of gold has certainly not gone unnoticed but it has not been satisfactorily analysed.

Some commentators have seen it as a symptom of the risks posed to the financial system by the supposed threat of deflation, while others ascribe it purely to dollar weakness. Very few observers have taken the traditional view that the upturn in gold is a sign of nascent inflation pressures.

Most market participants seem to view gold's strength as having no longer-term significance, being merely the result of diversification by investors and accompanying speculative activity by hedge funds.

The conventional wisdom is likely to prove mistaken. The gold market may be relatively small but gold retains its significance as a longer-term monetary indicator. Contrary to a popular view, this importance does not depend on the whims of a few central bank governors and finance ministers but, rather, on the characteristics that have historically made gold a money, and that lie behind its long history as a monetary asset.

Looking back, the medium- and longer-term movements in the real gold price have contained information about the forces shaping the economy and financial markets. The difficulty, as always in economics, has been in understanding and correctly analysing those influences as they are occurring, rather than after the event.

For more than 100 years gold has experienced very long cycles in its real value (that is, its price relative to goods and services), but these long cycles have occurred around a constant level. That is, in a long-term sense the real gold price has tended to remain stable. (This was not true longer ago in history, when large gold discoveries had an impact). Around this stable real value there have been three extended periods of depressed real gold prices: the first from 1920 to 1933; the second in 1952-70; and the third the period that began in the mid-1990s.

The first of these coincides roughly with the monetary regime of the gold exchange standard and the second with the era of the Bretton Woods system of fixed exchange rates. In both these periods, the price of gold was fixed by central banks and governments.

The difference between the two was that under the gold exchange, standard price levels in the economy were forced into alignment with the low fixed price for gold -- meaning deflation -- while under Bretton Woods, ultimately they were not. Central banks pursued expansionary monetary policies in the 1960s and early 1970s that were incompatible with the low price fixed for gold, until the system inevitably broke down, with inflationary consequences.

The third period of low real gold prices, which continues today, can also be attributed to the actions of central banks and governments; but the forces at work are more complex. Beginning in the mid-1990s, central banks and governments not only sold gold heavily from reserves and lent gold to short-sellers but their wider activities also encouraged excessive speculation in financial assets that further discouraged investment in gold. In the bubble environment of the 1990s, this helped create many of the "feedback loops" that sustained the financial bubble. For instance, low gold prices played a role in helping to suppress inflation expectations, which further encouraged the financial markets.

Arguably, the downward trend in the price of gold also helped to cement the dominance of the dollar as the world's reserve currency and store of value. The strength of the dollar, in turn, was a further force keeping U.S. inflation low even as the Federal Reserve implemented an increasingly loose policy. The weakness of gold until the end of the 1990s was therefore integral to the financial bubble environment, both as a cause and an effect of the inflation of financial asset prices.

This perspective leads to two main conclusions. First, the new upward trend in the gold price may well point to the fact that the post-bubble adjustment process still has some way to go. Second, particularly if it continues, it will be an indicator that Fed policy has indeed been too lax and ultimately inflationary. This implies that the Fed's latitude for policy action is becoming much narrower.

When these conclusions are added together, they suggest an outlook for the global economy, and both bond and stock markets, that is much less benign than the optimists would have us believe. Investors would do well to look more closely at gold's steady rise.

* The writer, an economist, is author of "Why the Markets Went Crazy," published next month by Palgrave Macmillan.

http://www.ft.com


A NEW GOLDEN STATE - David Bradshaw, Editor, RMP
Sept. 15, 2003

Thankfully, I was not among the 40% of Americans who skipped taking a vacation this year. It allowed my wife and I to become consumers for about a month, rather than strict capitalists.

And wow, what a vacation! Imagine a 4,000 mile road trip, over 22 days with a pregnant wife and three chihuahuas visiting family and friends in CA, OR, ID, WY, UT and NV. Sound fun?

We started out from PHX to LA to visit my daughter and family. What can you say except, LA is still beautiful, despite all of the traffic, smog, attitudes, etc.

We loved the windy drive up the California coast, but cringed at the prices of real estate...even inland, the beautiful wine country is out of reach for most non-Cali homeowners.

We especially loved Ferndale, CA, with its rolling hills, wildlife galore and private beach...but pricey. The Victorian-style theme of Ferndale is notosgic, romantic and ecclectic...be sure to visit next time you're near Eureka...and visit The Collingwood B&B...where animals and people are both welcome to share their hospitality.

The trip outcome? A renewal of family (we visited my brother in Twin Falls, ID for the first time ever...I've been promising to visit for 10 years) and friendships. We are scouting a new place to beat the summer heat in Phoenix.

And the winner is... Southern Oregon! The climate is great and the scenery is beautiful virtually everythere between Grants Pass, Medford and Ashland, OR.

I missed visiting my friend and talk show host, Roger Fredinberg in Medford (he was on vacation as well along the Oregon coast) but no problem, we'll be back very soon.

"Don't Californicate Oregon," was the local attitude I found in Ashland, OREGON where real estate prices have risen dramatically in recent years, based on the migration north of CA real estate sellers, looking for more value.

We took a speedboat ride up the Rogue River with a group of tourists and had great fun while traveling to and fro looking at potential properties.

Jackson Hole, WY was another beautiful sight to see. Best of all, old friends took us boating on Jackson Lake to a remote beach for a barbecue. No one else was even out on the lake that day. Amazing, huh?

We then headed south to SLC, UT to visit another daughter, BreeAnne, to celebrate her birthday. SLC is another beautiful city at the foot of the Rockies.

Our final stop was Las Vegas, NV ('lost wages' for many) to see Circus de Solete. It was spectacular! Micki had never gambled before so I gave her $10 and she turned it into $50 and then called it quits. Vegas is a city that tangibly reflects the result of decades of haphazard growth fueled by the rise the lottery mentality now rampant in America. We were glad to see the show, but equally glad to leave for our good old home in Phoenix, AZ.

* * *

It seems that the best fun and values are discovered off of the beaten track - perhaps true in life and in most of the investment world as well.

For example, gold has proven to be the best investments of the new millennium, as we suspected it would. Now, as the massive personal, corporate and government debt bubble keeps grows, the upward pressure on all types of tangible assets also seems to grow. Why?

For the same reason that debt is the root cause of our unemployment problem. Debt strangles growth...of a person, a family, a company, a nation, a world. Tangible assets offer hope because they're debt-free.

Gold and U.S. rare coins are on a trajectory toward the moon right now, and yet most Americans are not even watching them.

That creates an opportunity par excellante for our readers to jump into gold and coins, while the rest of the world sits on the fence watching CNBC for clues.

But, before you jump into anything - get educated. Read our book, Rediscovering Gold in the 21st Century: The Complete Guide to the Next Gold Rush. Read our latest pubs, The New Gold Rush, I & II. See why we're right.

All investment has risk, but then all vacations have risk too! If you put your faith and hope in the wrong investments you could end up as one of the hopeless. Don't risk it. Diversify at least a small portion, say 10-15% of your liquid assets into gold or gold coins (hey, Richard Russell says 30%, see below).

Since Swiss America has been helping with the conversion from paper to tangibles for over 21 years, I think you it's safe to say that you will be in good hands...hands that will hand you a product that has been faithful and hopeful for over 6,000 years.

Regardless of where you live, you can enter a new golden state - it is a state of mind that understands why gold is the color of hope.. -DMB

P.S. The bull market in gold has now moved into Phase II


BEFORE THIS BEAR MARKET IS OVER...Richard Russell, DTL
When the public finally realizes what happening to its dollars, there'll be a panic to swap dollars for gold.
Sept. 1, 2003

Before this bear market is over, I foresee paper money being distrusted and discredited and the institution of the Federal Reserve not only despised but rejected. The US, today the world's greatest debtor, will no long be the world's leader, and I foresee US stocks smashed to levels not dreamed of even by the leading pessimists of today.

All the above may sound harsh, but it is what I believe lies ahead. When the normal and natural forces of the market are man-handled as they have been under the Greenspan Fed, other normal and natural corrective forces will ultimately take over. In the history of markets, the greater the speculation, the greater the ultimate correction. And the world has seen nothing like the speculation of the last eight years.

Every movement in the stock market, minor, secondary or primary -- is ultimately corrected. The "double bubble" that we've experienced under the Greenspan Fed is unprecedented in stock market history. This bear market, before it has breathed its last, will also, in my opinion, be unprecedented in its severity.

Question -- Russell, I note that many Asian stock markets are doing well, and, in fact, almost appear to be in new bull markets. Would you suggest buying closed-end Asian-oriented funds such as CHN, GRR, GCH, IGF, JFC, JFI, TDF and TRF?

Answer -- All these funds have done well, and I believe they may continue to do well as long as the US market holds together. But the world is so dependent on the US that I'm afraid when the US stock market starts to unravel it will take most of the world with it.

Question -- So what do you suggest?

Answer -- I suggest just what I've suggested all along. Gold and gold shares. But I'm making one change. I now suggest that subscribers put at least one-third of their liquid assets (not counting their home, their business, etc, just the liquid assets) into gold coins and gold shares.

Question -- Where can I store the gold coins?

Answer -- I don't know, find a place to hide them. There's nothing like the actual possession of gold with no paper of ownership between you and the actual metal. Find a place to hide 'em, period.

Question -- What if the government decides to call gold in as they did during the '30s?

Answer -- It won't happen. Look, the Chinese government is now openly and strongly encouraging its citizens to accumulate gold. Do you think the US government would move to confiscate gold from its citizens while the Chinese are accumulating gold? Do you realize the idiotic implications of that kind of move? Communist China being freer than the democratic US? No, there'll be no confiscation of gold in the US, believe me.

Question -- OK, Russell, let's say we stay with our gold, and ultimately gold goes into its bull market third phase, Gold blows off at I don't know, a price of 800 or 1,000 or 3,000. What do we do then? Shouldn't we sell out? But what do we sell for, more paper dollars?

Answer -- Whoa, that's looking too far ahead. I don't know what we'll do when if or when the gold bull market goes crazy on the upside. Maybe at that time we'll just hold the gold. Or maybe we'll sell the gold for a gold- backed Chinese renminbi or an Arab gold dinar. I'll just have to see how things look at the time. That's looking too far ahead. First things first -- for now, just build up your gold position.

Question -- You say we're still in the early accumulation phase of the gold bull market. How do you figure that?

Answer -- The public at this point doesn't even know that gold is rising in price. If they do, their reaction is "So what, who needs gold, my dentist, maybe." The public doesn't realize that gold is real wealth and that dollars are a temporary currency and not a store of value. When the public finally realizes what happening to its dollars, there'll be a panic to swap dollars for gold.

Question -- Russell, why are you so sure that this is really a gold bull market.

Answer -- Because the government of the US has put itself in a position that is untenable and unsustainable. We're spending ourselves into a form of bankruptcy. Sure, a sovereign nation with a reserve currency can't go bankrupt, but it's paper can become unacceptable to buyers from other nations.

The US today is enjoying its so-called "prosperity" solely because other nations continue to accept dollars for their goods, merchandise and services. But two phenomena say that the dollar, as a reserve currency, is doomed. The first is the trend of the dollar which in the big picture is down. The second is gold, which is now in a primary bull market. Both of these spell the demise of the dollar. When the dollar is no longer acceptable by other nations, the US prosperity will be over.

Question -- What of the stock market at this point?

Answer -- What we've been seeing of late is the market moving up on less and less upside volume. This can continue for a while, and it's mainly continuing with small and medium-sized stocks where it does not take a lot of volume to move these stocks higher. But it takes a lot of volume to move the big "backbone of the economy" type stocks higher, and this is where the upside volume is dropping off.

Note that as the Dow approaches the halfway level of the entire bear market decline, Dow 9504, important resistance comes in and the Dow backs off. Let's watch to see whether this phenomenon appears again if the rally continues. But I think it will take more upside volume than we've seen so far to move this market higher. Besides, the market is pushing towards overbought status now, but let's be open-minded. Remember, the market does what it wants to do, not what we want it to do.

Richard Russell
Editor-in-chief - DOW THEORY LETTERS
http://www.dowtheoryletters.com


HARD-ASSET BUGS KEEP THE FAITH - Thom Calandra, CBSMW
Fund managers search for market alternatives
Sept. 12, 2003

Most of the folks who handle paper investments on behalf of their clients are agog at the 40 percent gains in America's smallest companies these past six months. The gains in small stocks stack against a 25 percent return for the Dow Jones Industrial Average and other earth-mover stocks. See the chart.

Professional money managers, grateful for this reprieve, are sure to hit the "sell" button at any sign of a tipsy balance sheet, a hiccup in sales, stale profit margins or lull in new contract signings. As Market Semiotics' Woody Dorsey told The Calandra Report in an interview this week that will come to define both the looming meltdown in paper assets and the building momentum of the commodities rally, "Most portfolio managers have no faith in what they own, except for the commodities crowd."

This hit home with me two months ago, when I was at breakfast with a $1 billion asset manager, a $300 million asset manager and the chief executive of a commodities miner whose shares in the weeks that followed doubled in price. Both managers said they were desperate to lighten up on the small-cap technology stocks they owned and wanted a foot into the world of hard assets, be they copper, gold, platinum, nickel, zinc or iron ore.

Says Dorsey, "The day is coming when a Hecla Mining, lots of these (gold, silver and copper mining) names, can trade like an EBay and triple in three years."

Some in the hard-nosed hard-asset crowd would have me substitute three months for three years. So what's really making money in this crazy, mixed-up investment world?

Frank Holmes, an often-quoted hard-asset manager and chief executive of $1 billion-plus U.S. Global Investors in Texas, told me at the New York Precious Minerals Conference this week that a large portion of the investing public -- i.e., ordinary folks -- have no idea how well commodities have performed since the U.S. terrorist attacks of two years ago.

Commodities baskets of all stripes, stuffed with gold, lumber, copper, energy products, grains, livestock and more, are up almost 25 percent since Sept. 11, 2001. The boost in prices of hard assets comes as China, whose imports of natural resources are rising at a 15 percent and greater clip each year, steps up demand for copper, lumber, nickel, platinum and gold.

In this same two-year scenario, America's largest paper investments, as measured by the Dow Jones Industrial Average, are even-steven flat. So we know where the long-term money -- what some people call "smart money," if there is such a thing -- is going.

Indeed, Chuck Butler, chief strategist at Everbank, the banker that specializes in currency-denominated certificates of deposit for ordinary folks, tells me the rising demand for natural resources is one reason why the Australian and New Zealand currencies, both of them backed by expanding economies built on metals and agriculture, are making steep gains against the American dollar.

Back in the world of asset managers, Holmes of mutual fund operator U.S. Global says he is confident that gold, copper, platinum (near a 23-year high), nickel (near a three-year high) and other prices will rise sharply in coming weeks and months.

Holmes is a Canadian by birth and a specialist in gold, silver, copper and platinum companies. He's good at sound bites and even better at identifying undervalued gold and copper companies that are making their way from Canada to the American Stock Exchange.

On the sound bite part, he tells me that since Sept. 11, 2001:

* The country went from a budget surplus to a deficit of more than $450 billion. Interest rates are at a 40 year low.
* There are 5,000 fewer commercial flights per day. The dollar is down 15.4 percent against a basket of currencies.
* Gold is up 32.8 percent.
* The S&P 500 Index of earth-mover companies (paper assets mostly) is down 4.35 percent.
* U.S. Global Investors Gold Shares Fund is up 149 percent.
U.S. Global Investors World Precious Minerals Fund is up 162 percent.

http://www.cbs.marketwatch.com


WHAT DOES THE GOLD MARKET KNOW? - Bill Bonner, Eric Fry
Sept. 10, 2003

Open your new eyes, dear reader, and look on in awe: we have what appears to be a major, major bull market in gold developing. At first, people hardly notice. The price of gold is reported as a curiosity. 'Must be central bank buying,' they tell themselves. Or, 'I wonder when those nutty gold bugs will finally give up.' The average person has no idea. He listens to CNBC and is blind to what is actually going on. Gold... the dollar standard... deflation - they are all occult mysteries to him... strange, forbidding, and vaguely menacing.

But as a bull market develops, more and more people see what is happening. Gradually, one by one at first... and then in droves... they discover the rising market and want to get in before it is too late. Already, the Tocqueville Gold Fund reports that assets are up more than 50% in the last 12 months... but only to $293 million. A prediction: the fund will have billions in it before the bull market in gold has run its course.

The rising price of gold means something. Below, Eric wonders what. We don't know. But when we look upon the phony mess erected on the sands of the Dollar Standard system, it seems to be leaning. Is it us? Or is the proud tower itself actually tilting more and more... ? If so, gold will not hold it up, but it will be a good thing to have buried in your yard when the average investor finally opens his eyes... and sees the Dollar Standard fall.

-------------

Eric Fry writing from New York...

- The gold market has been nothing short of spectacular over the last few months. The dazzling metal has jumped $30 since the bond market topped out on June 13th. The metal's impressive rise has inspired a dramatic rally in gold shares, which has vaulted the XAU Index of gold stocks to a six-year high.

- Again we wonder, "What does the gold market 'know?'" Does it know that the Fed's reflation campaign will succeed too well? Or does it know that President Bush will continue spending billions of taxpayer dollars to preserve Iraq as a breeding ground for terrorists and a habitat for anti- American terrorist acts?

- Or maybe the gold market knows only that U.S. financial assets are very expensive, and worries, therefore, that U.S. stocks selling for 35 times earnings, U.S. bonds yielding 4.40%, and a U.S. dollar selling for $1.12 per euro are all too pricey for risk-averse investors to own in large quantities. The gold market offers up itself, therefore, as an eye-pleasing alternative.

- Gold has always provided a kind of insurance, first and foremost. It is not an 'investment' per se. But when economic uncertainties mount, buying a bit of gold 'insurance' can be a terrific investment. At the moment, insurance is in demand.

http://www.dailyreckoning.com


FORTRESS AMERICA - Stephen Roach, Morgan Stanley
Sept. 12, 2003 (from Edinburgh)

The United States is turning protectionist. Or at least that’s the growing risk in this tough economic climate. America is now taking dead aim on the “China problem.” Legislation has been introduced in the US Congress that threatens to impose 27.5% across-the board tariffs on Chinese exports into the US if the RMB peg is not abandoned. In my opinion, this is a classic example of opportunistic politics leading to bad economics. Such an approach would have negative impacts on the US, China, and the broader global economy. It is right out of the script of the nightmares of the 1930s.

At present, the odds of this piece of legislation (S. 1586) being enacted are low. I would currently assign no higher than a one in five chance to such a possibility. Yet those odds will undoubtedly rise as the US political cycle heats up -- especially if America remains stuck in a jobless recovery. Perceptions of job and income security have long been the defining issue in US presidential campaigns. It’s hard to believe that it will be any different this time around, especially since America’s hiring shortfall -- some 4.2 million jobs and counting, by my reckoning -- is the worst in modern experience.

Significantly, this Congressional assault on China is bipartisan -- sponsored by three Democrats (Senators Schumer, Durbin, and Bayh) and three Republicans (Senators Bunning, L. Graham, and Dole). That underscores the breadth of support for the China assault -- an especially worrisome sign of more protectionist efforts to come. For that reason, it is hard to dismiss the real significance of S. 1596: It is a shot across the bow of America’s commitment to globalization.

FULL STORY


LOSING LIBERTY - Pat Boone, The Pat Boone Show
Sept. 15, 2003

[EDITOR'S NOTE: Pat Boone is a renowned singer, performer, actor, author, client, spokesperson and friend of Swiss America for many years. Bravo Pat!]

You're looking at one fortunate guy.

I started to say "lucky" - but I know it's not luck. For reasons only God can explain to me some day, I am blessed. I was born in America, to begin with.

Though I'm blessed to have been born to exceptional and loving parents, and have a great brother and two beautiful sisters - if I had been born in Mongolia, or Yugoslavia or Pakistan, or indeed anywhere else in the world, my story would be vastly different.

Above all other people on the face of the earth, we are the most blessed.

As you know, the first explorers and settlers who arrived here, welcomed by the Indians in most cases, were Christian people from various backgrounds and occupations, looking for a "promised land" where they could be free, and self-governed, make their own decisions about where they'd live, what they'd do and say, and above all be free to worship God as their consciences and their Bibles instructed them to do. They took enormous, almost incalculable risks, endured tremendous hardships, cut themselves off from everything in their past, and found their way through largely uncharted seas to a new land. And here, they founded a new society, a new Republic eventually, predicated upon - and dedicated to preserving - liberty

For over 200 years, our forbears fought numerous wars, shed blood on our soil and abroad, fought and argued and sacrificed, and many died, simply to defend and preserve our way of life, and its foundation - liberty.

In short, America, as folks my age knew it, in our younger years, was the closest thing to an ideal society this world has ever known, and it was certainly the envy of the rest of the world. We all thought it would go on forever that way, didn't we?

After all, who could take away our liberty? We were the strongest military power in the world, we were the richest nation in the world, one of the most populous, and we had proved again and again that we would successfully defend our rights against all opposition. Right?

FULL STORY

To order Pat Boone's new CD "America's Glory"


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