AT THE CROSSROADS

Nov 5, 2004


MARKET NEWS DIGEST
-> Dollar Falls to Record Low Against Euro
-> Gold at 16-year high on dollar weakness -FT
-> Stocks gain on job data -CBSMW
-> Bush Wins Re-Election, Reaches Out to Foes
-> Bin Laden lauds costs of war to U.S. -MSNBC
-> China signs giant oil deal with Iran -WashTimes
-> Stock Market Indicator Predicts Election? -NewsMax
-> Economic Events for November 1-5, 2004
COMMENTARY
-> IZZY PLAYS BASEBALL -Israel Friedman, SilverSeek.comSATC
-> COMMON SENSE ECONOMICS -Craig R. Smith, SATC
-> Osama enters the US presidential race - BARRY RUBIN, JP
-> Can Gold STOP WARS? -Alex Wallenwein, A-1Gold
-> SOME THINK THIS METAL IS GOLDEN -SHANNON BUGGS, HC
-> Falling Dollar: The Fed Won't Protect -John Mauldin
Founders' Quote of the Week

"There is little need of commentary upon this clause. No man can well doubt the propriety of placing a president of the United States under the most solemn obligations to preserve, protect, and defend the constitution. It is a suitable pledge of his fidelity and responsibility to his country; and creates upon his conscience a deep sense of duty, by an appeal, at once in the presence of God and man, to the most sacred and solemn sanctions, which can operate upon the human mind."

-Joseph Story


MARKET NEWS DIGEST


Dollar Falls to Record Low Against Euro -Reuters
Nov 5, 2004

NEW YORK (Reuters) - The euro hit a record high against the dollar above $1.2927 on Friday as the beleaguered U.S. currency weakened across the board in technically driven trading.

The dollar's bounce from strong U.S. employment data earlier in the session proved fleeting, as dealers, concerned about record U.S. trade and budget deficits, saw an opportunity to sell it lower again.

This involved buying euros en masse, taking out options barriers around $1.2900, and then at the previous all-time high of $1.2927.

The euro climbed above the high of $1.2927 hit on Feb. 18, touching a record peak around $1.2935, according to Reuters data.

Global policy-makers have recently appeared fairly tolerant of the dollar's decline, and their laissez-faire attitude has encouraged investors to continue selling the U.S. currency. Some Federal Reserve (news - web sites) officials recently signaled that the dollar would have to fall if the U.S. trade gap remains wide.

http://www.reuters.com


Gold at 16-year high on dollar weakness -FT
By Kevin Morrison
November 4, 2004

Gold prices moved higher on Thursday, breaking through 16-year highs as the dollar continued to weaken. Bullion was quoted at $432.50/$433.00 a troy ounce in afternoon trading.

Crude oil futures eased following the $1 rise in the previous session after President George W. Bush’s confirmed re-election victory overshadowed a rise in commercial crude inventories, and supply concerns were revived.

Traders said Mr Bush’s victory was likely to re-ignite fears about security of oil supplies in the Middle East and added that a Bush administration was likely to fill the US strategic petroleum reserve at current market prices.

IPE Brent crude futures for December delivery slipped 5 cents to $47.40 a barrel in early morning London trade, partly reversing the $1.01 gain on Wednesday.

Nymex WTI for December delivery was quoted 12 cents lower at $50.76 a barrel in electronic trade, following an advance of $1.26 in the previous session.

The Energy Information Administration, an arm of the US energy department, said on Wednesday that crude inventories rose by 6.3m barrels from the previous week, with most of the increase in the Gulf coast region, which is returning to normal operations following the damage of Hurricane Ivan in September.

The report showed a sharp increase in oil imports, which reached 10.7m barrels a day in the week to October 29.

http://www.ft.com

Related Story:
11/4/04 - The Dollar's Long-Term Direction: Down -NYT


Bush Wins Re-Election, Reaches Out to Foes
-Reuters Nov 3, 2004
By John Whitesides, Political Correspondent

WASHINGTON (Reuters) - President Bush won re-election to a second four-year term over Democratic Sen. John Kerry on Wednesday and promised deeply divided Americans he would earn their support and trust.

"A new term is a new opportunity to reach out to the whole nation," he said in a victory speech in Washington. "When we come together and work together, there is no limit to the greatness of America."

Speaking directly to supporters of Kerry, Bush said: "I will need your support, and I will work to earn it. I will do all I can to deserve your trust."

Bush clinched victory in a bitter eight-month struggle for the White House when Kerry ended the suspense of a vote-counting battle in the decisive state of Ohio and conceded the election. Kerry called Bush and later told supporters in Boston's historic Faneuil Hall that "I hope we can begin the healing."

In a dispute that evoked memories of the prolonged election recount in Florida in 2000, delays in counting provisional and absentee ballots in Ohio had postponed the final outcome of the presidential election for hours.

Ohio's 20 electoral votes were the final hurdle to Bush capturing an Electoral College majority of 270 votes after a divisive campaign that focused on the war in Iraq, the battle against global terrorism and the economy.

"I would not give up this fight if there was a chance we could prevail," an emotional Kerry said in Boston. "There won't be enough outstanding votes for us to be able to win Ohio, and therefore we cannot win this election."

Bush begins his second term with the daunting challenges of a worsening insurgency in Iraq -- the aftermath of his decision to invade the country in 2003 -- and soaring federal budget deficits.

Republicans also celebrated expanded majorities in the House of Representatives and the Senate in results likely to build the president's mandate and ease Bush's conservative agenda in Congress.

Bush captured a majority of the popular vote, unlike the disputed 2000 election against Democrat Al Gore. With 99 percent of precincts reporting, Bush had 51 percent of votes against Kerry's 48 percent.

Kerry called Bush after meeting with running mate John Edwards and Sen. Edward Kennedy, his colleague from Massachusetts in the U.S. Senate.

"Sen. Kerry waged a spirited campaign and he and his supporters can be proud of their efforts," Bush said.

"DESPERATE NEED FOR UNITY"

Kerry said he congratulated Bush and they discussed the country's divisions and "the desperate need for unity, for finding the common ground, coming together. Today I hope that we can begin the healing."

The dispute over uncounted ballots in Ohio had thrown the presidential result into uncertainty, as Kerry vowed he would not concede until all the outstanding provisional and absentee ballots had been counted while Bush claimed victory.

White House Chief of Staff Andrew Card made a predawn appearance before Bush supporters to say Bush had a "statistically insurmountable" lead in Ohio and had won a majority of the popular vote.

Ohio's Republican Secretary of State Ken Blackwell had estimated as many as 175,000 provisional ballots could be cast, and counties reported as of Wednesday morning that 135,149 had been issued.

Republicans will hold at least 54 of the 100 Senate seats, three more than they now have, and widen their slim majority of the 435-member House in the new 109th Congress, set to convene on Jan. 3.

That will make it easier for Bush to push his conservative agenda through Congress, potentially making his tax cuts permanent and appointing more federal judges including possibly some U.S. Supreme Court justices.

"With a bigger majority, we can do even more exciting things," said House Majority leader Tom DeLay, a Republican from Texas.

Stocks soared on news of the win from Bush, with shares of major U.S. drug and defense companies rising on the expectation those industries would do well under Bush.

Allies like Russian President Vladimir Putin and Italian Prime Minister Silvio Berlusconi saw Bush's victory as bolstering the U.S.-declared "war on terror." But some disenchanted Europeans urged Bush to heal transatlantic rifts.

British Prime Minister Tony Blair, Bush's biggest ally in the war in Iraq, said in London the re-election of Bush came at a critical time when the world must unite to fight terrorism and Europe must rebuild its relationship with Bush.

"We must be relentless in our war against terrorism," Blair said. "We should work with President Bush on this agenda."

Long voter lines were reported across the United States on Tuesday and few major voting glitches were recorded in the final act of the long campaign.

With 270 electoral votes needed to win the White House, Bush had captured 29 states with 274 electoral votes. Kerry won 19 states and the District of Columbia and 252 votes. Bush held a lead of 3.5 million votes over Kerry nationwide with 99 percent of the precincts reporting.

Still undecided were Iowa and New Mexico, but only Ohio could make either candidate a winner.

http://www.reuters.com


Stocks gain on job data -CBSMW
Boost in U.S. nonfarm payrolls lends support for equities
By Mark Cotton, CBS.MarketWatch.com
Nov. 5, 2004

NEW YORK (CBS.MW) -- U.S. stocks traded higher Friday after the number of new jobs created in October far surpassed expectations, suggesting the recent slowdown in the economy may be coming to an end.

However, a decline in the dollar to new lows against the euro kept a cap on gains.

The Dow Jones Industrial Average was last up 55 points, at 10,369, after briefly posting a triple-digit gain to reach an intraday high of 10,416.67. The benchmark index however has risen over 300 points in the last three sessions.

The Nasdaq Composite Index was last up 5 points, at 2,028, off a high for the session of 2,046.92.

The S&P 500 Index climbed 2 points to 1,163.55 after closing out Thursday's session at a 2 1/2-year high.

On the broader market for equities, decliners had a 17-to-15 edge over advancers on the New York Stock Exchange, while winners outpaced losers by a 16-to-13 score on the Nasdaq.

Volume was 1.2 billion on the Big Board and 1.3 billion on the Nasdaq.

http://www.cbs.marketwatch.com


China signs giant oil deal with Iran -WashTimes

Beijing, China, Oct. 30 (UPI) -- China's Sinopec Group has signed a $70 billion oil and natural gas agreement with Iran, the China Daily reported Sunday.

The huge agreement is China's biggest energy deal with the No. 2 producer in the Organization of Petroleum Exporting Countries, the newspaper said.

Under a memorandum of understanding signed Thursday, Sinopec Group will buy 250 million tons of liquefied natural gas over 30 years from Iran and develop the giant Yadavaran field, the China Daily said. Iran is also committed to export 150,000 barrels per day of crude oil to China for 25 years at market prices after commissioning of the field.

Iran's oil Minister Bijan Zanganeh, who is on a two-day visit to Beijing pursuing closer ties, said Iran is China's biggest oil supplier and wants to be its long-term business partner, the newspaper said.

Official figures show that China imported 226 million tons of oil in 2003, about 13 percent of which coming from Iran, the paper said. Beijing expects to secure foreign energy supplies by the deals for its economy, which has turned China into a major oil importer but suffers severe power shortages.

http://www.washingtontimes.com

Related Stories:
11/01/04-Barrels of oil are pots of gold for Kuwaitis -CSCNews

$5 GAS COMING SOON! -- 10-22-04 -- SWISS AMERICA SPECIAL REPORT-- Oil prices have jumped from $17 in 2001 to over $55 in 2004 -- skyrocketing 65 percent in the past year alone! Gas is already over $4.00 per gallon in all of the top 10 most expensive cities in the world. Demand is swamping available capacity which means high oil prices are here to stay. Here's what do about it...


Stock Market Indicator Predicts Election? -NewsMax
Oct 31, 2004

Some pundits say the most accurate predictor of presidential elections for the past 100 years has been the Dow Jones Industrials' performance during the month of October.

Stock Trader's Almanac found that over the past 100 years, when the Dow rose 3.3 percent or more during October, before November's Election Day, the incumbent party has never lost. The study also found that if the Dow declined 0.5 percent or more in October, the incumbent party has never won re-election.

As it turns out, October trading has ended with the Dow down 0.5 percent. Enough to sink President Bush's re-election chances?

We're not so sure. For starters, Bush has a way of confounding history. Remember how unusual it is for a presidential son to run for president himself and win? It's happened only once before in American history.

Then there is the 9/11 factor. So much of our economic woes and lack of market confidence can be traced to Sept. 11. Polls show that Americans don't blame Bush for that, and see him as the better candidate in dealing with national security issues.

The verdict: Bush may trump all precedents come Tuesday!

http://www.newsmax.com


Bin Laden lauds costs of war to U.S. -MSNBC
In videotape, he boasts of economic damage
By John Mintz
Nov. 2, 2004

Osama bin Laden boasted that the invasion of Iraq has bogged down the United States in a hopeless war that advances al Qaeda's recruitment goals and bin Laden's aim of bankrupting the U.S. economy, according to a translation of the full text of the terrorist leader's remarks on a videotape that surfaced last week.

"The thinkers and perceptive ones from among the Americans warned Bush before the war" about the dangers of invading Iraq, bin Laden said on the tape, according to a U.S. government transcript released yesterday. "But the darkness of the black gold [oil] blurred his vision. . . . The war went ahead, the death toll rose, the American economy bled, and Bush became embroiled in the swamps of Iraq that threatened his future."

The tape, bin Laden's first videotaped appearance since September 2003, was given to the Qatar-based al-Jazeera television network, which released a seven-minute version Friday. It showed bin Laden saying, among other things, that Americans would be held responsible for electing any president who persecutes Muslims.

On the tape, the Saudi millionaire brags that he is succeeding beyond his dreams in destabilizing the U.S. economy and bankrupting the U.S. government, asserting that President Bush is easily manipulated into taking military and security steps that harm American interests.

The results of the U.S. war in Iraq, he said, "have been by the grace of Allah positive and enormous, and have by all standards exceeded all expectations."

"The policy of the White House that demands the opening of war fronts to keep busy their various corporations -- whether they be working in the field of arms or oil or reconstruction -- has helped al Qaeda to achieve these enormous results," bin Laden said. "And so it has appeared to some analysts and diplomats that the White House and we are playing as one team toward the economic goals of the United States, even if the intentions differ."

Bin Laden added, "Bush's hands are stained with the blood of all of those killed from both sides, all for the sake of oil and keeping their private companies in business," referring at one point to the Halliburton energy services company, which Vice President Cheney led before his election.

Bin Laden also suggested that the huge sums of money Washington spends on homeland security and the military serve his agenda of weakening the U.S. economy.

Full text of translation

"All that we have mentioned has made it easy for us to provoke and bait this administration," bin Laden said. "All that we have to do is to send two mujaheddin to the farthest point East to raise a piece of cloth on which is written 'al Qaeda' in order to make the generals race there, to cause America to suffer human, economic and political losses, without their achieving for it anything of note other than some benefits for their private companies."

He added: "We are continuing this policy in bleeding America to the point of bankruptcy." He noted remarks by counterterrorism experts that al Qaeda's expenses in attacking America are a tiny fraction of the cost of Washington's counterterrorism efforts. "Every dollar of al Qaeda defeated a million [U.S.] dollars . . . besides the loss of a huge number of jobs.

"As for the size of the economic deficit, it has reached record, astronomical numbers estimated to total more than a trillion dollars. Even more dangerous and bitter for America is that the mujaheddin recently forced Bush to resort to emergency funds to continue the fight in Afghanistan and Iraq, which is evidence of the success of the bleed-until-bankruptcy plan."

In the address, bin Laden also imagined the nearly 3,000 victims of the attack on the World Trade Center reflecting during their last moments on their guilty feelings about U.S. foreign policy. "They say, 'How mistaken we were to have allowed the White House to implement its aggressive foreign policies against the weak,' " bin Laden said.

http://www.msnbc.com

Related Stories:
11/2/04 --Bin Laden's call to bleed the U.S. economically -AP


Economic Events for November 1-5, 2004
---------------------------------------------
MONDAY, November 1:
Personal Income & Spending for September (8:30 am ET)
ISM Index for October (10 am ET)
Construction Spending for September (10 am ET)
Treasury auctions 3&6-month bills
Auto Sales for October
---------------------------------------------
TUESDAY, November 2:
Weekly Chain Store Sales (9 am ET)
Challenger Layoffs Report for October (10 am ET)
Election Day
---------------------------------------------
WEDNESDAY, November 3:
Factory Orders for September (10 am ET)
ISM Services Index for October (10 am ET)
EIA Petroleum Status Report (10:30 am ET)
Treasury announces 3, 5, & 10-year auctions (11 am ET)
---------------------------------------------
THURSDAY, November 4:
Weekly Initial Jobless Claims (8:30 am ET)
Productivity & Costs for Q3 (8:30 am ET)
Chain Store Sales for October (11 am ET)
Weekly Money Supply (4:30 pm ET)
---------------------------------------------
FRIDAY
Employment Report for October (8:30 am ET)
Consumer Credit for September (3 pm ET)
---------------------------------------------


COMMENTARY


IZZY PLAYS BASEBALL -Israel Friedman, SilverSeek.com
Nov. 4, 2004

We’ve had big changes from last year in far eastern countries, like India, China and others who’ve accumulated dollar reserves from their exports and who have started to rapidly expand their economies. This explains why countries with populations in the billions caused big demand for raw materials across the board and we saw tremendous price hikes in many commodities.

It looks to me that this is just the beginning of a new era of demand for raw materials. We must remember that billions of people are only starting to buy the modern things that we in the western world take for granted. It’s hard to imagine how big demand will be in the future. So many modern items, especially electronic, contain silver.

That means silver, as a commodity, will have rapidly growing demand in the future. This will only lead to more deficits in silver. As it is, we have a deficit in silver, even before the coming new demand from billions of new world consumers.

My vision is that we are going to have a permanent shortage of silver. In order not to have a shortage of silver, they would have to find a substitute for all of silver’s many uses, which is highly unlikely. No material that I know has ever seen the permanent shortage that I expect in silver.

Sixty years ago we had a stockpile of 6 billion ounces of silver. That was enough to cover 20 years of consumption. Even at the current high rates of world consumption, 6 billion ounces could cover almost 7 years supply with zero production. But because we have eaten up this 6 billion ounce world inventory, we’re lucky to cover months, not years worth of consumption. No commodity in history has ever seen such a depletion in inventories.

If I am right and the permanent shortage comes, the only question is what are the price expectations for a material where most world stocks are gone? Remember this has never happened before. Last year in October, the price of silver was under $5. Today, it’s around $7. We could see some price corrections but silver can also explode at any moment.

Let’s put this in baseball terms.

1st Inning. We are in the first inning where the top price is $10. It’s a long inning and the fight between the longs and the shorts is still going on. We don’t know how long this inning is going to take but the shorts will be exhausted by the end of the inning,

2nd Inning. In the 2nd inning we will see prices 10 to 18 dollars. I think $18 will be a resistance area, the same that we had in 1979 for a while. In this inning there will be some profit taking, but this inning will be much shorter than the 1st inning.

3rd Inning. Price $18 to $25. This inning will be shorter than the 2nd, with less profit taking and some shorts will start to get in big trouble.

4th Inning. Price 25 to 49. COMEX is going to increase margins to 30% of the value of the contract and force 100% margin money for the current delivery month, a month before the delivery.

5th Inning. Price 48 to 76. COMEX is going to divide the existing contract into 5 contracts of 1000 oz each. This transformation will be easy for them because the current contract is 5 bars of 1000 oz each. The new contract will be only 1000 oz. In this inning some miners who are hedged will have financial difficulties on their short silver positions because nobody will lend for future production. Some miners will have such financial difficulties that they will be forced to close their mines and this will add to the deficit.

This is the last inning that I want to write about this year. I know there are 9 innings to a game, but I will write about the last four innings next year. If there is an emergency, I promise to write about the last four innings earlier

It looks to me that the physical holders will benefit the most if the price of silver goes sharply higher. The physical holders will provide the future balance between supply and demand. The US retail investor has approximately 300 million ounces of silver in bullion and coins. It is this silver that balances the deficit. The US retail silver investors will be in the driver’s seat, getting whatever price they demand.

Silver Mining stocks are also something to consider investing in. But we can have dangerous situation in the poor South American countries where a lot of silver is mined. Countries like Peru and Bolivia and some other countries that are not so poor, like Chile and Argentina, are going to tax the export of silver if the price goes sharply higher. Already we are seeing royalties instituted or increased, even before the price of silver has exploded. The mining companies in those countries will not benefit from rising prices.

All the people who want to buy silver, do your homework and only after that should you make a commitment. If you buy silver, think Big. Only people who think big make big. Have a vision, have common sense and luck. I wish that all the people that invest in silver become rich. And don’t forget; the modern gold is silver.

http://www.silverseek.com


COMMON SENSE ECONOMICS -Craig R. Smith, SATC
Nov 1, 2004

"Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people. To destroy this invisible government, to befoul the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of the day."
-Theodore Roosevelt, April 19, 1906

The difference between a politician and a statesman is simple: politicians live by consensus (polls), statesmen live by convictions (principles). For that reason alone I have already cast my 2004 vote for GW Bush!

Back in 1776, "Common Sense," was written by Thomas Paine advocating absolute American independence from the mother country England. In this little book appeared all the arguments that had been made in favor of separation, each being stated with great clearness and force, yet with such simplicity as to bring them within the comprehension of all classes of readers.

Now, 228 years later, central bankers in charge of the global economic future (they think) have decided that the world can no longer take the risk of free currency markets, so they issue a communiqu� asserting that "excess volatility and disorderly movements in exchange rates are undesirable for economic growth."

I disagree on the basis of Common Sense, which tells us that manipulated financial markets, for whatever reason simply postpone the inevintable. Common sense knows that every currency that is unredeemable in a hard asset will ultimately fall to its true value - ZERO!

Central bankers pretend otherwise, but they succeed only because so few Americans are willing to take the time to learn from history� to use their common sense and stop playing the blame game, as I wrote in my book, Rediscovering Gold in the 21st Century back in 2001 ...

Ending The Blame Game ...

Instead of blaming, America's founders took responsibility. They willingly shed their blood and gave up personal fortunes to secure our future and the personal freedoms that we hold dear. Yet today the majority still want someone else to be in charge - to be the responsible party.

American statesmen like James Madison assumed that future generations would choose wise leaders to represent them and govern by putting the common good of the country ahead of their personal interest. They deduced that if elected officials violated our trust they would be removed from office and never re-elected. I guess they did not figure on such a high level of public complacency.

No, the Founding Fathers never foresaw that the population would become so caught up in the pursuit of wealth that they would vote their pocketbooks rather than their conscience. They thought "We the People" would always do the right thing because they always sought to do the right thing. History seems to prove that was a bad assumption.

Sadly, most Americans cannot even define the word "money" today, so when it disappears very quickly they are frustrated that their luck has run out and must blame someone. Perhaps the best way to end the blame game is to understand the "game" well before playing it at all.

Work, Risk & Luck

There are only three ways to create wealth... 1) to work
2) to take risks
3) to rely on luck

Yet today the masses want wealth without risk, without much work and with good luck following them around like a shadow in the afternoon. Much of this is due to the rise of a lottery mentality, which is promoted at almost every level today.

There was a time in America when great invention and marvelous discoveries were sought after for the primary purpose of improving mankind. Most of America's great inventors cared more about making the world a better place than about the wealth that might follow - men (and women) like Edison, Salk, Franklin and Pasteur.

There was also a time when savings was a sign of maturity - when debt was shunned like the plague. But not today, it is just the opposite - and now Americans can't figure out why they feel like they are walking up a down escalator, financially. I believe we live in the greatest country of opportunity in the world, but we must keep things in proper prospective.

Yet when someone or some group in society doesn't have wealth our first reaction is often to blame someone or something else. Rarely do we consider that the reason someone doesn't have a job could be that they are just plain lazy or not skilled to do the job right. Or if you didn't make as much money as your friend on an investment, could it be he was willing to take more risk than you?

You see the problem with the blame game is that even if you do pin the blame tail on the right donkey it doesn't fix anything unless you do something with the donkey. What we need to do is to analyze the problem and see how we can fix it. Not the politicians - us! Until we begin to take responsibility and stop playing the blame game, I expect growing volatility in the financial markets and gold prices.

ReGold.com

Back in Nov. 2000 ...

Swiss America published a booklet and CD entitled "The Big Picture: The Shape of Things to Come on Planet Earth which was the last major cultural crossroads. America chose GW Bush instead of Al Gore in 2000, and I think we made the right choice.

Today, I have an uneasy feeling that America will not make the right choice again and therefore, we can expect...

1) Further disuniting of the United States (political gridlock)

2) More terrorism destabilizing the financial markets (falling stocks, rising commodities) and

3) A further, rapid decline in the value of the U.S. dollar (flight to quality tangibles; real estate, art, rare U.S. coins.

Not sure? Here is what I wrote in The Big Picture in Nov. 2000. You be the judge...

Millennium Economic Super-Cycles

I feel like a renaissance man, standing at the edge of world, looking at the extreme disequalibrium in our modern geopolitical, economic and religious scene - all on the verge of historic changes. And in my hand is the most valuable asset mankind has ever known - rare gold.

What will this millennium super-cycle mean to your financial portfolio? One of two things -- a giant harvest, or a giant headache. The so-called "New Economy" is coming back to earth. The "NASDAQ Nation" is now ready to "get real."

The massive ideological pendulum has begun a historic swing in the direction of morality, freedom, liberty, and justice - all of which draw strength from real assets like gold, land, livestock and all other commodities.

Consider these key economic factors:
1) Gold bullion is very undervalued, yet some rare coins are up over 50% in 2000.
2) Stock Indexes globally grow more volatile, fueled by wild Dot-Com speculation.
3) Global economic instability is rising, leading to a debt-liquidating crescendo.

The cumulative "millennium super-cycle effect" is unpredictable, perhaps even dangerous. However, in every approaching crisis is also a hidden opportunity. I fully expect rare coins to exceed the performance of the last two cycles. This is, as they say, a once in a lifetime opportunity!

P.S. To help readers understand the growing economic threats to your assets regardless of who is elected as President on Tuesday, we have two NEW FREE educational resources...

"A CITIZEN'S GUIDE TO COUNTER TERRORISM" A new educational DVD that covers how to prepare for five major types of terrorism that America now faces. Features Pat Boone who recommends; a family communications plan, basic steps of emergency planning and "financial terrorism" preparedness.

RESTORING THE STANDAND: A TRIBUTE TO REAGANOMICSDISCOVER WHY... Islamic Terrorists are targeting Mid-East oil and U.S. dollar Ronald Reagan fought to restore the gold standard. A Gold Standard will restore morality to our money.

Call our offices toll-free at 800-289-2646 between 8am to 6pm MT Monday-Friday to request these new resources. Read more from the Craig Smith Archives


Osama enters the US presidential race - BARRY RUBIN, JP
Jerusalem Post
Nov 1, 2004

An apparently authentic brief message from Osama bin Laden, which specifically addresses the American people, has set off political controversy in the US and elsewhere.

For the first time, bin Laden also remarks about his own experiences since US forces invaded Afghanistan, requiring him to flee.

The fugitive terrorist, responsible for the September 11 attacks on the America and many other terrorist operations, put on his moderate face and counseled the US to save itself from attack by surrendering to his demands.

The real reason for the September 11 attacks, he says, was the US-Israel alliance against Muslims, as in the 1982 Israeli invasion of Lebanon. This is what gave him the idea of striking the towers of New York.

Clearly, this is pure propaganda. In his many earlier statements, both public and internal, such a motivation was never mentioned. Indeed, his discussion of Israel was a relatively small part of his political discourse, eclipsed by his call for revolution in Saudi Arabia and condemnation at US sanctions on Iraq.

While his tone shifted somewhat after September 11, when Arabs criticized him for not focusing on the Arab-Israeli conflict, this was true to only a limited extent. Indeed, the Arab media and intellectuals often pretended that he had done so in trying to persuade the West to make greater concessions on this issue.

Compare, for example, this tape to one he made that was broadcast in February 11, 2003, directed at the Muslim world. He hardly mentioned Israel. Instead, he explained that the jihad was in response to an American imperialism which seeks to control the Muslim world on behalf of economic capitalists, political gangsters, and ideological Crusaders.

As he had so often done before, bin Laden identified the Muslims' enemies as Jews and Christians and said the only language they understand is force. Quoting well-established Islamic verses often employed by radical Islamists, he insists that it is religiously required to kill them and take their property. The goal of the jihad is nothing less than "to establish the rule of God on earth."

Aside from this new propaganda line � we are not against America or Christians as such but only their support of Israel � bin Laden made an explicit attack on President George W. Bush, almost as if he were trying to sway the result of the American election.

He also embraced anti-Bush conspiracy theories developed by American leftists and European anti-Americans as evinced, for example, in Michael Moore's film Fahrenheit 911. Among other points, bin Laden criticizes the Patriot Act, which is designed to fight terrorism. He claims the 2000 election was rigged and suggests that the success of the September 11 attack was due to Bush's incompetence.

Finally, he suggests that the US could preserve its security by staying away from the Middle East. This is similar to an earlier message to the Europeans to that effect.

Contrary to many analyses, however, the tape should not be mainly viewed as a threat to attack the US again. Such a conception arises out of a failure to understand that al-Qaida will attack America and its interests or personnel at every possible opportunity. Bin Laden does not need to make tapes to repeat that point. Rather, it is his attempt to win over US support by suggesting that changing the country's policies or leadership will end this war.

In direct terms, of course, the message was met by derision and anger in the US. This can mean that the tape will help Bush in the election. But this is not what bin Laden had in mind.

FULL STORY


Can Gold STOP WARS? -Alex Wallenwein
All wars are deficit-financed.
Nov 1, 2004

Please read that again:
All wars are deficit-financed!

This simple five-word sentence brings home a truth that is so profound, so revealing - and if correctly applied so devastating in its effect on illegitimate government power - that it has the potential of literally changing the world we live in.

But it can have that effect only if enough people are informed of it.

The good thing: it's very, very easy to understand how this is so - once somebody explains it to you in the right way. How so?

A stringent "gold-only" payment and borrowing system would not allow governments to borrow unlimited amounts of money from their subjects and then proceed to print the necessary fiat to "monetize" (pay back) that debt. The result: no more wars - because wars are always too expensive.

The bad thing: all it takes to utterly nullify the effect of these words is for politicians and bankers to lie to their subjects to make them fear for their safety and make them believe that a war must be fought to "defend freedom" or whatever, and that people need to show their patriotism by buying government debt.

Not that freedom isn't worth fighting wars over. In my personal view, it's the only legitimate reason for fighting wars. But the problem arises when the political/banking/industrialist and media-complex honchos put their heads together and figure out a way to benefit from a war. Together, they have the power to lie to us and convince us that - just this once - we need to make an exception and support them in their efforts - or else we die!

In that way, very credible threats are often artificially conjured up so the people, in a knee-jerk reaction, rally to support an otherwise unnecessary war. Once that happens, the re-ignition of the deficit-spending process is a forgone conclusion - gold standard or not.

So, what does that five-word sentence above really mean?

It means that, as long as wars are fought, an official gold standard will never last.

Just take a look at the history of the gold standard:

Every time an existing gold standard period was interrupted in history, it was because somebody started a war and there wasn't enough money around for any of the participating nations to fight it to conclusion. Even a country that didn't want to go off the gold standard had no choice but to do so, once it got involved.

Therefore we know truth number one: no country can ever really afford a war.

From that arises truth number two: IF (and that's a big "if") you can find a way to keep governments from borrowing money, you can find a way to prevent wars!

There is a corollary to truth number two: truth number two proves that it is really the people who have the true political power in every single instance (if only they could remember that fact occasionally!). If people simply refused to loan their government money (by "investing" in government bonds, treasuries, etc.) their governments would have no choice but to quit that nonsense.

The other corollary to truth number two is this: other nations have the very same power!

Just look at China or the other Asian countries who continue to almost single-handedly prop up our fiat-paper so they can export more of their products to us. If they stopped buying our government debt, we would not be able to finance wars anymore. And it's the same with any other country.

Therefore, if the entire world were to go and stay on a gold standard, and if that could be effectively enforced, major and protracted wars would be a thing of the past - but there it is again: that big, humongous "if."

Unfortunately, that's where the problem comes in and "reality" starts to bite us in the rear again. These nations have a vested interest in buying our debt - so far at least. On top of that, they themselves want to have at least the possibility to raise money for future wars (defensive or otherwise). So, trying to stop wars by forcing governments to stay and operate exclusively on a gold standard is like saying: "Let's just all destroy our weapons, and we won't have wars anymore." Idle dreaming, nothing else.

Or is it?

Would a private, parallel precious metals-currency make a difference, maybe?

Let's see. An established, parallel, non-state-run precious metals currency would give people the power to decide to get off, or stay off, the government-run debt racket. Governments, on the other hand, would not be able to manipulate a currency that they did not establish. They could only outlaw it altogether. People who want to save money could simply save their metal currency. They could still decide to work for paper-money, of course, but in order to make them accept and trade in paper (or computer-blip) currency, their government of choice would have to offer gigantic interest-rates as an incentive to bridge the by then obvious risk-gap.

That would make government borrowing very, very expensive - to the government, of course. The only ways for the government to reduce that expenditure would be (a) to jack the tax rates up sky-high, or (b) to inflate its way out of the problem.

Inflating its way out would make their paper even less desirable (by reducing its purchasing power) and would force them to offer successively higher interest rate incentives to the point where they would price themselves out of the debt market.

Taxing their people at ever higher rates would make the people grumble and would cause their subjects' opinions to change and would impel them to install a more user-friendly set of politicos.

Of course, governments always have the option to reveal their true face and become outright tyrants who simply don't care what people think. They can go back to ruling by force and make whatever fiscal extractions they deem necessary, impose price and wage controls, restrict movement, etc.

But history has shown that such nations or systems are never successful in the long run. These would-be tyrants have learned their lessons (or at least a part of it): that, ultimately, no forced economy can prosper! Just look at the lessons learned by China versus Soviet Russia. China is still with us - and is prospering indeed. To that extent, the "tyrant's option" always works against the tyrants in the long run - and they know it, trust me!

That's why Soviet-style communism has failed and was utterly abandoned by those who previously tried to implement it. A "gentler, kinder" version had to be installed. The politically free but economically stifling "social market" system of Europe is one exponent of this new trend. The politically repressive but economically free Chinese hybrid system is another.

And, don't think for a minute that we in the US live under true capitalism! We do not - and have not - for the longest time.

Instead, we live under a system that relies on both political and economic outright deception. Witness the lie of debt-based paper-money - and the lie of a "two-party system" where both parties' leaderships are pulling in the exact same direction (that of slowly eroding national sovereignty, leading to first regionalization and then total globalization). They differ only in the political rhetoric and the emotional hot-buttons they have learned to push in order to keep their respective constituents focused on fighting each other -- instead of fighting them.

In short, would-be tyrants have learned to compromise somewhat with the forces of freedom. But they have not abandoned their exclusive purpose in life: to wrest more and more power from the people - under whatever guise necessary. That's their nature. They just can't help it.

Anyway, a widely accepted and established parallel gold currency could force governments to live within their means more than any other thing on the face of this earth. Since governments will never subject themselves to such draconian restrictions voluntarily, and since even in "democratic" countries the electoral processes are so rigged that voters will never gang up in sufficient numbers to throw the rascals out, a parallel gold currency would give people the chance to "vote with their wallets."

Unfortunately, all it takes for people to willingly give up such a system, or to support yet another war or another assault on Liberty before it is ever instituted, is a nuclear explosion inside the US that can be blamed on Al Queda, Iran, North Korea - or whomever.

Currently, with the recently revealed CIA-verified Al-Queda and Osama videos, the groundwork for that contingency has already been laid. Better watch out!

Whatever happens, owning at least some gold will make most of these contingencies less devastating. No, gold will not deliver you from these dangers, but it will add an additional layer of protection you will otherwise not have.

Gold is not just money, gold is also insurance. What's even better: it is insurance coverage under which you don't need to file a claim to get your pay-out -- because that underwriter will never go broke on you!

Got gold?

EURO vs DOLLAR CURRENCY WAR MONITOR


SOME THINK THIS METAL IS GOLDEN -SHANNON BUGGS, HC
Houston Chronicle
Nov 1, 2004

Terrorism alerts. Oil prices around $50 a barrel.

Federal reserve rate hikes and hints of more to come.

Pockets of corporate layoffs.

Military personnel and private contractors dying overseas.

A presidential election too close to call and sullied by voter disenfranchisement allegations.

Dramatic investment market dips and dives.

So many disasters to avoid, so many uncertainties to resolve, no wonder so many investors have been cautious about buying stocks and bonds.

But anemic gains wiped out by inflation and taxes have the risk-averse looking to move cash out of savings accounts and money market funds and into more lucrative investments.

Gold futures, which closed up $3.30 on Friday at $429.40 an ounce after hitting a 16-year high of $429.90 earlier in the week, appears to be the most spectacular alternative right now.

Ancient asset

Gold is a valued financial asset because of its centuries-long history as legal tender.

Prices for this precious metal have kept pace with inflation for at least 200 years, according to the World Gold Council.

High oil prices have created turmoil in domestic financial markets. A 12-month analysis by Lipper of the movements in gold's price and the price of crude oil found no direct link between the two, but it did find a correlation to how both commodities are responding to investors' desires to avoid risk.

What else has the markets so worried?

Questions about why the nation's monetary policies have not helped the economy regain its strength.

Doubts that the federal government can balance its checkbook. Fears that Tuesday's election will be a repeat of 2000 and further lower the world's view of U.S. financial and political stability.

When other nations question a country's stability, that country's currency becomes less valuable.

Those are some of the reasons the dollar is weak.

Fleeing to safety

But because the dollar is such an important trading currency in the world marketplace, institutional investors can't abandon it completely. To protect their portfolios from the weak dollar, professional money managers have been flocking to gold as a safe haven.

So what do they know about investing in gold that you should know to avoid getting entangled in a scam or capsizing a portfolio?

For one, they know that when the U.S. dollar index goes down, the gold index goes up.

And they also know there are several ways to get investment gold and other metals into a portfolio.

The methods most accessible to individual investors, according to the World Gold Council, are mutual funds, mining company stocks, gold bars and rare coins and bullion coins, which are legal tender made with gold or silver issued by several countries.

South Africa launched the first bullion coin with the Krugerrand in 1970.

The mutual fund route is the simplest one to follow because it allows a professional money manager to make your commodity plays for you. But remember, the precious metals funds sector is very volatile.

Much to check out

If you choose to buy stock in a mining company, don't be dazzled by gold's high price right now. Check out the company's management and operations to see if it is well-positioned to capitalize on potentially higher prices.

"In the next few years, there will be more drastic reductions in the supply of gold," said Neal Ryan, a spokesman for Blanchard and Co., one of the oldest metals trading firms in the United States. "There have been no new large mining projects brought on stream in the last few years and no new ones on the horizon."

Investors looking for more direct ownership of gold can buy as little as a 1-ounce coin or several bars through retail dealers, such as Blanchard.

There are other, more complex investments - gold futures and options, gold forward contracts and gold-linked bonds and structured notes - that are best left to professionals.

Novice gold investors, if someone uses any of this jargon to try to sell you a gold investment, be careful.

FULL STORY

Related Story:
GOLD'S BIG PICTURE - The Aden Sisters, 9-22-04


A Falling Dollar - Fed Will Not Protect -John Mauldin It's All About the Trade Deficit
How High Can the Euro Rise?
The Fed Will Not Protect the Dollar
October 29, 2004

In March of 2002, I wrote an e-letter entitled "King Dollar and the Guillotine," which as the title suggests was a quite negative view of the future prospects for the dollar. Two weeks earlier, I had written a bullish letter on gold, having been bearish (really more agnostic) on gold for years. Since that time, we have seen gold and the euro rise over 50% from the cycle bottoms in dollar terms. Other currencies have not risen against the dollar at all. The Chinese Renminbi is exactly where it was and has been for many years. Almost three years later, we will review the future prospects for the dollar in this week's letter.

This is the third in a series of letters in which I review my major investment themes. The first two were on secular bear markets and the Muddle Through Economy. You can find them at the archives at www.2000wave.com.

But before we get into such weighty matters, I have had more than a few readers ask me to comment on the upcoming election. Of course, most of them know I am a Texas Republican and have a pretty good idea who I will vote for next Tuesday. They just want me to say something good about Bush or bad about Kerry. I am not above a little partisan politics, having served on the Executive Committee of the Texas Republican Party when President Bush was governor. But I am going to leave that partisan debate to other more skillful writers. The beat we cover here is money.

What I AM going to do next week (assuming we know who won) is focus on what the next four years will be like in terms of the economic and political climate and what will be the effect (or lack thereof) on the markets. In terms of the economy, whoever wins has a daunting challenge with remarkably few tools to bring to bear upon the major problems. Fortunately, we as investors do not have to sit back and do nothing. We do have the tools. It should make for an interesting letter. But back to the dollar.

The trade weighted dollar fell from around 110 when I wrote in 2002 to 85 early this year and has gone sideways since then. Even with the rather significant drop in the last few weeks, we are only roughly back to where we were in January against the major currencies. One final note, the trade weighted dollar is back to where it was in late 1996 and even 1991.

The Federal Reserve defines the trade weighted dollar as "a weighted average of the foreign exchange value of the U.S. dollar measured against a subset of the broad index currencies that circulate widely outside the country of issue." What that means is they look at the countries with which we trade and create an index based upon the average of their currencies. The more we trade with a specific currency, the more "weight" it has in the index. That is why the euro can rise 50% and the dollar only fall some 25%. The currencies of Japan, Mexico and Canada are in the index, as well as that of China. The dollar has risen recently against the peso, is flat with China and has not moved all that much in terms of many of our Asian partners. The euro has taken the brunt of the declining dollar.

I am still bearish on the dollar and will list the reasons in a few paragraphs. But before we start, let's take a deep breath. The dollar falling is not the end of western civilization. It is not some calamitous event which will shake the US to its core. It will have consequences, of course, but far less import than the problems a secular bear market will have upon our portfolios. It is, however, a trading opportunity.

I invite you at some point to go to http://research.stlouisfed.org/fred2/series/TWEXMMTH/95/Max. This is the St. Louis Federal Reserve's web site with hundreds of tables listing every sort of economic data that you can imagine. The link is to the long-term history (since the early 70's) of the dollar. The index began in 1973, and we can see several major moves. The dollar went sideways to slightly down for eight years from 1973. The real rise began from the high 90's in 1981 to 140 in 1985. It then dropped to around 80 by 1995 before rising back to 110 in 2002.

The point is that a drop of over 40% was not noticed by most of America in the late 80's and 90's. Unless you were traveling overseas, you did not see much difference. The economy grew fairly well throughout the period. Inflation continued to fall. There were some great trading opportunities and many commodity traders made their reputations and fortunes in that period. In fact, the recent drop of the dollar has not had that much of an affect upon the average American (again, unless you travel). Some industries are helped and some are hurt, but most of us just plow on ahead.

But it was certainly not a disaster. The valuation of the dollar is a symptom, not the problem.

Secondly, we should take note that currencies are the one market in the world where profit is not the end game. In stocks, bonds, commodities, real estate and anything else that moves, the object is to make a profit.

Currencies are a manipulated market. They are manipulated by central banks of sovereign nations who make decisions about what the level their own currency should be for the own economic and political purposes. That makes them volatile and very difficult to predict in the short term. In the long term, the markets work. But it can be much longer than most people think. Now, with those caveats let's proceed. I am going to work very hard to condense my thoughts, because you could make a book out of this topic. Indeed, Richard Duncan did an excellent book called The Dollar Crisis. My own book has several chapters on the dollar. (See http://www.amazon.com/exec/obidos/ASIN/0471655430/frontlinethou-20)

It's All About the Trade Deficit

There are many reasons to be concerned about the dollar, but the number one reason is the trade deficit. It is now at $600 billion and rising. I readily acknowledge there are those who say deficits do not matter. In the short term, you can make case for such an argument. But over the long term, I am at a loss to see how you can make such an argument.

Yes, $600 billion is a fraction, and a very small one at that, of the annual international currency market, which trades $1.2 trillion every day. I understand that the US is a very desirable country to live in and in which to invest and do business. I understand that $600 billion is less than1% of our total national assets. I understand that our intellectual capital is a huge selling point. As many have pointed out, the dollar is holding its own this last year.

Most of the above were true a few years ago, and the dollar still dropped since 2002. While the above reasons may make dollar bulls feel better, it seems to me like they are whistling past the graveyard. They really do not have much to do with currency valuations.

I have often quoted from a Fed study which shows that any time a country gets to a 5% trade deficit, there follows a sharp correction (usually 20-30% or more) in the value of its currency. We have been there for some time, and are going higher. The rising price of oil almost guarantees the deficit will rise.

Why have we not seen such a correction? As noted above, currencies are manipulated by governments for their own benefit. There are governments who believe it is in their best interest, at least for now, to keep the dollar propped up. (See more below.)

The Fed Will Not Protect the Dollar

As Bill Gross of Pimco noted this week, the Fed is between a rock and a hard place. (www.pimco.com)

"Despite candidates' insistence that this is the most important election of our lifetime, I suspect that the ones in 1980 and 2000 were more important, and the latter was decided by 500 votes in Florida or the U.S. Supreme Court depending on your political persuasion. Four years later and much deeper in debt, there's little either candidate can do to stop the near inevitable hegemonic (not hedonic!) decay. It's really quite simple you know. Asia has hollowed out our manufacturing base and is now making inroads into services. Job growth is and will continue to be hard to come by. To compensate we temporarily turned ourselves into a finance-based economy, dependent on paper profits and capital gains that in turn were driven by the march to historically low interest rates. That journey ended sometime over the last year or so - some marking their hegemonic calendar at June 13, 2003, the 3.13% low of the 10-year Treasury, others signaling the beginning of the end on June 29, 2004, the point of the Fed's first cyclical hike in short-term rates. Whatever, whenever. If the driver of profits and job growth is the price of money as opposed to domestic investment, it should come as no surprise that when the price goes up, the good times fade away. Either Bush or Kerry - Hillary as well - will have to contend with this near inevitability....

"My/our most certain idea, as expressed in previous Outlooks, is that real interest rates in the United States will have to be kept low, that the old Taylor rule is out. Too much debt in a finance-based economy precludes raising interest rates like we have in the past and while that keeps the patient/economy breathing; it leads to asset bubbles, potential inflation, and a declining currency over time."

If the Fed raises rates too far, too fast it will slow the economy and bring on a recession. If it keeps rates low, it risks inflation and a falling dollar. As I have written on several occasions, members of the Fed have let it be known that a little inflation buffer is not a bad thing if it is the price of protecting us from deflation during a future recession.

Inflation, however, is not good for a currency, as Gross and practically everyone else has noted. But the Fed does not care about the dollar. They will not willingly watch the economy wilt in an effort to protect the dollar. The only central banks interested in protecting the dollar are across the Pacific Ocean.

How High Can the Euro Rise?

FrontlineThoughts


ARCHIVES ...
(2004 news/views weekly summary


ABOUT THE EDITOR

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 ... NOTE: Youngest daughter Braida Zoe (9 months) is learning the importance of having a crash helmet -- a valuable habit for us all to remember!


DISCLAIMER: All of the information in this story is believed to be true, however errors are possible.
Past performance is no guarantee of future performance. All investments have risk.

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