Forum Archive Index - May 2002

[nickk@quicksilver.net.nz]

Lindley

Hey..........I was playing devil's advocate!

I want objectivity too and for the last 5 or so years I feel we have been
getting impartial rubbish from most commentators.  IMHO the US is stuffed
and slowly drifting into a bad recession.  Gold is rising quite markedly. 
Why?  Gold-eagle has some answers.

Cheers

Nk

Lindley Smith writes:

> I don't mean to start a slanging match . . . actually I'm very tempted.
> 
> The snippet read's like anti-captialist/anti-globalisation propaganda. I was 
>surprised that it took me until the last para to see the word globalization.
> 
> There are plenty of things I could agree with about the US being far less 
>than perfect, but the links/'causes' between facts are doubtful to say the 
>least eg. 'An overvalued dollar that is now leading to U.S. led trade wars.', 
>I think they'd have the trade wars irrespective of the level of the dollar.
> 
> The one I liked best was 'equilibrium price, most likely to around $600'. 
>With the cost of mining gold $200 I don't think a $400 profit margin is needed 
>to encourage miners to find more gold. Does demand massively exceed supply and 
>hence such a price rise is necessary to reduce demand?
> 
> BTW, I don't really know anything about gold, so feel free to let rip. I just 
>like to see a bit of objectivity when it comes to gold.
>   ----- Original Message ----- 
>   From: Nick Kearney 
>   To: sharechat@sharechat.co.nz 
>   Sent: Wednesday, May 29, 2002 11:05 AM
>   Subject: [sharechat] Gold
> 
> 
>   Go here and learn.
> 
>   http://www.gold-eagle.com/gold_digest_02/taylor052802.html
> 
>   Open your eyes people.  Like Rachel said, it won't happen overnight but it 
>will happen.
> 
>   As an example - the main reason why NZ economy is quite strong at the 
>moment is largely due to Rogernomics.  It takes a while but these things are 
>never short term.
> 
>   The US has MASSIVE fundamental economic problems.  Why are interest rates 
>1.5%?  I repeat, go here and learn.
> 
>   Here is a snippet.
> 
>   Nk
> 
>   PS Sorry to sound like RIL. IT's late and I'm tired.
> 
>   And so, by dishording gold in this manner, and by propagandizing the 
>largely false notion of enormous productivity gains in America during the 
>1990's, the Clinton Administration created a phony "Strong Dollar" Policy that 
>conned foreigners and Americans into buying American financial assets at 
>enormously overvalued prices. This resulted in the greatest financial bubble 
>of all times. But the con job worked for Wall Street and for the Clinton 
>Presidency. With booming stock prices he managed to escape removal from office 
>by trial and conviction of impeachment by the Senate.
> 
>   Because Americans were then and still are largely unaware of the deceit 
>that underpinned the booming 1990's, Clinton was able to claim credit for the 
>good times though in fact he laid the final foundation for the tragic times we 
>are now beginning to encounter. Blame for that will not doubt be doled out to 
>President Bush. The problem is, the rigging of the gold markets led to lower 
>interest rates even as the Fed created more and more money out of thin air. 
>But alas, as was true during the late 1960's and 1970's, foreigners are once 
>again showing signs of the signs of drowning in dollars. Thus the stage 
>appears to be set once again for a foreign led exit from paper money to gold 
>and other tangibles assets starting with real estate. Once again, we can 
>expect the laws of nature to prevail over the lies of our politicians as told 
>by the tell tail signs of dollar debt asphyxiation. The correction this time 
>however, is likely to make that of the 1970's look like child's play because 
>dollar excesses and imbalances are far more excessive.
> 
>   GOLD RIGGING LEADS TO MAJOR GLOBAL IMBALANCES
> 
>   Trashing gold not only assisted in inflating the U.S. financial bubble, but 
>it also lead to a number of very significant economic bubbles that threaten to 
>send the global economy into the second Great Depression of the last 100 years.
> 
>   The current account imbalances continue to worsen year after year after 
>year. Had the gold price been free to rise to its equilibrium price, most 
>likely to around $600, the U.S. would never have experienced the irrational 
>exuberance of the late 1990's that has subsequently led to imbalances like the 
>following:
> 
>     a.. Major domestic debt the likes of which we have not seen since the 
>1930's and which is far greater in terms of national income. 
>     b.. $2.2 TRILLION of debt owed to foreigners, making the U.S. by far the 
>largest debtor nation on earth. 
>     c.. The evaporation of trillions of dollars of stock market value leaving 
>Americans ill-prepared for retirement. 
>     d.. An overvalued dollar that is now leading to U.S. led trade wars. 
>     e.. A housing bubble that will soon lead to personal bankruptcies on top 
>of record bankruptcies already. 
>     f.. The demise of basic industry in America (mining, manufacturing and 
>agriculture) without which we will become an impoverished nation as other 
>nations rise in relative terms. 
>     g.. A stock market that remains hugely overvalued and still sucking 
>unsuspecting investor money into that rat hole. No doubt trillions more of 
>equity valuations remain to be lost as the existing secular bear market 
>remains in its early stages. 
>   What is most concerning to your editor is the fact that globalizatoin on 
>top of these problems along with huge supply side excesses continues to put 
>downward pressure on the profit margins of American companies at a time when 
>share prices remain extremely inflated. There is in fact no way you can paint 
>a realistic picture of growth in the U.S. economy required to generate profit 
>levels sufficient to justify current equity prices for stocks listed in the 
>major U.S. indexes. At the end of this week, the S&P 500 had at the end of 
>this week an EARNINGS YIELD of only 2.25% (same as last week). Of this yield, 
>about 1.4% is in the form of dividends with the remaining portion in highly 
>suspect retained earnings. In other words, for every $100 you invest in the 
>S&P 500, you get $1.40 in pre-tax cash returns and another 85 cents in "maybe" 
>value. By comparison, if you buy the 10-Year U.S. Treasuries, you get a yield 
>of 5.14% or $5.14 in CASH for every $100 invested plus you get favorable tax 
>treatment from state and local government.
> 




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