EXIT STRATEGY?

Feb 4, 2005


MARKET NEWS DIGEST
-> Stocks climb after jobs data -CBSMW
-> Bush Outlines Goals on Social Security -AP
-> Gates, Buffett and China Gang Up on Dollar
-> Gold edges lower on firmer dollar -CBSMW
-> Oil-hungry China finances Yukos takeover -AFP
-> Cheney: Israel might attack Iran -JP
-> Baby Bell buying Ma Bell -CNN
-> DAVOS: Dollar hasn't hit bottom yet -CBSMW
COMMENTARY
-> CUTTING LOSES: An "Exit Strategy" -Craig R. Smith
-> 2005: Rare Coins Set For Another Record Year -KLRC
-> IRAQ: New Home of the Brave -JD Williams
-> GOLD TO KEEP RISING! -Alex Wallenwien, A1Gold
-> To beat drooping dollar, reduce debt... -BURNS
-> Iraq confounds the prophets of doom -Telegraph
-> Does the Market Know How to Price Al-Qaeda? -BL
FOUNDERS QUOTE OF THE WEEK

"Religion is the only solid Base of morals and that Morals are the only possible Support of free governments."

-Gouverneur Morris


MARKET NEWS DIGEST


Bush Outlines Goals on Social Security -AP
By DEB RIECHMANN
Feb 2, 2005

WASHINGTON (AP) - With four years left to build his legacy, President Bush's State of the Union address outlines his goals to give Social Security a makeover, stay the course in Iraq, push for democratic reform abroad and tackle an array of domestic issues at home.

Bush was delivering his speech Wednesday on Capitol Hill, already the scene of a testy, partisan debate over his plan to offer private retirement accounts.

His ideas for changing the 70-year-old Social Security program scored just two sentences in last year's State of the Union. This year, it's the signature topic of his 40-minute speech before Congress and a nationally televised audience at 9 p.m. EST.

The White House says Bush will offer new details about his plan to let younger workers divert some of their Social Security payroll taxes into personal investment accounts. But experts say while the president will seek to reassure Americans who are at or near retirement that they can expect to get their Social Security checks as expected, he'll leave larger questions unanswered.

"He's leading with the dessert and not revealing the spinach," Peter Orszag, an economist at the Brookings Institution and former Clinton White House adviser, said Tuesday.

Social Security is projected to start paying out more in benefits than it collects in taxes in 2018, according to Social Security trustees, and can pay full promised benefits only until 2042. The nonpartisan Congressional Budget Office has projected that the program will be solvent until 2052.

"The real question is how he will restore solvency to Social Security?" Orszag said. "What benefit reductions will be needed and what are the debt implications? The type of questions he's prepared to address won't answer that."

FULL STORY

Related Story:
2-2-05 --State of the Union Transcript
SOCIAL SECURITY SOLUTIONS - Research Report


Gates, Buffett and China Gang Up on Dollar -BL: William Pesek Jr.

Feb. 2 (Bloomberg) -- The dollar can add the world's two richest men to its list of detractors, something that's raising eyebrows here in Asia.

Bill Gates, chairman of Microsoft Corp., left no doubt of that, telling television host Charlie Rose ``I'm short the dollar.'' The world's wealthiest man called the record $7.62 trillion federal debt ``a bit scary'' and lamented that the U.S. is in ``uncharted territory'' fiscally.

And he's right. Just ask Warren Buffett, the world's No. 2 moneyman, who has been buying foreign currencies since 2002, citing concerns about the U.S. deficit. The bet is paying off, too. Buffett's Berkshire Hathaway Inc. reaped a $412 million pretax gain on the trade in the third quarter of 2004.

Gates and Buffett may not be reading from the same playbook as George Soros, though their investments bear some similarities. Financier Soros has long since given up on the world's reserve currency, and U.S. President George W. Bush's competence on economic matters.

Yet the U.S. is managing to run afoul of an even more powerful force than wealthy individuals: the world's fastest growing major economy. China, it seems, has had just about enough of the U.S.'s bickering about its currency policy.

`Reasonable Level'

``Please leave it to us,'' Li Ruogu, deputy governor of the People's Bank of China, said in Davos, Switzerland, when it was suggested a stronger yuan would help China. ``We are happy and willing to listen, but don't ask us to practice what you say,'' he said.

Huang Ju, who directs China's finance policy as deputy prime minister, threw even more cold water on speculation the yuan will rise. ``We have to maintain the exchange rate at a reasonable level,'' said Huang, who also was attending the World Economic Forum in Davos.

Yet it's Chinese officials further down the political food chain that seem to sympathize most with Gates and Buffett. ``The U.S. should take the lead in putting its own house in order,'' said Chinese central bank adviser Yu Yongding.

It's breathtaking, really, to see the U.S. being chastised by Chinese policy makers. Perhaps it's payback for all the lecturing Treasury secretaries from Robert Rubin in the 1990s to John Snow today have done here in Asia. More likely, though, Chinese officials are getting antsy about their own U.S. dollar holdings.

Group of Seven

If Gates sunk his entire $46.6 billion fortune into U.S. debt, it would only amount to about a quarter of China's holdings. Officials in Beijing buy U.S. Treasuries to maintain their 8.3 peg to the dollar. And its U.S. debt holdings are on the losing end of the dollar's 26 percent drop against a basket of six major currencies since the start of 2002.

A lower dollar increases China's competitiveness, yet it may have too much of a good thing on its hands. While China won't free the yuan for fear of losing control over its economy, a lower exchange rate makes it harder to cool inflation and avoid overheating this year.

The issue is coming to a head days before Group of Seven officials meet in London. There's little doubt the dollar's weakness, and the euro's resulting strength, which will be the center of attention. European Central Bank President Jean-Claude Trichet has voiced concern about the dollar.

The Risk

Until now, the U.S. has been able to dazzle currency traders with its deficits-don't-matter poker face. Yet it's clearly losing its ability to keep investors -- and central banks -- in check. Once central banks here in Asia turn on the dollar, the U.S. is in for some very turbulent times as bond yields surge.

The risk can be seen in China's evolving incentives to alter its dollar peg. The U.S. has been using its strength to push China to boost the yuan, thereby reducing its trade advantage. Yet it's the risk of instability and big losses on dollar holdings that may ultimately force China's hand. So it's U.S. weakness, not strength, that's turning heads in Beijing.

Amid all this, Gates and Buffett are warming up to China. It's a risky proposition, perhaps, given its fragile financial system, inadequate transparency, lack of democracy and failure to halt the piracy of goods. In Davos, Gates described China as a ``change agent'' for the next two decades.

In September, Gates's $27 billion foundation received approval from China's foreign-currency regulator to invest as much as $100 million in yuan shares and bonds. Buffett, who visited China with Gates in 1995, made his first investment there in 2003, buying a stake in PetroChina Co.

Still, the U.S.'s biggest challenge isn't keeping Gates or Buffett happy; it's persuading the central banks of China and the rest of Asia not to dump their roughly $1.1 trillion of U.S. Treasury holdings. If they do, the world's two richest men also may be two of its most prescient currency speculators.

http://www.bloomberg.com

Related Story:
2-4-05 -- Greenspan: Market forces likely to stabilize trade gap -USATODAY ... "We may be approaching a point, if we are not already there, at which exporters to the United States, should the dollar decline further, would no longer choose to absorb a further reduction in profit margins," he said. Greenspan said higher U.S. import prices would cut the volume of imports "but leave the resulting value of imports uncertain."
2-3-05 -- Are Commodity Prices Headed for Switch to Euros?: Matthew Lynn - Bloomberg


Oil-hungry China finances Yukos takeover -AFP
Feb-01-2005

MOSCOW (AFP) - China financed the takeover of Russian oil giant Yukos's main asset, lending six billion dollars to its new state-run owner in return for oil supplies to the energy-hungry Asian giant, Moscow officials revealed.

In the first details of the financing of the mystery deal, Finance Minister Alexei Kudrin told reporters that Chinese banks had lent Russia's Vnesheconombank six billion dollars to enable it in turn to provide financing to Rosneft.

Rosneft, a mid-sized state oil firm, swallowed up Yukos's main production arm -- with an oil output more than twice its own -- after a controversial December auction, leaving market watchers wondering how it afford the 9.35-billion-dollar (7.2-billion-euro) sale price.

Completing the pieces of the jigsaw puzzle, federal energy agency chief Sergei Oganesyan said that Chinese state-owned oil and gas giant China National Petroleum Corporation had later agreed to provide a six-billion-dollar credit for a long-term oil supply contract with Rosneft.

"The Chinese company CNPC has made a pre-payment for long-term oil deliveries," he told a separate press conference.

Last month Russian newspaper Vedomosti reported that CNPC could help Rosneft pay for the main Yukos subsidiary Yuganskneftegaz by offering a six-billion-dollar credit in return for guaranteed oil supplies.

According to Vedomosti, the Chinese credit would be used to pay off short-term loans provided by banks for the purchase, which had to be settled in full in January under the terms of the auction.

These banks had been assumed to be Russian, but the finance minister said the money had come from Chinese financial institutions, including Eximbank (China Export-Import Bank).

The main shareholders in Yukos immediately threatened Tuesday to sue Vnesheconombank and the Chinese banks for facilitating the sale of Yugansk in defiance of a US bankruptcy court ruling in Houston, Texas.

FULL STORY

Related Story:
$5 Gas Coming Soon?-- 12-10-04 -- SWISS AMERICA SPECIAL REPORT --


Bill Gates, World's Richest Man, Bets Against Dollar -BL

Jan. 29 (Bloomberg) -- Bill Gates, the world's richest person with a net worth of $46.6 billion, is betting against the U.S. dollar.

``I'm short the dollar,'' Gates, chairman of Microsoft Corp., told Charlie Rose in an interview late yesterday at the World Economic Forum in Davos, Switzerland. ``The ol' dollar, it's gonna go down.''

Gates's concern that widening U.S. budget and trade deficits are undermining the dollar was echoed in Davos by policymakers including European Central Bank President Jean-Claude Trichet and German Chancellor Gerhard Schroeder.

The dollar fell 21 percent against a basket of six major currencies from the start of 2002 to the end of last year. The trade deficit swelled to a record $609.3 billion last year and total U.S. government debt rose 8.7 percent to $7.62 trillion in the past 12 months.

``It is a bit scary,'' Gates said. ``We're in uncharted territory when the world's reserve currency has so much outstanding debt.''

A week before Group of Seven officials meet to discuss currency policy, Trichet repeated the ECB's concern over the dollar's drop to record lows against the 12-nation euro currency.

FULL STORY

Related Story:
THE IN-CREDIBLE SHRINKING DOLLAR -- Special Report


Cheney cautions Israel might attack Iran -JP
By HERB KEINON AND NEWS AGENCIES
Jersalem Post
Jan 31, 2005

US Vice President Dick Cheney on Thursday cautioned that Israel may attack Iran in order to eliminate its nuclear threat, a comment Jerusalem interpreted as meant more to prod the international community into action to stop Teheran's nuclear march, than as a warning against Israel.

Cheney, in an MSNBC interview on the day US President George W. Bush was inaugurated for a second term, said Iran was at the top of the American administration's list of world trouble spots.

Cheney said that the Administration is concerned by Iran's combination of pursuing "a fairly robust nuclear program" and a history of sponsoring terrorism.

"If, in fact, the Israelis became convinced the Iranians had significant nuclear capability, given the fact that Iran has a stated policy that their objective is the destruction of Israel, the Israelis might well decide to act first, and let the rest of the world worry about cleaning up the diplomatic mess afterwards," Cheney said.

"We don't want a war in the Middle East if we can avoid it. And certainly in the case of the Iranian situation, I think everybody would be best suited by or best treated and dealt with if we could deal with it diplomatically," Cheney added.

Cheney, who was a leading advocate for the Iraq invasion, said one concern was that Israel might act against the Iranians, "without being asked."

Senior Israeli officials said Cheney's comment was more a warning to the Europeans and the international community that they have to take a more concerted action to keep Iran from becoming a nuclear power, than a warning to Israel not to act.

FULL STORY


Stocks climb after jobs data -CBSMW
Jobless rate falls to lowest level since September '01
By Susan Lerner, MarketWatch
Feb. 4, 2005

NEW YORK (MarketWatch) - Stocks headed higher Friday morning as Wall Street wagered the weaker-than-expected January employment report could mean a quick end to the cycle of Fed rate hikes.

The Dow Jones Industrial Average was up 42 points, or 0.4 percent, to 10,634 while the Nasdaq Composite Index added 15 points, or 0.7 percent, to 2,072 and the S&P 500 rose 6 points, or 0.5 percent, to 1,195.

"Everyone expects interest rates to continue up - it's the idea of where they stop going up. This kind of report indicates we're near the end," said Stephen Massocca, president and head of trading at Pacific Growth Equities.

The Labor Department reported that the U.S. unemployment rate fell from 5.4 percent to 5.2 percent in January, the lowest since September 2001. Nonfarm payrolls, however, rose a disappointing 146,000 in the month.

Economists were expecting payroll growth of about 189,000, according to a survey conducted by MarketWatch. The jobless rate was expected to remain at 5.4 percent.

"I think for equities at this stage of the cycle we're kind of hoping for Goldilocks type of economic data," said Bryan Piskorowski, market analyst at Wachovia Securities.

"Anything on the super strong side I think would create fears that the Fed will have an increased proclivity to tighten. At this point in time, to have job creation maybe at a slower-than-expected pace might be ultimately positive for equities."

Meanwhile, orders for new U.S.-made factory goods grew 0.3 percent in December, the third increase in a row but the weakest since September, the Commerce Department estimated.

Economists had been looking for a gain of 0.6 percent in factory orders, according to the survey conducted by MarketWatch.

Also, nonmanufacturing sectors of the U.S. economy expanded last month at the slowest pace since September, the Institute for Supply Management reported Thursday.

The ISM nonmanufacturing index fell to 59.2 percent from 63.9 percent in December. The fall was larger than expected. Economists were looking for a pull back to 61.5 percent.

http://www.cbs.marketwatch.com


Gold lower on firmer dollar, IMF concern -CBSMW
By Myra P. Saefong, CBS.MarketWatch.com
Feb. 4, 2005

SAN FRANCISCO (MarketWatch) -- Gold futures edged lower Friday, tapping a fresh three-month low with traders assessing the weaker-than-expected January employment report, prospects for strength in the dollar and concern G-7 officials may call for the International Monetary Fund to use its gold to cancel African debt.

"Like a deer caught in headlights, gold bulls have been frozen by a mirage of bearish factors like IMF gold sales and an unjustifiable belief that the U.S. dollar is entering a long-term bullish uptrend," said Peter Grandich, editor of the Grandich Letter.

Gold for April delivery fell 70 cents to trade at $417.80 an ounce on the New York Mercantile Exchange. It traded as low as $415.50, its lowest level since Oct. 13. Prices fell $4.50 in the previous session.

The Labor Department reported that the U.S. unemployment rate fell from 5.4 percent to 5.2 percent in January, the lowest since September 2001. Nonfarm payrolls, however, rose a disappointing 146,000 in the month. See full story.

The news prompted the dollar to lose ground, but the greenback cut its decline against the yen and turned firmer against the euro following dollar-supportive comments on the U.S. current account deficit from Federal Reserve Chairman Alan Greenspan.

Elsewhere on the market Friday, other metals futures were mixed.

March silver traded down by 2.7 cents at $6.65 an ounce, and the March copper contract stood at $1.379 a pound, down 0.95 cent.

http://www.reuters.com

Related Story:
BULLION DOWN, COINS UP? by Craig Smith, SATC 6/05/2002


Baby Bell buying Ma Bell -CNNMoney
SBC to buy former parent AT&T despite drop in long-distance business; analysts question $16B deal.
January 31, 2005

NEW YORK (CNN/Money) - After 128 years as an independent company, since just after the invention of the telephone that's the centerpiece of its business, AT&T will be absorbed into its offspring SBC Communications in a stock-and-cash deal valued at $16 billion.

SBC also will be assuming about $6 billion in AT&T's net debt, bringing the total value of the deal to $22 billion. SBC, announcing the deal Monday, said it could find value in AT&T (Research) even with the decline in its traditional long distance business. Shares of AT&T fell about 5.6 percent in early trading Monday morning while shares of SBC were down slightly.

The deal marks the end of several eras, one that started with company founder Alexander Graham Bell, and another that began when a federal judge split the original company into eight separate entities in 1984.

In the more than 20 years of telephone deregulation that followed, the offspring such as SBC moved into dominant positions in the growth areas of telecommunications, including wireless and Internet connections.

http://www.cnnfn.com


Dollar firms as oil, Iraq jitters ease -FT
By Steve Johnson in London
January 31 2005

The US dollar pushed higher in European morning trade on Monday as oil prices eased and the Iraqi elections passed off about as well as could be hoped for.

However trading remained muted ahead of a series of upcoming risk events, including the first rate-setting US Federal Open Market Committee meeting of the year on Tuesday and Wednesday, US payrolls data on Friday and the G7 conference in London, also starting on Friday, at which China is expected to be pressured to speed up the timetable for the revaluation of the renminbi.

Regarding the last, Li Ruogu, the deputy governor of the People’s Bank of China, said there were no signs of the Chinese economy overheating, adding: “The world economic imbalance is attributable to many reasons, but not the exchange rate. China has not the capacity to address that so-called imbalance. We are not willing to do it, and we are not able to do it.”

Huang Ju, China’s vice premier, added that any adjustment to the peg will come in a “gradual, steadfast” manner.

This apparent unwillingness to ease the renminbi’s tight peg against the dollar in the near future caused the discount on 12-month non-deliverable forwards to narrow from 4,000 points to 3,840, implying a 12-month rate of Rmb7.894, against Rmb8.278 at present.

The comments, allied to falling oil prices and the passing of the Iraqi elections at least gave the green light for the dollar to firm 0.3c to $1.2990 against the euro, 0.4c to C$1.2444 against the Canadian dollar and Y0.1 to Y103.65 against the yen.

http://www.ft.com


DAVOS: Dollar hasn't hit bottom yet -CBSMW
Bush administration draws criticism for allowing currency to decline
By Christopher Noble, MarketWatch
Jan. 30, 2005

DAVOS, Switzerland (MarketWatch) -- Look out below.

That appeared to be the consensus about the U.S. dollar's future among many of the participants leaving this small Alpine ski resort at the end of the World Economic Forum's annual meeting.

U.S. corporate leaders, academics and some policy makers warned of further declines for the battered greenback, though none predicted a sudden, uncontrolled fall that could lead to a currency crisis and recession.

"The U.S. dollar is no longer a stable currency, it's devaluing all the time," said Fan Gang, Director of China's National Economic Research Institute, China Reform Foundation.

The expectation that the dollar will fall more was likely to be a source of tension at the meeting in London this week between the United States and its chief economic partners in the Group of Seven (G7) rich countries.

G7 members including Britain, France and Germany have sharply criticized Washington for not doing more to reverse the dollar's decline against the major currencies.

"The sharp moves upward of the euro were unwelcome," European Central Bank President Jean-Claude Trichet said on Saturday, adding that the dollar's weakness was "counterproductive on economic growth".

The mood surrounding the dollar was so bleak that U.S. Undersecretary of the Treasury for International Affairs John Taylor was moved to tell reporters that he saw no reason for a dollar crash.

"There is nothing in play here except some good, sensible policies ... so I see no reason for that," Taylor was quoted as saying by Reuters.

The twin budget and trade deficits, and the perception that the Bush administration is willing to tolerate a weaker dollar have helped undermine the currency, which has fallen steadily over the last three years. The drop has caused some to lose confidence in the dollar and raised fears that foreign investors, whose money is needed to finance the deficits, may slow their contributions.

Evidence of this loss of confidence was revealed in a survey of central bankers released last week, which showed that many had cut their level of dollar reserves in favor of euros over the last two years. The survey was carried out by Central Banking Publications.

Still more evidence of the lack of confidence in the dollar came from Bill Gates, chairman of Microsoft Corp. and the world's richest man, who said on Friday night he was betting the dollar would fall more.

"I'm short the dollar," Gates said in an interview held in front of an audience of about 200. "The old dollar, it's going to go down."

http://www.cbs.marketwatch.com

RELATED STORY:
Dollar Poised to Drop as Fed May Keep Gradual Rate Increases 1-31-05 -- Bloomberg - USA -- The dollar may fall for the first week in three on speculation Federal Reserve policy makers will keep a commitment to raise their benchmark ...


COMMENTARY


CUTTING LOSES: An "Exit Strategy" -Craig R. Smith
12/8/00 - Real Money Perspectives

[EDITOR'S NOTE: We rejoice in the new found rights and responsibilities of the Iraq people who overwhelmingly voted for a new form of government, illustrating tremendous courage in the face of terrorist threats. As the financial world ponders the impact of this new democratic Shiite Iraq, the pundits on the left are now demanding that president Bush provides an "exit strategy" for the troops ASAP. Everyone from Kerry to Kennedy to Al Franken are also quick to remind Americans that we have plenty of BIG problems ourself right now, including; a falling dollar, a ballooning debt, twin (tower-like) trade and budget deficits and a $44 Trillion dollar Social Security and Medicare "crisis." Therefore, we wanted to do our part to help in the "exit strategy" national dialogue ... so we dug up this December 2000 commentary on cutting losses and developing a financial exit strategy. We hope you find it both timely and relevant... four years later. It also illustrates why you should read RMP ... because we have been more right than wrong! See: 21st Century Investment Scorecard].

"True wealth stands the test of time because it is always based on a solid foundation. The global economies and stock markets are now entering a period of extended turbulence and testing to reveal whether they are in fact based on a solid foundation or, a an inflated foundation.

During the last four years, the U.S. stock market has exploded upward for a number of reasons including; political stability, new Internet technology, and a flood of liquidity (thanks to Alan Greenspan). But on Election Day 2000 that era came to a screeching halt.

In the last few weeks and months we have seen a reversal of these bull market trends which I have been writing about since February 2000. The political and economic landscape has shifted dramatically, creating political UNcertainty, Internet UNcertainty and a credit tightening - which signal that a new recession is now building steam.

Stock market investors must immediately develop a clear "exit strategy" or else suffer the consequences of a protracted market drop, which could quickly spin out of control.

During any bear market rally we may see, I suggest you consider cutting your losses and moving out of highly speculative, low/no profit/earning stocks.

I also suggest diversifying a portion of your assets into gold and silver coins because they represent true wealth. In my view we are entering what may be the most exciting bull market in tangibles that we've seen in over a decade. Get the facts!

For more than 23 years, Swiss America has poured its resources into educating millions of Americans that TRUE wealth is more than just money, it's built on peace of mind, strong relationships and time-tested economic principles.

America has just gone through an unprecedented period of financial growth fueled by the greatest bull market in stocks we've seen in many years. But in today's slowing economic environment, can it continue? American investors need a new agenda.

Students of economic history know that bear markets always follow bull markets. The "super-bull market" of the last decade will be followed by a "super-bear market" - it's just how the economic cycle works.

Since March 2000, the NASDAQ has lost over 40% of its value, but what if the worst still lies ahead? The one thing we should all have learned this past year is that the so-called financial experts are often wrong in calling market tops and bottoms.

In sharp contrast, since March 2000, the U.S. Gold Commemorative coin market is up as much as 46%, with an average growth on the 11-coin set of 17.75% (53.5% average since 3/99!) The trend is definitely shifting toward assets with real value, earnings and profit potential - like U.S Gold Commemorative coins.

As a Swissamerica.com reader, we want to help you develop an "exit strategy" to move some of your money from highly volatile Tech and Internet stocks into tangible assets like high- performance U.S. gold coins. (See U.S. Gold Commemorative Research Report)

We offer a full menu of educational resources to help you position your portfolio for a season of change. The future is full of opportunities, but it also has many serious challenges.

Swiss America brokers have been briefed by some of the best financial minds of our generation to help you establish an exit strategy today. Call us at 1-800-289-2646 now, before the smiling analysts on network TV spin you into the poor house.

Source: Real Money Perspectives, 12/8/00

P.S. RAISING AMERICA'S INVESTMENT QUOTIENT (I.Q.) It is said that "a fool and his money are soon parted." WE TOO are amazed that they ever got together in the first place. Craig R. Smith, CEO Swiss America -- Feb. 5, 2004 -- RMP Archives


2005: Rare Coins Set For Another Record Year -Kevin Lipton, KLRC
Feb 2, 2005

2004 was a record year for the coin industry! More collectors and investors entered the market than anytime in history.

Near the end of the year one of the cable networks "Shop at home" sold over $1 million in numismatics in one hour of TV time! Their supplier, Silver Towne is spending close to $1 million a month with NGC -- just encapsulating product for the network! Amazing! Kevin Lipton Rare Coins has never experienced a December like this before -- with record sales.

With 2004 behind us, I expected the New Year to perhaps start slowly, was I ever in for a surprise. January was a record month at KLRC with sales of over $6 million.

F.U.N. SHOW

The highlight was a gem-quality set of Stellas which I sold for $2,225,000.00. The Florida United Numismatic show was fabulous -- and the (FUN) show is always a great forecaster for the year. Over $ 90 million in U.S. rare coins were sold at the auctions held in conjunction with the show.

One of the greatest coins sold, a semi-unique 1866 no motto Dollar which sold for $1,207,500. I was the under bidder on this coin. The most intriguing thing about it is the fact that there were 5 separate bidders between 900k and the eventual sale price! Imagine, 5 different buyers for the same coin at the 1 million dollar level!

DOUBLOONS FETCH $4.4M

Two Brasher doubloons set new record prices at $2.4 and $2.99 million. The Doubloon was probably the most common gold trade coin used in Colonial America, and one with which every merchant of substance was on intimate speaking terms.

The Brasher Doubloons were the only colonial gold coinage issues produced with intent for circulation, and therefore, must be considered among the most important of all colonial coinage. A case can certainly be made that these are the most important American coins, bar none.

Another record price was for the 1894-S 10c at $1,035,000. (I sold this very same coin a few years earlier for $625,000).

GOLD COMMMEMS!

I was surprised to see only a limited quantity of U. S. Gold Commemoratives on the bourse floor and in the auctions. Gold Commems that were available sold for very strong prices, making it difficult to acquire many choice examples.

For example, it was almost impossible to buy Pan Pac and Sesqui $2 1/2 at the current price levels. My Gold Commem inventory is at the lowest level in years. One can expect a healthy rise in this market in the first quarter of 2005.

Generic $20 gold coin prices eased in January, as bullion prices have eased from $450+ to $420. As the year is now underway, I look forward to a great overall coin market. Buy scarce, U.S. rare coins of the highest quality -- that is my advice for 2005!

Related Stories:
2004 U.S. RARE COIN MARKET TRENDS By Kevin Lipton, KLRC Dec 17, 2003
Why U.S. Gold Commemoratives - Lewis & Clark - 4/04 - Tom Rodriguez


New Home of the Brave -JB Williams, TheRant.us
January 31, 2005

January 30, 2005 marks the beginning of a new era in Iraq, a day when amid threats of death and destruction, more than 60% of the population of Iraq braved the deadly streets for the single purpose of exercising their new found freedom of self-governance.

Terrorists launched several suicide bombing attacks, managing to kill some 36 Iraqi patriots on their way to the polls, but it didn’t deter the people of Iraq from showing up at the polls in astounding numbers, proving once again that freedom and liberty belong to only the brave.

Iraqi men and women took to the streets, some walking miles through a gauntlet of terrorist threat just to vote, just to have a chance at freedom and democracy. They knew the risks they were taking with their own lives, they had received the threats, some of them on a very personal level, and still they were ready to have a say about the future of their country.

As I watched the events unfold on TV, I couldn’t help but think about the great sacrifices made by the brave in our own country not so long ago, to guarantee Americans the freedoms and liberties we all take for granted today.

I also couldn’t help but think about all the nay-sayer’s here and abroad, who were convinced that this day would be the bloodiest day in Iraq’s history, and that the Iraqi people would not support democracy in their own land, or that their fear of the terorists would overcome their will to be free… They were wrong, really wrong, not even in the ball park.

As our nation’s most prominent coward Teddy Kennedy stood before the world calling for our troops to leave the Iraqi people in a vacuum of terror after all they have been through for more than 40 years, the Iraqi people calmly demonstrated unparalleled courage and so did our troops and our President.

As I watched CNN scamper across Iraq searching for footage of the latest suicide bombing, I watched FOX on another screen, interviewing voter after voter, tracking voter turnout across the country and speaking with Iraqi poll workers who risked their lives for 24 hours solid, as they helped voters exercise their new found rights.

In the once fear filled eye’s of Iraqi citizens I saw hope, I saw jubilation on the faces of people who have never known a day without terror in their lives. It was a sight to be celebrated, cherished and played over and over again, so that people everywhere, including America, can be reminded of the value of freedom, and that every man, woman and child in the world deserves no less.

America experienced its largest voter turnout in decades in the 2004 election with a turnout of about 60% of registered voters. There were no suicide attacks, no threats of death and destruction, no snipers, and no terrorists leaflets handed out in our neighborhoods warning us to stay home. Just an overly complacent electorate that has lost its zeal for the freedom we enjoy everyday.

Bush was right, a thirst for freedom and personal liberty rests in the hearts of every human being on earth, and no one man deserves it more or less than another.

He was right that the Iraqi people want us there to provide this possibility, and that they need us there to secure their future as much as is humanly possible. He was right that these people are prepared to risk life to have a future they never thought possible before America intervened.

Nobody including Bush thought it would be easy, without cost. Freedom has always come at the highest possible price, always paid in the blood of those willing to fight for it.

Those unwilling to fight for the freedom of others deserve no freedom themselves…

Those unwilling to fight for another’s security and liberty deserve no security or liberty of their own…

In a utopian world, we would have no brutal dictators, no terrorists, no suicide bombers and every individual would be free. But in this world, evil people exist and all it takes for evil to prevail is for good people to do nothing.

Our election in 2004 was decided on this basis alone. I and many others have written about the motivating factor of morality in our last election and we were right. But moral is as moral does, it isn’t found in words, but rather in deeds and there is nothing more morally right than risking our own life and liberty for the freedom and liberty of others…There is no more just cause.

America’s cowards will continue quibbling over the WMD in Iraq that everyone, including the cowards themselves, said existed. But Americas best and brightest, heard the more than a dozen reasons for implementing the policy of regime change in Iraq, supported in words by the Clinton administration, performed in deeds by Bush.

Nobody knows exactly what the future of Iraq will look like, they are breaking new ground, accomplishing things no man has had the courage to even attempt before. But there can be no mistaking the message sent by the more than 60% who turned up at the polls today against the advice of terrorists and cowards around the globe; they intend to be free…

No matter how difficult the struggle for freedom from here, there can be no mistaking the message that not a single coalition soldier died in vein in Iraq, their sacrifice vindicated, their brave deeds honored as the Iraqi people marched to the polls at great risk of peril.

The cowards will focus there attention on the minority in Iraq who didn’t vote, as if the vast majority that did doesn’t matter. They will find ways to discredit the courage of the Iraqi citizens who braved the deadly streets to secure their own future and they will continue to call for America to leave these people to their own devices because for them, freedom of the Iraqi people is not worth the cost.

They may never understand that securing freedom for others around the world is right, or that it is the best way to protect our own freedoms at home.

But thank God we still have men and women who do understand, who remain willing to sacrifice for their country and the freedom and liberty of others. Without these brave people, members of the greatest military on earth, and leaders willing to risk their own political future to do the right thing, freedom and liberty would not exist anywhere.

http://www.therant.us


GOLD TO KEEP RISING! -Alex Wallenwien, A1Gold
Jan 31, 2005

US Congressional Budget Office: GOLD TO KEEP RISING! Well, the CBO didn't say that exactly - but it might as well have.

On January 25, 2005, the CBO released a short, less than 200 word, news item designed to calm a worrying public. In essence, it said that the decline of the dollar over the next two years will be an orderly one - a view that has since been reiterated by other US officials speaking from the World Economic Forum in Davos, Switzerland.

Phew, am I relieved!

I surely thought that there is a danger of a catastrophic fall in the dollar, which would eventually lead to a skyrocketing gold price. But now that the CBO itself has said this won't happen, I guess I can just go back to throwing whatever cash and savings I have available at the stock market, and forget about buying gold to protect myself.

But wait a minute. What did the CBO really tell me there when it made that market-calming announcement?

It told me, from on high in the US government, that gold will continue to rise for at least another two years! Why? Because a falling dollar inevitably brings with it a rising dollar-POG, as we have seen over the past three or more years.

The statement was obviously designed to remove any trepidations anyone might have nurtured in the darkness of his or her untrusting soul that a falling dollar might bring bad tidings of future economic collapses, etc. Ironically, in issuing its report, the CBO has inadvertently but officially given the green light to all who would consider dumping dollars and buying gold in their narrow-minded, selfish desire to protect themselves from the dollar-fallout.

Or was it really that inadvertent?

It is no longer a secret that the US administration and Fed both like the idea of a falling dollar, at least for now. Even mainstream financial news outlets are on to John Snow with his repeated claims that the administration supports a "strong dollar" policy. Everyone is quietly laughing at these remarks as obvious, Bush-ite double-talk. But is it really?

Maybe Bush took a few pages out of Clinton's play book? Not such a far-fetched idea, now that we have all been treated to the questionable pleasure of seeing the grand-master of double talk and forked-tongue word-parsing ("tell me what the definition of "is" is) himself making joint appearances with two generations of Bushes on TV, appealing to the American public to donate money to Tsunami victims. (Why is Bush, the "moral president", giving such elevated recognition to a known scumbag?)

So, where's the double-talk here? What is Snow really saying when he repeats these statements over, and over, and over, in the face of an "earth-rocketing" US dollar? After all. He never said that the administration prefers a high dollar, only a "strong" one.

"Strong" doesn't necessarily mean "high. If the Bush administration rightly sees a high dollar as vulnerable to outside attack and as conducive to in-country stock market woes (foreigners now refuse to buy US equities unless they represent a super-bargain due to a lower dollar) and therefore as weak, then a "strong" dollar can without any doubt mean a far lower dollar than we have today. It's just like a low, ground-hugging building is more stable (stronger) in the face of a hurricane than a tall one. But I digress.

We all know that the falling dollar means rising gold. Apparently, that's okay with the Washington crowd these days, because it's just one price to be paid for a continuing rise in US equities - or so they hope. Gold control? Who cares! That's only an issue when a higher dollar is needed, and that is now a policy of the (Clinton-era) past.

If anyone ever wants more solid proof that Bush wants - no, needs - a lower dollar, all he needs to do is watch how adroitly the Bushites have been falling onto their knees and gone begging to China to please, please, pretty-please, let their yuan rise against the dollar to remove that "unfair" trade advantage. All that is couched in terms of "tough talk" of course, lest one lose face with the electorate, but what it amounts to is nonetheless nothing more than begging.

Bush is in no position to be ordering the Chinese around.

China, of course, is in no hurry to comply. The communist regime first needs to make sure that the EU can swallow a sufficiently large chunk of its future exports before it can afford to do so. But whenever China does revalue (and eventually it will, gradually or not), the dollar will undoubtedly fall further than it already has.

For how long will they let it rise? For however long it takes the Chinese to let their currency slowly adjust to world-markets so it can "float" like a piece of you-know-what in muddy water right along the other floating pieces of the same matter down the sewer line of monetary history. Uh-hum. Sorry. I seem to be digressing a lot, lately.

So, how far will the dollar fall then?

According to the calming voice of the CBO, not too far.

What does that mean?

Who is to know? ...FULL STORY


To beat drooping dollar, reduce debt, be flexible -BURNS
Scott Burns / DallasMorningNews
Jan. 31, 2005

Q: It seems the dollar may have a long drop ahead, as our government continues to ignore the burgeoning federal and trade deficits.

With war costs mounting and the Chinese and Japanese moving away from the dollar, I am wondering how to hedge against a fall. Could you suggest a good investment against a falling dollar?

A: Many readers have sent in variations on this question, including one who sent copies of colorful and pretty — but worthless — currencies. Most people don't want to think about runaway inflation. So let's consider the problem in three stages, recognizing that we may never go beyond stage one:

Stage one: A decline in the dollar that stays in a range that requires material adjustment but not radical change. It entails the kind of inflation pressures we experienced in the late '70s.

Stage two: We lose our position as consumer of last resort. The dollar would be deposed as the world's reserve currency. A significant reduction in our standard of living would follow.

Stage three: There is wholesale weaseling from the government on promised benefits such as Social Security and Medicare. This would create institutional chaos and circumstances worse than the Great Depression. Without major changes, this could easily happen to our children.

We're in the first stage today. This requires that we practice real asset diversification.

That means favoring Treasury inflation-protected notes over conventional coupon securities.

It means owning shares in an unhedged international bond fund or certificates of deposit in other currencies, as well as domestic fixed-income funds. It means investing in energy companies, particularly those with domestic reserves.

It also means having real international equity diversification, probably through the ownership of small international companies and basic industry shares in developing countries.

If you are young and securely employed (almost mutually exclusive today), this is also a good time to maximize your home mortgage, but not maximize the size and cost of your home. You can repay the debt in dollars that are worth less than the dollars you borrow.

Otherwise, this is a good time to eliminate short-term debt, regardless of your age. All these steps will spread your risk and reduce your vulnerability to our currency. They will not make you rich.

The second stage will begin when, and if, the dollar loses its position as the global reserve currency. When that happens, we'll be forced to eliminate our trade deficit and increase our savings rate. Foreigners won't be saving for us. This will bring high interest rates, high inflation and a significant reduction in our standard of living.

The best protection is having needed work skills, little or no debt, flexibility and a willingness to buy fewer services. Note that none of this involves investing.

We could be in this stage before the next presidential election. In stages one and two, gold will be a good "investment" because it will gain relative value.

The third stage will begin when our government is down to two ugly choices, printing money or defaulting on promised benefits, particularly the massive promises of Medicare. This is the runaway inflation that concerns some readers.

Impossible, you say?

We've already done it. It could happen again. When our first currency, the continental, became worthless after the Revolutionary War, it led to the only armed insurrection against government in our history, Shea's Rebellion in Massachusetts. Many gold enthusiasts expect such runaway inflation.

http://www.dallasnews.com


Iraq confounds the prophets of doom -London Telegraph
Staff Reporters
Jan 31, 2005

That elections are a better thing than tyranny seems a truth so obvious as not to be worth stating. Yet such were the passions aroused by the Iraq war that many Western observers now find themselves hoping, disgracefully, that that country's first free poll will fail.

Left-wing commentators, in Britain as in much of Europe, have focused disproportionately on the difficulties that any state must undergo during a transition process. To many of them, every terrorist bomb, every murdered election official, every sign of heightened military alertness - even the loss of a British aircraft - makes a nonsense of Iraq's democratic aspirations.

Yesterday's high turnout, in defiance of the gunmen, should be celebrated. Of course the Iraqi insurgency is an important story. But this does not explain the loving attention devoted to each setback faced by the forces of order. Compare yesterday's reports with those by the same commentators during South Africa's first democratic election. Then, too, there were many technical problems: electors who were not properly registered, voter intimidation, long queues. But these things were set in their proper context, as the backdrop against which the moving drama of people casting their first ballots was being played out. No one suggested that the clashes between IFP and ANC supporters in Zululand undermined the whole process. No one argued that the backlash by a handful of black homeland chieftains and Boer irreconcilables made South Africa unfit for democracy.

Looking to hang their doubts on something specific, the cynics focus on the ejection of the Sunni Arabs from their traditionally dominant position, and the prospect of a permanent Shia majority. There is plainly some truth in this analysis. A combination of sulkiness and intimidation has led to large-scale abstentions among those who prospered most under the old regime: Saddam's townsmen in Tikrit, for example, seem largely to have stayed at home. Meanwhile, the Shias, sensing that they may be the masters now, have flocked to the polls in huge numbers. None of this, though, is an argument against conducting a ballot. To return to our earlier parallel, no one contended that the likelihood of a permanent ANC majority - or, to make the analogy more precise, a permanent black majority - invalidated the concept of South African democracy. No one wrote sympathetic pieces about the plight of the Afrikaners as they lost their hegemony.

In any case, why assume the worst? It is possible that Iraq will become a second Lebanon, in which different religious groups refuse to accept each other's legitimacy; or a second Iran, led by Shia ayatollahs. Equally, though, Iraq may turn into a secular democracy - imperfect, no doubt, as all states are, but far happier than it was. After all, the Iranian people are clamouring louder than ever against government by their mullahs. It is surely somewhat patronising to believe that their Iraqi co-religionists want to saddle themselves with their own theocracy. Remember that this is an election to a constituent assembly, not a full parliament: though their votes may be few, Sunni Arabs will almost certainly be given a voice in framing the constitution commensurate with their real numbers. The more fair-minded among them have long since accommodated themselves to the new reality.

No democratic election is flawless. It is human nature that the loser in any system should blame the system rather than himself: think, for example, about our own squabbles over postal voting, the West Lothian Question, or the wording of referendums. But, yesterday, Iraq became the most democratic country in the Arab world. What a pity that so many writers who, in other circumstances, are optimists about human progress, should shut their eyes to what is happening. In their determination to say "I told you so", they are coming perilously close to siding with jihadi murderers. Shame on them.

http://www.opinion.telegraph.co.uk


Does the Market Know How to Price Al-Qaeda?: Michael Lewis

Jan. 28 (Bloomberg) -- If in late 1999 someone had told you what the world would look like in early 2005, you would not have been surprised when they also told you gold would be near a 16- year high and oil would be approaching $50 a barrel.

What you might never have guessed is that Wall Street would be behaving as if the boom in political chaos was otherwise financially irrelevant.

In a column for Bloomberg News earlier this month, Caroline Baum pointed out that it's been a long time since the U.S. bond market jumped around the way it did back in the 1980s. Even more surprising is that the American investor has come to assume that his stocks and bonds won't jump around much in the future either.

The price of insurance on U.S. financial assets has collapsed. Options on U.S. stock market indexes, for instance, are as cheap as they've been in a decade. Another echo of the general absence of financial anxiety: The premium that shaky companies must pay to borrow money has been falling steadily for the past two years.

Quickening Pulse

When you board a plane, or cross a bridge, or travel to New York City on business, you probably do it more anxiously than you did four years ago. But the markets do not share your fear. They are behaving as if the risks to American economic life are so trivial they can be ignored.

On the face of it, the sheer calm in the U.S. financial markets is bizarre. The sort of bad things more likely to happen now than just a few years ago -- bombs exploding in shopping malls, U.S. air travel suspended for weeks at a stretch, religion- inspired coups in nations rich in either oil or nukes, the American military bankrupting the American government -- would seem to be just the sort of things that might disrupt the American economy, and panic the American investor.

True, these events are hard to predict -- if the CIA has no idea what al-Qaeda will do next, how can you? -- but their unpredictability only deepens the mystery. The absence of information usually makes investors more risk-averse; in this case it seems to have offered investors an excuse for ignoring the risks altogether. The Age of Terrorism has brought to Wall Street a blitheness of spirit.

Are You Worried?

It's possible that the financial markets know what they are doing and that isolated acts of terror -- the odd nut job getting his hands on nuclear weapons, the occasional coup, indeed news from abroad in general -- will have little effect on the future value of our domestic assets.

It's possible, what with a more transparent and predictable Federal Reserve, that the U.S. financial markets have become inherently more stable. It's possible that the sort of sophisticated investors who make their living by selling options and buying junk bonds know something that I don't.

It's also possible that the sheer newness of our age's political risks has created some odd incentives for the more sophisticated risk-takers -- and that a lot of smart money managers have been given yet another way to get paid for taking risks without acknowledging what they are doing.

Comfort in Crowds

Somewhere out there, I'll bet, is a hedge fund manager, or an arb trader at a big Wall Street firm, inventing a clever new technique for shorting U.S. stock market volatility, or for lending money at surprisingly low interest rates to surprisingly insolvent companies.

Like everyone else, he feels the new risk in the air; like everyone else, when he boards an airplane he feels a quickening of his pulse. But he also knows that he is unlikely to be blamed if something shocking happens tomorrow.

If al-Qaeda discovers the American mall, or the Pakistani generals are decapitated, or Osama bin Laden goes nuclear, sure, he'll lose a bunch of other people's money. But so will a lot of other smart people just like him.

And so he won't be held responsible, at least not in the usual, draconian way. After all, no one else saw it coming either.

http://www.bloomberg.com


ARCHIVES ...
(2000-2005 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 ... 2004 Reflections: A Year of New Beginnings...and Answered Prayer! NOTE: Youngest daughter Braida Zoe (age 1, next week) is now WALKING, clapping, waiving, says "bye-bye," her name, "mama" & "dada" to the correct parent -- and is our gift from God!


DISCLAIMER: All of the provided information is believed to be accurate, however errors are possible. The opinions in the Commentary section do not necessarily reflect the opinions of Swiss America. Past performance of any investment is no guarantee of future performance. All investments have risk.

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