THE REAL COLOR OF MONEY

Mar 06, 2003

-THE GOLDEN PERSONALITY - Tom O'Brien, The Gold Report

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QUOTES OF THE WEEK

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"Aren't we suppose to buy and hold? Don't stocks always come back? Well, no. Worldcom and Enron died...long bear markets are rarely followed by new, strong bull markets."

-JANE BRYANT QUINN, "Rolling the Market Dice," NEWSWEEK, 3-3-03

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"I see little reason to bank on business capital spending as the sector that will spark the next cyclical recovery in the United States. War or not, that upturn will eventually come. But for many reasons -- some tied to the time-honored rhythm of the business cycle and others related to the unique characteristics of this post-bubble climate lacking in pricing leverage -- the uplift from capex should come later rather than sooner. Once again, that puts the burden of recovery squarely on the shoulders of the American consumer. And that could well be the biggest problem of all."

-STEPHEN ROACH, Capital Spending Myths, 3-5-03

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"Despite three years of falling prices which have significantly improved the attractiveness of common stocks, we still find very few that even mildly interest us. That dismal fact is testimony to the insanity of the valuations reached during the Great Bubble. Unfortunately, the hangover may prove to be proportional to the binge. Derivatives are time bombs, both for the parties that deal in them and the economic system and are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

-WARREN BUFFETT, March Shareholder Letter, (see below)

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"Derivatives have become central to global economic growth. At the same time, because their price moves are greater than those on the underlying assets there is the remote possibility of a chain reaction of failure."

-ALAN GREENSPAN, speech to Council on Foreign Relations, 11/02

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"I really hope you're not taking seriously the "boycott" made by liberal opponenets of the Michael Savage show. I can tell you already, I actually work for a living and have zero time to make web pages for people that piss me off! Because I work for a living (I suspect that would be of interest to you), I would hope my opinion means more than someone that doesn't have the sense that God gave dirt and that same someone doesn't have the initiative or kahunas to focus on a productive life! Best wishes to your company - I know you will succeed as a proud sponser of the Michael Savage show.

-JULIE GARRELS, 3-4-02, via email to Swiss America

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"I am emailing you in support of your company's continued sponsorship of Michael Savage and the Savage Nation. I found the Savage Nation boycott website where you are mentioned as one of his sponsors. Please, for the sake of all that's decent, keep supporting Michael and don't give in to a group of un-American, demoralizing, detestable traitors! Michael Savage is good for America and great business for your company. Thank you.

-MATTHEW SHREVE, 3-5-03, via email to Swiss America

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"Conservative talk radio phenomenon and best-selling author Michael Savage has been signed by MSNBC to host “The Savage Nation,” a one-hour weekly issue-oriented opinion show set to air live on Saturday afternoons at 5:00 pm ET."

-MSNBC NEWS, 3-6-03 Program launch scheduled for 3-8-03
MSNBC News

[ED. NOTE: I will be tuning in, how about you? Listen to The Savage Truth about the economy, stocks, dollar & gold Part 1 of a recent Michael Savage interview with Swiss America CEO Craig Smith]

LAUGHS OF THE WEEK

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"The recession of 2001 should have trimmed consumer spending and debt. Unlike any recession ever seen before, both went up. Is it any wonder that the recovery never came along as it should have? What was there to recover from?"

-BILL BONNER, Daily Reckoning, 3-6-03

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"By now it should be clear to everyone that Greenspan likes bubbles - both in his bathtub and in his economy. (His fondness for hour-long bubble baths is nearly as well known as his propensity for creating years-long asset bubbles.) Like a 5-year old running across the front lawn with a bubble-wand in hand, Greenspan seems to delight in creating his evanescent, ill-fated orbs. Can't you just hear him squealing: "Wow! Look at that one!...And look at that one!"

-ERIC FRY, Daily Reckoning, 3-6-03

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MARKET NEWS DIGEST

The (new) color of money - CNNfn
Unveiling the new $20 -- an effort to thwart counterfeiters -- is set for March 27. March 5, 2003 By Jonah Freedman

NEW YORK (CNN/Money) - The federal government will unveil a new $20 bill that will introduce a predominant but subtle color into the background, marking the first time in modern history that a U.S. bill will feature a color other than green. The Bureau of Engraving hasn't said what color it will choose for the new $20, but think of the possibilities.

According to the Treasury Department, other changes will include new images of Andrew Jackson and the White House, as well as other adjustments that are being kept secret. The official unveiling will take place on March 27, with the new bill entering circulation in the fall.

The last redesign of American currency was in 1996, when a new $100 bill was introduced with new features to thwart counterfeiters. A new $50 came in 1997, followed by the $20 in 1998 and new $5 and $10 notes in 2000.

New features on those notes included new ink that appeared black from one angle and green from another; a watermark, visible only when holding the bill up to the light; and a security strip that ran vertically through the bill. While these features also will be included on the new redesigned bills, they may not fix the problem of counterfeiting.

http://www.cnnfn.com

[ED NOTE: The color of U.S. currency is not really the issue. The real issue is that the dollar is rapidly becoming an IOU nothing. It may resemble Monopoly money soon, but do not be deceived, the real color of money is gold and silver.] Recommended read; US DOLLAR: ACHILLES HEEL by Richard Russell

Stock selling accelerates on prospect of war - CBSMarketWatch
By Michael Baron, CBS.MarketWatch.com

NEW YORK (CBS.MW) - U.S. equities posted a triple-digit loss Thursday as investors keyed upon worrisome jobless claims data amid a growing feeling on Wall Street that war with Iraq is both inevitable and imminent.

The Dow Jones Industrial Average lost more than 103 points, or 1.3 percent, to 7,673.78, while the Nasdaq Composite sank 12.53 points, or 1 percent, to 1,301.87. The S&P 500 index dipped 1 percent to 821.38.

The specter of war with Iraq continued to exact a toll on equities, providing that blight on the buying mentality - uncertainty.

News that President Bush would address the nation Thursday evening accelerated the moderate selling that dominated most of the morning's trading.

The speech comes just before a key report on the progress of the disarmament process from chief weapons inspector Hans Blix to the United Nations on Friday.

http://www.cbs.marketwatch.com

Apocalypse is nigh, Buffett warns - FT.com
By Simon English in New York (Filed: Mar. 4, 2003)

Warren Buffett is poised to issue his most doom-laden forecast for the state of the world economy yet, including a damning verdict on the derivatives industry he fears could cause a global financial crisis.

In the upcoming annual letter to shareholders of Berkshire Hathaway, Mr Buffett drops his usual folksy style to warn that banks do not understand the hidden risks lurking on their balance sheets.

He labels derivatives "time bombs, both for the parties that deal in them and the economic system" and "financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal".

The views of the world's second richest man are closely watched and his apocalyptic vision will do little to steady nerves on Wall Street or in the City of London. Extracts from his annual letter, to be delivered on Saturday but posted on Fortune.com yesterday, reveal that he has little optimism for the stock market.

"Despite three years of falling prices which have significantly improved the attractiveness of common stocks, we still find very few that even mildly interest us. That dismal fact is testimony to the insanity of the valuations reached during the Great Bubble. Unfortunately, the hangover may prove to be proportional to the binge," he writes.

http://www.ft.com

Snow 'Not Concerned' With Dropping Dollar - Bloomberg
By Mark Tannenbaum

New York, March 5 (Bloomberg) -- The dollar fell to $1.10 per euro for the first time almost four years after Treasury Secretary John Snow said he was "not particularly concerned" that the currency declined 21 percent against the euro the past 12 months.

Snows comments raised speculation the U.S. is abandoning its so-called strong dollar policy, held since Robert Rubin took over as Treasury secretary in 1995. Many investors have suggested the U.S. will tolerate a weaker currency to help boost the economy by making exports more competitive.

"When you get a top-ranking official suggesting a little weakness in the currency is not a bad thing, you're going to sell the currency," said Tim Mazanec, senior currency strategist at Investors Bank & Trust in Boston. "It's a weaker dollar scenario."

The U.S. currency dropped as far as $1.1001, its weakest since March 19, 1999, from $1.0925 yesterday, before trading at $1.0963 at 9:02 a.m. in New York. The dollar fell to 117.44 yen from 117.65. The dollar may depreciate to $1.14 per euro later this year, and perhaps weaker, said Mazanec.

http://www.bloomberg.com

SEC Faults Pension Reporting, Wants More `Reality' - Bloomberg
By David Evans

Washington, March 6 (Bloomberg) -- U.S. Securities and Exchange Commission officials say they're concerned that companies are obscuring their pension losses in federal filings and giving investors incomplete information.

"There was a general lack of informative transparent disclosure," says Carol Stacey, chief accountant of the SEC's division of corporation finance. She says she reviewed more then 500 annual reports for 2001 with her staff. "We strongly encourage companies to remedy this in future filings."

Companies in the Standard & Poor's 500 Index lost more than $200 billion in the past two years in pension investments without clearly disclosing those losses in SEC filings, according to studies by investment banks Credit Suisse First Boston and UBS Warburg LLC.

Over the past five months, 12 companies, including General Motors Corp. and International Business Machines Corp., said they had reduced shareholder equity by $40 billion to account for pension deficits.

http://www.bloomberg.com

COMMENTARY

POINTING OUT THE OBVIOUS - Craig Smith, SATC
Mar. 6, 2003

The Fed reports the economy is weak, but the "silver lining" is that duct tape, plastic and shovels sales are up.

What else is up? The anxiety level of most Americans, based economic reversals that are tied to geopolitical and economic crises that keep erupting. Here is a short list;

1) Iraq War - It may only take 6 days, but expect 6-10 years and billions to occupy and rebuild.

2) Oil/gasoline prices up 65% in the last year - This will produce inflation that will ripple thoughout the economy.

3) North Korea - nuclear capibility may go on the market to the highest bidder.

4) Corporate earnings on Wall Street - lackluster and still overvalued according to all historical standards.

5) U.S. dollar is crashing (in slow motion)- but many currency experts say this is just the beginning.

6) Personal, corporate and government debt are at historic levels pushing more and more into bankruptcy.

7) Cost of living increases, but cash equivalents are not keeping pace, producing negative real returns.

8) Unfunded pensions could become the next big scandal on WS.

9) Derivative "time bombs" as Warren Buffett and Bill Gross refer to them...you do remember LTCM, right?

I don't want to sound negative, but these threats to America are all very real and individually present great challenges for investors to overcome...perhaps for many years to come.

But, for the sake of argument, let's say that each one of these potential crises could be isolated and then resolved fairly quickly. Would the stock market recover? Would GDP bolt upward? I seriously doubt it, as fast as one crisis blows over, two more erupt.

Here's my point: until the economic uncertainty is over, it is now illogical, even crazy, NOT to own gold today because we are in the early stages of a text book secular bull market in gold, for all of the above reasons and more. The truth is I can see no end to the economic uncertainty which is exactly why I am persistent in my efforts to explain the wisdom of owning gold to Americans ... online, in print, on the radio and occationally on TV. Wednesday I was on the radio with Tom Obrien, editor or "The Gold Report" and host of two daily programs on TFNN

Tom asked a great question; "How did you survive a 22-year bear market in gold?" My short answer: My firm has always specialized in rare U.S. gold and silver coins, so regardless of the downside pressure on gold, coins have a great record of performance over the long term. In fact, I devoted a whole chapter in my book to discussing why "All gold is not created equal." RediscoveringGold.com

At this point, whether you decide to buy gold bullion coins ... OR U.S. rare coins ... DON'T WAIT to buy gold, buy gold and WAIT!

Listen to Tom Obrien Show interview, Part 1 (4:04 trt)

Listen to scores of recent media interviews in the mp3 Archives

COIN GURU SHARES SECRET OF SUCCESS - David Bradshaw, IFP News
Mar. 6, 2003

When Kevin Lipton, president of Kevin Lipton Rare Coins of Beverly Hills, speaks, the coin market becomes silent. As the nation's top wholesaler of ultra rare U.S. coins, Kevin has earned the respect of his clients over the last 25 years.

On Tuesday, he visited with Swiss America brokers to give them the state of the market and future prospects so I sat it.

"This is the greatest coin market in history ... auction prices are breaking all records as we are seeing the purity of collector coins returning to the market," Kevin Lipton reported. "Semi-numismatic $20 Double Eagles rose sharply in 2002 -- largely based on the end of the year gold buying frenzy, but Lipton reports that the best opportunities are in true rarities, like U.S. Gold Commemoratives and Proof Silver Type coins.

"Low original mintage is the key to long term growth because collectibles are not commodities with unlimited supplies," Mr. Lipton admonished.

Kevin Lipton also challenged SATC brokers to remind potential buyers that they should not become comfortable with continued losses in the stock market, but rather, should cut losses and move a reasonable portion into tangible assets like U.S. rare coins for long term safety, privacy and profit potential.

So, the secret of success in rare coins according to Mr. Lipton is much like the secret of success in life: Patience. The best things in life both come and go to those who invest in TRUE wealth - which, like gold - passes the test of time.

"A good man leaves an inheritance to his children's children: and the wealth of the wicked is laid up for the just." -PROVERBS 13:22

Read more by Kevin Lipton at SwissAmerica.com

BULLION RALLY STOPPED COLD BY GOLD POLICE - Lemetropole Cafe
Mar. 3, 2003

"Like an old gold-panning prospector, you must resign yourself to digging up a lot of sand from which you will later patiently wash out a few minute particles of gold ore." -Dorothy Bryant

Patience is what has been required with gold and the gold shares. Today, was just like most of the other decent up days this past year. Gold bolted right out of the box, surging more than $5 early. Enter The Gold Cartel’s elite goon squad troops to contain the rally. End of the story for the day. No serious excitement allowed.

Clearly, the cabal is unable to keep gold below $350 for very long. With the dollar heading further south, it will be impossible. The Gold Cartel has to use up too much gold at those prices. Even they have limits, especially since half the central bank gold is already gone. At some point, they are going to have to deal with the fact they cannot afford to kick in any more ammo to keep gold from taking off. The monthly supply/demand deficit is too large. Only sharply higher prices can bring gold anywhere close to an equilibrium price level.

Stock markets are weak all over the world and getting weaker. Confidence in equity markets is on the wane. Soon, there is going to be outright disdain for them. Gold will be the beneficiary.

The key for gold is $360. If it takes that price point out, gold should really fly straight towards $400. http://futures.tradingcharts.com/chart/GD/43

LeMetropoleCafe.com

DON'T SHOOT THE MESSENGER - The Economist
Feb 27, 2003, The Economist print edition

WHEN markets fall, short-sellers—who try to make money by selling shares they do not own, in the hope of buying them back at a lower price—become everybody's favourite whipping- boys. They are accused of aggravating pain by further driving down the market. Before long, people start muttering that something must be done to stop the tawdry practice.

Those who call for restrictions are often trying to run companies in trouble, or entire economies that are on the ropes. David Prosser, chief executive of Legal & General, a British insurer, called last summer for more “grit in the system” to work against short-selling. A little later, L&G tapped shareholders in a rights issue for £800m ($1.2 billion). Last year, Hans Eichel, Germany's finance minister, proposed banning short-selling in times of crisis. In 2002 the German stockmarket fell by 44%.

Admittedly, unflattering or even downright misleading rumours are sometimes spread about a company's financial state, in internet chat-rooms, research notes and through leaks to the media. By shorting the shares, so-called stockbusters hope to benefit. That said, during the boom years, similar tactics were used by those who were hyping shares, mainly tech stocks, for personal gain. Did they do any less damage?

In fact, short-sellers usually deserve more praise than blame. Sometimes they are among the first to spot trouble. For years Tyco vilified David Tice of Prudent Bear, http://www.PrudentBear.com a fund manager specialising in short-selling, for his negative stance on the company. Not long before Tyco went bankrupt it was still buying full-page advertisements to campaign against short-selling. Jim Chanos at Kynikos, another short fund, was one of the first to notice Enron's unorthodox accounting practices.

http://www.economist.com

Read The Prudent Bear book review of Rediscovering Gold in the 21st Century

THE GOLDEN PERSONALITY - Tom O'Brien, The Gold Report
Mar. 5, 2003

Each and every market has a personality. The Gold market has now confirmed for the third time that it not only likes to do ABC's but also likes to come back to confluence. With each pullback the metal gets stronger on the next leg up. That is what makes a bull market. A true bull market climbs a wall of worry.

It is easy to say, "buy the dips" however in my experience if has never been easy. The key to understanding the waves in the market and having the confidence is to always look to the volume. You will see us get down to these confluence numbers with no volume. This Gold market just loves coming back to these numbers. Remember that the market never tops on volume.

The last high of February 5th ($390.80) had the highest volume of contracts traded on the Comex. Study the Gold future charts and the confluence numbers so you can understand how this market likes to trade. This is a huge opportunity to get into some nice trades as we pull back to these numbers knowing we are going to be back to the $390.00 mark in the near future.

http://www.tfnn.com