July 22, 2005
MARKET NEWS DIGEST
* Blasts Shake London Subway Stations, Bus -AP
* China Severs Its Currency's Link to Dollar -AP
* Fed to keep raising interest rates -Greenspan
* Stocks worried about earnings -CNN
* Oil nears $57 on slowing demand -Reuters
* Glistening gold tipped for gains into 2006 -Reuters
* Market's bounce no help to pensions -USAT
* Al-Qaida's U.S. nuclear targets -WND
* Pipeline sabotage: Terrorist’s weapon of choice -IAGS
COMMENTARY
* GOLDEN MOMENT -Liu Jie, ChinaDaily
* Commerce Without Morality: The tale of two CEOs -Craig Smith
* Ryan's resolution to reform Social Security -Tom Barton
* The Passion of the Marketers -Sharon Waxman, NYT
* NEW FEATURE: A BLAST FROM THE PAST...
FOUNDERS QUOTE OF THE DAY
"We ought to consider what is the end of government before we determine which is the best form. Upon this point all speculative politicians will agree that the happiness of society is the end of government, as all divines and moral philosophers will agree that the happiness of the individual is the end of man. ... All sober inquirers after truth, ancient and modern, pagan and Christian, have declared that the happiness of man, as well as his dignity, consists in virtue."
-John Adams
MARKET NEWS DIGEST
Blasts Shake London Subway Stations, Bus -AP
Associated Press
July 21, 2005
LONDON -- Explosions struck three London Underground stations and a bus at midday today in a chilling but less deadly replay of the suicide bombings that killed 56 people two weeks ago.
Only one person was reported wounded, but the lunch-hour explosions caused major shock and disruption in the capital and were hauntingly similar to the July 7 bombings by four attackers.
The London police commissioner confirmed today that four explosions took place in what he described as "a very serious incident."
"We've had four explosions -- four attempts at explosions," Metropolitan Police Commissioner Ian Blair said outside police headquarters at Scotland Yard.
"At the moment the casualty numbers appear to be very low ... the bombs appear to be smaller" than those detonated July 7.
Related Story:
Operation Divest Terror -- WND -- 7-8-05 -- Private-sector offensive aims to shut down 'business' of extremists... The goal of "Operation Divest Terror" is to help investors identify U.S. companies whose business activities provide revenues, equipment and technology and political cover to governments sponsoring terrorism and send them a message this is a bad business decision.
China Severs Its Currency's Link to Dollar -AP
By STEPHANIE HOO, Associated Press Writer
July 21, 2005
BEIJING - China dropped its politically volatile policy of linking its currency to the U.S. dollar on Thursday, adopting a more flexible system based on a basket of foreign currencies that could push up the price of Chinese exports to the United States and Europe.
The government also strengthened the state-set exchange rate to 8.11 yuan to the dollar — from 8.277 yuan, where it had been fixed for more than a decade — in a surprise announcement on state television's evening news. That raised the value of one yuan by about one-quarter of one U.S. cent to 12.33 cents.
China had been under pressure for years from its trading partners to let the value of the yuan float or at least trade at a stronger rate and some U.S. lawmakers had threatened to impose retaliatory tariffs if China didn't adjust its currency scheme. The United States and others had said the communist nation undervalued the yuan by up to 40 percent, giving Chinese exporters an unfair price advantage.
The Bush administration on Thursday praised China's decision but said it planned to monitor the country's implementation of the new arrangement.
U.S. stocks extended their losses Thursday morning amid an exceptionally heavy volume of news events, including reports of new incidents in the London underground, the Chinese government's scuttling of the yuan-dollar peg, and new earnings reports.
In addition, Federal Reserve Chairman Alan Greenspan is again speaking about the economy to law makers, and Treasury Secretary John Snow praised the end of the yuan-dollar peg.
"I welcome China's announcement today that it is adopting a more flexible exchange rate regime," Treasury Secretary John Snow said in a statement. "As we have said, reform of China's currency regime is important for China and the international financial system."
The dollar drooped 2% to 110.60 yen, as Japan is expected to harvest more revenue from its chief trading partner, China. The move also will make Japanese goods more competitive against their Chinese counterparts.
Gold rose the most in five weeks after China ended its decade-old fixed exchange with the dollar, weakening the U.S. currency and boosting the appeal of precious metals as alternative investment.
Crude futures were down 1% at $57.45.
http://www.ap.org
Related Story:
7-18-05 -- GOLDEN MOMENT -LIU JIE, ChinaDaily ... China's individual gold investment is likely to surge in the coming years with market liberalization and more new products catering to consumers... favourable policies decreed by the central government may make ownership of gold as an investment easier...The China Banking Regulatory Commission gave the go-ahead to the country's four biggest commercial banks to operate individual gold investment business at the end of last year.
Fed to keep raising interest rates says Greenspan -Reuters
July 20, 2005
WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan, in probably his last semiannual testimony to Congress, said on Wednesday the U.S. growth outlook was solid and the Fed expects to keep raising interest rates.
But he warned "significant uncertainties" confront this positive prospect, including the high price of energy, labor costs, the future behavior of low long-term interest rates and the danger this spells for the country's housing market.
"Our baseline outlook for the U.S. economy is one of sustained economic growth and contained inflation pressures," he told the House of Representatives Financial Services Committee.
"In our view, realizing this outcome will require the Federal Reserve to continue to remove monetary accommodation. This generally favorable outlook, however, is attended by some significant uncertainties that warrant careful scrutiny."
Turning to long-term yields that have stayed low in the face of rising official interest rates, Greenspan said their decline was "without precedent" and warned their future behavior was a risk to the outlook.
Part of the danger lies in the fact that low borrowing U.S. costs have contributed to a boom in U.S. house prices, with Greenspan citing "speculative fervor" in some markets.
The Fed has raised interest rates in nine quarter-percentage point steps since June last year to 3.25 percent and is expected by financial markets to keep going to around 4.0 percent by the end of 2005.
In his testimony, Greenspan cited the last Fed policy committee statement, which said the Fed expects to raise rates at a "measured" pace.
The 79-year old chairman, due to retire in January, said it was not clear if U.S. unit labor costs would keep on a modest upward path and warned this could have an important impact on inflation.
A spike in oil prices above $60 per barrel along with other energy price rises posed another important risk.
A flattening in prices would be good for inflation, but Greenspan noted that financial futures markets see little chance of a decline in energy costs "for years to come."
http://www.reuters.com
Related Story:
"If you want to know where interest rates are going... WATCH GOLD!" -Alan Greenspan ... Here is Greenspan's classic 1966 speech with a golden perspective...
Stocks worried about earnings -CNN
Stocks inch lower after Citigroup's earnings miss at start of heavy week for quarterly reports.
July 18, 2005
NEW YORK (CNN/Money) - Stocks slipped Monday morning after an earnings miss from Citigroup sparked worries at the start of a heavy week of earnings.
The Dow Jones industrial average (down 46.65 to 10,594.18), the broader Standard & Poor's 500 (down 5.53 to 1,222.39) index and the Nasdaq composite (down 10.53 to 2,146.25) all lost at least 0.3 percent around 45 minutes into the session.
The major gauges have risen for three weeks in a row, with the S&P 500 ending Friday at a four-year high and the Nasdaq finishing at a 2005 high. After such a move, stocks may have been vulnerable to a bit of profit taking Monday, particularly amid some mixed earnings news.
http://www.marketwatch.com
Oil nears $57 on slowing demand -Reuters
OPEC cuts demand growth forecast, but traders want to see if Hurricane Emily disrupts production.
July 18, 2005
LONDON (Reuters) - Oil prices eased Monday on signs of slowing demand, though the selloff was limited by concerns that Hurricane Emily might damage oil infrastructure in the Gulf of Mexico.
U.S. light sweet crude oil for August delivery fell $1.04 a barrel to $57.05, while August London Brent crude was 28 cents lower at $57.80 a barrel.
Prices Thursday fell to a two-week closing low following a welter of bearish news, indicating a healthier supply situation and the possibility that high prices could be eroding demand.
The markets rallied Friday and early Monday as traders turned their attention to the latest hurricane of the Atlantic storm season.
"There are two things in the market at the moment," said Geoff Pyne, consultant to Standard Bank Plc. "There is quite a lot of crude building up, but that is counteracted by a series of worries."
The most pressing concern is this year's hurricane season, which forecasters have warned could be especially severe.
http://www.reuters.com
Glistening gold tipped for gains into 2006 -Reuters
Jul 18, 2005
By Veronica Brown
LONDON (Reuters) - Gold prices will rise this year and next on renewed dollar weakness, strong investment and global security jitters that will confirm its status as a haven for money, a Reuters poll showed on Monday.
The global poll of 30 analysts and senior traders arrived at a median average gold price of $433.25 per troy ounce in 2005, up 0.75 percent on a similar poll conducted in January and up 4.8 percent on 2004's average bid price of $413.56.
The rising trend was seen spilling into 2006, with analysts predicting an average of $450.00, a sharp reversal from the January poll, which saw prices falling back to $413.00. The highest forecast for next year came in at $500.
"Under our broader economic scenario of slowing growth, the dollar is likely to come under renewed pressure in the second half of this year and that should lead to gold surprising on the upside," HSBC metals analyst Alan Williamson said.
Platinum group metals (PGMs) were tipped as the weakest performers this year, with platinum prices seen up just 1.5 percent, while palladium was expected to drop a hefty 11.9 percent from 2004.
Silver was seen as the star performer among precious metals, with forecasts revised up more than seven percent from January to an average of $7.00.
http://www.reuters.com
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The Future of Gold and Silver CD ...Discover why gold prices should be $750 today -- and may rise to $2,000! ... Why Silver prices should be $15 today -- and may rise to $50!
Market's bounce no help to pensions -USAT
Stocks rebound, but pensions haven't
By Matt Krantz, USA TODAY
July 18, 2005
Stocks improved last year, which you might think would help solve Corporate America's pension problem. The trouble is, it has barely made a dent.
A vast majority of pension plans still face massive cash shortfalls, according to statistics to be released Sunday by Standard & Poor's.
While that may worry retirees, it's primarily a concern for investors, because if something doesn't change, companies will need to divert cash into their pension plans rather than do such shareholder-friendly things as buying back stock or increasing dividends.
The rebound in the stock market the past two years hasn't done much to help fix Corporate America's underfunded pension problem. These are the 25 most underfunded companies in the S&P 500.
"This is more of an investor concern," says Howard Silverblatt, market analyst at Standard & Poor's. "Where are you going to get the money from, and what will change?"
The shortfalls are staggering, especially considering that the pensions are invested partially in the stock market. The market, measured by the S&P 500, gained 10.9% and 28.7% in 2004 and 2003, respectively, with dividends reinvested. But even with those gains, pension plans are still:
�Deep in the red. Companies in the Standard & Poor's 500 are still short $164.3 billion in covering their expected payouts to pensioners, S&P says. That's only a slight improvement from the $164.8 billion deficit of 2003.
�Broadly underfunded. Of the 369 S&P 500 companies that offer pensions, 311 do not have enough money in their pensions to cover their obligations.
�Disproportional shortfalls. There's a large spread between some companies that are slightly underfunded and those with massive shortfalls.
For instance: Ford Motor, ExxonMobil, General Motors, Boeing and IBM face $11.7 billion, $10.1 billion, $8.6 billion, $6.7 billion and $5.8 billion deficits, respectively. Meanwhile, Ambac Financial, AmSouth, Coach and Sealed Air are each $3 million or less underfunded. 25 most underfunded pensions
http://www.usatoday.com
Al-Qaida's U.S. nuclear targets -WND
Captured documents, terrorists reveal bin Laden's preferred dates, places for 'American Hiroshima'
July 18, 2005
Al-Qaida's prime targets for launching nuclear terrorist attacks are the nine U.S. cities with the highest Jewish populations, according to captured leaders and documents.
As first revealed last week in Joseph Farah's G2 Bulletin, the premium, online intelligence newsletter published by the founder of WND, Osama bin Laden is planning what he calls an "American Hiroshima," the ultimate terrorist attack on U.S. cities, using nuclear weapons already smuggled into the country across the Mexican border along with thousands of sleeper agents.
The series of attacks is designed to kill 4 million, destroy the economy and fundamentally alter the course of history.
At least two fully assembled and operational nuclear weapons are believed to be hidden in the United States already, according to G2 Bulletin intelligence sources and an upcoming book, "The al-Qaida Connection: International Terrorism, Organized Crime and the Coming Apocalypse," by former FBI consultant Paul L. Williams.
The cities chosen as optimal targets are New York, Miami, Los Angeles, Philadelphia, Chicago, San Francisco, Las Vegas, Boston and Washington, D.C. New York and Washington top the preferred target list for al-Qaida leadership.
Special Offer:
Operation Divest Terror -- WND -- 7-8-05 -- Private-sector offensive aims to shut down 'business' of extremists... The goal of "Operation Divest Terror" is to help investors identify U.S. companies whose business activities provide revenues, equipment and technology and political cover to governments sponsoring terrorism and send them a message this is a bad business decision.
Pipeline sabotage: Terrorist’s weapon of choice -IAGS
Institute for the Analysis of Global Security
Mar 28, 2005
Until recently, the pipeline industry has been preoccupied primarily with environmental, safety and maintenance issues. Beyond occasional cases of vandalism, the human factor was hardly perceived as a threat to the world’s vast web of oil and gas pipelines, which, all told, carry roughly half of the world’s oil and most of its natural gas.
This has changed since September 11. With the threat of terrorism looming, pipeline operators in the industrialized world have taken action to prevent terrorism from harming energy infrastructure with steps that include:
* Increasing system redundancy,
* Deploying state-of-the-art surveillance equipment,
* Deploying aerial and ground patrols, and
* Fortifying pipeline systems against cyber-security breaches.
All these have made the pipeline system in places like North America and Europe relatively secure. But since most U.S. oil and a growing portion of its natural gas come from abroad our energy system cannot be protected unless similar security measures are applied at the generating points of oil and gas in the Middle East, the Former Soviet Union, Africa and Latin America.
Unfortunately, the security situation in those parts of the world where terrorists are known to operate leaves much to be desired. In fact, terrorists no longer need to come to the U.S. in order to wreak havoc in our energy system. They can achieve the same degree of damage by going after energy targets in their home base where they enjoy support on the ground.
In mid-December 2004, Arab satellite channels aired an audiotape message by Osama bin Laden in which he called on his cohorts to take their holy war to the oil industry and to disrupt supplies to the U.S from the Persian Gulf.
Two days later a follow-up statement by the Saudi branch of al Qaeda was published, calling on “all mujahideen ... in the Arabian Peninsula” to target “the oil resources that do not serve the nation of Islam.” These statements reflect the reality of the post-September 11 world in which terrorist groups have identified the world’s energy system, “the provision line and the feeding to the artery of the life of the crusader nation,” in the words of al Qaeda, as the Achilles heel of the West. Throughout the world the jihadist message is gradually being heeded and it is becoming increasingly apparent that a new chapter in the war on terror is looming on the horizon and that its primary targets are oil and gas pipelines.
Weapon Of Choice
Pipelines are very easily sabotaged. A simple explosive device can put a critical section of pipeline out of operation for weeks. This is why pipeline sabotage has become the weapon of choice of the insurgents in Iraq.
Since President Bush declared the end of major hostilities in April 2003, there have been close to 200 pipeline attacks. According to the Iraq Pipeline Watch at the Institute for the Analysis of Global Security, most of the attacks took place in northern Iraq, primarily on the pipeline running from Kirkuk to the Turkish Mediterranean terminal of Ceyhan.
In addition, there have been dozens of attacks on oil and gas pipelines leading to the refineries around Baghdad, primarily near the Bayji refinery complex 125 miles north of Baghdad. In March 2004, terrorists began striking at oil installations in the south near Basra as well, where more than two-thirds of Iraq’s oil is produced. The attacks have exacted a heavy price from the new Iraqi government— it is estimated that pipeline sabotage costs the country more than $10 billion in oil revenues — and have undermined the prospects of Iraqi construction.
Such attacks also have a corrosive influence on the morale of the Iraqi people and their attitude toward the presence of U.S. forces in their country. Iraqis are growing increasingly vexed by the coalition’s slow progress in the reconstruction effort and its inability to guarantee a reliable supply of electricity, which is primarily derived from oil. Worse, the sabotage campaign has created an inhospitable investment climate in Iraq and scared away oil companies that were supposed to develop its oil and gas industry.
Emulating the success of the saboteurs in Iraq, terrorists in many oil-producing countries have set their sights on pipelines and other oil installations. In December 2004, Sudanese rebels attacked an oil field, killing 15 people. “This was our first military operation and we chose the oil fields because this is the wealth of Sudan, which this government is not sharing with all of its people,” said Ali Abd al-Rahim al Shindy, leader of the group that carried out the attack.
Chechen guerrillas fighting to sever themselves from Russia are going after the country’s gigantic pipeline web of roughly 31,000 miles. Russia is the world’s second-largest oil exporter and 40% of its revenues are derived from oil. There is no better way for the Chechens to hurt the Russian economy than hindering Russia’s capability to export crude. In 2004, pipelines were blown up in Volograd, Dagestan, Stavropol as well as in and around Moscow.
In India, a separatist rebel group called United Liberation Front of Asom (ULFA), which fights for independence for oil-rich Assam state, has taken responsibility for a number of pipeline attacks. Assam is the source of some 15% of India’s onshore crude oil production and, as the country’s oil demand grows, the implications of disruption of the flow of oil from there will become increasingly noticeable.
In southeast Turkey, Kurdish guerrillas belonging to the Kurdistan Workers Party (PKK) have staged a campaign of bomb attacks on an oil pipeline.
In Colombia, terrorist groups, primarily the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN,) have attacked the 480-mile Cano Limon-Covenas oil pipeline so many times that it became known as “the flute.”
The campaign against the world’s vulnerable pipelines is likely to continue to spread to new territories. Terrorists have already indicated interest in the nearly completed 1,000-mile Baku-Tbilisi-Ceyhan (BTC) pipeline, slated to transport 1 million barrels of oil a day from the Caspian Sea to Western markets through the Turkish port of Ceyhan. The pipeline is expected to be operational by the end of 2005 but even before construction ends, terrorist elements may already be planning attacks on it. According to Azerbaijan’s National Security Minister, Namiq Abbasov, the country’s special services had obtained information that regional insurgents and members of al Qaeda are planning acts of sabotage against the pipeline.
Another problematic area in the pipeline’s path is Georgia, where separatists in South Ossetia and Abkhazia provinces often clash with the Georgian government. In addition, there is increasing threat by Islamist groups operating in the Caucasus such as the Islamic Party of Eastern Turkestan, the Islamic Movement of Uzbekistan (IMU), Chechen separatists and Hizb-ut-Tahrir al-Islami. The latter group seeks to seize power and supplant existing governments with a sharia-based caliphate for the purpose of jihad against the West.
China, the world’s fastest growing energy consumer, is also vulnerable to terrorist strikes against oil. To satisfy its growing energy needs, China has decided to run pipelines connecting the northwest district of Xinjiang with neighboring Kazakhstan. This means China’s oil will be at the mercy of increasingly hostile Muslim Uighur minorities trying to break away from the central regime in Beijing.
But in no oil and gas domain could pipeline sabotage do more damage than in Saudi Arabia, home to one-fourth of the world’s oil. Over 10,000 miles of pipeline crisscross Saudi Arabia, mostly above ground. Were concerted pipeline attacks to spread to Saudi Arabia, repeatedly interrupting the Saudi oil supply, the implications for the global economy could be profound.
Not all pipeline sabotage is politically driven. Thieves often pilfer fuel from pipelines for personal use or to sell on the black market. Such activity sometimes ends tragically. In 1998, more than 1,000 villagers in Nigeria died when a ruptured gasoline pipeline exploded as they scavenged fuel.
Fear Premium
Whether perpetuated for political or criminal reasons, assaults on oil infrastructure have added a “fear premium” of roughly $10 per barrel of oil.
The cause and effect are not lost on terrorists whose goal, feasibility aside, is to bankrupt the U.S. “The killing of 10 American soldiers is nothing compared to the impact of the rise in oil prices on America and the disruption that it causes in the international economy,” exhorted one jihadist website. For the U.S., which imports more than 10 million barrels a day, the spike in oil prices due to oil terror cost close to $40 billion in 2004.
Governments, oil companies and pipeline operators are seeking to put in place mechanisms to reduce the impact of the scourge. The most effective way to address the scourge of sabotage is to confront terrorists wherever they are. This is already being done by most countries as part of the global war on terror. By pursuing jihadists and separatist groups, denying them freedom of operation and destroying their infrastructure, governments can reduce the number of attacks.
The most obvious way to increase pipeline security is the use of patrols and the creation of buffer zones along the pipeline routes into which unauthorized personnel are prohibited from entering. In Iraq, close to 14,000 security guards have been deployed along the pipelines and in critical installations. But ground patrols are only effective to a certain degree, especially in areas of inclement weather and forbidding terrain.
Another way to reduce pipeline sabotage is by paying tribes and powerful warlords to protect the pipes on their territory. This method was tried in Iraq with limited success. Rival tribes would often blow up a pipeline and then claim to be more deserving of the protection money.
Sensing Systems
Technology could also play an important role in the effort to secure pipelines. Sophisticated surveillance systems to enhance infrastructure security can be deployed in critical locations. New technologies for seismic sensing of underground vibrations can provide early warning when saboteurs approach the protected area. Such systems may be expensive, but by making possible the remote monitoring of much of the pipeline network, governments can eliminate the need for large numbers of troops and instead rely on smaller numbers of rapid-response teams.
Such systems can also be complemented by air surveillance. As a result of progress in high-resolution remote sensing and image processing technology, it is now possible to deploy small and medium-size unmanned aerial vehicles (UAVs) and unmanned helicopters for pipeline inspection purposes. These UAVs can stay in the air up to 30 hours at medium-to-low altitudes, and can send images to a central control station where they can be reviewed by security teams. Some defense contractors are developing UAVs mounted with automatic weapons to be used against saboteurs.
Unfortunately, many of the countries where such technologies would be most effective are too poor to afford them. Under such circumstances governments and pipeline operators that cannot prevent attacks altogether should invest in mechanisms to minimize the damage attacks can cause. The cheapest and most effective way to protect an existing pipeline is to prevent easy access by surrounding it by walls and fences. New pipelines should be buried. While this may substantially increase construction cost, in areas where saboteurs are known to operate the investment will quickly pay for itself. This is the reason the BTC has been completely covered from the outset.
New technologies can fortify pipes with external carbon fiber wrap that can mitigate the affects of explosive devices. Equally important is to shorten the lead time between the attack and the repair. The quicker it takes to repair the damage, the lower the cost of the disruption. Pipeline saboteurs often target pipelines at critical junctions or hit custom-made parts that take longer to replace. To reduce the lead time, pipeline operators should be equipped with sufficient inventories of spare parts.
It is important to realize that none of the approaches discussed here is likely to put an end to the problem. As long as oil and gas continue to be essential to the functioning of the world’s economy, pipeline sabotage is likely to remain one of the industry’s risks. No matter what remedy is applied, it will add a surcharge to the price of a barrel, which is already unusually high.
Gal Luft is executive director of the Institute for the Analysis of Global Security (IAGS). This article was originally published in Pipeline & Gas Journal.
Related Stories:
Terrorists Have Oil Industry in Cross Hairs -WashPost 9-27-04 ... Economic Disruption Is a Key Goal
OPERATION DIVEST TERROR: A new way to fight terrorism ... and win! -WND
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COMMENTARY
GOLDEN MOMENT -LIU JIE, ChinaDaily
2005-07-18
Chinadaily.com
The stock market is bearish, interest rates are dismal and investment channels are limited.
So which investment vehicle would help maintain the value of your assets?
The answer could be "gold."
It is a necessary ingredient in an investment portfolio because of its long-term value and as a hedge against risk, experts say.
According to a research report by the World Gold Council (WGC) and the Beijing Gold Economy Development and Research Centre released last month, it is prudent to pool 5-10 per cent of individual assets into the precious metal, either in physical or paper form.
"During market fluctuations, gold moves in a direction opposite to all investment tools, including stocks, bonds, securities, funds and foreign exchange," says Albert Cheng, managing director of WGC Far East.
It is among only a handful of financial assets that is not matched by a liability and can provide insurance against extreme movements in the value of traditional asset classes in times of instability, he says.
WGC is a London-based non-profit organization that promotes gold consumption.
In times of uncertainties in the international market and a falling US dollar, gold supply cannot be cranked up in a short period because there are few new mines - which means it could be a golden moment to include the metal in an investment portfolio.
World gold prices reached an 18-year record high of US$455 per ounce late last year mainly because of the weak US dollar. Last week, they were hovering around the US$425 mark.
"The price has not peaked, we believe," Cheng says.
The report indicates that though bank savings are the safest way to keep your assets, the rate of return is rather poor in China, given the low interest rate and the 20 per cent interest tax.
Official statistics show that the combined savings of citizens on the mainland amounted to 12 trillion yuan (US$1.45 trillion) at the end of last year.
Meanwhile, the stock market has been in the grip of bears for years; and the immature bond, securities and fund sectors highlight the value of gold.
Individual investment
China's individual gold investment is likely to surge in the coming years with market liberalization and more new products catering to consumers.
The report points out that the favourable policies decreed by the central government may make ownership of gold as an investment easier.
The China Banking Regulatory Commission, the nation's banking watchdog, gave the go-ahead to the country's four biggest commercial banks - Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China - to operate individual gold investment business at the end of last year.
Bank of China launched its "Gold Treasury" on trial in late 2003 - the first paper gold product on the mainland - and China Construction Bank released "Account Gold" on February 28.
"Compared with physical gold trading, paper gold products are more convenient and economical, as investors need not worry about how to store the gold bars. Also, no gold processing fee is charged," says Cheng.
Agricultural Bank of China has tied up with Shandong Zhaojin, one of China's largest gold mine operators and processors, to provide a physical gold trading platform for individual investors from January 14.
Another investment form available to retail investors is commemorative gold bars or coins sold in department stores or specific gold shops.
Liu Shan'en, a researcher with the Beijing Gold Economy Development and Research Centre, cites the Lunar New Year gold bars issued every year since 2002 as an example.
"In 2003 and 2004, 1.25 tons of bars were sold each year; and to meet the supply-demand gap, 1.985 tons of bars were issued this year on the retail market," says Liu.
However, Liu points out that commemorative gold bars are not a pure investment vehicle "as designing and processing fees are charged and its value mainly lies in collection."
Individual gold investment on the mainland is limited to spot transactions. Though the People's Bank of China, the nation's central bank, has proposed the establishment of a gold futures market, a timetable has not been announced because conditions are not ripe, it said earlier this year.
"As the renminbi is not fully convertible, gold investment in China cannot fully catch up with the international market. Investment products such as gold options and swaps cannot be launched now," says WGC's Cheng.
"When China's gold market is completely open, such derivative products may play an active role in the market."
Related Story:
CHINESE GOLD RUSH -Craig Smith, CEO, SATC ...
In 1997, I wrote "China, The Economic Dragon," discussing the potential impact when one-fifth of the world's population are turned loose on the world's free marketplace. Now China is fast becoming a world leader in the worldwide rush toward gold.
Commerce without Morality: The tale of two CEOs
A few bad apples Vs. the Cockroach Theory
By Craig R. Smith
Worldnetdaily.com
July 18, 2005
"America's greatest economic need is higher ethical standards, enforced by strict laws and upheld by responsible business leaders."
- GEORGE W. BUSH, July 8, 2002
Bernard Ebbers, Ex-WorldCom chief executive, was sentenced to 25 years in prison for his role in orchestrating the biggest corporate fraud in the nation's history last week.
Ebbers was convicted last March for his part in the $11 billion accounting fraud at WorldCom that was the biggest in a wave of corporate scandals at Enron, Adelphia, Healthsouth, etc., etc.
"Completely bizarre" is how Ebbers described his situation to CNN. Legal experts said the sentence, effectively a life term for the 63-year-old, is the longest ever for a CEO found guilty of committing corporate crimes while running a Fortune 500 company.
A few bad apples vs. the Cockroach Theory
If you're an optimist, you could say these trials, plea bargains and admissions show that the system is correcting itself and things are getting better. The problem is that new scandals keep arising.
When the Enron scandal broke three years ago, optimists argued we were dealing with only "a few bad apples." Instead, it turns out, Enron was an example of the Cockroach Theory: if you see one cockroach, a whole nest is undoubtedly lurking nearby.
Just as we started trying to stamp out old scandals -- the trials of former Credit Suisse First Boston star investment banker Frank Quattrone and former Tyco chairman Dennis Kozlowski got underway -- a whole new bunch of roaches sprang out of the wall.
- In 2004 alone, Forbes reports that Wall Street firm paid over $4.5 billion in fines
- A former top hedge-fund trader, Steven Markovitz, copped a plea to making improper "market timing" trades with mutual funds
- Alliance Capital became the fifth fund manager to admit allowing such trades
- Prudential Securities (now Wachovia) and Merrill Lynch canned employees for improper fund trading
- JPMorgan Chase paid $25 million to settle charges that it violated rules covering initial public offerings of stock
The mutual-fund scandal involving firms like; Strong, Janus, Bank of America and Bank One are still expanding and could turn out to be the most disturbing of all -- worse than even Enron and WorldCom. Yet some funds like Vanguard, American, and Fidelity seem untouchable. Hmmm� perhaps we should send out for more bug spray.
In the 1987 movie "Wall Street," Gordon Gecko proclaimed "greed is good". Gecko represented one of Wall Street's most celebrated traders -- a modern spokesmen for the notion that "commerce without morality" pays.
But in Adam Smith's classic "Wealth of Nations," the 18th century Scottish moral philosopher proclaimed that self-interest leads to the common good ONLY IF most people in society have internalized a general MORAL LAW as a guide for their behavior.
So corporate immorality is not a Democrat or Republican issue, it's a moral crisis. Yet some business people become so blinded by greed they will risk anything, including family disgrace and prison time, if it means adding to their financial holdings.
Here's the lesson: It's not wise for us to put our trust in someone who could, if ethically or morally challenged, ruin us financially. All people are capable of moral lapses, and therefore we must be eternally vigilant.
Saved by a prayer?
Also in the news last week -- in sharp contrast to Ebbers 25-year sentence -- the government dropped plans to retry Richard Scrushy, the fired HealthSouth Corp. CEO, acquitted of directing a $2.7 billion fraud back in 2002.
"God is good," Scrushy said on the courthouse steps after the verdict on June 28, 2005. A recent Washington Post article, "The Lord and Richard Scrushy" makes a good point, illustrating the power of prayer:
[Scrushy] left his suburban evangelical church and joined a predominantly black congregation in a blue-collar neighborhood. He bought a half-hour of local TV for a morning prayer show featuring himself and his wife, and frequent guest spots by black ministers. He had a prayer group praying for him every day at the trial. All this was in Birmingham, Ala., where HealthSouth was located and where the trial occurred.
Cynics have suggested that Scrushy and his advisers might have been trying to influence the local jury with these tactics. Why can't a man turn to God in his moment of trial (or, indeed, in his actual criminal trial) without being accused of ulterior motives? Scrushy prayed, and his prayers were answered.
One can only hope Mr. Scrushy has indeed 'seen the Light.'
Violating the most basic Commandments such as "Thou Shalt Not Steal" and "Thou Shalt Not Lie" should be minimum requirements of those we entrust with our hard-earned money -- or we will surely pay the consequences later. Welcome to the brave new era of corporate transparency, accountability and morality! Thank you Sarbanes-Oxley.
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Rep. Ryan files resolution to reform Social Security -Tom Barton
The Journal Times
July 15, 2005
U.S. Rep. Paul Ryan's (R-Janesville) proposal for fixing the insolvency of social security in the nation took a step forward today, as a resolution co-authored by Ryan and others on the House Social Security Subcommittee was filed today in the House.
The proposal, House Resolution 3304, would take Social Security dollars left in a surplus, which have long been used to fund government programs outside of Social Security, and put them in personal investment accounts for those paying into Social Security.
"Today, and for the next 12 years or so, workers will be overpaying their payroll taxes, thereby contributing to the Social Security surplus," Ryan said Friday during a teleconference with Wisconsin media. "Two workers are paying the payroll tax to benefit one retiree."
The Social Security Trustees have predicted that Social Security will run a surplus until 2017.
Under his co-authored proposal, workers under the age of 55 would have the choice of having their portion of the Social Security Surplus distributed to a Social Security Retirement Account or GROW (Growing Real Ownership for Workers) Account.
"The advantage the worker has is this is a real asset that they own. These accounts are the right and the property of the workers, and they would be fully inheritable," Ryan said. "Workers currently have no legal right to their Social Security benefits. But with GROW accounts, workers would own these assets that would help them pre-fund their Social Security retirement benefits."
Currently, Social Security benefits disappear with a person's death. In the case that a spouse of a married couple dies, the surviving spouse must decide if they will keep their own Social Security account or take their deceased partner's account. With the House Resolution, the personal account could be willed to a worker's family.
A worker's portion of the surplus would be accounted back to them into this personal account through marketable U.S. Treasury Bonds.
For example, Ryan said if the payroll tax is at 12.4 percent and the government only needs 10 percent to pay benefits, that remaining 2 percent in surplus would go back to a worker in the form of 2 percent of his or her taxable earnings.
"In other words, this proposal takes part of the unfunded promise of Social Security benefits and replaces it with one of the safest assets � U.S. Treasury Bonds," He said. "There is no downside risk. You'll get your guaranteed Social Security benefit, only a portion of you're benefit will come through this account."
Essentially, a person will get two checks for their total Social Security benefit � their regular, unchanged Social Security check they receive, plus a check from this new account.
"It brings up the safety net so every senior is getting at least a poverty level benefit, which is not the case today," Ryan said, stressing that the proposal would not change the current Social Security formula and would not change the current payroll tax or benefits. "Those two checks will equal the current Social Security formula, now, you're just getting it from two different sources instead of one."
Ryan also stressed that it would be an opt-out program, where all those under 55 would be enrolled in the program, but can choose to stay in the current system if they wish.
He also emphasized that putting the Social Security surplus in personal investment accounts would not privatize Social Security, as the accounts would be managed and administered by an independent board similar to the one that manages retirements plans for federal workers. This board would submit a plan to Congress that would allow workers to choose other prudent investment options or stay in low-risk treasury bonds, according to the House Resolution.
"This is not outside of the Social Security system," Ryan said.
Ryan's aggressive perseverance
Ryan has pushed ahead as one of the most aggressive proponents of Social Security reform who will face reelection next year.
In listening sessions on Social Security held by Ryan in Burlington and other towns in Wisconsin's District 1, which Ryan represents, he was greeted with skepticism and outright opposition, highlighting the difficulty he and Republicans face in trying to create personal investment accounts with Social Security dollars. He received even more criticism for his comments on wanting to devise a formula of radical changes to overhaul a popular program.
Most have not taken to reforming Social Security, as a March CNN/USA Today/Gallup poll result of 443 of 900 adult Americans surveyed showed that 59 percent oppose the use of private retirement accounts, with 60 percent opposing the use of individual accounts.
The issue
Social Security Administration and the Congressional Budget Office reports that Social Security will begin to take in less money than it pays out is 12 to 15 years and will completely drain its trust fund in another four to five decades. With no changes, the system would be able to pay 70 percent and 80 percent of its obligations at that point using taxes being paid in by workers.
This is why Ryan, as well as President Bush, have said investment gains on private accounts would offset cuts in guaranteed benefits, but the White House has, however, conceded that personal accounts alone would not be enough to guarantee Social Security's Solvency.
Democrats, on the other hand, as well as some independent observers, have said diverting a portion of Social Security funds would require the government to borrow nearly $5 trillion over the first 20 years to allow the system to pay current retirees, with the possibility that benefits might have to be cut as much as 40 percent under the plan.
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The Passion of the Marketers -SHARON WAXMAN, NYT
New York Times
July 18, 2005
LOS ANGELES, July 17 - In the summer blockbuster movie "Mr. and Mrs. Smith," from 20th Century Fox, Brad Pitt and Angelina Jolie play godless suburbanites and professional assassins. But when they steal their neighbor's car for an extended chase scene, a crucifix hangs conspicuously from the rearview mirror, and in the next scene the actors wear borrowed jackets that read "Jesus Rocks," as they go on the lam.
A double wedding in "Left Behind: World War III," the third film in the series about the biblical end of days.
"We decided to make the next-door neighbor, whose crucifix it is, be hip, young, cool Christians," explained the movie's director, Doug Liman. "It's literally in there for no other reason than I thought, This is cool."
Mr. Liman isn't alone. Mainstream Hollywood, after decades of ignoring the pious - or occasionally defying them with the likes of Martin Scorsese's revisionist "Last Temptation of Christ" and Kevin Smith's profane parody "Dogma" - is adjusting to what it perceives to be a rising religiosity in American culture.
Certainly, the odd provocation still occurs. Billboards for the heavy-metal rocker Rob Zombie's "Devil's Rejects," set for release on Friday by Lions Gate Films, shows a murderous band of outlaws in a pose that mimics the Last Supper.
More often, though, producers, directors, studio executives and marketing specialists have been looking to either mollify or entice an audience that made its power felt with last year's "Passion of the Christ." That film, directed by Mel Gibson, took in an astonishing $370 million at the domestic box office when released by Newmarket Films in February 2004 and - along with the empowerment of a Christian conservative bloc after the last presidential election - helped change attitudes and practices in an industry usually known for its secularism.
"Mel Gibson did us a service," said Bob Waliszewski, a media specialist with Focus on the Family, an evangelical group that was invited with about 30 other such organizations last February to see an early trailer of Disney's "Chronicles of Narnia: The Lion, the Witch and the Wardrobe." The studio, which is producing "Narnia" along with Walden Media, is making a concerted push to include Christian organizations throughout the production and marketing of what it hopes will become a major franchise. (The film is to open in December.)
"The Hollywood elites' eyes widened big time," Mr. Waliszewski said. "They said, 'I thought the church was dead. I didn't think people cared. Is it possible that we don't know what's happening in state after state?' And the answer is a resounding yes."
Evangelical and fundamentalist Christians number an estimated 30 million in the United States, and Hollywood - faced with a prolonged slump in ticket sales - has followed its natural instincts in trying to tap one of the country's most powerful niche markets.
Recommended Movie Review Site:
Movieguide.org ... dedicated to redeeming the values of the mass media according to biblical principles, by influencing entertainment industry executives and helping families make wise media choices... "Commending those who do right" - 1 Peter 2:14
NEW WEEKLY FEATURE:
A BLAST FROM THE PAST... (It's what we reported one year ago...)
Gold Standard
MARKET NEWS DIGEST
-> Gold still outshines alternatives -Courier Mail
-> Silver, Gold Up On Weak Dollar -DJ
-> Producer prices fall 0.3% in June -CBSMW
-> Snow: Terror puts economy at risk -CNNfn
-> There's lots of glitter left in gold -Globe & Mail
-> Watching the consumer wane -CNNfn
-> No business as usual after "perfect storm" of Enron
COMMENTARY
-> CITIZEN'S GUIDE TO COUNTER-TERRORISM -Craig Smith-> INFLATION HAS RETURNED -Mary Anne and Pamela Aden
-> ODDS OF A CRASH? HIGHER THAN YOU THINK -Bill Fleckenstein, MSN
-> Not Living in Terror in the Face of Terrorism -Doug Giles
-> A Recovery Trying ... Suddenly Feels Woozy -NYT
-> How to Recognize a Housing Bubble -John Mauldin
-> A SLAP IN THE FACE -The Mogambo Guru, DR
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Welcome to the 21st century paradigm shift
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In "Economic Solutions for the 21st Century" you'll discover ...* SOCIAL SECURITY REFORM ... A plan to unify America
* WHY YOU MUST OWN assets that offset a DECLINING DOLLAR
* WSJ SAYS: "You don't have to be rich to invest in COINS."
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ABOUT THE EDITOR
David M. Bradshaw is Editor of 
REAL MONEY PERSPECTIVES,
a new, syndicated daily financial/cultural news digest. In 2001, he
published REDISCOVERING GOLD IN THE 21ST CENTURY: The Complete Guide to the Next Gold Rush
and
has been an economic commentator since 1987, when he
produced the World Economic Perspectives radio show.
In 2004, he produced "A CITIZEN'S GUIDE TO
COUNTER-TERRORISM" a free-to-the-public educational resource on DVD and CD.
In 2005, he released a new CD, "WHAT'S YOUR WORLDVIEW?" a one-hour CD sample from his 24-hour series, "THE BIG PICTURE: The
Shape of Things to Come" discussing geopolitical,
economic and spiritual trends in the 21st Century. MORE ...
PERSONAL NOTE: Youngest daughter Braida Zoe (age 17 mo.) is now feeding herself, running, climbing and floating & swimming. Shown with
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