A $68,000 DIFFERENCE!

08/24/2001

In This Issue:

ALL GOLD IS NOT CREATED EQUAL - Craig R. Smith, SATC

WALKING BACKWARDS TOWARD REDEMPTION - Bill Bonner,TDR

GOLD AS THEATRE - John Hathaway, LeMetropoleCafe

ECONOMICS: THE POWER OF GOSSIP - Dennis Peacocke, SCS

PAT BOONE - AN UNUSUAL FAITH - Janet Chismar, Crosswalk.com

"GOLD!" BRAVO TO HISTORY CHANNEL - David Bradshaw, IF Press


ALL GOLD IS NOT CREATED EQUAL - Craig R. Smith, SATC

The nature of our present economic and monetary environment requires decisive action - if not for ourselves, for our children and their sake. As R.E. McMaster Jr. puts it, this is “no time for slaves.”

Today, monetary myth is so widespread that it appears nothing short of a financial meltdown will rattle Americans enough to face reality. Is that what it will take? I hope not, but I fear so.

U.S. non-financial corporate debt has reached a staggering 46 percent of GDP - its highest level ever. Consumer installment debt is up to 21.7 percent of disposable income - also the highest level ever.

In early 2001 the average household has a credit card balance of $7,200 - an amount that would take 30 years to pay off if you made only the minimum payments. Savings rates recently hit zero.

Does anyone want to argue the point that now is the time to take personal responsibility for our savings and investment habits?

Last week I was interviewed by The Cincinnati Enquirer for an article entitled "Gold Rules No Longer." Cincinnati Enquirer The reporter states, "Gold is no longer a hedge against inflation or a safe haven in soft economic times," which fairly sums up the present sentiment about gold in today's debt-addicted society.

But thankfully, the reporter allowed me to make an important distinction - that all gold coins do not perform equally. Here is an example from the first chapter of REDISCOVERING GOLD IN THE 21ST CENTURY.

"A $68,000 Difference"

Here is an example of a client (Mr. C) who listened to our advice in 1995 and bought high-quality investment gold coins instead of bullion coins. Mr. C invested $107,085 in U.S. rare coins in 1995 and 1996. In May 1999, Mr. C. decided to cash in his portfolio, valued at $146,094, for a net gain of $39,009.

At the time of Mr. C's initial investment, gold bullion was $385 per ounce. At that price he could have purchased 278 ounces of gold bullion ($107,085 divided by $385). By May of 1999, the price of gold bullion had dropped to $278 per ounce. If Mr. C had invested his $107,085 in gold bullion rather than rare coins back in 1995, his portfolio would only have been valued at $77,284 in May 1999 - creating a net loss of $29,801 instead of a net gain of $39,009.

Conclusion

Mr. C's experience clearly supports my premise that all gold is not created equal. Holding the right type of gold coins helped Mr. C turn a potential loss of $29,801 into a gain of $39,009 - that's a $68,800 difference.

Identifying opportunity is a lot easier in hindsight. All gold isn't created equal, but we all have an equal chance to identify new opportunities in today's marketplace.

Back in 1999 many stock investors were bemoaning the lost opportunity when it comes to the raging dot-com stock market. Here's your chance to get in on the ground floor of the next gold rush. I believe that today's U.S. rare coin market has the same type of growth opportunity as the stock market, with far less risk.

Remember, always buy quality because all gold is not created equal.

Learning the basics of buying U.S. rare coins is the next step in our journey to rediscover gold in the 21st century. (More next week)

Read Mr. Smith's latest Research Reports on... U.S. Gold Commemorative coins and U.S. Proof Silver Type coins

Read the early book reviews here: Book Reviews

Order your copy of REDISCOVERING GOLD here: ideaman@myideafactory.net


WALKING BACKWARDS TOWARD REDEMPTION - Bill Bonner,TDR

The U.S. press is full of hard luck stories - investors who bet the farm on Nortel, Cisco or Amazon...and lost. Well, these are not super-hard luck stories. Maybe we should say they are semi-hard, like those soft-porn movies you find in respectable hotels. A man of 45 has been forced to go back to work...a widow in her 60s now has to wash her car herself...a high- rolling workaholic has been forced to take a long vacation...Almost all of them are suing their brokers.

But even with these life-changing stock market losses, stocks are still very expensive. Krispy Kreme is at 105 times earnings. Dell is at 40 times. The normal p/e is about 14...yet the Dow is now at 25, and much higher by WSJ/GAAP standards...

Richard Russell: "In the past, bear markets have taken stocks down to the point where a dollar would buy 17 cents and even 20 cents worth of earnings and anywhere from 6 cents to 10 cents worth of dividends.

"In today's market, a dollar buys 3 cents or 4 cents worth of earnings and no dividend - it's a sucker's market. It's a Las Vegas market...Today Wall Street is one step away form Las Vegas. The difference - Wall Street enjoys greater publicity: over-priced stocks are touted around the clock, and millions of people are living with the illusion that stocks at today's prices are a good holding 'for the long haul.'" (more below)

ERIC FRY REPORTS FROM NY...

- "The Fed is trying to cure our post-bubble economic hangover by the 'hair of the dog' - excess money growth," says Northern Trust's Paul Kasriel. "The ECB is getting ready to crank up its printing press, too."

- Increasingly loose monetary policies in the U.S., Europe, and Japan will spark a renewed interest in gold: "With the Fed signaling that it is no longer prepared to guarantee global investors a positive return over inflation on their 'parked' funds, folks are starting to look for another place for their funds to hang out."

- A kind of paralysis seems to be taking hold on Wall Street. All hope is not lost, but its wings are clipped a bit.

REDEMPTION

Investors, waiting for the messiah of the "second half recovery" and the resumption of the bull market, are puzzled. The second half has been here for two months. We have just gotten our 7th rate cut in 8 months. But nothing seems to be happening. Why the long pause?

Some stockholders have become weary. A few have become surly - biting the hands that once fed them stock tips. But most have resigned themselves to wait. "Over the long haul," they say, "things will get better. They always do."

Or, as Porter Stansberry put it in this space two weeks ago: "The reckonings don't last. Redemption follows... You see, common stocks afford individuals the opportunity to own the means of production - the machines and organizations that have produced this amazing trend towards wealth. And this is a system that, despite its best efforts, the government hasn't yet been able to destroy."

"Capitalists and entrepreneurs continue to make the world a better place...and for this, they make a profit and their investors earn a return..."

Porter believes investors will be redeemed by technology and the spirit of enterprise. Long-term investors are supposed to be redeemed painlessly. "For the long term holders of equity," he says, "there is no reckoning - only redemption."

And despite our reckonings, says Porter, "we're getting richer, not poorer."

Here at the Daily Reckoning, dear reader, modesty forbids us from pretending to know the future. We further confess that we are scarcely more certain of the past or the present. But when we look through the glass darkly at the here and now, we do not see people making financial progress. To the contrary, we see them walking backwards...

Looking back at the last five years, we see many Americans smoking $10 cigars. First, the stock market bubble convinced them that they were getting richer - so they stepped up consumption. Now, their other major asset - their homes - are rising in price. So, they use their houses as though they were an extra revenue source - spending the additional equity almost as soon as it appears. Over a ten year period - from 1986 to 1996 - American homeowners' mortgages walked backwards by a full 10%.

Prepare for a "prolonged, very painful adjustment process," Richebacher warns.

How long? How painful?

"Just to give you an idea of how far out of historical whack the stock market is," writes Ben Stein on TheStreet.com, "consider that stocks rise over the long term by about 4% a year, with immense deviations around the mean. If the earnings depression ends tomorrow and profits rise by 4% a year again, it will take roughly 14 years (not months) for the Dow's P/E to reach historical norms...Or to put it another way, the Dow would have to fall in half for it to resume historical P/E behavior."

People who believe in automatic redemption over time may have a very long wait. Redemption is neither automatic, nor guaranteed by the passage of time.

Americans may be redeemed, but they will be nailed to a cross first.

Your correspondent, hoping for redemption, but doing the best he can in the long pause of life... Bill Bonner

Read the Daily Reckoning


GOLD AS THEATRE - John Hathaway, LeMetropoleCafe

[Editors Note: John Hathaway is the highly regarded gold fund manager for the Tocqueville Gold Fund and is very well thought of throughout all the gold industry. He interviewed by Neil Cavuto on FOX NEWS last Wednesday to discuss the amazing growth of gold funds this year.]

In a private meeting in June 1993, the late Sir Jimmy Goldsmith asked me whether I thought his bullish stance on gold at the time was correct. Yes, I answered. We agreed that paper currencies were suspect and that the rising gold price signaled legitimate concerns. He responded with a question: "But what happens if the authorities try to squash the signal?" In retrospect, this was not only an excellent question, but quite possibly foreshadowed what has been going on in the gold market since then.

The price of gold in perpetual checkmate became a central motif in the mythology of the new economic paradigm. The imagery played a role in facilitating the investment bubble that ended over a year ago. The evolution of the financial markets has diminished the role and effectiveness of traditional monetary policy. The Fed no longer controls the monetary aggregates and now only has a direct influence on interest rates. Tinkering with the gold price would be a very tempting way to reinforce the strong dollar rhetoric. It would be simply shocking, even inconceivable if no high level official had ever considered the idea. A low or declining gold price would soothe financial markets and, conversely, a rapidly rising price would roil them. The price behavior of gold is a simple sound byte able to penetrate the increasingly confusing overload of electronic inputs and media circus confronting traders and investors. It is a much more efficient way to communicate a state of being than the inscrutable or indecipherable pronouncements of various economic policy spokesmen, especially for grass roots consumption. The behavior of gold, notwithstanding repeated attempts to write it out of the script, still affects market and consumer psychology.

Legions comforted by the somnolence of the gold price assume that such behavior is the result of a free market process. The history of government intervention in currency markets alone would strongly suggest otherwise. The precedent of the London Gold Pool, a scheme orchestrated by the US and Britain to rig the gold price in the 1960’s, exemplifies the keen interest of our government in the matter. For these reasons alone, believers in whatever low gold prices are signaling should suspect a fairy tale.

Given the long history of official sector antipathy to gold, especially in the US and the UK, one would be hard pressed to explain why it had suddenly become sacrosanct. In fact, there is growing body of credible evidence that the US government and others may have been manipulating the metal price for some time. A few years ago, such claims were unsubstantiated and lacked credibility, but recently some weighty evidence is beginning to accumulate. Credit for the heavy lifting on discovery of possible price fixing activity goes to Bill Murphy, Reginald Howe, James Turk and their associates. A useful source to learn more are the two Gold Antitrust Action Committee web sites: Le Metropole Cafe or GATA

Read the rest of the story with charts to support here: Le Metropole Cafe


ECONOMICS: THE POWER OF GOSSIP - Dennis Peacocke, SCS

Economics, as many of you know, comes from the Greek word "oikonomia" which literally means household management. In other words, the oft times complex study of how the world does business is really nothing more than the study of the laws of household management on a much larger scale. The message here is: If you can't manage your own business, how can you manage or understand someone else's?

But economics is more than just the study of the managing of choices in terms of goods, services, production, currency, trading, and the like. It really involves, on a societal level, the study of whose big mouth is fueling either the confidence or despair of the people. During the Great Depression of the 1930's, when President Roosevelt stated, "We have nothing to fear but fear itself," he said a mouthful. Indeed, though I strongly disagree with many of Mr. Roosevelt's centralizing policies, I give the man credit for understanding the real force behind this so-called "dreary science." Booms and busts, economic expansions and contractions, are more about powerful gossip from powerful people than anything else.

The old TV advertisement stating, "When E.F. Hutton talks, people listen," was not only smart advertising, it displayed a true prophetic insight. Certain key people make and influence decisions, which push the next layer of key people to make decisions, which push the next layer and so on and so on.

When those decisions begin, they may or may not be based on solely "economic" reasons. In fact, I am quite sure they often are not. Rather, it's about politics and newsroom editors and communication company owners and people who are in major places of influence deciding that world events and political figures or administrations should move in particular directions toward success or frustration. Beyond all that, I am even more certain God's management of history ultimately is involved.

Read it all here: Go Strategic


PAT BOONE - AN UNUSUAL FAITH - Janet Chismar, Crosswalk.com

In facing a family crisis, the recording artist leans on his faith and the power of prayer.

Crosswalk.com News Channel - Religion Today editor Janet Chismar had the opportunity to interview Pat Boone on Aug. 17, just prior to his appearance on Larry King Live on CNN. Boone spoke about the upcoming broadcast, his faith and his grandson's condition.

BEVERLY HILLS, CA (ANS) -- Here's a man who knows how to shake up stereotypes. Long regarded as the vanilla version of '50s rock, recording artist and film star Pat Boone startled most of Christendom when he donned an earring, tattoo, leather and studs for the 1997 American Music Awards broadcast.

His album, "Pat Boone in a Metal Mood: No More Mr. Nice Guy" - a compilation of classic heavy-metal songs set to big-band sound - was far from Boone classics, "Tutti Frutti" and "Ain't That A Shame."

"In a Metal Mood" launched Boone back into mainstream consciousness as an entertainer who, while outspoken about his Christian faith, is "not afraid to laugh at himself or rub shoulders with folks whose public images are decidedly less virtuous than his own," said one news report at the time.

Mainstream media devoured the "born-again crooner posing for the dark side." Newspapers plastered Boone's new look on their front pages; "Entertainment Tonight" flashed footage of his head-banging transformation.

Although he was hurt by the vicious backlash he received from Christians who "didn't get it," Boone counts that period as a time when the Lord used him in an unusual way.

Now, in 2001, Boone is back in the media limelight ... but for a tragic and much more challenging reason. His 24-year- old grandson, Ryan Corbin, remains comatose after an almost fatal accident on June 19. Corbin was sunning on the roof of his condo, tripped and fell through a skylight, down four floors to concrete. He hit two sets of stair railings on the way down.

Corbin sustained massive injuries. His skull was fractured and for a time his heart wasn't functioning properly. His lungs had collapsed and his brain was deprived of oxygen. But, Boone points out, although every internal organ was wounded and his spleen had burst, Corbin didn't break a rib and his spine was not damaged.

"Ryan has been on a roller coaster ride that alternately gives us reason for hope and then dashes us," says Boone. "It challenges our faith every day and every night."

Boone hopes the attention this incident has generated will bring many to faith. It has already captured the attention of some unlikely eyes - for example - one Larry King.

"Larry King himself is vitally interested," says Boone. "It was his initiative to invite us on the show."

The Aug. 17 broadcast marked Boone's second appearance on "Larry King Live" in two weeks. The response to the first appearance - which featured Boone, his daughter Lindy, and Kenneth Copeland - was overwhelming. The phone calls and e-mails stacked up, so King invited them back. "Larry himself wanted to ask more questions, but we ran out of time," Boone adds.

Is Larry King on his own spiritual journey? "Well he is," Boone admits. "I think Larry would not mind my saying that we've had private conversations several times now, off the air, in which he has said, 'I wish I had what you people have, but for this Jewish boy from Brooklyn, it just doesn't compute ... it has not connected for me. One of the main unanswerable questions I have is why does God let horrible things happen to good people?'"

According to Boone, King is agnostic, which to him means, "I don't know and I wish I did."

"He is aware of his own mortality and the shortness of time and he himself wants to know, 'What is your belief in prayer based on, and does it really make any difference, and how, and why?'

"He has these basic wonderful questions which we are all eager to answer and I think it's a discussion that millions of people world-wide want answers to," Boone adds.

Read the full story at CrossWalk.com

Get a FREE PAT BOONE CD here: BuyCoin.com


"GOLD!" BRAVO TO HISTORY CHANNEL - David Bradshaw, IF Press

Bravo to the History Channel for their wonderfully produced four-hour documentary entitled "GOLD!" It has been on all week at 9PM and will air again this weekend. "The quest for gold has sparked wars, inspired the exploration of continents, and driven men literally to move mountains," according to the History Channel. Here is a link for more details: History Channel

Is this the beginning of the epic new millennial gold rally?

The bullion price has advanced about 4 percent over the last three weeks. What's more, the XAU Gold Stock Index has gained almost 14 percent since Greenspan began rate-cutting on January 3. By contrast, the Dow has dropped more than 4 percent since then and the NASDAQ 22 percent. It's almost enough to make a guy bullish on gold. Well, almost.

"CONTRARIAN SIGNALS SAY GOLD IS COMING BACK!" says Doug Casey. "The cover of Business Week in August 1982 that predicted 'The Death of Equities' marked the onset of the great bull market. Well, the front page of the "Financial Times" recently proclaimed the 'Death of Gold.' Once again, the mainstream media is leading investors astray."

"But their foolishness offers you the perfect opportunity to make huge profits now. New technological breakthroughs are unleashing a 21st Century Gold Rush."

"Gold production is roughly 2,000 tons per year. Consumption -- or demand -- is over 3,000 tons. It's a classic supply and demand squeeze. But that's just the beginning. With gold around $300, over 50% of the world's mines are uneconomic. It just doesn't make sense to mine at those prices. Now add to this the exploding demand coming out of Asia and the Third World right now."

"Do people actually think all gold mining is going to cease? Or that gold, which has been the most desirable form of money since the dawn of civilization, will suddenly become obsolete because 'it's different this time'? It's never going to happen."

"Central bank sales have played a large role in depressing the price of gold. But central banks only have a limited amount of gold to sell, and many aren't even interested in selling. So these sales won't continue indefinitely. And when they stop -- or even slow down -- the effect on the price of gold will be dramatic."

"Conservative estimates put the price of gold above $600 when the selling stops, based on simple supply and demand fundamentals. And that's without any investment demand!"

"Investors are all but gone from the gold stock market. And just as in previous market bottoms, very few investors will take advantage of it. They won't cash in on the next big bonanza."

"But guess what's going to happen once gold starts moving back up? The same thing that always happens. Investors will pile in and ratchet stock prices to extremes. And who do you think they are going to buy from? The early investors who had the foresight and the courage to act first. Those investors who snuck in and bought while no one was looking."

"The global gold rush is just that -- a rush. It's not going to wait at the station for you.

Read more about Doug Casey's International Speculator here: Doug Casey


QUOTE OF THE WEEK:

"Give me control over a nation's currency and I care not who makes its laws." - Baron M.A. Rothchild



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