DOWN TIME
Aug 29 - Sept 1, 2003
Gold at six-month high... Greenspan's "uncertainty"... Stealth bear/bull markets... Debt boom going bust... Labor Day History... WSJ sees "gold rush"... "The greatest rare coin market in history!" says Kevin Lipton.
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MARKET NEWS DIGEST
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Gold approaches Feb highs as funds buy - Reuters
LONDON, Aug 29 (Reuters) - Gold shot up by more than $4 in London on Friday afternoon to approach its highest level since February as funds tried to trigger buy stops, prompted by a stronger euro against the dollar, which makes dollar-denominated bullion less expensive for European buyers, traders said
At 1253 GMT, spot bullion was quoted at $375.00/375.60 an ounce compared with $370.30/370.80 quoted in New York late on Thursday. The market is now$1.00 away from $376.00 an ouncescored on February 6.
"I'm hearing there's been some stop-loss buying," a trader said. "They're trying to trigger stops."
http://www.reuters.com
U.S. stocks dip in early trades - CBS
By Julie Rannazzisi, CBS.MarketWatch.com
Aug. 29, 2003
NEW YORK (CBS.MW) -- U.S. stocks opened with mild losses Friday ahead of a speech from Fed Chief Alan Greenspan.
Greenspan's speech, entitled "Monetary Policy and Uncertainty," will take place at the Kansas City Fed's annual symposium in Jackson Hole, Wyo. Check economic calendar and forecasts.
In economic news, U.S. personal income rose 0.2 percent in July, less than expectations for a 0.3 percent increase. And personal consumption expenditures rose by an as-expected 0.8 percent -- the fastest rate since last December.
http://www.cbs.marketwatch.com
THE GLOBAL PLAYER - By MICHAEL R. SESIT, WSJ
New Gold Rush Shows Metal Retains Luster
Investors Snap Up Bullion, Mining Shares,
Leading Some to Predict Bull Market
In the 1540s, Spanish conquistador Francisco Vasquez de Coronado led a small army through what is now the American Southwest in search of seven cities of gold, only to find pueblos made of sun-baked clay.
Nearly five centuries later, global investors are bidding up the price of bullion and gold-mining shares so aggressively you would think they are chasing Coronado's gold. Indeed, a growing number of money managers, strategists and other gurus are proclaiming the cusp of a new bull market in bullion that some contend could drive the price up hundreds of dollars over the next decade.
The price of gold already has jumped 45% to $365.60 (€328.75) an ounce as of Wednesday, from a 22-year low in the first quarter of 2001. It is up 19% in the past 12 months; and at one point in February, gold traded as high as $389 an ounce, a seven-year peak. It fell back $5 to $360.60 Thursday.
The First Labor Day - U.S. Dept. of Labor
Labor Day, the first Monday in September, is a creation of the labor movement and is dedicated to the social and economic achievements of American workers. It constitutes a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.
The first Labor Day holiday was celebrated on Tuesday, September 5, 1882, in New York City, in accordance with the plans of the Central Labor Union. The Central Labor Union held its second Labor Day holiday just a year later, on September 5, 1883.
In 1884 the first Monday in September was selected as the holiday, as originally proposed, and the Central Labor Union urged similar organizations in other cities to follow the example of New York and celebrate a "workingmen's holiday" on that date. The idea spread with the growth of labor organizations, and in 1885 Labor Day was celebrated in many industrial centers of the country.
Full Story
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COMMENTARY
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DOWN-TIME - David Bradshaw, Editor, RMP
Aug. 25, 2003
East Coast Blackout, Mideast Erupts, Arizona Gas Shortage, Spam Worms Disrupt Internet, Obesity Blamed on Marketing... these are a few of the headlines in just the last week while I've been on vacation. I can hardly wait to see what next two weeks will bring.
After three years of doing my level best to present the clearest picture of the urgent economic realites facing America in the 21st Century, I decided that it was time for a family holiday.
So my wife, unborn child, three chihuahuas and I all piled into a rented SUV and hit the road bound for cool southern Oregon from historically hot Phoenix.
So far, we've visited LA, Monterey, Guerneville and Ferndale, with a week planned in Ashland, Oregon to check out property to excape the grueling desert heat from May-October.
As a financial news editor, I can tell you that it's hard to stop analysing -- even for a week -- but I know that down-time is as important as up-time over the long haul.
This principle of up-time and down-time seems to be the way the cosmos was created. If you postpone down cycles too long, then a crash results -- physical, mental, financial and/or spiritual.
After three years of down time in the stock market, most of the experts say, "it's now up time," for equities and the U.S. economy, yet the evidence is unconvincing. Most stocks, bonds and urban real estate looks top heavy to the best minds over money that we read. So what's left? CDs that are a guaranteed loss at present interest/inflation rates?
Why not consider gold and U.S. rare coins? With so many of the stock cheerleaders lining up to agree with the "gold-bugs" what are you waiting for? How about if 39 respected economists all told you that you should own a small percentage of gold as financial insurance and for profit potential? Well they did!
The 21st Anniversary Issue of Real Money Perspectives is; The New Gold Rush, Pt. II: The Color of Hope is now in print.
If you are one of the millions of confused investors, then please call Swiss America today to request your free copy at 1-800-289-2646.
Still not sure, read the Introduction and Table of Contents and the quotes from over three dozen economists who all agree that gold is well on its way to becoming the best investment of the 21st century...(like we said it would be in '99, 00, 01, 02 & 03.)
Swiss America members can read it online in pdf format
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SLEALTH BULL & BEAR MARKETS - Richard Russell, DTL
Aug. 15, 2003
Right now, as I see it, there's a lot of "stealth" around. What do I mean by "stealth?" The bear market has lapsed into a "stealth bear market," meaning that the bear is hiding and well, he's just patiently awaiting his time and his turn.
There's also a "stealth bull market" operating, and I'm referring to the sneaky bull market in gold and gold stocks. At its April 2001 low, gold was selling at 260 an ounce. Today gold is selling at 365 an ounce. That's a gain of 40% since April 2001. I'd call that a bull market.
At its October 2001 low, the unhedged "gold bug's" gold average was priced at 36. Today HUI is at 181, That's a rise of 405%. I'd call that a bull market, wouldn't you?
So if gold and gold shares are in a bull market, how is it that nobody is noticing? And if, by some chance, they do notice, how is it that they sneer at gold and claim that it's just a commodity, and that it's going nowhere?
Well the reason there's no publicity being given to the bull market in gold is that gold is the "uninvited guest" at the Fed's party. But you can't fool all the people all of the time. Lincoln said that, and Lincoln knew what he was talking about.
You see, I have a theory, and my theory is that gold, even the idea of gold, is embedded deep in man's psyche. It's almost in man's DNA. The lust for gold opened up Alaska and the Yukon territory. The search for gold opened up California and the West. The search for gold made South Africa rich. The first metal mentioned in the Bible is gold. Steel may build factories and apartment buildings, but gold builds nations. In other words, you can BS the public about gold for a while, but not forever.
Here's the central banks' problem. If gold heads higher in a dramatic way, people will start asking questions. "What's happening, why is gold rising in price? Is something wrong with the dollar? Why has Rolex raised the prices of its gold watches?"
So at this strange and peculiar time in history, government's don't want higher gold. In fact, they don't want attention directed to gold at all. "Let it lie," says the Fed, "Let it do what it wants as long as it's not noticed by the crowd."
Which is fine with Richard Russell and his subscribers, because it means that we can continue to buy "cheap" gold and "cheap" gold shares. And what's better than buying "underpriced merchandise" in the early stages of what promises to be a great bull market?
http://www.dowtheoryletters.com
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DEBT BOOM GOING BUST - Craig R. Smith, CEO, SATC
Aug. 25, 2003
In just 8 years U.S. Household debt has risen from $4.6 trillion to $8.7 trillion. That is a 87% increase in just 8 years. Doubled in 8 years. UNBELIEVABLE! Mortgages have surged by 93%, Consumer debt increased 75%. Debt in America is now equal to $30,000 for every man, woman and child. That doesn't even take into consideration the debt associated with corporate, govt. and derivative debt. We are in the deepest debt ever. The question is can we handle it?
Last week the L.A. Times and Wall Street Journal both announced that bankruptcy is at a all-time high. There were, in the year ending June 2003, 1.6 million bankruptcies filed by individuals and another 50,000 businesses for a total of 1,650,000 bankruptcies. The second quarter alone there were 430,926 filings. The courts are deluged with people seeking protection from their creditors. The same creditors who are showing these loans on their books as equity and earnings.
There are now 1.2% of all mortgages that are in foreclosure. That is about 400,000 homes that will soon be on the block for sale. The banks and lenders are getting killed at the auctions due to the fact that too much money was lent and the home is worth less than the loan.
Americans now have less equity in their homes since - well FOREVER. Even though values have increased homeowners have a higher debt to equity ratio than ever before. People have borrowed what years ago was looked at as somewhat of a savings account ie: the equity in their home. Most people would allow equity to grow and never thought to touch it up until recently. They finally succumbed to the relentless calls by commercials to borrow on the equity of your home and "take advantage" of the lowest rates in 50 years. While it has helped a lot of people lower their monthly payment it has also caused them to spend what traditionally has not been spent before - the equity of their home.
Mortgage debt is the highest it has ever been in terms of % against equity. Today to get a 90%, 100% and even 125% loan on the value of your home is not out of the question. Again what was once a "ace in the hole" (home equity) has virtually disappeared. Watch what happens to the people who have adjustable rate mortgages as rates start to go up. Rates are already up a full point and going higher.
Mortgage refinancing which has been a huge source of cash to the borrower, the markets and the economy at large has virtually dried up. It has come to a screeching halt. The affect will be felt by the homeowners in so much as they have no where to go to get cash in a pinch and the markets which need cash will no longer see the huge amounts of cash coming from this area. All this is happening at a time when the Govt. needs to borrow $455 billion to cover the deficit and while the recovery still needs piles of money to continue to help businesses. This doesn't even take into consideration that the economy has been in large part sustained by consumers borrowing and then spending that money on everything from home remodeling to big screen T.V.'s. What happens to the economy when that spending slows drastically or disappears all together?
Zero % interest and zero down car financing has produced an average car loan that has a 97% debt to value ratio. Most people now own cars that are worth far less than what they owe the bank. What will the banks and the automakers do with all these cars that will end up on the block? People who are looking for work should consider the repossession business. What will this do to the value of the companies that made these loans. Keep in mind these companies show all this "bad" paper on their books as equity. Talk about bad bookkeeping? This would be like listing a person who owes you money as an asset knowing that there is no way you are going to get paid.
5.1% of all credit card holders are 30 days past due and many way beyond that. Credit card losses due to bankruptcy is at a all-time high. Banks are forced to write off 7% of ALL outstanding credit card balances 7%. It is unheard of. These losses are not only hurting the bottom line of the companies but are being passed on to other credit card holders. The consumer debt crisis is not something that may happen in the future it is happening here and now! This is not a theory it is occurring. Think about any business that would have to write off 7% of all their revenues?
For every dollar a worker takes home they are shelling out 14 cents (14%) to service debt not counting their mortgage. It is the highest in history since the number has been tracked. Credit card spending FINALLY has started to drop. In June Credit card spending dropped $400 million. This is all putting a huge drag on the economy.
So now that the consumer who has supported this economy by borrowing on their homes
and then spending that money in the economy are drying up where will everybody look for help?
TECH STOCKS off course!!! That was the savior in the late nineties as the economy
started to slow. So let's take a quick look at some major players in the tech world.
Broadcom trading @ 225 times earnings...
Amazon Trading @ 111 times earnings...
Apple trading @ 144 times earnings...
Juniper networks trading @ 367 time earnings.
That is where the investment money is going. They figure the techs can save us. Not likely.
Corporate earnings aren't what they appear to be. Think about it. We have had cost cutting,
weaker dollar (until just recently) and higher oil prices all of which help push up earnings of S&P 500
companies. Strip away those effects and things look pretty bad for corporate profits.
Straight up with honest bookkeeping the standard S&P stock was up a paltry 1%
Yet with all this massive debt growth, from June of 2001 to date gold is up over 30%. Certain gold coins (MS-64 libs, etc.) have been up dramatically. With all the uncertainty and the absolute confusion over the economy it is easy to see why over 39 major economists are suggesting gold to the public.
Read all about The New Gold Rush Part II, Introduction
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ALL TIME RECORDS - Richard Spohr, SATC
Aug. 22, 2003
Time to stand aside and check out the All Time Records.
Ratio of insider selling vs. buying: 32 to 1. An all time record.
Bullish Percent divided by Fear Gauges: All time record.
Number of stocks trading above 200-day: Over 90% for 2 1/2 months. An all time record.
Decibel level of Matrix Bullhorners: All time record.
Money supply: All time record.
Gold sold short or leased out: All time record.
Consecutive days of CBNC's Maria screeching on the open: "Strength in Tech and Financials" All time record.
Number of penny stocks up 50%+. All time record.
Trading volume as a % of GDP: All time record.
Height of Paper Pyramid: All time record.
End Zone Cheerleading on Kudlow and Cramer after a Dow Cyclical breaks out to new highs: All time record.
Level of GSE debt outstanding: All time record.
Number of companies "tapping the bond market" for new funds: All time record.
Number of stock market Stick Saves: All time record.
Degree of Creativity in Structured Finance: All time record.
Number of phony appraisals and stated incomes on mortgage applications: All time record.
Number of 52-week highs made on the FEED index: All time record.
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The Greatest Rare Coin Market in History - Bruce Amspacher, PCGS
August 19, 2003
Mint State Barber coins offer one of the best values.
The blue-hot rare coin market continues well into mid-summer without so much as a rumor of a slowdown or an undercurrent of skepticism from any quarter. Gold and silver aren't soaring in price, but they've shown nice increases in the past year and gold continues to stay above $350 an ounce most of the time.
With so much happening elsewhere in recent weeks the generic gold market has been momentarily pushed to the side, at least in this column. What is happening in the world of MS64 $20 St. Gaudens and similar items?
"This is the third or fourth time that gold bullion has challenged the $370 level and each time it has fallen back a little," says Richard Schwary of CNI. "It will have to break $380 in order to create major excitement, but even now there's a lot of activity going on. We're selling everything that we get."
What is selling the best? "There's a lot of action in MS65 Saints. In fact, everything that's in the eight-piece gold type set is selling really well in all grades from MS63 through MS65. Other items that are in demand are Type One and Type Three gold dollars and $3 gold pieces n MS63/64. The $3 pieces are not usually big sellers for us, but they're definitely active now."
Can generic gold be considered as hot as the rest of the market? "It's balanced," Schwary replied. "It's not hot and it's not slow. Wait until the spot price passes $380 and then I'll show you hot!"
The "greatest in history" and why!
The new owner of the 1804 Class III silver dollar (PCGS PR58) from the ANA sale is Kevin Lipton of Kevin Lipton Rare Coins in Beverly Hills, California. Was the coin purchased for a client or simply because it was a classic rarity that offers great value?
"The coin was purchased for inventory," Lipton said. "Actually, it was my son who bought the coin. He was the under-bidder on the King of Siam set with its 1804 dollar in 1989 and he didn't want to miss out on this one."
You're kidding, right? After all, your son was only four years old in 1989! "That's true, but he was sitting on my lap and slugging it out with his bidding paddle and nearly got the set."
Since you're willing to buy million-dollar coins for inventory you must be bullish on the rare coin market. "I believe that this is the greatest rare coin market in history by far," Lipton said. "There's never been so much money coming into the market from so many diverse areas. A lot of people with a lot of money are disenchanted with stocks and bonds and the interest-bearing instruments are showing no appreciable return so they've turned to rare coins.
"Besides that, a lot more people are learning how to play the game," Lipton continued, "They're buying what we consider to be the right coins, such as top condition pieces and legitimate rarities. The rare coin market is still relatively small, so $100 million to our business is like $100 billion to the stock market."
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*I'll be out Aug. 19th - Sept. 8th on a working vacation. Eeeeha!*
First since y2k. Reporter at large; CA, OR, ID, WY & UT. B&B style.
Daily web updates, interview bookings, meaningful family relaxation!
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