12/19/2002
IN THIS ISSUE
MARKET NEWS DIGEST
-Gold surges as war jitters intensify - FT.com
-A rally for the New Year? Maybe not. - CNN/Money
-Economic Indicators Up 0.7% in November - Bloomberg
-Merrill Lays Off 10% of Investment-Banking Staff - Dow Jones
-UBS PaineWebber launches Art/Numismatic Services in U.S. - UBS
COMMENTARY
-THE NEW GOLD RUSH: FAQ - SwissAmerica.com
-COIN MARKET PROSPERS AS ECONOMY STRUGGLES - CDN
-CHEATING NATURE - Bill Bonner, TDR
-BUSH TO ENACT 'FAITH-BASED' MEASURE - FOX News
-EVELYN Movie Review by Dr. Ted Baehr, Moviguide
QUOTES OF THE WEEK
"Gold will reach $500 next year, even without a war in Iraq,
because investors have been putting money in the precious
metal as an alternative to stocks."
-PETER PALMEDO, Fund manager, Sun Valley Gold LLC
* * *
"We're getting $1 million a day of new money this week, and
that compares with less than $100,000 a day a few months ago."
-JEAN-MARIE EVEILLARD, Fund manager, Eagle SoGen Gold Fund
* * *
"...the Greenspan approach," Wood concludes, "should be
viewed, therefore, as an effort to cheat nature and the
business cycle, since there is nothing more natural than
for American consumers to slow down after their decade-
long shopping spree. Like any effort to cheat, it is,
ultimately, not going to work..."
-CHRIS WOOD, Greed & Fear Report.
LAUGHS OF THE WEEK
"How do you kick $1.3 billion a day habit? U.S. current
account deficit widened to a whopping $127 billion in the
third quarter. At that rate, the U.S. must lure in $1.3
billion a day in unsuspecting foreign capital just to keep
the consumer binge alive."
-BILL BONNER, The Daily Reckoning, 12/12/02
* * *
"Debt, Deflation, Default, Deficits, Demographics...
The letter D seems to have ascended to one of the more, if
not the most, useful letters dominating descriptions of the
financial landscape this morning. In fact, if we were going
to play a game of financial Scrabble, rather than trying to
figure out what's going on in the markets today, we'd have
to re-assign the value of the D tile...and give it ten
points, in inverse ratio to its usefulness."
-ERIC FRY, The Daily Reckoning, 12/13/02
* * *
"Investment banker's sob story by Damon Vickers" On the lighter side here is a link to a funny, (2 min) audio
MARKET NEWS DIGEST
Gold surges as war jitters intensify - FT.com
By Gordon Smith, Dec. 19 2002
Gold surged higher in London, adding to gains in the Asian and US trading sessions where the precious metal hit five- and-a-half year highs, as the US was expected to say that Iraq's weapons declaration was in violation of the United Nations resolution on arms disclosure.
The gold price soared to $346.75 per ounce, its highest since March 1997, before being fixed in morning trade at $345.75 as investors switched out of other asset classes into the safe haven.
In Asian trade it broke the resistance level at $350 per troy ounce in what traders said was extremely thin trade. In New York, where funds, banks and commission houses have steadily been increasig their exposure to the alternative investment, the spot price rose $4.70 to fix at $342.7.
The gains were made as the likelihood of a US-led war against Iraq intensified after Colin Powell, US secretary of state, told a news conference on Wednesday that, "our analysis of the Iraqi declaration to this point... shows problems with the declaration, gaps, omissions". But US officials were keen to stress that a declaration of "material breach" would not be an immediate trigger for war.
Gold has risen around 25 per cent this year as investors have sought the safety of the investment of last resort as other assets have declined. The dollar, undermined by a weak US economy, has fallen more than 10 per cent this year against the euro and the Dow is down 15.7 per cent year-to-date as the outlook for corporate profits remains unclear.
Rises for Brent crude continued to threaten the outlook for the US economy. It jumped 43 cents to $28.92 a barrel, the highest levels since the attacks on America pushed the price above $31 briefly.
But Kevin Norrish, head of commodity research at Barclays Capital, warned the gains for gold were purely speculative, he said the short term gains continued to be driven by two factors.
"War with Iraq now after comments from US and UK government on disclosure and recent troop movements and dollar weakness which makes US treasuries less attractive", Mr Norrish said.
Analysts added that if private investors in the US decided to move from the sidelines and switch their funds into bullion it could spark an avalanche. The last time private investors moved into gold in any numbers was in the early 1980's when the spot price reached $800.
As well as the geopolitical and economic reasons for the rise in the gold price analysts said the decision taken last year by the large mining companies to stop hedging against a rising gold price has spurred gains. Gold has moved steadily higher from $280 an ounce in August 2001.
SOURCE: http://www.ft.com
A rally for the New Year? Maybe not. - CNN/Money
December 19, 2002: By Meghan Collins
NEW YORK (CNN/Money) - Pity the poor investor. The markets are set to log losses for the third consecutive year in 2002, hurt by a weak economy, tepid corporate earnings and the lingering prospects of war with Iraq.
Which means stocks will be ready to bounce back big time in 2003, right? Not so fast, veteran money managers and market experts say. The new year could prove to be mediocre for the financial markets as the economy struggles to mount a meaningful recovery from the recession of 2001.
"I think sentiment will improve steadily, but we're in no way at the beginning of a great bull market," said John Bollinger, technical analyst and stock market strategist with Bollinger Capital Management. "The market is at the beginning of a long process."
The market's major indexes were all set to end lower this year for the third year running, the first time this has happened since 1941. The Dow Jones industrial average was off about 14 percent as of Dec. 16, while the Nasdaq composite had fallen 28 percent and the Standard & Poor's index was down 21 percent.
The last time the Dow and S&P registered declines for four years running was from 1929 to 1932 -- starting with the two-day stock market crash in October 1929 that helped usher in the Great Depression. The Nasdaq market did not yet exist.
While tech stocks have floundered over the past three years, many analysts say this sector is set to rally and outperform other sectors of the market in 2003.
"I now feel more strongly than ever that the Dow Jones industrials and the blue chips will bear the lion's share of the brunt of the leg down," said Bernie Schaeffer, chairman of Schaeffer Investment Research. "And while the IBMs and the Dells and the Microsofts of the world may also get hit hard, there may be enough strength in the smaller-cap tech names to keep the Nasdaq composite on a relatively even keel -- even if the blue chips implode."
SOURCE: http://www.cnnfn.com
Economic Indicators Up 0.7% in November - Bloomberg
By Vincent Del Guidice
Washington, Dec. 19 (Bloomberg) -- The U.S. recovery may start to strengthen by the middle of next year, according to an index designed to project the direction of the U.S. economy over the next three to six months.
The Conference Board's index of leading economic indicators rose 0.7 percent last month after rising a revised 0.1 percent in October. It was the largest increase in the index this year.
"It points to a little bit of pent-up improvement in the economy," said Steven Wieting, an economist at Salomon Smith Barney in New York. "It's pointing to an economy growing a little bit."
The economy will expand at a 3.5 percent annual rate in the 2003 third quarter, a percentage point faster than the first three months next year, according to the median of 68 forecasts in a Bloomberg News survey.
Economists had expected a 0.6 percent increase in the November index,according to the median of 44 forecasts of economists.
Growth this quarter will be slower than economists expected a month ago, according to the Blue Chip Economic Indicators survey released Dec. 10. Economists forecast a 1.4 percent annual rate of growth in the fourth quarter, according to the December survey. A month earlier, they expected a 1.6 percent growth rate.
SOURCE: http://www.bloomberg.com
Merrill Lays Off 10% of Investment-Banking Staff - Dow Jones
Dec 11, 2002
Merrill Lynch & Co. late last week gave layoff notices to more than 100 members of its investment-banking group, as Wall Street's investment-banking outlook remains dim despite a recent rebound in the stock market, people familiar with the matter told The Wall Street Journal.
The cutbacks affected roughly 10% of the firm's investment- banking operation, these people say. Especially hard hit: senior associates who were in a position to be promoted to vice president.
The move particularly infuriated some employees because it came less than a month before the firm was scheduled to pay out year-end bonuses. Instead, those affected will receive severance payments that they are expecting to be less than the bonuses they were due.
"We continue to actively manage our resources including expenses and head count in line with the business environment," a Merrill spokesman said. "This means while we may reduce head count in some areas, we are selectively hiring in others. Based on our current assessment of the environment, we believe that the bulk of staff.
SOURCE: http://www.dowjones.com
UBS PaineWebber launches Art/Numismatic Services in U.S. - UBS
December 10, 2002
UBS PaineWebber announced today that it will offer UBS’s industry-leading Art Banking and Numismatics Services, currently available in Europe, to the firm’s U.S. client base for the first time. The U.S. offering, called Art and Numismatics Services, enhances UBS PaineWebber’s product mix for high net worth individuals and advances UBS’s position as a world-class provider of financial services and wealth management solutions.
UBS PaineWebber’s Art and Numismatics Services is a unique advisory service for clients of the firm, which includes art research, art management, counsel on sales and purchases, and structured solutions. In addition, the firm’s service features a full numismatics department – the first of its kind in the industry. Art and Numismatics Services, delivered through the firm’s nationwide network of financial advisors, connects UBS PaineWebber clients to UBS’s in-house team of art professionals and the world’s leading art experts.
"Art is often a significant part of a wealthy individual’s total assets, and as such, UBS PaineWebber’s Art and Numismatics Services is a differentiating component of our full-service approach to clients," said Kathleen O’Toole, Director, UBS PaineWebber Preferred Client Services. "In today’s largely unregulated art market, we are confident that trusted advice and customized solutions will add tremendous value to our client relationships."
Art and Numismatics Services provides clients independent and objective insights on art as an investment as well as guidance on how to build and maintain a collection. Clients also benefit from the firm’s rigorous due diligence process; introductions to the exclusive UBS global private client base of art collectors, buyers and sellers; unique access to works of art rarely seen on the market; and a single point of contact for all art-related issues. A flexible fee structure allows UBS PaineWebber clients to select the appropriate service level for their needs.
The expansion of this service into the U.S. market, the fastest growing of all major art markets globally, builds on the firm’s profile as a key supporter of the arts worldwide. In the United States, the UBS PaineWebber Collection, one of the finest assemblages of contemporary art owned by a corporation, has solidified UBS’s reputation as a leader in the arts community.
SOURCE: http://www. UBSPaineWebber.com
COMMENTARY
THE NEW GOLD RUSH: FAQ - SwissAmerica.com
This is the first of a series of Frequently Asked Questions (FAQ) about gold and U.S. rare coins that have been posed to Swiss America CEO Craig Smith in 2002. You can listen to them at this link
You can read all about The New Gold Rush at this link
GOLD AND U.S. RARE COINS - THE BASICS
Chuck Harder: When people start collecting gold coins, Which is something that I, as you know I have taken a position now with some of my late lives savings in gold coins.
Craig Smith: It's interesting in talking with you these last couple weeks. While you and your wife were acquiring your gold. It's made me really reevaluate my whole thinking towards gold bullion. Because right now with real rates returning being at 1%. Even owning gold bullion now, is such greater wisdom than owning stocks or bonds or even real estate at this point. But, I'm starting to reconsider my whole position on bullion and I'm starting to do a whole lot more research on it. And I can thank you for that because you know I've been an artdent coin guy. And I think there's a lot of wisdom in owning even gold bullion right now.
HARDER: Explain what that is!
CRS: Well, gold bullion verses a numismatic coin. Gold bullion coins are just what they sound like. They take a 400 oz. Bar of gold at the mint. They divide it up in 4 equal amounts of 1 oz. Which, makes up the 400 oz bar. Then they turn the little oz's of gold into what is called plainchant. If you can imagine a coin without any relief on it or any design that's a plainchant. And they take that plainchant and they clamp it down into a dye and then they strike it with dyes. That obviously have just deposed of which you see on the coin. And the strikes refer to as the devices in the coin. Now the bullion coin trades for a small premium above the price of gold. For example, if gold is trading for $320 today, the gold bullion coin would trade for somewhere between $335 and $340. That additional cost above it waving gold is what's referred to as a manufactured premium. That's what the manufacture gets in order to go through the process of dividing out 400 oz's and making these individual coins. Now obviously, a 400 oz bar of gold doesn't have the same equity factor as 4 individual 1 oz coins. A 400 oz bar would be worth approximately $120 thousand dollars and every time you want to cash it out, you would have to cash out $120 thousand dollars worth. Verses having individual coins worth $300 plus dollars apiece. In the case of numismatic coin. The numismatic is a gold coin that was struck in the same type gold but not only trades for its value of gold but also for it's collectible. The rarer the coin the higher the premium above it's price in gold. For example, there was a coin traded in an auction recently that's just like the coins you bought Chuck. That traded for 7.5 million dollars. Well, its obviously a little different in so much that it was a specific year specific rarity, but really the coins look virtually the same. And that's the basic difference between a bullion coin and a numismatic coin.
Next Week: ARE RARE COINS DEPRESSION PROOF?
Read Craig's latest Feature Article: "Not Just Stocks, Gold!" 12/11/02
COIN MARKET PROSPERS AS ECONOMY STRUGGLES - CDN
December 13, 2002
Negative economic news weighs heavily on the general buyers of rare coins. Most dealers agree that numismatic coins are a luxury and people tend to curtail their buying when they, and others are hurting financially. All things being equal you would expect a sluggish rare coin market at this time. However, many dealers are pleasantly surprised because the impact of the weak economy has had mitigating circumstances. One dealer sees cross currents that not only counter the negative, but make it positive. The economic slowdown may have had a more measurable impact on rare coin sales were it not for the gains attributed to the State Quarter program and the internet. New customers being drawn into coins are countering those that are leaving due to the economic weakness. This has helped the rare coin market prosper white other financial sectors suffer. Weak economies also tend to drive people towards a flight to quality. We know that collectors and dealers are looking to buy premium quality coins today. One mid-west dealer is seeing this flight to quality to a large degree, even from dealers who have traditionally not been "PQ dealers." Consequently, strong demand continues to outstrip the supply of quality coins. A major problem and concern facing dealers today how to replace the coins that are sold? Another important problem facing them is what to Bid for PQ coins? Increasing the Bid is most helpful if the higher Bid results in a completed transaction. However, it may be that Bids will have to jump considerably to force the supplies needed to satisfy the current demand. The December 4-5 auction by Stack's featuring selections from the Vanberg collection realized just over $1 million in New York.
SOURCE: http://www.greysheet.com
CHEATING NATURE - Bill Bonner, The Daily Reckoning
December 16, 2002
"What is this madness?"
-John Gutfreund, Former Chairman, Salomon Bros.
A year ago, dear reader, we wondered about the first rate cut. Today, we wonder about the 11th one. [... the 12th one, and so on...]
Readers who are tired of wondering about rate cuts - or who have made up their minds - may comfortably pass over today's Daily Reckoning. For we have nothing to offer but more of the same. Except that, today, we explain what not one economist in 100 seems to understand: why rate cuts don't always work.
Not that we want to take the mystery out of the market. We would no more attempt to do that than we would try to turn women into lifeless mannequins or round off Pi to a whole number. That is never our purpose at the Daily Reckoning. Instead of making things simpler...we aim to make them more complex, like...well...life itself.
You see, not all recessions are created equal. Yesterday's commentary on The Prudent Bear.com referred to a research paper from HSBC: "The research paper also noted the difference between planned and unplanned recessions. HSBC defines a planned recession as one where vigorous steps are taken to combat inflation, like the early 1980's recession. Conversely, an unplanned recession '[is] associated with collapsing private sector expectations for economic growth and profits and, from a policy perspective, are very difficult to turn around.'"
Back in 1959, notes the Prudent Bear, Alan Greenspan thought something very similar: "Once stock prices reach the point at which it is hard to value them by any logical methodology, stocks will be bought as they were in the late 1920s - not for investment, but to be unloaded at a still higher price. The ensuing break would cause a panic psychology that cannot be summarily altered or reversed by easy-money policies."
There is no trace of "panic psychology" in today's markets. Investors are calm and confident. They are standing their ground, to use Schumpeter's phrase...but the ground is giving way beneath them.
Alan Greenspan, now the world's most powerful and celebrated central banker, tries to shore up the economy with easy-money policies. The first 10 rate cuts have done little apparent good. The HSBC research paper, we believe, tells us why...and why the latest cut will do no better: because the Fed neither caused the bubble, nor did it end it. Can it revive it?
There are "planned" recessions - brought about intentionally to cool inflation in an "over-heated" economy. And there are unplanned recessions - which happen spontaneously, when individuals and businesses begin to realize that they have invested too much money in too many projects that are not too likely to pay off. They may or may not panic. But they always sell.
SOURCE: http://www.dailyreckoning.com
BUSH TO ENACT 'FAITH-BASED' MEASURE - FOX News
December 12, 2002
WASHINGTON — President Bush is enacting by executive fiat key pieces of his divisive "faith-based initiative," including one that lets federal contractors display religious favoritism in their hiring.
Hoping to involve churches and religious organizations more deeply in government efforts to address social ills, Bush on Thursday was signing an executive order aimed at giving those groups a leg up in the competition for federal money, administration officials said. His plan was also the subject of a speech to religious and charitable leaders in Philadelphia.
The president began pushing the issue on Capitol Hill in his second week in office and ran into a fierce debate over how religious groups could get government money without running afoul of the constitutional separation of church and state.
By far the most explosive of the changes is Bush's directive informing federal agencies that religious organizations refusing to hire people of any faith can still win contracts.
Broadly, Bush's executive order tells federal agencies to ensure religious groups are treated equally with others in all respects, said the officials, who spoke on condition of anonymity. Federal contractors also can no longer be denied federal money for displaying religious icons, such as a cross or a menorah.
Bush's aim is not to favor religious groups, merely to erase barriers to give them as fair a shake as any others, one senior official said. And the executive order restates that organizations cannot use federal funds to preach a particular faith, worship or provide religious instruction.
SOURCE: http://www.foxnews.com
EVELYN Movie Reveiw - Dr. Ted Baehr, Moviguide
REVIEW: Bruce Beresford is a consummate filmmaker, whose faith shows through in the Christian worldview of all his works, including DRIVING MISS DAISY. EVELYN is arguably his finest work to date.
Set in 1953, in Ireland, EVELYN opens up with Desmond Doyle preparing Christmas for his family of three children, including his little daughter named Evelyn (Sophie Vavasseur), Maurice and Dermot. His father arrives, so Desmond goes to find his wife at the pub. Looking through the pub window, he sees her nuzzled up against another man. Early on the morning after Christmas, the mother packs her bags and drives off with the other man, as Evelyn runs after her.
The social welfare worker tells Desmond that he needs a wife and a job. The social welfare worker then sends in the nuns (remember that Ireland was officially an Irish/Catholic country at that time) to take care of Desmond’s small children.
Desmond is a part-time house painter and can’t make ends meet. Eventually, the government tells him that he must turn his three children over to the Catholic orphanages. The welfare official tells Desmond that if he gets his life together and gets a job, he can get his children back.
He loves his children so much that he gets several jobs and even sings with his father in pubs. However, it turns out he can’t get his children back because his wife has to agree with their return home, and she has disappeared in Australia.
Desmond goes to an attorney, Michael (Stephen Rea), who makes an attempt to help him. When they lose their case, the attorney quits.
Desmond will not be stopped. He challenges the attorney while the attorney is fishing on his elegant estate with his friend, Nick (Aidan Quinn). The friend, who lost his own children in a divorce, has compassion on Desmond and says that he will take the case. Together, they recruit another retired attorney, Nick’s mentor, Thomas Connolly (Alan Bates), who is known as a man who can’t be bought and a lawyer who beats the system.
Desmond refuses to take no for an answer. To get his children back, they must overturn the child welfare act. When they lose once more in court, they try one last gamut.
Desmond does not make the case or the attorney’s jobs any easier. He drinks out of depression. When he finds out that one of the nuns has ruthlessly hit his daughter, Evelyn, he marches into the convent school to seize his daughter and ends up throttling the nun. At the trial, all of his flaws come out, and everyone wants to believe the state and the church, but his profession of Trinitarian faith and Evelyn’s profession of her faith reinforced by a miracle, in the midst of all her trials and tribulations, is incredible.
Pierce Brosnan is surprising in this role. One soon forgets all about James Bond. His humility and limitations as Desmond come through clearly. Alan Bates is superb as Thomas Connolly.
The fact that every single actor and actress in the movie is good, shows that the director, Bruce Beresford, is one of the few true auteurs in the movie industry.
In terms of its Christian virtues, EVELYN is a +4 movie, but the smoking, drinking, and minor violence, as well as some foul language, recommend caution for younger children. Little children should not see the nun beating Evelyn, but adolescents and adults should see God’s grace, mercy, love, and even visible miracles transform a hopeless situation into a triumphant victory for Jesus Christ.
There is so much to commend in this movie. It is so real that it could be used over and over and over in school and church to teach valuable lessons. People are human. People are fallen. People make mistakes. Faith and love, however, transcend the condition of man. EVELYN is a brave, triumphant, heart-rending faithful movie that will delight, encourage and touch all who see it.
SOURCE: http://www.movieguide.org
ABOUT THE EDITOR: David Bradshaw is the editor of Swiss America's Market News Digest and Real Money Perspectives. He is the founder of Idea Factory Press... publisher of Rediscovering Gold in the 21st Century... and The Big Picture... Contact at ideaman@swissamerica.com
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