$1 BILLION in rare coins draws a crowd -> Stock bulls unfazed by long decline, SELL! -> New evidence of possible al-Qaeda attack -> CYBER-TERRORISM in the 21st century -> Gold/Silver: The Calm Before The Storm!"> MARKETS ADRIFT - Aug. 20 $1 BILLION in rare coins draws a crowd -> Stock bulls unfazed by long decline, SELL! -> New evidence of possible al-Qaeda attack -> CYBER-TERRORISM in the 21st century -> Gold/Silver: The Calm Before The Storm!" />

Aug 20, 2004


-> Oil prices near $50 a barrel -AP
-> Gold jumps to $416, four-month high-CNNfn
-> $1 billion worth of coins draws a crowd -CNNfn
-> Stocks Lower; Google Cuts IPO Price -NYT
-> Sales tax in, income tax out? -CNNfn
-> Bulls are unfazed by long decline –USAT


-> The Terror-Proof Portfolio –Craig R. Smith, CEO SATC
-> Terrorism turns logic on its head -JERRY HEASTER, KCS
-> The Calm Before The Storm! -Bill Murphy, GATA
-> CYBER-TERRORISM in the 21st century -Crime-Research.org
-> Lean, Mean Reversion Machine –John Mauldin, FL
-> THE DOLLAR-TITANIC -Alex Wallenwein, A-1 Gold Inv.


Oil prices near $50 a barrel -AP
‘Now the market is thinking $60, possibly,’ analyst says
Aug. 20, 2004

SINGAPORE - Crude oil prices passed $49 per barrel on Friday, striking fresh record levels amid heightened concern about supplies in Iraq, and doubts over how much extra crude could be pumped anytime soon to ease the price surge.

The spike brought prices close to the psychologically important $50 threshold.

U.S. light crude for September delivery peaked at $49.27 a barrel on the New York Mercantile Exchange, a new intraday high. That later fell to $49.20, 50 cents above Thursday’s closing price of $48.70, which was the highest Nymex settlement on record.

When adjusted for inflation, oil is roughly $8 less per barrel than it was leading up to the first Gulf War.

On London’s International Petroleum Exchange, Brent crude futures for October delivery also soared to a new intraday record high of $45.15, before falling to $45.06.

Market watchers said some investors had started to whisper about the possibility of a $60 barrel, even as the head of producers’ cartel OPEC made soothing-but-vague comments about “a significant outcome” from its next members’ meeting in September.

“$50 is, I would say, a foregone conclusion,” said Esa Ramasamy, editorial manager for oil in Asia at Platts, the energy market analysts. “Now the market is thinking $60, possibly.”

The September futures contract — essentially a bet about where crude prices would be in that month — was due to expire later Friday. OPEC President Purnomo Yusgiantoro said Friday in Jakarta: “I expect there will be a significant outcome from the meeting to overcome this big problem (of rising oil prices).”

Similar comments from OPEC officials have so far failed to halt the energy market’s record-breaking run as investors suspect tight supplies and possible disruption are currently more powerful factors than loose assurances from the cartel.

OPEC accounts for a third of global supply, but around half the oil exported worldwide. Its ministers are set to gather in Vienna, Austria Sept.15-16.

Purnomo, who is also Indonesia’s energy minister, told reporters the Organization of Petroleum Exporting Countries will also meet with major non-OPEC oil producers at the meeting. He didn’t elaborate.

“The momentum of fear is running so hot now, everyone is waiting for something bad to happen,” said Ng Weng Hoong, editor at EnergyAsia.com in Singapore.

Market-watchers said concern was still focused on the showdown in Iraq between radical cleric Muqtada al-Sadr and coalition forces in the holy city of Najaf, a confrontation that has already lasted three weeks.

The militia has repeatedly threatened to target Iraq’s vulnerable oil infrastructure, especially the Gulf state’s pipeline network, accentuating market fears about tight global supplies.

Oil prices are now up 57 percent in the past 12 months, although in real terms — adjusted for inflation — they remain about $9 a barrel lower than in the run-up to the first Gulf War in 1991.

When asset prices undergo rapid shifts, trading levels often overshoot, or swing far beyond the levels dictated by fundamentals as quickly shifting sentiment takes hold. The condition accentuates volatility, as do the activities of large hedge funds.


Gold jumps to $416, four-month high-CNNfn
Dollar Nears Lowest in a Month
Aug. 20, 2004

NEW YORK (Reuters) - Gold futures rocketed to four-month highs Friday morning, as record high crude oil prices above $49 a barrel drew investors to the precious metal considered a safe-haven asset, traders said.

Silver rode gold's coattails to a four-month peak as well, while platinum eased.

Gold for December delivery jumped $6.70 to $416 an ounce at 10:59 a.m. EDT on the New York Mercantile Exchange. It's in trade between $407.50 and $416.20, its highest since April 13.

Peter Hillyard, head of European metal sales at ANZ investment bank, said the market was in the grip of oil and softer sentiment in the dollar.

"Gold is being caught up in the swell of attention focused on these things -- if oil goes higher, you assume gold will go higher."

Gold extended gains from Thursday's rally, topping the $410 resistance level after the open, amid growing concerns over recent sluggish U.S. economic growth and the risk of inflation from record oil prices.

Traders said gold also has loosened its correlation to the euro in recent days as dealers increasingly focused on oil and less on the dollar's fortunes.


$1 billion worth of coins draws a crowd -CNNfn

PITTSBURGH, Pennsylvania (AP) -- Chump change it is not.

A silver dollar insured for $10 million and nickels worth as much as $3 million each are among the $1 billion in coins on display at the American Numismatic Association's World's Fair of Money.

From Wednesday through Sunday, as many as 16,000 people are expected to stroll through the David L. Lawrence Convention Center to buy, sell or gawk at coins -- from a half-cent coin to a $100,000 bill.

The 1794 coin believed to be the United States' first silver dollar and two of five existing 1913 Liberty Head nickels are on display.

The U.S. Mint also gave conventioneers a glimpse of the designs being considered for the next round of special-design nickels. And the U.S. Treasury's Bureau of Engraving and Printing placed on display the newly designed $50 bill that goes into circulation in September.

Kyle Aber, a refinery operator from Houston, Texas, was among those surveying approximately 500 booths where about 1,000 dealers displayed their collections. He was looking for two Morgan silver dollars -- a 1889-CC and a 1893-S -- to complete his set.

One of the coins is worth about $20,000.

"My family and friends are supportive, more or less," of the hobby, Aber said. "My dad really didn't understand spending 50 cents to buy a penny."

Aber and others believe coin collecting has become more popular in the last decade, thanks to the advent of the Internet and the popularity of auction Web sites like eBay.

Like any other collectibles, supply, demand and condition are factors that determine the value of a coin, ANA spokesman Donn Pearlman said. A 100-year-old Indian Head penny could cost anywhere from $1 to thousands of dollars, depending on its condition, he said.

But old doesn't necessarily mean valuable. A 2,000-year-old Roman coin might be worth $25, while a 100-year-old coin might be worth $1 million or more, Pearlman said.

Many collectors don't buy coins for an investment, he said.

"Every piece of money has a story to tell. Money, literally, is history you can hold in your hand. It's either a symbolic representation or a historical artifact of an era," Pearlman said.

One of the most coveted items at the event is the Neil/Carter/Contursi 1794 Silver Dollar. Researchers and other experts said while it is impossible to unequivocally say the coin was the very first silver dollar struck in the United States, it probably was the first.



Stocks Lower; Google Cuts IPO Price -NY Times
August 18, 2004

NEW YORK (Reuters) - U.S. stocks fell at the market's open on Wednesday after crude oil pushed to a fresh high overnight and Google Inc. slashed its initial public offering price, which appeared to dampen investor sentiment.

Oil, used almost in most manufacturing and transport, peaked at $47.01 a barrel in electronic trading and its continued rally has to affect profits, investors said.

``If oil keeps going to $50 (a barrel) you are definitely going to have a problem with the market,'' said Barry Ritholtz, chief market strategist at the Maxim Group which oversees $5 billion.

S&P 500 futures for the September contract fell 3.7 points to 1079.4, or 0.4 of a point below fair value accounting for dividends, interest rates and time to expiration on the contract.

Dow Jones industrial index futures slid 33 points, while Nasdaq 100 futures slipped 4 points.

In a statement posted on its IPO Website, Google said it had cut the range on its IPO to $85-$95 per share from $108-$135 previously, a 26 percent reduction at the mid-point of the range.

Steve Previs a trader at London-based Jeffries International, said Google's handling of the IPO had damaged confidence in the Web search company and its management.

``The one thing that I find incredible is that this IPO has gotten so much fanfare at a time when the market looks like it could really fall apart,'' he added.


Bush: Sales tax in, income tax out? -CNNfn
President says replacing current system with sales tax is an idea we should 'explore seriously.'
August 11, 2004

NICEVILLE, Fla. (Reuters) - President Bush said Tuesday that abolishing the U.S. income tax system and replacing it with a national sales tax was an idea worth considering.

"It's an interesting idea," Bush told an "Ask President Bush" campaign forum here. "You know, I'm not exactly sure how big the national sales tax is going to have to be, but it's the kind of interesting idea that we ought to explore seriously."

Republican economists who speak regularly to the White House have said that the Bush campaign has been mulling the idea of an overhaul of the tax code as part of an agenda for a second term should Bush win reelection.

Some lawmakers have floated ideas of simplifying the tax code by putting in place a "flat" income tax rate or a national sales tax. But those ideas have so far not gained much traction in Congress.

Opponents say such a system would not be in the best interests of the poor and the middle class who would pay the same tax rate as the wealthy even though they have less disposable income.


Related Stories:
Dump the income tax? Don't bet on it -CNN
Emancipating America from the Income Tax: How a National Sales Tax Would Work -CATA
National Retail Sales Tax Alliance

‘This is looking more real every day,’ says senior intelligence official
Sun Aug 8, 2004

FBI official warned a congressional leader he and others could be targeted in Washington and on trips around U.S.

New York – An FBI official warned a congressional leader that he and other top legislative officials could be targeted by al-Qaeda in Washington or on their trips around the country, TIME has learned. The warning came two days before Ridge issued his nationwide alert.

TIME reveals exclusive new detail of al-Qaeda attack plans, in the cover story/special report “Al-Qaeda in America. Inside the Terrorist Group’s Plot to Attack the U.S. Can We Get to Them Before They Strike?” (on newsstands Monday, Aug. 9).

Assessing the accumulation of evidence of a possible attack inside the U.S., a senior intelligence official tells TIME, “This is looking more like the real deal every day.” TIME also learns that Osama bin Laden may already have ordered up another attack: a top homeland security official tells TIME “We have a number of times picked up information that al-Qaeda wants to attack us before the election, and some of the communications attribute that desire to Osama bin Laden.”

Though surveillance for the al-Qaeda attack plans seized July 24 was mostly done in 2000 and 2001, “there remains plenty of cause for concern,” according to TIME. A surveillance report notes windows behind the six columns in front of the New York Stock Exchange building make it appear “a little fragile.” Operatives specifically discuss using “usual methods” such as a heavy gas truck or oil tanker to attack facilities. Surveillance of helicopter ports and cockpits in New York City suggest al-Qaeda has investigated using them for an airborne attack.

A U.S. law-enforcement official told TIME that a recent Pakistani intelligence report made available to senior U.S. intelligence and security officials offers details of alleged al-Qaeda plans to use speedboats and divers for attacks in New York harbor before the November 2004 elections.

TIME has learned that one seized disc contains an updated photo of the Prudential Building in Newark, New Jersey that was added in January of this year. Operatives noted it might be difficult to drive a truck or van into the Prudential’s underground parking garage. So they proposed acquiring a black limo, gutting all but the front seat and presumably filling the empty portion with explosives, TIME reports. They also discussed using an oil truck to ram through the front entrance. Information on New Jersey Transit passenger rail systems and PATH train timetables suggested al-Qaeda may have been exploring ways to escape after pulling off the attack, TIME reports.

A senior U.S. intelligence official tells TIME that the three laptop computers and 51 discs seized in a July 24 raid in Pakistan represent an unprecedented “treasure trove” of information about al-Qaeda’s determination to pull off more acts of catastrophe on U.S. soil. “The discs revealed far more detailed, wide-ranging and current research” than has been made public, a source tells TIME. A senior law-enforcement force tells TIME the FBI is pursuing information from computer files that may lead to al-Qaeda members in the U.S. Perhaps a half-dozen individuals are believed to have been in contact with at least one of three men apprehended in Pakistan. Developing...


Aug. 10 UPDATE: Target: America -TIME.com
An exclusive look at what investigators have discovered about al-Qaeda's plans for its next big attack

The headquarters of Prudential Financial Inc. in Newark, N.J., would not seem like an obvious target for terrorists. It is neither a venerated symbol of American capitalism like the New York Stock Exchange building nor an iconic piece of modern architecture like the Citigroup building in midtown Manhattan, which houses America's biggest bank. It looms over a city that was once the very symbol of urban blight in America. On a clear day the more famous spires of Manhattan are visible from Newark, and so too is the empty space in the skyline on the island's southern tip, where once the city's two tallest buildings stood side by side.

As unspectacular as it might seem to most Americans, the Prudential Plaza building is a site of intense interest to Osama bin Laden and his operatives. Beginning in 2000, al-Qaeda operatives inside the U.S. conducted detailed surveillance of the Prudential building, with the apparent intent of destroying it and killing the civilians who work there. They took multiple photographs of the building and observed the parking garage underneath. One report outlined possible methods for carrying out an attack. Written in English, the report noted that it might be difficult to drive trucks or vans into the parking lot. Black limousines, however, could approach without much trouble. The report proposed acquiring a limo, gutting everything except the front seats and presumably filling it with explosives. It then provided details on the New Jersey Transit rail system and nearby path trains and maps of the network and train timetables—suggesting that instead of deploying a suicide-bomb squad, al-Qaeda may have been exploring ways to escape after pulling off the attack.

Most chilling. . .


Bulls are unfazed by long decline -USA T
By Adam Shell and Matt Krantz, USA TODAY

The stock market, sinking fast and at a new low for the year, is in poor health. But despite telltale symptoms of a bear market, few Wall Street gurus are willing to make such a depressing diagnosis.

Thursday, record oil prices helped send the Dow Jones industrial average to its second-worst drop of the year. The Dow fell 163 points to 9963, widening its loss to 775 points since peaking at 10,738 in February.

What many analysts have called a trading range could just as easily be labeled a down market. The Nasdaq composite slid 33 points to 1822, its lowest close of the year, down 9.1% for 2004 and off 15.4% from its January high. The Standard & Poor's 500 also set a 2004 low.

Despite the pain, brought on by worries about Iraq, election uncertainty, terrorism fears and rising interest rates, Wall Street strategists are quick to squelch talk of a bear market. The furthest they'll go is admitting it feels like one.

"Anytime the stock market goes down, it's exhibiting bearlike behavior," said Hugh Johnson, a strategist at First Albany. Signs the bear is on the prowl:

•One time market leaders roll over. At the start of the year, the S&P semiconductor industry group was leading the pack. During the week of Jan 12, semiconductors were up 15.8% over the previous 90 days, well above the S&P 500's 8.1% return during the same time. But chips have fallen 8.9% the past 30 days — much worse than the S&P 500's 3.2% decline.

•New stock offerings stall. In the past two weeks, six IPOs have been withdrawn and five have been postponed, according to Renaissance Capital. And the much-anticipated Google IPO, expected as soon as next week, looks like it will be delayed.

•Good news can't rally stocks. S&P says corporations are on track to post their biggest quarterly earnings ever. Yet stocks are falling, and investors remain complacent. "That's dangerous," said Todd Salamone, vice president of research at Schaeffer's Investment Research.

Other worrisome signs: Investors are fleeing the riskiest stocks, rallies have been met with selling and up days have come on anemic volume. "The market needs to make a goal-line stand soon," said money manager Gary Kaltbaum, who sees more pain ahead.



The Terror-Proof Portfolio – Craig R. Smith, CEO SATC
Aug. 9, 2004

The financial markets hate uncertainty -- and there's certainly no shortage of things to worry about on Wall Street these days. Oil prices. Terrorism. Decelerating economic growth. Fed tightening of money and possible interest rates increases. The list goes on.

Today we have all the components in place for a major financial market meltdown. Recent terrorism warnings sent concerns deep into the heart of investors who depend on certainty in the free market for sustainable growth, performance and profit.

Early last week, I warned American investors on national T.V. (FOX NEWS & CNBC) that terrorism targeted at the financial industry would effect the markets in a big way over time and that asset diversification is the key to keeping your powder dry right now.

These radical terrorists are smart and they know finance. Do we truly believe that they do not have a hand in the recent $45 price spike in oil? If OPEC wanted $25 a barrel price as they have said, why don't they sell it to us as the friends they claim to be? The fact is, they HATE US! They are not our friends and they want us to go down, just like OBL.

"The persistently high price of oil is a troubling issue for investors. It sucks purchasing power out of the pocketbooks of many Americans,” says Robert Hormats, Goldman Sachs vice chairman, International to CBSMarketwatch.

Last Friday’s jobs report was expected to be as high as 300,000, but instead it came in at just 33,000. This type of “anemic” job growth calls into question the strength of the U.S. recovery and the chance that stagflation (high inflation/high unemployment) could be here -- which can be even worse than a just plain inflationary environment.

As a result the Dow lost 250 points for the week, that's about $250 billion in loses. But that could be just the start in today’s overvalued market. If the current U.S. stock P/E ratio of 22 returns to a historic average fair value P/E of 16, large caps stocks would drop 38% and US small cap stocks would drop 41%, according to Wall Street researchers.

Another bad sign for the stock market is that the now famous upcoming "Google" IPO has been put on hold on growing fear it could flop in the present market environment.

Defense is the name of the current investment world game -- but where can you catch the ultimate flight to safety in a world of insecurities, debt and fear?

My personal belief is that in the next five years gold and silver (bullion and numismatic coins) will make a phenomenal come back which few can even imagine today.

Right now gold prices are near $400, right where it was during the 1997 Asian currency crisis. You remember, that was when Muslims lost millions at the hand of “greedy Americans” like Warren Buffet. Perhaps that is why OBL is pushing the Gold Dinar as a competitive currency with the U.S. dollar so hard.

Al-Qaeda hopes to convince Muslims to convert U.S. dollars into gold Dinars, to prevent Muslims from getting "ripped off" as the U.S. dollar and stock market drop further (according to former Malaysian Prime Minister, Mahatir Mohamed).

Alan Greenspan is on record warning investors to “watch gold” for clues as to what the Fed will do with future interest rates. Yet under the present economic conditions, I don't see how he can raise interest rates the expected quarter point this week. We shall see.

The bottom line is that the financial markets are now in serious trouble and the price of gold is finally starting to catch up with the price of oil. I heard a very conservative stock market bull say that “we are lucky that gold is not at $450/ ounce already.” Lucky indeed.

For all of the reasons above, I am recommending that investors immediately reallocate at least 5% to as much as 25% into tangible assets such as gold and silver coins – which must be included in a truly “terror-proof” portfolio.

To help our readers understand the growing terrorist threat we have two new FREE educational resources...

"A CITIZEN'S GUIDE TO COUNTER TERRORISM" A new educational DVD that covers how to prepare for five major types of terrorism that America now faces. Features Pat Boone who recommends; a family communications plan, basic steps of emergency planning and "financial terrorism" preparedness.

RESTORING THE STANDAND: A TRIBUTE TO REAGANOMICS” DISCOVER WHY... Islamic Terrorists are targeting Mid-East oil and U.S. dollar … Ronald Reagan fought to restore the gold standard … A Gold Standard will restore morality to our money.

Call our offices toll-free at 800-289-2646 between 8am to 6pm PT Monday-Friday to request these new resources.

Terrorism turns logic on its head -JERRY HEASTER, Kanas City Star
Aug. 11, 2004

The surging price of oil isn't a passing phenomenon, and the high cost of gasoline is something Americans must learn to live with for the foreseeable future.

No matter how much extra supply the Organization of Petroleum Exporting Countries manages to produce, oil is now subject to a terror premium. As long as the world fears terrorists will either sabotage production sources or foment Middle Eastern political unrest, relatively cheap oil will remain a thing of the past.

What we're experiencing is not a temporary oil shock associated with previous price spikes, but the advent of a new era of energy economics in which a small group of extremists can exert its will on the established order.

Beyond 9-11's death and carnage and whatever depredations lie ahead, the war on terrorism will be as much about our economic security as the homeland's physical security. Not even the promise of transforming farm crops into fuel can overcome the economic harm terrorists are capable of inflicting on America.

What is driving some petroleum economists crazy is that even as global oil supply is exceeding demand by levels not seen in four years, oil's price keeps soaring. In June the surplus was 1.8 million barrels a day, which was the fourth straight month of surplus. Economic logic says supply overages of recent magnitudes should be driving prices down.

This traditional view, however, ignores the uncertain world that oil has become. Not only does the world fear terrorist supply disruptions, but traders also have become unnerved by the turmoil disrupting Russia's oil industry. This is what is driving the price of petroleum up — not the law of supply and demand.

The economic consequences already are being seen in the slowing of U.S. growth. The initial read on the second quarter's performance, as measured by gross domestic product, revealed a surprisingly weak economy. The consensus forecast called for an annual growth rate of 4 percent, but the early data showed only a 3 percent rate.


The Calm Before The Storm! -Bill Murphy
August 10, 2004

August 9 - Gold $400.30 up $1 – Silver $6.71 down 3 cents

The wise are instructed by reason, average minds by experience, the stupid by necessity and the brute by instinct...Marcus Tullius Cicero, statesman, orator and writer (106-43 BCE)

A note from this weekend.... After the US financial markets’ dramatic day on Friday (the result of a stunningly disappointing US jobs report), I thought I would pay special attention to how the pundits viewed the developments, like those on Fox TV’s Saturday morning business market shows.

Several things stood out:

*Most were still bullish, yet admitted confusion over the surprisingly lousy jobs number. That the economy has deteriorated so quickly the past month or two has them befuddled. It seems to have done so under the radar screen of Wall Street? Perhaps a number of them ought to subscribe to this column or read the very insightful King Report. What they might have picked up:

1. The jobs reports were overstated all along due to something esoteric called the Birth/Death Hedonic Adjustment Indicator. Bill King has been all over this after each report, citing they were not nearly as strong as trumpeted by Washington and Wall Street. Without utilizing this indicator, the job numbers would have been weakish for some time. Perhaps the Labor people felt they just couldn’t get away with their fudging any longer. There are also a number of Café members who now believe the "powers" behind the scenes won’t mind if Bush is dumped as he has become a liability to their grandiose plans. Meanwhile, they have another Skull & Bones Yale man in Kerry to step in and take his place.

2. While the jobs numbers have been overstated, inflation has been understated. Even without taking into account the juggling of the real numbers, the fact that the core CPI, the most focused on inflation number, is calculated without implementing energy costs is ludicrous. As oft-mentioned here, next to health costs what item could be more important to the average American? Consequently, US corporations and the average Joe and Jane are being squeezed and it is beginning to really show. This should not surprise either as 80% or more of the US economic reports the past two months have been sup-par and more anemic than anticipated.

3. The manipulation of US financial markets is beginning to catch up to the price managers. A false sense of economic well-being has been force-fed on the public. PRICE ACTION MAKES MARKET COMMENTARY. Many of the US financial markets have been nothing but technical illusions from a chart/TA standpoint. This has resulted in an unusual amount of complacency among investors, which could lead to dangerous herd investor movements in the months ahead.

4. What really surprised me was how few of the pundits were bearish and NONE suggested investors should "batten down the hatches" and prepare for some very difficult economic times. Amazingly NONE focused on the tax cuts running their course, the effects of the incredibly low interest rates for an extended period of time having run their course, as well as the initial stimulus of spending on the Iraq War having also run its course.

5. For years one of my rants has been the artificial suppression of the price of gold was going to come back and haunt the riggers and eventually prove to be calamitous for the average American. The basic reason is very simple. Rightfully so or not, gold is used as a barometer as far as the health of the US economy is concerned. When the price of gold is soaring EVERYONE talks about inflation, crisis, or safe-haven investing. Each of is a negative for Wall Street, which is why the disingenuous, corrupt ones in The Gold Cartel have made such an effort to keep the price down. Had they let it take its natural free market price course, gold would be MUCH, MUCH higher than it is today; and, the average American would have been given a fair signal to be more defensive with their investments.


It’s Monday morning. As if to prove my point made over the weekend about gold being a key indicator for both Wall Street economists and the public, Bear Stearns chief economist, John Ryding, was on CNBC early on saying gold was his key inflation indicator. Thank you very much! It could not be more obvious why The Gold Cartel is suppressing the gold price. It’s called motive.


Cyber-terrorism in the 21st century -Crime-Research.org
August 06, 2004
By: Vladimir Golubev

Information on new scaled terrorist attacks being prepared caused the necessity of urgent security measures to be undertaken.

According to the CIA, Al Qaeda, as earlier, will try to prepare terrorists' acts with more casualties than ever. Al Qaeda and the other terrorists' movements will utilize leakages of secret information that come to mass media, information on methods of mixing explosives and achievements in the sphere of electronics that are also published at the open sources.

Terrorists can change their traditional tactics in order that counter-terrorist services will not reveal and destroy their plots. But irrespectedly of the chosen tactics, Al Qaeda actively seeks the way to attack the USA and cause the maximum possible damage related to numerous human casualties and economic losses.

President Bush said Monday that he is asking Congress to create the position of a national intelligence director to serve as his principal adviser on countering terrorism.

"Our goal is an integrated, unified national intelligence effort," he said.

Bush wants the director to be appointed by the president and approved by the Senate. He said the director will be charged with overseeing and coordinating the "foreign and domestic activities of the intelligence community."

Creating such a position is a key recommendation of the so-called 9/11 commission, a bipartisan panel established by Congress to investigate events before, during and immediately after the terrorist attacks of September 11, 2001.

"We're a nation in danger," Bush warned Monday, as three major East Coast financial districts operated under heightened security.

The move would require Congress -- which is in recess -- to revise the 1947 National Security Act that created the CIA, Bush said. Under the president's intelligence reorganization plan, the CIA would be managed by a separate director.

"We can expect to see an escalation in terrorism on a global scale with a continuation of conventional acts of terror, such as suicide bombings and shooting, as well as mega-terror like September 11 in the US and March 11 in Spain," Professor Yonah Alexander, director of International Center for Terrorism Studies, one of the world's leading expert on terrorism told. "There will also be a move towards the use of non-conventional weapons: biological, chemical, nuclear as in dirty bombs, and cyber-terrorism, whereby perpetrators will try to disrupt power supplies and air traffic, for example, at the touch of a button."

The actuality of his warnings was in some measure proved by testimony of Mohammad Naeem Noor Khan, the Al Qaeda computer expert recently captured in Pakistan. He told Al Qaeda used email and websites in Turkey, Nigeria, and regions occupied by Pakistani tribes to communicate with each other.

Since cyberterrorism is a today's reality, governmental and private authorities should be legislatively obliged to undertake technical measures to provide the security of computer networks as the most vulnerable element of the modern society.

The humanity entered into the 21st along with the terrorism that has become one of the most dangerous problems by its scales, suddenness and social-political and moral sequels.


Lean, Mean Reversion Machine –John Mauldin, Frontlinethoughts.com
Aug. 7, 2004

Stocks are currently at a P/E ratio of 22, based upon 12 month trailing earnings. What would be the total stock market return over the next seven years if P/E ratios revert to the mean of 16?

Remember my contention that stock market valuations have always proven to be a lean, mean reversion machine. This can be good when valuations are to low, but it is painful for future returns when valuations are too high or above trend.

There are four components to the growth of stock market returns. Two of them are real sales per share growth and dividend yields. Grantham expects real sales to grow at about 2.9%, which he admits is optimistic.

Sound too low? Long term real sales growth per share has been around 1.8%. Even in the powerhouse 90's, real (inflation adjusted) sales per share growth was a very average 1.9%. Compare this with my study which shows earnings growth for the ten years beginning 1993 was a meager 1% per year or 4% if you included inflation.

Grantham, optimist that he is, assumes that dividend yields for the next 7 years will grow to 2.3%, up from the historically low 1.7% at which they are today. Combine these two returns and you get 5.2% growth over the next 7 years (again in real terms).

But then it gets ugly. The major component of stock markets returns is either the increase or decrease of P/E valuations. If we see the P/E ratio return to "fair value" or drop from 22 to 16, that reduces returns by a negative -4.5% per year over the next seven years. Again, remember that 80% of the growth in the stock market from 1982 to 1999 had nothing to do with earnings growth or inflation. It was due entirely to an expansion of the P/E ratio, from single digits in 1982 to around 32 in early 2000. What provided the wind in the sails in the boom will be the drag of a heavy anchor as valuations revert to the mean.

Profit margins are the final component. Today they are high, almost off the top of the charts, at 7%. Historically, profit margins run around 4.9%. Grantham (again, perhaps optimistically) thinks they will only fall to 6%.

Why would profit margins fall? Because as Grantham jokes, "If profit margins do not mean revert, capitalism is broken." What does he mean by that?

Any time margins get too high for a business, some competitor looks at them and says, "I can do that cheaper and will be glad to take smaller margins." Competition serves to hold down prices and profit margins. Conversely, when profit margins are too thin, businesses tend to fail thus opening the way for the survivors to charge more.

This ebb and flow is part of the business cycle that began shortly after the Medes started trading with the Persians. But if margins begin to erode, their contribution to stock market growth will become negative. Grantham suggests that the result will be a negative real return of -2.1% per year over the next seven years.

Adding all four components together, and you get a compound real annual return over the next seven years of a negative -1.7% a year. Add in expected inflation and you still get less than 1% annual returns. Not a thrilling ride for investors expecting 10%.

This squares with Yale professor Robert Shiller's study which suggests that investors would be better off in money market funds for the next ten years than to invest in stocks when P/E ratios are in the range of 22, as they are today. More on the negative psychological effect on investors later.

What if stocks were to go to fair value or the average historical valuation tomorrow? US large caps stocks would drop -38% and US small cap stocks would drop a negative -41%. International stocks would drop in the neighborhood of 15- 16% and surprisingly emerging market equities would not drop at all.


THE DOLLAR-TITANIC -Alex Wallenwein, A-1 Gold Inv.
Aug. 7, 2004

The fiat-dollar is a disaster waiting to happen.

It's just like the Titanic in a way, except that this currency-cruiser is not really about to hit an iceberg. Instead, it has been set on a wrong course from the very beginning (meaning 1971) with the rudder structurally tethered so that the course cannot be changed. Unfortunately, the inevitable consequence of this is that, the longer this ship sails, the greater is the likelihood that it will hit dry land - eventually. (And that eventuality isn't too far away anymore, as July's non-farm payrolls fiasco has shown us today!)

The only question is: will it hit a nice, sandy beach - or a steep, jagged cliff?

A mighty ship she surely is, this fiat-pleasure cruiser of ours. The entire world's monetary and international trading system has learned to ride on it. But most of the world (except for the top monetary thinkers of every nation, maybe) has no clue that it is about to hit rock- bottom.

Unfortunately, too many of us peasants, and especially our families, friends, co-workers, and happy-hour drinking buddies, have no idea what's about to hit us, either. That's because this monetary juggernaut is currently sailing through a huge, artificially created bank of extremely dense fog - the fog of a massive, coordinated, deliberate, and pervasive public disinformation campaign. This ‘fog' is to make sure that everybody has their eyes (and all of their desires and hopes for the future) firmly fixed on the ship itself - and not on what may lie ahead.

How awesome, how splendid a ship she is, isn't she? She has sailed on an inflexibly straight course for over thirty years now, and she's still plowing full steam ahead in all her glory. That's longer than some of us "investors" have been alive. A whole generation has grown up that cannot remember the days of the gold standard, or even the gold exchange standard, in action - and that generation has now come of age and is "investing" left and right as if this fiat-ship could never sink.

"Just look around you, friend" they say. "Not a single sign of danger anywhere in sight!" (thus quoth the blind man who can't see his own hand before his eyes.)

This officially sanctioned disinformation-fog is surely doing its job.

According to this ship's congressionally appointed ‘captain' (whose hands are just as tethered as the rudder is) this fog-diversion is absolutely ‘necessary'. It's even in the interest of ‘public policy.' Can't allow a "panic" to occur, right?

"What??" they scream when you tell them there is danger waiting ahead: "you say we should invest in golden life boats? You say we should prepare to abandon this stunning palace of floating pleasure that has thus far satisfied our every whim? Are you insane? Who would want to leave this gorgeous ship? Lifeboats? Lifeboats??? We don't need no stinkin' lifeboats!!"

"You say there is danger ahead? You say our dashing captain might as well be a blow-up doll like the emergency pilot in the Mel Brooks movie "airplane"? You dare call him incompetent?? You misanthrope! You party pooper! Don't you see we are having a great time here? Why don't you just get yourself a drink and relax, buddy? Maybe you should see a shrink about that. Ha! Ha! Ha!"

(Meanwhile, under deck, a group of slightly better informed people has been busily sawing, hacking, and hammering away at whatever wooden furniture they could find on board in order to construct at least the semblance of a lifeboat.



David M. Bradshaw is Editor of Real Money Perspectives, publisher of Rediscovering Gold in the 21st Century: The Complete Guide to the Next Gold Rush (7/01) and has been an economic commentator since 1987, when he produced the World Economic Perspectives radio show. In 1997, he produced a one-hour TV documentary, "Preparing Wisely for the Next Millennium," which was distributed free of charge at Blockbuster Video nationally. In 1999, he produced a one-hour radio special, "The Big Picture: The Shape of Things to Come" discussing geopolitical, economic and spiritual trends in the 21st Century. MORE ... NOTE: Youngest daughter Braida Zoe (6 months) is learning the importance of having a crash helmet -- a valuable habit for us all to remember... just in case!

DISCLAIMER: All of the information in this story is believed to be true, however errors are possible.
Past performance is no guarantee of future performance. All investments have risk.

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