"Midas" commentary for September 15, 2001 Copyright 2001, www.LeMetropoleCafe.com By Bill Murphy www.LeMetropoleCafe.com September 15, 2001 Gold $286 up $6 Silver $4.26 up nine cents The agony for all Americans is overwhelming. For that matter, it has to be agonizing for the entire world -- excluding the subhumans who carried out the plane bombing monstrosities. Even to comment about markets seems so trivial, but as President Bush remarked today in his radio address to the nation, we must go on with our lives on Monday -- with a special awareness. When it comes to financial awareness, one cannot afford the luxury of not grasping that what is ahead of us marketwise is not pretty. The following news items were featured by Bloomberg on Friday: * * * London, Sept. 14 (Bloomberg) -- European stocks plunged, with most indexes ending their worst week in almost three years, on concern the United States will retaliate for the terrorist attack that destroyed the World Trade Center in New York. Losses accelerated as crude oil gained as much as 5.1 percent. "Nobody wants to hold stocks over the weekend," as investors are concerned the situation may escalate, said Thomas Pethofer, who helps manage 3.5 billion euros ($3.2 billion) at Gerling Investment in Cologne. "It's better to hold cash." The Dow Jones Europe Stoxx 50 Index dropped 184.79 points, or 5.6 percent, to 3098.20. All of the 18 Stoxx industry groups fell. Germany's benchmark DAX Index slid 6.3 percent, bringing its drop this week to 13 percent, and France's CAC 40 Index shed 5 percent for a weekly loss of 11 percent. * * * U.S. Treasuries Advance, Pushing 2-Year Yields to 50-Year Lows New York, Sept. 14 (Bloomberg) -- U.S. Treasuries gained, pushing two-year yields to the lowest level in almost half a century, as Tuesday's terrorist attacks drove investors to the safety of the most actively traded government securities. Two-year notes, which account for as much as 40 percent of trading by primary dealers, rose 6/32, or $1.88 per $1,000, to 101 13/32, according to Toronto Dominion. Yields fell 11 basis points to 2.87 percent in the second trading day after a two-day closure after the attacks destroyed the World Trade Center in New York and damaged the Pentagon near Washington. * * * U.S. Economy: Production Falls for 11th Month in Row Washington, Sept. 14 (Bloomberg) -- U.S. industrial production fell in August for an 11th straight month, suggesting a fragile economy that may weaken more as the effects of the worst terrorist attack in history take a toll on business. The 0.8 percent drop in the Federal Reserve's measure of work performed at factories, mines and utilities followed a 0.1 percent decline a month earlier. Until August, production hadn't fallen for so many months in a row since February-December 1960. The decline, the first in six months, was led by a record decrease in computer costs. The index including all prices included rose 0.4 percent after a July drop of 0.9 percent that was the largest in almost eight years. * * * Crude Oil Rises on Concern U.S. Response Will Affect Oil States New York, Sept. 14 (Bloomberg) -- Crude oil rose, nearing $30 a barrel, on concern U.S. retaliation to this week's terrorist attacks in New York and Washington will disrupt oil supplies from the Middle East. Crude oil trading was halted at $29.76 a barrel, up $1.99, on the New York Mercantile Exchange, which was holding an Internet- based trading session today, its first since the attack Tuesday. * * * It is hard to imagine a less attractive scenario for investors in the stock market. What is worse is that economic conditions are likely to deteriorate sharply from here. The Fed just pumped in $100 billion into the financial system. The inflation implications of this maneuver are obvious. The stark implications for the already overvalued dollar are ominous. Central banks around the world will do what they can to stem the fall of the dollar, but even if they are effective, it will work only in the very short term. For a long time Cafe members have heard it here that exiting from the stock market would prove to be the right thing to do and that to be heavily invested in gold and the gold shares was the way to go. That could not be more the case than now. Chris Powell and I have spent three years now crying out to our political leaders to do something about the gold fraud before some event out of the blue set off a gold meltup that could rock our financial system because of the massive gold short positions of the shortsighted bullion banks and central banks. Americans have no clue of the gold horror show out there because the mainstream U.S. press suppressed reporting of GATA's documentation to placate the high and mighty bullion banks. The American public is going to be shocked and blindsided when the price of gold goes north of $1,000 per ounce. Fortunately, the journalistic world has begun to wake up and the GATA's information IS slowly getting into the mainstream. It is most significant that the following paragraphs appeared in the new issue of The Economist: * * * Giacomo Panizzutti, head of foreign exchange and gold at the Bank for International Settlements (BIS), estimates that central banks worldwide have lent no more than 4,700 tonnes of gold to the market. The figure, published in The Alchemist, the London Bullion Market Association's quarterly, is about one- third of the amount estimated by GATA (the Gold Anti- Trust Action Committee) based in Dallas, Texas. GATA says it has uncovered evidence that the American government, assisted by others, has somehow "lent" thousands of tonnes to speculators and bullion banks, notably Citibank and J.P. Morgan Chase, to depress the gold price. * * * The more that serious investors in the world examine GATA's allegations and findings, the more they realize that the GATA camp is correct. What we have here is some of the most irresponsible, negligent, and, in some cases, criminal behavior imaginable by many bullion banks and gold industry personnel. They have perpetuated disinformation about gold to mislead the investment world and are guilty now of trying to cover it up. Unfortunately for the Gold Cartel, Murphy's Law has struck again, as they are being found out. "What can go wrong, will go wrong, at the worst possible moment" -- and that is happening for the gold price-fixing crowd. The Gold Cartel has always managed to put gold back in check whenever they have lost control due to unexpected surges in demand. They can try to do the same again this time, or they can let the price of gold explode now and blame it on the terrorists. Then, from behind the scenes, they could make some sort of government decree about gold and bail out the bullion banks by allowing cash settlements in lieu of their returning physical gold to the central banks -- or something like that. Who knows what the United States will do about a market that it says it never trades in, but if they do attempt to control the price (as they are so used to doing), it will most likely backfire this time in the weeks and months to come for the following reasons: * The dollar is in big trouble and is going much lower, which is going to stimulate worldwide gold demand. * "Safe haven" has a new meaning these days. Gold has been just that for thousands of years. * Greed was the name of the financial game in the 1990s. Preservation of wealth will be the mantra for this decade. * The Fed has injected so much money into the banking system that it has to diminish U.S. paper and make inflation a likely problem in the near future. Wholesale prices were up .4 percent last month alone. * Some U.S. paper is at 50-year lows. Interest rates are headed even lower in the short term, which enhances gold investments. * GATA is waking up the investment world that the central and bullion banks are short around 14,000 tonnes of lent gold, most of which is actually sold. The banks are trapped -- prisoners of their own short positions. Add to that an inordinate amount of vulnerable gold derivatives. That is about as combustible combination as one could put together, and I could easily come up with many more problems for the Gold Cartel. As our country is now at war, all Americans must get behind our president to win. To do so, we must be financially sound. That means facing reality. Denial must not be an option for this decade. Emotionalism will not protect our 401-ks and the financial well- being of our families. Owning gold and the right gold shares is the way to go from here on to give stability and profitability to investment portfolios. There is much else going on in the gold world that ought to be brought to your attention: * * * "Central Bank of Venezuela (BCV) authorities are meeting with counterparts across Latin American in an effort to limit the sale of national gold reserves in an effort to stabilize prices. BCV official Laurent Michel is quoted as saying that central bankers gathered at the 4th International Reserves meeting in La Paz (Bolivia) are about to apply a 1999 agreement under which 14 central banks with 47 percent of the world's official gold reserves will restrict sales to strengthen gold investments and the development of new mining projects in the Latin American region." (Friday, September 14, 2001, http://www.vheadline.com) * * * What happens to the gold price if other central banks follow the lead of the Russian Central Bank and decide to build their gold reserves while some of the central banks that have "lent" 14,000 tonnes of gold try and get it back? Many of you sent me emails about Fox TV's Neil Cavuto regarding his comments about the gold and silver warehoused underneath the World Trade Center. I pass this along as I am not sure what to make of it: * * * "FYI Neal Cavuto (about 9:20 AM CDT, just a few minutes ago) live on Fox News said that "they can't find" the silver and gold under the WTC debris. He cited the amounts, using figures in the millions of troy ounces for each metal. I wonder where he got his info. He said some pretty dumb things, like it could/would add to an "inflationary spiral," which is unlikely, in my opinion, given the relatively small amount of gold and silver under there. Again how does he know it's gone when they can't even get down to the parking garage, where there could be survivors trapped? If the precious metals are gone, they must have been gone in advance of Black Tuesday, and someone must have found out. I'm just speculating about this now, but it was a statement that really caught my attention. How could he know?" * * * What is most important to take into consideration is that the gold buried under the Comex is deliverable- grade gold that could be used by the shorts if the Comex longs stand for delivery in October. There does not seem to be much of a chance that, even if the gold is there, it will be available to the Comex shorts that soon. The Comex gold? The Fort Knox gold? The West Point gold? The disappearing Special Drawing Rights Certificates? The 14,000 tonnes of "lent" central bank gold? What a mess the Gold Cartel has created -- all in the name of greed based on lies. GATA has supporters from all over the world. The Cafe membership is a worldwide one. I am particularly fond of two Cafe members I have had the privilege of meeting; one is in Vancouver, British Columbia, and the other in Durban, South Africa. One is of Arab descent and the other is Jewish, a descendant of Holocaust victims. Both are color-blind, prejudice-free, and just good people. Like other HUMAN beings, they are anti- terrorist. Our president has called out to the world to defeat the terrorists. It must be done. It is in that spirit that I share this very special email sent to Chris Powell and me this week: * * * Dear Bill and Chris: I wish to express great sympathy and participation in your/our sorrow and pain. My heart and the hearts of all Israelis go out to you. America has been a great defender of Israel in so many hard times while we were the spearhead fighting this murderous terrorism, which has made all Western culture a target, be it in Israel or the United States. This is a fight all the West should unite in. I have been an officer in a commando unit in Israel and have seen how terrorists entered a kindergarten and blew the heads of five children -- guns put at their heads from 5 centimeters. These children were 3 years old. They never knew what was going on. It was then that I understood the extreme cruelty these people can reach, and understood that they will never stop until they are stopped. I hope the United States will now lead the fight against terrorism. I was very worried about you when you didn't write for a few days, not knowing where you were. You are also fighters for freedom. God bless you. With much respect, Dani Davidi Israel -END- ------------------------ Yahoo! Groups Sponsor ---------------------~--> <FONT COLOR="#000099">FREE COLLEGE MONEY CLICK HERE to search 600,000 scholarships! </FONT><A HREF="http://us.click.yahoo.com/47cccB/4m7CAA/ySSFAA/WfTolB/TM"><B>Click Here!</B></A> ---------------------------------------------------------------------~-> Your use of Yahoo! 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