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Sent: Saturday, May 25, 2002 7:38
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FYI
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Goldie Locks And The Free Bears
No 50 May 24 2002
Economics
Page 1 - GOLD HOT TO TROT AND CRACKING THE
GREENBACK: The mighty dollar has been falling for three months against
nearly every other currency…
Page 2 - DOWN UNDER MOUNT IDA: International
gold investor Frank Timis has bought a major position in the small Western
Australian gold exploration company, Hamill Resources…
Page 3 - BUYING BACK THE FARM: Japan’s Sumitomo
is said to have sold its Hunter Valley coal mine for just $1 million, yet the
new operators hope to make $50 million profit this year…
Politics
Page 4 - TURKEY JOINS JIHAD: television
programs and newspaper articles in Turkey have begun attacking Christianity
and stirring up hatred among the Muslim majority…
Page 5 - MEDIA ACCUSE BUSH OF CONSPIRACY:
Stories like NY Post’s “911: Bush Knew” charge Washington with knowing about
the attack and doing nothing to prevent it….
Psychology
Page 7 - WHY CAN’T THEY READ? Archbishop Pell
told activists disrupting Pentecost Sunday services in Sydney’s Cathedral that
God created Adam and Eve, not Adam and Steve…
Gold Replaces Greenback
The mighty US dollar has been falling now for three
months. Most currencies are gaining on it. Even the Australian dollar, since
hitting its nadir of 48 cents, has risen 16%.
But it’s gold that everyone’s talking about, the
greenback’s greatest competitor as the world's alternative currency. Gold is
hot - up 13% against the dollar so far this year. The ones profiting are the
bears, independent-minded mavericks and free spirits.
As yet only 1% of mutual fund and pension fund assets
are in gold. Institution investors are not smart but rather conformist clones
that always run with the herd. “The smart money group,” though, as our Issue
Number 3 on August 10 2001 mentioned, “are more concerned about the economy
than they are letting on. With the greenback increasingly shaky, to more and
more people, gold, the ultimate crisis investment, is looking once again like
the way to go for protection.”
Now what would happen if the world’s institutional
investors suddenly wanted to double the proportion of their assets in gold
from 1% to 2% - ore more? Take the Japanese. "Japanese buying of gold is tiny
when compared to the country's GDP per capita," writes Hong Kong-based
financial guru Marc Faber in his excellent Gloom Boom Doom Report. “Japan
currently imports only about 100 tons of gold annually for a population of 120
million with a GDP per capita of more than $35,000. Compare this to India,
which imports close to 900 tons of gold for a population of one billion but
with a GDP per capita of only around $300. Compared to India's purchases with
a far lower purchasing power, Japan's gold buying has so far been very small,
but it could rise significantly in the future and become a price- driving
factor in the gold market." See http://www.dailyreckoning.com/home.cfm?loc=/body_headline.cfm&qs=id=2088.
So what’s driving the yellow metal? Renewed inflation,
the central banks’ excessive money-printing, war, terrorism and political
crisis, the lack of alternative investments against a backdrop of a stagnant
economy, an overpriced stockmarket and a falling bondmarket, supply and
demand, especially with the closure of so many gold mines due to the
historically low gold price.
But the biggest factor of all could be the huge
derivative position which the major gold producers and the banks have taken
out against gold. There are said to be more than 800 million ounces of gold
tied up in derivatives contracts. That’s more than ten year’s world supply
from mines. This strategy has been a very profitable gamble for the banks
until now. But with the rising gold price these institutions are bleeding. To
staunch the bleeding, cut a loss and extricate themselves from these losing
positions, they have to buy gold. And that pushes gold higher
still.
The bank most in jeopardy is JP Morgan Chase
Manhattan. Like its debtor Enron, JPM has not been disclosing the information
to its shareholders but the Office Of Comptroller Of The Currency in its Bank
Derivatives Report for the 4th Quarter 2001 shows that JPM had about $41
billion of gold derivatives on its books as of December 31 2001. That's almost
six times the hedge book of the next biggest player in the gold derivatives
market.
We had already warned our readers in Issue No.7 on
September 18 2001 in an article entitled Laughing All The Way To The Bank: “JP
Morgan Bank’s quarterly financials lodged with the SEC Securities and Exchange
Commission - see www.jpmorganchase.com/pdfdoc/jpmchase/10Q2Q01.pdf - report stockholders' equity at $42
billion but a derivatives position of $26 trillion. In other words, each
dollar JPM shareholders have put up has been leveraged by management to $600
worth of exposure to the risky derivatives market. That is on top of their
exposure - their money many times multiplied as banks are wont to do - to
residential house mortgages, business loans and government
securities.
“Derivatives are financial bets: futures and put and
call options. They are a zero sum game: for every winner there is a loser. So
there must be some big losers out there. What is worrying is that, when one or
more of them is broken by a sudden price swing in financial instruments, a
chain reaction could be triggered. So when your investment adviser tells you
to sell your shares and real estate, reduce your debt and get into cash, by
cash he might not be referring to bank deposits but gold. 600 to one! How
would you like to keep track of that every morning? Snap, crackle and
pop.”
What will happen? Our No. 4 Issue of August 18 2001
posed this very question: “Are the banks safe? If not, where can one park
one’s savings? Gold seems increasingly like the only safe haven, the last
resort in the gathering storm. Some very interesting developments are emerging
on the gold scene. Like who owns Fort Knox? Where has all America’s gold gone?
They are saying the gold scam is bigger than Watergate.”
While JPM shares have fallen to $38 from their 2000
peak of $66 to $38, that’s still three times what they were fetching 10 years
ago. Will JPM like the Japanese banks have to run to the government to bail
them out? Will Treasury then release some of its gold reserves from Fort Knox
“to stabilise the gold price.” What reserves, what Knox? who’s been sleeping
in my bed? cried Goldie Locks.
Attractive Grades At Mount
Ida
Chairman of Canada’s Gabriel Resources, Frank
Timis, has bought a 15% stake in Perth-based junior gold explorer Hamill
Resources - at a 30% premium over the share price.
When you know what you want, and there is not much of
it around, you have to pay for it. Linking up with Timis gives Hamill (ASX:
HML A26c) a whole new complexion. Timis achieved great results with Gabriel,
taking it from a company not much bigger than Hamill - marketcap $3m - to a
major miner with a resource base above 10 million ounces - and a marketcap
approaching $300m. He recently raised some $50m for Gabriel through his
contacts among European and North American investors. HML owns the Mt Ida
project in Western Australia's Eastern Goldfields, encompassing the 18
kilometre Timoni shear with its high-grade old underground mine which produced
about 260,000 ounces at 16gpt. Success at Mt Ida has rapidly transformed it
into a going concern. Using non-debt financing HML will develop a modest but
lucrative 24,000 ounce 24gpt orebody to generate $1 million profit over the
next eight months - not too bad a start. HML has been finding more high-grade
shoots below the initial discovery, with intersections including 2m at 98gpt
and 4m at 77gpt. Then there is a joint venture with Canada’s Falconbridge
exploring Sophie Downs nickel prospect in the Halls Creek area of the
Kimberleys not far from the Sally Malay nickel mine. Maybe this is what
attracts Timis? With private company Jackson Gold, HML is launching an initial
public offering incorporating Northcote and Iron Range gold projects.
Interests associated with the Bears Bar hold HML, which, it should be noted,
is a highly risky investment. For further info, see
hamill.com.au.
Buying Back The Farm
Sumitomo sold its struggling Wambo coal mine in the
Hunter Valley for just $1 million a couple of years back to a likely group of
lads called Hunter Coal.
We hear that not only did the Japs retain liability
for cleaning up the site but also that the new operators are hoping to make
$50 million profit this year alone after dramatically changing the way the
mine is operated. Good for the workers, the trade unions, and also for the
nation. But does anyone know who these lucky new owners
are?
Turkey Joins Jihad
A campaign by Turkey police to shut down 18
churches continues, Christians forced to endure aggressive demonstrations by
Muslims every Sunday.
According to Barnabas Fund News Service, demonstrators
parade placards with slogans like Every Missionary Is A Spy. They accuse
Christians of an alliance with Israel against Palestinians. Local authorities
levy fines against churches and file claims against church leaders. In Izmit
police keep watch at every service and have even followed congregation members
home. In Ankara and Istanbul, Christian schools are being shut down. Until
recently Christians in Turkey were free to worship without fear of harassment
but in November 2001 several television programs and newspaper articles began
attacking Christianity and stirring up hatred among the Muslim majority. The
media reports prompted Turkey’s government to come down against religious
liberty.
Bush Accused Of Conspiracy
With headlines like ‘911: Bush Knew,’ the US media
is accusing Washington of having known in advance of a terrorist
plane-hijacking and suicide attack and of doing nothing to prevent
it.
But is this fair? In 1994 French authorities prevented
Algerian terrorists from crashing a plane into the Eiffel Tower. In 1995
terrorists in the Philippines considered crashing trans-Pacific planes into US
targets but didn't get beyond planning stage. In July 2001 Kenneth Williams, a
counter-terrorism agent in Phoenix, noticed that a large number of suspected
Islamic terrorists were taking flying lessons and tried to notify the FBI. On
July 3 2001 Ahmed Ressam, a terrorist who was convicted for plotting to bomb
LA Airport, testified that Al Qaeda was planning to target US airports. When
President Bush became concerned about the number of terrorist threats directed
at US targets abroad, he did order National Security Adviser Condoleeza Rice
to look more closely at domestic security and received a briefing that
detailed Osama bin Laden's exploits. During 2001 the Federal Aviation
Administration issued almost a dozen warnings about possible
terrorism including hijackings. Now the FBI think an attack is planned on the
Statue of Liberty or the Brooklyn Bridge. But anyone who can plumb the mindset
of a Third World terrorist and hatred for “Babylon The Great” would know that
the key target could not be such impotent symbols. Ground Zero is more likely
to be capitalism’s nervous system and world financial centre, the New York
Stock Exchange. One person who is making sure lightning does not strike twice
in the same place is Defence Secretary Rumsfeld. In his opinion another and
worse attack is a “almost certain” - not a case of if but when. He believes it
will involve nuclear, biological or chemical. With today’s mini-nuke
technology and backpack-size bombs, even an innocent-looking hatbox in a
cloakroom could be the instrument of ultimate vengeance. The perpetrators
would not be concerned about accuracy, thereabouts would be enough to flatten
Manhattan.
WARNING: THE FOLLOWING CONTAINS RELIGIOUS
REFERENCES THAT MAY OFFEND SOME READERS. NON-SPIRITUAL TYPES PLEASE STOP
READING NOW!
Adam And Steve
When Sydney Archbishop George Pell refused
communion to homosexual activists at St Mary’s Cathedral on Pentecost Sunday,
he told them, "God created Adam and Eve, not Adam and
Steve."
RSM Rainbow Sash Movement is campaigning for
recognition of the ‘dignity’ of sodomy. In church they wear coloured sashes,
making a strident political statement in loud ‘body language.’ 20 went forward
in Sydney, and at St Patrick's Cathedral Melbourne 12. But they were denied
communion, although Archbishop Denis Hart offered them his blessing. (‘Ab illo
benedicaris…’?) But in New York, Chicago, Minneapolis and Rochester, sashers
claim they were given communion. By giving communion to public sinners, that
is to the blatantly unrepentant, priests are creating doctrinal confusion. RSM
is considering an appeal to Rome. A spokesman said, "Refusal to give communion
is the second most serious sanction in church life after excommunication. So
it's a very rare and very important sanction that's been imposed on us." But
can’t they read? On the subject of sodomy, the Bible is as in your face as can
be. See Romans 1 or Leviticus 20 or Genesis 18,19 or Corinthians 5,6,7. For
these unhappy souls - not too gay really - the way out of their addiction and
obsession is simply to ask. Heaven’s promise is conditional on just this. Ask
and you shall receive.
See IRG research reports
