Snow Job
By Rick Ackerman
Wednesday, July 17 2002
This commentary has been provided courtesy of 321gold.com
Mr. Greenspan came to Congress on Tuesday with an upbeat earnings forecast, providing yet more evidence that he inhabits the same bizarre, parallel universe as CNBC's bubbly crew. He spoke of an economy that is fundamentally strong, apparently unaware that corporate profits, capital investment, wage growth, household savings, employment, debt formation and a dozen other key areas are performing so miserably as to beg comparison with the days leading up to the Great Depression. But then, President Hoover and his economists all said pretty much the same thing in their day -- that the economy was "fundamentally sound."
In fairness to Mr. Greenspan, he can't very well go on television and talk about the looming juggernaut of deflation, or of the possibly insurmountable difficulties holding it at bay when banks are already able to secure more or less unlimited quantities of lendable cash for under 2%. Better the Fed chief should make like a Disney animitron and follow an innocuous script rather than risk stampeding the herd.
But surely he must know that things are not right -- that the most aggressive credit expansion in all history should have had more of an effect by now? Eighteen months into that expansion we are experiencing an unprecedented third straight year of falling stock prices, and the economy remains so limp as to make one pine for the days of stagflation. Or maybe Mr. Greenspan actually believes that GDP grew at 5.8% in the last quarter, as was reported. If he does, it could only be because his office is in Washington, D.C., virtually the only town in America where most of the work force could say that business these days is just great.
It's the leaf-thin silver lining of an economy which has shifted precipitously from surplus to deficit, even as business and corporate borrowers have grown more overextended than ever. So overextended, in fact, that the only type of borrowing that is keeping the economy afloat comes from a still-burgeoning mortgage market. This is one reason we are having to borrow nearly $6 these days to engender just a single dollar's worth of economic growth. Even at that, of the reported 5.8% percent spurt in GDP, 62% of it came from slower inventory expansion, 22% from higher government spending, and the remainder from the statistically turbocharged sale of computers. All of this has been reported in publications that I quote here regularly
Perhaps Mr. Greenspan reads GQ, Maxim, or The Times Literary Supplement to escape the hard realities of his public relations job? Whatever the case, with his made-up theories about why the supposed New Economy is working so well, he only sullies the reputation of the MIT economics department that gave him his Ph.D.
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AUG GOLD - 317.50
The futures will need to close above a Fib-based resistance at 319.90, or trade more than two points above it intraday -- to be ready for a run at the June 24 high near 328.
Click here for August Gold Chart.
GOLDCORP Inc. - GG 10.05
We hold 400 shares with an average cost of 7.58. Stochastic signs remain moderately bearish and could remain so for another 2-3 days.
Thereafter, once the stock closes above 11.19 or trades at least 13 cents above it intraday, it will be on its way to a test of early June's watershed top at 12.35.
GoldCorp website
Durban Roodepoort Deep - DROOY 4.32
We hold 600 shares for an average 4.29, with 200 of it offered GTC at 5.38.
Short-term stochastic influences are bearish, but we should be encouraged by DROOY's ability to make some headway to the upside yesterday despite this.
Durban Deep's website
Int'l Business Machines - IBM 71.00
No change. Any rally that falls shy of 90 (the lower threshold of April's spectacular gap) should be viewed as a tease and nothing more.
Stochastic indicators remain supportive, although they look too long-in-the-tooth to power Big Blue to 78.84, a Fib-based level that probably represents its maximum upside potential over the next 2-3 weeks.
-Rick Ackerman |
