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Gold/Mining/Energy : Barrick Gold (ABX)

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To: nickel61 who wrote (2333)	4/3/2002 11:23:21 AM
From: nickel61	of 3558

From Bob Chapman of the International Forcaster, who has had a stupendous record of late...Unless the dollar begins its decline soon a major shift of money from the US to overseas markets is inevitable. If that happens gold will take flight. US asset prices are clearly way over valued. The dollar still trades at a 16-year high and the current account deficit is 4.5% of GDP. The dollar, now that many countries have sold off their gold reserves, accounts for 68% of global currency reserves up from 51% ten years ago. US stock valuations are at a 25-year high versus Europe and are trading at a 56% premium to emerging markets. The result is that the US represents 56% of global market capitalization in spite of having lost $5 trillion in value in the tech-dot com collapse. The US markets are fortunate in as much as the rest of the worlds’ market are a shambles. Irrespective the US markets will fall but foreign markets will fall further leaving the only alternatives to be gold and US government bonds and notes for long side investors. There will be special situations and you of course can go short. As soon as US consumer mega consumption wanes the US economy and markets will deteriorate. The consumer markets and economy are up 281% over the past 10 years due to massive availability of money and credit. This is a recovery built on sand. The US should have stayed in recession in 1992. Returns overseas have ranged from 8-12% during that time frame. Emerging markets are again beginning to appreciate up 11.3% for the last year versus 4.1% for the DOW. For that to happen money has to be leaving the US. The equity mindset of the 1990’s is fast losing its luster and risk is falling appropriately on the US. It is now only a matter of time before the US markets again correct and the last three bubbles, credit, real estate and derivatives bursts. More companies are shifting out of commercial paper into asset-backed and longer-term securities. They are also using bank lines of credit, which have less repayment flexibility and cost more. Eventually many companies will run into liquidity problems as the cost of money increases. The size of the commercial paper market has shrunk from $1.6 to $1.4 trillion or a $200 billion reduction, which is substantial. Due to ratings reductions may companies have been shut out of the commercial paper market or they have had to back their paper issuance with assets. This way securities are paid out of cash flow. An alternative is long-term debt accompanied by a swap agreement to exchange interest rate payments, which allows normal exposure without running the risk of being shut out of the market. Companies are best advised to go to long term paper and pay up because rates should go higher

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