John Galt stopped the motor & Bill Murphy (GATA) stopped "Hannibal Lechter".
For those new to this organization that has in a great good way affected the
price of gold, the following is a speech by Bill Murphy given last June in
New York, NY at a mining conference. An extreme much has happened in the
last four months, but the following is a good lead in to what GATA is.
Speech by Bill Murphy, Chairman, Gold Anti-Trust Action Committee, Inc.
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Northeast Investment Mining Conference - New York, NY (June 3, 1999)
As Harry Bingham likes to say, hello everyone.
Much is being said about The Gold Anti Trust Action Committee,
but unfortunately most if it has been sound bite analysis. So today I
thought I would try and set the record straight by explaining the
background of GATA, what we are trying to accomplish, and what it can
mean to all of you.
Personally, I have a background of some 25 years in the commodity
markets, but quite frankly, until the past few years had little interest
in gold. In my formative years I was fortunate to be around, and learn
from, some great economic minds. One of the great commodity traders of
all time is Dan Ritchie, the Chancellor of Denver University. I saw him
turn down both the Harvard Chancellorship and DK Ludwig's request to run
his empire. Ludwig was probably the wealthiest man in the world at the time.
There was Ray Dalio who heads up the esteemed Bridgewater Associates,
who manage $15 billion including some foreign government portfolios.
And then there is Frank Veneroso who most of you know from his work in the
gold market. But Frank is well known to me for his consultative
expertise in advising the IFC, the World Bank, and many governments in
macro economic matters. In past years, the Finance Minister of Mexico
called for "The Priest" ( Frank ) when they had serious financial
problems that needed to be solved.
I learned a great deal about the commodity markets from all of them and
having been a limit position futures trader myself at times, I think I
have come to learn something how about how markets trade.
Thus, it was with great excitement and with the help of Donald & Co's,
John Brimelow, that I decided to launch my own financial website,
www.lemetropolecafe.com, around Labor Day of last year. I was fortunate
to be able to attract some outstanding financial commentators. Charles
Peabody, oft quoted by Barron's Editor, Alan Abelson, is one of the top
banking analysts in the US; David Tice, of the Prudent Bear Fund, is
constantly on CNBC; Paris' Eric Barande is well known among the central
bankers of France; and Dr. Neville Bennett teaches Japanese history in
Canterbury, New Zealand while writing for the National Business Review.
But more to the point of why we are all here today. This past September
the gold market looked to me like it was poised for one of the big moves
of all time. Demand was strong and it appeared that the supply plagues
of the past couple of years were subsiding. Any pre EMU selling by
European Central Banks would be over by the end of they year, the Asian
crisis, scrap supply shock, which included a 300 tonne mobilization from
Korea alone, was behind us, and it appeared that producer forward
selling should be greatly slowed because of the low gold price.
That left only leased gold as a major supply concern.
At the time I thought this might be a plus. Long Term Capital Management
was blowing up. Over that summer we had heard that they were short some
300 tonnes of borrowed gold as part of a "carry trade". The gold price
started to rally towards $300 and we licked our chops as we prepared for
Long Term to buy back their position.
Then the word spread that they were let out of this position in an
"off market transaction" - a rigged trade so that the price of gold
would not shoot up.
The fall went on and every time it looked as if the price of gold would
take off, the same crowd of bullion banks would knock it down. We then
heard this same cartel was offering unheard of relaxed credit terms to
producers if they would just sell forward. It was reported to us that a
well known gold analyst was requested by his higher ups to tone down his
bullishness on gold. At the same time, we twice received feedback from
very reliable sources that our officialdom asked the Asian officialdom
to refrain from any aggressive gold purchases as they were in the market
at the time.
After all this, the Counterparty Risk Management Group, led by Goldman
Sachs and JP Morgan was formed to manage risks in the financial sector
along with the likes of Credit Suisse. How long do you think it would
stand if Chrysler, GM and Ford got together to do the same thing in the
automobile industry?
There was much more and I wrote a piece called "Scandale Gold".
Le Metropole member, Chris Powell, the Managing Editor of the Journal
Inquirer in Connecticut, said it looked to him like we might have
violations of the Sherman and Clayton anti trust Acts here, so we should
stop complaining and do something about it.
That is how GATA came into being.
We put out a press release and then I was on CNBC. Coincidentally,
Merrill Davidoff, a senior partner of Berger & Montague, one of the most
prestigious law firms in the US, had just signed up at my website at the
suggestion of John Devlin of Bema Gold, so we contacted him.
Chris, John Meyer, our hardworking Vice Chairman, and I flew down to
Philadelphia a few days later. What a dream! Merrill, who is here today,
was very knowledgeable about the gold market and our other attorney
would be Jerome Marcus, just off of the front page of the NY Times as it
was discovered he was the "behind the scenes brains" in "The Paula Jones
Case". Furthermore, Berger and Montague was a plaintiff's counsel in
such powerhouse cases as the Michael Milken/Drexel Burnham case, the
Exxon/Valdez case, the Orange County Case, and many others.
While Berger & Montague would work on some basis of contingency, we were
to conduct an investigation at first - not a law suit, so a reasonable
retainer for a firm of their stature would have to be secured.
The clarion call went out for support from people all over the world
just like yourselves. MANY of your fellow gold shareholders and a FEW
mining companies quietly gave us the funds to retain this dream law firm.
We then needed a plan to seize the day.
Perhaps I have had too much idle time these past years and watched too
many movies, but after seeing the TV serial about the great Zulu warrior
of South Africa, Shaka, I decided to fashion our battle plan after his.
To vanquish his foes, Shaka formed a diamond formation that became an
enveloping horn. We would do the same.
At the front of the diamond, was our retention of Berger & Montague.
They are so highly regarded, our protagonists would know we are for real.
So would our supporters. Those that might have information about
our claims of gold market manipulation might more easily come forth and
speak confidentially with our attorneys. Merrill and Jerome would be
available at times to fly anywhere in the world to speak with those that
have additional facts to support our allegations.
As they told us:
"This is a just case about price-fixing. It goes on all the time"
Thus, we would confront the colluders head on with GATA legal power.
Right about then I was flooded with emails and amazed at how many people
said that threats would now be coming our way and they questioned
us whether this might be too intimidating; confronting Wall Street
Giants, the most powerful financial entities in the history of the
world. The only way I could answer the intimidation question was that
everything seemed relative.
About 30 years ago, I was playing wide receiver for the Boston Patriots
of the old American Football League in a game against the Kansas City
Chiefs. Over the middle I went on a pass pattern, when Hall of Famer,
Willie Lanier, punched me in the face out of nowhere. Down I went. A bit
dazed I staggered back to my huddle. As I reached the line of scrimmage,
I looked up and saw 6' 10" 280 pound Buck Buchanin and 6' 9" 300 pound
Ernie Ladd glaring at me. I thought that if these two both hit me at the
same time, I am a goner. Now, THAT'S intimidation! That was big back then.
While proceeding head on with our investigation, we would call for the
left flank to flair out and start to encircle those that have no regard
for free market activity. The left flank would be a PR campaign that
targeted the Congress of the United States and the press. We would alert
them as to the size of the gold "spec" borrowings and the size of the
total gold loans. We believe them to be 3,000 tonnes and 8 to 10,000
tonnes respectively. Since mine production in 1998 was only 2529 tonnes,
we believe the gold loans have become too big to pay back in a short
period of time. They have now become a "systemic risk" problem and if
not reduced soon, they could effect another savings and loan type of
financial crisis.
I went to Washington and met with Jim Saxton, Chairman of the Joint
Economic Committee, his Staff Director, and their senior macro economic
advisor. I also met with the Senior Counsel of the House Banking and
Financial Services Committee and the Staff Director of the Capital
Market Sub Committee, which I found out is investigating Long Term
Capital Management for ANTI- TRUST violations.
I urged them all to look into our contentions in the most vigorous
manner. I suggested that they quiz Alan Greenspan the next time he
testified before committee.
Whether it was a result of GATA's effort or not, the following has occurred:
1. Jim Saxton issued a strong statement against the IMF gold sales the
day after my visit. A well known bullion dealer analyst said that "GATA
mugged Jim Saxton" into making that statement.
2. Alan Greenspan WAS quizzed in his next banking committee appearance
about the very issues we raised. Some of his comments are very
controversial from our point of view, but he did say, "gold represents
the ultimate form of payment in the world," etc.
That is now on record and I feel reasonably confident that we would not
have that statement if it were not, in good part, because of GATA's
efforts. I would be also remiss, if I did not laud Larry Parks of the
Foundation for Monetary Advancement who has been very effective in this area.
The understanding by many market followers that the gold market is being
manipulated is spreading rapidly now.
My namesake and technical analyst guru, John Murphy, came out on CNBC
and said he would not analyze the gold market "because it is manipulated".
And just last Friday, I received this note from South Africa.
"Dear Bill,
Just thought I'd let you know that I'm noticing almost daily in the
South African press the odd mention of a possible conspiracy in the gold
market. Today, in a widely read financial daily, the "Business Report"
we have a nice 20 odd paragraph column on GATA, yourself being quoted at
length. It comes across quite well.
The columnist says all we need to find now is the "smoking gun". Well,
the way these things are being discussed publicly lately, who knows, it
might be soon. Regards, Francois"
At the same time and very curiously, the mainstream US press has refused
to present our side of the gold story to date. Ditto with the London
press; the Financial Times of London actually told a prominent gold
analyst that we were dangerous( to whom? ).
Yet, all in all, I would say the left flank has begun to unnerve our
foes. Outstanding progress is being been made.
We have now unleashed the right flank and progress is being made there
too. The plan was to go to the gold companies via the press and letters
to their CEO's and ask them to speak up for their industry, to take some
action, and to get behind us.
Now, we realize the producers have a big dilemma.
He's called "Hannibal Lechter".
In toto, the bullion bankers are eating the producer's lunch. They are
flooding the market place with gold supply via 1% gold loans known as
the "gold carry trade", they flood the media with bearish propaganda
which tends to feed on itself, etc, and scare the producers half to death,
pleading with them to sell forward, even at these very low gold prices.
The producers have been "silenced like lambs"!
Why? Because Hannibal is his credit lifeline, his banker. The gold
producer privately loathes what is going on, but fearing to alienate
Hannibal, does little, or nothing, about it. The result of that silence
has produced a slaughter.
All the while, the "Hannibal Lechters" make fat fees and are making a
fortune by investing their virtually interest free gold loans in other
investment vehicles. How would you like it if your papa came to you
today and said, "son, go borrow what you want, practically no risk,
practically no interest cost and invest it. How well do you think you
could do? If you had some bad debts that had to be repaid - would that
sort of proposal help you get back on your feet?
But Dad, you might say, such a deal! - how can that be? Oh, don't worry
son. We'll make sure the gold price does not go up for some time. You
won't have to worry about paying back the gold loan with a higher gold
price. Only some poor, gold producing countries, gold producers, gold
miners, and gold shareholders will suffer and they don't matter.
Alan Greenspan's TWICE made comment on July 24th before a House Banking
Committee and on July 30th before a Senate Agricultural Committee,
"central banks stand ready to lease gold in increasing quantities should
the price rise", set the recent stage for this big money game and for
the manipulation of the gold price.
The gold market manipulators have taken no chances of losing control of
this rigged market and money making bonanza. Their line of defense
points- first right above $300, have ratcheted down to $296 and then
$290. But, the irony is, this scheme could blow up in their faces at any
time. The natural supply demand deficit, which Frank Veneroso thinks
could be 1500-2000 tonnes this year, is making it harder and harder to
keep the price down. The natural supply/demand deficit is 4 to 5 times
the intended BOE sale, for example.
According to Haruko Fakuda of the World Gold Council, the British
decision to sell gold was a "political one". What does that really mean
and why was it effected? Could it be that the manipulators were running
out of supply to hold the gold price down? Does the fact that Goldman
Sachs' international economist, Gavyn Davies, just happens to be Tony
Blair's economist, have anything to do with this "political decision"?
That is too much to deal with here. Suffice to say we have been very
heartened by the recent comments coming from leaders of the producing
community. Chris Thompson, Chairman of Gold Fields led off with a
comment about the dealers trying to talk the market down by spreading
unfounded rumors. That was followed by John Wilson, President of Placer
Dome, who spoke of malign forces acting in concerted action to hold down
the price of gold.
We are asking all the gold companies to get behind "our big tent
campaign" in SOME WAY. In addition to conducting an investigation of the
manipulation, we are lobbying Congress to vote against the IMF gold
sales. You might like to know that Tom Delay, House power broker, is
circulating a letter right now about his grave concerns in this matter.
He joins Congressional heavyweights, Jim Saxton, Tom Daschal, Senate
Minority Leader, and Dick Armey, House Majority Leader, that are opposed
to the IMF gold sales.
We also are pressing on with the banking committees, feeding them
information about the size of the gold loans, and we are encouraging them
to find out what is going on here for themselves - BEFORE a crisis develops.
To do all of this, we need the support of the industry. The World Gold
Council is doing a fine job in promoting gold demand around the world.
But, there are things we can accomplish that are just too sensitive for
them to touch.
We are asking the senior gold producers for some decent financial
support on a confidential basis, if necessary, and we want every gold
company out there, no matter how small, to purchase one of the fine art,
limited edition GATA prints. If they cannot afford the $500, we are
asking them to be responsible for finding just ONE shareholder that can
afford it.
Absolut Vodka artist, Alain Despert, has brilliantly captured the spirit
of GATA. The people in his painting are all of us. By taking our own
"concerted action" we CAN make a difference.
The diamond formation has just begun to turn into the "enveloping horn".
We believe that without this onerous supply of borrowed gold, it would
take an equilibrium gold price of $450 to $500 to clear the market. What
would that do to the share price of your favorite gold company?
With your help, GATA will surge forward. It is only a matter of time
before a "John Dean" comes walking in the door or someone sends us a
"stained dress". The enveloping horn will close in on the "Hannibal
Lechters". They will have to cover their shorts and retreat out of the
back, open end of that horn. The price of gold will rise dramatically
and then all of us here will be the ones with the happy "grin".
Thank you.
Copyright (C) 1999 All rights reserved.
All the best,
Bill Murphy, Chairman
Gold Anti Trust Action (GATA) gata.org
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