(GATA) (1) What Happened Friday. (2) Credit Bubble Bulletin by Doug Noland.
Subj: MINI MIDAS - What Happened Today
Date: 1/28/00 8:43:25 PM EST
From: LePatron@LeMetropoleCafe.com
Le Metropole members,
MINI MIDAS - What Happened Today
The U.S. economic numbers continue to strengthen, while the inflation outlook
becomes more worrisome. The Gross Domestic Product for the U.S was close to
6% for the fourth quarter while the Employment Cost Index was 1.1% - both
numbers were higher than expected.
In the meantime, U.S bonds continue to rally because of reduced available
supply as our government buys some 30 year bonds back. Because of the
inflation numbers, the yield curve is becoming more and more inverted;
ie, the 2, 5 and 10 year notes all have higher yields than the 30 year bond.
This is causing market players that are "long" short term credit instruments
and "short" the Treasuries to be squeezed. Rumors were rampant of financial
institutions suffering massive losses.
I received a call that the mortgage desks of two big banks were in trouble.
Deutsche Bank and Mellon Bank were in the rumor mill as two likely candidates.
In addition, there may be many smaller problems out there for financial
institutions that are also "long" short term money and "short" long term money.
Market participants that have hedged commitments by shorting Treasuries are
really being squeezed. That encompasses many types of players.
The irony is that the U.S. buying of bonds - which normally would be VERY
supportive for the stock market as long term yields come down - is causing
financial distress for many financial institutions caught in the squeeze.
That is why stock market rallies failed all day today and the Dow closed down
nearly 300 points.
The economic news was bullish for gold. It fluttered either side of unchanged
for awhile, but as soon as the rumors started to fly and the stock market
swooned, Deutsche Bank and Chase Bank came in and bombed gold and the price
collapsed, ending the day $4.50 lower.
The good news is that the modus operundi of the "Hannibal Cannibals" is so
blatant that the manipulation cries are being heard now by more and more of
the mainstream gold market participants.
Over and over, it is Deutsche Bank, Chase and Goldman Sachs doing the selling
at strategic moments. Why today? Because with banking rumors flying and the
stock market in a big dive, the bullion banks could not afford a rising gold
market after the latest increasing inflation news.
The banks have to deal with yield curve problems now. They do not want gold
rising above the critical gold loan area of $290 and have to deal with their
gold loans going underwater too. SO THEY GET TOGETHER and SELL.
They also fear that a rapidly rising gold market would indicate the financial
distress now creeping into the markets. In other words, as always, hide the
truth - and ALWAYS at gold's expense.
It is not too hard for them to win the battle in the short term either.
Not too many longs around. The Comex open interest has now dwindled to
139,790 contracts, the lowest in many years.
Like I said last nite, who wants to bet in a casino in which that casino
practically announces that the game is rigged against you. Would you take
your hard earned money and sit down to play "21" in a casino that had this
blazing neon sign out front:
"ALL CARD GAMES IN THIS CASINO ARE RIGGED.
IF YOU START TO WIN, THE DEALERS HAVE THE RIGHT
TO PULL CARDS OUT OF THEIR SLEEVES."
That is why speculators do not want to play the gold game anymore.
That is why they are selling off the North American gold shares
and the XAU, at 59, is on a slow road to oblivion.
Short term. That is the bad news. The good news is that it won't be long
now before either this fraudulent scheme is exposed, as it is becoming
blatantly obvious, or another surprise like September's Washington
Agreement will confound the bears again.
In either case, the price explosion in gold is likely to be dramatic
and sustaining this time. Holders of bullion and gold shares will clean up.
This is NOT a day to be disheartened. Daylight is not that far off and the
events in the market place today set the stage for gold market fireworks
in the not too distant future.
Lost in the fray today was the fact that platinum closed very close to $500
while palladium continues its own relentless move higher.
One final note. Had some email chat with Reginald Howe this afternoon.
Part of his email included the following:
"I watched the Greenspan confirmation hearing (yawn).
Senator Bryan (Dem., Nevada) in his opening statement mentioned that he had
appreciated the chance to meet beforehand with the Fed chairman to discuss
certain unspecified matters. Since Nevada is the biggest gold mining state,
perhaps gold was one of those matters. Maybe his office could be helpful."
I almost fell off my chair as I read that. The two days before Greenspan's
confirmation hearing, I spoke with two of Senator Bryan's staff members
and sent them a great deal of material about GATA, Senator Lieberman's
questions on our behalf and Greenspan's response to Lieberman. I also sent
them a proposed question that Senator Bryan might ask Greenspan; as Reginald
said, Bryan is from a gold big mining state. They told me they would bring
the gold matter to his attention.
Did Greenspan squash GATA's proposed gold question that Bryan might have
asked? No way of knowing. I will call Senator Bryan's office next week.
Nevada Caf‚ members might follow up also and try to see if Senator Bryan
would be receptive to meeting with us.
[end]
Credit Bubble Bulletin by Doug Noland
"A Completely Different Environment" has been served at the Hemingway Table.
Doug Noland is a name that you will hear more and more of as times go by.
Especially now that the credit markets are under great stress.
This is a man you will want to follow.
The Credit Bubble Bulletin by Doug Noland
A Completely Different Environment
David W. Tice & Associates
The Prudent Bear Fund
dcnoland@aol.com
January 28, 2000
"And while the contraction of money supply so far
in January is clearly immaterial compared to the
previous huge increase, we do note that the credit
market, once again, functions poorly anytime money
supply does not expand aggressively. From the
beginning, we have been skeptical of the concept
of the Fed mopping up excess Y2K liquidity because
we believed the vast amount of the excessive money
and credit creation during last year's second-half
had less to do with Fed Y2K operations than it did
with a credit system spinning out of control. It
is our view that money supply growth was fueled by
overzealous borrowing by the household and financial
sectors, as well as being augmented by
unappreciated leverage created concomitant with
the historic speculative run in the stock market.
Now, however, it looks like we could be in the
early stage of a deleveraging process. Such excess
doesn't work well in reverse."
"... is simply difficult to comprehend why the Federal Reserve did not
move long ago to take the punch bowl away. But, then again, key Fed.....
... than they are on money and credit excess, unprecedented stock
market speculation and endemic distortions to the real economy. Having
so missed its timing, it is going to be a very difficult task to get
this wild party under control - very difficult, indeed.
We saw hints of this in today's near chaos in the credit market.....
... an inversion that has not occurred in more than 10 years.
... that it looks increasingly like an unfolding dislocation in the
derivatives market. Keep in mind that the large US banks have more
than $28 trillion of interest rate derivatives on the books. Clearly,
there were those within the leveraged speculating community that had
made a seemingly reasonable bet on a steepening yield curve. This trade
has been a big loser. It also is quite likely that the speculators have
been shorting or buying put options on the long bond to hedge leveraged
positions in mortgages, corporates and agency securities. These trades,
as well, have not worked. Not much has worked in the credit markets over
the past few months accept narrowing spread trades. Now these trades
look vulnerable. We see that the generic 10-year swap spread.....
... Importantly, these are all indications of less liquidity and
increased systemic stress stress that has been inevitable with the
combination of a desperately overheated economy and highly overleveraged
financial system. Going forward, spreads on mortgages and agency securities
should be followed closely. This is likely where the most leverage and
speculation has developed, hence the area most prone to dislocation.
There is just no way around the fact that highly leveraged financial
systems are precarious. Yet, highly leveraged financial institutions
and, unfortunately, an aggressive speculating community have.....
... In both cases, however, we are not sure where the buyers will be found
if the leveraged speculating community becomes aggressive sellers. Markets
function well when the leveraged speculating community is buying, not well
at all when they are liquidating.
As for a catalyst, we certainly.....
The Credit Bubble Bulletin by Doug Noland
A Completely Different Environment
David W. Tice & Associates
The Prudent Bear Fund
dcnoland@aol.com
January 28, 2000
[End.]
Have a nice weekend.
Bill Murphy
Chairman, Gold Anti Trust Action (GATA) gata.org
Le Patron, Le Metropole Cafe lemetropolecafe.com
The above mention of GATA is as follows.
Bill Murphy, Chairman, Gold Anti Trust Action (GATA) gata.org
Also, GATA related articles can be obtained at the pay for view site.
Bill Murphy, Le Patron, Le Metropole Cafe lemetropolecafe.com |
