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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Benkea who wrote (47986)	4/25/2000 8:20:00 AM
From: SBerglowe	Respond to of 99985

White Knight Saves NAZ: Current Account Deficit of International Concern: from one of the legendary names in the gold industry, John van Eck. I thought I would zip John van Eck's commentary out to you directly. First, three comments for the day. One - the WHITE KNIGHT showed up one more time in the last half hour of trading today to conveniently save a Nasdaq rout. You know what they say about teaching an old dog new tricks. Man, are they becoming obvious. Two - the BLACK KNIGHT has done such a job on gold, few investors want to play (just what the manipulation crowd has intended all along) as Comex gold volume today was almost non-existent at 7,000 lots. Three - incredulous as it may sound, DJ Research Capital decided to cover Bema Gold and CAME OUT WITH A SALE on that gold producer. Bema trades less than $1 per share first of all and second, no one in the investment community that we talked to today could ever remember anything like this before. Have you ever heard CNBC quoting an investment firm rating a firm a "sell" to begin with. That is bad enough, but why announce coverage of a "sell." Who does that? This is scandalous, an insult to the gold industry and warrants internet disgust. Oh yes, it was announced in a DOW JONES wire release. Nice DJ! I brought to your attention earlier that we have asked the gold producers to fund GATA so we can fight back. This kind of contempt for anyone involved in the gold market has gone on for far too long. ENOUGH is ENOUGH. >From the famed Mr. van Eck: Hello, my friends. This is John van Eck, founder of the Van Eck precious metals funds, speaking to you on Monday, April 24, 2000. The spot dollar gold price slipped 1% last week to close at $279.70 an ounce. It was testing its March low of $275 an ounce. Due to the weakness of the Euro the prices of gold in European currencies edged higher than the previous week. Better than expected earnings reports helped the broad stock market to rally. Gold share prices generally drifted back to their earlier April lows. The news that the U.S. February trade deficit in goods and services climbed to a record $29.2 billion was a reminder that the threat posed by growing global key currency misalignments was continuing. The strength of the dollar last week, possibly partly due to higher expected interest rates, distorted further and delayed the external imbalance adjustment. The U.S. net liabilities to the rest of the world are close to 20% of GDP. This is likely to get worse as U.S. economic growth continues to outpace that of its main trading partners. The continuing threat is when the U.S. current account deficits will be reversed probably accompanied by a sharp fall in the value of the dollar. After the International Monetary Fund spring meeting early last week, Stanley Fischer, the acting managing director, said that he was under no illusion that there will never be a financial crisis again. The private investment demand for gold may continue to grow on a sustained basis in Japan. Last year it climbed 16.2% over 1998 to 81.2 tons. We believe that it could show further strength this year due to riskier financial conditions and due to reinvestment demand from maturing postal savings time deposits. Japanese financial risks appear to be rising due to three threats. First, short term interest rates, which have been reduced to almost zero levels since the Bank of Japan cut the discount rate to 0.5% in September 1995, may rebound to higher market rates when the economy strengthens. Higher rates could effect all capital markets. Second, the credit rating of the Japanese government debt could fall as Moody's warned recently. The government has run years of deficits in attempting to lift the economy out of its post bull market recession in true keynesian fashion, so far without success. Since August 1992 it has had at least 10 stimulus packages worth the equivalent of approximately $1.1 trillion. Its ratio of gross debt to GDP has soared from less than 60% in 1990 to 130% currently. Its debt is the highest in the industrialized world at the equivalent of over $6 trillion. Its deficit is about 10% of GDP. The risk is that continued debt issues could saturate the market and spiral out of control. Also, debt service at current depressed interest rates represents some 25% of government expenditures. At higher market interest rates it could exceed total revenues. Third, the Bank of Japan has raised its twelve- month growth in total assets to over 20%. This raises the question of a willful policy of inflation to reduce the debt burden. Nearly $1 trillion of Japanese 10-year yen postal savings accounts will mature over the next two years. A decade ago these time deposits had 6% guaranteed returns. Today interest rates on comparable accounts yield a tiny 0.2%. A portion of these maturing accounts will undoubtedly seek other investment opportunities. We estimate that 0.3% (the approximate percentage of 1999 household savings invested in gold) of these maturing accounts could be reinvested in gold. This could accordingly amount to close to 100 tons. Gold accumulation plans are sold at most Japanese post offices. This sum plus another possible 100 tons invested from this year's household savings could total 200 tons, a significantly bullish factor in the gold market. In Taiwan, for the first quarter gold imports totaled 23.9 tons, 33.3% up from the same period in 1999. China's threat to use force if Taiwan does not begin negotiations for unification marks a growing aggressive trend. The recent Taiwan election makes highly unlikely a unification agreement. China has embarked upon an accelerating military buildup. An eventual possible military confrontation must, in our opinion, stimulate a further growing local investment for gold. <A HREF="http://www.LeMetropoleCafe.com/scripts/products.cfm">Le Metropole Cafe</A> All the best, Bill Murphy Le Patron www.LeMetropoleCafe.com