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To: SliderOnTheBlack who wrote (80600)	12/2/2000 4:07:30 PM
From: SliderOnTheBlack	Read Replies (1) \| Respond to of 95453

How, when & why stock market money will flee to safety... URL: cbs.marketwatch.com Safe money to seek gold, writer says By Thom Calandra, FT MarketWatch.com Last Update: 8:43 AM ET Nov 30, 2000 NewsWatch Latest headlines NEW YORK (FTMW) - If the worsening tech tumble moves investors to flee the dollar, gold will become a shelter from the storm, says the editor of the Safe Money Report. Mind you, Larry Edelson is not saying gold will surge if the Nasdaq Composite continues to hurtle lower. The Florida-based writer, who has been following markets for 23 years, says the gold price first must break above $276 an ounce. It sells for about $267 an ounce in futures markets. "I expect gold to break out soon. But I wouldn't' be surprised if it fell to $250 an ounce one day and ran to $300 the next," says Edelson. A sharp drop in the dollar, which is showing signs of weakness against the Swiss franc and even the lowly euro this week, could be the spark. "If the dollar continues to decline, yes, gold will break out," says Edelson, who sees gold trading in a tight trading range for now. "Gold's fate is much more entwined with the dollar than anything else." Gold prices are largely denominated in dollars. A falling dollar could encourage overseas investors to buy the depressed metal. Out of tech, into gold Gold will benefit from the slide in technology stocks, "but when people least expect it," says Edelson, whose reports are found at www.safemoneyreport.com. Edelson bills himself as a bullion veteran. In the early 1980s, he says he became the largest gold arbitrage trader in the world by trading an average of $175 million worth of bullion each day. He started International Commodity Services, a brokerage that operated from Germany and Japan. His reasoning on the dollar is simple. Several weeks ago, the tech turmoil sent investors into the dollar. Bond prices benefited. That is changing. The slowing U.S. economy is "a bad omen for the dollar." A runaway trade deficit eventually will weaken the dollar, which trades near 15-year highs against many currencies. Edelson's killer argument is the tech tumble. Falling tech stocks will force overseas investors to liquidate their positions. That means more pressure on the dollar. Gold may shine, not silver Edelson has other views that stir opinions. One is that the coming gold rally won't necessarily benefit silver. "People who say silver is an industrial metal in short supply are missing the point," he says. "Digital cameras are killing silver. Plus, Comex (futures market) stockpiles are just a fraction of the world's silver." Edelson sees about 500 million ounces of silver in India, about 300 million ounces in Bahrain, Dubai and Thailand and another 500 million ounces in London and Zurich, which are centers for silver storage. Silver sells for about $4.60 an ounce. Edelson also says not all gold mining companies will benefit from a higher gold price. Companies such as Barrick Gold (ABX: news, msgs) that hedge their production by using derivatives contracts to lock in higher prices ultimately will suffer when gold prices surge. "I wouldn't be surprised to see Barrick and other companies fall in a rally," he says, pointing to Ashanti Goldfields' (ASL: news, msgs) drop last year when gold prices staged a brief rally. His favorites are companies that do little or no hedging. These include Homestake Mining (HM: news, msgs) , Franco-Nevada, Glamis Gold (GLG: news, msgs) and Placer Dome (PDG: news, msgs). Thom Calandra is editor-in-chief of FTMarketWatch.com and CBS MarketWatch.com. ================================================================= PS: fwiw; HM/Homestake Mining has allready bounced 50% from its low of late... and we "aint" seen nothing yet - bank on it. fwiw pt deux: I'm actually going to buy my first gold & silver coins folks... I am now soon to be; an official Gold Bug ! I'm also going to significantly up my Gold Stock holdings this week via some laggards that haven't moved off their bottoms as yet as NEM & HM have done. ... not sure I completely agree with the above analysis on Silver; as Silver has traditionally outperformed Gold on virtually all prior Precious Metal Flight to Safety Moves. I am not sure that the Silver in India etc would come onto the market at prices under $10 per oz. And one other reminder; the XAU is so small; that it does NOT require a majority shift in sentiment for major sector moves; quite the contrary - it rarely ever has achieved such a sentiment shift. The popular sentiment shifts when they did occur - have led to dot.com types of speculative moves as we saw in 1980... - also; Bill Seidman was on CNBC yesterday afternoon; I all most forgot this... this stopped me in my tracks and along with what I personally know about the historic level of credit problems in our system; Seidman said that a recent audit of US Banks determined that twice as many US Banks & S&L's (9% vs. 4.5%) were now at risk of insolvency as there were in the prior S&L crisis should we have another Real Estate recession... Twice the number of insolvent banks... that's sobering. Add to that doubling of insolvency risk; the alltime derivative exposure - literally an exponential off the chart expansion of such. There are multiple LongTerm Capitals out there people and that is exactly why Greenspan pushed so hard for this Bank Failure Reform & why he has addressed the derivative issue so directly in doing so. Accounting issue's with Financials like Citicorp and their reckless acquisition of these high risk consumer finance companies like Associates & Commercial Credit etc...atop the most reckless expansion of consumer credit in global history that is heading into a record number of bankruptcies atop an equity market bubble is insane imho...and one has to ask; how low is the bubble going to go - when, not if - it does collapse. Many think 1929 can never happen again.... I am not so sure. We so cavalierly dismiss a 1929-esque type of market crash/economic collapse as impossible in this modern world. Actually; quite the opposite is true. This market is now owned in greater numbers by more people than in 1929 and the market represents a far greater degree of their wealth than in 1929. Americans now have a negative savings rate and we are at near full employment - so, there is only one way to go from here... Americans are also indebted to a degree much greater than 1929 and much greater than anytime in history. Consumer debt to income ratio's are at alltime highs. Americans also have borrowed against their only remaining safety net - via the explosion of the mortgage refinance industry; replacing short-term consumer debt with long-term mortgage debt in many cases - and then reassuming maximum levels of consumer debt. We just may be seeing history unfolding atop what may become the greatest repatriation of wealth in history...a true 1929-esque market crash would decimate and eliminate the "middle class" in America & Europe as we now know it. It would create an over-night rollover of a near socialistic dependance on Government for a bailout of the Banking System, a dependance for Health Care, Retirement and in essence; total Governmental Intervention & Dependance - a true Clinton-esque Dream Come true... a separation into two distinct classes of the ultra-rich & everyone else...and Government would be the savior...an entirely new huge class of Government-dependant citizenry would be created overnight... Gold; if not now - when ? As it "aint" looking too good out there and the "potential" for the greatest financial collapse in modern history - most definitely exists. - and history has delivered such collapses right atop the greatest market excesses... not that we will heed that either... as indeed; the pendulum does over-swing in both directions. This risk of collapse not only exists; the stress fractures are beginning to show and the Buffets, the Robertsons, the Soros's and the Vinik's have all recognized it as such. If you ever "respected" your (market) elders; this may be a good time to do so... Gold & Pm's are the only safe haven and will be the ONLY safe form of currency & money. I don't think it is paranoia in the slightest degree to have as much as a 35% weighting in actual gold/silver coins and stocks; I rather think it's prudence - not paranoia; as when has there ever been a more complexly levered, non-transparent market place in history - at still alltime high valuation multiples; held into the face of so much apparent risk ? And if the "fall" starts - we indeed; will be falling from heights never before seen...and all that derivative leverage & these alltime high valuation multiples and a collapse from near fully employed consumer with record debt levels and a negative savings rate will serve as an accelerant on the downside/fall by the way... Prudence, or Paranoia ? - we shall see...