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To: Jim Willie CB who wrote (50372)	4/22/2002 4:16:27 PM
From: stockman_scott	Respond to of 65232

Ronald Brownstein: Bush Faces a Fork in the Road on the Way to a Mideast Solution The LA Times April 22, 2002 latimes.com

To: Jim Willie CB who wrote (50372)	4/22/2002 4:43:45 PM
From: stockman_scott	Respond to of 65232

Sharing the pain Venture capital in America Apr 11th 2002 \| SAN FRANCISCO From The Economist print edition The first of two articles on private equity looks at the humbling of America's venture capitalists, the second at Europe's maturing buyout market START-UPS are risky—except, you might say, for venture capitalists. Although investors and entrepreneurs have suffered badly over the past couple of years, venture firms have collected more fees than ever for managing their funds. Until now, that is. The funds' limited partners (mostly pension funds, university endowments and rich individuals) are now pressing the venture capitalists to share the pain—with some success. In recent weeks, several leading Silicon Valley venture firms have announced changes that amount to accepting a pay cut. Mohr, Davidow Ventures was the first to take that step, by reducing its most recent fund from $843m to $652m, thus lowering the management fees its limited partners have to pay. Then Kleiner Perkins Caufield & Byers, the alpha males of venture capital, in effect cut their fees by a quarter. Accel Partners is proposing to split its $1.4 billion fund in two, forgoing fees on the second half until 2004. Cue Schadenfreude among those who blame venture capitalists for the dotcom bust. Venture firms make money in two ways. They get a share of a fund's profits (the “carry”), and they also earn a percentage of the capital committed in management fees, regardless of whether the capital is actually invested. Traditionally, the carry was 20-25% and the fee 1.5-2.5%, depending on a firm's record. An average venture firm managing a $200m fund could thus make $4m in annual fees, which sounds quite reasonable. With the dotcom boom, however, things got out of hand. Venture firms started demanding a higher carry and higher fees. More importantly, the funds exploded in size, often reaching more than $1 billion. Some venture capitalists, dubbed “drive-by VCs”, ended up sitting on more than a dozen company boards. Investors were happy so long as the money could be invested quickly and yielded a healthy return. Since the Internet bust, however, general partners have had a harder time investing the money they have raised: undeployed venture capital is estimated at $45 billion in America alone. Venture capitalists are spending most of their time trying to salvage start-ups in their portfolios rather than seeking out new targets. The average portfolio has lost over a third of its value in the past year. All this is particularly painful for the limited partners, most of them entrepreneurs, who invest their own money. What seemed a small commitment in boom times is increasingly a significant portion of an individual's net worth—which is why Kleiner Perkins Caufield & Byers cut its fund. Other firms, such as Benchmark Capital, appear less understanding, a fact that has led Eric Greenberg, founder of Scient, an Internet consultancy, to attack the firm publicly. Might such conflicts lead to a wave of lawsuits between limited and general partners? Investors recently sued MeVC and idealab to get back some of their cash. But these are special cases: MeVC is a publicly traded venture fund and idealab an incubator. Other venture firms are working hard to avoid court fights, to preserve precious relationships with investors. Some venture firms may vanish, though. The Barksdale Group, founded in 1999, has called it quits. Others may follow once their current funds have been invested. If there is a lesson in all this, it is that limited partners need to think twice about what they sign up for. The people who run the funds, for their part, should realise that there are limits to how much money a firm can reasonably manage. The venture business will no doubt see better days again. In fact, although investments reached a new low in the first quarter, venture firms are starting to put money into brand-new firms again, particularly in biotechnology. But it is unlikely that venture capitalists will regain star status soon. That doesn't seem to worry them. As one puts it: “It's nice to be back in an era when the VCs are only nominees for best supporting actor instead of best actor. Entrepreneurs should be centre stage.” economist.com

To: Jim Willie CB who wrote (50372)	4/23/2002 3:37:12 AM
From: stockman_scott	Respond to of 65232

Analysts see continued rally ahead for gold Precious or precocious? By Thom Calandra, CBS.MarketWatch.com Last Update: 1:04 PM ET April 22, 2002 SAN FRANCISCO (CBS.MW) - With gold playing hopscotch around $300, some analysts expect more fireworks from the precocious metal. Gold's spot price Monday morning rose $2 to $304.10 an ounce. Gold stock prices, meanwhile, were poised for another leg up in their six-month rally. Gold stocks as measured by the XAU miners' index and the Toronto Stock Exchange's gold-share index rose more than 1.5 percent Monday morning to their highest points since late 1999. Andy Smith at Mitsui Precious Metals in London has a forecast for gold this year at the very high end for professional analysts: $355 an ounce. Smith says "technical analysis suggests gold may test $290 to $292 support in the near term, then, if this holds, move onward and upwards to $328." Smith says fiscal turmoil and price momentum are gold's best friends. "The momentum of international risks is increasing," Smith says from London. That includes French voters' move toward an extremely conservative candidate, Jean-Marie Le Pen, who placed second in national elections this weekend. On the momentum angle, Smith points to U.S. gold mutual funds, which dominated first-quarter rankings. Most gold-only mutual funds are up more than 40 percent since Jan. 2. The world's gold mining equities, as measured by the HSBC Global Gold Index, are up 30 percent since the start of the year, and that's not even factoring in a surging South Africa. (See chart.) Smith sees subdued gold selling in the futures pits these days. Speculators in New York, he says, are running net long positions of more than 100 tonnes for only the fourth time ever. The analyst, speaking from London Monday, said he rests much of his bullish case on the willingness of miners to reduce or eliminate their tricky selling strategies, called hedging. Most major producers, anticipating higher bullion prices, have reduced their hedge books, a practice that floods the market with gold as executives attempt to lock in slightly higher prices for their mining output. Smith says gold, which is up about 12 percent since January, has yet to enjoy platinum's massive rally since September. The spread between an ounce of platinum and an ounce of gold is now $247; on Sept. 10 it was $170. He also takes solace in how well gold's price has stuck above $300. Pronouncements of possible selling from Germany's central bank and from the International Monetary Fund have done little damage to gold's rally, the analyst says. "I favor 'thinking small' as an explanation for the rally, especially miners' abstinence from hedging and speculators' almost unprecedented patience on the long side, rather than the 'big picture' stories," Smith told me. Another gold optimist, Barry Cooper at CIBC World Markets in Toronto, forecasts an average $325 an ounce for the metal for 2003. "We may have to change that," he said Monday morning. Cooper, who ends his voicemail messages with "Have a golden day," said gold prices will benefit from many factors this year and next. Top of the list is supply and demand. Last year was a peak year for global gold production, he said. He estimates 2,600 new tonnes of gold came to the market in 2001, with another 1,000 tonnes of scrap gold and about 400 tonnes of the metal sold by central banks. "The production of the large producers will be off 3 percent to as much as 10 percent this year," says Cooper. "There are not a heck of a lot of new mines being developed." Cooper also sees reduced hedging by producers as a big plus for the metal. He counts only Placer Dome (PDG: news, chart, profile) and Barrick Gold (ABX: news, chart, profile) as "active hedgers." Investors, says Cooper, are voting with their dollars, preferring to buy shares of the world's largest unhedged producers, Denver's Newmont Mining (NEM: news, chart, profile) and South Africa's Gold Fields (GOLD: news, chart, profile), as opposed to their hedged counterparts. "Investors just don't want to be stuck with a hedged position if gold rallies strongly," Cooper said about the widening gap between hedged and unhedged companies. Mind this gap Indeed, shares of unhedged producers have outpaced by a wide margin those that hedge by forward-selling their gold. Shares of Gold Fields, South Africa's second largest gold miner, are up 145 percent this year. Gold Fields has no hedge book. In contrast, shares of hedger Placer Dome have risen just 13 percent and Barrick Gold is up 16 percent since Jan. 2. "Hedging has got to be a dirty word," says Cooper. So have central bank sales of the metal. Cooper predicts the Bank of England, which recently concluded a three-year series of gold auctions, will not announce another auction of gold reserves. "The U.K. needs all the gold it has (about 300 tonnes) as a precondition for entry into the euro, if they decide to go that route," he says. Cooper, like Smith, also sees a fading connection between the dollar and gold. From 1996 through most of 2001, a strong dollar translated into weak gold prices. This year, with the dollar holding most of its gains against a global basket of currencies, gold's price is rising steadily. "There is no longer a negative correlation between the two, which means we don't have to see a dollar collapse for gold to perform," he says. Cooper's favorite gold stock is unhedged Goldcorp (GG: news, chart, profile). The Canadian producer's shares are up 41 percent this year. Most of Goldcorp's gold comes from the Red Lake district of northwest Ontario, an area that has produced some 16 million ounces of gold since the 1930s. Goldcorp's average grade from its underground Red Lake mine runs about 2 ounces per tonne vs. a worldwide underground average of 0.25 ounces per tonne. Cooper estimates Goldcorp will be able to pull as many as 6 million ounces of gold from the mine. Production this year will approach 500,000 ounces. With Goldcorp shares, which sell for about 28 times current earnings, "you are buying the option to participate in future gold rallies and on their expanding their reserves through discovery," the analyst says. Copper says he has a sheet hanging near his desk that shows 15 investment banks with their 2002 gold-price forecasts. All of them, he said, were in the $270 to $290 range: Barclays at $271 an ounce, Deutsche Banc, CS First Boston, Merrill Lynch and Salomon Smith Barney all at $280 an ounce. "The average was $283 an ounce, and I was the only one with a 3 in front of their estimate," he says with a chuckle. _____________________________________________________ Thom Calandra's StockWatch appears each trading day. marketwatch.com

To: Jim Willie CB who wrote (50372)	4/23/2002 3:50:27 AM
From: stockman_scott	Read Replies (1) \| Respond to of 65232

Global: In Search of Growth By Stephen Roach (New York) / Morgan Stanley April 22, 2002 Growth could well be in short supply in the world economy over the next decade. The United States -- the unquestioned engine of global growth since the mid-1990s -- could be facing stiff headwinds for years to come. Nor do Europe and especially Japan seem particularly capable of filling the void. That puts the onus on the developing world -- heretofore heavily dependent on exports to the industrial world as a major source of growth. With that impetus likely to be on the wane, the developing world will have no choice other than to discover a new recipe for growth. For a world in search of growth, that could well be the only way out. The US-centric global growth dynamic has overstayed its welcome. That’s the unmistakable message of America’s massive current-account deficit -- the broadest measure of international balance between the United States and the rest of the world. The world economy is now attempting another transition from recession to recovery. But it commences that shift with the US current-account deficit at 4.1% of GDP in 4Q01. By way of contrast, the current-account deficit was 2.7% in late 1998, when the United States was about to lead an important transition in the world economy from financial crisis to global healing. Back then, there was considerable scope for a further widening in the US external imbalance. Today there is not. Another spurt of US-led global growth could well take America’s current-account deficit up to 6% of GDP in 2003, requiring foreign capital inflows of nearly $2 billion per day in order to finance it. History demonstrates that current-account adjustments usually commence when deficits hit 5% (see my 4 April dispatch, "On Current-Account Adjustments"). I doubt if the United States will be an exception to that rule. Our "global decoupling" thesis stresses the likelihood of three new attributes to the character of the global economy in the years ahead -- slower growth in the US, faster growth elsewhere in the world, and a weaker dollar. Only by some combination of these outcomes would America’s massive current-account deficit begin to move back toward balance. But the coming realignment in the mix of global growth will be driven by more than just an adjustment in the US current-account deficit, I believe. Also at work is a confluence of powerful structural forces likely to impede potential growth in the United States and Japan, and to limit progress in Europe. Two sets of forces are at work in the US -- a likely downshift in trend productivity growth and a purging of the excesses that built up during the bubble. The productivity story rests on three likely developments -- a sharp slowing in IT spending after the binge of the 1990s, a shift in the mix of aggregate output toward nonproductive expenses on homeland and national defense, and higher business operating expenses associated with the added logistical costs in the post-9/11 era. The excesses that need to be purged include record debt loads of consumers and businesses alike, anemic household saving, and a lingering overhang of business capacity. Reflecting these likely depressants, I look for the US economy’s potential growth rate to slow into the 2.5% range over the next 3-5 years, a significant moderation from the 4% trend of the late 1990s. If such a downshift comes to pass, it would all but neutralize the "excess growth contribution" the US has been making to the world economy since 1995. The world’s growth engine would, as a result, be chugging along at a much slower speed. The outlook in Japan is, unfortunately, more of the same. Robert Feldman’s CRIC cycle says it all -- Japan is locked into the political economy of a most vicious circle. The nation has now moved into the "I" phase of this paradigm -- a modest degree of Improvement. But that’s what then sets the stage for the next phase, a sense of Complacency that, in turn, sows the seeds of next Crisis. While each crisis evokes a Response, in the CRIC cycle it falls far short of the legitimate reforms that are required to break a pattern that is now into its second decade. The lack of financial sector reforms is particularly disturbing in this regard, as the authorities continue to drag their feet on the cleanup of nonperforming bank loans. Prime Minister Koizumi’s disappointing failure as a reformer makes a political resolution of this dilemma highly unlikely. As a result, it seems improbable that the Japanese economy will stage a meaningful breakout from the 1% growth path it has been on since the early 1990s. That would keep Japan’s contribution to global growth very close to "zero." The outlook in Europe is more upbeat than in either the United States or Japan. That’s in part because Europe did not succumb to the excesses of the late 1990s -- especially the seemingly open-ended business spending binge on information technology. If anything, Corporate Europe remains IT-starved. Moreover, debt and saving imbalances are nowhere near those of the US. At the same time, Europe has been making a good deal more progress on the reform and restructuring front than a weak euro might lead one to believe. Tax, cost, and price harmonization within the EMU has led to improved efficiencies for the region, as have surprising improvements in labor market flexibility (i.e., Germany), together with the eventual improvement in the shareholder-value culture. While there can be no denying Europe will benefit from several of these developments, our euro team believes that it will still take at least three years to realize the ultimate productivity benefit of around 2% per annum. Even if that were to occur, it would result in an add-on of only about one percentage point to the gains of the 1990s. That’s not enough to offset the emerging weakness in the US and the ongoing malaise in Japan. That brings us to the developing world. For global economic growth to stay the course of the last 30 years, I believe that the developing world will finally have no choice but to unshackle its domestic demand. Needless to say, that won’t be easy, nor will it occur quickly. Two candidates seem best positioned to lead the charge -- China and India. Collectively, in 2001, these countries accounted for 45% of total developing-world GDP, according to the purchasing power parity metric of the IMF. By way of comparison, the combined output weight of China and India is double the 22% share of Latin America. China and India have already demonstrated encouraging progress in taking more of a leadership role in today’s global economy. In 2001, these two nations kept the world from tumbling into a severe global recession -- they accounted for fully 44% of world economic growth that the IMF now places at 2.5% (see my 19 April dispatch, "The World’s New Growth Cushion"). China and India are both extremely focused on the first stage of their economic development -- drawing sustenance from external demand. That underscores the huge potential both nations have both as exporters and as the world’s outsourcers of preference. China has the opportunity to become the dominant force in world manufacturing, whereas India has to the potential to do the same with respect to IT-enabled services. Yet exports and outsourcing are but a means toward the end -- the job creation and income generation that eventually unshackles domestic demand. For China and India, which collectively comprise 38% of the world’s population, the impacts of that potential can hardly be minimized. But at this point, that’s all it is really is -- potential. Sadly, the long history of economic development is littered with the carcasses of false promises. It remains to be seen whether China and India will break the mold in that regard. China and India could well be the answer for a world in search of growth in the first decade of the 21st century. The world has lost its engine, and there are no obvious candidates to take its place. That’s especially true in the industrial world, where a possible downshift of trend growth in the US economy seems unlikely to be offset by a pickup in underlying growth elsewhere in the developed world. Nor is this likely to be a transitory development -- especially in the United States and Japan. That puts the onus on the developing world, especially on its two gorillas, China and India. I am hopeful that both nations can pull it off over the next three years or so. But barring that critical transition, a seemingly chronic global slowdown could become the new norm in the first decade of the 21st century. Just as China and India collectively saved the world from recession in 2001, they have the opportunity to underwrite recovery and expansion in the immediate future. Companies domiciled in mature markets have no choice other than to look to China and India for new sources of growth, in my view, and investors need to do the same. The search for growth is on. morganstanley.com

To: Jim Willie CB who wrote (50372)	4/23/2002 3:56:29 AM
From: stockman_scott	Read Replies (1) \| Respond to of 65232

Japan's gold demand jumps sixfold Business Times - 23 Apr 2002 TOKYO JAPAN'S gold demand surged sixfold in March as investors bought the precious metal as a safe haven before the government imposed limits on insuring time deposits in the nation's debt-laden banks. Gold imports jumped to 13.2 tonnes last month, a gain of 569% from March 2001, the ministry of finance said on its website, without giving the amount of gold imported in March last year. The value of gold imported in March surged eightfold to 16.3 billion yen (S$228 million). Gold demand in the world's second-largest economy may rise to 200 tonnes this year, producer-funded World Gold Council said last week. The rise in demand from Japanese investors helped the price of the metal rise 8.6 per cent so far this year to recently trade at US$302.95 an ounce. Japan's government cut insurance coverage on savings accounts of more than 10 million yen from April 1. More depositors may buy gold as a bulwark against bank failures later this year as lenders report declining half-year earnings after September, the council's chief executive Haruko Fukuda said. Local commercial banks are saddled with 1.5 trillion yen of bad debt. Japanese investors have bought gold in times of crises before. - Bloomberg Copyright © 2002 Singapore Press Holdings Ltd. All rights reserved. business-times.asia1.com.sg