US MARKETS

We continue to hear debate over undervalued currencies, particularly in China and in Asia. We have said before, even if the dollar index fell from 82 to 65 or 70, the US and Europe would still not be able to compete with slaves’ wages. All the mental gymnastics in the world are not going to change that. The third world has no intention of letting their currencies or wages rise if that is preventable. We have said the only way to solve the problem is to raise interest rates and purge the world financial system or set up protective tariffs. The third world is not playing by the rules and the G8 governments refuse to act to protect their own economies. Any other arguments are blather and a waste of breath. The time for the G7 to act is now. The longer they wait the worse the pain. The system as we know it is terminal. Two years from now, it will have collapsed. 

                        The geniuses at Bank of America tell us they have lost computer tapes containing personal information on 1.2 million federal employees, including some member of the US Senate. The lost or stolen data includes Social Security numbers and account information that could make customers of a federal government charge card program vulnerable to identity theft. Last week Choice Point, this week Bank of America. The loss and exposure of financial data can be financially damaging, but Congress should end this erosion of privacy rights, as more and more personal and financial information is collected and sold on databases, we get less and less privacy and more and more vulnerability to criminals and others.

                        No sooner was the ink dry on the Gillette-Proctor and Gamble deal and we find thousands of Gillette retirees may face diminished medical benefits. P&G, the surviving company, cannot make any changes for two years. Even after the two-year period, retirees’ pensions, which are held in trust, will be protected. After two years, P&G can do what they want. As you can see, you can work hard all your life for a company and not receive what you were promised. We can understand financial misfortune, but the theft of benefits is wrong and outrageous.

                        Last week our government lost a bid to obtain telephone records of two NY Times reporters in a major free speech battle over journalists’ rights to keep their resources secret from prosecutor’s probes. The ruling by a US District Judge who said reporters’ rights are protected under the First Amendment, which guaranties freedom of speech and press, will we are sure, be challenged in a higher court and be superceded by the Patriot Acts. Under those acts, you have no rights.

                        Retired Major General Alan Stretton says Iraq will end in disaster just like Vietnam. Eventually the Bush neocons will bow to public pressure and withdraw the troops, leaving behind a bloody mess. General Stretton is an Australian. Australia is sending another 45 troops to southern Iraq to protect Japanese engineers. The General said Australia should not have been involved in Iraq in the first place, as there were no WMD. He said, “This talk about fighting for democracy is absolute bullshit. The whole operation is flawed and Iraq could never be democratic.” Amen.

                        HIV infection in black Americans doubled in the last decade. Between ages 18-59 in 1991, the rate was 1.1%, in 2001 it was 2.14% and the gap has increased 13 times that seen in whites. Particularly high was the 3.6% between black women ages 40 and 49, who make up 72% of new HIV cases. Overall, 42% of those infected were unaware of it.

                        Riggs Bank and two members of the bank’s controlling Allbritton family agreed to pay $9 million to victims of former Chilean Augusto Pinochet for the bank’s roll in concealing and moving Pinochet’s money out of Britain in 1999. The Allbrittons pay $1 million, the bank $8 million. Riggs was a revolving door for money laundering for the CIA, the US government and their friendlies throughout the world. As you can see, convicted elitist insiders never go to jail. They pay a chump change fine and go on their merry way.

                        Merchant banker C. Gregory Earls fleeced a number of elitists in Washington, D.C. out of $13.8 million, and for this crime is sentenced to more than ten years in prison. This is a perfect example of American justice. Earls may well have deserved to go to prison, but how about the Allbrittons’ who had laundered hundreds of millions of dollars; they were only relieved by $1 million of these millions of dollars.

Senator Joe Lieberman (D-CT) and Senator John McCain (R-AZ) have introduced a resolution condemning Russian President Putin’s assault on democracy in Russia that violates the spirit of the industrialized democracies. This issue became part of the meeting between Putin and Bush in Slovakia. In question is Mr. Putin’s opinion that he does not believe that Iran is seeking to build nuclear weapons of mass destruction. That, of course, is diametrically opposed to the US-Israeli position. The other reason is the demise of all but one of some 20 oligarchs in Russia that were financed by merchant bankers from Europe, the main one of which was the Rothschilds. They were able to inject their wealth into Russia via their Russian contracts and were able to purchase whole industries for $0.05 on the dollar. Mr. Putin has put them all out of business. For those unpardonable sins Mr. Putin and Russia is now the enemy. The world media, which is controlled by these elitists for the last six months, has been staging a subtle attack on Mr. Putin. For these reasons Russia supposedly is violating democratic principals. This reflects the goals of our corporatist, fascist, and neocon dictatorship. They are again out to destroy Russia and Mr. Putin because they cannot control them.

                        Since 1994, both agreements, the World Trade Organization, WTO, and the North American Free Trade Agreement (NAFTA), our economy has been clobbered. Their laws, particularly their tax laws, have overridden our laws, in pricing of imports, and dictating how we are to conduct business in our own country. They have expedited the movement of manufacturing and service industries out of the US and have encouraged outsourcing. Over the last ten years, we have lost about ten million jobs from our economy.

M3 went screeching back upward, up $43.5 billion to $9.50 trillion. That is up $82.5 billion in a month and $538 billion, or 6% over the past year. M3, less money market funds, has expanded at a 9.4% rate over the past year. Repurchase agreements jumped $19.9 billion (up $31.1 billion) in two weeks.       

            Bank credit has gone berserk expanding at an alarming $226.5 billion over the past eight weeks (21.8% annualized). For the week, bank credit surged $41.8 billion for the week of 2/23/05 to a record $6.971 trillion. Real estate loans are up $335.8 billion, or 14.8% over the past 52 weeks.

            Total commercial paper declined $6.2 billion to $1.434 trillion, having expanded at an 8.4% rate y-t-d. Non-financial CP increased $1.6 billion to $144 billion, the highest level since 5/03. Non-financial commercial paper is up 19.4% over the past year.

            Foreign holdings of Treasury and agency debt jumped $14.0 billion to $1.379 trillion, up $36.4 billion in two weeks. Custody holdings are up $42.9 billion, or 18.6% annualized y-t-d, up $277 billion or 20% over 52 weeks.

            Year-to-date ABS issuance declined $9 billion to $106 billion, up 6% versus comparable 2004. At $65.7 billion, home equity ABS issuance is running 22% above a year ago.

            Sir Alan Greenspan is determined to sustain how artificially low interest rates and excess market liquidity while pandering to the leveraged players and other speculators. The cost of this misplaced mistaken determination continues to expand exponentially. We go through bubble after bubble. It is still the stock market, real estate, bonds, derivatives and hedge funds.

            Custody holdings are up $36 billion in two weeks, which means central banks are supporting the dollar-support operations. That means the dollar is very vulnerable. The mini-dollar rally will soon be over. When the dollar reverses, specs buy bonds and sell more dollars. This front runs the banks – it catches the bond shorts and derivative players in the open. All that liquidity is not going to stop a blow off in the mortgage finance bubble, leveraged speculation and the structured finance bubble. We have called for the 10-year Treasury at 7 5/8 to 8% and that is conservative. What Sir Alan is attempting to do is, head off deflation and depression by inflating madly. It has been tried thousands of times and has never worked.

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GOLD, SILVER, PLATINUM, PALLIDIUM, AND DIAMONDS

We are amazed that as world elitists manipulate markets and suppress gold and silver prices, producers stand idly by for the most part, and say nothing about how their companies are being destroyed and their shareholders robbed of profits. There are a few voices but only a few with the guts to attack the problem, we find this extremely disappointing that these executives are so gutless. Just as bad is that there are only a handful of newsletters who will broach the subject - they run in object terror. Then again, most of them are “Johnny Come Lately’s”, who are in for the fast buck. We have seen lots of that gutless type as well over the last 46 years.

The demand for gold over this year is startling, particularly for India. Gold jewelry demand was up 4.9% and investment demand 32%. These are spectacular numbers. We wonder what lies the World Gold Fantasy Council and Gold Fields Mineral Services will have to say about that. They have been lying about the statistics for a long time to cover central bank sales and leasing.

It is just like 1977, everyone is buying gold except the dumb Americans. Fourth quarter consumer demand rose 5% in tonnage and 18% in dollar terms versus the fourth quarter of 2003. For the year, tonnage was up 20%. As this sterling performance held forth, hedgers were de-hedging as fast as possible. They covered 59% more gold than 2003. Gold supply fell 13% versus 2003. One of the biggest surprises of 2004 was that scrap supply was 14% lower. All these favorable developments should have propelled gold much higher but as you know our government is our enemy. We have three things on our side. The elitists have to be running out of gold. Each time they do a major price manipulation more people catch on to what they are doing, especially professionals. Production is barely holding its own and physical demand is hot and overwhelming.

Japanese gold imports for January were 10.95 tons or 97% above December and 71% higher than 1/04. As we head for the abolition of bank deposit insurance on 3/31/05, we will see more and more excess funds moving into gold.

A stronger South African rand and a suppressed gold price are taking its toll on South African gold mining companies. DRD Gold fell to a four-year low last Friday as it dropped 23.5% for the day and wiped out $83.20 million of its share equity. It fell 4.6% on Thursday or 28.1% in two days. Liabilities exceed assets and a cash squeeze could put them out of business and into bankruptcy. We had warned you over and over regarding South African gold shares. Get out and stay out.

The Philadelphia Stock Exchange changed the PHLX Gold/Silver Sector Index (XAU) effective 3/21/05. Glamis Gold (GLG) and Pan American Silver (PAAS) will be added while DRD Gold (DROOY) will be deleted.

                        Probably at the behest of the Bush administration and the Federal Reserve, the Securities Exchange Board of India and the Reserve Bank of India are working out the rules for mutual funds to float gold-backed units, which would be traded on exchanges. This is a further effort to suppress gold prices.

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