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MAY 2005 (#1) Vol. 9 No. 5-1

P. O. Box 510518, Punta Gorda, FL 33951-0518

An international financial, economic, political and social commentary.

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US MARKETS

 

Afghanistan’s President Karzai is a figurehead and without a small Army of Afghans he will not be able to stay in office. His security is still run by mercenaries in the pay of the US government. Four months after Secretary of Defense Rumsfeld’s visit, it was announced that nine new bases would be built in the country. After the meeting it was announced that a 70,000-man Afghan Army would be formed and trained to protect democracy. The national Army presently has 20,000 troops backed by 17,000 US troops, all of whom are watched by 5,000 plus NATO troops. The Afghan Army is run by an Afghan warlord who has 30,000 militia under his thumb as well. They have had plenty of combat training. All they need is respect for law and order. Outside large cities there is little law and order and bombs still go off in the cities.

 

            In 2003, US occupied Afghanistan produced 4,200 tons of opium and in 2004 set a new record of 4,950 tons. The Pentagon and their masters refuse to deal with the problem because it is a big, very profitable, business.

 

            The US wants the new bases because they have no intention of ever leaving. Of course, their presence is to stop al Qaida and the Taliban. That is about as salient as stopping non-existent terrorism in the US. This is no exit strategy, only permanent occupation. The current three central bases in the country are Bagram Air Field, north of Kabul, Kandahar Air Field in southern Afghanistan and Shindand Air Field at Herat, which is 63 miles from the Iranian border. The nine new bases will be single bases in Helmand, Herat, Nimrouz, Balkh and Muzar-e-Sharif and two bases each in Jalalabad/Khost and Paktika. Balkh and Muzar-e-Sharif face Tajikistan to the northeast and Uzbekistan is directly north. Bagram, Kabul, Jalalabad, Khost, Paktika and Kandahar face Pakistan and Herat, Shindand, Helmand and Nimrouz face Iran. They are setting up a military perimeter as a permanent base of operations. This allows them to outflank Russia, India and China and perhaps Pakistan on the north and east and Iran, Iraq and the Middle East to the west and south. The country, after several years of occupation, has yet to have a permanent parliament, which ostensibly must approve all these permanent bases. What we really have is another American satrapy similar to what the Romans used. The presence and bases, as we explained over five years ago, are to control the crossroads of the Middle East, Central Asia and South Asia. We also have a base at Munas near the capital of Bishkek, the capital of Kyrgyzstan northeast of Afghanistan, where 3,000 American troops are based. We have 1,500 soldiers at Tajik and Kazakh airfields directly north of Afghanistan as well. This is a permanent presence. In addition, Pakistan has allowed a commercial airport at Jacobabad, 300 miles southeast of Kandahar to be one of three bases by the US and allied forces to support their operations in Afghanistan. A number of other bases are being used as jumping off points for the military and Special Forces from Pakistan.

 

            We envision a presence in the region for the next 50 years or more because this presence allows the US the option of using the bases for aggressive warfare. We expect, in the event of a move against Iran or another state, Israel will move first. The simple question now is when.      

 

            Per US Treasury figures the net capital inflow into the US in January was more than $4 billion a day, to support the current account and budget deficits. Ninety percent of that flow is coming from corporations and individuals, not governments. Although the US government and the Fed are accommodating and monetizing the onshore debt it financially does not get any worse than this.

 

            The Chinese are considering export tariffs on certain categories of textiles in the hope of slowing a rapid growth in shipments to the US and Europe. This month the Commerce Department said that Chinese cotton knit shirts and blouses’ imports rose 1,250% in the first quarter, while cotton trousers surged 1,500%. In January, 12,200 jobs were lost in the US due to China’s textile exports and 500,000 more will lose jobs here and 29.5 million throughout the world.

 

            Arizona’s state school chief ordered an investigation into students crossing the US Mexican border a year ago. Tom Horne said officials still haven’t checked to see where the children actually live. Mr. Horne and the officials should all be fired. There are hundreds of illegal Mexican children in our schools and the state refuses to pursue the matter. The reason is the district would lose more then $425,000 in funding if the 85 illegal students are culled from its rolls. Heaven forbid they would have to lay off teachers. They even send school buses to Mexico to pick these children up. The parents in Mexico, who claim to be poor, rent trailers for $50 a month to put these illegal aliens into the school district. They, of course, do not live in the trailers.

 

In another matter George Bush said, “I didn’t know you might need a passport to stay a day in Mexico.” He then added, “Fingerprints may be used to serve as a so-called passport for daily traffic.” That means all of us who travel will have to be fingerprinted like criminals. In 2007, our passports will have Radio Frequency Identity (RFID) chips embedded inside them. That also means our personal information is not secure from identity theft, kidnappers, terrorists and thieves.

 

Former Secretary of Fatherland Security is a board member of Savi Technology, which supplies RFID chips to the military. The Bush doctrine is to enrich other elitist cronies while keeping the population under control.

 

            In 4 1/2 years the Fed, the Bank of England and the Bank of Japan have seen money supply increase 80% or by 14% a year compounded.

 

            We have a new antigravity space-fighter-bomber, the Advanced TAW-50.

 

            The technology defies reality and is the result of the study of crashed foreign space ships. The TAW-50 is capable of moving at a speed of 38,000 miles per hour. The velocity to escape the earth’s gravity is 25,000 MPH. That means the TAW-50 is a spacecraft as well. It has a crew of 4 and is run by computers. It can carry a combined payload of glide bombs and a package of MIRV (Multiple Independently Targeted Reentry Vehicles), mil-speck for a group of intercontinental ballistic missiles, each of which can seek out and strike a different target. It has a killer laser system to track SAM, STTA, ATTA missiles. The lasers can take out fighter interceptors. It has hyper-dart missiles by the hundreds. It has an on-board 2-day air supply for space. It can hide in hundreds of miles of space, orbiting at 22,000 MPH and can dive through the atmosphere at 38,000 MPH on a 80-degree attack vector, reverse direction within 150 feet of the ground with little loss of motion and without a glide turn and also almost instantly go vertically straight up at over 38,000 MPH until long after it leaves the atmosphere and resumes orbiting in space. It nullifies the G-Force on pilots. It is far too fast for tracking radars. It can be refueled and rearmed in space from a space station. Refueling is done in less than 10 minutes. With a few extra tanks of liquid oxygen it can fly to the moon and back. The planes are at the Lockheed Martin’s skunk works at Palmdale-Helendale, Ca., and at Northrop in the Tehachapi Mountains, northwest of Lancaster, Ca. We for years went shooting in those areas. That is awesome. 

 

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GOLD, SILVER, PLATINUM, PALLADIUM AND DIAMONDS

            Down Mexico way, the Central Bank was able to temporarily kill silver legislation. Another bill is in process and is very well supported in the assembly. This bill will bypass Ways and Means, which followed the orders of world elitists. The Silver Libertad is in Mexico’s future, whether the elitists like it or not.

 

            The keys to the next major move in the gold bull market is the central banks running out of gold; a further devaluation of the dollar and the rise of gold against other currencies, particularly the euro. The key to higher prices has been foreign buying and for now it will continue to be the main positive factor. Americans and Europeans just do not get it yet. Gold versus the euro recently traded at 337 euros. The resistance level is 350 euros. Once that is broken, holders of not only euros, but also all currencies will pay attention. The euro as a currency versus the dollar came at $.97 four years ago, went to $.85 and then rallied to $1.36. Presently it is about $1.29. The moves in the euro have been largely mirrored by gold. We feel the dollar relationship with gold will continue to be a factor, but once either the central banks run out of gold or gold breaks out against the euro and other currencies, there will be two new pro-gold events to deal with. That is when stage two and three of the gold market will erupt.

 

            Gold historically has been an inflation and deflation hedge. Today inflation is substantially higher then what the government says it is. We have been in the gold and silver markets since 1960 and the inflation that began in 1963 was exacerbated by the oil crisis in the mid-1970s. That led to a blow-off in 1980. Gold hit $850 an ounce and silver $50 and ounce. Today the oil/gold ratio is at its lowest in modern history. This is the best opportunity since 1975 to buy gold related assets. In 1978 inflation was 9%. In 1979 it was 10% and in 1981 it was 13.5%. Today real inflation is already 9.5%. Gold should already be selling at $800 an ounce. Once the central banks are out of gold, that gap will be closed in weeks. Over the last 30 years gold has been trading at an average of 16 barrels of oil per ounce of gold. The ratio is now eight barrels of oil for an ounce of gold. Such extremes do not last long. For the reason of oil alone and the current ratio, gold will move higher.  We could well be approaching peak oil. If we are and prices double, gold has to fly. There will be no way the central banks will be able to stop it. The word is Saudi Arabia’s Ghawar is in irreversible decline. It is peaking and this is the biggest oil field ever found. What will replace it? No one knows, but we do know it will force oil and gold higher. This is a better buying opportunity for gold and silver then when they were at $250 and $4 respectively. The fundamentals are overwhelming. We like numismatic coins in the US, St. Gaudens and US Liberty series and we like 90% silver bags.

 

The major gold shares have been under pressure due to Newmont’s, Pierre Lessondes taking his position at the World Gold Fantasy Council and disappointing earnings. It is viewed as a sell-out. Even more damaging is the pitiful buying in of hedges by Barrick, Placer Dome and others. Investors are disgusted so all shareholders are suffering. It will pass so be patient. This bull market in gold and silver has a long way to go yet. You buy them when nobody wants them.

 

            Anglo-Gold Ashanti CEO Bobby Godsell has called for a crisis meeting to tackle problems facing South Africa’s gold industry. The call comes ahead of annual wage negotiations, in which leading producers have urged restraint from labor unions. South Africa’s output slumped to 342 metric tons in 2004, the lowest total since 1931.

 

            If there was ever a doubt about central bank gold selling here it is. In the European Central Bank’s weekly statement it was disclosed that they had a 528 million euro fall in gold holding last week. At the 329.759 euro book value currently applied, this is 1,601,169 ounces or 49.8 metric tons, the biggest weekly sale ever. This is part of the 43 ton sale by the ECB announced some weeks ago finally showing up in its data. This shows as the gold price approached $440 in mid-March and then again in the $430s last week the ECB was indiscriminately clobbering the market. This is what central banks and governments like to call price management.

 

            Barrick Gold, which is working with the US government to suppress gold, and is the major gold hedger, has said they believe gold will go to $500.00 an ounce. Their hedge is below $300.00 an ounce and they have $1.9 billion in losses due to these hedges.

 

            Gold sold by mining companies in forward contracts in the first quarter fell in the last three years. Since then, gold has soared, forcing mining companies to buy on the spot market to unwind hedges.

 

            Forward sales dropped 1.3 million ounces from December 31 to 55.6 million ounces. The large scale de-hedging of the pasts two years has created a considerable support level for gold and gold demand. Although de-hedging continues, it continues at the slowest pace in three years. It should also be noted that current hedges at $500 an ounce would show national losses that would be about double taking them to $10 billion. The peak in gold hedging was 3-1/2 years ago. The bottom line is the big four hedgers, Barrick Gold, Placer Dome, Anglo-Gold Ashanti and Newcrest, have little intention of major de-hedging. That is because it would push up gold prices and the central banks cannot allow that to happen. Evidently there is an agreement with the US government guaranteeing these companies against loss, which, of course, the US taxpayer gets to pay. As you can see, there is a floor under gold and de-hedging support for the market will continue for some time to come to be continuing support. The key though is the central banks running out of gold.

 

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