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GOLD and Bush Junior Investment Indicators from Peter George 14th December 2000 SCRIPTURE "My Father made your yoke heavy; I will make it even heavier. My father scourged you with whips; I will scourge you with scorpions." 2 Kings Ephesians ch 5 v 11 CONCLUSION There is a prevailing opinion that a new Bush Administration will adopt a different stance towards Gold. We think they will be just as corrupt and manipulative as Clinton, Summers and Greenspan - and the Administration before that of George Bush Senior. Here’s why. 1. THE BUSH FAMILY HAS A HOSTILE TRACK RECORD ON GOLD Back in 1980 Reagan and Bush Senior were battling it out in the primaries. Reagan’s running mate for the slot of vice-president was Jack Kemp. He was rooting for the US to return to the Gold Standard - some suggested $2,000 an ounce. Reagan was winning votes by denouncing the ‘Eastern Establishment’ and vowing not to select any of them for his cabinet. In the Massachusetts primary Reagan went further. He thrashed Bush by exposing his links to Rockefeller. Gold looked set to break right past its all time high of $850, particularly as sitting president Jimmy Carter had been thoroughly discredited and was certain to lose. He had mismanaged the economy and resorted to the printing press to finance the deficit. A return to gold and balanced budgets was thought by many to offer the best method for a Republican Administration to restore long term financial discipline. Then the elitists bought Reagan. I received a call one night in November 1980 from the managing director of the Zurich office of a major international merchant bank. In bald terms he informed me of the following: "Your hero Reagan has sold out. Rockefeller summoned him to New York and offered him the presidency, but there were three conditions. 1. He dump Jack Kemp and take Bush as his running mate for vice-president. 2. He forget all talk of returning to a gold standard. 3. Instead of PRINTING the money to finance the deficit as Carter had been doing, Reagan was to agree to BORROW the funds instead." What else would one expect of a Banker? As erstwhile Treasury Secretary Connolly was heard to say later: "Borrowing the money instead of printing it will give us one more go-around before we have to raise the price of gold". From the moment of Reagan’s election, Gold entered a 20 year bear market from which it has yet to recover. The US economy began to load up on debt as Rockefeller had instructed - internally through the budget deficit, externally through the trade deficit. Shortly after Reagan was elected, his Rockefeller-selected vice president almost grabbed his job. Reagan was shot in an assassination attempt. The young man responsible was none other than the son of Bush’s most important financial supporter at the time - Governor Hinckly. What a strange coincidence! In due course Reagan finished his second term and his vice president Bush finally achieved what he wanted. Gold never prospered under Bush. In fact, the day before he was due to announce US military intervention on behalf of Saudi Arabia and Kuwait in the war against IRAQ, he instructed the Saudis to dump 60 tons of gold in a single trading session. The price collapsed in time to protect the dollar and US bonds. Otherwise US financial assets would have taken a beating. Everyone knew America was in no position to finance a war. In the event they didn’t have to. Britain, West Germany, Japan, Kuwait and Saudi Arabia all agreed to come to the table. It was later revealed that the Bush family - together with certain high profile South African interests - had oil interests in Kuwait! Yet again gold was the victim. During the war Bush repeatedly waxed enthusiastic about the benefits of the ‘New World Order’ and its ability to bring about global peace. In this respect his driving motives to promote a One World Government differed little from the man who succeeded him and will certainly be adhered to by his compliant son, George Bush Junior, as he now takes office. Despite Clinton’s recent and much vaunted programme of ‘buying back’ 30 year bonds, total debts have continued to escalate. There has simply been a switch from borrowing long to borrowing short - not very clever if a debt crisis is round the corner and long rates are set to rise. Far better to have opted for long term funding whilst rates were at or near long term lows. 2. BUSH OUT OF OFFICE JOINED WORLD’S BIGGEST HEDGER As he prepared to leave office in ’91, Bush Senior pledged not to accept any board appointments in his retirement. As with his urgings to voters to ‘read my lips’ with regard to his promise not to raise taxes - he again went back on his word. He accepted a position as a member of the ‘International Advisory Board’ of Barrick Gold. This is highly significant in determining Bush Senior’s attitude to the metal - and therefore that of his son today. In co-operation with the bullion banks, Barrick some years ago - in 1994 when the gold cartel began its manipulations - hedged their gold production 10 years ahead and the policy continues to this very day. Every board member then - whether belonging to the ordinary Board or the highly influential International Advisory Board - would have been made aware of Barrick’s views on the future of gold. Barrick would have passed on to them the iron-clad guarantees they were receiving from the likes of Rubin and Greenspan - that should private market forces attempt to push gold UP, Central banks could be counted on to lease gold in sufficient quantities to bring it back down. Rest assured that in his time at Barrick, Bush Senior simply wore his ‘private’ hat instead of his ‘public’ one. His words and thoughts remained the same. In a recent response to a query from our office, the Investor Relations division of Barrick made it clear that : "George Bush is no longer on our International Advisory Board". The statement confirms that it was certainly the case at an earlier stage. In view of his previous position, would George Bush Senior ever contemplate joining efforts to break a gold cartel which has so successfully suppressed the price for his friends in high places ? We doubt it. He would know the fatal damage it could inflict on his erstwhile colleagues and employers at Barrick. Furthermore, his role on the Advisory Board probably required him to keep in close contact with the Rubin- orchestrated cabal to hammer gold. Although belonging to a different Administration, the string pullers remained the same. 3. GATA CANNOT TRUST A BUSH ADMINISTRATION In daily comment of December 6th, posted on the GATA internet site called Le Metropole, Bill Murphy voiced his hopes that if a Republican Administration came to power it would act differently: "A new republican Administration can move against the Rubin/ Democrat camp for deliberately orchestrating a scandalous financial situation". In view of what we have written above, we suspect that GATA’s hopes in a new Republican Administration are misplaced. Bush Senior’s shadow will constantly be in the background. His erstwhile henchmen are already in the foreground. GATA may get more political mileage by using the likes of Ralph Nader. Why ? Because, despite political differences amongst themselves as to timing, methods, and personalities, the ‘Elitist’s’ overall long term objective of moving towards a ‘one world government’ are widely shared by all its members - ‘political persuasion’ not withstanding. Before investors become despondent however, we need to ask a further question. Will a new administration - of whatever nature - make any difference to the expected and likely moves in gold? We doubt it. There are some events even the ‘Elitists’ cannot control. We discuss the single most important one below. It is the market for US financial assets - the Dow, the Dollar and US bonds. . 4. GUSH OR BORE - DOES IT MATTER ? Within minutes of Gore conceding victory to Bush, flowing from the 7-2 decision by the Supreme Court, a senior Democrat warned : "In a Bush Administration the Senate will assume a much enhanced role in protecting the wishes of the people". This is a barely concealed threat that any legislation introduced will have to pass a veritable minefield of Democrat approval in the Senate. If it fails, it will simply die in a graveyard of political stalemate. Bush may think he’s won the Presidency. Instead he could find his role plagued with frustration, burdened with responsibility, but empty of power and the ability to get things done. This is no recipe for investor confidence and could spell the beginning of market mayhem. The economy is slowing. Flat sales will hurt profits, soon to be squeezed by rising costs. Easing rates could hammer the dollar. Together these negatives could trigger a 50% reduction in acceptable price earnings ratios for Dow Blue Chips. We think these risks are very real and that despite Greenspan’s best efforts to underpin the market, a meltdown could be close at hand. 5. INVESTMENT RECOMMENDATIONS CONSIDER VARIOUS ‘PUT’ OPTION STRATEGIES 5.1 Buy ‘Put’ options on the Dow 5.2 Buy ‘Put’ options on the US Long Bond 5.3 Buy ‘Put’ options on the Dollar CONSIDER VARIOUS ‘CALL’ OPTION STRATEGIES 5.4 Buy ‘Call’ options on Gold 5.5 Buy ‘Call’ options on the EURO WHAT TO DO WITH YOUR PORTFOLIO 5.6 Sell Industrials and Long Term Bonds - a US ‘debt crisis’ will drive long term rates very much higher. 5.7 Keep up to 25% in cash or 7 day bank deposits. Keep ‘notice periods’ short. 5.8 Invest 60% in gold shares through an FSB registered portfolio manager who knows and likes gold! You can’t expect a person who doesn’t believe in the metal to understand the finer nuances of the market. By the time he’s ready to change his mind, you’ve already lost ground. Active management of a gold share portfolio can substantially improve returns, even in times that are generally ‘quiet’. Once the market takes off - as it is threatening to do - active management becomes vital. One ought at least to be able to outperform the index. But changes need to be ‘performance’ related. A portfolio manager with his eye on overall returns may do you more good for a client than a broker tempted to focus on turnover. If you have funds in excess of R100,000 and wish to have them actively managed, you could do worse than call my son, Quinton George. He controls a Portfolio Management company called Trinity Holdings Pty Ltd which is registered with the Financial Services Board. It also receives support from a broader financial services group called Sovereign Asset Management. He has been well-schooled by his father in all aspects of the gold market over almost a decade. There is nothing like hands on experience in preparation for the real thing. He ought to be able to out manage today’s young investment tigers who’ve never felt the need to look at gold. They have no background in the metal and little preparation for a bear market in equities. They’ve been taught it can’t happen. 5.9 Smaller investors may safely choose the Old Mutual Gold Fund. The FUND could also appeal to a particular category of larger investors - those who place a high premium on maximum ‘liquidity’. However, as market turnover in gold shares improves, ‘liquidity’ considerations will gradually diminish but, for the ultra cautious, will always remain a factor. There is one drawback to investing in the gold fund. To achieve the required SPREAD they have to invest in shares like AngloGold which have a substantial hedge position. If the gold price rises sharply as we anticipate, they could suffer. Purists may wish to buy their unhedged gold shares direct and have a portfolio manager trade between them as relative values fluctuate. 5.10 Invest 10% to 15% of your portfolio in Kruger Rands. Foreign Investors may consider buying them through a ‘non resident’ account and KEEPING THEM in a South African ‘Non Resident’ vault. This could cut costs and improve tradeability. Years of suppressing gold have done major damage to the overseas Kruger Rand network of distribution. Many banks who used to trade them now actively discourage clients holding them. No doubt the result of pressure from the US. 5.11 Set aside 2% of your funds for investment in a selection of the various ‘Put’ and ‘Call’ options discussed above. Profits on Gold options will ultimately give the best returns but from time to time - like the present - there may be more specific short term opportunities in ‘Puts’ on the Dow and US Long Bonds. After yesterday’s final rally in the Dow - at one stage up 130 points - a major downturn could be right ahead. The same applies to US Long Bond prices. They have enjoyed a fantastic run with rates in the recent downcycle falling from 6.75% to yesterday’s 5,48%. As rates fell, bond prices rose. But the bull run could now be over. With a debt crisis looming and the dollar slide set to resume, this could be an excellent time to ‘short’ US Long Bonds. The next move could lift rates from below 5,5% to between 7% and 8%. If accompanied by a 30% to 45% fall in the dollar, gold will prices will double. There are opportunities aplenty to profit if this happens. LATEST OPTION PRICES ON DOW ‘PUTS’ We concentrate here on the latest prices for ‘Puts’ on the Dow. If you want latest prices for gold options call us - as too if you are interested in taking a ‘put’ on the US Long Bond. ‘PUTS’ ON THE DOW The December 15 expiries have only a day to run. Some of our clients invested in them and, barring a miracle, stand to lose. They need to persevere and push through to the Januaries which expire on the 18 th of next month. For the cautious there is the January 10,500 strike ‘Put’. A single contract costs $1600. Each point drop below the strike price brings in $10. So a 500 point drop generates $5,000. e.g. If the Dow falls only to 10,000 by January 18th, a 10,500 ‘Put’ costing $1,600 would be worth $5,000. At Dow 9,000, it would be worth $15,000 and at Dow 8,000 it would be worth $25,000. A return of 15 X. For the more adventurous, there is a Dow ‘Put’ with a strike of 10,000. With the Dow at 10,794, this costs only $700 instead of $1,600 for the higher strike. If the Dow falls to 9,500 by January 18, a 10,000 ‘Put’ would be worth $5,000. At Dow 9,000 it would be $10,000 and at Dow 8,000 its worth $20,000. A return of 28 X Peter George Tel : 021-790-7602 Fax : 021-790-7634 pgportfo@iafrica.com |
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| aus der Diskussion: | Bush und Gold |
| Autor (Datum des Eintrages): | golden-bear (16.12.00 00:10:38) |
| Beitrag: | 22 von 46 (ID:2540820) |
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