Hakki a gold bug?
http://gjsag.pitas.com/ Ominous Parallels by Kurt Richebacher (Sept 2002)
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From http://www.Nationalinvestor.com
Leaked Gold Report Reveals Trouble Ahead. . .
“CONSPIRACY THEORY” GAINS NEW CREDIBILITY
You didn’t hear about this on the national news, CNBC, or in your local newspaper. After all, most of these controlled/scripted sources of “news” are still trying to keep us all believing that all is well with the world, even as the stock market and economy show new cracks. For all its obvious faults, “the system”—i.e, the fractional reserve monetary system administered by the Federal Reserve—is still sound, according to these pundits. Thus, and in spite of the rally in gold and gold stocks in 2002, the press will usually go out of its way to dismiss gold as either a viable investment alternative or as having any relevance to today’s financial and monetary structure.
With this mindset, our press saw fit NOT to cover a news story that broke recently which should have made the front pages of at least every financial publication. It’s a story that has much more to do with the financial markets generally than one merely of interest to “gold bugs.” And it’s one which—if the warnings inherent in it ever come to pass—could lead to the insolvency of a number of major institutions, and devastate global financial markets.
From time to time in my newsletter The National Investor (www.nationalinvestor.com), I have commented on the ongoing efforts of GATA (the Gold Antitrust Action Group—www.gata.org) to bring to the light of day their contention that gold prices have been artificially controlled by a cabal which includes our own Federal Reserve. In short, GATA has assembled considerable evidence that various financial institutions have made a bundle of money in recent years by betting on the decline in the gold price. This was done in a variety of ways; “short sales” of borrowed gold from central banks, hedging on the part of some major mining companies and the creation of complex derivative transactions among them (to understand the intricacies of this, I suggest you visit the above-referenced web sites.) Until recently, these bets paid off handsomely, as gold went from over $400 per ounce in January, 1996 to lows around $250 per ounce more recently.
The trouble now is that, with gold prices having bottomed and now starting to rise, many of these same institutions face potential disaster. It has been reported, for example, that the banking powerhouse J.P. Morgan, Chase and Company has over $40 billion of exposure to gold-related derivative contracts; these instruments could destroy Morgan’s overall financial health in the event the gold price were to spike considerably higher. Thus, to protect Morgan and certain other financial houses in the same boat to one extent or another, it has been claimed that the world’s central banks—led by the Fed—are now conspiring to keep the gold price from rising too much. Further, the way this effort is being conducted has opened up the entire financial system to a potential meltdown if the bankers fail in their suppression efforts.
Though GATA’s claims, if true (and I believe they are in this regard) paint the picture of impending danger for the financial markets equal to or greater than anything currently in the Establishment news, they have none the less received short shrift. For the most part, the group and its adherents are dismissed as “wackos” and “conspiracy theorists” who are simply trying to come up with excuses for the lousy investment performance of gold throughout much of the last two decades. Meanwhile, a financial time bomb with possible ramifications extending well beyond the gold market itself continues to tick.
However, the recent publication of a March, 2002 report obtained by GATA has given significant new credibility to the group’s claims. It has also made some people in the financial world extremely nervous.
It seems that well-regarded mutual fund manager John Embry of Royal Bank of Canada authored a report on the gold market for his peers at the bank early this Spring. In it, he offered his viewpoint that--among other things-- there has indeed been a “conspiracy” to suppress the gold price, the suppression has been engineered chiefly by the U.S. Federal Reserve, and that the Fed is scared to death that it could lose control and have tens of billions of dollars worth of gold-related derivatives to clean up one day. Somehow, this report made its way outside the four walls of RBC, and ended up in the hands of Bill Murphy at GATA. Needless to say, Murphy has spread Embry’s report far and wide. I would too, if I were him; after all, Embry is one of the most highly regarded money managers in North America. His firm is not some local coin shop where local militia members come to talk conspiracy over coffee all day long, nor is it the publisher of one of the many sales-oriented newsletters that hawk gold come Hell or high water. It is one of the biggest financial companies in Canada.
For their part, embarrassed (and quite angry) Royal Bank officials were quick to claim that Embry’s report does not represent the bank’s views. Instead, this was a report meant for other managers and big shots at RBC, and was not intended for public consumption, they say. Bottom line, the bank is hopping mad that, of all the people who got their hands on this, it was Bill Murphy. (NOTE: Murphy claims that this report also went to some of the “biggest and best” clients of the bank, one of whom forwarded it to him.)
Embry cannot be dismissed, however--and he is respected enough that this report is turning some heads as more people read it. As Matthew Ingram of Toronto’s Globe and Mail put it in one article on this crazy story, getting such a well-regarded money manager from a major bank to essentially agree with what GATA has been saying for a few years now is, “. . .a bit like the U.S. government admitting that yes, there was a top-level CIA plot to assassinate former president John F. Kennedy, and the whole lone-gunman theory was just a crock.”
THE REPORT
Following is a copy of Embry’s report, generously forwarded to me by Murphy:
RBC INVESTMENT MANAGEMENT, LTD.
Report on Gold
http://www.nationalinvestor.com/leaked_gold_report_reveals_troub.htm