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Conferences Current Daily Commentary (2005) (Public)
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Duncan	07-Jul-05, 09:26 AM (GMT)
"explosions in london"
m explosions in london
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Duncan	07-Jul-05, 09:33 AM (GMT)
1. "RE: explosions in london"
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Duncan	07-Jul-05, 09:35 AM (GMT)
2. "RE: explosions in london"
10.30am update Many hurt in London blasts Sarah Left and agencies Thursday July 7, 2005 Sky News reports the first explosions Sky News reports the first explosions. Photograph: Sky News Many people were hurt today in a major incident on the London transport network as at least two explosions were reported on the tube, at least two buses were ripped apart in suspected bomb blasts and London's transport network was plunged into chaos. Union officials said their sources had told them there had been at least one explosive device on the Underground. A Sky News producer who was evacuated from Kings Cross and was walking towards Russell Square also reported seeing an explosion on a bus. He said the blast was caused by a bomb, and said people with "blood injuries" emerged from the bus. Scotland Yard could not immediately confirm the report. Article continues Shortly after 10am Laura Matthews, a press officer at Universities UK, which has offices in nearby Tavistock Square, said she had seen bodies lying around, some without arms or legs. "Get people down here quickly," she sobbed. She thought a bomb had gone off and was trying to evacuate her office. British Transport police said several power surges had caused explosions across the network at Aldgate, Old Street, Kings Cross, Russell Square and Edgware Road. Emergency services crews attended wounded passengers outside Aldgate station, and there were reports of passengers covered in soot emerging from King's Cross. Travellers emerged from tunnels covered in blood. Eyewitnesses reported "multiple casualties" at Liverpool Street. One witness who had been in a train at the time of the explosions reported seeing "bodies everywhere" in the carriages and limbs lying in on the floor. Emergency services reported several injuries. Scotland Yard declared the emergency a "major incident". The incidents caused a complete shutdown of the London Underground system, which is thought to be unprecedented. LU confirmed the incidents had been caused by "something to do with the power supply". A British Transport police spokesman said that two trains remain stuck in tunnels at Edgware Road, but it is not known if they have collided or if passengers remain onboard. "It's difficult to know exactly what is going on at the moment," he said. "The initial report came from Liverpool Street, but there are incidents occurring across the network." He said that officers have been sent into the network to assist with rescue operations. "Officers are working at tunnel and platform level to help get people out and to help find out what has happened," he said. Special reports Transport in the UK Useful links London Underground Transport for London
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Duncan	07-Jul-05, 09:38 AM (GMT)
3. "m"
European Stocks Drop, Led by British Airways; BP, Total Decline July 7 (Bloomberg) -- European stocks dropped, paced by British Airways Plc and Bayerische Motoren Werke AG, after crude- oil futures climbed to a record, stoking concern higher energy prices may curb economic growth. ``There's no reason to rush out and buy stocks,'' said Marc Boukhobza, a fund manager at Gerer Conseil in Paris, which oversees $3.2 billion including shares of oil company Maurel et Prom. ``The wakeup will be brutal. Everything is in place for a decline in'' corporate profits. The Dow Jones Stoxx 600 Index lost 1.5 percent to 275.60 as of 10:12 a.m. in London. The Stoxx 50 slid 1.7 percent and the Euro Stoxx 50, a benchmark for the 12 countries using the euro, declined 1.5 percent. Benchmarks extended declines as subway stations in London's financial district were evacuated after explosions were reported in at least one location. Emergency services were called to Liverpool Street station, Aldgate, and Edgware Road, after a ``major incident'' that caused casualties, London police said in a statement. The U.K.'s FTSE 100 Index dropped 1.7 percent. ``If it were a terrorist attack, it would be very negative for stock markets,'' said Carlos Sanchez, a trader at Legg Mason Inc. in Madrid. ``At a time when oil prices are this high, any political instability derived from terrorism could make energy prices skyrocket.'' Benchmarks retreated in all 17 Western European markets that were open. France's CAC 40 Index declined 0.7 percent and Germany's DAX Index lost 1.2 percent. Energy Companies Drop Energy companies including BP Plc and Total SA fell after the Stoxx 600 Oil & Gas Index rose to its highest in four years yesterday, extending its gain this year to 29 percent, the most among the 18 industry groups on the benchmark. Oil prices increased on speculation Hurricane Dennis may disrupt shipments along the U.S. Gulf coast, where 38 percent of U.S. oil is delivered. Oil climbed as much as 1 percent to $61.86 in after-hours electronic trading on the New York Mercantile Exchange, the highest since oil futures trading began in 1983. Oil has risen 57 percent in a year. Every 10 percent increase in oil price reduces gross domestic product of the world's seven largest industrialized countries about 0.3 percent, according to Goldman, Sachs & Co. British Airways, Europe's second-biggest airline, declined 2 percent to 266.75 pence. BMW, the world's largest maker of luxury cars, lost 1.5 percent to 38.06 euros. BP, Europe's largest oil company, declined 1 percent to 623.5 pence. Total, Europe's third-largest oil company, dropped 0.9 percent to 200.50 euros. Interest-Rates Decision The European Central Bank will probably keep its benchmark rate at a six-decade low today. The Frankfurt-based ECB will set its benchmark refinancing rate at 2 percent, the lowest level since at least 1946, for a 26th month, all 43 economists surveyed by Bloomberg said. ECB policy makers will announce their decision at 1:45 p.m. in Frankfurt. The Bank of England will also keep its rate unchanged at 4.75 percent today, according to 39 of 42 economists in another survey. Munich Re, world's largest reinsurance company, slipped 1.4 percent to 87.85 euros after Chief Executive Officer Nikolaus von Bomhard said the company may have to increase reserves at its American Re unit to cover asbestos and casualty claims in the U.S. Groupe Danone Groupe Danone SA, the world's largest yogurt maker, surged 4.9 percent to 76.4 euros. PepsiCo Inc. may be preparing a bid for the company, Dow Jones reported, citing an advance copy of the French publication Challenges, which didn't name its source of information. PepsiCo, in a statement released yesterday, denied the magazine's assertion that it has built up a stake of about 3 percent in Paris-based Danone. Stephanie Rismont-Wargnier, a spokeswoman for the French company, declined to comment after the report appeared yesterday. Aberdeen Asset Management Plc jumped 12 percent to 137.5 pence. The Scottish money manager that's recovering from a regulatory probe agreed to buy Deutsche Bank AG's U.K. fund unit for as much as 265 million pounds ($464 million) to almost triple assets under management. Adidas-Salomon, Amadeus Adidas-Salomon AG fell 1.9 percent to 138.31 euros. The sporting-goods maker is increasingly being hurt by counterfeit products bearing the German company's logo, Berliner Zeitung said, citing an interview with CEO Herbert Hainer. Amadeus Global Travel Distribution SA, a travel-reservations company, added 0.3 percent to 7.34 euros. Cinven Ltd. and BC Partners Ltd. said they will pay 7.35 euros a share to buy the remaining 5 percent of Amadeus they don't already own. Oce NV dropped 4.5 percent to 11.75 euros. The world's largest maker of wide-format printers said fiscal second-quarter profit fell 50 percent to 10.6 million euros as income from leasing contracts declined. The median estimate of six analysts surveyed by Bloomberg News was for net income of 13.5 million euros. Scottish & Newcastle Plc, the U.K.'s largest brewer, dropped 2.2 percent to 477.5 pence. The world's largest liquor maker said sales growth slowed in the second half and will be little changed this year as budget-conscious Europeans spent less time and money in bars. Deutsche Bank analysts cut the shares to ``hold'' from ``buy.'' ``The recommendation downgrade is solely on valuation grounds,'' the analysts wrote in a note, adding that the shares are now close to Deutsche Bank's 500 pence share-price forecast. Diageo Plc slid 5 percent to 796.5 pence. The world's largest liquor maker said sales growth slowed in the second half and will be little changed this year as budget-conscious Europeans spent less time and money in bars. Fielmann, Salzgitter Fielmann AG advanced 3.4 percent to 60.01 euros. The German eyeglass-store chain said second-quarter sales rose 28 percent to 189 million euros. Salzgitter AG added 3.4 percent to a record 23.84 euros. Germany's second-biggest steelmaker plans to buy back shares on the stock exchange, partly returning to investors the gain it made from selling its stake in tube-maker Vallourec & Mannesmann. The number of U.S. workers filing initial claims for unemployment benefits probably rose last week to 320,000, according to the median forecast of 37 economists in a Bloomberg News survey. The Labor Department is scheduled to release the weekly claims figures at 8:30 a.m. in Washington. In the U.S., the Dow Jones Industrial Average tumbled 1 percent yesterday and the Standard & Poor's 500 Index slipped 0.8 percent. Most of the decline came after the close of European markets as oil advanced. Asian stocks fell for a third day as crude oil climbed. The Morgan Stanley Capital International Asia-Pacific Index, which tracks more than 900 stocks in the region, fell 0.5 percent. The Nikkei 225 Stock Average slipped 0.2 percent. To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net. Last Updated: July 7, 2005 05:14 EDT
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Duncan	07-Jul-05, 01:21 PM (GMT)
4. "g"
G day trading, does work im now making 1000k a week, on a few lots. and on 3 to 5 trades, a day. for, small amount of points. but i have been in this game, since 1992. Position works also. But the older i got, i cant handle big stops. if i could, i be still trading positions. but i do, the odd 1 to 3 day trades.. like to today, looks like a buying opportunity, for 1 to 3 days.
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Duncan	07-Jul-05, 01:46 PM (GMT)
5. "RE: explosions in london"
Rush-hour attack on London Jul 7th 2005 From The Economist Global Agenda Bombs have exploded across central London, at several points on the metro system and on at least one bus, as Britain hosts the Group of Eight summit in Scotland. Details are unclear but it looks disturbingly like a repeat of 2004’s horrific Madrid train bombings Getty Getty THERE have been plenty of warnings that London might be the target of a big terror attack—and indeed, from the second world war Blitz to the IRA bombing campaign of the 1970s-1990s, Londoners have long been used to living with the risk of attack. But no amount of preparedness could reduce the shock of the chain of explosions—apparently caused by bombs—that hit the British capital’s transport system during the morning rush on Thursday July 7th. So far all that seems certain is that there were explosions, all around 9am local time, at several metro stations and on board at least one, possibly more, buses in the city centre. The home secretary (interior minister), Charles Clarke, said there had been “terrible casualties” in the attacks—but it is too early to say how many have been killed or injured. Mr Clarke told the House of Commons that so far four explosions had been confirmed: one in a tunnel between Aldgate East and Liverpool Street metro stations; one in a tunnel between Russell Square and King's Cross stations; one in a metro train at Edgware Road station; and the fourth on a bus in Woburn Place. Several other parts of central London were also cordoned off. The entire metro system was suspended, as were bus services in the city centre, while overground rail services were being stopped short of the capital. All hospitals in London were put on high alert. The public were urged not to try to travel into central London at all for the time being. The explosions came as Tony Blair, the British prime minister, was hosting the summit of Group of Eight leaders at Gleneagles in Scotland—and the day after London was chosen to host the 2012 Olympic games. Coincidence? Or were the attacks timed to send a message to Mr Blair and the other leaders of the world’s main powers? Mr Blair came out of his meetings to confirm that the London explosions did appear to be a “series of terrorist attacks” and that the G8 leaders had affirmed that they “share our complete resolution to defeat this terrorism”. Security was stepped up on public-transport systems in Washington, DC and other G8 capitals as news of the London attacks reached them. The attack on London bears disturbing similarities to the series of bombs set off on commuter trains in Madrid in March 2004, killing almost 200 people and injuring around 1,500. The seven suspected Islamist bombers, mainly Moroccans, blew themselves up in a confrontation with the police soon after. Speaking to Sky television, London’s police chief, Sir Ian Blair, said he feared the explosions in the city did bear signs of a “concerted attack”. Sir Ian said he knew of no advance warning being given of the attacks. It may be some time before it becomes clear—if it ever does—who was responsible for the bombings. Suspicions are bound to fall on al-Qaeda or its militant Islamist sympathisers. It is not impossible that some anti-capitalist or anti-globalisation group caused the explosions, timing them to coincide with the G8 meeting, but a high level of organisation would be required to make the devices and set them off in such an apparently co-ordinated manner. The IRA has been on ceasefire since 1997 and seems unlikely to have been involved; nor is it likely that one of its splinter groups was responsible. In the immediate wake of the Madrid bombs, Spain’s then conservative government was swept out of power in an election, amid public anger at how it had tried to plant the blame, wrongly, on ETA, the Basque separatist group. Given this precedent, Mr Blair and his government are likely to be highly cautious about attributing responsibility for the London bombs until there is clear evidence. Earlier this year, Mr Blair’s government struggled to push through Parliament a terrorism law containing strong powers for the state to impose “control orders” restraining the liberties of terror suspects, even in the absence of sufficient evidence to bring charges. This followed a ruling by the Law Lords, Britain’s most senior court, striking down a measure in an earlier terrorism bill that had allowed the government to detain suspects indefinitely. While Britain’s security services have strong anti-terror powers and London has among the world’s best contingency plans for coping with such serious incidents, its transport system, like any other big city’s, is highly vulnerable. It is almost impossible to prevent determined bombers bringing explosive devices on to trains and buses, and no amount of planning or security measures will eliminate such a risk entirely. Londoners understand this and they—and the security services—have known that it was only a matter of time before something terrible like this happened.
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Duncan	07-Jul-05, 03:27 PM (GMT)
6. "um"
WHERE'S THE SILVER? A Review of the Silver Institute's World Silver Survey 2005 Franklin Sanders Editor, The Moneychanger © 2005, The Moneychanger Every industry boasts its yearly surveys of global supply and demand, and one always stands out as the standard. In silver's world that distinction belongs to the Silver Institute's World Silver Survey. Having read the 2005 Edition, I have to wonder why. When will the Silver Institute wake up and figure out that Gold Fields Mineral Services is short-changing it? Poor writing, analysis unsupported by data, conclusions that leaves the reader clueless, and poor writing all drain away the Survey's usefulness. It gets harder and harder to swallow GFMS analysis and conclusions, or even respect them. This year's Survey contains puerile errors and in some points is almost incomprehensible, with half explanations and hints at explanations which are in themselves incomprehensible. THE STYLE: IS IT ENGLISH? Did I say "poor writing" twice? I meant to mention it three times. Who did they hand this off to? Some apprentice analyst? A speaker of English as a second language? Somebody please tell them that English has more verbs than "to be," and that 'is" plus a verbal adjective and "of" does not satisfactorily substitute for a real verb. "Is supportive of" will never replace "supports" in the hearts of any true English speakers except hopeless bureaucrats. Here's a howler from page 18, col. 2: "Demand for US$1,000 face value 90% and 40% coin bags is more clearly investment related as these typically contain 710-800 oz. silver." Can it be that GFMS, world leader in gold and silver market intelligence, does not know that US 90% silver coins were minted at exactly 723.4 fine ounces to the dollar face value? Could they possibly fail to know that the industry counts this most popular form of physical silver investment as 710 - 715 fine ounce? Or that 40% silver half bags contain only 295 fine ounces? This statement leaves the informed reader gasping like a bass out of water, first for its ignorance, and second for its puerile truism. Of course demand for US silver coin is "investment related." Why else would anyone buy a 55 pound bag of common silver coins? To drill holes in them and make washers? Here's another sample of the Survey's somewhat less than pellucid style: "The addition left the total outstanding delta-adjusted book at end-2004 at a provisional 53.5 Moz (1,665 t), representing roughly 8% of global mine production. A relevant comparison here is of one against the gold book, which at end-2004 stood at 57.2 Moz (1,779t) or 72% of annual gold output." (p. 28) Now, those look like English sentences, but they aren't. I only think I know what that second one means, but I'm not wholly sure. Here's another one from p. 31: "As such, this does not include the large amount of bullion held by many private individuals or in non-recognised depositories, which by its nature is impossible to quantify on a fully scientific basis." I am lost. What foregoing word does "its" refer to? What makes it "impossible to quantify"? What is a "fully scientific basis"? Does this mean the whole Survey was written on a "partially scientific basis"? Where am I? What's my name? I like this one, too, on p. 32: "In the context of increased investment activity throughout the year -- discussed extensively in Chapter 3 -- such a possibility would not seem illogical." Go get 'em, Tiger. There's a bold, clear cut statement if I've ever seen one. No doubt where the writer stands - I think. The GFMS style rule seems to be "never use one plain word where two imprecise ones can be substituted." So on page 34 I find "ndeed the country operated a silver monetary standard through to 1935." Would this mean "until"? SENTENCE RATIONING Apparently the GFMS style book rations the number of sentences which may be used per Survey, so the poor writers have to pack two or three sentences into one to save periods. On page 34 I read, "As we have pointed out in previous World Silver Surveys, silver mining in China only really expanded in the late 1970s, when it was realised by the governing authority that, in order to support the nation's push to industrialise and become self sufficient, it would need to actively promote industry sectors such as silver mining." I'll bet that "it was realised by the governing authority" means "the government realised," but I'm not certain. Here's one last mysterious paragraph-sentence from page 37. I begin with the preceding sentence to give you at least some hope of understanding. "The surging silver price in the early part of 2004 led to a rise in scrap supply (mainly in the form of Maria Theresa Taler coins) in Saudi Arabia, Yemen and north Africa. While the trade spoke of significant volumes, these paled against those seen in 2002 and it was perhaps the concentrated nature of the flurry of activity that led to some exaggeration regarding annual quantities supplied." Supplied? What? Scrap? What? What? I'm dying of preposition poisoning! Naaah, let's not quit yet. I'm having fun. On page 38 my bleeding eyes read, "One important feature (and a differentiator from gold) is that imports of scrap from price sensitive regions are rarely substantial." Does "rarely substantial" mean "usually small." And what, pray tell, is a "differentiator"? Is that a Swarzeneggerian Terminator bred to differentiate instead of terminate? I really like the "flying references" that throw you back to another chapter or Survey without mentioning exactly where you should look. "In addition, 2003 had seen a sharp rise in exports to the United States, in response to an arbitrage opportunity (see last year's Silver Survey for more on this), of which there was no repeat last year." The yearly Survey generally contains about 90 pages with 7 chapters, numerous appendices, and focus boxes. It is a rich and tiresome field for research when given only the vaguest notion what you're looking for. WHERE'S THE PROOF READER? Unhappily the GFMS folks haven't discovered that neither a computer spell checker nor your ear can be trusted. Page 43 makes this plain, speaking of South Korea. "The large increase in exports followed a commensurate rise in silver recovery from the imported concentrates processed by the two main smelters based on the peninsular." Granted, there is such an English word as "peninsular," an adjective, and the spell checker would pass it. Unfortunately, it's not the word wanted in this place. Rather, the writer wants the noun. He means "peninsula", but in many English (and Southern) dialects, final a is pronounced er. So my Mississippi-born father-in-law, God bless his memory, would have pronounced it "peninsuler", but spelled it "peninsula." This might seem a picayune and picky objection, but remember that the Survey is not a high school term paper. It claims to be a professional statement produced by an organisation standing at the top of its class in the world. Can they not afford a competent proof reader? THE MATTER I will grant that in the past few years GFMS has improved in supplying supporting data. For a few years there they offered mystery conclusions without any data, or two by two and a half inch "charts" without data tables. (Does that thing read "500" million ounces, or 550 million?) And Oh, how painful is their unapologetic mixing of metric tonnes on some tables and millions of ounces (Moz) on others. That makes analysis almost as much fun as comparing Greek and Old Slavonic translations of the prophet Malachi. (One metric ton equals 32,150.8 troy ounces.) I concede that GFMS must transmute an ocean of data into a short, comprehensive report, but too often past Surveys left the reader guessing what on earth might be the factual basis of their conclusions. The Surveys often betray a foundational editorial bewilderment. Which data should we include and which excise? How many details -- if any -- should we give about this or that controversy? Too often the Survey merely alludes to some recondite controversy without data or explanation, offering a conclusion only, with its feet firmly planted in the air. For example, over the past 16 years the silver market has faced a single giant riddle: how is the ongoing deficit of supply over demand being filled? Nearly one and a half billion ounces of silver doesn't just pop out of the ground. For the past couple of years the Silver Survey has concluded that China supplied the deficit silver. Well, that conclusion may be correct, and it may not, but the Survey doled out facts and arguments so niggardly that the reader could not rationally evaluate that conclusion. Therefore GFMS's conclusion sounded like "magic Chinese silver" that appeared and vanished according to their need to balance the Survey, even though it may very well be correct. This year's Survey offers an example of how they should address controversies and mysteries. Page 41 discusses certain tax changes by Indian states that altered long-established flows of silver into India. This is very important because India ranks as the world's hungriest silver consumer. The world's second largest silver consumer (after the US), the Indian silver market is also the world's most volatile. A change in the monsoon there, for example, can exert profound influence on silver, raising or lowering farmers' income and with it their appetite for silver. Details such as these serve a useful purpose, if they are in context. Otherwise they become surplusage -- packing to camouflage lack of substance. THOSE BEWILDERING REVISIONS This year's Survey also offers an example how not to address mysteries. There's nothing unusual or sinister about revisiting previously published statistics and correcting them when better data become available. In fact, integrity obligates it. But this years' corrections were huge, and offered without any explanation I could find. This year's revised mine production figures were astonishing, raising mine output over the last ten years by 54.9 million ounces (1,707.6 tonnes). Combined with other changes, notably in fabrication and photographic demand, GFMS materially lowered the cumulative silver supply shortfall. Using the 2004 Silver Survey, the cumulative deficit from 1989 through 2003 was 1,521.6 Moz (47,327 tonnes). Using the 2004 Survey, however, with all its revised figures, the same shortfall becomes 28.2 Moz (877 tonnes) less. Hey, what's 877 tonnes among friends? Perhaps GFMS offered some explanation of these large revisions in the 2004 Survey, but if they did I overlooked them. 2005 SILVER SURVEY RESULTS Here are the highlights of the 2005 Survey: * Mine production increased from 611.2 Moz to 634.4 Moz (by 4%), an all time high. * Silver production from primary mines (as opposed to by-product mine) grew to 30% of all silver mined, up from 28%. * Scrap supply fell to 181.1 Moz, a four year low and 2.5 Moz drop from 2003. * For the seventeenth straight year the marked showed a "structural deficit." That is, production and old scrap fell short of meeting fabrication demand. * Government silver sales fell by 30%, furnishing only 7% of all supply. Chinese government sales dropped by nearly half. * Fabrication demand fell 2%, but this was a strong showing in the face of a 36% higher average silver price. * Photographic usage dropped 6%, with some sectors falling and some rising. Chinese photo demand grew 6%. * For their third year running industrial fabrication demand grew, by 5% to 367.1 Moz. * Jewellery and silverware slumped to 247.5 Moz or 9-3/4%, thanks to a huge drop in Indian demand. (Silver rose 30% in rupee terms and the monsoon was poor, pinching Indian farmers' incomes.) * Implied net investment jumped from 2003's 8.7 Moz to 42.5 Moz. PHOTOGRAPHY: RED HERRING BEGINS TO STINK Touching silver demand, the loudest argument for two and a half decades has raged around digital replacing silver in photography. Those who understand silver photographic demand have always known that this transition would not take place overnight. Callow analysts and green reporters new to silver, on the other hand, periodically "discover" that digital is about to replace silver in photography. Amazed by their "discovery," they publish articles shouting that silver is about to plunge because of digital competition A suspicious mind might conjecture that scared people longing to escape their short silver positions must hire these analysts to force silver to jiggle downward a couple of days, allowing them to flee. A serious mind must laugh at this tired old red herring. In our 1993 book, Silver Bonanza (pp. 69-77),Jim Blanchard and I concluded that rising economic development and incomes in China and elsewhere would keep silver photographic consumption high. Shifting photography from silver halide to digital would take a long, long time for several reasons. First, technology never changes overnight. The new must wait until the old needs to be replaced. Next, the new technology costs many times as much as the old, and offers much lower resolution. Third, enormous pent up Chinese demand would run into cheaper silver halide photography first. Fourth, digital photography would actually increase demand for some silver halide products, such as photographic paper. The bottom line was that digital would not replace silver at any time material to our case for a bull market in silver. Eventually, maybe, but not soon enough to hurt silver. It's comforting to see that the 2005 Survey's photography section (pp. 57 -61) confirms our 1993 forecast. "Chinese photographic demand rose 6% year-on-year . . . higher than the 2% growth rate seen in 2003. Despite the penetration of digital cameras, the consumption of traditional film in China has actually grown because of an expansion of the total photographic market. … Although the prices of digital cameras are falling, they are still expensive for low income families. Personal incomes in rural areas have increased enough to encourage the purchasing of discretionary items, putting low cost film cameras within the budgets of many consumers, but digital cameras by and large remain out of reach. … he preference for film cameras is also driven by the fact that they are easier to use in terms of obtaining and sharing the . . . photograph." (pp. 60, 61) Relief! Silver is safe in photography for yet another year. Another interesting twist remains to the photographic silver controversy. Silver photographic use has always ranked as one of the most active recyclers of scrap. As silver photographic use declines, so does the silver supply from photographic scrap. SILVER IS JUST AN INDUSTRIAL METAL Here's another tired old argument against silver that often raises its balding head: "gold is money but silver is an industrial metal." From that descends the objection that a world economic downturn would send gold up but silver down. As a slower world economy reduces industrial demand for all commodities, silver demand would drop, too, regardless how gold moved. What this argument overlooks is that over half of silver production (58%, in 2004) comes as a by-product of lead/zinc or copper mining. (Primary silver mines produce 30% of all silver mined, and gold mines 12%.) My German friend Dietmar Siebholz points out that this production profile at least partially contradicts the whole "industrial metal" argument. "Compared to last year, silver mine production's dependence on base metal demand has relaxed somewhat. Besides, the assertion still remains valid that any cyclical economic decline that curtails zinc, lead, and copper usage curtails silver production at the same time. On the other hand silver usage, which resists cyclical economic declines much more readily because of its unique strategic qualities, will suffer a much lower percentage drop in demand." ("Meine Meinung zum", 27 May 2005, my translation). In other words, as demand for base metals decreases, so does their silver production. That doesn't completely correct silver's problem, but it offsets part of it. Beyond that, I don't buy the "silver is an industrial metal and only gold is money" argument. At the margin investment or monetary demand primarily drives both silver and gold prices. The fundamental demand pictured by supply/demand analysis changes only slowly, while monetary demand hits and grows suddenly. Is silver money or not? It's beside the point. Since 1960, silver has moved with gold in every gold bull market, spurred by the same investment demand. Before 1873, silver moved with gold, spurred by the same monetary demand. Overwhelming odds are, silver will move with gold in the future, although certainly the past doesn't guarantee that. ABOVE-GROUND SILVER STOCKS Some silver stocks you can see, and some you can't see. Some, like the reported stocks in the New York or Tokyo commodity exchanges, or in government hands, are plainly visible. Others, like European dealers' stocks, are invisible, and must be estimated. GFMS estimates these at 332 Moz at end-2004, about three times COMEX stocks of 104 Moz. That leaves me nervous. As far as I know there is no government mandated or even official account reporting required from these dealers. The dealers are notoriously tight-lipped about their business (witness GFMS remark on page 32 about "obvious confidentiality issues" with individual dealers.) Since not every dealer will report stocks to GFMS, I reckon that they must infer the total. How? By a statistical abstraction. That is, they get samples from 30 or more dealers, compare those to last year's statistics from those same dealers, and from that and other factors infer the current level of all European silver stocks. There's nothing wrong with that, it's a standard statistical procedure, except when dealers aren't reporting their exact physical stock levels. Not long ago Dietmar Siebholz reported a conversation with a Swiss banker that hints that most of the silver European banks hold on deposit has been loaned out. Whether that's true or not, I can't verify. However, since I don't know what statistical procedure GFMS used to infer stocks, or how accurate dealer reports might be, or how many dealers report out of the total, a large shortfall in European stocks is certainly plausible. Add to that seventeen years' supply deficits, and the mysterious "appearance" of enough silver to fill that void, say, 1.5 billion ounces. Now consider the silver leasing market, where rates at the end of 2004 were a minuscule 1/10 of one percent. With an interest rate that low, either demand is awfully low, or supply is awfully plentiful. But GFMS reports that the silver leasing market is growing, reaching at year end 275 Moz or 8,560 tonnes (p. 33). In fact, GFMS reports, "n recent years intermediaries have aggressively targeted such manufacturing companies that use high volumes of silver. A number of these users were arguably 'under-borrowed' and their silver leases have seen an important growth over recent years. . . That the pick-up in borrowing demand has had little or no effect on leasing rates owes much to the surge in available liquidity from investors' long positions in silver." Hmmmm . . . Why exactly would investors' long positions in silver cause a "surge in available liquidity"? First guess is that GFMS believes the bankers holding silver deposits for those investors are loaning it out. In fact, the bankers are "aggressively" beating the bushes for borrowers, to make a measly 1/10 of one percent. Somebody is mobilising lendable silver stocks and actively promoting borrowing, and only the banks possess the silver. Now why would they take all that risk for a lousy 1/10 of one percent? Because they plan to invest the loan proceeds into something else which, they expect, will pay a higher return than silver before they have to buy the silver back. In plain English, they have sold massive amounts of silver they owe to depositors. They are short physical silver. And that may furnish us yet another reason to buy and take delivery of physical, not paper, silver, before the investors make a run on the banks to retrieve their missing silver. THE STRUCTURAL DEFICIT The way GFMS reports world silver supply and demand confuses me somewhat -- and others, too, I don't doubt. They don't report supply and then subtract fabrication usage from that to arrive at a surplus or deficit. Rather, they treat supply and demand like a problem in double entry bookkeeping. Total silver supply must meet total demand, by definition. If they don't match perfectly -- and they never do -- then GFMS infers balance figures such as "Producer Hedging," "Implied Net Disinvestment," "Producer De-Hedging," and "Implied Net Investment." . Yes, "infers" is a nice word for "makes up to balance." (You know somebody who "infers" balance figures on his income tax return, I'll bet.) So if you want to know how silver consumption compared to silver supply, you have to throw out those balance figures and calculate the "structural deficit or surplus." For the past 17 years that calculation has produced a shortfall (deficit). As a result, the world has burned a cumulative 1.5 billion ounces of silver since 1989. Nobody seems to know where all that silver came from, but they infer, pretty soundly, that it came onto the market following the 1980 price surge. Since most everyone believes that price eventually balances supply and demand, that cumulative deficit is the first and best argument for higher silver prices. But a related question must be asked: Is the deficit increasing or decreasing? For this reason I dislike very much GFMS's unexplained diddling with past figures in the 2005 survey. Here's the change in the structural deficits, according to GFMS changing figures: 2004SS 2005SS 2003 72.0 Moz 58.6 Moz 2002 62.6 Moz 44.2 Moz 2001 89.5 Moz 72.8 Moz 2000 147.6 Moz 136.3 Moz These changes affect the shortfall's chart even more dramatically. From a chart that appears to have bottomed and begun to climb back toward even, the structural deficit chart now ascends very steeply. This implies the deficit's days are numbered. I'm not accusing GFMS of fudging the numbers to make the deficit look smaller, but the change did accomplish that. I'm curious why they made those large changes, but GFMS remains silent. CASH COSTS Another good work from GFMS is their attempt to establish cash production costs for silver mines, a statistic that remained a mystery until recently. While these cannot comprehend all silver mines, because 70% of silver comes as a by-product of mining some other metal, at least GFMS' estimate gives us an annual number to compare. Wonderful! In 2004 simple cash margins (average annual silver price less cash costs) were $4.29/oz, which leaves healthy room for profit in primary silver mines. Total production costs (including depreciation, depletion, and amortisation) were estimated at an average $3.40/ounce, and ranged from $2.11 to $8.12. (pp. 27 & 28). BOTTOM LINE Nothing I found in the 2005 World Silver Survey changes my outlook for silver. All the following factors remain, all working for higher silver prices: Long term shortfall of supply against demand (17 years) Long term undervaluation (much of the 1990s spent with silver's price under production cost) Wearing out old bulls. No doubt 1970s investors (and their heirs), tired of holding silver so long, supplied much of the 1.5 billion ounce cumulative deficit. The last 17 years has burned up their silver. No overhanging stocks. Hoards such as the US government's or India's have been dissipated. By the 1980 peak all the U.S. "attic silver" that could be bought under $20 (equal to $50.79 in 2004 dollars) was bought. The rest of the world doesn't have any attic silver. Demand inelastic to price. In most industrial applications only a tiny amount of silver is used in relation to the end product's price, so usage doesn't shrink much when silver's price climbs. There's more: in most applications no good substitute exists for silver at anything near silver's efficiency or price. Technological reductions in silver use. Stung badly by the 1980 silver peak, for more than two decades silver users have been applying every technological innovation to squeeze down silver use, so further reductions will be tiny. Primary trend of falling paper asset, rising hard asset cycle. Paper assets like fiat currencies, stocks, and bonds move inversely to hard assets like metals. Stocks peaked in 2000, the US dollar in 2002, and bonds in 2003. These trends will last at least a decade. Gold began rising in 2000 and silver in 2001 after more than 20 year bear markets. Investment or monetary demand moves the silver market at the margin. Only that can take silver to new price heights. Falling confidence in dollars and other fiat currencies stimulates monetary for both silver and gold as alternative monies. Since only investment demand for silver really drives the price wild, fundamental demand doesn't matter much for our investment case. Certainly fundamentals must be on our side, since large surpluses or supply overhangs would create a strong headwind. However, since silver has already racked up big deficits, we only want to check fundamentals to make sure the trends that favoured silver in the first place still exist. They do, and I still cannot see a single investment on the horizon that will outperform silver. I remain convinced that silver will outperform gold by 400% and will reach US$78.80 or more in the next ten years. 6 July 2005 World Silver Survey 2005, US$195 from the Silver Institute, 1200 G. Street NW, Suite 800, Washington, DC 2005. (202) 835-0185; fax (202) 835-0155 or www.silverinstitute.org. Outside North America, contact Gold Fields Mineral Services at +44 (0) 20 7478-1777 or www.gfms.co.uk, who produce the report for the Silver Institute. Since 1980 Franklin Sanders has edited and published The Moneychanger, a monthly newsletter about silver and gold. In 1993 he wrote (with James U. Blanchard III) Silver Bonanza. In 2004 he published Why Silver Will Outperform Gold by 400% & How To Make The Most Out Of Your Silver & Gold Investments, available from www.the-moneychanger.com.
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Duncan	07-Jul-05, 03:27 PM (GMT)
7. "n"
n Hi Duncan Interesting post from G It would be good if he would let us know a little more of what he does, although I know that can be a bit difficult ! I'm working on a system using a stochastic indicator to get me in and then just scalping 3 points in the S&P just once a day, seems to work more times than it doesn't. I agree today would be a good time for a 2 to 3 day trade for a long, I just don't have the balls to do it. With no indicator to get me in or out, just a gut feeling the pressure is very high. How do you do it G ?? Cheers N
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Duncan	07-Jul-05, 04:15 PM (GMT)
8. "um"
The Deflation Debate Heats Up: 10 Reasons Why Hyperinflation Is Coming Mike Shedlock The Deflation Debate Heats up: 10 Reasons Why Hyperinflation Is Coming Before anyone has a heart attack, the items listed below are not my reasons for impending hyperinflation, but Jim Puplava's, listed in his June 24 Storm Watch Update. Here is Jim's list, point by point, with each point immediately followed by my reply. 10 Reasons for Hyperinflation 1. "Global oil production will peak between 2005-2008. Economic growth ceases to exist as global economies and markets are thrown into chaos and turmoil." Sorry, Jim, peak oil is a resource phenomenon, not a monetary phenomenon. It is no more inflationary than is soybean blight. By the way, rising oil prices are probably deflationary, if anything. Excess driving will come to a halt, as will hotel bookings and airline travel. Bankruptcies and layoffs will both soar. The net effect of that is deflationary, unless you are going to tell me that wages and jobs will rise to meet rising gas prices. Since that has not happened on the rise in crude from $25 to $60, pray tell, why will wages rise if crude rises to $100? 2. "The war on terror escalates into a resource war over oil, pitting the great powers, the U.S., China, and Russia, in a replay of 'The Great Game.'" My answer is the same as to No. 1 above. 3. "Debt creation and monetization hyperinflates as the government's deficit spirals out of control with a war and a depression." What about debt creation in Japan, China, Europe, and the United Kingdom? Exactly who is going to war against whom? Prices are going to rise in this "depression"? Why? Is China going to raise prices? If so, where are the jobs going to come from for U.S. consumers to buy Chinese goods? 4. "Foreigners begin to bail out of the dollar, setting off a dollar crash." They are going to bail and buy what? Euros? Pounds? Yen? Why, why, and why? Japan has debt equal to 250% of GDP, the United Kingdom is six months ahead of us in its housing bust and has a huge percentage of public sector workers to boot, and the European Union seems to be in political shambles at the moment. Tell me exactly what everyone is going to buy when they start bailing. This Breakthrough Genetic Treatment Could Bring 5,000% Profits or More! A group of Scandinavian scientists is using the world's largest "genetic map" to pinpoint cures for mankind's deadliest ailments. Obesity, heart disease and stroke could be wiped off the planet with absolutely no side effects. This company's pioneering treatment may well become the industry standard. The U.S. government, major financial institutions and Big Pharma are lining up to partner or invest in this technology. Find out how you can, too... 5. "The U.S. puts in place capital controls to corral U.S. and domestic money. The war on terror will be given as the reason." I am not exactly sure what this would do, so I take a pass and will think about this one later. 6. "The government takes over GSEs owning most American mortgages." Even assuming this happens, how does that lead to hyperinflation? (See my answer to No. 7 for more clarification.) 7. "A national mortgage bailout bill is passed, lengthening mortgage payments in an effort to forestall debt defaults. A new restructuring agency will be set up to repurchase impaired mortgages from the banking system and renegotiate terms of the debt to avoid default. The 100-year mortgage is born." OK, so a 100-year mortgage is born. How does that cause prices to rise? Furthermore, a near-universal criticism of Japan was the fact that Japanese banks kept bad loans on the books for years, refusing to write them off. Now you are suggesting that when we do the same thing, it will cause hyperinflation, even though it clearly prolonged the deflation in Japan. Sorry, Jim, I do not buy it. 8." A national retirement security act is passed, forcing private pensions to buy long-dated zero-coupon government bonds that will be inflated away. The reason given will be for plan protection against bear markets." Assume such a bill is passed -- I seriously doubt it, but for the sake of argument, I will assume it happens. Pray tell, exactly how is that hyperinflationary? How and to what extent would it increase the money supply or cause prices to rise? 9. "As the U.S. economy goes into a hyperinflationary depression, the rest of the world's economies follow suit. Money printing on a grand scale occurs in Western and Asian economies as governments wrestle and try to satisfy the demands of a social welfare state and an angry, aging populace." The entire world goes into a hyperinflationary depression at the same time. Hmm. Do home prices head to infinity? Is everyone who buys homes at these prices and takes out 125% loans going to be bailed out? Are jobs going to be so abundant in this worldwide depression that everyone has enough money to buy things? In your model, do Congress, bankers, and the credit card companies all stand back and watch this happen? How nice of inflation to bail out all of the debtors at the expense of powerful creditors like banks. 10. "As governments hyperinflate and debase their currencies, gold will take on its true role as money rising in value against all currencies. The world will move towards a global currency backed by gold. Here is how I see it: As debt everywhere is repudiated in a deflationary crash, the grand experiment in fiat money backed by nothing will lead to reinstatment of the gold standard, or a gold/silver standard, and once that debt is all wiped clean and we start over from a complete K-cycle deflationary debt purge, then we will see inflation take off. Puplava continues.... "MY ARGUMENTS FOR DEFLATION: "1. Elimination of the Federal Reserve "2. Gold backing of the U.S. dollar "3. Honesty returns as a virtue in Washington "4. World peace "Need I say more?" Yes, you do need say more, because you completely failed to address the questions posed by deflationists such as myself in a believable scenario. Furthermore, the above four points simply cannot be considered a serious attempt to consider or understand the deflation arguments. On the other hand, I freely agree with much (but not all) of what you have had to say about the consumer price index being understated; that deflationists (and others) do not understand what money is; and that hedonics, imputations, and productivity all need to be appropriately factored in. We seem to also be in general agreement about gold, but for reasons that are 180 degrees apart. Not a single hyperinflationist (most of them, oddly enough, point to the debt bubble and expect a housing crash, both of which are inherently deflationary in nature) has been able to explain how we will end up with inflation if home prices keep rising, jobs are lost in the upcoming recession, wages keep falling because of outsourcing, bankruptcies soar, etc. I still feel that I have not gotten a credible reply, given my challenges to the 10 reasons for hyperinflation presented above. I will repeat the key paragraph from "Same Data/Different Interpretation": "Falling home prices, and the resultant slowdown in trade jobs coupled with rising unemployment, are the Achilles' heel of inflationists. They cannot explain how this scenario leads to further inflation. Nor can inflationists tell me how home prices can keep rising as long as we have global wage arbitrage, falling wages, and loss of jobs. Home prices CANNOT rise above wage growth over the long haul! The destruction of credit and money, along with an increasing number of bankruptcies that will accompany a significant downturn in housing, is the very essence of deflation." Now, perhaps the above 10 items were meant to address the issue, but I believe most of the 10 points are easily refuted, as I did above. Oil is easily dismissed and is, in fact, an argument for deflation, if you come right down to it. I am not the only one who feels this way. It seems Bill Gross is in my corner with his July 2005 Investment Outlook, entitled "Fire!": "The Fed may soon be out of fuel, despite hints of Bernanke-style helicopter money. Stocks and houses are already at low yields and high prices reflective of European economies nearing Japan-style liquidity traps. "If the asset pumps run dry and the kerosene cans empty, the inevitable path of the U.S. economy will reflect slow growth at best and recession as a realistic alternative. Inflation then would return to low 1% levels in the ensuing years and be pressing the deflationary crossover line. Nominal Treasury paper would enter the 3-4% zone for 10-year maturities and lower still for shorter intermediates. Such an analysis argues for capturing yield via duration extension now in the face of admittedly artificially low current yields. If Rome burns, long maturity bonds will rule the day, and that day may come sooner than many imagine possible." The theory of the entire world going into hyperinflation at once certainly seems to require massive worldwide hiring and wage growth. Unless that happens, where are people going to get money to buy things? The argument that forestalling debt is hyperinflationary must be dismissed, since it did nothing but prolong Japan's agony. The last stand of hyperinflationists seems to be some scenario in which governments all over the world do some sort of "helicopter drop" to bail out all the debtors. Sorry, Jim, that is just not plausible if one considers the real-world implications. Hyperinflation would bail out debtors at the expense of banks, credit card companies, and other creditors. Are banks going to want or allow that? Would Congress allow it? No. In fact, Congress went the other way. Congress passed a bankruptcy reform bill that will have consumers owing money to the company store from now until doomsday. A key point to remember is that when Greenspan slashed rates to 1%, he was bailing out banks, not consumers. Corporations owed money to banks, as did numerous foreign nations. Greenspan kept rates low enough, long enough, to enable corporate balance sheets to be restored and bank loans to corporations to be repaid. Now it is consumers, not corporations, that are deepest in hock, and the primary creditors are GSEs, not banks. That is a huge difference, and I find it silly at best to think that money will be dropped from helicopters (or given away in massive quantities) to bail out consumers at the expense of banks and other creditors. Bill Gross does not find the Bernanke helicopter-drop theory plausible, and neither do I. Here is the nut hyperinflationists need to crack: 1. Falling home prices 2. Falling wages 3. Stagnant employment or rising unemployment 4. Slowing world economy 5. No incentive for the Fed to bail out consumers at the expense of banks 6. The K-cycle is not likely to be defeated by throwing more money at the problem 7. At some point, lenders refuse to lend or borrowers stop borrowing. That time will be at hand when housing plunges. Look at current events in the United Kingdom as a prelude for what will happen here . Point No. 7 above is a new one, so let's take a good hard look at what happened in Japan and what is happening in the United Kingdom right now. Here is a good link to consider: "Bank Warns on Threat to Economic Stability From Consumer Debt ." "The Bank of England will today issue one of its clearest warnings to date of the risk to the United Kingdom's financial system from the surge in consumer borrowing. "In its key twice-yearly review of financial stability, the bank says banks had been caught unawares by a sudden jump in the number of debts that had to be written off, particularly on credit cards. It says lenders reacted by tightening their criteria -- a move which could aggravate the current sharp slowdown in consumer spending. "The warning comes as the Bank for International Settlements -- the central banks' central banker -- warned that rich countries' financial sectors faced 'significant macroeconomic risks'... "Sir Andrew Large, the bank's deputy governor, said recently while the near-term outlook was 'generally healthy,' there were some concerns on the horizon. He said: 'There are signs that areas of credit risk may be underpriced and the liquidity of some assets could prove illusory in stressed conditions.'" Hmm. Bankruptcies increasing and credit standards tightening. Sounds like classic liquidity trap action to me. Perhaps hyperinflationists believe, "It's different this time." Here is another point of view to consider: "Stephen King: Low Interest Rates Can Point to Deep-Rooted Weaknesses ." "Interest rate cuts are back on the agenda. It's a surprising result, given how low interest rates already are. Not everyone has got there yet. Only two of the nine members of the Bank of England's Monetary Policy Committee have so far voted in favor of a rate cut. And although Jean-Claude Trichet, the president of the European Central Bank, seems to be willing to think the previously unthinkable, his colleagues are likely to delay a move downwards in European interest rates until later this year... "Low interest rates are not the cause of high inflation; they are a consequence of low inflation and, for that matter, low inflationary expectations... "Overall, the U.S. looks a bit like the U.K. a year ag Growing imbalances, but a lack of transparency on precisely when the economy will begin to stumble. "Underneath all this is a failure to come to terms with the post-bubble world we are living in. The basic truth is that, post-bubble, life is tougher. No longer do people have the supposed guarantee of everlasting capital gains and, hence, endless jam today, tomorrow, and for ever. But how have we reacted to this new truth? Consumers pretended it wasn't there: They continued borrowing, helped along by rising house prices. Policymakers hoped it wasn't there: by setting interest rates at low levels, they created the illusion of ever-rising house prices to offset the earlier illusion of ever-rising stock prices. Pension funds assumed it wasn't there: They were happy to pretend the 1990s would return, because otherwise, their unfunded future liabilities would begin to look extremely daunting. "As reality dawns, there is a price to pay. High debt and low savings will be gradually replaced with low debt and high savings. As economies structurally come to terms with this change, interest rates will end up at very low levels. But low interest rates will not be an indication of monetary laxity. Instead, they will simply be telling us people would rather save than spend. Low interest rates might seem to be desirable, but in these circumstances, they point to deep-rooted fundamental economic weaknesses. Just ask anyone living in Japan." Sorry, Jim, but a housing bust will lead to a deflationary recession, not a hyperinflationary one. All signs point that way. Your 10 points fail to address the above seven deflation arguments in any sort of plausible manner. My offer to bet a box of steaks on the outcome is still on. July 7, 2005 Mike Shedlock - "Mish" Whiskey & Gunpowder www.whiskeyandgunpowder.com
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