Bill Murphy''s speech to the NY gold show


5:30p EDT Saturday, June 12, 1999

Dear Friend of GATA and Gold:

Here's an especially important "Midas" commentary by
GATA Chairman Bill Murphy at
Please post this wherever it may be of interest.

Secretary, Gold Anti-Trust Action Committee Inc.

* * *

A Financial Scandal Unfolding Slowly Before Your Eyes

By Bill Murphy

June 11, 1999. Spot Gold $260.40, up $2.10
Spot Silver $5.10, up 2 cents

This is not meant to be the comprehensive analysis of
all that we intend to put together to illustrate to you
that we believe a financial scandal of epic proportions
will be revealed in time. This is summertime and I had
no intention of writing this Midas, but in light of the
events of yesterday, I thought I should recap some of
our previous commentary and alert you as to what talk
is making the rounds and what it means to you as a
precious metals investor.

It is my opinion that what is going on in the U.S.
markets RIGHT NOW is the crux of the gold problem. The
current turbulence is the raison d'etre behind the
manipulation of the gold price. In the Midas on
Thursday I alluded to the fact that it was becoming
clearer by the week, day, hour. Yesterday it really was
by the hour.

Yesterday began with a benign producer price index
accompanied by retail sales that were a bit stronger
than the consensus predictions. In addition the
previous month's retail sales were revised upward. The
bond market fiddled up and down on the news and then
swan-dived, finishing the day down a point. Yields
soared to 6.15 percent. An unthinkable number at the
beginning of the year (except to the Cafe's Charles
Peabody and one other mainstream analyst.)

Even as the bonds swooned, the CNBC commentators
remarked all day how boring everything was and the bond
action was just ho-hum, and the general commentary was
it was only a matter of time before they would recover
and thus the stock market would come roaring back.

Then rumors started to swirl that the Fed was having,
or would over the weekend, an emergency meeting
concerning a hedge fund bailout. Stocks then headed
straight south until the end of the day when "Mr. White
Hand" showed up for the umpteenth time to lift the Dow
50 points late in the going.

Well, as all of you know we have been alerting you to
hedge fund problems all week. No sense going into more
of that. But what is of significance is that GATA has
told the press and Congress that financial problems of
the Long-Term Capital Management type are lurking
beneath the surface that were never resolved after that
crisis. We told them that it was a time bomb and that
we felt it was only a matter of time before they could
be contained no longer. We told them that the gold
price was being manipulated lower in order to: 1)
protect certain financial entities that were short
"leased gold" as part of a "gold-carry trade"; 2) to
allow various financial institutions to continue to use
gold as a cheap source of financing; 3) to prevent
"force majeur," as the borrowed gold loans have risen
to such a degree that they could not be covered without
a major debacle if the gold price were to rise sharply;
4) to discredit gold so much that its sinking price
would draw attention away from the serious financial
problems gurgling out of sight from public view and

The Fed denied to comment the press on the rumors
yesterday, which is standard for them, but that they
had no comment was all over the wire services. We have
no further comment either on the hedge fund bailout
story except to alert you once again that something is
very wrong out there. You might recall that we just
told you about the big banking meeting in Philadelphia
in which all the participants were urged to reveal none
of the substance of the meeting. Fed Chairman Alan
Greenspan was rushed from that meeting, surrounded by a
phalanx of Secret Service agents. A clue that the
financial problems are serious is that the bond yields
have been soaring while the movement in the
Philadelphia Utility Index seems to be oblivious to the
bond market retreat -- an obvious divergence. The
recent bond debacle and that divergence are telling you
that the bonds are not tanking just on inflation fears;
there are liquidity problems out there.

On Thursday we alerted Cafe members that where there is
so much smoke there is probably fire. Charles Peabody
told you five months ago that there would be unintended
consequences from the Greenspan-led LTCM bailout and
series of interest rate cuts. He told you that the
unparalleled shift in the yield curve (short rates
staying down and long rates moving up) would not be
good for the banks. The bank stocks have already been
hit sharply and, if Charles is right, are just starting
their descent. He told you many months ago that the
financial problems were shifted, not fixed, by the LTCM
bailout, and that these problems would most likely
surface in late spring.

Midas has told you that the manipulation of the gold
market started in earnest right after the LTCM bailout.
That is clear. That is when the bullion dealers started
roaming South Africa and other mining locations,
offering unheard-of credit terms and begging the
producers to sell forward. That is when they got
together to stop gold rallies at $306 or so, $296, and
then $290. Out of bullets at $290, our officialdom
called on the English Poodle (Treasury) to make its
pathetically obvious announcement about its dumping 415
tonnes of gold. Clearly this was done to demoralize the
entire industry, and it worked as gold dropped $30.

Throughout this period we have identified Goldman Sachs
as goon squad leader, hit man against the gold market.
And to capsulize: we know that former New York Fed
Governor, Ed Corrigan is a top exec at Goldman; their
international economist Gavyn Davies is tied to British
Prime Minister Tony Blair; sources say Goldman Sachs
has a 1,000-tonne gold short position on their books;
and one could say that Treasury Secretary Robert Rubin
has some pretty close ties to Goldman as he used to be
their CEO. Then of course you have Jon Corzine, former
Goldman Sachs top dog, all buddy-buddy with John
Meriwether, LTCM chairman.

Do we really want to pick on Goldman Sachs? No! It is
just that everywhere we turn, there they are. Needless
to say, they have been noticeably on the sell side
almost every day since the BOE announcement. Yesterday
(with Fed emergency meeting rumors all over The
Street), they were finally buyers.

The point of going all over this again is that it would
appear we are here, or at least going into the period
when all that we have been talking about in the Cafe is
going to begin to surface. The bond yields surging to
6.15 percent is most likely the tipoff that what we
have been saying is correct. Liquidity is likely to
become a big issue. For example:

We have been alerted by Charles Peabody that about five
weeks ago many of the hedge funds put on the yen carry
trade. They borrowed money in yen and then bought
Treasury bonds thinking yields were going back down. A
successful trade such as that could help them with any
redemption or cash-flow problems. It backfired and they
have been exiting this trade the past few days. That we
know for sure.

Meanwhile back at the ranch, Britain's finance
minister, Gordon Brown, was all over the tape yesterday
talking about the righteousness of his gold decision
and saying he was confident of an agreement about IMF
gold sales by autumn. What timing! Just as bond yields
are surging and there was to be news about hedge fund
problems. This is more than redundant and sad; it shows
desperation. Gold has dropped $30 and he has to come
out with this headline, "U.K.'s Brown Sees Wide Support
for IMF Gold Sales."

Then there is this little tidbit which may have
everything to do with everything, or just be a
coincidental anecdote. We received information
yesterday morning that the president of one the largest
hedged gold producers was in New York telling hedge
funds that were short that "the game had changed." I
will leave that one alone for the time being. But I
submit to you that the jig is up for the colluders. We
are on to them and it is most likely that events will
begin to unfold in time that will expose their
nefarious activities and their role in this big

The scandal is that there has been a great manipulation
of the gold market that involves certain segments of
the present U.S. administration, foreign
administrations, and various bullion dealers. The
resulting suppression of the gold market has been put
into place to mask failed fiscal policies and to buy
time for greedy financial institutions that want riches
but are unwilling to face the consequences when their
trading strategies go bad. It is about hubris that
would make Zeus blush.

All the while an entire industry is being devastated,
as many gold-producing countries that are poor or need
the gold revenue are being squeezed. An entire segment
of investing shareholders is suffering terribly all
because they were not informed the game was going to be
rigged against them.

Unbelievably, while all this goes on, the financial
press is completely asleep, or, worse, just plain cowed
by the money powers. They say that bonds are tanking
because of inflation expectations and that gold is
tanking because of a LACK of inflation expectations. I
could go on and on here, but you know my spiel.

Instead, to enhance to what I am referring to, I
present an article this past Monday by John Crudele of
the New York Post, "Feds pass Fraud Buck to
Brokerages." While it is on a different subject, it
captures the essence of what one faces when one
presents information that takes on big money. The
mainstream press (wire services included) loves to talk
about the First Amendment and dissent, but present them
with a solid story that goes against big money or the
power structure in Washington and they retreat into a
shell. My naivete is gone forever. My disappointment in
the U.S. press grows and grows. No wonder financial
bombshells erupt out of nowhere.

John Crudele's N.Y. Post story:

"One defendant in a recent securities fraud case said he
tried to cooperate with prosecutors by giving up
damning information about two big Wall Street
investment firms. The U.S. Attorney's office in New
York said no thanks.

"A second defendant said he too was willing to give
damaging leads to prosecutors about one of those same
firms. He was also told that the feds weren't

"Then there is the case of a third man who recently
came to my attention -- a guy named Edward Manfredonia
who's been carrying on a five-year correspondence with
federal prosecutors in hopes he'll get someone
interested in corruption on Wall Street.

"`In the beginning, they were very interested. They
wired me. They were going to tap my phone. And then it
died,' said Manfredonia, who was a trader on the floor
of the American Stock Exchange before he turned into a
whistle-blowing, letter-writing reformer. Some members
of the Amex "bragged that it wouldn't be investigated.
It went too high" -- involved important people -- said
Manfredonia, whose accusations have been partly aired
already in a series of Business Week stories.

"The three men -- all of whom I spoke with last week --
have a simple question: Is someone protecting the Wall
Street big shots while the government goes after the
minnows? That isn't to say going after any wrongdoing
is bad. Anyone who ignores securities laws -- whether
they're home-based Internet traders or big firms --
should be punished. But most of the enforcement lately
has been against small fries, no big firms.

"For instance, a former partner of Spear, Leeds &
Kellogg last week was fined $100,000 for illegal
trading on the Amex. Pasquale Schettino, that former
partner, was barred for life by the National
Association of Securities Dealers for trading without
his company's or the exchange's approval. That case
came two months after a Spears trader was suspended and
another was barred from the industry over violations at
the New York Stock Exchange.

"Spear Leeds wasn't cited for any wrongdoing in either

"The NASD, the Amex and the NYSE wouldn't comment about
it The NASD also declined to comment to the Journal on
why Spear Leeds wasn't named or to confirm or deny any
ongoing investigation.

"The U.S. attorney's office in Manhattan says it
evaluates cases on an individual basis and that no deal
exists for the securities industry to handle its own
problems. There are explanations for refusing to accept
information. The U.S. attorney's office in lower
Manhattan, famous for going after every Wall Street
violator back in the '80s when now-Mayor Rudy Giuliani
was in charge, may simply think the information being
offered wouldn't be useful. Or wrong.

"Or, in not accepting information about big, powerful
securities firms, the regulator/prosecutor
establishment may understand that there are other ways
for these matters to be handled -- like the Schettino
matter was, through disciplinary channels. But if this
trader breached securities laws, why wasn't he
prosecuted the way someone would be if he was tipped
off about an upcoming takeover?

"While authorities say Schettino didn't make any money,
the whistle-blowers -- one of whom was intimately
involved in that case -- say there are plenty of
examples of illegal profiteering by securities
professionals. One of the snitches says he volunteered
to give authorities information on illegal activities
of two major firms. `They don't care,' he said. 

"Says another source: `We spoke about (one company).
They didn't say anything. They didn't care. We didn't
get an answer back.'

"The most prominent case in recent months has been the
one against people connected with Oakford Corp., which
wasn't a member of the NYSE but which did trade through
brokers on the floor of that exchange. In that case,
charges were filed through criminal channels and not
administrative ones. And people are going to jail.

"Plus, published reports say that another 64 brokers on
the NYSE floor are under investigation, some as
offshoots of the Oakford probe. But the betting is
they will be handled through securities industry
channels. And if wrongdoing is found, my three sources
above believe something akin to the Schettino
punishment will be invoked.

"In fact, the ambiguity of the rules may convince
criminal authorities that it would be best to let the
brokerage industry regulate itself. That would be
especially handy for everyone if large and powerful
Wall Street firms suddenly find themselves in the
target area."

Yes, the stench grows. Which brings me back to when we
were berated publicly by Long-Term Capital Management's
P.R. firm in a Dow Jones newswire story about GATA that
was vanilla-ized by editors to such a degree that it
was of interest to no one. In that story, LTCM decried
the claim that they "traded" gold. (We never said they
did; we said they borrowed gold.) Their senior counsel
called our attorney making similar denials and said he
would send a letter making his denials official.

Well, we have waited long enough. The letter from the
LTCM lawyer NEVER came. And yesterday, in a potential
breakthrough, a source of ours confirmed to us that he
knows a former trader at LTCM who confirmed to him that
the firm was up to its eyeballs in the gold-carry
trade. We will protect our source, and the trader, just
as any other journalist would. A bit like "Deep Throat"
was protected.

It is now time to go out and enjoy the weekend, but
from a gold family standpoint, this is all good news. A
big, big move in the gold market is not far off. That
is what the bonds, silver, oil market (headed toward
$19 per barrel and more again), and XAU are telling us.
When this financial scandal is exposed, the world will
finally realize why gold has performed so badly. They
will learn that it was not gold that performed so
badly; it was the manipulators that have given us such
a lousy performance. And they will get the hook for
such scandalous behavior.

Before they do, the price of gold will soar as they try
and cover their shorts. There will be a breaking of the
ranks, like rats leaving a sinking ship. It happened
during the financial crisis of late last summer. There
will be no honor in this den of thieves either. It will
start as some will run for the hills as they learn the
jig is up; that will be followed by panic gold buying.

Yes, our day is coming, and as I said in my speech to
the Northeast Mining Investment Conference, we are
going to be the ones with the happy grins on our faces.


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