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Dispatch from Bill Murphy: This is war!
12:45a Saturday, July 24, 1999
Dear Friend of GATA and Gold:
This dispatch from GATA Chairman Bill Murphy is very
interesting. Please post it as seems useful.
With good wishes.
CHRIS POWELL, Secretary
Gold Anti-Trust Action Committee Inc.
* * *
Friday, June 23, 1999
I spoke with Charles Peabody today and I want to convey
his thinking to you because there is no hotter bond
analyst around than Charles.
We have been telling LeMetropole Cafe members for weeks
that something is very amiss in the financial arena,
and Midas has expressed his opinion that it is part of
the reason for the gold market manipulation. As Murray
Pollitt says, when you go hunting and all of a sudden
the little animals come running of the bush, you know
there is something ferocious that has scared them out.
That is clear, but you just do not know what it is --
at least for a while.
Well, Charles points out that 10-year swap spreads just
went to 10-year highs. This term was new to me but
Charles said that in the fixed-income world it
signifies liquidity fears. The spreads are higher now
than at any time in the 1990s. You may check out the
dramatic move of this spread by going to this chart:
Down and dirty for the rest of this conversation.
1) The word in the bond world today is that there is
some big financial event about to unfold that will
shake investor confidence to some degree. Today the
South Korean market was down 7 percent, and we heard
rumors of panic buying of Hong Kong dollars. The event
that is coming may be related to Daewoo, the South
Korean chaebol that is supposedly having difficulty. Or
the hidden financial problem that Midas has discussed
for months may be of a different nature. Hard to say.
2) Corporate treasurers are rushing to the issuance
window. Charles Peabody says they listened to Greenspan
and word is spreading that interest rates are going up
and they want to raise money before the credit window
on money at this level closes.
3) The widening swap spreads are telling us that
another Long-Term Capital Management problem may be
right around the corner. How so? Interest rates are
going up. Credit spreads are widening and loan
originations are declining. The probability of that is
only 1 percent. That kind of incredibly low probability
is what blew up LTCM. There is a logical reason the
probability is so low. Almost always when credit
spreads widen, there is a flight to safety and bonds go
up in price, not down, as in the last two days. As a
result, some quot;black boxquot; hedge fund trading operations
may be in deep trouble again.
Yes, all of this reinforces our gold-market
manipulation claims, big-time. Today oil was up some 60
cents, the CRB was up over 2 points and about to make
multi-month highs, base metals in London were all very
strong, beans and corn were almost limit-up, silver was
up, bonds were down, etc. Yet gold went $1.30 lower,
with Goldman Sachs a late seller.
I am not going to belabor Midas' and GATA's views, but
how clear can this be about what this crowd is doing
and has fostered? Along this line, more people called
me today than ever asking how could gold -- now priced
in the $250s -- not go up when it is plain as day that
times are changing and it is so cheap?
You already know what I told them. On a positive note,
we are stepping up our effort to advise Congress of the
gold market manipulation, and we have more
congressional ears listening. It is now clear to GATA
that the Clinton administration, the Blair
administration in Britain, the bullion dealers, and,
most likely, some gold producers are colluding to hold
down the price of gold.
GATA has no political axe to grind, but we are shifting
strategy to become involved in the political arena to a
greater degree, and it began with the letter to Senator
Gramm, chairman of the Senate Banking Committee. We
will let you know more about this in the weeks to come.
But, in essence, it is a quot;take no prisonersquot;
philosophy. Today's gold action is just one example of
the lengths to which the other side will go to suppress
the price of gold to protect their other financial
interests. This devastation must end. This is war!
The response to the letter to Senator Gramm was a
quiet, smoldering one at first, but today responses
about what we revealed in that letter have triggered
revelations that are politically explosive. We have
gone to Congress again and disclosed what we know. This
is not hype, but please do not ask about the nature of
what we know because the next time, we hope, you will
hear about this will be from someone in Congress.
BILL quot;MIDASquot; MURPHY