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Strange how wars start. Superficially, it is over something noble: Honor, Justice, Right, Truth, Terrorism, God...ah, that last word...God...This is the secret hold card in the deck, the one seldom mentioned but the one which is at the core of Bush's vindication and the word which will not only disrupt and wring economic changes but that word which will eventually bankrupt the West and pit Christians against Moslems ...

As Freud eschewed, the Subconscious can serve as a greater force than the Conscious. Add the third force, the Libido, to this recipe and much of life, as attested by the Iraq debacle, becomes sheer illusion. All the pretexts in the world: WMD's, Good vs. Evil, ridding the world of tyranny-- will not disguise what this war has evolved into: two disparate religions whose adherents foster deeply-seeded animosities towards one-another... For years these animosities have been cloaked by Western-appointed dictatorships, oil-generated kickbacks to various and sundry shahs and sheiks and, primarily, the Western-Communist conflict which curried favor for balance-of-power in the Mideast .The War, however, rather than providing a panacea, a stability, for Freedom, Democracy, promotion of capitalistic ventures, has generated quite the opposite: nearly universal scorn for the US as well as a resurgence in Terrorism... Is there a solution for this morass? Nothing short of retreat and pare down losses. The war is approaching the trillion dollar mark and, ironically, will ultimately result in the very same military-economic scenario which brought down the Soviet Union: bankruptcy.

Of course, with our false military bravado, we can still bully many a nation into accepting our counterfeit currency via Treasury Bonds; furthermore, it appears we are teaching them our comrades our bag of tricks (utilizing the bully pulpit)--printing money non-stop, contorting monetary indices, massive debt along with contrived non-existent interest rates for repayment, and spend, spend, spend... This inanity might even succeed--if we shared our avarice with the rest of the world, yet the Trilateral, CFR, World Bank philosophy is to expend the riches of the Have's at the behest of the Have-Not's... Why not, at least, allow everybody to participate in the charade (which would extend "prosperity" until the massive debt piled up beyond repair)...Give Africa and all "Third World" nations all the cars, appliances, houses they desire and let them charge it as we do...Sell WMD's to all nations (at gigantic profits). Why should just "friends" such as China, North Korea, Pakistan, Turkey and Russia have them when we could play much more creative war games if everybody had them! In the meantime, through our "free enterprise system," we can continue to rig economic markets through jiggling interest rates, derivatives and propaganda so that if some country doesn't agree with our dictums, we can bankrupt them and appoint our own governing councils...Our politicians, lawyers, bankers and military have brought dictatorial powers to a new level of sophistication!

Where to place our money then? Sorry to say but nothing is safe, sacrosanct...Gold should be, however, too many powers have a lot to lose if gold replaces their currencies. Eventually, gold will win, but the battle will be a long, torturous one. The US holds a "Donald Trump" bankrupt card on the table. If creditors try to force the US hand and fail to take our Treasuries, if we go down, not only will they not get paid, but they will go down with us. Our only hope is after printing so much money, we gain control of all the world's oil, military juntas and terrorist (which will be deemed "anybody anti-US-anything) groups...In the meanwhile, the Iraq War goes on until the real enemy, the way the people and religious leaders think, is annihilated. Hmm. how are we going to wipe out a whole country and make it look like they were all terrorists?

Isn't this a cozy scenario? Just as it appeared Europe was poised to heed market forces and raise interest rates, she succumbed to the US's scam of artificially lowering rates while creating more debt through profligate spending while benignly neglecting the fall of (i.e.: the default of) the dollar...In the long run, it won't work! But who cares about the 'long run?' This is the Age of Instant Gratification. So long as we can have a Roman Orgy today, who cares about the problems our children face tomorrow?

What will result in the demise of the US's (notice how I don't spell out Bush in particular, as he's just the newest link in an idiot chain of politicians?) dollar-scam is pure economics. Credit can only go so far. Because the US Treasury has the highest credit rating (and will be the last to be accountable), the State coffers/notes/bonds, the City's and, first and foremost, the general public will be the first to fall. As in the stock scams in the past decade, the first out and least hurt will be the directors, CEO's and banks; the general public/stockholders will be the first to lose their capital (Capitol?)....The bond market bubble/crash is only a matter of time ...And, while we're at it, good-luck on the real-estate bubble. The only thing keeping that game going is 125% equity on homes, 0% credit cards and trick-bank-accounting averting foreclosures...Who was it who held his finger in the dyke so the floodwaters would tear down the dam? We need him today so that when inflation breaks through her walls, we can pretend that, too, is being held in check.

Act II: While banker/broker induced euphoria is running rampant on the stock market, goading us into believing that everything is coming back and the last "correction" was but an aberration, a tug-of-war is ensuing in the gold stocks. In short, they are in stagnation, holders and investment services are disgruntled and many technicians are pointing to a final topping-out phase. Are they correct?

First off, let me play Nostradamus for a moment: the longer the wait, the greater the orgasm. We paused at $330 gold for what appeared an eternity. 330 was our first major resistance area. 430 is our second major resistance area. The longer it takes for us to crack 430, the greater the uprising till we try to take out our old all-time highs in the 850 areas, our next major resistance area. If we crack 880, we're off to the races and 1000 will go down as fast as wheat chaff under a combine!

For those subscribers who have not yet contacted me about personal consultations this month: I have some additions and reductions in gold holdings. There will be a three-way street in gold stocks ahead: those mines with political problems, those mines with currency/derivative problems and those mines with green-light, high margin profits. The scene shifts constantly and those mines recommended yesterday may prove to be boondoggles tomorrow. Stay abreast.

As the euphoria grows and our political guardians either paint a glowing picture or a growing morass, as investors, what are we to believe?

An indisputable fact is that the Dow Jones Industrial Average is within 1,000 points of its all time high of 11,800+. My bet is that the Industrials will push through the all-time high shortly--just in time for the Bush camp to proclaim economic victory! Should we then, also, proclaim an economic transformation? And suppose that the S&P also makes an all-time high? Isn't that the icing on the cake? Yes, for the large caps...

Unfortunately, stock market highs in a few indices do not always confirm a bull-movement. The market is comprised of diverse averages including the NASDAQ, the Dow Jones Utilities and the Dow Jones Transports. If these indices fail to reach new highs within 90 days of the Dow Industrials, this is alluded to a non-confirmation and typifies a very dangerous situation for those indices attaining major tops...

This case is especially true for the NASDAQ which, although rallying practically double from 1108 to well over 2000 is still down from its high of 5133 reached in March of 2000. So, for all intents and purposes, this means that the general run-of the-mill small cap stock is still down almost two-thirds from its top. The odds of that index superceding its old high within 90 days of the Industrial breakthrough are about as valid as my alma-mater, Stetson, winning the NCAA's...Furthermore, the Dow Transports (conveniently overlooked by the "new analysts" on the Street) needs to move from the 2900 to the 3200 area by that time...I don't see that in the offing; therefore, I see a double-non-confirmation and a false top--or, as the Fibonacci Theory goes, a 3 down wave cycle of down/up/down--with the last down being the longest and most precarious as adjudged by historical standards.

How long do we have to wallow in any long positions? Enough to fool anybody and everybody! The market, as it did in March of 2000, wants to suck in as many suckers as humanly possible. Already everybody has forgotten about the last crash (or brokers propagandize on how the Industrials have recovered and only fools with the wrong stocks have been hurt--even though they conveniently fail to mention that either they or their firms recommended these 'wrong stocks' way back when). All we hear today is how by not reinvesting we have lost at least 100% gain back on our money. By all means, go for it! But be sure to be near the fire exit, when the first bodies scream, "Fire!!"

Are we being lied to (again?) by our beloved solons and politicians in Washington (and all points north, south, east and west)? Let's not even go into campaign promises over the Environment, Social Security, Health, Budget, Let-No-Child-Be-Left-Behind--not to speak of WMD. It is a truism that politicians say and do anything to get elected; however, today we are no longer dealing with a president being caught with his pants down or an Iran-Contra duplicity or a Bay of Pigs. We are dealing with the oncoming bankruptcy of the United States--provided we continue down the same road President Bush is "leading" us down...

The Federal Government is no more exempt from bankruptcy than a common citizen--only as with a Caesar, a Napoleon, a Hitler, governments can resort to power-ploys to try and extricate themselves from deceits and travesties. The problem with our present day government is not only are we dealing with deceit, obfuscation, disinformation, but we are dealing with a bunch of ignorant buffoons who have about as much understanding of budgets as a kid in a candy store, a bull in a china shop or a bulldozer tearing down a mall. And their arguments are no more rational than the kid's, the bull's or the bulldozer's: we are every bit as guilty as they for acceding to their specious arguments for more spending, less taxes. We deserve what we are going to get: bankruptcy!

If we as citizens tried to pull these shenanigans, we would encounter little tolerance from our creditors.. If somehow our credit card payment was lost-in-the-mail or the statement didn't arrive, etc. and we are one day late, that one payment past due would enter our credit reports and we would be placed on Watch Alert. Furthermore, if the company we were working for declared bankruptcy (after the CEO's had fleeced it through exercising their options) and we fell behind on our payments, we would soon face judgments, foreclosures and confiscations. We may have all the good intentions (and bad luck) in the world, but that doesn't matter to our creditors: they want their money or legal action!

But because the dollar has served as the world's reserve currency for the better part of a century (originally backed by gold reserves), no foreign governments have dared question the validity of our various treasury bonds used to finance our debt--and even though we have been running monstrous budget deficits and negative balances-of-trade, foreigners have put up with us for numerous reasons, not the least of which is greed; .however, this equation has now changed--not because "Operation Iraqi Freedom" has siphoned off billions of dollars from our finances, but because (1) we have defied the UN mandate, (2) we have created an Arab jihad not only rivaling but superceding the one against Israel and (3) we have made fools of ourselves in the world's eyes with our paranoiac obsession with Terrorism and by acting like wild cowboys shooting up an Indian reservation and expecting subservience in return. Many nations in the would like nothing better than to see our comeuppance.

"Then why," you may ask, "does the rest of the world put up with our devaluation of the dollar and our supercilious Holier-Than-Thou attitude?" Simply because as grim as the outlook for the dollar may be, if our ship sinks, their ships sink with us. Their think tanks are working overtime on how we can mire in our own quicksand, how they can smash the dollar and still get repaid. Before the high-tech crash, their answer was, "Invest in the stock market bubble." That magical carpet ride plummeted. Next, the Feds pulled another fast one and virtually declared there would be little to no interest paid on debt, so those countries being paid 2-4% interest on Treasuries would up with massive losses due to a 8-12% depreciating dollar. Only China resisted this devaluation by pegging their Yuan in the 8.28 area--to insure no further currency losses. They still retain vast real estate holdings, but wait till that bubble bursts!

Despite all the political jawboning for a maintenance of a strong dollar and the solvency of the US economy , one salient fact remains: the US will continue to devalue the dollar in order to pay back less in debt; in short, the US--like anybody in bankruptcy--has no desire to pay back its debts-- EVER. Will all the Bush military might and righteous preaching ultimately convince foreign governments to accept our default? The time is drawing nigh. The chips are on the proverbial poker table and are readying to be called!

2004 will be the year gold makes its decisive breakthrough. Does that mean rush out and buy gold bullion/gold coins/gold stocks? Only if you are the kind of boater who tackles whitewater, hazards and upsets--and can roll up from them. If you are a calm-water boater and are afraid to swim, stay out of these hazardous waters!

If gold will ultimately breakthrough its major resistance area of 425 in 2004 and start moving into its second and most truculent leg in which it will test its all time high of 800+, then why proceed with caution? Why not just take a position and/or pyramid new positions? Because success, in whatever endeavor, breeds overweening contempt. We may all admire a successful business person, entertainer, politician, but when the downfall arrives, especially if some sort of stigma is attached to that person's venture, we smugly gloat at the comeuppance. How many of us love to see dynasties such as the Yankees, Lakers or a Mike Tyson lose? And thus it is and has been with gold...Gold's very success produces furor in the eyes of stockholders and investment advisors losing on the markets, politicians blaming their monetary ineptitudes on gold-speculators and the general public being duped into believing gold, not the mismanagement of the Federal Reserve, has served as the cause of erosion in their purchasing power and standards-of-living. What these people fail to understand is that gold is a reflection, a conscience of monetary unrestraint--not its catapulting force.

Back in the late 1970's when inflation was running rampant, commodity prices were spiraling through all-time highs, CD rates were approaching 20%, who did our "authorities" try to blame? The egregious gold and silver speculators for our monetary upheaval (along with the greedy Arabs for spiking up oil prices). No politician, military bigwig or banker was about to say it was their fault for the unrestrained Great Society programs/deficits, the Vietnam War folly or credit spigots. It was the fault of people like the Hunt Brothers-- unpatriotic, unscrupulous urchins who were cornering the commodity markets at the expense of the sweet, innocent American public.

Here we are again, 25 years later, 2004, but instead of a little matter of hyper-inflation, we are going to get whipsawed by a double-whammy of inflation/deflation (higher prices, lower wages), a worthless dollar, a loss of worldwide respect (Caesar, Napoleon and Hitler all proved military might = foreign plight) and our civil rights scurried in the name of "Homeland Security." So why or why not gold?

1. Gold bullion, gold coins and gold stocks (we'll discuss silver and platinum later) will all move to all-time highs.

2. Gold will be a prime protection against the dollar rummaging around for bargain-basement lows.

3. The fundamentals of gold are positive: more gold is being consumed than produced. New mining will take another four to five years to meet this deficit.

4. China, Japan (if the Yen does not go belly-up supporting the dollar) and the Mideast (who certainly don't want their oil dollars confiscated for faulty political views) and, traditionally, India will all be neat buyers and overwhelm any European Central Bank sales. China is a particularly interest case. Not only will an affluent bourgeois hoard gold but, little by little, the politicians will grasp that by gaining control of the world's gold supply, they will control global power much more expeditiously than by militancy (a Marxian axiom). Thus, once China commits to converting worthless dollars into gold, it will become the world's 21st Century Superpower (and we shall supplant their coolie system).

5. The technicals are all in place for the move from 320 to 425. Once we crack 425-430 resistance area, we will have only two minor (which could take months to crack, however; remember the longer a movement evolves, the slower each movement between support levels takes) resistance areas to penetrate before testing our old highs at 800 (once that is breached, who knows--especially if takes many months)?

1.Gold's success will be its own worst enemy. As we discussed previously, gold will attract many jealous, on-the-wrong-side-of-the-tracks losers who would like nothing more than to contribute to gold's demise (countries who wish to promote their own worthless currencies at the expense of gold--as well as the usual suspects of "investment advisors," bankers, politicians and "super-patriots.").Right now, however, the War is providing excellent fodder for gold to be sneaking higher without undue fanfare. So long as this War is prolonged and protracted, Central Bank sales will have only a tentative effect on slowing down the gold-engine.

2. Not all gold companies will benefit from the rise in price of gold. This is where things will get very tricky. In almost all group rotations, the entire group benefits simultaneously--some companies, of course, more than others. Such will not be the case with the gold sector, for there are four mitigating forces at work: (1) companies which hedge their books, (2) companies in countries with strong currencies, (3) companies in countries with political instability and (4) companies mining in politically-stable countries. In the first three case-scenarios, it may prove perilous to buy into these gold-mining stocks. American Barracks (ABX) is a case-in-point. Whereas the HUI index has more than doubled in the past year, Barracks has posted less than half that. A company with a surprising de-facto hedge has been Goldcorps (GG) who chose to sell its reserves at market, thus creating a mini-psychological panic and a stunting of its own share price, the view being that it did not trust the price of gold at these levels and wanted to get out while the getting was good...In the second scenario, gold is still not in a bull trend in countries with currencies strong against the dollar (South Africa, Euro countries, Japan). In South Africa and the Philippines' cases, Nationalization is a conceivable factor and these mines should be avoided. The demise of these companies, like capsizing in capturing a marlin, sometimes have an imminent effect upon the entire gold index. They are but small outgoing tides and will not countervail the thunderous body of arriving waves.

3. Fundamentally, the gold market will be inundated from time-to-time by sellers who, for whatever reason, panic and sell their positions. Remember, the price of gold is not necessarily contingent on supply and demand. Derivatives can determine market movements over the short haul. The collusion of Chase and Barracks is a case-in-point. By selling without the physical metal, they were able to depress the price of gold for many months. All it takes is a plethora of "paper-sellers" (short sellers) to finagle the gold price around and panic speculators who may not believe in the basic upward movement.

4. Pure technicals always command a correction and often these corrections are vicious and scary. They even make the most reverent gold-bug doubtful. Take the years from 1980 through 2000. False rallies. Lost money during these rallies. But remember this: in hindsight, we can say these were bear-market rallies (just as the current NYSE will prove to be). Once gold breaks through the 425 resistance line. we will be off to the races; otherwise, we are only part of another bear-market rally in gold and can get wiped out...HOWEVER, we will make a convincing double-top before this will ensue. If you don't know when that is, go with Gold-Advisors who do!

5. Confiscation of gold. It happened in the 30's with FDR and it can and probably will happen again. The general public will be out of work and politicians will be elected by promising to punish those speculators who benefited from the crash of the stock markets. Last time around, gold stocks were unaffected--only the bullion was seized. Silver and platinum are alternatives--especially platinum. In the 70's, certain moguls were so intrepid with a possible stock market crash that they converted their wealth into platinum bullion (which weighs far less than gold), stuck it in a briefcase and tripped the light fantastic! One great thing about living in a bureaucracy: it takes the knuckleheads eons to legislate. We will have time to counterattack and protect our assets!

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