A wounded deer leaps highest. Emily Dickinson, Poem #165

Thomas Hardie, foreign correspondent for UPI, while having dinner in Baltimore in 1958 at a friend's home who had recently returned from Paris, was startled by the coating of a non-stick pan that had been brought from France, named Tefal. Hardie flew to the Tefal factory outside Paris and learned from President Marc Gregoire that a friend had showed him how to affix a thin layer of a new plastic to coat his fishing tackle so as to minimize sticking and tangling after which his wife had conceived the idea of coating her cookware with it. To please her, he coated one of her frying pans, and soon French stores were selling more than a million Tefal-coated pans a year. Hardie was shocked to disbelief that the miracle product had not reached America, and in the next two years he called on every major cooking-utensil manufacturer in the US, but not one expressed the slightest interest. So Hardie cabled Gregoire to ship him 3,000 pans, and then forwarded a complimentary sample to 100-major department stores, but not a single buyer placed an order because not one believed that the pans were stick-free from food. Finally, he persuaded Macy's Herald Square in New York to take 200 pans priced at $6.94, and they went on sale on 15 Dec 60 during a severe snowstorm; nonetheless the stock was sold out in only two days. When Paris could no longer meet American demand, Hardie formed his own company in 1961, in Timonium Maryland. And where did this "new" plastic come from? At DuPont's New Jersey laboratory, way back on 6 Apr 38, Dr Roy Plunkett examined a container of coolant gases of the type used in refrigerators and air conditioners, that had been stored overnight. It should have been a cold gas, but it had instead congealed to form a waxy solid that was not only incredibly slippery, but also impervious to the many corrosive chemicals to which he subjected it. He named the compound "teflon," short for tetrafluoroethylene. (The Guiness Book of World Records would later list it as the slipperiest substance on Earth.) Today teflon is used in spacesuits, computer microchips, replaces arteries of the human heart, serves as a heat shield during a rocket's re-entry into the Earth's hemisphere, has been applied to the Statue of Liberty's 15-thousand joints to slow her aging, coats lightbulbs to minimize shattering, and is applied to automotive brakes to reduce the wear and tear of friction. Discoverer Plunkett was inducted into the National Inventors' Hall of Fame in 1985, 47 years after his discovery of that fluoronated hydrocarbon.

And so it is with new discoveries, disbelieved by all at first, because those who are first always "look wrong," by definition. How could we make money knowing this? Applied to the stock market, palladium is in a teflonized Uptrend, visible to everybody's naked eye in the chart on page one. As is platinum, both of which erupted this week, yet was scarcely noticed in the world's press. Consequently, it should be no surprise that the press likewise remains unaware of Stillwater Mining, America's largest producer of platinum and palladium, and that is your buying opportunity, before it is too late.

Franco-Nevada is also in the teflonized chart on the front page. We have never seen a report from any other Analyst in the world that really understands this company, or why it keeps making new highs regardless of the price of gold.

In fact, the entire gold group is awakening, as can be seen by the charts in this issue. The Mass Pessimism brought on by the Bre-X scandal has run its course and wounded the golds, that company has been disgraced, Bre-X investors who lost money have lost it, everybody in the world who was going to have sold golds because of Bre-X has sold, therefore the path of least resistance is up. We flashed this buy signal on the golds in our ninth Interim Warning Bulletin (IWB) of the year on 24 Apr 97: "DIGSIC has descended into the "Buy" zone again, suggesting that there will be a short-term rally by the precious metals imminently, probably no later than the middle of next week. The Canadian gold market is wallowing in pessimism, so with DIGSIC (top, right) on a Buy, this looks like a time to scoop up some half-priced bargains. It's psychologically difficult buying at Bottoms."

Indeed, by a stroke of luck, the XAU Gold Average turned up on precisely the day of that Interim Warning Bulletin, during the depths of despair and pessimism, a classic buy signal based on Mass Psychology. The new bullish phase is starting out in orthodox fashion, with strength in blue-chips such as Placer, Newmont, and Barrick, but it will soon radiate toward mid-caps such as TVX, Cambior and Agnico-Eagle. Finally, the extraordinarily depressed low-priced juniors will recover from their flat-on-their-backs levels, so the bargains are there to be bought right now. We believe that this is a path to profit. Indeed, looking back, a number of golds and silvers have already made their lows earlier this year, and April's Bre-X madness was merely a retest of those earlier lows (see chart, left). Why should the golds go up? What might trigger a rally? The real answer is Mass Pessimism, as we are one of the very few remaining optimists on precious metals, and this is typical of gold Bottoms. But the more obvious trigger will probably be either in the currency markets, or some kind of banking crisis. When we turned bearish on Japan in 1989, we began warning about the Japanese banking system, but few paid attention at the time because Japanese business was idolized, and bad news emanating from Japan was considered extremely unlikely another Mass-Psychological sign of a Top.

More likely, gold bullishness will come from the currency markets, which are so heavily manipulated by governments that it is not easy to make predictions without access to secret decisions in faraway places. In any event, the dollar has been plunging and the countertrend precious metals have firmed up from their overly-depressed levels brought on by the Bre-X selling panic. True bull markets shrug off bad news like water off a teflonized duck's back, and continue "invisibly" during periods of superficial weakness.

Last year we warned that the soaring US dollar would harm our exporters, which indeed proved to have been a boon for European and Japanese exporters, and now it's all over the headlines. But that's today's news. Looking ahead, by 1999 the currencies of many major European countries will be replaced by a new currency the "euro." This newsletter was the first to warn of "The Coming Competing Currency Devaluations," for which you might want to review your editor's second book The Invisible Crash, published in 1975. Which will even apply to the euro itself, as governments are now becoming fond of deliberately devaluing their currencies to help their exporters, a beggar-thy-neighbor policy that is the modern equivalent of the infamously protectionist Smoot-Hawley Act that aggravated the Great Depression of the 1930s. The stage is carefully being laid for the next Major bear market, but it is too soon to worry about that just yet. Please read excerpts 1 and 2 at the end of this feature in that regard. We heap scorn on the euro, yet another in a long line of futile attempts to replace gold. Gold already is the single currency, and a euro consisting of different piles of paper will be a house of cards mark our words.

The second probable reason for a bull market in golds is a resurgence of inflation. Now, now, no need to remind us that everybody, from President Clinton and Fedhead Greenspan on down, insists that there is "no inflation" in sight, and that the latest Producer Price Index reported on April 14th was minus 0.6%. We're not going to get into whether our Government is lying or merely - mistaken, but you pay us to call the shots as we see them. And, excuse us, but we see inflation. As evidence, look at the higher prices in commodities such as petroleum, copper, aluminum, nickel, uranium, titanium, cobalt, zinc, coffee, grains, cattle and beans. "Wine Prices are Soaring" was the headline for a Wall Street Journal article on 2 May 97. Again, on May 2nd the Wall Street Journal had an article entitled, "Art Sellers Rush to Spring Auctions While Markets Still the Picture of Health," so the latest auctions show that collectibles are again in demand. Real-estate prices are rising strongly, as are stock prices. We remain rampantly bullish on the economy, which has been a radical prediction so we take the iconoclastic position that inflation will roar back. Our charts of Futures (top, right) are in Uptrends. "No sign of inflation"? Look, don't think are your prices falling, as Government figures indicate?

Indeed, two of the very few inflation hedges not up yet are gold and silver, but they can be suppressed by governments for only so long.

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