I'm Mad as Hell
...and I Won't Take it Anymore!
Yesterday the following news item appeared via Bloomberg:
http://quote.bloomberg.com/fgcgi.cgi?ptitle=Securities%20Firms%20News&b1=ad_bottom1&br=blk&tp=ad_topright&T=wealthstory.
ht&s=APcviCRV_R29sZG1h
Goldman's New York Gold Mining Equity Analyst McConvey Fired
By Claudia Carpenter
New York, Nov. 8 (Bloomberg) -- Goldman, Sachs & Co. gold mining analyst Daniel McConvey was fired after five years on the job as the securities firm halted research on the industry amid a slump in business on Wall Street. ``I was a casualty of downsizing,'' McConvey, 47, said in a telephone interview from his home in Berkeley Heights, New Jersey. Goldman spokesman Ed Canaday in New York said the company has dropped coverage of 12 gold-mining companies that McConvey covered, including Newmont Mining Corp., the world's biggest gold producer. McConvey joined Goldman in 1997 after three years at Lehman Brothers Inc., and before that he was a comptroller at Barrick Gold Corp. in Toronto. In May, McConvey said gold would have a hard time extending its 17 percent gain this year.
Gold prices in New York are now up 16 percent for this year, trading at around $320 an ounce. A war with Iraq is gold's best chance of climbing further, and even then it probably wouldn't go much over $350 an ounce,
McConvey said.
``The problem with $500 gold is there's so much scrap in the world'' that any price above $350 would probably lead investors to sell some of their holdings rather than buy more, he said.
``You're going to need central bank buying to support gold prices significantly over $350, and at this point I think the chances of that are low,'' McConvey said.
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Of course, there is absolutely no doubt that downsizing is occurring within the investment bank sector. We have seen numerous press releases from a variety of investment firms indicating that they are taking severe measures to cut labor costs now that mergers and acquisitions, IPO's, secondary offerings, etc. have effectively dried up during the current stock bear market.
However, the gold sector has been one of the strongest performers in the current bear market. So for Goldman Sachs and its obedient gold mining analyst to imply that coverage of the gold sector is no longer warranted simply adds another piece of evidence to the charges of collusion, cronyism, price rigging, and moral hazard within the gold market.
After all, when tech stocks were outperforming all other sectors in 1996, would it not have seemed strange if Goldman abruptly stepped forward and announced it would drop coverage of tech stocks and suspend all its tech stock analysts?
Would Goldman be willing to suspend coverage of Coke, the world's largest cola maker...yet for some bizarre reason, Goldman has absolutely no trouble in suspending coverage of Newmont, the world's largest gold producer?
In the forementioned press release there is no mention whatsoever that the Goldman mining analyst, who was once comptroller for Barrick Gold, happened to serve under Barrick at a time when the company abruptly
transformed itself into a de facto gold short hedge fund by selling forward 75% of its gold production at prices ranging between 360 and 400 an ounce? Doesn't such background info seem pertinent to understanding the man's negative perspectives on gold?
Why would any impartial press release pertaining to the gold sector only address the issue of scrap gold availability while entirely ignoring the astronomical gold short position held by Wall Street's major bullion banks?
How can a "balanced" press release only provide comments on the gold industry from a gold short bullion bank like Goldman (currently under SEC investigation for stock laddering in the IPO market) without providing a second opinion from, for example, a gold-friendly, unhedged producer like Goldcorp or gold's latest champion, Chris Thompson, the head of the
World Gold Council?
When JP Morgan steps forward and screams that rumors pertaining to its enormous, underwater gold derivatives position are specious and irresponsible, why does the "impartial" press release fail to provide background to the effect that JP Morgan is now under investigation for its role in establishing phony offshore trading corporations for the purposes of defrauding Enron's various counterparties? Isn't such background info pertinent to the determination of the veracity of JP Morgan's comments?
There is a stink within the gold sector today that is palpable and incontrovertible.
What is even more galling is the major media's direct complicity in perpetuating an unrelenting torrent of anti-gold propaganda. The latest Bloomberg release is yet another example of tendentious mass "brainwashing" masquerading as real news, executed in a manner more reminiscent of the old communist Soviet press arm, Tass, than what one would expect of a fair Western media agency.
Where is the counterbalance?
When Goldman's McConvey states that a war with Iraq might raise the gold price to $350 at best, no doubt he extrapolates from gold's performance in the last encounter with that Middle Eastern nation.
But haven't things changed?
Back then, the gold carry trade had barely been established and the aggregate gold short position held by bullion banks had not begun to approach the current estimated 10,000 physical tons of gold (equivalent to approximately four years of total
global new gold production)
Back then, the US had not been hobbled by a single terrorist group (Al Qaeda) which managed to destroy one of America's leading symbols of economic power, the World Trade Center. In doing so, Al Qaeda showed the world that America is far from invincible today.
Back then, there were much better relations between America and the Arab world, having since deteriorated considerably as a consequence of America's intensive investigation of domestic Arab investments following the September 11 attacks.
Back then, Iraq had yet to be humiliated in a swift, one-sided war -- and remember, the last time a country was humiliated in a 20th century war (Germany, World War I), that very same country struck back the next time (11 years later) with a force and fury far greater than in the initial encounter.
Back then, there was no stock bubble. There was no bond bubble. There was no US dollar bubble. There was no real estate bubble. In other words, there was no confluence of economic factors that might lead to the
triggering of a "perfect financial storm," the one event almost certain to inspire a mass flight to safety into precious metals.
Back then, America had not gone through a triangle of events that shattered the image of the US government's good faith (and remember... good faith is ALL that backs the US dollar today): the impeachment of Clinton, followed by his refusal to step down and place the country's interests above his own personal interests; the public dispute between Gore and Bush over the results of the election, in which for a whole month, the nation's two leading political parties priortized their own interests above the country's interests; and the collapse of Enron, one of America's leading corporations, whose litany of malfeasance can be traced directly to both the Clinton and Bush governments.
Considering all these new variables, does McConvey really believe that gold's performance in the face of another Iraq encounter will be no more than a mirror of its past performance?
If an Iraqi war happens to prick the US dollar bubble, does McConvey truly believe global gold holders will be happy to dispose of gold only a mere nine per cent ($30) higher than its current price?
Finally, when McConvey states that he doubts central banks will buy gold to support prices over $350, one wonders what planet he is living on.
Since the Bank of England auctions, seemingly designed to cap gold in advance of any potential Y2k panic, there have been no major central gold bank sales announcements; no major central bank gold loan announcements; and even the IMF has ceased agitating for gold sales. If anything, there
is every appearance that various central banks, increasingly nervous about a US dollar problem, are reining in gold loans and trying to get their gold returned.
No small wonder because, if the US should experience any kind of military setback anywhere, then the most important element sustaining US dollar hegemony will be eliminated. That is because, America, as the world's leading debtor nation, is only able to maintain global economic hegemony and power over its creditors by remaining a de facto "backyard bully,"
threatening military reprisals against those antagonists who challenge its power or threatening to remove military protection from "allies" who challenge it in the economic realm.
In the past, when downtrodden gold investors would read the kind of "anti-logic" that exemplifies the Bloomberg press release, the typical response would be no response at all. Weary, defeated gold investors have long been accustomed to a sense that the Establishment manipulates as it chooses and "there is no sense in fighting City Hall."
However, I think the standard absence of response is a mistake today. There has never been a better time for gold investors to protest and protest vociferously. That is because gold investors are gaining more and more sympathizers who, even if they don't much care for gold, nevertheless, are fiercely angry at the avalanche of evidence mounting each and every day
pertaining to the egregious, self-serving, market manipulations by Wall Street and corporate America.
So where does a gold investor begin?
Well, I say it's time to begin at the source.
Mr. Daniel McConvey, gold mining analyst at Goldman Sachs, is likely receiving a very hefty severance package from Goldman that will provide nicely for his retirement. He will likely walk away from Goldman with more money than most people would see in several lifetimes of hard work. Some of the more cynical observers among us might even liken such a hefty severance to being the de facto equivalent of a "payoff" for loyalty to the gold short ideology of the employer.
For years now, Mr. McConvey has dispensed merrily very negative opinions about gold and gold stocks that have assisted in the devastation of an entire investment sector (gold) and an entire industry (gold mining) whilst hugely benefiting his gold short employer and the rest of the gold short bullion bank cartel. In effect, Mr. McConvey indirectly assisted in the dismal fates of thousands of miners and their families who have been thrown into the street whilst also indirectly bankrupting numerous gold mining companies. At the same time, the entire class of gold investors has been harmed dramatically via the gross distortions of gold fundamentals as purveyed by the likes of "gold mining analysts" such as Mr. McConvey.
Don't you think it is time that people like Mr. McConvey be held directly accountable for their actions and their self-serving propaganda?
I say, "COMPLAIN." Demand fairness and demand retractions. After all, that is the modus operandi utilized in today's politicial campaigns whereby the citizen is exhorted to phone a particular political candidate and demand he cease a particular strategy or retract some lie. If the political Establishment feels such direct contacts are an acceptable form of action, then why don't gold investors utilize analogous tactics?
You may contact Mr. McConvey @ (908) 464-1612 or Goldman Sachs @ (212) 902-1000 or Bloomberg News @ (212) 318-2000
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