first majestic silver

The New, Evolving More Savvy American Investor!

April 10, 2000

It started to look like October 1929 all over again in the equities markets this past Tuesday. Stocks were falling like rocks tossed off the Empire State building. It really was beginning to look like doomsday! Then, like clockwork, it happened again! Americans began to behave in a psychological manner, which until about the 1990's was unknown in the history of man. Suddenly at 1:20 PM, millions of Americans suddenly, spontaneously, collectively and mysteriously understood that stocks were a great bargain precisely when the Dow was down 503.53 and Nasdaq was down 574.57. In the past, participants in markets have not behaved that way. In days of old, this kind of frightening market action beget even more fear as panic overtook rationale behavior, thus leading to bear markets that resulted in stocks being as under priced as they were overpriced when the fall began.

But now, thanks to the Clinton Administration's excellent management of the economy, and our superiority as Americans, we have evolved to the point where we are able to avoid fear and hence stock market under-valuations. We obviously used that new and great insight once again at 1:20 PM on April 4th. Americans began buying stocks with both hands, confident that once again, they mastered the stock market universe. Once again, those who have sold the idea that "you can't lose in the long run in stocks" won the argument as did those who are convinced that you should "always buy on the dips and dives". Wow! This makes me really proud to be an American because we have the unique and superior ability to understand markets and act rationally. We have managed to eliminate bear markets!

Too bad such collective intellect is unique to Americans. Indeed, we do have this thing down pat don't we? Armed with our infinite knowledge, we have been able to know with certainty not once or twice, but dozens of times since the crash of 1987 just the right time to buy the "dips and dives". See I told you. "If you buy on the dips, you will never lose!" We Americans certainly are an intellectually superior lot. Makes me proud!


Quietly and perhaps subconsciously, that is what Americans seem to believe. But if you believe the notion about American and Clinton superiority I actually do have a bridge to sell you and it's a great bargain! It spans the East River between Manhattan and Brooklyn.Any serious student of markets must wonder how it is that Americans have this unique ability to "catch a falling knife" without getting injured, as we did again this past Tuesday. What some of us have begun to notice is that this unique ability began to take place since 1989 when a former Federal Reserve Governor Robert Heller spoke about plunging stock markets. He suggested in a speech that year that sharp market declines could and indeed should be avoided by the U.S. Treasury through massive purchases of stocks by the Treasury in the futures markets. Having free reign of the printing presses, this of course is not a difficult task for the U.S. Treasury. In essence, what Mr. Heller was suggesting is that the U.S. Treasury should rig the equities markets because it is for the common good!


This past week, John Crudele has written once again about evidence that President Clinton's so called "Plunge Protection Team" began buying the futures indices to shore up the stock market and thereby deter another impending market crash. Its looks like the Treasury acted through proxies that have been become the usual suspects, namely Goldman Sachs and Merrill Lynch. Goldman Sachs is the same firm some serious observers believe is rigging the gold market, perhaps in co-ordination with the same "Plunge Protection Team" that has been publicly disclosed in the Washington Post.

All we have here is circumstantial evidence and you can be sure that the slickest President of all time has covered his tracks and done his level best to keep this market manipulation by the Treasury Department out of sight of the public for at least two reasons. First, if people knew the fix was in, the ability to use this measure would become ineffective. Even stock market bears like me would buy stocks with both hands. Secondly, it would most certainly be challenged in the courts under Anti-trust regulations, just as GATA is attempting to challenge what it believes is manipulation of the gold markets, under anti-trust legislation. Of course, philosophically, Clinton would believe it is O.K. for the federal government to rig markets, using all the power it has at its disposal including the printing press. He just would not want the private sector to do it.


Let me urge you to read this pasts Wednesday's comments by John Crudele as he sites evidence of U.S. Government interference in the stock market. You can read these comments at www.newsgurus. com. They are included in my column titled "More Evidence of Stock Market Intervention by the U.S. Treasury" In that article, I not only quote Mr. Crudele, but also offer some reasons why in fact, fixing the market is creating great harm to the American economy and American freedom over the long run.


Taking market manipulation by our Federal Government as a given and realizing as Dr. Larry Parks points out that there are 40 + years of above ground gold supply, the powers that be may be able to wreck havoc for quite some on the gold markets. Then again, they may loose control at some unexpected moment, in which event confidence in paper money could go up in smoke in a matter of hours as it seemed ready to do last Tuesday. When intervention no longer works, for whatever reason, gold could rise in value to thousands of dollars per ounce, given the enormous amount of paper money that has been created since 1971. It is for that day, when (not if) our fiat currency finally implodes in value toward zero, well prepared investors, not those who listen to the mass media, will cash in on their gold insurance policies. Since we cannot predict when that day will arrive, we want to continue holding approximately 15% of our portfolio in precious metals and precious metals shares. We are basing a 15% allocation mostly on the basis of our Homestake Study which, between 1903 and 1998 demonstrated that a 15% allocation to gold and 85% to the Dow, greatly enhanced long term gains while eliminating losses most of the time, even during devastating bear markets.


With stocks continuing to be priced at levels never before seen in the history of man (in relation to "risk free" treasury returns), we are continuing to limit our equity exposure to (excluding precious metals stocks) to 28%. Thus far, our model portfolio continues to perform well. From January 1 through April 7th, our portfolio gained 16.11% vs. a 3.21% in for the S&P 500. Our technology or moon shot stocks are, on average up 76% so far this year. For this we thank our God from whom all blessings flow.

In 1934 President Franklin Delano Roosevelt devalued the dollar by raising the price of gold to $35 per ounce.
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