''Midas'' commentary for September 20, 2001


11p ET Thursday, September 20, 2001

Dear Friend of GATA and Gold:

Thom Calandra's commentary today at www.CBSMarketWatch.com
dealt at length, toward the end, with gold, GATA, and Reg
Howe's lawsuit against the gold cabal. It's below.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

By Thom Calandra
September 20, 2001

SAN FRANCISCO -- It's the rare American investor who is
escaping this week's market pounding.

With the exception of a handful of short-selling mutual
funds, such as the Potomac U.S. Short Fund, which
inversely tracks the S&P 500 Index and has gained
7.5 percent thus far this week, few investments have
benefited individuals.

Even municipal bonds, which are tax-free and generally
mimic the behavior of Treasury securities, have seen a
year-long rally shrivel in New York, California,
Massachusetts and other states. Muni-bond mutual funds
on average were up about 5.5 percent for the year,
before the Sept. 11 terrorist attacks sent net asset
values down almost a half-percent, according to

Hardest hit may be Port Authority and Battery Park City
bonds, which "continue to weaken on the bid side," one
Manhattan-based trader said Thursday. Battery Park City
surrounds the destroyed World Trade Center. Bonds of
the Port Authority of New York and New Jersey, owner of
the destroyed World Trade Center, were put on Standard
& Poor's CreditWatch with a negative outlook

Sheila Amoroso, a muni-bond portfolio manager with the
Franklin Templeton mutual fund family, notes that East
Coast municipal agencies may step up their demands for
cash as infrastructure needs increase. In California,
which seems far removed from New York City, lawmakers
appear poised to approve ballot measures that would
seek $22.8 billion of school bonds. Such a record-
breaking supply of bonds, if approved by voters, would
be a further damper on the muni-bond market. Still,
"our market went into this disaster with a lot of
cash," Amoroso says. "People are attracted to the
(muni-bond) market for diversification." To be sure,
the art of spreading one's bets is benefiting some
investors, mostly those with deep pockets. Investors
with access to market-neutral and short-bias hedge
funds are faring well.

Dedicated short-bias hedge funds were up almost 7
percent as a group through August, before the attack,
according to the CSFB/Tremont Hedge Fund Index. August
data for the index are preliminary because of the World
Trade Center attack, the index compiler says.

Unfortunately, wealthy individuals, and the
institutions that operate or invest in hedge funds,
generally can dip into their profits just once a year.
That's in January, which looks a long way from here.
The VIX trick Volatility indicators for the stock
market are puzzling. Gauges such as the VIX, VXN and
QQV measure estimates of expected market volatility by
using the bid and ask quotes on equity index options.
The VIX, for example, is calculated by taking a
weighted average of the implied volatilities of eight
S&P 100 Index calls and puts. Puts are option-contract
bets the indexes will fall, and calls are bets they'll

The so-called VIX, the CBOE Market Volatility Index,
has gone to 49 from 35 before the Sept. 11 terrorist
attacks. This may indicate that investors, greatly
stepping up the put contracts they are buying as
insurance against the falling stock market, have thrown
in the towel. Such disgust with the market could be
foreshadowing that the major indexes are ready to turn
higher. Not so fast. "The fact the VIX is now trading
at levels that have previously been market bottoms is
good; however there are a few differences," says Chris
Johnson, whose work as a senior quantitative analyst at
Schaeffer's Investment Research has correctly forecast
many of the stock market's down, and up, moves this

Johnson says in the October 1998 and October 1997 sell-
offs, when the VIX struck 45, the stock market's major
indexes, like the Standard & Poor's 100 and 500, were
trading above most major long-term moving averages.
Such a pattern indicated at the time that the S&P 500,
the benchmark U.S. stock market index, and other equity
benchmarks had "a great deal of support."

For instance, the October 1998 damage to the S&P 500
Index, in the wake of the Long Term Capital Management
fiasco, "was contained by its 21-month moving average,"
he points out. This week, the market "is trading well
into bear market territory, so we should expect to see
some investor fear priced into the market, which is not
the case in a bull market," Johnson said from
Cincinnati. "This means that we would expect to see
higher levels of the VIX achieved before the market
puts in a credible bottom."

How high? Johnson and other quantitative analysts
aren't exactly sure. But don't be surprised to see the
VIX, which is shown here on a chart, to go as high as
60.6, its October 1998 intra-day high, before bargain-
hunters return. "The 21-day moving average of the CBOE
Equity Put/Call ratio is currently in a strong
uptrend," Johnson says about the number of investors
betting through the use of options contracts on a
further market fall. "The fact that this trendline
looks like it will continue to rise forces me to expect
higher VIX levels."

Gold, grocers and GATA

As stock indexes continued their weeklong cascade
Thursday, Johnson said he sees gold stocks and grocers
such as Kroger Co. as two possible havens in the market
storm. "People still have to buy groceries," he said.

On the gold front, he points to Newmont Mining
one of the largest North American producers of the
metal. Gold stocks as a group rose 2 percent Thursday
afternoon. Newmont shares have risen 12 percent since
the attacks nine days ago. Shares of Canadian, South
African, and Australian gold mining companies are up
anywhere from 5 percent to 15 percent since the
terrorist attacks on American soil.

Some gold supporters, like Bill Murphy, Texas-based
founder of pro-bullion Web site
www.lemetropolecafe.com, are mystified that the actual
price of the metal, around $290 an ounce, is up only 5
percent since the attacks.

"I am no economist but we have just come out of a stock
market bubble, and no one knows what the consequences
are of coming out of a bubble," Murphy said. "You can't
have a normal, orderly market correction like you are
used to."

Murphy, one of the supporters of a lawsuit alleging
bullion banks and U.S. financial regulators are
manipulating the gold market, sees "the consumer going
into a bunker and many more layoffs coming." U.S. job
cuts announced this year, prior to the attacks,
surpassed the 1 million mark, brining the jobless rate
to 4.9 percent.

Murphy, a former commodities futures broker and Boston
Patriots wide-end receiver, sees Nasdaq 900 and Dow
5,500 on the horizon. From January 1973 to October
1974, a slumping American economy, rising unemployment
and Middle East worries sent the Standard & Poor's 500
Index down 50 percent. The S&P 500, which represents
two-thirds of the U.S. stock market's capitalization,
is down 36 percent from its March 2000 peak. The Nasdaq
Composite Thursday afternoon was down 2.7 percent to
1,486. The Dow Jones Industrial Average was down 3.3
percent to 8,465.

"I'm putting every penny I have into gold," said
Murphy, chairman of the Gold Anti-Trust Action
Committee, which alleges that central banks, gold
producers and Wall Street investment banks conspired to
keep gold prices depressed, largely through short-
sales, derivatives, and other measures.

Platintiff Reginald H. Howe's U.S. District Court
lawsuit against the Bank for International Settlements
and other defendants, including Federal Reserve
Chairman Alan Greenspan and U.S. Treasury Secretary
Paul O'Neill, has its next hearing Oct. 9 in Boston,
Murphy said.