Sunday Telegraph about Martin Armstrong


1a EDT Tuesday, September 21, 1999

Dear Friend of GATA and Gold:

This is another long dispatch, so if it comes to you as
an attached file and you don't like to download those,
as I don't, you can read it on the Internet at:

I'm sending you a statement issued today by the
Princeton Economic Institute, which defends the
recently arrested financial analyst Martin Armstrong.
The PEI statement is followed by a reply dispatched
tonight by GATA Chairman Bill Murphy at

Since I corresponded with Armstrong a few months ago on
behalf of GATA and since that correspondence has been
quoted since his indictment, I will take the liberty of
a making a few observations here.

The statement by the Princeton Economic Institute
accuses GATA of "outright slander" of Armstrong for
GATA's suggestion that his operations were short gold.

But that suggestion was made only after his indictment,
and only after a statement by the Commodities Futures
Trading Commission that Armstrong's operations had
positions in the precious metals markets. Since
Armstrong had predicted publicly and to GATA that the
price of gold would fall to $200 before rising, any
error on GATA's part here would be only that of taking
Armstrong at his word.

If there is any serious dispute about Armstrong's
positions in the precious metals markets, it can be
quickly resolved by disclosure of the books of his
operations. I would be surprised if Armstrong's
operations want to carry the matter that far, but we
try to be decent people here and we will make
corrections forthrightly and graciously when we are
shown to be in error.

Secondly, the PEI statement accuses GATA of blaming
Armstrong for the bear market in gold. We never did
that. PEI confuses us with others.

I know that other adherents of the gold cause HAVE
blamed Armstrong for the decline in the price of gold,
because of his widely distributed analysis. Indeed,
prior to his recent troubles I saw attacks on Armstrong
that were personally abusive and even scary. Some of
those attacks were turned against GATA when I engaged
Armstrong in a cordial correspondence and published
some of that correspondence here. Yes, some adherents
of gold seem to have considered Armstrong the

As for me, I never had to make such a judgment and I
continue to reserve judgment on him. Oh, I know what
the federal indictment against him says, and I will
watch the legal proceedings with great interest. But I
would remind people that the defense he appears to plan
-- that his trading losses were honest and that he
really was not operating the Ponzi scheme that has been
alleged -- is plausible prior to any examination of the
evidence. And Armstrong doesn't have to prove his
innocence; the government has to prove his guilt.

Further, I would be sorry for anyone's honest losses,
having incurred plenty of my own as an advocate of
gold. In any case all I really do know is that
Armstrong was cordial and decent to me, and I was the
same to him in return.

Much is being made of Armstrong's lack of formal
academic credentials. I don't know whether his economic
forecasts generally have been as good or as bad as has
been claimed, but I know from experience that the most
credentialed people and the people most obsessed with
credentials are often the least competent, and having
no college degree myself, I can't help but believe that
there are other ways of getting educated.

GATA is after the truth and seeks justice, not the
destruction of individuals. Prior to his indictment,
Martin Armstrong was simply someone of renown with whom
we had agreed to disagree about some things.

While GATA does not advocate a gold standard, we
believe that gold's traditional monetary function as a
measure of national currencies and as a competitive
form of money is crucial to economic justice

It is amazing to me that only eight months after its
formation GATA has become the target of some entities
more powerful than we can imagine. I believe that this
is because the gold industry is demoralized, because
leadership of the gold cause has defaulted to us,
because we carry its flag proudly, and, most of all, of
course, because we are right.

In a recent essay Armstrong disparaged GATA as a "two-
man army." In fact GATA has three officers and several
hundred active supporters. But even so we can be
perceived as such a threat to the established order
only if we may be right and only if justice really may
be on our side. If so, then with Martin Armstrong and
with everything else here....

Fiat iustitia et ruant coeli.

That is: Let justice be done though the heavens fall.

Please post this as seems useful.

Gold Anti-Trust Action Committee Inc.

* * *

Statement of
Princeton Economic Institute
September 20, 1999

The Princeton Economic Institute is an independent
research organization and is not owned by Martin
Armstrong, nor is Mr. Armstrong a director of the
Institute. It is NOT related to Princeton Global
Management or part of Princeton Economics
International, nor does it engage in the management of
any funds.

Our daily forecasting reports, Global Market Watch, and
system models used at Princeton Economic Institute are
independent models that are not the product of any
single analyst. It is our intent to continue to publish
our research and bring an independent and objective
information to our many loyal clients around the world.

While Mr. Armstrong has always been an outspoken
opponent of government manipulations, interventions,
and "the billionares' club," his direct warnings about
the political corruption in Japan and the billions of
dollars in hidden losses within its financial system,
in some cases carried out by ex-MOF officials, have put
him in the direct line of fire by the Japanese
government as the man they most wish to discredit. No
doubt his highly critical stand against the accounting
systems used by all governments that distort CPI, GDP,
trade statistics, poverty statistics, and taxation have
not made him very popular in some circles. His
outspoken warnings about the failure of the Euro have
also created a few enemies. Mr. Armstrong has always
been aware that his research has made him a target over
the years; nevertheless he has always stood his ground.

Mr. Armstrong's involvement as an activist in
governmental reform is well documented, particularly in
the field of global tax reform and its impact upon the
economy. He stood by his convictions against the birth
of the G5 back in 1985. When his Economic Confidence
Model pinpointed the precise day for the low during the
crash of 1987, he stood alone calling for new highs
into 1989. His research was even requested by the Brady
Commission, charged with investigating the incident,
and some of our clients were on the commission itself

He became famous in Japan when his model also projected
the high for the Nikkei in 1989 and he boldly warned
that the market would collapse by 20,000 points within
10 months. His research forewarned of the bull market
in U.S. and European equities in 1994, calling for the
Dow to reach 6,000 by 1996 and later 10,000 by 1998.
His research warned of the Asian crisis in 1997 and of
course his model was able to project the collapse of
Russia, which made headlines in the London Financial
Times. His warning that the Euro would fail made him an
enemy to some political groups in Europe. Of course,
when the very same model that pinpointed the 1987
Crash, Tokyo Crash, and the birth of the bull market in
equities also gave July 20 as an important major top
last year, the validity of more than 20 years of his
model became undeniable.

As staff members here can attest, even the CIA
approached this office requesting that Mr. Armstrong
assist the government in duplicating his model just
last October, but he refused offering advisory
services, insisting that the model remain proprietary.

Mr. Armstrong was invited to China by the government,
where the Chinese made a similar proposal to obtain his
model following his successful forecast of the Asian
Crisis in 1997. Even after a visit to Princeton in 1998
by a representative of China, Mr. Armstrong still
refused to cooperate with the Chinese, insisting that
the model remain proprietary.

Even the Gold Bugs have tried to join in on the issue,
claiming that there is a huge short position in gold of
20,000 ounces and that the demise of Mr. Armstrong will
now lead to a bull market. Once again, there is no huge
short position by anyone, and this is another example
of outright slander by GATA in a futile attempt to
blame Mr. Armstrong for the bear market in gold simply
because of his warnings of coming central bank and IMF
sales more than one year ahead of the general media.

Mr. Armstrong's warning that gold would decline has
generated even personal threats sent to this office by
some crazy Gold Bugs. There are many who have a vested
interest in trying to discredit Mr. Armstrong,
including one financial institution, in particular,
which stands a lot to gain. They may all try to kill
the messenger, but they will not change the forecasts
he has made for the future.

Mr. Armstrong flatly denies the allegations made
against him and he intends to vigorously defend
himself. His attorney has stated publicly that he is
being made a "scapegoat," but the media prefers to
print the propaganda handed directly to them by his
opponents. The Japanese press is blaming all foreign
firms for the demise of the Japanese financial system
and even the FSA has publicly stated that they will
investigate all foreign firms in Japan with a new
nationalistic zeal after the Credit Suisse affair.

If Mr. Armstrong is misquoted by the media in any
response he would make, it can be used against him by
the government. This is why his legal advisers insist
upon his silence until he is heard in a court of law.
Any similarity to the Credit Suisse situation has been
totally ignored by the Western media and they prefer to
try to discredit Mr. Armstrong's research of the past
20 years.

At no time has Mr. Armstrong ever misrepresented his
background, as confirmed by Mark Pittman of Bloomberg
in his article of September 14. Pittman interviewed Mr.
Armstrong two years ago for Bloomberg. After all,
Keynes, Ricardo, and even Adam Smith became important
contributors to economics without any formal degree in
the subject, relying instead upon unbiased experience
and observation.

The staff of Princeton Economic Institute greatly
appreciate the numerous responses of support, the gifts
sent to the staff to cheer them up, and those who have
come forward offering even financial support to insure
the long-term survival of this operation. We will keep
our clients updated as to any developments in the near
future, and the staff here will do its best to keep the
flame of free speech and objectivity alive. It is not
an easy task.

* * *

Reply by Bill Murphy
Chairman, Gold Anti-Trust Action Committee Inc.

What is Going On Here?

Do any of you find it particularly odd that two recent
and notorious financial disasters have taken the time
to take on GATA about what we have had to say about the
gold market?

First, Eric R. Rosenfeld, a partner in Long-Term
Capital Management, which had to be bailed out by
various financial institutions through the
orchestration of the New York Federal Reserve, sends an
affidavit to GATA. Rosenfeld said, "I submit this
affidavit in response to the allegations of Bill
Murphy, chairman of the Gold Anti-Trust Action
Committee, that Long-Term Capital Management L.P or any
fund managed by LTCM or any affiliate thereof,
including without limitation, Long-Term Capital
Portfolio L.P., was involved in the manipulation of the
gold market."

I wrote a letter back to LTCM's attorney, James G.
Rickards, Esq, to ask him to elucidate just one
instance where GATA indicated that LTCM was part of the
manipulation of the gold market. Rickards since has
departed from LTCM without ever responding to me.

The bottom line is that we never suggested that LTCM
"manipulated the gold market." We and countless others
just surmised that half of Wall Street had heard that
LTCM had borrowed about 300 tonnes of gold and was
using the proceeds for investment purposes.

Now another financial fiasco: the Martin
Armstrong/Cresvale International Ltd./ Princeton Global
Management/Republic Securities ordeal.

Princeton Economics International, the home-based
research arm of this operation (I guess), continues to
take on GATA. I suppose this is so because I intimated
in commentary at that we have
heard from the best of sources that Armstrong's
operations may be short or may have borrowed up to 746
tonnes of gold.

PEI has the nerve to come out attacking us today in
this press release when Armstrong is the one who did
the attacking by publishing a essay on June 10, 1999,
called "Gold: Manipulation or Exaggeration?" This
commentary was circulated all over the world and this
is how it started out:

"A two-man army calling itself GATA has begun to
besiege the media, attempting to gain a lot of press on
the platform that gold is being `manipulated' by a
cartel of investment banks. They constantly point to
what they call the huge `carry trade' in gold, where
there is far more gold sold than exists."

It would appear that a front-page story Sunday in the
business section of the London Telegraph by Economics
Editor Bill Jamieson has the PEI people in a tizzy.
Here is one quote from the story: "Armstrong had so
many fooled. He came across as Mr. Academia."

In that story Armstrong is quoted from a letter he
wrote to GATA Secretary Chris Powell: "I hate to tell
you, but gold will drop to under $200 until it turns --
and I do not want to hear how I am short or some
nonsense to try to discredit my views, because it is
not true."

OK, Martin.

Now let us go to the videotape or, even better, to this
Bridge News article of Sept. 14, 1999:

"The Commodity Futures Trading Commission said
financier Martin Armstrong, who is accused of
defrauding Japanese investors out of about $1 billion,
had a variety of futures positions including yen, crude
oil, and precious metals. However, Daniel Nathan,
deputy director of the CFTC's division of enforcement,
declined to quantify these positions or losses.

"While market players have speculated that Armstrong
and his companies, Princeton Economics International
and its subsidiary Princeton Global Management, had
maintained large positions in gold and silver, Nathan
would not provide any specifics on Armstrong's precious
metals trading activities.

"Rumors started to circulate today in the precious
metals trading community that Armstrong has been
liquidating short positions in both gold and silver
futures. However, the freezing of the accounts would
prevent any activity from taking place, Nathan noted.
On Monday the court appointed a temporary receiver with
the power to take possession of assets and property and
records of PEI and PGM."

Armstrong stated categorically to GATA he was not short
gold. This statement by the CFTC strongly suggests
otherwise. If Armstrong traded his PEI pontifications,
he was short oil, short yen, long bonds, and short
gold. The only winner this year was the short gold
position. Yet while proclaiming to the world that the
price of gold was going to $200, he then denied he was
not short the only one of the four previously mentioned
trades he was right about.

I could go on forever, but I think you all get the
point. This strains credulity.

So that bring us back to why the two biggest financial
disasters in memory have gone out of their way to deny
being short one of the few good trades they had on
their books to a "mouse" like GATA.

I suggest to you that it is because....


Or the people responsible for them now are short in
their behalf.

You have heard me say this before, so I will ouch on
this only briefly tonight. The shorts are in big
trouble. They had no idea of how bad it was going to
get for them. They had no idea of how big the
supply/demand deficit was. They had no idea of how big
the gold loans were.

NOW they have an idea and they know they have a tiger
by the tail. That is why they are manipulating the
market. They are scared to death. That is why the lease
rates won't go down -- the one-month lease rate was 4.3
percent today.

They are all running around saying the open interest on
Comex is going up (almost 210,00 contacts) and the
lease rates are high because everyone wants to borrow
gold to sell it. Yet no one says why they so much want
to do so, nor does it make sense.

Why is everyone so excited about selling $255 gold at
4.3 percent interest rates with oil headed for $25 per
barrel, commodity prices rising, and bond yields rising
everywhere? And we are headed into potential Y2K
disturbances with potential liquidity problems. On top
of all that, physical demand for gold is at record
levels and the bullion dealers tell you how tight the
physical market really is. So why drool over borrowing
gold at high gold lease rates and entail all that risk?

The gold cartel is a desperate lot and they are feeding
out garbage to the press and to the public. That is
what they feed you -- disinformation. I am hearing that
there is so much demand for gold around $253.50 (much
of it coming from India) that the bears are actually
afraid for the price of gold going down because it will
exacerbate the physical gold tightness problem.

This is has been a nightmare for us. Soon it will be a
nightmare for THEM. The gold and silver markets are
going to rock and roll. It is only a matter of time now
before the REAL GOLD MARKET is exposed. Then a
"Hannibal Cannibal" will panic and run for the hills.
That will be the beginning of the end for the gold
market manipulation crowd.

These characters will have no more time to lob salvos
at GATA. They will be too frantic and busy trying to
find a way to cover their shorts.