Bill Murphy''s "Midas" commentary for Sept. 13, 2000


11:45p EDT Wednesday, September 13, 2000

Dear Friend of GATA and Gold:

Last week the Frankfurter Allgemeine. This week
the Financial Times.

The conspiracy against gold is getting exposed,
and GATA is doing it.

Yesterday the foremost columnist of the Financial
Times, Barry Riley, mentioned GATA prominently
in a column suggesting that the rising price of
oil may shift stock market sentiment in favor of
the bears. For us the most important thing about
Riley's column was that it showed that the
failure of gold to reflect increasingly obvious
inflationary pressures is getting noticed and
raising suspicions.

The Financial Times wouldn't be citing GATA
unless it thought we just might have something
to say that's worth considering.

The word IS getting out. And we're going to
keep getting it out.

Riley's column in the FT follows. Please post
this as seems useful.

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

* * *

Oil crisis may give bears the upper hand

By Barry Riley
The Financial Times (UK edition)
September 13, 2000

Through most of the long bull market, frustrated bears
have dug in their heels.

They have resorted to conspiracy theories and
allegations of statistical distortions, whether
deliberate or not, to explain the refusal of Wall
Street and other global stock markets to tumble back to
somewhere nearer historical valuation levels.

Now the oil crisis gives them revived hopes of winning
the arguments.

Doom-mongering newsletter editors have persisted. Kurt
Richebacher, for instance, one of the Europe-based
bears, has relentlessly accused the U.S. Federal
Reserve of recklessly pumping up the U.S. consumer
economy through a credit-based boom and relying on
volatile capital inflows to cover the yawning trade
imbalances. But this has been no period to be contrary.
The U.S. economic boom continues merrily on.

James Grant, who preaches gloom out of New York, has
recently lashed out at the so-called "hedonic"
inflation adjustments adopted by the United States.
These, by cutting the index costs of computers, have
kept headline inflation down and have arguably
exaggerated the growth in productivity. This
statistical device has been implemented on top of the
decision to side-line energy price inflation as "non-

Elsewhere, it is more than two years since the London-
based investment consultant, Andrew Smithers, pointed
out the distortions arising from the mis-accounting in
the United States for stock options, which has
significantly exaggerated earnings per share,
especially in the technology sector.

Such arguments, however, have had little impact on
technology stock prices, which are not linked at all
closely to earnings per share. All the same, there has
been a general disillusionment with U.S. accounting
practices, culminating in the Securities and Exchange
Commission's efforts to crack down on conflicts of
interest in auditing firms.

Japan's statistics have often been unreliable, but the
latest figures for alleged growth in the second quarter
have been greeted with unusual degrees of cynicism. In
any case recovery, if it exists, is being achieved only
through the adoption of reckless public borrowing
policies. A potential Japanese financial meltdown
continues to be one of the enduring themes of the
frustrated global bears.

Gold bugs, meanwhile, are steaming over the yellow
metal's failure to respond to the inflationary
pressures obvious in oil prices and in certain other
commodities. The gold bug pressure group GATA -- the
Gold Anti-Trust Action Committee -- has alleged that
the U.S. Treasury, in cahoots with other countries --
including the United Kingdom and Kuwait -- has
organized a price manipulation conspiracy to suppress
gold's traditional role as an alternative global
currency to the dollar. It is certainly curious that
the bullion price appears to be pegged to the dollar.

But all of this contrary propaganda from the bears has
totally failed to puncture the bubbles. The dollar is
marching on, especially against the euro. True, Wall
Street has found the going comparatively tough this
year, and yet the S&P 500 is within about 3 percent of
its all-time high back in March.

Mainstream institutional investors around the world
have also often been deeply suspicious of the U.S.
miracle, but now they are capitulating. Thus Merrill
Lynch's latest survey of global fund managers said that
U.K.-based managers have turned bullish on Wall Street
for the first time since 1994.

Perhaps just as significantly, U.S.-based managers (who
so far this year have burned their fingers in Japan on
equities and, if unhedged, have lost money on the euro)
are overweighting their domestic market on the
assumption that nothing worse than a soft landing lies

Bulls argue that the bears are simply trapped in
backward-looking mindsets and have missed the new
realities of the technology-based revolution. This
time, as they say, it is different.

But now an oil crisis has emerged almost out of
nowhere. At last, it seems, suppressed inflation is
bursting out elsewhere than just the asset markets. The
U.S. authorities have been unprepared for the impact of
surging demand for oil products. Now, economic power
has suddenly been transferred to people of the likes of
Hugo Chavez and Saddam Hussein.

The bears are licking their lips. An oil crisis has
begun with social and economic disruption across the
European Union, and the prospect of a sharp slowdown in
the global economy as higher oil costs hit economic

All the bearish warnings of the past two or three years
have come to nothing, as a "virtuous" circle of credit
growth, U.S. domestic demand expansion, and global
investment flows has overwhelmed the obstacles. The
manner in which recent consensus opinion has ignored
the oil threat seems to indicate worrying levels of
complacency, however. If a downward spiral begins, it
may be wise to refresh our memory of those old
newsletter themes.