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November 2, 2005

PPT and Sprott, Wed., Nov. 2, 2005, 6:45 AM

Having published a blog last evening that hit some hot buttons, let me say that I have had some sleep and would like to add a couple points.

In a way I have been joking that conspiracy theories seem to come out of the woodwork whenever there is volatility and trend reversals underway in capital markets. So my pointing to Sprott Asset Management's Visible Hand" document is to say that here is an example, readers should be aware these things are being floated at this time, and that many players take some of these report generators (like SAM) seriously. That's all.

In case you didn't get Sprott's paper, here is the link:
The Visible Hand

I am also joking in recent days about being blindfolded by assassins and so forth as a way of saying that emotions are heightened at this time. I'm having some fun with it. That's all.

I pointed out that John Embry is an influential player in gold markets, and a master of the conspiracy theory universe, in order to tell those who don't already know this, to be aware. That's all.

Do I follow the gold choices of Embry or the others I referred to (Grandich, Rule, Van Eeden), no, for the same reason I wouldn't trade in oil contracts with the Saudi Prince, or take advice on oil markets from an OPEC leader or a Texas oilman like T. Boone Pickens. They all have an axe to grind. Their own.

These people can help me in my research, and so I mention them. That's all. Embry's public fund is down about three pct this year. Do you think Embry's personal portfolio is down even point three of a pct this year? Get real.

Do I believe in conspiracy theories? Let's just say I have never taken the time to watch an Oliver Stone or Michael Moore movie, but I used to like Hitchcock thrillers. They were more believable.

Do I think there is a Plunge Protection Team playing us like a Monopoly board game? That's complicated.

I believe that the world would be best served with a universal currency based on a gold standard, where monetary policy in each country is set by the people-elected Administration and not by an institution called the central bank. That means I'd like to see the capital markets be able to operate freely, and that Greenspan not have a job. John Snow (or the person in that position) should do this job as long as the President and Congress are supportive. That puts the people and the free markets in control.

I believe that governments in every country should not hold gold. What is the purpose of that other than to possibly use their positions to affect free markets?

It took over 30 years to out Deep Throat, and he did that himself to gain another 15 minutes of fame and limelight for his family to indulge before he passes on. He broke a law but another law saved him from being outed years earlier. He was also protected because just a few people were participants, and their values were true to the verbal contract he had with them.

I don't care to get into the Deep Throat issue other than to say that there is a parallel to PPT.

I believe that PPT would necessarily involve a hundred times more people, and few if any of them would have protections afforded the press. In fact, as government and central bankers and investment bankers they would be obligated under law to be transparent. So how is it that hundreds if not thousands of people, none of whom are protected by law, could operate in secret for 20 or 30 years?

The answer is they couldn't.

Do I believe that the Fed conducts open market operations? Of course, everybody knows it.

Does it involve equities and gold in addition to treasury securities? Yes.

Should it? No. If there is stability in currency (i.e., foreign exchange) markets, which would happen with a universal gold-linked, currency, the free market can, and should, manage/replace all open market functions of the Fed.

A Fed (preferably operated directly as part of government and directly accountable to the voter) ought not to be a player in capital markets, but be a visionary and a referee only " like the CEO of a corporation. The mandate to maintain price stability through fiscal and monetary policy ought to be exclusively that of government. Then if government fails, the public ought to vote them out.

Intermediaries like central banks and like floor specialists on the NYSE have played an important role in history. But we now live in a digital age, where under the principle of transparency, the owners of capital need to be dealing direct. Not only are intermediaries costly, but that's where people in shadows are allowed to work in their self-interests.

In my view, public policy should terminate every intermediary that the owner's of capital and payers of taxes do not individually opt to subscribe to. We the public ought to be free to make decisions on the basis of the value-add principle.

I could go on about these things, but my purpose here is to let readers know where I stand so that you don't question my motives. Question my judgement, please, but not my motives.

Posted by Posted by Bill Cara on November 2, 2005 06:45:19 AM | Category: Yada yada