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-Caveat Lector-

The Daily Reckoning
Weekend Edition
May 15-16, 2004
Baltimore, Maryland

THE PERFECT STORM
By Tom Dyson and Addison Wiggin

MARKET REVIEW:

The markets are confused, the Fed is confused, we are confused. Good
news is bad news - for stocks; inflation is bad news for gold and good
news for the dollar; the Fed couldn't print money any faster if it was
giving it away, yet there's talk of a liquidity crisis; credit has
grown to levels people couldn't have conceived of 20 years ago, yet
some fear a credit crunch; befuddling.

Of course, there are explanations for all these phenomena - though
mostly far too complex and overly thought-out for our wine-addled
brains. Sometimes you just have to go back to basics.

The Fed has been inflating its way out of a recession. In fact, the Fed
has been inflating since the dollar was released from its golden anchor
in 1971, at which point - for the first time since 700B.C. - no
currency on the planet had any connection to gold.

We are now steaming 'full ahead' into the "perfect-storm" - as Steven
Roach put it. The potential confluence of three economic weather-
systems - an energy crisis, a China collapse and a Federal boob-job on
the interest rate - all bearing down on the unseaworthy U.S. balance
sheet, loaded with debts, derivatives and deficits, could,
theoretically speaking, sink the ship.

Nobody can possibly predict how this story might end, let alone assign
the correct probabilities to all the different factors. We are sailing
across uncharted waters. What is clear, though, is that the U.S. dollar
is in a bear market. And although we may see some prolonged rallies,
and sharp, upward spikes - call them death-throes - the long-term
conclusion doesn't make for pleasant reading, unless, of course, you
own gold.

Gold closed the week at $377, down a couple of dollars on the week.
Next week, it may go down more. Or it may go up. We don't know. The
huge dollar-short position may uncoil, or it may not. The debt bubble
could explode, or is it implode? We couldn't say. [Ed. Note: The chart
boffins downstairs think gold is about to collapse! They have been
predicting this current correction for months, and now the bottom's
about to fall out, they say. For the perfect approach to shorting gold,
follow this link...

http://www.agora-inc.com/reports/WL3/WWL3E507/ ]

The important point is that - no matter how the tragedy plays out -
gold will benefit eventually.

Elsewhere, on Friday, crude oil hit another intraday all-time-high at
$41.50 per barrel, as did gasoline on Thursday, touching $1.4015 a
gallon.

Meanwhile, at the stock market, the Nasdaq made a new low for the year,
reaching 1,878 on Wednesday. It closed at 1,904 at the end of Friday'
session. It had been as low as 1,896 in mid-March, which is still well
clear of the bear-market-low at 1,108, set in October 2002. The Dow
closed the week at 10,013, 107 points lower than this time last Friday.

30-year 'risk-free' Treasury rates fell from 5.56% to 5.50% on Friday,
but gained 4 basis points over the week. Considering that both the PPI,
on Thursday, and the core CPI, on Friday, jumped unexpectedly higher,
the reaction was muted, which perfectly suited the character of this
baffling market.

Maybe next week, no news will be bad news.

Regards,

Tom Dyson,
The Daily Reckoning


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----------------------

THIS WEEK in THE DAILY RECKONING

THE ETERNAL SUNSHINE OF THE SPOTLESS MIND 5/14/04
By Bill Bonner

"... According to the reviews, a couple decides to divorce... and to
scrub their minds of all the unpleasant memories of their union. We can
imagine what happens next... the way is now clear for the couple to fall
in love again... "
http://www.dailyreckoning.com/body_index3.cfm?id=9089


PAYING OFF THE PIPER 5/13/04
By John Myers

"... The U.S.'s financial obligation is so big that it is hard to
fathom. One way to look at it is to consider the fact that America's
annual deficit almost matches the total value of goods and services
that Canada produces in a single year... "
http://www.dailyreckoning.com/body_index3.cfm?id=9079


AGAINST A BRICK WALL 5/12/04
By Marc Faber

"... From the 1950s to the late 1970s, $1 of additional debt generated
between $0.50 and $0.70 of additional nominal GDP. However, more
recently, $1 of additional debt has only managed to increase nominal
GDP by around $0.20. In other words, in order to maintain its altitude,
the pilot of the U.S. economic airplane needs to continuously increase
the RPM of the engine... "
http://www.dailyreckoning.com/body_index3.cfm?id=9075


IMBALANCES AND DISLOCATIONS 5/11/04
By Kurt Richeb�cher

"... For most American economists, sufficiently easy money is of
infallible efficacy. The few instances in history when record-low
interest rates persistently failed to work, like recently in Japan and
during the 1930s in the United States, are summarily discarded with the
argument that central banks failed to act fast enough... "
http://www.dailyreckoning.com/body_index3.cfm?id=9064


FORCES OF NATURE 5/10/04
By The Mogambo Guru

"... With pyramids, it all comes down to one thing - gravity. The same
goes for economics. You can try and make an economic structure out of
many things, arranged in many ways, but there is one thing - inflation
- that will always bring it down. And that is why I am so fixated on
inflation... "

http://www.dailyreckoning.com/body_index3.cfm?id=9041

----------------------

HEADLINE, NEWS And INSIGHT:

Hero Worship
by Taki
"... When Cogny appointed him commander of Dien Bien Phu, de Castries
named the various outposts surrounding his headquarters after his
favourite French mistresses, including Claudine, Eliane (there were two
Elianes), Huguette, Lili, B�atrice, Fran�oise, Gabrielle, Dominique and
Isabelle... "

http://www.dailyreckoning.com/body_headline.cfm?id=3916


Economic Autopsy
by Byron King

"... The particular business owner, with whom I am dealing, ran up a
series of delinquent accounts to obtain materials, bouncing from one
vendor to another when the previous one would shut him off. He max'ed
out his credit cards for day-to-day cash and expenses, and drew down
every other line of unsecured credit that he could find... "

http://www.dailyreckoning.com/body_headline.cfm?id=3910


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---------------------

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www.ctrl.org
DECLARATION & DISCLAIMER
==========
CTRL is a discussion & informational exchange list. Proselytizing propagandic
screeds are unwelcomed. Substance—not soap-boxing—please!   These are
sordid matters and 'conspiracy theory'—with its many half-truths, mis-
directions and outright frauds—is used politically by different groups with
major and minor effects spread throughout the spectrum of time and thought.
That being said, CTRLgives no endorsement to the validity of posts, and
always suggests to readers; be wary of what you read. CTRL gives no
credence to Holocaust denial and nazi's need not apply.

Let us please be civil and as always, Caveat Lector.
========================================================================
Archives Available at:

http://www.mail-archive.com/[EMAIL PROTECTED]/
<A HREF="http://www.mail-archive.com/[EMAIL PROTECTED]/">ctrl</A>
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