StockbrokePro.com NOTES Tuesday, June 10, 2003

-      Since President Bush gave Alan Greenspan a fifth term as Chairman of the Federal Reserve, the Chairman has ended the long drought of new money by creating $92 billion of new money in just four weeks. This offsets almost all of the $100 billion trade deficit with China over the past year. Combine the new money with the falling dollar and tax cuts and we are setting up the U.S. economy for a healthy recovery, maybe even a boom.

-      Rubinomics just isn't so. Former Treasury Secretary Robert Rubin is famous for saying that rising deficits means more government borrowing which raises interest rates. So, he says, cut deficits and interest rates will fall and the economy will boom. Well, deficits are rising and interest rates are at their lowest levels in more than 40 years and have been falling as the deficit has been rising. (The correlation of rising deficits leading to higher interest rates just doesn't exist).

-      Another myth: deficits "squeeze" out other spending. WRONG! Federal government debt service this year will take up just 7.5% of the budget this year, down from 12.5% in 2000 and 2001, the years the economy started to slump.

-      And another myth: getting rid of deficits heals the economy. NO! NO! NO! The biggest budget surpluses we've ever had were in 2000 and 2001, the years the economy started to slump. Bottom Line: deficits rise in economic slumps and get paid off when the economy booms, then surpluses are created. It is no more complex than that.

-      GOLD INDEXES. The two major U.S. gold indexes are the "XAU" and the "Gold BUGS Index." Each is distinguished by the stocks in them. The XAU is actually the Philadelphia Stock Exchange Gold and Silver Stock Index. It's made up of generic mining stocks, has been around since 1983 and is the industry standard. The Gold BUGS index is NOT an index of generic mining stocks. It is specifically a gold index, and contains only "non-hedged" gold mining companies, those that are fully exposed to the price of gold. The two largest stocks in the XAU are Barrick Gold and AngloGold, two of the world's largest gold-mining companies. They are also significantly hedged which means that a significant rise in the price of gold above a certain price may not necessarily benefit their businesses. When the gold market is soaring and you are looking to make a gold play, the XAU does not give you the better bang for your buck, the Gold BUGS index does. BUGS is an acronym for Basket of Unhedged Gold Stocks, trades on the AMEX (symbol HUI) and was started in 1996. The two major stocks in the index are Newmont Mining (NEM) and Goldcorp (GG). Newmont is the world's number one gold miner and is unhedged as is Goldcorp and the rest of the stocks in the index.

-      Books you can read to learn about investing in gold and gold stocks: "The Power of Gold" by Peter Bernstein; "Bre-X: The Inside Story" by Diane Francis; and "Mining Explained" by James Whyte.

-      Trend reversals in the U.S. dollar (we are going through one right now, from strong to weak) usually last several years. In the 30-year period since the dollar was taken off the gold standard in 1973 and became "free-floating," we've had only four major currency trends:

Weak dollar 1972-1978 (6 years)

Strong dollar 1979-1985 (6 years)

Weak dollar 1986-1995 (9 years)

Strong dollar 1996-2001 (5 years)

Weak dollar 2002-????

Because the current weakening only began in February of 2002, the cycle could still have a number of years to run. The dollar could fall significantly from its early 2003 level before it reaches its lows. The last time the U.S. actively pursued a weak dollar was in 1985, in response to the then record trade imbalances caused by the strong dollar of the early 1980's. The dollar remained weak until 1995 when Treasury Secretary Robert Rubin announced a strong dollar policy. After the bull market of 1996-2002 the U.S. has again experienced a record current account deficit, this time even worse than the mid 1980's! The number has reached over 5% of GDP and is the largest trade imbalance in U.S. history. We are probably in for a dollar plunge to pre-bubble era lows. Invest with this in mind. It is a very important component of the investment decision equation.

-      ARBITRATION. Investors filed a record number of arbitration requests seeking damages from Wall Street in 2002, according to statistics released by the National Association of Securities Dealers Dispute Resolution. It was the second consecutive year that the number of cases hit a record (and will continue its record-breaking streak this year). A total of 7,704 new arbitration cases were filed with the organization in 2002, 11% higher than in 2001 and 39% higher than in 2000. In 2002, the damages paid out on these cases were $139 million (of which $23 million was for punitive damages). In 2001, the damaged paid was $97 million (of which $15 million was for punitive damages).

-      There is now $3 trillion in savings deposits earning basically nothing. When there is a new bull market and investors start taking risks again, there certainly is plenty of cash around to fuel a boom!

-      Please, please, please. I must know if there is anyone of my NOTE subscribers that believes what Hillary Clinton is saying about Monica and Bill, etc. You MUST email to let me know if you believe a little of what she says, all of what she is saying, or anything, anything at all. Please let me know.

-      Chairman of the New York Stock Exchange Richard Grasso, what were you thinking? You're getting paid almost $1 million a month and you had to get on the board of directors of Home Depot? You really found that necessary? You truly believed it would pass the smell test of public scrutiny? Is your political ear made of tin? Is what you are paid not enough? Must you moonlight? Was it worth it? I don't understand? He seems to be a bright guy. Can someone explain this to me? Is it me?

-      Unemployment hit 6.1%, the highest level since 1994. We have to see these numbers start reversing to have a recovery of any substance.

-      The Great Wealth Transfer. A 1999 report by the Social Welfare Research Institute at Boston College estimated that at least $41 trillion, and quite possibly double or triple that amount, will change hands by 2052. More than 6 million estates of $1 million and above will be settled. What a GREAT time to be an investment professional!!!!!!

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From Broker Coach, David McKee (603)598-3794

www.simpleintellection.com

After reading the last installment of my contribution to NOTES, three ideas came to mind: subjectivity, objectivity and interpretation.

You see, the fundamental, the very foundation of how you interpret is based on experiences that aren't even yours. You are so intimately involved in experiences that every time your Host(ess) conceived of "I", you assumed "I," which really is the guest (the "you" subjective). You assumed it was you who was required to retain the experience's information.

Like having a computer fully loaded and running on its own volition, you blindly assumed all the while that "you" (the subjective) is fully in control.

Objectivity is gained by stepping out of your frame of reference and viewing heretofore the un-inspected database of information in front of you. There are a number of ways to accomplish this.

Interpretation definition: to free from mystery or obscurity; to make clear, to translate into intelligible or familiar terms.

This is the component of expansion or creation that has the greatest baring on the growth of your business.

We'll continue from here in the next NOTES.

Feel free to email me to discuss these concepts at: alidade@tellink.net

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