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Updated @ 4:00 p.m. EDT, Sunday, October 10, 2004.


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SAYING OF THE WEEK: We should all wish President Bush the best of success with his "no child left behind" initiative, since we are going to need every one of those children to help pay off the huge national debt that the President has significantly helped to inflate. --Steven Jon Kaplan

ANOTHER SAYING OF THE WEEK: The more that investors are convinced that something will occur in the long run, the more they are likely to have made a speculation that this event will occur, and, therefore, paradoxically, the more likely that the opposite will happen in the short run. --Steven Jon Kaplan

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A special thanks to Mr. Don McEachern for designing the beautiful banner at the top of the web site, and a slightly different one seen on the back issue list.

WELCOME! This is True Contrarian by the same yours truly. I will attempt to create an entertaining, readable viewpoint a few times per month. Each issue will feature my intermediate-term financial outlook, my long-term financial outlook, and a personal reminiscence from my journal. Please write to let me know how you like my new design.

Recent comments are in boldface.

INTERMEDIATE-TERM FINANCIAL OUTLOOK: The main focus in the U.S. financial markets remains the U.S. dollar, but first let us consider recent important developments, especially with commodities. The traders' commitments for both gold and silver deteriorated sharply in the past week. Gold commercials added 32,104 to their net short position, and became net short 154,266 contracts as of Tuesday's close. Since gold has risen an additional $4.50 since Tuesday, it is likely that commercials are currently net short more than 160 thousand contracts. This is higher than almost all historic readings in the past three decades, including those in January and February, but are not as high as the record commercial net short position in early April of almost 200 thousand, which preceded a 14% fall in gold, and a 30% drop in most gold mining share prices over the subsequent six weeks. Thus, momentum might carry precious metals higher in the very short run, but a significant downside move in both gold and in gold mining shares is likely very close timewise. Technical chart divergences are already turning increasingly negative, such as in Friday's trading when gold peaked just after the open, and gold mining shares closed at their lows of the day in a progressive afternoon fade, with HUI not quite reaching an important intraday multiple of 10 (239.90), and closing just below a multiple of 2.5 (at 237.44). For silver, commercials added 15,845 to their net short position, and were therefore net short 67,291 contracts as of Tuesday's close. As with gold, the current net short position is likely greater, given silver's move to new highs later in the week. This is not as exaggerated as it was in early April, but then again, after April's extreme net short position, silver collapsed by three dollars, more than 35%, in just six weeks. The Commodity Research Bureau's index of commodities also surged to a multi-year high in Friday's trading.

What is currently happening with commodities is typical of a bull market in any financial asset. Given an improvement in underlying fundamentals, a strongly undervalued asset becomes less undervalued as savvy bottom-fishers purchase this asset near an important cyclical low. As time passes and the chart patters for this asset look more positive, combined with short covering by speculators who were previously confident of a continued price decline, the price of this asset rises first to fair value and then higher. As the rally continues and becomes more noticeable by average investors, a large contingent of buyers who are trading purely for momentum pushes this asset into a level of clear overvaluation. Initially, this serves to push prices even higher, as media coverage becomes almost unanimously positive and a new crop of long-side promoters encourage the least informed segment of the investing public to become involved. This stage has finally been reached in the commodities markets in general, as those advisors and media which had been almost universally bearish on commodities just three years ago are now almost unanimously bullish. Speculation has driven commodities prices to the levels at which those most closely connected with the industry, who have been progressively selling short in recent weeks, are now in a position to benefit handsomely by engineering a sharp, short-term price collapse, just as they did exactly six months ago. Since the futures markets were created for the benefit of the commercials, Comex commercials can simply ask the exchange to raise the margin requirements for speculators. Such an action would force speculators to raise their sell stops for tens of thousands of contracts much closer to current prices, and therefore a mild price drop could easily be exaggerated by a cascade of stop-loss selling to create a short-term collapse. This most recently happened in a six-week period from April to May of this year, as described above, and conditions are almost as ripe for a repeat performance. One indication that a pullback is imminent are the number of covers of financial publications in the past two weeks that excitedly tout either commodities themselves or the shares of commodity-producing companies. Media coverage toward commodities at this time is even more positive than it was in early April, raising the danger that recent very heavy fund flows into commodity and commodity share mutual funds have been swelled by the ranks of latecomers who have no emotional or knowledgeable commitment to the sector, and are buying only because "everyone says its going up, and I don't want to miss out". These investors are notorious for bailing out when faced with even a modest price decline, and are therefore likely to exacerbate any downside move by their inevitable selling when things turn sour.

I am always skeptical of accusations of collusion or manipulation of the financial markets, but it must be considered that President Bush would not like voters to go to the polls at a time when crude oil prices are at an all-time high, and the U.S. dollar is in a freefall. Therefore, whether it means selling crude oil from the national reserves, or talking up the greenback, or whatever other actions the President can take overtly or covertly, they are likely to be engineered before the election on November 2, rather than after. There is also a historic seasonality pattern in which precious metals present an excellent buying opportunity shortly before the American Thanksgiving holiday, which occurs this year on November 25. That is partly because gold is a popular Christmas present, and therefore frontrunners usually get the edge ahead of these buyers. The period of heaviest overseas buying of gold is also about to pass, with most important lunar holidays having occurred a couple of weeks earlier this year (relative to the solar calendar) than in most years, and which have been generally winding down around the world. Worldwide physical buying of gold is at its lowest point since early April, and remains at significantly lower levels than in 1998-2003, as price-sensitive buyers are reluctant to pay for precious metals near their 17-year highs. The lifting of hedges by gold producers has picked up most of the slack, but historically when physical buying has been poor, subsequent price action has been to the downside.

As pointed out in the past two updates, the U.S. dollar has been making a very impressive series of higher lows since February. The July low is substantially above the February low, with the September low slightly above the July low, and the October low slightly above the September low. In the past three weeks, there have been repeated intraday attempts to push down the U.S. dollar in the morning, with the greenback fighting its way back in the afternoon. When this pattern is seen in any financial asset over an extended period of time, it generally precedes an extended rally, and a move higher is therefore what the U.S. dollar is likely to enjoy over the next several weeks, if not longer. Media coverage remains lopsidedly negative toward the greenback, while the dollar's modest rebound in the past seven months has received basically zero attention or comment. Very negative sentiment accompanied by rising prices is almost always a very positive sign for future gains. Interestingly, exactly the opposite situation can be seen for U.S. equities: a clear pattern of lower highs accompanied by rising optimism, with bulls outnumbering bears 2:1 in most surveys, and rising complacency as evidenced by multi-year lows in most index volatility measures. Thus, expect U.S. equities to decline while the U.S. dollar rises in value. There remain few speculators on the short side for most currencies. The U.S. dollar may therefore be signaling an upcoming upside breakout. As the dollar rises, gold and silver prices are likely to decline. Bullish sentiment toward gold is above 80% for the first time since early April, and is at a level which has marked numerous previous price peaks. Therefore, any additional price gains by precious metals in the very short term are likely to be rapidly reversed, and followed by significant further declines in subsequent weeks.

GOLD MINING SHARES AND THE NASDAQ: Gold mining shares have generally traded in the same direction as the Nasdaq over the past four years, although not always in matching percentages, particularly during rallies. Thus, the most important indicator for the near-term direction of gold mining shares is the same as the most important indicator for the near-term direction of the Nasdaq: implied index volatilities. On Friday, October 1, 2004, VXO hit a multi-year low of 12.43, VIX hit a multi-year low of 12.60, and VXN fell to 18.72, just nine cents above its all-time low (VXN has not been measured for as many years as VXO/VIX). More significantly, if one picks any random volatitility measure, such as VXO at 14, and looks at all price points for major U.S. indices this year when VXO was exactly equal to 14, one observes that investor complacency has remained steady at progressively lower price levels. This is a classic precursor toward much lower prices, and constitutes one of the defining characteristics of the early years of an extended bear market. U.S. equities are likely to decline substantially over the next several weeks, with the Nasdaq falling to around 1500, just below its 61.8% Fibonacci retracement from its bottom of October 2002 to its peak of January 2004. HUI, the Amex index of unhedged gold mining shares, is likely to fall to around 190, just below its 61.8% Fibonacci retracement from its bottom of May 10, 2004 to its recent peak (assuming that any new highs in HUI, if reached, are not more than a few percent above Friday's intraday high of 239.90). Over the longer run, the Nasdaq has shown a clear pattern of lower highs throughout 2004, which is likely to continue for at least the next two years as the Nasdaq falls toward fair value just below 700. A pattern of three or more consecutive interest-rate increases by the Federal Reserve has almost always been bearish for the financial markets, as is epitomized by the maxim "three steps and a stumble." With gold mining shares, look for the differential between the price of spot gold and HUI to increase over the coming weeks. This spread, which was recently 183, has increased to just below 186. It is likely to approach 200 over the next month. Either because equities have not experienced a sharp price decline since the early autumn of 2002, or because the media keep harping on the concepts of a "trading range" and a "dull, flat market", or because investors naively believe that U.S. equities cannot fall significantly in a Presidential election year (obviously no one remembers the year 2000), or because of some other reasons, almost no market participants are prepared for U.S. equities to set new lows for the year. This is in spite of the fact that most of the equity groups which traditionally lead the market have already hit new annual lows, such as semiconductor shares, while chart patterns for most equity groups show a classic failure to break and hold above their respective 200-day moving averages. The most likely interpretation is that the U.S. economy is slowing, and that liquidity is therefore drying up in the equity markets, which will negatively affect all stock groups, including gold mining shares. I expect the Nasdaq to make its 2004 bottom very slightly below its Fibonacci 61.8% retracement level of 1507 (see below for more Fibonacci retracement details), with the U.S. election having surprisingly little influence except probably to create a brief late October bounce. Quite a few gold mining analysts have proclaimed that gold is in a trading range with either $380 or $390, or even $400, as the downside limit. Therefore, there are likely to be many sell stops sitting close to important round numbers all the way down to $380 and possibly lower. With the sole exception of May, in which gold sagged to $371.25, the yellow metal has found repeated support at $387 this year, so it will be interesting to see if that key level is once again approached, and if so, if it can be broken to the downside. My guess is that gold will indeed go below $387; the commitments when this happens will give us a good clue as to potential further downside at that time. As was the case in the first week of July, when gold mining shares continued higher for one week before joining the remaining U.S. equity groups in their downward trend, gold mining shares and the shares of other commodity producers, including energy and base metal shares, are very unlikely to be able to move higher as most U.S. equity groups decline. A falling tide usually lowers the level of all boats, if not necessarily by precisely equal percentages.

GOLD AND REALITY: Gold often correlates closely to the real rate of return for short-term U.S. time deposits. The lower the real rate of return, the better for gold, and vice versa. The real rate of return is equal to the nominal time deposit rate (roughly equal to the anticipated Federal funds rate) minus the inflation rate. Of course, one can quibble over the current inflation rate, as well as which rate to use for the nominal rate, but in general, it can be seen that when gold peaked this past winter, inflation was about 2.0% while the anticipated Federal funds rate was about 1.0%, thus yielding a real rate of return of negative 1.0%. At the current time, inflation has risen to about 2.3% while the anticipated Federal funds rate is about 1.8%, yielding a real rate of return of negative 0.5%. As this is a less negative rate than before, it is logical that the gold price should be lower now than it was seven months ago. Looking forward, most observers expect the Fed to continue to gradually raise short-term interest rates; if this rise occurs more quickly than the corresponding rise in U.S. inflation, which is likely, then the real rate of return for U.S. time deposits will become even less negative (although it probably won't quite reach zero), and therefore the price of gold should drop further. It should be noted that when gold experienced its lowest point in 1999-2001, the inflation rate averaged 2.0% while the anticipated Federal funds rate was as high as 6.5%, yielding a real rate of return of as much as positive 4.5%.

At 9:17 a.m. on Thursday, August 12, 2004, the South African central bank surprised most observers by lowering a key lending rate by half a percent, instead of leaving it unchanged as had been expected. No reason was given for this decision, but many presume that the central bank was concerned about the rand's powerful rally from 13.5 to the U.S. dollar in December 2001 to 5.9 to the dollar in late July 2004. Since most South African workers are bound to union contracts which are denominated in rand and include annual raises of roughly 9% per year in rand terms, the rand rally caused these workers to be paid more than twice as much in U.S. dollar terms, which caused a significant erosion of profit margins for those manufacturers who sold their goods in U.S. dollar terms, such as precious metals miners. The rand responded to the central bank decision by falling from 6.18 rand to the greenback just before the announcement, to 6.48 rand to the dollar immediately afterward, and 6.60 rand to the dollar a few days later. The rand/dollar exchange rate has remained close to 6.6 rand to the greenback over the past four weeks. South African gold mining shares responded to the rate cut decision with a sharp price surge that lasted for eight calendar days, through August 20. It remains to be seen whether this is a permanent change in policy by the South African central bank, or merely a one-time event. Since the South African economy is growing sharply in real terms, it also remains uncertain whether or not the rand will continue to decline, or will resume its uptrend if currency participants perceive the current rand level as being undervalued.

I am expecting official U.S. government data to show a "sudden" drop in real estate prices, which will change the entire perception of real estate as a "sure thing" and likely cause a sharp drop in investor confidence, and perhaps even help to trigger a recession which could become quite severe as early as 2006. REIT investors already know about this decline, as evidenced by the very bearish chart patterns of the REIT indices IYR and RWR, but most U.S. homeowners and recent home buyers, aided and abetted by the media, foolishly believe that record high real estate prices will continue to show significant annual gains for many years to come. The consensus is about as strong as the surveys four years ago that showed the average investor expecting the Nasdaq to continue to rise 30% per year for at least another decade.

LOOKING FORWARD TO 2060: I'll make a very far forward prediction by stating that I believe U.S. equities will make a double bottom in 2010 and 2018, with the Nasdaq bottoming near 300 in 2010, rebounding to around 550 sometime thereafter, and then making a final double-bottom retreat to around 400 in 2018, followed by a roaring bull market that will bring the Nasdaq to the 3000-3500 level by perhaps 2035, followed by a relatively mild bear market. The all-time Nasdaq high of 5132 from March 2000 will probably not be seen again until 2060 at the very earliest.

PRESIDENTIAL POLITICS: Assuming that the U.S. Presidential election in early November 2004 is between Bush/Cheney and Kerry/Edwards, this will have an important impact upon the world financial markets. If Bush wins, then his lame-duck second term, which will last until January 20, 2009, will have little incentive to prop up the economy, as he and his advisers will have no possibility of a third term, because of the U.S. constitution forbidding it. Therefore, the U.S. financial markets will likely fall apart quite rapidly and in a sustained manner, with the Nasdaq most likely collapsing to its historic mean fair value around 650, perhaps in September or October 2006. With Bush opposed to tax increases, while promoting every ridiculous spending plan on the planet, and even off the planet (such as the manned Mars mission), the deficit will reach historic proportions and the U.S. dollar will continue to stage a sustained long-term decline, as it has already been doing anyway for more than thirty years. If Kerry wins, then he will not want the economy to fall apart, as he and his associates will be working hard for re-election. Kerry, or any Democrat, will almost surely create a new series of significantly higher tax brackets for the wealthy, probably very closely matching the tax code during the Clinton administration, and thus sharply reducing the deficit. The lower deficit will keep the U.S. dollar from falling as much, and will keep Treasury yields from rising as much, although the U.S. stock market will still likely decline significantly, as there is no way to overcome its fundamentally overvalued condition. Extreme overvaluations in the financial markets almost always lead to equally extreme undervaluations, and vice versa.

RE-ELECT GEORGE W. BUSH: Make no mistake about it, President George W. Bush is one of gold's best friends. By ensuring the huge increase in the U.S. account deficit through idiotic temporary tax cuts, which are scheduled to gradually expire each year from now through the end of 2010; by intentionally depreciating the U.S. dollar and by extension causing the U.S. trade deficit to soar; and by artificially depressing short-term interest rates to devastate normally conservative savers while encouraging them to become market and real estate speculators, the price of gold in U.S. dollar terms has increased by about half during Bush's first term as President. If re-elected, gold is likely to rise by a roughly equal percentage during a second Bush stint. True goldbugs should be campaigning aggressively for the President's re-election, as Kerry might attempt to improve the long-term health of the U.S. economy, or even do something really crazy such as establishing a coherent economic policy. The Bush tax-cut policy has been to enact only temporary tax cuts, since permanent cuts would require realistic assessments of the long-term huge deficits that such revenue cuts would entail, and therefore would never be accepted by even a Republican-dominated Congress. Therefore, the tax code has to be rewritten at least once per year, as some of these "temporary" cuts are extended, some are allowed to expire, but none are ever allowed to be made permanent. Apparently the President strongly favors an environment of continual tax confusion rather than resolution. The only ray of hope on the horizon is that Americans are forced to compute their taxes each year using the higher of two methods, the "regular" method and the "alternative minimum tax" method, the latter being a flat 28% federal tax with almost no exemptions and a large standard deduction. If the current temporary tax cuts are extended year after year into infinity, then within a decade, almost all upper-class and upper-middle-class Americans will be paying their taxes using the alternative minimum tax, and the deficit will thereby at least not be as horrible as it otherwise would have been.

FIBONACCI LIVES (and so does WD Gann)!: I have found the Fibonacci retracements to be quite accurate in predicting retracement levels within the context of long-term bull and bear markets. If one takes the Fibonacci sequence 1, 1, 2, 3, 5, 8, 13, 21, 34, etc. (each number represents the sum of the two previous numbers), one finds that the ratio of these numbers eventually approaches almost exactly .618. Similarly, in the financial markets, if any financial instrument in a long-term trend has a retracement in the opposite direction of that trend, most often .618 of the most recent previous gain is surrendered during such a retracement. (There are other retracement levels that apply in certain situations, but the .618 level is the key for most multi-month studies.) Now, let's put this theory to work. Gold shares as measured by HUI bottomed at 112.61 in the morning of March 13, 2003, its lowest level that year. HUI peaked at 258.60 on December 2, 2003. If HUI had given up 61.8% of this gain, then its bottom this year would have been 168.38. The actual bottom for HUI was 163.81 just after the open on Monday, May 10, 2004, which I suspect may have been the final low for 2004. Gold itself rose from $319.10 on April 7, 2003 to $431.25 on January 6, 2004, so that would signal an upcoming 2004 nadir of almost exactly $362.00. The 2004 low so far was on May 10 at $371.25, suggesting that the bottom for gold itself has not yet been made. For the Nasdaq, the post-bubble intraday low was 1108.49 on October 10, 2002; the recovery peak on January 26, 2004 was 2153.83. Assuming the January peak is not exceeded in the near future, if 61.8% of the gain is retraced, then the bottom for the Nasdaq later this year will be 1507.81. Be sure to save these numbers for future reference, so you can either congratulate me (or Fibonacci, a monk who lived in the twelfth century; they had gold back then, but not the Nasdaq), or else curse the both of us if "we" are wrong. To give credit where credit is due, this observation was first discussed in detail by W. D. Gann (1878-1955). Since the late great Gann had only a slide rule, not a calculator, he used the 5/8 level, which is .625, and almost exactly matches .618.

LONG-TERM GOLD OUTLOOK: Gold will continue to make a pattern of higher lows as its strong bull market from April 2001 to the present continues throughout the next 10 or 15 years. The most recent major low was at $319.10 on April 7, 2003, so the next low will likely be between $350 and $370 an ounce later this year. Gold's lowest recent price was $371.25 spot in the morning of Monday, May 10, 2004. Gold has surpassed $400 per ounce in many years in the past dating back to 1979, but has gone above $440 per ounce in only a few years, so that barrier has apparently reasserted itself once again. Inevitably gold will go above $500 per ounce, perhaps even as early as 2005, and then above $600 at some point in the next several years. A decade or so from now, after the U.S. stock market has had some time to recover from a very deep bottom, gold might stage a typical late-recession rally and spend a few years above $1000 per ounce. Since gold averaged about $350 per ounce from 1979 through 1996, it seems reasonable that its median price in the next two decades will be perhaps at twice that level, near $700. My guess is that gold will probably not ever exceed in inflation-adjusted terms its all-time peak from January 21, 1980, but given the recent U.S. equity euphoria, perhaps anything goes.

Since gold's rally has been almost entirely due to the U.S. dollar's decline, gold's price has been basically flat in terms of most other major world currencies. This is likely to change in the future, with gold rising perhaps twice as much as the U.S. dollar declines, and gold generally rising in terms of most world currencies. The reason is that the world's major industrialized nations are not just going to sit back and let the U.S. devalue its currency uninhibitedly. Given any threat of recession, the European central bank and Japan's central bank and Canada's central bank and Australia's central bank are going to depreciate their currencies aggressively, and given that their short-term rates are generally far above those of the U.S., they can depreciate more aggressively and more impressively than the U.S. can, given that the U.S. has basically exhausted nearly all of its interest-rate cutting potential already. This process of competitive devaluation will help gold to rise even without cooperation from a falling U.S. dollar. For that reason, gold producers in South Africa, which have been suffering from the price of gold actually declining in South African rand terms while wages have been rising at about 10% per year, will see far improved profits relative to most other producers. Meanwhile, gold coins and collectibles are still selling at historically low premiums to their melt (intrinsic) values, and therefore merit consideration whenever gold is oversold.

U.S. equities in general will continue to decline until the dividend yield on the S&P 500, currently at only 1.78%, is between 7.5% and 10.5%. Great bull excesses are usually followed by equally severe recessions.

REMINISCENCE OF THE WEEK: Two years ago, I was at work in downtown New York City when the person sitting in the cubicle next to me said his chair was shaking. I thought he was joking, until about a half minute later when my own chair began to rattle and then the apparently solid floor below us began to vibrate. Soon, we could hear books and glasses crashing down all around us. A few people started yelling, and shortly thereafter an announcement was made on the fire system to "please evacuate the building through the stairs". When we gathered on the sidewalk below, a few hundred of us could talk about nothing else but what we figured was the first serious earthquake in Manhattan in history, until we noticed that only people from our building were clustered outside. Everyone else from neighboring offices and down the street was working at their desks as usual, apparently unconcerned. Puzzled, we couldn't figure out what was going on, until a fire department investigation determined the cause of the tremors. An aerobics class of fifty people was entirely responsible for creating resonance and massive vibrations that had affected a dozen floors of a major skyscraper.

REMINISCENCE OF THE WEEK: As mentioned in more than one previous reminiscence, in November 1977 I played piano for our high school production of "Guys and Dolls". One of the liveliest and cutest members of our cast played the role of a "Hot Box girl", performing two burlesque numbers in the show. As a student, she was quiet in class, but outside the classroom, she was very outgoing and enjoyed life fully. She was always the center of attention when we would go to the local diner during rehearsal breaks. Since high school graduation, I have not seen her again, but three years ago I was, shall we say, somewhat surprised to see her name in print. In the "New York Times" Sunday "Styles" section, from September 2, 2001, was a front-page article by their lead society writer, Guy Trebay, entitled "All Undressed and So Many Places To Go". On the page 8 continuation, she is given two full paragraphs. One sentence should suffice for a family-oriented web site: "For herself, however, the experience of going naked at Lighthouse Beach this summer was liberating."

REMINISCENCE OF THE WEEK: I used to attend a summer music composition camp known as the Walden School. It was run by an energetic, inspiring man named W. David Hogan, Jr. We were each assigned to a kitchen crew in order to set out the dishes and silverware, and to serve the food and drink. There were two crews per meal. One day, our crew showed up as usual, but the other crew was nowhere to be found. We didn't know what to do, so we decided to do the best we could with our limited numbers. Naturally it took twice as long to set up as usual, so we still had a few tables to go when the counselors and kids began to pour in for supper. We tried to work a little faster, when the other crew suddenly showed up. It turned out that they had been playing a close game of handball that went into overtime, and they didn't want to interrupt the game to do something boring like setting the tables. The second, tardy crew tried to cover up for their misdeed by rushing to set out the final table, which was comprised of the most senior staff and counselors. They did a good job at first, but when they served Mr. Hogan himself, the head of the tardy crew rushed just a little too energetically, and tipped an entire meal and large cup of grape juice onto David Hogan's freshly washed shirt, tie, jacket, and pants, not to mention splattering the director's face with some kind of vegetable medley. Needless to say, that particular crew did quite a bit of floor scrubbing, lint cleaning, and every other conceivable and inconceivable task for the remainder of the summer without a complaint.

REMINISCENCE OF THE WEEK: When I was a kid, the most popular birthday activity by far was to have a duckpin party. In Baltimore, unlike other American cities, almost every bowling alley is divided into two halves. In one half, there are lanes with tenpins that require fifteen-pound balls and where you throw the ball twice per frame, as you can find throughout the U.S. In the other half, there are lanes with pins that are much smaller, known as duckpins, for which you throw a ball weighing only 3-1/2 pounds, and where you get three throws per frame. It's more difficult to throw a strike (all pins down in a single throw) or a spare (all down in two throws) with duckpins, since the ball is far less powerful, so a score of 120 is considered very good. Kids almost always prefer duckpins, because they can hardly lift the larger balls needed for regular tenpins, and because it has been the norm for Baltimore youth for decades (although this tradition has somewhat faded in the past twenty years, alas). Our parents would drop us off at the bowling alley, whereby we would bowl for about 1-1/2 hours. Afterward, we would gather in a big room nearby to eat strawberry ice cream and pound cake, and be entertained by someone dressed as a clown, who would then suffer the indignity of having leftover melted ice cream and cake thrown at him whenever any of his antics were less than excellent. As a true contrarian even then, I decided that for my ninth birthday, I would have my friends meet at Patapsco State Park just west of the city limits. Instead of bowling, we all went on a five-mile hike along a stream with a waterfall, and instead of ice cream and cake, we had barbecued goodies with lemonade and root beer. The general attitude afterward was "it was weird, but we had a lot of fun and we learned something". I guess that's similar to the reaction of those who read this page after perusing the usual web sites.

REMINISCENCE OF THE WEEK: In the summer of 1983, I went to visit my best friend from high school, who had moved to Chicago to attend the university in Hyde Park. He was rather busy during the daytime hours, so I explored a lot of the city on my own. One morning around 10 a.m. I headed for a park, and discovered an elaborate sculpture which looked like it might be or once have been a fountain. I walked over to it, and finding it intriguing in its design, I went toward its center to examine it more closely. Suddenly I heard a whirring sound, and soon discovered that it was very much a live fountain, which began to spout prodigious amounts of water. Since it took me quite some time to climb out of the middle of the contraption and move away from the range of the spray, I was thoroughly drenched, at which time the fountain shut down as rapidly as it had started up. I walked around to the other side of the massive sculpture and saw that it was called "Buckingham Fountain", which I later discovered was the most famous fountain in the city. Its posted hours of operation were clearly in the afternoons and evenings only, so the person in charge of its maintenance must have turned it on that morning solely for my benefit.

REMINISCENCE OF THE WEEK: In my senior year in high school, there was a family living next door that had grown up in the farm belt of North Carolina. They grew corn and other crops in the back yard, instead of planting the traditional lawn grass, and they had a huge dog which lived in a doghouse in the front yard. One day in January they went on vacation for two weeks to visit their family back on the farm. While they were gone, a small brown-and-white stray dog moved into the doghouse and begged for scraps in the neighborhood. Whenever I left the house for a walk, the stray dog would follow me for a block or two, unless our own family dog was with me, in which case it would stay at a distance and whimper. After a week had passed, the dog was still in the doghouse and I knew it would get kicked out the following Sunday when the next-door family was scheduled to return. On Saturday afternoon, as snow flurries fell, I walked to the library to return some books, and the dog followed me all the way, more than a mile, but stayed just outside the library door. I only took about half a minute to drop off the books, but when I went back outside, I couldn't see the dog anywhere. I looked around for almost an hour, then gave up and walked home. Perhaps the stray dog somehow sensed that the doghouse would no longer be available, and decided to head for a new place to live.

REMINISCENCE OF THE WEEK: Several years ago I was teaching piano in Chinatown in downtown Manhattan. My star pupil not only improved his performing ability, but also began to write his own songs. One day, he surprised me by telling me he was treating me to supper for my birthday. I selected my favorite Thai restaurant called "Thailand" at the corner of Baxter and Bayard Streets (it has been there now for twenty years). My protégé asked me what to order, and I told him probably he should get one of their excellent curries, but not the "jungle curry", since that would be too spicy for him to eat. Naturally, he ordered the jungle curry, telling me that since he was from southern China, he could certainly eat much hotter food than any red-haired wimpy American from Baltimore. I warned him again to get either the red, green, or yellow curries instead, but he insisted, so I intentionally ordered the yellow curry for myself, the mildest of their signature dishes, so that he could swap later without losing face. When the jungle curry arrived, my overeager student took one bite, then without a word switched plates with me. I was truly surprised when he discovered that even the yellow curry was a lot spicier than anything his mother usually cooked (he was only a high school junior at that time, and had not eaten out very frequently), since that was mild even to my taste. I ended up eating both of our entrees, encouraging him to order something even more harmless than a Big Mac, such as pad thai, but he was too embarrassed to want to order anything further at that point. Finally, the bill arrived, and he made a great show of very proudly taking out his first, very recently obtained credit card to pay for both of us, only to discover that the restaurant accepted only cash; he had less than five dollars in his pocket. We have since become good friends, although to this day he becomes upset if I remind him of this incident.

REMINISCENCE OF THE WEEK: In the late summer of 2001, my brother and I visited Iceland. We went horseback riding, swam in thermally heated pools, went biking, and marveled at the Northern Lights (the aurora borealis). I had met an Icelandic man while playing bridge on the internet; we later sent e-mails and talked on the phone, and he was kind enough to drive my brother and myself around the country for two days. We saw amazing geysers and waterfalls, wide open countryside with a few domestic animals, and a generally austere landscape. Rainbows were almost an everyday occurrence. On the second day together, after we had just visited an ancient Icelandic graveyard, my friend said, "I'm not sure why, but I'd like to hear the news on the radio for a few minutes if you don't mind." My brother and I couldn't understand what was being said, but my friend told us "the World Trade Center was just hit by an airplane." That didn't make any sense to us, and then shortly thereafter he told us "another plane just hit the other tower, and they say it's terrorism." We drove immediately to my friend's house and, just as we arrived and turned on the television, on CNN we saw the South Tower fall.

(c) 1996-2004 Steven Jon Kaplan Your comments are always welcome.

AUTOBIOGRAPHICAL SKETCH: I was born and raised in Baltimore, Maryland, U.S.A., and was graduated from the Johns Hopkins University with a Bachelor of Engineering Science degree in May 1982. I have been studying the precious metals markets since the 1970s, and began this web site in August 1996. I have been writing music and short stories since the mid-1960s. I maintain a fiercely independent stand toward the financial markets and toward everything else in life, and am not compensated for my writings by any person or organization with the exception of the advertising banners posted on this site. I am also a pianist, computer programmer, bridge player, and runner, and enjoy world travel. I appreciate all those who have quoted the various sayings on my web site over the years, which have wound up in some pretty interesting collections.


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