Why Gold?

Centuries ago Aristotle said gold and silver were money because they fit the five properties of money.

Kings and governments used gold for international transactions.

JP Morgan, 100 years ago, said gold was money and nothing else.

If Gold has no use or utility, then why do central banks own it? Why does the US own gold and no paper reserves?

It is because gold is money and the ultimate backstop to our monetary system.

Throughout history no currency other than gold and silver has kept its value.

You can't get a stock bull or gold bear to admit to this, because it defeats their central argument against gold.

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Dow plunges 290

as investors worry about banks.

Investors are back to worrying about banks. Long-present unease about soured loans bubbled over on Monday after Bank of America Corp. said it set aside $13.4 billion to cover lending losses even as it posted earnings that beat expectations. Other big banks have also increased loss provisions in the past two weeks.

Financial stocks suffered some of the day's worst declines and major market indicators tumbled more than 3 percent, including the Dow Jones industrial average, which fell 290 points.

Bank of America plunged 24.3 percent and Citigroup fell 19 percent as investors became worried that cleaning up bad loans from banks' balance sheets may have farther to go than many had anticipated.

Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said traders are now viewing bank earnings with more skepticism and believe that the better-than-expected profit reports may be disguising problems.

"They're looking at bank numbers and are saying they are not that great," Saluzzi said.

Even without growing anxiety about financial stocks, traders had been looking for some pullback after the Dow jumped 24 percent from 12-year lows in early March.

The renewed worries about banks' debt problems were aggravated by news reports that their lending remains tight and that the government may swap its debt in banks for ownership stakes as its $700 billion bailout fund runs down.

Because of the central role lending plays in keeping businesses of all kinds going, investors have been hunting for signs of a recovery in banks before they get more optimistic about the broader economy.

The market has been encouraged by early indications that a government drive for lower interest rates has been helping banks step up lending, but investors are still sensitive to any signs of trouble.

Now they're on high alert about what the government will say in two weeks when it reports results of in-depth examinations to see which banks might need more help to stay afloat if the economy gets even worse.

Energy and materials companies also fell along with the prices of key commodities they rely on such as crude oil.

The market declines were broad and deep, outweighing what would otherwise be positive news about a step-up in deal activity. After a deal with IBM Corp. didn't work out, troubled technology company Sun Microsystems found a buyer in Oracle, a leading maker of business software, while PepsiCo Inc. said it would bid $6 billion to buy its two biggest bottlers.

According to preliminary calculations, the Dow fell 289.60, or 3.6 percent, to 7,841.73.

Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 37.20, or 4.3 percent, to 832.40, and the Nasdaq composite index fell 64.86, or 3.9 percent, to 1,608.21.

About 10 stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.8 billion shares.

Concerns about the sustainability of bank earnings weighed on financial stocks. Citigroup Inc. lost 19.5 percent, JPMorgan Chase & Co. fell 10.7 percent and American Express Co. fell 13 percent.

Jeffrey Frankel, president of Stuart Frankel & Co. in New York, said the retreat in financial stocks is welcome after their massive gains from early March — he said too sharp a rise could endanger a long-term advance. Many bank stocks have doubled in only weeks.

"These banks have had a tremendous run," Frankel said. "Now you're hearing the bearish camp speak up a little bit."

Investors are also cautious about financials after The New York Times reported that the government might be forced to find ways to stretch the $700 billion allocated for the government's bank rescue fund by converting the government's loans into common stock. Such a move would give the government a controlling stake in banks and hurt existing shareholders by reducing the value of their shares.

Separately, The Wall Street Journal reported that banks receiving government bailout money are having a hard time making loans.

Wall Street was more upbeat about the Oracle deal, which carries a 42 percent premium to Sun's Friday closing stock price of $6.69. Sun jumped 36.8 percent, while Oracle slipped 1.3 percent.

Beverage and snack maker PepsiCo offered to acquire Pepsi Bottling Group and PepsiAmericas in a move to cut costs. Pepsi lost 4.4 percent, while Pepsi Bottling jumped 22 percent and PepsiAmericas surged 26 percent.

In earnings news, drug maker Eli Lilly & Co.'s first-quarter earnings rose 24 percent on higher sales of the antidepressant Cymbalta and as costs for Humalog, a form of insulin Lilly makes, remained flat. Shares slipped 2.3 percent.

Light, sweet crude fell $4.45 to $45.88 a barrel on the New York Mercantile Exchange.

Occidental Petroleum Corp. lost 6.3 percent, while Dow Chemical Co. fell 9.1 percent.

In other market moves, the Russell 2000 index of smaller companies fell 26.88, or 5.6 percent, to 452.49.

Bond prices rose. The yield on the 10-year Treasury note fell to 2.85 percent from 2.95 percent late Friday. The yield on the three-month T-bill was unchanged at 0.13 percent.

The dollar was mostly higher against other major currencies. Gold prices rose.

http://news.yahoo.com/s/ap/20090420/ap_on_bi_st_ma_re/wall_street

Gold May Rise on Demand for Dollar Alternative, Survey Says

Gold may rise for a second straight week as the slumping dollar boosts demand for the precious metal as an alternative investment.

Twenty-one of 28 traders, investors and analysts surveyed from Tokyo to Chicago on March 19 and March 20 advised buying gold, which rose 2.8 percent last week to $956.20 an ounce in New York. Five said to sell, and two were neutral.

Last week, the dollar dropped 4.8 percent against the euro, the most since December. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, has jumped 41 percent this year to a record.

Most traders surveyed on March 12 and March 13 anticipated gold’s gain last week. The survey has forecast prices accurately in 151 of 254 weeks, or 59 percent of the time.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAEQMMKIFNZ8&refer=home

Gold ends higher as investors seek a safe haven

Gold futures ended higher Thursday, as investors sought a safe haven amid grim economic data and falling U.S. equities. Gold for February delivery rose $8.70 to end at $858.80 an ounce on the New York Mercantile Exchange. Earlier, the contract had fallen to an intraday low of $844.40.

http://www.marketwatch.com/news/story/gold-ends-higher-investors-seek/story.aspx?guid=%7B07F7C29F-F195-4F7A-8B6E-C1A294300E8B%7D&dist=msr_5

Mass. investor saw inside Madoff scam

BOSTON – His repeated warnings that Wall Street money manager Bernard Madoff was running a giant Ponzi scheme have cast Harry Markopolos as an unheeded prophet.

But people who know or worked with Markopolos say it wasn't prescience that helped him foresee the collapse of Madoff's alleged $50 billion fraud. Instead, they say diligence and a strong moral sense drove his quixotic, nine-year quest to alert regulators about Madoff.

"He followed through on everything he ever did. He never let up," said his mother, Georgia Markopolos, in an interview Thursday. "Some kids just let it go if it's too hard, but he wouldn't do that."

"He feels very sorry for these people that got taken," she added. "It wouldn't have happened if they would have listened to him long ago."

Markopolos waged a remarkable battle to uncover fraud at Madoff's operation, sounding the alarm back in 1999 and continuing with his warnings all through this decade. The government never acted, Madoff continued his ways, and people lost billions.

Markopolos reached his conclusion with the help of mathematicians like Dan diBartolomeo, whose analysis of the Madoff's methods in 1999 helped fuel Markopolos' suspicions.

"People should have seen the writing on the wall," diBartolomeo said.

Markopolos did not respond to multiple e-mail or phone requests for an interview.

The 52-year-old resident of Whitman, about 20 miles south of Boston, grew up in Erie, Pa., the oldest of three siblings.

His mother said her son was a little nerdy as a child, as well as occasionally mischievous and unfailingly honest. She recalled an incident where he pelted his elementary school with eggs in the middle of winter, but no one saw him. Time passed with no confession from anyone, until Markopolos stepped forward, admitted he did it, and cleaned the school himself.

Markopolos became an adept hunter and fisherman as he grew up, like many from the rural area, but also showed early aptitude at academics, as well as a willingness to question authority.

"He used to challenge the teachers," his mother said with a laugh. "He'd tell them he had the right answers, but they had the wrong questions."

Markopolos graduated from Cathedral Prep in Erie in 1974, then in 1981 from Loyola College in Maryland, which his mother said he paid for on his own. After time in the Army and in the financial services field, he earned a graduate management degree from Boston College in 1997.

By 1999, he was working for Rampart Investment Management Co. and charged with doing competitive research on Bernard L. Madoff Investment Securities, which was using a similar investment strategy as his company, but far outperforming it. Part of Markopolos's research included a visit to diBartolomeo, whom he knew from his professional circle.

"I think he was curious about how his competitor was doing so much better than they were," diBartolomeo recalled.

Researching Madoff's numbers, using data the firm distributed to prospective investors, diBartolomeo concluded within hours that it was impossible for Madoff to get the returns he reported while using the strategy he said he used.

"As the market goes up and down, this strategy should have done a little better or a little worse, just like everybody else," he said. "Instead, it appeared to be indifferent as to whether the market went up or down. They made money all the time."

Markopolos complained to the SEC's Boston office in May 1999, saying it was impossible for the kind of profit Madoff was reporting to have been gained legally.

But Madoff continued to thrive, even as Markopolos continued to pursue the case.

In 2005, he submitted a report to the SEC saying it was "highly likely" that "Madoff Securities is the world's largest Ponzi scheme." In the report, he says he knew his research could ruin people's careers and asked the SEC be discreet about circulating the report and his name.

"I am worried about the personal safety of myself and my family," he wrote.

The report highlights 29 "red flags" about Madoff's business, among them the returns of a third-party hedge fund managed by Madoff's firm which had negative returns in just seven on the 174 months Markopolos analyzed.

"No major league baseball hitter bats .960, no NFL team has ever gone 96 wins and only 4 losses over a 100 game span, and you can bet everything you own that no money manager is up 96% of the months either," he said.

His warnings were heard too late, and he's become a symbol of a botched oversight of Madoff by the SEC. His mother says the father of three boys under 5 has been bombarded by media requests. Now, a man who tried to be heard for years is going to lay low for a bit, she said.

"Right now, he's out relaxing some place," he said. "I can't even get in touch with him."

http://news.yahoo.com/s/ap/20081219/ap_on_bi_ge/madoff_scandal_whistleblower