The following commentary can be found about m1/2 way down Bill's weekly WIR - full report at http://www.billcara.com/archives/2006/10/week_41_20061014_in_review_ini.html#more Can anyone direct me to a bullish argument that is as eloquent as Bill's bear argument Here is an excerpt from this weeks report ----- Today, the 200-day MA for $GOLD is 599.78, and the 50-day MA is at 605.37. So the current price ($582.70) is below these MAâs, which represent technical resistance. The $540-$560 was tested successfully, and now I believe -- based on a $USD that canât seem to cross up through the 200-Day MA resistance â that $GOLD is headed to the mid-600âs. I admit being out on a limb here, but I am not alone. Thatâs a view, btw, that is shared with most of the major broker-dealer analysts. Could we really be on the same wavelength? The people I hear talking about Gold at $540 - $500 - $440 etc are mostly people like Larry Kudlow and from small buy-side firms that CNBC likes to present to break the monotony. I continue to believe that the next Bull phase in the gold market will be on the back of a sliding $USD, and that $GOLD will move back over $700, and probably (as I see it) over $800. I also see that happening sooner than later â say within 12 months. When I look into the future of these gold miners, I can see a lot of new but small mines coming on-stream, but the winding down of some major producers. The net effect will likely be a declining gold production over the next 5 to 8 years. The U.S. reserves of gold are still huge, and quite sufficient to sell off bullion to hold the price from escalating to $2000, $3,000 or $4000 price levels. Nonetheless, the prospects of a financial systems failure that I referred to off the top, and again during this report, are concerns of mine. The problem is that financial futures are a zero-sum game that I donât see how could return to zero without counter-party failure along the way to positions being unwound. You see the Credit-Default Swap (CDS) market is now much bigger than the cash Bond market, and it has been growing in one direction. But, like Amaranth discovered with Natural Gas, trying to unwind positions when the cash market goes to extremes against you is almost impossible. Maybe with a cushion of another $10 billion or $20 billion, Amaranth might have weathered the storm. But $10 billion wasnât enough. As it happened, Amaranth had a little equity remaining when it rebalanced its NG positions, so clients lost that $6.5 billion. But lets suppose the next time, there is a major bank that is hedged (directly or via client positions) on interest rates only to say 6.00 pct on the long bonds, and their exposure is greater than its total capital. Say interest rates go 7, 8, 9, 10 pct in several days as failures start to ring up and large banks have to go to the Fed to borrow funds they cannot collect from clients that are failing. Iâm not a risk management expert, but I have heard and read such experts say that they believe failures will occur, and they will involve big name banks. I believe it because itâs happened before. The S&L crisis of the 1980âs caused the failure of many banks. Then in the 1990âs the Japanese banking crisis wiped out trillions in equity and sent the country into a deflationary spiral. Those two crises, however, occurred before there was such a thing as Credit-Default Swaps, which are now growing about as fast as the total assets of the worldâs biggest 1,000 banks. That growth is only possible if the inter-bank credit ring remains unbroken. Given that we could experience a banking crisis of the magnitude that occurred in the Great Depression (1929 and through the 1930âs), I think it is important for the various components of Humungous Bank & Broker to assuage the concerns of depositors, creditors and shareholders (all of us because it involves pension funds) by issuing reports that quantify the risks. I think itâs important to do that now before there is a 1,000 or 2,000 point loss in the DJIA or 100 or 200 basis point move in bond yields in the course of a week that would permanently sink some huge hedge funds and banks, putting everybodyâs capital at risk. What concerns me most is that when you drill down the revenue base of HB&B, youâll see that the reported net interest income of some of these banks is almost nil in growth â certainly single digit growth â while âfeesâ are growing at numbers like +20 pct Y/Y and âtrading revenuesâ are growing at like +50 pct. That result is not sustainable. What happens when âtrading lossesâ start to happen? What happens to net interest income during long periods of inverted yield curves? What happens to loan losses when refinancing mortgage loans becomes too costly for the average Joe? Will Mom & Pop start runs on those banks?