Dear Friends,
With Dan trying to figure out how to plug his computer with a 3 prong plug into a 2 prong outlet, myself in New York for business meetings and Monty arranging barbed wire and razor coils around his Malibu home (California’s prisoner release) many of us were missing today. My apologies.
At today’s luncheon meeting I was presented with a copy of an interview done in 2002 with Jim Puplava of the famed site, "Financial Sense." www.financialsense.com"
Some of the comments excerpted below are as relevant today as they were then.
Mr Prechter had just issued his deflationary prediction and bearishness on gold, the date then being (7/20/2002). It was exactly as we heard last week and was the cause of my inbox going into information overload.
Very little changes.
JIM: You said that the government will burn the system. There are many respected people in the financial industry that say we are headed for deflation. What is your view with the government pulling out all stops? We are in a war economy. The money supply is increasing. What are your views on deflation verses inflation ahead of us?
JAMES SINCLAIR: The definition of inflation is monetary aggregates. Price inflation is a result of that. Deflation is being looked at in terms of economic conditions. We need to get our terms defined. One of the major proponents of deflation has not historically distinguished itself in market timing. So is it possible that we will find ourselves in a business deflationary environment? The answer is most certainly, yes. The political reality of that is just what we have gone through in the five criteria to a long term bull market in gold. When you discuss deflation, you need to say in what terms you are discussing. When you discuss markets, it may be that it is a different order of events before the risk of a deflation.
What I suggested to you in the opening remarks and what has occurred today, don’t for a moment think that the Federal Reserve or the Treasury, are not technically savvy about markets. They are extraordinarily savvy about the technical characteristics of markets. Every tool that is available — will be brought in to try and prevent that. Before you get to the point of discussing whether or not you are headed for this "Prechter type" deflation, I think that you need to take a look at what the impact of the tools will be that are applied to change or to avoid, and what those effects will be on the market.
JAMES SINCLAIR: You could be at the beginning, Jim, of a major long-term transition of gold to money. What occurred today is totally historic and could be something they’ll write books about years to come. And General Electric may very well be a prime example. But I don’t disagree with you. I agree 100% with what you’re saying.
Editor’s Note Friday, July 19th: Once the transcription was posted and reviewed by Mr. Sinclair for accuracy, he had some additional thoughts on GE and today’s market mayhem.
"This paragraph has two thoughts in it.
The first thought deals with the transition of gold from a commodity, as it has been over the past 22 years, to currency which it may be for the next 30 years. This is a historic shift of psychological gears with implication that are more significant than even the gold crowd realizes. Gold will be a tool of economic resuscitation and currency stabilization during this period.
The second thought contained herein is the transition of GE of the ’50s from a superior, well-organized and well-managed manufacturer to a money changer by the ’90s, and now July 19, 2002, the downside of GE transformation. That downside is the now occurring. It is the public transition from absolute trust in paper assets, such as shares of GE and the worship of CEO like GE’s past super star Jack Welch, to the realization that corporate money changing and superstar, super-PR CEOs may have been hollow businesses with no valid purpose (except fancy accounting to produce profits) with false gods as leaders after all. GE’s technical chart is a duplicate of Enron’s chart during the demise of Enron. That fact shocks me. Both GE is and Enron was a triple Head & Shoulders formation with triple neckline breakdowns pull backs and fall away. GE is now a Classical Case of Financial Ebola. GE is a huge hedger in the cost of money derivatives and deals with complex leasing arrangements. Is there something in that equation which is amiss? The market says there is, but maybe GE itself does not know where or how. GE and IBM are the Big Blue as key opinion makers in the psychology of the markets. Both are now defensive with GE looking technically like a technical cripple.
