Jim Sinclair’s Commentary

This is from the Dean of Gold, Harry Schultz. I am proud to say I am a lifetime member of HSL.

Harry is the Dean. Enough said.

Please read.

Jim,

This is a watershed article from WSJ. Good R&D, in my opinion. It clarifies and codifies what we already know and narrows the parameters, saves us time and worries about less vital aspects.

Harry

Rethinking Gold: What if It Isn’t a Commodity After All
By JEFF OPDYKE
AUGUST 21, 2010

This won’t sit well with some people: Gold isn’t a commodity. There. I’ve said it.

But before you fire off an angry response, hear me out. The facts might change your view of gold’s role in a portfolio.

For a long time, we’ve all heard that gold is a commodity—no different, really, from silver or wheat or pork bellies. Its price ebbs and flows (supposedly) with inflation, which historically drives commodity prices.

Odd, then, that gold’s elevated price hasn’t fallen in response to tepid U.S. inflation numbers. The Consumer Price Index as of July pegged inflation at just 1.2% for the previous 12 months, not counting seasonal adjustments. Nor has gold reacted to what Mohamed El-Erian, Pimco’s chief executive, recently called "the road to deflation" on which he sees the U.S. traveling.

The conventional wisdom holds that neither of those scenarios—low inflation or deflation—should be good for gold. And yet it refuses to abandon record highs in the $1,200-an-ounce range. Something seems amiss.

I recently asked research firm Ibbotson Associates to run a correlation study to determine how closely inflation and gold-price movements track each other. You would expect gold, as a purported commodity, and inflation to move in tandem.

The data, going back to 1978 and capturing an inflationary spike, shows a correlation of, at most, 0.08.

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Jim Sinclair’s Commentary

The Banksters will soon have it all.

It is better stated as a headlined with the words "Middle Class" deleted.

Politically this has scary precedents.

On the Way Down
The Erosion of America’s Middle Class
By Thomas Schulz

While America’s super-rich congratulate themselves on donating billions to charity, the rest of the country is worse off than ever. Long-term unemployment is rising and millions of Americans are struggling to survive. The gap between rich and poor is wider than ever and the middle class is disappearing.

Ventura is a small city on the Pacific coast, about an hour’s drive north of Los Angeles. Luxury homes with a view of the ocean dot the hillsides, and the beaches are popular with surfers. Ventura is storybook California. "It’s a well-off place," says Captain William Finley. "But about 20 percent of the city is what we call at risk of homelessness." Finley heads the local branch of the Salvation Army.

Last summer Ventura launched a pilot program, managed by Finley, that allows people to sleep in their cars within city limits. This is normally illegal, both in Ventura and in the rest of the country, where local officials and residents are worried about seeing run-down vans full of Mexican migrant workers parked on residential streets.

But sometime at the beginning of last year, people in Ventura realized that the cars parked in front of their driveways at night weren’t old wrecks, but well-tended station wagons and hatchbacks. And the people sleeping in them weren’t fruit pickers or the homeless, but their former neighbors.

Finley also noticed a change. Suddenly twice as many people were taking advantage of his social service organization’s free meals program, and some were even driving up in BMWs — apparently reluctant to give up the expensive cars that reminded them of better times.

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