Jim’s Mailbox

Posted at 9:29 AM (CST) by & filed under Jim's Mailbox.

Hi Jim,

I have a couple of questions for you:

1.In the past decade or so, the price of gold has gone up more than sixfold. When asked to account for their mediocre profits, gold mining executives oftentimes blame "rising costs." I don’t know about you, but I don’t believe that costs have risen more than 6X. Not in my neck of the woods… and I live in the bubble world that is Alberta, Canada. What gives here?

2. In the old days, good company news would put short sellers into a panic. Shares would rise rapidly on the news and the short sellers would have to cover frantically and at market, all the while suffering staggering losses. Now, good news – if it has any effect on share price at all – seems to have only minimal upward impact for a very short period of time (i.e. one or two trading days at most). How have the short sellers managed to handcuff the markets the way that they have?

Your observations would be appreciated, Jim! Thank you for all that you do,
CIGA Mike

Mike,

1. In some cases it is lousy management. In others it is an unwillingness to pay anyone taxes. A commodity business can create whatever profits or losses they want to by the use of spreads.

2. Simple. Shorts have the guts to sell all good news heavily.

Jim

 

Jim,

MSM has now entered the realm of out and out lies.  Does this remind you more and more of the 1920′s – 30′s in Germany? Desperate men and/or desperate governments will do desperate acts. You know the results.

With gratitude,
CIGA Margaret

Margaret,

All the signs point directly to currency induced cost push inflation, a form of hyperinflation that occurs during dire business conditions.

Jim

Canada Stocks Slump on Slowing Gold Demand, U.S. Jobless Data
By Eric Lam – Nov 15, 2012 2:52 PM MT

Canadian stocks fell for a fourth day after a report showed world gold demand dropped the most since 2009 and U.S. jobless data disappointed investors.

Bombardier Inc. (BBD/B), which had its credit rating cut by Standard & Poor’s yesterday, fell 6.3 percent after postponing its $1 billion debt offering. Poseidon Concepts Corp. (PSN), a seller of tanks to the oil and gas industry, plunged 62 percent after it posted worse-than-estimated earnings. Alacer Gold Corp. (ASR) and Nevsun Resources Ltd. fell at least 5.4 percent as gold slipped to a one-week low. Birchcliff Energy (BIR) Ltd. rose 7.7 percent after reporting record production in the third quarter.

The Standard & Poor’s/TSX Composite Index (SPTSX) fell 118.41 points, or 1 percent, to 11,811.38 in Toronto. The benchmark Canadian equity gauge is down 1.2 percent this year. Trading volume was 50 percent higher than the 30-day average.

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Anti-austerity marches turn violent across southern Europe
CIGA Eric

In the 30′s, a global economic contraction paved the way for today’s socialism. Ironic how today’s global economic contraction will destroy that which it helped create. While the signs are everywhere, few see them through the daily distractions.

Headline: Anti-austerity marches turn violent across southern Europe

MADRID/LISBON (Reuters) – Demonstrations turned violent in Spain and Portugal after millions took part in a mostly peaceful general strike on Wednesday in organized labor’s biggest Europe-wide challenge to austerity policies since the debt crisis began three years ago.

In Lisbon, marches ended with a level of violence not seen since the crisis began, with police charging demonstrators who hurled stones and bottles, leaving nearly 50 people hurt.

Protesters in Madrid burned rubbish bins, filling the central boulevard with smoke, while in Barcelona demonstrators burned police cars.

Source: news.yahoo.com

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Dear Jim

The weak hands sell, and as usual smart money always buys when there is fear.

Mr. Soros adds to Gold Miner ETF positions by more than doubling in November. No wonder….

If I would have this financial power I would quadruple.

Regards,
CIGA Luis Ahlborn Sequeira

Soros Adds to Gold Miner ETF Positions, Raises GLD Stake (Excerpts)
Published November 15, 2012

The November filing indicates Soros has more than doubled his GDX stake to 2.32 million shares and now holds a sizable chunk of call options on the ETF as well. The firm’s position in GDXJ has not changed, according to the filing.

The filing also indicates Soros Fund Management has boosted its holdings of ETFs that own shares of gold miners. An August SEC filingclip_image002 showed the firm held 1 million shares of the Market Vectors Gold Miners ETF (GDX) and nearly 2.4 million shares of the Market Vectors Junior Gold Miners ETF (GDXJ).

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Jim,

Thank you for all you do – much needed and appreciated.

I find this par for today’s course, using this link, http://www.newyorkfed.org/markets/ambs/ambs_schedule.html we see what the Fed "plans" to purchase. However, if one takes the additional step of clicking on "results" for any month, the actual purchases dwarf the plan.

Example: Sept-Oct plan=$37 billion, actual result=$82.5 billion.

And the band played on.

CIGA Bill

Gold Follows The ABCD Cycle
CIGA Eric

Gold follows an A(minor up), B(minor down/consolidation), C(Major UP), and D(Major DOWN) cycle. The last major buy signal for gold came July 27th 2012 after the D-wave "hook".  This buy signal is marked in the chart below.

We’re in the middle of an AB transition, but today’s aggressive selling in the gold shares sector suggests that a large number of retail traders and community members have assumed the worst.  In other words, the trading black boxes won’t be the only ones behind the invisible hand’s woodshed.  A-wave rallies are not followed by D-wave declines, but I realize that Jim could be the only one left listening.

Statistical concentration always marks the B-wave.  If I can’t get Bono to promote the buy signal, it’s likely that the invisible hand standing alone on the long side of the gold trade before the C-wave rally.

Chart:  ABCD Wave Cycle in Gold:
clip_image002

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Dear Jim,

I have a question regarding deflation and gold. Many writers feel that we are heading for a deflationary period like in the 1930s. Of course this logic is based on them trying to save the currency and not going into hyperinflation. I know your intel suggests the latter but if it turns deflationary will gold fall drastically because it is an alternate currency?

Also what we see in Europe suggest that credit is drying up. Mainly because there are fewer qualified borrowers to transport credit. This would bring on a deflationary time, correct? If the printed money is going to the black hole (called the banks) then that money would not be in circulation, thus no inflation, correct? Very hard to understand now that money is so manipulated.

And always I thank you for your response

CIGA Gene

Dear Gene,

Study the history of the Weimar Republic where the exact same story was told incorrectly. You will get your answer from every instance of hyperinflation in history.

Currency Induced Cost Puhs Inflation is understood by almost no one.  It occurs with horrible business conditions simultaneously.

Regards,
Jim

Jim,

Seems like markets are getting rattled over this, hype or not. But at this point wouldn’t gold be moving higher regardless due to fear? Or is it anticipated this will happen closer to January 1st if no real resolution is coming. Although I’m guessing the resolution will be the use of the Fed’s only tool in the drawer?

Thanks!
CIGA Greg

Greg,

The market is manipulated, but every manipulation requires a story. The story being sold by the manipulators is that if we fall off the fiscal cliff that the central banks will do nothing and therefore deflation. The story is bunk.

The easily scared gold and gold share holders are falling into the short’s hands one more time like lemmings going over a cliff.

Respectfully,
Jim

Jim,

Respectfully, Dan admits to perplexity and the tinge of his own panic seems evident.

I think it’s more than just the hedge funds shorting shares. There’s been a lot of discussion lately as to how difficult it is for miners to make a profit, what with low grades and rising production costs.

Instead of buying GLD and SLV puts, this time I’ve bought GOLD and SLW puts, and will look to put descending buy orders under GDXJ, TRX and MUX.

Does this sound like a plan?

I’m still gobsmacked that the Walmartians beat the Oilers. Amazing.

CIGA Robert

Dear Robert,

Dan is a trader. He must go with the short term flow. So be it.

I am an investor and company builder. I do not give interviews anymore to anyone.

Gold will go to $3500 and above. Gold shares as soon as the hedge funds cover will outperform gold.

I have invested $32,000,000 in my own company and am pleased with what I have done so far.

The best plan is to make your buys the second gold break out of its power down trend on the French Curve.

Respectfully,
Jim

Dear Robert,

I am not sure where you get the notion of “panic” from. It certainly did not come from me. As Jim states, I am a trader and have to keep an objective view of these things especially if I am to try to maintain my sanity in these insane markets. As I wrote, it is going to be interesting to see whether or not gold can maintain its footing with the severe sell off in the shares.

There is a sharp dichotomy between the HUI and the price of gold, something which will eventually resolve itself one way or the other.

As Jim stated yesterday, it is just a few hedge funds doing the shorting on those spread trades I mentioned. Once certain stocks in the sector give way technically, then the longs in the other shares just dump their position. The entire sector then moves lower.

The price of gold is going to move inexorably higher because there is no easy cure to what ails the current monetary system (namely too much debt). The cure to this is painful and therefore no politician wants to administer the necessary prescription. That would entail structural reforms. You can tell how popular those are by observing events in Greece. A few burnings here, a few burnings there, a few smashed windows here and a few smashed windows there.

As a trader you have to respect the money flows. When something is weak, it is weak for a reason. The reason is that no one wants to buy it at that time. When something is strong, it is strong for a reason; that means lots of folks want to buy it at that time.

If the shares are underperforming bullion, they are doing so because there are more willing sellers at a lower price than there are willing buyers under the market. Eventually prices will fall to a level at which there are more willing buyers than willing sellers and the market bottoms.

Respectfully,
Trader Dan

 

Print Unlimited (Insert Currency) Still Causes Black Friday Stampede Out of Gold Shares
CIGA Eric

Headline – Japan’s Likely Next PM Calls on BOJ to Print Unlimited Yen

Blah, blah,blah, print unlimited yen to achieve new inflation target.  Blah, blah, blah.

As the investors execute their own version of a Black Friday Stampede* out of the gold shares today, don’t let it be said that I didn’t mentioned the drive for sovereign nations to  print unlimited currency before gold accelerates in the C-wave advance.

Black Friday Stampede*

Headline:  Japan’s Likely Next PM Calls on BOJ to Print Unlimited Yen

Japan’s main opposition leader Shinzo Abe, seen as the most likely next premier if a snap election is held next month, called on the central bank to print "unlimited yen" to achieve a new inflation target.

In comments on Wednesday, he didn’t spell out what the inflation target should be. But in recent weeks he has called for the Bank of Japan [BNJAF 0.00 --- UNCH ] to achieve 3 percent inflation, three times higher than the current target, after years of deflation pressures.

Source: cnbc.com

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Jim,

Community? Hell Jim, we’re not community. We’re family!

Did you hear FEMA? They need twelve billion to cover Sandy. Trouble is they only have three billion. Oh wait, I have a great idea. Why don’t we just print the money?

Regards, and non illegitimus carborundrum, Storfisk – No response expected

CIGA CG

 

Jim,

December or January meeting?  Right after announcing QE3?

Derek

Derek,

QE to infinity does not require a #4, and you are totally correct.

Stimulus will rise and soon.

Respectfully,
Jim

Expect more from the Fed — and soon
Mohamed El-Erian
November 15, 2012

The minutes of the US Federal Reserve released on Wednesday are an essential read for those interested in a real time snapshot of the complexity of modern day central banking. They are also a cautionary note for all who believe that, acting on their own, today’s hyper-active central banks can engineer good economic outcomes.

While the Fed is already deep in experimental mode, the minutes confirm that officials there are already considering additional measures. There are two reasons for this. First, their baseline economic expectations remain subdued as more positive housing and consumption indicators are offset by slower business activity. Second, they recognise the “significant downside risk” to the baseline forecast due to the global economy’s synchronised slowdown and the possibility of further financial shocks, such as the US falling off the fiscal cliff.

The minutes also reveal considerable confusion as to what exactly the Fed should do next. With interest rates at zero and forward interest rate guidance already extended to mid-2015, policy is faced with a shrinking set of options. This includes evolving further its communication role by moving to “quantitative thresholds” (i.e., specific targets for the unemployment rate and inflation or, alternatively, for a broader concept such as nominal GDP); and/or expanding the programme to purchase securities on the open market (or “QE3”) in order to change the private sector’s behaviour.

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Jim,

Manipulation or just regular market forces?

CIGA Ted

Ted,

There has been total manipulation since the five body blocks at $1775 to $1800. However, the terrified CIGAs are jumping out the window.

This too will pass.

Jim

 

Jim,

Sorry to bother you, but in your opinion, is the hedge fund play here still to decimate the share prices of juniors to starve them of financing, or are they covering into this weakness and finally moving to the long side?

Best,
CIGA Jisoo

Jisoo,

The game is for profit. To cover they need an avalanche. That is what all the gamesmanship is all about.

Jim

Hi Jim,

Looks like the BOYS are constructing the final downside blowoff to shake out the last of those with weak hands.  We should be heading up after they force the final liquidation in the next couple of days.

Hope you get some sleep tonight, as your phone will be ringing off the hook and e-mail box will be loaded. Be well.

CIGA David

Dr. David,

When your patients need you, you are there no matter what. When my friends need me, I am there no matter what.

Last night did not offer too much sleep due to the demands of my friends. I am also balanced in my advise as sometimes I feel that I am manning the only "Suicide Prevention Service" in the investment industry with clients in need since $248 gold.

Gold is going to and through $3500. The US dollar will test .7200 and in time fail. QE is going to infinity.

Most vocal interviewed famous gold guys have no idea how to interpret the Fed balance sheet or even know what to look at when the figures are divulged.

Respectfully yours,
Jim

 

Dear Mr. Sinclair,

I need assistance in how to evaluate the best gold and silver mining companies to invest in.  Evaluating the management team is my biggest challenge.

In the past I have blindly relied on the “experts” to pick the best gold and silver mining companies for me.  I want to learn how to evaluate mining companies myself for long term investment.

Right now I am attempting to evaluate Agnico Eagle, Gold Corp, Silver Wheaton, Tanzanian Royalty Exploration Corporation, Pretium Resources, and Hellix Resources

I am heavily invested in Sprott physical gold and silver trusts and plan to sell a portion to invest in certificates of good mining shares.

My central bank is 80% physical gold coin, 17% Sprott physical gold & silver trust, 2.5% cash, .5% bank accounts.

Thank you!
CIGA Tom

Tom,

First hire yourself an economic geologist who is independent from brokers and investment banks. Have him speak with the technical people in the company of your interest. After he reports and if you take an interest in the professional technical report of your economic geologist you speak to management and ask your questions. There is no other way.

If you pay $10,000 in order to be fundamentally correct, consider what that might buy you and save for you.

There are many major consultant firms that provide this service which investors tend never to use.

Jim

 

U2′s Bono Warns Fiscal Cliff Cuts Will Hurt World’s Poor
CIGA Eric

Sunday Bloody Sunday hell!  Bono is worried about the fiscal cliff.  And here I am teetering on my micro soapbox suggesting that the fiscal cliff would most likely be a non-event.

Don’t tell Bono, and I’m not proud to suggest this either, but the world’s poor will take a colossal beating after 2015 regardless of the size of the band aid applied to the fiscal cliff either in 2012 or 2013 and whom jumps on the bandwagon to support it.

Sunday Bloody Sunday hell, there goes my backstage pass at the next U2 concert.

Headline: U2′s Bono Warns Fiscal Cliff Cuts Will Hurt World’s Poor

Even Bono is worried about the fiscal cliff.

The lead singer of Irish band U2 says spending cuts that hit in January would devastate programs to help the world’s poor, leading to more than 60,000 deaths.

“There’s real jeopardy,” Bono said Wednesday at a discussion at the World Bank with bank President Jim Yong Kim. “I’m still terrified of people wrestling the wheel of this mad lorry that they’re driving off the cliff.”

Source:  blogs.wsj.com

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