Jim’s Mailbox

Posted at 5:26 PM (CST) by & filed under Jim's Mailbox.

Dear Mr Sinclair,

Thank you so much for your lights upon the dark side of Western finance.

I read you on a regular basis, and sometimes even take the time to translate and forward your views to friends or relatives who may not be so fluent in English (like my mother-in-law…).

>My latest favorites were :

- The video interview by James Turk (which was eventually French-subtitled by his means…)

- QE: The Final Game

- QE Works And Will Continue To Do So

Forget the rest of this blog of mine, which pretends to be some funny soap of my invention (in French), named "The Crash of the Titans", staging mad crews onboard both the Titanic and the Hindenburg airship…

Your case on gold (the metal) and the future of quantitative easing (to infinity) cannot be contradicted, to my opinion. Simple mathematics prove that nothing else than QE to infinity may be the final resolution for the unprecedented monetary expansion in history. QE works for its purpose, and is the only thing that will work.

Your explanations on the shadow banking and the derivatives world, (both much unknown to the public), make the case even more undeniable. But… for mining shares, things are not so clear!

Reading you on gold shares, there seems to be some kind of tacit assumptions which people who are not familiar with the gold market or the mining sector may feel they are missing. I hear from many sources that mining companies are not so good an investment for they have to bear costs due to rarefaction of gold, price of energy and wages, etc. that undermine and will undermine their profits. That is why I would be most grateful, and may not be alone to be so, if you could make a clear statement of your case on gold shares in the long term, as compared to the metal itself.

Thankfully, and sincerely yours,
CIGA Renaud,

Dear Renaud,

The same kind of logic applied to gold shares says a few things.

1. The market will demand that the company have some spectacular attractions defined as ounces, low cost and ample funding plus forward looking management that is both scientific and financially savvy. Those companies will perform.

2. The present negative MSM MOPE on shares has taken over the attention of investors. Even good gold writers are being taken in by this black PR campaign. It is not true that mining costs are anywhere near present gold prices on many projects. Those costs are estimated with good accuracy in the NI 43-101 and feasibility studies.

Apparently only the professional types reads these public documents that estimate all your concerns from metallurgy, salaries to the cost of energy. It is not true that the major cost of building a mine must be financed by increased capitalization.

The idea that a company that succeeds in mine finding must mine share is total crap. No significant property has recently or in the near past been financed by public issue of shares. Where some reasonably intelligent commentators got that one from is a mystery unless they simply accept MSM MOPE.

There is an entire industry in banking and quasi government banking that will finance a project to production from NI43-101 to a strong feasibility study and strong country affiliation.

Since the main criticisms of the gold industry are without merit among many good a company, those good companies with leverage to the gold price will significantly outperform gold before gold sees full valuation.

The truth of the matter will become visible to markets as these successes take place.

Respectfully,
Jim

Jim,

I am sure you’ve seen it, but the bullion banks closed out 46000 short-of-gold contracts this past week. It’s a big number, one of the biggest I’ve ever seen.

Seems like we have the possibility of a turn where at long last they are starting to switch and go long?

Oh please Santa
CIGA Doug

 

Jim,

The bull market in paper gold could be over. Let the bull market in physical gold begin.

That would be a line which would make your CIGAs scratch their heads.

CIGA Patrick

Patrick,

Not really. In the major price move to full valuation paper gold’s price lags behind the cash gold price, and there always is the tendency to try and turn a paper exchange into a cash exchange which is simply impossible. The result of that is either a novation of the contract (Hunt’s bull silver market), or a very loud explosion heard all the way to Andromeda.

Jim