Posted at 4:29 PM (CST) by & filed under Jim's Mailbox.

Hey Jim,

There is a turn in energy around the corner. The Oil Service Index (OSX) to Airline Stock Index (XAL) ratio appears to have bottomed and is nearing a technical buy signal on the monthly time frame. Watch money flows into the Cando to confirm the move.

CIGA Eric

Jim Sinclair’s Commentary

Have you had enough? If you want to make a difference take delivery out of the Comex warehouse!

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Looking for hedge fund managers with pilot’s licenses flying Zeros, Mig 15/17 or M109-As?

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Wealth is Gold in the mayo jar.

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Posted at 4:25 PM (CST) by & filed under General Editorial.

Texas will return to College Station next weekend for the Big 12 vs. SEC meet, where the Aggie faithful might be more willing to cheer for the Longhorns.

“I know the crowd, as much as they want us to win, they want Texas to lose,” said Texas A&M sprinter "Justin Oliver," who won the 400 meters. “It was a great atmosphere in here to know so much emotion and history was involved with a meet like this. Plenty of people in here have been following this rivalry for decades.”

— Austin Talbert

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Posted at 4:15 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Another day, another brand new all-time high in gold priced in terms of the British Pound and in Euros. Euro gold indeed looks like it has a legitimate shot at the 700 level while Sterling gold  has taken out the 650 level.  Euro gold was set at 691.627 at the PM Fix.

I found the remarks by one of the investment houses that gold was undergoing a period of “irrational exuberance” almost laughable to read. People actually pay good money to read such reports which I find a tragic waste of wealth. The gist of the notion set forth in the report was that since there is no inflation and that gold performs poorly during periods of recessionary environments, gold buying  has no fundamental underpinnings.  I had to wonder if the person who wrote it was just out of business graduate school since it is obvious they have not a clue as to what gold actually is. For some reason there remains this almost fog-like obstruction that exists in the minds of so many, particularly the younger folks working in investment circles, that prevents them from recognizing that gold is a currency, not a commodity. When it is viewed as a commodity, of course its price will decline during periods in which jewelry or even industrial demand is waning. However, and this is the key, when a crisis of confidence in paper currencies exists, then gold resumes its historic, time-tested role of being a store of value and investors seek it out to preserve that which they have labored so diligently to acquire. After all, if Central Bankers are diligently at work seeking to undermine any “value” that might or might not exist in their paper by debauching it as quickly as they can, where else can one put their wealth if not into something tangible that is a perceived store of value. Try telling the good folk of Britain who are watching their once proud currency disappearing that gold is experiencing irrational exuberance. The only thing irrational that I see is the actions of the Central Banks and the governments who continue to manufacture money faster than a flock of hungry wild geese can pick clean a rice field.

Technically gold was able to muster sufficient buying power to kick it above the round number resistance and psychologically significant $900. The handle or “9” in front of the gold price tends to garner attention which is the reason you often see sellers attempting to push prices back from such levels. The push higher was a follow through to the upside breakout of the wedge formation noted last week that can be seen on the daily chart and partially on the shorter-term chart that I use for analysis during the day. Any subsequent setbacks in price should find buyers resurfacing near the $880 and then $870 level to keep the bullish chart picture in the favor of the longs.

Gold was capped however by concerted bullion bank selling which came in especially as crude oil began to weaken and moved into negative territory after rallying to $48.59.

I want to again urge some the bigger players and fund managers to seriously consider making a portion of their long positions at the Comex designated specifically for taking physical delivery of the gold out of the warehouses. Do not settle for the receipt but actually remove the gold. You cannot hope to beat opponents who never have to meet a margin call nor have trading practices put in place that would force them to liquidate losing positions to prevent major losses as most responsible commercial firms currently have in place. Playing the paper game is not the best way to take on such concerted selling. The reason I say this is because Friday’s open interest showed a huge, and I do mean HUGE jump in open interest in gold with an increase of 17,817 contracts to 359,905. That is a lot of new long positions which were added into strength – a number large enough to offset what was undoubtedly a substantial number of buy stops that were triggered forcing out the funds who had gone short. The volume was simply enormous with over 250,000 contracts trading hands – some of that is rollover activity which always artificially distorts volume numbers but even after accounting for switches, it is still a very strong number. Take the gold out of the warehouses – your old “strategy” of chasing prices higher leaves you susceptible to big losses as you are failing to buy low and sell high but are instead hoping to buy higher and sell yet even higher. You will be the first ones to get picked off if prices stall out with the result that you will have a book full of losses before you know it. The reason the bullion banks can sell with impunity in the face of such bullish fundamentals for gold is because no one will call their bluff and take the gold out of the warehouses leaving them with nothing to backstop their gambit.

February gold will be going into the delivery period at the end of this week so I will be switching charts and commentary to the April contract but will also be monitoring and reporting on the deliveries. An interesting side note is that for the month of January, the largest stopper has been JP Morgan’s futures arm. Whether they will retender that gold is unclear but I want to see what they may or may not do with it come next week.

Both of the mining indices, the HUI and the XAU faded well off their highs after punching through horizontal resistance near the December highs and triggering buy stops in the process. A close above those levels would generate buy signals on many of the technical charts particularly the old Point and Figure style charts that were once widely used by longer-term oriented investors. I sometimes wonder if anyone even uses those things anymore since they were primarily trend identifying charts and today’s crowd of money throwers are momentum oriented. I must say that I do not like what I see taking place in these indices today as it shows a potential short term buying exhaustion pattern. Tomorrow’s session will be important in determining what we get in there.

The jump in copper prices today is most interesting and something we will want to watch. A couple of factors were working in its favor in today’s session most notably the weakness in the Dollar, but the December existing home sales, which came in above expectations, sparked a sizeable jump in the red metal which has a large short position among specs built up in it. It is a bit tricky getting a read on this because trading in copper has been thin due to the Chinese Lunar New Year holiday this week. Still, a technical breakout will be significant, should it occur on gold volume as copper is often a barometer of economic activity in advance. We’ll see.

Incidentally, the large SPRD’s gold ETF, GLD,  reported that its holdings had reached another record high of 832 tons last Friday.

Bonds dropped yet again today – Gee – what a surprise! Seriously, this market is so overdue for a bounce but the fact that it cannot even seem to hold its gains for more than an hour is quite revealing. Bonds must bounce soon or they are setting up for a major technical collapse. On the technical charts there really is not much support until we get down to the 123^20 – 124^00 level. That is also near the 100 day moving average. Failure there and we are going to see long term interest rates shoot sharply higher; something which the Fed does not want to see with housing still in such a tenuous condition.

Equities managed a bit of a bounce but ran out of buyers after mid-morning.

The Dollar got smacked today and once again faded from the region near 88. It just cannot seem to get through that level which is where the rally failed back in December of last year. Unless it can get through there and do it quickly, it is beginning to look more and more like a double top with a weak right top has formed. That needs to be confirmed however.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

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Posted at 3:21 PM (CST) by & filed under General Editorial.

Dear CIGAs,

The day in 2009 that insolvency comes in the planetary form, you can be sure of only one thing: You will not know it.

Your government, whomever they are, will keep the collapse a total secret until you are completely wiped out by hyper-inflation and/or insolvency of your retirement plan.

You cannot trade your way to insurance. That concept is egomaniacal and downright stupid.

Own gold and gold shares or you will be the victim of your government and the media’s feeling that you are:

NOT WORTHY OF THE TRUTH

Revealed: Day the banks were just three hours from collapse
By Glen Owen
Last updated at 11:21 PM on 24th January 2009

Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown’s Ministers has revealed.

City Minister Paul Myners disclosed that on Friday, October 10, the country was ‘very close’ to a complete banking collapse after ‘major depositors’ attempted to withdraw their money en masse.

The Mail on Sunday has been told that the Treasury was preparing for the banks to shut their doors to all customers, terminate electronic transfers and even block hole-in-the-wall cash withdrawals.

Only frantic behind-the-scenes efforts averted financial meltdown.

If the moves had failed, Mr Brown would have been forced to announce that the Government was nationalising the entire financial system and guaranteeing all deposits.

But 60-year-old Lord Myners was accused last night of being ‘completely irresponsible’ for admitting the scale of the crisis while the recession was still deepening and major institutions such as Barclays remain under intense pressure.

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Jim’s Outlook On 2009
Posted: Jan 26 2009 By: Jim Sinclair Post Edited: January 26, 2009 at 12:20 am
Filed under: General Editorial

Dear CIGAs,

1. Before 2009 is out the next major economic shock will become obvious. There is not one major funded retirement program intact thanks to the manufacturers and distributors of OTC derivatives. The unfunded ones are a total loss. Retirement in the future is totally out of the question. Many now retired will end up in the same situation as those trying to live off fixed income. Both categories are being culled from the human gene pool.

2. By my 68th birthday Obama will recognize his position as a bagged President, knowing then that the economic situation does not have any practical solution.

3. By July 4th, 2009 the rally in the US dollar will have become a simple hope for the lows to hold.

4. My long held targets of $1250 and $1650 for Gold that were once laughed at as outrageously high can now be laughed at for being painfully too low.

5. Only gold and related shares are insurance against the economic cataclysm now taking place.

 

Everyone is looking for where and when the top in gold will come. Will it be Jim’s $1650 or Alf Field’s $10,000 plus before it comes back down?

To put it nicely, you are all wrong. Gold is going up and STAYING up.

There is no top to look for because like all things people strive for, the top does not exist.

Gold will trade within $200 of a given point as a product of the Master of the Financial Universe, Paul Volcker, taking control when all this is totally out of control. He will instate the revitalized and modernized Federal Reserve Gold Certificate Ratio, not gold convertibility, and not tied to interest rates as an automaticity. Only then can Volcker put in place policy backed by the sitting administration that has a provable history of starting the change from deficit to surplus, his price of saving the world one more time.

The Gold mining business will then be the best business there is and the highest dividend paying monetary utility.

Respectfully yours,
Jim

Posted at 12:20 AM (CST) by & filed under General Editorial.

Dear CIGAs,

1. Before 2009 is out the next major economic shock will become obvious. There is not one major funded retirement program intact thanks to the manufacturers and distributors of OTC derivatives. The unfunded ones are a total loss. Retirement in the future is totally out of the question. Many now retired will end up in the same situation as those trying to live off fixed income. Both categories are being culled from the human gene pool.

2. By my 68th birthday Obama will recognize his position as a bagged President, knowing then that the economic situation does not have any practical solution.

3. By July 4th, 2009 the rally in the US dollar will have become a simple hope for the lows to hold.

4. My long held targets of $1250 and $1650 for Gold that were once laughed at as outrageously high can now be laughed at for being painfully too low.

5. Only gold and related shares are insurance against the economic cataclysm now taking place.

Posted at 12:14 AM (CST) by & filed under General Editorial, Guild Investment.

Dear CIGAs,

IT IS NEVER WISE TO INSULT YOUR BIGGEST CUSTOMER, ESPECIALLY WHEN YOU PLAN A BIG SALE OF PRODUCT THAT YOU WANT THEM TO BUY. Even if you have political debts to large donors who do not care about what is best for the average American, they care only about what is best for them.

Respectfully yours,

Monty Guild
www.GuildInvestment.com

Chinese Ministry Denies Geithner’s Currency Claims
JANUARY 25, 2009, 9:35 P.M. ET
By IAN JOHNSON and SHEN HONG

BEIJING — A Chinese ministry Saturday strongly denied Obama administration claims that China "manipulates" its currency, as the first contact between the new administration and China takes a markedly sour tone.

On Thursday, President Obama’s nominee for Treasury secretary, Timothy Geithner, told U.S. lawmakers that President Barack Obama, "backed by the conclusions of a broad range of economists — believes that China is manipulating its currency." No Chinese official of Mr. Geithner’s standing has fired back — a move analysts say shows that China doesn’t want to overreact to the statement — but Saturday morning an official from China’s Ministry of Commerce said "we never have used currency manipulation or exchange-rate manipulation as a mains to gain an advantage in international trade." The statement, provided by an official from the ministry’s news department, also said China would not "rely on devaluations" of its currency, the yuan, to promote exports.

Some Chinese commentators say the verbal sparring is a sign of greater trade friction to come with Washington. They noted that both sides’ comments were written, not spoken — and therefore should be taken as a serious view of intent.

"This is the first communication by the new president’s team to China and it is provocative," said Shen Dingli, professor of international relations at Fudan University in Shanghai. China’s official Xinhua news agency also weighed in Friday evening, saying that Mr. Geithner’s claim "fans Sino-U.S. trade fears," alluding to concern in Beijing over protectionism in the new administration.

Chinese officials are deeply concerned that the global economic downturn could spur protectionist moves in the U.S. and elsewhere that could further damage China’s trade-dependent economy. Mr. Geithner’s comments marked a significant escalation in U.S. criticism of China’s exchange-rate system.

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Posted at 3:36 PM (CST) by & filed under General Editorial.

JimsAdvisors

 

Jim Sinclair’s Commentary

#28 and counting!

First Centennial Bank of California Shut by Regulator (Update1)
By Margaret Chadbourn and Ari Levy

Jan. 23 (Bloomberg) — First Centennial Bank of Redlands, California, was seized by a state regulator, the third U.S. bank to fail this year, as the recession deepens and the slump in the housing industry sends home foreclosures to records.

First Centennial, with $803.3 million in assets and $676.9 million in deposits, was shut by the California Department of Financial Institutions and the Federal Deposit Insurance Corp. was named receiver. First California Bank, based in Westlake Village, will assume deposits. The failed bank’s 6 offices will open Jan. 26 as branches of First California, the FDIC said.

“Depositors of the failed bank will automatically become depositors of First California,” the FDIC said in an e-mailed statement. “There is no need for customers to change their banking relationship to retain their deposit insurance coverage.”

Regulators closed 25 banks last year, the most since 1993, draining money from the FDIC deposit insurance fund, which had $34.6 billion as of Sept. 30. National Bank of Commerce in Berkeley, Illinois, and Bank of Clark County in Vancouver, Washington, were shuttered by regulators on Jan. 16.

First California will buy about $293 million in assets and will pay a premium of 5.3 percent to assume the failed bank’s insured deposits, the FDIC said. The cost to the deposit insurance fund, supported by fees on insured banks, will be an estimated $227 million, the agency said. First Centennial had about $12.8 million in deposits that exceeded insured limits, the FDIC said.

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