Posted at 10:59 AM (CST) by & filed under Guild Investment.

Dear CIGAs,

WE ARE QUITE CERTAIN THAT IN THE UNITED STATES, BANK AFTER BANK WLL BE RESCUED AS CITIBANK WAS THIS WEEKEND

WHO WILL BE NEXT…BANK OF AMERICA, JP MORGAN, GOLDMAN SACHS, MORGAN STANLEY?

The surprise is not that they will be rescued, the surprise is that not enough attention is being paid to the fact that the U.S. will have to sell several $ trillions in bonds in order to finance the above bail outs.

If bond buyers wise up, they will stop buying a bond with an almost infinite quantity for sale, and they will start selling them. This will send the US dollar lower. We expect the market to awaken to this obvious outcome, sooner rather than later. We are bullish on foreign currencies and gold longer term.

FOR THOSE WHO THINK THAT DEFLATION WILL BE A LONG TERM OUTCOME

May I remind you of the words of Milton Friedman, who said "Inflation is always and everywhere a monetary phenomenon".

My money is on Milton Freidman.  He will be proven correct as the devastatingly inflationary monetary policies being pursued worldwide will lead to inflation in years to come.  His former co-author, Anna Schwartz, said as much in a recent Barrons’ interview, inflation will return.

I lived through the inflation of the 1970’s and have been a student of inflations worldwide for 40 years.  In past recessions (much like today’s), as the recession/depression starts to get underway, it can initially appear to be a dis-inflationary cycle as prices moderate for a few months.

We go through a large amount of economic data every month.  A tremendous amount of liquidity has been added to the global banking system, but the system has not yet engendered enough confidence for it to function.  As confidence returns to the system, all the money circulating will ignite inflation.  If confidence does not return to the system, we expect even more and more liquidity pumped into the system…which can create the possibility of a loss of confidence in the government’s ability to manage the problem.  This will likely set off a run on the currency.  In other words, if the U.S. continues its rapidly growing liquidity creation, and it does not create confidence in the banking system…eventually confidence in the U.S. Government will be damaged…and the world investors will not want to hold the main asset of the U.S. Government, its currency.

In this case, the country’s currency becomes an unattractive investment, because of the perception that the government has failed to bring order to its banking system.  Recent examples are Iceland and Zimbabwe.  In both cases, when the banking system failed, the currency collapsed.

POLITICIANS PANIC

Meanwhile, politicians are panicking.  It is not good for their re-election prospects to have a slow and sluggish economy.  Their constituents want benefits, they want restrictions on imports, they want handouts, they want special treatment for their industry, and they want government loans for themselves or their family.  Eventually, whole classes of citizens (the poor, the homeowners, those in certain states or professions) will be lining up for their share of the pie.  Politicians listen, and act in their own best interest…which for most of them is protecting their place at the public trough.

Eventually, the effects of the unwise, inflationary monetary and fiscal policies (which are being promulgated not only in one country, but in many countries worldwide) begin to seep into the system.  Inflationary psychology takes hold, and rational investors begin to invest for inflation.  The final result is prices rising higher…and for longer.

THIS IS THE FUTURE AS WE SEE IT…THE QUESTION IS…WHEN WILL INVESTOR PSYCHOLOGY REFELCT THIS EVENTUALITY?

The following article found in this past weekend’s Barrons illustrates how the U.S. Central Bank’s inflation fighting ability is being compromised.

Has the Fed Mortgaged Its Own Future?
By: JACK WILLOUGHBY
The fed’s highly leveraged balance sheet will make it hard to fight inflation.

IF THE FEDERAL RESERVE BANK WERE A COMMERCIAL LENDER, it would be a candidate for receivership, based on its capital ratios. Bank examiners generally view any lender with a ratio below 2% to be dangerously undercapitalized. The Fed’s current capital ratio, or capital as a percentage of assets, is 1.9%.

The Fed has provided so many loans and emergency credits — to banks, brokers, money funds and foreign countries — that its balance sheet, viewed one way, is as leveraged as any hedge fund’s: Its consolidated assets amount to 53 times capital. Only 11 months ago, its leverage on this basis was a more modest 25 times, and its capital ratio 4%. A caveat: Many of the loans are self-liquidating facilities that will disappear in a few months if the financial crisis eases.

Although the Fed’s role as a central bank is much different from the role of a private-sector operation, the drastic changes in the size and shape of its balance sheet worry even some long-time Fed officials. Its consolidated assets have swelled to $2.2 trillion from $915 billion in about 11 months, and contain at least a half-dozen items that weren’t there before. Some, like a loan to backstop the purchase of a brokerage, Bear Stearns, are unprecedented. (See table for highlights.)

Critics say this action could hinder the Fed in achieving its No. 1 priority: keeping inflation in check. To try to get in front of the crisis, many decisions have had to be made on the fly.

"If the Fed had been [a savings-and-loan] ballooning its balance sheet so fast, the supervisors would have been all over it," says Ed Kane, a Boston College finance professor.

verweelfed

Adds Walker Todd, a former Fed lawyer: "The Fed has stretched its authority farther and wider than it ever has in its entire history. The risk is that they won’t be able or willing to mop up all this excess liquidity when it comes time to head off inflation a few years down the road."

How did the U.S. central bank, under Ben Bernanke, get to this place? The boldest move hit the headlines on St. Patrick’s Day, when the Fed made its unique 10-year loan to bail out Bear Stearns by backstopping JPMorgan Chase ‘s (ticker: JPM) purchase. That was done, some say, to prevent the domino effect that Bear Stearns’ collapse might have had on certain big counterparties, including banks.

In September, the Fed provided $85 billion to American International Group (AIG), effectively taking control of the world’s biggest insurer in a deal that’s since been restructured. And the central bank has poured so many billions into the commercial-paper and money-market mutual-fund markets that one in every seven dollars, about 15% of the $1.6 trillion commercial-paper market, is Fed-supported.

The Fed also created special lines for London offices of primary U.S. government dealers after the Bank of England cut off its short-term lending to them because Lehman Brothers repatriated $8 billion to New York from London just before its bankruptcy filing.

Then came the $571 billion in foreign-currency swap lines funded and operated by the Fed. The last time swap lines were used in a major crisis, the so-called Exchange Stabilization Fund — to bail out Mexico in 1995 — was operated by the Treasury and Fed.

The Fed has its supporters. "Given the alternative — doing nothing in the face of a crisis — the Fed has done a remarkable job of holding the system together by inventive use of short-term liquidity," says Charles Blood, senior strategist at Brown Brothers Harriman.

Yet others see a willy-nilly series of moves that didn’t weed out insolvent banks. Boston College’s Kane blames Treasury Secretary Henry Paulson for frightening Congress into parting with $700 billion. Kane’s view is that the Fed’s independence has been compromised by working too closely with Treasury.

For all that, banks remain reluctant lenders, because no one’s sure who’s solvent. Reserve balances held with Federal banks now rest at $592 billion, up from the normal $15 billion in the months prior to September.

"The Fed has violated two principal tenets of central banking," says Lee Hoskins, former president of the Cleveland Fed: "First, don’t lend to insolvent institutions, and second, don’t lend on anything but the most pristine collateral" — and at a penalty rate.

In lending and selling off most of its hoard of U.S. Treasuries, the central bank may not have the resources to sop up all the liquidity. Its current accounts show that the Fed’s holdings of Treasuries not already lent to dealers have dropped to about $250 billion, the lowest level since the late 1980s.

The Bottom Line
In attempting to calm the financial crisis, the Fed has more than doubled the size of its balance sheet. Yet insolvent lenders still lurk — and so does the specter of inflation.

The Fed needs at least $48 billion more in capital to return to 2007 levels, just to meet the standard it demands of banks, says Gerald P. O’Driscoll, a senior fellow at the Cato Institute and former vice president of the Federal Reserve Bank of Dallas. And some of that capital might go into reserves to shield against unanticipated loan losses. "[The Fed has] spooked the market with [its] scare tactics and ever-changing plans," he says "The Fed’s actions coupled with the Treasury’s bailout of the banks have taken us one big step closer to corporatism — big business in cahoots with big government."

It’s possible some of the better-capitalized regional Fed banks may balk at some point. "Of course, there are plenty of regional Reserve bank presidents and directors deeply concerned about what the Fed has done," says Hoskins. "But how do we register that concern?"

THE MARKET HAS RALLIED, AS WE EXPECTED.  THE RALLY WILL CONTINUE UNTIL THE NEXT BANK MELTS DOWN. 

VOLATILITY WILL CONTINUE, SO BE A NIMBLE TRADER IN THIS MARKET.

Thanks for listening.
Monty Guild and Tony Danaher
www.GuildInvestment.com

Posted at 10:33 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

Linked below are a few charts detailing the price of gold when viewed through the prism of differing major currencies. As you can see, gold in British Pound terms has notched another new all time high. So did gold priced in Canadian Dollar terms. Gold in Australian dollar terms is just a wee bit below its all time high. The same goes for gold in terms of the Russian Ruble. Gold in Euro terms is 20 euros below its all time high. The weakest gold chart is Yen-Gold which has been hit because of the strength in the Yen coming from the carry trade unwind. That has served to push the yen sharply higher which depresses the price of gold when measured in those terms.

We Americans tend to view the price of gold only in US Dollar terms forgetting that a major portion of the world does not do so. It is my opinion that those American-based analysts who make their prognostications of gold without considering the price in terms of the other major currencies of the world do their readers a huge disservice. Ask yourself a simple question as you look at the following price charts – does this look like a metal that is experiencing a deflationary psyche among a large portion of the global investment community or does it look like a metal that is preserving the wealth of millions of international investors as the global economic chaos expands?

Keep this in mind whenever you read some self-proclaimed gold expert dissing the metal because it is not trading back above $1000 US and is anxious to short it. Such gloom and doom gold dirges would be met with incredulous scorn in the UK and perhaps with amusement in Canada and elsewhere. Australian investors must be thinking that American beers are missing a few vital ingredients if this is the kind of thinking that they are producing.

Whether some folks want to admit it or not, gold is an international currency of last resort and always will be, no matter how much the US based elites and their paper love-sick puppies want to pooh-pooh it.

Trader Dan

 

Click here for today’s action in Gold in various currencies and the Dow/Gold Ratio with commentary from Trader Dan Norcini

Posted at 9:01 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Add this to the Begging Bowl Fed loan window and TARP:

Quantitative Easing

Be prepared to watch the Federal Reserve over the next 18 months as this is the last of two arrows left in the quiver. Quantitative Easing is going to look more and more attractive.

Quantitative Easing is the process of dumping money directly into business enterprises. The other tool is simple – announce a target of 2% for 10 year bonds to further drop mortgage rates as you Helicopter Drop funds directly into non-financial business enterprises for the public to pick up and spend. This is a tactic added to the Begging Bowl Fed loan window and TARP.

Business glossary
Quantitative Easing
Guardian.co.uk, Tuesday October 14 2008 12.10 BST

Quantitative easing is what non-economists call ‘turning on the printing press’.

In extreme circumstances, governments flood the financial system with money, easing pressure on banks and business entities by giving them extra capital.

Ben Bernanke, the chairman of the Fed, won the nickname ‘helicopter Ben’ when he floated just such an idea earlier this decade. US economist Milton Friedman had originally said it would be theoretically possible for governments to drop large amounts of cash out of helicopters for the public to pick up and spend.

More…

Dear Jim,

Many respected commentators, even in our camp, warn not of hyper-inflation but rather a bone chilling depression.

Help me please.
CIGA Arlen

Dear CIGA Arlen,

History declares that all major hyper-inflation started in depressive to depression type business conditions as a currency loss of confidence event.

The key is the word HYPER which means a total currency unwind.

Large inflationary periods are products of the mechanics that creates bubbles, but are not HYPER in nature.

Bubble-Inflation and Hyper-Inflation are two distinctly different events

All "Hyper-Inflation" events have occurred as a product of "Quantitative Easing." Google that term and study it.

The Fed has announced their move towards "Quantitative Easing" because of all that occurred so far in bailing out the good ole boys that caused the problems with their damn OTC derivatives, now known as "Toxic Paper."

All the best,
Jim

Posted at 8:51 PM (CST) by & filed under Jim's Mailbox.

Dear Friends,

I have received close to 700 emails today. I will do my best to reply, yet at this number the task is quite overwhelming.

Truth be known, almost every question has already been answered here on JSMineset.com.

Respectfully yours,
Jim

Dear Jim,

The litany of disasters continues. The Fed has only one alternative to improve its balance sheet – get money from the Federal Government. The government can either borrow from the world through debt issuance, or they can print money. Either alternative exercised is very bad for the US dollar and very good for gold. As always you have called it again and again.

Respectfully yours,
Monty

Has the Fed Mortgaged Its Own Future?
By JACK WILLOUGHBY

The Fed’s highly leveraged balance sheet will make it hard to fight inflation.

IF THE FEDERAL RESERVE BANK WERE A COMMERCIAL LENDER, it would be a candidate for receivership, based on its capital ratios. Bank examiners generally view any lender with a ratio below 2% to be dangerously undercapitalized. The Fed’s current capital ratio, or capital as a percentage of assets, is 1.9%.

The Fed has provided so many loans and emergency credits — to banks, brokers, money funds and foreign countries — that its balance sheet, viewed one way, is as leveraged as any hedge fund’s: Its consolidated assets amount to 53 times capital. Only 11 months ago, its leverage on this basis was a more modest 25 times, and its capital ratio 4%. A caveat: Many of the loans are self-liquidating facilities that will disappear in a few months if the financial crisis eases.

Although the Fed’s role as a central bank is much different from the role of a private-sector operation, the drastic changes in the size and shape of its balance sheet worry even some long-time Fed officials. Its consolidated assets have swelled to $2.2 trillion from $915 billion in about 11 months, and contain at least a half-dozen items that weren’t there before. Some, like a loan to backstop the purchase of a brokerage, Bear Stearns, are unprecedented. (See table for highlights.)

Critics say this action could hinder the Fed in achieving its No. 1 priority: keeping inflation in check. To try to get in front of the crisis, many decisions have had to be made on the fly.

"If the Fed had been [a savings-and-loan] ballooning its balance sheet so fast, the supervisors would have been all over it," says Ed Kane, a Boston College finance professor.

More…

 

Dear Jim,

In the heart of this derivatives crisis insurance companies are still selling their junk to unsuspecting customers seeking yield. If sovereign bonds are having trouble you can just see these products will blow up in the future, leaving investors hi and dry again and needing more government money.

Keep up the great work,
Ciga Big Tatanka

Insurers cash in on deflation fears
Firms are using the volatility of the stock markets to push poor products
Jennifer Hill

Investors are being lured into discredited products by insurers keen to capitalise on tumbling interest rates and volatile stock markets.

Legal & General (L&G) has reported a 186% surge in sales of with-profits bonds in the first nine months of the year, while Prudential saw a 174% jump in business. Norwich Union has sold bonds worth £1 billion in the first nine months alone.

With-profits bonds, which had fallen out of favour after the mis-selling scandals of the 1980s and 1990s, are an easy sell in the current climate because they are pushed as a “halfway house” between equities and deposit accounts. They invest in a mix of shares, gilts and cash, so claim to be less volatile than the equity markets.

They are also attractive to income seekers because they allow you to take an income of up to 5% a year with no immediate tax to pay. This is particularly attractive following this month’s 1.5 percentage point cut in Bank rate.

More…

 

Dear Big Tatanka,

When these people depart the mortal coil the only way to keep them departed is to screw them into the ground.

As long as there is someone stupid enough to buy something, someone will manufacture and sell it.

Regards,
Jim

Posted at 3:40 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Short term profit taking did not last very long last evening and early this morning as dip buyers wasted little time in making their presence felt. Technically, this is quite positive as it indicates growing confidence on the part of the bulls and growing apprehension on the part of the bears. Last evening it had appeared that the bears were going to beat gold back down towards $780 but the upward surge in the Euro and the rally in the equities over the CITI bailout news was too much for the gold shorts. Amazing what a few billion dollars sprinkled hither and yon can do for a reflation trade.

I should note here that gold priced in terms of British Pounds shot to a new all time high today. The PM fix came in at 546.875 – that was not only the highest PM fix ever, but it was also higher than the previous high AM fix. Is it any wonder that at 3:00 AM, CST, when London traders were fully awake, that Comex gold exploded higher shaking off the early profit taking that occurred in Asian trading. I will try to get some charts up this evening of gold priced in various currencies as a point of reference as it has been a while since I have done that.

Open interest in gold did see an increase in Friday’s strong upside day; however, given the size of the move higher and the huge volume, the change in open interest of an increase of a bit more than 3,000 contracts suggests that my thoughts on Friday were correct – namely – a huge amount of shorts from the spec side were squeezed out. The move above the $780 level took out their buy stops and also brought in some of that money which has been sitting on the sidelines. Long side specs need to make sure they do not forget that a winning strategy to beat the commercial shorts in this market is to stand for delivery and not just play the paper game. Take the gold away from the warehouses if you want the real metal in possession as well as depriving the bears of their ammunition. They came back to play about 30 minutes prior to the close of pit session trading and bopped it down $6.00 just to make a statement. Don’t forget where their Achilles’ heel lies. Without the physical metal in the warehouse to back them, they are huffing and puffing and can only bluster.

Technically, gold has smashed through the 50% retracement level from the October peak in very convincing fashion. There looks to be some light resistance in place near the $830-$835 level. Above that is even numbered resistance near $850 and then $880. Downside support is light near $810, stronger support following that near the $790 level and much more significant support now moving up to $770.

The HUI and the XAU are showing much improved looking price charts at this point in the trading session. The HUI’s 50 day moving average has been hit in today’s trading and is serving as upside resistance. The 50 dma must be taken out to turn the technical pictures firmly in favor of the bulls. If the HUI can then go on to break downsloping trendline resistance near the 250 level that should seal the deal and put the bulls back in charge. First it needs to close above horizontal resistance near 225.

The delivery picture for November gold continues to show Bank of Nova Scotia as the main stopper of size. There were a total of 75 deliveries issued early this AM with BNS taking 46 of them. Morgan issued another 20 with Prudential being the largest seller today and issuing 51. The December contract will soon be entering the delivery period, so if you want gold in December and do not have a long position, you will  be able to enter Monday of next week.

Regarding the Dollar – the USDX had been showing signs of negative divergence for some time now as all of the technical oscillators were showing definite signs of waning momentum with the move higher in the USDX not being confirmed by the indicators. Selling resistance has proven to be quite fierce near the 89 level with the Dollar unable to take out that level and maintain its footing above there for long. The breakdown in the Dollar in today’s session confirms that divergence has been valid; however, I would want to see two consecutive closes below the 85 level to confirm that a top is in the USDX. The broad Dollar Index that I track has not been as weak as the USDX. That might change however with today’s general failure. I prefer to see both indices confirming the other.

With the kind of wicked volatility we have seen in these markets, confirming much of anything in these markets is at best a bit tricky and at worst, a fool’s game. Simply put, news of another failure elsewhere could prompt a whole new round of liquidation all over again with the Dollar getting another temporary lift as a result. Still, with everything going in its favor from a deleveraging standpoint and  redemption-related repatriation from abroad, coupled with massive Chinese purchases of US Treasuries, the fact that the Dollar could not plow through the 89 level and on to 90 is most telling.

The weakness in the Dollar is providing the lift across a broad spectrum of the commodity markets this morning. All of the grains are getting a very strong boost as shorts cover and new longs move in on the idea that the weaker dollar will provide a desperately needed boost to our ag markets. While some have been cheering the surging dollar, US exporters have been cursing the rally coming at a time when they really needed the business from abroad. A stronger dollar combined with credit tightness has been killing US grain and farm exports of late.

Crude oil has put in a nearly $6.00 swing from its session low to its current session high with the liquid energies of course seeing corresponding moves higher in price. Nat gas is higher as well with the cold weather helping to further buying from specs already in the mood to buy tangibles. Copper, platinum and palladium all putting in decent sized gains today with silver in particular having a banner day. If silver can clear 10.80 and maintain a price above that level, it has a chance at making a trending move higher.

Bonds are getting dumped today with weakness associated with the surge in the equities. Interestingly enough, gold has been outperforming bonds as the safe haven play for the last couple of trading sessions. In my opinion, this is because the yields on treasuries are simply too low for those looking to protect their wealth given the fact that the US is cranking out immeasurable sums of paper to throw at all the problems breaking out like a good case of Poison Ivy.

The Euro-Yen cross is as expected, strongly higher today, with “risk” back in vogue as the Japanese Yen gets dumped. How fickle are thy lovers Oh coin of the rising sun! the first sign of trouble they will come running back to you however.

The rally in the US equity markets has brought the emini S&P into the 10 day moving average. While the rally from the recent low  has been quite impressive, in the larger scheme  of things, a rally in a bear market back to the 10 dma is not really saying much. The 20 day stands near the 895 level with the 40 day at the 939-940 level. To have even a prayer at turning the longer term chart pattern more friendly, the S&P would need to take out the 50 day near 992. 

Click chart to enlarge today’s 12 hour action in gold in PDF format as of 12:30 pm CDT with commentary from Trader Dan Norcini.

November2408Gold1230pmCDT

Posted at 2:00 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

1. The bailout begging bowl program will continue to grow according to the US Federal Reserve using the plural of trillions. 
2. The financially Democratic approach, which taxes the haves and uses fiscal stimulation, will be building roads, schools, and financially securing major employers.
3. The combination is out of control while it will produce lower tax revenues. Increase taxes on the haves only means more attorneys to reduce the taxes of the haves. The real taxpayer in the US is the average family.
4. Confidence will be lost as all plans FAIL.

U.S. Approves Plan to Help Citigroup Weather Losses
By ERIC DASH
Published: November 23, 2008

As part of a rescue agreement with federal regulators, Citigroup will effectively halt dividend payments for the next three years and will agree to restrictions on and review of certain executive compensation, it was announced on Monday. The bank will also put in place the Federal Deposit Insurance Corporation’s loan modification plan, which is similar to one it recently announced.

Federal regulators announced late Sunday night that the government had approved a radical plan to stabilize Citigroup in an arrangement in which the government could soak up billions of dollars in losses at the struggling bank. President Bush said on Monday that more such rescues could be arranged if they became necessary.

In pledging similar assistance, President Bush said, “We have made these kind of decisions in the past, made one last night, and if need be we’re going to make these kind of decisions to safeguard our financial system in the future.”

Speaking from the steps of the Treasury Building with Secretary Henry M. Paulson Jr. beside him, the president said Mr. Paulson was working closely with the transition team of President-elect Barack Obama, and that the new president would be kept informed.

More…

Posted at 1:52 PM (CST) by & filed under General Editorial.

Dear Friends,

I am repeating this small missive because with the trillion dollars worth of more funds promised to financial institutions this morning by the Fed (which means the Obama Administration) plus the upcoming huge Fiscal Stimulation to create jobs, hyperinflation cannot and will not be avoided.

The spin is that in order to transmute hyper liquidity into hyperinflation you must have an improvement in business conditions. This is totally FALSE. History declares that hyper inflation comes from a loss of confidence followed by a sequence of events as outlined at the close of the missive.

Prior Article:

1. Hyperinflation takes birth and is currency-visible during major economic upheavals. There is NO historical truth that business recovery is a necessary criterion to transmute massive increases in money supply into hyperinflation.

2. What has been the major cause of the transmutation of massive liquidity into hyperinflation has been one form or another of Quantitative Easing combined with a loss of confidence in the inflator.

Quantitative Easing does not sterilize its offspring – violent inflation. We will see this offspring not in the far future but in 2009, 2010, 2011 and maybe much further.

It is akin to the Japanese Sci-Fi out of the 70s titled “The Green Blob That Ate the Earth.” It just grew and grew until it consumed everything.

For the moron financial TV hosts claiming that major inflation is well down the road because inflation requires a business recovery to occur, tell them to review:

Angola 1991-1999
Argentina 1981 – 1992
Belarus 1993 – 2008
Bolivia 1984 – 1986
Bosnia – Herzegovina 1992 – 1993
Brazil 1986 -1994
Chile 1971 – 1981
China 1948 – 1955
Georgia 1993 -1995
Germany 1919 -1923
Greece 1943 – 1953 At the high point prices doubled every 28 hours. Greek inflation reached a rate of 8.5 billion percent per month.
Hungry 1944 – 1946
Israel 1971 – 1985 (price controls instituted)
Japan 1934 – 1951
Nicaragua 1987 – 1990
Peru 1987 – 1991
Poland 1990 – 1994
Romania 1998 – 2006
Turkey 1990 – 2001
Ukraine 1992 – 1995
USA 1773 – not worth a Continental
Yugoslavia 1989 – 1994
Zaire 1989 – present (now the Congo)
Zimbabwe – 2000 to present. November of 2008 – inflation rate of 516 quintillion percent

From http://en.wikipedia.org/wiki/Weimar Republic

The steps to hyperinflation are and have throughout history always been quite simple:

1. This is it.
2. It is now.
3. It is out of control in terms of the size and constancy of fiscal and monetary injection in world liquidity.
4. Loss of general confidence in paper assets.
5. Hyperinflation

Please understand how important it is for your knowledge of economic history, and therefore why this missive is repeated and emailed to those who have expressed their interest in closer contact.

Have you really considered the following:

I have no doubt that $1650 will come. My concern is not that it will not happen, but that I am much too conservative in my long-term price objective held since 2000.

If major banks can be torn apart how can we have faith in the small local institutions that hold most of your ready cash?

When I said "It is Out of Control," it is not something that I take lightly. Never in 49 years in finance have I seen a set of circumstances so challenging to the man in the street.

What I am getting at is a simple question. Are you prepared? You have heard us talk repeatedly on removing financial intermediaries between you and your assets, but the time has come for us to recommend going one step further:

Do you have a true-custodial-ship account?

Even if you think you do has your counsel read the agreement and blessed it?

Hold enough cash at your household to last you a month or two. It may be largely unnecessary for the majority, but what do you have to lose?

If your bank should fail this will save you a lot of grief in the short term. If they do not, you still have all your cash that can easily be deposited back into your account.

Respectfully yours,
Jim