Posted at 1:28 AM (CST) by & filed under Jim's Mailbox.

Dear Jim,

It is quite apparent that physical gold coins are very difficult to get anywhere in the US and in many parts of the world. I have called a few local shops to test for availability and there is none. The best alternative I got was a large premium over spot on a bullion gold ounce, to be paid to the dealer up front and then a long wait time for delivery. The days of walking into a shop and purchasing a coin or two are gone, and we don’t know if or when those days will return.

Internet coin dealers are in the same boat, not much available and high premiums and wait times for all types of bullion and numismatics. It seems that the logical extension of this phenomena is spreading to the Comex in the US. Ultimately there will be a showdown for gold in lieu of the intense worldwide demand for physical. Nothing can take the place of the real thing. Gold ETFs by extension may have difficulty in getting physical gold to back their deposits, they may limit new investors or change their rules to hold less gold per outstanding share. Gold ETFs may experience a period of intense scrutiny about what they truly own, which may cause investors to shy away from them as gold investment vehicles.

When push comes to shove and gold finally makes its move up and through the old highs from this year, it will be understood by everyone that gold is in a real bull market. It will be easily understood by the man in the street as he will see the financial upheaval and wealth destruction talked about here on JSMineset. The dollar’s buying power will plummet and the small investor will realize that gold is what he will need. Inflation will be unable to hide any longer.

And if the coin shops are empty and there is no real way to get gold in hand, there will be only one quality substitute, Gold Stocks and Gold Mutual Funds, and possibly not Gold ETFs. Senior, Mid-Tier, and Junior gold stocks will skyrocket as there will be no real physical way for the average investor to participate in the Gold Bull Market that is coming. The watertight doors are closing: gold coins, small gold bars– these door are now shut, (large bars next?), (ETF’s next?).

Quality gold stocks are selling at 2003 gold prices, some at 2001 giveaway prices. Even though the ship is listing, there are still lifeboats available on this ship! Soon these boats will be lowered away as the last vehicles of gold financial survival, and even then one must take the precautions set out here on JSMineset to distance yourself from financial entities that are between oneself and one’s assets.

In my opinion, time seems short and the band on deck is playing a happy tune. 

Ciga Ken

Dear Ken,

You are 100 percent correct.

Regards,
Jim

Posted at 6:22 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Between 400,000 and 1,000,000 STILL cannot get access to their savings.

Don’t follow the spin, and let your guard down. This is the beginning, not the end. This could have been you!

The primary target that should be faced has not been even been aimed at. That target is called over the counter derivatives.

Part of the rescue is the use of an OTC derivative by the Federal Reserve – a swap.

Reserve Funds investors still waiting for their money
30 Oct 2008 11:53 am

This isn’t good:

At least 400,000 people, and perhaps as many as a million, can’t get access to their savings, a problem that has quietly persisted in spite of widely publicized federal efforts to restore confidence in money-fund investments.

Some of these customers — who, like most Americans, assumed their money funds were as safe and accessible as bank accounts — are getting desperate.

“Longer term, I just don’t know how we’ll deal with it,” said John Oakes, a retired engineer in Austin, Tex., who can’t tap $20,000 in a Reserve account to pay his mother’s nursing home bill. “They say we may get some money this week, but we don’t know if we’ll get 100 percent, 90 percent or 30 percent.”

Sandra and Lawton Dews, a retired couple in North Myrtle Beach, S.C., had more than $250,000 — 35 percent of their retirement assets –invested in the Reserve US Government Fund.

“They even bragged that you could sleep at night if you invested in their funds,” Mrs. Dews said. “In the past month and a half, we don’t sleep at all.”

Her insomnia began soon after Sept. 15, when the Reserve Fund was hit by a wave of redemptions, apparently because its largest fund had a stake in notes backed by the newly bankrupt Lehman Brothers.

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Jim Sinclair’s Commentary

Gold will never entirely separate from the US dollar. The tie may loosen in favour of gold, but will never fully part. Look at the dollar supply and demand. The world needs hundreds of billions of dollars to stave off a potential Weimar situation until the USA joins that club themselves.

The world does not need the same in euros, yen or rubles; only dollars. Is the Federal Reserve the lender of last resort to the entire planet? Does that not make many of you the lenders of last resort to those who accept worthless collateral or swaps that promise to pay paper backed by nothing in exchange for freshly created electronic paper backed by nothing sometime in the distant future?

IMF needs hundreds of billions of dollars more: Brown

RIYADH (AFP) – Prime Minister Gordon Brown said the International Monetary Fund (IMF) needs “hundreds of billions of dollars” to help countries at risk of collapsing amid the world financial crisis.

Brown, who is in Saudi Arabia, told reporters Saturday during a four-day tour of Gulf states that countries which had benefited from recent high oil prices could contribute to the plan.

Brown also stressed that Britain welcomed investment from Gulf sovereign wealth funds “as long as they play by our rules and operate in a commercial manner.”

Brown, whose struggling premiership has been boosted by his leadership in the financial panic, wants the IMF’s 250 billion dollar bailout fund for affected countries to be extended to prevent “contagion” elsewhere.

He has not previously indicated the amount of cash by which he believes the IMF, which is set to bail out Hungary, Ukraine and Iceland, needs to boost its coffers.

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Jim Sinclair’s Commentary

That seems a tad wrong.

Banks to Continue Paying Dividends
Bailout Money Is for Lending, Critics Say
By Binyamin Appelbaum
Washington Post Staff Writer
Thursday, October 30, 2008; A01

U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years.

The government said it was giving banks more money so they could make more loans. Dollars paid to shareholders don’t serve that purpose, but Treasury officials say that suspending quarterly dividend payments would have deterred banks from participating in the voluntary program.

Critics, including economists and members of Congress, question why banks should get government money if they already have enough money to pay dividends — or conversely, why banks that need government money are still spending so much on dividends.

“The whole purpose of the program is to increase lending and inject capital into Main Street. If the money is used for dividends, it defeats the purpose of the program,” said Sen. Charles E. Schumer (D-N.Y.), who has called for the government to require a suspension of dividend payments.

The Treasury plans to invest up to $250 billion in a wide swath of U.S. banks in return for ownership stakes, which the government will relinquish when it is repaid.

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Jim Sinclair’s Commentary

FDIC’s capital shrinks weekly bit by bit.

Alpha Bank & Trust fails, taken over
October 31, 2008 | 10:04 AM

ALPHARETTA – Regulators descended upon Alpha Bank & Trust on Old Milton Parkway like a swarm of bees Friday as it became the latest bank closed by the Ga. Department of Banking and Finance and the second in the Alpharetta area. Integrity Bank was closed Aug. 29, though technically its headquarters were in Johns Creek city limits by virtue of being east of Kimball Bridge Road.

The Federal Deposit Insurance Corporation (FDIC) was named receiver.

Depositors saw the change Monday as the bank’s two branches – one on Old Milton Parkway in Alpharetta and the other in Marietta – reopened under control of Stearns Bank, National Association of St. Cloud, Minn. That bank assumed the insured deposits of Alpha Bank & Trust in an agreement with the FDIC.

Depositors of the failed bank automatically became depositors of Stearns Bank. Deposits continue to be insured by the FDIC, so customers do not need to change banks to retain their deposit insurance coverage.

As of Sept. 30, Alpha Bank & Trust had total assets of $354.1 million and total deposits of $346.2 million. Stearns Bank did not pay the FDIC a premium for the right to assume the failed bank’s insured deposits.

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Jim Sinclair’s Commentary

New gold reserves come from the explorers, making the pressure on the juniors wholly illogical. In time this will cost the shorts.

Gold production ‘in crisis’ – AngloGold Ashanti CEO
By: Martin Creamer

Gold production was “in crisis” and a gold price of $900-to-$1 000/oz was needed to arrest the downward trend, AngloGold Ashanti CEO Mark Cutifani said on Thursday.

Cutifani said that the world had seen a decline in the production of gold across the globe in the past seven years, and that the industry could experience another decline of production at up to 5% a year for the next five years.

“The gold industry from a production perspective is in crisis,” he said.

There had been a 20% to 30% production decline in South Africa in the last five years and grades are continuing to diminish in opencast mines around the world.

That lack of production, he said, would result in gold’s fundamentals improving.

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Jim Sinclair’s Commentary

There is nowhere to hide other than gold.

Fears after run on Kuwait bank
By Andrew England
Published: October 31 2008 02:00 | Last updated: October 31 2008 02:00

The outlook for Kuwait’s banking system is shifting towards negative for the first time in a decade, Moody’s rating agency said yesterday – a sign likely to heighten concerns about potential weaknesses in the nation’s financial services.

The Moody’s report comes days after a run on Gulf Bank, Kuwait’s second-largest commercial bank, following revelations that it had incurred significant losses as a result of derivatives trading.

Standard & Poor’s revised outlooks on six Gulf banks from positive to stable, a further sign analysts are becoming more cautious.

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Jim Sinclair’s Commentary

The world needs a flood of dollars according to the IMF and the Fed means to make sure it happens. Talk about a formula for a dollar decline!

“That’s even after a boost this week from an International Monetary Fund emergency loan program for emerging markets and the U.S. Federal Reserve’s decision to pump as much as $120 billion into Brazil, Mexico, South Korea and Singapore. The Fed said yesterday that it aims to “mitigate the spread of difficulties in obtaining U.S. dollar funding.”

`Panic’ Strikes East Europe Borrowers as Banks Cut Franc Loans
By Ben Holland, Laura Cochrane and Balazs Penz

Oct. 31 (Bloomberg) — Imre Apostagi says the hospital upgrade he’s overseeing has stalled because his employer in Budapest can’t get a foreign-currency loan.

The company borrows in foreign currencies to avoid domestic interest rates as much as double those linked to dollars, euros and Swiss francs. Now banks are curtailing the loans as investors pull money out of eastern Europe’s developing markets and local currencies plunge.

“There’s no money out there,” said Apostagi, a project manager who asked that the medical-equipment seller he works for not be identified to avoid alarming international backers. “We won’t collapse, but everything’s slowing to a crawl. The whole world is scared and everyone’s going a bit mad.”

Foreign-denominated loans helped fuel eastern European economies including Poland, Romania and Ukraine, funding home purchases and entrepreneurship after the region emerged from communism. The elimination of such lending is magnifying the global credit crunch and threatening to stall the expansion of some of Europe’s fastest-growing economies.

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Posted at 5:30 PM (CST) by & filed under General Editorial.

Dear Friends,

If you are tired of being had by paper gold the following is the only course of action if you wish to take a positive step to end the games being played at your expense.

Delivery Process for Gold or Silver:

Delivery – Prudential holds the receipt in PFG’s account for customer

1. Client buys the futures contract.

2. Client will take delivery between First Notice Day and the Last Trading Day.

3. On delivery day account is debited cost plus a $50.00 delivery fee.

4. Receipt is booked to customers account

5. Monthly storage charge passed on to customer’s account(about $50.00).
Physical Delivery – Customer wants bars in their procession

1. Client buys the futures contract.

2. Client will take delivery between First Notice Day and the Last Trading Day.

3. On delivery day account is debited cost plus a $50.00 delivery fee.

4. We will provide the customer with name and phone number of the individual at the depository to contact.

5. Customer makes arrangements for the physical delivery

CIGA JB Slear, who is in the commodity business, offers his services to assist anyone seeking physical delivery of metals. He will guide you through the entire process, including arrangements for delivery.

To be totally clear, I expect JB not to discuss any type of speculation with you but ONLY help you acquire 100 ounce gold bars. Once 21,000 bars have been taken the paper gold’s reign over the price of gold is over.

CIGA JB Slear can be reached at the following:

Fort Wealth Trading Co. LLC
www.FortWealth.com
866-443-0868 ext 104

Posted at 8:07 PM (CST) by & filed under General Editorial.

Dear Friends,

I, like yourself, am fed up with the gold bank’s ownership of the gold price via paper instruments. Therefore I respectfully ask those that can afford it to purchase as many Comex contracts as you can afford to take delivery of and do so.

Accept my assurance that I will take delivery of Comex 100 ounce bars on every delivery month from this day forward.

Respectfully yours,
Jim

Posted at 8:05 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Was this by omission or commission? Greenspan was neither asleep nor stupid. He knew exactly what he was doing.

Greenspan Slept as Off-Books Debt Escaped Scrutiny (Update1)
By Alan Katz and Ian Katz

Oct. 30 (Bloomberg) — As George Miller welcomed 60 bankers to the chandeliered Charlotte City Club one evening in September, the focus was on more than the recent bankruptcy of Lehman Brothers Holdings Inc. From their 31st-floor perch, members of the American Securitization Forum, which Miller leads, fretted about the future of their $10.7 trillion industry

The bankers were warned that a Financial Accounting Standards Board plan would force trillions of dollars back onto balance sheets, requiring cash reserves to soar. Their business of pooling and reselling assets had dropped 47 percent in the first six months of the year, and the industry couldn’t afford another setback.

The next day, Miller, 39, the forum’s executive director, took that message from North Carolina to a Senate hearing in Washington examining the buildup of off-balance-sheet assets. “There are great risks to the financial markets and to the economy of moving forward quickly with bad rules,” he said of FASB’s proposal.

Miller was trying to preserve an accounting rule for off- the-books assets that helped U.S. banks export toxic debt around the world. It is a loophole that Jack Reed, the Rhode Island Democrat who chairs the Senate securities subcommittee, said had contributed “to the severity of the current crisis.”

The damage to date: more than $680 billion dollars in losses and writedowns, about one-third of that by European banks.

More…

Posted at 3:13 PM (CST) by & filed under General Editorial.

Dear Friends,

There is absolutely no question in my mind that gold will trade at $1650 on or before (probably much before) January 14th, 2011.

Regardless of what financial TV or popular analysts claiming never to have made an error say, we are correct.

Stay the course. Do not let your guard down. Protect yourself as the most significant dislocation economically in world history for major nations is at our doorstep. In fact it is one foot through your door already. Are you prepared?

You ask why? Then read on!

There seems to be some degree of assumption that each action by the Fed brings the credit lockup closer to being corrected.

There are many challenges to this assumption.

Will banks use funds to patch up their pillaged balance sheet or actually start loaning in a progressive manner? The answer is balance sheet as they really have no alternative.

As in the case of AIG below, is any cash bailout enough to bail out losers? We need to remember that what OTC derivatives do not do to financial or any other entity, the drop in earnings will. Whatever is left over litigation will pick the bone clean of.

Regulators went from 12 to 1 leverage to 40 to 1 leverage where a 2-½% change in total asset value would bust financial institutions. The losses taken are not bookkeeping, but are hard and real.

The only thing bookkeeping did was allow these losses to be maintained in full value because they were OTC derivatives, not listed derivatives with a clearinghouse guarantee. Clearinghouses demand losers pay in and winner are paid out daily while there is no such facility for OTC derivatives. Because of no clearinghouse function, banks and other entities carried the declining value in OTC derivatives at full value at 40 to 1 leverage.

The bailout funds are simply putting a thumb into the leak in the dyke as more holes open up from earnings declines, slow business and serious litigation.

The TIC report is looking quite bad, indicating that dependence on non-US entities to finance a budget deficit that is about to go ballistic cannot be depended on.

All that we have seen is emergency action without limits to hold financial zombies from being discovered by the general public.

The US Fed is in fact holding up the entire world that is near and dear to them. One of the methods is through swaps, which are a form of OTC derivatives and just like the disease, are off balance sheet items.

There is no limit to what the US Fed and Treasury will do in the next few months. It will be discovered in the not too distant future that the US dollar has moved into critical oversupply. At that point expect to the see the US dollar drop like a stone and gold trading at $1200 and $1650.

The US dollars will see.72 again prior to .62 and .52.

The limiting factor to the present terminal financial condition under the Fed and Treasury bandage bailout is the US dollar. There is no escaping the event of publicly recognized dollar oversupply, the ineffectual nature of bailouts and the appearance of hyper-inflation in the midst of non-recovering business conditions.

Keep firmly in mind that retired Chairman Volcker has described this situation as “We have a failed financial structure.” He went on to describe the condition of the financial situation as “Code Blue.”

What you see now is only the beginning of a great economic drama, out of control and nowhere nears its end.

This is it. It is now!

Gold is the only entity that has the capacity of insuring your future buying power, maybe even more.

Enough said.

Respectfully,
Jim

AIG Already Running Through Government Loans
By Mary Williams Walsh, | 30 Oct 2008 | 06:51 AM ET

The American International Group is rapidly running through $123 billion in emergency lending provided by the Federal Reserve, raising questions about how a company claiming to be solvent in September could have developed such a big hole by October. Some analyst’s say at least part of the shortfall must have been there all along, hidden by irregular accounting.

“You don’t just suddenly lose $120 billion overnight,” said Donn Vickrey of Gradient Analytics, an independent securities research firm in Scottsdale, Ariz.

Mr. Vickrey says he believes AIG [AIG  1.64    0.09  (+5.81%)   ] must have already accumulated tens of billions of dollars worth of losses by mid-September, when it came close to collapse and received an $85 billion emergency line of credit by the Fed. That loan was later supplemented by a $38 billion lending facility.

But losses on that scale do not show up in the company’s financial filings. Instead, AIG replenished its capital by issuing $20 billion in stock and debt in May and reassured investors that it had an ample cushion. It also said that it was making its accounting more precise.

Mr. Vickery and other analysts are examining the company’s disclosures for clues that the cushion was threadbare and that company officials knew they had major losses months before the bailout.

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Posted at 4:30 PM (CST) by & filed under Guild Investment, Jim's Mailbox.

Jim,

Perhaps Taiwan read “GEAB N28 Global systemic crisis Alert – Summer 2009: The US government defaults on its debt.

Regards,
CIGA Bernie

Taiwan Dumps Fannie, Freddie. And Uncle Sam?
By RANDALL W. FORSYTH

Despite bailout, GSE debt is eschewed by major foreign investor, and ally.

WHO LOST TAIWAN? After Mao drove the Nationalists off the Mainland in 1949, the cry went up among U.S. conservatives, “Who lost China?”

Now Washington might well worry about who lost Taiwan as a major investor in U.S. agency securities as the Republic of China has openly questioned their credit quality — even after the federal government has committed hundreds of billions of dollars to bail out mortgage giants Fannie Mae and Freddie Mac.

Beyond that, Washington might well worry that other nations also no longer view its agencies — and now, by extension, the very credit of the United States of America — beyond question.

Taiwan’s financial regulators reportedly have ordered that nation’s insurance companies to pare their holdings of the debt and mortgage-backed securities of Fannie Mae (ticker: FNM), Freddie Mac (FRE) and Ginnie Mae securities, according to a report on the Internet site of Asian Investor magazine.

Such an order would be a stunning rebuke to Washington, coming a little more than a month after the federal government effectively nationalized the mortgage giants. Fannie and Freddie last month were placed into conservatorships with the Treasury standing ready to inject up to $100 billion through purchases of preferred shares in the government sponsored enterprises.

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Dear Jim,

I couldn’t help noticing the parallels in language between the following two items:

“Lower Federal tax revenues in the face of increased federal spending causes geometric, not arithmetic, rises in the US Federal Budget Deficit.”
–Jim’s Formula, September 1, 2006, Point 6.

“The financial rescue operation will force the federal government to borrow an unprecedented amount of money as the budget deficit climbs to record heights, a top Treasury Department official said Tuesday.” … “[Anthony Ryan, Treasury’s acting undersecretary for domestic finance] said the rising borrowing was occurring against the backdrop of a slowing economy.”
–Associated Press, M. Crutsinger, “Treasury Predicts Huge Government Borrowing Needs,” October 28, 2008.

Thanks for the heads up!
CIGA Richard B.

Dear Richard,

In one sense, an event like this is a compliment.

Can you imagine when the FRGCR appears out of some major meeting of the sages on international finance?

Regards,
Jim

Dear Jim,

“World Will Struggle to Meet Oil Demand” is a front page headline in the Financial Times today.

The gist of the article is that the first authoritative public study on the biggest oil fields has been completed. It shows that production is falling much faster than had been thought. The International Energy Agency authored a report entitled “World Energy Output” which states that “the natural annual rate of output decline is 9.1%”. All I can say is WOW! This is much faster than anyone had thought. This means a lower long term supply of oil, and resulting higher long term prices for oil, coal and other energy sources.

Also today, soft commodities began a much overdue rally. We think food commodities and gold can continue to trend higher. Ending food stocks after the current harvest are at 34 year lows. The potential for food shortages and starvation in parts of the world remains high.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Dear Monty,

Add to this that not if but when Pakistan blows oil will rise $100 in 60 days from whatever price it is at that time.

Regards,
Jim

Dear Jim,

This Bloomberg article explains why we have been harping on free trade for such a long time. Free trade is essential. Look at Iceland, when confidence in their banks evaporated, there was a currency collapse and inflation. Free trade became an impossibility due to a lack of trust in the currency. By the way, the Icelanders who owned gold, did great compared to everyone else, and they can now buy real estate companies and other assets cheaply in Iceland.

Best regards,
Monty Guild
www.GuildInvestment.com

Credit `Tsunami’ Swamps Trade as Banks Curtail Loans (Update2)
2008-10-29 10:49:09.610 GMT
By Michael Janofsky, Mark Drajem and Alaric Nightingale

Oct. 29 (Bloomberg) — Richard Burnett’s lumber company had started loading wood onto ships heading for China. More was en route to the docks. It was all part of an order that would fill 100 40-foot cargo containers.

Then Burnett got a call from his buyer at Shanghai VIVA Wood Products Co. The deal was dead. He told Burnett, president of Cross Creek Sales LLC in Augusta, Georgia, he couldn’t get a letter of credit to guarantee payment for at least six months.

“It was like a spigot got cut off,” Burnett said, recounting the transaction that fell apart in July. The inability of buyers in China and Vietnam to get letters of credit has cost his company as much as $4 million this year, a third of projected revenue, forcing him to lay off 15 of 35 employees, he said.

Suppliers of oil, coal, grains and consumer products from Chicago to Mumbai are losing sales as the credit crisis spreads beyond financial institutions, and banks refuse financing or increase the fees for buyers. Coupled with declining demand, the credit squeeze is threatening international trade, one of the lone bright spots in the global economy.

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