Posted at 12:16 PM (CST) by & filed under Guild Investment.

Dear CIGAs,

Mainstream media outlets are devoting more airtime and front page space to the developing banking and financial system crises.  There were two articles this weekend that may be useful.  One article is for those who are interested in the evolution of the housing market’s problems, and another about the banking system’s inability and/or unwillingness to lend.

From the October 5, 2008 NY TIMES:
Pressured to Take More Risk, Fannie Reached Tipping Point
By: CHARLES DUHIGG
http://www.nytimes.com/2008/10/05/business/05fannie.html?partner=rssnyt&emc=rss

From the October 4, 2008 THE ECONOMIST:
Blocked Pipes
http://www.economist.com/displaystory.cfm?story_id=12342237

We recommend the Blocked Pipes article as it clearly explains the concerns that we have had for years about the banking system of the world.  After reading the Blocked Pipes article, you can see why we remain pessimistic about a rapid recovery of the world banking system.  We strongly recommend that readers contact us, about the security of the banking institutions where they have their assets.  Our attorneys have carefully analyzed the legal language of many institutions, and we have strong opinions about which banks and which areas within banks provide the most safety for investors.  We will be happy to discuss your situation with you and suggest alternatives for you.

Albeit a little late, it appears that the problems within the global financial system have captured the interest of the general public, not just investors.  Markets are often held captive to fear and greed.  Fear has clarified the public’s attention.  Those who may have had a casual interest in how the world of investing worked before are becoming convinced they need to understand what happened, what is happening, how it might affect them, and what steps if any should they take.

The markets are based on psychology, and understanding the public psyche is important to successful investing.  Since people still rely on the media for much of their information, we believe is valuable to monitor.

Thanks for listening, and please feel free to contact us if we can be of assistance.

Monty Guild and Tony Danaher
www.GuildInvestment.com

Posted at 9:54 AM (CST) by & filed under General Editorial.

Dear CIGAs,

Today the Fed entered the off balance sheet credit default market and plans to buy unsecured debt instruments in order to cure the problems caused by off balance sheet credit default derivative buying in the form of non-performing failed counterparty credit default derivatives. This appropriately named toxic paper will be purchased to an infinite degree.

The Fed does the same to cure the same.

The Fed actions today declare the bailout bill a non-functioning pile of pork.  This infinite production of paper dollars will kill the dollar

Gold will trade at or above $1650.

The Dow is thumbing its nose at the infinite amount of money being dropped by rising 150 points and coming back to even.

Modern day Weimar here we come!

Jim

Posted at 2:02 AM (CST) by & filed under General Editorial.

Dear Friends,

Please understand that the Fed reacts to circumstances rather than acting before potential problems happen.

If the Fed hadn’t taken the rather strange action they took today by becoming OTC derivative dealers themselves this would have been the day the USA banking system imploded.

Watch Libor rates to signal the point of detonation.

Circumstances appear as if there were many problem Angels dancing on top of a pin that is being balanced on the nose of just those people who created the problem in the first place.

An implosion of the banking system is coming, which means a bank holiday will occur.

You now must have enough cash in hand to last a month or two.

If you have not distanced yourself from financial agents then you have a financial death wish.

If you have NOT made absolutely sure that your custodian account is a real custodial- ship you are probably in for a surprise.

I took a call yesterday from a mature lady who told me she feels her money market fund that is only in Treasuries will not pay her out. They did tell her they intend to in seven days. I asked her to call me back in eight days. How does she know that this money market fund is not in OTC derivatives based on the movement of Treasuries?

I do not want you to make that call to me.

If you can retire from your  retirement program at some reasonable discount do it NOW.

This is it and it is NOW. Gold is going to $1200 and $1650. The US dollar rally has NO fundamental legs.

Why are so many of you sitting there like a deer caught in the headlights? Protect yourself and do it TODAY!

Respectfully,
Jim

Posted at 5:37 PM (CST) by & filed under General Editorial.

Dear CIGAs,

  1. Gold is the ultimate currency when others fail as a store house of values.
  2. Gold has no liability attached to it.
  3. Gold is universally fungible.
  4. Gold is an appreciating asset on the balance sheets of central banks..
  5. Gold will trade at $1200 and $1650.
  6. Of course gold bottomed on its first break from $1033, but I only say such things once.
  7. The third try for above $1000 is being set up now.
  8. Have you protected yourself?

Your friend,
Jim

Posted at 5:35 PM (CST) by & filed under Jim's Mailbox.

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There is no doubt the US dollar is going to hit .52 in the coming years. Is there a chance the physical market is breaking or pressuring the Comex Paper market?

Alex

Dear Alex,

The answer to your question is YES. Add to that the fact that gold is the ultimate currency, not paper.

Regards,
Jim

Dear Jim,

I stand in awe to imagine 16000+ bank owned properties from foreclosures in one city alone, with 12000+ coming in pre-foreclosure! It is truly incredible. This amounts to HUGE selling pressure on real estate in coming months and years!

When gold is over $10,000 and estimated tax collections turn positive I will have to buy one in Arizona or Florida, along with an airplane!

Best,
CIGA Big Tatanka

Dear CIGA Big T,

I agree on one thing. I will buy an A-10 Wart-hog. The early models are in for decommissioning in two years.

All the best,
Jim

Posted at 1:01 AM (CST) by & filed under General Editorial.

Jim Sinclair’s Commentary

Read this as OTC derivatives kill more and more.

Another Fund Heavily Used by Schools Is Frozen
By JOHN HECHINGER in Boston and CRAIG KARMIN in New York

A second investment fund offered by investment adviser Commonfund froze most withdrawals this week, posing possible financial strains for the 200 colleges and schools invested in the fund.

The Commonfund Intermediate Term Fund held $1 billion in assets for the schools. Commonfund, a Wilton, Conn., investment adviser for colleges and schools, told clients they could withdraw only 30% of their money now, and said it will make the rest available “as quickly as possible,” depending on market conditions. The fund would normally give investors any part of their money the day after a withdrawal request.

Keith Luke, managing director of Commonfund, says about half of the fund was invested in mortgage- and other asset-backed securities from which investors have been fleeing. The rest was in government-agency and corporate debt that has held up better in the financial crisis. Mr. Luke said Commonfund instituted the freeze because redemption requests would have forced the fund to sell securities at “distressed prices.” He said the portfolio’s securities haven’t had defaults.

The fund returned less than 1% in the year ended June 30 and 2.7% annualized over the past five years, underperforming its benchmark Merrill Lynch 1-3 Year Treasury Index, according to Commonfund. Mr. Luke says the fund has had outflows but they “haven’t been huge.” He said he didn’t know when restrictions would be lifted but it would depend on improvements in the credit markets.

More…

Jim Sinclair’s Commentary

Gold is the final form of money. It will be chosen by all those seeking safety from paper instruments & currency over treasury instruments of bankrupt countries.

Financial Crisis: Rush for gold as savers queue for bullion
Savers have been queuing in the street to buy gold bars and coins, as they search for a safe place to invest their money.
By Harry Wallop, Consumer Affairs Editor
Last Updated: 6:26PM BST 02 Oct 2008

Traditionally, gold has been one of the safest investments during times of financial turmoil Photo: AP

London’s two leading bullion dealers, ATS Bullion and Baird & Co, have reported a rush of interest from savers, many of whom have hundreds of thousands of pounds worth of savings they want to convert into the precious metal.

At least two customers have invested the entire proceeds from selling their houses into gold, each buying up more than £500,000-worth of gold bars, according to one dealer.

Savers have been queuing in the street at ATS Bullion, whose offices are just off the Strand in London’s west end.

Sandra Conway, the company’s managing director, said: “We’ve had to turn people away. The queues have been right out of the door and it’s been really hectic at times.

More…

Jim Sinclair’s Commentary

Quietly and continually Pakistan is going pear-shaped.

US Strikes in Pakistan Tribal Areas Fuelling “Backlash” – Paper
Posted on: Saturday, 4 October 2008, 03:00 CDT

Text of editorial headlined “Fighting the militants” published by Pakistani newspaper Dawn website on 4 October

Shah Mahmood Qureshi, the foreign minister of Pakistan, has been a largely anonymous figure in the weeks since the US stepped up attacks inside FATA [Federally Administered Tribal Areas] in September. However, Mr Qureshi hit all the right notes in a speech at Princeton University this week. “I’m afraid that a relatively recent element in this already difficult war threatens to undo what we have already achieved,” the foreign minister said in a reference to US strikes inside Pakistan. When American Special Operation forces landed in a village near Angoor Adda in South Waziristan in early September, observers pointed out the disastrous potential such attacks had to alienate Pakistani public opinion — and especially the tribes whose support Pakistan requires to defeat the militants in Fata and northern Pakistan. Since that attack, the Americans have stated their respect for Pakistan’s territorial sovereignty, and launched numerous missile strikes inside Fata. US Secretary of Defence Robert Gates has even claimed that the UN charter permits America to act in “self-defence” against militants operating from Pakistani soil, if the Pakistani government is unable or unwilling to do anything about those militants.

The problem is that the Bush administration is desperate for a quick success along the Pakistan-Afghanistan border, whereas an effective anti-militancy strategy must necessarily be long-term. And an effective strategy can only be led by Pakistan itself, with some combination of tribal and state action. What Mr Qureshi was highlighting is that at present Pakistan is advancing against the militants, with clear help from local tribes. Lashkars [forces] have been organised by tribes in Bajaur, Peshawar, Khyber, Swat, Dir, Buner and Lakki Marwat, and they have had some success against the militants. Engaging the tribes in such a positive manner is a delicate affair for each tribe has its own dynamics and strategic position. Earlier this week Gen Kayani visited Bajaur Agency and met with tribal leaders; later, Salarzai tribesmen announced a full- fledged operation to clear their tehsil and neighbouring areas in Bajaur of militants.

More…

Posted at 2:37 PM (CST) by & filed under General Editorial.

Dear International Friends,

Maybe you should consider a visit to your local bank for their abbreviated Saturday hours.. What do you have to lose? That all depends on how much you have deposited there…

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 “This is IT,” 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:

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.

Regards,
Jim