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

My Dear Friends,

1. President Obama was JUST given the hook by having his speech flushed away on Bloomberg TV in preference for Trichet speaking privately to Bloomberg at Davos. Man that was a big mistake on Bloomberg’s part.

2. Once again you permit the Comex short gang to paint their own chart for gold in the short term. As long as the more financially capable members of the gold gang do not buy gold on the Comex and take delivery the knuckle draggers from the gold banks will continue to take from all of you. Gold is headed to Alf’s number but if the Comex has their way it is 10 feet forward and nine feet backward.

Regards,
Jim

Posted at 10:42 PM (CST) by & filed under Guild Investment.

BRITAIN

…GORDON, HOW I LOVE YOU, HOW I LOVE YOU, MY DEAR OLD GORDON…[sung to George Gershwin’s old American folk song "Swanee"]

We conjecture that this tune will not be sung in the halls of Britain in the future.  The current British Prime Minister, Gordon Brown, is presiding in a major decline in the fortunes of his country.  This is the same "brilliant" Gordon Brown who forcefully told the British people when he was Chancellor of the Exchequer (finance minister), that Britain no longer needed the hoard of gold in its reserves.  During his tenure Britain proceeded to sell off half of their inventory in 2001 at the princely price of $270 per ounce.  How does that compare to today’s $890/per ounce?  I think you will agree Gordon flubbed that one in a big way.

Now, Gordon Brown is presiding over a decline in the British Pound to a 23-year low, an economy declining at about 6% per year, and a banking system crisis that he is trying to bailout…but it is proving to be too little too late.  Of course, as we keep saying in our communications, too little bailout today, will necessitate a much larger bailout later.  It is going to be cheaper to do a large bailout the first time versus coming back and making it bigger than it should be later.

To put it another way, it is easier to stop a runaway train when it is coasting at 10 miles per hour than when it reaches 70 miles per hour.  For Gordon, the current failure is nothing new.  Since his days as Chancellor, his economic policies have always been muddled.  For the sake of all countries, let us hope that Britain will be steered by more competent leadership and financial management.

There was also a very good article this past weekend in the Daily Mail’s "Mail Online" that articulates just how fragile and precarious the British banking system has become.  The link to the article is: http://www.dailymail.co.uk/news/article-1127278/Revealed-Day-banks-just-hours-collapse.html

MEXICO AND PAKISTAN…POLITICS

There is a lot of worry about Iran, Afghanistan, and Iraq and we understand the need to be concerned about these places.  However, we do not hear enough in the American press about the two major trouble spots which are coming to the fore, Mexico and Pakistan.

Mexico has serious economic problems.  Corruption, falling national oil production, and rising narco-terrorism as six major drug cartels fight for control of the lucrative drug trade.

We believe that the government’s ability to govern is compromised, and that many in the police departments and military are working for various narco-lords.  As a major symptom, we point to the open gunfights on the streets of Mexico’s cities, and the fact that 4,000 have been killed by rival drug gangs within the past year on Mexico’s streets.

Another symptom is that many more illegal immigrants transit into the U.S. every day to seek employment and to flee narco-terrorism.

We can expect more illegal immigration into the U.S., and the increased pressure it puts on the U.S. health care delivery and education systems.  We can expect more costs for oil and police protection as narco-terrorists try to corrupt U.S. police agencies, especially the border patrol.

In Pakistan, Al Qaeda has taken over a large part of the best farm land in the country and has terrorized the Pakistani populace with their lifestyle demands, such as men must wear beards, and not trim them, and girls may not attend school.  Breaking the strict lifestyle codes can get one rapidly beheaded.  The Pakistani secret service is well known to be supportive of Al Qaeda, and they have many apologists in the corrupt Pakistani political system.  We should watch carefully as Pakistan could become a source of a great deal of global conflict and possible nuclear disturbance incoming years.

HOW TO INFORM ONESELF ABOUT GLOBAL ECONOMIC EVENTS

May we suggest the Financial Times of London, The Asian Wall Street Journal and The Economist as regular reading for all investors?  We have found that most countries national newspaper’s do a poor job of covering global economic, social, and political events.  The above three international publications do a better job.

SUMMARY

The world banking crisis continues to simmer, and no strong, definitive solution has been found.  Implementation of good ideas has not been fast enough, in no small part due to the political shortsightedness of both sides of the political aisle and the politicians desire to pander to local voters, while ignoring the national best interest.  Where did all the statesmen and women go?

Our favorite investment, gold, has done well this month, and we see no reason that it will not continue to do well.  We hold gold and some asset based stocks, which pay high dividends.  Other than that, we hold primarily cash balances in government guaranteed paper.

This is a conservative approach, and one which is working for us thus far in 2009.  We do not anticipate making any major commitments to common stocks in the U.S. or abroad until a further correction has been seen in world markets.

For no charge, as a service to our readers, we will be happy to examine your current investment portfolio, and explain how we might restructure it to meet your needs for income and capital appreciation in the current environment.  Please give us a call if we can help you in this regard.

Thanks for listening.

Monty Guild and Tony Danaher
www.GuildInvestment.com

Posted at 4:51 PM (CST) by & filed under In The News.

Dear CIGAs,

The following is my new guard dog – he eats hedgies for lunch!

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Jim Sinclair’s Commentary

All hail the probable Nobel Prize Winner in Economics for 2009 and our new in place and undeniably Marxist Western economic policies.

Full Marx for such imaginative thinking
David Wighton: Business Editor’s commentary

Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take on more and more expensive debt, until their debt becomes unbearable.

The unpaid debt will lead to the bankruptcy of all banks, which will have to be nationalised, and the State will have to take the road which will eventually lead to communism.” So says the Karl Marx quote that has been whizzing round Wall Street and the City.

We seemed a step closer to that prospect yesterday. Bank shares plunged again on both sides of the Atlantic amid concern that more capital injections will be required. Bank of America shares fell 20 per cent on reports that it needed further government help to complete the acquisition of Merrill Lynch. Merrill has suffered higher than expected losses in the fourth quarter and BoA is in talks with the American authorities about an infusion of capital.

Citigroup shares tumbled further, ahead of today’s results, which are expected to be horrible.

These falls took the combined value of Citigroup and BoA – so recently the two most valuable banks in the world – below that of Wells Fargo, the conservative West Coast lender.

More…

Jim Sinclair’s Commentary

Madoff lives in his 7.2 million dollar apartment in New York, but this poor old guy is on his own.

Where is your outrage?

93-year-old freezes to death at home after utility firm limits power use
Mon Jan 26, 4:33 PM
By The Associated Press

BAY CITY, Mich. – A 93-year-old man froze to death inside his home just days after the municipal power company restricted his use of electricity because of unpaid bills, officials said.

Marvin Schur died "a slow, painful death," said Kanu Virani, Oakland County’s deputy chief medical examiner, who performed the autopsy.

Neighbours discovered Schur’s body on Jan. 17. They said the indoor temperature was below zero Celsius at the time, the Bay City Times reported Monday.

"Hypothermia shuts the whole system down, slowly," Virani said. "It’s not easy to die from hypothermia without first realizing your fingers and toes feel like they’re burning."

Schur owed Bay City Electric Light & Power more than $1,000 in unpaid electric bills, Bay City manager Robert Belleman told The Associated Press on Monday.

More…

 

Jim Sinclair’s Commentary

Number 29 and 30 on the banks that have not been bailed out and just checked out.

Regulators Shut Two Community Banks
By Joe Adler
January 21, 2009

Federal regulators shut two community banks late Friday—the first failures of the new year—in what is expected to be a busy 2009 for the Federal Deposit Insurance Corp.

First, regulators closed $431 million-asset National Bank of Commerce in Berkeley, Ill., and transferred all $402 million of its deposits to Republic Bank in Chicago. The failed bank’s two branches will reopen as Republic branches on Saturday.

It was followed by the failure of $446 million-asset Bank of Clark County in Vancouver, Wash.

The FDIC said nonbrokered insured deposits at Clark County – which had a deposit total of $366.5 million – will be assumed by Umpqua Bank, in Roseburg, Ore. At the time of its failure, the Washington bank had roughly $39 million in uninsured deposits in 138 accounts, and $117.8 million in brokered deposits. Brokered depositors will be compensated for their insured portion by the FDIC directly, the agency said.

Clark County branches will reopen on Tuesday as branches of Umpqua. The failures commence the FDIC’s resolution activity in a year that most experts believe will equal or exceed the 25 closures suffered by the industry in 2008, when the housing crisis took direct hits at banks’ balance sheets.

More…

 

Jim Sinclair’s Commentary

Birds of a feather flock together.

U.N. crime chief says drug money flowed into banks
Sunday, January 25, 2009

The United Nations’ crime and drug watchdog has indications that money made in illicit drug trade has been used to keep banks afloat in the global financial crisis, its head was quoted as saying on Sunday.

Vienna-based UNODC Executive Director Antonio Maria Costa said in an interview released by Austrian weekly Profil that drug money often became the only available capital when the crisis spiralled out of control last year.

"In many instances, drug money is currently the only liquid investment capital," Costa was quoted as saying by Profil. "In the second half of 2008, liquidity was the banking system’s main problem and hence liquid capital became an important factor."

The United Nations Office on Drugs and Crime had found evidence that "interbank loans were funded by money that originated from drug trade and other illegal activities," Costa was quoted as saying. There were "signs that some banks were rescued in that way."

Profil said Costa declined to identify countries or banks which may have received drug money and gave no indication how much cash might be involved. He only said Austria was not on top of his list, Profil said.

More…

Posted at 3:48 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold appears to have run into resistance near the $920 level which is blocking its upward path for now. Since we know that the funds are purely technical traders and have been buying, both adding new longs and for those who were short, getting out by covering, while open interest has been steadily increasing, it is safe to say that the bullion banks are the ones blocking the upward trajectory. Nothing new there and it does not take much observation for those who have been watching gold the last 8 years to know this.

The inability of the mining shares to continue higher yesterday, even in the face of a much higher bullion price, gave some paper longs at the Comex a reason to cash in some profits and emboldened the bears to dig in their heels.

To show you how fickle these markets have become, do you remember when gold was following the equity markets around not all that long ago. They went down – it went down. They went up – it went up. It was all about the famous “risk aversion” or deleveraging trade. Now the exact opposite seems to be happening. The equities go up and gold goes down. Well guess what they have come up with to now explain this turn of events? Yes – risk aversion!

Here’s the latest – equities are going up because supposedly some of the news from the banking sector is not as dire as many have come to expect. The bearish sentiment in the equity markets is misplaced. Gold has been going up because of banking sector fears and currency risk. Ergo – gold should now go down as those fears are overblown because the risk averse psychology has become too excessive. In other words – all’s clear and the water is just lovely so dive on in!

I could not make this stuff up if I tried.

Had enough – how about this one?  – Gold has now broken its relation to the Dollar. The fact that the Dollar was being bid up was evidence of a panic into safety. Now that the Dollar is going down it means that the panic is subsiding. Therefore gold should go down as well which means the inverse relationship between gold and the Dollar has been severed.

Again, I am just repeating the latest mantra du jour.

Just wait and see – when gold starts going up as the Dollar starts going down the same guys who came up with the latest explanations will be singing how the historic relationship between gold and the Dollar has been restored once again. No matter what happens – they will have proven to be right! Geniuses all!

It reminds me of the global warming crowd. When droughts were springing up and record highs were being shattered it was called global warming. When record snowfalls suddenly showed up and record lows were being set as people all over the globe freezing their keisters off,  it morphed into climate change. No matter which way the temperatures go, that crowd will always be right! Shame on you climate destroyers for not cramming your family into something that more closely resembles a go-kart rather than an automobile on your assorted trips around town. If you had any concern for the planet you would be riding a horse to work. Then again that creature gives off methane gas which is actually being seriously considered as a pollutant and thus liable to be taxed by the idiots in Washington DC, so no matter what you do, you are royally screwed. It’s too bad that there remains no undiscovered country where freedom loving people who believe in honest money and limited government could sail off to and found a nation where the money changers and government control freaks would be banned from entering.

By the way, did you notice that the new President just signed the death sentence for the US automotive industry yesterday by mandating new mileage efficiency standards – all in the name of saving us from a problem that does not exist? Yep – nothing like telling an industry already on life support that their most profitable units, the bigger and safer vehicles, will have to go in favor of smaller, less profitable ones. Don’t touch the unions however whose demands have forced the US auto industry into concentrating their efforts on the more profitable lines (the larger vehicles) in an effort to offset the financial drain imposed upon them by the exorbitant salaries and benefits that they are forced to pay these same unionized workers.

Remember that big move up in Copper yesterday? Remember how the existing home sales number ran all the shorts out and pushed the market right into technical chart resistance threatening an upside breakout? Well, that is history today as it went “KERPLUNK”! To show you how utterly insane these markets have become and the farce that the hedge funds have turned them into, consider this – Copper closed at 1.4720 on Friday. On Monday it rallied sharply blasting upwards closing at 1.5865 reaching a high of 1.6310. Today it collapsed making a low of 1.4545 and closed at 1.4850, down 10 cents a pound. In other words, it went NO WHERE in TWO DAYS but in the process it careened all over the place blowing out upside buy stops before triggering a wave of downside sell stops today. And to think this hedge-fund created madness has become the price discovery mechanism by which commercial producers and end users are somehow supposed to be able to enter into contracts and hedge risk to ensure profitability. I have been watching these futures markets for more than 20 years and I have never seen such idiocy. This is what happens when computers have taken over trading decisions based on nothing but the latest price tick. I know it sounds excessive to some, but I honestly have come to believe that the entire futures industry is very close to being destroyed by these out of control hedge funds. A commercial entity simply cannot use these markets to hedge and without commercials these markets cannot survive since they will serve no useful purpose whatsoever as all that will be left is hedge funds trading their algorithms against the algorithms of other hedge funds with the commercials using forward contracts amongst themselves and bypassing the futures markets altogether.

Back to gold – technically gold still looks very good although it has stalled just below the $920 level. Ideally, it would hold support on any subsequent RE-test of the Downsloping trendline of the wedge formation on the weekly chart which is drawn off the July and October highs. That comes in near the $880 level. I would prefer to see it consolidate above the $880 level but would view an ability to hold above the $870 level as still friendly. Failure at $870 would give the shorts enough impetus to try to shove it back to $850- $840.

Upside resistance remains near $920 while more formidable resistance comes in near the $945-$950 region. That corresponds to both Downsloping trendline resistance drawn off the peak high made back in early 2008 and the July high which also happens to be the highs made back in October last year. Those are the parameters we are working with technically.

On the daily chart, all of the major moving averages, including the 100 day moving average are all now trending solidly upwards. The 10 day is close to making a bullish upside crossover of the 20 day which will give some trend following funds a reason to buy while the RSI remains below the 70 level. So we have room to run to the upside IF, and this is a big IF, the market can push through the bullion bank selling near $920. The inability of the mining shares to continue moving higher does concern me however. In an ideal bullish environment for gold, the shares move higher alongside the bullion price.

It looks to me like the weakness in crude oil today is contributing some downward pressure in gold as many of those fund algorithms use its price action as a factor in their selling or buying of commodities. Weaker crude oil prices give rise to the deflation scenario and that still leads some to sell gold because of misguided notions of how it will perform during periods of general price deflation. Again, gold is primarily a currency – not a commodity, and it will rise when faith in paper currencies falters, all of the arguments of the deflationists notwithstanding. When governments slash interest rates to NOTHING and issue more and more paper IOU’s, the sheer supply guarantees that they will lose value meaning that investors seeking wealth preservation are buying scraps of paper that pay zero return and lose any “value” that they might have once possessed. Gold thrives in such periods as it is solid, substantial and cannot be diluted by conniving Central Bankers. Which would you rather have in your hand during times of financial chaos and upheaval – a promise by a politician or a metal which has stood the test of 6,000 years? If you have any problem making a decision, I suggest you take a good look at the price chart of the British Pound and especially the price of gold in Sterling terms.

The HUI and the XAU were unable to manage strong closes above their former double tops make back in mid-December of last year and early January of this year in yesterday’s session meeting up with selling from the opening bell and never quite being able to shrug that off. Still, their charts look good as they are consolidating right around that former double top. I would like to see them hold above the 10 and 20 day moving averages near the 115 – 116 level in the XAU and 279 – 282 in the HUI.

Bonds finally saw an up day today which is to be expected given the beating that they have taken of late. The downdraft in bonds could be called “parabolic in reverse”. Jim likes to call it a “waterfall”, which is an apt description considering the fact that if one were long while this has occurred, they have indeed taken a bath in their trading accounts or better yet, drowned under a sea of red ink.

The Dollar is generally weaker today although it has bobbed back and forth between a small gain and a small loss. The charts still appear to show a technical failure near the 88 level. It is treading water above the 50 day moving average (barely) while the 100 day lies near the 83.50 level. A breach of that level and it should move back down to retest 80.

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 3:28 PM (CST) by & filed under General Editorial.

Money_Page1 Money_Page2 Zimbabwe1 Zimbabwe2 gold - 20090127_081348

 

Dear Friends,

They say this is impossible and will never happen in the West. The transition however is clear and common to all experiences of hyperinflation – a currency event whose foundation is in the sand of weakening confidence.

Money:

First is a contract between the issuer and holder as in the gold certificate. Then it is a piece of paper whose amount outstanding is politically motivated that promises nothing and contracts for less.

a. In Zimbabwe there was a transition from reputable management to special interest favouritism. Such a change has been considered by many as an example of Fascism.
b. In Zimbabwe government income was non-existent when compared to government expenditures.
c. In Zimbabwe the military became the favored industry for government spending.
d. In Zimbabwe all the economic initiatives failed miserably.
e. In Zimbabwe there are rumors of bank and public fund looting.
f. In Zimbabwe economic statistics are unreliable by many.

Could such a thing occur in the West or has it already? If it could occur or has occurred it swamps anything that ever happened in any previous example of hyper-inflation, a currency event based in the weak foundation of confidence.

The conclusion is clear. Gold is the only Honest money there is, has even been or will ever be.

Respectfully yours,
Jim

Posted at 1:42 PM (CST) by & filed under Jim's Mailbox.

Folks,

Mr. Sinclair often communicates in something I refer to as "Sinclair speak." He’s telling us quite a bit below. First, gold will re-enter the monetary system. Second, the implementation of the mechanism to accomplish this will result in STABILIZING the gold price at a new higher level… there will be no "crash." Finally, in the future, gold mining entities will be viewed as "utilities" and will pay dividends. How would you like to own something configured to take advantage of these eventualities?

CIGA Frank

"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.

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

Dear Frank,

You are totally correct!

Jim

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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