Jim Sinclair Loses It
NOTE: Posted for Metal Augmentor subscribers on November 12, 2009 at 9:30 P.M. EST.
In a demonstration of just how insular some of the thinking can be in the gold camp, today Jim Sinclair made a ridiculous commentary regarding the Obama White House’s initial efforts to reduce the size of the $700 billion TARP fund. Here is what Sinclair said:
TARP to reduce the Budget Deficit is quantitative easing to infinity because they are not buying their own bonds. They are creating money to credit the budget deficits.
There has never been a more inflationary scenario in the history of currency. Trader Dan expresses his opinion on the subject at hand.
Guys,
Take a look at the following story…
I am past the point where I read in disbelief anything that this administration is capable of but this is so stupendously asinine that I could not resist sending it out.
If you sweep aside all the BS contained in the article, the crux of the matter is that these hucksters are so out of control and infatuated with their spending, that they now think it is fiscally responsible to print money into existence, saddling this plunge the nation further into debt to create the TARP program and then use the TARP money to reduce the debt and somehow can congratulate themselves for being fiscally responsible???
Once upon a time the rallying call of these drunken spenders was “raise taxes on the rich” to fund their redistributionist schemes. Now it is “raise taxes upon those who are not yet born” by destroying the currency.
With this sort of idiocy now being considered as responsible policy, gold’s target price is moving higher and higher.
These moronic comments were made in reaction to a report by the Wall Street Journal as regurgitated by Fox News:
The Obama administration, under pressure to show it is serious about tackling the budget deficit, is seizing on an unusual target to showcase fiscal responsibility: the $700 billion financial rescue.
The administration wants to keep some of the unspent funds available for emergencies, but is considering setting aside a chunk for debt reduction, according to people familiar with the matter. It is also expected to lower the projected long-term cost of the program — the amount it expects to lose — to as little as $200 billion from $341 billion estimated in August.
The idea is still a matter of debate within the administration and it is unclear how much impact it would have on the nation’s mounting deficit levels. Still, the potential move illustrates how the Obama administration is trying to find any way it can to bring down the deficit, which is turning into a political as well as an economic liability.
The White House is in the early stages of considering what bigger moves it might make for next year’s budget. The Office of Management and Budget has asked all cabinet agencies, except defense and veterans affairs, to prepare two budget proposals for fiscal 2011, which begins Oct 1, 2010. One would freeze spending at current levels. The other would cut spending by 5 percent.
OMB is also reviewing a host of tax changes. The President’s Economic Recovery Advisory Board will submit tax-policy options by Dec. 5, including simplifying the tax code and revamping the corporate tax code.
Please allow me to break this down for those poor folk who have substituted Sinclair’s dementia-tormented logic for their own thinking. The report is basically saying that the Obama administration is considering a reduction in the TARP by several hundred billion dollars, which would result in the retiring of an equivalent amount of government debt (or at least a reduction of future debt issuance). Moreover, the report also goes on to state that President Obama is asking most government departments to prepare budgets for next year under two scenarios, one with a spending freeze and the other with a 5% cutback.
But let’s not let the truth stand in the way of the dollar bears and gold “to da moon Alice” crowd from twisting it around to claim this is yet another tragic sign of the death of the dollar. A number of blogs have basically missed the entire point of the report in their frothy self-indulgant rant against the “socialists” in charge of the “U.S. Empire”. I’m sure there will be plenty more to come from the “experts” who will join in the misinformed chorus. We caution that you should listen to these experts and pundits at your own risk. From our perspective, this report is actually dollar bullish and gold bearish, assuming of course that the political willpower is there to pull it off. We suspect it has little chance of happening because there is no economic recovery in sight, but at a minimum the talk is encouraging in that it shows a recognition at the highest levels of the U.S. government that the budget deficit is a critical problem. Misunderstand these signals at your own risk.
Another dollar bullish and gold bearish report out of the White House is that President Obama has rejected all proposals calling for an escalation of troop levels in Afghanistan. This report has raised hopes that a rational foreign policy might be forthcoming now that the President has nearly one year in office under his belt. Again, misunderstand this signal at your own risk.
In a coincidental appendage to this post, we are hereby re-affirming our red flag for precious metals in the speculative short term (under three months) after reviewing a number of factors including the gold and silver basis, silver and precious metal share prices, open interest in COMEX and other futures, macro-economic conditions, market sentiment/complacency, as well as a number of other factors.
Tom
What’s your take on the tungsten “gold” bars story?
I’m inclined to agree with J.Willie that it will motivate a lot of vault inspections/audits and assays.
The question is the actual quantity and source of these bars.
Assuming the quantity is indeed large, what effect would this have on confidence in gold markets?
TARP is a sideshow.
But nice point Tom.
I posted this at http://forums.silverstackers.com/post.php?tid=480&qid=3947: “Thankfully Perth Mint gets its gold from AGR Matthey so it is OK. One problem with the Kriby theory however is that it assumes that all 400oz bars just sit in vaults and are never actually used. He fails to consider that some of it must get turned over and thus end up in the hands of users (eg jewellers, mints) would would quickly find out it is dodgy. If you sell these dodgy bars into the system, how do you then control/track them to make sure they are never resold/delivered to an actual user?
FYI, one theory at the Gold Standard Institute conference in Canberra was that the tungsten rumors were part of the conspiracy as they would dissuade people from buying physical gold, but this would mean that Kirby is therefore a double agent and part of the conspiracy :)”
See also http://www.prisonplanet.com/the-rumor-about-london-good-delivery-gold-bars-that-are-allegedly-filled-with-tungsten.html
Kirby a Double agent….LOL…thats a riot. Anyhow, we know the biggest COUNTEFIT OPERATION in the world is the US TREASURIES. You don’t have to get them assayed or inspected. If anyone believes there is any worth in those WORTHLESS PIECES OF TRASH you might want to get an MRI on ones brain stem….they far outweigh the amount of so called “SALTED GOLD BARS”. There will be a great AVALANCHE of people out of US TREASURIES and probable default.
Today, many still think the US GOVT is there for the benefit of the people. This FACADE has been erased especially in the past 2 decades. I am looking forward to when the BIG LEADERS in GOVT and FINANCE get taken to jail and have to deal with new COURTS to put these bastards away for good.
I believe the USA will be a much different place in 6-12 months. Those who still cling to a US DOLLAR BOUNCE and US TREASURY SAFE HAVEN….will probably be the ones crying to most when the dust settles. You know the old saying…..STUPID IS….STUPID DOES..
WOW silverax is starting to sound like Nadler
Well on the tungsten bars my own theory is that Kirby and a few others are (in some case unwitting and other case fully aware) agents of some funds and foreign banks that are making a squeeze play on the gold market and in particular gold futures (COMEX and elsewhere). The idea is to get enough gold bullish stories out there that keeps the longs confident at least past Dec. option expiration and into contract delivery.
Specifically on the tungsten bars Bron makes an excellent point that many of these bars get taken off the market so the first time there is a tungsten bar, it would be a huge deal and basically force a major physical audit.
There are two other things to consider that make Kirby’s story total BS however. The first is the good delivery certification into LBMA warehouses is actually quite rigorous. A bar must either come from the refiner directly or it is subject to assay (a sample is drilled and some bars in an allotment may actually be melted down). Once a bar is within the LBMA system and assuming it never leaves a warehouse, it does not need to be re-assayed. This makes the possibility of tungsten-filled or underassay gold (e.g. 99.3% purity instead of 99.9%) virtually impossible. There could be one or two bars out of 1 million but certainly not a large number. The other thing that stinks about the Kirby piece is that he talks about LBMA warehouses in the Far East but to my knowledge they are pretty much all located in London.
The other thing here is that bullion warehouses and others who deal with a lot of gold have some very sophisticated proprietary testing non-destructive methods that are applied to gold that passes through the system. For obvious reasons these methods are closely guarded secrets and not known to the public but if you look hard enough you can find reference to technologies employing heat (tungsten and gold have a dissimilar coefficient of heat expansion), ion diffusion detectors, electrical conductivity and resonance tests, etc. It’s not like the gold industry didn’t know before Kirby came along that tungsten substitution is a serious possibility!
Squeeze play, foreign banks..
Things have changed in gold.
Good point about certification of bars.
However, private warehouses might be vigilant,
but what about our own beloved Fed/treasury?
Bars that never see the light of day.
There is no credible basis to suspect anything with the Treasury gold — we are to believe Kirby was given documents showing tungsten was shipped to Ft. Knox? So they painted them gold right there on site? And were so careless about it that shipping documents showing the tungsten are being circulated between people on the Internet?
Not a good argument.
One does not need proof to distrust obvious crooks and to SUSPECT fraud.
Especially where the light don’t shine.
One only needs proof to prosecute.
A lot of incredible things were said to have occured during Clinton that were often dismissed as being too outrageous and without credible basis.
I am surprised by nothing.
Our nation seems to have evolved to where citizens are guilty until they bankrupt themselves trying to prove their innocence.
But our “leaders” are readily excused for lack of evidence or “credible” witnesses.
It stinks.
Should be the other way around. BE SUSPICIOUS
@BarbarianWho
Try this then –
I’m suspicious when things look too obvious like obvious crooks.
I look for answers not where I expect them to be but where they don’t expect I will look.
I don’t need to be told who or what is credible because I use the process of elimination.
I am surprised by everything because otherwise life is too boring.
I assume those proclaiming their innocence are guilty because the innocent don’t proclaim the truth, they reclaim it.
Suspicion is no badge of wisdom; if you can confirm it but don’t, you’re being lazy, if you can’t confirm it but try, you’re being obstinate.
Oh, I don’t know.
I would not habitually discount the “obvious” ALL the time. The problem with that is, what is obvious to you might not be obvious to most others. You might actually be seeing reality.
Every criminal makes mistakes, or neglects something. Every fraud leaves a trail of sometimes obvious clues.
Process of elimination is a good process, but its employment does not ensure that you’ve reached the right conclusion. One error along the way and you’re lost. The logic used at every step to eliminate something must be sound.
You are (skeptical) of the too obvious. I believe (that) is what you meant to say when you used the word suspicious. Sure, me too.
I wanted to make the point though, that we MUST be very suspicious now of the PEOPLE IN POWER irregardless of the veracity of rumors. Our suspicions should NOT be restrained by skepticism of the “facts at hand.” Guv is a beast without feeling. We are under no obligation to trust it. We do not have to be concerned about its rights, feelings or self esteem – only ours. Despite your skepticism of the “facts” the pressure on guv to demonstrate integrity must not be lowered.
We need to stop playing this “hide and seek” game – where they hide and we seek. That’s BS.
The presumption that the public has to define the crime and prove it really bugs me. The burden of proof regarding guv misbehavior should NOT be on the public - we’re all spinning our wheels. It’s damn difficult to make a “credible” case against those in guv.
It is an inappropriate role reversal.
We’re supposed to be the BOSS. Not them.
We’re a bunch of pussy bosses and they know it.
Show us the gold.
“Get your ass into my office and show me what the @*$k you’re doing. And it better be straight-forward clear language and data - or you’re out of here!”
If you suspect something amiss, then call them in to demonstrate convincingly that they are honest.
The mindset must change. We’ve let this dog eat off the table for too long.
The tungsten story is an interesting “possibility.” To me it makes no difference to my investment strategy. Counterfeit fraud - nothing new there. For other people that might be different and they would want to verify the story.
But I say the guv should step up.
I really do hope you are not “surprised by everything” Tom.
I’m guessing you were busy or distracted when you wrote that.
I prefer NOT to be surprised by bad things. A bunch of hissing snakes lurching from a dark place is not my idea of excitement.
You said, “Suspicion is no badge of wisdom.”
I say, when is comes to the SNAKES in suits with a history – SURE it is.
And, “confirmation” of a suspicion is irrelevant to the act of suspecting.
When you confirm a suspicion, it is no longer a suspicion by definition.
Just a quick thought on the continued shorting of JPM on silver contracts. Once a thief always a thief JPM and the s.e.c have already done a deal. Another fear driven stock decline is coming at which time selling of of pm’s are going to let JPM and the boys cover thier shorts. Then the good part!!!! SEC announces the short contact limits, but not before JPM and the thieves have gone big time long on silver bullion. Wa la they cash in big time. Is it possible ??????
As I stated, who really cares about “SALTED GOLD BARS” when you have the US TREASURIES which are the biggest COUNTERFIT OPERATION in the world today. Tom has given Jim Sinclair some criticism. Sure…maybe Jim is a TAD BIT over the edge on certain remarks, but let me also say:
JIM SINCLAIR was one of the most successful GOLD TRADERS in the 1960-80’s. He learned from one of the best stock market traders ever….and that was from his father BERT SELIGMAN. BERT used to trade 10% of the total NYSE volume in his day. He also invented what is now called NASDAQ. Furthermore, BERT was friends as well as a partner in deals with another famous stock market trader, JESSE LIVERMORE.
JIM SINCLAIR is now CEO of TANZANIAN ROYALTY EXPLORATION (TRE). Not only is he running TRE similar to the old fashion style of HOMESTAKE MINING, TRE is designed as a ROYALTY COMPANY. Many of the LARGE CAP STOCKS today have derivatives attached to their balance sheet that killing their balance sheet. Look at CDE for example, they had record production and revenues, but stated a $23 million loss due to derivatives.
Given these kind of ACCOMPLISHMENTS, sometimes we need to think about which individual to put more weight when it comes to OPINIONS, CRITICISM and REMARKS. Does this make any sense???
I’m still waiting for $580 gold and that washout low for oil in the $20’s…. From the guy who said the Fed was bankrupt, I’d expect a bit less condescension…at least until your track record inproved a bit. I like the site, but am completely baffled by the tone of the attacks, especially against a guy who has steadfastly stood by his long term predictions, and is looking, at the moment, to be completely spot on.
I trust everybody has been reading the articles by John Galt on the day the dollar died. This is more than a plausible possibility.
In fact, the whole basis for my bet with Tom of 55% unemployment by April 30, 2010 is based on just this outcome.
The USD is the most abused fiat curreny in the history of humanity and has little time left. The only difference between a pure fiat currency reaching its intrinsic value of zero is time.
Joe M.
I just skimmed through Jim Willie’s new article and while I’d agree that some of his claims are laughable; again with the ‘gold explosion’ for about the 10 to the power of a billionth time, though he may be right this time, I think he does have a point with the ‘tungsten bars’.
Debasing the coinage is a scam as old as history, the London Bullion Market is (as far as I know) the largest market for monetary gold. Is it such a stretch to believe that the coinage is being debased? Its been done before & will be done again.
I didn’t say anything about Sinclair’s track record, I said he has become so insular and single-minded that he misinterprets a reduction of the bailout as an extension of the “drunken spenders’ idiocy”. What he should have said is, yeah they might not be using all $700 billion of the TARP funds now, but they’ll be using that and more later. So to break it down for you . . . I wasn’t attacking the message, I was attacking the insular nature of ABSOLUTELY EVERYTHING BEING BULLISH FOR GOLD, which has become a hallmark of Jim Sinclair the past two years. You can listen to him at your own risk but I suggest you recognize that he is in a position, as Chairman of a gold royalty company, to never be bearish on gold.
@BarbarianWho
It was tongue-in-cheek but thanks for the thorough analysis anyway!
@SRSrocco
I read Jim Sinclair now mostly as a contra-indicator but I’m getting bored because he hasn’t had any new ideas in about 2 years. He is apparently never wrong.
Ain’t gonna happen, the Fed would have to be declared officially bankrupt first, yet here we are more than a year after I claimed the Fed was de facto bankrupt and there isn’t any recognition of it, not even by the most wild-eyed conspiracists. Even the middling details are taking much longer to play out than I would have thought, which is great if you trade but sucks if you buy-and-hold.
The thing about the John Galt “fantasy” (wet dream?) is that the U.S. dollar wouldn’t go out like that — money flows and the import-export equation would prevent a move of that magnitude from happening. Even in the worst contra-cycle of rotating out of massive FX positions like the Yen (involving probably hundreds of billions in dollar-equivalent trades being unwound in days, even hours) there was no crash requiring bank or market holidays. Keep in mind, a decline in the value of the dollar in such big chunks would allow dollar-debts to be liquidated en masse and thus the dollar’s reserve position would actually strengthen. Moreover, this idea of bank holidays is trite and antiquated, it’s just not going to happen.
All that said, a similar scenario to what Galt describes could possibly happen, just not in the dollar. The premise would be that Dubai started a domino reaction that circles the world to punish markets that have the greatest over-leverage and over-capacity. The biggest domino in that chain is actually China.
@Joe M.
actually it is worth less than zero, zero at this point would be a good thing, let me throw this out there- if the usa is regulating private companies with assets… what would stop china from seeking legal reparations on government owned assets, think mining rights, oil, land, etc. What happens if you borrow money for a house and don’t pay the loan? they repossess the house.
@james
China permitted its state owned enterprises to renege on oil and other derivative contracts so “legal reparations” aren’t in the cards. In any case, the Chinese hold Treasury securities that are to be repaid with U.S. dollars when they mature. It doesn’t say the dollars must be “worth” X and there is no security backing for them. At least if the Chinese held mortgage bonds they could potentially keep the houses but with U.S. Treasury securities they get nothing but dollars back. The Chinese made this choice, nobody was holding a gun to their head.