March 20, 2013 New York City, Meeting with Jim Sinclair
Dear friends and clients of AFE,
Yesterday Jim Sinclair spent over 5 hours in a question and answer session in New York City. He covered the implications of Cyprus proposing to confiscate as much as 10% of depositor wealth directly from bank accounts, as well as his views on a wide variety of subjects related to gold.
Mr. Sinclair is a 50 year veteran of the gold markets, and one of the most respected voices in the gold community. While we do not always agree 100% with Mr. Sinclair’s views, my personal observation is that he is genuinely concerned for the well-being of others when it comes to wealth preservation through gold.
What follows is a summary of what Mr. Sinclair had to say on these issues. Please bear in mind that this is being re-constructed from hand notes. If a phrase appears in quotes, it is verbatim, otherwise I am paraphrasing.
According to Jim Sinclair:
The announcements that Cyprus put forward a proposal to force depositors to pay for bank bailouts directly has created a global uproar, and the backlash will have a substantial effect on the gold market. Sinclair considers this a major turning point in the gold market, and herald’s gold’s next major up leg.
Sinclair’s comments on various gold related subjects:
There are three phases left in this bull market. Now-2014, 2015-2017, 2018-2021
“As long as the price is made in the paper markets, the supply is infinite”. “Gold will only recognize its true value when the physical price (versus paper) is making the market”.
GOLD WINDFALL TAX:
In this environment taxes are going up across the board, it is difficult to project what the government will do on that.
During the last confiscation in the 1930’s gold was the QE at the time. Nixon needed to expand the money supply and had to use gold to do it because QE wasn’t available to him at the time. I do not consider another confiscation likely.
GOVERNMENT CONFISCATION OF MINING RESOURCES:
“Yes it could happen. It depends on the wisdom of managers to share the bounty with the government as to whether they are a partner or not”.
PERSON ASKS QUESTION AND PREFACES WITH “I AM IN THE IF YOU DON’T HOLD IT YOU DON’T OWN IT CAMP, WHATS YOUR VIEW OF HOLDING GOLD OVERSEAS”:
“According to the way I have done it, I don’t have an ounce of gold here, its all in Africa.” “Gold you have should be stored internationally”. “For storage you don’t want anything cheap or easy, that doesn’t exist”.
“Ratios are all 20/20 vision in hindsight. Keep what you have don’t sell gold for silver or vice versa”.
CORRUPTION IN THE FINANCIAL SYSTEM:
“The financial system we live in now is comparable to Sodom and Gomorrah, only Sodom and Gomorrah was probably a lot more fun”. “Finance is now a criminal enterprise”.
“FDIC gives us comfort, but does not function in a systemic crisis”.
IRA’s CASH OUT OR KEEP:
“Cash out, take the tax hit”. “If QE fails the next large pool of money they have easy access to are pensions and IRA’s.”
If the USD goes to 72.00 or below, the Fed may cease QE and go directly after pensions and IRA’s
“If it happens it will be short lived and violent. Approximately 3 months in time frame”.
“We will have a virtual reserve currency”. “The new reserve currency will be a worldwide M3 ratio versus gold held by central banks. This will be marked by the market versus the government”.
GOLD PRICE MANIPULATION. ARE THE MEN IN THE ESF, CFR, ETC MANIPULATING THE GOLD PRICE LOWER?:
“As we would be if that was our job and motive”. “My dogs could figure out this is a manipulation”. “Economics schools today teach that gold is competitive to the control of currency”.
ON STATES MAKING GOLD LEGAL TENDER:
“States making gold legal tender is fine, but if there is no system to support a transaction it’s not practical”.
GOLD PRICE DROPPING AS IT DID IN 1980:
“We will not see a price drop like we did in the 80’s, the entire paradigm is different”.
REASONS TO BAIL OUT OF GOLD:
“The only argument I can see to bail out of gold would be the legitimate end of QE”.
ON TIMING AND PRICE:
“Anything below 3500 is a buy. Anything above 4400 is a sell”.
RAISING CAPITAL FOR MINING COMPANIES:
“Any attempt to raise money issuing stock in these capital markets is a suicidal move”. Jim goes on to explain additional capital raising with TRX will be by sales of gold not stock.
“Attacking Iran is attacking other nations, big nations”. “This does not look attractive today.” “China recently surfaced two submarines in a US Navy Carrier group, undetected. This means they can also surface off the coast of the US undetected and fire nuclear weapons if they wanted to”. “The use of the dollar in trading energy (oil) is paramount to the strength of the dollar.” “The move in energy trading is away from dollars”.
3 PHASES OF A BULL MARKET:
“By all historical measurement’s, we should be approaching the final phase of this bull market”. “Keep in mind we are living in a false economic world today”.
Unless there is a ready market to buy it back, you are probably better off buying well known coins.
“I think China will shoot for a 15% reserves position in gold”.
Please keep in mind that while we have published these comments for the benefit of our clients, there are some areas we may disagree on (for example, confiscation of gold).
If you are unclear about any of these subjects, we are happy to discuss them.
With kind regards,
Chief Market Strategist