GOLD

[G0ldfinger]

Has Bernanke entered the room? They've just hit the PMs hard again...

Isn't it funny how cheap $957 gold suddenly looks? I am really tempted to buy.

[G0ldfinger]

Evening all, hope you have had a good day so far.

 

I'm just about to have a look at the Dow. Seems a little poorly to me.

 

The Dow indeed looks pretty poor indeed.

 

[G0ldfinger]

Wow this drop is relentless, large volume and no relief rally. Can't help but feel we're close to the bottom now though, maybe 950 will do it. Horrible day for miners as well.

Looks like Cartel's Last Stand to me.

[Billy]

Oh, I read somewhere that he was due to speak again at 7:30pm or something. Perhaps I've misinterpreted something along the way.

 

Oh well, thanks for the heads up in that case...

 

 

 

And it's mostly been a down day price wise...

 

 

Yes he spoke earler to the comm bankers but CNBC have been saying he is due on later - still waiting.

[Billy]

I've found some analysis of Jim Sinclair's recent speech - will post for posterity in case the original site disappears.

 

Point # 1: “This is It.”

 

We have sometimes questioned exactly what Jim means by this. He said that he has been aware for years, and has discussed with us, inherent flaws in the financial markets, and the impending turmoil that was inevitable. Credit and debt are the foundations of our economy. Due to complex fnancial instruments, (derivatives, aka SIVs,) expanding beyond all logic and control (they are unregulated) we have entered unchartered financial waters in recent years. These are unprecedented conditions. The systemic dislocations have never been this great. Neither he nor any of the people he has been educated by, past or present, have ever witnessed anything of this kind. Now the credit markets have broken down with no viable solution for fully repairing the damage, and the damage is spreading from one financial asset class to another. This is the peril that he foresaw happening, and he knew that gold would benefit and protect its owners when this scenario unfolded. Once the credit implosion began he alerted us that “This is it:” the peril he had expected was now a reality.

 

Here is a simplified example of the way derivatives play out: As Jim has said before, these contracts are structured so that the performance of the contract is dependent on the solvency of the person who is on the losing side of the transaction. I.E. this is already a flawed “investment.” He says that if you were to buy a soybean contract and the investment went against you, you would get a margin call. In derivative contracts, however, there is no margin call. The investment simply goes against you, and suddenly trucks start arriving, dumping loads of soybeans on your yard. And you are obligated to pay for them, even though you don’t have the money. While this may be a bit of a simplistic example, Jim said it gave the general idea of how these transactions work and what a hopless mess is created.

 

Jim says that derivatives at this point are basically all “busted” and many have been for a long time, plus they have no real market. The grantor and grantee are the only parties who can “take off ” or liquidate the contract, but in most cases the originators have resold the derivative to other people, who may have in turn done the same. He says the inventors of the OTC derivative in 1992 were eventually jailed, as the transactions were deemed to be illegal and fraudulent, as too little money was creating too large a sum for the “investment.”

 

I am not sure how we moved to the place in the financial world where these instruments were allowed, and actually sanctioned, based on the information I have provided above. Either Jim didn’t explain that, or I didn’t catch that part. In any case, SIVs are little better than a ponzi scheme, and now the genie can’t be put back in the bottle. A lot of “investors” have the proverbial yard full of soybeans and the trucks are tooting a merry salute as they drive away!

[Justin Thyme]

So FP isn't the owner then fair enough, but someone is.

 

The owner of HPC is one Brendan McLoughlin.

 

Financial Planner is a very active poster on this board. he's recently turned relatively bullish on the US banking sector and if not bearish then certainly less bullish on gold. His opinions are his own but i don't think he'd change his opinions for a "bung" . . .

[Billy]

BTW this is at goldtent.com

 

Point # 2: Consolidation of the Mining Industry

 

This is one of Jim’s main points that we at the tent have found unclear. He worded this matter yesterday in such a way that it is obvious he does not mean that Barrick will gobble up every single mining company and own them all. His wording was “all companies of interest who are willing to be taken over.” This, of course, makes most sense. Barrick will not want every mining company, and the shareholders of many mining companies won’t want to be absorbed into Barrick. Nothing was said as to whether he recommended owning Barrick stock. He reitterated, however, that at the end of the game it would play out like the Ashanti case. I am not sure I completely understand the following concept, or how this works, so feel free to jump in and clarify: shareholders would receive delivery in kind, or it would be settled more likely in cash and shares. While I am ignorant about this mechanism, he made it clear in person as he did on his website that the shareholders would have made a lot of money by the time the owners of the Barrick hedges called “game over.” If I understand the matter correctly, these ”longs” on the other side of Barrick’s hedge obligations, would then own the company and would henceforth own and control all future production. Which brings us to Point # 3 . . .

[Billy]

Point # 3: Stable High Gold Prices are part of the End Game

 

If anything at all could be considered the crux of Jim’s message, it would be: You are playing on the winning team. Gold wins in the end.

 

While it has felt to us as gold investors that we are swimming against a tide, and that those at the top of the “global food chain” hate gold and are trying to depress the price and destroy it, that is not the case. The scenario that is playing out now, with gold coming back as the form of wealth revered throughout the centuries, has been slowing unfolding over a period of years. Jim prefers not to think of it as a conspiracy, although he admits that most of his friends use that term, but he calls it taking advantage of opportunity. The financial “paper-based” world has structural flaws, as we all know. It is logical that the smart money people, at the top of the global pyramid of power, would find a way to isolate themselves from the destruction of fiat money markets. They know that the U.S. dollar is on life support, and there are large investors and nations who are trapped, holding vast sums of dollars around the world.

 

The end game is a shift from inflated “paper” financial assets to real assets. As we all know, China, India, and the other developing nations around the world will continue to require natural resources - minerals and metals, for a very long time. Paper assets are no longer the road to wealth, hard assets are. One very interesting and somewhat surprising point that Jim made, was that gold was not the entire focus in this plan. All minerals and metals are being targeted by the people at the top of the financial pyramid. Obviously gold plays a special role in that it is “money” as well as serving its other roles.

 

So while it may seem that we have been fighting gold opposition, the opposition does not hate gold, and are in fact positioning themselves to own as much of it as possible, not only the above ground supplies, but more importantly its future production as well as the future production of other minerals and metals. Naturally, at that point, they wouldn’t want the price of gold to plummet back to $250 or $500 an ounce, would they? Which leads to point # 4 . . .

[Billy]

# 3, the game is to make money (profits) in paper, then to convert to hard assets before fiat money collapses.

 

The mechanism that will eventually halt the continued devaluation of the dollar will be what Jim calls the Gold Certificate Ratio. If I understand this correctly, once this financial mechanism is instituted, it will be a ratio relationship between US gold holdings verses the amount of US dollar debt held by overseas entities. (Jim was asked how anyone knows just how much gold the US actually holds, and his answer was that it will be whatever we say we still own, as it has not been audited in years, and will never will be, but this will be accepted.) The ratio will not be tied to interest rates as in the past, but to the money supply. While the amount of debt may not be fully transparent, Jim seems to feel that it can be estimated accurately enough, and that a contract will trade on global exchanges that is based on the gold/debt ratio. This financial vehicle will arrest the decline of the dollar, as the price/value of gold will change to reflect changes in debt levels. He believes that the price of gold will remain reasonably close to whatever price it is trading at when this new policy is instituted. The price may range from $50 to $200 an ounce, either way, which is potentially a range of $400/ounce, but at a projected price of $1650.00/ounce when this happens (or higher) this is still a pretty high gold price. The main point being that this mechanism insures that the price of gold doesn’t drop off a cliff as it did in the 1980s. It will remain reasonably stable and quite high.

 

Jim states that it is in the interest of the people who hold vast sums of dollar denominated debt, with no practical means of unloading it all, to eventually stop the dollar’s decline and to resussitate the dollar to improve the value of their dollar holdings. His target for the institution of the gold certificate ratio is around .52 on the USDX index, and he believes that the dollar will eventually trade back to around the 72 to 82 level.

 

As a personal aside, I have read the works of Another and Friend of Another, aka FOA, in the past, and these individuals had many ideas of how the gold markets would evolve, and how price movements of gold and oil were interrelated. Many of these concepts have played out, but some have not. One of the scenarios put forth that did NOT occur was: Entities like Barrick with huge hedge positions that were “under-water” as the price of gold increased (somewhere between $350 and $400/ounce), would “blow-up.” At that point it would be discovered that most of the gold traded today is only “paper gold” contracts, not backed by actual gold, like fractional banking where there is very little cash actually backing the debt/money created into existance. When this became evident, the Comex would seize up and stop trading, and gold would be revalued upward in the many thousands of dollars. The problem I always had with grasping this scenario, is that I found it hard to believe that ”smart money” would allow themselves to be trapped like rats on the wrong side of the rising gold price trend and lose everything. It seemed to me that they would find some way to offset the hedge risk, or push the risk off onto someone else, and manuever themselves into a place where they could get rich off the rising gold price rather than be destroyed by it. In Jim’s scenario, they have done exactly that. The smart money are actually the people on the other side of Barrick’s hedges. They will end up being the owners of the mine and its future production and they will benefit from high gold prices.

 

Something else I find interesting is that Another and FOA spoke with a voice of authority as if they had inside knowledge of the inner workings of the gold and oil markets. To some degree, I believe they did, because so much of what they outlined has come to pass. On a few points, however, FOA warned that what he laid out was not all carved-in-stone fact, and that no one knew exactly what would happen. In looking at Jim’s message, we see the same confidence and voice of authority, as if he has inside knowledge. To some degree, his message is speculation based on huge amounts of research, which he has written up on his website recently in the series of articles “Connect the Dots.” So how much is speculation, and how much is fact?

 

One of the most interesting things Jim said during this segment of his speech was that he has talked to many people in high positions in business and in the economy that agree that what he has outlined for us is going to happen. He went so far as to say that a few individuals have sanctioned his speaking on these subjects, saying “go ahead and talk about it, it’s coming.”

 

I am not fully confident that what Jim says is carved-in-stone fact, and of course each of us will assign to his message a diferent degree of credibility. It does make sense, though, to me. Whether we accept his view of how this will all play out will affect other choices we make, so it is an important issue. I believe he has said previously that he does not believe personal gold holdings would be confiscated. He does not believe the dollar will crumble and society degenerate into a Mad Max world. I share that particular view. I have always felt that if facing economic chaos the US would hyperinflate the dollar and hand out financial aide countrywide rather than allow starvation or social chaos. I don’t spend time worrying about hungry people showing up at my door demanding my garden produce. I don’t believe society will collapse and we will need to live in fortified compounds, although I do believe things could get rather ugly. Just not THAT bad. Along that same theme, Jim believes that firm, decisive police action will be taken if there are any financial/societal uprisings, and yes it might not be pretty. My impression is that Jim doesn’t think the action will be aimed at the “haves” such as those of us who have prepared, but at the “have nots” who would create any uprising and break laws. This topic and concern has been discussed recently here at the tent, and it is a valid concern, as none of us can be certain what we face in the future, and the most we can do is watch how things unfold and assign probabilities to future events accordingly.

[Bobsta]

Isn't it funny how cheap $957 gold suddenly looks? I am really tempted to buy.

As you may recall, I was ready to buy in a big lump yesterday. Fortunately I only went in at around 25% of what I wanted. I've added a similar amount today.

 

Some would call it chasing the market down, I call it averaging in.

[Billy]

Point # 5: The Time Frame

 

While I may never understand how this is possible, JS says that the gold price of $1650 and the target year of 2011 has been in his calculations from early in his career. I believe he said something to the effect that it is based on “math and the markets.” We know that he predicted in advance the 1980 top in gold within a few dollars, so I tend to believe him, despite being unable to grasp how he arrives at his figures.

 

During the question and answer period, someone asked what was the probability that his time and price predictions were off, and in which direction would his predictions err. His response was that if he was wrong, the price would be higher, and the time frame sooner. I gathered from his subsequent comments that he believes it is quite likely that the price will be higher, and sooner. He has made conservative predictions, not wanting to mislead anyone. One of the quotes I wrote on my notepad is: “When price preceeds time the price projection is likely not estimated high enough.” If memory serves me correctly, he has stated a few times in the past that we have run to and exceeded the “angels” (magnets or price targets) faster and more easily than anticipated, entering a runaway stage of the gold market.

 

Tying in with this issue of price and time targets, I should note his statement that money and fiscal stimulus can get out of hand, and that these efforts are partly controlled by psycology. While I’m all for a higher gold price sooner, too much of a good thing could work against us. If market psycology breaks down, I believe this will threaten the timeframe and plans which we have been discussing, and the gold certificate ratio might have to be put in place far ahead of schedule (thereby freezing the dollar’s decline and gold price’s ascent at that point). So, perhaps we should applaud the efforts of our leaders who are trying to smother each new economic crisis that breaks out, and lull the investing public into a belief that everything is under control and, “it will all work itself out.” In the meantime, gold marches ever higher while we accumulate mining stocks and metal.

 

Jim mentioned the possibility of a large spike in price. I know some people here rub their hands in glee at the idea, but as Jim reminds, price spikes are typically followed by an equally “violent reaction” (meaning a sharp correction). A slow but steady increase is sustainable, and is better for we who are long the metals and the shares. I am unclear about his comments that followed the mention of a price spike. I am not sure if he felt that after a spike and a correction the price would continue its upward journey, or whether the spike and fall would indicate such market distress that it would demand the immediate institution of the Gold Certificate Ratio.

 

2011 is not very far away, so if all things play out as Jim says, those of us who have patiently held through the wild price swings and the long, morale-shattering corrections, will be rewarded. We will probably laugh someday over the very things we are crying over today.

[Billy]

Point # 6: Success and Security are not a Geographic Location

 

After skimming through a few of the great posts that have been submitted today, particularly the one by TQ discussing the importance of maintaining the proper outlook on life, I decided to make the following item Point # 6.

 

One of the questions asked of Jim was something to the effect of “how to find a place of sunshine and safety” as financial turmoils and transitions take place. Jim’s answer was that he has given us the information we need to create that “place of sunshine” for ourselves and our families. He said that it was not a geographic place. Such a place does not exist. We can, however, do our best to make the choices that will provide as much as humanly possible for a safe and prosperous future. He said that the point of his website and this conference was to help as many people as possible through this difficult time with our families. He wants us to look back on it from a perspective of being safe and financially secure.

 

A related question was, “Shouldn’t we be concerned about food?” and be storing food in case of social upheaval. Jim’s answer was that “If you have gold, you’ll have food.” He said he didn’t mean to make light of the issue, but in every period of financial distress, people with real money have always been able to buy food and whatever they needed, and it would be no different this time. Of course, putting aside a store of basic necessities isn’t a bad idea, but he believed it wasn’t mandatory. Naturally, the follow-through question was, “What about the people who don’t have gold, and don’t have food?” This is where we got into the issue that the economy would be stabilized before the situation degenerated into utter chaos, and that social unrest over food, money, or whatever would be put down with an unfortunate Kent-State type action if the situation got far enough out of hand to require such extreme measures.

 

I’ll close this segment by saying that one of the attendees who stepped up to the microphone was a young Vietnamese fellow who told a very moving tale. He said that as he grew up, his mother often told him with a smile that he owed her eight ounces of gold. This was the price she had paid for herself and each member of the family, to buy passage on the boat that brought them to safety and a new life. He said that he had not fully understood until he grew up, and in recent years began learning about gold, and reading Jim’s website. Now he understands the importance of the timeless wealth-holding: gold, and the freedom and security it has provided to others in similar circumstances.

 

Let’s hope that none of us ever needs to make use of gold in the same way that this young man’s mother did, but it is a reminder of the perils of paper “money” and the difference between gold and the fiat currencies that are here today and gone tomorrow.

[Billy]

Point # 7: The World is Greedy and Dumb

 

I can’t recall exactly where in Jim’s speech this quote fit in, but his statement certainly sums up our present financial environment. Jim states that “every soverign wealth fund is a back door out of the dollar into assets.”

 

Now that the dollar has been gutted by greed and stupidity, the smart people are all fleeing to alternative currencies and safer investments. If we as small time investors have figured out that we distrust fiat currency and need to protect our assets, one would suppose that people with vast sums of money would be even more frantic to extricate themselves from a dollar implosion. The people at the top of the pyramid of power may be among the greedy, but they aren’t among the stupid. As Jim says, follow the smart money and see where they are investing and you won’t go wrong. His research in “connecting the dots” in the gold market led him to what he describes as “a corporate entity in Grand Cayman” who holds the derivatives on Barrick and would get the shares of the company like foreclosing on a house. When asked point blank who that corporation is, he said that he believes it is the Carlyle Group.

 

In Jim’s opinion, gold is the main focus, as “money.” Other metals and minerals are in demand, but not in the same sense as gold. When asked about silver, he reiterated that silver may outperform gold early on, but it won’t be supported at its ultimate high level as gold will be. He also said that he expects platinum and palladium to perform very well as investments.

[Billy]

Point # 8: Gold Shares, especially Juniors

 

Someone asked Jim if he had $100,000 to spend right now and the choices were physical metal, top tier producers, or junior mining companies, which would he chose. He said he would go with the juniors, providing that the junior is a company with both good property, and good management. He said it is unbelievable the number of depressed investors who write to him daily regarding the poor porformance of the gold stocks relative to the price of gold. The greatest complaints, naturally, are about the juniors. He still states that this is due to “black box trading” of ratio spreads. Traders go long the majors (or trade a derivative of this transaction rather than actually take long positions) and short the juniors. They make money as long as the ratio is intact and there is good momentum. Fortunately for us, the momentum is stalling. The majors are losing appreciation momentum, and the juniors are not going down much these days. Apparently he believes that the black boxes have already, or will be, recognizing this shift, and this ratio-spread trade isn’t going to work anymore. He expects a shift in momentum where the majors will level off or pull back and the juniors will advance in price.

 

Jim said he has noticed, in some stocks, multi-million share bids which are usually on “reaction days” where they can slip in and scoop up blocks of shares at reasonable prices. But will these traders be able to cover the shorts so easily? I don’t think so. Jim noted that with many juniors, they don’t gradually increase in price, they pop. And when one pops, often others pop at the same time or soon after. He thinks the shorts are going to have a tough time unwinding their positions, but I don’t know whether he’s saying that the shorts’ attemps to get out will create violent upward spikes, or whether it means it will take them a month of daily price increases to eventually dig their way out. Some of you understand these matters much better than I do, so feel free to comment and speculate. I am curious to know how this may play out. I know he is amused at the fact that the host of people who have taken possession of their share certificates has just made the shorts’ scramble to cover much more difficult.

 

As we at the tent have been saying, the imbalance between the price of gold and the share prices is completely illogical, and can’t last indefinitely. We should soon be reaching the stage where the beach ball can’t be held under water any longer, and it is going to explode upward. I think it is already happening.

 

That’s the end of my report. It has been very useful in organizing my own recollections and opinions on what he said. Again, I want to thank everyone who said they enjoyed hearing about the meeting. I’m delighted to know you have found my notes helpful.

[Billy]

Brrrmystr @ 17:13 pm.

 

You are very kind.

 

Nothing was said about the next president. JS’s speech was pretty much a generalization of events transpiring over a period of years, and where we are headed next. A lot of the movers and shakers are not in the US. He talks about the “top of the pyramid.” Someone specifically questioned him as to the name of corporation he has alluded to. He gave his opinion of which corporation it is, and I will share that later, but it is only an educated guess based on his research.

 

As for my notes, I have about 9 pages of scribbles on a small blue, lined pad, LOL. The notes are enough to “take me back” to the meeting so I can reconstruct what was said in greater detail. I have done my share of writing in the past, and had many things published, but only by obscure magazines/publishers. (And my forte’ is fiction.) With this subject matter, however, it can safely be said that truth is indeed stranger than fiction.

[enrieb]

Wow this drop is relentless, large volume and no relief rally. Can't help but feel we're close to the bottom now though, maybe 950 will do it. Horrible day for miners as well.

 

Dow Jones to Gold ratio 12.6 to one ounce, that doesn't look to bad to me.

[marceau]

Dow Jones to Gold ratio 12.6 to one ounce, that doesn't look to bad to me.

 

 

True.

 

The drop has been pretty unnatural to be honest, gold got hit way harder than anything else today and (as usual) with little reason. I'm hoping it was just a tree shake before the move over $1000, but I could be wrong. Either way, I haven't sold a thing!

[Bobsta]

What are the financials of a site like HPC? What does it really cost to run? How do you "own" a site? What advertising revenue do they bring in? You suggest "millions" but I would be surprised if they got more than a few grand in practice. Like I said, it's a pretty small site in the run of things (Maybe they should introduce some sheepshagging to get the numbers up!).

I used to work in the hosting business. So to answer your questions:

 

You own a site effectively by owning the domain name (i.e. housepricecrash.co.uk). You then need to "point" www.yoursite to some kind of infrastructure. In the case of HPC.co.uk this is a number (I'd guess two or three) of Linux servers. These servers will physically sit in a datacentre of some sort, and will need connecting to the Internet (most likely with some firewalling in place). The servers run the forum software and we all post lots of stuff on there.

 

Costs for hosting and bandwidth are difficult to estimate. I've worked on infrastructures that cost circa £5000/month up to £180,000/month to manage. There are also smaller outfits who provide hosting on a much cheaper level than this. As I understand it Fubra are a hosting company themselves and are quite likely to be a "cheap and cheerful" outfit rather than a pricey bunch.

 

So, finger in the air, I'd estimate costs (hardware, software, services, power, bandwidth) of ~£2500/month.

 

HPC.co.uk is littered with Google Adwords ads. As has been mentioned previously, these ads are automatically targetted based on the site's content. However, I would argue that the HPC forums *aren't* like most sites. I've used the HPC site for 3+ years now and I'm certain I've *NEVER* clicked on an ad. I would expect the click-through rate to be quite low. I honestly don't see them making "millions" at all. Maybe £10k/month in ad revenue, offset against the hosting and management costs... it's not a huge proft.

[Pluto]

Today was a buying op. for all the procrastinators and alike. With all the banks ready to keel over deflation is not an option on the table.

[marceau]

Today was a buying op. for all the procrastinators and alike. With all the banks ready to keel over deflation is not an option on the table.

 

 

Absolutely. In fact with the DOW so close to the 12000 precipice I can't see the Fed waiting until the 12th for the next rate cut. I reckon there will be an emergency one this week.

[No6]

Absolutely. In fact with the DOW so close to the 12000 precipice I can't see the Fed waiting until the 12th for the next rate cut. I reckon there will be an emergency one this week.

DOW is attempting a last hour fightback like yesterday.

[No6]

The owner of HPC is one Brendan McLoughlin.

 

Financial Planner is a very active poster on this board. he's recently turned relatively bullish on the US banking sector and if not bearish then certainly less bullish on gold. His opinions are his own but i don't think he'd change his opinions for a "bung" . . .

FP has been pretty consistant in his views as regulars here will know.

 

Brendan ocasionally posts on here.

[Goldilocks]

Brrrmystr @ 17:13 pm.

 

You are very kind.

 

Nothing was said about the next president. JS’s speech was pretty much a generalization of events transpiring over a period of years, and where we are headed next. A lot of the movers and shakers are not in the US. He talks about the “top of the pyramid.” Someone specifically questioned him as to the name of corporation he has alluded to. He gave his opinion of which corporation it is, and I will share that later, but it is only an educated guess based on his research.

 

 

Your fingers must be soar with typing the excellent info at the JS meeting,

It all makes sense now, follow the top of the pryamid the Carlyle Group

http://www.hereinreality.com/carlyle.html.

 

I will look into some of their holding, oil, defence, healthcare, gold exploration etc, and i think i would be onto a sure thing,after all the pigs at the top have done well through the real power behind politics the Carlyle group,they must be worth a punt or two.

[Outsider]

Hello all, another convert from HPC here. I never posted there, but spent a lot of time reading. Without a doubt, the gold thread was the most informative and interesting thing over there and...... well you know the rest.

 

Anyhow, after 24 hours of withdrawal symptons, it was a relief to find all those familiar names again. Thanks for all the advice, esp. Goldfinger. I'd never have got into PMs without reading that thread and I'd be a lot worse off for it.

 

Best thing on the site and they remove it. Unbelievable!

[whoops_apocalypse]

Hey guys have you seen this?

 

http://www.housepricecrash.co.uk/forum/ind...69928&st=30