Jim Sinclair has officially declared that things are now “Out of Control”. The piece is particularly frightening because I know he’s right. The steps he advocates are in preparation for an absolute melt down, absolute chaos. In my heart of hearts, I hope he is not right. But hope is not a strategy folks. So be prepared because there is no one left to blame but yourself now. Prudence often times requires no action. In this case, prudence requires decisive and sweeping action to protect what you have.
Just to give you an idea of who Jim Sinclair is you should read the following. I will let him explain in his own words:
Margin of Risk
Posted On: Saturday, August 16, 2003
Author: Jim Sinclair
Q: Jim, you used margin when you where building your foundation. I am young and willing to accept risk. So Jim, what’s your problem?
A: Let me answer your question under two subheadings for simplicity’s sake.
Few who write on the Web fully recognize the responsibility they have to their readers. I would also suggest that this statement applies equally to those in the print and electronic media as well. In contributing to the debate on questions of the day – whether they be economic, political, or both – you need to consider your words with attention and care, especially when someone else’s livelihood is at stake.
My father is Bertram J. Seligman. From simple observation and a study of history, I believe he was the greatest trader that ever lived. Yes, greater than Jesse Livermore who befriended Bert because of his talent.
Bert traded like an old master painted. He used to trade 10% of the NYSE’s volume and ended the day with a 500 share position. He taught me to trade from as far back as I can remember. I sat beside him in the car, in the office, and in the house.
We failed miserably as father and son but succeeded beyond anyone’s wildest imagination as partners. He was also a business man. He financed the first movies in aircraft via “In-flight Motion Pictures, Inc.” He put the first refrigeration device in trucks via “Thermo King Inc.”
A partner of Smith Barney who ran its trading department had inadvertently become a controlling shareholder in a small company and called Bert when the company asked him to lower his position. Bert took on the man’s entire position and control of the company and went on to promote Dr. Land’s new camera. The company eventually became Polaroid and Dr. Land visited my home on several occasions.
Bert financed a company that had invented a feminine hygiene product called Pursettes which was sold in the U.S. through the 1960’s and 1980’s. One of the great fortunes he made was in a metals company called Strategic Materials.
He was also a partner in deals and trading operations with Jesse Livermore, Old man Kennedy and Arthur Cowen. He invented what is today called the NASDAQ.
At my request, he left me totally out of any financial or material inheritance, having given me more than that: the knowledge to spot value in businesses and – more importantly – how to trade for a living.
I was in a trading department when I was 12 years old. At 19, I was an over-the-counter market maker maintaining 35 markets. That is the training and qualification you need to handle huge margin positions.
During the entire gold market, I never got a margin call – not because I never made a mistake but rather because I margined myself and if a call was pending I liquidated my holdings before the close of that trading day.
I am trained to be a survivor in a battle that takes no prisoners. You may not be. I live markets day and night. I come from the lineage of Jesse Seligman and a famous banking family. (editor’s note: see also Joseph Seligman)
Now you will love this. The Cartel of Common interest is comprised largely of Seligman firms. Yes, my ancestors founded them all except Merrill. Goldman and Lehman are my family’s. Many of you made fun of me when I first told you those cartel members had met their match. Well, they have. They face the bloodline of their founder and did not know it until know.
Read the book, “Our Crowd,” by Stephen Birmingham and it’s all there. Markets, metals and entrepreneurialism course through my entire body not just my blood. The market is my mistress but compared to the real life equivalent I thrive on the volatility associated with this one.
I am committed totally to markets. I love risk and feel alive only when all is committed. Absolutely nothing else in the material sense interests me. Now that I have played the material game, even that no longer interests me. Money does not interest me. I have given away much more than I have. The game interests me. The game is called building companies and trading markets.
Now I am passing my love of this business on to whoever recognizes the gift and is willing to run with it. My two youngest children have chosen to go their own routes outside the financial sphere and my eldest daughter is in my service in Africa. She is an adventurer in her own right but remains uncomfortable with the intensity I show when the bell rings which is her feminine prerogative.
For the curious, my name has been James E. Sinclair since the day I was born. My mother was Abbey’s Irish Rose.
Monday, September 27, 2004, 3:05:00 PM EST
Why An Investment in Gold is Absolutely Correct
Author: Jim Sinclair
Thirty three years ago Bertram Seligman shifted his focus from equities into minerals and currency trading – almost 100% to be exact. The obvious answer for this quantum divergence from normal practice was that President Nixon took the US off the gold standard.
The simple answer, however, is that Seligman was a member of “Our Crowd” which was populated by many prominent families of that era including the Warburgs, Solomons, Lehmans & Rothchilds.
As with these other families, Seligman was part of a long term plan to preserve and increase their liquidity. Sure, they continued in the paper asset business which they’d been in for generations.
These families had lent support to the government of the day because it had placed gold in its election platform as a standard of value – in effect protecting the liquidity of their investments. In the end, however, they felt betrayed and had no other recourse than the action they took.
I know this because the administration at the time had me on a short list for Treasury Secretary and Bertram J. Seligman was my father. He told me – and I believed him – and shortly thereafter I entered into gold in a big way and filled my pockets.
After liquidating my gold assets at the top of the market, I waited patiently for the bear market in gold to end which I had publicly thought was going to be 15 years back in 1980. In actual fact, my estimate was off the mark and it lasted more than 20 years.
With the gold standard gone, we now have a pure fiat currency backed by nothing. As a result, the dollar means, â€œI OWE YOU NOTHINGâ€ – no gold, no silver.
The DOLLAR IS A DEBT OBLIGATION OF SOMEONE ELSE. This goes to the heart of the problem and why we have debasement of the US dollar. Our whole society is based on debt, not gold, not silver.
I would like to relate to you a story that a friend of mine recently told me. When he was a boy in 1954 at 6 years of age, his great uncle took him aside and showed the lad a silver dollar. He never forgot what his uncle said: “The silver dollar is real money.” Then he showed the boy a “Silver Certificate” which he could bring into a bank and exchange it for “real money”, namely silver. He later explained how gold was money! But in 1971 Nixon took the US off the gold standard.
Personally, I remember silver certificates being replaced by FEDERAL RESERVE NOTES which is nothing more than a glorified IOU. With the government going to fiat currency, they can print as much as they want and you know what that causes – inflation. Inflation has one source: expansion of the money supply.
Now one might say in a global marketplace that the expansion of international liquidity is the primary cause of inflation. But it’s worth noting that monetary inflation always precedes price inflation. Fiat money allows the government to expand the money supply to meet its obligations whether they are in the national interest or not.
A friend of mine has a waterfront home that was built by his father-in-law in 1964. The cost at the time was approximately $40K and it’s worth ten times that today. Amazingly, in 1964 the price of gold was about $40 an ounce and today it’s ten times that. Coincidence?
In terms of gold, the home cost my father-in-law the equivalent of 1000 ounces of gold. Guess what? That is what I would get for the home today if I sold it! The home has same value in a gold currency!
Inflation is created by the government and directly relates to how they pay for wars and programs such as social security, Medicare, etc.
Back in1971 when Nixon took the US off the gold standard what happened? An oil crisis occurred shortly after in 1973/1974. Why? Oil producers wanted their purchasing value – not cheaper dollars. Think in terms of gold. That is why we hear Muslim nations talking about going to the Gold Dinar.
No fiat currency system ever lasted and they all eventually fail. Even the Romans debased their currency and we all know what happened to that empire.
I have shown you the massive Head & Shoulders formation which is extremely long term and is part of the puzzle. What created this formation is long term liquidation. I believe that the major families of European wealth have been dollar liquidators over this long term period. They knew the dollar eventually would be doomed due to the removal of the gold standard. That is why I believe “Our Crowd ” – the real old money – has been collecting gold on the cheap.
They have been taking advantage of the suppression of the gold price throughout the 1990s. And this served US government as well, allowing them to inflate the money supply. With gold suppressed, people think the dollar is an excellent store of value even though it isn’t.
Government is nothing but a policy organization that redistributes wealth – some to the poor but generally a lot more to the wealthy who put them in power.
Gold is the entity that will protect you from the depreciation of the US dollar which is happening as we speak. As I see it, the dollar is a technical disaster, teetering on a precipice before a free-fall.