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I have been quoting Jim Sinclair in these pages for a decade.  I take his comments very seriously.  Why?  Because he has been very accurate in most of what he has predicted.  He has never wavered over his statement that gold will hit at least $1,650 by February, 2011.  He made that prediction several years ago and it no longer seems unrealistic.  It’s hard to believe, unless you check the numbers, but one year ago today, spot gold was $935.  Gold is UP by 31.5 percent in the past 12 months.  If gold increases in the next 12 months at the same percentage that it increased in the past 12 months then one year from today spot gold will be $1,624.  Like I said, his number is not off the wall.

Those who argue that we are in deflation and imply that gold will not rise unless we have inflation miss an important point.  Inflation is a “currency” event, not an economic event.  We can have a recession or depression and still experience rising prices. If the government fights the deflation with more handouts and money creation then it will take more dollars to buy the basics.  Sinclair believes that we will experience, briefly, a period of hyperinflation in the next few years and with it will come SHORTAGES of the basics – food, medicine, gasoline, etc.  Yesterday, for the first time that I can recall, he discussed this.  Here is the essence of what he had to say:
Hyperinflation, a currency event which is certain to occur, will disrupt for economic reasons the distribution of food, bottled water, medicine and utilities.
The currency event will be that of the entire Western world, not simply the dollar. It is not the lack of these items as much as it is the disruption economically of the means of distribution that require us all to think beyond gold.
Vacation homes in rural settings are smashed price wise. Owning such a residence might enhance normal family life, and become an island for those few months when distribution collapses due to hyperinflation.  Don’t laugh; it is going to happen to some degree.
It’s hard enough to convince people that they need gold.  To even suggest that there will be a collapse of distribution of the basic necessities is nearly impossible.  But when Sinclair writes “don’t laugh, it is going to happen to some degree,” it really is time to start to think things through and ask yourself is owning gold and silver enough to get through the turmoil that is headed our way?  Your needs will go beyond gold and silver, if Sinclair is correct.  If you think that gold is going to $3,000 or $5,000 or beyond, then you already agree with Sinclair’s “Hyperinflation” scenario.  By the way, Gerald Celente and John Williams both agree.   They both warn that we are headed into a Great Depression with Hyperinflation.  I find it hard to take a stance against the advice of these forward thinkers.  Just because you don’t like the message, don’t kill the messenger.

It really is easier to buy into Wall Street’s rosy view of the future.  But those who paint a different picture are called “doom and gloomers,” when just maybe they should be called realists.  I say it makes sense to hope for the best and prepare for the worst.  That way, if you are wrong, things will still turn out o.k.

I bet Noah’s neighbors though he was a nut case too.

Yesterday, I spent an hour talking to the owner of the firm that my wife works for.  I have known him for more than 25 years.  We discussed gold and he told me that he just read an article in the WSJ that said gold was a bubble.  I asked him “how many of your employees own any gold, or have ever held a gold coin in their hands?”  I asked him “how many of your friends and associates own any gold?”  He said probably none.  In the late 90s, when the NASDAQ went crazy, all of his employees and all of his friends and acquaintances owned stocks.  That’s bubble territory!

When I got home, there was a large advertising brochure in the mail that had two full-page ads offering to BUY YOUR GOLD.  Here, in Minneapolis, we have two companies, Pawn America and The Gold Guys, who are all over TV offering to buy your gold.  My point is when gold really is in a bubble, no one will be advertising to buy your gold; the ads will all be to sell you gold.

For the next few days we will all have to do without the sage advice of Richard Russell.  Yesterday he had an appendectomy and will be out of the loop for a while.  You don’t realize how important his information is and how much you rely on it until it stops coming.  Fortunately, it will only be a few days.  Get well quick, Richard, we miss you.  We need you!

For the past two days, I have presented information on the oil “volcano” in this column.  Most of the response I received was favorable.  A few readers questioned the credibility of the sources.  It is up to you to decide what is credible and what is not.  Here are a few more comments from Dave Kranzler, in the LeMetropole Café. As more and more information leaks out that Obama/BP are trying to cover up, it is looking like this blown well is taking on Armageddon-like proportions. Yesterday an article appeared in the San Francisco Chronicle in which “a BP engineer described the doomed rig as a ‘nightmare well,’ according to internal documents released Monday.” LINK. And Clusterstock.com carried an article today in which Matthew Simmons, arguably the most respected oil industry analyst, professed that an attempted relief well will fail and that there is a possibility that a giant undersea lake may already be covering the floor of the Gulf: “The Road” in real life?

I have also had conversations with a couple people who have chatted with industry insiders. Independently, both offered the same type of assessment: this situation is completely out of control and Obama/BP are trying to cover up as much of the truth as they can; there is no way BP has a shot at containing this – the pressure that has built up in the deep rock formations is much greater than the ability of available technology to contain; the well-head will likely be blown apart; fissures are forming on the Gulf floor from which oil is already leaking into the water (as described: “BP has cracked the earth with this well”); in addition to the obvious and immediate annihilation of the Gulf ecology and environment, if this problem develops into its full potential, the effect on the ocean will have a global effect on the atmosphere and the food supplied to the world by the ocean.