I had the pleasure yesterday of hearing Jim Sinclair speak to a packed room of “CIGA’s.” I met up with GATA/Le Metropole Cafe’s Bill Murphy ahead of time for lunch and then we headed on down to the conference. Jim was in Dubai for most of the past week (on TRX business) and flew 24 hours to make the conference. Though he claimed a massive case of jet lag, he was sharp, witty and did what I had “hoped” he would. If you read Jim’s website then you know that “he goes there” on nearly any and all topics financial and normally doesn’t pull any punches. I have seen him speak several times before this (I attended his very first conference in 2003 in CT) and if you listen carefully he says more than he writes, he did not disappoint yesterday!
Before going any further I want to give you an idea of “who” Jim is. He started right out of the box yesterday saying that “honor” in the financial world is completely gone and that fraud is everywhere. Through his words to us you could feel his “genuity” both intellectually and spiritually. I would have no problem ever doing any deal of any size on a “handshake” with him. I’ve trained in various martial arts for 27 years and consider him the “master’s master” of finance, not surprisingly his “Eastern studies” show through if you know what to look for.
OK, so what did Jim tell us? He did do a recap of derivatives and said that any and all “pre Lehman” derivatives are worthless and that “bail ins” are scary as hell and probably inevitable. Because “honor and integrity” are long gone, no one really knows what they have in their bank accounts. Your bank statements can say whatever they say but you won’t really know what you have until after the dust of bankruptcies and bail-ins has settled. He spoke of gold’s “triple bottom” and believes it highly unlikely that the $1,180-$1,200 level will be broken or even tested again. He rightly pointed out that gold has been acting very differently recently and the “feel” has changed 180 degrees. He also does believe that the bullion banks have now become long rather than short and they will again as they did in 1979 make more money and faster than anyone else in the gold arena.
He said that even if another retest of support or even a break were to happen it will be meaningless in the big picture. Gold and silver have been manipulated “too low” in price (under the cost of production) and that the unintended consequence of creating excess demand (especially from Asia) has put them on very solid ground and in very strong hands. The “pricing” mechanism of gold and silver will change, COMEX will become a “cash settled” market and become irrelevant while the “physical settled” markets (like the one he is chairing in Singapore) that are popping up in Asia will come forward and become the pricing mechanism. He also believes that 2014 will be a year of many many “events” which will cause changes and inflection points unlike any years in the past. He believes the Euro will rise (because the dollar will drop) and that “.56” on the dollar index is the obvious target. Not surprisingly he believes that Janet Yellen will flinch on “taper” and that “QE to infinity” will resume when she goes dovish. This action by the Fed will probably move our stock markets higher and the lows may already be in.
Privately during a break, Murphy asked Jim that if the bullion banks were now long, who would take the short side? The answer to this was “no one”…which would cause air pockets to the upside. Air pockets as in no offers and flash crashes upwards faster, greater in size and more violent than we have experienced to the downside. This is something that I’ve written about many times which would lead to a “reset.” My personal opinion is that we can see one occur at any time, Jim disagrees as he believes it may occur 2-3 years out. This “3 years out” by the way is how long he believes that the next (he believes it may have already started) bull move will last which after listening to him will terminate in a “great reset.”
He had already told us all of the above through his writings, what follows is what he told us but has not put in print to my knowledge. During the Q and A session he was asked about silver. Much to my surprise he is wildly bullish! In past sessions (and writings) whenever he was asked about silver he would say that “I am a gold guy,” he was reluctant to and rarely spoke of silver. This has changed, he said and I quote, “Silver will lead and it will be gold on steroids.” He followed up by mentioning that you will need to make a decision in the future about silver, while it will outperform gold by a huge margin there is a “monetary event” out there somewhere and that a decision will need to be made as to whether to hang on to your silver or to swap into gold. Don’t worry, he was not talking “now,” now he believes that silver will trade to $50 and possibly even $100 this year.
Another shocker to me was when a question was asked regarding the (waning) status of the petrodollar. The questioner mentioned that in the past, whenever the dollar came under attack the U.S. would respond in some measure to support it, “What might the U.S. do this time around?” was the question. Jim answered bluntly and with one single sentence…”Bomb Saudi Arabia.” There was an audible gasp from the crowd as this would be horrific…but guess what; it’s very true in my opinion. First off, was Saudi Arabia to accept anything other than dollars for their oil that would be THE event that put a nail in the dollar’s coffin? I have written on this subject before that our “allies” Saudi Arabia and Israel have been thrown under the bus regarding Syria and Iran. His answer was very logical yet you could feel the shockwave through the room as he said it.
I stood in line to ask a question and naturally 2 of my questions were asked and answered while in line but Jim said something that I had not seen him definitively print before. He was asked about the German gold and he bluntly said, “It’s gone.” He said (and I love the common sense and down to Earth analogy), “If I owe you $100 and you only pay me back $1.50, then you are either a deadbeat or you don’t have it. The German gold is gone.” Another question while standing in line was about his “crazy” (in his own words) speculation that gold could even go to $50,000 per ounce at some point. He mentioned that a Goldman Sachs analyst (I did not catch the name) had also done a mathematical study and came up with the same number of $50,000 so he was no longer the “only crazy one out there” anymore.
So I got to thinking and put these 2 together as I have written on this in the past. To come up with a mathematical number for gold’s price you must have 2 pieces (really 3) of information. You must know exactly how much gold there is and how much money supply (and total debt) in order to do the math correctly. In other words you need a numerator and denominator to put into your calculator (because we can no longer do math in our heads anymore) to come up with an answer. The amount of total gold held is your numerator and that is divided by money supply/debt as your denominator…and presto you get a number.
So this is what I asked, “Today is the very first time to my knowledge that you’ve said the German gold is gone, we have not had an audit since 1956 of the U.S. gold so that may also be gone (I kicked myself later because I did not ask him what he believed the U.S. gold holdings actually are). How can you or anyone else mathematically come up with a dollar price of gold if in fact we don’t have any left? In order to come up with a true final number, we must have a real number as the numerator. If the numerator is zero then the price of gold in dollars is actually infinity?” Jim’s answer to this was simply, “You cannot, this is why I always say that gold may go to prices that amaze even me.”
To finish, I want to thank Mr. Sinclair for everything he has done over the last nearly 15 years for us “little guys.” He has put more knowledge (for free) out and into the public on what was coming and how to ultimately protect you than anyone else. He was asked “why” he did this, what motivated him? He wittily said that, “Attila the Hun killed, Mother Theresa healed…it’s what they do,” he explained that trying to help people get out from in front of the coming economic and financial train wreck is “what he does.” When listening to him speak you can feel this, it’s a “heart thing” and an act of selfless honor. Jim Sinclair is truly a “master’s master!”