Last week, we attended a lively and informative four hour seminar in Scottsdale. The speaker was Jim Sinclair, a legendary commodity trader and financial advisor who now resides in Tanzania where he manages and is majority shareholder in Tanzania Royalty (TRX), a gold mining company.
Time and space don’t allow for even a condensed summary of that event, but only some highlights. He estimates the notional value of financial derivatives at more than $700 trillion, an amount that will collapse the system. Some alarming signals are the moves by big insurers to exit their annuity obligations, the impending stress tests for banks and a shocking draw down of gold in depositories.
We are now experiencing a flow of power from the West to the East. The BRIC countries (Brazil, Russia, India and China) are colluding in various ways to circumvent using the U.S. dollar: oil being the biggest example. The BRIC’s are net accumulators of gold and by 2015 could have their own gold backed currency. Soon, we’ll see the opening of new gold exchanges. They will become the price discovery mechanism, replacing the current futures (paper) system. Once that is in place, and the TRUE figures for physical gold are known, the gold price will rise to $1,650 and, after a challenge, exceed its old high. This could happen within a year, but not without a lot of volatility.
Currently, he said, gold is cyclically exhausted. Within 90 days, a big embarrassment will emerge in gold storage numbers as depositories are rapidly being depleted.
In Jim’s opinion, need will overcome greed and eventually by 2020, we’ll see gold at $50,000 an ounce. Six hundred people sat in stunned silence as that number sunk in.
A great leveling of the middle class is imminent, starting with a serialized “bail-in” of banks who fail the stress test. If your bank was one of those “bailed out” in 2008 with government money, it will likely be “bailed in”, meaning the deposits above the insured amount will be converted to equity, as done in Cyprus, to share the cost of failure.
Nationalization of retirement plans is on the horizon as well. We have devolved from a democracy to a fascist state.
The number of Fed fiscal “hawks” is declining. The next chairman of the Fed will likely be an easy money advocate. The U.S. dollar breakdown to .76 and then .56 on the G-7 index will ensure a currency induced hyperinflation. Since January 1st of this year, 90 percent of all U.S. Treasury debt sold has been purchased by the Fed.
Gold confiscation? Not likely here, but in the future would be conceivable in China as a form of patriotism. Currently, the populace is encouraged to buy gold.
What does Jim do with his money? He uses Swiss Francs and Canadian dollars in a Singapore bank. Your assets should be outside the system as well. For shares, get certificates or direct registration. For metals, get physical delivery. No foreign storage. There is no longer any financial privacy anywhere. The only privacy left is between you and your local coin dealer.
The bottom line for us according to Jim? – Confidence is a fickle thing. It can be lost in a day. The gun is loaded. Only the trigger hasn’t been pulled. Get out of the system now while you can.