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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Frank Pembleton who wrote (4428)	11/26/2001 3:07:56 PM
From: Crimson Ghost	Read Replies (1) \| Respond to of 36161

Golden Oldie (from Forbes) Having called the top of the gold market 22 years ago, a goldbug thinks he has found the bottom. In 1977 James Sinclair boldly predicted that gold would rise from $150 per troy ounce to $900. Gold never reached that mark, but it came close on Jan. 21, 1980, peaking at $887.50. The next day, says Sinclair, he unloaded his entire gold position, personally netting $15 million. Pointing to the Federal Reserve's efforts to fight inflation, Sinclair then predicted at an annual gold conference that the metal would languish for the next 15 years. Which it did. On Friday, Jan. 20, 1995, it closed at $383.85. So this is a guy to listen to. He's bullish again. Why? Because he believes, despite the whiff of deflation in the October producer price index, that the country is headed for mild inflation. He thinks the dollar is due for a fall. He also is moved by the fact that mining companies, which routinely sell unmined metal forward at fixed prices to protect themselves against further price drops, have recently pulled back from placing these hedges, a move that should prompt gold prices to rise. When and if they do, Sinclair expects a massive squeeze on gold speculators who have $36 billion in short positions. Sinclair figures the shorts will cover their positions soon after gold hits $305, a move that could force the price to $350 and maybe as high as $430. Persuaded? You could go to the New York Mercantile Exchange to buy an option to purchase 100 ounces of gold in six months, with a strike price set at a slight premium to today's price. An option exercisable at $300 would cost you $9 an ounce. If gold hits $350 you pocket $4,100 in profits. Sinclair is not just buying futures and options. Since 1996 he has invested $11 million to develop 2,154 square miles of barren land in central Tanzania that he's convinced hold vast gold deposits. Drilling on the property is still in the early stages, but Barrick Gold is already pulling metal out of an adjacent site whose proven and probable reserves have nearly tripled in the past two and a half years to 10 million ounces. It's a gamble not many investors would make, but then Sinclair has always stood apart from the crowd. On the walls of his office hang six photographs of Shri Sathya Sai Baba, a guru whom Sinclair visits in India several times a year. Sinclair's love of carrot juice recently turned into a 50-pound-a-week habit brought to a halt only when his doctor grew alarmed at the orange tint to his skin. A loner, Sinclair paid $3 million in 1983 to turn a 19th-century barn into a reception hall for his house but has held only three parties there since. After his 1970s career as a goldbug, Sinclair retreated to his Connecticut estate, where he played with his helicopters, show ponies and collection of Ferraris. He didn't stay idle long. He built cable systems at Cross Country Cable, a company he started with two friends, then made millions selling some of them to John Malone's TCI. "Jimmy is different," says his onetime cable partner Vincent Tese, the former New York banking commissioner and now Bear Stearns director. "But in the trading business people don't care if you're purple, just as long as you're making money."