RE: Get A Grip, Man! (Q & A Format)
From: Jim Sinclair
>>Calm down. Think straight. Act disciplined. And stop being stampeded on the up and down side. Get a grip, man.<<
Date: Thursday, October 16, 2002
Q: Now that the number 5 requirement finally kicks in, and in style (bonds crash), gold stocks crash and gold plummets. Money simply flows into paper stocks again. Seems that Andy Smith has a point that it’s hopeless. Charts break down on all sides. What a dismal performance! Don’t understand it any more.
A: Is that a statement or a question? I will approach it as if it is a question, although I doubt that.
The 5th Element may be in, but I doubt it. I doubt it because I do not believe we are, at this point in time, reversing the bear equities market, but only reacting to an oversold condition. We cannot rule out the possibility that the bond market breakdown at this point is a product of flight of capital that flew into the bonds and is now flying out and into equities. I have explained to you about the absolute requirement that money managers be in any appreciating market to protect their employment. Money that has been put to sleep in bonds is today being pulled out and employed in general equities. That is NOT the 5th Element, which is a product of overseas selling of bonds on a dollar depreciation vs. bonds market level sell-side decision.
Today's multi-hundred point rally is on the back of IBM's poor earnings report. When IBM warned the Street $50 higher that they were going to experience poor earnings in the next quarter, would it not have made sense to have overestimated the decline in earnings so that you could better them? Well, IBM bettered their significantly reduced earning prediction. That is what gave us our second dose of near $300 DJII one day up-move. Total Madness? Does anyone really expect improved earning across the board for DJII companies into 2003? Hardly. The level this equities market goes to will be a product of how it handles the neckline of the head and shoulders formation that it is approaching from the bottom side at approximately 8,320. On the high today, that neckline was hit. I refer you to figure #24 on page #85 of Technical Analysis by Edwards & McGee. This chart is of MCA Inc., February through August of 1986. Also note figure #25 on page #86. Both will demonstrate what I am speaking about.
Now, as far as gold is concerned and Mr. Smith's supposed frustration, what has changed fundamentally?
1. Is the dollar back in a sustained and defined long-term bull market?
2. Does the general public have renewed faith in paper as a long-term storehouse of value?
3. Has the US Current Account balance shifted back toward equilibrium on it's way to surplus?
4. Has the general commodity market returned to its previous bear nature across the board?
5. Is the bond market on the threshold of a new bull market phase?
No. Nothing has changed at all except the price of the Dow as a result of IBM's poor earnings.
Yes, the price of gold has changed, but that is just in line with the enthusiasm for equities and reaction of the sort that you are experiencing. I have over 300 emails on my computer today alone. They sound very much like yours.
The real question is why are you in gold in the first place? If your answer is to make money, then there are many better ways of speculating. Short big Dow rallies for instance. How about my mention of being long on Coffee back when it was 49 cents?
If your answer is to insure the balance of your assets by owning a portion of a gold-related asset, then why in the world have you made such a maniacally depressed statement about gold without one shred of fundamental evidence that the situation has changed? It simply has not.
My contribution, if there is any for the gold community, is that having done this for so many years I am able to maintain balance both in the good and bad times for gold. It is therefore an ability to add balance to your thinking. I have also been around long enough to be able to separate the crooks from the good guys. Finally, I know this market well and can share that with you. It is not my purpose to educate speculators to be better speculators. I will avoid questions that refer to this and people who are doing that. I intend to help the investor by transferring as much of my talents as I can.
Calm down. Think straight. Act disciplined. And stop being stampeded on the up and down side. Get a grip, man.
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RE: Tech Review of DJIA & Comment on GG
From: Jim Sinclair
Date: Tuesday, October 15, 2002
Who Said Casino was Dead?
Prior to the opening of the equities market in New York, the Dow Jones Industrial Averages were plus almost $300 in overseas trading. This move was attributed to better-than-expected earnings reports of Dow components and less than awful next quarter estimates. It was also attributed to an oversold condition in the various index components. The real reason for the Casino-type rise is that professional money managers employed by funds, those who spend others people's money, cannot maintain their positions if they hold significant cash during a market rise. They rarely get fired for being long equities in a decline. Therefore, the buying of the index future prior to the opening is necessary self preservation of those who manage OPM (other people's money) for a living.
#1 DJIA 1980-present
#2 DJIA 1980-present
Goldcorp (GG) 10/15
Chart #1 is of the Dow Jones Industrial Index from 1980 to present. Please note a defined Head & Shoulders reversal formation which broke down below the neckline. Please refer to "Technical Analysis of Stock Trends" by Edwards & McGee page #93 figure 32 which is National Supply, April through September of 1946. I have selected this chart because it shows the natural desire of a market not to dramatically change. That natural desire called "hope rains eternal" will motivate a market that has broken either down through or up through the neckline of a classic reversal pattern Head & Shoulders to return to the neckline. This is what I believe that the Dow Jones Industrial Index is doing. I made this point to you as a possibility when I pointed out that last week we had a "one day key reversal" in the Dow Jones Industrial Index. Because of this, the Dow Jones Industrial Index is attempting to reach the level of 8,320 approximately. It is in this attempt to reach and exceed this level that determines the ability of the market to reverse from its Bear trend. Chart #2 is there to give you a better look at the power down trend line and neck line.
Goldcorp (GG) opened this morning smartly back in it's power down trend so serendipitously I was saved on that. Regardless, continue to closely monitor the power down trend lines on all gold positions for the reentry point. I preferably want to have both MACD 3-6-7 and Momentum 14 supporting the reentry.
Scam Protection
As community members send me charts of their holdings, I look in disbelief at the action of some of their holdings. Items rocketing up and rocketing down are not the sign of a sound situation. To come from absolutely nothing a year ago (well under a dollar) to $8-$12 then drop to $2.50 is the ear mark of a promotion. Please do your homework as I have repeatedly advised. In every one of these wild situations (mainly silver, but some gold) a simple ruler, a basic understanding of TA plus the courage to act immediately when up trend lines broke down, would have saved you.
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RE: Technical Heads Up on "Some," NOT All, Gold Shares
From: Jim Sinclair
Date: Monday, October 14, 2002
Technical Heads Up on "Some," Not all, Gold shares
Still standing aside on most issues.
Still stand aside on Silver and most Silver shares
Although it is still early for replacement of the 1/3 position sold on 9/23, we must deal with each issue independently.
As an example, GG has successfully broken out of its power downtrend bullishly and therefore positions sold in GG should be replaced. Please refer to my technical comment posted on www.financialsense.com. Notice the power downtrend lines drawn on GG and AEM. Apply the same technique to the shares of your interest.
If their prices rise above the power downtrend even intra-day, replace your position. You can handle this daily by examining the power down trendline that day and determining where it would move above the power downtrend. Then place a stop buy at that point for the day.
Focus please on what I say here:
As examples AEM, PDG, NEM have not broken out of their power downtrends and therefore you continue to stand aside from these issues. If they remain intact in the power down trend, remain on the sidelines. Be careful of silver and silver shares as long as December Comex Silver if below 4.32. Fax me your charts at (860)364-0673 days and (860) 364-1019 evenings, if you wish me to check your power down trend lines drawn as the most acute angle down from the recent highs.
Again, look at how these are drawn on AEM and GG on today's technical post. This will guide you on your work. Charts are available on www.bigcharts.com and www.stockcharts.com free of charge. Repositioning will be issue by issue and not broad brushed. To plow back in, because a very few are starting to act well, is downright foolish, IMO.
Trade smart! Invest smart! This is a serious business, not a game and not casino.
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RE: Gold Leasing Rates Are Higher - Why? (Q & A Response)
From: Jim Sinclair
Date: Sunday, October 13, 2002
Question
Are gold leases rising now? If so, why?
Answer
We have to be cautious because www.kitco.com, the main web page reporting on lease rates, hasn't been consistently correct. They have reported all four of the recent four nonexistent increases in the gold lease rate. The only other source on the web reports daily hypothetical gold lease rates, which need not have anything to do with real gold lease rates. Clearly, I am not the most favored person at the gold cartel trading desks, so all I can do is ask Kitco if they got it right this time. Today is Sunday.
Therefore to answer your question, I will review for you what makes the gold lease rate rise and what is the main ingredient today that will influence the rate.
The theoretical gold lease rate is the difference between Libor (the British inter-bank rate for the period in question) minus the gold forward contangos (difference between cash and forward price of gold for the period in question up to one year). Therefore the theoretical gold lease rate formula is Libor (minus) Contango=Lease Rate.
The real gold lease rate is the above theoretical gold lease rate, plus or minus supply and demand for gold leases. It is for this reason that the one-year gold lease rate ran up to above 9% during the Ashanti Derivative Hedging Crisis.
Gold leases are therefore determined by:
1/ The Forward rate of gold for the period, the contango.
2/ The Libor inter-bank lending rate for the period.
3/ Supply and Demand for gold leases.
What is happening, now?
The forward gold rate (contango) had expanded slightly, but not enough to be a serious ingredient to higher gold lease rates.
I expect Libor to rise, but I am totally alone on that expectation. However, on the theoretical level, one could offset the other between numbers 1 & 2.
I believe any gold producer that seriously increased their derivative gold hedging via gold leases at this time -- even to finance a non-recourse gold loan for development of a new promising gold project -- would ignite a fierce stockholder revolution that could reach the proxy war level.
Supply & Demand Factors
Therefore, that leaves only the Supply Side of the gold lease equation to influence the gold lease rate. That means the willingness of the Central Banks, who are the gold lease sources, to re-grant gold leases as they all expire yearly. The supply side of the gold lease also represents the Central Banks' willingness to grant new gold leases.
However, the demand for new gold leases is now dead in the water. Therefore, higher lease rates cannot be affected by that factor of supply/demand.
That leaves only one viable possible reason for an increase in the gold lease rate.
That factor would be the lack of the willingness of some, probably not major, Central Banks to continually and into infinity renew by re-grant the gold leases that mature yearly for all eternity. It should be remembered that during the Ashanti Crisis, it was a minor Islamic central bank that declared it was willing to fill all leasing demands that broke the lease rate and in turn help gold off the $350 level! Most certainly the Central Banks representing the 28 Islamic countries planning to join in the Gold Dinar strategy of June 2003, would not renew gold leases now.
As a result of the highly publicized derivative credit downgrades made by major credit rating services on international commercial banking operations that are the gold cartel dealers, smaller central banks will be concerned about many current gold dealer' s creditworthiness. These secondary central banks will defect from the Club of Central Bankers by failing to automatically re-grant gold leases.
As a result of this possible action, the gold cartel dealers, who generally have accepted in their deals with gold lease clients the legal/financial responsibility to provide the roll-over of the gold lease for their clients, will have to seek a new gold lease elsewhere. This new gold lease demand, with a lower gold lease supply due to credit downgrade revelations, is what I see as the primary reason for any new rise in rates.
Has this occurred? We shall see, but 1.6%, the reported level even if it is factual, is still a pitifully low cost of money. Yet if it exists, it has a TA implication which would be important.
SEE also my editorial posted today: Central Banks Can/Will Control POG Forever. WRONG!
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