Zeev's Turnips Patch-No Politics (ZEEV)

[basserdan]

*** Gold related post ***

James Sinclair's

General Editorial

To The Gold Investment Community

A Note on History as it Applies to Present Gold and Gold Share Market Conditions

Putting war to a vote is like asking someone if they would like to contract Ebola by voting for it? How the present US administration got itself into this box will come to haunt whoever invented the idea in the first place. If it came from any one source outside of the President himself, that person's job security is certainly tenuous at best. Since this matter has been elevated to a matter of national security for the US, is there a standing policy of asking the world for permission first? If such a policy exists among superpowers, then the world has seen its last war.

The single event that brought the US into the Second World War was not a common will to participate but rather the attack on Pearl Harbor. Prior to that, if you had to put to a vote the entrance by the US into that conflict, it would have been soundly voted down. Do you really believe that if we had asked the world for permission to enter the Korean War, we would have had overwhelming international support? Hardly!

So as the US prepares to deliver a new memorandum to the United Nations Security Council seeking a blessing for the Iraq invasion, gold, gold shares and the equities markets do their "no war thing." The only thing that brings world support for a war is victory in that war or immediate clear and present endangerrment to the country or body of countries to whom you pose this question: "May we have your permission and blessing to go to war and, by the way, will you come with us financially and physically?"

The concept of seeking permission for the unthinkable is totally flawed. Victory is the only permission for war and a sorry permisson it has been. History therefore mocks the US/UN farce presently being played out as all markets wait breathlessly for the next report of our esteemed civil servant, Mr. Blix.

How can anyone in the market assume that France and Russia, who have multi-billions of investment dollars at stake in the Iraqi oil fields, will really vote to put those fields into mortal danger? It is reasonable to assume that Saddam has learned a great deal since he put the oil fields of Kuwait to the torch as he prepared to make his hasty and highly exposed exit. Russia and France fear that if Saddam fails to deploy his scorched earth policy as he did in Kuwait, the US will, in the name of a coalition, take possession of the oil fields, pump the oil, and use the proceeds to reduce the cost of rebuilding Iraq.

Therefore, the market assumes that as hard as the US and Tony Blair (not Great Britain as a whole) lobby to get a supporting vote from the United Nations Security Council, Russia and France will lobby just as hard to prevent the vote. Neither Russia nor France will support this initiative unless they see it going strongly in the direction of the USA without their participation.

The gold share market lacks an establishment media spokesperson with credentials. Recently, a popular independent analyst of gold shares was severely embarrassed because he was revealed to be in possession of insider stock options of a once highly touted company. You may recall in my article on how to select a good gold share, I called attention to the fact that published reviews of any company had to emanate from known investment dealers, not independent analysts. This event should not be taken lightly as investors are now examining how they found the situation and whether it was via a write-up from anything OTHER than a known and regulated investment company. It was clear on Friday that some shares are correctly suffering while other gold shares are incorrectly suffering from this afront to investors and the gold industry as a whole.

Now gold companies with the following characteristics are witnessing an exodus of shareholders without any offsetting new investor interest:

1/ Hedgers - both producers and juniors - in joint ventures with hedgers.
2/ Companies with large insider stock option programs and immediate re-grant of new stock options upon exercise of existing stock options.
3/ Corporate executives who are also executives of other public gold companies.
4/ Corporate executives who hold private mineral interests.
5/ Companies that rely on independent analysts' reports, not reports from regulated investment houses, to recommend their shares.

As a result of this problem with gold shares themselves, and the "War-No War/ War with whom/Please world may we go to war" talk making bullion shorts and long traders as nervous as a Wheat Fly in final imitation of a prayerful Whirling Dervish, the gold market has not been a easy place - even for your faithful servant.

A Restatement of my Position on Gold and therefore honestly managed, transparent, non-hedged Gold Shares.

We are in the early stages of a major bull market in gold and, therefore, in specific gold shares because:

1/ Assuming the tax cut proposed by the present US administration is voted into place and there is no war with Iraq, we can calculate a cumulative budget deficit of USD two trillion, two hundred billion by 2011 (data source, the Financial times editorial section and the Economist). If we have a war with Iraq that is a fast "slam dunk" victory and do not have a cost-carrying coalition, then it is reasonable to expect a USD budget deficit of three trillion, two hundred billion in the same period. (data source, The Economist)

2/ We have a US Current Account deficit at 5% of GDP and growing.

3/ We have a record US Balance of Trade Deficit that is growing.

4/ We have a defined bull market in Commodities outside of the price of oil.

5/ We may have had a top in the long-term and medium-term bull market in bonds.

6/ We have had definitive statements made by Chairman of the Federal Reserve on December 19th 2002 in a Washington address that they are friendly to gold's role, having a clear historical precedent for gold as an anti-deflation tool for use in such a situation.

7/ Gold will be re-monetized if the Malaysian Dinar proposed by the Premier of Malaysia and 28 other Islamic countries is initiated as expected on/or before June 2003. The Arab Big six Dinar, which was rescheduled between 2005 and 2010, will also be an important factor in the equation. The present discussion is to add a signicant percentage of Euro and some gold character to it.

8/ There is a tool being discussed among significant economists and central bankers that would take the form of a modernized and revitalized Federal Reserve Gold Certificate application tied not to interest rates but to M3 creation when above 3% that could help the dollar.

9/ The US dollar has made a clear top having fallen from 121 on the US Dollar Index to under 100. It appears it is headed in this move to .92 and could actually go below .70.

These are only some of my reasons for me taking the position that we are in a long-term gold bull market, which in time will make a high above $400 this year and possibly up to $529 next year.

http://www.jsmineset.com/s/Home.asp

Regards,
Dan