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Date Posted: 19:59:35 08/17/03 Sun
Author: siempre
Subject: Gold Alert from Jim Sinclair

Dear Friends,

As I communicate with you concerning the market, technical disciplines,
and the means of trading, I also need to write you about staying
focused on what this gold market is all about.

It is about a financial Tidal Wave that is headed directly towards us
at 700 miles per hour.

Gold is financial high ground in this situation. Gold is the ability to
be insured against the results - not of what may be tomorrow - but what
is reality today. The long bonds have topped but that phenomenon is not
the product of an economic recovery. It is the product of the end of
the line for deceit economics in its worst transgression: the
over-the-counter derivative.

It is known but never spoken of except in hushed circles. It is hoped
that if the media does not define the problem it might go away. But
that was before the long bond dropped from 123 to 105 in an almost
straight line. The Tidal Wave is in motion and it is hitting shore now.

After finishing my introduction to the gold futures and share option
article earlier today, I came down to join my wife and eldest daughter
who had just arrived for a short stay from Tanzania where she
permanently lives and works. I had planned to review the new issue of
the Economist and read the Sunday New York Times business section, the
only part that really interests me.

I started with the article titled, "Mortgage Markets Are Out of
Control." At the end of this article it said: "Mr. Bianco argues that
the extreme volatility in the market suggests that the players have not
properly managed their risk."

I have already told you that there was not one derivative out there
when the market broke in long bonds that was properly adjusted towards
the top of the bond market and therefore the bottom of interest rates.

In terms of this huge market, few have made that adjustment - possibly
as few as 5%. The article goes on to say: "Now, it's the higher
borrowing costs and their grimmer implication for which everyone must
be prepared."

Then I moved to the Economist where on page #59 I started reading the
article: "Who is Carrying the Ball." This article was focused on many
aspects of the so-called risk transfer from the "few" banks to the
"many" willing and capable of accepting it.

This article gives special attention to the insurance programs that
supposedly protect bond holders from financial problems the companies
might have and therefore the insolvency of those bonds. This is called
last risk insurance.

The article properly pointed out that this so-called insurance is an
over-the-counter derivative. The amount of money involved here is a
mere two trillion US dollars. Logic tells us that where the risk is the
greatest, the risk takers are the least in number.

You can only redistribute this type of risk from the "few" to the
"fewer." In all probability these few are the big six US derivative
dealers themselves and their financially bullet proof foreign
subsidiaries. Those subsidiaries are in all probability Chai Walla Inc.
(See "A Call to Battle" Aug. 13, 2003), the last and financially
weakest risk holders in the daisy chain of the derivative.

The derivatives are bashing the bond market and the recent little rally
is only one moment of illusion between two moments of great bond market
distress. Higher interest rates are not being spoken of as the killer
of an economic recovery. No one is pointing out that there isn't enough
of a business recovery to be responsible for the collapse of the bond
market so far nor is anyone ready for what is to come.

We have fought the gold war so long that it is easy to fall into the
trading trap and lose focus that gold is our life raft in a financial
sea where the movie, "The Perfect Storm," would grossly understate what
is actually HAPPENING NOW.

Therefore, in all my answers concerning trading that seems so important
to this Community, please don't stop watching the ball. The bond market
top is in. The 5 fundamentals of a long term bull market in gold are
now functioning.

The bond market has broken more than it should have over a short period
of time. The derivatives are exploding now and we might just go
straight to and through not only $400 but $500, $600, $700 and up. That
is how it happened at the end of 1979. No one knows for sure, however.
I certainly do not. But I know it is possible right now and right here.


So with all the trading talk, do not give up your core positions. You
might find out that you jumped out of the life boat and you have given
up your financial lifeline by trying to be too fancy at just the wrong
time.

I will know if this is the Big One step-by-step as it occurs.

In my opinion, this is the beginning of that move. That I am sure of.


Copyright (c) 2003 JIM SINCLAIR'S MINESET () All rights reserved. For
more information visit our website at http://www.jsmineset.com/ or send
mailto:tnxinvestor@tanrange.com
Message sent on Sun Aug 17, 2003 at 4:01:40 PM Pacific Time

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