for bears only bulls avert your eyes

Good reading from Jim Sinclair at www.jsmineset.com




Jim,

I read your blog avidly, probably because I agree with your logic.

Something you said persuaded me to send this summary of newsletters from 1929 onwards from what is now Citibank. It has been said that "history would not repeat itself if mankind didn't keep making the same stupid mistakes over and over again." Today the crowd is saying that the "fundamentals" are sound, hoping that what they 'want' is what will happen and refusing to look at any negative view to that. There are none as blind as those that will not see.

CIGA JustamereBear

News Letters of the National City Bank of New York. (Now CitiBank or CitiCorp)

November 1929; The collapse of stock speculation has overshadowed all other events in business during the past month. We do not believe the fundamentals of the business situation have changed. The countries farms, mills and factories are intact. All over the country, general business is proceeding in a healthy and orderly fashion in marked contrast to the chaotic conditions in the stock market.

December 1929; The essential fact is that business itself is healthy and has not been involved in over expansion as in the stock market. There is no collapse of commodity prices. There is no inventory problem. There is no breakdown of the banking system. There are no great business failures, nor are there likely to be.

July 1930; Since the stock market collapse of last fall, the average business man has been more inclined to question his faith in the recuperative power of the country. From most other quarters of the globe come reports of similar difficulties besetting trade and emphasizing the widespread character of depression.

November 1930; We do not believe that business will go much lower, and we think the next important movement will be upwards.

June 1931; The country is in the midst of a severe business depression and there is relatively little demand for money for either speculative or business purposes.

October 1931; Excess caution on the part of bankers in making loans is one of the reasons why business is slow to climb out of depression. Everyone seems to have a story of a worthy borrower who is unable to obtain a loan.

January 1932; Of all the markets, the decline in bonds has been most severe. Amid the confusion of the times, those who would buy bonds have been plainly uncertain as to what debts are good and what are not. This continues to make financing, and even refinancing virtually impossible.

Note, in fact the October 1931 statement was exceptionally valid. Bankers were losing money all over the place, and called loans in abandon. They were trying to save themselves, were frightened, and did not care what damage they did to others, only that they saved themselves. Just get the money back. A major reason for the depression.



Dear CIGA JustamereBear:

Today's situation is infinitely more dangerous than that of 1929. A financial Armageddon is possible due to the size (BIS Quarterly) of the OTC derivative mess. It is for just this reason that there is no limit to the monetary and fiscal stimulus that will be applied to prevent it. It is that attempt to prevent a total meltdown that will take the price of gold to and above $1650. I wish the Fed and PPT good luck because no one could possibly want to see what is coming in 2011.

Regards,
Jim