The Ellis Martin Report Interview with Jim Sinclair
February 6, 2012
TEMR: Join me know for a candid interview with America’s preeminent expert on precious metals, commodities and foreign currencies, Jim Sinclair. Mr. Sinclair is the President of sponsor, Tanzanian Royalty Exploration Corporation, trading on the Amex division of the New York Stock Exchange under the symbol TRX. Tanzanian Royalty focuses primarily on gold assets strategically located in the Lake Victoria Greenstone Belt of Tanzania, one of the most prolific gold producing regions in the world. The company acquired a 55% interest in the advanced stage Buckreef Gold Mine development project which could see commercial production in 2014. Previously to helming Tanzanian Royalty, Mr. Sinclair was the founder of the Sinclair Group of Companies which offered brokerage services in stocks, bonds, et cetera, operating in New York, Chicago, Kansas City, Toronto, London and Geneva. He was an advisor to Hunt Oil and the Hunt family from 1981 through 1984 for the liquidation of their silver position as a prerequisite for the $1 billion loan arranged by former Fed Chairman, Paul Volker. Mr. Sinclair was a general partner and member of the executive committee of two New York Stock Exchange firms and the President of a commodity clearing firm as well as Global Arbitrage, a derivative dealer in metals and currencies. And, we’re pleased to have him as a weekly guest on The Ellis Martin Report. Jim welcome back to the program. You sound exuberant.
Jim Sinclair: Why shouldn’t I?
TEMR:Extra exuberant today.
Jim Sinclair:Why not?
TEMR: Is it because of the good news I just read about with Daniel Snow from Energy Equities?
Jim Sinclair:That’s very nice. It’s really because I just feel good. You know, that was last week but it doesn’t necessarily mean, you know, anything other than yippee doo I feel good.
TEMR: Well, it’s good to hear somebody who’s still feeling fantastic. It’s still morning for us here in California. You’re well into your afternoon there and you’re still feeing wonderful. That’s fantastic.
Jim Sinclair: I couldn’t believe it when I heard you were on the phone. I said this must be 8 o’clock in the morning or something.
TEMR: It’s actually 10 o’clock in the morning here.
Jim Sinclair: That’s worse. I honestly see things, you know, like, what I things today’s conversation should be about, unless you have other specific questions.
TEMR: No, go ahead.
Jim Sinclair:I think today we should talk about the spin on the employment figures.
TEMR: Oh, you know, that was going to be one of my questions. It’s a huge amount of spin coming out from every single angle.
Jim Sinclair: Un-bloody, believable. I’ve never seen anything like it.
TEMR: It’s like a heyday now.
Jim Sinclair: Bliss has broken out everywhere.
TEMR: I know. But that’s not why you or I are happy this morning is it?
Jim Sinclair: It may be contagious. I don't know. Everybody is so happy. ON financial TV they're just going bliss into bliss and giddiness. So, you know, I think it might be catching.
TEMR: Well, you predicted this exuberance a few weeks ago and by gosh it's started. We're well into February right now. How are you feeling about this "positive economic news" that's being pumped into our psyche by the government and the media at this time?
Jim Sinclair:I think it's actually reached a level that has to be defined as a spiritual level. I have never seen an attack of bliss come out of economic figures to the degree that the report on employment has developed. What we need to keep our eye on is not necessarily the machination of our money bunnies reporting from the various TV stations about unemployment. But, really the most important factor is what is its effect on the U.S. dollar because down deep and understanding the figures and recognizing that one of the finest way to create a good unemployment figure is to stop looking for a job. The 80 to 82 range on the USDX is the key level where fundamental selling has taken place. Fundamental selling based on the advent of QE3. Fundamental selling based on the clear (inaudible) that's used when the U.S. Federal Reserve created the $500 billion plus swap line and the IMF created its rescue fund and invited external non-member contributions to be able to make at least the first quarter rollover in the euro debt possible. All of that's going to be filtered right into the dollar. And, the competition between the management of perspective economics, clearly that's what you see on the airwaves, what you see on the headline on the Wall Street Journal Saturday, Sunday edition, clearly all of that will resolve itself into a common denominator which can be defined as the price at which the dollar trades on the USDX Index. There's a terrific amount of resistance right now at 79645, at 79.645, which in today. And, between 80 and 82 I believe there's a fundamental stonewall created by those significant dollar holders, which really see that position to be a position by default, that wish to diversify out of the U.S. dollar.
TEMR: Are we talking about the Chinese possibly and some entities in the Middle East as being, so called, non-member contributors?
Jim Sinclair: I think you're speaking about China particularly because on our last conversation we defined the supply of dollars required would come from Fed swaps. And, the management of the euro with that 1.3 in front of it, which is almost inexplicable looking at the euro's condition and remembering that it traded at a 1.19, you look at the Chinese as being the (inaudible) of the euro and you look at the U.S. Fed as the suppliers of the dollars required in order to prevent another liquidity crisis.
TEMR:You've got these banks, such as JP Morgan, in bed with the Chinese entities. And, what do you think their end game is when they're touting their business over there in China?
Jim Sinclair: Well, when there's business to be done obviously it's the establishment that does the business. And, the fact, I wrote a book, as you may know, I think it was in 1995 it was published, dealing with the future of China, India and Africa. And, clearly there's really no stopping China because regardless of whether the swings China might have from time to time, like all economic cycles, when you begin to incorporate into an economic system even the smallest percentage of a huge population you create markets as big as Euroland itself in one swoop. So, there's no question in my mind that the leading economy of the world will be China, second U.S., third India. And, I think you could probably have a trade between U.S. and India between who will be second and who will be third. It's simply when you enfranchise into an economy even the small percentage of the huge populations you create markets for consumption the size of Spain, the size of Germany, et cetera, et cetera, until you've actually created a new Euroland. So, China; so, doing business in China is an absolute necessity. Now China has been for a long time politically isolated, if you will. That (inaudible) isolation broke down in '85. And, China became business people. But, if China, if you've been in there or if you do business with the Chinese, you'll discover quite quickly that China hasn't changed at all. The Chinese are Maoist that want money more than territory. Maoist that want money more than territory. And, the analyst who discuss China seem to believe that China's economy will function very much like an economy in the West were free choice has a great deal to do with markets. China has free choice but as Maoist who want money, believe me, when China's population is told to march they being and they march. So, it's an entirely different situation. The major wealth families, in the biggest banks in the world, the largest international corporation all have to be established in China and India.
TEMR:Is it in; it's got to be in the interest of China therefore, with so many dollars at their holding, to participate in QE3.
Jim Sinclair: It's in China's benefit not to have the euro go into a total crisis situation. It's in China's benefit to contribute to that as much as possible. It would be in China's benefit to offload dollars by whatever means. But, as it seems now China is in the market for euros while the Fed supplies the dollars to prevent a liquidity crisis.
TEMR: Where does the yuan fit within all of this?
Jim Sinclair: Most likely a reserve currency by default. Nobody should want to be a reserve currency because it carries with it as much as a deficit in what you're doing as it does in credits in terms of your corporate internal strength. I would suggest a reserve currency by default.
TEMR: You were very optimistic the last time we spoke about general equities and gold stocks, at least with the general equities in the short-term and by that I mean a year or two out.
Jim Sinclair: General equities there's a (inaudible). And, it has been correct forever and it's going to remain correct forever. The grease of the wheels of the equity markets is liquidity. So, as you supply liquidity the wheels turn faster and easier in a sense of higher prices regardless of whatever's going on in the general economy. Since I don't believe that these employment figures are in fact truly reflective of the employment situation I would say that it could be that just quite recently has been the positive for equities. The underlying stage, let's say, foundation, if you will, that will prevent equities from imploding in difficult business is the fact that QE3 does exist as we're speaking, certainly exists on a global scale, as we've discussed with the Fed action. So, I think the floor under these reactions is provided by QE while probably this recent few days has been more a product of the employment figures than anything else.
TEMR:So, the status quo wants to remain in power and is, I'm going to say, Jim Sinclair is not necessarily going to say it, the books might be cooked, might be, underline, underline, underline, might be cooked in order to keep everything the way it is come November. Now these 5 million people that are unemployed in the U.S. are they going to vote or are they not going to vote?
Jim Sinclair:They're going to vote. I'm sure they're going to vote because that's the way a citizen exercises whatever political power they have. If they didn't vote they're accepting their situation and that could only be because a depression. I think they'll vote. And, I think they'll vote against whoever is in office.
TEMR: So, no matter how these numbers are cooked, baked and taken out to a cake sale it doesn't necessarily change possible reality in November.
Jim Sinclair: Well, you're basically asking an interesting question. If you could fudge the figures in 1930, would you have had a depression until 1940? My position is more the changes that have been made in the means by which the figures are calculated, and a very good commentator on that is David Williams and Shadow Statistics. The way the changes have taken place to benefit more positive figures is going to continue to be overrun at least to a point of neutral by reality. I don't think that the figures are as much fudged as the means of calculating them have been set up to clearly benefit the positive result rather than a negative result. I guess that might be a definition of fudging.
TEMR: Oh it's all on how it's reduced isn't it?
Jim Sinclair: Yes. So, I don't think that they could just absolutely just change the figures and put out anything they wanted to. I think that the negative pressure on employment, meaning those that are unemployed is so significant and business is doing nothing but bouncing along a bottom that it really hasn't shown signs of an intact uptrend. The only reason car sales are so high is because if you lose your house you can go buy a nice Cadillac Escalade for $500.00 and live in it. It's the place where subprime loans thrive today. So, the business environment out there is not supportive. The significant return to employment at the rate that would be required to established significant recovery for those that are looking for a job over the next year or 5-years. So, at best I think the employment reports will be rather neutral. This exuberance right now is more an attempt at management of perspective economics. That is if you can make markets ebullient you might change business decisions. I don't think there's enough steam out there to make that happen. So, I would suggest that the coming reports are going to be a little less favorable then what we've just seen and that QE3 will be the basis to maintain general equity prices during the election year.
TEMR: So, we don't see a lot of positive change that could happen within 10 or 11 months to counter exploit the unemployment situation that exists.
Jim Sinclair: No.
TEMR: No.
Jim Sinclair: No I don't believe you can see that. But, I do believe that every effort will be made through the addition of liquidity to prevent it from rolling over on the negative side.
TEMR:Changing the subject just a little bit although it's related, what can the American consumer do to protect his or herself against what's coming? Should we just get rid of our credit cards right now and only buy what we can afford?
Jim Sinclair: You basically hit it on the nose. The average consumer can't go out and make investments that will benefit from these difficulties. But, the average listener can certainly pay attention to their own situation. And, if the problem we have, and it is so, that an entire world is drowning in debt then whatever can be done to lighten the debt load of each person should be done. In other words you've got to bite the bullet. And, you should consider yourself extraordinarily lucky if you're in a position where you can do that. Standard living is changing. And, the attempt to maintain prior standards is what causes bankruptcy. And, if the condition is bankruptcy then the listener should face it as it is and do the necessary because it's not going to get better. So, it's a willingness to accept a different lifestyle that will keep you out of getting into more trouble. Trying to maintain a past lifestyle as a result of our banks and financial intuitions destruction of our economic system is impossible. Recognize it and do the necessary.
TEMR: Well, what if you're addicted to borrowing on your credit cards, like somebody might be addicted to smoking or drinking, that you can't stop?
Jim Sinclair: Well, like any other bad habit you've got to go to the bottom before you can change. You've got to admit you have a problem before anything can be done. So, enjoy buying a new TV. Get a couple of new cars. See if you can get a house or two and wait for the explosion.
TEMR: You know, it's been my philosophy for a long time that instead of buying these TVs and gadgets, and, you know, I'm as guilty of it as anybody, divert some of that into precious metals.
Jim Sinclair: Well, that does make great sense. But, for the average guy how about diverting it into bringing that debt or consolidating the debt and stopping it right here. Or if you are bankrupt go bankrupt. The ability for listeners to go out, again in a general sense, invest in gold or gold mining companies or the type of items that will benefit from this unfortunate situation they just simply don't have the ability. What they've got to do is say, what can I do? And, then define it and do it. I mean, basically if we're talking to people who are alcoholics where debt is concerned and they think they're having a problem they can't even get into step number one for recovery.
TEMR: Well, essentially if you're not in the markets right now, you don't know anything about precious metals or . . .
Jim Sinclair: . . . even yourself. I look everywhere to see where expenses can be cut. You know, you ask yourself, how many suits do you need and isn't one car enough? You look at your own lifestyle and recognize that things are changing and you've got to change with it. Changing politicians does not undo the damage that's done. And, during an election year there isn't a politician out there that's going to take any firm stand in any matter to be able to overcome the problems. And, the opportunity to change what we have now has passed us. The damage done gives us a situation where there is no practical solution. If what is conservative and right is to be done you could probably hear the economic explosion on Mars. You can't do the right thing politically at this point in time without creating as much harm as the problem itself.
TEMR: So, whether you're financial straits are good or they're poor you're recommending that everyone basically consolidate.
Jim Sinclair: Absolutely. Bite the bullet. Look around you. See what's there. Don't listen to the great employment figures, which will give you the hope that tomorrow things will get better, that make you go out and say, yeah I think I will buy that foreclosed home and speculate or that just says go out and get yourself a new suit or whatever. Consolidate, absolutely this is what must be done.
TEMR: And, do what with those consolidated funds that you might have?
Jim Sinclair: Just enjoy. You know, there's a life out there. There's people. There's family. There's a Super Bowl game. Whatever it is that you enjoy that doesn't cost a lot of money. You know, be under less tension. Live life. You don't have to live life by living things.
TEMR: You know, it's amazing how many people, at least I hear of this, I haven't seen a lot of evidence of this, but I'm sure you have in your travels, how many folks in these poor countries truly are happy.
Jim Sinclair: I've seen happy people destroyed by wealth. Wealth isn't going to buy you happiness. If you're not happy before wealth isn't going to help you at all. You'll suffer from the syndrome of winning the lottery. You know, if everyone around you has gone mad maybe it's a good time to seek sanity.
TEMR: And, on that note I wish everybody that message. Seek sanity. Enjoy life and take a nice walk if you can.
Jim Sinclair: And, a glass of cold water. It's terrific.
TEMR: I'm drinking one right now. Jim it's always a pleasure to speak with you. I really enjoy our new discussions. And, I look forward to speaking with you again next week. Have a fantastic rest of the week.
Jim Sinclair: Well, thank you very much Ellis and I'd like to thank the listeners.
TEMR: I’ve been speaking with Jim Sinclair the President of Tanzanian Royalty Exploration Corporation, trading on The New York Stock Exchange under the symbol TRX. Listen to this segment again on the homepage of our website, ellismartinreport.com.
2012 Ellis Martin Report All Rights Reserved
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