The Catalyst For Financial Disaster

     Author: Jim Sinclair

   
   

Dear Friends,

A serious event occurred today. This event was the very public international recognition of more off balance sheet so called  assets  revealed as having little, if any, value.

This event is arguably the most serious financial upset ever. If you have not protected yourself, it is getting very late - maybe too late.

Your best hope is that this event is so complex that the herd of self anointed experts has no clue what that vehicle is, how large it is and therefore the profound meaning it has.

Gold, serious junior gold shares (the only seriously underpriced and therefore real value in equities) and non-dollar short term federal currency instruments are your sanctuary. You better get there, and get there FAST!

 

Click here for the criteria you should consider when selecting junior gold share situations.

 

The meaning of this is not only are Freddie and Fannie s troubles much costlier than realized, but now there is an entirely new definition of market-less financial entities with off balance sheet assets that undermine primarily the US and now international banking systems. Conduit mortgage OTC derivatives will have to be marked down now that the sun is shining on them.

The U.S. mortgage industry transformed itself in a way that has opened dangerous SIV sub prime real estate conduits to global capital markets.

A conduit loan is priced by swaps and swap spreads, thereby becoming a package of various OTC derivatives generally derived from a formula that would make Einstein look like a kindergarten mathematician.

By turning mortgages into securities, lenders created vast distances between homeowners and their mortgage holders, who can be anywhere in the world such as Australia.

US banks have written down $450 billion in bad housing loans. The revelation from NAB means that they will now certainly need to take provisions to $1,000 billion. Write-downs of $1,300 billion and perhaps even more are in the cards.

That guarantees the USDX at .6200 and more likely at .5200.

That guarantees gold to reach at least $1650 much sooner than I anticipated.

This strongly suggests that my estimate of $1650 is significantly below the price of gold coming soon.

This opens the probability that a modernized and revitalized Federal Reserve Gold certificate ratio tied to the M3 will evolve into the monetary system.

The greatest economic crime ever committed is OTC derivatives. Those that proffered these will have killed more people than most wars.

This is it and it is NOW!

Respectfully yours,
Jim Sinclair