Jim,

Gold is the tool or mechanism for defeating a deflationary debt depression at the end of an economic cycle.  Many years of devaluation still lie ahead.

CIGA Eric

Click charts to enlarge in PDF format…

Dear Mr. Sinclair,

Per your comment:

"In the second great depression, gold companies went from relatively small to large dividend payouts.  The same will happen in the third great depression" Royal Gold Raises Common Stock Dividend 13% to $0.36 Per Share."

How about gold companies, (such as GXX) which offer NO dividend? In the second depression, did companies that had no dividends begin to offer them? Do you see that scenario playing out, or not?

Thank you,
CIGA TC

CIGA TC,

This time while enjoying unprecedented prosperity, most gold companies without derivative time bombs will pay small dividends, raising the salary and bonus of management.

This is the New Normal of the Depraved Age.

Gold companies have the greatest stockholders on the planet and generally the other end of the spectrum as management.

Jim

Jim Sinclair’s Commentary

Wall Street may be booming, but Main Street is bombing out.

Read here to see what the CIT situation means to businesses that have relied on them.

Dear Mr. Sinclair,

A brief update from the trenches.  I’ll title this "It’s getting dirty out there!".

On Monday I had a meeting with the local business development representative for our primary hardware supplier (an independent national wholesaler with annual revenue in excess of $1 billion).  The failure of the second largest independent wholesaler (reliant on CIT) gave the representatives company a boost due to new account acquisitions but business overall at existing customers is "weak". 

Our secondary supplier is a nationally recognized co-operative hardware supplier which recently announced its third quarter earnings.  The company was profitable and reduced its debt burden but its gross revenue was down by the most significant amount of any quarter in over a year.  There seems to be an acceleration of downward momentum.

In various meetings with additional sales representatives for smaller, local suppliers I have found that in general there seems to be price wars occurring.  The cost of obtaining goods directly from manufacturers has in most cases been either flat or slightly up depending on the product category but wholesalers have reduced prices dramatically in an effort to retain business and move merchandise. 

Every business must be run with a margin for profit and it appears to me that many are being forced to shrink that margin in order to beat out their competitors and remain active.  This is a dangerous game that allows only a fine margin for error and is simply unsustainable from a long term perspective.  On the other end we are being hit with higher costs for health insurance, tolls and taxes which makes this game all the more difficult.

Last week a major industrial supplier in our area filed for Chapter 11 bankruptcy and is the largest to date to do so locally that I am aware of.  October was our worst month to date this year with sales off over 25%.  November hasn’t been much better.

To this businessman the economies trajectory remains clear. I truly would like to say otherwise but I see the conditions and fear they are deteriorating further.  I know of too many businesses facing difficulties and talk to small business owners every day that are looking for ways to reduce expenditures, cut head counts and simply seek the survival of their entities.  What is taking place on Main Street in this country is truly tragic and is clearly overlooked by the political elite and their legislation. Let’s hope they wake up and realize how much we actually contribute to this nation’s economy however small we may be as individual entities.

Best Regards,
Your Friend,
CIGA Marc