Jim Sinclair thinks that there's much hurt out there too.

Posted On: Friday, August 03, 2007, 7:08:00 PM EST

Laughing At OTC Derivatives: It Isn't As Funny As Most Think

Author: Jim Sinclair


Dear CIGAs,

Soft landing? You have to be kidding. Last week the talk was Goldilocks economy. That is total madness!

I have been screaming about OTC derivatives since 1999 and nobody gave a damn, especially the gold producers.

Other well read gold sites thought I was nuts and made sport of my views by dragging out a math professor’s aid.

I am absolutely right not only on derivatives, but on companies that do their business in the RGLD manner (assuming RGLD has staid the course) or have no derivative risk will prosper and be the only survivors of higher prices for gold among gold companies.

Last week at a Vancouver Gold Investors meeting part of the event involved making fun of me and the derivative message. Following that came the NEW 2,000 million single quarter loss on short of gold derivatives.

Still few believe.

Few juniors have a clue. They feel because they have no direct corporate loans they have no exposure. It may well be they do not know that by subordinating their property they have direct risk. They may well think NEM will somehow eat their $2 billion loss and not charge the property that the development loan with the embedded short of gold OTC derivative was taken for. They are either totally stupid, or in total denial of reality. Clearly they do not have a clue about accounting.

Ignorance is bliss. However the ignorant should not make fun of what they do not want to hear. That will not stop the process they may well not even know they are in.

When it is all said and done, there is no doubt I am totally correct.