stagflation?? oh dear......

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    A bit of history before the stagflation piece (in part)

    all on 'stagflation' can be read at

    Thursday, October 16, 2003

    Proud to Call You Friend, Kenny!

    Author: Jim Sinclair/Kenny Adams

    I have already told you how proud I am to know Kenny Adams. In my opinion, he is the finest technician in terms of market consistency and a living Remington sculpture of the old West. If there is anything to the Eastern belief in reincarnation, then the bond between us comparable to that between Butch Cassidy and the Sundance Kid during their famous jump scene.

    Kenny writes with a style that he speaks with. He has lived a life that he doesn't really know is totally unique. He is a man of honor. Kenny is a risktaker par excellence, a successful professional gambler, a market analyst whose work has been so good that people have actually stolen his notes and my friend.

    The following note from Kenny discusses some old mining misadventures. It struck such a cord that I pondered sharing a small part of it until my CFO said, I know you are going to do so do it! Here it is.

    "Thats what a coupla of rounders did to H.A.W. Tabor in Leadville, Colo. back in the late 1800's. They Fired a shotgun full of rich silver ore into the ground, filed a claim on it and then sold it to him for a few thousand bucks. He sold his dry goods store to buy the claim.

    After he Dug one hell of a hole, he finally realized that the claim had been salted. But he was so embarrassed that he swore he would spend the rest of his money diggin away until he either went broke - or hit somthing. When he was down to about 6 cents, he struck the biggest silver vein in all of the west at the time. Named it "The Matchless Mine." He married Baby Doe Tabor (best looking hooker in Leadville) and got himself elected a U.S. Senator.

    He and Baby Doe went bust in the great panic of 1893, when silver fell to nothing. He died soon thereafter, but told Baby Doe to never sell "The Matchless." He assured her that silver would come back bigger than ever. She believed him and lived penniless in the old mine shack until she died about 1931 or so. She Was found frozen in the mine shack, if I remember correctly.

    I was last at the old shack at the "Matchless," in the late 1950's. In the old days, the mines used a windlass (I think it's called), to lower the miners down the shafts, when the main or entry shafts were vertical. They used burros haltered to the "windlass turn" to walk around in a circle, letting the rope drop the miners down in one ton ore buckets, and then walk the other way to pull em up out of the shaft.

    What most folks don't know is that they also dropped burros down those shafts to spend their lives pulling the ore carts back and forth, in the horizontal shafts. As such, there were hundreds - maybe thousands of burros that were born and died way down in the mines all across the west, never having seen the light of day. Amazing - huh?

    Anyway, Tabor had a favorite burro that been born way down in the Matchless, and he had him brought to the surface. He harnessed him to the windlass (inside the mine shack), where he worked untill he died. Then, Tabor had the burro stuffed and kept him sitting right
    there in the mineshaft watching over the place.

    When I was there in the 50's, that stuffed burro was still there, standing in the same place he'd always been, although the varmits had just about eaten his hide off.

    Never coulda been a miner. Those old shafts give me the willies, and I've been down in more than a few. If you remember, I don't do well when I can't see the sky. Went down into the Sulpher Caves in Glenwood, Colorado. The same caves where Doc Holiday went, in hopes of curing his consumption (TB). The deeper you go in the caves, the hotter it gets - and the greater the sulpher gases, until you can't breathe at all.

    Course the sulpher caves are what finally accelerated old Doc's TB and did him in. He's still buried just outside Glenwood on the road to Aspen. Was a local hero, as he singlehandedly fought off a small indian raid while he living there. He had gone to Glenwood from Tombstone and the gunfight at the O.K. Corral. I know all of this, because as a kid, I traveled and lived all over the western slope of Colorado, trying to make a living playing poker in the sawdust joints.

    My last game in Colorado was in a place called "Cotton's Social Club." It was an old 6 table pool and domino hall in front, with the poker action in back. Cotton would pay me to swamp out the hall,
    clean the spittoons, and bed down on one of the pool tables, when I was down on my luck.

    You really gotta be outa luck, when you hafta clean spittoons, but it does wonders for character."


    Thursday, October 16, 2003

    Stagflation Evidence Recognized by Acclaimed Investor

    Author: Jim Sinclair/Herald Tribune

    Stagflation is a term coined by my friend H.D. Schultz back in the 70’s and it’s something I am seeing more evidence of each day. To see that Sir John Templeton now anticipates this phenomenon only deepens my concern. Below I’ve excerpted a small part of this article for your review. It is available in its entirety at

    Templeton feeling bearish

    The legendary investor predicts the U.S. dollar will lose 40 percent of its value.

    [email protected]

    SARASOTA -- Legendary investor Sir John Templeton is worried about the U.S. economy and stock market.

    Gary Moore, a Sarasota investment adviser who met with Templeton last week in the Bahamas, says Sir John has never been more bearish.

    Moore says Templeton is telling investors to avoid U.S. stocks and sell off excess residential real estate. He's also suggesting they buy bonds -- not U.S. bonds, but Australian, New Zealand, and Canadian bonds.

    The reason for all this, Moore says, is that Sir John, who founded the highly successful Templeton Growth Fund and Templeton World Fund, believes the dollar will lose 40 percent of its value against foreign currencies in the coming months, especially the Japanese Yen and Chinese Yuan.

    This depreciation will cause the Chinese and Japanese, who own 36 percent of all U.S. foreign debt, to sell their bonds and mortgage obligations and take their money out of the country.

    When that happens, market forces will cause interest rates to rise, choking off investment in residential real estate and forcing the construction industry to contract.

    Stagflation, a combination of economic stagnation and inflation, will then set in, Moore said.

    U.S. manufacturers will face higher costs of production, but they won't be able to pass on price increases due to continued competition from lower- cost manufacturers in China and India. Profit margins for U.S. corporations will be squeezed and stock values will suffer.

    "Stagflation is hell on equities," Moore said.

    In turn, U.S. consumers will see their living standards decline, causing them to pull back on spending, sending another negative shock through the economy.

    Templeton, who is 92, could not be reached for comment. But investment advisors contacted by the Herald-Tribune did not dispute his logic.

    They all agreed that the greatest fear hanging over the world economy at the moment is the possibility that the value of the U.S. dollar will crash.


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