March 30, 2003
James Sinclair

Heads Up! Gold Community Alert

1/ Market Action since last week's Heads Up is strengthening and reinforcing the probability that the cyclical low for gold and gold shares is in fact taking place.

2/ The longer it takes to find a point of resolution to the Iraq war, the less likely it is that such an event will result in a euphoric stock market or dollar rise of any duration.

3/ Since the Administration publicly anticipated a different scenario for the Iraq war, there is less chance that the victory it obtains will in fact be that which is declared as victory.

4/ One of the goals of the Iraq operation is to impress the Islamic world with both US strength and determination. Should that impression not be fully delivered, the march towards the euro and gold in the Islamic world will accelerate, offsetting the market effect of an Iraqi oil settlement solely for US dollar under US management.

5/ Bureaucratic administration as nation building, unless wholeheartedly embraced by the citizens of that nation, will prove an impossible task to accomplish. There is almost no understanding in the US of the Islamic mind and ways. The endless tea and strong coffee drinking before business, the need for a 5% sponsor to get anything done, and the underlying teachings of Islam that permeate all activities, are totally inscrutable to the American way of thinking and doing.

To place an American lady in a major position of authority, although natural to us, is an insult to the Islamic men and women she would attempt to administrate. This is akin to showing an Arab the bottom of your foot or putting your thumb out to hitch a ride. In both cases you are "flicking off" whoever sees it. We stop our cars in an accident but in the Middle East, Asia or Africa for an American that is one of the swiftest and easiest ways to get yourself killed by a crowd.

Do you really believe a US Bureaucrat knows how to tell one sect of Islam from the other? Do you really believe those same people that gave you the IRS, The Post Office, and Army Intelligence (the ultimate oxymoron) are going to deliver to the world a united Iraq with a modern form of democratic government? Even US government studies say otherwise. That stands as much of a chance as Lawrence of Arabia did when he really believed he had become a full fledged Bedouin chieftain. We are more apt to get the same treatment from the "Shock and Awed" citizens of Iraq than Lawrence of Arabia received from the Turks.

In terms of world-class boners, the only events to surpass our expectations that we would be welcomed by the Iraqis with massive surrenders, open arms and flowers, is the absurd expectation that we can financially afford to police the entire world and that we are capable of building a new Islamic nation administered by US bureaucrats.
We have learned nothing from the Korean police action. We have learned nothing from Vietnam. We have learned nothing from the ruble that went to rubble and destroyed communism. Capitalism is in trouble and the whole story will be told by the action of the US Dollar.

6/ It is becoming clear that the lack of vitality in the economy, which is being blamed on the war, is not the result of the war but rather over-their-heads-in-debt consumers who are afraid of the level of unemployment that represents the heart of the recessionary psychology.

7/ The statements of Chairman Greenspan and Governor Bernanke concerning methods of super liquefying the financial system are being rehashed continually by the establishment press in hopes that it becomes a self-fulfilling prophecy.

Conclusion:
You are in a long-term bull market in gold which has completed its reaction from this market's first try to better $400. We are preparing for the second attempt.