Tuesday, October 23, 2007, 2:11:00 PM EST

Author: Jim Sinclair

Many of you have asked what exactly I mean by “This is it,” so here it is in point form:

1. There is a rampant, serious financial problem with terminal potential and no practical solution hidden just outside of the public’s view (OTC Derivatives).
2. Because central banks have gotten so out of hand and political which cannot be controlled by investors or the man in the street, we need to adjust our actions so that each person takes on the responsibilities normal to central banks for their own finances.
3. Everything we buy is getting more expensive and many assets people have, other than gold, are losing value. Because of this credit is not a proper idea regardless of the weak dollar for the majority of people reading this.
4. Major financial institutions, Internet financial entities and banks operate without transparency where their derivative holdings are concerned. Losses the financial institutions are publishing are considered by media as having extinguished all the risk. I do not believe this. I believe they are still marked to model, only the model is moving slowly towards reality of worthlessness.
5. There is an acceleration of bankruptcy among financial institutions. This translates to the individual needing to act as their own financial institution by having their share investments in paper form, gold in their close possession with no one in-between and available cash. The individual must be their own bank and central bank as one has failed us and both may.
6. The savings rate in the US is negative while the expansion of credit is totally over the top.
7. Business is turning south so the US Federal Budget Deficit will move up exponentially.
8. The US dollar has become a bombed out and lost battle zone. There is nothing good anyone can say fundamentally about the US dollar.
9. Non US entities are fed up with financing the US consumer and US Federal activities. This is clear from the recent TIC report, which is now down trending.
10. Financial privacy is non-existent.
11. There is a model for exactly what is happening now and that is the Weimar Republic. Name war retributions as OTC derivatives and you begin to see the picture.
12. The US dollar has now made a clear indication of the final head and shoulders; the massive formation from the absolute top is breaking down.
Number 12 is the item that impacts all of the above because of the dollar’s technical position now beginning to reflect the dire fundamentals. This is it

This is it because you now have to perform not only as your own bank but also as your own central bank. This is it because the US dollar has completed a major head and shoulders bear formation, pulled back to the underside of the neckline and thereafter declining below the major support line drawn from the beginning of the big dollar bull under Chairman Paul Volcker. Volcker made the dollar and Greenspan gave it all back to Asia.

The dollar break below the recent and most important major, major support line drawn from 1980 to now is the fundamental basis which will push Gold to $1650. The US dollar is without any doubt in my mind is going to .7200, followed by .6200.

Ladies and gentlemen, prepare to defend yourselves.

Visit Jim Sinclair’s website at www.jsmineset.com

By Peter Schiff

As a contrarian, it is my nature to worry when too many people start agreeing with me. Currently, many of my most vocal critics, who had previously ridiculed my warnings about the dollar, now concede that it will continue to decline. With so many people now on the bandwagon, some currency watchers have asserted that sentiment now has nowhere to go but up, and that the stage is set for a dollar rally. Although I am unnerved by the company, I take solace in the fact that the conclusions that many of these nouveau-dollar bears draw are completely off the mark.

The group is united by two basic assumptions. First is that the dollar’s decline will be orderly, and second is that the decline will actually be positive for both the U.S. economy and the stock market. Therefore, other ways to confound the consensus would be for the dollar’s decline to be disorderly or for it to be negative for both the U.S. economy and the stock market.

For the dollar to register a significant short-term bottom based on negative sentiment, I feel there would have to be a much greater sense of panic associated with its weakness. However such is clearly not the case. The overwhelming consensus is that a weak dollar is good for America. Ironically there is more worry in Europe over the strong euro than there is in America over the weak dollar. My prediction is that before we get any significant dollar bounce this complacency will need to be replaced by outright fear, and that the dollar needs to fall more sharply as investors actually act on those fears by dumping dollars.
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