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0912 EST Monday February 27 2006

Good Morning: The past week certainly provided a number of tests for equities, which appear to have been passed with flying colors. Intel INTC dragged the Nasdaq lower, earlier in the week, but on Friday, the Nasdaq came back impressively and could break out to higher levels today and into month's end. With the S&P nearing monthly, yearly and multi-year highs, a monthly close around these levels or any higher could really elicit a strong breakout to new highs and continuation of this emergingly powerful uptrend and should draw the Nasdaq higher along with it. Much may depend on how oil behaves in the coming days, but as we have seen, it seems to be less of an influence on equities of late, having little negative effect when Crude Oil briefly retested the $69 level, before dropping back to just under $60 and then rebounding on colder weather and the unexpected Friday disruption scenario in the Middle East and to a lesser extent out of Nigeria.

Oil actually looks like it could break down some again, however, a move above $64 might set in motion a potential renewed uptrend and a possible breakout to new all time highs. It would probably take some kind of exogenous event catalyst for this to happen, or some kind of inventory shock number that could return the whole Energy complex to super bullish again and even the fears of hurricanes or other sorts of disruptions later this year. Nothing can really be ruled out in regards to oil and there is still the wild card of an unexpected demand side blowout that could re-create the kind of anxiety over Global growth in demand from such rapidly growing economies as China, India and Latin America whose middle classes are as large as the entire US population and are rapidly moving towards US consumption levels and that is something that has not entirely been factored in to the current Global demand - supply equation.

On numerous occasions, we have expounded the idea that the solution to America's future Energy needs, lies in the 400 plus year supply of coal that lies beneath its territories that we believe is every bit as rich, if not more valuable than the Saudi Arabia's massive oil reserves.

The solution is staring at us in the face and the first hint of possibilities that Coal can bring to 'weaning the US off oil' and replacing current gasoline supplies with Ultra Clean Fuels, has been demonstrated by the massive potential that the Alberta Tar Sands might deliver, buying us sufficient time to make the transition to the next generation of fuels. North America's coal reserves potentially may dwarf the estimated 2 Trillion Barrels of Oil that are now thought to lie within the Alberta's vast hinterland. The emancipation of America's Energy is coming and we will be outlining our ideas and thoughts on this as soon as time permits as we've now promised to do for some time. Necessity is the mother of invention and just as the North Sea Oil came in just in time following the 70's crisis, Energy's future lies in Tar Sands and Coal.

Gold and Silver moved up sharply last week with Silver closing less than 30 cents shy of the psychologically important $10.00 resistance. It is important to keep in mind that Global Gold and Silver demand is growing at a near unprecedented pace and supplies are drying up, so that is partly behind the very powerful uptrend that has manifested itself since July last year and as such surprises could be on the upside, much as what occurred last week, confounding many Gold experts who thought that Gold might correct further. Whether Gold is tracing out a pattern in 2006 much like what began in 1976, exactly 30 years ago, many investors back then underestimated how super strong the market was and almost no-one foresaw a near unstoppable four year bull right ahead. As we have said here many times, Gold has a very strong propensity to increase by a factor of 7 fold from its lows to its highs in each secular bull move. It did this twice within one decade of the 1970's, initially from $30 or so to $210 and then following a pullback to $125 or so, it soared to $875, or 20 fold for the entire decade. Silver did even better, rising from around $1.28 to a stunning $50.36 in one of the most spectacular blowoffs moves of all time. Records are made to be broken and some of our long term work projects Silver to between $75 and $125 per oz over the next 15 years. The seven fold projected move off the recent secular lows in Gold of 1999 ~ 2001, actually could see Gold as high as $1,785 within a reasonable period and some have Gold being worth $2,200 today adjusted for inflation over the past 25 years or so. This is why this is a very powerful trend...

Trade Well
From the Desk of Savant

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