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0920 EST Monday March 13 2006

Good Morning: The impressive job numbers released Friday at 243,000 new jobs created in February shows that the economy may be a good bit stronger than most were expecting and the recent decline in US Treasury Bond prices tends to bear that out and in a way may be signaling that the Economy's momentum may actually be accelerating, since during the entire expansion thus far, Bond prices have in fact been abnormally high reflecting historically low long term interest rates, which may in of themselves have been stimulative to the economy.

As we suggested earlier last week and at times past when Bond prices initially decline, that can sometimes spook stocks temporarily, but once they stabilize, stocks tend to rally again and that is almost exactly what happened on Friday, when the employment new came out it caused investors to almost entirely reassess the situation and stocks rebounded impressively, especially the blue chip driven Dow Jones.

This may be enough to reinvigorate some upward momentum into stocks, although it is important that we see some follow-through in this coming week as a failure to do so might become a troubling new sign. Can the economy continue to perform this well and can stocks also continue higher this year? That is the big question that is most likely on the minds of investors, brokers and fund managers Worldwide.

One hidden stimulus to the economy that has yet to be fully manifested may well be the growing need and urgency for re-construction of the Gulf Coast region post Katrina. It usually takes 6 months or so emergency and insurance funds to really start flowing, so that we could begin to see a re-construction boom in that region that could support the softness that may have started to affect other areas of the nation.

In addition, it seems that there are widespread areas of territory that has not been cleared since the hurricanes hit and this looks like it will be a monumental task to remove debris that could endanger lives in the event that more hurricanes hit this region during the 2006 season.

While the general consensus seems to acknowledge that this renewed strength in the economy may warrant the Fed raising rates one to three more times and those who clamor for rate increases, ultimately regret getting what they wish for, just as happened in 2000, there are other analysts of considerable reputation, who like us are very concerned about the damage that additional rate hikes could do to what has been so far, by far the best economy ever. Some other notable analysts are fearful that the recent torpedoed Dubai Ports World deal could be a precursor to a depression as it has similar sentiments and elements that eventually led to the 1930's depression and ultimately World War II. While that may be an extreme view, the fact is, depressions start out as recessions and for sure, if we continue down this path, we will eventually end up in a recession and that could lead to something much worse, especially if we have to deal with Nuclear proliferation issues, the consequences of which could be unimaginable, as it is bound to be sooner or later a situation that will lead to a major conflict.

Having made reference to the new Federal Reserve Chairman's thesis on the preventability of The Great Depression and how he would do everything in his power to avoid the same under his reign, gaining him the description by some as 'Helicopter Ben', for his statements that he would pour liquidity across the entire national economy, as if from a helicopter overhead: The thought occurred to us, that in the event of any of the above notions becoming true, this guy is going to lose his nerve and start re-inflating the economy with a vengeance, as soon as or if he detects we are going anywhere near there, because he knows only too well, that with the largest budget deficit ever recorded just in February 2006 at 119.2 Billion, his options will be severely limited to literally pouring liquidity into the economy a la post '87, and rate cuts.

And what would be the consequences of such action: Most probably a sharply declining $US Dollar and an exponential rise in Gold prices.

So in a way, the stage is set for that run-up in Gold prices that increasing numbers of analysts now believe probable added to the breaking news last week from Bloomberg News that former Goldcorp CEO now sees $2000 Gold by 2010 and whether it's the troubling forebodings of ancient soothsayer Nostradamus with ominous references to Iran etc, we also have the potential deja vu of 30 years ago looming closer.

The importance of maintaining or adding to Gold holdings at this time cannot be underestimated. Back on September 11, 2001 there were no advanced warnings and the situation brewing across the Middle East is so increasingly tenuous, a full blown War could erupt overnight.

There has been no payback for increasing escalations in state sponsored terrorism events over the past 30 years, which have in effect led to the current Nuclear standoff. If 9/11 was a wake-up call the World simply cannot allow any potential for Nuclear terror events to threaten

19th Century Whip Ambrose Bearse said: 'War is the devil's way of teaching Americans geography', now seems ever more likely to unfold.

Gold may rise sharply in the years ahead on monetary fears as indicated below, but may also rise on scarcity of supply and war fears too:


Gold Prices May Reach $2,000 by 2010, U.S. Gold's McEwen Says
March 6 2006 (Bloomberg) -- Gold prices may reach $2,000 an ounce by 2010 on demand for an alternative to currencies, U.S. Gold Corp. Chief Executive Officer Robert McEwen said.

``You have much more money than there is gold, and as people see their currencies falling relative to gold, they're going to be saying `Maybe I should have some of this','' McEwen, the former CEO of Goldcorp Inc., said today after a presentation at a mining conference in Toronto. ``And you have an industry that's consolidated, so you have less product and more buying.''

We're Very Bullish on Silver - Demand Keeps Rising - Expect Silver to Rise to $15

Bloomberg TV: Ian Telfer - Goldcorp's President and CEO: No slowdown visible as demand for Gold continues to increase from Jewelry, especially from India and China. Silver being an industrial metal tends to get burned up and is used up forever. Supplies are now dwindling and stockpiles are being used up. Production from mines around the World is beginning to seriously decline. There is a growing shortage of Silver and we think it will continue. We're very bullish on the price of Silver. Silver could to rise to $15 within the next 12 months and may spike higher as demand surges. Most Silver comes from mines that produce Lead, Zinc and Copper and in the foreseeable future there are not a lot of new mines of those types being put into production and so we see both ongoing supplies and stockpiles dwindling.

With everything going on in the World Investors who are not heavily exposed to precious metals over the coming years will deeply regret it

Trade Well
From the Desk of Savant

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