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0920 EST Friday March 31 2006

Good Morning: Some people may think our views might border on being crackpotish at times, especially when we come up with numbers that today might be considered extreme or off the charts. But, may we remind you that when Louise Yamada came up with her at the time extreme $67 target price for Crude Oil eons ago, most investors didn't much give it a second thought and it might not have even raised a few eyebrows way back then. We may well have raised more than a few eyebrows even more recently, because many of our perhaps often interpreted as extreme calls, have ended up exceeding even our own expectations, especially by how rapidly our predictions have actually unfolded. From calling the Russian market lows in November 1998 and recommending investors place 10% of their net worth in Russia and to see that market soar 100 fold over just 7 years or so and to make similar calls on the Mexican Bolsa, the Bombay Sensex and Japan's Nikkei Index and witness these markets become among the strongest in the World over recent years, is humbling indeed. More recently we have very strongly made a case that Oil prices might soar to new highs and soon, ahead of what have been very sharp rises over recent days and in explaining our reasoning of same, in particular elaborating on the delicate supply-demand balance, or potential imbalance, that could yet occur with the slightest threat of interruption to supplies and the realization that the World is running out of resources from Oil, to Natural Gas to Gold, Silver, Copper and now apparently Zinc as well as it too soared to new all time record price highs overnight in London.

In regards to Oil, we pointed out a few days ago, that at 85 Million Barrels per day, which we cannot even manage today, is about tops for Worldwide production, if everyone maxxed out to the limit and anything beyond that on the consumption side would have to send Oil prices through the roof. So it was with some degree of confirmation, as well as an alarm of sorts to hear the World's oldly and newly anointed Oil Baron: T Boone Pickens say almost exactly the same thing, pretty much adding that any consumption beyond 85 Million BPD would in all likelihood involve a very sharp price adjustment indeed, which he foresees as upwards of $100 per Barrel to even as high as $150. And this in of itself renders Goldman Sach's own forecasts of a little less than a year ago of $110 per Barrel as increasingly credible, just as Merrill Lynch's out of the blue call for $850 Gold, also puts the Precious Metals Sector sharply in focus and behind the scenes, the $850 number might be the more conservative view, leaving those with an enviable track record such as Louise Yamada to be at the vanguard of pricing at upwards of $1,000 per ounce, which incidentally fits within our own expectations of between $925 ~ $1,025 possibly as soon as next year.

And, if you think $100 ~ $150 per Barrel sounds extreme, some other so called or previously described crackpot analyst trader at the New York Mercantile Exchange is calling for $250 Oil, we might want to start taking these crackpots more seriously: Such as, one Christopher Woods out of Hong Kong who is calling for $3,700, a lot sooner than we are, although we believe this number will be reached by 2019. We have had the honor to personally speak with someone who believes Gold could eventually soar to $38,000 per ounce and believe this, he is a pretty smart analyst, who fully understands the dynamics behind what could make that happen, better than most. Listen, it happened in Wiemar Republic in Germany in the 1920's that eventually led to World War II. Could something similar in the next few years lead to World War III? Never say Never. And, as we said yesterday, the once Almighty Dollar might not stay so mighty for ever. Still, in spite of the Dollar tanking some Thursday, almost immediately following our statements in regard to its potentially waning almightiness at hand, and in all probability, helping Gold to soar to new 25 year highs above $590 and deliver on our revised early morning prediction that March 30 2006, might actually be the day finally delivering on our prediction and promise of the first Limit Up (50 cent) move in at least a decade, if not two.

To our surprise, Silver not only went Limit Up, but beyond Limit Up in the front months, where there are actually no limits, with May 2006 Silver closing up around 55 cents or so, to close at $11.66 and reaching even higher overnight, briefly touching $11.94 in a stunning display of strength and apparently getting closer to our interim target of $16, which we now believe may be achieved on a continuing upsurge soon.
That could put Gold breaking north of $600 per ounce soon and as we've believed for a while, maybe headed for a new range of $650~$750.

The one thing that has been extremely telling of Gold and Silver's strength is that their moves have happened against a backdrop of a fairly strong US Dollar and frankly, if that continues, we wouldn't complain, as we believe it is an incredibly bullish longer term development. Still, we have to be cautious in getting too negative on the US Dollar right now especially based on this morning's rebound, as one outstandingly successful investor and very sharp analyst agrees, that the Worldwide sentiment on the Dollar may be just a bit too overly negative at this time and there is still an outside risk of some kind of short squeeze in the US unit, that in essence could unfold on a break of 91~91.50. At the same time US interest rates are at their highest levels in years and might be going higher. Treasury Bond prices have been falling quite sharply over recent days again somewhat reminiscent of what happened back in the late 70's that fueled Gold and Silver prices so sharply.

Unfortunately we've been severely limited in our ability to conduct MODAR operations over the past week due to a major internet backbone series of outages especially over recent days. Yesterday MODAR completed its first year of operations just squeaking past the $6M mark.

Trade Well
From the Desk of Savant

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