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0920 EST Friday January 13 2006

Good Morning: Notwithstanding our recent exceedingly bullish comments and outlook thus far all year and, in just the same way as we returned to our long standing massively bullish posture since early 2003, we could and would just as easily turn massively bearish on the Equity markets, simply because we have seen this movie before and sometimes, when investors get too complacent with the January effect as being a template for a banner year, this theory is not cast in stone! In fact, against a very similar backdrop of rising oil prices in 1973, the first few days of January were notably strong at the end of an ominously similar 15% rally off mid-October lows, that topped out on January 11, that's too spooky for words, the comparisons are so closely matched. And the bad news: The 1973 top amidst a palpable backdrop of boundless hope and optimism, was the start of a devastating bear that led to a Depression in the UK and a very severe mid-decade slump in 1974 ~ 1975 and it was also the beginning of the largest percentage moves in Gold's history, where prices soared from less than $45 for Gold and $1 for Silver at the beginning of the seventies to $875 and $50 or a huge 20 fold and 50 fold move respectively.

The wild card risk here is of course something going badly wrong in regards to Iran and just as we had the ultimate showdown at the end of the 1970's, that caused Gold and Silver to soar to their all time record highs, the potential for a Deja Vu repeat performance appears to be increasingly likely and there are many similar factors that make up the overall backdrop, including a long term basing action in Gold & Silver that has only just started to play catch-up and the real potential for what we wrote about here half a year ago that no-one else was airing at that time, the looming potential "Global Hyperinflationary Threat" that back then nobody was yet seeing, but now is beginning to be aired in table-pounding terms by many and varied analysts of Gold prices soaring anywhere from $1,000 to $38,000 per ounce. While these upper range numbers may sound extreme, it's happened before: In the Wiemar Republic when people went shopping with proverbial wheelbarrows full of Money. It happened in the 1980's in Latin America. Is the American Peso next? Or would you rather own Gold...!

Prescient foresight: Should it result in anything close to even the lower extreme, let alone the upper, it could result in phenomenal riches for those who own Gold in any form of leverage and the highest form or relatively low risk leverage today, is in long overlooked Junior Gold mining stocks, especially those with proven in-ground reserves. In recent days many emerging Gold issues have had staggering gains that are reminiscent of the early days of the Internet. There are very few opportunistic and truly high quality Gold issues that represent a miniscule percentage of the 22,000 publicly listed companies. This is only the beginning, the very earliest days a la 1973... The World has not yet woken up to the full implications of what may lie ahead for Gold prices and those who are not invested, will deeply regret this lifetime opportunity, to not only insure their futures against some kind of untimely catastrophe, but in a World that is rapidly running out of Gold, every opportunity should be taken to buy dips in these issues and increase holdings, wherever and whenever it is possible to do.

On the other side of the coin, recent comments by George Soros that fit with our warnings a year ago that the Fed was going too far in their zeal to raise rates, may have delivered the 'coup de gras' to the economy that might be irreversible any time soon. Whilst the very strong World market performance over the past year, should spill over into what might continue to be strong economic performance in what may still be: "A Banner Year" The first problem that might surface, is a slowdown in the acceleration or pace of economic growth, that is very difficult to initially detect, but recent numbers are already starting to tip their hand, that the leading edge of increasing growth has already been dented and that usually shows up in the employment numbers first and then later on, as the slowdown gathers pace, things can quickly turn very ugly and that is basically what happened in 2000, when the Fed went too far back then. It should also be well borne in mind that stockmarkets are anticipatory vehicles and that when or should the economy deliver on anticipated growth, Equities could sell off on the news... The real risk with the current status is: A slowdown could have a devastating impact on overpriced Equities as happened following the 2000 highs. As we have said before, we follow things day by day, hour by hour and minute by minute, so we of course stand ready to act propitiously as events may dictate. We have been fortunate to have had some exceedingly successful days of late on our MODAR service, reflecting the very strong start to the year with Equities. We will adopt a more cautious tone going forward.

We repeat again, the hallowed words of wisdom from former Savings and Loan mess savior and recent architect of Japan's re-emergence and fantastic stockmarket outperformance, Bill Siedman: "Every recession thus far since inception, can be traced to an over-reaction by the Federal Reserve".

Yesterday, we highlighted the continuing amazing performance by Mexico's IPC Index and whilst it could still be gunning for 20,000 plus, for the first time, in sync with a possible interim top in the making in US markets, Mexico may have also set an important interim top...

Zinc is making new all time record highs on World markets, Platinum is closing in on its all time record highs of 26 years ago and Gold and Silver are acting very firm and appear to be building value at technically important levels around $550 and $9 per ounce respectively. A breakout to the upside from these levels could lead to a series of stunning rallies that could include some long lost Limit Up type days.

Trade Well
From the Desk of Savant

We have received many questions of late as to how we have chosen to profit from a "World Running Out of Gold". Those who receive our Newsletter already have the answer. However, we will be discussing the topic further in this column over the next few weeks.

Trade Safe
From the Desk of CT

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