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0920 EST Wednesday January 18 2006

Good Morning: Regarding our Friday warnings of clear and present dangers over the past few days appear to have been manifested in the Equity Markets with a considerable degree of drama, especially in regards to Japan's Nikkei having to close early due to being unable to handle overwhelming volumes. Both Friday and yesterday, we warned of the potential consequences of a breakdown in Equity prices and amongst some of the leading issues we mentioned, including Google GOOG, which this morning was downgraded and expected to come in lower following our recommendation to sell it short yesterday along with the major equity indices we were short since Friday's session.

As we suggested yesterday: While this may appear to be an alarming way to open the third week in January 2006, we felt compelled to air these negative views because of the growing momentum and strength of a near runaway bull move in Gold and even though Gold did pull back some from setting new 25 year record highs and Platinum soaring to all time record highs, yesterday, on the back of soaring Energy prices, the Reuters CRB index itself soared to new all time record highs that are a potent elixir for Gold prices to potentially do the same soon, since back in 1980 when this index was around 280, Gold soared to its all time record of $875. Yesterday the inflation index closed at 342.57, so there is a considerable disconnect between the where Gold is today and where it should be basis this index. The fact is that the recent surge in this index is likely to bring in fundamental inflation numbers that reflect the latest rise in oil prices that in all likelihood could mean a continuation of the annualized rate at between 3 and 5 per cent or even more. This is a powerful backdrop for Gold to continue rising, especially with the World increasingly running out of Gold as we have reported. Gold has run up a lot, but just recently $10 ~ $20 pullbacks have tended to present buying opportunities. As we also said yesterday, its best to be very well prepared...

As we warned Friday, we felt investors were getting too complacent with the January effect as being a template for a banner year and that this theory was not cast in stone! And remind readers of that 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 extraordinarily similar 15% rally off mid-October lows that topped out on? Yes, you guessed it January 11, the comparisons being too spooky for words, being reported to you on Friday the 13th, the comparisons were 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. Gold is not going to make it easy for you either, it has a bad habit of shaking people out when they should in fact be buying dips. Back in 1979 ~ 1980, there were numerous examples of investors calling the top all the way up prematurely and since some of the most highly regarded and accurate analysts in the World are calling for $1,000 per ounce to be reached as soon as this year or next, it might be a big mistake to second guess them, as many did with Oil...

History has a tendency to repeat itself and we are preparing a special report on the potential for hyperinflation to be repeated, although this time around, it may not be some third World country, but the might US Dollar itself could become the casualty. Before you say it cannot happen and the US Dollar be cut in half, as we proposed yesterday, it's already happened over the past 30 years to a number of 1st World countries such as the UK, Italy, Japan, Canada, Australia and South Africa to name a few that come immediately to mind. Could the $US Dollar be next. The evidence is compelling and many issues are coming to a head that have already resulted in a decline from a 120 high on the index in early 2002 to an 80 low last year. That is a fairly significant decline and portends further declines ahead...

Just as we had Iraq war l & ll, we have a looming Deja Vu showdown with Iran, 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 some kind of 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 where the inflation was so incredibly rapid, severe and intense that the people dining out saw the price of their meals actually soar while they were eating! It happened in the 1980's in Latin America. Saw it first hand Brazil as prices soared 50% overnight: Is the American Dollar next? Or would you rather own Gold...!

Again repeating for the benefit of many new readers just joined: 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. 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.

Trade Well
From the Desk of Savant

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