The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

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Last Thursday I ended my e-mail by saying I see the current equity markets as very uncertain and volatile, and that I can’t over-emphasize what I consider to be the importance of ‘thinking for yourself’ in these and prospective market conditions. This was reinforced for me again Friday morning when I opened my computer to learn that on Thursday night the Asian markets had dropped precipitously (the AORD, NIKKEI and HSI being down 2.8%, 3.2% and 4.8% respectively), and that gold had fallen at 3:00 a.m. ET Friday by approximately $50 to $1,140. By 9:00 a.m. Friday morning, the FTSE was down slightly, gold had recovered to $1,154 (and later Friday recovered further to about $1,174), and the Dow Futures were down 211 about 25 minutes before the NYSE opened for an abbreviated 4 hour trading day (it closed Friday down 154 points, or 1.5%).

This activity was (and continues to be) largely attributed by commentators and analysts to Dubai ’stunning investors’ (see article by clicking here) by requesting lenders to Dubai World, Dubai’s main investment vehicle, to suspend payments on U.S.$59 billion in debt for 6 months. To me, the skittishness of the world equity markets to such a request again emphasizes the short-term thinking and immediate reaction (over-reaction?) to any news - be it positive or negative. I do not believe such activity is the hallmark of a disciplined market populated largely by thoughtful, long-term investors. Certainly if nothing else, such activity for me belies the ‘efficient market theory’ espoused by so many market followers - a concept I personally have never given much credence to going back at least 20 years.

As I see it, this is indeed a ‘Market for those with Strong Stomachs’ where:

· the more you study macro-economics, and what I see as rapidly developing changes and weightings in the world order;

· the more you study the equity markets and develop an ‘investment philosophy and strategy’ that is ‘right for you’ given your own personal risk tolerance;

· the more you study the companies you invest in, and form your own opinions as to the risk profiles of those companies and whether those risk profiles comply with your investment philosophy and strategy; and,

· the less you rely on third parties to make your investment decisions for you

the better off you will be, the less you will need to regularly ingest a ‘Maalox type product’, the better you will sleep at night, and the happier you are likely to be.

On my continuous point of taking a large (for many people I am sure ‘greater’) role in making investing decisions with respect to your own capital, Thursday a reader took the time to send me a thoughtful e-mail setting out his general views on interacting with investment advisors. In essence he expressed the view that he thought my advice to people who participate in the equity markets who are not knowledgeable investors is ‘as good as any’ other advice (i.e. spend a lot of time talking and consulting with your investment advisor). However, he also expressed the view that knowledgeable investors should be encouraged to have specific discussions with their advisors to determine how much those advisors really understand about the various aspects of gold and silver investments, both as insurance and, in the case of mining stocks, as investments (read equity investments generally).

This suggestions make good sense to me, and captures an idea I haven’t expressed in these e-mails, but frankly (perhaps in error) have taken for granted. Simply put, the more you know, the better position you are in to determine how knowledgeable your investment advisor is - and hence how valuable to you the advice you receive from him/her is to you. Clearly, if at any time you are not confident in your assessment of your investment advisor’s level of knowledge, in my view you ought to find an investment advisor whose knowledge base is at a level you are satisfied with. I think that by not continuously making such ‘investor advisor assessments’ you do yourself a disservice.

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The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

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U.S. Thanksgiving

First, I would like to wish all our U.S. Subscribers and friends a ‘very Happy Thanksgiving’. On a personal note, my wife and I spend 3 months each year in North Carolina, and currently are in Pinehurst. Good friends here have invited us to share their Thanksgiving celebration and we are looking forward to our 2nd Thanksgiving dinner of the year later today. To explain, my wife and I are Canadian residents. Canadians celebrate Thanksgiving in early October each year, where Thanksgiving is an important ‘family day’ but not seen as nearly as important a holiday as it is here in the United States.

As I am sure readers know, tomorrow is referred to in the U.S. as ‘Black Friday’. Historically Black Friday has been, and again this year almost certainly will be, the biggest shopping day of the year in the U.S. It is the day that begins the U.S. Thanksgiving - Christmas ‘purchasing season’ that in the past has taken many U.S. retailers from being ‘in the red’ to being ‘in the black’ (i.e. going from a ‘year-to-date loss’ to a ‘profit for the year’. I suggest you carefully watch the retail sales numbers that are (usually) reported tomorrow (Friday) night. I think they could have a large psychological impact on both the U.S.$ and U.S. equity markets next week - which if I am right may have a (perhaps significant) near-term impact on the gold price.

The Circus Rider & The Markets

Two evenings ago my wife and I had dinner with good friends. Both are investment advisors, have ‘good brains’ and common sense, are highly entreprenurial, and (in my view very importantly) care deeply for the financial well-being of their clients. As usual these days, the discussion turned to the U.S. economy, the rise in the equity markets since last March, and in particular the rapidly rising price of gold over past weeks.

When able to ‘get a word in edgewise’ - our friends will laugh if they read this - I said that I thought the physical gold market and the equity markets where out of sync. I compared them to the circus performance you likely all are familiar with - the one where a rider stands atop two horses with one of his/her feet on the back of each and parades them around the circus ring. In order for the rider to do that successfully, he/she must coordinate two animals each far more powerful than they, control both at the same time, while themselves performing a difficult ‘balancing act’ - quite a feat when you think about it. If one likens one of those horses to the physical gold market, and one to the equity markets, it strikes me one ought currently to see a significant dichotomy between the two. One can postulate that the physical gold market has been telling us every day lately that the U.S. dollar (read the U.S. economy) is in a downward spiral that is likely to continue, while concurrently the equity markets are telling us the U.S. economy is in a recovery that is significant in economic terms and is going to continue. Pity the poor rider trying to ride both horses simultaneously. Chances are as a minimum they would hit the floor of the circus ring hard, and as a maximum could be trampled and killed. It seems logical to me that if you are an American circus performer and you think your two horses are likely to go in different directions, it is sensible to pick only one to ride and not both - or simply elect to sit at home today and enjoy your Thanksgiving dinner.

That said, tomorrow and the next weeks and months are of course a different story. For what it is worth, on a second personal note I continuously think about what I see as dichotomous gold and equity market conditions, and currently am being far more cautious than I normally am in what I see as very uncertain and volatile markets. Once again, I can’t over-emphasize what I consider to be the importance of ‘thinking for yourself’ and being in constant contact with your investment advisors in these, and what I see as likely prospective, market conditions.

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The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

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Qualification

This e-mail (read ‘blog post’) has been prepared for background information only, and should not be taken or otherwise construed as either U.S. or Canadian Income Tax advice. Any reader owning or contemplating owning physical gold or shares of a gold ETF should seek the advice of their own income tax counsel with respect to the income tax treatment of their respective gains or losses on the disposition of either physical gold or gold ETF shares in the jurisdiction(s) in which they pay income tax.

Last week a friend of mine sent me an article that purported to discuss the tax treatment afforded U.S. taxpayers who purchase physical gold or gold ETF shares (the article also implied silver ETF shares would be afforded the same U.S. tax treatment as gold ETF shares). In its simplest terms, the article said that the U.S. Internal Revenue Service (IRS) considers gold to be a ‘collectible’ and not a ‘capital asset’ - and that in these circumstances gains on physical gold are treated as ‘ordinary income’ for U.S. income tax purposes if that gold is held for less than 12 months, and can be subject to a 28% ‘maximum tax rate’ if held for more than 12 months (the U.S. capital gains tax apparently is 15% for capital assets held more than 12 months). A comment appended to that article by a reader says the IRS has made an exception for gold and silver ETF’s held in a U.S. Individual Retirement Account (’IRA’). I am simply reporting this without knowledge of U.S. income tax laws.

Following my review of that article and the comments appended to it I again reviewed my understanding of the Canadian Revenue Authority’s (’CRA’) view on this issue. In the simplest of terms, in 1978 the CRA issued an Interpretation Bulletin (IT-346R if you want to sound particularly knowledgeable when you talk to your Canadian income tax advisor) that deals with speculators’ ability to report commodity gains/losses on account of capital (i.e. and not as ‘income’) so long as a consistent approach is taken on all commodity transactions. There are also instances where Canadian Courts have found that gains from trading gold were on account of capital. Those things said, my experience in acting over the past 40 years both on behalf of Canadian taxpayers and the CRA in business valuation consultancy matters is that the CRA’s views in any taxation matter are dictated by the facts specific to that matter - such that generalities may not apply to a specific taxpayer’s (i.e. each individual reader’s) circumstance.

It follows from the foregoing I would not - nor do I believe should you - purchase or trade in physical gold or gold (or other) ETF shares without first seeking the advice of your income tax advisor with respect to how, based on your own specific ‘fact circumstances’, realized or unrealized gains or losses that accrue to either you or your Estate (on your death) will be treated for tax purposes in the jurisdiction(s) in which you pay, and your Estate may pay, income tax or capital gains tax.

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The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

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U.S. Housing Update

An article late last week titled ‘U.S. housing crisis hits new level‘ says that a record one in seven U.S. mortgages are in foreclosure or delinquent, that even those with safe credit ratings are losing homes, that mounting unemployment is pushing foreclosure rates higher in the United States, and that all this is driving even Americans with good credit from their homes in greater numbers. The article also says:

· the housing market accounts for about 20 per cent of the U.S. economy where a strong housing sector is seen as key to any economic recovery, but rising unemployment and a stagnant economy threaten to erase recent signs of stabilization;

· worsening the problem, millions of unconventional mortgages issued to Americans who didn’t even have to prove they had a job are due to reset in the next two years, further harming the sector’s prospects;

· the Mortgage Bankers Association said on November 19 (a record) one in seven U.S. mortgages, or four million homeowners, were in foreclosure or at least one payment late in Q3 2009;

· Americans with solid credit ratings comprised 33% of Q3 2009’s foreclosures; and,

· analysts said the next wave of bad loans will likely come from alternative mortgages that de-emphasized credit ratings and employment, most of which have five-year reset rates that start coming due in January.

U.S. Resident ‘Dependency Factor’

A second article titled ‘In Survey, Hard Times Before Slump‘ reported a 2005 survey by the U.S. Census Bureau of 14% of all Americans suggests that even before the recession, more than one in five Americans could not pay for basic needs (paying bills for basic needs, avoiding foreclosures, and buying sufficient food) without help from family, friends or outsiders.

U.S. Government Frustration

A third article titled ‘House Attacks Fed, Treasury‘ late last week said “Political frustration over the rescue of Wall Street and high unemployment erupted in the House Thursday, with one committee threatening to impose tighter scrutiny on the Federal Reserve and another trading verbal insults with Treasury Secretary Timothy Geithner”.

My Comments

· first, I can’t imagine the U.S. jobs/unemployment situation is likely to improve in a meaningful way in the near term. In fact, I think it more likely to deteriorate over the next few months than to improve. I will be very surprised if the overall U.S. housing situation improves prior to the U.S. jobs/unemployment situation turning positive. That said, it was reported yesterday by the U.S. National Association of Realtors that sales of previously owned U.S. homes jumped 10.1% month/month in October to their highest level in more than 2-1/2 years;

· second, it seems obvious that if the same ‘Resident’s Dependency’ survey were done today the results would be worse, and likely far worse, that the 2005 survey results. I consider the results from the 2005 scary for the U.S. economy going forward from here - although I would like to know more about the components of the demographic cited in the referenced article; and,

· third, it strikes me that any elected U.S. politican who thinks Timothy Geithner or any other individual is capable of waving an magic wand and returning the U.S. economy to a pre-September, 2008 condition is, to state it charitably, unrealistic. I see this type of ‘politican commentary’ as nothing more than ‘looking for a scapegoat’. The U.S. bi-annual election process will get seriously underway early 2010 in anticipation of fall-2010 elections. I think it will be very interesting to see how the U.S. populace deals with its current elected representatives both during that process, and when it votes.

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The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

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I have frequently stated my belief that one risk element that must take center stage in any thoughtful investment research and analysis of a company are the politics, economics, and prospective economic well-being of the country(ies) in which that company principally operates. That is one important reason StockResearchPortal.com categorizes each mining and oil & gas company in its Company Universe by it business ‘type’ (e.g. explorer or producer) and the geography in which it principally operates. You can find these categorizations on the ‘Company Overview‘ page on each ‘Company Data Page‘ in our website, in the ‘Compare & Rank Companies‘ data component in our website, and in several other tables and data components in our website. You can also review the latest write-up on countries in which companies in our Company Universe principally operate by visiting ‘Economic Research‘ on our Main Nav, clicking on it, and then clicking on ‘Country Specific Economic and Political Commentary‘ found on top of the left Navigation Bar of the resultant webpage.

I recommend you read an article titled ‘One man’s defence of a national reputation‘ in its entirety by clicking here. The article discusses a Private Member’s bill currently before the Canadian Parliament that “aims to impose controls on powerful Canadian mining companies that operate overseas”. The Conservative Party, who currently operate under Canada’s Parliamentary System of Government as ‘minority government’ (the party with the largest number of Members of Parliament, but without a majority of those Members) are reported as having “vowed to kill the bill”, which apparently is going to be debated in a House of Commons Committee this week. The Bill is opposed by Canada’s Mining Industry which is reported in the article as:

· being comprised (in 2007) of 1,373 mining companies listed on the Toronto Stock Exchange (’TSX’);

· having had (in 2007) 79 billion shares traded on the TSX collectively valued at Cdn$482 billion;

· representing 60% of all world mining companies;

· representing 43% of total world mining exploration; and,

· allegedly having violated human rights in 30 countries, in circumstances the companies say they have done nothing wrong and, where there are no Canadian laws that regulate mining companies abroad.

Canada’s International Trade Minister Stockwell Day is reported as saying there will be no legislative action because it would not work, the companies do not need it, and “one country doesn’t develop laws that apply in another country”.

The article also reports that while Canada’s Members of Parliament consider controls, foreign pension funds have signaled they won’t invest in Canadian mining companies unless they adopt firm corporate responsibility rules abroad.

My comments on all of this are:

· first, having spent my adult life as an objective expert witness in major corporate litigation matters I can tell you unequivocally that its is easy to allege wrong-doing, that there are two sides (or more) to every story, that in litigation plaintiffs (i.e. in this case the countries that are protesting) often act for opportunistic reasons that go beyond the claims they make, and allegations in lawsuits often ‘overreach’ and are ‘overstated’. Stated simply, while I recommend you click here and read the referenced article, I suggest you do not leap to the conclusion that Canadian mining companies who operate abroad are guilty of anything until a Court decides otherwise;

· second, that mining (or any other type of) companies operating abroad have documented ‘corporate responsibility rules’ makes good sense to me as part of a company’s overall Corporate Governance. While I don’t know how many companies operating in foreign jurisdictions have such ‘documented rules’, I expect many do - and that going forward any that don’t likely will create such documentation; and,

· three, I think the fact that the referenced Private Member’s Bill has been put forward should be seen by investors as nothing more but something that focuses them, not on the behavior of the Canadian mining companies in foreign jurisdictions, but on the question of how (if at all) the politics and economics of any particular jurisdiction influences the ‘risk profile’ of a company operating in that jurisdiction.

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The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

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In a previous e-mail I suggested the importance of the amount of net cash (cash + short-term investments - interest bearing debt) an exploration company has on hand in the context of its monthly total operating expenses and current year drilling program/business plan - and discussed what I see as the importance to you as an investor in such a company to continuously monitor its net cash balance and monthly ‘cash burn rate’ or ‘run rate’ (the company’s prospective monthly net cash outlay).

In the past few weeks we have been speaking both with people who help raise capital for Canadian Mining Exploration companies and the executives of some of those companies.  Certainly for many of these companies raising cash through private placements has been easier after March (when the stock markets bottomed) than it was from mid-2008 to March - albeit most executives I have talked to express the view that those private placements often have been done at share prices discounted from ‘real value’.  Simply put:

·    at any point in time an inability to raise new capital may result in dire consequences (e.g. mothballing, sale at a ‘forced to sell’ and hence discounted share price, or in the extreme case ‘liquidation’) for a company and its shareholders even if the company has  promising exploration prospects; and,

·    where a company is able to raise incremental capital, the more expensive that capital is, as a rule the greater will be the dilution suffered by existing shareholders.

You may or may not believe that going forward the world stock markets (read in particular the U.S. stock markets) will deteriorate following their +/-50% index rise since March 9, 2009.  In either case, I suggest in this environment if you hold or are considering investments in junior mining exploration companies that you, in combination with your investment advisors, now look closely at the amount of:

·    net cash each such company currently has on hand;

·    debt each such company currently has on hand; and,

·    how the net cash balance of each such company relates to its prospective ‘cash burn rate’.

You can quickly determine the amount of net cash a company had at its last quarter end, and the amounts it has spent in each of its most recent 8 fiscal quarters, by reviewing its quarterly balance sheets and cash flow statements found under the ‘Latest 8 Quarter Data’ in the left Navigation on the Company’s Data Page on StockResearchPortal.com.  Using that data as a a basis for discussion, I suggest you then call the company’s President or Investor Relations Executive in an attempt to determine the Company’s current net cash position and prospective ‘cash burn rate’ over at least the next 12 months.

Where a company does not have net cash on hand to sustain at least 12 months of operations at its current and near-term planned monthly ‘cash burn rate’ I suggest you address with your investment advisors what that means to the company in the contexts of both:

·    the likelihood the company’s ability to raise cash in the current and prospective market; and,

·    what that likely means to the company’s risk/reward profile going forward.

In this regard, I suggest you carefully consider what happened to virtually all listed companies last fall and winter - the prices of their shares pretty much all dropped precipitously with the general drop in world stock markets, irrespective of the quality of their operations or opportunities.  If a significant drop occurs again in world stock markets, mining exploration and other companies that might be able to raise capital in the present market environment may once again find it extremely difficult if not impossible to do that.  I consider the current economic (and hence stock market) climate to one of significant uncertainty.  In my view strong cash positions are a very important ‘touch point’ when considering investing in exploration companies in any stock market environment, and become even more so in times of greater market volatility and uncertainty.

Ultimately, of course, the real question you and your investment advisors need to answer is whether that risk/reward relationship is right for you in each company you presently are invested in, and what course of action you now (and each day hereafter in both good and bad markets) should take with respect to your investment in each such company.

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The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

*          *          *          *          *

An article on Wednesday titled the ‘World ‘can no longer rely on dollar’‘ reported that the Managing Director of the International Monetary Fund (’IMF’) delivered a speech in Beijing on Tuesday on the global economy and IMF reform, saying “The imperative of greater global currency stability meant the world could no longer rely, as it had done since the end of the gold standard, on a currency issued by a single country”. He further stated his view that a new global currency might evolve out of the IMF’s Special Drawing Right (’SDR’) in-house unit of account. He also said China needs a stronger yuan as part of a package of policies to help rebalance its economy by promoting domestic demand, the sooner the better, but this will take time. He then expressed concern that political willingness to overhaul the international monetary system would falter if, in a year’s time, the visible signs of the economic crisis had faded.

The article reports that former IMF chief Michel Camdessus at the same conference said time was of the essence in reforming the global monetary system given: “This favourable window of opportunity is there. It will not stay open forever”. Camdessus also is reported as giving broad backing to a recent proposal by Chinese central bank governor Zhou Xiaochuan that an expanded SDR could eventually replace the dollar as the global reserve currency and to that end the SDR basket had to be modified to include the yuan and perhaps the Indian rupee and Brazilian real.

I think this is interesting stuff, that it certainly must be disconcerting for the current U.S. Administration, and that it ought to be taken as a clear signal to Americans that the world is perceiving America quite differently from an economic perspective than it did as late as only one year ago. Prior to the September, 2008 economic meltdown there had been talk by Iran and others about replacing the U.S.$ as the World’s Reserve Currency. This is now becoming an increasingly discussed topic - none of which in my view can be good for prospective world confidence in the U.S.$.

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The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

* * * * *

I came across an article this morning titled ‘Panic in Gold Market? Looming Shortage and Massive Short Squeeze?’ when selecting articles for StockResearchPortal’s ‘Today’s Filtered News’ feature. The article says:

· We are hearing of more and more cases of gold investors wanting to take physical delivery or have allocated gold;

· A couple of months ago Greenlight Capital, the large hedge fund, switched $500 million of investment in GLD to physical gold bullion;

· Apparently Germany has requested that its sovereign gold held by the NY Federal Reserve Bank be returned to Germany”, and “Hong Kong has requested the same of the Bank of England that stores its sovereign gold;

· Robert Fisk, a respected journalist for the UK’s Independent newspaper, reported this week that the Arab oil producing states, Japan, Russia and China have been holding secret talks to replace the dollar as the international reserve currency and as an accounting unit for trade - and that the basket of currencies they propose instead of the dollar would include gold!

· Rob Kirby’s (of KirbyAnalytics and GATA consultant) sources have told him that there was panic in the London gold market around September 30th, 2009 as participants in the market wanted to take delivery of their purchased gold and refused generous cash settlements that were offered instead - and that Central Banks had to come to the rescue to provide the gold via leasing;

· The gold market is in a precarious position. Just like in the days of the gold standard it only required one customer not having his deposit returned to bring down the bank because a domino effect is initiated that results in all depositors asking for their deposits to be returned. If my estimates are correct that somewhere between 64,000 and 150,000 tonnes of gold have been sold against a reserve of only 15,000t; and,

· If you “think” you own gold you should take a few more steps to make sure that you do actually own gold. If you have unallocated gold in some sort of pool account that does not have a satisfactory audit or you own shares in an ETF that does not have a reliable audit then take action. Take delivery of gold or move your investment to reliable and audited allocated storage.

I don’t know whether the statements made by the author of this article, or his assertions, are factually correct. I can tell you that about 2 weeks ago I spoke directly with representatives of the GLD ETF who directed me to an audit report prepared by Inspectorate International Limited, a UK based commodity inspection and testing firm. I revisited the GLD website this morning. By clicking here you can read a copy of Inspectorate’s latest report (dated October 21, 2009 - lower left side of the webpage) on the physical gold held on behalf of GLD on July 10, 2009 at the vaults of HSBC Bank USA National Association in London, England. This morning GLD reports holding 1,113 tonnes (35.8 million ounces) of physical gold valued at U.S.$40.6 billion.

I have thought hard about whether there is incremental risk attached to indirectly holding physical gold through an ETF (GLD is the largest Gold ETF, having accumulated the gold it holds from a standing start in late 2004) as contrasted to holding physical gold directly. While I don’t know how to quantify any such incremental risk, I have concluded there has to be some. My only real conclusion in this regard is: ‘How stupid would you feel if you were unable to realize on an indirect investment in physical gold when you could have held it directly‘. Anecdotally, a person I believe to be of modest means yesterday told me she owns physical gold, and has it buried in an undisclosed place - saving it for ‘a rainy day’. There are many reasons why I think ‘burying physical gold in an undisclosed place’ is not a great idea - but in the end it may beat holding physical gold indirectly.

I recommend that any reader who owns, or who is contemplating owning, physical gold either directly or indirectly click here and read the referenced article in it entirety and in context.

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These indeed are interesting times. As I assume you do, each day I follow as best I can what is going on in the world - both politically and economically - observe the behavior of world equity markets, carefully follow (usually several times each day) the direction of the U.S. and Canadian equity markets - and in particular the price changes in gold, copper and other commodities, and (importantly from my perspective) watch the price fluctuations in the gold and commodity stocks I own. Obviously the price of gold currently is a focal point in my thinking, but even more so is my sense of the market volatility of some of the stocks I hold. I have said more than once in these e-mails:

· I see physical gold in a different light than I see gold stocks - as I assess it the former is nothing more than a ’safe haven’ purchasing power retention asset in both inflationary and deflationary times, while the latter are very price-sensitive to changes in the price of gold;

· I see the rapid rise in gold’s price in the past two weeks to be a direct function of the weakening of the U.S.$ over that period. Gold, like every other asset, is a ‘risk asset’ that currently is being priced in an environment where money market instruments yield virtually nothing. While I think its price may hold at or somewhat below current levels, I think in the longer term gold likely has ‘price upside’ from here. That said, I will not be surprised if the price drops back from current levels in the near term;

· what ‘goes up fast’ often ‘falls fast’. The U.S. equity markets have moved upward very significantly since March 9 of this year. Largely because I so strongly believe in the importance of the U.S. consumer beginning to spend seriously - and don’t believe that will happen any time soon - I will not be surprised if they give back some or all of those gains in the next several months; and,

· rising tides rise all boats, falling tides lower all boats. This was never more obvious to me than in the period September, 2008 - March, 2009 when the price of shares of resource companies I believe have highly valuable ‘assets in the ground’ dropped precipitously as a result of a combination of investor panic, investor cash and margin calls, and continuous financial and general economic ‘bad news’.

Everyone has their own ‘crystal ball’ and their own beliefs in the prospects for U.S. economic recovery, the appropriate pricing of the U.S.$ against other fiat currencies, the prospective price of gold, silver, copper, nickel, etc. Personally I think the U.S. is still ‘lost in the woods’ economically, with no clear route that will get it back on the economic ’super-highway’. I also believe in the ‘fool me once, shame on you; fool me twice, shame on me’ mantra, and I think we may see the tide going out again sometime in the next few months.

All of the foregoing leads me to focus on the liquidity of the shares I hold in the resource companies I currently am invested in, and I recommend you likewise pay careful attention to liquidity in the context of your own holdings. I measure that liquidity primarily by comparing the number of shares I own in each of those companies against the latest average daily trading volume over the most recent (trailing) 3 months. This data is readily available in the Price & Volume Table found on each Company page of StockResearchPortal.com, and soon will be available in several other ‘obvious’ places on our website. Typically I take liquidity in the context of my own investments to mean a shareholding is somewhat illiquid if it may take more than 3 trading days to liquidate it, with the degree of my perceived illiquidity increasing (more than linearly) as the estimated number of trading days to liquidate increases. In this market I suggest you ought to pay careful attention to the length of time, on the balance of probabilities, it will take you to liquidate each of your share investments - perhaps save and except any share positions you hold that you consider to be strategic, and where you are indifferent in the near term to significant price fluctuations in those share positions.

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The following is the text of an e-mail I sent today to Subscribers of StockResearchPortal.com. StockResearchPortal.com is a research website that provides coverage on the approximate 1,600 Mining and Oil & Gas stocks listed on the Toronto and Toronto Venture Stock Exchanges.

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China, Iran, Russia and other countries continue to express concern about the ongoing credibility of the U.S.$ as the world’s Reserve Currency in a ‘fiat currency’ world (a ‘fiat currency’ simply being ‘a currency declared by a government to be legal tender). There are many reasons for this, not the least of which are the U.S. economic statistics I summarized in last Thursday’s e-mail. As you may know, President Obama currently is visiting China. Among other discussion topics is the Chinese government’s position on continuing to fix the value of the Chinese Yuan against the U.S.$. The U.S. and other developed countries would like to see the Yuan (in their ‘ideal world’) float freely against other major currencies, or as a minimum be re-priced upward against the U.S.$. I consider this ongoing debate (Henry Paulson met with Chinese officials on this over a year ago) and the outcome of it to be critical generally, and to commodity prices in particular.

I recommend you read the following two articles that have come across my desk in the past two days. The first, is titled ‘Is China’s Currency Manipulation Coming to a Head?‘ written by Bryan Rich of MoneyandMarkets. Mr. Rich contends what he calls China’s ‘currency manipulation’ will “become a major point of contention for the global economy in the coming year”. He expresses his belief that there is a very low probability of ‘China floating its currency’, and a high probability that China will resist any revaluation of the Yuan or will appreciate the Yuan slowly as from time to time it has done in the past. In the latter scenario Rich “expect(s) the world to quickly grow impatient, for political tensions to mount, and for major tariffs to hit Chinese goods”. He thinks:

· this might result in the global economy reverting to recession, and probably depression.

· both scenarios “are major disappointments for those who have anticipated a sharp recovery in global economic activity. That’s a major blow to risk appetite. And a blow to risk appetite is bad for global stocks, bad for commodities and likely good for the safe haven appeal of the U.S. dollar”.

A second article titled ‘China-U.S. discord on currencies clouds Obama visit‘ says

· “China has pledged to keep monetary policy moderately loose, and their concern is still the economic recovery,” said currency strategist Enrico Tanu Widjaja at OCBC Bank in Singapore. “They will probably let the yuan strengthen when they start tightening policy.”: and,

· Chinese officials have grown testy about the pressure over the yuan. Chinese banking regulator Liu Mingkang told a forum in Beijing on Sunday that ultra-low interest rates in the United States were fuelling speculation in overseas asset markets and threatened the global economic recovery.

Whether or not Mr. Rich proves to be correct remains to be seen. My own current view on all of this is:

· I find it difficult to believe China’s government will do other than what it believes to be in China’s best interest. I don’t see the Chinese Government agreeing to let the Yuan float freely any time soon. I simply see the Chinese Government predictably acting in whatever manner it thinks is the best interest of China; and,

· I am not sure why Mr. Rich believes a continuation of China’s current currency policies defacto would be ‘likely good for the safe haven appeal of the U.S.$’ unless he believes the U.S. will institute major tariffs against the import of Chinese goods into the U.S. in an attempt to revert manufacturing jobs back to the U.S. that have been lost to China over (in particular) the past 10 years. I think globalization has advanced too far, too fast, for that to happen in a meaningful way, and that other (perhaps nasty) repercussions would arise out of such protectionist actions by the U.S. and the other developed countries.

That said, I strongly recommend you read the two referenced articles by clicking on the links to them provided in this e-mail - and subsequently follow this ‘Chinese Currency Exchange Rate’ issue closely. You can also find several additional articles on this topic and Obama’s ongoing China trip in the ‘Today’s Filtered News’ data components available on the left side of StockResearchPortal.com’s Home Page - see for example ‘Obama unlikely to push China hard on currency‘.

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