Having said that, I want to make it clear that there are many very skilled commentators in these businesses, and I speak only about a few who are more cheerleaders than thoughtful investors.

If their subscribers/viewers are making money, they get progressively more bullish. When the subscribers/viewers are losing money they soon get progressively more pessimistic. It turns out that their perception almost always gets more extreme the longer the market moves in one direction. If a market is rising they get increasingly bullish, if a market is falling they get progressively bearish as its decline continues.

For example, during the days of the internet bubble they were saying that internet stocks were worth any valuation. To them it did not matter how absurd because “the internet was a new and once in a lifetime phenomenon that would change the world greatly”. Well, in one sense they were quite correct, the internet has changed the world greatly, but in the important financial sense they lost a lot of money. At the time, the internet stocks were fundamentally highly overvalued.

THE KEY TO INVESTING IS TO FIND VALUE

Thus I submit that the most important insight to gain as an investor, is not if the stock market is appreciating your investment thesis, but how accurately are the financial markets valuing the company. Is the market considering all of the variables that impact the company and its current and expected profits? Or is the stock market in its alternating over and under enthusiasm (based on waxing greed and waning fear or the opposite waxing greed and waning fear) fundamentally miss-pricing stocks in general or specific groups of stocks.

TODAY THERE IS A LOT OF FEAR, BUT A SHIFT IS TAKING PLACE

Globally many stocks are not expensive and gold and oil are not expensive. Yet many investors are terrified. This is the type of fear dominated environment that leads to good rallies for the unloved sectors. I mention some of the areas we like below.

GLOBAL STOCK MARKETS LOOK GOOD TO US NOW

Several global markets are attractive in our opinion. There is the generalized realization that U.S. and European authorities will preside over slowing, but not recession bound economic growth.

The general fear that Asian economies will collapse when the U.S.

slows down is incorrect. Asian economies are actually growing more rapidly now than they were six months ago. China announced that its purchasing manager’s index is at the second highest level in 21 months. This is very bullish. The growth rates of the Chinese and Indian economies are actually increasing. This means I expect good stock markets in both countries for at least the next several months, and very rapid economic growth from both countries in 2007.

STOCK PRICES REFLECT THE TRENDS OF CORPORATE PROFITS

Trend 1:
We see corporate profits in India, China and Europe expanding. We see them growing in the U.S. but at a lower rate and we see all of this activity leading to a longer term increase in the inflation rate on a global basis. This is long term bullish for stock markets and for gold. By long term I mean over a multi-year period.

Trend 2:
The bigger U.S. budget, trade and current account deficits will eventually cause a slow and steady decline in the 
U.S. dollar. This will not happen tomorrow, but it will happen.

GLOBAL MONEY FLOWS

It is obvious that U.S. political and economic power in the world has diminished. It is now a multilateral world. In our opinion, the allies of the U.S. in Mid Eastern oil producing nations must be getting increasingly nervous.

I have it on good authority that large quantities of Middle Eastern money have been flowing out of that region. It is fairly easy to see that the regions’ political stability and long term security have come into question. I am told that the money is heading to Europe (especially the UK), India and other stable parts of South and East Asia. Money is not flowing into Japan because interest rates are too low. I think that if I was a wealthy Middle Easterner and I saw the rise in power of fundamentalist Muslim groups and the diminishment of unilateral U.S. power I would want to diversify my assets as well.

OIL AND GOLD LOOK LIKE THEY ARE IN THE BOTTOMING PROCESS.
MANY STOCK MARKETS HAVE ALREADY BOTTOMED AND ARE RISING.

A rally in Indian, Chinese and some selected European and U.S. stocks is already underway. We expect it to continue and we are participating in these rallies for our clients.

Commodities especially oil and gold are under pressure. It is the season for oil prices to decline as demand is lower in the fall season. We own gold and oil shares and we believe that they may be near their correction lows. As the old saying goes it is always darkest before the dawn, and it certainly looks dark for these two groups now. However, it is hard to conceive that winter will not follow fall and that demand will not once again rebound. When it does, the prices of energy and precious metals shares will also rally strongly as shorts cover and long investors remember that these companies are mainstays of their portfolios.

THANKS TO SOME WISE AND EXPERIENCED FRIENDS

As many have said, “Business is about contacts”. I have been blessed with many wise and experienced friends who have given me great advice and shared many insights with me for over 3 decades. These are highly successful investors who are true masters of their areas of focus. I would like to mention a few of them and thank them for their insight.

Alphabetically they are: Ken Adams, Jeff Cohen, Tony Danaher, Tom DeHudy, Steve Emerson, Earl Gould, Larry Jeddeloh, Herb Kay, Gary Mintz, Dan Norcini, Bharat Sahgal, Harry Schultz and Jim Sinclair.