The only two ground rules I request are:

• BNN makes available past interviews of both of us on the air and our ability to show some of them and their results.
• The moderator be either Kim Parlee or Howard Green.

I await your response.

Peter Grandich

Since our last update, Farallon Mining Ltd. continues to advance on many fronts as it ramps up production at the G-9 Mine in Guerrero State, Mexico.

Back on May 7, 2009, Farallon announced a $30 million four-year term loan with Credit Suisse out of Switzerland, that significantly reduced the interest rate from approximately 15% to 6.9%. As well, the term allows the company to restructure the balance sheet by reducing current liabilities and replacing them with longer term debt that significantly improves the working capital position of the company. This loan, which was completed on June 8, 2009, is a testament to Farallon’s asset they have in the G-9 Mine and in the overall Campo Morado property. More importantly, posting a four year, term loan, together at a fixed interest rate of 6.9% in today’s credit and debt market environment is another milestone for Farallon’s management to crow over. While other small – and some much larger – companies are struggling to secure debt, Farallon has put an exceptional deal together that once again vindicates my confidence in this team. And all this, without a feasibility study is truly impressive.

Another milestone of note was reached on May 25, 2009 when the company announced a corporate name change from Farallon Resources Ltd. to Farallon Mining Ltd. The new name is more reflective of the current status of the company as a full commercially producing mining company. The Company management mantra was “A Mine by ‘09” and they have done that! The ultimate intention of the management of Farallon is to create a mid-tier, low-cost, multi-mine producer. Management has been very diligent in bringing into production the G-9 Mine, under 4 years from the timing of the first blind discovery hole back in June 2005 up until the announcement of commercial production on April 1, 2009. This is a management team that has performed!

The management team has recently been strengthened. On June 10, 2009, Kevin Weston joined the company as the Chief Operating Officer. Mr. Weston comes over to Farallon from Capstone Mining, where he was in charge of the Minto operations in the Yukon. When Mr. Weston started with Capstone Mining (formerly Sherwood Copper) his mandate was to bring the Minto mine up to the full design efficiency and he was successful on that front. Mr. Weston’s mandate with Farallon is to improve the efficiencies of the operation to maximize the value gained through the G-9 mine plan. Mr. Weston is a specialist in getting operations up to the full design capacity in the shortest time-frame. Farallon is very pleased to have secured his services and look forward to an even more efficient operation at G-9.

As well, Farallon has been shipping concentrates to several Asian smelter destinations over the past several months. However in late June Farallon’s zinc concentrates were shipped to Teck’s smelter in Trail, B.C. for the first time. This marks the first North American delivery of Farallon G-9 concentrates to a North American based smelter, which proves that Farallon’s concentrates are being very well-received in the marketplace. This further enhances Farallon’s reputation as world-class producer of mineral concentrates.

Going forward, with the asset at G-9 projecting to produce positive cash flow in the second half of the year, and also making continuous improvements to the efficiency of the operation, the time is ripe to re-establish exploration on the Campo Morado project in order to unlock further value from the property. Farallon’s intention is to start exploration drilling again in October 2009 and to add further resources to the current mine-life at G-9. The team is very optimistic that further areas of 10% + zinc are likely on the property particularly adjacent to the current G-9 mine workings. The exploration potential at a stratigraphic horizon that is 200 metres lower than the existing deposits Reforma, Naranjo, El Largo, and El Rey shows signs of great promise. As well, with the restructured balance sheet, the company can now focus on looking at potential accretive acquisitions that meet the overall corporate objective of building a mid-tier, low-cost, multi-mine producer.

All in all, the future at Farallon is looking very bright indeed and it is shaping up to be the next major player in the mid-tier mining space.

There was a time in my life when I would visit a craps table or two. Based on the money the house had on their side of the table versus mine, I should have chances were they wouldn’t be renaming the casino after me by the time I was done. But I did pick up valuable information that has benefited me in the investment world.
 
The first thing I learned was despite the game basically offering almost the same odds whether you bet on the shooter or against them, the vast majority of players bet with the shooter. Why? Because our nature is to be part of a crowd rooting for the same thing versus betting against the crowd. Just stand by a craps table and you will see not only how camaraderie develops among those betting on the shooter, especially as he or she makes passes and numbers, but how that crowd reacts to anyone who happens to be betting against the shooter. Another factor that usually develops is as those betting on the shooter win more, they not only tend to bet more, but also make certain types of bets they otherwise wouldn’t if the shooter wasn’t “hot”. Yet another factor is the small minority of players who bet against the shooter, tend not to pile on when they’re winning like those who bet on the shooter. They also seemingly stop making their bets far more often after a few losses than those betting on the shooter.

So what does this have to do with the markets? The vast majority of individuals and professionals go long. The 1990s gave stock market players an unrealistic belief that being long or wrong was the way to play the stock market. That “fable” has since been destroyed or has it? After two months of a virtual straight up move, the “Don’t Worry, Be Happy” crowd has managed to gain the ear of the market by playing the announcers voice at the end of the U.S. versus Russia 1980 Olympic hockey game who said “Do you believe in miracles”? This has rallied the troops after 18 months of near full retreat and given them an air of confidence not seen in quite some time.

 
Whether or not the dice are hot again for the long side is not the issue before me, but should I make the classic craps mistakes of allowing all my bets to ride only to hear that inevitable call from the stickman – seven out? I think the answer is clear for me – Color in (the craps table terminology whereupon a player places their chips on the table to cash out and leave).

 
U.S. Stock Market – It’s been an incredible 18-month ride for me. I managed (somehow I think the man upstairs had a hand or two in it) to recommended selling everything (except precious metals) just two days before the all-time high in the stock market and to short the market itself. Then, just one day before this incredible rally began, I left the bear camp and forecasted a rise to DJIA 9000. I say this not to pat my own back, but because such a feat is playing an important part of the following advice – it’s time to cash in some chips.
 
While 9000 is still a bit away, I’m reminded of my craps theory and recall what ended up happening to me when I let it ride. Yes, to many now the worst appears over and I’m not going to argue with that (at least at this moment). But looking out past the next couple of years, the future socially, economically, politically and spiritually scene here and abroad looks the scariest ever. I will discuss this at another time but by taking the following action now, I believe I’m doing the best possible strategy for those who have been following me given current and future anticipated conditions.

 
The following open positions are recommended for sale on the opening Monday morning:
DXO
OIL
HOU
IYE
XLE
HEU
IEO
XOP
PHO
XFN
COSWF
GMF
EWH

 
The thought process on this recommendation is as follows:

•   We’re way ahead of the crowd in terms of investment return thanks to the actions recommended since the all-time high in the stock market. By locking in these gains, many of them equal to or surpassing the average gains from the bottom in early March (I’m also getting rid of a couple of bad oil related choices), we should be in the catbird’s seat for whatever lies ahead.

•   We still have exposure to oil and the higher prices I see in the years ahead (more in the oil comment) but lock in some great returns from foreseeing oil at a bottom in late December.

•   I can continue to be a scale-up seller if the market manages to get to, or rise above 9,000. (There’s a possibility it can get back to 10,500, a factor I’ll discuss as we move forward).

•   We simply have gone too far too fast and when the correction of this near straight up move comes, it should be sharp and fast. We’ll be in a position to increase exposure again if warranted.

•   There were a couple events this past week that few paid any attention to other than a passing word or two. I’m speaking about the sharp selloff in the dollar and bonds (more later). These events may not end up important now, but I think they will play a critical role in the very ugly picture I see out past the next 24 months or so.

•   One of the smartest and most gracious persons I ever met in this business was Kennedy Gammage (old FNN fans will remember this extraordinary gentleman). Besides treating me like a son, he enthusiastically poured out his wisdom on me (the broken glass soothsayer saying I use comes from Kennedy). One of his many great sayings was, “You’ll never go hungry by eating a half of loaf of bread.” Translation- taking profits is never a bad thing.

•   The positions and markets exposure my model portfolio still holds appears appropriate IMHO.

Remember, there are bulls, bears and pigs. The bulls and bears will each have their day but the pigs always end up going to the slaughter house.

Oil - Back in late December when I turned bullish on oil at $36.50 and throughout its rise (until most recently), most professional and individual investors were bearish on oil. My target back then was $60 and while we’re not quite there yet, given the reasons above and the factor that I wouldn’t rush out to buy oil for the first time today, I think it was smart to take some profits off the table. This doesn’t change my long-term view that Peak Oil is real and evolving as we speak, but based on my reasons above, this move is being taken.

U.S. Dollar – One of the rarest technical formations we get to see is a diamond formation. It’s one of the surest formations when broken. I believe the break to the downside is yet another signal that the dollar is a “dead man walking”. Don’t be concerned about the next day, week or month’s trading but concentrate on a long-term outlook. The fundamentals are terrible for the dollar, especially since “Helicopter Ben and Dollar bomber Obama have combined to create the most massive creation of paper money in modern history. Ironically, this can be good for the stock market at first as the liquidity has to go some place and rest assured, the “Don’t Worry, Be Happy” crowd will do its best to steer it into the market. The problem is not if, but when, the dollar is devalued and eventually replaced as the world’s currency. I continue to love the Canadian dollar and I’m more confident than ever on its eventual parity to tired and poor Uncle Sam.

U.S. Treasuries – My no-brainer pick for 2009 is not failing me. Both the 10yr. and 30yr. have broken down technically and the fundamental outlook, thanks to our massive debt binge and dying currency, should make my target of a doubling of interest rates more likely now.

Precious Metals - While Platinum and silver are doing well, gold remains trapped in a trading range. Until it breaks out or down, we should just leave it alone.

Base Metals - They, too, have risen too far too fast but shouldn’t correct as sharp and fast when the stock market does. A healthy 10% correction would be a great buying opportunity.

Please Note – I took profits in some foreign equity markets but believe they will do better than the U.S. One of the possible strategies in the future if our market gets as high as DJIA 10,500 or so would be to short it and go long certain foreign markets. Stay tuned.

In a time when many companies are either suspending their operations or putting them on indefinite suspensions, Farallon continues to advance at the high-grade, low cost G-9 Mine in Guerrero State, Mexico. In January 2009, Farallon announced an operational update on the progress at the G-9 mine and all key production targets were met during the commissioning months of November and December of 2008. Since that time the G-9 Mine has continued to make significant strides to get to the full design capacity of 1,500 tpd, which is anticipated to be achieved during the month of March 2009. Once at full design capacity and operating at this level on a sustained basis, the G-9 Mine is projected to be in the lowest quartile of zinc producers globally.

On the legal side during the month of February 2009, Farallon made announcements which brought to a final conclusion all the claims by David Hermiston on the Campo Morado property. Essentially, all appeals by Hermiston have been rejected by Mexican courts and, significantly, costs were awarded to Farallon. Therefore, after a very lengthy legal process, Farallon has come through and management has once again delivered.

Also in February 2009, Farallon announced the first vessel shipment of zinc, copper, and lead concentrates that sailed from the port of Manzanillo to various Asian smelters. Farallon had been trucking concentrates from the mine to the port since October 2008, however this is the first time that G-9 concentrates have been shipped by a vessel. Therefore, this is the beginning of revenue generation for the company.

The G-9 Mine has significant potential both in terms of near-term operational profitability even at low metal prices and also in terms of the growth potential of the mine. When the G-9 mine is at full design capacity Farallon anticipates producing positive cash flows even in this low metal price environment. When there is an inevitable turnaround in base metal prices, the G-9 Mine should be in an excellent position to fully benefit from any upside in metal prices as any increase in prices should flow directly to the bottom line. Also, Farallon should be poised to ramp-up the production levels to exceed the current target of 1,500 tpd to take advantage of any turnaround in prices.

In the current global credit crisis that we are all involved in at this time, it is absolutely critical to have an asset that can perform when metal prices are low and equity/debt are hard to come by, and the G-9 Mine is one of those assets. This is a historic moment in the company’s history and the G-9 Mine should now be able to form the basis for further corporate growth as Farallon targets becoming a mid-tier mining company. From a shareholder perspective, it is necessary to select companies that have excellent prospects both in the near-term and in the long-term and Farallon fits that profile very well when one is selecting performing mining companies based on excellent fundamentals in a very volatile market.

Mine in 09, a slogan the company proudly spoke of the last few years has become a reality. Reality usually ends up fantasy in the mining and exploration business. Thankfully, Farallon has proven to be the exception to the rule.

Special Alert – Bye, Bye Permabear Camp – It’s Been Great!

About 18 months ago, after correctly calling for one more stock market rally on the heels of a Fed easing, I put on a permabear suit just two days after the DJIA made an all-time high. I remained (Thank God) a growling bear up until now. I’ve grown fat “feasting” on bull meat (Thanks in part to CNBC-TV and their constant parade of blind bulls). While my fellow bears can still feast for a while longer, I’ve learned after 25 years it’s always better to be a year too early then a day too late.

Now before my fellow bear followers scream “traitor” and question how can my cup go from half empty to half full, please note I’m not applying for membership in the “Don’t Worry, Be Happy” crowd. I tend to be early for everything (appointments, airplanes, buying NY Jets Superbowl tickets, etc.). I just believe that based on how well we’ve done overall these last 18 months, and all the possible scenarios I envision going forward at this point, the time has come to implement a program that appears to be prudent and offers potential gains from the long side. Even if my worst case scenario unfolds, the net effect should still be that being a permabear greatly lessened the hit one would’ve had otherwise.

At the minimum, we’re overdue for a sharp bear market rally. Never have my technical indicators suggested so in almost 25 years. Several market indexes are dramatically below key moving averages. Several have never seen this far of a spread between price and moving average while others only once or twice. Knowing in technical analysis you must look only at the charts, I do believe anyone experienced in this type of analogy would suspect as I do that a significant correction of an almost straight-down decline is overdue.

This belief is not the sole reason for my “change” (I’ve come not to like that word in the last year or so). When I started in the business 25 years ago, the investment community and investors usually used a 3 to 5 year outlook. Thanks to a desire to truly have a chicken in every pot, long-term investing became as short as 3-5 minutes. Yes, buy and hold was finally blown up (and thankfully as yours truly as called it one of the myths created by traditional financial planning). But unless one believes the world as we know it is gone and guns, dry foods and a cabin in the mountains is all we’ve to look forward to, I do think it’s come time to be selective on the long side again. One must realize that making 10% a day, week or even month, was never a good goal and is not likely for the foreseeable future. 10% a year gain versus 25%-75% losses a year should be more than acceptable going forward.

So here’s my plan knowing it’s not only subject to change, but remembering those of us who try and make a living looking into a crystal ball, only end up learning how to eat lots of broken glass.

One market I turned bullish on back on December 18, 2008 is oil. I’ve waited to take any significant positions in equity oil stocks because at that point I felt there were still lots of downside left in the overall market. That decline indeed came and combined with the fact that since then oil appears more and more each week to have put in a long-term bottom, I think one of the ways to get back in the stock market is through oil stocks. Even if the overall market doesn’t improve or worse, goes lower, I think oil stocks can outperform.

I also think we can at least return back to a stock pickers market. The $64,000 question is how one should allocate funds going forward. A lot of that will have to do with age, financial and emotional condition, and a series of other factors that makes one size fits all impossible. Therefore, discuss with your adviser before making any decisions.

The most conservative way would be either a scale-down or up program. This is where you make and/or add to positions based on the price of what you’re looking to buy goes down to or up to certain levels. This is not dollar cost-averaging because you only act if certain levels are reached. The older and more conservative investor is most likely to use a scale down approach. If we go straight up from here, you’ll have some exposure. If we do go lower, you should be buying at lower levels. Remember, I’m suggesting this because we’ve the luxury of not being heavily exposed to the large losses suffered in most markets. The younger more speculative investor (remember, the word speculative is really another word for gambling) can be more aggressive and be able to financially and mentally afford the risks of the market losing another 25% or so.

A couple of more suggestions; I do believe most equity players should at least be even weight, if not over-weight, in foreign markets. The tendency for individual investors is to buy mostly U.S. stocks. The chances of a “V” bottom are small. Whatever low we make before a bear market rally is likely to be retested at least once. An “L” bottom is the most likely scenario (which usually means only a selective stock picker can have any real chance for gains).

I want to make it perfectly clear; the stock market can still go substantially lower before any real bottom. The chances of it going straight up from here are like the Vancouver Canucks winning the Stanley Cup – slim or none.

U.S Stocks – If this was a normal recession, I would be jumping back in with both feet. However, all the bearish indicators I’ve spoken of late remain. The only thing different is risk/reward appears at least balanced now (DJIA 5,000 or 8,000 appear to have similar chances). Because I missed all the downside since the all-time high, if we go down to 5,000 from here, the net effect would mean I still prevented far bigger losses if I had been bullish up until now. After 25 years in and around the markets, I’ve learned if you can live with the worst case scenario both financially and mentally (mental anguish from losses is usually much harder to deal with then financial losses), then nothing unexpected should occur. I no longer believe it’s worthy to sell rallies and one should now look to buy declines (but only on a scale-down basis).

Oil - Per my December 18^th alert, I returned to the bullish camp at $36.50 a barrel. Since then, oil has been tracing out a very good bottom despite an onslaught of truly bearish news. Again, after 25 years (and enough losses to last a lifetime) I’ve learned that when a market fails to go in the direction the fundamental news strongly suggests it should, it’s clearly signaling the market has just about priced in the news and sellers or buyers have exhausted themselves. Such appears the case for oil. While one shouldn’t expect a straight up move, the risks appears to be $10 lower and $50 higher in the next 12 months.

Precious Metals – I remain very bullish on precious metals. I don’t believe general equities are entering a new secular bull market and therefore won’t take away reasons to own gold. In fact, they appear to have strong potential to co-exist for awhile based on my belief that deflation is going to be replaced by inflation before most perceive at this time. In the early stages of inflation, general equities will be enhanced but eventually higher inflation should put an end to whatever run the stock market has. Precious metals meanwhile, should continue higher.

Base Metals – While it’s too early to get back in on them except in a few selective equity plays, I continue to believe that metals like copper not falling even close to past major lows, continues to suggest the great supplies of metals once around the world is no longer a key bearish factor. The fact that so many mines shut down so fast and most of the best projects have already been well-developed, suggests when the world does recover from this spiraling deflation, base metals can come roaring back. Stay tuned.

U.S Dollar – Despite all sorts of talk about a strong U.S. dollar and great gains over the last year or so, the U.S. Dollar Index remains trapped in a narrow trading range. Again, when the market isn’t fir-filling the expectations of the majority, it does many times suggest that belief is already baked into the price. I also believe its way overblown in how well the dollar has supposedly down. The Index went from 120 to 70 and has only managed to retrace not even half of that loss. If the dollar was truly still a safe haven, it would be much, much higher and gold wouldn’t be even close to $1,000 an ounce.

U.S. Bonds - I think the no-brainer play is shorting the 10 and 30 year Treasuries. Interest rates can only go much higher over the coming years no matter what the economy does. There’s no instant gratification in this trade unless you’re trading the futures themselves, but at the same time, it’s the least risky of all the suggested plays of mine. Sorry Uncle Sam.

Please Note – Remember, it’s not my belief that this alert marks the ultimate bottom. Accumulating as noted above is strongly suggested. Please speak to a financial adviser before making any decisions. These ETFs and individual stocks are now being added to Model Portfolio

Foreign Markets ETFs

SPDR S & P Emerging Asia Pacific GMF  $37.75

SPDR S & P China GXC $37.81

IShare Hong Kong EWH $9.03

IShare Japan EWJ $7.12

IShare Canada EWC $14.03

U.S. Energy ETFs

IShare DJ O &G Exp IEO $30.25

SPDR S & P Oil & Gas Exp & Dev XOP $23.81

ProShare Ultra DJ Crude UCO $8.18

U.S. Energy Equities

Exxon/Mobil XOM $64.03

BP $35.32

Petroleo Brasileiro PBR $26.72

Ensco Int’l ESV $23.64

Special Situation

Power Share Water Resources ETF PHO $10.41

Canadian

IShare CDN S & P TSX Financial XFN $12.02 U.S. price $9.37

Canadian Oil Sands COSWF-PK $15.63  U.S. $12.19

Sprott Resource Corp SCP $2.49  U.S. $1.94

Int’l Royalty Corp IRC $2.17 U.S. $1.69

Prices as of 3/9/09

DJIA 6,626
S&P 500 683
Nikkei 7,173
Hang Sang 11,921
Shanghai 2,193
TSX 7,591
U.S. 10YR. T-Bond 2.82%
U.S. 30YR. T-Bond 3.48%
Gold $938
Silver $13.33
Copper $1.65
XAU Index 119.56
HUI 285
U.S. Dollar Index 88.55
Canadian Dollar 77.65
Oil $45.60

Silvermex’s primary objective is to increase shareholder value through the acquisition and development of near-surface, advanced-stage silver deposits in Mexico.  The company holds an impressive 85,000 acres of mineral claims located in Mexico’s most prolific mining production regions.

Silvermex has defined near-surface resources of 42.4 million ounces of silver and 240 million pounds of lead and zinc on its primary projects. Silvermex’s goal is to advance these projects to the prefeasibility stage in 2009.

Silvermex has a very low MCAP valuation per resource ounce of silver, currently trading at only $0.13 per ounce, plus base metals. The company offers superior leverage in increased resources and silver prices.

Silvermex is in the select and rare group of junior silver explorers that have established in-ground silver primary resources. Of this group, Silvermex has the lowest market capitalization at $5.3 million CDN or $4.3 million USD.

Silvermex’s projects are located close to infrastructure within low-risk mining jurisdictions.  The resources are near-surface and are potential low-cost bulk-mineable targets.

To date, Silvermex has raised $9.1 million which translates to some 4.7 ounces of silver delineated for every $1.00 raised or $0.21 per resource ounce owned or under option.  Future financings will fund development of priority projects toward the pre-feasibility stage.

San Marcial

The San Marcial project is located approximately 90 kilometers east of  Mazatlan in the state of Sinaloa Mexico. It is a past-producer with current total resources of 22.4 million ozs of silver. The indicated mineral resource is estimated at 3,756,000 tonnes averaging 149.2 g/t silver; inferred mineral resources are estimated at 3.075,000 tonnes averaging 44.21 g/t silver. The resource also holds 49.4 million  lbs of lead and 90 million lbs of zinc.  Each of these intersections is on or near surface.

This deposit is a near-surface, potential bulk mineable target which is open along a 1.8 km strike length and at depth. Preliminary metallurgical testing demonstrates 90%+ recoveries. San Marcial is under option from Silver Standard Resources Inc. whereby Silvermex has the right to earn-in 100% interest in the project.

La Frazada

The La Frazada project is a past producer located in the state  of Nayarit, Mexico approximately 300 kilometers west of Guadalajara.  The project has extensive underground workings and has a current high grade measured mineral resource of 304,000 t grading 259.6 g/t silver, an indicated Mineral Resources of 279,000 t grading 240.5 g/t silver, and an Inferred Mineral Resource of 534,000 t grading 224.9 g/t silver.

Additional base metal resources of 22 million lbs lead and 62 million lbs zinc in all resource categories offer increased potential for development. The resource is located near surface and is a potential bulk-mineable target.  Past production records indicate positive metallurgy.

Penasco Quermado

Penasco Quermado project is located approx 3 hours south of Phoenix, Arizona in the state of Senora, Mexico.  It is a past open-pit producer with a near surface current resource of 11 million ozs of silver. Recent metallurgical testing demonstrates 78% recoveries in 45 hours by 2 stage leach process.  This project is potentially a low-cost, open-pit target. Thus far, a total of 9.847 meters of core and reverse circulation drilling has been completed at Penasco Quermado. The deposit sits on surface and has a maximum depth of approximately 100 meters.  The near surface and oxidized nature of the mineralization suggest the deposit would have a low strip ratio and be amenable to low cost, bulk tonnage, open pit mining methods.

Bottomline

• 42.4 million Oz silver resources (NI 43-101)
• 240 million lbs of lead and zinc (NI 43-101)
• 1.42 Oz silver resources per share
• 443% resource growth in last 24 months
• High resource return on money raised
• The lowest market cap within its peer group
• Low MCAP Value per OZ ($0.13 per Oz)
• Near-surface, bulk-mineable projects
• Proven management in Canada and Mexico

The Company’s objective is to advance its projects toward production. Preliminary economic assessments are scheduled to commence October 1, 2009.

Investors looking for undervalued situations which offer low MCAP valuations on established, in-ground silver resources with superior leveraged exposure to increased resources and silver prices, should consider this company carefully.

Silvermex is a client of Grandich Publications and Peter Grandich participated in its most recent private placement.

Anooraq Resources (ANO-AMEX) – The completion of the acquisition is expected shortly. I believe this should bring a big bump up in the share price. The rise in platinum prices won’t hurt either. Stay tuned.

ATW Gold (ATW-TSX-V) – Like many of the emerging gold producers, ATW is beginning to generate a lot of attention as they move towards production in March.  I have high expectation for 2009.

I’ve put together a quick summary of the company’s progress in Australia to date.  A full corporate update, which will include the updated mine plan and production schedule for Burnakura, is scheduled to be released by the end of the month.   Brent Butler and his team have made considerable progress at both the Burnakura and Gullewa mine sites:

On the exploration side, ATW has had continued success with the drill bit: consistently hitting high-grade intercepts during their fall program:

-      16.0-metre intercept, grading 9.79 grams per tonne gold.

-      23.7-metre intercept, grading 16.0 grams per tonne gold

-      15.6-metre intercept, grading 13.7 grams per tonne gold

Refurbishing of the plant at Burnakura is nearing completion, with the elution circuit for gold recovery and the gold room being the only items remaining to be completed. Recently, the crushing circuit and mill were commissioned with great success.  A video of the crusher has been posted on the company’s website www.atwgold.comm

A new zone within mining distance of the underground workings has been discovered; drilling has yet to fully define this new zone but the results to date will be included in ATW’s new mine plan.

The underground mining contractor has been selected and management tells me they are pleased with the proposed cost for delivery of ore to the plant.

An IP survey and gravity survey were completed on the Gullewa Project.  Interpretation of these surveys show that the current 750,000 oz Deflector Deposit could continue for an additional 1500 meters.  Gullewa should add another dimension to ATW’s story when it is drilled this spring.

Moving ahead in 2009, I believe that ATW can benefit from the easing of fuel prices and labor costs in Western Australia, giving the company some breathing room in their projected cash operating costs of $700 AUD per gold ounce.  The economics at Burnakura continue to be robust, with the price of gold in Australian dollars recently hitting $1200.  The transition from explorer to emerging gold producer can create significant value for shareholders in 2009.

Bravo Ventures Group (BVG-TSX-V) A brand new client. I hope to have a full report out shortly.

Continental Minerals (KMK-TSX-V) – There hasn’t been much news on KMK in the last few months so I’ll provide the latest fact sheet

Crosshair Exploration and Target Exploration See commentary

Donner Metals (DON-TSX-V) – 2008 was a banner year for Donner and its Matagami Project. The Mining Journal awarded the Donner / Xstrata Zinc Canada exploration team with an Outstanding Achievement Exploration Award for their zinc – copper discoveries in Matagami, Québec. A scoping study is in progress, and enough drilling was done that we can expect a 43-101 calculated resource estimate in the near future.

The Matagami Project is Donner Metals’ zinc – copper project with joint venture partner Xstrata Zinc Canada, one of the world’s largest mining companies. There have been decades of profitable, low-cost production from the Matagami Mining Camp with 10 former producers as well as the Perseverance Mine that was put into production early last year. Perseverance has an estimated 5-6 year mine life, at which point Xstrata should need more mill feed for its 2,600 tonne/day Matagami mill. Donner’s award-winning Bracemac/McLeod discoveries are about 5 kilometres from this mill, and the area has the necessary road, rail, airport, and other infrastructure in place and ready to go. With a positive feasibility study, the Bracemac/McLeod discoveries could be fast-tracked into near-term production.

In 2009 I see Donner continuing the advancement of the Bracemac / McLeod discoveries, while moving ahead with drilling exploration in other areas of the Matagami Camp on highly prospective targets. The exploration team is well-equipped with both historical drilling results as well as a continually evolving exploration approach built upon their success at Bracemac/McLeod. I am very interested to see how many other areas can yield results like Bracemac’s 23.70 metres of 11.46% zinc and 5.63% copper. There is plenty of blue sky potential in the Matagami Camp to go along with the many historical high grade intersections that never had the chance for sufficient follow up exploration. I understand that the Donner / Xstrata team have a very high level of confidence for 2009 with respect to maintaining their strong rate of success.

Eastmain Resources (ER-TSX) – In contrast to the TSX composite index, in 2008 Eastmain’s share price performance bucked the trend of the horrible market meltdown, ending the year on a positive note. Eastmain is very well financed with $20Million in working capital, no debt and an annual exploration budget of $4M in mining-friendly Québec. With two 100%-owned gold deposits, a new discovery at its Goldcorp joint venture and a strong treasury, Eastmain is well positioned to grow in 2009. The Corporation plans to drill a number of gold projects this year.

Drilling over the past 12 months on its 100% owned Eau Claire gold deposit confirmed higher gold grades. The Company reported 300 intersections that averaged 14.65 g/t gold over 1.28 metres including lots of visible gold, with 100 veins averaging 35.87 g/t gold or 1.05 ounces per ton. The Corporation is delineating a high-grade, near-surface gold resource strategically located in an emerging gold district of James Bay Quebec, within trucking distance to Goldcorp’s Éléonore mine development project. Eau Claire is close to existing infrastructure including roads, power, fuel and telecommunications.

Recent drilling has helped determine some of the principal controlling factors to the deposit and has led to a new discovery (”T-Veins”) north of the gold resource. Over 60 drill intersections, extending north into the footwall of the deposit hit high-grade gold-bearing T-Veins, containing up to 17.99 g/t gold over 4.8 metres, and with numerous veins grading over one ounce per ton. The next drill phase at Eau Claire, scheduled for February 2009, will continue to delineate the main gold trend at depth.

Eastmain Resources is a textbook case on how a junior resource company can be successful.

Farallon Resources (FAN-TSX) – Farallon is quickly advancing the G-9 mine through the first months of the commissioning phase in order to get to the target of full commercial production design capacity of 1,500 tpd in January 2009. Once the G-9 mine is at the 1,500 tpd on a sustained basis the mining costs should show G-9 to be a low cost producer on a global scale. The G-9 mine is projected to be in the lowest quartile of zinc producers world-wide. The production targets for the calendar year January – December 2009 are as follows:

January 2009 — December 2009 Targeted Production

Under very difficult circumstances in the metals markets, the management of Farallon has been carefully managing the costs associated with bringing the G-9 mine into production. For almost any mining project the tendency during the commissioning stage is to have a higher start-up cost when bringing a mine into production. However once the G-9 mine is at the full production level, the robust mine plan and the high grades associated with the G-9 deposit should allow Farallon to weather the current downturn in prices far better than others in the peer group. Ultimately, this should allow Farallon to consolidate its position as a low cost producer and benefit from the potential uptick that should occur in metal markets when stability returns to the market.

In this current environment the companies that show they can produce cash flow even at these current low metal prices should be the prime beneficiaries in a return to a bull market in metals. The management of Farallon has utilized a “Parallel-Track” approach in bringing the G-9 into production in a very quick time frame. Management has been flexible in managing revisions to mine plans and, at the same time, expediting the mill commissioning has given Farallon the opportunity to reach commercial production much earlier than most other poly-metallic mines. This is a testament to the strength of the management team and the ability to adapt to changing external circumstances. This approach has allowed Farallon to be more in control of their own destiny when others in the peer group may simply be at the mercy of metal prices due to their higher cost structure. While they’re still working towards their goals on an operational level, I believe their chances for success are still very much in their grasp. In this type of market it is not easy to have that type of confidence, but the quality of the G-9 mine allows them to be confident.

Geologix Exploration (GIX-TSX-V) Quality and expertise of the GIX team.

Randy Smallwood – Wheaton River, Goldcorp, Silver Wheaton

Eduardo Luna – Luismin, Goldcorp, Siver Wheaton

Dunham Craig, Wheaton River, Cominco

etc etc…

These guys know how significant the San Agustin is (they have looked at hundreds of projects during their careers), they know how to build companies, they know how put value back into the shares and increase market caps. The board feels strongly that doing what’s necessary to acquire this project gives GIX a “company maker” asset.

Value of the San Agustin

- San Agustin deposit is 215 million tonnes or conservatively 8.7 m ounces gold Equiv

- value of deposit is $1.0 billion (again this is very conservative because that takes the current value of $1.8 billion and discounts it significantly)

- cap cost is estimated to be $500 million

-leaving $500 million value

Even with 200 million shares that is a per share value of $2.50

100% ownership vs. JV

- Majors don’t always recognize upside (as an example under the stewardship of Silver Standard, the San Agustin was simply a 400K ounce equiv project that they had given up on)

- and that is what can happen when you enter into a JV with a bigger company. They tend to have less urgency so once you enter the JV, you are at the mercy of the major in terms of timimg.

- the Geologix team saw what others didn’t and turned San Agustin into a multi-million dollar ounce deposit.

- SO … having GIX 100% in the driver’s seat gives shareholders the benefit of having the GIX team in control of the project’s growth (the same team who have grown this project 2,000% in 2 years)

Upside

- Project remains open for immediate expansion potential

- high potential to add another 100 million tonnes ( a 40% increase in deposit and value) without going back to market

- medium potential to add another 200 million (85% increase) possibly without going back to market

- potentially explosive gold and silver price rally

- potential to identify additional targets on project

- potential to acquire additional prospective projects as secondary assets

Knight Resources (KNP-TSX-V) – In terms of grade and thickness, Knight uncovered the best intersections to date at the West Raglan Project in northern Québec during this past year. For Knight and joint venture partner Anglo American, the 2008 results show a significant breakthrough on the road to discovering economic deposits. Highlights from the expanded 2008 drilling program include 8.80 metres of 4.73% nickel and 1.16% copper, as well as 36.43 metres of 2.66% nickel and 1.10% copper.

Located just 90 kilometres from Xstrata’s prolific Raglan Mine, the experienced nickel team working in West Raglan has identified Raglan-style mineralization in multiple locations on the project area. Over the past 5 years Knight has continued building upon the geological understanding of the West Raglan Project area and has generated ever-encouraging drill results. The partners are currently working on a 2009 program, and if the past is any indication of their future, 2009 could be another year of significant advancement for the West Raglan Project.

Oromin Explorations (OLE-TSX-V) Oromin Explorations Ltd. is a growth-oriented resource company focused on exploring the Sabodala gold concession in Senegal, West Africa and the Santa Rosa Dome oil prospect in Argentina. The company is well financed and managed by experienced industry professionals with a track record of discovery. The company continues to find significant new deposits and building past discoveries into potential mines. In addition, their oil play is about to kick the can and here’s hoping it goes through the uprights.

Rockwell Diamonds (RDI-TSX) – “RDI has cash and has a new very efficient, low-cost plant ready to go. Although rough diamond prices are off, RDI’s continues to monitor the market and state that unique, very rare diamonds are still achieving premium prices.

Rockwell is actively implementing a range of operations measures to reduce costs and conserve the cash position (approximately C$8m as at Nov 30/08) beginning with an extended 5 week shutdown period over Christmas-New Year’s holiday.

The new processing and recovery plant at the Saxendrift property was completed on-time and on-budget at the end of November 08. Depending on how the diamond market turns in 2009, this new low-cost, high-volume plant is set to go and able to produce with an initial capacity of 200,000 tpm and ramping up to 380,00 tpm

The diamond market has been strongly impacted by the credit crisis and prices of rough diamonds have softened appreciably since the beginning of October 2008 due to decreased trading in the rough diamond market.

Very large, high-quality, rare polished diamonds have continued to achieve premium prices in the market. With Rockwell’s unique manufacturing and marketing agreement with Steinmetz Diamond Group, the company achieves additional revenues – going directly to Rockwell’s bottom-line without any additional risk from the sale of these selected cut and polished diamonds

2008 Accomplishments:

Completed TSX main board listing and assumed ownership of 74% of assets (from previous hold of 51%)

Completed acquisition of TransHex Middle Orange River Ops – doubling Resources – increased production profile

Maintained ops during labor strike and successfully concluded labour negotiations with National Union of Mineworkers

Fended off hostile takeover bid from PALA Investments and revamped BOD to include PALA representation

Saxe drift: commissioned new state of the art diamond recovery plant and new high-volume, low-cost, wet plant (4×18foot rotary pan plant) completed on-time, on-budget (capacity of 380,000 tpm longer term)

Beneficiation agreement with Steinmetz -sale of 102 ct and 2 matching 10ct stones – $$s being added directly to the bottom-line.

In 2008, Rockwell was cash flow positive at operations ($48million) and producing 24,000 carats valued at US$2466/carat.

Santa Fe Minerals (SFM-TSX-V) – Cuatro Ciénegas Project

Cuatro Ciénegas is a high-grade copper oxide project with recorded grades as high as 6% OxCufrom outcrop channel samples. The project area covers 3,408 hecatres in six concessions composed of three separate claim blocks: the El Granizo, Adriana and Don Indio. The deposit is classified as a sediment-hosted stratiform copper-silver-lead-zinc deposit of the Kuperschiefer-type of which there are numerous world-wide examples including: Zambia-Congocopperbelt); Michigan, USA (Spar Lake and White Pine); and Germany and Poland (theupferschiefer district). Tabular deposits of this type may extend laterally for tens of kilometer sand varies in thickness from tens of centimeters to several meters. Within the Cuatro Ciénegasproject area, this lateral potential is indicated on the Don Indio concession from mapping and sampling in mines and prospects over 5km (the total strike length potential in Don Indio is 17km where 70% of the outcrop has been obscured by scree and has yet to be mapped and sampled).

Mineralization on the El Granizo concessions, in the same formation but on the opposite side (south) of the Valle de Jabali, occurs over a strike length of 2.5km. In the NW section of the property, in the Don Indio claim, silver, lead and zinc sulphide predominate. There are several historical small scale workings that have exploited the high grade mineralization.

In the San Marcos West Mine, the weighted average of 36 samples recorded 75g/t silver and 9.5%combined lead and zinc. In La Encalmada Mine, 27 samples averaged 49g/t silver and 9%combined lead and zinc.

The Company intends to commence the copper production from this project by late 2009. Copper oxide mineralization from underground exploration drifts, to be developed as part of an exploration program on the property, will be processed on site in a standard acid heap leach operation to produce cement copper, a product highly coveted by smelters because of its high copper content. This type of process has existed for centuries and is a reliable, cost-effective way of producing copper (although any silver contained in the copper oxides will not be recovered by this process.) Proceeds from the sale of cement copper will be used to fund exploration activities on this and other Company properties.

Professional Research Associates Ltd. (PRA) laboratories in Richmond, BC has been performing metallurgical test work since October 2008 on a 250kg sample of copper oxide material gathered during two campaigns from the outcrop on the El Granizo claim block. A total of 16 channel samples were taken over approximately 100 meters of exposed face. The weighted average head grade as determined by PRA is 1.90% total copper (TCu), 90% of which, or 1.72%, is leachable copper oxide (OxCu). Sampled grades ranged from 3.7% TCu (3.6% OxCu) to 0.6% TCu0.54% OxCu) and bed thicknesses from 2.7m to 9.6m.Initial results from a series of bottle roll tests indicate that target copper recovery should be 85%on a crush size of 10mm. Final process parameters for leach pad design will be confirmed by column leach test work expected to commence mid-January. Final results from the column tests are expected by the end of February 2009. This test work is being supervised by John Fox, B.Sc

(Met), P.Eng of Laurion Consulting Inc. Mr. Fox, a competent person under NI 43-101, is also a director of the Company.

The Company is completing a preliminary economic assessment and is currently evaluating detailed proposals from three mining contractors. The process facility contemplated is very simple, consisting of leach pads, launders containing scrap iron to precipitate the copper, and pumps and piping to circulate the acid and pregnant solution. The Company expects that the capital cost to build the plant, including working capital, to be in the range of $US2-$3 million and produce approximately 10 million pounds per year of copper in precipitate (70% to 80%Cu).

Lobos Project

The Company’s 2008 drilling program tested five northwest-trending epithermal brecciastructures and four potential Carbonate Replacement Deposits (CRD) within an area of 4.5km by4.0km to depths of up to 200m.Drilling in the Cerro Media Luna area returned significant mineralization which, together with the presence of multiphase intrusive events, exhibit good potential for CRD’s at depth. At Charcos, significant mineralization was intersected over four meter and eight meter intervals with values as high as 0.7% zinc and 0.29% lead. Silver and gold mineralization was also anomalous with values over one meter of 0.32gpt gold and 36.5gpt, 47.5gpt, and 34.0gpt silver.

This zone has characteristics of a typical episodial epithermal vein system and has been mappedover a strike length of 1.5km. Complete drill results are posted on the Company’s website.

During the last quarter of 2008, the Company focused its activities on the northern area of Lobosproperty, where mapping and sampling has identified significant silver and lead/zinc values (>300g/t Ag and 10% combined lead/zinc in surface samples) in an area (called Mayra) where there has been small scale antimony mining over a strike length of over 6km. The Company will continue mapping and sampling this structure prior to initiating a geophysical program with follow-up diamond drilling.

About Santa Fe Metals Corp.

The Company’s mission is to utilize the extensive experience and expertise of its management team and board to identify and develop precious and base metal properties of economic and strategic importance in economically and politically stable jurisdictions. The Company has assembled a very experienced management and board with more than 200years of combined industry experience in senior corporate positions encompassing exploration, mining and metallurgical engineering, operations, project management, finance and accounting and mining, corporate and securities law.

The Company’s initial focus for project acquisitions is the prolific Mexican precious metal (gold and silver) and Carbonate Replacement Deposit (zinc, lead and copper) belts of north/central Mexico. Management and Board have extensive Mexican experience, a country that has low political and permitting risk. Further information, including

Detailed drill and metallurgical test work results and Technical Reports, is available on the

Company’s website: www.santafemetals.com

Sunridge Gold (SGC-TSX-V) – Through the latter part of 2008, Sunridge Gold has been one of the most severally oversold junior mining companies out there. This has set up an opportunity to speculate in Sunridge as they remain well funded and are currently sitting on a tremendous amount of contained metals on their Projects in Eritrea that they continue to push towards production.

Sunridge currently has roughly $7 million in its treasury. Given the global financial challenges, the company is conserving capital by limiting the amount of exploration drilling and focusing efforts on advancing their 4 known deposits towards production.

In 2009, Sunridge is expected to continue developmental programs on several deposits. A scoping study at the Emba Derho gold-copper-zinc deposit is continuing and should be complete early in the year.

Metallurgical test work is being conducted at the Debarwa copper-gold deposit and the Gupo Gold deposit in anticipation of scoping studies beginning on these.

Emba Derho: Sunridge recently issued a resource update on the large Emba Deho Copper-Zinc-Gold deposit which now hosts an indicated resource of 62.5 million tonns containing 996 million lbs of copper, 1.9 billion lbs of zinc, 575 thousand ounces of gold, and 20 million ounces of silver. The scoping study is being expanded with a specific focus on utilizing the very good infrastructure that exists in and around the Asmara Project such as local power. The expanded scoping study should be completed by the end of the first quarter of 2009.

Debarwa: Metallurgical work is underway for Debarwa with an emphasis on the high grade copper supergene zone containing 43-101 indicated resources of 1.336 million tones averaging 5.36% copper and 1.54 grams per tonne gold. The objective is to examine the fast track to production possibilities of a smaller high grade operation given the more attractive financing options for a smaller operation in the current market.

Gupo Gold Deposit: The Gupo Gold deposit hosts an inferred gold resource containing 189,000 ounces of gold, with an average grade of 3 grams per tonne. The mineralization is at surface and open for expansion. Sunridge is expected to be conducting meturlugical test to see if the gold can be mined in conjunction with the gold oxide zone at the nearby Emba Derho deposit.

Of interest to Sunridge and their shareholders is the activities of Nevsun Resources, which is currently building the Bisha Gold-Copper-Zinc mine, the first modern mine in Eritrea. Nevsun announced late in 2008 that it had secured $89 million in debt financing and is expected to complete the debt financing of over $200 million of the mine by the end of the first quarter of 2009. This will demonstrate to the market the mining potential in Eritrea and Bisha is expected to be in production in 2010.

2009 is expected to be a good year for Sunridge. With the scoping study at Emba Derho expected to be completed soon and further studies at Emba Derho and other deposits planned, there will be a steady news flow for the company. With Nevsun completing their debt financing, we can expect investor sentiment to improve for companies with projects in Eritrea.

Timmins Gold – (TMM-TSX-V) The Company is preparing an extensive new update and I’ll bring it to you ASAP. Meanwhile, this company remains on track to be a producer in 2009 and emerging producers are likely to develop more interest as they come closer to production.

2008 Year in Review and Outlook for 2009

I could’ve sung “It was a very good year for me in the markets if not for one big blunder – mining and exploration stocks. Foreseeing the economic and stock market crisis in October 2007 and urging reads to sell all stocks (except those related to precious metals) and actually shorting the stock market (and covering just under 8,000 on the Dow) proved to be an almost perfect year. Unfortunately, my black eye came from the annihilation of the junior resource stocks. Even knowing what I know now, I would still find it unfathomable that these stocks could nearly totally disintegrate. It does prove one thing – I put my pants on one leg at a time just like everybody else

Those of us who fool ourselves into thinking we can predict the future on a regular basis by looking into a crystal ball really end up learning only one thing: how to eat broken glass. With this in mind, I will attempt to look out into 2009 and beyond. Keep in mind that if I had any real degree of certainty, I would be writing this from my own island in the Pacific.

The Big Picture- When it comes to the good old U.S.A., I believe there’s one overwhelming view one must take despite all the political rhetoric and “I’m okay, your okay” from the “Don’t worry, be happy” crowd on Wall Street; America is trying to operate on a failed business model. While doing so, Americans have truly mortgaged their futures on a far worse situation than the sub-prime fiasco.

While there should be more bull markets to come (hopefully in our lifetime), I think one must understand that the crisis we’re currently in is going to be just a pimple to what our children and grandchildren are facing. This 30 minute video will go a long way in explaining the disaster facing us not too far down the road. I urge, no make that implore you, to send this video to everyone you know. I know in my heart it’s true and truly a prophetic message for the 21st century. If you can’t accept these findings, I don’t believe you should take any more time reading my comments.

Okay, I assume since you’re still reading, you’ve accepted the facts, figures and estimates given in the video. The $64,000 question (if our government handles it the question could likely be $6 trillion) is, “What should one do going forward?”

Praying is a good start, really. As David Walker said in the video (Davis is America’s 21^st century financial prophet), we’re suffering from a fiscal cancer and the cure is nowhere to be found. I doubt the average American is not only unaware of this, but even if they now were, dealing with the current crisis has already been too overwhelming. I doubt very much they have the stomach to do anything about this cancer any time soon. This is only going to add to the problem in the future. Read

After you’re done praying, I think there are some cold hard facts we must make part of our future planning:

• America is a fallen empire. Its ability to be the world’s #1 economic power is gone. We’ve gone from the world’s biggest creditor nation to the world’s biggest debtor nation. When we add the tremendous debt of states, municipalities and consumers themselves, we see the American people drowning in a sea of red. This debt will greatly impair our government and our fellow Americans’ ability to operate and to live a lifestyle (Listen to video) that has become unsustainable.
• Uncle Sam is no longer the world’s favorite Uncle. In fact, to many in the world, they hope he never comes to visit again. The loss of political and economic clout may not be seen in our daily lives, but it will impair us nevertheless.
• No matter what any politician tells you, taxes can only go up. Medical costs will continue to rise sharply. Government services will either be curtailed or end. On the State and local government level, things are actually worse because they can’t print money.

Pandora’s Box is the 78 million baby boomers that have already started to qualify for Social Security and soon Medicare. As this video will show, they are going to be an economic tsunami to the Social Security and Medicare system. (Watch this video. It was made “before” the credit crisis). 60 minutes video

The financial playing field going forward is unlike anything ever faced by Americans. No matter what the financial services industry tries to portray (and the airwaves and print media is full of things can only get better predictions), the pieces that make up the playing board are mostly landmines that can wound or destroy players. Opportunities to profit will still exist but the methods used to capture them will be radically different.

2009 Outlook – What a difference a year makes. Last year at this time, the overwhelming majority of professionals and individual investors still had no real idea what was unfolding and before them. I find it ironic that the vast majority of so-called experts who are calling for a much better 2009, were the same folks who failed miserably in 2008. I guess one of these years they have to end up right.

Being the bearer of bad news is not profitable nor a way to win friends. In October 2007, when I suggested selling everything but precious metals and going short, the vast majority couldn’t phantom the coming carnage.  And, even if they thought it was possible, their advisors talked them out of it. The professional community touted “Buy and Hold” as the savior to all portfolios. “It always comes back,” was their spiel. You would think the world would beat a path to those few who had the foresight to see it beforehand. Unfortunately, most investors are like a herd of deer in the headlights and/or are hoping “it always comes back” happens one more time (then they can run to for the hills).

One of the major problems with so many people “stuck” is they will indeed be sellers if they’re fortunate to recapture some of their heavy losses. The problem there lies in how much more percentage-wise prices must rise versus what they fell in order to get whole again. Another related issue is time. It is one thing for a 30 or 40 year old person to wait it out, but so much of the nation’s wealth is held by seniors. These folks have not only seen their wealth cut in half or more but have seen decent fixed income rates fall tremendously. We also have so many people who have had financial plans that used an 8%, 10% or more rate of return target in order to reach their “dream” retirement. Those dreams are now nightmares that aren’t going to disappear overnight.

There’s going to be an ample supply of equities for sale if and when the stock market rises.

One thing is for sure, the book DOW 36,000 is now strictly a collector’s item.

U.S. Stock Market – There’s good news and bad news. The Good? I don’t see another 50%+ drop from here. If it did occur, life as we know it has gone from bad to worse. The bad? Despite an avalanche of “bottom is in, bottoming process underway, we’re going higher yada, yada, yada” forecasts, the “Don’t Worry, Be Happy” crowd is going to see membership continue to dwindle and it’s public mouthpiece, CNBC-TV, will be searching for new bulls as recycling of old ones no longer works.

On December 16, 2008, the Fed fired what history may show as their biggest silver bullet through a cannon but it did little to change the uphill battle. Yes, the positive spin will continue and be enhanced by the Obama “magic carpet ride” but the overwhelming bearish fundamentals should continue to pressure the market for the foreseeable future. A minimum retest of the lows around 7500 is likely in the first quarter and, depending on if it holds or not, will go a long way in deciding if I jump back in.

What’s lost among the sea of wounded bull cries is that in bear markets like this, not only do we see deleveraging but also shrinkage in multiples people are willing to pay. S&P 500 forecasts for 2009 range from about $65 to $80. I think the market can bare a 15x multiple at best and depending how bad things get, as low as 10x to 12X. That means the S&P 500 could see a low of 650 or a high of 960. It’s currently around 895. In this scenario, buying the dips and selling the rallies seems to be the only way to make money in equities as a whole. I do think oil equities are going to become attractive sooner rather than later. I also believe if and when equities in general are worthy, overweighting in foreign markets versus the U.S. will be the way to go (one reason for this is most countries are cutting taxes while the U.S. can only raise them. History has shown raising taxes are not good for the economy).

Gold Investment Comparison Chart

Precious Metals – TOUT-TV (CNBC) and the like continue to spew out how gold failed to fire in 2008 given all the turmoil. Let me ask you something, if your house was in the middle of a big hurricane and after it was over, it was the only one still standing and sustained no real damage, would you care about anything else?  Of course not. If one bought gold on January 1, 2008, instead of any other investment, they would still have everything they had come January 1, 2009. How many people wish all they did was break even in 2008? Gold continues to offer not only that result, but gains of 20% or more in 2009, IMHO.

Silver is a base metal but still gets bundled up with precious metals. Like in 2008, I think it will mostly follow gold versus lead it.

Platinum appears to have seen its lows and while the upside may be limited in 2009, so appears the downside.

Base metals – I’ve been bearish on them for about two years. As we begin 2009, there isn’t anything to change that view other than further declines which could bring us to the point where accumulating them for 2010 and beyond could be worthy. Stay tuned.

I do think uranium has bottomed and can work its way back to triple digits in the next 24-36 months.

Oil - I threw my hat back into the bullish camp in the waning days of 2008.

U.S. Dollar Index – I’ve had a constant saying for the last few years that “the only party that doesn’t know the U.S. Dollar is dead is the U.S. Dollar. “If I was wrong and it was only sick, trust me the trillions of dollars being created and pumped into the system was its death warrant. Pity the poor souls on Tout-TV who say the Fed will be able to remove these trillions of thin-air created dollars from the system without causing inflation. If you believe that one, you should join those who believe Elvis is still alive and on an island somewhere with Jimmy Hoffa. Look for a test of the low 70s by years-end, if not sooner.

U.S. Treasuries – The one remaining bubble that should burst in 2009 (watch). While the 10-year can still get below 2% yield, the time has come to short treasuries. We may go down before going up, but by years-end I think this strategy can be a winner. Read

Mining and Exploration Shares – Can it get any worse? Since I didn’t think it could be this bad to start with, maybe I’m not the person to answer this. I do know gold is doing well, mine production is falling, new big discoveries are few and far between and someday juniors will be needed again to do the grunt work (hopefully in my lifetime).

I’m gathering updates from our client companies and hope to bring them to you ASAP.

Closing Comment – Most of us have made another set of resolutions for 2009. And most of us will sooner or later failed to keep them. Why? I believe it’s because we try to do it with our own strength, not God’s. Never in the history of mankind has the world seem on the wrong path. Many will suffer. I truly believe the only saving grace comes from the Creator of all that was and is good in the world.

They say you can’t guarantee anything but death and taxes. I’m going to guarantee you one more thing; Trust and love God with all your heart and do the same to others and life will become much easier and enjoyable no matter what.

“Put your hope in the LORD, for with the LORD is unfailing love and with him is full redemption.” Psalm 130:7

Barring anything major in the markets, this should be my last update for 2008. Rest assured if something of significance does break, I will address it.

U.S. Stock Market – I noted in my December 16^th update that a 1,000 point move in the DJIA was possible after Bernanke threw his latest “Hail Mary” pass and the “Don’t Worry, Be Happy” crowd on Wall Street was hailing it as the “Second Coming” (even though it was the umpteen time they have said so). I noted that despite all the cheerleading and pom-poms by them and TOUT-TV (CNBC), the market had still not managed to get over 9,000.

In just five trading days, we’re already halfway to the 1,000 point move. This time around a sharp five day decline took place in a virtual silent-mode and is now lower than where it was when the Fed shot what may be their last silver bullet through a cannon.

8,000 is the next key support area so stay tuned.

Oil – I’m on the bullish side again at $36.50. Some momentum indicators of mine are suggesting the decline is losing steam and oil is deeply oversold. I continue to shy away from oil stocks until such time I enter the long side of equities in general and/or oil breaks to $30 or below.

Gold – Very thin market conditions so don’t make much of any pop or pull back until the New Year.

U.S. Dollar Index – The bear market rally has been crushed and sometime in 2009 we should be seeing the lows of earlier this year tested.

I continue to avoid base metals, but like silver and uranium.

I’m hoping for all our client companies to bring us up to date by early January. I will then update you.

Some interesting reading