November 10th Edition

Good Morning All,

Last week at this time, we hinted at the possibility of a Tuesday turnaround in markets, but in a copp out which was quite out of character, we came up short of actually committing to it. Instead we offered the quiet reassurance that the upward trend remained intact and would renew itself no later than mid month. Well my dears, the week that was, proved to be a rather good one for the bulls, bringing markets back to, and in some cases, beyond their former recovery highs making today yet an important flex point for markets.

Ideally, bulls should hope for some early morning profit taking to be absorbed in advance of a moderate confirmation of the week's considerable achievements. Sector performances will also be an important marking point as new highs in gold, copper and other commodities are likely to come under some profit taking pressure sooner rather than later. It is thought by most observers that U.S. dollar weakness is the commodity price generator, so keep an eye on our own resource based currency for clues. Either way, this China trade is likely to be on for some time to come. The simplest way to play this is not through Asian stocks but through our own resource based companies. Mining and oil stocks are ripe for takeover by cash rich internationals and sovereign entities. Even the forest product ne'er do wells are drawing interest. Check out Domtar's trading range par example, while you continue to collect Norbord in Canada and Louisiana Pacific in the U.S.; respectively 13ish and under 7.

A few weeks ago we wrote of gold as being the next bubble, due to the ease with which it can be manipulated. As long time readers of this letter are aware, I am a cynical bull on this subject, having recommended its purchase around the 350$ level some 5 or 6 years ago. My then original target of 1000$ has since been exceeded and I expect my second level of 1500$ soon will be. As most investors are aware these are nominal dollar prices when related to all time highs reached in the early 80's, which are closer to 2300$ when adjusted for inflation. I was not kidding when I recently targeted prices well in excess of 3000$... if the bubble theory proves out. Just remember however, that you cannot eat gold, live in it or make love to it...at least not in a normal way.

Commentary

It is not their recent Gubnatorial victories that should delight the Republican Party, but the loss of their 100 year old Congressional seat in upstate New York. The crazies that occupy the right wing of the GOP who are bent on taking over the entire shooting match, just had a refresher course on how moronic they can be. Moderate Republicans and adult Americans everywhere can rejoice in this defeat of the lunatic fringe led by Palin, Limbaugh and the denizens at Fox network.

On the other hand, Democrats may have cynically wished for such a takeover, as they are all too well aware that only 20 % of the public is actually certifiable and by definition...unelectable.

…or as Bobby Kennedy used to say "20% of the people will be against everything, all of the time"

Bill Copp
Montreal, Canada
November 10, 2009
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