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August 20, 2004

August 20, 2004

I am sending you another missive to share ideas and hopefully some salient thoughts about Iran, Iraq, gold and the dollar. I like to fool myself by thinking that these thoughts could have substantial and long lasting implications for global investment markets.

IRAN

I was first notified of the intentions of Iran several years ago by my friend Larry Jeddeloh, the prescient and articulate editor of The Institutional Strategist (who can be contacted at tis@tisgroup.net). At that time, Larry repeatedly pointed out to his readers that the U.S. would engage in three wars in the next few years. He predicted that these wars would be with Afghanistan, Iraq and Iran. He was not only correct, but also stuck to his guns under much flack from purveyors of the conventional wisdom.

In our opinion, it is obvious that there are several major points about Iran that should be known by all, but are ignored by most of the Western media. I do not hold myself out as an authority on Iran or Iraq and these are my personal opinions, but I believe them to be founded upon accurate information.

1. Muqtada al Sadr is an agent of Iran. He is directed by Iran and represents Iranian interests in Iraq.
2. Iran would like very much to control much of the Shiite dominated sections of Iraq, and is using al Sadr and others to achieve this goal.
3. Iran certainly would not mind controlling all or part of the southern Iraqi oil fields.
4. Al Sadr’s army is not just a bunch of guys who hang around the mosque and are available to attack when he suggests, but are actually Iranian Shiite fighters who have been sent to engage in a very specific series of intelligence, political and military operations. I have heard that there are about 25,000 Iranians fighting in Iraq. In essence, Larry Jeddeloh has been correct again. The U.S. is already fighting Iran. So far, the fighting is taking place in Iraq.
5. In the Middle East, like in most of the world, things are not always what they appear to be on the surface (e.g. al Sadr reneging on his recent agreement to leave the mosque).

GOLD

In the last couple of days gold has been very strong and the U.S. dollar strong as well. Why? In our opinion, gold and the foreign currencies both move up versus the dollar when economic issues are driving them, for example, budget deficits etc.

However, when gold and the dollar are both strong simultaneously it is usually because gold is getting a war premium and global speculators are holding the dollar as a safe haven currency during a war environment.

My bullish view on gold will be maintained as long as war with Iran appears to be an oncoming reality.

In my opinion the best gold input available is from my dear friend Jim Sinclair. His www.jsmineset.com website is the most complete and informative source about both the technical and fundamental aspects of gold and related socioeconomic issues. Jimmy has forgotten more about gold than most of us will ever know. For individual precious metal stock charts, I use Gold Charts R Us, which is run by another dear friend, Harry Schultz, at www.hsletter.com.

RECOMMENDED BOOKS

A few books that I have read or re- read recently:
(Title- Author-Summary of message)

The Rise and Fall of the Great Powers – Kennedy
The big powers fall when they spend more on military adventures than is healthy for their economies.

The Battle for Investment Survival – Loeb
There is a strategy for successful investing. It requires a lot of work, thorough research and constant attention.

The Two Faces of Islam – Schwartz
Title explains much of the message

The Pentagons New Map -Barnett
We should include nations in the world economic system in order to remove them from the list of military problem nations.

Running on Empty –Peterson
Nations must balance their budgets and cannot run deficits for prolonged periods without destroying their economic future and saddling future generations with problems.