Dow Jones Industrial Average   10,634
Value Line Arithmetic Index   1,900
30-Year Treasury Index   4.39%
Gold 1/10 Ounce   $44.82

The Big Picture for Stocks
The 4-year cycle is negative into 2006.

Technical Trendicator (1-4 month trend):
Stock Prices   Down
Bond Prices   Down
Gold Price   Up

People are trying to analyze what effect Katrina will have on the economy and the markets. One scenario that seems somewhat likely is that the hurricane will have a negative effect on some economic statistics. This is coming at a time when there seems to be some economic weaknesses around the edges, such as in the crucial sector of housing.

My assumption recently has been that the Fed will continue to raise rates to force a recession. But the Fed has become very sensitive to crises, and sees as its job to counterbalance problems or potential problems. It could be that the Fed will slow down their determined interest rate raises.

This would tend to be bad for the dollar and good for gold. Note that gold (GLD) has broken out to new highs. This may be the time for a really significant move in gold.

Looking at the charts of the small gold stocks on our Special Situations list, I think the patterns look like they have successfully tested the lows. Note in particular Crystallex (KRY, 2.57) and US Energy (USEG, 4.40). But NSU, CGR, and CAU may also have bottomed. As you will note from the track record posted on our site, the Special Situations positions that have been closed out from our list have averaged in excess of 100% per annum rates of return. Hopefully, the next nice gains for the portfolio will come from some of these stocks that have lagged.

You might want to read the latest statement from Crystallex regarding their progress on getting the permit from the Argentine government: http://finance.yahoo.com/q?s=kry.

Also, I call your attention to the comments from Dutton and Associates regarding the important lawsuit that is coming to a head for US Energy: http://www.jmdutton.com/research/USEG/index.html.

Note: We own KRY, USEG, NSU, CGR, and CAU in accounts we manage.