Common sense tells me that higher inflation and slowing economies, which is the classic stagflation scenario, is now being recognized in Europe, UK and Japan, and that as a consequence those currencies are weakening against the US Dollar, with inevitable consequences for US equity markets.

I shouldn’t accept the view that any strength, real or perceived, in the US equity market and in the $USD is sustainable. What is happening in my view is that there is a ratcheting down, one currency group (Euro, Pound and Yen) versus the other ($USD), where the latest step is seeing strength in the Dollar and the next will see more weakness.

This was a time for traders to avoid the inevitable pull-down in commodity prices for the short-term, while awaiting the next timely opportunity to re-board the commodity train.

You are starting to get a sense that I have been right about this.

I feel bad that some of you hung in with the junior mining stocks that are not what we say “in play” but still have good exploration prospects. I encouraged you to step aside for the short run and when the cycle bottom has been hit, to back up the truck.

A little Canadian-based precious metals exploration company like ValGold (VAL.V) is a good example. You know I like the properties and the management, but it is thinly traded. The smart money behind this company will not buy it on the way down in thinning volume during a liquidity crunch. Ergo, the price of VAL has dropped from $0.71 (May 23-2007) to $0.15 yesterday. There are so many other stocks like this.

Just for a learning experience, I have a chart book on my desk dated Nov 6, 1981, that I’d like one of you in the Discourse to input a page number, not knowing the name of the chart book until I tell you later. I want to show you what happens when Interventionists pull down commodity prices with the tools they have at hand. It is a sad story for penny stock speculators.