Dear Traders,

My conclusions for 2010 are:

Long term interest rates in most all countries are headed higher. The shape of the yield curve in the US is the steepest in over 30 years. This is a recovery signal. But it is an uncertain recovery like a sand castle on the beach. The big Tsunami wave can wipe away the castle at any time.

By the 2^nd quarter central banks around the world will be forced to exit their ultra easy monetary policies.

Bond prices in most markets will tumble- this is true for government bonds as well as corporate bonds.

As bond prices drop stocks will move ahead. Commodities, crude oil, gold will rise as inflation increases.

At some point when interest rates on bonds exceed dividends on stocks the Dow will experience a steep correction and pull down markets world wide.

Gold will find strong support at USD 1075 and should move back above 1250 in the weeks ahead. Shrinking mining supply as well as central bank demand will be supportive even in the face of higher interest rates.

Currencies will remain stable as central banks world wide act in concert to raise rates. The AUD should outperform the USD and most other currencies as Australia will raise their interest rates faster than in the US. Australia is in much better financial condition than Europe/ the UK or the US and has a vast supply of commodities- real assets which China requires for their development.

Continue to deal in high grade blue chip dividend paying Malaysia shares and precious metals such as Am Precious metals but keep an eye out for the exit door.

As the US continues to print vast quantities of paper money with nothing tangible to back it up- much of this liquidity will find its way into stocks and gold. – for the time being -but at some point the piper must be paid and there will be a collapse.

I wonder who is going to pay for the new 30 + million US citizens with no health insurance who are now promissed free medical care by Obama? or who is going to bail out the bankrupt states like California or continue to fund wars in Afganistan and Iraq, mortgage bailouts for those who bought homes but do not have the means to service their loans ?

I was reading the history of the Roman empire. It collapsed mainly because the politicians debased the currency, spent way beyond their means, waged expensive wars that ultimately bankrupted the Roman empire. I think the politicians in America are going down the same road. Especially Obama and his band of socialists.

I hope all of you had a pleasant holiday and Merry Christmas and are recharged for 2010.

Bill