Hi all!

Sorry for the absence of late. I have been so busy that I did not even have time to check the price of my precious Noront more than once per day. The days and weeks seem to fly by as my wife and I just moved into a new house we had built. Inspections, meetings, new furniture, deliveries, changing addresses, ... all things that made stocks look less important for the better part of December.

And the funny thing is that though I missed the comaraderie on here, I did not miss the Noront swings anymore than the swings of September through November.

I still own a nice sum of Noront shares though I have diversified into some other favorites over the past two months. For me, Noront is a ten bagger that took about ten months to blossom. Kind of like watching a seed become a four pound pumpkin. While I am waiting for this pumpkin to grow into a ten pound pumpkin, there are no guarantees that we will see a fifty pound pumpkin in the next three months, so I bought a few more seeds to see if maybe a watermelon or even just a carrot might sprout during this market downturn.

I know there are a lot of people wondering how Noront can hit less than $4 today when it was on a roll just a few weeks or months ago. It all has to do with the overall market and investor confidence.

We all talk about how the shorters and market manipulators fleece the "retailers" (those who do not buy at PP levels). But when large market downturns happen, it is the brokers and funds that lose too. I have witnessed three market downturns this year, and many sector downturns.

First the Uranium-mania downturn in Q1 which saw Uranium spot prices drop and subsequently share prices in Uranium companies drop as much as 80%.

Then we saw the "sub-prime" crisis in July to August which saw prices drop on small venture stocks at least 20% across the board.

The last drop has been slower and is a result of the first two. I call it the "tax loss" drop. Normally, this happens the last few weeks of December, but this year it started much earlier in November. Due to the sheer amount of losses incurred by many but the hedge funds in the markets this year, we saw many funds selling inventory to cover their margins. Like banks, funds leverage what they have to make money. When things turn south, they are forced to sell unless they can raise capital.

But capital this year has been very hard to come by due to the sub-prime mortgage crisis. Many lendors are extremely risk averse these days when lending due to the losses they incurred on the high risk mortgage investments.

How risk averse?

Take a simple mortgage rate for instance (I know as I just financed a new house). The prime rate in Canada is now at the same level it was when mortages had a five year rate. The rate prior to July 2007 was 4.25 and undiscounted mortgages were around 6.45%. The rate between the BOC rate and a five year mortgage has traditionally been about 2.2% as long as people remember.

The smell of a rate increase last June caused the bond market to factor in a predicted Bank of Canada increase of half a point (.50) to the prime lending rate. The result was that mortgages rose a full point as the bond market reacted to the BOC warnings. In July 2007, the BOC rate was 4.50 and mortgages were at 7.44. This was the first of two expected .25 point increases.

In the late summer of 2007, the Bank of Canada chose not to raise its rates yet bond market did not react. Recently, the BOC lowered the rate a .25 point back to pre-July 2007 levels of 4.25.

The bond market reacted and bond yields and prices have returned somewhat to pre-July 2007 levels.

But mortgage rates have stayed relatively the same as if the BOC rate was at 4.75. As I write this, the posted five year rate on a closed mortgage at TD Canada Trust is 7.39.

With a BOC rate at 4.25, this is a 3.14% difference rather than the traditional 2.2% spread. Yet the bond markets are still lower.

Why the difference?

The US sub-prime mortgage crisis is still in effect and it is getting harder and harder to raise money for lending. Though the US Fed and the Bank of Canada are trying to correct this through cash injections and lower rates, those who distribute the cash have built in almost a 50% risk factor into their margins. That is the difference between 2.2% and 3.14%.

Think of what this does to an economy, yet alone the little guy looking to get a mortgage.

My message in all of this is to hold your head high and do not worry about the stock prices for the next one to six months. If you can afford to hold, hold. We are at a bottom like I have never seen on the eve of a commodities boom.

Many investors, large and small have sold to cover cash flow deficits. Many more are selling to take the tax loss credits for 2007 to apply to past years capital gains in 2004, 2005, and 2006 which saw boom markets.

Many of the stock I follow (but do not own) have seen declines upwards of 70% this year from their 52 week highs. And many of these are solid companies with good business plans and actual resources. For those companies losing money (like Tahera -TAH), the results this year are much worse. They are trading today at 7 cents after hitting a high of 4.00 less than two years ago.

I predict a market rebound in middle to late January. I see more tax loss selling through the end of this year, followed by profit taking in early 2008 for those (like NOT holders) who made some nice cash in 2007. At some point, the traders will need to trade and those who want to make more than 3% on their retirements will come back to play. At that point demand for resource companies in hot sectors like Oil, Gold/Silver, and precious metals will begin their climb.

The next few weeks will be a nice time to buy some seeds low in order to sell high in the first quarter of 2008.

I doubt I will be posting again this year as I am unpacking boxes and taking a vacation to buy some goodies at par, but I wanted to wish all of the NOT brother and sisterhood an excellent Christmas and a very prosperous New Year.

Take care and God bless...

Misfit1

P.S. QQGirl, thanks for your emails. I will get back to you in early 2008 :)