Featured Video What the Hedge Funds are Doing How hedge funds invest can sometimes be an indicator of where the economy and markets are heading. Vincent Deluard, global equity strategist at TrimTabs Investment Research, and Kenneth Heinz, president of Hedge Fund Research, talk with Bloomberg's Carol Massar and Matt Miller about their outlook for hedge funds in 2010.

Dear Members,

We live in a world where everything is go, go, go. A world where a yellow traffic light means speed through instead of slow down.

In last week's newsletter, Another Shot at Glory, we urged our readers to prepare for a correction that will soon take place before 2010 is over. Despite the fairy tales Wall Street is telling you about strong corporate earnings, market data, and insider buys, do not succumb to the glitter of green arrows. That's exactly what they want you to think...so they can dump their profits on you before the next crash.

The Obama administration, with the help of Wall Street, is leading us to believe that the markets have not only recovered, but are ready for growth. Is it really possible to experience what we have experienced over the last 2 years and already be on the road to strong economic recovery?

That's exactly the mentality that got us into this mess . And that's why we need to be patient.

Fundamentals, corporate earnings, market data, and historic events can all help us determine and predict what may happen in the future. We're not saying we can use this information to predict what happens tomorrow, but we can use it to help us predict what happens in the years ahead of us.

We need to look at the road ahead, and not just the road we are on.

Economics 101 teaches us about cycles. Right now, we're in a cycle of a long economic recovery that could stretch many, many years. Regardless of what we're being told by the press, we are still in a depression stage as true US unemployment numbers are closer to 20% (see A Hidden Agenda).

The economies of the world are still collapsing:

• The Eurozone is in trouble with no sight of what is to follow
• Commercial real estate losses could reach 45% this year (see Another Shot at Glory)
• 81% of the option ARMs originated in 2007 are expected to default, with many ending in foreclosure (see Another Shot at Glory)
• Amount of debt per US citizen continues to rise
• Slow economic growth and high unemployment, accompanied by inflation from the printing press (stagflation) (see we're back and its time to prepare)

These are just a few of the signs that will ultimately lead to another correction this year or early 2011.

Our recent stock market recovery since the bottoms of March 2009 to January 2010, reminded us of a comparable recovery during the crash of October 1929. The recovery in market prices, much like ours today, stemmed from government intervention via loose monetary policy, the spending of hundreds of billions of borrowed money, and extremely low interest rates. This helped the Dow recover close to 50% of the losses incurred in the October 1929 crash.

In the past, government incentives gave investors a renewed optimism and sent retail investors flocking back towards stocks, only to see another correction months later in April 1930.

Despite being in a completely different era, we are expecting the same thing to happen again. We predict the markets will correct itself later this year, with debt being the catalyst for our next economic and stock market decline.

Even with the best banking system in the world, Canada is at risk.

Household debt in Canada rose to record levels in 2009, with almost two-thirds of families reporting that they would be in financial trouble if their pay cheques were just one week late, according to a report by the Vanier Institute.

In its 11th annual assessment of the state of the Canadian family, the institute found that average household debt rose to $96,100 last year. That resulted in a debt-to-family-income ratio of 145%, the highest ever, with the level set to climb to 160% by 2012.

Based on our cycle theory, the debtload per household, and a rise in interest rates, we can expect real estate prices to drop significantly in Canada some time within the next three to five years.

It's scary, but it's not all bad

This time around, we can not only protect ourselves, but reward ourselves by being prepared (see We're Back and It's Time to Prepare)

Precious metals such as gold and silver were the investments that allowed investors to reap strong returns during the recovery of the 1930 crash, with precious metal shares outpacing metals prices themselves.

While we like the prospects of gold and silver, we favour the junior miners even more (see A Clear and Present Danger)

Which leads us to one of our featured companies, Trueclaim Exploration (TSX-V: TRM)

As we have mentioned before, the world of major gold discoveries and easy to spot formations are OVER! If you look at every gold company that is being funded right now and have access to capital, they all have one thing in common: Historical Data!

What smart geologists do now to find massive deposits is start by going back to the biggest and best of the old ones.

And that's what Trueclaim Exploration (TSX-V: TRM) has done, with their past producing property at Scadding.

Towards the end of last year, we announced Trueclaim Exploration (TSX-V: TRM) as one of our featured gold companies of 2009. During that time, Trueclaim (TSX.V: TRM) had some advantages over its peers including:

This time around, they have even more.

Earlier this past week, Trueclaim released the results of its Phase I drill program for their Scadding property in Ontario.

The results speak for themselves

Take a look:



(for a better view of the numbers, please click here)

Highlights of these results include:

• TRM-10-07 19.29 metres of 12.9 g/t
• TRM-09-02 10.10 metres of 3.5 g/t
• TRM-09-13 1.00 metre of 47.6 g/t
• TRM-10-02 4.00 metres of 9.6 g/t
• TRM-10-06 2.00 metres of 22.3 g/t
• TRM-10-06 4.00 metres of 2.3 g/t
• TRM-10-07 1.80 metres of 25.6 g/t
• TRM-10-10 9.00 metres of 2.9 g/t
• TRM-10-11 1.23 metres of 11.2 g/t

With the assay results of Phase I now complete, the Company is preparing to launch the Phase II drill program in early summer, 2010. The recent results, as the company has mentioned, offer oustanding potential for Scadding and Trueclaim.

We invest in every company we feature after our initial reports and our investment criteria ranges from one to two years, depending on the situation. Combine Trueclaim's advantages over it's peers and its recent drill results, you can see why we selected them as a featured company.

Next week, we will be heading over to the PDAC ( Prospectors and Developers Association of Canada) convention in Toronto, Canada to meet with Trueclaim's management, as well as other companies of interest. If there are any companies you'd like for us to check out there, let us know right away!

We are likely going to witness another a resumption of the economic and financial problems that began in 2007 this year. This will presage another move from fiat currency into gold and silver, driving precious metals prices higher once again.

Be prepared.