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Before calling a cyclical peak for the Nikkei, that index doubled since SKC identified its perfect low in April 2003. Now, gold gas doubled, since its higher low at $280 was identified in these pages. This is why SKC's asset allocation model has been unsurpassed for four years. From $280 on, SKC identified every key turning point, going into 2004: www.sidklein.com/comments/Apr12005.doc . Then, SKC forecast and identified the key turns in gold at $410 and $455. From the November 6, 2005 report: "Gold is in the process of being held almost exclusively in the hands of Easterners and there's nothing the West can do about it. It belongs to them, now. SKC felt that $455 would be the worst case scenario. We're there now. $445 wouldn't change a thing. For what it's worth, since January 2002, SKC has forecast spike corrections that stopped on a dime at those levels, at which points we would also warn of what could be the next and meaningless level - that would almost never materialize anyway." On the currency front, Japan and South Korea have determined to increase its swap capability from $7 billion to $15, so as to strengthen Asian trade capacity, by providing superior liquidity. Note: The Japanese and South Koreans have stated that they will be demanding that the IMF cede greater power to Asian countries, to reflect their increasing economic importance, lest the IMF lose credibility and power to function as the institution it was theoretically set up to be. The IMF is seen as an American institution by many, the world over, and this event comes at an interesting time. Make no mistake, however. This demand on the IMF was foreseeable, just as the shift in dominance from West to East will surely put the "I" in "IMF". That shift in dominance has been a theme in these pages for a long time, and evidence is now coming from all sides. History has taught that this is how change occurs - from all sides - and this time is no different. Firstly, in 1999, I wrote that the Japanese were showing their interest in becoming a de facto Asian block currency, by guaranteeing Southeast Asian federal debt that was denominated in Yen. When, in open forum, I asked the new Japanese ambassador to Canada whether this was his government's design (to become a new block currency, as opposed to be acting from post-war kindness). he ignored the question. Now, let's take a still broader view. The Chinese and Russians do not want the US Dollar to remain as the world reserve currency, as that utility has become one of the tools of economic war and instability. For instance, by printing money like there's no tomorrow, the US government actually got everyone to pay for the invasion and occupation of Iraq, an event which was opposed by the sovereign, democratic free world. Since the latter is the perception of its allies, the US faces an as-yet unexpressed will, that joins that of Putin and the Chinese leadership (Putin has expressed his desire to see oil denominated in Euros, while the Chinese government actually recommended that its citizens purchase gold). These long term events are, as one might expect, slow in development (by a single human incarnation's standards), but the upshot is that heaven only knows where and when gold will stop when all this is over. Along side the Kondratieff cycle is how this phase in history breaks down: First, there is financial calamity (overvalued stocks collapse). Then, the economy crumbles. Thirdly, war. The next one (2010 - 2015?) will be the dilly. From the currency side of all this, the US will do everything in its power to not lose its position as the world reserve currency. Why? Among other things, the devaluation of the USD spells huge profits for the decision makers' foreign asset holdings. Example: Today, the Dollar crumbles, as the currency is printed to pay for the Iraq affair. Meanwhile, foreign holdings soar, in terms of foreign currency denominated valuation, as trade agreements permitted US interests to purchase foreign assets, in historic proportion. Therefore, the trade agreements and the currency standard, are "assets" that will defended at all cost, and by any means deemed necessary. So, while the preceding reflects the risks for confrontation longer term, they also reflect risks to the Dow premium (to other international indices), over these coming five to ten years. CONCLUSION: Since gold broke out of a contracting triangle above $440, a wave three of three for this move is completing, which should result in the entire move's completion in the $600 area, by quarter-end. Meanwhile, due to momentum, a wave wave-four correction should be contained by $540. In deference for the possible effects on precious metals stocks of a steep decline in the Dow, we remain 50% invested in leveraged precious metals stocks. Now, though, I further recommend the cheap stocks of companies that only become profitable at much higher precious metals prices. Over about a year, the Yen has declined about 20%. We are again and still fully long. Our consistently superior asset allocation has been founded every year in the correct recipe of currency mix, which today continues to be: 50% gold, 25% Japanese Yen and 25% Swiss Franc. Super Bowl: Cart or horse? Is it still a truism that if the AFC wins, the market is in for a bad year? If so, is Vegas calling for a bear market, or does the 4-point spread reflect concern over my prognosis for Dow 6,500 this year? Sid Klein LEGAL NOTICE: On this 5th day of February, 2005, Mr. Sidney Klein has donated this market letter to the public domain. DISCLAIMER: This market letter is intended to assist in the dissemination of information to private subscribers. The information contained herein represents Mr. Klein's best efforts in good faith to advance knowledge to his clientele, but there can be no implied guarantee as to its accuracy or completeness. The information is given as of the date appearing on this market letter, and Mr. Klein assumes no obligation to update the information or advise on further developments relating to the information provided herein. No solicitation to buy or sell securities is intended, and none should be inferred. Investments are inherently risky, but investment risk itself is a function of individual preferences. Thus any opinions, recommendations, or judgments expressed in this market letter are of necessity abstract and general. They must be modified, accepted, or rejected by individual subscriber/investors whose risk averseness cannot be known to Mr. Klein. 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