By proceeding, I acknowledge that I have read and understood the Disclosure and Copywrite Statements.

Dear Friends & Clients,

We are off to an excellent start in 2007! Your portfolios are showing nice YTD returns due in large part to positions in silver, gold, oil, and Japan. Let me say, with personal humility and with professional respect for the vagaries of the markets, I’m confident that more auspicious rewards are forthcoming.

I have been preparing your portfolios for a change in season. Sometimes it take’s a while for investment strategies bear fruit, but now there are clear signs that we have a well cultivated crop. I’m expecting good harvests. Thank you for your patience.

I have made a change to your portfolios. I added 5% to your position in Street Tracks Gold Trust (GLD). This brings the GLD weighting close to 11% of your overall portfolio. Gold and Silver prices soared through some key resistance levels on more than double the normal trade volume on Wednesday. This is an indication of strong buying interest.

I believe that this renewed interest in precious metals could be the tip of the iceberg. There are many reasons why precious metals stand to perform well on a short, intermediate and long-term basis. Touching on all of them would be a little onerous for today’s comments. So, here are just three reasons why we are investing in precious metals.

First, there are clear signs that inflation is on the rise in the U.S. economy and precious metals offer protection against the ravages of inflation. The primary scourge of inflation is the erosion of your purchasing power. These commodities can preserve your purchasing power when consumer prices rising. Believe me, no matter what the CPI numbers tell you, prices are on the rise.

Secondly, this week Federal Reserve Chairman Bernanke expressed concern that the current distress in the housing and sub-prime mortgage markets could lead to a substantial decrease in personal consumption. This should come as no surprise to you, since I have been talking about the potential risks in the housing and residential credit markets for many months now. Anyway, personal consumption drives close to 70% of the U.S. economy and a sharp decrease in spending could usher in a deeper economic slowdown than anyone, including the Federal Reserve, expected. The U.S economy may miraculously avoid a slowdown but, remember, economic cycles are inevitable. We should be prepared to survive a down cycle. Precious metals typically act as a safe haven for your capital during periods of economic uncertainty.

As if that weren’t enough reason to invest in precious metals, the third and perhaps the most important fundamental reason to own gold and silver relates to the increasingly bloated U.S. trade deficit and it’s implications for our national currency. The U.S. trade deficit is, in essence, borrowing from foreign countries on a mass scale to finance the purchase of goods from those countries. In other words, we are buying a lot of imported stuff on credit. The absolute size of the debt is becoming a burden to the U.S. consumer and cannot be supported indefinitely. The easiest way to repay the foreign debt is to systematically devalue the dollar. It should be no mystery that the orderly devaluation of the Greenback is central to U.S. Treasury Secretary Paulson’s agenda with China. This portends a continued and, hopefully, measured slide in the value of the U.S. dollar against other foreign currencies and particularly against precious metals. With that said, foreign governments, central banks, institutions, and investors that are looking to reduce their positions in the Greenback will likely replace many dollars with investments in gold and silver among other alternatives.

With these three trends in place, there should be plenty of investment demand for gold and silver which should translate into higher prices and attractive investment gains for those who get in before the herd. We are already there.

Catamount Capital is located on McKinney Avenue in Dallas, Texas. I welcome you to drop by for further discussion on this topic. We enjoy visitors!

Greg