Have You Got The Guts To Buy?

Debt is evil, as shareholders in ABC Learning Centres have sadly been taught just this week.

Cash is king, as are resources, with oil, gold, platinum and silver all hitting multi-year highs.

We exclusively reveal the name of one of our specially selected uranium stocks, and give you details of one of our favourite gold explorers PLUS an explorer that could be about to strike oil in a big way.

Dear Fellow Stock Market Investor,

If you thought January was a bad month on the stock market, February hasn’t turned out to be a whole lot better.

Last week marked the fourth consecutive weekly decline in the stock market, the longest weekly losing streak since July-August last year when the sub-prime crisis was first unfolding.

Unlike January, February hasn’t seemed quite as volatile a month. It has felt more like death by small percentages…with a down 3% here, an up 0.5% there, here a down 4%, there an up 1%, everywhere a down 2%, E-I-E-I-O.

With apologies to Old McDonald and his farm, we wouldn’t be surprised if you are feeling some serious stock market pain.

Take a look at the year to date performance of some of these household names, companies who also happen to be some of the more popular stocks in ordinary investor’s portfolios…

Commonwealth Bank – down 24%

ANZ – down 18%

Harvey Norman – down 29%

Seek – down 18%

Allco Finance – down a whopping 82%

(Prices taken on February 25^th 2008, not taking into account dividends.)

And then there’s ABC Learning Centres, who saw their shares absolutely hammered this week over doubts surrounding their debt levels. The lesson in this unforgiving stock market is clear – debt is evil, cash is king.

It’s blindingly obvious now, but it seems many CEO’s, many investment banks and many stock market investors had forgotten about debt and all the added risks it entails in the great bull market of 2003 – 2007 (RIP). They haven’t any more!

It’s a gloomy picture no doubt.

Oil, Gold, Platinum and Silver All Power Higher

Yet amidst the pain, the prices for oil, gold, and platinum all hit record highs last week, and silver reached a 27-year peak.

It should be no secret to regular readers of this email that we continue to advocate an “overweight in resources” approach to investing in this stock market, with a particular emphasis on gold and oil.

We have more on our stronger for longer resources boom theme a little further down, including…

· Details of one of our favourite gold plays, a company that looks like it could be sitting on an amazing 3-5 million ounces of gold, and;

· A mid-sized oil exploration company set to drill 17 wells within five separate project areas during 2008, about whom we recently said “…is sure to generate exploration excitement.”

But first, we have a little more on the stock market, including the name of one of our top uranium stocks, a company we think could be on the cusp of something huge.

The Uranium Explorer On Sale Now

Many commentators, including us, have been quick to describe the stock market conditions of the past few weeks as extremely volatile.

Sure there has been increased volatility in recent weeks, with the markets been jumping several percentage points one day and falling several percentage points the next, but the truth is that stock markets have been volatile for about four years now.

The difference is that markets positively volatile before, and are negatively volatile now.

It’s an important difference, because if effects how many people invest. They are only too happy to invest in positively volatile markets, but suddenly do the exact opposite in negatively volatile markets. They are more likely to panic-sell and/or do nothing, like they are frozen in time.

It’s bizarre behaviour. Just a couple of months ago people were prepared to pay over $4 for a share in promising emerging uranium producer Bannerman Resources, yet today the shares languish around the $2.15 mark. If they were a buy at $4, surely they are a buy at almost half that price, aren’t they?

Cricket And Uranium – A Strange But True Mix

We could have picked any number of companies other than Bannerman who have seen their share price halve in the past couple of months. A little further down, we’ll show you why we’ve chosen Bannerman, and why we think this exciting uranium company could be on the cusp of something huge.

For cricket fans, as an aside, did you know that the company is named after Charles Bannerman, the Australian opening batsman who, in 1877, had the honour of facing the first ball ever bowled in Test cricket? He went on to score 165, which still today remains the highest score by an Australian batsman on debut. Also, his 165 runs, out of Australia's total of 245, is still the highest proportion (67.35%) of a completed innings in a Test match.

Jumping back to Bannerman the uranium company, the share price movement over the past couple of months is quite enlightening. It shows more than anything how in the short-term, share prices often move more because of fear and greed than the performance of the underlying company.

Many investors make the simple mistake of assuming the short-term performance of the share price accurately mirrors the performance of the underlying company.

Nothing could be further than the truth. Forget short-term share price movements, except when they allow you to buy great companies at cheap prices, and to sell mediocre companies at great prices.

The one key thing to remember is that in the long-term, it is the performance of the underlying company that drives the performance of the share price.

72 Million Pounds Of Uranium

As for Bannerman Resources, the company recently announced an updated resource statement, increasing its contained uranium from 27 million pounds to over 72 million pounds.

In our most recent report, we estimated its uranium project could generate operating cashflow of $160 million a year, which compares extremely favourably with its total market capitalisation of $280 million.

Bannerman remains one of a select few uranium plays our portfolio, and we look forward to continuing to follow its progress as it heads towards full production around mid-2011.

You Can Be An Investing Genius With An I.Q. Of 25

The human mind thinks in weird and wonderful ways. It’s our greatest asset, yet when it comes to stock market investing, the brain can be our greatest liability.

It makes us do irrational things, like buying shares in obscure companies based on a “hot tip” from a friend of a friend’s uncle’s electrician who heard that the company was about to announce a major iron ore find in the east of Western Australia.

It makes us do irrational things like selling shares in great companies at knock-down prices, just because you read some “expert” say the US economy was headed into recession and that China will be next.

Successful investors use their heads. They focus on the long-term and make rational investing decisions. We think these two quotes from master stock market investor Warren Buffett sum things up perfectly…

“Success in investing doesn't correlate with I.Q. once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”

“You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ.”

Have You Got The Guts To Buy?

We suspect most people reading this email have an I.Q. above 25, in which case Warren Buffett, the $50 billion man and the greatest stock market investor of all time, thinks you ALL can be successful investors.

· Have you got the will to invest in the stock market during good times and bad?

· Have you got the guts to buy when all others are selling?

· Can you keep your head whilst all those around you are losing theirs?

· Can you be fearful when others are greedy and be greedy when others are fearful?

· Can you ignore short-term “noise” and concentrate on long-term reality?

The list could go on. We hope you get the picture. With a reasonable level of intelligence, in the months, years and decades ahead, you can build significant wealth from investing in the stock market.

The Tiny Company That Struck Oil

Picking the right shares is obviously the key to making your stockmarket riches, and that’s where we think we can help you.

We generally focus on smaller companies. Smaller companies are often over-looked and under-researched, allowing us to find companies with outstanding prospects, yet valued at a fraction of the price of larger companies.

Some of our very best past recommendations have been smaller companies.

Take Carnarvon Petroleum for example. This small oil company typifies exactly what we are looking for when we search for stockmarket hidden gems.

We first recommended the stock as a BUY back in February 2006. At the time, the share price was a lowly 5.4 cents and the total company was worth just $17 million.

This was your typical under-researched small company. The share price had gone nowhere for the previous two years. As far as the market was concerned, it was a corporate basket case, a perennial under-performer, destined to spend the rest of its days stuck in penny share land, going nowhere fast.

But we noticed things were changing for the better. In our initial report in February 2006, our special buy email alert said…

“Over the past 12 months, key board and management changes have occurred that indicate exciting times ahead for investors. Carnarvon Petroleum now has all of the key foundations in place for success – a dynamic board and management team, a solid producing oilfield in Thailand, and the ability to evaluate and pursue projects on the international stage.”

The Cheap Tiny Company That Struck Oil

We also had the opportunity to meet with the company’s new Chairman and Chief Executive Officer to hear first hand about their plans to reinvigorate the company. Crucially, these two men had extensive mining sector experience, something we always look for with junior mining and resources companies.

Finally, the company was cheap, based both on its underlying oil assets and our positive view of the oil price. We concluded our BUY report by saying…

“The company’s market capitalisation is modest by industry standards, particularly given the quality of its board and management team, and its level of drilling activity. We believe the share price downside is limited and we recommend Carnarvon Petroleum as a Buy to all Members around 5.4 cents.”

How You Could Have Turned $20,000 into over $175,000

Fast forward to now, and the Carnarvon Petroleum share price is around 48 cents.

For Members who bought at 5.4 cents, at 48 cents they’d be sitting on a profit of almost 790%.

To put that into perspective, an investment of $20,000 would now be worth a quite unbelievable $177,777.78.

Now not every share we recommend to our Members will perform as well as Carnarvon Petroleum. Some will fall in value – after all, we’re only human, and mistakes can and will happen.

But, we hope it gives you an idea of what’s possible by investing in the stockmarket, and by our share recommendations.

The Hunt For The Next Huge Stockmarket Winner

The hunt for the next Carnarvon Petroleum is now officially on.

Could it be Platinum Australia – up an amazing 697% since we first recommended it as a buy back in November 2005?

Or could it be Andean Resources, up an astonishing 648% since we first recommended it as a buy also back in November 2005?

Or could it be Terramin Australia, up a breathtaking 574% since we first recommended it as a buy back in December 2005?

(Prices taken on February 25^th 2008; gains don’t include dividends.)

Despite the massive increase in the share prices of each of those three companies, we are still confident of further gains in the months and years ahead.

This Emerging Gold Player Could Be Sitting On 3-5 Million Ounces Of Gold

But it’s only one of those companies that we currently recommend as a BUY. In our most recent update, we said…

“…we believe an eventual global (gold) resource in the vicinity of 3-5 million ounces is virtually a certainty. The discovery cost remains extraordinarily low at less than US$10 per ounce.”

“…we believe the future….has never been rosier.”

We concluded the report by saying…

“…we recommend the stock as a BUY…”

For potential investors in this exciting emerging gold player, there are two pieces of good news…

1. The shares are currently trading slightly below our latest BUY price, despite them at one stage being some 19% higher than our most recent buy price.

2. Since our latest buy report, the gold price has continued to rise, recently hitting an all time high of US$958 an ounce. The psychologically important US$1000 an ounce gold price is closer than ever, as is our 2008 target price of US$1100 an ounce.

To put the size of the gold resource into perspective, a chart recently produced by the company showed that between 1999 and 2006, there have been a grand total of only 24 one-million plus ounce gold discoveries. This compares with 23 in 1996 to 1998, and a further 128 from 1985 to 1995. No wonder the price of gold is near record highs, and we think is headed significantly higher.

As you can see, we’re excited about the prospects of this company. Could it be the next Carnarvon Petroleum? We’ll find out in the weeks, months and years ahead.

The Oil Price Surges Through US$100 A Barrel

Then there’s the mid-sized oil exploration company we previously mentioned, the company about whom we recently said “…is sure to generate exploration excitement.”

Just before we give you some more details on this company, first a word on oil.

Over the past five months, the price of oil has been contained to a relatively broad range between support at US$85.82 and resistance at US$100.09.

We see this as a period of consolidation, typical of this part of the price cycle, and not surprising considering the strong gains achieved throughout 2007. Although we anticipate further consolidation within this range, given the resilience of the longer-term upward trend we expect oil prices to break higher in due course.

Given our confidence on the oil price, the challenge is to unearth hidden stock market gems that are set to not only benefit from the record high oil price, but who are likely to make significant new oil discoveries in the not too distant future.

We think we have several such companies in our portfolio, the names of who can be accessed the instant you sign up to become a Member.

Is This Mid-Sized Oil Explorer Set To Explode?

But we think one oil exploration company in particular could be set to benefit from its 2008 aggressive and extensive drilling programme.

Not only that, one of the locations the company is drilling is Oman, an area of known oil accumulations.

If that’s not enough, the potential oil resource in place in the area they are drilling is estimated to lie somewhere between 6 million and 40 million barrels, with mean oil resources estimated at 20 million barrels.

We first recommended this exciting oil explorer as a BUY in January last year when the shares were $1.64. We re-recommended them as a BUY in January this year at around the same price, despite the company making excellent progress over the intervening 12 months.

Fast forward to today, and largely courtesy of the sub-prime fall out, the shares currently trade around the $1.40 mark, and that’s even after the shares jumped over 6% on Monday this week on positive news from its first well in Oman.

Then there’s their six well Indian drilling programme, expected to commence any moment now. We understand the quality of the 3D seismic data to be excellent.

All in all, we think this company adds up to an excellent medium-high risk/high reward oil explorer.

We wish you happy and profitable investing.

P.S. As we’ve said previously, we think the world is experiencing a once-in-a-century boom via China. The country is undergoing unparalleled industrialisation, with an enormous rural migration to cities. The Chinese economy is growing at an annualised rate of 12%. For a country with over 1.3 billion people, giving it more than 20% of the world’s population, that sort of growth is simply stunning. We think resource-rich Australia is uniquely placed to benefit from the Chinese boom.

P.P.S. The Australian Financial Review this week featured an article titled “Upside all the way for resources” in it saying, amongst other things, “In a strange way, US economic weakness is positive for commodities. Commodity markets see the US Federal Reserve’s recession-fighting policies as supportive.” We couldn’t agree more.

The Seven Steps To Investing Success

Whilst the stock market at large continues to struggle, resources stocks continue to march higher…just like we predicted they would.

The US economy may be headed for recession, but as witnessed by the recent interest rate rise, the Australian economy powers on to the tune of the ongoing resources boom.

With the price of gold, oil, coal and platinum all around record highs, we think the our portfolio of small resources stocks is uniquely placed to profit.

Dear Concerned Stock Market Investor,

We’ve said it before and we’ll say it again…we firmly believe the resources boom will last for decades ahead. We view resources as strategic assets and with many large developing countries industrialising, such resources will be in demand regardless of market conditions, regardless of the US economy, and regardless of Australian interest rates.

A little further down we highlight one smaller gold company and one smaller platinum company, both of whom we think are uniquely placed to prosper from their higher commodity prices and their outstanding exploration prospects.

But first, as usual, there are plenty of things to be worried about…

· The state of the US economy – will it or won’t it fall into recession?

· Australian interest rates up to 7% and set to rise even further – are we set up for a housing slump, like the US and UK?

· Ricky Ponting’s batting form – when will he stop edging the ball to slip?

· China’s future growth prospects – will they be affected by a global economic slowdown?

· Commodity prices – can they sustain today’s historically high levels, and rise even further, as they’ve done in the past few days and weeks?

· The stock market – was January 22^nd 2008 the bottom and shares are set to sail higher in the month and years ahead, or is there more pain ahead?

· BHP Billiton’s bid for Rio Tinto – is BHP potentially over-paying, what will happen to the Rio share price if the bid fails, and what will the Chinese do?

The list could go on.

They are all legitimate concerns, and each concern on its own might be enough to scare you out of making an investment in the stock market. But if you look at stock market investing as being a decades long experience, hopefully the picture looks a lot brighter.

War & Peace And The Economy Over The Next 30 Years

In the next 10, 20 and 30 years, the world’s economies will go through periods of recession and periods of growth. There will be war and there will be peace. There will be feast and there will be famine.

There will be flood and there will be drought. There will be house price booms and house price busts. There will be periods of stock market joy and periods of stock market despair. There might even be a period in which England wins back-to-back Ashes series.

If you thought about all that could happen in the ensuing years, you would likely never invest in the stock market. But you’d be missing the big picture, and missing out on some wonderful stock market profits.

Your job as a stock market investor is relatively simple. In fact, we’ve boiled it down to 7 simple steps. If you follow these 7 steps, we hope that in the years ahead, as you count your wealth accumulated from the stock market, you’ll have long forgotten about the sub-prime crisis, the US economic downturn, George Bush (both of them!) and January 22^nd 2008.

Step 1 – Commit To Invest In The Stock Market

This is often the hardest step of them all. It is possible to lose money by investing in the stock market, and this very fact puts many people off taking the plunge. As we have said previously, psychologists tell us that the pain of loss is three times the joy of gain.

People are happy to avoid the pain of losses by not investing in the stock market…ever.

That is fine. But they are also missing out on the potential gains available by investing in the stock market.

Over time, we firmly believe the stock market offers you a great opportunity to make money and build long-term wealth, ahead of all other asset classes, including property.

For example, take a look at some of the extraordinary profits people could have made by investing in these ordinary household names…

CSL – up over 4500%* since they floated in 1994.

ABC Learning – up more than 1700%* since they floated in 2001.

Woolworths – up over 1000%* since they floated in 1993.

BHP – up over 1000%* over the past 20 odd years.

Commonwealth Bank – up over 800%* since they floated in 1991.

(Prices taken on February 11^th 2008; gains don’t include dividends.)

Ordinary people like you could have made extraordinary profits by investing in companies such as those mentioned above.

Step 2 – Commit To Invest In The Stock Market For At Least 5 Years

Investing with anything less than a 5 year time frame is closer to gambling than it is to investing.

In the short-term, the share price movements are determined much more by investor sentiment rather than the underlying prospects for the company.

Take a huge company like Newcrest Mining for example. The share price hit close to $40 early this year, only to slump below $32 just 5 trading days later. Could a company worth around $14.5 billion one day be worth around $11.5 billion a few days later?

We don’t think so.

Newmont Mining is just one example of how share prices can move rapidly in a very short space of time. But as a long-term investor, these sharp movements in share prices will ultimately likely prove to be relatively meaningless.

Over time, we expect the share price of a company like Newcrest Mining to march higher. We like the company so much that we recently re-recommended it as a BUY to our Members.

We also expect the stock market in general to march higher over time. Sure there will be periods of extreme volatility like we’ve seen this January, but over the long-term, stock market returns have proven to be excellent.

Commenting on the North American markets, Trapeze Asset Management recently said the following…

“Over any 20 year period stocks have always outperformed all other asset classes. Over any 15 year period stock outperformance drops to 93% (although it would also be 100% if you exclude the '30s depression); over any 10 year period, 89%; over any 5 year period, 74%; and, for any 1 year period, 70%.”

Need we say any more?

Step 3 – The Time To Buy Is Now

People often wonder when is the best time to invest in the stock market. For example, with so much uncertainty around the global economy right now, some people may think now is not a good time to invest.

However, history has shown that time in the market is more important to your returns than timing the market.

Using that argument, the time to buy shares is now. It is always now.

Adding to the “buy now” argument is the current uncertain economic environment.

Virtually without exception, all the great stock market investors have prospered because they have bought during times of pessimism.

The current mood of the stock market is one of caution. One tremble from Wall Street creates earthquakes on the Australian stock market.

As an aside, did you realise that for the month of January, the US Dow Jones Industrial Average fell 4.6% versus a fall of 11.3% for the Aussie All Ordinaries Index? Hardly seems fair does it, especially as it’s their economy that’s close to recession, not ours?!

But yet that pessimism creates buying opportunities. For example, we think the share prices of some of the Fat Prophets specially selected stocks are trading at what we consider to be a significant discount to their true value.

We have more on them, including the two stocks we think are uniquely placed to prosper, a little further down.

The time to buy shares is when they are cheap. The time to buy them is now.

Step 4 – Invest In Industries And Sectors That Will Out-Perform Over Time

Do you think now is a good time to invest in the typewriter industry?

If such a company existed today, we suspect its shares would be rather cheap. No-one else would be buying shares in typewriter companies, so in a contrarian way, that might make the company attractive.

So here we have a cheap company that is completely overlooked by the stock market. But would that company make for a great long-term investment? We suspect not.

If the future is not typewriters, what is it?

We think you get the picture.

Successful investing is about the big picture too.

That’s one of the reasons our team concentrates a lot of its collective intellectual brainpower to working out which industries are likely to prosper in the months, years and decades ahead.

And we firmly believe it’s the resources sector that will prosper in the future, particularly oil and gold. We view resources as strategic assets and with many large developing countries industrialising, such resources will be in demand regardless of market conditions.

Not only that, as you’ll see a little further down, we believe our view is backed up and verified by the charts we’ve produced for you below. But as ever, we’ll leave it to you come to your own conclusions.

Step 5 – Buy Outstanding Companies With Excellent Management

There are many poor companies quoted on the Australian Stock Exchange. They destroy shareholder value, whilst often at the same time enriching the executives who are charged with running them.

HIH Insurance

One-Tel

Centro Properties

MFS

You have probably heard of these high-profile companies. The first two have long gone bust, with executives spending some time in jail for their part in the collapse. The latter two are in the process of a fire sale of assets in an attempt to ensure they live to fight another day. All four have destroyed a significant amount of shareholder value, if not all of it.

Outstanding companies grow. They have smart management who are of the highest integrity. They have strong competitive positions. They operate in sectors and industries with favourable long-term economics and prospects.

Woolworths

BHP Billiton

QBE Insurance

Oxiana

The difference is clear to see. The long-term shareholder returns are suitably impressive. We rest our case.

Needless to say, we place management experience, expertise and integrity right at the very heart of our stock picking process. We try to meet as many directors as we can so that first hand, we can assess their qualities.

We believe it’s that sort of attention to detail that sets the our service apart and has lead us to our market-beating stock recommendations over the 7 or more years of our existence.

Step 6 – Focus On Buying Smaller Companies

There is clear evidence that smaller companies tend to out-perform larger companies. We call it the small company advantage.

The rule of large numbers says large companies like simply can’t grow at the rates of smaller companies. Woolworths are in the process of fining this out now. Over the past 5 years, their sales have grown from $20 billion to over $40 billion. Barring a massive acquisition, sales are not going to double again over the next 5 years.

When it comes to mining companies, if Rio Tinto or BHP discovered a new uranium deposit, the rule of large numbers says that is not going to dramatically and instantly affect the share price.

But, when it comes to smaller companies, things are different. A new discovery or improved production or a new product line can instantly do wonders to the share price.

Also, over time, smaller companies can grow to be larger companies. For example, a company worth $10 million can grow into a company worth $100 million, and all else being equal, the share price would rise by 1000%!

Finally, smaller companies are generally over-looked and under-researched, allowing us here at Fat Prophets to find companies with outstanding prospects, yet valued at a fraction of the price of larger companies.

Amongst our current BUY recommendations, we have several smaller companies, including one oil explorer that is valued at just $10 million. Over the long-term, we think it and our other smaller companies could offer investors outstanding returns.

Step 7 – Invest In Times Of Pessimism

We’ve touched on this previously.

Just as it is logical that the price of an asset increases as demand increases, the opposite is also true.

So indiscriminately buying uranium stocks when they are hot and just because everyone else is buying them is a strategy unlikely to lead to long-term investing success.

Conversely, buying gold back in 2001, when the gold price was US$262 an ounce, and everyone else was selling, including The Bank Of England, was an excellent investing decision.

The good news for potential stock market investors is that now is a time of pessimism. Australian interest rates are high and heading higher. The US is close to recession. The sub-prime mortgage induced credit crunch lurches from one crisis to another, chewing up and spitting out highly indebted companies with dubious business models.

That is the exact environment that creates times of pessimism and therefore attractive prices for specially selected stocks.

Seven Steps To Stock Market Success

In summary, our 7 steps to stock market success are…

1. Commit To Invest In The Stock Market

2. Commit To Invest In The Stock Market For At Least 5 Years

3. The Time To Buy Is Now

4. Invest In Industries And Sectors That Will Out-Perform Over Time

5. Buy Outstanding Companies With Excellent Management

6. Focus On Buying Smaller Companies

7. Invest In Times Of Pessimism

Sounds easy.

Reality is different. For example, the current stock market continues to be finely balanced between a bull and bear market trend. Right now, the bulls are winning.

However, before becoming overly sanguine about recent market action, you should be aware that this could well be a bear market rally. Such rallies serve to lure investors back into the market, thinking the worst is over.

So Is The Time To Buy?

Based on step 3 above, the answer is yes – the time to buy is always now.

But are you buying now?

We suspect not.

We suspect many people may be waiting for the stock market to hit rock bottom before hitting the buy button. They are nervous because they are fearful of losing money.

Trying to buy at the absolute bottom of the market is a futile exercise – you’ll end up either never buying or buying back after the share market has more than bounced back. It’s this type of behaviour that sees many inexperienced private investors sell low and buy high.

May The Resources Sector Be With You…

Despite the threat of markets falling further, it is clear that the underlying makeup of the market suggests the strength lies with the resource sector.

But we’ve been saying that for a long time now…

At a time when the broader stock market remains on a knife-edge, both the energy and materials sectors remain well above their August 2007 lows, suggesting the bull market in the resource sector remains intact.

Maintaining our exposure to the sector has been our strategy for some time and we continue to advocate such a stance.

Whilst Avoiding The Banks…

Compare that to the widely held financial sector, a sector that includes the ever-popular banks.

The banking sector is under pressure, and investors are rightly concerned of the impact of higher interest rates on an already indebted household sector.

Over to the US, and we see the Federal Reserve Bank is hardly too concerned about inflation, with official interest rates in the US now at 3%. There is widespread expectation that the Fed will deliver another 50 basis point rate cut when they next meet on 18 March.

Lower interest rates and the Bush government’s emergency relief package continue to undermine the long term health of the US dollar.

Whilst this is not great for American tourists, it’s great news for gold, because gold is the US dollar’s major competitor.

Gold, Oil, Coal and Platinum All Surge Higher

In fact, last Friday gold prices surged US$12.30 to US$922.30 an ounce, close to an all time record high.

Gold has not been the only commodity on the rise. Just this week platinum for April delivery surged to a record US$1,949 an ounce. Coal is trading at record highs, and according to a report last week on the ABC, “the price of Australian coal is set to double as demand from Asia expands and world supply remains tight.”

Oil jumped decisively above US$90 a barrel early this week, trading over US$93 a barrel. The US$100 a barrel mark is well and truly within sight again.

As regular readers will know, we have been keen on the energy sector for quite some time now. We’ve backed up our confidence by recommending our Members buy some of our specially selected resource stocks.

Despite all the good news surrounding the sector, including higher commodity prices, an increasing acceptance that Chinese demand is not going to fall off a cliff if the US economy goes into recession, and the prospect of further takeover activity especially in the mid-cap sector, the share prices of many mining and resources companies are still a long way off their 2007 highs.

The Small Company With One Million Ounces Of Gold

Take this Brazilian gold miner. Last week, we reiterated our BUY recommendation to our Members.

We initially recommended the company as a buy way back in November 2006 when the shares were just 33 cents. They have subsequently hit a high of 93 cents last year, but now trade back around the 83 cents level.

· The total company is worth only around $125 million. As we mentioned previously, smaller companies generally have the potential to provide investors with stronger upside potential.

· We particularly like the quality of the company’s project portfolio, its experienced management team and its promise of rapid exploration and evaluation of its portfolio.

· We have had the opportunity to visit the company’s Brazilian operations and came away impressed with progress, and having met the company in the last couple of weeks, are comfortable that they are on track for first gold by March 2008, now just a few weeks away.

· Whilst the company is rightly focusing on bringing its Brazilian operation into production, once that is done it is planning to quickly move forward with development work on two other exciting projects, one in Brazil and the other in Peru.

· The Peru project in particular is very exciting, with the company believing there is potential for gold resources in excess of 1 million ounces, and we think even that could turn out to be a conservative estimate!

The market often fails to fully appreciate many of the better quality junior mining companies in their initial stages. This ignorance can present buying opportunities for astute investors. We think this junior gold miner is a prime example.

We concluded our report to Members with “It is our strong belief that this company has the funding, projects and management team in place to be a success…We reiterate our view that it has the potential to be a long-term success story for our Members.”

Is This Platinum Explorer A Prime Takeover Target?

Then there’s the South African platinum explorer whose share price hit an all time high of $2.90 at the end of December. Despite the price of platinum continuing to hit all time highs, the share price trades around the $2.55 level, some 12% off its recent peak.

In a recent report to our Members, we said that in the coming months we believe the share price has the potential to break above $2.90 again and to extend to all time highs.

We concluded that report by saying the company “…continues to represent a rare, high quality investment opportunity for Members. It boasts two extremely attractive emerging South African platinum projects at a time of record prices. This is sure to sustain investor interest…which could result in a takeover or merger at some stage in the future.”

With many experts suggesting the market is over-sold and headed for a bounce, we urge you to act now in order to access our current recommended stocks and our very special subscription offer.

We wish you happy and profitable long-term investing.

P.P.P.S. Don’t just take our word for it regarding now being a great time to buy shares. Wilson Asset management principal Geoff Wilson was quoted in last weekend’s Australian Financial Review as saying “It appears some incredible value is presenting itself, with companies trading at a sizeable discount to assets. The mis-pricing of assets really seems to have started.”

The Time To Buy Is Now

As interest rates edge up yet again, many people must be wondering if now is the right time to be buying shares.

The simple answer is yes.

With the share prices of some of specially selected stocks trading at what we consider to be a significant discount to their true value, the time to buy is now.

Dear Stock Market Investor,

The Australian stock market is on the move again.

Since its January 22 low, the All Ordinaries Index is UP around 13%, including a massive 185 point or 3.2% jump last Friday alone.

Was January 22 2008 the bottom of the current market?

We don’t profess to be able to predict the short-term direction of the stock market. We don’t know anyone else who can either, despite there being no shortage of ‘experts’ willing to give it a try.

Is it too late to buy now?

No way.

The time to buy is now. It is always now.

But…there is a catch.

It’s only time to buy THE RIGHT STOCKS now.

A little further down we’ll give you details of some of the stocks we are finding attractive now, but first a little background…

China’s $15 Billion Resources Investment

“We have a very bullish view of the long-term prospects of the global mining sector.”

Those words come from Chinalco president Xiao Yaqing in London last week as he unveiled his company and its US partner Alcoa’s $15.5 billion massive CASH investment in Rio Tinto.

Chinalco and Alcoa now jointly own a 12% stake in Rio Tinto’s London shares.

The deal is significant for several reasons.

Most obviously it scuppers BHP Billiton’s three-for-one all share takeover offer for Rio Tinto. BHP were likely anyway to have to increase their offer anyway, but this significantly increases the amount BHP will have to pay in order to secure its prey.

We will know more this week about BHP’s response, possibly even by the time you read this email.

We’re happy to let BHP and Rio and Chinalco and Alcoa and their myriad of highly paid bankers, lawyers and advisors sort out it all out.

Needless to say, as regular readers of this email will know, we’ve long been fans of Rio Tinto and particularly BHP, and this deal simply endorses our bullish long-term views.

As an aside, with BHP shares now trading around $40, Members who acted on our special buy alert email and bought BHP Billiton shares at the $31* they traded at just 2 weeks ago will already be sitting on a nice 29%* profit. And we think that is just the beginning.

The Resources Boom That Just Keeps Getting Bigger

As for Rio Tinto, last week we said we believe they remain in a position of strength, and along with other large diversified miners, will continue to be a major beneficiary of the ongoing global commodities boom.

We’re not alone in thinking this resources boom is only just beginning.

Last year, prominent investor Marc Faber was quoted on Bloomberg as saying, “the up wave of the (current commodities) cycle is likely to last another 15 to 20 years”.

So just another 14 or 19 years to go then…

Four Big Bets On The Resources Boom

Since that quote, we’ve had four of the biggest bets yet to back up the view that the resources boom is set to continue for years ahead…

Bet #1

Last year, at APEC, Woodside Petroleum announced the largest export deal in Australian history. It will sell up to $45 billion in liquefied natural gas (LNG) to China's leading energy producer, PetroChina.

To put that into perspective, trade between China and Australia was $50 billion for all of last year, making China Australia's largest trading partner, ahead of Japan and the USA.

At the time, Gordon Kwan, head of China energy research at CLSA called it "…the mother of all LNG deals.”

Bet #2

BHP’s $350 billion takeover offer for Rio Tinto. If ever you needed proof that mining companies believe in the longevity of the resources boom, surely that was it.

Bet #3

The $15.5 billion cash paid by Chinalco and Alcoa’s for a 12% stake in Rio Tinto’s London shares.

What is also highly significant is that the consortium paid a large premium for their stake in Rio. When Rio’s London shares closed last Thursday at £50, Chinalco and Alcoa paid £60 per share for their stake, a 20% premium to the prevailing share price.

Do you think they believe in the “stronger for longer” resources argument?

Bet #4

Mrs Beryl Gray of Wagga Wagga put $1000 of BHP Billiton shares into a trust fund she set up for her newly born grand daughter.

The trust fund cannot be accessed until her grand daughter is 21 years old, and at that time, Mrs Gray hopes it could pay for a new car, be used towards a deposit on a first house, or be used to fund further education costs.

Mrs Gray thinks BHP is a safe investment and is a company that will survive and prosper over the next 21 years. She hopes the power of compounding returns, including dividends, will ensure her grand daughter is presented with a decent sized cheque in 2029.

The Share Market Offers The Best Returns

We have a confession. We made the last bet up.

But, we wouldn’t be surprised if similar scenarios haven’t been regularly played out around the country.

The point of course is that over the course of such a long time period, the share market usually offers the best returns. Also, because it is such a long-term investment, you want to invest in large, stable and growing companies.

Like the theoretical Mrs Gray, we think BHP Billiton fits the bill.

Over $550 Billion Of Resources Bets

Those first three bets above are well and truly for real.

There are many more examples of bets being made in the resources sector. In fact, every day resources companies around Australia are effectively making bets on the longevity of the resources boom.

As just reported in the Australian Financial Review, according to Access Economics there are already around $200 billion of mining projects already committed or under construction.

As if that’s not enough, a further $178 billion of possible projects are now pending, AND another $175 billion worth are under consideration.

It all adds up to an Australian mining project pipeline totalling over $550 billion.

Insatiable Chinese Demand Continues To Fuel Resources Boom

Either this is the greatest resources bubble of all time or the insatiable demand from China, the increasing demand from India, plus the usual consumption from huge economies like the USA, Japan, Germany and the rest of Europe will continue to fuel this resources boom.

We clearly think it’s the latter.

Many so-called experts have continually under-estimated the length and breadth of this resources boom. That’s fine by us, as it means the share prices of some of our specially selected stocks are trading at what we consider to be a significant discount to their true value.

Most successful stock market investors usually go against the crowd.

Most successful stock market investors are value investors.

Even though mining and resources stocks seem like they’ve been flavour of the day for a while now, we firmly believe the best is yet to come. Once the stock market at large cottons onto the longevity of this resources boom, we think it’s inevitable the valuations of many of our specially selected resources stocks will soar.

A Very Good Environment For Long-Term Investors

For example, even with the shares trading at around $40, BHP trades on a 2009 forward price earnings ratio of about 10.5. That is the equivalent to an earnings yield of 9.5%, and for a rapidly growing company with favourable underlying economics, we think is just plain cheap.

But you’ve known that for a while now…

We’re not the only ones who think leading mining companies are cheap. When asked by the weekend Australian Financial Review about the prospects of the leading mining companies, Australian Foundation Investment Co chief executive Ross Barker said…

“Their cash flows are fantastic and it’s a very good environment for long-term investors because you have people concerned about resources and China and they sell quality companies down, and that is where you can pick up some good buys.”

We couldn’t agree more, as evidenced by the special buy alert email we sent out to our Fat Prophets Members at the height of the stock market meltdown of 2 weeks ago.

We went on to name SIX high quality resource companies, all of which had seen their share prices hammered over the previous week or more. In tune with the rest of the stock market, all have risen smartly since we sent out that email.

Yet all SIX remain some way off their record highs, and despite the share price rises of last week, we remain confident about their long-term prospects.

Searching For More Great Small Companies

We are value investors. We don’t just search for cheap companies. We search for cheap companies with excellent management, outstanding assets and sustainable competitive advantages.

Although we like the share price and the future prospects of huge companies like BHP Billiton and Rio Tinto, we generally focus on smaller companies.

These smaller companies are generally over-looked and under-researched, allowing us to find companies with outstanding prospects, yet valued at a fraction of the price of larger companies.

Some of our very best recommendations have been smaller companies.

For example, each of these companies was initially recommended when they were worth less than $30 million. Just look at the stunning gains they’ve racked up since…

Carnarvon Petroleum – Up an amazing 919%* in just under 2 years!

Terramin Australia – Up a breathtaking 577%* in just a little over 2 years!

Image Resources – Up an astonishing 341%* also in just a little over than 2 years!

(Share prices taken on Monday 5th February 2008. Gains don’t include dividends.)

It’s Likely An Excellent Time To Be Buying Shares

That sort of performance is no fluke. It is the result of years of experience, plenty of skill, hundreds of hours of research, and a complete dedication to selecting and profiting from stock market winners.

When it comes to the mining and resources sector, we have a long and enviable track record.

Now obviously our portfolios have fallen over the past month or so in tune with the rest of the stock market. The market is taking no prisoners.

The share prices of some of our very favourite resources and mining stocks have been beaten back.

But that has created some compelling buying opportunities. Like many other stock market experts, we believe around now is likely to be an excellent time to be buying shares.

Exceptional Opportunities

For example, Wilson Asset Management principal Geoff Wilson was quoted in the weekend Australian Financial Review as saying some “exceptional” opportunities have presented themselves, particularly in the mid-to-small company sector.

“I am more excited about the next 12 months than I have been in the last two or three years.”

It never ceases to amaze us when stock market investors head for the exit when prices are cheaper than they were just a few weeks or months ago.

Particularly disturbing to us was another article in the weekend Australian Financial Review which talked of younger investors, who have invested in the stock market and never experienced a significant downturn, looking to switch out of stocks and into property.

We’re not going to get into a debate here and now about house prices, suffice to say in the past we’ve said we think there is a greater risk of Australian house prices falling in the future than rising. More on that in future editions…

It’s About China, Stupid

A few short weeks ago, people were happy to pile into shares.

China was growing at a double digit annualised rate, placing it on track to surpass Germany as the world’s third-largest economy.

We were predicting the commodity boom would last for years to come.

The Australian stock market was regularly hitting new highs.

Fast forward to now…

China is still growing.

We are still predicting the commodity boom will last for years to come.

World stock markets have wobbled and shares have become cheaper.

Can you spot the difference?

Obviously shares are now cheaper than they were a couple of months ago.

In any normal market, you would expect demand to increase when prices were lowered. Only in the stock market does demand decrease when prices go lower.

Why Stock Market Investors Are Idiots

It defies belief.

It’s idiotic…crazy…absurd…imbecilic…insane…foolish...(insert your own objective here…)

Yet it happens time and time again.

That’s because, in the short-term, the direction of the stock market is driven by the twin emotions of fear and greed.

To be a successful investor, you have to be able to control your emotions, concentrate on the long-term picture, and follow master investor Warren Buffett’s timeless advice…

“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."

You May Have To Be Quick To Snap Up These Bargains

The good news coming out of the recent stockmarket shenanigans is that we’re finding many of our existing share recommendations trading at even more attractive prices.

But you may have to move quickly, as the share prices have already made some significant moves, although they are mostly still some way off their recent peaks.

For example, take a look at the share price falls of some of these mining & resources stocks…

This emerging gold producer’s share price – about which just last week we told our Members “…is a dirt cheap gold exposure” – is around 39% lower than it was in November 2007, and a whopping 63% off its June 2007 high.

This small oil producer and explorer – who very recently announced record oil revenues and an aggressive oil and gas development programme – has seen its share price plunge around 23% in just over 3 months, despite the shares being up around 17% in the last 2 weeks.

The uranium producer – which remains our standout uranium share pick – has seen its share price tumble over 40% lower in just the last three months. Sure it has had some short-term problems as it ramps up production at its new mine, but we believe these are only temporary. It seems the stock market may also be starting to believe this too, judging by the 8% share price jump on Monday this week.

Our Newest Uranium Stock Continues To Out-Perform

Of course, not all companies have seen their share price decimated over the past few weeks.

Those companies that continue to perform well continue to be rewarded with rising share prices…just the way it should be!

When it comes to junior mining and resource companies, good news on the exploration front is still being rewarded for quality issues.

Take the Namibian uranium explorer we told you about a few weeks ago.

As a reminder…

· We remain extremely bullish on the uranium sector, yet at the same time, we stay away from the purely speculative “boom or bust” end of the market.

· Despite there being dozens upon dozens of uranium hopefuls listed on the Australian Stock Exchange, we have so far recommended only four.

· To emphasise the sort of research we undertake before recommending our Members buy a stock, last year we undertook a site visit to our newest uranium stock’s project in Namibia.

· We genuinely believe that this company has the potential to discover a world-class uranium deposit.

This Company Has Just Made A Massive Uranium Discovery

Last week, things got really interesting for this Namibian uranium miner when it firstly announced to the stock exchange news of a “massive uranium intersection” at its Namibian exploration target.

Soon after, in another stock exchange release, it announced a further “major new uranium discovery.”

Given the success of the latest drilling programme, we are extremely confident that an initial resource estimate, due in the next few weeks, could be in the vicinity of 30-40 million pounds of uranium, with the potential to surprise on the upside.

In our latest report to Members sent last week, we concluded by saying “We reiterate that this is merely just the beginning with respect to this company.”

Not surprisingly, the share price took off in response to these latest massive new uranium discoveries.

Yet the company is still only relatively small, with the whole company still valued at less than $250 million. Compare that to uranium producer Paladin Energy which is valued at well over $3 billion.

The Only Way For Gold Is Up

As regular readers will know, our target gold price for 2008 is US$1100 an ounce. The precious metal is progressing steadily on its inexorable journey towards the US$1,000 per ounce mark.

The financial market panic associated with a struggling US economy has set the scene for gold's next assault on the summit. With major production issues, albeit temporary in nature, emerging in South Africa and China, and more US interest rate cuts to come, the only way is up for gold.

Gold finished 2007 with its biggest yearly gain since 1979, its sixth straight annual increase, and it has taken this positive momentum into the New Year.

The gold price hit an all-time high during the first few days of 2008, with an impressive burst through the US$850 per ounce mark, and it has continued to climb higher despite the carnage on world financial markets, climbing to a fresh record of US$929.80 an ounce just last week.

We are seeing a simultaneous decline in global gold production at a time of increasing demand and record gold prices. However, there are enormous supply-side restrictions affecting gold.

This supports the strong long-term gold price outlook that we have held and maintained for years.

Three 3 Ways To Profit From The Soaring Gold Price

Given our confidence in the gold price, as you can imagine our portfolios are packed with gold exploration and production companies.

Here is a flavour of just three of our favourite gold stocks…

1. The Egyptian gold miner with over 11 million ounces of gold reserves.

2. The West Australian company whose corporate goal is “To produce 1 million ounces of gold per annum and have reserves of 10 million ounces by the end of 2010.”

3. The Argentinean gold explorer about which we recently said is “one of the world’s most exciting emerging gold players.”

We reiterate that 2008 should be another stellar year for the yellow metal. Gold has so much going for it, with a quartet of high profile factors comprising high oil prices, a slumping US dollar, economic uncertainty and the risk of inflation.

Accordingly, we continue to recommend that Members maintain strong exposure to gold during 2008

We wish you happy and profitable long-term investing.

P.S. As long-term investors ourselves, we’d be delighted if you would join us in our journey to bring you wealth creating stock recommendations. As we have previously said, we think the resources boom is only just beginning, and if it does run for the next 15-20 years, based on our past track record, we are very confident of continuing to thump the returns of the overall stock market.

P.P.S. Remember the tiny Mexican gold, silver, copper, lead, zinc and molybdenum explorer we told you about a couple of weeks ago? Despite the company recently announcing that drilling in Mexico is progressing well, with results indicative of elevated levels of gold and silver, the share price still remains around the level it was way back in June last year. This is the same company about whom we concluded our initial BUY recommendation by saying “…we believe there is very little downside for Members, but rather, for patient investors, there is potential for tremendous upside over the longer term.”