Resource Stock Report - V14 #7.0  - Markets, Gold, HBU ETF, DE - June, 24, 2008

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                                                     Markets

I last updated you on May 20th about a crucial turning point in the markets, see quote below

http://www.playstocks.net/RSUV1445May202008Mkt.asp

"we are getting close - or at the point were I suspected that this bear market rally may end. We are
close to the 1450 area which I said was a major resistant level. The market actually hit 1440
yesterday and retreated. This 1430 to 1440 level has also become the 200 day moving average, more
resistance. This rally has taken sometime and we may see a topping pattern here that may last
several weeks. A break below 1380 would be a signal we are going lower."

S&P 500 chart

The market held at 1375 for a while but then fell through on June 6th.

It looks pretty certain - a test of recent (January) lows around 1275 is in the cards. The Dow Jones
is already very close to testing its January lows.

Most likely we are going to make new lows in this bear market. The period from July to October has
seen some very bad markets and I think we will see a lot more weakness.

The market is acting exactly as I expected. The bear market rally would be fueled on beliefs of an
economic recovery and an end to the housing and credit risk and that the rally would fail when the
markets realize or wait to find out that there is no economic recovery, it is getting worse and the
same for the housing and credit crisis.

It’s no understatement to say that the world is faced with the gravest crisis since the oil shock of
the 1970s, with oil, food and raw materials prices skyrocketing.

Consumer price inflation across the 15-nation euro zone rose at an upwardly revised annual pace of
3.7% in May, up from a preliminary May estimate of 3.6% and an April pace of 3.3%. Consensus
expectations were for CPI to hold at 3.6%, according to a Dow Jones survey of economists.

The Labor Department report showed that the U.S. CPI for May rose 0.6% last month, ahead of the
average estimate of a 0.5% rise. However core inflation, excluding food and energy, came in at 0.2%,
as expected.

Even the U.S. phony inflation data is getting too high!

The Royal Bank of Scotland issued a warning to its clients to - “Brace for a full fledged crash in
global stock and credit markets. A very nasty period is soon to be upon us, so be prepared.

Morgan Stanley has predicted a "catastrophic event" in world currency markets during the coming
months as occurred in 1992 due to opposing views between the Fed and the ECB about what to do about
monetary policy and inflation and due to imbalances in the ECB itself.

The stock market just becomes more and more over valued and more and more riskier as earnings plummet!!!!!!!!!!!

In my 2008 market outlook, I talked about earnings for the S&P 500 and that projections were way to
optimistic. I said " No doubt, earnings for the S&P 500 are going to be revised down again and again
as the year goes on - just like we seen in 2000 - 2002."

So what has actually happened - 1st qtr. S&P earnings are  down -25.9% from a year earlier, a sharp
reverse from the 5.7% increase expected at the beginning of the qtr. Energy contributing 23.2% of
S&P 500 operating earnings during the first quarter, up from 13.6% a year ago. This follows the 4th
qtr. in which earnings contracted -30.8% more than any qtr. since 1990.

David Rosenberg of Merrill Lynch notes that the 0.2% decline in real spending on durables and
semi-durables was the 6th decline in a row, which has never happened in the 49 years that such data
has been tracked. He notes there has never been a time when consumer spending on durables (like cars
and appliances) and semi-durables (like clothing) have contracted for two quarters when the economy
has not been in a technical recession.

Of course we all know that the government stats are bogus and the U.S. is really in a recession!

Since 2001, the average income of the bottom 90% of wage earners dropped by 0.9%, from $32,371 to
$32,080 in 2006, in constant 2006 (inflation-adjusted) dollars. The further down the income scale,
the more pressure on the consumer. (source: Center for American Progress) The stats I have seen in
Canada are even more bleak. Without the house as an ATM machine, consumers simply have no way to
maintain the previous ludicrous spending rate.

In short, wherever you look, tax receipts are down. That means income and sales are down. There is
no spin that trumps tax receipts.

Gold chart

Last year when the markets got hammered from July 2007 to January 2008. Gold soared from $650 to over $1,000. Once again, I expect gold to soar and go well past $1,000 when the market gets hammered again. This is because it is going to be in an environment of rising inflation as the US$ drops to
new lows and the dollar price of commodities continues to rise.

As the economy accelerates into a further descent, which is likely to occur in the near future, the
Fed and the US Treasury will toss the so-called "strong dollar" policy into the nearest financial
melting pot in order to save the economy and the Wall Street crooks that created the mess.
Accompanying the "strong dollar" policy on its way to the melting pot will be the next round of BCBS
(Bull Crap Backed Securities) that is on its way thanks to the upcoming surge in fallout from
tanking real estate markets.

Currently the gold price is correcting and consolidating before it makes it's next spike upwards.
This is normal healthy market action.

I have always recommended that 10% of your portfolio be in physical precious metals. Gold and Silver coins and bars.

I do not recommend any of the ETFs, because they could all be part of the same BCBS. If shit really
hits the fan, the ETFs or those that guarantee them could collapse and you are stuck holding
worthless paper.

Once you own some physical metal and if you want to speculate on gold prices other than in gold
stocks, I would suggest the Horizons Beta Pro Comex Gold Bullion Bull Plus ETF - symbol 'HBU'

http://www.hbpetfs.com/

The ETF is designed to mimic the price movement in Comex gold by 200%. In other words it will move
up twice as much as the gold price does, but also drop twice as much when gold drops.

The Gold Bullion Bull 'HBU' is currently priced at $18.80 and is at a good buy price if you believe
the gold price will rise as I do.

I still believe gold stocks will see a very strong rally, the likes we have not seen in over 2
years, but this ETF will give you direct exposure to gold, but remember - it is not a replacement
for owning the physical metal.

http://www.stockhouse.com/comp_info.asp?symbol=HBU&table=LIST

                                   Comments

I would like to thank everyone for comments sent on my last update on long term investing. I was not
looking for any praise or thanks for any good stock picks but trying to drive home the importance of
a long term approach and of course taking some short term profits when they arise.

I believe my fears or suspicions were confirmed. I did here back from some of you that made some big
lone term profits, but it was very few. I could count on one hand!

I did here of one person that took part profits out of CLL and is still holding the rest

I heard from another person that still holds 4 of the big gainers I mentioned and made 600% on Grove
Energy

Another reader did very well with Viceroy and still holds Oilexco

One reader has been able to generate a 29% compounded return over the last 6 years holding many of
these stocks long term, including Oilexco.

A phone call from another subscriber who holds all their stocks long term.

So I am glad to hear there are some of you that held for some big long term gains and there is
probably a few who never responded, but it sure sounds like most investors including subscribers of
this newsletter are NOT holding at least part positions for the long term.

Long term is where all the big gains are made and I am not talking a life time, in most cases it is
about 3 to 5 years. We still are holding many stocks we bought in 1999 to 2002 at the bottom of the
commodity market, but these are strong companies that are top performers so you keep holding. I am
talking of Goldcorp, Ultra Petroleum, Kinross, Agnico Eagle, Cameco, Pan American Silver and
Haliburton to name some of them.

                                            Millennium Index

Our Millennium Index is long term holdings, stocks we buy and hold. We collect fat dividends and
nice returns year after year.
Year  Total Return
2003    +42.8%
2004    +27.0%
2005    +36.8%
2006    +17.0%
2007    +15.3%
2008    +22.7%  so far

I have always recommended that 20% of ones portfolio be in this index, spread among all the stocks listed.

I am now adding a new stock to the index to buy. I will be away next week for vacation and it might
come further into my buy range at that time so I wanted to get this out now

John Deere    NY:DE          Recent Price US $76.00

52 week trading range   $56.55  to  $94.89

Buy and add to position on weakness around $71

Shares Out:  430.95M

I have been following DE for years with the idea of adding it to the Millennium Index, but did not
seem to get the timing right. The stock always kept moving higher and then I would wait for a pull
back, but it would not come back very far and continue higher. Until it peaked earlier in the year
around $95. It then seen a violent correction in January with the rest of the market, would have
been a good entry point but it was a short one, at that time we added a couple other stocks to the
index, Russel Metals, Pfizer and Tech Cominco.

Anyway another good buying opportunity is upon us. Again DE seems to be selling off with the market.
I guess by short term investors and traders.

In simple terms, we are just one year into the rise in agri/food commodities. We have a shortage
problem in many food stuffs that is not going to go away soon or easy. There is a big problem of
food shortages around the globe and the only answer is a lot more time and investment into growing
more crops.

John Deere is the biggest supplier of agriculture equipment in the world and is in perfect position
to benefit from a huge increase  in demand for their equipment, and for many years to come and
probably decades to come.

This showed up very obviously and really noticeable for the first time in their last quarterly
report ending April 2008. Revenue jumped to $8.1 billion from $5.2 billion the previous qtr. Profits
jumped to $1.76/share from $0.84/share the previous qtr. For the first six months, net income was
$1.133 billion, or $2.56 per share, compared with $862.3 million, or $1.88 per share, last year.

On May 28th Deere & Co., said  it will hike its quarterly dividend by 12% and repurchase $5 billion
of its own stock. It has been repurchasing stock for years and the number of shares outstanding has
been decreasing every year since 2004 while dividends and earnings are increasing. Imagine how much
better DE will do in this bullish environment for their business.

Year                          10/2007  2006    2005    2004

Normalized Net Income/Share      4.00    3.08     2.87     2.77

Dividends Paid per Share             0.86    0.74     0.59     0.50

Weighted Shares Outstanding  449.30  466.80  486.60  494.40

The company also said it plans to spend $35 million to increase its production of combine harvesters by about 30%.

The dividend has been increased to $0.28 from $0.22, so the yield is now about 1.5%

The stock is trading at 16 times trailing earnings which is far cheaper than the S&P 500 average
that is over 20 times and DE is only trading at 12 times this years projected earnings of 5.08,
which could turn out to be a conservative estimate.

Business Profile

The Company and its subsidiaries have operations which are categorized into four major business
segments.

The agricultural equipment segment manufactures and distributes a full line of farm equipment and
related service parts including tractors; combine, cotton and sugarcane harvesters; tillage, seeding
and soil preparation machinery; sprayers; hay and forage equipment; material handling equipment; and
integrated agricultural management systems technology.

You can see that the farm equipment sales are over 90% of their revenues

Worldwide net sales and revenues increased 18 percent to $8.097 billion for the second quarter and
were also up 18 percent to $13.298 billion for the first six months. Net sales of the equipment
operations were $7.469 billion for the quarter and $11.999 billion for six months, compared with
$6.266 billion and $10.081 billion for the respective periods last year.

The commercial and consumer equipment segment manufactures and distributes equipment, products and
service parts for commercial and residential uses including tractors for lawn, garden, commercial
and utility purposes; mowing equipment, including walk-behind mowers; golf course equipment; utility
vehicles ; landscape products and irrigation equipment; and other outdoor power products.

The construction and forestry segment manufactures, distributes to dealers and sells at retail a
range of machines and service parts used in construction, earthmoving, material handling and timber
harvesting including backhoe loaders; crawler dozers and loaders; four-wheel-drive loaders;
excavators; motor graders; articulated dump trucks; landscape loaders; skid-steer loaders; and log
skidders, feller bunchers, log loaders, log forwarders, log harvesters and related attachments.

The credit segment primarily finances sales and leases by John Deere dealers of new and used
agricultural, commercial and consumer, and construction and forestry equipment. In addition, it
provides wholesale financing to dealers of the foregoing equipment, provides operating loans,
finances retail revolving charge accounts, offers certain crop risk mitigation products and invests
in wind energy development.

Summary

The balance sheet is strong with about $4 billion in cash and marketable securities.

Long term debt is around $11.5 billion which has been quite consistent over the years and represents
a low debt to equity ratio of 0.35.

John Deere is the leader in the agriculture business and hence the stock market for years to come as
an exploding world population faces the challenges of feeding itself.

As they say  "Nothing runs like a Deere"

http://www.deere.com

Phone:  (309) 765-8000

http://www.stockhouse.com/comp_info.asp?symbol=DE&table=LIST

(c) Copyright 2008, Struther's Resource Stock Report

All forecasts and recommendations are based on opinion. Markets change direction with consensus
beliefs, which may change at any time and without notice. The author/publisher of this publication
has taken every precaution to provide the most accurate information possible. The information & data
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only current opinions, which are subject to change. The author/publisher may or may not have a
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