Resource Stock Update - V15 #9.4 - Markets, SDS, Commodities, PZG - June 3, 2009

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An update on a few items here.

I continue to see no sign of any recovery, just continued deterioration, all the fuss in the media
and talk of 'green shoots' is just noise, spin and disinformation.

The debt unwinding and what I call the balance sheet recession has got a long way to go. In fact, I
believe we are now entering into a depression, this is becoming more than a recession.

The housing market continues to slide, the inventory of unsold homes is at new highs as foreclosures
pick up pace. While the sub prime problem has probably seen it's peak, other mortgage problems are
on the rise. The prime mortgages, which is your best credit rated customers has seen a continued
rise and the foreclosure rate has doubled in the past year and in dollar terms is now bigger than
the sub prime problem.

Then you have the corporate/commercial real estate starting to run into problems with foreclosures on the rise, along with auto loan and credit card defaults increasing. In other words the debt problem and de-leveraging of debt is getting worse, not better.

The government actions are just going to create bigger problems down the road as we will now have a
government debt and deficit bubble building.

A quick comment on the government bail out of GM, it is just more bad news and delays, sinking money
down an endless pit and creating a huge bill for tax payers down the road. The government will now
own 60% of GM.

As hard as it may be, the only solution is to just let a lot of these entities go under getting to
the point where demand and supply are more in balance. The increased tax load that all these bail
outs will eventually cause is just going to put more strain on consumers that will result in a
further shrinkage in demand. Keeping people working to build more cars does not solve the problem of
not enough willing buyers.

We have not seen the end of the problems with banks nor GM and as a government entity it will just
become more politically driven. The U.S. is moving further and further into a socialist state, as
free enterprise and capitalism go out the window as the government takes control of more and more
what use to be 'free enterprise'.

The government will now dictate what kind of vehicles GM makes and where.

I have a new acronym for you, remember you heard it here first

GM will now stand for 'Government Made'

You cannot make people spend and in the current environment, private spending will continue to
decline, savings increase and debt implode.

The U.S. personal savings rate jumped to a 14-year high of 5.7% in April as after-tax incomes were
boosted by provisions of the economic stimulus plan, the Commerce Department reported. The stimulus
was supposed to increase spending to give the economy additional support, but the 1.1% rise in real
disposable incomes in April mostly went into savings. Real consumer spending fell 0.1%, the second
consecutive decline and the 8th decline in the past 11 months.

Some of you may remember my comments back in the last market decline of 2000 - 2003, on why real
portfolios suffer more than stock market indexes. The indexes are biased to the upside as poor
performers are removed and replaced by better stocks.

For example, after 84 years as one of the Dow Jones Industrial Average's 30 blue-chip stocks,
General Motors is given the boot and also ousted was Citigroup. GM was replaced by Cisco, but in the
real world, investors lost most if not all their money with GM, they simply cannot switch their
1,000 shares of GM for Cisco that has a price 20 times higher, like the index does.

And now to the markets

First, we seen a break out to the upside this week in the general equity markets. Notably the S&P
500 broke above it's 930 high of early May. It went as high as 949, but the high close was 944.7
yesterday and we are back down today. Not a convincing break out, but maybe a signal that the top is
not in yet.

PROSHARES ULTRASHORT S&P500   NY:SDS     Recent Price US$54.50
Entry Price $56.60                      Opinion - hold
Stop/loss $53.00

This came very close to triggering our stop/loss on the SDS which is at $53.00. Remember, using the
'mental stop/loss' if the stock or ETF in this case closes below our stop loss, we sell the next day
if it does not open back higher, meaning it opens below the stop loss.

In the case of SDS, it closed yesterday at $53.00 right on our stop/loss, so it did not fall below
the stop/loss. If it had, it did open higher today above the stop/loss, so in either case we do not
sell. Currently SDS is at $54.50.

I follow numerous analysts and market technicians etc. and all the ones I believe in and have good
track records are all worried about the market. They believe this is a bear market rally and will go
back down. All are saying the market is topping, the only discrepancies are when and how high. Some
are saying the market may rally into July before peaking and we could see the major indexes go up
another 5% to 15% from current levels.

Nobody can say for sure and everyone is suggesting different scenarios that change the timeline a
bit and the peak in the rally a bit.

However, the point is - this bear market rally does not have a lot left in it, and it is not
important where exactly the peak is and whether we time it perfectly. We want to trade out near the
top and prepare for the next down cycle. If I have to sit with a high cash level for 1 month or 6
months, I am not concerned with the exact time frame. While we may be anxious sitting with cash when
we see opportunity and stocks still going higher, I am sure we will get our chance to buy lower.

In the mean time, I really do not want to sit with a lot of cash, because 'cash is trash'. Interest
rates are low so we don't earn much on cash. While Bonds have performed well in market corrections
before, they are too risky now and will continue to have price pressure on the downside with
exploding government debt. Also the cash will actually go down in value as it's purchasing power
decreases, especially US$ cash.

Therefore I am looking at some places, ETFs etc, where we could park some of this cash. We do not
want to go all into gold or precious metals, we have to maintain some diversification.

Stay tuned more on this to come

                                        Commodities

We have seen a good rise or recovery in a lot of commodities like oil, copper and some of the
grains. Most of this is a price recovery from very depressed levels and also some hope of a recovery
or pick up in demand along with a drop in the US$ that causes the dollar price to rise.

I believe the main bullish factors that will drive commodity prices higher and not all of them is
problems on the supply side of the equation and further weakness in the US$. Whether we go to new highs in the commodities will mostly depend on China/Asia's path on the demand side and how far the
US$ falls. Some commodities will see big price increases because of supply and one of those will be
Natural Gas. I have already talked about this but will have more on it.

So is the commodity bull market over. You may find this chart of the old CRB index useful. As you
know I use the old CRB index because it is the only true comparison we have with history and is not
altered by some black box algorithm that nobody understands nor will the creators of the balckbox
explain it. What we do know the new index is over weighted in commodities that are weak or going
down in price and will under weight ones rising in price, so it will have a bias to the downside.

                                         Old CRB Index chart

From this monthly chart, there are a few important observations. The correction or drop has been
brutal, but has only unwound gains since 2005. Also the peak of 1980/81 around 330 that acted as
mild resistance in 2005, did provide support on the way down with the index bouncing higher off of this level. From this 327.50 bottom, the index close May at 418 which is a rally of 27.6%. Bull
markets are often described as a move up of over 20%. So this is either a new bull market that may
or may not get back to the 2008 highs or a steep correction in a longer term bull market that goes
to new highs.

It is also worth noting that the new index, that the main stream, media and vast majority follow and
is quoted every day in financial circles paints a different story.

                               New CRB index chart

You cannot see it on this weekly chart, but the monthly will show it went well below it's 2005 level
(when it was first created) of about 320 to new lows and looks like it is in an extreme bear market,
plunging straight down from 2008 with just a brief rally in the past month. The index bottomed
around 200 in February and closed up at 253.8 at the end of May, a 26.9% increase. So the new index
would also signal a new bull market, from a much lower level.

The old index hit it's low in December of 2008 while the new index went to new lows in February of
this year.

Currently the old index is just 31% below it's 2008 high while the new index is 47% below it's 2008
high. The new index seen a 58% plunge from peak to trough while the old index just fell 46% peak to
trough.

The old CRB index has moved up to it's first resistance level around 400 to 420, the level of the
summer of 2007 and peak of 2006. So a correction or consolidation would be quite normal now, while
those following the new index will see a rally that quickly faded, more like a dead cat bounce.

Paramount         TSX/NY:PZG                Recent Price - C$1.75
Entry Price C$0.60                        Opinion - buy back trades

I last updated Paramount last week when it dropped to $1.60 on Thursday, suggested to buy back any
traded positions. Unfortunately there was not a lot of time as it spiked higher on Friday because of
another newsletter recommendation out of the U.S.

Michael Murphy put a target on Paramount as high as $15, if certain exploration goals are met.

http://newworldinvestor.com/983/radar-report-52809/

Regardless, the same monthly pattern continues, after the rise to new highs in the first half of May
we hit the low at month end, on Thursday the 28th, one day before the last trading day of the month.
Without the newsletter recommendation Friday, the stock would have certainly remained weak, maybe
going a bit lower.

Then, right on cue we broke out to new highs in the 1st of June and will probably see the peak in
this run in the next 2 weeks or so. I was able to buy some stock at 1.61, but bids I had in the high
$1.50s did not get filled. I will continue to buy back now on any weakness in the $1.70s or US$1.50s
and then try to trade some out in the next 2 weeks to buy back at month end again.

I also speculated that there had to be big sellers, funds or large insiders that were selling or the
stock would have gone higher with that kind of volume. As per my last update, with filings we know
Sprott was selling and now on Monday, Tara Gold announced that they sold their Paramount Stock. It
sounds like they sold all of it or most of it and their last filing stated that they held 7,368,519
shares. Most of this stock was restricted so it could not be sold on the market and must have been a
private transaction, probably at a decent discount to the market price. So those shares would not
show in the trading volume, but any shares that were not restricted were probably crossed in the
market.

Anyway, this and other stock has turned over into pretty good hands with funds and investors of the
Seabridge group.

While it is hard to pick the peaks and valleys in this monthly trading pattern, maybe this chart
will help

This is a US$ price chart. You never know for sure on resistance levels. I thought there would be
resistance around $1.40 to $1.50 what I have marked as the 2nd resistance level, but the stock went
right through that, but it was held at the 3rd level around $1.75. The next major resistance level I
see is around the US$2.10 to $2.20 level. If the stock gets there in the first part of June, that is
where I will sell my trading position to buy back at month end.

At some point this pattern will change, but until it does you can take advantage. I have maintained
for quite a while that there is some undeclared or illegal short position that is responsible for
this pattern. At some point this short trader will be squeezed out, maybe they already have or maybe
they have some other hedge they are using to help maintain this short position and perhaps others.

There is more and more new investors, analysts, etc., following the company and probably more to
come. I think we will soon see news of the next drill program to begin or has already started and
this might be the news that propels the stock to the next resistance level.

Paramount Investor Relations: Chris Halkai
Tel: 1-613-226-9881
Toll-free: 1-866-481-2233

Website - http://www.paramountgold.com

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

(c) Copyright 2009, Struther's Resource Stock Report

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