September 15, 2007

8 Perhaps the Last Great Buying Opportunity?
         Peter Schiff, President and Chief Global Strategist

8 Featured Investment Recommendations
         Two Mining Companies with Promise

8 Digging a Hole to China
         Paul Craig Roberts, Guest Columnist

8 Euro Pacific In The News

8 Upcoming Appearances

8 Previous Editions of Our Newsletter

As the air is finally coming out of the real estate bubble, the waves of the implosion are being felt around the world. The sudden realization that Americans can not repay their debts has caught most of our foreign creditors off guard. The result has been a bit of a panic, as shell shocked foreign holders of our debt look to shore-up their balance sheets. That has caused the share prices of many of the foreign stocks that we own to fall, creating one of the best buying opportunities in years.

Some of our clients have expressed concern that since foreign stocks fell in sympathy with American stocks that our strategy of owning foreign stocks to protect against weakness in domestic stocks is flawed. They are worried that the positive correlation recently experienced will persist. However my sincerely belief is that it will not. I am confident that once the dust settles, it will be clear to the world that the real problems are here in America, and that the global economy will perform even better once it no longer has to subsidize our economy.

Think about it this way. Suppose your free-loading in-laws moved in with you. They eat like pigs, use up all your hot water, smoke like chimneys, raid your liquor cabinet, run-up your phone bill, and hog the remote control. Would you really miss them if they moved out? What does America contribute to the global economy? We squander their savings on our own consumption and take for ourselves scarce recourses and consumer goods that would otherwise have been available for them. Will the world really suffer if we stop borrowing money we can not repay and stop consuming goods we did not produce? Will a world suddenly awash in savings, resources and consumer goods really suffer? More likely this newfound abundance will bring about a boom of global prosperity.

I feel that the outlook for the stocks that we own has never been brighter. The current weakness in share prices reflects the liquidly problem of some shareholders, not the earnings or dividend outlooks of the companies themselves. As such, the recent pull back should be short-lived, and in the meantime provides an excellent opportunity to buy.

The dollar index is poised to break below 80, a level that has acted as long-term support for almost 30 years. When it does, I expect a major dollar collapse. In addition, as a result of the enormous losses our creditors have already suffered as a result of their investments in our mortgage and other asset backed securities, they will be extremely reluctant to loan us more money. Therefore The Fed will be running the printing presses overtime as it attempts to keep the bubble from deflating completely before the 2008 elections.

All my predictions about the U.S. economy have either already come true or are about to. Over the next few years, perhaps months, I believe the true value of our investment strategy will finally be realized. Despite the fact that our strategy has worked well during the bubble years, it is after the bubble bursts when it should be its most effective. The important thing is not to let any short-term market noise distract you. Remember why we invested the way we did in the first place, and stay the course. If you still have any dollars left, use them to buy more foreign stocks on this dip, as it may well be the last chance you have to do so.

Company Number 1

Silver Wheaton trades at about $11. How would you like to buy it now for $2?

We think we have an outstanding silver miner that looks like a young Silver Wheaton. The company is headquartered in Canada with mines in Mexico and Portugal. Their stock trades on the Toronto's Venture Exchange. They were spun off from a parent company also in the mining business.

We like the company because they have a long term growth pattern and their cost of production is $3.92/oz. Silver currently sells for about US$11.50. They are now producing 1 million ounces of silver annually and have plans to increase their production to 3 million ounces. The company has over 100 million ounces in measured and indicated resources, about 30 million of which are proven.

They have publicly stated they believe their total historic resources of silver are in excess of 200 million ounces, and have commissioned an audit to confirm that amount. The results of the audit are due within the coming weeks. If confirmed, these deposits would rank the company as one of the largest silver miners in the world.

We also like the company because it is new and under followed. We can buy an up and coming silver miner before it becomes popular and runs up in price. We like silver bullion as an investment; this company allows us to leverage silver via the stock market.

Market capitalization is $160 million. No yield. This year's high and low was C$3.60 on June 6th and C$0.65 on September 21st. Now trading at about C$1.80/US$1.71.

Company Number 2

The next pick is a junior mining and exploring company located in New Brunswick, Canada. It trades on the Toronto Venture Exchange. They are a base metal miner. They have 110 million pounds of zinc, 61 million pounds of lead and over 1 million ounces of silver projected for production next year and are actively expanding production. At current prices that translates into almost US$250 million dollars per year of revenue.

This is a growth story in strategic resources. Lead is used in batteries and in x-ray technology; zinc is used as a protective coating for steel and in the automotive industry. Since January of 2003 the price of zinc has risen over 4 times in price while lead is up 7 fold. Zinc and lead inventories remain near all-time lows and with growing consumption from China, India and much of the developing world we expect that prices will remain robust for years to come. Also, unlike many mining operations in politically risky locales, this company is a safe North American source of zinc and lead to supply growing world demand.

We also like this company because it has delivered on its promises. They bought a mine that had been shut down, pumped in new capital, and made it a producing asset. The company is actively exploring for new resources and considering acquiring other mining operations. Their president is a 30-year veteran of the New Brunswick mining area and expert in mining engineering.

Over the next weeks and months as the company begins to report full production figures, it will be completing its evolution from a riskier developmental story to a much safer and very profitable producing entity.

The 52-week high was C$0.77 on July 12, 2007 and the 52-week low was C$0.25 on October 10, 2006. Market capitalization is about US$160 million. Stock trades as of September 14, 2007 at C$0.52/US$0.50. No yield.

Resource companies, while having potential for substantial gains, also have the possibility of extreme volatility and risk of loss. Investments in mining companies, by definition, must be considered speculative. Much of the information above has been supplied by the company. Euro Pacific Capital is very familiar with this company and its officers, and feels confident in making this recommendation for suitable investors. However, Euro Pacific has not independently verified the information supplied by the company, and cannot make any representations as to its accuracy. While every effort has been made to assure that the accuracy of the material contained in this report is correct, Euro Pacific cannot be held liable for errors, omissions or inaccuracies. This material is for private use of the subscriber; it may not be reprinted without permission.

© Euro Pacific Capital Inc. All rights reserved. 1-800-727-7922
10 Corbin Drive, Darien, CT 06840

Early this morning China let the idiots in Washington, and on Wall Street, know that it has them by the short hairs. Two senior spokesmen for the Chinese government observed that China's considerable holdings of US dollars and Treasury bonds "contributes a great deal to maintaining the position of the dollar as a reserve currency."

Should the US proceed with sanctions intended to cause the Chinese currency to appreciate, "the Chinese central bank will be forced to sell dollars, which might lead to a mass depreciation of the dollar."

If Western financial markets are sufficiently intelligent to comprehend the message, US interest rates will rise regardless of any further action by China. At this point, China does not need to sell a single bond. In an instant, China has made it clear that US interest rates depend on China, not on the Federal Reserve.

The precarious position of the US dollar as reserve currency has been thoroughly ignored and denied. The delusion that the US is "the world's sole superpower," whose currency is desirable regardless of its excess supply, reflects American hubris, not reality. This hubris is so extreme that only 6 weeks ago McKinsey Global Institute published a study that concluded that even a doubling of the US current account deficit to $1.6 trillion would pose no problem.

Strategic thinkers, if any remain who have not been purged by neocons, will quickly conclude that China's power over the value of the dollar and US interest rates also gives China power over US foreign policy. The US was able to attack Afghanistan and Iraq only because China provided the largest part of the financing for Bush's wars.

If China ceased to buy US Treasuries, Bush's wars would end. The savings rate of US consumers is essentially zero, and several million are afflicted with mortgages that they cannot afford. With Bush's budget in deficit and with no room in the US consumer's budget for a tax increase, Bush's wars can only be financed by foreigners.

No country on earth, except for Israel, supports the Bush regimes' desire to attack Iran. It is China's decision whether it calls in the US ambassador, and delivers the message that there will be no attack on Iran or further war unless the US is prepared to buy back $900 billion in US Treasury bonds and other dollar assets.

The US, of course, has no foreign reserves with which to make the purchase. The impact of such a large sale on US interest rates would wreck the US economy and effectively end Bush's war-making capability. Moreover, other governments would likely follow the Chinese lead, as the main support for the US dollar has been China's willingness to accumulate them. If the largest holder dumped the dollar, other countries would dump dollars, too.

The value and purchasing power of the US dollar would fall. When hard-pressed Americans went to Wal-Mart to make their purchases, the new prices would make them think they had wandered into Nieman Marcus. Americans would not be able to maintain their current living standard.

Simultaneously, Americans would be hit either with tax increases in order to close a budget deficit that foreigners will no longer finance or with large cuts in income security programs. The only other source of budgetary finance would be for the government to print money to pay its bills. In this event, Americans would experience inflation in addition to higher prices from dollar devaluation.

This is a grim outlook. We got in this position because our leaders are ignorant fools. So are our economists, many of whom are paid shills for some interest group. So are our corporate leaders whose greed gave China power over the US by offshoring the US production of goods and services to China. It was the corporate fat cats who turned US Gross Domestic Product into Chinese imports, and it was the "free trade, free market economists" who egged it on.

How did a people as stupid as Americans get so full of hubris?

This Newsletter is a service of Euro Pacific Capital Inc.