January 2006 Issue

Bill or Miles…

Preparing to write to you this month, I was listening to the Columbia/Legacy 20-BIT REMASTERED version of Miles Davis’ “Kind of Blue.” KOB
is probably the first major jazz album in modal—improvising on scales instead of chords. To many critics, KOB is thought of as “the greatest
jazz record” ever made. Recorded in just two days in the spring of 1959, Miles, John Coltrane, Cannonball Adderley, Paul Chambers, Jimmy Cobb,
Wynton Kelly (one track), and Bill Evans recorded five tunes with virtually no rehearsal and only one take each. All the compositions are credited to
Davis. But I’ve long suspected that Evans was at the least the dominant co-composer along with Davis and quite possibly the sole composer of these
masterful tunes. Evans had left the group prior to “Kind of Blue” and was brought back just for this recording. Evans wrote the liner notes
for the 1959 album. Davis was not a sharing kind of guy, and this, after all, was a Miles Davis session to be sure.

1959—A Seminal Year

The year 1959 was memorable not just because of “Kind of Blue.” It was also the year I began my studies on the stock market. It was a good
year for folk named Brown. Jim Brown was staring for the Cleveland Browns, and James Brown was #1 on the R&B charts with “Try Me.” The
Cleveland Indians’ Rocky Colavito became the second hitter in major league history to hit four consecutive home runs in one game (the night of
my senior prom on June 10). And sadly, 1959 was the year Billie Holiday passed away. All in all, 1959 was a year to remember for me, and perhaps for
you, on many fronts.

Politics & Stock Prices from 1959 On

The stock market likes good times. Until just recently in 2005, most investors (not you, I trust) have not had much about which to cheer. Much of the
trauma this year has related to the foul media coverage President Bush has received regarding Hurricane Katrina and the Iraq war. Just how much does
the political landscape affect stock prices? A whole lot. In fact, few variables rate higher on my list of stock market influences. To make my point,
I have put together four historical displays starting with the year I got started with the stock market—1959. The displays depict stock market
gains and losses in each of the four years of the presidential cycle.

Display #1—Election-Year Power

Anyone who tells you to pay no attention to politics as it relates to the stock market is smoking something funny. Politicians of all stripes will say
just about anything to get elected, and the vote-getting bribery of politics provides a good-time feeling in almost every election year. Since 1959,
a presidential election year has brought with it higher stock prices in 10 of 12 years.

Display #2—The Year After a Presidential Election

The rubber hits the road as the incoming president attempts to back up all those over-the-top campaign promises. The results are often short of the
mark, and the stock market has an in-and-out time of it. The stock market results in 2005—an after-election year—have been pretty predictable.

Display #3—Two Years After a Presidential Election

This is also an in-and-out year, as electioneering is not front and center. Furthermore, tough and often unwelcome presidential decisions must be made.

Display #4—The Year Before a Presidential Election

Since the banner year of 1959, there has not been a single stock market downer in the year leading up to a presidential election. Furthermore, stocks
make big gains more so than in any other year in the presidential election cycle.

Since 1959, you get a 22-and-2 record of ups and downs when you pair the year before a presidential election with the election year. By contrast, pairing
the two years following a presidential election gives you a not-so-hot 11-and-11 record.

Looking Ahead and Cringing

In terms of the presidential election cycle, next year has the lowest odds of success of any of the four years in the cycle. Worse yet, the year coming
up, 2006 (two years following the presidential election), has the fewest number of big years.

Two Standard Deviations

My display below gives you the Dow’s year-to-year rate of change from 1959 to current. I’ve inserted upside and downside boundary lines
for two standard deviations. For any normal series of data, you can expect 95.5% of total experiences to be contained between the boundary lines of two
standard deviations (up and down). You must lower your expectations for the stock market as the two standard deviations line is approached on the
upside.

So, 2006 will not be helped much by the presidential election cycle. As my chart indicates, stock market momentum is currently in a mid-zone range,
not offering much direction either up or down. Interest rate momentum continues on the upside, which is negative for stocks. Price earnings ratios for
stocks are higher than average, and the yield for stocks remains well below the norm. There is ample reason to take a cautious approach looking to 2006.

4% Draw

Over many decades, you can look for stock prices to offer appreciation that matches nominal GDP growth. To achieve a total return, you add your dividend
yield to stock appreciation. Historically, 7% stock price appreciation and an average 4% yield have provided a projected average annual total return
for stocks of about 11% per year. Today, with P/Es high and yields low, I’m using a benchmark of 8%. A portfolio divided equally between stocks
and fixed income might be expected to offer average annual total return potential of say 6% to 7% per year. I’m not saying you cannot do better,
and I hope you will do better, but I also hope you will not end up a whole lot worse off by taking undue risk.

Last month, I wrote that your initial portfolio draw in retirement is more important to the prospects of your not outliving your money
than your exact portfolio allocation. In order to maintain the initial dollar value of your portfolio, I advise an average initial portfolio draw of no
more than 4%.

Gauge Your Risk

Turn to my Charts #50, #51 and #52 to find out why fixed-income belongs in all conservative and retirement portfolios. To gauge risk and return, go
to Chart #47 in your enclosed Economic Supplement. A portfolio of 100% stocks will offer modestly better returns than a 30/70 (bonds/stocks) portfolio
but with a whole lot more volatility/risk. Conservative investors will want to dampen volatility and seek consistency in total returns. Just think of
the tragedy of a person retiring in 1999 invested 50/50 NASDAQ and S&P 500 and no bonds. Six years into retirement, the portfolio is down about one-third,
and that is before any money is drawn to live on.

Great News

My chart above presents great—and I mean really great—news for investors. The yield on risk-free full-faith-and-credit U.S. Treasury bills
has climbed to 4% from under 1%. Investors once again have the badly needed option of investing in the ultimate blue-chip security while receiving a
suitable return for a retirement portfolio.

Iraq & Katrina

Here’s a statement that may shock some. We are doing better in Iraq than in New Orleans. Americans are not receiving from mainstream media an
accurate assessment of what is actually going on in Iraq. Remember, the deck of playing cards that included the 52 most-wanted in Iraq? Well, the list
was eventually expanded to 55 cards. How are we doing? To date, 45 of the 55 most-wanted have been taken out of action. How often have you read or heard
this from the mainstream media?

The Real People

Do the names Adnan Thabit and James Steele mean anything to you? Steele is one of America’s foremost experts on counterinsurgency. J.S. led a
Special Forces mission during El Salvador’s 1980s civil war. Steele has teamed up with notorious tough guy General Adnan Thabit to lead a commando
group that is wreaking absolute havoc with the insurgents.

General Thabit’s team consists of battle-hardened veterans with experience. Most of the often late-night raids are conducted in the Baghdad area
and in the Sunni Triangle. The Thabit-led commandos are not Geneva Convention types, and the insurgents know it. It makes for a climate of terror.

The Word from General Abizaid

General John Abizaid, Commander U.S. Central Command, has responsibilities that include Iraq and Afghanistan. He recently spoke to mid-grade and senior
military officers at the Naval War College. Former Army Ranger Captain Michael Barnes has filed a field report summarizing General Abizaid’s comments.
The general begins by outlining that the insurgency is in only four of 18 provinces in Iraq, not all 18. You do not hear about the 14 provinces where
there is no insurgency and where things are going well. Iraq now has over 200,000 soldiers/police under arms and growing. They are starting to eclipse
the U.S./coalition forces. The insurgents in the four Sunni provinces in northern/central Iraq and in southwestern Afghanistan will be there for the
foreseeable future. Our primary enemy is not the insurgents in Iraq and Afghanistan. It is Al Qaeda and its ideology. Its goal is to get the U.S. out
of the region and come to power in the Islamic countries of the region.

Al Qaeda

Since Desert Storm in 1991, General Abizaid notes that U.S. forces have not lost any combat engagement in the region at the platoon level or above.
Al Qaeda has no beliefs that they can defeat U.S. military. They see our center of gravity as being the will of the American people. Their plan is to
keep the casualties in front of the American people via the media. Al Qaeda is a virtual organization connected to the Internet. We are winning, but
as the general outlines, we have to maintain constant pressure with the international community and across the U.S. government agencies.

The Media Is the Problem

Ranger Captain Barnes concludes his report from the field by saying we are winning every fight in Iraq and Afghanistan. The media is keeping that from
you. From the media you get all of the bad news and none of the good. It is clear from the preceding that the picture on the ground in Iraq is much better
than the liberal-biased U.S. media would have you believe. A long tough road lies ahead, but the job is getting done. Now on to China.

Falun Gong

Chen Yonglin is a former Chinese diplomat who sparked fears of a diplomatic incident through his defection to Australia in the summer of 2005. One of
Yonglin’s jobs as the consul for political affairs in the Chinese consulate in Sydney was the monitoring of Chinese political dissidents, especially
Falun Gong living in Australia.

Falun Gong is a controversial Chinese spiritual movement introduced in 1992 by Li Hongzhi. Many of the central tenets of Falun Gong are similar to the
teachings in Buddhism and Taoism. Falun Gong claims to have more than 70 million followers in China, which would exceed membership in the Chinese communist
party. In 1999, the government of the Peoples Republic of China began a nationwide suppression of Falun Gong. Li Hongzhi, now living in Brooklyn, N.Y.,
has been using increasingly radical language to describe himself and his mission.

In testimony before the U.S. Congressional Subcommittee, Chen indicated that there are over 1,000 Chinese secret agents and informants in Australia
and a similar number in the U.S. This summer, The Washington Times published accusations made by Chen regarding the Chinese buildup of
a nuclear arsenal capable of a pre-emptive attack on the U.S.

Last week, the Chinese government issued new guidelines that seek to limit the use of cell phones for text messaging. Chinese leaders have become increasingly
paranoid that text messaging could be used for pro-democracy and anti-communist political activities. In recent months, large-scale anti-Japanese demonstrations
have apparently been instigated by widespread text messaging.

Taiwan Reunification

I’ve been writing to you about China’s fixation with reunification with Taiwan. Chen Yonglin, with access to secretive Chinese leadership
discussions and documents, has reportedly told of talks among communist party leaders urging war with Taiwan. And Chen maintains that China’s long-term
strategy is directed exclusively at countering the U.S. both in Asia and worldwide.

Red-Hot Growth in China

There is no doubt that China is going to become an increasingly important player in the world economy. And as 2005 ends, the fast growth pace continues.
The most recent quarterly report shows that fixed-asset investment growth in China remains red-hot at over 27.2% year/year.

My Investment Strategy

I’m not investing directly in China nor advising Chinese shares. My strategy for participation in China’s economic growth is to own shares
of international companies that stand to benefit from China’s long-term strong demand for commodities of all types, including energy. My Monster
Master List carries BHP Billiton (NYSE: BHP) and Rio Tinto (NYSE: RTP), two massive and well-diversified international resource companies positioned
to benefit on a long-term basis. I think you should own each.

Japan Up—South Korea Down

I have reluctantly advised sale of the T. Rowe Price New Asia Fund. Take your sizable gains. We look for a huge reduction of forces in S. Korea and
a substantial buildup over the next five years of U.S. forces in Hawaii and Guam. Donald Rumsfeld has already said that 2,000 of the 30,000 U.S. troops
in S. Korea will be pulled out by the end of the year. The scenario has a troubling look, and S. Korea has done their cause little good of late.

Japan is a different story. The economy is percolating along with GDP gains of 2% likely in both this year and next. Japan runs a trade surplus, unlike
the $750 billion U.S. trade deficit of the latest 12 months. And the Nikkei 225 is up over 22% YTD in local currency terms and about 7% in U.S. dollar
terms.

In Japan, Reformists ticket Prime Minister Junichiro Koizumi is off to a good start (see my Economic Supplement). Real estate has a much better tone
to it for the first time in well over a decade. Dry rot in the banking system has been blown out with nonperforming loans no longer the overhang they
have been for many years. I’m adding T. Rowe Price Japan Fund to my Monster Master List as a good way for you to invest in Japan.

Economic Supplement First

Prior to reading my letter each month, I strongly advise you to spend some time with my constantly evolving economic analysis supplement. Your comfort
level, your knowledge base, and your investor consistency will all get a nice boost. With the two-decade decline in interest rates and inflation history,
gold is once again on the upside of the curve. In Chart #24, I give you a hypothetical price for gold keyed to world currency reserves. My price per
SDR (1 SDR = $1.42 US) is the hypothetical price for gold required to back world currency reserves 100% with gold. Central banks and governments inherently
hate gold because gold reserves equate
to fiscal discipline.

Gold Looks Good

Chart #24. In 1980, the monetary value of gold was approximately 400 SDRs/oz, or $568/oz. Today, gold’s monetary value is more like 3,200 SDRs/oz,
or $4,544/oz. The huge increase in the hypothetical monetary price for gold is simply a function of an explosion in currency reserves. Last month in
featured Chart C, I related the price of gold to stock prices with the DJIA as a proxy. With the exception of three spikes, it is normal for the DJIA/gold
ratio to stay below 20, and frequently the ratio is below 10. Today, with a ratio at 25, gold has lots of room to run on the upside.

Chart #29 shows the real or inflation-adjusted price for gold. You will see that in real terms today’s gold price is well less than a third of
its price at the peak in the late 1970s. Chart #35 relates gold’s price to copper prices. Given the ratio channel of the last two decades, a long
gold/short copper strategy looks real good here. Chart #37 indicates that gold is today cheaper than oil than at any point since gold’s link with
the dollar was broken in 1971. Gold is cheap, and, as Charts #39 and #40 show, oil prices are well above an economically rational equilibrium. As seen
in Chart #39, it is normal for the actual price of oil to closely track our theoretical price line calculated on oil demand relative to inventory.

One-Ounce Gold Pandas

I was involved with the Pandas when they were first issued by the China Mint Co. in 1982. The 1982 one-ounce gold Panda is exceedingly rare. The initial
mint run was only 15,815 coins worldwide. Today, my preferred dealer, PandaAmerica (1-800-472-6327 or www.PandaAmerica.com) will most likely only
sell you a 1982 as part of a complete set. And at that you will now pay about $3,000 for the 1982 gold Panda. I like the small mintage 1983s and 1984s
at about $1,250 each, and I would definitely buy the 1995 at about $1,195. The official mint run was 35,000 gold coins. My guess is that the actual mint
run for the 1995 was much less. The new 2006 Chinese gold Panda can now be ordered for about $550/coin, which is only about 10% over the price for gold.
The mint run has been set at 150,000, so this coin will never be the rarity that the coins above have become. But the new Panda is an inexpensive and
fun way to add gold to your portfolio, and you can buy a stack without breaking the bank.

For individual gold stocks, I like Placer Dome (NYSE: PDG), Newmont Mining (NYSE: NEM), and Barrick Gold (NYSE: ABX) as starters.
I’d own all three. Go to www.YoungResearch.com for a link to the world’s gold mining companies.

Fixed Income

My Big Idea highlights the 2008 start of the babyboomers retirement wave. Approximately 76 million Americans will begin to exit the workforce and begin
retirement. As such, in order to generate a steady flow of cash for retirement needs, fixed income will come into sharp focus. In Chart #51 on the Vanguard
Wellington Fund, I show how fixed income can stabilize returns. Wellington looks for moderate long-term capital growth and current income by investing
60% to 70% of its assets in dividend-paying value stocks and 30% to 40% in high-quality corporate bonds and U.S. Government securities with an average
maturity of 5 years to 15 years.

The max I’d put in fixed income is 75%. My Efficient Frontier Chart (#47) shows that a portfolio invested 75% bonds/25% stocks has about the same
risk as a portfolio invested 100% bonds. You can achieve your fixed-income needs with (a) balanced funds, (b) straight fixed-income funds, (c) investment-grade
preferred stocks, (d) full-faith-and-credit-pledge U.S. Treasury securities, and (e) AAA-insured tax-free municipal bonds. You will most often be best
served by sticking with the low-cost leader, Vanguard, for your fixed-income funds. I do. My one/two punch for many quarters has been the low-duration
combo of Vanguard GNMA (4.92% 30-day security yield) and Vanguard Short-Term Investment-Grade (4.45% 30-day security yield). At various
points in the interest rate cycle, I will advise using Vanguard High-Yield Corporate, Vanguard Intermediate-Term Treasury, Vanguard
Inflation-Protected Securities, and the American Century Zero-Coupon series of funds. All are approved for you. I also like Dodge & Cox
Income. Consolidate all your investment accounts at Vanguard or Fidelity, or even use both if convenient for you. Each has operations that will allow
you to invest in pretty much any security you might select.

Avoid corporate bonds, agency securities except GNMAs, municipals not rated AAA insured, and preferred stocks not A-rated investment grade. Listen up.
Do not let a salesman talk you into violating my guidelines. I know that I am probably more conservative than any advisor with whom you may come into
contact, but I put that bias on the table. I will sacrifice additional potential return for additional safety of principal. My goal is to compound a
regular flow of interest and dividends and to achieve consistent total returns that would in retirement allow a regular inflation-adjusted 4% annual
draw.

An investor retiring in 1999 without fixed income faced an immediate horror as the stock market fell in each of the next three years. The S&P 500
fell by about 9%, 11%, and 22%, while the NASDAQ cratered with declines of 39%, 21%, and 31%. No way could a retired investor ever hope to recover from
this three-year debacle at the start of a retirement. Fixed income is a MUST in order to avoid getting bombed out. The balanced Vanguard Wellesley
Income Fund (overweighted in fixed income) produced returns of +16%, +7%, and +4% for 2000, 2001, and 2002. No down years here. What a contrast from
the S&P 500 and NASDAQ. What is to be learned here? (1) Invest for balance and (2) invest for income and dividends. Let the miracle of compound interest
work its magic for you.

Retirement Compounders

Given the economic emergence of China and India and the exploding U.S. trade and budget deficits, I’ve increased our international component.
YTD, the S&P 500 is ahead by 6.1%. Legg Mason Value Trust, Bill Miller’s widely followed benchmark fund, is ahead by 6.9%. Our in-house Retirement
Compounders portfolio is ahead by 9.2% (unaudited). This portfolio acts as my internal farm team for a lot of the ideas I bring to you in these letters.
Some of our internal names are quite small, so it would not be suitable to include these names here due to the thinness of trading. Others are foreign
names that are (a) hard to buy, (b) expensive to trade for the individual, and (c) brutal to research for the individual investor.

My goal with the Retirement Compounders is not to outperform anyone special or any special index. I insist on dividends, and the portfolio yield at
3.5% is about double the Dow’s. Dividends are a foundation for me. Our Retirement Compounders program is set up as a counterbalancer against adversity.
The holdings are generally conservative and do not include technology names. We emphasize scarce international resources and companies with high barrier-to-entry
characteristics. We also gravitate toward powerful brand franchises such as Harley-Davidson and PepsiCo.

Staggering Upside Performance

Vanguard Precious Metals & Mining has been one of my most powerfully advised funds and is one of my own largest holdings. It is up 37% YTD. And
over three years, the average annual return is near 40%. You haven’t missed the boat have you? You should have a huge score here. All four of my
strongly advised Third Avenue funds have recorded double-digit increases YTD. I own all four. And I will add to each as should you. International and
Real Estate are closed to new investors. Do not let Third Avenue Value and Small-Cap Value slam the door in your face. Call Vanguard or Fidelity now
and open a position in each fund. Overall, my #1 fund choice is Third Avenue International Value. And both Third Avenue Real Estate and Small-Cap Value
rank at the top of my listings.

I Love Fidelity International Real Estate

Do you own Fidelity International Real Estate? I like this small fund a lot. When I make my first-quarter 2006 investments, this fund will be my single
biggest investment. Like the Third Avenue funds, you do not want to get closed out. I’m going to write about Fidelity International Real Estate
a lot in coming months. Do not let inertia halt you. Take action now. Over 20% of the fund’s assets are in my highly favored Australia. You’ll
hear more from me next month, so call and get on board now so we will be on the same track.

Get on BlackRock

BlackRock Dividend Achievers Trust is a listed closed-end fund that pays out a fixed $0.90/share dividend. The yield is now near 7%. And the fund has
been selling at a discount to NAV. Retired investors will find this fund ideal as a cash generator. Don’t necessarily look for big-time asset growth
here. Your regular dividend stream is all you really need. Any more is a nice bonus. I also like BlackRock Global Energy & Resources Trust and Fiduciary/Claymore
MLP Opportunity Fund as cash-generating machines for your retirement years. Check my mutual fund Monster Master List last month or the one coming next
month for the top-10 holdings in each fund.

Among my counterbalancing favorites carried on my mutual fund Monster Master List are Canadian General Investments, iShares MSCI Australia
Index, iShares MSCI Singapore Index, PIMCO All Asset, PIMCO Commodity Real Return, and streetTracks Gold Shares. I
would own all in your mutual fund mix. I would devote 5% of your portfolio to each of these names.

New Era Score

Add to your Mutual Series funds. These funds rank tops on my own list. And be sure you have a foundation position in T. Rowe Price New Era Fund. The
fund is one of my oldest and biggest positions. You are ahead by nearly 30% just this year. And you have averaged an even better 31%/year over the last
three years. Once again, you should have scored big. As I write often, the only investments I make for myself are investments I write regularly about
for you. I cannot possibly win unless you win.

Monster Master List Stocks

Alcoa (NYSE: AA) and Alcan (NYSE: AL) have both had a tough year in 2005. Continue to buy each. Scope out my Charts #32 and #34. Aluminum is cheap versus
copper. The main ingredient in aluminum is alumina. Alumina, as well as aluminum itself, will end 2005 in production deficit. Rising costs of alumina
and energy will continue to limit supply growth. Plant closures in Europe and North America, as well as cutbacks in China’s energy-intensive smelting
industry, will constrain supply. China is regularly short on electricity. And power accounts for about half the cost of smelting. At least over the short
run, China must be an importer of aluminum. Alcoa and Alcan are the #1 and #2 players in the aluminum world.

ExxonMobil (NYSE: XOM). Next year, the company could generate as much as $35 billion in operating profits. Capital expenditures should require
no more than half of this cash. The rest will go to benefit shareholders in dividend increases and share buybacks. The last dividend increase was 7.5%.
And share buybacks have been running 3% to 4% of the company’s shares each year. In coming years, you will read a lot about ExxonMobil’s
gas exploration in the Rockies. ExxonMobil has extensive holdings in Colorado’s Piceance Basin. The WSJ writes that the company believes
it “can extract more than 35 trillion cubic feet of gas from its Piceance land—more than one year’s consumption in the U.S.” XOM
continues as my #1 energy selection.

BP (NYSE: BP). Along with ExxonMobil and Royal Dutch (NYSE: RD), BP is one of the world’s three largest energy companies. BP has
formed BP Alternative Energy. As much as $8 billion will be invested in alternative-energy projects, including hydrogen, wind, and solar. The goal is
a 15% return on capital. Stick with your BP holdings.

New High List

On the new high list recently have been Monster Master List names Archstone-Smith (NYSE: ASN), Cameco (NYSE: CCJ), Costco (NASDAQ: COST), Falconbridge
(NYSE: FAL), Forest City (NYSE: FCEa), McDonald’s (NYSE: MCD), Microsoft (NASDAQ: MSFT), Norfolk Southern (NYSE: NSC), PepsiCo (NYSE: PEP), Plum
Creek (NYSE: PCL), Prologis (NYSE: PLD), Rayonier (NYSE: RYN), Rio Tinto (NYSE: RTP), T. Rowe Price, Teck Cominco (Toronto: TEK-SVB.TO), and Union Pacific
(NYSE: UNP). I like all these names. You can add to your holdings or create a new position in each. Timber is my favorite counterbalancer of all, and
I have hammered away at Plum Creek and Rayonier for a long while. All of you should have long since owned both and made good money in the process. Cameco
is the Saudi Arabia of uranium. Say no more. I love the rails as a group. Union Pacific, while having a knack for major screw-ups, is somehow getting
the job done. Norfolk Southern is a big coal hauler. McDonald’s is now selling Newman’s Own Organic Coffee in its 600 New England stores.
It’s a huge upgrade over its own swill. The coffee is produced by Green Mountain Coffee Roasters in Waterbury, Vermont. Placer Dome is bucking
Barrick’s low-ball bid. And the stock has moved even higher. There’s more good news ahead for you with your big score on Placer Dome. Stay
on board. Finally, on individual stocks, go to my Top-10 Countdown for the 10 names to add first each month.

Breaking News

An inversion of the 10-year/2-year Treasury yield curve has regularly flashed recession when the inversion differential has hit 50 basis points. The
chart below has an ominous recession watch to it.

The national median existing single-family home price was up nearly 15% in the third quarter. The hot three markets were Phoenix/ Mesa/Scottsdale, Arizona,
up over 55%; Orlando, Florida, up 45%; Cape Coral/Fort Meyers, Florida, up 42%—despite the hurricane season. The lower the barometric pressure,
the more intense the storm. Three of the worst six in history (Wilma 882 millibars, Rita 897, Katrina 902) hit this year. The other three were Allen
in 1980 (899), Labor Day Hurricane 1935 (892), and Gilbert in 1988 (888).

2006

Looking ahead to next year, I see a continued strong appetite worldwide for gold, platinum, aluminum, oil, gas, coal, timber resources, uranium, and
soft commodities as a group. I’m focusing on New Zealand, Australia, Canada, Hong Kong, Singapore, Norway, and now Japan for international counterbalancing.
There may be a chance in 2006 to establish favorable positions in my highly favored TIPS and STRIPS. Heading my own list and I hope yours for initial
investing in 2006 will be Fidelity International Real Estate with its sizable holdings in Australia, Hong Kong, Japan (on the move up), and Singapore.
I’ll be adding to all my Third Avenue Value funds in 2006. Do not miss the boat and get closed out of Third Avenue Value and Small-Cap. Vanguard
Precious Metals & Mining will be on my early radar, as will PIMCO All Asset. And with an additional correction in oil prices, PIMCO Commodity Real
Return will make a lot of sense. On the fixed-income side, among the biggest five fixed-income funds in the country, the one with the best return YTD
is my #1 favored Vanguard GNMA. Place your first fixed-income bet here. Based strictly on investments written about for you in these letters, I’ve
had yet another good year, and you must have generated pleasing results as well. Virtually all of every working day for me is spent reading and developing
strategies that can make you and me money in the quarters ahead. I’ll be working hard for us both in 2006. Thank you for being my subscriber. I
hope that you and your family will have a happy Christmas season.

Warm regards,

Richard C. Young

P.S. Remember that $100 computer I wrote about a number of months ago? Nick Negroponte, founder of MIT’s Media Lab, thinks he can put hundreds
of millions of these $100 laptops into the hands of schoolchildren worldwide. It is hoped that a commercial version will be on the market for $200. Software
will include a word processor, an e-mail program, and a web browser. No hard drive will be included—instead flash memory. More coming up on this
revolutionary, user-friendly computer.

P.P.S. Go to www.YoungResearch.com for a link to a list of the 100 biggest gold producers. And you’ll find my latest CD recommendation
on the greatest American Rock & Roll band of all time.

P.P.P.S. Next issue, as I did last year, I’m going to devote a big part of the issue to your most pressing questions. Space is strictly limited
so give your question serious thought. The broader the appeal of your single question, the better the chance I will be able to include your question.
Please, none on individual securities. I will be personally writing a thank-you to those of you who contribute the most insightful questions.
E-mail me at service@intelligencereport.com.

Richard C. Young’s Intelligence Report® (ISSN 0884-3031) is published monthly by Phillips Investment Resources, LLC, 9420 Key West Ave., Rockville, MD 20850. Please write or call if you have any questions. Phone: 301/424-3700 or 800/301-8968. E-mail: service@intelligencereport.com. Web address: . Editor: Richard C. Young; Group Publisher: Michael Bell; Chairman: Thomas L. Phillips; Associate Editor: Deborah L. Young; Marketing Manager: Jim Brinkhoff; President: John J. Coyle; Research Director: Jeremy Jones, CFA; Sr. Managing Editor: Shannon Miller; Business Manager: Thomas C. Burne; Research Associate: Rebecca L. Young; Editorial Assistant: Danielle Hart; Sr. Vice President: Christopher Marett; Subscriptions: $249 per year. © 2006 by Phillips Investment Resources, LLC, Founding Member of the Newsletter Publishers Association of America. Photocopying, reproduction or quotation strictly prohibited without the written permission of the publisher. While the information provided is based upon sources believed to be reliable, its accuracy cannot be guaranteed, nor can the publication be considered liable for the investment performance of any securities or strategies mentioned. Subscribers should review the full disclaimer and securities holdings disclosure policy at /disclosure.php or call 800/219-8592 for a mailed copy. Periodicals postage rates paid at Rockville, MD, and at additional mailing offices. Postmaster: Send address changes to Richard C. Young’s Intelligence Report, Phillips Investment Resources, LLC, 2420A Gehman Lane, Lancaster, PA 17602.