As expected, earnings season thus far has been very poor as TSG reports..."In the third week of Q4-08 reporting season with a total of 609 companies having reported (up from 435 last week), average earnings are now down 80% versus Q4-07, versus -60% last week and -48% two weeks ago. This compares to a drop of 62% for Q3-08 versus Q3-07. Consumer goods (retailers, restaurants, airlines etc) have been hardest hit with financials a close second. Given that earnings have so far experienced their biggest drops since first turning negative in Q3-07 and that results have deteriorated as reporting seasons have progressed, we expect results to continue to deteriorate as more companies report."

A few other important observations from TSG are described as follows..."Stocks finished their third consecutive (albeit holiday-shortened) week with losses across the board for the major indices in our table (above) as the global economy provided more signs of slowing. We also experienced the worst Inauguration Day loss in history Tuesday.

But perhaps more sobering is what as we learned with the failure of a German €6 billion sovereign bond auction Wednesday, “as investors shunned one of the most liquid and safe assets in the world in a warnings for governments seeking to raise record amounts of debt to stimulate slowing economies,” according to an FT report. This is certainly a troubling development given that governments around the world hope to issue an estimated $3 trillion in debt this year, or more than three times that in 2008 according to the report. Spendthrift politicians in Washington should sit up and take note!"

All we need is a little more confirmation this week to determine if gold and silver have truly broken out.

Regards - VHF

-

-