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Chapter 2-1
Lake
Look around the house for a few items. There is also an 'Anonymous Letter' here for you to read. Use the typewriter if you need to, then head outside.
Walk over to the dock, and you should find your boat still there. Jump into the boat, and head in the opposite direction of the dock. You should see blue flames in the distance, so head for that. Go inside the cave to find another Merchant.