The chase by Noah Zivitz:
This was a year that (as of yesterday’s close) saw Canada’s benchmark stock index shed nearly 12%. Research in Motion trailed furthest among all index members, with still plenty of questions to be answered about whether the Jim and Mike show can regain lost market share in the new year. Even amid the ruins of a year that left the TSX lagging the S&P 500, there were some outsized returns to be had. Trilogy Energy shares surged 206%. Why? And what’s the plan to keep shareholders happy in 2012? And how about other leaders like Westport Innovations, Valeant and Dollarama? Throughout the day, and into next week on The Street, we’ll be reviewing the hits and misses of 2011.
Today is rich in symbolism for anyone who has watched Manulife Financial's volatile post-crisis experience. When former CEO Dominic D'Alessandro announced his retirement in 2009, his pay package generated tremendous criticism. Hearing the outrage loud and clear, D'Alessandro slapped conditions on the package. And now he appears poised to lose out on $10 million in restricted share units with MFC shares well below year-end vesting thresholds. After all of the hedging and de-risking Manulife has undergone over the past couple of it years, it still hasn't climbed back to levels D'Alessandro hoped for. Will patient MFC shareholders be rewarded in 2012? We’ll explore this one today.
And from today’s headlines:
The Globe and Mail is reporting Bill Ackman is reaching out to former CN CEO Hunter Harrison to lead the way at CP. According to the unconfirmed report, Harrison has demonstrated an interest in Ackman’s approach. We’re seeking comments from principals. Let’s also ask shareholders and analysts for perspective on the possibility of the iconic rail boss plying his trade at CP.
Manufacturing activity shrank in China this month, albeit at a slower pace than in November. We need to hear what the source of the PMI softness is, and what policy measures can be expected from Beijing next year. With Hu Jintao nearing the end of his term as president, I’d like to hear more about the country’s next leader.
After a string of losses that left gold in bear market territory at one time yesterday, the metal is staging an end of year rally today. But for how long, and what could support prices early in 2012? The Street gets a trader’s perspective at 8:30, and the technical view at 8:45.
January 3 will be the most important day thus far for candidates seeking to lead the Republican party in the next U.S. presidential race. Today and Tuesday we’ll need to ramp up analysis of what’s at stake in the Iowa caucuses.
We’ll be watching Silvercorp shares after it announced late yesterday two consulting firms have been retained to provide technical reports on a trio of projects to “alleviate” lingering concerns after the company had to fend off fraud allegations earlier this year.
Friday, December 30, 2011
Thursday, December 29, 2011
Gold Falls,Global markets declined in light volumes on Wednesday
Global markets declined in light volumes on Wednesday, as the price of gold fell and a report showed eurozone banks were hoarding cash from the European Central Bank instead of recirculating it through loans.
In Toronto, the benchmark S&P/TSX composite index fell 198.26 points, or 1.66%, to 11,728.41. Nine of the 10 sub-indexes declined, led by materials, down 4.22%, and energy, which fell 1.62%.
The price of crude oil fell US$1.98 to US$99.36 a barrel as investors were reassured that even if Iran did block the Strait of Hormuz to oil shipments as it has threatened, the situation would not last long enough to cause real shortages. The price of gold dropped for the fifth straight session - its longest slump since October 2009 - closing at US$1,562.90 an ounce, a loss of US$31.30. It has fallen in 10 of the last 12 sessions. "As a hiding place, it served its purpose," Bob Decker, a money manager at Aurion Capital in Toronto, said of gold. "As people look to the new year with a little more optimism with regard to the U.S. economy, maybe they're taking profits in their winning trades."
Profit-taking - and getting the house in order as the year ends - explained much of the declines on the markets, which came back from the Christmas holiday on Tuesday and in Canada on Wednesday.
"Volume goes light and really the only things that are left are the hedge funds making sure that they're in good shape for year-end and a lot of them have to sell to cover their losses," John Kinsey, portfolio manager at Caldwell Securities, said.
"The other part of it is the windowdressing," he said. "This is the most important quarter for window-dressing because it's obviously the end of the year for most mutual funds and other corporations and so they all sell their losers and that puts pressure on the market."
The Canadian dollar fell 33 basis points to US97.64¢ on Wednesday as the U.S. dollar advanced.
Also a factor on Wednesday were reports that eurozone banks were sitting on cash from the ECB. "If the eurozone banks are too afraid to lend, that does not bode well for future growth in the region," Brian Jacobsen, chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, told Bloomberg. "The banks are not borrowing from the ECB in order to spur lending. It's to shore up their own balance sheets. That could lead to a credit contraction in the eurozone."
The Dow Jones industrial average fell 139.94 points, or 1.14%, to 12,151.41 and the Nasdaq composite slipped 35.22 points, or 1.34%, to 2,589.98. Canada's junior Venture exchange dropped 18.60 points, or 1.27%, to 1,451.08.
© Copyright (c) The Montreal Gazette
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In Toronto, the benchmark S&P/TSX composite index fell 198.26 points, or 1.66%, to 11,728.41. Nine of the 10 sub-indexes declined, led by materials, down 4.22%, and energy, which fell 1.62%.
The price of crude oil fell US$1.98 to US$99.36 a barrel as investors were reassured that even if Iran did block the Strait of Hormuz to oil shipments as it has threatened, the situation would not last long enough to cause real shortages. The price of gold dropped for the fifth straight session - its longest slump since October 2009 - closing at US$1,562.90 an ounce, a loss of US$31.30. It has fallen in 10 of the last 12 sessions. "As a hiding place, it served its purpose," Bob Decker, a money manager at Aurion Capital in Toronto, said of gold. "As people look to the new year with a little more optimism with regard to the U.S. economy, maybe they're taking profits in their winning trades."
Profit-taking - and getting the house in order as the year ends - explained much of the declines on the markets, which came back from the Christmas holiday on Tuesday and in Canada on Wednesday.
"Volume goes light and really the only things that are left are the hedge funds making sure that they're in good shape for year-end and a lot of them have to sell to cover their losses," John Kinsey, portfolio manager at Caldwell Securities, said.
"The other part of it is the windowdressing," he said. "This is the most important quarter for window-dressing because it's obviously the end of the year for most mutual funds and other corporations and so they all sell their losers and that puts pressure on the market."
The Canadian dollar fell 33 basis points to US97.64¢ on Wednesday as the U.S. dollar advanced.
Also a factor on Wednesday were reports that eurozone banks were sitting on cash from the ECB. "If the eurozone banks are too afraid to lend, that does not bode well for future growth in the region," Brian Jacobsen, chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, told Bloomberg. "The banks are not borrowing from the ECB in order to spur lending. It's to shore up their own balance sheets. That could lead to a credit contraction in the eurozone."
The Dow Jones industrial average fell 139.94 points, or 1.14%, to 12,151.41 and the Nasdaq composite slipped 35.22 points, or 1.34%, to 2,589.98. Canada's junior Venture exchange dropped 18.60 points, or 1.27%, to 1,451.08.
© Copyright (c) The Montreal Gazette
Read more:
Click Here
Wednesday, December 28, 2011
Back to work
The chase by Noah Zivitz:
Where do we start?
Crude oil continues to hover above $100 per barrel, after settling at its highest level since mid-November, on the heels of renewed threats from Iran about shutting the Strait of Hormuz. Let’s continue to probe the stakes for international diplomats tasked with watching over Tehran’s nuclear strategy, while also keeping oil flowing through the strait. And after seeing U.S. consumer confidence rise yesterday to heights unseen since April, let’s try to quantify the psychological impact of $100+ oil.
Italy’s short-term borrowing costs were cut in half in a $12B debt auction today. The next test comes Thursday, when Rome seeks to raise $11B in longer-term debt. Let’s hear about the sustainability of demand for Italian bonds, and how much of that demand comes from banks basking in cheap cash, courtesy of the ECB.
Those look like the biggies. But we’ve got plenty more to sift through:
Athabasca Oil Sands has received full regulatory approval for its Mackay River oil sands project, with construction slated to start next month. This is a 40/60 joint-venture with PetroChina, and forces us to ask (once again) about labour constraints in the Canada’s energy hub.
Fresh off the wires, Ruggedcom just announced a poison pill to give itself plenty of time to consider options after Belden recently disclosed its plan for an unsolicited takeover offer. Paul Bagnell will give this one a look, and I’d like to find out whether other bidders could line up for Ruggedcom. We’ll chase the company.
Bombardier provides the other notable Canadian corporate story thus far today, with a $300-million rail contract in London. We’ll be peering into the company’s order book today as it prepares for a critical year in the evolution of its CSeries jet.
There's still a story to be told after Sears Holdings yesterday showed the wear and tear of a hyper-competitive retail sector. In case you missed it, SHLD disclosed a plan to close up to 120 stores, and said it will "carefully evaluate store performance going forward and act opportunistically to recognize value from poor performing stores as circumstances allow." In other words, CEO Lou D'Ambrosio has more work to do. As we return to our desks and have our first chance to do a holiday shopping debrief, I want to hear what the winning strategies have been, and whether Sears Holdings will regain its footing.
The U.S. Treasury Department dodged fireworks with Beijing after it declined to label China a currency manipulator in its report to Congress late yesterday. Even so, it's giving China a nudge, saying RMB movement thus far is insufficient -- and plans to press for policy moves that will inject some more flexibility into the currency. How long will the U.S. wait before using the m-word, and how detrimental is China's currency strategy to global economic rebalancing? We’ll bring it up with Stewart Hall at 9:35.
Barack Obama is going the bipartisan route with his latest nominations to the Federal Reserve’s board of governors. Possibly in a bid to facilitate the Senate approval process, U.S. President Obama is offering up a Republican, Jerome Powell, as a nominee alongside Democrat Jeremy Stein. Powell has quite the résumé, having worked in the Treasury Department during George H W Bush’s presidency. Powell also spent time as a partner at Carlyle Group. We’ll be familiarizing ourselves with Powell and Stein in the lead-up to their nomination hearings.
An unnamed U.S. Treasury Department official yesterday said the White House will be asking for a $1.2-trillion debt ceiling boost before the end of the week. It looks like this request for extra borrowing power will be far more routine than the downgrade-inducing showdown in August.
It’s as good a day as any to explore supply and demand for rare earths, after China unveiled a full-year export quota for 2012 that looks essentially unchanged from 2011 – but there’s more to the story than the headline.
The quota covering the first half of the year is being sliced by 27%. Let’s find someone who can help us understand China’s export strategy, and how buyers are adapting.
Where do we start?
Crude oil continues to hover above $100 per barrel, after settling at its highest level since mid-November, on the heels of renewed threats from Iran about shutting the Strait of Hormuz. Let’s continue to probe the stakes for international diplomats tasked with watching over Tehran’s nuclear strategy, while also keeping oil flowing through the strait. And after seeing U.S. consumer confidence rise yesterday to heights unseen since April, let’s try to quantify the psychological impact of $100+ oil.
Italy’s short-term borrowing costs were cut in half in a $12B debt auction today. The next test comes Thursday, when Rome seeks to raise $11B in longer-term debt. Let’s hear about the sustainability of demand for Italian bonds, and how much of that demand comes from banks basking in cheap cash, courtesy of the ECB.
Those look like the biggies. But we’ve got plenty more to sift through:
Athabasca Oil Sands has received full regulatory approval for its Mackay River oil sands project, with construction slated to start next month. This is a 40/60 joint-venture with PetroChina, and forces us to ask (once again) about labour constraints in the Canada’s energy hub.
Fresh off the wires, Ruggedcom just announced a poison pill to give itself plenty of time to consider options after Belden recently disclosed its plan for an unsolicited takeover offer. Paul Bagnell will give this one a look, and I’d like to find out whether other bidders could line up for Ruggedcom. We’ll chase the company.
Bombardier provides the other notable Canadian corporate story thus far today, with a $300-million rail contract in London. We’ll be peering into the company’s order book today as it prepares for a critical year in the evolution of its CSeries jet.
There's still a story to be told after Sears Holdings yesterday showed the wear and tear of a hyper-competitive retail sector. In case you missed it, SHLD disclosed a plan to close up to 120 stores, and said it will "carefully evaluate store performance going forward and act opportunistically to recognize value from poor performing stores as circumstances allow." In other words, CEO Lou D'Ambrosio has more work to do. As we return to our desks and have our first chance to do a holiday shopping debrief, I want to hear what the winning strategies have been, and whether Sears Holdings will regain its footing.
The U.S. Treasury Department dodged fireworks with Beijing after it declined to label China a currency manipulator in its report to Congress late yesterday. Even so, it's giving China a nudge, saying RMB movement thus far is insufficient -- and plans to press for policy moves that will inject some more flexibility into the currency. How long will the U.S. wait before using the m-word, and how detrimental is China's currency strategy to global economic rebalancing? We’ll bring it up with Stewart Hall at 9:35.
Barack Obama is going the bipartisan route with his latest nominations to the Federal Reserve’s board of governors. Possibly in a bid to facilitate the Senate approval process, U.S. President Obama is offering up a Republican, Jerome Powell, as a nominee alongside Democrat Jeremy Stein. Powell has quite the résumé, having worked in the Treasury Department during George H W Bush’s presidency. Powell also spent time as a partner at Carlyle Group. We’ll be familiarizing ourselves with Powell and Stein in the lead-up to their nomination hearings.
An unnamed U.S. Treasury Department official yesterday said the White House will be asking for a $1.2-trillion debt ceiling boost before the end of the week. It looks like this request for extra borrowing power will be far more routine than the downgrade-inducing showdown in August.
It’s as good a day as any to explore supply and demand for rare earths, after China unveiled a full-year export quota for 2012 that looks essentially unchanged from 2011 – but there’s more to the story than the headline.
The quota covering the first half of the year is being sliced by 27%. Let’s find someone who can help us understand China’s export strategy, and how buyers are adapting.
Thursday, December 22, 2011
Supreme Court to rule on securities regulator
Supreme Court to rule on securities regulator
The chase by Marty Cej:
Our top story today is the Supreme Court of Canada's decision on whether the government can proceed with plans to create a single securities regulator for the country. The plan, which has scandalized regional regulators in Alberta and Quebec (a single regulator? Next thing you know people will be allowed to marry their pets!!), would establish the Canadian Securities Regulatory Authority (CSRA), targeted to begin operations by the end of 2013. The push for a national regulator gained significant momentum with the financial crisis but the debate began decades ago. The Feds argue that a single regulator will provide more consistent protection for investors across Canada, improve regulator and criminal enforcement, create new tools to support the stability of the Canadian financial system, faster policy response, simpler and cheaper processes for businesses and investors and more effective international representation and influence for Canada. Canada remains the only country in the G7 without a single regulator. The provincial holdouts' argument goes something like this: That's what you say.
Today's decision will affect companies, institutions, investors, traders and analysts at home and abroad. A decision that allows the government to proceed will put into motion a process that will bring Canada into line with global standards but will also cause great consternation and worry for many people working at regional regulators now. Will regional expertise be sacrificed in the transition? Is regional expertise of any value in the first place? What will the next steps be for the holdouts in the event of a ruling in the government's favour? And what would the government's next steps be if the court rules against? The decision comes down at 9:45 a.m. ET. Our analysis begins with the Street.
Among our guests on this key Canadian story today are Tom Hockin, Executive Director for the IMF representing Canada; Ermanno Pascutto, Executive Director of FAIR Canada and Ian Russell, Executive Director of the Investment Industry Association of Canada. We are also expecting to hear from Finance Minister Jim Flaherty after the decision.
Today also sees the unveiling of BNN's Newsmaker of the Year. Beginning at 11:00 a.m. ET, we'll count down the stories that mattered most to Canadian investors to No. 1. What were the biggest deals? The biggest blunders? The boldest coups? The toughest calls and flimsiest strategies?
Speaking of strategy, Thomson Reuters said a few moments ago that it has suspended its attempt to sell its healthcare business. The company put the unit up for sale back in June, but says the "global economic conditions have become more challenging and the company believes they are not conducive to concluding a transaction that reflects the fair value of the Healthcare business at this time." This is a big important company that is in turmoil and struggling to find its feet again after a period of remarkable internal upheaval.
Yahoo will be a stock to watch amid speculation the company is poised to sell a big chunk of its holding in Alibaba Group.
The chase by Marty Cej:
Our top story today is the Supreme Court of Canada's decision on whether the government can proceed with plans to create a single securities regulator for the country. The plan, which has scandalized regional regulators in Alberta and Quebec (a single regulator? Next thing you know people will be allowed to marry their pets!!), would establish the Canadian Securities Regulatory Authority (CSRA), targeted to begin operations by the end of 2013. The push for a national regulator gained significant momentum with the financial crisis but the debate began decades ago. The Feds argue that a single regulator will provide more consistent protection for investors across Canada, improve regulator and criminal enforcement, create new tools to support the stability of the Canadian financial system, faster policy response, simpler and cheaper processes for businesses and investors and more effective international representation and influence for Canada. Canada remains the only country in the G7 without a single regulator. The provincial holdouts' argument goes something like this: That's what you say.
Today's decision will affect companies, institutions, investors, traders and analysts at home and abroad. A decision that allows the government to proceed will put into motion a process that will bring Canada into line with global standards but will also cause great consternation and worry for many people working at regional regulators now. Will regional expertise be sacrificed in the transition? Is regional expertise of any value in the first place? What will the next steps be for the holdouts in the event of a ruling in the government's favour? And what would the government's next steps be if the court rules against? The decision comes down at 9:45 a.m. ET. Our analysis begins with the Street.
Among our guests on this key Canadian story today are Tom Hockin, Executive Director for the IMF representing Canada; Ermanno Pascutto, Executive Director of FAIR Canada and Ian Russell, Executive Director of the Investment Industry Association of Canada. We are also expecting to hear from Finance Minister Jim Flaherty after the decision.
Today also sees the unveiling of BNN's Newsmaker of the Year. Beginning at 11:00 a.m. ET, we'll count down the stories that mattered most to Canadian investors to No. 1. What were the biggest deals? The biggest blunders? The boldest coups? The toughest calls and flimsiest strategies?
Speaking of strategy, Thomson Reuters said a few moments ago that it has suspended its attempt to sell its healthcare business. The company put the unit up for sale back in June, but says the "global economic conditions have become more challenging and the company believes they are not conducive to concluding a transaction that reflects the fair value of the Healthcare business at this time." This is a big important company that is in turmoil and struggling to find its feet again after a period of remarkable internal upheaval.
Yahoo will be a stock to watch amid speculation the company is poised to sell a big chunk of its holding in Alibaba Group.
Wednesday, December 21, 2011
ECB rolls out cheap money
The chase by Marty Cej:
European stocks are mostly higher and U.S. stock index futures are pointing to early gains after the European Central Bank said it will lend the region's banks a record 489 billion euros for three years, almost double expectations. The loans, at a sporty 1 percent (at these prices, you'd be crazy not to borrow!), provide Europe's cash-strapped banks with plenty of liquidity for the foreseeable future and should bolster confidence in the European financial industry, economy and the ECB's commitment to stability. In the simplest terms, European banks can borrow from the ECB at 1 percent and lend to companies, consumers and governments at much higher rates, pocketing the difference. Yes, Virginia, the ECB is a central bank. The true test of the efficacy of the ECB's plan, however, is not the demand from the banks but the demand from the banks' customers.
With just a few trading days left before the New Year, time has all but run out for a Santa rally. So far this month, the S&P/TSX Composite is down 4 percent, the S&P 500 down 0.45 percent and the Dow Jones Industrial Average up a measly 0.48 percent. Volume is low, tax-loss selling is picking up and many of the headwinds that buffeted financial markets through 2011 continue to blow.
There is still plenty of time left this year for us to label and list the challenges and opportunities investors will face in 2012. Yesterday's conversation with economist Joel Naroff was an excellent example. One of the most accurate forecasters for the U.S. economy in recent years, he surprised us when he argued that the world's largest economy will grow much more briskly next year than most economists and investors expect. Outliers… I love 'em.
Speaking of outliers, Edward Zarbitsky at ACI Research is the only analyst
anywhere who has a 'sell' recommendation on Apple stock. He joins us at 10:00 a.m. ET.
The market is talking about Research In Motion today after Reuters reported late yesterday the company rebuffed talks with Amazon that could have led to an offer. Citing unnamed sources, Reuters reported that Amazon hired an investment bank to kick the tires but RIM executives decided to fix its own problems rather than court outsiders. The Wall Street Journal followed with a story of its own -- again citing unnamed sources -- that Microsoft and Nokia considered a joint bid for the BlackBerry maker.
No matter how flimsy the speculation -- who hasn't spit-balled a bid for RIM this year over their third dirty martini at a wood-paneled pub with the word "Olde" in its name?? -- the stock rallied as much as 10 percent overseas and is higher in the pre-market. We've contacted all the principals, none of whom comment on market speculation, and will continue to test the logic of the potential tie-ups that have been proposed.
The tech sector will be a busy on today after Oracle reported after the close of trading last night. The world's second-biggest software maker missed both revenue and profit expectations and said that customers are taking longer to assess and close deals. That level of caution among companies can tell us plenty about the software and hardware industries, as well as the broader economy. The Oracle story today is bigger than Oracle.
The TMX Group said a few minutes ago that it has purchased a 16 percent stake in the Bermuda Stock Exchange, scoring a seat for TMX CEO Tom Kloet on the BSX board and some choice tee times. The TMX says the deal "represents TMX Group's commitment to looking beyond Canada for opportunities."
While that is true, I'm curious just how big an opportunity the BSX provides. It's not exactly the Hong Kong Stock Exchange. We expect to have a conversation with the CEO of the BSX later this morning.
European stocks are mostly higher and U.S. stock index futures are pointing to early gains after the European Central Bank said it will lend the region's banks a record 489 billion euros for three years, almost double expectations. The loans, at a sporty 1 percent (at these prices, you'd be crazy not to borrow!), provide Europe's cash-strapped banks with plenty of liquidity for the foreseeable future and should bolster confidence in the European financial industry, economy and the ECB's commitment to stability. In the simplest terms, European banks can borrow from the ECB at 1 percent and lend to companies, consumers and governments at much higher rates, pocketing the difference. Yes, Virginia, the ECB is a central bank. The true test of the efficacy of the ECB's plan, however, is not the demand from the banks but the demand from the banks' customers.
With just a few trading days left before the New Year, time has all but run out for a Santa rally. So far this month, the S&P/TSX Composite is down 4 percent, the S&P 500 down 0.45 percent and the Dow Jones Industrial Average up a measly 0.48 percent. Volume is low, tax-loss selling is picking up and many of the headwinds that buffeted financial markets through 2011 continue to blow.
There is still plenty of time left this year for us to label and list the challenges and opportunities investors will face in 2012. Yesterday's conversation with economist Joel Naroff was an excellent example. One of the most accurate forecasters for the U.S. economy in recent years, he surprised us when he argued that the world's largest economy will grow much more briskly next year than most economists and investors expect. Outliers… I love 'em.
Speaking of outliers, Edward Zarbitsky at ACI Research is the only analyst
anywhere who has a 'sell' recommendation on Apple stock. He joins us at 10:00 a.m. ET.
The market is talking about Research In Motion today after Reuters reported late yesterday the company rebuffed talks with Amazon that could have led to an offer. Citing unnamed sources, Reuters reported that Amazon hired an investment bank to kick the tires but RIM executives decided to fix its own problems rather than court outsiders. The Wall Street Journal followed with a story of its own -- again citing unnamed sources -- that Microsoft and Nokia considered a joint bid for the BlackBerry maker.
No matter how flimsy the speculation -- who hasn't spit-balled a bid for RIM this year over their third dirty martini at a wood-paneled pub with the word "Olde" in its name?? -- the stock rallied as much as 10 percent overseas and is higher in the pre-market. We've contacted all the principals, none of whom comment on market speculation, and will continue to test the logic of the potential tie-ups that have been proposed.
The tech sector will be a busy on today after Oracle reported after the close of trading last night. The world's second-biggest software maker missed both revenue and profit expectations and said that customers are taking longer to assess and close deals. That level of caution among companies can tell us plenty about the software and hardware industries, as well as the broader economy. The Oracle story today is bigger than Oracle.
The TMX Group said a few minutes ago that it has purchased a 16 percent stake in the Bermuda Stock Exchange, scoring a seat for TMX CEO Tom Kloet on the BSX board and some choice tee times. The TMX says the deal "represents TMX Group's commitment to looking beyond Canada for opportunities."
While that is true, I'm curious just how big an opportunity the BSX provides. It's not exactly the Hong Kong Stock Exchange. We expect to have a conversation with the CEO of the BSX later this morning.
Monday, December 19, 2011
All eyes on North Korea
The chase by Marty Cej:
2011 was not a banner year for dictators, despots and political strongmen. Kim Jong Il, the second-generation North Korean dictator has died, shoving the region into a period of uncertainty of unknown depth and time. The heir apparent is the 28-year-old son, Kim Jong Un, who has been educated in Switzerland and elsewhere and has been named a four-star general though he has no military experience. South Korean stocks slumped overnight and the country's military has gone on high alert. Japanese Prime Minister Yoshihiko Noda's cabinet held a security meeting after the announcement. China sent its sincerest condolences. The dictator leaves behind an economy that is less than 3 percent the size of South Korea's and has relied on economic handouts since the 1990s when some 2 million people died from famine. Both are important measures of a despot's regime: economic catastrophe and body count. We're pursuing insight and analysis into what this new measure of instability could mean to a crucial economic region.
Eldorado Gold has agreed to buy European Goldfields in stock and cash in a deal valued at about $2.5 billion, giving Eldorado a foothold in the Aegean. Calls are out to the principals and we're looking at how the European Goldfields properties mesh with Eldorado's existing projects in China and South America.
Sino-Forest has defaulted on two sets of bond payments and will create a restructuring committee in the hopes of receiving waivers on additional payments to bondholders as it struggles to make it through another week. Our challenge today is to better understand the process of what Sino-Forest is trying to do and to talk about what recourse bondholders might have. We have contacted the company and are pursuing bond owners. We are also digging for analysts and lawyers who can tell us what the next steps are for investors.
U.S. Republicans in the House of Representatives have rejected a two-month extension of tax breaks for 160 million workers that was overwhelmingly approved by the Senate over the weekend. House Speaker John Boehner has demanded a new round of bargaining with the Democratic-controlled Senate to extend the tax break through 2012. Democrats are accusing him of reneging on a deal brokered by Senate Republican leader Mitch McConnell and his Democratic counterpart Harry Reid.
The two arrived at the modest two-month extension on Friday after failing to break a deadlock over how to pay for the tax break for a full year. The debate will be difficult to settle with less than two weeks left before the tax break expires. And so it goes.
2011 was not a banner year for dictators, despots and political strongmen. Kim Jong Il, the second-generation North Korean dictator has died, shoving the region into a period of uncertainty of unknown depth and time. The heir apparent is the 28-year-old son, Kim Jong Un, who has been educated in Switzerland and elsewhere and has been named a four-star general though he has no military experience. South Korean stocks slumped overnight and the country's military has gone on high alert. Japanese Prime Minister Yoshihiko Noda's cabinet held a security meeting after the announcement. China sent its sincerest condolences. The dictator leaves behind an economy that is less than 3 percent the size of South Korea's and has relied on economic handouts since the 1990s when some 2 million people died from famine. Both are important measures of a despot's regime: economic catastrophe and body count. We're pursuing insight and analysis into what this new measure of instability could mean to a crucial economic region.
Eldorado Gold has agreed to buy European Goldfields in stock and cash in a deal valued at about $2.5 billion, giving Eldorado a foothold in the Aegean. Calls are out to the principals and we're looking at how the European Goldfields properties mesh with Eldorado's existing projects in China and South America.
Sino-Forest has defaulted on two sets of bond payments and will create a restructuring committee in the hopes of receiving waivers on additional payments to bondholders as it struggles to make it through another week. Our challenge today is to better understand the process of what Sino-Forest is trying to do and to talk about what recourse bondholders might have. We have contacted the company and are pursuing bond owners. We are also digging for analysts and lawyers who can tell us what the next steps are for investors.
U.S. Republicans in the House of Representatives have rejected a two-month extension of tax breaks for 160 million workers that was overwhelmingly approved by the Senate over the weekend. House Speaker John Boehner has demanded a new round of bargaining with the Democratic-controlled Senate to extend the tax break through 2012. Democrats are accusing him of reneging on a deal brokered by Senate Republican leader Mitch McConnell and his Democratic counterpart Harry Reid.
The two arrived at the modest two-month extension on Friday after failing to break a deadlock over how to pay for the tax break for a full year. The debate will be difficult to settle with less than two weeks left before the tax break expires. And so it goes.
Thursday, December 15, 2011
Sense of calm hits markets
The chase by Marty Cej:
Financial markets appear to have found a modicum of composure this morning after a day that saw declines in global stocks, the euro, the Canadian dollar, precious metals and industrial commodities. Most commentators put today's modest gains in European stocks, gold, silver and the euro down to the fact they fell yesterday. Obviously, our viewers expect a little more analysis than that. A read on the euro-zone's manufacturing economy rose in December, countering expectations for a decline, but still sits in contraction territory. A sale of Spanish debt raised almost double its target. What do these data points tell us about the outlook for the European economy or confidence in Spain's fiscal authorities?
Are today's gains in European stocks and the common currency a brief reprieve or something more?
A crowded slate of U.S. economic data this morning is likely to determine the direction of markets, regardless of the European data. Inflation at the wholesale level is due out at 8:30 a.m. ET along with the current account balance, Empire State manufacturing report and initial jobless claims. Industrial production and capacity utilization are out at 9:15 and the most potentially market-moving data point, the Philly Fed index -- a read on the manufacturing economy in the Philadelphia region -- is out at 10:00. The market is anticipating an improvement in both the Empire Manufacturing data and the Philly Fed.
Many Canadian investors will zero-in on Research In Motion today as it reports third-quarter earnings after the close of trading tonight. Already this morning, agitated and agitating shareholder Jaguar Financial has called out two of RIM's directors, Barbara Stymiest and Roger Martin to stand up and insist that the company separate the chairman and CEO roles.
Some analysts and investors are saying the stock is dead money until the issue of leadership and governance is settled. Others argue that RIM could represent one of the best -- if riskiest -- bets for 2012. Should the company split into two? Should it put itself up for sale? Should it soldier on and prove the skeptics wrong? Will it beat, meet or miss? Will it warn or raise forecasts? The company reports after the close but our coverage begins now.
For the record, RIM is expected to report a 34-percent decline in third-quarter earnings per share of $1.15, the average forecast of analysts surveyed by Thomson Reuters. Revenue is seen declining 4 percent to $5.26 billion. Yes, that's right, one of the worst performing stocks on the TSX still generates sales of more than $5 billion on a quarterly basis.
Also in earnings, we're watching Fedex, which topped second-quarter expectations and ordered up 27 brand-spanking new 767 jet freighters. One of the best economic barometers in the U.S. equity markets, we'll need to pick apart the numbers.
In Canadian earnings, tourism and airline Transat reported a stronger fourth quarter on the revenue line but swung to a net loss on the bottom line. The company also cautioned the market that so far this winter, "a significant portion of seats remains to be sold and the trend towards last-minute bookings and the volatility of margins make it difficult to make forecasts."
Also today, we'll be watching for numbers from Adobe, Empire Co., Pier 1 (wicker, anyone?) and Rite Aid.
John Corzine has been invited to testify before the House Financial Services Committee.
We are also waiting for the release of the National Energy Board's Arctic Review at 12:30 p.m. ET. Any energy company with ambitions for the North will be following the release as well.
Financial markets appear to have found a modicum of composure this morning after a day that saw declines in global stocks, the euro, the Canadian dollar, precious metals and industrial commodities. Most commentators put today's modest gains in European stocks, gold, silver and the euro down to the fact they fell yesterday. Obviously, our viewers expect a little more analysis than that. A read on the euro-zone's manufacturing economy rose in December, countering expectations for a decline, but still sits in contraction territory. A sale of Spanish debt raised almost double its target. What do these data points tell us about the outlook for the European economy or confidence in Spain's fiscal authorities?
Are today's gains in European stocks and the common currency a brief reprieve or something more?
A crowded slate of U.S. economic data this morning is likely to determine the direction of markets, regardless of the European data. Inflation at the wholesale level is due out at 8:30 a.m. ET along with the current account balance, Empire State manufacturing report and initial jobless claims. Industrial production and capacity utilization are out at 9:15 and the most potentially market-moving data point, the Philly Fed index -- a read on the manufacturing economy in the Philadelphia region -- is out at 10:00. The market is anticipating an improvement in both the Empire Manufacturing data and the Philly Fed.
Many Canadian investors will zero-in on Research In Motion today as it reports third-quarter earnings after the close of trading tonight. Already this morning, agitated and agitating shareholder Jaguar Financial has called out two of RIM's directors, Barbara Stymiest and Roger Martin to stand up and insist that the company separate the chairman and CEO roles.
Some analysts and investors are saying the stock is dead money until the issue of leadership and governance is settled. Others argue that RIM could represent one of the best -- if riskiest -- bets for 2012. Should the company split into two? Should it put itself up for sale? Should it soldier on and prove the skeptics wrong? Will it beat, meet or miss? Will it warn or raise forecasts? The company reports after the close but our coverage begins now.
For the record, RIM is expected to report a 34-percent decline in third-quarter earnings per share of $1.15, the average forecast of analysts surveyed by Thomson Reuters. Revenue is seen declining 4 percent to $5.26 billion. Yes, that's right, one of the worst performing stocks on the TSX still generates sales of more than $5 billion on a quarterly basis.
Also in earnings, we're watching Fedex, which topped second-quarter expectations and ordered up 27 brand-spanking new 767 jet freighters. One of the best economic barometers in the U.S. equity markets, we'll need to pick apart the numbers.
In Canadian earnings, tourism and airline Transat reported a stronger fourth quarter on the revenue line but swung to a net loss on the bottom line. The company also cautioned the market that so far this winter, "a significant portion of seats remains to be sold and the trend towards last-minute bookings and the volatility of margins make it difficult to make forecasts."
Also today, we'll be watching for numbers from Adobe, Empire Co., Pier 1 (wicker, anyone?) and Rite Aid.
John Corzine has been invited to testify before the House Financial Services Committee.
We are also waiting for the release of the National Energy Board's Arctic Review at 12:30 p.m. ET. Any energy company with ambitions for the North will be following the release as well.
Tuesday, December 13, 2011
Fed steps up to the mic
The chase by Marty Cej:
Monetary policy will be front and centre at BNN today. Bank of Canada Governor Mark Carney sits down with Howard Green at 12:30 p.m. ET for a conversation about the European morass, global economic challenges, financial regulation and how Canadian companies must step up and save the world… or else.
The Federal Reserve is expected to make some indication today -- however subtle -- that another round of quantitative easing is not a done deal. Recent U.S. economic data has been surprisingly robust, helping to stoke optimism that while European leaders shuffle towards a solution to their debt crisis, the world’s largest economy is slowing but surely regaining its composure.
Chairman Bernanke has been trying to improve the transparency of the Fed’s operations and provide clearer signals to markets, companies and consumers. Today, he is likely to take another big step in that direction. The statement is scheduled for 2:15 p.m. ET.
We have several corporate stories we’ll have to pursue through the morning, including the biggest-ever order for Boeing jets. Southwest Airlines ordered 150 737 MAX airplanes and 58 “Next-Generation” 737s.
The dollar value is about $19 billion. The new orders speak to the global push by airlines to cut costs with more fuel efficient planes. We need to ask again where Bombardier fits in this story.
Best Buy missed third-quarter earnings expectations by 4 cents but reiterated its full-year forecast.
Its numbers come just as investors digest a smaller than expected increase in U.S. retail sales. Shoppers drove sales up 0.2 percent last month, compared with expectations for a gain of 0.6 percent. The preceding month was revised higher to 0.6 percent from 0.5 percent. The question now is whether an early surge in holiday shopping will persist through the actual holidays.
With Research In Motion’s earnings just two days away, analysts at JPMorgan say the company is “increasingly likely” to delay the launch of its BlackBerry 10 phones in the second half of next year, a disappointment the company and shareholders can hardly afford just now. We will test JPMorgan’s assumptions and question the persistent speculation about a sale of the company with analyst Pierre Ferragu of Sanford Bernstein at 9:50 a.m. ET.
Newsletter writer Dennis Gartman goes to great pains to reiterate that he is a trader and that he will hold a position until that position is no longer profitable. In his words, “a trend in motion tends to stay in motion… until it stops.” After selling his gold holdings yesterday, he proclaims this morning “the death of a bull.” We gotta talk gold today. It has dropped down through its 50-day and 100-day moving averages but still has a long way before it bounces against the resilient 200-day moving average. Has Gartman sold too soon? Let’s find out.
I’m running late and the make-up people are breathing down my neck. And brandishing brushes and puffs.
Monetary policy will be front and centre at BNN today. Bank of Canada Governor Mark Carney sits down with Howard Green at 12:30 p.m. ET for a conversation about the European morass, global economic challenges, financial regulation and how Canadian companies must step up and save the world… or else.
The Federal Reserve is expected to make some indication today -- however subtle -- that another round of quantitative easing is not a done deal. Recent U.S. economic data has been surprisingly robust, helping to stoke optimism that while European leaders shuffle towards a solution to their debt crisis, the world’s largest economy is slowing but surely regaining its composure.
Chairman Bernanke has been trying to improve the transparency of the Fed’s operations and provide clearer signals to markets, companies and consumers. Today, he is likely to take another big step in that direction. The statement is scheduled for 2:15 p.m. ET.
We have several corporate stories we’ll have to pursue through the morning, including the biggest-ever order for Boeing jets. Southwest Airlines ordered 150 737 MAX airplanes and 58 “Next-Generation” 737s.
The dollar value is about $19 billion. The new orders speak to the global push by airlines to cut costs with more fuel efficient planes. We need to ask again where Bombardier fits in this story.
Best Buy missed third-quarter earnings expectations by 4 cents but reiterated its full-year forecast.
Its numbers come just as investors digest a smaller than expected increase in U.S. retail sales. Shoppers drove sales up 0.2 percent last month, compared with expectations for a gain of 0.6 percent. The preceding month was revised higher to 0.6 percent from 0.5 percent. The question now is whether an early surge in holiday shopping will persist through the actual holidays.
With Research In Motion’s earnings just two days away, analysts at JPMorgan say the company is “increasingly likely” to delay the launch of its BlackBerry 10 phones in the second half of next year, a disappointment the company and shareholders can hardly afford just now. We will test JPMorgan’s assumptions and question the persistent speculation about a sale of the company with analyst Pierre Ferragu of Sanford Bernstein at 9:50 a.m. ET.
Newsletter writer Dennis Gartman goes to great pains to reiterate that he is a trader and that he will hold a position until that position is no longer profitable. In his words, “a trend in motion tends to stay in motion… until it stops.” After selling his gold holdings yesterday, he proclaims this morning “the death of a bull.” We gotta talk gold today. It has dropped down through its 50-day and 100-day moving averages but still has a long way before it bounces against the resilient 200-day moving average. Has Gartman sold too soon? Let’s find out.
I’m running late and the make-up people are breathing down my neck. And brandishing brushes and puffs.
Monday, December 12, 2011
Investors skeptical of European measures
The chase by Marty Cej:
European stocks are lower, industrial commodities are sliding and U.S. index futures are pointing to early losses after the weekend?s EU summit left investors and lawmakers skeptical that the long-term steps agreed upon will solve the debt crisis in the near term. European leaders ended the summit with a pact to draft a new treaty that enforces tighter fiscal integration but details won?t be settled until at least March. In the meantime, the EU leaders have agreed to lend up to 200 billion euros to the IMF to help it support the weakest members of the euro-zone, and to accelerate the permanent rescue fund ? the European Stability Mechanism ? by a full year to mid-2012. Between now and March, the markets will look to the European Central Bank for support and wonder whether Standard & Poor?s will cut its ratings on European countries before Christmas. One definitive result of the meeting was British Prime Minister David Cameron?s political alienation from the broader European Union. By standing up for Britain?s financial services industry and opposing a transaction tax, Cameron has thrown his political future into some doubt and potentially removed White Hall from the next phase of decisions in Brussels.
The U.S. Federal Reserve?s policy-setting Open Market Committee reveals its latest take on the U.S. economy tomorrow at 2:15 pm Eastern. The FOMC is not expected to invoke any new measures to stimulate growth so the market?s attention will be on how the Fed sees the recent spate of stronger-than-expected economic data, including a big drop in the unemployment rate and remarkably resilient consumer confidence numbers. Today, Headline sits down at 1:00 pm with Alice Rivlin, a member of the President?s Debt Commission and a former Vice Chair of the Federal Reserve.
It should be noted that stronger-than-anticipated retail sales last month have many analysts and economists arguing that U.S. shoppers are now already tapped out. A survey by UBS and America?s Research Group (ARG) this morning says that with ?
two weeks to go before Christmas, holiday shoppers buffeted by the weak U.S. economy have already spent all they can afford to on gifts? ?More Americans are living week to week,? said ARG Chairman Britt Beemer, who noted that the new findings are the bleakest in the survey's 27-year history. "They simply have no money."
And what about Canadian monetary policy? Rather than speculate we?ll simply ask Bank of Canada Governor Mark Carney, who joins us Tuesday on Headline. We?ll talk about the outlook for the Canadian economy, Canadian interest rates, household debt, global financial regulation and the skiing near Basel, Switzerland, maybe.
This is one interview you will not want to miss.
Sun Life Financial said this morning that it is cutting 800 jobs, closing two lines of business in the U.S. and will take a small charge as it intensifies its ?focus on reducing volatility and improving the return on shareholders' equity by shifting capital to businesses with superior growth, risk and return characteristics.? Paul Bagnell is listening in on the conference call for more details and Peter Routledge, director of research, financial services, National Bank Financial, will join us with his take on Sun Life and its competitors at 10:30.
Suncor is pulling out of Syria and EnCana is fighting back against claims from the Environmental Protection Agency that its drilling activities in Wyoming are poisoning the water.
Stock movers today could include Air Canada, GMP, Ivanhoe Energy and Yellow Media, all of which were booted from the S&P/TSX Composite.
European stocks are lower, industrial commodities are sliding and U.S. index futures are pointing to early losses after the weekend?s EU summit left investors and lawmakers skeptical that the long-term steps agreed upon will solve the debt crisis in the near term. European leaders ended the summit with a pact to draft a new treaty that enforces tighter fiscal integration but details won?t be settled until at least March. In the meantime, the EU leaders have agreed to lend up to 200 billion euros to the IMF to help it support the weakest members of the euro-zone, and to accelerate the permanent rescue fund ? the European Stability Mechanism ? by a full year to mid-2012. Between now and March, the markets will look to the European Central Bank for support and wonder whether Standard & Poor?s will cut its ratings on European countries before Christmas. One definitive result of the meeting was British Prime Minister David Cameron?s political alienation from the broader European Union. By standing up for Britain?s financial services industry and opposing a transaction tax, Cameron has thrown his political future into some doubt and potentially removed White Hall from the next phase of decisions in Brussels.
The U.S. Federal Reserve?s policy-setting Open Market Committee reveals its latest take on the U.S. economy tomorrow at 2:15 pm Eastern. The FOMC is not expected to invoke any new measures to stimulate growth so the market?s attention will be on how the Fed sees the recent spate of stronger-than-expected economic data, including a big drop in the unemployment rate and remarkably resilient consumer confidence numbers. Today, Headline sits down at 1:00 pm with Alice Rivlin, a member of the President?s Debt Commission and a former Vice Chair of the Federal Reserve.
It should be noted that stronger-than-anticipated retail sales last month have many analysts and economists arguing that U.S. shoppers are now already tapped out. A survey by UBS and America?s Research Group (ARG) this morning says that with ?
two weeks to go before Christmas, holiday shoppers buffeted by the weak U.S. economy have already spent all they can afford to on gifts? ?More Americans are living week to week,? said ARG Chairman Britt Beemer, who noted that the new findings are the bleakest in the survey's 27-year history. "They simply have no money."
And what about Canadian monetary policy? Rather than speculate we?ll simply ask Bank of Canada Governor Mark Carney, who joins us Tuesday on Headline. We?ll talk about the outlook for the Canadian economy, Canadian interest rates, household debt, global financial regulation and the skiing near Basel, Switzerland, maybe.
This is one interview you will not want to miss.
Sun Life Financial said this morning that it is cutting 800 jobs, closing two lines of business in the U.S. and will take a small charge as it intensifies its ?focus on reducing volatility and improving the return on shareholders' equity by shifting capital to businesses with superior growth, risk and return characteristics.? Paul Bagnell is listening in on the conference call for more details and Peter Routledge, director of research, financial services, National Bank Financial, will join us with his take on Sun Life and its competitors at 10:30.
Suncor is pulling out of Syria and EnCana is fighting back against claims from the Environmental Protection Agency that its drilling activities in Wyoming are poisoning the water.
Stock movers today could include Air Canada, GMP, Ivanhoe Energy and Yellow Media, all of which were booted from the S&P/TSX Composite.
Tuesday, December 6, 2011
Bill Carrigan Says... North America Bull Starts To Run
Times have changed since my first appearance in this space about 15 years ago.
Back then we were investors. Now we are traders. An investor used to be an owner of a business with long-term growth prospects. Now an investor is simply a trader who has held a declining stock too long.
Back in the late 1990s investors were enjoying the late stages of a powerful 20-year linear advance in the major global equity markets. The dominant theme or prime driver of growth was the “new economy” technology boom of 1980 to 2000.
The other dominant theme was the emergence of the financial services and financial planning industry stimulated by the big banks’ entry into the investment dealer space.
Buy and hold worked from 1980 through 2000. The Dow ran from 800 to over 10,000 and all you had to do was to find a way to get on board.
Investors stampeded into the mutual funds which at the time had no competition from the little-known exchange traded fund (ETFs) industry. “Buy, Hold and Prosper”, became the business mantra of the former AIC mutual fund boss Michael Lee Chin who embraced the emerging financial services industry.
The technology bubble burst in 2000 and the “buy-and-hold is dead” movement got underway. Now the fashionable mantra is the cynical “buy, hold, and lose” and “buy, hold and suffer.”
The unfortunate fallout of the technology bubble of 2000 and the subsequent financial crisis of 2008 is that we don’t invest anymore. We trade.
If you do a Google on “online trading” you get 68 million results.
Recently, I got a question from an industry professional wishing to know my one-and-only investment pick. He said his clients were long-term investors. When I asked for a time horizon he replied, “Oh, at least two months.”
How sad and what a waste. What is the point of putting in hours of analysis and then tossing a solid investment away just because you made a few fast bucks?
The root of the problem seems to be that investors and analysts are hyper-focusing on the fiscal and monetary problems in the U.S. along with the noise of the European Monetary Union, wars and the threat of another recession. This in turn has investors jumping in and out of equities in reaction to good and bad news days.
If I had to select my one-and-only investment pick today for at least a 2-year hold I would want a skilled management team who can guide the company through the noise of the global economy.
At this time the Dow Industrial Average is the obvious choice because most of the 30 components are global multinationals, all with skilled management teams.
When you own the Dow you gain direct exposure to names like was McDonald’s Corporation, International Business Machines, Hewlett-Packard Co., Caterpillar Inc., Walt Disney Co., Coca-Cola Company, United Technologies Corp. and Chevron Corp. — all multinational businesses. The dominant theme among the group is their activities in globalizing and expanding their operations overseas.
Our chart this week is the monthly closes of the Dow Jones industrial average plotted above the monthly closes of the iShares MSCI EAFE Index (NYSE-EFA). The EFA is an ETF that seeks to replicate the MSCI EAFE index. The index has been developed by MSCI as an equity benchmark for its international stock performance (Europe, Australia and Southeast Asia).
We can see that, from the 2007 price peaks of both plots, the Dow is the stronger investment product beginning with the financial crisis collapse of 2007 — 2009. The Dow on a peak-to-peak monthly closing basis lost about 50 per cent compared to the 60 per cent loss of the EFA.
More important is the recovery period of 2009 through 2011 with the Dow retracing 83 per cent of the financial crisis collapse compared to the EFA retracement of only 60 per cent of the financial crisis collapse.
Currently the Dow is still out performing the EFA with the recent August lows, well above the July 2010 lows. Over the same period the EFA gave back all of the same period gains.
Canadian dollar accounts can own the Dow via the TSX listed BMO Dow Jones industrial average Hedged to CAD Index ETF (ZDJ) and U.S. dollar accounts can own the Dow via the NYSE listed SPDR Dow Jones industrial average ETF (DIA).
Keep your investment close to home and buy, hold and enjoy.
Bill Carrigan, CIM is an independent stock market analyst
Back then we were investors. Now we are traders. An investor used to be an owner of a business with long-term growth prospects. Now an investor is simply a trader who has held a declining stock too long.
Back in the late 1990s investors were enjoying the late stages of a powerful 20-year linear advance in the major global equity markets. The dominant theme or prime driver of growth was the “new economy” technology boom of 1980 to 2000.
The other dominant theme was the emergence of the financial services and financial planning industry stimulated by the big banks’ entry into the investment dealer space.
Buy and hold worked from 1980 through 2000. The Dow ran from 800 to over 10,000 and all you had to do was to find a way to get on board.
Investors stampeded into the mutual funds which at the time had no competition from the little-known exchange traded fund (ETFs) industry. “Buy, Hold and Prosper”, became the business mantra of the former AIC mutual fund boss Michael Lee Chin who embraced the emerging financial services industry.
The technology bubble burst in 2000 and the “buy-and-hold is dead” movement got underway. Now the fashionable mantra is the cynical “buy, hold, and lose” and “buy, hold and suffer.”
The unfortunate fallout of the technology bubble of 2000 and the subsequent financial crisis of 2008 is that we don’t invest anymore. We trade.
If you do a Google on “online trading” you get 68 million results.
Recently, I got a question from an industry professional wishing to know my one-and-only investment pick. He said his clients were long-term investors. When I asked for a time horizon he replied, “Oh, at least two months.”
How sad and what a waste. What is the point of putting in hours of analysis and then tossing a solid investment away just because you made a few fast bucks?
The root of the problem seems to be that investors and analysts are hyper-focusing on the fiscal and monetary problems in the U.S. along with the noise of the European Monetary Union, wars and the threat of another recession. This in turn has investors jumping in and out of equities in reaction to good and bad news days.
If I had to select my one-and-only investment pick today for at least a 2-year hold I would want a skilled management team who can guide the company through the noise of the global economy.
At this time the Dow Industrial Average is the obvious choice because most of the 30 components are global multinationals, all with skilled management teams.
When you own the Dow you gain direct exposure to names like was McDonald’s Corporation, International Business Machines, Hewlett-Packard Co., Caterpillar Inc., Walt Disney Co., Coca-Cola Company, United Technologies Corp. and Chevron Corp. — all multinational businesses. The dominant theme among the group is their activities in globalizing and expanding their operations overseas.
Our chart this week is the monthly closes of the Dow Jones industrial average plotted above the monthly closes of the iShares MSCI EAFE Index (NYSE-EFA). The EFA is an ETF that seeks to replicate the MSCI EAFE index. The index has been developed by MSCI as an equity benchmark for its international stock performance (Europe, Australia and Southeast Asia).
We can see that, from the 2007 price peaks of both plots, the Dow is the stronger investment product beginning with the financial crisis collapse of 2007 — 2009. The Dow on a peak-to-peak monthly closing basis lost about 50 per cent compared to the 60 per cent loss of the EFA.
More important is the recovery period of 2009 through 2011 with the Dow retracing 83 per cent of the financial crisis collapse compared to the EFA retracement of only 60 per cent of the financial crisis collapse.
Currently the Dow is still out performing the EFA with the recent August lows, well above the July 2010 lows. Over the same period the EFA gave back all of the same period gains.
Canadian dollar accounts can own the Dow via the TSX listed BMO Dow Jones industrial average Hedged to CAD Index ETF (ZDJ) and U.S. dollar accounts can own the Dow via the NYSE listed SPDR Dow Jones industrial average ETF (DIA).
Keep your investment close to home and buy, hold and enjoy.
Bill Carrigan, CIM is an independent stock market analyst
Last August I attended a buddy’s annual rib fest. He wore a T-shirt with a bold statement, “I love vegetarians: more meat for me!”
My next T-shirt will read, “I love the euro crisis: more cheap stocks for me!”
Last Wednesday was a bit of a wake-up call for the bulls when the Dow Jones industrial average dived 3.2 per cent or 389 points as the Europe’s debt crisis focused on Italy’s borrowing costs. That was the Dow’s largest points and percentage drop in seven weeks, and the sixth largest points and percentage drop this year.
Even before Friday’s stock market gains, when you look at the bigger picture, the Dow was only down 8 per cent this week from its 2011 closing high of 12,810 on April 29 and had rebounded more than 10 per cent from its 2011 closing low of 10,655 on Oct. 3.
To regain my confidence as a bull, I need to confirm the nasty April through October mini-bear in the equity markets is over. Technically a bull market will post a long series of higher highs and higher lows. A bear market will post a series of lower highs and lower lows.
The turning points, such as bull market peaks and bear market troughs, are called junctures. Was the early October low in the Dow a juncture?
Our chart this week shows about five months of daily closes of the Dow Jones industrials plotted above the daily closes of the 10-year U.S. Treasury bonds. In this example, I am comparing the level of the Dow to investor fear as illustrated by the flight into U.S. Treasuries. Note the recent prices relative to their August lows. In mid-September, the 10-year bond yield broke below the 2 per cent level of the August lows and the Dow industrials held firm just at the August low. This price divergence has created a bull set-up because while investor fear was greater (lower bond yields), the Dow held firm. This is called bullish divergence.
This week, the price divergence was even greater, with the 10-year Treasuries still at the fearful 2 per cent level and the Dow well above the early October low. Internally the Dow is very healthy. All 30 Dow components are now sitting well above their relative early October lows. A very bullish scenario!
The bottom line here is that, from a technical perspective, the August through October lows are an important juncture that will likely become the origin of a major bull market.
We need to participate. We need to focus more on the earnings and guidance from companies such as Cisco Systems Inc. and less of the names of the Greek and Italian prime ministers.
First you need to know what kind of an investor you are. If you lack experience and are not being advised, keep it simple and just buy the Canadian and U.S. equity markets in two baskets.
For Canadian exposure, you can buy the iShares S&P/TSX 60 Index Fund, which trades under the symbol XIU on the Toronto Stock Exchange. The XIU gives us direct ownership of 60 Canadian large-capitalization companies.
For U.S. exposure, you can buy the SPDR S&P 500 fund, which trades as SPY on the New York Stock Exchange. If you wish to operate only in Canadian dollars, another exchange-traded fund choice is the TSX-listed BMO Dow Jones Industrial Average Hedged to CAD Index ETF, symbol ZDJ.
These products contain the shares of large domestic and multinational corporations, which allow you to participate in both the Canadian and the global economy.
If you are an experienced investor or have an adviser, you may seek to enhance the returns of the above broad and diverse products and drill down a bit into the stock sectors such as the financial, technology or industrial groups of stocks.
In Canada, the three prime price drivers are the energy, materials and financial groups of stocks. Related ETF investment products are the TSX-listed iShares S&P/TSX Capped Energy Index Fund (XEG), the iShares S&P/TSX Capped Materials Index Fund (XMA) and the iShares S&P/TSX Capped Financials Index Fund (XFN).
Another important but lesser profile stock group is the TSX industrials, rich in domestic and global corporations. Unfortunately for Canadian investors, no ETF covers just that sector.
In the U.S., the three prime price drivers are the industrial, technology and financial groups of stocks. For related investment products, try the NYSE-listed Industrial Select Sector SPDR (XLI), the Technology Select Sector SPDR (XLK) and the Financial Select Sector SPDR (XLF).
Again if you only wish to operate in Canadian dollars, BMO Financial Group has a series of ETFs that cover most of the major global asset classes.
Bill Carrigan, CIM, is an independent stock-market analyst.
My next T-shirt will read, “I love the euro crisis: more cheap stocks for me!”
Last Wednesday was a bit of a wake-up call for the bulls when the Dow Jones industrial average dived 3.2 per cent or 389 points as the Europe’s debt crisis focused on Italy’s borrowing costs. That was the Dow’s largest points and percentage drop in seven weeks, and the sixth largest points and percentage drop this year.
Even before Friday’s stock market gains, when you look at the bigger picture, the Dow was only down 8 per cent this week from its 2011 closing high of 12,810 on April 29 and had rebounded more than 10 per cent from its 2011 closing low of 10,655 on Oct. 3.
To regain my confidence as a bull, I need to confirm the nasty April through October mini-bear in the equity markets is over. Technically a bull market will post a long series of higher highs and higher lows. A bear market will post a series of lower highs and lower lows.
The turning points, such as bull market peaks and bear market troughs, are called junctures. Was the early October low in the Dow a juncture?
Our chart this week shows about five months of daily closes of the Dow Jones industrials plotted above the daily closes of the 10-year U.S. Treasury bonds. In this example, I am comparing the level of the Dow to investor fear as illustrated by the flight into U.S. Treasuries. Note the recent prices relative to their August lows. In mid-September, the 10-year bond yield broke below the 2 per cent level of the August lows and the Dow industrials held firm just at the August low. This price divergence has created a bull set-up because while investor fear was greater (lower bond yields), the Dow held firm. This is called bullish divergence.
This week, the price divergence was even greater, with the 10-year Treasuries still at the fearful 2 per cent level and the Dow well above the early October low. Internally the Dow is very healthy. All 30 Dow components are now sitting well above their relative early October lows. A very bullish scenario!
The bottom line here is that, from a technical perspective, the August through October lows are an important juncture that will likely become the origin of a major bull market.
We need to participate. We need to focus more on the earnings and guidance from companies such as Cisco Systems Inc. and less of the names of the Greek and Italian prime ministers.
First you need to know what kind of an investor you are. If you lack experience and are not being advised, keep it simple and just buy the Canadian and U.S. equity markets in two baskets.
For Canadian exposure, you can buy the iShares S&P/TSX 60 Index Fund, which trades under the symbol XIU on the Toronto Stock Exchange. The XIU gives us direct ownership of 60 Canadian large-capitalization companies.
For U.S. exposure, you can buy the SPDR S&P 500 fund, which trades as SPY on the New York Stock Exchange. If you wish to operate only in Canadian dollars, another exchange-traded fund choice is the TSX-listed BMO Dow Jones Industrial Average Hedged to CAD Index ETF, symbol ZDJ.
These products contain the shares of large domestic and multinational corporations, which allow you to participate in both the Canadian and the global economy.
If you are an experienced investor or have an adviser, you may seek to enhance the returns of the above broad and diverse products and drill down a bit into the stock sectors such as the financial, technology or industrial groups of stocks.
In Canada, the three prime price drivers are the energy, materials and financial groups of stocks. Related ETF investment products are the TSX-listed iShares S&P/TSX Capped Energy Index Fund (XEG), the iShares S&P/TSX Capped Materials Index Fund (XMA) and the iShares S&P/TSX Capped Financials Index Fund (XFN).
Another important but lesser profile stock group is the TSX industrials, rich in domestic and global corporations. Unfortunately for Canadian investors, no ETF covers just that sector.
In the U.S., the three prime price drivers are the industrial, technology and financial groups of stocks. For related investment products, try the NYSE-listed Industrial Select Sector SPDR (XLI), the Technology Select Sector SPDR (XLK) and the Financial Select Sector SPDR (XLF).
Again if you only wish to operate in Canadian dollars, BMO Financial Group has a series of ETFs that cover most of the major global asset classes.
Bill Carrigan, CIM, is an independent stock-market analyst.
Wednesday, November 30, 2011
Central banks provide liquidity
The chase by Marty Cej:
European stocks added to their gains and U.S. stock index futures surged after central banks around the world moved a few moments ago to provide additional liquidity to a financial system that is beginning to seize up. The Bank of Canada, U.S. Federal Reserve, Bank of England, European Central Bank, Bank of Japan and Swiss National Bank agreed to reduce the interest rate on U.S. dollar liquidity swap lines by 50 basis points and extend their authorization through Feb. 1, 2013. In short, that means the banks are providing cheaper money for longer. In its accompanying statement, the Bank of Canada said that the coordinated actions are meant to "provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity."
The action comes after China's central bank cut for the first time since 2008 the amount of cash that banks are required to set aside as reserves. In an unambiguous nod to slumping export demand from Europe, the People's Bank of China said reserve ratios will drop by 50 basis points to 21 percent for the country's biggest lenders on Dec. 5. An adviser to the central bank, Xia Bin, said at a forum this morning in Beijing that the PBOC would maintain a "prudent policy" in 2012. The fact is, prudence now demands lower interest rates in China and elsewhere in the world to revive flagging growth. Yesterday, the talk in the market was about QE3 ? not the "if" of it, but the "when." Earlier this week, the OECD warned that even Canada ? yes, even Canada ? may have to cut rates if things in Europe worsen any further. In other words, central banks are being compelled to stimulate growth whether they want to or not, which is a position none of them appreciate much. This morning, let's talk about the specifics of the coordinated central bank action and the PBOC decision but we'll need to broaden the conversation quickly to include new expectations for quantitative easing in the U.S. and rate cuts in Canada. Will Canadians see lower borrowing costs before year-end?
Finance Minister Jim Flaherty is giving a speech this morning in New York City. We've sent a camera. We'll hear from him shortly.
Meanwhile, in Europe, finance ministers wrapped up a crucial meeting in which they agreed on detailed plans to leverage the European Financial Stability Fund (EFSF or bailing bucket) but could not say by how much because of rapidly deteriorating credit markets. In short, they agree that a lot more money needs to be thrown at the problem by the EFSF but they can't say where they'll get the dough, though the letters I, M and F have been heard in the carpeted halls of Brussels, whispered as if in prayer. Christian Noyer, France's central bank governor and a governing council member of the European Central Bank, presaged the global central bank actions today to an audience in Singapore, saying that "We are now looking at a true financial crisis ? that is a broad-based disruption in financial markets." European leaders get together for a summit on Dec. 9. That means 10 more days of rising funding costs for euro-zone economies and falling confidence in European banks.
Canada's main competition regulator says it has "serious concerns" about Maple Group's $3.7-billion acquisition of the TMX Group. It seems the proposed takeover of Canada's financial markets by Canada's biggest trading firms ? as well as the takeover of the primary clearing house as part of the deal ? has raised the antennae of someone in Ottawa. The TMX and Maple Group have responded by saying they will work with the regulator to address those concerns and perhaps identify possible "remedial measures," which, if I recall my own youth correctly, can range from standing in the hall to getting the strap from Ms. Murphy, the ex-nun with forearms like tree trunks. The announcement comes a day before hearings in Toronto before the OSC. Paul Bagnell has the file.
U.S. outplacement firm Challenger, Gray and Christmas said this morning that planned layoffs in the U.S. were virtually unchanged in November from the preceding month but were down 13 percent from a year earlier. This could provide a little more bullishness to expectations that this Friday's nonfarm payrolls report could exceed the average forecast of 120,000. Canadian jobs are due out Friday as well.
Industry Minister Christian Paradis didn't so much as drop the ball on issue of foreign investment in the Canadian telecom industry yesterday so much as take the European Gambit, or what's known as Kick the Can Down the Road. Admitting that the issue is very serious and of great importance to Canadian consumers and companies, he concluded that it is so important he won't make a decision on it anytime soon. Incumbents, investors, would-be entrants, consumers? they're all asking "what gives?" We need to provide some better answers.
Busy day for economics at home and abroad. We're watching Canadian GDP and home prices as well as the Chicago PMI, U.S. pending home sales, productivity and the ADP employment report.
European stocks added to their gains and U.S. stock index futures surged after central banks around the world moved a few moments ago to provide additional liquidity to a financial system that is beginning to seize up. The Bank of Canada, U.S. Federal Reserve, Bank of England, European Central Bank, Bank of Japan and Swiss National Bank agreed to reduce the interest rate on U.S. dollar liquidity swap lines by 50 basis points and extend their authorization through Feb. 1, 2013. In short, that means the banks are providing cheaper money for longer. In its accompanying statement, the Bank of Canada said that the coordinated actions are meant to "provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity."
The action comes after China's central bank cut for the first time since 2008 the amount of cash that banks are required to set aside as reserves. In an unambiguous nod to slumping export demand from Europe, the People's Bank of China said reserve ratios will drop by 50 basis points to 21 percent for the country's biggest lenders on Dec. 5. An adviser to the central bank, Xia Bin, said at a forum this morning in Beijing that the PBOC would maintain a "prudent policy" in 2012. The fact is, prudence now demands lower interest rates in China and elsewhere in the world to revive flagging growth. Yesterday, the talk in the market was about QE3 ? not the "if" of it, but the "when." Earlier this week, the OECD warned that even Canada ? yes, even Canada ? may have to cut rates if things in Europe worsen any further. In other words, central banks are being compelled to stimulate growth whether they want to or not, which is a position none of them appreciate much. This morning, let's talk about the specifics of the coordinated central bank action and the PBOC decision but we'll need to broaden the conversation quickly to include new expectations for quantitative easing in the U.S. and rate cuts in Canada. Will Canadians see lower borrowing costs before year-end?
Finance Minister Jim Flaherty is giving a speech this morning in New York City. We've sent a camera. We'll hear from him shortly.
Meanwhile, in Europe, finance ministers wrapped up a crucial meeting in which they agreed on detailed plans to leverage the European Financial Stability Fund (EFSF or bailing bucket) but could not say by how much because of rapidly deteriorating credit markets. In short, they agree that a lot more money needs to be thrown at the problem by the EFSF but they can't say where they'll get the dough, though the letters I, M and F have been heard in the carpeted halls of Brussels, whispered as if in prayer. Christian Noyer, France's central bank governor and a governing council member of the European Central Bank, presaged the global central bank actions today to an audience in Singapore, saying that "We are now looking at a true financial crisis ? that is a broad-based disruption in financial markets." European leaders get together for a summit on Dec. 9. That means 10 more days of rising funding costs for euro-zone economies and falling confidence in European banks.
Canada's main competition regulator says it has "serious concerns" about Maple Group's $3.7-billion acquisition of the TMX Group. It seems the proposed takeover of Canada's financial markets by Canada's biggest trading firms ? as well as the takeover of the primary clearing house as part of the deal ? has raised the antennae of someone in Ottawa. The TMX and Maple Group have responded by saying they will work with the regulator to address those concerns and perhaps identify possible "remedial measures," which, if I recall my own youth correctly, can range from standing in the hall to getting the strap from Ms. Murphy, the ex-nun with forearms like tree trunks. The announcement comes a day before hearings in Toronto before the OSC. Paul Bagnell has the file.
U.S. outplacement firm Challenger, Gray and Christmas said this morning that planned layoffs in the U.S. were virtually unchanged in November from the preceding month but were down 13 percent from a year earlier. This could provide a little more bullishness to expectations that this Friday's nonfarm payrolls report could exceed the average forecast of 120,000. Canadian jobs are due out Friday as well.
Industry Minister Christian Paradis didn't so much as drop the ball on issue of foreign investment in the Canadian telecom industry yesterday so much as take the European Gambit, or what's known as Kick the Can Down the Road. Admitting that the issue is very serious and of great importance to Canadian consumers and companies, he concluded that it is so important he won't make a decision on it anytime soon. Incumbents, investors, would-be entrants, consumers? they're all asking "what gives?" We need to provide some better answers.
Busy day for economics at home and abroad. We're watching Canadian GDP and home prices as well as the Chicago PMI, U.S. pending home sales, productivity and the ADP employment report.
Tuesday, November 29, 2011
AMR files for bankruptcy protection
The chase by Marty Cej:
Cyber Monday is a silly thing to say.
Thin on news, markets rallied yesterday on optimism that European authorities were finally shuffling their slippered feet towards a solution to their sovereign debt crisis and evidence that U.S. consumers continue to shop like, well, U.S. consumers. Today, we are spoiled for choice.
AMR, the parent company of American Airlines, filed for bankruptcy protection in a New York court. The airline is the last of the U.S. heavyweights to file for protection after managing to hold out through the financial crisis and the industry downturn in the wake of the September 11 terrorist attacks.
The company said it will continue to operate as usual as it reorganizes "to achieve a cost and debt structure that is competitive in the airline industry." While its competitors restructured their debt under bankruptcy protection, cut their costs and pension plans, American decided to gut it out and is now paying the price for deals it cut with employees a few years ago. Calls are out to principals and analysts. For some unique insight into the industry and how the filing could affect Canadian travelers, we'll sit down with Greg Saretsky, CEO of WestJet, at 3:10 pm Eastern.
In Europe, finance ministers meeting in Brussels today are tasked with doing the grunt work ahead of a meeting of European leaders on Dec. 9. Their work will include finalizing details of the enhanced bailout mechanism, or EFSF. German Chancellor Angela Merkel made clear again this morning that her priority is a rewriting of the relevant euro-zone treaties to impose tighter budget rules and greater oversight/influence on the ne'er do wells by the core countries (ahem, Germany, ahem).
In the meantime, the ECB, which is not allowed to backstop sovereign governments, found that it was unable to fully "sterilize" the 203.5 billion Euros of government bonds that it has purchased since May of last year to provide liquidity but not – it insists – not to backstop needy governments. Frances will try to explain the process to me on Business Day and says she will speak slowly and use hand gestures when I get confused.
Germany's biggest potash company, K+S Aktiengesellschaft, or Aktiengesellschaft for short, said it will spend $3.5 billion on developing its project in Saskatchewan and expects to be in production by 2015. Kristine Owram is on the story in the early going today and I would like to see our coverage expand to include the bigger picture of Saskatchewan being open for business.
Like, way open. Home prices in Regina are climbing, Saskatchewanionians (sp?) who went west in search of their fortunes are returning home to find them. I'd like to hear a little bit more about what is going on there and see whether lessons have been learned from the boom and bust cycles of a certain neighbour.
One story that has jumped out for me is Compton Petroleum. The company said late yesterday that President and CEO Tim Granger is stepping down. Oh, and Chief Operating Officer Shannon Ouellete will also be resigning. And let's see… oh, yes, Theresa Kosek, the CFO will also be departing the company. And David Horn, VP of business development, too. A few quarters ago, this company had a market cap of more than a billion dollars. Now it's a small cap. Brett Harris will take a look at this company's short and bumpy trip to the bottom.
Still in the oil patch, Nexen has given its 2012 production and expenditure forecasts this morning and announced a joint venture with Japan's Invex to develop its Horn River, Cordova and Liard basins in BC.
Industry Minister Christian Paradis was expected by some to announce changes to foreign investment rules in the telecom industry at a speech in Ottawa today but the Globe and Mail says not to hold your breath. The Globe also reports that the minister has cancelled meetings with telecom analysts in New York this week and could signal in his speech today that a decision on the rules may not be reached at all this year. The news will disappoint potential investors and competitors from abroad who have been waiting for an opportunity to enter the Canadian market. It will also disappoint the incumbents who have been asking for clarity.
Oh, and unnamed sources are telling The Wall Street Journal and Bloomberg that Facebook is getting closer to filing for a $10-billion IPO that would value the company at a whopping $100 billion. Me, I'd like to test that valuation against what we know about the company's growth, its revenue, profit, management and the market's appetite for new listings. The IPO would not take place until the spring, at the earliest, sources say.
Cyber Monday is a silly thing to say.
Thin on news, markets rallied yesterday on optimism that European authorities were finally shuffling their slippered feet towards a solution to their sovereign debt crisis and evidence that U.S. consumers continue to shop like, well, U.S. consumers. Today, we are spoiled for choice.
AMR, the parent company of American Airlines, filed for bankruptcy protection in a New York court. The airline is the last of the U.S. heavyweights to file for protection after managing to hold out through the financial crisis and the industry downturn in the wake of the September 11 terrorist attacks.
The company said it will continue to operate as usual as it reorganizes "to achieve a cost and debt structure that is competitive in the airline industry." While its competitors restructured their debt under bankruptcy protection, cut their costs and pension plans, American decided to gut it out and is now paying the price for deals it cut with employees a few years ago. Calls are out to principals and analysts. For some unique insight into the industry and how the filing could affect Canadian travelers, we'll sit down with Greg Saretsky, CEO of WestJet, at 3:10 pm Eastern.
In Europe, finance ministers meeting in Brussels today are tasked with doing the grunt work ahead of a meeting of European leaders on Dec. 9. Their work will include finalizing details of the enhanced bailout mechanism, or EFSF. German Chancellor Angela Merkel made clear again this morning that her priority is a rewriting of the relevant euro-zone treaties to impose tighter budget rules and greater oversight/influence on the ne'er do wells by the core countries (ahem, Germany, ahem).
In the meantime, the ECB, which is not allowed to backstop sovereign governments, found that it was unable to fully "sterilize" the 203.5 billion Euros of government bonds that it has purchased since May of last year to provide liquidity but not – it insists – not to backstop needy governments. Frances will try to explain the process to me on Business Day and says she will speak slowly and use hand gestures when I get confused.
Germany's biggest potash company, K+S Aktiengesellschaft, or Aktiengesellschaft for short, said it will spend $3.5 billion on developing its project in Saskatchewan and expects to be in production by 2015. Kristine Owram is on the story in the early going today and I would like to see our coverage expand to include the bigger picture of Saskatchewan being open for business.
Like, way open. Home prices in Regina are climbing, Saskatchewanionians (sp?) who went west in search of their fortunes are returning home to find them. I'd like to hear a little bit more about what is going on there and see whether lessons have been learned from the boom and bust cycles of a certain neighbour.
One story that has jumped out for me is Compton Petroleum. The company said late yesterday that President and CEO Tim Granger is stepping down. Oh, and Chief Operating Officer Shannon Ouellete will also be resigning. And let's see… oh, yes, Theresa Kosek, the CFO will also be departing the company. And David Horn, VP of business development, too. A few quarters ago, this company had a market cap of more than a billion dollars. Now it's a small cap. Brett Harris will take a look at this company's short and bumpy trip to the bottom.
Still in the oil patch, Nexen has given its 2012 production and expenditure forecasts this morning and announced a joint venture with Japan's Invex to develop its Horn River, Cordova and Liard basins in BC.
Industry Minister Christian Paradis was expected by some to announce changes to foreign investment rules in the telecom industry at a speech in Ottawa today but the Globe and Mail says not to hold your breath. The Globe also reports that the minister has cancelled meetings with telecom analysts in New York this week and could signal in his speech today that a decision on the rules may not be reached at all this year. The news will disappoint potential investors and competitors from abroad who have been waiting for an opportunity to enter the Canadian market. It will also disappoint the incumbents who have been asking for clarity.
Oh, and unnamed sources are telling The Wall Street Journal and Bloomberg that Facebook is getting closer to filing for a $10-billion IPO that would value the company at a whopping $100 billion. Me, I'd like to test that valuation against what we know about the company's growth, its revenue, profit, management and the market's appetite for new listings. The IPO would not take place until the spring, at the earliest, sources say.
Friday, November 18, 2011
Bankers Petroleum net income soars
14 November 2011 13:58pm
StockMarketWire.com - Bankers Petroleum's third quarter net income jumped by 363% to $13.7m in the three months to the end of September.
Oil revenues were up 22% at $93.6m with average production up 39% at 13,667 barrels per day while the average price rose by 60% to $74.48 per barrel.
Net income for the first nine months rose by 506% to $35.7m.
At 1:58pm: (LON:BNK) share price was +5p at 322.5p
Story provided by StockMarketWire.com
StockMarketWire.com - Bankers Petroleum's third quarter net income jumped by 363% to $13.7m in the three months to the end of September.
Oil revenues were up 22% at $93.6m with average production up 39% at 13,667 barrels per day while the average price rose by 60% to $74.48 per barrel.
Net income for the first nine months rose by 506% to $35.7m.
At 1:58pm: (LON:BNK) share price was +5p at 322.5p
Story provided by StockMarketWire.com
Monday, November 14, 2011
Bankers Petroleum Announces 2011 Third Quarter Results
Record Financial and Operational Quarter
CALGARY, Nov. 11, 2011 /CNW/ - Bankers Petroleum Ltd. ("Bankers" or the "Company") (TSX: BNK) (AIM: BNK) is pleased to provide its 2011 third quarter financial and operational results. The complete reporting package, consisting of Management's Discussion and Analysis along with Financial Statements and Notes, is posted on the Company's website www.bankerspetroleum.com and SEDAR: www.sedar.com.
Results at a Glance
(US$000, except as noted)(1) Three months ended
September 30 Nine months ended
September 30
2011 2010 Change 2011 2010 Change
Oil revenue 93,650 42,135 122% 251,570 119,431 111%
Net operating income 44,898 19,646 129% 131,976 55,638 137%
Net income 13,696 2,958 363% 35,715 5,895 506%
Per share - basic ($) 0.055 0.012 358% 0.145 0.025 480%
- diluted ($) 0.054 0.012 350% 0.140 0.024 483%
Funds generated from operations 42,601 16,308 161% 115,773 48,063 141%
Per share - basic ($) 0.172 0.067 157% 0.469 0.205 129%
Capital expenditures 65,147 27,456 137% 186,465 82,350 126%
Average production (bopd) 13,667 9,826 39% 12,578 9,318 35%
Average price ($/barrel) 74.48 46.61 60% 73.26 46.95 56%
Royalties 14.68 9.16 60% 13.18 9.37 41%
Operating expenses 13.78 10.40 33% 12.69 10.31 23%
Sales and transportation 10.31 5.31 94% 8.96 5.40 66%
Netback ($/barrel) 35.71 21.74 64% 38.43 21.87 76%
(1) Effective January 1, 2011, and retroactive to January 1, 2010, the Company adopted International Financial Reporting Standards (IFRS). Previously, the Company prepared its Financial Statements in accordance with Canadian Generally Accepted Accounting Principles (GAAP). The transition has not resulted in any material variation from prior periods. Full details on the transition adjustments are contained in the Notes to the Consolidated Interim Financial Statements.
Highlights for the quarter ended September 30, 2011 are:
Production averaged 13,667 bopd, an increase of 39% compared to the same period in 2010. Current production is 14,750 bopd.
In the third quarter of 2011, revenue increased by 10% to $93.7 million ($74.48/bbl) from $85.2 million ($77.03/bbl) in the previous quarter and by 122% from $42.1 million ($46.61/bbl) in the third quarter of 2010.
Net operating income (netback) was $44.9 million ($35.71/bbl) in the third quarter of 2011, compared to $47.2 million ($42.72/bbl) during the second quarter of 2011 and $19.6 million ($21.74/bbl) in the third quarter of 2010.
Funds generated from operations were $42.6 million in the third quarter of 2011 compared to $42.9 million in the second quarter of 2011 and $16.3 million in the third quarter of 2010.
During the third quarter of 2011, capital expenditures were $65.1 million. The Company drilled sixteen (16) horizontal wells, a vertical cored delineation well, two (2) thermal horizontal wells, and two (2) water disposal wells, as well as reactivated 19 wells in addition to other related infrastructure/expansion projects. During the same period of 2010, capital expenditures were $27.5 million.
New export market agreements for 2012 have been agreed at higher average price levels than the current year crude oil contracts. ARMO, the Albanian refinery, also agreed to purchase Patos-Marinza crude in 2012 for a significant realized average price increase from the current year contract. The 2012 pricing agreements represent an average 7% increase over the 2011 Patos-Marinza oil price.
The Company continues to maintain a strong financial position with cash of $53.2 million and working capital of $73.5 million at September 30, 2011. Working capital for December 31, 2010 and September 30, 2010 was $130.9 million and $138.8 million, respectively.
Operational Update
Current production at the Patos-Marinza oilfield is 14,750 bopd. This volume represents an 8% increase from third quarter production average. Four (4) of the ten (10) wells drilled and completed in the first five weeks of the fourth quarter targeted reserves and delineation drilling outside the main field. The Driza 1 formation outpost drilling to the west of the main field continues to demonstrate excellent cold flow production in this area of the concession with the last two wells producing at a current average rate of 160 bopd. In addition, the first Gorani 4 horizontal well has been drilled and is currently producing at a rate of 230 bopd. This well is located in the southern portion of Area 1 and extends into Area 2, a part of the field that to date had limited reactivation operations. A second Gorani 4 horizontal well is currently drilling further south in Area 2. Several more wells are scheduled to be drilled in this area.
Two of the existing drilling rigs recently encountered mechanical issues and have been since been repaired and put back into service after eighteen days of combined down-time, The fifth drilling rig has arrived at the Patos-Marinza field and is currently rigging up and will spud its first well in the next few days.
The first Block F exploration well is now scheduled to spud in January 2012 as soon as we can free one of the current rigs focused on incremental production and reserves assessment drilling and move it to the Block F exploration area.
Surface facilities construction has been completed for the thermal pilot program at the Patos-Marinza oilfield. Steam injection into the first horizontal well is projected to commence later this month in the Driza 1 sandstone. The reservoir simulation model is being updated with new core data information. The steam cycle is planned for a period of 60 days following which the well will undergo a soak period for several days before being placed on production and at that time steam injection in the second horizontal well will begin.
Outlook
Current year-end capital expenditures estimate remains at $215 million, net of capital inventory. The Company plans to drill an additional 18 wells before the end of this 2011, including 17 horizontal and one water disposal well. Exit production target is 16,000 bopd; while this rate represents the low case projection, it is a 33% increase from the 2010 exit rate. The Company expects to release its 2011 reserves updates in February 2012.
The 2012 work program and budget is being finalized and its details will be announced in December after receiving necessary board of directors and government approvals. Bankers' continues to hold a strong financial position of $53 million in cash and minimal long-term debt of $31 million with $80 million remaining available within current credit facilities. With Patos-Marinza crude sales agreements being based on Brent crude oil pricing, the Company anticipates a strong cash flow projection for next year and will be able to deliver its most active capital program in 2012.
For additional information, please see an updated version of the Company's corporate presentation on www.bankerspetroleum.com.
CALGARY, Nov. 11, 2011 /CNW/ - Bankers Petroleum Ltd. ("Bankers" or the "Company") (TSX: BNK) (AIM: BNK) is pleased to provide its 2011 third quarter financial and operational results. The complete reporting package, consisting of Management's Discussion and Analysis along with Financial Statements and Notes, is posted on the Company's website www.bankerspetroleum.com and SEDAR: www.sedar.com.
Results at a Glance
(US$000, except as noted)(1) Three months ended
September 30 Nine months ended
September 30
2011 2010 Change 2011 2010 Change
Oil revenue 93,650 42,135 122% 251,570 119,431 111%
Net operating income 44,898 19,646 129% 131,976 55,638 137%
Net income 13,696 2,958 363% 35,715 5,895 506%
Per share - basic ($) 0.055 0.012 358% 0.145 0.025 480%
- diluted ($) 0.054 0.012 350% 0.140 0.024 483%
Funds generated from operations 42,601 16,308 161% 115,773 48,063 141%
Per share - basic ($) 0.172 0.067 157% 0.469 0.205 129%
Capital expenditures 65,147 27,456 137% 186,465 82,350 126%
Average production (bopd) 13,667 9,826 39% 12,578 9,318 35%
Average price ($/barrel) 74.48 46.61 60% 73.26 46.95 56%
Royalties 14.68 9.16 60% 13.18 9.37 41%
Operating expenses 13.78 10.40 33% 12.69 10.31 23%
Sales and transportation 10.31 5.31 94% 8.96 5.40 66%
Netback ($/barrel) 35.71 21.74 64% 38.43 21.87 76%
(1) Effective January 1, 2011, and retroactive to January 1, 2010, the Company adopted International Financial Reporting Standards (IFRS). Previously, the Company prepared its Financial Statements in accordance with Canadian Generally Accepted Accounting Principles (GAAP). The transition has not resulted in any material variation from prior periods. Full details on the transition adjustments are contained in the Notes to the Consolidated Interim Financial Statements.
Highlights for the quarter ended September 30, 2011 are:
Production averaged 13,667 bopd, an increase of 39% compared to the same period in 2010. Current production is 14,750 bopd.
In the third quarter of 2011, revenue increased by 10% to $93.7 million ($74.48/bbl) from $85.2 million ($77.03/bbl) in the previous quarter and by 122% from $42.1 million ($46.61/bbl) in the third quarter of 2010.
Net operating income (netback) was $44.9 million ($35.71/bbl) in the third quarter of 2011, compared to $47.2 million ($42.72/bbl) during the second quarter of 2011 and $19.6 million ($21.74/bbl) in the third quarter of 2010.
Funds generated from operations were $42.6 million in the third quarter of 2011 compared to $42.9 million in the second quarter of 2011 and $16.3 million in the third quarter of 2010.
During the third quarter of 2011, capital expenditures were $65.1 million. The Company drilled sixteen (16) horizontal wells, a vertical cored delineation well, two (2) thermal horizontal wells, and two (2) water disposal wells, as well as reactivated 19 wells in addition to other related infrastructure/expansion projects. During the same period of 2010, capital expenditures were $27.5 million.
New export market agreements for 2012 have been agreed at higher average price levels than the current year crude oil contracts. ARMO, the Albanian refinery, also agreed to purchase Patos-Marinza crude in 2012 for a significant realized average price increase from the current year contract. The 2012 pricing agreements represent an average 7% increase over the 2011 Patos-Marinza oil price.
The Company continues to maintain a strong financial position with cash of $53.2 million and working capital of $73.5 million at September 30, 2011. Working capital for December 31, 2010 and September 30, 2010 was $130.9 million and $138.8 million, respectively.
Operational Update
Current production at the Patos-Marinza oilfield is 14,750 bopd. This volume represents an 8% increase from third quarter production average. Four (4) of the ten (10) wells drilled and completed in the first five weeks of the fourth quarter targeted reserves and delineation drilling outside the main field. The Driza 1 formation outpost drilling to the west of the main field continues to demonstrate excellent cold flow production in this area of the concession with the last two wells producing at a current average rate of 160 bopd. In addition, the first Gorani 4 horizontal well has been drilled and is currently producing at a rate of 230 bopd. This well is located in the southern portion of Area 1 and extends into Area 2, a part of the field that to date had limited reactivation operations. A second Gorani 4 horizontal well is currently drilling further south in Area 2. Several more wells are scheduled to be drilled in this area.
Two of the existing drilling rigs recently encountered mechanical issues and have been since been repaired and put back into service after eighteen days of combined down-time, The fifth drilling rig has arrived at the Patos-Marinza field and is currently rigging up and will spud its first well in the next few days.
The first Block F exploration well is now scheduled to spud in January 2012 as soon as we can free one of the current rigs focused on incremental production and reserves assessment drilling and move it to the Block F exploration area.
Surface facilities construction has been completed for the thermal pilot program at the Patos-Marinza oilfield. Steam injection into the first horizontal well is projected to commence later this month in the Driza 1 sandstone. The reservoir simulation model is being updated with new core data information. The steam cycle is planned for a period of 60 days following which the well will undergo a soak period for several days before being placed on production and at that time steam injection in the second horizontal well will begin.
Outlook
Current year-end capital expenditures estimate remains at $215 million, net of capital inventory. The Company plans to drill an additional 18 wells before the end of this 2011, including 17 horizontal and one water disposal well. Exit production target is 16,000 bopd; while this rate represents the low case projection, it is a 33% increase from the 2010 exit rate. The Company expects to release its 2011 reserves updates in February 2012.
The 2012 work program and budget is being finalized and its details will be announced in December after receiving necessary board of directors and government approvals. Bankers' continues to hold a strong financial position of $53 million in cash and minimal long-term debt of $31 million with $80 million remaining available within current credit facilities. With Patos-Marinza crude sales agreements being based on Brent crude oil pricing, the Company anticipates a strong cash flow projection for next year and will be able to deliver its most active capital program in 2012.
For additional information, please see an updated version of the Company's corporate presentation on www.bankerspetroleum.com.
Saturday, November 12, 2011
Friday, November 11, 2011
Keystone XL aftermath
The chase by Marty Cej:
"Hi, Kettle? Yeah, it's me, Pot. How are you? Me? Oh, I'm good, good. Just great, yeah, thanks. Anyhow…" The White House has been clear in its criticism of Europe's handling of the sovereign debt crisis, condemning the lack of leadership and will necessary to overcome the morass of local politics to find a lasting solution to a long-term systematic problem. Yesterday, with nary a wink or a nod, the White House said it would delay the permitting of the proposed Keystone XL pipeline until, ummmm, lemme check the ol' calendar here, ummm, yep, we'll put 'er on hold till after the 2012 election. Officially, the U.S. State Department's decision is meant to give the Obama administration more time to assess and analyze the impact of the pipeline on the "health and safety of the American people as well as the environment." Fine. Obama arrived at the White House with a promise to "free America from the tyranny of oil" so the decision is not necessarily out of left field. The guy is in a bind 'cause he's way behind and he's willing to make a deal. Unfortunately, while the battle for the White House rages over the next 12 months or so, American energy consumption habits are unlikely to change. So where to next? Let's talk angles…
TransCanada: How can the company overcome domestic politics to get this project done? How important is the project to the company's future? What does the company's growth strategy look like over the next 12 months in the absence of Keystone progress? What does the growth strategy look like without any Keystone at all? This is a terrific opportunity to get inside a company and see how it ticks.
TransCanada, the stock: Scotiabank says the stock still doesn't reflect the value of the Keystone XL project and reiterated its "outperform" rating. CIBC sees $2-$3 per share downside if the project is denied outright but thinks the pipeline will be approved eventually. CIBC rates the stock a "market perform." RBC is cutting its 2013 EPS estimate but still rates the stock "outperform." Let's make sure viewers get the full range of investment opinions from the Street.
Politics: a friend reminded me yesterday that policy doesn't matter to business until it does. Suddenly, policy matters. What are the next steps for Alberta's new premier? She's off to Washington with a burr under her saddle, but will it matter? What can Ottawa do? What should it do?
Alberta: What does the oil patch think of the decision? What does it do to the mood in Calgary? Edmonton? Fort Mac? Calgary Bureau Chief Brett Harris has the lead on this compelling story. Please keep him informed of any outstanding chases and new opinions.
Speaking of getting inside a company, Howard Green sits down at 1:00 with Michael McCain, CEO of Maple Leaf Foods, to talk about leadership during times of crisis and uncertainty. This is one that every manager and aspiring manager should tune in for.
We'll also sit down with the CFO of Canadian Tire, Marco Marrone, at 9:10 am Eastern. There are few companies with a better read on the Canadian consumer than this one. The company topped expectations with its earnings yesterday and raised its dividend. We'll find out whether that is a vote of confidence in the consumer.
Turning to Europe, well, you know the story. We continue to monitor developments and will report and progress and all the setbacks as they arise.
Today is also National Metal Day, by the way, and also marks Black Sabbath's first ever U.S. gig in 1970 at the Whisky A Go-Go in LA.
"Hi, Kettle? Yeah, it's me, Pot. How are you? Me? Oh, I'm good, good. Just great, yeah, thanks. Anyhow…" The White House has been clear in its criticism of Europe's handling of the sovereign debt crisis, condemning the lack of leadership and will necessary to overcome the morass of local politics to find a lasting solution to a long-term systematic problem. Yesterday, with nary a wink or a nod, the White House said it would delay the permitting of the proposed Keystone XL pipeline until, ummmm, lemme check the ol' calendar here, ummm, yep, we'll put 'er on hold till after the 2012 election. Officially, the U.S. State Department's decision is meant to give the Obama administration more time to assess and analyze the impact of the pipeline on the "health and safety of the American people as well as the environment." Fine. Obama arrived at the White House with a promise to "free America from the tyranny of oil" so the decision is not necessarily out of left field. The guy is in a bind 'cause he's way behind and he's willing to make a deal. Unfortunately, while the battle for the White House rages over the next 12 months or so, American energy consumption habits are unlikely to change. So where to next? Let's talk angles…
TransCanada: How can the company overcome domestic politics to get this project done? How important is the project to the company's future? What does the company's growth strategy look like over the next 12 months in the absence of Keystone progress? What does the growth strategy look like without any Keystone at all? This is a terrific opportunity to get inside a company and see how it ticks.
TransCanada, the stock: Scotiabank says the stock still doesn't reflect the value of the Keystone XL project and reiterated its "outperform" rating. CIBC sees $2-$3 per share downside if the project is denied outright but thinks the pipeline will be approved eventually. CIBC rates the stock a "market perform." RBC is cutting its 2013 EPS estimate but still rates the stock "outperform." Let's make sure viewers get the full range of investment opinions from the Street.
Politics: a friend reminded me yesterday that policy doesn't matter to business until it does. Suddenly, policy matters. What are the next steps for Alberta's new premier? She's off to Washington with a burr under her saddle, but will it matter? What can Ottawa do? What should it do?
Alberta: What does the oil patch think of the decision? What does it do to the mood in Calgary? Edmonton? Fort Mac? Calgary Bureau Chief Brett Harris has the lead on this compelling story. Please keep him informed of any outstanding chases and new opinions.
Speaking of getting inside a company, Howard Green sits down at 1:00 with Michael McCain, CEO of Maple Leaf Foods, to talk about leadership during times of crisis and uncertainty. This is one that every manager and aspiring manager should tune in for.
We'll also sit down with the CFO of Canadian Tire, Marco Marrone, at 9:10 am Eastern. There are few companies with a better read on the Canadian consumer than this one. The company topped expectations with its earnings yesterday and raised its dividend. We'll find out whether that is a vote of confidence in the consumer.
Turning to Europe, well, you know the story. We continue to monitor developments and will report and progress and all the setbacks as they arise.
Today is also National Metal Day, by the way, and also marks Black Sabbath's first ever U.S. gig in 1970 at the Whisky A Go-Go in LA.
Wednesday, November 9, 2011
Canada gets taste of European debt crisis
The chase by Marty Cej:
A direct line between events in Europe and Canada was brought into clear focus yesterday when Finance Minister Jim Flaherty cut his projections for government revenue and moved out his target date for balancing the budget. All told, Flaherty slashed $53 billion from his revenue estimates between 2011 and 2016 due to slowing global growth and rising financial risks. Many investors appear to agree with the minister's gloomier outlook this morning as stock markets across Europe shed billions of dollars in value and bond yields in Italy -- the world's third-biggest bond market -- surged 66 basis points to 7.38 percent. A few moments ago, British Prime Minister David Cameron said Italy's cost for borrowing money had jumped to "a totally unsustainable level." He implored Europe's leaders -- again -- to get their act together and provide details of how they planned on preventing the contagion from spreading even further. At present, Greece has failed to announce a new leader, Italy's Berlusconi has said he will resign once new austerity measures are approved but there is no certainty as to who will step into the PM role; the ECB is adamant that it will not be the lender of last resort (it says so right there in the ECB's mandate), no one wants to buy EFSF bonds and the IMF wants to get back into the business of helping developing nations rather than saving profligate developed ones. Apart from that, we're good.
A large part of our mandate is to ensure Canadians understand precisely where we are in the economic cycle, to analyze countless data sources on global economic activity, recognize changing global dynamics and unpredictable politics (opa!) and to bring it home in a form that is comprehensive, understandable and, hopefully, can yield some benefit to viewers in their financial decisions. Finance Minister Flaherty said yesterday that his new forecasts provide a "cushion" for Canada in a worsening global economic environment. We need to press harder today on whether that cushion will be sufficient, whether events in Europe are accelerating beyond the combined resources of the ECB, EU and IMF to slow down. France's two largest banks, for example, have a combined exposure of $416.4 billion to Italian public debt. How much more of a hit can France's big banks take from plunging bond holdings? How long will they continue to lend when their capital is crumbling? If credit freezes up in Europe, what will that mean for U.S. and Asian exporters and, by a short extension, Canada's exports to the U.S. and Asia? Like Willie Dixon said, bring it on home.
With Italy, let's talk about the most likely scenarios. Centre-Right coalition? The centrists say "bah!" and Berlusconi's party goes looking for new friends that results in some technocrats in charge? General elections are called? In any event, the next stage will take weeks to unfold and investors will be left having to make some tough decisions in a vacuum. Did I mention that Greece cannot agree on who will lead that country?
I admit that it is with relief that I turn to Canadian and U.S. earnings, which continue to top most expectations. GM, for example, reported a profit of $1.7 billion US, or $1.03 a share in the third quarter, topping the 94 cent average expectation. Also on our radar today is WestJet, Shoppers Drug Mart, IAMgold. Silver Wheaton, Saputo, Enbridge, Onex, RONA, LionsGate, Quebecor, PetroBakken and Wi-Lan. Macy's, too.
RONA CFO Dominique Boies joins us at 2:10 p.m. ET while Pat Daniels, the CEO of Enbridge, sits down with BNN at 4:00 p.m.
A direct line between events in Europe and Canada was brought into clear focus yesterday when Finance Minister Jim Flaherty cut his projections for government revenue and moved out his target date for balancing the budget. All told, Flaherty slashed $53 billion from his revenue estimates between 2011 and 2016 due to slowing global growth and rising financial risks. Many investors appear to agree with the minister's gloomier outlook this morning as stock markets across Europe shed billions of dollars in value and bond yields in Italy -- the world's third-biggest bond market -- surged 66 basis points to 7.38 percent. A few moments ago, British Prime Minister David Cameron said Italy's cost for borrowing money had jumped to "a totally unsustainable level." He implored Europe's leaders -- again -- to get their act together and provide details of how they planned on preventing the contagion from spreading even further. At present, Greece has failed to announce a new leader, Italy's Berlusconi has said he will resign once new austerity measures are approved but there is no certainty as to who will step into the PM role; the ECB is adamant that it will not be the lender of last resort (it says so right there in the ECB's mandate), no one wants to buy EFSF bonds and the IMF wants to get back into the business of helping developing nations rather than saving profligate developed ones. Apart from that, we're good.
A large part of our mandate is to ensure Canadians understand precisely where we are in the economic cycle, to analyze countless data sources on global economic activity, recognize changing global dynamics and unpredictable politics (opa!) and to bring it home in a form that is comprehensive, understandable and, hopefully, can yield some benefit to viewers in their financial decisions. Finance Minister Flaherty said yesterday that his new forecasts provide a "cushion" for Canada in a worsening global economic environment. We need to press harder today on whether that cushion will be sufficient, whether events in Europe are accelerating beyond the combined resources of the ECB, EU and IMF to slow down. France's two largest banks, for example, have a combined exposure of $416.4 billion to Italian public debt. How much more of a hit can France's big banks take from plunging bond holdings? How long will they continue to lend when their capital is crumbling? If credit freezes up in Europe, what will that mean for U.S. and Asian exporters and, by a short extension, Canada's exports to the U.S. and Asia? Like Willie Dixon said, bring it on home.
With Italy, let's talk about the most likely scenarios. Centre-Right coalition? The centrists say "bah!" and Berlusconi's party goes looking for new friends that results in some technocrats in charge? General elections are called? In any event, the next stage will take weeks to unfold and investors will be left having to make some tough decisions in a vacuum. Did I mention that Greece cannot agree on who will lead that country?
I admit that it is with relief that I turn to Canadian and U.S. earnings, which continue to top most expectations. GM, for example, reported a profit of $1.7 billion US, or $1.03 a share in the third quarter, topping the 94 cent average expectation. Also on our radar today is WestJet, Shoppers Drug Mart, IAMgold. Silver Wheaton, Saputo, Enbridge, Onex, RONA, LionsGate, Quebecor, PetroBakken and Wi-Lan. Macy's, too.
RONA CFO Dominique Boies joins us at 2:10 p.m. ET while Pat Daniels, the CEO of Enbridge, sits down with BNN at 4:00 p.m.
Markets Yawn...then drop at Resignation of Italy's Prime Minister Silvio Berlusconi's
By Barry Moody
ROME (Reuters) - Prime Minister Silvio Berlusconi's pledge to resign after implementing economic reforms did nothing on Wednesday to staunch a perilous collapse in market confidence in Italy.
Financial markets have been clamoring for weeks for Berlusconi to depart because of his failure to push through painful austerity measures.
But after Berlusconi's announcement on Tuesday that he would step down, there were few signs of the swift appointment of a government capable of supervising reforms. Berlusconi said he expected an election would not take place until early 2012.
Yields on 10-year Italian debt soared above what is seen as the 'red line' of 7 percent and spreads between Italian government paper and German bunds also rose over another watershed of 500 basis points, reaching a record of above 560.
Analysts said Italy was now in territory where Greece, Ireland and Portugal were forced to seek bailouts.
Berlusconi said he envisaged an election taking place at the start of February, and that PDL party secretary and former justice minister Angelino Alfano would be the center-right's candidate for prime minister.
"I will resign as soon as the (budget) law is passed and, since I believe there is no other majority possible, I see elections being held at the beginning of February and I will not be a candidate in them," he told La Stampa newspaper.
Italy is at the eye of the euro zone debt storm because, as the region's third largest economy, it is viewed as too big to bail out. Its travails therefore pose a threat to the survival of the single currency.
ROME (Reuters) - Prime Minister Silvio Berlusconi's pledge to resign after implementing economic reforms did nothing on Wednesday to staunch a perilous collapse in market confidence in Italy.
Financial markets have been clamoring for weeks for Berlusconi to depart because of his failure to push through painful austerity measures.
But after Berlusconi's announcement on Tuesday that he would step down, there were few signs of the swift appointment of a government capable of supervising reforms. Berlusconi said he expected an election would not take place until early 2012.
Yields on 10-year Italian debt soared above what is seen as the 'red line' of 7 percent and spreads between Italian government paper and German bunds also rose over another watershed of 500 basis points, reaching a record of above 560.
Analysts said Italy was now in territory where Greece, Ireland and Portugal were forced to seek bailouts.
Berlusconi said he envisaged an election taking place at the start of February, and that PDL party secretary and former justice minister Angelino Alfano would be the center-right's candidate for prime minister.
"I will resign as soon as the (budget) law is passed and, since I believe there is no other majority possible, I see elections being held at the beginning of February and I will not be a candidate in them," he told La Stampa newspaper.
Italy is at the eye of the euro zone debt storm because, as the region's third largest economy, it is viewed as too big to bail out. Its travails therefore pose a threat to the survival of the single currency.
Tuesday, November 8, 2011
Shares of Bankers Petroleum Receive a Boost, Up 8.4%
Published on Thu, 10/27/2011 - 10:16
By Robert Cotter in Market movers, BNKJF, bankers petroleum, market movers, nasdaq:bnkjf
One of today's stocks on the move is Bankers Petroleum (NASDAQ:BNKJF), up 8.4% to $5.45. The S&P is currently trading 2.2% higher to 1,269 and the Dow Jones Industrial Average is trading 2.1% higher to 12,101.
In the past 52 weeks, Bankers Petroleum share prices have been bracketed by a low of $2.84 and a high of $10.15 and are now at $5.45, 92% above that low price. Over the last five market days, the 200-day moving average (MA) has gone down 0.5% while the 50-day MA has advanced 0.2%.
Bankers Petroleum (NASDAQ:BNKJF) has potential upside of 65.2% based on a current price of $5.45 and analysts' consensus price target of $9.00. The stock should find resistance at its 200-day moving average (MA) of $7.05, as well as support at its 50-day MA of $4.36.
Bankers Petroleum Ltd. is an oil and gas exploration and production company. The Company has a working interest in the Patos-Marinza oil field in Albania.
By Robert Cotter
By Robert Cotter in Market movers, BNKJF, bankers petroleum, market movers, nasdaq:bnkjf
One of today's stocks on the move is Bankers Petroleum (NASDAQ:BNKJF), up 8.4% to $5.45. The S&P is currently trading 2.2% higher to 1,269 and the Dow Jones Industrial Average is trading 2.1% higher to 12,101.
In the past 52 weeks, Bankers Petroleum share prices have been bracketed by a low of $2.84 and a high of $10.15 and are now at $5.45, 92% above that low price. Over the last five market days, the 200-day moving average (MA) has gone down 0.5% while the 50-day MA has advanced 0.2%.
Bankers Petroleum (NASDAQ:BNKJF) has potential upside of 65.2% based on a current price of $5.45 and analysts' consensus price target of $9.00. The stock should find resistance at its 200-day moving average (MA) of $7.05, as well as support at its 50-day MA of $4.36.
Bankers Petroleum Ltd. is an oil and gas exploration and production company. The Company has a working interest in the Patos-Marinza oil field in Albania.
By Robert Cotter
Sunday, November 6, 2011
Ivan Lo Says...Gold Will Run Thru $2000.00 Per Oz
Unless you truly believe the world's financial system is coming to an end, then investing in the markets shouldn't keep you up at night - not yet anyway.
As predicted, gold is continuing to climb and I believe that we're about to see a breakout past $2000 very soon. The gold majors are climbing and the The Market Vectors Gold Miners ETF (GDX) is up another 3% this week, while the Market Vectors Junior Gold Miners ETF (GDXJ) is up another one and a half percent.
As gold continues to climb, you can bet the majors will follow suit as record earnings and cash flows steal the spotlight from the Groupons of the market.
We all know the big names: Goldcorp, Barrick Gold, Newmont, Freeport, Kinross, Eldorado, Yamana...
All of these big names should do well as gold inches closer to $2000 and beyond. But while these companies can give us strong returns in a volatile market - as they have done in the past few months - the major upside still remains in the junior sector.
The biggest risk in the junior mining industry is the need to explore in order to find and define an economic resource on which a mining project can be built.
Most risk capital is lost in the ground. A study by Mackenzie and Bilodeau (1984) found that in the period from 1955 to 1978 a total of $1.6 billion had been spent on exploration (excluding oil and gas) with thousands of mineral occurrences discovered. However only 43 of these discoveries were considered to be economic, with even fewer ultimately being developed. That means an average finding cost of $38 million (1984 dollars) is required per deposit. Adjusted for inflation, this number would be over $100 million.
There's no doubt that our markets are still in turbulent times. If you look at history and think toward the future, commodities and the stock market will always be at the forefront of our economic growth. Not only do we need commodities to grow, we need commodities to survive and we need the stock market to fund those opportunities.
Despite the volatility we have experienced, there are still many opportunities in the market - especially in the juniors. Don't forget that an insurmountable of funds were raised in the mining sector even when our stock market was at its lowest point this year and investors were scrambling to turn paper into cash.
But how do you know what projects are good enough for your investment?
The majority of us aren't geologists, so for us to completely interpret or truly understand everything in an NI 43-101 report is difficult. Even today, the majority of geologists still have a hard time putting a resource together or moving a project from a resource to the feasibility stage. It takes some very special people in this industry to know where to drill and it takes even more special people to know how to put it together.
So while we'll never learn everything, it certainly helps to learn the basics. Over the next few months, I'll go over in more detail how to read 43-101's, how to assess certain projects, and how to understand drill results in much greater detail.
For now, let's get started with the basics.
Mining Methods
There are many methods of mining but the one most widely used thus far has been open pit mining. It accounts for more than 80% of mines in the United States.
Open pit/cast/cut or surface mining is a method of extracting ore or mineralization that is found very close to the surface, with a sufficient quantity of ore within a close proximity to make it economically viable to extract.
Think of it as digging a large hole in the ground.
Depending on the geometry and depth of the ore body, open pit mining is generally by far the most economical method of extraction for the recovery of low grade (1g/t up to around 3-4g/t for gold) finely disseminated ore. Ore is simply the naturally occurring concentration of minerals.
The advantage of open pit mining, as opposed to underground, is that it is usually easier, cheaper and quicker to bring into production but generally relies on a larger resource base due to economical and social reasons. You're digging a big hole in the ground - it better be worth it.
For example, underground gold mines usually require at least 4-10g/t (grams per tonne) of gold to be considered economically viable (dependant on a lot of factors such as country of origin and geophysical locations.)
If you have invested in any mining company, you will have heard the term cut-off grade. Cut-off grade is the minimum metal grade at which a tonne of rock can be processed on an economic basis and determines the workable tonnage of an ore. In Canada, resource calculations under the 43-101 standard will always include the cut-off grade. (I will go into more detail regarding this extremely important factor in a future letter.)
Companies determine what it costs per ton of material mined and what the ore values is going to be from that tonne. From this, they can determine how much each ounce of gold will cost to mine. For example, in South Africa, the cost to mine is generally between $300-$400 per ounce of gold. At today's current gold price, that is a very profitable operation - and a reason why companies in this region do really well.
However, even with a strong resource, you still have to factor in the size of the mine and what it costs to put the mine into production. Even if you have a small resource that costs less than $400/oz to mine, there is a great chance that financiers may not find the project large enough for their appetite, and thus the mine will not go into production - even at today's high prices.
Let's not forget that you still need approval from the government to proceed. They won't let you pollute their land and water without adequate and substantial economic benefit.
In short, a mine that appears feasible by the numbers may still not go into production - so don't expect every company with a promising NI 43-101 resource to get there.
Before full on production can take place, there are many costly steps involved with bringing a mine into production, even if it is open pit. You have to identify the resource through various sampling methods, determine cut-off grades, and conduct a full on feasibility study before you can even come close to production.
Some key points to focus on (in most cases) include:
High Grade Levels - the higher the grade level of ore, the better the project
Cut-Off Grades, Low vs. High - Cut-off grades are essential to determining the economic feasibility and mine life of a project. Increased cut-off grades can reduce political risks by ensuring higher financial returns over a shorter period of time. Conversely, lower cut-off grades may increase project life with longer economic benefits to shareholders, employees, and local communities. In short, a low cut-off grade does not mean a poor project.
Easy Access - having easy access to infrastructure including water, electricity, and work force cuts down project costs significantly
Proximity to Producing Mines - the closer the proximity to a producer, the less the infrastructure costs may be
Indicated and Inferred in NI 43-101's - Indicated estimate has a higher confidence level that such resources exists by estimating from sampling at places spaced closely enough that its continuity can be reasonably assumed. Inferred estimate is an estimate of resource whose size and grade have been estimated mainly or wholly from limited sampling data, assuming that the mineralized body is continuous and thus less confidence is placed on the data
Never Rely on Estimates Alone - both indicated and inferred resource estimates in NI 43-101's DOES NOT factor in the feasibility of its resources
Place of Operation - a great resource is one thing, but a resource located in an unstable country with an unstable government can spell disaster
Access to Capital - a well funded company usually means other professionals not only have done their research but believe in the project
Great Management Team - a project can be great but ultimately, a management has to be able to execute
Mineable mineral deposits are rare and to bring a deposit into profitable production is even more so. The chances of bringing a raw prospect into production have been estimated at one in 5,000 to 10,000. That's why there are many instances in which mining companies have revived old prospects and drilled just one more time before a discovery was made.
The great news is that with recent technological advances and the continual growth of resource prices, many projects with low grade ores and past producers are now becoming more economically viable.
Yet, few mining companies have the financial resources to delineate ore reserves too far into the future, which is why the big guns, such as Barrick, continually seek out and invest in other gold juniors to increase their reserves. This is yet another reason why a junior with a nearby producer has a much higher chance of going into production because the costs of production are often too high for a junior to fund by themselves. Economies of scale is a big asset in the mining industry; the ability to use someone else's tailings dam or processing mill can save a junior millions.
Feasibility Studies
There is a common misconception surrounding feasibility studies. We know they're important but their significance is commonly misconstrued. Make one mistake or skip one step of the process and it can have detrimental effects on a mining project.
A mining feasibility study, in short, is an evaluation of a proposed mining project to determine if the mineral resource can be mined economically. But there are many stages of this process before the actual feasibility study or report is finalized.
First off, there are three main feasibility studies: the scoping study, preliminary feasibility and detailed feasibility.
The first one is the order of magnitude, conceptual or what we investors generally call it, a scoping study or Preliminary Economic Assessment (PEA)
Scoping Study or PEA
This first step in the feasibility process is the initial financial appraisal of an indicated mineral resource. This study usually begins once a sufficient level of drilling and sampling to define a resource has been completed, such as a NI 43-101 in Canada. Scoping studies are developed by copying plans and factoring known costs from industry standards and comparable historical data.
It involves a preliminary mine plan, and is the basis for determining whether or not to proceed with an exploration program, and more detailed engineering work.
The end result of the study is a description of the general features and parameters of the project and an order of magnitude estimate of capital and operating costs. A study of this level is valid to determine whether a project is worth pursuing further but not enough data has been collected for reserve definition. This study is generally 35 -50% accurate.
Don't mistake the term mineral reserves for mineral resources.
Mineral resource is a guess of what's in the ground such as the indicated and inferred resources found in NI 43-101's. Mineral reserve, on the other hand, is the resource known to be economically feasible for extraction. Few projects survive this part of the study.
The next stage after this is the preliminary feasibility study or "prefeasibility study."
Prefeasibility Study
This study determines the mining and milling extraction methods and rates, the product recoveries, environmental and permitting issues, and preliminary capital and operating cost estimates. It also determines whether or not to proceed with a detailed feasibility study, which is very costly.
As part of this process, areas of concern that need further research during the feasibility stage need to be identified. These areas often include geotechnical studies for mine, waste dumps, and tailings facilities design, metallurgical testing for refining estimates of product recoveries, and waste characterization studies. Identifying these items at this stage can avoid costly delays during the feasibility stage - any additional delays and costs can be detrimental to a project which often translates to shareholders directly. Added costs mean further funding may be required and could add further dilution to shareholders.
Depending upon the level of detail in these studies, and the securities exchange that is involved, reserves can, in some cases, be declared at this point.
This preliminary feasibility study is usually 20-30% accurate and only 50% of the companies that go through this stage pass onto the final stage of the feasibility study or what many call the "bankable" study.
Bankable Feasibility
Detailed or "bankable" feasibility studies are the most detailed and usually determines whether or not to proceed with the project. General industry standards of this study results in estimates that are within 15 percent accurate.
In essence, this stage is simply a refinement of the pre-feasibility study, which evolved from the scoping study. Key components in the feasibility study are the mine design, production schedule, a detailed process flow sheet, product recoveries, a detailed plant design, consideration of the environmental issues, detailed capital and operating costs estimates, and an economic model of the project. Each of these components is EXTREMELY important.
If a company can make it this far and is feasible after this stage, they can generally take this study to the "bank" for financing purposes.
At this point there is sufficient information to declare reserves, provided the project has positive economics and is noted as bankable. However investors always seem to forget that "bankable" describes only the level of accuracy of the analysis and not necessarily the outcome of the project.
As I said, just because a project is feasible, doesn't mean it will get the go ahead for production. Just because a feasible project can make money, the return on investment may not be enough for the company to advance the project.
For example, the profit from the mine may be $100 million but it may cost $95 million to build it out. So is it feasible? Yes. But does it make sense to spend $100 million to make $5 million? I doubt it.
If the benefits do not significantly outweigh the costs, not only may the government deny you permits, but your financiers may pull out.
At this feasibility level, roughly 20% of the companies will fail, and of these most fail as a result of either overly optimistic assumptions or skipped steps. For this step to be successful, the scoping study and the pre-feasibility study must be conducted at reasonable estimates; many companies will conduct more than one scoping study to ensure the accuracy of the data.
I have seen companies shell out a lot more cash and time than they needed to once they hit this stage because they over emphasized their scoping and pre-feasibility studies.
A great emphasis needs to be placed on each and every step with new rules and regulations constantly changing the way feasibilities are done (welcome to the world of regulation).
While much of what I covered this week seems simple, it is imperative that investors in the mining sector have a basic concept of why they're investing in certain companies.
While I am continuing to buy majors such as Barrick, Eldorado, or Kinross as a way to play the gold boom, the same cannot be said about investing in gold juniors - especially not in this market.
In this market, capital will be fuelled into projects that have a high hope of success - not just a play on some overly promoted drill results. That's what you may see the price of gold go up, yet the price of your gold junior still lags. But eventually that will change.
Over the coming weeks, I'll be going into more depth and discussion surrounding mining valuation and presenting new ideas to play with.
ntil next week,
Ivan Lo
Equedia Weekly
As predicted, gold is continuing to climb and I believe that we're about to see a breakout past $2000 very soon. The gold majors are climbing and the The Market Vectors Gold Miners ETF (GDX) is up another 3% this week, while the Market Vectors Junior Gold Miners ETF (GDXJ) is up another one and a half percent.
As gold continues to climb, you can bet the majors will follow suit as record earnings and cash flows steal the spotlight from the Groupons of the market.
We all know the big names: Goldcorp, Barrick Gold, Newmont, Freeport, Kinross, Eldorado, Yamana...
All of these big names should do well as gold inches closer to $2000 and beyond. But while these companies can give us strong returns in a volatile market - as they have done in the past few months - the major upside still remains in the junior sector.
The biggest risk in the junior mining industry is the need to explore in order to find and define an economic resource on which a mining project can be built.
Most risk capital is lost in the ground. A study by Mackenzie and Bilodeau (1984) found that in the period from 1955 to 1978 a total of $1.6 billion had been spent on exploration (excluding oil and gas) with thousands of mineral occurrences discovered. However only 43 of these discoveries were considered to be economic, with even fewer ultimately being developed. That means an average finding cost of $38 million (1984 dollars) is required per deposit. Adjusted for inflation, this number would be over $100 million.
There's no doubt that our markets are still in turbulent times. If you look at history and think toward the future, commodities and the stock market will always be at the forefront of our economic growth. Not only do we need commodities to grow, we need commodities to survive and we need the stock market to fund those opportunities.
Despite the volatility we have experienced, there are still many opportunities in the market - especially in the juniors. Don't forget that an insurmountable of funds were raised in the mining sector even when our stock market was at its lowest point this year and investors were scrambling to turn paper into cash.
But how do you know what projects are good enough for your investment?
The majority of us aren't geologists, so for us to completely interpret or truly understand everything in an NI 43-101 report is difficult. Even today, the majority of geologists still have a hard time putting a resource together or moving a project from a resource to the feasibility stage. It takes some very special people in this industry to know where to drill and it takes even more special people to know how to put it together.
So while we'll never learn everything, it certainly helps to learn the basics. Over the next few months, I'll go over in more detail how to read 43-101's, how to assess certain projects, and how to understand drill results in much greater detail.
For now, let's get started with the basics.
Mining Methods
There are many methods of mining but the one most widely used thus far has been open pit mining. It accounts for more than 80% of mines in the United States.
Open pit/cast/cut or surface mining is a method of extracting ore or mineralization that is found very close to the surface, with a sufficient quantity of ore within a close proximity to make it economically viable to extract.
Think of it as digging a large hole in the ground.
Depending on the geometry and depth of the ore body, open pit mining is generally by far the most economical method of extraction for the recovery of low grade (1g/t up to around 3-4g/t for gold) finely disseminated ore. Ore is simply the naturally occurring concentration of minerals.
The advantage of open pit mining, as opposed to underground, is that it is usually easier, cheaper and quicker to bring into production but generally relies on a larger resource base due to economical and social reasons. You're digging a big hole in the ground - it better be worth it.
For example, underground gold mines usually require at least 4-10g/t (grams per tonne) of gold to be considered economically viable (dependant on a lot of factors such as country of origin and geophysical locations.)
If you have invested in any mining company, you will have heard the term cut-off grade. Cut-off grade is the minimum metal grade at which a tonne of rock can be processed on an economic basis and determines the workable tonnage of an ore. In Canada, resource calculations under the 43-101 standard will always include the cut-off grade. (I will go into more detail regarding this extremely important factor in a future letter.)
Companies determine what it costs per ton of material mined and what the ore values is going to be from that tonne. From this, they can determine how much each ounce of gold will cost to mine. For example, in South Africa, the cost to mine is generally between $300-$400 per ounce of gold. At today's current gold price, that is a very profitable operation - and a reason why companies in this region do really well.
However, even with a strong resource, you still have to factor in the size of the mine and what it costs to put the mine into production. Even if you have a small resource that costs less than $400/oz to mine, there is a great chance that financiers may not find the project large enough for their appetite, and thus the mine will not go into production - even at today's high prices.
Let's not forget that you still need approval from the government to proceed. They won't let you pollute their land and water without adequate and substantial economic benefit.
In short, a mine that appears feasible by the numbers may still not go into production - so don't expect every company with a promising NI 43-101 resource to get there.
Before full on production can take place, there are many costly steps involved with bringing a mine into production, even if it is open pit. You have to identify the resource through various sampling methods, determine cut-off grades, and conduct a full on feasibility study before you can even come close to production.
Some key points to focus on (in most cases) include:
High Grade Levels - the higher the grade level of ore, the better the project
Cut-Off Grades, Low vs. High - Cut-off grades are essential to determining the economic feasibility and mine life of a project. Increased cut-off grades can reduce political risks by ensuring higher financial returns over a shorter period of time. Conversely, lower cut-off grades may increase project life with longer economic benefits to shareholders, employees, and local communities. In short, a low cut-off grade does not mean a poor project.
Easy Access - having easy access to infrastructure including water, electricity, and work force cuts down project costs significantly
Proximity to Producing Mines - the closer the proximity to a producer, the less the infrastructure costs may be
Indicated and Inferred in NI 43-101's - Indicated estimate has a higher confidence level that such resources exists by estimating from sampling at places spaced closely enough that its continuity can be reasonably assumed. Inferred estimate is an estimate of resource whose size and grade have been estimated mainly or wholly from limited sampling data, assuming that the mineralized body is continuous and thus less confidence is placed on the data
Never Rely on Estimates Alone - both indicated and inferred resource estimates in NI 43-101's DOES NOT factor in the feasibility of its resources
Place of Operation - a great resource is one thing, but a resource located in an unstable country with an unstable government can spell disaster
Access to Capital - a well funded company usually means other professionals not only have done their research but believe in the project
Great Management Team - a project can be great but ultimately, a management has to be able to execute
Mineable mineral deposits are rare and to bring a deposit into profitable production is even more so. The chances of bringing a raw prospect into production have been estimated at one in 5,000 to 10,000. That's why there are many instances in which mining companies have revived old prospects and drilled just one more time before a discovery was made.
The great news is that with recent technological advances and the continual growth of resource prices, many projects with low grade ores and past producers are now becoming more economically viable.
Yet, few mining companies have the financial resources to delineate ore reserves too far into the future, which is why the big guns, such as Barrick, continually seek out and invest in other gold juniors to increase their reserves. This is yet another reason why a junior with a nearby producer has a much higher chance of going into production because the costs of production are often too high for a junior to fund by themselves. Economies of scale is a big asset in the mining industry; the ability to use someone else's tailings dam or processing mill can save a junior millions.
Feasibility Studies
There is a common misconception surrounding feasibility studies. We know they're important but their significance is commonly misconstrued. Make one mistake or skip one step of the process and it can have detrimental effects on a mining project.
A mining feasibility study, in short, is an evaluation of a proposed mining project to determine if the mineral resource can be mined economically. But there are many stages of this process before the actual feasibility study or report is finalized.
First off, there are three main feasibility studies: the scoping study, preliminary feasibility and detailed feasibility.
The first one is the order of magnitude, conceptual or what we investors generally call it, a scoping study or Preliminary Economic Assessment (PEA)
Scoping Study or PEA
This first step in the feasibility process is the initial financial appraisal of an indicated mineral resource. This study usually begins once a sufficient level of drilling and sampling to define a resource has been completed, such as a NI 43-101 in Canada. Scoping studies are developed by copying plans and factoring known costs from industry standards and comparable historical data.
It involves a preliminary mine plan, and is the basis for determining whether or not to proceed with an exploration program, and more detailed engineering work.
The end result of the study is a description of the general features and parameters of the project and an order of magnitude estimate of capital and operating costs. A study of this level is valid to determine whether a project is worth pursuing further but not enough data has been collected for reserve definition. This study is generally 35 -50% accurate.
Don't mistake the term mineral reserves for mineral resources.
Mineral resource is a guess of what's in the ground such as the indicated and inferred resources found in NI 43-101's. Mineral reserve, on the other hand, is the resource known to be economically feasible for extraction. Few projects survive this part of the study.
The next stage after this is the preliminary feasibility study or "prefeasibility study."
Prefeasibility Study
This study determines the mining and milling extraction methods and rates, the product recoveries, environmental and permitting issues, and preliminary capital and operating cost estimates. It also determines whether or not to proceed with a detailed feasibility study, which is very costly.
As part of this process, areas of concern that need further research during the feasibility stage need to be identified. These areas often include geotechnical studies for mine, waste dumps, and tailings facilities design, metallurgical testing for refining estimates of product recoveries, and waste characterization studies. Identifying these items at this stage can avoid costly delays during the feasibility stage - any additional delays and costs can be detrimental to a project which often translates to shareholders directly. Added costs mean further funding may be required and could add further dilution to shareholders.
Depending upon the level of detail in these studies, and the securities exchange that is involved, reserves can, in some cases, be declared at this point.
This preliminary feasibility study is usually 20-30% accurate and only 50% of the companies that go through this stage pass onto the final stage of the feasibility study or what many call the "bankable" study.
Bankable Feasibility
Detailed or "bankable" feasibility studies are the most detailed and usually determines whether or not to proceed with the project. General industry standards of this study results in estimates that are within 15 percent accurate.
In essence, this stage is simply a refinement of the pre-feasibility study, which evolved from the scoping study. Key components in the feasibility study are the mine design, production schedule, a detailed process flow sheet, product recoveries, a detailed plant design, consideration of the environmental issues, detailed capital and operating costs estimates, and an economic model of the project. Each of these components is EXTREMELY important.
If a company can make it this far and is feasible after this stage, they can generally take this study to the "bank" for financing purposes.
At this point there is sufficient information to declare reserves, provided the project has positive economics and is noted as bankable. However investors always seem to forget that "bankable" describes only the level of accuracy of the analysis and not necessarily the outcome of the project.
As I said, just because a project is feasible, doesn't mean it will get the go ahead for production. Just because a feasible project can make money, the return on investment may not be enough for the company to advance the project.
For example, the profit from the mine may be $100 million but it may cost $95 million to build it out. So is it feasible? Yes. But does it make sense to spend $100 million to make $5 million? I doubt it.
If the benefits do not significantly outweigh the costs, not only may the government deny you permits, but your financiers may pull out.
At this feasibility level, roughly 20% of the companies will fail, and of these most fail as a result of either overly optimistic assumptions or skipped steps. For this step to be successful, the scoping study and the pre-feasibility study must be conducted at reasonable estimates; many companies will conduct more than one scoping study to ensure the accuracy of the data.
I have seen companies shell out a lot more cash and time than they needed to once they hit this stage because they over emphasized their scoping and pre-feasibility studies.
A great emphasis needs to be placed on each and every step with new rules and regulations constantly changing the way feasibilities are done (welcome to the world of regulation).
While much of what I covered this week seems simple, it is imperative that investors in the mining sector have a basic concept of why they're investing in certain companies.
While I am continuing to buy majors such as Barrick, Eldorado, or Kinross as a way to play the gold boom, the same cannot be said about investing in gold juniors - especially not in this market.
In this market, capital will be fuelled into projects that have a high hope of success - not just a play on some overly promoted drill results. That's what you may see the price of gold go up, yet the price of your gold junior still lags. But eventually that will change.
Over the coming weeks, I'll be going into more depth and discussion surrounding mining valuation and presenting new ideas to play with.
ntil next week,
Ivan Lo
Equedia Weekly
Thursday, November 3, 2011
Making history in Cannes
The chase by Marty Cej:
The Euro has erased slight gains after the European Central Bank unexpectedly lowered its benchmark interest rate to 1.25%. We have a new top story.
Speculation is growing that the Greek government will fall before it gets a chance to hold a nationwide referendum on membership in the euro-zone. The BBC is reporting right now that Prime Minister George Papandreou will offer to resign in the next half hour or so.
He has been chairing an emergency cabinet meeting in Athens in a bid to quell dissent after his surprise announcement on Halloween. His Finance Minister, Evangelos Venizelos, appears especially put out since he was not consulted or warned about the plan. A confidence vote set for Friday could force an election and an end to Papandreou's stay at the Maximos Mansion, which sounds like it was named by a teenager, who plays bass.
The Greek cabinet confab was called after what Reuters is characterizing as a "torrid meeting" between Papandreou, French President Nicolas Sarkozy and German Chancellor Angela Merkel (brrrrr) at which it was decided that Greece would not receive one cent of the 8 billion-euro bailout installment earmarked for this month.
The Greek finance minister has now gone on the record to say that his country's membership in the euro "cannot depend on a referendum."
Meanwhile, the chairman of euro zone finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, said policymakers were working on possible scenarios for a Greek exit. Making clear his own priorities, he told a German TV channel that he and his colleagues "are working on the subject of how to ensure there is not a disaster for the people in Germany, Luxembourg, the euro zone." Lest Greece miss the point, France's Europe minister (they have a minister for that?), Jean Leonetti, said simply that "Greece is something we can get over, something we can live without."
One of the questions we need to answer today is just how long Greece can avoid default without the bailout funds. Also, we should talk again about the mechanism of an orderly default vs. a chaotic and thoroughly messy default. How would Greece's exit from the euro-zone be orchestrated? Would the money destined for Greece's bailout be channeled directly to Italy? If Greece makes its exit, wiping its hands of its financial obligations to lenders, what's to stop Portugal and Ireland? Oh, Papandreou.
There is a terrific list of Canadian company earnings to slice and dice today starting with BCE, which topped expectations, and Manulife Financial, which appears to have reported a wider-than-expected loss. Manulife CEO Don Guloien, who will join us on Headline tomorrow, said he is "disappointed" with the results. CNQ is on our watch list, as are Suncor, Agrium, Air Canada, Husky Energy, Eldorado Gold, Centerra Gold, Penn West, Manitoba Tel, Valeant Pharmaceuticals, Magna, Dorel Industries and Yellow Media.
We are also watching same-store sales updates from the major U.S. retailers, which will be reported through the morning. A new survey released by America's Research Group and UBS says this year's Black Friday will be the "biggest ever." Today's sales data could help support or undermine that assertion.
The Euro has erased slight gains after the European Central Bank unexpectedly lowered its benchmark interest rate to 1.25%. We have a new top story.
Speculation is growing that the Greek government will fall before it gets a chance to hold a nationwide referendum on membership in the euro-zone. The BBC is reporting right now that Prime Minister George Papandreou will offer to resign in the next half hour or so.
He has been chairing an emergency cabinet meeting in Athens in a bid to quell dissent after his surprise announcement on Halloween. His Finance Minister, Evangelos Venizelos, appears especially put out since he was not consulted or warned about the plan. A confidence vote set for Friday could force an election and an end to Papandreou's stay at the Maximos Mansion, which sounds like it was named by a teenager, who plays bass.
The Greek cabinet confab was called after what Reuters is characterizing as a "torrid meeting" between Papandreou, French President Nicolas Sarkozy and German Chancellor Angela Merkel (brrrrr) at which it was decided that Greece would not receive one cent of the 8 billion-euro bailout installment earmarked for this month.
The Greek finance minister has now gone on the record to say that his country's membership in the euro "cannot depend on a referendum."
Meanwhile, the chairman of euro zone finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, said policymakers were working on possible scenarios for a Greek exit. Making clear his own priorities, he told a German TV channel that he and his colleagues "are working on the subject of how to ensure there is not a disaster for the people in Germany, Luxembourg, the euro zone." Lest Greece miss the point, France's Europe minister (they have a minister for that?), Jean Leonetti, said simply that "Greece is something we can get over, something we can live without."
One of the questions we need to answer today is just how long Greece can avoid default without the bailout funds. Also, we should talk again about the mechanism of an orderly default vs. a chaotic and thoroughly messy default. How would Greece's exit from the euro-zone be orchestrated? Would the money destined for Greece's bailout be channeled directly to Italy? If Greece makes its exit, wiping its hands of its financial obligations to lenders, what's to stop Portugal and Ireland? Oh, Papandreou.
There is a terrific list of Canadian company earnings to slice and dice today starting with BCE, which topped expectations, and Manulife Financial, which appears to have reported a wider-than-expected loss. Manulife CEO Don Guloien, who will join us on Headline tomorrow, said he is "disappointed" with the results. CNQ is on our watch list, as are Suncor, Agrium, Air Canada, Husky Energy, Eldorado Gold, Centerra Gold, Penn West, Manitoba Tel, Valeant Pharmaceuticals, Magna, Dorel Industries and Yellow Media.
We are also watching same-store sales updates from the major U.S. retailers, which will be reported through the morning. A new survey released by America's Research Group and UBS says this year's Black Friday will be the "biggest ever." Today's sales data could help support or undermine that assertion.
Wednesday, November 2, 2011
Papandreou's gamble
The chase by Marty Cej:
You give and you give and you give… now what's a Troika to do? Greek Prime Minister George Papandreou's Halloween surprise has shaken Europe's debt crisis resolution framework so severely that European leaders, the new ECB boss and the head of the IMF have summoned Papandreou to Cannes for a stern talking to. Given that the framework was constructed of sparrow bones and Silly String, a sense of urgency will attend the meeting as well. In the meantime, investors are having to price in the growing possibility of a messy default by Greece, a shift in focus from Athens to Rome and a European banking crisis.
The analysts at Stratfor, for example, are telling clients that whatever Europe (nee Germany) does, "three things are all but inevitable: an Italian bailout, a European banking crisis, and a Greek default. Any one outcome will likely trigger the other two."
The leaders of the G20 nations, who are en route to Cannes right now for the weekend summit, would disagree with Stratfor's conclusions and will do what they can to prevent those outcomes. Whether they will be able to do it in the absence of support from the Greek government or the Greek people, will be the real challenge.
Just how tough has Papandreou made things? The European Financial Stability Facility is delaying its 3 billion-euro bond sale "due to market conditions," spokesman Christof Roche said today.
Much of the criticism of Papandreou's move to call first a confidence vote and then a referendum on the terms of Europe's bailout package of Greece appears to stem from the assumption that he is motivated by the greater good, which in this case means a more stable, economically-integrated euro-zone, the prevention of the sovereign debt crisis spreading to Italy and a functioning banking industry.
Some might argue, however, that he is motivated by the same desires as any other political leader, that is, to remain a political leader. BMO Capital Markets characterized Papandreou's announcement as one of the "all-time bonehead moves," but it's only a bonehead move if you assume he as erred in a grand ambition for a better Europe.
Can anyone name a populist president, prime minister, senator or governor who would not launch an appeal to the vox populi when in grave political straits? By putting the decision of the bailout package to a referendum, Papandreou shifts responsibility and demonstrates his democratic cred. If the referendum results in a "no" vote, he will send his apologies to Berlin and Brussels and set out about leading his country into a freshly independent future.
If it is "yes," then he will, with the mandate of the people, lead Greece into a freshly integrated and renewed Europe. Bonehead move? The Papandreou family has called the Maximos Mansion in the centre of Athens home for several years now and won't give up the address without a fight.
The U.S. Federal Reserve's policy-setting Open Market Committee will finish a two-day meeting this afternoon and will issue a statement at 12:30 p.m. ET. Too often we see and hear the Fed's recent decisions characterized as "doing nothing" or "staying on the sidelines" or "making no decision."
That is categorically untrue and we need to nip to stop perpetuating that misconception. The past two policy meetings saw three dissentions in each statement, meaning that debate, argument, appeals to logic, emotion, economic theory and anecdotal evidence prompted some members of the meeting to turn one way and some to turn another.
A decision is being made right now whether to invoke another form of quantitative easing to stimulate the U.S. economy; a decision is being made regarding what form another round of quantitative easing might take; decisions are being made as to when and how much, and how to communicate the decision… We do our viewers a disservice by diminishing the actions of the world's most important central bank.
Ummm, hello. My name is Ben (long exhalation), and I'm a central banker… Fed boss Ben Bernanke takes questions from the media at 2:15 p.m. ET.
Howard Wetston, Chairman of the Ontario Securities Commission, will also be taking questions today, from us. He sits down with us at 12:40.
A U.K. shale gas explorer said today that its hydraulic fracturing new Blackpool in northwest England probably caused two small earthquakes in the region. While this story hasn't garnered much attention yet this morning, if I know the British press, it will by the end of the day. The company, Cuadrilla Resources, said it is "highly probable" that its fracking caused the seismic events and says it is willing to put in place an early detection system. We need to get ahead of this story.
There a ton of important earnings reports to follow today including Sun Life, Time Warner, Mastercard, Molson Coors, Talisman, Kraft, Calfrac, Intact, Qualcomm…
You give and you give and you give… now what's a Troika to do? Greek Prime Minister George Papandreou's Halloween surprise has shaken Europe's debt crisis resolution framework so severely that European leaders, the new ECB boss and the head of the IMF have summoned Papandreou to Cannes for a stern talking to. Given that the framework was constructed of sparrow bones and Silly String, a sense of urgency will attend the meeting as well. In the meantime, investors are having to price in the growing possibility of a messy default by Greece, a shift in focus from Athens to Rome and a European banking crisis.
The analysts at Stratfor, for example, are telling clients that whatever Europe (nee Germany) does, "three things are all but inevitable: an Italian bailout, a European banking crisis, and a Greek default. Any one outcome will likely trigger the other two."
The leaders of the G20 nations, who are en route to Cannes right now for the weekend summit, would disagree with Stratfor's conclusions and will do what they can to prevent those outcomes. Whether they will be able to do it in the absence of support from the Greek government or the Greek people, will be the real challenge.
Just how tough has Papandreou made things? The European Financial Stability Facility is delaying its 3 billion-euro bond sale "due to market conditions," spokesman Christof Roche said today.
Much of the criticism of Papandreou's move to call first a confidence vote and then a referendum on the terms of Europe's bailout package of Greece appears to stem from the assumption that he is motivated by the greater good, which in this case means a more stable, economically-integrated euro-zone, the prevention of the sovereign debt crisis spreading to Italy and a functioning banking industry.
Some might argue, however, that he is motivated by the same desires as any other political leader, that is, to remain a political leader. BMO Capital Markets characterized Papandreou's announcement as one of the "all-time bonehead moves," but it's only a bonehead move if you assume he as erred in a grand ambition for a better Europe.
Can anyone name a populist president, prime minister, senator or governor who would not launch an appeal to the vox populi when in grave political straits? By putting the decision of the bailout package to a referendum, Papandreou shifts responsibility and demonstrates his democratic cred. If the referendum results in a "no" vote, he will send his apologies to Berlin and Brussels and set out about leading his country into a freshly independent future.
If it is "yes," then he will, with the mandate of the people, lead Greece into a freshly integrated and renewed Europe. Bonehead move? The Papandreou family has called the Maximos Mansion in the centre of Athens home for several years now and won't give up the address without a fight.
The U.S. Federal Reserve's policy-setting Open Market Committee will finish a two-day meeting this afternoon and will issue a statement at 12:30 p.m. ET. Too often we see and hear the Fed's recent decisions characterized as "doing nothing" or "staying on the sidelines" or "making no decision."
That is categorically untrue and we need to nip to stop perpetuating that misconception. The past two policy meetings saw three dissentions in each statement, meaning that debate, argument, appeals to logic, emotion, economic theory and anecdotal evidence prompted some members of the meeting to turn one way and some to turn another.
A decision is being made right now whether to invoke another form of quantitative easing to stimulate the U.S. economy; a decision is being made regarding what form another round of quantitative easing might take; decisions are being made as to when and how much, and how to communicate the decision… We do our viewers a disservice by diminishing the actions of the world's most important central bank.
Ummm, hello. My name is Ben (long exhalation), and I'm a central banker… Fed boss Ben Bernanke takes questions from the media at 2:15 p.m. ET.
Howard Wetston, Chairman of the Ontario Securities Commission, will also be taking questions today, from us. He sits down with us at 12:40.
A U.K. shale gas explorer said today that its hydraulic fracturing new Blackpool in northwest England probably caused two small earthquakes in the region. While this story hasn't garnered much attention yet this morning, if I know the British press, it will by the end of the day. The company, Cuadrilla Resources, said it is "highly probable" that its fracking caused the seismic events and says it is willing to put in place an early detection system. We need to get ahead of this story.
There a ton of important earnings reports to follow today including Sun Life, Time Warner, Mastercard, Molson Coors, Talisman, Kraft, Calfrac, Intact, Qualcomm…
Tuesday, November 1, 2011
Greece plunges global markets into turmoil
The chase by Marty Cej:
Asian and European stocks are tumbling, the cost of insuring against default on European bonds is surging and commodities are slumping after Greek Prime Minister George Papandreou said thanks for the bailout money but I think I’m gonna ask the people of Greece what they think about the deal first. In what BMO Capital Market’s economists are calling one of “your all-time bonehead moves,”
Papandreou shocked global financial markets with his call for a referendum on the most recent austerity measures required by the EU, IMF and ECB for the disbursement of funds necessary for Greece to avoid a disorderly default. Fitch Ratings told clients a few moments ago that a rejection of the measures would “increase the risk of a forced and disorderly sovereign default and - whilst not Fitch's central rating case - potentially a Greek exit from the euro.”
In short, Greece may have collapsed Plan A – a generous description if there ever was one – without the benefit of having a Plan B in place. The announcement has likely thrown the agenda for this weekend’s G20 summit into disarray and will turn the market’s conversation to the question of what happens when Greece defaults and exits the euro-zone. Will it mean the end of the euro currency? Is Italy next? Spain? Credit default swaps on Italian debt have soared 32 basis points this morning and jumped 28 points on Spanish bonds.
The broad Markit iTraxx index of Western European CDS surged 25 basis points. Gavin Nolan, director of credit research at Markit in London will join us at 10:20 am Eastern to walk us through the implications. Silvio Peruzzo, Euro-area economist at RBS will join the conversation a few minutes later.
The Reserve Bank of Australia cut interest rates this morning for the first time since 2009, saying Europe’s debt crisis was undermining Asia’s export-dominated economies. The rate cut came as a purchasing managers’ index for China fell to 50.4, its lowest level since February of 2009. South Korea, meanwhile, reported its smallest gain in exports in two years. It won’t be hard to connect the dots all the way back to the Canadian economy, earnings growth and the outlook for stocks.
I almost forgot! It’s Mario Draghi’s first day on the job as the new president of the ECB! Congratulations, Mario, and good luck.
It is also the first day of a two-day meeting for the U.S. Federal Reserve’s policy-setting Open Market Committee. The conversation is likely to have changed a bit this morning. How will the increased political and financial risk in Europe affect the discussions? Will there be fewer dissenters this time around? How unconventional can unconventional get?
MF Global became a much more compelling story late yesterday after the Commodity Futures Trading Commission and Securities and Exchange Commission revealed that a last-minute sale of some of the assets to avoid a bankruptcy was scuppered after “deficiencies in customer futures segregated accounts held at the firm” were found.
Unnamed sources are telling Bloomberg and The New York Times that hundreds of millions of dollars in customer accounts may have been funneled into MF Global’s proprietary accounts to back up a losing trade. We need to talk more about the kind of trade that MF Global made, the risk the company took on through its proprietary book and what could happen next. Of course, at the middle of it all, is Jon Corzine, one of the best-known names on Wall Street.
Commodities, currencies, bonds and stocks, they’re all reflecting the sudden increase in financial, political and economic risk emanating from Europe but in different ways. Let’s be specific and accurate. “Commodities falling on European woes” does not help anyone understand anything any better.
And still the earnings parade marches on. We have numbers today from Bell Aliant, Pfizer, Anadarko, Valero, CME Group, Archer Daniels Midland, TransCanada, Baker Hughes, Dollar Thrifty, Dunkin Brands and Westport Innovations.
Asian and European stocks are tumbling, the cost of insuring against default on European bonds is surging and commodities are slumping after Greek Prime Minister George Papandreou said thanks for the bailout money but I think I’m gonna ask the people of Greece what they think about the deal first. In what BMO Capital Market’s economists are calling one of “your all-time bonehead moves,”
Papandreou shocked global financial markets with his call for a referendum on the most recent austerity measures required by the EU, IMF and ECB for the disbursement of funds necessary for Greece to avoid a disorderly default. Fitch Ratings told clients a few moments ago that a rejection of the measures would “increase the risk of a forced and disorderly sovereign default and - whilst not Fitch's central rating case - potentially a Greek exit from the euro.”
In short, Greece may have collapsed Plan A – a generous description if there ever was one – without the benefit of having a Plan B in place. The announcement has likely thrown the agenda for this weekend’s G20 summit into disarray and will turn the market’s conversation to the question of what happens when Greece defaults and exits the euro-zone. Will it mean the end of the euro currency? Is Italy next? Spain? Credit default swaps on Italian debt have soared 32 basis points this morning and jumped 28 points on Spanish bonds.
The broad Markit iTraxx index of Western European CDS surged 25 basis points. Gavin Nolan, director of credit research at Markit in London will join us at 10:20 am Eastern to walk us through the implications. Silvio Peruzzo, Euro-area economist at RBS will join the conversation a few minutes later.
The Reserve Bank of Australia cut interest rates this morning for the first time since 2009, saying Europe’s debt crisis was undermining Asia’s export-dominated economies. The rate cut came as a purchasing managers’ index for China fell to 50.4, its lowest level since February of 2009. South Korea, meanwhile, reported its smallest gain in exports in two years. It won’t be hard to connect the dots all the way back to the Canadian economy, earnings growth and the outlook for stocks.
I almost forgot! It’s Mario Draghi’s first day on the job as the new president of the ECB! Congratulations, Mario, and good luck.
It is also the first day of a two-day meeting for the U.S. Federal Reserve’s policy-setting Open Market Committee. The conversation is likely to have changed a bit this morning. How will the increased political and financial risk in Europe affect the discussions? Will there be fewer dissenters this time around? How unconventional can unconventional get?
MF Global became a much more compelling story late yesterday after the Commodity Futures Trading Commission and Securities and Exchange Commission revealed that a last-minute sale of some of the assets to avoid a bankruptcy was scuppered after “deficiencies in customer futures segregated accounts held at the firm” were found.
Unnamed sources are telling Bloomberg and The New York Times that hundreds of millions of dollars in customer accounts may have been funneled into MF Global’s proprietary accounts to back up a losing trade. We need to talk more about the kind of trade that MF Global made, the risk the company took on through its proprietary book and what could happen next. Of course, at the middle of it all, is Jon Corzine, one of the best-known names on Wall Street.
Commodities, currencies, bonds and stocks, they’re all reflecting the sudden increase in financial, political and economic risk emanating from Europe but in different ways. Let’s be specific and accurate. “Commodities falling on European woes” does not help anyone understand anything any better.
And still the earnings parade marches on. We have numbers today from Bell Aliant, Pfizer, Anadarko, Valero, CME Group, Archer Daniels Midland, TransCanada, Baker Hughes, Dollar Thrifty, Dunkin Brands and Westport Innovations.