Weekly Status + Pescod Talks Stocks While I'm In Mexico

MOTHER SAID THERE WOULD BE YEARS LIKE THIS!
This year started out with so much fun in the natural
resource sector, but now it’s ending abysmally.

We assume that the worse will be out of the way with the end
of tax-loss selling in the next 10 days, but it has been
horrific of late. Many resource stocks have dropped
50%, uranium stocks even worse. And of course there’s
banking, financial and brokerage stocks—ouch! Glad
we missed that!

We’ve been a big follower of Don Coxe, who has
been an advocate that for the decade we should have
fun in the commodity sector. We expected there would
be bumps along the way, but this is more than a bump.
In the most recent Don Coxe weekly webcast, he
talks about how bad this had been. “It’s a true global
financial crisis and it’s more serious now than it was
earlier.” He continues, “there’s no precedent in financial
history for what we are experiencing and today,
there has never been a better time to make sure you
have your financial ducks in a row.” “This is a big deal”
he repeats.

He makes the great comment looking at a chart of
Citigroup that “if this were the chart at the end of the
hospital bed, for someone in a hospital, you would
probably be sending flowers to the widow.”


lot of cheap stocks out there right now.
Meanwhile, one of our other favorite commentators,
Jeff Rubin, the head market guy at CIBC has been making
outrageous prognostications that have almost always
come correct (two decades ago when he suggested Toronto
real estate would drop 25%, he raised lots of excitement)
and he’s a big believer that energy prices will remain
high if not higher and the sector six months from
now will be better than ever.

Meanwhile, since we’re in this frame of mind, let’s review
the biggest component of oil and gas (at least in Alberta)
and that’s natural gas, and it’s been ugly.

Take a look at some of the charts outlining this and it shows you
over the last two years how absolutely beaten natural gas
stocks have been. Remember, if you are talking oil and
gas in Alberta, 70% of the revenue comes from natural
gas. Most trusts, and oil and gas companies are dominantly
gas. It’s very few that are oil in the majority and
have benefited from $90 oil.

All have been hit by what’s happened in natural gas
where we’ve seen relatively low prices as well as a soaring
loonie, high labor costs, high service costs and now a
government that hasn’t figured out that it’s gas that pays
the bills!

With the upping of royalties coming in down the road,
this could make things worse. Maybe we’ll see many
other companies doing what Exalta did, and just give up
and sell themselves for whatever they could get.
What happens next for some of these natural gas companies?

Well things could get even tougher as so far,
there is no sign of winter through much of North America
except for a brief bit in the U.S. Mid-West, and with inventories
at near record levels, it’s hard to get excited about
this sector. If winter doesn’t come, one wonders how
many gas companies will be left.

Source:Pescod

I'm Mexico Bound

Its cold here in Toronto...time to fly south.
I will be taking some time to enjoy some Mexican Hospitality.
I will check in periodically, but will return Dec 18th.
Take care of PDP+BWR In my short absence

Pre-Fed expectations firm futures

RTGAM

Stock-index futures are upbeat Monday ahead of a likely interest rate cut tomorrow, even though Swiss bank UBS took whopping writedown on subprime mortgage holdings. But in a move reminiscent of Citigroup, UBS got back on track with a big capital injection from Singapore and an unidentified Middle Eastern investor.

"The amazing reaction to UBS' announcement today indicates investors switched to a more positive view," Oliver Hagen, a fund manager with LGT Capital Management, told Bloomberg, referring to UBS shares gaining in Europe. "The strength of financial stocks might support the market in general."

Indeed, Citigroup, Bank of America, Wells Fargo and JP Morgan Chase all advanced overseas, sending European markets into positive territory. Separately, Barron's magazine says JP Morgan in a better position to withstand credit-market turmoil because it can count on revenue from non-banking sources.
Investors, though, are eagerly anticipating an interest rate decision in the U.S. on Tuesday, although the market is divided over whether the Federal Reserve will lower rates by a quarter of a percentage point or a half.

At 7:30 a.m. EST, Dow Jones industrial futures are up 28 points, with S&P 500 futures adding 1.4 points and Nasdaq 100 futures up 2.75 points.

In corporate news, the Toronto and Montreal stock exchanges could unveil a merger as early as Monday, reflecting ongoing consolidation globally.

Blackstone Group might be planning a bid to acquire Rio Tinto Ltd., leading a consortium that would include China's sovereign wealth fund, according to a published report in Britain.
And Japanese drug maker Eisai is buying MGI Pharma for $3.9-billion (U.S.) in a move aimed at boosting its cancer drug business and sustaining sales growth.
In the economic pipeline is a report on pending U.S. home sales in October at 10 a.m. EST.

Copyright 2001 The Globe and Mail