U.S. money czars on hot seat

TheStar.com - Columnist - U.S. money czars on hot seat


CHARLES DHARAPAK/ASSOCIATED PRESS

Fed Chair Ben Bernanke, left, and Treasury Secretary Henry Paulson seated at the witness table before testifying before the Senate Banking Committee on Sept. 23, 2008.
Paulson, Bernanke and Cox face anger from both sides of the Senate over financial system bailout dismissed as `unacceptable' for its lack of oversight, accountability
September 24, 2008 Tim HarperWashington Bureau

WASHINGTON–Congressional momentum toward quick passage of a historic, $700 billion (U.S.) economic bailout package came to a screeching halt yesterday in a Senate committee room heavy with anger and skepticism.

The triumvirate of would-be saviours – Treasury Secretary Henry Paulson, Federal Reserve Chair Ben Bernanke and Security and Exchange Commission Chair Christopher Cox – sought quick passage of the package, citing imminent economic apocalypse, albeit in understated jargon designed to exude calm.

Instead, they received a pummelling from senators from both sides of the aisle, many running for re-election in November.

Republicans and Democrats told the trio they were seeking a blank cheque which would leave American taxpayers holding the bag while providing golden parachutes for reckless Wall Street executives who brought this woe upon themselves.

The administration's three-page plan contained no oversight or accountability and was therefore "unacceptable,'' Connecticut Senator Christopher Dodd, a Democrat and the chair of the banking committee, said following a hearing which lasted almost five hours.

A new round of uncertainty on Capitol Hill about the fate of the rescue plan sent stocks plunging again, with the Dow beginning the day in positive territory before finishing down 161 points.
Negotiations on a package acceptable to a majority in Congress continued yesterday, with White House Economic Adviser Keith Hennessey telling CNBC that there was room for discussion on details of the plan.

But it was becoming clear passage would neither be swift, nor easy.
"This proposal is stunning and unprecedented in its scope and lack of detail," Dodd said.
"It would do nothing, in my view, to help a single family save a home ... it would do nothing to stop even a single CEO from dumping billions of dollars of toxic assets on the backs of American taxpayers, but at the same time do nothing to stop the very authors of this calamity to walk away with bonuses and golden parachutes worth millions of dollars."
Then Dodd took direct aim at the unfettered power Paulson was conferring on himself.
"After reading this proposal, I can only conclude that it is not just our economy that is at risk, but our constitution as well," he said.

Many observers called yesterday's hearing the most important financial meeting ever held in the capital.

And many U.S. legislators now believe the rush to action after the 9/11 attacks conferred too much power in the White House and led to speedy passage of the flawed U.S. Patriot Act.
So they resolved not to be stampeded yesterday – after hearing from outraged constituents over the weekend who wanted to know what they were going to get for such a massive outlay of taxpayers' money.

Paulson said he shared much of that outrage, admitting the crisis was "embarrassing" for the United States of America.
"You worry about taxpayers being on the hook?" he said at one point. "Guess what – they're already on the hook.

"Regrettably, not every homeowner is going to save their home," Paulson said.
As he was speaking, the U.S. government housing agency reported that house prices dropped another 0.6 per cent in June, bringing the cumulative decline across the U.S. to 5.8 per cent since housing prices peaked in April 2007.

Even before Paulson unveiled his plan, the U.S. deficit for the 2009 fiscal year was already projected to be a record $438 billion. And if only half the bailout money is used in this fiscal year, the deficit could soar to $900 billion.

Richard Shelby of Alabama, the ranking Republican on the committee, said the Paulson plan combined with an estimated $300 billion already spent propping up failing Wall Street firms has pushed the bailout price tag to $1 trillion.

He said Wall Street bet the government would ride to its rescue if it created this mess "and it appears that is the one bet which will pay off."

Both presidential candidates, Republican John McCain and Democrat Barack Obama, will vote on a final package, but neither is involved in crafting the bill.

McCain said yesterday that congress must "trust, but verify,'' but he said inaction was not an option.

Obama told a press conference the Bush administration was showing "stubborn inflexibility'' in its determination to force quick passage of the bailout plan and he said taxpayers must benefit because they are bearing the risk in the plan.

With files from Reuters News Agency

Q&A with ABBY BADWI and D. Pescod

Q&A with ABBY BADWI
PRESIDENT AND CEO with BANKERS PETROLEUM
(As of September 22, 2008)
As we touch base with some of the oil and gas stories that
have been beaten and battered, but still should have big to
huge production growth in the coming years, one story
that definitely comes to mind is Bankers Petroleum. Abby
Badwi who had so much success in Egypt with Rally Energy
has now reunited much of the team for their Patos-
Marinza project in Albania.
Abby was on a tour talking about Bankers through some
of the financial districts in the United States last week
when the financial crisis was at its peak. Needless to say,
he blames the financial collapse in the US for destroying
some of value he had helped create. But it’s time to get
caught up with Abby:
David Pescod: Abby, the crisis that’s just been created
has been courtesy of the financial industry – the housing
crisis and the “fly-by-nighters” that tried to finance them,
but it does make one concerned about ones banking relationships.
How does your debt/credit position sit now and
how solid do you feel about it?
Abby Badwi: Bankers is in a strong financial position. We
have a positive working capital of $60 million mainly in
cash with major Canadian Banks, minimal bank debt, for a
company our size, of $29 million and we generate $20 million/
quarter in net operating income. Our capital program
is fully funded from our cash flow.
David Pescod: We’ve had a big drop in oil prices from
$150 to $100, but no oil and gas companies were ever
priced as if oil was really that high and now we see many
oil and gas companies priced as if oil was $80. What do
you see for oil prices down the road in a very new environment?
Abby Badwi: Our capital expenditure plans for 2009 and
2010 are based on Brent oil price of $84 and $80. $100 oil
is a bonus. I am bullish on oil price since it’s a depleting
commodity and a world that is consuming some 80+ million
barrels per day.
Bankers Petroleum
Bankers Petroleum (T-BNK) $3.17 -0.01


E&P companies cannot find 80 to100 million barrel oil
fields every single day. Oil prices will continue to have
wide fluctuations due to the economic health of the US
financial sector, the US$ and geopolitical issues
around the world.
David Pescod: Albania has just increased its royalty
rates, but they still remain some of the better ones on
the face of earth, particularly compared to what has
happened in Alberta lately. Your thoughts on working
in Albania and any interesting characteristics that
should be apparent?
Abby Badwi: Albania is hungry for foreign investments
and Bankers is one of the largest investors in the country.
A democracy since 1992, Albania is pro free market
economy, privatization of the public sector corporations
and has a slogan of “Albania is open for business”.
It has been invited to join NATO and is an aspiring
nation to join the EU.
David Pescod: The Patos-Marinza project in Albania
has huge, make that enormous reserves. How much of
it do you think is recoverable and what kind of production
rates can you see going forward?
Abby Badwi: With two billion barrels of oil in place,
Patos-Marinza has already produced 120 million barrels
and has another 150 million barrels of 2P reserves remain
to be recovered through primary recovery methods
of reactivating existing wells and infill vertical and
horizontal drilling. We believe that we can recover another
10% to 20% by secondary and tertiary recovery
applications of water flood and thermal injection. The
Kucova oil field has 500 million barrels of oil in place, it
has produced 25 million barrels to date and we expect
to recover a similar amount. We will be announcing our
reserves for this field shortly. Our current plans target
is 20,000 BOPD by the end of 2010.
David Pescod: I guess in a world like this, where
things seem to be coming out of left field, what are
your concerns about the global economy and particularly
in the oil and gas business?
Abby Badwi: The escalating problems that hit major
financial institutions in the US this year reached its
peak with the downfall of Lehman last week and vulnerability
of several other big banking names being added
to the list.


David Pescod 780-408-1750 Debbie Lewis 780-408-1748 Fax: 780-408-1501 Page 3
DEB’S DITTY:
One Sunday morning, the pastor noticed little Alex standing in the foyer of
the church staring up at a large plaque. It was covered with names and small
American flags mounted on either side of it. The six-year old had been staring
at the plaque for some time, so the pastor walked up, stood beside the
little boy, and said quietly, 'Good morning Alex.'
'Good morning Pastor,' he replied, still focused on the plaque. 'Pastor, what is
this? The pastor said, 'Well son, it's a memorial to all the young men and
women who died in the service.'
Soberly, the just stood together, starring at the large plaque.
Finally, little Alex's voice, barely audible and trembling with fear asked,
'which service, the 8:30 or the 10:45?'
To receive the Late Edition and be on our daily circulation simply e-mail Debbie at
Debbie_lewis@canaccord.com and give your address, phone number and e-mail and we’ll have you
on the list tonight.
The US Government intervention stabilized the situation for the time being and I believe that the US economic
powers will do its share through M&A transactions that will create bigger and stronger financial institutions. Our
industry is strong but you will also see increased activities in M&A in our industry this year carrying on into 2009.
David Pescod: There are an awful lot of oil and gas stocks that have been absolutely beaten up over the last few
weeks. Are there any that you would recommend at these prices?
Abby Badwi: Major Canadian E&Ps such as Encana and Canadian Natural Resources lost 30% in share value over the
last three months and should recover well. Of course, Bankers Petroleum is also a very good bet.
Disclosure: Canadian Natural Resources: Canaccord Capital covers this stock and has a Buy rating on it. (Buy: The stock is

No bailout? Even scarier

Market News: After the Bell
The close: No bailout? Even scarier
RTGAM


Investors listened to Ben Bernanke and Henry Paulson make their bailout pitch before lawmakers on Tuesday, and they didn't like what they heard.
Oh sure, the $700-billion (U.S.) price tag on the rescue package for financial institutions didn't surprise anyone. But they learned that Democrat and Rebublican senators alike have voiced some opposition to the package, which could delay its passing. As well, investors learned that the plan does not involve buying toxic assets from beleaguered financial institutions at firesale prices, but rather something close to the market value. That, potentially, leaves a lot of downside risk for taxpayers and no upside potential.
As for delaying or modifying the package, Mr. Bernanke outlined the risks in his testimony before the Senate Banking Committee: "I believe if the credit markets are not functioning, that jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover."
In other words, who wants to own stocks in this uncertain environment? The Dow Jones industrial average closed at 10,854.17, down 161.52 points, or 1.5 per cent, after treading water throughout most of the day. The broader S&P 500 closed at 1,188.22, down 18.87 points, or 1.6 per cent.
The losses were widespread - and, combined with Monday's loss, erased most of the gains enjoyed during a rally last Thursday and Friday. All 10 subindexes at the S&P 500 fell. At the Dow, 27 of the 30 members fell during the day. General Motors Corp. fell 7.4 per cent, General Electric Co. fell 4.6 per cent and Bank of America Corp. fell 2.5 per cent.
In Canada, the S&P/TSX composite index closed at 12,532.63, down 105.44 points, or 1.5 per cent. There, the losses weren't nearly as widespread though, with four of the 10 subindexes rising.
Fairfax Financial Holdings Ltd., which has made bearish bets on the stock market and may benefit from the demise of American International Group Inc., rose another 5.3 per cent - bringing its cumulative rise to more than 40 per cent in the past four trading days. Other financial stocks performed well: Royal Bank of Canada rose 1 per cent, Bank of Nova Scotia rose 3.3 per cent and Manulife Financial Corp. rose 4.2 per cent.
Energy and materials stocks declined, though, following the price of crude oil and gold. Oil fell to $106.61 a barrel, down $2.76; gold fell to $891.20 an ounce, down $17.80. Suncor Energy Inc. fell 2.7 per cent, Goldcorp Inc. fell 2.1 per cent and Potash Corp. of Saskatchewan Inc. - an agriculture stock that generally moves with commodities - fell 9.7 per cent.
Copyright 2001 The Globe and Mail

This parrot is dead

This parrot is dead

Tuesday, September 23, 2008

With the markets becoming more incomprehensible by the day, Canaccord Adams decided to toss out the fundamental analysis books and instead pull the Monty Python reels off the shelf for inspiration and wisdom."Has the turmoil translated to new stability ahead? Or has a (dead) cat (bounce) temporary treed the bear (market)?," Canaccord asked investors in its weekly junior mining update. "In keeping with the loony market activity, we felt a series of Monty Python quips would help in identifying with our important question posed above."So, ladies and germs, the quips (and Canaccord's interpretations) ...

"He's not pining, he's passed on. This parrot is no more. He has ceased to be. He's expired and gone to meet his maker. He's a stiff, bereft of life, he rests in peace. If you hadn't have nailed him to the perch he'd be pushing up the daisies.

He's rung down the curtain and joined the choir invisible. This is an ex-parrot!"(replace: 'parrot/he' with 'market')'Bring out yer dead.''Here's one.''I'm not dead.''Ere, he says he's not dead.'

'Well, he will be soon, he's very ill.''I'm getting better.' (replace: 'one/he' with 'the market')

'It's just a flesh wound. 'Tis but a scratch.' 'A scratch? Your arm's off.' 'I've had worse. Oh! Had enough, eh? Come back here and take what's coming to you! I'll bite your legs off!'(market decline)"It's funny, isn't it? How your best friend can just blow up like that?"(replace 'best friend' with 'market')"When you're chewing on life's gristle,Don't grumble, give a whistle.And this'll help things turn out for the best ...And ... always look on the bright side of life ...Always look on the light side of life ...""Well, we'll not risk another frontal assault. That rabbit's dynamite."(short sellers vs. U.S. regulatiors, ie rabbits )'I'm not a witch I'm not a witch!' 'But you are dressed as one.' 'They dressed me up like this!' 'We didn't! We didn't ...' 'And this isn't my nose. It's a false one.' 'Well?''Well, we did do the nose.' 'The nose?' 'And the hat, but she is a witch!' 'Yeah! Burn her! Burn her!'"
Now, back to work.
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