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Sunday, December 13, 2009
Friday's Market Summary
Posted by Treasure Picks at 10:58 AM
U.S. pay czar brings in limit on fat bonuses
U.S. pay czar brings in limit on fat bonuses
December 12, 2009
DANIEL WAGNER
WASHINGTON–The Obama administration's pay czar is limiting the cash compensation for executives at companies that received the largest taxpayer bailouts to $500,000.
The 25th through the 100th top earners at Citigroup, GMAC, American International Group and General Motors must also take more than half their compensation in stock, and at least half must be delayed for three or more years, said Kenneth Feinberg, the Treasury Department's Special Master for Executive Compensation.
About 12 executives were granted exemptions to the $500,000 cash cap because they were necessary for the companies to "thrive, be able to compete and not lose key people," he said Friday.
The new rules will only apply to the second half of December, and will not affect what the employees have already been paid this year.
The rules will affect many workers' year-end bonuses and stock grants and will serve as a starting point for negotiations next year over pay packages for 2010.
Feinberg already announced specific pay packages for the top 25 earners at firms he oversees. His rulings don't apply to Bank of America because its bailouts were repaid this week. Chrysler and Chrysler Financial also were exempt because executives there made less than $500,000.
Under the new rules, cash can make up only 45 per cent of a person's pay. At least half of total compensation must be ``long-term," and cannot be redeemed for at least three years. And all incentive pay must come from a pool whose size is based on earnings or another performance measure.
Fringe benefits like the use of private jets will be limited to a value of $25,000 per year.
Unlike the pay packages for the top 25 earners, the rules will mostly be implemented by the companies. But Feinberg said he did review all the requests for cash salaries in excess of $500,000 per year.
He reviewed dozens of requests but granted only about 12. Of those, all but one will earn between $500,000 and $950,000. The remaining person will earn about $1.5 million. He did not identify the individuals or companies.
Feinberg did say that some of the exemptions were granted for AIG, which received government support worth up to $182 billion. Large bonuses at the firm sparked outrage earlier this year.
Going forward, the independent directors on the companies' compensation committees will have to approve such exemptions. Feinberg will continue to oversee them.
Posted by Treasure Picks at 10:52 AM
Equedia newsletter says...
For the last six months, we have been a big supporter of gold, silver and resource stocks. Since March, during the historical bottoming of the markets, we told our readers to follow the smart money and load up on resource plays:
"The big players in the investment business have all come to play ball on the resource sector's home court. Do you want to be sitting in the nosebleeds when the game begins or do you want a spot in the starting line up?" - Playing Ball with Resources April 5, 2009
At that time, we were shunned by many. We were told the bottom hasn't arrived; that the uncertainties in the markets were too great to be placing any bets. To add insult to injury, we were told by some analysts that investing in these plays - especially the juniors - was plain stupid, as financing for these companies was improbable.
To some degree, they were right. Many companies folded during that time. But those who made it past the few rough months...Well, just take a look at the one exchange dominated by resource and mining plays, the TSX Venture:
TSX Venture Chart
Take a look at the two companies we have continually supported:
Teck Resources (TSX: TCK.B)
Teck Resources Chart
Ivanhoe Mines (TSX: IVN)
Ivanhoe Mines Chart
Just imagine for one second that you had invested in either of these companies. Well the big money has. Over $45 billion were put into mining and resource plays at that time. For example, our mention of Kinross Gold when it was nearing its 52-week low of $16.52 has since bounced back to hit highs of over $25.
Needless to say, we are still confident and bullish on resource and mining plays moving forward.
There's no doubt that uncertainty remains prominent in the markets. Looking at the numbers alone, the stock market really shouldn't be at these levels and many are already preparing for a correction.
But think about it this way. If the bubble was to burst once again, there could be another opportunity to participate in the starting line up of another resource bang. If it doesn't, there is still plenty of upside potential in this sector, especially in gold and silver-related plays. (see the Report that Shocked the World)
Follow the Smart Money
We always like to follow the smart money and the big players when making our investment decisions. This year, we followed the smart money that was pouring into the resource sector when all else had failed and the results speak for themselves.
We are not about to change that approach.
Some of the world's best money managers have already taken large positions in gold. Big names like John Paulson, Paul Tudor Jones, and George Soros, are among the many already invested gold. The list of smart money and big-time hedge fund managers investing in gold runs deep.
They're not alone.
Life insurance companies are doing the same. Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time in the company's 152-year history to hedge against further asset declines according to a report from Bloomberg.
Goldman Sachs, probably the biggest player of them all, is predicting that gold will shoot past $1,400/ounce by 2011 on the basis that central banks are becoming net buyers of gold, that gold ETFs are continuing to buy substantial volumes, and that real estate prices will remain depressed.
Right now Central banks are drastically curtailing their sales of gold and many are continuing to buy large quantities. For the first time in 22 years, these banks are net buyers of gold. According to a report by precious-metals research firm GFMS, for the first time since 1987, central banks around the world bought more gold in the second quarter than they sold. They are also bound by an agreement that imposes limits on sales.
Never Forget China
China, whose foreign currency reserves holds $2 Trillion with only 2% in gold (vs. a 10% worldwide average), is still looking to buy large quantities - especially on the dips.
The Chinese are seeing the value of their foreign currency reserves lose value every day and are doing everything in their power to keep their Yuan down. If China makes the logical move to increase its gold reserves and reduce its fiat currency exposure to even just the worldwide average, gold prices could move substantially higher.
China's state-owned Assets Supervision and Administration Commission (Ji Xiaonan, the Chief) said, "we recommend China increase its gold reserves to 6,000 metric tons within three-to-five years and possibly to 10,000 tons in eight to 10 years."
According to the calculations of David Rosenberg, Former Chief North American Economist at Bank of America-Merrill Lynch in New York:
"...if China were to lift their gold reserves to 5,000 tonnes, which is equivalent to about two years of global production, that shift in demand would boost the gold price by $800/oz to around $2,000 ($1,978) based on our models. If China moves towards 10,000 tonnes, well, that would end up taking the gold price to $2,623/ounce if our calculations are in the ball-park."
China isn't the only country continuing to buy gold. India just recently bought 200 metric tons of gold from the IMF, at $1,045 an ounce.
Even small countries such as Sri Lanka and Mauritius are buying large quantities of gold.
Where is the Gold?
While everyone is chasing gold to protect themselves from a falling Dollar, producers aren't keeping up. Gold production was down 3% last year, and it was flat in the most recent quarter. Although mining companies are spending more on new production, especially in China and Russia, that is not enough to offset dwindling output from mature mines. Don't forget China has drastically increased its gold production outputs making it the largest gold producing country.
Aaron Regent, CEO of the worlds largest gold producer Barrick, said that global output has been falling by roughly one million ounces a year since the start of the decade. Total mine supply has dropped by 10% as ore quality erodes, implying that the roaring bull market of the last eight years may have further to run. He continued to say that, "Production peaked around 2000 and it has been in decline ever since, and we forecast that decline to continue. It is increasingly difficult to find ore."
There are simply too many concrete reasons why gold and precious metals will most likely continue their run.
The Opportunity
In the short-term, gold could have its dips (as with every tradable investment) fuelled by a declining stock market which we believe should not be where it is today. If the stock market drops, the Dollar will more than likely rise sending gold down with it.
In the end, however, gold should prevail as inflation kicks into high gear within the next 5 years.
The road to the top will not be a straight line so it only makes sense to take advantage of the inevitable corrections.
Buy on the dips, and sell on the bounces.
Posted by Treasure Picks at 8:10 AM
Thursday, December 10, 2009
Pescod Talks about...
COLOSSUS MINERALS
(T-CSI)
MINERA ANDES
(T-MAI)
FORTUNA SILVER
(V-FVI)
Canaccord’s mining guys got together in the Junior Min-
ing Weekly issue and in a special issue called “What a Dif-
ference a Year Makes” (Amen brother!) they take a look at
the junior mining sector and as people are prone to do this
time of year, come up with their eight picks for the coming
year.
Some of our mining guys have been picking stocks red-
hot and while we are probably undergoing a gold correc-
tion here for a couple of weeks anyway (by our guess) it’s
always intriguing to look at their nominees as plays for the
coming year.
Colossus Minerals (CSI) which owns the Serra Pelada pro-
ject, an extremely high-grade gold/platinum/palladium pro-
ject in northern Brazil is the first selection, followed by
Copper Mountain (CUM) (given a $3.00 target), Detour Gold
(DGC), owner of the large project in the Abitibi Greenstone
Belt has a $22.50 target and Exeter Resources (XRC) in North-
ern Chile with their Caspiche gold/cooper/porphyry project
is given a target of $8.80.
Meanwhile, Minera Andes (MAI) is a top pick by Wendell
Zerb looking for $1.55 down the road and Premier Gold Mines
(PG) is given a $5.20 target as more than a few suspect the
company will be consolidated by Goldcorp in which they
have several joint ventures.
Then we get to Hathor Exploration (HAT) which some sug-
gest is the best uranium discovery in Canada in recent
years and then UR-Energy (URE) with its Lost Creek project
in Wyoming which has a target of $1.50. Hathor’s target is
$4.50. But those last two names have a wee bit of a prob-
lem. Just what do you think uranium prices are going to do
next folks?
There seems to be a majority out there that figure over
time, supply of uranium will decrease as all those spent
Russian weapons will run out and then uranium will have
quite a shortage. That view however, is not universal. For
instance, Edward Sterck, who follows uranium for Bank of
Montreal is now suggesting that the uranium market is
forecast to enter a time of over-supply.
He writes, “Having conducted a detailed supply/demand
and cost analysis, BMO Research estimates that the ura-
nium market is about to enter a period of over-supply...and
views the uranium space more cautiously than previously
and is downgrading spot uranium share price forecast,
which impact the valuations and target prices of stocks
under coverage.”
Sterck continues, “Supply from outside the West is
proving more price elastic than previously forecast:
The high uranium prices of 2006/2007 have stimulated
a supply-side response with a greater amount of supply
coming on at a lower marginal cost.”
BMO is now lowering their 2010 spot price to $45.00 a
pound from $55.00 a pound and the long-term price fore-
cast to $50.00 a pound, from $60.00 a pound.
Because of that, BMO is downgrading Cameco to mar-
ket-performance with a reduced target of $33.50 and re-
ducing the targets of Denison to $1.35 and Paladin to
$3.80. So it’s a big question mark. We know that there’s
two commodities that have not done well in the last year
at all. Natural gas that looks like it’s going to be down and
out for some time and uranium that stirring up quite a de-
bate.
Needless to say, you have to be a believer that uranium
prices can get somewhere higher than they currently are
because very few make any money at this level, except for
the very rich producers.
There you go...the bulls on uranium versus the bears
and one of them might be right!
For sure, holding uranium stocks over the last year has
just been an attempt at hitting ones head against the wall.
If you are looking for something hopeful, there’s currently
52 nuclear plants being built around the world at this time,
an increase of about 12%. Sooner or later, all those new
plants are going to need to sign up secure supplies. But
will there still be too much supply around?
Meanwhile, whether you are bullish or bearish on ura-
nium, Cameco, the monster uranium player has just raised
over $800 million selling its interest in Centerra. Sooner
or later, we suspect that Cameco is going to make a pur-
chase in the uranium sector, don’t you? I wonder which
one?
Disclosure: Colossus Minerals, Copper Mountain Mining, Detour Gold, Exeter Resources, Minera Andes, Premier Gold Mines, Hathor
Exploration and UR-Energy: Canaccord Capital covers these stocks and has a Speculative Buy rating on them. (Speculative buy: Stocks
bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the stock may result in material
loss.) Cameco Corporation: Canaccord Capital covers this stock and has a Hold rating on it. (Hold: The stock is expected to generate risk-
adjusted returns of 0-10% during the next 12 months.) Paladin Energy: Canaccord Capital covers this stock and has a Buy rating on it. (Buy:
The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.)
Canaccord has recently participated in financings for Colossus Minerals and Hathor Exploration.
Canaccord has recently led a financing for Exeter Resources.
Posted by Treasure Picks at 5:32 PM
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