Anonymous is whacking QEC Today

Did Speculation Fuel Oil Price Swings?

(CBS) About the only economic break most Americans have gotten in the last six months has been the drastic drop in the price of oil, which has fallen even more precipitously than it rose. In a year's time, a commodity that was theoretically priced according to supply and demand doubled from $69 a barrel to nearly $150, and then, in a period of just three months, crashed along with the stock market.

So what happened? It's a complicated question, and there are lots of theories. But as correspondent Steve Kroft reports, many people believe it was a speculative bubble, not unlike the one that caused the housing crisis, and that it had more to do with traders and speculators on Wall Street than with oil company executives or sheiks in Saudi Arabia.

To understand what happened to the price of oil, you first have to understand the way it's traded. For years it has been bought and sold on something called the commodities futures market. At the New York Mercantile Exchange, it's traded alongside cotton and coffee, copper and steel by brokers who buy and sell contracts to deliver those goods at a certain price at some date in the future.

It was created so that farmers could gauge what their unharvested crops would be worth months in advance, so that factories could lock in the best price for raw materials, and airlines could manage their fuel costs. But more than a year ago those markets started to behave erratically. And when oil doubled to more than $147 a barrel, no one was more suspicious than Dan Gilligan.

As the president of the Petroleum Marketers Association, he represents more than 8,000 retail and wholesale suppliers, everyone from home heating oil companies to gas station owners.

When 60 Minutes talked to him last summer, his members were getting blamed for gouging the public, even though their costs had also gone through the roof. He told Kroft the problem was in the commodities markets, which had been invaded by a new breed of investor.

"Approximately 60 to 70 percent of the oil contracts in the futures markets are now held by speculative entities. Not by companies that need oil, not by the airlines, not by the oil companies. But by investors that are looking to make money from their speculative positions," Gilligan explained.

Gilligan said these investors don't actually take delivery of the oil. "All they do is buy the paper, and hope that they can sell it for more than they paid for it. Before they have to take delivery."

"They're trying to make money on the market for oil?" Kroft asked.

"Absolutely," Gilligan replied. "On the volatility that exists in the market. They make it going up and down."

He says his members in the home heating oil business, like Sean Cota of Bellows Falls, Vt., were the first to notice the effects a few years ago when prices seemed to disconnect from the basic fundamentals of supply and demand. Cota says there was plenty of product at the supply terminals, but the prices kept going up and up.

"We've had three price changes during the day where we pick up products, actually don't know what we paid for it and we'll go out and we'll sell that to the retail customer guessing at what the price was," Cota remembered. "The volatility is being driven by the huge amounts of money and the huge amounts of leverage that is going in to these markets."

About the same time, hedge fund manager Michael Masters reached the same conclusion. Masters' expertise is in tracking the flow of investments into and out of financial markets and he noticed huge amounts of money leaving stocks for commodities and oil futures, most of it going into index funds, betting the price of oil was going to go up.

Asked who was buying this "paper oil," Masters told Kroft, "The California pension fund. Harvard Endowment. Lots of large institutional investors. And, by the way, other investors, hedge funds, Wall Street trading desks were following right behind them, putting money - sovereign wealth funds were putting money in the futures markets as well. So you had all these investors putting money in the futures markets. And that was driving the price up."

In a five year period, Masters said the amount of money institutional investors, hedge funds, and the big Wall Street banks had placed in the commodities markets went from $13 billion to $300 billion. Last year, 27 barrels of crude were being traded every day on the New York Mercantile Exchange for every one barrel of oil that was actually being consumed in the United States.

"We talked to the largest physical trader of crude oil. And they told us that compared to the size of the investment inflows - and remember, this is the largest physical crude oil trader in the United States - they said that we are basically a flea on an elephant, that that's how big these flows were," Masters remembered.

Yet when Congress began holding hearings last summer and asked Wall Street banker Lawrence Eagles of J.P. Morgan what role excessive speculation played in rising oil prices, the answer was little to none. "We believe that high energy prices are fundamentally a result of supply and demand," he said in his testimony.

(CBS) As it turns out, not even J.P. Morgan's chief global investment officer agreed with him. The same that day Eagles testified, an e-mail went out to clients saying "an enormous amount of speculation" ran up the price" and "140 dollars in July was ridiculous."

If anyone had any doubts, they were dispelled a few days after that hearing when the price of oil jumped $25 in a single day. That day was Sept. 22.

Michael Greenberger, a former director of trading for the U.S. Commodity Futures Trading Commission, the federal agency that oversees oil futures, says there were no supply disruptions that could have justified such a big increase.

"Did China and India suddenly have gigantic needs for new oil products in a single day? No. Everybody agrees supply-demand could not drive the price up $25, which was a record increase in the price of oil. The price of oil went from somewhere in the 60s to $147 in less than a year. And we were being told, on that run-up, 'It's supply-demand, supply-demand, supply-demand,'" Greenberger said.

A recent report out of MIT, analyzing world oil production and consumption, also concluded that the basic fundamentals of supply and demand could not have been responsible for last year's run-up in oil prices. And Michael Masters says the U.S. Department of Energy's own statistics show that if the markets had been working properly, the price of oil should have been going down, not up.

"From quarter four of '07 until the second quarter of '08 the EIA, the Energy Information Administration, said that supply went up, worldwide supply went up. And worldwide demand went down. So you have supply going up and demand going down, which generally means the price is going down," Masters told Kroft.

"And this was the period of the spike," Kroft noted.

"This was the period of the spike," Masters agreed. "So you had the largest price increase in history during a time when actual demand was going down and actual supply was going up during the same period. However, the only thing that makes sense that lifted the price was investor demand."

Masters believes the investor demand for commodities, and oil futures in particular, was created on Wall Street by hedge funds and the big Wall Street investment banks like Morgan Stanley, Goldman Sachs, Barclays, and J.P. Morgan, who made billions investing hundreds of billions of dollars of their clients’ money.

"The investment banks facilitated it," Masters said. "You know, they found folks to write papers espousing the benefits of investing in commodities. And then they promoted commodities as a, quote/unquote, 'asset class.' Like, you could invest in commodities just like you could in stocks or bonds or anything else, like they were suitable for long-term investment."

(CBS) Dan Gilligan of the Petroleum Marketers Association agreed.

"Are you saying that companies like Goldman Sachs and Morgan Stanley and Barclays have as much to do with the price of oil going up as Exxon? Or…Shell?" Kroft asked.

"Yes," Gilligan said. "I tease people sometimes that, you know, people say, 'Well, who's the largest oil company in America?' And they'll always say, 'Well, Exxon Mobil or Chevron, or BP.' But I'll say, 'No. Morgan Stanley.'"

Morgan Stanley isn't an oil company in the traditional sense of the word - it doesn't own or control oil wells or refineries, or gas stations. But according to documents filed with the Securities and Exchange Commission, Morgan Stanley is a significant player in the wholesale market through various entities controlled by the corporation.

It not only buys and sells the physical product through subsidiaries and companies that it controls, Morgan Stanley has the capacity to store and hold 20 million barrels. For example, some storage tanks in New Haven, Conn. hold Morgan Stanley heating oil bound for homes in New England, where it controls nearly 15 percent of the market.

The Wall Street bank Goldman Sachs also has huge stakes in companies that own a refinery in Coffeyville, Kan., and control 43,000 miles of pipeline and more than 150 storage terminals.

And analysts at both investment banks contributed to the oil frenzy that drove prices to record highs: Goldman's top oil analyst predicted last March that the price of a barrel was going to $200; Morgan Stanley predicted $150 a barrel.

Both companies declined 60 Minutes' requests for an interview, but maintain that their oil businesses are completely separate from their trading activities, and that neither influence the independent opinions of their analysts. There is no evidence that either company has done anything illegal.

Asked if there is price manipulation going on, Dan Gilligan told Kroft, "I can't say. And the reason I can't say it, is because nobody knows. Our federal regulators don't have access to the data. They don't know who holds what positions."

"Why don't they know?" Kroft asked.

"Because federal law doesn't give them the jurisdiction to find out," Gilligan said.

It's impossible to tell exactly who was buying and selling all those oil contracts because most of the trading is now conducted in secret, with no public scrutiny or government oversight. Over time, the big Wall Street banks were allowed to buy and sell as many oil contracts as they wanted for their clients, circumventing regulations intended to limit speculation. And in 2000, Congress effectively deregulated the futures market, granting exemptions for complicated derivative investments called oil swaps, as well as electronic trading on private exchanges.

(CBS) "Who was responsible for deregulating the oil future market?" Kroft asked Michael Greenberger.

"You'd have to say Enron," he replied. "This was something they desperately wanted, and they got."

Greenberger, who wanted more regulation while he was at the Commodity Futures Trading Commission, not less, says it all happened when Enron was the seventh largest corporation in the United States. "This was when Enron was riding high. And what Enron wanted, Enron got."

Asked why they wanted a deregulated market in oil futures, Greenberger said, "Because they wanted to establish their own little energy futures exchange through computerized trading. They knew that if they could get this trading engine established without the controls that had been placed on speculators, they would have the ability to drive the price of energy products in any way they wanted to take it."

"When Enron failed, we learned that Enron, and its conspirators who used their trading engine, were able to drive the price of electricity up, some say, by as much as 300 percent on the West Coast," he added.

"Is the same thing going on right now in the oil business?" Kroft asked.

"Every Enron trader, who knew how to do these manipulations, became the most valuable employee on Wall Street," Greenberger said.

But some of them may now be looking for work. The oil bubble began to deflate early last fall when Congress threatened new regulations and federal agencies announced they were beginning major investigations. It finally popped with the bankruptcy of Lehman Brothers and the near collapse of AIG, who were both heavily invested in the oil markets. With hedge funds and investment houses facing margin calls, the speculators headed for the exits.

"From July 15th until the end of November, roughly $70 billion came out of commodities futures from these index funds," Masters explained. "In fact, gasoline demand went down by roughly five percent over that same period of time. Yet the price of crude oil dropped more than $100 a barrel. It dropped 75 percent."

Asked how he explains that, Masters said, "By looking at investors, that's the only way you can explain it."


The regulatory lapses in the commodities market that many believe fomented the rampant speculation in oil have still not been addressed, although the incoming Obama administration has promised to do so.

Source

Questerre Updates Quebec Activities

Questerre Updates Quebec Activities

00:41 EST Monday, January 12, 2009
CALGARY, ALBERTA--(Marketwire - Jan. 12, 2009) -

NOT FOR DISTRIBUTION ON U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Questerre Energy Corporation ("Questerre" or the "Company") (TSX:QEC)(OSLO:QEC) reported today that drilling operations have been successfully completed on the St. David well in the St. Lawrence Lowlands, Quebec.

Drilled to a target depth of 1995m on schedule and budget, St. David is the third well in the four-well farm-in program. The well has been cased as a potential gas producer. St. David was recently logged to evaluate the Utica and Lorraine shale/siltstone zones and the Trenton Black-River group. An analysis of these logs is ongoing to select prospective intervals for stimulation and testing.

Subject to equipment availability, completion and testing will commence after spring break-up. The Company expects the operator will spud the fourth and final well in the program, St. Edouard, in late February.

Questerre also reported on the status of the La Visitation and Gentilly wells in the Lowlands. Completion operations with multiple fracs on the recently drilled La Visitation well are currently underway. On the Gentilly well, the operational issues surrounding the packer have been resolved in order to allow testing of the Lorraine to resume shortly. Questerre anticipates preliminary results from these wells will be available during the second quarter.

Michael Binnion, President and Chief Executive Officer of Questerre, commented, "Drilling results on St. David were very positive as we saw promising gas shows in the Utica and Lorraine." Mr. Binnion also commented, "The pilot programs in the Lowlands are rapidly ramping up with several operations underway simultaneously. All these operations are designed to provide extensive technical data critical to assessing the commerciality of the play. We are very pleased that the operator does not compromise in this regard. We believe we remain on track to have an adequate sample of quality results to make a preliminary assessment of the commerciality of the Quebec shales in 2009."

Questerre is a Calgary-based independent resource company actively engaged in the exploration, development and acquisition of high-impact exploration and development oil and gas projects in Canada.

This news release contains forward-looking information. Implicit in this information are assumptions regarding commodity pricing, production, royalties and expenses, that, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. These forward-looking statements are based on certain assumptions that involve a number of risks and uncertainties and are not guarantees of future performance. Actual results could differ materially as a result of changes in the Company's plans, commodity prices, equipment availability, general economic, market, regulatory and business conditions as well as production, development and operating performance and other risks associated with oil and gas operations. There is no guarantee made by the Company that the actual results achieved will be the same as those forecasted herein.

Barrel of oil equivalent ("boe") amounts may be misleading, particularly if used in isolation. A boe conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil and is based on an energy equivalent conversion method application at the burner tip and does not necessarily represent an economic value equivalent at the wellhead.

This news release does not constitute an offer of securities for sale in the United States. These securities may not be offered or sold in the United States absent registration or an available exemption from registration under the United States Securities Act of 1933, as amended.

FOR FURTHER INFORMATION PLEASE CONTACT:

Questerre Energy Corporation
Anela Dido
Investor Relations
(403) 777-1185
(403) 777-1578 (FAX)
Email: info@questerre.com
Website: www.questerre.com

© Copyright CCNMatthews

The Shale Gas Revolution

Oil Magazine.

Dec 2008

A float on fir rafts and light royalties, a production line forms across a northern B.C. muskeg seaMike Graham, EnCana Corp.’schief for the Canadian foothills of the Rocky Mountains, has noillusions.

The breakthrough he’s mandated to lead in northeasternBritish Columbia takes labor and cash – big time.“You walk offthose mats and you’ll be up to your waist in muck,” he says. Hiswarning describes a hazard of tapping natural gas beneath muskeg swampsin the Horn River Basin near B.C.’s boundary with the NorthwestTerritories.

The insects are beyond description.Portable firdecks are built by the tens of thousands at Prince George timber millsfor truck deliveries north, to lay down end-to-end and side-by-side ina growing network of floating roads and work platforms for B.C.drilling rigs.“It’s by no means cheap,” Graham adds. Each well into the new geological jackpot, where EnCana leads the industry pack with nearly 900 square kilometers of Horn River mineral rights, can cost $10 million.

The target only yields its riches to horizontal bores drilled up to 1.5kilometers across formations buried as deep as three kilometers belowthe swamps. Every well requires up to 10 “fracs” or rock-fracturinginjections of sandy fluid, with each shot using about 4.5 millionlitres of salt water obtained by drilling nearly a kilometer down intoanother geological layer. Multiple wells radiate outwards from eachfloating rig location.

This is the gritty and expensive Canadian version of the hottest drilling play in the United States: shale gas. EnCanaranks among the top participants in the new specialty’s cornerstoneBarnett Shale, a 13,000-square-kilometre Texas field in the Dallas-FortWorth region that produces about three billion cubic feet per day or asmuch as all of B.C. The Barnett total has the potential to triple,Graham says.EnCana also has 1,320 square kilometers of mineral rights in an emerging U.S. field – the Haynesville Shale on safe, dry land in northern Louisiana – that Graham describes as potentially twice as productive as the Barnett.

Therewere easier places to start transplanting the Texas technology toCanada. Earth scientists are poring over geological maps of shaleformations and starting to drill in Alberta, Nova Scotia, New Brunswickand Quebec.Talisman Energy and Questerre Energy are poised to launch a commercial pilot project in the St. Lawrence Lowlands west of Quebec City. Stealth Ventures Ltd. describes its pioneer Albertashale gas program as advancing from “a conceptual technology play to acommercial producing asset” with a 70-well drilling program atWildmere, southeast of Edmonton.

Triangle Petroleum Corp. and Corridor Resources Inc. are probing geological formations beneath New Brunswick, Nova Scotia and Prince Edward Island.B.C. lured large-scale development by industry who’s who – from Apache Canada to Nexen Inc. – with a gas counterpart to Alberta’s pro-development oil sands royalties. Mineral rights sales in the Horn River region and similar Montney area topped $2 billion in the first nine months of 2008 or more than double B.C.’s previous annual record.Thenew B.C. regime, enacted with Alberta industry guidance and no publicfanfare last spring as the “net profit royalty regulation,” chargesonly two per cent of gross production revenues.

The rate stays at thatnominal level until all gas-field drilling and development costs arepaid over up to 10 years.After “payout” or full cost recovery,three higher “tiers” set B.C. gas royalty rates at the greater ofseveral potential levels: five per cent of gross revenues or 15, 20 or35 per cent of net revenues after operating expenses.

The rules ensureincreases will be gradual. The rising tiers only kick in as revenuesreach levels double and then triple project costs. The policy continuesto evolve and potentially widen beyond shale gas, with B.C. authoritiesinviting further industry submissions on types of operations thatshould qualify for the incentive scheme.As in Alberta’s oilsands, the key to commercial success in B.C. shale gas is economies ofscale. Developments work when high initial costs are spread thin overthe greatest possible production. In industry language coined by EnCanathese are “resource plays,” where jumbo projects harvest large mineralrights spreads by doing multiple standardized, repetitive drilling andproduction installations over long periods of time. “We talk about amanufacturing approach,” Graham says. “We talk about a natural gasfactory.”EnCana alone expects to produce one billion cubic feet of Horn River gasper day eventually, single-handedly increasing B.C.’s current totaloutput by 33 per cent. The company plans to operate up to 10 drillingrigs around the clock, 365 days a year in the remote region.

“Everytime we drill a well, we get more proficient. We get better at it,”Graham says.At a technical level, the new specialty deserves tobe called revolutionary. The approach replaces eons of fossil fuelevolution. Shale is a geological “source rock,” where organic materialfrom ancient sea beds and swamps biodegrades into methane or oil, thenslowly leaks out and migrates to underground “trap” formations.

These much rarer natural storage sites have been the industry’s drillingtargets for its entire history to date, with their scarcity, size andstructure setting limits on reserves and production.Theresource potential of source rocks is measured in hundreds or eventhousands of trillions of cubic feet, in a gas version of theastronomical ratings for the oil sands. B.C. alone has enoughpotentially gas-charged shale to harbor up to 1,000 trillion cubicfeet, the province’s energy ministry calculates – a fossil fuel motherlode that is the energy equivalent to 166 billion barrels of oil. Theswampy Horn River Basin sprawls across 12,800 square kilometers ofnortheastern B.C.Shale gas also has the potential torevolutionize the energy outlook for all of North America, Graham says.Conventional forecasts, saying U.S. and Canadian gas supplies havepeaked and begun to turn down, are starting to look obsolete.“We’re still just scratching the surface.

The big supply is yet to come.”Instead of building a long lineup of import terminals currently proposed for tanker cargoes of liquefied natural gas from overseas, the industry may need LNG export ports, the EnCana executive suggests.

The first project catering to a possible about-face in gas suppliessurfaced as summer ended. Calgary-based Kitimat LNG Inc. converted its$750-million proposal for a north Pacific import terminal on the B.C.coast at Kitimat into an export scheme about four times bigger.Alberta Oil Magazine.Dec 2008

Cro Insiders Loading Up On Shares For A 10 Bagger In 2009

- This company has connections to very well funded mining operations through decades of experience. I believe Mr. Tyler when he says they are speaking with 5 strategic partners for completion of there project through joint ventures. Joint venture speculation could drive our sp into a frenzy.

- The drill program which comprised our 253 million dollar property is open at depth and further drilling could significantly increase the resource. Some of our strongest results were on outer edges of the drill zone. De-watering of the 2500 meter mine shaft will allow them to get at these areas. The intersection I speak of is the 7% nickel over 5 meters that intersection comes from the end of the drill core. Further exploration could offer up amazing results. 0 summer 2008 drill results out, any significant finds in mine ready atikocan or kenora/dryden properties will lift stock.

- The company has contractual agreements with Opiwica explorations (OPW) on the TSX.V to mill there major gold and copper find with in close proximity of Canadian Arrows Planned site. Mining could begin on both projects in early 2010. This represents earnings and is a good partnership for a company seeking to be the next significant Nickel Copper producer in Canada.

- Canadian Arrow has the ability to produce nickel in its mine at 3.47 per pound nickel. That kind of number is unheard of in comparison to other mines. With production scheduled for early 2010 (around the same time our economy should be significantly rebounding) what if nickel prices return back to 15 dollars per pound? This site will look like a gem to any investor! (plus the property would be worth about 400mil at 15 dollars per pound nickel.

This is just a few of the key points that I believe make this company look attractive. If my predictions are correct we will see a significant rebound to normal multiples over the course of the next couple of months and with any significant news pertaining to my points and our sp and volume will be sent soaring. JV with cash on the books and abilitiy to help put project into production will send our sp back to .50 if not higher! I am Bull on Canadian Arrow mines.

Source

Review This .pdf 12 page report:

http://www.chfir.com/CRO_Valuation/CRO_ValuationReport.pdf

QEC Insiders Buy at 1.80 x 250,000 share options

Canadians starting to save cash, shun debt

Top Court Rules On Tax Scheme

So, while taxpayers will still have to be wary of offending the GAAR through the application of legitimate tax breaks, it's clearly acceptable for couples or individuals to use investment or business assets to pay for a home or to retire a mortgage, and to immediately borrow money to replace those assets and to deduct the interest cost as an expense at tax time.

The Supreme Court had already ruled in 2001 that Vancouver lawyer John Singleton was perfectly justified in taking $300,000 from the capital account of his law firm to help buy a house in his wife's name and, on the same day that he wrote the cheque for the house, borrow money to replace the partnership capital and claim a tax deduction for his interest costs.

Top court says no to family's tax scheme TheStar.com - Business - Top court says no to family's tax scheme

Judges rule 4-3 that husband's deduction of wife's expenses was `abusive tax avoidance'
January 09, 2009 James DawBusiness Columnist
Earl Lipson has lost his final appeal over his right to deduct his wife Jordanna's interest expenses and leave them with more money to pay for a $750,000 home they bought in Toronto in 1994.

But thousands of other taxpayers can breathe easier, says their lawyer, Edwin Kroft of McCarthy Tétrault LLP in Vancouver, and others familiar with yesterday's widely anticipated Supreme Court of Canada ruling, which also applies to Lipson's brother Jordan.
A four-to-three majority of judges ruled that a series of transactions and the use of available tax breaks resulted in abusive tax avoidance, contrary to the general anti-avoidance rule, or GAAR.
But Kroft says it will be significant to many taxpayers that the court's general endorsement of two lower court rulings did not give the Canada Revenue Agency everything it might have wanted.

The top judges saw nothing wrong with the taxpayers' wives deducting interest expenses for a loan used to purchase shares in a family company, and for the brothers to apply the proceeds of the loans to buy family homes.

"The tax benefit of the interest deduction resulting from the refinancing of the shares of the family corporation by Mrs. (Jordanna) Lipson is not abusive viewed in isolation, but the ensuing tax benefit of the attribution of Mrs. Lipson's interest deduction to Mr. Lipson is," wrote Justice Louis LeBel for the majority.

The brothers had made use of the option to report the sale of company shares at their adjusted cost instead of the fair market value, as is permitted.

They would thus have had to report any income their wives earned from dividends. But interest expenses on loans produced a loss that gave them the major tax benefit questioned by the CRA, and which has now been ruled inappropriate by the four Supreme Court judges.
"I don't know whether Mrs. Lipson had other sources of income (than dividends from the family company), but to the extent she did, she could claim the interest expense deduction, or she could carry forward such deductions and claim them in future years," said lawyer Brian Kearl of Gowling Lafleur Henderson LLP in Calgary.

"At the time, the carry-forward period was only seven years. Now it is 20 years."

So, while taxpayers will still have to be wary of offending the GAAR through the application of legitimate tax breaks, it's clearly acceptable for couples or individuals to use investment or business assets to pay for a home or to retire a mortgage, and to immediately borrow money to replace those assets and to deduct the interest cost as an expense at tax time.

The Supreme Court had already ruled in 2001 that Vancouver lawyer John Singleton was perfectly justified in taking $300,000 from the capital account of his law firm to help buy a house in his wife's name and, on the same day that he wrote the cheque for the house, borrow money to replace the partnership capital and claim a tax deduction for his interest costs.

"So unless the transaction is very similar to the Lipsons' – if it's a plain vanilla debt swap strategy – I think it's okay," said Jamie Golombek, managing director, tax and estate planning at CIBC Private Wealth Management.

Kroft said "his decision still leaves lots of uncertainty for taxpayers – and the Crown" over the use of complicated tax planning strategies.

With the division of opinion among judges about Canada Revenue's use of the general anti-avoidance rules, "there is no clarity that they are going to win."

QEC New website + Corp. Presentation

Click Here For The Most Current Power Point Presentation

Oil's plunge continues

Oil's plunge continues

GEORGE JAHN
Thursday, January 08, 2009
VIENNA — Crude prices fell again Thursday on more evidence that the global economy is under strain and that demand for energy will fall further.

Light, sweet crude for February delivery fell $1.11 cents to $41.52 (U.S.)a barrel on the New York Mercantile Exchange.

On Wednesday, the contract tumbled 12 per cent, or $5.95, to settle at $42.63 after the U.S. Department of Energy's Energy Information Administration said that inventories of commercial crude oil inventories rose 6.7 million barrels. That was well above the 1.5 million-barrel build expected by analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., suggesting demand continues to erode.

Later Thursday, the U.S. government will report natural gas reserves.

The “huge builds in both the crude and products markets for last week” was the main downward price driver, said trader and analyst Stephen Schork, in his Schork Report. And Toby Hassall, an analyst with investment firm Commodity Warrants Australia in Sydney, said the stock build reminded the market that demand remains weak.

The global economy continues to weaken and on Thursday, U.S. president-elect Barack Obama said the recession could “linger for years” unless Congress pumps unprecedented sums from Washington into the economy.

“I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible,” Mr. Obama said in a speech set to be delivered at George Mason University in Fairfax, Va., outside Washington. Excerpts from his prepared text were released in advance by his transition team.

It was the fourth day in a row that Mr. Obama has addressed this front-burner issue and it was the highest-profile appearance yet on an issue that can define his early months in office.

The economic crisis has hit retailers hard as consumers steer clear of buying even heavily discounted merchandise.

Department-store operator Macy's Inc. said Thursday it will close 11 stores in nine states — affecting 960 employees — and lowered its forecast for the fourth quarter after one of the weakest holiday seasons in years.

Wal-Mart, the largest retailer in the U.S., slashed its forecast for fourth-quarter earnings, and its shares fell more than eight per cent in pre-market trading.

Equities markets fell from Asia to Europe.

The FTSE 100 index of leading British shares slipped 78.94 points, or 1.8 per cent, at 4,428.57, despite another half percentage point interest rate reduction from the Bank of England, which took the benchmark rate to an all-time low of 1.5 per cent.

Meanwhile Germany's DAX fell 82.86 points, or 1.7 per cent, to 4,854.61, while France's CAC-40 was down 71.64 points, or 2.1 per cent, to 3,274.45.

Tokyo's Nikkei 225 stock average lost 362.82, or 3.9 per cent, to 8,876.42, snapping a seven-day winning streak as the yen traded higher, and Hong Kong's Hang Seng Index fell 571.55 points, or 3.8 per cent, to 14,415.91.

Oil prices had risen earlier this week to above $48 from a five-year low of $33.87 a barrel on Dec. 19 on investor concern that the conflict between Israel and Hamas in Gaza could spread to the rest of oil-rich Middle East and affect supplies.

Lebanese militants fired at least three rockets into Israel early Thursday, threatening to open a new front for the Jewish state as it pushed forward with a bloody offensive in the Gaza Strip that has killed nearly 700 people. Israel responded with mortar shells.

“There was a shift of focus to geopolitical issues last week,” Mr. Hassall said. “If the situation calms down a little over there, the market's focus will come back to the weak global demand outlook, and that should keep prices pretty suppressed.”

Also adding to tensions in markets recently was the gas dispute between Ukraine and Russia, with all gas deliveries to Europe through Ukraine frozen for a second day. Both sides met earlier Thursday and were in Brussels to speak to the EU about how to resolve the impasse.

In other Nymex trading, gasoline futures rose less than a penny to $1.08 a gallon. Heating oil gained 2.6 cents to $1.57 a gallon, while natural gas for February delivery added 9.4 cents to $5.966 per 1,000 cubic feet.

In London, February Brent crude fell 46 cents to $45.40 a barrel on the ICE Futures exchange.

© Copyright The Globe and Mail

Merckles to sell Ratiopharm as credit approved

TheStar.com - Business - Merckles to sell Ratiopharm as credit approved
January 08, 2009

FRANKFURT–The family holding company of dead German tycoon Adolf Merckle got a long-awaited bridge loan from banks yesterday, in a deal that will force it to sell Ratiopharm, the world's fourth-largest generic drugs maker.

The family's VEM Asset Management investment vehicle said its creditor banks had transferred the bridge loan after weeks of tough talks. Financial sources had earlier told Reuters the loan was for 400 million euros ($545 million U.S.).

"We are very happy to have found a solution," VEM head Ludwig Merckle, one of Adolf's four children, said in a statement.

The loan, which buys the family time to work out a broader restructuring of the business empire that Merckle built up over the past 40 years, comes less than two days after he threw himself in front of a train.

In addition to Ratiopharm, the Merckle family controls HeidelbergCement and drug wholesaler Phoenix Group as well as a diverse portfolio of other business investments that helped put Merckle in the ranks of the world's wealthiest people.

Under the deal, a trustee named by VEM and its banks will guide the sale process for Ratiopharm and Ludwig Merckle will also have to step down as VEM chief, the statement said.

Reuters News Agency

Oil Ready For Another Big Bull Run?

Bolling: Oil Should Be in the $70-$85 Range, Buy the Dips
Posted Jan 07, 2009 11:53am EST by Aaron Task in Investing, Commodities
Related: USO, DUG, DXO, OIH, XLE
After rallying 40% from the December lows, oil prices were recently down more than 3% to $46.95 per barrel Wednesday, falling in concert with stocks and as the DOE reported a sharp build in inventories.
Declines like these are opportunities to add to oil positions, says Eric Bolling, a former NYMEX commodity trader and host on Fox Business News. While oil's midsummer rally overshot reality, its subsequent decline was similarly overdone, says Bolling, who believes oil should be in the $70-$85 per barrel range.

The trader and television commentator is currently long oil via the United States Oil ETF, which he says is the best ETF at handling the "roll" that occurs when crude futures contracts expire each month.

Bolling said he will add to the USO position if/when spot crude falls below $45 per barrel - which it approached earlier today - and is a long-term bull on the commodity because of geopolitical risks and the U.S. government's efforts to "reflate" the economy.

And David Pescod Says...

CRUDE OIL
$42.82 -5.76
NATURAL GAS
$5.86 -0.13
It’s an ugly day on the markets. In the U.S.A. they report
almost 700,000 job losses, which shows things aren’t going
that well.

Meanwhile, in the energy market it’s also an ugly day as
the U.S. Department of Energy reported its latest petroleum
inventories for the week and crude inventories rose last
week by 6.7 million barrels and is currently much higher
than the same time last year.

Gasoline inventories rose last
week by 3.3 million barrels to 211.4 million barrels and are
slightly lower than last year. The net result was a significant
swack to the oil index and oil dropped over $5.00 a barrel.
In the meantime, it’s the time of year that oil analysts tend
to make the projections for the coming year and needless to
say, the projections from the different brokerage houses are
all over the place.

The parameters they are looking at are
much the same, but what their crystal ball delivers can be
quite different. The one big negative is that suddenly the
world has a lot bigger supply than it needs, courtesy of addi-
tional Saudi production that could come on stream. That’s
the only big negative, but it’s the only one that matters.
If you are trying to find positives, it’s that it looks like
OPEC might be actually cutting back as it said it might, par-
ticularly some of the countries that never seem to do what
they say they will do such as Venezuela, Iran, Ecuador and
the like. Also the Americans are looking up to 20 million
barrels of oil for their strategic reserves and the Chinese
also suggesting they might need multiples of that, is a posi-
tive. But quickly becoming the big factor is the enormous
cutbacks by companies around the world from Enerplus
Income Fund in Canada (cutting exploration from $500 mil-
lion to $300 million) to Gazprom (the Russian giant cutting
exploration by 25%).
With oil companies around the world, whether it’s Pemex
or Petrobras, if these people aren’t looking for oil...they are
not finding it and meanwhile, the natural decline rates in
different areas of the world can be anywhere from 5% to
30%, so a year from now, there is going to be less oil coming
on stream.
It’s the time of year that analysts get around to making
predictions about what next for oil prices for the different
brokerage houses and of the reports we find of interest is
the one put out on December 31st by Barclays Capital and
they write, “At the moment there is an inbuilt instability in-
volved in the realities of supply and demand. The price that
generates enough long term energy supply is a high one,
and the current freezing up of investment activity across
energy and alternatives is likely to make it even higher in
the medium and long term.

QEC News Unrisked Target=$41.42:Initial flow back the wells have co-produced burnable gas and frac fluids at varying rates

January 7, 2009

Questerre Updates Their Quebec Yamaska Activities
CALGARY, ALBERTA--(Marketwire - Jan. 7, 2009) -

NOT FOR DISTRIBUTION ON U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Questerre Energy Corporation ("Questerre" or the "Company") (TSX:QEC)(OSLO:QEC) updated operations for the St. Francois du Lac and St. Louis de Richelieu horizontal wells on the Yamaska permits in the St. Lawrence Lowlands, Quebec.

Operated by its partner, both horizontal wells were successfully frac'd. Frac operations went according to plan and on schedule. On initial flow back the wells have co-produced burnable gas and frac fluids at varying rates.

The frac plugs were only just recently drilled out with minor operational delays. Tubing has been run in the hole to complete the well for long term production testing which will also assist in lifting the frac fluids for final clean up of the wells. We anticipate it will take several weeks for final clean up of the wells and determination of a final stabilized production rate equivalent to a '30-day rate'.

Michael Binnion, President and Chief Executive Officer of Questerre, commented, "These are the two first horizontal wells in the Lowlands and are another step in a multi-well pilot program to evaluate the commerciality of the Quebec shale plays. They represent a critical step in our technical understanding of the Quebec shales and we are obviously pleased with how well the frac operations were carried out. "

Cro Insiders Loaded Up In December

- This company has connections to very well funded mining operations through decades of experience. I believe Mr. Tyler when he says they are speaking with 5 strategic partners for completion of there project through joint ventures. Joint venture speculation could drive our sp into a frenzy.

- The drill program which comprised our 253 million dollar property is open at depth and further drilling could significantly increase the resource. Some of our strongest results were on outer edges of the drill zone. De-watering of the 2500 meter mine shaft will allow them to get at these areas. The intersection I speak of is the 7% nickel over 5 meters that intersection comes from the end of the drill core. Further exploration could offer up amazing results. 0 summer 2008 drill results out, any significant finds in mine ready atikocan or kenora/dryden properties will lift stock.

- The company has contractual agreements with Opiwica explorations (OPW) on the TSX.V to mill there major gold and copper find with in close proximity of Canadian Arrows Planned site. Mining could begin on both projects in early 2010. This represents earnings and is a good partnership for a company seeking to be the next significant Nickel Copper producer in Canada.

- Canadian Arrow has the ability to produce nickel in its mine at 3.47 per pound nickel. That kind of number is unheard of in comparison to other mines. With production scheduled for early 2010 (around the same time our economy should be significantly rebounding) what if nickel prices return back to 15 dollars per pound? This site will look like a gem to any investor! (plus the property would be worth about 400mil at 15 dollars per pound nickel.

This is just a few of the key points that I believe make this company look attractive. If my predictions are correct we will see a significant rebound to normal multiples over the course of the next couple of months and with any significant news pertaining to my points and our sp and volume will be sent soaring. JV with cash on the books and abilitiy to help put project into production will send our sp back to .50 if not higher! I am Bull on Canadian Arrow mines.

Source

Review This .pdf 12 page report:

http://www.chfir.com/CRO_Valuation/CRO_ValuationReport.pdf

Facing Losses, German Billionaire Takes Own Life

The New York Times

January 7, 2009

Facing Losses, German Billionaire Takes Own Life

By CARTER DOUGHERTY

FRANKFURT — Adolf Merckle, the German billionaire whose speculation in volatile Volkswagen shares pushed his sprawling business empire to the edge of ruin, has committed suicide, his family said Tuesday.

Mr. Merckle, 74, was found dead Monday night on railroad tracks near his villa in the southern German hamlet of Blaubeuren. German authorities in the nearby city of Ulm confirmed the death, saying there was no sign of foul play.

“The distress to his firms caused by the financial crisis and the related uncertainties of recent weeks, along with the helplessness of no longer being able to handle the situation, broke the passionate family businessman, and he ended his life,” the family said in a statement.

Forbes put Mr. Merckle’s fortune at $9.2 billion in 2008. A native of Dresden who made his way to the West after World War II, Mr. Merckle parlayed a family business in chemicals into one of the biggest pharmaceutical companies in the world. Ratiopharm, a maker of generic drugs that nonetheless became a recognized brand itself, became the pride of the family.

Other businesses included Phoenix, a pharmaceutical wholesaler, and HeidelbergCement, a building materials supplier that in 2007 acquired a British rival, Hanson, to become a leading global player.

The financial crisis began taking its toll on HeidelbergCement last year as the debt incurred to buy Hanson became more burdensome. Standard & Poor’s lowered the company’s credit rating as liquidity became scarce thanks to global market convulsions.

But Mr. Merckle’s dalliance with Volkswagen shares, more than any other single investment, caused the distress that apparently led to his death. Caught in the “short squeeze” that also cost many hedge funds dearly, Mr. Merckle lost hundreds of millions of dollars, and was facing the breakup and sale of his business empire.Copyright 2009 The New York Times Company

Pescod says...

QEC: Rises Russian gas disruption spreads across Europe

Russian gas disruption spreads across Europe

CHRISTIAN LOWE
Tuesday, January 06, 2009
MOSCOW — Russia's worsening gas dispute with Ukraine cut supplies on Tuesday to Turkey and a swathe of European countries, threatening disruption as far west as Italy and Germany.

The European Union, dependent on Russia for a quarter of its gas, urged Moscow and Kiev to find a solution this week. The head of Ukraine's state energy firm said he would fly to Moscow on Thursday.

Bulgaria, Turkey, Macedonia, Greece and Croatia said flows of Russian gas via Ukraine had come to a halt, creating what Bulgaria called a “crisis situation” in the middle of winter.

European Union member states Austria and Romania said deliveries were down 90 per cent and 75 per cent, respectively, and German energy firms warned there could be gas shortages in Europe's biggest economy if the dispute dragged on and sub-zero temperatures persisted.

“Even our possibilities will reach their limits if these drastic cuts in shipments last and if temperatures continue to stay at very low levels,” E.ON Ruhrgas chief executive officer Bernhard Reutersberg said.

Russia's Gazprom can only guarantee gas supplies to Italy of 7 million cubic metres on Tuesday, or less than 20 per cent of the expected amount, an Italian source close to the matter said. The industry ministry earlier said Rome was planning to increase gas imports form alternative suppliers.

Russia and Ukraine blamed each other for the crisis, which has struck at the height of the European winter and spread alarm across the continent.

Ukraine's neighbour Slovakia will declare a state of emergency, Czech news agency CTK reported. Poland cut gas supplies to industrial clients.

The Czech Republic, which holds the EU's rotating presidency, said it was considering the “extreme option” of a three-way EU-Russia-Ukraine summit.

“However this is not on the table yet because we insist the two sides must reach an agreement,” Prime Minister Mirek Topolanek said.

The dispute threatens to worsen Russia's ties with the West, already fraught after its war with Georgia last year.

Europe's heavy dependence on Russian energy – and vulnerability to supply disruption – was highlighted when Moscow reduced volumes to Ukraine on New Year's Day after failing to reach agreement with Kiev over gas prices.

But Simon Blakey, director of European research at Cambridge Energy Research Associates, said EU countries had seen the crisis coming and could tap large storage reserves.

“If there are significant drops in supplies to the European Union, the key question is whether it goes on for a very long time. But it would have to go on for weeks or months for serious problems to arise for Western European customers,” he said.

Russia and Ukraine have clashed repeatedly on a range of other issues, particularly the ambition of Ukraine's pro-Western leaders to join NATO.

Russia's Gazprom said Ukraine shut down three Russian export pipelines early on Tuesday and said it was a hostage of Kiev's “irresponsible behaviour”.

“Russia has requested that the gas which was stolen, which is equivalent to 65 million cubic metres (mcm), should be returned,” deputy chief executive Alexander Medvedev said.

But Ukraine blamed Russia, with President Viktor Yushchenko saying Moscow would continue cutting gas supplies to Europe or stop them altogether.

Gazprom says it usually exports about 300 mcm of gas per day to Europe via Ukraine during the winter while Ukraine consumes about 100 mcm. The latest news of pipeline shutdowns suggests exports via Ukraine running at below 100 mcm, which could mean shortages in Europe in a day or so.

The dispute helped push gas prices around 10 per cent higher in London trading on Tuesday.

The disruptions come at a bad time for Europe, which is experiencing a cold snap likely to drive up gas demand.

“As of 3:30 a.m. (0130 GMT) supplies ... to Bulgaria as well as the transit to Turkey, Greece and Macedonia have been suspended,” Bulgaria's Economy Ministry said in a statement. “We are in a crisis situation.”

Bulgaria is particularly vulnerable to the disruptions because, unlike Greece and Turkey, it has no access to alternative gas supply routes.

State firm Bulgargaz told industrial users it was suspending or cutting supplies to a minimum and urged them to switch to alternative fuels such as oil. Two fertilizer companies, Neochim and Agroploychim, were forced to halt production.

The government said people would not be left in the cold, but urged households to start using other means for central heating.

A delegation from the Czech presidency of the European Union met Ukrainian officials in Kiev, while talks between Gazprom and the EU were planned for later on Tuesday in Berlin.

“The situation [with gas supplies via Ukraine to central Europe] ...is getting worse by the minute and we would like to talk about this new situation,” Czech Industry Minister Martin Riman told reporters in Kiev.

Most larger EU countries say they have large amounts of gas stockpiled after several mild winters, and have access to supplies from sources such as Norway and Algeria.

The conflict between Moscow and Kiev, now in its sixth day, escalated dramatically on Monday when Russian Prime Minister Vladimir Putin ordered Gazprom to cut deliveries of gas to Europe via Ukraine by about one sixth – the same amount Moscow accused Kiev of siphoning off.

Worries about European gas supplies, coupled with Israel's military operation in Gaza, have pushed oil up to a three-week high close to $50 (U.S.) a barrel. Russia, whose main export is oil, stands to benefit for a recovery in prices.

© Copyright The Globe and Mail

Bargain hunters come to buy

Bargain hunters come to buy

RTGAM






Investors feeling more optimistic about 2009 snapped up stocks in some of the worst performing sectors and sent the Toronto stock market sharply higher on the first day of trading in the new year.

New York markets also surged despite data showing a further slump in the U.S. manufacturing sector as investors expect significant moves to stimulate the American economy after president-elect Barrack Obama is sworn-in later this month.

"You have a big stimulus package coming from the incoming U.S. administration - the timing is uncertain but we know it's going to be enormous," said John Johnston, chief strategist, The Harbour Group, RBC Dominion Securities.

Toronto's S&P/TSX composite index was up 246.41 points to 9,234.11 with all sectors positive save gold and consumer staples stocks, gaining 923.56 points or 11 per cent this week.
The TSX ended 2008 down 35 per cent for the year - the second-worst year ever, compared with a 37 per cent decline in 1931.

New York's Dow Jones industrial average, down 34 per cent for 2008, rose 258.3 points to 9,034.69.

The TSX Venture Exchange added 49.67 points to 846.69. The Canadian dollar edged up 0.16 of a cent to 82.26 cents US.

The Nasdaq composite index, fresh from a 40 per cent plunge last year, rose 55.18 points to 1,632.21 while the S&P 500 added 28.55 points to 931.8 following a 38 per cent tumble in 2008.

The gains on the market followed news from the Institute for Supply Management that said its manufacturing gauge stood at 32.4 in December, a 28-year low and worse than November's reading of 36.3.

"As if it needed restating, this report emphasizes once again that the U.S. economy is in a recession, as any figure below about 44 for the headline index has historically matched up well with this condition," said Eric Lascelles, chief economics and rates strategist at TD Securities.

"And to the degree that the U.S. slowdown is not actually a business-led slowdown - driven rather by sour housing, financial, and consumer factors - it speaks to both the breadth and depth of the slowdown."

Helping drive the Dow higher was General Motors Corp. - it jumped 45 cents or 14 per cent to $3.65 (U.S.), after the U.S. government paid out $4-billion in emergency loans.

A number of deals in the financial sector arising from the credit crisis were finalized at year-end. Bank of America acquired Merrill Lynch & Co., Wells Fargo & Co. closed its acquisition of Wachovia Corp., and PNC Financial Services Group bought National City Corp.

The battered TSX base-metals sector, down 68 per cent last year, was up almost 16 per cent as the March copper contract ran up 4.7 per cent to $1.461 a pound after the metal plunged 54 per cent last year. Teck Cominco Ltd. rose $1 to $7.02 and FNX Mining surged 91 cents or 30 per cent to $3.95.
The energy sector was up 6.25 cent as the February crude contract in New York gained $1.74 to $46.34 a barrel. Petro-Canada rose $2.38 to $29.10 and EnCana Corp. gained $2.79 to $59.75.

Oil surged more than $5 a barrel Wednesday after Russia threatened to cut off natural gas supplies to Ukraine. Russia followed through with that threat Thursday, though both countries pledged to keep supplies flowing to the rest of Europe.
The Toronto financial sector, down 38.5 per cent in 2008, was ahead 1.4 per cent with Royal Bank up 85 cents to $36.95 (Canadian) while Bank of Montreal headed 90 cents higher to $32.15.

The consumer staples sector was down 0.7 per cent as Shoppers Drug Mart gave back $1.55 to $46.50.

The gold sector was weak, down two per cent as the February bullion contract in New York faded $4.80 to $879.50 (U.S.) an ounce.
NovaGold Resources Inc. shares ran up 13 cents to $1.90 (Canadian) after Electrum Strategic Resources LLC of New York bought a 30 per cent stake in the Vancouver-based company for $60-million.

High River Gold Mines Ltd. shares retreated three cents or 19.7 per cent to 34.5 cents is looking to float more equity or debt while reporting a cash shortfall amid ongoing production troubles in Africa and Russia.

- The Canadian Press

Copyright 2001 The Globe and Mail

"If Santa Claus should fail to call, bears may come to Broad & Wall."

Analysts see equities under pressure until the U.S. musters an economic recovery – perhaps in the back half of 2009

January 01, 2009

RITA TRICHUR
BUSINESS REPORTER

"If Santa Claus should fail to call, bears may come to Broad & Wall."

That adage – coined by Yale Hirsch, founder of the Stock Trader's Almanac – warns that if the traditional Santa Claus rally fails to materialize during the last five trading days of the outgoing year and the first two of the new one, it is a bad omen for stocks.

The last five trading sessions of 2008 produced a flurry of mixed results for key New York indexes, while the Toronto stock market mostly posted gains. It remains to be seen how investors will ring in the new year when trading resumes tomorrow. Nonetheless, analysts suggest that glad tidings may be in short supply in 2009 – at least for the near term.

Since mid year, stocks on both sides of the border have been trapped in a vicious bear market that has already proven to be one of the worst ever for Toronto's main stock index.

Despite soaring to a record-breaking high of 15,073.13 on June 18, Toronto's S&P/TSX composite index posted a 35 per cent loss for 2008 as the crisis of confidence that infected credit markets also proved contagious for stocks.

If past experience is any guide, the average TSX bear market requires about three years to return to its previous peak.

The bad news, experts say, is that markets will likely remain choppy in the short term.

"We anticipate that Canadian equities will remain under pressure through 2009; our end-2009 TSX composite target is 8,000, and we expect the market to trade somewhat lower than that through the year," said David Wolf, an economist with Merrill Lynch, in a recent report.

"Our TSX operating EPS forecast for 2009 is $620, down 35 per cent from 2008 and 28 per cent below the bottom-up consensus. We cannot call a bottom for equities until Canadian market participants evince a more realistic and balanced assessment of the drastically changed macro environment and until greater visibility allows risk premiums to ebb."

Underpinning his "still-bearish outlook" is a two-pronged argument that contends analysts' revised earnings forecasts are still too upbeat, while stocks are "not nearly as cheap" as they might seem.

"Based on the bottom-up consensus EPS (earnings per share) number for 2009, the TSX is currently trading at 10 times forward earnings, indeed close to the lowest levels we've seen in 20 years," observed Wolf. "But using our $620 forecast, the market is trading at more than 13 times forward earnings, no cheaper by this metric than has generally been the case over the past several years."

Wolf may be known for his bearish views, but even traditional equities bulls are advising investors to tread cautiously. Among them is Paul Taylor, chief investment officer for BMO Harris Private Banking, who warns the first half of 2009 will be "very challenging" for capital markets.

"As a result we plan to only be a very selective buyer of Canadian equities early in the year," stated Taylor. "However, as economic growth re-ignites, there will be an opportunity for a rotation into more cyclical stocks and sectors."

Even allowing for that smidge of optimism, Taylor's cautious stance is a marked shift from last April when he predicted the outlook for equities would improve during the second half of 2008.

Taylor, however, is not the only Bay Street veteran altering forecasts in the face of deepening economic woes. Jeff Rubin, chief economist of CIBC World Markets, recently pared his 2009 year-end TSX target by 1,000 points to 11,000. In doing so, he counselled clients to "think twice before bulking up on stocks just yet."

Last June, Rubin predicted that strong crude oil prices would spur the TSX to hit a record high of 15,200 by the end of 2008. It didn't quite make it, but came within spitting distance as commodity prices soared.

As oil prices reversed course, however, he slashed his short-term target to 9,500 and then again to 9,000 on Dec. 10. The TSX actually ended 2008 at 8,987.70 points.

"We continue to expect the North American economy to contract over the first half of the year, with near-term punitive consequences for earnings," Rubin said, suggesting that investors "going long stocks now should be prepared for more jolts along the way."

Despite the darkening economic outlook, Rubin does hold out hope that "more than reasonable" returns could be generated over the next 12 months. His prediction largely hinges on plans for a mammoth fiscal stimulus from the American government. Such measures, he said, "should resuscitate growth by the second half of the year, spelling a recovery in both earnings and commodity prices, particularly energy."

Vincent Delisle, director of portfolio strategy at Scotia Capital, also suggests the long-term equity outlook is poised to improve even if the not-so-distant future looks dim.

"Since Canada's economy and equity market lag the U.S. by approximately 12 to 18 months, 2009 will be the year where Canada's numbers visibly deteriorate," Delisle said. "Our 2009 TSX EPS forecast is set at $650, pointing to a 32 per cent decline in TSX earnings."

Delisle suggests that S&P 500 earnings will likely rebound before those of the TSX. With that being his "index of choice," his "defensive" sector preferences include financials, discretionary, consumer staples and utilities.

He agrees it may be too soon to call a definitive bottom, but observes that past bear markets have either rebounded or fell into a trough during recessions rather than times of economic recovery. Historical data suggest S&P 500 bear markets typically end about eight months before the job market heals.

CIBC economists Peter Buchanan and Meny Grauman, meanwhile, suggest the TSX's bottom could be nigh if the United States manages to muster an economic recovery during the back half of 2009.

"The good news is that since the 1920s Canadian stocks have tended to bottom between three and nine months before the end of a U.S. recession, with the median being around five months," they wrote.

"True, the economic challenges facing the country are nearly unprecedented, but so too is the accompanying government response."