Commodity News And Mining Stocks

We Have Moved ...

2010-01-29T17:16:00.000-08:00

We have moved to a new location.

We hope you continue to follow us in our journey at Investing Thesis

If you continue to be subscribed to our RSS Feed, we recommend you do the same HERE (by RSS Reader) or HERE (by Email).

We promise to pour our hearts and soul into publishing articles, interviews and content that will inspire, help and enlighten you in your quest for financial freedom. We urge you to Contact Us with comments, recommendations, criticisms or even if it only to say 'Hi.'

We can also be found on Facebook, Twitter and Scribd where we upload research pieces and presentations.

We hope you drop by our new home at Investing Thesis and drop us a Line.

Ciao .....

Gold - Just a Shiny Yellow Metal?

2010-01-19T04:00:00.004-08:00

****Note****

This is will be the final post on this blog. I am currently focusing on building an Investment Blog with a Canadian Focus Thia new blog will contain not only interviews with investment professionals and CEO's but with also cover news and analysis with regards to mutual and hedge funds, fixed income, economics and personal finance.

So head on over to the Canadian Investment Blog

An in-depth article by Jamie Hyndman, CFA of Mawer Investment Management about the usefulness of gold. The article also highlights gold's investment track record and assesses the chances of gold replacing fiat currency.

Gold - Just a Shiny Yellow Metal?

On the Radar: Constantine Metal Resources (CEM: TSX-V)

2010-01-04T18:45:00.000-08:00

A short conversation with J. Garfield MacVeigh, President, C.E.O. and Director of Constantine Metal Resources (CEM: TSX-V)

When investing in junior resource stocks, one must keep in mind a few rules to abide by, to separate the wheat from the chaff. Out of the plethora of publicly traded micro-cap resource companies, only a handful ever find a economic deposits and see it through to production. With the odds stacked against you, one of the few guiding points that investors can hope to bet on is management. Experienced, competent management is a critical factor for all companies but even moreso when only 1 out of every 1000 junior resource companies actually finds the Holy Grail: a high grade, low cost economic deposit. Betting on people who have found and developed economic deposits in the past is perhaps the most important rule to live by when dabbling in junior resource. With that introduction, I turn to J. Garfield MacVeigh, President, C.E.O. and Director of Constantine Metal Resources (CEM: TSX-V) for an introduction to his company.

Biography: Mr MacVeigh received his B.Sc. from Queen's University at Kingston in 1972. He has 32 years of experience in gold and base metal exploration in Canada, U.S.A. and Central America. He was a participant in the discovery of the Hoyle Pond Gold Deposit in Timmins, Ontario, and contributed to the exploration and discovery of the HW Deposit and several new zones at Westmin Resources Ltd.’s Buttle Lake massive sulphide ore deposits on Vancouver Island, British Columbia. As District Manager for Lac Minerals Ltd. in western Canada and Alaska in 1991 - 1995, was involved in the exploration of the Red Mountain gold deposit near Stewart, B.C. Canada. Mr. MacVeigh was a founding member and past President and CEO and Chairman of the Board of Rubicon Minerals Corporation. He is currently a director and Vice President of Exploration for Paragon Minerals Corporation, a Newfoundland focused company that was formed through the spinout of Rubicon’s Newfoundland property assets.

Q: Mr. MacVeigh, can you please provide us with some of the most salient points of the Palmer VMS project in Alaska? In addition, what kind of blue sky does the asset offer?

A: The Palmer VMS project, located in a very accessible part of southeast Alaska, includes Constantine's significant new Southwall and RW discoveries that are high-grade copper-zinc zones with associated gold and silver. The discoveries are in Triassic aged rocks and are located between two well known world class deposits of the same age - specifically the Green's Creek deposit that is one of the world’s highest grade large tonnage VMS deposits and the huge Windy Craggy deposit that is the fourth largest deposit of its type in the world. The value of these deposits is apparent in Hecla’s recent $750 million purchase of 70% of the Greens Creek deposit from Rio Tinto. On a 100% basis this values the deposit at $1 billion, a significant sum when considering that the deposit has already been in production for about 20 years.

One of the major advantages of the Palmer project is its access and proximity to the ice-free, deep sea port of Haines, Alaska, which is only 60 kilometers by existing road from the discovery area and provides direct access to the hungry Asian smelting markets.

Constantine's Southwall and RW discoveries were made late in the 2007 drill season and the steep dipping Southwall was expanded significantly in 2008 and 2009 drill programs and now has an open strike and dip length of approximately 400 meters each. The high-grade RW discovery made late in 2007 that is the folded equivalent of part of the Southwall zone has not yet been followed up with drilling.

The South wall and RW discoveries offer the short to intermediate term exploration potential for 10-15 million tonnes of high-grade copper and zinc rich massive sulphide that would be sufficient to justify more than a 10 year mine life at 3000 tonne per day. These deposits are known to occur in clusters and the Palmer project contains many additional high-grade prospects that are linked by strong alteration corridors over more than 15 kilometers of strike length that have seen minimal to no drilling. One of these prospects is highlighted by very large high-grade MHC float boulders located 5 kilometers from the current drilling that includes assays of 2.5% copper and 33% zinc over 1.8 meters. These features indicate “blue sky” geological potential on the order of 30-50 million tonnes.

Constantine has just completed metallurgical benchmarking of the Southwall mineralization that indicated very good copper and zinc recoveries combined with good marketable concentrate grades. This initial metallurgical data also provides the important information required for our first NI43 -101 compliant resource estimate currently in progress, with results anticipated early 2010.

Q: Mr. MacVeigh, you were the past President and CEO and Chairman of the Board of Rubicon Minerals Corporation, which is having a stellar year – however, not many people seem to know about Constantine Metals – why do you think that is and what is the catalyst for that to change?

A: Rubicon is a good example of a company that started with fairly humble beginnings and in the past 5 years has grown its market cap from <$20 million to a current market cap around $1 billion , an exceptional increase as a result of perseverance and exploration success. Constantine is a new company that went public in August 2006 and was formed with the specific purpose to explore the Palmer project as the result of an agreement between Carlin Gold and Rubicon Minerals. Palmer was originally a Rubicon project that was acquired in the early formative days of Rubicon at a time when I was Rubicon’s president Constantine, like Rubicon, went public in markets that turned dramatically downwards not long after going public. In Rubicon's case it was the aftermath of the Bre-Ex scandal and the fallout from that. With Constantine, our significant discoveries were made at the on-set and continued through the financial meltdown and we lost the traction that this type of discovery would normally deliver. Palmer is also a copper-zinc dominant discovery and the base metal opportunities have not received anywhere near the attention of gold and silver projects. We believe there is some excellent value in base metal stories in the market at the present time and people are starting to realize this. The long term fundamentals of the base metal sector are really quite exciting, and with an early stage discovery on our hands we are well positioned for the next major up-swing. Constantine has recently ‏hired a full time experienced investor relations person [R.E. (Bob) Jeffery)] and we are ramping up our efforts to get our story to a broader audience. These efforts are showing some results as we have seen increased liquidity in the stock over the past several months. Q: With regards to Constantine as a company, you just raised $1.4 million in financing, so how is your financial position? How long will that $1.4 million last Constantine Metals last and when do you expect to come back to markets next? A: Constantine has approximately $1.7 million in its treasury and has also just announced the accelerated exercise of $0.20 warrants that we anticipate to bring in another $2.0-2.5 million dollars, leaving us with a treasury of about $3.7- 4.0 million by mid-January 2010. These funds are sufficient for a winter Croesus drill program (in planning stages) and a good portion of the 2010 Palmer program. Ultimately, Constantine would like to have funding of $10+ million in place to allow for 2 years of exploration and development of the Palmer and Croesus projects. Constantine is in the early discovery and the steep value building phase of the Palmer project and we are optimistic that there is huge upside for existing and new shareholders at current prices. Q: With regards to the Munro-Croesus Project, where in the exploration/development process are you with that? What are the upcoming events/catalysts for that project? A: The Croesus project includes the small past producing Croesus Mine that is famous for having produced probably the richest gold ever mined in Ontario (> 10,000 oz/t). The Munro Croesus Project consists of 85 claims made up of the 22 claim Munro Croesus property and the adjacent 63 claim Four Corners property. The project lies along the north side of the Pocupine-Destor Fault Zone (Break) that controls most of the more than 65 million ounces of gold that has been produced from the Timmins camp.

Constantine management has intimate familiarity of the history and geology/mining of Croesus. My great uncle (James Grant) operated the mine in the late 1920s –early 1930s and my father (Edwin MacVeigh) worked there as a geologist during that time and later. I mapped the Croesus property in the early-mid 1970s that resulted in a very detailed stratigraphic and structural map that provided key information on the geological controls for the spectacular high-grade Croesus gold.

Constantine acquired the property in 2007 and has carried out 2 drill campaigns on the Croesus mine site that have demonstrated high grade gold in vein structures that probably represent the faulted off-set of the high-grade Croesus vein and in addition has discovered another high grade vein structure below the mined out Croesus vein that lies in exactly the same structural block and sulphide-carbon rich flow setting of the high grade mined out Croesus vein.

Constantine is now preparing to carry out a focused drill program on a relativity small target area that has potential to yield spectacular high-grade gold ore. Close spaced drilling combined with downhole geophysical techniques will be used to zero in on the high-grade gold targets. The tenor of some of the historic direct shipping gold is such that 1 to 2 cubic meters of similarly mineralized rock could yield more than $100,000,000 of contained gold at current prices, so the exploration cost of relatively shallow drilling justifies the potential reward.

Q: Can you please highlight a few of the accomplishments of the management team at Constantine Metals?

A: Constantine’s management and directors are proud of the exploration team that has been assembled and the discovery success that has been accomplished in a short time frame in very difficult markets. While staying focused on our flagship Palmer discovery, we have also acquired a high profile and exciting gold project in the very prolific Timmins gold camp area where management has considerable expertise.

The Palmer discovery was made with the initial $2.2 million IPO funds. We have now raised a total of more than $11.0 million, including $2.2 million in 2008 and $4.4 million to date in 2009 in extremely tough markets. Management and directors have participated in all but one small financing and insiders own more than 30% of the outstanding shares which demonstrates their commitment to the company and the projects.

Prior to the formation of Constantine, management has been associated with several major mine discoveries. Perhaps most relevant to our Ontario project, I lead the exploration program that discovered the Hoyle Pond deposit in the Timmins area that has produced over 2.4 million ounces of gold to date (currently mined by Goldcorp Inc). Wayne Livingstone, Chairman of the Board for CEM also has a strong history of discovery, highlighted by the Hycroft gold mine in Nevada, where he was involved with the project from original discovery through production. Hycroft currently has a resource base in excess of 10 million ounces.

Constantine has been able to attract some young, dynamic geological talent including Darwin Green as VP Exploration. Darwin did his Master’s thesis on the Palmer project (with Rubicon support) in the late 1990s, has intimate familiarity with underground mine permitting in southeast Alaska and has already had a major impact on Constantine’s strategy and success.

Q: Lastly, if you were addressing potential investors, what reasons would you give for them to look at Constantine Metals? Also, when are you expecting the National Instrument 43-101 compliant resource estimate for the Palmer VMS project to be out?

A: Constantine offers its potential investors a Board of Directors and a management team with a very successful track record and a history of economic discoveries. The Board and the management work well together and have a diversity of skills in exploration, mining, permitting and investor relations and a sincere interest in community relations and First Nations cooperation that is required to build a discovery into an economic success.

Constantine has made significant new discoveries at Palmer that demonstrate management’s ability and potential investors still have the opportunity to participate in a great new discovery at a very attractive share price.

As mentioned in question 1 above, our first NI 43 -101 compliant resource is now in progress, with results anticipated early in 2010.

Thank You Mr. MacVeigh!

Disclosure: Long Constantine Metal Resources (CEM: TSX-V)

Don Coxe Basic Points December 2009

2009-12-18T23:53:00.000-08:00

Don Coxe Basic Points December 2009 - Financial Heroin

To read/download Mr. Don Coxe's November 2009 Edition of Basic Points Click Here

Props: ZeroHedge

BMO Capital Markets Basic Points Dec 2009

Note: I am slowly migrating to a new and improved blog at Investment Thesis. See you there!

Interview with Cam Hui, Blogger and Advisor to Qwest Investment Management

2009-12-16T07:00:00.005-08:00

A short conversation with Cam Hui, Blogger and Advisor to Qwest Investment Management

Biography: Mr. Hui was employed by Merrill Lynch in New York City as a Relative Value and Technical Research Analyst. Before joining Merrill Lynch, Cam Hui held portfolio manager positions with Graham Capital Management LLC and Batterymarch Financial Management, Inc. Mr. Hui also held positions with Wood Gundy Inc. (now CIBC World Markets).

Mr. Hui obtained his Bachelor of Science degree (Honours) in Computer Science in 1980 at the University of British Columbia, and passed the Canadian Securities Course in 1985 and the CFA Charter in 1989.

Mr. Hui is currently semi-retired and living in Vancouver, Canada with his family. He maintains his interests in the markets and advises hedge funds and other clients as a consultant and serves on the Board of Advisors to Qwest Investment Management. Mr. Hui has presented numerous papers to quantitative discussion groups. Sample topics include: How Global are Resource Sectors; Hidden Biases in Quantitative Models; and Hedge Fund Replication.

Mr. Hui is a regular blogger and you can find him at Humble Student of the Markets

Q: Mr. Hui, you recently commented on the lack of follow through with some of the gold stock indices in relation to gold's most recent run-up to new highs. Can you please elaborate a little more on that and if possible, you’re view of gold moving forward? Also, how do you suggest investors play gold?

A: I believe that gold stocks are tactical trading vehicles and not investment vehicles, in the same way that leveraged ETFs are trading vehicles but could disappoint in the longer term. Investors seeking a leveraged play on gold should buy long dated call options on gold or GLD, the gold ETF. Investors seeking to hedge their inflation risk could just hold gold or gold like vehicles, such as Central Fund of Canada or GLD.

To read more on Mr. Hui’s thoughts on gold, I would direct you to a post his blog entitled, "Why You Shouldn’t Buy Gold Stocks”.

Q: On a broader basis, Mr. Hui, what is your call on valuations on the TSX and the S&P 500 going into next year - is there room for further multiple expansion as quantitative easing continues and interest rates appear to not be going anywhere soon? How are you playing this view?

A: Let me preface my remarks by saying that no model works all the time, including valuation. Recall that as early as 1997 there were all sorts of stories flying around about how overvalued AOL or Amazon.com were (e.g. at one point if Amazon’s sales were to be as big as Walmart they would still be overvalued) – but their stock price kept going up. I use valuation models to gain a perspective on the market and to understand context and risk.

The S&P 500 appear to be overvalued on a number of dimensions. Consider, for example, Tobin Q (Editor’s note: The Tobin’s Q ratio was devised by James Tobin of Yale University, Nobel laureate in economics, who suggested that the combined market value of all the companies in the stock market should be about equal to their replacement costs. The Q ratio is calculated as the market value of a company divided by the replacement value of the firm's assets. A low Q, between 0 and 1, implies undervalue while a high Q, over 1, implies overvalue)

(chart courtesy: Smithers and Co.)

I also see a number of other fair value estimates that are way below the current value of 1100. John Hussman believes fair value is between 672 and 810. Jeremy Grantham of GMO (AUM $US 86 billion) has a fair value estimate of 860 on the S&P 500 (download Mr. Grantham's q3/09 report here)

When I see these sorts of numbers, I see that there is a lot of downside risk in the market. History shows that when markets correct they overshoot past fair value.

In the short term, however, it doesn’t mean that the stock market necessarily goes down. My inner trader tells me that valuations and fundamentals have a way of not mattering to the market, until they do and the Tech Bubble of the late 1990’s is an example of that. We need to watch how the market reacts to news and how market internals behave.

While I have my own opinions, I have found in the past that my opinions tend to be extremely early in its calls and can’t time the market well. For market timing, I prefer to build more systematic models, such as the Inflation-Deflation Timer that I outline in my blog and in my research reports for Qwest Investment Management.

Q: Mr. Hui, I know you closely monitor inflationary and deflationary trends in the economy, so are we currently facing inflationary or deflationary pressures, why or why not?

A: The investment conundrum for many wealth management specialists is to get the macro-economic environment right, as the inflation vs. deflation call could very well be the Call of the Decade. There is a lot of risk in that call. The two scenarios are diametrically opposed to each other. Inflation hedges (e.g. commodities) get creamed during deflationary episodes and deflation hedges (e.g. long dated default-free U.S. Treasuries) wither horribly during periods of runaway inflation.

Making that call is especially difficult because there are many well-respected people on both sides of the debate and I have never seen opinions so split in my career. On the inflation side, you have the likes of Warren Buffett and Simon Johnson, the former chief economist at the IMF. On the deflation side, you have Nobel laureates such as Paul Krugman and Joseph Stiglitz.

Given the huge differences in opinion, I am agnostic on the topic. Instead, I built an inflation-deflation timer model that uses trend following principles as applied to inflationary expectations. This class of model is useful for understanding macro-economic trends, which are persistent.

Currently, the model is calling for inflation, although the trend is weakening. For now, I am staying with the discipline of the model and giving the inflation trade the benefit of the doubt.

I am also producing an inflation and deflation headline watch report in association with Qwest Investment Management.

I continue to perform research, as well as product development, with Qwest Investment Management on this issue of timing the inflation and deflation trade. I believe that it is of utmost importance for anyone looking to formulate investment and asset allocation policy with a 5-10 year time horizon. For people in wealth management and on investment committees, there is also a lot of career and reputational risk at stake. Get it right and you’ll be a hero. Get it wrong and you may never recover.

Q: Are you a believer in Peak Oil, Mr. Hui? What are your thoughts and predictions regarding the energy sector going forward?

A: People like Robert Hirsch, who co-authored the book, "Peaking of World Oil Production: Impacts, Mitigation, And Risk Management" in 2005 for the US Department of Energy, and Matt Simmons, author of "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," are compelling in their analysis.

What’s more, standard micro-economic theory holds that higher prices means high supply. Blogger Gregor Macdonald shows that non-OPEC production has been flat to down for the last several years.

(Chart courtesy: Gregor Macdonald)

Oil prices have been rising, so where’s the new supply? This chart signals to me that we may be supply constrained on oil production in some way.

I won’t go into all the reasons why I am a Peak Oil believer however, you should download my report on peak oil for further analysis on peak oil.

Looking at this from a big picture point of view, Hirsch is right in that the challenge for over the next several decades is to transition from an economy that is powered by petroleum based energy source to other technologies. It isn’t about how high oil prices go, but whether economic growth can continue if we don’t have another energy source or use energy more efficiently.

Q: Sir, can you please highlight 1 trade idea that you think offers the best value moving forward and your reasons for liking it?

A: I am unable to make such short term calls. I prefer to rely on the discipline of models such as the Inflation-Deflation Timer, which is still bullish on the inflation and risk trade, but those readings could change anytime.

Thank You Mr. Hui!

Interview with Jamie Hyndman of Mawer Investment Management

2009-12-11T03:30:00.001-08:00

A short conversation with Jamie Hyndman, Director of Marketing for Mawer Investment Management Ltd.

Q: In the face of the recent volatility in the stock market, and gold hitting new all time highs – what would be you’re view of gold moving forward (is this the end of the bull run or does gold have a ways to go)?

A: We don’t have a strong view of gold prices or any other commodity price for that matter. The reason is that commodity prices are largely driven by macro-economic events, which we believe are impossible to predict with any consistent accuracy. Capital markets are considered to be what’s known in the scientific world as “complex adaptive systems” which means there are too many moving parts and their linkages can never be determined because they are in constant flux (see Mawer Insight #11 - Lookout for Outlooks for a full description of these concepts). So, armed with the knowledge that making macro bets is likely to have a low probability of success, we don’t spend our time and energy here. What we do spend our time on is finding companies that have a proven business model with strong, enduring competitive advantages, great management teams, improving business fundamentals, and then try to buy these companies at a discount to intrinsic value.

Q: On a related note, what is your call on valuations on the TSX and the S&P 500 going into next year - is there room for further multiple expansion as quantitative easing continues and interest rates appear to not be going anywhere soon? How have you geared your funds to reflect this view?

A: Valuation appears to be fair at this point, considering the level of interest rates. However, interest rates have nowhere to go but up from here so there is likely going to be pressure on multiples at some point soon. If corporate earnings can pose a strong rebound at the same time as the rising interest rates then this will not be a problem, but if corporate earnings do not come through then we will see pressure on equity prices.

Q: Given the glut of inventory in natural gas and crude sitting at approximately $75, what are your thoughts and predictions regarding the energy sector going forward? Do you prefer oil over gas stocks or vice versa - why?

A: The answer to question number one applies, but generally speaking we are more comfortable with the energy sector than most commodities because there is a scarcity issue with energy that doesn’t exist with most other commodities, such as base metals (there’s hundreds of years of supply of most base metals so the long-term price will always return to its cost of production when new supply is brought on, which will cause miners to become unprofitable for a period of time). With respect to oil vs. gas, natural gas appears to be in ample supply for the near-term, so we think the focus here should be only on those companies that are the low-cost producers of natural gas, like Encana. We are more inclined to favour the oil sector at present, but hold this lightly.

Q: Given that cyclical stocks have outperformed defensives in this rally since March 2009, can you please highlight one sector among Canadian stocks (e.g. can be financials, energy stocks, technology, resources etc.) that you believe to be overvalued and due for a correction and one sector that you believe to be undervalued and due for a bounce and why?

A: We really don’t think this way. We are a bottom-up manager and find both under and overvalued companies in most sectors. Furthermore, we don’t think in terms of short time frames and therefore don’t put any emphasis on catching “bounces”. We are not active traders – our annual turnover is very low, often in the 10%-30% range. The companies we own are ones that we expect to own for the long-term because they have a track record of creating wealth over long time frames and we expect them to do so in the future, regardless of short-term stock price fluctuations. We also believe short-term trading can be costly in terms of commissions and capital gains taxes.

Q: Lastly, can you please highlight 1-2 stocks/themes that you think offers the best value moving forward and your reasons for liking it?

A: Yes, security selection is the thing we strongly emphasize. We believe it is possible to separate good companies from bad with a fairly high level of probability. In Canadian equities we have recently been adding to our positions in Rogers and the TMX group. Both companies have strong business models, very capable management, improving fundamentals and trade at attractive valuations (we think the attractive valuation exists because the market has incorrectly built in assumption about potential competition that we think will not materialize in any significant way (new wireless entrants in the case of Rogers and new alternative trading systems in the case of TMX).

Thank You Mr. Hyndman!

Credits: Ms. Olivia Woo - Senior Portfolio Manager, Private Client Portfolio Management

To read Mawer's latest publication which explains why the appropriate asset mix is so crucial, one should read Mawer Insight Vol. 28 - Asset Mix Revisited

Disclosure: I do not hold any positions in the stocks mentioned in this article.

Bearish Technical Divergence In Gold

2009-12-10T12:14:00.000-08:00

If we were congnizant enough to have been monitoring the bearish divergence in the Roc (Rate of Chhange) indicator and the Moving Average Convergence/Divergence (MACD) indicator, perhaps we could have called for a top in gold. Alas, we weren't and we didn't.

What is the Rate of Change (ROC) indicator?

The Rate of Change (ROC) indicator is a very simple yet effective momentum oscillator that measures the percent change in price from one period to the next. The ROC calculation compares the current price with the price n periods ago. The ROC oscillator fluctuates above and below the zero line as the Rate of Change moves from positive to negative. The oscillator can be used as any other momentum oscillator by looking for higher lows, lower highs, positive and negative divergences, and crosses above and below zero for signals.

What is the Moving Average Convergence/Divergence (MACD) indicator?

The Moving Average Convergence/Divergence (MACD) measures the difference between two Exponential Moving Averages (EMAs). A positive MACD indicates that the 12-day EMA is trading above the 26-day EMA. A negative MACD indicates that the 12-day EMA is trading below the 26-day EMA. If MACD is positive and rising, then the gap between the 12-day EMA and the 26-day EMA is widening. This indicates that the rate-of-change of the faster moving average is higher than the rate-of-change for the slower moving average. Positive momentum is increasing, indicating a bullish period for the price plot. If MACD is negative and declining further, then the negative gap between the faster moving average (blue) and the slower moving average (red) is expanding. Downward momentum is accelerating, indicating a bearish period of trading. MACD centerline crossovers occur when the faster moving average crosses the slower moving average. The histogram represents the difference between MACD and its 9-day EMA. The histogram is positive when MACD is above its 9-day EMA and negative when MACD is below its 9-day EMA.

Forent Energy (FEN: TSX-V) - Stock To Watch

2009-12-10T03:00:00.003-08:00

According to the December 9, 2009 edition of the TSX Venture Exchange Daily Bulletin , we were informed that the TSX Venture Exchange had accepted for filing documentation with respect to a Brokered Private Placement for Forent Energy (FEN: TSX-V) announced September 1 and October 30, 2009.

The reason we chose to highlight this company [ Forent Energy (FEN: TSX-V)] was due to some of the participants in the private placement. While not all 24 placees have been named, a crucial few have.

We're not entirely certain of who Brant Investments might be but UTA Asset Management Corp. is the sub-advisor to Goodman & Company Investment Management Ltd., the manager of CDR 2007 Private Flow-Through LP , CMP 2008 Resource Limited Partnership and Canada Dominion Resources 2008 Limited Partnership. Goodman and Company Investment Counsel is Dundee Wealth Management's investment management division.

While not 100% certain, we're willing to bet big that Patricia Schachter is a close relation of the eponymous Josef Schachter of Schachter Asset Management.Schachter Asset Management Inc. provides oil and gas research coverage for small to mid-cap energy companies to Maison Placements Canada for their institutional clients.

John R. Ing is the President of Maison Placements Canada. Maison Placements is a leading independent Canadian research-based institutional investment dealer. Mr. Ing specializes in the precious metals sector, and has been featured numerous times on BNN and a number of media outlets. I was fortunate enough to interview Mr. Ing some time ago and you can our diatribe by clicking: Interview with John R. Ing of Maison Placements Keep in mind, however, that Mr. Ing's firm, Maison Placements was the agent that brokered the private placements.

Lastly, Brenda Asplund is an employee of Schachter Asset Management

Indulge me a little here, what are the odds that Patricia Schachter, Mr. Ing and Brenda Asplund have relied significantly on Mr. Schachter's oil and gas expertise to aid in their decisions to invest in Forent Energy (FEN: TSX-V) huh?

Lastly, and most importantly, while Forent Energy may have some smart people investing in them, they are predominantly an exploration company. Forent is the largest petroleum exploration leaseholder in Nova Scotia. 1,200,000 acres on two blocks: the Alton Block (740,000 acres) and the Beech Hill Block (460,000 acres). According to the Forent Energy website, the Alton Block is a “World-class shale gas play and a Large reef oil play.” While the Beech Hill Block is a “Continuation of shale gas opportunity, Additional reef oil deposits [and a] Known shale oil play.’

We are not recommending purchase of shares in Forent Energy (FEN: TSX-V), in fact, we don't own any shares ourselves and hadn't even heard of the company till today, even though it has been in existence for quite a while. Our intention, via this post, was to simply point out the investing activities of people very close to Josef Schachter of Schachter Asset Management, since a whole bunch of you (me included) are keen followers of his insights. If we were to recommend anything, it would be to keep Forent Energy (FEN: TSX-V) on your watch-list.

Do Your Own Due Diligence!!

Disclosure: I do not hold shares in Forent Energy (FEN: TSX-V)

Details of the private placement include:

Number of Shares:        10,223,799 Units
                         (Each Unit consists of one common share and one-
                         half of one share purchase warrant.)

                         9,841,411 flow-through shares

Purchase Price:          $0.15 per Unit
                         $0.17 per flow-through share

Warrants:                5,111,900 share purchase warrants to purchase
                         5,111,900 shares

Warrant Exercise Price:  $0.17 expiring on April 28, 2011

Number of Placees:       24 placees

Insider/Pro Group Participation:

                             Insider equals Y/

Name                     ProGroup equals P/            No. of Shares

Brant Investments Ltd.   Y                           4,412,000 Units
UTA Asset Management
Corp.                    Y                           3,393,500 Units
Patricia Schachter       P                           1,000,000 Units
John R. Ing              P                             367,000 Units
Brenda Asplund           P                             150,000 Units

Agent's Fee:             $320,661 and 2,006,521 Agent's Warrants payable
                             to Maison Placements Canada Inc.

                         Each Agent's Warrant is exercisable for one
                         common share at a price of $0.17 expiring on
                         April 28, 2011.

Short Signals on 30 Year US Treasury Bonds

2009-12-08T01:00:00.004-08:00

It is very hard to deny Jason Russell's trading acumen. As founder and Chief Investment Officer of Acorn Global Investments, Mr. Russell applies "highly disciplined, adaptable and proven strategies to a liquid portfolio of exchange traded futures and exchange traded funds diversified by geography, sectors, instruments, systems, frequencies and trade direction," according to the Acorn Global Investments website. While Mr. Russell may be down -7.92% year to date, keep in mind his year only began in July 2009, as a result of starting up his new firm, Acorn Global Investments. However, Mr. Russell's performance in 2008 was a highly noteworthy 22.32% and according to the Acorn website which lists his performance going back to 2005, Mr. Russell has never had a losing year. Could 2009 be his first - perhaps, but I wouldn't count him out as yet cause he still has the rest of December to do what he does best. Highlighted below is his latest Market Commentary piece (as of December 7, 2009), which I have requested permission to reproduce below. I also encourage you to visit: Acorn Global Investments

"Bonds maturing in less than two years and even out to five years continue to attract capital and thus, prices have continued to climb. However, on the longer end of the yield curve, the 10 year and 30 year US bonds have been weakening and recently have given some short signals. It will be interesting to monitor the profitability of these positions and to see if the trade spreads around the world and down the curve."

Disclaimer: This commentary is produced by Acorn Global Investments Inc. (“Acorn”). Opinions expressed here adapt quickly and without notice to changing market conditions. Acorn is under no obligation to update any of this information. The information we use is obtained from sources we believe to be accurate, however, that is not always the case so we make no guarantees. The information here does not constitute a recommendation to buy or sell anything and should not be considered by anyone to be a substitute for their own judgement. Acorn is the manager of the Acorn Diversified Trust (the Fund). Important information about the Fund including risks, objective, strategy and fees is contained in the offering memorandum. Past performance is not indicative of future results. This is not and may not be used as a solicitation. If you wish to use any of this information, please ask permission.

Interview with Martin Braun of Adaly Investment Management Corp.

2009-12-07T02:00:00.004-08:00

A short conversation with Martin Braun of Adaly Investment Management Corp. (AIMC)

Biography: Martin Braun, M.B.A., CFA is the President/CEO & lead portfolio manager at AIMC.

Martin began his career at Richardson Securities (later Richardson Greenshields) in 1981, joining that firm’s research department. Over the next seven years he covered the financial services and real estate sectors, among others.

In 1988, he joined Gluskin Sheff + Associates. During his 10 years there, he was responsible for the analysis and management of Canadian and U.S. equity portfolios.

In 1999, Martin co-founded Trapeze Asset Management Inc. Over the next seven years, as President and a portfolio manager at Trapeze, he launched and managed the Adaly Opportunity Fund and later The Strategic Opportunities
Master Fund.

Martin left Trapeze to form AIMC in September 2006.

Adaly's strategy, according to Mr. Braun is to "research and analyze companies, assess their prospects and weigh them against expectations. We also are value-oriented, so in our make-or-break decision we look at the stock price versus what we have concluded the company is worth. We never pay up, and sell when the valuation is stretched. We find the ideas everywhere and anywhere. It could be a theme we believe in, or a management team we really like, or a recommendation by a brokerage house, or came off a screen we ran, or just a name we know well that goes up and down in price and is now at a point that appeals to us."

Q: Mr. Braun, in the face of the recent volatility in the stock market, and gold hitting new all time highs – what would be you’re view of gold moving forward (is this the end of the bull run or does gold have a ways to go)?

A: Like everything else, I really don’t know where gold goes. It is a crowded trade in my world, but perhaps on a global scale less so. It makes sense to buy gold when central banks are sacrificing their currencies to stimulate on an unprecedented scale. But on the other hand, the velocity of money has collapsed, which explains why GDP has dropped as much as it has. Also, overcapacity is everywhere you look (labour markets, factory utilization, etc.), which restrains price levels. So though gold should continue to rise in nominal terms over the long-term (it always has), it might be done for now. The problem in forecasting anything is sentiment - it is extremely powerful, and can drive markets (including the gold price) to levels that have no fundamental support. That factor alone reduces forecasting to pure guesswork.

Q: On a related note, what is your call on the TSX going into year end and early next year - are we in for a correction or is this liquidity fulled rally going to continue? How are you gearing the fund to reflect this opinion?

A: I don’t follow the TSX – it is a junior market that is resource-based but also heavily weighted in the 5 big banks. Between these two polar opposites is a hodge-podge of companies in various industries. Canada attracts foreign capital when commodity prices are rising. Also, the weakness in the US banking system has increased ownership in our banks. When we invest in Canadian stocks we are really investing in just the stocks themselves and their individual characteristics, without any regard to the Canadian market in total.

Q: Given the glut of inventory in natural gas and crude sitting at approximately $75, what are your thoughts and predictions regarding the energy sector going forward?

A: We invest in individual companies. So though the outlook for oil and natural gas prices is unappealing to us, we will invest in energy companies if the growth and profit stories triumph over the weak commodity backdrop. Also, as hedge fund managers, we have no problem short-selling oil and natural gas through the futures markets (as we do), or individual companies and ETF’s that are really just proxies for the commodities.

Q: Given that cyclical stocks have outperformed defensives in this rally since March 2009, can you please highlight one sector among Canadian stocks (e.g. can be financials, energy stocks, technology, resources etc.) that you believe to be overbought and due for a correction and one sector that you believe to be oversold and due for a bounce and why?

A: Clearly, in Canada, the obvious sector that is a candidate for being overbought (short-term) is precious metals. The only other one that I would consider overbought is our banks. With such a strong advance, identifying an oversold sector is hard. But one could argue that energy services has underperformed and could offer good value as the operators reposition themselves and their equipment in more attractive markets (such as international, shale plays, etc.).

Q: Lastly, can you please highlight 1-2 stocks/themes that you think offers the best value moving forward and your reasons for liking it?

A: Despite gold stocks being extended, the fact that gold is well north of $1000 an ounce means that there are many gold resources around the world that are economic now, versus just over two years ago when gold was sub-$700. Even if gold corrects to $1000 (down almost 20% from the high), these resources can be brought into production and generate good cash flow and IRR’s. We spend a lot of time these days looking for junior companies that are drilling up precious metal properties, and reporting exciting results – but haven’t gone through the roof yet. A second theme is how technology has improved the economics of developing oil and gas fields. A few cycles back companies discovered horizontal drilling. Now they have discovered new ways of fracturing the rock off the horizontals. As a result, formations like the Bakken, the Montney, the Cardium, the Viking and the Shaunavon (all well-known prior to this) suddenly have an appeal they never had before. The companies that play in this new high-tech world of energy exploration have been and will continue to be big winners.

Thank you Mr. Braun!

Interview with Jason Russell of Acorn Global Investments

2009-12-04T13:49:00.001-08:00

A short conversation with Jason Russell of Acorn Global Investments

Biography: As founder of Acorn Global Investments , Jason Russell serves as the firm’s Chief Investment Officer. Jason is an accomplished portfolio manager who brings more than 18 years of industry and alternative investment management experience to the firm.

Previous experience included roles at Bankers Trust, Merrill Lynch, CIBC, and his most recent position at Salida Capital where he was the sole Portfolio Manager for its Global Macro Hedge Fund. He has considerable expertise and experience in the areas of research, programming and systematic trading.

Jason continues to be very active in the areas of systematic trading research and trading psychology. He collaborates closely with several distinguished traders and founded two research groups focusing on system development and trading psychology. Jason was highlighted as a systematic trading professional in the book titled Trend Following by Michael Covel.

Jason is a member of the CFA Institute and the Toronto Society of Financial Analysts.

Acorn's strategy, according to Mr. Russell involves "no regard for news, opinions, speculations or third party research. "We simply focus on the bottom line profitability of each position," he says. Positions that are earning money attract capital, positions that are losing money have their capital taken away. There are no black boxes or magic formulas. This approach does not work all of the time but it has proven to work over time."

Q: Mr. Russell, in the face of the recent volatility in the stock market, and gold hitting new all time highs – what would be you’re view of the trend in gold moving forward? Do you see any indications for a pause or a correction?

A: If you are long gold, you better have an exit price in mind, every day. Today we are short gold but that could change tomorrow.

Q: On a related note, what is your call on the TSX and the S&P 500 going into next year - are we in for a correction or is this liquidity fuelled rally going to continue?

A: Without a doubt, equity markets will go much higher and much lower. I don’t know when or in what order. One of the secrets to good trading (and life for that matter) is that it does not matter what happens. If you are really sweating about an outcome, you have your position sizing wrong.

Q: Given the glut of inventory in natural gas and crude sitting at approximately $75, what are your thoughts and predictions regarding oil and natural gas going forward?

A: I have been short natural gas for a very long time. Crude oil could easily go back below $40 in the next couple of years. That being said, I’m long.

Q: Lastly, can you please highlight 1 trade that you think offers the best risk-reward trade-off and your reasons for liking it?

A: The best trade on the books right now is long Malaysian Palm Oil. Again, this could change tomorrow.

Thank You Mr. Russell!

Interview with Tom Akin of Research Capital

2009-12-03T03:00:00.001-08:00

A short conversation with Technical and Quantitative analyst Tom Akin of Research Capital

Bio: Tom Akin is a technical and quantitative analyst with nine years experience, most recently with Research Capital Corporation. He holds a Chartered Market Technician designation (CMT) from the Market Technicians Association and was ranked 2nd in technical analysis and 3rd in quantitative analysis in the 2008 Brendan Wood Institutional Investor Survey. Tom began his career in 1999 with TD Securities Inc. after graduating in 1999 from the University of Western Ontario with a Bachelor of Science in Mathematics.

Q: Mr. Akin, in the face of the recent volatility in the stock market, a number of Elliot wave practitioners are calling the recent rally from the lows a bear market rally and that we are now in a secular downtrend, does your analysis concur with this view?

A: I don't really utilize Elliot Wave analysis as it takes an enormous amount of practice and requires a long history of study and understanding. Additionally, a lot of patterns in technical analysis can't really be recognized until they are completed, and as such, it is potentially dangerous to identify formations before they have had a chance to satisfy themselves. For example, a head and shoulders looks like normal market action after the first shoulder and head at the point of the bottom of the right shoulder. Only after the right shoulder has formed and the neckline is being tested are we more confident of the pattern. As such, I prefer to try to react to what the market is telling me and not try to identify larger overall secular patterns before they become obvious.

And what the market is telling me is that this isn't your father's standard bear market rally. After this far, this fast, it is difficult to believe that we are still in a bear market. We would need to be at the beginning stages of a depression that would rival the great one of the 30s for this rally to simply be a fakeout/hope trade. And I just don't believe the underlying economic and earnings factors are as bad as they were then. As such, it is a fair possibility that the bottom has been seen, at least for now (secularly). I would say that I am not expecting new lows or an immediate return to lows at any point soon. That being said, I am also anticipating that 2010 is going to be a very tough year for investors and traders alike. Volatile, mostly sideways action is a reasonable expectation after the scope and nature of the rally we have had, much like 2004 following the final 2003 low in what turned out to be a triple bottom.

Despite the fact that a new bull market had dawned, 2004 was a year when the S&P 500 was very volatile and ended up net down around 10% after 9 months of chop. It was very difficult to trade. 2010 could very well end up similarly. We will be facing more difficult year-over-year comps in 2010 than we were in 2009 . Additionally, overbought conditions and valuations may dictate an investor attitude of demanding economic and earnings results that start to show that they are actually recovering more strongly rather than simply not getting any worse.

Q: What are the technical and quantitative factors telling you about the TSX Composite as we move into 2010? Do you have any near term pivot points of support and resistance for the TSX Composite?

A: 11,500 has proven fairly strong resistance up to this point. From a sector perspective, of the three drivers of returns, Energy and Financials appear to have topped for now, with only Gold having been capable of reaching new highs. This may limit the overall Composite going forward. Beyond this, at 12,500 (only 1000 points away), I see very strong resistance from 2007-2008 where the level was defended multiple times by the bulls before the Lehman bankruptcy finally caused it to fail. A consolidation between 10,500 and 12,500 could be the story of 2010 based on my view of sideways/volatile markets in the near-future. Of course with this in mind, we must still be respectful that the market hasn't told us that it is doing this yet, but it's my best estimate to this point. We will continue to react to breakouts or breakdowns that will ultimately tell us what the right view on the market is.

Q: What are your thoughts on the energy sector? In a recent note, you contended that oil is oversold relative to gold - can you please elaborate on this and your reasons for coming to this conclusion? Also, what are your thoughts on natural gas going forward?

A: The story in commodities is the weak U.S. Dollar. Interestingly, however, although Crude Oil is 90% correlated to the U.S. Dollar over the last year, and Gold only 70%, Crude has gone down during the last couple of weeks of U.S. Dollar weakness and incredible strength in Gold. This sets up a situation where Crude is oversold relative to Gold and in the context of the U.S. Dollar and may be an opportunity to buy Crude in the very near-term. In situations like this, Crude can either play catch-up, or would be defensive in a commodity pullback since it didn't participate on the way up.

Natural Gas is a tougher story. The supply situation is at record highs according to the DOE, and the futures complex is complicated by significant contango in the term structure. I believe inventories are rolling over and this might provide another bump to Natural Gas prices as the fear was that they would hit maximum storage and prices would be under even more pressure. Additionally, Oil and Gold both hung onto seasonality longer than expected, so why can't NatGas? I will probably remain cautiously bullish of Natural Gas until the spring when inventories will probably be bottoming at already high levels historically. I'd like to see one more push into the stocks before then.

Q: Given that cyclical stocks have outperformed defensives in this rally since March 2009, can you please highlight one sector among Canadian stocks (e.g. can be financials, energy stocks, technology, resources etc.) that you believe to be overbought/overvalued and due for a correction and one sector that you believe to be oversold/undervalued and due for a bounce and why?

A: The cyclical/non-cyclical issue is potentially more complicated than many believe. I prefer to take resources out of this equation as they are a different kind of cyclical where it's all about the underlying commodity price, which has seasonal and supply-demand factors that don't necessarily have to do with the state of the economy. If you look at growth (non-cyclical) versus value (cyclical) in the U.S. where commodity sectors are not very highly weighted, it is true that cyclicals outperformed after March. But non-cyclicals have actually taken back over and held their long-term uptrend relative to cyclicals from August to present. This is one of the reasons why I am worried about the state of the rally heading into the New Year. This is one underlying market machination that is suggesting the rally could soon come to a peak.

A cyclical sector I would be wary of in a pullback would be Retailers. We saw downward revisions across the board on their last reports while the recent technical patterns appear to be breaking after a reflation rally. As such, names like Canadian Tire (CTC.A:TSX), Gildan Activewear (GIL:TSX), Rona (RON:TSX), Reitmans Canada (RET.A: TSX), Forzani Group (FGL:TSX), etc., could be at significant risk going forward.

A non-cyclical group that is looking brighter is Grocers. We saw upward revisions across the board when they last reported, while the stocks are much closer to support lows than most other stocks and starting to rally off of lows, demonstrating more definitive technical strength in the intermediate-term.

There are always cyclical areas that can be hot, however. We have seen strong intermediate trends in Water Treatment/Filtration companies recently, such as GLV Inc. (GLV.A:TSX) and Bioteq Environmental Technologies (BQE:TSX). We continue to look for breakouts from bases in these stocks. A non-cyclical group that looks weak to us are Banks. Technical patterns in this area are very weak and toppy, with uptrend lines being violated.

Q: Lastly, can you please highlight one stock/ETF/commodity that you think offers the best technicals/value moving forward and your reasons for liking it?

A: I try to avoid the top pick/bottom pick because there are too many criteria when discussing the overall market. Large/Small, Cyclical/Non-Cyclical, Resource/Non-Cyclical, names we wouldn't buy yet but are watching for a breakout, something that's just crossed its 200-day MA, etc.? There's always a style, sector, and risk decision that investors should make before making any purchase, and hence why a top pick is moot. I need to know the style, sector, and risk decision before I can then say, "OK, here's what I would buy."

But let's shoot for something that is at least digestible for most and say large cap/liquid, medium to medium-high risk tolerance, and resource sector. I would select Potash Corp. of Saskatchewan (POT):
- testing intermediate highs from spring at US$120, after staging a rally off of support at US$90
- price ratio relative to closest comp AGU is back up above 1.9x after a false breakdown, and has room to run to 2.5x area, in our view
- DAP, Urea, Ammonia prices improving which should be good for overall sector
- although strongest month for market is December, it is by far strongest month for potash companies such as POT and MOS
- foray back to overbought levels suggests slightly overbought condition and buying on weakness to setup a breakout.

Thank you Mr. Akin!

Interview with Michael Chender of Metals Economic Group

2009-12-01T03:00:00.001-08:00

A short conversation with Michael Chender, Founder and CEO of Metals Economic Group

Bio: Michael started Copper Studies, the leading copper industry consulting publication, which he later sold to Commodities Research Unit. He worked in a joint venture with Brandeis Goldschmidt, a leading metal trader, from 1977 to 1980, at which time he founded Metals Economics Group (MEG). In 2001, Mr. Chender started Coemergence, a competitive intelligence software solution company focused on the resource sector. That same year he also founded the Shambhala Institute for Authentic Leadership, now a recognized leader in organizational learning and training. He returned to an active role in MEG in 2008 to help lead a major expansion of information and consulting services.

MEG has created a niche in the field of minerals economics-related consulting by focusing on a soft “real world” approach to issues for exploration and development managers. Its Mine Search database, the first on-line minerals database, remains the acknowledged leader for project-related information. For the last ten years MEG has been publishing the Corporate Exploration Strategies worldwide survey, the leading source in the field. The Group counts virtually every major mining company amongst its clients and subscribers to various services. Mr. Chender is the author of numerous studies, and his papers have been published in leading industry journals. He is a frequent speaker, including to the PDAC annual convention. His talks generally draw on combining a thorough analysis of data with an understanding of the psychology of company behaviour to question prevailing opinion.

Q: Mr. Chender, with the price of gold hitting news highs, what is your opinion of the fundamental supply and demand situation of the metal? With prices sky high, what is your best guess for likely acquisition targets?

A: Gold is unique in that it usually doesn't respond to "fundamental" supply and demand. However, at the moment we may be witnessing a rare shift with big jumps in Central Bank buying and direct investment demand. What is less obvious is the supply picture. Golf discovery rates have been falling off for decades, more is being produced yearly than is being found, and many of the the more promising areas to explore are in politically challenging countries. In addition, there has been tremendous inflation in the costs of developing new miner, largely based on the jump in energy prices in the past several years. At the same time, companies compete for investor interest based on their growth prospects. So that growth is becoming more and more expensive as poorer-quality deposits in more remote locations become the next generation of gold mines. And that means that a higher price will be necessary to make those mines economic. This is the long-term argument for high gold prices (producers are making significant margins at today's prices, but weren't a year to two ago.) The short-term one is of course concern about the underlying potential for inflation in the stimulus packages, downward pressure on the dollar, and general uncertainty about the economy.

Q: Given that copper prices are holding around the $3/lb even with considerable inventories at the LME, what would be your thoughts on copper?

A: Copper has been supported by Chinese buying, but also by strikes and technical problems at some producers. If the economy recovers at a reasonable pace and Chinese demand holds up, may observers expect it to continue in the current range next year, and for inventories to be substantially drawn down by 2012. Of course if we go into a double- dip reception, its another story.Copper suffers from similar long-term supply problems as gold. In the case of both metals, the drying up of credit for much of the past year, and in the case of copper, the price crash, have set back a number of mine development plans, thereby possibly exacerbating the longer-term availability of supply, and further supporting a bullish argument for the medium-term. However, I would caution that while history shows that "experts" do a lousy job as a group at forecasting future prices, the increased speed of communication has created a much more dynamic, networked economy than we had previously, which by its nature, is now even more unpredictable.

Thank You Mr. Chender!

Interview with Cory Venable of Venable Park Investment Counsel

2009-11-30T03:00:00.002-08:00

A short conversation with Cory Venable of Venable Park Investment Counsel

Bio: Cory is a Fellow of the Canadian Securities Institute (FCSI) with over 18 years of market experience. He has also earned the Canadian Investment Manager (CIM) designation. A Chartered Market Technician (CMT), Cory has developed a quantitative risk management method used by Venable Park Investment Counsel, to address price risk. Cory is a member of the Canadian Society of Technical Analysts (CSTA), The American Finance Association (AFA), and the Market Technicians Association (MTA) based in New York.

Q: Mr. Venable, in the face of the recent volatility in the stock market, a number of Elliot wave practitioners are calling the recent rally from the lows a bear market rally and that we are now in a secular downtrend (with respect to the TSX and S&P 500), does your technical analysis concur with this view?

A: I would agree with the thesis that we are currently in a Secular Bear market that started in 2000. The S&P500 failed to make a meaningful higher high in 2007 over its high in 2000. I believe that the data suggests an environment similar to that of 1966-82. The similarities however may be similar in price only, as we may in fact have the mirror image from a macro-perspective. i.e., deflation rather than the inflation that occurred during 1966-1982. The catalyst for deflation this time would be low savings rates, negative home equity and a de-leveraging economy, as the Western consumer is now taking a break from torrid spending to re-build personal balance sheets.

Q: What is your near and long term outlook for the Canadian Dollar with respect to the US Dollar? While the general viewpoint of most market commentators calls for a decline in the US Dollar, I have heard a few technical analysts (primarily the Elliot wave practitioners again) call for an uptrend in the US Dollar, once again, does your analysis concur with this view or not and why?

A: I suspect it may be a classic case of herd mentality and extrapolation that everyone is now bearish on the U$. It must be as crowded a trade as history has seen; except for perhaps tulips! Over-crowded trends can however extend grotesquely beyond the fundamentals; therefore it is difficult, in fact dangerous to suggest when the bottom will occur. It will no doubt occur when it stops dropping or when the dollar-weighted vote suggests it has gone far enough. Lest we forget: pricing is set by a secondary market in which the future earnings of all asset classes are auctioned off every day, week, quarter.

The price behavior of the U$ index since the Jan 2005 weekly low of 80.81 to now, is very similar in behavior to the bottoming process that occurred in 1991 to mid 1995. Three distinct lows took place over a 4 year time frame. If the bottoming process is similar to now it would suggest a test of the ultimate early 2008 low of 71.61 will fail to go as low and likely find support between the 73-75 levels. An un-winding of the U$ carry trade would be a likely catalyst. The other potential fuel for a U$ bounce would be the obvious fact that seems to go unnoticed by U$ bears: ITS AN OLD OLD STORY. Its strikes me as odd that we believe the market can be an efficient discounter of future macro events, yet forget to acknowledge that fact when contemplating the price behavior of the U$. At some point there will be a time of maximum pessimism which also equals maximum opportunity for buying U dollars. A turn at 73-75 on the U$ index and breakout above 76.15 area may prove very painful to those holding hard assets. Markets that are commodity-centric will suffer greater declines.

Q: With oil at approximately $76 and gas hovering below $4, what is your outlook and forecast for these 2 commodities?

A: It’s all about the US Dollar. If the dollar strengthens then commodities priced in dollars will decline. Long term support for oil is $40; not a forecast, that’s just where resistance has been for over a decade and now, suggests support.

Q: With gold hitting new highs, what is your outlook on gold - is it a good time to get in or get out? Also, why do you think the gold stocks are underperforming when compared to gold bullion?

A: Anecdotally when every 3rd commercial on TV is someone holding a fist full of dollars as a result of jewelry sold at a gold party, and that Central Banks are buying gold to prop-up their reserves to counter depreciating U$ holdings, I get nervous. Parabolic price moves go 2 ways; the second part of that is nothing I want exposure to. If you hold it, put in tight stops or sell 1/2 your holdings. If you don’t, look for opportunities in the counter trade areas: things that will appreciate when gold prices drop. Remember in 2000-2002, Central Banks were sellers of their gold reserves when it was below $300/oz. Now they’re buyers above $1,000/oz. Support for gold is in the 700-725/oz area if 1,000-1031/oz level is breached.

Q: Lastly, can you please highlight 2 stocks/themes that you think offer the best value moving forward and your reasons for liking it?

A: After a pullback of at least double digit, look at assets that pay you well to hold them. (XTR:TSX, XRE:TSX, XDV:TSX) while keeping your eye on the 30-year treasuries for a move down in price as this would suggest a change in the outlook for interest sensitive stocks.

Thank you Mr. Venable!

Interview with Judith Dwarkin of Ross Smith Energy Group

2009-11-27T03:00:00.002-08:00

A short conversation with Judith Dwarkin, Chief Economist at Ross Smith Energy Group

Bio: Judith is Chief Economist for the Ross Smith Energy Group. Judith's vast expertise includes energy market operations and regulation, transportation issues and energy policy. Before joining Ross Smith, Judith was Senior Vice President, Global Energy with the Canadian Energy Research Institute (CERI), where she managed the domestic and international research program pertaining to crude oil markets and prices, as well as the Institute's Conference and Training divisions. Prior to joining CERI, Judith was a Managing Director with the Alberta Petroleum Marketing Commission, where she was responsible for oil and gas market analysis and energy regulatory interventions on behalf of the Alberta Government. All of Judith's degrees are in economics.

I reckon it must be confounding for an economist to reconcile the rising stock markets with the shaky recovery that the U.S. economic statistics are foretelling. However, for Judith Dwarkin, Chief Economist at Ross Smith Energy Group, the crux of the matter lies in whether private sector investment can pick up the slack when the government stimulus is removed. Ms. Dwarkin points to falling personal incomes in the third quarter of 2009 and rising unemployment which she thinks will likely not peak till next year and could take several months to fall back to pre-recession levels as reasons for further stimulus to come. Furthermore, she adds that the share of personal income coming from transfer payments hit 8% in Q2/09, compared to around 2% during the boom. With the total federal package designed to be spread over 2009 and 2010with a tad left over for 2011, Ms. Dwarkin is still fearful for potentially scary developments at the state level in the coming months. Several states face falling taxes, leading to losses in public sector employment with the huge care packages still to come from Uncle Sam. Given this backdrop, Ms. Dwarkin doesn't sound too optimistic about the economic health of the United States. She cites a persistently large output gap as little incentive for businesses to re-invest anytime soon. Along the same lines, larger companies that are able to raise money and earn profits are hoarding the cash to shore up balance sheets. It remains to be seen whether the United States can reinvent itself as salesman to the rest of the world because in case you missed it, the world has changed, says Ms. Dwarkin.

Q: Given the widespread pessimism regarding natural gas and the glut in inventory, what are your thoughts going forward for this commodity?

A: My colleagues and I have long thought the required correction in near-term market balances has to come from the supply side. We still think so. In this light, the good news is the collapse in gas-directed drilling in the Lower 48 this year has translated into a slow-down in production and probably a contraction, measured year/year. I say “probably” because the EIA data that everyone uses to gauge reality appear to be deteriorating in quality, adding more uncertainty to the mix. The bad news is the supply-side adjustment is too little, and coming too late to thwart a large bulge in Lower 48 gas storage remaining at the end of the current winter. This will continue to put a damper on price recovery. To compound the problem, we’re now seeing gas producers ramping up their spending and drilling programs. The practical effect of this could be to prolong the market imbalance. Low-cost and price-hedged producers with production close to market will be best-positioned to weather the continuing storm.

With respect to the longer-term fares of the industry, capturing a greater share of the electricity generating load would seem to be a no-brainer for natural gas in a carbon-constrained world. But gas is not the preferred alternative to coal for the US administration at present, so the industry needs to do a better job of explaining the merits. In addition, although a renaissance in US industrial activity isn’t likely anytime soon, the sector will be helped by a lower dollar, which in turn should be positive for gas demand.

Q: With crude oil hovering at approximately $80/barrel, do you think these price levels are sustainable for the next 1-2 years, especially in light of the IEA saying that they only expect a marginal increases of 1.5% per annum in oil demand between 2007 and 2030 in their most recent world energy outlook, why or why not?

A: $80 is somewhat fluffy relative to current and likely market balances over the near term, in my opinion. This price is signaling there’s a supply issue when there isn’t one.

However, this isn’t the first time, and won’t be the last time where prices are at odds with the fundamentals. There are many different players in the oil market with different interests, strategies, time horizons, information, and perceptions, all of which can combine to trump the basics of supply and demand, sometimes for surprisingly long periods of time. But ultimately, the fundamentals re-assert themselves, as we have seen many times in the past. Layered onto this is the fact that the global oil market isn’t competitive (although regional/local markets are). Rather, the world’s least-cost producers manage their production levels to keep stocks low and maintain upwards pressure on prices. The higher-cost producers supply as much as they can at the prevailing price, and costs tend to follow prices.

The IEA projection actually anticipates global oil demand growth returning to its long-term trend, which isn’t a provocative supposition. However, the next 20 years will see the locus of demand growth continuing to shift towards emerging economies, while consumption in the advanced economies continues to shrink. The data for emerging-economy oil demand are much less transparent, plus some of these countries regulate retail prices, making it more tricky to understand the behavior of oil demand in these places. This spells greater uncertainty for prognosticators, more uncertainty about price direction and likely greater volatility in prices.

Since late last winter, oil prices have doubled, alongside surging equities – in anticipation of economic and oil demand recovery - and a falling dollar. If equities correct and/or the dollar pauses in its descent, oil prices are vulnerable.

Q: With the oil/gas ratio sitting at approximately 20 and the average over the last 2 years being around the 12 to 13 mark, would you short oil at the moment or go long natural gas?

A: There are structural reasons to expect the oil/gas price ratio to remain elevated relative to its historical average, albeit not to the degree currently. On the gas side, the supply curve has shifted upwards because of the shales plus improvements in drilling and completion technology across the board. This means more gas can be supplied at a given price, compared to previously. And unlike oil prices, North American natural gas prices are much more fundamentals-based. And as I’ve already noted, calling the timing of a turnaround in the near-term gas market is a tough one, particularly if producers get ahead of themselves and start supplying more gas into a market that doesn’t yet need it.

In addition, growing global spot trade in LNG makes the US market more vulnerable to offshore suppliers diverting cargoes to the US to maintain netbacks from markets in Europe and Asia which will have a chronically dampening effect on gas prices.

On the oil side, the transportation sector will likely remain in thrall to oil for some time to come, meaning a continued premium on this fuel relative to potential, but still very imperfect substitutes such as compressed natural gas or fuel cells. In addition, world oil prices will continue to have a habit of becoming somewhat (or very!) detached from the fundamentals from time to time, causing the oil/gas price ratio to scoot up. While the fundamentals in oil eventually reassert themselves when prices get out of whack, timing the corrections is a guess. Certainly, the further oil prices diverge from the actual costs of finding and producing the stuff, the greater the likelihood a correction is in the works.

Q: What is your outlook for M&A activity in the energy sector? Do you have any plays (as in the bakken, montney, cardium etc.) or particular stocks that may be particularly susceptible to M&A activity?

A: As always, companies with good land positions but lacking the capital or technical skills to exploit them are targets for takeover or acquisition by companies with the financial wherewithal and good operating teams.

As well, a number of large players in Canada currently are shedding non-core assets, presenting smaller players with a smorgasbord of opportunities, provided they have the financial backing, can acquire these properties at the right price, have the know-how to exploit them efficiently, and can tolerate a volatile price environment.

Thank you Ms. Dwarkin!

Interview with Andrew Hoffman of Geovic Mining

2009-11-26T03:00:00.001-08:00

A short conversation with Andrew Hoffman, Vice President, Investor Relations for Geovic Mining (GMC: TSX), a publicly listed cobalt mining company.

Bio: Andy is a Chartered Financial Analyst (CFA) and has a diverse history in the financial markets, specializing for the past decade in the Energy and Precious Metals sectors. From 1996 to 1998, he worked as a buy-side analyst, specializing in small-cap companies across a variety of business sectors. From 1998 through 2005, he was a sell-side analyst covering oilfield service equities at Salomon Smith Barney. Since 2005, he has managed an extensive portfolio of small to micro-cap mining equities, and performed investor relations consulting for junior mining companies. In 2007 through early 2008, he held the title of Vice President, Corporate Development, for EXMIN Resources, a Precious Metal mining company.

Q: Mr. Hoffman, in the face of the recent volatility in the stock market and gold hitting new highs – what would be your view/forecast of gold moving forward (is this the end of the bull run or does gold have a ways to go)? Is it of concern to you that everyone seems to on the same side of a long gold-short dollar trade?

A: I believe the gold bull market is still in its very early stages, even after ten years of annual increases. The factors that drove me toward precious metals in 2002; rising deficits, easy monetary policy, a bankrupted industrial base, growing housing and consumer spending bubbles, and rising global anger toward the U.S. - have increased by several orders of magnitude in recent years.

Moreover, the global financial system, particularly in the U.S., is showing its true colors as the Ponzi scheme of paper money and paper securities that is it to investors, institutions, and governments world wide.

When you combine these factors with extraordinary supply/demand fundamentals for both gold and silver, increasing distrust of Central Banks such as the Federal Reserve, Bank of England, and Bank of Japan, as well as the nearing end of the manipulative gold and silver Cartels, you can see why the bullish move in precious metals has the potential to be the most explosive of all time. And, unlike past manias like the internet, it will be based on a combination of greed and fear.

As far as the "short dollar trade being too crowded," I'd dismiss it as nothing more than Nazi-style propaganda with no basis at all, only an underlying motive of trying to scare people out of their gold and silver positions so that the "bad guys" can take it from them.

Q: Why do you think the larger cap gold stocks are underperforming gold?

A: Despite the broad rise in most stock market sectors this year, investors have been far more defensive due to the currently weak economic conditions and memories of last year's stock market collapse, particularly in the junior mining sector where the average stock fell roughly 80%, and for some far more. The TSX Venture Exchange remains 60% below its spring 2007 high, and a lack of capital amidst the juniors remains a sticking point for investors worried about further economic/market calamities and, potentially, further share price dilution.

Given the limited knowledge of the PM sector in the United States, my sense is that, that far, most of the new capital has flowed into the largest of names, as well as the big precious metals ETFs such as GDX, GLD, SLV, and now GDXJ. But as the "Street" becomes more comfortable that the gold and silver bulls are here to say, my guess is that money will pour into the more speculative names.

In mid-2007, the average PM junior traded for roughly $4.00-$7.00/ Ag equivalent ounce, regardless of the nature of those resources/reserves, and that number fell as low as $0.20-$0.25/oz last winter before mildly recovering to roughly $0.50-$0.75/oz today. I expect the former valuations to be achieved again in the not-so-distant future, and potentially be exceeded dramatically when gold and silver commence on parabolic upward moves.

Q: On a related note, what is your fundamental outlook/forecast on silver?

A: Funny you should ask, as I am more bullish on silver than gold. Silver has a long, storied history as money in dozens of cultures over hundreds of years. There is a reason why dozens of countries (such as Argentina) and currencies (such as the French "l'argent") mean silver, and that relationship will remain intact long after the dollar and Euro are gone. "Poor man's gold" is far more affordable (for now), and far more useful for bartering if required, yet has the same monetary properties and history as gold.

However, unlike gold, silver is consumed by industry as well, and it is estimated by silver experts such as Ted Butler that no more than one billion ounces of "investable" silver still remains, worth roughly $20 measly billion paper dollars in today's hyperinflationary global monetary environment.

Throw in the fact that roughly 70% of all silver production is by-product, primarily from base metal mines, and you have a precious metal with relatively little supply elasticity during a raging bull market. Moreover, putting it mildly, silver Cartel activity is far more blatant, and more vulnerable, than even the gold Cartel. And trust me, their end on this orb is nigh.

Q: Given that you, are the investor relations representative for Geovic Mining – can you please elaborate on Geovic’s cobalt, nickel and manganese project in Cameroon and a few reasons why investors should be paying attention to the company? Also, what are some of the fundamentals behind cobalt?

A: Geovic owns 60.5% of Geovic Cameroon ("GeoCam"), with the remaining 39.5% controlled, and to date fully funded, by the Cameroonian government. GeoCam owns the largest primary cobalt deposit in the world, which is important because roughly 95% of all cobalt is mined as by-product, mostly from extremely expensive nickel and copper mines. Additionally, it is located in Cameroon, Africa, which is quite politically stable, particularly compared to the DRC (Democratic Republic of Congo), where the majority of cobalt reserves (via copper deposits) are located.

GeoCam had planned to construct and finance its Nkamouna (ka-moon-ah) cobalt project a year ago, but was delayed in this action by the falling capital and commodity markets. However, the Company was very active in working to increase the resources/reserves and reduce project costs/risks during 2009, and consequently anticipates a significantly more bankable Feasibility Study to be completed around mid-2010, with significantly lower capital expenditures than the $379 million estimated in the September 2008 Feasibility Study. At that point, the Company aims to commence financing and construction, targeting initial production in late 2012.

Equally important is the fact that long-lived reserves in a politically stable nation have attracted the attention of multiple potential cobalt (and nickel/manganese) off-take partners in the Far East. Such companies think more about long-term supply issues than Western banks and trading companies, increasing the likelihood of mutually beneficial agreements being reached.

Q: Lastly, if you could only buy 1 stock (other than Geovic) today what would it be and why do you like it?

A: I would say that the entire precious metals sector has tremendous upside potential; particularly the smaller companies due to their upside leverage and currently near record-low valuations. But the nature of such investments depends on one's appetite for risk.

To be conservative, I would highly recommend Central Fund of Canada (CEF) and Central Gold Trust (GTU), two closed-end funds managed in Canada but traded in both Canada and the United States. CEF holds roughly 60% gold bullion and 40% silver bullion, while GTU holds 100% gold. The premiums to NAV, or Net Asset Value, have fallen closer to the 5%-10% range in recent months, but I believe they will return to the 30%+ range as the PM bull takes off, particularly if mistrust in paper securities causes investors to flee from potentially dangerous ETFs such as GLD and SLV. CEF and GTU are GUARANTEED to hold the gold and silver they purport, while, in my view, GLD and SLV are not.

Thank you Mr. Hoffman!

Disclosure: I have no position in shares of Geovic Mining.

Interview with Jeff Young of NexGen Financial

2009-11-25T11:59:00.000-08:00

A short conversation with Jeff Young, Portfolio Manager with NexGen Financial

Bio: Jeff has over 12 years financial industry experience, largely spent in the private client discretionary investment management and mutual fund segments of the industry. Jeff is a graduate of the inaugural cohort of the Simon Fraser University Global Asset and Wealth Management MBA program and was a Co-Recipient of the 2004 Barclays Global Investors Canada Research Award. In addition, he is a Chartered Financial Analyst (CFA). Jeff joined NexGen in 2005 to focus on North American equity investing and is the lead portfolio manager for the Nexgen Canadian Large Cap Fund, the Nexgen North American Large Cap Fund and the Nexgen Global Dividend Fund .

Q: Mr. Young, in the face of the recent volatility in the stock market, and gold hitting new all time highs – what would be you’re view of gold moving forward (is this the end of the bull run or does gold have a ways to go)?

A: It depends on the future actions of the Governments and Monetary authorities around the world, and especially in the US. Gold is generally purchased by investors to provide protection in the case of an uncontrolled inflationary or deflationary environment. Currently both inflationists and deflationists have potentially valid fears and are buying gold. The worst thing for gold would be a US economy that begins growing organically (i.e. not solely as a result of fiscal stimulus). This would allow for a reduction in government spending / deficits, an increase in interest rates (or at least a credible threat to do so) and provide some support for the USD. Gold could be volatile but should see buyers on weakness until the USD gets some support from a tempering of the current monetary and fiscal largess.

Q: On a related note, what is your call on the TSX going into year end and early next year - are we in for a correction or is this liquidity fulled rally going to continue? How are you gearing the fund to reflect this opinion?

A: Q3/09 earnings weren’t bad and even showed some hope for companies on the revenue line. As well, the outlook from management seems to be more positive than past quarters. Recent comments from Central bankers indicate that they are willing to leave rates low until they are certain a sustainable economic recovery has taken root which should support equity prices into year end. Recently, large cap dividend paying stocks, which have largely underperformed since the March bottom, have begun to perform better as investors take profits in more speculative companies. The funds are positioned to benefit from this trend.

Q: Given the glut of inventory in natural gas and crude sitting at approximately $75, what are your thoughts and predictions regarding the energy sector going forward?

A: From a secular perspective I am more bullish on Oil than Natural Gas. New technologies and discoveries have led to an abundance of Natural Gas which can now be taken out of the ground more cheaply whereas oil appears to be getting more difficult to find, more expensive to extract and has less elasticity of demand. Oil prices have held up remarkably well given the drop in Western demand over the last year.

Q: Given that cyclical stocks have outperformed defensives in this rally since March 2009, can you please highlight one sector among Canadian stocks (e.g. can be financials, energy stocks, technology, resources etc.) that you believe to be overbought and due for a correction and one sector that you believe to be oversold and due for a bounce and why?

A: The Materials sector is probably the most overbought and could certainly correct at any time. That being said the forces supporting gold are at play here as well. The biggest danger with the long commodities trade is the fact that US dollar sentiment is extremely one sided and negative. Such extremes set the stage for violent reversals which would hurt commodity prices, at least for a short time.

Consumer Discretionary and Telecom are under owned. Telecom worries are based on industry competition and growth outlooks and Consumer Discretionary stocks on economic concerns. I think there are some decent opportunities in both of these sectors that pay good dividends and would be somewhat defensive in the event of a pullback.

Q: Lastly, can you please highlight 1-2 stocks/themes that you think offers the best value moving forward and your reasons for liking it?

A: I think there is value in large cap dividend paying stocks. From a secular perspective, low interest rates and demographic change support the need for income. From a cyclical perspective, these companies tend to have strong balance sheets and good access to credit which puts them in good position to take market share from smaller weaker competitors as the economic recovery develops. They also tend to have multi-national operations which allow investors to benefit from the growth in emerging economies without the risk of investing there directly. We are probably leaving the period where the weakest performers of the sell off outperform simply because they survived and investors once again concern themselves with identifying companies that can provide sustainable earnings growth.

Thank you Mr. Young!

Interview with Kim Husebye of Lakeshore Securities

2009-11-19T09:03:00.002-08:00

A short conversation with Kim Husebye, VP & Portfolio Manager at Lakeshore Securities

Bio: Kim Husebye, CFA, CMT is licensed as an Investment Advisor and Portfolio Manager in the province of Ontario, and has more than twenty years’ experience in brokerage and investment management.

Kim graduated from the University of Toronto with a Bachelor of Science and double majors in Commerce and Applied Mathematics.

In 1994 he earned the Chartered Financial Analyst designation (CFA), and in 2006 he earned the Chartered Market Technician designation (CMT).

In 2006 Kim attended Investor’s Business Daily Masters Program in Los Angeles, which was taught by Bill O’Neil and six of his top portfolio managers. In 2007 he successfully passed the associated exam.

Q: Mr. Husebye, in the face of the recent volatility in the stock market, a number of Elliot wave practitioners are calling the recent rally from the lows a bear market rally and that we are now in a secular downtrend, does your fundamental and technical analysis concur with this view?

A: We are in the final stages of a bear market rally which began in March 2009. In Elliott Wave terms, this is Primary Wave 2, which is a counter-trend move. A 50% retracement of the initial bear market decline would place the S&P 500 at 1121, which is only about 10 points away, as of this writing. We may or may not reach that target – in any event, the rally is very close to being finished, if it isn’t already.

Further evidence that we have indeed been in a bear market rally includes the following:

• Volume and breadth have been waning.
• The action during the rally has been “corrective” in nature, meaning that the wave structures have been overlapping and in groups of three.
• Bullish sentiment has reached high levels – a contrarian indicator.
• Sales and earnings growth outlooks remain soft, while valuations remain high
• Dividend yields never increased to the levels associated with typical bear market bottoms.

My 12-month target for the S&P 500 is below 500 (S&P 500 at 1090.60 at the time this was posted)

Q: What is your near and long term outlook for the Canadian Dollar with respect to the US Dollar? While the general viewpoint of most market commentators calls for a decline in the US Dollar, I have heard a few technical analysts (primarily the Elliot wave practitioners again) call for an uptrend in the US Dollar, once again, does your analysis concur with this view or not and why?

A: The Canadian dollar likely peaked out at 97.69 on October 14th. The Loonie will depreciate significantly from current levels, particularly when commodity prices start sagging, which probably will coincide with a major rally in the US dollar.

My intermediate target for the Canadian dollar is well below 80 cents (Canadian dollar at 93.40 at time of posting)

It is important not to confuse the US/CAD dollar relationship with that of the US Dollar Index. The USD Index measures the value of the US dollar against a basket of foreign currencies, of which the Canadian dollar is a small part. The USD Index is in the process of bottoming, after which I expect a powerful rally that will take most market participants by surprise.

The USD Index is in many respects the linchpin which, after reversing, will throw most stocks and commodities into a tailspin. In fact, the USD Index has shown an exceptional inverse correlation with the stock market in recent times. The last peak occurred within two days of the stock market’s bottom on March 6th.

For additional charts on the major indexes and gold, you can visit Mr. Husebye's website at: http://www.kimhusebye.com/charts.html

Conversely, the US dollar’s imminent bottom should coincide closely with a top in the stock market.

Further evidence that the US Dollar Index is bottoming includes the following:

• Bearish sentiment has reach extraordinarily high levels – a contrarian indicator.
• Talk of eliminating the greenback as the world’s reserve currency is a strong testament to the widespread disdain for the dollar – a contrarian indicator.
• From an Elliott Wave perspective, the USD Index has traced out five-waves to the downside, indicating we are in the final stages of an ending pattern.
• US dollars are still considered a safe haven in times of crisis. When the next panic in assets occurs, there is no reason to expect people to change that belief.
• As is now widely known, a major short position currently exists in the US dollar, whereby speculators have borrowed the buck at almost zero cost to finance securities purchases. A rush to buy back those borrowed dollars will accelerate an expected dollar rally, as the short-sellers get squeezed.
• Finally, when magazine covers show pictures of the US dollar in tatters, you know it’s probably a safe bet to take the opposite side of that trade.
• An upside reversal will be confirmed with a break above 76.82.

My 12-month target for the USD Index is near 100 (Dollar Index at 75.48 at time of posting)

Q: Given that cyclical stocks have outperformed defensives in this rally since March 2009, can you please highlight one sector among Canadian stocks (e.g. can be financials, energy stocks, technology, resources etc.) that you believe to be overbought and due for a correction and one sector that you believe to be oversold and due for a bounce and why?

A: All Canadian stocks will decline as the bear market enters the next leg down; consequently, there are no buy recommendations at this time. When the selling kicks in more strongly, the better stocks to sell short will include those that rallied the most during the uptrend, such as commodity and financial stocks.

My 12-month target for the TSX Composite is below 5,000 (TSX at 11,503.43 at time of posting)

Q: With gold hitting new highs, what is your outlook on gold - is it a good time to get in or get out? Also, why do you think the gold stocks are underperforming when compared to gold bullion?

A: Gold’s rally has been corrective in nature, and is in an ending pattern. Now is the time to sell gold, especially while investor sentiment is at wildly optimistic levels. An exception applies to long term investors who wish to own gold bullion as a hedge against a potential future crisis in fiat (paper) money. For that purpose it is recommended to own actual gold bars or coins, not shares in gold companies.

Gold stocks often lead the price of bullion, so from time to time gold stocks will advance before the price of bullion increases, and vice versa. It may be that today’s relative weakness in gold shares is portending weakness in bullion.

My intermediate target price for gold is below US$700/oz (Gold at US$ 1,134.80/oz at time of posting)

Q: Lastly, can you please highlight 1 stock/theme that you think offers the best value moving forward and your reasons for liking it?

A: Aside from selling stocks short, or putting on a synthetic short through inverse ETF’s, an excellent speculation at this time would be 30-year US Treasury Bonds. Each percentage point decline in yields from current levels would give a capital gain of 19%. On top of that you get a decent coupon of 3½ % to 4 %, as well as potential currency appreciation from owning the US dollar as investors look for safety.

My target for US long term bond yields is near 2% (30-year treasury yields at 4.375% at time of posting)

Thank you Mr. Husebye!

Interview with Craig Stanford of Trivest Wealth Counsel

2009-11-18T03:00:00.001-08:00

A short conversation with Craig Stanford of TriVest Wealth Counsel

Bio: Craig has 20 years of senior-level experience in the investment and finance sector. His prior Portfolio Manager and Investment Counsellor positions include the following: Partner / Director of Private Client Portfolio Management Mawer Investment Management; Managing Director / Portfolio Manager Cypress Capital Management; and, Managing Director / Portfolio Manager at Brickburn Asset Management. Craig also worked for Royal Bank Financial Group as a Senior Account Manager, Global Private Banking, providing offshore and domestic solutions to high net worth clients, trusts, foundations, and not-for-profits. In addition, he worked as a Trust and Investment Advisor for Royal Trust providing offshore and domestic portfolio management, custody, estate, and IBC formation services.

Craig is a Chartered Financial Analyst (CFA) Charterholder. He obtained a Master of Business Administration degree and a Bachelor of Science (Agriculture) degree from the University of Alberta. In addition, he holds and maintains Trust and Estate Practitioner (TEP) and Professional Agrologist (P.Ag.) designations and is a Certified Financial Planner (PFP).

Q: Mr. Stanford, in the face of the recent volatility in the stock market, a number of commentators are citing the over-valued nature of the markets based on the economic realities – what would be you’re view of the market (Canada and U.S) right now?

A: At TriVest, we see the equity markets starting to look a bit stretched and are finding it more challenging to find opportunities that are not fully valued. Overall, there are still a few individual securities that appear attractive from a bottom up basis, but as a whole the markets currently look fairly valued. The U.S. market, for example, is up 60% from its March lows and trading at approximately 16X forward earnings. This is not only above historical norms of nearly 15X, but is also predicated on a more than 30% growth incorporate earnings in 2010. We consider this to be tad optimistic considering the overall health of the US economy and the double digit (and climbing) unemployment.

Q: What is your near and long term outlook for the Canadian Dollar with respect to its fundamental value and its impact on the earnings of Canadian companies?

A: We believe the current strength of the CDN dollar is a more of a function of a weakening US dollar. In the short term, we think the CDN dollar could easily go to par. The U.S. government needs a low U.S. dollar to stimulate its economy and deal with its massive debt load. It was fairly clear from the recent OECD meeting that the U.S. intends to keep interest rates low and is (not so secretly) supporting a low dollar policy. This clearly hurts all of their trading partners and especially Canada. China is avoiding this pain by keeping its currency pegged, but is currently under a lot of pressure by the U.S. to allow its currency to appreciate. In regards to CDN corporate earnings, obviously the manufacturing business is hurting as the industry can no longer rely on a weaker dollar to offset poorer efficiency. It also doesn’t fair well for the energy business given cost structures are in CDN dollars and revenue in USD.

Longer term, it is always difficult to predict currency movements. We’ve never found anyone or any institution that can do it consistently or accurately. Ultimately, we think the U.S. dollar will appreciate when the current U.S. dollar carry-trade unwinds. There are currently huge net short positions in zero-cost U.S. Treasuries right now with offsetting long positions in higher yielding equities and commodities.

Q: Given that cyclical stocks have outperformed defensives in this rally since March 2009, can you please highlight one sector among Canadian stocks (e.g. can befinancials, energy stocks, technology, resources etc.) that you believe to be overboughtand due for a correction and one sector that you believe to be oversold and due for abounce and why?

A: We believe that the financial sector is fully valued, especially in the U.S. The next shoe to drop is likely defaults in the commercial mortgage area with U.S. $2 trillion of maturities over the next 15 months. A few large cracks are just starting to appear in the U.S. commercial property sector already, and it would not be prudent to believe Canada wouldn’t be impacted in some fashion. For example, despite the stronger positioning of the Canadian banks, many are trading near record levels reached in 2007.

When we screen for relative value, Utilities and Telecommunications are trading below historical valuations and have not participated to the same extent as some of the other sectors in the recent run up. On a bottom up basis, there are still some attractive stocks in the energy sector trading at reasonable cash flow multiples but it is very selective. As for example, we believe many of the gas-levered stocks to be trading at multiples greater than what is being implied by the forward curve for natural gas.

Q: With regard to risk management, which I see is one of your founding principles, how do you recommend investors approach managing their risk? Can you please elaborate on one or two methods utilised by TriVest in current times to 'protect and grow' assets?

A: At TriVest we utilize a three step process for stock selection. A formalized approach to risk management is included in each step. From a 30,000 foot view, we begin with a quantitative model that we have developed to screen the market for relative valuation and risk metrics that we deem important. We then follow this up with intensive fundamental research further screening our target opportunities by ranking of their management track record, the quality of their assets and/or business with a subsequent outlook for growth or sustainability of dividends, and lastly their overall relative value. To supplement our own research we also have considerable access to institutional equity research.

As a last and important step, we then take our equity model portfolio and apply an option overlay. This is our final level of risk control and can be tilted to match our views of an individual stock or the market in general. Options are a very powerful risk management tool that aren’t traditionally utilized by the Investment Counsellor community. As an example, you can buy a Put to hedge a particular exposure or implement a costless collar strategy (buy a Put and sell a Call) to set a floor and a ceiling on an investment.

We would not recommend that the individual investor utilize options unless they have some education in that area. There are publically traded ETFs that can be utilized to hedge a sector or market exposure. However, we would caution against the average investor utilizing double or triple leveraged ETFs as they can lose market tracking over a relatively short period of time.

Q: Lastly, can you please highlight 1 stock/theme that you think offers the best value moving forward and your reasons for liking it?

A: Two very different themes that we would recommend looking into further would be Telecoms and Energy. Telecoms are currently trading at low valuations and we do see good future growth prospects in the cellular area in Canada (the U.S. market would be a different story given a more competitive landscape). Long term, oil prices should rise as cheap conventional reserves continue to decline and demand from countries such as China and India continue to rise. Short term, oil prices could be quite volatile in both directions with issues such as the large U.S. carry-trade, fear of future inflation etc.

Thank You Mr. Stanford!

Interview with Travis Dowle of Vistra Capital

2009-11-17T05:00:00.001-08:00

With the S&P 500 and the Dow currently attempting to remain above key levels (Dow – 10,345 and S&P 500 – 1100), the widespread US Dollar weakness has caused Gold to surge to 1135/oz. While weakness in the US Dollar could have something to do with the news coming out of APEC indicating China’s failure to agree with U.S. demands of revaluing the Chinese Yuan, on the economic front, U.S. retail sales numbers from October came in at +1.4% versus expectations of +1.0%. These retail sales numbers seem to have failed to dampen the risk appetite of investors as stocks rose and the greenback fell.

For further clarity on the markets, I turned to Mr. Travis Dowle of Vistra Capital Management in Vancouver, BC, Canada.

Bio: Travis Dowle is the founder and President of Vistra Capital Management, an independent investment management firm located in Vancouver, Canada and the fund manager for the Vistra Fund. Mr. Dowle has also served as the Vice President, Portfolio Investments with Gibralt Capital Corporation and Second City Capital Partners – both Vancouver-based private equity groups – since July 2007.

Prior founding Vistra, and to joining Gibralt Capital and Second City Capital, Mr. Dowle was a portfolio manager for one of the world’s largest investment managers, HSBC Global Asset Management. While with HSBC he was the lead manager for the firm’s global equity strategy offered to Canadian high-net worth investors. Prior to that, Mr. Dowle held various investment management and research positions with HSBC and M.K. Wong & Associates.

Mr. Dowle has more than 13 years of experience in the investment industry, is a graduate of the University of Western Ontario and holds the professional designation of Chartered Financial Analyst (CFA). Mr. Dowle is also a past instructor for Stalla’s CFA exam preparation program covering equity valuation techniques and capital markets theory.

Vistra Capital Management is an investment management firm founded with the philosophy that an active, flexible and opportunistic approach to investing provides the best opportunity for generating positive investment returns across a variety of market environments. The Vistra Fund is a long/short fund focused on event-driven opportunities and special situations.

Q: Mr. Dowle, in the face of the recent volatility in the stock market, a number of commentators are citing the over-valued nature of the markets based on the economic realities – what would be you’re view of the market (U.S. and Canada) right now?

A: Looking at the broad market indices in North America, I think that we are in for a bumpy ride over the next few months. Since early March, three factors have spurred this rally: first, realization that all companies were not going bankrupt; second, a dramatic injection of liquidity and other stimulus measures; third, corporate earnings results surpassing low expectations due in large part to severe cost-cutting. Underpinning and related to all of this, has been a huge increase in investor risk-appetite, albeit off of very low levels. In order for the markets to continue an uninterrupted climb, many companies need to grow into their current valuations, and for that they need revenue growth – costs can only be cut so far. Broadly speaking, I think we are bound to see some disappointment. But, having said all of that, volatility creates opportunity and I’ll be on the hunt for opportunities as volatility increases.

Q: Given that cyclical stocks have outperformed defensives in this rally since March 2009, can you please highlight one sector among Canadian stocks (e.g. can be financials, energy stocks, technology, resources etc.) that you believe to be overbought and due for a correction (i.e apt to short) and one sector that you believe to be oversold and due for a bounce and why?

A: Looking at things from a short-term perspective, I’d have to say financials looks to be somewhat overbought here. The TSX Financials sector is up almost 90% since early March and the big banks in the index are trading at about 13x forward earnings – not inexpensive for a bank. While Canadian banks are healthier than their global peers and the credit environment has improved dramatically, I believe we’re going to see a slower growth economy coming out of this recession and financials will be challenged in such an environment.

It’s tougher to single out a sector that looks oversold right now with most being markedly higher over the year. I tend to look at things from a bottom-up perspective while being cognizant of the sector specific and macro risks. I’m still seeing interesting opportunities in the technology , energy and basic materials sectors, however based on recent performance, I certainly can’t say they are oversold. I really think you have to pick your spots with individual companies in this market.

Q: Given the tremendous rebound in Asian (particularly China and India) economies, what are your views on investing in stocks or themes related to these economies? Do you have any particular trades/themes you could elaborate on?

A: Asia is giant economic force that will undoubtedly continue to become more dominant over the next few decades. Like any economy it’s going to get ahead of itself at times and be subject to business cycles. There are a few different ways investors can take advantage of the growth in China, India and other Asian countries and emerging markets. Energy and basic materials are the obvious themes. I also like the agriculture theme. As huge populations in these emerging economies urbanize and per capita income rises, they will consume more of everything – from basic materials, to energy, to food and to water. Sprott Resource Corp (SCP) is an interesting way to play all of these themes in a single security – it invests directly and indirectly in natural resources, minerals, oil and gas, water, forestry and agriculture.

Q: Can you please highlight 1 stock/option or pairs trade that you think offers the best risk/reward potential moving forward and your reasons for liking it?

A: I think GLV Inc. (GLV/A:TSX) has attractive upside. GLV Inc. is a global provider of engineered processes and technologies designed for industrial, municipal and environmental applications. Said in English, they design and produce equipment used to treat municipal and industrial wastewater, and water used in industrial processes, and pulp preparation and sheet formation. Water scarcity and quality is going to be a big issue. By some reports almost half of water use for irrigation is lost to evaporation and waste – this is a serious problem with an exploding global population. As emerging market diets become more meat/protein-based, agricultural use for water increases. Over half of cities in China suffer from water shortages. Major developed cities lose water through leaking pipes due to old and aging infrastructure. GLV won’t solve all these issues itself, but it has strong growth prospects, trades at a reasonable valuation and it’s one of many companies that should benefit from the ‘water’ theme.

Q: Lastly, how about we play a game where you're only responses can be Buy, Sell or Hold to the things mentioned below:

A: Sure, but I’ll have to specify whether it’s a short-term call or a long-term one by specifying ‘S/T’ and ‘L/T’ respectively:

Gold: Buy (S/T)

Base Metals: Hold

Canadian Dollar: Hold

Agricultural Commodities: Buy (L/T)

Oil: Hold

Natural Gas: Buy

TSX 60 (XIU): Sell (S/T)

S&P 500: Sell (S/T)

Clean/Alternative Energy: Sell (S/T)

Canadian Real Estate: Buy (L/T)

For real estate it, of course, depends on location, location, location. For the rest of the asset classes it’s all about price, price, price. The price you pay eventually determines your return. Happy investing!

Thank You Mr. Dowle!

Interview with Gordon Currie of Blackmont Capital

2009-11-16T07:08:00.001-08:00

A conversation with Gordon Currie of Blackmont Capital

The most recent U.S. Department of Energy’s weekly report paints a sorry state of U.S petroleum demand, with primary weakness coming from the diesel category. The increase in heating oil inventories in the all important PADD I complex is a further drag on the entire oil sector. Crude oil futures were down on Friday, November 13 as NYMEX light sweet crude for December delivery fell $0.59 to $76.35 per barrel. What is most probably a result of the higher than anticipated U.S. inventory levels, Canadian natural gas spot prices fell dramatically by $0.85 to $2.42 per Mcf. However, U.S. natural gas futures were slightly higher Friday, despite statistics revealing a build of 25 Bcf in inventories, which was ahead of median expectations for 20 Bcf, and brought overall storage levels to 3,813 Bcf. Cash prices at the Henry Hub in Louisiana fell $0.79 to $2.44 per Mmbtu while NYMEX Henry Hub for December delivery actually increased, by $0.022 to $4.392 per Mmbtu.

To paint a clearer picture of the energy sector, I had the opportunity to interview oil and gas analyst Gordon Currie of Blackmont Capital. The following is a transcript of our interview.

Bio: Mr. Currie is a 29-year veteran of the petroleum and securities industries. He has worked both sides of the oil and gas industry: as an analyst and an executive. He joins us most recently from his work as an Oil & Gas Analyst with Wolverton Securities. His research insights are infused by his experience as IR Manager of NAL Oil & Gas Trust and President of Easton Drilling Fund. Mr. Currie holds the Chartered Financial Analyst (CFA) designation.

Q: Given the widespread pessimism regarding natural gas and the glut in inventory, what are your thoughts going forward for this commodity?

A: I am in the camp that believes that natural gas supplies will be ample for several years to come although there is an argument to be made that natural declines in production combined with a low level of drilling activity will bring supply and demand back into balance quickly. Most of the gas producers subscribe to the latter theory. Investors also seem to be expecting gas prices to improve next year, judging by the rally in stock prices after Labour Day. Now it is only November but spot prices here in Alberta are still mired in the $3.50/mcf range and forward prices on NYMEX are below $5/mcf thru the first quarter of next year. The initial euphoria about a rebound in gas prices seems to be waning.

Q: With crude oil hovering at approximately $80/barrel, do you think these price levels are sustainable for the next 1-2 years, especially in light of the IEA saying that they only expect a marginal increases of 1.5% per annum in oil demand between 2007 and 2030 in their most recent world energy outlook, why or why not?

A: Actually I think 1.5% annual growth in demand is pretty good, and I do think prices can stay in the $80/bbl range. However I don't see prices rising to $100/bbl any time soon, as OPEC still has sufficient spare capacity to supply several years worth of growth in demand, and countries like Iraq and Iran are opening up huge fields to development by foreign multi-nationals.

Q: With the oil/gas ratio sitting at approximately 20 and the average over the last 2 years being around the 12 to 13 mark, would you short oil at the moment or go long natural gas?

A: No, I concur with the International Energy Agency view that prices have become de-linked. Until natural gas can be widely substituted for oil as a transportation fuel, as Boone Pickens is advocating, that ratio will continue to fluctuate.

Q: What is your outlook for M&A activity in the energy sector? Do you have any plays (as in the bakken, montney, cardium etc.) or particular stocks that may be particularly susceptible to M&A activity?

A: It is difficult to do deals in periods of really low commodity prices and really high commodity prices, because buyers and sellers have different expectations about takeover values. And in periods of low prices there are added 'social' issues - some people are going to be put out or work. Crescent Point will continue to hoover up Bakken producers (if there are any left) but I don't really see play types driving M&A.

Q: Lastly, can you please highlight 1 stock/theme that you think offers the best value moving forward and your reasons for liking it?

The stocks that I cover are intermediate sized companies and mainly gas-weighted, so given my view on natural gas supply, it is difficult to recommend any of them. My favourite is NuVista Energy because it is typically the lowest cost producer and therefore best able to withstand a downturn in gas prices. It is also and acquire-and-exploit company so when gas prices are down they can buy assets cheap, and when gas prices are high they generate lots of cash flow.

Thank you Mr. Currie!

Don Coxe Basic Points November 2009

2009-11-14T18:43:00.000-08:00

Don Coxe Basic Points November 2009 - The Power of Zero

To read/download Mr. Don Coxe's November 2009 Edition of Basic Points Click Here

Props: ZeroHedge

BMO CM Basic Points Nov 2009

Interview with Allan Ross of Ross Smith Energy Group (RSEG)

2009-11-12T15:05:00.000-08:00

A short conversation with Allan Ross, Chief Executive Officer of Ross Smith Energy Group (RSEG)

Bio: Allan graduated from the University of Western Ontario with an MBA in 1979 and obtained his CMA designation in 1981. After moving to Calgary , Allan spent two years with Gulf in their economics and planning department before joining Burns Fry in the Corporate Finance group. After two years in this capacity, Allan moved to retail sales with Burns Fry in 1985 and then moved to Peters & Co. Limited a year later where he spent twelve years working in institutional sales, covering Toronto and Asia. Allan is one of the founding partners of the Ross Smith Energy Group.

Q: Mr. Ross, Given the widespread pessimism regarding natural gas and the glut in inventory, what are your thoughts going forward for this commodity?

A: Investors should remember that natural gas is a commodity and the best cure for low prices is low prices. The natural gas sector is currently experiencing cap-ex cutbacks, production shut-ins and even the service stocks are suffering. Natural gas has a shorter reserve life than oil and the supply/demand scenario can change very quickly. Right now, there is a great amount of pessimism that has already been discounted into the price and in my opinion, it makes economic sense for natural gas prices to be in the $6-9/mcf range. With regards to M&A activity in the natural gas sector, if prices continue to remain at current levels for the next year or so, natural gas producers will be forced to engage in some deal making at the corporate level.

Q: With crude oil hovering at approximately $80/barrel, do you think these price levels are sustainable for the next 1-2 years, especially in light of the IEA saying that they only expect a marginal increases of 1.5% per annum in oil demand between 2007 and 2030 in their most recent world energy outlook, why or why not?

A: I have a tough time agreeing with the International Energy Agency’s long term forecast for global oil demand (which concludes that Global oil demand is expected to advance 1 percent a year to 105 million barrels a day by 2030 from 85 million barrels a day in 2008). We are not discovering any massive new oil fields and the ones being discovered offshore Brazil will take a very long time to come on-stream as currently there is no technology that is able to accomplish this feat. If I was a trader, I would probably be selling oil right now as oil is probably overvalued here (the world is awash in oil at these prices); however, I expect the price of oil to be higher this time next year With regards to what might happen to oil prices if governments around the world were to withdraw their stimulus packages by this time next year, I don’t believe that the stimulus packages are having much impact on oil prices, perhaps later when people feel more comfortable and start spending again you might see a lift in demand.. The big demand driver is Chinese activity.

Q: Lastly, can you please highlight 1 stock/theme that you think offers the best value moving forward and your reasons for liking it?

A: In terms of themes, in the energy space, I have been keeping an eye on the Marcellus shale plays for close to three years. The Marcellus is prolific because it has 199 TCF of remaining recoverable reserves, covers 5,000,000 acres, has 62,000 locations, and is close to market (US NE).

Another theme playing out right now is that the world hates the oil sands. However, the world needs the oil sands. If someone were to throw a monkey wrench into this equation and some new technology were to be discovered that makes the extraction of oil sands less intrusive, this could change the perception of the sector which in turn could be a boon for companies involved in the oil sands. I am not aware of anyone who is specifically working on technology for cleaner oil sands extraction process but given the prize there have to be lots!

Thank you Mr. Ross!

Interview with Robert Cooper, Oil and Gas Analyst at Acumen Capital

2009-11-11T21:29:00.001-08:00

A short conversation with Robert Cooper, CFA - Oil and Gas Analyst at Acumen Capital

Bio: Robert Cooper joined Acumen in August 2008 as an Oil & Gas Analyst. Acumen Capital Finance Partners (http://www.acumencapital.com/) Limited is an independent, full service investment dealer based in Calgary, Alberta, Canada.Prior to joining Acumen Capital , Robert spent several years in equity research with two other investment banking firms covering the junior oil and gas industry in addition to several years with a leading mid-market merchant banking firm. Prior to that, Mr. Cooper spent two years with a leading commodity trading organization as a commodity trader. Robert has a finance degree from the University of Regina, is a CFA charterholder and is Vice President of the Calgary CFA Society.

Q: Given the widespread pessimism regarding natural gas and the glut in inventory, what are your thoughts going forward for this commodity?

A: The night is always darkest before dawn and I think in early September we reached dawn with gas bottoming out at cyclical lows. I tend to be a contrarian by nature so when everyone is stampeding for the exit I take note of it but try to find out what is driving the group-think. Low prices for natural gas have been driven by two main reasons. First, the rapid deterioration in U.S. industrial demand and second, supply increases primarily driven by the U.S. shale plays (i.e. Haynesville, Marcellus, et al). With the massive stimulus percolating through the U.S. economy, I think there is a chance that industrial demand will perk up as the U.S. economy gathers steam. Second, generally the best cure for low prices are low prices. Drilling levels have been way down and this will inevitably lead to a supply response. So overall, I think we could see upside from here although in the short term gas will be highly correlated to the amount of cold weather that hits the major consuming regions in the U.S. Longer term, policy makers are eventually going to realize that natural gas should be the preferred fuel type going forward - it is plentiful, cheap, clean and doesn't involve sending billions of dollars overseas to questionable regimes who produce oil.

Q: With crude oil hovering at approximately $80/barrel, do you think these price levels are sustainable for the next 1-2 years, especially in light of the IEA saying that they only expect a marginal increases of 1.5% per annum in oil demand between 2007 and 2030 in their most recent world energy outlook, why or why not?

A: Generally, yes I agree. Oil appears to be trading at or about the marginal cost of new supply. We have seen comments coming from some of the supermajors, for instance, that for new oil sands projects to proceed an oil price of around $80/bbl is required in order to earn an appropriate rate of return. What folks fail to appreciate sometimes is that the world is awash in expensive sources of oil. The easy to produce oil has been produced. Therefore, in order to stimulate new supply, prices have to be strong and remain strong. Extreme volatility doesn't do anybody any good - it adds risk to major projects on the corporate side and wreaks havoc on the demand side (consumers). What I will say, however, is that oil is now much more dependent on emerging market economic growth than OECD growth and that is a big shift from years past.

Q: With the oil/gas ratio sitting at approximately 20 and the average over the last 2 years being around the 12 to 13 mark, would you short oil at the moment or go long natural gas?

A: I like the risk reward profile of natural gas better at the moment but that doesn't mean i would short oil. It takes a brave soul to short oil when you are one terrorist attack or geopolitical event away from a steep change in price. Some smarter folks than I may do that but I prefer to sleep at night.

Q: What is your outlook for M&A activity in the energy sector? Do you have any plays (as in the bakken, montney, cardium etc.) or particular stocks that may be particularly susceptible to M&A activity?

A: The short answer to that question is that I want to own energy stocks that larger energy companies want to own. And in my opinion, larger companies want to own assets in which they have a high degree of working interest, have low operating costs through controlled infrastructure/facilities, operate, and assets that have scale and scope (through increased capital intensity, improvements in technology, etc.) Finding names with those attributes can often lead to potential M&A targets. I try to find these companies and own them because they are good investments that may get merged out, not solely because they are M&A targets.

Q: Lastly, can you please highlight 1 stock/theme that you think offers the best value moving forward and your reasons for liking it?

[Note: Mr. Cooper is restricted from providing non-clients specific stock picks but he was kind enough to provide us with the following insight]

A: I don't have a specific stock pick but I like resource plays. That speaks to the scale and scope point i made earlier. Repeatability of a specific play type is very important and is worth more to investors because it is predictable. As a general rule, predictability is usually worth more than unpredictable results.

Thank You Mr. Cooper!

Interview with Ken Norquay, CMT of CastleMoore

2009-11-06T13:13:00.000-08:00

A short conversation with Ken Norquay, CMT of CastleMoore Inc., a portfolio management company.

Bio: Ken is an officer and director and chief investment strategist of CastleMoore Inc., a portfolio management company.

Ken is a graduate of McMaster University in Hamilton Ontario and has qualified as a Chartered Market Technician as well as attaining a number of industry specific qualifications in the trading of Futures and Options.

After serving three years in the Canadian Armed Forces, he entered the financial services industry as a mortgage officer with a large Canadian trust company. Ken entered the investment business and became the manager of the Hamilton and St. Catherines offices of Merrill Lynch Canada before becoming a founding partner and major shareholder of Market Street Investment House, a retail investment dealer. He sold his firm in the first quarter of 2000, realizing his life goal of selling at the top. Ken then became a director of Quest Capital Group, a day trading investment dealer. He subsequently established The Glen Nova Division of The Glen Ardith Company Ltd., an investment counseling firm.

Ken served as the chairman of the Hamilton Investment Dealer's Association and member of the IDA's Ontario District Council, in the late 1970's. He also served on the Board of Directors of the Canadian Society of Technical Analysts and as its President in the early 1990's.

Q: Mr. Norquay, in the face of the recent volatility in the stock market, a number of elliot wave practitioners are calling the recent rally from the lows a bear market rally and that we are now in a secular downtrend, does your analysis concur with this view?

A. Almost. My heart tells me the Elliott Wavers are right. But my best technical model has not yet given a sell signal for the stock market.

Q: What is your near and long term outlook for the Canadian Dollar and the US Dollar? While the general viewpoint of most market commentators calls for a decline in the US Dollar, I have heard a few technical analysts (primarily the elliot wave practitioners again) call for a secular uptrend in the UD Dollar, once again is do you or do you not concur with this view and why?

A: Our view is: CD$ down, US$ up. This time our models agree with the Elliot Wavers.

Q: What are your thoughts on the energy sector that is crude oil and natural gas in the next few months?

A: I have no opinion. Since the big wash out in crude from July 08 to Feb 09, this year’s action looks like a base and a break out. Oil looks higher. But I don’t trust it. Gas is crazy. Wild and volatile. I do not feel confident in the energy sector.

Q: Given that cyclical stocks have outperformed defensives in this rally since March 2009, can you please highlight one sector among Canadian stocks (e.g. can be financials, energy stocks, technology, resources etc.) that you believe to be overbought and due for a correction and one sector that you believe to be oversold and due for a bounce and why?

A: Overbought = Financials, Oversold = Nil

Q: Lastly, can you please highlight 1 stock that you think offers the best technicals moving forward and your reasons for liking it?

A: Deere & Company, usually known by its brand name John Deere (NYSE: DE) looks like a massive head and shoulders bottom.

Thank You Mr. Norquay!