Posted by Andrew Bell on June 30, 2009

We’re happy to report that the fun-lovin’ crowd at the Royal Canadian Mint aren’t letting this silly business of more than $15 million worth of missing bling get in the way of their Canada Day festivities.

Check out its website for a rundown of activities at mint premises in Ottawa and Winnipeg, including face-painting, clowns, free tours and family activities. Perhaps the merriment will include a scavenger hunt for those unreconciled precious metals.

Transport Minister John Baird and Rob Merrifield, minister of state for transport, yesterday called the loss "inexcusable" and spluttered that the mint will be held "accountable."

Sounds like mint president and CEO Ian Bennett, chairman James Love, chief operating officer Beverley Lepine and chief financial officer Marc Brûlé have some splainin' to do.

Seems the Crown corporation’s festivities will also include clowns. And magicians.  Everyone loves a good a disappearing act.

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Posted by Michael Hainsworth on June 29, 2009

Recently Jeff Parent of Quadrexx Asset Management was on the program discussing stocks using technical analysis.

Since we are often inundated with requests about where investors can go to learn more on technical analysis, I asked Jeff to provide us with links to sites he felt would help us become better investors.

Here’s his list:

A great glossary of terms can be found at http://www.stockcharts.com/ and there’s an investor education page set up at www.stockcharts.com/education.

For interactive charting, he recommends either Yahoo finance at http://finance.yahoo.com/ or Google finance at http://www.google.com/finance.

Parent also recommends http://www.investopedia.com/ and his favourite, http://www.equis.com/customer/resources/TAAZ. Specific indicators can be found on the developers’ site, he advises, for example, Bollinger bands: http://www.bollingerbands.com/services/bb/ and candlesticks: http://www.candlecharts.com/about-candles-basics.html.

Thanks for your calls, emails and tweets on the day’s show. Click HERE to watch Jeff’s appearance.

Michael

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Posted by Frances Horodelski on June 26, 2009

Each week we have conversations with all types of investing experts who share their own particular approach to the equity markets; approaches they have found to be successful.

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Click here to watch the latest Stock $ense segment

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Ian Lapey at Third Avenue Management, for example, focuses on what he calls net asset value; Christine Poole at GlobeInvest Capital uses a GARP (growth at a reasonable price) style; others focus exclusively on the squiggly lines of technical analysis and still others have a combination of value and growth or bottoms up and top down.

All our speakers have been largely successful, one would hope, in the approach they use for investing.  But the approach they use is really neither here nor there.  The important thing is that they have one.

I know there is a plethora of data on style diversification which urges investors to incorporate a number of different styles into their investment plan in order to enhance returns and decrease risk.  And mathematically, the data are probably right.  But for the individual investor who wants to do this on their own, the best approach that I’ve found is "pick a style, any style BUT stick with it."

In the end, it doesn’t likely matter whether it is a pure value approach, or a technically oriented one.  Whether you’re an earnings momentum investor or a "only buy on Mondays" kind of guy.  

The first step, I believe, in becoming a successful investor is developing an approach that is right for you and staying with it.  This doesn’t mean buy and hold.  It means developing a consistent approach to choosing individual securities.  Why?  Because you will have a plan on when to buy individual companies at the right price – but more importantly, have a set of signals that will tell you when to sell them -- maybe the most difficult part of investing.

Some of these approaches are more complicated than others – and need more homework.  But to be successful at anything, including investing, you have to do your homework.

Mr. Lapey’s approach requires a thorough knowledge of the company’s management, the balance sheet, the growth prospects and a model to calculate net asset value.   He has his lists of companies that he can then narrow down based on his check list.  By regularly reviewing his holdings and seeing how they stack up against the check list, he can sell those that no longer meet his criteria and replace with those investments that do.  Sound hard?  Once you have figured out the style/approach you want to use and develop a check list for that style – it’s actually pretty easy.   Style choice should allow you to ignore all the noise and focus on the companies you own or those you want to own.

One last piece of advice.  Don’t try to cover it all and don’t worry about the one that got away or the tip you got from your brother-in-law or a situation that doesn’t fit your style.  It’ll just make you crazy.

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Posted by Scott Peterson on June 25, 2009

His lawyer could have done it alone, but the self described "Chinese Warren Buffett" decided to appear in a Toronto court yesterday. There were gasps of surprise from the gallery as Weizhen Tang entered the provincial court to hear the case the Ontario Securities Commission has against him. The OSC is alleging that Mr. Tang is at the centre of a $40-million Ponzi scheme and has little left to show for it.

Mr. Tang is now facing 12 charges of violating securities laws. He is a slight man, standing about five ft. three, sporting a dark blue suit, and worn black shoes. Roughly 40 people packed the three rows of benches at the back of the court.

The clerk told Mr. Tang that standing in the court was not permitted. Mr. Tang nodded politely and waited outside until his new lawyer Loftus Cuddy, his third in three months, brought him back in when his case was read to the courtroom.

Wednesday’s preliminary hearing revealed that OSC lawyers have a hard drive with 8,745 client records, 3 DVDs, and 44 unspecified transcripts.

A pre-trial has been set for August 12th. It consists of two parts. First, lawyers from both sides get together and have a private discussion with the judge. This is where any plea bargaining might take place. Then at 9:30 a.m. the public is invited in and a trial could be set at that time.

Legal experts have said that Mr. Tang doesn’t have much bargaining clout, and that the OSC looks like they have a strong case against him. Another possible outcome at the pre-trial is that Mr. Tang and his lawyer will ask for more time to go through the evidence.

Either way Mr. Tang might be in no hurry to face a trial. If convicted on all 12 counts he could face up to $60 million in fines or up to 60 years in prison.

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Posted by Frances Horodelski on June 24, 2009

Yesterday, Boeing’s shares declined 6.5% on news the Dreamliner 787 aircraft would not fly this week as anticipated. The company provided little in the way of specifics on when the airplane would fly, the nature of the problem, the charges that may be related to delays or other details that investors could use to gauge the costs associated with the announcement. More importantly, it appears the need to delay the flight was also a surprise to management – never a good sign. As Barclays Capital’s analyst Joseph Campbell indicated in a note following the announcement, the shock of the news "reminds, warns and potentially scares" them about the risks inherent in the 787 program.

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Click here to watch the latest Stock $ense segment

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For investors, the situation at Boeing can be an education in how to deal with news events that come out of the blue. Putting on an analyst’s hat, it’s time to look at valuation and then at potential catalysts that could move the stock further one way or the other.

Let’s look at valuation. Boeing’s shares are currently trading near a 10-year low. The average price/earnings multiple during this time has been 19 – the current p/e is 9.5. The average price/sales ratio has been 0.8 – now 0.5.  The average dividend yield has been 1.7%. Boeing’s current dividend of $1.68 yields almost 4%. While the shares aren’t the cheapest they have been over this period, they are closer to the low end of valuation rather than the high end. This says that some of the bad news is discounted in the current share price. Boeing also sports an A-rated balance sheet. Investors should also remember that commercial aircraft contributes less than half of the company’s $60 billion in revenues. The other part of the company is defense-related, a relatively more stable business, although some argue it's under margin pressure as global governments look to save money where they can.

But investors are skeptical. Management credibility is under fire. The costs related to the delays could be significant (although right now the expectations are for relatively modest additional costs). Quantifying the delays is difficult because of the lack of detail available at this time.

What are the catalysts for a change in the price direction of Boeing shares? There appears to be nothing in the very near term. Analysts however are looking toward the July 22nd second-quarter earnings release for more clarity. Right now, the street is more on the fence than in favour of Boeing. According to Bloomberg, of the 27 analysts covering the stock, only one-third rate Boeing a buy. There are 13 hold ratings and five sells. The average target price is $48.50 US versus today’s price of $43. Even the bulls, however, suggest the stock will stay under some pressure until more details on the 787 are available. In the meantime, investors can do their homework to decide whether the apparent value in the numbers noted above provide an opportunity or a trap.

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Posted by Andrew Bell on June 23, 2009

CAE Inc. (CAE – TSX) stock has already dived more than 40% in a year, closing at $6.77 Monday, amid fears for commercial aviation. But investors had better watch for another air pocket.

Just as the company gets ready to splash out as much as $270 million on a move into training and simulation for healthcare, mining and heavy equipment, it faces a tough new competitor in its core market for commercial aircraft simulators.

CIBC analyst Chris Murray chatted with management of the simulation division of Rockwell Collins Inc. (COL – NYSE) at last week’s Paris Air Show. Execs at the U.S. avionics and defence contractor "indicated they intend to enter the civil simulation market and capture a significant share," Murray reports. "We believe the entry by a credible third player will prove to be negative to CAE."

Murray, who rates CAE as a sector performer with an $8 target, says Rockwell Collins plans to exploit "existing customer relationships… focused on Airbus and Boeing platforms where they are already supplying avionics. They believe their existing brand name will prove an advantage, although they did admit that they believed they would be forced into aggressive pricing in order to gain market share."

Doesn’t sound like much fun for CAE and France’s Thales, the two major players in the civil simulator market.

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Posted by Niall McGee on June 18, 2009

After months of grim news, we’re finally seeing some positive signs for the economy. Job losses are slowing and Canada’s inflation rate has ticked higher, instead of heading into deflation territory. Perhaps most importantly, we’ve had a decent rally in the equity markets since March.

Now that we’ve had a chance to catch our breath, I thought I’d ask a few BNN regulars a simple question: why did so few predict last fall’s bloodbath? It seems to me we had very little warning from the experts of the credit crunch and resulting global meltdown.

Here’s what our guests told me:

Kate Warne, Canadian market strategist, Edward Jones: "I think this was an extraordinarily unusual event which is good news for all of us who are investors over time. But I think that’s part of why you saw so few predictions."

Graham Harris, chairman, ATW Gold Corp: "The main problem is the whole industry is predicated on self-preservation. No one wants to be the guy that cries wolf."

Larry Levin, president, Secrets of Traders: "People are very shortsighted, unfortunately, even investment professionals … here and all across the world. When the going is good, people jump on the momentum and it just kind of builds on itself. Nobody ever believes that it’s going to go away."

Michael Smedley, chief portfolio manager, Morgan Meighen & Associates: "When greed is winning, you tend to shut your eyes. You shut your eyes to the downside. We never learn."

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Posted by Aaron Sobeski, BNN staff on June 18, 2009

"G'day mate, let's throw another 'protectionist measure' on the Barbie."

The Australian state of New South Wales, or NSW, has added "Buy Australian" legislation to its latest budget. All NSW government departments and agencies will be forced to buy Australian-made products.

The rules are pretty simple. Australian products receive a 20-percent discount when comparing prices with imports. So let's say the NSW Department of Agriculture needs some new desks. The desks made in Australia are $1,000 and the desks made in Japan sell for $850. Under the new program, the Department of Agriculture must buy the Australian-made desks because the Japanese products are not a full 20-percent cheaper. The government estimates, this policy would cover about A$4-billion in expenditures.

Located in the south-east corner of the country, NSW is Australia's most populous state, with most of the residents living in the capital, Sydney. NSW is also enduring the highest unemployment rate among Australia's states at 6.4 percent. The "Buy Australian" policies are part of a much larger A$62-billion dollar stimulus package aimed at getting people working again.

The U.S. and the E.U. were quick to denounce the state's protectionist move, as was Australia's federal government.

"Rather than helping create jobs, 'buy local' schemes will come at a cost as Australia's trading partners retaliate," said Simon Crean, Australia's Trade Minister.

But what is the U.S. denouncing? It has substantial "Buy American" provisions in its stimulus package, provisions that have been met with retaliation here in Canada. Canada's municipalities narrowly passed a protectionist measure of their own. The municipalities don't want to deal with cities, counties or municipalities shutting out Canadian business. How quickly the dominoes begin to fall.

High unemployment and a weak economy are usually fertile ground for the seeds of protectionism to grow. One of those seeds was sown when a story broke regarding Australian police, ambulance and nurses uniforms being purchased from China. I'd be surprised if the uniforms were NOT made in China.

It should be good news for Australian companies doing business with the government of NSW. An internationally competitive company can now raise their prices by 20 percent without fear of competition. If the government complains, the company can offer them a 5 percent "thanks for buying Australian discount."  Of course, the real problem for the company arises when it is shut out of foreign markets. The bigger problem for the economy occurs when entire industries are shut out of foreign markets.

While it's easy to rally people around the flag during tough times, protectionist policies only make things worse. Crickey, this is not the way to get out of a global recession, mate.

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Posted by Andrew Bell on June 17, 2009

Canaccord analyst Bob Hastings wonders why TransCanada Corp. (TRP- TSX) was in such a rush to sell a massive $1.6-billion in new shares.

In a report today, he praises the company’s plan to buy ConocoPhillips’ 20 percent interest in the Keystone oil sands pipeline. The Canadian company now has 100 percent ownership of the $12-billion US project, which will link Alberta to Texas.

"The purchase price looks to be about book value (a very good price), which should add to TransCanada’s share price meaningfully once the pipeline is up and delivering cash flow," Hastings says.

But he adds that the "real cost" of the share sale, which will cover the acquisition and ongoing capital costs, "is the lost opportunity to issue stock at a higher price next year to finance the 2010 capital spending requirement, when Keystone is starting to show earnings and cash flow, and investors can better see the investment potential."

Hastings provides a rather dismal reality check for investors who have bought into TransCanada stock sales in recent years. "This is the fourth significant equity issue in just two and a half years ($1.7-billion in February 2007; $1.3-billion in May, 2008; $1-billion in May 2008 and $1.6-1.84 billion currently) and … each issue has occurred at a lower price than the previous issue ($38, $36.50, $33 and $31.50 respectively)."

He goes on to wonder: "Is management just worried about financing risk after recent difficult markets or does it see problems on the horizon that it has not shared with its owners yet?"

Nevertheless, Hastings is sticking with his Buy rating and $40 (Canadian) target price "though we expect it will take the market some time to digest this latest issue."
TransCanada stock has sagged 5 percent today to trade at $31.36 on news the pipeline and power-generation empire is selling 50.8 million shares at $31.50 each.

Desjardins analyst Pierre Lacroix warns that TransCanada could be dead money until investors absorb the financing.

In a report this morning, he cut his rating on the stock to Hold from Buy and reducing his target to $35.25 from $39.

The deal "should provide TRP with full control over a valuable long-life asset" offering earnings, cash flow and a platform for future expansion in the crude oil pipelines, Lacroix says. But "over the near term, we believe that the dilution from the announced equity offering and short-term power market weakness are likely to constrain TRP’s share price performance."

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Posted by Michael Kane on June 17, 2009

Kraft mills produce a bi-product when they process wood into pulp. It is a nasty, toxic, caustic ooze that produces hydrogen gas and heat when it comes into contact with aluminum, zinc or tin. That also makes it effective as a power generation agent. It is seen as an alternative fuel.

The U.S. government is giving billions of dollars in subsidies to companies that use alternative fuels in conjunction with fossil fuels.

Pulp mills use this “black liquor” almost exclusively as a source of power generation. But to qualify for billions in subsidies, the mills have now started to use… are you ready… fossil fuels in conjunction with black liquor. They qualify under the bureaucratically-blind energy program, but are clearly contradicting its intent.

That has been giving them an unfair cost-advantage over Canadian mills. Tembec blamed the practice for the forced closure of the Skookumchuck Mill, north of Kimberley in eastern British Columbia. And it is pushing the Canadian government into a position between Barack and a hard place.

The Obama Administration could use this situation to show it knows how to do the right thing and disqualify the companies that make this stuff from receiving government subsidies.

Or is the judgment impaired?

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Posted by Niall McGee on June 17, 2009

A U.S. bankruptcy court issued a ruling late on Monday blocking Jim Balsillie from moving the Phoenix Coyotes to Canada. On Tuesday, a Basillie spokesperson revealed the RIM co-CEO is pondering a new bid for the Phoenix Coyotes.

Isn’t all of this getting a bit ridiculous? Balsillie runs one of the biggest tech companies on the planet. Shouldn’t he be concentrating on that job and not focusing on frivolous things like hockey? How is he enhancing shareholder value exactly? I decided to ask a few people in the financial community if they think Balsillie’s pursuit of the Coyotes is distracting and thus bad for shareholders? Here’s what they told me:

Kate Warne, Canadian market strategist, Edward Jones: “I haven’t seen any evidence that he’s distracted. Certainly the company seems to be quite driven. Introducing new products and staying up with the competition. So no, I don’t think shareholders right now have anything to complain about”. 

Graham Harris, chairman, ATW Gold Corp.: “I think he’s got enough people there to run that company. I’m sure that it’s not distracting to the actual RIM operations”.

Benj Gallander, president, Contra The Heard investment letter: “Certainly it must be a distraction for him and it’s going to consume and it has been consuming a lot of his time. You can say I want you focusing on my company. And perhaps he’s got other people in place that can do that. But there still has to be a distraction level”

That’s what a slice of Bay Street thinks. What do you think?

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Posted by Aaron Sobeski, BNN staff on June 11, 2009

Straight talking Bank of Canada governor Mark Carney reiterated his belief that the rising Canadian dollar could halt Canada’s economic recovery, saying "the recent sharp increase in the value of the Canadian dollar, if it proves persistent, could fully offset recent positive developments in financial conditions, commodity prices, and confidence." (Click HERE to read Carney's speech)

Sure, it makes the price of Canadian exports more expensive, but there are benefits to having a stronger dollar, too.  

On average, a Canadian export product contains 40 percent imported materials, so when the loonie climbs, it becomes cheaper for the producer to buy the Taiwanese computer chips or steel exhaust pipes from the U.S. The real benefit comes from adding even more components from off-shore producers such as China or Latin American countries. These days just about anything that is labour intensive has moved off-shore.

For those worried about the so-called hollowing out of corporate Canada, the higher dollar is actually a godsend. Canadian companies can do more than simply purchase American goods on the cheap; they can buy American companies outright. Add a stronger loonie to the depressed values of many U.S. companies and you have some golden opportunities to buy competitors, suppliers or even diversify your business.  The Canadian banks are also in a much better position to help fund cross-border acquisitions than most other banks around the world.

Probably the best opportunity lies in Canada's ability to modernize its productive capacity. Gains in our wealth as a nation are directly linked to our ability to be more productive. Often we think of productivity gains in manufacturing terms. Buying better machines helps to produce more stuff with less labour. But it's not just about manufacturing. The manufacturing sector only accounts for about 20 percent of Canada’s gross domestic product. The service sector can also gain from improved technology.  From faster computer servers, to better software, to cheaper pens and pencils, the opportunities are endless.

The currency specialists at TD Securities predict the dollar will continue to rise, reaching parity by the end of the year, so we simply can't rely on a weaker dollar as a competitive advantage. The experts are telling us to get used to it. As Canadians we must be innovators, taking advantage of our stronger dollar to become acquirers of the best technology available and better utilize low cost regions of the world to produce labour-intensive components.

If a strong Canadian dollar is the reality, we don’t need to fight it, we need to flex it.

 

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Posted by Scott Peterson on June 11, 2009

The Ontario Securities Commission has slapped fraud charges against the man at the centre of what could be Canada’s largest Ponzi scheme. Weizhen Tang who calls himself the "Chinese Warren Buffett," has been hit with 12 counts of contravening Ontario securities laws and could face up to 60 years in jail if convicted.

"In the next days to come, I shall have more to say," he told BNN after learning of the charges. "I am looking forward to defending my name and reputation, (and) to showing my innocence."

It is a posture Mr. Tang has maintained since the OSC first froze his trading accounts in March. Back then he told BNN that he had only lost $15 million and that the rest was returned to clients. But the OSC said he raised at least $40 million and can find little record of what happened to it. The OSC is also accusing him of using new client money to pay off existing investors: the classic definition of a Ponzi scheme.

That Ponzi charge is echoed by some of Mr. Tang’s clients who have contacted BNN. They said they were tempted by the promise of a 1 percent return per week on their investments. As a result, some of them said they lost as much as $500,000 of their life savings. Some of his clients said that when they approached him to pay back their money he stalled until it was too late.

Mr. Tang is accused of making unregistered trades, of not issuing prospectuses, and of making "prohibited undertakings." That means Mr. Tang made unrealistic promises to his clients in regard to the returns he could make for them, including a return of 52 percent a year.

In the course of BNN’s own investigation, Mr. Tang has refused repeated requests to offer his side of the story. Since BNN broke the news in March Mr. Tang has maintained that he will be cleared of all charges and is eager to get back to investing.

Some of the clients who spoke to BNN still think Mr. Tang has the ability to pay them back. They are a diverse group of people mostly from the Chinese community ranging from restaurateurs to desk clerks. They spoke to BNN anonymously, despite going to the OSC and in some cases the police, because they said if Mr. Tang sees them speak out, he will withhold the money he says he still has.

The OSC, however, said that the balance in his trading account was as little as $640 US on March 12 2009.

Each of the 12 charges could carry a fine of up to $5 million, or a sentence of up to five years in prison. The trial is set for June 24 in Toronto, under provincial jurisdiction.

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Posted by Mark Bunting on June 10, 2009

Brave new world. Line in the sand. Those are the titles of two strategy reports from Bank of America Merrill Lynch (Merrill) and RBC.

Merrill’s Chief Global Equity Strategist, Michael Hartnett, and his team examine the current equity bull and bear cases. Over at RBC, Myles Zyblock, Chief Institutional Strategist and Director of Capital Markets Research, and his squad conclude that they are "relatively optimistic towards the equity market."

Merrill thinks March marked a major inflection point for global markets as the combination of excessive bearishness and extreme policy easing reduced the risk of deflation and set the monstrous equity rally in motion.

The bulls and bears both have valid cases right now according to Merrill with neither side likely to emerge a clear winner soon. Merrill summarizes some of the bulls and bears arguments.

Bulls:  Cash levels remain high
            The global recovery has begun
            Credit markets are thawing
            Bond yields are rising
            Rising earnings per share revisions

Bears:  Businesses and consumers continue to deleverage
             The markets are ahead of their fundamentals
             Credit is scarce
             Rising bond yields will choke off a recovery
             No revenue growth

Merrill thinks the recovery will be uneven so investors need to be flexible. The report recommends quality dividend-yielding stocks like Johnson & Johnson (JNJ-NYSE), Chevron (CVX-NYSE), General Mills (GIS-NYSE), Kimberly Clark (KMB-NYSE) and McDonald’s (MCD-NYSE). It also says money should be allocated in the following way: defense, infrastructure, technology, emerging markets, inflation protected bonds (TIPS), investment grade bonds and gold.

As for RBC, the strategy team is seeing healing in financial markets with stress receding and confidence rising. It says weakness in stocks is an opportunity to buy. The strategists suggest that maybe the markets have it right with bond yields rising, and oil and stocks moving higher.

But, RBC points out that the rise in unemployment in the U.S. will continue to crimp consumer spending. However, the rally can accelerate if improving confidence in the recovery and earnings lures some of the "ample cash" from the sidelines.

Two different reports, but both angling towards the view that the recovery is underway and certain sectors and stocks are worth buying.

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Posted by Howard Green on June 9, 2009

Foreign journalists, come on down. Come on down to Canada, eh? The federal government is inviting business journalists from other countries to come and see just how great our banking system really is.  And Canadian taxpayers will pay for the five to seven day junket.

A delegation of scribes from afar is expected this summer.  No details on timing or how many journalists have taken Ottawa up on its offer.

The theme, according to a package sent recently to a European business journalist, is the "stability of Canada’s banking sector" and how it is "expected to contribute significantly to Canada’s faster and stronger rebound from the global recession."

A sample program put forward in the invitation includes meetings with the Canadian Bankers Association, executives and economists at TD Bank, along with visits to other banks and finally a pit stop in Ottawa to meet "ministers." No mention of whom, although one comes to mind as a possibility.  

The cost of flights and hotels for the foreign reporters will be picked up by the Government of Canada. 

"We typically pay for expenses such as transportation and hotel, in accordance with Treasury Board guidelines," said Renee David, director of Trade Media Relations with the Department of Foreign Affairs and International Trade.

She added that the government "plays a proactive role in attracting foreign media attention to Canadian good news stories….this is a common practice among many countries."

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Posted by Frances Horodelski on June 8, 2009

When stock markets appreciate 40 percent or more, one would think they should be called something more than just a bear market rally. The definition of a bull market is a rise of 20 percent or more over a sustained period of time. But the time description of that definition is pretty vague. So far, the markets have been appreciating for about 90 days from the March 6th intra-day lows. Not the longest bull market in history, but not the shortest either.

According to Stock Trader’s Almanac, the shortest bull market on record over the past 100 years was experienced by the Dow Jones industrial average in 1932. It lasted 61 days and appreciated almost 94 percent. The next shortest bull market, in terms of duration, was also in 1932 – 98 days for a 111-percent appreciation.

More recently, the next shortest bull markets occurred post-9/11, lasting 105 days for a 45-percent appreciation in the Nasdaq and about 34 percent for the S&P 500.

Unfortunately, this last bull market petered out with the major averages losing all those gains and more into the late 2002 lows. Interestingly, according to a report by RBC Capital Markets technical analyst Ray Hanson, this was also a time when the golden crosses failed to usher in a major new bull market.

Only time will tell whether we are embarking on a new great bull market, or whether we’ve just completed another rare, and frustratingly, short bull market.

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Posted by Andrew Bell on June 4, 2009

Gold’s roaring back after yesterday’s selloff – soaring more than $16.70 US, closing at $982.30 an ounce – amid fresh concerns over the U.S. dollar.

"We remain staunch bulls" on bullion, say analysts Jacques Wortman and Eldon Brown at GMP Securities. "There could be an attractive opportunity in small cap, near to early-stage gold producers."

GMP initiated coverage today on Colossus Minerals Inc. (CSI – TSX), Lake Shore Gold Corp. (LSG – TSX), Romarco Minerals Inc. (R – Venture) and San Gold Corp. (SGR – Venture) with buy recommendations and maintained its buy on International Tower Hill Mines Ltd. (ITH – Venture).

The analysts have a 12-month target of $4.25 on Colossus, which is trading at $3.11 today. They say its Serra Pelada project in northern Para state in Brazil is in a "relatively remote" location but the availability of infrastructure is "favourable."  The mineralization is "high grade" and "the asset would be an attractive takeover target," GMP analysts reckon.

GMP sees International Tower Hill climbing to $5.25 over the next year, up from $3.45 today. The  company’s Livengood project, northwest of Fairbanks, Alaska, "benefits from paved state highway access through the project and good access to water." The analysts say "a project of this size and scope is attractive to intermediate and senior gold producers, with the most likely group of potential suitors including AngloGold, Barrick, Newmont, Kinross, Goldcorp, Agnico Eagle, and perhaps Franco Nevada.”

Lake Shore Gold is trading at $2.37 today; GMP sees the stock hitting $3.45 within a year. It says the company, whose key Timmins project is 18 kilometres west-southwest of Timmins, Ont., has the "financial strength to complete all planned development activities in 2009 and 2010."

The analysts have a target price of $1.10 on Romarco, which is changing hands at 84 cents today. The company’s Haile project in South Carolina offers "all of the necessary infrastructure such as power, water and road access." The area has been plagued by job losses in textiles and "municipal and state governments are highly supportive of the re-start of the Haile mine and are offering financial support and assistance in securing the necessary permits."

Finally, GMP sees San Gold climbing to $3.40 within a year, up from $2.40 today. San Gold operates the Rice Lake mine in southeastern Manitoba, 150 kilometres northeast of Winnipeg.  Last year, the company discovered a new, high-grade gold zone, named the Hinge Zone. GMP sees potential for this zone to exceed its own estimate for contained gold and extend mine life.

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Posted by Michael Kane on June 2, 2009

In speaking with auto analyst David Silver at Wall Street Strategies, he speculated in the early hours after the sale of GM’s Hummer division was announced, that the buyer would be Chinese private equity.

GM says the sale of Hummer will save 3,000 jobs in the United States.

Following the logic, a Chinese buyer sees the market for Hummer not in the U.S. but overseas.

One of the major complaints of the United Auto Workers union and the Canadian Auto Workers union is that vehicles made in Asia can be imported here, but vehicles made in North America can not be exported into Asian markets.

Could the purchase of Hummer by Chinese interests mean the barrier might come down?

Silver told BNN that, yes, it could be a precedent-setting event and a game-changer for the unions.

Ancient Chinese benediction: "May you live in interesting times."

 

Editor’s note: Since Michael wrote his note about his interview with David Silver, BNN received word that GM had sold Hummer to Sichuan Tengzhong, a privately-owned manufacturer of heavy machinery equipment, including special use vehicles.  The company operates in Chengdu, the capital of China’s Sichuan province.

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Posted by Frances Horodelski on June 1, 2009

General Motors will be removed from the Dow Jones Industrial Average effective June 8th, replaced by Cisco. Citigroup is being replaced by Travelers Insurance effective the same day. The mighty have certainly fallen.  But the Dow lives on.

The Dow is one of the mostly widely followed indicators in the world. It is useful as a single point for investors to see what U.S. equity markets are doing but more importantly, it's set up to be representative of what is American.  And that is how its components are chosen.

While there are no official quantitative criteria for being included in the index, the committee responsible for choosing the components looks for the largest and most widely held companies that are leaders in their respective industries with a long track record in operations. They also wish to maintain a broad representation across industries. With the proposed changes, the sector make-up of the Dow will be five industrials, five technology companies, four each in financials and consumer discretionary, three each in healthcare and consumer staples and two each in telcos, energy and basic materials.

It is important to remember that the Dow is an average not an index so it is price weighted, not market capitalization weighted like the S&P/TSX or the S&P 500. It was originally calculated by adding up the prices of all the components and dividing by the number of companies included. This worked in the early days, but the impact of stock splits and other price adjusting actions over time undermined this averaging process. Mathematically, a "divisor" was calculated that is now used to adjust the average. Before the changes noted above take effect, the divisor is 0.125552709. 

What this means is that each dollar move in any stock in the average represents about eight Dow points. So despite the fact that IBM is at $106 US and Citigroup at $3.72, a dollar move in either one of these names represents the same move in point terms in the Dow.

This price weighting also has skewed the index to place a great deal of weight on IBM (10% of the average) which is the highest priced stock.  Ten of the companies represent almost two-thirds of the weight of the average (This will change when higher priced Cisco and Travelers replace the lower priced GM and Citigroup).  This price issue is one of the reasons that Google and Berkshire Hathaway are unlikely to be included in the Dow in the future, unless their shares are split.

 

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Posted by Aaron Sobeski on June 1, 2009

It’s E3 time. E3 stands for Electronic Entertainment Expo and it’s North America’s biggest video game extravaganza - where the stars from the hottest video games run, shoot and punch their way into the hearts of hard-core gamers. And from a business perspective, it’s also the place where industry buyers decide which games will be the hottest sellers next Christmas.  

Unfortunately, video-game sales are falling – dropping 8.5 percent in the first quarter of the year. The NPD Group tracks the industry and has never seen it contract since they began tallying the data in 2002. 

But the falling sales numbers don’t tell the whole story.  The software for new game systems such as Play Station 3 and Nintendo Wii are posting double digit growth of 35 percent and 24 percent respectively. Xbox sales are rising at a 6-percent rate. Not as strong as the other players, but it has been around longer. The sales declines are all in the late model categories like the old Play Stations, the old Xbox, and the old Game Cube. 

The new stuff is making money, the old stuff isn’t and that is what makes the E3 so important. Much like a multi-player video games, these companies are competing for the ultimate prize: a bigger share of what could be a finite amount of gamers’ dollars. And while the show officially kicks off Tuesday, three of the industry’s biggest players – Microsoft, Electronic Arts and Ubisoft – have press conferences scheduled for today.

It’s worth following the news that comes out of this conference and the web is full of speculation as to what each manufacturer may unveil. With the reinvigoration of Nintendo and its wildly successful Wii system, Microsoft is expected to launch its own motion control system. Nintendo’s interactive and less-violent games, introduced a whole new demographic of games to the mix and helped catapult the Wii to No. 1 status among video game console sales.

Halo is one of Microsoft’s best selling games and Mr. Gate’s protégés are likely to have a massive demo of the latest edition in the series, Halo 3 ODST. This game is simply one of the most popular things on the planet. Halo 3 sales topped $125 million US on the first day it went on sale, and while it was funny to see teens skip school to buy the game and play it all day, it was a bit weird to see adults taking the day off work, too. 

Industry insiders are also looking at Microsoft’s Zune HD as it tries to steal market share from Apple’s iconic iPod. Taking on the iPod is no simple task and to this point Microsoft has been pretty unsuccessful. But the latest buzz is that the Zune HD will link to the Xbox 360, and become to gaming what the iPod was to music when it was first launched. It’s worth a shot, but we’ll have to wait and see what Microsoft does with its billions and billions of dollars.

Microsoft shares up 6.2 percent year to date, but down 25 percent over the last 12 months. Of the 34 analysts covering the stock 25 have it rated as a buy and 9 have it rated as a hold.

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