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Dec. 3/07
A) Year End Rally
The hoped for interest rate cut has rallied investors .
" Curious and curiouser " said Alice ( Investor off in her own Wonderland )
Curious because the interest rate cut would be as a result of the Federal Reserve concluding market conditions are getting worse and need the comfort of lower rates.
The past lowering of rates saw the market head higher - even though the credit mess is worse than ever . Despite lower rates there are daily stories of the credit market being frozen . As one example Florida has had to suspend resumptions of its money fund that is used as a bank deposit for municipalities and school boards. And as another more disturbing development ,Citi Group had to accept $7.5 billion dollars ( at 11%) to shore up its capital - and that may not be enough.
The change in market sentiment - from the doom and gloom of the housing meltdown to optimism that rate cuts and the banking industry superfund/ bailout fund - draws in a lot of money now on the sidelines. Lower money market yields make equities more attractive - even at the additional risk .( The long term equity return is 7% - The AMP Portfolio has had 25 % returns for the past three years.)
B) The Apprentice Millionaire Portfolio has seen a recovery in Timminco and Oilexco this last week.
Individually :
B1 ) Oilexco ( OIL)
" Curious and Curiouser "
Oil sector analyst Alice.
Oil commodity prices retreated on fears a U.S. slowdown would lessen demand - after a pipeline scare lasted only one day and failed to hold its increases.
Despite oil prices being down 10 % in the last two weeks ,. Oilexco has climbed back to just under $15. This is on the interest in the potential of the Huntington discovery AND the added production scheduled for 2008 and beyond.
Joseph Schacter - The Bow tie That Walks Like A Man - says the Huntington information will be available in early December . He - as part of his coverage - has access to the management and I take it therefore , that we are finally going to see the appraisal stats and soon.
This should continue to support the Oilexco market price.
Oilexco has other drilling projects drilling :
West Huntington - spud November, results in December
Danica - given as 2007
Moth - 2008
TARGET PRICES for Oilexco
Scahacter says - ( November 21 , 2007 )
" Our 12 month target of $25.00 is based on 5 X the forecast Q4 2008 annualized cash flow of U.S. $ 4. 28 in addition to a small premium for the Huntington discovery and future exploration potential.
Running a $90 Brent price deck , annualized cash flow is estimated at $ 5.78 ... Applying the same 5 X multiple a $29 target is conceivable. "
B2) Timminco ( TIM)
The 2008 production - which has been sold out a year in advance, moves closer and the result is less risk in the stock
I believe this is attracting new investors and they have pushed on the price .
Also, this was Peter Hodson's ( Sprott fund manager ) number one pick on Monday -
and the stock responded after that TV public relations .
C ) Orca ( ORC.B)
A Natural Gas Play That Can Be purchased NOW - below the private placement price of $13.80
- because its natural gas finds and sales are in Africa- not North America. I highlighted this company a number of months ago but a Report on Business interview pushed the price of the stock. It has since meandered down - and this recent quarterly report highlights continuing success. The management team is from Pan Ocean Energy which I owned and only sold because the Company was bought out - the same story may follow here.
TORTOLA, British Virgin Islands. Orca Exploration Group Inc (“Orca Exploration” or the “Company”) announces its results for the quarter ended 30 September 2007.
??Generated a profit before tax of US$3.0 million (Q3 2006: US$1.3 million) with funds from operations before working capital changes of US$3.7 million (Q3 2006: US$1.6 million). The increase in profitability is primarily the result of an increase in sales volumes to the power sector.
??Satisfied the conditions precedent for the option agreement with Tower Resources plc that gives Orca the opportunity to become a 50% interest holder in the 6,040 square kilometer Exploration Area 5 in Uganda. ??Shortly after the quarter end, successfully completed the SS-10 well, which was tested at rates up to 52 mmscf/d. It is forecast that the well will be able to flow at a rate in excess of 55 mmscf/d once on production. The well is expected to be one of the best producers in the field and takes the deliverability of the six wells in the field to greater than 200 mmscf/d.
??Increased Q3 2007 sales of Additional Gas to the power sector by 165% to 1,974 mmscf (an average of 21.5 mmscf/d) compared with 744 mmscf in Q3 2006, at an average price of US$2.19/mcf (Q3 2006: US$1.69/mcf). .
??Sold 442 mmscf of Additional Gas to Dar es Salaam industrial customers or an average of 4.8 mmscf/d. This represented a 10% decrease on Q3 2006 when 491 mmscf was sold. However, average industrial prices increased by 11% to an average of US$9.58/mcf (Q3 2006: US$8.63/mcf)
??Advanced negotiations with the Tanzanian Ministry of Energy and Minerals and TANESCO for the supply of gas to 245 MWs of gas fired generation for a period of 16 years.
??Completed the installation of an additional 8 kilometers of low pressure distribution pipeline to improve security of supply. Four new industrial customers are in the process of being connected from this new line. ??Submitted a proposal to Songas that would enable the gas processing capacity to be increased by approximately 25 – 35 mmscf/d. It is estimated that the proposal would take less than six months to implement and could be introduced before the third and fourth gas processing trains are installed by Songas.
??Completed the private placement that raised gross proceeds of Cdn$34.5 million through the issuance of 2.5 million Class B shares at a price of Cdn$13.80 per share.
D) China - Economy expands at the fastest pace in 12 years
- and that economy runs on consumption of oil and metals
Gross domestic product grew 11.5 percent in the third quarter from a year earlier, the fastest pace of any major economy. The 11.9 percent expansion in the previous three months was the economy's quickest in 12 years.
Of 20 industries surveyed, 19 of them, including clothing producers, transportation equipment manufacturers and energy processors, recorded PMI of more than 50, today's report said.
The accelerating PMI reflected ``China's rising investment in recent months,'' said Zhang Liqun, a researcher at the State Council Development and Research Center in Beijing. ``A quickening momentum of China's economic expansion will continue, despite continued government curbs,'' Zhang said.
Nothing Lasts Forever
Standard & Poor's Tuesday forecast that "despite all the euphoria the China juggernaut will inevitably slow down," a situation that could have a profound negative impact on the earnings and credit health of Australian resource companies - and by implication on resource companies worldwide.
E ) DO NOT Bottom Fish on U.S. HomeBuilders
The outlook is bleak with new home sales projected to fall 13 percent in 2008, according to estimates from the National Association of Realtors in Chicago, even as interest rates drop. Losses at Fannie Mae and Freddie Mac, the two biggest U.S. providers of mortgage financing, may restrict the availability of home loans, and chief executive officers at D.R. Horton Inc. and Centex Corp. expect another tough year.
``This looks like it's going to be the deepest correction of any housing correction since World War II, and the question really is, `What's the duration, how long will it be?''' Centex CEO Timothy Eller said at a JPMorgan Chase & Co. conference in Las Vegas on Nov. 27.
The decline in the S&P homebuilding index has pushed the measure to March 2003 levels, with companies including Centex and Pulte Homes Inc. falling more than 65 percent in composite trading on the New York Stock Exchange.
`Bankruptcy Risks'
Beazer Homes USA Inc., the Atlanta-based homebuilder under investigation by the U.S. Securities and Exchange Commission, and Hovnanian are ``bankruptcy risks,'' Wilson said. Those companies have too much debt and are exposed to slumping housing markets in Florida and Michigan, Indiana and Ohio, he said.
F) Apprentice Millionaire Program Portfolio
"Building Your AMP Portfolio
Our Best Ideas for 2008 "
AT A MINIUMUM - if you are investing thousands of dollars in a particular recommendation - invest $35 bucks to develop a portfolio plan. That's common sense - and common sense is highly valued because it is uncommon. Use the order form in the top right hand margin.
EMAIL - I have a new modem and am caught up with all email. Please use the " Contact " button in the upper right hand corner of the AMP block to send your message.
G) Teck Cominco ( TCH.B) will stop Galore Mine development
One of the world's largest undeveloped copper-gold mines is now removed from adding to world production.
The AMP Portfolio took the hit for its shares but holds a position as the Company has buffet of metal, oilsands and exploration and production plays. At an estimated project long-term copper price of $1.50 per pound, however, Galore Creek is not economically feasible at the present time. Lindsay speculated that--if problems develop with projects with copper projects in the Congo or other areas in the next year or two, and if copper inventories remain pretty tight-Galore Creek may be more economically feasible.
During the conference call, Lindsay said Teck Cominco will "cut back spending to a minimum while we determine a more economic way forward." Lindsay also noted that, while more than US$20 billion has been spent by the mining industry worldwide on exploration this year with very little success, Teck will spend an additional $72 million over the next five years for engineering studies to find a viable way to bring Galore Creek into production to be a good investment
Copper Prices -
are also being supported by the continuing strike in Mexico
A four-month strike at Grupo Mexico's giant Cananea copper mine is bogged down in a complex legal dispute and could go on into 2008, slowing investment in new projects, the company said on Wednesday.
The strike, which started on July 30, will cut Grupo Mexico's total 2007 copper output by about 10 percent and is costing the company around $2.8 million a day in lost sales, international relations head Juan Rebolledo said.
H ) GOLD - Interest Rate Cuts in the U.S. Will Help
National Bank Financial recently suggested that lower U.S. interest rates will "continue to weigh the greenback down and that in conjunction with the high oil price will continue to keep the gold price elevated."
In addition, metals analyst Tanya Jakucsonek and associates Farooq Hamed and Joanne van Ballegooie assert that continued investment demand through gold ETFs and speculative positions will also drive demand for gold.
With the gold price hovering near the $800/oz mark, NBF expects to see gold ETF holdings continue to grow as the fourth quarter closes out. Noting that ETF holdings have continued to maintain the gold demand pressure, NBF said central bank sales have not kept the same pace in the fourth quarter as they had in the previous quarter. "These conditions along with another expected Fed rate cut in December could be enough of a catalyst to see gold maintain its lofty position through the end of the year."
NBF analysts expect gold stocks to perform well this quarter, but analysts still maintain that "identifying companies with short to medium-term production growth, low operating costs (hence margin expansion), good exploration programs adding to reserves and resources and growing net asset values (NAVs) will be a strong strategy." The analysts favor Goldcorp "for its quality development projects and low cash costs."
The Apprentice Millionaire Portfolio maintains its basket of gold juniors - based on production increases in 2008 and the following years - not on any prediction of $1000 an ounce gold - although that would certainly propel the sector.
In particular Western Goldfields ( WGI) will start production in January Centamin Egypt ( CEE ) looks like it is building a base for a price advance. CEE however, is little known at this point and its target 2010 production allows accumulation as the price rises - the basis of APM's " step up investing strategy.
I ) It is the Season - Help The Rich
1.1 Carl Ichan
- has purchased his stake in Compton Petroleum ( CMT) for more than $9.00
You and the AMP Portfolio know natural gas pricing will not rise for another year - why didn't you tell Carl about the Apprentice Millionaire Program ?
and this little fellow , the Tiny Tim of Wall Street
( from Fortune magazine )
1.2 Eddie Lampert
Like Warren Buffett, Lambert calls himself a "value investor," meaning he buys into companies whose assets he calculates are worth more than the current trading price
Eddie Lampert bought his stake in CITI Group at about 30 % above its present day price .
Another opportunity for you to have warned your friends - based on the AMP advice that it is better to wait to see the full disclosure of the subprime mess than try and guess when the market and particular stocks have hit bottom.
Don't allow this tragedy to happen again .Email your friends this blog as a Christmas card and buy the book " Our Best Ideas for 2008 "as a gift. Give the gift of money , always welcome in the best of homes.
J) Thompson Creek (TCM)
Picked as a speculative play by Jim Cramer on " Real Money " Thursday, Nov 30th. There is no such thing as bad publicity ?
I am up-to-date on emails and mailing out book orders - keep those cards and letters coming.
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