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Year-End News and Views

As I read article headlines and selected articles this morning, I again observed the wide diversity of opinions and views as to where the world is headed economically in 2011 and beyond.  I for one see that diversity of opinion at one level ‘as healthy’ for those who take the time to think about what they read and form their own opinions, at another level ‘scary’ for those who don’t read broadly and hence don’t expose themselves to (and/or think about) those diverse opinions, and at a third level ‘worrisome’ as we go into 2011 there is not more consensus among commentators than there appears to me to be.

From my perspective, I see 2011 shaping up to be both ‘interesting’ and, from the point of view of equity investors and traders an ‘ever more “think for yourself” environment’.  Some forecasters are ‘for sure’ getting things wrong.  So here are some of the things (largely consistent with what I have been saying in my e-mails over the past many months) I think are either likely to occur, or may occur, in 2011 on the economic front:

·        I don’t see China taking steps to meaningfully alter its currency exchange rate unless that is clearly in China’s best economic interest – and I don’t see how it can be until the Chinese economy becomes more self-sufficient;

·        I see China continue (in 2011 and beyond) with its strategic acquisition program – particularly in the resources area (read Oil & Gas, Base Metals, and Agricultural related commodities in particular);

·        I don’t see the U.S. unemployment situation improving in 2011 in a meaningful way;

·        I don’t expect to see U.S. housing prices or markets improve in meaningful way in 2011, unless there are further U.S. Federal subsidies thrown at this sector – which I doubt will happen given the recent new Republican strength in Washington.  If such subsidies were legislated, I would see that as a ‘sign of desperation’;

·        I see the potential of increased ‘residential housing foreclosure’ problems in 2011;

·        following from all the recent media coverage on U.S. State and Municipal debt problems, I can’t help but think that ‘where there is smoke there is fire’, and that while this might not prove in calendar 2011 to be as great a problem as forecast by Meredith Whitney (see commentary in my recent e-mails), I can’t help but think it may prove to be a problem of some significance.  For some time I have been saying in these e-mails that the Municipal and State income and sales tax bases have had to have been eroding after 2007, and that has led to or will lead to obvious financial problems;

·        in 2011 I see the U.S. continue to run substantial monthly net trade deficits, a large budget deficit, and suffer a substantially increased cumulative National Debt – while Washington politics suffers from partisan gridlock.  In particular, with the Republicans having a greater say in things after October, I am not expecting to see further Quantitative Easing measures – which I don’t see as having been particularly effective in any event;

·        I expect to see an ever increasing gap between the wealthy in America and America ‘Main Streeters’.  I don’t see that as a good thing;

·        I expect to see a continuation of what I see as U.S. economic weakening as measured against the economies of China in particular, and perhaps when measured against resource rich and ‘stable’ political Australia and Canada;

·        I expect to see further, and perhaps more exacerbated ‘Sovereign Debt’ issues rear their heads in the Eurozone in 2011;

·        it will not surprise me if we see an increasing number of social unrest ‘hotspots’ as 2011 progresses, as people in the developed economies in particular come to an increasing realization that the standard of living they enjoyed (at whatever level that was) is eroding, and likely will continue to erode, for a great number of them – and as youth unemployment becomes a greater and greater problem in some of those ‘developed economy’ countries;

·        although I don’t want to go there, whether it happens in 2011 or beyond, I see an ever increasing change of meaningful ‘terrorism incidents’ in the developed countries – particularly in the U.S. – and, heaven forbid, I also see what I see to be an increasing possibility of country confrontation as the world population continues to increase, and as economic power shifts increasing to the emerging market countries;

·        with respect to the equity markets, I have for some months seen them as over-reacting on the high side.  So far I have been proven to be wrong in this regard.  I continue to think the equity markets are not factoring in all of the economic issues I see out there, and expect those markets to reflect those things in 2011 in a way they haven’t in 2010.  Having said that, I am highly aware that this is one area I have ‘failed to get right’ so far.  My biggest concern as an equity investor in the resource sectors is, as I have said many times in these e-mails, ‘a rising tide raises all boats, and a falling tide lowers all boats’.  Not a day goes by that I don’t reflect on this adage in the context of my own resource investments, and I suggest you do likewise; and,

·        in the uncertain economic environment we all live in, I expect to see the price of physical gold to continue to trend upward in 2001 – but as I have said in many of these e-mails (1) I don’t believe anyone is smart enough to forecast a target price for physical gold in a meaningful way, and (2) right or wrong, I see physical gold as a ‘save haven’ protector of ‘purchasing power’.  As a result I suspect I have less interest than most its price, other than for the fact the price of physical gold is highly relevant to equity prices in the gold exploration and gold production sectors, which I do care about.

Caveat with respect to all the foregoing ‘predictions’: But then again Casey Stengel (New York Yankee baseball team manager circa 1950′s), known for his bizarre statements, famously said “Never make predictions, especially about the future”, and Yogi Berra (New York Yankee catcher same circa) famously said “It ain’t over ’til it’s over”.  Like me, neither Casey nor Yogi were economists.  All that said, I sincerely hope my prognostications largely prove to be wrong.

I will be sending my next e-mail on Tuesday, January 3.  We have spent time reformatting that e-mail, and think the result will be more useful and user-friendly for readers.  You may recall that a few weeks ago we did a survey of our readers.  Many of you made helpful and constructive suggestions as to how we could improve our e-mails.  We have worked to incorporate many of them in our new e-mail format and content.  I take this opportunity to wish all readers a Happy and Prosperous New Year.

Yesterday’s Press Release Highlights

The following table summarizes the companies in Stock Research Portal’s Company Universe who yesterday issued Press Releases and whose shares increased in price from the previous day’s close by more than Cdn$0.05, more than 10%, and whose share volumes yesterday exceeded their trailing 3 month average trading volume.  Review research data on each of these companies here

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Yesterday’‘s Insider Trade Highlights

The following table summarizes the companies in Stock Research Portal’s Company Universe for who our system yesterday reported insiders who filed reports indicating they had acquired shares through ‘purchase’ transactions.  Review research data on each of these companies here.

Additions to Stock Research Portal’s ‘Company Universe’

Today we added the following Companies to our Company Universe:

Minera IRL Limited (TSX:IRL).  We currently categorize Minera IRL Limted as a gold producer operating principally in South America (Argentina, Peru).  Minera IRL Limted’ s current market capitalization is approximately Cdn$180 million.  Review research data on Minera IRL Limted.

Tahoe Resources Inc. (TSX:THO).  We currently categorize Tahoe Resources Inc. as a silver explorer operating principally in the Caribbean/Central America Region (Guatamala).  Tahoe Resources Inc.’ s current market capitalization is approximately Cdn$1.66 billion.  Review research data on Tahoe Resources Inc.

Trinidad Drilling Ltd. (TSX:TDG).  We currently categorize Trinidad Drilling Ltd. as an Oil & Gas Services business operating principally in Canada (Alberta), Mexico and the U.S.  Trinidad Drilling Ltd.’ s current market capitalization is approximately Cdn$770 million.  Review research data on Trinidad Drilling Ltd.

Disclaimer:  I currently own no shares in these companies, have done little or no research on any of those companies, and am not recommending you either buy or sell their stock.  None currently are paid advertisers on StockResearchPortal.com.

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As always, please forward ideas to me as to how we can improve StockResearchPortal.com at info@stockresearchportal.com.

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An article today titled ‘EnCana hedges about 35 per cent of natural gas production in 2010 gas year’ says “Natural gas giant EnCana Corp. (TSX: ECA) has entered into fixed price hedge contracts on about 35 per cent of the its expected natural gas production and remains pessimistic about prices for the commodity in the short run”.  The hedge applies to about 1.39 billion cubic feet per day of its 2010 natural gas production as is reported to be at an average price of US$6.21 per thousand cubic feet for the 12 month period ended Oct. 31, 2010.  Encana is North America’s largest natural gas producer.

I think this is a transaction that investors ought to pay attention to.  I have always found in my business valuation consulting practice that ‘business operators’ know a lot more about the intricacies of their respective businesses than do consultants (me included), analysts, economists, and pundits.  Considering the NYMEX natural gas future is quoted at U.S.$4.26 this morning as I write this, the fact that Encana’s internal experts have decided to hedge at U.S.$6.21 I think is encouraging for anyone with a vested interest in a prospective increase in natural gas prices – particularly where the referenced article quotes Encana’s President and Chief Executive Randy Eresman as saying “We expect the prices to be between $4 and $8. We will continue looking at adding to our 2010 gas hedge positions as the year unfolds and as opportunities arrive until they are about in the 50 per cent range”.  Encana issued a Press Release with respect to its hedge position yesterday – for full text see StockResearchPortal.com → Company Research → Encana → Press Releases → June 15 – “EnCana extends risk management measures by hedging about 35 percent of natural gas production in 2010 gas year”.

Click here for Natural Gas Stock Research.

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The following (paraphrased and summarized) is taken from today’s report from Oilwatch Monthly.  Information will next be updated July 15.  ‘Non-OPEC countries produce 60% of world oil production, but the output of those countries is going to ‘fall off its plateau’ in 2010.  More importantly, there currently is an overall decline in investment in oil projects in non-OPEC countries resulting from both suspension and postponement of planned projects.  The results of these things will be large as OPEC gains increasing control and influence over the world’s economy resulting from OPEC, within ‘a couple of years’ being the only group left that can increase oil exports’.  If the commentary in the referenced report is accurate (and I have not independently checked it) it seems to me the implications for the Canadian Oil Sands and natural gas (among other energy sources) may be significant.  The referenced report is replete with charts and data, and I recommend that all readers sign up to this free newsletter and read the report in its entirety.

‘Oilwatch Monthly’ is a free newsletter containing the latest data on oil supply, demand, oil stocks, spare capacity and exports.  I find its narrative and charts particularly well laid out and easy to read.  Readers can view today’s newsletter by clicking here and subscribing to it.  The website is in the Dutch language, the newsletter is in English.  In order to subscribe fill out the name and e-mail address boxes, select ‘Oilwatch Monthly’ from the dropdown, and click the  ‘Schrijf je in’ box.

Click here for the ‘Today’s News’ Economic, Mining and Oil & Gas feature on StockResearchPortal.com.

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