China Can't Cool Its Economy With Half Measures: Andy Mukherjee
June 20 (Bloomberg) -- The receding tide of global liquidity has left many emerging markets high and dry in the past month, but not China.

The challenge facing the People's Bank of China is the opposite: It has to prevent its monetary policy from being swept away by a deluge of surplus cash, which has created a property bubble and is fanning credit growth that's too rapid and risky.

The monetary authority's strategy will be what People's Bank Vice Governor Wu Xiaoling has evocatively described as ``removing the firewood from under the cauldron.''

If only it was that simple.

Take for instance the recently announced 50 basis-point increase in the reserve requirement, or the amount of cash that lenders have to keep with the central bank, to 8 percent of deposits. This increase, which will come into force July 5, has been anticipated by the market for at least a couple of months, giving banks ample time to build excess reserves.

In fact, it is precisely because of this reason that central banks around the world have largely given up using cash reserves for active monetary management and moved on to targeting short- term interest rates.

``The new policy,'' as Credit Suisse economist Dong Tao puts it, ``merely moves part of excessive reserves into required reserves.'' People's Bank of China holds 2.3 trillion yuan ($290 billion) of required and excess reserves, of which only 150 billion yuan will be frozen by the central bank's action.

The effectiveness of tweaking reserve requirements is further blunted in China by the fact that it doesn't hurt Chinese banks as much as it should to set aside excess money. And that's because they receive interest income from the central bank even on their extra reserves.

Interest Income

The interest rate on excess reserves was first reduced in December 2003 to 1.62 percent per annum from 1.89 percent. It was cut again last year to 0.99 percent. With the inter-bank overnight rate this year averaging about 1.52 percent, a lender that maintains excess reserves is not bearing too high an opportunity cost on ``idle'' money.

``The People's Bank of China ought to discontinue the payment of interest on excess reserves,'' economists Marvin Goodfriend at Carnegie Mellon University and Eswar Prasad at the International Monetary Fund, wrote in an April paper. ``Experience has shown that discontinuing interest on excess reserves in order to raise the opportunity cost would lower the elasticity of excess reserve demand and greatly reduce its volatility.''

Policy by Fiat

The other weapon in its arsenal that the Chinese central bank won't hesitate to use is ``administrative measures,'' or giving banks firm directives to rein in credit growth.

This strategy, when it was tried in 2004, ended up as an across-the-board denial of credit to businesses, something that can't -- and indeed didn't -- go on for too long.

Besides, diktat-based monetary controls ``vitiate the process of banking reform by keeping lending growth under the administrative guidance of the People's Bank of China rather than letting it be guided by market signals,'' say economists Goodfriend and Prasad.

The root of the problem with the Chinese monetary policy is well-known: It is compromised by the authorities' desire to keep the exchange rate under tight control.

And while it may appear that the central bank's bond sales are quite well able to mop up the excess liquidity that's released in the banking system by its foreign-exchange purchases, the authorities are now getting ``fundamentally worried'' about the rising stock of the so-called ``sterilization debt,'' says UBS AG economist Jonathan Anderson in Hong Kong.

Yuan Holds Key

As the Chinese central bank buys dollars to keep the yuan stable at about 8-to-1 against the U.S. currency, it ties itself to a low interest-rate regime because an even bigger deluge of capital inflows into China may happen from a closing of the rate differential with the U.S. Federal Reserve.

The one-year benchmark deposit rate in China is 2.25 percent, as much as three percentage points lower than in the U.S. It was last raised by 27 basis points in October 2004.

Credit Suisse's Tao estimates that Chinese deposit rates must rise by 200 basis points -- and lending rates by 300 points -- to reach the neutral zone. And yet, he expects the central bank will only raise the rates by a maximum of 54 basis points this summer. That may take the lending rate, which was increased by 27 basis points in April, to 6.39 percent.

The net result of all the tightening may be a big zero: Analysts almost unanimously expect the Chinese economy to expand 9.5 percent or more in 2006, not much slower than 9.9 percent last year.

Every year of ``no landing'' is increasing the risk of an eventual ``hard landing.'' People's Bank of China badly needs to raise the cost of money significantly. And that necessitates a move on exchange rates, sooner rather than later.

China calls on local authorities to curb projects, put brakes on investment
06.18.2006, 10:20 PM

SHANGHAI (XFN-ASIA) - The Chinese government has called for regional government agencies to strictly control new projects to curb the excessive growth in fixed-asset investment, state media reported.

'If the current trend continues, it will tend to exacerbate the oversupply problem in certain industries, lead to more financial risk and cause additional pressure on the environment,' the official China Securities Journal reported, citing a circular issued by the State Council.

It added that will affect the adjustment of the economic structure.

Official figures showed that urban fixed-asset investment rose 30.3 pct year-on-year in the first five months of the year to 2.54 trln yuan.

The circular, jointly compiled by several government agencies, told local government to review all new projects launched since the beginning of the year and halt those that do not comply with regulation or policy.

It also requested local authorities rigorously assess plans for new projects and properly implement review and approval procedures.

The authorities must strengthen regulation over the use of land while commercial banks and policy banks need to impose stringent review of loan application for new projects to avoid risks, it added.

Local authorities must rigidly limit new projects in industries with oversupply problems, including steel, auto, cement and coal.

(1 usd = 8.00 yuan)

Strategic oil reserve due for completion

(Guys, after reading this one I had to shake my head! The Chinese build huge oil reserve tank farms and then can't fill them until oil is cheap again? Kipp)

By Wang Ying (China Daily)
Updated: 2006-06-17 09:06

China will complete construction of its first strategic oil reserve facility in Zhenhai, East China's Zhejiang Province, in August, a top energy official said in Beijing on Friday.

"Three other sites in Dalian (Liaoning), Huangdao (Shandong) and Daishan (Zhejiang) are also under development," said Xu Dingming, director of the Energy Bureau under the National Development and Reform Commission (NDRC).

But he refused to comment on when the pumping of crude oil into the Zhenhai reserve would begin.

"Anyway, we would not let them (the oil storage facilities) remain unused," he said, adding he would not disclose whether the country would use imported or domestically produced oil.

The Zhenhai facility will be able to hold 5.2 million cubic metres of oil.

"A lot of people ask what China should do (with these tanks) as global crude prices are soaring We have our own solutions, but I won't disclose them," Xu told an energy forum.

Minister Ma Kai of the NDRC said in March that China expected to start filling the Zhenhai storage facility by the end of this year.

The three others would be filled "in due course" once their construction is completed in 2007 and 2008, Ma was quoted as saying in an AP report.

Building strategic oil reserves is part of China's efforts to ensure energy safety while cushioning China against possible interruptions of foreign supplies, but some experts are concerned that the move might trigger a spike in an already volatile oil market if China imports oil to fill its reserves.

Crude oil reached a record US$75.35 a barrel on the New York Mercantile Exchange in April, the highest since trading began in 1983.

Chinese Government officials have said the country will not use imported oil to fill its reserves at the current high prices.

"As world oil prices remain high, China will not import oil to fill the strategic reserves since that would involve great risks," Zhang Guobao, vice-minister of the NDRC was quoted as saying in a Chinese-language newspaper based in Beijing.

An oil expert who declined to be named said that China would use two sources to fill the reserve tanks to avoid paying high prices: the country's domestic oil fields and overseas oil assets in which Chinese firms own stakes.

Zhou Fengqi, former director-general of the NDRC's Energy Research Institute, earlier told China Daily that China's planned strategic oil reserves ultimately aimed at 90 days of imports in the previous year, or a fourth of the total oil import for one year.

China last year imported 127 million tons of crude oil, more than 40 per cent of its total oil consumption.

The country has begun looking for new sites to build a second batch of strategic oil reserves in addition to the four under way in Zhejiang, Shandong and Liaoning provinces, the State Council Energy Leading Group said earlier, without elaborating.

Media sources said the new locations might include Tangshan, in northern Hebei Province and Guangdong's Maoming and Zhanjiang in the south.

China's Stocks, Bonds May Fall as Banks Told to Raise Reserves
June 19 (Bloomberg) -- China's stocks and bonds may fall after the government ordered banks to increase reserves to help curb an investment boom in real estate and factories in the world's fastest-growing major economy.

The People's Bank of China last week raised the required reserve ratio for commercial lenders by 0.5 percentage point, effective July 5, to 8 percent. The first increase in the ratio since April 2004 may help soak up money supply, leaving less available for investment.

``Stocks and bonds will probably get a hit because the tightening measure will slow growth and hence company earnings,' said Lu Wenlei, a fixed-income analyst in Shanghai at Shenyin Wanguo Research and Consulting Co., a unit of Shenyin & Wanguo Securities Co., China's third-biggest brokerage by assets. ``For bonds, concern will increase that there will be a shortage of funds and that will push up yields further.'

Premier Wen Jiabao is stepping up efforts to slow an economy that grew 10.3 percent in the first quarter as the investment boom left manufacturers saddled with excess capacity. A buildup of funds in the financial system has encouraged banks to lend to investment projects, leading to overcapacity and falling profits in some industries. That could cause bad loans to rise, the central bank has said.

The move comes less than two months after the bank raised interest rates for the first time since October 2004.

Central bank Governor Zhou Xiaochuan last week told local governments and banks to limit lending. Increasing banks' reserves may help reduce credit to companies, slowing their expansion. The increased reserve ratio will reduce money that banks have available for lending by 150 billion yuan, according to the central bank.

Real Estate

Investment in real-estate development, which accounts for almost 25 percent of total investment, rose 21.8 percent in the first five months from a year earlier after climbing 21.3 percent through April.

China's banking regulator said May 25 that lenders should tighten credit to real-estate developers, responding to a directive from the State Council, China's de facto Cabinet, to rein in property-price gains and speculation.

The tightening in lending echoed the government's previous announcement of measures to cool surging home prices on May 17 including raising the minimum deposit for larger apartments, adjusting tax policies and restricting land for expensive housing.

Shares of Chinese property developers including China Vanke Co. may fall today. Stock of China Vanke, the country's largest publicly traded developer rose 4.5 percent on Friday to close at 5.57 yuan in Shenzhen. The shares have risen 29 percent this year compared with 46 percent of gain in the Shenzhen Composite Index.

Bank Shares

The increase in the reserve ratio will tighten liquidity of commercial banks and lead to a decline in gains on lending charges. It may also result in more bad loans.

China's banks remain vulnerable to an economic slowdown although ``significant progress' has been made in carving out their bad loans, Fitch Ratings said in a report on May 30.

Chinese lenders, from the four biggest state-owned banks to city commercial banks and rural cooperatives, had a combined $206 billion of non-performing loans and $270 billion of others that could go bad, Fitch said.

Shares of China Merchants Bank Co., the biggest publicly traded mainland lender, rose 1.99 percent to close at 7.16 yuan in Shanghai on Friday. The stock has risen 4 percent this year. China Minsheng Banking Corp., the nation's first privately controlled lender, advanced 3.06 percent to close at 4.04 yuan on Friday in Shanghai. It has risen 39 percent this year.

Bond Retreat

China's government bonds may also retreat as central bank's announcement will increase the cost for investors to buy government debt with borrowed funds.

The yield on China's benchmark 10-year bond rose 1 basis point, or 0.01 percentage point, to close at 3.08 percent at the Shanghai Stock Exchange on Friday.

The price of the 2.8 percent note due March 2016 rose 0.06, or 06 yuan per 1,000 yuan face amount, to 97.67. Bond yields move inversely to prices.

Earlier this month, Governor Zhou said that credit-fueled investment may stoke inflation and create asset bubbles.

The bank will increase open-market operations, which include selling bills in the inter-bank market to soak up liquidity, Zhou said on Thursday.




To contact the reporters on this story:
Jianguo Jiang in Shanghai at jjiang@bloomberg.net;
Tian Ying in Beijing on ytian@bloomberg.net

Last Updated: June 18, 2006 20:31 EDT

Donald Coxe Weekly Commentary

Talks about Asian Liquidity, Interest Rates, Hedge Funds, Banks, etc. Always worth 30 minutes.

Link:

http://events.startcast.com/events/199/B0001/#

Good Luck!

Kipp

Booking of Oil Company Reserves - Next big thing.

I listened to Don Coxe last night. He is saying that the next big flap will be how oil companies account for reserves. Says to buy solid companies in stable countries with proven track record.

Does anyone here have input on how oil companies have accounted for reserves to date and what the big problems might be?

Coxe link: http://events.startcast.com/events/199/B0001/

Thanks,

Kipp

Len - Chinese recession.

I know China will have to pay the piper at some point, but I think it is still way too early. As crazy as things seem now, think about the tech bubble when it burst. Compare that to today's commodity run.

For example:
In the average automobile there's 17 pounds of zinc in the form of galvanized steel for rust proofing. Another 20 pounds go into die cast parts like door handles, locks and trunk latches. Each tire contains about half a pound of zinc which is used to cure rubber. If zinc is $1.00 per pound there is about $40.00 worth in the average car. If zinc goes to $2.00 per pound are manufacturers going to drop the 10 year 100,000 mile rust-free warranty for the extra $17.00? Are we going to drop 70,000 mile tire warranties for the extra $2.00. Zinc still seems cheap for what it does for us. Perhaps commodities have been too cheap for what we get out of them???????

At what point is gasoline not worth the price? $5.00/gallon $10.00?

It's early.

Kipp

China copper smelters threaten to cut output this yr unless fees raised
06.13.2006, 10:25 PM


BEIJING (AFX) - China's major copper smelters said they will cut production by 10 pct in the second half of the year unless the treatment and refining payments they receive are raised, the official Xinhua news agency reported.

The official news agency cited Yang Jun, head of a China smelter purchasing team, as saying the fees paid by overseas suppliers are so low they cannot break even.

The smelters under Yang's group are demanding that the payments made for treatment and refining of spot imported copper concentrates equal or exceed 100 usd per ton and 10 US cents per pound respectively.

The current fees are 60 usd for treatment and 6.0 cents for refining, according to the report.

Xinhua said that Zou Shaolu, chairman of Yunnan Copper Group, warned that smelters would lose over 2,000 yuan on every ton of electrolytic copper at the current fees.

Processing charges, which are the fees paid by copper concentrate suppliers to smelters, are the main source of smelters' profits.

Yunnan Copper Group is a member of the purchasing group, along with Jiangxi Copper Group, Tongling Nonferrous Metals Group, Jinchuan Group, Daye Nonferrous Metals Company, Zhongtiaoshan Nonferrous Metals Group, Baiyin Nonferrous Metals Company, and Yantai Penghui Copper Company.

Last year, their combined output of electrolytic copper amounted to 1.7 mln tons or 66.7 pct of the nation's total. Their copper concentrate imports came to 3.14 mln tons or 77.5 pct of China's total imports of the resource.

The group is also calling on China's Commerce Ministry not to issue import permits for contracts that set prices lower than the fees they are requesting, according to Xinhua.

Wei Jianghong, deputy chairman of the China Nonferrous Metal Association, said in the report that while international copper prices had risen this year to about 7,000 usd per ton, processing charges had fallen.

He accused overseas copper concentrate suppliers of manipulating the market and profiteering.

China imported 821,465 tons of copper and copper related products in the first five months of this year, down 23 pct from the same period a year earlier, according to a separate Xinhua report.

The decline was attributed to the country's macro controls for the sector, which came into effect late last year.

China: Big Economy, Bigger Peril?
Investors wonder if Beijing is up to the challenge of taming runaway growth in a nation awash with export-generated cash and easy loans


The Chinese economy is pumped up. And whether Beijing can really wrestle it down is one of the bigger economic dramas in Asia this year. That task falls to Zhou Xiaochuan, the cerebral and seasoned governor of the People's Bank of China (PBOC).

The task is greatly complicated by the fact that Zhou has one arm tied behind his back and confronts a devilishly tricky balancing act. He must gently guide China's scorching economy onto a more sustainable track without triggering a painful bust that could in turn trigger ugly social unrest.

The financial data coming out of China is alarming. Growth in the first quarter hit a torrid 10.3%. On June 12, the government reported that China's global trade surplus hit $13 billion in May, with exports climbing 25% vs. the year-ago period. That brings the tally so far this year to $46 billion, vs. $102 billion for all of 2005.

EASY MONEY The acceleration of export earnings, which are eventually converted from foreign currencies into yuan, is creating a tremendous amount of excess cash swirling around the economy. That, in turn, is feeding into ultra-loose bank lending—and by extension—industrial over-capacity and real estate bubbles in Shanghai and Beijing (see BusinessWeek.com, 5/16/06, "Controlling China's Runaway Growth").

Official data on bank loans and loan-supply growth for May aren't out yet. But leaked numbers reported by Shanghai Securities News suggest growth in M2, the broadest measure of money supply, hit nearly 20% year-on-year. That's well above a 16% target set by the central bank. The publication also indicated that some $26 billion in loans were handed out in May, about double the level of a year ago.

If true, "this is all likely to create much discomfort for the PBOC, and is going to cause some nail-biting among economists," notes Stephen Green, a senior economist with Standard Chartered Bank based in Shanghai.

GLOBAL SHOCKWAVES It is also an unwelcome prospect for global investors already worried about slower global economic growth in 2006, as central banks in the U.S. and Europe continue to tighten credit via interest rate hikes and other measures. Asian stock prices are now trading at six-month lows, and Japan's benchmark Nikkei 225 index plunged 4.1% on June 13.

Inflation isn't a huge concern for China just yet. (Consumer prices advanced 1.4% year-on-year in May.) But a boom-bust scenario for a country that soaks up so much of the world's cement, steel, iron ore, and aluminum, and is the third-biggest trading nation, would be another huge shock for the global economy.

Is Zhou up to the task? He's widely regarded as one of the shrewdest political movers in Beijing. His father, Zhou Jiannan, was a minister in the State Council, China's cabinet, in the 1980s and a Communist Party power broker. The younger Zhou has been a force for change since he started serving as an adviser on economic restructuring to the State Council in 1986.

TOUGH CHOICES He later did stints as head of China Construction Bank and chairman of the China Securities Regulatory Commission before becoming chief banker in late 2002. In Washington and Europe's capitals, Zhou is viewed as an economic reformer who understands the economic devastation that deflated economic bubbles can wreak.

Yet there may be little he can do other than issue verbal warnings to Chinese banks and local government officials eager to finance yet another trophy highway extension or gleaming skyscraper. To cool things off, China must either engineer a significant appreciation of the yuan vs. the dollar or raise interest rates steadily for some time to come. Neither option is appealing to the government of Chinese President Hu Jintao.

True, the yuan has edged up against the dollar in recent weeks, and the PBOC and other financial regulators are taking steps to let market forces shape the currency's day-to-day trading range. China's State Administration on foreign exchange recently eased limits on how much overseas currency Chinese companies can use to make foreign acquisitions.

IN REAL ESTATE But nobody expects Hu's government to sign off on the 20%-plus appreciation of the yuan that some economists say is needed to make a meaningful dent in the trade numbers. And a big increase in foreign food imports (made more competitive by a sizable appreciation in the yuan) could devastate China's agricultural sector, a massive employer of low-wage workers. The mainland's industrial exporters would be outraged too.

Raising interest rates, something that Zhou has hinted isn't in the cards short-term, would also be extremely risky. A huge chunk of Chinese household savings and national investment is tied to the mainland's over-extended property market.

PBOC deputy governor Wu Xiaoling has warned publicly that the value of total private and commercial investment in real estate shot up from about 2.5% of total gross domestic product in 2001 to 8.6% in 2005. "e;Real estate bubbles will affect the economy and people's lives seriously, especially when bubbles burst,"e; Wu said in a late-April speech to an international housing conference in Beijing.

STAYING HOME Instead of a rapid round of interest rate increases, Beijing in June rolled out a series of decrees aimed at containing the luxury real estate market, where most of the speculative excess occurs, and steer more funds into affordable housing. The measures boost the minimum down payment to 30%, up from 20%, on homes larger than 900 square feet.

To discourage rapid flipping of apartments, a tax of 5.5% is being slapped on the entire purchase price of any property sold within five years, up from two years (see BusinessWeek.com, 6/19/06, "China: The Starter Home is a Non-Starter").

UBS Asia chief economist Jonathan Anderson thinks the PBOC may also raise the levels of reserves that banks must keep with the central bank. Still, it will take more than a mix of interest rate hikes and yuan appreciation to get China's economic growth down to a more manageable level of 8% to 9%. That will require some tough choices that Beijing has so far been unwilling to make.

If money supply and loan growth keep growing unabated, at some point there will be a price to pay. And any contraction spurred by a property-bust in China would be felt far and wide in the global economy.

China's industrial production up 17.9 percent in May



China's industrial production grew 17.9 percent in May from the same month last year, the National Bureau of Statistics (NBS) said on Wednesday.

The total added value of China's large and medium-sized industrial enterprises in the first five months is 3174.8 billion yuan, up 17 percent.

A NBS monthly report said the added value of China's large and medium-sized industrial enterprises reached 706 billion yuan (88.25 billion U.S. dollars).

In terms of products, the output of coal went up by 12.9 percent to 173 million tons, crude oil, up 2.5 percent to 15.72 million tons, and electricity, up 12.5 percent to 217.5 billion kilowatt-hour.

The output of pig iron, crude steel and steel rose 23 percent, 19.6 percent and 27.1 percent, respectively, the NBS said.

The output of automobiles grew 28.4 percent to 620 thousand units, with that of sedans increasing 51.7 percent to 330 thousand units.

Double-figure growth was registered in the industrial added value of the textile industry, chemical materials and related processing industry, non-metal mineral industry, ferrous metals smelting and pressing industry,telecommunications devices, computers and other electronic devices, and transportation equipment manufacturing.

The value of goods for export delivered by large and medium-sized enterprises witnessed a 23-percent growth in May to 475.5 billion yuan.

The sales ratio of industrial goods increased by 0.22 percent to 97.75 percent.

Large and medium-sized enterprises comprise all state-owned ones and non-state owned ones, whose annual sales exceed five million yuan.

Source: Xinhua

40% more efficient engine, 6 stroke.

The Six-Stroke Engine
Posted by Alan Bellows on March 18th, 2006 at 10:01 pm
Under the hood of almost all modern automobiles there sits a four-stroke internal combustion engine (ICE). Though the efficiency of the design has been improved upon significantly in the intervening years, the basic concept is the same today as that used by the first practical four-stroke engine built in the 1870s. During every cycle in a typical car engine, each piston moves up and down twice in the chamber, resulting in four total strokes… one of which is the power stroke that provides the torque to move the vehicle. But the automotive industry may soon be revolutionized by a new six-stroke design which adds a second power stroke, resulting in a much more efficient and less polluting alternative.

In a traditional ICE cycle, 1) the fuel/air valves open as the piston moves down, which draws air and fuel into the chamber; 2) the valves close as the piston moves back up, putting the air/fuel mixture under pressure; 3) the mixture is then ignited, causing a small explosion which forces the piston back down, which turns the crank and provides the torque; and finally 4) the exhaust valves open as the piston moves back up once again, pushing the byproducts of the fuel explosion out of the chamber. This leaves the piston back in its starting position, ready for another cycle. This process is repeated thousands of times per minute.

The clever new six-stroke design was developed by 75-year-old mechanic and tinkerer Bruce Crower, a veteran of the racing industry and a the owner of a company which produces high-performance cams and other engine parts. He had long been trying to devise a way to harness the waste heat energy of combustion engines, and one day in 2004 he awoke with an idea which he immediately set to work designing and machining. He modified a single-cylinder engine on his workbench to use the new design, and after fabricating the parts and assembling the powerplant, he poured in some gas and yanked the starter rope. His prototype worked.

His addition to the ICE design is simple in principle, yet a stroke of genius. After the exhaust cycles out of the chamber, rather than squirting more fuel and air into the chamber, his design injects ordinary water. Inside the extremely hot chamber, the water immediately turns to steam– expanding to 1600 times its volume– which forces the piston down for a second power stroke. Another exhaust cycle pushes the steam out of the chamber, and then the six-stroke cycle begins again.

Besides providing power, this water injection cycle cools the engine from within, making an engine's heavy radiator, coolant, and fans obsolete. Despite its lack of a conventional liquid cooling system, his bench engine is only warm to the touch while it is running.

From the Autoweek article:

Crower invites us to imagine a car or truck (he speaks of a Bonneville streamliner, too) free of a radiator and its associated air ducting, fan, plumbing, coolant weight, etc.

“Especially an 18-wheeler, they’ve got that massive radiator that weighs 800, 1000 pounds. Not necessary,” he asserts. “In those big trucks, they look at payload as their bread and butter. If you get 1000 lb. or more off the truck…”

Offsetting that, of course, would be the need to carry large quantities of water, and water is heavier than gasoline or diesel oil. Preliminary estimates suggest a Crower cycle engine will use roughly as many gallons of water as fuel.

And Crower feels the water should be distilled, to prevent deposits inside the system, so a supply infrastructure will have to be created. (He uses rainwater in his testing.) Keeping the water from freezing will be another challenge.

Bruce Crower holds a patent on the new design– which he is still developing and tweaking– but he estimates that eventually his six-stroke engine could improve a typical engine’s fuel consumption by as much as forty percent.

Further reading:
Autoweek article on the six-stroke engine
Wikipedia article on Internal Combustion Engine
Crower Cams & Equipment homepage

Related Articles:
Fossil-Fuel Stopgap May Virtually Eliminate Auto Emissions
Hydrogen Injection Proven in Real-World Usage
BMW Revives the Steam Engine Concept


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ARSD.PK Getting Action

Those $.80 shares some of us scooped up are looking good here. Wonder if they will get their act together and get .OB listed?
Could be a $4-6.00 stock.

Anyone have any news other than new credit line with B of A?

Kipp

Donald Coxe Weekly Address

Here is the link:

http://www.bmoharrisprivatebanking.com/webcast.asp

HudBay Aquisition

HudBay Minerals, amid high metal prices and low costs, looks at acquisitions
Canadian Press - Thursday June 1, 2006


By Gary Norris

TORONTO (CP) - HudBay Minerals Inc. (TSX:HBM), feasting on high base-metal prices and low production costs, is on the watch for takeovers - but could become an acquisition target instead.

While production at existing and new operations has been expanding rapidly, CEO Peter Jones told the company's annual meeting Thursday that "merger and acquisition plans continue to be a focus" for HudBay. The firm transformed itself at a stroke from a development-stage company into Canada's third-largest producer of zinc and copper with its December 2004 takeover of Hudson Bay Mining and Smelting Co. from Anglo American PLC (Nasdaq:AAUK) for $316 million.

It has since been using the flood of cash flow from unprecedented zinc and copper prices to pay down debt and in just over a year has eliminated $107 million US of the $175-million-US note issue used to fund the HBMS purchase.

"They could be an acquirer or an acquiree," analyst Catherine Gignac of Wellington West said after the meeting.

"Building up of cash, being able to pay down their debt . . . they're looking pretty attractive," said Gignac, who rates HudBay a "buy" with a share-price target of $18.

The stock traded at $13.70 Thursday afternoon, off 12 cents on the day but up from $2.50 a year ago.

With a stock-market value of $1.2 billion, HudBay would be readily digestible by a Canadian company like Teck Cominco Ltd. (TSX:TEK.B), with a market capitalization approaching $15 billion, Falconbridge Ltd. (TSX:FAL.LV), worth over $20 billion, or Inco Ltd. (TSX:N), valued at $14 billion - all currently involved in bigger takeover dramas.

On a wider scale, global giants like BHP Billiton Ltd. (NYSE:BHP) have been striding the world in search of new metal supplies.

HudBay's flagship asset is the 777 mine, opened in 2004 at Flin Flon in western Manitoba; it has other mines in Manitoba and recently reopened the Balmat zinc mine in upstate New York, and it processes zinc and copper in Manitoba, Michigan and Ontario.

Its vertical integration - active in everything from exploration to refined metal sales - distinguishes it from other intermediate-sized miners, Jones told shareholders.

HudBay also enjoys low costs, with year-over-year increases on a per-unit basis ranging from five per cent in copper smelting down to three per cent in mining and 1.4 per cent in concentrator operations.

"We've had excellent production . . . but we've also had first-class cost control," Jones said in an interview.

The 1,500-employee company's labour costs have been moderate under its union agreement, Jones said, while HudBay has suffered less than many competitors from rising costs for inputs ranging from explosives to steel, "in part because we're an efficient producer and in part because we are more focused in underground mining than we are in surface mining," thus avoiding moving masses of overburden.

"Also we benefit from having the lowest electrical power costs in North America, as we're supplied principally by Manitoba Hydro."

HudBay is spending $10 million this year on exploration, mainly in the Flin Flon region but also in the Yukon and South America.

In terms of acquisitions, "we tend to be a very conservative company," Jones said.

A takeover would likely be in the Americas and preferably in zinc - "but any base or even precious metal would be of interest," he added.

"But above all, whatever we acquire must be relatively low on the production cost curve, as it has to survive through a relatively low metal price cycle."

That said, HudBay doesn't expect prices to turn down soon.

"Even though there may be some short-term fluctuations, we believe the medium to longer-term underpinning for zinc is very strong indeed," Jones said.

"It's driven by a supply-side situation. There are few new zinc sources available worldwide, and that's going to be with us for at least two years and possibly longer."

Wade - EZM HBM.TO Copper/Zinc

Wade,

You should take the time to read "Basic Points" written by Don Coxe.

http://www.harrisnesbitt.com/bresource/basicpoint/default.asp

You should be buying these stocks on weakness, not selling.

Zinc will be the big story in the next 2 years.

Good Luck!

Kipp

Donald Coxe Out With May "Basic Points"

Always a good read!

http://www.harrisnesbitt.com/bresource/basicpoint/default.asp

Kipp

ARSD.PK News

http://biz.yahoo.com/e/060531/arsd.pk8-k.html

Going to use Bank of America and new 12 million $ line of credit. Also paid off 2.0 million loan.

Still holding a chunk of this one to see if they can get their act together and do something good!

Kipp

DNO.OL Annual Report

Here is a link to DNO.OL's annual report.

http://www.dno.no/Templates/PressRelease.aspx?id=1585

Kipp

Peru Election

Concerns over South American countries nationalizing raw material resource is warranted. I am concentrating on Canada.

"Candidate vows to ‘free’ Peru, steady economy
Nationalist presidential hopeful Humala says it’s time to end ‘kidnapping’

Reuters
Updated: 2:08 p.m. MT May 27, 2006


LIMA, Peru - Nationalist presidential candidate Ollanta Humala promised Saturday to free Peru from centuries of racial discrimination but vowed not to risk economic policies that have made the country one of the world’s top mineral exporters.

Comparing Peru to a restaurant where foreigners run the kitchen and cash register, the former army commander said it was time to end the “kidnapping of my nation by multinational companies,” and help the half of Peruvians who are poor.

“We want to raise the flag on a free Peru, free from oppression and from the powerful who don’t solve this country’s problems,” Humala told Reuters in an interview at his house in a middle class Lima suburb.

Preaching economic revolution and nationalism, Humala came first among 20 candidates in the first round of presidential voting on April 9, but polls put him far behind left-of-center former president Alan Garcia before the June 4 runoff.

Humala, who has never held elected office, has been hurt by worries that he is too extreme, possibly anti-democratic and too close to Venezuelan President Hugo Chavez, also a nationalist ex-army commander, whose radical ideas and anti-Washington rhetoric alienate many Peruvians.

Humala said many have tried to politicize his relationship with Chavez, but he had only ever met Chavez once and did not see his potential government echoing Venezuela’s.

“I want to unite our society, I want to end racial discrimination and end the favoritism that your surname or your money can buy,” he said, taking a break from playing with his two baby daughters along with his 30-year-old wife Nadine.

But Humala’s proposals, which have made him a hero to the poor and hate figure for some in the middle class, worry business leaders.

Garcia leads Humala by 59.9 percent to 40.1 percent, according to CPI poll results released on Sunday. Garcia is seen as a pro-business moderate despite his 1985-1990 government that caused hyperinflation and food shortages.

‘Economic stability’
Humala said his plans to give the government greater control of mining and energy would not endanger the economic model that helped Peru’s gross domestic product to increase by 7 percent in 2005.

“I want to strengthen the middle class, I want to help small businesses. It is Alan Garcia who destroyed the middle class during his government,” Humala said, referring to the economic collapse during Garcia’s first term.

“We’re going to work on economic stability, a careful fiscal policy ... low inflation and there won’t be any traumatic changes on the economic front,” Humala said.

Peruvians who have no access to schools and hospitals say Humala is what the country needs after 15 years of pro-business policies whose benefits have not trickled down to the needy.

But the country’s small middle class fears a return to the 1968-1975 military dictatorship of Gen. Juan Velasco, which kicked out foreign companies, nationalized a U.S. oil company, and set the economy into a 15-year tailspin.

Pro-Velasco comments by Humala have prompted Peru’s media to dub him “as a threat to democracy.” Humala launched a failed coup in 2000 against then President Alberto Fujimori.

“I am a democrat ... I’m not going to hurt the profitability of the economy, of the mining sector. But I want the state to participate ... we’re going to renegotiate the contracts that are damaging to our country,” Humala said.

Humala says gold mines such as Yanacocha in northern Peru, Latin America’s largest bullion pit, make a $400 profit on every ounce mined, most of which leaves the country because the mine is U.S.-owned.

But mining companies say Peru will receive a record $820 million in 2006 via royalties and income tax paid by miners, equivalent to slightly more than the government’s total annual health and education budget."

Link to Donald Coxe Weekly Call

http://events.startcast.com/events/199/B0001/

EZM - Wish I could hire on.....

"The company offers a full range of benefits, housing allowance and competitive wage packages. These are unique opportunities to work and play in one of the finest recreational areas in Europe as the operations are located only a short drive from the world famous Algarve region of Portugal and in close proximity to Lisbon and Faro in Portugal and Seville, Spain."

This sounds a lot more attractive than say.....Siberia!

Kipp

EZM Hiring for Aljestel Zinc Mine

http://www.eurozinc.com/s/employment.asp

The hiring of these types of people is a huge problem in the mining industry. I hope they find these people and soon. Interesting reading the job descriptions.

Kipp

Hogfan- EZM

More growth could come from:

1. Core drilling they are doing to extend the area of the mines they already own.
2. New drilling on new concessions just announced.
3. Mention of aquisition. (BWLRF????)
4. Increase in Copper and Zinc prices.

Only negative I see is snags in bringing zinc to market in July and getting Aljestrel up and running. Delays will cause a drop in investor confidence.

I am in this one for the long haul as I believe owning metal in the ground will be worth more than US dollars in the bank.

Good Luck To You!

Kipp

EZM - New Presentation Just Posted

Go to: http://www.eurozinc.com/s/Home.asp

See California May 25-26 Presentation link. Click and download pdf.

Kipp

SDRL.OL Chart

I like the fact that SeaDrill gets paid no matter what the company leasing the drilling rigs finds. Dry hole - SeaDrill gets paid! The other thing I like is the big oil companies are sitting on Billion$ that they need to invest in new drilling.

DNO.OL chart = gaps, gaps, and more gaps!

Anyone care to comment on this chart? The gap at 37 from December is obvious, does it need to get filled?

Oslo Borse Exchange closed today

I was looking for Oslo quotes and see that the exchange is closed today.

http://www.oslobors.no/ob/aapningstider

I added a little more SeaDrill and DNO yesterday. Talk about a roller coaster! Remember the day DNO went up over 40%?

Good Luck!

Kipp

SOLD my TRGD.PK, read the 10Q and got spooked. I also looked up the company headquarters:

It's a private home in a culdasak in chicago burbs.

http://www.google.com/maps?f=q&hl=en&q=2162+Acorn+Court,+Wheaton,+IL+60187&ll=41.828642,...

Company tried software during dot com bubble, oil during oil boom, now gold.

Good Luck!

Kipp

Black Sheep

I always seem to pick that one Black Sheep! I am just hoping for another top 20 finish! At least all of my other picks are green today!

Thanks for all the hard work on putting this contest together!

Kipp

RGMI 10Q

http://biz.yahoo.com/e/060522/rgmi.ob10qsb.html

Copper Price Low - Historical Comparison

Looks like copper has been very depressed for a long time.

Zinc Story Remains The SAME!

Zinc Metal Inventory down, price up!

EZM - HudBay - Base Metal Prices

Look at this table and tell me how Base Metal prices are "Crashing"? The last column is May 5,'06, Zinc is $1.49/lb and Copper is $3.43/lb today.

Canadian Stock Market Holidays

Closed today for Victoria Day.

http://www.tsx.com/en/market_activity/market_hours.html

2006 Holidays - Markets Closed
New Year's Day - January 2, 2006 (for January 1 holiday)
Good Friday - April 14, 2006
Victoria Day - May 22, 2006
Canada Day - July 3, 2006 (for July 1 holiday)
Civic Day - August 7, 2006
Labour Day - September 4, 2006
Thanksgiving Day - October 9, 2006
Christmas Day - December 25, 2006
Boxing Day - December 26, 2006

Bobwins - bmgx

I read the 10Q from yesterday's filing. Sounds like they are abandoning the water exploration business. Also sounds like Mark Kucher "IS" the company. He is going for the royalty business.

Would be interested to here what you think after looking at this.

Thanks for pointing this one out, interesting potential.

"OVERVIEW

Since its inception in January 2004 Battle Mountain Gold Exploration
Corporation's (the "Company") focus has been on mineral exploration, with an
emphasis on gold discovery in the State of Nevada. The primary gold exploration
efforts are driven by the application of a hydro-geochemical testing program to
evaluate ground water chemistry that can identify the presence of gold and
associated minerals and elements in gravel-covered pediment locations, most of
which have not been tested due to the substantial costs associated with older
testing methods.

The mineral exploration and gold discovery efforts have been through our joint
venture, Pediment Gold LLC (Pediment). As of March 31, 2006 the Company had no
proven or probable reserves.

On November 28, 2005, the Company announced an agreement to acquire two
wholly-owned subsidiaries of IAMGOLD Corporation (TSE/AMEX: IMG/IAG), which hold
title to a portfolio of gold royalty assets, consisting of twelve net smelter
gold royalty interests. The asset purchase was completed on April 26, 2006 (See
additional discussion in Plan of Operations section). As a result of the
acquisition, the Company will be focusing its efforts on managing and expanding
the gold royalty portfolio, and will discontinue its focus on direct mineral
exploration. The Company's management believes this important acquisition
represents the Company's foundation in building a significant international
portfolio of gold royalty assets.

PLAN OF OPERATION

Since late November 2005, the Company has changed its focus from direct mineral
exploration with emphasis on gold exploration in the State of Nevada, through
its joint venture in Pediment, to acquiring and developing gold royalty assets
throughout the world. This is achieved by obtaining net smelter royalty rights
from currently operating gold mines and other sites in various stages of
exploration and development. A net smelter royalty ("NSR") is defined as the
right to receive a percentage of the gross revenue from a resource extraction
operation. NSR's can either be based on a fixed or variable percentage of the
gross revenue the mining operator receives from the sale of mineral product from
the property."

"On December 9, 2005, the Company announced the signing of a letter of intent to
acquire a 100% ownership interest in its joint venture, Pediment. In accordance
with the terms of the agreement, the Company funded an additional $150,000 for
completion of the 2005 field reconnaissance program and work related to the
Fletcher Junction and Hot Pots Project Areas (See 8-K filed as of December 1,
2005). For the three months ended March 31, 2006 the Company contributed $98,825
to Pediment to fund its continuing operations.

In April 2006, in line with the Company's current focus on developing its
royalty asset portfolio, we have decided to separate from our interest in
Pediment. As of the date of this filing no formal agreement has been reached
with Nevada Gold Exploration Solutions related to the terms of the separation.

The Company will be focusing its efforts going forward on managing the recently
acquired royalty portfolio, and looking for additional royalty acquisitions on a
selective basis."

WE HEAVILY DEPEND ON MARK KUCHER.
- ---------------------------------

The success of the Company depends upon the personal efforts and abilities of
Mark Kucher. Mark Kucher serves as sole director and officer of the Company,
including the Company's Chief Financial Officer, pursuant to an employment
agreement. Mr. Kucher and the Company may voluntarily terminate the employment
agreement at any time. The loss of Mr. Kucher could have a material adverse
effect on our business, results of operations or financial condition. In
addition, the absence of Mr. Kucher will force us to seek a replacement who may
have less experience or who may not understand our business as well, or we may
not be able to find a suitable replacement.

Look at the VIX??

Any comments?

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=vix&sid=0&o_symb=vix

Donald Coxe call just out:

Good listen for metals:

http://events.startcast.com/events/199/B0001/#

cl001 - BRLRF has warrant BWR.WT

See if you can open this link:

http://www.tsx.com/HttpController?GetPage=DetailedQuotePage&SelectedSymbol=BWR.WT&RowNumber=...

I will try to find the details on the warrant and post them.

Kipp

cleverrox - CTT

I think it is the Grifco affiliation that everyone is concerned about.

RGMI - Earnings early next week?

Anyone else in RGMI? I looked back and they should have earnings report out next week. Anyone have any feelings on this one.

This is what they said a while back, quiet since:

Company Expects Growth of Over 200% Over 4th Qtr. 2004


DALLAS, TX--(MARKET WIRE)--Mar 31, 2006 -- RG America, Inc. (OTC BB:RGMI.OB - News), ("RGA") a Dallas-based Insurance Restoration Company specializing in recovery, remediation, roofing and re-construction of insurance losses, today provided guidance for fourth quarter and year-end financial results for 2005. Due to extraordinary demands from major growth in new projects contracted in 2005, the Company has filed an extension with the Securities and Exchange Commission ("SEC") for its annual 10-KSB report. RGA does however, expect to file its annual report within the normal 15-day extension period granted by the SEC. The Company has been very busy as a result of last year's extraordinary hurricane season, and is currently working on contracts in excess of $35 million.
ADVERTISEMENT


RGA estimates that it will report positive growth in revenue and net income for the fourth quarter of fiscal 2005, in excess of 200%, as compared to the same period in 2004. For the year ended December 31, 2005, the Company also estimates significant growth in both revenue and net income, as compared to year-end 2004 financial results. Actual year-end financial results will be released in the Company's annual 10-KSB filing.

"We look forward to announcing our 2005 results, and this delay in filing the 10-KSB is not the result of any error or need to re-state any previous releases. We have been upgrading both our accounting and tracking software to meet our growing needs and unfortunately, this has prevented us from completing all of the reports required in the expected time frame," stated Bruce A. Hall, CFO for RG America. "We have truly been working at a breakneck pace continually signing new contracts, as well as working on contracts carrying over from 2005," added Mr. Hall. "RG America expects to continue our aggressive expansion, considering business opportunities as they arise, while we prepare for the heavy hurricane seasons forecasted for the next 5 years."