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Pearl Exploration to raise C$40 mln from warrant sale
Tue Apr 7, 2009 10:25am EDT
* To sell 45.5 mln warrants at C$0.88/warrant for C$40 mln
* To use proceeds for capital expenditures
April 7 (Reuters) - Canada's Pearl Exploration and Production Ltd (PXX.TO: Quote, Profile, Research, Stock Buzz) said it plans to raise C$40 million by selling 45.5 million special warrants to a syndicate of underwriters led by GMP Securities.
The financing is structured on a bought deal basis -- in which an underwriter or syndicate buys shares from an issuer before selling them on to the public.
Under the offering, which is expected to close on or about April 20, the company would sell each warrant at 88 Canadian cents.
The underwriters have been granted an over-allotment option to purchase up to 6.8 million additional special warrants. If the over-allotment option is fully exercised, gross proceeds from the offering will be about C$46.1 million, the company said in a statement.
Pearl Exploration said it plans to use the net proceeds from the offering to fund capital expenditures and for general corporate purposes.
The underwriters included Canaccord Capital, RBC Dominion Securities and Tristone Capital, the company said.
Shares of the company were down 2 Canadian cents at 93 cents Tuesday morning on the Toronto Stock Exchange. (Reporting by R. Manikandan in Bangalore, Editing by Dinesh Nair)
TXCO big % move on no news I can find?
CNO - Conseco This is not a VMC stock by any means. I put it on my watch list at $5, it went straight down to $.26 but is up 500% in a few trading days. I got the stock from a post on one of the VMC boards but can't remember the specifics.
Have any of you done any DD on CNO? I am sure there must be some big risk.....but there may be a chance it was wrongly painted with the same brush as other insurers.
Kipp
clever - I look out and see $1200+ gold, 2000tpd production, 7 gram per ton gold in the not to distant future. It will take time. The bonus will be the pipeline from Gray Fox and Mexico. They may also find a lot more gold under Black Fox. Who knows? but I do also have to promote my own book!
Kipp
Off Topic - These are the best pictures yet of the epic struggle our brothers to the north are enduring. These are fine Americans, not complaining, not blaming....just getting it done. You will also notice that they won't be looking for a "bailout" our a "handout". http://www.boston.com/bigpicture/2009/03/red_river_flooding.html
AGT - The only negative I heard was an approx. non cash loss of $10 million will be reported on the hedges. (I am not sure when they report?) It is hard to say how the stock will react to this news, my opinion is it will be a great buying op if it tanks.
I was VERY impressed with the equipment, and the staff. All are tried and tested hardcore rock crushers. They have a real mine, with real gold, and they know what the heck they are doing. They also have more properties in the pipeline. I like my investment here. As long as Turbo Timmy and Uncle Ben run the printing presses wide open gold will be strong.
They need more analyst coverage as they come on line and a share price above $2 would help too.
Thanks to cl001 and you Bob for covering this one!
Kipp
AGT Slides are available at the link to C.C. I just rifled through them and see no surprises. They hedged 250k ounces at $860's/oz and hedged 60 million Canadian Dollars at 1.21:1 They could make a few million on the USD:CND hedge as the USD drops.
The only thing I did not see is the start-up date.
AGT Conference Call In 30 Minutes 11:00EST
Here is a link to the call.
http://www.vcall.com/CustomEvent/NA013701/index.asp?ID=142790
Fingers Crossed.
Kipp
Commercial Real Estate Time Bomb
http://www.q1publishing.com/index.php?&content_id=245
The Soft Panic of 2009 Has Just Begun
By Andrew Mickey, Q1 Publishing
Boston’s Clarendon Street sits on one of city’s most iconic buildings. It’s also the symbol of what could kick off what I call the “Soft Panic of 2009.”
Locals know it simply as “The Hancock.” The 60-story frame wrapped in reflective blue glass makes it look like the tallest mirror in the world. I’m sure it was an impressive sight when it was built in the 70’s. It still is.
The I.M. Pei designed building stood as a symbol of financial strength and ingenuity. Now, it’s looking a whole lot different.
And for those of us looking into this situation now we will be protected. And for more aggressive folks, we’ll actually be able to profit from it all. Here’s how.
A Sign of the Times
The Hancock Tower was purchased by Broadway Partners in 2006. It cost $1.3 billion. The vacancy rate was a mere 5%. Broadway looked like they had another big winner on their hands.
Broadway Partners was one of the rock stars of the real estate boom. The New York real estate firm snapped up $15 billion worth of real estate between 2000 and 2007. The firm stuck to red hot real estate markets in places like Boston, New York City, Washington D.C., and Florida. The strategy paid off too. Broadway earned an average 35% annualized return from leveraged real estate deals.
A lot has changed since then. The boom has turned to bust. In less than three years The Hancock Tower has turned from an iconic asset to a top-heavy liability. Now, Broadway had to sell out.
Earlier this week, Broadway defaulted on the Hancock Tower payments. The building had to be auctioned off. In a two minute auction (using the term “auction” loosely - there was only one bid) the Hancock sold for a $20.1 million and the assumption of $640.5 million in debt. That works out to a total price of about $660 million. That’s almost half of the $1.3 billion paid for the building back in 2006. More importantly, it shows just how far commercial real estate (CRE) values have fallen.
The thing is, CRE problems won’t be one for Manhattan real estate players. Not at all. This is a sign of things to come in the CRE market. And when we look at who owns most of the CRE debt, it’s easy to see it will affect a lot more people.
I’d go as far to say, the CRE crash could be even more disastrous than the housing bubble. The costs will run into the hundreds of billions of dollars. Here’s why.
The “Sweetest” Piece of the Pie
For long time readers of our Free e-Letter, the Prosperity Dispatch, the problems of CRE shouldn’t be much of a surprise. We’ve been expecting this for a while. Back in Kicking Off the Panic of 2009, we warned of the vicious cycle about to hit CRE:
As unemployment rises, consumers spend less, retail sales fall some more, more shops close down and walk away from their leases, and overleveraged mall owners collect less revenue eventually defaulting on their loans and forcing the banks to take the losses. Throughout it all, unemployment rises even more from the retail stores closing up, manufacturers cutting back production because the retail outlets buy less from them, banks cut back staff, and start the cycle all over again.
Falling CRE values are a problem, but it’s not the big problem. The big problem is the debt.
As we’ve seen time and time again, markets do work – when they’re allowed to. The Hancock Tower is the perfect example. The owners were forced to liquidate. They lost all of their equity. The property and all the liens against it (primarily the $640 million mortgage) were sold to a new owner.
If the new owners can run the building efficiently enough to make payments, their equity will build. If not, the lenders will be forced to take the building, sell it, and write off the loan.
Markets work. And they will continue to do one-time deals like this. However, if there is a widespread downturn in CRE prices, most CRE transactions won’t go this smoothly. Sellers will outnumber buyers. And we’ve seen how prices can fall very quickly when that happens. At that time, the lenders (and those who bought the securitized loans) will be on the hook for falling prices. From here, there is no place to go but down.
Unemployment Soars, CRE Crashes
When you think about it, you can practically see the next big round of bailouts headed for CRE. Another vicious cycle has begun. And it all stems from rising unemployment.
It’s no secret unemployment is on the climb. At the end of February, the official unemployment rate in the U.S. was 8.1%. The next unemployment report is due out tomorrow. The consensus estimates forecast another 650,000 jobs lost and the unemployment rate to climb to 8.5%.
The march to double digit unemployment we predicted last year is continuing. It’s only a matter of time until we see the real consequences of 10%+ unemployment. One of the hardest hit sectors will be CRE.
During a recession, especially a bad one, commercial rents fall fast. As jobs are lost, offices shut down, and the office property market reaches significant points of overcapacity. Inevitably, the cost of leasing an office falls. Since CRE prices are based on rental prices, CRE prices fall just as fast.
The decline stems from the vicious cycle which was started a year and a half ago.
Trickling Down Economics
It’s the same vicious cycle we’ve been over before. Businesses cut back on spending, investing, and hiring. Unemployed people, or those who just fear they will be unemployed, cut spending. This, in turn, reduces revenues and the downward cycle continues.
This is nothing new. We see it every day. The key here is the cycle takes a long while to hit CRE.
The delay comes from many factors. For instance, businesses don’t renew leases every month. They don’t close up shop quickly. They try to survive until the last dollar is spent. This results in a long delay. Considering the recession began in November 2007, right about now is the time when it starts to hit CRE.
New York is the “canary in the coal mine” when it comes to CRE. A year ago, vacancy rates in the Big Apple were between 7% and 8%. The rate climbed to 10.9% at the end of 2008. Now, just three months later, the vacancies are up to 12%. And they’re still going to go.
Climbing vacancy rates have pushed the cost of renting way down. The lease rate on a square foot of office space went from $74.49 to $65.18 in just the past three months. That’s a 12.5% decline in just three months. Keep in mind; this is in New York City where some of the world’s most valuable CRE is. We can only imagine what is going on across the country.
CRE has its own vicious cycle. Unemployment increases, demand for office space decreases, rents fall, and then commercial property prices fall. CRE prices have already fallen and the next leg down could make the subprime crisis look like a cakewalk.
The Biggest Shoe of them All
The difference between the impact of the housing bubble bursting and the CRE bubble is critical to understand. The majority of residential loans were originated by banks or other lenders, packaged together (securitized), and then sold off to investors.
These mortgage-backed securities paid anywhere from 6% to 10% (depending on which tranche you bought). Investors were happy to have them. They were especially happy to buy them if they were buying insurance against a default from AIG – but that’s a topic for another day.
CRE is a whole different matter. Many of the CRE loans paid higher rates of interest. More importantly, they were backed by renters with businesses which generated revenue and profits. In other words, CRE loans were made to people who could pay them unlike a lot of the residential loans. So the banks didn’t sell them off to others. They kept them on their books.
These loans meant more interest income which would allow them to pay a higher interest rate to attract more cash from depositors and still make strong profits. Meanwhile, they could sell the garbage residential loans to someone else.
That’s why the CRE downturn will create even bigger problems…have a great impact on balance sheets…and end up in even bigger bailouts.
Of course, we went over how bad commercial real estate declines would be for regional banks months ago. At the time Wall Street was still riding high on hopes the new administration would provide a plan quickly.
The big problem though is not that banks kept the CRE loans on their books. The Fed, Treasury, and FDIC are making progress. They’re getting bad residential and credit card loans off banks’ books. CRE loans are a different story. That will change.
A Bigger Shoe to Drop
We’re not the only ones hot on the trail of commercial real estate though. A lot of people have spotted this storm on the horizon. But only a few have boarded up their windows and moved to higher ground.
Billionaire hedge fund investor George Soros sees it coming. He says, “CRE has not yet fallen in value. It is inevitable, it is written, everybody knows it, there are already some transactions which reflect and anticipate it, so we know, they will drop at least 30 percent.”
The impact on the value of real estate loans is starting to appear as well.
The Wall Street Journal claims “Commercial Property Faces Crisis.” The financial news service reports:
The U.S. banking sector could suffer as much as $250 billion in commercial real-estate losses in this downturn. More than 700 banks could fail as a result of their exposure to CRE.
In 1993, less than 2% of the nation's banks and savings institutions had commercial real-estate exposure. In 2008 that had risen to about 12% or about 800 financial institutions.
CRE in the U.S. is worth $6.5 trillion and financed by about $3.1 trillion in debt.
Deutsche Bank predicts about two-thirds of the $154.5 billion of securitized commercial mortgages coming due between now and 2012 likely won't qualify for refinancing.
Matthew Anderson, partner at Foresight Analytics, expects nearly 50% about $524.5 billion of whole commercial mortgages held by U.S. banks and thrifts are expected to come due between this year and 2012 as they exceed 90% of the property's value because, today, lenders generally won't loan over 65% of a commercial property's value.
A CRE crash would require an additional $250 billion (or more) bailout from the government. That’s another big number that Congress is going to have to muster up the political will to pass. Or the Fed will just cover it. Either way, it’s an ugly scenario shaping up. And one industry (insurance companies) will likely pay a big price.
Pockets of Weakness
Over the past few years, insurance companies bet big on CRE loans. It makes perfect sense from their perspective.
Insurance companies have the same motivation as banks do to seek out a higher return. They get a great return on the capital they are responsible for managing. They can charge lower premiums to attract more business. And they can still maintain healthy profits. It’s great – until real estate prices start to fall and the CRE loans are at risk.
The downturn has already taken a toll on most life insurance stocks. As you can see in the chart below, the decline of shares of major life insurers range from 63% to 91%:
Life Insurance Stocks: Tough Road Ahead
Company
Decline From
52-Week High
Hartford Financial Services (HIG)
91%
Lincoln Financial (LNC)
89%
Prudential (PRU)
79%
MetLife (MET)
66%
Manulife(MFC)
63%
Sun Life (SLF)
65%
I think this is just the start of it though. Housing has got the headlines, but it’s CRE that can do just as much damage – if not more.
You see, there were never any runs on banks over the past few months. The public had confidence in the FDIC. So there was never any need to run and withdraw all your money – which you can’t really do anyway without a week’s notice. Insurance companies are a completely different matter.
There is no government backstop guaranteeing your life insurance. Maybe the AIG deal is an example of what will come, but you can bet there won’t be much public support for it. AIG, an insurance company, has done everything so poorly the public might just not be willing to allow Congress to foot the bill for the CRE downturn.
That’s the real risk here. If there’s a bailout – ok. Insurance stocks will be worth a tiny fraction of what they are worth today (I don’t think they can’t fall another 70, 80, or 90%).
Insurance firms have already started preparing. Earlier this week Principal Financial Group (NYSE:PFG) announced it was going to do everything necessary to cut expenses. It stopped hiring. It slashed pay across the board up to 10%. It also cut back employee vacation time. These are not actions taken by a company expecting the good times to return during the anticipated recovery in the “second half of 2009.”
Irrational Crisis and Rational Opportunity
In the end (yes the end is near – this was a bit long, but it’s not a simple topic and the risks posed warrant the time), the CRE debt issues are a ticking time bomb. With unemployment on the rise, vacancy rates rising, rents dropping, and CRE loans on the brink of default, this is shaping up to be a big problem.
The deal to unload the iconic Hancock Tower is just a sign of what’s to come. There are buyers now. But when liquidations increase, you’ll see prices fall much faster than the three year near-50% decline in the price of the Hancock Tower.
More importantly, spotting problems like this early enough allows us to make the moves necessary to protect ourselves from the very real risks posed to the major insurance companies. You don’t have to short commercial real estate REITs or insurance stocks to take advantage here.
By focusing on the reality of what’s on the horizon, we have the chance to adjust our plans accordingly. We’ll have the chance to prepare psychologically, get prepared for some more bad news, and we’ll be able to make the right moves when this does become a problem.
And it is that, getting prepared to act rationally when others will be surprised and act irrationally, that will allow us to turn this potential crisis into a genuine opportunity.
Good investing,
Andrew Mickey
Chief Investment Strategist, Q1 Publishing
ANOTHER TRILLION IN BANK LOAN WRITE-OFFS
April 3 (Bloomberg) -- U.S. regulators may force Bank of America Corp., Citigroup Inc. and at least a dozen of the nation’s biggest financial institutions to write down as much as $1 trillion in loans, twice what they’ve already recorded, based on Federal Deposit Insurance Corp. auction data compiled by Bloomberg.
Banks failing Federal Reserve evaluations of loans this month may be ordered to make sales worth as little as 32 cents on the dollar, according to FDIC data. That would be less than half of the 84 cents on the dollar the Treasury Department suggested was a possible purchase price. Some of the bank- insurance agency’s auctions brought 0.02 cent on the dollar.
Lower valuations would lead to new writedowns and capital injections from the $134.5 billion remaining in the Troubled Asset Relief Program, Nobel Prize-winning economist Joseph Stiglitz said.
“The only way banks will sell is under duress,” the 66- year-old professor at Columbia University in New York said in a phone interview.
Asset sales are the latest step in President Barack Obama’s effort to restart the U.S. economy through the most costly rescue of the financial system in history. Treasury Secretary Timothy Geithner’s Legacy Loan Program and Legacy Securities Program together are targeted to start at $500 billion and may expand to $1 trillion.
Geithner’s plan will purchase loans and be overseen by the FDIC, which will offer debt guarantees while the Treasury invests capital alongside investors.
‘Right Decision’
The FDIC would auction assets after the Office of the Comptroller of the Currency, the Office of Thrift Supervision or the Fed signals that a bank is in danger of failing.
“If we thought that was the right decision to address their situation, we would certainly tell an institution to move in that direction,” said William Ruberry, an OTS spokesman in Washington.
Kevin Mukri, a spokesman for the Comptroller of the Currency in Washington, declined to comment. = “Past auctions cannot reliably predict asset prices in the Public Private Investment Program, as we are creating a new market that has not previous existed to help value these assets, and offering financing to help investors purchase them,” Treasury spokesman Isaac Baker said in an e-mail.
The program is voluntary and the government expects banks will want to sell assets to clean their balance sheets and make it easier to raise capital from investors, he said.
Setting up a facility to purchase distressed loans will allow the FDIC to put a bank into “a silent resolution,” said Joshua Rosner, a managing director at investment-research firm Graham Fisher & Co. in New York.
‘Wind Down’
“This is a way to functionally wind down a bank as big as Citi without the world realizing that they’re essentially in resolution,” he said. “The real value of this is a tool to resolve a too-big-to-fail institution.”
The FDIC is considering allowing banks to share in future profits on loans sold to public-private partnerships to encourage healthier lenders to participate, according to Jim Wigand, the agency’s deputy director for resolutions and receiverships. The regulator is seeking comments through April 10 on the program, said spokesman David Barr.
Assets sold under the Legacy Loans Program may be worth an average of 56.3 cents on the dollar, based on the results of FDIC auctions at failed banks over the past 15 months.
Writedowns would total $1 trillion if the program buys $500 billion in loans at 32 cents on the dollar, the average for non- performing commercial loans in the FDIC sales.
‘Large Amounts’
Geithner said March 29 that some financial institutions will need “large amounts of assistance.” He’s trying avoid bank nationalizations by wooing investors to purchase loans with taxpayer-guaranteed financing to protect them against loss. The U.S. move to clear away distressed assets contrasts with Japanese financial authorities’ reluctance to do so in a 1990s financial crisis, which led to a decade of economic stagnation.
“This is going to be our Yucca Mountain right here,” said Joseph Mason, an associate professor at Louisiana State University in Baton Rouge and former FDIC visiting scholar, referring to the proposed radioactive-waste storage site in Nevada.
“You can put it in a train car and ship it across the country. The half-life of this stuff is real long, but it has to burn off,” he said.
The FDIC’s average auction value of 56.3 cents on the dollar for residential and commercial loans is based on 312 sales worth $1.1 billion since Jan. 1, 2008, according to the FDIC. The average for 348 commercial loans for which borrowers stopped paying was 32 cents on the dollar. Auction prices ranged from 0.02 cent to 101.2 cents on the dollar, according to the FDIC.
‘Just Laughable’
In announcing its loan-sale program last week, the Treasury provided an example of a purchase price of 84 cents on the dollar, with taxpayers putting up 6 cents, investors 6 cents and the FDIC guaranteeing 72 cents in financing.
“Eighty-four cents is just laughable” because the market value for loans is much lower, said Barry Ritholtz, chief executive officer of New York-based FusionIQ, an independent research firm.
The U.S. is structuring the loan purchases to leave the government with most of the risk, while investors stand to gain most of any profit, economist Stiglitz said.
“There’s almost no upside for the taxpayer,” he said. “The government is giving a 110 percent bailout.”
Key Determinant
How much investors offer for assets is “going to be the key” determinant of Bank of America’s participation in the government’s two asset-purchase programs, CEO Kenneth Lewis said in a Bloomberg Television interview March 27.
“If there’s an issue with the program, it’s going to be trying to get banks to sell assets,” FDIC Chairman Sheila Bair said in a speech the same day at the Isenberg School of Management of the University of Massachusetts in Amherst.
“If I have concern, it’s the pricing may not be where seller and buyer are willing to meet,” she said.
Any standoff between investors and banks over loan prices may scuttle Geithner’s plan to segregate non-performing assets and restart lending, said Bob Eisenbeis, chief monetary economist with Vineland, New Jersey-based Cumberland Advisors and a former Atlanta Federal Reserve Bank research director.
“It’s hard to believe that the really bad stuff that’s causing all the problems are going to be offered for sale,” Eisenbeis said. “The institutions won’t want to sell them if they get a true price, because their capital would take too much of a hit.”
Stress Testing
With preparations for auctions under way, U.S. banks are being put through so-called stress tests, which Geithner said last month are a comprehensive set of standards for the financial system’s most important lenders. The examinations of loans and their collateral and payment histories are scheduled to be completed by April 30.
Banks have almost $4.7 trillion of loans that aren’t packaged into bonds, according to the Fed. The vast majority are carried at full value because they don’t need to be written down until they default, according to Daniel Alpert, managing director of New York-based investment bank Westwood Capital LLC.
“Just because it’s being held at full value doesn’t mean it’s not bad,” Alpert said.
While regulators don’t intend to publish the details of their stress tests, the results will effectively become known once banks announce how much capital they need to raise. Regulators will then give lenders six months to obtain funds from investors or taxpayers as a last resort.
Obama Effort
The tests are designed to mesh with Obama’s effort to remove banks’ distressed mortgage assets that have hampered lending to consumers and businesses. Officials aim to have the first loan purchases by private investors financed by the government within weeks of the conclusion of the stress tests, according to the Treasury.
Including TARP, the U.S. government and the Fed have spent, lent or guaranteed $12.8 trillion to combat the financial collapse and a recession that began in December 2007. The amount approaches the $14.2 trillion U.S. gross domestic product last year.
Obama met with the CEOs of the nation’s 12 biggest banks on March 27 at the White House to enlist their support to thaw a 20-month freeze in bank lending.
‘Constructive Plan’
Lenders undergoing stress tests include New York-based Citigroup, which has received three rounds of capital infusions valued at $60 billion, including $45 billion from TARP, according to Bloomberg data.
“The administration has put forth a constructive plan to address the critical issues facing the financial services industry, and we are committed to working together with the industry to help achieve the goals of the plan,” CEO Vikram Pandit said in a statement before meeting with Obama.
Citigroup spokesman Stephen Cohen declined to comment.
The U.S. tests also involve Charlotte, North Carolina-based Bank of America, which also received $45 billion from TARP. It bought Merrill Lynch & Co. -- the largest underwriter of failed collateralized debt obligations, according to Standard & Poor’s -- and home-lender Countrywide Financial Corp.
Bank of America spokesman Scott Silvestri declined to comment.
Option ARMs
San Francisco-based Wells Fargo purchased Wachovia Corp., the nation’s biggest provider of option adjustable-rate mortgages, for $15 billion. In doing so, it took responsibility for about $122 billion of option ARMs sold by the Charlotte bank.
Option ARM loans allow borrowers to defer part of their interest payments and add it to their principal. When housing collapsed, many holders of the mortgages were left owing more than the value of their homes.
Wachovia issued more than half its option ARMs in California, according to bank filings. Wells Fargo was already the biggest lender in the state.
“Wells Fargo supports any plan by the Treasury that helps financial institutions efficiently sell troubled assets while still providing an investment return to the U.S. taxpayer,” spokeswoman Janis Smith said in an e-mail.
The ability to distribute loan information over the Internet will also support prices by expanding the number of buyers and allowing for sales as small as $100,000, said Stephen Emery, a managing director at New York-based Mission Capital Advisors, which brokered $3 billion of real-estate loan sales last year.
Terms offered under the Legacy Loans Program, including government-backed financing, will also help boost demand and selling prices by as much as 20 percent, he said.
“The leverage will allow buyers to bump their price a little bit,” Emery said. “But that still doesn’t mean that something that was worth 30 is now worth 60. What’s going to happen is now it’s worth 35 or 36 cents.”
AGT - I am topped off! It would be refreshing to not get burned tomorrow.
Kipp
Gordon Brown was just onT.V. waving his arms he said "We have just announced the largest cumulative global stimulus program, the likes of which the world has never seen!" My translation:
"We have just fired up the printing presses in an effort to paper over the largest banking scandal and hijacking of taxpayers the world has ever seen, and as a result we will soon see the largest bout of inflation the world has ever seen!!!!!"
The world has gone into paper money printing overdrive! Every country is in a race to devalue their currency more than the next guy.
Kipp
I don't think G. Brown talking down the gold market by announcing IMF sales is going to have much bearing on the gold price. Smart money is scooping up gold like crazy!
Kipp
The Group of 20 leading economies have agreed to increase International Monetary Fund resources to $1 trillion to help tackle the global financial crisis, U.K. Prime Minister Gordon Brown said Wednesday.
"This agreement to push money into the international economy is a very significant step towards recovery," he said at a news conference following a summit with other G20 leaders.
The total includes a trebling of current IMF resources to $750 billion and use of additional resources from agreed IMF gold sales to constitute a $1.1 trillion program of support to restore credit, growth, and jobs in the world economy, the G20 leaders said in a communiqu??.
cl001 - I just topped off on more AGT. Do you have any more comments ahead of the c.c. tomorrow? I feel any pull back here in gold is a gift, A BIG GIFT! The global printing presses are ALL working 24/7 now and a blizzaed of paper fiat money is going to boost all "stuff". Give me anything but paper money!
Kipp
Bobwins - I have been eying YARA again. Taking disadvantaged gas and turning it into urea fertilizer still seems like a good business.
There seems to be a lot of natural gas in the ground. It sure seems like we should burn more in our cars!
Kipp
Natural Gas rigs 857 vs. 1,433 last year
http://www.cornerstoneenergy.com/marketnews/mi032709.pdf
Some day we will go through the inventory and hit a wall. The ? is when?
This Week - 857
Last Week - 884
Last Year - 1,433
The week over week number is dropping like a rock.
Kipp
otc - I needed a good fear mongering read before bed. Who ever wrote that trash is giving the US Governmnet way too much credit. Let's see if there are 200,000,000 guns, and billions of rounds of ammo, they had better get cracking if they are going to get it all rounded up by September.
Good night.
rogue - That was a great Rolling Stone article. It is finally getting bad enough that the sheep are getting nervous and trying to understand what is going on. Explaining it in terms that the sheeple can understand was surprising.
There is going to be some kind of revolution. We are going to take this country we all love so much back from these S.O.B.'s
Will it be violent, I don't know, but it WILL happen.
Kipp
bbotcs
I wanted to move over to this board and off the Motherboard:
I have a friend that works for "1st Bank" in Denver. I asked him if there was any truth to the stories about the FDIC raising insurance premiums for deposit insuance. He said they were slammed with $28 million, up from a little less than $4million last year. It wiped out any chance of them making money this year. The bad thing is they resisted making subprime type of loans, stayed old school, now they are punished. This is really a sick deal.
Re-inflating a national debt bubble is hitting some headwind. It seems really hard to get on board with a plan that counts on consumers taking out more loans and racking up credit card debt. WHAT AM I MISSING? Kipp
"Fees are another "mechanism" to combat rising defaults as the economy spirals downward, says Kevin Duignan, managing director at Fitch Ratings. "The unemployment outlook is dreary, there's been a tremendous loss of personal wealth, and the housing situation has forced many consumers to take a hit," he says.
At the end of 2008, 5.6% of credit card accounts were at least 30 days late, the highest since the Federal Reserve began tracking this data in 1991. Credit card charge-offs, at 6.3%, are at the highest since the first quarter of 2002. Charge-offs and delinquencies are likely to rise for at least another year, Fitch says.
This year, AmEx raised its late fees for some holders of its corporate charge cards, which have to be paid off each month. Borrowers 45 days late will be hit with a $39 fee, up from $29. For each month the balance remains delinquent after that, AmEx will charge $39, or 2.99% of the balance, whichever is higher.
At Wells Fargo, many consumers who withdraw cash from their credit cards inside a bank branch will now be charged $20 instead of $10, and the fee at the ATM will double to $10. Some late fees are also going up, says spokeswoman Lisa Westermann, as the bank seeks to "manage risk in this difficult credit environment."
In January, Chase imposed a $10-a-month fee on roughly 400,000 borrowers it says carried a large balance for more than two years and made little progress paying it off. Their minimum payments were raised to 5% of the balance from 2%."
$2.7 TRILLION??????
Can this be right. There is over $5 TRILLION in outstanding credit card lines????
Meredith Whitney, one of Wall Street's best known and most bearish bank analysts, estimates that Americans' credit card lines will be cut by $2.7 trillion, or 50 percent, by the end of 2010 -- and fewer Americans will be offered new cards.
Credit Cards - The Next Shoe Dropping!
THUD!
U.S. credit card defaults rise to 20 year-high
Mon Mar 16, 2009 6:17pm EDT
By Juan Lagorio
NEW YORK (Reuters) - U.S. credit card defaults rose in February to their highest level in at least 20 years, with losses particularly severe at American Express Co (AXP.N: Quote, Profile, Research, Stock Buzz) and Citigroup (C.N: Quote, Profile, Research, Stock Buzz) amid a deepening recession.
AmEx, the largest U.S. charge card operator by sales volume, said its net charge-off rate -- debts companies believe they will never be able to collect -- rose to 8.70 percent in February from 8.30 percent in January.
The credit card company's shares wiped out early gains and ended down 3.3 percent as loan losses exceeded expectations. Moshe Orenbuch, an analyst at Credit Suisse, said American Express credit card losses were 10 basis points larger than forecast.
In addition, Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) -- one of the largest issuers of MasterCard cards -- disappointed analysts as its default rate soared to 9.33 percent in February, from 6.95 percent a month earlier, according to a report based on trusts representing a portion of securitized credit card debt.
"There is a continued deterioration. Trends in credit cards will get worse before they start getting better," said Walter Todd, a portfolio manager at Greenwood Capital Associates.
U.S. unemployment -- currently at 8.1 percent -- is seen approach 10 percent as the country endures its worst recession since World War Two, leaving more than 13 million Americans jobless, according to a Reuters poll of economists.
However, not all were bad surprises. JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) and Capital One reported higher credit card losses, but they were below analysts expectations.
Chase -- a big issuer of Visa cards -- reported its charge-off rate rose to 6.35 percent in February from 5.94 percent in January. The loss rate for the first two months of the quarter is 126 bps from the previous quarterly average compared to an estimate of a 145 bp increase, Orenbuch said.
Capital One Financial Corp's (COF.N: Quote, Profile, Research, Stock Buzz) default rate increased to 8.06 percent in February from 7.82 percent in January.
MORE PAIN AHEAD
Analysts estimate credit card chargeoffs could climb to between 9 and 10 percent this year from 6 to 7 percent at the end of 2008. In that scenario, such losses could total $70 billion to $75 billion in 2009.
"People underestimated the severity of the downturn we are experiencing and I wouldn't be surprised to see them north of 10 percent," said Todd, who added American Express was most exposed to higher credit card losses, given its sole reliance on the industry.
Credit card lenders are trying to protect themselves by tightening credit limits, rising standards, and closing accounts. They have also been slashing rewards, raising interest rates and increasing fees to cushion further losses.
Meredith Whitney, one of Wall Street's best known and most bearish bank analysts, estimates that Americans' credit card lines will be cut by $2.7 trillion, or 50 percent, by the end of 2010 -- and fewer Americans will be offered new cards.
"We believe that the US credit card industry will feel additional credit pain over the next 12-18 months. Until lenders like Capital One show stabilization, followed by trend-bucking improvement over a several-month period, we will continue to remain bearish on credit card lenders," said John Williams, an analyst at Macquarie Research.
Todd said credit card issuers shares -- which are down up to 60 percent in 2009 -- will remain under pressure until the end of 2009, or early next year, when bad loans could start to redeem.
(Reporting by Juan Lagorio, editing by Bernard Orr)
$10,993,768,400,704.15 US National Debt
US Population estimated at 305,820,030
Each person owes $35,948.49
My family of 4 owes $144,793.96
Half of the population pays zero income tax.
http://www.brillig.com/debt_clock/ link to National Debt Clock
We need to raise $50 BILLION EVERY WEEK just to stay afloat.
My conclusion is that we are beyond broke at this point.
This link is to another clock that updates in real time when you log in and has charts (slightly dated):
http://www.alkalizeforhealth.net/Ldebtclock.htm
I can't immagine a painless way out of this mess.
Depressing............
Kipp
$10,993,768,400,704.15 US National Debt
US Population estimated at 305,820,030
Each person owes $35,948.49
My family of 4 owes $144,793.96
Half of the population pays zero income tax.
http://www.brillig.com/debt_clock/ link to National Debt Clock
We need to raise $50 BILLION EVERY WEEK just to stay afloat.
My conclusion is that we are beyond broke at this point.
This link is to another clock that updates in real time when you log in and has charts (slightly dated):
http://www.alkalizeforhealth.net/Ldebtclock.htm
I can't immagine a painless way out of this mess.
Depressing............
Kipp
I need to look at EXN.TO again, any of you look at the numbers yet? Canadian companies collecting USD for silver/gold, paying Mexican workers in devalued Mexican Pesos, repariating USD and paying execs in CAD, stand to bank some cash!
Kipp
Excellon's previously announced plan to construct its own mill at its Platosa site will be put on hold indefinitely as it will be able to immediately utilize the Miguel Auza mill to process all ore produced from its Platosa mine. As a result, Excellon will be able to increase near-term production at its Platosa mine to 150 tonnes per day (4,500 tonnes per month) and plans to increase production to 250 tonnes per day (7,500 tonnes per month) or more in 2010. Excellon will no longer sell ore to Minera Maple, S.A. De C.V. (a subsidiary of Industrias Penoles S.A. de C.V.). Excellon will leave the Miguel Auza mine on a care and maintenance basis as it reviews its future potential.
EXN.TO Excellon Agrees to Acquire Silver Eagle
Thursday March 5, 8:01 am ET
TORONTO, ONTARIO--(Marketwire - March 5, 2009) - Excellon Resources Inc. (TSX:EXN - News) and Silver Eagle Mines Inc. (TSX:SEG - News) are pleased to announce that they have signed a letter of intent (the "Letter of Intent") providing for the acquisition by Excellon of all of the issued and outstanding common shares of Silver Eagle (the "Transaction"). Under the terms of the proposed Transaction, Silver Eagle shareholders will receive 0.2704 Excellon common shares in exchange for each Silver Eagle share held. Following the acquisition, Excellon will have approximately 176 million shares issued and outstanding. The Transaction is expected to be completed by way of statutory plan of arrangement under the Business Corporations Act (Ontario). The completion of the Transaction will be subject to, among other things, completion of due diligence, Excellon completing its financing arrangements, the entering into a definitive agreement, obtaining Silver Eagle shareholder approval (not less than 66 2/3% of the votes cast at a special shareholder meeting) and obtaining all required court and regulatory approvals.
Excellon has also agreed to provide Silver Eagle with a bridge loan of US$500,000 plus any additional amounts that are reasonably agreed to, that are required to facilitate the closing of the transaction. The first $250,000 of the bridge loan has been advanced to Silver Eagle with a further $250,000 to be advanced on the signing of the definitive agreement. The bridge loan is secured by the shares of Silver Eagle's Mexican Subsidiary, San Pedro Resources, S.A. de C.V. As part consideration for providing the bridge loan, Silver Eagle has agreed that, in the event that the Transaction is not consummated, Silver Eagle will provide Excellon with the use of their mill at the Miguel Auza site for a period of one year on reasonable commercial terms to be agreed.
Silver Eagle's primary asset is its fully permitted Miguel Auza mine, mill and adjacent properties located in Zacatecas State, Mexico. The Miguel Auza property is located 220 kilometres from Excellon's Platosa Property. As previously announced, Silver Eagle temporarily suspended all operations and put the Miguel Auza mine and their recently expanded mill on a care and maintenance basis in mid-December 2008 while they considered all options and strategic alternatives.
The Transaction has been approved by the board of directors of Silver Eagle, following the unanimous recommendation of a special committee comprised of independent Silver Eagle directors. The Transaction has also been approved by the board of directors of Excellon. Under the Letter of Intent, Silver Eagle has agreed to certain exclusivity terms.
Haywood Securities Inc. has provided an oral opinion to the special committee of the board of directors of Silver Eagle that, subject to their assumptions and limitations and their review and analysis of current market conditions, the consideration to be received by the shareholders of Silver Eagle in connection with the Transaction, as set out in the Letter of Intent, is fair, from a financial point of view.
Excellon's previously announced plan to construct its own mill at its Platosa site will be put on hold indefinitely as it will be able to immediately utilize the Miguel Auza mill to process all ore produced from its Platosa mine. As a result, Excellon will be able to increase near-term production at its Platosa mine to 150 tonnes per day (4,500 tonnes per month) and plans to increase production to 250 tonnes per day (7,500 tonnes per month) or more in 2010. Excellon will no longer sell ore to Minera Maple, S.A. De C.V. (a subsidiary of Industrias Penoles S.A. de C.V.). Excellon will leave the Miguel Auza mine on a care and maintenance basis as it reviews its future potential.
"This is a very positive development for Excellon as it will give us immediate access to a recently expanded, modern mill and will allow us to start processing our own ore almost immediately. In addition, we have also acquired a large land package that holds significant exploration potential" said Peter Crossgrove, Excellon's Chairman and acting CEO. "We also believe it will allow shareholders from both companies to benefit from the significant upside potential that the combined properties will have."
About Excellon
Excellon, a mineral resource company operating in Durango State, Mexico, is committed to building value through production, expansion and discovery. The Company is producing silver, lead and zinc from high-grade manto deposits on its Platosa Property, strategically located in the middle of the Mexican silver belt. In fiscal and calendar 2009, Excellon's focus is on expanding its operating capacity and increasing its Mineral Resources through an aggressive exploration program. The Platosa Property, not fully explored, has several geological indicators of a large mineralized system.
About Silver Eagle
Silver Eagle is a Canadian-based mining company exploring and redeveloping an historic silver property in the heart of the Mexico Silver Belt. The Company's primary asset is the Miguel Auza mine, mill and adjacent properties in Zacatecas State, Mexico. The property includes the mineral rights to 41,498 hectares and hosts several past producing mines.
On behalf of
EXCELLON RESOURCES INC.
Peter A. Crossgrove, Chairman
SILVER EAGLE MINES INC.
John Hick, Chairman
New Tax on US Oil/Gas Drillers
I got an email from a friend that was trying to get people to sign a petition against a new tax on US drillers. It makes me think my Canadian drillers are "safer" plays. Here is the explanation:
When President Barack Obama announced his FY2010 budget request last week, he also unveiled a tax increase of over $30 billion for US natural gas and oil production investment, which is the most devastating tax proposal in the history of America’s oil and natural gas industry. Already the second largest revenue stream for the U.S. Treasury, the oil and gas industry is a large employer, tax payer, and revenue stream for Federal, State and Local Governments.
“I am greatly disturbed by this most recent attack on our Industry,” LOGA President Don Briggs said today. “The oil crash in the mid eighties was a cakewalk compared to what this could be,” Briggs also said. “The eighties crash was due to a crash in oil prices. Today, we are experiencing a crash in oil prices, natural gas prices, world recession, tight investment capital and now a proposal to rescind all economic incentives of the oil and gas industry.”
Natural gas and oil provide 65 percent of America’s energy. America’s independent natural gas and oil producers develop 90 percent of US wells, produce 82 percent of US natural gas and produce 68 percent of US oil. Independent producers reinvest over 100 percent of American oil and natural gas cash flow back into new American production. Lower natural gas and oil prices and the tight credit market are limiting investment capital; drilling activity is down over 25 percent since a year ago. (Source: Independent Petroleum Association of America)
For Louisiana, which prides itself in being THE Energy State, a slow down in drilling activity translates into fewer jobs, less investment in community, and less state and local revenue from producing companies.
In a time of global insecurity, it is imperative that the United States become independent from foreign oil sources, to ensure our Nations’ security. The oil and gas industry supports the development of alternative fuels as an important part of our future. However, as we encourage that growth, we cannot ignore the vital role this industry plays in our present. Removing natural gas and oil from the equation of a varied, comprehensive energy structure for the United States is not practical or feasible.
President Obama’s proposed tax increase, aimed at increasing revenue from the oil and natural gas industry, flies in the face of the goal of creating the comprehensive energy proposal that utilizes all sources of energy.
FY2010 Budget Proposals Include:
· Repeal Expensing of Intangible Drilling Costs
· Repeal of Percentage Depletion
· Repeal Marginal Well Tax Credit
· Repeal Enhanced Oil Recovery Credit
· Increases Geological and Geophysical Amortization Costs
· Excise Tax on Gulf of Mexico Production
· Repeal of Manufacturing Tax Deduction
· Implement a $4/acre fee on Gulf leases designated as non-producing
BTO.TO and SMC
Did BTO.TO really trade 781,800 shares, closing at C$.69? And SMC 58,064 at US$.56?
Canadian Dollar = .775 USD.
So BTO.TO at .69 x 1.28 equals $.883 Canadian
SMC at .56 US is worth .7168 Canadian
$.166 Canadian arb spread
The volume in BTO.TO makes me think this spread is a safer bet than when there was no volume in either stock.
What do any of you think?
Kipp
Our financial mess explained...
Heidi is the proprietor of a bar in Berlin. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
Word gets around and as a result increasing numbers of customers flood into Heidi's bar.
Taking advantage of her customers' freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively.
A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit.
He sees no reason for undue concern since he has the debts of the alcoholics as collateral.
At the bank's corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.
One day, although the prices are still climbing, a risk manager (subsequently of course fired due his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Heidi's bar.
However they cannot pay back the debts.
Heidi cannot fulfil her loan obligations and claims bankruptcy.
DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs better, stabilizing in price after dropping by 80 %.
The suppliers of Heidi's bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor.
The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties.
The funds required for this purpose are obtained by a tax levied on the non-drinkers.
Finally an explanation I understand ....
Look at the arb spread on SMC vs. BTO.TO. Something has to give!
Kipp
Those horsemen have been riddin' hard and put away wet peeker, they need a rest before we saddle 'em up again and horse whip them to the promised land! Greener pastures lined with gold I tell you........gold!
Kipp
AGT - YYYEESSSSSSS!!!!!!
This is great news and the mine will be built. I put AGT in my PSL 11 on Friday. I almost got spooked last week, needed cl001 to get back from vacation to calm my nerve.
cl001 has been on fire!
Thanks!
Kipp
Comrades - China is locking down zinc supplies. This one is for $1.7 Billiion. There was another deal for $18 Billion last week for another zinc mine in Australia by the Chinese. They are securing zinc and oil, we are bailing out sub prime. There will be hell to pay someday.
http://network.nationalpost.com/np/blogs/tradingdesk/archive/2009/02/18/chinese-locking-up-long-term-metals-supply.aspx
Kipp
Buy Stocks When The Market Hates Them!
Many of us are profiting from the gold/silver Jr's that got knocked down 85-95%. I am starting to see the same % loses from the highs with our favorite oil and gas stocks.
Timing......always the timing of these rebounds that is hard to figure. The gold/silver market is propped up with all of the government spending. What is going to be the catalyst for oil and gas and when is it going to get started?
What does the board think about the timing for a rebound in oil and gas prices and Jr. stocks?
Kipp
SMC plunge had me looking at the volume and BTO.TO share price. I actually was trying to buy more at $.72 but I only had $300 in my Ameritrade account! I am waiting for the 43-101 to come out. I also think we could see a spike if ANY Jr. gets taken out at a multiple of today's price. Go back and look at the Platinum spike, everyone called the top from $1500, $1800, $2000, $2200, $2400.......eventually they were right! I think gold goes higher.
Kipp
Capstone News -
http://finance.yahoo.com/news/Capstone-Reports-5th-New-High-iw-14375423.html
They are a survivor of the base metal melt down......so far.
Kipp
Capstone News -
http://finance.yahoo.com/news/Capstone-Reports-5th-New-High-iw-14375423.html
They are a survivor of the base metal melt down......so far.
Kipp