Poseidon ready to arise from grave
26th April 2007, 6:00 WST
Nearly 40 years after one of Australia’s biggest share price runs, the Poseidon name could soon return to the stock exchange trading boards if billionaire entrepreneur Andrew Forrest gets his way. Niagara Mining, which recently appointed Mr Forrest as chairman, is giving serious consideration to a name change to Poseidon, which is synonymous with the nickel boom of the 1970s. Niagara reserved the names Poseidon Nickel Mines and Poseidon Mines more than two years ago. The explorer also has a strong claim on the name through its control of the mothballed Windarra mine, near Laverton, which underpinned the original Poseidon. Niagara chairman Doug Daws said that, despite its decision to reserve the Poseidon name, the group had not considered a name change until Mr Forrest came on board earlier this month. “Andrew has a different vision to us and he has made it clear that it is some thing that he wishes to give consideration to,” Mr Daws said. “I think it is a sensational name, a name that is known around the world and is synonymous with the great nickel boom we had in Australia. Niagara is a good name but Poseidon is potentially a much better name.” Poseidon prospector Ken Shirley discovered nickel about 28km from Laverton near Mt Windarra in 1969. The find triggered a massive run on Poseidon shares that sent the stock soaring from 80¢ to a peak of $280 in just over six months. But by the end of 1970 the dream run was over with falling nickel prices sending Poseidon shares plunging to $39. Mt Windarra began production in 1974 but Poseidon failed to make a profit and collapsed two years later. Niagara shares have staged their own run, more than trebling from 24.5¢, when Mr Forrest’s appointment was announced on April 4, to $1.08 on Tuesday. The sharp appreciation of the stock means that Mr Forrest and his associates’ $2.2 million placement at 40¢ a share and a further 117.5 million incentive options, exercisable at 40¢ in five tranches at trigger points between 60¢ and $1, are already in the money. Niagara shareholders are yet to approve Mr Forrest’s appointment and a restructure, which includes a two-forone share consolidation. Mr Daws credits Niagara’s rally to the involvement of Mr Forrest. “The fact that the stock has hit a high of $1.08, I think, is a pretty clear indication that the market thinks that Andrew Forrest and his team taking control of the fortunes of Niagara is a good thing for the company,” Mr Daws said.
TRACEY COOK
http://www.thewest.com.au/default.aspx?MenuID=159&ContentID=27062
Thursday, April 26, 2007
Monday, April 16, 2007
Australasian's relisting a test for iron
Australasian's relisting a test for iron
Kevin Andrusiak April 16, 2007
AFTER more than five months off the ASX boards, Clive Palmer's Australasian Resources will be a good litmus test of the market's appetite for iron ore stocks when it rejoins the share market today.It comes back a markedly different company to what it was in December when it had a market capitalisation of $506 million. Since then, it has signed agreements with China's fourth-biggest steel maker, Shougang, to finance the $US2.1 billion ($2.5 billion) Balmoral project through an interest-free loan and added 201 million tonnes into the probable ore reserve category.
Australasian is majority owned by Mr Palmer, who picked up much of the Balmoral ground in the iron ore-rich Pilbara region of Western Australia in the 1980s.
The company is one of a new breed of iron ore miners developing magnetite projects purely to feed Chinese demand. Others include Andrew Forrest's Fortescue Metals and Tony Sage's Cape Lambert.
Mr Palmer is estimated to hold between 60 billion and 100 billion tonnes of magnetite ore in his tenements, much of which could end up being vended into Australasian.
Last year, he sold off one block of land containing 1 billion tonnes to Citic in a deal worth $5 billion and vended key tenements, which form the basis of the Balmoral Project, into Australasian for a controlling stake in the company.
The project has State Agreement approval and its coastal proximity means it won't need to rely too much on infrastructure, which can lengthen the time to get a mine to the export stage.
Australasian is expecting 11.5 million tonnes of production a year, based on 5 million in concentrate, 5 million in pellets and 1.45 million in briquettes.
That will mean Australasian will have to build a hot-briquetted plant on site, but its forecasts suggest it can produce them for $US83.03 a tonne and they are worth three times that on world markets.
Shougang, which has an 8.4 per cent stake in Australasian, has first right to execute off-take agreements for 100 per cent of all products, but there is no sweetheart clause, the prices being set against world benchmarks.
First production is slated for 2010.
"The board believes the relisting marks an important milestone for the company's future as it moves towards the development of the Balmoral project," Australasian Resources managing director Darren Hedley said.
Mr Hedley believes Australasian will become a bigger company, in terms of gross revenue and EBITDA, than Newcrest Mining, Iluka Resources and Oxiana.
http://www.theaustralian.news.com.au/story/0,20867,21561925-5005200,00.html
Kevin Andrusiak April 16, 2007
AFTER more than five months off the ASX boards, Clive Palmer's Australasian Resources will be a good litmus test of the market's appetite for iron ore stocks when it rejoins the share market today.It comes back a markedly different company to what it was in December when it had a market capitalisation of $506 million. Since then, it has signed agreements with China's fourth-biggest steel maker, Shougang, to finance the $US2.1 billion ($2.5 billion) Balmoral project through an interest-free loan and added 201 million tonnes into the probable ore reserve category.
Australasian is majority owned by Mr Palmer, who picked up much of the Balmoral ground in the iron ore-rich Pilbara region of Western Australia in the 1980s.
The company is one of a new breed of iron ore miners developing magnetite projects purely to feed Chinese demand. Others include Andrew Forrest's Fortescue Metals and Tony Sage's Cape Lambert.
Mr Palmer is estimated to hold between 60 billion and 100 billion tonnes of magnetite ore in his tenements, much of which could end up being vended into Australasian.
Last year, he sold off one block of land containing 1 billion tonnes to Citic in a deal worth $5 billion and vended key tenements, which form the basis of the Balmoral Project, into Australasian for a controlling stake in the company.
The project has State Agreement approval and its coastal proximity means it won't need to rely too much on infrastructure, which can lengthen the time to get a mine to the export stage.
Australasian is expecting 11.5 million tonnes of production a year, based on 5 million in concentrate, 5 million in pellets and 1.45 million in briquettes.
That will mean Australasian will have to build a hot-briquetted plant on site, but its forecasts suggest it can produce them for $US83.03 a tonne and they are worth three times that on world markets.
Shougang, which has an 8.4 per cent stake in Australasian, has first right to execute off-take agreements for 100 per cent of all products, but there is no sweetheart clause, the prices being set against world benchmarks.
First production is slated for 2010.
"The board believes the relisting marks an important milestone for the company's future as it moves towards the development of the Balmoral project," Australasian Resources managing director Darren Hedley said.
Mr Hedley believes Australasian will become a bigger company, in terms of gross revenue and EBITDA, than Newcrest Mining, Iluka Resources and Oxiana.
http://www.theaustralian.news.com.au/story/0,20867,21561925-5005200,00.html
Magnate's new Poseidon adventure
Magnate's new Poseidon adventure
April 14, 2007
The market is betting Andrew Forrest may turn nickel into gold, writes Jamie Freed.
THE legendary Poseidon nickel deposit, which launched the greatest speculative sharemarket boom in Australian history, could soon be resurrected by one of the nation's most controversial entrepreneurs.
Almost 40 years after the nation was captivated by one drill hill in remote Western Australia, investors are again betting there is plenty more nickel - and money - to be mined from the infamous site.
In late 1969 a temporary global nickel shortage combined with a spectacular amount of hype about the Windarra discovery propelled shares in its owner, Poseidon, from less than $1 to a peak of $280.
"It was terribly exciting," recalls Tony Howland-Rose, a veteran miner who helped discover the deposit as a young geophysicist. "It was just sort of the unreality about it all."
Everyone from Sydney taxi drivers to City of London financiers took a punt on once-obscure exploration companies in the wake of the Poseidon find. But dreams were shattered and fortunes lost after the drilling results responsible for the frenzy were revealed as fraudulent.
Eventually, a mine was built on the site, but it proved very disappointing before it closed 18 years ago.
Yet the spotty history of Windarra has not fazed the Perth entrepreneur and paper billionaire Andrew "Twiggy" Forrest, who is leading an attempt to reopen the mine.
"Poseidon always generates an emotion of excitement in the hearts of the more experienced financial players," he said.
Mr Forrest and his family are hardly strangers to the Laverton region where Windarra is located. It was first explored by Mr Forrest's great great uncle, Sir John Forrest, in 1869 during a search for the lost Leichhardt expedition party. Sir John later became the state's first premier.
And now that Andrew Forrest - a friend of the Prime Minister, John Howard, and a guest at the controversial Perth dinner for the Labor leader, Kevin Rudd, hosted by Brian Burke - has put his weight behind Windarra, he has got the market buzzing.
The value of the company that owns the deposit, Niagara Mining, has tripled within a week on the strength of Mr Forrest's involvement alone.
His last nickel venture, Anaconda Mining, left investors in the lurch when the Murrin Murrin plant failed to meet initial expectations. The corporate regulator is seeking to ban him as a company director for misleading investors over his $3.2 billion Pilbara iron ore venture, Fortescue Metals. His name came up frequently at the recent West Australian Corruption and Crime Commission hearings, since he used Mr Burke as a lobbyist.
Yet punters are still backing Mr Forrest in his latest venture.
Mr Howland-Rose admits he had a "good laugh" when he learned Mr Forrest, a friend, had decided to tackle Windarra. But he thinks there is a good chance it could be resurrected.
Based on his experience, Mr Howland-Rose said he was hardly surprised Forrest's involvement managed to triple the value of the deposit.
"Markets are like a pendulum," he said. "Sometimes it swings one way and sometimes it swings the other. And sometimes it seems to swing so far it's ridiculous. And that's what happened with Poseidon."
The Poseidon fraud led to stricter controls on sharemarket reporting standards and insider trading following the Rae commission report in 1974.
Although Windarra was mined from 1974 to 1989, primarily by WMC Resources, it proved a break-even proposition at best. Overall, the rocks contained only one-third the amount of nickel the initial spectacular drill results had indicated. For all his enthusiasm, Mr Forrest may be unable to remedy that.
Ron Grogan, a metallurgist who worked at Windarra from 1980 to 1983, said: "[Mr Forrest] is certainly the entrepreneurial type who can get projects going, but it doesn't mean you can find nickel."
But a new nickel boom based on seemingly insatiable demand from China has caused the price of the metal to rise tenfold since 2001. Nickel is now trading at more than $US1 an ounce, meaning it could technically be classified as a precious metal with gold, silver and platinum.
That has made once-marginal deposits like Windarra worth a second glance.
The West Australian Government estimates there is at least 52,400 tonnes of nickel left at Windarra, which would be worth $US2.6 billion ($3.1 billion) at today's prices.
Most of the nickel is under water at the moment, the 550-metre mine shaft flooded up to the 70-metre mark.
On the surface the site in the shire of Laverton serves as a monument to the Poseidon boom, and is visited by hordes of curious tourists.
But that has already begun to change. Drill rigs are on site and tourists are banned on blasting days. Windarra's owners expect they will be able to start mining in September, on a small scale.
Luckily for Niagara, many industry veterans familiar with Windarra do not think most of the past issues, such as the lower-than-expected amount of nickel and some serious rock falls, will return to haunt the mine.
Dave McGowan, who worked underground at Windarra in the early 1980s, said there had been huge advances since the mine closed 18 years ago.
"There are [mines] currently operating with worse conditions," he said. "Things we were doing in those days are classed as prehistoric nowadays."
Peter Arden, a mining analyst with the company Intersuisse, said the economics of nickel mining were greatly different today to what they were when WMC mined Windarra.
"I think maybe it might finally be the case that [Windarra] does throw up some of the enormous promise that was given to it when it was discovered in the 1960s," he said.
"The nickel price is going to stay high for a lot longer."
The excitement among investors, especially day traders, is palpable at the moment, even if it is not quite at Poseidon-like levels. But a decision on whether to invest in Windarra has turned into a referendum on Mr Forrest and his ability to move beyond his tarnished reputation in the nickel industry, rather than one based on concrete evidence.
"He's an interesting addition to the equation," Mr Arden said. "I sense that he has a strong desire … to put the record straight. He left the operation of [Anaconda's] Murrin Murrin project under less than satisfactory conditions. The technical outcomes were poor and the financial outcomes were drastically bad."
Mr Forrest said Windarra would be a "really simple project" since the type of nickel is much easier to process. "We don't see any of the rocket science required over the road at Murrin Murrin at this project."
The former Niagara chairman Doug Daws, who led the effort to buy the infamous mine from WMC two years ago for $7 million and brought in Mr Forrest to improve its prospects, has stopped short of giving any guarantees about Windarra's future.
However, he did offer this: "One day when the pages of history are written about the mining industry in Western Australia, Andrew Forrest's name will be in bold print."
And depending on the outcome at Windarra, Mr Forrest's name may rank right alongside that of Poseidon.
http://www.smh.com.au/news/business/magnates-new-poseidon-adventure/2007/04/13/1175971360135.html?page=fullpage#
April 14, 2007
The market is betting Andrew Forrest may turn nickel into gold, writes Jamie Freed.
THE legendary Poseidon nickel deposit, which launched the greatest speculative sharemarket boom in Australian history, could soon be resurrected by one of the nation's most controversial entrepreneurs.
Almost 40 years after the nation was captivated by one drill hill in remote Western Australia, investors are again betting there is plenty more nickel - and money - to be mined from the infamous site.
In late 1969 a temporary global nickel shortage combined with a spectacular amount of hype about the Windarra discovery propelled shares in its owner, Poseidon, from less than $1 to a peak of $280.
"It was terribly exciting," recalls Tony Howland-Rose, a veteran miner who helped discover the deposit as a young geophysicist. "It was just sort of the unreality about it all."
Everyone from Sydney taxi drivers to City of London financiers took a punt on once-obscure exploration companies in the wake of the Poseidon find. But dreams were shattered and fortunes lost after the drilling results responsible for the frenzy were revealed as fraudulent.
Eventually, a mine was built on the site, but it proved very disappointing before it closed 18 years ago.
Yet the spotty history of Windarra has not fazed the Perth entrepreneur and paper billionaire Andrew "Twiggy" Forrest, who is leading an attempt to reopen the mine.
"Poseidon always generates an emotion of excitement in the hearts of the more experienced financial players," he said.
Mr Forrest and his family are hardly strangers to the Laverton region where Windarra is located. It was first explored by Mr Forrest's great great uncle, Sir John Forrest, in 1869 during a search for the lost Leichhardt expedition party. Sir John later became the state's first premier.
And now that Andrew Forrest - a friend of the Prime Minister, John Howard, and a guest at the controversial Perth dinner for the Labor leader, Kevin Rudd, hosted by Brian Burke - has put his weight behind Windarra, he has got the market buzzing.
The value of the company that owns the deposit, Niagara Mining, has tripled within a week on the strength of Mr Forrest's involvement alone.
His last nickel venture, Anaconda Mining, left investors in the lurch when the Murrin Murrin plant failed to meet initial expectations. The corporate regulator is seeking to ban him as a company director for misleading investors over his $3.2 billion Pilbara iron ore venture, Fortescue Metals. His name came up frequently at the recent West Australian Corruption and Crime Commission hearings, since he used Mr Burke as a lobbyist.
Yet punters are still backing Mr Forrest in his latest venture.
Mr Howland-Rose admits he had a "good laugh" when he learned Mr Forrest, a friend, had decided to tackle Windarra. But he thinks there is a good chance it could be resurrected.
Based on his experience, Mr Howland-Rose said he was hardly surprised Forrest's involvement managed to triple the value of the deposit.
"Markets are like a pendulum," he said. "Sometimes it swings one way and sometimes it swings the other. And sometimes it seems to swing so far it's ridiculous. And that's what happened with Poseidon."
The Poseidon fraud led to stricter controls on sharemarket reporting standards and insider trading following the Rae commission report in 1974.
Although Windarra was mined from 1974 to 1989, primarily by WMC Resources, it proved a break-even proposition at best. Overall, the rocks contained only one-third the amount of nickel the initial spectacular drill results had indicated. For all his enthusiasm, Mr Forrest may be unable to remedy that.
Ron Grogan, a metallurgist who worked at Windarra from 1980 to 1983, said: "[Mr Forrest] is certainly the entrepreneurial type who can get projects going, but it doesn't mean you can find nickel."
But a new nickel boom based on seemingly insatiable demand from China has caused the price of the metal to rise tenfold since 2001. Nickel is now trading at more than $US1 an ounce, meaning it could technically be classified as a precious metal with gold, silver and platinum.
That has made once-marginal deposits like Windarra worth a second glance.
The West Australian Government estimates there is at least 52,400 tonnes of nickel left at Windarra, which would be worth $US2.6 billion ($3.1 billion) at today's prices.
Most of the nickel is under water at the moment, the 550-metre mine shaft flooded up to the 70-metre mark.
On the surface the site in the shire of Laverton serves as a monument to the Poseidon boom, and is visited by hordes of curious tourists.
But that has already begun to change. Drill rigs are on site and tourists are banned on blasting days. Windarra's owners expect they will be able to start mining in September, on a small scale.
Luckily for Niagara, many industry veterans familiar with Windarra do not think most of the past issues, such as the lower-than-expected amount of nickel and some serious rock falls, will return to haunt the mine.
Dave McGowan, who worked underground at Windarra in the early 1980s, said there had been huge advances since the mine closed 18 years ago.
"There are [mines] currently operating with worse conditions," he said. "Things we were doing in those days are classed as prehistoric nowadays."
Peter Arden, a mining analyst with the company Intersuisse, said the economics of nickel mining were greatly different today to what they were when WMC mined Windarra.
"I think maybe it might finally be the case that [Windarra] does throw up some of the enormous promise that was given to it when it was discovered in the 1960s," he said.
"The nickel price is going to stay high for a lot longer."
The excitement among investors, especially day traders, is palpable at the moment, even if it is not quite at Poseidon-like levels. But a decision on whether to invest in Windarra has turned into a referendum on Mr Forrest and his ability to move beyond his tarnished reputation in the nickel industry, rather than one based on concrete evidence.
"He's an interesting addition to the equation," Mr Arden said. "I sense that he has a strong desire … to put the record straight. He left the operation of [Anaconda's] Murrin Murrin project under less than satisfactory conditions. The technical outcomes were poor and the financial outcomes were drastically bad."
Mr Forrest said Windarra would be a "really simple project" since the type of nickel is much easier to process. "We don't see any of the rocket science required over the road at Murrin Murrin at this project."
The former Niagara chairman Doug Daws, who led the effort to buy the infamous mine from WMC two years ago for $7 million and brought in Mr Forrest to improve its prospects, has stopped short of giving any guarantees about Windarra's future.
However, he did offer this: "One day when the pages of history are written about the mining industry in Western Australia, Andrew Forrest's name will be in bold print."
And depending on the outcome at Windarra, Mr Forrest's name may rank right alongside that of Poseidon.
http://www.smh.com.au/news/business/magnates-new-poseidon-adventure/2007/04/13/1175971360135.html?page=fullpage#
Wednesday, April 11, 2007
Interview With Jim Rogers: 'The Best Place To Be Is In Commodities'
Interview With Jim Rogers: 'The Best Place To Be Is In Commodities'
Posted on Apr 10th, 2007
Hard Assets Investor submits: Jim Rogers (pictured) is widely known as one of the most insightful – and irreverent – commodities bulls in the market today. Rogers, who made his (first) fortune as George Soros’ partner in the Quantum Fund, has been championing commodities to investors since at least 2004, when his book “Hot Commodities” laid out the case for a long-term bull market in hard assets.
Rogers, who runs his own index to capture the growth in commodities, argues that the commodities market runs in what might be called “supercycles”; 10-20 year stretches when pent-up demand meets the long lead times required to bring on new supply, sending prices steadily higher. With China and India growing fast, he thinks the current commodities bull market has plenty of room to go..
The editor’s of Hard Assets Investor recently spoke by phone with Rogers, to get his view of the current situation in the commodities market.
HardAssetsInvestor [HAI]: With recent fluctuations in the commodities market, are you sticking with your “supercycle” theory? Where are we in the cycle?
Jim Rogers (Rogers): Supercycle is your term, not mine, so I won’t say that. But I will say that we are in a bull market for commodities.
We are in a bull market for commodities because supply and demand got terribly out of whack years ago, and they are still out of whack.
I also wouldn’t call it a theory. Nobody has discovered a gigantic oil field for thirty years. That’s not a theory; that’s a basic fact. In the meantime, demand for oil has been going up for many years. That’s not a theory, either; that’s a simple fact. Likewise, there has been one lead mine open in the world for the past twenty years, and the last lead smelter was built in the U.S. in 1979. I could continue: the number of acres devoted to wheat farming has been declining for 20 years.
Those are simple facts that lead me—and, I think, any rational person—to conclude that we’re in a bull market for commodities that has a ways to go.
HAI: What about the recent pullback?
Rogers: There have been consolidations along the way; there always will be. In the stock bull during the 1980s and 1990s, there were huge corrections that scared the pants off some people. But the people who really knew what was going on, they bought more stock during those consolidations, and they did well. It was the same during the gold bull market in the 1970s. There was a stretch when gold went down every month for two years, and eventually ended down 50-plus percent. Everyone was scared. But then gold turned around and went straight back to $820/ounce, a new high.
That’s how markets work. There will be awesome corrections in the commodities markets during this period of time, and I hope that I’m smart enough to recognize them for what they are.
HAI: The market panicked when China’s stock market fell in February. Was that a blip, or signs of a bubble beginning to burst?
Rogers: Anybody who sold stock in the West or in Japan because China had a 9 percent drop in one day is a little bit nuts. The Chinese market has almost zero percent impact on the rest of the world. Foreigners can’t invest in China, and the Chinese can’t invest here. The idea that what goes on in China’s market matters to us is nuts.
I’m sure that people worry about China’s growth. That’s understandable. The Chinese government is trying to slow down growth. But let’s say that they succeed, and that China’s growth slows from 10 percent GDP growth to 3 percent GDP. That’s still growth. People still need to buy more tires and more eggs.
HAI: The commodities markets have been in deep contango recently. Is that situation permanent, and is it harming the thesis to invest in commodities? Are investors better off in physicals?
Rogers: Some sectors of the market have been in contango, and some have not. I’m not sure I agree with your assertion.
HAI: I was referring specifically to energy.
Rogers: Well, energy is just three or four commodities out of fifty…
Oil and energy have been in contango recently for a variety of reasons, and partly because of the index funds. I’ve seen contango come and go for decades. Usually, when the market gets out of whack, the people who need to buy the oil come along and take advantage of it. If people come along and there’s contango, people will make money off it [presumably, buy buying oil today and storing it to sell in the future]. Likewise, when there’s backwardation. People who need oil will find the best price and the best place to buy oil, and they will do so. They take advantage of the discrepancies and then the discrepancies disappear.
HAI: What are the most pressing issues that commodity investors should understand?
Rogers: They should understand that until somebody brings on a lot of supply, commodities will do well. If people start seeing windmills on every roof and solar panels on every house, then maybe this [commodities boom] is coming to an end. If somebody discovers a gigantic gas field in Berlin, maybe this will start to change. Investors need to watch and see when and if new sources of supply develop.
Bur really, short of worldwide economic collapse, the best place to be is in commodities. There is no shortage of stocks. The world is cranking out new stocks every day. No one is cranking out new lead mines every day. People need to get a basic understanding of supply and demand, and then they’ll figure out what the big picture is, and they will make money. HAI: Are agricultural commodities a different animal from metals and energy, in that their supply is more elastic. Does that change the analysis there?
Rogers: They are not much more elastic. It takes five years for a coffee tree to mature. If you decide to go into the coffee business today, it might take five or seven years before you come to market. It takes ten years to bring on a new coal mine, but many plantations take a long time, too.
In theory, we can increase our acreage devoted to corn, as America did recently [per the USDA’s perspective plantings report]. But farmers did that at the expense of soybeans and cotton and everything else. It’s not as if the world has created a lot more land. Even when farmers do bring on more acreage, it takes a few years and it costs money and time.
Moreover, when you have acreage lying fallow, it’s always the marginal acreage. When farmers take acreage out of production, they keep the good acreage in production. Doubling the number of acres devoted to corn will not double production. Yes, in theory, you can bring on more corn quickly. But it is at the expense of other things.
HAI: Does active management have a role in the commodities space?
Rogers: The world has demonstrated repeatedly that index investors outperform 80 percent of active managers year after year after year. If you can find a good active manager who can beat the market consistently, invest with her, and introduce me to her, too. But my index fund has been running since August 1998, and it has done 500 percent better than the average CTA over that time.
HAI: Last year, we saw the London Metals Exchange intervene in the nickel markets. With supplies tight for many commodities, will we see that happen again? Will it become more frequent?
Rogers: I suspect it will happen less. The more it happens, the more credibility the exchange loses. With the internet and electronic trading, it’s very easy for a new market to develop. And any exchange where that happens frequently will lose its market.
http://seekingalpha.com/article/31835
Posted on Apr 10th, 2007
Hard Assets Investor submits: Jim Rogers (pictured) is widely known as one of the most insightful – and irreverent – commodities bulls in the market today. Rogers, who made his (first) fortune as George Soros’ partner in the Quantum Fund, has been championing commodities to investors since at least 2004, when his book “Hot Commodities” laid out the case for a long-term bull market in hard assets.
Rogers, who runs his own index to capture the growth in commodities, argues that the commodities market runs in what might be called “supercycles”; 10-20 year stretches when pent-up demand meets the long lead times required to bring on new supply, sending prices steadily higher. With China and India growing fast, he thinks the current commodities bull market has plenty of room to go..
The editor’s of Hard Assets Investor recently spoke by phone with Rogers, to get his view of the current situation in the commodities market.
HardAssetsInvestor [HAI]: With recent fluctuations in the commodities market, are you sticking with your “supercycle” theory? Where are we in the cycle?
Jim Rogers (Rogers): Supercycle is your term, not mine, so I won’t say that. But I will say that we are in a bull market for commodities.
We are in a bull market for commodities because supply and demand got terribly out of whack years ago, and they are still out of whack.
I also wouldn’t call it a theory. Nobody has discovered a gigantic oil field for thirty years. That’s not a theory; that’s a basic fact. In the meantime, demand for oil has been going up for many years. That’s not a theory, either; that’s a simple fact. Likewise, there has been one lead mine open in the world for the past twenty years, and the last lead smelter was built in the U.S. in 1979. I could continue: the number of acres devoted to wheat farming has been declining for 20 years.
Those are simple facts that lead me—and, I think, any rational person—to conclude that we’re in a bull market for commodities that has a ways to go.
HAI: What about the recent pullback?
Rogers: There have been consolidations along the way; there always will be. In the stock bull during the 1980s and 1990s, there were huge corrections that scared the pants off some people. But the people who really knew what was going on, they bought more stock during those consolidations, and they did well. It was the same during the gold bull market in the 1970s. There was a stretch when gold went down every month for two years, and eventually ended down 50-plus percent. Everyone was scared. But then gold turned around and went straight back to $820/ounce, a new high.
That’s how markets work. There will be awesome corrections in the commodities markets during this period of time, and I hope that I’m smart enough to recognize them for what they are.
HAI: The market panicked when China’s stock market fell in February. Was that a blip, or signs of a bubble beginning to burst?
Rogers: Anybody who sold stock in the West or in Japan because China had a 9 percent drop in one day is a little bit nuts. The Chinese market has almost zero percent impact on the rest of the world. Foreigners can’t invest in China, and the Chinese can’t invest here. The idea that what goes on in China’s market matters to us is nuts.
I’m sure that people worry about China’s growth. That’s understandable. The Chinese government is trying to slow down growth. But let’s say that they succeed, and that China’s growth slows from 10 percent GDP growth to 3 percent GDP. That’s still growth. People still need to buy more tires and more eggs.
HAI: The commodities markets have been in deep contango recently. Is that situation permanent, and is it harming the thesis to invest in commodities? Are investors better off in physicals?
Rogers: Some sectors of the market have been in contango, and some have not. I’m not sure I agree with your assertion.
HAI: I was referring specifically to energy.
Rogers: Well, energy is just three or four commodities out of fifty…
Oil and energy have been in contango recently for a variety of reasons, and partly because of the index funds. I’ve seen contango come and go for decades. Usually, when the market gets out of whack, the people who need to buy the oil come along and take advantage of it. If people come along and there’s contango, people will make money off it [presumably, buy buying oil today and storing it to sell in the future]. Likewise, when there’s backwardation. People who need oil will find the best price and the best place to buy oil, and they will do so. They take advantage of the discrepancies and then the discrepancies disappear.
HAI: What are the most pressing issues that commodity investors should understand?
Rogers: They should understand that until somebody brings on a lot of supply, commodities will do well. If people start seeing windmills on every roof and solar panels on every house, then maybe this [commodities boom] is coming to an end. If somebody discovers a gigantic gas field in Berlin, maybe this will start to change. Investors need to watch and see when and if new sources of supply develop.
Bur really, short of worldwide economic collapse, the best place to be is in commodities. There is no shortage of stocks. The world is cranking out new stocks every day. No one is cranking out new lead mines every day. People need to get a basic understanding of supply and demand, and then they’ll figure out what the big picture is, and they will make money. HAI: Are agricultural commodities a different animal from metals and energy, in that their supply is more elastic. Does that change the analysis there?
Rogers: They are not much more elastic. It takes five years for a coffee tree to mature. If you decide to go into the coffee business today, it might take five or seven years before you come to market. It takes ten years to bring on a new coal mine, but many plantations take a long time, too.
In theory, we can increase our acreage devoted to corn, as America did recently [per the USDA’s perspective plantings report]. But farmers did that at the expense of soybeans and cotton and everything else. It’s not as if the world has created a lot more land. Even when farmers do bring on more acreage, it takes a few years and it costs money and time.
Moreover, when you have acreage lying fallow, it’s always the marginal acreage. When farmers take acreage out of production, they keep the good acreage in production. Doubling the number of acres devoted to corn will not double production. Yes, in theory, you can bring on more corn quickly. But it is at the expense of other things.
HAI: Does active management have a role in the commodities space?
Rogers: The world has demonstrated repeatedly that index investors outperform 80 percent of active managers year after year after year. If you can find a good active manager who can beat the market consistently, invest with her, and introduce me to her, too. But my index fund has been running since August 1998, and it has done 500 percent better than the average CTA over that time.
HAI: Last year, we saw the London Metals Exchange intervene in the nickel markets. With supplies tight for many commodities, will we see that happen again? Will it become more frequent?
Rogers: I suspect it will happen less. The more it happens, the more credibility the exchange loses. With the internet and electronic trading, it’s very easy for a new market to develop. And any exchange where that happens frequently will lose its market.
http://seekingalpha.com/article/31835
Commodities guru Rogers sees oil hitting $100/bbl
Commodities guru Rogers sees oil hitting $100/bbl
Tue Apr 10, 2007 6:06PM EDTNEW YORK
(Reuters) - Commodities investment guru Jim Rogers said on Tuesday he expects oil prices to hit $100 a barrel as part of a larger commodities bull run that could last another 15 years.
With new oil discoveries struggling to keep up with rising demand from emerging economies in China and India, Rogers said crude prices will surge past historical highs.
"The surprise is going to be how high oil prices can stay and how high it goes. The old high for oil adjusted for inflation would be $100 a barrel, say," Rogers said at the Reuters Hedge Funds and Private Equity Summit.
"We'll certainly get there again," added Rogers, who rose to fame as the co-founder of the Quantum Fund with billionaire investor George Soros in the 1970s.
U.S. oil futures surged to a record high over $78 a barrel last year driven by supply concerns from producer nations, before easing to current levels around $62 a barrel.
Rogers, who is also known for founding of the Rogers International Commodity Index (.RICIX: Quote, Profile, Research), said commodities are in the midst of a bull run that started in the late 1990s and that could last through 2022, until prices rise to a level where demand is finally sated.
"If oil goes to $200 they will be drilling for oil on the White House lawn. If it goes to $300 they will be drilling at Buckingham Palace," Rogers said, adding: "This will come to and end someday, but someday is a long way from now."
http://www.reuters.com/articlePrint?articleId=USN1043501020070410
Tue Apr 10, 2007 6:06PM EDTNEW YORK
(Reuters) - Commodities investment guru Jim Rogers said on Tuesday he expects oil prices to hit $100 a barrel as part of a larger commodities bull run that could last another 15 years.
With new oil discoveries struggling to keep up with rising demand from emerging economies in China and India, Rogers said crude prices will surge past historical highs.
"The surprise is going to be how high oil prices can stay and how high it goes. The old high for oil adjusted for inflation would be $100 a barrel, say," Rogers said at the Reuters Hedge Funds and Private Equity Summit.
"We'll certainly get there again," added Rogers, who rose to fame as the co-founder of the Quantum Fund with billionaire investor George Soros in the 1970s.
U.S. oil futures surged to a record high over $78 a barrel last year driven by supply concerns from producer nations, before easing to current levels around $62 a barrel.
Rogers, who is also known for founding of the Rogers International Commodity Index (.RICIX: Quote, Profile, Research), said commodities are in the midst of a bull run that started in the late 1990s and that could last through 2022, until prices rise to a level where demand is finally sated.
"If oil goes to $200 they will be drilling for oil on the White House lawn. If it goes to $300 they will be drilling at Buckingham Palace," Rogers said, adding: "This will come to and end someday, but someday is a long way from now."
http://www.reuters.com/articlePrint?articleId=USN1043501020070410
Jim Rogers says China's yuan headed higher
Jim Rogers says China's yuan headed higher
Tue Apr 10, 2007 5:45PM EDTBy Steven C. Johnson
NEW YORK (Reuters) - China's yuan has further to climb against the dollar and could rise by up to 500 percent over the next 20 years, U.S. fund manager Jim Rogers said Tuesday at the Reuters Hedge Funds and Private Equity Summit.
Rogers, who co-founded Quantum hedge fund with billionaire
investor George Soros in the 1970s, urged investors to hold the yuan and said he is "extremely bearish" on the U.S. dollar.
"It's going to go a lot higher," he said, adding he holds yuan in two Chinese bank accounts.
He declined to predict where the yuan would trade against the dollar by year-end, but said he expects it to appreciate anywhere from 300 to 500 percent over the next two decades.
The dollar last traded at 7.7325 yuan. It has shed 1 percent so far in 2007 and about 4.7 percent since July 2005, when China widened the band in which the yuan floats.
Rogers said the United States' transformation from a creditor to a debtor nation and a growing tendency in Washington to embrace tariffs and other anti-free trade policies would decrease investment inflows into U.S. assets.
The administration of George W. Bush has long argued the yuan is undervalued, giving China an unfair trade advantage. Congress has threatened punitive tariffs on Chinese goods.
Last month, the Department of Commerce imposed duties on some Chinese coated paper imports, and on Tuesday, at the World Trade Organization, Washington accused China of piracy and blocking access to U.S. films, books and software.
Rogers said signs that U.S. protectionism was on the rise were "terrifying," adding "a trade war or a currency war will turn into a mess" and encourage other states to embrace protectionism and possibly lead to a global depression.
Rogers has traveled across China by motorcycle and car and said he plans to move permanently with his family to the Chinese-speaking world -- probably to Singapore.
He also holds Chinese stocks and is bullish on commodities, including copper, oil and wheat, largely because the appetite of China and other emerging markets for them means demand will continue to outstrip supply.
"The best way to play China is through commodities," he said. "If you're going to invest in China or Asia, invest in something they have to buy."
For more stories from the Reuters Hedge Funds and Private Equity Summit, click on (ID:nN10168454: Quote, Profile, Research)
http://www.reuters.com/articlePrint?articleId=USN1043707420070410
Tue Apr 10, 2007 5:45PM EDTBy Steven C. Johnson
NEW YORK (Reuters) - China's yuan has further to climb against the dollar and could rise by up to 500 percent over the next 20 years, U.S. fund manager Jim Rogers said Tuesday at the Reuters Hedge Funds and Private Equity Summit.
Rogers, who co-founded Quantum hedge fund with billionaire
investor George Soros in the 1970s, urged investors to hold the yuan and said he is "extremely bearish" on the U.S. dollar.
"It's going to go a lot higher," he said, adding he holds yuan in two Chinese bank accounts.
He declined to predict where the yuan would trade against the dollar by year-end, but said he expects it to appreciate anywhere from 300 to 500 percent over the next two decades.
The dollar last traded at 7.7325 yuan. It has shed 1 percent so far in 2007 and about 4.7 percent since July 2005, when China widened the band in which the yuan floats.
Rogers said the United States' transformation from a creditor to a debtor nation and a growing tendency in Washington to embrace tariffs and other anti-free trade policies would decrease investment inflows into U.S. assets.
The administration of George W. Bush has long argued the yuan is undervalued, giving China an unfair trade advantage. Congress has threatened punitive tariffs on Chinese goods.
Last month, the Department of Commerce imposed duties on some Chinese coated paper imports, and on Tuesday, at the World Trade Organization, Washington accused China of piracy and blocking access to U.S. films, books and software.
Rogers said signs that U.S. protectionism was on the rise were "terrifying," adding "a trade war or a currency war will turn into a mess" and encourage other states to embrace protectionism and possibly lead to a global depression.
Rogers has traveled across China by motorcycle and car and said he plans to move permanently with his family to the Chinese-speaking world -- probably to Singapore.
He also holds Chinese stocks and is bullish on commodities, including copper, oil and wheat, largely because the appetite of China and other emerging markets for them means demand will continue to outstrip supply.
"The best way to play China is through commodities," he said. "If you're going to invest in China or Asia, invest in something they have to buy."
For more stories from the Reuters Hedge Funds and Private Equity Summit, click on (ID:nN10168454: Quote, Profile, Research)
http://www.reuters.com/articlePrint?articleId=USN1043707420070410
Rogers shorts U.S. builders, eyes more losses
Rogers shorts U.S. builders, eyes more losses
Tue Apr 10, 2007 6:21PM EDTBy Svea Herbst-Bayliss
NEW YORK (Reuters) - Investment industry icon Jim Rogers, who helped launch one of the world's best performing hedge funds, said on Tuesday that he is betting against U.S. home builders and expects the sector will suffer more losses.
"I am short home builders and Fannie Mae (FNM.N: Quote, Profile, Research)," Rogers, who co-founded the Quantum Fund with hedge fund industry legend George Soros, said at the Reuters Hedge Funds and Private Equity Summit on Tuesday.
"They will go down a lot more. You just don't clean out a speculative bubble in six months," added Rogers, who now invests only his own money. Rogers' calls, particularly his views on commodities, still resonate with other investors. He said he was short American Home Mortgage Investment Corp (AHM.N: Quote, Profile, Research) and other mortgage companies as well.
The U.S. housing sector has taken a hit in recent months as home builders are reporting slumping orders and the number of U.S. borrowers falling behind on making payments on riskier types of mortgages is rising.
As a group, home builders have lost about 18 percent of their value this year, according to the Dow Jones U.S. Home Construction Index (.DJUSHB: Quote, Profile, Research), an industry benchmark.
Rogers said the call was not difficult to make considering the obvious risk at a time lenders were becoming far more lenient than ever before.
"Never in American history has there been a time where you could get a mortgage for no money down," Rogers said.
However some other investors, most notably Legg Mason's Bill Miller, considered the best U.S. stock picker for having beaten the Standard & Poor's 500 index 15 years in a row, said in December he expected home builders to show new promise in 2007.
Mutual funds won't release data on the investments they made in the first quarter until later this spring.
Rogers said he is also betting against some of the big investment banks which have been making headlines with multimillion dollar pay packages for top executives.
"That is one of areas where there are excesses," Rogers said, noting "Even though hedge funds and mutual funds aren't doing so well, people are making gigantic amounts of money."
Last year five hedge fund managers, including Centaurus' John Arnold who topped the list of star earners, took home at least $1 billion. Goldman Sachs (GS.N: Quote, Profile, Research) chief executive officer Lloyd Blankfein earned $54.7 million in 2006.
Even though hedge funds are pulling in money from investors like pension funds at a record pace, Rogers said the $2 trillion industry is poised for a setback.
"There will be many disasters coming both from incompetence and dishonesty," Rogers said adding "Right now the best way to make money is in the private equity and hedge fund industries and some people will be wiped out. It is all going to come to a bad end," he forecast.
http://www.reuters.com/articlePrint?articleId=USN1044091420070410
Tue Apr 10, 2007 6:21PM EDTBy Svea Herbst-Bayliss
NEW YORK (Reuters) - Investment industry icon Jim Rogers, who helped launch one of the world's best performing hedge funds, said on Tuesday that he is betting against U.S. home builders and expects the sector will suffer more losses.
"I am short home builders and Fannie Mae (FNM.N: Quote, Profile, Research)," Rogers, who co-founded the Quantum Fund with hedge fund industry legend George Soros, said at the Reuters Hedge Funds and Private Equity Summit on Tuesday.
"They will go down a lot more. You just don't clean out a speculative bubble in six months," added Rogers, who now invests only his own money. Rogers' calls, particularly his views on commodities, still resonate with other investors. He said he was short American Home Mortgage Investment Corp (AHM.N: Quote, Profile, Research) and other mortgage companies as well.
The U.S. housing sector has taken a hit in recent months as home builders are reporting slumping orders and the number of U.S. borrowers falling behind on making payments on riskier types of mortgages is rising.
As a group, home builders have lost about 18 percent of their value this year, according to the Dow Jones U.S. Home Construction Index (.DJUSHB: Quote, Profile, Research), an industry benchmark.
Rogers said the call was not difficult to make considering the obvious risk at a time lenders were becoming far more lenient than ever before.
"Never in American history has there been a time where you could get a mortgage for no money down," Rogers said.
However some other investors, most notably Legg Mason's Bill Miller, considered the best U.S. stock picker for having beaten the Standard & Poor's 500 index 15 years in a row, said in December he expected home builders to show new promise in 2007.
Mutual funds won't release data on the investments they made in the first quarter until later this spring.
Rogers said he is also betting against some of the big investment banks which have been making headlines with multimillion dollar pay packages for top executives.
"That is one of areas where there are excesses," Rogers said, noting "Even though hedge funds and mutual funds aren't doing so well, people are making gigantic amounts of money."
Last year five hedge fund managers, including Centaurus' John Arnold who topped the list of star earners, took home at least $1 billion. Goldman Sachs (GS.N: Quote, Profile, Research) chief executive officer Lloyd Blankfein earned $54.7 million in 2006.
Even though hedge funds are pulling in money from investors like pension funds at a record pace, Rogers said the $2 trillion industry is poised for a setback.
"There will be many disasters coming both from incompetence and dishonesty," Rogers said adding "Right now the best way to make money is in the private equity and hedge fund industries and some people will be wiped out. It is all going to come to a bad end," he forecast.
http://www.reuters.com/articlePrint?articleId=USN1044091420070410
Friday, April 6, 2007
Twiggy back in nickel via old Poseidon mine
Twiggy back in nickel via old Poseidon mine
Jamie FreedApril 5, 2007
YEARS after leaving bondholders in the lurch at Anaconda Nickel, paper billionaire Andrew "Twiggy" Forrest has returned to the nickel business to resurrect the mine responsible for the infamous Poseidon Nickel boom of 1969.
Mr Forrest resigned from a few board seats last year, arguing he was focused on managing Fortescue Metals' $3.2 billion Pilbara iron ore development. But he has since decided to accept the chairmanship - and millions of options - in the owner of the infamous Windarra mine, Perth explorer Niagara Mining.
Niagara, which last traded at 24c, said it would undertake a 2-for-1 share consolidation.
Mr Forrest and some of his associates will join the board and buy $2.2 million worth of 40c shares, which will give them a 4.5 per cent stake in the company.
In return they will receive 117.5 million "incentive" options, which would take their stake up to 35 per cent. These are exercisable at 40c in five tranches when, for five consecutive days, the shares trade at 60c, 70c, 80c, 90c and $1.
Niagara picked up the closed Windarra mine for $7 million from WMC Resources in 2005. The notorious mine had previously been owned by Robert Champion de Crespigny's Normandy Mining and before that was responsible for the Poseidon Nickel bubble and the famous Rae Commission, which led to stricter mining reporting standards.
But its low-grade ore deposit never lived up to the hype that generated the 1970s boom and it has hardly caused a blip in mining circles since.
Mr Forrest said he was attracted to Niagara by "the asset itself and the genuineness of the people".
He said his involvement should allow the company a lot more access to funding, given his history of junk bond raisings for Anaconda and Fortescue.
Although there were severe technical problems during the start-up phase of the Murrin Murrin nickel plant when Mr Forrest was involved with Anaconda - since renamed Minara Resources - he said the Windarra project should not prove difficult to develop.
"Remember, it is a sulphide [deposit], not a laterite, so it is quite simple," Mr Forrest said.
Niagara is initially targeting a resource of 70,000 tonnes of contained nickel from the project.
"There's definitely going to be more resources found at depth," said Richard Monti, a new director who previously headed marketing at Murrin Murrin.
April 5, 2007
YEARS after leaving bondholders in the lurch at Anaconda Nickel, paper billionaire Andrew "Twiggy" Forrest has returned to the nickel business to resurrect the mine responsible for the infamous Poseidon Nickel boom of 1969.
Mr Forrest resigned from a few board seats last year, arguing he was focused on managing Fortescue Metals' $3.2 billion Pilbara iron ore development. But he has since decided to accept the chairmanship - and millions of options - in the owner of the infamous Windarra mine, Perth explorer Niagara Mining.
Niagara, which last traded at 24c, said it would undertake a 2-for-1 share consolidation.
Mr Forrest and some of his associates will join the board and buy $2.2 million worth of 40c shares, which will give them a 4.5 per cent stake in the company.
In return they will receive 117.5 million "incentive" options, which would take their stake up to 35 per cent. These are exercisable at 40c in five tranches when, for five consecutive days, the shares trade at 60c, 70c, 80c, 90c and $1.
Niagara picked up the closed Windarra mine for $7 million from WMC Resources in 2005. The notorious mine had previously been owned by Robert Champion de Crespigny's Normandy Mining and before that was responsible for the Poseidon Nickel bubble and the famous Rae Commission, which led to stricter mining reporting standards.
But its low-grade ore deposit never lived up to the hype that generated the 1970s boom and it has hardly caused a blip in mining circles since.
Mr Forrest said he was attracted to Niagara by "the asset itself and the genuineness of the people".
He said his involvement should allow the company a lot more access to funding, given his history of junk bond raisings for Anaconda and Fortescue.
Although there were severe technical problems during the start-up phase of the Murrin Murrin nickel plant when Mr Forrest was involved with Anaconda - since renamed Minara Resources - he said the Windarra project should not prove difficult to develop.
"Remember, it is a sulphide [deposit], not a laterite, so it is quite simple," Mr Forrest said.
Niagara is initially targeting a resource of 70,000 tonnes of contained nickel from the project.
"There's definitely going to be more resources found at depth," said Richard Monti, a new director who previously headed marketing at Murrin Murrin.
http://www.smh.com.au/news/business/twiggy-back-in-nickel-via-old-poseidon-mine/2007/04/04/1175366327622.html
Jamie FreedApril 5, 2007
YEARS after leaving bondholders in the lurch at Anaconda Nickel, paper billionaire Andrew "Twiggy" Forrest has returned to the nickel business to resurrect the mine responsible for the infamous Poseidon Nickel boom of 1969.
Mr Forrest resigned from a few board seats last year, arguing he was focused on managing Fortescue Metals' $3.2 billion Pilbara iron ore development. But he has since decided to accept the chairmanship - and millions of options - in the owner of the infamous Windarra mine, Perth explorer Niagara Mining.
Niagara, which last traded at 24c, said it would undertake a 2-for-1 share consolidation.
Mr Forrest and some of his associates will join the board and buy $2.2 million worth of 40c shares, which will give them a 4.5 per cent stake in the company.
In return they will receive 117.5 million "incentive" options, which would take their stake up to 35 per cent. These are exercisable at 40c in five tranches when, for five consecutive days, the shares trade at 60c, 70c, 80c, 90c and $1.
Niagara picked up the closed Windarra mine for $7 million from WMC Resources in 2005. The notorious mine had previously been owned by Robert Champion de Crespigny's Normandy Mining and before that was responsible for the Poseidon Nickel bubble and the famous Rae Commission, which led to stricter mining reporting standards.
But its low-grade ore deposit never lived up to the hype that generated the 1970s boom and it has hardly caused a blip in mining circles since.
Mr Forrest said he was attracted to Niagara by "the asset itself and the genuineness of the people".
He said his involvement should allow the company a lot more access to funding, given his history of junk bond raisings for Anaconda and Fortescue.
Although there were severe technical problems during the start-up phase of the Murrin Murrin nickel plant when Mr Forrest was involved with Anaconda - since renamed Minara Resources - he said the Windarra project should not prove difficult to develop.
"Remember, it is a sulphide [deposit], not a laterite, so it is quite simple," Mr Forrest said.
Niagara is initially targeting a resource of 70,000 tonnes of contained nickel from the project.
"There's definitely going to be more resources found at depth," said Richard Monti, a new director who previously headed marketing at Murrin Murrin.
April 5, 2007
YEARS after leaving bondholders in the lurch at Anaconda Nickel, paper billionaire Andrew "Twiggy" Forrest has returned to the nickel business to resurrect the mine responsible for the infamous Poseidon Nickel boom of 1969.
Mr Forrest resigned from a few board seats last year, arguing he was focused on managing Fortescue Metals' $3.2 billion Pilbara iron ore development. But he has since decided to accept the chairmanship - and millions of options - in the owner of the infamous Windarra mine, Perth explorer Niagara Mining.
Niagara, which last traded at 24c, said it would undertake a 2-for-1 share consolidation.
Mr Forrest and some of his associates will join the board and buy $2.2 million worth of 40c shares, which will give them a 4.5 per cent stake in the company.
In return they will receive 117.5 million "incentive" options, which would take their stake up to 35 per cent. These are exercisable at 40c in five tranches when, for five consecutive days, the shares trade at 60c, 70c, 80c, 90c and $1.
Niagara picked up the closed Windarra mine for $7 million from WMC Resources in 2005. The notorious mine had previously been owned by Robert Champion de Crespigny's Normandy Mining and before that was responsible for the Poseidon Nickel bubble and the famous Rae Commission, which led to stricter mining reporting standards.
But its low-grade ore deposit never lived up to the hype that generated the 1970s boom and it has hardly caused a blip in mining circles since.
Mr Forrest said he was attracted to Niagara by "the asset itself and the genuineness of the people".
He said his involvement should allow the company a lot more access to funding, given his history of junk bond raisings for Anaconda and Fortescue.
Although there were severe technical problems during the start-up phase of the Murrin Murrin nickel plant when Mr Forrest was involved with Anaconda - since renamed Minara Resources - he said the Windarra project should not prove difficult to develop.
"Remember, it is a sulphide [deposit], not a laterite, so it is quite simple," Mr Forrest said.
Niagara is initially targeting a resource of 70,000 tonnes of contained nickel from the project.
"There's definitely going to be more resources found at depth," said Richard Monti, a new director who previously headed marketing at Murrin Murrin.
http://www.smh.com.au/news/business/twiggy-back-in-nickel-via-old-poseidon-mine/2007/04/04/1175366327622.html
Nickel pulls Twiggy back
Nickel pulls Twiggy back
Kevin Andrusiak
April 05, 2007
ANDREW "Twiggy" Forrest will make a belated return to the nickel mining game, tying in with the mine that was at the centre of the Poseidon nickel boom and bust of the early 1970s.
Mr Forrest, the billionaire founder of iron ore hopeful Fortescue Metals, will assume the post of non-executive chairman of Perth-based junior Niagara Mining, the company with dreams of remining the West Australian goldfields' Mt Windarra deposit, discovered by Poseidon in the late 1960s.
Mr Forrest will take a 4.5 per cent stake in the company by buying $2.2 million Niagara shares, pending shareholder approval, in a deal that includes a swag of options and which could see him end up with a 35 per cent stake in the company.
Mr Forrest's previous foray into nickel was a bitter disappointment after he failed to prove up a 100,000 tonne per annum dream during his time at Anaconda Nickel.
That saw many investors lose millions and Mr Forrest retreat from corporate life until he returned to lead Fortescue Metals, which is on the verge of breaking the iron ore duopoly in the Pilbara held by Rio Tinto and BHP Billiton.
"I've had an eye on this industry for a very long time," he said. "As our clients at Fortescue are satisfied in their iron ore needs, the next question they always ask is, can you help me secure a source of nickel?" Nickel hit a record high of $49,800 a tonne yesterday as world stockpiles fell further.
Niagara bought Mt Windarra from WMC Resources in 2005 just before it was taken over by BHP Billiton. Mt Windarra produced 7 million tonnes of nickel sulphide before it closed in 1991.
It was the centre of the Poseidon nickel bubble in the 1970s which saw shares in the junior explorer blow out to $280 before it eventually collapsed. Poseidon delisted in 1976 in a move that tainted the Australian mining industry at the time. Mt Windarra was bought by Western Mining, which became WMC.
Niagara does not have a JORC-compliant resource for Mt Windarra.
Chief executive Chris Daws, a former stockbroker who was previously banned from the financial services industry for deceiving clients, before the ban was lifted in March last year, said Niagara had an initial target of 70,000 tonnes of nickel for Mt Windarra.
Niagara shares are worth 24.5c.
http://www.theaustralian.news.com.au/common/story_page/0,5744,21508092%255E643,00.html
Kevin Andrusiak
April 05, 2007
ANDREW "Twiggy" Forrest will make a belated return to the nickel mining game, tying in with the mine that was at the centre of the Poseidon nickel boom and bust of the early 1970s.
Mr Forrest, the billionaire founder of iron ore hopeful Fortescue Metals, will assume the post of non-executive chairman of Perth-based junior Niagara Mining, the company with dreams of remining the West Australian goldfields' Mt Windarra deposit, discovered by Poseidon in the late 1960s.
Mr Forrest will take a 4.5 per cent stake in the company by buying $2.2 million Niagara shares, pending shareholder approval, in a deal that includes a swag of options and which could see him end up with a 35 per cent stake in the company.
Mr Forrest's previous foray into nickel was a bitter disappointment after he failed to prove up a 100,000 tonne per annum dream during his time at Anaconda Nickel.
That saw many investors lose millions and Mr Forrest retreat from corporate life until he returned to lead Fortescue Metals, which is on the verge of breaking the iron ore duopoly in the Pilbara held by Rio Tinto and BHP Billiton.
"I've had an eye on this industry for a very long time," he said. "As our clients at Fortescue are satisfied in their iron ore needs, the next question they always ask is, can you help me secure a source of nickel?" Nickel hit a record high of $49,800 a tonne yesterday as world stockpiles fell further.
Niagara bought Mt Windarra from WMC Resources in 2005 just before it was taken over by BHP Billiton. Mt Windarra produced 7 million tonnes of nickel sulphide before it closed in 1991.
It was the centre of the Poseidon nickel bubble in the 1970s which saw shares in the junior explorer blow out to $280 before it eventually collapsed. Poseidon delisted in 1976 in a move that tainted the Australian mining industry at the time. Mt Windarra was bought by Western Mining, which became WMC.
Niagara does not have a JORC-compliant resource for Mt Windarra.
Chief executive Chris Daws, a former stockbroker who was previously banned from the financial services industry for deceiving clients, before the ban was lifted in March last year, said Niagara had an initial target of 70,000 tonnes of nickel for Mt Windarra.
Niagara shares are worth 24.5c.
http://www.theaustralian.news.com.au/common/story_page/0,5744,21508092%255E643,00.html
Wednesday, April 4, 2007
Commodities Trounce Stocks, Bonds on Oil, Soy Revival
Commodities Trounce Stocks, Bonds on Oil, Soy Revival
By Tan Hwee Ann and Pham-Duy Nguyen
April 2 (Bloomberg) -- Commodities are beating stocks and bonds for the first time in nine months, and the quarterly rebound is likely to continue on China's increasing imports of raw materials.
Oil, gold, soybeans and sugar for delivery at the end of the year on the New York Mercantile Exchange and the Boards of Trade in Chicago and New York show at least a 3.7 percent appreciation, beyond the 5.7 percent gain in the UBS Bloomberg CMCI index of 28 commodities through March.
``When we look at the supply and demand'' of most commodities, there's a lot ``to be very bullish about,'' said Larry Kantor, co-head of research in New York at Barclays Capital Inc., which told customers last week to buy tin, gold and corn. China has ``a voracious demand for raw materials.''
Imports of copper jumped 12 percent in February from a month earlier and were almost triple the level of a year ago, according to the Customs General Administration in Beijing. Crude oil purchases rose by 8 percent in the month and palm oil by 20 percent, the administration reported.
Copper rallied 8.4 percent in the quarter to $6,860 a metric ton on the London Metal Exchange, crude oil advanced 7.9 percent to $65.87 a barrel in New York and palm oil gained 3.5 percent to 2,064 ringgit ($597) a ton on the Malaysia Derivatives Exchange.
``We do see, across all commodities, phenomenal growth,'' Charlie Sartain, chief executive officer for copper at Xstrata Plc, the world's fourth-biggest producer of copper and nickel, said today in an interview in Manila. Demand for copper in China, the biggest buyer of the metal, may increase 8 percent to 10 percent this year, he said.
Quarterly Returns
First-quarter returns from commodities were more than triple the 1.6 percent gain in U.S. Treasuries and the 0.2 percent increase in the Standard & Poor's 500 Index. The Dow Jones Stoxx index in Europe added 2.5 percent, and German government bonds returned about 0.3 percent in the quarter. Commodities benefited from China's increasing imports of copper, oil and construction materials.
Stocks will suffer from a slowing U.S. economy, while European shares will be hurt by reduced profit growth, said Jane Drake, who helps oversee $10.4 billion as investment director at Tilney Investment Management in Liverpool, England. The Treasury benchmark 10-year note fell 7 cents per $100 face value last week, continuing a monthlong slump as Federal Reserve Chairman Ben S. Bernanke described inflation as his primary challenge.
``Over the next three months, commodities could outdo shares,'' said Shane Oliver, who helps manage $83 billion at AMP Capital Investors Ltd. in Sydney. ``China is importing heavily again'' to feed the world's fourth-largest economy.
Inflation Concern
Rising prices for food, metals and fuel may accelerate inflation, driving up manufacturers' costs and dashing speculation that central bankers from Washington to Tokyo will lower interest rates.
Inflation as measured by the U.S. Consumer Price Index rose at an annual rate of 2.4 percent in February, greater than economists forecast. The annual rate was 3.1 percent in 2006. Consumer prices rose 1.8 percent in the year through February in the 13 nations that share the euro, compared with a 2.4 percent increase a year earlier.
Fund managers say inflation and a weakening real-estate market are the biggest risks to stocks during the next year, according to a quarterly survey released last week by the Russell Investment Group in Tacoma, Washington.
``The bottom line for us is that commodities will outperform the other markets for the rest of the year due to serious problems in the equities markets,'' Christoph Eibl, who helps manage $1.1 billion at Tiberius Asset Management, said in a phone interview yesterday from Stuttgart, Germany.
Bernanke's View
Bernanke last week said central bank policy ``is still oriented towards control of inflation, which we consider at this time to be the greater risk'' than a slowing economy.
A 10.7 percent expansion in China's economy in 2006, the fastest pace in 11 years, is spurring demand for materials to build skyscrapers, bridges, roads, cities and cars. The Chinese government forecasts 8 percent growth for 2007.
The commodities rebound promises to revive export revenue from Russia and Saudi Arabia to Vietnam and Brazil and hurt importers including the U.S., Japan and Germany, the three biggest economies. BHP Billiton Ltd., based in Melbourne, and Exxon Mobil Corp. of Irving, Texas, the largest publicly traded mining and oil companies, may profit. U.S. builders may see costs increase for cement and copper.
Morgan Stanley the Bear
Commodities investors so far this year are the biggest winners. As recently as January, after commodities lost money for the first time in five years, Goldman Sachs Group Inc. said the outlook for higher prices was ``very much intact.'' Deutsche Bank AG told clients the drop was little more than a ``correction in a continuing bull run.''
A $10 million investment in the UBS Bloomberg index earned $570,000 in the quarter, compared with a $20,000 profit from the S&P 500. U.S. Treasuries returned about $160,000.
The bears, led by Morgan Stanley, aren't impressed. The firm's chief global economist, Stephen Roach in New York, and ABN metals analyst Nick Moore in London anticipate slowdowns in the U.S. economy later this year will damage demand and vindicate their forecasts. Moore in January said falling prices then marked the ``definitive end'' of the commodity price boom.
``More supply is coming in copper, and the economic headwinds continue to intensify,'' Moore said March 30 in a telephone interview. ``People should look carefully at the disconnect between the activities of traders and the fundamentals of the market.''
Roach says China may restrain growth, hurting consumption in a country that accounted for about 50 percent of the gain in metals and oil during the past four years.
Copper Demand
``With downside risks building for the world's most commodity-intensive economy, suddenly investors are reassessing the demand side of commodity markets,'' he said in a March 6 e- mail from New York. He didn't return telephone and e-mail messages to comment for this article.
Copper use may grow 12 percent this year in China, exceeding an 8 percent earlier estimate, Goldman Sachs, the world's biggest securities firm by market value, said March 27, raising price forecasts for iron ore and copper. Deutsche Bank, Europe's biggest investment bank by revenue, increased its projections for nickel, copper and iron ore a day earlier.
Yunnan Copper Industry Co., China's third-largest producer of the metal, said March 31 it was increasing output 11 percent this year to feed the rising demand.
Oil demand in China and India will continue to grow, said Jim Rogers, the author of ``Hot Commodities'' who predicted the start of the rally in 1999.
Corn, Ethanol
``China only uses one-fifteenth of what people in America use,'' he said, referring to China's 0.049 barrel of oil consumption per capita per day and the U.S.'s 0.677 barrel. ``Even if they use the same amount as people in Japan and South Korea do, imagine how much demand is yet to come.''
Developing economies will expand 6.4 percent in 2007, led by China and India, the world's two most populous nations, the Washington-based World Bank estimates. The U.S. economy will grow 2.1 percent, the bank projects.
``More people have downgraded their U.S. expectations, and upgraded their Chinese, Europe and Japan expectations,'' said Hans Kunnen, who helps manage $70 billion at Colonial First State Investment Australia Ltd. in Sydney. ``The driver is predominantly the almost self-sustaining growth in China and the reduced reliance on the U.S.''
Demand for oil is improving the outlook for ethanol and biodiesel fuel and pushing up the prices of agricultural commodities and food. Corn has surged 59 percent in the past year, hurting cattle ranchers, hog farmers and poultry producers.
Farm Lands
U.S. farmers this year will sow the most acres of corn since World War II and cut soybean plantings after record ethanol production boosted grain prices to a 10-year high, a government survey showed last week. A.G. Edwards & Sons Inc. forecasts that the rising demand will keep corn at around $4 a bushel, after ending last month at $3.745 a bushel on the Chicago Board of Trade.
Limits on farm lands and increasing demand of 5 percent a year will drive grain prices, said Michael Coleman, managing director at Aisling Analytics Pte., which runs a $450 million commodities hedge fund.
``It's not just because of food demand, which is rising rapidly because of increasing wealth, but also biofuel has created a new source of demand,'' he said March 26 in Hong Kong.
Defaults Increase
U.S. incomes and spending last month gained 0.6 percent, the Commerce Department said last week in Washington. That was twice the increase anticipated by economists. Prices rose 0.3 percent, while the National Association of Purchasing Management-Chicago's business barometer jumped to the highest in almost two years.
Defaults by subprime mortgage borrowers, or those with poor or limited credit histories, have damped prospects for a quick housing recovery.
The subprime meltdown hasn't hurt commodities because ``it's a small part of the overall market,'' said Richard Steinberg, chief investment officer at Boca Raton, Florida-based Steinberg Global Asset Management, which manages about $490 million. ``Eighty percent of the subprime market is still good. It's not the demise of the U.S. housing market.''
Home construction accounts for 5 percent of the U.S. economy, and when furniture, home-improvement spending and utilities are included, it rises to about 15 percent. Consumer spending is 70 percent.
``The world is doing better than we thought, and the slowdown in the U.S. is being offset by growth both in Europe and Asia,'' said Jan Loeys, London-based global head of market strategy at JPMorgan Chase & Co. ``As a result commodities and equities are likely to perform better than bonds or cash.''
To contact the reporters on this story: Tan Hwee Ann in Melbourne at hatan@bloomberg.net Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net .
http://www.bloomberg.com/apps/news?pid=20601109&sid=a1KjROpWWE9I&refer=home
mms://media2.bloomberg.com/cache/vB6N8K4_nAIs.asf
By Tan Hwee Ann and Pham-Duy Nguyen
April 2 (Bloomberg) -- Commodities are beating stocks and bonds for the first time in nine months, and the quarterly rebound is likely to continue on China's increasing imports of raw materials.
Oil, gold, soybeans and sugar for delivery at the end of the year on the New York Mercantile Exchange and the Boards of Trade in Chicago and New York show at least a 3.7 percent appreciation, beyond the 5.7 percent gain in the UBS Bloomberg CMCI index of 28 commodities through March.
``When we look at the supply and demand'' of most commodities, there's a lot ``to be very bullish about,'' said Larry Kantor, co-head of research in New York at Barclays Capital Inc., which told customers last week to buy tin, gold and corn. China has ``a voracious demand for raw materials.''
Imports of copper jumped 12 percent in February from a month earlier and were almost triple the level of a year ago, according to the Customs General Administration in Beijing. Crude oil purchases rose by 8 percent in the month and palm oil by 20 percent, the administration reported.
Copper rallied 8.4 percent in the quarter to $6,860 a metric ton on the London Metal Exchange, crude oil advanced 7.9 percent to $65.87 a barrel in New York and palm oil gained 3.5 percent to 2,064 ringgit ($597) a ton on the Malaysia Derivatives Exchange.
``We do see, across all commodities, phenomenal growth,'' Charlie Sartain, chief executive officer for copper at Xstrata Plc, the world's fourth-biggest producer of copper and nickel, said today in an interview in Manila. Demand for copper in China, the biggest buyer of the metal, may increase 8 percent to 10 percent this year, he said.
Quarterly Returns
First-quarter returns from commodities were more than triple the 1.6 percent gain in U.S. Treasuries and the 0.2 percent increase in the Standard & Poor's 500 Index. The Dow Jones Stoxx index in Europe added 2.5 percent, and German government bonds returned about 0.3 percent in the quarter. Commodities benefited from China's increasing imports of copper, oil and construction materials.
Stocks will suffer from a slowing U.S. economy, while European shares will be hurt by reduced profit growth, said Jane Drake, who helps oversee $10.4 billion as investment director at Tilney Investment Management in Liverpool, England. The Treasury benchmark 10-year note fell 7 cents per $100 face value last week, continuing a monthlong slump as Federal Reserve Chairman Ben S. Bernanke described inflation as his primary challenge.
``Over the next three months, commodities could outdo shares,'' said Shane Oliver, who helps manage $83 billion at AMP Capital Investors Ltd. in Sydney. ``China is importing heavily again'' to feed the world's fourth-largest economy.
Inflation Concern
Rising prices for food, metals and fuel may accelerate inflation, driving up manufacturers' costs and dashing speculation that central bankers from Washington to Tokyo will lower interest rates.
Inflation as measured by the U.S. Consumer Price Index rose at an annual rate of 2.4 percent in February, greater than economists forecast. The annual rate was 3.1 percent in 2006. Consumer prices rose 1.8 percent in the year through February in the 13 nations that share the euro, compared with a 2.4 percent increase a year earlier.
Fund managers say inflation and a weakening real-estate market are the biggest risks to stocks during the next year, according to a quarterly survey released last week by the Russell Investment Group in Tacoma, Washington.
``The bottom line for us is that commodities will outperform the other markets for the rest of the year due to serious problems in the equities markets,'' Christoph Eibl, who helps manage $1.1 billion at Tiberius Asset Management, said in a phone interview yesterday from Stuttgart, Germany.
Bernanke's View
Bernanke last week said central bank policy ``is still oriented towards control of inflation, which we consider at this time to be the greater risk'' than a slowing economy.
A 10.7 percent expansion in China's economy in 2006, the fastest pace in 11 years, is spurring demand for materials to build skyscrapers, bridges, roads, cities and cars. The Chinese government forecasts 8 percent growth for 2007.
The commodities rebound promises to revive export revenue from Russia and Saudi Arabia to Vietnam and Brazil and hurt importers including the U.S., Japan and Germany, the three biggest economies. BHP Billiton Ltd., based in Melbourne, and Exxon Mobil Corp. of Irving, Texas, the largest publicly traded mining and oil companies, may profit. U.S. builders may see costs increase for cement and copper.
Morgan Stanley the Bear
Commodities investors so far this year are the biggest winners. As recently as January, after commodities lost money for the first time in five years, Goldman Sachs Group Inc. said the outlook for higher prices was ``very much intact.'' Deutsche Bank AG told clients the drop was little more than a ``correction in a continuing bull run.''
A $10 million investment in the UBS Bloomberg index earned $570,000 in the quarter, compared with a $20,000 profit from the S&P 500. U.S. Treasuries returned about $160,000.
The bears, led by Morgan Stanley, aren't impressed. The firm's chief global economist, Stephen Roach in New York, and ABN metals analyst Nick Moore in London anticipate slowdowns in the U.S. economy later this year will damage demand and vindicate their forecasts. Moore in January said falling prices then marked the ``definitive end'' of the commodity price boom.
``More supply is coming in copper, and the economic headwinds continue to intensify,'' Moore said March 30 in a telephone interview. ``People should look carefully at the disconnect between the activities of traders and the fundamentals of the market.''
Roach says China may restrain growth, hurting consumption in a country that accounted for about 50 percent of the gain in metals and oil during the past four years.
Copper Demand
``With downside risks building for the world's most commodity-intensive economy, suddenly investors are reassessing the demand side of commodity markets,'' he said in a March 6 e- mail from New York. He didn't return telephone and e-mail messages to comment for this article.
Copper use may grow 12 percent this year in China, exceeding an 8 percent earlier estimate, Goldman Sachs, the world's biggest securities firm by market value, said March 27, raising price forecasts for iron ore and copper. Deutsche Bank, Europe's biggest investment bank by revenue, increased its projections for nickel, copper and iron ore a day earlier.
Yunnan Copper Industry Co., China's third-largest producer of the metal, said March 31 it was increasing output 11 percent this year to feed the rising demand.
Oil demand in China and India will continue to grow, said Jim Rogers, the author of ``Hot Commodities'' who predicted the start of the rally in 1999.
Corn, Ethanol
``China only uses one-fifteenth of what people in America use,'' he said, referring to China's 0.049 barrel of oil consumption per capita per day and the U.S.'s 0.677 barrel. ``Even if they use the same amount as people in Japan and South Korea do, imagine how much demand is yet to come.''
Developing economies will expand 6.4 percent in 2007, led by China and India, the world's two most populous nations, the Washington-based World Bank estimates. The U.S. economy will grow 2.1 percent, the bank projects.
``More people have downgraded their U.S. expectations, and upgraded their Chinese, Europe and Japan expectations,'' said Hans Kunnen, who helps manage $70 billion at Colonial First State Investment Australia Ltd. in Sydney. ``The driver is predominantly the almost self-sustaining growth in China and the reduced reliance on the U.S.''
Demand for oil is improving the outlook for ethanol and biodiesel fuel and pushing up the prices of agricultural commodities and food. Corn has surged 59 percent in the past year, hurting cattle ranchers, hog farmers and poultry producers.
Farm Lands
U.S. farmers this year will sow the most acres of corn since World War II and cut soybean plantings after record ethanol production boosted grain prices to a 10-year high, a government survey showed last week. A.G. Edwards & Sons Inc. forecasts that the rising demand will keep corn at around $4 a bushel, after ending last month at $3.745 a bushel on the Chicago Board of Trade.
Limits on farm lands and increasing demand of 5 percent a year will drive grain prices, said Michael Coleman, managing director at Aisling Analytics Pte., which runs a $450 million commodities hedge fund.
``It's not just because of food demand, which is rising rapidly because of increasing wealth, but also biofuel has created a new source of demand,'' he said March 26 in Hong Kong.
Defaults Increase
U.S. incomes and spending last month gained 0.6 percent, the Commerce Department said last week in Washington. That was twice the increase anticipated by economists. Prices rose 0.3 percent, while the National Association of Purchasing Management-Chicago's business barometer jumped to the highest in almost two years.
Defaults by subprime mortgage borrowers, or those with poor or limited credit histories, have damped prospects for a quick housing recovery.
The subprime meltdown hasn't hurt commodities because ``it's a small part of the overall market,'' said Richard Steinberg, chief investment officer at Boca Raton, Florida-based Steinberg Global Asset Management, which manages about $490 million. ``Eighty percent of the subprime market is still good. It's not the demise of the U.S. housing market.''
Home construction accounts for 5 percent of the U.S. economy, and when furniture, home-improvement spending and utilities are included, it rises to about 15 percent. Consumer spending is 70 percent.
``The world is doing better than we thought, and the slowdown in the U.S. is being offset by growth both in Europe and Asia,'' said Jan Loeys, London-based global head of market strategy at JPMorgan Chase & Co. ``As a result commodities and equities are likely to perform better than bonds or cash.''
To contact the reporters on this story: Tan Hwee Ann in Melbourne at hatan@bloomberg.net Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net .
http://www.bloomberg.com/apps/news?pid=20601109&sid=a1KjROpWWE9I&refer=home
mms://media2.bloomberg.com/cache/vB6N8K4_nAIs.asf
Tuesday, April 3, 2007
Faber Says U.S. Stocks Suggest `Start of Bear Market'
Faber Says U.S. Stocks Suggest `Start of Bear Market' (Update1)
By Eric Martin and Ellen Braitman
March 29 (Bloomberg) -- The Standard & Poor's 500 Index is more likely to fall than rise above its six-year-high reached Feb. 20 because the threat of faster inflation and slower growth persists, said Marc Faber, an investor who predicted the stock market crash in 1987.
``We're right where the market would usually be at the start of a bear market,'' Faber said in an interview from Copenhagen. ``Financial stocks are not performing well and this is usually a bad indicator for the market.''
A measure of financial shares has retreated 5.9 percent since Feb. 20. Countrywide Financial Corp., the biggest U.S. mortgage lender, and Lehman Brothers Holdings Inc., the fourth- biggest U.S. securities firm by market value, led the losses.
Inflation and rising oil prices may restrain economic growth and keep stocks from completing a rebound from the Feb. 27 rout that sent the S&P 500 to its worst plunge in four years, Faber said.
``What the government publishes as inflation isn't the cost- of-living increase for the average household in America,'' said Faber, who oversees $300 million at Hong Kong-based Marc Faber Ltd. Increases in corn, wheat, soybean and meat prices have driven food costs up for most Americans, he said.
Emerging markets, including China, may fall more than the U.S., according to Faber. Rising oil prices and defaults on mortgages by the riskiest borrowers in the U.S. reduce the cash available for investments in those markets, he said. Growth in the U.S. current account deficit has boosted global equities, he added.
`Excess Liquidity'
``In an environment where global liquidity is tightening, emerging markets that benefited from excess liquidity would be the most vulnerable,'' he said.
A sell-off in Chinese shares on Feb. 27 sparked the global rout. China's CSI 300 Index of yuan-denominated A-shares, previously known as the Shanghai and Shenzhen 300 Index, has since erased its losses and yesterday climbed to a record. The S&P 500, by contrast, is still down 1.8 percent.
Faber said a 10 percent slide in U.S. stocks from their Feb. 20 peak, a common definition of a correction, and a decline of 20 percent for brokerage firms including Goldman Sachs and Morgan Stanley would increase pressure on the Federal Reserve to reduce interest rates, bolstering stock prices while weakening the dollar.
``The Wall Street managing directors would be on the phone with the Fed to cut interest rates and to flood the system with liquidity,'' he said.
Home Loans
The emergence of home loan concerns means the stock market is unlikely to benefit from the conditions which supported its eight-month rally since last June, according to Faber. Oil prices fell 34 percent from a record $77.03 on July 14 to a 19-month low of $50.48 on Jan. 18. Over that period, the S&P 500 has gained 15 percent.
Since its January low, crude has rebounded 28 percent to $64.62 a barrel at 11:43 a.m. in New York.
``Part of the rally was supported by a sharp drop of oil prices,'' he said. ``I don't think this will happen again.''
The U.S. stock market yesterday extended this week's losses after Fed Chairman Ben S. Bernanke said inflation remains his main concern even amid growing evidence the economy is slowing.
Core personal consumption, a price gauge tied to spending patterns and excluding food and energy costs, increased at a 1.8 percent rate in the fourth quarter, down from the initial estimate of 1.9 percent. The Fed's preferred measure of inflation rose at a 2.2 percent rate in the third quarter.
mms://media2.bloomberg.com/cache/vVQaYH9J7zgM.asf
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net .
Last Updated: March 29, 2007 11:54 EDT
By Eric Martin and Ellen Braitman
March 29 (Bloomberg) -- The Standard & Poor's 500 Index is more likely to fall than rise above its six-year-high reached Feb. 20 because the threat of faster inflation and slower growth persists, said Marc Faber, an investor who predicted the stock market crash in 1987.
``We're right where the market would usually be at the start of a bear market,'' Faber said in an interview from Copenhagen. ``Financial stocks are not performing well and this is usually a bad indicator for the market.''
A measure of financial shares has retreated 5.9 percent since Feb. 20. Countrywide Financial Corp., the biggest U.S. mortgage lender, and Lehman Brothers Holdings Inc., the fourth- biggest U.S. securities firm by market value, led the losses.
Inflation and rising oil prices may restrain economic growth and keep stocks from completing a rebound from the Feb. 27 rout that sent the S&P 500 to its worst plunge in four years, Faber said.
``What the government publishes as inflation isn't the cost- of-living increase for the average household in America,'' said Faber, who oversees $300 million at Hong Kong-based Marc Faber Ltd. Increases in corn, wheat, soybean and meat prices have driven food costs up for most Americans, he said.
Emerging markets, including China, may fall more than the U.S., according to Faber. Rising oil prices and defaults on mortgages by the riskiest borrowers in the U.S. reduce the cash available for investments in those markets, he said. Growth in the U.S. current account deficit has boosted global equities, he added.
`Excess Liquidity'
``In an environment where global liquidity is tightening, emerging markets that benefited from excess liquidity would be the most vulnerable,'' he said.
A sell-off in Chinese shares on Feb. 27 sparked the global rout. China's CSI 300 Index of yuan-denominated A-shares, previously known as the Shanghai and Shenzhen 300 Index, has since erased its losses and yesterday climbed to a record. The S&P 500, by contrast, is still down 1.8 percent.
Faber said a 10 percent slide in U.S. stocks from their Feb. 20 peak, a common definition of a correction, and a decline of 20 percent for brokerage firms including Goldman Sachs and Morgan Stanley would increase pressure on the Federal Reserve to reduce interest rates, bolstering stock prices while weakening the dollar.
``The Wall Street managing directors would be on the phone with the Fed to cut interest rates and to flood the system with liquidity,'' he said.
Home Loans
The emergence of home loan concerns means the stock market is unlikely to benefit from the conditions which supported its eight-month rally since last June, according to Faber. Oil prices fell 34 percent from a record $77.03 on July 14 to a 19-month low of $50.48 on Jan. 18. Over that period, the S&P 500 has gained 15 percent.
Since its January low, crude has rebounded 28 percent to $64.62 a barrel at 11:43 a.m. in New York.
``Part of the rally was supported by a sharp drop of oil prices,'' he said. ``I don't think this will happen again.''
The U.S. stock market yesterday extended this week's losses after Fed Chairman Ben S. Bernanke said inflation remains his main concern even amid growing evidence the economy is slowing.
Core personal consumption, a price gauge tied to spending patterns and excluding food and energy costs, increased at a 1.8 percent rate in the fourth quarter, down from the initial estimate of 1.9 percent. The Fed's preferred measure of inflation rose at a 2.2 percent rate in the third quarter.
mms://media2.bloomberg.com/cache/vVQaYH9J7zgM.asf
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net .
Last Updated: March 29, 2007 11:54 EDT
Subscribe to:
Posts (Atom)