It may be wise to reconsider our ownership of US exploration and mining companies. Since the Alberta oil and gas royalty review was approved by the government, oil and gas companies with an interest in Alberta have seen their stock price slaughtered. And from what I discovered it will get worse. http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=CA:WTL&sid=1838762&time= , http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=ca%3Ahpx&sid=0&o_symb=ca%3Ahpx&freq=1&time=8&x=39&y=17
Recently the US House Committee on Natural Resources approved legislation that rewrites the General Mining Law of 1872. The new legislation imposes federal royalties on hard-rock mining and exploration companies. The bill provides for royalties of 8% of gross revenue on new mines. The committee passed the bill 23-15. Alberta’s new royalties plan in my opinion is a mistake, however; the new US bill could turn out to be graver for US mining.
Powerful nations such as Canada and the US can get away with imposing such penalties. It cannot be said for other nations that rely heavily on foreign investment.
Perhaps we need not take Mr. Sinclair’s warning lightly. On Thursday Standard & Poors alerted us that a series of CDOs (collateralized debt obligation) issued “Event of Default” notices. An “event of default” is issued when a pre-set ratio of collateral is broken, or when one entity fails to pay. The amazing thing is the CDOs range from a rating of AAA – BBB+… in other words the very highest rated CDOs issued the same notice as the high grade junk. Is it not just a little disconcerting to be witnessing problems from AAA securities….This cannot be a good thing. http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-11-01T170527Z_01_N01422077_RTRIDST_0_RATINGS-CDOS-SANDP.XML
Using history as a tool can help us prepare for the future. Do you remember in the 90’s when Japan’s stock market flew to unprecedented levels and then suddenly dropped, seemingly into an endless bear market because one crisis after another crisis surfaced. The Japanese stock market continued down as companies tried to deter reporting losses on derivative trading and under-the table transactions that eventually proved fatal… What is taking place in front of our eyes with Merrill Lynch and Citigroup is not something we should discount. I think it is highly reasonable to expect there will be other banks and brokerages to follow Merrill and Citi’s lead. How many other banks and brokerage firms will try to hide their losses on credit derivatives? In Canada, our five major banks are assuring us their exposure to US mortgage backed securities is minimal; should we believe what the banks tell us? I for one do not. The rumor of more bad news is rampant. If the bad news rumors turn out to be credible, there will be panic in the marketplace. Perhaps it is time to confirm with Dennis where our new CDN $26M cash infusion will be held.
