Wow, what a year!

I haven't posted for a while, mostly because life has been extremely busy. But also, what an ugly market! It doesn't matter how good of a story any stock has, they are all getting indiscriminately slammed in this economy.

That being said, I have made some really good buys in the past two months at what appear to be lows (and I hope that remains the case). In the past month I've been focusing on picking up stocks that have a lot of cash on the balance sheets, especially those companies that are producing and have a good revenue stream.

There are a few ways to go with it these days. First option: trade, trade, trade. If you are comfortable with trading, and you know how certain stocks fluctuate, then there is a lot of money to be made right now. Things are incredibly volatile, which is awesome for traders. But that take time, patience, and steel huevos.

The other way to go is to look for companies with a market cap that is less than their current cash holdings, especially those that are not burning through the cash with major capital expenditures. New Gold (NGD.to) has been my best performer to date, as I bought it @ $0.98/share back in mid-November. It's doubled and pulled back a bit, but I think it'll go higher so I'm holding on for now. Another favourite is PhosCan Chemical (FOS.v), which is not yet producing but is worth at least $0.40/share based on its cash holdings alone, and it's currently sitting in the mid-$0.20 range. I picked up some around $0.20 cents, and I may add if it dips down again.

Anyone who bought oil stocks in the past year, especially jr. companies are probably crying in their cereal these days. What a truly depressing situation. I've seen my Oilexco stock go from $19 a share just six months ago down to a very sad $0.20 this morning on insolvency news. I probably couldn't even sell what I have for the transaction fee at this point. So what to do? Well, if you are like me and you think that the price of oil is madness, then think about investing in direct relation to the commodity. This morning I spent my Christmas bonus on shares of HOU.to, which tracks the price of oil on the NYMEX (but at double the rate). If you think oil will go up in the long term, then it's looking good right now to invest.

Other stocks that have been holding up nicely in this total market glut: Marvel (NYSE: MVL), Thomson Reuters (TRI.to), Kinross (K.to) and Goldcorp (G.to). Stocks I've purchased in the past six weeks that are performing well include: Kodiak Exploration (KXL.v, up 20% from purchase), Paladin Energy (PDN.to, up 30% since purchase), Uranium One (UUU.to, up 42% from purchase), Endeavour Financial (EDV.to, up 15% plus a nice dividend pay out today). I have only purchased one stock recently that is down, which is Ivernia (IVW.to). That's a long shot if Magellan can get their lead mine up and running again with blessings from the Australian government. So we'll see.

So that's my recent moves in a nutshell. Due to the shaky market, we've been diversifying lately ... really diversifying. We recently started to invest in income property and are in escrow/closing with a week or so to go. Maybe real estate will be good to us. In the meantime, I started a second job at a cruise agencY, selling warm vacations to frozen Canadians. Business is good, and it's a fun change of pace from my full-time job (which I still love, too).

I hope for everyone's sake that 2009 is an easier ride than 2008, but if not... just remember that you can find opportunities just about anywhere as long as you look hard enough!

Happy New Year everyone!

Deb

Mining 101

For those that want more information about how mining companies are valued and how the system works, check out this blog on mining. Really good stuff, especially if you're new to the game.

Unconventional Natural Gas Blog

Hats off to Vince "Stateside" Marciano, a fellow smartinvesment.ca poster, for his excellent blog on some of the hot natural gas plays in Canada. He's mostly covering the Utica formation in the Quebec Lowlands and also some of the Maritime shale gas plays. The man is making me lazy, since now I can practically go to one source for shale gas news. Well, at least for East Coast plays.

Now I just need a good Montney site!

Good job, Vince!

Deb

Summer Frenzy

Wow, it's been a while since I wrote. One thing about living in Canada is that you have a lot of down time in winter (so you do time consuming things like start a blog), and then summer is a flurry of activity. In Edmonton, you've got three good months to get your stuff done. Especially if it involves the outdoors.

Summer's in full swing now, with kids going to soccer, corporate extra-curricular activities, vacations, etc. So unfortunately, this blog is low on the priority list. Lucky I write off the cuff.

Usually around this time of year, most natural resource stocks take a breather and you can kind of ignore the market a little. Not the case this year, though. Oil and gas stocks have been on fire, and certain jr. mining companies are too low to ignore. So the slow shoulder season has been volatile and great from trading, making my life pretty busy.

For the past few months I've been trading in and out of Altai Resources (ATI.v), while keeping a core position, which has been fairly lucrative. I've also had good luck with a lot of other oil & gas stocks. I've been loving the rise in Bronco Energy (BCF.to), Talisman (TLM.to, US: TLM, Falcon Oil & Gas (FO.v), Tusk Energy (TSK.to), Profound Energy (PFX.to)... and well, just about all of my energy stocks actually. I've been taking profits and buying back in with the volatility, and it's been a good ride so far.

To balance my oil & gas-heavy portfolio, I've been trying to dabble in other hot areas. For solar & tech, I've started a position in VN Plus (VNP.to). Great article released a few days ago, says it best. For fertilizer/ag, I've bought some Viterra (VT.to), MagIndustries (MAA.v) and Phoscan Chemical (FOS.v). Working out good so far, with pretty decent gains in the past few months. Once again, I'm taking money off the table from time to time as these have been rising (my trade count with TD Waterhouse is smoking this quarter, which is cool because now I get the $9.99/trade deal).

With energy plays coming down, I've been holding on to some cash to hopefully pick up some beaten down gold or PGM shares in August. Seems like there's always something good to buy in August.

Anyway, I hope everyone is enjoying the summer... and getting some good trades going in the market this year.

Cheers!

Deb

Everything Looks Marvel-ous

Well, tomorrow is a big day for long-time shareholders of Marvel Entertainment (MVL), as it sets to release the much-awaited Iron Man movie. This event is the beginning of a new future for Marvel as a movie studio, which could bring superhero-size rewards.

I originally bought Marvel for my husband, a consummate Spider-Man fan and long-time Marvel comic collector, as a Christmas present. The original idea was that I’d get him into stocks by buying into a company with a product he knows and loves. I knew virtually nothing about the company, beyond maybe a handful of characters, but that all changed once we added it our portfolio. Since we bought into Marvel in December 2006, it’s had a lot of ups and downs, especially when you factor in USD/CAD parity. But I’m really starting to think that it will be a winner in the long-term, especially if they see success this summer at the box office.

While you’d think that Marvel would make a ton of money off of the box office sales of their movies, it wasn’t really the case, as the actual movie studios got the majority of the windfall. Or in the case of a dud like Elektra, it’s the movie studio that took the hit. In reality, a big chunk of Marvel’s previous revenue came mostly from its licensing division, where Hasbro and other companies would roll out toys, backpacks, and an endless list of goods donning the likes of Spider-Man, the Hulk or the Fantastic Four. Just think of all that junk they give away with kids meals at fast food restaurants, and the licensing royalties they mean for Marvel.

The movie business is a hard one, so this is a big gamble. But in my opinion, Marvel’s starting out on this bold path with the perfect movie. Iron Man is not the typical superhero flick, where an average dude’s (or dudette's) life is turned upside down by some bizarre twist of fate, leaving him (or her) with super-human abilities. It’s almost exactly the opposite, in that its a self-absorbed, money-grubbing billionaire that has a life altering experience and changes his future through his own ingenuity and the self-realization that he should be a better person. Iron Man has a solid cast, with Robert Downey Jr. in the title role and Jeff Bridges, Terrence Howard and Gwyneth Paltrow backing him up. Wrap it all up with one of my all-time favourite directors in Jon Favreau (Made, Elf), and it’s almost too good to be true. The Tony Stark/Iron Man character also seems like a natural for Downey, given the similarities between his real life drug problems and Tony Stark’s alcoholism, which will hopefully lend his character that much more depth.

So far, it’s looking like reviews are positive, and there really is no particular competition this week for the box office. Marvel has been working toward being it’s own studio company for a long time, so if Iron Man is the success that I’m hoping for, it will be a jubilant Annual General Meeting next week.

Marvel has made one other recent deal that makes me think they’ve got their heads on straight and that they are really thinking of the big picture. And that’s hedging your bets on the small screen. With the rising cost of movie theatre tickets, the cheaper big-screen televisions, and expanded HD channels, more and more families are choosing to wait to watch the big releases when they come to cable. Marvel’s recent deal with the FX channel for exclusive rights to some of its future releases could bring in big profits, and it establishes a new practice for Marvel going forward.

The Marvel snowball will just keep growing, now that Marvel wooed Ira Rubenstein from Sony's digital division to head up its new Global Media Digital Group. This spring has brought one big news release after another, and in my mind, Marvel keeps doing the right things to grow their brand.

So here's to hoping this weekend will be a Marvel-ous beginning to the summer blockbuster season!

Riding the Bronco

While the market feels a lot like a bucking bronco right now, I am not talking in such broad metaphors here. This entry is about one of my new stock stars: Bronco Energy. Over the past six years, I have followed the oil sands development pretty closely, just from reading the local papers. Almost two years ago, I ended up becoming much more acquainted with the oil sands business researching a report I wrote on Upgrader impacts to the municipality I work for. Okay, if you're really interested, you can find the report here. (And for my co-workers that just clicked on that: ha, made you do work stuff!)

But learning about the oil sands business and how heavy oil is produced and marketed, really gave me insight into the oil sands runaway train. Is it sustainable? I really don't think so. Definitely not environmentally, very likely not growth-wise or financially in the long-term. There's just not the labour to do it or the infrastructure. So something will need to be addressed. But in the meantime, there are those companies that are already out there with completed projects, and quite a few more that are coming on stream soon or are just starting to produce.

Right around the time that I worked on that Upgrader report, I thought that I would start investing in the oil sands by buying some of the producers or small up-and-comers. I bought Canadian Natural Resources(CNQ.to, CNQ) solely because I thought the way they managed their labour force was brilliant. They built their own airstrips so they wouldn't have to use the strained Ft. Mac airport. They hired labour from Asia. They provided their own on-site housing camps. In this tight Alberta labour market, they were saying all the right things to me. They did piss off a lot of unions, etc., through their actions, but in the long run I think they did a great job controlling costs in the insane Alberta boom.

My second pick was a smaller venture: Connacher Oil & Gas (CLL.to). I liked Connacher because they were thinking very holistically to me: they had a refinery in Montana making a small profit and some conventional oil wells to help bring in cash, and they had some proven management. Unfortunately for me, they also had some awesome pumpers on the various stock discussion boards. So once I fell for Connacher, I got swept up in the frenzy and bought too high. And then the bubble burst, and it plummeted. I hung on for a long time, and even averaged down by purchasing more every once in awhile when I was sure that it bottomed (yeah, right!). I was intent on holding on to Connacher as well as Canadian Natural, because I really liked the stories behind them.

However, all that changed when Premier Stelmach ordered the royalty review last fall. Canadian Natural, which also has a huge natural gas component, was set to be really hurt by the royalty review. Connacher, a smaller company with lots of capital costs mounting, seemed really risky when nobody knew how big of a hit the new royalty scheme would be. So I ended up bailing from both. At a loss no less. That being said, I may look at CNQ again, given their exposure to natural gas.

Okay, so by now you are thinking... wait, wasn't she going to talk about Bronco Energy?

You see, once Stelmach rained on the Alberta oil sands fiesta, I started hunting for other options. I found that Saskatchewan has Oil Sands Quest (BQI), with it's freakin' huge oil sands property. And I'm not just being funny here, it really is freakin' huge. So just on resource value alone, that's not a bad option. Plus, Saskatchewan has lower royalties, good labour, and their stock price is not too bad with the dollar at par (since it's listed only in the US). On the downside, it's a long way from production. I think the company is thinking 2012 for start-up, but that still seems a little optimistic to me. Plus, I don't see how they have addressed the transport issue of the heavy oil yet (as Saskatchewan doesn't have the huge network of pipelines that Alberta does). I do have a small amount of BQI, but I mostly own it from pure speculation.

So, my second find, and the one that I think has more immediate upside, is Bronco Energy (BCF.to). Ta da! We actually made it to the discussion of Bronco.

The reason I like Bronco? It has all of the upside of the oil sands: good location between Edmonton and Ft. Mac, good access to labour and infrastructure (as strained as it is), and a supportive business environment. It also has strong management, with a CEO that has brought heavy oil projects into production in the past, and a lot of the key players have worked with Canadian Natural getting the Horizon project off the ground. But it's also got the added bonus of no royalty review problems. That's right, our little Bronco is on First Nations land. It's under Federal jurisdiction, boys and girls... not Alberta! And it's also a small company for the oil sands, at a market cap of a mere $500 million (and a few months ago it was only $350 million or so). Compare that to say, a Suncor Energy ($48 billion), Canadian Natural ($41 billion) or Canadian Oil Sands Trust ($21 billion), then we're talking really small potatoes. So that means growth potential.

And that's the best part about Bronco, it's just starting it's growth spurt. It's just pulling out of it's capital heavy development stage, which is that hardest part of the game for oil sands, as the amount of capital expenditure needed to get the projects going is staggering. So with the production starting up, the riskiest time for Bronco Energy is over. Bronco's Annual Report (pdf link) was released on April 1, 2008, which sets the production target at the end of Q2 2008 at 4,000 to 6,000 bopd.

But one other good thing about Bronco is that it has two facets to the company: the oil sands projects and it's wholly owned Bronco Drilling subsidiary. The small drilling business gives Bronco the ability to schedule their own drilling, without the need to wait for rigs during peak use times. But it also gives Bronco the opportunity to lease out the rigs for profit when they are not in use, maximizing their capital outlay. Recently Bronco's been drilling on their own lands, proving up resources (and doing a great job at that). As discussed in the previous entry on Precision Drilling, rigs were not in high demand in Western Canada for years due to soft natural gas prices. So this was a great time for Bronco to be purchasing and utilizing their own rigs. With natural gas on the rise now, those rigs could be leased for more cash if the company needs it. It's a fantastic little security net for a company in the volatile oil sector.

With oil prices at an all-time high, Bronco's had a nice run up in the past few months (probably about 40% from where I bought in). But I think that Bronco is still relatively little-known in the investment world, with no first-call analysts following it. So as (or if!) oil prices start to come down, I may try to add more to my position if the stock has weak days. With production coming on though, I'm hoping that there won't be too many of these in the near-term.

Falcon Flies

This blog entry started as a post in the Mexico Mike Forums, but because I wanted to expand on the topic a bit, and give part of my own history with Falcon Oil & Gas, I decided to bring some of my hyperbolic or colorful writing over here. Anyone interested in investing in Falcon, can read the entire thread in the link above to get a good sense of the kind of shenanigans that have gone on with this stock in the past few years.

This also follows up a bit on a previous blog entry I did about Natural Gas.

As background, Falcon Oil & Gas (FO.v) sent out a news release (NR) stating that Exxon will be putting their Mako Trough property, a potentially staggering natural gas resource in Hungary, into development. That means moving their Mako Trough resources into the next stage of flow testing, which CEO Bruner could never do.

So why is this a big deal? Because Europe is growing and they rely heavily on natural gas (for now). Russia controls a large percentage of the natural gas resources available to Europe, as well as the pipelines that supply Europe with their gas supply. And they play hardball, so Europe's quaking a little. Yeah, the Euro is doing some major domination with their currency, but the group of countries are not a strong enough gang to stand up to big, bad Russia. After all, it takes a lot of wimpy kids to take down the school bully.

Falcon's gas resource in the Mako Trough property, is therefore, in Martha Stewart terms, a good thing for Europe. Especially since it wrests control of a big natural gas resource from Russia.

So back to the original discussion on smartinvestment.ca:

stevens wrote:
From waiting for ridiculously overdue flow test results, to go directly to a JV announcement is definitely a huge surprise. Next to Margaret Kent at CMM, Bruner is my least favorite CEO, but at least FO has a deposit that a major is interested in testing. I still don't understand why Shlumberger and all the rest couldn't come up with flow test results for us but I'm happy that Exxon is taking an interest. Don't even bother worrying about the millions Exxon will pay FO. Bruner will suck that up like a six pack on Saturday night.

Still, this is REAL NEWS!!!!! Amazing for FO. Just remember that in the past FO has always risen BEFORE news and gone down ON news.

nerudite wrote:
You are so right. So I was surprised yesterday to see that FO.v actually ended the day in the green (and by a decent percentage).

After thinking about this for a bit last night, I actually feel fairly positive about this deal. With other jrs., I would probably be a little disappointed, because you want to keep control over such a huge resource just for the sheer upside potential if it goes into production. But in this case, I think Bruner would never get it off the ground, and if you're going to have a white knight, it might as well be someone with unlimited capital like Exxon at this point in time.

So I think I'll hold on for now, and see what a new exploration team does with Falcon's massive natural gas resource. After my initial burn and Bruner's bungling a few years back, it's tempting to get out after an 80% run up from where I bought in this time around. Especially now that I'm a little in the green overall. But I'm intrigued about the Exxon thing, so I'm in for the next chapter of FO's crazy soap opera.

That kind of sums it all up. And stevens really nailed it when it came to Bruner. I have a little history with this stock, mostly because I got totally swept up in the potential of Falcon's massive resources when I bought initially (in the upper-$3.00 range) a few years back. And then after the big correction of the market in May 2006, the company became one of the most heavily manipulated stocks I've ever seen. I ended up selling at a loss just to get out of the drama, and then about six months later Bruner put out the white flag, and the SP gradually tanked to somewhere in the $.20s. I bought in somewhere in the $0.50 range (too lazy to average out the different purchases for the purpose of this blog), thinking it wouldn't go lower, but it did and for quite awhile. So it's close to doubling since I repurchased the stock, and normally I'd take some money off the table. But I think that the Mako resources are now in better hands, and in the long run that will be good for the stock. The Mako Trough, while a big resource, is also very deep in the ground. But if anyone can get it out of there, it'll be Exxon.

And for all of the anti-Americanism out there in the world today, I think that European utilities are breathing a sigh of relief that at least another American company has control of the resource so they may have options someday. A new bully has come to school to even out the natural gas playing field.

A brief hiatus

For anyone that actually reads this blog, sorry for my sudden departure. I was away from computers, t.v. and just about anything that would give me news of the outside world for a few weeks there. It was gorgeous on Galiano Island, and I feel totally relaxed now. But, wow, it's amazing how long it takes to actually catch up with financial news, once you get a week behind!

I'm glad to say that a few weeks away from the computer did not kill me, and I even came back to a few surprises. The Falcon Oil and Gas stock I talked about earlier really flew (no pun intended) while I was away, now sitting about 80% above where I bought it a few months ago. It's currently on a halt with the TSX, pending news, so here's hoping I get to go for my second stock doubling so far this year. I guess that's one of the good things about a shaky market like this: lots of opportunities to pick up cheap shares after an over-reaction.

Speaking of cheap shares, if I had extra cash in my pockets I'd buy more Pediment Exploration (PEZ.v) which announced some lacklustre results on one of their secondary properties this week. Which in turn has really driven down the stock price in the last few days. It's a great price right now (hovering around $2.05 CAD) based upon their flagship property alone, let alone their other properties. My vacation wiped me out, otherwise I would likely buy some more.

Again, sorry all for the sudden disappearance, but I was presented with an opportunity for a quick vacation and I wasn't going to pass it up.

Cheers!

Working the System: Free Stuff from Your Broker

As a person relatively new to researching my own stocks and investments, I'm trying to learn as much as possible in the shortest amount of time. That being said, there are so many free resources out there, especially through your brokerage firm. So no excuses! Everyone can learn something when it comes to investing.

As an example, I happen to have an account with TD Waterhouse, using their WebBroker system. I pay $29 for each trade, which for a small potato like me, can be quite a high percentage of my investment depending on how much money I'm putting into a stock. It's especially hard for trading, when you want to be in and out of a stock in a short period of time. In the States, a discount brokerage may charge $7 to $10 a trade, which makes it much easier to budget into your investment. That being said, if you make more than 25 trades in a month (which I don't), then there is a system that is much cheaper at TD.

Having traded in the States and up here in Canada, I have found that the adage is true: you really do get what you pay for. TD Waterhouse's WebBroker system is not only easy to use, but the brokers often beat the limit prices I input into the system. Where I find real value for my money though, is in the research and other free training they give you. Each morning I read the TD Morning Action notes, which provides detailed analysis of each stock that TD follows and often will comment on changes to the tax structure in Canada (such as with income trusts), etc. I will also quickly look at the Ink Morning Insider report, which is much easier than combing through sedar.com everyday to find out the previous day's insider activity. Other free reports include the Argus Market Watch and the S&P Outlook Report, which I find are generally more useful if you trade in a lot of US-listed stocks.

TD also provides very comprehensive reports on a number of economic sectors and industries. I like to browse through TD's Economic Reports each evening as way to ensure that I'm up to date with various aspects of world economics. I think these are free to the general public, too... not just TD customers. An example of the last week's offerings:

• February 29, 2008 - The Weekly Bottom Line


• February 29, 2008 - U.S. Personal Income and Spending Commentary


• February 27, 2008 - U.S. Durable Goods Orders Commentary


• February 26, 2008 - The 2008 Federal Budget


• February 25, 2008 - Weekly Commodity Price Report


• February 25, 2008 - Industrial Outlook


• February 21, 2008 - What’s Going On With U.S. Inflation?

So as you can see, between these economic reports and the previously-mentioned Daily Pfennig, I usually know a good deal about what will affect my investments in the coming week.

I think that TD Waterhouse particularly stands out from the rest of the crowd when it comes to their free seminars. While other discount brokers like BMO and RBC provide an investing basics seminar from time to time, TD really caters to their clients by offering a wide variety of topics in their seminars. You don't even have to be a Waterhouse customer to attend. TD offers lunch and learn sessions in most major cities, if you are lucky enough to work downtown. Last week I went to a free seminar on investing and taxes, which taught you different ways to structure your investments to achieve maximum income potential (and lower taxes). It was a real eye-opener, and I learned more in an hour and a half than I ever dreamed I could. I'm going to an upcoming all-day options trading class that they are sponsoring, as well as a few other investment seminars. I mean, why not? They're free! And I'm like a little sponge when it comes to these things.

The point I'm trying to make is that if you want to learn, there are tons of resources out there. You just need to dig around and see what each brokerage is providing.

The Legend of Mexico Mike

Although Mexico Mike Kachanovsky thinks he's a small-time player in Canada's resource market, he's got a long line of followers who champion his cause: to propagate the gospel of the junior resource companies. Although he spreads his knowledge through a number of Internet forums, he frequents the aptly named Smart Investment forums at mexicomike.ca.

So what makes Mexico Mike different than your average resource investor? Well, unlike many of them out there that play the market purely on commodity speculation, Mike's got the geology know-how. And he applies that knowledge and I dare say love of geology to make his investing decisions. And the best thing? He shares that knowledge to the rest of us for free in the form of articles and trip reports.

Oh yeah, and he's way cuter than your average resource investor, too. If BNN was smart, they'd tape this guy on his next trip a la Naked Chef to attract more female viewers. Hmmm... maybe I'm on to something there!

Suffice it to say that if you are interested in investing in resource companies, you should frequent the Smart Investment forums. And everyone investing in resource companies has to read Mexico Mike's recent blog post regarding the current state of the market.

Playing the Palladium

Poor palladium is finally starting to get the spotlight. As the ugly little sister to platinum, it was long regarded as one of the byproducts of platinum production. I mean, don't get me wrong, it's always helped the bottom line, but it's never been the metal a company's looking for. Well, it seems those times are changing.

You see, for several decades North America's Platinum Group Metals (PGM for short) have always been palladium-heavy, as opposed to say South Africa's platinum-heavy PGMs. But with the recent power problems in South Africa, platinum's meteoric rise is taking palladium along for the ride. And like an understudy's big shot on Broadway, palladium is making a break for the Big Time.

Over the past five weeks or so, the price of palladium has sky-rocketed due to not only South Africa's woes, but the #2 producer right now is Russia. And a lot of investors don't want to deal with the whole fear-of-nationalization thing. Just these two things alone would make palladium spike in these speculative times. But even when the price isn't moving much intraday, the number of orders put through each day for the metal are on the rise, too. So higher volume and more trades in a day, in my mind, means higher interest in the future of palladium. While I'm just too damn lazy right now to go look at statistics about the trading volume, I can offer that as a person who reads the 'All Metal Table' at kitco.com several times each day, I can say that the time of last trade has been changing almost in pace with silver each time I check.Palladium used to trade like Rhodium: maybe once in the morning and once at night. Just take a look at the Kitco tables during the day to see what I mean.

At first all of this interest was merely a reaction to short-term supply fears, but now speculation is setting in and people (meaning, the big companies that control the market) want to make a buck or two off the white metal. And why do they think they'll make a bundle? Because with the skyrocketing platinum price, the two metals have never been further apart in value.

Personally, I think this means that platinum will come down a little, and palladium over the next six months will play catch up. And I really don't know what the experts are saying on the issue, because after reading a dozen totally contradictory accounts, it seems like nobody really knows anyway.

But all of this chaos and the run up in palladium prices turns out to be awesome news for Canada and the United States. Because 1) we've got decent power supplies, 2) we've got palladium-heavy PGM reserves, and 3) we aren't likely going to nationalize whatever company we want in the name of our country.

So in the short-term, the North American companies, (preferably producers), with palladium resources may be a good trading option. That doesn't mean jump in right now though. Palladium has risen very quickly and needs some consolidation. So when we do get that cool-off, I'll be looking at adding some palladium companies.

I've already done a little trading in a palladium stock. And I say trading because I was only in the stock for about five or six weeks, and I bought it totally speculatively, not based on its business fundamentals. I purchased North American Palladium (TSX: PDL; AMEX: PAL) on January 4, 2008, and sold my last remaining shares yesterday. I bought in @ $4.02, sold half at $8.15 thinking it would correct, and then sold the other half yesterday @ $9.17. Don't get me wrong, this company may be totally solid and worth the investment, but I haven't done enough due diligence on the management or the company's fundamentals to really tie up cash for the long-term. Plus, after more than doubling in the past six weeks, I think it's time to let this stock have a breather. I will very likely look into the company more in the next few weeks, especially since it is producing in Ontario, a historically mining-friendly province.

The other company I'll look into for investing is Stillwater Mining. It's the only platinum and palladium producer in the States. It reported a modest profit for the past quarter, but a deficit for the year due to labour relation issues (including the double whammy of attrition and strikes). They are also still under hedge contracts for the first part of 2008, which may allow for some weakness in the stock price during a possible palladium consolidation. So that may allow a good entry point for a long-term investment. Now if you are Canadian and hit the trifecta, CAD above par, then Stillwater may become a screaming buy as it's only listed in the States. And then you can think, "who's got the Monopoly money now, suckers?", as you snap up shares.

The other reason that I like the producers for investment is that the palladium story is also starting to hit the mass media. All of a sudden there are articles showing up about how palladium will save us all (especially automobile and aerospace manufacturers ), since it can be used to replace the much-more-expensive platinum. So now the race is on to expand palladium use in PGM-heavy applications. The added bonus is that China has pledged that in the next 15 or so years it will bring its country up to the U.S. 1960s standard of living. So that will further drive PGM demand as automobiles become more prevalent in the world's fastest growing economy.

And for the super-speculative plays, there are also large PGM deposits owned by tiny companies: Noront Resources (NOT.v) with a $597M market cap; Golden Chalice Resources (GCR.v) with a $62M market cap; Pacific North West Capital (PFN.to) with a mere $30M market cap; or, maybe even add more Kodiak Exploration (KXL.v) for its Caribou Lake property. Oh yeah, market cap of $237M.

But the best part of palladium's story is that it's still unfolding. And for some of us, maybe that'll include a happy ending.

Out of Africa

Geography has a lot to do with the success of a business (and therefore a stock). And when I decide to invest in a company, geography plays a big part because that's my background. While I'd love to start picking apart the globe in terms of business stability, I'm going to focus on Africa today.

Either for political and human rights reasons, the shaky economies, or because most Americans (including many money managers) know squat about Africa, it's barely on the radar of most investors. Just look at the map above that's being circulated around the Internet. I know it's a joke and everything, but there's some truth to it. I mean, otherwise it wouldn't be funny. And where's Africa on the map? Exactly!

The stock market relies on little investors that buy stocks at the wrong time and sell at the wrong time, so others (the 'smart' money) can reap the profits. And that's why you have the pumpers and dumpers. But the key here is that you need to invest where you know others will also be investing, especially the general public eventually, because they're the ones that will drive up the price of the stock to it's apex. And that's when you'll get your profit (and hopefully bail out in time).

So beyond the fact that the general public doesn't know a thing about Africa, what little Africa had going for it (such as South Africa's rich resources and long mining history), has lately become even more risky. In the past few years there has been labour unrest and strike calls, and now rolling blackouts are the norm in the country. It's just too risky to do mining deep underground if you don't know the next time the power's going to go off. Before you take that elevator down, you want to know you've got an air supply and that the little elevator's going to be able to get you back up and topside again.

You just need to read First Uranium's recent news release on its quarterly financials to see how volatile the situation is becoming. And with South Africa out of the picture for now, platinum, palladium and gold supplies have all tightened up. If your business relies on these metals (like car manufacturers), then life's a bitch right now. But if you are lucky and you're a producer of these metals, in a 'safe' country, then you are golden! No pun intended, I swear. So this is a good time to be looking at producers in more stable areas, to also pick up on a little of that action. In the next few days, I'll post about some possible investment opportunities I'm looking at in Palladium.

But wait, let's get back to Africa. So should you totally stay out of Africa? If you are a total investing newbie, that answer is 'hell, yes'. But let's say you think you're pretty savvy. Then if you do invest in Africa, you have to really trust your company and its relationship with the country it's mining. As an example, the only investment I have in Africa right now is Paladin Energy (TSX: PDN; ASX: PDN). They've spent a lot of time wooing the Namibian government, and I think the company's trying to do right by their employees. Paladin's gone so far as to list on the Namibia Stock Exchange to allow their employees to receive stock incentives and to allow any Namibian to invest in the company. So I do make exceptions, but only after a lot of due diligence about the country I'm looking at. And Paladin also has its fingers in lots of other pots in its native Australia to balance out the risk.

And I've pulled out of some investments too, just because I was too gun shy about Africa. Take Tanzanian Royalty Exploration (TSX: TNX; AMEX: TRE). And we're talking about a company that's run by Jim Sinclair, the guru of all things gold. But with Tanzania's royalty reviews over the past few years, I just don't have the intestinal fortitude to worry about my money in that country. And it may be my loss, because TRE may totally kick ass in the next decade. But you have to go with your gut, and in this case my gut said, "get out of it". So I sold (for a loss no less). Live and learn.

To sum up: be careful when contemplating investing in Africa, since she's a harsh mistress. Even Karen Blixen learned about business in Africa the hard way 75 years ago. And in many ways, Africa hasn't changed as much as everyone thinks.

The Easy Way to Track Currencies

Political, environmental, financial and, well, all kinds of events affect currencies, and currencies in turn affect commodity prices. It's a well-known fact that the exchange rate of the USD against other world currencies often has an inverse correlation to the price of gold (and sometimes oil, gas and other commodities). I mean, it's not the only factor, but it shows up in just about every article I read in the mainstream newspapers. So that theory is solidly propagated through the mass media.

To know about commodities and their futures, you need to know what's shaping the world's economic growth and you need to learn how currency rates work in general, so you can figure out how to form your investment strategy. This is especially true if you are an ex-pat or you live in some other country besides the U.S. There are so many companies that report, and royalties from are paid, in USD, that buying corporations that earn income in USD can be detrimental depending on the current currency exchange ratio. Or they can be a benefit if you think your country's currency may devalue against the dollar. Also, if you live in a country whose currency suddenly appreciates, you may have to think about how that affects the exports of the country and check out more specifically how that affects your actual investment in particular businesses.

I can't, therefore, stress how important it is to understand how different world events affect currencies and the price of commodities. The USD, especially with inflation, recession or stagflation on the horizon, needs to be tracked against world currencies regularly. When things go bad for the U.S., you have to start finding your bear market niches and looking more critically at alternative investments.

As I have a real job that doesn't involve world economics, where I have little time to pay attention to what's going on outside my job each day, I really don't have the time to read the dozens of sources that would give me all the information I need to know about currencies. So I stick with one main source each day that gives me the Reader's Digest version of what I think I need to know: Chuck Butler's The Daily Pfennig. Chuck is a down-to-earth kind of guy, and he distills a massive amount of global political, economic and social information into an easy-to-read newsletter that he publishes each weekday morning. The other cool thing about Chuck's newsletter is that he will e-mail it to you for free each morning so you don't have to worry so much about browsing on company time. When you take your work break you can learn about world finance without guilt. One note though, Chuck's newsletter digests everything that happened the previous day (and sometimes what's coming up to look for in the current day).

So depending on the kind of trading you're doing and how volatile your stock picks are, you may have to keep an eye on world developments overnight or during the day all by your lonesome. But for investing, where you don't have to worry so much about the day-to-day movements of your commodity stocks, Chuck's next day summary of what's going on in the world is awesome. Plus, he seems to be a really decent guy who loves his wife and adores his grandkids, and takes pleasure in the finer things (like college sports and classic rock). He's a real person, even in this cold medium, and that makes me trust him for the daily world economics lowdown. He's like my wise uncle who gives me the scoop each morning over breakfast. And I've grown to think about him each day after I read his column, and I hope his health improves, because he's someone you want in your life even if it's just to get a mass e-mail in your inbox each day. He's a real stand-up guy, and the Daily Pfennig is a must read for anyone making their own investment decisions or trading in commodity stocks.

The Secret of RIM

Research In Motion (TSX: RIM, US: RIMM) is one of my favourite non-resource stocks. For one thing, it's the only tech stock out there that I think is totally unstoppable in the next three years. Beyond that horizon, who knows really. Because it's tech, and for the average Joe, we really can't predict, or even really comprehend, the types of technical leaps and bounds that will occur in the next five years. So I don't even try.

The other thing about RIM is that it's good for trading and for long term investing. So it fulfills both of my stock hobbies. For this reason, I tend to watch it a little more closely from day to day than some of my other stocks.

For disclosure, I actually bought into RIM fairly recently, meaning within the past six months. However, I've watched it for a long time and I go to the company website fairly often. In fact, I often wonder how many times people visit the career page and think "RIM job". But that really has nothing to with why I bought RIM, I bought RIM for its story.

My version of the RIM story goes something like this:

A homegrown Canadian company takes the texting craze happening in the rest of the world and they package it in an easy-to-use Blackberry device palatable to the corporate world. Soon, middle-aged businessmen everywhere have their new favourite toy and thousands of middle managers have instant access to everything they need in the office, even when they are away from the office. These little devices become beloved, and they buy special leather pouches for them. They even buy special holsters for their hips, so they can whip out their Blackberry in a flash at a meeting. "You don't think I know last quarter's net sales, punk? Make my day." What was I saying about the Wild West recently? Anyway, those same guys whipping out their Blackberry a la High Noon are the dudes spending big bucks on their Department budgets or the guys that put together the I.T. purchase list for the next three years. To be fair, women use Blackberrys too, but they don't tend to have the holsters, so it's just not as funny.

Soon, the Blackberry (or oft used 'Crackberry') became the norm in the corporate world. And how it works with the old school I.T. guys, (that are now the middle managers), once you get a 'standard' that's the one you go with for a long time. It costs a lot to change systems or even train your whole corporation on new devices, and you don't want to invest the precious time in training your hardware support guys on two dozen different types of handhelds. They really don't have the time for all that hassle.

Blackberry was, therefore, the new thing across the country, and then it was the new corporate standard in the States, too. And that's a sweet spot to be in. It's market cap grew by 100% in the past year alone, so shareholders love this story.

But then in late-2007, the big R word surfaced. And all you hear about now in the tech sector is recession, recession, recession. Big companies all over the U.S. start cutting back, and tech budgets get slashed. Software upgrades can wait, and new toys are not the highest priority. I mean, there's still some purchasing and replacement, so there's still corporate buying, but that's not going to fuel any real growth for the future. Plus, those holsters really have started to come in handy. I bet far fewer men are losing their Blackberrys in the toilet when they bend over to flush and it falls out of their breast pocket.

The story starts to get sad here though, because over the past four months or so, RIM has really suffered. Because it's in the tech sector, it's treated like all of the other techs. It's like in the Outsiders, where Ponyboy was labeled by his peers as a bad kid, when we all really knew he was good. Each time another company in the handheld gang gave some earnings warning or low subscriber guidance, all of them would get painted with that bad boy sweep of the brush. Just like poor Ponyboy, RIM was no exception. Why, just the other day it got slammed when Intuit issued a warning. And how related are these two stocks? Not at all. So that's where RIM is fun with trading. You know that it's down for no good reason, so you buy.

But the other cool thing about RIM, and why I invest in it long term, is that it's made the leap into the consumer market. And not just our recession-prone North American markets, but they're going global, baby. They've hit all the big money, big business areas. They're in Bahrain for pete's sake, and who has more disposable money than Bahrain? They've taken Europe, and now they're infiltrating the BRIC.

And they aren't just doing it in the corporate market, they've jumped to consumers. They have 14 million corporate (aka business enterprise) subscribers, but they're also adding over 150,000 subscribers per week, and a lot of those are just normal consumers. The reason? They started getting flashy colours and integrating music, cameras and other little goodies, as well as PBX capability. So now you don't need a handheld and a cool cellphone, you can have it all in one. And based upon the company's recent subscriber forecast, that has to be the case.

So here you have a company that's literally taking over the world, is selling its business to both consumers and corporations, and yet is getting lumped in with the rest of the tech businesses. All of this equals amazing opportunities to make money. Or, at least that's the way I see it. Let's take January 23, 2008, as an example. Motorola and Apple freaked out the market, sending all tech stocks into the floor. RIM fell 8.5% that day. But I didn't worry, because I have that gut feeling that RIM is different, it's gone global, and so who cares about the U.S. consumers.

And the good news? I really think I'm right. Just the other day, RIM released the aforementioned subscriber forecast. And the stock flew, gapping up 10% at one point. The forecast was really just reiterating their previous views. It wasn't adding that much to their previous forecasts. So to me, this proves the stock had been just beaten down due to its sector performance (aka being in the handheld gang) and all it had to do was say, "yeah, we're still doing what we said we'd do."

That's why I really like this stock as an investment. It's doing all the things that I would do, if I ran that company. But it's also volatile and it's still at the whims of the rest of the handheld gang. So use that to your advantage to trade the swings, feeling a little safer in knowing that you still like the company even if you have to hold onto those shares for awhile because you didn't time the market right.

And that's my RIM story.

My Story

Okay, before I start telling the stories of different stocks that I like and may be investing in or have already invested in, I should probably tell a little of my own story. And maybe a little bit about my perspective on investing my money, so you know right off the bat how I compare to your own background. Because if it's one thing I know, one person's stable investment or finance strategy is another person's roller coaster nightmare. Trust me, this will save time later when you're wondering who the hell I am and why you may think I'm insane for investing my hard-earned cash in some company or other.

Well, I grew up in Los Angeles, the daughter of a stockbroker and commodity dealer. My mother believed in family dinners every weeknight, and back then we didn't have a whole lot of extracurricular activities in the evenings. So we had real dinners, with real conversation. My parents would talk about their days, and I'd listen to stories of what happened that day in the markets (or what chaos my brother or I had caused). I remember coffee mugs with bulls and bears on them looking like they were walking in a ticker tape parade, and a miniature ticker tape machine in something that resembled a butterfly jar. But to make a long story short, the environment sunk in and eventually germinated an interest in stocks and commodities. Or better yet commodity stocks.

In my mind, gold is king, baby. But other resource stocks are cool, too. Like all gold bugs, just about anything shiny will catch my eye, if it's worth owning. Lately, that means just about any liquid or metallic thing. Plants are also good these days. But since I have a general love of stocks, and just about anything that moves the world economy, I invest more broadly than just commodity stocks.

I would say that I find the junior commodity stocks the most exciting, probably because they're the most volatile, and also have the best chance to make you stinking rich. Geology is something tangible, and in the case of assays and resource reports, something measurable. So you usually know what you're getting. I mean, if played right, with certain resource stock juniors you can pretty much win the lottery. So nothing grabs my interest like an awesome junior resource story.

The problem though with junior resource stock stories is that there are so many people out there pumping some story or other, so you never really know what's true. There's a lot of manipulation, and a lot of misinformation out there. I've been burned more than a few times by believing stuff I read online, from sources that I really thought were credible. A lot of analysts out there are getting paid good money for telling a good story, so you've got to go with your gut a lot of the time. Or you have to learn the industry inside and out, and that's pretty hard when it comes to each type of resource being traded. They really are specialties amongst themselves.

Lesson #1: unless you are one of those aforementioned experts, you better only be using the money you can afford to lose.

And, reading those last paragraphs, you'd know one thing. I'm no expert. I'm just a regular person, (I don't even work in the finance or trading biz), with a freakish interest in the way commodities and politics shape our world economy and I use this interest to trade and invest in stocks.

But this is my hobby. I let real economists (at TD Bank mostly) invest money in stocks through the equity mutual funds that best align with what I believe will make the most money in the coming years. There is a basket of mutual funds that I invest a specified amount in each month, employing the law of averages in my long-term investments for retirement. I change the mutual fund ratio around from time to time to reflect my view of the world economy, but the day to day trades are totally left up to those mutual fund managers. I also have a very conservative pension, because I'm a government worker (municipal government to be specific). So, I get the sweet matching pension investments from my employer (that someday I can roll into a self-directed retirement fund if that pension really pisses me off or if I'm worried about it going belly up). So for the most part, I really don't have to worry that much about the companies that I'm trading or investing in.

And those are two different things in my mind by the way, trading and investing. I invest in some companies for the long term, because I believe in their story or I'm pretty comfortable with the things they do. They probably don't have a lot of exposure to really evil governments (although evil in government is such a loose definition these days) or practices, and if I walked away from finance news and the Internet for a few months, I wouldn't have to worry too much about this company. In my mind, they've got it right, and I'm cool with helping them fund their business.

Trading, now that's another story. That's for pure profit, and I'm hoping to get out of the stocks in a matter of months. I'm shooting for the moon with those, not the steady climb to the hill on the horizon. It's about momentum and gut feelings, and often is done with profits from my more steady investments.

Oh yeah, and one more thing: I'm 37 years old. So I don't have to retire anytime soon. Although it would be super cool if I did not have to worry much about the daily grind by the time I turn 45 or 50.

Okay, I know it sounds like I'm rambling, but what I'm trying to drive home is that I'm no expert, and I'm youngish so I'm not worried too much about risk. Draw your own conclusions on how that relates to you.

I've worked my way from California to Canada, and I've seen a lot of regional economies along the way. I was also a geography major in University, so geography will play a big part in my decision on whether something is a short trade or long term investment.

I guess that leaves us with the one last thing you should probably know: I'm an American living in Canada. That translates into the fact that I have to deal with two different sets of tax laws. But it also means that I'm learning, with the help of paid tax guidance, how to work the different systems to my advantage.

So that's my story. Thanks for reading.

Natural Gas Stories

This entry started as a regular post at the Mexico Mike web forum, and was the impetus to start this blog. On the forums, I go under the name "nerudite", which really has nothing to do with stocks or resources.

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Having watched stocks of all kinds since I was 5 years old and got my first share of McDonald's (or was it Disney?), I have always liked story stocks and probably make more of my decisions to buy stocks on their business story and my gut instinct than I do on their business numbers. Don't get me wrong, I also look at the numbers... but to get real value, you often have to pick stocks that everyone else hates.

Being fairly young, I like to look to the next four years or more when picking investments, not just thinking about the short plays in the next few months. Although, I must admit a certain amount of my trading is just speculation, because it's so damn fun. It can give you that little thrill just like going to the racetrack, because let's face it... just about everything that makes a stock go up or down is totally out of your control.

Living in Alberta the past six years, I've come to read a lot of oil and gas news from reading our local newspapers. For those of you in the States, Alberta is the second Province (think big State) from the left in Canada. It's where all the oil comes from that helps you drive your cars. Sorry, but I have to explain it in easy terms, because most of my old friends and co-workers really don't know where the hell I live these days.

Sorry, I digressed. So anyway, I'm up here in Edmonton. And if you live anywhere in Alberta, you've got to know something about the oil and gas business. Even if all you know is that you're getting the crappiest customer service ever at your local restaurant and guys under 20 in the oil patch get paid more than you do as a government worker, you know something about the oil business. But I pay close attention, so I know a little bit more.

From reading the papers and following some of the local companies and their ups and downs, I've really liked the grit of the homegrown Western Canadian companies. It's like the wild west is still in full swing, what with boomtowns and hostile takeovers. In the past few years I've really started to like the stories of some of the oil and gas service stocks, you know... the companies that provide services to Big Oil. But after watching the aftermath of the Halloween massacre for some time, I shied away from the energy trusts like a lot of people. That being said, I recently decided to jump into Precision Drilling Trust. P/E of around 7 when I bought it, with a 9% dividend yield or something like that. I think now it's more like P/E 8.5 with a yield of 7.2%. It changes a lot everyday, and it's an investment so I don't have to worry about it too much. And still, that dividend yield is better than you can get with just about any government bond right now, so there's nothing wrong with that!

PD.UN (PDS in the States) has been taken to the woodshed for the past few years because of its Western Canadian focus, Flaherty's Trust debacle (aka Halloween massacre), astronomical capital costs in Western Canada and low Natural Gas (NG) prices. All of this meant demand for drill rigs dropped, and day rates for those rigs that were used dropped, too. I know that sounds depressing, but the story does get better.

Over the past few years the company has started moving rigs into the US, and it looks like NG prices may be on the rise. So I'm hoping that this stock will be a stable choice with some dividends that will be like free money to use for buying more risky choices. Especially since it's in my RSP (IRA in the States), so I don't have to worry about taxes with my dividends right now. I'm also hoping that NG prices rising will bring back the drill demand and/or buying this stock while Canadian currency is at par will come in handy if the CAD sinks back down against the USD. Although it's not as sexy as a junior oil and gas stock, and probably won't have a really fun 20% up (or down!) day, it's a good balance for my speculative choices, so I have a much better chance of not losing my shirt one of these days.

Speaking of risk, I bought some FO.v (Falcon Oil and Gas) recently when it was nice and low. It's been a heartbreaker to a lot of people that loved its story. Listening to some of the pumpers, and it had a lot of them, FO.v was the Hungarian natural gas hero that would save poor Europe from those mean Russians. Actually, that's a pretty good summary of about two full years of pumping I read in the Stockhouse forums. The bad part of this story is that all that NG is very deep in the ground, and therefore expensive to extract (or even find). With NG prices falling for the past few years, it was hard to justify (or even find) the capital to get the gas out. Falcon Oil and Gas has already got the white flag waving, and I'm hoping if NG prices start climbing back up that some knight will come to the rescue. The ironic part would be if it's evil Russia (such as Gazprom) itself. Guess we'll have to see how this story ends. I only have a small position, because this really is speculation.

To get back to Western Canada, I also follow the Mackenzie pipeline story pretty closely. It's a good court and First Nations drama. If the proponents of the Mackenzie pipeline win, and they get to build this enormous venture, I'll probably buy some Northern Sun Exploration (NSE.v). Getting that enormous NG resource into production would be like a winning lottery ticket if the stars aligned and the Mackenzie and other pipelines feed the tar sands growth with natural gas. But for now, I don't have any NSE.v. I'm always watching though. I'm hoping that someday it comes through, because it's been on my radar so long and I know a lot of nice people that have hitched their wagons to this play.

So those are my NG stories, and I'm sticking to them (well, for now at least).