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A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Haven't built any new refineries in North America since 1976. A refinery takes crude oil and makes it into higher valued products, the most important one being gasoline used in transportation. 2/3's of crude oil is turned into gasoline.
The "crack spread" has historically been about $4, is now $32, because we are demanding more and more gasoline for transportation.
That's why there is so much excitement about refining and why he recommends stocks that have a refining component.
BUY
This show isn't about stocks so much as emerging markets, so there isn't much stock information available.
An enormous revolution in emerging markets, but not as quantifiable. There is more of a maturity in the markets.
Her top 3 favorite countries are Brazil, Thailand (3-5 year basis), and Korea.
Is negative on the India economy of late. Inflation there is 6.3% (in Canada it's 2.5%)
WATCH
On Gold. There are big concerns about the US dollar and how far it can fall. In cases like that there tends to be a rush in to gold.
At the present time however the Canadian gold sector is acting poorly, because their fair market value is continuing to fall. This might be due to gold being quoted in US dollars and the margins getting squeezed.
It's a bit early to buy gold, but he has one in his top picks.
BUY
A caller was asking if that because the Canadian dollar has been running so hard, it might be a good idea to go into bonds to preserve capital.
He replies that it's not a bad idea, but don't go too far out with it, because inflation is rearing it's head, and if the States decides to lower it's interest rates who knows what will happen. He says don't go into US bonds, but a 5 year Canadian bond is a good idea.
PAST TOP PICK
(A Top Pick June 14/06. Up 2.1% plus coupons.) Government of Canada 2029 bonds. Rate of return has always been about 12%. He loves the fundamentals of the Canadian economy.
Paul Gardner, CFAOwned
BUY
COMMENT
Uranium - Historically, there have been major discoveries followed by a lot of green pasture (Closeology!). Those companies were able to raise money in the venture capitalist market, but all went to zero. Stay with companies that have proven reserves, good management and near production. If a company only has aerial surveys, you are at least 7 years away.
COMMENT
Rate of earnings per change. Paraphrasing his example. Used the example of RIM. If it was expected to sell 500 thousand, but they actually sold 700 thousand, then the stock price goes up because first they sold more units so there is more value in the company, and second the expected amount was lower then the actual, so the stock price will be adjusted upwards. Then if the next quarter they sell 1 million units but were expect to sell 700 thousand, the same thing happens again, but amplified. The opposite happens when a stock decelerates, in which case you would want to short the stock, because it will head down faster and faster.
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