Playing Ball with Resources and Obama Talks G20

Nobody likes resource companies these days. Heck, nobody likes the markets at all.

But I think it’s time for anybody with a sense of reality to once again consider looking at resource plays as a way to reap the incredible opportunities that this market has in store for risk-tolerant and patient investors.

Since last year, I am sure that all of your senses have gravitated towards the sentiment that the resource sector, especially the juniors of the Canadian exchanges, will not last another year. I am sure you have heard that many are stuck with projects that are too big for their companies to handle. I am sure you have seen corporations go belly up right under your nose. I have too. I speak with these companies each and every day.

But have you heard the other side of the story?

Traditional sources of financing have been near impossible for corporations. Remember the days when banks would force upon you every possible loan available? I do. That was last year. But things are different now. Banks have undergone a dramatic overhaul and are now terrified to even mention the word loan.

For most corporations, it doesn’t matter how good your cash flow, revenue, forecasts, or your balance sheet might be. It doesn’t matter if you have been in business for 50 years and have never missed a loan payment. Even the billions upon billions of government bailout funds and depressed central bank rates all across the world are not enough to get the credit flowing again. And you know what? It doesn’t seem to be that big of a deal.

Not to the resource companies, anyway.

Click to PlayIn the past few months, natural-resource players have raised well over $40 – $45 billion from outside the regular banking system. Most of the funds, from private investors and investment banks, have been accumulated through private placement bought deals and these astronomical financing figures are still pouring into both the smallest of the small caps and the largest of the large caps.
Need proof?

In February, Kinross raised $400 million (bought deal), then used $150 million to buy 20% of Harry Winston Diamond Corp. Cameco raised $460 million (bought deal) and BHP Billiton creatively raised $3.25 billion through corporate bonds. The list goes on. Even Gold Wheaton, a company trading at less than $0.26, has raised $200 million in the last few months.

Early February, practically every mining junior corporation I spoke with were worried about raising cash. Now many of them have held successful fundraisers over the last 60 days. In less time to follow a full season of your favourite sitcom, the one industry everyone shunned is now at the forefront of cash infusion from private lenders and big time investment players.

The money being poured into the resource sector is obviously coming from the successful and notably wealthy players of our markets. No doubt they see the natural resource sector as the goose that lays the golden eggs and as a force field to deflect the dangers against the battalion of the U.S Treasury’s printing presses.

It’s not only the big investment players coming out to swing their bats. Let’s not forget the biggest player of them all: China.
Over the last few months, China has been buying up everything natural resource from Copper and Iron miners to Canadian Oil Sands.

According to a statement on their central government’s Web site from Commerce Minister Chen Deming, China will send more commercial missions overseas to make purchases and investments this year. During a recent purchasing tour in February to Germany, Switzerland, Spain and the U.K., Chinese companies spent more than $13 billion. According to the 21st Century Business Herald, the US is the next stop as the Chinese ministry sends a business group on a buying trip to the U.S. later this month.

These investments may not all be in the form of resource-specific plays, but the underlying tones based on their recent actions suggests to me that resource is a big part of their focus.

The big players in the investment business have all come to play ball on the resource sector’s home court. Do you want to be sitting in the nosebleeds when the game begins or do you want a spot in the starting line up?

Hedge Fund ETF and Obama Goes Viral

As our economy wrestles to get back on its feet and rebuild a foundation of trust and loyalty in consumer confidence, the financial markets are once again seizing the opportunity to profit. Amidst the gloom and uncertainty of individual stocks bloom dozens of ETF’s ranging from resources to junk bonds to the newly created hedge fund ETF.

Word around town is that Direxion Funds, with their triple-leveraged and inverse exchange traded funds, just filed to launch 40 new funds with the SEC. But today I want to bring up a new ETF
which I found to be surprisingly interesting giving the recent Madoff Scandals and hedge fund failures.

Click to PlayWelcome to the world of the new IndexIQ’s Hedge Fund ETF called IQ Hedge Multi-Strategy Tracker ETF trading under the symbol QAI on the NYSE Arca. The fund attempts to reap the performance of hedge fund strategies and reap hedge fund-like returns but trades as an ETF, allowing investors who don’t understand the concepts of their strategies to make their bets. And with $5.5 billion in hedge fund outflows for the month of February (according to one of featured media users Charles Biderman of Trimtabs) can QAI make it?

Before the market collapse, only the richest and the well-connected had access to hedge funds. But now QAI is attempting to allow access to regular investors with minimal investment to become part of the elite. But let’s not jump the gun.

QAI doesn’t actually invest in hedge funds; rather, they analyze publicly available hedge-fund performance data and use this to match returns using ETFs and other liquid trading vehicles by creating an ETF-based index. The multiple strategies employed include long/short equity, global macro, market neutral, event-driven, fixed income arbitrage, and emerging markets.

This ETF-based investment approach allows QAI to provide intra-day liquidity, portfolio transparency, lower fees than the typical hedge fund, and the elimination of manager-specific risk. Or so they say.

Although the stated intent of QAI is to mirror the performance and strategies of hedge funds, there are obvious strategies used by hedge funds that simply cannot be duplicated with ETF’s. Things like merger arbitrage strategies which require taking positions in individual securities and convertible arbitrage can’t be duplicated using ETF’s. Nor can the flexibility of reconstitution and re-balancing be achieved.

But all that won’t stop me from following this newly formed hedge fund ETF. Because if I can get away with hedge fund returns without paying thousands of dollars to buy a hedge fund manager’s next Ferrari, I’d gladly give it a shot.

Take a look at their IQ Alpha Hedge Strategy Fund, a mutual fund that was down just 4.1% for the year, compared to an 18.2% loss in the S&P 500. The IndexIQ fund itself is down only about 12% since July 2008 compared to the S&P 500, which is down 38%. Not bad for an ETF created index.

With hedge fund managers requiring annual expenses of 2%, and many with a 20% performance fee charge, QAI could easily spring out from this crisis as the new hedge fund for dummies. But first I’d like to see how they fare in this market. But I can tell you that I will be watching these guys very closely. Very.

Get Ready For More Outrageous Compensation

This past week, outrage was sparked over the controversial executive compensation from AIG, which recently received billions in taxpayer dollars. President Barack Obama on Monday blasted AIG and pledged to try and prevent it from giving its executives 165 million dollars in bonuses.

Eight top executives of Nortel Networks got approval from the courts for up to $7.3-million (U.S.) in bonus payments under a retention plan – despite the layoffs of 1,100 Canadian workers last year who were denied their severances after the telecommunications giant filed for bankruptcy protection in January.

The list of outrageous compensation to executives of failing companies stretches for miles and will continue to stretch because they argue that these big bonuses are required in order to keep good people in the company.

I say that’s bull. But it won’t change. It will just get worse.

And here’s why.

When you offer big bonuses to high level executives, you’re giving them an incentive to start looking for the BBD – the Bigger, Better Deal. How many executives of failing corporations have watched their companies go further down the drain during their tenure?

Why would anyone want to keep the guys who have done nothing except help the corporations fail by requiring billions in taxpayer dollars to survive and millions in compensation to file for bankruptcy protection?

And once their contracts are over, then what?

Like sports, they become free agents and begin to look for the BBD.

Great employees are like great athletes. Sure they want the money, but they also want to play for a team where they can show off their talents so that they can work toward the next BBD. Do you think any of AIG’s or Nortel’s top producers will stay at their jobs? Fat chance.

Can you picture what these guys will face if they stayed at their jobs? Just imagine the opening line of an employee from AIG, “Hi, I am from AIG and I want to show you how to protect your money.” Yeah, that will help close a deal. It’s like saying, “Hi, I am Vince Carter and I’ll win games for your team.” Sorry Vince.

Compare AIG to the NBA’s Grizzlies. Do you think there is person on that team, or any other team, that wants to play for them? Every player on the Grizzlies will be looking at other teams once their contracts are up. Every top-level employee of these bailout banks and insurance companies will leave as soon as they’ve received their bonuses. Once the bonus season is over, it’s the BBD for them.

That’s why these outrageous compensations will get worse.
Think about it. The stock markets are insanely depressed. Citigroup used to be worth fifty bucks. Now they’re under three. AIG was over seventy bucks. Now they’re barely breaking one. The only possible way for AIG, Citigroup and the struggling banks to retain and entice new employees is to overpay with stock options.

Every employee, especially the sales guys, know this. And every one of them will use this as leverage.

These financial groups know they can’t offer them a working environment where they can be great at their jobs and show their talents. But what they can offer is a lottery ticket with insanely great odds by overcompensating them through stock options.

Let’s put this into perspective and use AIG as an example:

I am going to give you ten million stock options (which is a very real scenario for top level executives) at today’s current prices, which is $1.26. Last year, we were near $50. Our stock will bounce back once the markets turn around and even if we get back to a quarter of what we were last year, you’ve made a bundle. Oh, and the government has our back.

Now if you were in the NBA making $10 million per year and was offered a chance at $100 million to play for the Grizzlies with the NBA backing that contract, would you? That’s how these banks will retain and attract talent.

And that’s why when our markets settle and these banks begin paying back their TARP, you’re going to see even more headlines regarding outrageous compensation. All the while taxpayers are waiting for their money.

So instead of focusing on outrageous compensation from yesterday, the Government needs to figure a system for the future because that’s when the BIG money will be revealed. The amount of wealth that will be generated for these few executives and employees via the current financial sector bail-out will be astounding. It will be tax payers who will ultimately provide the biggest compensation packages in history for these guys.

With the governments preventing these large entities from failure and putting in place the new laws and regulations for financial best practices, the survival of these corporations rests more on our government and our tax dollars, rather than the skill set of the CEO’s and high level executives.

The bailout has simply become a euphemism for making the executives of these financial entities richer than they were before.

Meanwhile, the lower level employees lose their jobs, their tax money, and their life savings.

Once again, the rich get richer and the poor get poorer.

What a concept.

America Takes Notice – Obama vs. Harper

He’s good for business. He’s good for the growth of the economy.

He’s the reason why his country’s banking system not only remains safe, but has been ranked by the World Economic Forum in 2008 as the healthiest banking system in the world. He’s the reason why his country will emerge out of this crisis stronger than it has ever been. And he’s the reason why Americans are taking notice.

He’s Canada’s Prime Minister Stephen Harper.

And he is squashing President Obama on the scorecards.

This past week, the Tories handed in their first report card, created by the Opposition Liberals who insisted, as a condition of their support for the federal budget, that the government introduce one every three months. So far, I am giving them passing grade and it appears that even the opposition party is succumbing to Harper’s methods. “But let me be positive,” said Ignatieff. “I’m delighted that the Government of Canada, the Conservative government, is taking accountability seriously.”

Meanwhile, a new poll revealed that President Obama’s personal approval ratings have slumped to levels below those of George W. Bush at the same stage of his first term. The Rasmussen Reports found that Mr Obama enjoys the confidence of just 56 per cent of voters, with 43 per cent who do not have confidence and a third strongly disapproving of his early performance.

Obama’s first 50 days has passed and now he is clearly being pushed to step up his game. I don’t hear any Republicans giving the Democrats any credit.

Obama continues to be bombarded with opposition toward his overzealous and unrefined spending. But he continues to defend his decision not to veto a massive omnibus bill — passed this week by the Senate — that includes almost $8-billion in earmark spending on items ranging from a tattoo-removal program in California to little green golf carts for his government.

President Obama“I am signing an imperfect omnibus bill because it is necessary for the ongoing functions of government,” said Mr. Obama. Not a very convincing statement.

Meanwhile, Mr. Harper and his government continue to focus on what is necessary for Canada to churn out of this economic crisis. By April 1st, income-tax changes should kick in and the beginning phases of $12 billion in spending on roads, bridges and green infrastructure should take place. “Our action plan is on track. In fact, the pace of its implementation is accelerating,” said Stephen Harper.

“We are executing our economic stimulus package to stabilize markets, provide credit, protect communities, preserve jobs, and to move forward on our longer-term plans for the economy.”

He noted that Canadian’s comparative strengths include:

  1. The strongest banking system in the world
  2. The best fiscal position in the G7. (Not only of the lowest debt-GDP ratio and a long-term structural balance in the budgets of most governments, but also strengths in off-balance-sheet items such as a solvent public pension plan)
  3. The Bank of Canada has a stellar record of low and stable inflation.� Canada should avoid both significant deflation and renewed inflation, both of which are significant risks in other countries.
  4. A highly educated, skilled, largely mobile, modern workforce and real economic diversity, including commodities that will be in high demand as the global economy recovers.

He concluded his speech by saying, “We are positioned to emerge from this global recession in a stronger position in the world than we have ever been.”

�Yes, Canada is boring. And yes, it’s the last to take any risks. But Mr. Harper’s right. Based on the obvious facts, Canada has done more than survive thus far in this financial crisis.

Canadian banks now are not only well capitalized but are poised to take advantage of opportunities that American and European banks cannot seize. The Toronto Dominion Bank, for example, was the 15th-largest bank in North America roughly the same time last year. Now it is the fifth-largest. Where’s Citigroup?

Perhaps I am being a little harsh on President Obama. The stock market did end positively this past week.

Hopefully, it’s a sign of things to come.

Have No Fear, Obama is Here

Unemployment rate at the highest level in a quarter century. 651,000 jobs lost in February alone. 8.1%

The headlines this past week certainly were not pretty and sent the markets down further than it has ever been since 1997. Based on stock market data, we just went back in time over a decade. Based on economic and employment data, we travelled back over 50 years. Sources close to the White House say Obama and his staff have been “overwhelmed” by the economic meltdown and have voiced concerns that the new president is not getting enough rest.

But have no fear. Obama has vowed to redouble their work to revive the stricken economy. The only question remains: How?

Unemployment has already reached the average rate the White House projected for the whole year. In addition to passing the largest stimulus package and the largest budget in US history, Obama is facing a plummeting stock market down 20% since his inauguration, the possible bankruptcy of General Motors, the war in Iraq, and rising unemployment. At the same time, he has put forth efforts to achieve universal healthcare, overhaul education andbegin a green energy revolution.

Now he plans to redouble their work. Is he doing too much too quickly?

The President’s $787 billion stimulus plan aims to create or save 3.5 million jobs but the U.S. has already lost 4.4 million since the recession began in December 2007, with more declines coming. “These aren’t just statistics, but hardships experienced personally by millions of Americans who no longer know how they’ll pay their bills, or make their mortgage, or raise their families,” Obama said in his weekly address.

Obama said yesterday that he’s “committed to doing all that’s necessary to address this crisis.”

Key Obama economic advisor, Christina Romer said that despite the grim economic news, better times would return, and would eventually cause a rebound on the stock markets.”The best thing we can do for American consumers is exactly what we’re doing, which is creating jobs, getting banks in a position where they can lend again and keeping people in their homes.”

She’s right. So is Obama. That is why they need to keep their focus on repairing the banking system, implementing the stimulus and instilling consumer confidence rather than launching his green energy revolution and efforts to achieve universal healthcare. I know going green and healthcare is important, but that can wait till next year.

I have always said that in order to look toward the future, we must focus on the present. That is why Obama needs to focus on our economy right now, if he wants his green revolution and universal healthcare policies to stand a fighting chance.

Earlier this week, Obama warned that improvements were highly unlikely in the first quarter of 2009. Guess what? The first quarter is almost over.

Obama Prepares for Battle

Obama’s $3.55 trillion budget proposal represents a gamble that the American people are ready for the sort of change they embraced when they elected him last November.

His goals are ambitious and it appears the only thing bigger than his ambitions are the obstacles they must clear.

That’s why President Obama warned on Saturday he was bracing for a fight against powerful lobbyists and special interests who sought to pick apart the $3.55 trillion budget he wants to advance his agenda of reform. “I know these steps will not sit well with the special interests and lobbyists who are invested in the old way of doing business, and I know they are gearing up for a fight as we speak. My message to them is this: so am I,” he said.

And a fight he will have. Already waves of opposition are pouring in. In a radio response, the Republicans stuck with their campaign remarks from last year, warning that Democratic spending priorities threaten to destroy the American dream that hard work can build a better life for each successive generation of citizens.

“This week, the president submitted to Congress the single largest increase in federal spending in the history of the United States, while driving the deficit to levels that were once thought impossible,” said Senator of North Carolina Richard Burr.

He said Obama’s budget commits the government to a billion dollars a day in interest on the debt over the next decade. “Now, instead of working hard so our children can have a better life tomorrow, we are asking our children to work hard so that we don’t have to make tough choices today,” Burr said. The White House predicts the United States will enter the new fiscal year with a budget deficit of $1.75 trillion – the largest since World War II, and four times the size of this year’s deficit.

But Obama has pledged to cut it in half by the end of his first term. Specifically, administration officials say the annual gap between federal spending and tax collections will fall from something north of $1.4 trillion this year — the highest since World War II — to $533 billion in 2013. He said a page-by-page examination of the federal budget had already identified $2 trillion in potential savings over 10 years.

But when you look at it from a technical standpoint, this year’s budget deficit has already been bloated by major spending in the stimulus package and various financial-sector bailouts which include expenses unlikely to be repeated in future years.

The nonpartisan Congressional Budget Office (CBO) recently predicted that the deficit could be halved by 2013 merely by winding down the war in Iraq and allowing some of the tax cuts enacted during the Bush administration to expire in 2011, as Obama proposed. That alone would cut the deficit to $715 billion, according to the CBO.

As Senior Republican on the Senate Budget Committee Judd Gregg (who recently withdrew as Obama’s nominee to head the Commerce Department) said, “You’re not getting savings if you’re assuming spending that isn’t actually going to occur.”

Last week, we interviewed the American CEO of Canadian-listed gold junior Gryphon Gold regarding their recent Q3 results plus Obama’s stimulus and his over-zealous spending. Take a look at the clip here.

It’s tough to side with President Obama when you’re an investor and I know most of you are. But I have to admit that his stance and his utmost confidence in his proposal almost make me feel at ease despite all of the loopholes, wordplay and shortcomings of his proposed budgets. Almost.

The fight has begun. Which side are you on?

The Obama Restructuring

The US stimulus is now a reality. Some say it’s good. Some say it’s bad. But most are saying it is absolutely ridiculous.

The $787 billion dollar Obama stimulus package has been met and passed with serious scrutiny. Will the package work? What do business leaders think? What do people in the capital markets think? And most important, what do the markets think? The Dow closed this past Friday at a 6-year low, dipping well below the 7500 mark.

For businesses, investors, and financial consumers, this package appears to be nothing more than a government restructuring program designed to move the Government further into democratic socialism, not stimulate the economy. Despite the fact that much of what many are calling a “pork bill” is going towards tax relief (roughly 34%), the rest of the bill is short on incentives to get consumers spending again. The socialistic approach of this bill has in place long social goals that will most likely not stimulate economic activity.

Sure it will create some jobs in the short term. Sure people will save around $60 per month in taxes. But where is this money coming from? The federal government alone is now borrowing at an annual rate of well over $2 trillion. This does not include state and local government borrowing. For $787 billion worth of spending, how much of that is really stimulating the economy?

With most of the tax cuts given to individuals and not toward businesses and business owners, how can we expect further job creation? Already we are seeing jobs slashed at record rates as spending from consumers weaken. There are no incentives in this bill to further promote businesses or increase spending, both of which will ultimately create more jobs.

In the bill, there is what they call “discretionary spending ‘which equates to around $308 billion. In that, $48 billion goes to the Department of Transportation to repair and expand infrastructure. The remaining $260 billion “discretionary spending “goes to various federal agencies, as well as state and local governments.

Let’s cut a small chunk of this overcooked pork and have a quick taste:

  1. $300 million to buy “green cars” for federal employees and tax credits if you want to go and buy a “Neighbourhood Electric Vehicle” (NEV)
  2. $98 million towards a polar icebreaker
  3. $200 million to “design and furnish” the Department of Homeland Security Headquarters
  4. $3.4 billion to the Fossil Energy Research and Development program to achieve “clean coal.”
  5. $144 billion to state and local governments where spending is undetermined

It’s great to see that so much of what is meant to be part of an economy stimulus bill be thrown into government expansion. How do little golf carts and ice breakers stimulate the economy? What about interior decoration for security buildings? Shouldn’t that be discussed in a bill related to security? Shouldn’t clean coal be discussed in a bill related to energy? Shouldn’t there be some measure of where and how $144 billion is going to be spent to stimulate?

Obama is about to spend close to $1 trillion dollars on a bill meant to stimulate the economy but it is obvious that he chose to expand government and increase the people’s reliance on it, while the private sector, which pays the Bill, continues to shrink.

When Obama said he wanted change, he meant it.

This past week, we had the pleasure of interviewing an American CEO of a Canadian listed gold company regarding his corporation in this market and what he thinks of the recent Obama bill. The video interview will be posted next week so be sure to stay tuned.

Best regards,

Ivan Lo
Equedia Network Corporation
www.equedia.com

The Gold Super Hero

With investors hurdling toward gold as our Government prints more money, I am reminded of a story that many gold enthusiasts may already know. It’s a story about a real life gold super hero whose deviance of conventional wisdom turned a failing corporation into one of the world’s largest gold producers.

Rob McEwen wasn’t a miner. He was a young man following his father’s footsteps into the business world. Like his dad, he had a fascination for gold.

After years growing up hearing stories around the dinner table of miners and prospectors, he finally got his shot.

One day, he stepped into a takeover battle as a white knight and emerged triumphantly as majority owner of a mine in Red Lake, Ontario. Here he stood at the head of the boardroom table filled with a room full of experienced senior geologists, all of whom doubted his ability to lead this company. Who could blame them? He was a mutual fund manager turned CEO of a gold corporation overnight.

But it was hardly a dream come true. The company he had taken over was plagued with negative news and on the brink of failure. The miners were on strike and they were overwhelmed by lingering debts. The gold market was contracting and the mine’s operating costs were exceedingly high, forcing them to cease mining operations. Unless they found evidence of new gold deposits, the fifty-year old mine was about to be shut down along with the company.

McEwen knew that the mine had potential. “The Red Lake gold district had 2 operating gold mines and 13 former mines that had produced more than 18 million ounces combined,” he says. “The mine next door had produced about 10 million ounces. Ours had produced only 3 million.” So he sent his geologists packing with $10 million dollars and a plan to drill in the most remote and deepest parts of the mine.

A few weeks later the geologists returned. With smiles on their faces, they broke the news to McEwen that would save Goldcorp – at least for another few years. They had found results signalling new deposits of gold as much as thirty times the amount they had been mining at the company. But that wasn’t enough.

The senior staff continued years of further exploration in attempts to find a more accurate depiction of the gold’s value and location. Despite the expertise and experience among the staff of senior geologists, they efforts proved stagnant. It had become obvious that something critical needed to change if they were to secure a future for Goldcorp. They needed to act faster.

Exhausted and uncertain about Goldcorp’s future, McEwen decided to take a break for some personal development. He attended a MIT conference in 1999, where corporate presidents from around the world had come to learn about advances in information technology. Perched up in his chair, he listened as the lecturer talked about how Linus Torvalds built a masterpiece computer operating system by revealing his code to anonymous programmers all around the world on the internet. Without the help of thousands of anonymous participants, the Linux system would have cost millions of dollars to produce and would have taken years. But it didn’t.

Then it hit him. If his senior geologists couldn’t find the gold in Red Lake, maybe someone else could.

McEwen wasn’t a miner. He didn’t think like one either. But that was his strength. So he rushed back to his corporate head office in Toronto to share his idea of “open sourced” mining.

McEwen wanted to take all of the data the company has spent creating in the last fifty years and he wanted to share it openly with the world by posting it on the internet: “Then we’ll ask the world to tell us where we’re going to find the next six million ounces of gold.”

At first, Goldcorp’s geologists were appalled at the idea of exposing their fifty years of secret data to the world. And they had good reasons to be. The mining industry is an intensely guarded business and geological data is to miners what treasure is to pirates. Giving this sort of data away could not only subject you to takeover risks, but can also imply that your company no longer has the ability to move forward on its own.

Despite the inherent risks, McEwen decided to push forward and in March 2000, he launched the “Goldcorp Challenge.” They posted every bit of information they could on their 55,000-acre property through their website and setup a contest offering $575,000 worth of prize money to the participants that could show Goldcorp the best methods and estimates on their property.

McEwen knew this strategy entailed big risks. But the risks of continuing to do things the old way were even greater. “Mining is one of humanity’s oldest industrial pursuits,” McEwen says. “This is old economy. But a mineral discovery is like a technological discovery. There’s the same rapid creation of wealth as rising expectations improve profitability. If we could find gold faster, we could really improve the value of the company.”

And improve the value they did. Within weeks, submissions from over one thousand virtual prospectors in over fifty countries crunched the data. But geologists weren’t the only participants. Mathematicians, graduate students, consultants, and military officers all submitted entries. They had, “applied math, advanced physics, intelligent systems, computer graphics, and organic solutions to inorganic problems.”

Not only had the contestants identified new targets on the Red Lake property, they introduced Goldcorpto state-of-the-art technologies and exploration methodologies, including new drilling techniques and data-collection procedures, and more advance approaches to geological modeling. McEwen had harnessed a technological trend that most in the industry would have shunned. As a result, he turned his destined-for-failure $100 million company into a company today worth over $27 billion – even in our currently depressed market.

In our last newsletter, we talked about Jim and his unwillingness to change by accepting current and future movements in technology and communications. This led to a ninety percent haircut of his company’s share value versus the average thirty percent haircut his peers experienced in the same year. McEwen’s courage to challenge the mining industry’s safe-keeping of geological data reveals to us that change can lead to astonishing results.

Despite our market climate, corporations need to advance. They must have the backing of their investors. No longer should a corporation’s marketing and communications expenditures be focused solely on attracting new shareholders. An emphasis and strategy for retention must be put into place for all corporations, big and small. Over the course of this year, Equedia will bring you deep inside the minds of the companies you invest in. This will allow you to truly gauge the sentiment of your investments and their management’s ability to conquer. As we work with corporations on deploying these methods, I hope that others will take part in these strategies.

When our economy picks itself up from under the dirt and begins to re-root its foundation, corporations willing to embrace change now will become the future. Investors will not forget the efforts of the corporations that held their hands through this crisis. They will not forget the corporations who cared.

Its not the strongest that survive

It’s hard to find an industry that’s not experiencing dramatic change. Charles Darwin once said, “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” As part of our current economic conditions and as financial consumers, we must be responsive to change.

Change begins with the evolving dynamics of our investment world. The internet has become one of the most important tools for public corporations, impacting and expanding the methods for communicating a company’s investment story. With the onset of Sedar’s electronic filing and the ability for news releases to land through news wires instantly, the world of news dissemination now moves at the blink of an eye. Access to information is easier than ever. Conversely, this makes it that much more difficult to share it with the right audience.

Our generation has changed. Along with that, comes the change in our efforts to pursue further opportunities. America now has a new President, a new administration, and a new SEC Chair and is in the process of a complete an overhaul of its policies. The biggest change in our last decade has come. President Barrack Obama is leading this change.

Many say that President Obama’s campaign was won in part by how he interacted with change. He embraced today’s current trends and technologies through his use of social networking tools such as Twitter and video presentation tools such as Google’s YouTube.

The use of these online tools allowed President Obama to communicate and present his ideas to everyone, at anytime. No longer did American citizens have to rush home from work to watch his speeches to determine if he should lead their country. They could now, at anytime, know what he was doing with Twitter and more importantly, see what he was doing through his consistent video uploads on YouTube.

If America’s newest president is embracing change, shouldn’t we?

I recently spoke with the VP of Communications for a Canadian resource company (let’s pretend his name is Jim) regarding this change and my goals to help public companies embrace it. We started to talk about the use of our “on-going” online video solutions and online strategic methods for corporate communications. The moment we began speaking about better presentation and giving their investors (and potential investors) the ability to access information and up-to-date video interviews online, Jim interrupted me.

I wasn’t upset that I was interrupted. I wasn’t upset that he didn’t like my ideas nor shared my views on change. I was shocked at what he said:

“People don’t have time for this. They don’t have time for the internet. Investors don’t want to see and waste their time with online videos and interviews. Don’t quit your day job.”

I knew I couldn’t win that argument because Jim just seemed so stuck in the past. Yet I couldn’t help but think if there was some truth to what he said.

Driving to my next meeting, I was stopped at a red light in horrible downtown Vancouver traffic. I reached into my warm left overcoat pocket and anxiously pulled out my glitchy Blackberry Storm to do a little research. After fidgeting with the touch-screen display, I finally managed to pull up information on Jim’s company:

  • Record-breaking annual cash flow, significant new discoveries on its properties, and decent dividend payouts
  • Share value 8 months ago….$ 3.00 dollars
  • Share value today….less than $0.30 cents

No videos, no interviews, a presentation from a year and half ago, and the last updated document was uploaded back in Q1 of 2006

The TSX endured one of its worst years on record in 2008, losing 35 per cent of its value. Despite record-breaking annual cash flows, significant new discoveries on its properties, and decent dividend payouts, Jim’s company on the TSX took a 90 per cent haircut. Then it hit me:

No videos, no interviews, a presentation from a year and half ago, and the last updated document was uploaded back in Q1 of 2006

The red light had turned green now and traffic began to move. I drove to my next meeting, selfishly more confident about my goals.

Employees of public companies visit our website everyday and ask for information and interviews about the companies they work for. If a corporation’s employees are asking for this, I think it’s a pretty obvious sign that there needs to be a better way of distributing and presenting corporate information.

As a corporation, ask yourself if you are truly happy with your IR campaign, investor management and the way your company is being presented?

As an investor, are you happy with the way public companies present themselves and communicate with you? At the end of the day, these are your investments and corporations depend on you to keep it living, dynamic and vibrant.

“Change is the law of life. And those who look only to the past or present are certain to miss the future.” – John F. Kennedy

P.S. If you agree with me that corporations need to embrace change, the way President Obama has, please forward this email to the leaders of public corporations. Just don’t forward it to Jim.

If you build it, they WONT come

If you run your company well, build a good management team, hit your milestone marks, make some discoveries, and make some profits, investors and financial consumers will come knocking at your door to throw their money at you. After all, they want to be part of the winning team and could care less if you care about them…right?

Buy Warren Buffett. I am.

“Be fearful when others are greedy, and be greedy when others are fearful.”

Yes, I know, you have heard that phrase a million times over. And yes, I know, it is a phrase coined by one of the most successful – no – THEE most successful investor of all time: Mr. Warren Buffett

As a kid growing up that phrase has always echoed in my head. So has the Oracle of Omaha. There is no doubt that he is the best and why so many investors think of him when they think of successful investors.

So why are we not all rich and successful like him? You would assume that if we think of him as “the best of the best”, we should all follow his advice. We should all invest in what he invests in. But we haven’t.

Why? Because we’re not like him.

He is old. He is traditional. He is the past.

We are the new age investors. We are the investors who are shaping and changing our future. We are the investors who promote change and aggressive progress in order to become the best. We want to improve our technologies and explore the unexplored. We are the next generation.

Mr. Warren Buffett, you are old.

We are much more complex than you.

But that is our problem.

In our quest to move forward, we have forgotten the single most important rule that can be applied to practically every situation: KISS (Keep It Simple Stupid)

Throughout Mr. Buffett’s career, he has always had a very few simple rules of investing that has taken him to where he is today, one of the richest men in the world. I encourage everyone to read his works (such as “The Essays of Warren Buffett : Lessons for Corporate America” and “The Intelligent Investor”) and you will see (and agree) with me that his mantra all equates to simplicity.

There are arguments that he could have invested in some of the tech companies during the boom and potentially made millions more than he already has. But guess what? He is still on top.

It’s scary to see how accurately Mr. Buffett has predicted the outcome of our historical financial events. Back in 1999, when the tech boom was booming, he wrote yet another rare article, which you should all read here:

In that article, he says:

“Let’s start by defining “investing.” The definition is simple but often forgotten: Investing is laying out money now to get more money back in the future–more money in real terms, after taking inflation into account.

He also makes a comment that strikes a profound note by saying, “The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.”

He was referring to the airline boom.

And boy was he right.

Applying that to the dot.com explosion, which I discussed here (http://equedia.com/blog/view.php/Financial-Crisis-Not-So-Bad), and Mr. Buffett was right – again. How many companies of the tech boom came out alive? Yes, there are your Googles, Amazons and Ebays but much more failed than those who succeeded.

Simplicity wins again.

I think it’s about time to listen.

Below, I have pasted Mr. Buffett’s recent article (October 16, 2008), “Buy American. I Am.”

(Please note that the article “Buy American. I Am.” was published in the New York Times and in no way is work of my own. You can find the article link here: http://www.nytimes.com/2008/10/17/opinion/17buffett.html?_r=1&partner=rssuserland&emc=rss&pagewanted=all&oref=slogin

Financial Crisis Not So Bad

Comparing the Tech crash to our current financial crisis