Taking the Next Step

There is a common misconception surrounding feasibility studies. We know they’re important but their significance is commonly misconstrued. Make one mistake or skip one step of the process and it can have detrimental effects on a mining project.

A mining feasibility study, in short, is an evaluation of a proposed mining project to determine if the mineral resource can be mined economically. But there are many stages of this process before the actual feasibility study or report is finalized.

First off, there are three main feasibility studies: the scoping study, preliminary feasibility and detailed feasibility…Read More

Key Things You Should Know

Mining resources has been the hottest sector during this market upturn. Last week, we talked about Ivanhoe Mines running from $2 per share to $13 and Teck Resources soaring from $3 per share to over $32, both in less than a year.

There’s no doubt that investors are flocking towards the mining sector, especially Canadians. Sixty percent of all public mining companies are listed on the Canadian public markets and about half of all mining capital is being raised in Canada.

With so much hype around this sector, how do investors know what to look for?

Investors should understand the process and costs involved in mining before they jump in and make a wrong investment by chasing the markets. When investing in miners, its much more fun and rewarding when you at least understand the basics.

This topic can very easily take up thousands of pages, hundreds of books, and years of schooling, but there are some basic fundamentals average investors can work with. For this week, let’s start with the basics.

A Lesson in the Making

The deal is done. In last week’s newsletter, we talked about the significance of October 6, 2009 – a date marking the final signing of an agreement that will begin the process of opening up one of the world’s largest undeveloped copper-gold resources.

Ivanhoe Mines and Rio Tinto has now officially signed with the Mongolian government to begin the Oyu Tolgoi copper-gold project, a project with a fully operational expected production of 450,000 tonnes of copper per year and 330,000 ounces of gold and an estimated resource with an astounding 45.2 million ounces of gold and 78.9 billion pounds of copper.

That’s not a misprint.

It’s no wonder why Ivanhoe’s share price is almost back to its two year high, climbing from its 52-week low of just over CDN$2, to this past Friday’s close of CDN$13 even.

Let’s put that into perspective.

The Mongolia Advantage

With the world’s largest undeveloped copper and gold projects, you’d think by now Mongolia would be a mining household name. But this destitute country’s overzealous legal restrictions on mining, stemmed from its greed for an ever-greater share of mining profits have finally been broken.

Obama’s Bank Stress Test: Government Plot or Apophenia?

Earlier this year, Tim Giethner presented a plan on how the administration is going to “fix” the banking system by subjecting the country’s 19 biggest banks to a series of dire what-if scenarios that assume ballooning unemployment and further GDP contraction: the Stress Test

The Treasury Department’s end game is to weed out banks that need more capital and to give Americans more transparency and accountability in the banking system. That would separate the weak from the strong and put the latter group of banks in the position to repay money they got under the Troubled Asset Relief Program (TARP).

The consensus has been that banks for the most part won’t need more capital, with a few exceptions.

The banks whose balance sheets look the weakest under those scenarios will have six months to raise new capital. If they can’t, they can convert their TARP preferred investment into common shares or raise new capital from the government under stringent terms.

Over the last week, I have heard many arguments and viewpoints on the Stress Test. Some argue that because much of the results in this test would remain ‘hidden” from public view, it defeats the purpose of the transparency and accountability goal of the stress test. Many arguments have been made stating that the test is not only useless, but may do more harm than good.

But has anyone ever considered the Stress Test as a government tactic to gain further ownership and control of the US banks in order to form Obama’s new democratic government?

Let’s face it, the US government is known for using wordplay, distraction and diversion tactics to gain trust and then unleash its hidden agenda.

Just think about it.

In order to pass the Stress Test, banks will have to clear the hurdle of a three per cent tangible common equity (a measure of financial strength that divides the value of outstanding stock by assets). Based on the tangible common equity (TCE) to risk-weighted assets in the first quarter, the stress-test banks that have already reported their profits should clear the 3% hurdle.

But here’s the problem. The government’s stress test is based on an assumption that unemployment will peak at 10%. Under these circumstances, it appears that most of the banks under this test should past.

Given recent numbers however, and based on the forecasts by many different analysts, the unemployment rate could very well reach past 10% and grow to as high as 12% from now until the end of 2010. Under these numbers, many of the banks, including Bank of America, Wells Fargo, BB&T, PNC Financial, SunTrust Banks, Regions Financial, Capital One and U.S. Bancorp may not pass the 3% TCE.

They basically have two simple choices if they don’t pass, both of which ultimately give the government a bigger stake in the US banks:

1) Convert their TARP preferred investment into common shares

Or

2) Receive new capital from the government

Citigroup, for example, has chosen door number one and in doing so will give the government a 36% stake. Keep in mind the administration has said that no bank will “fail” the test; those with big holes that need filling will have them filled at government expense.

So here we have a test from the government to weed out the bad banks, yet no bank under this test will fail. So if no one fails, what is the point of having a test?

It looks to me like the government is using the stress test as an excuse to gain further ownership of the big banks and thus begins their movement toward further control and ownership under Obama’s democratic government.

So is the Stress Test an act to raise accountability and trust from the banks or Obama’s government plot to gain further control and stake for his democratic government?

Call it apophenia, but I choose the latter.

The Truth About Real Estate and Obama on Working Through the Mortgage Crisis

In my part of town, developers are scrambling and offering major discounts on pre-sale homes giving up homes for up to 40% off their original asking price. And many first time home buyers are jumping at the chance and lining up early for their spot at making a bid for these drastically reduced luxury condos.

If you consider the battles and bid wars that many home buyers had to endure in the previous years, these offerings are their golden ticket to affordable housing.

This scenario is happening all over N. America and is even more apparent in the US. Sellers are using tactical advantages and mind games to lure more buyers into our currently depressed market by listing housing prices for well below market value to trigger bidding wars. And it’s working.

But should buyers be jumping the gun? Let’s take a look at both the Canadian and US housing market.

According to TD Economics, Canadian house prices have further to fall, while overbuilding in the residential market will prevent the sector from making a quick recovery from the current downturn in sales, prices and construction.

They also expect the average Canadian house price to fall to about $246,000 in 2009, down 24% from the peak of $324,000 in 2007. As of February, the average nation-wide house price stood at $282,000, down 13% from its peak. Based on those figures alone, it would appear that we still have another 11% decline to go.

The report also found house prices had been overshooting their fundamental value by about 9% since 2005 as speculation drove up prices and encouraged overbuilding, which I am sure every Canadian witnessed or participated in.

TD said Calgary and Edmonton had accumulated “worrisome” inventories of unsold single family homes, while the overhang of supply in Saskatoon’s was at a historical high. Montreal also had a growing inventory of unsold condos and apartments.

Although Toronto and Vancouver have so far avoided a major oversupply in inventories, TD said the large number of condos under construction in both cities raised the possibility of mounting oversupply this year.

As housing prices correct, the excess supply of housing in the market will continue to weigh on the sector throughout 2009.

However, Canada should avoid a housing crash like the US because the oversupply of housing is much smaller.

TD estimates the overhang of residential homes in the Canadian market is equal to about three month’s supply, compared to about 10 months in the United States – where conditions are much worse and likely to fall even further.

In RealtyTrac’s US Foreclosure Market Report™ for Q1 of 2009, an astonishing one in every 159 U.S. housing units received a foreclosure filing during the quarter. Foreclosure filings were reported on 341,180 properties in March, a 17% increase from the previous month and a 46% increase from Mar 2008.

According to Moody’s Economy.com, home value declines in Los Angeles for example, still have a long way to go. Based on historical balances of employment, housing sales, income, lending availability, foreclosures and vacancy rates, all dating back to 1982, home prices in the Los Angeles metro area still have 29% further to fall.

Total foreclosures are likely to be significantly higher in 2009 than they were in 2008, even with the mitigating effects of the Obama housing plan in the US. We also have to keep in mind that new home developments also compete with existing houses, whose inventories are still at very high levels.

Major lenders like Fannie Mae, Freddie Mac and JP Morgan have just recently lifted their foreclosure moratoriums which could signal the swelling of more cheap foreclosed homes this spring and summer.

The best real estate deals, it seems, are yet to come.

So take your time. This recession isn’t going away tomorrow. In my part of town, developers are scrambling and offering major discounts on pre-sale homes giving up homes for up to 40% off their original asking price. And many first time home buyers are jumping at the chance and lining up early for their spot at making a bid for these drastically reduced luxury condos.

If you consider the battles and bid wars that many home buyers had to endure in the previous years, these offerings are their golden ticket to affordable housing.

This scenario is happening all over N. America and is even more apparent in the US. Sellers are using tactical advantages and mind games to lure more buyers into our currently depressed market by listing housing prices for well below market value to trigger bidding wars. And it’s working.

But should buyers be jumping the gun? Let’s take a look at both the Canadian and US housing market.

According to TD Economics, Canadian house prices have further to fall, while overbuilding in the residential market will prevent the sector from making a quick recovery from the current downturn in sales, prices and construction.

They also expect the average Canadian house price to fall to about $246,000 in 2009, down 24% from the peak of $324,000 in 2007. As of February, the average nation-wide house price stood at $282,000, down 13% from its peak. Based on those figures alone, it would appear that we still have another 11% decline to go.

The report also found house prices had been overshooting their fundamental value by about 9% since 2005 as speculation drove up prices and encouraged overbuilding, which I am sure every Canadian witnessed or participated in.

TD said Calgary and Edmonton had accumulated “worrisome” inventories of unsold single family homes, while the overhang of supply in Saskatoon’s was at a historical high. Montreal also had a growing inventory of unsold condos and apartments.

Although Toronto and Vancouver have so far avoided a major oversupply in inventories, TD said the large number of condos under construction in both cities raised the possibility of mounting oversupply this year.

As housing prices correct, the excess supply of housing in the market will continue to weigh on the sector throughout 2009.

However, Canada should avoid a housing crash like the US because the oversupply of housing is much smaller.

TD estimates the overhang of residential homes in the Canadian market is equal to about three month’s supply, compared to about 10 months in the United States – where conditions are much worse and likely to fall even further.

In RealtyTrac’s US Foreclosure Market Report™ for Q1 of 2009, an astonishing one in every 159 U.S. housing units received a foreclosure filing during the quarter. Foreclosure filings were reported on 341,180 properties in March, a 17% increase from the previous month and a 46% increase from Mar 2008.

According to Moody’s Economy.com, home value declines in Los Angeles for example, still have a long way to go. Based on historical balances of employment, housing sales, income, lending availability, foreclosures and vacancy rates, all dating back to 1982, home prices in the Los Angeles metro area still have 29% further to fall.

Total foreclosures are likely to be significantly higher in 2009 than they were in 2008, even with the mitigating effects of the Obama housing plan in the US. We also have to keep in mind that new home developments also compete with existing houses, whose inventories are still at very high levels.

Major lenders like Fannie Mae, Freddie Mac and JP Morgan have just recently lifted their foreclosure moratoriums which could signal the swelling of more cheap foreclosed homes this spring and summer.

The best real estate deals, it seems, are yet to come.

So take your time. This recession isn’t going away tomorrow.

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?