Goombarh 69 - August 12, 2011
Good day,
As is all the rage these days, people want to share their "musings", so I will ponder instead of muse. Just not wanting to be part of the larger crowd, it is the contrarian in me.
Firstly, and most important, are the markets going crazy or what; will the markets resume moving? Yes, the markets are forever evolving, and yes, the markets will move upwards. Look at Cisco, which was beaten down and an also ran, reported yesterday and moved upwards over 10%. Look at Europe, which banned short selling, so the markets responded by moving higher, over 5% each. Just a few sporadic examples, but the world is not ending no matter what happens; people just pick themselves up and move forwards. Attached is the latest missive from Ken Fisher, he does not know that I am advertising for him; but his outlook is for a plodding along year, with stock picking rated as important (since when is stock picking not important? I suppose only when the tide rises, then everything moves.).
The main fundamental themes driving the markets should still work. And what are these themes? IMHO they are:
1. Emerging market growth of middle class; especially in Asia. This is just huge, ten-fold increases expected in about 20 years. Analysts call this a secular move.
2. Shift of economy from making stuff to making and sharing knowledge. This makes measurement of economic numbers difficult and employment numbers are bad; because some segments of populations are being left behind. Witness the battle for #1 business giant between Exxon and Apple; oily stuff versus knowledge gadget.
3. Rises in costs for metals, precious metals, commodities, oil, food stuffs. Peak Oil theory here applies to Gold and mining, and all other avenues of human endeavour including farming etc. This is just basic economic theory, supply and demand; when supplies get stretched, further marginal production becomes more costly. For example: prime farmland is used already, to increase production, farmers use less suitable land on hillside, which does not grow as well and more difficult to irrigate etc., the production work is more for less output on the hillsides. This applies to everything from oil to sugar, coffee to REE, Gold to corn.
I think that is enough for big thematic items; in thinking about things, it is no use to get too complicated, simple is easier and quicker to act upon.
Therefore, my action plan, which I have already hinted and noted previously, is that I am moving my investments to where there may be more of a tidal effect, namely undiscovered oil plays. Three plays that I have looked at include the Alberta Bakken, the Nordegg Shale in Western Alberta SW of Edmonton and the Duvernay Shales underlying most of the present Alberta oil zones. The driver is the coming of age of horizontal drilling and fracing for oil and gas. The rage is now to go after not the existing reservoir areas, but the original source rocks where the oil is held tight. Therefore they need to be horizontally drilled and fractured to release their goodies. For the Nordegg, I have bought Anglo-Canadian Oil (AGC, AGDNF) and Donnybrook Energy (DEI, CSTPF) for the Duvernay.
Until next time,
Marco G.
PS: since this email, I have exited Donnybrook Energy.
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