Conrad Black: Why I became a Catholic

Islam was out of the question; too anti-western, too identified with the 13th-century decline and contemporary belligerency of the Arabs; and the Koran is alarmingly violent, even compared to the Old Testament. Judaism, though close theologically, is more tribal and philosophical than spiritual. And it was the spiritual bait that I sought, that converted me from atheism, that I premeditatedly swallowed, and that prompted me to agitate the line and be reeled in by the Fisher of Souls. I thought it more likely that the 80% of the early Jews who became Christians, starting with Christ, had correctly identified the Messiah than that the proverbially “stiff-necked” rump of continuing Jewry are right still, ostensibly, to be waiting for Him.

It need hardly be said that the Jews are the chosen people of the Old Testament, that they have made a huge contribution to civilization, and that they have been horribly persecuted. But being Jewish today, apart from the orthodox, is more of an exclusive society, and a tradition of oppression and survival, than an accessible faith. The Eastern religions, to the very slight degree that I have studied them, are philosophical guides to living, not frameworks for the existence and purpose of man. In terms of real religious affiliation for me, it was Rome or nothing.

via Conrad Black: Why I became a Catholic – Full Comment.

Exclusive Smoking Gun: The Fed On Gold Manipulation

Zero Hedge has recently presented several declassified documents from the pre-1971 “Nixon Shock” days, that endorse the case for gold as a major historical factor in US monetary and foreign policy, as demonstrated by State Department and CIA disclosure. Gold’s special status in policy and administrative decision-making was a direct factor in Nixon’s choice to abolish the gold reserve at a time of an exploding budget deficit.

Yet what about the days after 1971, and specifically, how did that critical “behind the scenes” organization, the Federal Reserve, perceive and manipulate gold in the post Bretton-Woods world? Was gold, freed from its shackles to the dollar, once again merely a symbolic representation for money?

Zero Hedge presents the smoking gun that may provide responses to all the various open questions, courtesy of a declassified memorandum, written by none other than the then Fed Chairman, addressed to the president of the United States.

via Exclusive Smoking Gun: The Fed On Gold Manipulation | zero hedge.

Goldman: “a thesis-changing quarter” for RIM

via Goldman Pukes RIMM, Downgrades From Conviction Buy To Neutral, Slashes PT From $96 to $73

Jim Rogers On Commodities Price Outlook

“When the global economy recovers, demand for commodities will rise, so will prices. If economies remain weak, governments will print money, and commodity investors can then benefit from the effects of inflation.”

in China International Financial Services Conference, held at Guangzhou in South China

via Jim Rogers Blog: Jim Rogers On Commodities Price Outlook.

Sprott to buy Auriga Energy

i like this deal, and the market does too!   in summary, SCP will pay out $60m cash and $40m in SCP shares to own approximately 81.4% of the Acquireco Shares, which will then be debt-free, have $140m tax losses to carry forward, and no longer “capital constrained” ie: ready to rock …

Canadian investment firm Sprott Resource Corp (SCP.TO) said it has agreed to buy private oil and gas company Auriga Energy Inc in an all-stock deal, to capitalize on Auriga’s portfolio of assets.

via UDPATE 1-Sprott to buy Auriga Energy in all-stock deal | Markets | Markets News | Reuters.

Assets

• 81.8% working interest in 25,600 gross acres of land (20,941 net) in Kaybob.
• 4.6% working interest in SemCAMS Kaybob Amalgamated (KA) Plant (the “KA Plant”), providing a significant reduction in operating cost structure.
• Mainly 100% working interest in 8,786 gross acres (6,150 net) in Redwater Property (Township 55 and Ranges 20 and 21W4).
• 100% working interest in 1,920 gross acres (1,920 net) in the Bigstone area (includes Township 60 and 61, Ranges 21 and 22 W5).

Reserves

Sproule Associates Limited (“Sproule”), an independent qualified reserves evaluator, assigned the following reserves to Auriga effective December 31, 2008 (using escalating prices as at December 31, 2008) and incorporating NI 51-101 and COGE Handbook reserve definitions as follows:

	Proved Developed Producing	Total Proved	Proved plus Probable
Company Gross Reserves
Light/Medium Oil (MBBLs)	807.8	1,141.0	2,018
Natural Gas (MMCF)	24,676.4	40,240.7	63,879.3
Natural Gas Liquids (MBBLs)	2,012.1	3,455.0	5,421.2
Combined (MBOE)	6,932.6	11,302.8	18,085.7

Following Closing and the Private Placement, the reserves will be re-evaluated under NI 51-101 guidelines removing capital constraints incorporated into the Sproule December 31, 2008 review.

Production

• Current production is 51.1% natural gas, 30.8% natural gas liquids and 18.1% light/medium oil.
• Average production of 2,572 boe/d for the first seven months of 2009 (results include May production of only 1,113 boe/d due to KA Plant shutdown and an economic deferral of 400 boe/d at Bigstone).
• Approximately 400 boe/d of natural gas production is currently shut in at Bigstone (this production was shut in on May 31, 2009 for economic reasons and is expected to resume production January 1, 2010 with no capital costs).
• Current production is divided by area as follows: 73% (Kaybob), 25% (Redwater) and 2% (Minors).

Financial

• Net debt of approximately $65 million. It is expected that funds from the Private Placement will be used to pay out the current credit facility.
• For the six months ending June 30, 2009, Auriga had cash flow from operating activities of $11.0 million and interest expense of $2.2 million. Cash flow from operating activities included $4 million in realized gains from hedging activities.
• Approximately 558 bbl/d of oil hedges in place for 2009 (average floor of US$64 and an average ceiling of US$79.70) and 540 bbl/d in place for 2010 (average floor of US$75 and an average ceiling of US$95).
• Approximately 4,732 mcf/d of natural gas hedged for 2009 (average floor of $6.74 and an average ceiling of $8.30), 4,340 mcf/d for 2010 (average floor of $6.30 and an average ceiling of $8.35) and 6,200 mcf/d for the first six months of 2011 (average floor of $5.43 and an average ceiling of $6.77).
• Tax pools of $140.2 million as at December 31, 2008.

canadian home prices …

CMHC was formed as a crown corporation in Canada after World War II to address the shortage in housing. It’s mandate was to make home ownership accessible to all Canadians. CMHC primary deliverables is mortgage insurance and mortgage backed securities. Think Fannie and Freddie.

CMHC admits that it was ordered to approve as many high risk borrowers as possible to prop up the housing market and keep credit flowing. 42% of all high risk applications were approved, a 33% increase over 2007.

While many banks were flogging that it was a great time to buy a home, not one of them increased their mortgage holdings. Between the beginning of 2007 and 2009 Canadian Banks increased their total mortgage credit oustanding listed on their books by only 0.01% (see CMHC chart below). One has to question if real estate was such a great investment, why didn’t they want to touch it?

Even at the zenith of the US housing bubble, prices peaked around $250,000 US while incomes were around $47,000 US. In Canada, incomes are $44,000 and prices are now at $326,613. If I have evidenced to you at this point how risky our lending has been, how are we so different than America? One might even say that we are much worse.

None of this is sustainable. This will all end very badly for our nation and taxpayers in the next couple of years.

via america canada – Economic Analysis and Discussion: CMHC – Canada’s Breaking Point.

Julian Robertson: US May Face ‘Armageddon’ If China, Japan Don’t Buy Debt

Julian Robertson is a legend; when he speaks – I listen.

Robertson had the best hedge fund record throughout the 1980s and 1990s. It is reported that the compound rate of return to his investors was 32%. During his active years, he was considered to be the “Wizard of Wall Street.” His hedge fund, Tiger Management, became the world’s largest fund, which peaked at over $23 billion invested.

He seems to appear on CNBC once a year, this is our opportunity to learn via osmosis.

A 30 minute interview below on CNBC – watch it; you’ll see I am not the only one who “talks crazy”

One portion of it below:

The US is too dependent on Japan and China buying up the country’s debt and could face severe economic problems if that stops, Tiger Management founder and chairman Julian Robertson told CNBC.

“It’s almost Armageddon if the Japanese and Chinese don’t buy our debt,” Robertson said in an interview. “I don’t know where we could get the money. I think we’ve let ourselves get in a terrible situation and I think we ought to try and get out of it.”

“If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent,” he said. “It’s not a question of the economy. It’s a question of who will lend us the money if they don’t. Imagine us getting ourselves in a situation where we’re totally dependent on those two countries. It’s crazy.”

“That’s much worse than not buying,” he said. “The other thing is, they’re buying almost exclusively short-term debt. And that’s what we are offering, because we can’t sell the long-term debt. And you know, the history has been that people who borrow short term really get burned.”

The only way to avoid the problem, he said, is to “grow and save our way out of it.”

“The U.S. has to quit spending, cut back, start saving, and scale backward,” Robertson said. “Until that happens, I don’t think we’re anywhere near out of the woods.”

via Fund My Mutual Fund: Julian Robertson: US May Face ‘Armageddon’ If China, Japan Don’t Buy Debt.

Munger: Treasury and Fed are “all-in”

Berkshire Hathaway’s Charlie Munger recently:

“In poker terms, the Treasury and Fed have gone “all in.” Economic medicine that was previously meted out by the cupful (pumping dollars into the economy) has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation.”

Doug Kass

If value is in the eyes of the beholder, I need glasses — the recent surge in sentiment and in share prices has left me out in the cold. As I said previously, my bearish thesis has been that investors would look through the “statistical” domestic recovery in the improving earnings cycle and in the temporary or artificiality of the numerous stimulus policies (that we’re borrowing from 2010), and look ahead at the nontraditional headwinds that pose a threat or at least a degree of uncertainty in a self-sustaining recovery outcome.

Many market participants appear to be growing increasingly comfortable with the certainty of a self-sustaining recovery. Possible … but in my view we face a broad array of consequences (some good, some not so good!) in 2010-11.

The points I made above on the consumer are crucial to my double-dip thesis and for now, in my view, are being lost in the bull dialogue. But there are other nontraditional headwinds that will undermine economic growth:
1. Deep cost cuts have been mainstay of corporations over the last few years. Cost cuts are a corporate lifeline (like fiscal stimulus), but both have a defined and limited life. Ultimately, top-line growth is needed.
2. Cost cuts (exacerbated by wage deflation) pose an enduring threat to the labor force. The consumer remains the most significant contributor to domestic growth. Unemployment should remain high, exacerbated by many retiring later in life because their nest eggs have been reduced.
3. The consumer entered the current downcycle exposed and levered to the hilt, and net worth (and confidence) has been damaged and will need to be repaired through time and by higher savings and lower consumption. (The consumer is hurting. Last week I met with a midsized bank’s lending team. The bank is seeing a big mix change toward rising use of their debit cards (where money is in the bank) at the expense of credit cards (where money is then owed).)
4. The credit aftershock will continue to haunt the economy. The unregulated shadow banking industry is dead, as is the securitization market. All signs indicate that banks will likely remain reluctant to lend to individuals and small businesses. Just try to get a jumbo mortgage today!
5. The effect of the Fed’s monetarist experiment and its impact on investing and spending still remain uncertain.
6. While the housing market has stabilized, its recovery will be probably remain muted. (My view was supported by last week’s housing starts release). More important, there are few growth drivers to replace the important role taken by the real estate markets in the prior upturn.
7. Commercial real estate has only begun to enter a cyclical downturn. It might not be as deep as many expect, but it won’t provide much of a contribution to growth.
8. While the public-works component of public policy is a stimulant, the impact might be more muted than is generally recognized. There may be less than meets the eye — most of the current fiscal policy initiatives represent transfer payments that have a negative multiplier and create work disincentives.
9. Municipalities have historically provided economic stability during times of economic weakness — no more. They are broadly in disrepair. State sales taxes are being raised all over the country, and so are sin taxes (to shore up municipal finances) on cigarettes, booze and maybe even sugar products.
10. The most important nontraditional headwind is the inevitability of higher marginal tax rates. How will higher individual tax rates affect an already deflated consumer? How will corporations react to higher tax rates? Will rising taxes be P/E multiple benders?

via RealClearMarkets – An Interview with Doug Kass.

Honda unveils U3-X personal mobility device

Honda U3-X – Click above for high-res image gallery

We’ve seen our fair share of personal mobility devices over the past few years — from the ill-received Segway to Toyota’s i-Real. Now, Honda’s joining the minimalist motoring set with its own limb-atrophying U3-X.

Using technology originally developed for ASIMO the robot, the “U” in U3-X stands for both “universal” and “unicycle,” and that’s where the interesting tech resides. Housed within the large wheel are a series of smaller wheels that can rotate independently, allowing the awkwardly perched user to go forward, backward, side-to-side or diagonally. Like the Segway, the person piloting the U3-X simply leans in the desired direction to control the movement through the Honda Omni Traction Drive System (HOT).

Honda’s keen to point out that the 22-pound U3-X is ultra-portable and easy to use, with fold away footrests and seat cushions. A single, lithium ion battery powers the electric motors up to one hour and the maximum speed is just a few ticks under four MPH.

We’ll see the U3-X in person next month at the Tokyo Motor Show, but before then, you can get an eyeful in the gallery below and make the jump for several videos of the U3-X in action, along with Honda’s press release.

via Tokyo Preview: Honda unveils U3-X personal mobility device — Autoblog.