This weekend Ms. Park will be speaking at the Toronto Resource Investment Conference which is running Sept 26 and 27 at the Metro Convention Centre. On Sunday Sept 26 she will be giving a presentation at 3:30 pm EST, as well as appearing on two panels of discussion at 830am and 530 pm. Attendees can register for a fee at the door, or free in advance on the Cambridge House web site. More details of speaker times and topics are indicated on the Agenda.   more »

Ms Park was a guest last night on CBC Newsworld at 6:50pm est with Fred Langan, and on BNN this morning at 8:15 am est. A clip of the BNN interview is available here on the BNN website.   more »

Many years of real-time market experience does not make one clairvoyant, sadly. It can however lend some valuable perspective. Call it realism, call it wisdom; some have it sooner, some come to it later, some just never will.

There is so much excitement today about the momentum in stock prices. Those looking to think clearly must take care. Six months ago our firm were one of few optimists. As markets hit 12 year lows over a 17 month decline, in February-March we were seeing some of the best valuations that we had seen in several years. Not that stocks were "cheap" or high yielding, but relative to several years of uber-expensive, stocks were starting to look relatively attractive.

Fast forward six months and market sentiment has changed 180 degrees. Risk assets around the world are exploding (once again) fuelled with the liquidity of "free" money from government intervention. We can see this pretty much everywhere that we look in the world. The Russian stock market is up 99% year to date, China is up more than 100%. (although these markets are still down heavily from their cycle peak); all dramatic shock and awe. But this is where the plot thickens.

The gains off the March lows have not been fuelled by organic revenue and earnings expansion but rather by an expansion of the multiple buyers are willing to pay for anticipated future earnings. Experience tells us that eventually the present valuation imbalance that we are seeing today will be corrected either by an actual and dramatic increase in corporate revenue and earnings, or by a decrease in stock prices.

Longer term, we see a pick up in revenue albeit at a modest pace as a reasonable probability. But in the more immediate term we measure that stocks today are over-bought and over-priced. Sentiment has gone from depressed to manic euphoria in a matter of 6 months. This is not typically the way lasting bull cycles begin. Real economic recoveries begin gradually and build over time with the stock market climbing a wall or worry as it goes...   more »

Stock markets put on a happy cheer today for higher than predicted August US Retail Sales data: 2.7% M/M ahead of the market consensus for a more modest 1.9%. But stripping out the massive one-time-juice from cash for clunkers and higher oil prices, core retail sales actually rose by a more modest 0.6% M/M. Running with this 'good news' many pundits are heralding the much desired return of the US consumer. If we look at the real product of cash for clunkers though, we have to admit a less-lasting benefit than we would like.

I am all for greener cars, and there was doubtless some gains made in fuel efficiency by handing in older cars for new. But after this marginal benefit, the net effect is likely to be more negative. For one thing cars that were older and therefore largely paid for have now been replaced with cars that are new and mostly financed. Cars aren't exactly appreciating assets. The government program has really prompted consumers to spend more and save less again; precisely the disastrous approach that got us into the mess in the first place. Secondly, we have once again borrowed growth from the future- car sales- and spent it today. Once people have a car payment, it is harder for them to buy other things in the future. This is the case, even if they are able to keep their jobs, and their houses--which for many, still remains to be seen. Buying new cars in response to a government incentive looks good this quarter, but likely increases the risks ahead.

I am happy to see some signs of life in the economy, but one month's data born of government stimulus doesn't declare a recovering consumer.

This Reuters clip reminds us that at this point, in one of the harshest economic periods in history, the story of most consumers in the world today is not so much about recovery as it is about survival. Watch: Time of Crisis.    more »

I must admit: some days life on earth can seem a little dark. Sometimes it can seem like we humans are rather hopeless creatures. Too big to fail? More often it can seem like our more serious issues are just too big to fix. Never mind the financial system for a moment, what about water management, food and the sustainability of our eco-system? Wasn't it David Suzuki who said we are all speeding head-long into a brick wall driving a Mini and arguing about who gets to sit in the front seat?

A few years ago I saw an Astrophysicist being interviewed about the evolution of our planet and the fate of humans. He acknowledged that we were very likely destined for extinction eventually but "that was ok". He was calm about it; I will never forget the peace he seemed to possess.

This excellent video clip about the Big Bang gave me a similar sense of peace about our world. Not that it is hopeless. Not that we should give up or give in, or not keep trying to make things better. But in the end, we are not ultimately in control of our destiny. Whether we believe it was “God” or random, there was definitely a larger energy force that created our universe. We are perhaps only one phase in an enormous boom and bust life cycle that will carry on throughout infinity. Food for thought…

   more »

First is Nouriel Roubini reminding us that although we are likely to see a couple of positive growth quarters born of government stimulus, there are significant problems still overhanging the world recovery and why the Euro zone is in worse shape than the US. See Ambrosetti forum 2009: The Rising Risk of a Double Dip.


And from the World Economic Forum meeting in China this week, FANG XINGHAI, Director-general of the Shanghai Metropolitan financial services office, on the need for China financial reform and why Chinese people are culturally averse to spending on credit. See Fang Xinghai on The need for China financial reform.   more »

Our technical analyst Cory Venable gave me an interesting picture this week of relative risk and reward in the S&P 500 today. Dividing the VIX (Volatility Index) by the price level of the S&P 500 Index, we can see buys were triggered for "a trade" in both November 2008 and March 2009. What is interesting now is that with stock prices about 50% higher than March and volatility about 70% lower than the highs of last November, this risk ratio has recently been ticking up again. A third test of the dotted trend line may present another buying opportunity ahead.

   more »

The number of wealthy individuals and families filing for bankruptcy jumped 73 percent in the second quarter from a year earlier, according to the National Bankruptcy Research Center. See: Bloomberg: Wealthy Families Face Bankruptcy

"Wealthier people filing for bankruptcy typically have large homes, two car payments and children in private schools, said Leslie Linfield, executive director of the Institute for Financial Literacy in Portland, Maine, a credit-counselling and research group.

“You’re living on the edge, you’re juggling those financial balls,” Linfield said. “When one ball goes, they all fall down.”

Listings of homes for sale worth $1 million or more increased 27.3 percent in July from October, according to Zillow.com, a Web site that tracks real estate transactions. The number of homes sold with a value between $1 million to $2 million fell 23 percent in July from a year earlier, according to the Chicago-based National Association of Realtors. There was a 21-month supply, up from 16 months last year."

This is US data but the spike in bankruptcy filings across all socio-economic groups is up all around the world...   more »

Meredith Whitney, founder and CEO of the Meredith Whitney Advisory Group, discusses financials and the state of the credit market on CNBC. Two things I appreciate about Whitney are her ability to explain the interconnection of banks, credit, housing and the economy in a common sense way; and the fact is that she is now given lenghthy time for her interviews which allows for a fuller explanation of her thoughts.

Bottom line:

Nothing fundamentally has changed with the banks. The government intervention has just kicked the can down the road. She expects another major leg down in the stock market:




And "There's no doubt that home prices go down dramatically from here.":...   more »

An article in the Washington Post this morning reminds us of a major headwind now coming back to the foreground over the next several months: mortgage resets. Fitch Ratings estimates that 70 percent of the $189 billion in outstanding option ARMs will reset to higher payments by 2011.

Option ARMs, also called pick-a-pay loans, allowed borrowers to choose how much to pay each month. Nearly all the borrowers who took out this type of loan from 2004 to 2007 chose to pay less than the interest due. Sometimes they paid as little as 1 percent interest. But the loans eventually require the borrowers to start paying the principal and full interest rate. This rate reset will cause monthly payments to increase an average of 63% over more than $1,053 a month. This type of cost increase will be effectively impossible to pay for the hundreds of thousands of homeowners who bought too much house at bubble prices. (Not too mention those who are now unemployed).

The most severe problems have surfaced in states with the steepest price drops. About 75 percent of option ARMs financed homes are in California, Florida, Nevada and Arizona, where prices have plunged on average 48 percent from the second quarter of 2006 to the first quarter of this year. Most of the effected people will be unable to refinance into lower rate payments because their houses are now worth much less than the loans.

The overall impact of the Option ARM resets should be less than from Subprime over the past 2 years, but the drag of still increasing housing supply and the negative knock-off effects of more families going under are going to continue to be felt in the economy for at least the next 2 years, maybe longer.

See: Another Wave of Foreclosures Loom   more »

A friend sent me a link to a painful but potentially enlightening New York Times article this week: Software Entrepreneur’s Property Is Sold at Auction. This story is common but too little discussed; and the lessons from it can be helpful to all that will hear.

John McFee, started McAfee Associates in the late 1980s to sell computer antivirus software, and made a fortune of about $100 million by 1994, when he sold off the shares of his company, about two years after it went public. Mr. Mcfee then set about losing his fortune in a classically human string of bad investment choices and reckless spending. Proving once again, that when it comes to losing money 100 million can go just as easily as 100 thousand when deployed with disrespect.

Over the past 15 years, McFee had built several homes in remote locations, pouring in incredible sums for recreational pursuits like movie theatres, flying light-weight planes, plane hangars, guest houses and a fleet of antique cars. The collapse of real estate prices and the stock market the past couple of years wiped out big chunks of his capital, forcing him to sell off assets at a fraction of what he had spent on them. All of this underlines the wise adage that money goes where it is wanted and stays where it is well care for. It also reminds us that dumb buying and spending is not "investing"; the price we pay is our greatest risk; and no matter how much money we have, if we spend more than we make we will run out.

Hopefully Mr. McFee is enlightened by his experience and now wiser for it. Hopefuly others can use Mr. McFee as a inverse mentor and learn from his story without having to make the same mistakes. Remember: spend less, save more; once you sell your business protect your capital; timing is everything; don't lose money...don't lose money...humility and self-discipline above all else.   more »