Ethanol??:

I am having a difficult time understanding the increased interest in bio-fuels, which in most cases is referring to ethanol. There has been a big rush to promote this as an alternative to gasoline the idea being that it burns cleaner and is a renewable resource. The problem is that it is very expensive to produce, does not produce and equal amount of power per gallon, is very corrosive to engine parts and in North America is generally made from corn which should be used for food.

I think it is interesting that the environmental movement is using Brazil as the poster child for this promotion. In Brazil more than half the vehicles run on ethanol which is produced from sugar grown in that country. The funny part is that the environmental lobby is at the same time shouting about the loss of Brazilian rain forests to agricultural use, where do they think the sugar is grown?

Is the North American consumer really willing to pay more for basic food so that they can feel better about running their SUV’s by switching to ethanol, I don’t think so. The only logical option in my mind is to look at other alternate power sources such as fuel cells or the complete redesign of the internal combustion engine. Consumers deciding to drive smaller more fuel efficient cars, I mean really do we all need an 8 passenger 4X4 to get to the mall and back, would make a big difference over the short term as well.

I missed the mark yesterday on Research in Motion (RIM-t) the earnings report was excellent and the guidance for the next quarter ids quite bullish. The announcement was delayed due to the inclusion of information that RIM is going through an internal review of their option granting policy regarding back dating.

Sound familiar, it seems that most technology companies are reviewing their option granting to see if they are in compliance with the law and that they are not in a position where they could be open to charges of fraud.

This is a joke if these companies are willing to manipulate the option price by back dating the pricing do you really think they will not manipulate the review process. Greed is a very powerful emotion and most of the management involved in these back dating schemes really believe they are entitled to the extra money and that the shareholders are not due an explanation of the process.

I suggest that anyone who buys shares in accompany that has a history of option price manipulation should not be surprised when information comes out completely out of the blue to blows the company up. Investors beware!

For more information go to www.campbellreport.com

HP & RIM in the news:

The press has been abuzz with news from the congressional hearings into the investigative techniques used by a private investigation company searching for the person responsible for leaking board meeting info to reporters.

The majority of those called to testify pleaded the Fifth Amendment in an effort to avoid testimony that could be used against them in a criminal trial. It should not have come as too much of a surprise to the legislators that these people are not willing to contribute to the circus for fear of ending up in jail.

I think it is a sad state of affairs when the lawyers that were advising the management at HP couldn’t say for sure if the use of “pretexting”, pretending to be the person in question, was legal or not. When did it become legal to use someone else’s identity to gather information and how come the phone companies do not have a solid policy on giving out this information over the phone?

I am just amazed that this type of action can even be contemplated with out someone involved saying “maybe this is a bad idea”. This whole thing got out of hand when it became personal, once that happens logic tends to get thrown out the window.

If the management of HP is not willing to do the right thing when it comes down to their own board members and employees, what will they be willing to do to their shareholders? I think investors have to ask this question before they make a decision to invest in HP shares.

The market has been eagerly waiting for the quarter earnings report from Research in Motion, the maker of the Blackberry, expectations are high that RIM will report excellent growth in subscribers with a forecast of 650,000 new subscribers this quarter and earnings of 72 cents per share.

The market will be focused on the projections for the next quarter and will expect an increase in subscribers to 750,000 – 800,000 due to the launch of the new product Pearl targeted at the consumer market.

But we will all have to wait as the conference call has been postponed. Be prepared for a disappointment from RIM as that is normally the only reason companies do not announce their earnings when scheduled. It will be interesting to see what is going on at RIM, glad I do not own any shares.

For more information go to www.campbellreport.com

Sign of the Times:

Chinese exports in July have for the first time out paced the US and taken the number one position globally. China had exports of $80.3 billion in July verses the US at $79.2 billion. This is the first time in history that China has reached this level of exports and the momentum appears to be very strong with August exports up another 12.95% higher at $90.7 billion, the US figures are not yet available. It is not very likely that the US figure will be up by more then 12.95% making this the second month in a row where China is the global leader in exports.

The movement of manufacturing capacity to China has been an ongoing process for a number of years now and the momentum appears to be picking up steam. The change in the North American economy to service verses production has been evolving over the past 30 years or more and there is no going back. The loss of the dominant global exporter position by the US should not really be a surprise.

There are many investors who do not believe the changes going on in Asia are sustainable but this latest information should be a wake up call for them. The pace of change is only picking up steam and will still take a number of years before it is complete.

Investors should be looking to Asia as the measure of the potential for investments and be focusing on companies that supply Asia with materials or services. Avoid those companies that are in direct competition with China as they are going to be facing increasing competition and loss of market share globally.

US consumers have received some mixed news as gasoline prices have declined again for the seventh week in a row, the average nationally is now $2.38 a gallon down 48 cents fro the same time last year.

On the flip side existing home sales were down 0.5% in August to a 6.3 million annualized rate and the inventory of homes for sale increased again by 1.5% for the month but is up 37.9% from a year ago. This is becoming a buyers market and median sale price declined by 1.7% the first decline in 11 years coming in at $225,000 verses $230,000 in July.

The long bull market in home prices has been fueling a large percentage of the increase in consumer spending and that support appears to be ending. This will have a significant impact on the pace of US economic growth going forward.

Investors should avoid the suppliers to the housing market such as Home Depot and Lowe’s as earnings growth will be very difficult for any in this business.

For more information go to www.campbellreport.com

More mergers and acquisitions:

Canadian Natural Resources (CNQ-T) announced that they have won the bidding contest to acquire the Canadian assets of Anadarko Canada in a deal worth $4.1billion (US).

The assets are mainly natural gas properties located in BC and Alberta that produce approximately 358 billion cubic feet of gas per day and 9300 barrels of oil daily. These long life reserves will increase Canadian Naturals production of natural gas by 25%.

Other assets include about 1.5 million acres of undeveloped properties located near Canadian Naturals current active production area. The close proximity will enhance the opportunity for synergies by fully utilizing the infrastructure already in place.

CNQ expects the purchase to increase cash flow by 24 cents per share for 2006 and 99 cents per share in 2007, total cash flow for 2006 is now expected to be $4.9 billion to $5.3 billion once the deal completes.

Two medium sized gold producers have agreed to merge and create one of the top ten gold producers globally. Iamgold Corp. (IMG-T) will pay $1.34 billion in an all stock transaction to acquire Cambior Inc (CBJ-T). On completion of the deal Iamgold shareholders will own 57% of the new company and Cambior shareholders will hold the balance of 43%.

The deal will see Cambior shareholders receive 0.42 of an Iamgold share for each of their Cambior share which values the Cambior shares at $4.83 a 31% premium over the previous trading price.

The combined company will have production capacity of approximately 1.1 million ounces of gold annually and reserves of 9.7 million ounces of gold.

The deal is expected to close by the end of November.

Sun Life Financial Inc. (SLF-T) is looking to divest or merge its US money management subsidiary MFS Investment Management. The US subsidiary has not been performing up to expectations and Sun Life is looking at a number of options in an effort to increase shareholder value.

MFS Investment Management has $168 billion under management and is currently valued at approximately $4 billion, but fund performance has not been up to par and Sun Life would like to see the unit merged into another money management company that would take control of the day to day operations.

Sun Life currently holds a 35% percent interest in CI Financial one of Canada’s largest mutual fund companies and also holds a 56% interest in McLean Budden one of Canada’s largest institutional money managers.

The US money management business is consolidating and this should be an excellent time for Sun Life to be in the market looking for a partner.

If a partner is found in the next while expect to see Sun Life shares advance on the news.

For more information go to www.campbellreport.com

Telus to convert to a Trust:

Telus has just announced it will reorganize in to an income trust structure to become the second largest trust in the country. The shares rocketed higher on the news as investors jumped in. It is expected that Telus as an income trust will increase the distribution form the current $1.10 per share dividend to approximately $4.00 per unit. This quadrupling in income to the unit holders is mainly due to the changes in tax implications when moving from a Corporate to a Trust structure.

I would not be jumping into Telus at this time due to the surge in price, I would be waiting to see if the new income trust can in fact generate enough cash on a consistent basis to payout the anticipated distributions. There will be a huge investment of capital required to remain competitive in the telecommunications business over the long term. I am not convinced that a telephone company has the required consistent cash flow needed to be a viable income trust.

Hewlett Packard is under increasing pressure due to the continuing investigation into how investigators hired by the company were able to get information on unlisted private phone numbers of reporters and HP board members as part of an internal investigation into media leaks of board meeting information.

Rival Dell is also under pressure due to an ongoing investigation by the SEC into the details of the option back dating program at Dell. Dell today announced it will be delaying the release of earnings reports until the details are clarified.

I would stay away from both of these companies as the down side risk is very high due to the increased possibility of more negative news coming out in the near future.

September 11th is now a day that everyone in North America views as a day that changed the world. The live coverage at the time was absolutely mind numbing the picture of the first tower falling was something I will never forget. The confusion about how it could happen, who was responsible, was there more to come kept everyone on edge for days even weeks after.

I am a bit surprised that the feeling that we had all shared a common experience has not remained alive after only five years. The world has not become more stable more understanding it has instead become more uncertain more violent more divided than it has been in decades or so it seems.

I do not think we have learned anything from this shared experience it seems that in many ways it is just business as usual. There has not been a continuation of the courtesy and helpfulness that was the general reaction to September 11th at the time. I think all of that has been lost in the race to retribution and the notion that if we just eliminate a few of the terrorist leaders we can all be safe.

I think we in North America have missed a golden opportunity to learn from this event and change the way we as individuals deal with each other, with respect and courtesy, which over the longer term would have a huge impact on how we deal with other nations and that would make the world a safer place.


For more information go to www.campbellreport.com

More Base Metal Consolidation:

It looks like Alcan and Alcoa could be finding a little more competition if the recently announced merger between the two Russian aluminum producers goes through.

The proposal is for OAO Rusal and Sual Group to merge which will create a company that has the potential to rival either Alcan or Alcoa and change the supply dynamics in the Aluminum industry globally. The $30 billion merger has not been completed but is another in a series of mergers that have been spurred on by high commodity prices and the need to grow to stay competitive in the global market place.

The announcement today from Chevron Corp regarding their drilling project in the Gulf of Mexico has the potential to change the long term oil supply picture for the US.

Chevron is a 50% partner along with Statoil ASA of Norway (25%) and Devon Energy (25%) in a 300 square mile property in the Gulf. The initial inducations are that this find could be the largest since the Prudhoe Bay Alaska find. This field holds a potential of 3 billion to 15 billion barrels of oil which could become a major source of supply lasting up to 20 years.

The oil is very deep approximately 20,000 feet under the sea bed and is located 7000 feet below sea level. The initial hole is a total of 28,175 deep or over 5.3 miles below sea level.

Any production from this find will be years into the future likely production will not start before 2010 and that would be if everything goes according to plan. This find will increase the pressure on all of the Gulf coast states to rethink their opposition to exploration along their coasts. It will be interesting to see which other companies announce similar finds in the area over the next few years this is likely to be a focus region for American oil companies due to relative closeness to the US market. The fact that it is US controlled reduces the long term risk to production disruptions due to political uncertainty as well.

Chevron and Devon appear to be well ahead of the pack in this region and this could be a way for them to stay out if front for a long time.

For more information go to www.campbellreport.com

Canadian Dollar on the move:

The Canadian dollar has been on a tear over the last few days moving up through 90.55 cents US. The CAN$ has also been stronger against the Euro and the Yen as well.

The move has been developing over the past few months and the trend appears to be well established. Over the next few months do not be surprised if see the Canadian dollar moves to new all time highs against all three of these currencies as an increasing number of global investors focus on the Canadian market.

The recent flurry of mergers and acquisitions is bringing a lot on interest in to the commodity producing sectors of the markets. As this interest heats up and more Canadian companies become the target of takeovers by other global player the currency will be in much larger demand and this should push the currency higher.

This interest in the mining and energy sectors is just starting so there is plenty of room for continued strength in the currency going forward. There is increasing potential for the Canadian dollar to achieve parity with the US dollar some time in the next year or so. Those investors looking for an attractive currency play should look no further than the Canadian dollar.

The decline in crude oil over the past couple of weeks should not surprise anyone as the geopolitical uncertainty premium that was priced into crude oil had reached extreme levels and now that the uncertainty seems to abated that premium has come back to more normal levels.

All it will take is another violent episode in the Middle East and that premium will return. For those looking for an attractive medium term position look at the large integrated oil companies such as PetroCanada (PCA-T) or Exxon mobile (XOM-N) as they should react to any increase in Middle East tensions.

For more information go to www.campbellreport.com