The Campbell Report

A New Decade A Changed World:

2010-01-06T14:59:00.000-08:00

As we start a new decade investors should take some time to reflect on the previous ten years and how those years of economic turmoil are likely to impact on this new decade. It seems to me there will be two long term economic trends that carry over in to this new decade and will have a profound impact going forward.

The first and likely the most powerful trend is the continuing economic growth in Asia. China and India are starting off the decade in a position of economic strength that will give these countries a huge advantage over the next ten years. The development of a strong and diverse middle class will generate enormous internal economic activity that will power the expansion through any short term softness in western growth. By the end of the decade China and India will be global economic powerhouses set to rival the US economically. The entire Asian region will be big winners going forward as the middle class expands and demands more and more modern and diverse consumer goods.

The second trend (concern) is the unprecedented expansion of debt by the Western Industrialized nations. In an effort to relieve the financial stress of the credit meltdown Governments have issued debt at an unprecedented rate, the rush to stop the economic meltdown regardless of cost will have extremely negative long term effects on the economy. I believe that Governments have set in motion the potential for rapid and debilitating inflation that will cause extensive and devastating economic damage across the entire economic spectrum.

As a long term strategy I would stay away from debt issues by all Western Nations, consumer, communications, transportation and financial stocks. I would be long gold, energy, industrial commodities, agricultural suppliers and Asian industrials.

A LOOK AHEAD TO 2010:

2009-12-29T16:12:00.000-08:00

The next 12 months will be full of surprises due to the continued global economic uncertainty. The year ahead will not be nearly as consistently positive as this year. We are not likely to see the same double digit returns of 2009. The global economic recovery is not as robust as many have forecast. Global growth is not being driven by the North American consumer as has been the case for the past couple of decades. The lack of consumer growth will make this expansion much slower than those seen historically.

The only reason the economy is growing at all is due to the enormous stimulus spending by Government and this can not continue at the current pace for all that much longer. Government debt levels are growing at a record pace causing some Countries such as Greece to implement draconian economic measures in an effort to bring the fiscal hemorrhaging under control. North America is not immune to this escalation in debt which is causing extreme pressure in other regions.

Global central banks are going to be under pressure to keep money flowing freely, but the reality is that this cannot continue and when the taps are being turned down it will be a very unpleasant economic environment for the vast majority of people in the industrialize world. The pain will be nearly as disruptive as the financial meltdown was.

The excesses have been far too extreme for the next stage to be anything but a slow painful climb out of the current situation.

Uncertainty tends to breed contempt and I am certain there will be a substantial amount of contempt as both the central banks and governments change course. Be prepared for very uncertain and unpredictable markets later in 2010. The uncertainty will be centered in North America and Europe, with the only glimmer of economic growth showing up in Asia.

Areas of opportunity are likely to be seen in precious metals as investor’s hedge turmoil, base metals as the Asian economies move forward and the agricultural sector as the emerging economies continue to expand the middle class creating increased demand for a more diversified diet.

Have a safe and profitable New Year, but be careful out there.

Bank bonuses hard to justify!!

2009-12-10T12:22:00.000-08:00

An announcement by the major Canadian Banks regarding bonus payouts should come as no surprise. The bonuses this year are expected to set a new record for the industry totalling $8.3 BILLION. This after these same institutions who came crying to the government a little over a year ago that they needed to be bailed out to the tune of $25 billion in order to stay competitive. This is nothing short of thumbing your nose at the Canadian Taxpayer and rubbing in the fact, that the entire industry is manipulating the Politicians with talk of all the dire consequences if they are not appeased. Tax payers globally should be out raged by the arrogance of the management in this industry.

The banking industry in Canada is one of the most stable globally but it has very little to do with the industry itself but everything to do with the protective environment they operate in. There is very little competition due to legislated restrictions on foreign operations in the country. This has insulated the Canadian financial services sector from the turmoil seen in other countries. These legislated restrictions have an inordinate positive impact on the profitability of Canadian financial institutions. By the same token Canadian companies trying to raise capital are limited by this legislation as well.

The lack of foreign competition in Canadian Capital markets has allowed for a very stable and profitable financial services industry to develop. For shareholders to allow bank management to take all the credit and pay themselves as though they alone were the reason for the dramatic turn around in profitability seems to me to be a bit far fetched and stretches the credibility of the industry.

Rates stay low

2009-12-09T13:11:00.000-08:00

The Bank of Canada has sent a bold message to the global financial markets by leaving the bank rate at 0.25% and indicating a commitment to keeping rates at or near zero for a considerable time in to the future.

The lack of consumer confidence is keeping the Bank of Canada on hold much longer than expected. This low interest rate environment could be in place till well into next year.

My concern going forward is that the real estate market could become substantially over valued due to historically low interest rates. If low rates are available over a long period of time it becomes ingrained in the price and creates a false pricing model that will have to be deflated at some time. The Bank of Canada has to walk a very fine line and be ready to act quickly in order to avoid a made in Canada real estate collapse.

The relatively low Government budget deficits will give the Bank of Canada slightly more flexibility relative to other central banks. Deficits at all levels of Government in Canada are low when compared to other industrialized nations offering more economic resilience going forward.

Now is not the time to be making bold investment moves as the global economy is still not showing consistent signs of growth. Central Banks are offering accommodating economic policy but the financial services companies globally are not following through with access to capital. This lack of cooperation by the major banks is going to delay a strong economic recovery and puts all of the stimulus measures at risk of failure.

This near term economic uncertainty will be supportive of gold and will keep currency markets volatile over the coming weeks or possibly months.

Food inflation is gaining strength:

2008-01-29T12:44:00.000-08:00

A combination of factors is driving the price of basic foods up and this trend is not a reaction to seasonal factors or changes in crop yields due to drought as has been the case in the past. In the past food prices tended to move up due to crop failures from droughts and other weather related factors. The current trend is partially a reaction to lower crop yields in Australia and Brazil, with a considerable influence from the ridiculous push to produce ethanol as an alternative to gasoline in the US. But these factors can only account for a portion of the increase in prices, the main force behind the increase in basic foods such as wheat, corn, soybeans, sugar, coffee etc. is the added demand for these commodities from an expanding middle class in Asia.

In Asia millions of middle class families are being created annually as the average income increases so does the ability to diversify their diet from the previous subsistence diet of rice, fish and poultry to start to include beef, pork and additional meals over poultry. All of this additional meat is creating a huge demand for feed grains such as corn and soybeans. One thing is certain once the diet is diversified it is highly unlikely that those consumers will go back to the old subsistence diet regardless of the additional cost, it has been proven that a diversified well rounded diet can increase the size, strength and mental ability of children it also adds to the longevity of a population so going back is not going to happen.

As Asia continues to create new middle class families by the millions the upward pressure on the price of food will continue, likely for decades. This new trend will create opportunities for companies supplying to this sector such as fertilizer companies, seed suppliers, transportation and equipment suppliers.

PetroChina now the world’s largest:

2007-11-05T11:49:00.000-08:00

If you needed confirmation that the Chinese stock market is over valued look no further. PetroChina tripled in value on its first day of trading in Shanghai. The company now has a market value of over $1 Trillion, the first company in history to do so making it the largest company in the world when ranked by market capitalization, larger than the market value of Exxon and GE combined.

The risk in the Chinese equity markets has gone through the roof and this latest example of extreme valuation is just another indication of the excesses in the market. As I have been saying for months, stay away for direct Chinese investments but continue to invest in companies that supply the materials required to build the industrial infrastructure and complete the modernization of the Country.

For more information go to www.campbellreport.com

Citibank cleans house:

2007-11-05T11:46:00.000-08:00

The largest bank in United States has just accepted the resignation from CEO, Charles (Chuck) Prince, after announcing that the firm will be taking a write down of approximately $11 billion (that’s billion) due to exposure to the subprime mortgage sector. Investors are getting out in a big way as indicated by the share price decline of $2.20 or 5.85% today.

The question for all investors is have the financial companies such as Citibank and Merrill Lynch come clean on their exposure to the subprime slime they helped create? I would suggest that is not likely and that we will be seeing additional substantial write downs going forward as well. When the new CEO is appointed at Citi and Merrill you can bet there will be another write down, that has just come to light, just like a new President or Prime Minister does when taking over power, blame the last guy with as much as you can get away with.

I would stay away from financial shares until the real final number is out and that won’t happen for months.

For more information go to www.campbellreport.com

Copper new uptrend?

2007-04-03T13:21:00.000-07:00

The price of copper has been on a tear over the past few weeks as inventory levels worldwide fall. China which consumes about 20% of global production remains on a very robust growth trend and continues to be the main force in the copper market. The global inventory levels have fallen for eight weeks in a row and there appears to be the potential for further declines as the building season in many parts of the world is just starting to pick up momentum.

Over the past few years there has not been a dramatic increase in copper production and the opening of new mines has been a slow process. The current producers have been unable to expand production sufficiently to meet the increase in demand. New mines are going to come on stream but the time frame to get approvals and complete the permitting process can extend out to ten years in some regions. Do not be surprised when the price of copper rallies back to last years high of just over $4.00 a pound from the current level of $3.32 per pound.

I continue to be bullish on copper and would continue to hold Northern Orion Resources (NNO-T, $4.85) which is held in the Aggressive Model Portfolio originally purchased in January 2007 @ $4.33 (12% return to date or 56% annualized) initial 18 month target $8.00 and Aur Resources (AUR-T, $25.00) which has been held in the Growth Model Portfolio since March 15 2005, original cost was $8.45. (total return to date 195% or 135% annualized) 18 month target price increased to $32.00.

For more information go to www.campbellreport.com

BCE being taken private?

2007-03-29T11:54:00.000-07:00

The rumor mill is going wild on the news that BCE may be taken private by Kohlberg, Kravis Roberts (KKR). The US private equity firm has been involved in many of the most spectacular deals over the past decade or so. The firm has access to the capital required to complete this $24 billion deal.

The main hurdle will be the foreign ownership limits in place on Canadian telecom and media companies. KKR would need to find a wiling Canadian partner or partners to complete the deal. The Ontario Teacher Pension Plan already has an ownership position in BCE and would be a likely partner along with other pension plans.

If this deal goes through it seems that this will potentially be one of the unintended consequences of the Governments decision to stop the creation of income trusts. If BCE had been allowed to convert to a trust structure I doubt that any of the unit holders would be willing to tender to an offer taking the company private and give up the high income distributions. The common shareholders will be much more receptive to an offer for this lackluster performer. BCE shares have basically gone sideways for nearly 5 years as management tries to refocus the company back to its core businesses.

If you currently own BCE shares be prepared to accept an offer from a group led by KKR and say good bye to another Canadian icon stock as global investors continue to see value in the Canadian market.

For more information go to www.campbellreport.com

Canadian Budget 2007:

2007-03-19T15:36:00.000-07:00

The Conservative Government has just tabled their newest budget; the budget has a lot of new spending initiatives mainly aimed at the provincial governments for infrastructure, education and health care.

The Federal Government has tried to meet the requests of many special interest groups which appears to be a strategy by the Conservatives to divide and conquer the opposition in the next election. If the opposition parties defeat the Government on this budget they will be penalized by Canadians who do not want to go to the polls again so soon.

The Conservatives have made some headway on the so called fiscal imbalance by offering a substantial increase in the transfer payment system which will potentially become more flexible and can be tailored to the individual provinces requirements.

The budget does have one interesting change that is the ability of a family to file jointly which will eliminate the marriage penalty. Now Canadian families will be treated equally regardless of whether they are a one income or two income families, reducing the penalty forced on a family where one spouse stays home to care for the children.

I am a bit surprised that the budget did not deal with any changes to the capital gains taxes as many had expected and the government had hinted at, also that the Government decided to reduce the investment incentive for the development of the oil sands projects.

The Government is going to apply $9.2 billion to debt reduction but has increased spending by a considerable amount. The Government did not change the current structure of the tax brackets which will hurt the average taxpayer over time.

Generally the budget meets a lot of the concerns expressed by Canadians recently, it does not dramatically change the average Canadians tax bill and it will not add any impetus for increased investment but that being said it does not hinder the economy either so that economic growth should continue to be robust going forward.

For more information go to www.campbellreport.com

Sub prime will be the dot com of 2007:

2007-03-14T16:07:00.000-07:00

The sub prime mortgage market is sending shock waves through out the equity and bond markets. Many investors will ask what is all the fuss about. The answer is that the sub prime segment of the mortgage market has ballooned over the past four years as lenders scrambled to expand market share.

Sub prime mortgages are those that are issued to borrowers with less than attractive credit histories or mortgages that have extremely lax terms such as zero down payments. The explosion in sub prime mortgages generally happened in areas with substantial increases in home prices. The assumption being that the lender could justify the mortgage due to an anticipated increase in real estate prices which would protect their position.

Over half of all the mortgages currently out standing were issued in the last three years, and a large percentage of those would be considered sub prime. As real estate prices continue to soften over the next few months the number of defaults in sub prime mortgages will increase dramatically.

Investors have to be very careful going forward as it is not going to be easy to see which lenders will be most affected by the increase in default rates. Many of the major financial institutions have been funding the expansion in mortgages and will have substantial indirect exposure to this segment of the market.

The fall out from this huge increase in lending risk will hit a number of sectors of the stock market. Avoid any and all sub prime mortgage lenders, small regional banks and trusts and be very vigilant in looking at the details of loan loss provisions for any of the major lenders as well. The home builders and building supply companies are going to be hit hard as the number of homes for sale jumps due to foreclosure action. The retail sector will be hit as many borrowers cut down on consumption in an effort to hold on to their homes.

This is only the beginning of the slide in the financial services sector and the process will take months to complete and there will be a lot of tears shed before this is finished.

For more information go to www.campbellreport.com

Look to the land of the rising sun:

2007-03-08T13:55:00.000-08:00

The economy in Japan over the past year or so has been showing consistent signs of improving. The previous cycle of deflation appears to have ended and prices of most goods and services have stopped going down. Consumer confidence is starting to improve and corporate profitability has turned the corner as well. The Japanese economy has benefited from increased trade with China as well.

The Japanese economy has been hampered by a decade long fight with deflation which started in real estate and quickly spread to the rest of the economy. The extreme valuations that occurred in real estate took years to correct and over that time frame the Japanese consumer drastically reduced consumption.

Real estate prices appear to have stabilized and that has helped to embolden the consumer, this increase in consumer activity has helped to push up corporate profitability which has helped to reduce the jobless rate in the country.

All of these factors are starting to have a positive impact on the over all Japanese economy and once the psychology of deflation has turned around to one of optimism and growth the trend will last a considerable length of time.

An efficient way to get access to Japan is by utilizing Exchange Traded Funds (ETF’s) the ishares MSCI Japan Index Fund (EWJ-N) tracks a broadly based index of Japanese stocks. The top five holdings in the fund are Toyota, Mitsubishi Financial, Mizuho Financial, Sumitomo Financial and Canon Inc. The fund is quite large approximately $14 billion and very liquid with 1 billion units out standing. This is an inexpensive fund with a management expense ratio of only 0.59%.

For investors looking to diversify into a strengthening international market Japan appears to have the potential to out perform many other regions over the next 18 to 24 months.

For more information go to www.campbellreport.com

China and Greenspan upset markets:

2007-02-27T14:25:00.000-08:00

The sell off in China over night has put North American combined with Allan Greenspan’s caution that the US economy could be in recession by the end of the year put investors in a selling mood. The Dow Jones Index at one point was down over 550 points. The S&P/TSX was down over 400 points the China sell off triggered investors to crystallize their profits.

The main theory seems to be that the economy in China may not be as robust as last year and that led to a sell off in the commodity stocks even though the commodities themselves were stable. The uranium sector got hit hard on the assumption that China will not follow through on the expansion of their nuclear power plants.

All of this is giving investors an opportunity to buy base metal stocks at much better prices than they were. The basic fundamentals have not changed in Asia only the stock market levels have changed. The market in China has been seeing an excessive amount of speculation over the past few months being fueled by the huge run up in prices over the past year. The speculators are generally unsophisticated and have been using leverage to increase their exposure, this always ends in tears and it will be no different this time.

North American investors have to keep the fundamentals in mind and realize that the markets have been going up steadily all year and have been due for a set back. The current sell off may extend for a week or two but over that time frame there are going to some very good buying opportunities. Investors have to ignore the shouts by the media that the end is near, they have never been able to call the top or the bottom of a market move before and I doubt they will be able to do it this time either.

For more information go to http://www.campbellreport.com/

GM rumored to be looking at buying Chrysler:

2007-02-20T14:29:00.000-08:00

The rumor mill is just humming with talk of GM buying Chrysler. This would be a huge deal and would change the dynamics in the global auto sector. The notion that the largest car maker in the world would buy the third largest is quite intriguing.

If this deal does go together it will create a flurry of auto mergers just so that the other car makers don’t get buried. The deal would likely be the final nail in the Ford coffin and force the company out of business. Ford has not been nearly as aggressive in making changes as it should have and I believe that none of the other auto makers would be willing to take on the risks of merging with Ford at this point.

The potential for a massive change in the auto sector is very high if this first deal gets finalized. The rush to achieve similar economies of scale will be dramatic. The rationalization of plant and personal will be massive as well. The layoff numbers we have seen recently will be nothing compared to the potential layoffs that will be planned due to the consolidation of the entire global industry.

The only way this deal makes any sense is if the newly merged company reduces duplication and cuts the number of models down to only a couple of dozen not the 100 or more currently available. I wouldn’t want to be in the auto parts business if that happens.

For more information go to www.campbellreport.com

Institutional Investors looking at Europe:

2007-02-14T11:41:00.000-08:00

Merrill Lynch has released an updated survey of institutional investors and the current survey reports a very bullish sentiment by these professional investors. The survey also indicates that the bullishness is not reserved just for American markets but surprisingly there is a renewed interest in European shares.

It seems to me that the increased interest in Europe is not consistent with the deteriorating fundamentals in the region. The European Central Bank (ECB) has been focused on fighting inflation for so long they don’t see anything else. This stance has forced the ECB to increase interest rates over the past year to the point where they are now higher than US rates even as the economy in Europe has only seen small increases in GDP growth over that time frame.

The potential for continued economic growth diminishes with each interest rate hike. The impact of interest rate hikes on economic growth often takes 6-9 months to show up. The previous interest rate increases by the ECB are only just starting to have an impact on growth and the full impact is still likely months away.

The focus by the ECB on inflation and only inflation will reduce economic growth over the next year or so and slower growth will lead to lower earnings growth which will cause the equity markets in Europe to decline. Those getting in to European equities now have missed the easy money and are now taking on increased risk and reduced potential profits, not a recipe for successful investing.

For more information go to www.campbellreport.com

Winning with Finning International (FTT):

2007-02-13T15:34:00.000-08:00

Finning announced the highest ever earnings for the company in the third quarter coming in at $52.7 million or 59 cents per share verse $36.2 million or 40 cents per share for the same quarter of 2005.

The company reported revenue of $1.41 billion a 25% increase from the $1.12 billion for the third quarter of 2005. The dramatic improvement is largely due to the increased activity in the commodity sectors in both Canada and South America.

The demand for basic material in China and India has driven the prices of base metals to historically high levels and Finning is the largest Caterpillar dealer with operations in Western Canada and Chile, Argentina, Bolivia and Uruguay.

The company has been in the right markets and offering the right equipment and services for an expanding mining industry in these regions which appear to have only just started to upgrade equipment and technology in order to increase production to take advantage of the higher demand

Finning is one of the companies held in the Growth portfolio and it was included due to exposure to the commodity sector and for exposure to the global growth being driven by increased demand form Asia. First purchased in January 2005 the shares are up over 41% and appear to have the momentum to go higher.

For more information go to www.campbellreport.com

SXR Uranium One:

2007-02-12T14:49:00.000-08:00

SXR Uranium one announced a take over deal for UrAsia which sees SRX buying all of UrAsia in a share exchange where each share of UrAsia will be exchanged for 0.45 shares of Uranium One. This deal values UrAsia shares at $7.05 a 21% premium to the average trading price in over the past three weeks.

The deal vaults Uranium One up in the tier of senior producer with capacity of 7 million pounds of uranium annually. The combined company will have proven and probable reserves of 49 million pounds and total proven, probable, indicated and inferred reserves of approximately 389 million pounds of uranium.

The price of uranium has moved dramatically higher over the past three years from around $10.00 a pound to $75.00 a pound currently. The increase in demand due to new nuclear facilities coming on stream will maintain upward pressure on the price of uranium, while the addition of new supply has been slow to come to the market. The time frame to bring a new mine into production tends to be about 10 years, companies that are on the verge of bringing in a new mine or expanding production from an existing operation have an excellent opportunity for earning growth.

This merger positions SXR Uranium One as one of the larger uranium producers in the world and creates a opportunity for growth in a uranium market that is the best in decades.

For more information go to www.campbellreport.com

Changes at Home Depot:

2007-01-04T15:04:00.000-08:00

Home Depot announced the surprise departure of the CEO, Bob Nardelli, and effective January 2, 2007. The new CEO will be Frank Blake who was the Vice Chairman of the company.

The surprises just keep on coming it was reveled that Mr. Nardelli will be receiving a severance package valued at $210 million. There have been many shareholder complaints over the past few years concerned that Mr. Nardelli was being over paid and was underperforming as the CEO.

The company share price performance has been disappointing having with the share price down 8% over the past 6 years while under the guidance of Mr. Nardelli, this compared to competitor Lowe’s which is up over 200% in the same time frame.

Stock options made up a large part of the compensation package for Mr. Nardelli and Home Depot is now under investigation regarding the granting of options. The company recently stated that in reviewing their option granting procedures they have over stated earnings by $200 million over a 20 year period, this is not an inconsiderable sum.

Investors should be outraged at the severance package but relieved that Mr. Nardelli is gone, maybe a new CEO can turn the share price trend and bring some relief to the long suffering shareholders.

For more information go to www.campbellreport.com

Market Predictions 2007:

2007-01-02T10:56:00.000-08:00

The first thing I would like to do is review some of my forecasts for 2006. I find that I was right in some areas wrong in others but close in most.

I was not bullish enough on the equity markets in North America, expecting the TSX to reach a high of only 12,500 when the high for the year was just over 13,000. I was optimistic that the DOW would be the leader in the US and outperform the other major averages and that proved to be correct, but here again I was not bullish enough expecting the Dow Jones industrials to top out at just over 12,000 when the high for the year was 12,549, I was far too bearish of the technology sector with a forecast that the NASDAQ would only increase marginally to 2300 when in fact this index closed at 2470 seven percent higher than my target.

I was right in calling for high energy and base metal prices, although the strength in some of these commodities surprised me. I was far too bullish on the Canadian dollar relative to the US dollar with a target of 90-92 cents having expected the US to be in recession by now.

I was a little too bearish of the economy in North America generally and that had an impact on my interest rate forecast, calling for rates to be falling during the year. A lot of the interest rate forecasts will actually be seen this year.

In many of the forecasts I am right but maybe a little early. The one surprise which did materialize was the sell off in the income trust sector.

Now for my views on what is likely to develop over the next year.

Canada:

The TSX will continue to perform well over the next 12 months but will not be as robust as over the past 2-3 years. The TSX is more likely to see a high single digit advance reaching a high for the year in the second or third quarter of 14,000.

The TSX will continue to see strength from the commodity sectors such as energy, base and precious metals. The financial services sector will hold up well but will not be a big factor in the over all advance in the Canadian market.

I am expecting interest rates to fall as the economy shows more consistent signs of slowing, the Bank of Canada will lower rates by 0.25% five times in 2007 bringing the Bank rate down from 4.25% to 3.00% by year end.

The rest of the bond market will rally as investors realize that rates are going to decline substantially, the 30 year government of Canada bond yield will decline from the current 4.10% to around 3.25%. The 30 year Zero Coupon (strip bonds) offer an attractive capital gain potential as this happens.

Commodities:

I am expecting the price of crude oil to remain relatively high trading in a range of $55.00 t0 $70.00 a barrel due to ongoing supply disruptions. Natural gas is a little harder to forecast as the price is tied quite closely to weather conditions but if 2007 is a normal year I would expect natural gas to trade back up in to the $8 -$10 range.

In the Base metal market I would expect to see copper trading between $3.00 and $4.00 a pound, zinc in the range of $1.90 to $2.25 a pound and nickel in a range between $14.50 and $16.50 a pound. This should keep the base metal stocks in the forefront of the move higher over the year.

The price of uranium which has been moving steadily higher over the past couple of years will continue to move up and may reach $100.00 a pound as it will remain in short supply.

The precious metals have been moving up recently and this trend is likely to persist and would accelerate if the US dollar weakens as I expect. The price of gold is likely to move back to the recent high of $750.00 an ounce while silver will move through the high set this year and is likely to touch $20.00 an ounce some time in the next year.

The surprise in the commodity markets will be the surge in the grains as the world demands more variety in their foods and as the ethanol craze uses any excess corn that may be available.

US Markets:

In the US the Dow Jones industrials Index had an excellent year up 16% coming in with the best return of all the major indices. The Dow has more exposure to oil producers and this has helped to push the index higher. Going forward the Dow will have a hard time producing double digit returns in 2007. The US economy is showing signs of slowing and this will have a negative impact on earnings growth over the next 12 months. The Dow will still be the leader due to the multi national companies in the index which will see a benefit of a weaker dollar on over seas sales.

My forecast for the Dow is a moderate up move to 13,250 in the first half of the year then a slide back to around 12,000 in the last half of 2007 as recession concerns dominate investor sentiment.

The NASDAQ was up about 10% in 2006 well ahead of my expectations. The recovery of a number of major technology stocks added strength to the NASDAQ over the past six months. The technology sector still seems to be over valued to me and the excess capacity that was created in the late 1990’s has not been fully absorbed. If the economy slips at all and consumers slow down their pace of consumption price discounting in the tech sector will become even more fierce causing losses at many companies.

As the economy slows I expect the technology sector to be hit hard and with that the NASDAQ will lose value. The NASDAQ could move marginally higher in the first couple of months of the year, but after that it looks down hill all the way to the end of the year with the index closing at or below 2175 a decline of at least 10% from the 2006 closing level.

The Federal Reserve will be forced to lower interest rates starting in the first quarter of 2007 as the economic slow down gains momentum. The Fed will bring rates down for the balance of the year with the Fed Funds rate ending the year down 1.5% from the current 5.25% to close the year around 3.75%.

There are a few areas that bear watching any of these would have an impact on these forecasts. The option backdating scandal could easily blow up into a major event as the SEC and other Federal agencies dig deeper into the process. There is a distinct possibility that this could become another Enron style blow up which could have an impact on a wide range of companies, most in the technology sector creating a very negative investor sentiment towards technology companies.

The Middle East remains in turmoil, Iraq, Iran and Israel are all volatile countries there could be any number of surprises develop in the region any of which could cause the price of oil to surge to new all time highs and cause a global economic slowdown as a result.

As the Democrats take control of the house in January they may be in a very aggressive mood on trade and related areas the potential fall out could be a loss of confidence in the US or a heating up of trade disputes either of which will not be good for the global economy.

So as the saying goes “be careful out there”.

Uranium on a Tear:

2006-12-07T14:10:00.000-08:00

The price of uranium is up again due to increased concerns regarding supply. The commodity price has increased dramatically over the past two years up from $20.00 a pound in December 2004 to $64.00 a pound today and continues to power higher.

The recent announcement by Cameco (CCO-T) regarding the flooding at their Cigar Lake Mine and the uncertainty about when that project will be able to get back on line has created a fear of a long term supply shortage. Cameco is the global leader in the production of uranium and had planned to have Cigar Lake up and producing in the very near future, it is rumored that the flooding at the mine halt production for up to 5 years.

Other producers will benefit from the price increase as will any companies that can bring on new production in the relatively near future. There is a high potential that the uranium price could reach $100.00 a pound in the next year or so.

The shortage in current production is being made up from surplus military supplies, those supplies are finite and will likely run out in the next 4-5 years.

According to the World Nuclear Association there are 442 reactors operating, 28 under construction, 62 planned and 161 proposed. If all of theses new plants are completed the number of reactors will increase by 56% from current levels.

There is a huge opportunity for investors in the uranium sector, the commodity does not trade in an open market and investors will have to look at individual companies.

Cameco in the largest producer in the World and even with the set back at Cigar Lake offers excellent exposure to the sector. Cameco supplies approximately 20% of the global demand and holds the largest reserves with 550 million pound of combined proven and probable reserves. Cameco has just increased he annual dividend by 25% per share to 20 cents from16 cents.

Denison Mines (DEN-T) is an emerging second tier producer that has been on the acquisition trail over the past few months in an effort to vault up in the production ranks. DEN recently completed a merger with International Uranium Corp and is in the process of the take over of Omegacorp Limited an Australian uranium miner.

SXR Uranium One (SXR-T) is currently developing to properties the Dominion mine in South Africa and Honeymoon mine in Australia. The company expects top have the South African mine in production in early 2007 with an initial capacity of 2 million pounds of uranium annually moving to 4 million pounds by 2011. The Australian mine in forecast to be in production by 2008 with a production capacity of 800,000 pounds annually.

The uranium market appears to have the potential for a sustained move higher as demand continues to increase while supply is slowly coming on stream.

For more information go to www.campbellreport.com

Wi-LAN (WIN-T) breaks out:

2006-12-05T14:17:00.000-08:00

Wi-LAN Inc yesterday announced a patent licensing deal with Nokia, that see Nokia paying $15.2 million and transferring 93 patents to Wi-LAN in exchange for the licensing of all of Wi-LAN’s wireless technology patents.

The patents that Wi-LAN has acquired will allow the company access to a new sector, the in the high speed internet space. Wi-LAN now has access to Asymmetric Digital Subscriber Line (ADSL) technology which the company believes will have to be licensed by a number of North American companies. The enhanced portfolio of patents positions Wi-LAN for growth over the next few years.

This is the largest patent licensing deal that Wi-LAN has completed and is the first since the company reorganized. Getting out of the hardware production business and concentrating on the licensing of the patents they have developed over the past few years.

The new CEO, James Skippen, has a background in this field and was previously the Vice President of patent licensing at Mosaid Technology Inc. The company exited the broadband wireless equipment business earlier this year selling the manufacturing facility and moving the head office from Calgary to Ottawa.

The company’s shares have been on a tear over the past two days and have now broken out past the previous high set in 2004. The increased momentum and volume are very encouraging indicators that Wi-LAN has started a new up trend phase. The break out has begun and the next target is $7.50 and this could happen relatively quickly.

see www.campbellreport.com for more

Pfizer Surprise hits Drug sector:

2006-12-04T13:38:00.000-08:00

Pfizer (PFE-N) caught the market by surprise over the weekend with the announcement that the clinical trials of their promising new drug Torcetrpib have been stopped. The drug trials were being over seen by an independent monitoring agency which called for the suspension of the trial due to adverse patient reactions which have led to the dead of 82 of the participants in the trial.

The trial was being done on a global basis with 7,500 participants the cancellation of the trial sets Pfizer back regarding the potential for a replacement for their current cholesterol drug Lipitor. Torcetipib was expected to be used in combination with Lipitor as a new form of cholesterol fighting drugs.

Pfizer shares are down $3.24 to $24.62 or about 11.5% and have been a negative for the rest of the sector as well pulling down all of the other major drug company shares.

This is the main risk when investing in the drug and biotech sectors the market punishes disappointments and it can take a considerable amount of time before investors are willing to buy the shares again.

Investors who have the patients should be looking at Pfizer as a buy, the current sell off is a reaction to this one particular trial and seems to have dramatically discounted the other potential drugs in development.

For more information go to http://www.campbellreport.com/

Pengrowth deal invigorates Energy Trusts:

2006-11-29T17:55:00.000-08:00

Pengrowth Energy has announced they will buy $1.04 billion of oil and gas assets from ConocoPhillips Co. The deal meets the proposed new rules on energy trust expansion laid out by the Federal Government. The Government has set an arbitrary limit to the expansion of an energy trust to 15% of existing equity.

The Pengrowth - ConocoPhillips deal is a mix of debt and equity with approximately 65% of the funds raised by debt financing and 35% by the issuance of equity. The additional 20 million units will add about 9% to the current equity outstanding at Pengrowth.

The additional assets will increase oil & gas production by 27% to 100,000 barrels per day and proven reserves by 22%.

The deal is the first since the October 31st announcement by the Finance Minister that income trusts will be subject to income taxes in 2011 and placed a restriction of 15% on the increase in equity by a trust. The new reality in the income trust sector is that the companies will be expanding by issuing debt and there seems to be an appetite by Canadian Banks to get involved in this new stage of expansion in the energy sector.

It seems to be business as usual in the energy trust sector unless the Government changes the rules again when they finalize the process in the next few weeks. It seems appropriate to look at energy trusts with low debt levels as the most likely to have the potential to expand and grow under the new rules. Trusts with high debt levels will be severely restricted going forward and are likely to be left behind by investors.

For more information go to http://www.campbellreport.com/

Time to Prepare for Year End:

2006-11-28T15:03:00.000-08:00

This is the time of the year to sit down and review your portfolio. The review should be as objective as possible with the goal of weeding out the losers and concentrating on the winners. The idea is to go over all of your decisions and decide what went right and what went wrong, do not use this as a session to beat yourself up.

Remember that not every investment is going to work out the way you want, but if you can learn from those decisions then the investment wasn’t a total loss. There are two types of capital, real and mental, the cost of losses in real capital can be easily calculated, the cost of losses in mental capital is very much harder to quantify.

The mental capital we expend in making investments can be much more expensive that the real capital over the long term so we have to manage that segment carefully or we run the risk of trading paralysis due to uncertainty and lack of conviction.

One of the best ways to retain mental capital is to sell the losers! I don’t mean the ones that are just underwater, I mean the ones we fret about and worry about, the ones that hold us back from making new investments. If you are holding any investments that you a HOPING will recover sell them now sell them today, hope is not an investment strategy. One more thing do not ever add to a losing trade, averaging down is an almost guaranteed method of going broke.

The decision to sell is often the hardest one to make especially when you take a loss, but by ridding your account of the bothersome holdings it will free up an amazing amount of mental capital that you can compound into winning trades next year.

For more information go to www.campbellreport.com

Canadian Banks start reporting Year End results:

2006-11-27T10:39:00.000-08:00

The Bank of Montreal (BMO) is expected to report quarterly and year end results today. The expectation is that the BMO will come in with $1.25 per share for the quarter slightly below the $1.30 in the third quarter. BMO is expected to increase the dividend by approximately 12% to $2.78 per share annually.

The Canadian banks have been one of the more stable sectors in the market and have seen a lot of interest by investors looking for income. The banking sector has a long history of increasing dividend payouts over time and is viewed as stable high income common share investments.

The recent changes by the government regarding taxation of income trusts has increased the attractiveness of bank shares due to the potential for higher income as profits grow. This increased interest has pushed bank shares higher over the past month and in many cases the share price is becoming over valued. Investors should be cautious and not become over exposed to this sector as any disappointment in earnings will have a negative impact on the share price, expectations have become a little too bullish for my liking.

The rest of the banking sector reports over the next two weeks with the Royal and National Banks on November 30th, CIBC December 7th, TD and Bank of Nova Scotia on the 8th.

For more information go to www.campbellreport.com

Violence in Iraq watch out for an oil price spike:

2006-11-24T11:25:00.000-08:00

The escalation in violence in and around Bagdad is likely to have a spill over effect in the rest of the region. The sectarian violence is based on the two main Muslim sects and the different views have been causing problems for centuries.

The religious fighting appears to be pushing Iraq into a civil war and because the war is based on differences in religion it is quite likely to spread to other countries in the region. When the violence spreads you can be assured that there will be disruptions in the supply of oil out of this region to the rest of the world.

Investors should be prepared for higher oil prices in the near future owning oil producers that are not dependent on the Middle East for supply are an excellent hedge against a spoke in crude oil prices.

The Canadian market offers a number of producers to choose from, I would look first at companies with long life reserves such as Suncor (SU), PetroCanada (PCA), Canadian Natural Resources (CNQ) and Nexen (NXY). All of these companies have the majority of their properties in safe secure areas of the world.

For more information go to www.campbellreport.com

International Nickel Ventures (INV-T):

2006-11-23T17:03:00.000-08:00

Nickel prices remain elevated and appear to be in a long term bull market due to an increase in demand from Asia. Investors in a potential nickel mine coming on stream in the next few years will be rewarded from the continued high commodity prices.

International Nickel Ventures has just released an update on the potential resource in their Brazilian property. The Santa Fe and Iproa nickel deposits which are located in Goias state of Brazil. The property is being developed as a joint venture with Teck Cominco (TCK.B-T) 25% and International Nickel 75%.

The data from the completed 55,000 meter 4100 hole drill program shows an inferred resource of 109 million tonnes grading 1.11% nickel. This is an increase of approximately 20% from previous results due in large part to the inclusion of peripheral areas not previously explored.

International Nickel is well funded with $17.5 million in cash available to meet future obligations this equates to approximately 50 cents per share in cash. The expertise available from the joint venture partner Teck Cominco adds to the potential for success in the development of this property.

For more information go to www.campbellreport.com

Another Mining Mega Merger:

2006-11-20T16:24:00.000-08:00

Freeport-McMoRan Copper& Gold Inc. (FCX) has made a takeover offer for Phelps Dodge Corporation (PD) the deal has an estimated value of $26 billion. Phelps Dodge shareholders will receive $88.00 in cash and 0.67 common shares of Freeport-McMoRan for each Phelps Dodge share tendered, the cash portion represents about 70% of the total offer.

The combined company will be the second largest copper producer on the planet with combined reserves of 75 billion pounds of copper, 41 million ounces of gold and 1.9 billion pounds of molybdenum (moly). The new company has annual production capacity of 3.7 billion pounds of copper, 1.8 million ounces of gold and 69 million pounds of moly.

The combination will have very strong cash flow of $5.5 billion annually and revenue of approximately $16.6 billion. The company will be geographically diverse with operations in North & South America, Africa and Indonesia. The Freeport-McMoRan Grasberg Mine in Indonesia is the worlds largest copper & gold mine when measured by reserves.

This merger will create a global powerhouse in the production of base metals and will enhance the potential for future growth opportunities.

For more information go to www.campbellreport.com

The Future on track for CP Rail:

2006-11-16T14:58:00.000-08:00

CP Rail has increased its guidance for the coming year by approximately 13% raising earnings forecast to $4.30 – $4.45 per share up from the previous estimate of $3.95 per share.

The company expects revenue to increase 5-6% with both load volume and prices forecast to rise. The company is seeing strong demand well into 2007 this increase along with continued emphasis on productivity enhancements should add to the bottom line on a consistent basis.

The Canadian railways are in an excellent position for growth as the global demand for materials and grains supports the expansion of service across the country. CP Rail (CP-T) is an attractive buy with good long term potential for capital growth and increased dividend income.

For more information go to www.campbellreport.com

A new Political landscape what now:

2006-11-09T14:14:00.000-08:00

The recent mid term elections have changed the political landscape for the coming two years which will create opportunities for investors going forward. The Democrats will try to focus the congress on areas they feel are important to their constituents.

The Democrats have indicated that they are going to investigate the major oil companies and this could create a lot of uncertainty for investors. The US oil companies are likely to come under increased pressure which will force global investors to look at other markets for energy exposure.

The Canadian energy stocks are likely to benefit from the increased global exposure and there will be an opportunity for investors to capitalize on this over the next few months. Companies such as PetroCanada (PCA-T), Suncor (SU-T) and EnCana (ECA-T) are all well positioned to attract international interest if the US congress becomes aggressively negative on the US energy producers.

For more information go to www.campbellreport.com

Flaherty makes the worst tax decision in history:

2006-11-01T13:07:00.000-08:00

The Federal Government announced that they are changing the rules regarding Income trusts and these entities will be required to pay tax at the same rate as corporations. The credibility loss from this decision will have long term ramifications for the Canadian capital markets.

The Government has proven that they can not be trusted, investors can not be confident when they make a decision to invest in Canada that the rules will not be changed, even when the Government has stated emphatically that they would not make any changes. Capital will be very hesitant to flow into Canada and that will restrict economic growth over the longer term.

I believe that one of the over riding reasons for this change is the fear by the Federal Government that the Provincial Governments would end up with a larger share of the tax revenue if a large number of companies were to convert to a trust structure. This announcement is all about the fear of sharing power when power goes to the Government with the largest share of the tax pie.

The Government has just handed individual investors who are investing for income a 15% reduction in the value of their investments and a potential 50% reduction in their incomes. The tax grab by the Federal Government is an over reaction to the potential revenue loss due to conversions by corporations to trusts.

The smoke and mirrors of a change to the income splitting rules for those with pension income will not appease anyone who is seeing their income drop by as much as 50%.

The Government is likely to fall victim to the “law of unintended consciences” with the change on income splitting. I would be amazed if a tax lawyer and a constitutional lawyer do not get together and challenge this rule as unconstitutional on the basis of age discrimination (which it is). When they are successful then every married taxpayer will be able to file jointly and the Government will be in the position to see revenue drop dramatically as a result.

The political fall out will be dramatic as investors of all ages react with disgust to these changes, realizing that their standard of living will be effected and their plans forever changed and not for the better.

The conservative government has just assured itself of a defeat in the next election (and so they should) and will go down in history as one of the shortest terms in office. The reaction will be swift and severe the next time Canadians go to the polls, which is now likely sooner rather than later.

What a stupid move, you would think that with all the high priced help they have available Stephen Harper and Jim Flaherty would be able to make better long term decisions.

For more information go to www.campbellreport.com

Teck Cominco Third Quarter:

2006-10-30T16:46:00.000-08:00

Teck Cominco (TCK.B-T) released third quarter earnings this afternoon which showed a substantial improvement from the year before.

The company reports earnings of $504 million or $2.4 per share verses 4405 million or $2.00 for the third quarter of 2005, for the first nine months earnings have nearly doubled from $834 million to $1.6 billion. Cash flow for the quarter came in at $629 million a 32% improvement over the $476 million in the same quarter of 2005.

Teck reported average copper prices of $3.48 a pound more than double the $1.70 a year ago. The improvement in zinc prices is even more dramatic moving from 59 cents in 2005 to $1.53 in the most current quarter. The realized price for gold was $622 verses $439 per ounce last year.

Only the prices for molybdenum and coal did not move relative to the previous year and both of these commodities had made dramatic increases in 2005 and it should not be a big surprise that they have stabilized in 2006.

The recent quarter continues a string of improvements going back for nearly 2 years as commodity prices have surged with increased global demand. The global base metal markets have been under pressure recently in the belief that the US economy is slowing.

The flaw in this scenario is that the US economy is not the main driver in global commodity demand and will have a relatively minor impact on prices. The inventory level for zinc as an example is down to 110,000 tonnes enough to meet about 4 days of demand, the inventory has been dropping steadily all year long even as the US economy shows increasing signs of a slow down.

Teck Cominco being one of the largest zinc producers in the world is very well positioned to benefit from the ongoing strong global demand for the metal.

For more information go to www.campbellreport.com

Uranium the new gold!!:

2006-10-24T12:13:00.000-07:00

Cameco Corporation (CCO-T) has announced another delay at the Cigar Lake mine, on Sunday there was a rockfall that has caused the mine to flood. Cameco has not been able to contain the flooding due to a malfunctioning bulkhead door which did not seal allowing water in to the mine.

It is expected that the flooding will set back operation of the mine by at least a year. The company has not had time to fully assess the impact of the flooding but has indicated that it will add materially to the cost of developing the mine.

This bad news for Cameco is good news for other producers such as Denison Mines (DEN-T). The reduction of supply that will develop due to delays at Cigar Lake will drive the price of uranium even higher.

Uranium is in a classic situation where a shortage of supply and an increase in demand has been pushing the commodity price relentlessly higher over the past two years.

The shortage is expected to increase to 32 million pounds from 25 million pounds by 2008 due to the delays at Cigar Lake mine. These shortages have been met by recycling of surplus military uranium that supply is almost exhausted and will not be available for much longer.

The pressure is now on for current producers to add production to ensure that Nuclear power plants currently running will not be forced to shut down due to a lack of fuel.

The supply shortage is not going to be easily fixed and uranium prices will remain elevated for an extended period of time as a result.

For more information go to www.campbellreport.com

CN Rail earnings on Track

2006-10-20T11:56:00.000-07:00

CN Rail (CNR-T) has released third quarter earnings that are well above analyst expectations.

The company reported earnings of $497 million or 94 cents per share up substantially from the $411 million or 74 cents per share reported a year earlier. The main factor in the improvement can be attributed to a successful program of cost cutting. The company reported an improvement of 6% in the operating ratio bringing the ratio down to a record low of 57.4%. The operating efficiencies have been achieved with the introduction of new technology that has substantially reduced the amount of waiting time at switching yards and rail sidings.

CNR is forecasting a continuation of strong revenue growth and forecasts earnings for the full year 2006 of $3.40 per share with an expected 10% increase for 2007.

The rail industry is seeing a sustained increase in demand due in large part to the shipment of metals and other basic material to Asia. This trend is likely to be in place for some time and CNR is well positioned for growth with operations in both Canada and the US continuing to operate at peek efficiency.

For more information go to www.campbellreport.com

Ivanhoe & Rio Tinto partner in Mongolian property:

2006-10-19T10:48:00.000-07:00

Ivanhoe Mines Ltd. (IVN-T) has just announced a joint venture deal with London based Rio Tinto PLC to develop their Mongolian property. The Oyn Tolgoi gold and copper project has hit a few snags in the development process, the Mongolian government has past legislation allowing them to take a controlling interest in any development in the country.

Rio Tinto has pledged up to $1.7 billion over a number of years, the first investment totals $335 million with an additional $445 million when an investment agreement is reached with the Mongolian government. When the deal is finalized Rio Tinto will hold a 33.4% ownership position in Ivanhoe Mines.

The deal looks very good for Ivanhoe due to the infusion of cash and the access to expertise offered by the partnership. Rio Tinto is the second largest mining company in the world and will enhance the potential for Ivanhoe to complete a deal with the government of Mongolia.

The risk for both these companies is that the government is not willing to complete a deal on favourable terms and the project gets delayed to the point that nobody makes any money. I believe that risk is substantial and I would follow the Rio Tinto strategy and wait until a deal is announced before jumping in.

For more information go to www.campbellreport.com

Bank of Canada sees lower growth:

2006-10-18T14:05:00.000-07:00

The Bank of Canada has held interest rates at 4.25% again this month, sighting slower US economic as the main cause for concern.

The Bank has reduced the forecast for Canadian GDP (Gross Domestic Product) growth to 2.5% down from 2.9% previously. The Bank is also expecting the core inflation rate to increase over the short term to over 2%, the target rate, and for the core inflation rate to fall back below 2% by mid 2007.

The Bank did not indicate an imminent move to lower interest rates but has reduced their forecast of economic potential in an effort to balance their view of current capacity and the potential capacity later this year and into 2007.

The main concern sighted by the bank over the past few months has been that the Canadian economy was operating at maximum capacity which could lead to an increase in inflation pressure if not contained. That concern appears to be diminishing as the economy in Ontario and Quebec starts to show signs of weakness due to slower demand from the US.

Investors should be looking at long bonds as an opportunity to capture income and capital gains as interest rates fall due to slower economic growth.

For more information go to www.campbellreport.com

Technology sector under pressure:

2006-10-18T10:34:00.000-07:00

The technology sector has received some disappointing news from two major companies Intel and Motorola both reporting dramatically lower quarterly earnings verses a year ago.

Intel reported a 35% drop in earnings coming in at $1.3 billion or 22 cents per share verses $2.0 billion or 34 cents per share in the third quarter of 2005. The analyst’s expectation have been lowered continuously all year and were below actual performance, so Intel beats the Street, but is this really good news? I don’t think so. The price war in the chip sector has been taking a toll and it appears that the pressure may be subsiding but only time will tell. If the US economy continues to show signs of slowing you can bet that prices will continue to fall in an effort to win market share. This has all the indications of a race to the bottom. I would caution investors not to get caught up in this race as nobody wins.

The situation at Motorola was even more disappointing as revenue came in 17% higher and earnings were down 45%. The third quarter results showed earnings of $968 million or 39 cents per share compared to 41.75 billion or 69 cents per share in 2005. The previous year earnings include a gain on the Nextel investment of 39 cents per share. The cell phone market is seeing some of the same pressure as the chip market as over capacity forces prices down and shrinks margins.

For more information go to www.campbellreport.com

Markets moving to new highs so what!

2006-10-13T16:28:00.000-07:00

The Dow Jones Industrial Average has finally moved up past the previous highs achieved in January 2000. The buzz in the media has been deafening the hype about the DOW has been building as the index approaches the “big round figure” of 12,000. These round numbers tend to attract like a magnet as soon as they are with in sticking distance so do not be surprised when this happens next week.

The reality is who cares it has taken the DOW over 6.5 years to get back to the levels last seen in 2000 and the NASDAQ is nowhere near the previous highs. It will likely be a number of years yet before those extreme levels are achieved again. The technology sector is going to have to come clean regarding the abuse and manipulation of the stock option granting process and how that abuse has been at the expense of shareholder value over the long term.

The enrichment of management has been at the direct expense of shareholders and investors should be taking theses companies to task for their greed. The massive amount of share buy backs that have taken place over the past few years just to reduce the impact of the massive option granting scheme has cost shareholders dearly as they did not receive the dividends or capital appreciation that they should have.

Then to ad insult to injury we find out that not only did the management of these companies issue themselves excessive amounts of options but if the prices went against them they just backdated and reset the strike price so that they could continue to enrich themselves. Wouldn’t it be nice to be able to buy stock by backdating you purchase price too.

These companies have treated their shareholders with contempt and shareholders should now do likewise.

For more information go to www.campbellreport.com

Hedge Funds Suffering:

2006-10-04T16:34:00.000-07:00

The hedge fund industry appears to be showing some cracks with a few more revelations of mega losses coming to light. The industry has been growing at a very rapid pace and not all these guys can be geniuses. The original idea was to in fact be hedged but that seems to have gone by the wayside as all of theses new managers fight for returns they have in many cases gone to extreme positions.

Many hedge funds are now pure speculations on the direction and are making huge bets in a very narrow segment of the market. Amaranth Capital Partners is a good example of what can go wrong, the fund lost $6 billion, or 2/3rds of the entire fund, on a bet that natural gas would move higher. Amaranth has now had to close down as it can on longer operate.

These funds tend to have sophisticated investors many of which are institutional who are supposed to be aware of the risks, but I don’t think any of them would have expected a fund to have concentrated the portfolio in only one or two positions. This is not money management more like gambling. How do these guys justify their fees if they don not have a legitimate strategy and a discipline to follow it. Many of these hedge funds charge huge fees as much as 20% of the profits on the notion that they have a sophisticated strategy that justifies the fee.

Many managers are getting in to the hedge fund business because the potential revenue is so large which is the wrong reason to open a fund business. Do not be surprised to see a number of other spectacular blowups in this industry there have already been over 1000 hedge funds of 7000 or so that have shut down in the past two years. Unique genius is not that common.

For more information go to www.campbellreport.com

Ethanol??:

2006-09-29T16:39:00.000-07:00

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:

2006-09-28T15:27:00.000-07:00

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:

2006-09-25T15:51:00.000-07:00

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:

2006-09-18T15:59:00.000-07:00

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:

2006-09-11T16:34:00.000-07:00

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:

2006-09-05T16:44:00.000-07:00

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:

2006-09-01T17:31:00.000-07:00

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

Bombardier and AnorMed in the news:

2006-08-30T14:28:00.000-07:00

Bombardier (BBD.B-T) reported second quarter earnings of $58 million or 3 cents per share well down from the $117 million or 6 cents per share reported last year.

The plane and train manufacturer reported a slow quarter in its regional jets with only 26 planes delivered this quarter as compared to 39 last year. The aerospace division has seen margins decline due to competition mainly from Brazilian plane manufacturer Embraer SA. The market for regional jets has not recovered from the 9/11 attacks and Bombardier is now only producing 7 or 8 planes a month. Bombardier has been able to grow the business jet segment but will encounter more competition in this area from Embraer as well.

The company has not been able to reduce costs fast enough to off set the decline in orders and until it does is not likely to see earnings improve. There is no reason to own this company and there won’t be until the regional jet market picks up and Bombardier is able to manage costs more effectively.

Canadian biotech firm AnorMed Inc (AOM-T) is trying to fend off an unwanted takeover attempt by Genzyme Corp (GENZ-Q). The proposed $350 million offer would see AnorMed shareholders receive $8.55 per share. The news has pushed AnorMed shares up by almost 100% today as the shares closed at $10.99 up $5.44.

AnorMed is currently in stage III clinical trials with Mozobil a drug developed for cancer patients undergoing stem cell transplants. The company is also in the late stages of development of a promising HIV drug.

AnorMed management does not believe the current offer fully reflects potential shareholder value of the company which they believe should be valued in the $12 - $13 range. AnorMed management is not opposed to a takeover just not at this price.

AOM may be an interesting speculation now that it is in play, there is an opportunity to participate in a potential take over bidding war with limited down side risk.

The second quarter US GDP came in at 2.9%, slightly lower than most had expected indicating that the US economy is not as strong as first believed. This information should confirm to the Federal Reserve that their decision to hold interest rates was correct. If the payroll numbers on Friday are lower than forecast coming in any less than 100,000 and investors should expect the Fed to remain on hold and we may see a change in bias as well.

Stats Canada reported that Canadian merchandise trade surplus declined by $4 billion to $4.2 billion in the second quarter. The decline was mainly attributed to a decline in the exports of goods while imports remain strong.

The strength in the Canadian dollar has made imported goods much more attractive but has at the same time made it much more difficult for exporters to compete in the global market.

The Bank of Canada will have to be very cautious regarding any change in interest rates which would make the Canadian dollar more attractive to foreign investors creating the possibility of the trade surplus becoming a trade deficit.

For more information go to www.campbellreport.com

Banks and Consumers:

2006-08-29T15:45:00.000-07:00

The Bank of Nova Scotia reported third quarter earnings were up 19% over the same quarter last year. The quarterly earnings came in at $928million or 93 cents per share up from 77 cents per share in 2005.

The Banks Latin American and Caribbean operations showed excellent improvement and were the main driver for increased earnings, while the Canadian operations performed about the same as last year.

The Conference Boards consumer confidence index declined materially in July falling from 107.0 to 99.6, economists had expected a decline to 102.5. Over the past ten years there has been a 66% correlation between the level of consumer confidence and consumer spending.

The recent slow down in the real estate market along with higher energy prices are likely the main reason for the sharp decline in confidence, if this trend continues it does not bode well for the US economy going forward.

The Federal Reserve will be watching the jobs number closely when it is released on Friday a weak report will tend to confirm the other data released over the past month. The data has tended to indicate that the US economy is slowing, possibly more dramatically that first anticipated.

Gold and oil both fell today as there appears to be a sigh of relief that the Gulf coast will not be hit by a hurricane and that maybe Iran will be reasonable regarding their uranium enrichment program.

Only time will tell if these events are not going to be threats in the future.

The Canadian dollar continues to hold up around the 90 cent US level and the longer this holds the more likely it becomes that the Can$ goes a lot higher. It will be interesting to see if the Can$ will continue this move gaining on most currencies including the Euro and the Yen.

For more information go to http://www.campbellreport.com/

Week in review:

2006-08-25T16:20:00.000-07:00

Bank earnings have been coming in well ahead of last year and in some cases like the TD Bank dramatically higher than those in the third quarter of 2005.

The US housing market is slowing much faster than anticipated with both new and existing homes sales falling for the fourth month in a row. The only bright spot for home owners is that existing house prices did move a little bit higher in July but the pace of change was only 0.5% as the median price for single family homes moving up to $231,200 in July from $230,100 in June.

More mergers in the Canadian market, Domtar and Weyerhaeuser merge their free sheet paper divisions in a $3.3 billion deal. EuroZinc and Lundin agree to merge creating a company with a combined market capitalization of over $3 billion.

The Canadian dollar much stronger closing at 90.13 cents US as investors come to a consensus that US interest rates are not going higher.

Oil and natural gas higher on fears that tropical storm #5 heading for the Gulf Coast will become a hurricane causing damage to this region.

Nickel on the London Metals Exchange touches all time highs of almost $35,000 a tonne ($15.90 a pound) as inventory levels fall to 6400 tonnes which is around a 1 day supply.

It should be another interesting week starting Monday.

For more information go to www.campbellreport.com

Housing market gets more bad news:

2006-08-23T16:36:00.000-07:00

US existing homes sales were down a dramatic 4.1% in July coming in at a two and half year low of only 6.33 million on an annualized basis. This is the fourth month in a row of declining home sales and was well below the consensus of 6.55 million. The housing market received more bad news as the inventory of homes for sale in July rose 3.2% to 3.86 million or a 39.9% year over year increase. The only bright spot was that median sale prices were up marginally to $231,200 a 0.5% increase over June.

It seems that the Federal Reserve is seeing an impact from the interest rate hikes of the past year or so. If this trend in home sales continues it will not be too long before home prices actually start to decline as it becomes a buyers market. When home prices start to decline the consumer will see their spending power reduced and that is not going to be good for economic growth.

Big merger news in the forestry sector as Domtar and Weyerhaeuser announce a merger of some their paper divisions. The $3.3 billion deal will create the largest free-sheet paper producer in North America. Free-sheet papers are products such as those used in copiers and printers. The new company will retain the Domtar name and will be 55% owned by Weyerhaeuser shareholders and 45% by the current Domtar shareholders. The merger offers Domtar an opportunity to move into the global market as one of the largest free-sheet producers in the world.

Interesting news on global trade as Japan suggests an Asian free trade zone that would include Japan, China, India, Australia, South Korea, New Zealand and the current 10 member Association of Southeast Asian Nations (ASEAN).

This is just in the very early discussion stages but it could create the largest free trade zone in the world that would function along similar lines to the European Community (EC) and The North American Free Trade Agreement (NAFTA). The implications for growth in Asia are huge as Asia will be in a much better position to grow regardless of access to other markets such as the US and Europe.

It will be very interesting to watch and see if this idea gets off the ground.

For more information go to www.campbellreport.com

Another Merger Monday:

2006-08-21T17:06:00.000-07:00

The merger activity in the Canadian mining sector continues as Eurozinc Mining Corp has agreed to merge with Lundin Mining Corp. The merger will create a global base metal producer with operations in Portugal, Sweden and Ireland. The combined company will have a market capitalization of close to $3 billion and will produce 450 million pounds of zinc, 200 million pounds of copper, 175 million pounds of lead and 6 million ounces of silver annually.

This merger is another in a series of mergers in the base metal mining sector and it will not be the last as companies try to grow by acquisition in an effort to remain globally competitive.

This week and next the banking sector will be releasing earnings and it appears that it will be another excellent quarter for the Canadian banks. It is expected that loan growth will be enough to offset a slower investment banking segment. The first to report will be the Bank of Montreal on Tuesday and then the Royal Bank on Friday. The Bank of Nova Scotia, TD Bank and the CIBC will all report next week.

The financial services sector has been a very stabilizing influence on the Canadian market this year as investors have viewed this sector as a safe haven during high volatility. Expect to see more interest in this sector as the commodity markets are likely to remain quite volatile.

Stats Canada will be releasing CPI inflation data Tuesday and the Bank of Canada is expecting that the 1.0% reduction in the Goods and Services tax (GST) that came into effect on July 1st will reduce inflation by 0.5% on both the CPI and Core CPI. The forecast now is for the CPI to decline by 0.3% for July bringing the annual rate down to 2.0%.

For more information go to www.campbellreport.com

Mining Merger News:

2006-08-18T10:38:00.000-07:00

It looks as though the taker bidding war for Inco is coming to an end. The final bid from Teck Cominco is not going to fly as Teck has been unable to complete a stock issue designed to raise enough cash to compete with the all cash offer by Brazilian company CVRD.

It appears that investors have learned a lesson from the takeover activity that occurred in the late 1990’s when companies were able to use their high priced stock to purchase other companies high priced shares. In the end when the air came out of the bubble these companies suffered most dramatically due to the over valuation built in to the share price from over paying for acquisitions.

Investors who hold Inco should be selling into the market as there does not appear to be much upside from this point. Take the cash and look at some of the smaller base metal companies such as Aur Resources (AUR) and LionOre International (LIM). This segment of the market has much more potential for upside on a fundamental basis and will be the next area of consolidation in the mining sector.

The technology sector is receiving a steady stream of less than sterling news. The recent earnings announcement from Hewlett Packard was very encouraging but the news from Dell was just the opposite. These two companies are competing for the same market and it appears that the market is maturing and not growing as fast as expected. The situation with Dell and HP is that they are fighting for market share and HP has been able to offer better prices due to the ability to offer a variety of chips in their products giving HP more flexibility.

Dell has just announced that they will be offering AMD chips in some of their new models this should allow dell more flexibility in pricing. The downside to the whole segment is that over capacity is leading to very narrow margins and the margins continue to decline. It will be very interesting to see how either of these companies can overcome the margin squeeze over the longer term.

I would stay away from this sector the economy is slowing and the upside from here appears limited.

For more information go to http://www.campbellreport.com/

Everyone waits for Friday:

2006-07-31T08:00:00.000-07:00

Investors are all waiting for the Jobs report which is due at 8:30 Friday morning. I would expect to see a relatively small number on Friday somewhere around 100,000 new jobs for the month of July.

Teck has increased its offer for Inco to $82.50 per share and has added a second option which is a combination of stock and cash. This option is $40.00 cash plus 0.5821 of a Teck share, the original offer of 1.1293 Teck shares plus a nickel for each Inco share is still on the table.

This new Teck offer has increased speculation that more bidders will develop to compete with both Teck Cominco and Phelps Dodge for Inco. Inco shares are currently trading over $86.00. I would be tempted to sell Inco as the current price is well ahead of any previously mentioned valuations.

A small Canadian brewer Sleeman Breweries (ALE-T) has been put up for sale and they are expecting at least four bidders will compete for the company. This could be a very interesting speculation and has the potential to move higher over the short term as investors get positioned for the bidding war to develop.

For more information go to www.campbellreport.com

Inflation is the top topic today:

2006-07-19T08:34:00.001-07:00

Fed Chairman Ben Bernanke is in from of the Senate Banking Committee today and it appears that inflation will be on everyone minds. The CPI was released earlier today and showed an expected 0.2% increase for the month and is now up 4.3% year over year. The surprise is that core inflation was up more than expected coming in 0.3% for the month of June and is now up 2.7% year over year. This pretty much puts the icing on the cake for an increase in interest rates on August 8th.

Yahoo released quarterly earning and they were in line with expectations, but the company announced a delay in the eagerly awaited update to tier ad placement program moving the launch out to next year. The investor disappointment has shaved $6.00 off the share price and it still looks expensive.

Falconbridge shareholders should be selling as the takeover companies are yelling.

For more information go to http://www.campbellreport.com/

Phelps Dodge increases bid for Inco:

2006-07-18T08:29:00.000-07:00

Phelps Dodge has increased its bid for Inco by $2.50 to $00.00 the new offer is intended to help Inco fend off a competing bid for Falconbridge.

Inco has increased its bid for Falconbridge by $1.00 in an effort to fend off the competing bid by Xstrata. The Xstrata bid is an all cash offer of $59.00 per share the Inco bid is a combination of Inco shares and cash and is currently calculated at approximately $62.00.

Falconbridge shareholders should consider the option of selling their shares as there is a risk that the takeover will become mired in a legal battle and be delayed to the point where the small amount of gain will not be worth the wait.

Inco shareholders should also consider selling into the market as the convoluted takeover by Phelps Dodge may also be held up by legal arguments by Tech Cominco regarding the proposed Inco poison pill.

Once these takeovers become contentious and the offer prices reach a substantial premium to the rest of the sector it is prudent to bail and look for other opportunities in the sector.

The mid tier commodity producers look very attractive on a relative valuation to the large producers. These companies such as LionOre (LIM-T) and Aur resources (AUR-T) are likely to be takeover candidates themselves in the near future.

Take the money off the table and let the institutions wait around for the dust to settle. There is a substantial risk these deals will fall apart.

For more information go to www.campbellreport.com

Xstrata increases offer for Falconbridge:

2006-07-11T08:14:00.000-07:00

Swiss mining company Xstrata has increased its takeover offer for Canadian nickel producer Falconbridge to $59.00. The all cash offer is only slightly higher than the current competing bid by Inco. The Inco offer is a combination of stock and cash currently stands at approximately $58.00.

The consolidation in the global base metal mining business is heating up as the major players try to diversify their production into different metals in the belief that metal prices will remain at elevated levels longer term.

The Inco bid has been enhanced by the offer for both Inco and Falconbridge by Phelps Dodge. The Phelps bid is valued at approximately $80.00 a share for the combined Inco/Falconbridge but is not dependent on Inco acquiring Falconbridge.

This story is only part way through as Inco is very likely to top the Xstrata bid with assistance from Phelps Dodge. Stay tuned.

What Now

2006-07-10T07:47:00.000-07:00

The recent market volatility has created a lot of uncertainty and fear as investors second guess themselves. The uncertainty is being heightened by the talk of inflation pressure increasing due to higher fuel prices and the potential for higher interest rates as a result.

Investors should be looking at this market decline as an opportunity to refocus their portfolios to take advantage of the next upswing. This is a time to be cautiously greedy and patiently waiting for share prices to get back to levels that represent good long term value. There will be some excellent opportunities created by this decline and the best strategy to utilize in this type of market is to be ready to act.

The global economy remains in a strong growth trend even as there are signs that the US economy is starting to slow. The US economy is likely to see a recession as the Federal Reserve continues to increase interest rates in an effort to reduce inflation pressure. Investors should be looking at sectors that are not dependent on the US economy for profit growth.

The Canadian market contains many companies that are in a position to benefit from global growth that is not centered in North America. Investors will be well rewarded for selling shares of companies that are depend on the strength of the North American economy and moving into companies that are supplying products to the global growth region Asia.

There are a number of sectors that are well positioned to capitalize on the long term growth in Asia. The global demand for base metals is driven by the increase in infrastructure and housing demand that is being created by the transformation of China and India from an agricultural to industrial societies.

The creation of wealth is being reinvested in homes, highways and power facilities to supply the needs of a newly created middle class. The pace of change is picking up speed and the trend appears to be very well entrenched with the potential to last for years into the future. The demand will remain strong as millions more people will be participating in this over the next few years.

The Canadian mining sector is attracting global attention as seen in the recent take over activity with Phelps Dodge the largest copper produce in the world trying to buy Inco/Falconbridge in an effort to be a global player in the nickel business as well. While at the same time Falconbridge is trying to fend off a takeover by Xstrata of Switzerland. This takeover activity is driven by the belief that metal prices will remain at elevated levels for a lengthy period of time and that the premiums being paid to buy these companies will be justifiable over the long term.

The Economy this Week

2006-07-08T07:31:00.000-07:00

The economic news this week has been quite mixed as investors focus on what the Federal Reserve will do at their next meeting in August. The consensus opinion remains tilted towards a rate hike of 0.25% with 60% of those surveyed still expecting the Fed to focus on fighting inflation.

The Labor Department released the non-farm payrolls report today and the number of jobs created in June was well below the forecast of 175,000, coming in at only 121,000. There were some indications that the number could be substantially higher due to ADP survey that was released on Wednesday which forecast 350,000 new jobs in June.

The US economy appears to be slowing but the non-farm report also showed an increase in average hourly wages of 0.5%. This is 3.9% higher on a year over year basis the largest increase since 2001. The increase in earnings could be an indication of increased inflation pressure or it could be that businesses are seeing the economy slowing and have chosen to increase the number of hours worked with the same workforce.

The pace of consumer spending is falling as indicated by the recent chain store sales data which was much lower than expected falling 0.7% for the week ended June 30th. Chain store sales for the month of June were down 0.4%, this is the second month in a row of declining sales. The reason cited is higher gasoline prices which have been consistently impacting the consumer’s ability to buy. Higher energy prices are only part of the story as home prices have been falling as well and this is dramatically reducing the consumer’s ability to borrow to consume.

The Federal Reserve will receive a number of other reports on the economy before their August meeting and if the data continues to show a weakening economy they may have to rethink their stance on inflation in the short term rather than move rates too high at a time of a decrease in demand. At this point I believe the Fed will err on the side of caution and leave rates unchanged in August due to the consistent reports of economic activity declining.

The day North Korea blinked:

2006-07-05T08:31:00.000-07:00

It appears that North Korea has failed at holding the world hostage. The recent missile tests have not been nearly as successful as they had hoped. This is a very good thing for Japan and South Korea as this failure may keep North Korea from being over aggressive going forward.

The global equity markets have no reacted dramatically to the news as most investors now realize that North Korea is mainly all talk with little ability to follow through on their threats. The market in North America are down at the start of the day but are likely to be in positive territory by the close as investors shrug off the current threat.

The North Korean government has been holding the US hostage with threats of nuclear action and in the past the US and others have paid North Korea in the form of aid to back off. This recent missile test has reduced N. Korea’s ability to continue to demand payment. This will prove to be very beneficial for the rest of the world as tensions will be much lower now that North Korea has proven they are not nearly as much of a threat as they had indicated.

The bigger news this week will end up being the non-farm payroll report on Friday, the market is expecting 170,000 will have been created for the month of June anything higher will increase the potential for an increase by the FOMC in August, stay tuned.

A slowdowns’ a comin:

2006-07-03T10:15:00.000-07:00

The US economy is showing signs of slowing and the recent interest rate increase by the FOMC will hasten the arrival of a recession.

Auto sales at all the American companies are well below expectations with sales at Ford down 6.9%, Chrysler down 13% and GM down 34% from a year ago. High fuel prices are having some impact but it appears that generally the consumer is not feeling as confident.

The slowdown in the real estate sector is having a major impact on the consumer, the wealth effect from home price increases has been a driving force in consumer demand. It appears that is coming to an abrupt end as higher interest rates make mortgages unaffordable to a larger and larger segment of the market.

The economic coming slowdown will have a wide ranging impact on share prices as consumer demand slows profit growth will be very hard to come by. Profit growth has been the main driving force over the past four years of the bull market. The expectations have been for double digit growth in earnings and that is not a sustainable rate. Be prepared for a considerable number of disappointments over the next few weeks as earnings announcements are released.

Investors should also be prepared for two other potential shocks to the markets. I believe there is a very high potential for a major blowup in the hedge fund sector that will have a spill over effect in to all markets. The world has been a wash in cheap money due to the Zero interest rate policy in Japan, that is coming to an end as it does these hedge funds will be squeezed and they will then make mistakes. Be on the look out when these highly leveraged accounts get even more aggressive in an effort to maintain their performance in the face of higher cost capital. This could come to a very ugly end.

The second potential shock is from the current investigation in to option pricing the high tech sector is going to come under increased scrutiny due to option back dating investigation. There are going to be a few companies whose abuse of this strategy will be so blatant that the executive will end up in jail. This investigation comes at a time when there very little to support the current prices and will end with a huge sell off in this sector. Be careful.

Mining Mega Deal

2006-06-26T08:27:00.000-07:00

Phelps Dodge (PD) has just announced a take over offer for Inco (N) and Falconbridge (FAL).

The merger will create a super major mining company and create the largest nickel producer in the world. This is the largest mining deal in history valued at approximately $48 billion. PD is offering $80.13 CAN for the combined Inco/Falconbridge.

In an effort to have the deal complete as planned PD is buying # billion of Inco debt in the form of subordinated notes, this will give Inco the flexibility it requires to complete the Falconbridge takeover. Inco has raised its bid for FAL to $62.11 CAN from $46.80 this should trump the current offer for FAL from Xstrata Plc of Switzerland.

This deal will be an industry changing deal as it sets the standard regarding size for global competitors.

Oil Mergers

2006-06-24T08:00:00.000-07:00

The energy sector was helped this week by the announcement that Anadarko Petroleum Corp has made a takeover offer for both Kerr-McGee Corp. and Western Gas Resources Inc. The two separate offers came on the same day and added substantial interest medium sized oil and gas companies. The Anadarko combined offers are for more than $21 billion and were at huge premiums to the closing share prices for both Kerr-McGee (40%) and Western Gas (49%). The take over will make Anadarko one of the largest independent oil & gas producers in North America.

The fact that Anadarko has offered such a huge premium has created a stir in the small to medium sized energy sector of the market as anticipation of additional consolidation moves investors into other potential candidates. At this point investors are being rewarded by owning just about any of this sector of the market. Time will tell which companies has assets and reserves that make them attractive take over targets. I would expect this sector to sell off over the next few weeks as cooler heads prevail not all of these companies are going to warrant a 40% plus premium.

Changes in Telecom:

2006-06-19T08:03:00.000-07:00

The announcement today that Nokia and Siemens are going to combine their mobile networks operations will create the world’s second largest mobile telecom equipment company.

The new joint venture will has annual sales of $20 billion and corner approximately 20% of the global equipment market just behind the world leader Ericsson which currently has a 26% share. The companies expect cost savings of about $1.9 billion annually.

This combination is another is a series of consolidations in this industry and this will not be the last. This joint venture will put increased pressure on Nortel as it will leave it lagging well behind in market share. This is just another nail in the Nortel coffin laving the company in a seriously lagging position in a market where they had a real opportunity for leadership.

The problem at Nortel is that they do not have any credibility and that will be a major huddle that will have to be over come before any other company will be willing to take a run at them or partner with them.

Nortel may be the next big failure in the tech sector another casualty of over capacity and accounting tricks. Stay away!

Inflation, Inflation, Inflation

2006-06-16T14:24:00.000-07:00

The economic news this week has been dominated by inflation concerns. The Federal Reserve has been talking up the inflation factor and investors have reacted by selling bonds and pushing up interest rates. The Consumer Price Index (CPI) for May was up 0.4% for the month and is 5.2% on a year to date basis. The core CPI which excludes food and energy was up 0.3% for the month and 3.1% year to date. The pace of change is building momentum and this is causing an increase in concern at the Federal Reserve. The Fed is not alone in being concerned about inflation pressure the European Central Bank (ECB) raised rates this week and sited inflation as the reason for the increase.

The Federal Reserve Chairman, Ben Bernanke, has been quoted as saying that “Inflation expectations, if they get high enough can create a self-fulfilling prophecy”. The Fed is concerned that the general expectation of future inflation has been increasing over the past few months and that is that sentiment persists then consumers will be more willing to accept higher prices. This willingness to pay higher prices will allow inflation to take hold in a much broader segment of the economy not just in energy and related sectors.

The New Federal reserve Chairman is also concerned about how the world perceives him and in order to make his position as an inflation fighter clear, I would not be surprised to see the Fed move rates by 0.5% at the next meeting June 28-29th. This would signal to the rest of the world that the Bernanke Fed will do what it takes to halt inflation.

It’s a small world after all:

2006-06-14T08:23:00.000-07:00

The last week has really brought this statement to mind as the entire worlds equity markets react in concert. The global central banks have been focused on the increasing inflation pressure from higher energy prices. This inflation concern is causing the central banks to increase interest rates in an effort to reduce demand and slow economic growth.

It is interesting to see the reaction as investors move out of the commodity stocks on fears of a global slowdown. In many sectors the commodity prices were pushed well beyond their fundamental values due to hedge funds plunging into the metals and energy sectors.

The hedge fund industry has boomed over the last few years as they have been able to borrow in Japan with no cost and buy in North America reaping the benefits of cost free leverage. Now that Japan has signaled an end to the Zero Interest Rate Policy in the near future these hedge funds will no longer be able to leverage their portfolios with as much ease. The fall out of this has been a reduction in the amount of capital available to support markets in North America and to an extent Europe as well.

The current correction still has some downside but over the next few weeks there are likely to be some very interesting opportunities in the commodity producers such as base metals and precious metals.

Global demand may slow over the next year mainly in North America and Europe but the growth in Asia appears to be sustainable over the long term and this is region the commodity producers are leveraged to. It would seem prudent in the short term to wait for the markets to settle down a little before moving back in to equities.

Inflation concerns causing market volatility:

2006-06-12T08:21:00.000-07:00

The Federal Reserve is signaling that inflation pressure is still a major concern. At every turn the FOMC members are talking tough on inflation. This hawkish rhetoric is keeping the bond and equity markets under pressure. The next CPI report will be on Wednesday June 14th this will be a major piece of information that will likely set the policy decision for the Fed.

The stock markets are selling off again today due to the Fed remarks and the rise in crude oil price which is feeding inflation concerns. Crude is trading around $72.00 again this morning.

It is interesting to note that the CEO of British Petroleum (BP) is talking about crude oil falling all the way back to the $35-$40 range over the medium term. This is a considerably different forecast from the rest of the market and if BP really believes this you should see their hedge book move to fully hedged over the next while to lock in the current high prices. I don’t think anyone is that bold but you never know will be interesting to see if Mr. Brown is willing to put his company where his mouth is.

Have you seen the Apple commercials lately? These spots are focusing on the Macintosh and pointing out the differences between Macs and PCs. This may be an indication that Apple is seeing an opportunity to capitalize on the Ipod phenomenon as a marketing edge for their computers. It will be interesting to see if the Ipod can bring in new Mac users.

What a week

2006-06-10T16:33:00.000-07:00

This has been quite a week in the Nort American equity markts. The Dow and the S&P 500 are now back to their 200 day moving averages and this support level must hold or it could get very ugly.

The NASDAQ has already broken below the 200 day MA and looks like it could go a bit lower in the short term. This market has not looked very invitng for some time now and I would stay away.

The TSX compositre has been able to remain above the 200 day MA and still appears to have the potential to be the best performing market again this year.

There has been an increase in concern regarding inflation and the ECB has increased interest rates by 0.25% as a result. The Federal Reserve appears to be indicating that heigthened inflation pressure will force them to increase rates again this month. The anticipation of a rate hike has now pushed the yield curve into an inversion in the 2-10 year part of the curve this is signalling a recession in the US economy sometime late this year or early next.

Stay away from from companies that are dependednt on consumer spending and focus on the commodity producers ove the next few months, over weight oil and gas, base metals and precious metal stocks.