Petro-Canada & Its Stocks

September 27, 2005

This article has a few major points to make, but also some "hands on" guidance for following, doing research, and profiting from Canadian mining and energy stocks. Often called "penny stocks," many have appreciated wonderfully in an environment of some much less heightened risk than their reputation deserves. Canadian resource stocks are routinely aided by a monster tail wind of the rising Canadian Dollar currency, which has gained in value by more than one third in the last three years!!! This article points out:

  • The Canadian Dollar has gradually become recognized as a petro-currency, rising with the price of crude oil and natural gas
  • Canadian stocks gain value for US investors as the Can$ rises (in the past six months, Can$ is +8%; in the past two years, Can$ is +17%; in the past three years, Can$ is +36%)
  • Canadian mining stock market capitalization equals the rest of the world's combined
  • Canada manages to supply tremendous sums of finance capital without Wall Street, from private sources, commodity fund sources, and foreign sources
  • Canada owns the largest, most concentrated geologist expertise in the world
  • Canada boasts the largest oil deposits in the entire Western Hemisphere, in western provinces (see Alberta, which rivals and will eventually be recognized as exceeding Saudi Arabian reserves)

As a researcher aid, guidelines are provided at the end of this article on the research, tracking, and purchase of Canadian stocks. These are mechanics to overcome some obstacles which lead some timid American investors from bothering with incredible promising stocks up north. Between Vancouver and Toronto, we have two major fine strong world renowned cities. By the way, if you have not visited Vancouver, you owe it to yourself to do so before your final breath. My travel experiences have covered several European cities and most every large US and Canadian city. Sorry, nothing in Latin America outside Cuba and Dominica, and no trips to Asia, not yet. Vancouver is the most beautiful city in the world, at least from my experience. Furthermore, this city by the bay, enveloped by mountains, contains the largest collection of extraordinarily beautiful women I have ever laid my fortunate eyes on, Anglo and Asian alike. Their cross section of women is so beautiful that when Shaquille O'Neal played his last game against the Vancouver Grizzles in the National Basketball League, before the Vancouver franchise moved to Memphis, he had a comment for the press. "So Shaq, what will you miss the most from Vancouver?" His reply was typically frank, what a guy! "Without a doubt, the women."

THE CANADIAN DOLLAR
The Canadian Dollar has gradually established itself as a petro currency. With the Iranian Oil Exchange, and significant Russian oil production, the euro is absolutely certain to make a strong challenge to establish itself as a second leading petro currency. The Canadian intrusion occurs under the USDollar shadow within North America, where truly enormous trade occurs. Given little recognition, which is changing, the Can$ is the strongest currency in the world in recent years.

The fundamental reasons behind the new resurgence in Canada are many. Details are provided in the October Hat Trick Letter issue. This analyst here is sick to death of hearing pissy spin propaganda against Canada by ignorant Americans who probably have never visited Canada, nor anywhere else outside the nation, for that matter. Their experience is limited to quick views across Niagara Falls. Canada is slammed typically by shallow criticism of "socialist quagmire" without benefit of knowledge. Sure, they have national health care and higher personal taxes. The nation decided long ago not to run debts paid by Asians, which have the harsh consequence of turning ownership of national assets to the Asians in a gradual "measured pace." The United States is a nation up for sale, denuded of its wealth amidst sickening bankruptcy and hemorrhaged trade gaps. Our economic think tank of counselors is shockingly incompetent. We Americans are quick to sell debts overseas, with a blind eye on the toll to national security and national labor force. The central core of US claimed wealth is a housing bubble. Canada has broad strengths in its foundation of a solid tangible nature. The reasons behind the Canadian rise to power pertain to:

  • development of Alberta conventional oil & gas deposits and oil sands
  • attractiveness of mining and energy assets, for acquisition and development
  • government fiscal responsibility (surplus versus US red ink, waste, escalating debt)
  • less hostile government officials, less military interference in national policy
  • corporate business cost advantages
  • several other key specific advantages

Global investors are awakening. They finally link the strong Canadian Dollar to soaring oil prices, two principal pillars of the Hat Trick Letter. Big European banks have begun to recommend selling US$-based securities in favor of Canadian currency. In addition to oil, Canadian lumber and mining industries have created a story built upon truly magnificent land resources, especially in western provinces. The North American housing boom has called for strong lumber demand. The Can$ must rise slowly, however, or else short circuit its own success from lost price competitiveness. Their northern economy is developing a broad base beyond simply mining and energy, often called minerals & resources. The risk is for mainstream commerce to be adversely affected. The primary driving force for a Can$ rise is the crude oil price. Development of western oil sand deposits has brought several billion$ in US investment, with the promise of future Chinese funds. Some speculation has given the looney added muscle as Canadian energy and mining firms are seen as ripe for acquisition. Any acquiring party must assemble a sizeable cash horde to execute on any M&A deal. Look for the crude oil price to consolidate in the 62 to 66 range, until early winter sets in and shortages are realized.

Carl Weinberg of High Frequency Economics sees a grand upside trend. In a report, he predicted by 2015 the "Petro-Looney" will become the strongest G-9 currency, which would include China. Canada exports 1.5 million barrels of oil per day. From June over May, those exports to the USA rose by $275 million per day in revenue. He goes on to forecast a production increase of 400k barrels per day for at least a decade. Annual increments to Canadian trade surplus would amount to $7.3 billion. He summarized the challenge."Right now this is seen as an Alberta versus the rest of Canada problem, but ultimately the Bank of Canada and Finance [Ministry] are going to have to get involved… to set up some kind of a scheme to try to manage the currency through all of this. So far there has been no sign of that to see." Norway is cited as a model example of successful money management of oil windfall profits. They held export sale proceeds in foreign currencys. Nigeria is the disastrous example. Perhaps Canadians can gradually purchase US properties and corporations, in competition with China. It looks like the United States will forfeit its sovereignty slowly but surely to foreigners. My preference is for Canadians to own my land, and much of its assets, to become my benevolent stewards. They look like me, speak my language, but they definitely do talk funny, eh?

LOONEY VIG TO STOCK PORTFOLIO
Last year, my brother's biggest stock holding gained nothing on the Toronto Stock Exchange. But his position gained 10.5% from the Canadian Dollar alone from Dec2003 to Dec2004. It was deemed a good year, but the previous year vig (benefit, gain, added plus) from the appreciation of 17% from Dec2002 to Dec2003 in the Can$ was much better. These are big numbers, 27% over the past two years, which totally eclipse the pathetic paltry puny gains in the mainstream S&P500. As the looney gains more ground in its inevitable guaranteed march to parity with the crippled USDollar, i.e. US$ = Can$, more vigorous vig will be granted to investors in Canadian stocks. Leaders in Canada, both politically and financially, must manage the rise in the Can$ judiciously in order to prevent a feedback stall in their economy. My suggestion is for the western provinces to secede from the union. Leave the east to the socialists, and the west to the capitalists. Eastern fiscal inefficiency and questionable management is easily offset by burgeoning western expansion and shrewd development.

INDEPENDENT CAPITAL FUNDING
Vancouver and Toronto boast of enormous sources, deep wells of capital funds. Canada has a few kingpins among their super rich, like Eric Sprott, Rick Rule, John Embry. An array of powerful capital finance firms dot the two centers in Canada. Many strong connections exist between these two cities and New York City, as well as with London in England and Frankfurt in Germany. Many controversies have surfaced over the past few years concerning public stock offerings in the United States. Surprisingly few scandals arise among Canadian stocks. They do not go wanting, however. They do not corrupt themselves by association with Wall Street. In a sense, Wall Street and Bay Street (Toronto) are like cats & dogs, like ants & termites. Wall Street sells paper backed much more so by intellectual property and foreign business operations. Bay Street sells paper backed in a majority sense by tangible properties of minerals and natural resources, like copper, gold, silver, molybdenum, zinc, tin, lead, structural metals, along with crude oil, natural gas, uranium. Wall Street sells more fluff, pumped by falsified accounting, whose value is murky at best. Bay Street sells more valued assets to share holders, which are under development to supply global industries, factories, and manufacturing sites. Human greed and corrupt practices will always be in our midst, but for the last several years, the US firms clearly dominate in fraud. Notice the parade of criminal trials and convictions for US corporate chieftains, the most recent being from Tyco.

In Canada, embryonic mining and energy firms are quick to form, raise capital, enlist experienced geologists and petroleum engineers, purchase properties, prove up reserves via drilling, and gain feasibility. This is the essence of capitalism, a long lost concept in the USA, where consumer spending, Asian outsourcing, low-cost solutions, housing bubbles, and deficit spending are the principal pillars. Typically, those who join the skeleton management ranks in their early days of Canadian business formation, come with capital and connections to more capital access. Energy firms are different, since an early drill success feeds cash flow toward the next property asset acquisition, in what is often described as "wildfire." Energy firms enjoy internal growth, while mining firms enjoy growth through partnerships and eventually are acquired by giant producers. Some enter partnerships with the deep pocketed giants.

CONTRAST IN PERFORMANCE
The S&P500 stock index, in my analytical opinion, has gained ground primarily from a painful decline in the USDollar. In doing so, the S&P index has maintained its value to such extent as to enable a claim of preserved purchase power. The S&P index purchases as much stuff as before the USDollar fell in value, before stuff began to cost more. Easy money from the low interest rate environment easily finds its way into mainstream stock indexes, often under the watchful eyes and hidden aid from the Working Group for Financial Markets (aka Plunge Protection Team). Notice its flat performance in the last two to three years, except for the last few months. The S&P uptrend shows a gradual rise of 5% annually. Is another USDollar decline in the offing? Methinks yes. The S&P cannot seem to move up sharply, despite a hefty rise in corporate profits, supposedly strong balance sheets, and low interest rates. Could it be the threat of higher long-term interest rates amidst colossal federal budget deficits, against a lethal backdrop combination of gargantuan trade gaps and rising energy & material costs? Methinks yes. Contrast the S&P performance with mining stocks and energy stocks. The mining index HUI is up 125% in three years. The energy producer index XOI is up 160% in three years. Nuff said!!!

CHARTING CANADIAN STOCKS
My favorite charting website is StockCharts, with no close second place finisher. They kindly gave me a free membership for advanced services, appreciative of the many charts posed in my public articles. For a fee, one can subscribe with them for wider services. Their website is in a class by itself for public free usage (BigCharts is another fine chart website). Many technical chart tools are available. Experimentation can be a worthwhile exercise. They have features not even touched on my part, with no interest to get too complicated.

This versatile site permits charting of US stocks and many indexes:

e.g. S&P500 $SPX, Dow Jones Industrials $INDU, Nasdaq Composite $COMPQ, S&P100 $OEX, S&P Midcap $MID, precious metals miners $HUI, energy producers $XOI, energy services $OSX, homebuilders $HGX, techs $MSH, bankers $BKX, financials $XLF, banks & brokers $BBX, S&P energys $GSPE, utilities $UTY, retail $RLX, semiconductors $SOX, pharmaceuticals $DRG, insurance $IUX, health care $HCX, Japanese stocks $NIKK, South Korean stocks $KOSPI, and so on

It permits charting of currencys:

e.g. the USDollar $USD, the Japanese yen $XJY, the Canadian Dollar $CDW, the euro $XEU, the Swiss franc $XSF, the South African Rand $ZAR

It permits the charting of Treasury Bonds across the maturity curve:

e.g. the 30-yr TBond principal value $USB, the 30-yr TBond yield $TYX, the 10-yr TNote principal value $UST, the 10-yr TNote yield $TNX, the 5-yr TBill principal value $USFV, the 5-yr TBill yield $FVX, the 3-month TBill yield $IRX

It permits charting of many commodities:

e.g. commodity index $CRB, gold $GOLD, silver $SILVER, platinum $PLAT, copper $COPPER, crude oil $WTIC, natural gas $NATGAS, unleaded gasoline $GASO

It permits interesting and relevant charting ratios:

e.g. gold in euro terms $GOLD:$XEU
gold in Japanese yen terms $GOLD:$XJY
gold metal over gold mining stocks $GOLD:$HUI
gold metal over crude oil $GOLD:$WTIC
gold metal over Dow Jones Industrials $GOLD:$INDU
gold mining stocks over energy stocks $HUI:$XOI
silver metal over PanAmSilver stock $SILVER:PAAS copper metal over Phelps Dodge stock $COPPER:PD

Click here for the StockCharts website link, which displays here a 3-year weekly chart for GOLD. It contains a 60-week moving average, along with relative strength and slow stochastix cycle. Its full URL with all the gobblygook Java code embedded is more intimidating, fully required to handle the numerous useful chart options.

http://stockcharts.com/def/servlet/SC.web?c=$GOLD,uu[w,a]waclyyay[df][pc60!f][vc60][iUb14!Uh15,5,5]&pref=G

This helpful top flight website is my main chart tool. It is excellent for even the most minimicro-cap Canadian stocks, many of which are included in its vast database of price history. For instance, a little favorite upcoming powerhouse mining stock is International PBXVentures. It has a small marketcap of under C$30 million, and owns substantial properties of copper, gold, and molybdenum in Chile. The symbol in Canada is "PBX.V" which if inserted on the StockCharts website, can produce a nifty PBX chart for viewing and technical analysis. The "V" is critical to tell the charting database to search for a Canadian stock on the Venture Exchange in Toronto. The displayed 3-year chart contains a 20-week moving average and a 50-week moving average, together with a slow stochastix cycle above and share trading volume below. Notice the bullish "Head & Shoulders" chart pattern in 2005 months, which signals a strong move by winter toward C$1.30 or higher. An uptrend is clear.

CANADIAN STOCKS & NEWS RELEASES
Let's be plain. US-based online brokerage website stink on ice for retrieving information about Canadian stocks. Even stalwart sources such as Yahoo are mediocre at best in supplying useful information for research of companies north of the border. US news sources are helpful when the Canadian stock has an AMEX equivalent, permitting it more volume in a minor mainstream. For instance, TransGlobe Energy has "TGL.V" as its symbol in Toronto in Can$ pricing terms, but "TGA" on AMEX in US$ pricing terms. Its volume is five to seven times larger in the USA than on the Canadian exchanges. Yahoo does have a Canadian page that follows more energy news items, mining news items, and currency related stories. The US sources like Yahoo can provide information, both trading and news, with "PBX.V" as the stock entry just like you would have "IBM" or "MSFT" or "GE" as symbol requests. However, the Toronto Stock Exchange has its own primary website, a grand source for research to retrieve stories. You need to use the Canadian symbol for TSX quotes, which means the part before the ".V" suffix.

Yahoo in US: http://finance.yahoo.com/?u
Yahoo in Canada: http://ca.finance.yahoo.com/?u
Toronto Stock Exchange: www.TSX.com
 

Click on the "QUOTES" tab on the TSX website, then proceed to enter your favorite list in a stock portfolio. For the lead stock symbol, you can see a bunch of sideline information, both the bid & ask with sizes, highs & lows with trading volume for the day, but also outstanding stock share float size with market capitalization.

My most often used method for gathering news releases on Canadian stocks is to begin with the TSX website for stock quotes. Then, with focus on the first listed stock symbol, click on its chart request on the right side display, for instance "1yr" in the lower section typically. This produces a chart for the latest 12 months. All trading news and company information pertains to that first listed stock. With the GlobeInvestor chart comes an icon for "NEWS" which leads to a laundry list of news items, provided by CNN Matthews. A trick is useful to know after reading a given single news story. Go back to the full list of news items by clicking on the "NEWS" icon shaped like an open book with left & right page. This icon is located on the upper right side. That gets you back to the full list without the extra step of having to ask again for a chart in redundant style. The chart service is basic, which does provide volume and simple moving averages. If you click on another listed symbol, say the third or sixth in the list, you get trading news and company information for the picked clicked stock symbol.

Here is a typical TSX webpage quote display. Notice the nice corporate information links. The link for "NEWS RELEASES" is bogusthough. Unsure exactly why, but it does not work well with MSWindows. Screen lockups commonly occur.

The other portion of the TSX webpage gives marketcap information and more, like basic charts which are helpful for quick observations.

On the chart webpage, the "NEWS" link for corporate news releases leads to a nice list of recent stories. This format is the best from the TSX from my personal experience.

For the quickest way back to the full list of news releases, hit the open page icon shown.

Of course, news stories are obtainable from individual company websites. Not only are news stories more complete and perhaps more timely, but corporate officer backgrounds are described, properties are listed and displayed, financial data is recorded, and investor relations contacts are provided. It is legal for an investor to phone a company to ask information directly.

PURCHASE OF CANADIAN STOCKS
They are not hard to purchase, but it is important to ignore your stock broker. He or she will usually try to talk you out of it. Fight the broker off by pointing out that in the last three years, the Canadian Dollar added 36% to the stock portfolio, which surpassed the S&P500 performance, a remarkable fact. That is probably a fact which (s)he is unaware of. They cry unreasonably about excessive risk without knowing what they are talking about. Use that to silence the broker, and ask

"Why do you make statements about concepts you are ignorant of?
Have you ever visited Canada, or do you read off a script?
By the way, what is your vested interest anyway?"

The reward for sticking with Canadian mining and resource stocks is very big and extremely worthwhile. But you must overcome the obstacles on the brokerage side. Ameritrade, along with several other online brokers, has a Global Desk. They can give quotes over the telephone when necessary.

A key point is worthy of mention. For a Canadian stock with a US listing on AMEX such as TransGlobe (TGA), you can submit "market buy" orders with ease. However, for most of the Canadian stocks which trade with a US equivalent, "limit buy" orders are the only available method to purchase. One must therefore beware of the current realtime bid and ask size. My habit is to obtain by telephone the bid and ask, along with the size of each. One must act quickly sometimes in order to secure a purchase, as bid-ask prices change in a matter of minutes.

Most Canadian stocks have a US equivalent, with tradable symbol in the United States. The majority of Canadian stock issues in my experience have a symbol which lists on extensions to the OTC market (Over The Counter). The NASDAQ is a network of more than ten thousand brokers & dealers working to create an electronic market to match orders to buy (bids) with orders to sell (asks). The network has many branches, where the OTC usually lists Canadian stocks. In other words, you can buy and sell them just like you would Cisco Systems, Intel, or any other 4-letter stock. Volume is far less. Limit orders must be used, where a specific price to buy or sell is given by you. Other rules often apply, such as forbidden margin usage to buy stocks under a certain price level. The US equivalent involves a direct link through to the Toronto trading desks. An example or two can be useful.

International PBX Ventures (copper, gold, molybdenum) has a Canadian symbol of "PBX.V" with a tradable "IPBXF" equivalent on the US side
First Majestic Resources (silver mining) has a Canadian symbol of "FR.V" with a tradable "FMJRF" equivalent on the US side

The ratio in price (for the two issues tied to a single company) is roughly the exchange rate for the Canadian Dollar. Usually one penny is added to the buy price, and subtracted from the sell price when using US equivalents. Volume on the US side is usually lower. My habit is to follow price on the Toronto Exchange, to follow stories typically on the Toronto Exchange except when the Canadian stock has an AMEX equivalent issue. The only use for the US equivalent in my view is the vehicle for buying and selling the stock.

GO TO THE GREAT WHITE NORTH FOR INVESTMENT OPPORTUNITY !!!
PROTECT YOURSELF AND FAMILY WITH CANADIAN RESOURCE STOCKS
THE USDOLLAR IS MISMANAGED, CORRUPTED, FRAUDULENT, AT RISK

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Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 23 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com.

Jim Willie

Jim Willie

Jim Willie CB, also known as the “Golden Jackass”, is an insightful and forward-thinking writer and analyst of today's events, the economy and markets. In 2004 he launched the popular website http://www.goldenjackass.com that offers his articles of original “out of the box” thinking as well as content from top analysts and authors. He also has a popular and affordable subscription-based newsletter service, The Hat Trick Letter, which you can learn more about here.  

Jim Willie Background

Jim Willie has experience in three fields of statistical practice during 23 industry years after earning a Statistics PhD at Carnegie Mellon University. The career began at Digital Equipment Corp in Metro Boston, where two positions involved quality control procedures used worldwide and marketing research for the computer industry. An engineering spec was authored, and my group worked through a transition with UNIX. The next post was at Staples HQ in Metro Boston, where work focused on forecasting and sales analysis for their retail business amidst tremendous growth.

Jim's career continues to make waves in the financial editorial world, free from the limitations of economic credentials.

Jim is gifted with an extremely oversized brain as is evidenced by his bio picture. The output of that brain can be found in his articles below, and on the Silver-Phoenix500 website, on his own website, and other well-known financial websites worldwide.

For personal questions about subscriptions, contact Jim Willie at JimWillieCB@aol.com

 

A one-ounce gold nugget is rarer than a five-carat diamond.

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