PETER HODSON
Sprott Growth Fund F series (Canadian small/mid cap)
One-year return: 33.1 per cent
Year to date: 29.86 per cent
Peter Hodson believes the Canadian market still has legs despite pessimism emanating from the U.S. housing crisis.
"In the short term, I am relatively bullish - not a screaming bull," said the manager with Toronto-based Sprott Asset Management Inc. The U.S. is likely in a recession, and will probably stay in one for a couple of quarters, he suggested.
An average recession lasts about 10 months, and "markets tend to do okay soon into a recession as they anticipate the profit recovery" coming out of a period of a downturn, Mr. Hodson said.
"Canada is in better shape, and may actually escape a technical recession [defined as two consecutive quarters of negative growth]."
Although he is avoiding financial, housing-related and U.S. consumer stocks, he is finding attractive companies with a lot of cash that are trading at low valuations.
His fund is 25-per-cent invested in resource stocks - mainly oil and gold companies. "Oil and gold are the easier calls in the commodity spectrum," because of supply constraints, he said.
"We do think $100 (U.S.) per barrel oil is more or less inevitable" this year, he said.
Mr. Hodson expects gold prices at the $850 to $900 level as it benefits from a U.S. dollar decline and/or a flight to hard assets amid a global effort to lower interest rates.
He also owns technology stocks, as well as foreign plays like Chinese jewellery maker FUQI International Inc.
"In a slow growth environment, growth companies can do exceptionally well because anyone that can execute and outperform tends to get the majority of the money."




MARK MOBIUS
Templeton BRIC Fund F series (emerging markets)
One year: 46.2 per cent
Year to date: 33.76 per cent
Mr. Mobius is positive on emerging markets for 2008, but warns not to expect "dazzling returns" each year.
"I am cautiously optimistic about good returns," said the Singapore-based value investor with Franklin Templeton Investments Corp. "Economic growth in emerging markets is good, but expectations of 30-, 40-, or 50-per-cent returns year after year are unrealistic."
Mr. Mobius runs both the Templeton BRIC Fund, which invests in Brazil, Russia, India and China, and the Templeton Emerging Markets Fund.
The veteran manager is "very optimistic about the longer-term potential for emerging markets" because their growth is double, on average, that of the developed countries.
He doesn't expect a U.S. economic slowdown to have an impact on emerging markets unless growth slows to 1 per cent or less. Demand in the BRIC countries has increasingly come from domestic sources rather than exports, he said.
But he doesn't expect the U.S. to head into a recession with the central bank lowering interest rates and pumping money into the system. "I have been hearing this talk about a U.S. recession for the last three years, and I am still waiting."
China, Russia, India and Brazil still represent terrific opportunities, but "you can't forget other countries like South Korea, Thailand, Turkey, South Africa and Poland," Mr. Mobius said. "And then there are Middle Eastern countries like Tunisia and Morocco - small countries but interesting in terms of their valuations."
The H-shares of Chinese companies that trade on the Hong Kong Stock Exchange also offer some interesting opportunities

http://www.globeinvestor.com/servlet/story/RTGAM.20080103.wford0103/GIStory/

Tata chosen as top bidder for Jaguar, Land Rover
TOM KRISHER


Thursday, January 03, 2008

DETROIT — Ford Motor Co. has picked India's Tata Motors Ltd. as the top bidder to buy Ford's Jaguar and Land Rover units, the U.S. auto maker said Thursday.

Ford said in a statement that it has entered into “focused negotiations at a more detailed level” with Tata, which means Tata has been picked as a preferred bidder for the storied British auto makers.

“There is still a considerable amount of work to do, and while no final decision has been made, we will proceed with further substantive discussions with Tata Motors over the forthcoming weeks with a view to securing an agreement that is in the best interests of all parties concerned,” Lewis Booth, executive vice president of Ford's European units, said in a statement.

Jaguar and Land Rover employees in the United Kingdom were told about the negotiations Thursday morning shortly before the company made the announcement.

Ford executives have said they expect to announce the sale of the two British auto makers early this year.

Ford spokesman Jay Ward in London would not comment on how much Tata bid for the auto makers, nor would he say if the other two bidders, Indian automaker Mahindra & Mahindra Ltd. and U.S. private equity firm One Equity Partners LLC, were still in the running.

Last month people close to the negotiations told The Associated Press the potential suitors had submitted bids that ranged from $1.5-billion (U.S.) to $2-billion.

Cash-hungry Ford, which lost $12.6-billion last year but earned $88-million in the first nine months of 2007, has been looking to sell Jaguar and Land Rover.

It has mortgaged its assets to borrow money to stay operating and expects to burn up $12-billion to $14-billion until 2009, when it plans to return to sustained profitability.

Jaguar and Land Rover have been hit by unfavourable exchange rates and high production costs in Britain.

Ford bought Jaguar for $2.5-billion in 1989 and Land Rover for $2.7-billion in 2000, joining them with Aston Martin and Volvo to form its Premier Automotive Group.

Earlier this year Ford completed the sale of its controlling stake in Aston Martin for $931-million in cash and preferred stock.

Ford has said it plans to keep Volvo for now, fixing its cost structure and making it a more premium brand.


© The Globe and Mail

Breaking News from The Globe and Mail

Gold nears a record $900 an ounce
Atul Prakash


Wednesday, January 09, 2008

LONDON — Gold surged to a record high just under $900 (U.S.) an ounce on Wednesday, powered by heavy buying by investment funds and helped by rising oil prices and a strong debut for Shanghai gold futures.

Platinum also set a lifetime high on positive fundamentals and tracking gold's rally. Silver touched two-month highs and was not far from its highest level in 27 years.

Spot gold jumped to $891.40 an ounce, surpassing the previous record of $881.10 reached on Tuesday. It was quoted at $883.60/884.40 at 12:41 p.m. GMT, compared with $878.10/878.90 in New York late on Tuesday.

“This is an extension of the ongoing rally with very strong underlying interest in buying gold across geographic locations,” said David Holmes, director of precious metals sales at Dresdner Kleinwort Investment bank.

“Clearly, the jewellery demand is suffering as a consequence of the high price, but it's being more than offset by broad-based global investor demand in gold. We are very much trading on momentum and gold is currently self advertising.

“I perceive that it's possible for gold to continue making new highs. $900 is clearly within reach and given its recent momentum it may continue making progress towards the psychologically-important $1,000 level,” he said.

The market gained momentum after the key Japanese gold futures price hit its highest level since March 1984 and gold futures were launched on the Shanghai exchange.

The contract surged to nearly $1,000 an ounce on Wednesday, as enthusiastic new bullion bulls bid a hefty premium over their global peers.

“The launch of the Shanghai gold futures contract seems likely to be the trigger for gold to hit our one-month target of $900/oz, probably before the end of the week,” UBS Investment Bank said in a daily client note.

“While we continue to consider the air to be thin at these levels and that gold is vulnerable to a sharp sell-off should investor sentiment reverse, there is a chance that developments in Shanghai could lead to much greater near-term gains.”

In other bullion markets, U.S. gold futures rose in line with the spot price. The most active February contract was up $7.00 from New York at $887.30.

The key gold futures contract for December 2008 delivery on the Tokyo Commodity Exchange (TOCOM) finished at 3,134 yen a gram, up 37 yen or 1.2 per cent from Tuesday.

“It looks like the gold market wants to see and test the $900 level. I could imagine that there will be some long liquidation by then at the latest,” said Alexander Zumpfe, a metals trader at Germany's Heraeus.

“Overall, the environment for the metal should continue to be supportive as long as economic worries persist and oil maintains its bullish tone.”

Spot gold rose more than 30 per cent in 2007, its biggest annual gain since 1979. Traders said gold was becoming more appealing as the market sought higher returns with U.S. shares slumping and prospects for the U.S. economy deteriorating.

Investors were also convinced to buy gold due to lingering tensions in the Middle East, rising oil and dollar weakness.

Oil rose above $97 a barrel as further declines in U.S. crude stocks and the potential for more disruptions to Nigerian supply offset concerns over the U.S. economy.

Platinum rose as high as $1,560 an ounce and was last quoted at $1,559/1,564, versus $1,547/$1,552 late in New York.

Palladium was flat at $376/379 an ounce, while silver rose to $16.14 an ounce before falling to $15.92/15.97, against $15.70/15.75 in New York.


http://www.globeinvestor.com/servlet/story/RTGAM.20080109.wpreciousmetals0109/GIStory/

Canadian interest rates to tumble: Merrill
TAVIA GRANT


Wednesday, January 09, 2008

The Canadian economy is poised for a sharp slowdown as U.S. demand weakens and that, combined with cooling inflation, spell much lower interest rates in the coming year, Merrill Lynch Canada predicts.

Economist David Wolf sees a 125 basis-point cut in interest rates this year, which would bring the Bank of Canada's key lending rate to just 3 per cent.

It's a rather bleak outlook, and one that came the same day Goldman Sachs said the U.S. economy is already likely falling into recession, while former U.S. Treasury Secretary Lawrence Summers said the chance of a U.S. recession this year is at least 60 per cent.

“Canada is destined to play a primary role in global economic rebalancing away from American demand, given its proximity to the U.S., its openness to trade and its strong currency,” Mr. Wolf said in Merrill's economic outlook.

That means a swing to current account deficit as exports buckle, lower inflation and overall weaker GDP growth “as Canada's economy is thrown off-balance in 2008,” he predicted.

He expects the Canadian economy will grow 1.7 per cent this year, much slower than 2.6 per cent last year, while core inflation could fall to 1.5 per cent from 2.2 per cent. Canada's benchmark stock index will likely slide about 4 per cent this year as earnings deteriorate, he expects.

Goldman, meantime, expects the Federal Reserve will slash its key lending rate to 2.5 per cent by the third quarter from 4.25 per cent currently.

It doesn't, however, see a prolonged, deep contraction.

“The recession is likely to last two to three quarters and should be relatively mild by historical standards,” its report said, as interest-rate cuts, tax cuts and exports stay strong.

The World Bank also chimed in Wednesday, saying 2008 global growth will slow for the second year in a row amid tighter credit markets and more expensive oil prices.

“A weaker U.S. dollar, the spectre of an American recession and rising financial-market volatility could cast a shadow over this soft landing scenario for the global economy,” the bank warned in its annual forecast.

Global markets have entered a period of “heightened uncertainty,” it said, adding that growing risks and increased volatility have made some developing countries “more vulnerable to financial disturbance.”

It sees global growth this year of 3.3 per cent — down from its previous forecast of 3.6 per cent — after 3.6 per cent growth last year and 3.9 per cent in 2006.

© The Globe and Mail

Well, the banks may not follow suit by dropping their prime rates even if Feds drop interest rates.
That's the gist of the foll long story if you don't wish to read it

http://www.globeinvestor.com/servlet/story/GAM.20080117.RPRIMEBANKS17/GIStory/

A central bank's waning influence
The gap between the prime rate banks charge their customers and the Bank of Canada rate has widened before or during recessions as banks protect themselves from the risk of bad loans. Below, a brief history of monetary policy and economic ups and downs.
DAVID PARKINSON


00:00 EST Thursday, January 17, 2008

Central banks have spent the past decade convincing the world's markets that interest rate policy is the magic tool - give it a few well-placed turns and it can repair most, if not all, economic ills. But with central bank rate changes lacking the necessary torque in the face of the current global credit crisis, some pundits are beginning to ask: Have central banks lost their mojo?

And if so, will they get it back?

Doubts about the influence of monetary policy has crept into markets in the past several months, as central banks have cut rates only to see credit-crunch-battered commercial banks threatening to stubbornly resist following suit with their lending rates to customers.

And now, with the Bank of Canada poised to make further rate cuts as early as next week, there is growing talk that Canada's Big Banks may decide to ignore the cuts and keep their prime lending rates on hold.

Experts say the credit crunch and the prospect of a bank revolt has exposed a dirty secret of monetary policy - it no longer has the influence it once had on commercial banks' lending rates.

Thanks to innovations in banking products and regulations over the past generation, lenders don't have nearly the same dependence on central bankers as a source of capital as they once did.

As a result, the banks' funding costs have become less and less tied to central banks' benchmark rates - typically the rates at which banks can borrow directly from central banks on an overnight basis.

Adam Posen, deputy director of the Peterson Institute for International Economics in Washington, said the explosive growth in structured-finance products such as mortgage-backed securities has served to further distance commercial banks' lending costs from those implied by central bank rates. However, he said these products are merely the latest step in an evolution under way since the 1970s.

"The apex of central banks' influence came and went a few years ago, even if people didn't realize," he said. "With every banking innovation, central banks have lost a bit of their ability to influence lending rates."

Ironically, this has come during a period when central banks' credibility had climbed, thanks to better transparency, improved communications and better-focused policy. And in Canada, as well as in many other countries, central banks were able to promote more stable, sustainable economic growth by directing their policy efforts toward keeping inflation at bay - a successful strategy that helped foster confidence in central banks.

But that may have been something of an illusion, Mr. Posen said - and, indeed, one the central banks themselves have played a role in promoting.

"Central banks' control over the economy through interest rates was never as great as people thought - or maybe the central banks wanted them to think," he said.

"But in terms of communication, that's not the message the central banks want to convey."

An obvious gap in central banks' ability to influence lending rates is the fact that their rate changes directly affect only extremely short-term borrowings by banks. While decades ago this spoke directly to banks' funding costs, the connection has been eroded, leading to occasional discrepancies between longer-term lending rates the banks were willing to offer to maintain their own internal credit spreads (and, hence, profit margins) and the costs of short-term borrowings.

Meanwhile, in times of rising risk in credit markets - in particular, economic recessions - lenders have a history of tightening up their lending conditions and demanding higher rates. The current economic climate appears no different, experts said.

"In this type of environment, where the economy is slowing ... it's quite possible that default rates that banks are facing with their loans could rise," said Ted Carmichael, chief economist at J.P. Morgan Securities Canada Inc. He noted that while prime lending rates have moved in lock-step with the central bank since 2000, the spread between the two has historically widened in times of economic slowdown and rising credit risk.

"One of the things that may be happening is that some of the businesses that have made a lot of money for the banks in recent years, the prospects of generating revenues from those businesses has deteriorated," he said. "So they might have to achieve it the old-fashioned way - with wider credit spreads."

Nevertheless, experts say, central bank interest rates will continue to influence lending rates broadly, even if their direct impact has been eroded. But they say we can expect it to take longer, and for central banks to have to cut deeper, if they want to affect cuts in lending rates as a form of economic stimulus.

"People forget that there are long lags in monetary policy," said Don Drummond, chief economist at Toronto-Dominion Bank. "It doesn't turn the economy around on a dime."

"It's more like turning around an ocean liner as opposed to a sports car," Mr. Posen said. "But eventually, it will still have the desired effect."

*****

THE REACTION

The Globe and Mail reported yesterday that banks may hold their prime rates steady if the Bank of Canada cuts its key rate on Jan. 22. This could undermine monetary policy and it sparked comments from Bay Street to Main Street, Steven Chase reports

BIGGER CUTS FROM THE CENTRAL BANK

"It simply means that if the [Bank of Canada] desires to reduce borrowing rates for consumers, home buyers and businesses, it has to make larger reductions in its policy rate."

Ted Carmichael, chief economist, J.P. Morgan Securities Canada Inc.

CALLS FOR NEW BANKING LEGISLATION

"These banks have to be told by the government of Canada that they have no right to start ripping people off even further ... If the banks aren't willing to do the right thing ... then the Bank Act is going to have to make them be fair."

NDP leader Jack Layton, calling on Ottawa to rewrite federal law so financial institutions are forced to follow central bank rate reductions.

NO COMMENT

"I am not going to speculate on what the Bank of Canada might or might not do on their next rate setting day, which is very close."

Finance Minister Jim Flaherty, refusing to comment on any potential move by big banks to ignore a central bank target rate cut, saying to discuss this would be prejudging how the central bank will act in the days ahead.

WHAT IT WOULD MEAN

"Things are becoming a bit more fuzzy."

University of Western Ontario economist David Laidler, who says such a move by the banks would be another sign that the environment the central bank is operating in has changed.

*****

1974-75

The spread between the prime rate and Bank of Canada rate jumped in the runup to the 1974-75 recession, when central banks hiked interest rates to temper inflation sparked by the oil shock and other high commodity prices.

The recession ended as rates eased and commodity prices fell back, allowing the economy to recover.

1980

The spread again widened in the brief first phase of what would be a double-dip recession, again after oil prices spiked and Iran and Iraq went to war. The U.S. Federal Reserve under Paul Volcker attacked inflation with sharply higher interest rates.

Interest rates fell back, as did the spread, but the end of the recession proved to be short-lived.

1981-82

Inflationary pressures came roaring back during a housing boom and interest rates soared -- mortgage rates topped 20 per cent -- leading to the second leg of the double-dip recession, the deepest in the post-war period. Again, the spread between the prime rate and Bank of Canada rate jumped.

The recession ran for six quarters, and while rates fell by more than 10 percentage points, kick-starting the economy, growth remained sluggish.

1990-91

Spreads were volatile as central banks boosted interest rates in the midst of a real estate boom. Organized labour was demanding pay hikes to cover the GST, and the Bank of Canada under John Crow was determined to curb inflation.

A marked, and lengthy, decline in interest rates put the economy back on its feet, but, again, the economy still remained sluggish for some time.

© The Globe and Mail

http://www.yash.ca/news17.php

Ontario Automotive Companies Shine At Auto Expo In India

Jan 16th, 2007

NEW DELHI, INDIA, Jan. 16 - Ontario automotive delegates at the largest automotive trade show in India are optimistic about landing contracts with India companies to secure their future, Minister of Economic Development and Trade Sandra Pupatello said today.

Minister Pupatello is leading Ontario's first automotive mission to India to generate a number of leads for Ontario companies.

"Our approach is focused on three objectives: meet with all 12 Ontario exhibitors and learn about their products, provide them with information they need to make relevant business contact in India, and speak with the largest automotive players in South Asia about Ontario's profile as the premier automotive manufacturing investment destination in North America," said Pupatello. "Companies at the Ontario pavilion have attracted lots of interest."

"Minister Pupatello is a driving force in linking Ontario companies with auto firms in India," said David Arjune, President of Arjune Engineering and Manufacturing based in Waterloo. "We are very encouraged about the leads we've made through Minister Pupatello's leadership and will be working hard to seal
deals and bring jobs back to Ontario."

"Companies here in India recognize that Ontario companies have the resources and expertise they need to help them enter new markets and increase India's position as a serious automotive producer," Pupatello added.

Pupatello also spoke with senior executives of the Tata Group of Companies, one of India's most respected business conglomerates, about mergers and partnerships with Ontario companies.
"Presence is everything. That's why Premier McGuinty led a business mission to India last January and that's why we've returned here now to follow up on the leads we generated and to work toward new deals." Pupatello said."We're working hard to secure and generate high-value jobs for Ontarians

http://www.globeinvestor.com/servlet/story/RTGAM.20080116.wsrcfofukakusa0116/GIStory/

Breaking News from The Globe and Mail

The most in-demand guest at Davos? Sovereign funds
NATSUKO WAKI


Thursday, January 17, 2008

LONDON — Business and political leaders will be queuing up to talk to sovereign wealth investors at next week's Davos forum as debate rages over whether these cash-rich funds are the saviours of global finance or a threat to economic stability.

Sovereign wealth funds, state-run investment vehicles which manage assets of over $2-trillion (U.S.), have shot up to the main stage of the world economy in the past few months with their $60-billion injection into banks hit by the U.S. mortgage debacle.

The sheer scale of their investments became more evident this week as funds from Asia and the oil-rich Middle East poured nearly $20-billion into Citi and Merrill Lynch.

Eager to find investment destinations for their burgeoning coffers, SWFs are transforming the landscape of global markets after liquidity dried up for hedge funds and private equity.

“Emerging markets have lived up to their name, and are now a greater economic bloc than the United States. These are countries that are giving emergency aid to the world's rich countries,” said Filip Weintraub, portfolio manager at Norway's Skagen Global.

“They now have appetite for risk to increase returns. Then (the West) run into a dilemma - you need the money but you don't want to give up control. You don't want to sell up a part of such an important part of your infrastructure.”

In the Swiss ski resort of Davos, business leaders will have a rare chance to mix with managers of the world's top wealth funds at the annual World Economic Forum meeting.

Next Thursday's session on SWFs brings key speakers in the field, including Bader Al Sa'ad, head of the Kuwait Investment Authority; Muhammad Al-Jasser, Vice Governor of Saudi Arabia's central bank; Alexei Kudrin, Russia's finance minister; Kristin Halvorsen, Norwegian finance minister and Robert Kimmitt, U.S. deputy Treasury Secretary.

As the SWF's assets set to reach $12-trillion by 2015 -- almost 10 per cent of all financial assets in the world – rapid growth and their often opaque strategies have raised alarm bells among the developed economies.

Politicians worry that rapidly-growing SWFs could invest with political rather than economic motives, gaining control of firms important to national security.

U.S. Senator Evan Bayh, an Indiana Democrat, has warned that a lack of transparency undermined the theory of efficient markets at the heart of the U.S. economic system.

“There will be a massive debate around sovereign wealth funds in Davos,” said Mark Spelman, head of global strategy at Accenture.

“The EU and the U.S. are already beginning to work together to make sure there is transparency. There is a strong feeling in the West that there is a potential for an uneven playing-field.”

Some see SWFs as having a longer investment horizon and a higher tolerance for swings in their balance sheets than hedge funds or private equity, hence providing a welcome source of liquidity and stability rather than volatility in markets.

“To the extent that SWFs improve market liquidity, particularly in a way that is not herdish like other types of short-term capital flows, SWFs should be a positive factor for markets in general,” Stephen Jen, global head of currency research at Morgan Stanley, said in a note.

Relatively young SWFs, with heaps of money but little investment experience, also offer lucrative opportunities to the investment community.

Morgan Stanley reckons SWFs in the aggregate may outsource around 20 per cent of their assets to external investors, placing as much as $200-billion in the next five years.

For SWF managers, the World Economic Forum provides an ideal recruiting ground as they scour the world for talent to maximize investment returns on their trillions.

Pressure on them to boost returns is enormous. Lou Jiwei, head of China's new $200-billion state fund, has said that he needs to earn 300 million yuan ($41.47-million) a day just to cover the cost of the bonds issued to finance the agency.

“We are civil servants and it's hard for us to match salaries of private-sector fund managers or provide a competitive remuneration package. So getting the right people would be difficult,” a senior Asian central bank official, whose country has yet to establish a sovereign fund, told Reuters.

© The Globe and Mail