Such has been this week’s market turmoil escalating fears over economic slow down and fanning talk about a double-dip recession, bond yields have already fallen to such levels that makes it hard to justify moving lower without severely weaker data. Friday’s June employment report carried a 9.5% headline rate of unemployment and failed to materially strengthen the case that the economy is moderating to a point worse than Federal Reserve members have already predicted. As such the dip in bond prices following the report offered a suggestion of surrender for the recent rally in yields.

Click on link for updated table throughout the day at http://www.interactivebrokers.com/en/p.php?f=daily_analysis

Eurodollar futures – Such has been the abundance of what many believe to be bad economic news this week, ranging from declining consumer confidence and weaker factory output around the world, today’s reported 125,000 drop in jobs during June hurt the rush to lower yields. Investors can’t respond in an overly negative fashion from the more than expected loss of 125,000 jobs given the 83,000 increase in private sector jobs for the month while also poring over upward revisions to the previous couple of months. Fears that lower growth will curtail consumption in the second half of the year are always subject to the surprising vigor that consumers have showed during the recovery even when the rate of unemployment was running at a double-digit pace.

Also lost in today’s overall job loss was a deeper sense of the performance of the labor market. The net decline was largely caused by the end to 225,000 temporary positions created to conduct this year’s census. What next for these people and will they remain part of the labor pool? Manufacturing jobs continued to gain although at a slower pace than was predicted as 9,000 new hires were made, confirming the recent PMI data indicating a slowing in the pace of expansion. Of concern, however, is the loss of 117,000 service positions after a 420,000 rise. Confirming the less than wonderful health of the building trade, construction companies shed 22,000 positions in June.

Equity prices made a positive response after digesting the data, while the dollar remains weak. Treasury traders appeared to book profits and concluded that there was nothing so worrying about today’s report that justified pushing yields lower. The 10-year note future expiring in September dipped 10 ticks to yield 2.94% as Wall Street opened for business, while Eurodollar traders also appeared to bank easy gains from falling yields this week.

European bond markets – European bonds came to a calmer finish this week with peripheral bond yields narrowing relative to those of Germany. September bund prices are now trawling the lows of the session at 129.14 and continue to decline. The health of the financial sector is ever so slightly under less scrutiny after weeks of torment. Hard economic data showed producer prices in the Eurozone rose 3.1% year-on-year during May, while the unemployment rate slipped to 10% although remaining near the cycle high.

British gilt – The softer tone to bonds has gilt prices on the decline with the 10-year yield jumping by three basis points to 3.34%. That despite positive commentary on the fiscal health of government finances from Moody’s rating agency.

Japanese bonds – The recent rally in the yen has the potential to harm export profits but a more positive tone for risk appetite overnight helped relieve some of the strain on the yen, which in turn forced bond yields to increase by three pips to 1.083%.  

Canadian bills – Bills rose ahead of the U.S. jobs report as investors continued to rely on gains in Eurodollars to erode confidence in the view that the Bank of Canada would push rates higher. Later, however, dealers had a rethink and pushed implied shorter-dated yields up by eight basis points. Bond prices were under light pressure with the 10-year government bond adding one basis point to stand at a yield of 3.07% maintaining a 13 basis point yield premium over U.S. notes.

Australian bills – Aussie 10-year yields rose a notch to 5.08% despite rising risk appetite overnight. Bill prices were lower sending yields a couple of basis points higher.

Andrew Wilkinson

Senior Market Analyst                                                               ibanalyst@interactivebrokers.com

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Andrew Wilkinson

Director of Media Communications

Interactive Brokers Group LLC

8 Greenwich Office Park, Greenwich, CT 06831

(203) 618 8085

BIG PICTURE – Let’s face it; central banks are blowing another asset bubble.  As if two burst bubbles in the prior decade are not enough, the money maestros have decided to fuel another speculative orgy.

Let there be no doubt, both the technology and real-estate bubbles were spawned by cheap credit and it is now clear that the central banks have learned nothing from those two episodes.  Despite the fact that near-zero interest-rates caused the previous mishaps, the central banks are (once again) pursuing a suicidal monetary policy.  By keeping interest-rates well below the rate of inflation, the officials are encouraging speculation, thereby sowing the seeds of yet another asset bubble.

At present, the yield curve is steep in most nations and the cost of borrowing is low, so is it any surprise that asset markets are rallying?  All over the world, asset prices are inflating again and dangerous excesses are around the corner.  Only this time around, the public sector in the West is already over-leveraged and when the next asset bubble bursts, governments will not be able to come to the rescue.

Today, most of the developed world is drowning in debt and various industrialised nations face severe deficits (Figure 1).  Moreover, these over-indebted economies are struggling to grow, therefore it is highly unlikely that their stock markets will provide leadership.

Figure 1: Serious problems in the developed world

Source: PIMCO

Now, given the fact that the developing world is growing much more rapidly, it is highly probable that the emerging market equities will benefit the most from asset inflation.

Apart from sporting superior growth rates, it is worth noting that the developing nations have relatively low debt levels.  It is our contention that this combination of strong economic growth and compressed leverage will be sure to catch investors’ attention.

Figure 2 highlights the huge discrepancy between the fiscal health of the industrialised and developing nations.  As you can see, public debt relative to the economy is already very high and likely to surge in the developed world, whereas this ratio is expected to decline in the developing world.  Therefore, over the next decade, we can expect more and more investors to shift their capital from the debt plagued developed nations to the healthy developing economies.

Figure 2: A two-tier economy

Source: DB Research

Historically, the developing markets have traded at a valuation discount when compared the developed markets. However, over the coming years, we suspect that the ‘risky’ developing markets will command a valuation premium relative to the industrialised world.  Put simply, when you factor future earnings growth and an expansion in valuations, the developing markets are prime candidates for the next asset bubble.

Since the turn of the millennium, we have favoured the developing countries in Asia and we continue to like China, India and Vietnam.  In our view, these economies will prosper for different reasons and their stock markets will reward long-term investors.  Now, there can be no doubt that both China and Vietnam have been disappointing over the past few months, but we view the ongoing consolidation as a fabulous buying opportunity.

In addition to the developing nations in Asia, we believe the energy sector is also a worthy candidate for the next asset bubble.  In fact, when the realities of ‘Peak Oil’ dawn in investors’ minds, we could witness an outright mania in conventional and alternative energy stocks.

Although we recognise that the developed world faces some serious economic problems, we are positive about asset prices for the next 2-3 years.  In our view, monetary policy determines the fate of every asset-class and as long as interest-rates are low, the ongoing bull-market should continue.  In fact, history has clearly shown that each bear-market in the past was preceded by a period of significant monetary tightening.  In every previous bull-market, rising interest-rates was the straw which broke the camel’s back.

Figure 3 shows the Fed Funds Rate since 1998 and plots the two most recent US recessions (pink shaded areas on the chart).  As you can see, prior to the 2001 recession, the Fed Funds Rate peaked in mid-2000 and it is this monetary tightening which caused the NASDAQ-bust and the 2000-2003 bear-market.  Furthermore, prior to the most recent recession, the Fed Funds Rate peaked in mid-2007 and this monetary tightening was responsible for the credit-bust and the 2007-2009 bear-market.

At present, the Fed Funds Rate is extremely low and if the economic recovery remains intact, then over the following months, interest-rates will rise.  In our opinion, the next bear-market will only occur when the Federal Reserve is done raising its benchmark rate for this cycle.  Now, given the precarious state of the US economy, we suspect that the Federal Reserve will increase interest-rates in baby-steps and the next monetary tightening cycle should last for at least 2-3 years.  If our guesstimate turns out to be correct, the next significant correction in asset prices will occur around 2012-2013 and until then, we intend to enjoy the benefits of cheap money.

Figure 3: Monetary tightening = bear-markets

Source: Economagic

Now, before you get excited, we want to caution you that the next bear-market has the potential to be as equally traumatising as the previous one.  Remember, when the bear returns in 2-3 years time, governments in the West will be unable to provide more ‘stimulus’.  By then, their balance-sheets will be in a terrible state and during the next bear-market, sovereign default risk will be the Achilles Heel.  So, in the next bear-market, instead of financial institutions going bust, entire nations are likely to default.

Given the ominous scenario outlined above, we want to re-iterate that we have no intention of suffering during the next bear-market. Accordingly, we will endeavour to re-position our clients’ capital towards the end of this bull-market, so that we are able to preserve our gains over the full business cycle.

If our assessment is correct, towards the end of this bull-market, we are likely to see the following red flags –

· Rising interest-rates

· Surging inflationary-expectations

· Deterioration in the market’s breadth

· Diminishing new highs and expanding new lows

· Increasing credit spreads

· Credit concerns

· Spike in the price of crude oil

· Inverted yield-curve

· Extreme investor optimism

When the above warning lights start to flash in tandem, the next recession/bear-market will be around the corner and we will switch from ‘capital growth’ to ‘capital preservation’ mode.  However, as we have explained above, this bull-market should continue for the next 2-3 years and as long as the primary trend is up, we will remain fully invested in our preferred growth-producing assets.

Puru Saxena publishes Money Matters, a monthly economic report, which highlights extraordinary investment opportunities in all major markets.  In addition to the monthly report, subscribers also receive “Weekly Updates” covering the recent market action. Money Matters is available by subscription from www.purusaxena.com.

Puru Saxena

Website – www.purusaxena.com

Puru Saxena is the founder of Puru Saxena Wealth Management, his Hong Kong based firm which manages investment portfolios for individuals and corporate clients.  He is a highly showcased investment manager and a regular guest on CNN, BBC World, CNBC, Bloomberg, NDTV and various radio programs.

Copyright © 2005-2010 Puru Saxena Limited.  All rights reserved.

Oil failed to get above yesterdays levels and as of this post just went negative. We expect prices to drift lower but would advise cutting losses on any open shorts on a settlement above $82 in May; our target remains $77/78. Now that natural gas has seen a trade below $4 will buyers enter the market? We are expecting the long Crude/short natural gas unwind to help natural gas find a bottom.

Additionally check out the inverse correlation with natural gas to stocks. A top in stocks may equal a bottom in natural gas. We have advised clients to cut half their position on May longs at a loss on a trade below $3.90. We still like purchasing June 50 cent call spreads.

Surprise equities higher on the day! June ES puts are the only way I’d suggest having exposure speculating on indices coming off. Cotton lost 1.5% today putting May just above 80 cents; our targets remains 78 and then 76.Coffee prices perked up today gaining 2% closing above the 50 day MA the first time since mid-January. We have started to price out July 10 cent call spreads for clients…stay tuned.

Treasuries broke a key trend line today and look to be heading lower. We would refrain from being out right short but a possible idea would be a pair trade; short 30-yr/long 10-yr or short 10-yr/long 2-yr.

Agriculture came under pressure today. We advised clients who were long December corn futures to sell May futures 1:1. Those who have held back or only have a small position we would advise lowering your cost basis and buying more corn ahead of next weeks USDA.

Bear in mind you may need to take some heat but we view this as temporary. The KCBOT/CBOT wheat spread picked up a few pennies today; again we are expecting December KCBOT wheat to be at a premium to December CBOT wheat.

Both cattle and hogs were lower on the day; continue to sell rallies. Metals were sideways today but the fact that they were able to remain positive in the face of a stronger dollar does show some resiliency.

We are expecting gold and silver to trade down before we see any substantial upside; $1075 then $1045 in gold and closer to $16 in silver. As long as the dollar stays above 82 we should see pressure in foreign currencies. If the Loonie was to trade to .9600-.9650 we would start looking for an exit door on shorts.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

Currencies calmly accept rampant Chinese growth

Thursday March 11, 2010

There’s a nice mix of arguments this morning to give rise to conflicting views on today’s currency movements. A slew of healthy data out of China confirmed up to be a rambunctious pup desperate to play in the yard. Moreover the strength of the data raises the stakes in terms of monetary tightening, which helped boost the Japanese yen rise against regional currencies on a risk reversion theme. Yet the yen showed its true colors against both the dollar and euro where rising confidence in a recovery and where growing conviction that the dangers stemming from the Greek episode have passed increased the confidence in both currencies. U.S. and European stock markets are heading lower today after healthy recent performances meaning that the overall risk aversion theme has also been put out in to the back yard along with stray pups.

Click on link for updated table throughout the day at http://www.interactivebrokers.com/en/general/education/FX-View.php?ib_entity=llc

U.S. Dollar – The major driving force in global market sentiment must stem from the data released by China earlier today in which it is more than clear that the domestic economy is enjoying rude health. On account of data yesterday showing surging exports one can only conclude that the global economy isn’t doing so badly either. Retail sales surged 22% over one year ago while industrial production rose by 13%. New loans, having been a strong bone of contention for the Peoples Bank, rose by 700 billion yuan and more than the 600 billion forecast. However, the previous reading for January was 1390 billion and the control exercised by Chinese banks is quite clear. However, along with data today that showed a 2.7% pace of consumer price inflation it’s clear that investors should prepare for further action from the central bank. Inflation rose to a 16-month high and close to the 3% full-year projection of Premier Wen Jiabao.

Two months ago when this type of data “shocked” the world, investors ran headlong back in to their shells and fully priced in an Armageddon-type scenario in which the necessary measures to slow the pace of growth were discounted to reflect a huge slowdown in global growth. And how wrong they were! Today’s reaction is far-more muted and appears to have adapted to why the Chinese need to keep moving rather than what the worst case might be.

The dollar is therefore mixed and has reversed earlier losses to the euro to stand at $1.3642, while it’s also unchanged against the yen at ¥96.50. Initial weekly jobless claims data is once again shifting in the right direction, although a 6,000 decline underwhelmed predictions of a 9,000 drop. In the big picture a move further to the south side of that half million mark is what the market needs to see from this series.

Euro – Earlier the euro reached $1.3687 to the dollar as a growing chorus of voices attempt to package up the fiscal crisis surrounding Greece and wrap it up with a nice red ribbon. Yesterday’s words from former Italian Prime Minister Prodi continue to resonate and despite new and admittedly scheduled public union strikes across Greece today, the gravity up the media and therefore investor pull towards sovereign debt has eased. The euro has, however, reversed earlier gains against the yen to and now buys ¥123.30. It also eased to 90.82 pence to the pound.

British pound – Rising inflation expectations according to a Bank of England report today have boosted the fortunes of the pound. The survey asks the public for its inflation perceptions one year forward. At the time of the previous report in November the consensus reading was a 2.4% annualized pace of price increases. Today’s report reveals a 2.5% consensus among the public. While it is highly possible that the Bank of England will discount the reading based upon its own analysis, investors today assumed a closer end to easy money and helped fuel a gain for the pound, which rose to $1.5065. After U.S. jobless claims data the pound pared its gains to $1.5014.

Japanese yen – Despite the bullish Chinese data and impact on the Asian region, the need for risk aversion safety remained complicated by a 1% rise in the Nikkei.

Aussie dollar – Another example of conflicting arguments arrived today in the form of the Aussie jobs report. The dollar fell earlier in response to a net 400-employment increase during February yet stands a shade higher at 91.59 U.S. cents in early New York trading. However, the picture is less clear. January data was revised higher while the full-time element of the report showed an increase of 11,400 jobs in February maintaining a sixth straight monthly increase. Interest rate expectations moved sharply higher in response, making the muted currency reaction all the more inexplicable. That said, the Chinese data today argues for further action from the central bank in an effort to tame the economy.

Canadian dollar –Price action on Wednesday did indeed create a huge spike down in the U.S. dollar allowing the Canadian unit to make an eighth consecutive string of gains. Friday brings the Canadian employment report and currently the unit is about unchanged on its midweek close at 97.38 U.S. cents.

Andrew Wilkinson

Senior Market Analyst                                                               ibanalyst@interactivebrokers.com

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Andrew Wilkinson

Director of Media Communications

Interactive Brokers Group LLC

8 Greenwich Office Park, Greenwich, CT 06831

(203) 618 8085

Ready, willing and able

Monday March 8, 2010

French President Sarkozy’s strong weekend words supportive of the plight of Greece have seemingly struck a chord with investors across a variety of asset classes today. It would appear that last week’s efforts by the authorities in Greece have received a positive global response leaving traders ready to once again step back up to the table to feast on bolder prospects as appetite for risk returns.

Click on link for updated table throughout the day at http://www.interactivebrokers.com/en/general/education/FX-View.php?ib_entity=llc

Euro – Monsieur Sarkozy’s comments gave investors the strong impression that EU partner aid in the form of financial assistance was very much available now that a stringent budget has been implemented. That the collective EU governments have given such a strong seal of approval for the Greek measures bolsters Sarkozy’s stance that the bloc is ready, willing and able to come to the financial rescue of Greece. The determined aspect of those words is in the short term at least having as supportive impact on the euro and risk in general.

The potential for independent sovereign default on behalf of the government of Greece appears that much more remote beyond a budget that has allowed for the creation of demand for high-yielding government debt. And the ongoing ratification of the path its government is treading helps make the short posturing surrounding the euro that much more tenuous. Latest CFTC data through March 2 shows that short euro positioning by speculators took a 7% haircut. Outstanding short positions slipped to 66,770 as the euro steadied.

There is little on the data front today other than a small decline in French business sentiment, which slipped from an index reading of 104 to 102 for March. In neighboring Germany the data could have been worse for industrial production during January. A 0.6% gain fell short of an expected 1% gain, but a serious backward revision for the better left the year-over-year data with a 2.2% gain.

U.S. Dollar – A broad rise in risk appetite for Asian stocks inspired by Sarkozy’s comments has helped push the euro to $1.3662 this morning, while the dollar and yen are suffering as investors appear to be breathing that little bit easier.

Emerging market stocks have built on last week’s 4.2% rally and are fast approaching breakeven for the year. The fact that Greek debt woes are receding has helped investors buy into the Asian recovery story more to start the week. In addition, bankers close to counterparties in the Dubai World saga have hinted that the conglomerate with outstanding debt of $26 billion is preparing to submit plans to creditors that may see them receive all of their loans back. According to media reports, creditors’ best option may be patience and a willingness to remain longer term lenders might assure them a guarantee from the government of Dubai.

The “safer” world this week is setting off a domino-style resumption of risk taking. The yen and the dollar are both falling as appetite for riskier bets in the shape of natural resources, emerging stock markets and riskier currencies picks up.

Japanese yen – The yen fell against the euro but is stable at ¥90.30 against the dollar. The better tone to the euro saw it rise to ¥123.32. March is the end of the Japanese fiscal year and is typically marked by a flood of overseas earnings returning to head office. Typically this supports the Japanese unit. However, investors are having a hard time making the argument that such demand for the yen can last beyond month end given the growing differences in the shapes of recovery between the world’s two largest economies. It’s becoming easier to argue that the Fed will shift policy higher before the Bank of Japan despite warnings from former and current Fed officials that now is not the time to remove either fiscal or monetary stimulus. Last week Japan’s Nikkei newspaper ran with a story that the Bank of Japan is set to mull new initiatives to stimulate its moribund economy. This will likely see a reversion to further Bank purchases of government debt in an effort to revive corporate and retail demand for loans.

British pound – Weekend opinion polls saw a widening of the lead for the opposition Conservative party ahead of a summer election. This, along with a wider appetite for riskier currencies aided sterling, which rose to $1.5196 and its highest point versus the dollar since the end of February. The euro rose a little to buy 90.23 pence.

Aussie dollar – This week brings the February employment report for the Australian economy. The booming domestic jobs market is expected to add a further 15,000 positions after an increase of 57,000 in January. Demand for the Aussie was once again fuelled by demand for natural resources in the shape of equities in associated companies or in physical buying of commodities. The Aussie rose to a six-week peak at 91.31 U.S. cents.

Canadian dollar – Throughout the recent Eurozone crisis the Canadian dollar fared far better than its Australian counterpart. As firmer economic data continues to emerge, investors are growing increasingly skeptical that the central bank will be able to maintain its near-zero policy beyond the date it promised in June. Each swoon in the euro that was exaggerated by losses in emerging stocks and commodity prices was felt less and less so by the Canadian unit, which has quietly accelerated towards parity with the U.S. dollar. Today the Canadian dollar buys 97.38 U.S. cents.

Andrew Wilkinson

Senior Market Analyst

ibanalyst@interactivebrokers.com

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Housework

Tuesday March 2, 2010

Several nations have unfinished housework before investors can make further informed assumptions over future currency direction. That’s the message stemming from the world’s largest and most furiously traded market this morning. Hawkish comments from a Fed messenger boosted the dollar although are likely to cause conflicting rebuttals. The ongoing discussions to get the Greek house looking tidier as keeping euro sellers busy, while Britons are growing more alarmed at who is best cut out to do the nation’s dirty laundry after the summer election. It’s central bank meeting time for the commodity units with investors wondering whether the RBA’s raise in interest rates today concludes its housework, while Canadians are wondering whether the same process is soon to get underway in earnest.

Click on link for updated table throughout the day at http://www.interactivebrokers.com/en/general/education/FX-View.php?ib_entity=llc

U.S. Dollar – I wonder whether the fact that Philadelphia Fed President Charles Plosser doesn’t get to vote on the FOMC throughout 2010 makes him more provocative than if he did vote. His comments to the Wall Street Journal carried today sound pretty hawkish and argue for a closer end to low interest rates. He says the Fed should back-off its “extended period” positioning and notes, “I don’t like that language. It ties our hands, or people believe that it ties our hands.”

The dollar surged in value against the euro to $1.3425, triggering plenty of stops at the recent $1.3450 low. However, this exercise has flushed the system of more weak longs and the euro has subsequently rebounded, unable to follow through to the downside. The euro subsequently rose to $1.3572 and now stands at $1.3554 -  more than a cent above its overnight low.

Euro – So much is already known about the woes of Athens that one has to expect at some point the market will overcome its bearish attitude along the way. Typically when markets turn, it occurs at the moment of maximum bearishness when there are no sellers left because everyone is already short. We keep witnessing the type of sharp rebound for the euro as empty pockets of resistance get burst as shorts scramble to exit.

For now the euro remains hampered by the remaining housework that has to be completed before it can recover. Over the weekend EU Monetary Commissioner Ollie Rehn laid the groundwork for further austerity measures that must be rapidly implemented “in the coming days.” Failure to do so will render meaningless Friday’s trip to Berlin where Greek Prime Minister George Papandreou will meet his German counterpart, Angela Merkel. A lack of progress with his domestic chores will dishearten Ms. Merkel who is struggling to justify a what is increasingly being seen as a handout to the people of Greece who have become permanently adjusted to living with an expensive safety net providing living standards far beyond their means.

Ms. Merkel’s discussions with Mr. Papandreou are hinged around rapid-fire progress on the domestic front. According to unnamed German lawmakers, a package of up to €25 billion awaits Greece via state-owned German lenders in the event it is needed to shore up debt issuance by Greece.

Greece faces a weakening economy and is hindered by the additional burden of rising interest rates to fund its debt. The domestic fracas is also creating stiff public opposition with another union calling for a national strike to coincide with the March 16 deadline for submitting further plans to the EU. At this point the government retains widespread public support for its austerity measures but aggressive pressure or an acceleration of demands from EU members could turn the plebiscite hostile.

The EU has spelled out to Athens that it could introduce fuel and alcohol levies as well as a sales tax and include a luxury tax on sales of expensive cars and yachts. Greece also has a so-called “14^th wage,” which provides two additional payments during the year giving workers an additional one month’s wage.

British pound – The pound has now weakened for six days straight against the dollar. Another opinion poll released on Monday showed the narrowest lead for the opposition Conservative party in two years as Britons are apparently shrinking from an austere Conservative mandate aimed at reducing public debt. The public is apparently thinking twice about who is best suited to tackle the mammoth debt burden. The pound has now rebounded from weakness to $1.4855 and so held Monday’s lowest point in 10 months at $1.4782 and currently stands at $1.4960.

Aussie dollar – The RBA officially raised its short term benchmark interest rate to 4% stating that inflation would be consistent with its target. That suggests that rates could now be on hold and as such dulled investor appetite for the currency. It initially fell in response to the news, but has later rebounded against a weaker U.S. dollar today and currently stands at 90.53 U.S. cents.

Governor Stevens also maintains that most borrowers still face lower than average lending costs at this point and also acknowledged that the economy has thus far benefitted from a firm domestic currency in the shape of weaker than otherwise inflationary pressures. Evidence that previous moves on rates is working comes today in the form of a 7% decline in building permits for January after applications to build or renovate new houses or apartments slowed.

Canadian dollar – The Bank of Canada left interest rates unchanged at 0.25% this morning as it announced its monetary policy decision. However, there is growing speculation that Governor Carney might begin to sound off about prospects for raising rates later during 2010. The core rate of inflation rose last month to the Bank’s 2% target, although the headline rate was a fraction more subdued at 1.9%. But fourth quarter annualized growth data revealed yesterday of 5% spanked the daylights out of an official 3.3% projection. The Canadian dollar surged after the BoC described recent growth as “vigorous” sending the dollar to 96.93 U.S. cents.

Japanese yen – Buoyant global stock markets continue to contain investor appetite for the yen, which is weaker at ¥89.14 against the dollar. The euro also strengthened back above ¥121.00.

Andrew Wilkinson

Senior Market Analyst                                                               ibanalyst@interactivebrokers.com

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Tuesday, March 2, 2010

The money market response to an upbeat policy statement out of the mouth of the Bank of Canada was pretty bearish with bills of acceptance slumping by one-eight of a percentage point. Dealers took the view that the Bank is indeed likely at some point in 2010 to start raising interest rates. The Canadian currency jumped in response to a perceived growing yield cushion against the dollar with local exporters far more likely to benefit from what the Bank of Canada referred to as strong domestic demand in many emerging market economies.

Canada’s 90-day BA’s – December bills dropped 11 basis points to 98.69 to imply a year end three-month cash yield of 1.31%. The benchmark short cash rate was left untouched at 0.25% but the upbeat statement from the BoC left dealers in the frame of mind that tightening will happen as the recovery continues. Bond yields actually dipped one basis point to 3.39% possibly on account of the note from the Bank that a rising dollar has the persistent impact of constraining inflationary pressures. The bottom line is that prevailing stronger economic activity and prospects are tipping the market towards an expectation of tighter monetary policy.

Eurodollar futures – June bonds became the lead month today as we approach delivery of March notes. The contract is trading either side of unchanged as investors see a relatively muted inflationary profile with a need to keep an ongoing watch on the situation in Europe. Eurodollar futures are not paying much attention to the overnight comments from Philadelphia Fed President Charles Plosser who said he’d rather the fOMC ditch its “extended period” terminology. The words gave a caffeine boost to the dollar earlier but as a non-voting member at the Fed, we know his hawkish words are not shared by more important voting members on the basis of recent speeches.

European short futures – Euribor futures are unchanged across the strip. On Thursday the ECB gets to air its latest views on whatever subject it chooses to. Factors important today are the state of play in EU negotiations with Greece over budgetary controls as well as the roadblocks the furor raises as the ECB attempts to step back from its emergency exit strategy.

March bunds are 10 ticks lower at 124.23 where the yield is 3.12%.Greek Prime Minister George Papandreou is scheduled to meet the German Chancellor Angela Merkel on Friday. It’s still unclear whether we will ever hear of an emergency fund or plan to support Greece even in the event that it takes each and every measure suggested by the EU Monetary Commissioner Ollie Rehn who flew to Athens at the weekend.

British interest rate futures – A good auction of gilts has the bond bulls out in force buying government debt today. The June gilt future rallied sharply after the auction to yield 4.03% with the future adding 52 ticks on the day to 114.55. Short sterling has precious little to react to and is unchanged across the curve.

Australian rate futures –The RBA indeed raised its short rate to 4% and said that average borrowing costs still remained historically low. Inflation is now likely to be consistent with its official target, although that doesn’t mean that risks are balanced, that would be a signal that rates are on hold. Given that the market is still looking for a further 1% as the economy simmers, 90-day bill futures continued to fall by about three basis points. The March 2011 maturity settled unchanged at 94.77 to imply a yield of 5.23% before the time the RBA has finished tightening. The 10-year government bond shed five basis points to 5.28% as the yield curve flattened. In a sign of robust demand for its resource exports the Australian Bureau of Agricultural and Resource Economics today forecast demand would grow by 15%to A$187 billion in the 12 months ending June 2011. The record of A$197 billion was set in the 2008/9 period also ending in June.

Japan – Yields fell one basis point at the 10-year where they stand at 1.28% and on the threshold of the lowest in many weeks. With Asian stocks remaining firm for two days in a row, it’s strange to see bonds and stocks rise together.

Andrew Wilkinson

Senior Market Analyst

ibanalyst@interactivebrokers.com

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Bloomberg also reports that China is eying investments into companies. They are interested in the iron-ore producers in Brazil as well as the silver producers in Mexico.

Source: Interviewed by Karen Roche, Publisher, The Gold Report 01/26/2010
As if the fairy godmother flicked her magic wand, once drab and droopy Saskatchewan has blossomed into the belle of the ball—and the healthiest economy in Canada. According to Tom MacNeill, undeniably one the province’s most ardent fans, the transformed province will keep heads turning for the next century. Chairman and CEO of 49 North Resources Inc. (TSX-V:FNR), Tom is reaching out to line up suitors and fill out dance cards to finance a lot of early-stage opportunities in the now-flourishing resources sector that’s leading the economic revolution. It wasn’t magic, though, that sparked the revolution and morphed Saskatchewan from laggard to leader. In this exclusive Gold Report interview, Tom tells us how what once proved Saskatchewan’s economic undoing is now ironically proving a boon. There’s one reason. The socialist sentiment that reigned for generations kept capital out and kept Saskatchewan’s rich resources pretty much buried in the ground. Previous regimes discouraged development to the point of expropriating businesses and driving prospective producers away. They’ve changed their tune, and Tom couldn’t be more gung-ho about it. He’s thrilled to be facilitating the inflow of investment capital to further dynamic junior resource projects in everything from base metals to gold.

The Gold Report: Your website’s home page points out that Saskatchewan has everything the developing world needs except for the capital markets to support projects. You created 49 North specifically to fill that gap. Can you update us on 49 North, progress you’ve made in the last three years and challenges you’re facing over the next couple of years?

Tom MacNeill: Actually I think the greatest challenge is behind us—the state of world capital markets. They are now less volatile. It’s true that Saskatchewan has everything the developing world needs. We’re geologically blessed with the best of both worlds. Half of Saskatchewan lies in the Western Canadian Sedimentary Basin, with all the hydrocarbons and sedimentary resources you could imagine. The northern half of the province is underlain by the Precambrian Shield, so we also have just about every hard rock mineral asset known to man that can be exploited economically.

The only downside is that we never had a capital market that caused a great deal of development in those resources. As some people know, we are the birthplace of socialism in North America. In the 1940s we elected the first socialist government ever in any North American jurisdiction. We made some extraordinary choices—to some degree along the path that Barack Obama is taking the U.S. these days—in that we had tremendous government oversight of all facets of life, including resource exploration and development.

Government hooks in business spook away a regular capital market. Much like Hugo Chavez expropriating assets in Venezuela today, it tells the rest of the world “stay out” because there’s too much sovereign risk. We did that to ourselves. We went through a whole period where we ruined our economic activity because we thought socialism was the neat thing. We came out of it, but we’re still living the hangover.

That means that we have an opportunity suite unparalleled in the world because we simply didn’t develop it even though we knew it was there. The inroads that 49 North has been making are to develop a capital market. Several hundred companies are exploring for various resources in Saskatchewan now, and while I’m developing local interest and awareness, there’s a tremendous investment opportunity for people external to the province.

TGR: Do you see the direction in which Obama is taking the U.S. as additional opportunity for capital markets in Saskatchewan? Or might Saskatchewan catch socialist fever again from south of the border?

TM: No, we won’t. Been there, done that. We know what happens when you have government oversight in resource development. With resources the backbone of our economy; we’re not going to screw up a second time. We watched Alberta develop from a base of 800,000 people to a population of 3 million people while we stayed stagnant at one million people over the last 50 years. It’s not going to happen again. Saskatchewan is immune now because of our previous experience, so to some degree that will make us very attractive to capital worldwide.

Canada has always been mining- and resource-friendly. The U.S. is becoming more and more restrictive. Put a green stamp on something and everybody loves it; put a mining stamp on it and everybody hates it. That’s becoming a very challenging environment, so we see a tidal wave of money flowing into Saskatchewan to take advantage of opportunities we have kept in the ground.

TGR: You’re in the catbird seat of having all these untapped resources.

TM: And we couldn’t be happier about that. I’m a second-generation resource developer. I watched the struggles my father had in this province from the 1950s onward, and I watched the transition. We are in the best place of any jurisdiction in the world. We have virtually zero sovereign risk because of our previous experience, tremendous undeveloped resources, more roads per capita than any jurisdiction in the world because we have all the infrastructure that socialists like to build. Power lines and gas lines run everywhere. Even our left-wing friends in previous administrations started developing good policy and resource royalties. We’ve set the playing field such that we’ll be the belle of the ball for the next 100 years.

We’ve got it all and we’re happy to be a part of early-stage development. That’s what 49 North is about, pointing fingers at good projects. We invest in third-party projects through equities or other instruments, but we also develop our own. We’re absolutely tickled about the opportunities ahead.

TGR: You develop your own projects?

TM: Yes. Because we have a corporate structure, we can actually develop our own projects, which we do. We don’t just develop things in Saskatchewan, either. We have a strong focus on Saskatchewan, but we look anywhere in the world.

TGR: Given such abundant natural resources, how does 49 North prioritize which resources?

TM: Everything tends to move in tandem. But we do get specific. A couple of years back we kicked out most of the uranium exposure in our portfolio and haven’t really gone back into it heavily because I don’t think it’s quite time. Probably late 2010 or early 2011 will be time to do that. I guess what I’m saying is that we look at the commodity, where it is in the cycle, the macroeconomics around it and what the projects are.

We use a lot of macroeconomic factors to figure out what we want to do. After that we answer other important questions. What do we think about the short term and short-term pricing? What’s the capital market going to say about this? Can we finance the project moving forward? Is it the right time in the cycle? It’s usually not the right time to bring a copper project on stream if copper is at $8 because you’re near the end of that cycle. Just about everything I can imagine has seen what I’d consider the short-term bottom in its commodity price, so now is a good time to be putting things back on the books. Right now we’re focusing on light oil in Saskatchewan—we’ve been doing that for the last six months—and base metals projects. It’s time for that.

TGR: We’re at the bottom of their cycles so you’re starting to invest in them?

TM: I think we’re near the bottom. But having said that, I don’t try to pick a perfect bottom. Any time from a year ago to two years from now is a good time to put together a project for most commodities. I’m usually spending money when everybody else is shunning a particular commodity or project or area. In some ways what we do at 49 North is either countercyclical or ahead of the cycle. As an early-stage junior resource guy, the place I live in is the 10-cent equity that we take to $3 to $5; not the $15 stock that goes to $50 because all of a sudden there are 100 years of production ahead.

TGR: In terms of being countercyclical and focused on junior resources, what are some interesting junior resources plays that investors should look at?

TM: Definitely pay attention to potash. It’s absolutely a necessary nutrient for growing crops. You can’t do without it. There’s no way to artificially manufacture it. Saskatchewan’s salt beds contain 50% of the world’s mineable supply, so Canpotex (Canadian Potash Exporters) has become the largest supplier in the world. Pay attention to excellent local developers like Athabasca Potash (TSX-V:API) and Potash One Inc. (TSX-V:KCL).

TGR: Is Saskatchewan’s dominance threatened by Amazon Mining Holding Plc (TSX-V:AMZ), which is drilling on a big potash play at their Cerrado Verde project in Brazil?

TM: Not at all. More power to them. Demand growth will continue. We’re just realizing shortages in potash in the market now, so we’ll see supplies tighten up even further. In my lifetime the population of this planet has doubled, growing from 3 billion to more than 6 billion. A lot of these people are moving up the economic ladder, which means more protein in their diets, which is creating an exponential increase in potash demand. So more potash production is a good thing. You get much better crop yields if you apply the recommended amount of potash to the soil. The more that is mined, the more that is put on fields, the better the harvests are, and the better we can feed the growing population.

TGR: What other opportunities do you see for investors in those masses moving into the middle class?

TM: Any advancement in civilization is great for commodities. China overtook the U.S. as the world’s largest consumer of automobiles in 2009. They are building more cars for all these people. To build cars, you need everything from rubber, lead, zinc and tin to hydrocarbons for the plastics. You need base metals. Hybrids or electric cars need rare earth elements. They need roads, so they need asphalt. Roads need bridges when they come to a river, so they need concrete. That means limestone and kaolin and iron and thermal coal. And coking coal to make the steel to build the bridge.

So infrastructure development in Asia and elsewhere, in the BRIC countries—Brazil, Russia, India and China—will drive the commodity cycle going forward. That’s an unstoppable force. That is tremendous for virtually all commodities. It’s even better for Canada because we’re a commodities country and it’s the best for Saskatchewan because we’ve got just about everything. We’re ready to supply it to the world.

TGR: Earlier you said you’re focusing on base metals. Could you talk a bit about opportunities you’re seeing for companies in base metals in Saskatchewan?

TM: We really have had hardly any base metals production in Saskatchewan ever. In eastern Saskatchewan, most of the mining’s been at the border or on the Manitoba side and policy never promoted Saskatchewan base metals. 49 North’s focus on base metals is due to the fact that we have such extraordinary resources here that have never been developed. We’re looking no further than our backyard to find some of the best copper showings in the world.

We have incredible projects that are 43-101 quality that have never moved forward. We’re doing it simply because nobody else is. There’s another old adage that if you can’t make money at $2 copper, you shouldn’t be in the copper business. Well, we have nearly $4 copper right now, right? So there’s a lot of demand for base metal resources and we’ve never exploited any properly in Saskatchewan. It’s about time we did. We have a wide open field here. It’s like going to a contest and finding out you’re the only entrant. Might as well do it; you’re going to win.

TGR: Can you share with us some of the interesting base metal plays that you’re involved in?

TM: We’re talking about such absolute early-stage projects that we don’t even have a name for the various property packages. They’re not in a corporate structure yet.

TGR: Is gold also prominent among Saskatchewan’s resources?

TM: Absolutely. Saskatchewan has one producing gold mine. In fact, it was founded by my father. It’s the longest-running gold mine in Saskatchewan history. I think they’ve poured about 800,000 ounces. It’ll likely go for the next 25 years, if not longer, because they have two other deposits they’re bringing on stream. There’s an entire gold belt in Saskatchewan that, again, has never been seriously developed because of the lack of a capital market.

TGR: What mine did your father found?

TM: It’s Seabee Gold Mine, under the Claude Resources Inc. (NYSE/AMEX:CGR) banner, and Claude has two other deposits within trucking distance that they’re bringing on stream. Claude also has the Madsen deposit in Red Lake, Ontario, which by my estimation is an analog to the Goldcorp (TSX:G) (NYSE:GG) mine there. The deeper they go, the richer it gets. Some deep drilling suggests that’s the case at Madsen as well.

To put a positive spin on going without a local capital market, one of the neat things is that resources stayed in the ground so opportunities are not hard to find. They say that the best place to find a gold mine is to look from the head frame of an existing mine, and that’s true. If you look at Goldcorp’s Red Lake gold camp in Ontario or any significant gold camp in the world, there’s always multiple mines around an initial one.

As I said, Saskatchewan has one long-running gold mine, and I believe seven other producers over the history of the province. Two are coming on stream. Golden Band Resources Inc. (TSX-V:GBN) is bringing a series of deposits into production shortly and Linear Gold Corp. (TSX:LRR) has the Box deposit in northern Saskatchewan that will be coming on stream.

So it’s like base metals. It’s all there. We’ve always had the potential in Saskatchewan; we’ve just never had enough money spent on it to properly develop the gold industry. The more holes you poke in the ground, the more you find, the more capital it attracts, and the more likely you’re going to have another mine and another and another.

TGR: Any others that you have your eye on?

TM: Otis Gold Corp. (TSX:OOO) in Idaho. Otis has several very interesting projects, but the current one—where historical drilling shows 11 grams over 9.5 meters—really gets me interested. That’s why we’ve been putting Otis in our portfolio and will continue to do so. I want to see how they do with their Kilgore Gold Project because the market’s ready for resources with big tonnage that also come with zones of pretty hot running ore. That means you can define a high-grade resource and treat it almost like an independent underground mine, but also block out a bunch of stuff in the 1- to 5-gram range that really makes it a big tonnage operation. We’re excited about that one and curious to see how they do over the next year in the drill program they have underway.

TGR: One of your top 10 holdings, Pinetree Capital Ltd. (PNPFF.PK), is interesting in that it’s almost like 49 North.

TM: The work that Sheldon Inwentash (Chairman and CEO) and his crew do is similar in a lot of ways. We did a stock swap with Pinetree, so they hold 49 North paper as well. That promotes deal flow through the two enterprises. We offer early-stage opportunities for Pinetree in western Canada and especially Saskatchewan, and part of what we gain from holding Pinetree is tremendous exposure to a bunch of junior and intermediate uranium explorers, as well as a great portfolio of other opportunities.

TGR: But you also have uranium in Saskatchewan.

TM: A lot of Pinetree’s holdings are companies exploring for uranium in Saskatchewan, which holds the largest uranium resource in the world. In fact, we supply 20% of the world’s reactor-grade uranium. The Athabasca sandstone basin is one of our blessings. It has the highest-grade uranium in the world. A couple of the mines regularly bring out ore that is 25% uranium. Hathor Exploration Limited (TSX-V:HAT)—which in my estimation has one of the best near-term potential productive resources in the world—has had intersections as high as 80% uranium over multiple feet.

TGR: So you have gold, base metals, oil, uranium, potash. What have we missed?

TM: We haven’t talked much about infrastructure materials. Saskatchewan has a host of those, too. A world that demands commodities, which I see going forward extraordinarily over the next 25 years, needs limestone and kaolin for cement. We have limestone. Whitemud Resources Inc. (TSX-V:WMK) has a tremendous kaolin resource and is at very early days of developing it. Saskatchewan has probably the largest contained helium resource in the world. Up in the Precambrian, we’ve got just about everything you can imagine. Great Western Minerals Group (GWMG) has one of the world’s largest rare earth deposits. That’s what’s so beautiful about Saskatchewan. We’re incredibly underdeveloped. We have only a million people in a geographical area larger than the U.K. So we’re frontier country. You name it, we have it. We’ve just never had a capital market to take advantage of it.

TGR: And you have the enthusiasm.

TM: Hey, I’ve been in this business my entire life and I’ve stuck to the junior resource end. It’s fun. It’s populated with very interesting characters. It’s also very lucrative. I like riding a story from initiation, whether from a nickel or dime to a few dollars or even $10. Occasionally you’ll catch a ride that takes 10 cents to $20. That’s a thrilling world to be in, but you have to be a lifer. You have to know what you’re doing. That’s usually management first, resource second. Unfortunately, people usually bet on the commodity without realizing that management may not know anything about it.

TGR: Because socialist leanings kept Saskatchewan resources tremendously underdeveloped, where is good management coming from?

TM: Most of the exploration actually is done by companies headquartered elsewhere—typically Vancouver or maybe Toronto. Suppose one of them drills a hole in the ground, hits a few meters of something and needs $10 million to develop the resource. If they can’t raise the money around here, they raise it elsewhere, drill the holes, and take their 10-cent stock to $1. They thus create $90 million worth of wealth, but that wealth doesn’t reside in Saskatchewan. It goes back to Vancouver or Toronto or wherever the money was raised and stays there.

So one of the reasons 49 North was created was to get locals involved and say, “Let’s raise the money here. Then we will have that $90 million for the next project that needs it, and then the next and the next.” That’s been the missing ingredient in the cake that is Saskatchewan—the local capital market. So my agenda in creating that here, by definition, creates a tremendous opportunity for external investors outside the province to piggyback on what we’re doing inside. Almost all of the capital in the hard equity raise we did in June came from outside of the province.

TGR: When we started, you said your greatest challenge was behind you. Is your next challenge just finding the time and the people to get all these projects done?

TM: It’s the people. Here’s an example to help me illustrate that point. Rallyemont Energy, a private company sponsored by 49 North, formed last year, will likely go public very soon. They’ve garnered a tremendous heavy oil land position in Saskatchewan. From historical drilling, they know they have oil. The project probably needs about $20 million. Then they’ll need $200 million to develop it. We can’t raise that kind of capital locally, but we have the institutional connections to get the job done.

In Rallyemont’s case, they have a tremendous management team, so we can do that, but with other companies, this is where we run into problems. The local company needs local expertise. We’ve been shipping people out of Saskatchewan. We educate them here and they move away, so it’s hard to find good management. We need to bring some people back to Saskatchewan and that’s beginning to happen already.

Even so, finding five more Rallyemont-caliber management teams here would be a stretch, so one of the biggest challenges is populating the companies to develop these resources with capable people. With 49 North acting as a sponsor, we have the capital market and there’s no shortage of good projects. Now we need the people to go with them.

TGR: Before 49 North came along, a local capital market was the missing ingredient in your “cake that is Saskatchewan.” Now, the missing ingredient is abundant management talent.

TM: Absolutely. We have no problem finding world-class resources.

TGR: Any last words for our readers today?

TM: A high-level advisor to the Chinese Sovereign Wealth Fund and I had a discussion not long ago, and my observation to her was that we have incredible projects, but they need billions of dollars worth of financing to move forward and we don’t have that kind of money. Her response was that China’s problem is the exact opposite—trillions of dollars and not enough projects to supply the country’s demand for resources.

To make a long story short, the developing world, especially China, knows what Saskatchewan has to offer. Over the next 25 years—or any other time period going forward—we’re going to see our resources developed. One of the reasons I’m so excited about the opportunities here is that we have first-mover status. 49 North gets to be in the very early-stage seed capital that can be so lucrative. We have driven our net asset value from $1.25 to approximately $4.50 over the past year and the market has not yet caught on. At the current level of discount our shares trade at, we view our own stock as one of the best value plays around.

TGR: You have a wonderful story and we appreciate you taking the time to share it with us.

Like many others in commodity country, Tom MacNeill of Saskatoon is a resources guy. Four years ago, based on a sentiment shift suggesting that Saskatchewan was open for business, he established 49 North Resources Inc. basically an incubator fund to raise capital for early-stage projects to develop resources throughout the province. Officially, he serves as President, CEO and Director of 49 North; unofficially he also can arguably lay claim to the Saskatchewan Head Cheerleader title too. A graduate of the University of Saskatchewan (economics with a geology minor) and a Certified General Accountant (CGA), Tom also completed the Canadian Securities Course (with honors) in 1987 and is a Chartered Financial Analyst (CFA). With 25-plus years of experience in resource investment and corporate finance, his work history includes positions as an investment advisor with a major Canadian brokerage firm, management accountant within the mining industry, Chief Financial Officer of a Canadian trust corporation, and extensive resource portfolio management. Since the early 1990s, his focus has been exclusively toward Canadian junior exploration, development and mining opportunities with particular emphasis on Saskatchewan’s increasingly important resource sector.

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DISCLOSURE:
1) Karen Roche of The Gold Report conducted this interview. She personally and/or her family own none of the companies mentioned in this interview.
2) The following companies mentioned in the interview are sponsors of The Gold Report or The Energy Report: Goldcorp, Otis Gold Corp., Amazon Mining
3) Tom MacNeill—I personally and/or my family own shares of the following companies mentioned in this interview: Athabasca, Claude Resources, Hathor, Great Western Minerals, 49 North. I personally and/or my family am paid by the following companies mentioned in this interview: None