German Government Relies On BlackBerry, Pretium Resources Proves Seabridge Gold Underpriced, Oil Stocks (CPE)

         BlackBerry (bbry) gains on rumours that German government and possibly others remain more committed than ever to BlackBerry devices - a few months ago they ordered 40,000 q10/z10 units.  Apparently NSA snooping isn't being tolerated at all in Germany, and that has led to a government-wide ban on the iPhone.  Two reasons for this 1) Germany-based firm secusmart has created a micro sd card that, when used on a BlackBerry device, renders the phone impenetrable (enhances BlackBerry security via encryption technology) .. would take a minimum of 149 years to hack.  2) Apple's iPhone servers are located in the US where NSA has governmental authority .. unrestricted access to private information  3) Germany's federation office for information security (BSI) has developed software that must be used in government employee phones.  Apple's devices aren't compatable with secusmart software.

on the flipside
Could the NSA access BlackBerry servers via relationship with government ? The Canadian government helped the NSA collect information during the 2010 Toronto G8 summit.  This leads to other concerns:  Does the Canadian government have unrestricted access to BlackBerry servers in Ontario ? We know that a big reason BlackBerry is off the market is because the government won't ok such a deal if it involves a foreign company such as Lenovo, this leads us to believe that the government of Canada does have a certain level of influence over BlackBerry.

Gold Silver stock doubles on news of higher than expected pre-production

Nov 21-22 Pretium Resources (tsx|pvg) stock climbs 80% on news that initial ore samples taken from the area known as 'Valley of the Kings' within the company's flagship Brucejack gold mine in British Columbia, yielded higher than expected gold grades:  19% higher to be exact (16g vs expected 13g per ton).  That translated into 4200 ounces of gold, 3500 ounces of silver.  The mine won't begin commercial production until 2016.  Reserves estimated at 7 million ounces of gold, 35 million ounces of silver.

That makes my favorite gold mining stock Seabridge Gold (SEA) even more enticing.  You see, Seabridge has 5X as much gold and silver at neighbouring mine Kerr-Sulphurates-Mitchell.  Higher gold grades at Brucejack probably means higher gold grades at KSM !  Either way, Seabridge Gold has to be on your stock radar .. has much more gold than Pretium Resources at a property that is only miles away .. any company looking to develop Brucejack is going to take an interest in KSM.  Future news regarding development at KSM will have a huge impact on Seabridge stock.  With Brucejack prepping for 2016, it's only a matter of time until the focus shifts to KSM.

Watch Out: New tax on gold in India will affect gold demand

Two months ago, in September India raised the duty tax on imports of gold jewelry from 10% to 15%.   Unsurprisingly Thailand, a major source of India's gold (3% of Thailand -India trade) initially objected to the tax hike however by the end of October, Thailand agreed to abide by the new rules after India threatened to suspend imports of gold jewelry from the country.  India also introduced a tax of 10% on gold bullion.

The new tax on Indian gold imports will eventually have a significant affect on world gold consumption:  Last year, India was the primary driver of gold demand - the country accounted for a fifth of gold consumption worldwide (864 tonnes out of 4405 tonnes total; 11% more than China).

Sears Canada being run into the ground by parent Sears Holdings ? (owns 51%; Sears Canada closes)

Over the last five weeks, Sears Canada raised $695 million in two seperate deals that saw the 61 year-old retailer sell a number of its core, revenue generating stores.  In the $380 million October 29 deal, Sears gave up its most profitable location in Toronto's Eaton Centre (335 employees there alone, store is so big mall gets its name from previous tenant Eatons) and one of its biggest stores in Western Canada (Richmond BC).  What's most alarming about the deal is this:

Euro zone leaders reach debt deal; Gold, Silver demand up/price up $100/oz on week

   In Brussels, European leaders alongside the IMF negotiated with the financial institutions that own Greek debt in the form of bonds. They struck a number of key agreements the main one being a reduction in the value of Greek bond debt by half (banks take on the 50% loss on the nominal value of those bonds) wiping out $100B worth of debt commitments, bringing debt to a more managable level (120% of GDP down from 160%). Some of the insurers affected such as France's Groupama (wrote 2 billion euro worth of CDS) could bear an even greater burden due to their issuance of credit default swaps (CDS contracts) which they'd have to honour if it's determined that a credit event has taken place (unlikely though given that the deal was not forced on either party). CDS contracts on Greek debt stand at $75 billion up 50% since 2009. To woo insurance companies, the EU made available to it a €30B+ credit. Also helping Greece; Government crackdown on corruption which could increase tax revenue by as much as €1.2B in 2011 (will force more businesses to collect taxes on sales).

Just because Greece was taken care of doesn't mean the European situtation has stabilized; Italian bond rates are currently at 6.5% (November 2011, was 5.867% on Oct 27) up from 4.6% in June 2011 meaning that Italy needs to raise €600 billion from private investors over the next three years just to finance its current debt level. In comparison, it was when the ten year Greek bond yield initially hit 8% that Greek debt became unmanageable. To deal with that problem the European Financial Stability Facility (EFSF) increased its available funds from €440 billion to €1.0 trillion euros (US$1.4 trillion) giving more security to Spain and Italy at least for the next couple years. Problems at the negotiating table remain an issue due to differences between Germany and France. News of the deal pushed the euro to a 7 week high against the US dollar ($1.42). Update: On November 3rd the yield on Greece's 2 year bond topped 100% for the first time.
2010 deficit to gdp ratio by country: UK: 10.4% (government debt is 80% of gdp), Spain 9.2% (Spain's unemployment rate suprassed 20% in 2010, total government debt to gdp ratio is 60%), France 7% (gov debt 81% of gdp), Italy 4.6% (gov debt 119% of gdp, austerity has included cutting back on public holidays). (CBC: TSX, loonie, soar on Europe crisis plan) The budget deficits in most of those countries is a direct result of deflation due to prices being too high/governments of the weak economies having no control over the currency (monetary policy). Also during the week, the EU approved another €130B bailout package.
Here is where Greece is coming from, Last year they had 800,000 civil servents collecting $48,000 annually in full pensions, those pensioners became eligible for that at age 52. New austerity measures are likey to impact those people significantly. European banks typically leverage about 80 times (debt used to acquire additional assets), that puts the EU in a more preciarious situation than the United States (40 times leverage). More info Buyers of Greek Bonds Choose only 1 of 4

Update - A new problem has since been acknowledged: The European Stability Fund is having a difficult time attracting investors. Canada has already said no to investment while China has "no concrete plans". The Fund recently delayed a €3B bond sale citing market conditions.

Gold is up again! Gold soared by 1.4% to $1,747.70 (after reaching a one month high of $1,728.11/oz, up half a percent before the day even began) as demand remains strong in China (high inflation, economic uncertainty, real estate bubble) and the rest of the world where many still view the EU's most recent deal as only a temporary fix that doesn't solve the root of the problem. SPDR Gold Shares added 16.645 tonnes over the last three sessions. Silver was up 5.77% or $1.80. There's also a temporary slowdown in demand from India (Diwali festival of lights festivities are ongoing; Diwali is a five day festival however the entire event including other festivities runs from the middle of October to the middle of November, most of its gold demand came in preparation for the festival) and Thailand (recovering from the worst floods in fifty years). In India, gold trades on the Multi Commodity Exchange (MCX) where the price is commonly listed per 10 grams. Indian gold demand was up 38% in the second quarter of 2011 and 29% in the last 12 months. Just to give you an idea of how unprecedented the price of gold is today; Over history, the last bull market high was $850/oz.

If, as many suggest, the People's Republic of China lets the RMB increase in value relative to the USD, that will weaken demand for gold in the short term as investors see the new exchange rate as a sign of economic stability but in the long run, the stronger RMB will increase Chinese demand for Gold due to its greater purchasing power. Also, a stronger RMB will raise Chinese import demand, indirectly increasing Gold demand from abroad too.
Platinum group metals increase Platinum was up 2.77% ($44.2/oz) by the end of the trading day Thursday to $1,641.4/oz. Platinum, used in everything from surgical equipment to white gold plating to catalytic converters, is produced at a rate of only 5-6M ounces a year (5-10% as much as gold). South Africa produces 80% of the world's platinum. Spot palladium up 2.78% to $665/oz reaching another one month high (also recorded one month high the day before). Palladium began the year around $799.5/oz but since then has dropped 20%, platinum began the year at around $1770/oz but has dropped 7.8% since.

Other Notes: In the July-September 2011 period the US economy grew 2.5% up from the 2.3% estimate.
Total EU-Canada (ex UK) trade is $50 billion (6% of total Canadian trade). News of the Greek debt deal boosted the exchange rates of a number of currencies against the American dollar however not versus the Chinese Yuan or Japan's Yen (Euro up 2% to US$1.42, Canadian dollar up 1.5 cents to above parity at US$101.02). Many non US currencies actually strengthened versus the euro and dollar (US & Cdn).
Sony buys out its partnership with Ericsson for $1.5B giving Sony complete control over its smartphone business, allowing it integrate more of its products and software. Ericsson will now be able to focus more on its wireless technologies. Total world debt represents about 5X total GNP.

Smaller Profit Margins & Mega Refineries Force Companies Out of the Refining Business (Sunoco, Shell, PBF, Chevron), Higher Italy Bond Yield Pressures ECB to Buy More Government Bonds, Barrick Gold Makes New Discovery

&nbsp&nbsp U.S. gas station operator Sunoco (4,900 stations) officially ended its 117 year old refinery business by putting its last two refineries up for sale (335th bbl/d Philadelphia, 178th bbl/d Marcus Hook). During the last two years the refining business segment showed profit in only two quarters. The last two refineries sold by Sunoco were Ohio's 170,000 b/d Toledo refinery to PBF Energy in December 2010 (third refinery acquired by the NJ based company in 2010 for $400M ($200M cash) with an additional $125M based on future profitability). That was preceded by the sale of Tulsa, OK refinery in June 2009 to Holly Corp. for $65M. The two remaining assets are significant, in 2010 they accounted for about 40% of all refining done on the east coast of the United States.

Sunoco's exit comes amidst declining refinery profit margins (dubbed the crack spread, earnings realized from turning 3 bbls of crude into 2 bbls of gas and 1 barrel of distillate) industry-wide, stemming from higher cost imports (though cheaper shale oil from Canada is helping refineries in the midwest; 74% of gasoline pump prices come from the crude oil itself while refining costs account for about 10%). (Energy Information Administration, US Govt) Profit margins have also been affected by what Royal Dutch Shell calls 'mega refineries' in India, China, the Middle East and Japan that are designed to export. Shell is another major company that has downsized its refining business; In March 2011 it sold the 270,000 bbl/d refinery in Britian to India's Essar Energy for $1.3B, then later in April it announced the closure of its Clyde refinery in Sydney, AUS (the sale comes at a time when Shell is investing billions of dollars in the Canadian oil sands to raise production output and purchasing gas plants: two in Qatar). (Exxon, Shell use soaring profits to buy output growth) Also, BP is trying to unload its 430,000 bbl/d refinery in Texas City, Texas and another in Carson City, California while Chevron sold a 210,000 bbl/d refinery in Pembroke, UK. With the exception of a temporary rise in margins around 2005/2007 they have been in a long term decline, since at least the 1990's. (CNN: Refining more gas won't bring prices down) February 2012 update: Crack spreads are slowly recovering, they were $6.8/bbl in the fourth quarter of 2011 and a number of international refineries responded by increasing capacity. more info at Keystone pipeline rejection creates opportunity

In Canada, an increase of C$1 in the price of a barrel of crude oil raises pump prices by about 0.63 cents/liter with only 0.03 cents of that due to the GST tax (gas taxes applied also vary depending on what part of the country you're in). (March 2010: National Energy Board of Canada-Gasoline Pricing-Energy Facts) In June 2008 taxes accounted for the following proportion of pump prices in these countries: Canada 24%, USA 9.6%, Japan 34.7%, Spain 45.4%,

Industrial and Commercial Bank of China (ICBC), the World's Largest Bank Is Bigger Than You Think

&nbsp&nbsp&nbsp&nbsp&nbsp Since July 24, 2007 when it overtook CitiBank in market capitalization (US$ 254 billion versus US$ 251 billion) ICBC has been the largest bank in the world by market value (4th overall. It is 22.7% bigger than domestic competitor China Construction Bank, in contrast, construction bank's (2nd largest bank by market cap) overall rank fell 5 spots to 12 down from 7 in March). (FT Global 500 List June 2011) ICBC's impressive performance during the economic crisis has lifted it higher in The Global 2000, a ranking system compiled by Forbes; in it ICBC was ranked 12 overall in 2009, 5 in 2010 and 7 in 2011 (2011 slight drop was because higher oil prices pushed 3 oil companies into the top 6, by comparison none were top 6 in 2010), in 2011 ICBC overtook Bank of America but was overtaken by JP Morgan (rank 1st overall on highest sales of any bank and strong earnings) and HSBC (rank 2nd on high sales and assets (4)); HSBC was ranked lower than ICBC in 2010 (8 versus 5) but in 2011 it shot up to 2 (ICBC 7), JP Morgan was ranked higher than ICBC both years even though its market value was much lower and ICBC had 41% more profit (US$24B vs US$17B). In March of 2009 ICBC became the world's biggest bank in terms of deposits after its clients added US$140 billion to accounts bringing the total to US$1.31 trillion, higher than JP Morgan and Mitsubishi UFJ Financial Group.

Although many key indicators for ICBC improved in 2010 [(cost/income ratio down to near record low levels (30.99%) at a time when wealth managers worldwide are facing higher cost/income ratio's (wealthbriefing.com): Net fee, commission/operating income ratio 19.13 a 4 year high, 4 year high also in ROA assets (1.32% up 86% since 2006), ROA equity (22.79% up 336 basis points in 2 years), non-performing loans ratio down to 1.08 (down 49% since 2008)], the bank's market value has been slow to respond (growth) because of concerns among investors regarding banking risks faced industry-wide (brought on by banks abroad in countries where unemployment is high and consumer debt, national exceeds annual income, gdp) and a possible housing bubble in mainland China (loans secured by mortgages amounted to US$ 421.117 billion on December 31, 2010 up 31.2% since December 31, 2009 (US$ 321.063)); Market Values in the graph for the 3 big banks are from December 31 for each year, the end of the fiscal period.

In terms of revenue, JP Morgan still leads all banks however the major Chinese banks including ICBC significantly closed the gap between themselves and Bank of America/Citigroup. In the first half of 2011 HSBC leaprogged all banks except JPM even though its revenue grew by only 5%. Chinese institutions closed the revenue gap with their Western counterparts, ICBC only 45% the revenue of Bank of America (56% of Citigroup) in 2010 1st half but that increased to 88% in 2011. More info on 2011 revenue, assets at top 20 banks as of September 2011 ranked by 2011 2nd half metrics

Mortgage loans make up 41% of all loans at ICBC (2011 January 1) up from 38.3% a year earlier even though the government instituted new laws aimed at limiting lending to local governments (financing vehicles) and to the real estate sector. In May of 2011 in an attempt to reduce mortgage risks, ICBC told separate branches to raise certain minimum downpayments (up to 40% from 30% in places where prices are unusually high) and lending rates when the branch sees fit (110% higher than the benchmark best), in 2010 home prices were up 47% in Hangzhou (Zhejian ranks 5 in gdp per capita (US$7.4th), 10 in population), 37.9% in Chongqing (14 gdp pc (US$4th)/20 in pop.) and 37.1% in Beijing (3 in gdp pc (10.4th/26 in pop.). Prior to the increase, buyers of a second home were required to give a 60% down payment. (BBC: ICBC bank's profits surge as China economy grows, China Economic Review)

Also, the bank's less than perfect credit rating (A1+) due to the bank being highly exposed to a softening Chinese real estate market and having increased international exposure (Chinese government has shown interest in helping the bank gain a foothold outside the mainland since Chinese banks don't have as much global exposure as their western counterparts and China has the capability to do that; China has shown interest in establishing new international finance; In 2009 it gave China Investment Corp $200 billion to do that), may have scared away some investors who aren't aware of the bank's solid fundamentals (arrears/risks are as low as any other bank even those with better Moody's ratings).

At a time when the largest bank based outside of China (HSBC, US$ 176.9 billion in market cap) announced a 3 year plan to cut 30,000 jobs worldwide (10% of its workforce, 20-25% of its employees in Europe and North America), China's ICBC is hiring (workforce is over 397,000 up 1.8% on the year with over

A CANDU reason to buy SNC-Lavalin

In mid 2011 the government of Canada auctioned off Atomic Energy of Canada Limited commercial reactor unit to SNC-Lavalin for $15 million, including future royalties over 15 years, the government's return could be as high as $285 million (AECL makes and refurbishes the popular CANadian Deuterium Uranium reactor brand) (CBC:Candu purchase gives SNC Lavalin 'free call option'). The acquisition doubles the workforce of SNC Lavalin's International Power division and increases those employed by the nuclear energy unit by a factor of six (400 to over 2,400, doesn't include about 2,500 jobs which are in the laboratory division not affected by the deal). Nuclear energy meets a lot of the world's energy needs (it is a key source both domestically and internationally; 55% of Ontario's 2010 electrical capacity and roughly 15% globally). (World Nuclear Association) It is one of the top 3 alternatives to coal for utility plants (about a third as popular a fuel as leading coal) and with coal fired plants facing tougher restrictions (sulphur content must be brought down to zero, renewables being promoted by the American government & EPA), volatile dry bulk shipping rates and Australian exports (major source of coal) reduced by floods in Queensland, nuclear is one of only a handful of sustainable alternatives. As well, nuclear energy use can only go up with 86.8% of coal in the United States already going to electricity generation (down from 88.5% in 2009 meaning coal has become less popular). (Alpha Natural Resources 2010 Report) Coal has also become comparatively more expensive relative to its alternatives (tripled in price between 2004 and 2010 while natural gas is unchanged). (Gas Rally Boosts Coal's Allure for Power Plants)

Candu is in an industry of its own, the nuclear reactor has been credited with promoting nuclear development in China, India and South Korea. Though sales of CANDU reactors have historically been strong in the last decade they have dwindled, the direct result of it being a crown corporation under the direction of an overly protective/selective government (wouldn't allow for any risk, that affected its ability to get contracts signed with eager clients). CTV News: Ottawa to sell Atomic Energy of Canada Ltd. to SNC-Lavalin The nuclear reactor business is also highly political in nature meaning Canadian companies have to work harder than their counterparts to secure foreign contracts; traditionally American companies have had the edge however SNC Lavalin has shown itself to be more than capable of competing in such an environment (has obtained many large concessions in foreign countries, has pushed on in countries like Algeria even after a terrorist bomb killed a dozen of its employees in 2008).

All criticism of nuclear energy stems from safety concerns regarding meltdowns and weapons grade by products however those problems can be avoided simply by converting reactors to thorium fuel based from uranium based. (Cosmos:New age nuclear) Additionally, CANDU reactors (newest of the 34 used globally, was commissioned in 2007 in Romania, Romania has also ordered another one for 2013) use natural uranium and the radioactive water doesn't directly power turbines to create electricity, rather it stays in a secondary closed loop that can readily be made to release excess heat into the atmosphere rather than the water (unlike Fukushima Dai-Ichi). (SFGate:Canada Sells AECL's CANDU Reactor Division to SNC-Lavalin) In Qinshan, China, Candu reactors have been shown to operate on thorium meaning that even before New Generation nuclear reactors are widely accepted, SNC-Lavalin has access to technology that's already ahead of the competition. (World Nuclear Association: Thorium)

Although Generation IV reactors haven't yet been produced by Atomic Energy of Canada, the Canadian government has invested billions of dollars into cutting edge research carried out by the company. (Natural Resources Canada: Priority Area:Next-Generation Nuclear Energy Technologies) AECL's Enhanced CANDU 6 (EC6) has Generation III features and is the only medium sized reactor capable of being implemented on smaller grids. The Enhanced Candu 6 gives customers the option of using either thorium, uranium or other popular fuels. (Atomic Energy of Canada Limited 2010 Financial Report)

Thorium based rectors yield 200 times as much energy as those fueled by uranium. Though safe, other renewable sources are expensive costing as much as five times the price per kWh produced when compared to coal (23 cents versus 4 cents).

Furthermore, energy consumption experienced the biggest yearly increase since 1973 in 2010, in 2010 it was up 5.6% largely due to China (up 11.2% surpassing the USA) and non-OECD nations (63% higher than 2000 levels). (World energy consumption up 5.6% in 2010, biggest rise since 1973: BP) Nuclear energy accounts for about 7.8% of the world's energy needs (24 out of 470 million BTU's (2011 pace as of August).