Saturday, February 28, 2009

Canoro Q3 Results.

Feb 27, 2009 13:03 ET

Canoro Reports Third Quarter and Updates Activity

CALGARY, ALBERTA--(Marketwire - Feb. 27, 2009) - Canoro Resources Ltd., (TSX VENTURE:CNS) is pleased to announce its financial and operational results for the three and nine months ended December 31, 2008.

Financial results

The table below, "Financial and Operating Results," provides a summary of the Company's financial and operating results for the three and nine month periods ended December 31, 2008, and the same period ended December 31, 2007. For the periods ended after March 31, 2008, Canoro has begun reporting all financial information in US dollars and has translated and restated the December 31, 2007 numbers, which were previously reported in Canadian dollars, to reflect the change in reporting currency. Consolidated financial statements with management's discussion and analysis (MD&A) are now available on the company's website ( and will also be available on the SEDAR website (


Three months Nine months
ended ended
December 31 December 31
($ thousands, except per % %
unit amounts) 2008 2007 (1) change 2008 2007 (1) change
Natural gas (mcf/d) 2,725 1,122 143 3,421 1,031 232
Crude oil (bbl/d) 197 100 97 256 93 175
Total (boe/d) 651 287 127 826 265 212

Realized gas price
($/mcf) 2.00 2.45 (19) 2.26 2.42 (7)
Realized oil price
($/bbl) 55.17 96.35 (43) 107.83 80.71 34
Nigerian Bonny Light
($/bbl) 58.98 90.62 (35) 101.21 79.72 27

Realized price ($/boe) 25.05 41.32 (39) 42.77 42.46 1
Royalties ($/boe) 2.99 4.09 (36) 4.30 2.47 74
Operating costs ($/boe) 4.61 7.20 (36) 4.27 7.07 (40)
Netback ($/boe) 17.45 30.03 (42) 34.20 32.91 4

Funds from operations 32 (1,578) - 3,445 (1,458) -

Capital expenditures 11,685 3,253 259 26,171 11,376 130

(1) Restated in United States dollars from the previously reported Canadian
dollar amounts.

Operational Update

The third quarter of Fiscal 2009 has proven to be a challenging period for Canoro Resources Ltd. Whilst there were initially encouraging drilling results in Q2, subsequent testing of Amguri-14 and Amguri-12 yielded mixed results. While A-14 proved to be an excellent dry gas producer, A-12 was unable to demonstrate commercial production potential. Persistent problems with one of the drilling rigs under contract resulted in significant delays and cost overruns and the rig was subsequently released. A complete re-evaluation of the Amguri geological model was initiated while the liquids extraction plant project at Amguri was moved ahead.

Canoro posted a loss of $3.6 million, or $0.03 per share for the quarter. Funds flow from operations was negligible with a realized oil price of $55.17 per barrel and natural gas prices of $2.00 per mcf average during the quarter. With approximately 70% of the Company's production currently being natural gas sold on a fixed price contract basis, Canoro currently has limited exposure to changes in oil prices. For each $1.00 per barrel change in oil prices, the Company's annual funds flow changes by approximately $0.1 million based on year-to-date average liquids production volumes. Having $12.0 million working capital as at December 31, 2008, the Company continues to be debt free and well capitalized to complete its 2009 program, although low oil prices contribute minimally to capital re-investment at this juncture. With little access to either equity or debt markets in the current environment, Canoro will be cautious with its available resources to ensure that it can complete this phase of its development and be well positioned as conditions improve.

Going into Q4 FY2009 and the next year, the Company has the following objectives:

- Double condensate production and increase the proved reserves by installing a liquids recovery and gas re-injection facility in the current Amguri gas condensate reservoir.

- Tie in additional gas production at the recent discovery Amguri-14 as well as recomplete A-11 for dual zone capability.

- Refine the geological model of Amguri by reprocessing and re-interpreting 3D seismic using Pre-Stack Depth Migration (PSDM).

- Conserve financial resources by deferring discretionary exploration activities.

- Continue to reduce operating and G&A expenses.

- Free up capital by obtaining alternative financing for the Amguri facility additions.

- Expand the portfolio with development projects to increase the critical mass of the Company.


Production for the quarter averaged 651 boe/d and 826 boe/d for the nine months ended 31 December 2008, representing increases of 127% and 212% over the respective prior year periods. Quarter over quarter production declined 30% due to both lower seasonal gas demand and the need to maintain reservoir conditions while waiting for the condensate extraction plant to be installed later this year. The effect of the liquids extraction is two-fold. First, overall reserves of condensate and gas have the potential to double through the enhanced recovery of liquids and the ability through reservoir management to produce the gas significantly longer. Second, the production mix will change from approximately 30/70 condensate/gas to 70/30, the net effect of which would be to increase funds flow from operations by approximately 60% from the same production volume due to the substantially higher netback generated by liquids sales.

During the quarter, the Company completed the evaluation of bids for gas re-injection and condensate extraction facilities at Amguri. The main equipment packages have been awarded for manufacture with commissioning expected by the end of the year based on manufacturers' current delivery dates. The delay in commissioning is primarily due to longer than expected delivery times for the equipment packages. Preparations are being made to convert the Amguri-11 well to a dual producer/injector, install an electric submersible pump (ESP) in well Amguri-5 to increase Barail condensate/oil production and tie in Amguri-14 as a producer of dry Tippam gas by June 30, 2009. Amguri-14 gas is planned to be used for sales and additional reinjection supply. Current production is estimated to be approximately 225 barrels of oil/condensate per day and 3.0 million cubic feet of gas per day, or about 725 boe/d.

The Amguri A-12 and A-14 appraisal wells were drilled in the prior quarter and production testing was conducted during Q3 FY2009. The Amguri A-14 appraisal well was tested in the upper Tipam Formation. A three-day production test on this section yielded maximum rates of 4.8 mmscfd on an 8mm choke with a tubing pressure of 2100 pounds per square inch ("psi"), and a stabilized final rate of 2.7 mmscfd on a 6 mm choke with a tubing head pressure of 2,180 psi. These results combined with a subsequent pressure buildup test, support the Company's view that the A-14 well is an excellent dry gas well which could be capable of flowing over 6 mmcfd dry gas at minimal pressure drawdown. This Tipam gas discovery allows the Company to sell dry natural gas to local markets as well as re-injecting excess Tipam gas for voidage replacement in Barail gas condensate reservoir currently producing. The Company has commenced the building of a four-inch diameter flow line to facilitate both gas sales and gas re-injection from A-14. The Company had high expectations for the Amguri-12 well; however production testing of the two main Barail intervals was unsuccessful in spite of log analysis indications of hydrocarbons. The well tested water in both target Barail sands. The A-12 well came in significantly lower than prognosis and appears to be in a separate compartment and not connected to the "A" pool as defined by the A-11, A-10B and A-6 producers. The Company plans to conduct additional pressure gradient work to confirm this result. The disappointing results of A-12 have led to the Company re-evaluating its geological model of the reservoir with the aid of a detailed PSDM analysis of reprocessed 3D seismic, expected by the beginning of calendar Q2 2009. The Company is optimistic that the PSDM work will result in a significantly better understanding of the subsurface geology at Amguri.



The Company drilled the Dergaon #2 well, on the Assam portion of the AA-ON/7 block during the quarter. Dergaon #2, the appraisal well was offsetting Dergaon #1 and targeted a zone of equivalent structural height to Dergaon # 1. The zone tested in Dergaon #2 was non-hydrocarbon bearing on well-log data and the well has been plugged and abandoned. Subsequently, Canoro has withdrawn its application to the Government of India seeking an extension of the exploration phase thereby, relinquishing the Assam portion of the AA-ON/7 Block.. As a result of the relinquishment, probable reserves of 21.2 BCF (3.5 MMBOE) net to Canoro's 65% working interest and possible reserves of 15.8 BCF (2.6 MMBOE) net have been written down by the Company. Proven reserves will be unaffected by the relinquishment. Canoro is currently pursuing a new PSC to be established on the Nagaland portion of the AA-ON/7 block the exploration license for this was granted in August 2006.

Other Blocks

In Arunachal Pradesh, Block AA-ONN-2003/2, the operator has contracted a drilling rig and commenced location and road building. Canoro and its joint venture partners have a commitment to drill seven wells. However, based on current interpretation of the 3D seismic, only three drillable prospects have been identified and approved for drilling to date. It is anticipated that the operator will complete the three wells this calendar year with expenditures estimated at $3.0 million net to Canoro's 15% working interest. The remaining blocks in Assam are AA-ONN-2004/3 and AA-ONN-2004/5 with Phase I commitments that require 2D and 3D seismic programs, which will be deferred to later this year or early 2010, and the drilling of one exploration well on each block. The estimated capital expenditures required on these blocks for Phase I over the next three years is approximately US$6.8 million net to Canoro's 30% working interest. Procedures for the transfer of the 30% interest, operatorship to Canoro is in progress and pending approvals of the Government of India.

Common shares of Canoro trade on the TSX Venture Exchange under the symbol 'CNS'.

Tuesday, February 24, 2009

US Monetary System.

One of the chief mandates of the U.S. Federal Reserve is to manage the nation's monetary stock. This essay analyzes the historic growth of the American monetary stock (or aggregates) since 1960 and looks at some recent developments revealing a marked adjustment in policy. These changes are a direct response to the on-going worldwide financial crisis that escalated in September 2008 following the collapse of Lehman Brothers.

U.S. Monetary Aggregates

The U.S. Federal Reserve regularly publishes Money Stock Measures showing a breakdown for the different components of each measure. Data from this source was used to produce the following chart.1
Components of U.S. Monetary Aggregates
M1 includes the most liquid forms of money. Higher order monetary measures include money acting more as a 'store of value' as opposed to a 'means of exchange'.
The U.S. Federal Reserve stated that it would cease publishing the M3 monetary aggregate as of May 23, 2006 and all of its components except for that of Institutional Money Market Mutual Funds (MMMF) citing that "...the costs of collecting the underlying data and publishing M3 outweigh the benefits."
The reason for continuing MMMF is that it is a component of the recently devised Money-Zero-Maturity (MZM) monetary aggregate. This measure includes M2 less Time Deposits plus all MMMF and is deemed by many as best representing the money available within an economy for spending and consumption. Some economists oppose the inclusion of money market mutual funds as 'money' because, while liquid and eligible to be sold without incurring a capital loss, they are still technically an asset that first must be sold in order to be spent.
Components of U.S. MZM

Controlling the Money Supply

The Federal Reserve primarily controls the U.S. monetary stock through three mechanisms:

1. Setting the Federal Funds Rate

By decreasing interest rates and effectively making money less expensive to borrow, the Federal Reserve increases the demand for money. Conversely, the Federal Reserve can lower the demand for money by targeting a higher interest rate, as Paul Volcker did early in his tenure as Federal Reserve Chairman from August 6, 1979 to August 11, 1987. At present, the effective federal fund rate is being targeted to remain between 0 - 0.25%, the lowest in its history in response to the current financial crisis.
Effective Federal Funds Rate

2. Buying U.S. Government Treasuries

When the Federal Reserve purchases U.S. treasuries it loans money to the U.S. government. In addition to the money created by the Fed to purchase these treasuries, the assets of the Federal Reserve increase allowing them to lend more to their clients under the fractional reserve banking system. Previously, the weekly release of the U.S. Federal Reserve balance sheet, known as the Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks, was a complete non-event, showing a slow and steady increase over the previous week's release. This has since changed following the Fed's historical response to the global financial crisis. A wide variety of assets now back the U.S. Dollar in addition to U.S. Treasuries. Many of these assets, such as Term Auction credit, loans to American Insurance Group, and commercial paper holdings, Mortgage Backed Securities (MBS) are of questionable value due to their illiquidity when previously within the public domain.
Composition of U.S. Federal Reserve Assets

3. Adjusting the Reserve Ratios

All commercial banks operate under a fractional reserve banking system whereby they must legally hold a set amount of cash reserves against the amount they lend out to their customers. By adjusting the reserve ratio limits, the Federal Reserve can affect the amount of money commercial banks are able to lend. Increasing these ratios deflates the money supply because banks can no longer lend out as much as before. Decreasing them has the opposite effect. As of January 1, 2009 the reserve ratios are as follows:

Inflation and Deflation

Historically, the term inflation referred to an increase in the monetary stock. Deflation described the opposite process. Modern-day usage of these two words now refers only to changes in prices, which may lead to awkward, and potentially misleading, statements. While prices do respond to changes in the monetary stock, it is not a direct relationship, as there are other factors to consider. A ten percent increase in the monetary stock does not directly correspond to a ten percent price increase for all goods.
Reasons for this discrepancy include the following:
  1. Unavoidable time delays required for market participants to assess the impact of newly created money entering the public domain. Components of the economy that are the first to receive newly created money benefit the most as they can spend it at full purchasing power. Those components which receive little or none of it experience only higher prices.
  2. The supply and demand dynamics for goods are independent from the supply and demand of money. For instance, advances within the telecommunications industry during the 1990's, outpaced the growth of monetary stock during this period resulting in lower prices for related equipment and services.
  3. Speculation may lead to unfounded price levels well above what fundamentals would suggest. The most recent example of this is the 70% price collapse in crude oil from over $140 in July 2008 to around $40 today occurring during a time when the U.S. total monetary stock increased by 21.5% from $8.7 trillion to $10.6 trillion.
While changes to the monetary stock do not account for 100% of the changes in prices, they are especially important over longer time periods, often becoming the dominant factor.

The U.S. Monetary Base

Recent announcements over the escalating U.S. monetary base have surfaced in the financial media. The U.S. monetary base consists of several components. The currency in circulation was historically the predominant component. Recently, Federal Reserve Bank balances have become sizeable components as well. So long as the reserve cash remains in bank vaults or on deposit with the Federal Reserve, it is not money.
U.S. Monetary Base
The sharp increase in bank reserves is a result of the current efforts to recapitalize the U.S. banking industry. The above graph visually shows the historic significance of these actions. While bank reserve cash does not directly enter the financial system as money, it can enter through the fractional reserve banking system as debt.

The Fractional Reserve Banking System

Fractional reserve banking is the practice whereby the value of issued bank loans far exceeds the amount of cash held in reserve.2
Assuming a ratio of ten percent, a commercial bank can lend out $10 million for every $1 million it holds in reserve. This makes for particularly profitable business, as annual revenue on $10 million in mortgages at 6% earns $600,000, whilst the interest paid on $1 million in deposits at 2% is only $20,000. Thus, the overall effect is net revenue of $580,000 from $1 million of depositor savings.
Of course, should those mortgages begin to default on a large scale, this business model will begin to suffer.
The recent explosion in bank reserves potentially sets the stage for an unprecedented amount of lending. Prior to September of 2008, the typical amount of Reserve Balances with Federal Reserve Banks stayed under $20 billion. A mere five months later, this amount increased more than thirty-fold to over $640 billion! Considering that this balance was created by the Federal Reserve in exchange for financial assets, the potential risks to the purchasing power of the U.S. Dollar are significant.
The commercial banks have been publicly criticized for not lending and thus are not encouraging consumer spending. Given the circumstances, we may want to be careful what we wish for, as the creation of US$ trillions of additional debt is the last thing the American economy needs.

Opinion: Deflating the Hype About Deflation.

"Inflation is taxation without legislation."
-- Milton Friedman

Since everyone today is fearful of deflation and falling prices for everything from commodities to stocks to housing, this is a good time to consider what causes deflation and its opposite, inflation.

Deflation is caused by a reduction in the supply of money available in an economy, relative to the goods and services available. This usually happens because of a combination of wealth destruction, credit contraction and excess production.

The most classic example of this is in Japan, which has experienced mostly deflation for nearly two decades despite, enormous efforts to combat it from the government. Many people believe that the U.S. is headed for a similar fate because of our housing and stock market collapse combined with the credit crisis.

Here is why that is not very likely to happen.

First, the Japanese government was very slow to respond to its deflation problem with zero interest rates, quantitative easing and massive government spending. By the time it did get around to implementing these policies, the psychology of deflation had already taken hold among the Japanese people and businesses.

In contrast, the U.S. government has moved forward with these anti-deflationary policies in short order. Although significant damage has been done to consumer and business confidence, the problem has not been going on for years as it was in Japan.

The Fed has already come out and effectively said that it is going to target and basically guarantee a certain level of inflation. If the Fed has credibility about anything, it should have it with respect to printing enough money to create inflation, if that is what it wants to do.

In just a few months, the Fed has effectively printed trillions of dollars and the Treasury has spent more than a trillion dollars trying to increase the supply of money. That should demonstrate their seriousness about preventing deflation.

Second, it is in the national interest of the U.S. and the personal interest of most American consumers to create inflation. The U.S. government owes trillions of dollars to foreigners. It has a strong financial incentive to destroy the value of the dollar in order to repay that foreign debt with cheaper currency. Similarly, most Americans are deeply in debt and would benefit from inflation that would effectively reduce that debt burden on their households.

In a social democracy like ours, people support policies and government implements policies that benefit most of the people. In Japan, most people were savers and didn't have much debt relative to Americans.

Japanese corporations and the government have a lot of debt, but it is all owned domestically rather than by foreign creditors. So from a political standpoint, destroying the currency doesn't really benefit Japanese society as a whole.

Third, Japan produces too much and consumes too little, relative to the size of its economy and its stage of development. This is exactly the opposite of the U.S. Here, we produce very little and consume way too much. That has been our economic model, based on borrowing money to spend and speculate, for decades.

An economy oriented toward consumption and away from production like ours is far less likely to fall into a long-term deflationary spiral because there are not likely to be too many goods and services produced relative to demand.

Also, since America imports most of what we consume, our declining currency will create even more inflation because the imported goods will become more expensive in terms of our dollars.

People should not confuse short-term declines in commodity prices and asset prices caused by a recession with long-term deflation, which is always a monetary phenomenon. After the economy bottoms out later this year, inflation is likely to resume even stronger than before because of all the excess money in circulation and also because of all of the productive capacity that will have been eliminated during the recession.

The only way deflation could have a chance of happening long term in America would be if our economy continued to shrink for many years. Somehow I don't believe that the government is going to allow that to happen because the American people would definitely replace that government in the next election. That is another difference with Japan.

The Japanese electorate has shown extraordinary patience with their government's mismanagement of their economy. Americans are notoriously impatient and quick to "throw the bums" out if we don't like the immediate results that we're seeing.

For investors, what this means is to avoid long-term Treasuries, which are assuming deflation or no inflation in the economy. It also means that gold and other hard assets are a good long-term value to protect your cash against future inflation.

On a relative basis, oil is probably the best value of any investment today, because it has collapsed down to unsustainably low levels and almost has to go up substantially over the next six to 12 months.

The best ways to play this rebound in inflation and in oil are to own U.S. Oil Fund ETF (USO Quote - Cramer on USO - Stock Picks) or ProShares Ultra DJ Crude (UCO Quote - Cramer on UCO - Stock Picks); both are for more aggressive investors.

Oil stocks are not as good, but investors could also benefit from owning Energy Select SPDR (XLE Quote - Cramer on XLE - Stock Picks), which has among its holdings Chevron (CVX Quote - Cramer on CVX - Stock Picks), Exxon (XOM Quote - Cramer on XOM - Stock Picks), Occidental Petroleum (OXY Quote - Cramer on OXY - Stock Picks) and Anadarko Petroleum (APC Quote - Cramer on APC - Stock Picks).

Another choice is Oil Services HOLDRs (OIH Quote - Cramer on OIH - Stock Picks), which holds shares in Halliburton (HAL Quote - Cramer on HAL - Stock Picks), Baker Hughes International (BHI Quote - Cramer on BHI - Stock Picks) and Schlumberger (SLB Quote - Cramer on SLB - Stock Picks).

Gold could be owned efficiently through SPDR Gold Shares (GLD Quote - Cramer on GLD - Stock Picks) or PowerShares DB Gold Double Long ETN (DGP Quote - Cramer on DGP - Stock Picks); again, both are for more aggressive investors. However, gold is overvalued right now relative to other commodities, especially oil. It may be a good idea to wait for a pull back in gold before buying.

Another way to benefit from future inflation is to take advantage of low-interest rates and lock in long-term financing to buy income property such as apartments in supply-constrained markets that will benefit from future inflation through increased rental rates and higher cash flow to the owner.

Do not believe the hype about deflation. It could be dangerous to your financial health. Right now is the best time to start hedging against future inflation because most people don't believe it's going to happen. Now is the classic time to buy a straw hat in winter, because people are just giving them away.


Hurt by realty, infra firms eye 'safe haven' govt deals

Mumbai: Mumbai-based infrastructure firm Patel Engineering has a land bank of over 500 acres in cities such as Mumbai, Hyderabad and Bangalore. But just when the company thought of developing the property through its subsidiary Patel Realty & Infrastructure, tough times in the realty market began and the company was forced to postpone plans.

The story is the same for many of its peers. Infrastructure firms that have a presence in the realty sector are not keen on expanding as the liquidity crunch has led to significant delays in payments by realtors.

Contractors just want to finish the ongoing projects and exit for the time being.
Companies that were looking to enter the sector -- either directly or as contractors for real estate developers -- have also deferred plans.

One of the strategies adopted by these companies to derisk business is to target government contracts, which tend to be far more reliable.

"With incremental order flows from the real estate sector slowing and concerns over payment delays, construction contractors are focusing on raising the proportion of government and infra orders where visibility is better," observed Citi Investment Research analysts Ashish Jagnani and Karishma Solanki in a recent report.

Arun Sahay, chief executive officer of New Delhi-based Ahluwalia Contractors, admitted that there has been a slowdown in real estate projects. "We have not taken up any real estate project in the last six months and would like to just complete the existing projects," he said.

Targeting government contracts would be a good strategy, Sahay felt. "Currently about 40-45% of our order book is in the public sector and we are working towards increasing that number," he said. The company has of late been focusing on contracts awarded by the Public Works Department.

Ashwin Parmar, director of business development at Patel Engineering, said the company's conservative attitude of sticking to government contracts has paid off. He added that there have been no delays in payments in public contracts. "We have never done private contracts and we will never do," said Parmar.

Simplex Infrastructures, which is executing six projects worth Rs 500 crore for developers like Unitech and Nitish Estates, has not taken any new initiatives in the past one year. Amitabh Mundhra, director of the company, said the payment cycle has gone up from 45 to 60 days. "All our projects are in advanced stages of completion... But, from now on, we will be very selective in choosing realty projects."

Realty in India constitutes 5% of Simplex's Rs 10,600-crore portfolio.

Even infra firms that are realtors themselves seem to be shunning the sector. H S Bharana, chairman & managing director of Era Group, does not see a revival in the sector soon. "It does not make any sense to look for new realty projects," he said. Era Landmarks, the group's realty subsidiary, is currently executing 15 commercial & residential projects.

DNA Money reported in January that Unity Infraprojects would be seeing a three-four month delay in the completion of its three malls in Nagpur, worth Rs 300 crore. Yogel Lal, chief operating officer, had said that the company was not looking at any more real estate projects.

How Bad Can It Get?

A lot of what is taken for gospel about bear markets isn't true. The downturns aren't as bad as they seem when you include the effect of dividends.

Before you bail out of stocks -- or start to invest again -- it may be worthwhile to look closely at stock-market history. How bad can the stock market get? How long does it take for you to get even after you hit bottom? The market's history offers valuable clues.

A lot of flawed information about the extent and duration of bear markets is being disseminated today. The information is faulty -- or at least misleading -- because it fails to account for the impact of dividends when computing total returns. Let's look at the real story (the data for this article was supplied by Ibbotson Associates, a subsidiary of Morningstar, the mutual fund tracker).

We'll start with the period from 1966 through 1982 -- an era during which many experts claim the stock market went nowhere. There's a grain of truth in this assertion. The Dow Jones industrial average reached a record high of 1000 intraday in 1966, but then meandered for years. It didn't close above 1000 again until 1972 —- and didn’t close for good over 1000 until 1982. The implication, of course, is that the typical stock-market investor earned nothing over that lengthy period.

But that calculation omits dividends. In fact, Standard & Poor's 500-stock index, the benchmark that most professionals prefer when discussing performance, returned an annualized 6.8% during that 17-year period.

The S&P 500 lost 29% from the end of November 1968 through June 1970. But it took just nine months -- until March 1971 -- for investors who had bought stocks at the peak to break even.

The 1973-74 selloff was one of the three worst bear markets since the Great Depression. The market plunged 43% from January 1973 through September 1974. If you had invested at the precise top, you would have made all your money back by June 1976 -- less than two years after the trough.

The current decade has been far worse than the 1970s. The S&P 500 plunged 47% from March 24, 2000, through October 9, 2002. It didn't recover until October 2006.

The current bear market began on October 9, 2007, and the market had tumbled 50% on a total-return basis through February 23. That makes the current bear market the worst since the 1930s.

Indeed, this decade is already the worst in at least the past 100 years. The S&P 500 has fallen an annualized 3.6% since 2000. That compares with an annualized loss of 0.05% in the 1930s.

The bottom line is that unless we really are embarking on Great Depression II -- or something resembling it -- the worst of the decline is certainly behind us. I think we've already had our "lost decade."

So what happened to stocks during the Great Depression? The answer: terrible things. The market peaked in August 1929 and didn't touch bottom until nearly three years later, in June 1932. At its nadir, the market had lost 83%.

The market didn't decline in a straight line after the October '29 crash. Instead, its fall seemed devilishly designed to ensnare every investor. After sinking 31% by the end of 1929, the market rebounded smartly, gaining 18% by March 1930 before swooning again. Similar sucker's rallies took place over the ensuing two years, luring even investors who had waited for stocks to become cheap before they bought.

The market remained volatile throughout the decade, although the general path was upward. Fierce bull markets were followed by almost equally horrible bear markets. The last ended in April 1942. Hapless investors who bought stocks at the 1929 peak had to wait until January 1945 to break even.

Here again, though, much of the information about how long it took investors to recover from the Great Depression is inaccurate. I've read in numerous places that it took until 1954 for the market to recover. Well, that's true -- but only if you don't count dividends.

For long-term investors, the data about the Great Depression is heartening. If you're 45 or younger, and planning to work another 20 years or so, you can justify investing all of your retirement money in stocks. That is, unless you think this market collapse will be worse than the Great Depression, something that strikes me as utter nonsense. And, by the way, the S&P 500 now yields 3.4%, the highest level it's been at in years, because of the sharp decline in share prices and despite a raft of dividend cuts. That should help boost long-term future returns.

For investors with shorter time horizons, the hard numbers are likewise reassuring. I think the odds are overwhelming that we won't return to the 25% unemployment rate and bread lines of the Depression. Yes, times are tough. I have never seen an economy even remotely this bad. But economists know a lot more about how to get out of messes like this than they did in the early 1930s. And programs such as federal bank deposit insurance, Social Security and unemployment insurance -- not to mention assorted stimulus programs -- should keep the economy from spinning out of control.

Most of us know that large-company stocks have returned an annualized 10% since 1926 -- about twice what bonds have garnered. Inflation, meanwhile, has averaged 3% a year. But over the short term, the stock market is like a roller coaster. The trick is to keep a diversified portfolio, invest regularly until retirement, and not to try to outguess the market's short-term swings -- even swings as gut wrenching as the current one.

Steven T. Goldberg (bio) is an investment adviser and freelance writer.


Saturday, February 14, 2009


Date: Friday, February 13, 2009.
US markets ended marginally up. US Market was down for most of the day but Obama's announcements about helping mortgage owners to avoid foreclosure brought the market up in last 1 hour of trading. Nikkie was also up 1-2% before Indian markets opened. Indian markets opened with Sensex Futures upwards.

Indian Market surged in the opening as pointed out by Sensex Futures. Market held the up position till 2 pm and again there was a surge in coincident with the surge in European markets. Lot of profit booking seen during end of the day.

Looking at the Sensex Futures up, I bought some CALL options. Market rallied and I sold the options at 10% profit before the European markets opened. I should have waited for the European markets to open. I expected the European markets to rally. I could have made 20% intra day profit.

Tuesday, February 10, 2009


Date: Friday, February 10, 2009.

US markets ended flat. US Market concerned about the Stimulus Package. Rumours about some deviation from the "Bad Bank" solution.
Indian markets opened with Sensex Futures down by 200 points. Nikkie was almost flat trending downwards.

Indian Market dipped in the opening as pointed out by Sensex Futures. Market then rallied it 1 PM. Market became cautious about European market. Lot of profit booking and lower opening of European markets brought the Indian markets down. As European Market stabilized, so did Indian market.

Looking at the Sensex Futures down 200 pts, I bought some PUT options. Market rallied and I sold the options at 20% loss before the European markets opened. I should have waited for the european markets to open. I expected the European markets to rally looking at the Indian markets.

Saturday, February 7, 2009

Canoro Resources Ltd. Announces Operations Update.

CALGARY, ALBERTA--(Marketwire - Feb. 5, 2009) - Canoro Resources Ltd. ("Canoro" or the "Company") (TSX VENTURE:CNS) announces that Company working interest production averaged approximately 2,725 thousand standard cubic feet per day ("mcf/d") of gas and 197 barrels of condensate/oil per day ("bbl/d"), or a total of 651 barrels of oil equivalent per day ("boe/d") during the three months ended 31 December 2008. By late December, the Company was successful in working over Amguri well A-5, adding approximately 30 bbl/d of oil and a small amount of associated gas net to Canoro. A-5 production and increased gas offtake to Assam Power has increased overall production and sales volumes.

Work is proceeding on the Pre-Stack Depth Migration ("PSDM") re-processing and re-interpretation of Amguri 3D seismic data with initial results expected by Q2 2009. The Company has completed the evaluation of bids for gas re-injection and condensate extraction facilities at Amguri. The main equipment packages have been awarded for manufacture with commissioning expected by the end of the year based on manufacturers' delivery dates. Preparations are being made to convert the Amguri-11 well to a dual producer/injector, install an electric submersible pump (ESP) in well Amguri-5 to increase Barail condensate/oil production and tie in Amguri-14 as a producer of dry Tippam gas by Q3 2009. Amguri-14 gas is planned to be used for sales and additional reinjection supply.

Canoro is continuing to develop its new business opportunities around the Company's core area of operations in northeast India.

Canoro also announces that, pursuant to the terms of its stock option plan, it has granted options to purchase an aggregate of 2,125,000 common shares at a price of $0.16 per share, of which 1,950,000 were granted to officers and directors. The options vest as to one-third immediately and one-third on February 2, 2010 and one-third on February 2, 2011.

Sunday, February 1, 2009

Telecom Sector.

Q: Any thoughts on stocks like Idea in telecom or even Bharti. What would you do with them now?

A: We do not like the telecom space too much now. While at this point of time there is still growth but obviously (1) the base effect is coming into play as we go long over the next few quarters, so the growth rates are going to come down (2) there is going to be huge amount of competition from the new players like Reliance Communications and the other new license holders (3) the market itself could start getting saturated after maybe a few more months because the addressable space is only about Rs 70 crore and we have already got Rs 35-38 crore of subscriptions, so Rs 1 crore per month if it continues then in the next 10-12 months you could see slowdown there definitely happening and (4) once 3G comes you will definitely see valuation coming down because 3G is a space where lot of expenditure is going to happen. Capital expenditure means these companies will not become cash flow positive for quite some time to come. There will be operational losses for the first couple of years, so valuations will go down.

So we do not like this space too much but in something like a Bharti, valuations have already taken into account so it’s going to become sort of a defensive stock from here onwards. But companies like Idea, we do not like too much because we think that being number three-four players they are going to find it much more difficult going forward.