Vancouver Cambridge Resource Conference

06/15/2008

Cambridge Conferences are the world's largest resource conferences by attendance. This June's edition featured over 300 resource companies with attendance in the thousands.
While the crowd didn't match the perennial January conference held at the same place, it was large nonetheless. Howard Fitch and Joe Martin the organizers spent hundreds of thousands of dollars reaching out to investors and were able to recruit the highest caliber of speakers including Frank Holmes, Doug Casey, and Rick Rules. Again, the speaker hall was standing room only.
We had the pleasure to exhibit at the conference, where I also participated on 2 panels (with Doug Casey and David Morgan) and hosted a packed workshop.

Eye Opener Workshop with Luis Paquette, Victor Goncalves, and Leonard Melman (Sunday 8am)

Over half the hall is full at 8am in the morning. I was pleasantly surprised by the turnout. Below are key points I remembered.

Q: Oil and Gold Target
No one thought oil will be $130 today. It just kept going up from $40, $60, $80, $100...
I don't have a target for oil. However it is indeed overpriced relative to the other commodities.
Given oil is often the driver for the rest of commodities and is the least volatile commodity, the longer it stays above $130, the less likely it will go back to $100. Last time gold reached $850 was in 1980 when oil was $40. So I see gold right now is sitting at great support of $880, while the upside is anyone's guess. So I don't have a target, but I like the risk and reward ratio of gold much better than oil at this juncture.

Q: View on agri-potash
1.3 bil Chinese didn't all descend from Mars in 2006 when the agri bull started. It's all about money flow. Agri-Potash reminded me of the Uranium boom, which Uranium stocks crashed spectacularly last August. (Uranium stocks went from 20cents to $2 now back to 20cents). There is also a difference between investing in the commodity vs commodity stocks. Potash stock shells are selling at 3 times a gold shell, both with nothing. Given agriculture commodity futures are most volatile (pointing to my 3 grey hairs), I would put tight stops on both agri-futures and agri-stocks.

Q:My favorite commodity play
I like zinc a lot. It has come down from high of $1.5 to 80cents now. 80cents is merely double its all time low of 40cents. It does seem very good value.

The Mau Capital Team

We met some very interesting people in the conference. Most of them already are heavily invested in the resource markets. We sensed more European and South American people visiting the conference. I also managed to talk to a few interesting companies which I will hopefully write about it and share with our Stockchart of the Week subscribers.
http://new.goldmau.com/stockchartsubscribe.php

3pm Sunday Workshop #1

This is by far my largest workshop with over 80 people in attendance. I talked about my trip to Dubai and London in late May 08, and my views on various metals. One can't group all metals into one basket as they have very low correlation to one another.
Then I finished up with my favorite stocks. One stock I mentioned in the January conference more than doubled in 6 months so the crowd was very eager to hear what I had to share this time. The full presentation can be accessed here:
http://new.goldmau.com/media/presentations/2008-06-15.pdf

Monday 6pm World Outlook Panel with Doug Casey, David Morgan, and John Nadler

It was a packed house with heavyweight speakers. I was very pleased to be standing next to my idol Mr. Casey. Although my views are a bit different from his (i.e. prosperity vs gloom and doom) we nonetheless had a lot of fun on stage.

Q: China, how come they haven't taken leader ship role in helping the world
They have. Given out billions in infrastructure, mineral, and oil development in dozens of countries in Africa (Nigeria, Congo, etc) and South East Asia. They have replaced the World Bank.

Q: View on China
They along with UAE are in a dollar panic trying to get rid of dollars they have. China is raking in $100 million dollar PER hour with $1.7 trillion in the pocket. China's actions speak through the fact that they mended century long borders disputes with India and Russia. They are too busy getting rid of dollars to play war games right now.

Q: Alliance and Iran
I don't see Africans trusting the Chinese and I don't see Africans trusting the Indians. There isn't really any political alliance other than economic bi-lateral pacts. I said 5 years ago that Iran is protected by Russia. Plus Britain has withdrawn support from the US after Gordon Brown came in power. The British have already got what they wanted from the war (i.e. re-establishing London as the global financial center of the world). Bush is not going to gather enough allies domestically or internationally to go after Iran. No, I am not concerned about Iran.

Q: Obama vs McCain
Makes no difference. US GDP was $11 trillion in 2004 while World GDP was $35 trillion. Now it's $13 trillion vs $55 trillion. Percentage-wise US influence has decreased from 33% to less than 25%. US influence globally is quickly becoming irrelevant.

Q: Americas becoming EU style
No sane American will abolish the border with Mexico - a border the Americans are busy building, not tearing down. Even crossing borders between Canada and US is becoming more and more of a hassle. On the currency side, raise your hand if you like to merge Canadian dollar with US dollar (no one from the audience raised their hand). You see, I have always said Canadians are more practical than ideological. Consequently, I don't see an integration of North America in EU style.
Several people came to me after the panel and shook hands.

Reception Monday evening 7pm

We hosted a small reception to greet friends and investors. It was set at a nice patio at a restaurant right by the convention center. As you can see from the photo, the turn out was a bit more than expected. All had a great time.

Overall it was a great event. I saw many familiar faces. The traffic was good and the speaker halls were always packed. The views on markets are mixed. Many took the short-term cautious, long term bullish on gold and gold equities. My take is gold has made the bottom at $850, inflation is beginning to gather notice at headlines and gold equities are ready to rise. Mr. Howard Fitch and Mr. Joe Martin never fail to put on a good conference. Thank you both Howard and Joe.
Next stop is Singapore July 7 - 9, 2008 http://www.terrapinn.com/2008/commodity/. I will see you then!

John Lee, CFA
http://www.goldmau.com
johnlee@goldmau.com

Travel Diary: DUBAI Commodities Investment World MENA 2008

06/03/2008

Dubai Commodities Investment World Conference (May 25-27, 2008)

I had the pleasure to speak at Commodities Investment World MENA 2008 (http://www.terrapinn.com/2008/ciwae/) in Dubai in May. This was the first time I’ve had an opportunity to visit the Middle east, so off I went.

May 24: boarded plane Vancouver to London

May 25 I arrived in London in the morning and got to spend an afternoon in the city with a 6 hour layover. Tower Bridge, Piccadilly Circus, the usual tour.

Piccadilly Circus

Regent Street

Tower Bridge

Wong Kee Restaurant in Chinatown. I used to go every week when I was a student in London some 20 years ago. Time flies, yet memory remains.

Heathrow Express is terrific: 15 min to Central London for GBP 19 one way. Be sure to buy the one day round trip for GBP 23. (I was stupid and paid more).

London has to be the most expensive city I’ve traveled to in the last 5 years (and I see dozens per year). A Starbucks coffee sets you back GBP 3.5 pounds (USD 7); A subway ticket cost you GBP 5.1 (USD 10). After the first hour, I had to stop the pain and simply replace the “GBP” with “USD” everywhere I looked and chose to shock myself once my month-end credit card bill came.

Britain is the twin sister of the US in terms of debt addiction. Its largest mortgage issuer Northern Rock was nationalized last year. Housing prices last month showed the first decline in a decade, and consumer confidence is at a 9 year low. Interest rates are at 5%. Such a relatively high rate is the only thing that’s holding the pound sterling up. The rate has to go down and somehow I feel this is a reply to the US lagged by about one year, except that the UK may be in worse shape because its economy is almost entirely service sector-driven. Technically if the XBP breaks 195 (head of shoulder neckline) we will see 185 and possibly back to 175.

Save the GBP 50 for the private double-decker bus tour, I took the #15 bus (free with the GBP 5.3 one day travel pass) from Tower Bridge all the way to Paddington (passing Trafalgar Square, Oxford Street, Marble Arch) to catch the Heathrow Express for the 8pm flight on Emirate Airlines to UAE.

The airline is said to be the best airline in the world. I am not so sure. Check-in lines were VERY long and they were clearly short-staffed. The waiting lounge had some dated magazines and the carpet and seats were dirty and worn-out. The flight is no different than any other; the meals were so-so and I didn’t detect any superior hospitality from the staff. In fact, I’d advise against traveling Emirates to Dubai since from London it carries mostly transit passengers to other Mideast countries, India, and Australia. It was very full. I can’t imagine BA would use Dubai as a hub to Australia and therefore I assume there’d be more room and the process would be less hectic.

May 26 (Monday)

Arrived in Dubai. Taxi was cheap with an 80-cent start. Don’t rent a car. I checked in at the Shangri-la at 7am, used the gym and shower to get ready for the 9:40am conference start.

Airport at 6am. Look at the crowd! Just like Air Emirates, I found the duty free to be over-rated. There aren’t dedicated storse for name brands and the selection is much smaller than Heathrow or even Vancouver.

This conference is an institution type of conference. There were about 50-100 in attendance and it’s a highly qualified and intellectual crowd. I was surrounded by head traders of billion dollar-plus funds. I appeared on one panel in the morning and did well. Most investors have exposure to the futures/metals but nearly none have invested in mining.

Right after the panel I received much positive feedback at the break and lunch. I slept in the afternoon and went out for dinner with Donner Metals CEO Dave Patterson (TSX-V: DON).

It was very hot during the day (40C/104F) and at night slightly tolerable at around 35C/95F and very dry throughout. I headed out for one drink and called it a night.

In the morning I spent a good hour preparing some slides for my afternoon panels and sessions to present, since the crowd paid $thousands to attend and was very focused.

My slides on the gold panel with World Gold Council are here:
Download PDF

My slides on the base metals / mining panel are here:
Download PDF

The crowd in the afternoon was lighter and I think my panels went very well and received good comments. I learned there are 1.7 billion Muslims worldwide, they are very law-abiding as I saw not a single police officer in the entire time after leaving the airport. Money in the Islamic banking system is set to reach $1 trillion shortly from less than $100 billion at the turn of the century. On the topic of oil, it’s surprising to learn that many Gulf States are running oil deficits in order to fuel their own development and growth.

The conference finished at 5pm. Terrapinn (http://www.terrapinn.com) arrange many conferences around the world every year. They are very professional and organized. The sessions include keynotes, panels, interactive round tables, speed networking, and post-conference mingling events. I would not hesitate to recommend their conferences.

Dubai

Dubai is an incredible tale. For the last 50 years, it was run by the king and his heirs. The city began as a tiny fishing village surrounded by empty desert. Oil was found in 1960’s and in the last 10 years in particular, the city has transformed to become unquestionably the MOST Futuristic City. Oil money today is only 20% of their revenue and 6% of GDP. The King knew the oil will run out in a few years for UAE so they developed Dubai as the Middle East Financial Center, an international hub, and top tourist destination.

Sheikh Zayed Road

Sheikh Zayed Road today from my 27th floor hotel room window.

Burj Dubai (150 floors), again from my hotel window. Nearly twice as tall as the Empire State Building.

Building Madness – 20% of the world’s construction cranes are in Dubai, the other 80% probably in China.

Having praised Dubai’s progress, one can say there is no city planning to speak of. Development replicates in pockets throughout the city with nothing in between. There is no “let’s go for a walk” since there is no public park, seawall, or garden to speak off. You will die of heat exhaustion anyway, so better just stay in at the mall.

I had 3 more days to burn before going home. I didn’t know what to do. Dubai is a very conservative city by western standards. Not much to do indoors, at night time the government closed most dance joints leaving out some hotel bars and restaurants. You can get long term jail time for public drunkenness or driving with a single drop of alcohol. The air is dirty, the people aren’t really friendly and did I mention it’s 40C? So I wandered around the mall, went to the hotel gym, and worked the rest of the time. Dubai is 11 hours ahead of Vancouver and I never really adjusted to it during the 5 day stay.

Shopping Mall. Exact replica of Vancouver’s Pacific Centre Mall. That’s the “French Connection” store on the left.

Food Court. That’s KFC, McDonald’s, Hardee’s, DQ, Subway on the far end. Feels like Déjà vu… am I in Dubai?

Burj Al Arab by Jumeirah beach – Must be a hotel guest or eat hotel dinner to get in. You cannot see the coastline from driving since there is only one public beach. I had to book a reservation at a Jumeirah Beach Hotel beach bar by Burg Al Arab just to take a picture.

The famous gold Souk. Some 20% of world’s physical gold changes hands in Dubai. I was quoted about $900/oz for finished products (22 to 24 karat). That is pretty much the spot price, there is no room to bargain even if I tried. I snatched up 2 chains for USD 400.

Ski Dubai. Silly amateur straight runs – no corners or moguls, overrated.

May 31

Finally time to go home. I found airport security and immigration at Heathrow and Dubai to be easy and efficient. One need not take off shoes, take out laptops to go through security. There are no interrogation questions and customs forms to fill; I timed and it took on average 5 seconds for a Heathrow immigration agent to process each traveler, granted it’s shy of Narita’s record of 3 seconds in my estimation, nonetheless it’s far, far ahead of any US or Canadian cities. No wonder recent congressional reports indicated over tens of billions lost per year in airports through airlines and passenger delays.

The development in Dubai truly puts most governments to shame. Just what happened to the US surpluses from early 2000? Wasted. Most cities in the US lack modern development barring another sports stadium. This is just not in the US: in Vancouver there is only one major business/commerce building erected in the 5 years (Bentall), and 30 floors is considered low rise in Dubai. The Arabs are smart, they raced to convert petrol dollars to hard goods before the Chinese convert USD 1.7 trillion of theirs. Latest report shows China is accumulating $100 million US dollars every hour. Just how can commodity prices (oil, gold, anything) not go up when there are $trillions to be spent with urgency?

Dubai is an interesting spot, although not my top destination to visit. This makes me realize all the more how special Vancouver is. I will be in downtown Vancouver for the Cambridge Investment Conference June 15 & 16: http://cambridgehouse.ca/ch_june2008.html
Come and visit…

John Lee, CFA
http://www.goldmau.com
johnlee@goldmau.com