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To: ms.smartest.person who wrote (1092)	5/19/2006 8:12:43 PM
From: ms.smartest.person	Respond to of 3198

No bubble to burst in commodities: PIMCO Thu May 18, 2006 3:52 PM ET By Barani Krishnan NEW YORK (Reuters) - The drop in oil and metal prices this week has raised fears that a speculative bubble in commodities is bursting, but giant U.S. fund manager PIMCO says fundamentals will hold up the asset class. "In considering commodities, we need to take a more strategic view instead of trying to predict in very short term what prices might give," said Bob Greer, senior vice-president and manager for real return products at the $600-billion-fund which mainly invests in fixed income. Many analysts saw the corrections as a normal pause needed in bull markets, particularly for energy futures and copper, which hit record high prices in the last four weeks. But some say too many speculators were bidding up prices too high to justify demand supposedly coming from hungry economies like China and India. Some economists also fear a sudden exit of speculative investors like those that have caused real estate and dotcom stocks to crash in the past. Greer, who oversees a $12 billion allocation for commodities at Pimco, said his model showed economics would support prices of natural resources. "To have a speculative bubble, you need one or both of two things -- one, a restricted supply of whatever it is that's going to bubble up, and two, you need to lose all concept of an objective measure of value." "The former was true in real estate." he said. "Real estate is in limited supply and you can certainly bid up the price of that limited supply. In the case of dotcoms, there was a classic case of losing all concept of what a measure of value was. Neither of that holds for commodities." U.S. crude <CLc1> has slid nearly 5 percent since Friday, touching five-week lows on signs high energy costs were stoking inflation and stifling consumption. Copper <0#HG:> tumbled 4 percent early this week amid worries that any further rate hikes by the Federal Reserve could slow economic growth and undermine metals demand. Meanwhile, gold <0#GC:> was struggling under $700 an ounce after sliding almost $52 from a 26-year high of $732 on Friday. Greer said the "real" debate over commodity investments was about the passive investments in commodity futures indexes made by funds, pensions, endowments and wealthy individuals looking to hedge their investments in stocks and bonds. Analysts say passive investment portals such as the Goldman Sachs Commodity Index, the Dow-Jones AIG Commodity Index and Reuters Jefferies CRB Index have seen total inflows of more than $100 billion in recent years, leading to an all-round surge in raw materials prices. "I do not believe that long-only index investors are driving prices," Greer said. "PIMCO is by most accounts the largest manager of commodity index mandates in the world. Yet, PIMCO does not own one barrel of crude oil, one bushel of soybeans, one ounce of gold. We do not consume any of those commodities," he said. "And as far as the objective measure of value is concerned, that occurs on the wheat fields of America, the natural gas terminals, the gasoline pumps and supermarkets where we decide how much we're going to pay for that commodity." Greer said although there were instances when futures led cash prices of commodities, "it is more likely that futures will converge to the cash, and not the other way around". "In the short term, you might have some traders in one pit looking at what's happening in another pit. But over the longer term, it will still be the fundamental economics that are unique to that market that will prevail." "So, you don't have the necessary requirements for a speculative bubble." © Reuters 2006. All rights reserved. today.reuters.com

To: ms.smartest.person who wrote (1092)	5/23/2006 10:13:06 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 3198

&#8362 David Pescod's Late Edition May 23, 2006 INTL. FRONTIER (V-IFR) $1.67 +0.05 GULF SHORES RES. (V-GUL) $0.58 -0.03 OILEXCO (T-OIL) $4.75 -0.25 It’s one thing we keep learning with those “little itty-bitty” junior oil and gas company’s that come up with a big play that could change fortunes overnight. We learn again and again, that nothing ever seems to happen on time. But in this case with Gulf Shores and bigger partner International Frontier, at least we know now that it is going to happen. Pat Boswell of IFR, is one of the key guys behind a very significant play in the North Sea, which I am sure you are going to hear a lot more of over the next few months, because of its size. While there is a lot of exploration being done these days on the small pools that were left by the biggies 20 and 30 years ago when exploration in the North Sea was so exciting, this is one of those big ones that was left that could cause major drooling over the results. While Boswell suggests that his technical people give a target between 300 and 600 million barrels, a half a billion seems to be a even number that people are working with and that represents an enormous target that you would be happy to find anywhere in the world, particularly in a relatively safe domicile like Britain. He also tells us that according to the announcement, Oilexco suggests that drilling will commence before year end, but part of Oilexco’s problem is with their new discovery of Disraeli and when they will use their rig to do additional appraisal wells there. The one important thing though, is that at least it is getting explored, because many of the permits in the North Sea states that if you don’t get a look at them by a certain date there is a risk that you can lose your permit. Clive Stockdale, the former oil & gas analyst at Pemberton, Dominion and Loewen Ondaatje, comes up with many of our favorite high risk/high reward oil & gas plays and this was a story that he talked about to us way back when Gulf Shores was $0.20 a share. He says today, “it’s going to be fun” and the only difference between what we expected a while ago and now is of course the time difference, and then all of a sudden three plays we own shares of are involved in the same play. IFR has an advantage, though, in that they have a carried interest, but the question to be asked about a little guy like GUL is, what would a punter pay for a lottery ticket that if this well hits and hits big, could be worth $15 or $17 a share? Would he pay $1.00, could he pay $1.50 or could he pay $2.00? We would be very disappointed if GUL is anywhere near it’s current price when this play is spudded. COPPER $4.0755 +0.4355 GOLD $673.40 +16.30 SILVER $12.99 +0.625 OIL $71.76 +1.80 Volatile or what? Dead cat bounce or what? It doesn't matter what you want to call it - some huge moves in commodity prices, but according to Bloomberg today after the huge sell off in commodities (it’s funny how what goes up slowly comes down quickly, isn’t it?) around the world are actually doing quite well. In China today, which is not the freest of free economy's – authorities have allowed prices on many commodities related to oil to rise and it didn’t disturb the market at all. And once again, what happens in China is moving commodity prices worldwide! AURIZON MINES LTD. (T-ARZ) $3.18 +0.88 Once again, in a very volatile commodity market, the question remains; if you are big mining company is it better for you to go and buy some potential production or just keep your exploration team busier than ever and hope they actually find something? Today Northgate Minerals (NGX) seems to be following in line with others, as it suggests that it’s not as easy to find those big commercial deposits anymore and despite not knowing which way commodity prices are going next…they put their money on the line and decide to make a take over offer for Aurizon Mines. Aurizon is not necessary cheap, but its Casa Berardi project will be going into production later in 2006 and it’s a fairly sizable one in Northwestern Quebec. This isn’t cheap, of course, as Aurizon has 149 million shares outstanding, so this is a fairly sizable deal worth approximately 1/2 billion dollars. If you would like to receive the Late Edition, just e-mail Debbie at debbie_lewis@canaccord.com