A spectacular account of the ‘100-year financial crisis’ as told by the 74th United States Secretary of the Treasury, Henry Paulson. The interview was done for the new Bloomberg documentary which will be on Netflix on Monday called ‘Hank: Five Years from the Brink’.
Hank on the Unpopularity of TARP:
“The way I read the polls, TARP was more unpopular than torture. We don’t like bailouts in this country. If you take a risk and make money? That’s good. But if you take a risk and the government has to come in and save you? Well, I understood the anger.
I was never able to convince the American people that what we did with TARP was not for the banks. It was for them. It was to save Main Street. It was to save our economy from a catastrophe.”
Hank on the Lives About to Change Forever:
“I remember waking up very early the morning of Sept. 15 in New York and looking out the window at all the people on the street walking to work. Some I’m sure worked at Lehman. Some worked at other banks. Others didn’t work at any bank. But their lives were about to change in very profound ways.
Lehman’s Dick Fuld (Newsweek)
Lehman intensified the crisis — it was a symptom, not the cause. I don’t subscribe to the “domino theory” when it comes to Lehman. My former colleague, Ed Lazear, had a line that’s more apt: The crisis was like a giant popcorn popper, and it had been heating these kernels for a year as the crisis went on. Lehman might have been the first to pop, but we knew that weekend that Merrill Lynch and AIG were going to pop next, and many others in the U.S. and Europe were not far behind.”
Hank on Advice from President Bush:
My own view has always been to admit when you’re wrong and change course quickly. I didn’t have to have long debates with the White House staff about how bad the harm to the economy would be if the financial system went down. President Bush had a good feel, and he understood markets. He basically said, “Holy cow, you’ve told the whole world you’re going to buy illiquid assets. It’s going to be important how you explain it, but of course you’ve got to put capital in the banks.” The best advice he gave me was to do what’s right and ignore politics.
So just remember, when you are fed up with the junior resource space and you think it is the be all and end all of your life, take a step back and think about how close we were to the brink of total financial disaster a mere five years ago. Be thankful. Easier said than done, I know.
No-rail advantage puts Oceanic’s Hopes Advance project before Asian steelmakers for potential partnership.
Iron ore is the key ingredient used to make steel. The majority of the seaborne trade, that is, iron to be shipped to other countries, goes to China.
An oligopoly exists today whereby China is forced to rely on Big 3 producers Vale, Rio Tinto and BHP Billiton for over 60% of its imports at arguably inflated costs.
This is primarily because domestic Chinese production is very high cost and very low grade. Given 7 of the world’s top 11 steel producers are Chinese, it is rational to assume China’s appetite for foreign sources of iron ore will remain strong for the foreseeable future. We published an article on February 1, 2013, titled “Wuhan Iron to buy more overseas mining assets” because we felt that this was a strong signal that Canadian iron ore resources will be on investors’ and steelmakers’ radar over the next few years.
In the article, Government owned Wuhan Iron and Steel (Group) Corp, China’s fourth-largest steelmaker by output, said it plans to achieve 100% self-sufficiency in three to five years and abandon its heavy reliance on the Big 3 by investing directly in iron ore resources in Canada and Brazil.
Chinese steelmakers have been looking to Canada, and in particular the Labrador Trough, as a source for high quality long term supply of iron ore in a safe jurisdiction. Steel companies typically invest in smaller owners of iron ore resources, and enter into an offtake agreement to purchase a portion of their mine production. Wuhan and China’s largest steelmaker, Hebei Steel, have already made investments in projects in the Labrador Trough.
We decided to take a closer look at some of the iron companies in Canada. Most are large and well established and therefore out of our junior filter. Of the juniors, one stood out because of its large valuation gap, which caused us to take a closer look. Continue reading →
With special thanks to Odgers Berndston, global leaders in executive search, for supporting these interviews.
Meet Brent Cook: seasoned geologist and the mind behind Exploration Insights, one of the most credible and influential gold stock newsletters in the world today. We recently caught up with Brent in Vancouver, and asked him to share some of his experiences in the junior mining sector.
According to Cook, odds of making a discovery are 1:1000 (“those are just statistics”), but if you take a hard look at the data (“the company reports, the geology”) you can lower the odds to 1:250. Cook figures that his odds of success are 1:25 or 1:50 after his due diligence. “That’s about as low as I can get it… there’s so much of what you don’t know when buying into an early-stage project, but the key, in my mind, is to know what it is that you’re looking for, and what [the deposit] looks like — meaning, when the results come back, evaluate in terms of what you need to be seeing. If you’re not seeing it, if it’s not meeting your thesis, sell it.”
Our conversation shifted to the Vancouver financial scene, which Cook described as “quite a rude awakening.” As someone who places a lot of value on honesty, he found Vancouver to be “cut-throat.” “The flat-out lying takes a bit of getting used to. I’m certainly not saying everyone in Vancouver is a crook, but that is how the vast amount of money is made here.”
Cook continued, warning about rigged exploration deals and “seed stock.” “I suspect most of the money made in Vancouver is made through inside deals, seed capital financings, early stage financings that go out to a group of people and of companies built up around some [big] name people, and eventually this gets recommended by whatever newsletter writers or brokers or analysts and these guys are able to get off their paper at a double or a triple, going from 10 to 30 cents… Some of these are legitimate stories, but if the flat out odds are 1:1000, you can see that when you get to the stage where you’ve put money in at 10 cents and this thing is at 30 cents, you can just keep doing that and make a good living. That’s what happens a lot here, and you’ve got to be aware of that.”
If honesty is hard to find around here, who should we turn to? “A good geologist’s mind is the best tool because there is so much subjectivity to it,” Cook told us. Some lesser-known mineral explorers Cook thinks investors should follow include Steve Nano, Rob Carpenter, and Rob McLeod. “There is too much emphasis on the gurus… I think the people who are going to make the next discoveries are the people we don’t know, like the names I just mentioned.”
It’s always rewarding to connect with Brent Cook. Exploration Insights is an outstanding newsletter for the sophisticated investor, and we recommend following Brent if you’re serious about making money in this sector.
The Atascosa Ranch is walking distance from the US/Mexico border, just outside of Nogales, Arizona. It’s owned by Dave Lowell, an affable 84-year-old man who’s spent the past 75+ years hunting for buried treasure. Today, he’s known as the most successful mining explorationist of the past century, having discovered an unprecedented seventeen ore bodies, including the world’s largest copper mine. Last week, Lowell and his wife, Edith, invited us to Atascosa for lunch. We brought our cameras and sound equipment, and recorded a conversation with one of mining’s greatest outliers of all time.
J. David Lowell was born February 28, 1928, to a modest family, not too far from Atascosa (the ranch belonged to his uncle at the time). Lowell was first exposed to mining at age 7, when his father, a mining engineer, put him to work. When Lowell pursued his college education at Arizona and then Stanford, he concurrently worked at mines and on exploration programs. Not too long after he had completed his degrees, Lowell had become one of the foremost experts on copper deposits.
Lowell is probably best known today for co-authoring the Lowell-Guilbert Model, a guide to large, low-grade porphyry copper deposits published in 1970. Throughout most of his career, Lowell used the model to locate some of the most profitable mineral finds in the history of mining, such as the 1981 discovery of the Escondida deposit in Chile. Containing hundreds of billions of dollars worth of ore, Lowell and his colleagues found it at the cost of a mere $2.5 million.
Escondida at night, the world’s largest copper mine, and a Lowell discovery. Photo: BHP Billiton
Over lunch of elk tacos and Mexican fried beans, Lowell was modest about his success. But he offered a theory as to why major mining companies don’t make discoveries as efficiently as prospectors like Lowell. Major mining companies have a “don’t make mistakes” approach, which “doesn’t fit at all with the profile of the mad scientist who discovers mines,” he said. “When something like one in five hundred good-looking targets will become a mine, a successful explorationist needs permission to be wrong four hundred and ninety-nine times.” Here he paused. “If there’s anything my career says about me, it’s that I’m very good at being wrong.”
Despite being a pro about being wrong, Lowell does admit to limitations. Having “no taste for shareholder relations,” he recalled giving a presentation to investors in 1995 that resulted in the share price of one of his companies falling from $35 to $15 during the time it took him to finish his talk. The shares recovered shortly thereafter.
On the changing impact of technology on mineral exploration over the span of his lifetime, Lowell holds that it’s been “very little.” He believes that “geophysics has been very oversold,” instead favoring “drill holes and geochemistry… The best guide to ore is ore.” Lowell also voiced doubts that technology would be able to revolutionize mineral exploration the way 2D and 3D Seismic has for the oil and gas business, at least in the near future.
The commodities super-cycle is intact, Lowell believes. There’s elasticity in mining companies’ profit margins, he told us, but not in the demand for the underlying commodities they produce. For that reason, large, undeveloped, low grade copper deposits will need to be put into production, sooner than later.
When asked about his favourite jurisdictions for exploration currently, he told us he favors Chile, Peru, New Guinea, Mongolia, Nevada, and some parts of Africa. But he qualified his dispositions by recalling that attractive jurisdictions are constantly changing. “Places like Arizona were very attractive as a place to explore for copper deposits, and now Arizona is about as bad as Venezuela,” he chuckled.
When we moved on to the role luck has played in his career, Lowell avoided answering directly. Instead he responded that “minefinders who make one discovery are much more likely to find another.” His basic philosophy is that of persistence, and it shows — his career is equally productive after retirement age as it was before.
At age eighty-four, Lowell is not slowing down. With financiers Dave De Witt and Marcel De Groot of Pathway Capital (“as efficient, honest and reliable as partners get”), Lowell is developing several projects, including a titanium-iron deposit in Paraguay, which he believes is the largest of its kind in the world. Other active projects are under wraps for now, as to avoid competition. Investors who rode his Arequipa Resources shares from .20 to $30.00 in 1995 will surely be watching Lowell’s upcoming public ventures. An autobiography is also in the works.
It was an honor to spend time with Dave at his ranch, and we’re pleased to share some video, pictures, and sounds of the day. We hope you enjoy the following short film about the greatest outlier and maverick the mining industry has known in recent memory, J. David Lowell.
With special thanks to Odgers Berndtson, global leaders in executive search, who are working with us to grow their Resources practice. We look forward to introducing them to you over the coming weeks.
Three Mining Pros Take The Reins At Prophecy Platinum
Prophecy Platinum Corp. (NKL), has scored a major talent coup by attracting a trio of credible and experienced mining executives to advance its flagship Wellgreen platinum, nickel and copper project in the Yukon Territory.
We had the opportunity to sit down with new CEO Greg Johnson late last week to better understand Prophecy Platinum’s evolving story (Jump to video).
We had the opportunity to sit down with one of the youngest and most successful CEO’s in the mining business today, Nolan Watson, of the Sandstorm companies. Chosen as a Canadian “Top 40 Under 40”, Nolan has created billions in shareholder wealth beginning as a 26 year old CFO at Silver Wheaton. He currently appears to be repeating the same process at Sandstorm.
While his accomplishments are profound and deserve the highest of honors—they are merely a by-product of something deeper. It was our discovery that faith and conscience developed at a young age, are at the root, and are the secret of, Nolan’s success.
Recently we sat down with Amir Adnani, CEO of Uranium Energy Corp. ($UEC), an American uranium mining company, for a conversation on the nuclear industry eighteen months after the catastrophe at Fukushima which devastated both Japan and most uranium miners’ share prices.
One of the most critical issues we discussed in our interview was the severity of the US uranium supply and demand deficit. According to Adnani, “The US is consuming 55 million pounds of uranium per annum…to generate 20% of US electricity…[but] domestic production of uranium is only 4 million pounds per year…The US is more dependent on foreign uranium than it is on foreign oil.”
We had the opportunity to sit down with Frank Giustra last week, the lion behind Lionsgate Films, and an early architect of countless resource companies—most notably Wheaton River Minerals (now known as the $33B Goldcorp, which spun out the $12B Silver Wheaton), Petro Rubiales (now the $7B Pacific Rubiales), and Urasia Energy.
By all accounts Giustra is brilliant, connected and wealthy. He made headlines in 2007 by pledging over $100 million and half of his future earnings to establish a charitable foundation with President Clinton. Outside of philanthropy however, Giustra has been reluctant to draw attention to himself, and rarely speaks publicly about investing.
In 2002 however, he moved heavily into gold and published, “A Tarnished Dollar Will Put the Shine on Gold”, when it was trading under $300 an ounce. Ten years later and with gold now priced over $1600/oz., it still occupies the largest percentage of his investment portfolio, and his views remain the same.
In discussing gold during the interview he said, “I believe it’s going a lot higher…it’s going to have a parabolic spike, caused by some event or some loss of confidence…a US dollar crisis would be a perfect example. That will cause gold to go through the roof, and then everybody will want to own it…I don’t think we’re even close to that yet…Gold will probably have a much greater run than some of the other hard assets–because it’s also a currency.” (19:16)
On the subject of inflation he remarked, “It’s easier to make money with inflation than with deflation. All you need to make money with inflation is money…Those that influence policy are usually the ones that have access to money, or can borrow it very cheaply… They have a conflict of interest… [Inflation is] where a lot of people are getting rich, and the public is being educated—quote “educated” to accept that type of [inflationary outcome].” (11:10)
When asked about the parallels between today’s Western societies and previous civilizations, he replied that a strong example would be, “Sixteenth century Spain. In just over 100 years, it went from an almost nothing nation, to a great empire, and back to a nothing nation. They became a consumption economy…They waged a number of wars with almost everybody on the planet…because they felt they were a superior nation…[and] that’s what’s happening in America today…There’s no way out except currency debasement.” (15:30)
With respect to the mining shares, he said, “The resource market is in the worst state I’ve ever seen it in…people usually connect irrational and stupid market behavior with peaks of markets, but it takes place at the bottom of markets too. And it’s just as bad [at bottoms]…fear is a much stronger emotion than greed…[There are] companies developing world-class assets trading at pennies on the dollar.” (21:50)
Additional topics discussed included agriculture, success, and mentorship (31:07).
Giustra’s predictions for the western world economies are sobering, but his view of the resource sector is optimistic, and his case for inflation is impossible to ignore. We feel this interview is required listening for all those who seek and desire wealth.
So without further comment, here is billionaire mining and entertainment mogul Frank Giustra in conversation at the Vancouver Club last week. Special thanks to Cambridge House and VC for putting us up, and to Frank for joining the program.
Originally published on TommyHumphreys.com, CEO.CA’s predecessor site, and republished by WSJ, Business Insider, among others.
I had wanted to interview Kevin O’Leary ever since I attended a small presentation on his O’Leary family of mutual funds that he gave to money managers in Vancouver last spring. Before those financial gatekeepers, O’Leary was his usual fast talking self, but more humble and incisive than he appears on TV.
When we were able to sit down and talk in Whistler last Friday, I thought Cambridge House investors should see that side of him. Our discussion revealed a quieter, analytical, and generous side that most people never see. O’Leary articulated his investing philosophy, which also guides his fund family.
It will surprise you: He’s actually very conservative, and believes “an investment without a dividend is simply speculation.” Hence the mandate for capital preservation and income of O’Leary Funds, which are aimed at retail investors.
For an hour, we talked about investing, macroeconomics, geopolitics, life and even wine. So dust off a bottle (1990 Cheval Blanc, Mr. Wonderful’s favorite) and get to know the other side of Kevin O’Leary.