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Although it may sound frightening and risky to many investors, if handled correctly, commodities could be the missing piece of an investor?s portfolio. What exactly are commodities? Commodities are any mass goods traded on an exchange or in a cash market including: cocoa, coffee, eggs, lumber, orange juice, soybeans and sugar just to name a few. Industrial metals are also included with copper, aluminum, zinc, nickel, silver, and lead ranking among the most popular industrial metals holdings. Finally, the most widely followed commodities include oil, natural gas and gold.

The diversification benefits equal or surpass those of other asset classes like fixed income and real estate. The primary reason for this is their correlation, or lack thereof, to the stock market as represented by the S

In a previous interview about coalbed methane (CBM), Sprott Asset Management CBM analyst Eric Nuttall told us he would remain, ?quite excited about the prospects for companies with coal bed methane assets so long as natural gas prices remain above $6 per Mcf (thousand cubic feet). The economics would be very skinny under $6.? That?s because CBM exploration and development can get pricey. What if there was a drilling firm regularly bringing gas out of the ground for under $1.50/mcf? There is and they?ve proven it with more than 250 wells in Australia. They?ve moved into India, where they drilled another 30 to 50 wells and another 70 wells to come. Mitchell has taken acreage in southern Kansas, where the company just finished its first CBM well. And the company formed a joint venture with Pacific Asia China Energy (TSX: PCE) to bring its Dymaxion? technology to China later this year.

You don?t get to be Australia?s largest privately owned drilling company without timing your markets right. The Mitchell family?s great timing ability began in 1969, when company founder Peter Mitchell bought his first drilling rig at a repossession sale for $11,500. Parts of Queensland, Australia were in the grips of a drought. Mitchell put his rig to good use as he began drilling water wells for farmers in the surrounding rural counties. Just as the drought had ended, Mitchell caught the boom in coal. His growing company began drilling in the oil shale and coal fields around Moranbah, then a remote part of Queensland. They then caught the drilling boom in mineral resources through the 1980s. By then, the company was drilling oil, gas, uranium and coal reserves throughout Australia. In the 1990s, Mitchell Drilling got the first whiff of Coalbed Methane (CBM) exploration entering Australia. That is when the major U.S. oil companies, such as Amoco, Conoco and others, came to the country searching for new CBM fields.

But, the major U.S. oil companies abandoned CBM in Australia because they soon discovered Australia?s shallow coal fields were too expensive for their big oil rigs. ?The economics just didn?t work,? Nathan Mitchell told StockInterview. ?They needed high gas flow, but the fracing technique just didn?t give them what they needed.? Still they persisted and asked Mitchell Drilling to run his smaller water well rigs. ?That was the start of it,? Mitchell recalled. ?We made CBM work with the water well rigs from an economics point of view, but they still weren?t making enough gas.? Still, the economics of the smaller rig made it work to a degree.

Enter the politicians. ?The Queensland government made a law that said five percent of all coal-fired power stations had to be run by gas,? explained Mitchell. ?That spawned the industry and CBM really took off.? Mitchell continued with the vertical rigs, but it was the economics of the smaller rig that made CBM work.

GETTING BLOOD OUT OF A STONE

It was during the CBM boom when Mitchell developed the better mousetrap. Coal miners didn?t see the gas resource beneath their feet. ?They just saw them as coal fields,? said Mitchell who knew there was ?nuisance gas? there. ?There was never even a thought there was enough gas there to make it viable.? With natural gas selling for $2/mcf in Australia, the economics didn?t make sense. Australian coal seams are found at shallower levels where greater pressures have to be created to liberate gas from the extended horizontal seams. The Australian one-two punch of shallow coal seams and low gas prices drove Mitchell to become innovative.

?We?d seen in the coal business the underground in-seam drilling of horizontal holes and degasification,? Mitchell explained. ?But, there was usually a lot of water involved and no way to get the water out.? Because of the company?s decades of experience in drilling water wells, Mitchell combined the vertical well with the horizontal well. Mitchell described the process, ?The vertical well became the conduit for the coal mine, the gas and the water, and gave us a huge surface area. Suddenly, in areas where there wasn?t a resource, we could produce something like a million or up to 2 million a day from these Dymaxion? wells.?

The technology was put to the test in central Queensland, Australia. An Australian newspaper reported in June 2004, ?In an industry where tradition plays a strong role, innovative drillers Mitchell Drilling have chalked up the 100th example of their revolutionary Dymaxion surface to in-seam (SIS) methane gas drainage hole for gas producer CH4 Limited at their Moranbah gas project.? CH4?s website spoke highly of this gas project, ?The Moranbah Gas Project will utilise innovative drilling and gas extraction techniques, allowing increased potential gas yields while leaving the coal resource undamaged.?

How does this impact the industry? ?We see this as revolutionary,? Mitchell cheerily remarked. ?It has changed the face of CBM. It works in areas where people didn?t think it would work.? For example, the Dymaxion? drilling works in high permeability with low gas. ?We can get such high gas from low gas content reservoirs, where people didn?t previously think there were reservoirs.?

It has worked in Australia, where every penny counts. ?Our price may cost around $1.25 or $1.10 (US$) per mcf so they are still making reasonable profits at around 50 percent.? How will it play outside of Australia? Mitchell shot back, ?If you can imagine costs at $1.25 and you?re selling it for $6/mcf, that?s some pretty good bloody profits.? Drilling at reasonable profits for $2 gas, Mitchell said, ?We are keen to take this technology around the world. Even if we were to double our costs, our clients would still be extremely happy.?

USING BOTH VERTICAL AND HORIZONTAL WELLS

When discussing the Dymaxion? technology with an oil and gas man, his puzzled response was, ?Did I hear you right? You are using both a vertical and horizontal wells to get the gas?? There are the skeptics. ?Contractors from the larger oil and gas companies came over to have a look,? Mitchell said. ?Some people thought we were sliding by or sort of skimming costs.? He explained the procedure, ?We have to intercept (the vertical) because we actually line up every one of our lateral wells with a slotted liner, a perforated liner. It is stacked into the vertical well, by the arrangement we?ve developed, so we know we?ve intercepted it.?
Mitchell said the key is the ability to flush and know that the finds are coming out. ?We can have a number of wells lined, going from one point to another,? he explained, ?and we?ve got continuity of connection and flow between one well which is 1000 to 2000 meters away and the vertical well. We can flush between both.? He gave an example, ?We can have three horizontals going into one vertical and two of the horizontals can be closed. Number one can be opened and flushed; then number two can be open, flushed and closed. So you have this over the 10 to 20 year life of the well.?

How does the SIS hole de-gas a greater Read more…

In mid January, we warned that you might wish to ?circle the date March 20, 2006? on your calendars in red. (This past week, June Crude Oil futures hit all-time highs!) That is when Iran, the world?s fourth biggest exporter of crude oil, planned to reportedly launch their new oil exchange, competing with both London?s IPE and New York?s NYMEX, both of which are owned by U.S. corporations. They also planned to be invoicing oil trades in euros not dollars. Petrol for euros is an echo of the 1970s petrodollars, but this time it would be petro-euros. Depending on the trading volume for Iran?s proposed oil exchange, this oil exchange might begin to spell serious trouble for the entire U.S. financial system. Iran?s oil and natural gas assets are estimated to be worth about $3 trillion.

Some of the pretty ?out there? reports have began circulating, throughout 2005, about how it?s the ?end of the world as we know it.? A few of the more serious reports suggested the current Iranian uranium enrichment dispute may be a prelude to an invasion of Iran, whether by Israel or the U.S. Top U.S. politicians are not ruling out a military strike against Iran. Both Iran?s Economy Minister, Davoud Danesh-Jafari, and Iran?s current president, Mahmoud Ahmadinejad, have both taunted the U.S. and others about uranium enrichment.

With someone as irascible and impetuous at Iran?s helm, as is the current president, , quite any of his wild notions could quickly become a shocking reality. For example, a few months ago, the Iranian president referred to the Jewish holocaust during WW II as a myth, setting off a global condemnation. Shortly thereafter, Iran announced it was convening a scientific conference to evaluate any evidence supporting the mythical holocaust. Unfortunately, all of this Iranian drama may just be Act One with two or three more to follow. What happens if Iran?s brash actions move the world?s reserve currency from dollars to euros?

The road from dollar to euro may just be another transitory move. As the gold standard fell to the oil standard, the U.S. dollar began replacing gold in the 1970s as the ?world?s reserve currency.? For the past thirty years, it?s been earth?s most sought-after currency, as any seasoned tourist knows. And as travelers have come to realize, the dollar?s dominance has weakened over the past few years. Today, the euro is more desirable in many countries where the dollar was once King. As late as a few years ago, Canadians joked about their one-dollar Loonie as the Canadian peso. Not true today. More than a few experts believe the C$ will someday soon trade on par with the USD. Iran?s launch of their Oil Bourse may be the proverbial straw that breaks the camel?s back. What they may now lack, an oil marker found on New York?s Mercantile Exchange and London?s International Petroleum Exchange (IPE), such as West Texas Intermediate, Norway Brent, or UAE Dubai. William Clark, author of Petrodollar Warfare (New Society Publishers, 2005), argued Iran?s new oil exchange would ?usher in a fourth crude oil marker.?

If invoicing oil in euros gains momentum, what?s to stop other commodities, such as gold or natural gas, from being priced in euros? If the dollar continues its long-term decline, plunging below its late 2004 nadir, then how little confidence will resource-rich countries have in the fiat dollar? At least one serious expert believes it might make perfectly good sense to price a number of these commodities in Canadian or Australian dollars instead of U.S. dollars.

We talked to Wyoming legislator, former International Atomic Energy Agency consultant and president of Strathmore Minerals (TSX: STM; Other OTC: STHJF) David Miller believes, ?A switch out of U.S. dollars would just accelerate the current rise in the price of uranium in terms of U.S. dollars for American utilities, the world?s largest consumers of uranium.? What if Cameco (NYSE: CCJ) decided to price uranium in Canadian dollars? ?Cameco?s long-term contracts are coming up for renewals,? explained Miller. ?It might make economic sense for Cameco to sell uranium in Canadian dollars, and it?s something they should consider. If the dollar falls hard, it would decrease Cameco?s revenue stream if prices and contracts remain in U.S. dollars.? Miller added, ?A lower U.S. dollar would also make U.S.-produced uranium more attractively priced.? A uranium price, which has soared by more than 500 percent, has yet to seriously shake up the mindset of U.S. utilities, even in the context of a rapidly growing uranium supply deficit.

Another worry might now be registering on their radar screens: uranium imports from three of the world largest uranium producers may not be available later this decade. Russia?s hints at expanding their nuclear industry by about 300 percent, as reported by the Moscow Times in an article entitled ?Putin Revives Nuclear Alliance? on January 13th, could impact the current supply of uranium to U.S. utilities from Kazakhstan. According to the U.S. Energy Information Administration, Kazakhstan supplied more than 4 million pounds of uranium to U.S. utilities in 2004, nearly 10 percent of all foreign uranium purchased.

If Russia?s nuclear alliance materializes with Kazakhstan and also includes Uzbekistan, U.S. utilities might lose access to about 8 million pounds of uranium annually. Domestically, the U.S. uranium mining industry only supplied 10.2 million pounds to owners of U.S. civilian nuclear power reactors in 2003. Neither Kyrgyzstan nor the Ukraine reported their uranium supply statistics for 2004, but they would reportedly be part of Russian?s new alliance. A year ago, Russian announced a deal to supply Iran with enriched uranium at the $800-million Bushehr nuclear facility being constructed in that country. Russia hopes to construct, over time, up to twenty more nuclear power plants in Iran. Uranium consumption alone by Iran to power those nuclear reactors would exhaust Russia?s current mining production of about 30 million pounds annually. One might wonder if that uranium transaction will be Read more…

With coal bed methane, the gas content per unit volume of coal increases with depth. Pressure is what holds it in the coal. Often, companies drill deeper looking for more gas per unit volume of coal. However, according to Marchioni, ?The deeper you go, permeability decreases. And it decreases exponentially, not linearly.? There?s always a trade-off in any coal basin. Geologists will try to find the depth where they will find optimal gas content and optimal permeability. Of course, the more shallow the depth, where you can find an economic gas deposit, the better for the company and its shareholders.

What do you need to know about risks when investing in coal bed methane gas exploration companies? The risk is permeability and the ability to produce the gas from the coal. Permeability, as Marchioni explained, is the ability for the gas to flow from the coal into the well bore. ?Coal typically has a set of fractures, a natural set of fractures, in it,? he clarified. ?They can be better or less well developed. It can have minerals in them, for instance. A mineral can be deposited there that can plug between the fractures. Coal, as a substance, has very low permeability. But because it is fractured, it can have good permeability.?

We asked Dr. Marchioni point blank about the project Pacific Asia China Energy (TSX: PCE)will soon be drilling on its massive Guizhou project in China, ?We don?t feel there?s much risk on the coal being there. We have abundant evidence for that. I don?t feel there?s very much risk about gas content. There?s a lot of Chinese testing, and even if it is not fully accurate, within the margins of error, you?d still have a lot of gas in the ground. We have good control geologically. Much of the place has already been explored for coal. I don?t feel much geological risk in that respect.?

He cautioned, ?The risks in any CBM play are: ?Can you get out of the ground at the right price?? What influences that is the permeability of the coal and also the amount of water that is there. We?re looking for permeability. That?s what we are trying to measure: If there?s water there, can we pump out the water fast enough to reduce the head of water so that we drop the pressure on the coal? That?s basically what we have to do. You have to drop the pressure and allow the gas to bleed off.?

And that is what makes this exploration. ?Everything we?ve got in terms of water, permeability, and that kind of stuff is coming from coal mines that are very shallow.? The slim-hole drilling, over the next several months, should answer many of Dr. Marchioni?s questions.

Coal Bed Methane Development May Alleviate Pollution

According to a U.S. Congressional ? Executive Commission on China, which held a series of Issues Roundtables in late 2004, it was estimated that 12 Chinese mine workers die for every million tons of coal produced. Most are killed by methane gas explosions while inside the coal mines. China Business Weekly reported in July 2000, ?To prevent gas explosions, China emits 6 billion cubic meters of methane from mines annually, seriously polluting the environment?? Last year, instruments on the world?s largest environment-monitoring satellite, the European Space Agency?s Envisat, revealed the world?s largest amount of nitrogen dioxide was hanging over Beijing and northeastern China. Because the country emits more methane from its coal mining than any other coal producing country, China pollutes the earth?s atmosphere with about one-third of the total annual emissions of methane. According to the US Environmental Protection Agency, methane traps heat twenty times more than carbon dioxide, which impacts global warming.

On March 6th, People?s Daily reported, ?Shanxi, China?s largest coal-producing province, plans to put the brakes on the further expansion of coal mining in the next five years.? Shanxi Governor Yu Youjun at a recent press conference announced, ?We can not continue the rough way of development any more and must limit coal production strictly with the guidance of scientific concept of development.? While only slightly reducing the country?s aggressive GDP growth, China has instituted reforms to maximize its energy efficiency and minimize the environmental damage and loss of human life. Not only is the country stamping down on the causes of these problems, it wants western technology to help become more efficient.

Since September 2005, Shanxi shut down nearly 5,000 illegal mines and fined or imprisoned more than 1,200 operators, including 60 local officials. Coal produced about 70 percent of China?s energy supply in 2005. The Chinese government worries China?s dependence upon coal could rise above 80 percent over the next five years. The country is second only to the U.S. as a net importer of petroleum. Nontraditional sources are being encouraged to clean up the environment and reduce China?s dependence upon foreign oil. StockInterview.com has widely discussed China?s scramble for uranium as the country has embarked upon the most aggressive nuclear power program since the United States in the 1970s. Along with nuclear energy, China hopes to exponentially expand its natural gas program as a means of lowering its astronomical levels of air pollution.

Chinese Premier Wen Jiabao told the National People?s Congress earlier this month that the country?s growth rate would be reduced to 7.5 percent over the country?s next five year plan. Economic growth reached nearly 10 percent in 2005. The strain imposed on China?s natural resources and labor has been taking its toll. According to the next five-year plan, China?s government policy will concentrate on building a resource-efficient and environment-friendly society. Their idea is to sustain the high output while reducing waste.

That may not be so simple. On February 20th, China Daily reported, ?The bulk of China?s gas-fired power plants are on the verge of closure due to a shortage of natural gas.? Wang Yonggan, secretary general of China Electricity Council, said nearly 40 percent of China?s power plant capacity remained unused because of the lack of gas supplies. Wang warned a plan drafted the National Development and Reform Commission to increase China?s gas power capacity to 30 gigawatts by 2010 (up from 10.7 now) would make ?such targets impossible to reach,? because of the gas shortfalls.

China?s Ambitious Coal Bed Methane Gas Development

One of the more serious reforms being addressed is the energy crisis within the context of the environmental stigma now attached to China. Coal is a problem because, as toxic as it is known to be, it helps fuel China?s growth, literally. But the dark rock has its bright side. Following the examples of the U.S. coal industry, predominantly in New Mexico?s San Juan Basin, Wyoming?s Powder River Basin, and Alabama?s Black Warrior Basin, and the more recent rise of Alberta?s Horseshoe Canyon, China has aggressively moved into the development of its coal bed methane gas industry. The degasification of coal can not only increase mining safety, but it can be an economic method of natural gas production.

According to the U.S. Geological Survey Fact Sheet,
?The coalification process, whereby plant material is progressively converted to coal, generates large quantities of methane-rich gas which are stored within the coal. The presence of this gas has been long-recognized due to explosions and outbursts associated with underground coal mining. Only recently has coal been recognized as a reservoir rock as well as a source rock, thus representing an enormous undeveloped ?unconventional? energy resource.?

In a 2005 report issued by the Federal Reserve Bank of Dallas, coal bed methane is being taken very seriously as an alternative energy source with strong growth potential in the U.S. energy mix,
?Geologists call it continuous gas, but it is also called unconventional gas or even weird gas. Whatever you choose to call it, you must give it due respect for its growing importance. The Department of Energy reports the share of unconventional gas doubled from 17 percent of Lower 48 natural gas supplies in 1990 to 35 percent in 2003. By 2025 it is projected to be 44 percent? matching the role of conventional gas?with the remaining 12 percent of domestic supplies imported.?

By 2010, China hopes to increase its dependence upon cleaner burning fuels, such as nuclear and natural gas. However, the greatest immediate growth, for instance over the next five years, is likely to come from natural gas. Recent statistics show natural gas to be about 3 percent of China?s energy mix. Numerous announcements over the past two years have been made that the country wants gas in its energy mix to reach 8 percent or more. For those who have traveled to China, it is no secret the country is in dire need of cleaner burning fuels.

Official statistics show that China uses 2.45 tons of water to produce a ton of coal. Coal bed methane, a byproduct, is often wasted. In 1996, China established China United Coalbed Methane (CUCBM) to harness that byproduct and to help reduce the toxic pollution and alarming fatalities, generated by coal mining. CUCBM is a sole professional company with the exclusive right to explore and develop coalbed methane resources in joint ventures with foreign companies. It is controlled jointly by PetroChina Energy Company and the China Coal Energy Group Corporation.

Methane gas is found in the conventional anticlinal (downward sloping) trap, but it is stored in the earth and produced differently than natural gas. It is stored uniformly in a formation that extends over a wide area, but it is trapped in a rock formation which requires additional resources to free it from that trap. Over the past twenty years, new technologies were developed to drill for methane gas and to complete production wells. The industry has grown by leaps and bounds in the United States. For example, in New Mexico, gas production rules the modern era of hydrocarbons. Once completely driven by oil exploration, New Mexico now produces nearly four times as much gas as oil. China would be happy to approach a fraction of that ratio.

CBM development would also decrease China?s plague of mine safety issues. In a white paper published by World Markets Research in 2002, the values of coal bed methane (CBM) were summarized as follows, ?With a relatively small investment – around US$10m per mine – the all-too frequent, horrific accidents related to CBM would come to an end. Over the years, CBM explosions have killed thousands of miners. In the future, we will see a lessening of these distressing fatalities with safety regulations, sensitive gas detectors and mine ventilation.?

CUCBM has been actively developing China?s coal bed methane industry by drawing upon the expertise, technology and capital of its foreign partners. ?More high level technologies need to be deployed to ensure reliable power supplies,? Ma Songde, China?s vice minister of science and technology told Associated Press in late February. ?By developing these technologies, we can resolve issues restricting growth and enhance growth.? China is actively seeking foreign investment and cooperation in power generation, particularly in clean energy.

As a light hydrocarbon, coal bed methane is among the cleanest sources of energy. Published reports show that China?s coal bed methane (CBM) resources, buried within a recoverable depth of 2000 meters, are estimated at approximately 36.81 trillion cubic meters. China has the world?s third largest CBM resource. Following behind the United States, it is the second country to have conducted large-scale field exploration of coal bed methane.

According to a March 9th article in People?s Daily, ?China?s coal bed methane industry made important headway in 2005.? About 340 CBM wells were drilled across the country. That may not sound astonishing compared to the number of wells drilled in Canada, during the same year, which surpassed the 3,000 level for the first time. In that context, China remains nearly a virgin territory for CBM. CUCBM has been actively Read more…

Think Rich ? Invest News

What’s news this year? New year’s resolutions, same as always, property markets down yet still up, share markets up yet still down, the Aussie dollar falls but is still high, gold prices high even though fallen. Confused yet? You should be!

It’s probably cynical to say that market commentators deliberately keep investment news confusing. It’s probably cynical to say that there is a “boys club”, using jargon, so that the ordinary person never has a chance to compete with them and make great returns. It’s probably cynical but it’s possibly true as well….

The only thing that the average person can see for themselves, without relying on a news report, is that we have had a LOT of rain in recent weeks. If you have managed to get outside you would perhaps have noticed that the grass is a lot longer, the trees are a lot greener, and the smiles on the faces of the farmers are a lot bigger than they have been for around a decade…

From the popular media: Property prices are “softening” but still staying higher than where they were two years ago. Sort of like “three steps forward, two steps back”. In the market news: Aussie Dollar powers ahead then stalls: “The Aussie dollar fell 1.5% over the week against the greenback as a result of the decline in the price of gold. The dollar closed the week at 76.6 US cents, still more than 30% higher than its value one year ago. ” (Note to self: if something goes up by 30% and then drops back by 1.5%, it is STILL up.)

More market news: “The price of gold stepped back to US$407 per ounce, 4.2% lower than it started the week, and its lowest point in over three months. It remains, however, 42% higher than this time two years ago.” (Second note to self: if something goes up by 42% and then drops by 4.2%, it is still up a long way.)

Try going to Paritech.com and doing a chart of the stock “GOLD”

You can see by looking at the 12 month graph of gold prices, that the little drop at the end would only have upset you if you had bought all your gold last week and then wanted to sell it today. If you had happened to have bought all your gold the week before, or a month before, or a year before, and wanted to sell it now, you would have made a profit. (Note to self: buy a good investment and keep it for a long time. Selling one week later may be bad. Listening to news that says “Gold drops 4.2% in a week” may be meaningless.)

So Read more…

The 2005 trade numbers released last Friday are sure to get the China trade hawks riled up. But if you look behind the numbers, the trade imbalance with Japan is likely larger than China.

According to the trade statistics, the trade deficit with China was $201 billion or 28% of America?s total deficit of $726 billion. No doubt these trade numbers capture only a portion of the value traded between countries but nevertheless are rough barometers of trade.

Our 2005 trade deficit in petroleum products was an even larger $210 billion but the China number will certainly get the most political attention. If you look at the numbers a bit more closely, however, you will find a surprising result- Japan is likely a bigger trade problem for America than China.

Here?s why. China custom data indicate that about 60% of China?s exports come from foreign companies manufacturing and assembling in China. Even if we knock this number down to 50%, this is still equal to $100 billion worth of China?s exports last year.

According to research from the think tank ChartwellAmerica, the vast majority of these so-called Chinese exports are controlled by Taiwanese, South Korean, American and Japanese firms. For example, about 75% of manufacturing output by Taiwanese companies takes place in China. Samsung has 23 factories in China and closed down its last notebook plant in South Korea last year. Japan?s Panasonic has 70,000 employees working in China.

This why I have been recommending clients have allocations to the Taiwan (EWT), South Korean (EWY), and Japan (EWJ) exchange-traded funds in order to capture this growth in their global portfolios.

A major reason for Japan?s economic recovery can be attributed to its booming exports to China of which a major slice goes on to America. China has now replaced America as Japan?s largest trading partner.

If we conservatively assume that 25% of $100 billion of foreign-controlled Chinese exports are from Japanese companies in China and add that to Japan?s 2005 trade surplus with America of $82.7 billion, this brings the number to $107.7 billion ? higher than China?s number stripped of its foreign company exports.

The Japan imbalance is often explained by its weak economy and consumer demand but it is amazing that the deficit has stubbornly persisted and that American firms have still been unable to penetrate the Read more…

Think Ritch NO, my spell check is not broken. You should always be thinking richly, and occasionally you should visit the archived newsletter section of the invest-org-au website. There you will find a wealth of information, ramblings and also be able to ?back trade? to see how much money my previous ingenious tips would have made for you?

With the above, the ?Think RITCH? refers to a little acronym for ?Refund of Imputation Tax Credits?. Even if you are NOT a tax-payer, if you receive a pension or benefit that is tax-free, you can still get extra RITCH. If you do NOT submit a tax return, you can still lodge a single page RITC form to the Australian Tax Office and you can get FREE MONEY (a refund of your imputation tax credits. This is because Australian companies usually pay tax on their profits before they pay the shareholders. Often they pay more tax than you would, and as an owner, you can ask for this back).

Note that it is nobody?s job to tell you this? If you are entitled to get money back from the Australian Tax Office, do not expect them to call you and say ?Ah, we have $945 of your money, would you like it back?? It is NOT gonna happen. Do not wait for the ATO to call you. Do not expect your accountant or Financial Planner to call you and tell you (unless they are REALLY nice and good at their job).

It is up to you to ask for the money. To quote Jesus out of context, ?You have not, because you ask not?. Pensioners, self-funded retirees and any of those who earn less than $60 000 could definitely benefit from ownership of Australian shares and/or managed funds. Check with your accountant or call the ATO regarding RITC. Invest five minutes of your time and as little as $500 of your money to benefit twice (the investment could make you money, plus the ATO gives you money when you fill in the RITC form). Call your favourite investment adviser or Financial Planner to find out more. Keep Thinking RITCH?

Australia, you?re moving on up. Sometimes they report boring things on the financial news (OK, most of the time), and it seems boring because they use jargon and you don?t know what it means, or how it impacts you. National Accounts Surplus is up; is that good? Foreign Accounts Deficit is down; is that bad? Balance of Trade Figures ascendant; is that a rock band?

Ignoring the jargon of GDP and import/export figures, just try to think of Australia as a business. The business buys things, and sells things to other people. A business such as ?Beds R? Us? may buy timber for $20, turn it into a bed (paying the tradesman $10) and then sell the bed for $50. This means that they made a profit, and will probably make a larger profit the next year (because with more profits they can buy more timber and employ more staff), and they will probably continue to grow.

In the last decade, the cost of manufactured goods (such as cars, clothing, cameras, TVs and DVD players) has actually fallen; quite dramatically in the last few years. (Are you old enough to remember when the cheapest new car was around $30 000? Now they can make a brand new car for $13 000. Remember when digital cameras and DVDs were over a thousand dollars? Now they sell them in the grocery stores!)

Australia buys a lot of manufactured goods. Over the same timeframe, the cost of raw materials (coal, oil, gas, steel, wheat, cattle, aluminium and gold) has risen, again quite dramatically in the last few years.

Thinking again of Australia as a business that buys and sells things, that puts us in a good position. We are buying things for less, and selling things for more. China is paying more for our oil and cotton. We are paying the Chinese less for the toys and clothes. Australia is turning a profit!

For most of our short (two century) history, Australia has seen its ?terms of trade? (what we buy compared to what Read more…

Back to the past

You may also recall reading a newsletter with information on who the world?s biggest oil companies were (refer to ?Invest News? August 2005) and how they spent their money diversifying into other industries. The ?common sense? belief that higher oil prices would make oil companies go broke, may be commonly held? this doesn?t mean that it is true?.

Oil goes up, buy more oil…

Huh? Since the article was written, the price of oil (and petrol) has continued to rise at a massive rate. The profits of oil companies have increased dramatically, as has their share price. Did you buy into any oil companies? Prices on fuels and lubricants have risen by 21%, so did we all buy 20% less oil? Nope, we bought 18% MORE.

The oil companies don?t just have us over a barrel; they have us over millions of barrels a day? Did you buy into oil companies yet?

See the Past, now look at the Now

OK, so you?ve got the message about the oil companies. Like the dinosaurs that they dig up, these huge juggernauts* will rule the world for a long time. Don?t fight it, get used to it, and learn to profit from it. If you don?t take my word for it, look at what the major investment managers are doing with their money.

Which fund managers are buying into oil companies, and how much are they buying? Are they hoping to make more money in the future than they did this year? The fund manager?s job is to make money in the future, so what are they doing now?

Fund Manager —–

What is in their Top Ten? (as at June 30th 2005)

Credit Suisse—- Mortgages, phone companies and finance companies.

Barclays: —–Total Fina Elf is number two, Exxon Mobil at seven.

Merril Lynch —–Total Fina Elf is number two stock on their list also Platinum Royal Dutch Shell is number ten stock

UBS Global —-Total Fina Elf is number 3, BP at number 10

Westpac Intl —-Exxon Mobil number 1 stock held

BT USA —-Exxon Mobil number 2

BT Global —-Exxon Mobil number 1

BT European —-Royal Dutch Shell number 1, Total Fina Elf number 3

Oil = Money

If the oil companies are NOT going to make massive billions of dollars worth of profits in future years, then why are the biggest and smartest fund managers investing into the oil companies? Perhaps with all their money and all their research, the major oil companies know that major oil companies will continue to turn gargantuan profits. Perhaps with the largest fund managers? money and research, the fund managers have also come to the same conclusion: oil equals money.

Save the trees: shoot a beaver?

Sure, you can buck the trend against the juggernauts*. You can invest all of your money into stocks other than mining and oil. You can invest into ?new? areas such internet stocks and bio-technology. You can invest into mortgages and finance companies like Credit Suisse. You can invest into eco-responsible, genetically unmodified, environmentally-sustainable alfalfa-eating, alpaca-friendly, tree-hugging hippy stocks**.

It may make you feel good. It may even make you a dollar or two. A good idea is to diversify your money: — have some smiley, care-bear investments** and also have a little bit of investment into some of the ?smash, pillage and wreck the environment? stocks.

Exxon/Mobil hurt some penguins with a leaking oil-tanker. Fine, sell their shares, punch the CEO, or volunteer at Greenpeace.

Union Carbide upset some people with dodgy battery acid. Throw out your torches, toys and computers or choose to make a positive difference.

When I discovered that a subsidiary of BHP was mining uranium, I felt so bad about it that I donated some of my BHP dividends to my favourite charity***. Now, BHP were not making uranium nuclear weapons, it was for nuclear energy; and it was not BHP, just one of their connections.

I am not crazy enough to sell all of my BHP shares just because some of their friends are a little environmentally unfriendly: — that would be silly. Besides, I can do a lot more for the environment by gifting thousands of dollars to good causes, than I can by chaining myself to a bulldozer? Bulldozer. Hmm, that gives me another excuse to use the term ?juggernaut??

The price of gold is higher than it has been in 17 years. And it’s likely to go much higher. Why?

There is a very interesting article in the New York Times that caught my attention. You can read it here?

http://www.nytimes.com/2005/10/24/international/24GOLD.html

The article is really about how gold mining companies are harming the environment. But, as an investor, here are some key points that I think are important for the gold market?

The amount of gold that is left to be mined is extremely small and it is coming from the poorest countries in the world. 70% of gold in now being mined in poor countries.

To get one ounce of gold to make a ring, miners have to dig up and haul away 30 tons of rock and sprinkle it with diluted cyanide.

According to the Environmental Protection Agency, the cost of cleaning up metal mines could reach $54 billion.

According to the World Gold Council, jewelry sales soared to a record $38 billion last year.

Just in the last year, gold sales are up 11% in China and a whopping 47% in India, Read more…