Russo's Rules
Author: Sean Russo, Managing Director of Noah's Rule
Index
Every conspiracy has a silver lining
19 May 2011
I LOVE a good conspiracy as much as the next guy and we have plenty on the run at present. Osama bin Laden died years ago and president Obama chose now to stage the raid to save the USD and improve his chances of re-election; Dominique Strauss-Kahn (DSK to his mates) head of the IMF and presidential wannabe of France was framed in a "honey-pot sting" and didn't really try to assault a chambermaid; and my personal favourite - the world is running out of silver and so much so that it will be more scarce (and therefore logically more valuable) than gold.
Diesel days
28 April 2011
LAST week I drove about 2300km around New South Wales visiting a couple of mates on rural properties and doing a bit of camping and bush bashing with my youngest son. One simple pleasure of country driving in a diesel vehicle is being able to use the high-flow bowsers at truck-stops. Those suckers will fill an 80-litre tank in less than a minute.
Two and a half men in the boardroom
7 April 2011
I USED to think that Charlie Sheen was just playing himself in "Two and a Half Men". Based on recent events it seems heâ??s a better actor than most of us thought. Charlie Harper, the character performed to the script given him, looks to be very different to Mr Sheen, performing to a script he wrote himself.
Ratios, rational reasoning or reality: you decide
17 March 2011
I SAW a presentation last week on Peak Oil given by Bruce Robinson of the Australian Association for the Study of Peak Oil and Gas. There was a great array of data among the 91 slides that made up the full presentation, all suggesting numerous other parties clearly support his view that we aren't going to be able to replace with exploration, what we consume. Peak Oil is either here already or will be here soon.
Inside Job: do yourself a favour!
23 February 2011
NOT blessed with the looks of Ralph Fiennes I find it difficult to recall what I ever did on long plane flights before individual video screens. That said, on a recent trip to LA I couldnâ??t actually recall, by the end of the flight, all the movies I had watched on that flight. I had to revert to the program to remind myself. By the time I was home again I estimate I had watched over 10 movies and most tend to blend into a blur of clichés. One movie, however, was riveting.
Run rabbit run
19 January 2011
WITH the coming Lunar New Year we will be entering the Year of the Rabbit. I'm not sure what the Chinese astrologers have to say about the character of someone born in the Year of the Rabbit, but for me rabbits seem to be well known for three things: their ability to run fast but not particularly straight; their proclivity to breed, well, like rabbits; and, their propensity to stand in the middle of the road unblinkingly staring at the headlights of the vehicle about to dispatch them to that great warren in the sky
Silver lining or lead by-product balloon?
17 November 2010
WHAT if QEII was so well expected that the only people who actually sold US dollars and bought commodities after the announcement are the kind of people who should stick to their day jobs and not believe that they too can be George Soros, trading FX and/or precious metals on 1-5% down, based on the knowledge gained at a free seminar they learned about in the Sunday paper and some slick (and overpriced) software they bought whilst there.
Ignore the rant but please don't ignore Grantham
3 November 2010
A FEW people who read my last column, "What's it like inside a bubble", described it as a rant. I looked it up to be sure and the best definition of rant I saw was, 'a loud bombastic declamation expressed with strong emotion'. Then I had to look up bombastic.
What's it like inside a bubble?
27 October 2010
I'M mad as hell and I'm not going to be quiet about it anymore! There is a housing bubble in the country and quite frankly when an overpaid CEO like Ralph Norris says, "there is nothing to sustain the view there is a housing bubble as such" (Australian 22/10/10), it's just plain offensive.
Coming face to face with a distant relative
20 October 2010
OCTOBER 13: LOOKING back over past issues of this column and others, and a range of strategy notes to clients of Noah's Rule over the past six years, there has been one theme that has been by far the most consistent. And that is the simple position that it's not rational or logical to expect the Australian dollar to remain the Pacific Peso, adding healthy premiums to USD commodity prices if you are either in the crowd that has stapled itself to an ever expanding China; cemented yourself into a BRIC wall; you are in the crowd that believes the USD is going to hell in a hand basket; or, some combination of the three.
Change is the only constant
29 September 2010
FOR some time now much of the mining community has outsourced the concept of managing metal price and currency price risk to its shareholders. “That’s why they buy us”. “Not up to us to try and second guess the market”. Simple statements that supposedly pass the responsibility for significant risks that could (and regularly do) lead to business failure belie the truth of complexity and responsibility of properly running a multifaceted business such as a mining company with multiple exposures to metal(s), various currencies, diesel, electricity, freight rates etc.
Farmer wants a life
8 September 2010
IT WAS never the intention of this column to write about politics. It’s supposed to be about how market risks impact companies and developing a logical common sense approach to risk management. In the current environment it seems very difficult not to talk about politics because it seems in many ways that politics and the current political landscape in Australia is probably one of the most significant risks that business in Australia faces. Unfortunately it is also one of the most difficult to manage and impossible to hedge.
Changing of the guard
25 August 2010
HAVING read some of his books and articles I was a bit of a Niall Ferguson groupie before seeing him speak at Diggers and had high expectations. He exceeded them. Someone commented afterwards that his slides were of very poor quality to which I could only respond, “did he have slides – I didn’t notice?” It was powerful stuff, entertainingly delivered, but admittedly painting on a canvas that extends well beyond the average attention span of attendees who just want to know where copper or gold will be at Christmas.
Irrational moi
4 August 2010
BEHAVIORAL finance (or as it is sometimes called, behavioural economics) is a relatively new field. It is the study of the psychology behind the behaviour of financial market participants. It seems to be largely ignored by classical economists because the very essence of their belief/faith is that markets reach rational outcomes; whereas, the behavioural economist observes the regular irrationality of markets and market participants and seeks to understand the drivers. Keynes clearly had sympathy with their view when he quipped, “markets can remain irrational for longer than you can remain solvent”.
Quick Prime Minister, there's not much time
23 June 2010
DEAR prime minister, congratulations on your recent elevation. You must be exhausted after a day like that. We were exhausted just watching it.
Get up and go and visit a mine
16 June 2010
LAST week I had the pleasure to attend the official opening of the White Dam gold project in South Australia. It�s a long time since I have actually been to a mine site � too long.
Heads you win
2 June 2010
HEAD 'em up, head 'em up, come in spinner, they cry, as the punters bet on heads or tails. Two-Up's history in Australia dates back to the goldfields in the late 1800s and it was the spread of the discovery of gold that propelled the game across the country. It was very much a working class game which is why it found its way into the trenches in World War One and from there into the hearts of a generation of Australians and into the very fabric of our nation's story.
The great divide
19 May 2010
WHEN I lived in Perth the Swan River tribalism was a source of great amusement. Not a substantial body of water but a clear demarcation zone. In fact it seemed to me the two halves of Perth were so divided that two people from the north side wanting to have an extra marital affair need only meet up south of the river and they were unlikely to be seen by anyone they knew (or that they cared knew of their arrangements).
If the salary cap fits
5 May 2010
FOR heaven's sake what's all the fuss about with the Melbourne Storm? Firstly, it�s only rugby league. Secondly, they made league outside State of Origin almost watchable. Given the word on the street is that "half the clubs are doing it" perhaps the guys who should be getting the bollocking are the ones that are breaching the cap and still can't produce watchable games or winning seasons.
GFC over and not forgotten or forgotten and not over?
14 April 2010
AN ECONOMIST with a sense of humour seems to be rare in my experience so I took great delight in watching a presentation by Bill Evans of Westpac recently. He observed that the public perception of bankers has become so bad that where he once described himself as a banker when he filled in his customs and immigration forms, Bill now owns up to being an economist!
Wise heads ... after the fact
31 march 2010
YOU have got to try hard to be loved less than a banker, I know, but this is one of those times.
Flying and banking behind the curtain
16 March 2010
I HAVE just returned from my first visit to PDAC. It certainly won't be my last. What an amazing forum. It is testament to the scale of the mining industry worldwide and its still bright future mixed with a reminder that we share a great deal with the gaming industry, but their odds are better. If they had cocktail waitresses and punters that could buy stocks with 'PDAChips' I think they could run it 24 hours a day for the three and a half days it is on.
Once bitten, twice worth a try
9 March 2010
WHY is it okay to remarry (several times) after a shocking experience(s) but one bad hedging experience, it seems, is enough to have people swear off it for life?
Gold markets and urinals...
16 February 2010
How I had to travel to Cape Town to realise the gold market and football stadium urinals have much more in common than it might first appear.
There's nothing - absolutely nothing - half so much worth doing.
2 February 2010
IT WAS Toad�s friend Rat (or Kenneth Graeme for the pedants) who once said, "Believe me, my young friend, there's nothing � absolutely nothing � half so much worth doing as simply messing about in boats". After two weeks of doing just that I have to heartily agree.
My life was saved by a fridge magnet
21 December 2009
IT’S TRUE! My life was saved by a fridge magnet. Well not saved as in I was about to die but I was saved from a slow death in a life I had come to enjoy less and less, my life as an employee; a bank employee in particular.
Now it's Peak Gold, oh dear!
7 December 2009
I AM not sure how I missed this but scanning some old articles I noticed an interview with The Daily Telegraph in London where Barrick Gold president Aaron Regent said worldwide gold production has finally hit “terminal decline”. In fact he went so far as to argue that we have reached “Peak Gold”.
Dear Weekend AFR editor, please refrain from putting our metal on your cover
23 November 2009
THE AFR Weekend Edition ran a cover story on gold the weekend before last. Norman May would have been proud: it was gold, gold, gold and $US2000/oz was nothing to be laughed at. I call on all people who are involved in, or benefit from, gold mining to write to that venerable publication and plead for them to cease and desist. Feel free to copy the following and send it to them.
Are you my mother?
9 November 2009
IF YOU are a similar vintage to me, or my parents, then you may recall that 1960s children’s book about the little bird that fell out of the nest and wandered around asking various animals and even an earthmover, “Are you my mother?”. “Are you my mother” came to mind twice last week.
We're from the G20 and we're here to help
26 October 2009
FOR many of us the movement of the Mighty Aussie Dollar (currently not answering to Pacific Peso) is all a bit academic unless we have a French champagne habit or we want to go overseas on holidays. It's amusing to watch the way politicians take credit for it going up (sign of strong economic management) and then blame "traders" when it falls, but really we don�t care too much. Of course it�s a different story if you are an importer or an exporter.
Aussie dollar giveth, Aussie dollar taketh away
12 October 2009
IN THE past 18 months the Aussie dollar has been as high as US98.5c, as low as 60.09c and is now trading at 90.25c, with reports soon expected of party planners getting enquiries for themed 'Parity Parties'.
Pirates to starboard, politicians to port
28 September 2009
I LUNCHED this week with 700 other people at the Brisbane Mining Club. Such was the interest in the speaker Cynthia Carroll CEO of Anglo American that the venue kept being changed as the numbers swelled.
It's all about the journey, not the destination
14 September 2009
LAST year at Diggers & Dealers in Kalgoorlie, Noah's Rule hired "Connie" for the night flight and took a range of clients and "friends of Noah" up for a couple of laps of Kalgoorlie. I was so impressed with the people from the Historical Aircraft Restoration Society (HARS) who look after and fly the plane that I resolved to travel to Diggers on it the following year.
Money for Jam
7 September 2009
AUGUST 31: I RECENTLY read an interesting article about trends in television shows and what the stations (their advertisers) are demanding. The clear trend is to uplifting and positive "feel good" shows. In short, out with Big Brother and Survivor and in with Master Chef and Random Acts of Kindness
Green shoots abound in Kalgoorlie
17 August 2009
THE dust has settled on Kalgoorlie, the Diggers tent and most of the bar maids have left town and I almost feel human again.
Gold loan with a twist
July 20 2009
ON THE cocktail list of hedging and derivative products that have been offered up to gold producers over the years there are some very exotic products that have a kick like a mule. Think mescal with a worm. Our advice to clients is wherever you see �exotic� think toxic and lie down until any urge to sip such a cocktail goes away.
California Drowning (as sung by Peter, Michael and Arnie)
July 13 2009
SOMEONE once said "life's not fair", so why should markets be fair? World equity markets are supposedly approaching �fair value�. I contend markets never trade at fair value. I think it is more reasonable to argue that fair value is simply the line between overvaluation and undervaluation that historians and others draw in afterwards, with perfect hindsight.
7.30 ... time for a close look at gold
June 22 2009
THE fact that I feel the need to qualify offering my current "best guess" on the gold market has two key drivers.
The last two hundred days
June 15 2009
READERS of previous columns and clients of Noah�s Rule will know we put little faith in forecasting. Some "experts" get it right for a while and become the champion of a particular market movement for a while but the invariably flame out. Anyone heard of Abby Cohen lately?
Tipping point reached as black swans feast on green shoots
May 18 2009
I ALWAYS find it fascinating how quickly new words or expressions enter into the popular lexicon, particularly when used by financial experts in the media, and politicians.
Options: Expensive Compared to What?
May 11 2009
IN MY opinion options are the singularly most useful price risk management tool available to corporate hedgers. It is also my experience that they are significantly misunderstood which leads to them either being under-utilised (if used at all) or incorrectly utilised by many corporations.
Its all Relative
April 27 2009
A QUARTER of a century ago I started paying interest to foreign exchange markets in a reasonably serious manner. Prior to that all I knew was if you went to America you got more money (and things were cheaper) and if you went to New Zealand you got less money (and everything except dairy products was more expensive). How the world changes! It’s an interesting reminder of the longer term impact of “dirty floats”: think Yuan.
Would you ask your broker where to drill?
April 13 2009
AFTER years of attending various gold and base metals conferences and Diggers and Dealers I attended my first oil and gas conference last week. There were a few familiar faces in the crowd that had made the switch from mining, but otherwise it was a new crowd to me.
Feed the ducks
April 6 2009
MARCH 30: ANYBODY who has ever tried to sell a large position in a junior mining stock will know that it has to be done while the stock is rising and demand is strong. As they say, 'feed the ducks while they are quacking'. Once everyone else turns seller too, prices fall precipitously on very little volume.
Reverting to the Golden Mean
March 16 2009
IN SEVERAL of his presentations at Diggers and Dealers Pierre Lassonde has spoken about the importance of the Dow/Gold Ratio in his strategic thinking about gold. In particular, in the early 2000s when he acquired Normandy and bought back their in-the-money hedge book he was very bullish gold because the ratio was at an all time record high of 40:1.
The Year of Team Ox
February 23 2009
SITTING back and listening to one of the industry�s most entertaining presenters, rapturous audiences were left in no doubt that when it came to 'The Mighty Ox' there was oodles of potential oozing from their ground and the hungry horde up north ready to snap up all they could produce. Mr Hegarty was particularly famous for his use of Barrasi quotes and Aussie Rules references to describe the Ox's brilliant future. "It was only the third quarter and the best was yet to come."