John Burbank of Passport Capital is the next presenter. He is being patched in via video conference, which had a rough start due to technical issues. It added comic relief, which was welcome given the depressing morning presentation and current market numbers.
Passport Capital is targeting 30% annualize returns and the word here is that he is currently generating 40% annualized returns.
The presentation is focused on looking at the big sector changes. The presentation is themed to the Wizard of Oz of all things.
The market is now at Emerald City and the curtain on the Wizard is parted and the U.S. is now exposed for what it is. Net foreign purchases of U.S. Treasuries are down. This has not been good for the wizard’s buddies, the U.S. financial banks.
Burbank believes Bernanke is making a huge policy mistake and not getting enough liquidity into the market. He believes less will be investing in the United States, foreign capital will be invested more in their own markets.
Burbank’s firm believes in peak oil. Oil exporters are highly liquid and are an area to look for opportunities.
EFG Hermes and other regional managers seem to provide great value. AUE government ownes 25% of the company. The forward P/E looks very compelling.
Another company in this sector is Shuaa Capital. Great sales growth at both of these.
Burbank also likes fertilizer minerals quite a bit, since the emerging markets need these inputs. The focus here is on Mosaic (MOS) and Potash (POT). The P/E for MOS is around 3 and the P/E for POT is around 4. Potash is like the Saudi Arabia of potash. The replacement costs for these companies’ capacity is high and not really factored into the price of stock.
Burbank is long farmers and foreigners and short a leveraged United States and General Electric. He seems to question Buffett on this.
Burbank believes the financial markets are in massive cardiac arrest. They need to cut rates tremendously and flood the market with liquidity. The rest of the world has the ability to flood the country with dollars and that is what has to happen.