Here on the other side of the world asset prices all travel in the same direction: up. That's the conclusion your editor reached this morning wandering the streets of Paris' 4th arrondisement looking for a cup of coffee and Danish. Our hotel wasn't admitting guests yet. So we checked our bag and went looking for a newspaper and a quiet place to read it.
About twenty minutes later we found ourselves tucked away in Café Paradis reading about the latest deep-water oil find off the coast of West Africa. The positive drilling results in the Venus well off the coast of Sierra Leone are not far from the Jubilee field Ghana, which is Africa's largest deep-water oil field. It could be, so the experts say, the next big off-shore oil bonanza.
Jubilee...Venus...there's an air of love and triumph in the oil exploration business now, isn't there? At least off the coast of Africa, which, if you don't mind political risk, is one of the great prospective areas for oil in the world. The oil is probably there. But you'll just have to accept the risk that comes from operating in that part of the world.
As an aside, we wonder if there's really any more political risk to operating an oil business in Africa than, say, buying U.S. Treasury bonds from a bankrupt government that's increasing its deficit spending as we speak. Risk is risk, even if it's dressed up in a nice fancy greenback with a respectable looking dead president on it.
Later when we got back to our hotel we managed to see that Woodside Petroleum is involved in the Venus well. Woodside's Sydney-listed share was up just over 1.5% in Thursday trading. The company isn't yet at a 52-week high. But it's moving.
If he were here, we'd ask Lord Swarm where the Slipstream would take us if we tucked in behind WPL at just this moment.
The other Aussie story that we spilled coffee on while scanning our bleary eyes over the pink pages was that BHP says China's recovery is going to make steel demand, "soar." "BHP Billiton yesterday predicted global steel demand would double over the next 15 years as the world's biggest mining group said the 'upswing' already evident in China would be followed by a rebound in growth from developed nations in 2010."
Airplanes ARE kind of time machines. But after reading this story your editor wondered if he had been transported back to 2003. That's when we last lived in Paris and first felt our first flush of desire at learning of BHP's exposure to the China story. It certainly was a torrid three next years.
But is the story as good now-or even better-nearly six years on? We'll have to sleep on it and get back to you on Monday, once the jet lag subsides. Until then, we'll expect stocks, oil, and gold to keep marching up. That seems like what they want to do right now.
Paris on Thursday was colder than Melbourne when we left on Wednesday. How disappointing. And even the old neighbourhood had fallen on harder times. The bakery where we used to buy our breakfast pastry on Rue St. Martin has been replaced by a Subway Sandwich Shop. A Starbucks is nearby.
But the real surprise is that the scaffolding has finally come off the Tour St. Jacques off the Rue de Rivoli. For all we know this could have happened years ago. It's been several since we were in Paris. But for all the time we were here, the old tower was shrouded in scaffolding as it was being restored. Today, in the grey gloom, it looked just like we thought it would: a big stone tower with lots of carvings on it.
We'll have a closer look tomorrow. And get back to you on what Australia looks like from France. Until then...
Dan Denning
for The Daily Reckoning Australia
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About the Author
Dan Denning is the author of 2005's best-selling The Bull Hunter (John Wiley & Sons). He began his financial publishing career in 1997 and has covered financial markets form Baltimore, Paris, London and, beginning in 2005 Melbourne. He’s the editor of The Daily Reckoning Australia and the Publisher of Port Phillip Publishing.
Comment by Dan on 19 September 2009:
Does anyone actually believe in the China Recovery story? Yes, they are an awesome industrial power, with huge capacity to create real wealth (goods rather than paper money). However, any country basing its economic growth on selling to the American consumer is likely to be bitterly disappointed. The USA in the 1930s depression comes to mind, as the world's manufacturer they were hit very hard by essentially the bankruptcy of the rest of the world. Here the imbalances are far more extreme. China also has a recurring problem with bad loans, and has just increased its lending by 30% of GDP this year. Finally, has anyone had a look at the vast acres of empty expensive properties in China? Insane. Almost as bad as us.
I'd still rather be in a country that manufactures a great deal than in one that continues to exist with the forbearance of creditors, but China's economic growth is fairly likely to suffer some huge shocks when the "recovery" snuffs it.
Comment by Charles Norville on 19 September 2009:
Spot on Dan - the Chinese are subsidising their domestic economy and stock piling (maybe defence reasons too) Aus & Co minerals. How can even the middle class on $12,000/ann take up where the US and the rest of the World left off. Its all a waiting game. They are lending Aus US bucks that's not good when the $US collapses and we have to pay back in Aus$.
Comment by Pete on 20 September 2009:
Charles:
I generally agree with what you have said, but wouldn't a collapse of USD actually be better for our loans in USD? I mean, providing AUD didn't crash aswell?