Wednesday, September 2, 2009

30 to 40% of Junior Gas Companies Will be Involvent

BNN on Tuesday had Mr. Rick Rule, San Diego's Global Resource Investments, as a guest. Mr. Rule is not licensed to operate in Canada, thus had nothing to sell (directly). His past picks are up significantly (although he had picked them in March). He thinks markets are ahead of themselves. We are in the midst of a big sucker rally. View. View Part II.

However, Mr. Rule has a very interesting view on what will happen to junior gas resource stock. These companies are leveraged on the revolving credit facilities they have, facilities which are coming due in April and May. They are leveraged based on past gas prices which were much, much higher at the time those loans originated. Technically, these companies are incolvent. We are talking about 30 to 40% of the companies!

Mr. Rule says this will present a perhaps once in a lifetime buying opportunity as these companies are severely beaten down, and they and their resources are swallowed up.

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