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Hello, I'm Peter Switzer, welcome to the program which puts you in touch with the best and brightest minds in the business. On tonight's show - if you can't believe how long this Trump rally has lasted, well, we're going to test it out. How long will it go on for? With Macquarie Wealth Management's Martin Lakos and the Switzer Report's Paul Rickard. Critic and politics at the moment have a common problem and it's called leadership so what does former national cricket coach John Buchanan recommend for Steve Smith, Darren Lehmann and of course Malcolm Turnbull. With the rip-roaring resources rally, a lot of the smaller miners have been ignored, while the big miners have attracted all the attention. Mining industry expert Max Williamson thinks there are some small miners worth having a look at. Stay with us, we will bring you all the latest news and corporate analysis. If you have questions email them to, and follow me on Twitter at @peterswitzer. The Trump rally continues to defy gravity but how long can it last? Will it carry its momentum into the new year? To answer this question we have Martin Lakos from Macquarie Wealth Management and Paul Rickard of the Switzer Report. Thanks for joining us. We've created this panel situation, these two guys, over the last few weeks and we like it.It's working!It is working.Except you are not wearing the same time. That's true and also you guys have agreed too much! OK, let's have a look at this rally that people are staggered by. Martin, is this rally going to end or keep on going up?Of course it's going to end but clearly there is good momentum. You would have to say, on fundamentals that the markets have run ahead of themselves because we don't have details of the tax packages in the US or the details of the fiscal spend, infrastructure spend, by the new Trump administration. He is yet to be sworn in. But no doubt sentiment as turned upwards. I've watched the volatility very closely and it is virtually at the year's low. A lot of contrariens take the view when the VIX is that low it's time to buy cover. It is really indicating very low risk, low volatility, but if you are wanting to take the contrarien view, you might want to take some insurance. What about you Paul?I'm not negative, Peter, I'm in the let it run camp. Because I think we have been long equities for a long time. We're now clearly into the optimism phase in the US. Not sure we're quite as optimistic in Australia but we're following the lead and I guess that will generate optimism in due course. But the Yanks are loving it. They're pumped! Trump pumped!Now, where does that turn around? I don't know. Is Thursday's rate increase a trigger? Probably not. Is Christmas coming a trigger? Possibly. Is the inauguration a trigger? I don't know. But just go with them and I think if you are long just let it run! It will come to an end, I'm with Martin, whether it is tonight or - but I would probably view they want it to go higher.But we've see PEs in the US market get pushed out a bit now. So valuations are getting stretched. The question is really, what is the big driver in the short-term of earnings going forward? Are the tax cuts that much of a leverage for American companies, or will the American companies take the tax cuts and say, "This is great, we will keep buying back shares, we won't invest in our own businesses" and that is the big issue - business investment - as it is here.As you say he is not even inaugurated yet, and these things are miles ahead and it is just confidence at the moment, confidence that manufacturers will do more onshore for a start and invest more locally. So we won't know the answer to the questions for months but confidence is a factor.That being said, looking around the world, the outlook in China is becoming more positive and the indicators are turning up, so the manufacturing and services side, that's good news. Without getting ridiculously bullish about China, we think as a steady story. The risks are diminishing. We're seeing an employment-led recovery - well, the very early signs - although it is again very measured.Any good news in Europe has to be given a tick.Exactly so the risks weren't there like they were last year. If you remember the markets came off big-time in January and February because of the concerns on Europe.I think the important point you made is valuations aren't yet stretched - they're high, but they're not stretched. That's one of the reasons if the data still does start to fall in line with the early confidence of the market that others have taken, if it starts to fall in line, then I think the rally can continue. But we are certainly not stretched in Australia and the US, despite being at highs - they're expensive but things can go up still.It seems to me, even before the election, if Hillary Clinton had won, I still would have said - and I'm interested from area research at Macquarie, Martin, that, (a) 2017 globally was going to be a better year for the global economy and the earnings was going to be better in 2017 than 2016. So we were already set, I thought, on two fronts to think that stocks could go higher. Then you get this Trump steroid turbo-charging and it makes sense that it will run hard but there will be a pullback. First, do you agree with my analysis, and (b) what kind of pullback do you think?Well, I think you probably might not have had the momentous rally we've seen if Hillary Clinton got in, but the fundamentals ultimately would have overtaken or prevailed going into the year, with combgs earnings outlook and the leading indicators turning up. So a modest rally stretched over a long period of time. So the super charging you talk about is absolutely spot-on. So the markets are heading higher into 2017 just based on fundamentals.What kind of pullback do you think is probable? Given the big run-up? Well, I've just mentioned - we don't see huge risks out there. I think pullbacks are limited. 2.5-5% sort of stuff. I don't see a 10% pullback on the horrendous.You would need a big curve ball that no-one saw coming.I would love to see a 10% pullback because it would be a great buying opportunity but I can't see that happening.Paul?I can't see it in the short-term. Look, we've all been wrong and this market in the past couple of years has been a grind. I think this is one of the first times we've seen optimism reign, particularly in the US. It broke through last week and we followed in Australia. We haven't seen the enthusiasm it has generated.I have been praying for a long time for it! I'm having a good Christmas!Ye of the Santa Claus rally fame!That's right. I haven't used it but I will now.So I can't see where the - the sort of the unknown event is yet, we don't know what it is.Let's talk about the stocks and sectors you might like for next year. Martin, you first. What is a great sector do you think? Let's start at the top, Pete. Jason Todd our equity analyst has upgraded his outlook for next year, he has another 320 odd points on the ASX 200 and that is driven by fundamentals and an earnings outlook. Last number of years Australian companies have been doing a great job cutting costs and getting the balance sheets in shape. So despite not really getting a tailwind frommed the economy we think earnings look OK for next year, and that is one of the main drivers on top of what the Trump administration may or may not do. We are positive about the outlook for the resources sector still. Again, it's more about their financial position. That is, we see strong cashflows coming out of those companies without necessarily seeing a significant rally in commodity prices. We think commodities are going to be stable and slowly go higher, but the companies have got some leverage to that. So there's still room to move.We've already had that significant rally.We have indeed and we upgraded again to a $28 target on BHP which was a $24 target and it is now $26 and you have to question, how much more upgrades are we going to be seeing. So we like the resources and the consumer side. A bit like Paul, we like the outlook for the banks or that they've run pretty hard. Less positive about the interest rate sensitive stocks but they have had a big pullback. I haven't wouldn't be selling them down here.Paul, he has jumped the gun by saying you like banks and we always know you love banks.Well, we do and I think there's less risk on banks at the moment. We had Commonwealth Bank get up to almost $100, we had Westpac in the high 30s, $38 I think it got, and we're still a fair way from their highs so I'm not sure we're going to get up there, but I think in the environment of a chance to boost margins, a bit more growth in the economy, and no unknown capital issues in the short-term, bad debts aren't going to run out of control, yeah, I think there's still upside on financials. So I'm sort of with Martin there. Resources, look, they've gone beyond my wildest dreams so I think you've just got to let this run. Who knows where they could take commodity prices to? Certainly the balance sheets of BHP and Rio are pretty strong. It will take longer for those prices to flow through into earnings simply because of the cycle between when they produce, what they've sold forward, getting the value of those spot prices back in terms of cashflows. So I wonder whether the market has run ahead of itself there but I think you have to go with it because no-one expected them to come from - you know, BHP to go from $14 to Martin's target of $28.No-one would have picked that. No, so stay with it, I think there's neutral market weight on those things.And health?Health has been badly beaten up. I'm out of sync with the market. Today's performance, CSL down almost $3, Ramsey got rammed again, Cochlear down. Nobody likes health.Why do they do it?The interesting thing today is health went up in America on Friday night, and I can't work it out, maybe it is just fashionable to sell health. There are political events in the US about what Trump will do, question mark, because I think you have to stick with it, the tailwinds are still there. Both companies are still forecasting growth around 10-12% and there aren't too many companies out there with guidance to that extent at the moment.And they have been delivering.Year after year, I back form over every time.Where is Ramsey now?About $66.20.And where is it targeted?Off the top of my head I think it was around the 72 range. At 72 it was overvalued, but at 66 do you start looking at it? I was going to ask you about the currency impact because that is no longer as supportive as we would like it to be.Look, it's not as supportive and there are some issues there. But it's still supporting CSL with other US dollar earners like ResMed as well. So I think the currency is a good question because the US dollar should be going up and it is, the Aussie dollar is bouncing back because of commodity prices so we're actually strengthening against the currencies.And we are not rate cutting.No, no against the Euro and the pound we've gone up and against the yuan. So there are some negative impacts you could argue in places like Ramsey with exposure to the French and UK health sectorers, but I think generally most of our companies - the US dollar will still be more important in currency exposure, and maybe we'll just sit here and see, because we will off set the strength of the US dollar with high commodity prices. And I don't want to go to the sectors I don't like, but I still don't like REITs, property trusts, they've got some issues, I think, despite what's happened in the last couple of weeks and I think the consumer staples sector, you stay underweight on that, the grocery wars aren't over. Steer clear. So a lot of good quality fund managers have been caught out holding 30-40% cash, and they made their money picking companies like Sirtek and Bellamy's and all these sorts of companies, they did really well out of those. And Bellamy's now has its problems, which could be individual to that company but a lot of the fund managers have also probably sold out to materialise their profit to chase the stocks you guys like - resources and banks. They've gone into the top 20 stocks but some of them have been sold off - Bellamy's could have a problem, but some of them have been sold off because they are simply too high. Could some of these stocks eventually be picked up by the fund managers? They have to buy something, BHP hits 28 and where do they go? They might start looking at a company like these. Do you think that could be the theme in 2017, as money comes in the market, the fund managers are going to look - we probably went too far selling off.I think it's too early. We see these rotations take place typically and they take a lot longer to play out. So those investing in small caps and mid caps have done extraordinarily well but they were unloved for so long two years ago. I'm wondering whether in fact because of the large caps, almost at some point it's their turn, but the fundamentals are definitely improving for those large caps, that there's more to play out in that large cap. So you could be sitting buying what you see as value in some of the mid caps and be sitting here in six months' time and not get a lot of shareholder performance. Not a lot of downside but not a lot of performance. Where is that performance at the moment? Back in the ASX top 50.So people who want instant gratification over six months...It's very stock selective.But you think in 2017 if there is momentum in the market some of those stocks will be loved again? Particularly if you are getting more convinced around the earnings outlook for the market. If you get more positive that fundamentals are generally improving, of course they will start to perform.Paul?Yeah, I think so. I take Martin's point about sector rotation, I'm thinking everyone has been surprised by just how quick the market got back in love with materials. It was happening, you know, back in May/June but it has just been this last couple of months that's taken everyone by surprised. Now whether the velocity of rotation is happening more quickly, I don't know. So just as easily we could get to the top of this and they find something different. There will be value in that, but clearly at the moment there are just stocks that are of value but the market won't love them in the short-term. People talk about Telstra and I put them in that category. The market is not in love with Telstra. I think it will stay value and at some stage the market will come back to love Telstra but I don't think it's this week. If you want performance it's probably not the stock for performance.But there certainly is a time for people who just purely want yield to look at some of the companies that have been belted up because the yields are going up on these unloved stocks.Absolutely and you mentioned Telstra and we talk about it quite a lot because understandably as an interest rate proxy it's yielding, with franking, nearly 9%. Cash rates of 1.5. What's wrong with that? You won't get much capital growth out of Telstra, we know that, but that dividend looks fairly sustainable over the next couple of years and that is our forecast, the 31 cent dividend. So that is a nice yield play.I'm with you there. I think you have to go for the quality if you want the yield stocks.Any others?I think Transurban is growing up a little bit, and I think that has good earnings and it can argue quite substantially that because of the schedule of projects it has coming onstream that earnings can grow by 7-8% per annum in the next three to five years. So I think that is a stock you add. Whether at $10.12 you buy it or you wait as bond rates go up, that is the question mark.It is already down 20%. It has been sold a pretty...I think some of the traditional so-called better growth companies - there's probably value in companies like Seek has been sold off a long way,, those high-flyers come back. I think I would go fob the quality but I would be a -- for the quality but I would be wary of looking for any yield stock. I think the market is pretty punishing and buy stock selectively.OK, guys, this is our last week, so merry Christmas to you.And to you, all the best for 2017.Paul, I will be seeing you all week! So I'll wait until later in the week to wish you happy Christmas, but thanks very much for your contribution and see you next year without a doubt.See you next year.So that's Martin Lakos, Macquarie, of course, and Paul Rickard of the Switzer Report. After the break - cricket and politics at the moment have a common problem and it is called leadership. So what does former national cricket coach John Buchanan recommend for Darren Lehmann, Steve Smith and, of course, Malcolm Turnbull?

Welcome back to Switzer on Sky News Money. Now right at the moment it seems the Australian cricket team has a similar problem to politics in Canberra - a leadership problem. Former Australian cricket coach and leadership expert John Buchanan is head of a business called Buchanan Sucess Coaching so let's just see what needs to be done in Canberra and also for our cricket team. Thanks for joining us, John.Thanks, Peter.John, tell us about why you have gone into this business of, you know, trying to coach people for success?Oh, look, I think it was everything that I've been doing all my life. It took me a little while to realise that I was a coach, it took me probably 16 years in a sense, and then I began coaching Queensland and at that point in time I realised that seems to be what I do and what I have a real passion for and part of that is very much about challenging teams and individuals to seek peak performance, to be better than what they currently are, and that's what I really enjoy doing and I've learnt a lot of lessons along the way, a lot of lessons in sport and now really wanting to share that in the business and corporate world.How important is it for someone, either in sport or in business, or in any kind of leadership role to have an objective set of eyes and who tells them stuff that they really need to hear?That's ideal. You know, the leader's job, in my opinion, one is to light that vision - it's about prescribing that Everest and then part of the next role is really sticking with your own values, principles and beliefs, because they're going to be challenged almost minute by minute. You mentioned Darren Lehmann, you mentioned Malcolm Turnbull, but no matter who sits at the top of any tree, they're being challenged constantly and that, I think, really is one of the big challenges for all leaders and they've got to be able to stick with what they believe in. That might mean sometimes that they're not the best person for the job. I have been in that a couple of times, that while I occupied the role, I wasn't necessarily the right person to do the job, so I moved on or I was moved on. But I think that's really important as a leader, because leadership really is about relationships and most importantly, relationships within the team that you operate, whether it is a political team, a sporting team or a business team, because in the end they are the people you want to bring with you. They are the ones that are going to follow you and they are the ones that are going to help you achieve your vision.So let's just, for a moment, I'm - I'm sure you have analysed what's going on with our cricket team. What do you think explains why a group who are clearly very talented and seem to have gotten better since the South African series, but what do you think was going wrong with them? Look, obviously, you and I are a long way from the team and we read what the media says and, of course, the media very, very...Don't trust the media, John, you know that! That's right, that's right. But, look, my, I guess, experience would suggest that, as you said, the Australian cricket team is still is very skilled team. I don't think the results that pef -- that they have been putting together over the last 18 months or so reflect the skill set in the side so there's something else going on and generally you would put that down to this notion of team culture, things are not quite right in the group, why is that the case - possibly I think there are too many voices in there. We've got a high performance area that's sending messages into the team through either its sports science or its management of players, we've got selectors who, again, were a group of voices who are impacting on the way the team performance. We've got a coach, we've got assistant coaches and a captain and a leadership team. So to me, one of the things that possibly stands out for this period of time is that the head coach - in this case Darren Lehmann - has got to reclaim the ground and he has got to work very closely with Steve Smith, the current captain, in all formats of the game and really they then need to present a picture to the rest of the group about where they want to take the team and how they want to play the game. I think one of the roles of strong leadership is about actually trying to change the game. Why, within the rules and conditions of whatever your sector is, what do you want to play the same game as everybody else? Surely you want to play it differently so you give yourself some competitive advantage. So it seems to me that Darren and Steven really have to stamp their authority around everybody I've just mentioned to say, "Look, this is where we're taking the team and this is how we're going to get there, now we need your support".That is interesting because I would say someone like Darren Lehmann wouldn't be adverse to getting some advice from a person who has been great at being in coaching positions, had a leadership role and all that sort of stuff. If he thought things were going well, I'm sure he would be at least open to listening. I don't know whether prime ministers have often availed themselves the opportunity of getting someone to critically and objectively look at their leadership but you have had a chance to see Malcolm Turnbull and what's going on with the government right now. What do you think is the leadership challenge for both Malcolm Turnbull and, therefore, the government itself?Well, just what I said - I mean, I think if we look at this notion of changing the game, obviously we've seen it and you've just been discussing it with Trump in the US, I guess we've seen it with Brexit in the UK. Marine Le Pen, we're seeing some movement there in France, and so on, and of course in Australia we've got movement towards the minor parties, Pauline Hanson and Derryn Hinch, et cetera. And I think that's just because the major parties are not differentiating themselves, they are trotting out more of the same and I think what the electorate is looking for is someone to be bold, someone to come out with a real plan and a real picture for the future. I mean, that's not necessarily going to please everybody. In leadership you are not in there to be necessarily popular, albeit you would like to be, and I guess in politics you want to have 51% popularity versus the rest. From what I read and see of Malcolm Turnbull, to me, it seems he has a bit of a presence but at the same stage he seems to be a person who's pragmatic, if you like, that whatever the current view is where you might be able to keep yourself or your party in office that's the decision you make and I think if I went back to the sporting example, what players and people around a coach want is they want you to be consistent. They might not like you or agree with what you are doing, but they actually respect you as a person and they respect you as a leader. And I really think that's what our major parties need in their leadership, is just somebody who will be standing up, being bold, as you said, look, they'll get plenty of criticism from internal and external but in the end they've got to weather all that and say, "No, this is the direction we're going" and that may mean we've got to be prepared to lose to win.Have you seen similar kind of developments at the corporate level, in the companies that you have actually advised? Do they have this kind of leader who can't really put his stamp solidly on the company?Yeah, look, I think it is a bit of a common malaise, if you like, throughout our country at the moment. It just seems that we're all in a place where risk-taking, or we've become a bit more risk averse. I mean, it's all about survival, in a sense, just trying to get through tomorrow so we can face the day after. So the concept of looking with a vision is somewhat unusual in a sense. Around business, around politics, even around sport, you know. So I think the businesses that are prepared to back themselves into the future - and in other words almost predict where the future will be and therefore position themselves to do that - are the ones that are in the best position. I guess in a broad sense we see that with companies like Uber, you know, who are looking at the whole transport game and turning that on its head with a different picture of the way it should be done.John, that is the website if people want to see what you are up to?It's www. the break we look at what social enterprises are and why Westpac has a special interest in them.

Welcome back to Switzer. OK, for the past ten years, Westpac has been making a commitment to social enterprise. To talk about this activity we have the CEO of the Westpac Foundation Sinclair Taylor to explain what it means and why the bank does it. Good to see you.You too.Talk to us about the Foundation, first. What is the Foundation?Westpac Foundation is very, very old, we're 137 years old, we are one of our better kept secrets, not quite as old as Westpac which is 199 years old but we started 137 years ago when the chairman of the bank of the day created a fund called the Buckland fund to make financial hardship payments to Westpac employees, or Bank of NSW as it was called then, who died on our watch. He made those payments to the families of those deceased employees.Government welfare was not like it was today. No, that's right. That's right, so that's where we came from and we still make those types of payments to Westpac employees 137 years on. OK, but a particular interest over the last ten years has been social enterprises. So explain what a social enterprise is?Look, a newish term. So a social enterprise from our perspective - and I say that very deliberately, from our perspective - is a not-for-profit organisation running a business that the average consumer wouldn't necessarily know a not-for-profit is running it, it is running a business selling goods or services but for a very strong social reason and that is often about creating jobs or training opportunities for people who can't access the mainstream workforce.Give me an example?The Big Issue in Melbourne is a great example. It is a not-for-profit organisation helping people who are homeless, often, into self-employment. They're selling the magazines. But we've chosen to focus on social enterprises over the last ten years because it completely aligns to the bank's purpose and our purpose as an organisation is to help facilitate economic development and help people participate in the economy and we see a job as a really key way to do that.Is there a substantial difference in the way a social enterprise actually operates, compared to a mainstream enterprise. There is to some extent and I say "To some extent" because they're actually quite complex businesses. The for-profit business aims is to make a return to shareholders, or a mum and dad business running their business, but in a social enterprise, there is no shareholder to think about, it is not-for-profit, no-one sitting at the top of that, so they are there to help people into the economy, and those people have very challenged backgrounds as well. So the social support model required in the workplace is often more difficult and that also comes at a cost. So many of these organisations are running the most inefficient business they can afford to run. Yeah, so they seek productivity, but with a compassionate overlay. So if it becomes a choice between people and money, they choose people?They would absolutely lean on the side of people because once again, that is their core social purpose.How important have social enterprises become in modern Australia?Look, they're certainly growing. So give that some context, we've just announced our five social scale-up grant recipients for the year, so we're funding five social enterprises to the tune of $1.5 million over the next three years to help scale up further. We had 143 not-for-profit organisations, running businesses and creating jobs, apply for those grants. So it is growing off a small base and I think more organisations are realising one way to help people is to get them into the economy and the National Disability Insurance Scheme, the NDIS, is going to help that, certainly in relation to disability not-for-profit organisations.Can you tell us about one of the organisations that got a grant?We found a company called Jig dp saw services and they are a disability employer on the Northern Beaches of Sydney and they help people with disability into the workplace, around digitalisation, so they're helping scanning documents, and a lot of corporates and government agencies are trying to go more paperless, so they are out there competing for jobs in terms of tenders to try and provide those scanning services.So they are not trying to place people in jobs - they're competing for jobs and they employ disabled Australians to make the business work?They do, that's right and what is actually quite unique about Jigsaw is they pay award wages. A lot of people put that hat on thinking if it is a disability organisation it is a supported wage, but these employees are getting a full award wage and we thought that was really unique and part of their funding is to help them expand further from Northern Beaches into Western Sydney to open another operation there.OK. Reflecting upon the kind of organisations you've supported in the past, what's probably the most well-known one, do you think? Well, Big Issue, clearly.That is one we've supported for quite some time. Street in Melbourne is a large one, they run a well no-one known hospitality business, they have seven cafes and an a coffee roasting business and they're focused on at-risk yoit in Melbourne, kids who are long-term unemployed often, getting them into training opportunities so they can work in the hospitality sector.So it's called stret Street, is it? And the cafes are called Street?Cromwell House in Collingwood is their largest operation so far, absolutely worth looking out for.What is the next thing for the organisation?We have a big year ahead it is our 200th anniversary at Westpac so we will fund 200 communities. We've funded small grassroots organisations for the past few years. The grant applications open on 1 May so we're looking for grassroots organisations, trying to create social change in the Australian community, to apply for those grants.So you are actually asking any grassroots organisation out there that possibly would want to be considered to put...That's right so if they check out the Westpac Foundation website they will be able to found out our application criteria, that will open on 1 May. As it relates to scale-up grants for social enterprises we open for those against on 1 February.I notice you haven't always been in the touchy-feely aspect of the economy, you have been on the other side, superannuation or whatever, but do you find that the growth of social enterprise organisations is a reflection of maybe more hardship or is it that we are actually becoming more in tune that something has to be done?I think it is a combination of both. I think Australia is a very prosperous country, but let's agree that that prosperity isn't universally spread across every postcode and social enterprises are a very powerful way to help tackle some of those more complex social issues by getting people into employment. So it's not a silver bullet, these issues are very complex and very longstanding but it's certainly one we are very committed to.Ironically, I do think, with those social organisations, there is a bit of Donald Trump in them in the sense that they looked at government and government is not doing the job so at the grassroots level they say, let's try and find a capitalist solution and even though they are not like Donald Trump, they are actually revolting against the old system where a lot of people fell through the cracks.Australia has a very, very strong social welfare safety net and we have a great social welfare system, but it is also quite challenged so this is about finding new opportunities to tackle those longstanding issues. And the website? AU.Thank you for joining us. After the break - with a rip-roaring resources rally, a lot of smaller miners have been ignored while the big miners have attracted all of the attention. Mining industry expert Max Williamson thinks there are some small miners worth having a look at.

Welcome back to Switzer. This year's comeback for the mining sector has given all the headlines to big companies because Max Williamson, an independent mining expert, has his eye out for the smaller miners that he thinks are worth having a bit of a look at. Thanks for joining us. Thank you and merry Christmas.Same to you, mate. I was thinking, when BHP was down around 40 - did you come on the show then?Um... Yes! And I think you actually did suggest that these prices did seem a little bit overdone.Yes, yes.Did you think they would rebound by so much? Not quite as much. I did think they were rebound because they were oversold at that $14 level, it was ridiculous to be honest with you, but around about today's price is a sensible price but there will be a pullback I think in January/February because the Chinese will actually reduce their expectations for, you know, buying product out of Australia in that period.Why? Mainly because of Chinese new year and it's bloody cold in China at or about that time of year and invariably they pull back on their buying patterns.Will there be a buying opportunity for someone who wants to remain long resources?Oh, I think so. I very much firmly believe in gas - very strong believer in gas - and iron ore to large degree, yes, well and truly. I'm a BHP shareholders!So am I. What about Alcoa, what's going on there?There is a real issue down in Victoria with electricity and we just get frustrated with the Victorian government, but just recently they had a real problem with an outage and it looks like one of their pot lines, it went down as a result of a shortage of electricity. You know aluminium is all about electricity.It needs electricity.No electricity, the pot line goes down and the whole pot line froze. So they've got an aluminium pot line full of unprocessed aluminium, so that means hundreds of millions of dollars to get it fixed and it's all about this silly issue of Australia-wide, particularly south-east Australia, electricity, the delivery and maintainability of supply.Now, I hosted a conference in Noosa a couple of years back at the miners' conference they have there, and there were a lot of gas experts saying that NSW and Victoria have policies that will probably see them end up with a supply problem when it comes to energy. Are they right? Well, certainly. Every meaningful, useful study that I've seen, right, all show that the east coast is going to have troubles with its gas supply. Now, we keep having these ridiculous stories about renewables filling the gap. There's so many issues with renewables and, yes, technology in that area is improving, there's little doubt about that, but there's no way in the world that it can properly deal with the issue.The baseload demand, both residential and industrial - can't do it?It just can't do it, no. Air conditioning is improving, less and less power going to all of these things, but more and more houses, every house out at St Mary's Windsor, Richard, all of those places, they have to have electricity for air conditioning, it's too hot.So what companies do you think are well placed if there is going to be a demand for gas and a low supply - it means prices will go up eventually. What companies are well placed?Well, you are going to think that companies like Santos and maybe the spin-off of the IPO out of Origin might be beneficial here. There will be a number of other producers like Beech and some smaller producers in and around that Cooper Basin will be supplying. I don't really see too much gas coming south from North Queensland because most of that will be exported, so's really those companies around the Cooper Basin that at the moment could supply the gas into Sydney and we need production out of places like Narrabri, much closer.I don't think that's going to happen in the short-term.No, not in the short-term and we have major issues in NSW politics with that one and we need to talk to the grey hairs and other persons in the Liberal Party on that one.Alright, so you've got two companies you mentioned to me. One is called Elk. Tell us about Elk.I attended a number of annual general meetings and the two that really stood out was Elk and Heron which I hope we will talk about. But Elk is a company using new technologies in the United States of America to generate oil and gas, but principally oil.Shale oil or normal oil?Conventional oil.OK.So what they're doing actually is they're getting CO2 out of other resources, extraction areas around where they are in Wyoming, and they are going to reinject that CO2 into the same time of aquifers and they will then improve the pressure which will then move oil towards the collection processing areas that they would otherwise have.So this is oil that has been there but hasn't been easily accessible and this process makes it accessible?Yes, that's right. The old story, you know, more and more thought, "Apply to a project" and Elk is one of those companies that really is doing that well. If you attended that annual general meeting, there were plenty of people there with serious money. Given the fact we heard today that the non-OPEC conditions are -- non-OPEC countries are signing up for price cuts and predicting the oil price will go to 60, is that a good omen for Elk?Oh, certainly it is. In United States of America it will be a top-down pressure, because of the oil conditions turning on production, but it is not infinite and a lot of these are shortlived if you believe the bell curve concept, and then they have to do multiple fraks and it costs mega dollars to do these fracks.So you are not worried about the threat of shale oil for producers?No, but it will have a top-down effect. It won't explode like $150 a barrel anymore, not for a long time.Tell us about Heron.It is a very, very interesting company starting a project up in - just around Wood desist lawn in NSW. It is a lead zinc project. Principally zinc. There are a couple of gold credits up there which we don't need to worry about. But basically, they are one of the really few companies that I believe are going to move from an exploration play to a production play in the next, say, twelve to 18 months.So they haven't made any money yet?No, no, they are actually about to get construction finance. So they've got the right people, they've got the asset and it is now just a matter of convincing the bankers to lend them the money and the equity providers to give them the cash and I'm pretty sure they will get the equity without any worries.What is the calibre like? It's high grade. And I mean high grade. When you look at projects in the zinc consider you see companies lifeboat KBL Mining going crash and other companies that I don't think it is a good idea for me to mention, they're struggling because the zinc grade is too low. This particular project has high grades and in volume - they don't have small volumes as well. So look at the annual report, look at the most recently quarterly reports and soon the six-monthly report and you will see the resource which is there. No doubt 163 or $164 million to develop this project so I think they'll get it going and that's the key issue. If I said to you, these sound like speculative stocks, what would you say to me?Yeah!Yes, they are.I don't mind that.But are they speculative stocks where the likelihood of result is pretty good, do you think?Yes, I do.You wouldn't be mentioning it otherwise, would you, because your reputation rides on it.Look, I'm seriously depressed about the quality of...I should say, Max is an accountant as well. So he is not given to exaggeration! But go on.I'm 60-something now so I've seen management right through from the major corporations down to the smallest corporations and I think these two companies possess the management required. But I also say the reason why so many expiration companies that are going nowhere today is the quality of the management and the access to finance and the access to finance is driven by the quality of management.Given what you are seeing in the overrule resources cycle and some small ircompanies probably have struggled since the mining boom has come off the boil, could these become potentially takeover targets?Yes or no, and some will go out the back door and tenants will be available in the public environment, no doubt there will be more takeovers but I doubt there will be major dollars made on the profits of the takeovers.Do you feel the comeback of the resources sector, while not being a mining boom, heralds a pretty reasonable period for resources going forward?I do. I think we're coming back to some level of normality. If you think of the old swings and roundabouts, we're coming back to a swing somewhere near the centre, on a logical point, both for financing finance project and access to good quality people and the commodity price resist actually starting to get more sensible but there's one other company that deserves mentioning and that's Oro Cobre. They are lithium, one of the very few sexy minerals it's worth talking about.We'll talk about that when you come back again. That's the show for tonight, thanks for joining us, see you tomorrow night.