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September 3, 2010 Dear Friend,
We believe seasonal demand peaks, price
hedge buying and other factors temporarily inflate containerboard operating
rates to 98%, which will fall seasonally to 89% in the March 2011 seasonally
slower quarter. We do not believe 4.1% 2010 unit growth is sustainable, and
estimate a 2.1% decline in 2011. We rate IP Underweight, and Smurfit-Stone,
Temple Inland and Packaging Corp. of America each Neutral.
We do not expect precipitous share price
declines, but believe that the copper market enjoys a wonderful supply
shortfall leading to much better returns as investors realize the world
economy continues to grow. Copper, large cap diversifieds and other mining
shares appear to be better uses of capital, in our opinion.
We restored Goldcorp to Overweight as the
July 38.2 tonne liquidations of GLD ETFs reversed to an 18 tonne August
accumulation, reversing the bear trend that spooked us. The World Gold
Council estimated 51% of June quarter physical gold demand came from
investors, and we are very sensitive to any trend reversal. After the 1980
gold price peak, disinvestment continued for a full generation as investors
shifted to stocks and bonds.
Faithfully,
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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