The great investment opportunity of BHP Billiton

The leading financial event of last week, as regards the impact of the credit crunch, was Jean-Claude Trichet's press conference, for which our Central Bank governor Michael Bonello prepared the way on Bloomberg. The world awaits further ECB action with great anxiety.

The credit crunch was first induced by the shock of the revelation of unwholesome mortgage loans in the US. These have now come to amount to a total of $591 billion of which the highest figure of $80 billion is due by Citigroup and the lowest, $28 billion, is being registered by HSBC. Goldman Sachs says that subprime losses will finally total $1.3 trillion.

The Citigroup share price has been slaughtered. The HSBC share price, although by no means registering the heights of two and a half years ago, has been holding extremely well. This has been undoubtedly due because HSBC was the first major bank to acknowledge its subprime losses.

It thus made a mockery of the list of contradictory statements, befuddling investors' minds, which have appeared during these past 14 months.

There is nothing like contradictory and ignorant statements to ruin the financial market. These provoke bewilderment and consequent social upheaval.

Some politicians are doing as their predecessors did in the 1930s, wreaking havoc by making contradictory financial statements. I here refer to contradictory statements made by the Christine Lagarde, France's Minister of Finance. I have sat next to a finance minister who asked me what is meant by preference shares, and another one who had never heard of the multiplier, but Ms Lagarde's contradictory words beats them all.

This is a great pity, for none has spoken better than French premier Nicolas Sarkozy on the need to guarantee all French bank deposits. It is most likely that Trichet was wise enough to make use of Bonello to test the ground before he made his strategic stand on ECB interest rate policy. Bonello's Bloomberg statement ten days ago was definitely not engineered by our man in Frankfurt. As a member on the ECB governing body, Bonello has every right to an independent stand on the future of Europe's economy.

Trichet would have distanced himself from Bonello had it been in the interests of the European Union to do so.

Bonello made the important fundamental point that we need not panic before the menace which banking malfeasance in the US has hurled into our lives. Malfeasance is a betrayal of trust and it is being proved by the 800 subprime lawsuits which have already been filed in the US.

Trichet has done his duty not to dominate inflation by creating more inflation, though he is not expected to be doctrinaire. Malta has produced a central banker in the person of the redoubtable Bonello, a humble man though extravagantly qualified with relevant economic training.

The Central Bank functions as a team, and not as a one-man show.

The Bonello episode should raise everybody's morale in Malta. If this country's men can walk the corridors of high power in Europe, cannot we, perhaps lesser mortals (certainly not by much), demonstrate our ability to earn money in what is perhaps one of the greatest investment opportunities of all time? Metal prices have fallen to a 50-year low and a distraught Michigan Major is speaking of 'doomsday'. His words have become a joke in the mass media.

An introduction to the great investment opportunities of the moment, and in particular of BHP Billiton, is rendered necessary because the greatest present danger is fear. Roosevelt at the height of the 1930s depression used to say that the only thing to be feared was fear itself. He was proved right by history.

The vicissitudes surrounding the dramatic drop in the share price of BHP Billiton is a case in point.

Its turmoil is certainly not activated by fundamentals, but by the panic at present creating a global stock exchange rout.

This also happened two years ago in the copper market. Since then, we have seen the UK adopt a nuclear energy policy and Electricité d'France (EDF) buying up British Energy (BE). There is thus more need for uranium and it looks like being the best investment of the next 10 years.

There is all the probability of a resurgence of the BH Billiton share price.

On December 31, 2006, I wrote: "Whatever happens to BHP Billiton share price because of the fall in copper, let not investors forget that it holds 40 per cent of the world's uranium, and that the world needs to go nuclear if it wants to avoid disaster due to global warming."

The present analyst BHP share price recommendations are as follows: Buys 67 per cent, Holds 22 per cent, Sells 11 per cent, while the share price month consensus target is about 2200. It is at present 1121, so there is a wonderful space for a speculative game.

This can also be played in a relatively safe environment both as regards global and local financial conditions.

The government is able to guarantee financial stability as Malta's reserves are now monitored by the ECB and, by being liquid, is able to face any emergency.

World liquidity has received a massive push, though hardly enough, from the US Congress. Disaster is by no means in sight.

Mr Azzopardi Vella, economic consultant with DBR Investments Ltd, has promoted the Malta Development Fund and advised S&P.