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4/25/14

Many growth stories, selective coverage

The way in which good news from supposedly unfriendly countries in the LatAm region is ignored isn't a new phenomenon, but the way in which the news today from Bolivia,  that its 2013 GDP growth number at 6.78% represents a 25 year record, was greeted by virtually zero coverage gave a classic example upon which we might chew. After all, here's a country going great guns and expanding its economy rapidly but the world of serious people and their serious numbers seems wont to ignore the news. 

Why is that so?

That's the question that floated round this humble scribe's head today, so after a while and a bit of data compilation this chart appeared, that shows one supposedly "friendly country" annual GDP growth (Peru) next to two supposedly "unfriendlies" (Bolivia and Ecuador) in the period since 2000.


As always, such datasets are going to be noisy (in fact, GDP figures themselves are approximates at best and liable to many revisions) but I put forward that the graph shows two main things:

A: The three countries' development is roughly equal over time. That's the big picture verdict, but they're obviously not exact fits which brings us the main thing number two:

B: Aside a couple of punctual peak/trough moments, there are three periods that show differences worth mentioning. They're marked on the chart as...
1) The period when Peru outstripped the other two in size of growth. From its timing, it fits with the price rises experienced by its two main exports of copper and gold, as well as the growth of free market policies in the country (under the Toledo and then the García governments).  
2) The drops in GDP that resulted from the 2008 financial/U.S housing bubble/Lehman etc crisis were sharp, but Bolivia fared better than the other two. The best guess here is that exports of all types were badly hit, but as Bolivia's main export and source of currency, natgas, was sold under long-term fixed price contracts it had a better buffer zone. 
3) The last couple of years, which has seen decadence in Ecuador and Peru from higher levels, while Bolivia's growth has accelerated. Both Ecuador's and Peru's growth rates are still laudable however, just less than previous years. Meanwhile, GDP growth really seems to be taking hold in Bolivia and a virtuous circle developing.
Therefore yes, there are differences in the story (and 10 or 12 lines is hardly comprehensive on any country, let alone three, so I'm painting in the broadest strokes here) but the question is, why do we the English language consuming business news audience rarely get to hear about the good things going on in Ecuador or Bolivia, but Peru gets all the poster-child-wonder-growth-new-modern-development-hooray-applause stories?

And yes, the best answer starts with the fact that Peru is deemed "friendly" by the North, it's willing to trade and do deals with Western foreign direct investment (FDI), it promotes "market friendly" policies, it welcomes the arrival of overseas capital. Meanwhile, both Ecuador and Bolivia are known for their governments who on occasion (or even quite often) rail against the 'capitalist empire' give us the "go home imperialists" rhetoric, nationalize utilities or cut deals with Chinese capitals for large works or projects (and apologies for the overuse of speech marks there, kind of necessary this time).

But this isn't politics, this is GDP! It's about the opportunity to hear about a growth story and enjoy or share the news of success of a new thrusting economy, is it? After all what we're looking at is GDP growth, a measure of the country's well-being. It doesn't matter if FDI is there and making big money, if GDP goes up it means the country is doing better by and for itself and its people, that's what's being measured here. Which brings me back to my original question and the way in which biz and economics media studiously ignores the good macro news that comes from the deemed unfriendlies: Why is that so? For me, when it all gets boiled right down the only real answer is that the English speaking media is catering to its audience and that audience doesn't give a flying fig about Bolivia or Ecuador or whether those countries' inhabitants are doing well or badly, because they can't make a profit off their backs. Whereas Peru is a hot topic because it's Open For Business and a land of opportunity, not only for Peruvians but for new cash coming in and making its own wedge. Plaudits in the business press for Peru aren't there to congratulate the country, they're published to open the greed glands of its consumers. While the flipside is that Bolivia and Ecuador don't get the happyfeely coverage because there's nothing in it for the foreign audience as long as those commie bedwetters refuse to give us gringos the chance to make coin and bring it back home.

In short, the news is being generated for the self-interest of self-centred human beings. And that's capitalism for you.

4/24/14

The Whip It flowchart is the best thing ever

From the world of Twitter and @billykaos, IKN is duty bound to show this piece of wonderful:


Here's the original tweet


Bolivia GDP growth kicks butt

Bolivia today announced its GDP growth for 2013 was 6.78%, the best rate since 1989:


Socialists, eh?

You can guarantee that the usual haters up North will conveniently forget just how well Evo Morales is running his country. Again. 

The need to avoid mission creep

From day one, IKN Nerve Centre™ has been crystal clear on its main market advantage: political risk for mining companies in LatAm. For sure, over the weeks and months and years it's only natural for an inquiring mind to consider the multitude of other moving parts when it comes to mining company valuations and form opinions thereof, but on too many of those subjects this humble corner of cyberspace is just another voice, without a clear baseline advantage. Sometimes IKN is right on the way gold moves, sometimes wrong. Sometimes a bullshit management team has seduced this humble and fallible scribe into its world with grand plans, wise saws and modern instances, sometimes* not. No, all those tend to be reasonably level playing fields but the real advantage we run over The Great White North is LatAm political and community risk factors. That's been shown time and again because we may only have a single clue, but you guys up there don't even have that.

All the meta-twaddle and nonsense you read above was prompted by reading GMP's call on Argonaut Gold (AR.to) this morning. They like the thing, want you to buy it and even resort to the puerile "it's a smart money buying opportunity right now" argument to get your ego stirring and you on the phone to the trading and compliance desks. Thing is, GMP and IKN could argue the toss about its valuation call on the AR.to numbers (1.15X of NAV8% is rich as hell for this thing, guys) but when it comes to its pol risk call on what's happening in Mexico, they're just being plug dumb stupid. The subject is again San Antonio in Baja California Sur State, and the line GMP uses is...

"We continue to take a conservative approach, estimating production beginning in Q4/15."

Woah! Stop! That is not a "conservative approach". The true conservative approach is estimating production that will never begin and removing the $1.30/share NAV estimate for that "asset" (word used loosely, because in fact it's the exact opposite, a liability) from the calculation. Expecting San Antonio to ramp up in 2015 and calling that a "conservative" estimate shows a complete and utter lack of understanding about the political risk factors around the project, even if you decide to disagree with IKN's own "never gonna happen" call. It's the hallmark of a nodding dog analyst who cannot speak Spanish, hasn't bothered to read up on the local situation, has no clue about the type, strength or depth of the opposition to the project and has limited their DD to a phone call to the IR department to find out the company's own viewpoint and repeated it verbatim to brokerage clients.

It's at this point that the cry of "STOP TEH STOOOPID!" often makes its appearance in an IKN post, but not today. That's because I don't want the advantage to disappear, so Canadian brokerage dumbasses, please continue to be as dumbass as ever about Latam mining politics. AR.to and GMP today is but one example. 

*On that one, most times not. Gonna give myself a little extra credit.

Chart of the day is...

...silver, dailies:


A few days ago I posited on the potential for silver as a long trade. FWIW I didn't buy the metal but have slowly and carefully, been picking at a silver junior trade (subbers know which one). Today's silver price re-lapse puts that theory in doubt and it sure looks as though the metal needs a bounce, right here right now, else stocks are going feel the welter burden of the 18 handle.

As usual, a reminder that trading mentality isn't investment mentality. I'm looking for the near-term play here, longer term stuff unrelated.

UPDATE: And bounce it did. We live in a world where an unexpected result from a very noisy US data number can add U$20 to an ounce of gold in Bangladesh. Oh the humanity.

4/23/14

Proceeds

A little more detail in private placement news releases would be appreciated. Some honesty, too:
...the proceeds of the Offering will be used for exploration and general working capital purposes. By "exploration", we refer to your money being used in order that humanity might add to its knowledge of geological anomalies. By "general working capital purposes", we refer to how our CEO is fed up with traveling coach class. And the hookers and blow, obviously. This is Vancouver, after all.

Gold/Silver ratio, miner prices, GS, things of the ilk

On this...


..., the gold/silver ratio, the song remains the same. After flicking through a few other trackers, the overall sentiment is one of a sector in wait'n'see mode, looking for a catalyst to take it lower or higher. So for the meanwhile we drift, we follow a weak trend, we wait (and if only for that your humble scribe's general call in this period to pick at and buy decent beaten down mining names is reiterated; all good things to those who wait, Clarice).

Switching gears slightly, as it happens and after making a large cup of sweet tea, sitting down, pulling up that GS note yesterday evening (ty reader N) and reading it carefully, I happen to agree on their value-oriented call that producers concentrating on cash flows and bottom lines (rather than the growth model miners, or those running to stand still at current bullion prices) look cheap and are buys on their fundies. You should know by now that I'm no fan of the house and think them complete fuckers for a whole multitude of reasons, but credit where due, that note was a good argument and well put.

GS is still talking complete stupidities about gold price, however. The juxtaposition is best explained (in my own biased brain) by one set of GS analysts doing decent, oldschool, straight, numerical, value analysis work on stocks and seeing them cheap, while the bullion lower call from the very same company is sheer political bullshittery from a different place, department and mindset. Así termina mis dos centavitos.

On RIOM and rumours

After several e-mails arriving on the same subject, a quick note (if only to staunch the flow). Yes I've heard the same rumour as you, the one that apparently made the stock pop yesterday afternoon. No I'm not going to repeat it here because it's straight hearsay and I'm long the stock, so not going to join in the games. I'll say here that it looks like a classic rumour structure, with a grain of truth in the centre but then a whole heap of guesswork and conjecture is added on top, and as such I do not believe it. That's all and apologies if this sounds cryptic to others.