Lula speaks, the world is not allowed to listen

"C'mon Georgie, let's mambo"

"I reject your reality and substitute it for my own."

Adam Savage (of Mythbusters fame)

Y'see, up there in Anglospeakworld they tend to feed you a certain fresh baked, homogeneous, easily digestible version of what it's like down here. On the political front, the classic line is to split 'em up into "USA lovers" and "USA haters". So in the blue corner we get Uribe, Garcia, Calderon. In the red corner we get Chavez, Morales, Correa, Klishtina. Then the "neutral" dudes like Lula and Bachelet are there to help us all and not cause problems and say diplomatic things.

So to those residing in the USA: Expect a news blackout on the recent Lula da Silva interview in Germany's Der Spiegel magazine, cos it tells things that your media just won't want you to hear. Here are some of the money lines from Lula, translated into English;

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1. "Hugo Chávez is the best president that Venezuela has had in 100 years."

2. "The victories of Chavez, Morales and others and the latest (victory of) Fernando Lugo in Paraguay are signs of democratic advance....it was high time that presidents were elected who truly provided to the people."

3. "Europe need not fear the Latin American left."

4. "Where there is hunger, where people are deprived of education, politicians adopt more radical stances. This continent was ravaged by military dictatorships. 20 years ago there was guerilla activity in many countries. Today we all agree, with exception of the FARC in Colombia, that (democratic) elections are the only legitimate road to power."

5. We want to help (Raul Castro's Cuba). Brazilian agriculture experts will sow 20,000 hectares of soybeans in Cuba. It will be the first plantation of this type in the island."

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I'm sure that there are people out there who will now feel Lula is some sort of enemy just cos he says nice things about Chavez. If that's you, then this post is not for you...go back to stew in your own ignorance.

For anyone left reading, your helpful Otto strongly suggests you stop believing what your told in the English-speaking press, and I'm talking about left and right wing agendas promoted by whoever. Until you do, you'll never 'get' Latin America and the nuanced political way of the world down here. In fact, if you don't speak Spanish or Portuguese what makes you think you have an opinion about LatAm that is truly your own?

Gold Reserve (GRZ): The saga takes a twist

Naomi Campbell recently interviewed Chavez, and this is a really
gratuitous way of getting a picture of a nekkid chick on my blog

Just so you know once and for all that this whole permitting episode has absolutely nothing to do with the environmental impact of mining and everything to do with a high level politics, here's Steve Bodzin of Bloomberg on the latest twist in the tale today;

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Chavez to Decide This Week on Crystallex, Gold Reserve Permits

By Steven Bodzin

May 10 (Bloomberg) -- Crystallex International Corp. and Gold Reserve Inc. may get mining permits from Venezuelan President Hugo Chavez, less than two weeks after their stocks plunged on announcements operations would be blocked on environmental grounds.

``The decision will be made in the coming week,'' Environment Minister Yubiri Ortega said late yesterday in an interview at the presidential palace.

Crystallex plummeted 64 percent to 60 cents in trading on the American Stock Exchange since April 29, the day before it said Ortega's ministry would deny an environmental permit for its planned Las Cristinas mine. Gold Reserve said on the same day its permit for an existing mine would be revoked. The company's stock, traded in Toronto, has fallen 52 percent to C$1.75.

``There is irreversible environmental destruction, irreversible,'' Ortega said about the mining operations. ``If there is some type of remediation, and I don't know what in the world that could be, they may still get their permits.''

Ortega said Chavez will decide whether to grant permits after consulting with her and Minister of Basic Industries and Mining Rodolfo Sanz.

Crystallex Vice President Richard Marshall and Gold Reserve President A. Douglas Belanger didn't respond to calls for comment placed outside of business hours.

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Here are a few notes on that news story:

1) What the darnation does "irreversible damage" mean, anyway? In the case of KRY, the damage done up to now just goes away once you build a bigass open pit. In the case of GRZ, the area has been pockmarked but is still covered by a load of trees...what do the trees know that Yuri Ortega doesn't?

2) Chavez is now in full Simon Bolivar mode, and gets to decide on the fate of his country and minions with a simple "yes" or "no". This is Hugo's favourite fantasy, of course. All you greedy gringo minions hanging on his every word etc etc

3) This just blows the idea of the whole thing being about the environment straight out of the water. I hope that's clear as a bell.

4) Locals have shown they will lobby for Brisas. Meanwhile, the truth is coming out about the unpopularity of Crystallex in the region.

5) One of the stranger things in this note is the silence from Richard Marshall, IR guy at KRY. As one of the worst type of company pump merchants out there, he'd normally be jumping all over this story and getting his word in on a public level. The fact that he doesn't want to talk to the press while continuing to hand out false hope to the beaten up shareholders speaks volumes of the company culture at KRY.

Bottom line: Anything could happen in the next 7 days, and quite frankly the most likely thing to happen is nothing. This is just another episode in the sorry saga of Las Cristinas, and I maintain that GRZ has been caught up in the crossfire of a larger political fight. The dubious manoeuvres from KRY in the period 1998 to 2003 are easy enough to find out about, and I'd guess that all this environment thing is much more to do with that and much less to do with pollution in a state that continues to be heavily polluted every single day by informal artisan gold mining.

So as for the trade here, it's still obviously GRZ. There is no downside at this current price of U$1.72 (my average is U$1.89, for the record). There is upside for the company without any permit (to repeat, residual asset value is U$2.36 minimum, and likely much higher...see this post). And the big big bonus prize is now in play: King Hugo decides to let Brisas run, that $1.72 triples in a day. KRY would also shoot up, but without the permit the stock is worth exactly zero. GRZ has no risk and plenty of possible reward here. Definitely the way to play this soap opera from here.

sneakydeaky quiztime (IX)

It had to happen;

click to enlarge (worth it)

SNEAKYDEAKY QUIZTIME IX

And after last week's pathetic efforts that couldn't even reach 50% right answers, this Otto hopes you guys will be a little sharper this week. So here we go, and this week's quiz is all about "the big lie", or if you like "le grande mensonge", or if you like "deja de joder, che". Here follows ten (YES TEN!) statements, and your job is to attach the lie to the LatAm country that uses it the most. Goodie luckie my friendie.....

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1. We have rigorous screening procedures for bank account holders
2. We are giving our people the freedom they deserve
3. We are not dependent on copper.
4. We look after our poor.
5. We are significant
6. We are not shitscared of the USA
7. We are not dependent on oil.
8. We are serious people who prioritize economic development
9. We are not totally dependent on the USA
10. We do not have high inflation.

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And here's the list of countries (in alphabetical order, of course)

Argentina, Brazil, Chile, Colombia, Cuba, Ecuador, Mexico, Panama, Paraguay, Peru, Uruguay, Venezuela

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You'll notice that, to make it a little tougher, there are ten statements but 12 countries...that means there are two countries that don't have a saying to go to.

So what's up as 1st prize this week? Well, it'll be well worth you winning this one, cos it's an evening for two with Alvaro Vargas Llosa. Yes indeed, you get to share a dinner table with the winner of Mr. Bouffant Latino 1987, and while you listen to the great man talking about himself from caldo to creme brulée, wonder why you're not listening to his father...or at least reading one of his father's books.

Good luck this week, and let's have a bit of effort this time, guys. The address is:

otto.rock1 (AT) gmail (DOT) com

Answers out next Wednesday as per usual, so until then.........

Toodle Pip!

Covered the ECH short and bought GLD

Started at $52.88, finished at $48 today. Trade over, profit banked. It took a little under a month to get there, but patience is a valuabl commodity in this game.

Also, just bought the sub $86 offered on GLD. Today's gold price move smacks of a short-term slapdown, and these tend to bounce back rapidly. I see the $900 target as very gettable in the next few days.

MELI short still open; that's one volatile stock but it'll have to come down on valuation multiples at some point. Patience.........

UPDATE 3:55pm: Sold the GLD for a daytrade profit of a buck fifty. Ka ching

Farallon (FAN.to): more great drill numbers this morning

Farallon (FAN.to) has been ramping up its big Mexican zinc project to production this year, and that alone should be enough to push this stock a lot higher towards the end of 2008. But at the same time, the company is exploring other parts of its very large property, and today it released more drill results from another area that are very impressive.

Here's the link to the FAN.to press release, and you'll see that the Zn percentages alone are enough to make this a very interesting prospect, but added to the Zn are excellent returns for copper, gold and silver, and there's even some lead there, too. These are very nice interceptions, people.

So once FAN.to gets its first area into production (check the company website found right here for the details I'm not going into with this post), there will be a lot of upside waiting as the project expands. This company is beginning to remind me of Tyler Resources, the company that was bought out by Chinese money last year on the back of its large polymetallic deposit in Mexico. Farallon also has a large polymetallic deposit on its hands in Mexico, and every drill result is making it larger.

Here's the chart for FAN.to, and you'll see the clear resistance put up at the $0.80 mark. We break that and it's off to the races.

(click to enlarge)

FAN.to has over 400m shares outstanding, so there's plenty of dilution out there; it's likely to go back to the market one more time once production is underway to ask for working capital, but once that's done with, the company should be cash flow positive in 2009. There's a lot to like about FAN.to, with a good mgmt team working in a miner-friendly country, a big big deposit and the rising possibility of a lucrative buyout.

Buy it at today's 0.74. Trust your Uncle Otto. Target for end 2008 is $1.20.

Gold Reserve (GRZ): this could be a chance to buy more lower

I'm still looking for the previous low of U$1.90 to add to GRZ, and today's news that the Venezuela gov't has formally rescinded its Environmental permit could give the chance to buy while others panic.

Remember that its residual assets value is at least U$2.36, probably a lot more, and most of that is in cold, hard cash. Here's the latest press release:

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AP
Gold Reserve Inc. says permit rescinded for Venezuela mine
Friday May 9, 12:03 am ET

CARACAS, Venezuela (AP) -- Mining company Gold Reserve Inc. says its permit to develop a gold and copper deposit in Venezuela's biologically diverse Imataca Forest has been formally rescinded.

The Spokane, Washington-based gold miner says Venezuela's Environment Ministry cited environmental problems and illegal mining on its 1,235 acre Brisas property as reasons for revoking the permit.

Gold Reserve on Thursday denied that any illegal miners operate there, and said its representatives are meeting with Venezuelan officials to review their decision.

Canada-based Crystallex International Corp. last week said the Ministry had turned down its request to develop gold deposits in the Las Cristinas mining area, also in Venezuela's southern Bolivar state.

UPDATE 9:45am: Got some very cheap. Love them panickers.

Bolivia's senate pulls a fast one on Morales

In just 20 minutes this afternoon, by a simple majority vote, Bolivia's senate passed a motion calling for a national referendum on its President, Evo Morales.

The question the senate wants to put to the country is;

'Do you agree with the continuation of the process of change led by President Evo Morales Ayma and Vice President Alvaro Garca Linera?'

If 51% of Bolivians answer "no", then a general presidential election will have to be called.

A really nasty, sly piece of back door politics by the rich white racists that populate the senate, and it will be interesting to see how the president responds to this. He does not have to ratify the vote; if Morales prefers, he is totally within his rights to ignore the call for a national referendum. However, he may decide to go along with the idea and face his nation on what is in essence a confidence vote. If he won it would shore up his mandate in a somewhat definitive manner. With a simple majority in his favour, his position would be considerably strengthened in the debate over the separatist movement in Santa Cruz and other states.

On the other hand, he may decide not to ratify the senate vote and ignore the calls for a referendum, calling it the piece of sneaky underhand politicking that it is. Whatever happens, the ball is now in Evo's court.

UPDATE 10pm: Evo is going for it! Morales has accepted the challenge and his presidency will go to a national referendum. In his words, "If the politicians cannot agree, it's better that it goes to the people." Can't fault the guy for guts, and if his current 56% approval rating holds good, he'll have played a mighty strong card for the future.

Argentina SoyaWars™...do I have your attention yet?

Moral: listen to Uncle Otto.

Yesterday in this post, Otto writes this:

So, Otto's practical advice? Short Argentina bonds today, because if the jungle drums are proved correct the whole charade starts to get nasty at 3pm New York time today.



Today in Bloomberg, Lester Pimentel writes this:

May 8 (Bloomberg) -- Argentine bonds fell to a one-week low as farmers began an eight-day strike to protest tax increases after negotiations with the government of President Cristina Fernandez Kirchner stalled.

The yield on Argentina's benchmark 8.28 percent bond maturing in 2033 climbed 6 basis points, or 0.06 percentage point, to 10.56 percent at 9:05 a.m. in New York, according to composite data compiled by Bloomberg. The bond's price fell 0.45 cent on the dollar to 78.75 cents.

Argentine debt slumped for a second day as farmers blocked grain exports and withheld crops as the government refused to suspend a tax increase. The strike follows a work stoppage in March, when roadblocks triggered nationwide food shortages and a jump in consumer prices.

``The talks fell apart as the government is taking a hard line,'' said Edwin Gutierrez, who manages about $5.5 billion of emerging-market debt for Aberdeen Asset Management Plc in London.

The risk of owning Argentine bonds neared the highest since June 22, 2005, according to Bloomberg data. Five-year credit ...............etc etc

Junior miners should be screaming at you, cos they're screaming at the people that matter now

Good excuse for some cool art, dude

You need junior miners exposure in your portfolio. Period.

Check out this link to an interesting interview with the head dude of Kinross (KGC) published yesterday. He says that there are a lot of bargains in the junior/exploration miner sector, and he reasons this is because of the credit crunch that has dried up funding for these companies.

Well yeah...big DUH all round and obviously obvious to anyone that follows the industry. But to see the CEO of a big gold miner say it out loud should be a clear signal to you. It is to me.

Take a look at this chart....

(click to enlarge)

...which shows the Canadian Venture exchange (packed to the gills with juniors) in ratio to gold. Even though there's a slight recovery already started the ratio is still way out of kilter, and there is plenty of room for the better quality junior miners to float back up on this evidence alone.

Add to the mix the persistently high metals prices. Add to the mix precious metals producers who will be looking to replace in situ assets of gold etc as their present mines deplete. Add to the mix the likelihood of credit becoming a little easier to obtain soon enough.

So stocks to consider: I'm looking at good quality, large juniors or companies that have recently started production, because these are the ones most likely to get bought out first. Here are two lists, one for precious metals and one for base metals. The lists are by no means definitive, but will hopefully give you a starting point for further DD. All of them are LatAm exposed companies, by the way. I know there are opportunities in other regions, but I'm a LatAm dude and stick to what I know.

Precious Metals Ideas
Jaguar Mining (JAG)
Minera Andes (MAI.to)
Aurelian (ARU.to)
Fortuna Silver (FVI.v)
Mansfield Minerals (MDR.v)
Luna Gold (LGC.v)
Uruguay Mineral (UME.v)
Mag Silver (MAG.to) (MVG)

Base Metals Ideas
Inca Pacific (IPR.v)
Candente Resources (DNT.to)
Los Andes Copper (LA.v)
Baja Mining (BAJ.to)
Chariot Resources (CHD.to)
Farallon Resources (FAN.to)

So there's some food for thought. If you have your own favourite junior, tell me about it. I'm not trying to lay down the law and say these are the only good ones out there.

Ecuador's miners and investors holding their stock can look forward to a happy ending

I hope you've all loaded up on Aurelian (ARU.to) at these low low prices. Word from not one but two reliable sources is that the "three concession maximum" directive included in the mining mandate will work as follows:

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1. The mining company, for examples Aurelian (ARU), Corriente (ETQ), IAMGold (IAG), Dynasty (DMM.to) etc. will have to give up all but three of their mining concessions as per the mining mandate Article 4*.

2. The concessions will then be offered back to the same mining company on a "first refusal" basis, and a price-per-concession settled with the government.

3. If the mining company does not want the concession (or if the two parties cannot agree on a price) the concession will then and only then be offered in public tender to the highest bidder.

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Let's make this clear: this has not been announced, and may turn out to be an informal arrangement between miner and gov't, but I am very, very confident about the veracity of this information. I am also long ARU by way of full disclosure, and I have ARU in the core portfolio and as part of my trading account, so please take that into account.

Anyway, this sounds like a smart solution to me. The government gets a decent price for its mining concessions, the mining company gets its assets back at a cost (but probably not a prohibitive price tag, all things considered) and the market is assured once and for all that Ecuador really does want to play ball with the serious mining companies. However, at the same time the gov't gets to achieve the main objective of the mandate article by taking away concessions that were handed out on the cheap to locals as part of the old boys' favour network in very suspicious circumstances.

It also fits with stories from hardcore environmentalists upset with mining and petroleum minister Galo Chiriboga because he has not provided requested information to the loony treehuggers and, according to them, has been adapting the mandate to favour the nasty horrible foreign miners (you know, the ones who cause 1000 times less damage to the environment than the small unregulated miner). Interesting how calls for Chirboga's head from the hard left have been totally ignored by those with real power (Acosta, Correa etc), but big recent protests from out of work miners get full attention and further assurances of a better future.

Bottom line: It looks like President Correa is being true to his word about his desire to have a responsible mining industry in Ecuador. He's not going to accept any old deal, but this concession deal will go a long way to calm the frayed nerves of investors exposed to Ecuador.

Got ARU?

* Article 4 The extinction is declared with no economic compensation for those mining concessions that in number greater than three have been granted to a single person or their spouse, or to judicial persons and their related companies, be it via the direct participation of the judicial person, or its shareholders and their family members up to the fourth grade of blood and second of affinity.

sneakydeaky quiztime (VIII): the answers

click to enlarge (worth it)

So here we go with the answer to this week's quiz. If you remember (or care), I asked you to match the LatAm presidents to their current approval ratings, according to a respected pollster. Well here's the link to the PDF that holds the magic numbers, and the polling company in question is Mexico's established and pretty much reliable "Consultora" who published a recent "poll of polls".

So on with the show, and here come the answers from most loved all the way down to the most unloved

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1. Uribe (Colombia): 84%

Personally i can't stand the guy, but the Colombians just can't get enough of Uribe. In the end, I defer to democracy; 84% after nearly 6 years as head of state is an impressive approval rating no matter what side of the political fence you're looking from.

According to surveyors, Uribe gets plenty of bonus points for his forthright manner, the way he consults with the population on a barrio by barrio basis (which even I say is good), but most of all the way he tackles the FARC head-on. So if he goes for a constitutional change to give him re-re-election chances, expect foreign human rights wet-asses (like me) to kick up more of a fuss than the Colombians themselves.

2. Correa (Ecuador): 62%

Well he probably scores high on looks alone, but Eric's studmuffin is getting high approvals in a country famous for short honeymoon periods and popular revolts against its presidents. So far so good for Rafa. His stance against Colombia's incursion to bomb the FARC high earned him high marks with the locals.

3. Calderon (Mexico): 61%

Perhaps the most impressive showing of all. Calderon only just squeezed home by a wafer-thin majority against the leftist Lopez-Obrador, but since then has done a good job according to his own people. He has scored well for his tough stance against the US version of the Berlin wall. The shadows in his future include lower revenues from state run Pemex oil, and the US economic slowdown affecting Mexico's economy, as the US is around 80% of Mexico export demand. Time will tell.......

4. Morales (Bolivia): 56%

Although you'd never believe it from the total crap you read in the English press, Morales is one of the most popular regional presidents, and 1.2m people threatening to destabilize the country because of their own racist, fascist attitudes and backed up by shameless commentaries in the Washington Post or insurgent claptrap from people who should know better isn't going to change that, much to the chagrin of those who cling to the idea that LatAm is the USA's backyard.

5. Lula (Brazil): 55%

Why isn't he any higher in the polls? Well, Lula heads up a party reeking with corruption in its lower echelons, and that takes the shine away in the eyes of locals, but any on-balance positive rating in LatAm is cause for applause. Lula has been in the job for over 5 years, so he's doing very well, all things considered.

6. Chavez (Venezuela): 51%

This is the only percentage reading that whiffs of controversy. To get 51%, Sel Consultores took a recent DATOS poll of 65% and averaged it out with a previous "Hinterlaces" poll that put Chavez down at negative three zillion (cos that's what Hinterlaces do, cos they are extremely biased against Chavez and are pretty blatant liars to boot). He's probably a little higher than the 51% mentioned here, but all the same you can say without missing a beat that he polls better than his arch enemy Bush.

7. Fernandez de Kirchner (Argentina): 47% (now 45% according to latest poll)

Honeymoon, officially over. It's taken Klishtina less than half a year to get on the nerves of the Argentines, and nobody in their right mind thinks she wields any power. Nestor still rules, and Klishtina is just for show....she's not even doing that very well. Remember Isabelita!

8. Bachelet (Chile): 46%

Michelle is fighting back a bit, and good for her. She's been clobbered by the dog's dinner she made of the Santiago public transport system and then inflation, but since then she's done that radical thing they call "being honest about things", and Chileans have apparently appreciated being treated like adults. Lessons for 90% of world leaders there.

9: Tabare (Uruguay): 45%

Uruguay may be small, but they really love their politics there. Even though the country has been going through relatively good times, the traditional party divisions mean (as almost always) that presidential approval ratings are low. No matter; Uruguayans may not approve of the person but they have great respect for the institution.

10. Garcia (Peru): 34% (now 28% according to latest poll)

How can it be? Isn't Peru the country with the fabulous growth and the rave reviews? Yep, and it's also the country with 42% of the population under the poverty line and the country where anyone who lives outside of Lima is treated like a sub-human. Either Garcia starts listening, or he continues to plough his own arrogant, self-serving cause and brings serious problems upon his government and his country. Truly the worst president in today's South America, and Peru agrees with me.

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And thus ends another quiz. Interesting that the popular leaders don't fall into a left vs right category, isn't it? Of the top 4, 2 are despised by "the North", and two are loved. Tell that to the judge, dude.

This week I'm not declaring a winner, cos the best score was a mediocre 4/10 (and 4 people hit that score, too). Just not good enough, I'm afraid. If you were one of the seven souls who entered, thanks for trying but consider yourself finger-wagged, too.

Hah!

So watch out for the next quiz, coming to a screen near you Saturday. Until then:

Toodle Pip!

Argentina: SoyaWars™ is back on

you scratch my back I'll scratch yours

The negotiations between the rural boyz and the government boyz have been dragging on and on and on. But now the big producers have got their harvest in and nearly all product to market, expect the rural boyz to coincidentally "suddenly run out of patience" and start the roadblocks again. Also, expect the government to take a hard line with any roadblocks, and police/army action is in the cards.

Just another way of screwing the little guy and keeping the population under control. The fear/greed combination works anywhere in the world, ya knowz. I have nothing but contempt for both the Argentine government and the so-called farmers' representatives who care about themselves first, and way, way first, before giving a damn about those they are speaking for. I can see them on their cellphones now, calling their farm managers to make sure all their soybeans are safely in the silos before walking out of the talks in disgust. And the gov't has been "let's call for talks, and then just keep saying "no" until the country boys have harvested all their crop and then they'll walk out in disgust" etc etc lather rinse repeat.

So, Otto's practical advice? Short Argentina bonds today, because if the jungle drums are proved correct the whole charade starts to get nasty at 3pm New York time today.

UPDATE 5pm: You heard it here first (again). Here's the Bloomberg version of how things are about to develop, and here's Clarin explaining how exports are about to be blocked. I hope you got those shorts on the Argy bonds in place. Hot damn, this blog can make you money....

The bet is on

Ten bucks looks more impressive this way

For your general entertainment and edification, I have made a bet with gary from biiwii.com.

I say that spot gold hits U$900 before U$850

He says that spot gold hits U$850 before U$900

The bet is for a full TEN DOLLARS, so this ain't just two old fools jawin' off, here. There's beer money involved, and that's serious. I do wonder why I'm taking on one of the best technical analysts around (and winner of stockpicker competitions) on a ST trade wager, but hey....that's just me.

So let battle commence....errrr.....well...it has already, in fact. The bet was struck last night when Gold was hovering around the $875 midpoint, and here we are at $866...GULP

follow the bouncing ball

Famous quotes in history, number 37832; "It's not about oil." (George Bush Senior, 1980)

Somewhere in South America recently, the leader of a region expressed the long-standing discontent with its democratically elected national government by saying that autonomy for the region would be a good idea. That leader was condemned in the English language press.*

In another place in South America recently, the leader of a region expressed the long-standing discontent with its democratically elected national government by saying that autonomy for the region would be a good idea. That leader was cheered as a courageous beacon of democracy by English language press.

So what's the difference? Well, here's a quick profile of the first country

Name: Peru
Government: Under Alan Garcia, pro-foreign investment, friend of USA.
Dissenting region: Puno, one of the poorest regions in the country and virtually ignored by national government.
Dissenting Regional leader: Hernan Fuentes, left wing, sympathizer of Hugo Chavez.

Now here comes country two:

Name: Bolivia
Government: Under Evo Morales, Socialist, left wing, sympathized of Hugo Chavez
Dissenting region: Santa Cruz, the richest region in the country, complaining of the fiscal burden being placed on it by national government.
Dissenting Regional leader: Ruben Costas, right wing, opposed to Morales.

Rather than stuff the message down your throats in words of two syllables or less, I'm going to assume you have the necessary intelligence needed to spot the hypocrisy and also where that hypocrisy comes from. But just to make it clear what kind of reception the Santa Cruz vote received in Latin America, here's the list of countries that officially protest the move by Santa Cruz region:

Argentina, Ecuador, Colombia, Brazil, Venezuela, Guatemala, Mexico, Peru, El Salvador, Nicaragua, Haiti, Santa Lucia, Belize, and Trinidad and Tobago. Not a bad little list, eh? By the way, Bolivia had no vote, and Paraguay did not attend the necessary meeting due to its interim government status. (Only notable absentee? Chile. I wonder why...)

So, what have you been told in English about last weekend's Santa Cruz vote? Oh yeah......this.

UPDATE WEDNESDAY: Expect to hear a lot more about the idiot in charge of the Puno region, Hernan Fuentes. Today he has announced that Puno will also have its own autonomy vote in the near future. Here's a Spanish language link. The national governemnt has responded by saying he "shouldn't even be in Peru".

* and rightly so

Does Otto work for Deutsche Bank?

Don't say you weren't warned, people. Before the bell on Friday May 2nd, Otto writes this:

ITU: Banco Itau got a big pop on strong volume yesterday on the investment grade news, and will be one of the first in line to receive hot money when Sao Paolo opens tomorrow. It may be close to fully priced on fundamentals right now, but there may well be a lack of logic in Brazilian trading over the next couple of sessions. Trade it on a momentum basis.................


And on Tuesday May 6th, this is reported:

Itau Cut to `Hold' From 'Buy' at Deutsche After Rally (Update1)

By Fabio Alves and Paulo Winterstein

May 6 (Bloomberg) -- Banco Itau Holding Financeira SA, Brazil's second-biggest non-government bank, was cut to ``hold'' from ``buy'' at Deutsche Bank AG, citing a recent stock rally and "limited'' earnings growth......................

A little sanity is coming back to Gold

When gold went under U$850/oz, there were plenty of technical analysts that were calling $814, $770 and even $714 as logical targets on their charts. Well.....maybe it's something to do with the dollar, but I didn't buy the death of gold talk for a second. Here we are at $880 and rising, and maybe more importantly the dollar is dropping from its Fed-induced mini-rally.

The continued resilience in gold must be more than a little irritating for those that saw a bright near-term future for financial stocks, but that irritation be about 100-fold when they look at the price of oil.

www.oil-price.net, spot
WTI at $121 this morning

Bottom line for LatAm; commods high= region in bull market. Errrr.....next question?

Oh? You wanna know a target for gold? ok...ST $920.

Oh? You mean Peru's social problems are beginning to be noticed?

Otto bets: Alan will not be taking world leaders
on a tour of this neighbourhood

An interesting Reuters story yesterday, and here's the necessary link so check it out yourself. Basically, it's beginning to come to the attention of people "up North" that Peru's much-vaunted growth rate and all the riches and baubles that go with it isn't being spread around. The spokesperson interviewed by Reuters says that in the rush to develop, the country is forgetting little details like....errrrr....human rights. It also says Garcia's government is on a campaign to stigmatize NGOs that dare to point out a little bit of reality to anyone who'll listen.

Errrr.....DUH, dudes. Here's the note I put together on the same subject in March, and even waaaaaaaaaaaaaaay before this 'umble lil blog started, the problem has been pretty clear to anyone that bothered to go further than the gov't headline numbers (hmmm....those reading beyond headline numbers = 1% of people supposedly interested in Peru).

No matter...better late than never, and the wider world is going to get a better idea of the grassroots social unrest when the APEC summit gets going, cos local unions and social groups have orgenaized big rallies, marches and suchlike to coincide with the arrival of regional and world bigwigs. The mere idea of international delegates getting shown the "other" Peru while here has pissed Alan Garcia off to such an extent that he has baned any marches , and has threatened to use the Army to quell any street-noise. So all in all, a recipe for conflict in the next two weeks. Perhaps the hottest days will be May 14th and May 15th, but the protests won't be confines to those two days for sure.

shorting MELI here

(click to enlarge)

Hit $56 on good volume today, and it's now officially ahead of itself.

In this previous post, I made the case for MELI being a decent growth stock but prone to US pumping. The investment grade hike in Brazil will only make MELI's life better once the change ripples through to the real economy, and that's a way off still.

Until then, IMHO (and shown in more detail in the linked post) we have a stock that's worth about $48 in two years' time as long as the earnings growth continues on the same lines. The U$56 printing today is too far too soon. Short it as a trade, and look for $45 first stop. The bottom line is that, growth stock or not, MELI does not earn enough to justify this multiple..not yet anyway.

Bolivia, and how a picture paints a thousand words

The headline reads "Bolivia in Check", which loosely

trasnslates as "Bolivia at a crossroads", or "Bolivia Stalemate"

Here's today's front page of Peru's daily national, "La Republica". The top photo shows the celebrations in Santa Cruz last night. The bottom photo was taken at the march in La Paz /El Alto yesterday that protested the unofficial referendum.

But of course it's not about race....of course not. Whatever made you think that?

In my mailbag today, I got a message from A. Person, who was pretty horrified that I called the people of Santa Cruz racist, and for good measure I was told how communist I am. All I can say to that is "wrong". Race seems to be a touchy subject right now, what with a US presidential race with an afro-American as (slight) favourite for the job as i write this. And plain and brutal as it might look in print, the people of Santa Cruz have long had really nasty racist views. One thing particularly abhorrent about this public showing of supremacy is the way their leaders have jumped on the Morales presidency to polarize these views amongst its population, and thereby making its push for its long dreamed-of autonomy.

As for labelling people commie or fascist or any point in between, that simple doesn't work round here unless you understand the more subtle nuances of LatAm politics. This was driven home to me today, when somebody pointed out to me that Peru's growth of the last 5 years has pushed GDP per capita to around U$4,000. All very well, but the US GDP/cap stands at U$46,000, and 42% of Peruvians are members of families that earn less than U$1,000 per year (yep...that says year). When you're poor like that, the way you vote makes little difference.

On a lighter note, another mail asked me to put together a list of all ADRs in Latin America...yeah, I can do that, FR. There are quite a few, and there are also quite a few fully exposed US stoks to add in to the list perhaps (examples PCU, SIL), so maybe cutting it into a few country-by-country posys would be wise. Gimme a few days on that project.

Notes on the Santa Cruz vote today

"Errr......I had a little trouble voting today."

(courtesy lanacion.com)

Head Santa Cruz whiteman Ruben Costas said that today had been a success and qualified any violent incidents as "isolated". In his words;

"This is a peaceful revolution...I would say that Bolivia is re-born by its own decision, and not for speechmaking."

As published and labelled by local press today, here's a shot of pro-autonomy people demonstrating their brand of peace.

courtesy lostiempos.com, cochabamba newspaper

Yup, looks peaceful to me. Police say there have been confrontations in at least 10 places in the Santa Cruz region. No doubts that both pro and anti Morales groups were involved, and for sure both sides will say the others were the aggressors. But cameras tend not to lie so much, and the guys above don't look like they're on the defensive to me.

Meanwhile, the current vote looks like running around 85% "yes", 15% "no", which at first light looks like a resounding victory for the racists. But when you look a little closer, only 25% to 50% of the eligible voters turned out, and ballot boxes were destroyed in all the region's pro-government strongholds by protesting groups.

Ballot box burned by pro-Morales group, one of at least
63 ballot boxes destroyed in protest today (photo reuters)

Whole bunches of accusations are flying around from both sides, one of the more interesting being proof of ballot stuffing by anti-Morales groups, according to the national government at least. Also, around 200,000 people marched peacefully (glad to say) in La Paz to support the Morales government. But the most important statistic is "35 injured, 1 dead" (and that injured list is climbing fast). Choose which side is innocent and which side is guilty at your own peril. It's pretty clear to this Otto that no one is innocent, but how anyone in charge of the region....
....could call today successful and talk of peace is a total mystery to me.

A sad day in Bolivia all round.

Commodities bull over? Gimme a break!

violent peace....blah blah blah...buy it right now...blah blah blah
we are the world...we are so huge...blah blah blah
johnny can't read...blah blah blah...I can't see...blah blah blah
tuna on white...guns all night...blah blah blah

James Newell Osterberg Jr, 1986

Bubble this.... bursting that.... it's all over for commodities.... US recession the death of copper... buy financials and sell metals (the latest fashionable clarion call, you might have noticed)...

The amount of words written by people who do not have the slightest clue about the commodities market is quite incredible and is nothing but useless noise. If these people want to advise you into their favourite financials sector, well fair enough, but why you have to sell your commodities to go into financials is beyond me. Aren't you allowed to hold both?

The constant chatter neurosis of the market can suck the unsuspecting investor into thinking whatever at any minute. A new variant is how the bottom is going to fall out of spot copper as soon as the Codelco strike is resolved....oh gimme a break, yeah? Sure, this blah blah blah can move the short term market and make a buck for the sharp trader, but to make the serious money you need to see a little further than tomorrow. And to underline what the market really thinks of the future of base metals, have a look at the future contracts (yeah, say "DUH" if you like, but those that think they know better often miss this completely).

click to enlarge

To help read the chart, the X axis shows months out from today, and the Y axis shows the price for copper in US dollars per metric tonnes.

So what do we notice? Yeah, the curve goes down as time goes on. A metric tonne of copper is selling at U$7,700 for July 2010 delivery. In old money, that's U$3.496/lb right now. So to keep the argument simple, if you are a copper producer you can go to market with the wares you'll produce in 2 1/4 years' time and sell it at a raging profit. Is that clear?

Well if not, note that opportunity cost plays a part in the lower future price. Keeping to a simple model for the sake of demonstration, as a copper miner I could sell my 2 1/4 year copper production at $3.49/lb and with that money earn some nice interest. If a bank gave me 5% APR on that, my U$3.49 would turn into U$3,89 (a spit away from today's spot price, which is not a coincidence).

So tell me again, what is it that the commodity bears want us to believe about the US recession dragging down commodity prices for the next two to three years?

But that's not all, of course. Let's note that copper producers are turning their backs on hedging their product. That tells me that even though producers can lock in near record prices for the next two years, they'd rather let their bets ride. And I don't know about you, but I think the fact that producers large and small and all over the world are closing their hedge books shows the confidence about future prices from the people that really matter; the copper miners.

I do tend to focus on copper, but as the traditional leader of base metals it does tend to show the way for the rest of the complex. But the point is simple; if the traders moving thousands of copper contracts a day price copper with no significant drop, and the miners who make put the metals on the market don't want to lock in that U$3.50/lb, why should you think any different? And I haven't even started on the sustained Chinese demand and how last week's U$3.77/lb was snapped up by bargain hunters.

So if you really want to roll the dice and buy some financials right now, I wish you good luck (I’ll wait until things are safer, personally). But why turn your back on guaranteed high profits from companies such as Freeport McMoRan (FCX), Southern Copper (PCU) or the high likelihood of continued buyouts in LatAm copper juniors, with Inca Pacific (IPR.v), Candente (DNT.to) high on anyone’s list of targets? Or put another way;

GOT COPPER?

Happy Birthday To Me

Screw it, I'm gonna tell the world.

Yeah, today's my birthday. So don't expect much in the way of posting today, cos I'll be flaked out drinking rum'n'coke by about 10am*. We're pushing the boat out chez Otto and going for "the big table", too. Then later it's the big bad crunch match, when the world's greatest football team visits the world's luckiest football team, and as long as I'm not fast asleep by then I'll be glued to the screen for that one**. And as my second team in a far away land won promotion yesterday (early birthday present), hopefully the good luck will keep on running to the big duel today.

So have a good one wherever you are. And I'm not tellin' you dudes how old I am, either, but it's a number that comes between 40 and 42.

*wife permitting
** vamooo lo millooo carajooo

UPDATE: The match sucked