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6/14/08

Argentina SoyaWars™ The strike is back on (yep...I've definitely used this title before)

King Neshtor takes a gentle stroll round the plaza
in front of the town hall tonight

Jeez it's like the freakin' hokey cokey...these dudes are in out in out then shake it all about.

So according to the Agro Boyz and their announcement a couple of minutes ago, the strike starts at midnight tonight (officially...in fact it was back on the moment De Angeli was detained at lunchtime today), and it will be reviewed on Wednesday 18th. Four more days of tension, but this time there's a serious possibility of Buenos Aires running out of basic foodstuffs.

Tonight had also seen a very thin and drawn looking King Nestor turn up to marshal his hit squad at the Plaza de Mayo. Also, there are signs of a gov't willing to give ground, as cabinet chief Anibal Fernandez said (words to the effect that) the gov't is willing to negotiate at the table.....a long way from its triumphant attitude of last week, it must be underlined.

Obama: "Sanctions for Venezuela"

They tell me some country up North is having an election soon, and one of the dudes is a oldboy hardass war veteran. So cos the young dude up against him doesn't want to be painted as a bedwetter he's suddenly coming on all tough about his country's "enemies".

As a result, when the young liberal handwringer was interviewed recently by a Spanish news dude and asked about Venezuela and Chávez, this is what he had to say:

Interviewer: "And Hugo Chávez? Is he a threat to the national security of The United States and the rest of the continent?"

Barack Obama: "Yes, I believe that he is a threat, but a manageable threat. We know, for instance, that he could have been involved in supporting the FARC to the detriment of a neighbour. This is not the kind of neighbour that we want. I think it is important, via the Organization of American States or the United Nations, to begin sanctions that say this kind of behaviour is not acceptable. What I have stated (previously) is that we must have direct diplomatic relations with Venezuela and with all countries in the world."

Argentina SoyaWars™ : told you it was going to get nasty

The ruler of all Argentina talking with his wife

The semiofficial/unofficial picketing and road blocks by the agro boyz at the border crossing town of Gualeguaychú headed up by grassroots leader Alfredo De Angeli has been broken up by police this morning. De Angeli and about 20 other strike leaders have been arrested and taken into custody. Right now the agro boyz are in crisis meeting, and roadblocks have either sprung up again or have been reinforced all over the country. Here's Clarin on the story.

De Angeli (sitting, right) at the roadblock this morning. He was detained soon
after this photo was taken (source Critica de la Argentina)


Meanwhile the "cacerolazos" have started up again in downtown Buenos Aires, in protest aginst "the gov't repression" of the roadblock.

De Angeli being arrest and taken away. He might have been
on strike for over three months so far, but
it's safe to say it's not a hunger strike

The gov't has played a very strong and risky card, here. It may have something to do with the report that landed on Klishtina's desk last night and was leaked to the newspaper "Critica de la Argentina", that showed the low stocks of Soya in silos and a presumed multibillion dollar hole in tax payments due to the strike. Here's the link (Spanish note).

This is turning very ugly. Whoever is right and whoever is wrong, guarantee that it will have to get worse before it gets better.

UPDATE 5pm Argentina time:
De Angeli has just been released along with 18 other detainees. After being released he said "They think they will pacify us like this, but it's quite the contrary."

Local media report approximately 70 roadblocks have been set up all over the country. Protesters have congregated in the centre of Buenos Aires to denounce the gov't actions. It's all fairly civilized so far, and the detentions by the police weren't done with much violence.

UPDATE 2, 8:45pm Argentina time: In a hastily convened press conference, cabinet chief Anibal Fernandez said that road blocks are " not a valid form of protest."

Mercado Libre (MELI): Nice to know the CEO agrees with me

Galperin: Don't just stand there, let's get to it,
strike a pose, there's nothing to it.

While the permabulls bluster and cheer on "their stock" from the sidelines (you can tell when people are fully bought in...that's when they shout the loudest) and rip into anyone that dare tell them anything bar 'you must buy BUY BUY...anyone who buys this stock is just so clever, like....dude', signs from people that really know about MELI aren't so great.

President and CEO of MELI, Marcos Galperin, sold 96,895 shares on June 9th at U$41.62, and another chunky 280,099 shares at $38.40 on June 10th. Here's the link to the SEC form explaining all. Y'know, maybe Marcos is reading this blog, checking out my plans for a MELI buy at low prices and thinking, "Hey, dat Otto gotta point....I can pick 'em up cheaper later.....".

Or maybe not.

Of course, a single disposal like this one isn't exactly the end of the world, especially when the Galperin dude still owns 5.39m shares of MELI. But it does start to smell a bit funny when you also notice that in the last month:
  • Oscar Gimenez, the Senior VP payments, has sold 25,000 shares (leaving him with just 34,687 shares) at prices of $46.91, $52.53 and $50.38. Good timing, Oscar!
  • Nicolas Szekasy, the Chief Financial Officer, has sold 40,000 shares at $52.16 and $46.94. Nice vote of confidence from the man who oversees the books, yeah? And the stock has dropped 26% since Nicolas started selling too. You don't suppose.......? Nah, couldn't be!
  • Hernan Kazah, the Chief Operating Officer, has sold a total of 70,000 shares at prices of $51,85, $46.27 and $44.23. Nicely done, Hernan!
Anyway best of luck to you Marcos, and enjoy that cashout of fourteen million seven hundred and eighty-eight thousand five hundred and seventy-one dollars and fifty cents.

Hernan, you have fun with your wedge of three million three hundred and fifty-five thousand three hundred dollars.

Nicolas, buy yourself something shiny with your two million five thousand four hundred and ninety dollars, won't you?

Oscar, don't feel envious of the others, cos your one million two hundred and seventy-four thousand five hundred and fifty dollars is still a fair chunk of change, my man.

All before tax, of course. As they say in Argentina, "Que pais generoso".

6/13/08

Idiot Peru analysts strike again


By now you shouldn't be surprised, but let's check the latest episode of "We know nothing about Peru but still get paid to cover the country", featuring a band of stupids known as "the professional analysts". Here are the links to episode one and episode two of the saga, but let's just go straight over to our friend Alex Emery of Bloomberg to see how yesterday panned out:

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This report came out yesterday morning:

Peru's Central Bank May Keep Rate at 5.5% as Inflation Slows "June 12 (Bloomberg) -- Peru's central bank will probably keep its benchmark lending rate unchanged at the highest since 2001 after inflation slowed for a second month. Thirteen of 15 economists surveyed by Bloomberg expect the bank to leave the reference rate at 5.50 percent at its meeting today after an unexpected increase in April etc etc yada yada.................."

.....and this one came out yesterday evening

Peru Bank Unexpectedly Raises Rate to 5.75 Percent (Update1)

June 12 (Bloomberg) -- Peru's central bank unexpectedly raised its benchmark lending rate to 5.75 percent in a bid to control inflation etc etc yada yada............."

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

THESE PEOPLE ARE IDIOTS! Or maybe the bigger idiots are the banks and financial houses that actually pay them money for this crap, but they still have the analytical capacities of fruit flies. Next time you pay that extra charge on a bank transfer, remember where your hard-earned moolah is headed, yeah?

Whatever, but there's no doubt the central bank is a helluva lot more worried about inflation than the official noises that come from Garcia&Co and swallowed whole by the sheep who listen to them. This isn't much of a surprise, either (unless you're one of those "13 of the 15 professional dumbasses surveyed by Bloomberg" that is), as the weakening Nuevo Sol (now at 2.92, up from 2.65 in quicktime), will put pricing pressure on the fast rising quantity of imported goods aimed at Peru these days. Here's a chart showing how Peru's imports have been growing....

...and that's a serious, serious 54% increase in imports YoY. And despite the metals boom, Peru's trade balance is getting smacked around because of this....

...and there's not much in the way of surplus left to play with, Alan.

So it looks like there's an effort from the BCRP to slow the economy down, here. How long before our friends the freeloading, finger-in-the-air idiot analysts work this one out? That remains to be seen, but consider yourself ahead of the curve now, dear reader.

South America World Cup futbol qualifiers: beating the market

This weekend sees the World Cup qualifying matches back (YAY!), and UK bookmaker SkyBet is offering the following prices. So let's give ourselves a theoretical U$100 bankroll on the continent's main passion and see if we can make some money. First the prices, and let's use the first match up to explain how the British oddsmaking system works (for those used to the US system). You'll find the explanation at the bottom.

Uruguay 4/9........... Draw 11/4 ....... Venezuela 5/1*
Peru 6/5.............. Draw 2/1.......... Colombia 2/1
Paraguay 5/2...... Draw 11/5.......... Brazil 10/11
Argentina 1/7.... Draw 5/1....... Ecuador 12/1
Bolivia 11/8........ Draw 15/8............ Chile 15/8

Now for Otto's pick on this round:

The trick, as always, is to find the value. It's almost impossible to call every match correctly, so I'm going to concentrate on just two matches. I think Colombia is good value at 2/1 to travel to Peru and win, because this present Peru national team is, quite frankly, awful. It does have four or five European quality players in the squad, but that's just not enough at this level of soccer. So let's put $60 on Chile to win (a theoretical total return of 120 + 60 = 180).

For the other match, I'm going to bet $25 on Paraguay to beat Brazil (at 5/2), and $15 on Paraguay and Brazil to draw (at 11/5). Brazil are not fielding their strongest team in this round (thinking of Argentina in the next match, perhaps), and travelling to Paraguay is a tough match for the best of sides. Paraguay will be "up for" this match, and I expect them to get at least a point. My bet favours Paraguay to win (return of $87.50), but if it finishes as a draw I'm covered (return of $48).

So to recap, I have my theoretical $100 in play on the following bets:
  • $60 on Colombia to win @ 2/1
  • $25 on Paraguay to win @ 5/2
  • $15 on Paraguay/Brazil to draw @ 11/5
Let's see if we can beat this little market, too, yeah?

UPDATE SATURDAY: I see Skybet has trimmed its price on Colombia to 7/4. Others seeing the same value, it seems.

*This means if you bet 9 units on Uruguay to win, you get 4 back and your original 9 bet. So total return is 13. If you bet 4 units on the draw, you get 11 back + 4 = 15. If you bet 1 unit on Venezuela, you get 5+1 = 6 back if successful. Or if we use a straight $10 bet on each possibility

Uruguay returns $14.44 for a $10 bet
Draw returns $37.50 for a $10 bet
Venezuela returns $60 for a $10 bet

Two great Ecuador stories from Reuters

Ecuador has been playing poker with the foreign oil companies, and has been bluffing a soft pair right through to the river. Oil has held aces all the time...total nuts...and knows it. Today, Ecuador blinked. Here's a great piece of journalism from Reuters' Alonso Soto. It starts like this...go read the rest.

"QUITO, June 12 (Reuters) - Ecuador is offering to cut windfall taxes for foreign oil companies for one year and keep the current contract models in exchange for them dropping lawsuits against the government, Oil Minister Galo Chiriboga told Reuters on Thursday. The new offer would mark a softer tone for leftist President Rafael Correa, who wants to boost state control over..............."

Meanwhile, Reuters is also reporting no less than a foiled plot to kill Studmuffin himself, and involving three Colombians! Oh man...this story surely has some legs!

"QUITO, June 12 (Reuters) - Ecuadorean police arrested four men accused of plotting to kill leftist President Rafael Correa, the country's attorney general said on Thursday.

Attorney Washington Pezantes said police were interrogating the suspects, three Colombian citizens and one Ecuadorean, caught in the hilly capital Quito................."

According to reports, at least one of the four arrested is a member of an extreme right wing Colombian paramilitary group. Correa tonight said that the four may be simple con artists. Meanwhile the equivalent of the Attorney General of Ecuador, Washington Pesántez, later added,

"We don't have fine details, we simply know that there were foreign nationals contracted to assassinate the President of the Republic (and who are) connected with some Ecuadorean people."

I love LatAm... wouldn't live anywhere else.

6/12/08

Interpol speaks, the world doesn't want to listen (this time)

I just can't get over how good those laptops look after having
the crap bombed outta them. I mean, not a scratch.
Hot damn! I'm buying Toshiba next time.


Fernando Bustamente is a Presidential Advisor to Studmuffin Correa, which basically means in this case that he's his point man in the States. Bustamente met with Interpol last week, and the Interpol kinda cleared up what exactly its role, job etc was with those FARC laptop computers.

Basically, Interpol said, "look dudes, we didn't look at what the files contained...cos nobody asked us to look...we don't have a clue about what is written there, so how the hell can anybody say "Interpol proves Chavez's link with the FARC"?

And then they said, "All they asked us to do was to verify whether the computers had been tampered with from the time they arrived in Colombian hands to the time all the accusations started appearing and counter-appearing and stuff....and we don't know, ok?"

Here's the report link; best read it here, cos you shouldn't expect much comment from Andres Oppenheimer, Fox News, IBD and all the other hate-mongerers that try to BS their way into your opinion. Here are a couple of extracts;

"....INTERPOL “confirmed that their forensic informational analysis does not imply the validity or the exactitude of the user files that [the computers] contain......INTERPOL clarified to Bustamante that the report was an act of “independent technical assistance” and that it only confirmed that after March 3rd, Colombia complied with international standards for the treatment of evidence. Proper handling of the evidence could not be determined for the period between the attack and March 3rd. “Between March 1st and 3rd... there are no indications that user files have been created, modified, or eliminated, but neither is there evidence that demonstrates that this has not been done,” INTERPOL told Bustamante...."

Look I'm sorry to have done this to you, but if you really wanna hate Chavez you're gonna have to find a different reason. But don't worry too much...there are plenty more that have been left floating around for y'all.

Darnit: I agree with The Economist again....

....on this article about how the Kirchner regime is screwing the Argentine economy.

I'm feeling old again
Only two things to note;

1) The Economist calls it "creative accountancy". Fortunately, this blog doesn't have a whole hierarchy of editors and lawyers above it and I therefore don't have to give the lying, cheating bastards in office that much credit.

2) The article finishes by mentioning that as the Kirchners don't like doing U-turns, we unlikely to see a strong Peso policy (that would help the inflation problem considerably) put into operation. Well.....fingers crossed and all that, cos maybe that just ain't so, Joe. I've been calling for this gov't to strengthen the Peso for at least 18 months, and it's just possible that my dream is coming true. Here's the Peso/Dollar forex rate....
.... and we can see that since the crisis peak of 3.20 or so, the gov't brought it back to its favoured 3.15 position, but since then has let the Peso appreciate further to today's 3.05. Are we going back to the 2.90/3.00 range last seen in late 2005? Or perchance to dream the 2.80 level that I believe would be needed to cool down imported inflation? Time will tell, but it would certainly be a dose of Kirchneresque revenge on the agro boyz who get the wages in soyadollars and then buy their nice, shiny things in cheap Pesos. How would they feel if their dollar bought 10% less stuff all of a sudden?

Finally, I may be forced to agree with The Economist on its excellent Argentina note linked above, but I was relieved to see it was back to its normal mediocre standards of LatAm coverage when writing about Hugo Chavez (gotta sell them copies, people.... gotta talk Chavez, people... any old crap will do, people..... make sure his photo has him in a red shirt, people....... lather, rinse, repeat, people.......).

Mercado Libre (MELI) and Elmer Fudd

Be vewy vewy qwiet...Am huntin' wabbit


Here's a reminder of the set-up we're looking for. Wascally wabbit.

Snippety stuff: Fortuna Silver, Los Andes Copper, Net Servicos and Minera Andes

Los Andes Copper (LA.v) release yet another rocking press release, calling (amongst other things) 653m of 0.43% copper at its growing and evermore sexy Vizcachitas prospect in Chile. The company also said we should expect a scoping study around September, and that's kewl. The market reaction was precisely zero to this news, with the stock trading at $0.50 right now on low volumes. Gotta love this thing. Big copper, cheap, Chile.

Minera Andes (MAI.to) upping. The world's most frustrating metal stock goes up on commods down days, and down on commods up days. It releases great news, and drops. It says nothing to the world and rises. Nice volume today....I likey.

Net Servicos (NETC): Man, did i screw up on the entry timing there. I reco'd this thing at $15 (here's the post, with charts and everything), and here we are a cupla weeks later at $12.5. I still love it though, and it's one to buy and hold forever. A big "moat", as Warren would say. Recommended without hesitation at this price.

Fortuna Silver (FVI.v): I know that at least one reader has been waiting for my call to buy this at value prices. Well GF, that time is right now. Accumulate in 2008, then sell em back to the market in 2010 at $6. Easy money. This is a really well-run silver/zinc/lead miner with enormous upside. Here's the website, now go visit.


IMPORTANT: Do your own DD on these and anything else mentioned here. Look, dude...this is a blog you get to read for free. Just cos professional analysts copy what's written here almost word for word, it doesn't mean that you should trust my unsolicited opinions with your moolah. Investigate for yourself before risking your money.....cos it's YOUR money, ok?

Message to Eric Zaunscherb

Does your boss know you read this blog? Do your clients?

Compare this report on Eric's "original views" on the Ecuador situation to my post written a day before, and while you're reading remember Eric "follow-me-I-know-about-Ecuador" Zaunscherb was the analyst that panicked the market by putting a $1.40 per share target on Aurelian on the same day his employers were filling their boots at $3+.

Now suddenly our Eric wants to come across as the voice of all reason on Ecuador's political risk? Pathetic. And the funniest part is that you actually get paid for this. Almost as good as your SWG.to last year, when you waited until the stock was trading at a loonie before downgrading instead of getting your sheep ...OOOPS SORRY!....your valued clients out at between $2.50 and $3 after the Boka scandal hit.

Next time I write about Ecuador, I'm tempted to put in a deliberate factual error just to see what comes out from other places 24 hours later.

Message to Peruvian viewers


Remember this post back on April 12th that pointed out the money to be made by selling Peruvian Nuevos Soles (PEN) and buying the dollar? Well here we are, two months later, and it's time to cash in. With the PEN now trading at S/2.90 to the dollar that's a neat little 6.6% gain (from the widely available 2.72 that day) in just about two months. Cut it, print it, that's a wrap.

So now we sell those soles, and we buy those USD back again, and we rise the forex back down to 2.8 or so. Trust yer Uncle Otto, dudes. You know it makes sense to do the exact opposite of Carranza and company.

6/11/08

Colossus Minerals (CSI.to): Sometimes you have to admit you're plain wrong

map showing project location (click to enlarge)

Company: Colossus Minerals (CSI.to)
Website: www.colossusminerals.com
Shares out: 42 million
Share price: $3.55
Mkt Cap: $149m approx
Cash at bank: $20m approx


(click to enlarge)

Four times in the last few weeks I've been presented on a platter with the name Colossus Minerals (CSI.v) (CSIMF.pk), and four times I looked at the evidence and dismissed it virtually out of hand. That was a mistake...a big, big mistake. Here's why:

Strike One: The Midas Letter written by James West on March 14 made a really big write up of it, going into the history and potential of its Brazilian 'Serra Pelada' (bald hill) project. Here's the link, so go look for yourself. I read it. Ignored it. Dumb, dumb Otto.

Strike Two: A switched on reader of this blog by the name of Andy mailed me on May 20th with the same newsletter write-up and said it was his idea of a top junior. I wrote back saying something like, "If it's too good to be true, then it is." The stock was trading at $1.91. Dumb, dumb Otto.

Strike Three: The stock was featured in this SeekingAlpha note written by Michael Pollick (aka shootfirst at silicon investor). It caught my attention because Pollick made special mention of the upgraded management team, something I normally pay a lot of attention to. "Hey..Colossus is putting together a world class team", I thought, and then promptly did nothing about it. Dumb, dumb Otto. By the way, Pollick's note is also worth reading because he links a (now easy to say) must see video on the property. Full kudos to the author.

Strike Four: The stock was featured in the smart Canaccord "Morning Coffee" publication on Tuesday. I glanced at it, nothing more. Dumb, dumb Otto.

So what's to regret? This press release on Wednesday morning that moved the stock up over 32% on 15X average volumes. The PR includes some of the best drill results seen since the Aurelian FDN property exploded on the world, and makes Colossus a simply mouthwatering prospect. There is a lot to love about the news, and a full read is recommended, but highlights include (from the PR):
- SPD-002 intersected
46.72 metres @ 24.11g/t gold, 9.04g/t platinum and 11.57g/t palladium
(50.95g/t gold equivalent(ii))
plus
14.65 metres @ 22.51g/t gold, 4.56g/t platinum and 5.01g/t palladium
(35.64g/t gold equivalent(ii))

- SPD-004 intersected
53.50 metres @ 5.35g/t gold, 2.51g/t platinum and 4.01g/t palladium
(13.20g/t gold equivalent(ii))

- Both holes exhibit very high grade Au- and PGE-rich subzones

- Drilling to date shows continuity of high grade gold-platinum-palladium
mineralisation along 100 metres of strike length and vertical intervals of
more than 50 metres in the Central Mineralised Zone up to 260metres
southwest of the historic Serra Pelada open pit.
To give a rough idea, 46m of 50g/t gold equivalent is rock is worth around U$3,600* per cubic metre with gold at $900/oz. Interested yet? Well if not, think about the previous drill holes that have returned over 4,000 g/t gold at the site (yes, four thousand).

This is the five day chart of CSI, and as you can see there was all the $2 stock you wanted last week.
Yep...that's an 80% gain gone begging. DOH!

So I therefore officially want to be counted as one of the people who was stupid, doubting, cynical and dead wrong about ignoring Colossus. This is now one hot junior. Congrats to those who saw the light before this catchup-playing Otto.

* assuming the rock weighs in at the average of 2.5MT per 1m3

MELI is getting close to a buy

Here's a TA chart* for MELI....

(click to enlarge)

...that says to me "it's nearly a buy". As part of this post at the end of last week, I wrote, "....MELI is still somewhat overpriced at U$44 right now, but is a good stock to trade both ways. If it gets oversold to, let's say U$30, go long on it because it's not going Chap11 no way José....". The only thing that's changed since then is the share price, having been dumped to tonight's U$37.86 close. But even though I mentioned U$30 last week, I think that could be a stretch as the low, so the trading set-up is as follows:
  • Buy 50% position if MELI downs to U$35 (it looks like a long-term resistance level to my eye)
  • Buy the other 50% if MELI drops through U$32.5 (the February low)
  • If entry is made, I'll be looking for U$45 on the way up as first stop. From there we'll see how things stand.
  • Short-term trade mentality.
  • Strictly no entry before U$35. If it reverses and rises before then, we wish it good luck and you wave it goodbye.
To repeat a comment from another post on TA last week; in this market atmosphere, I'm not looking for a slight advantage from any short-term trade. I want massive overbuying/overselling and a monstrous, screaming "trade me now!!" shout from the company and its chart. I want the sheep who write idiotic comments underneath SeekingAlpha posts that dare to question their beloved stock to be sweating on their August calls. You know the ones; those permabulls who can't sell a stock underwater to save their egos or their financial lives. I would say that right here right now at U$38, MELI is oversold. But it's not crazycheap oversold yet, and that's what I'm waiting for. If I get my target price, well happy happy. If not, there are other fish in the sea.

*With apologies to the real dudes, Gary

And on the subject of the USD and the waning influence of the US on LatAm....

Not really my style to rob from other blogs, but this one is worth sharing and it's worth passing on the website, too. Bespoke Investment Group (slogan "think BIG"...geddit?), is a website run by a pair of smart dudes up North. They write snappy little posts on the different ways they cut, dice, and examine the numerical side of the market.

(Full credits to Bespoke Investment Group)

Today they came up with this post, and it's worth clicking thru and visiting. Here's the chart they run with the post, and it just goes to show with serendipitous timing another aspect of that "this time it's different" call from just two posts down. The difference in just four years is pretty startling, and that's the BRICs and Asia for you.

Aurelian and the art of the obvious buy

Yesterday gold and the miners tanked, but Aurelian (ARU.to) stayed solid and even added a penny. Today it's upping nicely (though volumes are still on the lowside). With the dose of good news handed out by Chiriboga this week (this post explains all) and the prospect of a miner-friendly attitude in the draft mining law coming out June 27th, it looks like ARU is the subject of bargain hunting.

And let's be crystal clear about things. If you're a Canadian reading this post, do you really think the band of crooks that run your brokerage account at any of the large houses will give you the all clear on Ecuador stocks before they fill their own boots? Wait for their word on this and you'll make a 50% profit. Move in now and we're in the 100% and above territory.

Aurelian is such a screamingly obvious risk vs. reward play at these prices. If you're looking at the PPS right now and thinking, "Damn, too late, it's already up 6% today", you're going to miss out on the next 100%. Why worry about whether you could buy tomorrow 2% lower when it's going up 100%? You don't get this kind of advantage handed to you on a plate every day, and I was thinking back to the last time I had the same kind of obivous, screaming political risk advantage with a LatAm play. I think it was back in 2003 when TEO was trading at U$5 or so. So ARU: Just buy it, then watch above from the peak of advantage when the Canadian houses play their games with retail dudes. And remember the lesson for the next time, too. And speaking of obvious, the following might help to remind you about the average intelligence of those who follow the crowd. This is the world we live in. Take advantage of the fact.


The USD index goes full circle in 24 hours.........

....and is back at 73.4, after peaking at 73.7 (you can always follow it on the little chart on the right hand side here). Gold is recovering from yesterday's beating, and crude is up $2 at $133 again. I'm not triumphantly calling for the end of the US Dollar as we know it; quite the opposite in fact. I'm with Dubya when he says a strong dollar is healthy for the US (and therefore world) economy. But I can't see how pure talk will keep the greenback floating when the fundamental totally suck, so my call is simply "watch out...no false optimism please".

The US trade balance at $60.9Bn in the red was the worst number in over a year. This was because average oil prices shot up to $96/bbl. Yep...look again at that spot price, and imagine what's going to happen to the trade balance for May...and June...and July....etc. Then we have another big financial in Lehman (LEH) about to do a Bear. An unemployment number that stinks at 5.5%. And we're told the worst is over? Gimme a break!

On the flipside LatAm grows, defies all economic predictions, and grows some more. Even the heavily US-exposed Mexico is holding up better than all calls by investing in public works. Apart from Chile's slack quarterly GDP growth mainly due to its water problem and the Codelco strike, the region is moving on up quite nicely. Why? Because the region doesn't need the US so much any more. Brazil at 5.8% growth, Argentina at 8% growth, Peru at 9% growth etc etc.

Put simply, Asian demand for the raw materials produced in LatAm is not going away. It really is different this time. Nice to be bullish about something not made by AAPL these days, isn't it?

6/10/08

SoyaWars™ : getting nasty

Word from Kirchnerlandia tonight is not good. Militant groups of agro workers are right now setting up roadblocks against the directives of its agro executive, and are totally fed up with the way they've been treated. Your average rural dwelling gaucho is not like those softies that live in the capital, and this does not bode well for any happy endings.

Meanwhile, Argentina's May inflation figure was published by the INDEC stats office today using the vaunted new calculation system. It seems that inflation was only 0.6% (using the old formula it would have been 1%, which is still a complete load) of tosh).

Interestingly, one of the things Klishtina said in her speech last night was that the agro strike, roadblocks etc etc had (and I quote) "de-stocked and made more expensive foodstuffs". Well, according to the INDEC figures, in May the price of beef dropped 4.5% and the benchmark 'canasta basica" (basic basket of goods/services that marks the poverty line) actually dropped by 1.67%

In Spanish, the saying is "Pez por la boca muere". My brother would say, "She pissed on her own strawberries".

Chavez: "Foreign investors have no place in Venezuela."

Miss Venezuela Universe 2008 selling you jewellery. If you
want yet another photo of fatlips,
find another
news source. I like beautiful women, ok?


That's what the man just said today, word for word. Of course it's obviously silly, and you only need look at the deals recently struck in the oil sphere with Russia, China, Portugal, Norway, Italy, the USA (yes...even dudes like Halliburton), that's without mentioning the LatAm states deals. Then there's Hewlett Packard as the gov't computer providers...dude I could go on and on.

As always, make sure you know the context of the Chavez soundbite, and then watch with amusement as it's splashed all over the English speaking world. His speech was from the Presidential palace, but aimed at the workers of the newly nationalized SIDOR steel plant. That understood, here's what the H dude said as reported by ABN:

"The only objective of capitalism has always been to obtain the maximum profit, which is why the owners of the companies take from Venezuela all the money that belongs to the Venezuelan people; this is why foreign investors now have no place in Venezuela, in our sovereign country."

So here's a game you might want to play;
  • Let's assume that Hugo Chavez understands the ongoing role of foreign investment in the country's oil sector (which was specifically mentioned later in his speech today).
  • Let's also assume he is not stupid (believe what you want to believe, but anyone who survives as long as Chavez has in LatAm politics is no dumbass).
  • Let's also assume he knows very well what he's saying, and how his comments will be used against him "in the North".
So why, in your opinion, would he say what he said? Try thinking about it for a while instead of swallowing somebody else's ready-made opinion about him. Whatever reason, it seems his loyal minions are taking him at his word today, as workers have blocked and shut down the factories of none other than the arch-imperialist beverage itself; Coca-Cola. Something to do with the owners not paying them on time.........how revolutionary..........

Snippety stuff

Peter Hambro Mining, Russia's second largest gold miner, is buying 14% of Rusoro (RML.v), the Russky/Canuck miner operating in Venezuela, at $1.25, a 25% premium to yesterday's close. Total price tag is U$80m. This shoots down all that "Nasty Venezuela is going to nationalize all the gold mining industry" talk started by anti-Chavez newspaper "El Nacional" last week. When will people wake up to the fact that the media is horribly biased in Venezuela, with pro and anti Chavez agendas put way before actual facts?

Gold down at $877, oil up at $137.4. That put the gold:oil ratio at 6.38X. It's like one of those limbo competitions......"How low can you go, bro?" My mother said there'd be days like this.

Also from the annals of "go figure": Brazil announces its economy expanded at 5.8% per annum in 1q08. The news is greeted by a 2% drop in the Bovespa index. Moral: hot money is more important than hard facts in Brazilian trades.

Farallon releases yet another cracking PR, and still can't climb past $0.80 even on the good volume traded today. That's because the crooks that run the Canadian stock market (in this particular case an outfit named 'Paradigm') keep holding down the share price with large cross orders. I know she's gonna blow, but I can't tell you when the liars and cheats in Canada will let her blow. The best method is "ignore 'em and they might go away", otherwise known as fundamental strength. In the words of Keats; "Time, that aged nurse, rock'd me to patience."

Vale (RIO) is reported by 'O Estado de Sao Paolo' to be looking to buy another large miner., and wants to raise up to U$15Bn in debt with which to go shopping. Another example of "if it's in the paper, it's too late", as this rumour was flying around all last week. Alcoa, Anglo and FCX are supposed to be in the firing line. Alcoa would be my first pick, but WTFDIK anyway? Here's Canada's 'Globe&Mail' on the story.

The dollar jawboning continues....

Dollar/Euro today

...as should be expected, and it's managed to hike the USD index over 73. Paulson's comment that dollar intervention "is never out of the question" led the way to this mini rally, and expect more blahblah when Bernanke stands up and talks inflation tonight.

Meanwhile, in the real world LEH has seen its rating cut from AA- to A+ by Moody's and the two year bond yield rocketed to 2.74% today...a real flight. That cuts the legs from under the chitchat.

Gold lost a few more pips down to $885 overnight. I have a few more bullets left to buy in at this level, but it is frustrating to see gold still under $900 now I'm largely bought in with the ST stuff. So be it...the fundamentals are very clear on this, and gold is clearly undervalued right now (see previous post on gold/oil ratio).

Meanwhile, Ecuador political risk goes up as predicted

Ecuador is next to Peru. Peru's capital is Lima, and this is the model Adriana Lima.
Pathetic way of getting a photo of a hot woman on my blog, isn't it?

In this post over the weekend, I pointed out that Correa mere mentioning a hint about maybe perhaps messing with sovereign debt would make people nervy. Of course, I was right (toot toot). Here's Bloomberg on what happened in the debt market yesterday:

June 9 (Bloomberg) -- Ecuador's bonds fell to their lowest in more than two months after President Rafael Correa said the government would annul debt deemed ``illegitimate'' by a commission auditing the country's debt.

Etc etc. Watch out folks, it's election time........

The Ecuador mining picture is becoming more positive by the day

Galo Chiriboga: Nice man

A very interesting press conference was given by Mining and Energy minister Galo Chiriboga yesterday. The conference (patchily covered in this Reuters Español note) was called to announce the reversal of a large amount of concessions, but then in the Q+A afterwards he gave some idea of the new mining law and how it's coming together. Here's what happened in the presser:

First, the ostensible reason for the press conference. Ecuador's gov't has 'reversed' (i.e. taken back) a total of 1,138 mining concessions since April 18th, which represent over two million hectares of surface area. The reversed concessions have so far been limited to those that were behind in necessary payments, though Chiriboga said that there would be more reversals to come. As at 2nd June, there were 3,995 concessions still in the hands of their original holders.

The provincial breakdown of the concession reversals so far is as follows: Guayas (110), Azuay (210), Chimborazo (145), Pichincha (350), Zamora (119), Loja (160) y El Oro (44). A total of 313 concessions that covered nearly one million hectares of land have been reversed which previously belonged to the following (national and foreign) companies: All Metals Mineria, Atlas Moly S.A., Arias Eguiguren Carlos Arturo, Dai Zhou Xiaohui, Ecuadorgold, Cia. Minera Mariana, Sierramin, Chanel Mining Resources, Elipe S.A. y Santa Barbara Copper and Gold.

Then came the supplementaries, and a lot of information was forthcoming. I'm glad to say that the overall impression given was very reassuring for the foreign mining companies with Ecuador exposure. Here are the main points to take away and chew over:

1) The new mining law will be published on June 27th 2008 (less than 3 weeks). The publication has been delayed somewhat, but the new date is now pretty much fixed. The main reason for the delay to now was to give time for a more in-depth look at how the royalties payments will work (in the first draft of the new law the royalties are fixed at 5% of gross for large mines), and also how the clean water regulations will work. The Ministry has been working with technicians from Chile on both these issues, as well as local gov't representatives from the projected mine areas.

2) Chiriboga said that the gov't would continue conversations with the mining companies until the 17th June, as on that date the law must be ready and will be presented to President Rafael Correa for review that same day. A meeting is slated with the miners on the 13th, and the formal review meeting with President Correa is set for the 22nd.

3) His Vice-Minister, José Serrano, said that on Wednesday there is a meeting between the national gov't and the local gov't representatives to decide on the percentages of mining royalties that will go to local authorities, as well as how the money will be paid. Also the issue of water rights, clean water rules and regulations will also be discussed. In the words of Serrano, "The environmental issue is a fundamental one." Interestingly, he said the gov't will not be discussing these issues with local communities, but only with town/city and provincial political representatives.

4) Chiriboga made a very clear statement about environmental and social matters: "If we want to start mining activity in the country, we believe that this mining activity must answer to environmental, social and economic criteria. This wealth must favour the development of the regions in which the mines operate, so that what happened to us with the petroleum (industry) does not happen, where unfortunately that wealth only benefitted other places that were not the places from which (the oil) was extracted."

5) On the subject of the "three concession limit", there is obviously some flexibility being shown by the gov't. Despite Article 4 of the now infamous Assembly mandate (here's an English translation) saying that no company could own more than three concessions, Chiriboga today said after consulting with experts who told the ministry that three concessions would not be sufficient for profitable exploration work more concession may be allowed, with a higher number as limit. He said "There will be a limit, but it will be technically reasonable."

So there you have it: The ministry has another week or so to put the finishing touches to the draft law, which will then be handed over for review by the President. On the 27th , we mere mortals get to look at it. The law promises to be tight on environmental controls, especially those involving water. A lot of the royalties generated from mining will stay with the local communities around the mines. Once again, not a word of any windfall tax. The three concession limit is likely to be lifted higher. The regional politicians will be the body directly consulted by national governments, not the more thorny local communities under the influence of radical treehuggers.

All this is a long, long way from the death, doom and gloom stories fed to hapless investors by the sharks pretending to be responsible analysts just a few weeks ago. We look on course to be given a draft mining law that we be tough on the environmental regulations, but fair to the companies that wish to mine in the country and make a fair profit. Add this to the initial-stage draft of the law already published and available right here with note in English on the important parts, we now have the makings of a stable environment for the miners in Ecuador. By no means a giftwrapped giveaway for them, but a perfectly workable situation.

Aurelian (ARU.to) remains my favourite stock in Ecuador, with its massive gold prospect at Fruta del Norte. With political and regulatory stability looking ever more likely, the time has come to load the boat with ARU. Others to consider include Dynasty Mining (DMM.to), Corriente Resources (CTQ.to) (ETQ), IAMGold (IAG) with plenty of other smaller plays also possible for the higher risk bracket, including Ecometals (EML.v) Coastport (CPP.v)and Plexmar (PLE.v) to name just three.

6/9/08

Klishtina raises the stakes

In her speech tonight (full transcript here) Klishtina announced her gov't would dedicate the extra income from the new tax hikes to a fund that will use the money to build hospitals, healthcare infrastructure, roads and housing. The amount of money has been roughly calculated at U$1.3Bn per annum in this note in Clarin, and 60% will go to the healthcare sector, with housing and roads getting 20% each.

Yes, it's emotional blackmail. Yes, it's the worst sort of demagoguery politics. But yes, it's also a good idea. There are a whole range of arguments against it, of course. From "Why not use some of the 49Bn tucked away in reserves?", to "why haven't you done anything like this before with the already record state fiscal incomes?", to "a slush fund like this in a corrupt state like Argentina is just asking for trouble" to "fighting inflation would be a better use of funds than tarmacking a road in Patagonia that 2000 people a year will use", but all that said, any time a gov't aims large slugs of money at its poor it can't be a bad thing.

So we're at the point where Klishtina grabs the rope that might eventually hang her. The bet she's made tonight will decide the way the Kirchner franchise is judged at the polls next time round. As for me, personally, I think this is the point where I part ways with Argentina. This economic model will end badly; the gov't has no idea what it is doing to itself, and the country won't know until it is too late. There's no point investing in Argentina any more, and especially not when there are serious alternatives in the region. Frankly, Venezuela runs its economy better (or if you want to argue that, 'with more transparency' will have you agreeing at least).

I therefore officially give up on Argentina economically. Politically it'll still be worth following, as the looney tunes between the politicos over there is high entertainment. Telecom, and Argentine bonds, exit stage left.

Chávez and FARC

"It's just hype, the believing is up to you."

I've been thinking about whether or not to say summink 'bout the Chavez remarks of yesterday, reported as (for example) :
CARACAS (AFP) — Venezuelan President Hugo Chavez has urged Colombia's Marxist rebels to free all their hostages, arguing that the time had come to wind up ...

etc etc yada yada by about 400 different newswire reports. On the one hand, it's getting a bit tiresome to read the same crap all the time. On the other hand, it might have been worth pointing out that this isn't a "surprising turnaround" as reported by the Wall Street Journal, but a slight variation on his samo samo "FARC, free the goddam hostages now" message he's been using for at least six months.

So there I was, humming and hahing over whether to mention Huguito again. Then suddenly the burden was lifted from me by the marvellous BOREV, who slamdunked the whole story with this pearl of a post. So stop reading this blog and go read da borev right now....much better than this guff.

Message to Argentina's govt

For God's sake, sit down with the agro boyz, swallow the tiniest bit of pride, relax the export tax regime a smidge. Agro will then agree and you can get back to doing all the other things wrong that you're doing. Latest developments include.........

1. Agro call off the strike and are willing to negotiate.

2. The national mediator calls you both to the table (errr...by the way...you're legally bound to agree to talk).

3. Klishtina announces yesterday, hours before the agro boyz look to call off the strike, that the gov't won't give an inch on the export tax. The result is impromptu roadblocks for the militant factions of agro.

4. The Klishtina gov't today says "we won't negotiate".

This is ridiculous! The most infantile gov't policies ever. Grow up for crying out loud!

UPDATE: Well, looks like Klishtina is going on national TV tonight to announce a whole package of measures. Let's see what she's got to say for herself this time. Watch this space......

Gold touched U$910/oz.........

....before doing a swandive this morning. At the risk of repeating myself, the USD is the whole ballgame this morning (with maybe one eye kept on the crude pits). No way I'm placing any early bets on gold today, cos if the big bad bankers decide the dollar needs more than moral support the whole thing could be skewed to merry hell.

So let's wait until after the bell, then stick a wet finger in the air and see which way the wind is blowing. The basic fact of GOLD IS CHEAP hasn't changed a jot....just trying to find an entry point to buy more.

UPDATE: Got some GLD when POG was showing $896. Peeep! All aboard!

UPDATE 2: Wrong! POG now at U$892. Can't win every trade.

6/8/08

Alan takes a leaf out of Deng Xiaoping's book

Alan meets Deng.....errr....I think....like.....dude

It's no secret that Alan Garcia is an admirer of Deng Xiaoping, the late leader of China. Alan mentions his name often in both formally scripted and off-the-cuff speeches, and when the two met on several occasions in the 1980's and 1990's the meetings left a lasting impression on El Gordo. So when I saw his latest plan to relieve poverty in the mountainous and rural areas of Peru, the connection sprang to mind again. Alan's latest wheeze is to get all the yokels off the mountains and into the large towns and cities, thus making Peru fitter, healthier, more productive (Thom dixit). In Alan's words from this report;

"We are going to invite the (rural) population to come (to towns and cities), because there they will have sidewalks, electricity, telephones, schools, and they will not live in the conditions they live in today."

If that isn't straight out of Deng's mighty urbanization playbook that has been rolling for the last 30 years, then nothing is.

Of course, he hasn't actually consulted the rural populations about this, or asked whether they'd like to come on down. He hasn't bothered to improve their lot as he promised to do in his election campaign, either. That much-vaunted APRA "Sierra Exportadora" (roughly translated, "High Country Exporter") initiative that helped get the fat slob elected is talked about by precisely nobody in gov't these days. Nor does he mention the fact that the Peruvian gov't is legally obliged to connect every house in every town, city, village and hamlet to the mains water and electricity supply if a formal petition is made by the householder. Nah, that's too expensive. I mean, it isn't as if Peru is growing in GDP terms or anything.............

¡dale campeoooo!

River won its 33rd championship this afternoon. The winningmost team in Argentina do it again.

Otto is a happy hen this afternoon. So are these dudes.

Diego Buonanotte scored both goals today. This is him slotting away the championship-winning goal. The new young star of River has been a revelation this season; European clubs with chequebooks, queue this way.

With luck, Ortega will lay off the champagne tonight. We need him again next season.



USA in denial about Ecuador, and Correa with his own pet denial, too

The Manta base, Ecuador. Expect Otto's blog to be hacked at any moment.

"Denial ain't just a river in Egypt" (Mark Twain)

Strange comments yesterday from William Brownfield, the USA's ambassador to Colombia. When asked about the possible plans for a US military base to be set up in Colombia once the agreement with Ecuador for the Manta air base runs out in 2009, Brownfield said (translated from the Spanish report),

"At the moment the gov't of the USA is waiting for a final decision from the gov't of the Republic of Ecuador over the future of the collaboration between Ecuador and the USA at the Manta air base.....If the Ecuadorian gov't decide to terminate or close the collaboration there, the gov't of the USA will be forced to look for another place where we can do this most important joint work against illegal drugs....among those (possible future air base) sites are without doubt some places in Colombia."

Big plane with a mushroom on top at Manta. Note the US military synchronized
swimming team doing "dry practice" in the foreground
If Colombia decides to let the US build an air base, then so be it. Two sovereign countries can agree to do what they want, basically. But to clear up any "confusion" the USA might have, your helpful Otto spent all of...what?.....four minutes on the internet yesterday and using the breaking news he found there, can help the USA decision-making process move forward.

24 Oct 2007: "The termination of the agreement of the Manta base is not negotiable." President Rafael Correa.

16 March 2008: "In 2009 there will be no more foreign bases on our country's soil and the Ecuadorian gov't will not be involved in a conflict that is not ours." President Rafael Correa.

16 January 2008: ....he (President Rafael Correa) also ratified that he will not renew the permit for the US base at Manta which expires in 2009....

12 May 2008: (Bloomberg) Ecuador declined to renew the U.S. lease on a military base that serves as a critical platform in the fight against narcotics smuggling, the New York Times reported.

So there are four of the hundreds of reports I found in those four minutes on Google, some dating back to November 2006 and saying exactly the same thing. Any further questions? If Brownfield really is broadcasting the official US party line here, there is a serious case of denial going on. It would take a coup d'etat that ousted Correa from power for the US to keep its Ecuadorian base...OOPS!...shouldn't have said that!!!!...........

Mind you, the US military seem to be a tad smarter than the diplo corps. In this report, the interviewed general said that another Manta would be unlikely in South America. So we got the gov't suits being all secretive and vaguely threatening, and the guys with the bombs all open and frank. Go figure......

Very sharp pointy aeroplanes at Manta

Meanwhile, Studmuffin Correa has his own version of denial going on, though it could be forgiven as part of the electioneering noises that have already started in the country. Yesterday he made more noises about annulling what he calls illegitimate sovereign debt that was issued by the state in previous years. This report from Reuters is about the only English language version I can find, but it does point to some of the difficulties facing Correa. Amongst other things, he's taking direct aim at the functionaries in the Ecuador Central Bank with this campaign, which isn't likely to be reported favourably in Guayaquil by his journalist pals.

"...Ecuadorean President Rafael Correa said on Saturday he will seek to annul parts of the country's $10.3 billion foreign debt after a preliminary audit report showed indications of "illegitimacy" in borrowing. Correa said a debt commission created last year, comprised mainly of leftist economists and his former economy minister Ricardo Patino, had found irregularities in borrowing by previous governments.

"There will be civil and administrative actions to seek the annulment of illegitimate debt," Correa said during a weekly radio address.

"We can show how many times the lawyers Ecuador hired were the same lawyers that worked for bondholders. ... They stole billions of dollars, those lowlifes, who today are working with the International Monetary Fund and World Bank, and some are still working in the central bank."

Whatever; this bonds thingy is a big and rough-tough issue. If Correa ploughs ahead and eventually declares the questioned bond deals illegal, he'll instantly make Ecuador international biz pariah state numero uno. For an idea about what that means just ask Alan Garcia about his experiences in Peru in the 1980s, when he decided to piss on the Peru sovereign debt holders by unilaterally limiting debt repayments. Of course, Correa will know all this...the guy isn't stupid, and he knows his economics. Otto hopes that this debt denial thing is being rolled out as part of the election campaign and will be dropped as a serious idea at an appropriate moment later. Mind you, hope isn't a rational investment thesis where I come from.......