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9/6/08

silver

Pity the silverbug.

(click to enlarge)

I kind of half followed their rantings about conspiracies, manipulations and massive shorting of the metal last week. For what it's worth, it's pretty clear that one of those three is at least half true. Sure, the metal got shorted. Why this is a conspiracy and not a simple winning trade is still not clear, though.

Anyway, as mentioned in other parts, if the world's leading silver market watchers have absolute proof of illegal practices in the silver market (as they seem to have claimed over the past couple of weeks), where is the legal action? Why hasn't it started yet? Or maybe my previous post on the matter is the real story, i.e. a big player made a trade and won. That simple.

But anyway, that chart is a pretty simple read right now, so if I were a silver addict I'd be rejoicing right now, not ranting and raving. That is one seriously oversold medium of trading people, and SLV (or the metal itself via futures or bullion or even coins if you like) is looking like a seriously good place to go long.

Finally, I was reminded today (via another subject and an e-mail) of the three cardinal rules of the stock market, and it's worth repeating them here. They apply to metals as much as stocks, and if a single silverbug reads them and sees a bit of light it will be worth all the badmouthing the others decide to throw at me (insults to otto.rock1 (AT) gmail (DOT) com, please....put them on the comments section and I'll just delete them, dudes: you get no public glory here, I'm afraid):

1. Buy low sell high
2. Never fall in love with a stock
3. Remember rule one at all times

Ecuador referendum: the latest poll

In Ecuador, 56% of those polled on August 30th said they would vote "yes" in the 28th September vote.

As this chart shows, support has been steadily growing for "yes", from 50% to 53% and now 56% in the last three surveys by SP Opinión & Estudios. The poll has a margin of error of +/-4%. Note that this does not yet include the bump Studmuffin's Yes vote will get from this week's decision from CONAIE to support the new constitution.

Repost: Curbing Costs with Google Apps

I'm reposting this for three reasons:

1) It's a good offer; you swap a couple of minutes of form-filling (with no 3rd party selling of your info) for a report that will help you save money.

2) It's part of my drive to make this blog self-sufficient without outright begging (I just can't get comfortable with the idea)

3) Though only one person downloaded the white paper Tuesday, my commission was a very useful U$7 (which surprised me...I thought I was getting the usual buck-fifty from the service). So if you feel like making a painless contribution to incakola and also getting a useful document in return, then go ahead and fill out the form.

Only USA and Canada residents are eligible, unfortunately.

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You may have seen this logo before

After the success of the free book link given out yesterday, here's another freebie offer for you, dear reader. The difference with this one is that those nice people at Google will pay me a couple of shekels if you decide to take them up on this (about U$1.50 for every copy distributed, I think), so this time I might even make some money out of this.

The name of the case study paper is "Curbing Costs with Google Apps", and it's aimed at people and companies who use IT and need to streamline operations. Here comes the official blurb that goes with the offer. If you go for it there's an application form to fill out, but it's not too heavy and being Google they won't sell any info to third parties, that's for sure. Let's see if my boringly aggressive drive towards making my humble corner of cyberspace pay for itself gets any love, yeah?

Have a good one, people, and access the free case study paper by clicking this link right here.

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"Curbing Costs with Google Apps"

Learn how both new and established companies are using Google Apps to curb costs amid rapid expansion.

Start-up IT services provider Counterpoint Consulting and office products distributor Indoff, which has been in business for thirty years, operate in very different industries, but the two rapidly growing organizations share the need to provide employees with cost-effective yet continually updated technological capabilities.

Read how both companies have benefited from Google Apps, a suite of applications that includes webmail services, shared calendaring, instant messaging and voice over IP services, with results including:

  • Reduced strain on IT due to streamlined operations and lower costs
  • Greater business scalability through easily-deployed services
  • More productive and efficient employees with best of breed communication tools

Geographic Eligibility: USA, Canada

Publisher: Google

Good weekend reading from respected bruddasites*

Gary sees the bottom in metals prices, and FWIW I agree with him. I'm going to cook some fish for lunch and ponder on how to arrange my own thoughts, then write later. Meantime check out the Biiwii view. This guy will make you money if you know how to read him.

Over at sapitos de la noche our hero was hit by a car in Caracas this week. No joke. Read all about it, and also note that hedgehog is beginning to discover why I have comments on "moderated only" at this blog now.

At Memory in Latin America, Lillie discovers Google Reader (which is cool). She also sheds light on two of my fave blogs, "The Mex Files" and Abiding in Bolivia". Get down to the Aymara beat, people.

Brad Setser is back from his short break, and it looks like batteries fully recharged. Four knockout posts on the macro worldview of money. The first link is to the front page so you can check out all four easily, but I particularly liked this note on Saudis and oil, which really puts some perspective on the sector. I don't link him on the right, but only because everybody else does. If you invest, imho Setser's blog on your RSS feed is obligatory. Best of breed.

*and sistasites: you rule lillie

He still doesn't know how lucky he was

Silly hair, silly man

"Dumbass Gringo of the Week" award goes to UK member of parliament Michael Fabricant (literally a made-up name, methinks). I always thought coffee whitener was a pretty nasty substance, but this batch was close to lethal (mixed with AK-47, not java). I'll let Reuters tell the story, but this guy is from the party that's very likely to be in power after the next election. Minister of Silly Walks, anyone?

MP in jungle cocaine search drama

LONDON (Reuters) - A British MP trekking in Colombia was held at gunpoint in the jungle and forced to eat coffee whitener from a jar in his backpack after soldiers mistook it for cocaine.

Michael Fabricant was on a walking holiday in South America with a friend when they were stopped by a group of gun-toting men in camouflage uniforms.

The soldiers found a container full of coffee whitener in their bags and immediately suspected it was drugs.

"In order to demonstrate that it wasn't cocaine, I had to take a whole pile of it and throw it down my throat," the Conservative member for Lichfield in Staffordshire told BBC television.

"They waited a few minutes to see whether I collapsed or went delirious and said something completely ridiculous like 'Gordon Brown's got a great personality'.

"Because I didn't say anything too weird, they came to the conclusion that it wasn't the case and they let me go."

His explanation for putting powdered whitener in Colombian coffee, regarded as among the best in the world, will be familiar to many Brits abroad.

"You have to be a little bit careful about what you eat," he said.

(Reporting by Peter Griffiths; editing by Steve Addison)

9/5/08

Trading Post (resistance is useless edition)

So c'mon, who amongst you thought it was a joke when I wrote this morning, "Gold shot up $16 on the (unemployment) news. You'd better sell that spike, cos in the Pachakuti that you guys live in 6.1% unemployment will be seen as dollar bullish."? I promise you I actually burst out laughing when the USD went positive on the day. You guys live in Kafkaworld, and today confirms it. You do realize there will be talking head experts on CNBC later explaining the logic behind the dollar's move, and they might even believe their own explanations, too.

Shall we dwell on the mining carnage again? Nah, you just name your own fave "5% down miner"...plenty to choose from. However I'd say that this chart is pretty important right now:

(click to enlarge)

Dr Copper has to decide whether it wants to break a three year trend right here and right now. Monday will probably decide the issue. I'll bet money that line in the sand holds again.

Very strong volumes in FCX, both yesterday and today. This was the level it reversed from last month. Check the chart and be the judge.

MELI bounced, up 9% and sits close to $29. If I were good enough I'd just play this rollercoaster the rest of my trading life and make tons'o'munney. Unfortunately I suck at trading it and don't try to be clever about it.

With 10 minutes to the bell, dare I mention Vena (VEM.to) is up again (though volumes low)? It's one of the very few green splodges on the screen right now, that's for sure.

Petrobras (PBR): great for Brazil, not so great for shareholders

Away from this blog over the last couple of days I've been looking at Petrobras (PBR), and there are some conclusions we can draw from looking at one simple ratio chart.

First, though, the basic price chart. Here it is from 2007 to date.....

.....and if I were of the technical analysis ilk, I would have drawn in all sorts of lines and arrows and channels and support points that have all been broken recently. I'm sure you can paint them in with your mind's eye anyway, so there's no labouring the point here. As it is, I've left the uber-basic 200dma to guide. But now comes a different chart that shows PBR in ratio to the WTI crude per barrel, and I've written a couple of observations straight on to the chart.

  • PBR was flavour of the year in 2007. In the investment world's perception it moved from relative obscurity to join the pantheon of big oil names, and we can see that on the chart the second half of 2007 saw PBR giving impressive leverage to WTI, its ratio moving from a low of 0.37 to a high of 0.62.
  • Then came a period when although PBR's share price still moved up, it was much more in lockstep with the rise in oil. It should be pointed out here that the high point of the PBR:WTI ratio came in February, while the share price peaked much later in mid-May when the Arjun-factor pushed WTI to $147/bbl.
  • Next, the May to July 2008 period was brutal, as the flipside of the 2007 leverage coin showed itself and PBR's ratio to WTI dropped sharply.
  • The final phase is the one we are in today, with PBR fairly rangebound compared to WTI. The word I use on the chart is "mature", as nowadays the public image of PBR is one of the big oil boys (be that correct or not).
Regulars to the blog will know that I never bought into the hype surrounding PBR, and there are plenty of previous posts that stand as evidence (when the hype machine was at full speed, this humble corner of cyberpace was even featured in the mighty London FT in this note that says "One blogger offers the response: short Petrobras."). Now that PBR has blown off the hype and found a steadier ratio against WTI, I might take it a bit more seriously in the future. However, the Steve Jobs-like UPOD (under promise over deliver) style that Wall St praises is turned on its head in Brazilian business. It's more like OPUD in their world, and the overexaggerated claims for Tupi, Carioca still need to be bumped down a few notches. Up to just a couple of months ago, the image sold was one of PBR only having to stick a pipe into the seabed and out pours 30 squillion barrels of ready-processed lead free fuel. Sure the oil is there (nobody knows exactly how much, but hey...who's counting?) but opex will be high and capex on this project will be simply enormous; we're talking in the hundreds of billions of dollars to get this thing rolling.

It's at this point the plain, boring, simple fact that Petrobras is a state run company needs emphasizing. Bottom line results are not the be-all-and-end-all of PBR's corporate philosophy. Never have been and never will be. Do you honestly believe that the company will continue to pay enormous dividends to foreign shareholders while at the same time taking out massive debt lines to pay for the capex? If so, you are in for a rude awakening.

So I'm still neutral on Petrobras stock. I'm reasonably bullish on the company and what it will do for Brazil in the long term future, but because shareholders are not the raison d'etre of PBR there's no reason why you or I should prefer it over CVX, COP, XOM or whatever other bigoil takes your fancy.

Ecuador: The referendum "yes" vote is now a lock

Does Intrade have a market on the Ecuador referendum coming up on the 28th September? If so, you can now put your mortgage on Studmuffin getting his way....yet again.

The largest indigenous organization, the umbrella group CONAIE, yesterday announced its support for the yes vote, though it was quick to point out that the project constitution does not meet all its demands and that their support for the new constitution is nothing to do with their opinion of Correa.

No matter; with CONAIE, the muffin man has 10% of the population voting his way. Most of those were already in his column, but this will be good for a 3% national swing towards "yes". With Polls already showing growing support for the yes vote and the way those same polls consistently underestimate Correa support, this one is now in the bag.

UPDATE: See this latest post for the updated poll numbers

Spooky chart

The blue line is WTI crude, November 2006 to date

The red line is the Nasdaq index overlaid on the chart with its now infamous peak in early 2000 (and before you ask, the timescale is 1:1 and has not been stretched or compressed in any way).

The correlation between the two lines is 96.65%, according to the guy who sent me this last night (he sent it as an Excel file and the numbers do seem to check out correctly. FWIW I regenerated this chart to check them myself.).

US unemployment 6.1%

Y'know, I'm trying my hardest not to get sucked in by the US election yada, but when I see numbers like this then reflect that the Republicans are still being taken seriously in this Presidential election it all gets a bit Kafka.

However, it does go a long way to explain how a couple of guys can freeze a monkey suit in a block of ice, say it's Bigfoot and actually sell it.

Gold shot up $16 on the news. You'd better sell that spike, cos in the Pachakuti that you guys live in 6.1% unemployment will be seen as dollar bullish.

UPDATE: I've been asked already via mail, so just for the record "pachakuti" translates pretty fairly as "upside down world" in Quechua. Tradition states we are currently living in pachakuti, and that the time is drawing near when the world will be turned back upright (the year 2012 according to the Q'eros people around Cuzco, which coincides with the date pencilled in by the more famous Mayan calendar). Spooky stuff, no?

9/4/08

Argentina: Damned if you do.........

Martin Redrado.
(Listen to him, Kirchner. He's actually making sense.)


The fall-out from the decision by the Leader of all Argentina (and his wife) to pay off the country's $6.7Bn Paris Club debt via this Presidential Decree has been totally predictable:

The Paris Club Group of Creditors, via its head honcho Xavier Musca, said "We consider that Argentina is making a good decision, if everything is confirmed and implemented". He also said that paying the debt off will help "repair the economic credibility of the country."

The IMF said "We welcome the normalization between Argentina and its creditors yada yada........."

The wolves in sheep's clothing known as ATFA (check out their shadowy background in this previous post) came out with a predictably dickhead interview that included, "...it's still to be seen whether the President really wants to correct the economy of the country or if she is only trying to avoid the next default". These crooks' binary worldview couldn't possibly imagine a third scenario where Argentina becomes an accepted member and doesn't have to crawl to their armtwisting tactics (no surprises that it's the scenario I prefer).

Local opposition politicos have done the normal stupid things like trying to get the courts to block the payoff, saying that Central Bank funds aren't allowed to repay this kind of debt. Don't worry, Xavier; not a snowball in hell's chance of this one bearing fruit.

Local exponents of the dismal science wrung their hands about using Central Bank reserves to pay off the debt. The fact that Argentina now saves over U$350m in debt servicing and that no country its size ever needs 50 large one tucked away in the bank vaults doesn't seem to occur to them. They then crawled back into their ivory towers.

But as mentioned on Tuesday, this bit of tidy financial housekeeping can only be a good sign. No matter what spin opponents would like to put on the matter, STFU is still the order of the day.

Typical IDEA member

However, the local business community still has its own gripes, and being the spoiled brats that they are will be looking to have their cake and eat it over the question of country inflation (around 8% officially, but really around the 20% to 25%). At the IDEA ( Institute of Argentina Empresarial Development) summit happening now, 93% of the preening suits on display ranked inflation as their top concern. "Do summink 'bout it, Klishtinaaaa!!" they all shout.

The argy Peso vs US dollar: $3.04 right now

Well, the obvious thing to do is to tell the Central Bank to stop intervening in the local forex market and let the Argentine Peso freely float and strengthen to its natural level (which I think is around 2.80 to the dollar, but others say is even higher).

Argy Peso vs Braz Real: nuff said

But of course, Señor Bizdude will then come back with the "NOOO!!! You're killing my export biz you fools", the same chant as we've heard for at least three years whenever something as radical as Economics 101 is proposed to them. I mean, look at that chart again and then point to the way Brazil's exports have been murdered by forex rates...NOT.

However, this time ArgyBizDude might have to lump it. Word is that Martin Redrado, anglophile and big cheese at the Argentine Central Bank (BCRA) is pushing los Kirchner to finally...FINALLY allow the peso to revalue. In off-the-record-third-party gossip (that's from a normally pretty accurate source), Redrado is reported to have said to his inner circle that the weak Peso has had its day and that monetary policy must be changed to attack inflation.

I for one hope that Klishtina listens to Redrado. There's no point in 9% GDP growth if inflation robs the country of the benefits. If Argentina can successfully swap its 8%/9% GDP growth and inflationary pressure for a 5% longer-term growth rate and lower inflation (not the BS number served up by INDEC, but the real number) the country will be in much better structural shape. It can then truly give the finger to ATFA vultures and all the other detractors who only see gloom and doom on the near-term horizon.

Venezuela: Financial justice, financial injustice


Justice: Gold Reserve (GRZ) is up 8% today and Crystallex is 12% down.

Injustice: Lehman Brothers (LEH) issues a "buy PDVSA debt" call today and informs Bloomberg, Reuters, Dow Jones Newswires, AP, AFP, and all the other necessary newswires (see the actual release below). Not one of these services has issued the news so far. I mean, actually passing on a buy recommendation on anything Venezuelan just isn't right, is it?

UPDATE: Justice is fleeting in Venezuela. GRZ closed a point down.

UPDATE 2: Injustice is done, as Bloomie is finally running the Lehman Brothers story (undoubtedly because they read this post and thought "oh cripes! Otto's on to us!")

Trading Post


US unemployment jumps, back-to-skool sales basically sucked, the Dow drops 200+ points......and (roll on the drums) the dollar reacts by moving up. That makes sense..........

Fortuna Silver (FVI.v) at $1.00. Gotta laugh, as 50c of that is ready cash at bank. A good reminder about how stupid investors really are sometimes, even the bigger ones.

Bovespa (BVSP) down 3.2%, and EM stocks in general continue their time over at the woodshed.

Petrobras (PBR) down 5% at $45. I'm even starting to feel a little sorry for Arjun Murti, the Goldman Sachs dude who called the oil spike but is now guilty of banging on the table about PBR. He's now way underwater on all his repeated calls to buy PBR this year. You're only as good as your last trade, Arjun*.

Mercado Libre (MELI) down 7% at $26. Recently there have been some idiots trying to start rumours about E-Bay wanting to take a larger portion of MELI. It's total bull. Don't fall for it.

Jaguar Mining (JAG) has just gone under $6. I'm glad I missed this falling knife.

Breakwater (BWR.to) at $0.28. I bought at 0.29 this morning, and thought I'd been everso everso clever not to pay the 0.30 and 0.295 offered at the open. Wrongo! I'll suffer it to a maximum of 0.265 and then puke if necessary.

*note to Otto: please look at your own repeated calls on FVI.v

Lehman Bros and Venezuela Bonds and Otto

Ok, hands up who remembers this line from yesterday's snippets;

"Why has Lehman Brothers (LEH) suddenly become interested in the Venezuela parallel rate and the role of Moris Beracha in the country's finance policy? All will be revealed shortly, I'm quite sure."

Well, we didn't have to wait long. Here's a PR from Lehman this morning, and while you're reading through, reflect on how incredibly connected this little Otto must be:

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Lehman Brothers | Fixed Income Research
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Emerging Markets Intraday Comment
-------------------------------------------------------
Gianfranco Bertozzi September 4, 2008
-------------------------------------------------------

Buy PDVSA
We think that investors should look to own PDVSA bonds at current levels. We
see several reasons to own these assets. All three bonds appear attractive from
different standpoints.

PDVSA 2017s are currently yielding over 11%. We think this is very attractive
for a bond with less than 10-year maturity, and the bonds trade about 80bp wide
to Venezuela 2016s and 100bp above N2018s in z-spread terms. Furthermore, the
2017s appear cheap relative to CDS, as shown in the basis chart below. On a
switch basis, this is the attractive part of the curve, and meanwhile, default
risk is extremely low, in our opinion, for this quasi-sovereign issuer.


[http://llpublic.lehman.com/LAS/UnauthProxy/RSL/jsp/researchDispatcher.jsp?dispatchID=PUBLIC_IMAGE&docID=102105190&streamFile=YES]

Yet while a payment default seems highly unlikely, current CDS spreads are
suggesting a 46% probability of default within 5 years and up to 74%
probability over a 10-year period. Bond-implied probabilities of default are
even higher. Using a constant hazard rate model, we find that the 10-year
cumulative probability of default is 87%. PDVSA has no history of default, and
we believe that oil prices are destined to be higher in the next 10 years than
they have been in the previous 10 years. In addition, PDVSA's recent efforts in
cleaning up Petrozuata debt sends a strong signal to markets about
its commitment to avoiding default.

PDVSA 2027s and especially 2037s may look a little less compelling on a switch
basis, but we think that they are more compelling credits to own outright. Both
are trading near all-time lows on a price basis and are trading close to
recovery levels - these very low dollar price bonds give investors nearly
unparalleled convexity in EM. The bonds have also underperformed CDS in recent
weeks.

Moreover, because VOD is much lower on these bonds, investors can hedge their
position at minimal cost. The investor will need $2.5 million notional of 10-
year CDS to hedge $10 million notional of PDVSA2027s and $2.2 million notional
of 10-year CDS to hedge $10 million notional of PDVSA 2037s to make the trade
VOD-neutral (assuming 40% recovery rate). We think that in a rally fueled by
liability management, stronger oil prices, or improved market sentiment, these
bonds could rally several points. When we look across the asset class, we see
few places where an investor has as much upside and such capped downside.

Gianfranco Bertozzi

Phil Yuhn

Kinross and Aurelian

I have to applaud Tye Burt and Kinross (KGC) for blind-siding the entire field and snagging nearly 75% of Aurelian (ARU.to) shares at a knock-down bargain price (which will rise to over 80% once the employee options go through the system). Once Ecuador's constitutional referendum is over and done with, the country's new mining law will hit the streets, the world will see that Fruta del Norte will have a a stable economic and political base on which it can move forward, and Kinross stock will undoubtedly benefit. Kinross has proved the old adage about fortune favouring the brave. Kudos, Tye Burt.

The losers are the small retail investors, and that includes me. The only silver lining that can be offered right now is to say that the band of brothers and sisters that formed around safeharbour and his agoracom bullboard will certainly become better investors thanks to this experience. I also applaud you all over there. Of course, there are still 20% of Aurelian shares untaken, so the remnant will still trade. No need to be a part of the Russian exposure to keep a hold of FDN (for the moment, at least).

As for Patrick Anderson, I'm going to refrain from saying a lot of the things I could say (there are posts already written, anyway). I'll limit myself to "not a good businessman", and be very clear about the fact that in the future I am very unlikely (and only because 'nevers' don't exist in CapMkts) to invest or to recommend investments in any company with him as a board member.

A complaint

Come on dudes....get yourself one of the free magazines on offer above. Just click on any link (or even this link here), choose a magazine (there are thousands to choose from in many categories, not just the one you click on) fill out the form and get a freebie that pays me a buck fifty or so, yeah? I've had those banners up there for two days now, and only one person has partaken (thank you, by the way). Just not good enough, I'm afraid.

More seriously, if this sounds pushy I apologize. But now there are a few thousand pageviews here every day, I'm just trying to find a way of making the blog pay for itself as I am a capitalist at heart and all I ask is that this blog pays for itself (which includes the opportunity cost) just to labour the point. I'm not trying to get all heavy on you and asking for straight donations via the PayPal button (which is still there basically because one person send me $10 every month and a couple of others throw over a beer's worth every so often). I like the fact that the magazine thing has the potential to pay a little bit to me while offering you guys something, too.

If it doesn't work and it's not popular, in the end I'll change tactics. But don't worry, I'm not planning on inviting Crystallex to sponsor the site at any point.


Think Zinc (Redux)

You have to like zinc now.
I love it when a commodity puts in a bottom on its pricing chart. Any commodity. It's like writing yourself a forward-dated blank cheque, and that's where we are today with Zn.

When I checked the LME Zn action this morning, my reaction was yet again, "hey, it just refuses to go down any further". And then I opened my mailbox, and a respected friend in the finance world had written "Zinc rocking and rolling... just won't go down these days..." as his header line. Thus the impulse to write this post right now.

So be on the ball with Zn, people. Here's a quicklist of stocks to consider (amongst many others)

BWR.to Breakwater: My fave way of ST trading the complex. I'll be buying some of this as a ST trade today, I expect.

BN.to Blue Note: Mentioned by an e-mailer to me a few weeks ago, and I've had half an eye on it since. Very cheap and very diluted. High cash costs at its Caribou mine. On the plus side, I've noted a few industry players circling around the stock in recent days. This is speculative, but risk/reward means you could try a few shekels (I have to say i prefer BWR).

VEM.to Vena Resources: Just waiting on its enviro permit (any day now, sez the Peru gov't) and this thing will be the owner of a Zn mine making a profit,and that's even if Zn drops to $0.75, according to my casio. Stupidly cheap here.

LMC Lundin: Has other worries right now (example govt of DR Congo), but it's a traditional Zn go-to play.

VOLCABC1 Volcan: If you have access to trading the Peru stock market, look no further for your Zn exposure. This very large Zn producer is due a good relief rally. Plenty of Pb and Ag exposure too (as you'd imagine).

There's also my top top favourite small miner Fortuna (FVI.v), but you have to think silver first and Zn second with that stock.

All this in my own opinion, DYODD, dude. It's your money.

9/3/08

South America World Cup futbol Qualifiers

Yep, it's time for another round in South America's religion, and while over in Europe you have such fascinating encounters as Andorra vs England, or Liechtenstein vs Germany (away wins, anybody?), the real action takes place this side of the big pond.

With my fictitious $100 bankroll standing at a lousy $60.58 after the last round back in June (ie way back before you knew who Usain Bolt was), I need to score a winning weekend to get back on track. So here are the five matches scheduled, with prices for the home win, draw or away win supplied by skybet dot com*:

Argentina (1/3) ........ draw (10/3)... Paraguay (15/2)
Ecuador (8/15) ...draw (5/2)..... Bolivia (5/1)
Colombia (10/11)...... draw (9/4) ......Uruguay (11/4)
Peru (4/5)................ draw (11/4)....Venezuela (3/1)
Chile (3/1) .........draw (9/4) ..... Brazil (4/5)

So now the bets:

As usual, the trick is to choose the best value and not try to guess all five matches correctly. Argentina looks good to beat Paraguay at home, but the price is prohibitive. Ecuador hasn't been scoring many goals, so I'm going to avoid their match against Bolivia for lack of value.

Uruguay looks a good price against Colombia. The Colombians haven't impressed much so far even though they have racked up 10 points in and sit in the qualifying zone, and even with home advantage I'll take the improving Uruguay to land the odds here.

Peru Venezuela is another too tough to call, but I'm going to make my main bet Chile to beat Brazil. This Brazil side is not firing on all cylinders yet, and any team has a tough time travelling to Chile. Marcelo Bielsa's team has pulled out excellent victories away at Bolivia and Venezuela, and will be all out looking for the three points at home to put them in the frame for the World Cup Finals. So the 3/1 price offered looks very good value to me.

Therefore, my hypothetical bankroll is being thrown at two bets:

$45.58 on Chile to win (3/1)
$15 on Uruguay to win (11/4)


And let's see how we get on.

*as a reminder, let's use the Argentina vs Paraguay game to show how the betting price system works. Argentina is 1/3 favourite, which mean that if you bet $3 you win $1 and get a total return of $4. The draw (10/3) pays a total return of $13 for a $3 stake. Paraguay to win (15/2) would pay $17 for a $2 stake.

Or if you prefer, for a $10 level stake:
Argentina win pays $13.33
the draw pays $43.33
Paraguay win pays $85

Aznar cannot be the father

The scandale du jour surrounds French Minister of Justice, Rachida Dati. She has confirmed she is pregnant but limits pointing a paternity finger by saying she has "a complicated private life."

However, Moroccan magazine L'Observateur has named ex Spanish topman José Maria Aznar as daddy, which provoked Aznar into replying that the rumours were "a total and complete falsehood". I have to agree with Aznar. Dati isn't blind. I mean.....look at the dude...


Would you?

But rumours iz as rumours duz, and there were no denials coming from Aznar a few months back when he and Dati were spotted dining together in swanky Paris dineries. The story at the time went that Nico Sarkozy presented the pair, and maybe at the time Aznar felt a bit left out in the Don Juan stakes after seeing the French prez waltz off with Carla Bruni.

But hey, I really don't care that much...just passing on the scuttlebutt. Sheesh! I've just caught myself by reading this back..this place is turning into PerezHiltonland. We apologize for the interruption in service, normal LatAm snarkiness will be resumed as soon as possible.

Bi-polar lithium investments

Why did this face come to Otto's mind? You be the judge!

I've watched with amusement the latest LatAm mini fashion craze play out in the junior mining world. A few months ago, somebody noted that Chile's SQM was doing very nicely thanks, then noted one of its main lines was selling lithium to people who then make snazzy new high powered batteries from it. They then noted that the techniques for "mining" lithium weren't that difficult (basically pumping the lithium brine found in some Andean lake areas and then refining it). They then noted there were still lakes of the stuff hanging around undeveloped up there.

Combine the above ingredients, add the shark-like attitude of the Canadian miners, bake in a few hapless saps who bought the idea and voilá, the latest pump'n'dump was created.

The fact is that lithium is not the battery fuel of the future. It does pack a voltage punch for sure, but the raw ingredients are unstable and the batteries have this nasty habit of exploding on you if they're even slightly mistreated. Also, technology looks like outpacing the all-aboard-the-latest-gravy-train juniors who actually paid money to get their hands on "assets" (I use the term loosely) that are not much more than oversized puddles 15,000 feet up in the mountains. (and you guys up there crack jokes about moose pasture....sheesh).

No, the brave new world of Hybrid transport and electric movement forces is likely to be supplied by good old Zinc/Nickel batteries, as the smart people in white coats have finally worked out how to get these safe metals combining more efficiently. Which just gives you another good reason to bet on the future of Zn the metal, I reckon (though this news is unlikely to move the spot market much in the next 24 hours, it has to be admitted).

So anyway, let the established lithium producers like SQM and FMC quietly and profitably supply the world market, and if you really like the sector, buy the producer. That's because the BS juniors jumping on the bandwagon like NW.v, LAT.v and a hatful of others are just trying to sell you so much snake oil, and a snake oil with a limited shelf life too, it seems.

Snippety Stuff (feigned puzzlement edition)


Why has Lehman Brothers (LEH) suddenly become interested in the Venezuela parallel rate and the role of Moris Beracha in the country's finance policy? All will be revealed shortly, I'm quite sure.

Why have the management of Crystallex (KRY) awarded themselves over 2.5 million options at a base price of $1.10? (Note to readership; if you don't know the answer to that one, I advise you never to buy stocks in junior mining companies and avoid Latin American exposure, too. Forever.)

Why is Franco Nevada reportedly pissed at the board of Dorato Resources? Take a look at the price FNV.to paid to get in, then look what happened to the DRI.v PPS as soon as the deal was sealed and work it out for yourself.

Why does Minera Andes (MAI.to) sell off every time it releases good news? (I really don't know the answer to this one...sorry).

Why did Vena Resources (VEM.to) trade a whole bunch of shares in Frankfurt today? Another 100,000 shares traded in Canada today, too. All this after weeks of near-zero volumes. Talk about fits and starts........

Message to Colombia: Time to grow up

A couple of Colombia stories have caught my eye in the last 24 hours. Firstly, this link shows that President Uribe's approval rating has dropped seven points from the boost he got from the hostage-freeing 'Operacion Jaque', and currently sits at 78%. Not that Uribe will be quaking in his boots about the loss of popularity; 78% is an extremely impressive approval rating for a long-serving President in any part of the world, and perhaps doubly so for LatAm.

The second was a call by the once and future presidential candidate, ex-hostage Ingrid Betancourt, to include the FARC in Colombian political debate (Spanish language Reuters link here). Now I'm sure this will be greeted by cries of "never surrender", "bomb the bastards", "string 'em up it's the only language they understand" and suchlike, but isn't it time that Colombians stopped beating the crap out of each other and talked a bit more?

The FARC are (to my knowledge at least) the only belligerant guerrilla force left in this part of the world, and the continuing outbreak of regional democracy will have to include them at some point, just as Sinn Fein is now (grudgingly by some) included in the Irish debate after years of bombs and guns. Of course, Betancourt obviously has her eye on the top job already thus keep in mind there's always the scheming politico angle to filter out. Even so, I welcome her statement, even though it won't be a night-to-day changemaker. In the words of the warrior-democrat Winston Churchill, "Jaw jaw is better than war war."

The aggressive stance taken by Uribe towards the FARC has undoubtedly worked on one level, and this explains the roots of his current popularity. But it has also caused innumerable human rights violations that will have to be reckoned sooner or later. Argentina has come to terms with its past. Peru is having more trouble facing the stark reality of its armed forces atrocities in the 1980s and 1990s, but it has made progress. As for Colombia, the day will come when a warrior leader such as Uribe is not needed nor wanted any more. The sooner the better.

Venezuela has a new blogger...

....that's well worth visiting. "Sapitos de la Noche" is an English language blog written by a gringo living in Venezuela with no political or financial axe to grind, it seems. He's also smart, observant and writes very well (something sadly lacking in most bloggers).

Anyway, here's the link again, so go have a look. You'll also find the link added to the list on the right as from today. I hope you enjoy as much as I've been enjoying since it came up on the radar.

9/2/08

Curbing Costs with Google Apps

You may have seen this logo before

After the success of the free book link given out yesterday, here's another freebie offer for you, dear reader. The difference with this one is that those nice people at Google will pay me a couple of shekels if you decide to take them up on this (about U$1.50 for every copy distributed, I think), so this time I might even make some money out of this.

The name of the case study paper is "Curbing Costs with Google Apps", and it's aimed at people and companies who use IT and need to streamline operations. Here comes the official blurb that goes with the offer. If you go for it there's an application form to fill out, but it's not too heavy and being Google they won't sell any info to third parties, that's for sure. Let's see if my boringly aggressive drive towards making my humble corner of cyberspace pay for itself gets any love, yeah?

Have a good one, people, and access the free case study paper by clicking this link right here.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

"Curbing Costs with Google Apps"

Learn how both new and established companies are using Google Apps to curb costs amid rapid expansion.

Start-up IT services provider Counterpoint Consulting and office products distributor Indoff, which has been in business for thirty years, operate in very different industries, but the two rapidly growing organizations share the need to provide employees with cost-effective yet continually updated technological capabilities.

Read how both companies have benefited from Google Apps, a suite of applications that includes webmail services, shared calendaring, instant messaging and voice over IP services, with results including:

  • Reduced strain on IT due to streamlined operations and lower costs
  • Greater business scalability through easily-deployed services
  • More productive and efficient employees with best of breed communication tools

Geographic Eligibility: USA, Canada

Publisher: Google

Gary's thoughts

There are only two technical analysts that I pay any attention to in this world, and Biiwii Gary is one of them*. As part of this post today in which he does his normal cool thing (i.e. slaps a couple of timely charts in front of us and then explains how he sees the market psyche) he comes up with a six point scenario that I can go for very easily. Gary sez:

1) Uncle Buck tops
2) Commodities bottom and rally... taking gold with them

3) Stock market legs down, eventually taking commodities down again and yes, gold too

4) Deflation Scare Central as Uncle Buck bottoms for next leg up and assault on 80/81
5) Euro goes pfffftt, oil down for a long count

6) Economic anxiety at a fever pitch accompanied by calls for government to DO SOMETHING. Gold says 'errr, I think that's my cue'

You rule Gary, I'll go along with your plan. As mentioned this morning it's getting near serious buytime, too. As for timing each step, anyone got any ideas?

*the other is you, Grin

Trading Post (after the bell edition)


I was so fascinated by the market today that I took my daughter into town for an ice-cream and bought her a new pair of sneakers with Kung Fu Panda's picture on the sides. Far more productive an afternoon than watching this circus (and I know her grandmother will be happy to read all this).

Just to pick a few daily disasters: DMM.to, KGC (and therefore ARU.to), JAG, LA.v, CS.to, MAI.to, BWR.to, FCX, FAN.to. I'm sure you have your own 'favourite' to tack on the list, too.

Vale (RIO) down 5% today. A dude named "El Zero" (good moniker) mailed me today, asking my opinion about this Bloomberg piece that explained to the world why RIO was about to double. My answer is one of the most quoted quotes from 'Reminiscences of a Stock Operator', the book I linked for you over the weekend.

"I began to realize that the big money must necessarily be in the big swing. Whatever might seem to give a big swing, initial impulse, the fact is that its continuance is not the result of manipulation by pools or artifice by financiers, but depends upon basic conditions. And no matter who opposes it, the swing must inevitably run as far and as fast and as long as the impelling forces determine."

This is why you need to read the book. It's full of gems like that one. It's as relevant as analyses published this morning. Go get your free copy (I note that 67 people already have, which is good).

Amazingly there were a few miners in green today. One-and-a-half cheers for Vena Resources (VEM.to), which managed a winning day on good volume, too. It looks like I underestimated the Canadian market a bit today, because I thought they wouldn't know what the name Romaña-Letts signifies in Peru mining circles. For those who don't know, it signifies "respect". Is this thing finally catching a bid or two?

Another miner up today is Baja Mining (BAJ.to). I like the way this company turns its back on the stupidity of recent market action and just gets on with the job of constructing its mine. Boleo is behind schedule for sure, but Greenslade&Co is not just throwing up hands and saying 'oh woe is me.' Good for them.

Minera Andes (MAI.to) released another positive PR after the bell. This one should be a wake up call to the person who mailed me a few weeks ago asking why San José is doubling production throughput tonnage to 1,500tpd when M+I resources aren't that big. At the time my answer was "either do a site visit, or talk to someone who has visited already". There are enough untapped veins in that area to make Dracula swoon.

Question: Does this ruling make Grupo Mexico a buy at last? Answer: Yes. Finally it's buyable.

UPDATE late night: A mailer has just reprimanded me for forgetting to mention that Corriente Resources (CTQ.to) (ETQ) also fought valiantly against the 'corriente' (Spanish for 'current') and managed to end in green as well. Well fair enough, but it only ended green cos Dundee painted the tape 18 minutes from the end of play with 400 shares, dj ;-). But hey...a win's a win, right?

Argentina and the Paris Club debt

Message from Klishtina to Bloomberg News

The big regional finance news this morning is that Argentina has agreed to pay off its Paris Club debt. The U$6.7Bn approx debt will be paid off using Central bank funds, and has been enacted by Klishtina in a Presidential decree. This is why Argentine banks are zooming this morning, for example the ADRs easily traded in the USA such as Grupo Galicia (GGAL)...

...and Banco Macro (BMA).
What this is really about in solid financial terms is good housekeeping. Argentina has $50Bn hanging round in reserves doing nothing, and it pays about $355m per year in debt servicing on the $6.7Bn Paris Club lump. It's kind of silly not to do this, in fact.

But despite the fact that it's only a small slice of the total debt owed by Argentina, also it sends an important psychological signal to the markets; "You damnfools who think we're going bust...think again." All the chatterers that have recently been snarking about Argentina replaying the 2001/2002 default in the weeks and months to come now have to STFU, at least for a while, and Argentina's country risk therefore directly benefits .

Ironically and deliciously, the lamentable regional coverage from Bloomberg ran a note titled "Kirchners Losing Argentina in Slump Leading To Crisis" this very morning, just minutes before crow was served up on a golden platter. Bon appetit, Drew Benson in Buenos Aires.

As the old saying goes, money talks and BS walks. FWIW, as much as I dislike the present administration, it's always been plain as day that there's no looming financial crisis. Politics is not economics, and gringo journalists who need a decent lesson in how LatAm works will hopefully have learned that little pearl today.

UPDATE: A tall and handsome gentlemen I know has just written and said that according to his Bloomberg terminal I'm totally wrong with that "just minutes before" in the 2nd last paragraph. In fact, Drew Benson's story was filed exactly 666 minutes before the Paris Club debt story broke. A number which is spooky...just plain SPOOKY. PTB, queue here..........

Post Labor Day drop: it had to happen

...or at least it was always a strong possibility.


Gustav missed and oil continues to unwind. The combo of words "demand concerns" are wheeled out at the right moment (a strange 180° turnaround from the accelerating US GDP number of last week, but let's not dwell on the silliness when we have arch-stupidity to examine).

The result is more fuel for the tinfoil hat conspiracy theorists that left over 70 comments under my two SeekingAlpha posts last week and tried anything to discredit the arguments offered without actually addressing the issues. Gotta laugh. Live free or die, dudes*.

Anyway, I'm rambling, but also kind of excited to see today's plummet. Thats cos I'm carrying cash and getting ready to buy things. This is where I want to buy copper exposure.....

.....and it's close to where I want to get gold exposure, too. U$780 would be nice again....

Meanwhile, the observant among you will note that I moved the furniture around a bit Chez Otto last night. The Adsense blocks have been demoted to sit between the posts. You now have no excuse not to sign up for one of the free magazines offered by the two links above and the two below on the right. I've also brought the Fortuna Silver and Seinest ads into view a little more, and I hope you take time out to visit them; two excellent companies.

*To live free, leave the USA. But then life gets uncomfortable, doesn't it? Discuss.

9/1/08

The Colombia stock market and IGBC index: An overview

Way back when I ran two posts, one giving an outline of the Peru stock market, and another being general on Argentina's market. So when I saw the good news out of Colombia today, namely that the country has confirmed the strong rumours bandied about and finally done away with capital controls on foreign investment money wishing to invest in equities there, I thought it a good time to pick up the thread and write a general overview of the Colombian market. But before we get there, a quick word on the news today. As reported here by Bloomie, Colombia has stripped away the 50% capital investment lock-up program that was very off-putting for foreign capitals. The news popped the main IGBC index by 3.5% today on the news, and Colombian investors now expect to be awash with foreign dollars....a bit like their army, I suppose.

So now that's out of the way, let's have a closer look at how stocks trade in Colombia and we'll concentrate on the main IGBC index to do so. It's worth mentioning right now that the Bolsa de Valores de Colombia (BVC), does the vast majority of its business in bonds, but even though between 85% and 90% of the money that flows through the BVC is in the debt market we're concentrating on equities today.

Here's a home-made chart that tracks the IGBC index from January 2007 to date (and click on any of the charts in this post to enlarge, by the way).

As we can see, 2008 has not been a good year for Colombian stocks, the main waterfall moment having come late January. Since then the index has moved roughly between the 9,000 and 10,000 level, so today's 300 point move to 9,709 means it is still very much in the recent trading range.

The IGBC is currently made up of 29 stocks. Here's a list of them all that shows the ticker, the company name and the weighting it has towards the IGBC.
Ticker Company Sector % weight 3q08
ECOPETROL ECOPETROL Energy 37.09
SURAMINV SURAMERICANA DE INVERSIONES S.A. Investment Holding 10.11
BCOLOMBIA BANCOLOMBIA S.A Banking 6.23
PFBCOLOM BANCOLOM PREF ADR´S Banking 5.63
ISA INTERCONEXION ELECTRICA S.A. ISA Energy Infrastructure 5.08
FABRICATO TEXTILES FABRICATO TEJICONDOR S.A Textiles 4.97
CEMARGOS CEMENTOS ARGOS Construction 4.31
INVERARGOS INVERSIONES ARGOS Construction/inv. 3.79
COLINVERS COMPAÑIA COLOMBIANA DE INVERSIONES S.A. Investment Holding 3.55
PAZRIO ACERIAS PAZ DEL RIO Construction/Steel 2.65
EXITO ALMACENES EXITO S.A. Retail 2.49
BVC BOLSA DE VALORES DE COLOMBIA S.A. Investment Holding 2.03
TABLEMAC TABLEROS Y MADERAS DE CALDAS Construction/Wood 2.01
CHOCOLATES GRUPO NACIONAL DE CHOCOLATES S.A Food 1.79
CORFICOLCF CORPORACION FINANCIERA COLOMBIANA Banking 1.51
ETB EMPRESA DE TELECOMUNICACIONES DE BOGOTA S.A. E.S.P. Telecoms 1.27
POPULAR BCO.POPULAR Banking 1.12
GRUPOAVAL AVAL S.A. Banking 0.96
INTERBOLSA INTERBOLSA COMISIONISTA DE BOLSA Investment Holding 0.91
ISAGEN ISAGEN S.A. E.S.P. Energy 0.68
BOGOTA BCO. DE BOGOTA Banking 0.47
ENKA ENKA DE COLOMBIA S.A. Petrochem/Plastics 0.41
PFBCREDITO BANCO DE CREDITO S.A. HELM FINANCIAL SERVICES Banking 0.37
MINEROS MINEROS S.A. Mining 0.25
ODINSA ORGANIZACION DE INGENIERIA INTERNACIONAL S.A. GRUPO ODINSA Infrastructure 0.13
PFCORFICOL CORPORACION FINANCIERA COLOMBIANA S.A. Banking 0.1
VALOREM VALOREM S.A. Investment Holding 0.08
SDCORFIC08 CORPORACION FINANCIERA COLOMBIANA Banking 0.003
SDPFCORF08 CORPORACION FINANCIERA COLOMBIANA Banking 0.0005

Below is chart that shows just how heavily weighted the index is towards just three companies, namely Ecopetrol, Suramerica de Inversiones and Bancolombia (note that Bancolombia holds third and fourth post on the weighting with its common and preferred stock in turn).

Between them, these three companies control a full 59.06% of the IGBC index, which nevertheless pretends to be the index that most represents the Colombian stock exchange. Shades of Tenaris in the Argentine Merval, I fear. This next chart shows all the other stocks bar the big three and their index weightings, as otherwise they are a little difficult to spot

So now let's move on and have a very quick look at a few of the main stocks in the index. Each one is accompanied by a 60 day price chart ripped directly from the BVC website that gives a bit of context. Click to enlarge charts as always.

As we can plainly see above, Ecopetrol is the 800lb gorilla in Colombian investments.
Ecopetrol is Colombia's own mini Petrobras, and with 37.09% of the total index weighting its influence has recently been called too great by local analysts. It has only recently gone public, and it's the first traded stock to be held by the wider general public; for the IPO its service stations were offering share certificates at the time.

Next comes Suramericana de Inversiones with a 10.11% index weighting.
This is an investment holding company with a wide range of holdings in local businesses. Its largest holding is Bancolombia which takes up 35% of its portfolio. It's very tightly held by other local investment houses and institutions, many of which also quote on the BVC (eg Argos holds 38% of suraminv).

Next is Bancolombia. Here's the chart for the common stock.....
...and here's the preferred stock evolution.
Between them they hold a 11.86% index weighting. Bancolombia is also available as an ADR in the USA, its ticker being CIB.

Next is Interconexion Electrica S.A. (ISA), with 5.08% index weighting.
ISA is one of the stocks that deserves a closer look. Although the recent high country inflation has taken the edge of Colombia's growth figures recently, there's much to like about holding infrastructure stocks in the longer term. Consider this a simple starting point for further DD.

Another infrastructure company to consider is Argos that has two IGBC listings. The cement listing shown here....
....and its investment company. Together they cover 8.1% of the index weighting.

The final example (leaving many out, obviously) is Almacenes Exito S.A. with 2.49% of current weighting.
Exito is a supermarket chain in Colombia that has been a traditional favourite for foreign investment. It's also available on the US pinksheets, the ticker being ALAXL.pk.

So that wraps up this quick look at the Colombian IGBC index and a few of its components. This type of post is not meant to provide solid investment advice, but it does serve to introduce the subject and give you a feel for what's on offer in Colombia's capital exchanges. One final thing to keep in mind is the currency forex, because as this final chart shows there has been plenty of volatility in the Colombian Peso recently....
....and any influx of foreign capital will be a currency strengthening influence. Now the capital controls that have been in place for nearly 18 months have been lifted, there will be plenty of foreign money sniffing around the BVC. DYODD, and see if you can pick up a bargain yourself.



Related Posts:
Argentina's Merval Index: An Overview
The Peru Stock Market (BVL): An Overview