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Which will be worth more at end 2015?

11/22/08

Los imágenes del día


Otto's weekend freestuff


Free free free! We love free!!!!!! Here we go:

This one is free for you and it earns me a commission from the publishers, so get educated and help maintain this site at the same time. It's a quality White Paper report, too (I don't offer no trasho, y'know) published by Adobe and called "Rapid E-Learning: Maturing Technology Brings Balance and Possibilities". You learn why more skilled learning professionals use e-learning tools and you can get solutions to keep pace with your business demands. This offer is for USA and Canada residents only. Here's the link again, so there's no excuses.

Next freebie is this report on junior miners that screens hundreds of them for good cash-to-market-cap ratio. Excellent source material.

The final freebie today might surprise some regular readers. Antal E. Fekete is an economic theorist who is highly esteemed in the goldbug community. I was pointed to this report last night by Lucas over at Trend&Value, and after my "Aw gawd, not him!" complaint and his "just read the report, then moan" reply I downloaded this paper written by Fekete dated November 4th 2008 and entitled "Revisionist Theory of Depressions (can it happen again?)."

It's a very interesting and intelligent take on the current crisis, and although I don't agree with some of his argument, other parts are certainly two or three cuts above the normal tosh written by the goldbug community. So here's the link, and have a read yourself. Twelve pages of not-too dense script and perfectly accessible for the non-academic (e.g. me). Excellent food for thought and thank you for insisting, Lucas.

Twobreakfasts: a nasty piece of work


President Twobreakfasts gave an interview to Peru's El Comercio daily this week as part of the general fanfare for the APEC conference. The local media all picked up on Alan saying he'd like to be President for a third time in 2016 (he can't run again in 2011), but Jurgen Schuldt over at memorias de gregorio samsa* has an altogether keener eye for a quote.

Schuldt spotted this one before I saw it mentioned anywhere else, and it really does sum up just how arrogant, mediocre and even dangerous Peru's Prez truly is. The subject was how Peruvians are never happy (Alan had already blamed his low approval rating on this...how convenient). The example was the large port facility being built at present in Callao, just North of Lima. The talk was how the people of Peru will find any excuse to complain about the development (the fact that Chilean money is building the port and not capital from Peru grates amongst the population). Under the scalpel of the OttoTrans Alan said:

"There is a lot of doubletalk. Peru has to free itself of these complainers and the best it could do is put all these people that speak through bitterness, envy or personal frustration in a boat and set it sailing and lose them (forever)."

That's Twobreakfasts down to a tee. He has no idea how much damage his lying and deception is causing his country, and anyone who stands up to his arrogance should be disappeared. And here lies a point that the reader unversed with LatAm culture and psyche often misses, but live here for a while and that soon changes.

The idea of "losing someone" in the way Alan theorizes is not just a metaphor in Latin America, dear reader. The word "desaparecido" (disappeared) is feared and reviled from Tijuana to Tierra del Fuego, and anyone with even a rough sense of regional modern history knows that it's no laughing matter. Speak to the family of a disappeared and you'll never laugh about it again, I assure you. No matter where, no matter if the regime were left, right, centre, revolutionary, military or (proclaiming to be) democratic. Chile, Argentina, Peru, Brazil, Colombia, and all the et ceteras.

But Alan García, the man who dragged Peru into the depths of economic and social chaos in the 1980s, still dreams of "losing" anyone that opposes him. The man is a danger to society, make no mistake. Under all that neoliberal, investor-friendly image that sits so well with the industrialized nations there's a really nasty piece of work. The English media sometimes muses about the apparent paradox of a country with great economic numbers having the President with the lowest regional approval rating (right now, measured at 19%....and remember 15% of those are the die-hard APRA party faithful who'd approve of Pol-Pot if he were the head of their organization). Those 'regional experts' that puzzle over this paradox don't know what they are talking about. Very simple.

The basic premise that world opinion is a better judge of a Peruvian president than the Peruvian people themselves is bordering on an insult. Think about it this way and ask yourself a couple of logical questions:
  • What would Alan's approval rating be if the country hadn't been lucky to enjoy the high metals prices over the last two years?
  • Have you noticed that those metals prices have recently dried up?
  • How will Twobreakfasts react when his back is up against the wall economically?
His track record is not good on that last score. I'd also point out that for the first time since Alan himself opened the door to the Sendero Luminoso (Shining Path) terrorists, those extremists are making headlines by killing police and army personnel. This is an ugly development that Alan brushes under the carpet with the catch-all excuse of "they're narcotraffickers". But is it really some strange coincidence of timing that the abhorrent scum of Sendero begin to make their presence felt with Alan's second term?

The 19% approval rating isn't some statistical fluke. Vox populi dixit. Are you listening?

*after a year traipsing around the blogosphere, I still think this is the best name for a blog I've found

11/21/08

Extra special weekend bonus

Click here for pictures of naked women.

Ecuador and Brazil rock them gently to sleep


It's like watching a movie; you know it's fiction but you suspend disbelief and get carried along by the story. Follow the bouncing ball, dudettes and dudes:
  • Studmuffin receives the illegitimate debt report from the CAIC commission in late September. To quote the commission Veep from Tuesday, "It is not that the President does not know the report, because it was delivered at the end of September as was our commitment."
  • Five weeks later, Studmuffin puts the international finance community on the hook for the $3.9Bn or so in illegitimate bonds (i.e. the Globals 2012, 2015 and 2030).
  • But he starts the ball rolling by saying "definitely won't pay the $320m in Brazilian BNDES bonds."
  • All the while saying, "We're willing to negotiate, of course".
So today Brazil recalls its ambassador to Ecuador for consultations, and suitably grave noises come from Brazilian functionaries.

ARE YOU TELLING ME THAT LULA DIDN'T KNOW WHAT CORREA WAS PLANNING TO DO? Gimme a break!

Otto bets $5 on the following: Brazil is being used as a lead precedent in the bonds negotiations. In the next few days we'll witness huffing and puffing from both sides, with gleeful media writing stories about how the Socialist axis has broken and how Correa has gone too far. Then the two sides sit down and spend hours thrashing out a deal (that's already been planned). Once the little charade is over, Correa looks the BIG bondholders in the eye and says "wanna come talk, too?". Thus meekly they walk in, they have their own little trasharound and a deal is struck (at some kind of haircut or reduced interest payment or combo or variation thereof).

Any takers? What odds will you give me for this scenario, sportsfans?

Trading Post (What's all that green doing on my screen? edition)


Gold went up. Did you notice? Now printing $801 and $55 up on the day (or 7.5% if you like). Note that gold is nearly the same price as platinum now. I don't know what that signifies, but it looks kinda cool. Anyway, I took 1/2 profits on my sexy winning position in GLD and the other half can ride this sucker.

Meanwhile........

FVI.v up 20%....w00t, PCU up 12%....w00t, JAG up 15%...w00t. Maybe it is just a relief rally, but I'm gonna enjoy it whatever happens. Plenty more double figure winners out there today. Pick your own faves.

It's not all joy out there, though. Capstone (CS.to) at $0.67 is down 3% and deserves much better than this. Also, I noticed Gold Hawk (CGK.v) traded at $0.01 this morning for a miniscule 5,000 shares before popping back to UNCH at $0.02. This set off a lightbulb in my head, and that lightbulb was;

"HEY, IT'S TAX LOSS SELLING SEASON!"

The point here is that plenty of people will be selling their beaten-to-a-pulp losers in the next three or four weeks, and in the microcaps like CGK we're likely to see some weird trading action as people just throw them away (like the guy who sold CGK.v at 1c this morning). Perhaps opportunities for the fleet of foot in the pipeline?

OH, nearly forgot. Lundin (LMC) is getting swallowed by HudBay (HBM.to). Big big merger, and LMC shareholders get the premium on their beaten down stock. Here's the PR, so read all about it.


Kinross (KGC), Andean Minerals (ADM.v) and gold in them Chilean hills

This is where

Yesterday's news that Kinross (KGC) was paying $250m (plus a royalty that RBC says is worth $30m) for the Lobo/El Marte goldmine in the hills of Chile got people talking about Andean Minerals (ADM.v) again. That's because ADM's Volcan property sits right next door to the land already owned by KGC up there and the main reason for holding ADM all this time has been the thought that KGC would buy them out (or some other miner, but KGC has always been the favourite).

I beg to differ.

Kinross is paying Teck and Anglo $250m for their interests in Lobo / El Marte and it's 5m+ ounces of inferred resource gold. Well that's fair enough. Personally I think KGC could have got the deal done cheaper, but CEO Tye Burt might well be taking into account the goodwill of doing a deal with two big miners; it never hurts to win brownie points with the big boys. All in all, it's probably a fair price considering the current market and all that jazz. So what about ADM at volcan?

Right now ADM.v is trading in the $0.50 to $0.60 range. With 85m shares out, I'm pretty sure Kinross could have snagged ADM for a buck a share (and that's being generous to ADM). So why did KGC pay $250m for one plot of land and not a maximum of $85m for another plot of land that's very close to the sold property and apparently contains roughly the same amount of gold?

The ADM.v five day chart (click to enlarge)

I think it has a lot to do with a point I made in this post on September 18th about the quality of the gold resource. I said back then that the gold is low grading and a lot of it is at depth (even ripped a cross section from one of the ADM presentations to illustrate). Since then I've had conversations with pro geologists who confirmed my suspicions. According to smarter people than Otto, the strip rate would be too high to make such low grades interesting.

At the time I thought ADM at a buck or so was a speculative flip play, but also cast doubts on the property ever becoming a mine. Since then of course we've had another very large leg down in this selloff and world financial sentiment is even worse. There's no flipping of marginal projects going on, not while other more promising projects have been beaten to death and are can be bought at extremely low prices. So ADM isn't on my shopping list. It doesn't look like it's on Tye Burt's either. So Otto sez avoid ADM.v. Don't buy it, don't short it, just avoid it. There are better junior golds out there imho. DYODD, dude.

News roundup

Image dedicated to Jeff in NYC

Read this report on the Venezuela regional elections and note where you find the phrase "sipping a plastic cup of whisky". I actually burst out laughing. Worse than pitiful reporting from....well, look for yourself. These people actually write to me and have the brass neck to say they don't promote a political agenda. Y'see, they treat me as a moron too, not just their readership.

Peru's APEC summit hits full stride today. Today every Peru media is proudly splashing Dubya's words that that Peru is "un país ideal para invertir" (quick Spanish lesson: país = country, invertir = invest...the rest should be clear enough). A better example of damned by faint praise unavailable this year. The soon-to-be ex-POTUS arrives in Lima today (I think). Expect mucho talk and poco action.

You just know things are desperate in the US stock markets and the NASDAQ is scraping the bottom of the barrel when they invite the guys at Cresud (CRESY) to ring the morning bell. November 24th, be there or be square. Tea'n'buns served afterwards, and don't mention Aquiline (AQI.to) to the bossman (or his family, for that matter)...might ruin the atmosphere.

Argentina's Senate easily passed the law that re-nationalizes its pensions system last night. No surprises, as ever since Veep Cobos said he wouldn't stop the Kirchners from charging ahead it was a done deal. I know I'm supposed to care about this story, but I don't. An excuse of a country run by ridiculous people who still think they matter on the world stage.

Ecuador has annulled
77 mining concessions due to the lack of investment made by concession holders.

I got a Nobel Laureate in my corner...who you got?

Remember how I keep banging on about the three month T-bill at virtual zero yield being a serious thing? Remember how this humble corner of cyberspace is long GLD because of that miniscule yield and what its consequences imply (two recent examples linked here)? Well check out what Paul Krugman blogged last night:

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
November 20, 2008, 7:15 pm

Don’t panic about the stock market

Panic about the credit markets instead. Interest rate on 3-month Treasuries at 0.02%; interest rate on high-yield (junk) bonds over 20%.

This is an economic emergency.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Unsurprisingly and quite rightly, nobody gives a rat's trasero about Otto's shrill voice, but when a heavyweight speaks, people listen. Here's spot gold this morning:

You go girl.

The Unasur commission into the Pando Massacre has started to make its findings known

Leopoldo Fernandez is the Pando prefect now under arrest awaiting trial. Note the two overriding colours
of his Bolivian supporters; white (skin) and green (separatist flag)


Rodolfo Mattarollo is the Argentine lawyer who headed up the Unasur fact-finding commission in Pando, charged with investigating what exactly happened on September 11th this year (sidebar..what is it with that date?).

Here's the link to a report by Argentina's Pagina 12 newspaper about the advance presentation Mattarollo made to dignitaries yesterday. I've translated the first part below, but quite honestly I don't feel like translating any more. Read for yourself and find why. You can always run the link through Google translator if you Spanish isn't up to scratch and you want to read the whole article.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

The ex-president of the Bolivian senate, opposition politician José Villavicencio, walked past the camera shouting, "If Evo wants blood, he'll have blood." Meanwhile in the background a mob ran towards a group of indigenous people. The images pass as if in a documentary, while the auditorium in the Argentina Chancellory watches in absolute silence. An indigenous woman tells of the Pando massacre looking directly into the camera.

With tears in her eyes, she remembered how a group of "men from the city" burned alive one of her colleagues last September 11th. Next to the burned body, the woman's baby was crying hysterically, she narrated. Enboldened by the wails and discontrol, they picked the baby up by the legs and shook it and, as it wouldn't stop crying, shot it in the head.

continues here

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Meanwhile, check out the racist taunts that indigenous Bolivians suffered in Washingtion DC this week in this post at Down South. These racist scum are the people that the WaPo innocently calls "opposition activists". What you just read above is the type of action they support.

Correction

I have been informed by Bloomberg and Reuters (so far) that they did in fact report on the Venezuela unemployment figures on Wednesday 19th November. The information was not passed on to the open internet, but kept for customers who pay the monthly subscription for their service (about $1,200 or $1,500 per month if memory serves for the Bloomberg service, but I am happy to be corrected on that, too. Please advise).

In other words, the Venezuela unemployment figure is extra special information for extra special people, but they aren't going to make it available to the wider world. That's the job of others.

Kinda sums them up, I think.

Anyway, thank you both for the stuffy e-mails and.....apologies. And thanks for caring about this crappy little blog more than actually informing people about what's going on in South America on the most basic of levels.

Charts of the day are...........

......five year LME copper warehouse stocks and five year copper spot price.


They go very well with this report from Reuters:

 SINGAPORE, Nov 21 (Reuters) - The world refined copper
market saw a surplus of 74,000 tonnes between January and
August this year, versus a surplus of 22,000 tonnes in the
year-ago period, the International Copper Study Group (ICSG)
said in its latest monthly bulletin.
 The Lisbon-based ICSG said world refined copper output in
January to August was 12,221 million tonnes, while consumption
reached 12,147 million tonnes. World refined copper consumption
and supply trends, 2007-2008, in thousands of tonnes:
                              Jan-July 08   Jan-July 07
World mine production 10,061 10,161
World mine capacity 12,187 11,838
Mine capacity utilization (pct) 82.6 85.8
Primary refined production 10,411 10,093
Secondary refined production 1,810 1,784
Refined production 12,221 11,877
(secondary+primary)
World refinery capacity 14,893 14,262
Refinery capacity utilization (pct) 82.1 83.3
World refined consumption (1) 12,147 11,854
Refined stocks (end of period) 1,293 1,223
Period stock change -129 96
Refined surplus/deficit (2) 74 22
Refined surplus/deficit 206 149
(seasonally adjusted) (3)
 (1) = Based on EU apparent usage.
 (2) = Surplus or deficit is calculated using total refined
production minus refined consumption.
 (3) = Surplus or deficit is calculated using seasonally
adjusted refined production minus seasonally adjusted refined
usage.
(Reporting by Nick Trevethan; Editing by Ben Tan)

11/20/08

Ecuador Bonds: The Eurasia Group's take on things

Below the XXXs, find the Eurasia Group's take on the Ecuador bonds saga as written yesterday morning. For those of you unaware, Eurasia is an analyst group that covers the region very well.

FWIW I often find myself disagreeing with Eurasia's Patrick Esteruela's take on things, but it's questions of degrees and not the basic philosophy. He's very VERY good at his job (and as regular readers might have worked out by now, I'm as cynical as they come on regional coverage but Esteruelas is as good as it gets in the English language). He also had this quote in the London FT tonight.....

Mr Correa was playing “a giant game of chicken” with bondholders, said Patrick Esteruelas, Latin America analyst at Eurasia Group. “Correa clearly feels that this is the right time to extract savings in a potential restructuring negotiation before oil prices continue to decline and before emerging market sentiment recovers. And his only way of doing that is if he credibly threatens default,” he said.

......and i think that nails the scene very well. Certainly a damned sight more perceptive than the annoyingly arrogant Alberto Ramos of Goldman Sachs who is quoted by Bloomie as saying;

"The report is so exaggerated that it weakens their claims,'' said Alberto Ramos, an economist with Goldman Sachs Group Inc. in New York. "This is about ideology and dogma and retribution......Their case for restructuring is non-existent,'' Ramos said. The country's "debt load is low.''

RAMOS..........JUST...........DOESN'T............GET..............IT.

Back to the Eurasia Group note pasted below: Today I listened to a recording of the Debt Commission Veep Canelos interview on Radio Quito mentioned in the text below and I think Esteruelas is cherrypicking his comments (that's being diplomatic). Canelos was much more conciliatory than he makes out, and both Canelos and Debt Commission chief Patiño are willing, nay keen, to get the bond holders to the table. My main problem with the whole Eurasia take on things is that Esteruelas thinks Correa has left himself no wiggle room. That's crap. So far it's been straight out of the Studmuffin successful playbook, and his deal with Carlos Slim shows he's perfectly willing to do smoke-filled room type deals and give way in negotiations in order to get to the idyllic win-win.

Finally, this afternoon The Muffin talked about setting up an international tribunal to investigate the illegality of the bonds. You can bet your sweet bippy that if such a body is set up, a prerequisite from the international community (and the IMF won't be invited to this party) is that the debt servicing continues while the commission sits. And you can bet that Correa will concede this point for the good of....of whatever.

So here's the Eurasia note. Enjoy. By the way, I think he's spot on with the Venezuela angle.

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ECUADOR: Debt audit announcement will heighten risks of default
19 November 2008 08:49 AM EST

The government-tasked debt audit commission (CAIC) will present and comment on the full results of a year-long audit of Ecuador's external debt on Thursday, 20 November - heightening market fears of a potential external debt default. The commission's report, which has been in President Rafael Correa's hands since September and which we include a copy of here, identifies multiple irregularities in debt contracted between 1976 and 2006 and recommends the suspension of payments on all three global bonds, at least 45 multilateral loans and the Paris Club debt. The government will likely use these findings to enter into talks with bondholders over restructuring terms, driving a very hard bargain that will hamstring any negotiations and could likely lead the government to default. Contrary to recent market speculation, we believe Venezuela will not play a moderating influence.

The debt audit commission (CAIC) will present the full results of a year-long audit of Ecuador's external debt on Thursday, 20 November, at 10.30am (EST). President Correa will also be in attendance and will offer comments, according to our local sources. Correa's government decided not to meet its $30 million coupon payment on Ecuador's Global 2012 bonds last Friday and to use its 30-day grace period to examine the final audit results and decide the government's future course of action. The commission's report, which has been in Correa's hands since September and which we include a copy of here, identifies multiple irregularities in debt contracted between 1976 and 2006 such as double payments, abusive clauses, false justifications and negligence on the part of high-level government officials and multilateral institutions. The commission's report recommends the suspension of payments on all three global bonds, at least 45 multilateral loans and the Paris Club debt. It remains unclear how much of this will be made public on Thursday. While legally questionable, the report appears to give Correa ample domestic cover to suspend payments. Ecuador's public external debt stood at $10 billion in September or 21% of GDP, of which Ecuador's external bonded debt represents an estimated $3.86 billion.

The government will likely use these findings to enter into talks with bondholders over restructuring terms, entering a slippery slope that could ultimately lead the government to default. Correa's government, which has always had a questionable willingness to pay, has in our view stepped up its threats to default out of concern with falling oil prices and in a bid to take advantage of depressed market conditions before Ecuador's fiscal and perceived bargaining position continues to deteriorate (see Eurasia Group Note 14 November 2008). Supporting this view, government officials such as Minister of Economic Policy Pedro Paez and Finance Minister Maria Elsa Viteri have refused to rule out a default in recent days and played down its market implications while at the same indicating that this would be a good time to seek talks with the government to restructure Ecuador's debt.

However, this strategy will have many pitfalls and will likely end up in failure. On the one hand, the government has proven to be a very aggressive negotiator in its dealings with private companies over the last two years, and will likely look to extract substantial savings. In what could be a sign of things to come, CAIC Vice-President Franklin Canelos indicated in an interview yesterday in Radio Quito that he would like to see the government seek a haircut of 85% from bondholders. On the other hand, bondholders are unlikely to make major concessions to a country that has sufficient funds to pay and whose annual debt servicing obligations on its bonds are under $400 million. Bondholders are for the most part minimally exposed to Ecuador, are in some cases legally barred from voluntarily accepting a lower value and have hedged their positions with credit default swaps (CDS). They will also be reluctant to allow Ecuador to set a poor precedent that could embolden other countries with much heftier external debt burdens to strong arm the market into a restructuring of terms. The government could therefore end up fulfilling its threat to default by the end of the 30-day grace period or at a later stage if, as it seems likely, the government fails to persuade bondholders to accept its terms. The government has not given itself much wiggle room to continue making payments under current terms after making the results of the audit public in such a dramatic fashion, and with strong political backing, a fiscal surplus and ample liquid assets at this point, clearly underestimates the costs of a potential default.

Contrary to recent market speculation, we believe Venezuela will not play a moderating influence. Some investors are betting Correa will pay because a default would hurt his ally, Venezuelan President Hugo Chavez. Venezuela owns structured notes tied to Ecuadorian CDS that would force Chavez's government to pay if Correa defaults on Ecuador's global bonds. The Venezuelan government, which had accumulated substantial Ecuadorian CDS positions in excess of $5 billion by early 2007, played a major role in persuading President Correa not to default on Ecuador's bonds right after he assumed the presidency in February 2007. However, the Venezuelan government has since dramatically pared back its exposure to Ecuadorian CDS. Venezuela's national development fund (FONDEN) currently has less than $400 million in structured notes after writing off $300 million in notes underwritten by Lehman Brothers. Given that the Venezuelan government has been quick to unload any notes tied to Ecuadorian CDS first after last year's scare, its real exposure in the event of a default could end up being quite small. Far from holding Correa back, Chavez has been reportedly in talks with Ecuador to provide financing if need be as other sources dry up and would likely support Correa's quest to question and undermine foreign bondholders and international financial institutions.

Patrick Esteruelas
Analyst, Latin America

The world according to the goldbug newsletter writer, updated crisis edition



THE WORLD ACCORDING TO THE GOLDBUG NEWSLETTER WRITER (UPDATED CRISIS EDITION)
Event Analysis Effect recommendation
Dow under 8,000 Had to happen; crooks getting justice people need the safe haven of gold BUY GOLD!
Rebound in Dow the plan is working, the economy is safe expansion of economy will help gold BUY GOLD!
DEFLATION! things getting cheaper people have more money left over to spend on gold BUY GOLD!
INFLATION! things will be more expensive tomorrow people will rush to spend their money on gold BUY GOLD!
oil now cheap great news at the pumps people have more money left over to spend on gold BUY GOLD!
oil on the rise at long last! commodity reflation the whole commodity sector is sure to follow BUY GOLD!
uneconomic mines closing down great news! Supply is crimping less gold coming to market BUY GOLD!
mines stay on schedule for opening excellent! Lots of industry confidence mine managers know the real story here BUY GOLD!
US Congress bails out Detroit smart move; US gov't assures employment Wealth for all is the only way BUY GOLD!
US Congress lets Detroit fall smart move; spend more on productive sectors the US sees reality at last. Real market forces to rule BUY GOLD!

Finally, a decent quote on the Ecuador bonds saga from Bloomberg

Over the weekend Bloomie sent its reporter Daniel Cancel from Caracas to Quito to cover the bonds saga at ground zero. And it was worth it just to get the first and only sane comment from the market as featured in this note today. Buried on paragraph 13 of the note is this;

"The decision to pay or not has become a political one rather than an economic or financial decision,'' said Jorge Cherrez, president of Quito-based brokerage IB Corp. "Our countries love to hear two things: 'Down with the gringos, and I'm going to suspend debt payments.' The government can pay and will pay, but they'll leave the issue uncertain until the last minute.''

That is exactly right, Señor Cherrez. What a difference it makes to actually ask somebody that lives in Quito and knows what they're talking about.

Unemployment factoid du jour

In the USA we have October unemployment at 6.5% and rising, with today's jobless claims making further rises a lock. AP has "many economists" (who are never wrong of course) calling US unemployment at 7% by year's end and 8% by YE 2009.

In Venezuela we have October unemployment at 6.7% and dropping. Amazingly, incredibly, stunningly, the only English language newswire reporting yesterday's number was lefty Prensa Latina. No Bloomie, no Reuters, no AP, no AFP, no DJNW. It must have slipped their minds...........

Here's the PL note in full (short'n'sweet)

Caracas, Nov 19 (Prensa Latina) The unemployment rate in Venezuela ended October in 6,7 per cent, which means a 0.5 percent drop compared to equal period in 2007, the National Statistics Institute said.

A NSI report said that 122,015 Venezuelans found jobs from October 2007 to October 2008, increasing the number of workers from over 11.77 million (92.8 percent) to over 11.89 million (93.3 percent.)

This shows a clear trend of sustained growth in the number of people in employment in Venezuela, the text says, while noting that 55.9 percent of the people work in the formal sector.

Trading Post (gold 751 edition)


TheLittleEngineThatCould gold is having a second shot at the 750+ levels right now. With the 3m T-Bill at 0.01% there's still plenty of reason to believe here. Long GLD and JAG.

Speaking of JAG there was all the $1.90 you wanted this morning. Otto too chicken again. Now up 1% on the day at $2.03. I like the odds here, and happy to hold through.

Andina Minerals (ADM.v) up 9.4% at $0.58 right now, presumably on the back of the Kinross / Teck / Anglo deal announced this morning. I'll have more to say on that later.

Cosan (CZZ) down 15% at $2.14. How low do you go, Mo? I'm watching this on closely and will buy for a splash'n'dash trade to the upside if it looks like springing. Great plan. What could possibly go wrong?

Nadagold (NG) down 16% at $1.70. Not Latam, but all the same..."Toldya it was a dog, Andy." ;-)

Malaga (MLG.to) at $0.07. Down 20% plus on low volumes. I repeat that I like the fundies on this pennycrapper. Not for the faint of heart, though.

Fortuna (FVI.v) up nicely at $0.54. Still crazycheap, still an obvious buy.

DYODD as always, dudes.


The Ecuador Debt Commission's final report is published

Get your copy by clicking on this link right here. If your stuck for a decent read, the 172 pages of financial Spanish on offer are sure to fascinate :-).

There's also a press conference at 10:30am (in just over an hour's time...Ecuador is the same time zone as New York right now) to inform on the results. Check the newswires for updates, yeah?

UPDATE: WHAT AM I BID?

At the presser, debt commission head and Minister of Policy Ricardo Patiño didn't surprise Otto in the slightest when he asked for debt holders to come forward with proposals on how to restructure or renegotiate the debt they held. Ladies and gentlemen , this was the whole reason behind Ecuador's tactics from the very beginning. In simple terms it goes like this:
  • Bond X is at 80c on the dollar.
  • Holder holds quite happily and collects the interest ad infinitum
  • Ecuador pissed at having to pay so much
  • Ecuador scares the crap out of the market
  • Bond X goes to 20c on the dollar
  • Holder wonders if he's ever going to see an interest payment again
  • Ecuador says, "Hey, dude...we should talk 'bout this."
  • Holder trundles up, offers a deal, Ecuador says "too high", makes a counter offer, holder says "too low", they keep chatting over tea'n'buns, reach a deal.
  • Ecuador gets lower obligations, holder keeps getting interest flowing his way.
  • We all live happily ever after.
Or at least that's how Studmuffin has it mapped out in his mind's eye. The tough part is about to begin now. It's likely that vulture funds have been scooping up distressed Ecuador debt (esp the 2012 and 2030 Globals) at these low 20c to 25c prices. These dudes play rough and hard and have successful track records of winning full value payouts against countries defaulting on sovereign debt (eg Peru). According to this Reuters Spanish language report, Ecuador is looking for a 60% haircut. Any final deal will be a compromise from both sides, I'd venture at this early stage.

turn on, tune in, vote for me

The concept of buying votes is illegal, scandalous and abhorrant...for you guys up there. Down here it's illegal, normal and happens all the time, but today's example even impressed your jaded correspondent.

In Cordoba Argentina, the Peronist (PJ) party were holding internal elections to decide on the next batch of local leaders. In order to encourage some of the younger party members to turn out and vote (specifically for their party ticket of course), not one but two of the candidates offered marijuana joints to anyone who'd go in the booth and put a tick by their name.

I think this one even beats out the Argentine local elections in the Rioja region in which one ticket offered a lottery for a breast enlargement operation to anyone that supported them (presumably more popular with women than men, but ya never knowz these daze).

Chart of the day is............

.....spot gold, ripped straight from Kitco

That's because today's line (green) is doing the LittleEngineThatCould and trying to huff'n'puff its way up. I know that there are plenty of other expecting a gold downleg here, even respectable voices such as Lucas at Trend & Value (who's been nailing calls left, right and centre recently...if you trade via charts he is required reading) but we're going to ignore all those people today. I'm long GLD and JAG and I'll be doing a funny dance in front of the screen shaking pom poms about and wearing a rah rah skirt over my chinos (but don't tell the wife...she worries).

11/19/08

Bolivia news round up

Veep Alvaro García Linera, overjoyed at being interim President while Evo
visits Washington DC, breaks into a chorus of Nessun Dorma

This first one is one of the nicest things I've had the pleasure of writing all year. Hard line right winger Pablo Klinsky, president of the Santa Cruz Parliamentary Brigade and member of the team that tried to overthrow Morales this year admitted that the coalition, CONALDE, had lost to the government. He said that CONALDE had not simply been weakened but had been "catastrophically defeated." Music to my ears!

Meanwhile, Evo is in Washington DC and has been on top form, according to all sources. Here's a snippet of Evoness from today's proceedings.

"When I was leader of the Coca producers in Cochabamba they called me a nacrotrafficker and a coca mafia (boss). Now that I'm President they call me animal, monkey, simian and that I'm incapable, an assassin, a dictator and authoritarian. If I were authoritarian I would never have allowed a recall election. For the first time since 1950 a President won more than 50% of the vote (in the 2005 presidential election). They then asked this party that won more than 50% for a recall election. They wanted to revoke me. If I were authoritarian I would have said "I have won with 54% and therefore I will not put myself up for referendum." But I submitted to the referendum and the people ratified me with 67%".

Anyway, Evo can't have explained his drug-runner's ambitions very well to his police force before leaving on his US jaunt, because the Bolivian anti-drug force (FELCC) arrested nine people last night who were armed with shotguns and attempting to smuggle 102kg of cocaine. But remember, Bolivia is the narco-boss's dream state. That's cos Dubya told you. When has he ever lied to you?

Welcome Hu Jintao!

By the way Peru's media are acting you would think that Chinese President Hu Jintao had flown in to Peru direct from Beijing...or the moon or something. Not a mention about the fact that he was hanging in Costa Rica and then Cuba (and got to meet a real celebrity on the island, too).

But Hu is in da house, and Twobreakfasts did his best to hide the worst corners of the capital on the drive round (they did a bit of open top waving when they got to the Plaza Mayor....the few proles let through the epic security cordon must have enjoyed that). However Alan let the side down badly in the end, as Otto "wannabe Perez Hilton" Rock explains.

BUY THE FAT DUDE A BELT, SOMEBODY. NOBODY WANTS TO SEE THAT SKIN ANY MORE.

I love hi-res photos.

A small victory

To celebrate the winning debut versus Scotland (1-0, international friendly, Maxi Rodriguez scored the goal) of the world's greatest ever player as his national team manager, here's d10s in full Braveheart gear.

Caricature by the wonderfully talented Sebastian Domenech

Trading Post (cruel reality edition)


So much for that gold rally, huh? Very weird looking gold intraday chart now...kinda 736...736...736....736...HEY, LET'S BUY EVERYTHING WE CAN TO 760 THEN SELL IT BACK DOWN IMMEDIATELY.....736....736......736...736. It almost looks like manipuNO, DIDN'T SAY IT. Anyway, I'm bot GLD at 1% higher than trading price now so I may as well hang around for a couple of days here.

Crystallex (KRY) update: Fifteen bottles of beer on the wall, fifteen bottles of beer, take one down and pass it around, there's fourteen bottles of beer on the waaaaaaaaaaaaaaaaaaaall. Though you note the big 13.5m volume traded in the USA and just 0.86m in Toronto. Just another weird shady thing in the annals of the shadiest stock imaginable.

Cosan (CZZ) down 11% at $2.52. With sugar harvest forecast reported low you would have thought CZZ would get some love. But no, no, no, not in the Benny&Hank Show.

The three month T-Bill now pays a very tempting 0.04%. It did its job, but gold didn't follow through. Y'know, I'm not this conspiracy theory tinfoilhat GATAfreak but I do know that manip exists occasionally and I think the goldbugs have every right to shout "foul" today. Or maybe that's because I'm long GLD now ;-) Biased...moi?

Frankly the market is impossible to trade. I mean, WTF is PBR doing at $18? I know it got pumped to kingdom come earlier this year, but this is a decent company making decent money, even with WTI at $53. The subject of coal stocks came up in an e-mail exchange today and I wrote the following. It applies to all sectors, not just coal. There's no point in putting one's value investor cap on and pondering the value of coal stocks because the tsunami rush of sheep flesh knocks over anything resembling intelligence.

Fortuna Silver (FVI.v) insider buying

FYI, Barbara :-)

Nov 18/08 Nov 12/08 Szotlender, Mario Direct Ownership Common Shares 10 - Acquisition in the public market 140,000 $0.510
Nov 18/08 Nov 11/08 Szotlender, Mario Direct Ownership Common Shares 10 - Acquisition in the public market 18,000 $0.520
Nov 18/08 Nov 11/08 Szotlender, Mario Direct Ownership Common Shares 10 - Acquisition in the public market 6,000 $0.510

Remittances: a looming problem for LatAm

Here comes another problem for LatAm economies, and Otto has the lowdown and lots of charts to illustrate. Remittances from the industrialized nations are dropping off quite sharply, and that means trouble aplenty for places like Ecuador and Bolivia.

US remittances to traditional receivers such as Mexico and the other Central American states are a well-followed story, so being the contrarian knucklehead that I am I decided to go have a look at the other main source of LatAm remittances, i.e. Spain. The picture that's developing is not a pretty one, sad to say.

Here we go with a few charts. First this one that shows remittances from Spain to all other countries up to 2q08 and is taken from the website remesas.org.

As we can see, the red line that shows the amount of Euros sent from Spain has dropped away for the first time ever. But this is only up to June 2008, so what can we expect for the rest of 2008 (and 2009 for that matter)?

If we look at the number of people from countries this side of the pond working in Spain, we can get some ideas. Here are some charts showing the number of legal workers employed in Spain since January 2006 on a monthly basis. It's worth emphasizing that these charts don't include the illegal workers over there, but all the same certainly give a good representation of the recent demographic trends.

Here is a chart that shows the five main LatAm countries of source for legal workers in Spain, namely Ecuador, Colombia, Peru, Bolivia and Argentina (FYI, next in line is Brazil with around 25,000 resident workers).

Now for some more detailed breakdown, starting with Ecuador as it has the largest number of legal LatAm workers over in Spain.

The drop-off in Ecuadorians working in Spain has been pretty sharp. The high summer season has 20,000 less workers than just two years ago, and since then the numbers have dropped sharply. October 2008 has less than 240,000 Ecuadorians on the Social Security register, and that's 10% down from the same month last year.

Second biggest source is Colombia:

The trend in seasonal workers is clear on this chart, but again we see a big drop in the last reported month of October.

Third is Peru:
Again the summer peak, and again the September and October figures are not forming the same rounded top of 2006 and 2007...the drop is much sharper.

Then it's Bolivia.
There are more Bolivians than ever in legal work in Spain and there hasn't been the same sort of drop as seen by the countries above....yet. Of all the countries mentioned, Bolivia has perhaps the most to lose. The absolute numbers of Bolivians in Spain may be lower, but their remittances account for around 10% of Bolivia's GDP so the effect on this country is significant.

Finally here's Argentina.

Notably, the number hasn't fluctuated so much here. This is likely connected with the lower numbers of Argentines who live and work in Spain in the lower paid, seasonal employment sectors.

This final chart shows the total number of non-European Union legal workers in Spain (includes other countries such as China, Morocco etc).

Again the trend is clear; the drop off in numbers has started much earlier after the Spanish high summer season. There are less migrant workers in Spain. Period. And with the way the world is going, those numbers are very unlikely to move higher for the time being.

These charts seem to indicate that LatAm is more exposed than ever to a downturn in Spain's economy in a very direct way, and that statement concerning my example nation of Spain is just as true for the other industrialized countries that are sources of remittances, such as the USA. The effect of an employment slump in any country is always felt first by the immigrant workers...it's just the way it is, Mr. Hornsby.

Bot GLD at the bell

Is that a breakout? Time will tell
(click to enlarge)


Hell, there's something very strange going on when Berkshire Hathaway CDS's are running at +415bps. Also, take a close look at the three month T-Bill at 0.07% yield. The last time that squeeze happened was the day gold shot up $100 (and I mentioned the reasons why in this post).

So, your humble blogger has bot some of that paper that says I own some of that yellow metal. Trading position only. And I don't wanna put the mojo hex on but I'm already 1% on the trade ex-comms....just hoping that JAG decides to join in the fun (BTW, I didn't add to my JAG yesterday...too chicken).

DYODD, dude.

Chart of the day is............

......Colossus Minerals (CSI.to) since Patrick Anderson joined on September 8th 2008.

(click to enlarge)

11/18/08

Ecuador bonds: The Audit Commission of Public Credit Presentation

It's that man again!

As those following the Ecuador bonds soap opera know, on Thursday 20th November the big bad audit report is being made public by Ecuador. The people who were asked to do the investigation are the "Comisión de Auditoría de Crédito Público" (Audit Commission of Public Credit) and said comission handed in their recommendations to President Correa in September. This was pointed out today in this report in Ecuador Inmediato (subscription site, but free to join). Franklin Canelos, the Veep of the commission, confirmed in an interview with Radio Quito today that:

"On Thursday the Commission's Report will be made public. It is not that the President does not know the report, because it was delivered at the end of September as was our commitment."

Now as you know, your humble Otto loves you as if you were his own children. And so on the next three links is the confidential powerpoint presentation that the audit commission handed over to President Correa back in September (along with the full written report). Be warned that;
  • These are three meaty downloads that total up to over six mega of memory space.
  • They are in Spanish, and technical financial Spanish at that.
  • There are lots of charts, tables and dense information on the pages and it's assumed you understand at least the basics on how bonds work.
All that said, the three PPT files that constitute this report are extremely interesting reading (and that's putting it mildly) if you have skin in the EM bonds sector.

This is part one, that concentrates on the multilateral debt

This is part two, that concentrates on the Global/Commercial debt (this includes the Global 2012 and 2030 paper and is perhaps the most pressing information at the moment, though I must stress that all three parts are important)

This is part three, that looks closely at the bilateral debt and the Paris Club

So help yourself, download the information and read all about it a full day before the rest of the world. I hope your Spanish is up to scratch (mine is :-). Remember where you heard it first, people. And before you ask, I'm not telling you from where these came.

A little Ecuador Roundup

For Bina, to help with those dreams

Three or four interesting developments. Firstly, those scallywags at Bloomberg found they had to change the title of their report from this one this morning....

Ecuador's Bonds Fall as Debt Commission Prepares Final Report

18 (Bloomberg) -- Ecuador's bonds fell as a group of legal advisers prepared a final recommendation on whether President Rafael Correa should default on ...

...to this one this afternoon.

Ecuador's Bonds Gain on Speculation Ecuador Will Make Payment

18 (Bloomberg) -- Ecuador's bonds rose on speculation President Rafael Correa will make a $30 million interest payment before a one-month grace period ...

And the sneaky part is that they decided to use the same URL, presumably hoping their biased call would be buried. OTTO IN DA HOUSE!

Next, the gov't is beginning to show its "mining friendly" colours by lifting import tariffs on mining equipment such as heavy plant. Here's a link to that one.

But at the same time, AP reports that Ecuador is about to slap bigtime import controls on a raft of goods, and has President Studmuffin saying that he will not allow Ecuador's dollars to be spent on imports such as "Colombian caramels" and "Chinese dolls" amid darkening financial forecasts. Because of this attempt to jumpstart the local economy the Central Bank bigwig Carlos Vallejo is staying with the official forecast of 6% GDP growth for this year.

At the speech given by Studmuffin, AP also reported him as saying he does not believe there is a high probability of fiscal crisis for Ecuador. But weirdly DJNW was at the same speech but came away reporting this. Mondo Bizarro, isn't it?

"QUITO -(Dow Jones)- The Ecuadorian government has decided to raise the tax on capital outflows to 1% from the current 0.5% and to restrict some imports in the wake of the unfavorable effects of the global financial crisis, President Rafael Correa said Tuesday.

As a consequence of the global crisis, "we could have problems in financing investment in 2009. There could be a possibility of problems in the balance of payments and restriction of financing," Correa said.

Reports available at the NOBS library

Due to the total lack of income recently Chez Otto, here I am again plugging the paid service. But this time my begging efforts are aimed at showing you the reports available right now over at the NOBS Library. Take a look at the reports on offer below, and if any tickle your fancy all you need to do is deposit ten dollars into my paypal account and the title is yours.

There's always the NOBS bespoke report service available, too. Find details of that right here. Any further queries, feel free to write me at...

otto.rock1 (AT) gmail (DOT) com

Thank you for your attention. Here are the titles available at the library.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Andina Minerals (ADM.v): Gold junior exploration stage company with main project in Chile. This report is not password protected and available as a free sample. Report dated September 21st 2008.

Franconia Minerals Corp (FRA.to): Copper and PGM junior explorer with main project in USA. Report dated September 23rd 2008.

Gold Resource Corp (GORO.ob): Gold junior with main project in Mexico approaching production start-up. Report dated October 8th 2008.

Gold-Ore Resources Ltd (GOZ.v): Producing gold miner with main mine in Sweden. Report dated October 19th 2008.

Metanor Resources (MTO.v): Producing gold miner with main mine in Canada. Report dated October 4th 2008.

Tamerlane Ventures (TAM.v): Exploration stage mining company with main lead/zinc project in Canada. Report dated October 4th 2008.

Western Goldfields (WGW): Producing gold miner with main mine in USA. Report dated October 13th 2008.

Chariot Resources (CHD.to): Copper junior explorer-stage miner with main project in Peru. Report dated September 28th 2008.

GobiMin Inc. (GMN.v): Producing nickel/copper miner in China. Report dated October 23rd

Crystallex International Corp. (KRY): Gold junior in Venezuela. Report dated October 9th

The Colombia and Medellin Housing Market: A macro overview of Colombia, and how it relates to the housing market. Report dated October 11th

Great Basin Gold Ltd. (GBN): Junior miner operating in South Africa and the USA. Report dated October 11th

Axion Power International (AXPW.ob): Alternative energy storage company operating in the USA. Report dated November 4th

Gold Hawk Resources (CGK.v): Poly Metal miner operating in Peru. Report dated October 19th