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3/21/09

Reuters' pathetic Venezuelan journalism


This corner of cyberspace might whack at Bloomberg Venezuela sometimes but that doesn't mean for a second that the competition is any good. In fact, it's crappo. Follow the bouncing ball, people:

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First we have Reuters stoking the rumours and heresay that shot the Bolivar Fuerte (VEF) up to as much as 6.6o to the dollar yesterday before it closed at 6.10.

Reuters, March 19th 5:29pm EST: "Chavez promises to this week unveil a set of economic measures that are the government's response to lower oil income. The measures could include moving the official bolivar peg........"

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Cut to today, and notice the timestamp on Bloomberg's factual report:

Bloomberg, March 21st, 7:22pm EST: "Venezuelan President Hugo Chavez said he won’t devalue the country’s currency."

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Then 27 minutes later, Reuters plays the revisionist card.

Reuters, March 21st, 7:49pm EST: "Some analysts believe Chavez is preparing a devaluation of the fixed-rate bolivar currency, although the president said in February he would not devalue in the short term."

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Moral of the story: Do not listen to these fools. The measures announced by His Hugoness today include (so far) a 3% upping of VAT/sales tax from 9% to 12% and making the obvious public debt overrun official by bumping up the 2009 budgeted debt to VEF34Bn..not exactly world-shatteringly surprising, bar perhaps the fact that the Chávez admin has come clean about its deficit.

As for the seemingly chimeric deval, it's only people that follow the MSM like sheep that thought Hugo would actually drop the currency this time around, cos for the smart folk (such as BBO, who called it perfectly) the whole thing was just a great way of making money by selling your dollars at over VEF6 this week, buying them back next week and pocketing the difference. As mentioned before on IKN, you can expect a VEF deval in the second half of this year if and only if crude oil doesn't pick up. My tipping point price is $65/bbl, but that might change. BTW, don't ask me for a forecast on whether that price will happen because I'm a total zero at picking oil. Vamos a verrrr.......

Common Sense

Krugman is correct.....again.

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Fulp's latest


I hope you're already signed up to Mickey Fulp's free (yeah, free) membership subscription service. If you're not, here's the link to go learn all the about the guy and get yourself organized.

Anyway, I wanted to share with you an excerpt from the latest Mercenary Musing that hit my inbox last night. The general subject was on the ownership of gold (something I fully agree with doing and for the very same reasons as Fulp), but this paragraph made me laugh and shout "Correctooo!" at the same time.

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"...The Executive comes to Congress screaming “World financial collapse imminent unless we act immediately and decisively.” Congressmen without bothering to read the bill vote for taxpayers to “loan” $170 billion in bailout dollars to AIG. This monopoly money is then created by the Fed with a few strokes of the keyboard. AIG gives $165 million (less than 1/1000 of the new money created) to its executives as retention bonuses. After all, these are indispensable employees in great demand in the world of financial engineering. Who else could they find to perpetrate the chicanery of their toxic credit default swaps and collaterized debt obligations? These derivative instruments were so efficiently disseminated thru out the world that even a municipality in Norway went bankrupt...."
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Eschew solid male bovine waste material. Read Fulp.

3/20/09

Friday Snaps

Right now in Bolivia the 2009 Miss La Paz pageant is in its final stages. Guess who the finalists went to visit yesterday? Yeah, him;


And I know he's a Head of State and all that, but he's also flesh and blood. Let's pan in and check out the expression on Dr. Morales' face.

Yep, even the tough jobs come with perks, eh Evo?

Ira Rennert, Doe Run Peru, Leopards and Spots

Ira Rennert (for it is he)
Seems to me
You don't wanna talk about it
Seems to me
You just turn your pretty head and walk away

The James Gang, 'Walk Away', 1970


We won't really know until the whole story unravels, but right now I'd bet a tenspot that Ira Rennert (above), the owner of Renco which is in turn owner of Doe Run Peru (DRP), has sucked all the money out of his wholly owned Peru operation and left it with no working capital. From here he knows that he can palm off the heavily indebted company to the Peruvian government as the complex is a vital hub in mining activity and the country can't afford to see it close down.

There's little doubt that even though DRP is a private company and under no obligation to disclose its operational results, it has been very profitable over the last four years. For example, Mineweb reports that in 2007 DRP's sales of $1.45Bn outstripped payments to suppliers ($1Bn) very easily. So at first light it seems strange that all of a sudden there's no money left in the coffers after just six months of low spot metals prices and slack demand. It's not just this corner of cyberspace that find this strange, either. Luis Castillo, Sec Gen of Peru's Mining Federation today said that it was suspicious that "the company doesn’t have any working capital despite making money over the past four years.”

But then if you look back at Ira Rennert's past business history, you see that he has a clear pattern that could even be called a modus operandi. This BusinessWeek article dated 2003 is particularly enlightening and here's an extract (the whole article is fully recommended):
  • Two of his companies--a Kentucky coal company and a Utah magnesium producer--have filed for Chapter 11 bankruptcy protection in the past two years. Two others, a steelmaker and a lead producer, both reported big losses in their most recent filings. "Rennert has a track record of dramatically leveraging up companies with debt," says Thomas A. Watters, an analyst at Standard & Poor's. "They're really financially distressed."
  • The $1.5 billion in bonds his companies issued from 1992 to 1998 have now lost about $700 million, or almost half their value, according to a rough tally by BusinessWeek of his companies' 10 bond issues. For example, the steel outfit's bonds are trading for as little as 26 cents on the dollar, while the lead company bonds have fallen to around 20 cents. A Rennert spokesman disputes the figure, calling the calculation "overly simplistic and misleading," but didn't offer another one
  • Some bondholders are gunning for Rennert. He became one of Corporate America's highest-paid chief executives in the '90s by taking a total of about $500 million in dividends and management fees from his companies, according to a 2001 report from Barclays Capital Inc. and Securities & Exchange Commission filings. Now the bondholders are trying to get some of that back: On Jan. 16, AIG Global Investment Corp., Carlyle High Yield Partners, and hedge fund Citadel Equity Fund asked a Manhattan bankruptcy court to appoint a trustee to decide whether the transfer of dividends, management fees, and other funds from Magnesium Corp. of America to Rennert was legal. "We believe the transfers made it impossible for the company to pay its reasonably anticipated debts and may have rendered it insolvent," according to their lawyer, Gerald K. Smith, of Phoenix-based Lewis & Roca LLP.
  • Despite the carnage, Rennert has done very well for himself. He owns a plush duplex apartment furnished with antiques and Impressionist paintings on Manhattan's Park Avenue near his Rockefeller Center headquarters. He has a palatial home in Israel and a Gulfstream 5 jet. And he's building a mansion, allegedly complete with bowling alleys and a huge garage, on 64.8 acres in tony Southampton, N.Y., for an estimated $100 million. Still incomplete after five years, the 100,000-square-foot complex angered neighbors and inspired James Brady's novel, The House that Ate the Hamptons.
  • This isn't the first time that Rennert's companies have run low on cash. BusinessWeek has learned that in 1962, when Rennert was a young securities broker running his own firm, I.L. Rennert & Co., in a Beaver Street office in Lower Manhattan, he was censured by the NASD for operating without enough capital. The NASD treats violations of federal rules requiring brokerages to be capitalized adequately as one of the most serious securities offenses because a lack of capital could leave clients in the lurch if a firm were to run out of money. Then, in 1963, the NASD caught Rennert with insufficient capital again, but it didn't give him another chance: It revoked his license on Nov. 29, 1964, according to securities regulators' documents, in effect banning him from the securities industry.
  • Today, nearly 40 years since he was ousted from the industry, Rennert denies he was punished by the NASD at all. Through a spokesman, he says he shut his firm voluntarily and the NASD revoked his license as a routine administrative matter because he was no longer in business. "Due to market conditions, the firm found itself in violation of the net-capital rule," says spokesman Jon Goldberg. Rennert "raised capital and put it into the firm to bring it into compliance. Again the firm fell below the net-capital requirements, and he voluntarily shut the firm down." But former NASD lawyer Bill T. Singer, a partner at New York-based law firm Gusrae, Kaplan & Bruno PLLC, points out that "you don't revoke your license, you surrender it; there is no voluntary revocation." NASD rules specify that anyone whose license is revoked is not allowed to associate with any NASD firm "in any capacity."
Or in other words, this wouldn't be the first time in a long career that Ira takes the money and runs, leaving other unfortunates to pick up his pieces.

According to reports, DRP owes its suppliers around $100m at the present time. This goes a long way to explaining why a deal led by Peru's Banco de Credito to refinance to the tune of $75m fell through last week and the government said that it would step in to bail out the company. However the news of plant closedown today demostrates that the García government hasn't yet stepped up to the plate. It also suggests that Ira Rennert via his Renco controlling company is willing to let DRP close rather than inject new capital. Thus comes the classic investor's question....

"Where has all the money gone?"

......as only a company used as a cash cow by its controlling company in the year-over-year good times and deliberately vacuumed clean of hard cash and left to wither and die in just months when the markets turned against its sector could run out of money so quickly. No?

Part of the answer may be the reported $200m that Ira Rennert had invested with a certain Bernie Madoff (a guy with a profile these days). But then again, with Rennert's individual net worth at U$6Bn acording to Forbes (update, Forbes March '09 has him at 'just' $4bn), his $185m mansion in The Hamptons and his past history of covering his tush first and watching others carry the can, it's unlikely that the guy is heading for his own personal chapter 11. More likely is that Peru will be forced to pick up the pieces and keep DRP in business, as the country has far more to lose by creating a production bottleneck than anyone else. And Ira knows it.

Update: Know more about Doe Run Peru from enviro-campaigners point of view at this 10 minute youtube. Features a couple of good interviews.

Anyone for a base metals supply squeeze?

More on Doe Run. There are a lot of unconfirmed and unconfirmable rumours going around about Doe Run, so let's just start at the beginning with two basic facts.
  • Doe Run Peru (DRP) is currently shut for all operations except its copper smelter supplied by its own 'Cobriza' mine
  • DRP is the hub for dozens of small and medium sized Peruvian mining companies. With DRP shut down, a potential supply bottleneck is already forming, especially for lead. DRP processes around 120,000MT of Pb per annum which is around 3% of world supply, as well as zinc, silver, etc.
Now the rumoury stuff that needs serious DD on your own part. UNCONFIRMABLE word is that DRP's owner, Ira Rennert, cannot get the extended credit lines needed to keep DRP running because he's up to his eyes in toxic paper and the banks that normally service both him and his debt lines are turning their backs. The parent company of DRP is junk bond traders Renco, which also controls the separate Doe Run company of the USA. If Doe Run USA gets closed down by the credit crunch, around 11.5% of world Pb (as well as the other base metals smelted by Doe Run) is taken off the market. Not only is that a large chunk of world Pb, it's a very large chunk of Pb not smelted inside China's borders. Then there's US Magnesium, the world's third largest Mg producer. That's a Renco company.

This could become an almighty cluster----. Peru's unions have already said that DRP should not be bailed out by Peru's government, but that would only mean standstill in many of the mines that supply DRP, not to mention the export activity, revenues etc that come from the smelter output. If Peru does bail out DRP, how much money would have to be flushed down a toxic black hole to keep the mining sector operational? Away from the possible knock-on effects, the US mining industry could be under the same kosh if the parent company is the source of the financial problems and it is not some isolated Peruvian problem at DRP. Then there's the spot market...is this the reason we've seen a 20% rise in Pb spot these last few days (likely, as LME ringtraders are much sharper than I)? Or just maybe this still a black swan and it hasn't been factored in yet.

The above is just speculation so far, folks, so DYODD. To emphasize the point, those two links provided are to Wikipedia pages, and nobody in their right minds makes a definitive decision based on a wiki. But it's certainly a story worth following.

UPDATE: Reuters has more information on an updated report. Check it out.

UPDATE 2: Bloomie is running its own report now, with useful quotes from Peru union people.

Three things

must....have....child....in...photo

The recession does what treehuggers could only dream about. Doe Run Peru at La Oroya is closed for business. The 10th most polluted place in the world (so they say) is currently a smoke-free zone.

Your humble correspondent has learned that poster's paradise Agoracom is abetting the propagation of completely false rumours about IKN being accused of libel. Interesting stuff, even taking into account that I don't care a jot about the permabull-or-banned policy that the site uses. I believe an immediate aclaration/retraction is in order, Agoracom.

Chile's economeisters continue their lessons to regional peers about responsibility.and transparency. Here's DJNW: SANTIAGO (Dow Jones)--The Chilean Central Bank will likely downwardly revise its 2%-3% gross domestic product growth outlook for this year in light of expectations that the global economy will contract in 2009, bank President Jose DeGregorio said Friday.

According to the central banker, the growth outlook, released in January, was based on expectations that Chile's main trade partners, namely the U.S. and the European Union, would grow this year. He added that recent forecasts show the situation has changed dramatically.

"This isn't a minor change and it will certainly affect our growth yada yada continues here

Peru's false GDP numbers

Click to enlarge

Not content with merely
pointing out the obvious about how Peru's GDP forecast for 2009 (officially +5%) floats in the realm of the impossible, Farid Matuk has now started another firestorm. The Matuk claim, which is backed up by some very solid statistical work, is that Peru's GDP didn't grow by the announced 3.14% in January but just 0.1%, the difference in the figures created by statistical jiggery-pokery that any serious country would never be able to get away with. Above is the screenprint of the report in yesterday's La Republica. Here's Matuk's blog to find out more (and there's a lot more).

For me it's yet another lesson in how the blogosphere trumps the traditional media, providing cutting edge analysis and insight where all around are lax and mediocre mainstream journalists. This is especially true in Peru where the so-called serious dailies, headed up by El Comercio, are a version of Peru on Prozac that reflect the "no problem here, move along now, nothing to see here" line of President Twobreakfasts.

Farid Matuk's critique of how Peru measures its GDP started at his blog (example post here, but there are more...go explore, hispanophones) and picked up by the centre-left newspaper La Republica, just about the only daily that bothers to criticize the government using facts and not simple reactionary bluster, opens a veritable can of worms that will surely be met by the usual Twobreakfasts defence (first silence then Ad Hom attacks and BS). The moneyline picked out by the Republica sums up the argument:

"The problem is that 70% of the real GDP is not measured in surveys but between four walls"

That 'between four walls' expression can be translated as either 'smoke filled rooms' or as a black box situation. Basically the point is that the 70% of the components that make up Peru's GDP calculation are chosen in an arbitrary manner and have little or no scientific rigour. One example of many found by Matuk is the GDP growth added by house rentals in Peru; every month since January 2007 the figure has been +3.54%..not a hundreth more or less for the last 24 calculations. And to stress, that just one example of many many red flags on offer.

Importantly, it's not just Matuk that is saying these things now, as other highly-respected local economists have chimed in on the issue. For example Pedro Francke of the PUCP (U. Catolica) in Lima says that the INEI (Peru stats office) calculations are "strange and are deeply attention grabbing." He continues by saying that the INEI "has modified the calculation formulae and applied them to a new database, and the worst is that some of the data have been omitted completely. The INEI is obliged to explain what is happening because we are not seeing managerial transparency." Today Francke has added to his quotes by writing this article that Spanish speakers will find well worth reading.

Or put throught the Ottotrans™, Peru's government is making shit up and pretending that the country is growing at a far faster rate than reality. This comes as no surprise to anyone that watches the country closely. It also comes as no surprise that the IMF endorse these phony numbers for that body has a nefarious history of pumping its posterboy du jour, as anyone who remembers the praise heaped upon the Argentina of Carlos Menem by the IMF will quickly and easily remember.


LatAm mining quickies


Corriente (CTQ.to) (ETQ): Some guy called Zerb who works for some company called Canaccord has slapped a $7.56 price target on the company. Personally, no comment.

TNR Group (TNR.v): It's great when you see a company make an announcement and you can go "Good, another company I never have to worry about or look at again." Basically, the management of any junior miner that moves into lithium greenfields (should that be bluelakes?) can be instantly ignored forever. The end. One less to worry about.

Suramina (SAX.to): Here's a pennyplay ($0.18) that has got a letter of intent from Japan's JOGMEC natural resources funding body, the target in question the SAX.to copper/gold property in Argentina. Now a LOI is by no means an open chequebook (and I often scratch my head about the scattergunny, pick-up-and-drop approach that JOGMEC seems to have in the region), but if the Japanese like what they see this could be a great source of funding that misses out the silly market shenanigans. By no means a lock on this news, but it is most definitely positive.

Cardero (CDU.to)(CDY): Another 'unexpected' delay, another batch of excuses. Wow, what a surprise. Just the most amazingly avoidable stock, mgmt full of hot air and short on results. How much BS an you take from these merchants? It ain't gonna happen and the blame will be stuck on the Chinese government, not whiter-than-white HVA.

Remittances in LatAm, 2008 (the chart of the day)

There has been ink spilled already on the slowdown on LatAm remittances (i.e. money sent back from industrialized nations by LatAm citizens living over there) that the financial crisis is causing, but so far the analysis has been stuck at the amounts of money being sent over and hasn't really examined which countries are more likely to feel the pinch.

This chart shows the percentage of GDP made up by incoming remittances for the major LatAm countries (with all due respect places like Belize are left out as their tiny GDPs skew the results out of shape and don't provide a fair comparative sample). The remittances data used comes from the Interamerican Development bank and the country GDP figures are from the CIA using the purchasing power parity (PPP) figures.


Click to enlarge

Top of the pops on this poll is El Salvador, a country that relies on cash sent home for 8.35% of its country GDP; that's an enormous figure and is comparable to the direct effect copper has on the GDP of Chile. Next up are three other Central American states, Guatemala (6.15%), Nicaragua (5.76%) and the Dominican Republic (3.73%). Only then does South America appear, with Ecuador (2.64%), Bolivia (2.51%) and Paraguay (2.4%).

Mexico is next at 1.59% but deserves a special mention due to the absolute size of its remittances trade. At U$25.145Bn it is by far the largest destination for remittances (second is Brazil at U$7.2Bn) and Mexico in fact accounts for 38.44% of all remittances received in LatAm in 2008.

Finally, the trio of Costa Rica (1.25%), Peru (1.24%) and Colombia (1.19%) are the other three countries that beat the regionwide average of Remittances/GDP of 1.09%. It's safe to say that all of the above countries will feel the effects of a slowdown in remittances in 2009 and beyond, with the first tranche of Central American states, Mexico, Ecuador, Bolivia and Paraguay feeling the worst effects.

3/19/09

Bolivia: The masks slip in Santa Cruz

Take a wild guess as to which one of these people is a
racist TV and radio presenter in Santa Cruz
?

In one of the worst articles to be written on Evo Morales in the last year (and my stars, there's some competition), some damnfool named Eliza Barclay managed to make Morales into Mugabe (she passed on Mandela...wonder why?) and tried to get chattering classes in NE USA nodding in sage agreement over another of her carefully chosen quotes;

"Instead of governing for a whole country, he is governing only for the indigenous class and has brought racism with him."

Now, Barclay's fetid hit-piece has already been thoroughly and correctly lashed by Abiding in Bolivia and other people that actually know the difference between a decent journalism and plain stupidity, but now it's time to gently explain to Barclay what real Bolivian racism is, what it sounds like and where it comes from. Ladies and gentlemen, I present to you Carlos Valverde Barberí (above), mainstay of Santa Cruz politics, TV and radio personality (his verbal vomit gets spewed out via friendly Santa Cruz media) founder of the now infamous Unión Juvenil Cruceñista (UJC) nazi youth thugs and all round piece of shit.

The issue is a commentary on the handing over of 38,000 hectares of land on March 14th that previously belonged to rich white landowners (Larsen, Branko, all the other boys) to indigenous Guarani people. This came about via the newly minted constitution that allows people to own a maximum of 5,000ha going forward, so Branko, his pals and his multizillion hectare soybean business has hit a bit of a bump in the road, all things told. But on to Carlos Velaverde's comments as featured on Radio Patria Nueva, Santa Cruz, today. Eliza, have a pen and paper handy to make notes for your next report, yeah? He said of the handover;

"We have to shoot those that have recently occupied our land. They have to be killed because they are individuals that subjugate. They have to be killed because we are not all the same. This is a subjugation of Santa Cruz. It's incredible that Cambas (Santa Cruz residents) don't agree with us because the indigenous don't have anything to do with us here."

This is the mindset of the people that were presented by Simon Romero in the NYT last year as the anti-Evo heroic resistance movement. These are the people Eliza Barclay decided to ignore when she wrote a 1,500 word expansion on her own prejudices. However, now that the rubber is hitting the road and the real reason behind all this "Autonomy Now!" claptrap is being exposed, namely that those in charge knew all along they'd lose their precious land, the masks have slipped and the vicious underbelly is being exposed for all to see. Ten years ago the racist slavedrivers had their vast tracts of very profitable lands and a virtual unpaid labourforce to work it for them. Now they're losing both and they don't like it...my oh my, dontcha feel sad for 'em?

But remember what the racist apologist media tell you. It's Evo who is the racist that insists on dragging Bolivia back into the 17th century, not the people that for generations have taken all, have given nothing and are now getting their comeuppance. Eliza Barclay is just the latest in a long line of racist apologymongers who don't have the first clue about Bolivia, and thus to her we present the IKN coveted weekly award. Enjoy it, dumbass:


Citigroup (C): Mexico moves the goalposts


And so Citigroup can likely keep Banamex, according to Mexican gov't politicos that have just earned themselves a "one large favour owed to me" card (and will surely know how to use it). Reuters translates the moneyline which is being used....

"The law does not cover emergencies derived from the global crisis"

.....which is, of course, a total affront to logic and commonsense. Y'see according to Mexican lawmakers the clear legal statute that does not allow any foreign government to hold more than 10% of a bank doing trade in Mexico suddenly doesn't count because......because....because the US gov't didn't WANT to buy 36% of Citigroup ....and that makes it different. Cos they said so. And that national laws go out the window and Mexican pants are dropped to US pressures isn't really news. After all, it's greedy human beings we're dealing with here so logic obviously has to take a back seat. I'll just shrug my shoulders and scrunch my brow a bit and go "waddya expect?".

Bloomberg does a good job of explaining the outcome of the Mexican mental and legal gymnastics that lawmakers have gone through to get to this point. Here's the link worth reading. The only thing lacking from both Reuters and Bloomie's reports are meaningful opposition quotes and positions. Bloomie has.......

"If it’s a proposal that helps, that doesn’t infringe against the sovereignty, the nationalism and the interests of Mexico, I say it should be approved. If it infringes, we’re going to dispute it.”

.......from an opposition PRD flunkey and Reuters hints at previous "pressure from nationalists", but the comments are low key. This is strange, because this story will create open season on a Felipe Calderon (allegedly) selling out la patria to the gringos. Lopez Obrador and company will milk this one for all it's worth; and it's worth a lot. Calderon gets the piñata treatment as of tomorrow morning.

Why have issues with English language coverage of LatAm?

Borev explains:

"To recap: Newsweek published a story about Venezuela attempting to overthrow a foreign government, and the author now admits he never had any evidence of such a plot, but that he came up with the story after analyzing a comment that Castro made about a baseball tournament. This is all fair journalism though because it is entertaining.

"Naturally, Foreign Policy (who praised the story) is not only owned by Newsweek, it's run by the former Venezuelan government official generally held responsible for the country's worst human rights disaster in modern history."

Full story right here.

Trading Post (mine eyes have seen the glory edition)


Freeport (FCX) up 8.3% at $41. This thing is the Duracell bunny and FCX is getting a gold-up-copper-up double dose of fun today.

Brazilian Real (BRL) up 7c against the dollar at R$2.23. I don't usually highlight currencies in the trading posts, but hey...my blog and I'll change the rules if I want. Some smartypants TA guy (you know who you are) swears the Real's next stop is 2.12. Who am I to argue?

Fortuna Silver (FVI.v) UNCH at $1.03. I sold my trading block today as planned. It was tempting to hold on, as the whole PM complex is still pointing higher, but a plan is a plan and the 20%+ win has been booked. Cut it, print it, that's a wrap.

ECU Silver (ECU.to) down 8% at $0.46 and was down even further earlier on very strong volume. Oh my, did the world just find out that the $8m spent on a little 500tpd plant isn't the Holy Grail? Strip away the negativity from my recent post and the positive spin from today's ECU PR here and the message is really very much the same. Don't say I didn't warn you about those who predicted "meaningful cash flow" (or whatever phrase Wistar used in his January clients' letter) from this new acquisition. Are we allowed to wonder out loud why the company lent its managers $800,000 in 2008 at 3% interest rates and no fixed payback period and then diluted the shareholders? Would it be ethical to note the facts about this stock? After all, nobody else ever does.......

Vena Resources (VEM.to) up 22% at $0.22. Hey, isn't this the stock I highlighted at $0.16 recently? Sheer luck you know........

Cosan (CZZ) down 4.9% at $2.52 and a dose of Viagra needed. Well, this one has me stumped today. With the pop in sugar and the nice recent upside in crude oil I really thought it would have a good day today. BofA hangover perhaps, but I really don't know. Still holding and still in the plus column, but I need to look more carefully for my mistake. Errar humanum est.

Brazil carry trade redux?

Your humble correspondent is not fond of putting question marks in title lines, but this time it's there because it's just an idea worth floating. The markets are taking Bernanke's announcements of yesterday as a new chapter in this ongoing trainwreck, so maybe it's time to shake off some of the convential wisdom about Brazil and the Real in particular and LatAm in general. The concept is based on four points:

1) Commodity price reflation due to the newly-cat-out-the-bag cheap dollars and credit. All LatAm will benefit from this of course (see previous Hugo caption) but Brazil is in the vanguard for purposes of investment.

2) Renewed strength of the Brazilian Real versus the US Dollar. Here's the chart....

...... and apart from one isolated downspike related to the Christmas demand period, today's BRL2.24 to USD1 is a new recent low.

3) The yawning gap between Brazilian interest rates and the USA. Even though Brazil's benchmark Selic rate was slashed 150 basis points last week (and there's probably more to come), the 11.25% rates on offer still look mightily juicy.

4) Emerging market money flows have not suffered this year. Here's a chart from the guys at EPFR that shows how EM hedge fund flows have held up in the year to date compared with the indutrialized nations.


For sure the absolute amounts of money depicted by those flows are not equal, with the (they-still-kid-us-into-believing-it's-the) developed world nations moving far more money around.

These four points, along with a few very tentative whispers in the investment world about how Emerging Markets are the new safe haven (I don't buy that one at all..not in lands of fast-shifting political landscapes and soft currenies , but a hedge play they certainly are) all aim at the same place: Is it time to think of LatAm anew and find a spot in your portfolio for some Latino exposure? I'm using Brazil's currency as the spearhead play here and the argument applies to other sectors and places as well. This is only for practical reasons as the market tends to use Brazil's Real as its entry point.

The counterargument to all the above can be summed up with the phrase "Ben's plan ain't gonna work", but it begs the question whether the Bernanke China Put will flat out not work, will work for a while then explode, or whatever. The carry trade idea here isn't a long term retirement play, after all. You be the judge. DYODD.

Bernanke Saves Chávez


Now, what was all that about non-payments and immediate devaluations? Here's the 90 minute chart:

Ice Ice Baby

Very glad I held on to CZZ through the Bank of America downgrade. Here's the chart for the ICE sugar contract...icing sugar? (groan)

Moral: Beware of news that's only news in the English language.

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

...spot gold.


A bit boring and unoriginal, maybe, as if you're a market-following investor you're likely to get this chart thrust in yer face several times today.

The highly inflationary nature of "Benny's Chinese Put" should be clear by now. Sure the dollar sunk in heroic style, but by way of another screaming example the gold/silver ratio bumped from 70 to 73 while the laddie was doing the ouroboros announcement.

Anyway, I thought I'd stick this chart up just before NYMEX opens in New York. Have fun and play safe today, yeah?

3/18/09

Urgent Twobreakfasts?

I've missed a lot of fun today, what with Bennyboy swapping debt at 3% interest for debt at o%, but just this story and thence to bed.

Looks like Twobreakfasts has finally had the penny drop. As IKN has said since gawd knows when, Peru will not grow at 6.5%, not even the last downward revised 5%. And thus, Alan suddenly changes his tune from the "relax, be optimistic, don't worry, be happy, recession is for others" to today's need to "act urgently". Now the race is on for the region's worst President to find a way to save face, and what better than those lazy regional politicians.

Ok, the guy is a two-faced breakfast, but at least he now recognizes there is a problem to confront. A dose of realism will help things and hopefully it's not too late. Here's Reuters with a better text than mine:

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LIMA, March 17 (Reuters) - Peruvian President Alan Garcia lashed out at bureaucrats on Tuesday, telling them to show their "patriotism" by working harder to implement an economic stimulus package as a slowdown hits the Andean country.

Garcia's comments came a day after Peru was stung by its weakest monthly economic data in nearly five years, which could hurt Garcia's approval rating, now at 34 percent.

Peru, which had been one of Latin America's fastest growing economies, grew just 3.14 percent in January from the same month a year earlier, well below the 9.8 percent rate of 2008, which was a 14-year high.

"We need more patriotic spirit to approve public works," Garcia said at a road opening ceremony in Tarapoto, a town in northern Peru.

"There are hundreds of public works that are stalled because Peru has bad bureaucrats who are scared of implementing them and putting the country first," he said.

The president also told his cabinet, provincial leaders, and mayors to act "urgently" to create jobs and build infrastructure projects.

Garcia has unveiled a stimulus package that includes about $3.1 billion in investments in its first phase, but critics have said its effectiveness may be undermined by a slow-moving bureaucracy and a reliance on provincial governments.

The government says the stimulus package will help keep economic growth at 5.0 percent this year, but the Lima Chamber of Commerce said expansion could be as little as 2.8 percent, and Morgan Stanley has cut its projection to 0.9 percent.

Chart of the day is.....

.....pretty self-explanatory, really.

click to enlarge (gets big)

I've had to be away from internetwebpipes today, doing things that real world people do. So just to mark the end of the day, here's a funny.

3/17/09

Peruvian gastronomy

Learn how to make the perfect Pisco Sour from the Peruvian bartender who has made them for his Presidents for decades. Also learn more about Hepatitis B and AIDS and how they compare to Alan García and Ollanta Humala. Hugely entertaining.


Three minutes of required viewing that comes with English subtitles. Thanks MH.

Trading Post (blowhard edition)


Baja Mining (BAJ.to) up 29% at $0.33 on this news reported last night. Yep, it's the kind of positive that's worth the revaluation we've seen today, but I'm sticking to my October 29th call on the stock. If there's nobody out there that's willing to finance your project, it matters not if you need $500m or $50m. Still, worth adding back to your radar. The cobalt byproduct is fun.

Fortuna Silver (FVI.v) down 4.2% at $0.91. This drop cannot possibly be anything to do with the illustrious and worldover-renowned Bob Moriarty. It should be clear by now that he has never been involved with any short-term pumping operation in his entire investment life.

Cosan (CZZ) down 8.7% at $2.63. It got whacked to $2.50 at the bell this morning on a BofA call that cut the stock to underweight on the CZZ debt burden. I know I'm long here and I know I have a vested interest, but this is only really news in the English language. Everybody connected with the Bovespa knows the story with the CZZ debt and I believe BofA is way late to the party on this call. DYODD. At a $2.45 buy avg I'm still on the right side here, but it's not the same as the $3+ numbers being printed last week. Ho hum, I'm holding thru (but a stop-loss is set).

Great Panther (GPR.to) up 6.4% at $0.415. I hope you didn't buy any at $0.45 this morning. Its results PR is one for Canadian mining IR dep'ts to study with admiration. I recommend they read it and ask themselves, "Can we be that brazen, too?" Strange how they left the net profit figure off the release, innit? Well, perhaps actually making money is inconsequential stuff for a producing miner after all.

Blatant political oppression in Argentina

In a shock decision, the Argentina Supreme Court today ruled that the "Partido Nuevo Triunfo" (New Triumph Party), a political group run by a certain Alejandro Biondini, is prohibited from becoming a recognized political party and cannot run in any national, local etc elections. This is because, according the the bigwig judges, PNT is "illicit, because it promotes discriminatory practices prohibited by law."

The question remains; will this draconian move by the puppet courtrooms bent to the will of the Hugo-loving Klishtina and her band of milksop lefty handwringers be protested by the Miami Herald, Fox News etc as a clear affront to the right of free speech? Let's have a look at a bit of visual evidence showing Biondini and PNT paraphernalia.



Ban the party? Chemical castration is more a like a plan, frankly.

Duran Duran

Far too large to be called Franklin

Hey, remember the Venezuela/Argentina suitcase scandal? Well the guy who pleaded not guilty, insisted on his day in court and allowed us to watch all the fun (the fat guy Antonini Wilson, the customs-officer-turned-nekkid-centrefold Telpuk and all the other 15 minutes of fame crew) got sentenced today.

Franklin Duran was facing up to 15 years on the rap but the judge gave him four years instead. So with his stay in jail counting as from his arrest (December 2007) and time off for good behaviour and Otto's finger in the air guesstimate, he should be out by...hmmmm.... next week, perhaps? Early June?

From there he'll be deported back to Land-Of-Chávez, say "hey! why did you confiscate my gas stations you swines?" and finish with a cushy job in the public sector somewhere.

Probably.

Good news for Dynasty Metals (DMM.to) holders

Yale Simpson is selling again.

Back in October, our pal Yale (director at DMM.to as well as the driving force behind Exeter Resources (XRC.v)) sold 18,000 of his DMM.to shares at an average of $2.84.

Then Mr. Simpson, owner of the rather long and convoluted nickname of "honestly-one-gram-per-tonne-sulphide-mineral-buried-half-a-kilometre-underground-at-thirteen-thousand-feet-above-sea-level-is-economic", sold another batch of 10,000 DMM.to at an average of $4.31 in late January early February.

So today we note that Yale has just unloaded another batch of 10,000 shares (and also activated 50,000 of his 1.8m options).

Mar 16/09 Mar 12/09 Simpson, Yale Ronald Direct Ownership Common Shares 10 - Disposition in the public market -2,100 $5.260
Mar 16/09 Mar 11/09 Simpson, Yale Ronald Direct Ownership Common Shares 10 - Disposition in the public market -5,800 $5.100
Mar 16/09 Mar 11/09 Simpson, Yale Ronald Direct Ownership Common Shares 10 - Disposition in the public market -2,100 $5.050
Mar 16/09 Mar 12/09 Simpson, Yale Ronald Direct Ownership Common Shares 51 - Exercise of options 50,000 $0.750
Mar 16/09 Mar 12/09 Simpson, Yale Ronald Direct Ownership Options 51 - Exercise of options -50,000 $0.750

By the looks of things, this augers well for another sharp rise in DMM.to shares in the near future. Thanks for the tip, Yale!

Venezuelans in Miami......gotta love 'em

Haircut, sir?

I'm not a baseball fan. To give you an idea on that one, sportsfans, I've heard the name Magglio Ordoñez before and know he swings a bat to make a living, but until today I didn't know he suffers from blindness when walking past a mirror or washing/combing/preening his silly Argentina futbol player's hairstyle. I mean, if you're going to have long hair, do it Mickey Rourke Wrestler style...with panache.

But this story sent over today by reader OS (thank you) made me laugh. Venezuelan residents in Miami decided to boo the dude every time he was at bat while playing for his national team because he supported Chávez in the recent referendum....did a video or something. That made me laugh. Y'see, in the pretzel logic of Miami latinos, a man who represents his country at sports is a traitor because he sides with...errr...the majority of his own citizens. And the people who abandon their own home country and take residence in the USA are justified in ranting things like; "He should be expelled!" in the Washington Post.

It's one of those funny kinks of reality that the US actually believes that Latino residents in Miami provide a representative voice of their peoples. Untrue. Miami Latinos are just a bunch of people who don't have the guts and want all the glory.

Links

Click to enlarge, or better still visit the WSJ link below
to see the original context


There has been so much quality reading on LatAm biz/economy/politics out there in the last 24 hours that it would be remiss of me not to direct readers to at least a few of the places.

Colombia: At blog Plan Colombia and Beyond we get the full English translation of an interview with Colombia's Veep Francisco Santos. The nub of Santos' argument is summed up in this line from the post; "Colombia should abandon Plan Colombia, downgrade relations with the United States, and seek relations with governments, like China, that don’t value human rights as strongly." Essential reading for those interested in the country.

LatAm Remittances: Market Memorandum comments on the Interamerican Development Bank's (IDB or IADB, goes under both acronyms, it seems) paper of yesterday that highlights the downturn-to-come in remittance monies for LatAm countries. Recommended viewing along with MM in the graphic above, available at this report in the WSJ. One thing so far unmentioned in the issue is the counterbalance of repatriated citizens and their contribution to local economies. I suppose we'll get round to that eventually.

Mexico: Stupid union leaders strike again...literally. BNAmericas has the outline of the story about how Peñoles workers have rejected a management pay offer and gone on strike. Mgmt are surely going "Great! That means we're making less of a loss on the zinc and lead you would have processed for us." Can someone please get it through the skulls of union workers that there's a recession on?

Peru: Farid Matuk blogs in English and lays wide open the clear irregularities in the methodology used by Peru's economic bodies. Presented in this way it really does seem as though they get an order from Twobreakfasts to "give me XXX result" and then find a way of massaging figures for their meister.

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

.....lead (Pb), six month price chart.

I could have chosen to feature copper again today, as the move to over $1.70/lb is eyecatching. As for Pb, it was a toss-up whether to look at a shorter timeframe or longer timeframe chart, so I kinda compromised with the six month period that shows both the dropoff in 2008 and the recent sniff of optimism that has put Pb at $0.60/lb today.

I'm not buying this upmove in base metals and think they have to drop again. It's not something I want to say but do feel compelled to say it. The recent moves are not demand-based but a combo of monetary playfulness and slightly lower LME inventory numbers (totally understandable when one considers the supply crimp from mine closures that really took hold around December). The bottom line is that until I see true end-user demand picking up and not just technical adjustments inside the market, I'm a whussy coward on BMs on general. DYODD and you're very welcome to disagree. This site is not one of those neverwrong BS merchants.

3/16/09

Morgan Stanley is the first to be honest about LatAm 2009

Viaducts Break Ranks (1937)
Paul Klee

It had to happen eventually.

I don't have a copy of the report yet (any fwding appreciated), but here's the link to the Bloomie coverage of today's Morgan Stanley macroeconomic review that finally... FINALLY... has a heavyweight player injecting some much-needed honesty into the debate over growth (or non-growth) for LatAm in 2009. Here's the country by country rundown of the Morgan Stanley team's 2009 GDP forecast for the region:

Brazil: GDP to drop by 4.5%
Mexico: GDP to drop by 5%
Argentina: GDP to drop by 4.7%
Chile: GDP to drop by 1.4%
Venezuela: GDP to drop by 4%
Peru: GDP to grow by 0.9%
Colombia: GDP to drop by 1.6%

Regionwide LatAm GDP to drop by 4%

These forecasts are clearly far more pessimistic than the normal ones trotted out by the national governments and dependent economic bodies. They may turn out to be overly pessimistic, but at least they are in the realms of realism and not sugar-coated for sheep consumption. I'm limited to a media-filtered report of the paper for the moment, but even so one quote featured in the Bloomberg text has me vigorously nodding my head in agreement. Here it is:

It is difficult to imagine that credit growth will play a meaningful role in boosting economic activity even as monetary policy is eased, given the sharp declines that we envision in consumer and business confidence, the weakness in labor markets and the risks to the quality of the loan portfolio

Or in plain English, pushing on a string won't do a thing. The regional governments and their economic teams might be anything from smart to stupid, but they're all in the same boat here. And once again, those governments (e.g. Chile, there are others) that treat their fellow citizens as adults and don't try to mask the fact that there's a serious slowdown coming will fare better than those governments (e.g. Peru, there are others) that continue insulting people's intelligence by insisting everything is fine and all you need to do is think pretty thoughts and all the nasty stuff goes away.

What Lula and Obama talked about, according to Lula


It's not just that Hugo guy in Venezuela and that Rafa guy in Ecuador that do weekly shows for their people, you know. Cuddly old Lula da Silva of Brazil also does his number in a weekly radio program called "Coffee with the President". This week he elaborated on what was said when he got together with the Hawaiian on Saturday, and here below is the Ottotrans™ via a Spanish-language report (my Portuguese isn't hot, y'see). No more blabbing, here's Lula dixit:

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"I talked with Obama about the need for the USA to have a new vision in its relationship with a democratic Latin America, which is growing and has made itself a development option. It is important that he has a vision of association and not insurgency, a vision of contribution and not interference.

"I think Obama understands this and I believe we can advance (together). I think that Obama has the conditions to make this inflection, especially if we analyse the Cuba issue. There is no reason to continue the Cuba blockade. I know it isn't an easy thing, but we have to take important step to democratize our relationship with the USA and the USA with Latin America.

"I was impressed with his clarity about the magnitude of the (current financial) crisis, clarity about the responsibility of the USA and the need to establish a consensus between the G20 countries to take the necessary measures to resolve this crisis."

Trading Post (funday Monday edition)


Pan American Silver (PAAS) down 1.8% at $14.28. PAAS's new silver/gold mine in Argentina "Manantial Espejo" in the Santa Cruz region, was supposed to have been officially opened (it's already doing its thing though) today by President Klishtina, but at the last moment she stood up the waiting suits and decided to stay in Buenos Aires. Word is that she is going to unveil the plan to bring forward the October elections instead.

Fortuna Silver up 5% at $0.95, and it's all thanks to the wonderful and illustrious Bob Moriarty that it's going up today. What a treasure for society that guy is! What would we do in the mining industry without his totally unbiased and humble opinions? Gawd bless ya guv!

Ecopetrol (EC) up 3.3% at $17.70. If proof were needed that cash is king, check out the EC story today. Ecopetrol has done a good deal with Canadian pipeline people Enbridge (ENB.to) to buy its 24.7% stake in Colombia's OCENSA pipeline. Ecopetrol is now the majority shareholder of the pipeline with around 60% of the shares. It's a good deal for EC, as it has the cash in hand and buying an asset such as this on its home patch makes much sense. It's also a fair deal for ENB.to as its PPS today shows (up 2.6%), because now it has a nice wodge of cash in the bank and can concentrate on its core N.Am assets with no need to finance/dilute/whatever. The sale price wasn't stupid in either direction, either. Your actual win-win deal.

Shock Horror! Economists wildly overestimate Peru's GDP figure again

Twobreakfasts' secretary reads the INEI press
release and wonders how to break the news

¡Pero que sorpresa!

Over at Reuters, the economists* polled put Peru's January GDP figure at an average of 4.0%. Meanwhile Bloomberg (who must have bothered to interview one bearish guy) had the average of those polled at 3.4%. As late as last week Peru's Finance Ministry estimated January GDP at 4.5%.

The Peru stats office, INEI, reported the figure two hours ago. Peru's January GDP growth came in at 3.14%, way below 'expert' opinion. In amongst the numbers manufacturing dropped by 2.69%, commerce grew by 2.53% and the building/construction sector upped by 4.5% (which sounds good but is a very disappointing result and way below expectations). Agro dropped by 1.46% and fishery by 21.05%. Mining activity grew by 10.69% (not export prices but oh my, hard landing for Month-over-Month figures coming in that sector in the months to come) and the mining services sector upped 5.99%.

But don't let that worry you, because Twobreakfasts says it's going to be 5% this year, and Carranza says 5% this year, and the Central Bank says 5% this year, and the IMF says 5% this year. I mean, why on earth should you listen to me and ignore all those utterly reliable and impartial sources?

*dumbasses in suits

Rusoro (RML.v): Blocking out the noise (another episode of 'cui bono?')


On Saturday IKN ran and linked the report in The Vancouver Sun that implicated André Agapov, CEO of Rusoro (RML.v), in banking crimes in Thailand that have put people behind bars. So by way of balance (on this blog?..wow) here's the link to the RML.v comeback that went out last night and here's the moneyline(s):

Far from filing any charges against Mr. Agapov, the Thai authorities have sought and obtained his cooperation and assistance. In the early 1990s, Mr. Agapov had a junior position in the Russian banking and commercial organization called "OLBI". In Bangkok he served as a Russian/English translator for a principal of OLBI. As a result, the Thai authorities interviewed him as a friendly witness and assured him that he was not under investigation.

Read the whole thing, because it's a strong reply. "What?", I hear you say, "an unjustified hit-piece in a Vancouver publication about a Canadian junior miner in Venezuela with Russian owners? What a shocker! There otta be a law, ya knowz!!"

There has been an awful lot of noise around Rusoro recently, of course. The GRZ hostile bid, the court injunction, the non-stop "Chávez's friends" nods and winks from mine chattering (no)class, the oogabooga Russkies are coming noises from those who still buy the J. Edgar Hoover line. Et cetera et cetera et cetera. But there are always manifold sideroads to travel down, not just the ones that those who would control your mind want you to visit. As an illustration, the Vancouver Sun note on Saturday got your humble correspondent looking a little more closely at Rusoro's numbers, projections etc and, it must be said, they really do stack up nicely and make it a junior at least worth considering.

First thing to note is that Rusoro actually produces gold, a fact that immediately separates the company from the other Bolivar State junior miners. Secondly, in 2008 it really made progress on both production levels and cash costs. RML.v produced 111k oz Au in 2008, and the 38k or so in the last quarter came at a very profitable cash cost of U$358/oz. Now if we look at the 2009 projections, the company expects to produce 170,000 to 190,000 ounces of gold and is also expecting to trim that cash cost even further.

I'm going to keep things ballpark here, so for argument's sake (and pick your own numbers if you don't like mine, I've done my XLS spreadsheet and we can split hairs all day on these things) RML.v ends up by netting for itself U$350 of the gross revenues per ounce. By taking 180,000 as our own target that puts us at U$63m profit.

Now a lot has been said about the large share dilution at RML, so let's look at that. Right now there are 391.5m shares out and a fully diluted number of 535.6m (and it should be noted that the vast majority of those warrants are way out the money and shouldn't be worried about too much as an overhang threat right now). To those numbers we have to add the recently announced placement, where RML.v is raising a tad over C$100m by selling 167m new shares (no warrants, and the offering is underwritten by Canaccord). This will bring shares out to 558.5m.

So, back to my very ballpark forecast for RML.v of U$63m in revenues for FY09. That works out as a projected 14.3 Canadian cents per share (using today's forex U$1=C$1.27). With RML.v currently trading at C$0.52, this thing, even after the large dilution, is trading at less than 4X earnings.

That's not bad at all for a gold miner going through its major growth period. Money talks and BS walks?

The above is a rundown of the numbers, for sure. I'm not going into the political side of the RML.v equation at all here. In fact on a personal level I'm still leery and still officially avoiding all things Venezuela investments, as there are clearly issues both real and imagined about the country. But run the numbers on RML.v and the value is obvious. Rusoro didn't need to get control of Brisas to be numerically attractive. The dilution to come is the dilution to come, but it will add C$100m to the coffers that will help bring its own projects online. Look into the company yourself and you'll see that forecast production is set as rising much higher in the years 2010 and onwards, no Belanger required.

There comes a moment when risk is outweighed by reward and each person's tipping point is different. I know people that are happy holders of RML.v. I know others that won't touch the stock. I know of others like me, the fence-sitters (after all, plenty more fish in the sea). All these positions are valid in my opinion. DYODD, I really mean it.

Final thought about that Vancouver Sun hit piece: Do they have something against Canaccord all of a sudden? The games people play, eh..........

UPDATE: Roy Carson at Vheadline can go **** himself. The cyberparasite turd pastes the whole of this article on his site with a tiny link.