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4/18/09

Regarding Ambrose Evans-Pritchard and His Copper-Backed Currency Stupidity

Want long-term? We do long term.
The 50 year chart for copper


This is a post I owe to reader PN. On Thursday he wrote in with comments and a question or two about this post that took the lamentable Ambrose Evans-Pritchard to task for his recent silliness about copper.

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I have a question regarding your post on the article by Evans-Pritchard: how does copper not being an asset class mean that it can't be included as part of a currency?

I read the definition of an asset class, and I understand that copper is not one, but I'm not understanding how you're applying that to the article. I also disagreed with the article, but my reasoning was that it would be too expensive to store the amount of copper required to back a currency. His article is also self-contradicting; why would you back a currency with an industrial metal that they have such a demand for? But theoretically, there is no difference between gold or copper backing a currency (although practically speaking, gold is better due to value) and both are not asset classes. Is that correct?

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I replied that I'd answer his question over the weekend, so here we are.

First, let's look at the bit that PN gets. An "asset class" is a vague term and causes some confusion due to the various ways it's used, but it's normally understood in the financial/investment etc world as equity, debt or property. Note at this time that "debt" includes things such as bonds and currencies (as banknotes are basically zero coupon bonds). Equities are stocks, for example. The best example of property is real estate.

In fact a house is a good example to study. It's tough to store (for non carbon-based life forms tuning in, we call them 'cities'). It's made up of things like bricks and cement (both ground up rock) wood, copper etc etc ad infinitum. So what's the sudden magical transformation that makes housing into an asset class?

What the things loosely covered by the term "asset class" have in common, is that they are not the means to an end but an end themselves. They're the conclusion, not the story. They're journey's end, a piece of the pie, whatever other way you want to say it. You buy shares because you want a small slice of company X because you think it's going up. You buy sovereign debt because you trust government X to pay you back with interest etc (as an aside, yes when you buy a sovereign bond you are in a very abstract way buying a piece of a country). You pay more for house X than house Y for reasons of size, location, neighbourhood etc but they're all "an end", not a means to an end. Humans like roofs.

Copper is not an asset class, it's a commodity, a means to an end. It's one of those things made by us then given a value as a good (or perhaps service) as it passes from one person to another, but it's not an end in itself. It's made by people who dig it out the ground, refine it and make a profit (hopefully) by selling it on. It's made by the buyers into pipes and wire and then sold (hopefully at a profit) to the housebuilder or car company or electricity generation plant to build other things which are then sold (hopefully at a profit) to the end user. Sure you can buy it and sell it on an electronic or even physical market just like you can with currencies. When you do you're speculating that it rises in value compared to the underlying currency of the purchase just like you do with a forex pair play. But try paying for lunch with a couple of kilos of the stuff. And try explaining to me the 2002 to 2008 bump in copper compared to its underlying price in the chart above. We know that China has been importing oodles of the stuff and it's become popular (i.e. expensive) because of that. But what happens when all those power stations are built? Chile goes bankrupt?

Now let's go a bit deeper. Milk is also a commodity, so let's imagine an Ambrose Evans-Pritchard parallel universe with a milk-backed world currency. Yeah you got it, cows become more sacred than in India! But then what would happen eventually is that cows become so abundant and so common that they begin to lose their "worth". Some dude says "this is silly..we can't use all this milk" and quite literally starts throwing money down the drain as the opportunity cost of storage outweighs its advantage (we call it inflation). Another dude says "yeah, cow's milk sucks, but my country is goat's milk only.....we're special" until we return to inflation via world overpopulation of goats....these two ideas and a thousand variations on the madness ensue.

So with that milk silliness in mind let's return to copper and the case for backing currencies with this commodity. If this specific commodity becomes the backing for a hard currency (e.g. Dollar or Euro, not the Paraguayan Guaraní or Thai Baht) what would happen to copper the commodity? Well first it would become a very, VERY popular metal. Secondly it would make Chile and Peru the centre of the financial world (and we can't have that I'm afraid :-) . Thirdly people would start doing whatever they could to mine and refine it...all those crappy low grading deposits around the world (example Duluth) would become centres of wealth and excellence. But eventually, as with all common things there will be so much copper hanging around that it loses all sense to imagine it as having any worth (according to my casio there are 10,000,000,000,000 metric tonnes of copper in the earth's crust. If we assume that just 1% or so is close enough to the surface to get at that's still ten billion metric tonnes. Store that).

So all that above outlines why copper can't be an asset class. Now to answer PN's question "how does copper not being an asset class mean that it can't be included as part of a currency?" it's a step and a jump away.

I'm sure you've heard of the term fiat currency as it's used disparagingly by every goldbug that ever walked. However "fiat" in fact means "trust" in latin (or even more simply "let be") and that's really what currencies are all about. You trust that bit of paper as much as the next person because it's backed up by "the word" of the particular government of bank that issued it. For a practical example of this, look at the writing on the British Pound (GBP); "I promise to pay the bearer on demand...." says the Bank of England.

Currencies work on trust. Period. And in fact the system of using trust in currencies to lubricate world commerce has been one of the greatest successes of post-renaissance man. Just look around you as currencies lubricate and speed up commerce and do it very well. But currencies don't work on whoever can store the most amount of things first (and yes, I'm well aware of gold and all its ramifications so don't write in, please). If you stop trusting a country's currency (therefore the country itself) its currency becomes worthless....check out Zimbabwe. If you trust a country to keep its word about things then its currency is valued as an asset above all others (i.e. the US dollar, and I accept no subjective arguments about this; we're talking about perceived value here, not your personal opinion. For a practical example of this, go around South America with any other currency than US dollars in your pocket and see how you're ripped off by the moneychangers).

Currencies do not work by hoarding commodities to back up their value. AEPs ridiculous theory would mean that instead of letting copper flow through the business and industrial worlds and creating wealth (from raw mineral to copper tubing in your car) it would be stopped in a big storage area and jealously guarded. It would put the world's economy into reverse as people stripped houses and electricity distribution systems. That's just a couple of examples off the top of my head, but the whole thing is tulipmania revisited. Backing the system of commerce lubrication (a currency) with the things that are transferred from one hand to another (copper) is contradictory and freezes things, it doesn't lubricate them. Or put simply, Chile becomes rich by NOT exporting copper? It's asinine. All that is a long-winded way of pointing out just how silly AEP's article is, I'm afraid. Ambrose Evans-Pritchard's proposal is an economic theory from someone either too arrogant to educate himself about basic principles before opening his mouth or too stupid to understand. I suspect both.

A final word on gold needs to be said. Yes it's mined and refined like copper, but it's also an asset class in itself. This is because it's also, basically the end of the chain rather than a means to the end, much like building wealth via currencies. If you like, hoarding gold doesn't freeze up the economy because even though it may be traded like a commodity, gold isn't a commodity. Gold is money (I've always liked Paul van Eeden's phrase "it is the very essence of money" even though I disagree with PvE's view on many things). Or if you like, its combination of rarity and desirability in the human eye makes it a good way of concentrating wealth. Gold has always been rare and always will be rare. I'm reminded of a well-known story about aluminium and how the US Congress proposed covering the Capitoleum with Alu when it was built. This because at that time AL the element had only just been discovered and was thought to be rare. We now know differently, but its rarity at the time made it highly desirable to the point where it nearly adorned that famous dome.

So there is a case (not one I agree with, but it's debatable) for a return to the gold standard, but the aspect of hoarding outlined above (aka human greed) is the very same thing that killed the previous gold standard and it would likely happen again. But at least a gold standard is theoretically possible. Copper? Forget it. It's not an asset class, beat that into your head. And stop reading Ambrose Evans-Pritchard because the man is clearly a dumbass.


The Summit of the Americas


So the big hoopla SotA is up and running and Obama-centric with a large side order of Cuba, spicy sauce by Chávez and etc etc snark.

Go find comments somewhere else. I'm not doing any coverage on it and there are a thousand blogs wringing their collective cyberhands over it all. Most are crap, but check out boz cos he does a pretty good job on this kind of thing normally and even if he hasn't updated has one of those interactive realtime bloglists on the RHS so you can see what the self-justifying academic pseudointellectuals that seem to hang around boz think.

The only real thing I have to say about the SotA is this.



UPDATE: Boz just left this comment in the bit below this post that you can't see on the main page. Worthy of pasting here to see what he says about Admiral Stavridis. My only thought about Boz's view on Stavridis is that it's sad that the Southcom commander is a noteworthy exception and not the rule.

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Boz: Thanks. I like that quote, by the way. The person who is really good at acknowledging that thought is Southcom's commander, Admiral Stavridis. He goes out of his way to use the term "America" properly, warns people in the US government against ever using the term "backyard," and I've heard him give a number of speeches that he ends with "God bless the Americas." It's actually fairly impressive the effort he makes.



At some point next week I hope to cover the non-Obama, non-Cuba news that comes out of the Summit. There's plenty of interesting other bilateral and multilateral topics going on at the Summit that have nothing to do with the US or the other high-profile debates. I just need to search deep in the regional media coverage to find it. God forbid the media try to cover more than one or two topics at once.

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4/17/09

Manu Chao: Me gustas tu

If you don't know Manu, now's your chance. Two minutes and forty-five seconds of Friday kickback and general happiness.



Simply wonderful. What time is it, my heart?

Also featuring this line at the end; "Not all that is gold shines", which I've always loved.

Yeah, it was him alright

A lesson for all the 24 year olds out there who think they're hard.

Don't mess with the ultra-rights. It must have been 117 days of excitement and "real live war games" for Dwyer, hanging with fascist Croat war veterans....

Dwyer listed as Eduardo Rozca Flores' friend on Facebook

.... training with live rounds, wearing green, feeling important, driving imported BMWs, wowing the local girls, feted by the UJC and plotting deep plots. He must have loved it all, right up to the moment before that photo happened.

All rather sad, really. R.I.P, Michael Dwyer.

UPDATE: Listen up anonymous posters and mailers both known and unknown:

1) The picture stays. Those that spend their life watching reality shows and unaware of reality need a wake up call. This is not a game. These people were plotting to destabilize Bolivia and got what they deserved, period. Don't like it? Hard luck.

2) I said it's "sad" for many reasons. After speaking with a couple of people on the ground in Bolivia my best guess that he was a young man living his own fantasy and way, way over his head. Anyone else out there think they're hard but run a Bebo page? Gimme a break.....

3) But it's also sad that the hatemailers (yep sure, come over to the house anytime and meet my dog) can't see a few basic facts, not least of which being that we're talking foreign nationals with far right wing connections in an area of Bolivia that tried to start a coup d'etat last year carrying guns and explosives, in itself totally illegal.

4) But the saddest part of all is the way that people think they can still change South America this way. You can't so go home now if you think that way. And stay home. And shut the fuck up cos you don't have the slightest clue of what you're talking about.

5) And yes, they're exit wounds. Which means he was almost certainly running away when the Bolivian armed forces shot him. Welcome to the world of rough justice. I don't feel sorry for what happened to the guy, I feel sad for the guy. There's a big difference.

6) For the forseeable future, any comments not from regular readers and all mails from people unknown will be deleted without being read, so feel free to waste your time.


UPDATE: Find out more about the people who funded the mercenaries by clicking here




Trading post (full of fish edition)


Went to a great fish restaurant with the better half this morning.

Capella Resources (KPS.v) up 28% at $0.69 with volume low. Gotta love these guys! That all you got, Senergy? Where is the OSC?

Cosan (CZZ) down 16.7% at $3.54 and the beta rollercoaster rides on (without me).

Dynasty (DMM.to) down 6.8% at $4.52 which is a bit disappointing for those of us already bought (eg me) but considering the gold drop today is understandable...i suppose. If it goes lower I'll pick a few extra up but until then it's just holding through the blue funk days. Seriously undervalued.

Vena Resources (VEM.to) UNCH at $0.28 and still doing far more trade in the serious markets (Lima, Frankfurt) than the mickeymouse TSXV. Comparatively serious anyway. I again look you in the eye and again say in my gravitas voice, "It's going higher". DYODD cos I'm long (and well in the green).

Capella Resources (KPS.v) and a Trip Down the Investor Relations Rabbit Hole

Our scamsters over at Capella Resources (KPS.v) came out with news last night. They've hired a firm of investor relations to help promote their rip-off by the name of Senergy Communications. Based in Vancouver (just across from the Hotel Vancouver in fact), Senergy provides (ahem..clear my throat):

"strategic investor relations, public relations, and (sic comma) marketing solutions that are customized to the needs of your organization".

Senergy also boast of having a 30,000 name database of North American investors.

In other words, they're a bucketshop pumphouse that are about to phone 30,000 houses in the next couple of weeks to see if they can dig out a patsy or two. However, by their fruits shall ye know them (Matthew 7:16 dude on a hill talking to a crowd 2,000 years ago) so let's see how Senergy clients have been getting on recently.

Let's kick off with Troymet Exploration (TYE.v) who hired Senergy in August last year to tell the world just how wonderful they really are. Let's check the chart, and.........
....hmmmm. I've seen better, has to be said.

Never mind, how about Senergy's previous client, Petro Vista Energy (PTV.v). When Senergy got the job of relaying to the world the stuff that PTV.v was made of the stock stood at $0.75.
Now it's at 20 cents. Time for a quick joke! Q: How do you make a small fortune in penny stocks? A: Start with a large fortune and believe what they tell you.

Then there's "True North Energy" (T8E.f), another client of Senergy's...
.......but you should be getting the picture by now.

However my fave story is that of Fox Petroleum (FXPT.ob) that hired Senergy to promote the company back in June 2007 (not July like wot I writted on the chart). Before getting fired by FXPT in September 2008, Senergy had overseen the stock price as it moved from $5.15 to $1.85.

Fox is now a $0.35 company. Death spiralz iz wot death spiralz duz and Fox were not happy bunnies with the service provided by Senergy. The telling phrase come in FXPT's filing on the matter that states;

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On September 1, 2008, we terminated an investor relations agreement with Senergy Communications Inc. whereby Senergy Communications Inc. provided investor relations services to us for US$10,000 per month

We terminated the agreement with Senergy Communications Inc. to improve the investor relations facility for new and old investors.

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You just can't the staff these days, can you? And those four were the only companies still in existence that have been mad enough to hire Senergy for IR work, according to my Google skills anyway (feel free to correct me if you know of any other suckers). So this is the cruddy IR firm just hired by the even cruddier Capella Resources to pump its BS to a bunch of greenhorns in the days to come. Just don't say I didn't try to warn you.

Freebie Friday


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Luis Carranza, Man in Denial


Yesterday Peru's increasingly embarrassing FinMin, Luis Carranza, said that first quarter GDP growth would come in at 3% and his full year forecast was still 4%. He alled the February 0.19% disaster a "pothole"....potsmoke is more apt under the circumstances, as Luis is obviously been toking the waccybaccy.

So let's check on this blathering. First Carranza's quarterly forecast January was 3.1%, February was 0.19%, so to get a 3% average for 1q09 we'll need March to come in at 5.7% or so. I mean, even his own ministry is calling March at 3%, and that's the highest forecast out there...and by a long way.

Secondly his 4% growth target for the year. I refer you, kind and gentle lector of IKN, back to the theoretical projections chart of yesterday, reprinted here.


The above isn't my estimate or guessworrk, this is just plain old mathematics and numbercrunching. Put simply even if Peru knocks out a 4% average monthly growth from here to December Peru's GDP comes up short of 4%.

He pins his hopes on a $3Bn stimulus package that doesn't even get close to covering the difference in copper revenues in 2009 (forget all other exports....just copper is going to drop by at least $4Bn). He cites the fact that fishery will pick up in March but forgets it's only 0.72% of GDP weighting, conveniently ignoring the disastrous 7.45% drop in manufacturing output that will surely repeat.

Look, this stuff isn't tough economics and Carranza knows his subject, so he's either suddenly developed a nasty case of stupid or he knows he's lying through his teeth.

Go on...take a wild guess....

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

....not really a chart but a statement.

Nuff said.

4/16/09

Is this the Irish would-be assassin of Evo Morales?


Sure fits. Thanks to some quick work by reader RM, check out this Bebo page on a certain Michael Dwyer.

Let's check the points in common

1) Is Irish

2) Loves guns and fancies himself as a sniper

3) Is definitely in South America and according to messages left by friends is in Bolivia

4) Has Bruce Willis's "The Jackal" as the answer to his "What kind of Assassin are You?" profile box

5) Thinks he's hard

6) Member of an Irish battlefield simulation club

Sure looks like a possible to me. Has anyone seen this man mooching round Santa Cruz recently? Well sure looks that way, as this photo from his Bebo album has him placed in the eastern Bolivia area 116 days ago.

UPDATE: I've been told that Bebo has now pulled his page, but I took a swipe of it yesterday and saved it on my PC. Here's a link to the PDF copy. I've removed the comments from friends out of respect for third parties but the rest is how it was.
For your information, several newspaper journalists have been mailing and asking questions on this story, including Irish, US and world media. I haven't told them a thing of use and they get the same treatment as the people that really matter, i.e. the grassroots readers.


UPDATE: Yep, it was him alright.

Police Foil Assassination Attempt on Evo Morales, Kill Three of the Gang, Arrest Two


Police raided a hotel in Santa Cruz (where else?) this morning and confronted a group of five heavy armed terrorists (guns, bombs etc). In the ensuing shoot-out, three of the suspects were killed. Two of the dead Hungarian nationals and one Bolivian. The other two, apparently one Irish national and one Romanian, were arrested and taken to La Paz. However there are conflicting reports of the groups' nationalities, with Croatia also mentioned. A large quantity of explosives and arms were also confiscated by Bolivia police.

Evo Morales said today (and I quote): "I'm not mistaken in saying that last Sunday the days of Evo Morales might have been counted. The results of todays operation coincide with the preliminary reports we have regarding this group of European and Bolivian terrorists and mercenaries."

According to police reports relayed by Evo in a press conference, the group was targeting Evo Morales, Vice President Alvaro García Linera and Minister Juan Ramón Quintana. Unsurprisingly the racist fascist shits and Evohaters are already looking stupid and calling it all a hoax, with the Prefect of Santa Cruz (where else?) calling it all a put-on and a show. Hey, remember that Facebook group?

UPDATE: Here's Reuters EngLang with the story

UPDATE 2: We now have confirmation of the names and nationalities of the would-be assassins. I don't know if the spelling is exact on the names but they're taken directly from this ABI report:

Mayarosi Ariad, (Rumania) Dead
Duayer Michel Martin (Ireland) Dead (SEE LATEST POST)
Jorge Hurtado Flores (Bolivia) Dead

Mario Tadik (Bolivia) Arrested
Iedad Toazo (Hungary) Arrested

Apparently the firefight on the 4th floor of the Hotel Las Américas, Santa Cruz, went on for around 30 minutes. Police conficated foru pistols, a rifle, a shotgun, ammunition and explosives, including high powered C-4 explosive and sophisticated detonators. These guys were no muppets, but they should have got down.

FINAL UPDATE: Nice job by Bina of putting today's timeline and the latest developments all together in one place. Check it out on this link.

Peru's Sendero Terrorists just doubled their number


A nice report from Reuters today that has spotted the quiet way in which Peruvian army chiefs have quietly upped their estimations for the strength of the Sendero Luminoso (Shining Path) guerrilla/terrorist/narcotrafficking group (all labels seem to fit) to 600 from 300. This also fits in with the insightful mail received by IKN and re-printed in this post earlier this week.

Here's the Reuters note, so go read yourself. Here's the first part:

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LIMA, April 16 (Reuters) - Peru's military doubled its estimate for the size of the Shining Path guerrilla group to 600 on Thursday, after months of bloody ambushes in a coca-growing region that have killed at least 30 soldiers. The deaths have piled up since August, when the army launched an offensive to retake control of the coca-rich Ene and Apurimac valleys. It has since realized there were more rebels than it had thought. "This new estimate (of 600) is based on information we have received following attacks by the terrorists," Peru's joint chiefs of staff said.
CONTINUES HERE

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Trading Post (Susan Boyle edition)


Man, she just has the most wonderful voice. She made me remember all the nice parts about being a human.

Capstone (CS.to) down 7.5% at $1.85 on very strong volume and the news of its $50m financing. Reader MontyHigh made a good point in the comments section of the blog this morning. He said, "These guys are really smart and would only be selling themselves if they thought their company's stock price was peaking" and I agree. By the way, Monty runs a nice traders' blog World of Wall Street that you can find on this link. He talks a lot about miners, his selection process and is well worth a visit.

Fortuna (FVI.v) down 4.9% at $0.97 and hasn't been panic-dropped this morning on the blockade news. Volumes nothing more than average, either.

Candente (DNT.to) up 5.2% at $0.40 and was higher earlier. The market first seemed to sleep on the Tuesday JV news and has rewarded DNT yesterday and today.

Fronteer (FRG) down 3.9% at $2.23 and the best laid plans of mice and men in play. Still in the green on the trade, but not half as much. Plenty of time and patience for the good quality stocks, please.

Capella Resources (KPS.v)

Well, it looks like the stock price has reacted nicely to this post last week...LOL!


As for that $5m placement the company was trying to scam at $0.73 a pop, as they say round these parts "sigue participando" :-)

But seriously, it's fine that the scam has been discovered and the PPS plummet, but really these people deserve to be in jail. The rats behind this scheme have done this kind of thing umpteen times and will just do it again if allowed to, but the supine OSC just sits backs and does nothing. And really, after all is said and done, the OSC is just a reflection of the nation in which it operates as Canadians don't kick up the fuss they should. For every Vancouver Sun David Baines (who gets them wrong ocasionally too...he was wrong on his recent take of Agapov imho) there are a hundred Brian Graceys, but you guys up there never weed them out. Those who don't learn from history are condemned to repeat it.

All Capella Resources scam posts linked here

The IKN forecast for Peru's GDP in 2009

Enough of just laughing at the neverending downward revisions of the dumbasses in suits, it's time to nail colours to the mast. Yesterday's February GDP numbers from Peru were downright horrible. No ifs, no buts, no maybes. So instead of getting on with my life last night I started to play with some previously tweaked models and then whipped up a couple of charts from them, too.

This first chart shows how Peru's 2009 GDP number will evolve (devolve?) in 2009 under five different and purely theoretical growth scenarios. From a highly optimistic 4% growth per month to a 0% average growth scenario.

Note that with this chart above even a 4% monthly growth rate from here will end up with a lower 2009 GDP than is being forecast by Peru's Central Bank, its Finance Ministry, the IMF and all the other liars. And to repeat: February GDP came in at 0.19%. March GDP is likely YoY flat or negative. Same for April. Etc etc.

Now this second chart is my best case (honestly, this is being optimistic) for Peru in 2009. The yellow bars show the monthly GDP figures and the red bars are the 12 month trailing GDP forecasts. And so after the shocking numbers posted yesterday, right now I'm predicting Peru to grow 1.28% in 2009. As for 2010, almost certain recession.


Moral: Miracles are for the religions, not economics. Welcome to reality.

Fortuna Silver (FVI.v) and its press release today

Two people have already mailed me this morning about this press release from FVI.v today. According to the presser, illegal roadblocks have been set up byprotesters at the company's San José silver project in Mexico. So rather than send the same copypasted mail to the 3rd, 4th, 5th etc mailer (although getting your mails is great, so keep 'em coming) here are my thoughts:

1) I don't work for the company and have no special information. In fact FVI.v hasn't even bothered to pick up the phone and say "hi" since I pointed out to them that they were hitching their wagon to a real unhinged scammy pump artist (who'll remain un-named this time as he scans Google for mentions of himself and them bombards you with hatemail if he doesn't like what he reads) who doesn't give a damn about anyone but himself. I haven't lost any sleep, though. This is business, not love.

2) Even if we talked today the company wouldn't be in the position to hand out information away from the official line that could be quoted, so no point in asking them. The water rights issue is the touchy one, for sure. Note that the enviro permit papers have just been filed, so this might be a Corleone-style negotiation tactic or NGOs making a fuss...or a bit of both.

3) FVI.v has always valued good community relationships and I've seen that attitude in action first hand. However Continuum were definitely faster and looser and unliked in the San José area, especially on a couple of projects that locals said were leaking pollution. This may be the root cause now that CNU.v has been fused in to the company.

4) FVI.v isn't managed by stupid people, it's managed by intelligent people. I'm the first one to call out the scam artists of this industry, but also I'll call the good ones as good. FVI.v is a responsible mining company that does care for the environment around it, just the type that will win out. Therefore with silver where it is right now, anything sub 90c is a buying opportunity if people decide to panic themselves out of selling an excellent silver mining comapny.

Disclosure: I don't own right now. Those of you that bought the NOBS report on FVI.v in February (still available, see link here) will know that I consider it inside a short-term trading range until further notice and know where my likely buy and sell points are. So far it's done pretty much what I expected.

Another screaming "Copper has topped" signal


I really should STFU about this because so far the market has thrown my idea straight back in my face, but this one is so obvious and so clear and SO classic that I'd be remiss to not mention it.

Ambrose Evans-Pritchard in the UK Daily Telegraph has already been featured on this humble corner of cyberspace, this because he's a world-ranking dumbass who makes a great living by screaming "it's the end of the woooorld" at his equally annoying readership. Anyone remember the time in 2007 when AEP predicted that China was about to dump their dollars on the world and cause the collapse of the US economy?

So anyway, today the dumbass really shows how much he knows about these things: NOTHING. His report entitled "A 'Copper Standard' for the World Economy" falls directly into the classic trap of regarding base metals as an asset class. Surely you remember all that talk this time last year from young'n'spotty fund managers in expensive suits who were promoting "copper as a hedge" against currencies? Those managers are now found flipping burgers (or should be, at least). As for AEP, he finishes his most ridiculous of arguments with this paragraph:

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Beijing may yet buy gold as well, although it has not done so yet. The gold share of reserves has fallen to 1pc, far below the historic norm in Asia. But if a metal-based currency ever emerges to end the reign of fiat paper, it is just as likely to be a "Copper Standard" as a "Gold Standard".
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That line of reasoning is:

1) Laughable. Repeat after me these six simple words, as if you don't know this you need to now. They will save you a lot of hardship going forward: COPPER IS NOT AN ASSET CLASS.

2) If necessary repeat it again. And again. Until it's nice and front'n'centre in your cranium.

3) A sure sign of copper topping out here. When the utterly ignorant promote a metal, commodity, stock or medium of exchange of any sort (esp. the ignorant who pretend to be the font of all wisdom), the more knowledgable make for the door and leave them holding a very large bag.

Yes, Virginia, I'm still bearish on copper.

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

.....the Bao-Gang Steel index, as featured at Casey's Charts last night.

The good Lord knows I'm no fan of these Casey dudes, but credit where credit is due. This is an insightful chart and worthy of eyeballs. Read up on the Casey take right here (but avoid the subscription link they give...it's a real rabbit hole) but what it means is pretty simple:

1) The whole recent price push was due to the Chinese stockpiling
2) There's no real end user demand
3) The stockpiling has stopped
4) Prices for metals will drop again


Yep, I'm still a copper bear.

4/15/09

So what makes you think Peru is any different?

The next time somebody tries to bore you with the Peruvian economic miracle story and how they are protected from the storm, show them this chart.

The only difference is that one is in for a much harder landing.

Peru's February GDP Growth +0.19%

How many breakfasts?
LatAm's worst President is about to get his trasero
served to him on a plate next mealtime

Now will you start believing me and stop believing the intellectually redundant bullshitter Twobreakfasts and his party of liars and thieves?

This is the link that takes you to the 33 page PDF published by Peru's INEI stats office this afternoon. Most level-headed commentators knew that Peru was slowing down, but these numbers are nothing short of shocking. Peru has hit a brick wall and its people are about to find out just how much their President has been hoodwinking them all.

I've spent a good hour poring over the numbers trying to find some saving grace. Construction is still holding up, but the real soft centres are the 7.45% drop in the manufacturing sector and the commerce sector, the key to understanding the internal demand economy, down 0.71%. I immediately recall the utter balderdash published by Fitch and S&P when they upped Peru to investment grade, as they both used the "strong internal economy breaking away from the traditional economic motors" kind of argument as centrepiece. Total lies.

Trickledown doesn't work, period. Bringing back Luis "world's luckiest economist" Carranza (luck's run out though) as some sort of half-assed economic supersub won't work, period. Telling people to "think positively" and assuring them that Peru is a Utopian oasis in the storm hasn't worked, period. And now going forward we'll see the difference in reaction between the prudent countries that have warned their citizens of the storm (e.g. Chile) and the irresponsible that used ostrich politics (e.g. Peru).

If the main Spanish language report is too heavy for you, check out this resumé in English from AP for the main points, or maybe this one from DJNW or perhaps this one from Reuters. And don't say I didn't try to warn you. We're all in the crapper on this one...said it before and I'll say it again. The only difference is the level of preparation that countries have done so far. Peru hasn't lifted a finger and now it will pay heavily for its mistake.


News Roundup (the bits they daren't mention in other places)

Ka-boom?

Ecuador: Unemployment took a nasty jump, up to 8.6% in the first quarter of 2009 (7.3% the last quarter). That mean 71,ooo or so people in real money.

Venezuela: Fox News, as objective and sober as ever, gives us headline of the week. "Venezuelan Opposition in Hiding, Behind Bars as Chavez Widens Crackdown". Special applause goes for this line:

"....FOX News witnessed residents of Maracaibo setting his effigy on fire.."

Gotta laugh.

Argentina: Ex-dictator and author of the Dirty War, Emilio Massera, has been taken to hospital with "cardiac problems". Otto sez the only thing wrong with his heart is that it's still beating.

Bolivia: Somebody dynamited the front door of Bolivia's Archbishop's house last night. Not a nice thing to do, as the guy has just left hospital after major heart surgery. Luckily he wasn't at home when the boom went boom. The gov't has launched an enquiry.

Peru: Twobreakfasts promising to "squash the narcoterrorists". Presumably thinking of some kind of wrestling move.

Trading Post (beg borrow steal edition)


Once again copper laughs at my bearishness and moves on up. Ho hum. As a reader mailed today;

I hope you are wrong about copper. Is it a case of investors (like me) afraid to miss the boat? Buffet said if you wait for the robins spring will be over.

I hope I'm wrong about copper, too. No denying I've been wrong in the short-term (from $1.75 to $2.15 without me) but let's see how the story unfolds. To counter the birdyquote, one swallow doesn't make a summer*.


Fronteer (FRG) down a penny at U$2.33 despite a positive PR this morning. No matter, as our long position taken at $2.25 and $2.10 has started nicely enough and sitting on the right side by a comfortable margin. By the way, the NOBS report is still available at just U$10 for this good looking investment vehicle. Here's the link to explain more and how to order. It's a winning stock, just allow me to explain exactly why. Plenty, plenty more upside to come from FRG, methinks. DYODD.

Nadagold (NG) down 4% at $2.62. Oh dear. How sad. A reader wrote and asked me what "nada" means. It's simply the Spanish word for "nothing".

Amerigo Resources (ARG.to) down 5% at $0.36 but was up at $0.39 earlier. To hell with it, I'm gonna toot my horn on this one. Here's what I wrote in this Trading Post on April 9th about ARG.to:
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Amerigo Resources (ARG.to) up 1.7% at $0.305. This seems to me to be a great way to add copper exposure to your portfolio, if that's what you want. This price is below that paid by Ross Beaty for his recent chunk, the company wrote down its share assets in LA.v and DNT.to in its year-end report (DNT.to significantly higher since then) and the cash injection from the Beaty-taken offering has given the company breathing room on its cash flows. With $2/lb copper it's probably making a profit right here and right now, and it will definitely be making a profit by the end of the year with Cu at $2+. DYODD and be clear that it's a high risk exposure of course, but it's a producer at a discount to peers...and that ain't a bad place. I don't own but it's on my shortlist right now.
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And if you ever make a coin or two via these little headsups maybe you'd consider donate one single dollar (that's all you're being asking for here...just one dollar) to the random beneficial cause fund on this link. It looks like we've added $46 so far already this morning so that's encouraging. Watch the video too, cos if I can't melt your cruel and stony heart those kids will.

*Linda Lovelaces' fave quote, so I'm told

There is a secret US military base in Peru.....

The secret document as published by La Primera today

.....which only comes as a surprise to those silly enough to believe what the liars that inhabit the Twobreakfasts government say. Peru newspaper La Primera has today got its hands on a secret memo (not secret any more though) that outlines the US military prescence in the VRAE coca growing region of Peru. Even this humble corner of cyberspace knows as much, though. In this post back in February I wrote...

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In fact, there might not be a formal US air base in Peru the same as the one in Ecuador, but anyone who hangs in the right places in lowland Peru more than a week knows the VRAE airbase, supposedly Peru soldiers only, is constantly packed full of US soldiers, planes, copters and air crew.
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...which, funnily enough, is the exact scenario laid out by La Primera in its report today. Here's a section translated by yours truly:

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  • "....The government categorically denied the possibility of the installation of a US military base in our country. However, La Primera has gained access to an official document stating the Ministry of Defence coordinated with the ex-commander general of the armed forces, Edwin Donayre, the request of the United States of America to construct an Operations and Intelligence Command Centre at the Pichari military base in the Valle de los Rios Apurimac y Ene (VRAE).
  • Via notice 058 VPD/A/SEC dated March 10th 2008, the Vice-minister of Defence Policy, Nuria Esparch Fernández, told Donayre that the administration of the sector coordinated with the Southern Command, via the the Constulting and Military Assistance Group of the United States, the construction plans for "A centre of medical assistance and a command centre for operations and intelligence in the territory where the armed forces are stationed in Pichari."."

Oh how they insulted Evo Morales when he had the balls to accuse Peru of running a secret US base. Let's see what they throw at each other this time, as apologies from Twobreakfasts are as unlikely as a hunger strike.

Nadagold (NG) reports

rick!
RICK!

I love these Nadagold (NG) guys and you should, too. The perfect example of the slick, positively spun but ultimately meaningless press release. We can all learn from them how to be all that we want to be in this fine 21st century world that rewards BS more than honesty. Here's the link so go read yourself, but once you wade through the guff and style at the top you start getting to the substance at the bottom. This is the bit I like:

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The Company's three material projects are the Donlin Creek, Rock Creek and Galore Creek projects. The Company's remaining share of the 2009 budget at the Donlin Creek project is approximately US$10 million, part of which will be incurred completing the feasibility study and the remainder is planned to be used for permitting activities at the project. The Rock Creek project is in care and maintenance, pending a review of whether to recommence start-up at the project. The current remaining care and maintenance budget at Rock Creek for 2009 is approximately US$7 million. The budget for care and maintenance and optimization studies activities at the Galore Creek Project for 2009 is $16 million, however, NovaGold is not required under its revised agreement with Teck to fund any of those costs.

The Company does not plan to commence development or construction at its Donlin Creek and Galore Creek projects in 2009, nor does it currently plan to recommence the start-up process at the Rock Creek project. However, the Company will need external financing to develop and construct its major properties and to fund the exploration and development of its other mineral properties in future years. Sources of external financing may include bank borrowings and future debt and equity offerings. There can be no assurance that financing will be available on acceptable terms, or at all. The failure to obtain financing could have a material adverse effect on the Company's growth strategy and or results of operations and financial condition. Development of the mineral properties would require significant capital expenditures. There can be no assurance that the Company will be able to secure the financing necessary to retain its rights to, or to begin or sustain production at, any of its mineral properties.

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Because it's now clear that NG isn't going to re-start Rock Creek anytime soon despite all the hopeful noises made earlier this year. Instead it's going to spend another $7m on care and maintenance there. Whether that expense includes paying back the $15m or so the company still owes to its suppliers in Nome is not made totally clear.

We also get a budget for the rest of the year. Add em up and divide by three (the first quarter is done) and we see that NG needs to spend $5.66m per quarter to keep its project expenses on track in 2009. I suggest you make a mental note of that number and compare it to the loss NG reports in the second quarter as it'll give you some idea of just how much cash is wasted in non-core stuff such as office space, Martini lunches, photocopiers, executive jets etc. Why follow this number? Because according to filings, expenditures on the three 'material projects' were $4m in 1q09 and the net result at the company was a $28.5m loss. Hopefully $15m went to pay off those previously mentioned and very patient suppliers in Nome, but as for the other $9.5m minimum it's anyone's guess. Seriously, that's at least $100,000 a day in non-core expenses for a company whose only income is a few hundred thousand a quarter selling gravel.

Or in other words, shareholders in NG are perfectly matched to the management team: More money than sense. DYODD.


Bolivia: Evo has lunch then signs his law

You know those ceremonial law signing moments that US Presidents do sometimes? Well Evo does them too, but in his case he invites less press corps along and more ordinary people.


Dr. Morales called the signing of the electoral law yesterday "another unforgettable memorable day for Bolivians" who had bent the will of an obfuscating parliament and tried to stop the democratially voted amendments from being debated by th lawmaking body. The Prefect of Tarija, opposition dude Mario Cossio, didn't think much of Evo's 4 1/2 day hunger strike, however. He said, "I think it's sad that Bolivia gives a pathetic image to the whole world." Hmmm...that's not what the 3,000 people that joined in the hunger strike from 216 different focal points in Chile, Spain and Argentina thought. And it's clearly not what the crowd that turned up to cheer Evo were thinking either.

And as for "pathetic Bolivia", the fact is that Bolivia is on course to show the best GDP growth in South America this year. That's right my kapitalist audience, the buncha wet lefties are forecasting 5% GDP growth this year as well as a dropping inflation figure according to Bolivia's FinMin Arce. Wouldn't it be funny if the rest of the world crumbled while Evo's Bolivia became economically stronger in 2009? Y'know, kinda funny in the Faith No More way:

"It's always funny until someone gets hurt
and then it's just hilarious."

You can tell there's an election coming up in Argentina...

The comedy never stops

...because Neshtor isn't just talking his usual crap. He's talking triple crap with a BS side, whipped cream and a cherry on top.

Example yesterday, as he told a crowd of descamisados that "Not only have we (Argentina) not fallen into recession but we have managed to reactivate the economy in dramatic fashion," which made me chortle as his words hit the wires almost the same time as two reports from independent buffets (forget the INDEC massage, the indies are as close as we're gonna get to reality) that said almost exactly the same thing; Argentina's economy had contracted for the last two quarters and is now in recession.

There was at the time plenty of debate about the precise reasons for the bringing the date of the congressional elections forward. Was is some kind of finessed move? Had the Kirchners something special up their sleeve? Well, no. The whole idea is to lie through teeth until polling day, tell people that everything is rosy and then go through the painful hard landing post-vote. Or in other words, it's still the Argentina we've known and loved for all these decades.