Tuesday, September 30, 2008

Manaos, a hundred hurricanes and royalties

Lula, Evo, Muffin and Hugo all got together for a "mini summit" in Manaos (North Brazil, Amazon, overrated tourist trap par excellence, Lonely Planet sucks) today. No doubt they were planning some secret plan to take over the world or some such, but they made plenty of public statements about the US financial crisis. Here are four snippets from the dudes in question:

Lula said, "We all have the same forecast; the crisis is very serious and so deep that we don't yet know its size. Maybe it will be the biggest in the history of the world."

Hugo said, "I hope they find a formula to get out of the crisis and so that it doesn't keep expanding around the whole world like a fire, like a spectre....it could cause more damage (to South America) than a hundred hurricanes."

Studmuffin said, "These crises don't terrorize (South American countries) like they did before.....Hopefully the day will come for Latin America when it's irrelevant what happens in the United States, probably that's when we would have achieved our true sovereignty."

Evo said, "Capitalism is not the solution for the people that inhabit this planet...We nationalize so that the people have money, while the USA wants to nationalize the debt and the crisis of people who have money."

I guess the real pisser for you guys up there is to realize they're either right, or at least making sense. It certainly fits in with something that happened to me today. This afternoon I got a mail about the post on Ecuador this morning. In that post I floated the idea that a 10% royalty on Ecuador mining wouldn't be a project killer for KGC, IAG, DMM, CTQ (though it may well affect the very early stage projects). The mailer today was worried that incakolanews would get read by people in the Ecuador gov't and give them bad ideas. It was all "10% royalty?? Aiii, nooooooooo! Don't give them ideas...they might just do it!"

My correspondent is making a fundamental mistake. You guys really think I'm on the side of the Canadian capital markets and the rip-off merchants that populate 70% (and that's being conservative) of junior miners?

What have you dudes up there done for us down here lately?

It's about time you see that things are fundamentally different now, and if you try and foist any old deal on the region á la 1990s you'll just get sent packing. It really hasn't sunk in that you can't take the lion's share of profits and leave crumbs any more, has it? In the case of Ecuador, that's going to mean splitting the gross profits around 50/50, not "pay some of the income tax, avoid the rest and squeal over a 3% royalty" like the mining industry did in Peru in 2005 (and still does today, in fact). It's payback time. If you don't like it, don't come. If you don't come that's ok, because you're unlikely to be missed.

Notes From The Rabbit Hole

I'm now going to recommend that you spend money at biiwii.com. Gary, owner of biiwii, has finally, FINALLY done what he should have done a long time ago. He's starting up his own subscription newsletter service, called "Notes From The Rabbit Hole." He's just published a free trial copy, and you can get yours on this link right here.

I'm really happy that he's finally taken the plunge on this (I egged him on earlier in the year but as he was still undecided I let it drop). The dude is a very fine technical analyst, and has his head screwed on about the fundamental side of things, too. He's going to charge U$26 per month for the newsletter, which is a real bargain considering it's a weekly newsletter, it gets supplemented with alert specials at any given moment and also most importantly knowing what Gary is capable of quality-wise. It's worth mentioning that he's asked me to write a NOBS report on a company of his choice once a month (I get a free sub that way, and he's even paying me a small cover for each one, too) and that'll be fun, too.

So hightail it over to biiwii now, and find out more. Pick up your free copy of NFTRH (here's the link again, so you have no excuse) and I hope you'll make yourself a client of Gary. and support this value-packed initiative. He'll make you a better investor via this service, of that I have no doubt.

I'm buying SLV tomorrow

Here's why (click to enlarge either chart):

It's not just Laura Palmer that should be afraid of twin peaks.

I actually did quite well on this last time and made 26% or so by getting very lucky and selling at the recent top (as documented on blog, too). Incakola isn't a tipping service, but SLV does seem to be a good opportunity and nobody can accuse me of trying to prime the market by reco'ing a metals ETF, either.

So let's see if they give me under $12 on SLV tomorrow. If so I'm a buyer. DYODD, dude.

Destabilize this

So McCain made a gaffe and kinda mentioned that Hugo Chávez runs some Middle East oil state.

It was a gaffe, that's all. You can see where the dude is coming from. I mean, it's not like his Veep sidekick who thinks that visiting an Irish Pub in Philly last Friday can go in her foreign relations resumé.

The thing that gets me about what McCain said was the other part of the sentence (here it is in script if you can't be bothered to watch the Youtube).

".....(Stress the importance of) ensuring that America is secure, and not dependent on oil from people like Hugo Chavez or other parts of the Middle East which is, we know, could be destabilized under certain sets of circumstances."

Soooooooooooo, what set of circumstances destabilizes Hugo Chávez? Go on....take a wild guess.

(hat tip borev)

Trading Post (still glad to be in cash edition)

So the US markets bounce, and euphoria is in the air. Let's not worry about LIBOR, eh..........
There are a whole bunch of stocks that dropped 10 and have bounced 5 or 6 or 7 today. I'll mention PBR and FCX here cos I mentioned them down yesterday, but there are hundreds to choose from. My general impression today is of low volumes, though. Not very comforting. Ask yourself a simple question: "Have we seen the lowest of the lows?" Yeah, me neither.

Apex Silver (SIL) at $1.78. Don't say you weren't warned.

Novagold (NG) $6.60. Ditto.

Corriente (CTQ.to) (ETQ) up 5% and coming back well. $5 does seem like a roof above its head right now, though. I'm interested in this, but want cheaper.

ECH up 5% at U$38 and bits. I've mentioned this Chilean stock ETF to a few people recently, and I'll be running a full post on it soon (just waiting for the quarterly update on total holdings and percentages, due out very soon). I think it's now seriously oversold and a great place to park some cash to protect yourself against the upcoming weak dollar. Details coming soon, watch this space.

Gold now U$868/oz. Try explaining to a goldbug newsletter guru that there's a perfectly logical and sensible explanation for this drop in gold and see what happens. Or better still, engage one in conversation and see how long it takes them to either swear or use the word Nazi (and the word 'Weimar' doesn't count, as you'll hear that one in the first twenty seconds). More seriously, when a whole group of people are consistently and totally wrong with their market analyses, isn't it about time you stopped paying these unclothed emperors any attention?

Snippety stuff

Shame about the boat race (better photos found on link below)

Peru is about to start the third and final phase of its U$24m program that innoculates 9m of its citizens aged between 9 and 19 years old against Hepatitis B. It may be a small program, but it deserves a shoutout. If only the other Peruvian gov't offices could use so little cash as effectively as MINSA. Good job, people.

As an example of how Peru's gov't wastes money, nine members of its congress are going on a bunfest to Chile this week, and they are claiming an average of U$370 for the airline tickets alone. I've just checked online and I can easily get on that plane for U$238 return, Lima-Santiago-Lima. Yet another example of their time-honoured "two for you one for me" expense account doctrine. You think Peru is changing? Gimme a break!

In Ecuador, Kinross now owns more than 90% of Aurelian stock, and compulsory purchase it about to happen. It's all over, folks.

In Bolivia, the Unasur commission headed by an Argentine lawyer and charged with investigating the Pando massacre has arrived on site. The United Nations high commissioner to the region, Vegard Bye, has pledged the UN's assistance.

Maria Telpuk is now in Miami and will take the stand soon (currently slated for Thursday or Friday, but you know how these things are) in the Antonini Wilson suitcase soap opera. If she says the same things she said last week in front of the Argentine courts, expect her to punch very large and embarrassing holes in lardass's testimony. Link for photos.

PS: Otto's Songs now has 20 music videos collected.

A small Ecuador auto-trumpetblow

As mentioned here on September 19th, I forecast 64.5% "Yes" in the Ecuador referendum. With 96.26% of the votes counted, here's how we stand.

Pity Otto isn't as good with stock prices :-(

Ecuador, the mining law, royalties and the windfall tax

Two macho men, a referee and an arm-wrestling contest.

Yesterday, a small report from Alonso Soto at Reuters hit the wires and I got three separate mails about it. Here below is the report pasted out (it's not a big one) and the mail I sent to one person and pasted to another. Further Ottocomments underneath:


QUITO, Sept 29 (Reuters) - Ecuador's leftist president, Rafaela Correa, on Monday ruled out nationalizing oil companies but said he will "not allow" them to reduce investment levels.
Correa also said an 8 percent royalty on mining companies proposed in a draft mining law was "too low" and said a 70 percent windfall tax will be applied to future mining contracts. (Reporting by Alonso Soto)


Correa is putting the mining companies on the defensive here. This is not the time to make them feel comfortable so he's doing a bit of "bad cop" here in his ongoing 'good cop bad cop' routine. He also made it clear in his comments that the mining law was "still in discussion" (that's a quote) and also that the publication this year "is a priority" (that's another direct quote).

Note that Correa was talking about the whole royalty band (3% to 8%) and the report only mentioned the upper limit to be charged to the big mines. It might be the lower band is raised to 5% and the upper band stays as it is. We don't know. To be honest the difference between an 8% payment and a 10% payment is not one that will break the budget of any project there.

As for the WFT, the whole thing depends on the base prices set. We'll not know those until the individual deals are made between MEM and the miners, and all that will happen in 2009 minimum (ie after the mining law is set in stone, and probably after the Presidential elections of March/April/May 2009)

Best, Otto


After a night to cogitate on the matter, I'd add the following:

1) Correa was probably targeting the 8% upper royalty limit. However it wasn't as explicit as the Reuters article suggests. Correa is very good at leaving himself exits hatches on his statements. In fact he's developed ito a very competent politician, period.

2) If the royalty goes to 10% (for example) it won't affect Kinross at Fruta del Norte or DMM.to or IAG or CTQ.to and their plans, but it will affect those companies early in the exploration track. It's an extra layer of cost for those who would finance the operations to take into consideration. The likely result is a 'wait and see' attitude for brand new mining projects, and investment capital flowing to other countries with a more mining friendly attitude.

3) The windfall tax (WFT) is likely to remain incognito for some time to come, and now becomes the bastion of Correa's 'make 'en sweat' tactics. Remember, he wants a fair deal or Ecuador. That means he doesn't want the mining companies feeling comfortable as yet. Just look at the way he's conducted negotiations with the oil sector players (a far more powerful lobby in Ecuador) and see how he's applying the style to mining. It's roadmap for mining investors par excellence (and he's doing the same in the hydro construction deals...AND it's already worked wonders for him in the telco negotiations).

4) Soto really is good at his job. Read him, even if you don't like the message.

Table of the day

And this one is about Latin America. The data was put together by Merrill Lynch and displayed at economist and national columnist Miguel Olivera's smart blog about Argentine economics

Note the strong position of all countries in the reserves-vs-short-term liabilities equation (short term meaning less than one year). Even the worst ratio of Argentina is manageable.

The second chart shows just just how much the region has strengthened in the decade so far. Particularly impressive are Brazil and Uruguay (the quiet achiever). Mexico might have a recession foist upon it from its northern neighbours, but there's no Tequila Effect this time round. And if you need convincing on whether this ratio figure is significant, look at the 0.9 figure printed by Argentina in 2001, and then remember what happened to that country in late 2001 and the early months of 2002.

Bottom line: I'd rather bank with a LatAm Savings&Loan than the dubious institutions up there right now.

Chart of the Day

From Brad Setser at 'Follow The Money'

His blog really is unmissable for financial wonks (guilty). Go over and read the context to this very impressive piece of charting.

Beware of anyone who says they "know" what's going on and how this will end. The best brains out there are flummoxed, so just ignore the pseuds and fools, please. Play it safe and preserve capital.

Monday, September 29, 2008

A country deserves the government it has

Feliz Salmon sums up the US House's decision to reject Plan Paulson with his headline "Oh Shit".

The Dow:
The USA really is governed by very, very stupid people. Just remember who voted for them. But one thing they don't realize is how much they're going to be loved down here after today:

The Bovespa (down 13.7% and dropping fast)
The Merval (down 9.8% and dropping fast)
So when the next round of job losses hit Latin America and the locals protest against the economic model that followed the USA and promised prosperity and all that, don't start blaming people for rejecting its politics, too. All in all, it's a good job you guys up there still have all those nuclear bombs, because otherwise nobody would take you seriously any more.

I know what the US citizenry's comment on the side-effects coming the LatAm is going to be too.

"We don't care."

And that, dear reader, just about sums it all up.

How's it going up there, finance boyz???

Down here we're getting credit ratings upgrade promised from Moody's, non-emergency debt buybacks in the cards and affirmations of robust net creditor positions.......... in.................


Looks like Paulson has a model to follow.


NEW YORK, Sept 29 (Reuters) - Standard & Poor's on Monday affirmed Venezuela's "BB-" sovereign credit rating, saying it was supported by its robust external and fiscal balance sheets, which continue to improve as a result of high and increasing oil revenues.

Standard & Poor's also said that the outlook on Venezuela remained stable.

"We expect that Venezuela's public sector will be in a net external creditor position of 25 percent of current account receipts in 2008, which is one of the strongest of any issuer in the "BB" category and significantly higher than the 1.5 percent net creditor position for the yada yada CONTINUES HERE

Trading Post (happy to be in cash edition)

The US three month treasury bill is the whole ballgame. Put it front and centre on your screen and don't take your eyes off it for a second. Gold is up at $898 right now, but be clear: It's not acting as safe haven, it's reacting to the T-Bill action (told you why before).

Excellent commentary on the unfolding US financial drama at Brad Setser's Follow The Money blog. The two latest two entries are 100% required reading, as Setser is on the leading edge of the analysis. Total kudos to the dude.

Bovespa (down 6.1%) and Merval (down 5%) and all the rest of the locals are being taken to the woodshed.

Mercado Libre (MELI) down 11%

Freeport (FCX) down 11%

Petrobras (PBR) down 11%

I could continue..............

Reaction to the Ecuador referendum result (and a word on Cornerstone)

Correa supporter celebrates getting to within one metre of Studmuffin

Correa calls for unity, peace, love, 'not the end but the beginning' and every other cliché you've come to expect from a politico that whips his opposition's ass in fine style. What he actually said was, "I call on all Ecuadoreans of good will and faith to put their shoulders and hearts together and build together the Ecuador that we have been fighting and hoping for and which starting today is approaching reality."

Jaime Nebot (the face of the opposition and Guayaquil's mayor) says he's willing to sit down with Correa. Well, after getting his ass whipped soooo badly what else could he say?

Simon Romero writes fruitfly level analysis copy on his laptop in a bar in Caracas (and don't deny it, Simon...you were spotted).

Meanwhile, Ecuador exposed stocks like Corriente (CTQ.to) (ETQ) and Dynasty Metals (DMM.to) jumped at the bell but then immediately sold off. The news is positive for them, no doubts about that, but the greater fear in world markets is outplaying the local political factor this morning. So be it.

Meawhile, here's an under-the-radar play on Ecuador that is worth a second look. Cornerstone Capital (CGP.v) has been added to the S&P factual stock stable this morning, and you can get your copy of the file right here. Totally free. My stars, I look after you guys.

Cornerstone isn't a bad play on Ecuador right now because:

1) It's cheap. Real cheap. Beaten down with the others, but not rebounded yet.
2) It has plenty of cash at bank to fund its planned operations ($4m or so as at 2q08 filings)
3) It has plenty of interesting/prospective concessions in Ecuador, and now that the new mining law almost certainly won't limit any company to just three it will benefit from the news of the final publication in October. Trust Otto on that one.
4) Perhaps most importantly, it's in JV in Ecuador with Newmont (NEM), and once mining exploration gets underway again NEM can decided whether the projects at CGP.v are worthy of it spending $4m as a 51% buy-in. IF CGP.v gets its free ride from NEM at the Ecuador projects, expect the share to pop back to the 40c pre-stoppage levels of March.

This one is a high risk play...be very clear about that. However it's a good looking microjunior that has a nice chunk of cash at bank (important) and plenty of possible blue sky, so the high risk is offset by the high possible reward. DYODD please. I disclose that I do not own (and in fact I've never owned it), but it's one of those stocks I've always had an eye for.

Copper goes under $3

Well, I can't say it's a surprise. On the one hand it validates my analysis to have bailed when I did, but on the other it's total BS. Anyone reading the morning wires would have seen a sudden rush to condemn from all analysts in some kind of concerted chicken little cry. If you remember that these are the same people that have called the market so very badly this year, it just shows how stupid investors are (yep, that includes me...and you). No surprise that the rest of the BM complex is down, too. Zinc back at it's bottom of $0.76/lb and lead dumping a mere 6% are amongst the damaged goods on offer.

Taking a look at a futures chart....

Copper orange line and reaches to Sept 2013. Oil white line and reaches to 2017.
Click to enlarge

........the difference between the uncertain demand for copper (well, according to the idiots who couldn't analyze their way out of a paper bag, anyway) and the perceived strength in crude. So explain to me one more time how those cars that will guzzle all that oil in those new cars in China get built without copper? Or how the factories that will get built to build those cars get built without copper? Or the houses of the workers who will work in the factory that (etc etc ).

But it's a little academic right now; we have to get over the panic merchants and their market swinging in the short-term. I did say earlier in the year that if copper spent much time below $3 I'd be shock'n'awed about it. It's now showtime.

First, the important stuff

It's my wife's birthday today. ¡Feliz cumpleaños mi amor!

So now a few thousand people that don't know her and will probably never meet her know that little fact. The internet's like that. Another useless fact; today's plan of activities includes me turning off the PC this afternoon.

Sunday, September 28, 2008

Ecuador: The referendum "yes" wins

Happy Muffin

...and it looks like it wins by a mile. Early exit polls give "yes" at between 66% and 70% with "no" in the low 20s.
  • Cedatos, interviewed 40,000 people on exit and give Yes at 70% and No at 24%, margin of error +-2%
  • SP interviewed 3,500 people on exit and has Yes at 66.4% and No at 25.4%, margin of error +-1.5%
Interestingly, the number of spoiled ballots seems very low, with between 6% and 8% quoted. This differs sharply from pre-vote polls and indicates that the undecided voters went with Correa's "Yes" vote en masse. We have to wait up to 10 days for the official final results, but there's not much doubt about it anyway. Even the staunch anti-correa stronghold of Guayaquil has voted more "yes" than "no" according to the exit polls. A real landslide for Correa.

Elearn Geometry Problem 185

Triangle and angles

See complete Problem 185 at:

Trapezoid, Triangle and angles. Level: High School, SAT Prep, College geometry

Post your solutions or ideas in the comments.

Make sure you're sitting down for this one: Tourists Get Charged More Than Locals In LatAm

Argentina's daily "Clarin" today picked up on an old chestnut in this story. They pointed out dual pricing was against the law but even so tourists get ripped for a few dollars more while tripping in Argentina. It tried to sound all shocked and indignant, but really the surprise level is zero. So as a tall, white-skinned gringo with over a decade in the region and wide and varied travel history, here are a few I've had the pleasure of coming up against:

Taxi drivers. This one is close-on universal, from the innocent and totally payable 1 Boliviano extra I'm charged in La Paz, to the dollar or so they'll add on in Colombia (no worries) to licenced bandits on wheels. "Ah, pero Meester, the meter is in dollars, not Pesos" in Buenos Aires. "Ah, pero Meester, the meter charge is per person and you are two people" in Montevideo. I think my favourite is Lima airport, though. Just for the laugh nowadays I put on my bad "cuantow cuestarrr to Mirarrflouresh?" act just outside the door on leaving the main terminal, and get told something between U$40 and U$60 in reply. I then walk three minutes to outside the airport gate and get a S/20 (U$7) ride to the same place. Bless 'em!

Police officers. I was a biker while living in Argentina. There you put a 20 peso note in the left side of the leatherette licence-holder. If a policeman stops you, just hand the thing over and wait. He'll walk to his car, walk back, say "thank you, everything's in order" even if the licence has a picture of Che Guevara instead of you, and return your licence with smile and sans banknote. It's not a bribe, it's just the way it is when you're a foreigner.

"Waiter! This check says the meal was 10 pesos! On the door it says 5 pesos!"
"Yes sir, it's 5 for the meal and 5 for the cover charge."
"Yeah right."
"Tips aren't included, by the way." (smiles)

Hotels. Trying to explain to a tourist that you can (in fact 'should' is a better word) bargain the ticket price for a room in any grade of hotel in any part of the continent is difficult. That price on the wall behind reception is there for just two reasons:
1) To make locals feel like they're getting a bargain for 30 when it says 50.
2) To charge gringos.
I guarantee that nobody in a hotel will ever get annoyed if you say "got anything cheaper?".

Shoeshine boys. Look, I don't mind paying a coin extra, I really don't. But when they tell me that black shoe polish is U$3 a tin it just gets on my nerves. Every single freakin' time.

Beach vendors. On a two week vacation in Buzios, Brazil, every day at the same time the guy came round with hammocks for sale. Day one was U$50. Day eight was Rs11 (about U$5) and a sale and we shared a beer to celebrate.

Lan Airlines. I like the service and the planes, but I hate hate hate the way I cannot pay the local prices while sitting in the local country just because I have a gringo credit card. For your information, foreigners unwittingly pay up to double for their ticket on Lan's internet booking service. So I don't bother anymore; as I live close to an airport I just take a taxi down there and pay cash at counter.

An ex-neighbour once asked me if he could 'pinchar mi luz' (i.e. tap into our house's electricity line and get free juice from us). When I said no, he comes out with "but you're a gringo, you must have money." Bless him!

There are plenty more. The plain fact is that I do pay more than a local local, and if it's a coin here and a coin there it never bothers me. But when you flag down a taxi with a small kid in school uniform and ask to go to an out of the way barrio (i.e. our house) and the dude looks you up'n'down and promptly doubles the normal asking price, it does kinda get a bit too much. Whatever the good or service, large or small, there's a 'fair price'. My idea of a fair price to pay is a 10% gringo premium, not 100%.

PS: If you're offended in any way by the word 'gringo', get a life.

Peru unveils "the giant potato" as a breakthrough solution to world hunger

Peru is famous as the home of the potato, but few people know the origins of the humble tuber. According to historians, the potato was developed by the pre-Inca locals over hundreds of years of cross-fertilizations from native wild varieties. In recent years scientists at the Centro Internacional de la Papa, in La Molina, Lima have been adding modern genetic engineering technology to the ancient art of potato cross pollenation. Over the last ten years they have unveiled potato varieties resistant to various diseases and even frosts, allowing cultivation for longer periods in difficult geographical areas, such as at high altitude and in the Amazon basin.

This all adds up, and modern Peru is now home to an impressive 5,000 varieties of potato, 3,500 or so of which that are grown by locals up and down the country. But we now have to make that 5,001, as this week the boffins at CIP unveiled this new variety that may change the face of world nutrition demands once and for all.

click to enlarge

Provisionally named "Peruano Papón" and grown in experimental conditions in the Andahuaylas region of Sierra Peru, this giant potato grows to a weight of up to 200kg per single potato in just five months, from seeding to harvest. Scientists also claim that it yields an incredible 250 tonnes per hectare, which is five times the yield of even the best cropping potato out there.

The variety has now been passed to international food bodies such as the FDA in the United States and the European Union's Farming Commission for further tests and genetic safety experiments. If all goes well, the potato may be commericalized in as little as three years from now. The benefits that such a cheap source of nutrition can bring the developing world cannot be underestimated.

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Otto Pumps His New Bespoke Analysis Service Yet Again

Last weekend I started the new NOBS bespoke analysis service, and I'm happy to report that as well as the 90 people who have downloaded the free, gratis, for nothing, no strings attached example report on Andina Minerals (ADM.v), I've just completed and sent the third bespoke report as ordered by you people out there. This early interest has come as a pleasant surprise and bodes well for the future, methinks. I've also been very encouraged by the feedback from the free report, so thanks to those that have written on that score, too (which reminds me; after calling the stock a 'speculative buy' in last week's report ADM.v has risen by 17.5%, so not a bad call, either :-).

Be clear that as the service is totally bespoke you can tailor your order to your personal requirements. Perhaps you know a lot about the bare bones of the company in question and want more financial analysis. Perhaps you're good at reading the financials but need more detail and opinion on the company operations. Perhaps a general overview is exactly what you need. The permutations are multiple, but the service can be tailored to your personal requirements no problems.

So if you haven't picked up your free example report yet, here's the link to click. Also, find more details about the service on this link. Please feel free to contact me at...

otto.rock1 (AT) gmail (DOT) com

...for any query, enquiry or even a firm order for the NOBS service. As mentioned before, you won't find a pushy salesperson who starts peppering you with "why haven't you taken me up on this yet?" if you write an enquiry mail. You will find someone who knows the business but also has a relaxed attitude to life. Thank you for your attention and I hope to hear from you soon.


Ecuador goes to the polls, Correa lays on the subtle theatre


Today's the day, and Ecuador hits the voting booths ostensibly to decide whether it wants that new constitution cooked up by a roomful of people earlier this year. Ostensibly, because if you believe everything you read you'll also be voting
  • for your own President, who says he'll resign if 'Yes' doesn't win through
  • against the Ecuadorian oligarchy, who will somehow disappear without a trace over the next 24 hours.
  • for a piece of paper that encapsulates the indigenous people's concept of 'Good Living' in harmony with nature and all that jazz. How this reconciles with the 500,000 barrels of crude oil that Ecuador pumps every day has not been explained so well.
  • for a constitution that will allow gays and lesbians to kill babies and be rewarded with gov't handouts (errr....I think that was how the local Catholic church pitched their argument, but might need to check again).
  • to allow Hugo Chávez to literally...LITERALLY* buy Ecuador for one dollar and then sell it to the Chinese as a source of slave labour.
One thing to note. In the 48 hours before any national vote in Ecuador campaign broadcasts are prohibited (quite right too). But Correa came up with a subtle doozy yesterday just to remind Ecuador he's the big boss, the foreign Johnnies don't push Ecuador around while he's in charge .. respect.... pride... yada yada... in the world stage. Newswire EFE reports that Odebrecht (the company Correa just kicked out for doing crappy hydroelectric dam construction and ripping the country off to the tune of U$200m) has come crawling back to him via a letter that says the company "accepts all the demands made by the gov't (of Ecuador)". Correa went on to say that he received this letter unilaterally and is now studying the proposal.

This is a cracking piece of news to broadcast on yesterday's radio show. Ecuador now goes to the polls en masse with the "Correa loves us like children and is looking after us and he's so sexy too and...and...and...". Could Lula have 'suggested' to Odebrecht that a friendly e-mail to Studmuffin wouldn't be a bad idea, all things considered? Naaaaaah...surely not.....

Whatever. Correa wins today, but let's see by how much. IncaKola is in da house, on top of the story and in the game. Check back here tonight for news as it happens in Studmuffinland.


Saturday, September 27, 2008

Confirmed: Simon Romero reads Abiding in Bolivia

You say potato, I say potahto
You say Falange, I say Falange too
You say tomato, I say tomahto
You see a nazi salute, I see a nazi salute

Here's the article that catches the region's worst journalist red-handed. Now compare the content to Abiding in Bolivia's last few days' worth of content....YOU BE THE JUDGE!

And a big round of applause to the blog "Down South" that caught the fascists on video and posted the footage up for all to see. This was important work, because not even the apologists can ignore it any more.

Ever needed proof that humble bloggers can make a difference to public opinion? See above.

A great article on Bolivia

Know who Tupac Katari is? If not you have no valid opinion on today's Bolivia

I fully agree with this excellent and insightful article written by Adolfo Gilly and translated into English by the website Ukhampacha Bolivia. If you are reminded while reading of the situation in Apartheid-era South Africa and the industrialized nations' attitudes towards the black majority movement at that time, I wouldn't be surprised. Here's the link, and here's an extract to whet your appetite:


".....what is happening is something much deeper and that goes much further than the elites, politics, and the economy. This is a questioning of the means of the historical domination by those elites, old and new. It comes from very far below, it is moved by an ancient fury, and it will not be stopped by the massacres at the hands of fascist groups nor by the fragile government agreements with the prefects of the Media Luna.


Good weekend reading from respected bruddasites*

News of the Restless does Paraguay, and it's good to filter the actual interview via Bina to get some context. Basically Lugo was so darned impressive that not even the region's second worst hack could get snarky.

The Mex Files is my newest and bestest friend because he has sent me a freebie copy of his new book. I'm four chapters in already (it's far too readable for my own good...me got real work to do) and soon as I get a decent chunk of time away from numbery stuff I'm dedicating the necessary time to the book, so expect a review to appear here as soon as I'm done. (Note to world: Otto is shamelessly bought by freebies). Get your copy at this link right here.

Sapitos de la Noche is back from a Venezuelan jungle jaunt, and is making up for lost time with some great posts on his adventures. Go see.

Remember the US Peace Corps "emergency evacuation" from Bolivia? Want to find out how totally bogus it was from the Peace Corps workers themselves? Check over at Abiding.

The great news from Borev is that I came 'second runner up' in the fabulous caption competition. This magnificent result more than makes up for my unfulfilled life's ambition of getting to the final five in a beauty pageant. I'm wearing a tiara as I type.

*and sistasites, bina

Friday, September 26, 2008

Stop Press! Fair and evenhand reporting on the Antonini Wilson suitcase trial thingy...in MSM...in English

"Wilson! Wilsoooooon!"

Err...hate to say it, blogpeople, but full kudos to Benedict Mander for today's report in the London FT about the suitcase trial. However, poor Mander will now be accused of blatant communism because he dared put forward both sides of the argument about what's going on at the Miami trial.

Note to all other media services in LatAm: Look how easy it is to actually do a bit of fair reporting on Venezuela issues. 1) Write 517 words, 2) submit copy, 3) take the rest of the day and hit the bars for happy-hour G&Ts. What -ho!

But seriously, this is good work from Mander. I don't want political agendas stuffed down my throat, I want the kind of thing written below the line here (i.e. facts, and both sides of the story). Kudos to you, Blighty.


Court case throws up tales of intrigue

By Benedict Mander in Caracas

Published: September 26 2008 18:46 | Last updated: September 26 2008 18:46

While President Hugo Chávez was touring Cuba, China and Russia this week with great fanfare, a court in Miami was hearing about what the prosecution claims was a more covert Venezuelan diplomatic mission that spectacularly backfired.

Witnesses have been providing evidence to support a tale of intrigue that they say involves secret agents, hush money, coercion and even death threats, that has fuelled speculation of corruption at the highest levels of the Venezuelan government.

Both Mr Chávez – who is directly implicated in the case – and Ms Fernández, have denounced the trial as “garbage”, and a transparent attempt by the US at slurring the reputations of leftwing governments emerging in Latin America.

It has further undermined already shaky relations between Venezuela and the US to deteriorate yet further, which plumbed new depths earlier this month when Mr Chávez banished the US ambassador in Caracas. The US was also accused of having links to an alleged coup attempt that was uncovered the very same week.

After starting to collaborate with the Federal Bureau of Investigation in Miami, Mr Antonini was visited by men – allegedly on behalf of the Venezuelan government – who were attempting to keep him quiet, for which Mr Antonini demanded $2m in an FBI-penned letter addressed directly to Mr Chávez. But their conversations were secretly recorded with wiretaps, leading to the arrest of the men visiting Mr Antonini, for acting as unauthorised agents of a foreign government. All but one, Franklin Duran, pleaded guilty; he is the man now on trial in Miami.

Many analysts agree that the case, and the furore surrounding it, is highly politicised. “This case smells to high heaven,” says Nikolas Kozloff, the author of a new book on leftwing movements in Latin America. He points out that the key witness, Mr Antonini, who has been linked to radical sectors of the Venezuelan opposition that tried to overthrow Mr Chávez in a 2002 coup with tacit US support, “raises eyebrows”.

“The Chávez government has an axe to grind and we should be circumspect about its claims that the US has somehow tried to set up Venezuela,” he said.

Nonetheless, he said Washington might also have ulterior, geopolitical motives: by attempting to embarrass Mr Chávez it could be aiming to limit his influence in the region.

For example, in one of the taped conversations with Mr Antonini, it is claimed that Mr Chávez – who has also been accused of using his plentiful petrodollars to fund political allies in countries such as Bolivia, Peru and Mexico, as well as Colombian Marxist guerrillas – may also have paid governments in return for their support in his failed attempt to secure a seat on the United Nations Security Council in 2006.

Trading Post (Bush now considered important in economics edition)

To be honest the major drag on the local markets today are the bonds, and stocks are suffering as a consequence. There are spots of light here and there, but it's that "not money to buy equities" feeling again, and it matters little how cheap they be.

To the reader who bought Jaguar Mining (JAG) under $6.20 this morning for a daytrade; nice going, but I hope you took the 6.4o+ (you know who you are).

Fortuna Silver (FVI.v) is hanging in there. It has cash, and that's the whole ballgame in today's junior market.

Corriente (CTQ.to) (ETQ) is still strong, up at $4.93 on low volume. This is a referendum play, and I really don't know how it will trade Monday when Studmuffin's 'yes' vote is confirmed. I'm just too chicken to buy anything today, even the good ones; that's the bottom line.

Freeport (FCX) is off 9% on heavy volume. For some reason this has something to do with Agrium's downgrade today, but I can't for the life of me understand the connection (apart from 'let's panic about commods again, sheeple'). This kind of PPS action vindicates me and my current non-participation (or at least I like to pretend it does :-).

Mercado Libre (MELI) is down at $22 now. This thing does have a bottom to it, and it's more a case of "when" than "if". It's not fabulous, but it's not that bad. It has growth and as close to a sector monopoly as is possible. Costs are low and importantly it makes a net profit. The chart also looks like one of those falling wedges on slackening volumes that Biiwii Gary gets all hot'n'sticky about. Have a look for yourself, but that looks rather buyable to me.

(click to enlarge)

Elearn Geometry Problem 184

Triangle and angles

See complete Problem 184 at:

Triangle and angles. Level: High School, SAT Prep, College geometry

Post your solutions or ideas in the comments.

The suitcase trial Antonini thing is beginning to get on my nerves....

...but there's just space for one snarkshot before I leave it alone. As part of his official declarations, obvious liar Antonini Wilson said that it famous $800k briefcase/suitcase/whateveritwascase wasn't his, had had nothing to do with it and he was just helping out etc etc. His exact words were: "All I did was to help carry the bags to the cars in a gentlemanly gesture to the assistant Victoria B.".

Well apart from the minor detail that before the briefcase was opened before his eyes by customs he first lied twice about its contents and then finally said it contained money, let's check out this photo of Antonini and his lawyer taken outside the courtroom on Wednesday.

As we can see, Antonini Wilson manages to make the gentlemanly gesture of carrying a cellular phone while his lawyer struggles with not one but two bags.

Otto sez: Actions speak louder than words, gentlemanly is as gentlemanly does, and this dude is a serious piece of shit.

Breaking: Black and White Television to be Phased Out in Latin America

One of the first prejudices that gets wiped from the brains of gringos on virgin visits to Latin America is the one about the region being backwards, planted in the 1970s and all that. True that there are patches of non-urban LatAm that are berift of vacuum cleaners and dishwashing machines have never really taken off, but all the world's brand names are on offer and just as loved here as they are 'up there'. Foreign brands are common and coveted with Nike, Nokia and all their friends typically popular. Some other tastes are quirky and local, such as the way Sony is still undisputed head'n'shoulders-above-the-rest king of music systems. And some are full eyebrow raisers; for example, if you've ever been in a bar and ordered a Something Special single malt scotch in preference to Johnny Walker or Glenlivet, it means you've almost certainly visited Venezuela at some point in your life.

But local brands are the most interesting aspect. In the last few years, strictly LatAm brands have taken on an air of respectability that would have been impossible to imagine even 10 years previously. The charge is lead by Brazil (rightly proud of their world independence and economic power), and Mexico (perhaps the most sophisticated regional market for marketing, if that makes sense), but the latest stage of this phenomenon is the acceptance of regional country brands across the region.

America Economia today published its annual "50 biggest public brands" list, which shows the 50 most important regional brands run by publicly traded companies. Here's the top ten from the list, with a quick familiarization line or two from your truly underneath.

(chart shamelessly stolen from America Economia)
Itaú: Brazilian bank
Bradesco: Brazilian bank
Banco do Brasil: Brazilian bank (see anything in common with the top three? Nah, me neither)
Cemex: Mexico's top brand-name company that boasts it can deliver cement quicker than Dominoes can deliver pizza. Went up even further in my (and many other's) estimation thanks to this story.
Claro: Carlos Slim takes over the region. The Claro telephone brand now stretches from Tijuana to Tierra del Fuego, and is at the leading edge of America Movil's enormous LatAm communications empire.
Telmex: Right behind Claro, Telmex is how it all started for Slim. Big in Mexico (duh) but now making inroads into the fixed line biz in South America (though Telefonica de España still leads by a country mile South of the Darien Gap).
Petrobras: The pride of corporate Brazil, and now a world energy player.
Telcel: Slim's Mexican cellular brand. Note he owns three of the top ten regional brands; now you know why he's fighting for the world's richest person slot.
Unibanco: Brazilian bank (see above)
Banco de Chile: Chile squeezes into the top ten despite its small relative market size thanks to the highly respected Banco de Chile brand.

Please note that the brands above are strictly from public companies. This explains why Argentina's Arcor (massive food company, but still in private hands) doesn't make the top ten list, or Venezuela's PdVSA (which to the surprise of outsiders dwarfs Petrobras and is a constant source of impressive national pride no matter what government is running the thing).

The rise of the pan-regional local brand is already here. Bank with Brazilians in Argentina, spend your telco money with a Mexican company in Peru, construct your new house with Mexican cement in Colombia, fill up your tank with Petrobras just about anywhere. It's yet another aspect of the growing regional independence, and overseas companies that are looking to break into the region with their own brands should be aware there is a new layer of competition, and it needs to be taken very seriously. I mean, would you consider any US bank as projecting a strong image right now?

Finally, for those of you wanting to read more (in Spanish, I hasten to add), click here to download your free PDF copy of the full America Economia report on the 50 biggest regional brands. Recommended reading.

Zinc (another one bites the dust) and Gold (upping this morning)

First gold, and it's printing $890/oz right now. I got a mail yesterday about the "Emperors with no clothes" post that said I was probably gloating too soon. That misses the point; I wouldn't hold gold if I thought it was going down. All that's being said here is the 3 month treasury bill is the place to look for direction on gold, not a bunch of tinfoil hatters and their ravings. This is the comparative post, and it's very simple, not brain surgery. Remember just one line to see where I'm coming from: Goldbugs give gold investors a bad name.

Now Zn, and this one from Reuters is just more confirmation about the current bottom. Adam Smith would approve.


DUBLIN, Sept 26 (Reuters) - The Galmoy zinc-lead mine in Ireland, owned by base metal producer Lundin Mining will begin a three-year phased shutdown in December, a union spokesman said on Friday.

"It was being mooted last night that they could probably mine ore for 10 more years -- there is still more there but it would cost too much to get it out of the ground,"

Thursday, September 25, 2008

Gold:Oil Ratio Update

In the ongoing quest to make sense of the tangled disaster called the stock market version 2008, here we go with one of the three must-watch charts in my humble little world. Gary calls it the gorfest, but we normal people (hehe) give it the long name of "the gold to oil ratio".

(click to enlarge)

What I see is a bit of calm on the horizon for the ratio, and that would be no bad thing. The RSI is coming off one of its intermittent overbot peaks, the MACD is a squiggly line down there that looks good even though I don't trust it much, but notably the 200dma has rolled like an ocean swell since my daughter was born and the ratio is coming back in the fold right here.

So my tentative proposal (that will be changed at a moment's notice if need be......Hey! I'm getting the hang of the technical analysis :-) is that gold and WTI run together for a while. This would point to calmer waters all round (and a likely predictable dollar for the period). And I don't know about you guys, but I'm fed up to the back teeth of living in interesting times this year and a bit of boredom would suit me just fine.

Bottom line: A GOR averaging a steady 8.0 for a couple of months would be good news. It remains to be seen whether we catch a break on that.

Regional roundup

(Monsanto is not a site sponsor)

Another family member of another powerful government minister is arrested in Colombia, suspected of collaborating with the right wing paramilitaries and their death squads. The world reacts in the usual way, kinda "yeah, but they're from the right...and they're not the FARC...so being raped and murdered and stuff isn't so bad when it comes from that side, is it?"

EvoQuote du jour; "These coup-mongers are mistaken; they have no support nationally nor internationally." Talks between the two sides broke down today, but the whole shabang continues next Monday.

In Argentina, the Antonini Wilson suitcase trial thingy is the object of all attention, and those who watch closely are beginning to see large holes in the Antonini Wilson testimony (though you'll notice that link is only available in Spanish, as English coverage wouldn't dare criticize the prosecution or do silly things like 'look at details').

In Peru, congress has been under pressure from a citizen's campaign. It was really quite simple; by Peruvian law, members of congress must reveal line items of expenses claimed to any citizen that asks (with reasonable time lapses, of course) and a campaign has been developing to ask for expense accounts en masse (see the 'Adopt A Congress Member' campaign over at site-friend Susana Villaran's blog, for example). So Congress last night came up with a great solution: They simply changed the whole law and now they don't have to reveal a thing. Even by corrupt latino politician standards, this one took my breath away.

In his mailbox, Otto has been widely slated for mentioning US politics. Ok folks...like I say it won't happen again.

Dear Voters of the USA

This is not my patch, and I promise not to mention it again here. Honest. That said, here we go;

Please don't do this to yourselves. Don't do it to Latin America, either. Or anywhere else. Not least Russia. I really don't have anything much against McCain. He seems like a stand up guy from what I see down here, he is a true hero and if you say you like him more than Obama that's fine by me. But he's made a massive mistake in his pick for Veep. Admit it. Don't put this person that Katie Couric interviewed even close to anything that resembles executive power. From CBS today


Katie Couric: You've cited Alaska's proximity to Russia as part of your foreign policy experience. What did you mean by that?

Sarah Palin: That Alaska has a very narrow maritime border between a foreign country, Russia, and, on our other side, the land-boundry that we have with Canada. It's funny that a comment like that was kinda made to … I don't know, you know … reporters.

Couric: Mocked?

Palin: Mocked, yeah I guess that's the word, mocked.

Couric: Well, explain to me why that enhances your foreign-policy credentials.

Palin: Well, it certainly does, because our, our next-door neighbors are foreign countries, there in the state that I am the executive of. And there…

Couric: Have you ever been involved in any negotiations, for example, with the Russians?

Palin: We have trade missions back and forth, we do. It's very important when you consider even national-security issues with Russia. As Putin rears his head and comes into the air space of the United States of America, where do they go? It's Alaska. It's just right over the border. It is from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right next to, they are right next to our state.

Party time in Ecuador

This one is for Bina...swoon it girl!

Right now the world's media is descending on Quito to cover the big bad constitutional referendum that's happening this Sunday, September 28th. Well...ok...maybe a dozen journalists are making ther trip, but no matter...it's the thought that counts (and let's see if they can string two or three lucid ones together on LatAm affairs for a change). So I thought scoop 'em all and mark your card with the most important stuff before the pro-hacks file copy for tomorrow's edition.

1. "Yes" will win. Bet the farm on it. No point adding a thousand extra words here. Obvious is as obvious does.

2. Important news: Boz and I have a side bet going. For those who don't know, boz is a popular blogger on Latam affairs, you can find his site right here, and you'll be happy to know that unlike Otto he actually lets his readership comment freely (obviously hasn't learned just how much fun dictatorship is yet). Anyway, boz says the pro-Studmuffin "Yes" vote gets less than 60% total, I say it gets over 60%. In play are bragging rights and a $10 donation to charity made by the loser (though the winner will probably end up donating too).

3. Opinion polls have been banned for the last three weeks, but a poll out this week that closely tracks the referendum puts Studmuffin's popularity at a near all-time high. Here's the link to that. Tremble, boz ;-)

4. The Muffin Man has also arranged a neat looking victory party for Sunday evening and has invited Chávez and The Village People along. Here's a snap taken at the Dress Rehearsal today.

Photo courtesy of the incredible blog 'el chiguire bipolar'

5. Once this is all over, our raving capitalist observers from Canada will finally get their wish and see the official published New Mining Law, due out October. With that in mind, it's time to buy a chunk of CTQ methinks (and I have to say it's been strong as an ox all week. Nobody selling that paper).

6. Nearly forgot to mention; for good quality coverage of the referendum in English, I recommend Stephan Kueffner at Bloomberg and Alonso Soto at Reuters. Both know their territory well and are fair voices.

Emperors with no clothes

These people may be able to write an entertaining article....
Corruption, Whispers & Receivership - by Jim Willie CB , Sep 24 2008 4:38PM
The Killers are with the Patient - by Darryl Robert Schoon , Sep 24 2008 1:47PM
The Gold Standard Strikes Back... - by Antal Fekete , Sep 24 2008 11:47AM
Trillion Dollar Treasury Defects: Truth and Consequences - by Richard Benson , Sep 24 2008 10:25AM
Final Boarding Call for Gold - by David Nichols , Sep 23 2008 4:07PM
Collapse Has Begun! - by David Vaughn , Sep 23 2008 2:54PM
The World Gone Crazy and Your Gold Stocks - by Kenneth J.Gerbino , Sep 22 2008 11:39AM
Paulson Goes All In Peter Schiff Sep 19 2008
Gold up to $893: Finally, the Wait is Over John Lee, CFA Sep 18 2008
$2,500.00 Gold and $250.00 Silver Peter Degraaf Sep 18 2008
....but they really suck at calling the market (all links from Kitco.com in the last few days, and I could have quadrupled that list if i'd wanted to labour the point). Sorry, but somebody has to tell you and it may as well be me.

On the other hand, this post explains exactly why gold has just dropped away from $900/oz. Or maybe you'd like to stay on the losing side of the market, believe the "broken clock right twice a day" brigade and have fun shaking your fist at the world.
Moral of the story: Live in the real world. I own gold and silver bullion, I recommend you hold it, but i have no illusions as to what it is and what it isn't.

Zinc up, copper down

Dr. Copper couldn't hold its $3.30 level and dropped back yesterday, with the move being confirmed this morning and Cu sitting at $3.16. However, Otto's beady little eye is on zinc. Spot Zn has been the whipping boy of the BM complex for a while, but the clear indications of a bottom in prices just keep on geting confirmation added. The upmoves of yesterday and today have "healthy" stamped all over them.
In the last few weeks we've seen plenty of news about lower production forecasts for this year, and the Ausie metals people calling a 10% drop to already reduced numbers last week was just another example. It really does come down to good ol' fashioned Adam Smith supply & demand stuff; while the market surplus continues so do the low prices, but there is always a limit to this price drop, as miners stop producing so supply dries up, and I'm confident about saying that it's here (or already passed, really).
Keep thinking zinc, folks. It's that "buy while they sell, and sell while they buy" thing. Here's a re-run of Zn plays to consider.


BWR.to Breakwater: High beta zinc miner in the Americas that's been pummeled to merry hell this last year. This one is playing the metal, but on steroids. A nice ST trading vehicle for the metal. Check the 1 year chart and 3 month chart to get a feel, and note the volume spikes.
BN.to Blue Note: Very cheap and very diluted. High cash costs at its Caribou mine. This is speculative, but risk/reward means you could try a few shekels (I have to say i prefer BWR)..

VEM.to Vena Resources: Just waiting on its enviro permit (any day now, sez the Peru gov't) and this thing will be the owner of a Zn mine making a profit,and that's even if Zn drops to $0.75, according to my casio. Stupidly cheap here. Remember that Vena is a site sponsor here. Also remember I don't reco dross.
LMC Lundin: Has other worries right now (example govt of DR Congo), but it's a traditional Zn go-to play.
VOLCABC1 Volcan: If you have access to trading the Peru stock market, look no further for your Zn exposure. This very large Zn producer is due a good relief rally. Plenty of Pb and Ag exposure too (as you'd imagine).