Brazil upholds the traditions of capitalism, despite Lula's best efforts

mmmmmmmmm!!! Yummy!!! Slavery!! Profit margins!! This from Bloomie today:

Jan. 7 (Bloomberg) -- Cosan SA Industria & Comercio, the world’s biggest sugarcane processor, fell the most in eight months on concern that its inclusion on a list of companies whose workers operate in slave-like conditions will drive away clients and cut off access to funding.

Barra Bonita, Brazil-based Cosan was added to the list on Dec. 31, according to the Brazilian Labor Ministry’s Web site. Petroleo Brasileiro SA’s fuel distribution unit is considering “restrictions” against Cosan, according to a spokesman at BR Distribuidora who couldn’t be named because of company policy.

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The so-called “black list,” created in 2004, is updated every six months, according to the Labor Ministry. The Ministry found and “liberated” 42 Cosan workers in conditions analogous to slavery, according to the list. CONTINUES HERE

UPDATE: Another topical slavery story from the other side of the planet, kindly sent in by reader BM. Thanks man....LatAm bore that I am wouldn't have seen it otherwise.

"......how does an economically troubled country build the world's tallest building in the middle of a desert? Unfortunately, all signs point to slave labor. Saying Dubai has a problem with slavery and labor exploitation is like saying Tiger Woods has a problem with fidelity (and incidentally, he also has a problem with some labor concerns around his Dubai golf course). Dubai regularly imports poor migrant workers from continues here

Trading Post (big and charty edition)

Getting snarky at Rick! van Alphabet would be just too damned easy today after the way he awarded himself one point one eight five million stock options at $5.25 on Friday. You do realize this comes out of the quarterly expenses, yeah? If you're a shareholder in this never-to-mine-an-ounce-ever company you're paying for his legal theft through your back pocket. Anyway, like I said, I'm not going to mention a word about him, his company his trickeries and lies nor point out the pummelling the stock is taking at market today after being pumped to high heaven in New York last week. Not a word.


Let's go with some LatAm names outside of mining that we haven't visited for a while and put a few charts up, too. Now for sure all these things are getting checked back today, but we're taking a slightly wider view just for once. No minutae of intraday.

Telecom Argentina (TEO) down 2.3% at $9.86 TEO has always been my idea of about the best run company on the Merval index. It keeps churning out growth and profit, too. It hasn't done much more than track the general index since the big rebound, but when you're up against foreign behemoths such as Tenaris and Petrobras it has nothing to be ashamed of, really.

Cosan (CZZ) down 14.1% at $5.22. Hey, remember the fool who didn't buy CZZ at $3.85 cos he wanted $3.60 or something? Yeah, that fool tis I. Errar humanum est, but CZZ has made great strides recently. With crude back in the high 60s the buzz is back in the LatAm ethanol business, by the way. We talked a bit about this in the last IKN Weekly.

Ecopetrol (EC) down 4.1% at $22.78. EC is another recent winner in the world of (relatively speaking) bigcap LatAm plays. The company is run well, and that's always good. The Colombian oil patch (not just EC) is quickly turning into a hot story down here, in fact. DYODD.

Petrobras (PBR) down 7.5% at $41.52. Petrobras is everyone's idea of the biggest oil company down here. Well it gets dwarfed by PDVSA, but let's not worry about that one, as PBR is still a big player getting bigger. The rumblings, rumours and positive anticipation is back about the subsalt oil reserves that caused all that hype last year, too.


Finally, a bit of mining. Southern Copper (PCU) down 7.2% at $21.70 and Freeport (FCX) down 7% at $52.90. Both stocks down (along with copper....ahem) but both have had great recent runs. Here's a chart with FCX, PCU and the S&P500 index together but on a shorter timescale than the above charts. This one is just the last two months.
You'll also note I've added the 10 day "Williams %R" as technical analysis to this chart. I don't have a freakin' clue as to what it is but it sounded good on the menu bar so I put it in. Ask Gary or Trend&Value if you want to know more...they care about this guff.

Chart of the day is.....

......sugar futures.

It's been a couple of weeks since featuring it here, but it's still very much part of my daily radar. Sugar popped to its highest level since 2006 last week on the much anticipated supply deficit (thanks to the low crop in India, mainly).

I'm going to re-take my position in Cosan (CZZ) today. The bottom was probably last week but that doesn't worry....looking for my profit, not the Utopian perfect profit.

DYODD

Ice Ice Baby

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

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

Bot Cosan (CZZ): Here's why

It's not just your humble correspondent that's been following this stock very closely these last couple of days. Yesterday I got this (extracted) from TL, a regular (and very patient) reader:

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"....... you posted on CZZ recently but curious whether you like it here, despite your previous wariness of the "falling knife." Isn't it now below your cost from the last time around? Unless there is something company-specific that we're missing it has the feel of hedge fund liquidation or similar forced or semi-forced selling. Do you see significant survival risk for this company? Maybe someone who realizes the world economy is continuously deteriorating thinks CZZ is going to get XXXXXX in the process? .....if you were to post again on CZZ I would be a happy blog reader.

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Well here's the word for TL and others: I've jumped off the fence and bought the thing today at U$2.50. Here's why. First let's look at the sugar futures chart.

Click to enlarge

The last time I posted on this I mentioned that I'd like to see $13.50 broken. Well true to form that happened, but then the sugar complex dumped. However the chart shows that there's no real panic going on and it only corrected inside the ascending channel. This, along with the general market negativity, whacked CZZ hard. The same three month period chart here shows the story.

Click to enlarge

Remember that CZZ is a high beta stock (2x) even in the best of times and these are surely not the best of times. So expect volatility at any given moment.

Fundamentals give reason to like CZZ right now. The ongoing sugar shortage in India has not gone away. CZZ has reacted to this by moving its ethanol-to-sugar production ratio down to its minimum of 40% ethanol to 60% sugar. And while we're at it, please remove that immediate kneejerk raction you might have to the word "ethanol", as CZZ supplies the profitable Brazilian market and is not in the same position as those flash-in-the-pans up North.

Financially, the dollar strength is clearly affecting both the commodity and the stock, but if you (like me) believe that there is a limit to this current short-term dollar strength and we're close to the top right now (USD index 89 and bits) there's another reason to like the short-term future. The other great issue at Cosan is its debt burden. Yes it's heavy and they went to the debt market at the wrong time, but it's not too onerous and looks serviceable enough under all logical outcomes to present circumstances.

The bottom line is that I believe CZZ is oversold now. So I bought it, looking in the short term at least for a return to that U$3.70 or so level it was revolving around. DYODD, dude.

Possible buys

After yesterday's washout there are some nice prices on offer. Here are just two that we cover regularly here:

Fortuna Silver (FVI.v) at $0.85 and $0.86 right now. I fielded two mails last night on FVI.v by saying it might have a touch more to drop. It all depends on spot silver, of course, but the price right now looks fine to me as a trading play. Once again the target is North of a buck. Get the report to know precisely where my trading ranges are (and to tempt fate I have to say they've been working very well so far).

Cosan (CZZ) at U$2.96. I sold them all at $3.71 and feel very lucky to have got out the last batch just before the drop. Sometimes dumb luck plays its part and it does you well to recognize it. Good for the ego control. Anyway, now at the sub $3 level Gary BiiWii finds attractive....and so do I.

Disclosure: I'll be dipping in both of these stocks at these prices today. Nothing heavy and both with short-term outlook.

DYODD, dude

UPDATE: I have a bid in for FVI.v but not touching CZZ yet. Now $2.75 and dropping like a stone, I'll wait and see just how far it decides to drop before making any firm decision.

I'm still on this sugar thing

Here's Bloomie with a report on today's market:

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Feb. 9 (Bloomberg) -- White sugar rose in London, extending its longest winning run in two years, on a forecast that world sugar production may fall short of demand this year as India switches to being a net importer.

Global output may drop 4.55 million metric tons short of demand this year, said Cargill Ltd., the largest privately held U.S. agricultural company. The gap between production and demand may widen in the 2009-10 crop year, Jonathan Drake, head of Cargill’s sugar business, said at the Kingsman Dubai Sugar Conference today. Prices will probably climb this year, he said.

“Next year the deficit is going to be worse than this year,” Drake said. “The important thing is to get a sense of India. This season’s crop seems to be slipping away” because of yada yada continues here

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And here's the latest daily chart. I'm playing this via Cosan (CZZ) which finished 3% up at $3.92 after breaking through $4 intraday.

DYODD

UBS recommends Cosan (CZZ)

The trick to making money in LatAm stocks is being there first and then letting the big houses catch up. UBS has just recommended the Brazil sugarcane sector (on currency weakness) and calls Cosan (CZZ) "the preferred sugarcane processor". Thanks for the headsup, GPB over at Market Memorandum, who's a useful person to know and a good blog to follow.

I'm long CZZ since $2.84 (late December buy), though took half profits at $3.71. The other half has no rush to sell and I'm fishing for $5 or so. Early trades have CZZ at $3.90 this morning.

UPDATE: Bloomie running this note on UBS and CZZ

Sweet

Oh how they laughed when I said I'd bought Cosan (CZZ) at U$2.84 on the 19th December 2008. How they giggled, guffawed and snickered. DYODD, I said, cos I've done mine.

CZZ now U$3.76, up 25% on the day. Otto 32% up in ten days and not selling yet. Merry Christmas and a prosperous new year. Now buy my report on Troy Resources and make yourself some money using my local knowledge.

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

.........sugar, March futures, two year chart.

This because a couple of regulars are intruiged that I've placed a trade in CZZ above the more normal mining fodder on this blog. Well, it's true there's a real bias towards miners here (it's the sexiest industry in LatAm for potential investment, so it gets a lot of my time) but every now and again Otto tries to pretend he's not a one trick pony.

The chart is self explanatory. It goes up, it goes down. One thing CZZ does is times its sales to this chart and last quarter it reported (as usual) that it was storing sugar for future sales.

Looking at this chart, they'd be pretty silly if they didn't. DYODD.

Bot Cosan (CZZ)

If you heard a big "SPLAT" sound in October, it was probablyCZZ

Hellfire, this feels weird. I've just bought a sizeable chunk of Cosan (CZZ), the big Brazilian sugar/ethanol play. The weirdest part of all is that I'm taking this position for at least three months (a promise to myself) and that's as close as I've been to adding to the LT positions for at least a year, maybe more.

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So mark me down as a buyer at U$2.84 and mark me down as a sugar bull over the next few weeks. Let's see how this one goes. DYODD dude.