Mysteries of economics forecasting explained (Peru finance ministry edition)

El Comercio is today running this report on how Peru's Ministry of Economy and Finances (MEF) is forecasting the local currency, Peru's Nuevo Sol (PEN), to reach a foreign exchange rate of S/2.90 versus the US Dollar in 2012. The MEF forecast is part of its tome-like "MultiAnnual Macroeconomic Update" published last weekend.

Now this all sounds very, but very important and calculatory and I'm sure you're mystified as to which powerful algorithmic formulae those MEF suits are using to come to their extrapolated conclusions, so let's just explain how things really work chez Spongebob Carranza.

All you really need to make official economic forecasts like these are:

1) A chart ripped from Yahoo Finance
2) A straight-edged ruler

(click to enlarge)

Five minutes later you have your three year forecast for the national currency. Six minutes later you're off for that long lunchbreak you and your MEF colleagues so desperately deserved.

Cusqueña and canchita served. The end

Peru's GDP for 2009 and the IKN prediction: How are we doing so far?

Back on April 16th I published this note which included this chart.

The chart shows my forecasts for monthly GDP (yellow) and for the evolution of annual GDP (red) in Peru for 2009. So for May 2009 I put my forecast at 5.66% for the trailing yearly GDP rate.

Now here's a chart ripped from this page in yesterday's 'La Republica' which has the yearly trailing numbers so far this year (May figures came out this week, remember). I've just changed the labels into English for easy reading.

Oh look, yearly trailing GDP is now at 5.65%, just one one-hundreth of a percent different than my forecast.

Autographs available on request. Pisco sours served. The end.

Fortuna Silver (FVI.v): Get the report

My marketing friend is telling me to "prosecute the sale" (whatever that means), so here we go with the post about the new Fortuna Silver (FVI.v) report out and available immediately. Be warned that (due to wife input after reading marketing friend's mail today) this post is getting repeated tomorrow, too.

Thanks in advance, etc.
Otto

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Mailbag and Fortuna Silver (FVI.v)

Click to enlarge

On Friday I had this short but very gratifying exchange with reader JB. Here it is in full (with names reserved):

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On Fri, Feb 13, 2009 at 2:19 PM, XXXXXXXXXXXXXXXXX wrote:

Just wanted to say thanks for you blog on this day that my Fortuna investment reached 100.46% gain. All the best, XXXXXXXXXX

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On Fri, Feb 13, 2009 at 3:47 PM, otto rock wrote: Wow XXXXXXXX, that's great! I'm very happy for you. With your permission I'll include this mail in tomorrow's mailbag post

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Anyone who gets me 100% can do anything they'd like with my mail. :)

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Thus permission was granted and you get to read the mails :-). I'd like to point out to JB and all readers that I didn't "get him 100%" as he got it for himself. DYODD, dude....I really mean it. It's always your money and your responsibility when you invest, so pat yourself on the back JB as the credit is yours. Still, it's great that somebody took into account my views on this humble corner of cyberspace and has managed to make good coin as a result.

So all that said, here comes the pitch for a new NOBS report on Fortuna Silver (FVI.v) available to the general public at a low, low price. I've written a latest update on the company with my views on how its earnings will develop in 2009. The report gives the necessary background, explains about its development plans, takes into account three metals prices scenarios and gives the reader a solid idea of Fortuna silver's price sensitivity to silver, zinc and lead. It rounds off with price forecasts and practical advice on how trade the stock.

This eight page report, packed with details and giving you the parameters you need to trade FVI.v in 2009, costs just U$10 (yep, just ten US dollars) and is payable by PayPal. Either send straight from your own PayPal account to.....

otto.rock1 (AT) gmail (DOT) com

........or use this paypal button (it's set for $10 by default):

As you'll see behind that button, all the usual credit cards are accepted.

So get wise to Fortuna Silver by investing just U$10 (the price of one trade's commission, basically) and getting your hands on a copy of this NOBS report, created from scratch by yours truly (someone that has visited FVI's Caylloma mine not once but twice in the last couple of years). I'd venture to say that once you see how 2009 prices and market sentiment is likely to play out on this stock price, the small investment in this report will pay for itself many times over for savvy investors.

Order your copy now and it will be delivered immediately on receipt. Thank you for your attention.

Fortuna Silver (FVI.v): Get wise

This below is a re-post from yesterday because...well...because I want you to buy a copy of the report. Those that have already ordered (seven of you) and those that order today will get their copy delivered tonight. If you order in the days to come you'll get yours immediately on receipt. Thanks in advance.

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Mailbag and Fortuna Silver (FVI.v)

Click to enlarge

Yesterday I had this short but very gratifying exchange with reader JB. Here it is in full (with names reserved):

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

On Fri, Feb 13, 2009 at 2:19 PM, XXXXXXXXXXXXXXXXX wrote:

Just wanted to say thanks for you blog on this day that my Fortuna investment reached 100.46% gain. All the best, XXXXXXXXXX

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

On Fri, Feb 13, 2009 at 3:47 PM, otto rock wrote: Wow XXXXXXXX, that's great! I'm very happy for you. With your permission I'll include this mail in tomorrow's mailbag post

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Anyone who gets me 100% can do anything they'd like with my mail. :)

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Thus permission was granted and you get to read the mails :-). I'd like to point out to JB and all readers that I didn't "get him 100%" as he got it for himself. DYODD, dude....I really mean it. It's always your money and your responsibility when you invest, so pat yourself on the back JB as the credit is yours. Still, it's great that somebody took into account my views on this humble corner of cyberspace and has managed to make good coin as a result.

So all that said, here comes the pitch for a new NOBS report on Fortuna Silver (FVI.v) available to the general public at a low, low price. I've written a latest update on the company with my views on how its earnings will develop in 2009. The report gives the necessary background, explains about its development plans, takes into account three metals prices scenarios and gives the reader a solid idea of Fortuna silver's price sensitivity to silver, zinc and lead. It rounds off with price forecasts and practical advice on how trade the stock.

This eight page report, packed with details and giving you the parameters you need to trade FVI.v in 2009, costs just U$10 (yep, just ten US dollars) and is payable by PayPal. Either send straight from your own PayPal account to.....

otto.rock1 (AT) gmail (DOT) com

........or use this paypal button (it's set for $10 by default):

As you'll see behind that button, all the usual credit cards are accepted.

So get wise to Fortuna Silver by investing just U$10 (the price of one trade's commission, basically) and getting your hands on a copy of this NOBS report, created from scratch by yours truly (someone that has visited FVI's Caylloma mine not once but twice in the last couple of years). I'd venture to say that once you see how 2009 prices and market sentiment is likely to play out on this stock price, the small investment in this report will pay for itself many times over for savvy investors.

Order your copy now and it will be delivered well before the opening bell Monday. Thank you for your attention.

The 2009 prediction game, LatAm country edition

It's the time of year, give or take a few days, that the idiots who were so wrong with their previous year's predictions shamefacedly go for the new round of crystal ball gazing for the year that cometh. The complete hash that these self-important, overpaid cretins made of 2008 isn't putting them off either, so there's a whole batch of soothsaying for 2009 going on right now.

As IKN's contribution to this zero-sum game, your humble correspondent has decided to avoid completely the stockpicking game ( I mean, I'm the fool who thought copper wouldn't drop under $3) but have a bash at predictions for the countries I follow most closely down here. No Mexico or Brazil as you'll get better commentary from RG at MexFiles and GPB at Market Memorandum on the "big two". Here you just get the little underdog guys....suits me better. So here we go!

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Argentina
Argentina version 2009 will be dominated by the October legislative (not presidential) elections, with half the lower house ("chamber of deputies") seats and a third of senate seats up for grabs. Otto expects the normal noise from outside opposition forces (Eliza Carrio the shrillest voice, Macri an interesting sideshow), but the real action will be inside the Peronist (PJ) party. The Peronist party is a very tough animal to sum up in just a couple of sentences (a friend based his doctoral thesis on the thing and used to spend hours running through his dissertation with me as a sounding board....believe me, it's complicated), but for our purposes 2009 promises a full-scale showdown between the Kirchner wing of the PJ and the "traditional" PJ line under the watchful eye of eminence gris Eduardo Duhalde.

This may not be the Prez election year, but what happens in October will set the scene for the next three years minimum (and likely longer). On the economy front, Argentina won't default its bonds but will see itself in recession. However expect the gov't INDEC stats office to cook the books and tell the world that the country is still growing....they might pitch for 5% or so. It's BS, but hey...who cares, right?

Bolivia
Evo will get his constitutional amendment on January 25th. He'll win the late year election, too. The medialuna racist opposition will continue to bitch and gripe, especially about the way they lose large swathes of land to their quasi-slaves who suddenly become unslaves. The pragmatic and effective Bolivian cocaine fighting campaign will continue without the "help" of the DEA and ATPDEA will be restored by Obama. Evo will continue to talk the socialist talk and be slagged by the English language media. In other words, it's going to be a very quiet year in Bolivia compared to 2008 and so much the better. As for the economy, expect the same prudent attitude as we've seen in the last three years and expect public works to take up the slack caused by the global recession.

Chile
Election year! Bachelet is enjoying an Indian summer of popularity that can only help my pick for the next Prez, José Insulza. This guy is my idea of a great centre-left politico; hard as nails and smart with numbers. I hope he gets the job and I think he will.

On the economy front, Otto sees Chile going through a meagre 2009 but its social fund will help things tick over. Whatever happens, expect the same countercycle economic policies from Chile in 2009, 2010, 2011 and beyond. It ain't broke, so why fix it?

Colombia
Colombia's going to have a hard time economically speaking. Its international currency reserves are low (in per capita terms) bonds are exposed to the winds of the world and Uribe needs to pray at the altar of coal, crude, natgas and coffee futures for a bit of respite.

The FARC looks more and more like toast (thank the stars) but is very unlikely to go gently. Expect more trouble, more rumblings, more extrajudicial killings by extreme lefties and extreme righties. Finally, "America's Friend" will get no love from Obama on the FTA front. Whether that's good or bad is another story.

Ecuador
Ecuador is in big economic trouble. When the bonds charade hits the NY courts and goes against Studmuffin there may well be hell to pay. As for timing, expect the opposition (both Ecuadorian and overseas) to crank the serious pressure just before the April elections. The country is in flux and it's tough to call anything more than a few weeks out.

On the mining front, the law will go through soon (at long last) which will let us rabid kapitalist pigdogs make coin on DMM.to. Otto's got other ideas about stocks to play on this....those thoughts for another day.

Paraguay
Possibly the world's best president-in-the-making, Lugo will continue to be wonderful. However the world will continue ignoring Paraguay and the population will continue giving 100% of its collective attention to its soccer team and they won't care much about politics or the economy, either. The main international headlines are likely to revolve around the Itaipu dam's electricity output and how much Paraguay wants Brazil to pay for its portion.

Peru
Peru is in for a very hard time. On the one hand you have economic reality staring at you in the face, with trade and BoP deficits a close certainty. On the other you have one of the most irresponsible, unpopular and corrupt governments on the continent that refuses to face reality and promises the world to its population. Expect greater social unrest and hardline reprisal actions from this shamefaced mob. Otto also predicts that PM Yehude Simon will see the error of his ways and resign his post before he loses all political capital. PPK will step up and soothe the neolibs as part of his President election campaign foreplay. Sendero will continue to be a pain in the ass of humanity and the cocaine trade isn't going away, either. The rich will try to get richer and the poor will undoubtedly get poorer.

My only hope is that S&P or Fitch face reality, stop playing politics, take the country's investment grade away and wipe that disgusting, patronizing grin off the face of the continent's most uncaring and arrogant president (and there's plenty of competition for that honour).

Uruguay
The Presidential election is in October and as things stand current Prez Tabaré Vasquez can't run. But if the constitutional amendment he's after gets through (probably via referendum if it happens at all) he'll get his re-election. If not, his 'Broad Front' party may find itself split apart and on the losing side. Delicate times right now. Tabaré has done an excellent job during his term
and runs close to historically high approval ratings for a Charrua President in his last year of mandate. Otto's prediction is that he gets his re-election. Economy-wise, Uruguay will feel the world downturn but will get through better than most.

Venezuela
The deval prophets of doom have called the same call every year since 2004. This time I think it's going to happen, but not until at least mid-year. Otto predicts that Hugo&Co will devalue the Bolivar Fuerte currency (the Strong Bolivar...expect a swathe of jokes about that name when it happens) to maybe the 3.0 level versus the dollar. The timing is right for 2009, as a deval into a deflated world economy lessens the inflationary impact that the country will feel.

On the political front, it's a tough call but Otto sez that Hugo will get his constitutional amendment in Feb/March and will be allowed to run in the next elections. Apart from these two calls, the whole caboodle depends on the price of crude. That hasn't changed in Venezuela for at least 35 years and it won't change in the next 35, no matter what flavour of politics is in charge.

Fertilizer issues, soya harvests and all that jazz

Here's a bloomie story on Brazil soya pasted as stands. Zero in on the highlighted para 2, people. This could become a big problem going forward. Watch Argentina come out with lower crop forecasts in the next couple of weeks, too.

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Brazil Cuts Soybean, Corn Forecast on Fertilizer Cost (Update1)

By Carlos Caminada

Nov. 6 (Bloomberg) -- Soybean output in Brazil, the world's second-biggest producer, will unexpectedly fall next year as farmers lack credit to buy more expensive fertilizer, the government said.

Soybean output will decline to between 58.4 million and 59.3 million metric tons, compared with 60 million tons this year, the Agriculture Ministry's crop-forecasting agency said today in an e-mailed report. The agency, known as Conab, last month forecast production to rise to between 60.1 million and 61.3 million tons.

The global credit crunch came as farmers in Brazil sought financing to finish buying fertilizers for planting this month. The lack of credit means some regions will cut planting, and the reduced use of fertilizers may trim yields, Conab said.

``Production costs are significantly higher during the planting season and there are difficulties to access credit,'' Conab said in the report.

Average soybean yields will drop 1.6 percent to 2.77 tons per hectare in next year's harvest, Conab said. A hectare is equal to 2.47 acres.

In the Center West, which accounts for half of Brazil's soybean output, farmers will reduce planting as much as 2.9 percent to 9.35 million hectares.

Corn production will fall to 54.3 million to 55.2 million tons, from 58.6 million tons, Conab said. That compares with the October estimate for a drop to 55 million to 56 million tons.

To contact the reporter on this story: Carlos Caminada in Sao Paulo at at ccaminada1@bloomberg.net

Last Updated: November 6, 2008 07:20 EST

South America World Cup futbol Qualifiers: results and next round

First, the result from the weekend's matches, and then the bets for the midweek round eight.

Yet again I prove to the world that I suck at betting. My bets were:

$45.58 on Chile to win (3/1)
$15 on Uruguay to win (11/4)

As for the results, Uruguay won 1-0 and made me money, but Brazil whupped Chile's trasero 3-0 and so I only get paid on my minor bet. This leaves me just $56.25 from my original $100 bankroll (a couple of rounds ago) to play with. Safe to say the bookmakers are not exactly tremblin' with fear about this series of posts.

But hope springs eternal, and here are the round 8 matches that are played tomorrow. Underneath my selections. Prices come from skybet dot com (for those not used to the UK oddsmaking system see the bottom of the previous post here)

Paraguay 4/11.... draw 3/1.... Venezuela 8/1
Brazil 1/9 ....draw 11/2.... Bolivia 20/1
Peru 9/2.... draw 5/2.... Argentina 4/7
Uruguay 8/15.... draw 12/5 ....Ecuador 11/2
Chile 5/6 ....draw 9/4 ....Colombia 3/1

The one compelling bet here is Chile at 5/6. Sure they lost at home over the weekend, but Brazil as a team finally decided to wake up, and when that happens they can make the best team in the world look ordinary. Chile is a good team, be sure about that. Also, Colombia haven't impressed much. I'm going to make this into a win double and add Brazil to win at 1/9. The odds are tiny, of course, but this is as close to an absolute certainty as is possible in futbol. Therefore the bet is:

$56.25 win double on Chile 5/6 and Brazil 1/9

For what it's worth, if the bet comes in my hypothetical bankroll will stand at $114.58.

Game on!