91%: Studmuffin pwns 'em all

Correa's role model

Maybe this is why The Hawaiian is getting all cuddly with Studmuffin...he wants to know how to get one over on WallSt in cool and definitive fashion. Oh wail ye captains of industry, the mouse has roared. Ecuador 1, World 0. I don't mind admitting that I didn't think he'd get away with this....pretty damned masterful play and I doff my cap to The Muffin.

Bloomie's Kueffner tells it better than I can and in fewer words, so here's his note:

Ecuador Buys Back 91% of 2012, 2030 Bonds in Default (Update1)

By Stephan Kueffner June 11 (Bloomberg) -- Ecuador bought back 91 percent of its defaulted bonds due 2012 and 2030 and will re-open its offer to bondholders who didn’t participate, Finance Minister Maria Elsa Viteri said.

Viteri disclosed the results today in Quito after the buyback offer ended on June 3. President Rafael Correa, who said in December that he was refusing to repay the $3.2 billion in bonds, was present at Viteri’s speech.

Viteri said 18.7 percent of the holders of the 2012 bonds didn’t participate, while 7.2 percent of the holders of the 2030 bonds didn’t take part. The government will offer these holdouts 35 cents on each dollar of the bonds’ face value, the same term as the initial offer.

She reiterated that Ecuador defaulted on the debt because it had evidence that crimes were committed in connection with its issuance.

To contact the reporter on this story: Stephan Kueffner in Guayaquil at skueffner@bloomberg.net

Bloomberg: All the Brazil, all the time

Message to Bloomberg: Brazil is one third of Latin America's population and one third of its economic output. Please try to reflect that there are other countries in the region.

Here is the menu at Bloomberg's Latin America page right now. Of the eight headlines chosen as representative of the region, six are about Brazil and one (the EM markets story) isn't even about Latin America. Truly pathetic regional coverage.

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Banco do Brasil Profit Slides 29% on Increase in Loan-Default Provisions Banco do Brasil SA, Latin America’s biggest federally controlled bank, said first-quarter profit declined 29 percent as it set aside more funds for loan defaults.

Stocks in Emerging Markets Drop for Fourth Day; Oil Falls, Treasuries Gain Stocks fell, led by the biggest decline in emerging markets this month, and commodities dropped on concern the recovery from the first global recession since World War II will falter.

Brazil's Real to Extend Rally for Three Month Before Falling, Embraer Says Brazil’s real will extend a six-week rally for two to three months before weakening again as commodity prices slump, according to Empresa Brasileira de Aeronautica SA, the nation’s largest industrial goods exporter.

Bovespa Stock Futures Fall on Retail Sales Slowdown, Commodities Decline Brazil’s Bovespa stock futures dropped, indicating the gauge may extend its three-day retreat, after commodities slumped and retail sales expanded less than expected in Latin America’s largest economy.

Usiminas Posts Unexpected First-Quarter Loss on Lower Production, Prices Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-largest steelmaker, unexpectedly posted a loss, the first since 2002, after production plunged.

Brazilian Retail Sales Rose 1.8 Percent in March From Year Earlier Month Brazil’s retail sales rose 1.8 percent in March from a year ago, the national statistics agency said.

Ecopetrol Profit Falls 30% to 1.61 Trillion Pesos in Quarter As Oil Slumps Ecopetrol SA, Colombia’s state- controlled oil company, said first quarter profit fell 30 percent because of declining crude prices.

Brazilian Steelmaker CSN Says First-Quarter Profit Slumps 52% on Demand Cia Siderurgica Nacional SA, Brazil’s third-biggest steelmaker, said first-quarter profit plunged 52 percent as it cut output to match lower demand amid a global economic slump.

Message to Bloomberg Editors: Please send immediate memo to Berlin correspondent Jeremy van Loon

Bloomberg's standards are slipping.

Standard number one: Never mention Venezuela in anything even approaching a positive light.

Standard number two: Never mention Venezuela without slipping in the keyword, "Chávez".

Standard number three: Never mention Venezuela without using words like "leftist", "enemy", "socialism", "Fidel", "crisis" etc.

Here's the link to the offending article. Send that memo, Caracas. Get the darned thing off the open web asap. C`mon, souljaboys, get to it. It comes to something when you can't even trust Bloomie to hold up its own standards. What kind of world is this, anyway?

Mixed bag of fun

Quack Quack

Wow! Look at what UK blogger ten percent has found out about the crooked British ambassador to Peru, Richard Ralph (above). This is the same guy that was (and still is) up to his neck with Monterrico Metals, the company responsible for torturing Peruvians when they dare to disagree.

After a full two years in office, President Studmuffin has an approval rating of 70%. To celebrate, here's Correa as seen by the enormously wonderful blog Chiguire Bipolar in the new series "Pimp My Prez".

hat tip el chiguire bipolar

A new discovery is the great blog on Peru Notas Desde Lenovo. Spanish language, excellent insight, news behind the news, a top class read. Put it on your RSS, too.

Yesterday's note pointing out the boringly obvious political bias used by Bloomberg Venezuela gets comment from no less an authority than ex-Bloomberg Venezuela journalist. And guess what? Yep, he agrees with me.

I wondered where he was

Guillermo Parras-Bernal* was a Bloomberg journalist I used to speak with (or spar with depending on the subject) quite regularly in my real job, but then kinda suddenly he kinda disappeared on me....kinda. Well the good news (for me at least) is that he's suddenly resurfaced as a blogger.

This is good news for you too, methinks. GPB is a smart watcher of LatAm affairs and his English language blog is well worth your time. As from today it's on the links list over there on the right. Any of you that don't just come for the snarky gossip and really do want to know more about what's going on down here would be wise to add his blog to your list.

Here's the link to his blog, named Market Memorandum. Use it. In fact, why are you still here at my cheesy blog? Go on.............go.........................now.

*crazy name, crazy guy

Finally, a decent quote on the Ecuador bonds saga from Bloomberg

Over the weekend Bloomie sent its reporter Daniel Cancel from Caracas to Quito to cover the bonds saga at ground zero. And it was worth it just to get the first and only sane comment from the market as featured in this note today. Buried on paragraph 13 of the note is this;

"The decision to pay or not has become a political one rather than an economic or financial decision,'' said Jorge Cherrez, president of Quito-based brokerage IB Corp. "Our countries love to hear two things: 'Down with the gringos, and I'm going to suspend debt payments.' The government can pay and will pay, but they'll leave the issue uncertain until the last minute.''

That is exactly right, Señor Cherrez. What a difference it makes to actually ask somebody that lives in Quito and knows what they're talking about.

Bloomberg LatAm watch: Edwin Gutierrez is funny

The hallmark of lazy journalism is hitting that address book, phoning the usual suspect, getting your de rigueur 'an expert sez' quote and filing your story. Feed da beast, boyz. Today's example is Bloomie's apparent love affair with Edwin Gutierrez, some dude who works for Aberdeen Asset Management and apparently manages a bonds AUM of $5.5Bn (though that's the same number that Bloomie has quoted all year, so methinks times maybe be slightly leaner right now). Plug his name into the Bloomberg search engine and you get 47 results back from 2007 and 2008. What's that, a phone call every two weeks on average? Not bad....

Anyway, today Lester Pimentel (crazy name, crazy guy) got Edwin as saying the following about Ecuador's debt situation:

"I don't see Correa sacrificing social spending to pay foreigners....They will default -- it's a matter of time.''

Which is pretty damning from an expert, right? Well Otto has this nasty habit of being cynical about things he reads (esp at Bloomie), checking up on track records, bonafides and things like that. Is this really the same Edwin Gutierrez that said on July 9th

"It's too costly for the government to entertain a default."

And surely it isn't the same Edwin Gutierrez that said on April 4th:

"(Ecuador) is one of my favorite picks. The fear of an unfriendly restructuring has faded."

Spookily, all reports were filed by Lester Pimentel...strange that, innit?

The bottom line: Any reason why we should trust the word of Gutierrez or his rent-a-quote vehicle Bloomberg this time around?

Ecuador: Slowly but surely the news media drips information....

......that the industry already knows. Today is the "revelation" that a lot of the Ecuador bonds under pressure are covered by Venezuela. Sure enough Bloomberg is back to its mediocre standard with this note that cherrypicks its way through the subject and only offers the disaster scenario without any balance of common sense.

Interesting that they should choose Barclays to quote, as according to that band of failures Ecuador needs oil at $95 next year. Why is that strange? Read this excerpt of an interview over the weekend with Ecuador's FinMin Viteri and file it under "yet another thing they forgot to tell me":

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Q: The budget for 2009 was calculated with a price of $85.40 per barrel and lately it has gone to $40. What would the reference price be now?

Viteri: We have to understand that with the changes in the new Constitution the pro-forma budget won't be able to be used until the second half of next year. In election season what we need to talk about is using the budget of 2008 calculated to August 31 2008 and prolonging it through 2009. It would need the price of oil at less than $35 for us to have problems in 2008. What's more, there are new revenues that are not quantified such as those of Law 42. There are between U$400m and U$500m that should come in next year. U$100m has already come in. We are meeting with the tax office on a monthly basis to correct the budget which we are estimating. So it's not worth talking about the exact (barrel reference) price that I will use, we're waiting until mid December.

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Or on other words, the $95/bbl guess (can't call it anything else) was just silly because

• The original budget was for $85.40. Viteri goes on in the interview to confirm that the original budget that needed $85.40/bbl was submitted by here predecessor Wilma Salgado and that Viteri has already lopped U$1.5Bn from the estimates (was $15Bn, now U$13.5Bn)

• Ecuador will continue to use the current budget until July 2009 that assumes a barrel where it is today

• Ecuador won't have a problem until oil goes under $35/bbl

You ever wonder about that expression they use in investing, "If it's in the news then it's too late"? That's because they won't tell you the full story until it suits them.

Ecuador will not default.

You know it's a slow news day in LatAm finances when......

......a Bloomberg Brazil journalist writes 1,158 words on the plastic surgery that Venezuelan beauty queens go through to win their crowns. Link here (if you dare).

Go on, keep telling me I should take Bloomberg LatAm seriously.

By the way, it's not a slow news day. Today is the Canuck deadline for 3q08 reports and a whole swathe of miners banging rocks down here will be handing in their performances. Just don't tell Bloomberg.

Only one country in Latin America

Here's the front page of Bloomberg Latin America right now. Eight stories, the top seven all about Brazil.

Truly pathetic

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BM&FBovespa Profit Unexpectedly Rises as Investors Cash Out in Market Rout BM&FBovespa SA, Latin America's largest exchange, reported an unexpected 15 percent increase in profit as Brazilian trading surged after investors cashed out during the worst quarter for stocks in seven years.

Petrobras Profit Almost Doubles on on Higher Production, Rising Fuel Price Petroleo Brasileiro SA, Brazil's state-controlled oil company, said profit almost doubled because of increasing output and higher prices for crude and refined products.

Cemig Says Third-Quarter Earnings Decline After Company Lowered Its Rates Cia. Energetica de Minas Gerais, Brazil's largest combined electricity generator and distributor, said third-quarter net income fell 5.7 percent after it reduced rates to comply with a government mandate.

Eletrobras Records 2.1 Billion-Real 3rd-Quarter Net as Units Raise Rates Centrais Eletricas Brasileiras SA, Latin America's largest utility, recorded a profit in the third quarter as power generation subsidiaries received rate increases.

Brazil Stocks Rebound in Late-Day Rally, Led by Redecard, Vivo; Bolsa Dips Brazilian stocks rebounded in a late- day rally as phone companies and credit-card processors surged after the largest wireless carrier reported profit that beat estimates and the government said the credit crisis is easing.

Vale Allows Customers to Alter Ore-Supply Contracts as Steel Demand Wanes Cia. Vale do Rio Doce, the world's largest iron-ore producer, is allowing customers to alter supply contracts as a global economic slowdown prompts steelmakers to scale back output.

Vivo's Quarterly Profit Soars After Telemig Acquisition, Beating Estimates Vivo Participacoes SA, Brazil's largest wireless carrier, posted a 30-fold profit increase after buying Telemig Celular Participacoes SA and getting more revenue from text messages and e-mail.

Chile Peso Falls on Drop in Stocks, Commodities: Latin American Currencies Chile's peso fell the most in more than two weeks as a drop in global stocks and commodity prices curbed demand for higher-yielding, emerging-market assets.

When Bloomberg Brazil pumps, the world dumps. So will it work the other way round?

When Petrobras was the bloated beast earlier this year, chief amongst cheerleaders was Bloomberg news. So now that Bloomberg is putting the boot into PBR, my innate contrarian nature is screaming "buy PBR!" at me.

PBR reports tomorrow, BTW. Here's the Bloomie hackjob.

For balanced, objective reporting, don't bother reading Bloomberg Venezuela

Another piece of biased crap from Bloomberg Venezuela hit the wires today, penned by Steve Bodzin and Matthew Walter (what? Him again? Sheer coincidence, y'know.........). Entitled "Chávez Ambitions in Venezuela, Abroad May Sink With Oil Price" its premise is that Venezuela is in the schtuck if oil prices remain low.

I don't really have a major problem with the concept of the note; after all, I said much the same thing with this post on Peru yesterday and even mentioned Venezuela will be in the same kind of position as Peru if long-term prices for commodities stay where they are (for the record, I say U$70/bbl is a baseline level for Venezuela in 2009 and U$90/bbl is comfortable). No, the problem I have with the crud from Bloomberg is the way the business world just gets spoonfed what it wants to hear from people who should be reporting the news, not trying to invent their own version of it.

1) Let's note the language used by Walter and Bodzin:

"tumbling oil prices", "slash output" "tailspin", "socialist revolution", "plummeting oil revenue", "arms purchases from Russia", "oil subsidies for Cuba".

And all that, ladies and gentlemen, is in the first two paragraphs of the report! Errrr....trying to suggest something here, bloomiedudes? I can hear the chat at Bloomie Vzla editorial meetings right now; "Hey, I have a great idea! Let's treat our readership like stupid, braindead sheep...that'll be good for ratings!"

2) So what about the people quoted in the report? Well Walter and Bodzin have managed to collate eight different people to quote from which is all very industrious and that, but strangely seven of those are anti-Chávez, his gov't and his plans. The other person quoted? Hugo Chávez. This is just the kind of populist crap the world wants to read, of course. But don't you think that Bloomie could have dug out just one voice to pit against the seven they quickly cobbled together for this ridiculously biased attack note? Just one? For the sake of appearance of trying to be slightly fair and balanced? Nah, not Bloomberg Venezuela. We have to put up with moronic reporting written by morons for morons and edited by morons.

So go and read the note if you want. As it happens I'm doing Walter and Bodzin a favour here, as they actually get paid year-end bonuses depending on the popularity of their reports (hey, working for Bloomie is like working for Gawker! I'd never thought of it that way before...). But please don't confuse what you read with serious reporting. If these so-called reporters want a job as analysts then they should go out and get one, then they'd have all the right in the world to opine on their chosen subject. But they're reporters, not analysts. They're paid to write balanced reports, not one-sided crap like this. Serious businesspeople read Reuters for LatAm.

Incakola scoops 'em again

Today Bloomberg covers the delayed Argentina debt swap issue with this report that begins,

Oct. 20 (Bloomberg) -- Trading in Argentina's $20 billion of defaulted bonds has dried up as speculation mounts the government will delay plans to restructure the securities amid the worst global financial crisis since the Great Depression.

Bids for the bonds have ``significantly decreased'' this month after trading surged following the government's Sept. 22 announcement that it was looking into a restructuring plan, said Amir Zada, an associate director at Exotix Ltd. in London. Exotix, a brokerage that specializes in distressed securities, is quoting the debt at about 25 cents on the dollar, down from 29 cents on Sept. 29.

President Cristina Fernandez de Kirchner is seeking to yada yada etc etc continues here

If the story seems familiar to you, it's because you read all about it here on October 8th and October 16th written by yours humble servant Otto. Hey, fact is some are born leaders and others born followers......

Venezuela and the oil price and supplies and stuff...and Bloomberg nails the story

Scuse me while I kiss the sky

As could only be expected, the shouts of "Venezuela is going bankrupt hooray hooray" are doing the rounds again, what with WTI at $75/bbl right now. As your diligent Otto pointed out in this post, Venezuela isn't going bankrupt any time soon. When WTI hits $60/bbl, give me a call and we can run the numbers again, but until it does the chatter is just so much hype from people who care more about their own politics than they do about society. By the way, note that serious voices agreed with my call a posteriori.

Meanwhile, credit where credit is due; I recently pulled Matthew Walter of Bloomberg Venezuela apart for writing crap (his editors let it pass, so they need the finger pointed at them, too). However Walter has just published this report that picked up on a Vz gov't communique from yesterday, crunched it nicely and (apart from the 2.36Mbpd figure used by Bloomie that they cream from the EIA and is a crock...but that's not Walter's charge) hits the nail on the head.

It's a very good piece of reporting by Walter because it lays out the growing relationship between Russia and Venezuela without lapsing into a shrill voice. It points to the growth in VZ oil exports to China. It also notes that, according to the H-man himself, Venezuela is currently subsidizing 300,000bbl/d of oil for its less developed neighbors (the Petrocaribe initiative, etc). The 300Kbbl/d number was a fair guesstimate that was doing the rounds but it just got a lot more weight thanks to the Chávez confirmation.

This is what we want from pro-journalists: Sharp, concise reports that lay out the facts and lay off the hype. Good job, Matthew Walter: Is it too much to ask that this standard is kept?

Mark Mobius and Brazil (and some Shakespeare)

Thus conscience does make cowards of us all,
And thus the native hue of resolution
Is sicklied o'er with the pale cast of thought,
And enterprise of great pitch and moment
With this regard their currents turn awry,
And lose the name of action.

Hamlet, Act 3, Scene 1 LL91-94

On reviewing headlines over at Bloomberg a few minutes ago, this one jumped out at me:

Mobius Looking at Brazil, China, Russia After Rout (Update1)

By Daniela Silberstein and John Dawson

Oct. 9 (Bloomberg) -- The global financial crisis won't last long and emerging-market stocks are a ``wonderful opportunity'' for investors after their record rout, said Mark Mobius, executive chairman of Templeton Asset Management Ltd yada yada CONTINUES

It didn't jump out due to happy thoughts, either. It was more a sense of deja vu. Another line from the same play as above came to mind; "The lady doth protest too much, methinks." So one quick search in the Bloomie system later, and we have the following (and there are more, believe me):

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On September 15th
Templeton's Mobius Says Merrill Deal Signals Bottom (Update2)

"....The decisions will ``go a long, long way to stabilize the situation,'' Mobius said. ``We're probably now at the bottom and it'll be a build up of confidence from here on in, if these decisions are made.''"

On August 20th
Emerging-Market Retreat Is `Overdone,' Mobius Says (Update2)

"...Mobius said he's buying as many consumer shares in emerging markets as he can."

On July 22nd
Mobius Sees `Good Bargains' in China, India Stocks (Update2)

Mobius added that he favors shares in Brazil and Russia because the two markets can still benefit from the demand for energy and other raw materials.

``Russia and Brazil are pretty much in the same position,'' Mobius said. ``Both of those areas are swimming in excess liquidity, which will drive consumer prices as well.''

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Otto sez: Frankly, Mobius can "add" anything he likes to all that. Otto adds that he's screwed and desperate. The next blood on the street you see may be his.

The Venezuelan telephone game*

1. Eight days ago, Otto hears about how Venezuela is thinking about buying back debt.

2. Otto posts on the subject (title "Venezuela to buy back sovereign debt") one week ago. Adds charts, background information etc and explains the sound logic and why it's a good idea.

3. Bloomberg misses the significance of this buyback completely and blames same-day currency movements clearly related to the plan on ridiculous supposition.

4. Otto points out the error (and gets unwarranted and boring flak from certain people sitting at certain desks in a certain S.Am city).

5. El Universal today runs story on how Venezuela is thinking about buying back debt.

6. Bloomberg runs the story in English, and finally informs those who don't read this blog about what's really going on.

Moral of the story: To find out what's going on down here, read more blogs and less mainstream media. Abiding with tell you the same. So will borev. So will Bina. So will Mickey Fulp. So will The Mex Files. And so will Sapitos......................


*Also known as "Chinese Whispers" in other places

Bolivia: Applause for Reuters

Credit where credit is due. Amongst the total dross reporting of mainstream media outlets, the coverage offered by Reuters over the events in Bolivia has been the shining exception. In this latest report, Reuters man-on-the-spot Eduardo Garcia (a man injured in a car accident in Bolivia last year that killed one of his colleagues) neatly captures what's really been happening and slaps down the ridiculously poor analysis offered by CNN, AP, Bloomberg and all the others in recent days.

Reuters LatAm deserves applause for the great job it's done in Bolivia. A far cry from the work of other newswires recently mentioned.

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Bolivia's Morales emerges stronger from crisis

By Eduardo Garcia - analysis

LA PAZ (Reuters) - Bolivia's first indigenous president, leftist Evo Morales, has deftly handled a violent political crisis and appears strengthened as he heads into talks with opposition governors who resist his socialist reforms.

At least 17 people were killed last week as anti-Morales protesters stormed government buildings, sabotaged natural gas pipelines and battled with the president's supporters in four opposition-controlled regions.

He ordered martial law in the remote Amazon province of Pando and arrested the governor there, accusing him of ordering a massacre of peasants last Thursday.

But soldiers showed restraint, taking a hands-off approach at times to avert confrontation. And South American presidents strongly backed Morales at an emergency summit this week, condemning any coup attempts or separatist rebellions CONTINUES HERE

Message to Matthew Walter of Bloomberg Venezuela

Remember this story yesterday when Bloomberg Venezuela tried to make the market panic about the Bolivar Fuerte (VEF) currency and how it was going to hell and how we were all gonna die and stuff, and how your truth-seeking Otto showed how they covered up their crappy analysis?

Well today the VEF strengthened from 4.80 to 4.35 versus the dollar, a simply enormous move for a currency of 9.375% in a single day. Here's the chart, and you'll be amazed to find out that.......

.......Bloomberg decided not to make a big song and dance about this. I wonder why? So this next picture is dedicated to you, Matthew Walter.

Milk and sugar with that, Matthew?

Shock Exclusive: Bloomberg Venezuela Reporter Writes Trash, Covers Butt Later

Bloomberg Latin America's mediocrity knows no bounds. Today's episode involves Bloomie Venezuela and;

• misinformation about the local currency market during the trading day

• falsely alarmist report and title

• factually incorrect pricings

• cherrypicked and totally unrepresentative quote from a local trader

• a rapid covering up of the bad story after the end of the US trading session, including a total re-write of the title line and article

But first a little background. A couple of weeks ago, your observant Otto pointed out how Bloomie Brazil made up shit about Vale (RIO) supposedly buying Freeport McMoRan (FCX), published its story with a totally misleading title and lead-in paragraph, the result of which pushed FCX stock to over U$90. The next day, one of the two reporters on the byline was presumably 'asked' to write a second story that countered the wild claims made in the original note (by the way, here we are dozens of trading days later, FCX stock is down at $65 and nada zip zero nothing in the way of takeover news from either company).

But it seems Bloomberg's bad financial journalism is Sans Frontieres. Today it was Venezuela's turn to get the Bloomie hack treatment, and here we go with the details.

Not content with financial chaos in the USA, Bloomberg today decided to make up shit about Venezuela's currency and try to cause panic in Caracas, it seems. The story in question hit the wires at midday and came with the title Venezuelan Bolivar Drops in Black Market as Devaluation Speculation Mounts. "Hmmm, innarestin'" thought your curious Otto, and went to read it through. Here it is in full for your viewing pleasure, with my purple prose continuing afterwards. By the way, there's a good reason I've made space for the whole story, as you'll find out later:

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Venezuela's Bolivar Plunges as Devaluation Speculation Mounts

By Matthew Walter Sept. 17 (Bloomberg) -- Venezuela's bolivar sank for a sixth straight day in black market trading as a two-month tumble in oil, the country's biggest export, fueled speculation the government will devalue the official exchange rate.

The bolivar fell 2 percent to 5.05 per dollar, leaving it down 21 percent since Sept. 5, traders said. Oil, which accounts for about 90 percent of Venezuela's exports and half of tax revenue, has dropped 17 percent this month to $95.75 a barrel amid concern a deepening U.S. financial crisis will add to a slowdown in global growth.

``There's a lot of doubt now about how solid the government's position is,'' said Tulio Bracho, a trader at Activalores Sociedad de Corretaje in Caracas. ``When oil prices fall like this, it makes the government's budget tighter and there's more speculation about a devaluation.''

Venezuelans turn to the parallel market when they can't get permission from the government to buy foreign currency at the official exchange rate of 2.15 per dollar. President Hugo Chavez imposed restrictions on currency trading amid a nationwide oil industry strike in 2003.

Chavez, emboldened by a six-year oil rally that sent prices to a record $147.27 on July 11, has ramped up spending this year, using public funds to nationalize the country's biggest cement maker, third-biggest bank and top steelmaker.

The government will likely pay $11.6 billion for the nationalizations announced so far, including last year's takeover of four heavy crude joint ventures in the country's Orinoco belt, Caracas-based consulting firm Ecoanalitica said last month.

Oil rebounded today, rising 5 percent, after its biggest two-day decline in almost four years. Crude oil futures have dropped 35 percent from the July 11 record high.

To contact the reporter on this story: Matthew Walter in Caracas at mwalter4@bloomberg.net.

Last Updated: September 17, 2008 14:27 EDT

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So to sum up, the story asserts

1) The Venezuelan Bolivar Fuerte (VEF) sank in trading today
2) The reason is the two month long decline in oil prices
3) This has fueled speculation about a currency devaluation
4) The VEF was trading at 5.05 to the dollar, "traders said."
5) The drop in oil prices puts the Venezuelan gov't budget under pressure
6) Yada yada

So let's put this little lot under the Ottoscope and see how it stands up to examination:

1) The Venezuelan Bolivar Fuerte (VEF) sank in trading today

Otto sez; False! Yesterday the parallel VEF traded bid 4.8 ask 4.95. Today is traded at bid 4.7 ask 4.8. this means the VEF actually strengthened today, it did NOT weaken.

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2) The reason is the two month long decline in oil prices

Otto sez; Subjective assumption, and likely untrue. As noted here on several occasions, the big drop in the VEF started in mid August when main man Moris Beracha was quoted as saying there wouldn't be any further dollar debt emissions. As soon as he said that, the VEF dropped hard. Of course the price of oil has dropped, but $90/bbl is still extemely profitable for PdVSA (and therefore Venezuela) at current prices.

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3) This has fueled speculation about a currency devaluation

Otto sez; False! I was a little taken aback by the way this was presented by Bloomie today, because I keep my ear fairly close to the ground on the subject of the VEF and up to yesterday I'd heard nothing out of the ordinary about devaluations. So as soon as I read the Bloomie note I shot off three mails to people I know in the Venezuelan bizworld. The mail asked very simply, "Any speculation about a deval going around?" The answers were a definitive "No".

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4) The VEF was trading at 5.05 to the dollar, "traders said."

Otto sez: False! This is poorly researched, lazy journalism and may mean that if "traders said" the moon was made of cheese Matthew Walter would report it.

I also asked about this with a currency exchange acquaintance. He said "Rubbish (or a much stronger Spanish word to that effect), 4.80 available all day," which means anyone wanting 5.05 for their dollars would have been doing zero business all day. The only reason Bloomberg could have quoted 5.05 is that Matthew Walter must have phoned just one trader and asked him for a quote. The trader thought "Ha!! Gringo wants to buy dollars!! I'll give him my special gringo price" and then quotes him a forex a full 5% above the going rate. Either that or Walter was just making shit up.

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5) The drop in oil prices puts the Venezuelan gov't budget under pressure

Otto sez; subjective, but almost certainly false. Most people (including me) agree that the Venezuelan budget is handily covered by oil prices at $90; $80 or below might be an issue, but not before. To add a touch of irony, crude oil shot up 6% today on very heavy futures trading.

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So now we've got all that out the way, let's move on to the way that Bloomberg covered up its bullshit, panic inducing reporting after the bell. That's because suddenly the whole story has been changed. Now understand that normally when a new story with a new title comes out it's given a new URL and the old story stays with the original URL and is still available. If a story is changed under the same URL, then the title remains and "Update 1", Update 2" etc etc is added. Not this time. This time the original story that appears word-for-word above has been 'disappeared' and the title is now.....

Venezuela's Bolivar Trades Near Seven-Month Low Amid Oil Rout

........and much of the clearly false information and analytical nonsense has been covered up. Here's the whole story as stands after the revisionism, and we'll play 'spot the difference' underneath:

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Sept. 17 (Bloomberg) -- Venezuela's bolivar held near a seven- month low in the parallel market as a two-month tumble in oil, the country's biggest export, fueled speculation the government will devalue the official exchange rate.

The bolivar weakened as much as 2 percent today to 5.05 percent before rebounding to 4.8 per dollar at 4:20 p.m. New York time, traders said. The bolivar has fallen 19 percent since Sept. 5. Oil, which accounts for about 90 percent of Venezuela's exports and half of tax revenue, has dropped 16 percent this month to $96.61 per barrel amid concern a deepening U.S. financial crisis will add to a slowdown in global growth.

``If oil prices get closer to $80 a barrel, the government is going to have to adjust the exchange rate,'' said Asdrubal Oliveros, a director at Caracas-based consulting firm Ecoanalitica.

Venezuelans turn to the parallel market when they can't get permission from the government to buy foreign currency at the official exchange rate of 2.15 per dollar. President Hugo Chavez imposed restrictions on currency trading amid a nationwide oil industry strike in 2003.

Chavez, emboldened by a six-year oil rally that sent prices to a record $147.27 on July 11, has ramped up spending this year, using public funds to nationalize the country's biggest cement maker, third-biggest bank and top steelmaker.

The government will likely pay $11.6 billion for the nationalizations announced this year plus payments leftover from last year's takeover of four heavy crude joint ventures in the country's Orinoco belt, Ecoanalitica said last month.

November Elections

Chavez has said repeatedly he has no plans to devalue the bolivar. Yesterday he said he isn't ``alarmed'' by the recent drop in oil prices.

Oil rebounded today, rising 6 percent, after its biggest two-day decline in almost four years. Crude oil futures have dropped 34 percent from the July 11 record high.

A devaluation is unlikely before year-end because Chavez's socialist party candidates are campaigning for state and city elections scheduled for November, said Miguel Octavio, head of research at BBO Financial Services Inc. in Caracas.

``The government has a lot of money right now, but it also has a lot of obligations,'' Octavio said. ``I don't think they'll devalue this year because of the elections.''

A devaluation bolsters the government's finances because it puts more bolivars in treasury coffers for each dollar from oil exports.

Venezuela-U.S. Relations

The bolivar has also weakened in the black market in the past week because the deteriorating relationship between Chavez and the U.S., Venezuela's top trading partner, has further eroded confidence in the South American country. Chavez last week expelled the U.S. ambassador in Caracas. Venezuela is the fourth- biggest supplier of foreign crude oil to the U.S.

The financial market rout in the U.S. has pushed down the price on Venezuelan bonds, making it difficult for the government to sell dollar-denominated bonds in the local market. The sale of dollar bonds has been one of the government's main tools to provide investors access to dollar-based assets and shore up the parallel market rate, Oliveros said.

``The government is going to have to do a debt buyback before it can sell any more dollar bonds,'' Oliveros said. ``This makes you think the exchange rate is going to continue to weaken.''

To contact the reporter on this story: Matthew Walter in Caracas at mwalter4@bloomberg.net.

Last Updated: September 17, 2008 16:46 EDT

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So here we go with spot the difference.

In story one, the title places the VEF under the spotlight. In story two, the title has been utterly changed and now makes no mention of the VEF.

In story one, the VEF is "sinking". In story two, the VEF is trading "near lows". You'll also note from this chart......

...... how seven months is a beautifully cherrypicked timeframe by looking at how the VEF has traded in 2008. The low for 2008 is a full VEF lower at 5.8.

In story one, the VEF forex is 5.05. In story two, Matthew Walter makes a lame attempt at justifying his 5.05 quote of earlier (note again that it simply didn't exist in the real world...I asked around, Bloomberg obviously didn't).

In story one, there is 'speculation' and 'a lot of doubt' about the gov't's position. In story two, Oil at $80/bbl (i.e. 20% lower than today) would be a cause for concern.

In story one, "Devaluation Speculation Mounts", In story two, "A devaluation is unlikely before year-end."

But then finally, right at the end of story two, we get the real reason for the move over the last 48 or 72 hours. As Otto reported this morning, Venezuela is going to buy back dollar debt. This means there will be less dollars available on the streets to change into VEFs and therefore the exchange rate weakened somewhat. This is normal. Or if you like, think about it in this more intuitive way; when the gov't emitted a lot of dollar debt last year the VEF parallel rate dropped, so it therefore stands to reason that if the gov't takes the same paper off the streets the exchange rate rises some.

Really this is finance 101, but it obviously went straight over the head of a professional finance journalist. Matthew Walter, his controllers and his editors got the story wrong, wrong wrong and so buried it in a sneaky and underhand way by using the same URL to create a totally revised title and story.

The only thing left to ask was whether he was deliberately try to create unease and speculation about the VEF, or whether Walter (along with his editors) is just plain ignorant about his subject matter. It's certainly extremely suspicious to get the false stuff during the trading session and the cover-up job after the bell. But either way, Bloomberg Latin America has proved once again why it has a credibility rating of zero amongst people who know what they're talking about.