Seeking Alpha

Marc Liu's  Instablog

Marc Liu
Send Message
Liu is currently the CEO of Capitol Isle Partners LLC a media consulting business focusing on corporate restructuring and new business development. He is a partner in Information Central, a newsletter content provider and web marketing company. He also serves as a Senior Advisor to Goldmark... More
My blog:
marc liu's instablog
View Marc Liu's Instablogs on:
  • A 45% + Crash Could Be Coming Part II - Will The Fed Launch A $800 Billion QE And Stop The Crash ?

    After my article (Part I), I have received a lot of comments saying basically we are looking at a 20-25% (maybe only 10-15%) drop quickly followed by a rapid recovery and then off to the races again. That does seem to be the prevailing view of the current events. And maybe, that is the way it will play out.

    But there is one thing that is different this time, the debt levels in the world are the highest ever recorded. Starting 2007, the world went on a debt funded spending binge in every category of debt and in virtually every country. China obviously being the largest participant. I have attached the URL for the McKinsey, it makes for fascinating if not somewhat depressing reading).

    "A new report from McKinsey, the global consulting firm, is sobering. Researchers compiled data on the full range of debt that countries owe - not just their governments, but corporations, banks and households as well. The results: Since the start of the global financial crisis at the end of 2007, the total debt worldwide has risen by $57 trillion, rising to 286 percent of global economic output from 269 percent."

    NYT Neil Irwin

    "Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact, rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007. Global debt in these years has grown by $57 trillion, raising the ratio of debt to GDP by 17 percentage points (Exhibit 1). That poses new risks to financial stability and may undermine global economic growth."

    "In our analysis we examine several important developments in global debt since the crisis: the continuing rise of leverage around the world; growing government debt and how it might be managed; continued rapid growth in household debt in some countries that raises the risk of future crises; the potential risks of China's rising debt, which accounts for about a third of the increase in global debt since 2007; and the decline of the riskiest forms of shadow banking and continued growth of other forms of nonbank lending. We conclude that, absent additional steps and new approaches, business leaders should expect that debt will be a drag on GDP growth and continue to create volatility and fragility in financial markets. Policy makers will need to consider a full range of responses to reduce debt as well as innovations to make debt less risky and make the impact of future crises less catastrophic."

    McKinsey Report 2/2015

    This is a large part of the problem the Fed faces in trying to rein in the monster they have created. The debt problem is not just local it has been exported overseas. Policy set in the US will ripple around the world and effect many economies that are much weaker than ours. To see the scope of what is happening, all one has to do is look at a currency map and view the dimensions of the collapses versus the US dollar.


    YTD Performance

    (vs. the US Dollar)

    1-year performance

    (vs. the US Dollar)

    Ukrainian Hryvnia (UAH)



    Belorussian Ruble (BYR)



    Azerbaijani Manat (NYSE:AZN)



    Brazilian Real (BRL)



    Bitcoin (BTC)



    Moldovan Leu (MDL)



    Euro (EUR)



    Czech Koruna (CZK)



    Swedish Krona (SEK)



    Canadian Dollar (NYSEARCA:CAD)



    Norwegian Krone (NYSE:NOK)



    Australian Dollar (NYSEARCA:AUD)



    Great Britain Pound (GBP)



    New Zealand Dollar (NZD)



    Argentine Peso (NYSE:ARS)



    Japanese Yen (JPY)



    Swiss Franc



    Russian Ruble (NYSEARCA:RBL)



    Source:, 3/20/2015

    "The U.S. dollar has strengthened over the past year while weakness in Europe and the former Soviet Union has led to declines in those currencies. Countries that rely on exporting oil and other commodities have been particularly hurt by declines in those prices as well. While the dollar is relatively strong now, it is sure to fluctuate in the future. A strong currency is bad for exporters whose goods become more expensive for foreign buyers, so the U.S. is likely to see mounting pressure from companies who rely on exports, or who do significant business abroad to advocate for a weaker dollar."

    Worst currencies

    What seems to be happening now is that some of the weaker countries have begun to repatriate their own currency from abroad to shore up their own economies. This is particularly true for China and Japan. This means that they are to selling down their holdings in US Treasuries and using this cash to support their currencies/economies at home by monetizing their debt. This is putting downward pressure on Treasury prices and upward pressure on yields. Note the summary of this situation in Randall Forsyth's (herein abbreviated) article in Barron's

    "The dollar's share of China's huge cache of currency reserves has been slashed to a record low. This leaves the Federal Reserve as lender of last resort to the U.S. government to fill the gap left by its biggest creditor. According to the Journal's crunching of the numbers, dollar assets comprised 54% of Beijing's $3 trillion-plus reserves as of last June 30, down from 74% as recently as the end of 2006. Beijing has made no secret of its desire to diversify from greenback assets and for the establishment of another reserve currency to use as a store of wealth and for international transactions. Recent Treasury data show China has been selling Treasuries outright.

    MacroMavens' Stephanie Pomboy thinks that there is an $800 billion gap between the $1.1 trillion the Treasury is borrowing to cover the budget gap and the roughly $300 billion overseas investors are buying. Banks, corporations and households have been doing little to fill that gap, preferring higher-yielding securities, so it would appear the heavy lifting has been done by long-only bond managers extending duration and specs rushing to cover their shorts. But Pomboy has little doubt that the Fed will step in to fill the gap left by others. In other words, debt monetization, a fancy term for printing money to cover the government's debts i.e. quantitative easing. Make no mistake, at $800 billion, allowing the markets to resolve the shortfall in demand would send rates to levels that would absolutely quash this recovery…if not send the economy in a real depression. The Fed's 'need' to take on an even more active role as foreigners further slow the purchases is to increase the currency debasement race now being run in the developed world -- a race which is speeding us all toward the end of the present currency regime.

    Yet, when the financing for huge government deficits dries up, central banks are forced into monetizing the debt. The Bank of Japan has stepped up its purchases of Japanese government bonds, ostensibly to fight the persistent deflation in that nation's economy, a move urged by politicians there.

    China's eschewing of Treasury debt should be a warning, but as long as the U.S. government can borrow for just 2% for 10 years, complacency reigns. Fiscal policy is now heading for a cliff of excessive, haphazard tightening. This will throttle growth -- and make the deficit worse. And QE3, 4, 5 or whatever will follow. It won't be the end of the world, but it just could be the end of the dollar's preeminence."

    China's Sale of Debt - Randall Forsyth

    So there you have it, the US is fiscally $800 Billion in the hole on an annual basis (Pomboy). The foreigners who had been buying our debt hand over fist are now selling Treasuries to monetize their own debt. So what's the Fed to do? Stephanie Pomboy thinks another round of QE. But as she points out, this is effectively a game of chicken where the loser may be the US dollar's dominance in the world. While there are many issues that could drive the market down 35-45%, all bets are off it the Fed pumps in $800 Billion in additional QE. The question is if and when this will happen? The Fed has a real quandary on its hands. Do nothing, risk a ($800 Billion) recession and allow foreign debt monetization to push interest rates slowly higher. Or launch another ($800 Billion) QE, and risk the reactive pressure that may ultimately start the fall of the dollar. What balance they chose and when, will define where the market goes either up or down:

    A QE expansion tomorrow, the market decline may be over.

    A QE expansion end of Q1 21016, the market decline may continue for a while (15-25%)

    No QE expansion at all and/or they raise interest rates now, the market may decline 35-45%


    This just in from Squawk Box this morning:

    "Based on his research of historical stock market valuations, Nobel Prize-winning economist Robert Shiller said Thursday he sees the "risk of substantial declines" ahead. Even with the recent turmoil, which pushed the Dow industrials, S&P 500, and NASDAQ into correction last week and again this week, "the market is high now," the Yale University professor told CNBC's "Squawk Box ." As of Wednesday's close, the Dow remained in a correction, despite strong gains. But the rally in the S&P and NASDAQ composite pulled those measures out of correction territory. Shiller measures valuation with his cyclically adjusted price-to-earnings (NYSEARCA:CAPE) ratio, which looks at price divided by 10-year average earnings. "The CAPE ratio right now is around 25. It's high," he said. The historic average is around 17, a level that would correspond with about 11,000 on the Dow and 1,300 on S&P 500. A retracement to those levels would represent more than 30 percent declines. Shiller said he's not saying that will happen, just the CAPE ratio serves as a "warning signal."

    What he's also not saying, is that market corrections usually over shoot on the up side and the down side. If it is a 30% correction to the "norm" it easily could correct by 45% at the extreme part of the correction. Whether any of this happens remains to be seen - and is in the hands of the Fed Gods.

    As an aside, Stan Druckenmiller (Soros's past investment head) has just put 20% of his own money into GLD as of his 6/30/2015 filing. He has not, however, forsaken his long positions and has added many oil positions.

    Stan Druckenmiller's portfolio


    This just in from Louise Yamada: S&P versus the Death Cross


    My point here is not that the world is coming to an end but rather that we are in a very dangerous place today. And, the issues making it dangerous are growing in number and scope on an almost a daily basis. Be very careful.

    Sep 04 1:00 PM | Link | Comment!
  • Carmanah Technology Corp - A Value Situation Ready To Break Out To The Upside (CMHXD)

    After a years worth of effort by the new management team, CMHXD breaks into profitability in the latest quarter.

    For the latest quarter ended 6/30/2014:

    Q2 2014 vs. Q2 2013

    Revenues: $9.0 million, up $2.7 million from $6.3 million

    Gross margin: 36.3%, up from 24.4%

    Operating costs: $2.8 million, down $0.2 million from $3.0 million

    Net income/(loss): $0.4 million net income, up from a loss of ($2.5) million

    EBITDA (a non-IFRS measure): $0.8 million, up from a loss of ($2.2) million

    Their financial condition has improved substantially:

    Financial Condition at June 30, 2014 compared to December 31, 2013

    Cash and cash equivalents of $8.5 million, up from $5.2 million

    Working capital of $12.3 million, up from $8.1 million

    Continued debt-free operations

    With the newly acquired SOL Inc. being added in the next quarter, CMHXD should be solidly profitable going forward.

    My personal estimate for full year 2014 is:

    Revenues: $48 million ($3/share)

    Profits: $2.8 million ($.175/share)

    EBITDA: $3.5 million ($.22/share)

    So, CHMXD trades for:

    1x sales

    17x estimated profits

    14x EBITDA

    This for a company that is debt free with $8 million in cash on the books.

    Adjusting for the cash on hand, CMHXD trades for:

    .8x sales

    14x estimated profits

    11x EBITDA

    My personal forecast for 2015 is:

    Revenues:$60 million ($3.75/share)

    Profits: $ 6 million ($.375/share)

    EBITDA:$10 million ($625/share)

    This forecast includes SOL Inc but does not allow for any other acquisitions which will most assuredly be coming. Management has stated that they are actively looking for acquisitions to build their core solar lighting business (as well as some of their other divisions).

    They have also stated that they are bidding on contracts worth $950 million in new business for their existing divisions.. Management is quick to point out, however, that there is no guarantee that any of these bids will come to fruition. But, this is none the less quite an effort for a company that only recorded $25 million in sales last year.

    With all of this going on, I direct the readers focus to the chart below. CMHXD is just at the $3 dollar level that once broken would clearly define the bottom for this stock.

    The company just completed a 10 for 1 reverse split (the symbol changed from CMHXF to CMHXD) which sets them up for a move in listing to a more dominant and liquid stock exchange.

    (For background on management go to my Instablog)

    (click to enlarge)

    Tags: long-ideas
    Aug 22 10:11 AM | Link | 3 Comments
  • Stock Whisperer At TIGER 21 Builds A 10 Bagger Plus At Tiny Carmanah Technologies Corp

    Lift off for Carmanah Technologies Corp (OTC:CMHXF)

    It's not often that you see a financial whisperer to $18 billion in assets take control of what was a $15 million public company - but when you do, you can be pretty sure he has some interesting ideas as to what to do.

    Well, that's exactly what happened in April 2013, when Michael Sonnenfeldt took over at CMHXF - a doggy little Canadian tech company (mostly solar) that was in the process of going out of business.

    A look at CMHXF - the set up:


    Carmanah Technologies Corporation designs, develops, and distributes solar-power LED lighting, and solar powered systems and equipment worldwide. The company's Signals segment is focused on the sale of self-contained solar power LED lights for marine, aviation, obstruction, and traffic applications. Its Outdoor Lighting segment provides products for use in general illumination applications, such as pathways, parking lots, and pedestrian areas, as well as highway/street lighting and perimeter lighting. This segment serves local and federal government facilities, government ministries, departments of defense, private utilities, highway concession owners, national and multi-national commercial facilities, and public institutions. The company's GoPower! segment distributes solar kits, solar panels, inverters, chargers, batteries, and other power accessories for the recreational vehicle, utility and fleet vehicles, and marine markets under the Go Power! brand name to RV dealers, marine resellers, and fleet owners. Its Solar EPC segment provides solar engineering procurement and construction services, and focuses on the development and construction of roof top solar grid-connected systems for commercial customers, which include developers, commercial property owners, and government entities. Carmanah Technologies Corporation was incorporated in 1996 and is headquartered in Victoria, Canada (source Yahoo finance). Source: Yahoo Finance


    The stock had gone from a high of $4 to $.30.

    Sales were declining at a double digit pace.

    CMHXF was losing around $5 million on a regular basis.

    Shares outstanding were 50 million.

    Carmanah Annual Profit/Loss
    US $ thousands201320122011
    Gross Margin$ 7,384$ 8,239$11,262
    Operating Losses-$ 5,564-$ 3,921-$ 8,553
    Total Assets$14,957$13,176$15,441

    (click to enlarge)Source: Annual Report

    Source: Yahoo Finance

    (click to enlarge)

    Source: Yahoo Finance

    Who is Michael Sonnefeldt?

    Michael is the founder, leader and coordinator of TIGER 21 (The Investment Group for Enhanced Results in the 21st Century) - a peer-run investment group. He is the investment whisperer to his members -among his other roles.

    Here's what Forbes had to say about TIGER 21:

    "Tiger 21: Meet the Wealthiest, Most Powerful Social Networking Group In The World

    When I asked Tiger 21 Member Louis David Spagnuolo about the network he explained it to me this way: "In the most purest sense, Tiger 21 is a fraternity of ultra-successful professionals, who all work in conjunction to advance each other both personally and professionally," he told me, "In relation to both aspects, Tiger 21 has been a game changer for me and has helped elevate me to a new frontier of success that I only could have dreamed of prior to joining.

    60% of the members are former entrepreneurs that had a large liquidity event, while the rest are a mix of business executives, investment bankers and real estate moguls. "

    Source: Forbes

    Penta Daily interviewed Michael:

    "TIGER 21: Tough Love For the Very Rich

    TIGER 21's 190 members, according to Sonnenfeldt, are sitting on $18 billion - that averages out to $95 million a head - and a press release further claims its members spend $1 billion to $1.5 billion annually on "living and travel expenses, capital purchases, insurance, and legal investment and professional fees." No wonder everyone from George Soros to Mohammed El-Erian have addressed TIGER 21 meetings.

    When I went up to Sonnendfeldt's Central Park West apartment in New York, I asked the soft-spoken club founder what trends were emerging from his members. He said that most were "taking risk off the table," earning 2% to 5% on their hyper-conservative portfolios. But they were coming around to the fact that this sort of return over a long period, and the income needed to fund their current lifestyle, requires a continuous and dangerous draw dawn of assets. So many are "rolling back their shirtsleeves" and going back to work, often as advisors to companies in their old field of expertise."

    Source: Penta Daily

    And, this is what Michael Sonnefeldt is doing with CMHXF; he's rolling up his shirt sleeves and getting to work. Michael is the Chairman of CMH.TO - and he is an "active" Chairman.

    So - How's that working out?

    A major capital raise was completed at $.12

    Nov 13, 2013 - Carmanah issued a total of 50,294,200 common shares (the "Rights Shares") under the Offering at a price of $0.12 per Rights Share, for gross proceeds of $6,035,304.

    Another capital raise was completed at $.22

    March 31, 2014 -

    Carmanah Technologies Corporation is pleased to announce that it plans to conduct a non-brokered private placement of up to 19,300,000 common shares in the capital of Carmanah at a price of $0.22 per Share for gross proceeds of up to $4,246,000.

    Of the 19,300,000 Shares expected to be issued, 10,000,000 are anticipated to be purchased by insiders of the Company. This represents less than 10% of the issued and outstanding shares of the Company, which is the upper limit set by the Toronto Stock Exchange for private placements of this nature. The following insiders with holdings around or above 10% are anticipated to partake in the Private Placement:

    Michael Sonnenfeldt, Carmanah's largest shareholder and Chairman of the Board, intends to subscribe for at least 3,500,000 Shares under the Private Placement. Mr. Sonnenfeldt currently holds 24,537,778 common shares, representing approximately 24.4% of the Company's issued and outstanding common shares. Assuming Mr. Sonnenfeldt acquires 3,500,000 Shares under the Private Placement and that 19,300,000 Shares are issued as part of the Private Placement, immediately following the closing of the Private Placement, he will hold 28,037,778 common shares, representing approximately 23.4% of Carmanah's issued and outstanding common shares.

    Jim Meekison intends to subscribe for 3,000,000 Shares under the Private Placement. Mr. Meekison sits on the Company's Board of Directors and currently holds 10,178,000 common shares. Assuming Mr. Meekison acquires 3,000,000 Shares under the Private Placement and that 19,300,000 Shares are issued as part of the Private Placement, immediately following the closing of the Private Placement, he will hold 13,178,000 common shares, representing approximately 11.0% of Carmanah's issued and outstanding common shares.

    Another capital raise was completed at $.25

    July 17, 2014 - Carmanah Technologies Corporation" is pleased to announce that it has completed a non-brokered private placement of 12,000,000 common shares in the capital of Carmanah at a price of $0.25 per Share for gross proceeds of $3,000,000.

    "All of the Shares issued under the Private Placement were purchased by James Meekison and Terry Holland; both of whom are insiders of the Company. Additional details are as follows:

    - JDM Investment Holdings Inc. subscribed for 10,000,000 Shares under the Private Placement. JDM Investment Holdings Inc. is beneficially owned by James Meekison, who serves on the board of directors of the Company. Mr. Meekison now holds 23,178,000 common shares, representing approximately 13.6% of Carmanah's issued and outstanding common shares.

    - TMH Capital Corporation subscribed for 2,000,000 Shares under the Private Placement. TMH Capital Corporation is beneficially owned by Terry Holland, who serves on the board of directors of the Company. Mr. Holland now holds 4,679,000 common shares, representing approximately 2.75% of Carmanah's issued and outstanding common shares."

    As you can see from the above, the board has a very substantial stake in this company - and their interests are totally aligned with the other shareholders.

    Since November 2013 the stock price has more than doubled.

    (click to enlarge)

    Why raise this money? What's the plan?

    Well, first off Michael hired John Simmons as the new CEO. He assumed this position on April 30, 2013.

    John Simmons -Chief Executive Officer

    John Simmons began his career in 1976 by joining multi-national Deere & Company. In 1983 Mr. Simmons began a lifelong pursuit of entrepreneurial activities by founding (or co-founding) three companies in succession - Contour

    Window Fashions Ltd., InsulPro Industries Inc. and Integrated Paving Concepts Inc. - each of which grew from startup to become TSX listed. In 1998, Mr. Simmons briefly stepped away from operating management and founded JC

    Simmons & Associates, Inc., which participated, directly or indirectly, in the early stage financing of several companies including Aspreva Pharmaceuticals, Protox Therapeutics (now Sophiris Bio) and Contigo Systems.

    In 2000, Mr. Simmons was appointed CEO of TSX listed Bridges Transitions Inc. a position he held until its sale in 2006. Following this assignment Mr. Simmons returned to Integrated Paving Concepts Inc. as its CEO and led it to a successful restructuring and turnaround. Between 2011 and 2013 Integrated Paving spun out and divested two of the company's brands and businesses which were followed by a concluding sale in 2013. In 2008 Mr. Simmons acquired Boulevard Magazine. This company was sold to Black Press Group in 2013. Source: Annual Report.

    Their initial goal was to stop the red ink and get the company back to profitability.

    After that, John stated that the company was in 7 market segments but that they are too small in each of those to be secure. They plan to expand the most promising sectors through organic growth and acquisition. Solar is a primary target.

    Towards that end: on July 2, 2014 CMHXF announced that it completed a merger with SOL Inc., a privately-owned Florida-based company that designs, manufactures and sells solar outdoor LED lighting solutions ("SOL"), pursuant to which SOL has become a wholly owned subsidiary of CMHXF.

    "The acquisition of SOL speaks to CMHXF's belief in the growth potential for solar powered outdoor lighting" said John Simmons, CMHXF's President and Chief Executive Officer. "Combined with SOL, CMHXF becomes a far stronger competitor in the market with greater capability to serve an expanding global customer base."

    Under the terms of the Merger Agreement, CMHXF will issue approximately 37,858,606 common shares of CMHXF valued at $7.5 million.

    In its first quarter results (period ending 3/31/2014), CMHXF was able to grow Revenues from $6.965 million in 2013 to $9.119 million in 2014. Its Operating Income went from ($.694 million) to $.521 million.

    Income Before Taxes went from ($.710 million) to $76, 000.

    In a little over a year, they have managed to achieve breakeven.

    The addition of SOL should serve to bolster their successful performance

    Their second quarter results will be issued on August 8, 2014.

    The one analyst that follows CMHXF has a revenue target of $39 million for 2014 and $49 million for 2015.

    Post the SOL acquisition their share count should total around 170 million shares but they are setting up for a 10 for 1 reverse split.

    On 7/13/2014, John Simmons, Chief Executive Officer of the Company, commented "One year ago we began a process to restructure and refinance the Company. During this period we have grown revenues, improved margins and lowered operating costs, all of which have served to restore profitability. In that time we have also raised approximately $12 million to bolster our balance sheet and have completed the acquisition of Sol, Inc. The consolidation of our common shares is an important milestone for Carmanah. It signals our view that we have completed the restructuring process. We are now shifting our focus to a strategy of profitable growth both organically and by way of acquisitions."

    CMHXF announced today that it intends to complete a consolidation of its common shares on the basis of (1) post-Consolidation Common Share for every ten (10) pre-Consolidation Common Shares. Following the Consolidation, the Company will have approximately 16,977,062 Common Shares outstanding.

    Often, share prices fall back for a period following a reverse split, this could be an excellent time to begin accumulating shares in CMH.TO should this happen.

    What's in the future?

    I think management will continue to pursue their acquisition strategy.

    The company has substantial access to capital via Sonnefeldt, the other directors and TIGER21.

    They have cleared the break-even hurdle.

    Management has executed brilliantly in a very short period of time.

    I don't see any reason why their success should not continue to grow.

    This is a very small company - even modest accomplishments over time can make for very large returns.

    The next earning report with the inclusion of SOL should prove to be good reading.

    Investors today are not paying far above the price the major investors paid to establish their positions.

    The investors and shareholder have their future goals and rewards well aligned with each other.

    Technically - the stock seems poised to soon break through the shoulder line at $.30 this could mark a major trend change for the stock price.

    CMHXF is an interesting company, with excellent management, well aligned with shareholders, and very early on in its growth phase. It's highly leveraged to management's talent but isn't that always the case?

    Most of all, it seems highly unlikely that an executive of the caliber of Michael Sonnefeldt with the contacts, resources and money that he has at his disposal would be wasting his personal time on such a tiny enterprise unless he saw a major payoff in the future.

    They have already seen their stock double over the last year. I think this is only the beginning of something that could end up being really big.

    Disclosure: The author is long CMHXF. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: I am long at $.12 - but I did not buy enough.

    Aug 04 11:31 AM | Link | 1 Comment
Full index of posts »
Latest Followers


  • $TNXP A little disconcerting to see the other biotechs bounce but not TNXP.
    4 days ago
  • $TNXP Another insider buy
    6 days ago
  • $TNXP Does TNXP have any exposure under the proposed legislation? It is using a repurposed and reformulated drug.
    Sep 25, 2015
More »
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.