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Maxe Paul
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I adopt a highly cynical yet humorous view of financial markets. I am a firm believer that you can never ask too many tough questions in order to obtain the answers that really count.
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Maxe Paul
  • The Bitcoin Bubble.

    What is the best performing currency in 2011?, if you answered the Australian dollar or maybe the Norwegian krone you would be wrong on both fronts, its actually the Bitcoin which has risen from a US dollar exchange rate of  $0.06 on 10/07/10 to $31.00 odd dollars on Friday 06/10/11 before crashing up to 30% back towards $20.00 and recovering at the end of the day to around $24.00, making the Dow Jones -1.42% look pedestrian in comparison.

    So what is Bitcoin?, Bitcoin is an Internet currency that uses a P2P architecture for processing transactions avoiding the need for a central bank or payment system.
    According to wikipedia,

    "Bitcoin is a digital currency created in 2009 by Satoshi Nakamoto. The name also refers both to the open source software he designed to make use of the currency and to the peer-to-peer network formed by running that software.

    Unlike other digital currencies, Bitcoin avoids central authorities and issuers. Bitcoin uses a distributed database spread across nodes of a peer-to-peer network to journal transactions, and uses digital signatures and proof-of-work to provide basic security functions, such as ensuring that bitcoins can be spent only once per owner and only by the person who owns them.

    Bitcoins can be saved on a personal computer in the form of a wallet file or kept with a third party wallet service, and in either case bitcoins can be sent over the Internet to anyone with a Bitcoin address. The peer-to-peer topology and lack of central administration are features that make it infeasible for any authority (governmental or otherwise) to manipulate the quantity of bitcoins in circulation, thereby mitigating inflation."

    Bitcoin is infact a virtual currency in which comparisons to eGold and its failure most likely come to mind, Bitcoin though has gained huge traction lately as a legitimate online currency in which to purchase real goods and services over the Internet, and it would appear the latest spike in Bitcoin value was fueled by an article in which Google released an open source Bitcoin client adding a certain level of legitimacy and new awareness to the once obscure currency.

    So what caused yesterdays large fall in Bitcoin value? It would be easy to point out that given the large increase in Bitcoin value over the last year that this was a bubble waiting to be popped and the news that surfaced on Friday was indeed "Bitcoin Bearish" with reports published by several media outlets that U.S. Senators Want to Shut Down Bitcoins labelling it "the Currency of Internet Drug Trade". This aggressive stance by US authorities appears to have come about by revelations that celebrity hackers "Lulzsec" are funding their hacking of targets which include amongst others Sony, PBS, FOX and (ironically) the FBI by Bitcoin donations.

    Although most likely near impossible for US authorities to actually shut down Bitcoin due to its virtual nature and wide global reach US authorities could certainly wage a protracted media campaign against its use which undoubtedly would lead to a further selloff in Bitcoin value going forward.

    For those interested in Bitcoin the largest Bitcoin exchange is MtGox which recorded its largest ever volume with Fridays peak record price and the ensuing sell off that followed that day resulting in the 30% decrease in Bitcoin price from the days earlier peak value, according to their website MtGox plan to introduce margin lending, options trading and even the use of dark pools for advanced trading in Bitcoins. There are now many numerous exchanges operating in the Bitcoin marketplace and charts of Bitcoins remarkable rise in value over the past year can be viewed at bitcoincharts.

    At this point we can safely say that trading or investing in Bitcoin is not for the faint of heart, It is probably to early to say whether Bitcoin will go the way of other virtual currencies and prove nothing more than a complex Ponzi scheme albeit very well designed, or whether Bitcoin can survive and thrive as an alternative online currency beyond the manipulation of the worlds central banks and governments.
     



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jun 11 5:00 AM | Link | 1 Comment
  • Bougainvilles Panguna Copper/Gold Mine to reopen?
    Bougainville's Panguna Copper and Gold mine rates as one of the most complex and intriguing gold and copper mine stories dating back to its inception as a mine back in the early 1970's, building the mine was a sheer marvel of modern engineering at the time, literally taking the top off a mountain located in the middle of dense jungle terrain.
     
    When the Bougainville Copper Limited (BCL) mine was closed in 1989 due to sabotage from former Bougainville employees and BRA (Bougainville Revolutionary Army) members due to mine royalty disagreements (amongst other tensions) it was the largest open pit mine in the world.........it was big! 

    Proving just how large the mine project was in its heyday there is even a website that is devoted to the former workers of the mine and the long lasting friendships between "mates" that worked in such an inhospitable environment creating such a mammoth mine, riverbendnelligen.com.

    Those of you in your 30's or older such as myself may only remember intermittent news stories of constant bloodshed in Bougainville due to a civil war lasting approximately 15 years centred around a fight for independence in which the Panguna mine was one of many issues culminating in the loss of thousands of lives of Bougainvilleans and PNG defence force personnel. Those of you in your 20's may never have even heard of Bougainville, let alone the Panguna mine, those of you who are considerably older may remember Bougainville was a key location where American and Australian troops helped fight off the Japanese in WW2.

    To cut a long story short, the mine has been closed for 21 years and to this day BRA soldiers still guard the mine preventing anyone from entering the mine site other than BRA approved persons. Current estimates of the companies mining tenement reserves according to Bougainville Copper Limited (BCL) are approximately 1 billion tonnes containing approximately 0.3% copper and 0.4% gold, although not of the highest grade copper content the size of the resource more than compensates for the grade, and given current gold prices you could well argue that this would primarily be a gold mine with copper credits!

    Over the last several months the current "closed mine" policy has dramatically appeared to change, elections in Bougainville back in June resulted in a new president of Bougainville being elected to replace former BRA member and president of Bougainville, James Tanis. The new president, The Honourable John Momis (a former priest and PNG minister of Parliament), was democratically elected by the people of Bougainville in what was widely reported as a peacfull and fair election process.

    In only two short months of being in office Momis has shown himself to be a formidable proponent of re opening the Panguna mine as a means to substantiate Bougainvilles autonomy from PNG and ultimately the economic base to support Bougainville as a fully fledged independent nation by 2015, It would probably be fair to say that the rebuilding of the Panguna mine would coincide with the rebuilding of a nation formally economically crippled by civil war.

    Things have progressed so quickly that even the owner of the mining lease and former mine operator, Bougainville Copper Limited (BCL) has announced to the market (trading on the ASX as stock symbol BOC) that the government of Bougainville "has shown early signs that it is interested in reopening the mine provided local land owners are in agreement".

    The next stage is for the traditional landowners to form a collective in which the BCA (Bougainville Copper Agreement) will be discussed, plans are afoot to commence this before years end, plans are also underway for the Panguna mine affected landowners to visit operating mines in the country to see how the mining industry has developed from the experiences of the once world class mine.
    The mines planned to be visited include Lihir in the New Ireland Province, Porgera in the Enga Province and Ok Tedi in the Western Province

    Currently shares of BCL trade in the USA under stock code BOCOF, on the ASX in Australia under stock symbol BOC and in Frankfurt Germany under stock code BOU1. BCL was also trading in the USA under an ADR (deposit receipt) arrangement though this formally ceased earlier this year, currently shares trade at around 75 cents.

    There is a large number of European shareholders on the register and they even have their own website, bougainville-copper.eu, dedicated to the company which provides the latest news from Bougainville on a daily basis. According to their website "Bougainville Copper Limited (BCL) has 401.062.500 shares outstanding. More than 70 percent of these shares are owned by Rio Tinto or the Independent State of Papua New Guinea. Almost 30 percent of the shares are traded on international stock markets, mostly in Sydney and Frankfurt/Germany."

    One could write a book on the Panguna mine and Bougainvilles civil war, though SA would not be the place for such a thing, with this in mind i would refer any readers who are interested in knowing more about the Panguna mine to check out the exceptional analysis of professional investor Sven Lorenz at Undervalued-Shares.com, where you will find the most intricate in depth valuation model/s of a possible restarted Panguna mine.

    In closing i suggest that there would not be many instances today in which you would be able to invest in a 1 billion tonne copper/gold resource at pennies in the dollar and simultaneously underpin the future development of a nation such as Bougainville should the Panguna mine be reopened.




    Disclosure: Long Bougainville Copper Limited (BOC)
    Aug 16 2:55 AM | Link | 12 Comments
  • 1000 point move? Food for thought.
    In the US ETF's (exchange traded funds) are all the rage, they have them in every basket and leverage the things up 3X in some cases.

    I have never liked them myself, you wont ever get rich buying one of these things.

    In some cases they pile in like lemmings on commodities like oil ETF's which have rollover costs and they perform dismally, limited upside and large downside, check out USO for example.

    Now, if we consider that thousands of people by into these ETF's, for example that has a basket of smaller stocks and those stocks are thinly traded, normally when those thousand people sell the one stock it is done over many days if not weeks, now imagine if these people all sell the ETF in a short period of time, at some point the manager of the ETF must sell the stock/s, it is more than likely it will be done in a block trade.

    Now what happens when you sell a huge block trade of a thinly traded stock?

    It drops like a stone, 1000 point move?

    Food for thought.


    'Disclosure: No positions'

    Disclosure: Nill
    May 10 12:24 AM | Link | Comment!
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