Over the last couple of days I've been looking at Petrobras (PBR), and there are some conclusions we can draw from looking at one simple ratio chart.

First, though, the basic price chart. Here it is from 2007 to date...

1) Show them a 1923 Silver Dollar (I have one right here). 
 
2) Ask them how much silver is contained in the coin. 
 
3) Congratulate the first one that says 24 grams (precisely it's 26.7g and 90% pure silver = 24.03g). 
 
4) Ask them how much the contained silver is worth today (making sure you're not talking about its collector's value; my example has been valued at around U$300, but a truly perfect mint example of the "freedom dollar" can go into the thousands). 
 
5) Congratulate the first one that says "over ten dollars" (in fact, using today's $13.76 London silver fix and doing the necessary calculations, it works out at U$10.63). 
 
6) Ask them how much it seems the silver in that dollar has risen in dollar value in the 85 years since it was minted. 
 
7) Congratulate the first one that says "over 90%" (90.6% if my quick math is correct, but there are a couple of variables), and then go on to say that apparently, and according to the pretty empirical evidence shown by that silver coin, it sure looks like the dollar has lost 90% of its value in the last 85 years.  
 
8) Ask them to look around. Check the room, the street where they're standing, the city and the people. Ask them whether there has been a general improvement in the standard of living in the last 85 years, considering the economy, healthcare, education, technology and any other measurement by which we tend to gauge that thing called "progress".  
 
9) Ask them why they think the financial system will collapse if the hated fiat dollar loses another 90% of its worth in the next 85 years. 
 
10) After a few minutes, I will guarantee that you need to tell one of them, "No, it's not a trick question."

I was sent this link yesterday by A.N. Other with the message "what do you think?” Well, the answer is that I think it's just another waste of bandwidth talking about a trade that somebody uses as evidence for an 'it's not fair' pet theory. Part of the report had this chart...

When any company, not just Fortuna Silver Mines (FVITF.PK), issues several news releases that contain substantive and positive developments on several fronts, the prices for its products recover and the share price proceeds to dump by up to 20%...

click to enlarge

I'm not a goldbug. Way back on April 16th I wrote as part of this post, "Give me a fundamentally sound reason to buy the dollar, and I will." I don't belong to the world of kneejerk hatred of fiat currencies, conspiracy theories and suchlike. For one thing, there's a big difference between the utopian world of the perfectly smooth capital market (doesn't exist) and the wholesale manipulation paranoia promoted by GATA and company. For me, being dollar bull/dollar bear is all about the macrofundies, and up to now the structural weaknesses in the dollar have precluded me from buying into the currency. At the same time gold has seemed to me a far better alternative as a means of capital preservation. 

This has worked well for me in the last three years. I bought bullion at U$451/oz, and I'm a million miles ahead of the person who put his dollars into a time deposit account and now wants to buy a few ounces of gold. However the trade has obviously unwound somewhat in the last month. The dollar index [USD] has moved from under 72 to over 77, and at the same time gold has made its headline-making plummet to under $800/oz. 

An important change is coming to the London Metal Exchange [LME] in September. As from September 29th, the biggest and by far the most important copper trading ring in the world is extending future contracts on the red metal to 123 months out, i.e. 10 years into the future. Presently, copper futures contracts at the LME are available up to 63 months into the future. The LME is also extending contracts on Aluminium to 10 years, and Zinc, Lead and Nickel to 5 years. Therefore what follows can equally be applied to the Alu sector, and also in part to Zn, Pb and Ni, but for the sake of simplicity (I ballpark quite a lot through this post out of necessity, as you'll see), I'm going to stick with copper as my example.

Here's the current 27 month futures price chart for copper:

Not a nice thought for most, I'd venture. The reason is that due to the political process in Peru it's likely that the political debate needed on the main point of protest amongst the miners isn't debated until the 26th. At the moment, congress is in recess, and only the permanent parliamentary commission is sitting. And according to this report, the 'Union Por el Peru' [UPP] political party is against this law being debated by the permanent committee and insists it is debated by the full congress. As UPP holds a chunky 20 seats in a Congress of 120 (the biggest block is only 36 seats big... it's a pretty fractured congress), this opinion may well be enough to halt all progress.

In the words of UPP spokesperson Oswaldo Luizar:

Peru's miners are on indefinite strike as of Monday, June 30th. That's the message from the syndicate leaders, and the whole thing is about better pay, conditions etc etc. Those with holdings in Southern Copper Corp (PCU), Compania de Minas Buenaventura (BVN) and other miners with Peru exposure such as Freeport-McMoRan (FCX) need to know how the land lies on this issue.

The threat of this strike has been rumbling for quite a few weeks, and up until the recent Moquegua protests I was a little cynical about the whole deal. For one thing miners (in general) in Peru get paid very well for their labours compared to the national average salary, with much of that pay is locked up in the profit sharing laws (which hand out 8% of gross profits to employees, with some ceilings to the program). Basically, they make this anything more than a gesture strike and they get hit hard in the back pocket.

Weird timing. I pick up on Inca Pacific [IPR.V] (IPRFF.PK) on Sunday and yesterday the company announces another very positive piece of news. Kinda reminds me of what happened to GLQ.TO when I posted on it*... nah... let's not dream down that lane today.

I like Eric Sprott. A straight shooter, a darned good stockpicker, a successful investor. You know where you are with the Eric dude. So the fact he owns a tad under 50% of Inca Pacific (IPRFF.PK) can only be a good thing, right? He originally took a 50+% position there, but at no point asked for a seat on the board or tried to put one of his dudes there to dictate matters. He basically said, "I like the deal, I'm buying in, now go make me money." And since then he's doubled down on IPR by buying large chunks of the subsequent placements. No doubt he still likes the company.

Thus, knowing that Eric sees Inca Pacific and its large copper/moly project at Magistral, Peru, the same way as me keeps me warm at night, but there is a downside. Sprott isn't the kind of dude who will sell his stock back to an eventual buyer for a 10% gain or similar; in my opinion he won't part with his large chunk of IPR for under $3, and even then I'm probably lowballing the deal. So with the stock fiddling around the $1.50 to $2 range, a potential buyer will not be interested in paying such a high premium to current market value, methinks.

After the bell Wednesday, Southern Copper Corp (PCU) announced a 3 for 1 stock split to happen July 10th to shareholders of record 30th June (i.e. end 2Q08). I'm not a fan of these things, but some traders play the bumps made by hot splitting stocks and swear by the action it gives them. The downside to splitting a stock with a fairly low amount of shares out (it’ll still be under 900m once it’s all over, and the vast majority will still be in owner/institution hands) is that it gets more vulnerable to short selling. Whatever happens, it sure doesn't affect the underlying fundamentals, so I don't care that much. Anyway, the company is doing it, so be it, and we'll see what's what as the big day approaches. Message to Biiwii: Gary... you got a TA view on splits?

Meanwhile, here's a chart I put together once I'd realized something about yesterday's action.

Well, it makes more sense than 'one trick pony' Freeport-McMoRan (FCX) (59% of earnings copper, and heavily dependent on its Grasberg pit).

While the permabulls bluster and cheer on "their stock" from the sidelines (you can tell when people are fully bought in...that's when they shout the loudest) and rip into anyone that dare tell them anything bar 'you must buy BUY BUY...anyone who buys this stock is just so clever, like....dude', signs from people that really know about MercadoLibre (MELI) aren't so great.

President and CEO of MELI, Marcos Galperin, sold 96,895 shares on June 9th at $41.62, and another chunky 280,099 shares at $38.40 on June 10th. Here's the link to the SEC form explaining all. Y'know, maybe Marcos is reading this blog, checking out my plans for a MELI buy at low prices and thinking, "Hey, dat Otto gotta point....I can pick 'em up cheaper later.....".

Four times in the last few weeks I've been presented on a platter with the name Colossus Minerals (CSIMF.PK), and four times I looked at the evidence and dismissed it virtually out of hand. That was a mistake...a big, big mistake. Here's why:

Strike One: The Midas Letter written by James West on March 14 made a really big write up of it, going into the history and potential of its Brazilian 'Serra Pelada' (bald hill) project. Here's the link, so go look for yourself. I read it. Ignored it. Dumb, dumb Otto.

A very interesting press conference was given by Ecuador's Mining and Energy Minister, Galo Chiriboga, yesterday. The conference (patchily covered in this Reuters Español note) was called to announce the reversal of a large amount of concessions, but then in the Q+A afterwards he gave some idea of the new mining law and how it's coming together. Here's what happened in the presser:

First, the ostensible reason for the press conference. Ecuador's government has 'reversed' (i.e. taken back) a total of 1,138 mining concessions since April 18th, which represent over two million hectares of surface area. The reversed concessions have so far been limited to those that were behind in necessary payments, though Chiriboga said that there would be more reversals to come.

Back in March I wrote this post about Mercado Libre (MELI), Latin America's answer to eBay (EBAY) (or so we're told by.....errr...Mercado Libre). Since then I've mentioned it again, particularly when its 1q08 results totally sucked and when I shorted it some.

Well, it seems those slowcoaches at Barron's have cottoned on to the fact that MELI is just a hypemachine. Regular reader DH sent me this article that was published in Barron's on the 4th of June (thanks DH) that calls into considerable doubt the current valuation of MELI. Go read the Barron's note yourself, but the final paragraph reprinted here just about sums up the feeling:

A few days ago a reader wrote in, noted that I liked Aurelian Resources (AUREF.PK) but I didn't seem to have an opinion on Corriente Resources Inc. (ETQ) [CTQ.TO],  and wondered why. It's a fair question, and it was a bit rude of me not to answer. (I do appreciate it when people take time out to write mail.) My only excuse is that it slipped my mind (not a great one, but honest). So for what it's worth, here's my opinion on Corriente.

Here's a big fanfare-type note on Bloomberg recently featuring two performing monkeys in Canada who decided to announce the totally obvious about Candente Resources [DNT.TO] (CDOUF.PK). This is presumably because their bosses at the big Canadian brokerage houses have filled up enough at the cheap prices and have told their "everso everso independent and free-thinking" analysts to pump the stock to the little people (errr...that means you, dude).

It had to happen, didn't it? With the combination of the sharp rise in oil prices combined with the ratcheting up of anti-Chavez rhetoric seen in the past few weeks (for example the FARC laptop baloney that is now unravelling), it was only a matter of time before the business world got in on the act.

It has fallen to Martin Hutchinson to float the idea. In this article at Prudent Bear dot com, he goes through the current problems with oil and after a few numerical twists and turns get to the point:

I was totally unimpressed with the Mercado Libre (MELI) earnings last week, but that didn't stop the sheep from buying the stock back up to U$55. As mentioned before, I covered my MELI short at a very small profit rather than fight the tide of illogic. I've looked at the company previously, but a few days ago a reader mailed me and said something along the lines of "What about NETC, dude?", and he was spot on with the call. Let's have a look at a much better LatAm company than the overhyped MELI.

Net Servicos (NETC) is a cable TV/internet/phone company in Brazil. In fact it's the biggest single cable player in Latin America. In its Brazil market it maintains a 46% share of the pay TV market, and it has a rising 17.5% share of the broadband internet market. It has recently started one of those fashionable 3-in-1 "triple play" packages for clients that offer cable TV, internet and fixed line phone in a single package, and the growth shown so far has been very good.