Sunday, September 30, 2007

Will Google miss expectations again?

Please note that Google's traffic is rising going into Q3, but less then Yahoo!'s. YouTube monetising and margins seams to be way below in order to improve Google's total picture. If industry insider is talking about Yahoo!'s flat Q3 in ads revenue Google will be under pressure to meet this Q3 expectations. EPS expectations are down to 3.74 from 3.75 in last 30 days. Somebody is already "talking down" expectation which is not a good sign particularly after CFO sudden decision about "retirement". It was not very much publicised fact that Google actually missed last Q2 expectation in EPS with actual 3.56 against expected 3.59: negative surprise of -0.8%. It was a clear change of trend with "normal" positive surprises to the upside from the Company. Nobody talking ofcause in Bubble Media about already apparent deteriorating fundamentals and slowing growth in financials results this year:
More on WEB 2.0 Bubble and Google:

Saturday, September 29, 2007

Silverstone Completes Purchase of All the Silver From Lundin Mining's Neves-Corvo and Aljustrel Mines

Lundin deal is closed:

"VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Sep 28, 2007 -- Silverstone Resources Corp. (CDNX:SST.V - News) ("Silverstone") is pleased to announce that it has closed its previously announced deal (June 6, 2007) with Lundin Mining to purchase all the silver production from Lundin Mining's Neves-Corvo and Aljustrel mines in Portugal for life of mine"
More on Silverstone Resources SSt.v:

Friday, September 28, 2007

Sterling Common Shares to Commence Trading on the TSX

"WALLACE, IDAHO--(MARKET WIRE)--Sep 28, 2007 -- Sterling Mining Company (OTC BB:SRLM.OB - News)(Frankfurt:SMX.F - News) announces that further to the conditional approval of the Toronto Stock Exchange ("TSX") to list its common shares (see press release dated August 2, 2007), the Company has now satisfied all conditions of the TSX, such that the common shares of Sterling will commence trading on October 2, 2007 under the symbol "SMQ"."
Major Exchange will open Sterling Mining SRLM.ob to new buyers on institutional level who are not allowed invest in OTC markets. With its production development on track we will have hot Christmas:

Silverstone Resources SST.v Denver presentation

New Silver Wheaton in the making:

MC 230 mil
0.700 Moz in 2007 up to 3 Moz of Silver sales in 2009
Resources over 300 Moz with historical
FCF in 2010 30 mil
Largest shareholders Lundin Mining 19% and Capstone Mining 22%

Silver Wheaton Denver presentation

Register, it is worth it:
Listen and learn, unique business model: option on rising Silver Price without time decay.
Only one remark: it is NOT the only pure silver company any more check out Silverstone Resources SST.v.

Thursday, September 27, 2007

Lundin Mining LMC Daily at Buy

Gold Bugs Index HUI Break Out after retesting resistance

Google GOOG Madness in WEB 2.0 Bubble

You can buy all Gold mining companies in Gold Bugs Index HUI plus couple of Oil companies for the price of One Google. What will happen if tomorrow there will be no WEB PAGE GOOGLE.COM?

US Dollar: Nobody Loves Me Anymore

Avino Silver drills 1,037 g/t Ag over 5.5 metres

"Avino Drills 5.5 Metres, 1,037 grams/tonne (33 ounces/tonne) Silver, 3.69 g/t (0.1186 oz/t) Gold Which Includes 1.45 metres, 3,908 g/t (125 oz/t) Silver, 13.71 g/t (0.4408 oz/t) Gold"

New Discoveries beyond the mine:

More on Avino Gold and Silver Mines ASM.v:

Tuesday, September 25, 2007

Jim Rogers on commodities and US Dollar

Commodities are going much, much higher:
Apparently he is not giving too much credit to "clowns in Washington" and their actions are killing US Dollar.

Monday, September 24, 2007

Mantle drills 27.61 m of 12.2% Zn, 2.99% Pb at Akie

"Mantle Resources Inc.: Assay Results for Hole A-07-43Monday September 24, 2:15 pm ET
27.61 Meters Grading 12.20% Zinc, 2.99% Lead, 20.01 g/t Silver
Akie Property, B.C.
VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 24, 2007) - Mantle Resources Inc. (TSX VENTURE:MTS - News; FRANKFURT:A0F7E1 - News; the "Company"), is pleased to report the following assay results for hole A-07-43, the first hole completed during the 2007 exploration program currently underway at its 100% owned Akie zinc-lead property, located in northeastern British Columbia, approximately 260 kilometers north-northwest of the town of Mackenzie.
Hole: A-07-43. (Az: 055 degrees; Dip: -81 degrees; Grid: 3400S/0105W; Elev: 1429 meters; End of hole: 629.72 meters)"

It is one of the strategic investments by Lundin mining LMC.

Sterling Mining SRLM.ob Sunshine mine opening is scheduled for December 2007

"BIG CREEK, Idaho, Sep 23, 2007 (The Spokesman-Review - McClatchy-Tribune Information Services via COMTEX) -- The Sunshine Mine bustled with activity Saturday morning, a forerunner of things to come.
Accompanied by the rumble of heavy equipment, men in hard hats scurried back and forth across the mine's "Main Street," a cement courtyard that leads to the portal, hoist room, maintenance shop and employee lockers.
Come December, "you won't be able to stand at the bottom of that stairway at shift change," predicted Mike McLean, the Sunshine's general manager. "You'd get run over by people heading out to their cars."
Sterling Mining Co. anticipates reopening the Sunshine Mine in December with a staff of 125. It's a second chapter for the underground silver mine, which closed in 2001 amid the financial troubles of a previous operator. "
More on Sterling Mining SRLM.ob:

Sunday, September 23, 2007

Cramer's 'Mad Money' Recap: Pedal to the Metals

Crowd is a crowd: I hope that all other fox have taken position already in advance. I like particularly that Lundin Mining LMC is "a sexy speculative buy".

"After the Fed's rate cut, it's time for investors to make some speculative mining plays, Jim Cramer told viewers on his "Mad Money" TV show Friday.
The half-point cut on Tuesday has raised the value of hard assets against paper money. Additionally, lower Fed rates lead to higher economic activity, which leads to more consumption of metals, Cramer said.
For a sexy speculative buy, Cramer recommended Lundin Mining (LMC - Cramer's Take - Stockpickr). Although the company has had its ups and downs, Lundin now deserves "two thumbs up."
Lundin has major exposure to four metals: zinc, copper, nickel, and lead. After acquiring Tenke mining and Rio Narcea earlier this year, Lundin is bigger than ever. By purchasing Rio Narcea and Tenke, Lundin has increased its nickel and cobalt exposure, Cramer said.
Asian consumption of zinc "continues unabated," driving up zinc's price by 3% this week, Cramer said. Lundin has captured this price rise, so its earnings should increase. With China and India importing record amounts of zinc and nickel, respectively, the increase in demand should continue. Additionally, Lundin has seen some insider activity. Lundin is a great buy at $12 per share, Cramer said."

Thursday, September 20, 2007

Lundin Mining LMC CEO interview

Prices for commodities will remain strong.

Will the company stay independent?

Lundin Mining to Commence Trading on NYSE at Market Opening on September 20, 2007

"VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Sep 19, 2007 -- Lundin Mining Corporation ("Lundin Mining" or the "Company") (Toronto:LUN.TO - News)(AMEX:LMC - News)(OMX: LUMI) is pleased to announce that its common shares will commence trading on the New York Stock Exchange ("NYSE") under the symbol "LMC" at the opening of the market on September 20, 2007.
The Company will participate in the opening bell ringing ceremony at the NYSE. To view a live webcast of the event please use the following link which will become active at approximately 9:25 a.m. EST on September 20, 2007"
This company will benefit from US Dollar collapse and is one of the prime candidates for take over bid in my opinion. It is more safe play then other Junior mining companies mentioned on this blog.
More on Lundin Mining:

Fears of dollar collapse as Saudis take fright

This is truly historical development: End of US Dollar as Reserve Currency of Choice:
"Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East."
"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.
"Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said.
The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg."

Remember? It is another sign in the picture:

Avino Drills 1.50 Metres, 1,511.8 g/t Silver, 15.77 g/t Gold at San Gonzalo

Another high grade results from recent exploration: capitalisation of this company is roughly equal to its hard assets: equipment and constructions, without any credit for resources at all. Company is in the process of preparing resources estimate. management is definitely pleased with the progress and adding second drill to the property:
"Avino Silver and Gold Mines Ltd. has added a second core drill to its program at the large Avino property located 80kms north east of Durango, Mexico.
The first drill continues to explore the San Gonzalo zone. It is currently drilling Hole 31 at that zone.
The second drill started at the beginning of the month and has currently completed two holes on the ET zone on the main Avino Vein. This is the zone on the main Avino Vein from which the company mined 1975-2001.
A program of 11 holes are planned to explore the ET zone below the 11 1/2 level where production ceased in Nov 2001.
Avino is pleased to announce results of a further four holes at San Gonzalo (20 through 23). (Locations can be viewed on the Avino website)."
More on Avino Gold and Silver mines:

Credit Suisse Raises Gold, Silver Forecasts on Supply, Dollar

By Saijel Kishan
Sept. 20 (Bloomberg) -- Credit Suisse Group, Switzerland's second-biggest bank, raised its 12-month forecast for gold, silver and other precious metals because of supply shortfalls and a decline in the value of the dollar.
Gold may trade at $730 to $770 an ounce, compared with the Zurich-based bank's previous forecast of $670 to $720, according to a report yesterday by Tobias Merath, Credit Suisse's head of commodity research.
Silver may trade at $13.50 to $14.50 an ounce compared with the bank's previous forecast of $12.50 to $14.50. Credit Suisse said that platinum may trade at $1,400 to $1,600 an ounce, up from a range of $1,250 to $1,450.
Palladium may trade at $310 to $350 an ounce, compared with $300 to $340, the bank said.
Gold for immediate delivery was at $729.17, silver at $13.1462, platinum at $1,312 and palladium at $335 as of 9:25 a.m. in London.

Wednesday, September 19, 2007

Silverstone Updates Silver Reserves and Resources at Lundin Mining's Neves-Corvo and Aljustrel Mines

It is very important development for new Silver Wheaton SLW in the making: Silverstone Resources SST.v effectively controls 207.6 Moz of Silver just in this one agreement. Update of Capstone Mining's Cozamin resources which is due in September 2007 will add more to this resource base. Silver cost is fixed at 3.9-4.0 USD per oz. Company is working on its own resource base in Mexico which has historical indication of more then 100 Moz. First silver revenue from Lundin deal will pour in on September 28th, 2007. Small junior will become second pure silver play with revenue stream from silver sales and with fixed cost base: it is option on rising silver price without time decay. Main shareholders are Capstone Mining, Lundin Mining LMC and couple of investment funds: shares are very tightly held.
"VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Sep 17, 2007 -- Silverstone Resources Corp. ("Silverstone") (CDNX:SST.V - News) is pleased to announce that it has completed its updated technical reports on Lundin Mining's Neves-Corvo and Aljustrel mines located in Portugal. The National Instrument 43-101 compliant technical reports were prepared by Wardell Armstrong International, for Silverstone titled Technical Report on the Neves-Corvo Mine, Southern Portugal dated August 2007, and Technical Report on the Aljustrel Mine, Southern Portugal dated September 2007."
More on Silverstone Resources:

Friday, September 14, 2007

China's planned economy will support commodities prices for decade to come.

Jim has nailed it:

"Important Dollar Considerations That Have To Be Added To The Formula Author: Jim Sinclair

Dear CIGAs,
Westerners do not understand China plans its economic future decades ahead, making all preparations for it. No Western country has any economic plan other than short term political rhetoric.
Since Western analysts have no clue about the depth of economic planning, they predict the consumption of China in raw material to be a product of China’s prior month's economic figures. Nothing could be further from the truth.
Diversification out of the US dollar by investment in raw material is part of the long term Chinese economic plan.
Since the Bank of China does not hold paper dollars, but rather US Treasury securities, such diversification will require bond liquidation.
As the dollars created by the sale of US Treasury securities are invested in raw material production, those dollars enter the international liquidity pool.
This type of diversification does avoid instant destabilization of the US dollar but clearly puts long term downward pressure on it.
It is well known that China officially has quiet interest in many of corporations, especially those operating internationally.
One only needs to follow the money to prove the above dollar negative long term thesis."

Commodities, Gold and Silver plays:

Important Market Observation for Lundin Mining LMC and Juniors

From Monty Guild:

Posted On: Thursday, September 13, 2007, 8:36:00 PM ESTMonty Guild's Global Market Commentary Author: Monty Guild

We have been bullish on gold, oil, base metals, India, China and transportation of energy and minerals for a very long time and that bullishness continues. In a recent email, I stated that we had become more cautious short term about the demand for base metals although continued to be long-term bullish. Our logic was that a U.S. economic slowdown in demand would impact the prices of base metals...and even though it takes many years to bring on new mines, a slowdown in U.S. demand would impact global prices.
Now after a few days of deep research and conversations with a number of economists, we have modified our position. It seems that the ship borne deliveries of many base metals and minerals are almost entirely imported by the fast growing countries like China; ship borne imports of many metals into the U.S. is not a large part of the global market. With the exception of copper and one or two others, most metals are not imported into the U.S. by ship in nearly as large quantities as they are imported into China and similar countries.
Because we continue to believe that a recession in the U.S. would not lead to anything more than a growth slowdown in the developing countries, we are once again short-term bullish on base metals such as iron ore, nickel, cobalt and others where the U.S. is not a huge importer. We will buy the companies that mine these metals on dips.

Also, for those of you who think more long-term take a look at uranium, which has suffered a big price decline. Perhaps not immediately...but over time, uranium prices will once again rise, as demand from nuclear utilities will be growing, due to the fact that more and more nuclear power plants are going to be built worldwide."

The most comprehensive comment on recent Markets. Gold, Silver, USD collapse, Subprime.

I am ready to delete this post immediately should Sprott consider it is in breach of their copyright.

Holdings of US Treasuries by Foreign Central Banks are falling further

According to Dan Norcini:

US Dollar will be under constant Selling pressure ss escape from USD nominated assets contunues.

Thursday, September 13, 2007

Sterling Begins Drifting on Silver Mineralization Exposed by Cross-Cutting at Sunshine Mine

Close to Sterling Mining SRLM.ob listing in Toronto we should expect more good news.
"WALLACE, IDAHO--(MARKET WIRE)--Sep 13, 2007 -- Sterling Mining Company (OTC BB:SRLM.OB - News)(Frankfurt:SMX.F - News) today reported that its mining crews have completed over 230 feet of drifting on a new portion of the Sunshine vein, that has been accessed from the new Sterling Tunnel and which was exposed during exploration cross-cutting in June and July.
Sampling by Sterling's geologists to date indicate a vein grade of 33.7 ounces per ton over an average of 0.9 feet true vein width for the entire length of the exploration drift.
Raymond De Motte, President stated "This initial result is very exciting, and adds to our projections that there is ore in the Upper Country area that has been either inaccessible to date, or not explored due to fragmented land ownership with prior operators. The Upper Country area, which is separate from the lower levels of the Mine and its silver reserves that are the focus of our return to production, is key to our continuing exploration efforts at Sterling".

Baja Mining Secures Underwritten Commitment for El Boleo US$515 Million Debt Financing

Good companies with strong management and real resources in Junior mining sector still can get financing, it is very positive for all PGM and commodities picture:

"The proceeds of the Facilities will be used to partly finance the development, construction and working capital costs of the El Boleo project (the "Project") located in Santa Rosalia, Baja California Sur, Mexico, which is 100% owned by the Company."

Google GOOG is fully exposed to the Recession Downturn in Advertisement

"Online Ad Recession Watch: Tracking The Signals
Henry Blodget September 12, 2007 7:24 AM
We continue to believe that we are likely nearing (or already in) the first stages of a cyclical downturn for advertising and the Internet sector--one that will affect not only start-ups and second-tier players but majors like Google (GOOG), Yahoo (YHOO), AOL, et al. Such downturns do not begin suddenly, and they are not instantly obvious (except in hindsight). Rather, as with the housing market, the environment changes gradually, over many months, with early signs slowly becoming a steady torrent of bad news."
These signs are all over Google's performance this year:

Wednesday, September 12, 2007

What Freeport-McMoRan FCX is going to Buy?

"Freeport-McMoRan Copper & Gold Inc. Announces Sale of International Wire & Cable Business for $735 Million"

It will be nice addition to 2.0 billion of cash according to recent filing.

"FCX is a leading international mining company with headquarters in Phoenix, Arizona. FCX operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. FCX has a dynamic portfolio of operating, expansion and growth projects in the copper industry and is the world’s largest producer of molybdenum. The Grasberg mining complex, the world’s largest copper and gold mine in terms of reserves, is the company’s key asset. FCX also operates significant mining operations in North and South America and is developing the potential world-class Tenke Fungurume project in the Democratic Republic of Congo"

Will Lundin Mining LMC fit the bill with its 25% in Tenke Fungurume? FCX knows Lundin group already and has another J/V with Fortress Mining FST.v

Gold Bugs Index HUI P&F Price Target USD 520.00

Newmont Mining NEM P&F Price Target USD 60.00

Streettracks GLD Gold holdings Up 51.51 tons in 4 days.

Dan Norcini reported:

Tuesday, September 11, 2007

US Dollar has entered WaterFall Zone

Google GOOG is sailing in Subprime heavy waters

Before chasing upside of 20% from here, print out two tables with Google financial results and ask yourself: will holders of Google with profits from 200 level sell into next earnings or wait for another confirmation of Slowing trend?
Q2 results 2007:

Q1 results 2007:

Google and Subprime:

Original posts:


Rainy Continues to Intersect Strong Gold Values

"Strong Gold Values in ODM and 17 Zone Drilling: 30.0 Metres Grading 2.04 g/t Gold, 10.0 Metres Grading 2.73 g/t Gold and 6.0 Metres Grading 5.98 g/t Gold"

Rainy River RR.v is still under recent Private Placement Price:

"VANCOUVER, British Columbia, August 2, 2007 -- Rainy River Resources Ltd. (TSX-V:RR) (the "Company") is pleased to announce that the Company has closed its private placement of an aggregate of 5,775,000 units of the Company (including full exercise of an over-allotment option consisting of 1,925,000 units) (the "Units") at a price of $5.20 per Unit and 840,000 flow-through common shares of the Company ("FT Shares") at a price of $6.00 per FT Share for gross proceeds of $35,070,000, as previously announced on July 18, 2007 (the "Offering"), all pursuant to an underwriting agreement between the Company and Canaccord Capital Corporation and Wellington West Capital Markets Inc. (collectively, the "Underwriters") dated for reference July 17, 2007."
You can get piece of action below Canaccord Capital which is worth studying. Development is interesting due to proximity to all infrastructure in the region. Website is here:

Sterling Mining SRLM.ob New Catalysis

August turmoil in the markets put on the second plan a lot of positive developments in Junior sector. Sterling Mining is ready for Run in Silver game. Graduation to Toronto Stock Exchange and start of production this year will move the stock back onto radar screen of investment public.

"August 02, 2007Sterling Mining Completes Private Placements And Receives Conditional Approval For Toronto Stock Exchange Listing"

"In addition, the Company has received conditional approval from the Toronto Stock Exchange ("TSX") to list its common shares on the TSX, subject to fulfilling all requirements of the TSX and filing of customary documentation on or prior to October 30, 2007."

Final Prospectus:

Monday, September 10, 2007

Hedgers are out of fashion in the Gold market.

First Barrick Gold and now NEWCREST to be Hedged is definitely becoming out of fashion. Additional demand for the Gold will push price higher.

Top Aussie gold miner to close out hedge book, restructure finances

"This latest big de-hedging by a major global gold miner, involves the close-out of hedge contracts totalling 2,049,017 ounces, though the company says it will purchase 2.25 M oz of gold put options equivalent to an average of 500,000 oz per annum over 4.5 years, beginning in January 2008. The strike price is $A800/oz ($US657.6/oz)."
""Newcrest intends to close out all its gold hedging contracts and gold loan embedded gold forward sales contracts totalling 2,323,642 oz for an approximate cost of $A842 M," said chief executive Ian Smith.
"Newcrest has pre-purchased 2.3 M oz at an average price of $A831 per oz to enable settlement of these contracts when the proceeds of the entitlement offer are received."
He said the company plans to temporarily leave the longer-dated gold bullion forward sales contracts in place. These would be closed out within 12 months, subject to the gold price, market liquidity and agreeing the terms with hedge counterparts."

Lundin Mining LMC has graduated to NYSE

"VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Sep 7, 2007 -- Lundin Mining Corporation ("Lundin Mining" or the "Company") (Toronto:LUN.TO - News)(OMX: LUMI)(AMEX:LMC - News) is pleased to announce that its common shares have been approved for listing on the New York Stock Exchange ("NYSE"). The Company expects it will begin trading on the NYSE on September 20, 2007 under the symbol "LMC"."

It is very positive development for the company and its Stock price. Company has met strict NYSE listing standards and will enjoy higher trading volumes hopefully. More fund managers and index funds will have to keep exposure to Lundin Mining and anticipation of this move will bring share price higher. Actual buying will provide new institutional shareholder base and will require more analyst following. Once the story will be told the Market's recognition of actual value of the company assets will be more apparent in rising share price.
"Lukas Lundin, chairman of the board of Lundin Mining, commented: "This is a proud moment for our company as it is a reflection of our growth and maturity as a global mining company. We have a large shareholder base in the U.S. and are very pleased to have received this important recognition of being accepted for listing on the New York Stock Exchange. We will continue to pursue our goal of becoming a major global mining house in the base metals sector and believe being on the NYSE will assist us greatly in our accomplishing this goal."

Saturday, September 08, 2007

Gold is moving Up and USD is breaking down? It is just the begining.

Thank you for coming. Gold is moving Up and everything else: USD, DOW, SPY and NASDAQ - down? If you are not surprised - this is your site. We are thinking aloud and are making some money here. Bad spelling and Grammar are downside, but read between the lines: you know all this stuff already - I am just putting it in one place. Consider it is like a Lab and research for IHPV. Invest your time before your money. Help me to learn. Read, study, share and post your thoughts. I am ready to share mine. First take some antidote from Bubble Media Madness: and welcome into Common Sense adventure.
I was busy lately buying into small names in Junior sector. After first initial excitement of public with Gold break out above 700 and big names like Newmont Mining NEM, Royal Gold RGLD, Silver Wheaton SLW, money will find its way into tiny Junior mining and exploration sector where the biggest reward for highest risk will be. Join me on the wild ride out of USD collapse and into Brand New World of opportunities:
First sharpen your saw and check yourself whether we are on the same page in big picture:
Secrets of trade to stay alive in the Slaughter House:
Few Research Ideas:
Yes, I think in the end rise in Silver price will be even more dramatic then in Gold due to tiny size of its market.

Thursday, September 06, 2007

Subprime slowly but surely is making its way to burst WEB 2.0 Bubble

Google will be affected as well: its slowing growth rate will fall of the cliff.

"NEW YORK (Reuters) - Shares in some of the biggest U.S. entertainment and media companies fell on Wednesday after Goldman Sachs downgraded its view on the sector to "cautious" from "neutral" due to concerns about the U.S. economic slowdown."

Copper developers ripe for consolidation

Near-term development projects offer better returns compared to producers, says Raymond James. Author: Tessa KrugerPosted: Thursday , 06 Sep 2007

Wednesday, September 05, 2007

Mortgage Impact on Google GOOG

From SAI
"Oppenheimer analyst Sandeep Aggarwal has weighed in on the mortgage-impact-on-online-advertising debate with a careful, lengthy analysis. Despite cutting estimates on Google (GOOG), Yahoo (YHOO), and other Internet leaders, Aggarwal remains "cautiously optimistic" about the mortgage situation. As described here, after performing a similar analysis, we remain cautiously pessimistic. The key differences between Aggarwal's analysis and ours are:
*Conclusion. Aggarwal cut estimates on Google, Yahoo, BankRate, and Valueclick based on the mortgage crisis, even though he believes the mortgage impact on these companies will be small. In our experience, once estimates start going down, they usually keep going down. We believe the mortgage crisis will have a ripple effect on other industries, such as broader financial services and retailing. We believe the full effect will take at least a year or two to play out and could be severe enough to cause Google, et al, to miss estimates in Q4. (Aggarwal, obviously, disagrees.)
*Different "financial services as percentage of online ads" estimates. Aggarwal bases his analysis on an IAB estimate that financial services accounted for only 16% of online advertising in 2006. We used a more recent figure of 34%, based on Nielsen impression counts for the month of July. Because financial services ads grew 79% in 2006 (growth that surely continued into the first half of 2007), we believe that Aggarwal's 16% figure is likely too low. Moreover, because the sector's growth rate was so high, even a slowing of growth (rather than a shrinkage) would affect the overall industry."

Monday, September 03, 2007

The end of US Dollar as the reserve currency of choice.CS

US Dollar has enjoyed happy times for the most part of last century. In its full glory it was driven by bull market in equities from 1980, economy expansion and most importantly by its safe heaven appearance. After collapse of Soviet Union, nobody could challenge the USA super power and its world’s policemen status. Dollars were welcomed everywhere as official tender for transactions, and entire nations kept their wealth in USD denominated assets. All black markets across the world and emerging economies had only one official currency – American Dollars.

Not any more. First dollars fall out of favor in shady circles: try to buy any real estate in Eastern Europe now: dollars are not welcomed. Now government institutions are ready to accept necessity of diversification out of reserve currency of choice. Dollar as any other FIAT currency is not backed by any tangible assets apart from “solid” government promise to pay back. This promise is based on government's ability to create wealth and spend less then its revenue in form of taxes and its ability to manage cash flow: its trade and current account. The US Dollar's fate is based on trust. Trust that government will repay the same value plus interest on its IOU, trust that government inflation figures are correct and you interest payment or yield on US Treasuries will be above real inflation and provide a positive return.

In August we have witnessed that the trust has gone, first in subprime securities, then in rating agencies. All financial system was put on hold because nobody trusts anyone. The academic approach that derivatives are helping spread and reduce the risk have proved to be wrong. The risk was spread to the least prepared, those who trusted the AAA ratings of subprime engineered junk. When even the risk averse sleeping state owned German banks get hurt in this turmoil, what is happening with risk proactive US banks?

Conservative Swiss UBS was quick to shut down hedge fund with mere losses of few hundred million dollars and CEO gets fired within two weeks after that. In the USA, high profile victim so far is CEO of Standard and Poor’s rating agency, which were given high ratings to tranches of CDO being paid by issuers of these junk paper. There will be more victims to come and losses will be exposed, but the first victim is already apparent. The US Dollar is losing its trust and appeal as reserve of last resort. The dollar is no longer preserving value, nor is it providing security as the most common investment instrument of US treasuries.

Dan Norcini reported: “This is the fourth consecutive week in which Treasury holdings by foreign Central Banks in the US Fed Custodial Accounts have fallen. I am continuing to monitor this development as it seems to be something flying under the radar screen of most analysts in spite of the ramifications involved should it continue and become a serious trend”

You can see the consequences of Stagflation and it's victim – US Dollar. After the subprime shock and the housing melt down, the US economy, in real inflation adjusted terms, will be in stagnation in the best case scenario. The government and Mr Bernanke will try to fight this subprime fire adding more gasoline. All these bubbles were created by easy credit and now they will try to save the financial system by pouring more money into it, creating monetary inflation and eroding value of USD and other FIAT currencies. The long term chart of 30-year US Treasury Yield is in its definite break out from multi year Down Trend after Double Bottom Reversal formation. The appetite for subprime currency and assets denominated in it is falling and in order to sell it even AAA rated you need to raise the premium - yield. In addition, more selling of treasuries by China, Japan and other USA creditors will put more pressure on prices and yield will go higher with USD going down.

Now this process will be accelerated with active role of Sovereign Wealth Funds (SWF). In order to diversify their reserves from the US Dollar wealthiest countries have created SWFs. According to Financial Times, top ten have a 2.4 trillion dollars cash pile. With biggest Abu Dhabi Investment Authority (UAE) standing at 875 billion dollars. Also important to note that China allocated so far “only” 300 billion to its State Foreign Exchange Inv Corp Central Huijin. This comprises less then 25% of its more then 1.3 billion reserves. In the case of UAE, it is 90% of reserves. Now all these money will be deployed in order to protect their value and secure resources for growth in all these countries.

As falling US Dollar price continues, Gold and Silver will be going up driven by economic fundamentals of supply and demand. All raw materials will appreciate in their value. Demand created by rising population and infrastructure development in BRICs countries will push commodities prices higher. Also, these countries are not experiencing any lack of paper dollars losing their value by the hour, further leading them in their willingness to exchange dollars for the real goods. As more paper money begins chasing the same supply of real goods, it will lead to the higher prices.

PGM and base metals industry will be driven by further consolidation. The trick is that you can not create any new supply of commodities, gold or silver in a split second as you can create supply of new credit in the financial system. Mr Bernanke does not even have to use helicopters for flush of liquidity rescuing markets, just political will and PC in Federal Reserve System. The new commodity supply story is completely different – the cycle is long, boring and risky. You have to find deposit (it is rule of thumb that from 1000 drill holes only 10 will lead to economic discovery and only 4-5 will become mines). You have to secure all permits and financing. You have to build the mine with all necessary infrastructure: water, electricity, safety and environmental issues. You can allow from 6 to 10 years depending on type of commodity, technical issues and permitting process. After 20 years of bear market, the commodities industry is feeling the heat right now with lack of qualified personal, drills and diminishing resources base. Majors are not even exploring any more and are cultivating approach of partnership with Junior mining and exploration companies, spreading the risk and running short on time. Any economic deposit with proven time schedule to become a mine is under constant search in the industry.

Once we identified our major trend: the demise of US Dollar and the end of its status as reserve currency of choice, we can formulate investment approach. In order to put this into perspective just consider that all biggest gold mining companies comprising HUI Amex Gold Bug Index have market cap of a little bit over 100 billion dollars now. Compare it to Google’s 161 billion dollars and the 2.4 trillion of Sovereign Wealth Funds seeking safety from collapsing US Dollar. Big names in the sector will benefit first: they are on the radar screens of investment banks fighting for the right to advise SWFs. Newmont Mining (NEM) could benefit from consolidation by being number 2 in the sector with Barrick Gold (ABX) looking for new resources. Silver Wheaton (SLW) has unique business model of 100% silver revenue stream and fixed cost base, giving the exposure to option on rise in price of silver without time decay. Royal Gold (RGLD) price action historically preceds a move in gold price and it has recently developed buy signal. Tanzanian Royalty Exploration (TRE) is backed by gold prophet Jim Sinclair and recently has entered into contract negotiations with a company from the People's Republic of China. Riskier plays which could bring more reward will be Mines Management (MGN) with silver and copper deposit in Montana and Sterling Mines (SRLM.OB) which is going to produce it's first silver from its Sunshine mine by the year end.

The sector is very volatile and provide one of the best entry point right now after recent sell off. You should stick with the best names in business who will not put their reputation on line for a quick buck. Among them is Lundin Mining (LMC), a diversified base metal producer with phenomenal growth. After recent acquisitions, the company with its commodity mix and strong financial position, becomes very attractive target itself and industry consolidation will drive the share price from recent lows. Voting in confidence of its rapidly expanding business Lundin family trust bought 8 million shares in the company during the recent sell off and the share price is fighting its way back now.

The most impressive returns in this major investment trend of the decade will be made in junior mining and exploration companies. Money will infiltrate into this tiny sector from the industry majors rushing to secure promising projects for development of their resource base. Once the dust will settles and they will understand that demand is not affected by US stagnation or even recession and that financing is available, they will go shopping. The sector is very risky and demands a good industry network and discipline. But once you have found your best shots they will pay off handsomely. Investment approach, risk management and further research ideas can be found on my website.

Sunday, September 02, 2007

USD Subprime currency 30-year Yield Break out of Down Trend

Consider previous post about declining holdings of US Treasuries and you will see the consequences for Stagflation victim - USD. Long term chart of 30-year US Treasury Yield is in definite break out from multi year Down Trend after Double Bottom Reversal formation. Appetite for subprime currency and assets denominated in it is falling and in order to sell this Junk even AAA rated you need to raise premium - yield. More selling of treasuries by China, Japan and other USA creditors will put more pressure on prices and yield will go higher with USD going down. Gold, Silver and commodities will fly.

Saturday, September 01, 2007

Foreign Central Bank Treasury Holdings In US Fed Custodial Accounts Continue To Fall

Author: Dan Norcini

Dear CIGAs,
This is the fourth consecutive week in which Treasury holdings by foreign Central Banks in the US Fed Custodial Accounts have fallen. I am continuing to monitor this development as it seems to be something flying under the radar screen of most analysts in spite of the ramifications involved should it continue and become a serious trend.
Also, take a look at the cost of three month money again. After a short rebound it has resumed falling.
Your pal,Dan