Google GOOG bear case continued.

The last pillar of palace full with memories and sweet dreams about forgone Bull market is shaking: Google is firmly on track of our bearish scenario with further slowing growth, flat FCF and contracting multiple. We have wrote before http://sufiy.blogspot.com/2008/04/google-goog-has-deliveredanother.html about recent trends and now they are finally manifested in crashing stock price.

Trust is shaken and company is not immune to slowdown - sell off will continue and will surprise a lot of people with its magnitude: fear is much stronger feeling then greed. Our diagnoses is that company is at its peak in market share, biggest foreign market in UK is saturated and economy is in downswing there as well, it is still one trick pony and is feeling the hit of slowdown in economy. Financials were hit first, next is consumers, the advertising budgets are cut: first print media, TV; then web based as well.

On our bearish financial front signs of further deterioration are all over the recent report: Revenue Growth Q/Q has slowed -50% from 6% to 3%, Y/Y has slowed -33% from 58% to 39%. The same rate of decreasing rate of growth as in Q1 2008.
EPS growth was -5% Q/Q and 33% Y/Y. Yearly growth is still impressive, but nothing out of the ordinary in order to support bubble valuation in recession environment. Capex has decreased to 697,5 mil -17% Q/Q YouTube blades add broadband must be eating hard into the company's margin and it is desperate to cut it in order to save FCF. Cash Flow from operations was flat Q/Q. With a lot of spin around two closed offices are indication of drastic financial measures: boom is over.

Free Cash Flow in Q2 is 1068.6 plus 14% (in the Q1 FCF was 842 mil - here was a typo FCF was 937.8 mil). Company can play with TAC figures and reduce CAPEX further in order to deliver at least 4 bil FCF in 2008. But what will it tell us with further slowing growth rate in revenue? It means that company has hit a wall in its YouTube monetisation efforts and will start reduce even existing bleak expectation about break through on that front. Double Click purchase is dilutive to the rate of growth as well: display advertising will be cut first before click based.

With our prerecession multiple at 30 we will arrive to 120 billion market cap for Google which translates into USD377 target price.

Problem is that market is punishing the yesterday winner very brutally after missing its always overoptimistic expectations. I will put a crazy and heretic for a lot of bubble vision guests assumption that we will see in this bear market FCF multiple of 20 and Google's market cap at 80 bil (please put it in economic context guys: it is still Internet Advertisement Company, not water, bread or oil).

This valuation will translate into USD250 share price.

Lundin Mining LMC LUN.to will company overcome its spell?

Everything depends on results. Now in company's value everything is discounted close to zero. No value for Ozernoe, it was a real problem: Russia's modern state of capitalism is noway better then mess in Congo if you are not connected into the right network. Looks like Lundin pass on this one. No value for Tenke Fungurume stake and it is understandable, hot guys in Congo did everything impossible to destroy value of their own projects. But what about Lundin's own operations and its strategic investments? Profits are under pressure with rising euro and falling Zinc and Lead prices, not so bad on Copper front. We are far and farther away from Lukas dream of 10 billion market cap. Will he bring his magic again? I am not sure, but I will not discount Mr Lundin. His trick should include diversification from Europe into new stable environment, spiced with upside in countries perceived less stable, but still manageable. If company will be able to get Wall street attention back and will come with strong production numbers logical steps will be to increase value of its strategic investments and move them quickly into development stage. On the radar are Mantle Resources MTS.v, Sunridge Gold SGC.v, Sanu Resources SNU.v and Nevsun Resources NSU.v. Situation become more for trading then for investment for our taste now. We have closed Puts protection and increased our Calls. Another approach is to accumulate potential targets of M&A activity.

US Dollar is a chosen victim of ongoing stagflation.

US Dollar is very close to waterfall scenario after breaking down from bearish flag. Every cook book in USA started with "Take more dollar and spice it with...." this is sad reality time is to pay for borrowed prosperity.

"Sovereign funds cut exposure to weak dollar

Some of the world’s largest sovereign wealth funds are seeking to scale back their exposure to the US dollar in a sign of global concern about the currency."

http://www.ft.com/cms/s/0/fc250ac2-5361-11dd-8dd2-000077b07658.html?nclick_check=1

Silver Standard Resources SSRI Measured & Indicated Silver Resources Increase 143% at Pitarrilla

This stock must be reading my blog, announcement could not be more timely for chart's definite break out to the upside. This are the fundamentals of Junior mining (Company will soon graduate to Major League starting production): rising underlining price multiplied by rising resources base. Those guys kept and grow them in the ground from Silver price at 5USD. Street did not realised that this company will be producing and justify much higher multiple in the near term. Money is coming back into the market and even 1% coming back into sector will rise all our boats. 99% coming back into financials will be "our clients" after next sell off.

"July 16, 2008 5:00 AM EDT
VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 16, 2008) - Silver Standard Resources Inc. (TSX: SSO)(NASDAQ: SSRI) is pleased to report that infill drilling continues to expand silver resources at its wholly-owned Pitarrilla silver project in Mexico. Measured and indicated resources at the Breccia Ridge Zone have grown by 143% and total project resources by 14% since the company's last update in November 2007. All of the silver resource increase is located in the Breccia Ridge Zone where infill and exploration drilling have been the priority."

http://www.streetinsider.com/Press+Releases/Silver+Standard+Resources+Inc.%3A+Measured+%26amp%3B+Indicated+Silver+Resources+Increase+143%25+at+Pitarrilla%26apos%3Bs+Breccia+Ridge+Zone/3822713.html

Mantle Resources MTS.v Canadian Zinc play. FXI, EWZ, EPI, PHO

Market has turned today after yesterday's panic, making intraday high on volatility index VXO at 33.48. Today CPI with 5% year-on-year headline inflation is showing that we on the tract of stagflation in USA. With this coming bear rally optimism will come back and after initial sell off in Juniors they will benefit from new risk taking flow of money. Yesterday capitulation in juniors is providing extreme value compare to all last years of this Bull market. Bubble TV with their latest concept of commodity Bubble bursting is the best indicator of continuing Bull.

We like to be contrarian within the sector and Mantle Resources MTS.v is a very good example for M&A junior play with solid management and advanced property in stable mining friendly environment. Company based in Canada with deposit in BC next to Teck Cominco/Korean Zinc deposit, all surrounded area is consolidated by Mantle. Lundin mining is holding 10% in the company and considering it as strategic investment. Resources were published couple of months ago and company is busy drilling now and building infrastructure. Zinc prices recently were under pressure, once investors will realise that world is still spinning around even with USA in a recession, company will have a double boost from rising zinc prices and advancing resources. Recent acquisition by Chinese zinc deposits in Yukon is very promising for an exit strategy in this play.

China has come down to earth as we have discussed before, now charts are looking like ready for fun and strong Olympic message will help. We think for our money it is worth to learn Chinese a little bit and stay in calls on FXI.

Brazil has always been interesting to me with my interest in Argentina junior exploration play TNR Gold TNR.v. Latest discovery of off shore oil will bring to this country new geopolitical meaning. Calls on EWZ looks timely now.

India has turned overnight form investment darlings into unloved, ugly and strange country with a very high investment risk according to market pricing at the moment. We dare to see here the same overpessimism and has established call position in EPI.

And finally - Water, after our last solar water energy fun with World Water and Power WWAT.ob we have stayed out of the sector for a while and like now to accept the invitation and test the concept of weathering bear market in this stable business. Calls on PHO were taking according to charts turn around signal.

SEC moves on short sellers. Juniors will benefit.

Time is for serious accumulation in Juniors. Criminals are out of favor, nobody wants to leave a footprint in the market when investigation will come. First SEC and financials, then hopefully Canada will wake up to the scam.

SEC moves on short sellers

WASHINGTON (Reuters) - The Securities and Exchange Commission will issue an emergency rule later on Tuesday to stop "naked" short selling in major financial firms, including Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz), the SEC said.
Short sellers borrow shares they consider overvalued and sell them. If the price drops, they repurchase the shares, return them and pocket the difference.
In a naked short sale, the investor sells stock that has not yet been borrowed. Sellers sometimes deliberately fail to deliver securities as part of a scheme to manipulate the stock price.
The emergency rule would require any person making a short sale in the listed securities to borrow the securities before the short sale is effected and deliver the securities on the settlement date.
The SEC has already proposed rules to curb naked short selling abuses and prevent market price manipulation.
(Reporting by Rachelle Younglai; Editing by Tim Dobbyn)

Yamana Gold AUY: new buying opportunity.

Yamana Gold was brutally punished for lower production in the last Q. It provided a nice buying opportunity for establishing new call positions. I do not mind small production problems which are providing good entry points into the bull market. Upside in Gold and metal prices will rectify small slip backs on technical side. The company in my opinion is one of the primary target for acquisition by struggling majors.

Silver Standard Resources SSRI forgotten treasure.

Silver Standard Resources is undergoing very crucial transformation to become a producer of silver. Very clever guys from this company were accumulating silver properties from silver price at USD5.0 and slowly worked them out to compliance resources. Now they are sitting on enormous value in the ground and will be reassigned with new multiple overnight once production will be started. Big money could go into silver story just in a few names and this company is one of them. Further consolidation in the industry will put this name as producer in to the spot lights again.

Royal Gold RGLD - Gold early warning indicator, is in upside break out.

Royal Gold has cleared finally resistance at 32 and in a definite break out mode. Company is highly leverage to gold price and well recognised in the market. Number of higher lows is providing a solid uptrend base.

Silver Wheaton SLW is ready to rock.

Very bullish formation with cleared double bottom reversal of short term bearish trend to the upside. On fundamental side if things company is highly leveraged to silver price and bought recently in gloomy market conditions more silver streams. This job added more value to the company cash flow and number of controlled MOZ of silver has increased. With moving up silver prise stock valuation will go at a faster pace.

Silver: ready for parabolic move

The same story as gold, but move up could be more explosive this time. P&F target is 23USD for definite break out of double top formation.

Gold: sky is the limit and then a little bit more.

Please note last Buy PPO cross in July 2007, before this year in June 2008. We are in a negative real rates territory, USD is looking for retirement, Chinese with 1.8 trillion reserve and hungry people are US Dollar best "unfortunate" friends, housing market and fraud build around it in investments banks and hedge funds is collapsing - would you like to try to continue?

US Dollar "Trouble is the only way - is down..."

Sorry James Blunt for putting you into this depressing picture. Currency market is too big to be manipulated for long and it is the only way out of troubles: more dollars are printed, less value they are. Chart looks tired in its bearish flag formation and could resolve in another waterfall downwards. I have not heard last Friday anyone calling for Fed's hike.

Fannie Mae FNM and Freddie Mac FRE test of the System and Hedge Fund Dream

If you are still puzzled with last week developments in crises management of these two pillars of housing market in USA controlling over 5 trillion assets, look no further then to our distinguished regulator - SEC: you can continue to sleep assured that everything is under control. While Mr Paulson and Mr Bernanke honestly are making all possible attempts to decide when they are going to bail out the falling agents, somebody is making a huge amount of money based on their true beliefs in the effective markets. They are so successful that you can not stop help thinking that you can smell on the back of your mind so familiar smell...of well used cooking oil.

http://www.faulkingtruth.com/Files/aguirre_congress0623.pdf

We can hardly turn the tide here with our doubts. We can only observe, be alert and try not to get under the freight train. If we make somebody think a bit more and make them better we will be extremely happy. We have sold our PUTs on FRE, banks, GM, AMR, INTC, SMH and will continue to build our strategy on falling USD and rising Gold, Silver and commodities. We still think that with so well managed financial system crash will be prevented with all means in the election year and US Dollar is the only way to make it....something has to give. And by the way folks from Iowa will hardly spend their vacation in Paris this year. System is rotten to the core and markets can be turned on a dime from this oversold short term condition. Even in Bear market rally could be explosive. Take the profit and preserve your capital. Investment strategy is "obvious now" - we will invest in "dimes" - they will need a lot to manage the orderly crash in the Trust and Confidence in the System.

Minera Andes MAI.v, Xstrata XTA.l and TNR Gold TNR.v in Los Azules copper project latest developments

The area is getting more interest and latest developments will bring new opportunities for all parties:

"Located in the San Juan province of Argentina, about 30 kilometers from the Chilean border in the Andes, the Los Azules copper project is evolving into a sizeable discovery. In November of 2007, Minera Andes put together the tentative option agreement with Xstrata Copper Americas. “This particular project had Xstrata owning the northern half of the target and we own the southern half,” said Ambrose, noting that the deal was constructed to consolidate both halves into one project. “Our deal with Xstrata is to bring it along and present them with a scoping study, which we hope to do by year-end. And then Xstrata will have to pay us back three times our expenditures if they exercise their option. And they have to complete a bankable feasibility study, and then they would earn a 51 percent interest and become the operator.”

http://www.goldminingnews.com/featured.aspx?ArticleID=41358

July 02, 2008TNR Commences Legal Action to confirm Escorpio IV Ownership

"Vancouver B.C.: TNR Gold Corp. ("TNR" or the "Company") advises that on June 30, 2008 it commenced an action in the Supreme Court of British Columbia against MIM Argentina Exploraciones S.A. ("MIM") a subsidiary of Xstrata PLC. ("Xstrata"). In the action TNR is seeking:
a declaration that the Escorpio IV property is excluded from the Exploration and Option Agreement entered into between TNR's Argentina subsidiary, Compania Minera Solitario S.A. ("Solitario") and MIM governing the Los Azules Project (the "Option Agreement");
a declaration that the defendant MIM has no contractual right to assert an ownership interest in Escorpio IV;
such further declaratory relief as may be requested and is appropriate in the circumstances; and
judgment for damages against MIM. The Escorpio IV Property is registered in the name of Solitario and is adjacent to the western border of the Los Azules property, currently being drilled by Minera Andes Inc., under an Option from MIM. Los Azules is located near the Argentina/Chile border in San Juan province, Argentina.TNR asserts that on October 20, 2003, MIM assigned to Solitario all of its rights, including any and all rights it had or might be entitled to with respect to Escorpio IV and that Escorpio IV is not a property subject to the Option Agreement. MIM has taken the position that Escorpio IV is or was subject to the Option Agreement, and as such is part of the Los Azules Project earned into by MIM. In the face of MIM's assertion of its position, TNR has been forced to seek the Court's determination of the issue.ABOUT TNR GOLD CORP.TNR is a base and precious metals exploration company focused on aggressively identifying new prospective projects as well as fostering work on its large portfolio of 17 properties in Argentina and Alaska. The company's focus over the next 12 months is the exploration and development of its Eureka, El Salto, and El Tapau in Argentina and Shotgun project in Alaska.

On behalf of the board,Gary SchellenbergPresident"

XSTRATA AND TNR ENGAGED IN MINING RIGHTS DISPUTE

"Thursday, 05 June 2008
Swiss mining giant Xstrata is in a dispute with the Canadian mining company TNR over the rights to “Escorpio IV,” a mining deposit on the border between Chile’s Region III and Argentina’s San Juan province.
TNR has already begun prospecting and the engineering process for its Los Azules project in the Argentine Andes, which includes parts of the Escorpio IV deposit. Xstrata, however, claims they own the rights to the deposit.
“Xstrata is certain that it holds the mining rights to Escorpio IV, and hopes to resolve this dispute through negotiations with TNR. However, legal action will be taken if necessary,” said offcials from Xstrata, whose current investment plans include a controversial hydroelectric dam project in Aisén.
According to TNR, however, “Escorpio IV is currently registered to Solidario Argentina S.A., an Argentine subsidiary [of TNR].”
The dispute and pending negotiations has led TNR to suspend its operations in the Escorpio IV area of its Los Azules project.
The high mineral content in the Andean border region between Region III and San Juan have attracted a number of mining companies, including the controversial Pascua Lama gold mine, owned by Canada’s Barrick Gold Corporation.
SOURCE: EL MERCURIOBy Carter Koppelman "

Silverstone Resources SST.v small brother of Silver Wheaton SLW is showing some life.

Insiders are selling for different reasons, but they are buying only in one case when the stock is undervalued according to all available inside information to them.

P.S. Rate Hike for anyone?

http://canadianinsider.ca/coReport/allTransactions.php?ticker=sst

Silverstone Resources Corp. (SST)
As of July 9th, 2008
Filing Date
Transaction Date
Insider Name
Ownership Type
Securities
Nature of transaction
# or value acquired or disposed of
Unit Price
Jul 09/08
Jul 09/08
Howe, Jason Paul
Direct Ownership
Common Shares
10 - Acquisition in the public market
20,000
$2.030
Jul 09/08
Jul 09/08
Kennedy, Sarah Jane
Direct Ownership
Common Shares
10 - Acquisition in the public market
5,000
$2.030
Jun 25/08
Jun 18/08
Barnes, Robert
Direct Ownership
Common Shares
10 - Acquisition in the public market
5,000
$2.460
Jun 25/08
Jun 18/08
Barnes, Robert
Direct Ownership
Common Shares
10 - Acquisition in the public market
5,000
$2.410
Jun 25/08
Jun 18/08
Barnes, Robert
Direct Ownership
Common Shares
10 - Acquisition in the public market
5,000
$2.410
Jun 25/08
Jun 18/08
Barnes, Robert
Direct Ownership
Common Shares
10 - Acquisition in the public market
7,400
$2.500
Jun 25/08
Jun 18/08
Barnes, Robert
Direct Ownership
Common Shares
10 - Acquisition in the public market
5,000
$2.460
Jun 25/08
Jun 17/08
Barnes, Robert
Direct Ownership
Common Shares
10 - Acquisition in the public market
10,000
$2.470
Jun 25/08
Jun 16/08
Barnes, Robert
Direct Ownership
Common Shares
10 - Acquisition in the public market
5,000
$2.400
Jun 25/08
Jun 16/08
Barnes, Robert
Direct Ownership
Common Shares
10 - Acquisition in the public market
6,600
$2.450

Google GOOG YouTube will continue to be a money drain.

News are old, but with a new meaning in the recession times: Google can not monetise its 1.65 billion investment, revenues are not material (200mil for 2008 is estimated) and it is officially a money drain from other profitable business. When you consider running costs for all those blades and bandwidth eaten by huge video traffic the picture will become even more bleak.

From: Google: We Can't Figure Out How To Make Money On Web Video, Either

"Of course, one other obvious solution to YouTube's sales woes would be to simply start advertising on YouTube pages, period. Nearly any page you see on the site today is ad-free. But Google is showing a billion clips a day. Why not simply start loading some of those pages with AdSense units?
Because of the other big admission in the WSJ story -- Google is afraid to sell ads on 96% of its inventory:
Fearful of fueling allegations that it is profiting from copyright infringement, Google will only sell ads against YouTube clips that have been posted or approved by media companies and other partners -- roughly 4% of the total, says one person familiar with the matter.
The story ascribes Google's fears to the billion-dollar Viacom suit, but we think that's not fair: Even if Philippe Dauman ends up settling with Google, it's not going to resolve the copyright cloud hovering over YouTube. So either Google's going to need a legal ruling that gives it the go-ahead to make money on its copyright-violating inventory -- or it's going to have live with diminished expectations for its $1.65 billion business."