Freddie Mac FRE & Fannie Mae FNM bail out and its downside for US Dollar.

Positive thinking manifesto.

According to the recent reports USA government is close to bail out Freddie Mac FRE & Fannie Mae FNM under the government control:

"Paulson Plans to Bring Fannie, Freddie Under Government Control

By Alison Vekshin and Dawn Kopecki
Sept. 6 (Bloomberg) -- Treasury Secretary Henry Paulson is preparing to announce plans to bring Fannie Mae and Freddie Mac under government control, seeking to halt the crisis of confidence in the companies that make up almost half the U.S. mortgage market. "

Now we can understand that operation in the open market by the world central banks in order to pop up the ailing currency US Dollar was the careful preparation for this bail out. I guess that too much is at stake to allow the newcomer get in the Washington DC mess. Georgia came in handy as well. With geopolitical risk economic worries are going on the second plan, choice is predetermined and USD is rising voting for USA military machine.

Without that intervention such a bail out could easily crash the US Dollar into another waterfall and make its "managed" depreciation impossible. Market manipulation has send USD dollar into Bear market reaction rally, Gold and Silver were trashed into the dust with investors running to the Exit. Investors confidence in Gold and Silver mining companies and Junior mining were shaken with a lot of casualties and money lost. Perfect storm in commodities market amplified by Bubble Vision commentaries on the end of the Commodities Bubble prepared the operation "Election Jump Start the Economy".

It came handy that few biggest US banks went short Gold just before the intervention in unprecedented amount. More details are in this great article.

What will be the consequences of such a bail out and why so many resources were put into this historical manipulation? At stake is a financial system of the world as we know it and its main reserve currency of choice US Dollar. This was the reason why European and Japanese central banks supported the intervention. All financial system is brought down to a still with toxic assets based on not only subprime mortgages, but also "primary" assets issued by Freddie Mac FRE & Fannie Mae FNM. Credit flow has dried out as confidence in a counterparty disappeared. Effective government overtaking of all liabilities issued by these agents means monetisation of this debt and its substitution effectively by government "currency" - Treasuries. More goods to sell with falling demand means lower prices. In case of Treasuries it means higher yield, real rates will go up. What about short term rates managed by FED? If after recent unemployment report anybody things about FED raising rates they better check their water supply. I will not be surprised if FED Cuts Rate in case the markets will tank further into the bear market territory. Welcome to the Stagflation world: Negative Real Rates (difference between FED short term managed rate and Real rate defined by the market in treasuries) like in the 2002 when Gold market was ignited to the new highs.

Threaten by deflationary pressures in the form of falling prices in housing, permanent Sales on the high street for squeezed consumer and falling financial assets prices on the Wall street FED will be always intentionally late to Raise the rate to fight inflation. Inflation is an increasing money supply be definition and with this bail out Pandora Box is open.

What is the magnitude of the situation? Both GSEs are holding and guaranteeing more then 5 trillion dollars in debt, it will go into the government books on the liability side in plus to the current 9.6 trillion dollars government debt. It is an astonishing 54% increase! Why is it negative for the US Dollar "value"? US dollar is a FIAT currency and supported only by perceived value of US government ability to collect revenues in the form of taxes and keep its supply "limited" to the real economic growth in goods and services produced by the USA Corp. When more money is chasing the same amount or falling amount of goods and services we have an inflation.

Let us make a quick "back of envelope" analyses of this M&A deal. USA Corp. is taken liabilities with fixed rates to be paid in the form of interest on Freddie Mac FRE & Fannie Mae FNM bonds to its holders like China, Japan, Russia, Middle East etc. On its assets side it is unwillingly getting falling in value houses as collateral for issued bonds. Assets are shrinking in value with falling house prices, cash flow is falling: people are not able to service their debt, late on payments and are walking away from properties. Common stock of USA Corp is going down - it is our "chosen victim" US Dollar. Then even worse is happening: in order to finance budget deficit and these adding to shortfall difference between fixed payment out to service debt and receivables from housing assets USA Corp is forced to borrow more to cover the cash flow gap.

Situation is becoming more complicated with need to save economy and its subjects from the bankruptcy: maybe Jim Cramer is right after all and USA Corp. will decide to extend mortgages and reduce the payments, US Dollar will be even under more pressure.

How will it play out into our investment approach:

1. Worst case scenario: USA is brought to the corner, depression is looming, elections are falsified, Iran is nuked and war with Russia started for resources. I do not know what to do or even how to live in such situation.

2. Goldilocks scenario: new way of building wealth is found. Make money and take profits; losses will be taken by the crowd - tax payers and they are happy to do it and even asking for more. USD is rallying further, markets are rallying, housing overnight is 30% up. I will write a book "You can do it too", get famous and will make my fortune by selling it.

3. "Positive scenario". FIAT currencies are chosen victims. Bail out is taking out the strain from the financial markets, foreclosures are managed by reducing rates and extending maturity. European agents are using the same medicine - inflation is a world wide normal cause of things. Rates are cut world wide to jump start the economy, government debt is substituting the debt of "falling agents" real rates are negative and all currencies are depreciating against real assets. New credit will make its way into the economy, but not into absurdly priced assets like standard housing or modern paintings, money will chase real resources and go into infrastructure which will make possible to build a new wealth. Gold and Silver will become more and more carrying its monetary function of value preservation, they will appreciate against all FIAT currencies, then will be mania stage with its following collapse. Trust is shaken about "last reserve of confidence" of USA, globalisation as a form of securing global resources market in exchange for Coca-Cola and Bubble Gum is finished, world is becoming more connected and fragmented at the same time. West has accepted the End of Empire stage, its last Prime resource - Military Machine is taken out of political and very costly equation. USA has concentrated on internal problems, new powers are rising, multipolar world is established with "fair" price for diminishing resources, which are rising in their value with rising demand from growing population. Nothing will be perfect as usual: it will put more strains on Supply side. Quality assets in a stable politically situations will be in the big demand. USA Markets will be in a range bound mood between greed, new credit chasing new opportunities and returning reality of hangover with derivative losses making its way throughout the system. One of the complications: WEST will have to reduce its quality of life style under the burden of debt service at least for a while in return for stability. EAST will be catching up with WEST in a new found consumerism happiness.

Deflationary camouflage has made its task: buyers in the commodities and PGM are scared, speculators are ruined, hedge funds are shutting down with fire sell now.

Time is to buy real assets with the best value, best management and best positions to benefit from recent historical event.

Those which are on the radar screens and will benefit first like Silver Wheaton SLW, Silver Standard SSRI, Royal Gold RGLD, Yamana Gold AUY.

Risky plays where fortunes could be made are in Juniors.

Some of them for further study are TNR Gold TNR.v, Silverstone Resources SST.v, Mantle Resources MTS.v, Suramina Resources SAX.to

I am not along this time for sure: clever money are already all over the story and even Used to Be Smart (UBS) guys are making interesting observations.

"UBS urges clients to buy gold - we already are say investors

Back at UBS the Bank states that it has seen "unprecedented" gold demand from India, from European consumers and from other Asian clients, that demand is very strong in Turkey and the Middle East and that it should pick up in Italy as of early September as the holiday season draws to a close. UBS is not alone in seeing this interest, with some Indian jewellers having to turn away clients and, with the Wedding and Festival seasons imminent, demand is expected to remain robust for the next few weeks. Diwali (the Festival of Lights, which is a very important Hindu Festival, the largest gift-giving and shopping festival in India and most popular for gold purchases, falls this year on 28th October."

Juniors Mining - second chance and Buy of your life or is it end of the World?

It is both and my money are on this story. It is the end of the world as we have known it before and it is Second chance to Buy into Junior Mining story. We all heard about the hurricanes, heavy storms and after getting into a wavy sea with some wind we are thinking that we know the story. Real life experience is something else and completely overwhelming in its brutal force.

Recent sell off in Junior mining companies is that kind of event which is separating boys from men. I am still here with my dairy and could be in much better shape as my treasures which are still in the ground or some do not even know that we are looking for them.

I will not go into a deep analyses of the recent geopolitical and economic developments and just will outline my big picture:

1. Using the Austrian definition of inflation as expending money supply with all bailouts of GSEs, fallen investment banks and Auto "retooling" inflation is out of control and USD will be worth close to nothing.

2. Deflation pressure of collapsing over leveraged housing sector will keep FED overreacting on the soft side in order not to allow lost decade Japanese style in USA.

3. Recent well organised intervention in USD in the thin holiday market has shown vulnerability of all FIAT currencies, now we will have stage number two in the Gold Bull market - run off from USD not only into other currencies, but run from all Fiat currencies into Hard assets.

4. Recent geopolitical events in Russia have shown that there is no such definition as energy security in that part of the world, West can not do anything because is using the double standards and my fear of wars for resources is very close to reality. My only hope is that this conflict will not put us to the real End of the World situation. All situation was played around and USD has benefited from it. USA have only one real Super Power attribute left - its military machine. Russian side was happy to show that the world has changed and will never be again the same. Brutal mistakes were done on the both sides and the world is certainly not better off: Russia will be pushed closer to align with China. One of the further complications from this situation will be mutual distrust, new cold war and diversifying from the USD. I do not like this situation at all, can not change it and invite you to participate in my plan and do not let evil forces to force you to sell at the Bottom and to buy at the Top. Maybe all the world will be better, if we become smart enough not to fool around each other.

5. "Decoupling story" is dead or just ongoing and its implications. The biggest torture in our investment world is to foresee the situation, to be right about the big picture and still experience that stomach feeling when everything is sinking together in the market sell off. I guess it is determined to be like this otherwise when everybody is rich around will we ever appreciate it? The trick of positive thinking is to fool yourself that you can profit from any outcome. If the world will become still I will profit from my puts on Google GOOG: hardly anyone will be clicking on anythings without house left, no electricity and running water. In all other cases China's stock market FXI chart looks very good for me, time is to push it up with recently rumored economic stimulus package. With retail sector growth more then 20% Y/Y internal growth will start to run the engine instead of pure reliance on export. Recent geopolitical tensions will emphasise once more time that the resources must be found, developed and protected with all necessary infrastructure in place. Decision will be taken more from military and geopolitical point of view then from economic efficiency. It will ensure strong demand for all raw materials. Another big kick start could come from USA should the new administration chose not the war in order to stimulate economy, but infrastructure development. USA was taken out of Great Depression by Second World War and interstate roads construction. Recent reports are showing that infrastructure in USA is in a miserable state including refineries, water treatment facilities, bridges and etc. Money will be printed anyway so maybe more careful approach on internal problems will safe the world and USA economy.

6. My market university paid off when I have entered this brutal phase of the Junior Mining sector this summer. I was without leverage and was not forced to sell at the wrong time. Now I am busy to accumulate great bargains if my writing here will get into God's office and he will like it.

7. My first pick is still TNR Gold TNR.v and I am stubborn to see exceptional speculative value here. It is a pure call on their value tighten up at Los Azules at the moment. In its recent SEDAR filing company disclosed that they have filed law suit in BC Canada against Xtrata in order to clear the title of Escorpio IV and, what is very important now, is to take out the condition that 25% back-in right could be exercised only within 36 months after option exercised by Xtrata and it has received Feasibility study. They are stating that it was added in the final version of the contract contrary to Memorandum of Undestanding which did not stipulate that condition. Alaskan projects in the proximity to famous Pebble deposit are not valued at all. Recent drilling on El Salto and El Tapau are underway. A lot of interesting thoughts about the Argentina and Mining can be found here.

My another pick is Mantle Resources MTS.v : it is pure Zinc market recovery story. Right metal - Zinc was under pressure when copper holds to its gains. Right place - BC Canada, even I could be fed up with high risk high-opportunity place. Resources have been published recently and are expending. Lundin has 10% stake. Lundin Mining has become trading situation with Tenke Fungurume in a slow motion. Strategy here is to take upside of the Zinc market in pure Zinc Canada M&A play and come to Lundin Mining LMC LUN.to should they overcome their spell. Sutors should include Lundin Mining itself and Teck Cominco with its J/V with Korea Zinc in Cirque deposit in the area. Story is known to industry people and not followed by investors at all. Sometimes it is a very good combination.

My old love story with Silverstone Resources SST.v is still under way. Stock must be jeolous and did not like when I took some profit at 2.5-3.15 levels. Beeing in the small brother of Silver Wheaton SLW story from the very beginning of its spin off from Capstone Mining CS.to was very fruitful. Our love was cemented in my belive in the Silver Bull when I was buying at 0.65CAD. Now when stock is messing around 1.5CAD my feelings are back. Some things are not in favor of the company: Lundin Mining Aljusterl is struggling with start of production cycle. No more silver streams were brought during the recent slump, but the selling was overblown and somebody has gotten into real liquidity story and was selling at any bid like there was no tomorrow. Recently announced normal cause issuers bid will help to stabilise the market and present another good entry point. Silver Standard SSRI, Silver Wheaton SLW, Yamana Gold AUY and Royal Gold RGLD are all my trading partners on options side of things as first money are pouring into big names in the sector. Water PHO, India EPI and Brasil EWZ along with China FXI my calls on recovery of decoupling story.

My diary do not forget that it is my own story and allow for all necessary DD, homework and other efforts necessary to become Mr Warren Buffet should you decide so.

Juniors are in a capitulation mode.

Nobody needs them, nobody loves them. Best time to buy. Our take is that we are either at the door step into depression all around the world (it is not our bet) or we have a life time opportunity to accumulate treasures in the ground while Bubble Vision is proclaiming end of the Commodities Bull Market. Why are we so stubborn in our vision of sustained infrastructure growth in the world with even USA economy deep in the recession state? Just watch some Olympic games, new world has arrived and they did not even start to consume yet.

Interesting post from "Argentina & Mining 101" on one of my favorites TNR Gold TNR.v:

http://mining101.blogspot.com/2008/08/wave-of-bank-loss-continues-led-by-rbs.html

As usual consider this source for information purposes only.

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."

Minera Andes MAi.to (TNR Gold TNR.v) Exploration program increases the size of the Los Azules porphyry copper target

"SPOKANE, WA June 27 /PRNewswire-FirstCall/ - Minera Andes Inc. (TSX: MAI; US OTC: MNEAF) is pleased to report that the final results from core holes drilled during the 2007-2008 exploration field season at the Los Azules porphyry copper project confirm that the copper target is open to the north. Several positive indicators including hole AZ-08-37A drilled at the northern limit of this seasons drilling, geologic mapping, and historic drilling indicate that the copper target at Los Azules extends another 3 kilometers to the north of the drilling completed this field season (see URL for map: http://files.newswire.ca/530/ProyectLosAzules07-08.doc)."

Tnr Gold TNR.v new website design launched:

http://www.tnrgoldcorp.com/s/Home.asp

Story of those who get caught. How many are out there?

Read the indictment: very good education about investing in modern terms:

http://www.alleyinsider.com/2008/5/bear_stear

Naked short sellers wanted!

From Jim Sinclair:

Dear Friends,
Today is proof that these people are running scared. Their target today is a message that their time has come to an end. Add to that the arrest of the Bear Stearns Hedge Fund managers for not correctly marking down their holdings and informing their investors. These events have to put these people that are committing bullying, illegal and unethical activities in the crosshairs of investors, management and the law.
Soon there will be no place to hide, no place to run and the name Anonymous has done them no good at all. The name Anonymous may well be their eventual undoing as illegal activities using such a means confirms their devious undertakings.
The major underestimation by these hedge fund operators is the nature of the old-line junior mineral management. When you push them hard they will push back harder and make it personal. They should study the history of past PDACs and how old timers can act when attacked.
Where I am concerned, today they made this personal.
There is a great deal of information available to the management of any company listed on an exchange.
The first step in determining what is happening in the short term is broker identification. Every transaction shows a broker on it with one curious twist on the TSX which allows trades to be noted as broker “Anonymous.”
That is not the stumbling block itself because you can see all the daily trades almost as they happen and the total volume of buys and sells on each trade for broker Anonymous, therein determining if this legal camouflage has been a seller on balance for that day.
This information can be obtained from www.tsx.com for companies on the Toronto Stock Exchange. Other exchanges have similar setups. It will have to be obtained by your company on www.tsx.com as info/short interest data is password protected.
When you are on the TSX homepage, click on “Market Activity” and select “Current Market.” There will be a 15-minute delay on information but you can see the broker’s activity and name including that famous broker, Anonymous.
This type of information can be obtained for all exchanges and the NASDAQ. Looking historically will be more informative as you can be assured that as the heat is turned up, procedures will change.
Knowing the broker who represents the greatest on balance selling daily or from period to period is quite easy as they will not use Anonymous often enough to camouflage that they are or have been the largest seller.
The next three documents companies need to obtain are:
The Participation List that shows all street name securities held and by whom. This document should be reviewed, as all documents should, from period to period.
The non-objecting shareholders list will show the changes in the positions of those investors. This is again reviewed from period to period. Even the major shareholders who object to their name being listed are available for the company from the same source to the shock of the hedge funds. These two items are key to knowing exactly what is occurring in your particular share.
The brokers who bought and sold list shows both percentage purchases and percentage sales.
By the comparison of all the above you are able to determine if the selling is long selling, legal short selling or unreported short selling.
It is an exercise that is common to forensic accounting, probably better done for many companies by their auditor rather than by non-accountant management such as geologists.
The next step is to retain a reputable Internet investigator as it is all out there in one form or another.
Anonymous is a nice cover name probably used by the naked short seller, but after the trade and into the statistics it loses its effective cover capacity.
We will keep that proprietary for the time being.
We live in an information world, complex of course, but not to those that specialize.
As this practice continues, your dedication to stopping the rape of shareholders must increase.
Complaining to exchanges, regulators and hiring attorneys at this point is a useless effort. Bringing the culprits out into the light is the most effective first step. Making their identity known is the goal.
The effort is to out those who are both pool raiding and those naked short selling your issue. One is conspiracy and the other is simply a crime. Identification is the first step. They will be identified and then they will be dealt with. We will come at them at every angle from rewards for information to cyber investigators and forensic accounting. Click here to read more about our efforts.
The incoming company interest in this is simply overwhelming. I would venture to say that the companies now interested in ousting these criminals represents at least 200,000 investors.
They can hide as all cowards do, but out they will come as many in the mineral industry have now dedicated their existence to this effort.
Remember, the threats you face you can overcome. The threats you run away from for any reason win.
To the management of the juniors: Never run, no matter what the message they try to communicate to you via your market is. Stockholders will support you because aggressive, dedicated and well-financed action is the only way to remove this vermin permanently. The more they speak via your market, the more you act. This is the only strategy that will protect shareholders from their reprehensible and illegal activities permanently.

Citi C has joined the club of "Financial News Makers"

"Costs linked to worsening consumer credit quality could have a meaningful impact on Citi's results for the rest of the year, Crittenden said." This is the key - what rate hike? Watch out BAC, FRE and AXP.

"UPDATE 1-Citigroup CFO sees big potential Q2 write-downs

NEW YORK, June 19 (Reuters) - Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) could take substantial write-downs for subprime mortgages, leveraged buyout loans and other assets in the second quarter, the company's chief financial officer said on a call with investors.
In at least some of these areas, the write-downs are on track to be smaller than the first quarter, but could still be substantial, CFO Gary Crittenden said.
Costs linked to worsening consumer credit quality could have a meaningful impact on Citi's results for the rest of the year, Crittenden said.
The company is always willing to look at acquisitions, and will make them where it makes sense, but is focusing more on improving its performance, he said. (Reporting by Dan Wilchins; editing by John Wallace) "

Yamana Gold AUY Exploration Update - more goods in the ground

This is the game here: rising prices for Gold plus excellent exploration results: I do not mind to keep the goods in the vault for a while - option on gold price without time decay.

TORONTO, ONTARIO--(Marketwire - June 19, 2008) - YAMANA GOLD INC. (TSX:YRI)(NYSE:AUY)(LSE:YAU) today announced an exploration update for Gualcamayo, El Penon, Pilar de Goias and Mercedes.GUALCAMAYO, ARGENTINADrilling at Gualcamayo continued during the quarter with two underground and two surface diamond drills. The significant results show:- Potential for expanded size of QDD Lower West deposit- Improved grades compared to the original resource model- Added tonnage through increased width of the deposit

http://www.yamana.com/NewsEvents/PressReleases/2008/YamanaGoldProvidesExplorationUpdateonGualcamayoElPenonPilarDeGoiasandMercedes/default.aspx

RBS issues global stock and credit crash alert, US Dollar is doomed.

What rates raise are they talking about?

What will happen to the dollar if FED will not raise?

Who is going intentionally to crash market in election year? Dollar is doomed, something has to give...

"The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks."

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/18/cnrbs118.xml

Weekend reading and strategy update.

Some profit is taken on Puts positions, puts on LEH, BAC, MER, C and GM were on fire this week. All three major indexes are in a Bear flag formation as we read it. Calls were accumulated further on SLW, SSRI, AUY and LMC.

Juniors are trying to raise their head: among strongest in our stable are Suramina Resources SAX.to with new drill results, latest PP at 1.2CAD was taken by Lundin family; Nevsun Resources NSU.to "one year old rumour of Lundin interest", Roxmark Mines RMK.v has showed some life finally with new drill results.

With Congo contract negotiation process announced to start from mid July Lundin Mining LMC LUN.to is still a wild card. The guys in that African country with their contract review are treating time differently from our perception of always slipping away treasure. "Very soon and very fast" was introduced in Feb and now they will start half a year later. Lundin Mining has became trading situation now: we are watching closely formation of Double Bottom reversal and taking more Calls under 7.o USD. Protection from downside is in PUTs at 7.5USD strike. Investment positions are reduced. Lukas Lundin is coming back into spotlight with a little bit reduced ambitions for market capitalisation of Lundin Mining in a 4-5 billion range in two years time instead of 10 billion "goal" last summer. Russia as always showed its own game and apparently J/V partner there is not strong enough to protect from "consolidation in the industry" and strategic resources game announced with new legislation coming. It could be a good news if not for Lundin Mining itself then for other considerable Zinc projects. Disposition of Ozernoe with 150 mil tons with combined Zinc&Lead grade of over 5% from Lundin's book will free company's ambition in other parts of the world. Price paid for 49% of Ozernoe in Russia is putting Mantle Resources MTS.v in a very favorable position with its Akie deposit in BC Canada. Lundin Mining holds 10% in the company. Lundin also has announced that they are going to sort out their Junior mining plays and will be looking for some acquisitions again. We are closely monitoring developments in Sanu Resources SNU.v and Sunridge Gold SGC.v. Nevsun Resources NSU. v has shown some accumulating interest and could be still an acquisition play. Conerstone Capital Resources CGP.v has exited market with recent developments after fiasco in Ecuador.

Sterling Mining SRLM.ob SMQ.v has announced departure of Ray De Motte, stock was a pure disaster and is hitting new lows: more dilution is coming, but there could be still some potential so it is on our close watch by list.

TNR Gold TNR.v is continuing its careful strategy of building value from its option agreement with Xtrata Copper behind the scene of Minera Andes MAI.v recent announcement of extension of Los Azules mineralised zone. Rock bottom valuation of this company always makes us think about the most important question in investing "Are we gonna be embarrassingly rich in the future or we are already incredibly stupid?" As usual Gods will decide with our help.

Good technical observations as usual from Adam Hamilton:

http://www.gold-eagle.com/gold_digest_08/hamilton061308.html

We liked the adrenaline in the process of making money in investment banks' hang over and invested some time in a better understanding of the game:

The Accidental Investment Banker

It is good that it is a weekend: first emotion was to buy as much Puts on all these egomaniacs as you possible can, but we will proceed with usual care and cynical analyses of the future developments.

Our general observation for this week is that you can be very unhappy when prices of your beloved companies are going down only in two cases:

1. You are already fully invested at much higher levels.

2. You do not have a real understanding and/or true believe in your own judgement.

P.S. always ask yourself a question...

Lehman Brothers LEH victim of global warming

Icebergs are melting, so investment banks and their valuations. You can not make banking business without Trust, it is gone and so will the firm...

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7b4C56AD35-A0AA-485B-87D3-81171D8D5207%7d&siteid=yhoof2

Intel INTC, semiconductors SMH are under fire with consumers retreating to windowshoping

First signs of consumers retrenching for recession defence: demand for Tec products is cut, chips are to suffer.

"SIA lowers 2008 chip sales growth forecast

SIA lowers 2008 semiconductor sales growth forecast to 4.3 percent from 7.7 percent

SAN JOSE, Calif. (AP) -- The Semiconductor Industry Association cut its 2008 semiconductor sales growth forecast Wednesday, citing ongoing pricing pressure in memory chips, and in DRAM memory chips in particular."

http://biz.yahoo.com/ap/080611/sia_forecast.html?.v=1

Goldman GS rumor

That is why it is called Bear market: any rumor is sending stocks in further wave of selling. Biggest problem with investment banks is that you can not assign any value to them, you can not trust them any more. So when Bernanke is rising rates?

Financial shares wilt on Goldman rumor: investors

Citi C, Merrill MER, UBS UBS Face Monoline losses, more Hot potatoes on SALE

Bernanke is trying hard to talk the market into bull on USD, so far he has succeeded only with killing investment banks. Pour guys: they were hoping to make it without too much attention to the junk they are holding. Now they are facing the music and forced to "deleverage" or fire sell of of their assets. We will be all surprised with the real prices they are getting for all those AAA scam.

June 9 (Bloomberg) -- Citigroup Inc., Merrill Lynch & Co. and UBS AG may post losses of $10 billion on bond insurance after MBIA Inc. and Ambac Financial Group Inc. lost their top credit ratings, Oppenheimer & Co. analyst Meredith Whitney said.
MBIA and Ambac, the world's largest bond insurers, had their AAA ratings cut two levels by Standard & Poor's June 5, which trimmed ratings on more than $1 trillion of securities they guaranteed. The downgrades may limit the so-called monoline insurers' ability to write new policies, putting further pressure on earnings, she wrote today in a note to investors.
``The limited earnings potential of monolines poses a risk to the value of the insurance and hedges on the subprime-related securities provided to the banks and brokers,'' Whitney wrote. ``The collateral damage could be in excess of an additional $10 billion.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=aWzDAfdNmgOw&refer=home

JP MORGAN CHASE JPM is on fire today like an iceberg and melting

JP Morgan got some fever today, virus must be very contagious and spreading fast. Who would like to hold next hot potato? I will throw some ideas here: Merrill Lynch MER, Freddie Mac FRE, Bank of America BAC, Citigroup C and even best of the breed: Goldman Sachs GS - its immunity is really suspicious.

Do you know how the price for Bear was determined? How much Paulson will agree to throw to shareholders after initial screw up at 2.0 dollars. They have agreed at 10.0, but do you think anybody really knows how much does it worth? It is pure liability for JP Morgan with its toxic trading book and liabilities from SIVs to lawsuits for its hedge funds.

The value of Investment Bank its people and Brand what do you have in Bear case - Brand? Or bunch of guys created that mess.

Lehman Brothers LEH "positive" developments continued.

A lot of spin will be put to work in order to make it positive:

Lehman Loses $2.8 Billion, Plans to Raise $6 Billion

You will make your own decision, here is as always the Trust issue: is it the last write down, is it the last capital rising?

Could company survive if they had announced hypothetical "real write down" of double the announced figures, would capital be still available to them?

We can find some hint in action of more strictly regulated guys like UBS (Used to Be Smart according to some) which are writing down without any end in sight.

Royal Gold RGLD Early Warning Gold indicator

Stock is making higher highs and higher lows in recent consolidation state, chart looks to me like a good spring before break out. Fundamental considerations are good as well: rising CAPEX is no issue here and rising gold price is translating into high leverage of royalty revenue.

From the newly relaunced website:

"The Company’s royalty portfolio provides investors with a unique opportunity to capture value in the precious metals sector without incurring many of the risks associated with mine operations such as capital costs, operating costs, and environmental liabilities. The distinction between a royalty company and a mining company is very important in the current market environment where the costs to build and operate mines are rising significantly. "

Royal Gold Business Strategy



-->
"Royal Gold collaborates with mine operators, royalty owners and other business partners to acquire royalties and unlock their value. The key elements of our business strategy include:
Focus on Gold. Royal Gold will continue to be a precious metals investment vehicle focused on gold.
Royalty Business Model. Royal Gold’s lower risk business model is based on acquiring royalty interests in precious metals properties rather than engaging in costly and more complex mining operations.
Growth and Diversification. Royal Gold is determined to add to its broad base of precious metals royalties through accretive transactions, to further reduce risk and provide ample opportunity for organic growth within the portfolio.
Margin Enhancement. Royal Gold’s unique business model allows us to efficiently grow our royalty revenue without adding significant overhead costs.
Financial flexibility. Royal Gold’s position of liquidity allows us to compete for royalty acquisitions by means of a purchase, by providing financing, or by entering into a strategic exploration alliance in exchange for a royalty"

Common Sense against naked short selling. CS

We are joining the fight for the investors' rights for fair play.

Definition http://en.wikipedia.org/wiki/Naked_short_selling

Good summary http://www.stockhouse.com/Community-News/2008/June/2/Naked-short-selling-gets-investors-motivated

Financial Sense http://www.financialsense.com/fsn/main.html Crime of the century.

Stockhouse http://www.stockhouse.com/Groups/GroupInfo.aspx?g=50176

Where it will count we will deploy our knowledge and resources to burn couple of dirty hands in the market.

Who will go down faster: more shorted Lehman Brothers LEH, more leveraged Merrill Lynch MER or USD?

All banks are build on trust, what kind of trust can you get when system is rotten to the core? Have you ever seen banker or trader bringing his bonuses back? The system itself is build on fraud.

You will tell that it is fraud committed by trader when he builds his positions, hide losses in "off balance sheet entities", mark his winners to his own taste, get his bonus and walk away with it.

Why in the case with investment banks it is considered to be different? They made risky positions, creamed the market by taking swaps without capital needed for proper underwriting, offload trades into SIVs off balance sheets and now are sitting on FED life support even before taken them back.

In case with a trader he will go to prison, sometimes - if he get caught, but what to do with whole system build around this?

You are right: no one can afford whole system collapse. So message will be send when one more player will be taken down, its shareholders punished, trading positions undertaken by FED effectively and majority of losses unwind into this "bottomless" pocket. Market can not be ruined, how can you trade if you can not trust your counter party? All that AAA rated trash need to be sank in one fallen angel, system will get monetary pumping in the amount of at least that of normal banking multiplicator which means 10% of total losses. With some estimations of 1 trillion losses, we are talking here about creation out of thin air 100 billion dollars by FED.

USD is a chosen victim, normal voting fox will hardly notice before they go to Paris for vacation, they are not eating gold for breakfast, so they will be fed with CPI stripped of everything you are paying for. One problem here is oil and imported inflation which is coming back through the same doors where you sending your worthless "money".

But we are not in a business of politics, we are just trying not to get caught in the middle and scratching our head: who will be fallen angel apart from what used to be "reserve currency of choice".

Remarks by Jeffrey M. Lacker. President, Federal Reserve Bank of Richmond
Financial Stability and Central Banks
Distinguished Speakers Seminar European Economics and Financial Centre London, England June 05, 2008

"Maturity transformation raises the possibility that a surge in demands by liability holders to "get their money back" could overwhelm an institution's ability to liquefy the assets in its portfolio.2 This is the traditional story of bank runs, and it motivates, in part, the view I cited earlier that financial markets are inherently unstable. Since banks' assets are less liquid than their liabilities (their deposits), they could have trouble meeting the demands of a large number of depositors to "cash-in" all at once. Knowing this makes depositors likely to run if they think such a large cash-in event is looming. So a run, in this view, can become a self-fulfilling prophecy. This means that a run can occur even if the bank's assets are fundamentally sound, in the sense that if held over a longer horizon the return would be sufficient to repay liability holders in full. The reduction in realized value associated with early and perhaps disorderly liquidation of an intermediary's assets in response to such a run is a deadweight cost that presumably could be avoided if the run could be prevented."

http://www.richmondfed.org/news_and_speeches/presidents_speeches/index.cfm/id=107

Yamana Gold AUY South America Focus - new advantage

After one of my babies has graduated and NNO.to Northern Orion was taken over by Yamana I took a rest and it happen to be wise/clever/just lazy, but fortunate, I mean in a sense of timing. I am glad that we have found one another at this sweet level of relationship. The main competitive advantage is "transportation cost": all Gold will be taken by local guys by 2025. Yeh, yeh it is my old story: "spin" will stay with USA, but center of the World will be rather stretched from now on. Nobody likes anymore to spin around, sorry guys...

"Yamana Gold Inc. is a Canadian-based intermediate level gold producer with significant gold production including other precious metals and copper, gold development stage properties, exploration properties, and land positions in Brazil, Argentina, Chile, Mexico, Central America (I like hard working people in these countries, you hardly can fool them into banks play any more) and the United States. Yamana has seven operating mines and five development projects.
The company is targeting sustainable production of approximately 2.2 million gold equivalent ounces in 2012."

"Why Invest
Why Yamana?
A leader in production growth
Targeted production growth from approximately 1.2 to 1.3 million gold equivalent ounces in 2008 to approximately 2.2 million ounces in 2012

Low cost cash producer
Generating strong earnings and cash flow from low cost operations

Sustainability
Robust portfolio of seven operating mines, five development stage projects

Superior exploration and development prospects
Geographical and asset diversification in mining friendly regions near existing infrastructure; $84 million exploration budget in 2008 and 2009

Highly liquid gold vehicle
Average daily trading volume today of approximately 24 million shares on three leading stock exchanges

Leverage to gold price
Gold production unhedged

Proven experience
High performing management and operations teams
Value Proposition
Delivering value to shareholders

Why Gold?

Gold is fundamentally a currency and in periods of increasing demand for gold the upward price movements can be more rapid and larger than in other currency markets
Gold serves as a store of wealth
Gold has functional uses in jewelry and certain industrial applications which distinguishes it from other currencies
There is a finite amount of gold available unlike paper currencies
Gold is considered a safe haven during times of geopolitical uncertainty

CEO’s Message
Since our creation in 2003, we have successfully turned undervalued Brazilian properties into profitable, producing mining operations, implemented an extensive exploration program and increased reserves and resources as well as proved our operation expertise through buildings two major mines, including Chapada, Yamana’s original flag ship mine.
Last year, in 2007, we proved the value of the acquisitions done in 2006 as we became a cash flow and earnings generating company. We fortified the base for subsequent phases of growth and distinguished ourselves as the premier intermediate gold producer.
This year, we will focus on organic growth with a strong push on exploration for both the short and long term and will continue to excel and deliver on our promises. It is our vision to increase our 2008 production to approximately 1.2 million ounces which we can achieve from our existing mines and project under development. "

http://www.yamana.com/Theme/Yamana/files/May%202008%20Corporate%20Presentation.pdf

We have a party today on the street: one guy Merrill Lynch MER sad to buy another one - Lehman Brothers LEH

What is the reason for the new found happiness, is it housing?

Home foreclosures set record in first quarter

Or credit quality is improving?

MBIA, Ambac May Quit Aaa Battle on Moody's Likely Cut (Update3)

No, it is just one trustworthy guy sad to buy another pal.

Do they need to unwind trading positions, short the hell out of LEH by themselves or just caring about your blue sky and palms retirement - you decide.

Take a break and read another good book:

Full of Bull: Do What Wall Street Does, Not What It Says, To Make Money in the Market (Hardcover)by Stephen T. McClellan (Author)

I hope you get it: nobody knows the value of any investment bank now: one real downgrade in this mirror house and run on another "TOO BIG To FAIL" bank will establish proper valuation in 24 hours.

The real story today was made in Europe when ECB and BOE Hold rates. ECB even sad that they could think about raising next time: for sure they will not cut and now Ben is on the hard place again: another cut and USD will collapse, hold and you have to invite Greenpeace to preserve couple of investment banks for future amusement in Disney Land.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aed5eIhbliJk&refer=worldwide

Silver Standart SSRI SSO.to transition Play

Give some credit to the big boys, they will not buy into Juniors - they are not allowed, when silver story will hit them they gonna pile up into this beauty: its market cap can allow them some room.

I am taking this as a one in a life time opportunity to come back into this silver play now: company is in transition from holding its goods safely in the ground to start printing money going into production with rising silver prices.

Company was "hit" with ABCP holdings of 45 mil which is non material at this price level.

http://files.shareholder.com/downloads/SSRI/327887570x0x196158/e7d591f5-7199-4728-aabf-0a4dff96ec79/SSRI%202008%20AGM.pdf

Company is claiming to have one of the best silver valts in the ground:

http://www.silverstandard.com/assets/pdfs/resource-summary.pdf

Silverstone Resources SST.v M&A Play?

Another Junior with Silver Wheaton SLW silver stream model. Management has been taken a nap recently and stock is down below latest PP at 2.9 CAD.

The beauty of things here is that your asset base is growing even when management is sleeping:

"Silverstone Announces 130% Increase in Silver Reserves at Lundin Mining's Neves-Corvo Mine"

http://www.silverstonecorp.com/news/

If you have missed SLW below 2.0USD, check this one with all due caution as usual.

Company could become acquisition target for Silver Wheaton if share price will continue to evaluate this company so much cheaper then SLW market valuation using the same investment metrix.

Silver Wheaton SLW Buy low, Sell High continued

This guys are the best: buying all the silver streams availible when everybody are busy spotting Commodity Bubbles and advising investing in Investment Banks...

http://silverwheaton.com/main/?en&newsReleases&PHPSESSID=9d53c69042f100dcd177da356c1e9998

Global margin call LEH, MER, GS, MWD

Prepare yourselves: global margin call is coming. I hope that all Juniors are already sold from big banks own books. Cash will be the king this summer. Those who can preserve it will get fire sell valuation where it is matters with real hard assets.

If the March low will not hold wave of brutal selling will bring us into Second Bear Leg.


"Three of Wall Street's biggest banks face handing billion of dollars in collateral to their trading partners after their credit ratings were downgraded a notch on Monday, an unwelcome capital squeeze as they scramble to raise more funds.
Credit rating agency Standard & Poor's downgraded Merrill Lynch, Lehman Brothers (NYSE:LEH) and Morgan Stanley (AMEX:MWD) - three of the credit crunch's most prominent casualties - to A, A and A+ respectively, saying their profit outlooks were weakening and more writedowns were possible.
Because the downgrades make the banks less creditworthy, their trading partners in over-the-counter deals (such as credit default swaps or interest rate swaps) can ask them to post extra collateral as security."

http://us.ft.com/ftgateway/superpage.ft?news_id=fto060320081838383098

Banks fear new $5,000bn balance burden

"Accounting changes could force US banks to take thousands of billions of dollars back on to their balance sheets in the coming months in a move that is likely to curb further their lending and could push them into new capital raisings, analysts have warned."


"The off-balance sheet vehicles have been used by financial institutions to keep some assets off their balance sheets, thereby avoiding the need to hold regulatory capital against them."

Very cleaver idea, do I smell some ENRON cooking oil here? Banks have barely "sufficient" capital without this exercise. It means that they will have to raise further capital to accommodate this new risky assets, diluted earnings will go further down, guess what will happen to valuation?


http://us.ft.com/ftgateway/superpage.ft?news_id=fto060320081838383099

Lehman Brothers (LEH) may not be independent for long

My Puts are liking this idea:

http://dailybriefing.blogs.fortune.cnn.com/2008/06/04/lehman-on-the-block/

Common guys - I need some Capital to accumulate juicy juniors which are on the plates all around the market place...

Know your enemy. CS

We are in the battle here, some guys are outsiders and would like to strip you out of your money and some of them are inside: emotions, greed and fear.

But we have some help at least with external nasty gang:

The Agency Issue: Conflicts of Interest, Fraud, Corruption & Crimes Against Investors with Eric King

http://www.financialsense.com/fsn/main.html

Crime of the Century Part II: How They Scam Individual Investors

The same page.

Invest your time before your money listen for these two podcasts.

Sharpen your Sword. CS

What to do when your Puts are slowly gaining respect and you are waiting for your Juniors bids to be filled?

In such a perfect world you should get in shape and read couple of books. You should not really waste any more a single dollar before reading these couple:

"Lost on Bay street" by Alex Doulis

"The trillion dollar meltdown" by Charles Morris

Whom am I kidding...perfect world...but I am reading, reading...

Mining explained, Disclosure meditation

After couple of months and a lot of money involved I have passed another level and it will be important to share here.

My main disclosure from now on is that you have to think for yourself and I will stop telling it every post.

I will write my Diary of battle with Common Sense further, but consider it only as diary and addressed to myself, you are always welcome to share with me your thoughts thou...

If you would like to get a better understanding of Junior mining sector I will refer you the links on my blog and particularly to the

http://mining101.blogspot.com/2008_05_01_archive.html

I came across recently.

Gold is heading to double bottom, Juniors are showing some life.

With so much talk about strong dollar you can even talk somebody into buying it again, gold effectively is bouncing around its long bull market support. In my positive scenario we will make double bottom within next two weeks. Silver will be more interesting this time again.

Juniors are showing some life now, bouncing from bottoms and retesting it to make double bottom.

Greenpeace should pay attention to investment banks: they are under threat - without FED life support they would be out by now.

You guess right, I was back to my old tricks: buying what nobody wants and playing down Investment and general banks and consumer related sectors.

PUTs AMR, MER, GS, LEH, C, BAC, AXP, GM, SNE, FRE, INTC, SMH, GOOG, AMZN, LMC

Calls LMC, SSRI, SLW, AUY

Juniors are under accumulation.