Sunday, May 27, 2007

fuBarrio/GL Update


It has been forever and a day since I've posted. Lots of things "happening" here in Uruguay.

I've been pretty busy during the weekdays, and sick as a dog last weekend so I didn't get a chance to update everyone on the 'haps'. Here is a brief summary:

Montevideo weather:

it's still sunny at times, but the weather is much colder and the "windchill" makes it almost chilly :) keep in mind, this is coming from the perspective of someone who was living in the bay area, ca, so "chilly" doesn't mean snow or anything like that....just not "shirt sleeves" type weather like so many of the other months.

Our living situation:

we are moving out of the "pocitos nuevo" neighborhood back to punta carretas. "pocitos nuevo" is a nice hood, close to shopping restaurants, nice homes, and situated between pocitos (beach neighborhood with lots of expats) and buceo (costal hood with port for small pleasure crafts and sailing lessons, etc where the uruguayliving offices are located).

loved the apartment. could love it more without all the construction. i made a post about the construction on day one i think and haven't touched on it since. it hasn't stopped. i've refrained from boring you with the details. let's just say that once i found out that the owners of the building had expanded the work to be done on the building once the project was started...thus extending my "pain" i was forced to look for somewhere else to live.

the next occupants will have a nice place once the construction is over with. it won't be us.

punta carretas is a slightly older neighborhood that went through a "renaissance" when an old prison was turned into an upscale "mall"....yeah, i know.... :) it's really not as hideous as it sounds. malls here aren't like the US with seas of parking lots, chili's, tgif's, check into cash's and various and sundry sketchiness.

the idea was i'd get a flat in an older buildin with fewer occupants (2 to 4 unit) but i just couldn't find it in the time frame i had. basically, gl was going crazy with the construction and i had to compromise with a small-ish 2 bedroom 2 bath in an access controlled building on a relatively quiet tree lined street. i'll take some pics so you can get a feel once we've moved in.

because the neighborhood is more upscale, and it's furnished pretty nicely actually, the apt will cost us 750/mo. "all in". not as cheap as you may have been led to believe apts run if you read the "hype" from international living or elsewhere. 750 is actually 650/mo + "gastos comunes" which includes paying for the doormen (24/7) building maintenance, elevators, and central heat.

House Fund

if ya'll have been following along, you'll remember that i've been calling for a collapse in northern hemisphere realestate for some time. if you've really been following along, i had opined that the realestate prices in Montevideo that had no relation to fundamentals (median incomes) were being driven by a few things:

1.) govt money (uruguayan and foreign -- this is a capital and there are lots of embassy employees etc.)
2.) foreign company money (there is a little bit of this...people bein paid in dollars or euros and living on pesos...nice gig if you can get it)
3.) equity locust money....People with big appreciation in western Europe and north america either selling outright or heloc'in the homestead to afford cash purchases "down under".

1 and 2 aren't goin to slow alot unless things get REALLY bad, but i suspect that the flexibility of the equity locusts is going to be limited a bit and i'm hoping that it takes some pressure off of the insanity down here.

that said, any natural slowing will probably be offset by more and more people "discovering" uruguay and the fact that it has what a lot of people are seemingly looking for these days....peace and tranquility.

So, with that backdrop, and since we had decided to stay here on a more permanent basis i had decided that buying would only be possible given a couple of criteria:

1.) i could purchase something in the 150k range so i wouldn't be tempted to sell and move up if/when a drop in prices occurs here
2.) paying cash for something in the 150k range wouldn't significantly derail my other financial plans.....right now, it WOULD! :)

so, i had decided that i would try to turn 50k into 150k as an experiment in "gambling" and speculation, stripped naked for all the world to see here.

however, as it became more obvious that we weren't goin to be able to ride out our lease....much less extend it a few months to get me to next fall (when i suspect things could move more in my favor -- at least for positions i feel comfortable taking), i lost a little bit of my gusto for "gambling".

just as well, i reckon, as my two positions i've taken have been pathetic underperformers.

1.) i held a 2x s&p short and sold it after a 1% decline after realizin shortly after the purchase that there wasn't even a trend in place. i was just "wishin and hoping"

2.) i purchased txm.v thinking that things would pick back up in Uranium juniors for a minute before the seemingly inevitable summer doldrums. it was a really ill-advised purchase because the price was falling off the table with no visible support at the time.

the deadcat bounce saved me and i was actually up from 4.39 all the way to 5.2...then, i noticed something ominous....

Relative Strength

another uranium junior that i own (in another account) started rocketing up on higher volume (EMC.TO). trading was halted and they announced they were in "exclusive talks" to be acquired (perhaps).

the problem is that, that friday the entire sector (it seemed) when up heavily.....except txm.v. i got sick that friday night/saturday, or i was going to post something explaining "relative strength". Relative strength in a sector is important to look at because it gives you a much better idea of the strength of a given security than just looking at the perfomance alone.

imagine tiger woods and i golfed a round in a hurricane. tiger was 10 over and i was 110 over par. rather than conclude that tiger was a talented weekend duffer by looking at his score alone, by noticing that he was facing substantial "headwinds" (no pun intended) it would give you better predictive ability as to how he might do on a nicer day.

i had noted a month (or more) back that (US symbol EMU) was showing great relative strength.....i had attributed that privately to the fact that their uranium was closer to market than some of the other speculative juniors and they may be able to take advantage of the squeeze on short term supplies.

however, when the buyout speculation began across the industry 10 days ago and txm.v didn't move, it was time to get clear.... i didn't :) price fell from 4.8 to 4.15 over the next few days before rebounding slightly. i think if the industry faces a disappointment things could get rough for txm but i still suspect there is a floor of support just under 4 until the drill results are in. time will tell.

Ok...GL has just prepared me some 4 bean soup....time to eat lunch. I'll continue the update in another post.


Monday, May 14, 2007

What will catalyze the "meltdown"?

Let's face it. fuBarrio has wasted a lot of time musing about potential melt-downs and scary outcomes for the financial markets in this blog. The executive summary of this entry in case you don't want to dig through the details of my still muddled mind is that I'm predicting a bankin crisis in the US -- beyond what we've already seen in the subprime lenders.

Uruguay and Argentina had a pretty brutal crisis here about 5 years ago that they are just shaking off. However, there are no shortage of people here with some pretty scary stories. While it's true that the people who were bein paid in dollars made out like bandits, those unfortunate souls would were being paid in pesos and borrowing in dollars made out like "bagholders"

The title of this blog entry "may" be overstating the case for a meltdown, but I believe a meltdown is imminent. So what does "imminent" mean? Well...this is a developin thesis so I'm still looking for feedback to help develop this theory from the two readers of this blog...but, as I start to lay out my arguments in a somewhat incoherent fashion (especially at first) maybe you can get an idea of what i mean by "imminent".

Here's the crux.

The US econ transforming into a service economy. While this sounds well and good, I believe it has gotten ahead of itself. Pushing bits has become the only way to make money in the US it seems. At first it was the technologists....and after that crashed the "bits" financial credits and debits represented by "bits" on a computer.....the new fangled version of pushing paper.


Lots of reasons, I guess....and i'm sure i don't know them all....but i think numero uno is costs of doing anything else in the North America. I had the opprotunity to look at the costs associated with opening up a new semiconductor fabrication facility in the valley in 2003/2004

Even with a desperate landlord and a built out fab selling for pennies on the dollar in the wake of the tech-wreck, all the "other" costs couldn't be reconciled against just boxing up the entire thing and sending it overseas. Now, don't get me wrong, moving, reinstalling and requalifying used semi fab equipment overseas ...even for a small fab, is a 7 or 8 figure expense....but the "hidden costs" of doing mfg business in the states is crushing.

Regulatory hurdles to new facilities/beauracratic red tape
Attorney costs -- any long term relationship/contract with any vendor/partner/distributor/supplier becomes something for attorneys to pine over for weeks at 450/hr.
Taxes -- these come in a 101 flavors for the small business
Compliance -- this is a big bugaboo...Sarbanes Oxley hits not just big companies, but little companies with hopes of being big, or hopin to be bought by someone big.

So, it was hard to open a plant making refrigerators in America's heartland the last 10 years. So, rather than just sit around and starve we got creative about ways to feed our families.

Those with "education" and didn't want to pull down big bucks fixing toilets or swinging hammers often found themselves in some part of either the "Real Estate Industrial Complex" (REIC) or something broadly defined as "Financial Services"

The result of this (coupled with criminally loose monetary policy) has been an explosion in the REIC and financial services include in my definition for the REIC

builders & construction
title companies
mortgage brokers
IB's repackagin mortgage products
RE Agents
etc, etc, etc, etc.

And for the "financial services industry"

commodity trading
hedge funcs
PE funds
derivatives traders
etc, etc, etc, etc.

Now that the REIC is contracting massively, it is putting additional pressure on a financial services industry that is already leveraged to the hilt (in my opinion).

What we are seeing now is banks (and other assorted bagholders) who still have yet to "come clean" on the depth of the mess. In one of the most disturbin revelations to come out of this, I read a few months ago (have yet to independently confirm) that many banks are booking negative amortization loans' unpaid balance increases as income in the current period. This is eerily reminescent of almost every other "accident waiting to happen" in recent memory of my adult life.

In summary...."income" being booked that had nothin whatsoever to do with "cash flow".

Those banks and financial institutions unfortunate enough to be holding a large amount of residential real estate returned to them by borrowers unable to pay will eventually be forced to unload their holdings at "any cost" to remain liquid.

So again, in summary....I need to study this issue more thoroughly, but I'm predicting a banking crisis of sufficient magnitude to hit the mainstream press....and not just in the subprime lenders as previously born out.

you'll see them first (probably) in smaller, less capitalized, regional banks in areas hit by heavy fraud...and then if it gets big enough this whole mess could people to look under the rocks at fannie mae.....and that's where you wind up with "too big to fail" issues. when something is "too big to fail" typically, the US taxpayer ends up footing the bill while a host of clowns sail into the sunset already set for life. This is a key covenant of "privatizing benefits" while "socializing risks".

The exact reactions of the Fed, the US govt, and our trading partners are a little difficult to gauge right now....We could see something like the old Real Estate Trust Co. (RTC) reformed and that is why i really don't have any "new" plays to try in this market other than *possibly* shorting the banking index with long term puts (this b.s. could carry on for years before it's brought to the light of day) and an inflation hedge offsetting your puts in case the printing presses try to paper over this mess.

for now, in the housing fund, i'll sit in depreciating dollars and txm.v

ciao for now,

Friday, May 11, 2007

moving to cash

this month i've been slowly moving more and more of the holdings to cash.

i'm going to accelerate that move tomorrow and be sitting 90% cash before next week.

i'm not "top calling", but i need to have time to analyse global liquidity...and i don't have that time right now.

i will diworsify across several currencies and hold an inflation hedge or two with what remains in the market.

good luck.

Monday, May 07, 2007

"Do as I say, not as I do!"

I was looking at my two trades last week.

OK...I was hurried. I lacked sleep. I missed breakfast. The sun was in my eyes....(sorry, can't think of any other excuses).

In looking at the charts I'm not sure what I was thinking in those trades. After all the preaching in my blog about not tryin to time a top or bottom, etc, I make two trades attemptin to do exactly that.

I sold out of my s&P short fast....perhaps too fast...and i'm still holding my junior uranium miner.

The chart on txm.v is positively frightening when i look at it.

I'm up about 10%-ish on that buy, but it has all the hallmarks of a "deadcat bounce".....In other words, it would be very easy to give back all those gains and more....the price was below my price point but it got there so fast that the stock hasn't had a chance to build slowly and bring in new buyers.

A jab down and reversal can be lead by dumbasses like me buying and thinkin they are getting a "bargain". The ride back up can be short lived as the people caught flat footed earlier decide to liquidate into the strength.

So, what has really been happening in uranium? Why all the volatility?

two big fundamental events unfolded at about the time that the spot went over 100 for the first time. perhaps it was coincidence, but almost "on schedule" with my blogged predictions (based purely on pschological factors of pushing through triple digits on U3O8) we saw profit taking across the board in the complex of stocks dealing in uranium.

australia (at the national level) relaxed restrictions on new U mines. This is big. By some estimates australia has 30 percent of the easily accessible uranium and it had previously been restricted to 3 mines.

second, nymex is launching a futures market for uranium next week. ugh. just what we need (NOT!) :) the futures market is fraught with problems of its own as it's not tied to a physical delivery of the commodity.....otherwise, rogue states like fubarrio's abandoned oil platform could just get their raw U3O8 direct from nymex without all the cloak and dagger prospective "evil doers" have to go through nowadays.

justifiably, on the back of these two tidbits uranium speculation is taking a breather. i went long on txm.v because it hit my price point, but would have MUCH preferred that it hit that price point after cupping a little lower after a long and grinding summer of little to no interest in the issues.

that said....that could be the case on my next purchase in late august. for now, i'll hold tight for what looks like it could be a wild ride.

i still think a leveraged short into the general market will pay off big sometime...soon....i'm just not sure what i can predict it "tomorrow" yet.

once i do, i'll post it here.

ciao for now,

A day with the Relics....

This Sunday afternoon GL and I spent a day with the relics.

And no, before I get flamed, I'm not talkin about hangin out with the usual cast of retiree types who frequent the Sunday expat get togethers. (har har har)

Golden Lotus and I went to visit some tibetan holy relics that were in Uruguay as part of some the basement of the uruguayan version of the YMCA (i think).

Golden Lotus has been in bean curd heaven as she has been the official chef this last week for the monks traveling with the relics. GL has her nascient food delivery service deliver all the meals to the monks during their stay.

Good thing for them I think as I learned they are "vegetarian, striving for vegan-ism". Speaking from experience, eating without animals can be pretty challenging in this part of the world.

The relics themselves mostly consisted of really small "pieces" of ancient religious leaders, etc. noticed one labeled a peice of a tooth of buddha's elephant or something (?) they had a really nice layout and setup though with lighting, drapery, music, candles and rice leading a path into the space....better than the "ymca basement" makes it sound.

i'm glad i went and GL was really happy to be there and get a prayer from one of the monks.

sorry no fotos as it wasn't really a good place for cameras.


Tuesday, May 01, 2007

"Sell in May and Go Away"

That's an old saying in markets.

Needless to say, it doesn't always hold true, however when it does and you're caught on the wron side of it, that saying will ring in your ears all summer.

I'm still in the depreciatin dollar in my housing fund, and off today ("may day" holiday).

I'm watching very closely today to see if there is an opportunity to get short in a big way. However, I'm very concerned about the excess liquidity continuin to crop up in the market. The futures are up this morning, but it has done almost exactly as predicted....It has cropped up over 13k....and if it holds true to the prediction it will "hit the wall" as it becomes obvious that no new rate cut is forthcoming.

CNBC is spouting that the dead dollar is helping international earnings -- a very sick way of looking at things. Earnings expressed in "non-paper" money, prices of stock, and the averages are DOWN in my estimation.

Time will tell.


p.s. sds is a way to get 2x short s&p and qid is a way to get 2x short the nasdaq

p.p.s. edit from 11:25 eastern. i went long on sds (an s&p short, yikes, and long on txm.v a uranium play that by all rights should have trouble going north the next 4 months.....double yikes....what can i say? they both hit my targets so i dabbled....i will stop myself out if/when i lose between 8 and 10 percent....i will update you on their progress.....

txm.v i was lookin for got all the way to 4.25....i loaded up, but couldn't get a fill until 4.39.

sds i bought a little this a.m. at 54.07 as a way to hedge a total route in the markets taking down txm.v with much for "selling in may and going away"

edit: may 2, 10:12 eastern...i chickened out of the sds after it was down a mere 1.25% :) just seemed too much like "top calling" to me....a dangerous business when you are an inflation believer. i still think there is a big down day in the cards, but i'll try to get on board as it is in motion rather than "guess". sds moves 2x faster than the s&p so 10percent of my position was in txm.v and 5% in sds. 85 percent in the dollar.
now, i am 10 percent in txm.v and 90 in dollars. i will update my house fund holdings in a new post at end of day today.