Tuesday, September 25, 2007

Inverted Cup and Handle -- Again

I went into a big crazy explanation of what I thought the psychology was behind a "cup and handle" and then later in the same post, why an "inverted cup and handle" went through some of the same psychology, only in reverse.

In case you don't want to follow the link to see what I'm talking about, I'll just summarize by saying that these are relatively predictive chart patterns. The inverted cup and handle I was most concerned about was the one in the US dollar. I had a really hard time finding a good chart that really showed this, but just today I found one on a site that stole it from GoldMoney.com.

I decided to steal it as well to help illustrate the point in more glowing detail, hopefully.
Of course, this isn't all academic. The falling dollar is what makes your imports (if you're living with dollars) cost more. In addition, it can even make things that people compete for on an international scale cost more too -- even if they are made in the USA (see wheat, corn, your local neighborhood food aisle, and comin soon to meats!)


Leveraging the Efforts of Others


Since I don't get out like I used to and take fotos of the city, AND people seem to enjoy my pictures of Montevideo a lot more than my endless rambling about how the sky is falling, I have found some nice pictures for you.

I'm not sure who took these, or who this blog belongs to, but nice job! :)

Make sure you scroll down far enough to see some of the old-school architecture....leave a comment....tell them that "fubarrio" sent you! :)

pictures of montevideo


Thursday, September 20, 2007

Life in Uruguay

Well, since Golden Lotus and I have moved through the one year in Uruguay mark, we had a chance for some reflection.

When we first moved to Montevideo without knowing anyone, or having every been to South America it was a pretty big leap. When Golden Lotus started questioning the move a few weeks before we left, I simply said, "hey, we'll go down, check it out...if we like it we'll stay....if we don't we'll leave."

That seemed to work. We arrived on the 12th of August and that August was *relatively* mild weather-wise and after about a month and half it had started to warm up. After this last winter, barring some unforeseen event we will NOT spend another winter in Uruguay.

Leave Uruguay (gasp!)

Well, the weather is only one part of the equation. Uruguay has a TON going for it, however after being here for a year+ it is lacking some things that we'd like to have around in the next few years too.

Now, before you hard-core lifers say, "well, duh" remember that 2/3 rds of my 3 person readership has never been to Uruguay.

It's choices for food are really limiting
Its cultural diversity is very limiting
It's professional opportunities are very limiting
The attitude of the people is not very open to foreign ideas or concepts
It's a little boring
(Golden Lotus entry) "the men are perverted" :)
(Golden Lotus entry) "no one knows how to cut non-mullet haircuts"

So, while a portion of our time may very well be spent in Uruguay, it will likely be that portion when a much larger percentage of the population is from somewhere else --- the summer! Our lease is expiring at the end of May with an option to extend for another six months. As of now, we do not intend on extending that lease.

Where to next, fuBarrio?

Well, that has yet to be decided. I'm goin to log off now and discuss it with Golden Lotus before she falls asleep.


Paraisos Fiscales

Is Uruguay A "Paraiso Fiscal"?

Admittedly, even though I studied a little bit of Spanish before I arrived in Uruguay, I'd never heard this term before I got here.

Paraisos Fiscales basically translates as "fiscal paradises" -- or a more direct translation is "tax havens". To be considered a paraiso fiscal a place needs to shield money from another jurisdiction's taxation.

When I moved to Uruguay, there was *no* income tax -- not even for the locals. In one short year, that has become a fond memory. Of course, still holding my US citizenship has made this semi-irrelevant.

For US citizens we are taxed on *world-wide* income regardless of where we earn it. Luckily for us, we have an $80k/yr tax exclusion as long as we can prove we were actually residing outside of the US. I've heard numbers like 325 days/yr outside of the US, but I'm not certain there is a hard and fast rule. However, this is basically a subsidy for large multi-national corporations to give to expat Execs working overseas. Why do I say this? Well, income on investment income is taxed from the first dollar -- even when we are living in another country.

For Europeans, Australians, and other South Americans however, Uruguay is very much a paraiso fiscal.

Why is Uruguay a "paraiso fiscal"?

1.) strong banking secrecy laws

2.) strong protection for foreign property ownership (even US citizens are not obliged to disclose foreign real property ownership to the IRS (yet!) any bank account over 10k you are obliged to file a treasury dept form)

3.) foreign income for those living in Uruguay is not taxable (for those non-US citizens obviously).

In other words, if you are Australian and want to trade forex, and don't want to pay taxes on your gains....you can move to Uruguay and simply show that your money was sourced from investments made "offshore" and you are exempt.....at least that's MY understanding :)

So, yes, as far as Paraisos Fiscales go, in spite of recent political pressure to crack down, Uruguay is still very much famous for being a haven for foreign money (just have a look at some of the homes in Punta del Este with Argentinian plated luxury vehicles parked out front if you don't believe).....It's just not as a big of a haven for their own citizens and those that chose to make a living here.....

Hmmmmm....sound familiar? Ironically, the US is the biggest paraiso fiscal of them all...as long as you aren't (north) American! :)



Wednesday, September 19, 2007

Montevideo "Craps Out"

In a semi-amusing story that ran here locally the gov't run casino (or at least if they don't run it, they limit the competition for a generous piece) actually reported a loss last year.

I was explaining to a co-worker that I started an online casino back in the 90's and that it is about a "no brainer" of a money maker that there is -- as long as you can do the marketing the operations is relatively straightforward, not a lot of innovation required, no inventory headaches....the only problems are hackers and thieves.

He argued that you had to have a lot of money to start a casino (once the infrastructure was in place) in case you lose some big bets.

I laughed and explained that probabilities and the law of large numbers had been worked out such that other than a 15 sigma event or other highly improbable outcome it was hard to have more than a losing day here and there.

The casinos, you see, for obvious reasons, have minimum and MAXIMUM bets on most games. This precludes the naive strategy of someone using a martingale strategy and simply doubling his bet until he comes out OK.

They also shy away (for the most part) from taking big one time bets. They are all about taking lots of the same bet over and over and letting the laws of large numbers work to their advantage. Some (very few) may have large proposition betting departments and lots have sports books which can see large lopsided bets on outcomes out of their control. However, in these cases, when a book has a very lopsided bet they will either edge the line in one direction or the other or, more likely, "lay off", some of their exposure to another book in the industry.

Even the online guys in Costa Rica had cordial working relationships with the other players in the market and would get on the horn before a big game if their exposure became too lopsided.

Anyways, all of this is just to express my utter fascination that their weren't arrests and a very public "perp walk" by some high profile casino execs after it came to public light that they lost money for a year.

Short of massive, gross incompetence and/or outright theft this is a virtual impossibility for a casino. If time and energy permits I'll get a copy of the original spanish article to post my source as a link here.


Tuesday, September 18, 2007

"Now What?" -- be Afraid....

.....be very, very, afraid... :)

Today, the Fed dropped the short term rates by 1/2 a percent.

Hooray!!! housing will be saved!!!

er, not so fast. As I remember, my home equity line (back when I had a house) was based off of LIBOR. LIBOR is some fancy acroynm for interbanking lending rate.

The reason the lenders insist on this is so that the Fed or some other NON-MARKET BASED price fixer doesn't set rates artificially too low and screw the mortgage holder.

Well, the people holding mortgages are screwed for a million other reasons, but in most cases, I believe those with resetting adjustable rate mortgages will have their rates tied to LIBOR....not the Fed funds rate.

But but but....won't this make it easier/cheaper for new buyers???

yes and no.....The "problem" is that the fed doesn't directly control long lending rates nor does it control what the market demands in the way of a risk premium over and above a Treasury to back Joe/Juan Six-Pack's Half-million dollar mcstucco crap-box dream.

in addition, cutting the short term rates is killing the dollar right now, and that is goin to force foreign buyers of dollar paper to seek a higher rate of return to offset the currency risk......oops.

on the positive side of the ledger, although residential housing sucks right now because the utility as a shelter is WAY WAY overpriced to buy (and by extension to buy as an investment to rent out) there will eventually be some other property perhaps that becomes attractive to foreigners if the dollar tanks relative to their currencies.

"luckily" for the dollar, the EU is trying to liquify away their mess, Japan has political problems right now, and even the formerly tough Bank of England finally had to blink ( a little ) and agree to lend Northern Rock some funds to head off complete insolvency in the face of an old fashioned bank run (exascerbated by the fact that people could go online and withdraw AFTER normal banking hours)

so, "now what?" is answered with those tired old lines....look to diversify your holdings out of just dollars and out of just paper priced in dollars....especially if your salary, retirement, savings (everything) is in that one dollar.

but, beware of other paper assets as well....look for a little bit of precious metals, some grains perhaps, and maybe some energy assets as well.

if you want to make a paper bet, bet on long term interest rates going up -- even in the face of the Fed easing today -- I know, "crazy", huh?


p.s. I couldn't believe how lucid and clear Greenspan was on sixty minutes now that he's out of the Federal Reserve chairmanship....Funny, he wouldn't make any comments on what he's investing in other than to say he's diversified....Then, he goes on to say, expect inflation and long term rates to come back after a 25 year hiatus. :) uh....

p.p.s. my friend wants google to find her new personal blog so.... odeliza jacoba

Sunday, September 16, 2007

"Sell in May and Go Away"....Now what?

Well, as my three loyal readers 'may' (har har) remember I posted about the general malaise that u308, gold, silver, and the mining stocks of all three seem to suffer from through the summer months.

uranium juniors, gold juniors (and majors), and silver stocks have been HAMMERED this summer.

then, almost on queue, the big money got back from the beach after labor day and things started moving up in these assets again.

Ok, so is it time to reenter these positions (if you got out)? should you get in if you never had a position?

First, a review....basically, my original thesis remains intact (somewhat)


  • everyone should stop speculating in housing. if you can sell your primary residence and rent, do it.
  • housing turbulence would kill the mortgaged backed paper market, and infect even higher grades than subprime and eventually the commercial paper market
  • liquidity would get really shaky
  • the US dollar index would break 80 to the downside
  • we could see some bank runs and smaller regional overleveraged players falling first (just starting to play out)
  • it would be challenging to find a hidin place as liquidity dried up everything would tank at first even traditional "safe havens"
  • the "x" factor would be the central bankers' response....would they inflate/liquify the markets in an attempt to forestall or avoid calamity (of one kind in return for the other) and the political response (see recent proposal to liquify markets by raising limits for fannie mae backed home loan)

To date, when Wall Street has cried over their lost million dollar bonuses, the Fed has blinked and liquified the markets....massively....The European Central bank, ditto....to a lesser extent the UK.

This liquidity will find a home and it won't be new subprime homeloans.....any guesses where it might go?

(to be continued)


Wednesday, September 12, 2007

Offshore Bank Wires -- in Hollywood

As some of you may have surmised by now, my day job involves doing some work for "up and coming" Offshore Banking Services industry here in Montevideo, Uruguay.

How do you make something as boring as "banking" sound sexy? Easy, just add in a dash of "offshore"....

Viola! Now you are dealing with arms merchants, spies, monopolistic cartels, money launderers, dirty CEOs, and drug lords.

The movies do a good job of glorifying the profession (while villifying it) and making it look a whole lot more sophisticated than my brief experience has shown it to be.

I crack up everytime someone sends an Offshore Bank Wire in a movie like Mission Impossible or "Firewall". The thief (or other unsavory type) types in his account, encryption key...pushes a couple of more buttons, and then sees a graphic onscreen filling up like an mp3 download tracking the progress.

Question: why would it take longer to wire transfer 200 million dollars than it does 2 dollars? :) technically i guess you have to send an extra 6 zeros over the wire (in binary...gasp!) but....long enough to have a progress indicator? :)

While my company recently implemented online banking, and we have fancy encryption keys, etc. However, a lot of processes -- especially sending wires to international accounts have a good deal of "hands on" processes that are still handled by people....and there is a reason....as some say, "three feet of air is still the hardest firewall to crack".

Tuesday, September 11, 2007

Gov't to Irradicate Inflation through Intervention

....we'll see, huh?

The article below is a translation as it ran in Uruguay Daily News today. It's amazing that they never think, "hey stop creating money faster than people create goods and services" is a solution...

Government Announces 7 Measures Against Inflation

Uruguay News

Yesterday, at a meeting between the President and the Ministers, Economy Minister Danilo Astori presented a package with seven measures to stop inflation.

This measures will entail a USD 65 million fiscal effort with the objective to act directly on four products which, according to the official analysis, are directly responsible for the rise in inflation: fuel, meat, wheat products, fruits and vegetables. The economy ministry has repeated several times that these products account for 60% of the increase in prices this year (4.74% out of 8.23%).

Vázquez’s cabinet and Frente Amplio party members expressed their support for Astori on the new measure. The PIT-CNT labor union applauded the government’s measures but considered them to be “insufficient.”
National Commerce and Services Chamber consultant María Dolores Benavente, called the government’s measures “positive.”

-According to information given by official sources to Últimas Noticias newspaper, last night, state energy company UTE received the price list of basic family products sent by the Economy Ministry Commerce Direction so UTE can print and distribute the list with their next bill. Yesterday, the Commerce Bureau received prices on 40 products and close to 100 items of merchandise sold in different parts of the country. Prices were processed and immediately sent to UTE.

-UTE rates will fall (4.3%) at a cost of USD 25 million annually and a 6% increase will be postponed until June 2008. This measure will take effect in January and will imply a USD 30 million decline in income for the state company.

-Fixed charges in ANTEL telephone rates will also fall 6.5% at a cost of USD 7 million annually.
-August CPI figures (1.73%) led the Economy Ministry to eliminate taxes paid by public companies for foreign currencies earlier than expected. The tax elimination, which was part of the new tax reform, was expected to be applied in January 2008 but was moved forward, at a cost of USD 8 million for the state (and USD 25 million less in collections for the state annually). The decree has already been created and will be signed next Monday by the ministers’ council.
-VAT exemptions on poultry at a cost of USD 2 million that will affect 17% of consumer prices and the acceleration of procedures to start vegetable exports and cause a slight reduction on prices for those products.
-Health care services will fall between 2% and 2.5%, which will be financed by employer contributions as planned by the tax reform.
-The government is planning a 2% reduction in fuel, which will be financed by the decline in the dollar exchange rate. State fuel company ANCAP parameters were calculated with an exchange rate of UYP 23.75 per dollar and last week the dollar closed at UYP 23.15.
The government expects to slightly affect inflation for October, November and December to keep inflation in the single digits for the year.

(Ultimas Noticias, Observa, 11 September 2007)

Wednesday, September 05, 2007

Introducing "Uruguay Guy"


Ok....I swear it isn't a gay porn site....Although that idea has a lot more promise of profitability.

UruguayGuy.com will eventually be a site that has some relatively useful stuff and links to information for "foreigners", visitors, expats, coming to Uruguay.

In the beginning I'm going to focus on some pretty elementary stuff just to give people another resource and maybe a little more comfort in the trip/move/relocation they are considering.

For now, until I get the website pointing to my blog, uruguayguy can be found at Moving to Uruguay