"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)

namely:

• 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)

fuBarrio

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".

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)

Introducing "Uruguay Guy"

UruguayGuy.com

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

ciao,
fuBarrio

Uruguay vs. The States

...no this is not about olympic b-ball qualifiers. this is the aforementioned promise to follow up with my thoughts regarding the differences between the US and our adopted home Uruguay.

it had been a year since I'd left South America, so I'd forgotten a lot of things that I like (and that annoy me) about the states.

We flew Delta which meant that we flew through Altanta...We arrived around 6 a.m. and had a layover of about an hour and a half to fly back to the Left Coast.

Impressions:

Everyone speaks English! While this is convenient for getting around, you have to put up with listening to people speak English! (UGh!) I've become accustomed to sitting in crowds or restaurants and being able to just tune out Spanish conversations, since listening actively is the only way I can understand conversational Spanish. It just turns into pleasant background noise. At the gate I had to listen to some woman talk about her real estate speculative prowess (think shoe shine boy with stock tips) and how her husband and her were going to clean up on some upgrades they were doing to a second home. If I wasn't so tired, I think fuBarrio would have gone off on a rant.

Everyone is FAT! ugh. Husbands and wives were HORFing down bags full of fast food (the choices were amazing IN the airport) as they waited for the airplane at the gate. They were doing this STANDING. That is just something you'd never see in Uruguay. Some kids got onto the tram with some kind of *crazy* sweet smellin waffle cone the struck some sort of 1970's carnival memory in my head. Again, this was at 6 a.m.

Once we got on the plane to PDX, it was like we'd stepped into the future! My coach seat had TV on demand (live CNBC), good cheese in the snack box, and "CDs on demand" (a bunch of'em)instead of really bad commercial free radio the planes used to have. I listened to Christina Aguilera's "newish" CD and skipped over songs I didn't like.

When we got to PDX everything was slick and clean and "modern". Kids were browsing in a "mobile electronics/entertainment kiosk" (in the airport on the "inside" of security). We walked across the skybridge to the multi-level parking lot covered by a huge glass roof to let light in and keep us from havin to deal with any rain that might fall. We were driven from the airport in a Lexus SUV.

Now, what I've described is just the first few hours. We hadn't even left the airport at this point, but the trip was basically more of the same:

• Many more choices of products/food/entertainment/ways to spend your money
• Much more convenient (part of this is the lack of language barrier obviously)
• More expensive (with the exception of gasoline, electronics, skin care, nuts, ethnic foods, some clothes, and a fender statocaster :) )

ciao for now,

fuBarrio

Meanwhile back in the States....

After a few weeks back in the US, I have a renewed perspective on what it means to live in Uruguay as a US native. There are definately some things I've missed from the States....and some things I haven't. More on that later. For now, just a few pics from the "greater" 48.

ciao,

fuBarrio

The Rule of Page One

The rule of page one states that once a story gets to the front page, the trade is over (in a nutshell).

Although this story hitting the mainstream media outlets hard signaled a (short term) end to the trade, I think the carnage still has a couple more legs down. As I've said before, it's either housing or the dollar (or both). It depends on how many times the Fed is going to "blink" I guess.

ciao,

fuBarrio

The fuBarrio Index

The fuBarrio index = The Fed's Unlimited Borrowing Appearing in the Real Rate of Inflation Observations....

I don't have a picture from 1999 but my memory is it jumped in 2002 from 4.59 to $5.49 for the Halibut and Chips. You can see in the picture above what has happened in the last five years (whisky tango foxtrot?!?!?!?)

Emerald City - Strat Heaven

Golden Lotus sat patiently as fuBarrio played nearly each and everyone of the pictured guitars in search of the perfect fit.

Of course, after trying out about 40 strats, fuBarrio's paws warmed up enough to play a riff without fumbling the pick -- no small feat for someone without opposible thumbs -- and fuBarrio's strat had been found.

ciao,
fuBarrio

CarryTrade and Global Liquidity

It's been my belief for a long time that global liquidity was really the only thing floating the leaky boat, aka, the US stock market.

Unfortunately, there is so much inflation built into the system that one can feel compelled to continue trying to "pick up nickels in front of steam rollers" -- nickel and diming the market, playing a dangerous game that works really well -- until it doesn't.

I've been looking for some indicator of global liquidity flows as a more reliable predictor of when the faucet is being turned on and off.

below is an idea that i stole from a currency trader posting as "hoz" on thehousingbubbleblog.com. Interesting stuff. He believes that the marginal money coming into the US stock markets only after a series of carry trades is being carried out. The trades go something like this (according to him)

1) borrow moneys in Japan from bank
2)buy Euro sell Yen =EuroYen
3) buy British Gilts
4) buy US stocks with Gilts as your margin requirement

This url is to a graph of the EuroYen vs the SP500 for 1 yr.
The correlation is 0.94, from a practical viewpoint if the EuroYen is higher than the previous day the stock market is going up - no matter how much bad news is out there.
http://tinyurl.com/2b9f3u

fwiw, i think we are very very close to a serious problem in the markets or the dollar. if/when the problems happen it could even take down the safe havens in the immediate term as leveraged players look to raise cash.

regards,
fuBarrio

Where in the world is fuBarrio?

GLQ.TO (again)

Just a quick note this a.m.


It's an hour before the market opens and one of the promoters of this stock recommended his clients back away from GLQ.TO last night (along with a whole host of other base metal plays based on the call of an immenent pullback in base metals).


I don't think anyone was speculating with me, but in case you were and haven't already closed out your position, I thought you might want me to tell you this.

It closed at $3.82 CAN last night. His recommendation to sell base metals could cause a minature rush to the exits this a.m. So if you're selling, as I like to say, "if you're going to panic, panic early."

Go cool.

fuBarrio

Eddie Murphy's Grandma

"it's cold...i'm so cold in here......eddie.....what time is it?"

I know I sound like Eddie Murphy's Grandma complaining about the cold every 2 or 3 posts.....not very compelling copy.

But, finally there is a source (with statistics!) to back up my assertion that it's been damn cold here. Apparently this is the coldest winter on record.....

The story below and the attached graphic to the story says it all:

Uruguay News on the weather.

ciao,
fuBarrio

Buceo, Montevideo in the a.m.

A picture of Buceo, with Malvin, the coastal neighborhood to the east of Buceo in the foggy background.

fuBarrio

Beach Soccer

Beach soccer, or futbol, is extremely popular in Uruguay...especially on Pocitos beach. Wide, white-sand beaches that are relatively flat have several permanent goal posts setup up to facilitate the action.

While these fields, and Pocitos beach in general have been empty the last couple of months, recent daytime sunshine has brought out the footballers again.

Clear sunny skies give way to windy evenings and cold nights as the sun sets. In another couple of months, sunny weekends will bring the brave back to Pocitos beach. In four months, you won't even recognize it as the same place :)

ciao,

fuBarrio

Montevideo Shopping's "twin towers"

In a "city" of 1.4 million, this is what passes for "twin towers".

The first time someone gave me walking directions to "Montevideo Shopping" (on of the malls) and told me to just walk towards the "twin towers" I got lost in the neighborhoods. These things don't exactly loom over everything in the immediate area.

During these colder months, and especially on the weekend, the malls are almost unnavegable as all manner of aimless citizens wander the halls like mindless robots as a way to get out of the cold. In the meantime, Montevideo's popular beaches are almost completely deserted.

The malls here aren't "vertical" like Hong Kong as you might imagine while looking at this picture. They are between 2 and 3 stories. These office towers were just constructed as part of the "complex". As you may be able to see, there has been some ongoing construction in front of the towers to create, what looks like, at least one more sibling for these twins.

ciao,

fuBarrio

Uruguayan Dryer

Electricy is not cheap and western style dryers are rare here. Many apartments in Uruguay have small rooms off to the side of the kitchen that often house a small washing machine and an area to hang clothes (to dry).

Most of the houses and top floor apartments have roof access for the express purpose of hanging wet laundry. Here you can see some clothes being hung out to dry in the dead of winter.

fuBarrio

Exaptriates are HATERZ!!!

This post is going to probably piss a lot of people off, but the truth hurts.

The Expats here are Haterz! (If you don't know what a "hater" is, then you are out of touch. Google it).

Our first 4 months in Uruguay were spent with ZERO contact with North American expats. In fact, we weren't even aware of how many existed (they blend in quite well most of the time).

However, as fate would have it, we were introduced to a circle of expatriates through a good friend, Mikey, who has recently had to return to the US (please read about mikey's trials and tribulations here http://www.amavericko.com/ and check out his entrepreneurial endeavor in Uruguay here http://www.outinuruguay.com/). Lately, I've grown nostalgic for the days when I didn't know any expats. That can't be good.

Why, you ask?

(sarcasm) Since everyone likes to be put into a box and classified (/sarcasm) I'm going to describe five types of expats I've met here in Uruguay:

1. actively working for a foreign govt (diplomatic corps) and are very well compensated by Uruguayan standards.
2. actively working for foreign multinational profits or non-profit and very well paid by local standards
3. retired and living off of big business or big govt pension or social security (common) or savings (more rare).
4. young and has some savings but will run out of money eventually and have to go back to earning money someday.
5. young (in spirit at least) and has an idea and enough cash to get something started here, but doesn't have infinite resources.

At various times I've heard some real negativity thrown around between each one of these sub-groups of people. To each and every person, of course, their source of income is honorable and beyond reproach. However, others' methods for trying to get by are questioned, demeaned, ridiculed, unsupported, negatively gossiped about, or somehow looked down on....at times, I've even heard people demeaning the way that *I* chose to support Golden Lotus and myself without realizing what I do for a living without realizing what I do.

Personally, I have my own bias as well. I'd like to attract more entrepreneurs to come and create, work and thrive here...but....

If the expats can't even support each other, how in the world do they expect a bunch of semi-xenophobic south americans that think every North American is born independently wealthy to do it?

I don't know if the "hating" is being driven by ignorance or petty jealousy or what. However, I pledge to do my part to stop the "hating" by trying to treat each person, regardless their station in life or how they came to find Uruguay, with non-judgemental dignity and respect.

Whether or not the collective decides to follow suit, I can only hope.

ciao,
fuBarrio

A Reprieve from the Freeze

Ok, it hasn't literally been freezing lately, but it has been cold and damp. Today was a very temperate 50 degrees (F) and brought some people out of hibernation. This is a shot at the end of the day of an old school fishing boat and someone getting some running in on the "rambla" -- the road and walk that lines the Rio Plata on the south side of Montevideo.

ciao,

fuBarrio

People who Save are Frickin' Idiots!

This post could also be known as "The Genius of the Collective".

I know, I know....crazy, huh? FuBarrio spends a lot of time harping on the idiotic behaviour he believe he observes in the herd mentality of people at large.

However, it's time to propose a competing argument in favor of the sheeple.

The last couple of years I've been bewildered by the willingness of consumers to overpay for nearly everything in the "other" Americas (North America). It has truly been consumerism at its most grotesque for quite some time, however, I would like to put forward the competing viewpoint that perhaps these sheeple aren't the ones lining up for the slaughter.

There is a children's tale of some fame where an ant works through the summer and a grasshopper spends its time buying "louie" bags, pedicures, and bad hair-weave jobs. Of course, in the end the grasshopper, so wishes he had wasted his youth slaving away and ferreting away those tasty scraps for the long, hard winter.

But what if the food they ant was storing had some bacteria in it and would all be rotted away by the time winter arrived?

There was a "study" done (supposedly) back in the dot-com heyday to point out the brilliance of a bunch of independently acting, not incredibly brilliant, autonomous entities. When the actions of the collective are evened out, you get a very "intelligent" behaviour, supposedly.

Since the beginning of 2006 the USDX, the dollar index, has gone from around 92 to a whisker above 80 as I type this. When you compound on top of that, that the dollar index is just an index of how easy it is the for the dollar to buy OTHER fiat currencies -- or other paper that is just being printed at will -- you get a really ugly picture.

It's a breakneck race for the bottom.

Ok, so what?

Well, the a**holes like me who saved their money, with the vain hope that i would be able to use the value received for work performed in the past (my pay from a few years ago) to purchase goods and services in the future (now and in the next few years) was incredibly naive.

So far, it has seemed to be a silent tax (to the masses anyways). Not that many people are ranting about it in wild gesticulations and maniacal tirades (with a few notable exceptions). And yet, it seems that maybe...just maybe...the North American populace isn't just a bunch of greedy, stupid, undisciplined children (who want it "NOW") :)

Perhaps, in consuming like there is no tomorrow (negative savings rate), they are voting with their wallets. Why put off what will give you 10 minutes of consumerism pleasure to hold paper that is sure to bring even less pleasure a year or two from now.

As a side note, something I haven't blogged about a lot, but one of the reasons I moved to South America. I think food inflation, especially in meat, is getting ready to take off. Feed grains are getting scarce as the developing world starts eating more and more meat. When the meat producers' hedges come off (the only thing in my opinion that has allowed soy, wheat, corn, etc prices to SOAR while keeping meat prices in check), it could get ugly fast.

It will be interesting to see if the meat prices soaring will be blamed on a weather event, ethanol subsidies, greedy oil companies, war, population growth, or irresponsible creation of cash and credit. I guess it depends on whatever sells the most advertising time.

ciao ("chow" -- food inflation is goin to get worse)
fuBarrio