Monday, September 22, 2014

You dont see this very often

What is really funny is watching the dolt newscaster try and recover. Oops that wasn't planned.. ...what ...say ..if ..not... told..

Good news in Mongolia?

It seems that the recent tax dispute between the GOM and Rio Tinto has been settled at a substantial discount. In addition Turquoise Hill , the operator of the Oyu Tolgoi copper mine, released the feasibility study on the phase 2 underground expansion. This now paves the way for an agreement between the two entities to proceed with phase 2 and lift the veil of uncertainty in Mongolia. Or at least we can hope.

In addition Bob Moriarty, who writes at, published a very favorable piece on Mongolia and my favorite Mongolian investment vehicle, MGG.


I’ve been to Mongolia three times now; the last time was about four years ago. When I landed a month ago, I thought I had landed in an entirely different country than the one I landed in years ago.


Mongolia has gotten a lot of bad press lately regarding their taxation of the Oyu Tolgoi copper mine. As is common with a lot of emerging countries, corruption and bribery have been a problem. A government with a strict view towards ownership of natural resources entered power and immediately came to blows with Rio Tinto, the major owner of the giant Oyu Tolgoi copper mine. The government wanted $130 million they claimed was owed in back taxes. Rio claimed they owed nothing. The issue was settled just this last week with Rio agreeing to pay $30 million more to the government.

Other mining companies were unhappy with the conflict and foreign investment in the mining sector plummeted. Settlement with Rio means the mining investment climate will improve and money will start flowing back into the sector.

It’s just my point of view but from what I saw, MGG is really well dialed into the powers that be in Mongolia. I was very impressed with the caliber of local talent they have brought on board. Their success will simply ride on their ability to maneuver financially. They have built a franchise in three short years and are perfectly positioned to much higher financial success than their numbers show.

Sunday, September 21, 2014

India rejects climate change nonsense



India’s Prime Minister Narendra Modi sensibly refuses to attend yet another climate summit – this one called by Ban Ki-Moon in New York for September 23 under the auspices of the United Nations, which profits handsomely from the much-exaggerated climate scare.


Mr. Modi, a spiritual man who is also down-to-earth, knows that a quarter to a third of India’s people – at least 300 million of its citizens – still have no electricity. In Bihar, four homes in five are still lit by kerosene. His priority is to turn the lights on all over India.

Electric power is the quickest, surest, cheapest way to lift people out of poverty, disease and subsistence agriculture, and so to stabilize India’s population, which may soon overtake China’s. Families that no longer have to worry about children dying before they are five, or need them to tend starvation-level crops, tend to downsize their families.


Misuse of climate models as false prophets is costly in lives as well as treasure. To condemn the poorest of India’s poor to continuing poverty is to condemn many to an untimely death. India Prime Minister Narendra Modi is right to have no more to do with such murderous nonsense. It is time to put an end to climate summits. Real-world evidence proves they are not needed.

It really does not matter anymore what a bunch of fat useless western bureaucrats at the UN say about anything. Modi is on a mission and that is to modernize India and make it prosperous. This is another indication of how the emerging countries are getting stronger and are breaking out of their former subservient shells. The west continues to commit societal suicide following policies such as this climate change caused by man nonsense. Good for India and its people. This is why I advocate moving funds to asia and away from the west. Normal thinking people versus nutjobs.

Tuesday, September 16, 2014

Tag Oil abandons east coast well

Stock drops over the last few days as it is obvious news leaked out:

Tag Oil reports the Company has agreed that after encountering extreme drilling conditions, including high pressure shallow hydrocarbon zones, in the interest of safety, the surface section of the Waitangi Valley-1 well, located in Petroleum Exploration Permit 38348, will be plugged and abandoned.

CEO Garth Johnson commented; "Waitangi Valley-1 encountered very high hydrocarbon zone pressures at shallow depths that cannot easily be compared to anywhere else in the world. We understood this program would be challenging and we encountered extremely difficult drilling conditions in the first 856m of drilling. After consulting with worldwide drilling experts and considering all data ourselves, we have made a difficult decision to plug and abandon Waitangi Valley-1 before reaching the intended total depth of 3600m, to maintain the safety and integrity of the operation. The well will be abandoned following all regulatory requirements and with no environmental issues encountered to date. The Company's previous guidance for fiscal year 2015 did not include any anticipated production or cash-flow from the Waitangi Valley-1 well."

The bad news is that they are abandoning and plugging this east coast well. The good news in my view is that this well encountered high pressures at shallow depths and it is not a "dry hole" and the indications are "quite positive". You can listen to the call where they discuss what happened. So they are moving the rig back to the west coast to drill out some more Cheal and Sidewinder wells to maintain cashflow while they re-evaluate how they will drill again on the east coast. So the market did not like this but the CEO was clear, and as I have said in the comments recently, this is going to take a few years.

Friday, September 12, 2014

S&P upgrades Greece


On Sept. 12, 2014, Standard & Poor's Ratings Services raised its long-term foreign and local currency sovereign credit ratings on the Hellenic Republic (Greece) to 'B' from 'B-'. At the same time, we affirmed the short-term sovereign credit ratings at 'B'. The outlook is stable.

The upgrade reflects our view that risks to fiscal consolidation in Greece have abated. We forecast that, from next year, the Greek economy will emerge from seven consecutive years of negative growth. We expect recovering real and nominal GDP will enable Greece to operate average primary surpluses of 2% of GDP during 2014-2017. This is less than the 4.5% of GDP target the government envisioned in its program with the European Union (EU), the European Central Bank (ECB), and the IMF (together, the "Troika"), but we believe the lower estimate is politically more feasible than the government's target and consistent with a modest decline in government debt as a share of GDP.

Things continue to get better, albeit at a slow pace. That is fine as I am looking for positive change at the margin in order for a revaluation of my Greek bank plays.

Record snowfall in South Dakota


An early September winter storm in the Black Hills has dumped up to 8 inches of snow in the area, while Rapid City received its earliest snowfall in more than 120 years.

Jon Chamberlain, meteorologist with the National Weather Service in Rapid City, said almost 1 inch of snow had fallen in downtown Rapid City by 8:30 a.m. Thursday while 2 inches was measured in higher elevations in town.

This is of course anecdotal and does not prove my global cooling thesis. Nevertheless we are starting to see more and more of these stories. These colder temperatures are consistent with what one expect to see if we are entering a sunspot lull, which we are currently.

Wednesday, September 10, 2014

I have not forgot about Myanmar

Grant Williams who writes the newsletter "Things that make you go hmmm" was talking about the prospects in Myanmar in his most recent issue. Here is the link.


With four major rivers running through the country (the Ayeyarwaddy, Chindwin, Thanlwin and Sittaung, for those of you boning up for an appearance on Jeopardy), Myanmar’s hydropower potential exceeds 100,000 MW. Currently, less than 5% of that capacity has been developed.

Only 26% of Myanmar’s 55.7 million inhabitants have access to electricity, with only 9% of the inhabitants of the country’s spectacular countryside finding themselves with power. In the capital, Yangon, only 63% have electricity, whilst in Naypyidaw (the country’s administrative capital — think Canberra to Australians) the number drops to a mere 52%.


Myanmar has 20 trillion cubic feet of proven (that’s proven) gas reserves, and estimated reserves are four times that. Estimates put the country’s oil reserves at 3.2 billion barrels. Domestic demand for crude is on the order of 60,000 barrels per day, and the country uses roughly 590 million cubic feet of natural gas per day. However, as a result of underinvestment in the infrastructure necessary to harness domestic supplies and the fact that previous governments sold gas to both China and Thailand to raise revenues whilst international sanctions were in place, only 33% of crude demand and 41% of natural gas demand is met from Myanmar’s own fields.

The article is chock full of data that basically brings one to the conclusion that there is massive opportunity in Myanmar for investors. Long term readers will recall that I played this via Yoma Strategic Holdings a couple of years ago. The stock got over priced and I sold it. Nevertheless this recent article reminded me I need to go back and take another look at Mynamar and see if there is another vehicle available to us as a way to play this market. If I recall Myanmar is shooting to get a stock market up and running by the end of next year. Until then, short of moving there, there are not alot of options. Nevertheless I will take another look at Yoma and see if the valuation has become a bit more realistic over the last year. I am actually going to an investment conference next week and Grant Williams will be there. I will try and hit him up about it and see if he has any ideas.

Friday, September 5, 2014

Protesting yourself right out of a job


Hundreds of fast-food workers and labor allies demanding a $15-an-hour wage were arrested in sit-ins around the country on Thursday, as the protesters used civil disobedience to call attention to their cause.

Organizers said nearly 500 protesters were arrested in three dozen cities — including Chicago, Detroit, Las Vegas, New York and Little Rock, Ark. All told, the sit-ins took place in about 150 cities nationwide, the organizers said.

In Milwaukee, United States Representative Gwen Moore, Democrat of Wisconsin, was arrested along with several fast-food workers.

“I’m doing this for better pay,” said Crystal Harris, a McDonald’s worker from St. Louis, minutes before she sat down in the middle of 42nd Street in Manhattan outside a McDonald’s restaurant about 7:30 a.m. on Thursday. “I struggle to make ends meet on $7.50 an hour.”

What Crystal and her fellow revolutionaries do not seem to understand is that history and progress wait for no one. Someone should forward the following website to her and the other compatriots:

Fast food doesn’t have to have a negative connotation anymore. With our technology, a restaurant can offer gourmet quality burgers at fast food prices.

Our alpha machine frees up all of the hamburger line cooks in a restaurant.
It does everything employees can do except better:
  • it slices toppings like tomatoes and pickles immediately before it places the slice onto your burger, giving you the freshest burger possible.
  • our next revision will offer custom meat grinds for every single customer. Want a patty with 1/3 pork and 2/3 bison ground to order? No problem.
  • Also, our next revision will use gourmet cooking techniques never before used in a fast food restaurant, giving the patty the perfect char but keeping in all the juices.
  • it’s more consistent, more sanitary, and can produce ~360 hamburgers per hour.
The labor savings allow a restaurant to spend approximately twice as much on high quality ingredients and the gourmet cooking techniques make the ingredients taste that much better.

Oops I don't need Crystal and her demands for a living wage for flipping burgers. I can get a machine to do her job faster, better, cleaner, and cheaper. I will note that the company that makes these machines is offering former burger flippers the opportunity to become installers and mechanics for these robots. I would drop my picket sign and hustle over there Crystal before the class fills up. But hey it isn't about Crystal and making her life better its about politicians getting a photo op and union officials getting dues paying members. Right? If you cannot create $15/hr in value than you will not be paid $15/hr, at least in a free market. The reason that burger flippers make low wages is because anyone can do the job so there is a large pool of labor available for that job. Supply/ Demand, do they still teach this in high school economics class? Importing 20 million illiterate/semi literate peasants from Mexico and Central America is not helping Crystals cause either. Curiously, no mention of that in the New York Times article. That's a subject for another time.

 Back in June I wrote that the ECB would eventually yield to market forces and pressure from politicos in Europe and begin a course of QE. It appears that the ECB is now embarking on a path down the road of perdition. Nevertheless my view was that European stocks would benefit from the new money printing. I remain convinced that the money printing will do nothing to help the moribund economies in Europe. However it will, if history serves us right, cause stocks to go up. I am not here to make policy its about making money. I remain long European stocks.

The Acting Man blog has a good review of the ECB's plan and commentary on why it will not work.


The announcement included: further rate cuts; with the repo rate now at 5 basis points, which we might as well call zero, this avenue is now rapidly closing. Since all rates were cut, they also increased the bizarre penalty rate on excess reserves to minus 20 basis points. All this measure achieves is that it costs the banks money. It's not going to make them more eager to lend, but it will lead to them cutting the paltry interest they pay to savers even further. So the war on savers is continuing at full blast.


After the last major inflationary push by the ECB (the LTROs of 2011/12), a brief surge in money supply growth triggered a temporary and evidently illusory spurt in economic activity. This Potemkin village quickly crumbled again, the very moment money supply growth declined back toward 5% y/y. The measures announced this Thursday may well achieve a similar Pyrrhic victory – but what then? Indeed, what Pyrrhus of Epirus is said to have remarked in the context of his victorious battles against the Romans can probably be applied in this context as well. 

One only needs to adjust his saying a bit:

“If we are victorious in one more battle with the faltering recovery, we shall be utterly ruined”.

Thursday, September 4, 2014

Soros going big in Argentina Shale


One of the world’s legendary investors is upping his bet on Argentina’s shale oil and gas industry in a show of confidence for shale production in South America’s largest unconventional prize - and a big boost for both supermajors and smaller players making big waves in the heart of new discovery areas.
George Soros has doubled his stake in YPF SA, the state-owned oil company in Argentina, which sits atop some of the world’s largest shale oil and gas resources, and is about to get even larger following a new discovery over the last couple of weeks of a second key shale play.  


And on Aug. 14, YPF announced the discovery of oil in another shale formation—Agrio shale--in the same basin.  

Some estimates suggest that combined, the two plays’ reserves could be worth as much as $3 trillion.


There are only a few junior companies who have significant land holdings in Argentina’s Neuquen Basin, among them, Madalena Energy Inc. (MVN.V), which will benefit from Chevron’s plans to drill 300 wells just west of the junior’s Coiron Amargo block. 
The point is that as the supermajors drill, the smaller companies reap the benefits, positioning themselves for big rewards with big players who are eyeing their large tracts of land in this promising basin.

Activity and funds flow into the Vaca Muerta and Argentina is increasing. I am playing this via the junior E&P Madalena Energy. I suspect Madalena either farms out its acreage or is bought lock stock and barrel at a premium. My view remains positive.