Monday, November 23, 2015

Commodity rout in visual format


Nice infographic from Visual Capitalist that shops the extent of the price declines in various commodities. The main culprit is the increase in value of the US dollar.  As commodities are priced in dollars, when the value of the dollar increases the price of commodities goes down. There is a silver lining because the low prices increase demand and force marginal producers out of business. This extended low price environment sows the seeds of the eventual next boom. Low prices are the cure for low prices.

Saturday, November 21, 2015

How to get rich without "slinging crack rock or having a wicked jump shot"

This articles title quote comes from the movie Boiler Room and a Notorious B.I.G. rap. I like this clip because even though it is a movie it illustrates a certain sentiment towards making money that is prevalent among many people today. Everybody wants to make money but very few want to to do the hard work required. People choose to take shortcuts like the young brokers in the movie selling worthless dogshit stocks to the schlubs and shoeclerks. In the end they give it all back and get busted by the FBI.

Others do what I did for many years, subscribe to every newsletter guru that offered a way to "beat the market". I wasted a ton of time and money and got sub par results and even . I even tried some different MLM plans and many other "get rich quick" schemes even though deep down I knew it was all BS and they wouldn't work. I wanted it fast and easy.

In real life investing, like most endeavors in life, the secret to success isn't really that secret or that difficult. Want to lose weight? There is a $60 billion dollar industry waiting to take your money and deliver disappointing results. How do you successfully lose weight? Eat less and move more. Why aren't people successful in losing weight? Because they are lazy and do not want to do the work. They rationalize skipping a workout or stopping at Taco Bell instead of preparing a healthy nutritious meal at home. One missed workout turns into two and etc etc...they are back on the couch watching a Law and Order marathon and telling themselves tomorrow they will start again. Of course they never do.

Getting out of debt is the same issue as losing weight. Earlier in my life I was in some serious credit card debt of over $40k. I was making minimum payments and not making head way financially. I was frustrated and pissed off. I followed this plan and got out of debt in a couple of years. Again it is simple, adopt an austere lifestyle, cut unnecessary expenses and apply the funds to debt reduction. No big secret but people dont want to do it because it means living an austere and minimalist lifestyle for a couple of years.

I find the same thing when discussing investing with people. They say, "Hey, I always see you reading the Wall Street Journal or Forbes". "Got any stock tips?"   They want a hot tip like one of those degenerate gamblers you see hanging around at the dog track. Just give me a tip and I can thoughtlessly dump a couple of grand into the name and hopefully it will go up. That is not investing.

So how does one get rich?

Most wealthy people I know of started and grew a business that they were passionate about. This means providing a good or service that people are willing to pay for and then day after day, month after month, year after year growing the business and reinvesting into the business. Hopefully, people will actually pay for the product and service you are offering at a price that nets you a profit. If they are good at what they are doing after many years they have accumulated a nice sum from their profits or they sell the business and walk away with a good chunk of dough.

Another way is real estate. There are plenty of people that bought a duplex or apartment building. They may have even lived in one of the units when they started out to save money. They then used the equity from that property to buy additional properties which they rented out to working joes. Rinse and repeat.

Notice the common denominator: save up a grub stake, time, reinvestment of profits, compounding, consistency, and most of all patience.

I use the various public markets (stock, commodity, bonds, options). The same thing applies to these markets as applies to the above examples. You think Warren Buffett is a genius. He really is not. Go back and read the early annual reports of Berkshire Hathaway. The original Berkshire Hathaway was a textile manufacturer in New England that was struggling. Buffet was struggling massively to turn the company around. He eventually figured out that the way to make big money was to buy parts of solid businesses (that's what shares of stocks are) at a low valuation and then sit back and let that business compound wealth over time. He then was consistent in ignoring market cycles and investing additional cash when other market participants became irrational and sold their pieces of businesses (stocks) during times of emotional stress such as bear markets or crashes (2008).

Anyone can do it. Don't believe me read about the janitor that accumulated an $8 million dollar portfolio. However, like losing weight or getting out of debt it takes work, commitment, and time. There is no fast and easy way to wealth. It is all work. I will have more to say about these factors in future "How to Get Rich" articles.

Thursday, November 19, 2015

Amaya crushed by recent news, my stock of the year for 2016

The house always wins, or so they say in the casino business. Amaya (AYA) is a stock I owned several years ago and sold for a nice profit. If I remember correctly at the time the company owned a bunch of slot machines in Mexico and various Indian casinos in the US and did B2B software for casinos. I became reacquainted with the stock recently after reading about the company in a newspaper article. I looked up the company and was surprised to see that it owns several major online poker franchises. From the company website:

Amaya is a leading provider of technology-based solutions, products and services in the global gaming and interactive entertainment industries. Amaya owns gaming and related consumer businesses and brands including PokerStars, Full Tilt, StarsDraft, the European Poker Tour, PokerStars Caribbean Adventure, Latin American Poker Tour and the Asia Pacific Poker Tour.

 These brands have more than 95 million cumulative registered customers globally and collectively form the largest poker business in the world, comprising online poker games and tournaments, live poker competitions, branded poker rooms in popular casinos in major cities around the world, and poker programming created for television and online audiences. 

Amaya, through certain of these brands, also offers non-poker gaming products, including casino, sportsbook and daily fantasy sports. Amaya has various gaming and gaming-related licenses or approvals throughout the world, including from the United Kingdom, Italy, France, Spain, Estonia, Belgium, Denmark, Bulgaria, Ireland, Romania, the Isle of Man, Malta, the state of Schleswig-Holstein in Germany, the province of Quebec in Canada, and the State of New Jersey in the United States.

What makes the company attractive is the recent nuking the stock took after it reported earnings a couple of weeks ago.

The company was the victim of currency differentials. Sixty percent of Amaya's business is in Europe. Their sales were up over 20% but earnings were up only 8% due to the strong dollar. The company also had some issues with getting some of their newer businesses up and running. Specifically their online casino and sportsbook. The company also has a daily fantasy site which it suspended recently due to the New York attorney general beginning an investigation into daily fantasy as a game of chance instead of the game of skill designation that it currently falls under. 

I am not worried by these issues. New York is not opposed to gambling per se as they have lotto, para-mutel wagering, and racinos. The AG is after Fanduel and Draftkings and its about money. In fact, Amaya recently was approved for online poker in New Jersey. You may recall that several years ago online poker was nuked out of existence in the US by the government. However, governments are hard up for cash so it was just a matter of time until they allowed online gambling as long as it is regulated and they get their cut. 

I am fine with that because Amaya has the dominant market share in online poker (71% market share). This is good from a branding standpoint as they can just bolt on their online casino, sportbook, and daily fantasy games as regulators allow online gambling to increase around the world. 

Amaya has over 95 million registered users so all it has to do to offer a new product is write some software add a link on its site and pimp the heck out of it to its existing client base. I think it highly likely that players already registered with Amaya and trusting the platform will be more likely to use Amaya's services then going to whole new site registering, wiring money and putting up with BS to start playing other games. I know I would.

I like this company because of its dominant position in online poker. This allows them to expand their product base to their huge existing audience. Being online means no buildings, restaurants, stores, customer acquisition, etc.. and no casino employees (who are unionized in NV and NJ) and all the BS that goes along with that. Plus most millennials are online and would rather play online. Only middle aged and older people go to casinos. 

The fact that the stock is down as much as it is gives people a real chance to get in on a high margin business with a dominant share that has years of growth ahead of it. This is a buy and long term hold for me. 

Here is a link to the article I referenced above. Read it because the article details some of the other great things about the company like how its margins and cashflow conversion are better than Microsoft and Apple. 

Sunday, November 15, 2015

Alterra Power reports third quarter earnings


Nothing earth shattering happened. The company continues to advance their projects. The Shannon 204MW wind farm should be commercial by yearend. The Jimmie Creek hydro project in British Columbia is continuing to progress and should be online next summer.

On the conference call the management was asked about a dividend. They said it will be considered but were not definitive. The company remains undervalued and their renewable projects continue to perform as planned. This is a long term holding that should do well over time.

Friday, November 13, 2015

China's nuclear buildout the biggest catalyst for uranium


China’s ambitions to diversify its energy portfolio, in order to reduce its reliance on heavily polluting coal and keep pace with growth, has generated a significant advance towards nuclear energy in recent years. Just this month, two sensational nuclear deals were signed into agreement between Chinese SOE’s and Western government and enterprise.


In March of this year, China resumed approvals for the building of new nuclear reactors, the first approvals for new reactors since Fukushima. From 2011 to 2015, the State Council and other bodies revised and enhanced safety plans, strengthened regulatory policies, and developed improved strategies for the long term growth and development of nuclear power.

At a time when the central government is confronted with the costly consequences of air pollution (citizen discontent and pressures on the burgeoning health care system), Beijing has the need and the capital to wager on the development of its nuclear energy industry.

China, India, Russia, and other developing countries will be the main drivers of uranium demand in the future. The question will be where will all the uranium come from. 

Elections in Myanmar to boost economy



From being the second-wealthiest country in all of Southeast Asia under the administration of the British, Myanmar has fallen a lot. So much that was recognized as one of the least developed countries by the UN in 1987 due to its economic bankruptcy.

Many attributed Myanmar’s historical downfall to the 1962 military coup which paved the way for the infamous plan referred to at the time as the “Burmese Way to Socialism.” By planning to nationalize all industries apart from agriculture, this scheme turned the once-wealthy country into one of the world’s most impoverished.

However, all of this has changed for the better. Elections in 2010 removed the 50 year military government rule, leading to what many called “the opening” of the country to foreign investment as well as some of the most sustained economic growth Southeast Asia has ever seen. A major driving force behind the economic uplift was the lifting of sanctions by countries around the world.

Myanmar is one of the fastest growing economies in the world and is starting from a small base. It has great demographics and foreign investment is pouring in and has years of growth ahead of it. It is a place where you put money and in ten years you will have huge returns. I am using Yoma Strategic Holdings as my investment vehicle. Yoma reported earnings yesterday and they were down quite a bit on real estate sales. The management said that people were holding off on real estate purchases until the election was over. The election is over and the NLD won a land side victory and will control both houses and the Presidency. This is considered a positive by foreign observers and investors. I would note that all of Yoma's other businesses; the KFC franchises, tourism, and ag equipment sales are all performing very well. I continue to like the company long term. 

Wednesday, November 11, 2015

Here is my speculative lithium play

The other day I wrote about the emergence of lithium as the new energy metal. I do see a potential opportunity for lithium as there is near to middle term window where there will be insufficient supply for the emerging demand. The lithium market is dominated by three large companies; FMC, Chile based Sociedad Quimica, and Albermarle. These are large companies and are not pure lithium plays. They should do well as lithium prices move higher but we want a pure play for the full exposure to the lithium market.

There are quire a few junior mining companies that are focusing on lithium but that always happens when a segment of the resource market becomes popular. Many of these new lithium companies have no prospects and will never mine an ounce of lithium. However the promoters behind these companies create them not to mine lithium but to mine investors wallets via share issuances and hype.

I have found a pure play lithium producer that just went into production and is currently ramping up its operations. The company is having a few startup issues but is in the middle of debottlenecking their operation and is projecting an increase in production levels to break even quantities by February 2016.

The name of the company is Orocobre (ORL.T). It is based in Australia with its operations in Argentina. The Salar de Olaroz facility is currently ramping up to full scale operation. The company had some issues during startup and had to do some debottlenecking. This is currently happening and the company recently said that production has increased for the third month in a row. The company was able to achieve 300 tons of production in October. Based on current prices the company needs to get up to 650 tons per month in order for the operation to achieve breakeven. Management expects this to happen by February 2016.

Here is a link to the company's most recent presentation. This is definitely a speculative stock that has its future tied to getting the bottlenecks worked out so production can increase. This stock traded around $3 per share earlier this year and is currently in the $1.70 range. Do your own due diligence.

A couple more views on the European invasion

From Gary North:


Europe will be hit by millions of immigrants from failed Middle Eastern states over the next few years. They will cash in on the entire welfare system, from free education to free medical care. They will be low-productivity workers, unable to speak the local languages, poorly educated, and living in ghettos with their TV satellite dishes pointed at Middle Eastern networks. We have seen this in France. We will see it across Europe.


Europeans thought they could vote themselves economic security by taxing the rich. Now they have become the rich, and their welfare systems will all go bankrupt under the weight of failed-state masses. It all looked so easy after World War II. Just vote yourself lifetime security. Surprise, surprise! The chickens are coming home to roost. . . by the millions.

These low-tax and no-tax immigrants have mouths to feed, bodies to house, and young minds to educate. They cannot get certified in the certification-mad societies of Europe. They will not get into the trade unions of the guild-dominated mercantilist states of Europe.

But, being liberals, most Europeans will not ask them to feed, house, and educate themselves. That would be -- you know -- Thatcherism. So, their governments will run massive deficits, funded by the European Central Bank. Europe is not only guild-ridden; it is guilt-ridden. They have believed in the ethics of voting yourself into security. In 25 years, they will no longer have the votes. The children of the immigrants will be the swing voters. It may take less than 25 years.

Pat Buchanan asks will Europeans stop there own dispossession:


Sunday, after a third of a million had passed through, Croatia replaced a center-left with a rightist party. A fortnight ago, the right-wing eurosceptic Law and Justice Party won a landslide victory in Poland.

Support for Angela Merkel, who has opened Germany to a million migrants, is plummeting. Bavaria’s CSU, sister party of Merkel’s CDU, is in rebellion. Bavaria has been the main port of entry for the hundreds of thousands of arriving migrants.


As long as Europe’s borders remain open, they will come. And the people who wish to come number not just in the millions but the tens and scores of millions. And they know how to get there.


Yet, across Europe, fences are going up, borders are being re-established, anti-immigrant and anti-EU parties like the National Front of France’s Marine Le Pen, are gaining converts.

If the mass migrations are not halted, the rise of nationalist regimes at the expense of Europe’s liberals and leftists is inevitable.

The rise of ultra nationalist governments in Europe is one of the possible outcomes I discussed in yesterdays blog post. Notwithstanding nationalists views on immigration they are also eurosceptics. I cannot see how the eurozone will survive this. What happens when the ultra nationalists get into power and decide to deport the immigrants. I don't see these recent arrivals voluntarily going back to war torn Syria, do you? How will this be good for the Euro currency long term? I wouldn't put a dime into Western Europe as I see no positive outcome to this.

Tuesday, November 10, 2015

There will be blood!

Whose blood I am not sure yet. I think there are several possible outcomes:

  1. Islam will conquer western europe with their wombs and through further immigration and replacement of native populations. The place will descend into barbarity just like everywhere else islam is in power.
  2. The feckless leaders of Western Europe wake up and begin deporting these people. Not likely.
  3. Ultra Nationalist leaders will replace the current crop of quislings like Merkel and you will see industrial scale killing that will make 1940's Germany look like a Sunday picnic. 
  4. Magic dirt theory will transform the newcomers into social justice egalitarian secularists that love gay rights, supporting old germans on pension, and democracy . Uh, no fucking chance.
My bet is the ultimate outcome will be number 1. The west is godless and believes in nothing except self. Men will not sacrifice themselves in war for social justice, egalitarianism, gay rights, or equality whatever that means. Better get a koran and get your wife and daughter a hijab. 

From an economic standpoint the euro has to be toast long term. Millions of skill less, hostile foreigners with a chip on their shoulder demanding that the native population support them. Those countries are bankrupt already without this influx. More will come until someone steps up and uses force to stop it. This will not end well socially, politically, or economically. I do not expect the censors at YouTube to allow this video to be online for long. 
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