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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Ed Ajootian who wrote (141012)	10/14/2010 10:15:58 AM
From: profile_14	5 Recommendations Read Replies (5) \| Respond to of 206146

Loaded questions.... I am not sure it has helped a lot but it has brought to light the contrast that everyone has forgotten about special purpose vehicles (SPVs) and off balance sheet financing. That is the Enron toxic way of doing things. Also, the piece suggests to me that it will become far easier for a company to book reserves and suggest through that inference that they are trading at a low multiple, because so many more reserves are being booked. I am seeing that type of promotional management presentation in junior metal companies -- consider the "company." That kind of thinking suggests incremental leverage. It cuts both ways. It helps and hurts depending on the direction of the market. To answer your question directly, it helps investors only if they are aware that they have to look for the exposure that companies have in off-balance sheet items. To do that one has to read the 10-K filings and dig, not be spoon fed by brokers stuffing client accounts. Yes, PBR is very cheap based on potential reserves. But like you said, it is going to cost to get the stuff out. Cost a lot. Who knows what prices will be or costs for that matter? I am a dual citizen of Brazil and the US, so yes, I like PBR and lots of stuff about Brazil. But growing up there until the age of 18 gave me a good perspective about the mentality of folks down there. I still have family there that I speak to weekly. The papers this morning suggest that Dilma and Serra are 6 points apart in the election (49% vs. 43%). Dilma is expected to win, but she IS a radical marxist in sheep's clothing. I don't like that. The conventional wisdom is that Lula didn't screw the pooch so Dilma won't either. Lula was good for Brazil so Dilma will be too. The truth is that Lula retained the conservative finance ministers and was dissuaded from embarking on populist spending early on in his administration. He was lucky that this occurred as commodity prices began to rise to the moon. Brazil being a major exporter or ore, grains, and oil, benefited tremendously and was able to reduce its debt, increase its credit rating, strengthen its currency, hold inflation, etc. I am not so sure that what has happened since 2002 for 8 years will continue. We are way overdue for a Brazilian snafu. Each time that happens, we get a 20%-30% haircut. With the dollar dropping like a rock, and Brazil screaming about uncompetitiveness, this is not a foregone conclusion in my book. The world economies are not decoupled in my opinion, no matter how much growth managers say so because they peddle their books. Brazil heavily depends on the US, which it is feeding through China. The real interest rates in Brazil are among the highest in the world. I would be careful. I think inflation is around the corner but also that things are pretty expensive outside of the US and that a correction is coming just as everyone goes overseas for investments. Really, if you think that PBR is a good bet, then opening an account in Brazil and earning low double digits on your deposits in a currency that is appreciating vis-a-vis in dollars is not so bad -- especially without the equity risk. If you go down that line, then buying the best Brazilian bank is the next step, such as ITUB. But remember volatility because it exists there more so than elsewhere. Hope this helps understand my perspective a little better. Best,