CuOro, CUA.V

Hamilton

CUA.V apr 2012cua.v june 2012

The small chart (see prev. blog) suggested an initial downside target of about $0.80, on the basis of that being a 4th wave of previous degree, perhaps. As it happens that is exactly where the decline stopped but longer term there could be more to go. What we may have had was an a-b-c X a-b-c, in which case the correction may indeed be over. However ,  the larger simple A-B-C may still be operational (in red) in which case the stock could drop a ways further. What did happen is that the gap to the upside was closed. Our remarks concerning the incentives on the part of management having diminished substantially, remain valid. In fact, apart from their own options being underwater, they are in the process of making an agreement with Pacific Road (Sydney , Australia) that among other things calls for the sale of about 20% of the company by way of stock and warrants over the next 5 years. This transaction would be done in two separate parts and might provide as much as $45 mln. to finance the development. How this relates to Hudbay Minerals and their non-dilution agreement is not immediately clear. Their stock dropped from $30 to $7 over the past 4/5 years and they recently cancelled a $400 mln. financing. Even so , in that context $40 mln.  is rather miniscule so why did they not step up to the plate? Too many questions therefore use a tight stop! The deal with the Australians requires stock holder approval, management has about 35% and HBM 14 %, so that should not be a problem.

FVI, Fortuna Silver

Hamilton

fvi jun 2012

A little early (at $3.79) we thought this might be a buy with a target of about $5.30 (where it would close a gap). That target remains even if the stock slid a little lower. From $7.50 there is a clear 5 waves down. What is not clear is whether this is a C-wave as part of an (irregular) flat correction, in which case we are on our way up, or simple a first wave down after a “thrust” from a nine month long triangle (see previous blogs) In that event there is a lot more downside so we would exit at about $5 and/or use a tight stop. This stock is a good example how the juniors have traded the last little while.

DJIA , Gold GLD, and Oil WTI

Hamilton

djia may 2012

This is a 5-year chart. No absolute amounts , just percentages. Black is the Dow Jones Industrial Average, down perhaps 10% over 5 years. Blue is gold by way of the GLD, up 130% over the same period. Then there is the yellow or brown line representing oil, down 45% from 5 years ago. None of this is the least bit interesting except that things are not supposed to happen this way. All three are directionally correlated quite well, unheard of in economics 101. When correlations move to 1, there is a problem ahead.

FSLR and GAM, Gamesa Corp Technological SA

Hamilton

We have been a little bearish on FSLR, First Solar, for the simple reason that we love this stuff but believe that any government involvement kills the whole thing. In the US homeownership was the politically correct story of the day, that is how Fannie May became the largest and most incompetent dealer in derivatives, never mind that most people there knew absolutely nothing about them nor did they need to know if they had stuck to their knitting. America claims to be the land of the free, and with that, raw capitalism. But any and every time something goes awry it reverts back to  a centrally , or dirigistic  type of economy. The Fed is the prime example of constant meddling but it also happens in that new wonder of the world, non conventional energy. From China to the US, from Romania to Hungary, from Denmark to Iceland etc.etc. government subsidies have been available at embarrassingly high levels, often well over 10x what the free market would have dictated. Here is what happens when they come to their senses and abruptly pull the plug;

fslr may 2012gam 2012

Spain has a problem with empty homes, it also has a problem with renewable energy policies, all this courtesy the government. First they discovery new sliced bread, subsidizes you to the tune of 10x + above the going market rates, completely ignoring how this might fit in the existing infrastructure and then reverse policy. One day the same will happen with interest rates!(see previous blogs on FSLR). Canada is doing exactly the same thing. Not knowing the basic difference between base-load and whatever else happens to be available, our politicians are embarrassed to have to explain why it is that we pay Americans to use our power, an economic concept that does not come across very readily. Never mind the non- tendered deal with Samsung.