Teetering at the abyss

So is Citigroup really a functional entity, or simply like some brain dead stroke victim lingering on permanent life support while the family, courts and the Government fight over the validity of pulling the plug?

Yesterday Citigroup announced another write down on mortgage investments to the tune of 18 Billion dollars, and a quarterly loss of 8.63 billion. This basically means that the 7.5 Billion that was injected by Abu Dhabi in November may as well been taken out to the desert, doused in gasoline and used for a Bedouin camp fire.

Despite this raging camp fire and the unbearable whine of industrial shredders in the offices of 1000s of Banks, regional lenders, Fanny and Freddy, CitiGroup announces they are selling another $14.5 billion worth of preferred stock to a new batch of apparent morons including the government of Singapore. What do they see that I don’t see?

The Mortgage Bankers association’s September numbers shows the mortgage default rate at 5.6% and still trending up all while the majority of ARM style mortgages have yet to reset. Just how much more of Citigroup’s $214 billion mortgage portfolio can go south? Certainly more than the newest 14.5 billion bail out, I would guess!

It’s not just mortgages any more either, default rates for car loans have hit 5% and credit card defaults are already creeping up, how much does Citigroup have in these categories? How many bad mortgage holders have credit lines, car loans, and several pieces of plastic.

What is really ludicrous was the Standard & Poor's rating of Citigroup that was lowered from AA to AA-, you’ve got to out of your freaking mind. You take multi billion dollar losses, write off billions more, drop the stock price by ½ in a year and require $25 Billion in asset and stock sales to keep afloat and you get your credit rating lowered by 1 insignificant level.

Of course rating agencies are the lynch pin of the entire system and they are likely under severe pressure not to do their job. The day rating agencies give the banks and especially the bond insurers legitimate ratings is the day the lights will go off on Wall Street.

Huge volumes of bonds are held by institutions and pension funds, these funds have strict rules allowing only investment grade products are held. Once the rating agencies downgrade the insurers these downgrades will taint the bonds and force many 100s of Billions worth of bonds will be dumped on the market crashing their prices.

This is the big one! Unlike the banks that will continue to nickel and dime us with repeated write downs and quarterly loses the bond market will go off like Krakatoa. Their only option is for the rating agencies to lie as long as possible and hope they can fend off law suites claiming fraud by those who bought the bonds. In the meantime the insurers will continue taking loses on failing mortgages bonds, burning through their remaining capital on the road to bankruptcy. Like the banks, some insurers like MBIA are raising fresh cash through stock sales and like Citigroup they will burn through this cash far too quickly.

This approach of lie and flounder won’t stop bond insurers from going bankrupt but this scenario might allow the impact to be staggered, the end result will be the same however a destroyed and discredited bond market that will add to the world credit freeze.

Today’s economy is like that Persian diplomat in the movie 300, standing with his back to a deep well. It's obvious that we are teetering at the abyss and any number of foreseeable and quite a few unforeseeable factors could act like King Leonidas and boot us into the pit.

I was most gratified to find that the Wall Street Journal linked my article but of course they are neither as bearish or pessimistic as I am.(I prefer the label "starkly realistic")
I was quite startled that bond insurers were even mentioned in the news, figuring that this segment of the puzzle would be verboten to the main steam media. Of course the real danger to the market should they fold was ignored!

Apparently calling the rationality of the Singapore investment community into question got me a plug here too.

Canadian Blog Awards 2007 nomination

Ok, I'll admit it right off the top, this post is a shameless plug for my site. The Canadian Silver Bug blog has been nominated for the Canadian Blog Awards under the category of best Business/finance Blog.

Whether I’m worthy or not is up for debate but alas, some poor slob was kind enough to nominate me.

If this site has been useful or informative and you can spare 20 seconds and feel I'm worthy, feel free to vote here.

Thank you,
We will now return to your regularly scheduled programing.

Gold and silver are both up, bwahahahahaha!

Abcourt Mines, or why should I bother?

Just for a change in pace (for me and my site) I've decided to look at at a few stocks once in a while. It's informative for you (hopefully) and forces me look a little closer at those companies I follow.

Abcourt Mines ABI.V it also trades in Frankfurt and in the pink sheets, but I’ll let you look up the symbol if you care.

To be honest Abcourt has been a looser for me, I bought some a couple of years ago, made a small gain,and sold. Recently I dived back in at what I though was a bargain at about .60 only to have it languish and falter on a combination of no substantive reporting on progress and repeated missed targets for getting production going. Since its plunge I have averaged down but without some real news of progress I would not invest any more than I already have. Drill results are fine but I want a time table for production, and I want to see goals set and met.

On the surface Abcourt seems to have the goods; known and growing resources, 12 million in mothballed infrastructure (estimated replacement value) and it resides in Quebec where the Provincial Government practically pays you to drill holes in the ground.


So what do you get for today’s .36 share price?

.005 ounces of gold/share

.51 ounces of silver/share

16.93 pounds of zinc/share

2.56 pounds of copper/share


Now prices are fluctuating a fair bit but this certainly represents over $30 per share of resources spread over a couple of different projects.


The most advanced project is the Abcourt-Barvue zinc-silver mine touting compliant resources of 500 million lbs of zinc, and 13+ million ounces of silver. In the recent optimized feasibility study it states that $43 million is required to bring this property into production with a 4-5 year payback period. Mine life is expected to be 13 years, with potential to expand the resource on site or perhaps truck in ore from near by satellite properties.

Abcourt has several satellite properties that are undergoing or have had recent drilling programs ,
Aldermac – zinc-copper
Jonpol zinc, copper, silver

Abcourt also has the separate Elder property, a past producing gold mine showing 200,000 oz of 43-101 compliant gold with much of it’s infrastructure intact.

Here’s a detailed paper by Howlett Research

Abcourt has 48,064,898 fully diluted shares which at .36 makes for a market cap of 17.3 million which is pretty damn cheap for what you get provided they ever get off their asses, live up to some promises and actually get the Abcourt-Barvue property into production.

That’s the major problem with this company, the Hinse family seems to think that because they hold 30% and control the board they don’t need to give us poor peasant shareholders accurate or timely information. Abcourt has an ugly ass web site and they don't make any effort to update their pages to keep them current. From what I've seen in online forums, small stock holders are just plain sick and tired waiting for news or action from this company, and I don't blame them.

Are they just building the resource, stalling and hoping for a take over, or are they serious? I can’t say that it’s clear either way, at least not to this poor slob.

At .36 this stock seems to have valid reasons for some solid upside, however I’m no longer confident that this team wants to achieve production and I don’t have the patience to wait indefinitely to find out, I guess I’m just frustrated as are many other stock holders who were promised production last year.

(Of course the moment I sell someone will probably buy them out at a 2.50 which is just my kind of luck.)

So Abcourt, Tell my why should I bother holding or enlarging my stake?

Do something, anything to convince me and other stock holders we are not wasting our time and money.


DISCLAIMER

These are not endorsements, I'm simply going through my stock watch list in no particular order and commenting on the companies themselves, my luck with them and my meagre insight. Some of these companies I own, some I have owned and some I just watch looking for opportunity or wishing I had more cash to invest.

While I believe that not having precious metals is foolish and state so frequently, I also believe that taking stock advice without doing your own research is just as foolish. Be warned and do your own due diligence, and don't you dare blame me for your losses if any. Of course comments are always welcome as are monetary rewards should you make money by ignoring this warning.

Silver battery revolution!

The Silver-Zinc battery story has been quiet for some time but ZPower claims to have made progress in energy densities and apparently has a pending deal to put it's batteries in Laptops as per this story over at EDN

We already know that Silver-Zinc is safer than Lithium-Ion and is fully recyclable with no toxic metals, so if these claims of higher density and adequate performance are proven there certainly will be a premium market for these higher priced batteries. While price point will matter to some consumers, tens of millions will pay the premium for better, safer, cleaner batteries adding great demand to the silver market. This type of battery and High temperature super conducting cables are likely to become biggest new users of silver in coming years.

That slurping sound you hear in the background is the remaining silver surplus being siphoned off.

Good times for silver are ahead.

Speaking of good times, today's 52 cent gain and the $18 for gold is nothing to bitch about. Man I hope I get this years tax refund before the market goes tilt, there is still time to get in but I don't know how much time.

Canadian Silver Bug- Predictions for 2008 Pt 3

I had some final 2008 predictions that I failed to write up for the New Year so I thought I’d just jot those down quickly.

U.S. recession- most definitely, the media is starting to use the R word and I doubt the Government can keep the lid on doctored growth numbers forever.

U.S. unemployment is going up, proof came out this week with private sector job growth slowing and those receiving jobless benefits rose. The first wave of job loss was mostly missed by manipulated stats and the numbers of undocumented illegals working in the housing industry. However with the second wave, legal labour, lumber, cement, hardware companies, furniture stores etc will hit take a hit as people don’t need shit if they don’t have a new house to put it in. I expect the statistical lying to continue but expect they will fail to keep inflation climbing from today’s two year high of 5% to no less than 6% by year end.

Added to my prediction of big banks going insolvent I expect to see at least one large house builder (probably Lennar) file for protection before the end of the Q2.

The subprime mess will continue but this year’s price downturn will also put many more prime mortgages into trouble as loan values exceed property values. Previous estimates of defaults will be sorely insufficient as even trustworthy borrowers end up owing more than their house is worth, those that can pay will ride it out, others who get asked for new down payments will bail.

I think the credit crisis, (the one thing I did not foresee last year) will get much worse unless the Fed just starts buying all debt or mandating loans to the public via the banks(legally the Fed can order loans be made then cover the risk themselves). Baring that, I can see a point this year where banks will start cancelling credit lines, many of these are backed by house equity that no longer exists, others just because of credit ratings or inability of banks to access sufficient credit. The result will be lower consumer spending and a switch from reasonably priced credit lines to expensive credit cards to float excessive consumption. This will be just one of the factors that will hit consumer spending hard this year. While the freeze seems to be thawing in Canada U.S. banks are rightly afraid of each others balance sheet.
Citibank for one is toast.

The recent trend of nearly 5% of car loans going bad will increase, credit card defaults will also head higher.

The inflation vs. deflation argument will continue all while the biggest personal investments of most people, (their homes) will continue to devalue in the U.S and soon Canada, England and Spain. At the same time, food costs, energy costs and the tax burdens in most countries will increase validating neither argument and making it that much harder when deciding how to protect yourself.

Stocks

This year will be a year of chaos, energy and precious metal stocks, some industrial metals, Ur, Moly, Cobalt, rare earths will still do very well. Financials, retail, commercial real-estate will range from weak to nuked

Oil

low of $90 high $140 on shortages. yes I said $140, it will take only 1 fire, hurricane, war etc to put the U.S. into it's emergency supplies, Canada has no emergency supply. What if that pipeline from Alberta into the U.S. that blew up last month had taken all 6 or 7 pipes and not just one? What if someone helped it blow up at one or more points along it's length? Mind you I take this a proof there are no real terrorists in N.A., that or they are too damn stupid to bring us to our knees.

For those who still think my pessimistic views are loopy I leave you this article Crisis may make 1929 look a 'walk in the park' as proof I'm not alone and the fear is spreading, Hell my wife is starting to think it will get worse than even I do. Soon she will actually listen when I tell her I really want that gold sovereign or bag of libertads for Christmas.