Morning Mumble: The Greek Malady (poor I know), with political guff in the European Disunion and Satan's Schilling + Wolf Minerals and GKP (Gulf Keystone), the former muppet stock?

Good Morning, 

Greece come out of round one without even a bruise winning the poker tournament. The EU couldn't even afford to call their bluff and go to the wire the EU (Germany) knew what was happening. The FT Greece and Eurozone agree bailout extension Peter Spiegel in Brussels. 

The markets are now realising the agenda of Greece but aren't acknowledging the risks, save for the euro being trashed, off near 5% since the debacle began to unwind. When certain EU countries appear weighted to benefit by any austerity within the Eurozone, the underdogs will become bitter. The EU have added some more fuel to equities by a Chinese type of intervention saving the bondholders, namely themselves. 

Greece have in essence been given a cooling off period, any negotiations were too close to the Greek elections. In at least putting some space between the two events perhaps, although unlikely, just perhaps Greece will yield to the EU demands and lose some steam, a possibility but not without giving something in return.

What it does show is the commentators who thought Greece do not have a strong hand were wrong. As mentioned at the time on FTML, Greece have an agenda and that is its own backyard, unlike some of the European Union. With Greece's win yesterday, its wise to consider those risks approaching and the small print of the extension.

With the current Dutch finance minister and eurogroup chairman Jeroen Dijsselbloem, stating “I think tonight was a first step in this process of rebuilding trust. As you know trust leaves quicker than it comes. Tonight was a very important, I think, step in that process.” It’s fair to say the entire process has become disenfranchised from the "EU" collective. Trust? Really...If one needs to establish trust between a union and partnership, its time to leave. 

If Greece feel they have been compelled to take "Satan's Schilling" or not is immaterial. Greece had the money and now common-sense means with political change and blame they’re reviewing the terms and thinking, "what have we done." The problem is, the entire EU, contrary to the assertions by those alleged better informed analysts, is at stake. There may be a common-agenda or policy with the loss of a currency.

Greece's default will ripple through the EU, with those in hardship likely to vote for similar political representatives to broker such deals. Would it be best to forget EU QE and await the outcome of Greece, Spain, Portugal and Italy await the knock on effects? I doubt it, but one might just be throwing good money after bad...

There's some gossip doing the rounds about Wolf Minerals (WLFE). Its certainly not the price of Tungsten APT US$292.5/MTU. Hmmm...The hilarity was the contraction in the oil price with positions requiring to anti up more margin or close on Thursday and Friday, so what happened to the price!?!?! Those cheapskates sold their positions, thank you for making the Christmas card list!

Its suspected Malcy is the cause of the gossip and reviews on Gulf Keystone after his views on iii… 

Short one as it was very busy Friday and Saturday even allowing for Manflu and the like.

Atb Fraser

Morning Mumble: a euro thrown across the bow of Bourgeoisiem, Petra Diamond's (PDL), GEMD + Grocers

Good Morning, 

There shall be a few sore heads in Greece today and Troika's headache is just starting. Fear not, you will not find the in-depth implications or thesis on Greece leaving the Euro here.  The risks are somewhat being ignored, the outcome for the rest of Europe may be more significant than the press and Government's acknowledge. Simply put, if one feels like a kicked dog in the corner, even the most placid of people get up, fight or leave.

You'd expect nothing less to read the risk aware view here. The EU would be wise to gauge whether Greece is part of a trend that is spreading in popularity across Europe. With the increase in extreme views in the UK and across Europe there is something that the EU isn't addressing that is causing discontent. Greece, as the potential bellwether of voters across Europe warning. After all, there's a little bit of extremism in all and it requires groups to create trends for people to jump on the bandwagon and turn the switch on for the moderates. Examples being UKIP, where the other UK parties are adopting moderate attempts at similar policies.

Greece may have been the master of its own destiny and financial distress, now it would appear they are again, BBCAnti-austerity Syriza wins Greek election. The global assessors will ignore why Syriza has won this election (via coalition) and focus on the financial implications for the EU. 

The Greek elections are being misunderstood by the markets. Greece is blamed for the slide in the Euro, oil and commodity prices and not the US inventory levels being the highest in 85 years nor Saudi's views or business as usual. Greece should be viewed as a potential indicator of political fashions and trends. This is likely to have greater implications than any financial damage and benefits the European Disunion. 

The jury for gold appreciation is out for the time being on the Greek elections with the implications in oil already being misunderstood. The flight to safety as Syriza get their feet under the table by renegotiation and face-saving of greater importance than financial prudence. Surely years of pain for a stronger economy over the longer-term is better; we have prime examples of excessive spending under Labour Governments in the UK. A quick perusal of historic UK government borrowing will clarify the position.

It would be wise to revisit EMED's projections before spending all those gains on the final permitting being obtained. With copper catching a cold in Asia with little support for base metals (absence of long speculation) trading at circa $2.46/lbs, EMED's return for investors now needs to be considered appropriately. The long-term view being if they can survive this market and minimise costs now they're likely to go from strength to strength. Cashflow will be welcome but how much of it remains the question. 

As Roger Bade points out this morning the price assumptions in the Technical Report from 2013 (here) might need a few revisions. To quote EMED (Page 9 Tech Report), "A copper spot price assumption of $3.50/lb used in the projects economics analysis compares to relative current market copper prices of $3.70lbs ($8,200/t) and a trailing 5 year average above $3.00/lb.” 

When reading through the technical report to net present value (NPV) if one was to apply a 12.5% discount, the project would be currently losing money at sub $2.50/lbs. Estimates (my own), suggest it would be better to increase to 9m/t p.a. and raise a full $254M, to fund through to larger expansion and reduced costs that "could" be completed by end of year two. The funding would give viability to the long investors and transparency. The relevance of copper has an impact on the secured loan facility that was able to paid in copper subject to the price being above $6,613.86/t, although there's still time for the market to recover it would be wise to acknowledge these risks. Over to the market to be despondent on this…5m/t's is simply not viable in the current market and outlook.

Anglo American (AAL) shareholders have finally seen sense, in fact the whole sector has...can we see some realistic pricing to entice longer-term shareholders into the stock. Over to Credit Suisse with their preferred AAL and RIO (Rio Tinto) for a little review? We hope AAL can find some muppet for their Dawson and Foxleigh mines l. With Q4 results due 28th Jan, we can look forward to something spectacular. 

Petra Diamonds (PDL) have announced what the market knew in terms of prices softening but maintaining a common-sense. It's hoped the dividend will provide some hope for the stock, but this will be unlikely today. No matter what you call it, it’s a revision downwards, over to Awal Bank SA to give it another kicking...with 13.2 million shares needing a home. As a result of PDL, I decided to sell Gem Diamonds (GEMD). 

For those supermarket/grocer investors and the people wishing to expose shorting funds, it would be wise to read the Delhaize Group 2014 revenues and preliminary results. Turnaround stories in grocers are possible as shown by Delhaize Group (Euronext Brussels: DELB) & listed NYSE if you want to play Euro/USD arb. DELB was a prime shorting candidate a 3+ years ago, it's now recovered, with results coming in strong today the longs in the recovery are benefiting. With Europe likely to be the indicator of how grocers recover it would be wise to follow a few including Carrefour. Roble S.A. yet again having a nice coup back in May 2012 (See: EMC Short Sellers) 

Carrefour could just be coming in to play, Les Echoes (The Moulin family owners of Galeries Lafayette increasestake in Carrefour to 9.5%) and the English version, via Reuters. Whether the Moulin family increase their stake further is another question. They say no others have a differing view. 

With most aware of the Igas Energy debacle, Statement re Finance Facility, there's a gossip of some large bets going in! Better late than never...

Atb Fraser

PM Bolt On: FX QE ECB KMR...Boron (not boring), what a steal!

Good Evening,

The ECB QE announcement was and did benefit the market (some quality) and dragged up some of the dross as well. Gold attempted to anchor in at $1310/Oz. and failed miserably (for now), with a good % of the Au market cashing in some very stale positions the market will look for further direction. Already the bulls are predicting $2k/oz. again! The Copper malaise continued ignoring anything QE, in fact shrugging the news off and dropping a cent or four to $2.57/lb circa $5665.87/t. 

The common-sense trades were FX movements and its now over to the market to eke out the beneficiaries of the ECB QE. With earnings under pressure from lower commodities, factory gate and exports, the jury for the ECB to cure the EU woes is out (myself included). 

Is it time for China to dump steel into the EU to suppress prices for longer and deflate consumer prices. This steel will of course be boron free (read as Tax Rebate) but there are limited alternatives with the Chinese market being awash with it. The surplus with the addition of boron (whether it was or not is another question) had previously made steel a competitive export (even for the poor performing mills) because of the 9% boron steel tax rebate that has now been cancelled. 

Russia has the potential to take up this strain from China, with the need for FX/Earnings Russia has been given the best headwind to obtain market share in hot-rolled steel exports. Russia has a weak Ruble () and Chinese contraction in steel exports in the short-term, Russian steel could be on to a winner! Evraz? OAO Novolipetsk Steel? Severstal? One wouldn't want to be holding the Indian equivalents, Tata’s costs are already difficult to manage, no market Europe for Russia? Nevermind India will do. Indian producers may become more bullish if the $1:56, where pricing will impact on Russian exports to India. .

The Chinese steel exports may contract in the short term, but Europe may find themselves the beneficiary of some cheap steel from China! With iron ore having plummeted and searching for a balance in pricing, steel prices declining 14%, if the two continue for much longer both steel and iron ore production may go into decline as well.

KMR (Kenmare Resources) proved the perfect trade today with the traders hearing the gossip of negotiations nearing an end that will give some assurances to any offer Iluka Resources wish to make (or not). KMR, as I've stated for a while at circa 2 pence becomes the pure down side protected/limited trade long. 

There's some loose gossip that Iluka Resources are not interested in to too many of the current senior management. How reliable this is is another matter and untested, but severance might be a stumbling block, could it go hostile? I doubt it as the creditors want more clarity on repayment and return on 'investment'. Iluka Resources as the larger entity will provide this if combined. With the chatter of 12 pence, it's certainly not for the faint-hearted 

Atb Fraser

Morning Mumble: QE...the amateur simpletons view & WRN...+++Rio, BLT, Monitise, Fever tree and Euroscepticism.

Good Morning,

Its coming and the bets are on but with the Swiss National Banks (SNB) decisive actions on Friday the market is looking for something a bit more charged. Putin will be praying for a significant cold spell, perhaps even planning a late 2015 re-entry where he can obtain leverage. QE is likely to assist this conversely promoting inflows of investment (where possible). The markets are getting hooked on drama rather than consistent and solid performance (read as also investing in crap!) with common-sense being applied. 

Unlike America where the culture may have ranges (diversity) but similar agendas, the Eurozone does not have this luxury with contrasting voters and more so agendas of protectionism (read as Germany and France albeit not a united front). 

Without pretending nor even attempting to be all things Euro or Macro, it’s looking more and more like an inverted pyramid with Germany propping up the fragile economies of the Eurozone. When considering the outcome, the markets will be cooking on gas again until they're taken off the market welfare assistance (QE). The real risk is the incapable governments utilising excuses to justify their spending rather than address their budgetary needs quicker to re-correct the fundamental issues within their economies.

The sticking point is who will be responsible for each member states debt. Its ironic that in alleged harmony the wealthier members do not want to share the load (read as take the load). So whilst the finer print is muddled through one can't help but wonder if the EU is in for some re-branding, to European Disunion. 

The conflict of interest is disliking all things EU, with yet another tier of bureaucracy where if the costs of the EU were stripped out it would be a long-term form of QE anyway. For every country contributing there's a net benefit to 2 by their membership in the EU, its a wonder its lasted this long. The EU may or may not have a determination of strength in due course if QE does not work. 

The issues of high level unemployment (Circa 10%+*) are unlikely to be improved by the EU's bond purchases as greater focus on the issues within each country are needed. France has yet again (for the third time) asked for an extension to deal with its deficit. The French are notoriously difficult to deal with when they're doing something or not...(yes thought was put into the phrase). So in the absence of economical stimulus with a focused approached its unlikely to be as effective bar a few KPI's  (Key point indicators). These are likely to be superficial living standards and welfare claimants measures (distorted by in work benefits).

In the markets today, we had Worthington Group (WRN) (still suspended pending a prospectus which should have been out by now) update on CPS Energy Resources. The question should be, with the information (surely) to hand why was it not specifically excluded in in the Company's calculation of consolidated assets, profits, sectors or geographic locations announced on the 9th January 2015. After all the deal was announced back in October 2014. 

Is this one for the regulatory team of AIM...even as far as the FCA. The company made no exemption for CPS in their calculation of the net asset value for mining, oil and gas within the announcement on the Friday 09 January, 2015. Today, in the RNS only four areas are now included: property, litigation claims, new economy and emerging markets, yet 13 days previously it includes oil, gas or energy, oops and also mining now! If you hold the stock it would be wise to call an EGM and force disclosure of everything including the prospectus. Actually why bother, if you own this stock don't read on, close the page!

Copper woke up this morning, I suspect with some draw from gold and the dollar weakening. Iron ore minnows were getting a kicking, whereas Rio and BLT shrugged off the obvious and went on an easy trading run. In the absence of traders and pension funds would Rio and BLT be circa 2,500 and 985 pence respectively? Although there’s starting to be a good argument for near bottom of cycle buying that I disagree with. Rio's ramp up and inventory sales support their thesis on expansion, will it continue?!

BLT having further issues with Manganese as Roger Bade pointed out, prices down circa 10%. Over to the Atlas Iron (ASX: AGO) whom had opportunity to get out considerably higher thanks to the DCE (Dalian Commodity Exchange) extension in trading hours. Gold and silver both stabilising and awaiting the next indicators its over to ECB QE. Oil likely to benefit as well with the steady appreciation continuing, appreciating to circa $55/bbl give of take 3% drift between WTI and Brent.

AB Foods (ABF) finally giving in to common-sense with significant selling. Does it really take that long to digest the results? EMC view January 15, 2015, who'd have thought it and time to quote myself: "With little upside on the current SP, it’s wise not to carry profits much past the news. Under review for the short, now January 2015 has arrived." Will a DRIP (Dividend re-investment plan) assist? I doubt it...

Hulme Capital had a few issues this morning with the 'wording', for which having wanted to find out more had some diplomatic clarification from two companies in RNS REM & UKOG after this morning's Dismissal of Adviser REM & UKOG. By sheer coincidence both with a related party associated to both companies, Mr David Lenigas.

Monitise's (MONI) trading update & initiation of strategic review, informs us its up for sale with the price reacting in the right manner. With UK Mail (UKM) coming out the reporting starting blocks 10 days ago Royal Mail (RMG) Nine Months Trading Update had little in the way of surprises and was the long to the news. With little commentary (in fact none) on fuel cost benefits, RMG have missed an opportunity to promote their own stock, improving margins and energy costs reducing. 

Limited time for some, including Tullow (TLW) and Gulf Keystone (GKP) but to my left eye Malcy has saved myself via his blog today. Fever Tree (FEVR) pre-close update come with no surprises from a quality label. FEVR are the Carlsberg of tonics in my view! Having been drinking FEVR tonic for a good time, its about the only additive to gin I can differentiate in taste save for Hendricks Gin and Adnams Copperhouse Gin after one.

Atb Fraser

*Unemployment stats: Greece 25%, Spain 23%, Cyprus 16%, Croatia 16%, Portugal 14%, Italy 13%, Slovakia 12%, Bulgaria 11%, Ireland 10%, Latvia 10%, France 10%....all 17 others sub 10% with an average of circa 10%. 

Morning Mumble: Food Prices (partial), CU lower soon + Market Items

Good Morning,

Apologises for the delay, Game Digital (GMD) stating the obvious sentiment in margin and bundles in the Christmas trading update. Many thanks to the GMD IPO (although a repeat listing) aiding 2015. Along with KAZ Minerals the short benefiting today's market joys with Credit Suisse yesterday commencing the kicking. 

VED (Vedanta) ( as EMC'd yesterday) was known to be closed early, it had hit the target price for a long term short circa 7 months. It does need a revisit for intra-trading but one has to take money off the markets with strict discipline. Its a muppets disease not to bank significant profits and that includes the institutional readers whom think the trend is forever, yes you too can be a Muppet. Glencore, my short on the basis GLEN's (Glencore) copper beliefs were out of touch with the market nevermind their "tear" of assets (poor I know). 

The herd shall follow in due course, but its wise to consider their coverage if they cannot get the obvious right. With coal getting a kicking again...GLEN's earnings are looking that great with greater capital intensity. Kudos to Liberum Capital whom I suspect didn't expect 240 pence, Investec might need to review their switch from Rio to GLEN

Below are some brief out-takes for something I did in June 2013/Jan 2014 and July 2014, for which I've adapted this morning. For those that know about Pork Riblets, Semi-Meaty (I'm trying to make it sound luxurious)...December has been the hit by a quadruple whammy that has continued unabated, positive for the pocket and for retail sales and more so if the trend continues. Retail will see cheaper goods (consumer durables/white goods) and higher demand as well (see  EMC thoughts on shipping costs) with greater disposable income. Global deflation/zero inflation is a risk to western economies more so than developing countries. Save for the developing nations weakness in currency (about time I must say) eroding a good 50% of any price price reductions.

So with oil now mirroring a lot of commodities with speculation being stripped out to leave a realistic market (over supply) even in the short-term, copper as the indicator of growth has fallen back. Readers cannot say they were not given the warning  in November/December. So the indicator (Dr Copper as most refer to it) of global health is pricing in more realistic growth patterns (see Chinese trade growth) nearly bang on my estimates at CampAlpha). Even with the EU's intentions of Economic stimulus etc...America's demand may however support China (perversely). 

So with the decline in commodities positively impacting on food prices for the consumer both in agriculture (inc fertilisers and other associated harvest costs), supply chain logistics (in its entirety) and point of sale costs (including energy and staff costs re: recent hourly rate declines in the US), there's only one likely beneficiary. This theme will continue for some time, with the FAO (Food & Agriculture Organisation of the United Nations) indices mirroring (to a degree) iron ore and belatedly copper. Other sources but limited time so apologies.

See FAO Food Commodity Price Indices (left), showing significant drops in prices there's a real risk of further drops as bio-fuels are awash in the market and with limited / static demand creating a surplus in animal feed as well the alternative demand does not look positive either (grain feed/food ingredients). Plus a significant pressure on the fertilisers likely to drive costs/prices lower as producers hold out for better deals and the market being in oversupply (although recently tightening). 

With record harvests across feed grains, soya and meats (if one is allowed to call them a harvest), save for coffee(long), Cocoa (only short-term) and citrus fruits (Florida Harvest issues inferring one of the worst crop every. Prices are set in trend for the next 12 months save for any major issues. We have Soybeans dropping 3.6% After USDA Supply Report (WSJ) So for the dinner party live enthusiasts you will finally not have to pretend to substitute meat for your vegetarian guests. 

The global super-cycle is moving through commodities to food and is taking hold . With commodities the first to give, then food prices, forcing the factory gate prices in decline. (Simplified version). When considering the below, also consider the global impact both to Grocers but also to the consumer. 

Just a summarised bit on what I'm able to share in terms of food prices, please feel free to ignore or digest (I know).

Today we saw the risks presenting in copper with the tank, EMC copper's real risk could not have summed it up better, taking larger positions on the way down...in the absence of any support $2/lb. is the next station. 

Limited time for the other items. Its worth commenting on the iron ore price for those thinking the summer would last longer. All the majors were down, save for Atlas Iron the second coming, with massive volume, it would be wise to pause and plan (you vultures!). With the energy crisis of over supply (Energy rout I think CitiGroup called it) guess what's happening with Coal. With a few changes to increase the liquidity in LME coming into force on the 19th of this month, traders would be wise to read the manual:-).

Risk off? Gold on? hitting the support line of $1239/oz and retreating quickly. Cost deflation is going to impact gold, its only a matter of time!

Atb Fraser

It would have been respectful for certain individuals to acknowledge the source of their information in emails, reports and articles rather than just copying and pasting.