I used to have a view that the Hot Copper forums could be a valuable resource in which like minded and knowledgeable individuals could share the spoils of their research for their own mutual benefit and also for the advantage of others who were prepared to take the time to do their own due diligence.
Nowadays, that view is augmented by an awareness that Hot Copper can be a cesspool of rumour, innuendo, half truths and misinformation spread by ruthless types who are hell bent on profiting from the folly of others. Such entities would possibly argue that the forums are derived from the markets, and the markets are first and foremost, a dog eat dog environment where it is every man/dog for himself in order to survive.
On a macro scale, the 'dog eat dog attitude' is evidenced in the markets by various tumultuous events this year both locally and overseas where unadulterated greed has lead to the financial demise of innocent participants on an enormous scale.
The abhorrent and blatant manipulation of markets is mirrored in events such as the Sub Prime melt down (globally), the Opes Prime collapse (locally) and the emergence of an inverted debt pyramid based on complex but ultimately worthless derivatives that might yet collapse the world’s financial system.
And this has all occurred through the actions of some of the world's most powerful and influential institutions, in front of our so called regulators and with the support of politicians and the Federal Reserve who continually use their exclusive money fountain to bail out effectively bankrupted institutions. Institutions that just happen to have favoured status, and are considered to too big too fail for fear that they will undermine the entire system. It is thanks to the tax payers and the mortgagees of the world, that the Fed and its cohorts won't be out of pocket as the little people relentlessly pick up the bills for criminal excess! But I digress.
The microcosm represented by Hot Copper contains participants with the same win at all costs mentality and a view that "the ends always justifies the means". However, I am of the opinion that integrity should come before profit. All the riches of the world are of little consequence if one has to stain one's soul in order to obtain financial advantage from one's associates, even if they are only virtual lemmings hiding behind anonymous nick names in a virtual community. In this regard, the standards set for one's behavior in a virtual life on Hot Copper should be no different than what should occur in real life.
Fortunately, there appear to be others who share this view and who make the forum, on balance, mostly worthwhile. Unfortunately however, in recent times, that balance is tilting precariously towards the weight of numbers who collude and confuse for their own ulterior motives.
So where am I heading with this post?
Well I am not entirely sure, but the saga that has been and still is being played out with CVI has given me cause to reflect, especially since I have been a little remote to the markets in recent times due to pressures emanating from the real world. And with what has evolved of late, being absent hasn't been such a bad thing. For starters I was able to avoid the temptation of clambering out of a large underwater holding, as the stock recently came to life after languishing around the 10 cent mark.
CVI is an interesting stock and it has been played for all that is worth. The destructive forces here on Hot Copper have attempted to sabotage Smyth's self professed flight toward prosperity, after a very successful take off about 12 months ago. That energetic take off was quickly curtailed only to see it stall and fall into a tail spin on several occasions, buffeted by turbulent market forces and by the weight of anticipation of passengers who resisted being inoculated for risk before climbing aboard, and who failed to take their 'patience pills' for the long flight into Africa.
And what a flight it has been. As well as taking on more fuel at endless stops along the way (ie continuous share issues) and picking up large amounts of cargo at more or less the same time (ie acquisition of additional mineral and energy projects), and losing altitude at each and every occasion, the latest announcement appears to have the trusty Cessna stabilized at a higher altitude. In fact management look as if they are only one or two announcements away from ditching the Cessna and trading it for a jumbo jet. I wonder how many passengers will still be on board when that happens?
Meanwhile, the games being played out in the market with CVI have continued, with the meteoric rise from 10 cents catching most by surprise, and providing a sign that insiders are now more inclined to accumulate stock than play the 'see saw' game. If only the register could gather together a team of more strident believers with the capacity to consolidate the stock that is spewed back and forth endlessly by the point traders. If that were to happen, we would be already much higher than where we are now, on the back of what was an exciting recent announcement and a remarkable accomplishment by the company.
I don't pretend to fully comprehend the complex deal making that has occurred with CVI and the exact way it will unfold in the future. But I do understand/believe the following.
The CVI Board is reputable, experienced and highly motivated towards getting this venture to work in a time frame that suits their own particular retirement timetables. I interpret those timeframes as sooner rather than later.
The Egan appointment was a big step forward for the company providing both credibility and competence to the management group.
The Chairman when announced will give great impetus to the company and additional strength to the Board. I believe that it is purposefully being reserved pending deals being formalised satisfactorily.
The short dated option entitlements of Directors provide a clue that CVI will gather a head of steam quite rapidly now.
The company has influential political connections within Angola and powerful financial backing to proceed with its various endeavours.
The eagerness and encouragement to ensure Angolan participation in the ownership of the company will augur well for the future.
Africa will always be fraught with difficulties but the regimes in power have a need to commercialize their resources to create much needed revenues to develop their economies. If indeed Angola represents low hanging fruit as Jim Rodgers seem to think, Smyth and Co are shaping up as slick orchardists who are in the right place at the right time, picking tirelessly around the clock with both hands. And by and large, it is the shareholders who will reap the rewards.
The oil and mineral assets contained in the company's portfolio of assetts, are real, plentiful, quantifiable and enormously valuable even at today's prices.....and growing!!
The company is hell bent on amassing a basket of commodities that will probably be taken off their hands by powerful, cash rich global resource companies, long before the company ever achieves first production.
The commodities super cycle will eventually give this company a tail wind that will eventually amaze on the upside.
Strong Commodities cycles don't come around too often and the neglect in this sector over the last 30 years is now responsible for rapacious demand with supply/demand equilibrium considerably out of balance. It will take many years for increased production to restore some balance, particularly when it can take between 7 and 10 years to discover new mines and to bring them into production. The takeover strategy adopted by the giant corporations in chewing up the smaller producers, might increase their profitability, but it does little to meet increased production requirements. Suffice to say, CVI will be noticed.
There are powerful manipulative interests who have focused their attention on this stock. And that isn't necessarily a bad thing as it demonstrates that the stock offers exceptional potential. It is usually only the good stocks that attract the attention of down ramping efforts to the degree that CVI has. The highlight of the current campaign was the expert opinions of poster Officialwire who presumably made a brief appearance after an invite from another altruistic poster (yeah right) who just happened to encourage the tripe that Officialwire was dishing out before his suspension was handed to him by the mods. I mean, why would they even bother to denigrate the stock if CVI had nothing going for it? What would be the point of bad mouthing the company continuously, particularly when you don't even own stock? Suffice to say that they did bother with an incredible amount of focus and energy, and some still do bother at every opportunity and will continue to do so while the CVI trading range lends itself to such overt attacks.
THE FUTURE?:
In the aftermath of the financial disasters that have washed through the markets for most of this year, there is a growing realization that investment funds need to steer away from investments in stocks that rely on financial engineering to create artificial paper profits, and to concentrate on companies that specialize in producing real things that are urgently needed.
The days of easy earnings by piling paper on paper and valuing derivative based assets with theoretical models are long gone. The focus now is on companies exerting real effort to produce real product that has recognizable and quantifiable value. To my mind, investment in commodities and commodities based stocks tick all the requisite boxes for future investment in an increasingly value based investment landscape.
Selecting the stocks that will go on and become major resource houses in their own right is fraught with difficulty. In relatively recent times, I admit to missing out on Oxiana at 3 cents (perceived sovereign risk issues), PNA at 3 cents (perceived sovereign risk issues again, and perceived low grade, marginal resources) AOE at 5 cents (methane gas in QLD considered to be not sexy enough at the time), PDN at 2 cents (a uranium hopeful at a time just before Uranium became fashionable just didn't do it for me), and EWC at 20 odd cents now $1.20 with Packer on board and looking at energy projects in Indonesia, appeared to be too risky and with too many bits of paper on issue.
My biggest 'cock up' about 9 years ago, was Davnet at 2 cents which provided good profits at 16 cents however I wasn't convinced about their business model in an emerging internet/technology bubble, nor did I believe that the bubble was sustainable. Directors thought differently and successfully marketed their company to a gullible world that was prepared to put internet start up companies on pedestals. Davnet went on to around $7, much to my chagrin, as I could have had suitcases full of them after being close to a broker who had good connections with the company.
In all of the above cases, the proverbial Wall of Worry had to be surmounted by the companies in getting their projects off the ground. They needed to convince backers to get on board, they needed to raise capital and to gather resources while working within regulatory frameworks to gain approvals for their projects. They needed to build infrastructure and to attract competent people to work with them; people with a willingness to share the corporate dream and make it happen. Success didn't happen overnight, but it did happen.
In retrospect, all companies with the exception of Davnet, had management that could be trusted and who had the interests of shareholders firmly entrenched as a major priority. The success stories contained therein demonstrate the following time honoured truisms.
1. A company with good management and good projects has a very good chance at being successful over the longer term.
and
2. A company with poor management, with or without good projects, may have short term success, but success will not be sustainable.
The companies I have highlighted are just the tip of the giant iceberg of unrealized opportunity in the markets. No doubt every investor would have their own lamentable stories about the ones that got away. CVI however, provides us all with an opportunity to reserve a piece of action in a possible future success story, as this tadpole looks quite capable of growing the legs needed to morph into a Bull Frog of size, operating out of resource rich Africa.
CVI has already absorbed a series of blows administered by its detractors, the Opes Prime fallout, set backs in Africa and teething problems with management as it learns to cope with all of the contingencies thrown at it. But so far it has refused to lie down for the count. In fact it continues to develop upward momentum both corporately and financially and with an ounce of luck this success should be augmented by success in the field with drilling, and with its applications for rights to attractive oil leases. Then the real work of proving reserves and developing exciting mineral prospects begins. By then though, it will be an easy story to market!
CVI is positioned more favourably now than at any other point in its phoenix like rise from the ashes just over 12 months ago. They are currently in a much stronger position than any of the success stories I have highlighted above in corresponding phases of their development. I believe that the management is reputable and capable of continuing the incredible momentum that has been established. The Wall of Worry is certainly showing signs of crumbling but it still exists at the present time. And that situation speaks of opportunity. Not for me as I already have more than enough tickets to enjoy future flights with Air Vice Marshal Smyth still at the controls, and still avoiding the major storm fronts.
The next raft of announcements should demolish the Wall of Worry once and for all as manipulative detractors find themselves out of stock and won't be prepared to pay up to climb back on board. Those announcements plus news that significant institutions want a piece of the action will set this company alight as we head onwards and upwards. It will also be the signal for me to ignore the ramblings here on Hot Copper, and to simply put my CVI holdings into the bottom drawer, alongside other multi bagger certainties like CDU and IGR for a future income stream that should amply suit both mine and Mrs Nopiproc's modest retirement needs.
By the way, I don't trade, although I have tried my hand at it with mixed success. Trading may be the road to riches for a select few, but in my experience the hard fought gains of several trades can be quickly evaporated by a trade that goes badly wrong. The big windfalls when trading can also be few and far between.
For mine, it is far better to back companies over the longer term and allow sufficient time for good management to maximize the potential of solid projects through professional and competent managers coupled with industry contacts and networks, and lashings of incentive to do so.
My strategy for what is an emerging bull market in commodities is simply to try and get it right with stocks, then sit tight. It is also helpful to have realistic price objectives in place to take some cash off the table as prices move forward. In some respects, making money is the easy bit. Hanging on to profits as the markets continue to throw up opportunities, is the really difficult bit. Invariably, the tide turns without warning, leaving re-invested profits high and dry and a sinking feeling in the pit of one's stomach as the realization of what might have been, comes home to roost.
The new investment paradigm being ushered in across the globe is to focus on commodities and to have healthy exposure to the real things that are in short supply and to have exposure to the stocks that deal in them. The trend has been in place for 8 years though it is only just being legitimized by the powers that be that control the media and the investment flows of the large funds. Although it isn't the bottom of the commodities cycle, it has a long way to run before it is exhausted in 10 to 15 years time. There is plenty of time yet for CVI to make its presence known! It is starting to do so now.
In closing, never forget that making money in the markets isn't easy. All stocks have plenty of reasons why one should avoid them, and the ones that sound to good to be true usually are. But just occasionally we need to put ourselves out on a limb for a chance at a multi bagger. Better still. Put yourself out on several limbs for a chance of at least one bringing home the bacon.
Sometimes you just have to take a punt on management knowing that the resource potential is there. CVI I believe is just one case in point, and what you don't need is to allow the detractors to worry you out of your holding for what invariably amount to baseless and mischievous reasons.
Put the bastards on ignore.
By the way, take what I have to say with a grain of salt, for I have been wrong before...LOL
