Month: December 2011

The Olduvai Theory

Hamilton

The Olduvai Theory dec 13 2011

The internet has a lot of fascinating stuff in it. Here is one that I found to be of particular interest. I believe this “theory” a.k.a. the pulse theory of civilization , by a chap by the name of R.Duncan has some good points even if they are hard to accept. Civilization is not defined as reading Gibbon’s Decline and Fall of the Roman Empire in your spare time. A more pragmatic definition is used, namely that we are civilized when energy consumption per person on earth exceeds 30+% of the maximum possible. Consumption in terms of electricity plays a major role. The name is derived from the Olduvai Gorge in the Serengeti in Tanzania (near Mount Kilimanjaro, partly because this supposedly is a site of the start of mankind, i.e. the stone age, to which , by the way we may return, and partly because the slopes of this gorge start at a slight angle and then become steep cliffs. I suggest you Google this stuff as I cannot do it justice.

What is interesting is that the 100 years of industrial civilization that we will enjoy, is expected to be only 100 years from 1930 to 2030. Similar “theories” have been postulated, think of “peak-oil”, Jeff Rubin’s the world is getting a lot smaller and dozens of others. Most are geared to energy availability which is also a cornerstone of this theory but it is more refined in that it homes in not only on energy, but also our ability to generate electricity which, by far, is the main end use of energy. Read this and you may want to consider buying more CCO or other uranium miners.

FSLR

Hamilton

FSLR dec 13 2011

Last time, see previous blog, I mentioned that we COULD be at a bottom of sorts but that the count then shown left a lot to desire, so it might well be wrong. It probable was , so here we are on our way to much lower levels. $30 or so may be the next target. Coming from a high of $320, that would constitute a 90% drop!, much of it courtesy government meddling.

IVN, Ivanhoe

Hamilton

IVN dec 15 2011

Even though the exact count on Ivanhoe has eluded us, it was quite clear that the recent rise from $13 to about $23 was corrective and therefore probable not sustainable (see ou previous blog where we specifically warn about the $23 level). Today Rio won a court suit that confirmed it’s entitlement to acquiring an additional equity position in Ivanhoe. The stock has dropped about 15% on that news and has now overlapped the $16-$19 range, the b-wave and consequently chances are now better for the stock to trade below $13 than above $23. There still is , however, an outside chance that the corrective action from the lows was only a wave A of a more complex correction. The odds are fairly low so , once again,  we suggest getting out on a rebound.

RIO, RIO Tinto Plc.

Hamilton

Rio Yahoo

This is Mnt. Everest plus $20. You must have a near religious conviction in the China story not to feel a bit uncomfortable with this stock, which is perhaps why they never show longer term charts on BNN or CNBC. This is a standard Yahoo chart but I have added one straight line through the whole thing which, very roughly, represents where the pendulum will swing to when we regress to the mean, and, invariable overshoot to the other side – first $30 and then maybe $20? Looking at the short-term charts, this is not that farfetched ;

RIO mRIO -s

My guess is that we are in a 4th wave, that may or may not develop as a triangle, to be followed by a 5th down. In commodities, as is clearly apparent from the big chart above, 5th waves often exceed all others either to the upside or downside. Alternatively we might just be in wave 4 of 3 but then we should drop almost immediately. However you slice it, it should continue down.