Ok, todays stock-review is going to be short. Since I wrote about Millicom I've been a little curious if there are other companies like it, and possibly in better positions. Well, there are:
MTN is another company in the mobile-telephony business which is very strongly exposed to the african markets. Really all they have is exposition to Africa, and to a small degree, the middle-east. And as you might remember from my Millicom-exposé, Africa had the absolute best growth-rates of all the places where Millicom was active (~100%). In comparison of the two, Millicom has a p/e of ~10, and MTN has almost 14; the revenue-growth of Millicom is 29%, and MTN 35% - this compares Millicom for full year 2008 and MTN for only first half of 2008; MTN will release full year results on March 12.
The reasons for Millicom's lower valuation I suppose would be because of it's large dependence on the much more mature markets of Latin-America. MTN practically dominates african markets and are present in most countries there. The greatest revenues come from Nigeria and South Africa with 30% and 40% respectively. As is well-known, the economies of these two countries have been driven pretty strongly by high prices of oil and metals, but they are still showing better growth than Latin America (between 06-07 Nigeria had growth of ~40% and SA had ~18%).
We're all aware of the great instability that has plagued Africa for many years, and obviously this is very problematic. But if you consider the great growth and the great potential for continued growth and the very large number of countries where MTN is active, political problems might just represent minor bumps. Because of the great instability of Africa in the past it might just, oddly enough, represent the most stable place to be in right now and for a few years ahead - especially in a strongly growing sector like telecommunications. I might add that the middle-eastern countries where MTN is active also show very strong growth, like Iran's 485%! Don't worry - I'm not going to make some lame bomb-Iran joke...!
In conclusion, I would personally prefer MTN to Millicom, but only by a thin margin - african instability still makes me plenty nervous, but so does 'instability' of financial chaos...
(edit: Odd coincidence, Millicom had a minor crash today as they announced a change in management. That thin margin might just have switched in Millicom's favor.)

Swedish culture:

Unless you haven't guessed it already I have kind of a "thing" for small gold-mining companies that are just starting up operations. I guess it's no big secret that there's alot of value in this particular area these days. If you want to make money off stocks in this environment, it has to be precious metals, possibly energy, gems like Millicom or stocks that have completely crashed like GM (the stock actually did a nice 50% bounce after my post... good coincidence). Anyway, here's another nice looking junior gold-miner:

Quick numbers - mcap ~$24M (USD, not CDN), working capital $4.2M, no debt. By the looks so far, there appears to be about a 10% net profit margin from gold sold.

GOZ is currently only active in Sweden where they have three main projects. GOZ's only operation is the Bjorkdal-mine which has been running since 1988 and which has produced about 1M ounces. Gold is mainly produced from open-pit, but an under-ground operation is starting up which will increase production from 28,000 to 50,000 ounces in 2009. Average cash cost per ounce is today slightly north of $500 - about $540, and is expected to slowly head lower. Open pit has avg. grades of 1.65-1.83g/t and inferred and indicated resource is about 160,000 ounces whereas underground has 4.72-5,65g/t and a total resource of 145,000 ounces; then there is a very low-grade stock-pile resource at 0.65g/t which holds ~40,000 ounces. That pretty much guarantees an operation of four years. The bjorkdal-mine is open at depth and there are large unexplored or underexplored properties in the area, most notably the Ronnberget property just next to the mine, which has shown drill intersections of 6m with 180g/t. Interesting to note is that the bjorkdal-area has a small resource of tellurium (a metal more rare than platinum), and it is being reviewed if this should also be extracted along with the gold, however the price of tellurium is not particularly high, although one might think so considering its rarity. Tellurium sure is purty though!

The other project of GOZ is Norrliden, which is 90% owned by GOZ and 10% by IGE Nordic. This is a project that has seen exploration for almost 50 years and which today holds a fairly large resource (Ind+inf: ~2,400,000 tonnes) of gold (0.40-0.63g/t), silver(31-51g/t), zinc (1.87-3.54%), lead (0.19-0.36%) and copper (0.72-0.74%). It is envisioned that ore will be mined from this location and transported to a nearby processing-plant owned by another company, thereby making it a very low-cost operation to start up.

So, if GOZ sells 50,000 ounces of gold in 2009, at todays price ($940), then they would make $47M, and if the above mentioned profit-margin stays about the same you would have $4,7M net profits. That gives us a p/e of only 5.2! That's really good for a company that's actually growing. And as the cash-cost will go down, the margins will improve (if the price of gold stays up). Not only is GOZ making lots of money, they also have lots of gold in the ground along with very bright potentials. Even if gold wouldn't continue to rise, I'd say GOZ is a great stock to buy.

If you were to simply consider the huge debt levels we in the west have accumulated in the last two decades or so, and then take a look at what happened in the world - politically - during the last depression, the picture is not too positive. We all know what happened in Iceland recently, of course it's a very small country with a citizenry that is basically unarmed and nice enough not to use violence. Eastern Europe (Russia excluded) is brewing from anger as all the easy loans from western europe are starting to make their negative impact - and here latvians got rid of their government just recently.
All this debt has turned a lot of people into modern serfs, or debt-slaves. If the number of people in this situation and others badly hurt by the crash start to reach a large enough mass, they will start to make political demands. So far two european governments have been overthrown, in a very "friendly" manner. And this is just the beginning - the debt levels have not come down and governments are frenzied to find ways to tackle this problem, but to work against an avalanche of debt this size could prove impossible.
And still, even if Iceland had a change in government it doesn't really change anything, we have not seen a real revolution - the political systems in Iceland and Latvia are exactly the same as before and some minor tinkerings with policies won't make the mob happy. What the people have expressed in Iceland and Latvia is that they want an overthrow of a system that has ruined everything, and they want a fresh start without the debts. These debt-slaves and/or debt-victims will continue to grow in numbers and with interventions that do nothing but prolong the process the politicans who had been hoping to stave off revolution, do in fact make it more likely. So, when we talk about political risk, we should be talking about where the highest debt-levels are, and they are in the US.
What would happen if US-citizens started demanding a new government, like in Iceland or Latvia, or maybe even a new political system? Do you think that Obama would be willing to just declare himself defeated and give up his seat? (Yes, here comes a tirade of Obama-bashing) This is a guy who consistently refuses to admit when he's wrong, who calls those who dissent him 'cowards' or 'irresponsible'. He claims to be transparent and willing to discuss everything - as long as the outcome is that he gets it his way! He talks down to or mockingly laughs at reporters who remind him of his lies or faults. This is a man who, unlike Bush, not only thinks he's right - he KNOWS he's right and won't stop to reconsider any of his decisions. He would not willingly leave his seat, because he's Obama and he knows best. Watch any number of interviews with Obama and you couldn't spot one moment where he doesn't give of an aura of authoritarianism and complete self-righteousness. Lets just pray that the people of America don't start to demand a change - not an Obama-change - I strongly doubt they will get one without violence. Lets hope I'm mistaken.

I don't know how informative that was? Maybe you think I simply hate Obama for whatever motive - but I'm telling you if you simply watch a bunch of his interviews or interactions with other politicans, you'll start to see what I'm saying. Maybe this creepy video can give you a hint of what the Obama-athmosphere can do to people...

good Obama-article: http://www.antiwar.com/justin/?articleid=14319

I figure it would be a good thing to have a look at the world economy to put the economic worries in some perspective and perhaps to try and see where and when the economic downturn might end. First off, the US is about 30% of the world economy, the EU is also about 30%; this makes these two regions of the world very important, and if you throw Japan in there, you're almost up to 75% of world GDP. The world economy of today is a very integrated one, thanks to globalism. This means that if 30% or 60% of the world economy is contracting, then so must invevitably the rest - obviously the ones with big exports will be hit harder.

I guess just looking at these charts says a lot, and the situation for the EU is about the same as for the US, only differences are that consumer debt levels vary greatly in the EU and generally are lower than in the US; corporate debt (non-financial) is about $11 trillion in the EU whereas the US only has about half of that. The financial debt levels? Well, nobody seems to know what those might be (there are estimates out there, but they look very unreliable), perhaps the derivatives market is some kind of guide. The situation today is much worse than the one the world faced in 1929-30, debt levels and imbalances of trade are much higher. (note: derviatives market has grown to almost 700 trillion, chart is alittle out-dated)

What we've had is a credit-driven expansion of the world economy and now that people don't want to or are unable to keep expanding the aggregate debt, then government steps in to keep things "growing". When an economy is expanded by credit it simply means that you buy something before you're able to buy it, which means that you will not be able to buy the same thing later. So, when government spends your money by borrowing (which is what they have to do) they are making sure that whatever you might have wanted to buy in the future will instead be purchased in an economy that is over-priced. This over-pricing came from the fake demand created by credit, and now the markets are saying that prices need to go down to reasonable levels so that business can carry on as normal. Government prolongs the agony of a bloated economy and is rewarding incompetitive businesses by keeping them alive, when in fact, the only good thing to come from recessions are that bad companies go into bankruptcy and the stronger ones survive to make the recuperation easier.

From this very sad background of government intervention the economic crisis might last for many years, when it might only have lasted for a year or two if things would have run their natural course. If the natural crash would have been allowed, you could see business resumed pretty much as usual (at a lower level) and young people just entering the economy could do so with very bright prospects, with very low prices and more job opportunities than under intervention, while those still in debt would be working to pay it off, and maybe in a couple of years they could have paid off the debt to a reasonable level where their personal economy can grow again. Now we're going deeper into debt, wasting money that needs to be saved for the recovery. If the past is any guide then I'd say that we might have to endure a depression-type economic environment for the coming ten years. What might make it different is the possibility of hyper-inflation, which would simply erode away the debt and possibly give us the natural crash in a kind of detour-way (that is, with lots of more suffering). Governments look pretty desperate and they might get carried away with the spending, so I'm slightly favouring this out-come... The world economy is in trouble!

I know it may seem silly to seriously consider buying GM-shares at this time, but a company that has lost so much value in such a short time should at least be reviewed... maybe the selling is overdone. Since october 2007 GM has lost about 95% of the mcap, and this means that to get back to that level GM would have to go up almost 2000%!

Could they fall further? The mcap today is not more than about $1bn, which isn't alot for a company with huge holdings (assets valued at about $30bn) and (still) huge sales of cars. The problem isn't that people aren't buying cars, the problem is that growth is shrinking... there's a big difference there. US-deliveries of vehicles in january was 129,227, down 49% from a year ago. That is a big drop, but they're still selling cars. Obviously they are going to have to change alot of things, for example the latest reported profit margin stood at -13.24%! But, hard economic times could be a great thing for a company like GM, the shake-up might bring in some new people and force management to do some long needed restructuring and re-thinking.
The latest reported balance sheet showed a total cash-holding of $15.9bn and a total debt of $45.16bn. Since the company is in a very shaky position I'm not going to bother trying to analyze the cash-flow or profitability. But what we can fairly easily see is that if GM does make it through the next few years without too great losses and if they are able to adjust properly it could easily make a stellar rise when things start turning around.
Although Bush-Obama have been very willing to throw away hundreds of billions to corrupt and incompetent bankers who in no way deserve it, maybe there is a chance that GM could also see some bail-out money, and not just a building up of loans. If they do get money this way that would obviously make things easier for the company. I strongly doubt that GM will fail, it is simply too big and has a too large productivity to be allowed to fail, not only for political reasons, but for sound economic reasons - they are selling lots of cars and they have a huge operation going, the right people with the right ideas could easily turn it into a money-making machine in a couple of years.

So, should one buy GM-shares today? I think that it is likely that the profit margin will improve somewhat over the coming year, even if sales keep falling and everything looks very bleak. Management is forced to do whatever they can to stop the company from bleeding right now. This could mean a number of things, maybe huge lay-offs and selling of assets and shutting down of research, but eventually I think they will turn it around.
Basically, if you were to buy today you would have to go through some really shaky times, but then you'd be on first row to watch the rocket take off whenever that might happen. And how much further could they really fall? Right now they're so cheap that anyone with a billion to spare could buy the whole thing... would you buy GM if you had a billion bucks? yes, maybe I would; I could turn one of their huge factories into my private luxury-villa.

edit: I'm sorry, I wrote the article a little too quickly and forgot to mention that the net tangible assets are actually -$60bn. This changes the picture, but I still think that considering the profits that the company has shown in the past it can get back to similar levels... however it won't be easy. If profitability came back to the levels of a few years ago, then that negative asset could turn positive in a few years.