Needless to say, Ted Butler and I had a discussion about yesterday’s goings-on. His guess [and it's only a guess] is that the ‘four or less’ traders in the Commercial category of the Commitment of Traders…all bullion banks…have covered all the shorts they can by rigging the price to the downside…and now they’re forced to cover their shorts in silver and gold by buying in the open market. This action on their part, if true, would have caused the spike up in prices yesterday. Time will tell.

Surprisingly, since both gold and silver prices rose on Wednesday, open interest in both metals fell…but as I mentioned yesterday…we’re in the rollover period before options expiry and first day notice for May, and a lot of switching is going on…and many contracts are also being closed out. Having said all that, gold open interest fell 2,824 contracts to 336,402…and silver o.i. was down 534 contracts to 95,743.

Not a lot to report in ‘other gold news’ this time. The Comex Delivery Report on Thursday showed that 49 contracts were delivered in gold…and two in silver. Not a lot of activity there. Over at the Comex-approved warehouses, I note that 477,032 ounces of silver was removed from the exchange yesterday. Virtually all of it came from Brink’s, Inc. (NYSE:CFL) Over at the GLD ETF, about 30,000 ounces was removed…probably a fee payment. There was no change in SLV.

I have four stories today…three of which are on the same topic. The first one is about Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). With the subprime debacle swept under the rug for the time being…another great hairy mortgage creature has come shambling forth to take its place. These are option ARMS…which are just as bad, if not worse than subprime. The main difference being that there are three years worth that have to be ploughed through…unlike subprime which was over in 18 months. This is the second residential real estate shoe to drop…and this one will be the killer…and it’s starting now! Here’s the graph that tells all.

click to enlarge

And here’s the story that I mentioned above. You can refer to this graph as you read the commentary. Better yet…save this chart on your own computer for future reference. The story, which is posted at globaleconomicanalysis.blogspot.com, is entitled “Fannie Freddie Delinquencies Soar [and they are going to get much worse]“. I thank Casey Research’s own John Grandits for this article. The link is here.

In a Wall Street Journal story that I ‘borrowed’ from lemetropolecafe.com comes this real can of worms…”BofA CEO says was told to be quiet on Merrill”…It appears that “Bank of America(NYSE:BAC) Chief Executive Kenneth Lewis told the New York attorney general he believed former Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke wanted him to keep quiet about the worsening terms of the bank’s acquisition of Merrill Lynch, according to testimony reviewed by The Wall Street Journal.” This is going to get ugly. The link is here.

The next ‘borrowed’ story is “the smoking gun”…the 5-page letter from N.Y. Attorney General Andrew Cuomo to Christopher Dodd and Barney Frank et al. “‘Dave from Denver”, a regular commentator over at lemetropolecafe.com, had this to say about the unfolding debacle…”This is a picture postcard example of what happens when rats are trapped in a corner…they turn on each other.” The link is here.

And lastly…and thanks once again to lemetropolecafe.com…is this piece on the same issue. It’s posted at businessinsider.com. When the lawsuits start flying on this one…Hank Paulson and Ben Bernanke will most certainly be amongst the accused. The commentary is entitled “Paulson Contradicts Bernanke, Blames Bernanke for Lewis Threat”. This will be a pissing match for the record books…but will anybody go to jail? The link is here.

Well…let’s make it five stories today. This last one is from Ambrose Evans-Pritchard at The Telegraph in London. It appears that Germany’s leading institutes forecast a 6% contraction of GDP in 2009…a slump reminiscent of 1931…” It should be no surprise to you, dear reader, that the world’s economy is collapsing in ruins. The story is entitled “Germany’s slump risks ‘explosive’ mood as second banking crisis looms”…and I thank the ‘Charleston Voice’ for bringing it to my attention. The link is here.

Most people still do not understand that the current crisis is not about saving capitalism; it’s about saving the welfare state-crony capitalist-fascist political economy in the US that can no longer pay its bills. – Bill King, the King Report

Today is Friday…and it’s Comex option expiry for both gold and silver. And as we watch the world going to hell in a handbasket…it will be another interesting trading day…to say the least.

All of us at Casey’s Daily Resource Plus thank you for reading our comments here this week…and we look forward to seeing you on Saturday.

Source: And Then There’s This…Friday, April 24th, 2009

This from Fleet Street Invest:

‘Welcome to the new West! Where overnight oil millionaires with Porsches and over-the-top mansions butt up against the salt-of-the earth cattle and rodeo country. It’s a place where fortunes are made in the tar sands at noon and lost on the poker tables at night.’

Phew! I don’t think we’re talking about Ilfracombe! More like Dallas, I should say. And this is indeed the promotion for a television series called The Wild Roses, described as an ‘epic clash between two families on opposite sides of Calgary’s oil boom’. Sounds good, doesn’t it?

But what concerns me today is not this riveting saga, but the story of ContentFilm (LON:CFL). This penny share company owns Fireworks International, the distributor of The Wild Roses and many other television shows. Could this be a share for these troubled times? After all, as I have said in my ‘Bounceback Report’, I am on the look out for companies that supply life’s essentials – and, let’s face it, to many people the TV is one of them!

So I went down to London to see ContentFilm’s American chief executive, John Schmidt. We met in a restaurant close to the group’s office just off Regent Street. The rain was lashing against the windows, the kitchen was suffering from a power cut and the stock market was crashing around our ears. The omens were not propitious but the sense of gathering doom was confounded by the calm demeanour of Schmidt.

Maybe this had something to do with the fact that he had recently returned from Cannes. He was there to attend the massive TV industry jamboree, MIPCOM. It’s where media journalists try to spot the stars of the small screen, senior executives discuss the great issue of the day – how the new digital communication channels will affect TV – and broadcasters tour the exhibition halls in search of programs to show on their own networks.

A business model that’s well-suited to recessionary times

Recession or no recession, broadcasters have to transmit something, and Schmidt told me that MIPCOM had been ‘business as usual.’ But still the recession is having some effect. Whether funded by advertisers or by viewers, broadcasters are worried about their revenues. That means more repeats and more factual programmes which always sell well. It also means less appetite to take a chance on expensive and unproven new drama.

All this suits ContentFilm rather well, because it has a library of two thousand hours of television programs. It has also acquired a rosta from the Canadian Broadcasting Corporation last year, including a good percentage of factual programmes. So ContentFilm has regular repeat sales of programs from its catalogue and when it acquires the rights to new content, which include both TV shows and feature films, it has a good idea of how it will sell.

There for ContentFilm has quite a low-risk business model. It does not get into the speculative business of financing new production, it knows its market and it has put its formerly troublesome DVD business into a joint venture with promising early results. So the shares should be a good investment at this time of recession. And yet the price has fallen by 80% in the last year! ContentFilm is now valued by the stock market at just £7m, and at 4p the shares trade at just two times earnings! Surely a bargain?

Why March 2009 will be critical for this share’s performance

Well, not so fast. Here’s why you always need to look a little deeper. You can’t just pile into penny shares without doing your research.

As in the plot of any good television drama, there is a catch. You see, five years ago ContentFilm issued 34.9m Convertible Preference Shares. Holders could either convert each preference share into one ordinary share, or else they can be redeemed at a price of 26p next March. With a choice between 26p or a share trading at 4p there is only one answer. The preference share holders will want their 26p back. That means that ContentFilm will have to come up with more than £9m. Such is the fate of the best laid financing plans!

This £9m liability has been hanging over the shares like a curse. But it must be resolved soon. The share price has started to edge up and I sense that some form of compromise agreement may soon be announced. The redemption date of the Convertible could be extended to give ContentFilm more time to pay, or to give the shares more time to recover to the 26p level at which convertible holders might convert into equity rather than taking the cash.

This is a battle not between rival families in Alberta, but between holders of the ordinary shares and the preference shares. The question is, will it have a happy ending – or will it be a disaster?

Source: Could This Tiny TV Stock Be A Great Recession-Busting Investment?