Eye opening presentation about oil market forecasts. In the last few years, oil companies spent an increasing amount of money for exploration and discovery, but as the price of oil is more or less stable, their operation starts to become less profitable, so they have started to reduce spending, and sell assets in order to be able to pay dividends. Most companies need crude oil at $100 or over in order to be profitable, with Petrobas needing $150 per barrel.
Source: http://energypolicy.columbia.edu/events-calendar/global-oil-market-forecasting-main-approaches-key-drivers
Nice summary @ http://ourfiniteworld.com/2014/02/25/beginning-of-the-end-oil-companies-cut-back-on-spending/
Showing posts with label crude oil. Show all posts
Showing posts with label crude oil. Show all posts
Tuesday, February 25, 2014
Thursday, November 15, 2012
GEAB 69: Katrina-Sandy : From one Storm to the Other, the End of America as we Knew it
Here are the highlights of GEAB 69 (Novenber 2012) entitled "Katrina-Sandy : From one Storm to the Other, the End of America as we Knew it":
- Katrina-Sandy : From one Storm to the Other, the End of America as we Knew it - The LEAP team has a controversial view that says Sandy, a small storm that has put New York to its knees, has shown that America has greatly weakened, and that it's the country we once knew anymore. In this section they also address the political division of the US and its dire financial & economic situation.
- 2013, the king is naked: The great geopolitical dislocation of America. - The US economy is slowly but surely weakening, and 2013 will be the year of the real crisis where the "dollar wall" will collapse.
- China 2013 : The global riot laboratory - A view of riots in China, and their consequences.
- A Canadian Tragedy – The Slump of its Real Estate Market - Contrary to the view of Canadian banks who see a market stabilization, LEAP believe the recent slumps in Toronto and Vancouver announced the popping of the Canadian real estate bubble.
- Strategic and operational recommendations. Currencies may remain irrational for a little longer, it's not to late to escape from the stock market, get physical Gold and do not play short term trades, energy commodities are better for the long term, but may suffer in the short term, and it's really not a good time to invest in Canadian real estate..
- The GlobalEurometre - Results & Analyses. Only 65% of respondents expect the dollar to go down, which is the lowest figure since the survey started.
Thursday, May 10, 2012
Jim Rogers: Not a Good Time to Buy Stock, Might Sell Euros
Some people think it's the best time to buy stock in 50 years, but Jim Rogers disagrees. He does not own stock in the US, and heven have some shorts, and does not see how the US stock market could double within a few years as Dr. Jeremy Siegel claims, because the economy is in bad shape and will remain so for some time.
Henry Blodget then asks him if housing has bottomed, and here Jim Rogers agrees that real estate may have bottomed in some markets, and there may be good opportunities especially in the country side, but other places like Massachusetts have probably to go further down.
Switching to currencies... Although he's very pessimistic over the long term, he owns the US dollar, and might sell his Euro holdings because albeit Europeans have implemented austerities measures, they haven't managed to reduce their debt.
As previously stated, he expects Gold to correct further as it has gone up for 11 years in a row, but he will certainly buy if it goes down, and claims the Gold bull run is far from over and will probably end in a bubble, a Gold mania.
Finally, his views on crude oil haven't changed, the surprise is going to be how high it goes as reserves are going down, although a temporary correct could occur in case of serious crisis (e.g. Spain defaults on its debt).
Friday, March 23, 2012
Jim Rogers on Crude Oil, Gold, Silver and Agriculture Commodities
Lots of media appearance by Jim Rogers this week. Here's an awesome interview by VisionVictory, where they discuss crude oil, precious metals, commodities, the future of the US dollar and potential civil unrests.
Sunday, March 18, 2012
Marc Faber: Beware of The Unintended Consequences Of Money Printing
Interview with Marc Faber and Chris Martenson (March 16,2012) about the unintended consequences of money printing by central banks.
First they discuss about the Greek default which does not matter according to Marc Faber, then they focus on central banks, the fact that they will never reduce their balance sheets as they have embarked on the path of money printing, and how the lower purchasing power of money particularly affects low and middle income people.
When Chris Martenson mentions the high price of oil, Marc Faber explains that consumers of Oil (mainly western economies) are suffering, but producers (Russia,. Saudi Arabia...) are benefiting.
Finally, they talk about Gold and Silver. Everybody should own precious metals as an insurance policy against a financial meltdown. Gold is not particularly expensive according to Marc Faber, although he still think we are in a correction phase. Having said that he won't sell his Gold as long as Obama (or a republican) is in power because they won't address the problems.
Marc Faber eventually sees the full financial system become an MF Global (he said some people got all their money whereas some didn't) and for that reason you should keep your Gold in a safe deposit, not in the US, but rather at some airports such as Singapore.
First they discuss about the Greek default which does not matter according to Marc Faber, then they focus on central banks, the fact that they will never reduce their balance sheets as they have embarked on the path of money printing, and how the lower purchasing power of money particularly affects low and middle income people.
When Chris Martenson mentions the high price of oil, Marc Faber explains that consumers of Oil (mainly western economies) are suffering, but producers (Russia,. Saudi Arabia...) are benefiting.
Finally, they talk about Gold and Silver. Everybody should own precious metals as an insurance policy against a financial meltdown. Gold is not particularly expensive according to Marc Faber, although he still think we are in a correction phase. Having said that he won't sell his Gold as long as Obama (or a republican) is in power because they won't address the problems.
Marc Faber eventually sees the full financial system become an MF Global (he said some people got all their money whereas some didn't) and for that reason you should keep your Gold in a safe deposit, not in the US, but rather at some airports such as Singapore.
Wednesday, February 22, 2012
Jim Rogers: Gold Going Much Higher In This Decade
ET Now interviews Jim Rogers on the 23rd of January 2012.
They asked him about commodities following the monetary easing by China, and he replied that natural resources such as silver, rice and natural gas usually benefit during periods of massive money printing. If the world economy gets better, there will be shortages, if it does not, they will print money. He owns more precious metals than base metals however.
If there is a conflict with Iran, everything will go down initially, except maybe crude oil, but this would be positive for Gold in the long term. He sees many people in Washington want to do something about Iran, and it looks like something will happen even though it's sheer madness.
They asked him about commodities following the monetary easing by China, and he replied that natural resources such as silver, rice and natural gas usually benefit during periods of massive money printing. If the world economy gets better, there will be shortages, if it does not, they will print money. He owns more precious metals than base metals however.
If there is a conflict with Iran, everything will go down initially, except maybe crude oil, but this would be positive for Gold in the long term. He sees many people in Washington want to do something about Iran, and it looks like something will happen even though it's sheer madness.
Tuesday, January 24, 2012
India to Pay For Iranian Oil with Gold
I've just seen a report on Russia Today saying that following sanctions from the US and Europe on financial transactions with Iran, India and Iran had found a compromise and India would now buy Iranian Oil with Gold.
Would that have any significant effect on the Gold market? Let's see the numbers.
Russia Today's reporter said that Indian imported 12 billions USD of Iranian oil per year.
Gold is now about 1670 USD per ounce. So That would be around 1.2 millions ounces of Gold or 200 metric tonnes of Gold per year. That's a massive amount considering India had 557.7 tonnes of Gold reserves in 2010 (source: Wikipedia). I assume India will not want to see their reserve go down, so they'd have to buy those 200 tonnes on the Gold market. By the way, 200 tonnes would just be the amount purchased by India from the IMF in 2009 (when gold was around 1100 USD).
Another way to look at this numbers is to compare it to the SPDR Gold Trust Holdings - the largest manager of Gold-based ETF - that stood at 1,239 tonnes in May 2011.
So if India and Iran actually implement this scheme for one or more years, this would be extremely disruptive on the Gold market both by the amount of required physical Gold and the geopolitical implications of such move.
Sunday, January 15, 2012
Marc Faber Picks at 2012 Barron's Roundtable
The first month of the year is time for Barron's roudtable. There were 10 panelists for 2012:
Here are Marc Faber's Picks for 2012:
Source: Bloomberg
Here's the part of Barron's Roundtable where he explains his long picks:
Faber: My preference is asset diversification, as we don't know how much money governments will print, the size of fiscal deficits and so forth. The biggest uncertainty is what will happen to the Chinese economy. The Chinese probably can continue to muddle through, easing interest rates again to keep things up. But we're dealing with an economy driven by capital spending, which is driven by credit, which wasn't the case until 2008.
Faber: There is a huge amount of underground lending throughout Asia. Mr. Bernanke can drop his dollar bills on the U.S., but the growth in dollars here can lead to strong economic growth and inflation in other countries. That has happened in the past few years. I am the most bearish person you can imagine on earth, which is why I recommend putting, say, 25% of your money in equities, 25% in precious metals, 25% in cash and bonds and 25% in real estate. These assets won't go up substantially this year, but they could preserve your wealth.
People say large-capitalization stocks are inexpensive, and I agree. I would buy a basket of high-quality big-caps in Europe and the U.S. You can by Total [TOT], in France, which yields more than 5%, and Nestlé [NESN.Switzerland] and Novartis [NVS] and Pfizer [PFE]. These stocks don't have huge downside risk. Because emerging markets saw big declines last year, you could also buy SATS [SATS.Singapore], in Singapore, which provides catering services to the airline industry and ports. It yields 5% and trades for 13 times earnings. I also like K-REIT Asia Management [KREIT.Singapore], a real-estate investment trust that yields 7%. The stock has fallen by about 50% and the dividend might be cut. But even if it is cut to 4%, this is an OK investment. These stocks won't go up right away, but reinvesting dividends will yield an adequate return over time. StarHub [STH.Singapore], the mobile-phone company, yields 6.9% and the P/E is 14.
Zulauf: If China decelerates sharply, won't markets like Singapore have another big hit?
Faber: The question is, to what extent has that been discounted already? They could fall another 20%, but a luxury-property developer like Wing Tai Holdings [WINGT.Singapore] already sells for half its book value. I am positive about Singapore in the long run because more Europeans are moving there, and to Hong Kong. Because of banking-secrecy laws it is probably safer to have a bank account in Singapore than Europe.
The Hong Kong market was hit hard, and stocks haven't bottomed yet. But you can buy Sun Hung Kai Properties [16.Hong Kong], with a P/E of five and a yield of 3.5%. Swire Pacific [19.Hong Kong] is a blue-chip, a well-managed conglomerate. It yields almost 5% and the P/E is 11. Hang Seng Bank [11.HK] yields 5.6% and trades for 11 times earnings. There isn't a huge risk in these stocks, but maybe I'm too bullish.
and his short picks:
Faber: IBM [IBM] is a good short. It is the back office of the world. There is room for earnings disappointment. If China implodes, the Australian dollar will go downwhill. That's another short. A third is Salesforce.com [CRM], which I recommended shorting in the June Roundtable ["Buy Low, Stay Nimble," June 13, 2011].
Faber: Order, order. I haven't finished. Fraser & Neave [FNN.Singapore], in Singapore, is a conglomerate similar to Swire. It sells for 10 times earnings and yields about 3%. It could become a takeover target at some point. Lastly, I am the chairman of the India Capital Fund [an open-end fund sold outside the U.S.]. The fund and the Indian currency have been hit hard, and the fund could go lower. But the U.S. outperformed India last year on the order of 40%, and the Indian market looks attractive at 12 times earnings. As Chen Zhao at BCA Research said, in China the macro backdrop is fantastic and the micro is a disaster, but in India the macro is a disaster and the micro is fantastic. India has very good companies. The fund is overweight the banks and has a P/E of 10.
Last year I was overweight the U.S. relative to emerging economies. At what stage will the outperformance of the U.S. cease and emerging markets rise again? It could be three or six months, or a year. I am gradually increasing my exposure to emerging markets. Thai and Indian banks have no exposure to Europe. Indian banks lend domestically.
Why is the Indian economy having trouble?
Faber: Money-printing in the U.S. created food and energy inflation. In poor countries the percentage of per capita income spent on food and energy is much higher than in advanced societies.
Faber: Yes. Credit was growing rapidly and the hangover period could last for a while but these markets are good long-term investments. I travel extensively in these countries and you can see the growth of economic development. People go from bicycles to motorcycles, and from motorcycles to cars. First-time buyers of cars jump socially, as do first-time buyers of homes. Thailand has several consumer-credit companies. Buyers will do everything to pay off their loans. They aren't going to walk away. Plus, bankruptcy laws are tough.
Hedge funds performed badly last year, with few exceptions. Why is that? The bond market was strong, gold was up 11% and the U.S. market was flat, but sectors such as utilities did well. This year the economy could contract and stocks could go ballistic as central banks print money. If investors are diversified, they might do all right.
If you are interested in the full Barron's roundtable transcript and have the time to go thru the 9 pages, you can do so by reading the article Listen Up, Class: Here's How to Profit.
- Scoot Black - Delphi Management
- Fred Hickey - The High Street Strategist
- Abby Joseph Cohen - Global Markets Institutes
- Brian Rogers - T. Rowe Price
- Marc Faber - The Gloom, Doom & Boom Report
- Meryl Witmer - Eagle Capital Partners
- Mario Gabelli - Gamco Investors Inc.
- Oscar Schafer - O.S.S. Capital Management
- Bill Gross - Pimco
- Felix Zulauf - Zulauf Asset Management
Here are Marc Faber's Picks for 2012:
| Investment/Ticker | Price 1/6/12 |
| Big-Cap Stocks | |
| Total / TOT | $50.75 |
| Nestlé / NESN.Switzerland | 54.00 CHF |
| Novartis / NVS | $57.31 |
| Pfizer / PFE | 21.57 |
| Singapore | |
| SATS / SATS.Singapore | S$2.23 |
| K-REIT Asia Management / KREIT.Singapore | 0.89 |
| StarHub / STH.Singapore | 2.9 |
| Wing Tai Holdings / WINGT.Singapore | 0.99 |
| Fraser & Neave / FNN.Singapore | 6.35 |
| Hong Kong | |
| Sun Hung Kai Properties / 16.Hong Kong | HK$98.20 |
| Swire Pacific / 19.Hong Kong | 75.45 |
| Hang Seng Bank / 11.Hong Kong | 92.9 |
| India | |
| India Capital Fund* | $66.24 |
| Short | |
| International Business Machines / IBM | $182.54 |
| Salesforce.com / CRM | 101.06 |
| Australian dollar | A$1=$1.02 |
| *Price of A shares as of 9/30/2011. | |
Here's the part of Barron's Roundtable where he explains his long picks:
Faber: My preference is asset diversification, as we don't know how much money governments will print, the size of fiscal deficits and so forth. The biggest uncertainty is what will happen to the Chinese economy. The Chinese probably can continue to muddle through, easing interest rates again to keep things up. But we're dealing with an economy driven by capital spending, which is driven by credit, which wasn't the case until 2008.
Faber: There is a huge amount of underground lending throughout Asia. Mr. Bernanke can drop his dollar bills on the U.S., but the growth in dollars here can lead to strong economic growth and inflation in other countries. That has happened in the past few years. I am the most bearish person you can imagine on earth, which is why I recommend putting, say, 25% of your money in equities, 25% in precious metals, 25% in cash and bonds and 25% in real estate. These assets won't go up substantially this year, but they could preserve your wealth.
People say large-capitalization stocks are inexpensive, and I agree. I would buy a basket of high-quality big-caps in Europe and the U.S. You can by Total [TOT], in France, which yields more than 5%, and Nestlé [NESN.Switzerland] and Novartis [NVS] and Pfizer [PFE]. These stocks don't have huge downside risk. Because emerging markets saw big declines last year, you could also buy SATS [SATS.Singapore], in Singapore, which provides catering services to the airline industry and ports. It yields 5% and trades for 13 times earnings. I also like K-REIT Asia Management [KREIT.Singapore], a real-estate investment trust that yields 7%. The stock has fallen by about 50% and the dividend might be cut. But even if it is cut to 4%, this is an OK investment. These stocks won't go up right away, but reinvesting dividends will yield an adequate return over time. StarHub [STH.Singapore], the mobile-phone company, yields 6.9% and the P/E is 14.
Zulauf: If China decelerates sharply, won't markets like Singapore have another big hit?
Faber: The question is, to what extent has that been discounted already? They could fall another 20%, but a luxury-property developer like Wing Tai Holdings [WINGT.Singapore] already sells for half its book value. I am positive about Singapore in the long run because more Europeans are moving there, and to Hong Kong. Because of banking-secrecy laws it is probably safer to have a bank account in Singapore than Europe.
The Hong Kong market was hit hard, and stocks haven't bottomed yet. But you can buy Sun Hung Kai Properties [16.Hong Kong], with a P/E of five and a yield of 3.5%. Swire Pacific [19.Hong Kong] is a blue-chip, a well-managed conglomerate. It yields almost 5% and the P/E is 11. Hang Seng Bank [11.HK] yields 5.6% and trades for 11 times earnings. There isn't a huge risk in these stocks, but maybe I'm too bullish.
and his short picks:
Faber: IBM [IBM] is a good short. It is the back office of the world. There is room for earnings disappointment. If China implodes, the Australian dollar will go downwhill. That's another short. A third is Salesforce.com [CRM], which I recommended shorting in the June Roundtable ["Buy Low, Stay Nimble," June 13, 2011].
Faber: Order, order. I haven't finished. Fraser & Neave [FNN.Singapore], in Singapore, is a conglomerate similar to Swire. It sells for 10 times earnings and yields about 3%. It could become a takeover target at some point. Lastly, I am the chairman of the India Capital Fund [an open-end fund sold outside the U.S.]. The fund and the Indian currency have been hit hard, and the fund could go lower. But the U.S. outperformed India last year on the order of 40%, and the Indian market looks attractive at 12 times earnings. As Chen Zhao at BCA Research said, in China the macro backdrop is fantastic and the micro is a disaster, but in India the macro is a disaster and the micro is fantastic. India has very good companies. The fund is overweight the banks and has a P/E of 10.
Last year I was overweight the U.S. relative to emerging economies. At what stage will the outperformance of the U.S. cease and emerging markets rise again? It could be three or six months, or a year. I am gradually increasing my exposure to emerging markets. Thai and Indian banks have no exposure to Europe. Indian banks lend domestically.
Why is the Indian economy having trouble?
Faber: Money-printing in the U.S. created food and energy inflation. In poor countries the percentage of per capita income spent on food and energy is much higher than in advanced societies.
Faber: Yes. Credit was growing rapidly and the hangover period could last for a while but these markets are good long-term investments. I travel extensively in these countries and you can see the growth of economic development. People go from bicycles to motorcycles, and from motorcycles to cars. First-time buyers of cars jump socially, as do first-time buyers of homes. Thailand has several consumer-credit companies. Buyers will do everything to pay off their loans. They aren't going to walk away. Plus, bankruptcy laws are tough.
Hedge funds performed badly last year, with few exceptions. Why is that? The bond market was strong, gold was up 11% and the U.S. market was flat, but sectors such as utilities did well. This year the economy could contract and stocks could go ballistic as central banks print money. If investors are diversified, they might do all right.
If you are interested in the full Barron's roundtable transcript and have the time to go thru the 9 pages, you can do so by reading the article Listen Up, Class: Here's How to Profit.
Saturday, November 19, 2011
8 Investment Ideas for 2012
2012 is coming soon, and we can start to consider some investments ides for next year.2012 is likely to be cursed with the same problem as 2011 with western debt crisis in Europe, the US, Great Britain and possibly Japan. As now, there will be a "fight" between market forces which want to liquidate the debt and the central banks & governments who want to print money to avoid deflation at all cost. There are also talks about a debt bubble in China, but their citizen and government have savings and reserve, so although they will suffer as well, they should be OK.
We know that the US, UK and Japanese central banks have done quantitative easing, and will probably do it again, although there is political pressure not to do so. The ECB has not (officially) done quantitative easing yet. The US and UK are in the worst possible position since both their government and citizens are heavily indebted and have trade deficits. The Japanese government has a lot of debt, but has a current account surplus and not much private debt. Europeans are in the middle.
In the next few years, peak oil (and peak everything) will also have a serious impact on your investment, so I'll also give some longer term investments ideas to try to preserve capital.
Here are eight investment ideas I have for 2012 in no particular order:
- Rice and agricultural commodities:
I like rice for 2012 as last year, it has not performed very well and there is currently a global glut due to Indian rice production that largely offsets the issues due to the floods in south east Asia. For individuals investors, it relatively tricky to invest in Rice. For people who have access to the French stock market, you can buy RICEF PI OPENN (FR0010606509 - 1377N). Read Investing in Rice for other options and more details.
Longer term, agricultural commodities should perform well due to rising global population, aging of farmers worldwide, reduction of arable land and possibly massive money printing by central banks.
The good news is that there are plenty of options to invest in agricultural commodities via ETF such as DBA, RJA and ELEMENTS Rogers Intl Commodity Agri ETN (RJA), PowerShares DB Agriculture (DBA) and iPath DJ-UBS Agriculture TR Sub-Idx ETN (JJA). If you prefer agricultural stocks, you could invest in Market Vectors Agribusiness ETF (MOO)
- Crude Oil
This is both a short term and long term investment. Many pundits explain that today, oil costs around 70 USD per barrel to produce. For 2012, if you see crude oil (WTI) go below 70 USD, you can consider investing massively in the commodity, even though it may go much lower. In that case, production will slow considerably until prices go above 70 USD (and more) again.
Since peak oil is inevitable and the IEA says reserves are declining by above 6% per year, so we'll have a supply problem even if the economy is in recession and demand collapses. A US military report also says that surplus may disappear in 2012, which serious shortage occurring in 2015.
First, I'll explain how not to invest in crude oil namely United States Oil (USO), iPath S&P GSCI Crude Oil TR Index ETN (OIL) and the likes as they have an horrific decay and their target is zero after numerous reverse splits. I'm not kidding. If you invest in a commodity linked ETF always try to compare it with the tracked commodity for a period of at least 2 or 3 years. Actually, it does not hurt to do it for any ETF you plan to buy.
Unless you have access to oil futures, it also difficult to invest in crude oil for individual investors and you cannot easily store the thing like you do with Gold and Silver. You invest in Crude oil (WTI and Brent) via ETF such as ELEMENTS Rogers Intl Commodity ETN (RJI) or a fund like Barclays Capital Funds - Global Commodities Deltafor Singapore/ Hong Kong investors. Those follow Jim Rogers commodity index, so they are composed of a basket of commodities and only 40% is actually invested in crude oil. If you have better alternative that do not involve buying an oil tanker, I'd appreciate.
An alternative way to invest in commodities is to buy stocks in the middle east, for example via Market Vectors Gulf States Index ETF (MES).
- Gold and Silver Bullion and/or Coins
Gold and Silver have had a tremendous run for the last 10 years, but as long as we have negative real interest over the world they should perform relatively well. Having said that, an 11 year bull market, with no negative year (for Gold) is not very common, so I would not be surprised if we have 1, 2 or 3 years where Gold does nothing. I would also not be surprised, if Gold and Silver become bubbles as the central banks print money to try to save the system. You can invest in gold via GLD or PHYS ETF and silver via SLV or PSLV. PHYS and PSLV are managed by Eric Sprott, so I'd trust those more than GLD and SLV. If you are afraid of default risk by third party, then simply buy physical Gold and Silver and store them at home. If you are a US citizen and are not afraid of default by your bank, google "celente mf global".
Finally, gold stocks are cheap relative to gold bullion on an historical basis. You can read The case for Gold Miners vs Gold and Eric Sprott: Time to Buy Gold Stocks for details. Hong Kong investors may have to make their own Gold stock portfolio, see Hong Kong Gold Mining Stocks and Gold ETFs for a list of Gold stocks in the Hang Seng.
- US Natural Gas
Over the last 5 years, US natural gas is down 39% (Source: Indexmundi) at 128.30 USD per 1000 m3 and at the same time, Russian natural gas is up 20% at 435 USD per 1000 m3 and Indonesian natural gas is up a whopping 160% at 377.22 USD per 1000 m3.
Usually, commodities trade similarly over the world, but natural gas is different since it is difficult to transport. The reason for the decrease in the US is fracking, a technology breakthrough, which dramatically increased recoverable natural gas reserve in North America.
This may not be an investment that rewards investors by 2012, but with such a large price difference between the US and the rest of the world, there will certainly be people who will work on liquified natural gas (LNG) and terminals are planned in the US.
Once again commodity investing is difficult, and products such as UNG should be avoided like the plague. Actually, I could not find a proper way to invest in natural gas, except by buying natural gas stocks, please read Investing in Natural Gas for details. If you have ideas, let me know.
- Short long dated US Treasury Bonds
If has been tried unsuccessfully over the years, so the timing is uncertain, but the fact that long dated US treasuries bonds will be much higher at some point in the future is a certainty.
The US is the worst offender in term of debt: high government debt, high private debt, low saving rate and massive trade deficits. It can't get worse than that.
The federal reserve is also committed to print money to avoid deflation at all cost, this means the US dollar will lose value and investors will sell their low yielding treasury bonds (10-year to 30-year) and find assets with better value.
If you can't short treasury bonds directly, you can invest in TBF ETF, although it decays a bit you may be able to keep it a few years, contrary to TBT or TMV. Read How to short US treasuries for more information.
- Alternative Energies
With peak oil and pressure against coal use due to climate change, alternative energy will have to be developed if we may to keep living a good life. Investments in solar, wind, (alternative) nuclear, cold fusion and more will be made and there will be a lot of failures, but it's likely some companies will have an amazing success. Alternative energy stocks are very depressed at those levels after the 2008 bubble.
This is a long term investment (5 to 10 years) and 2012 may not be the right time, but who knows. Avoid investing directly in alternative energy stocks, as you are more likely to lose a lot of money and invest with ETF or mutual funds instead. Since we don't know which technology will prevail, I'd also avoid investing in Solar fund or Wind ETF independently, but rather find a funds that covers a broad range of alternative source. If I had a gun on my head, I'd rather invest in wind energy rather than solar energy, as the former has a better EROEI.
Based on the comments above, you could invest in ETFs such as Market Vectors Glb Alternatve Energy ETF (GEX) or First Trust NASDAQ Cln Edge Smrt Grd Inf (GRID) as well as mutual funds such as BGF NEW ENERGY.
- Water
Companies related to water such as water treatment, pipes and valves manufacturers... will benefit of the water issues around the world. For example, I can feel some investments are needed in the water infrastructure in Thailand and with climate change and rising population, better water management is needed for agriculture.
This is also a long term investment and unlikely to pay off immediatly in 2012 but you can invest with PowerShares Water Resources (PHO) and PowerShares Global Water (PIO) , read Invest in Water with ETF for details.
- Buy the Euro
This may seem counter-intuitive with all the bad press and talks about the end of the Euro, but the truth is Europe is trying to take care of its debt problem now and the ECB is reluctant to print more money to further help the indebted countries thanks to pressure from Germany.
The US and UK central banks seem to be happy to print as needed, and the Japanese Yen seems overvalued as investors take refuge in this currency.
So if you are a holder of US dollar, British pound or Japanese Yen you may consider buying Euros, especially if it seems the debt crisis is resolved, European government keep implementing austerity measures, private investors take their losses on bad investments and the European central bank is not involved in printing currency.The best way to safely (without leverage) invest in the Euro would be to open a fixed deposit in Euro if your bank/country allows it. If it is not possible, you could also invest in a currency ETF/ETN such as CurrencyShares Euro Trust (FXE) or iPath EUR/USD Exchange Rate ETN (ERO).
Tuesday, November 8, 2011
Jim Rogers Mainly Owns Precious Metals and Agricultural Commodities
Jim Rogers interview by the (Indian) Economic Times on the 8th of November 2011.
He said (as in previous interviews) that QE3 has already started, because when Bernanke says he will keep interest rate at zero percent until 2013, he can't just sit he must intervene to keep the interest rate at that level and that shows in the money supply.
Precious metals (Gold and Silver) and agricultural commodities are his main commodity investments, but he also likes on base metals. He still prefers Silver rather than Gold because the former is still way down it's all time high.
Finally, he explains that crude oil will go higher than anyone expects because reserves are going down every year, although if a major event occurs (such as Spain going bankrupt), crude oil would go down with it, but that would then be a buying opportunity.
They first discuss about the current European debt crisis and that they still did not fix the problem as the debt is still going up: there will be more debt in one year and even more in two years.
He said (as in previous interviews) that QE3 has already started, because when Bernanke says he will keep interest rate at zero percent until 2013, he can't just sit he must intervene to keep the interest rate at that level and that shows in the money supply.
Precious metals (Gold and Silver) and agricultural commodities are his main commodity investments, but he also likes on base metals. He still prefers Silver rather than Gold because the former is still way down it's all time high.
Finally, he explains that crude oil will go higher than anyone expects because reserves are going down every year, although if a major event occurs (such as Spain going bankrupt), crude oil would go down with it, but that would then be a buying opportunity.
Sunday, October 30, 2011
Market Predictions for 2012 based on Trends
Last week, I reported Bloomberg Consensus of Predictions for Year-End 2012 in Where are Markets Headed for 2012 ?
That was their average forecast:
That was their average forecast:
- S&P 500: 1,428 vs Current: 1,229
- 10-year Treasury yield: 2.86% vs Current: 2.14%
- Inflation rate: 2.05% vs Current: 3.9%
- Unemployment rate: 8.7% vs Current: 9.1%
- GDP growth in fourth quarter: 2.5% vs Second quarter, 2011: 1.3%
- Gold price per ounce on Sept. 30, 2012: $1,835 vs Current: $1,704
- Value of euro: $1.40 vs Current: $1.39
- S&P/Case-Shiller 20-City Composite Home Price Index: 136.6 vs Current: 142.8
- Barrel of oil: $95 vs Current: $92.58
- S&P 500: 1000
- 10-Year Treasury yields: 2.5%
- Inflation Rate: 2.5%
- Unemployment Rate: 8.8%
- GDP Growth Rate: 1%
- Gold Price: 1850 USD
- Euro: 1.37 US dollar
- S&P Case-Shiller 20-City Composite Home Price Index: 135
- Barrel of Oil (WTI): 125 US dollar
Friday, October 28, 2011
Eric Sprott: Oil Price Must be over 75 USD for Production to Occur
Sprott Asset Management published their monthly newsletter Market at Glance (October 2011) entitled "Oil or Not, Here They Come".
First, they explain that oil has been mostly absent from recent financial headlines, but availability and price of crude oil remains a key factor in world growth:
and that the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) have had to consistently reduce their production forecasts over the years as you can see in the chart below with forecast for 2015 and 2020:
They also shows other charts with price forecast made in 2002 with price ranging between 15 to 30 USD (high price scenario) between 2002 and 2025, in 2009 they revised this with a price range of 50 to 200 USD. (2008 USD).
In the next section, they look at the causes of high oil price namely supply constraints, high production cost, middle east export are riskier and costlier and increased demand from emerging countries:
Supply Constraints.
To conclude, they recommend that western investors hedge themselves against declining purchasing power and oil consumption by buying oil producer and service companies:
My take is that you although you can invest in oil producer such as Exxon, BP and the like, you could also invest in Oil Producing countries via Market Vectors Gulf States Index ETF (MES) for example. However, since supply will go down overtime, that means reserve of oil companies will also go down so this is a negative for such companies although crude oil price is likely to increase. Another way would be to invest in Crude Oil directly either buy buying commodities futures or ETF, but be careful which one you choose (e.g. avoid USO at all cost).
First, they explain that oil has been mostly absent from recent financial headlines, but availability and price of crude oil remains a key factor in world growth:
While the recent clamor over EU solvency and weak global growth has temporarily displaced its media attention, oil’s crucial importance to the world economy has not dwindled in the slightest. Oil remains the world’s greatest single energy source todayThen then mainly focus on the lack of oil production growth:
...
By historical standards, the world has been coping with constrained oil production and high oil prices for most of the past six years. This tightness in oil supply has been a significant factor limiting global growth, and it would appear that no matter what financial solutions are eventually engineered by our politicians, global growth will remain significantly restricted by the real economy’s ability to produce oil. Limited global supply growth means that the Western world now faces significant competition for oil from emerging markets whose citizenry are willing to work much harder for far less. This will continue to result in a narrowing gap of per capita consumption between emerging and developed economies as the emerging economies continue to gain relative economic strength, wage growth, currency appreciation and purchasing power. We believe strategic investments in oil producers and service companies will offer an effective way to profit from this trend.
Global oil production has grown very little (since 2005), appreciating by a mere 2% in total production. This production plateau generated the 2008 oil price spike to nearly $150 per barrel. Subsequently, despite the economic stagnation experienced by developed economies, the price of Brent Crude Oil has averaged over $78 per barrel, four times higher than the ~$18 average that Brent traded at in the 1990s.
and that the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) have had to consistently reduce their production forecasts over the years as you can see in the chart below with forecast for 2015 and 2020:
They also shows other charts with price forecast made in 2002 with price ranging between 15 to 30 USD (high price scenario) between 2002 and 2025, in 2009 they revised this with a price range of 50 to 200 USD. (2008 USD).In the next section, they look at the causes of high oil price namely supply constraints, high production cost, middle east export are riskier and costlier and increased demand from emerging countries:
Supply Constraints.
First, and most importantly, global supply is struggling to grow because we are not finding and bringing into production any new "super giant" oilfields. This reality was well documented by the EIA in a study it published in 2008.3
The EIA study revealed that the largest 1% of oilfields (798 total fields) in the world account for over 50% of global production.
What has been discovered and brought into production in the past few decades are smaller fields, which normally have higher decline rates. As these new smaller fields replace production from larger fields, and older larger fields age, we can expect the global observed decline rate to increase from the current estimated rate of 6.7% (or 4.7 million barrels per day annually).
High Production Costs.
Middle East Exports are Increasing in Cost and Risk.Oil prices are also high due to rising production costs, and it’s worth noting that new production sources, such as offshore, tar sands and other unconventional sources are amongst the highest cost producers today... As a result, it is becoming clear to many industry analysts that current oil production cannot be sustained under $75 a barrel and the price required to sustain production seems destined to continually rise.
Increased Demand from Emerging Markets.The so-called "Arab Spring" uprisings in countries such as Egypt and Libya are forcing these and other major oil producing nations to spend more of their oil revenue on social assistance programs. For example, as a result of newly announced social spending in Saudi Arabia, it is forecasted by The Institute of International Finance, Inc. that the budget balancing price of Saudi oil will jump from $68 per barrel in 2010 to $85 per barrel in 2011 and then continue to rise, but at a slower pace, to $110 per barrel by 2015.
They also spend a large part of the letter comparing the US and China in terms of economic growth and oil consumption.As globalization continues, we can expect job growth to be higher in countries where the citizenry are willing to work harder for less. This roughly characterizes the emerging market countries which for the most part are also large exporters of goods and services, run significant trade surpluses and have strengthening currencies. These factors enable them to continue to increase their per capita and total oil consumption. Conversely, higher wage Western nations are fighting rising unemployment, trade deficits, weakening currencies and, consequently, are being forced to reduce their oil consumption.
To conclude, they recommend that western investors hedge themselves against declining purchasing power and oil consumption by buying oil producer and service companies:
You can subscribe to Sprott Asset management's Market at Glance newsletter free of charge or download the PDF version.For North American workers and investors, one way to hedge against a decline in living standards is to use your current relative advantage in oil purchasing power to accumulate oil reserves that will be developed in the future. This purchasing power advantage, currently evident in the time a worker in the West must work to earn a barrel of oil, will eventually dissipate, as world labour markets recalibrate and shift wealth from West to East....
The recent market decline and ongoing volatility is affording investors with an opportunity to invest in oil producers and service companies, in particular junior and mid-cap companies, at attractive valuations. Equities are pricing in much lower oil prices over the long-term. Our view is that while there may be additional volatility in the crude oil price in the short-term, long-term pricing will remain high and equity prices will rise to correct this disconnect.
My take is that you although you can invest in oil producer such as Exxon, BP and the like, you could also invest in Oil Producing countries via Market Vectors Gulf States Index ETF (MES) for example. However, since supply will go down overtime, that means reserve of oil companies will also go down so this is a negative for such companies although crude oil price is likely to increase. Another way would be to invest in Crude Oil directly either buy buying commodities futures or ETF, but be careful which one you choose (e.g. avoid USO at all cost).
Where are Markets Headed for 2012 ?
Bloomberg Consensus of Predictions for Year-End 2012 (unless otherwise noted):
1. UP Standard & Poor’s 500-stock index: 1,428 Current: 1,229
2. UP 10-year Treasury yield: 2.86% Current: 2.14%
3. DOWN Inflation rate: 2.05% Current: 3.9%
4. DOWN Unemployment rate: 8.7% Current: 9.1%
5. UP GDP growth in fourth quarter: 2.5% Second quarter, 2011: 1.3%
6. UP Gold price per ounce on Sept. 30, 2012: $1,835 Current: $1,704
7. UP Value of euro: $1.40 Current: $1.39
8. DOWN S&P/Case-Shiller 20-City Composite Home Price Index: 136.6 Current: 142.8
9. UP Barrel of oil: $95 Current: $92.58
Analysts are rather optimistic, except for the Case-Shiller index.
They also don't see huge swings in the markets (they never do).
Saturday, May 7, 2011
Jim Rogers: Where is the oil ?
Three parts interview of Jim Rogers on CNBC on the 5th of May 2011 about his views on the oil market, precious metals and the Euro.
Monday, April 18, 2011
Marc Faber: US Dollar will go to zero
Interview with Marc Faber on CNBC Asia on the 18th of April 2011.
In the first segment, he talks about the US budget deficit and the need to raise taxes and reduce spending, but he does not see democrats and republicans achieve anything
In the second segment, he talks about the dollar direction (i.e. possible strength in the short term and going to zero in the long term) and his outlook on precious metals which he sees not as speculative investments and simply as the best currencies.
In the final part, he answers viewers question and explain that compared to other equity markets, japan is probably the most attractive right now and should be accumulated, some more advise on investing in Gold (accumulate physical gold), crude oil which he sees going up whether the economy tanks or further recovers and than in the short term he expects a correction in asset markets.
Wednesday, March 30, 2011
Jim Rogers Bought Japanese Stocks - 30 March 2011
Interview of Jim rogers on CNBC on 30th of March 2011, where he explains he bought Japanese stocks (mainly the index actually) this week and last week.
My Take: After Marc Faber and Mish Shedlock, Jim Rogers is also bullish on Japanese equities, probably a good way to convert his Yen holdings. After a 20-year bear market, relatively good valuations (PE: 15, PBV: 1), the next bull market in Japan may start soon although there are bad economic fundamentals such as a declining population and huge government debt. If you want to invest in Japan, you can do so via EWJ (iShares MSCI Japan Index) in the US, 2814.HK in Hong Kong or FEDERAL INDICIEL JAPON P (FR0000987968) in France.
In the second part of the interview, he was asked about nuclear power which he believes will recover over time (several year) since we need nuclear power to replace oil and natural gas. He's also very bullish on oil due to declining reserves.
Concerning investing in Uranium, he is not rushing, but he's watching and may step in later on.
In the last and third part of the interview, they focus on Argentina with Slim Feriani who is very bullish on it, but Jim Rogers does not buy it at all even though Argentina has a lot of agriculture commodities.
Finally, he's also said he bought a bit of silver and gold last week, which surprised me since he generally does not buy at all time (or decades) high.
My Take: After Marc Faber and Mish Shedlock, Jim Rogers is also bullish on Japanese equities, probably a good way to convert his Yen holdings. After a 20-year bear market, relatively good valuations (PE: 15, PBV: 1), the next bull market in Japan may start soon although there are bad economic fundamentals such as a declining population and huge government debt. If you want to invest in Japan, you can do so via EWJ (iShares MSCI Japan Index) in the US, 2814.HK in Hong Kong or FEDERAL INDICIEL JAPON P (FR0000987968) in France.
In the second part of the interview, he was asked about nuclear power which he believes will recover over time (several year) since we need nuclear power to replace oil and natural gas. He's also very bullish on oil due to declining reserves.
Concerning investing in Uranium, he is not rushing, but he's watching and may step in later on.
In the last and third part of the interview, they focus on Argentina with Slim Feriani who is very bullish on it, but Jim Rogers does not buy it at all even though Argentina has a lot of agriculture commodities.
Finally, he's also said he bought a bit of silver and gold last week, which surprised me since he generally does not buy at all time (or decades) high.
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