Mobius: Positive on Commodities, China

Monday, September 1st, 2008

Mark Mobius, executive chairman of Templeton Asset Management, is very positive on commodities, especially integrated emerging markets oil companies including Chinese and Indian energy firms like Reliance. He shares his views with CNBC’s Martin Soong and Sri Jegarajah.

click to view video

“China’s Still a Great Investment”

The long-term story in China is still very bright. And investors should take note that H-shares are currently trading at a substantial discount to their A-share counterparts says Mark Mobius, executive chairman at Templeton Asset Management. He also goes further afield to say that Russia is in a sweet spot,  that Putin has done all the right things for Russia and comments positively that Russia’s diplomacy in the Georgia affair has far reaching foreign relations benefits.

Tags: China, Commodities, Gold, Iron Ore, Mark Mobius, Metals, nickel, Oil & Gas
Posted in Agriculture, BRIC, Brazil, China, Commodities, Emerging Markets, Gold, India, Infrastructure, Markets, Oil & Gas | No Comments »

Commodity Snapshot

Saturday, August 30th, 2008

Below we provide Bespoke’s trading range charts of ten major commodities.  The green shading represents two standard deviations above and below the commodity’s 50-day moving average, and moves above and below indicate extreme overbought and oversold levels.  It’s no news that commodities have suffered major pullbacks over the last two months, and the charts below provide a good view on how bad it has been.

After trading at the top of its range for what seemed like forever, oil finally traded to the bottom of its range late last week, and after touching extreme oversold territory, it finally bounced for a couple of days, only to see big declines again on Friday.  Like most other commodities, natural gas unfortunately hasn’t gotten a bounce.  Since touching 13.58 in early July, nat gas is down 42%.

While gold declines from $1000 to under $800 make the headlines for precious metals, platinum and silver have actually gotten hit harder.  From their peaks, silver has fallen 38% and platinum has fallen 40%.

Corn, wheat, orange juice and coffee have actually staged some pretty good rallies off of oversold levels over the last couple of weeks.  Wheat almost touched overbought territory last week, but all four are still well off their highs earlier this year.

Tags: coffee, Commodities, Metals, Oil and Gas
Posted in Agriculture, Commodities, Crude Oil, Gold, Oil & Gas, energy | No Comments »

Largest Companies in the World

Wednesday, August 27th, 2008

Once again, we continue to be impressed by the charting and tabling work that Bespoke Investment Group compiles on a daily basis. Here below is the latest survey which compiles the largest market capitalizations of companies from around the world.

One notable standout is the size difference between Exxon Mobil ($438-billion) and Gazprom ($237-billion). We point this out simply because while Exxon is worth close to twice as much in market cap, Gazprom happens to be 6 times larger according to their total hydrocarbon reserves, and a reserve life index of roughly 28 years or so, vs. Exxon’s 17-18 years. This is the post Georgia debacle, post-oil-price-downturn price. Russian energy companies are cheap, cheap, cheap.

And, even after the huge haircut that PetroChina and China’s largest banks and companies have gotten the last year, PetroChina still commands 2nd place at $341-billion, China Mobile at 5th place, ICBC at 7th place, and CCB in the 15th spot.

Finally, where is India? We give 3-5 years before several Indian outfits make it to the market cap pantheon. That spells opportunity.

Below we highlight the 30 largest companies in the World by market cap ($). As shown, Exxon Mobil is the top dog by about $70 billion. Exxon is trailed by another energy company, Petrochina, then General Electric and Microsoft. Eleven of the top 30 are based in the United States. The Energy sector has the largest representation at 8, followed by Technology at 5. Only 3 companies in the top 30 are up in 2008 — Wal-Mart, IBM and Johnson&Johnson. And Apple and Google followers will be happy to see them ranked 25th and 26th in the World.

Tags: Market Cap
Posted in BRIC, Banks, China, Crude Oil, Emerging Markets, India, Markets, Oil & Gas, Russia, US Stocks | No Comments »

Gartman: Oil Bull Market Over

Friday, August 8th, 2008

Dennis Gartman says that the bull market in oil is over for now, and it could be as much as 2 years before it resumes. He goes on, when asked, to say that oil could fall below $80 a barrell and that he would leave the trading in oil to much smarter people. Given the risks, there are many other trades that he’s more comfortable with right now.

Click the image to watch:

Source: CNBC, August 8, 2008

Tags: Gartman, oil, Oil Prices
Posted in Commodities, Oil & Gas | No Comments »

Oil and U.S. Banks

Friday, July 25th, 2008

(by John Authers, FT.com) Bastille Day, July 14, is a good day for an old order to come to a sudden and brutal end. And on July 14, the blade came down on the phenomenally successful “buy oil, sell financials” trade.

This trade, popular with hedge funds, offered a rare way to make money this year. It exploited the credit crisis and the response it provoked from the Federal Reserve. Investors deserted banks in the US (and Europe to a lesser extent) and bet that liquidity would instead flow to oil. As higher oil prices made it harder to aid banks with lower rates, and intensified pressure on banks’ customers, it was self-reinforcing.

By July 14, a trade of buying crude oil futures on Nymex while selling short the KBW index of US commercial banks would have made a profit of 168 per cent for the year. Even if we substitute the broader MSCI world financials index for the KBW, which covers the banks most exposed to US housing, the trade had made 114 per cent.

Then, banks bounced while oil dropped 15 per cent. The trade, using the KBW index, lost 35 per cent in the six days after Bastille Day (20.7 per cent using the MSCI world financials index).

This plunge was also self-reinforcing, in a different way. Traders covering their short positions by buying back bank stocks may have funded this by selling their positions in oil.

Note, however, that anybody who made the “long oil/short US banks” trade at the beginning of the year is still sitting on a gain of 74 per cent, much the same as they were six weeks ago. This has not hurt that much.

With the trade back to its level of early June, it appears, thankfully, that we can chalk up the extremes for banks and oil in the weeks before Bastille Day to speculative “piling on”.

But traders now have to find a new way to make money. And the world must still contend with the strong fundamental reasons for high oil prices and cheap US bank stocks.

Tags: Commodities, Credit Markets, FT.com, John Authers, kbw, long oil, Nymex, oil, short banks, Trading, US Banks
Posted in Commodities, Financials, Markets, Oil & Gas, US Stocks, inflation | No Comments »

Charts: Energy Sector Declines

Monday, July 21st, 2008

July 18, 2008 - Courtesy: Bespoke Investment - At the end of May, 94% of Energy stocks were above their 50-day moving averages.  Currently, there are none.  At zero percent, the indicator can’t get any worse.

Tags: bespoke, energy sector, energy stocks, gas, oil
Posted in Commodities, Crude Oil, Oil & Gas, energy, oil | No Comments »

Horizons BetaPro Bull Plus and Bear Plus ETFs

Friday, July 11th, 2008

Canadian investors looking for the equivalent of the popular Proshares which are available on American exchanges can do so via Horizons BetaPro ETFs which trade on the TSX. These ETFs allow investors with long-only accounts to easily bet against the market or hedge their bets.  The Horizons BetaPro ETFs provide either double or double the inverse of the daily returns of the asset classes they track.  In the current market environment, the HBP Financials Bear Plus ETF (up 31.4%) and HBP Nymex Crude Oil Bull Plus (up 113.8%) have been huge winners.

Below is a listing of Horizons BetaPro ETFs and their YTD returns. YTD returns are not available for the funds launched this year.

Tags: Agricultural Grains, Bear Plus, Bull Plus, ETF, Financials, Horizons BetaPro, Howard Atkinson, JovFunds, Mining, Natural Gas, Nymex, Proshares, S&P 500, TSX 60, ultrashort, US Dollar
Posted in Agriculture, Canadian Stocks, Commodities, Crude Oil, ETF, Emerging Markets, Financials, Fixed Income, Gold, Markets, Oil & Gas, US Stocks, mining stocks | No Comments »

Oil vs. Stocks

Monday, June 30th, 2008

July 1, 2008 - (courtesy of Bespoke Investment Group) If any one tries to tell you differently, all you need to do is show them the chart below.  As last week’s trading illustrates, every time oil went up, stocks went down, and every time oil pulled back, the market gained steam.

Tags: Correlation, oil, S&P500, US Stocks
Posted in Markets, Oil & Gas, US Stocks | No Comments »

Stephen Briese: 200-days Oil Supply Held Long by Speculators (Audio Interview)

Tuesday, June 24th, 2008

Stephen Briese, a highly regarded commodities trading expert, independent commodities analyst, author of The Commitments of Traders Bible (2008), editor of http://www.commitmentsoftraders.org/, and an advisor for JovInvestment Management’s Horizons Global Contrarian Fund, says, for example, that large investors are sitting (naked) on roughly 200-days worth of crude oil, and the CFTC (Commodities Futures Trading Commission) knows it.
GreenLightAdvisor.com interviewed Stephen Briese, and here is an excerpt. You may hear the entire interview by clicking the link below.

“I follow the Commitment of Traders reports and what we see there is that the producers and users who are hedging in the market, the ‘negative feedback traders’ - the higher prices go, the more they sell [of the commodities], and they were selling at record levels last September, indicating that they were fully hedged.” Briese says. “Now those hedged traders have continued to sell all the way up, and historically they have defended their markets by doing that, but I think that all of the price increases since September have been speculative.”

Under CFTC rules however, large investors who are not handling the commodities are not entitled to an exemption allowing them to trade in the commodities. Commodity Index Funds, such as the popular S&P GSCI (S&P Goldman Sachs Commodity Index) have gotten such exemptions, allowing investors to pile in this way.
 

Briese says the unwinding of these positions could have dire consequences for investors, large and small.
 

LISTEN TO THE INTERVIEW: [MP3] Stephen Briese, CommitmentofTraders.org, June 19, 2008, 9 min. 18 sec.

About the Commitment of Traders reports: 
The Commitments of Traders (COT) report is a very useful tool to use when trading commodities, yet most traders don’t know how to properly use this gem of weekly information. Steve Briese is considered an expert in this field of study and he gives the readers of The Commitments of Traders Bible a logical understanding of how the professionals move the commodity markets and how you can take advantage of those opportunities.

Tags: Briese, CME, commitmentsoftraders.org, Commodity Indexes, COT, iShares GSCI, Markets, negative feedback traders, Nymex, oil, S&P GSCI
Posted in Commodities, Markets, Oil & Gas | 1 Comment »

Oil: Higher Prices Lead to Lower Prices?

Saturday, June 14th, 2008

Will higher prices for crude oil lead to lower prices? The debate rages on in these days of oil north of $135.

Rob Fraim ’s recent report (Mid-Atlantic Securities, Inc.) is worth serious consideration as he has a good track record in this sphere, and secondly, his is a common-sense approach. It comes our way courtesy of Investment Postcards Blog, one of the finest on international investing.The paragraphs below are extracts from his excellent report.

I have for quite a lengthy period of time – going back several years – been bullish on energy markets and energy-related stocks. And fortunately this has been a decent call.

So now what? Last week a $10+ jump in the price of crude in one day. Visions of $200 oil dancing in their heads. Articles in the media about $15 gasoline, outcries about speculators driving up the price of oil, and the inevitable somewhat late-to-the-party recommendations to pile into the energy sector now.

Spoiler Alert: I’m going to suggest lightening up positions a bit in the energy sector. Sorry for ruining the suspense, but you’re busy, I’m wordy, and you were probably going to skip to the end anyway.

I’m not suggesting a complete exit – since I still believe that we will have reasonably high energy prices for the foreseeable future and that energy companies will be strong and profitable. However, I also believe that the oil market in particular has gotten a little goofy and frothy and that we are due for a meaningful pullback in crude – which is likely to impact the psychology and pricing for other energy markets as well. We all know how it is when the “hot money” gets out of a sector and how much volatility that can create.

Do I think that oil is going to $50? Not a chance? Not $50, not $60, not $80. But I do think that there is a better than average chance that we are going to revisit $100-ish and stabilize there for a while.

This being the case I am suggesting that reaping some profits and reducing energy positions a bit might be a wise move – at least on a trading basis. Keep a core holding for the long-term, but lighten up. Sell some stuff. Write some covered calls. Hedge a bit. Maintain the core but trade with part of your energy investments. Do something other than get whipsawed.

Why? A combination of fundamental, anecdotal, and emotional factors actually. (I might also throw in technical, psychological, sociological, zoological, anatomical, and astrological if I get really cranked up.)

Here are a few of the reasons why I am reaching this conclusion.

There are some indications that demand is actually beginning to fall – somewhat in the same way that it did in 1979 and 1980 when gas pump pain reduced gasoline use by 5% and 6% respectively.

Miles traveled in the US are down – off 4.3% in March. In the last week of May – with Memorial Day weekend – gas buying was down 3.9% from the previous year. Why the declines?

Consumers are adjusting their driving and consumption habits. There is a real switch toward smaller, more energy-efficient cars and away from trucks and SUVs. In May of this year 4-cylinder cars made up 45% of sales versus just 30% in 2005.

Anecdotally, transportation companies are adjusting as well. We had a conversation with a trucking company recently and they spoke of measures that they have put in place to reduce fuel consumption. They are using monitoring and tracking systems and technology to enforce the 55 mph limit on their drivers – instead of the “unofficial” 65 mph or so that was the norm before. They are very serious about this and have enacted real driver penalties for non-compliance. Different studies have shown different results, but roughly speaking the difference between 55 mph and 65 mph is about a 10% improvement in fuel economy.

A potentially strengthening US dollar can have a big effect. While we tend to focus on supply-and-demand metrics and speculative forces when talking about oil prices, the simple fact is that a lot of the rise in oil prices has been not about oil inflation, but rather dollar deflation. The greenback has been in a downward spiral for months – courtesy of the credit crisis, problems in the US economy, and the long series of interest rate cuts. Now that rates have likely bottomed and as the US economy comes out of panic/fear mode the odds favor somewhat of a rebound in the dollar.

Jeffrey Saut at Raymond James – a strategist for whom I have the utmost respect – has adopted a more bullish stance on the dollar after years of warning about dollar weakness. If he is right – as I suspect he is – dollar appreciation will bring down crude oil pricing – as the need is also lessened for oil producers to keep prices high on crude, which is their primary greenback denominated export.

Back to the supply and demand issues, we know that real (or perceived) energy consumption in the emerging economies in China and India has taken up all the supply “at the margin”. And it is those last few incremental percentage points of usage data that make the difference between tight markets (rising prices) and looser ones (stable to lower prices.) While the China and India growth stories are real – and will be a continuing factor – there are certain things that speak to a modest lessening of demand.

When government subsidies in many Asian nations disappear by year’s end, demand should slacken. And China, stockpiling supplies for the coming Olympics, will likely shift gears and cut back on its energy purchases by August according to some. Now, today’s report regarding potential demand from China speaks otherwise, but then again I could find another item that would again talk about demand leveling off. It’s always a tug of war of course, but I am getting the feeling that the picture is not nearly as one-sided as has been reported.

Furthermore a slackening economy here in the US should also take a little pressure off of the demand side of the equation.

While not the end-all of supply problems, there has been some modest production growth – largely from Russia. So all in all the supply and demand balance seems to be tipping back in a more favorable direction – at least for now – with some estimates and reports indicating that we have moved from a deficit of 900,000 barrels a day that had to be made up by dipping into reserves, to a global “cushion” of 600,000 barrels a day.

I also wonder at what point political ideologies and environmental concerns will crumble to voter dissatisfaction over painful energy prices – possibly opening up drilling in previously “off-limits” areas.

“There is no justification for the current rise in prices,” said Saudi Oil Minister Ali al-Naimi on June 9, 2008, calling for an energy summit between producing and consuming nations. Now to be sure, we can take anything from OPEC nations with a grain of salt, but ultimately it serves the interests of the oil producers for oil prices not to skyrocket too far – since this would encourage serious conservation measures and bring about further political pressure. While excess supply capacity is not huge, Saudi Arabia itself has about 2,000,000 barrels per day in potential production expansion capability.

So with all of that in mind, do I think that we’re going to return to the days of cheap energy and a huge energy price decline – as occurred after the 1980 spike? Hardly. It was easier to increase production back then since oil fields were less mature and exploited. Also there were a lot more energy inefficiencies (in cars, appliances, building materials and techniques) back then than there are now – areas that could be markedly improved easily enough.

No, not cheap energy – just maybe cheaper by a bit. It would not surprise me to see $100 to $105 oil by the end of the year. That probably equates to gasoline in the $3.50-ish area.

Of course the unknown and unknowable regarding crude oil is the geopolitical picture. What if Israel bombs Iran and the Straits of Hormuz are blocked? What about Nigeria? And Hugo Chavez down in Venezuela? And Iraq? Terrorists! Floods! Plagues! Locusts! Well, as we saw last Friday those types of concerns (absent the locusts) have been moving the energy markets. Did anything really happen on Friday – something other than rhetoric – that fundamentally impacted the picture? Not really. It was a speculation and fear-driven spike.

Now I’m not one of these folks who vilifies speculators and blames them for high prices. It’s a free market and speculators actually serve a purpose. But blame it or not, speculation does enter into the pricing picture as speculators vie with actual users of the commodity for a relatively limited pool of sellers. But like ’em or hate ’em, speculators give us our market timing opportunities – to buy when people are selling or sell when most are buying. It just seems to me that more than a little of today’s $136/barrel price tag on oil price has geopolitics/fear/speculation written on it.

Last week I wrote about the (in my view) somewhat silly finger-pointing and ranting about the role of speculators in having driven up the price or energy and noted that ultimately speculators aren’t bigger than the markets and that supply-and-demand always wins out. Speculative moves can last longer and go further than we expect – and no one, me especially, can hope to “top-tick” the market by selling at the very peak. That’s why my recommendation is not a 100% all-or-none exit from energy positions, but instead an attempt to be level-headed and proactive by taking advantage of speculative fever and “ringing the register” on portions of energy exposure.

Source: Rob Fraim,

Mid-Atlantic Securities, Inc, June 10, 2008.

Tags: China, Investment Postcards, jeffrey saut, Markets, Mid-Atlantic, naimi, oil, price, Rob Fraim, Saudi Oil Minister
Posted in Commodities, Economy, Financials, Markets, Oil & Gas, energy | No Comments »

Don Coxe’s Recommendations, Basic Points (05/30/2008)

Tuesday, June 3rd, 2008

June 3, 2008 – Here we feature the recommendations of Don Coxe, BMO Capital’s Chief Investment Strategist. 

As usual, his paragraphs are eloquent and provide significant guidance. Don Coxe’s Investment Recommendations,  excerpted from Basic Points, Traders of the Lost Arc, May 30, 2008.

1. Assume that the leading US forecasters on the US economy will be cutting back on their economic and earnings forecasts. You could be pleasantly surprised, but you’ll more likely feel the other kind of pleasure—the sensation of being right.

2. Assume that the leading global forecasters will be cutting back on their economic and earnings  forecasts. The actual outcomes will doubtless vary widely, but enough to challenge the performances of global stock indices.

3. Until the US financial stocks stop declining, rallies in the S&P or Nasdaq are selling opportunities. If the US banks still have problems when they can pledge their otherwise-unmarketable merchandise to borrow T-Bills, then those problems aren’t going away in a hurry. If the BKX index breaks 75, assume that the bad news is about to become much worse.

4. Gold and gold stocks become more attractive each week that global food and fuel costs rise along with writedowns on bank balance sheets.

5. Natural gas prices have benefited from the unusually cold winter in the Northern Hemisphere. They could be hurt if the cooling continues through July—when air conditioning demand peaks. Nevertheless, we believe the natural-gas-oriented stocks are fundamentally attractive.

6. The dollar failed to rise significantly even as US stocks were rallying and economic forecasters were declaring that the worst of the housing problems were over. If it goes to a new low, it will drive even more global investment funds into commodities and/or commodity stocks.

7. Wheat is the only grain to have experienced a dramatic rise and fall—a short squeeze rally, followed by a collapse—amid evidence of a huge winter wheat crop. Otherwise, the grains and oilseeds have been wellbehaved, within strong uptrends. Build exposure to the leading agricultural stocks.

8. The risks to global economic growth from stagflationary food and fuel conditions continue to increase. The commodity class whose outlook is most negatively affected by such perceptions is the base metal and steel group. We believe those stocks are the only truly vulnerable commodity sector for the balance of this year—barring a sudden, Black Swan-style, reversal in oil.

9. We didn’t expect to see spot oil at $133. Nor did we expect the oil futures curve to move—albeit briefly—into contango. As this is written, oil for delivery in 2016 trades slightly above spot crude. If this move toward contango accelerates, expect response from the Fed and the ECB. Within the oil group, emphasize producers with long-lived reserves, and underweight the Big Oil companies that are failing to replace their production.

10. The only thing more bearish for nominal bond portfolios than a central bank that doesn’t fight inflation is a central bank that suddenly discovers it must stop inflation in its tracks. That’s what happened when Paul Volcker took charge after the ghastly mistakes of his predecessors. We shall become interested in nominal long-term bonds again when Bernanke & Co. Drive short rates strongly higher. In the meantime, investors should emphasize real return bonds.

Tags: balance sheets, Banks, Basic Points, Bernanke, Black Swan, Commodities, contango, Crude Oil, Dollar, Don Coxe, ECB, Fed, financial stocks, Food prices, Gold Bullion, Grain, interest rates, Markets, oil, Traders of the Lost Arc
Posted in CPI, Canadian Stocks, Commodities, Credit Markets, Crude Oil, Economy, Emerging Markets, Financials, Gold, International Markets, Markets, Oil & Gas, Strategy, US Stocks, contango, inflation, wisdom | 1 Comment »

Bill Gross: Hmmmm? (Investment Outlook June 2008)

Monday, May 26th, 2008

May 26, 2008 - Pimco’s Bill Gross makes a most humorous analyses, drawing parallels that the hordes are marching on the new Rome (America), and that its time to act. Make sure you read this must read, the June 2008 Investment Outlook, by Bill Gross. At the end, Gross puts forth his recommendations.

What this country needs is either a good 5 cent cigar or the reincarnation of an Illinois “rail-splitter” willing to tell the American people “what up” -”what really up.” We have for so long now been willing to be entertained rather than informed, that we more or less accept majority opinion, perpetually shaped by ratings obsessed media, at face value. After 12 months of an endless primary campaign barrage, for instance, most of us believe that a candidate’s preacher - Democrat or Republican - should be a significant factor in how we vote. We care more about who’s going to be eliminated from this week’s American Idol than the deteriorating quality of our healthcare system. Alternative energy discussion takes a bleacher’s seat to the latest foibles of Lindsay Lohan or Britney Spears and then we wonder why gas is four bucks a gallon. We care as much as we always have - we just care about the wrong things: entertainment, as opposed to informed choices; trivia vs. hardcore ideological debate.)

It’s Sunday afternoon at the Coliseum folks, and all good fun, but the hordes are crossing the Alps and headed for modern day Rome - better educated, harder working, and willing to sacrifice today for a better tomorrow. Can it be any wonder that an estimated 1% of America’s wealth migrates into foreign hands hands every year? We, as a people, are overweight, poorly educated, overindulged, and imbued with such a sense or self importance on a geopolitical scale, that our allies are dropping like flies. “Yes we can?” Well, if so, then the “we” is the critical element, not the leader that will be chosen in November. Let’s get off the couch and shape up-physically, intellectually, and institutionally-and begin to make some informed choices about our future. Lincoln didn’t say it, but might have agreed, that the worst part about being fooled is fooling yourself, and as a nation, we’ve been doing a pretty good job of that for a long time now.

Bill Gross - Investment Outlook - June 2008 - “Hmmmmm”

Tags: Bill Gross, BRICs, Emerging Markets, Fixed Income, Hordes, inflation, Investment Wisdom, Markets, philosophy, PIMCO, rome
Posted in BRIC, Brazil, CPI, China, Commodities, Economy, Emerging Markets, Financials, Geo-political, India, Infrastructure, Markets, Oil & Gas, Politics, Russia, US Stocks, inflation | No Comments »

Derek Webb Interview, Part 1 - Outlook and Investment Strategy

Tuesday, May 13th, 2008

May 12, 2008 - GreenLightAdvisor.com recently interviewed [Part 1] Derek Webb, Portfolio Manager, Webb Asset Management. Here are some excerpts from Part 1, in which Mr. Webb shares his outlook and his thoughts about how he trades in volatile and range bound markets. Here are some excerpts:

Regarding the Fed’s recent moves…

Anytime the Fed puts this much liquidity in to the system it’s like blowing into a pipe; all that pressure has to go somewhere—When the Fed drops hay bails of money out of the helicopter, those hay bails of money are like molecules. They have to attach themselves to something.

When you look at the huge amount of money put into the system because of the Long Term Capital Meltdown and Russia—now that liquidity event created the internet bubble. This is no different.

All of this liquidity is going to find a home. I’ll tell you that I think it’s finding its home right now. Fundamentally I am very bullish because of all this liquidity.

On his investment focus…

Through our quantitative homework we found that the delta or change in earnings is the only thing that’s predictable in terms of determining the direction of a stock’s price. That’s all we focus on; that’s all our research focuses on. So, where is that delta accelerating right now—it’s in commodities. Agriculture is number one, Oil and gas are number two, some base metals number three, like copper—The shine has kind of come out of precious metals in the short run, but I don’t think that trade’s over, I think it’s more of a seasonal thing right now.

On when to sell:

[Firstly], If we saw one analyst lower EPS forecasts for Potash, for example, WE WOULD BE OUT. Analysts are out there doing site visits. They’re doing their homework – as long as they’re raising their numbers we’re going to be long. As soon as we would see them hold steady or lower their numbers we would be out.

Secondly, if the earnings themselves just start to de-accelerate, meaning we are looking at a smooth line of earnings, not to get complicated, but we look from 3 quarters ago out to the next quarter and if that rate of change de-accelerates were out.

Thirdly, one negative earnings surprise and we’re out.

And lastly, if the relative strength indicator of the stock de-accelerates were out.

We’re ruthless on all our positions.

And lastly, if the relative strength indicator of the stock de-accelerates were out.

PART 1: Derek Webb Interview, GreenLightAdvisor.com.

Visit Webb Asset Management for more information.

Tags: Agriculture, bifurcation, Derek Webb, Fed, Investment Strategy, liquidity, Markets, Metals, Monetary Policy, Oil and Gas, Webb Asset Management
Posted in Agriculture, Banks, Canadian Stocks, Commodities, Credit Markets, Crude Oil, Economy, Financials, Gold, Markets, Oil & Gas, inflation | No Comments »

Oil Stocks vs. Oil

Thursday, May 1st, 2008

May 1, 2008 - Courtesy of Bespoke Investment Group - Below we highlight the historical ratio of the S&P 500 Oil and Gas group versus the price of oil over the last ten years.  When the red line is rising, oil stocks are outperforming the commodity and vice versa when the line is declining.  For the last year, the red line has been trending downward, meaning the commodity has been outperforming oil stocks.  The ratio got down to 5 in mid-March, which was the lowest level seen since March 2003.  At these levels, the ratio typically bounces and heads higher for awhile, meaning oil stocks would begin to outperform the price of oil.  This could mean oil prices rise less than oil stocks or fall at a faster pace.

Tags: bespoke, Commodities, energy, Investment Strategy, Markets, oil, oil stocks
Posted in Markets, Oil & Gas | No Comments »

Jeff Rubin: The Age of Scarcity (04/24/08)

Wednesday, April 30th, 2008

April 30, 2008 - CIBC World Markets Chief Strategist, Jeff Rubin, says that Oil will eventually reach $150/barrel in 2010 and over $200/barrel by 2012. He cites among the leading reasons, the advent of cheap cars from India and China, or rather Tatas and Cherys, that will enable millions of middle class Asians who couldn’t previously afford a car, to do so, Take these developments and place them agaisnt the backdrop of peak oil and a decline in oil exports from key suppliers, Saudi Arabia, Russia and Kuwait, and we are in the midst of a long term supply/demand imbalance. Here are couple of excerpts:

Whether we are already at the peak in world oil production remains to be seen, but it is increasingly clear that the outlook for oil supply signals a period of unprecedented scarcity.

Our latest review of probable supply suggests oil production will hardly grow at all, with average daily production between now and 2012 rising by barely more than a million barrels per day (see pages 4-7). Despite the recent record jump in oil prices, the outlook suggests that oil prices will continue to rise steadily over the next five years, almost doubling from current levels.

While global oil supply is not growing, global gasoline demand is, and will continue to grow as cheap cars from Tata and Chery dramatically cut barriers to car ownership in the developing world. Millions of new households will suddenly have straws to start sucking at the world’s rapidly shrinking oil reserves.

Car purchases in Russia, for example, are exploding as US sales stagnate (Chart 2), while in India the advent of the Tata Nano, a car that will sell for as little as US$2,500 will allow millions of households in the developing world to own automobiles when they otherwise could not. It is the savings necessary to buy a car, not the price of gasoline that poses the greatest obstacle to fuel demand growth in those countries. But between rapidly rising domestic incomes and rapidly falling car prices, that obstacle is becoming more and more surmountable.

To read the complete report, click here:

StrategEcon: The Age of Scarcity, CIBC World Markets, April 24, 2008

Tags: Asia, Chery, CIBC World Markets, Economy, energy, India, Jeff Rubin, Middle Class, oil, Russia, Scarcity, Tata
Posted in Agriculture, Banks, Brazil, CPI, China, Commodities, Credit Markets, Crude Oil, Economy, Emerging Markets, Financials, Geo-political, Gold, India, International Markets, Latin America, Oil & Gas, Russia, energy | No Comments »