BlackBerry Buys Anti-Eavesdropping Tool Used by Merkel

BlackBerry Ltd. (BBRY), pushing further into security services, agreed to buy Secusmart GmbH, a provider of anti-eavesdropping technology whose clients include German officials such as Chancellor Angela Merkel.

Secusmart, a Dusseldorf, Germany-based company that already had a partnership with BlackBerry, makes voice and data encryption for mobile phones. Financial terms weren’t disclosed. The acquisition is BlackBerry’s first since the hiring last November of Chief Executive Officer John Chen, who vowed to cut losses by focusing on services to corporations and governments.

 

Now, having stabilized the Waterloo, Ontario-based company, Chen said in an interview yesterday that he’s laying the groundwork for hiring and sales growth. With Secusmart, BlackBerry aims to capitalize on demand for spy-proofing technology in the wake of revelations about U.S. government surveillance tactics, including allegations that Merkel’s mobile phone was tapped.

The deal is still subject to regulatory approval. Chen said he’s confident Germany will approve the sale, especially since the government already uses BlackBerry phones and software.

 

At a time of backlash against U.S. companies, including the German government’s decision not to renew a Verizon Communications Inc. contract, Chen said it doesn’t hurt being a Canadian company.

“Canadians are very neutral, as you know,” said Chen, who grew up in Hong Kong and is a naturalized U.S. citizen. “Canadians always do business with everybody else and it’s fine.”

 

More Orders
Germany’s government has already distributed about 3,000 encrypted smartphones made by BlackBerry to federal officials, and has plans to order more such devices, Tobias Plate, a spokesman for the Interior Ministry, said yesterday at a news conference in Berlin.

Last month, Germany’s top prosecutor said it would start a formal investigation into whether U.S. intelligence agents tapped Merkel’s phone. The White House has said agents aren’t spying on Merkel and has pledged not to do so in the future.

Chen’s goal is to return BlackBerry to profitability by the company’s next fiscal year, which ends in March 2016. The company is seeking to counter declining demand for its phones by focusing on supplying software and hardware to customers in regulated industries such as finance, government, health care and law, which have higher standards for security and risk management.

Hiring Again
BlackBerry announced plans to fire 4,500 employees, or a third of its workforce, less than two months before Chen took over as it tried to streamline the business for a buyout deal that eventually fell through. As the turnaround plan unfolds, Chen said he’s ready to start hiring again, with a focus on sales, software development and customer care.

“I have a plan to start slowly adding headcount into the company, and now we’re in that phase,” Chen said.

While BlackBerry shares are up 34 percent this year through yesterday with Chen at the helm, other technology companies are eyeing the same corporate niche he’s going after. BlackBerry fell less than 1 percent to $9.91 at 10:33 a.m. New York time.

This month, Apple Inc. and International Business Machines Corp. said they would work together to develop mobile applications for businesses. BlackBerry dropped 12 percent the day of the announcement.

“I’m paying a lot of attention” to the partnership, Chen said. “I’m giving them due respect that they could get something done, although they’re going to have to come from way behind,” he said.

Part of his plan to stay ahead might include acquisitions, he said. Areas BlackBerry is interested in include server technology and identity management, Chen said.

Still, he said he’s being careful not to risk too much in potential deals.

“It’s not, ‘Because the future is so bright, I’ve got to bet the farm,'” he said. “I’m a very safe, conservative guy.”

Bulls Fleeing Natural Gas

Bulls Fleeing Natural Gas as Goldman Sees Further Decline
Speculators are fleeing natural gas after prices dropped below $4 for the first time since December and power plant production fell to a 13-year seasonal low.

Hedge funds reduced net-long positions, or bets on rising prices, by 11 percent in the week ended July 22, the U.S. Commodity Futures Trading Commission said. Bullish wagers have declined 51 percent since February.

Futures slid as the output from electricity generators, the biggest consumers of the fuel, fell 11 percent in the week ended July 19 from a year earlier to the least for the period since 2001, according to the Edison Electric Institute. Mild weather and a record pace of inventory gains may push prices lower in the next three months, Goldman Sachs Group Inc. said.

“The move down in prices this early in the summer is surprising,” Breanne Dougherty, a natural gas analyst at Societe General SA in New York, said in a phone interview on July 25. “The power generation load makes and breaks summers and it’s extremely sensitive to weather.”

Natural gas dropped 7.9 percent to $3.772 per million British thermal units on the New York Mercantile Exchange in the period covered by the CFTC report. The contract for August delivery closed at $3.781 on July 25, capping a sixth weekly decline, the longest stretch of losses since the first quarter of 2010. It was at $3.771 in electronic trading today.

Gas Supply

Gas inventories, which declined to an 11-year low in late March, have rebounded at the fastest pace since 2001, U.S. Energy Information Administration data show.

Stockpiles rose by 90 billion cubic feet to 2.219 trillion in the week ended July 18, a gain bigger than the five-year average for the 14th straight week, according to the EIA.

“While we previously believed that risks to 2014 prices were skewed to the upside, we now see downside risks to U.S. gas prices in the next three months,” Daniel Quigley, a Goldman analyst in London, said in a note on July 22.

Power generation in the lower 48 states totaled 82,614 gigawatt-hours in the seven days ended July 19, the least since the week ended June 13, Edison Electric data show.

This month has been the coolest July since 2009, Matt Rogers, the president of Commodity Weather Group LLC in Bethesda, Maryland, said in an e-mail on July 25. “We’re expecting the cool pattern to continue into August.”

Power Plants

Gas deliveries to power plants dropped 13 percent this month to average 25.9 billion cubic feet a day as of July 25, the lowest for the period since 2009, according to LCI Energy Insight in El Paso, Texas.

Futures may find support between $3.50 and $3.75 for the rest of the stockpiling season, with those prices prompting power plants to switch from coal, Teri Viswanath, the director of commodities strategy at BNP Paribas SA in New York, said by phone on July 24.

“The problem with the emergence of this cool fall-like weather is that we don’t expect to see a slowdown in those inventory injections until the reemergence of heating demand,” she said.

In other markets, the downing of a civilian airplane in Ukraine and crude stockpiles at Cushing, Oklahoma, at a six-year low enticed speculators back to the oil market, boosting bullish bets from a six-month low.

Money managers raised net-long positions in benchmark West Texas Intermediate futures by 7.3 percent to 278,116 futures and options combined in the week ended July 22, CFTC data show. Long positions rose 1.1 percent 307,739 while shorts dropped 35 percent to 29,623.

WTI Jump

WTI futures advanced 4.5 percent to $104.42 a barrel on the Nymex in the period covered by the report. The contract closed at $102.09 on July 25.

Net long gasoline bets fell 22 percent to 34,115. Futures slipped 0.6 percent to $2.8807 a gallon on the Nymex in the week covered by the report and settled at $2.8653 on July 25.

Gasoline at U.S. pumps, averaged nationwide, slid 0.7 cent to $3.543 a gallon on July 24, the lowest since March 28, according to data from Heathrow, Florida-based AAA, the nation’s largest motoring group. Retail prices are down 4.1 percent from a 13-month high on April 26.

Money managers’ bets on ultra-low sulfur diesel flipped to a net short position for the first time since November with 1,520 contracts, the CFTC report showed. Futures fell 0.1 percent to $2.8542 a gallon in the report week and closed at $2.9157 on July 25.

Natural Gas

Net-long positions on four U.S. natural gas contracts declined by 25,772 futures equivalents to 201,090, the least since Dec. 3.

The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.

Long positions fell by 4 percent to 472,613, the least since February 2013. Bearish bets gained 2.3 percent to 271,523, the most since Dec. 10.

“I wouldn’t expect prices to go much lower,” said Societe Generale’s Dougherty. “That said, if we continue to get extremely mild weather as we saw in July through October, we will see a slightly different story.”

Guest Jack A. Bass on the Wealth DNA Radio Show

  • Guest Jack A. Bass on the Wealth DNA Radio Show http://t.co/W5AuG1UQpE

    Guest Jack A. Bass on the Wealth DNA Radio Show

    wp.me

    Featured Guest Jack A. Bass on the Wealth DNA Radio Show Discussing Off-Shoring Operations and Banking July 28, 2014 at 9:00 am PDT (12 Noon EDT) Special Guest Jack A. Bass discusses

 

Zacks View :Why BlackBerry (BBRY) Could Beat Earnings Estimates Again

Looking for a stock that might be in a good position to beat earnings at its next report? Consider BlackBerry Limited (BBRY), a firm in the Wireless Industry, which could be a great candidate for another beat.

This company has seen a nice streak of beating earnings estimates, especially when looking at the previous two reports. In fact, in these reports, BBRY has beaten estimates by at least 55.0% in both cases, suggesting it has a nice short-term history of crushing expectations.

Earnings in Focus

Two quarters ago, BBRY expected to post a loss per share of 56 cents per share, while the company posted loss per share of 8 cents, a significant beat. Meanwhile, for the most recent quarter, the company looked to deliver loss per share of 27 cents, when it actually saw loss per share of 11 cents instead, representing a 59.3% positive surprise.

Thanks in part to this history, estimates have been moving higher for BlackBerry. In fact, the Earnings ESP for BBRY is positive, which is a great sign of a coming beat.

After all, the Zacks Earnings ESP compares the most accurate estimate to the broad consensus, looking to find stocks that have seen big revisions as of late, suggesting that analysts have recently become more bullish on the company’s earnings prospects. This is the case for BBRY, as the firm currently has a Zacks Earnings ESP of 59.9 %, so another beat could be around the corner.

This is particularly true when you consider that BBRY has a great Zacks Rank #2 (Buy) which can be a harbinger of outperformance and a signal for a strong earnings profile. And when you add this solid Zacks Rank to a positive Earnings ESP, a positive earnings surprise happens nearly 70% of the time, so it seems pretty likely that BBRY could see another beat at its next report, especially if recent trends are any guide.

Amazon Loss Widens as Bezos Pours Money Into New Services

Amazon.com Inc. (AMZN) fell more than 11 percent after posting its widest loss since 2012, as its cloud-computing business showed signs of cooling and investments in new distribution warehouses and gadgets hold back profitability.

The world’s largest online retailer had a second-quarter loss of $126 million, wider than analysts’ $66.7 million average estimate and a $7 million loss a year earlier. Sales climbed 23 percent to $19.3 billion, while operating expenses increased 24 percent to $19.4 billion, Amazon said in a statement today.

Chief Executive Officer Jeff Bezos’s strategy since Amazon’s inception has been to invest heavily to expand and earn customer loyalty. While the approach has disrupted industries from bookstores and electronics outlets to providers of Web-computing software, it’s been expensive. Amazon began posting quarterly losses in 2012 after being consistently profitable for almost a decade.

“As long as there is money to pour into the business, they will be pouring money into the business,” said Sucharita Mulpuru, an analyst at Forrester Research in Cambridge, Massachusetts. “If you can spend down all your profit and nobody is going to penalize you for it, why show a profit?”
The stock fell as much as 11.5 percent in extended trading. The stock rose less than 1 percent to $358.61 at the close in New York, leaving it down 10 percent this year.

Weighing on results is a price war in the cloud-computing market, where Amazon rents data storage and computing power to other companies. Amazon, whose cloud competitors include Google Inc. and Microsoft Corp., cut prices for its Amazon Web Services unit this year, Chief Financial Officer Tom Szkutak said on a conference call.

Cloud Performance

While Amazon doesn’t disclose specific sales for Web services, it’s a part of the “other” category in financial statements, where revenue in the second quarter declined by 3 percent to $1.17 billion from the prior period.

“We had very substantial price reductions,” Szkutak said.

Shareholders have largely continued to back Bezos’s view that big investments are necessary to gain share because Amazon’s business opportunity is enormous and will pay off in the long run. Amazon is the second-highest valued company in the Standard & Poor’s 500 Index, trading at 573 times earnings and trailing Vertex Pharmaceuticals Inc.

CEO Strategy

Amazon’s lack of profits stands in stark contrast to Alibaba Group Holding Ltd., which has better margins and is planning an initial public offering soon. The Chinese Web retailer disclosed in a prospectus in May that its profit totaled $2.8 billion for the nine months ended Dec. 31 on revenue of $6.5 billion. Amazon earned $274 million for all of 2013 on sales of $74.5 billion.

Amazon is in an investment cycle that benefits customers and will eventually end, said Szkutak, without specifying when that will be.

“We have a tremendous amount of opportunity,” he said. While it’s impacting short-term results, he said “we’ll obviously be looking to get great returns on invested capital.”

Looking ahead, Amazon projected sales of $19.7 billion to $21.5 billion for the current quarter. Operating losses are projected to be $810 million to $410 million, Amazon said.

Bezos is spending to take Amazon further away from its roots as an online seller of books. As it makes that shift, the company is increasingly competing with large technology companies such as Apple Inc., Google Inc., Microsoft Corp. and Samsung Electronics Co.

Amazon is shipping this week its Fire smartphone, a $199 handset that lets users take a picture of a product to find and buy it quickly from Amazon. Reviewers have panned the device, citing a weak battery, lack of applications and the gimmicky nature of its 3-D display.

Amazon doesn’t disclose sales figures for devices like its Kindle e-readers and Szkutak declined to provide specific figures about orders for the new smartphone.

Strong sales or not, Bezos has proven with devices such as the Kindle Fire tablet that he’ll stick with a product and continue to invest, even if early models don’t prove popular.

“They keep investing in these incredibly capital-intensive businesses,” Mulpuru said.

Investment Management: Quarterly Review and Outlook, Second Quarter 2014

By John Mauldin
It’s time for our Quarterly Review & Outlook from Lacy Hunt of Hoisington Investment Management, who leads off this month with a helpful explanation of the relationship between the U.S. GDP growth rate and 30 year treasury yields. That’s an important relationship, because long term interest rates above nominal GDP growth (as they are now) tend to retard economic activity and vice versa.

The author adds that the average four quarter growth rate of real GDP during the present recovery is 1.8%, well below the 4.2% average in all of the previous post war expansions; and despite six years of federal deficits totaling $6.27 trillion and another $3.63 trillion in quantitative easing by the Fed, the growth rate of the economy continues to erode.

So what gives? We’re simply too indebted, says Lacy; and too much of the debt is nonproductive. (Total U.S. public and private debt rose to 349.3% of GDP in the first quarter, up from 343.7% in the third quarter of 2013.) And as Hyman Minsky and Charles Kindleberger showed us, higher levels of debt slow economic growth when the debt is unbalanced toward the type of borrowing that doesn’t create an income stream sufficient to repay principal and interest.

And it’s not just the US. Lacy notes that the world’s largest economies have a higher total debt to GDP ratio today than at the onset of the Great Recession in 2008, and foreign households are living farther above their means than they were six years ago.

Simply put, the developed (and much of the developing) world is fast approaching the end of a 60-year-long debt supercycle, as I (hope I) conclusively demonstrated in Endgame and reaffirmed in Code Red.
Hoisington Investment Management Company (www.Hoisingtonmgt.com) is a registered investment advisor specializing in fixed income portfolios for large institutional clients. Located in Austin, Texas, the firm has over $5 billion under management and is the sub adviser of the Wasatch-Hoisington U.S. Treasury Fund (WHOSX).

Some readers may have noticed that there was no Thoughts from the Frontline in their inboxes this weekend. As has happened only once or twice in the last 14 years, I found myself in an intellectual cul-de-sac, and there was not enough time to back out. Knowing that I was going to be involved in a fascinating conference over the weekend, I had planned to do a rather simple analysis of a new book on how GDP is constructed. But as I got deeper into thinking about the topic and doing more research, I remembered something I read 20 years ago about the misleading nature of GDP, and I realized that a simple analysis just wouldn’t cut it.

 

BlackBerry looks to partnerships to compete with Apple and IBM venture

” In Talks ” drives the market players back into BBRY.

BlackBerry Limited (BBRY)

-NasdaqGS  

10.18 Up 0.35(3.61%) 11:08AM EDT – Nasdaq Real Time Price
Prev Close: 9.83
Open: 9.78
Bid: 10.16 x 7800
Ask: 10.16 x 300
1y Target Est: 8.55
Beta: 0.45
Next Earnings Date: 26-Sep-14BBRY Earnings announcement
Day’s Range: 9.70 – 10.24
52wk Range: 5.44 – 12.18
Volume: 13,554,172
Avg Vol (3m): 14,921,000
Market Cap: 5.29B
P/E (ttm): N/A
EPS (ttm): -11.18
Div & Yield: N/A (N/

 

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By Daniel Thomas, Financial Times  Telecoms Correspondent

ll almost five per cent last week after IBM said it would work with Apple to sell iPhones and iPads loaded with applications for business users. The tie-up was seen by analysts as a direct challenge for customers that use BlackBerry’s enterprise services.
IBM is planning more than 100 apps targeting industries such as retail, healthcare, banking, travel, transportation and telecommunications, with a focus on security and mobile device management.
Mr Chen has also focused BlackBerry on driving enterprise sales in similar areas since joining as chief executive last year, using its market leading security software combined with devices, servers and messaging services.
Mr Chen said that the partnership between Apple and IBM was both good and bad news for BlackBerry. He likened the tie-up to when “two elephants start dancing”, adding that it would be interesting to see how they worked together given both companies “are used to taking charge”.
“The IBM-Apple tie-up validates what is a huge market,” he said. “[But] the bad news is that you are waking up two giants. It’s competition but it’s good competition and we are going to be more nimble. You don’t want to be a strong guy in a market that is not growing.”

Mr Chen said that BlackBerry was in talks about its own partnerships. “I am working on some, and maybe we will collaborate with others. If I focus on security and identity management then we will be a good solid partner in this enterprise world.
“I am not afraid of competing when I know I am more nimble. I never think [that] going alone is the right strategy. But we have a value add that no one else can do.”
Mr Chen said that BlackBerry was out of danger having almost completed its restructuring. BlackBerry will focus on enterprise customers rather than the consumer business for now, said Mr Chen.
Consumer sales of BlackBerry phones for have fallen, with less than 2 per cent market share in many Western markets, according to Kantar, the research group.
Mr Chen said that even forthcoming handsets such as the square-shaped Passport – which is expected to be released in September – were geared towards being used by enterprise customers in core “regulated industries” such as financial services and healthcare.

BlackBerry Passport extensive hands-on video leaks

The upcoming BlackBerry Passport is certainly one of the most unorthodox devices currently in the rumor mill. Packing a square screen with a resolution of 1440 x 1440 pixels, the Passport is probably the last chance for the troubled company to save itself.
The smartphone was already showcased by BlackBerry’s CEO himself, but outside of some live shots and vague specs info we didn’t get to learn much about it back then. Now however, a leaked video shows the BlackBerry Passport in action, demonstrating its UI and some of its cool new features.
A particularly impressive feature is the touch-sensitive three-row QWERTY keyboard that doubles as a trackpad. It gets its time in the spotlight towards the end of the video.

The BlackBerry Passport will launch in September at an yet unknown price.

BlackBerry Passport discussions are flooding the web, and now a new hands-on video reveals the specifications and features of the upcoming device.

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s much talked Passport smartphone video has surfaced online following the multiple pictures that stormed earlier revealing specs and form factor of the phone. The video, also, shows the specs and features of the device in action.

10,900 results (0.18 seconds)

BlackBerry Passport

BlackBerry Passport uses metal, plastic

The hands-on video has been uploaded by YouTube by an Arabic source. As per the video, the new device is designed using plastic and metal. On the USP front, the video reveals that the Passport is the first BB10 device with a three-row keyboard, which has a touch-sensitive input support. The source, also, revealed that apart from the personal voice assistant, the new device could also have improved video player and browser.

The new smartphone from the house of BlackBerry is expected to launch in September with an updated version of BlackBerry mobile OS, BlackBerry 10.3. Other specifications of the phone are 4.5 inches square display with a resolution of 1440×1440 pixels along with a three-row QWERTYkeyboard.

BlackBerry Passport will be powered by a quad-core Qualcomm Snapdragon 801 processor with a clock speed to 2.5GHz. The new device will have 3GB of RAM and 32GB included storage. The device will sport a front camera of 3.7 megapixel, and rear camera is expected to be of 8 megapixels. The handset will sit on 3450 mAh battery, 200,000 Android apps through the Amazon app store with over

Some compelling specs for users

BlackBerry 10 is touch friendly, but Passport is a step ahead with a slim keyboard for alternate keys and shortcuts, as well as trackpad/mouse for toggling and controls. With the help high resolution track-pad user will be able to offer better movement, precise control compared to only touchscreen phones.

Passport smartphone will be able to show 60 characters in a line, in comparison to most academic textbooks that show 66 characters in line and rectangular phones show just 40 characters in a line. So, the Passport can be easily used for reading e-books and surfing the web. Also, there is no such thing like optimizing the view by tilting the screen as Passport can offer optimum view of the content displayed horizontally or vertically.

CEO John Chen notes that Passport is made specifically for the businessmen keeping in mind what they want from a phone.

Is This A Stealth Correction – Are We Too Optimistic

The second “stealth correction” of the year had been underway below the surface for a few weeks, with a broadening selection of B-list stocks tiring and investor risk appetites ebbing, and is now threatening to break into the open.

The task of playing for a more damaging break in the upward trend is complicated, though, by the fact that several such threats have proved empty in the recent past. And the sudden rush for safety amid shrill geopolitical news headlines Thursday is just the sort of hasty reflex action that has indicated decent Buy signals during this largely imperturbable bull run.

Yellen’s market call

One of the ironies of Federal Reserve Chair Janet Yellen’s singling out of small-cap, biotech and social media stocks as appearing overvalued is that these sectors have been under pressure for months.

These three market segments – as measured by exchange-traded funds tracking the iShares Russell 2000 (IWM), iShares Nasdaq Biotechnology (IBB) and Global X Social Media (SOCL) indexes – have lagged the blue-chip Standard & Poor’s 500 by between five and 15 percentage points in the past four months. Yellen was mostly voicing the conventional wisdom circa March 31 in commenting on isolated evidence of excessive investor confidence. As Yellen’s remarks were scrutinized, these pockets of the market saw selloffs.
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Selloffs Post Yellen testimony.
Sliced up differently, the largest 500 stocks in the market as tracked by Russell were up more than 8% in 2014 before Thursday, and the smallest 500 down an average of 6% – a huge performance spread that shows a marked preference this year for stable, global companies over fast-moving, speculative ones. From July 1 through Wednesday, too, the largest 500 names were about flat even as the littlest 500 slid more than 5%, according to Pension Partners.

Before the S&P 500 on Thursday dropped 1.14%, breaking a 62-day streak without at least a 1% move, Canaccord Genuity strategist Tony Dwyer was citing other signs of ragged tape action and subtle weakness in reiterating his call for a 5%-plus market correction (which he feels should be bought for a powerful surge to his year-end S&P 500 target of 2,185, up more than 11% from Thursday’s close).

A time-proven gauge of internal market energy, the Lowry’s Buying Power index, has sagged to the lowest reading of the year. And despite the headline indexes being right up against all-time highs, fewer than one quarter of New York Stock Exchange names were within 2% of a 52-week high.

Such indicators “tell us the broad market is already in correction mode,” Dwyer says. “Many times, the correction shows up in the mega-cap stocks and major market indexes toward the tail end of a market correction.” Of course, in the springtime the damage never hit the headline large-stock benchmarks hard, as what I call an “immaculate rotation” shifted money from aggressive stocks to stable, bond-like shares instead.

The already-substantial pain in smaller-company stocks could even mean this trend of small-cap underperformance, something that often occurs later in a bull market, might not have quite as far to run in the immediate future as the growing consensus seems to believe.

Will Nasgovitz, portfolio manager of Heartland Select Value Fund (HRSVX), who hunts for inexpensive, out-of-favor stocks of all sizes, says, “It’s unfair to make a blanket statement about elevated [valuations] of small caps.” He says it’s mostly the lower-quality, more speculative subset of small stocks in the Russell 2000 index that are making the whole category appear overvalued. Indeed, the iShares Morningstar Small-Cap Value ETF (JKL) has handily outperformed its all-inclusive Russell 2000 counterpart during this choppy period.

Worrisome optimism

A nagging vulnerability of the market coming into the summer has been the pervasive optimism among active investors and traders. The proportion of investment-advisory newsletter writers tracked by Investors Intelligence who were bullish on stocks has been near historic highs since May, and the Bank of America Merrill Lynch global fund manager survey this month showed the second-highest tilt toward equities in 13 years.

Michael Hartnett, global strategist at Merrill and steward of that survey, has been firmly and correctly bullish on stocks and other riskier assets in recent years. Yet the fund manager ebullience – along with Merrill retail wealth management clients riding their highest equity allocation in at least nine years – prompted Hartnett to say Thursday that “an autumn correction is increasingly likely.”

As noted, of course, persistent predictions of a true, cleansing correction that pares stretched valuations and tempers investor expectations have failed to take hold since late 2012. The list of would-be or actual crises overseas that put a fleeting scare into the market includes the Cyprus insolvency episode, the Arab Spring, Syrian civil war, Iraq insurgency, Ukraine-Russia conflict and the current Israel-Hamas conflict.

If the current bout of unnerving foreign unrest proves a catalyst for a deeper and more inclusive Wall Street pullback, it will likely be more excuse than cause. The annals of major bull market tops and subsequent bear markets are generally free of pure military or geopolitical triggers.

The fact that the market conversation is now focused on whether or when a correction might arise – rather than whether a severe and prolonged market downturn is on the way – reflects the general sense that leading indicators of the economy are relatively encouraging.

Credit markets, while a bit softer lately, are far from signaling economic distress to come. Stocks are more expensive than the historical norm, but not dramatically so. Earnings have held up OK, even if they’re no longer growing rapidly. And corporate animal spirits, in the form of capital spending and mergers and acquisition activity, are on the rise yet haven’t tipped over to recklessness.

One sign that prior periods of news-driven market setbacks have run their course has been a spurt in trader anxiety, which has tended to well up forcefully with fairly shallow 2% or 3% index dips. There were some hints of this Thursday, with a rush for protective stock options driving the CBOE Volatility Index smartly higher – a jump well in excess of what would generally accompany a 1%-ish daily market drop. And the CNN/Money Fear and Greed Index sinking fast toward extreme fear.

One of these times, such familiar tactical signals for buying a dip won’t work and the market will break rather than bend. Are we there yet?

Oil tankers latest sinking business as U.S. imports less crude

 

 

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The changing oil flows mean much of the U.S. oil tanker movement is restricted to shipments within domestic ports that are handled by smaller vessels.

Tim Rue/BloombergThe changing oil flows mean much of the U.S. oil tanker movement is restricted to shipments within domestic ports that are handled by smaller vessels.
  • The surge in United States domestic crude oil production has begun to send serious ripples through the global oil supply chain, with oil-tanker firm, Windsor Petroleum Transport Corp., filing for bankruptcy protection Monday, citing dramatic shifts in global oil trade flows as the cause

 

The Bermuda-based company, with more than US$100-million in debt, blamed “reduced growth in demand for seaborne transportation, particularly in North America,” as a key reason for its misfortunes in its petition filed in U.S. Bankruptcy Court in Wilmington, Del.

U.S. oil imports have shrunk to 7.5 million barrels per day this year, compared to 9.8 million bpd in 2008, as Canadian and domestic production from the Bakken and Eagle Ford basins displace about two million bpd of OPEC oil. Louisiana Offshore Oil Port LLC, the country’s biggest oil port, has seen barrels entering the port reach 685,000 bpd in 2013, roughly half of its peak imports in 2005.

Most analysts believe the U.S. is poised to surpass Saudi Arabia and Russia as the world’s biggest producer of oil.

Windsor, which operates four very large crude carriers (VLCC) and was caught off-guard as domestic blends displaced imports from international markets. Reacting to changing trade flows, OPEC producers have been refining oil domestically and shipping it to Asia, further reducing need for tankers, as oil products are usually shipped on other vessels.

The changing trade flows “led to a decrease in international tanker usage, as the voyage to the U.S. from the Middle East is one of the longest possible voyages for seaborne crude oil,” the company said in its filing.

VLCCs also rely on long-term contracts with major oil players, and BP PLC’s decision to cancel exclusive charters for some of Windsor’s tankers and not renew contracts set to expire in 2015, also hurt the company’s bottom line.

“There is a mismatch between the economics of the oil industry and the economics of the shipping industry,” said Ian Holloway, dean of Law at the University of Calgary and a naval historian. “Ships are big, expensive things, and take a long time to be built and travel. Lately, oil and gas has been dynamic and changing. We will see lots more of this, and even if we don’t see bankruptcies, there is an awful lot of unhappy shipowners right now.”

Frontline Ltd., the parent company of Windsor, is also facing problems.
One of the biggest oil tanker companies based out of Bermuda, and controlled by Norwegian billionaire John Fredriksen, Frontline posted a net loss of US$12.1-million in the first quarter, and warned the company will need to restructure if cash flows from operations do not satisfy liquidity requirements. New York-based Overseas Shipholding Group Inc. also filed for bankruptcy in late 2012, blaming adverse market conditions.

The changing oil flows mean much of the U.S. oil tanker movement is restricted to shipments within domestic ports that are handled by smaller vessels. In addition, the so-called Jones Act stipulates only U.S.-flagged carriers can ship within the domestic ports, hurting the prospects of foreign-registered ships.

There is a mismatch between the economics of the oil industry and the economics of the shipping industry

In the midst of the downturn, VLCCs that were ordered prior to the U.S. production boom continue to enter the market, further depressing spot rates. VLCCs earned an average of US$10,907 a day last year, the lowest in 16 years, and rates remain “subdued” this year, according to the International Energy Agency.

“The lesson from Windsor is that especially in markets evolving rapidly, your business model and your business structure is absolutely critical,” said Darryl Anderson, managing director at Wave Point Consulting, based in Victoria. “In this case, companies that were chartering Windsor only needed them on the margins. The company was not structured for long-term stability in cash flow, in a market with tight freight rates.”

Large oil-tanker outlook could improve in North America if new shipping routes are opened, analysts say. The United States is contemplating scrapping an export ban on crude oil exports, which could boost tanker demand, although VLCCs may be the last to benefit as the Panama Canal is not equipped to handle such large carriers yet.

TransCanada Corp.’s proposal to build the Energy East pipeline project that ends at a shipping terminal in Saint John, N.B. could also boost the shipping industry, Mr. Holloway said.

 

17 July 2014

Baltic Dry Index (BDI)    -17   738 
Rates

È

BCI

(Cape index)

BPI

(Panamax index)

BSI

(Supramax index)
INDEX

1248

-41

603

-18

660

-6

SPOT TC AVG (USD)

9422

-359

4825

-144

6906

-61

YESTERDAY (USD)

9781

4969

6967

YEAR AGO (USD)

13710

9265 9381

Even in Canada, booming U.S. oil and gas is elbowing out Alberta’s crude

The dramatic rise of U.S. crude oil and natural gas production is disrupting even long-established trade flows inside Canada, as Alberta producers are increasingly finding themselves competing for — and losing — market share to American petroleum suppliers, even in their home province.
The Bermuda-based company, with more than US$100-million in debt, blamed “reduced growth in demand for seaborne transportation, particularly in North America,” as a key reason for its misfortunes in its petition filed in U.S. Bankruptcy Court in Wilmington, Del.

U.S. oil imports have shrunk to 7.5 million barrels per day this year, compared to 9.8 million bpd in 2008, as Canadian and domestic production from the Bakken and Eagle Ford basins displace about two million bpd of OPEC oil. Louisiana Offshore Oil Port LLC, the country’s biggest oil port, has seen barrels entering the port reach 685,000 bpd in 2013, roughly half of its peak imports in 2005.

Most analysts believe the U.S. is poised to surpass Saudi Arabia and Russia as the world’s biggest producer of oil.

Windsor, which operates four very large crude carriers (VLCC) and was caught off-guard as domestic blends displaced imports from international markets. Reacting to changing trade flows, OPEC producers have been refining oil domestically and shipping it to Asia, further reducing need for tankers, as oil products are usually shipped on other vessels.

The changing trade flows “led to a decrease in international tanker usage, as the voyage to the U.S. from the Middle East is one of the longest possible voyages for seaborne crude oil,” the company said in its filing.

VLCCs also rely on long-term contracts with major oil players, and BP PLC’s decision to cancel exclusive charters for some of Windsor’s tankers and not renew contracts set to expire in 2015, also hurt the company’s bottom line.

“There is a mismatch between the economics of the oil industry and the economics of the shipping industry,” said Ian Holloway, dean of Law at the University of Calgary and a naval historian. “Ships are big, expensive things, and take a long time to be built and travel. Lately, oil and gas has been dynamic and changing. We will see lots more of this, and even if we don’t see bankruptcies, there is an awful lot of unhappy shipowners right now.”

Frontline Ltd., the parent company of Windsor, is also facing problems.
One of the biggest oil tanker companies based out of Bermuda, and controlled by Norwegian billionaire John Fredriksen, Frontline posted a net loss of US$12.1-million in the first quarter, and warned the company will need to restructure if cash flows from operations do not satisfy liquidity requirements. New York-based Overseas Shipholding Group Inc. also filed for bankruptcy in late 2012, blaming adverse market conditions.

The changing oil flows mean much of the U.S. oil tanker movement is restricted to shipments within domestic ports that are handled by smaller vessels. In addition, the so-called Jones Act stipulates only U.S.-flagged carriers can ship within the domestic ports, hurting the prospects of foreign-registered ships.

There is a mismatch between the economics of the oil industry and the economics of the shipping industry

In the midst of the downturn, VLCCs that were ordered prior to the U.S. production boom continue to enter the market, further depressing spot rates. VLCCs earned an average of US$10,907 a day last year, the lowest in 16 years, and rates remain “subdued” this year, according to the International Energy Agency.

“The lesson from Windsor is that especially in markets evolving rapidly, your business model and your business structure is absolutely critical,” said Darryl Anderson, managing director at Wave Point Consulting, based in Victoria. “In this case, companies that were chartering Windsor only needed them on the margins. The company was not structured for long-term stability in cash flow, in a market with tight freight rates.”

Large oil-tanker outlook could improve in North America if new shipping routes are opened, analysts say. The United States is contemplating scrapping an export ban on crude oil exports, which could boost tanker demand, although VLCCs may be the last to benefit as the Panama Canal is not equipped to handle such large carriers yet.

TransCanada Corp.’s proposal to build the Energy East pipeline project that ends at a shipping terminal in Saint John, N.B. could also boost the shipping industry, Mr. Holloway said.

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