All posts in category Economic Recovery
Posted by jackbassteam on December 18, 2014
The author of The Gold Investors Handbook says the worst isn’t over yet for gold after prices erased this year’s gain.
“Risks are significantly skewed to the downside,” said Bass, who told investors to sell last year before gold’s biggest collapse since 1980. “Much of the support was coming from political uncertainty in Ukraine and what was going on in Middle East,” and those concerns have faded, he said in a telephone interview yesterday.
After bullion’s rally in the first half of the year beat gains for commodities, equities and Treasuries, the metal is heading for a quarterly decline to end out 2014. Demand for precious metals as a protection of wealth has been eroded by the outlook for a strengthening U.S. economy, which helped spark a rally in the dollar .
Gold fell to an eight-month low this week after the Federal Reserve raised its outlook for interest rates, crimping demand for an inflation hedge. Money managers cut bullish holdings for five weeks, while holdings through global exchange-traded funds slumped to the lowest since 2009.
“Gold is more responsive to the near-term growth momentum in the U.S., rather than long-term inflation concerns,” Damien Courvalin, a Goldman analyst, said . “Interest is lower in gold than it was say 18 months ago.”
. The Bloomberg Commodity Index of 22 raw materials slid 5.2 percent in 2014, while the MSCI All-Country World Index of equities rose 3.7 percent. The Bloomberg Dollar Spot Index climbed 4.3 percent.
Bass isn’t alone in predicting the end to this year’s rebound that drove the best first-half performance for gold since 2010. Societe Generale SA’s Michael Haigh, who also correctly forecast 2013’s slump, said in a report this month that he expects the metal will drop more than 5 percent by 2015’s third quarter. Investors, who in June and July were adding to bullish wagers, may be starting to agree with analysts, taking their short holdings on the metal to the highest in three months.
After 12 straight years of gains, gold tumbled 28 percent in 2013 as an equity rally and muted inflation prompted some investors to lose their faith in the metal.
Bass on April 10, 2013, issued a sell recommendation, before a two-day 13 percent plunge that ended April 15, 2013, and left prices in a bear market. The slump wasn’t foreseen by most money mangers, who had increased their bullish bets by 11 percent the prior month. The investors cut holdings to a six-year low by December.
Now, Currie expects bullion to drop to $1,050 by the end of 2015, maintaining a forecast from the start of the year. SocGen’s Haigh sees prices at $1,150 in the third quarter next year, he said in a report e-mailed Sept. 12. The metal reached this year’s peak of $1,392.60 in March amid violence in Ukraine.
Citigroup Inc. lowered its forecast for next year amid expectations of U.S. rate increases, while the “risk-related source of support has been diminished.” The bank cut its outlook to $1,225 from $1,365. UBS AG reduced it three-month outlook yesterday by 7.7 percent to $1,200.
“Turbulence is still there, but is not escalating any further, which we believe will help gold decline to our target,” Courvalin said.
“Our inflation forecasts are pretty subdued,” Bass said.
Inflation expectations, measured by the five-year Treasury break-even rate, this week reached the lowest since June 2013.
“Ultimately, what drives fair value for gold prices is the U.S. real interest-rate environment,” Courvalin said.
It is human nature to look for bargains - and destroy your portfolio as you gather losers into what used to be a ” nest” egg.
Look at Seeking Alpha and count the ” analysts” saying Dryships ( DRYS) is going to turn – how none forecast the sub dollar level it now enjoys.
What To Do ?
Here is our recent letter:
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.
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Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.
Tax website Http://www.youroffshoremoney.com
Posted by jackbassteam on December 15, 2014
EAC : NYSE : US$13.80
Erickson Air-Crane is a provider of heavy and medium-lift
air services for government and commercial customers.
Key markets include firefighting, personnel transport,
construction, and oil and gas. The company is the largest
operator, and type certificate holder, of the SH-64
Aircrane. The company is based in Portland, Oregon.
Transportation and Industrials — Aerospace and Defense
STRONG Q3/14 OVERSHADOWED BY SOFTER FULL YEAR OUTLOOK
EAC reported adjusted Q3/14 EPS of $1.22, compared to our estimate of
$0.95 and consensus of $1.01. Cash flow in the quarter was a positive
~$17M. Note that Q3 is usually seasonally the strongest quarter for EAC.
However, the company indicated that full year results would likely be at
the lower end of its guidance range, which was unchanged from prior
quarters. In the Government segment, firefighting revenues were up
12% over Q3/13, while Defense & Security revenues were down 25%
year-over-year. Much of the growth was in Infrastructure (oil and gas)
markets. We continue to see risk associated with the timing of the
commercial market ramp, while revenues in the defense segment
seemed to be declining slighter faster than we had modeled. We are
maintaining our HOLD rating and lowering our price target to $17.
The company saw a nice step-up in bill rates across markets.
However, the company indicated that Q4/14 results will drive full
year results at the lower end of the guidance range. We are
maintaining our full-year 2014 $0.46 EPS estimate.
While there was good cash flow in the quarter, the outlook for 2015
is still about the ramp down in Government revenues, and how fast
they can be replaced by commercial revenues, specifically in oil and
gas. The company did announce a win in Ecuador, which should be
positive for 2015.
We are lowering our price target to $17. Our price target is based on the
average of a 12.0x EPS multiple and a 5.25x EBITDA multiple applied to
our 2015 estimates
Posted by jackbassteam on November 11, 2014
You can review my past articles to confirm my calls:
1) BUY when gold was below $ 900
2) Steady reductions in all positions for Jack A. Bass Managed Funds
from $ 1800 til today.
Now What ?
We continue to see more downside risk in the next several days- from The Crude Oil Trader blog this quote which I second: ” as the next major level of support is 1,180 & if that price level is broken prices could slide rather dramatically. Gold prices settled last Friday at 1,216 finishing slightly lower for the trading week as volatility has certainly increased as prices were up $20 a couple of days back on the news of the coalition & the United States bombing ISIS but then prices came right back down as I still think lower prices are ahead as there’s no reason to own gold right now especially with a very strong U.S dollar so continue to play this to the downside making sure you place your stop above the 2 week high.”
No stocks are being spared .
In my book ” The Gold Investors Handbook” – available on Amazon – I pick B2Gold ( BTO) as my top junior . It moves lower and is so very tempting but there is no way to call a bottom. Wait and buy when there is a turn rather than catch all the falling knives.Use the book to develop your own gold watchlist . In the meantime there are so many better places to earn money with less risk.
The ever lower prices for Yamana are almost painful to watch – but there is less pain in the sideline compared to watching your portfolio wither away.
It is criminal in my less than humble opinion the Sprott and Peter Schiff continue to urge investors to buy into the conspiracy theory of manipulation of the commodity price. The printing press in the U.S. runs at full speed 24 hours a day – but the fact is there is still no inflation and no inflation on the horizon. This undermines a central argument for owning gold. Mining costs continue to escalate and thus pressure mining returns at lower commodity prices.
Even the Ukraine and Middle East turmoil and have not proved to be much of a factor to boost gold as a safe haven in times of trouble. Gold bugs are reduced to hoping the stock market stops its advance and the economic recovery in the U.S. runs out of steam.Right now dividend paying stocks in a recovery are more attractive than the gold sector.
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Posted by jackbassteam on September 27, 2014
West Texas Intermediate crude fell amid speculation that weakening manufacturing from Germany to China will cap global oil demand. Brent declined in London.
Futures dropped as much as 1.2 percent from the Aug. 29 close. Floor trading in New York was shut for the Labor Day holiday, and transactions will be booked for settlement purposes today. Purchasing manufacturing indexes for Germany, Italy, the U.K. and China all came in below estimates for August, while OPEC’s output increased to the highest level in a year.
“All eyes are on the demand side, and weaker statistics for example in China are bearish,” Bjarne Schieldrop, chief commodity analyst in Oslo at SEB AB, said by telephone. “The increase in tension between Russia and Ukraine is bearish for oil” because economic sanctions on Russia may eventually result in a slowdown in Europe, he said.
WTI for October delivery declined as much as $1.19 to $94.77 a barrel in electronic trading on the New York Mercantile Exchange and was at $94.88 at 1:46 p.m. London time. The volume of all futures traded was more than double the 100-day average for the time of day. Prices decreased 2.3 percent last month and are down 3.6 percent this year.
Brent for October settlement was $1.11 lower at $101.68 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $6.83 to WTI, compared with a close of $7.23 on Aug. 29.
China’s manufacturing slowed more than projected last month, joining weaker-than-anticipated credit, production and investment data in indicating that the economy is losing momentum. The nation is the world’s second-largest oil consumer.
Markit Economics’ euro-area gauge slid more than initially predicted, with the index for Italy unexpectedly falling below 50, signaling the first contraction in 14 months. In the U.K., manufacturing expanded by the least in more than a year.
A final reading of Markit’s U.S. manufacturing PMI is due today, along with the Institute for Supply Management’s factory index for August, which economists forecast will drop to 57, from 57.1 in July.
“There are slowdowns occurring,” Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said by phone. “OPEC is producing enough oil to placate any issues.”
Production from the 12-member Organization of Petroleum Exporting Countries rose by 891,000 barrels a day to 31 million in August, according to a Bloomberg survey of oil companies, producers and analysts. Nigeria, Saudi Arabia and Angola led supply gains as new deposits came online, security improved and field-maintenance programs ended. Iran and Venezuela were the only members to reduce output.
Ukraine warned of an escalating conflict in its easternmost regions as U.S. President Barack Obama headed to eastern Europe to reassure NATO members. Ukraine’s army will take on Russia’s “full-scale invasion,” Defense Minister Valeriy Geletey said on Facebook, a shift away from the government’s earlier communication that focused on battling insurgents.
Dollar Strengthens Before Data as Bonds Decline With Gold
The dollar strengthened to a seven-month high against the yen, government bonds tumbled and gold fell before data that analysts forecast will show expansion in U.S. manufacturing.
The dollar climbed 0.6 percent to 104.93 yen at 8:42 a.m. in New York and gained 0.4 percent to $1.6535 per British pound. Yields on 10-year Treasury notes increased four basis points to 2.38 percent. Futures (SPX) on the Standard & Poor’s 500 Index added 0.1 percent after the index rallied the most since February last month. Gold dropped 1.5 percent.
U.S. investors return after the Labor Day break with manufacturing and construction spending reports. Gauges of factory output in Europe and China signal slower growth, boosting speculation that policy makers will need to boost stimulus measures. European money markets are pricing in about a 50 percent probability that the European Central Bank will cut interest rates by 10 basis points this week, according to BNP Paribas SA.
“In the U.S. across the board we have had strong data,”said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen. “That will keep growth momentum going. We have had a positive dollar trend for the past two months. I find it difficult to see this trend is going to disappear in the short term.”
The Institute for Supply Management’s August factory gauge probably held last month near the highest since April 2011, according to the median of 70 estimates in a Bloomberg survey. Another report probably will show U.S. construction rebounded in July, a Bloomberg survey showed. Reports yesterday signaled manufacturing slowed in China, the U.K. and the euro area.
The yen fell to its lowest level against the dollar since Jan. 16 amid speculation Japan’s Prime Minister Shinzo Abe will appoint an ally to head the ministry in charge of reforming the Government Pension Investment Fund, potentially boosting investment overseas. The currency weakened to 105.44 on Jan. 2, a level not seen since October 2008.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, climbed 0.3 percent to 1,033.71 and touched 1,034.16, the strongest since January.
The pound weakened after a YouGov Plc poll showed growing support for Scottish independence before this month’s referendum. One-month implied volatility on sterling versus the dollar jumped by the most in almost six years.
European government bonds fell as Germany’s 10-year yield increased four basis points to 0.91 percent and the U.K.’s rose five basis points to 2.43 percent.
The euro overnight index average, or Eonia, which measures the cost of lending between euro-area banks, fell to a record minus 0.013 percent yesterday.
Corporate borrowing costs fell to a record in Europe, with the average yield demanded to hold investment-grade bonds in euros dropping to 1.28 percent, according to Bank of America Merrill Lynch index data. The gauge declined 19 basis points in the past month on stimulus speculation.
The Stoxx 600 of European shares fell 0.1 percent after increasing 0.5 percent in the past two days.
Vallourec SA climbed 4 percent after UBS AG advised investors to buy shares of the French producer of steel pipes for the oil and gas industry. Weir Group Plc gained 2.9 percent after Credit Suisse Group AG raised its recommendation on the British supplier of pressure pumps to outperform from neutral.
Posted by jackbassteam on September 2, 2014
STN : TSX : C$70.12
STN : NYSE
Focused on fee-for-service work, Edmonton-based
Stantec plans, designs, and manages projects in the
North American infrastructure and facilities sector. The
company’s business model incorporates diversity across
regions, end markets, and all phases of the infrastructure
life cycle to manage risk and deliver growth. 2013
marked Stantec’s 60th consecutive year of profitability.
Sustainability — Infrastructure
SOLID Q2/14 RESULTS; MAINTAIN BUY RATING AND INCREASING TARGET TO
C$78.00 (FROM C$75.00)
We are maintaining our BUY rating and increasing our one-year target
price to C$78.00 from C$75.00 following better-than-expected Q2/14
financial results, an increase in our estimates, and as we roll forward
our valuation base by a quarter. We still believe that Stantec’s 5%
targeted organic growth rate for 2014, paired with the strong pick-up in
acquisition activity (closed and announced deals), are supportive of the
company’s long-standing growth targets. In our view, Stantec should
remain a core holding: management has a clear and consistent strategy
and game plan, no lack of opportunities to drive average annual revenue
and earnings growth of ~15% for the foreseeable future, and a long
track record of very disciplined and consistent execution. We also expect
regular annual dividend increases of 10% or more for the foreseeable
We rely on our five-year DCF model (10.5% discount rate) to value
Stantec. Our target price equates to a P/E multiple of 20.0 times and an
adjusted EV/EBITDA multiple of 11.4 times our 2015 estimates. Given
the company’s available growth opportunity and consistent ROE (~18%
level), we view these multiples as supportable, although nearer to the
higher end of the historical range. We are comfortable with this given
current overall momentum, where we are in the cycle, and what we feel
are relatively conservative forward estimates.
Posted by jackbassteam on August 21, 2014
U.S. stocks climbed, sending the Standard & Poor’s 500 Index above a closing record, as investors speculated the Federal Reserve will continue to support the economy as central bankers meet in Jackson Hole.
The S&P 500 added 0.1 percent to 1,988.94 at 9:34 a.m. in New York, above a closing high of 1,987.98 reached July 24.
“Markets are looking for some indication from Yellen as to what happens once quantitative easing stops,” Peter Dixon, a global equities economist at Commerzbank AG in London, said by phone. “I suspect she’ll say that it depends on the data. The U.S. economy is in reasonable shape. The task for central banks, and Yellen is at the forefront, is how to wean markets away from almost unlimited liquidity provisions when the economy is recovering but remains fragile.”
The S&P 500 rose 0.3 percent yesterday, closing within two points of a record. The benchmark index has rebounded 4 percent from a three-month low on Aug. 7 as investors speculated central banks will keep interest rates low even as the economy shows signs of recovery.
Minutes to the central banks’ July meeting released yesterday showed that officials raised the possibility that aggressive stimulus will end sooner than anticipated, even as they acknowledged persistent slack in the labor market. The central bank will probably wind up its asset-purchase program at its October meeting, according to a Bloomberg survey of economists.
Data today showed fewer Americans than forecast applied for unemployment benefits last week. Yellen has highlighted uneven progress in the labor market in making the case for further accommodation.
The Fed minutes showed “many participants” still see “a larger gap between current labor market conditions and those consistent with their assessments of normal levels of labor utilization.” At the same time, “many members” noted that the “characterization of labor market underutilization might have to change before long,” particularly if the job market makes faster-than-anticipated progress, the minutes also said.
Fed Chair Janet Yellen will speak tomorrow at the Fed Bank of Kansas City’s economic symposium that starts today in Jackson Hole, Wyoming. European Central Bank President Mario Draghi will also speak.
The S&P 500 has almost tripled since its March 2009 low, helped by three rounds of Fed stimulus, coupled with better-than-projected corporate earnings. The gauge has not had a decline of 10 percent in almost three years. It trades at 17.8 times the reported earnings of its companies, near the highest level since 2010.
Investors are betting that a soft touch on monetary policy will continue to suppress stock volatility, pouring a record stretch of cash into an exchange-traded note that rallies as calm returns to equities. The Chicago Board Options Exchange Volatility Index, the gauge known as the VIX (VIX), has lost 31 percent this month, closing at its lowest level since July 23.
Among other economic reports today, data at 9:45 a.m. may show a preliminary gauge of manufacturing slipped to 55.7 this month from 55.8 in July. Another report may indicate existing-home sales expanded at a slower pace in July while the Conference Board’s index of leading indicators, a measure of the outlook for the next three to six months, rose 0.6 percent in July, economists forecast.
Gap Inc. and Salesforce.com Inc. are among eight S&P 500 companies reporting earnings today.
Posted by jackbassteam on August 21, 2014
FTT : TSX : C$31.84 BUY
Finning International Inc. is the world’s largest Caterpillar
equipment dealer. Finning sells, rents and provides
customer support services for Caterpillar equipment and
engines in western Canada, the United Kingdom and
parts of South America. Headquartered in Vancouver,
British Columbia, Canada, Finning is a widely held,
publicly-traded corporation, listed on the Toronto Stock
Exchange (symbol FTT).
All amounts in C$ unless otherwise noted.
Infrastructure — Equipment Distribution and Rentals
GETTING SHAREHOLDER FRIENDLY?
REITERATE BUY; TARGET RAISED
We rate Finning a BUY. In our view, the company could be in a position
by year-end to return a meaningful amount to cash to shareholders,
possibly up to $500 million. Separately, management’s efforts to drive
EBIT and lower invested capital could drive 35 cents in incremental EPS
over 2-3 years. We take our target to C$35.00 (from C$33.50) as we roll
our valuation period forward to 2016E EPS. We maintain a 14x target
P/E. FTT trades at 13.6x 2015E EPS vs. close comps at 14.5x.
Q2/14 EPS was $0.50 (+4% y/y), ahead of our $0.45 estimate and the
Street at $0.46. Revenue of $1.8 billion increased 9% y/y on strong oil
sands deliveries, Product Support growth of 4% y/y, and FX. Gross
margin of 29.6% was 60 bps below our estimate due to the high
proportion of New Equipment sales. SG&A of $388 million (22.0% of
revenue) was down from $392 million (24.2% of revenue) in Q2/13. This
left EBIT at $137 million (7.8% margin), which compares to our $122
million estimate (7.2% margin), and last year at $123 million (7.6%).
Steady backlog of $1.1 billion (flat y/y) affords decent visibility in 2H/14.
FCF was the highlight of the quarter coming in at $123 million vs. $7
million last year on lower capex and better inventory turns. TTM FCF is
an impressive $500 million and the debt/cap should be at the low end of
management’s target range (35-45%) by year-end (currently 41%)
leading us to believe a return to shareholders could be in the cards. We
do not see competing options (M&A, reinvestment) as probable.
Posted by jackbassteam on August 18, 2014
I post various economic forecasts because I believe they should be carefully monitored. However, as those familiar with this blog are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.
As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 12.1%; July’s average response was 12.13%.
The current average forecasts among economists polled include the following:
full-year 2014: 2.0%
full-year 2015: 2.9%
full-year 2016: 2.9%
December 2014: 5.9%
December 2015: 5.5%
December 2016: 5.2%
10-Year Treasury Yield:
December 2014: 3.04%
December 2015: 3.72%
December 2016: 4.18%
December 2014: 2.2%
December 2015: 2.2%
December 2016: 2.4%
Crude Oil ($ per bbl):
for 12/31/2014: $96.08
for 12/31/2015: $94.92
Posted by jackbassteam on August 8, 2014
By Barry Ritholtz
Last month, we discussed how we might be on the verge of a correction. We also noted the futility of trying to time the start and finish of such events. What actually matters is how you react — or overreact.
As my colleague Josh Brown has observed, “since the end of World War II (1945), there have been 27 corrections of 10 percent or more, versus only 12 full-blown bear markets (20 percent or worse).”
However, the data show that the distribution of corrections isn’t smooth. Indeed, almost half (45 percent) of the corrections occurred either in the 1970s or the 2000s. Both eras were part of longer-term secular bear markets, characterized by strong rallies, vicious sell-offs and earnings contractions.
It is noteworthy that almost half of the corrections occurred in two out of seven decades. I suspect this fact isn’t a coincidence. From a 30,000 foot view, it may be a key to understanding how likely a more severe correction might be.
Consider the various narratives that have been used as an excuse for a correction. The downgrade of U.S. debt by Standard & Poor’s was going to be a deathblow; it wasn’t. Treasuries rallied on the downgrade, just to prove that no one knows nuthin’. The sequestration of government spending was sure to cause a slow down in markets; it didn’t. Rising interest rates, the Federal Reserve’s taper, earnings misses, and of course, our winter of discontent, were all cited as triggers for corrections. And did I mention the Hindenburg Omen?
The punditry then shifted to valuations: We have heard repeatedly that markets are wildly overpriced, that we are in a bubble. Or if not a broad market bubble, then a tech bubble or an initial-public-offering bubble or a merger bubble. Some advanced the theory that Twenty-First Century Fox’s bid for Times Warner was itself proof of a top.
None of those claims gained much traction. The next set of catalysts for disaster was geopolitical. Russia’s annexation of Crimea was going to cause a spike in oil prices and a crash — only it didn’t. Then came the imminent invasion of Ukraine. UBS’s Art Cashin buried that trope yesterday. The Israel-Gaza war is another source of potential oil spikes and market crashes, which have yet to come to pass.
Now, today’s weak futures are blamed on the threatened U.S. airstrikes on ISIS, dragging America into another Middle East war. Each time I think I have finally put George W. Bush’s misadventures out of my mind, something comes about to remind us how utterly bereft of reason or intelligence the decision to invade Iraq was. It is likely to haunt the U.S. even longer than the disastrous Vietnam War.
But is that what is driving the markets? Probably not.
The simple reality is that corrections come along on a regular basis, and for reasons that are undecipherable or indeterminate. This is the way it is and always has been. Anyone who tells you he can predict when a 5 percent or even 10 percent correction is going to start and end, and do so with any degree of consistency, has something very expensive and mostly worthless to sell you.
Almost 500 trading days have passed without a 10 percent retreat. If you have grown so complacent as to have forgotten this, then you might very well be in the wrong line of work.
Corrections happen. Get used to it.
Posted by jackbassteam on August 8, 2014