(Bloomberg) — Iraq is taking OPEC’s strategy to defend its share of the global oil market to a new level.
The nation plans to boost crude exports by about 26 percent to a record 3.75 million barrels a day next month, according to shipping programs, signaling an escalation of OPEC strategy to undercut U.S. shale drillers in the current market rout. The additional Iraqi oil is equal to about 800,000 barrels a day, or more than comes from OPEC member Qatar. The rest of the Organization of Petroleum Exporting Countries is expected to rubber stamp its policy to maintain output levels at a meeting on June 5.
While shipping schedules aren’t a promise of future production, they are indicative of what may come. The following chart graphs planned tanker loadings (in red) against exports.
As in previous months, Iraq might not hit its June target – export capacity is currently capped at 3.1 million barrels a day, Deputy Oil Minister Fayyad al-Nimaa said on May 18. Still, any extra Iraqi supplies inevitably mean OPEC strays even further above its collective output target of 30 million barrels a day, Morgan Stanley says. The following chart shows OPEC increasing output in recent months against its current target.
Defying the threat from Islamic State militants, Iraq has been ramping up exports from both the Shiite south – where companies like BP Plc and Royal Dutch Shell Plc operate – and the Kurdish region in the north, which last year reached a temporary compromise with the federal government on its right to sell crude independently.
If you sold every share of every company in the U.S. and used the money to buy up all the factories, machines and inventory, you’d have some cash left over. That, in a nutshell, is the math behind a bear case on equities that says prices have outrun reality.
The concept is embodied in a measure known as the Q ratio developed by James Tobin, a Nobel Prize-winning economist at Yale University who died in 2002. According to Tobin’s Q, equities in the U.S. are valued about 10 percent above the cost of replacing their underlying assets — higher than any time other than the Internet bubble and the 1929 peak.
Valuation tools are being dusted off around Wall Street as investors assess the staying power of the bull market that is now the second longest in 60 years. To Andrew Smithers, the 77-year-old former head of SG Warburg’s investment arm, the Q ratio is an indicator whose time has come because it illuminates distortions caused by quantitative easing.
“QE is a very dangerous policy, in my view, because it has pushed asset prices up and high asset prices, we know from history, are very dangerous,” Smithers, founder of Smithers & Co. in London, said in a phone interview. “It is very strongly indicated by reliable measures that we’re looking at a stock market which is something like 80 percent over-priced.”
Acceptance of Tobin’s theory is at best uneven, with investors such as Laszlo Birinyi saying the ratio is useless as a signal because it would have kept you out of a bull market that has added $17 trillion to share values. Others see its meaning debased in an economy whose reliance on manufacturing is nothing like it used to be.
Futures on the S&P 500 expiring next month slipped 0.1 percent at 9:36 a.m. in London.
To Smithers, the ratio’s doubling since 2009 to 1.10 is a symptom of companies diverting money from their businesses to the stock market, choosing buybacks over capital spending. Six years of zero-percent interest rates have similarly driven investors into riskier things like equities, elevating the paper value of assets over their tangible worth, he said.
Standard & Poor’s 500 Index members last year spent about 95 percent of their profits on buybacks and dividends, with stock repurchases exceeding $2 trillion since 2009, data compiled by S&P Dow Jones Indices show.
In the first four months of this year, almost $400 billion of buybacks were announced, with February, March and April ranking as three of the four busiest months ever, according to data compiled by Birinyi Associates Inc.
Spending by companies on plants and equipment is lagging behind. While capital investment also rose to a record in 2014, its growth was 11 percent over the last two years, versus 45 percent in buybacks, data compiled by Barclays Plc show.
With equity prices surging and investment growth failing to keep pace, the Q ratio has risen to 58 percent above its average of 0.70 since 1900, according to data compiled by Birinyi and the Federal Reserve on market and asset values for non-financial companies. Readings above 1 are considered by some to be too high and the ratio has exceeded that threshold only 12 percent of the time, mostly between 1995 to 2001.
That’s nothing to be alarmed about because the American economy has become more oriented around services than manufacturing, according to George Pearkes, an analyst at Harrison, New York-based Bespoke Investment Group LLC. Nowadays, companies like Apple Inc. and Facebook Inc. dominate growth, while decades ago, it was railroads and steelmakers, which rely heavily on capital.
“Does that necessarily mean that the Q ratio should be as high as it is right now? I don’t know,” Pearkes said by phone. “With those sorts of long-term indicators, they can sometimes mean that the market is overvalued. But the reversion to the mean on them is usually going to take a lot longer than most people’s time frame.”
Any investors who based their investment decisions on the Q ratio would have missed most of the rally since 2009, according to Jeffrey Yale Rubin, director of research at Birinyi’s firm. The measure rose above its historic mean three months into this bull market and since then, the S&P 500 has climbed 131 percent.
“The issue we have with Tobin Q is that it does a very poor job at timing the market,” Rubin said from Westport, Connecticut. “The followers of Tobin Q never told us to buy in 2009, yet now we are warned that we should sell. Our response is sell what? We were never told to buy.”
Everyone from Janet Yellen to Warren Buffett has spoken cautiously on stock valuations in the past month. Both the Fed chair and chief executive officer of Berkshire Hathaway Inc. said prices are at risk of getting stretched should bond yields increase. The rate on 10-year Treasuries slipped last week to 2.14 percent while the S&P 500 gained 0.3 percent.
“It’s probably a sensible configuration for the stock market to be overvalued because competing investments are so poor,” Robert Brusca, president of Fact & Opinion Economics in New York, said by phone. “As an investor, you’re not just looking at the value of the firm, but the value of the firm relative to other things you can do with your money.”
At 2,260 days, the bull market that began in March 2009 this month exceeded the 1974-1980 rally as the second longest since 1956. While measures such as price-to-earnings ratios are holding just above historical averages, the bull market’s duration is sowing anxiety among professionals who watched the previous two end in catastrophe.
“We’re still close enough to that prior experience and that hold-over effect is still there,” Chris Bouffard, chief investment officer who oversees more than $10 billion at Mutual Fund Store in Overland Park, Kansas, said by phone. “When you start to see prior cycle peaks on the chart like Tobin Q and any other valuation metrics that people are putting up there, it looks dramatic, stark and scary.”
Trader cites added impact of Middle Eastern conflicts on pricing
Updated March 25, 2015 4:06 p.m. ET
Oil prices surged to their longest winning-streak in more than a month as the weakening dollar continues to fire up a rally despite a historic glut of oil.
U.S. oil pushed to the verge of $50 a barrel for the first time since March 9. Four straight sessions of gains matched a winning streak from late January and early February. The market hasn’t had a five-session winning streak since June, when Islamic State militants were threatening the Iraqi capital.
Middle Eastern conflicts could have played a role Wednesday as news spread of Saudi Arabia building up forces near Yemen, said trader Tariq Zahir. But the dollar was likely the main factor behind the rally, Mr. Zahir and others said.
Oil has been rallying for most of the past week, since the Federal Reserve ratcheted back expectations for a rate increase. That news started the dollar’s retreat from a historic high, which has since fueled an inverse price move in oil.
Oil prices moved in tandem with the dollar, especially in the past four months, analysts said. Dollar-priced commodities like oil become more affordable for holders of other currencies as the dollar depreciates.
Some traders have been buying on expectation of the tandem move. Others have been buying oil simply because they are looking for other trades now that the dollar’s long rally may be over, traders and brokers said.
“It’s the hope of U.S. dollar going down and production going down in the U.S.—without [the traders] fully thinking about it,” said Mr. Zahir, who is bearish on oil prices.
Light, sweet crude for May delivery settled up $1.70, or 3.6%, to $49.21 a barrel on the New York Mercantile Exchange. That is its highest settlement since March 9.
Brent, the global benchmark, gained $1.37, or 2.5%, to $56.48 a barrel on ICE Futures Europe, its highest settlement since March 12.
It could be a panic move and a mistake, said Bob Yawger, director of the futures division at Mizuho Securities USA Inc., comparing the rise to the last winning streak when traders bought into oil as rig counts started to fall precipitously. With rigs out of work, hopes grew that production would soon decline. Instead, production has kept growing.
“They think they have this newfound gem of an information point, and then they realize” the fundamentals rule, Mr. Yawger said.
The market briefly lost ground on news that U.S. producers added to a historic glut, but rebounded within about 90 minutes and kept rallying for the rest of the afternoon.
U.S. oil inventories rose by 8.2 million barrels in the week ended March 20 to 466.7 million barrels, the U.S. Energy Information Administration said, outdoing a 5.6-million-barrel increase expected in a Wall Street Journal survey of traders and analysts.
Stockpiles are at a high in weekly data going back to 1982. In monthly data, which don’t exactly line up with weekly data, inventories haven’t been this high since 1930.
Stockpiles in Cushing, Okla., a key storage hub and the delivery point for the Nymex contract, rose by 1.9 million barrels to 56.3 million barrels, adding to its highest level on record in data going back to April 2004. The EIA said in September that Cushing’s working storage capacity was 70.8 million barrels.
Domestic crude production also slightly edged out the weekly record it set last week of 9.4 million barrels.
“Bottom line, we’re filling up those stockpiles and as long as refinery operations are subdued, we’re going to see these” additions, said Mark Waggoner, president of brokerage Excel Futures. “This is about the time we ought to sell.”
Gasoline stockpiles fell by 2 million barrels, more than the 1.7 million-barrel drop expected by analysts surveyed by the Journal.
Front-month gasoline futures settled up 2% at $1.8365 a gallon.
Distillate stocks, including heating oil and diesel fuel, fell by 34,000 barrels, less than the 500,000-barrel drop that analysts had expected.
Diesel futures settled up 1.3% at $1.7283 a gallon.
Bloomberg) — While Yemen contributes less than 0.2 percent of global oil output, its location puts it near the center of world energy trade.
The nation shares a border with Saudi Arabia, the world’s biggest crude exporter, and sits on one side of a shipping chokepoint used by crude tankers heading West from the Persian Gulf. Global oil prices jumped more than 5 percent on Thursday after regional powers began bombing rebel targets in the country that produced less than Denmark in 2013.
Yemen’s government has collapsed in the face of an offensive by rebels known as Houthis, prompting airstrikes led by Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries. The Gulf’s main Sunni Muslim power says the Houthis are tools of its Shiite rival Iran, another OPEC member, and has vowed to do what’s necessary to halt them.
“While thousands of barrels of oil from Yemen will not be noticed, millions from Saudi Arabia will matter,” said John Vautrain, who has more than 30 years’ experience in the energy industry and is the head of Vautrain & Co., a consultant in Singapore. “Saudi Arabia has been concerned about unrest spreading from Yemen.”
Yemen produced about 133,000 barrels a day of oil in 2013, making it the 39th biggest producer, according to the U.S. Energy Information Administration. Output peaked at more than 440,000 barrels a day in 2001, the Energy Department’s statistical arm said on its website.
Brent, the benchmark grade for more than half the world’s crude, gained as much as $3.23, or 5.7 percent, to $59.71 a barrel in electronic trading on the London-based ICE Futures Europe exchange on Thursday. West Texas Intermediate futures, the U.S. marker, jumped 5.6 percent to $51.98 on the New York Mercantile Exchange.
“Yemen is not an oil producer of great significance but it is located geographically and politically in a very important part of the Middle East,” said Ric Spooner, a chief strategist at CMC Markets in Sydney.
Investors are in denial but bankers see the problem:
Lenders are already doling out tough love to companies, with some lenders wanting to see producer plans for handling further price drops while others are urging asset sales.
The 10 highest ratios of net debt/EBITDA from the last 12 months, according to S&P Capital IQ, belong to KWK, AR, WRES, GDP, REN, HK,XCO, REXX, MPO, EPE.
WTI Oil Pares Gain After Report Shows Fuel Supply Gains
West Texas Intermediate oil pared gains after a government report showed that U.S. fuel stockpiles surged. Brent earlier slipped below $50 a barrel for the first time since May 2009.
Inventories of distillate fuel, a category that includes heating oil and diesel, increased by a record 11.2 million barrels last week, the Energy Information Administration said. Gasoline stockpiles advanced 8.12 million barrels while crude supplies decreased 3.06 million.
“This report is bearish overall because of the huge builds in distillate and gasoline supplies,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “You can ignore the crude number because there’s already so much in storage. This decline was just a drop in the bucket.”
The plummeting price of oil means no more trout ice cream.
Coromoto, a parlor in Merida, Venezuela, famous for its 900 flavors,closed during its busiest season in November because of a milk shortage caused by the country’s 64 percent inflation rate, the world’s fastest.
That’s the plight of an oil-producing nation. At the same time, consuming countries like the U.S. are taking advantage. Trucks, which burn more gasoline, outsold cars in December by the most since 2005, according to data from Ward’s Automotive Group.
The biggest collapse in energy prices since the 2008 global recession is shifting wealth and power from autocratic petro-states to industrialized consumers, which could make the world safer, according to a Berenberg Bank AG report. Surging U.S. shale supply, weakening Asian and European demand and a stronger dollar are pushing oil past threshold after threshold to a five-and-half-year low, with a dip below $40 a barrel “not out of the question,” said Rob Haworth, a Seattle-based senior investment strategist at U.S. Bank Wealth Management, which oversees about $120 billion.
“Oil prices are the big story for 2015,” said Kenneth Rogoff, a Harvard University economics professor. “They are a once-in-a-generation shock and will have huge reverberations.”
Brent crude, the international benchmark, fell as low as $49.66 a barrel today, dropping below $50 for first time since 2009. Prices dropped 48 percent in 2014 after three years of the highest average prices in history. West Texas Intermediate, the U.S. benchmark, plunged to as low as $46.83 today, about a 56 percent decline from its June high.
“We see prices remaining weak for the whole of the first half” of 2015, said Gareth Lewis-Davies, an analyst at BNP Paribas in London.
If the price falls past $39 a barrel, we could see it go as low as $30 a barrel, said Walter Zimmerman, chief technical strategist for United-ICAP in Jersey City, New Jersey, who projected the 2014 drop.
“Where prices bottom will be based on an emotional decision,” Zimmerman said. “It won’t be based on the supply-demand fundamentals, so it’s guaranteed to be overdone to the downside.”
The biggest winner would be the Philippines, whose economic growth would accelerate to 7.6 percent on average over the next two years if oil fell to $40, while Russia would contract 2.5 percent over the same period, according to an Oxford Economics Ltd.’s December analysis of 45 national economies.
Among advanced economies, Hong Kong is the biggest winner, while Saudi Arabia, Russia and the United Arab Emirates fare the worst, according to Oxford Economics.
One concern of central bankers is the effect of falling oil prices on inflation. If crude remains below $60 per barrel this quarter, global inflation will reach levels not seen since the worldwide recession ended in 2009, according to JP Morgan Securities LLC economists led by Bruce Kasman in New York.
Kasman and his team are already predicting global inflation to reach 1.5 percent in the first half of this year, while sustained weakness in oil suggest a decline to 1 percent, they said.
The euro area would probably witness negative inflation, while rates in the U.S., U.K. and Japan also would weaken to about 0.5 percent. For what it calls price stability, the Federal Reserve’s inflationtarget is 2 percent. Emerging-market inflation would also fade although lower currencies and policies aimed at slowing the effects on retail prices may limit the fall.
As for growth, a long-lasting price of $60 would add 0.5 percentage point to global gross domestic product, they estimate.
Even as cheaper fuel stimulates the global economy, it could aggravate political tension by squeezing government revenue and social benefits, Citigroup Inc. analysts said in a Jan. 5 report.
Either way, previously unthinkable events now look more likely. Byron Wien, a Blackstone Group LP vice chairman, predicting that Russian President Vladimir Putin will resign in 2015 and Iran will agree to stop its nuclear program.
Iran is already missing tens of billions of dollars in oil revenue due to Western sanctions and years of economic mismanagement under former President Mahmoud Ahmadinejad.
President Hassan Rouhani, elected on a pledge of prosperity to be achieved by ending Iran’s global isolation, is facing a falling stock market and weakening currency. Iranian officials are warning of spending and investment cuts in next year’s budget, which will be based on $72-a-barrel crude. Even that forecast is proving too optimistic.
“Iran will stumble along with less growth and development,” said Djavad Salehi-Isfahani, a professor of economics at Virginia Tech in Blacksburg, Virginia, who specializes in Iran’s economy. “The oil price fall is not reason enough for Iran to compromise.”
The Russian economy may shrink 4.7 percent this year if oil averages $60 a barrel under a “stress scenario,” the central bank said in December. The plunge in crude prices prompted a selloff in the ruble with the Russian currency falling to a record low against the dollar last month and tumbling 46 percent last year, its worst performance since 1998, when Russia defaulted on local debt.
“The risk is that, as a badly-wounded and cornered bear, Russia may turn more aggressive in its increasing desperation, threatening global peace and the European economic outlook,” said Holger Schmieding, Berenberg Bank’s London-based chief economist. However, “the massive blow to Russia’s economic capabilities should –- over time –- make it less likely that Russia will wage another war.”
Russian oil production rose to a post-Soviet record last month, showing how pumping of the nation’s biggest source of revenue has so far been unaffected by U.S. and European sanctions or a price collapse. The nation increased output to 10.667 million barrels a day, according to preliminary data from the Energy Ministry on Jan. 2. That compares with global consumption of 93.3 million barrels a day, based on the International Energy Agency’s estimate for 2015.
Venezuela, which relies on oil for 95 percent of its export revenue, risks insolvency, Jefferies LLC said in a Jan. 6 note. The cost of insuring the country’s five-year debt has tripled since July, Citigroup said. President Nicolas Maduro is visiting China to discuss financing and expects to travel to other OPEC nations to work out a pricing strategy.
The U.S., still a net oil importer, would accelerate economic growth to 3.8 percent in the next two years with oil at $40 a barrel, compared with 3 percent at $84, the Oxford Economics study found. The boost to consumers could be offset by oil companies’ scaling back investments, according to Kate Moore, chief investment strategist at JPMorgan Private Bank. Producers are cutting spending by 20 percent to 40 percent, according to Fadel Gheit, an analyst at Oppenheimer & Co.
The mixed picture is confounding investors. The Standard & Poor’s 500 Index of U.S. equities fell 1.9 percent on Jan. 5, the biggest decline since October, as oil brought down energy shares and stoked concerns that global growth is slowing.
While cheaper oil helps consumers, business spending has a bigger effect on equities, and oil companies are set to cut investments. Oil at $50 a barrel could trim $6 a share off earnings in theS&P 500 Index this year, according to Savita Subramanian and Dan Suzuki, New York-based strategists at Bank of America Corp.
Bets on high energy prices have mashed share prices of companies such as Ford Motor Co., Tesla Motors Inc. and Boeing Co.
Caterpillar Inc., Joy Global Inc., Allegheny Technologies Inc., Dover Corp., Jacobs Engineering Group and Quanta Services Inc. are all down more than 20 percent since oil peaked at almost $108.
Despite those losses, Morgan Stanley last month concluded cheaper fuel is a net benefit for the U.S. economy.
“Any massive redistribution of income can raise political tensions,” Schmieding of Berenberg Bank said in the Jan. 6 report. “But, net/net, strengthening the U.S., Europe, Japan, China and India, while weakening Russia, Iran, Saudi Arabia and Venezuela, is likely to make the world a safer place in the end.”
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.
November 2014 – 40 % cash position 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.
Shipping Sector / Bulk ShippersYou can review our stock market letter athttp://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates- illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
Oil/ EnergyI am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…
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.
Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.
You can withdraw your funds monthly if you require an income stream.
Alternate Guaranteed Income Payments
Private client funds Minimum $10,000 Maximum Loan $500,000
Our client is seeking funds to expand their tanker fleet .
Interest 12 % compounded – paid 1% per month
Floating charge of the full $500,000 against the fleet – valued at more than $ 1 M
To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)
Call Jack direct at 604-858-3202
10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).
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.
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 Investment recommendation
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. Investment highlights
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. Valuation 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
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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Investors and pensions need efficient methods to screen, research, perform due diligence and monitor managers in their quest to deliver returns. They need to know the data they are using is accurate and fresh — and represents the best options available worldwide across every asset class. They must take into account their own assets and liabilities and the impact to portfolio risk while screening strategies and tracking exposures. They also need polished reports and presentations to provide evidence of a sound, inclusive selection processes for regulators and committees.
Placing these decisions in Jack A. Bass Managed Accounts removes the work from your hands to ours .
Meeting the Challenge
Jack A. Bass Managed Accounts offers a comprehensive suite of solutions for screening and monitoring, as well as risk assessment leveraging the data of the most important databases. In fact, 89% of surveyed clients agree that Jack A. Bass Managed Accounts helps them save their time during the due diligence process, while 75% of pension clients agreed .
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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.
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) Investment recommendation
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.