Tag: Oil - 24/7 Investor

Rooting for the Underdog

What a great Super Bowl game! I have to admit, I was pulling for the Saints, but mainly because of what the Saints mean for that city. I’m sure we all remember the horrible aftermath of hurricane Katrina. The very existence of New Orleans was in question. The Saints considered moving, and I recall suggestions that only the French Quarter be saved and made into a corporate convention amusement park.

Of course, that would have been an absurd commercialization of a proud and rich heritage. That New Orleans has come back to resemble the city it was before Katrina is nothing short of miraculous, and now the people of New Orleans have a Super Bowl trophy to crown their achievement. Congratulations, New Orleans and the Saints.

*****It’s tempting to extend the metaphor of New Orleans to the United States as we rebuild after the financial crisis. Of course, I have no doubt that we will recover. But there will likely be no single event that crowns the recovery like the Lombardi Trophy does for New Orleans.

And besides, we’re investors. It is our desire to be properly positioned for a growth in stock valuations, all the while avoiding the pitfalls of overvalued stocks and worsening economic conditions.

Clearly, investors have been pondering the potential of weaker economy as some stimulus policies end, Europe faces debt problems and China moves to slow its economy. Bloomberg reports that investors pulled $9 billion out of global equity funds during the last week of January. And investors have bet heavily on an extended sell-off as evidenced by huge volumes of put option activity.

At the same time, 73% of S&P 500 companies have beaten 4^th quarter earnings expectations. That’s the best performance since 1993. Strong earnings, coupled with the recent 7.3% decline, have left the P/E for the S&P 500 at 18, down from 24. The forward P/E, based on future earnings expectations, is below 13.

Why Deutsche Bank is Wrong About Oil

*****Deutsche Bank is out with its oil forecast for 2010. It believes reduced demand will keep oil prices at an average of $65 a barrel in 2010. The banks analysts believe that demand in the U.S. has peaked and that greater “oil efficiency” around the world will mean that demand will not rise much.

The term “oil efficiency” basically means that we get more use out of every gallon of oil. Like with higher MPG cars. We might drive just as many miles, but we use less gas to do so. That clearly makes sense. But there are also many assumptions included in Deutsche Banks’ theory.

One is that rising Chinese demand for oil will not continue on its current path because Chinese growth at current levels is not sustainable. Personally, I’m very hesitant to say that China can’t keep growing at an astounding pace. As we know, China can continue to support its economic growth for quite some time simply by deploying its foreign currency reserves. It doesn’t have to go into debt to support its economy like the U.S. does.

Also, let’s not forget that at some point, domestic demand in China will pick up and China’s economy can begin to transition away from its export orientation. When this happens, China’s growth becomes self-sustaining, the standard of living rises and you can bet that means oil demand will rise.

As it happens, there is an important catalyst for domestic demand in China we can watch for. Right now, China has a ridiculously high savings rate – around 39%. That’s because China has no social security type of retirement plan. It’s up to individuals to prepare for retirement. At some point, China’s government will implement some form of social security. And that may be the key that unlocks domestic demand in China because it will mean that Chinese citizens can spend more money.

Gold and the New World Currency for Oil

Were Yesterday’s Losses in Financials the Start of the Correction?

Cash for Clunker Stock Rally Pauses for Earnings Season

A Look at Strategic Oil Reserves - Who’s Buying Oil?

As the U.S. strategic petroleum reserve (SPR) approaches capacity (721.5 million barrels filled out of a total possible 727 million, and will be filled by January 2010), the federal government will fade out of the oil-buying business. Some bearish traders believe that this factor can weigh in on prices, since most petroleum stocks in the United States are government-held rather than private. Bullish traders have also used the filling of the Chinese SPR as a reason that oil should go much higher.

Oil, China and Cash for Clunker Stocks

Investing in the Future

There is a message to Detroit from Americans who participated in the Cash for Clunkers program: don’t make any more Ford Explorers, F-150s or Jeep Cherokees. These were the most traded-in clunkers.

Actually, the F-150 truck is pretty useful, so maybe we can just lose the Explorers and Cherokees.

Oil: The Economy’s Leading Indicator

Thursday’s nasty sell off appears to be bleeding into today. Of course, TradeMaster technical analyst Jason Cimpl had us prepared for more declines today with his excellent video chart analysis that accompanied Thursday’s Daily Profit. If you missed Jason’s analysis, here’s the link again.

Investing for Inflation?

So now the government is actually going to subsidize car sales with up to $4,500 in incentives for car buyers who get rid of cars that get 18 mpg or less.

I understand that the auto industry is hurting. And I also get that more efficient cars help reduce our dependence on foreign oil. But is it appropriate to use tax payer dollars to fund auto purchases?

VIX Showing Greater Uncertainty

Summer doesn’t officially start for a few more days. Tell that to the parents who are now getting their kids off to camp or getting ready for vacation. For the standard two-income household, living easy in summertime is just a memory.

Including today, we have just 12 more trading days until the end of June and the end of the second quarter. I suspect we will have seen the highs for stock prices by then. That is, if we haven’t seen them already.

The Paycheck to Paycheck Economy

Oil held steady on Monday. So did stock prices. Whether we actually get a rally, it’s clear that the market is waiting for the Senate to pass the stimulus bill and is eager to hear Treasury Secretary Geithner’s plan for dealing with banks’ impaired balance sheets.

I have to think that the stimulus plan is priced in to a large degree. The contents of the bill have been circulated. We know, basically, what the strengths and weaknesses of the bill are.

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Inauguration Rally?

What will be interesting is how stocks trade as we approach Inauguration Day in a couple weeks. It seems highly likely that a sizable percentage of Americans will anticipate the progress that the new administration has promised. And I’d expect some of that good will to carry over into the stock market.

USO |

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2008 Predictions

Two more days and we’ll put 2008 behind us. 2008 set a number of stock market records, none of them good. I came across a Business Week article highlighting some of the worst predictions for 2008.

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Happy Holidays

We’re ticking off the final days of 2008. Good riddance!

EBS |

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Reader Mail

It’s been too long since I printed your comments and answered your questions in Daily Profit. After I finished cutting and pasting the most relevant, I came out with 5 pages of reader mail.

USO |

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The Popped Oil Bubble

2 million barrels is a huge production cut. It’s far larger than the drop in demand. And the markets are still responding to OPEC with a big yawn. Oil prices aren’t moving higher.

CMN |

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Cheer for Higher Oil Prices

The Fed has spoken. Yesterday, the FOMC gave the market what it wanted: a half-point interest rate cut. This move was widely expected, so I’m putting much significance to the fact that stocks sold off following the announcement. In fact, I think that’s the most reasonable response given Tuesday’s huge advance. With conditions what they are, I don’t want to see stocks bite off more gains than they can chew. A little time to digest recent events is in everybody’s best interest.

AMGN |

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Norway’s krone on improvement track, benefits from crude oil

I've got crude oil on the brain. But I'm not alone. Basically every asset market in the world keeps looking over their shoulder to see what's going on with the price of "black gold." The most powerful economy on the planet now shudders audibly when crude oil prices rally. You know things have gotten out of whack when the people who sell crude oil are trying to talk down prices!

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David Fessler: Energy and Infrastructure are Driving Forces of Economy

Our goal is to ride the worldwide energy and infrastructure build-out boom that will be the driving force of the world economy for the next 20-30 years. Emerging markets require tremendous amounts of energy and along with it, lots of infrastructure. Energy demand alone is projected to increase by over 50% between now and 2030. We’ll be identifying those companies that…

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