Global Outlook

The Keystone Delay Won't Stop These Canadian Oil Sands Stocks

I'm not a knee-jerk hater of the Obama administration. But the President's decision to reject the Keystone pipeline was one of his worst. Aside from creating jobs, the pipeline would have decisively swung U.S. energy supplies more toward domestic sources and those of our friendly neighbor Canada. Granted, the pipeline wouldn't create energy independence but it would mean importing less oil from the Middle East.

The January Indicator Suggests A Postive 2012

As 2011 drew to a close, one of the focal points of our Market Comments was the prospects for a Santa Claus rally and the possible impact this would have for the start of 2012. The Santa Claus rally kicked in about mid-December, and the markets did not look back in January. By the end of the month, most major market indices were showing nearly 10% gains.

Could Gold Prices Double in the Next Two Years?

We have written many times about the 16- to 18-year cycles that markets and resources follow. For example, Gold increased in price 24 times from $35 in 1970 to $850 in 1980. Oil prices increased 13 times from $2.92 a barrel in 1965 to $38.34 in 1981. Commodity prices then dropped for almost two decades: Gold prices fell 18 years until prices bottomed at $253 in 1999, oil prices followed with a 17- year decline to reach a low of $10.35 in 1998. Seventeen or eighteen years is a long time! It is half of the entire working period of a person’s life.

“Compelling Valuation, or Value Trap?”

Valuations for U.S. equities have been stuck below the five-decade average for the longest period since Richard Nixon’s presidency; a sign investors don’t trust earnings even after a three-year bull market. Analysts estimate profits in the Standard & Poor’s 500 Index will reach a record $104.78 this year after increasing 125 percent since the end of 2009, the fastest expansion in a quarter century, according to data compiled by Bloomberg.

February-March 2012 Outlook

In the last few months we have seen some limited positive progress out of politicians who previously seemed determined to fail to the detriment of the economy. The US Congress kicked the can down the road again on tax cut extensions, while Europe has gotten closer to an orderly Greek resolution and made some decisions on how to move forward with greater integration. The ECB also bought them some more time by enacting a three year LTRO (long term refinancing operation) to ease bank funding issues, an effort that has salved sovereign markets.

Poland Gives Green Light to Massive Fracking Efforts

There is perhaps no more controversial energy source after nuclear than "hydraulic fracturing," or "fracking," of subterranean shale deposits containing pockets of natural gas. While the process can liberate previously unusable sources of natural gas, political, environmental and scientific concerns have risen along with production, as evidence mounts that fracking is responsible for everything from polluting subterranean aquifers to causing regional earthquakes.

Musings

The Federal Reserve's move on Thursday to keep interest rates at record lows until late 2014 is a very telling monetary policy strategy. Ben Bernanke's decision tells us that the economy is not recovering as robustly as it may have seemed in recent months. Or more importantly, that the USA is a long way from generating sustainable growth. Why else would the Fed implement such a prolonged and historic monetary easing policy?

“Precisely Watson?”

It is precisely on this distinction that Holmes bases his insight. When the inspector asks, “Is there any point to which you would wish to draw my attention? Holmes responds, “To the curious incident of the dog in the night.” But, protests the inspector, “The dog did nothing in the night.” To which Holmes delivers the punch line, “That was the curious incident.”

U.S. REITs

The U.S. housing market seems to have settled down, albeit at depressed levels. If, and it remains a big IF, the U.S. housing scene truly has bottomed (foreclosures were 40% less in 2011 than in 2010, although mortgage delinquencies remained largely unchanged), then housing and housing-related stocks may continue to recover. Since October 1, 2011, there has been phenomenal stock price increases in many of the U.S. housing stocks. Check out: Toll Bros. (TOL); D.R. Horton (DHI); Pulte Group (PHM); Lennar Corp. (LEN); and KB Homes (KBH).

LNG Trade is About to Take Off

Over the past two years, I have discussed at length the benefits of the coming U.S. trade in liquefied natural gas (LNG). Exporting LNG will offset the glut forming from excessive shale gas extractions, bringing balance to the U.S. market. It will also cause a small group of companies already involved in the development of this trade to become a main focus of investors. This is a complete game-changer.

Chart Presentation: Different Perspective

There seems to be a certain similarity between the current time period and that of early 1999. In other words the post-Eurozone bears a certain resemblance to the post-Asian/Russian/Brazilian situation that marked the end of 1998. First is a comparison between the S&P 500 Index and the sum of 3-month and 10-year Treasury yields from 1997 into 2000. Next is the same comparison running from the start of 2010 to the present day.

S&P 500: Momentum Sends a Market Message

High-volume trading characterizes a healthy bull market. Yet, the market's rise in the past few months has mostly included low volume. The past several weeks in particular have seen the percentage of up volume declining in the New York Stock Exchange. Moreover, the NYSE advance/decline ratio has been going downhill.

Those Fascinating Fibonacci Numbers and The Golden Ratio

Support and resistance levels on bar charts are a major component in the study of technical analysis. Many traders, including myself, use support and resistance levels to identify entry and exit points when trading markets. When determining support and resistance levels on charts, one should not overlook the key Fibonacci percentage "retracement" levels. I will detail specific Fibonacci percentages in this feature, but first I think it is important to examine how those numbers were derived, and by whom.

Is Deepwater Horizon the New Ecuador?

Nearly two years after the worst accidental offshore oil spill in the history of the energy industry, some of the biggest companies in the world are busy pointing their legal fingers at one another in court over who has to pay what in claims, damages and fines over the deadly Deepwater Horizon oil spill. A federal judge this week ruled that BP is still obligated to a clause in its contract with Transocean that would protect the rig owner from damages related to the spill. That means BP still has to shell out money to settle claims filed by those along the southern U.S. coast impacted by the spill. BP, meanwhile, is suing Halliburton, something Halliburton said was ridiculous. If the legal mess over Chevron's case involving Ecuador is any indication, former BP boss Tony Hayward will be pushing 80 before this gets settled.

Expected Breakout Has Materialized

Since the October 4th 2011 low, market action has been characterized by a series of higher lows. A Senior U.S. Portfolio Advisor wrote, “We are creatures of habit that often leads us to repeating the past. I believe that because we are creatures of habit, technical analysis is a very useful tool.” More and more indicators have been breaking out above the previous highs, repeating the behaviour of the past. In fact, the NASDAQ 100 Index is now at new 10 year highs! More and more long term Trend indicators have recently turned positive for major market averages.

Corporate Spending and Unemployment

Numerous investment articles over the past few months have implored America’s corporations to unleash their vast, burgeoning cash hoards to kick-start the economy. This may now be occurring and, if so, could provide the catalyst for a winning stock market in 2012, at least in the United States. A Federal Reserve report released in September 2011 stated that, at the end of June, U.S. non-financial corporations held more than $2 trillion in cash, and that excludes foreign cash holdings. This comprised 7.1% of all company assets, and was the highest level since 1963.

Using Ocean Temperature Differences to Create Renewable Energy

Ocean Thermal Energy Conversion (OTEC) is an idea for creating renewable energy by exploiting the difference in ocean temperatures between the surface and the seabed. The OTEC permit office first opened in 1981 as part of NOAA, America's National Oceanic and Atmospheric Administration, the marine counterpart to NASA. It was created after the oil price spike of the 1970's when interest in alternative power sources rose. Oil prices eventually settled and as a result interest in the alternative power sources dwindled, so in 1994, just 13 years later the OTEC office was closed without ever having issued a permit. Good old American bureaucracy.

Solar Yacht Sails Around the World Powered by Nothing More than the Sun

The World Future Energy Summit has recently finished in Abu Dhabi and for me one of the highlights was the Turanor, an impressive solar powered yacht designed and built by Planet Solar. It is the largest boat of its kind to ever sail and the first to ever circumnavigate the globe powered entirely by the sun. It steadily cruises at an average speed of five knots, but is capable of reaching more than double that on clear, calm, sunny days.

Danger Ahead

As I was writing this past weekend's newsletter "A Technical Review Of The Markets" it really dawned on me just how complacent investors have become on the economy, the markets and risk in general. The mainstream media, and most of analysts, are looking at recent improvements in the economic data as a sign that the economy has begun to make a turn for  the better. This view is further supported by the rise of the stock market. With a couple of breadcrumbs, a sprinkle of "hope" and a cup of optimism - analysts, economists and investors have whipped up the perfect concoction by extrapolating recent upticks into long term future advances.

What The Next Decade Holds For Commodities

What a decade!... A rapidly-urbanizing global population, driven by tremendous growth in emerging markets, has sent commodities on quite a run over the past 10 years. In fact, you would find that all 14 commodities are in positive territory if you annualized the returns since 2002. The best performer was silver with an impressive 20% annualized return. Surprisingly, that was higher than the 19% annual return on gold. Notably, all commodities, except natural gas, outperformed the S&P 500 Index 10-year annualized return of just 2.92%.

Something's Fishy in Tripoli

Way back in early 2011, members of the U.N. Security Council had no problem getting a resolution through that authorized military force in Libya ostensibly to protect civilians from attacks by forces loyal to strongman Moammar Gadhafi. The year before, lawmakers on both sides of the Atlantic were bickering over who did what and why in terms of the cancer-stricken Lockerbie bomber. This Scottish decision to release him, depending on which U.S. lawmaker you spoke with, was tied to a BP deal to drill for oil in Libya. Despite fractures in the new interim government in Tripoli and reports of renewed protests, a decision by the Italian government to quietly discuss trade relations suggests something isn't quite right in the way Western allies pick their fights.

Corporate Spending and Unemployment

Numerous investment articles over the past few months have implored America’s corporations to unleash their vast, burgeoning cash hoards to kickstart the economy. This may now be occurring and, if so, could provide the catalyst for a winning stock market in 2012, at least in the United States. A Federal Reserve report released in September 2011 stated that, at the end of June, U.S. non-financial corporations held more than $2 trillion in cash, and that excludes foreign cash holdings. This comprised 7.1% of all company assets, and was the highest level since 1963.

Everybody’s Unhappy!?

Money managers are unhappy because 70% of them are lagging the S&P 500. Economists are unhappy because they do not know what to believe: this month’s forecast of a strong economy or last month’s forecast of a weak economy. Technicians are unhappy because the market refuses to correct and gets more and more extended. Foreigners are unhappy because due to their underinvested status in the U.S. they have missed a big double play: a big currency move plus a big stock market move. The public is unhappy because they just plain missed out on the party after being scared into cash.

China to Aid Saudi Arabia in Nuclear Power Development

Ever since the end of World War Two, the U.S. has come to regard Saudi Arabia as almost its exclusive oil producing enclave. In February 1945, after the Yalta Conference with Soviet General Secretary Iosif Stalin and British Prime Minister Winston Churchill, on his way home U.S. President Franklin Delano Roosevelt and King Ibn Saud met aboard the New Orleans-class heavy cruiser U.S.S. Quincy in the Suez Canal's Great Bitter Lake.

“The Turtle?”

“We are suffering just now from a bad attack of economic pessimism. It is common to hear people say that the epoch of enormous economic progress which characterised the century is over; that the rapid improvement in the standard of life is now going to slow down; that a decline in prosperity is more likely than an improvement in the decade which lies ahead.”

The New Year Begins on a Positive Note

We would like to wish our subscribers a healthy and prosperous 2012. While observing the way the media portrayed 2011, one would get the impression that it was a year to  forget. But was it that bad? Certainly there were large doses of dramatic events on the economic and political fronts: the Euro-zone saga, rising debt, political and economic instability, and social unrest, to name just a few. However, despite all the chaos and negativity, the North American markets  finished the year much better than news sources reported.

Pakistan to Produce Gas - by Burning Underground Coal

As we start a new year, consider the miserable plight of the average Pakistani electricity consumer. With about 50 per cent less electricity generation capability than the actual demand, Pakistan's National Grid is facing more than a 5,000-megawatt shortfall in power generation, leading to blackouts in both urban and rural areas of the country.

Football Pitch-Sized Batteries Could Change the World of Renewable Energy

2011 saw huge advances in solar, wind and other renewable energy sources, and these advancements will continue into 2012. In fact 2012 could be the year that renewable energy sources start to seriously compete with traditional fossil fuels, at least that is the hope in the battle to reduce carbon emissions and our dependence on dwindling oil stocks. However a major problem with renewable energy sources is that they can rarely provide consistent power levels, due to a myriad of factors outside of human control.

The January Barometer

It’s that time of year again when the media is abuzz with that old stock market saying, “so goes the first week of the new year, so goes the month and so goes the year.” Admittedly, the January Barometer has a pretty good track record. To wit, according to the Stock Trader’s Almanac. Devised by Yale Hirsch in 1972, our January Barometer states that as the S&P 500 goes in January, so goes the year. The indicator has registered only seven major errors since 1950 for an 88.5% accuracy ratio. . . . Including the seven flat-year (minor) errors (less than +/- 5%) yields a 77.0% accuracy ratio.

Without discrediting the government’s views on STT, those opposing it are also right in seeking the abolition of this tax

The ongoing debt crisis in Europe and the efforts by governments in the Euro zone to put their economies back on track has brought  to the fore the topic of financial transaction tax (FTT). Economists, policy groups and some nations have proposed the imposition of FTT to curb destabilizing speculation in the financial markets and increase revenue for the government. While a concrete decision on this tax is awaited, speculations are rife that the Indian government may cut or completely roll back the securities transaction tax (STT), a version of the financial transaction tax.

A ‘domino effect’ of the current crisis on the Indian economy could soon be a reality.

Comatose is a condition pertaining to or affected by coma. And coma, a word derived from the Greek word ‘koma’, meaning deep sleep, is a state of extreme unresponsiveness, in which an  individual exhibits no voluntary movement or behaviour. Sounds too medical? Indeed. But look at the headlines of pink papers and the term comatose will surely seem appropriate for the current state of the Indian economy.

Indian Investors should opt for a good dividend-paying company.

What would you like  to have: a scenario where you work for money or where the money works for you? Obviously, we all would like the  money to work for us. And is such a scenario possible? Yes, it is possible if you are an equity investor and choose to invest in some of the good dividend-paying companies. In investing, two most powerful tools have contributed to the wealth of legends like Warren Buffett. One is the power of compounding and the other is the power of dividends.

Land acquisition issues and the lack of urgency to meet deadlines are holding up infrastructure projects in Mumbai.

Mumbai’s crumbling infrastructure is no secret. It is a complaint that every  Mumbaikar has and despite repeated promises by the state government, the city seems to be stuck in a time warp. While over the past several years, efforts have been made to improve the city’s infrastructure and for some reason or the other, most infrastructure projects meant to improve the city of Mumbai have faced delays. For instance, the Worli-Haji Ali sea-link, the proposed bridge to link Worli to Haji Ali over sea, is stuck because of a standoff between the state government and Reliance Infrastructure.

The Animation industry in India is set to witness an exponential growth.

India’s role as a significant destination for outsourcing of works related to animation is a fact. But a larger fact that  needs immediate attention is the strength of the Indian animation market to produce, create and develop exceptional animation works and workers and their strong acceptance in the Indian markets itself. Today, there is an increasing section of audience, appreciators across age groups, that is emerging and interested in works related to  animation. A case in point is the recent release ‘The Adventures of  Tintin’. Based on a comic book, the 3D-film was lauded by a wide range of audiences in India and abroad, too.

The Rates for small saving schemes will now be benchmarked to those of G-secs.

As per a government directive, the returns on small saving schemes will now be market-linked. What this means is that the rate of interest on various schemes such as public provident fund (PPF), National Savings Certificate (NSC) and post office deposits, among others, will be benchmarked to government securities or G-secs of a similar maturity with a positive mark up of around 25 basis points. For senior citizens however, there is little more reason to cheer as the mark-up for the Senior Citizens Savings Scheme is 100 basis points. But does this necessarily mean that it is a great reason to reallocate your investments and put a larger share of it into such small savings schemes? Definitely, not.

Review your life insurance policies on a timely basis and ensure the financial security of your loved ones.

Most of us believe that taking a life insurance policy will secure the  financial future of our near and dear ones. While that is what is expected of an insurance policy, do not expect it to work for you if you had taken the policy a few years ago when circumstances were different from what they are now. Over a period of time several factors that contribute to determining the insurance coverage for an individual are bound to have changed. You may now have been promoted, which means more money at your  disposal or you may have bought your first house taking a home loan you were not eligible for earlier.

Eicher Motors Ltd in India is likely to continue its growth story in the coming years.

Incorporated in the year 1982, Eicher Motors Ltd (EML) is the flagship company of the Eicher Group and a leading player in the Indian automobile industry. It is present in various businesses like commercial vehicles (CVs), two-wheelers and related component and design services, with CVs being the key revenue driver. Its 50-50 joint venture with the Volvo Group, VE Commercial Vehicles Ltd (VECV) designs, manufactures and markets reliable, fuel-efficient commercial vehicles of high quality and modern technology, engineering components and provides engineering design solutions. Eicher Motors manufactures and markets the iconic Royal Enfield motorcycles.

Market participants can consider contra and arbitrage funds in present market conditions.

The performance of equity markets have forced investors to look at  different types of mutual fund schemes instead of blindly putting money in conventional equity schemes. Equity markets have been under pressure since the past few months and if experts are to be believed, then in the coming months, the markets may remain range-bound. In such a scenario, retail investors can invest a part of their allocated money  in contra funds or arbitrage funds as these have outdone the benchmark indices in the last one year.

Shareholding pattern reveals how the shares of a company are divided among the various bodies that constitute its ownership.

Before buying any stock, we research the company from all possible angles.  We take into account the company’s profit and loss, sales and debt, among other things and thus, try to gather as much information as possible about the business into  which we are going to invest our hard-earned money so as to avoid nasty surprises in the future. This is also important because when we buy a share, we are not just buying a piece of paper, but also becomin  a part owner of the business to the extent of the shareholding percentage.

Gold Likely to Lose its Shine

In the last 11 years, gold prices have risen from $280/ounce to $1,920/ounce. In fact, in 2011, gold outperformed most asset classes. There are several reasons for this huge rally in gold. The yellow metal’s role as a store of value continues to gain with the growth in the global money supply (M2). Gold prices have grown faster than the growth of the global money supply (M2). Since the year 2000, world’s major central banks’ answer to crises have been easy monetary  policies and stimulus packages in various forms. Because of this, real interest rates have turned negative and inflation is constantly moving up (except in 2007-08).