Sunday, January 31, 2016

The Canadian Petro Dollar & Alberta Petroleum Industry Oil Price

The first month of 2016 turned out to be quite harsh for the Canadian dollar and those who use it, giving even more meaning to its pseudonym "the loonie".
Unlike the US Dollar which is riding high at the expense of nearly every other currency, the rate given for the Canadian (and Russia) version dipped to just under 68 cents breaking 25+ year lows (early 1990's was the last time the currency was anywhere close to current levels).

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You might ask: why is there such a strong correlation between the loonie and the oil price ?  and why doesn't the US dollar share that relationship to oil all things considered. 

ExxonMobil XOM, Chevron Corporation CVX are two of America's largest companies; oil companies represent 6% of the nasdaq 500; 3 of the 5 highest yieilding s&p 500 stocks are oil companies; United States oil production now ranks second behind Saudi Arabia.

look no futher than gdp vs the petroleum industry

Canada may produce less oil than the United States but its economy is nine times smaller and that makes it more dependent on the commodity (7% of gdp directly - tens of billions of dollars in capital expenditures by big oil which for the last five years fueled all of the growth in the only job-creating provinces of Alberta, Saskatchewan).  Also note that the USA only recently started exporting oil abroad - Canada exports nearly all of its oil to the United States thanks to a lack of oil refineries out west (Canada's biggest refinery is on the east coast and there are currently no pipelines going west to east).
Another thing to consider is the quality of oil that Canada produces.  Canadian oil is more like tar - it requires heavy processing before it can even be used by refineries.  This adds costs to usage and makes it less attractive to potential buyers.

What was the perfect set of conditions stateside turned out to be the perfect storm for Canadians

While Americans were being spoiled with 10 cents per litre gas price, Canadians faced rapid inflation thanks to their dependancy on the US for food ($8 cauliflower was commonplace).

Costco Conquers Canada

According to the most recent results out of Costco Canada, same store sales are up by a record 9% twice what it is stateside and triple that reported by Canadian grocery leaders Loblaw Companies and Sobeys.

Wednesday, December 30, 2015

The Oil Price: Noone Really Knows What's Going On; Russia economic growth usa oil oversupply opec report

Just two months ago, the World Bank estimated in its commodity forecast report that the price of crude oil will average $51.4 per barrel in 2016, virtually unchanged from the average price last year ($52.5), but since then oil has fallen all the way down to $30 with no bottom in sight.

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Just this month the price reached an 11 year low for the third session in a row ($36), despite positive news regarding US supply (stockpile down -5.8m barrels vs +1.1m estimate). The price was as high as $110 as recently as 2014 but $30 oil was not uncommon in the 1990's and early 2000's.

Now Opec which represents a third of the world's oil output, is coming out and saying that improved overall demand will lead to a recovery in the price ($70 by 2020).

And Russia - the world's second largest producer - is saying it doesn't expect oil prices to recover beyond $30 in 2016 which says a lot coming from a nation that loses $2 billion in revenues for every dollar decline.

My opinion - Oil prices will swing wildly in both directions in the upcoming years so prepare accordingly.  However peak oil is not the issue.
this opinion is based on

  • The USA oil oversupply cannot continue especially at current prices - most oil production increases in the US are attributable to North Dakota shale exploration the pace of which cannot continue at current prices.
  • New Canadian pipelines (Energy East Pipeline will allow Canada to fully utilize refinery capacity in New Brunswick / Northern Gateway Pipeline / others) will permanently lower glut of supply in US North Western PADD regions).
  • Higher oil exploration costs in general as tradition sources dwindle (shifts from light crude -> heavy oil which requires more expensive processing).
  • However
  • in much of the world the infrastructure and technology to utilize renewable sources of energy is not yet in place or too expensive to implement.  Furthermore, it is those parts of the world where most of the population and economic growth is happening (Africa, India, Economy of the Arab League).

Monday, November 30, 2015

Platinum Gold Ratio Just Breached 20 Year Low 0.78 Catalytic Demand Price South Africa Jewelry

The recent dive in platinum prices is forcing miners to turn to shallow, highly mechanized new mines.  "65% of South Africa’s platinum operations are unprofitable at current prices".  Making matters worse is the price of electricity - up threefold since 2008.  In 2014 South African platinum production dropped 10% to less than four million ounces - by comparison the country produced 4.8 million ounces in 2011.

But industry demand remains strong having eclipsed eight million ounces last year for just the second time in history, and with South Africa being home to 95% of global reserves, production issues in the country will swing supply/demand in the wrong direction in upcoming years.

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Demand - platinum is more widely used industrially (catalytic/automotive as well as laboratory equipment)
Supply - depends more on recycling than any other metal - 2.1 vs 5.7 million ounces (total demand ~ 8M ounces per year).  But there are concerns over production - demand for platinum is known to fall during times of economic uncertainty which is more true today than at any other time in past fifty years.  Volkswagen diesel scandal is also weighing down prices - diesel vehicles may not be as popular in the future meaning less demand for catalytic converters - which account for 40% of platinum demand.

Just last month an HSBC metals analyst said he expects "platinum to trade above gold next year"  A discounted platinum price will boost jewelry demand allowing it to take market share away from gold.

Analysts see platinum at $1150 in 2016, $1300 in 2018.

Saturday, October 31, 2015

Real Estate Investing Advice Buying Land Opportunities in Canada foreclosures discounted properties

Getting approved for a mortgage in Canada isn't as easy as it used to be.  There are a number of reasons for this

  • lower incomes and less job security with the majority of new jobs being in self-employment 
  • lending institutions playing it safe by choosing to sit on cash rather than lending it out
  • new mortgage rules that require from prospective borrowers a 20% down payment
  • shorter amortization period

this is forcing middle class buyers out of the market.

Let's take a look at some of the properties currently up for sale their advantages and risk exposure

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Also to consider : the changing attitudes of young people 

the next generation is putting off marriage until well into their 30's; they're also moving to the city choosing to rent rather than buy, and even forgoing the option to take over the family home when their parents decide it's too big for them. 
This, in my opinion, has created an opportunity for smart investors - people who are able to pay for something with cash !

Buying with cash is impossible ? think again - there are a number of properties in Canada that can be had for under $20,000; so if you can buy a car you can invest in real estate - yes, even in Canada :)

Quebec Real Estate Market A Wise Buy

With problems in the oil (Alberta) and manufacturing (Ontario) sectors investors are shifting their focus to Canada's other major market : Quebec - where the population keeps growing (thanks to a thriving student population driven by what is arguably Canada best all around university McGill) real estate remains cheap - yes rental income is lower than than it is in Toronto and even Ottawa but high demand means very low vacancy rates.

Quebec City is proving to be a great option for investors
median income in Quebec City is growing at a healthy pace - since 2009 it has surpassed Halifax, Hamilton, Kitchener, Kingston, has kept pace with Sudbury and is now tied with Victoria.

Wednesday, September 30, 2015

Why Gold Will Outperform Silver During the Next Economic Crisis price ratio

In times of crises historically, precious metals have been the preferred store of wealth.  Even though silver does have intrinsic value; by being the best store of value a preference for gold inevitably develops - this is especially true if the crisis leads to massive inflation and the rise of radical groups both of which occurred in weimar Germany and tsarist Russia.

There are benefits to owning physical gold but if you're going to buy stocks consider these precious metal companies

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Isis, Greece and the confiscation of wealth

As has happened in Cyprus, would've happened happened in Greece if the 2015 summer bailout didn't materialize and is happening in Iraq and other Isis strongholds, the confiscation of wealth makes portability important.  At 75 the current gold silver ratio gives gold the upper hand - being able to move your wealth more easily makes it less likely to be discovered and thus confiscated.


if the US dollar - which is by far the world's most relied upon currency - is ever forced to prove its value the way every other currency does (ie the money supply, possibility of insolvency/national debt levels) - rapid inflation the likes of which has never been seen in history definitely could happen.

US dollar losing precedence in international trade

- in 2006 127 countries called the United States their largest trading partner .. that number has since fallen to 76.  In just five years China displaced the US in 51 nations.

- When forming new economic partnerships with countries China is emphasizing the need to bypass the dollar.  Traditionally all trade is done first by converting into dollars, but China has developed new ways of avoiding this.

America's shaky relationship with Saudi Arabia as of late will affect the petro dollar 's unique status.

International trade by central banks

Sunday, August 30, 2015

Greek Companies To Invest In national bank of greece nyse NBG OPAP rebound stocks

Greece securing new bailout money stabilizes an economy that was free falling for the better part of 2015.  That creates investment opportunities - at least until September 2016 when all of the current deals expire.

Greek bank stocks stand to benefit from recent developments. August 29 - Greece National Bank Shareholders Approve Recapitalization Plan;  August 11 - The New York Stock Exchange NYSE notified the bank that it must bring its market price back above $1.00 by February 2016.

National Bank of Greece has the most upside but don't ignore the risks
- in 2008 TT Hellenic Postbank aka Greek Postal Savings Bank was one of the world's 2000 largest companies - in 2013 it was forced into liquidation.

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Motor Oil Hellas (FRA:MHZ)

- best performing Greek stock since 2012 (price: 3.80->9.0)
- since 2008 is the only 'new' Greece-based company added to the Forbes Global 2000 list.
- least risky of Greece's eight major companies (five are banks most of which were on the verge of collapsing on the eve of the last bailout deal).
- oil refineries stand to benefit from low oil prices (takes months if not years for gas pump prices to reflect lower oil price).  crack spread remains stable.

OPAP SA Greek Organization Football OTCMKTS:GOFPY

gaming stocks

- weathered the global financial collapse in 2007/2008 fairly well (ranked 1009 on the Forbes Global 2000 list in 2008 before eventually falling out).
- worst performing major Greek company stock since new bailout package announced (end of June price: 3.5 -> 4.5 August 14 -> 3.75 August 31)
- Greeks voted to stay in the EU - that benefits the tourism industry which OPAP business is tied to.

National Bank of Greece NYSE:NBG

guaranteed access to EU taxpayers money when facing collapse, bank bailout

yes, this is a very risky investment but the reward could be substantial.  The bank's market capitalization has been cut in half over the last 12 months ($4.2 billion -> $2.1 billion).  Despite ongoing financial problems in Greece, between 2010 to 2013 the stock price spent most of the time oscillating between $25 and $35;  It's now at 67 cents.
Keep in mind this has always been Greece's largest company - that takes away a bit of the risk since even in dire circumstances this is one of the first companies that the government will step in to support.  Consider it Greece's version of a bank that's too big to fail.

- revenue is about the same as Greece's #2 and #3 banks combined
- since 2008 Forbes has routinely called it Greece's top company
- despite new bailout money stock price continued to plummet - to me this is a result of a wait-and-see approach by investors; institutional ownership only 3%.
- End of August: new European Union rule tied to the new Greece deal gives greater economic flexibility to Greece allows it to tap into additional EU funds in order to bailout the most important banks - even going as far as to consider tapping into taxpayer funds from throughout the EU.

Another reason to expect a rebound in the stock price:
The NYSE requirement that ADS share prices of stocks listed at the exchange be above $1.00.  NYSE is threatening to delist the stock unless the company gets the price back up from $0.67 to to $1 (it has six months to do this - expiry date is February 11, 2016).