Friday, April 29, 2016

Dollar Falling Gold Rising price commodities rally silver mining production

What's different about this commodities rally is that it's not just the gold price that's up - gold equities and mining stocks in general are starting to exhibit overall growth, even the ones with known risks kinross, anglogold ashanti.

commodities, gold companies, mining companies, mining, spot price, gold price, spot gold, spot silver, anglogold mines, undervalued stocks, commodities rally, metals, platinum, equities, wallstreet, mining production, cash cost, quarterly, quarterly production, earnings, revenue, sales, south africa,
Get Used To The Dollar Falling


  • A deteriorating relationship with Saudi Arabia means we might be witnessing the last days of the 'Petro Dollar' - at best this translates into even less support for US dollar denominated trade.
  • China backed gold certificates issued by the BRICS fund gain traction
  • The Federal Reserve The Fed losing control of situation it attempts to solve due to plunging interest rates and lack of interest in treasury notes


Diversity Is Important


  • Don't limit your purchases to just one company spread it around but do favor companies that already have the infrastructure in place to produce gold since it can take a long time to develop a mine.  
  • Also keep in mind that many established companies shuttered a large portion of their mine portfolio over the past few years due to declining prices
  • Focus in on companies that weathered the storm and didn't resort to closing mines - in the short run they will yield the best returns.

Don't Ignore Silver

The gold silver ratio exceeded 80 for much of the last year but now with a new commodity bull run starting to take place, the ratio has already declined to 70.  Considering the recent past (10-15 years) the ratio has the potential to decline even further to below 40, leaving the possibility of a 2 to 1 return on silver verses gold.  Demand for silver remains strong but remember that central banks don't buy it - this means that global economic instability is less likely to benefit silver price and more likely to benefit the price of gold.  In the meantime make silver mining companies a priority.

Kinross Gold NYSE:KGC - has most to benefit from a new gold rally.  kept mines despite downturn in stock in recent years - weathered the storm.
iamgold NYSE:IAG - stock suffered more than competitors last five years down 85%.  key mines remain operational and showing robust growth.
Seabridge Gold NYSE:SA - 40 million ounces gold 300 million ounces silver and that's just 2P proven reserves.  any news regarding mine development will double the stock price overnight.
spdr gold trust
sprott gold trust - can redeem shares for physical gold

Tuesday, March 29, 2016

Stocks to Watch 2016 Valeant Pharmaceuticals nyse:VRX Sobeys tse:EMP.A undervalued

Valeant Pharmaceuticals nyse VRX


philidor, valeant pharmaceuticals, valeant, undervalued companies, undervalued, stocks, drug sales, diversified, sobeys earnings, price earnings ratio, stock price, nyse, new york stock exchange, drug pricing,
Although the specifics regarding Valeant's problems won't be aired out until the company releases it's 10-k annual report in April of 2016, it's safe to say the stock has borne the full brunt of investor scrutiny (high institutional ownership has been a factor).  The biggest risks here on out are revenue growth, write-offs, and lawsuits - but even in a worst case scenario there is no way these three will severely impair earnings for two or more quarters.  Valeant continues to own a number of game changing drugs and products - a non-ownership relationship with Philidor doesn't change that !

revenue stream remains strong this will be key in keeping operating costs per unit within reasonable levels.

- xifaxan is approved
- diversity of portfolio
- global exposure - problems in the USA do not affect Valeant's ability to affect/control prices in other countries.
- sales in China since 2013
- ranks high among diversified companies

Sobeys tsx:EMP.A


The large quarterly write-off related to the Safeway assets should be seen as a one time occurrence; the affect on future earnings is being exaggerated.  This makes it a stock to watch in the second half of the year.

A recovery in the price of oil (will average $45 this year and $72 in 2017) will be a boost to Alberta's economy - big Canadian companies have been able to withstand volatility more than shale companies south of the border/rig count down in USA = less oil glut in North America = more opportunity for Canadian oil price to close gap with WTI.  Since acquiring Safeway, Sobeys has been the number one grocery chain in Alberta.  For the first three months of 2016 calendar year same store sales +0.4% chain-wide despite being up +2.7% in its base of eastern Canada.  2016 has thus far been an extremely volatile time for Alberta's economy (keystone pipeline rejection/oil price dropped to historic low/oil companies slashed capital spending); it is likely that the situation will improve later on this year and into next year.

  • price/earnings ratio greatly undervalued versus alternative stocks Loblaw Companies, Metro Inc.
  • book value per share is at a discount.


Royal Bank of Scotland Group plc


Since coming off one of its worst earnings quarters in the bank's history the stock is off 30%.  The write-offs which hampered the stock last year will become less of a burden in the future thanks to

  • time deadline for claims related to mis-selling scandal (risky loans, payment protection insurance in US) now almost a decade old
  • 1.5 billion pounds of the latest write-down relate to a settlement with the US Federal Housing Agency for mis-selling of mortgage backed securities
so expect these write-downs to become smaller over the next 1-2 years which will allow the bank to return to profitability - and perhaps even start paying a dividend.

Risk is not a major factor - the bank is 73% backed by the British government.

Monday, February 29, 2016

Seller Beware China Taking Over companies foreign takeovers technology ChinaChem, Whampoa, Syngenta, Haier, OmniVision

In 2015 Chinese companies took over 103 American companies up from 100 the year before and way up from the average of 43 in the three years prior to that and 13 in the second half of the previous decade.  Total overseas takeovers valued at $110 billion last year up 86% from 2014, led by energy and utilities (worth $50 billion).
There are now serious questions stateside with regards to the intentions of the Chinese - you see, the Chinese government has more direct control over its companies than any other government does theirs (total currency control gives their companies competitive advantage overseas).  China's leadership prioritizes all aspects of the economy with domestic issues taking precedence - this negatively affects innovation and a company's ability to operate freely overseas.

overseas takeovers, china takeovers, whampoa takeover, hua capital, regulatory approval, national security, united states, united kingdom takeover, gold, us dollar, stock exchange, china imports, semiconductor industry, techonology, state owned, conflict, war, policy, regulatory approval, club med, entertainment, lionsgate, media, telecommunications, huawei, o2 arena, power grid, chemicals, tsingua,
There's also the fear factor - it is not uncommon for Chinese executives to be given the death penalty for making harmful decisions even if they are made accidentally.

Then of course there's the fact that most major companies are indirectly owned by the government itself - RDA Microelectronics is controlled by government owned Tsinghua Unigroup.


A Matter Of National Security


The takeovers now pose a direct threat to United States national security, particularly in the semiconductor industry where China holds a strategic advantage thanks to a series of takeovers which have gifted them advanced technology.  Even China acknowledges sectors involving industrial products and chemicals are critical its leader recently made it a priority to have 70% of these components made in China - China uses 60% of the world's chips (China now has 10 of the world's 50 biggest chip makers up from one seven years ago that rise is coming through takevers, not home grown innovation).

Silicon Valley has another problem here too - The world's other major semiconductor producer is Taiwan, a territory that China wants more control over.

it's not just the technology industry that China's after either - already in 2016 Chinese companies have taken over
1) Europe's Monsanto - Syngenta the world's leader in the manufacture of insecticides fungicides and herbicides bought by ChinaChem for $43 billion after the Monstanto deal was scrapped

2) OmniVision Technologies a maker of advanced chips used in smartphones and cameras. bought by Hua Capital Management for $1.9 billion.

3) Foxconn $6.4 billion takeover of Sharp makes Foxconn less reliant on Apple for its business.

4) Chicago Stock Exchange says it's being sold to Chongqing Casin Enterprise Group for $100 million gives Chinese company access to the US equity market and the potential to take trades away from the other big two Nyse and Nasdaq (by listing new stocks or versions with lower stock prices).

5) Hong Kong's Hutchison Whampoa becomes UK's largest cellphone plan service provider after basically receiving approval for O2 - the European Union rejected UK concerns regarding the deal (since O2 was operated by Telefonica a non UK but European company) nullifying the need for regulatory approval.

6) Just this month China's Haier takes over General Electric's applicance unit for $5.4 billion Haier immediately becomes a global player thanks to the deal.  Quingdao a state owned enterprise now runs the show !

then of course there were other pivotal deals made within the last two years such as Lenovo's purchase of Motorola making it the world's number three player in the smartphone market - this doesn't even take into account Huawei, the world's largest telecommunications equipment maker that just launched its own smartphone the Honor which is already becoming popular in the UK and the Huawei Y3, the cheapest smartphone in the UK

February 2016 : Xiaomi to start selling smartphones in the United States for first time.

United States Losing Companies Not Just To China


Biggest Insurer Chubb Corporation uses Ace Limited Takeover to form Chubb Limited a new Switzerland based company.  That means the United States lost Aon and Chubb to Europe in just two years !

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).

petro dollar, canadian dollar, oil price, chart, oil companies, costco canada, same store sales, petroleum industry, gas price,
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.

oil price, russia economy, oil, petroleum, natural gas, price forecast, index, middle east economy, oil companies, oil production, peak oil, arab league, economy, usa shale, north dakota shale, oil exploration, light crude, heavy oil, economic growth, growth in africa, african oil demand, population growth, opec, world bank report, oil oversupply
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.



south africa, platinum demand, pt, platinum mining, mining indutry, platinum gold ratio, platinum ratio, gold ratio, price ratio, platinum prices, metals, analyst, unprofitable, shallow mining, robotic, jewelry, jewellery, industry
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.