Month: March 2013

By MoneyMorning.com.au

If you want to profit from North America’s shale oil and gas boom, all you have to do is follow the drill rigs.

Today in Alberta, Canada there are 433 rigs spinning. Although that’s ‘only’ about half that of Texas, there’s a lot of opportunity brewing up north.

Last week I ventured to Calgary, Alberta to get a good (cold) feel for what’s happening. From what I saw, the next leg of North America’s shale boom is taking place right now, up north…

‘80% of the world’s oil reserves are held by national oil companies [NOCs],’ says Ken Hughes, Alberta’s Minister of Energy. Hughes is referencing the simple fact that countries – like Saudi Arabia, Iran, Russia, Venezuela, Nigeria, Brazil, Mexico and others – have nationalized their oil industry. Indeed, 80% of the world’s oil reserves are ‘hands off’ for you and me.

Although, ‘of the other 20%,’ Hughes concludes, ‘HALF are here in Alberta.’

Indeed, when you think of North American energy you likely think of places like Texas, Alaska, or more recently, North Dakota – but today I urge you to keep an eye on Alberta.

Part of Alberta’s energy bounty is found in its massive deposit of oil sands, to be sure. But the other part, important for today’s discussion, is found in up-and-coming shale oil and gas plays.

It’s the same story we’ve heard in the States. We’ve always known the oil and gas is under the ground, we just never knew an efficient way to get it out.

Today, we’ve unlocked the door to North American energy independence – and a huge part of that is taking place in Alberta’s shale patch.

There are two main plays that you need to be familiar with today: the gas-rich Montney and the oil-rich Duvernay.

The standout player in energy potential is the Montney. As you can see in the chart above, when converted to its oil equivalent, the Montney has the potential for nearly 1.5 million barrels per day (by 2030).

But, with the drawback in natural gas prices lately the Montney is more akin to Pennsylvania’s Marcellus gas play. The potential payout is huge, but a lot hinges on the price for natural gas.

The Duvernay on the other hand is more akin to the Eagle Ford in Texas. In fact, the Duvernay has the potential to be the BEST shale oil play in North America.

According to Hart Energy’s Peggy Williams, the estimated ultimate recovery (EUR) is anywhere from 600,000-1,000,000 barrels per well. One million barrels per well!? When compared to other familiar names in the shale patch, that far exceeds the Permian and the Bakken – it also nudges out the Eagle Ford for the top spot.

Indeed, with energy potential like that, it’s only a matter of time before producers in the region start cashing in. And although drilling and service prices are slightly higher in Canada there’s a lot of reason to stake a claim to this up and coming region. Not the least of which is my next point…

Canada’s Shale Boom: A Global Player

One of the major issues that Alberta has faced – other than modestly higher service/drilling prices due to seasonality – is geography. Alberta is landlocked. And when it comes to producing oil and gas, getting your product to market is just as important as getting it out of the ground.

In the past, selling oil and gas to the US was easy. But today, as seen with the Keystone XL decision/debacle, that’s not exactly the case.

‘Alberta has been well served by one customer, the US, but with growth in US capacity we have to get products to market – get to tide water – and get world prices,’ says Energy Minister Hughes.

Canada, Alberta in particular, sees the writing on the wall. The back and forth nature of US energy policy, along with a US shale boom, is creating a potentially unmovable impediment to Canada’s energy production.

So in the past where Canada could count on the US as an energy partner, today the tide is shifting. In fact, the one major theme that I walked away with after my trip to Calgary, was that Canada is open for global business.

And as the cheap and bountiful energy starts to flow from beneath the frosty tundra, there will be plenty of ways to play it. Here’s how…

Stake Your Northern Shale Claim

Back in October 2012 we discussed three simple words that can unlock the profit potential in shale oil and gas plays (these prescient words came to us from one of the forefront thinkers in the shale space, Richard Mason, Chief Technical Director for Hart Energy).

In particular for any shale oil and gas plays there will be three distinct phases: discovery, optimization and harvest.

1. The discovery phase offers wildcatter profit opportunities and the associated high risk. In other words, if you hop on the right horse that has acreage in an up-and-coming shale play you could be set to cash in.
2. Next up is the optimization phase. This is where established players with knowledge of the play learn how to maximize drilling and recovery rates, midstream players begin pipelines, storage facilities and processing plants, and majors come into the play and look for buyouts.
3. Last is the harvest phase. At this stage the established players have a well-known formula for making money. The bulk of the high profit opportunity is gone. But with continued production and transport, residual profits (through dividends) can payout for years to come.

The shale oil and gas plays in Alberta – the natural gas filled Montney and the oil rich Duvernay – are transitioning from the discovery phase to optimization. Right now, with the fog clearing around the estimates of the recoverable resource base, smart investors like us can start making a lot of money in the shale patch.

In fact, recently the money has started to really start flowing – a good sign that we’re in the right place. Take a look at the string of buyouts and joint ventures (JVs) in the past 12 months:

• Encana’s JVs with Mitsubishi ($2B) and China’s CNPC ($2B)
• Petronas’s acquisition of Progress Energy ($6B)
• CNOOC’s acquisition of Nexen ($20B)
• Exxon’s acquisition of Celtic ($3B)
• Petro China’s stake purchase of Shell Oil’s shale-gas assets ($1B)

Add it all up and there’s been over $35B in play over the past 12 months. Indeed, if the big guys are willing to shell out this type of cash, you know there’s some money to be made here, smack-dab in the of the shale cycle.

I’ll leave it at that for today, but there’s plenty more to cover north of the 49th parallel.

Matt Insley
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in Daily Resource Hunter

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From the Archives…

Gold’s Dark Hour Before Dawn
1-03-2013 – Dr. Alex Cowie

The Primary Colours of Investing
28-02-2013 – Kris Sayce

Revealed: Inside a Share Trader’s Den
27-02-2013 – Murray Dawes

Where to Find Value in this Rising Stock Market
26-02-2013 – Kris Sayce

China Bull Versus China Bear – There Can Only Be One Winner
25-02-2013 – Dr. Alex Cowie

By The Sizemore Letter

2013 might rightfully be called the year of the “Clash of the Gurus” to anyone watching the news.  The biggest is the very public slugfest between activist investors Bill Ackman and Carl Icahn over nutritional supplements company Herbalife (NYSE:$HLF).  Ackman is short 20 million shares of Herbalife at last count, and Icahn is long at least 14 million.

Taking a slightly lower profile than Icahn, Third Point’s Daniel Loeb also took an anti-Ackman long position of over 8 million shares, though he reportedly  slightly reduced that position in February.

Ackman and Icahn’s faceoff on CNBC got as close to something from the Jerry Springer Show as two Wall Street titans in suits can get, with each essentially calling the other a liar.  One of these guys is going to be wrong in a big way, and it’s going to cost their investors a fortune.

I recommend you run as far away from Herbalife as you can right now.  You don’t want to get caught in a nasty war of attrition between two masters of the universe.

Instead, I’m going to highlight three solid dividend-paying stocks being accumulated by well-known gurus.

It’s not a guru list without a mention of Warren Buffett.  Buffett made news with his acquisition of H. J. Heinz Company (NYSE:$HNZ).  But his Berkshire Hathaway (NYSE:$BRK-A) has been steadily increasing its position in several companies, including DaVita HealthCare Partners (NYSE:$DVA) and old standby Wells Fargo (NYSE:$WFC).

But as far as conservative dividend payers go, Buffett’s most notable addition is Archer Daniels Midland (NYSE:$ADM), the Midwestern food processing company.  Archer Daniels is about as un-sexy as an investment can be, which is precisely why it belongs in Berkshire’s portfolio.  It also happens to be a Dividend Achiever that has raised its dividend every year since 2002.  At current prices, Archer Daniels yields a respectable 2.4% in dividends.

Our next guru is one of my very favorites, Mohnish Pabrai.  If you haven’t read Pabrai’s book, The Dhandho Investor, you are costing yourself money.  It’s one of the best books on value investing written in the last decade.

While Pabrai is one of my favorite gurus to follow, I’m not the biggest fan of his current portfolio.  It’s too concentrated and too heavy in banks for my liking.

That said, natural gas exploration and development company Chesapeake Energy (NYSE:$CHK) is a fairly recent addition worth noting.  Calling Chesapeake a “dividend stock” might be a stretch, at it yields only 1.8% and it operates in a risky business in which dividend cuts are a real possibility.

High debt levels and a scandal last year involving CEO Aubrey McClendon have also soured investor sentiment towards the stock.  This is a riskier play than, say, Archer Daniels Midland, but Chesapeake is a good way to play a long-term boom in natural gas, and Pabrai is betting heavily that the worst is behind the company.  As of his most recent filings, Pabrai’s fund had 17% of its portfolio in Chesapeake.

And finally, we get to Prem Watsa of Fairfax Financial, commonly known as the “Warren Buffett of Canada” for both his investment acumen and his use of insurance companies as investment vehicles.

Watsa’s biggest current position is one you have to have an iron stomach to hold: smartphone also-ran BlackBerry (Nasdaq:$BBRY).

BlackBerry doesn’t pay a dividend at this time, and I consider the company’s outlook too uncertain to recommend at this time.  I do, however, like his number two holding, health care giant Johnson & Johnson (NYSE:$JNJ).

Johnson & Johnson is the ultimate dividend-paying machine, raising its dividend for 50 consecutive years, and currently yields 3.2%.  And after underperforming the market for years, J&J is finally showing signs of life.  The stock is up nearly 10% in 2013.  If Watsa’s track record is any indication, I would expect more gains to come.

Disclosures: Sizemore Capital is long JNJ. 

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The post Three Dividend-Paying Guru Stocks appeared first on Sizemore Insights.

By Martin Kay

It is no longer possible to ignore the fact that copper prices are going upwards and with HSBC confirms the tendency by raising its price forecast for 2013, binary traders should pay attention. The bank increased its forecast from $7500 per ton to $8000 as the global demand rose and customer sentiment improved. One reason for why prices are surging is that the main producer of copper failed to reach an expected output, but Chile is not the only player whose actions have a significant impact over copper price.

Goldman Sachs is bullish on copper

The investment bank has lost much of its credibility after the financial crisis erupted, but it still employs some of the brightest minds and its endorsements are taken seriously. With Goldman Sachs suggesting that September copper futures are a good idea, it is worth taking a closer look at their reasons. It is the Chinese market that the US bank counts on to drive the prices upwards by demanding increasingly higher amounts of copper in the upcoming months. China is still the main consumer of metals worldwide and despite the fact that its economy grows at a slower pace, its actions still make a huge impact.

One thing that doesn’t seem to bother Goldman Sachs is the fact that there is a surplus of copper out there, but the investment banks is not unaware of this situation. Their analyst is counting on a mild spike in copper demand and they believe that even such a minor dent would be enough to bring the market to a relative balance. If this will occur, summer is the most likely time of the year for this to happen and that’s why binary options traders are advised to act now and buy options with longest expiry dates.

Large mining companies plan to expand

The future looks bright for copper mining as several big players have announced their intention of expanding their presence in Chile. Over the next decade, Chile hopes to attract in excess of $100 billion and it needs to regulate this fast growing industry. So far there are plenty of loopholes that might be one day exploited by lawyers and any scandal could lead to painful losses. The example of Chevron is still vivid in many traders’ minds as the oil company saw its stock plunge as a result of multiple lawsuits.

Traders who use fundamental analysis for predicting the direction, in which stock prices might go, are fully aware of this ever-looming threat. You can take advantage of Binary options signals to get the extra edge from your Forex or binary account.  Right now, it is more important that companies such as Codelco, BHP Billiton and Rio Tinto, to name but a few are interested in investing larger amounts in copper mines. Escondida mine is the first to increase its production capacity and more will follow, which means that many are expecting demand for copper to increase and so will the price of the metal.

 By Martin Kay, binaryoptionsthatsuck.com

Dr. Tobias Preis of Tedx Zurich to Speak at 3rd Annual Social Mood Conference

Preview what you can expect to hear from the scientist who founded Artemis Capital Asset Management

An exceptional gathering of movers and shakers in finance and behavioral research will share their latest work this April 14 in Atlanta, at the Georgia Tech Conference Center. From physics to psychology and hedge funds to herding, these thinkers will cover the vast yet interconnected disciplines in social mood research.

Dr. Tobias Preis is one such esteemed speaker. A physicist and complex systems scientist by training, Preis and his research team are at the cutting edge of financial systems modeling. Preis will share some of his latest work, from his role as Associate Professor of Behavioral Science and Finance at Warwick Business School in the United Kingdom.

His presentation at the Social Mood Conference, “Quantifying Economic Behavior Using Big Data,” will touch on many ideas he shares in the following video:

To learn how big data provides insight into financial market crises — and how patterns of interaction on the internet provide insight into different perceptions of economic wellbeing around the globe — you won’t want to miss Dr. Preis’ talk.

Register now to attend the 3rd Annual Social Mood Conference on April 14 in Atlanta, GA — and gain the opportunity to meet and mingle with others who follow the exciting new science of socionomics.

Reserve your seat today and save $50 >>

If you would like to receive the free socionomics content each week, sign up here.

This article is syndicated by The Socionomist, a publication of the Socionomics Institute, and was originally published under the headline Dr. Tobias Preis of Tedx Zurich to Speak at 3rd Annual Social Mood Conference. The Socionomist is designed to help readers understand and anticipate waves of social mood. Copyright © 2012 Socionomics Institute.

By The Sizemore Letter

As the fracking boom has generated massive new interest in domestic oil and gas production, coal has become the red-headed stepchild of the energy industry.  Soaring new supplies of natural gas have led to a glut that has kept prices depressed for the past several years, but they’ve also pushed down the prices of energy competitors such as coal.  Coal prices collapsed during the 2008 meltdown and are still less than half their old highs.

In an age of climate change awareness, coal is about as politically incorrect as you can get.   By Energy Information Administration estimates, coal use produces 77% more carbon dioxide than natural gas for a comparable amount of energy.  This is a tough sell in an era when we have abundant alternatives.  Not surprisingly, coal consumption fell in the United States in 2012 and is expected to rise only modestly this year and next.

So what are we to make of this?  In the age of cheap gas and environmental awareness, is coal an industry in terminal decline?

Absolutely not.  Though we may associate coal with mines in America’s Appalachian region, China is the most significant player in the coal market.  China consumes nearly as much coal as the entire rest of the world combined, and despite being a major producer of coal for its own domestic use, China also imports massive quantities for use in the production of both energy and steel.  In 2012, a year that saw anemic economic growth, China’s coal imports rose by nearly 60%.

Demand for coal among other emerging markets, such as India, is also on the rise.  India is expected to overtake the United States as the second-largest consumer of coal by 2017, and its coal imports are expected to grow by well over 50% between now and then.  And even in the developed world, coal consumption is on the rise in several countries, most notably the manufacturing juggernauts Germany and Japan.  Worries of global warming have taken a backseat to fears of nuclear meltdowns after the Fukushima incident.

Coal’s pricing is also not as weak as the action of the past five years might suggest.  Looking at the longer term picture we see a very different story.  Aside from the 2007/2008 price spike, which saw the thermal coal CAPP price soar from $40 per ton to nearly $140 per ton in a matter of months, the price of coal has been relatively stable by energy standards.  Prices have spent most of the past 12 years in a fairly tight band of $40-$80 per ton.

Market Vectors Coal (NYSE:KOL)

 So, is coal a viable investment theme?  Judging by the performance of the Market Vectors Coal ETF (NYSE:$KOL), you might have second thoughts.  Coal stocks have fallen by half over the past two years and have barely budged at all since June of last year.  Yet coal stocks as a group trade for just 14 times rather depressed earnings, and the worst is likely over for coal pricing, as natural gas prices have shown some sign of stabilizing.

If you are pondering an investment in coal, Peabody Energy (NYSE:$BTU) is not a bad option.  Peabody has enormous coal mining operations in Australia, which now account for the majority of the company’s profits.  The Australian mines are well placed to serve China’s insatiable need for coal, which should only increase now that China is showing signs of life again.

Peabody is reasonably priced at 11 times expected earnings and just 0.7 times sales.  This is not rock-bottom pricing by energy stock standards, but it is by no means expensive.

Longer term, the company’s biggest risk is a true hard landing in China, not the 7.5% growth we saw in 2012 that (only in China) counts as “slow growth.”

By “hard landing,” I mean a prolonged economic contraction not unlike that experienced by Japan starting in the early 1990s.  I expect that hard landing to come before the end of this decade due to the country’s aging demographics and its apparent overbuilding of infrastructure in most of the higher-income coastal regions.  But in the meantime, a short-to-medium-term rebound in China should bode well for coal prices and for coal stocks such as Peabody.

Disclosures: Sizemore Capital has no position in any security mentioned at time of writing.    This article first appeared on MarketWatch.

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The post Is the Worst Over for Coal? appeared first on Sizemore Insights.

Trading around 14.089 the Dow Jones is reaching out for a new all time high – 14.164 being the current top from 9. October 2007.

Senior Strategist Ib Fredslund Madsen with his take on the Dow and the market this week.

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Video by en.jyskebank.tv

By www.CentralBankNews.info Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.

London Gold Market Report
from Ben Traynor
BullionVault
Monday 4 March 2013, 07:00 EST

THE SPOT gold price dropped to $1575 per ounce Monday morning in London, broadly in line with where it ended last week, while stocks ticked lower and the Euro held steady near two-month lows against the Dollar ahead of this Thursday’s European Central Bank policy meeting.

“For gold, the trending and momentum indicators are pointing lower,” says a note from UBS, “indicating any upside in the near-term must be limited.”

Gold in Sterling dipped below £1050 an ounce, while gold in Euros fell back below €39,000 per kilo (€1213 per ounce) this morning as the Euro traded either side of $1.30.

“The political uncertainty in Italy is a good reason to be bearish on the Euro,” says Saxo Bank currency strategist John Hardy.

“The ECB will be in defensive mode and they may cut rates this meeting.”

On New York’s Comex exchange, the so-called speculative net long position of gold futures and options traders – calculated as the overall difference between ‘bullish’ and ‘bearish’ contracts held by hedge funds and other professional money managers – rose in the week ended last Tuesday, a week after hitting its lowest reported level since 2008, weekly data from the Commodity Futures Trading Commission show.

The number of short gold futures positions held by professional money managers fell meantime.

The previous Tuesday saw the highest number of short gold positions held by speculative traders reported this century.

The week ended last Tuesday saw gold fall below $1600 an ounce for the first time since August.

“Clearly, [futures market] participants were encouraged to re-position at these lower prices,” says Standard Bank commodities strategist Marc Ground.

“From a risk/return perspective, we believe that the value in being short gold has declined substantially and that the largest part of the decline in the gold price has taken place already.”

The world’s biggest gold exchange traded fund, SPDR Gold Trust (ticker: GLD), continued to see outflows last week, with the volume of gold held to back its shares hitting a seven-month low at 1253.9 tonnes Friday.

“While ETF investors have been making a significant retreat from the gold market of late, demand for coins has not dropped off,” says today’s commodities note from Commerzbank, citing February’s US Mint sales.

In China meantime, the world’s second-largest gold buying nation, today’s closing price for the Shanghai Gold Exchange’s most popular gold forward contract was 320 Yuan per gram, equivalent to just under $1600 an ounce, a premium of around $20 an ounce over the international spot price.

“Most likely we will see banks bringing the metal onshore to take advantage of the wide spread,” one Hong Kong-based trader told newswire Reuters this morning.

Gold dealers in world number one India meantime reported light demand as the Rupee touched a two-month low against the Dollar.

Silver dipped below $28.70 an ounce this morning, while other industrial commodities were broadly flat.

In the US, interest rates are likely to stay near record low levels until the economic situation improves significantly, Federal Reserve chairman Ben Bernanke said in a speech on Friday.

“In the current environment,” Bernanke told an audience in San Francisco, “both policymakers and market participants widely agree that supporting the US economic recovery while keeping inflation close to 2% will likely require real [inflation-adjusted] short-term rates, currently negative, to remain low for some time.”

In the UK meantime the Bank of England could announce a further £25 billion of quantitative easing when it makes its latest policy decision this Thursday, according to a note from Standard Bank.

The nominee to be next Bank of Japan governor, Haruhiko Kuroda, said Monday the BOJ “will do whatever we can do” to end deflation in Japan.

Speaking at his confirmation hearing, Kuroda added that the central bank has not bought enough assets and should buy longer-dated bonds, saying it should send a clear anti-deflationary message.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

USDCAD stays above a upward trend line on 4-hour chart, and remains in uptrend, the fall from 1.0341 is likely consolidation of the uptrend. As long as the trend line support holds, the uptrend could be expected to continue, and next target would be at 1.0400 area. On the downside, a clear break below the trend line support will suggest that lengthier consolidation of the uptrend from 0.9932 is underway, then deeper decline to 1.0225 area could be seen.

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