InvestMacro Forex News

By MoneyMorning.com.au

The Federal Reserve Bank gets a lot of press. But Harry Dent has another idea about what investors should pay attention to.

‘What is more important than all the central banks of the world?‘ he asked the attendees at the Liberty Forum in sunny St. Kitts. The crowd, perhaps under the tranquilizing effect of the tropics, offered no guesses.

‘Babies,‘ Harry said.

There are many ways people make their guesses about what might happen in the world. Some people gaze at the stars. Some follow oddball theories of dead economists. Harry Dent – author, newsletter writer, forecaster of market trends – watches babies.

‘What I do is look at demographics,‘ Harry said, adding specifics, ‘and the predictable things people do as they age.‘

And that all starts with babies. On the next slide, Harry produced a picture of a cute little bundle in a blue blanket. ‘What’s going to happen to this baby? He’s going to grow up. He’s going to enter the workforce at age 20. He’s going to start earning money, spending money, borrowing money,‘ Harry said. ‘Does anyone know at what age you spend the most you’ll spend in your life?‘

That would be age 46. Here was something that I thought was interesting. Harry mapped out the typical life cycle of household spending in the chart below.

Click to enlarge

Childbirth comes at age 28. Maximum spending on groceries tends to hit at age 41, when that kid becomes a teen. ‘It’s a proven medical fact,‘ Harry said, ‘that the highest calorie intake happens during those teenage years.‘ (I can vouch for this. It seems all my wife and I do is go grocery shopping.)

Spending on furniture peaks at age 46. College tuition spending at age 51. And the most you’ll ever spend on a car is when you turn 53 (you finally get that Cadillac!). ‘This is usually the last major durable good purchase people make. After this, spending goes down much faster,‘ Harry said. ‘And so does borrowing. Old people don’t borrow money. They pay down debt.‘

Life insurance spending peaks at 58, travel expenses at 60 and cruise ship spending at age 70. ‘People finally say, ‘Put me on a cruise ship, stuff me with food and booze and I’m happy. No jet lag. No hassles,’‘ Harry says.

‘All of these things happen from cradle to grave, predictably,‘ Harry summed up. I’ve always had an armchair interest in these sorts of stats. Of all the things you could use to try to predict the future, the demographic trends seem to make sense. And they are hard to change.

From this kind of analysis, Harry teases out what might do well and what might not. Short auto stocks and buy RVs is one example Harry offered. Why? We’re past the peak on auto spending. But for RVs, the maximum spending happens between ages 53-60. We’re entering the sweet spot.

‘I’d be building nursing homes and assisted living facilities for decades,‘ Harry added. ‘That’s where I’d be investing.‘

Regards,
Chris Mayer,
Contributing Editor, Money Morning

Ed Note: A Reasonable Way to Predict the Future was originally published in The Daily Reckoning America.

Join Money Morning on Google+

By MoneyMorning.com.au

By MoneyMorning.com.au

Those who have jumped up and down fretting about the possibility of rising Aussie interest rates must feel a little sheepish this morning.

Yesterday the Australian Bureau of Statistics (ABS) released the latest unemployment and employment numbers.

The unemployment rate edged up from 5.7% to 5.8%.

The number of employed people fell by 22,600.

While the unemployment and employment rates aren’t the be all and end all, they are a key set of numbers analysts and economists like to watch. And they don’t like what they see.

The Aussie Dollar dropped more than a cent last night. The reason? Forecasters now see a higher chance of the Reserve Bank of Australia (RBA) cutting interest rates.

You know what that means…

If you’ve ever seen the movie All the President’s Men you’ll know that it’s a brilliant one.

It’s a docu-drama retelling the events of the Watergate scandal in 1972. The movie stars Robert Redford and Dustin Hoffman as legendary journalists Bob Woodward and Carl Bernstein.

The movie also portrays the anonymous character known as ‘Deep Throat’. He was the inside man who led Woodward and Bernstein on the trail that ultimately led to the White House. It also led to the resignation of US president Richard M Nixon.

We mention this story because in one memorable scene in the movie, ‘Deep Throat’ tells Robert Redford’s character, Bob Woodward, to, ‘Just follow the money.‘ In other words, cases of corruption always involve money. If you follow the money you’ll find the culprit.

You can apply the same advice to financial markets – just follow the money. Only in this case, we’re not interested in where the money has come from; we want to know where it’s going.

Don’t be a Lemming

Despite claims that asset bubbles are about to pop, the market keeps fighting off the bad news and continues to rise.

Two days ago the mainstream press was screeching about a 1.5% fall for the Aussie stock market. Apparently that fall had wiped $24 billion in value from stocks.

Well, it didn’t take long for the market to recover from that supposed disaster. Thanks to yesterday’s 1.2% run-up, stocks are back above Monday’s close.

We can only hope you weren’t one of the lemmings who read the bad stock market news and followed most mainstream investors by selling stocks.

Because if you did you’ve missed out on an 80-point rally.

But don’t beat yourself up too much. If you haven’t bought back into the market, it’s not too late. All you have to do is follow the money and you’ll see exactly where it’s is flowing from, and where it’s flowing to.

That should help you realise that the worldwide asset bubble that started in 2009 is still in full effect. And if we’re right about its impact on stock markets, this bubble still has much further to go.

Where is the Money Going?

You’ve heard the story. You’ve probably heard it more than you care to. Central banks are creating asset bubbles left, right and centre.

It’s a great piece of information. It’s a useful piece of information. But without the natural follow-up it’s also completely useless.

It’s one thing to identify an asset bubble, but what’s really important is the ability to take advantage of that bubble to potentially build profits. That’s what we mean when we talk about following the money.

Everyone knows where the money is coming from. The next step is to find out where it’s going. The answer worldwide is clear. Low interest rates have forced and are forcing investors to buy stocks.

And now that will start to feed through to the Aussie market in the same way it fed through to overseas markets.

One reason is that yields on dividend-paying stocks are typically higher than the interest rate on bank deposits. Investors would rather take on the extra risk of owning stocks to get the higher yield rather than have inflation eat away at their cash.

Second, you can get capital growth from stocks. You can’t get that from cash. If a company can grow its business it should lead to higher revenues, higher profits, and hopefully higher dividends. That’s a story we’ve followed in Australian Small-Cap Investigator for the past 18 months.

Many people I speak to are amazed that so many small-cap stocks are profitable and pay an ongoing and reliable dividend. And because small-cap stocks start from a low base they typically (but not always) have much further to go.

Of course, they’re also generally riskier than large-cap stocks, but if you like speculating then the small-cap sector is just about the best place to do it.

Aussie Stocks Heading to 7,000

This isn’t to say the small-cap sector will be the only place to benefit from the money trail. If the Aussie market follows the same trend as overseas markets you can expect other stocks to benefit too.

Remember, the Aussie stock market lagged most overseas markets. Part of that was due to the higher Aussie dollar, worries about China, and falling commodity prices.

Our bet is that the market will worry less about these things this year…especially if interest rates fall further and the Aussie dollar edges closer to US$0.80.

This is why we continue to put money on the Aussie market hitting 7,000 points next year. That would be 32% above the current level. You may think that seems like a big move, but in the context of low interest rates it’s par for the course when you look at overseas markets.

Make no mistake, it’s a risky bet. If interest rates don’t fall then stock prices could. That may happen if company earnings and dividends don’t rise.

But for now, and for at least the next two years, our advice is to follow the money. Everyone can see where it’s coming from, but amazingly in Australia, despite what has happened overseas, few are prepared to admit where it’s going – and that’s straight into stocks.

Cheers,
Kris+

From the Port Phillip Publishing Library

Special Report: The ‘Wonder Weld’

Join Money Morning on Google+

By MoneyMorning.com.au

Source: Tom Armistead of The Energy Report  (1/16/14)

http://www.theenergyreport.com/pub/na/five-ways-to-play-the-end-of-the-natural-gas-renaissance-bill-powers

Shale gas is not the foundation of U.S. energy security that conventional wisdom claims, says Bill Powers in this interview with The Energy Report. But as shale gas peters out, the law of supply and demand will drive gas prices up. Powers, an independent analyst and author of “Cold, Hungry and in the Dark: Exploding the Natural Gas Supply Myth,” sees a good future for gas-leveraged junior companies, and shares his top ideas as demand and price skyrocket in tandem.

The Energy Report: Bill, you published a book six months ago, “Cold, Hungry and in the Dark: Exploding the Natural Gas Supply Myth,” questioning the conventional wisdom of shale gas. Have events supported your thesis?

Bill Powers: Yes, absolutely. Several of the predictions I made in the book have come true since the book hit the shelves in July. First, we’ve seen numerous shale plays head into decline. We’ve seen big declines from the Haynesville as well as the Barnett. The Fayetteville is in decline; there have been further declines in the Gulf of Mexico and Wyoming. But what has really changed is the North American natural gas market has become extremely unbalanced, which was what I had predicted would come to pass sometime in the 2013–2015 timeframe. The cold weather over the last six weeks has accelerated what I have been talking about in the book.

TER: How so?

BP: I predicted that gas prices would lead to layoffs and industry supply disruptions, and that’s already occurred. We’ve seen paper mills in New Hampshire lay people off because natural gas prices in New England were north of $50/million Btu ($50/MMBtu) for a period and remain very high. We’ve also seen incredibly high prices in New York, and this is a time of record production coming out of the Marcellus. These are really the first examples of the violent price spikes and industrial shutdowns we will see in other parts of the country.

Across the U.S. over the next several years, I predict we will see spikes of very high prices, which will fall back to higher levels than they previously reached. Then, as the next weather event comes, prices will spike to new highs. That has already happened in New England and other areas of the Northeast in part because those areas are supply-constrained due to limited pipeline availability, but also because of increased demand.

The Northeast has also had several nuclear power plants close. Just recently the Vermont Yankee closed. Nuclear power plants have closed over the last decade or so in Maine as well as Connecticut. Much of this capacity has been taken up by increased natural gas demand for electricity generation. So you’ve had constrained supply because of the limited pipeline capacity and increased demand. In addition to the new demand from electricity generation, significant new demand in the Northeast has come from people converting from heating oil to natural gas furnaces.

Also, there’s been a huge disappointment in supply coming from Canada into the Northeast U.S. because Sable Island production offshore Nova Scotia has been so low compared to some very lofty original expectations. We’ve just had Deep Panuke come on in late 2013 after several delays and many cost overruns, but the pipeline that services those offshore fields in Nova Scotia is not even close to full, and the fields will be depleted fairly rapidly over the next three to seven years. This will be a period of continued supply constraints for New England. The Marcellus and Eagle Ford are the only two fields that are still growing, and I expect the Marcellus to flatten out in 2014. Additionally, we are going to see supply constraints throughout much of the rest of the United States over the next several years.

TER: The pipeline companies have acknowledged that there’s a supply constraint. Haven’t any of them made plans to extend lines to the Northeast?

BP: Yes, that is happening, and some of them are probably going to increase throughput from the production growth in the Marcellus, but there will be significant calls on Marcellus production, which is probably going to peak this year.

The U.S. Energy Information Administration late last year put out a white paper that talked about how gas production is becoming more efficient. But this white paper did not include the Barnett Shale, which is in steep decline now. It’s true, efficiencies have been gained over the last several years, such as the way fracking has changed, and operators are becoming more efficient in fracking, with longer laterals. But what is really happening is the completion of the inventory of previously drilled wells.

When companies ramp up their drilling activity, they often will drill more wells than they actually complete due to lack of pipeline capacity. Just recently, there have been about 200 wells in the Marcellus that were waiting for pipeline connections or to be fracked. A lot of those wells have been fracked over the last six months and the inventory continues to go down. I believe that inventory will be depleted by Q1/14, and given the drilling activity, the very high decline rates of the wells and the number of rigs running in the Marcellus, further growth is not supported. The Marcellus is still a very significant field, the biggest in the United States. When it peaks out it will probably plateau for a while, depending on activity levels, but it still will not be able to make up for falling production in nearly every other region in the United States. When this happens, we will see price spikes more frequently.

A really good example of the damage high prices can cause outside of the Northeast is Mexico. In August 2012, landed LNG prices in Mexico were $3.17/MMBtu. In August 2013, Mexico had landed LNG prices over $16. Despite its increase in gas production, demand is outstripping supply. Mexico is having a gas crisis that has forced the closure of numerous cement, steel and glass plants. There have been thousands of layoffs in Mexico because of extremely high natural gas prices. There’s not yet the pipeline connectivity into the United States to alleviate this crisis. What we’re seeing is very high LNG prices, and as the U.S. needs to go back in to the world LNG market, this is going to impact U.S. consumers over the next several years. In my book I completely refute the notion that the U.S. will ever become a significant exporter of LNG and recent events in the Northeast show why.

TER: So, you’re still expecting the gas boom to peter out in the next five to seven years? Is that still the timeframe?

BP: I think it’s happening sooner than that. Production has been flat in the United States since early 2012. Canada soon will start to export gas to Asia through British Columbia, and the Marcellus is likely to peak in 2014, but despite gas prices that are now over $4/MMBtu, you are still seeing very limited activity for gas-directed drilling. Until that picks up, U.S. supply is going to go down; how far down is still open, but the market is becoming increasingly unbalanced. Shale gas focused companies still cannot generate free cash flow at today’s prices and many have severely damaged balance sheets due to the weak prices of recent years. For example, Chesapeake Energy Corp. (CHK:NYSE) just sold 130 million cubic feet per day of production, 40 uncompleted wells and 200,000 acres in the Marcellus, to Chief Oil & Gas (private) because Chesapeake is financially distressed. It still cannot make money at today’s prices and it had to sell very good acreage to Chief at a fire-sale price.

People might think this is a one-off or this is just one company, but Chesapeake is the second largest producer of natural gas in the United States. It’s the largest shale gas producer in the world. It has drilled more shale gas wells than anybody else. Its gas production declined 10% in 2013 according to its most recent investor presentation and it will fall again in 2014, simply because the company has completely given up drilling gas wells.

It’s not just Chesapeake who fired its CEO, replaced several members of its board, largely walked away from the shale gas business and fired 20% of its workforce. The same thing happened with Encana Corp. (ECA:TSX; ECA:NYSE). It fired 20% of its workforce along with its CEO. EOG Resources Inc. (EOG:NYSE) also has walked away from the shale gas business. In 2013 its natural gas production declined 15%. This is not a small company; it is a top-20 producer in the United States. This is very significant; you’re seeing the biggest producers largely turn their back on shale gas. Without these large producers accelerating drilling more wells, U.S. production will head into a significant decline.

Now that the inventory of wells in the Marcellus is largely depleted, there’s very little chance that U.S. production is going to remain flat in 2014. It will probably decline. This is really going to put upward pressure on prices. The spikes in New England and New York have been largely weather-related, but this is going to happen more and more often, and it will happen on less severe weather. It will happen in other areas of the country, such as California, where the San Onofre nuclear plant has shut down. This summer, when it gets hot in California, we may see spikes similar to what happened at the turn of the millennium.

Up to 50 gigawatts (50 GW) of U.S. coal-fired generation will be shut down in the next two years to comply with MATS, the Mercury and Air Toxics Standards that are being enforced by the EPA. That’s between 15% and 20% of U.S. coal-fired generation. There will be more demand for natural gas for electricity generation. Also in 2013, five nuclear plants have closed. These nuclear plants serve a big part of the electricity base load. A lot of that electricity generation is now being pushed toward natural gas. You’re seeing the market become more and more unbalanced. This is only going to be exacerbated as Canada diverts more of its gas exports to Asia through British Columbia than to the United States because the prices in Asia are well into the double digits. Even with the recent spike in U.S. gas prices, it’s still far more economic to send it to Asia. That will begin later in 2014 when the Kitimat LNG facility opens.

TER: Natural gas prices in Canada and the U.S. have been on a roll, but they had a good run above $4/MMBtu for a month last spring too. They have not been able to sustain above $4/MMBtu since August 2011. What’s your forecast for 2014?

BP: I expect prices to move between $5–7/MMBtu simply because we are seeing huge drawdowns in the storage. We had a record withdrawal in the United States for the month of November. We had the biggest withdrawal of all time—285 billion cubic feet (285 Bcf)—in December, which happened before winter even set in. In January, we expect to see another record draw. I believe by this spring we will see prices close to $5/MMBtu, and they will move higher later in the year because it’s going to be very difficult to refill storage.

We should see storage fall well below last year’s end-of-winter low. We are more than 500 Bcf below last year’s levels. This would put us at a very low level of storage at the end of the winter heating season. I believe this will push prices somewhere between $5–7/MMBtu later this year. Then we will see a consistent march higher over the next two to three years and we will see spikes, depending on the weather. How high prices go will depends on the severity of it.

Right now, there are very few companies that make money even at $4/MMBtu. We saw that from the financial statements of all the big shale gas players; even at today’s prices, it’s still not that economic, so we will not see increased natural gas-directed drilling until prices are closer to $6/MMBtu. This leads us to another issue that I think is not widely recognized: In 2008, the last time we saw a sustained spike in natural gas prices, we had 1,300 to 1,600 rigs drilling for natural gas and about 350 drilling for oil. Now that is completely reversed in the United States. For companies to drop oil-directed drilling rigs and move them to natural gas, we will need to see some significantly higher prices. I think that will lead to further imbalances.

TER: Baker Hughes Inc. (BHI:NYSE) has acknowledged that the number of gas and oil rigs is no longer the measure of production that it used to be because so many laterals are running off each pad now. Are you accounting for that?

BP: Yes, absolutely. While there is no doubt rigs have become more efficient and pad drilling has had a lot to do with that, a factor that is very difficult to quantify is the quality of rock into which these laterals are being drilled. Anyone who’s familiar with the oil and gas business can tell you that the best wells will be drilled first and that you will drill into progressively lower-quality rock. While you can drill numerous wells off one pad, you still are going to need more rigs as you drill into lower-quality rock. We’ve seen increases in production in areas like the Marcellus, but a lot of this has to do, as I said earlier, with the completion of inventoried wells—wells that were drilled but waiting on completion. We are going to need a lot more activity in natural gas-directed drilling to keep production flat. At today’s activity levels I don’t see it and due to the high decline rate of these horizontally drilled wells and the length of them, it’s going to require more and more activity. This will happen only at significantly higher prices.

TER: Canada’s gas exports are blocked to the south, east and west. What does that mean for the future of its gas producers?

BP: Blockage is not the problem. The U.S. has imported gas from Canada for over 35 years, but Canadian production had declined significantly over the past 12 years before flattening out in 2013 at around 13 Bcf. U.S. exports were down substantially over the last five years, so there’s plenty of Canadian export capacity into the United States; it’s just not being used because of low prices and the significant decline in Canadian production. There’s plenty of Canadian export capacity into the United States, whether it’s from the Alliance Pipeline or from Nova Scotia via the Maritimes Pipeline. That’s nowhere close to filling the hole due to very poor exploration results offshore Nova Scotia and resistance to the further exploration of shale in New Brunswick.

The reason Canada will greatly reduce its exports to the United States over the next five years is it’s building out an enormous capacity in British Columbia to export gas to Asia. Petronas bought Progress Energy Canada Ltd. for $5 billion ($5B) and is building an $11B facility in British Columbia to export gas to Asia. We’re going to see numerous applications for LNG export facilities approved in the next several years, and we’re going to see a huge buildout in British Columbia to export gas from the Horn River Basin and the Montney to Asia.

We’re also seeing booming demand for Canadian users. Demand for the oil sands has gone from about 1.5 Bcf per day (1.5 Bcf/d) toward 2 Bcf/d. We’ve seen fertilizer plants open in Canada due to the low natural gas prices and the high prices for fertilizer. Due to the decline in Canadian production over the last 12 years and increased demand in exports to Asia, the United States will be left with a very unbalanced market. It’s certainly going to lead to higher prices, because Canadian producers just now have been able to stabilize their production, but only after a significant fall and a pickup in activity.

TER: How will the opening of Mexico’s oil and gas industry to foreign investment affect this market balance and the companies you follow?

BP: The law has changed, but it’s still unclear what type of terms will be offered to foreign companies. Iraq offers a useful comparison. Iraq has had difficulty attracting large companies to invest because the terms are so difficult. It will be interesting to see whether the Mexican government will allow foreign companies to make money in Mexico. If the terms are very difficult, it will not be able to attract investment. But, if it allows reasonable terms, I think there are plenty of companies that would be able to help stabilize Mexico’s declining oil production and probably grow its natural gas production significantly, because the Eagle Ford Shale extends into northern Mexico. But as that is an area where there has not been any foreign investment, it will be interesting to see how that plays out.

TER: Do any of the companies that you follow look as if they might get involved in the Mexican industry?

BP: The service companies have already been active in Mexico for years under contracting. I think you will see companies such as Calfrac Well Services Ltd. (CFW:TSX) and Trican Well Service Ltd. (TCW:TSX) increase their Mexican business as overall activity levels increase in Mexico. It’s difficult to see at this early stage what independents would be active in Mexico. A lot of this will depend on what terms are being offered. The service companies will certainly move toward some of the more difficult basins, such as the Chicontepec, which has been very, very difficult. It’s a tight gas field. And as other fields similar to that, other tight gas plays and the Eagle Ford Shale in northern Mexico get developed, this is certainly going to help North American-based service companies such as Trican and Calfrac.

TER: Have any technological innovations in the last year or two improved the prospects of success for small E&P companies?

BP: What I think has helped, and one of the things we’re seeing, is the way the wells were fractured in the Bakken. Rather than fracking outward, away from the wellbore 1,000 feet (1,000 ft), Bakken fracks are now designed so there’s a larger perforation, but the fracks do not go as far out from the wellbore, only a few hundred feet. The idea is that there’s a lot of reservoir that can be drained that is very close to the wellbore.

This will help improve the economics of fracturing wells, because for smaller companies drilling $8-million ($8M) wells, these are expensive ventures. Things that can improve the recovery per well per frack stage certainly will help the smaller companies grow as the wells become more economic.

What is exciting for the smaller companies is that with oil prices $92–100/bbl, and gas as it moves above $5/MMBtu later this year, cash flows should improve significantly. I think this will lead to much more activity for the smaller companies and will definitely lead to some exciting developments and a lot more investor interest in the space.

TER: Can you name some of the companies that you’re excited about right now?

BP: Certainly. In Canada I have three names that are very exciting. Bellatrix Exploration Ltd. (BXE:TSX)has an excellent portfolio of assets. It has grown production. This is a company that will benefit from higher gas prices; it is very leveraged to gas prices. It’s continuing to develop its Duvernay Shale. It acquired a company last year that temporarily depressed its stock price. I think that this company should be able to grow its production significantly over the next several years and do it profitably.

A company that will probably sell itself over the next six months or so is Advantage Oil and Gas Ltd. (AAV:TSX; AAV:NYSE). It has really proven out its Glacier play in the Montney over the last several years. Through this winter’s drilling season it should be able to prove up quite a bit more acreage. This will really help it. The higher gas prices are certainly going to help Advantage. As prices move higher, this is a company that should have a very good year in 2014.

I’m a director and shareholder of Arsenal Energy Inc. (AEI:TSX). We’re active in the Bakken in North Dakota as well as the Deep Basin of Canada. I’m very excited about what I’m seeing going on there. I’m also excited about a couple companies in the United States. One is Southwestern Energy Co. (SWN:NYSE). It did take a write-down on its Fayetteville Shale assets last year. However, this is a very profitable business, especially with higher natural gas prices. It still has more than 3 trillion cubic feet (3 Tcf) of proven reserves in the Fayetteville and has had very good success in the Marcellus. This is a company that can make a great deal of money at today’s prices, and it’s big enough that I think institutional investors will be very attracted to Southwestern Energy due to its leverage to higher natural gas prices.

The other one in the United States that I really like is Denbury Resources Inc. (DNR:NYSE). It’s very leveraged to the price of oil. It has been growing its production and just initiated a dividend. It has also been actively buying back its own shares. It generates a significant amount of free cash flow. Over the next several years, that free cash flow is going to grow significantly, and there’s very little exploration risk for Denbury because it is buying depleted fields. It has been able to bring these fields back to life through CO2 injections. Those are five companies I think have a very bright 2014.

TER: You’ve been very forthcoming. Do you have some closing guidance or advice for investors?

BP: The resource sector is very difficult and requires quite a bit of research, but I think prices, depending on the company, are going to be very helpful. Some companies that have struggled over the last several years due to weak natural gas prices will have a very bright future. There are a lot of opportunities for companies to grow cash flow per share and production per share and do it without really increasing their capex. This is a very exciting time to be in the space. As always, I think for investors who can spend some time and get to know some of the companies I just mentioned and plenty of others, there are a lot of opportunities out there.

TER: Thank you very much. This has been a very interesting conversation.

BP: Thank you. It’s been great being here.

Bill Powers is an independent analyst, private investor and author of the book “Cold, Hungry and in the Dark: Exploding the Natural Gas Supply Myth.” Powers is the former editor of the Powers Energy Investor, Canadian Energy Viewpoint and U.S. Energy Investor. He has published investment research on the oil and gas industry since 2002 and sits on the Board of Directors of Calgary-based Arsenal Energy. An active investor for over 25 years, Powers has devoted the last 15 years to studying and analyzing the energy sector, driven by his desire to uncover superior investment opportunities. Follow him on Twitterfor ongoing updates.

Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Interviews page.

DISCLOSURE:
1) Tom Armistead conducted this interview for The Energy Report and provides services to The Energy Report as an independent contractor. He or his family owns shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Energy Report: None. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Bill Powers: I or my family own shares of the following companies mentioned in this interview: Arsenal Energy Inc. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise – The Energy Report is Copyright © 2014 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Energy Report. These logos are trademarks and are the property of the individual companies.

101 Second St., Suite 110
Petaluma, CA 94952

Tel.: (707) 981-8204
Fax: (707) 981-8998
Email: [email protected]

By CentralBankNews.info
    Egypt’s central bank held its key interest steady, as expected, saying the current rates were appropriate “given the mixed balance of risks surrounding the inflation outlook and the GDP outlooks at this juncture.”
    The Central Bank of Egypt (CBE), which surprised economists by cutting its rate in December, also said it saw limited risks to inflation due to weak economic growth.
     “The pronounced downside risks to domestic GDP combined with the persistently negative output gap since 2011 will limit upside risks to the inflation outlook going forward.”
    The CBE, which cut rates by 100 basis points in 2013, underscored its determination to boost economic growth despite inflationary pressures with its December rate cut.
    Egypt’s inflation rate eased to 11.7 percent in December from an almost-four-year high of 12.97 percent in November. Core inflation was steady at 11.91 percent from 11.95 percent in November.

Article by Investazor.com

The German data was posted today in line with the expectations. The German CPI rose with 0.4%. ECB’s Weidman said today in his speech that German economic upswing is continuing this year and next.

The price of futures German DAX30 has crossed above the rejection line of a Rising Wedge and plunged back under it pretty fast. The corrective move was signaled, on the 60 minutes chart, by the 24 periods RSI which went overbought.

If the price will fall under the current support level, 9700 (which is also a round number), we expect for the down move to continue all the way to the next important support at 9612. The fall could also be confirmed by a drop in the RSI under the 62 level (which is a good support).  A breakout above the 9772 high will invalidate this setup, and the upside target will be 9800.

Trigger Price: 9700     Take Profit: 9612      Stop Loss: 9742

The post DAX30 Trade Setup – Bulls could take the Lead appeared first on investazor.com.

By Jeff Clark, Senior Precious Metals Analyst, Casey Research – Contrarians’ Wildest Dream Coming True

As most readers know, Doug Casey’s most notable characteristic as an investor is his highly successful contrarian nature. It’s how he bagged some of his biggest wins—not just doubles and triples, but 10- and 20-fold returns.

There’s only one way to realize these kinds of gains: You must buy when the asset is out of favor. Buying an investment that has already run up is at best chasing momentum and at worst a portfolio wrecker.

So, what’s the greatest contrarian investment today? Consider this pictorial data…

At the end of 2013, the sector with the highest level of pessimism, as measured by SentimenTrader, was the gold industry. It actually registered “zero” in mid-December.

Meanwhile, price-to-earnings ratios of the 15 largest gold producers are at their lowest level in 14 years, and less than half what they were when the bull market got under way in 2001.

The ratio of gold to the S&P 500 Index is currently at 0.66, its lowest level since the market meltdown of 2008.

The next chart, from our friend Frank Holmes at US Global Investors, measures gold’s 60-day percent change in standard deviation terms. It shows the metal’s actual gain or loss in relation to its average price change—and it’s never been this low.

Another chart from US Global Investors demonstrates that last year’s decline in the Philadelphia Gold and Silver Index (XAU) was the greatest on record, and further, that consecutive annual declines are rare. The XAU is one of the two most-watched gold stock indices in the world, and in 30 years it’s never had a losing streak of more than three years.

Also, JPMorgan noted last week that speculative positions in gold (defined as net longs minus shorts) dropped to record lows at the end of 2013.

(Source: Zero Hedge)

Finally, the XAU/gold ratio is at its lowest point in history, and the HUI/gold ratio—the other major gold stock index—shows that gold stocks are now cheaper than they’ve been since the beginning of this secular bull cycle in 2001.

Of course, just because something is cheap today doesn’t mean it will soar tomorrow. But given gold’s historical role as money, butted up against monetary recklessness today, the outcome seems all but certain.

As Casey Editor Kevin Brekke recently put it: “We are in this sector because of our belief that monetary and fiscal excesses have consequences. The only variable is the timing. We may not know where we’re going in the short term, but the long term is inevitable.”

And right now, some of the most successful resource speculators and investment pros are seeing the early hallmarks of a turnaround in the gold sector—which makes this the best time to invest in the yellow metal as well as top-quality, undervalued gold mining stocks.

New to the gold market? Don’t despair: the FREE 2014 Gold Investor’s Guide, a Casey Research special report, gives you all the basics on precious metals investing. Click here to get it now.

By George Leong, B. Comm.

Here we are in just the third week of 2014 and the media is all over the stalling in the stock market, saying that perhaps we are at the end of the bull stock market that is now in its fifth year.

I’m hearing about the low level of the S&P 500 Volatility Index (VIX), also known as a measure of fear in the stock market. Yes, it’s low and perhaps the stock market is too relaxed, but that doesn’t always imply that we are headed for a stock market correction.

Traders are also concerned with the lack of buying so far in January, which, if it ends in the red, could suggest a down year for stocks based on historical tendencies—albeit, I doubt that.

We are seeing some stalling on the charts, as the new approach to investing this year appears to be one of prudence and not bidding the stock market higher until we see evidence of a healthier economy, stronger jobs creation, and earnings/revenue growth from corporate America.

I’m not surprised by this shift, given the massive stock market gains in 2013.

The impact of the Federal Reserve and its proposed tapering timeline appears to be less of a factor this year, as it is expected that the tapering will continue. The uncertainty surrounding tapering that drove the erratic trading of 2013 is gone; traders are now discounting in the tapering. (See “Stock Market’s Dependence on Easy Money Weakening?”)

My view is that as long as the withdrawal of the bond buying is slow and the economy delivers stronger and steady growth, market participants won’t be that upset.

A slight rise in long-term rates and the 10-year bond yield is not going to hurt the stock market that much, either.

In fact, I like a return to normalcy in the stock market, where gains are determined by the progress of the economy and earnings, and not merely driven by what the Fed does.

On the chart, the S&P 500 shows a clear breakout at the top multiyear resistance level. Now, the breakout may be false due to the lack of active participation as shown by the declining volume, but so far, it has held up pretty well, contrary to the overbought condition.

Some are arguing that the stock market is vulnerable, as it’s in its fifth year of the bull market and interest rates are heading higher around the corner.

Yet take a look at the two charts below. Note the long, extended bull market runs in the previous decades in spite of much higher interest rates that were at times in the double-digits, as shown by the green line in the first chart below.

            Chart courtesy of www.StockCharts.com

Stocks steadily rose from 1980 to 2000 before the technology meltdown in early 2000—that’s a 20-year rising stock market. Of course, we will face stock market corrections along the way, but the overall direction could continue to be higher.

            Chart courtesy of www.StockCharts.com

And this may be the case at this juncture. We could be in the midst of another extended bull market that could easily last in excess of five years. In fact, this could be the new norm.

In this case, until we see a reversal, investors should be in equities, riding the wave higher. If you want more of a risk-managed strategy, play the continued bull market via the use of bullish call options on the S&P 500, Dow Jones, and NASDAQ.

This article Could This Bull Market Last a Decade—Or Longer? was originally posted at Profit Confidential

GOLD Daily

Gold has turned bearish at the start of September, after the break through the rising trend line of a corrective channel. We knew at the time that it was an important signal for a change in trend, which means that bearish price action is back in play which also accelerated at the end of December, so we assume that price is moving down in larger wave 5) heading through 1180 June low. With that said, we think that current bounce is most likely just another corrective rally in the middle of a bearish trend. Resistance is seen around 1250/1270 from where new sell-off could occur.

Gold Daily Elliott Wave Analysis

GOLD 4h

Gold has reached a new swing high around 1254 in this week from where we can see some bearish price action. At the moment a decline from 1254 is definitely still not enough strong and big to confirm end of a three wave (a)-(b)-(c) corrective rally. But further weakness today and tomorrow, back to 1216 wave (b) zone will suggests that new sell-off on gold is in progress.

GOLD 4h Elliott Wave Analysis

Written by www.ew-forecast.com

14 days trial just for €1 >> Register Here

AUDUSD: Bearish, Deeper Weakness Triggered

AUDUSD: With a third day of downside pressure seeing AUDUSD breaking through its key support at the 0.8822 level, further weakness is envisaged. Support lies at 0.8750 level, its psycho level where bulls may come in. However, if that level fails to hold, expect further decline to occur towards the 0.8700 level, its psycho level and subsequently the 0.8650 level. Its daily RSI is bearish and pointing lower supporting this view. On the upside, resistance resides at the 0.8915 level, its Jan 16’2014 high followed by the 0.9000 level, its big psycho level with a cut through here paving the way for a run at the 0.9050 level. Further out, upside objective comes in at the 0.9166 level, its Dec 10 2013 high. All in all, the pair remains biased to the downside on further weakness.

Article by www.fxtechstrategy.com

By CentralBankNews.info
    Serbia’s central bank held its policy rate steady at 9.50 percent, repeating that it expects inflation to return to the bank’s tolerance range in the coming period and the bank is “determined to gear monetary policy at stabilizing inflation at that level on a long-term basis.”
    “Though inflationary pressures and expectations have both lessened significantly, the Executive Board accentuated the need for a cautious monetary policy considering the risks emanating from movements in international financial markets, and in particular the Fed’s decision on tapering the quantitative easing program,” the Bank of Serbia said.
    On Tuesday, the central bank issued a statement saying a weakening of the dinar currency over the last three days did not indicate any “durable disturbances in the FX market” but rather an expected response by the currency to a seasonally higher demand for foreign exchange by local companies and the Fed’s decision to start reducing its asset purchases from January.
    Last year the Serbian central bank cut its rate by 175 basis points as inflation slowed from 12.8 percent in January to a year-low of 1.6 percent in November. In December inflation rose to 2.2 percent but remains below the central bank’s tolerance range of 2.5-5.5 percent around a 4.0 percent midpoint.
    The central bank said on Monday that the current undershooting is largely due to a 2.5 percent decline in food prices in 2013, shown by the fact that core inflation – which excludes food, energy, alcohol and cigarettes – was 4.2 percent in December. The main contributor to inflation last year was administered prices, which rose 10.4 percent.
    Inflation is expected to rise moderately in coming months toward the bank’s target, driven by higher administered prices and a one-off impact of a rise in value-added-tax on some goods in January. Lower food production costs and weak demand will continue to have a disinflationary effect.
    In today’s statement, the central bank said a consistent implementation of fiscal measures, together with the weak inflationary pressure, will help increase the country’s resilience to external risks and aid the economic recovery.
    Serbia’s dinar currency was resilient to pressure on emerging market currencies in the middle of 2013 after global investors started to withdraw funds in anticipation of the U.S. Federal Reserve’s reduction in its asset purchases on improving growth prospects. Nevertheless, the central bank often expressed its concern over the consequences of a sudden capital outflow and was cautious in cutting rates.
    The dinar appreciated by 2.5 percent to the U.S. dollar in 2013, ending the year at 83.0 to the dollar, up from 85.13 at the end of 2012. But in the first few days of January, the dinar fell, triggering the central bank’s statement on Tuesday. Today the dinar was trading around 84.90, down 2.2 percent.
    The central bank also repeated yesterday that it would intervene, both on the sale and purchase side of the foreign exchange markets when necessary to mitigate excessive volatility and ensure stability.
    Serbia’s economy has been improving in recent months following two years of recession with Gross Domestic Product expanding by 1.4 percent in the third quarter from the second quarter for annual growth of 3.70 percent.
    The central bank forecasts growth of 1.5 percent this year and growth of 2 percent in 2013.

     http://ift.tt/1iP0FNb