InvestMacro Forex News

A key economic index turns south

By Elliott Wave International

The federal government defines the Producer Price Index (PPI) as “the average change over time in the selling prices received by domestic producers for their output.”

With help from the Federal Reserve’s massive inflationary policies, the PPI has climbed even as the economy began to fall in 2008-09.

All the while, the financial media persisted with stories of an economic recovery. EWI analysts offer an independent perspective.

The New York Times declares, “Economic Gloom Starting to Lift.”

Corporate America, however, is not so sure. This chart of producer prices [wave labels removed] probably illustrates why. After years of largely uninterrupted growth, the Producer Price Index appears to be on the cusp of a critical reversal that should turn into a steady decline in wholesale prices.

The latest Financial Forecast published Dec. 7, and the latest evidence reinforces the message of the chart’s title. The PPI elevator has already descended to a lower floor.

The Labor Department said its seasonally adjusted producer price index slipped 0.8 percent last month, the second straight decline.

November’s drop in wholesale prices was the sharpest since May.

Reuters, Dec. 13

The Producer Price Index decline is happening in tandem with a notable reversal in consumer sentiment.

The Thomson Reuters/University of Michigan’s preliminary reading of the overall index on consumer sentiment plunged to 74.5 in early December, the lowest level since August.

It was far below November’s figure of 82.7.

Reuters, Dec. 7

The Federal Reserve’s machinations — which includes the Dec. 12 announcement of $45-billion in monthly Treasury bond purchases — will not stave off a developing deflationary trend.

In the second edition of Conquer the Crash (p. 114), Robert Prechter describes what generally happens, depending on the position of the Elliott waves, near the end of the Kondratieff cycle.

Near the end of the cycle, the rates of change in business activity and inflation slip to zero. When they fall below zero, deflation is in force. As liquidity contracts, commodity prices fall more rapidly, and prices for stocks, wages and wholesale and retail goods join in the decline. When deflation ends and prices reach bottom, the cycle begins again.

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By OilPrice.com

The oil and gas game can be a tricky one for junior companies, but if played right the pay-off can be massive. At a time when juniors are risking a lot in volatile venues in the Middle East and Africa, Canada’s Aroway Energy (ARW) is planting its feet firmly in homeland soil and in conventional plays.

Why? Because for the smaller juniors this is not a long-term game and blowing all your capital to drill a single unconventional well in a risky frontier won’t pay off. Canada still has plenty to offer for juniors, even though you have to kiss plenty of frogs to find the prince. The end game, after all, is merger and acquisition.

In an exclusive interview with Oilprice.com, Aroway CEO Chris Cooper discusses:

• How to make or break a junior oil and gas company
• Why rail is becoming more attractive than pipeline transit
• Why most juniors won’t make it big in risky frontiers
• Why Keystone XL will get the green light
• Why oil and gas prices will increase
• Why the smaller juniors will stick to the conventional plays
• How the asset market is heating up … and what is ideal
• Why having control of infrastructure is key to success
• Where Canada’s oil and gas industry will be in a decade
• What every junior’s goal should be

Interview by James Stafford of Oilprice.com

James Stafford: Junior oil companies have been storming the scene with some bold investments in tricky frontier areas. Where do you see this going and what will the next phase for the juniors be? Where will the action be, in conventional or unconventional plays?

Chris Cooper: I am a big believer in the conventional plays. I find that the non-conventional plays are turning into more of a game for the intermediate-size companies primarily as a result of the capital that is required to exploit the resources. Horizontal wells with multi-stage fracturing is an expensive game. I find that the conventional plays expose juniors to a less risky scenario with higher returns on investment and longer-term production more often than not.

Given the current state of the capital markets and the scarcity of funding, I think the smaller juniors will continue to play in the conventional arena.

James Stafford: What’s the ideal partner for a junior company, and what can make or break it for a junior?

Chris Cooper: As far as make or breaking a junior, I believe you need to minimize the company’s risk by drilling wells that are going to give you good internal rates of return and steady production; a good mix of development and exploration wells. It is also very good to have a good operator that is responsible in keeping a control on costs.

James Stafford: What separates the good management teams from the mediocre in the Canadian junior oilpatch?

Chris Cooper: Management teams that have built and sold companies in the past have a responsible, methodical approach to how they run their businesses. More often than not, these teams do not try to re-invent themselves by drilling wells and formations that they have not done in the past. They continue to focus on what they know best, whether it be drilling in the Peace River Arch, chasing Leduc wells, or focusing on cardium wells. They often do not stray from their formulas and that is why they are good teams.

James Stafford: More Canadian oil is now being marketed by rail. Can you put the rail versus pipeline transport comparisons into perspective for us from a Canadian operating perspective?

Chris Cooper: A lot of companies, including Aroway, are capitalizing on the benefits of moving their oil via rail as opposed to pipeline. I think it will increase our netback, our profit per barrel, by several dollars immediately.

For instance, before we purchased our West Hazel Property in Skaskatchewan, the owners would truck to Talisman or another big operator that was pipeline-connected. Then, once the oil got to the pipeline-connected operator, they had to pay a certain amount of money to get it in the pipeline for diluents to meet pipeline specifications. Then they had to pay for the pipeline tariff and then they got the price the pipeline operator provided wherever they were on the pipeline.

So for example, the last month we got $53 to $54 a barrel, after the blend-in tariff for our West Hazel production, which is probably the lowest you’re going to see for a long time. Our netback on that oil was still greater than $20 a barrel. But for that $53.32 a barrel we sold, if transported by rail, we remove the pipeline tariff, we remove the blend for the diluents and we get $9 more added to the netback value.

So what we’ll end up doing is trucking our oil from the field to a company called Altex Energy, which is partly owned by Shell Canada. Shell owns all the railway cars and all these railway cars get filled up with heavy crude and shipped down to their Port Arthur facility on the Gulf Coast. At Port Arthur what typically happens to our crude–because it’s somewhere between 11 and 13 degree oil—is it goes straight into bunker fuel for ships.

So the refinery doesn’t have to touch it in some cases and that’s where we get a pretty substantial bump. Then you’re not subject to pipeline apportion and issues. It just opens up whole new markets for you.

At the end of the day we will get somewhere around $66 or $63 a barrel this month and then we’re going to bump that up by another $9 next month by taking all the crude we have in West Hazel by rail. So our netback will be $35 to $40–and that’s just the West Hazel crude.

James Stafford: What is the market like for assets right now, from a junior’s perspective? What’s the ideal prospect?

Chris Cooper : Asset sales are heating up. We are finding that there are a lot of assets being marketed through companies like Sayer and NRG Divestments. There are also several larger brokerage firms representing companies for “strategic alternatives.”

As an example, Aroway just picked up a great producing asset in Saskatchewan for $10,000/flowing barrel. The market for similar assets in Saskatchewan at that time was about $40,000/flowing barrel. Companies need to exercise patience and do their due diligence. Not to mention kissing a lot of frogs to find these types of assets. They are out there.

James Stafford: A lot of North American juniors are hitting the riskier frontiers with all they’ve got these days—from Iraqi Kurdistan to Sudan, even Somalia. Why are they willing to take this risk and is it paying off?

Chris Cooper: With higher risk comes higher reward, but I don’t think it is paying off in the broader sense. Sure, there are 2 or 3 juniors that have hit home runs, but more often than not a junior is going into those types of plays with only $5 or $10 million in the treasury and they blow this after drilling just one well. I have always believed there is great opportunity offshore, but the risks are lower and infrastructure and political stability in North America is in place. There is plenty of opportunity in North America.

James Stafford: Related to this, where do you see Canada’s oil and gas industry 10 years from now?

Chris Cooper: I see the oil and gas industry in Canada continuing to grow with the advancement of new drilling techniques and new innovations in exploiting existing pools to increase the recoverability. We have a stable political system in place which enables business opportunity to grow in Canada.

James Stafford: We hear a lot about Alberta, but what kind opportunities are we looking at in Saskatchewan?

Chris Cooper: Saskatchewan is definitely open for business. The royalties paid in Saskatchewan are very low and the production opportunities are very good. We are actively looking for new opportunities in Saskatchewan.

James Stafford: Do you lend any significance to Canadian media reports that the Cabinet is reviewing some new legislation that would set stiff payouts for the oil industry for accidents?

Chris Cooper: Personally, I think it is part of the grand plan to help the approval process. My theory is that the Canadian government will lay out a plan for big fines and then push to have the pipelines approved. The construction of pipeline projects creates jobs and would be good for the economy.

James Stafford: Do you think this is simply a carrot for the protesters at a time when the Enbridge hearings are raising tensions?

Chris Cooper: There will always be protesters.

James Stafford: What do you see happening to energy markets in 2013?

Chris Cooper: I see the price of oil and gas both increasing. They are depleting resources….it’s an inevitable function of supply and demand.

James Stafford: What are your views on the Keystone XL Pipeline? Do you think it is likely that Obama will approve its construction, and if so how will this affect your business?

Chris Cooper: I think he will approve it. The Governor of Nebraska gave the new route the okay. I think now that Obama has been re-elected he will go ahead and approve. Again, that is a lot of job-creation for an economy that is struggling. More pipelines are good for Canadian producers as it helps get our oil to market.

James Stafford: What are Aroway’s top three plays, and why?

Chris Cooper : Our current plays all have different risk and production profiles. We have a large inventory and land spread in our JV lands in the Peace River Arch, which provide a healthy mix of development and exploration risk. Very big upside in this play.

Our West hazel production play is a very stable, long-term production scenario that we feel will provide great cash flow and netbacks to the company. For little investment we feel we can substantially increase production at West Hazel.

Our Kirkpatrick Lake and Little bow lands in central Alberta are also very prospective properties that have the ability to turn into new core areas for the company. All our properties are oil focused and are highly prospective.

James Stafford: What can we expect from Aroway in 2013?

Chris Cooper: I am confident 2013 will be a big growth year for Aroway. We will continue to drill on our existing properties and leverage our production and financial position to take advantage of existing and upcoming opportunities in the sector as far as acquisitions and potential farm-in opportunities. We are confident it will be a big year for our shareholders.

James Stafford: 2013 has been touted as the year of the merger and acquisition. As one of the hottest investments around at the moment, do you think that Canadian junior oil & gas companies, like yourselves, will become a favoured target for larger oil companies looking to expand?

Chris Cooper: I think I can speak for most junior companies when I say, ‘I hope so’. There are a lot of big companies that need to fill the production gaps in their natural depletion, thus in some cases forcing big companies to do that through acquisition. I think the goal for most juniors is to be taken over by a bigger company at a nice premium for the shareholders.

Source:

http://oilprice.com/Interviews/The-End-Game-for-Oil-Gas-Juniors-Interview-with-Chris-Cooper.html
By. James Stafford of Oilprice.com

EURUSD

Yesterday, nothing new happened to the overall picture for the euro. The trading session was boring and dull. The EUR/USD continues to be in a consolidation phase. Having rebounded from 1.2983, the pair managed to essentially recover to the resistance near 1.3045, which does not mean any improvement in its prospects. The euro is trading within a descending resistance line so far, and its attempts to increase continue to attract the sellers. Thus, the pair’s reduction to the support of 1.2880 still looks very real. Only the growth and the ability to consolidate above 1.3158/71 would mean a change in the trend.

GBPUSD

The GBP/USD is also consolidating after its decrease, which was suspended by the psychological level 1.5000, as expected. The pair managed to recover to 1.5140, but it is premature to talk about the development of an upward correction, at least while the pair is still trading below 1.5230 — 1.5280. The ability to consolidate above the 53rd figure would indicate the potential of developing a more substantial correction. Until then, the pair would remain under pressure, and it can drop towards the 48th figure.

USDCHF

The USD/CHF increased to 0.9462, then its entered a consolidation phase, whete it dropped to the 94th figure. The dollar is still able to stay above this figure, which shows the saved demand for it, as well as the potential to return to the current highs before their passing. In principle, falling below the 94th figure will not mean the worsening of the outlook, while the pair will be trading above 0.9280 — 0.9260. The next target for the bulls will be the level 0.9500, then — 0.9550.

USDJPY

Last week, the USD/JPY finished its trading period with its increase to 93.68, but at the beginning of the new trading week, the pair bulls did not have enough strength to continue increasing, and the rate dropped to 92.91. The bulls’ inability to break above 93.68 gives the bears a chance to try to develop the downward correction again, but if the pair overcomes this resistance, there will be no correction for a while. However, the bears have to pass the support near 92.20 — 92.00, in order to talk about the corrective movement.

provided by IAFT

London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 5 March 2013, 07:00 EST

U.S. DOLLAR gold prices climbed to $1584 an ounce Tuesday morning, 1.2% above last week’s low, as stocks and commodities also edged higher and the Dollar weakened slightly after another Federal Reserve policymaker spoke in favor of ongoing quantitative easing.

Silver hovered just below $29 an ounce this morning, 3.5% up on last week’s low, while major government bond prices fell.

“Given the heavy selling we saw in a host of markets last week, [precious metals] could push a little higher over the next few days,” says Ed Meir, metals analyst at brokerage INTL FCStone, “but having said that, the technicals in gold and silver remain quite poor and we likely have to do quite a bit more on the upside before some of the technical damage is repaired.”

“Between here and the $1635.48 December low, the gold price should continue to encounter resistance,” says Commerzbank technical analyst Karen Jones.

“Failure to hold over $1554.83 [however] will trigger losses to the $1522.48 December 2011 low.”
Gold in Euros rose back above €39,000 per kilo (hitting €1215 an ounce), slightly up on the week.

Sterling gold prices by contrast were slightly down on last week’s close at £1045 an ounce by lunchtime in London.

The volume of holding held to back shares in the SPDR Gold Trust (ticker GLD), the world’s biggest gold exchange traded fund, fell for the tenth straight session yesterday, the first time this has happened since the GLD was launched in 2004.

This makes the current run of outflows twice as long as the previous highest, with the GLD seeing its bullion holdings fall for five straight sessions on two previous occasions – in October 2010 and May 2011.

On the New York Comex meantime speculative futures traders last month built up their biggest gold short position since 1999.

Self-directed bullion investors meantime grew less bullish towards gold last month, according to the Gold Investor Index from BullionVault, which fell to a five-month low at 54.4

In the US, asset purchases made by the Federal Reserve as part of its ongoing quantitative easing program “have been reasonably efficacious in stimulating spending” said Fed vice chair Janet Yellen Monday.

Yellen added that she does not currently see any potential costs to QE “that would cause me to advocate a curtailment of our purchase program” and that it should continue until the US labor market improves and that the Federal Open Market Committee should not unwind QE until after interest rates start to rise from their current historic lows.

“The committee’s intention is to leave that accommodation in place until well into the recovery,” she said.

Last Week, Fed chairman Ben Bernanke said there are “clear benefits” to QE when he testified to Congress.

Since the start of February the US Dollar Index, which measures the Dollar’s strength against a basket of other currencies, has risen more than 2.5% to six-month highs above 82.

“A strengthening Dollar, an improving macro[economic] outlook and lower inflation expectations would certainly drive gold lower,” says a note from Societe Generale.

“Since the generally ‘negative’ real [inflation-adjusted] interest period since 2007, gold prices have rallied…if history provides guidance, returning to positive ‘real rates’ would create significant headwinds for gold.”

Over in Europe, economic conditions “may…justify in a certain number of cases reviewing deadlines for the correction of excessive [government] deficits,” said European Commissioner for Economic and Monetary Affairs Olli Rehn Monday, following the latest meeting of Eurozone finance ministers.

France is set to miss its deficit target of 3% of GDP this year and may do so again next year.

“We do not want to add austerity to recession,” said French finance minister Pierre Moscovici.

China “will have to work hard to attain” Beijing’s official growth target of 7.5% this year, due to a “growing conflict between downward pressure on economic growth and excess production capacity”, outgoing premier Wen Jiabao said Tuesday.

Growth of 7.5% would represent the slowest growth since 1990.

China was the world’s second-biggest gold buying nation last year, according to the most recent data from the World Gold Council.

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.

By www.CentralBankNews.info     Australia’s central bank left its benchmark cash rate unchanged at 3.0 percent, as widely expected, saying the outlook for inflation would make it possible for the bank to ease policy if necessary but there are signs that the impact of last year’s rate cuts are starting to stimulate the economy.
    The Reserve Bank of Australia (RBA), which cut its cash rate by 125 basis points in 2012, most recently in December, said inflation is likely to remain in line with the banks’ target and with economic growth expected to be a little below trend in the coming year, it is appropriate to continue with an accommodative policy stance.
    “Present indications are that moderate growth in private consumption spending is occurring, though a return to the very strong growth of some years ago is unlikely,” said Glenn Stevens, governor of the RBA, in a statement.
     While the full impact of last year’s rate cuts will take time to become apparent and “there are signs that the easier conditions are having some of the expected effects,” Stevens added that the exchange rate remains higher than expected, given the decline in export prices, low credit demand and the fact that some households and firms were focused on reducing their debt.
    The RBA’s statement largely mirrors last month’s statement. The RBA started its easing cycle in October 2011 and has cut rates by 175 basis points since then in an attempt to counter the impact of  lower Chinese demand for raw materials and the peak in resource investments, which “is approaching.”

    Australia’s Gross Domestic Product rose by 0.5 percent in the third quarter from the second quarter for annual growth of 3.1 percent, down from 3.7 percent and 4.3 percent in the first quarter.
    Stevens said the downside risks to global growth appears to have lessened in recent months and growth in China has stabilised “at a fairly robust pace.”
    In its latest quarterly report, the RBA forecast economic growth of 2.5 percent in the year to June 30 and inflation of 3.0 percent. The RBA targets inflation of 2-3 percent.
    In the fourth quarter, Australia’s inflation rate rose to 2.2 percent, up from 2.0 percent in the third quarter and 1.2 percent in the second.

By MoneyMorning.com.au

Great news!

The hate mail has just started arriving!

Let me explain why this is a good thing.

I’ve been writing about gold and silver for years; but only now have I started copping it. I’ve had some cranky emails, and also some posts questioning my sanity on my free Google plus page.

‘Wishful thinking!’ says Bill on my call for a rally.

‘You will regret writing your last report indicating Gold has started its big rise,’ emailed Stewart.

And my favorite, ‘I’ll bet you $50 the gold price won’t be at or above US$1900 by June 30^th,’ from Luke.

Then back for more the next day, Stewart tells me, ‘Gold stocks are toxic. I am getting out while I can’.

But why do I reckon that suddenly copping all this a good thing?

The reason this is such good news is that extreme vocal bearishness is without doubt the best sign of a market bottom that you’ll ever see.

(Please feel free to tune into our free Google plus page to give us your two cents worth.)

Look to the Bear

It’s only at this point of capitulation, when investors start dumping assets and throwing insults, that you can have a genuine turning point in the market.

For example, back in late July 2012, I had a few emails in the Diggers and Drillers inbox that would have made even a hardened miner blush.

The whole resource sector had been falling for 18 months. It was the darkest of days. But only at that point of capitulation for many did the frustration spill over in earnest into emails that needed a parental guidance warning.

At that point, I knew the market had bottomed. A few days later, on the 2^nd August I told Diggers and Drillers readers about the emails, saying that:

‘There’s an age-old cycle of market emotions, and the general apathy and low participation in the current market, along with the number of frustrated investors… could tell us we are somewhere around ‘despair’ [in the chart below] right now… If we are there, or close, then the worst could be behind us now.’

And sure enough, the timing of the emails coincided almost exactly with the resource sector hitting rock bottom. I copped it on the 19^th July, and the mining sector then bottomed on the 25^th July.

Since then it’s rallied 13.8%.

I think of it like this: An asset in uptrend is like a bus; it can only carry so many passengers. When there are too many punters trying to get a free ride, it’s overloaded, so it just won’t go anywhere.

You have to wait for the breaking point, when you’ll get a mass exodus. And only then can the bus resume its journey. Or in other words, only after the depths of frustration – and seller exhaustion – can that asset’s uptrend resume.

This is exactly why the old saying goes: bull markets are born in pessimism.

So, when investors are at record levels of bearishness, it’s yet another stark warning that we are at, or close to, a bottom for gold.

This is true in all markets. And for gold, you can see how well it works in the chart below. At the bottom of the chart, you’ll see the ‘Ned Davis Research gold sentiment daily composite index’ (paid research republished with permission by Tocqueville).

I’ve circled in red the times it’s plunged since 2006 as the market went bearish on gold.

Then, I’ve circled in green the corresponding times in the gold chart in the top half. This is where it gets interesting. You can see that since 2006, when the market goes maximum bearish on gold, it has always preceded a rally that lasted a few months at least, or in some cases more than a year.

Buy Gold When They’re Crying…and Sell When They’re Yelling

Click here to enlarge

So it’s great to see the market so deliciously bearish on gold right now. If this pattern repeats, get ready for a chunky move in gold very soon.

When it Comes to Gold, Don’t Forget the US Fed

We had more fuel for the fire over the weekend. The US Federal Reserve wheeled out its chairman, Dr Ben Bernanke, to deliver a riveting speech at ‘The Annual Monetary/Macroeconomics Conference: The Past and Future of Monetary Policy’.

After recent confusion from the Fed’s messages, Bernanke gave good reason to expect gold to pick up from here:

‘…the expected average of the short-term real rate over the next 10 years has gradually declined to near zero over the past few years, in part reflecting downward revisions in expectations about the pace of the ongoing recovery and, hence, a pushing out of expectations regarding how long nominal short-term rates will remain low.

‘As the persistence of the effects of the crisis have become clearer, the Federal Reserve’s communications have reinforced the expectation that conditions are likely to warrant highly accommodative policy for some time.’

I’ve emphasised those two sections in bold.

The first one is bullish for gold because low rates are generally better for gold. The reason is, historically some investors would rather have the funds in the bank or in bonds when there’s interest to be had, instead of in non-yielding bullion.

The second one is good news too, as ‘highly accommodative for some time’ translates to ‘money printing for some time’ which has so far been very positive for gold.

Yet this is the just the latest in a recent series of signposts warning of a big move coming for gold.

Dr Alex Cowie
Editor, Diggers & Drillers
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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