Archives for October 2012

October 2012 - Page 3 of 20 - Money Morning - Only the News You Can Profit From

Oil Prices: As the WTI-Brent Spread Widens, Refineries Are Set to Advance

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Brent and WTI crude oil prices have been on a downward trajectory. Recently Brent had declined for seven consecutive trading sessions while WTI had been down for five.

Given the importance these benchmarks have in pricing crude worldwide, it is useful to review what they are before talking about their widening spreads.

Brent and WTI (West Texas Intermediate) are the two principal crude oil price benchmarks of global trade. Brent is set in London, WTI on the NYMEX in New York.

As I have observed in Money Morning on a number of occasions, neither benchmark actually reflects the quality of the oil traded worldwide.

On average, 85% of the oil in the international market on any given day is more sour (having a higher sulfur content) than either of these benchmarks. That means the actual trades are done at a discount to the price of one or the other of these standards.

Both are denominated in dollars, the currency in which virtually all oil consignments internationally are priced. That certainly is one primary reason for their continued use.

In addition, the daily liquidity of futures contracts traded in the world's two largest investment locations is yet a reason for their use.

Finally, with more than 200 benchmark rates for crude existing throughout the world, most having insufficient volume to constitute a basis for oil prices, there needs to be yardsticks to determine pricing differentials and swaps.

Those common yardsticks should be the most liquid and highest volume trading contracts available.

Brent and WTI fit the bill in all of these aspects, despite the fact they don't reflect the lower quality of most oil traded.

Oil Prices: Global Markets Favor Brent Crude

Still, the most interesting development since mid-August 2010 has been the following: despite representing lower quality oil, Brent has been trading at a premium to WTI.

Of the two, Brent has more sulfur content. That should result in a lower price rather than higher comparative price.

Actual trading conditions prompt a spread in favor of Brent for several reasons.

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Gordon Gekko Was Wrong: Sometimes the Pig Gets Eaten

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As longtime readers know, I have a real affinity for old investing adages – in large part because of the very real lessons the best ones convey.

And one of my favorites tells us that "Bulls make money, bears make money – and pigs get slaughtered."

With apologies to Gordon Gekko, while greed may be good, excessive greed can be hazardous to your health – and to your portfolio.

And a news item I spotted last week drove that point home.

Last Monday, the trade journal Canadian Business reported that Canada has issued a "thumbs-down" verdict on a deal that calls for Malaysian state-run energy giant Petronas to pay $6 billion for Progress Energy Resources Corp. (PINK: PRQNF), a natural-gas producer that's based in Calgary.

Canadian Industry Minister Christian Paradis said Ottawa nixed the deal because the administration of Prime Minister Stephen Harper was "not satisfied that the proposed settlement is likely to be of net benefit to Canada," Canadian Business said.

Needless to say, the free-market crowd is using the Harper Administration for target practice – alleging the rejection will have a chilling effect on all foreign investment north of the border.

Greed is Not Always Good

Of course, that's a political concern. My focus today is on the investing fallout … and the lesson we can learn from it.

As a result of the decision, the value of other resource companies – especially ones investors thought might serve as decent takeover candidates (at a nice premium) – have also been hit.

Investors are also worried the decision also puts at risk the proposal by China's CNOOC Ltd. (NYSE ADR: CEO) to buy Canadian oil-sands player Nexen Inc. (NYSE: NXY).

And that brings me back to my "pigs get slaughtered" point.

You see, Permanent Wealth Investor Editor Martin Hutchinson twice recommended Nexen shares to Private Briefing subscribers – first in early September 2011 and then again in early July of this year … just two weeks before CNOOC offered to buy Nexen for $15.1 billion, or $27.50 a share.

Afterwards, the stock jumped to $26 – 33% and 54% above where he'd recommended it to you, but a full 6% below the "offer" price of $27.50.

When the Nexen deal was announced, a lot of folks asked us whether they should cash out and take their winnings, or hold out for that last 6% – which, admittedly, is a significant amount of money in today's zero-interest-rate world.

Martin didn't hesitate. In fact, he gave readers the same advice he gave his own subscribers (who, by the way, pocketed 68% on the deal).

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Thanks to the Fed, It's All Proceeding According to "The Plan"

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If you've been reading the headlines, you know Bank of America Corp. (NYSE:BAC) is in trouble. It could be in really big trouble.

Thank goodness they're so big!

Thank goodness all the big banks in America are all much bigger now than they were a few years ago, before the financial crisis brought them to their knees, by their own doing, of course.

Don't you just love it when a plan comes together?

Yeah, it's all part of "The Plan" to eliminate pesky banking competition.

Let me show you how nicely it's working…

The Fed's 100-Year Plan

The Plan was hatched a long time ago. Back in 1913, as a matter of fact.

That's when Congress devised the Federal Reserve System for eliminating competition and making sure U.S. taxpayers would be the lender of last resort to big bankers.

It has taken a while, 100 years, in fact. But it is working.

The first sign it was working came in the 1980s and '90s, when the savings and loans got into serious trouble playing the greed game.

They weren't covered by the Federal Reserve System. So they were shut down, or rolled up by government-backed insiders (Congress' puppet-masters), and later sold to big banks for sweet profits.

Anyway, they're gone. No more pesky competition from S&L associations.

Now look who's next on the chopping block…

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This "Second Skin" Can Save a Soldier's Life

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Before long, U.S. soldiers may be wearing what amounts to a "second skin" when in combat.

A team at the Lawrence Livermore National Lab in California is working on new a military uniform that repels chemical or biological agents. Team members say the material will change quickly and automatically, when it detects dangers, from a breathable state that lets heat out, to a protective surface that keeps harmful agents from getting in.

"The uniform will be like a smart second skin that responds to the environment," said team leader Francesco Fornasiero, adding it could be fielded in about a decade. He says the uniform of the future works "without the need of an external control system" so soldiers don't waste precious time turning on the barrier.

The suit is made of a unique fabric derived from carbon nanotubes (CNT). It took years to refine the process and make CNTs practical. Today, the nanotubes are used to reinforce carbon fiber products in everything from bicycles to parts of lightweight ships.

This shows you how fast things are moving in the Era of Radical Change. Scientists didn't even know carbon nanotubes existed until 1991, when a Japanese physicist discovered them in some soot.

In the near future, we may all be able to wear such cutting-edge clothes to protect us from a wide range of hazards.

And wait "til you see what else we just figured out.

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Silgan Misses by a Penny - Analyst Blog

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Silgan Holdings Inc. (SLGN) posted adjusted earnings of $1.17 per share in the third-quarter 2012; a 3% increase from the year-ago quarter’s EPS of $1.14. Earnings were on the lower end of its guided range of $1.15-$1.25 per share, missing the Zacks Consensus Estimate by a penny. Including rationalization charges of 2 cents per share, […]

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Apple iTunes Radio Service Doesn't Leave Pandora Any Hope

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Fresh reports that a long-rumored Apple iTunes Radio Service will arrive in February have caused shares of Pandora Media Inc. (NYSE: P) to swoon over the past two days.

Yesterday the selloff was so abrupt it triggered two circuit breakers that briefly halted trading in Pandora stock. Shares closed at $8.20 yesterday (Thursday), down nearly 12%, and have edged lower today.

The Bloomberg News report yesterday afternoon indicated Apple Inc. (Nasdaq: AAPL) is very close to a deal with the major record labels that will enable it to launch a very similar ad-based music streaming service.

Fears of such a service, possibly called iTunes Radio, drew the quick and nasty negative reaction on Wall Street.

"If the Apple radio rumors are true, Pandora has every reason to be scared – terrified, even," wrote Tom Cheredar in a commentary for Venture Beat.

Here's why.

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New Report on Fiscal Cliff 2013 Details Our Painful Future

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Are you worried yet about fiscal cliff 2013?

If not, here are millions of reasons to be concerned.

According to a report released today (Friday) from the National Association of Manufacturers, "The "fiscal cliff' is still two months off, but the scheduled blast of tax hikes and spending cuts is already reverberating through the U.S. economy, hampering growth and, according to a new study, wiping out nearly 1 million jobs this year alone."

The report, titled "Fiscal Shock: America's Economic Crisis," details how the fiscal cliff could destroy some 6 million jobs through 2014, and send unemployment skyrocketing to nearly 12%.

"The worst could be ahead," the report said. "If the fiscal contraction happens, the economy will almost certainly experience a recession in 2013 and significantly slower growth through 2014."

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This News Out of China Supports Higher Silver Prices in 2013

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A new report this week by the Beijing Antaike Information Development Co, an information center on the Chinese metals and industries markets, provided some good news for silver prices.

According to the company, analysts forecast China's silver demand to increase as much as 10% in 2013 from investors looking to preserve their wealth.

In an Oct. 22 Bloomberg News interview, Shi Heqing, an analyst at Beijing Antaike, said silver's demand could increase to 7,700 metric tons next year after incurring a 6% to 8% rise in 2012.

Where's the demand for silver coming from? Around 33% is from jewelry and coins, with the remainder in industrial use for photography, solar and electrical appliances, said Antaike analysts.

This is a record level for Chinese silver demand – and good news for silver investors since China is the world's second-biggest user of the metal.

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Stock Market Today: This Winner is Up Nearly 20%

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The stock market today opened slightly higher as GDP unexpectedly grew at 2% in the third quarter, overshadowing another miss from tech behemoth Apple Inc. (Nasdaq: AAPL).

Here's a breakdown of the latest news, along with one stock that's soaring today.

  • 3Q GDP beats as "consumption" increases- The initial estimate for third-quarter U.S. gross domestic product (GDP) surprisingly came in at 2%, ahead of expectations for a 1.8% increase. At first glance this is a positive sign for an economy that only grew 1.25% in the previous three months – but the details of the report point otherwise. Over one-third of the 2% increase, 0.71%, came from government consumption, of which 0.64% came from defense spending. While personal consumption contributed 1.42% to GDP growth, it only grew 2% from the previous quarter, below expectations of 2.1%. "You're getting a mix of data that don't have a clear direction," Stephen Wood, the New York-based chief market strategist for North America for Russell Investments, which oversees $152 billion, told Bloomberg News. "It's important for investors' psychology to see GDP data beating estimates. Yet the earnings season has been a very challenging one." It appears that the increase in government spending, which was the biggest rise in three years, was led by defense maintenance costs. This is the last GDP estimate before the election and U.S. President Barack Obama will surely try to promote this as overall economic growth, even though it is far from it.

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Mixed 2Q for CA, Guides Lower - Analyst Blog

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CA Inc. (CA) reported second quarter 2013 adjusted earnings per share (EPS) of 56 cents, a penny ahead of the Zacks Consensus Estimate. Revenue Total revenue in the reported quarter came in at $1.15 billion, down 4.0% from $1.20 billion in the year-ago quarter and below the Zacks Consensus Estimate of $1.17 billion. When adjusted […]

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