LEG reported a net profit after tax of 2.4 million Pounds, or an equivalent of 0.1 pence, itself a record.
Total investments increased by 231%, while assets and net assets grew 205% and 201% respectively.
Much of the value was driven by Virtual Stock (VS)/ VS valuation more than doubled to 58 million Pounds for the period. LEG's stake in VS now values 4.1 million Pounds.
Elsewhere, Amedeo Resources completed building its first rig while Bosques generation one and two pongamia had germinated and were producing saplings. Bosques is expected to benefit from the climate change accord achieved in Paris.
LEG has also acquired a 5.5% stake and an option over an additional 4.5% stake in Manas resources, a gold exploration company. While the price of gold has fallen in the last 3 years, a potential global debt crisis could see a revival in the demand for the precious metal.
LEG is very much a long term play. I still see the eventual listing of VS as a potential catalyst which could see LEG rising more than 300%. in the next 2 -3 years. Based on its net profit and stake's value in VS, LEG is indeed undervalued. However, investing in the UK AIM carries with it high risks and you are advised to do your own due diligence.
My disclosure: I own shares in LEG
Thursday, December 31, 2015
2015 HAS ENDED. WHAT LIES AHEAD IN 2016?
2015 came and gone. There were some ups but there were many downs as well. It anything, 2015 lay the foundations for a crises ridden year ahead.
To recap, 2015 saw the following:
1) The Fed raised its first interest rates in almost a decade. However, this was against a backdrop of a worsening economy. Just as recently, the Chicago PMI fell to a worrisome 42.9, way below the expected 50.
2) The US government finally lifted the ban on oil export.
3) Depressed commodity prices, especially oil which threaten to unravel the debt market with defaults.
3) Towards the end of the year, we saw unprecedented sell off of high yield bond funds
4) The Baltic Index continue to test its lowest lows
5) Precious metals continued their third year of decline despite central banks and retail investors buying
6) The Dow and S&P fell 2.2% and 0.9% respectively in 2015 while the NASDAQ was up 5.7%. The broader Russell 2000 fell 5.7% for the year.
7) US$ stayed strong while other currencies, especially emerging economy currencies fell.
8) Major economies such as Brazil, Canada and Russia fell into recession. If anything, EU and Japan failed to inspire despite the QE implemented while China looked set to have a hard landing
9) Geopolitical tension rose to a new high in the Middle East and spilled over into the EU as terrorists became a clear and present threat.
Yes, the sequence of events leading to 2016 do not look too bright I am afraid. In the immediate future we could likely see the following:
1) Further distress in the shale oil industry which could cause a series of defaults
2) Unraveling of high yield bonds which could threaten the financial derivatives market
3) Q4 2015 could see earnings drop in many companies in the S&P 500 due to a host of issues, such as a strong US$, heavy debts and a worsening manufacturing sector
4) Further defaults are expected in China due to worsening economic situation and lower revenue from exports.
5) A US debt which could spiral out of control which could push the government 's debt past US$20 trillion (as at end of December 2015 the debt stood at US$18,8 trillion). On top of that, the debt levels of EU nations, Japan, China and emerging economies continue to rise.
6) All the above will culminate in a full blown global debt crisis which
7) Geopolitical tension could turn for the worse, with an impending war involving nations
Certainly it makes good sense to take profit now while the stock market still hovers at near record levels. Retain some cash, while diversifying your portfolio into gold and silver mining stocks, gold and silver ETFs, and ETFs which short the markets (do need to exercise care in short ETFs as the Fed may surprise with a QE4. The other option is to invest directly in physical god and silver.
To recap, 2015 saw the following:
1) The Fed raised its first interest rates in almost a decade. However, this was against a backdrop of a worsening economy. Just as recently, the Chicago PMI fell to a worrisome 42.9, way below the expected 50.
2) The US government finally lifted the ban on oil export.
3) Depressed commodity prices, especially oil which threaten to unravel the debt market with defaults.
3) Towards the end of the year, we saw unprecedented sell off of high yield bond funds
4) The Baltic Index continue to test its lowest lows
5) Precious metals continued their third year of decline despite central banks and retail investors buying
6) The Dow and S&P fell 2.2% and 0.9% respectively in 2015 while the NASDAQ was up 5.7%. The broader Russell 2000 fell 5.7% for the year.
7) US$ stayed strong while other currencies, especially emerging economy currencies fell.
8) Major economies such as Brazil, Canada and Russia fell into recession. If anything, EU and Japan failed to inspire despite the QE implemented while China looked set to have a hard landing
9) Geopolitical tension rose to a new high in the Middle East and spilled over into the EU as terrorists became a clear and present threat.
Yes, the sequence of events leading to 2016 do not look too bright I am afraid. In the immediate future we could likely see the following:
1) Further distress in the shale oil industry which could cause a series of defaults
2) Unraveling of high yield bonds which could threaten the financial derivatives market
3) Q4 2015 could see earnings drop in many companies in the S&P 500 due to a host of issues, such as a strong US$, heavy debts and a worsening manufacturing sector
4) Further defaults are expected in China due to worsening economic situation and lower revenue from exports.
5) A US debt which could spiral out of control which could push the government 's debt past US$20 trillion (as at end of December 2015 the debt stood at US$18,8 trillion). On top of that, the debt levels of EU nations, Japan, China and emerging economies continue to rise.
6) All the above will culminate in a full blown global debt crisis which
7) Geopolitical tension could turn for the worse, with an impending war involving nations
Certainly it makes good sense to take profit now while the stock market still hovers at near record levels. Retain some cash, while diversifying your portfolio into gold and silver mining stocks, gold and silver ETFs, and ETFs which short the markets (do need to exercise care in short ETFs as the Fed may surprise with a QE4. The other option is to invest directly in physical god and silver.
Monday, December 21, 2015
LEGENDARY INVESTMENT UPDATE
Legendary Investment (LEG) recently announced that Virtualstock (VS) has appointed Robert Knott, formerly National Director of NHS Procurement as Director of Healthcare and Public Sector.
As you may well remember LEG holds a 7% stake in VS. VS had in July, 2015 entered into contract with NHS Teaching Hospital Trust.
I see this as a good progress and hope to see more contracts signed with NHS covering wider areas of procurement and distribution.
LEG has always been in the 0.08 - 0.09 pence range, but we are seeing a lot more consistencies in the 0.11 - 0.14 range.
LEG is still a good buy and hold story provided you have a wider time frame; ie: 3 - 5 years.
My disclosure: I own shares of LEG
Saturday, December 19, 2015
PPHM Q2 RESULTS
PPHM recently announced their Q2 results:
1) The Sunrise Phase 3 Trial is now more than 90% enrolled, which put it in line for a first look-in, possibly in Q1 2016 and a second look-in in mid 2016. final unblinding of results could take place in late 2016.
2) The Phase 2/3 Trial for breast cancer is expected to start at the end of 2015, while the Phase 2 Trial lung cancer trail combining Bavituximab and AZN's Durvalumad could start in early 2016.
3) Phase 1 Trials combining Bavituximab and Durvalumab for multiple tumours are expected to start later in 2016.
4) Avid Bioservices recorded a revenue growth of 52% in Q2 this year vs Q2 last year. YTD revenue increased 61% vs last year.
5) Current backlog of order have reached US$49 million. PPHM increased its revenue forecast in the current financial year to US$35 million - US$40 million from US$30 million - US$35 million previously.
6) The new manufacturing facility is finally ready to commence manufacturing. Armed with state of the art equipment, the new facility could easily double Avid Bioservices capacity. It has the potential to generate another US$40 million revenue once manufacturing goes into full swing.
2016 could be the defining year for PPHM. Increasingly, many medical professionals and researchers are acknowledging the role PS in blocking our immune system from functioning effectively. And Bavituximab stands as the only PS targeting drug with the capability to counter-react against PS. I see a bright future ahead.
My disclosure: I own shares of PPHM.
1) The Sunrise Phase 3 Trial is now more than 90% enrolled, which put it in line for a first look-in, possibly in Q1 2016 and a second look-in in mid 2016. final unblinding of results could take place in late 2016.
2) The Phase 2/3 Trial for breast cancer is expected to start at the end of 2015, while the Phase 2 Trial lung cancer trail combining Bavituximab and AZN's Durvalumad could start in early 2016.
3) Phase 1 Trials combining Bavituximab and Durvalumab for multiple tumours are expected to start later in 2016.
4) Avid Bioservices recorded a revenue growth of 52% in Q2 this year vs Q2 last year. YTD revenue increased 61% vs last year.
5) Current backlog of order have reached US$49 million. PPHM increased its revenue forecast in the current financial year to US$35 million - US$40 million from US$30 million - US$35 million previously.
6) The new manufacturing facility is finally ready to commence manufacturing. Armed with state of the art equipment, the new facility could easily double Avid Bioservices capacity. It has the potential to generate another US$40 million revenue once manufacturing goes into full swing.
2016 could be the defining year for PPHM. Increasingly, many medical professionals and researchers are acknowledging the role PS in blocking our immune system from functioning effectively. And Bavituximab stands as the only PS targeting drug with the capability to counter-react against PS. I see a bright future ahead.
My disclosure: I own shares of PPHM.
Wednesday, December 16, 2015
FINALLY THE FED HAS DONE IT!
Finally the Fed has raised the interest rate by 25 basis point. The Fed even mentioned that unemployment numbers were good and the economy was sound. They even forecast a 25 basis point rate increase in every quarter in 2016. But nothing could be further than the truth. Here's why:
1) An interest rate hike will push the value of the US$ upwards. So prepare to see US trade deficit increase and US made goods more expensive. This will result in further manufacturing slowdown. The November PMI is just barely above the 50 level at 51.3 while the ISM manufacturing data showed a reading of 48.6. Incidentally the Chinese Yuan has continued to depreciate vs the US$. So I expect to see further reduction of imports from the US in China, thus widening the trade deficit.
2) Yes, jobs growth have been fantastic - but at the expense of manufacturing jobs. Low paying jobs in the services sector are substituting high paying manufacturing jobs. So the volume matters less as more people are earning less. This could impact consumption further down the road. The unemployment data exclude people who have left the work force or gave up on finding any employment. If these were taken into account, the number of unemployment could see as high as 9.9% (The U-6 data). The unemployment rate is actually far worse than the Fed perceives.
3) There was a sell off in High Yield Bonds with two funds (Third Avenue and Stone Lion) halting further redemptions which prompted Carl Ichan to warn that a meltdown is coming. In fact the performance of the majority of High Yield Bond funds are already in negative territory.
Most High Yield Bond funds invest in the depressed energy, mining and industrial sectors. The recent rate hike would put pressure on major shale oil producers as the cost of refinancing increases. Add in a depressed oil price and many could be in distress in coming weeks. A total of 44 shale oil producers are utlising 83 cents per dollar of cash flow to pay interests on debts. Should these companies fail it could threaten a combined US$200B - US$250B worth of debt held by shale oil companies. This could unravel the financial markets.
4) The US is sitting on a debt time bomb. Increase in interest rate just increase the burden of payment. The Total US debt stands at US$58T, more than 300% of its GDP. Global debt is about US$230T which is also more than 300% of global GDP. Since 2007, global debt has increased more than 200%. Total global financial derivatives stands at US$700T (lowest estimate) which is more than the US$506T total during the 2008 Global Financial Crisis.
So the unraveling of bonds could impact the financial derivatives market, which could result in a full blown crisis, much worse than the 2008 crisis
The interest rate hike would push many companies worldwide into default especially those from the EM which borrowed US$ to fund their expansion, as their currencies fall in value vs the US$.
And if you've not read about it, auto dealers are offering cheap loans to buyers, and many of the loans could be of sub prime quality. The total auto loans just exceeded US$1T.
5) Home sales. The Fed touted the increase in home sales as a strong indicator for the economy. Well let's see if there's any increase in home sales after the interest rate hike. More likely, buyers are rushing to commit before the interest rate hike.
6) S&P 500 companies are already in earning recession. In 2014 the S&P 500 companies borrowed more money to buy back shares and paid dividends than their earnings. The ratio: US$1.27 of debt vs US$1.00 of earnings. Yet the S&P is trading at multi year highs.
Even the NASDAQ big 4, the FANG are trading at astronomical values. Facebook is trading at a PE of 107.28, Amazon, a PE of 980.29, Netflix, a PE of 372.02, and Google, a PE of 35.66. Talk about high valuations! In fact the 4 have almost the same marketcap of the DAX 30 companies combined!
7) The Baltic Index just hit a record low at 471 due to the collapse of the price of commodities, compared that to its height of more than 10,000 in 2007- 2008. If the Baltic Index cannot be a good gauge of global trade then I do not know what is.
All the above points to a potential crash of epic proportions.
These are some of the things which you can do:
Look into ETFs that short the market indices. (Please do your own research). The pivot point will be in Q1 2016 during the earnings period and potential default in debt by major shale oil producers.
Invest in Gold and Silver ETFs and mining companies. (Please do your own research). The strength of the US$ will propel the price of Gold and Silver lower, making the investment cheap as a hedge. Interestingly, Goldman and HSBC who were both bearish on Gold, bought more than 7 tons of the metal in August, 2015. China, Russia and India continue to accumulate Gold. Now, if it is such a bad investment why are the bankers and central bankers buying? Look at the COMEX. Amount of Gold sold is leveraged more than 300 to 1 physical ounce of Gold.
Buy physical Gold and Silver. Invest in other hard assets such as land.
The above are entirely my opinion. Always remember to do your own research.
1) An interest rate hike will push the value of the US$ upwards. So prepare to see US trade deficit increase and US made goods more expensive. This will result in further manufacturing slowdown. The November PMI is just barely above the 50 level at 51.3 while the ISM manufacturing data showed a reading of 48.6. Incidentally the Chinese Yuan has continued to depreciate vs the US$. So I expect to see further reduction of imports from the US in China, thus widening the trade deficit.
2) Yes, jobs growth have been fantastic - but at the expense of manufacturing jobs. Low paying jobs in the services sector are substituting high paying manufacturing jobs. So the volume matters less as more people are earning less. This could impact consumption further down the road. The unemployment data exclude people who have left the work force or gave up on finding any employment. If these were taken into account, the number of unemployment could see as high as 9.9% (The U-6 data). The unemployment rate is actually far worse than the Fed perceives.
3) There was a sell off in High Yield Bonds with two funds (Third Avenue and Stone Lion) halting further redemptions which prompted Carl Ichan to warn that a meltdown is coming. In fact the performance of the majority of High Yield Bond funds are already in negative territory.
Most High Yield Bond funds invest in the depressed energy, mining and industrial sectors. The recent rate hike would put pressure on major shale oil producers as the cost of refinancing increases. Add in a depressed oil price and many could be in distress in coming weeks. A total of 44 shale oil producers are utlising 83 cents per dollar of cash flow to pay interests on debts. Should these companies fail it could threaten a combined US$200B - US$250B worth of debt held by shale oil companies. This could unravel the financial markets.
4) The US is sitting on a debt time bomb. Increase in interest rate just increase the burden of payment. The Total US debt stands at US$58T, more than 300% of its GDP. Global debt is about US$230T which is also more than 300% of global GDP. Since 2007, global debt has increased more than 200%. Total global financial derivatives stands at US$700T (lowest estimate) which is more than the US$506T total during the 2008 Global Financial Crisis.
So the unraveling of bonds could impact the financial derivatives market, which could result in a full blown crisis, much worse than the 2008 crisis
The interest rate hike would push many companies worldwide into default especially those from the EM which borrowed US$ to fund their expansion, as their currencies fall in value vs the US$.
And if you've not read about it, auto dealers are offering cheap loans to buyers, and many of the loans could be of sub prime quality. The total auto loans just exceeded US$1T.
5) Home sales. The Fed touted the increase in home sales as a strong indicator for the economy. Well let's see if there's any increase in home sales after the interest rate hike. More likely, buyers are rushing to commit before the interest rate hike.
6) S&P 500 companies are already in earning recession. In 2014 the S&P 500 companies borrowed more money to buy back shares and paid dividends than their earnings. The ratio: US$1.27 of debt vs US$1.00 of earnings. Yet the S&P is trading at multi year highs.
Even the NASDAQ big 4, the FANG are trading at astronomical values. Facebook is trading at a PE of 107.28, Amazon, a PE of 980.29, Netflix, a PE of 372.02, and Google, a PE of 35.66. Talk about high valuations! In fact the 4 have almost the same marketcap of the DAX 30 companies combined!
7) The Baltic Index just hit a record low at 471 due to the collapse of the price of commodities, compared that to its height of more than 10,000 in 2007- 2008. If the Baltic Index cannot be a good gauge of global trade then I do not know what is.
All the above points to a potential crash of epic proportions.
These are some of the things which you can do:
Look into ETFs that short the market indices. (Please do your own research). The pivot point will be in Q1 2016 during the earnings period and potential default in debt by major shale oil producers.
Invest in Gold and Silver ETFs and mining companies. (Please do your own research). The strength of the US$ will propel the price of Gold and Silver lower, making the investment cheap as a hedge. Interestingly, Goldman and HSBC who were both bearish on Gold, bought more than 7 tons of the metal in August, 2015. China, Russia and India continue to accumulate Gold. Now, if it is such a bad investment why are the bankers and central bankers buying? Look at the COMEX. Amount of Gold sold is leveraged more than 300 to 1 physical ounce of Gold.
Buy physical Gold and Silver. Invest in other hard assets such as land.
The above are entirely my opinion. Always remember to do your own research.
Saturday, December 5, 2015
WITH NOVEMBER NFP EXCEEDING EXPECTATIONS A RATE HIKE IN DECEMBER LOOKS SET
Well, with November Non-Farm Payroll exceeding expectations at 211,000 jobs, and a revision in October that was higher than the previous; ie 298,000 jobs vs 271,000 prior, it looks set that the Federal Reserve will raise its first interest rate in almost a decade in December.
This is against a background of an ISM Manufacturing Index that fell below 50 in November at 48.6, which is a signal of a contraction, an escalating debt in the US which totaled more than US$58T (government, corporations and households), and a widening trade deficit, due to the continued strength of the US$.
What will be the impact on various sectors of the economy? What about the global economy?
Below are my summation of what could happen in the next few months:
1) US$ Index could go higher amidst QE in EU and Japan, and interest rates easing in many countries in Asia. This could further impact US exports and US trade deficit could grow wider
2) A stronger US$ could impact earnings of multi nationals in terms of US$. This could push the earning of major multinational in the S&P 500 companies into negative growth territory, It seems likely that the S&P 500 could see its earnings recession being extended for the next two quarters as global economy continue to deteriorate. And don't forget, the S&P 500 companies took in more debts than ever for dividends and share buybacks in the last few years. So earnings will be squeezed on both fronts
3) The burden of debt repayment will increase throughout the world, especially for governments and corporations in emerging markets which borrowed in US$. Coupled with the depreciation in the local currencies, many could see their budget stretched. In fact, it is anticipated that China which has US$16T in corporate debts, could face a string of defaults. So far 6 major corporations have failed to meet interest payments on their respective bonds and another 5 have been identified as potentially missing their interest payments in the coming months.
On the US front, the biggest threat would be the default by US shale oil companies which could potentially put US$250B worth of bonds at risk. According to the EIA, some 44 shale oil companies use $0.83 of every US$1.00 they took in to pay off their debt commitments. And herein lies the danger of default as OPEC failed to reach an agreement to lower production in their meeting in Vienna on December 4, which immediately sent oil price further south. Increase in interest rate will only burden these companies as refinancing becomes more expensive and private equity funds shun further investments.
4) REITs which rely on debts to fund acquisitions could find borrowing costs higher and thus impact upon the distributable income to unit holders
5) What of the US government's US$18T? Already tax revenue is falling short of expenditure. Will increase in interest rate result in more borrowings in order to pay off the ever increasing debt level?
In my opinion, despite the assurance by the Federal Reserve, I tend to agree with Citibank's assessment that global recession risks have just increased. This will be followed by a debt crisis of epic proportions which could make the 2008 Financial Crisis seem like child's play.
This is against a background of an ISM Manufacturing Index that fell below 50 in November at 48.6, which is a signal of a contraction, an escalating debt in the US which totaled more than US$58T (government, corporations and households), and a widening trade deficit, due to the continued strength of the US$.
What will be the impact on various sectors of the economy? What about the global economy?
Below are my summation of what could happen in the next few months:
1) US$ Index could go higher amidst QE in EU and Japan, and interest rates easing in many countries in Asia. This could further impact US exports and US trade deficit could grow wider
2) A stronger US$ could impact earnings of multi nationals in terms of US$. This could push the earning of major multinational in the S&P 500 companies into negative growth territory, It seems likely that the S&P 500 could see its earnings recession being extended for the next two quarters as global economy continue to deteriorate. And don't forget, the S&P 500 companies took in more debts than ever for dividends and share buybacks in the last few years. So earnings will be squeezed on both fronts
3) The burden of debt repayment will increase throughout the world, especially for governments and corporations in emerging markets which borrowed in US$. Coupled with the depreciation in the local currencies, many could see their budget stretched. In fact, it is anticipated that China which has US$16T in corporate debts, could face a string of defaults. So far 6 major corporations have failed to meet interest payments on their respective bonds and another 5 have been identified as potentially missing their interest payments in the coming months.
On the US front, the biggest threat would be the default by US shale oil companies which could potentially put US$250B worth of bonds at risk. According to the EIA, some 44 shale oil companies use $0.83 of every US$1.00 they took in to pay off their debt commitments. And herein lies the danger of default as OPEC failed to reach an agreement to lower production in their meeting in Vienna on December 4, which immediately sent oil price further south. Increase in interest rate will only burden these companies as refinancing becomes more expensive and private equity funds shun further investments.
4) REITs which rely on debts to fund acquisitions could find borrowing costs higher and thus impact upon the distributable income to unit holders
5) What of the US government's US$18T? Already tax revenue is falling short of expenditure. Will increase in interest rate result in more borrowings in order to pay off the ever increasing debt level?
In my opinion, despite the assurance by the Federal Reserve, I tend to agree with Citibank's assessment that global recession risks have just increased. This will be followed by a debt crisis of epic proportions which could make the 2008 Financial Crisis seem like child's play.
Tuesday, December 1, 2015
FEDERAL RESERVE JUST HAVE A TOUGHER DECISION ON INTEREST RATE HIKE
Two interesting developments:
US ISM Manufacturing Index fell to 48.6 last night
Atlanta Federal reserve cuts its Q4 US GDP growth rate to 1.4% from 1.8%
A manufacturing index below 50 means contraction. This could put pressure on the Federal Reserve to have a modest hike in interest rate in December or none at all.
If no hike, then Emerging markets will breathe a sigh of relief.
But... if could mean kicking the can further down the road.
US TOTAL DEBT NOW: US$18.827T!
In a report by ZeroHedge, US public debt has reached an unprecedented US$18.827T!
According to the report, it just 4 weeks, the US has accumulated a total of US$674B in just November alone!
Now for those who articulated that US will start a tightening cycle with interest rates increase every quarter, you better think again.
How can further increase in interest rates help improve the US debt payment and lower its debt burden?
It is a global economy where all the economies of the world are interconnected. How can the US economy power ahead amidst an interest rates increase, by claiming that the US economy is fully decoupled from the rest of the world?
Won't an increase in interest rates cause the US$ to spike further thereby hurting the exports of US made goods? Widen the trade deficit? Impose burden of debt among US corporations which went on a borrowing binge during the last few years? Affect US companies earnings and therefore future job growth?
To know that these are the high flying economists and analysts of big banks and financial institutions - is indeed a sad reflection of their poor acknowledgement of fundamentals.
And for all the shortfall, it is always easy to blame the Federal Reserve for failing to stop QE, but what about the banks and financial institutions and corporations' disproportionate increase in leverage relative to their earnings? The Federal Reserve has to shoulder some of the blame, but so must the greedy corporations too, in regard to the failure of QE.
The above is just my opinion.
According to the report, it just 4 weeks, the US has accumulated a total of US$674B in just November alone!
Now for those who articulated that US will start a tightening cycle with interest rates increase every quarter, you better think again.
How can further increase in interest rates help improve the US debt payment and lower its debt burden?
It is a global economy where all the economies of the world are interconnected. How can the US economy power ahead amidst an interest rates increase, by claiming that the US economy is fully decoupled from the rest of the world?
Won't an increase in interest rates cause the US$ to spike further thereby hurting the exports of US made goods? Widen the trade deficit? Impose burden of debt among US corporations which went on a borrowing binge during the last few years? Affect US companies earnings and therefore future job growth?
To know that these are the high flying economists and analysts of big banks and financial institutions - is indeed a sad reflection of their poor acknowledgement of fundamentals.
And for all the shortfall, it is always easy to blame the Federal Reserve for failing to stop QE, but what about the banks and financial institutions and corporations' disproportionate increase in leverage relative to their earnings? The Federal Reserve has to shoulder some of the blame, but so must the greedy corporations too, in regard to the failure of QE.
The above is just my opinion.
Sunday, November 29, 2015
HAS GOLD LOST ITS SHINE?
According to the media, the expectations that the Federal Reserve would raise interest rate is pushing commodities down due to the rising value of the US$.
We have economists and analysts saying that this is the beginning of a tightening cycle. Gold has lost its shine as it does not earn its investors any dividends or interest.
We have Goldman Sachs predicting that the Federal Reserve will raise its rate in December followed by a 100 basis point increase in 2016 and gold will fall to US$1,000 per oz.
Some even predicted that gold will fall below $1,000 per oz in 2016. The bearish signals are rather overwhelming.
Then incredibly, on 10 August, Speaking Alpha reported that on 6 August, Goldman Sachs bought 3.2 tons of gold while HSBC bought 3.9 tons. Both purchases were recorded as being for the benefit of the banks' own house account.
It leads one to wonder why the bearish call from Goldman Sachs when they are urging traders to sell gold. Reminds me of the CDOs fiasco back in the 2007-2008 period.
Incidentally, while traders have been most bearish on gold, Russia and China have been steadily accumulating as well. Now if gold is going to be worthless, one also wonders why the central bank of both countries are buying gold.
Link http://www.bloomberg.com/news/articles/2015-10-22/fed-getting-started-on-rates-will-hurt-bullion-goldman-predicts
Link: http://seekingalpha.com/article/3421396-the-big-long-goldman-sachs-and-hsbc-buy-7_1-tons-of-physical-gold
We have economists and analysts saying that this is the beginning of a tightening cycle. Gold has lost its shine as it does not earn its investors any dividends or interest.
We have Goldman Sachs predicting that the Federal Reserve will raise its rate in December followed by a 100 basis point increase in 2016 and gold will fall to US$1,000 per oz.
Some even predicted that gold will fall below $1,000 per oz in 2016. The bearish signals are rather overwhelming.
Then incredibly, on 10 August, Speaking Alpha reported that on 6 August, Goldman Sachs bought 3.2 tons of gold while HSBC bought 3.9 tons. Both purchases were recorded as being for the benefit of the banks' own house account.
It leads one to wonder why the bearish call from Goldman Sachs when they are urging traders to sell gold. Reminds me of the CDOs fiasco back in the 2007-2008 period.
Incidentally, while traders have been most bearish on gold, Russia and China have been steadily accumulating as well. Now if gold is going to be worthless, one also wonders why the central bank of both countries are buying gold.
Link http://www.bloomberg.com/news/articles/2015-10-22/fed-getting-started-on-rates-will-hurt-bullion-goldman-predicts
Link: http://seekingalpha.com/article/3421396-the-big-long-goldman-sachs-and-hsbc-buy-7_1-tons-of-physical-gold
Friday, November 27, 2015
LGO UPDATE
LGO announced that it has reached an agreement with BNP Paribas to terminate the prepaid swap at its current value of US10.8M including all future interests and fees.
LGo will have a schedule of repayments, starting with the next three months (December 2015 - February 2016) at a reduced rate of US$75,000 per month, after which the remaining outstanding balance will be recovered over the following 19 months at at rate of approximately 5% per month.
LGO and BNP will continue to have regular constructive discussions aime d at assisting LG to establish a secure and sustainable platform for future investment.
Meanwhile, LGO is working closely with its US advisors, Wellford capital markets and height Securities ons trategic investments in the business. LGO expects to be actively discussing with potential investments with clients of Wellford and Height in the next two months.
The agreement reached with BNP is pivotal to LGo to maintain the momentum in their oil production operations in Trinidad.
My disclosure: I own shares of LGO
LGo will have a schedule of repayments, starting with the next three months (December 2015 - February 2016) at a reduced rate of US$75,000 per month, after which the remaining outstanding balance will be recovered over the following 19 months at at rate of approximately 5% per month.
LGO and BNP will continue to have regular constructive discussions aime d at assisting LG to establish a secure and sustainable platform for future investment.
Meanwhile, LGO is working closely with its US advisors, Wellford capital markets and height Securities ons trategic investments in the business. LGO expects to be actively discussing with potential investments with clients of Wellford and Height in the next two months.
The agreement reached with BNP is pivotal to LGo to maintain the momentum in their oil production operations in Trinidad.
My disclosure: I own shares of LGO
CHINA'S YUAN IS DEPRECIATING AGAIN
China's Yuan is almost back to its devaluation level in August. And I think China's troubles are just beginning.
From Bloomberg website
China has a huge debt problem, almost 300% of its GDP, over capacity in state owned heavy industries such as copper, aluminium and steel. Only as recently, it was reported in the news that many are asking the government to absorb their excess capacity. Several are in default of their debt obligations. Here are some examples in 2015:
1) Kaisa Group interest default (US$52M)
2) Baoding Tianwei Group Co interest default (85.8M Yuan)
3) Sinosteel default on 5.3% interest on 2B Yuan notes
4) Winsay Enterprises Holdings failed to meet interest payment on US$ notes for a second time this year
5) Yunan Coal Chemical Industry Group has 1.31B Yuan of overdue loans
6) Shanshui Cement announced on November 5 that it could default on its interest payment
I am expecting more defaults to come by early next year as manufacturing continues to contract. China's PMI has fallen below 50 for the past few months. 50 signals expansion while below 50 signals contraction. This is amidst a wave falling exports which crimped revenue in the manufacturing sector.
It is best to stay off any investment in China, and that include mainland Chinese stocks, bonds and currency. The worst is yet to come. If you should invest in China, go for companies listed in the US or HK instead, but only companies with very strong balance sheets.
From Bloomberg website
China has a huge debt problem, almost 300% of its GDP, over capacity in state owned heavy industries such as copper, aluminium and steel. Only as recently, it was reported in the news that many are asking the government to absorb their excess capacity. Several are in default of their debt obligations. Here are some examples in 2015:
1) Kaisa Group interest default (US$52M)
2) Baoding Tianwei Group Co interest default (85.8M Yuan)
3) Sinosteel default on 5.3% interest on 2B Yuan notes
4) Winsay Enterprises Holdings failed to meet interest payment on US$ notes for a second time this year
5) Yunan Coal Chemical Industry Group has 1.31B Yuan of overdue loans
6) Shanshui Cement announced on November 5 that it could default on its interest payment
I am expecting more defaults to come by early next year as manufacturing continues to contract. China's PMI has fallen below 50 for the past few months. 50 signals expansion while below 50 signals contraction. This is amidst a wave falling exports which crimped revenue in the manufacturing sector.
It is best to stay off any investment in China, and that include mainland Chinese stocks, bonds and currency. The worst is yet to come. If you should invest in China, go for companies listed in the US or HK instead, but only companies with very strong balance sheets.
Tuesday, November 24, 2015
GLOBAL DEBT HAS REACHED US$230T.
Global debt has reached US$230T whcih is 313% of the gloabl annual GDP. Financial derivatives market itself is worth some US$700T!
So who thinks the federal reserve will continue to raise rates?
There could be a Q4 sooner than we think.
Link: http://www.mybudget360.com/global-debt-total-amount-of-debt-world-gdp-to-debt-ratios/
So who thinks the federal reserve will continue to raise rates?
There could be a Q4 sooner than we think.
Link: http://www.mybudget360.com/global-debt-total-amount-of-debt-world-gdp-to-debt-ratios/
Monday, November 23, 2015
US OIL RIGS COUNT FELL 10 FOR WEEK ENDING 20 NOVEMBER, 2015
US oil rigs count fell by 10 for the week ending 20 November, 2015. Despite the drop in oil rigs count, oil price remained in the US$40 - US$42 range.
Oil price could potentially fall below US$40 in the near term as the glut in supply refuses to give way. This could put many US shale oil companies in jeopardy of defaulting on their heavy debt loads. Re-financing options are thin as many investors and private equity funds got burned, investing billions of dollars in US shale oil companies in spring, believing that oil price would recover towards the end of the year.
As early as Q1 2016 we could witness another round of bankruptcies.
The ball is very much in OPEC's court as many members are facing a squeeze on budget and many more could see their sovereign wealth funds deplete to troublesome levels should oil price fall into the US$30s range.
A proclamation of war on US shale oil has reached a level where there will be no winners but all could wind up as losers.
Oil price could potentially fall below US$40 in the near term as the glut in supply refuses to give way. This could put many US shale oil companies in jeopardy of defaulting on their heavy debt loads. Re-financing options are thin as many investors and private equity funds got burned, investing billions of dollars in US shale oil companies in spring, believing that oil price would recover towards the end of the year.
As early as Q1 2016 we could witness another round of bankruptcies.
The ball is very much in OPEC's court as many members are facing a squeeze on budget and many more could see their sovereign wealth funds deplete to troublesome levels should oil price fall into the US$30s range.
A proclamation of war on US shale oil has reached a level where there will be no winners but all could wind up as losers.
Sunday, November 22, 2015
DOLLAR INDEX BRIEFLY TOUCHED 100
The Dollar Index briefly touched 100 this morning. In view of its momentum, it could well go above that mark in expectation of the Federal Reserve hiking the US interest rate for the first time in almost a decade.
Many economists are predicting in a 25 - 50 basis point increase in December while some said it could be a gradual 25 basis point increase every quarter in 2016.
I think there could be a possible rate hike in December but after that, the Federal Reserve will be done raising interest rate. I don't think there will be any rate increase in 2016.
The global economic indicators and risks do not support further rate increases.
1) EU, Japan and China will continue their easing policies. This will make US goods more expensive and likely widen the trade deficit between US and the rest of the world
2) Multinationals will suffer a drop in earnings in US$ terms. In fact, many companies in the S & P 500 are already facing earnings recession. This will not support the lofty valuations in the S & P and likely we will see a major correction in the coming months
3) EU GDP growth remains weak, and Japan is in a recession. China could face a hard landing. Despite expanding the monetary base, these countries are not registering the expected growth and this is a clear sign that the global economy is facing a deflation risk
4) Commodity prices are falling to multi-year lows. This is a sign that manufacturing is in recession. There is simply not enough demand to boost prices. To gauge, look no further than the Baltic Index which has fallen below 600
5) The global economy is awash with liquidity and high level of debt. The US has been raising the debt ceiling 6 times since 2009. Tax revenues are falling behind expenditure. To raise interest rates further is akin to borrowing at a higher cost to pay for borrowing at a lower cost. No economy can ever do well when the debt level is more than 100% of the GDP.
All the above does not support a strong Dollar Index. I could only term it as pure speculation. The momentum while strong, will not last.
Many economists are predicting in a 25 - 50 basis point increase in December while some said it could be a gradual 25 basis point increase every quarter in 2016.
I think there could be a possible rate hike in December but after that, the Federal Reserve will be done raising interest rate. I don't think there will be any rate increase in 2016.
The global economic indicators and risks do not support further rate increases.
1) EU, Japan and China will continue their easing policies. This will make US goods more expensive and likely widen the trade deficit between US and the rest of the world
2) Multinationals will suffer a drop in earnings in US$ terms. In fact, many companies in the S & P 500 are already facing earnings recession. This will not support the lofty valuations in the S & P and likely we will see a major correction in the coming months
3) EU GDP growth remains weak, and Japan is in a recession. China could face a hard landing. Despite expanding the monetary base, these countries are not registering the expected growth and this is a clear sign that the global economy is facing a deflation risk
4) Commodity prices are falling to multi-year lows. This is a sign that manufacturing is in recession. There is simply not enough demand to boost prices. To gauge, look no further than the Baltic Index which has fallen below 600
5) The global economy is awash with liquidity and high level of debt. The US has been raising the debt ceiling 6 times since 2009. Tax revenues are falling behind expenditure. To raise interest rates further is akin to borrowing at a higher cost to pay for borrowing at a lower cost. No economy can ever do well when the debt level is more than 100% of the GDP.
All the above does not support a strong Dollar Index. I could only term it as pure speculation. The momentum while strong, will not last.
Friday, November 13, 2015
PPHM UPDATE
PPHM achieved full enrollment for its two-arm Phase 1B Trial combining Bavtuximab with Yervoy, an Anti CTLA-4 drug for advanced melanoma in patients.
The trial is expected to take 12 - 14 weeks with data being possibly available in March 2016.
PPHM had done a pre-clinical trial involving mice and the data showed incredible proof of how Bavituximab could work with another immunotherapy drug to combat melanoma tumours.
The chart above exemplifies the efficacy of Bavituximab equivalent Ch1N11 (for mice) when used with Anti CTLA-4 in combating melanoma tumours.
It shows how Ch1N11 (red colour) alone can handily beat Anti CTLA-4 (blue colour) and how the two combination (green colour) could be a potent mixture which surpassed in efficacy vs each stand alone drug on its own.
My disclosure: I own shares of PPHM.
The trial is expected to take 12 - 14 weeks with data being possibly available in March 2016.
PPHM had done a pre-clinical trial involving mice and the data showed incredible proof of how Bavituximab could work with another immunotherapy drug to combat melanoma tumours.
The chart above exemplifies the efficacy of Bavituximab equivalent Ch1N11 (for mice) when used with Anti CTLA-4 in combating melanoma tumours.
It shows how Ch1N11 (red colour) alone can handily beat Anti CTLA-4 (blue colour) and how the two combination (green colour) could be a potent mixture which surpassed in efficacy vs each stand alone drug on its own.
My disclosure: I own shares of PPHM.
EU'S GDP MISSES TARGET
The EU's third quarter GDP growth missed its target of 0.4%. GDP rose 0.3%, which is down 0.1% form the previous quarter.
Netherlands, Italy and Portugal missed their respective targets by a wide margin. Portugal in fact, remained stagnant with zero growth.
This immediately put pressure on the ECB to intensify their QE.
It will be interesting to watch how the Federal Reserve would react to this latest data.
Netherlands, Italy and Portugal missed their respective targets by a wide margin. Portugal in fact, remained stagnant with zero growth.
This immediately put pressure on the ECB to intensify their QE.
It will be interesting to watch how the Federal Reserve would react to this latest data.
IS CHINA HEADING TOWARDS A DEBT CRISIS?
Bloomberg reported that Chinese banks' troubled loans swelled to almost 4T Yuan or US$628B, the equivalent of Sweden's GDP.
Banks' profit growth also fell from 13% to 2% in the first nine months of the year.
Bad debts continued to pile up recently when China Shanshui Cement Group went into default and prompted its lenders to demand immediate payments.
China's corporate debt is a potential disaster, totaling US$16T. Increasing default, especially by state owned companies which had gone on a borrowing binge in the last few years could shake confidence in the Chinese bond market and economy as a whole.
A recent report by the FSB (Financial Stability Board) shows that China's 4 major banks need to raise almost US$400B in additional capital in order to meet new standards set by the board.
That is why the recent rally in the stock market and prior it, the bond market, has unnerved any economists and analysts. China's weakness remains, and thus, any rally could proved to be a flash in the pan and is not sustainable.
With China being mired in a hard landing and the EU in a state of low growth despite the QE, and at the other end of the table, a potential interest rate hike in the US, we could potentially see another recession in the not too soon future.
Banks' profit growth also fell from 13% to 2% in the first nine months of the year.
Bad debts continued to pile up recently when China Shanshui Cement Group went into default and prompted its lenders to demand immediate payments.
China's corporate debt is a potential disaster, totaling US$16T. Increasing default, especially by state owned companies which had gone on a borrowing binge in the last few years could shake confidence in the Chinese bond market and economy as a whole.
A recent report by the FSB (Financial Stability Board) shows that China's 4 major banks need to raise almost US$400B in additional capital in order to meet new standards set by the board.
That is why the recent rally in the stock market and prior it, the bond market, has unnerved any economists and analysts. China's weakness remains, and thus, any rally could proved to be a flash in the pan and is not sustainable.
With China being mired in a hard landing and the EU in a state of low growth despite the QE, and at the other end of the table, a potential interest rate hike in the US, we could potentially see another recession in the not too soon future.
Thursday, November 12, 2015
OCTOBER JOBS BREAKDOWN IN 3 SIMPLE CHARTS
The following charts are sourced from www.zerohedge.com, and submitted by Tyler Durden.
It is interesting to note Construction added 31,000 jobs in October vs approximately 13,000 jobs in September while Retail Trade added 43,800 jobs in October vs approximately 5,000 jobs in September.
Manufacturing? A big zero.
Tyler Durden raised a valid point when he questioned the data on Retail and Construction.
Let's look at Retail first. September Retail Sales rose an insignificant 0.1% vs 0.2% - 0.3% forecast. Despite the poor data Retail jobs surged almost 800% in October.
Then let's look at Construction. Raw materials have been declining. Framing lumber prices have declined 21% y-o-y.
New home sales fell 11.5% in September vs August (468,000 units vs 529,000 units).
Nevertheless Construction jobs surged more than 130% in October.
There seem to be some disconnect here as jobs continue to grow despite the poor new home sales data.
The following 2 charts perhaps will show some uncanny resemblance of what happened in 2006 and onwards.
Will history repeats itself and we could see a crash further down the road? It does seem likely given the slowing global growth. It's best we start preparing ourselves.
It is interesting to note Construction added 31,000 jobs in October vs approximately 13,000 jobs in September while Retail Trade added 43,800 jobs in October vs approximately 5,000 jobs in September.
Manufacturing? A big zero.
Tyler Durden raised a valid point when he questioned the data on Retail and Construction.
Let's look at Retail first. September Retail Sales rose an insignificant 0.1% vs 0.2% - 0.3% forecast. Despite the poor data Retail jobs surged almost 800% in October.
Then let's look at Construction. Raw materials have been declining. Framing lumber prices have declined 21% y-o-y.
New home sales fell 11.5% in September vs August (468,000 units vs 529,000 units).
Nevertheless Construction jobs surged more than 130% in October.
There seem to be some disconnect here as jobs continue to grow despite the poor new home sales data.
The following 2 charts perhaps will show some uncanny resemblance of what happened in 2006 and onwards.
Will history repeats itself and we could see a crash further down the road? It does seem likely given the slowing global growth. It's best we start preparing ourselves.
Wednesday, November 11, 2015
EIA: US SHALE OIL PRODUCERS COULD SEE PRODUCTION DROP BY 118,000 BOPD IN DECEMBER
According to the EIA, US shale oil production could see a drop of 118,000 bopd in December.
Taking into consideration that US shale oil production has dropped approximately 500,000 bopd from April to October (reported by oilprice.com on 25 October), we could potentially see a combined drop of more than 600,000 bopd in shale oil production as we enter into 2016.
This far surpassed Citigroup's estimated drop of 500,000 bopd by the end of the year. The drop could be more pronounced as we enter Q1 2016. This is supported by the fact that US rigs count has dropped for the last 10 weeks, and further capex has been differed or cancelled.
Will continued drop in US production push oil price northwards?
I am inclined to believe so, even with Iran coming into the picture. This is because Iranian oil needs investment from major oil companies to kickstart its oil ambition and right now all oil majors have no intention to commit further capex in either oil exploration or oil field development.
According to Marketwatch (reported on 10 November), more than US$200 billion of energy projects have been cancelled thus far. So I believe it is unlikely that Iran would be able to secure enough investments to develop its oil fields in order for it to meet its targeted production in 2016.
In such a scenario, oil price could finally stabilise. I believe by Q1 2016, we could see oil price above US$50 a barrel.
The above is just my opinion. You are encouraged to do your own research.
Link: http://www.kallanishenergy.com/2015/11/11/shale-oil-production-drop-118000-bpd-eia/
Taking into consideration that US shale oil production has dropped approximately 500,000 bopd from April to October (reported by oilprice.com on 25 October), we could potentially see a combined drop of more than 600,000 bopd in shale oil production as we enter into 2016.
This far surpassed Citigroup's estimated drop of 500,000 bopd by the end of the year. The drop could be more pronounced as we enter Q1 2016. This is supported by the fact that US rigs count has dropped for the last 10 weeks, and further capex has been differed or cancelled.
Will continued drop in US production push oil price northwards?
I am inclined to believe so, even with Iran coming into the picture. This is because Iranian oil needs investment from major oil companies to kickstart its oil ambition and right now all oil majors have no intention to commit further capex in either oil exploration or oil field development.
According to Marketwatch (reported on 10 November), more than US$200 billion of energy projects have been cancelled thus far. So I believe it is unlikely that Iran would be able to secure enough investments to develop its oil fields in order for it to meet its targeted production in 2016.
In such a scenario, oil price could finally stabilise. I believe by Q1 2016, we could see oil price above US$50 a barrel.
The above is just my opinion. You are encouraged to do your own research.
Link: http://www.kallanishenergy.com/2015/11/11/shale-oil-production-drop-118000-bpd-eia/
Monday, November 9, 2015
IS THE RATE HIKE IMMINENT?
Since 2009, the US government has raised the debt limit 6 times, increasing it by US$5,709B to US$18,113 to date.
Taking this into consideration, US tax receipts is not enough to cover the the government expenditure, and thus the need to raise debt to cover the difference. With US$5,709B raised since 2009 at near zero interest rate, any interest rate hike will not only increase the borrowing costs for the government as the US will likely to continue issuing debts to cover its own shortfall.
When the amount runs into trillions of US$, the interest payment will be a nightmare. So will the Federal Reserve take on a hawkish stance knowing that it could cause a ripple effect which will result in heavier borrowing costs for the US and impact upon its trade balances as US made goods become expensive in the global market?
Just today the OECD trimmed the global economy outlook to 2.9% vs 3.3% previously. Therefore a potential interest rate hike could tip the outlook below 2.9%.
China meanwhile released its export and import numbers which were far from impressive. Exports dropped 6.9% while import fell 18.8%. The trade surplus widened US$61.64B. The trade imbalance with US could widen further should the US$ continue to strengthen.
Maersk also reiterated recently that global GDP is worse than forecast based on their knowledge of the amount of goods shipped globally.
Against such a backdrop, I am compelled to opine that a rate hike should not happen. But the Federal Reserve's reputation is at stake. So I think a rate hike, while not imminent, could be possible, just so the proponents of a rate hike stay of f its back. It will be followed by a long pause before any rate hike kicks in again.
The above is just my opinion of course.
Taking this into consideration, US tax receipts is not enough to cover the the government expenditure, and thus the need to raise debt to cover the difference. With US$5,709B raised since 2009 at near zero interest rate, any interest rate hike will not only increase the borrowing costs for the government as the US will likely to continue issuing debts to cover its own shortfall.
When the amount runs into trillions of US$, the interest payment will be a nightmare. So will the Federal Reserve take on a hawkish stance knowing that it could cause a ripple effect which will result in heavier borrowing costs for the US and impact upon its trade balances as US made goods become expensive in the global market?
Just today the OECD trimmed the global economy outlook to 2.9% vs 3.3% previously. Therefore a potential interest rate hike could tip the outlook below 2.9%.
China meanwhile released its export and import numbers which were far from impressive. Exports dropped 6.9% while import fell 18.8%. The trade surplus widened US$61.64B. The trade imbalance with US could widen further should the US$ continue to strengthen.
Maersk also reiterated recently that global GDP is worse than forecast based on their knowledge of the amount of goods shipped globally.
Against such a backdrop, I am compelled to opine that a rate hike should not happen. But the Federal Reserve's reputation is at stake. So I think a rate hike, while not imminent, could be possible, just so the proponents of a rate hike stay of f its back. It will be followed by a long pause before any rate hike kicks in again.
The above is just my opinion of course.
WHAT BANKING GIANTS NEED TO DO TO PREVENT ANOTHER LEHMAN LIKE CRISIS
This article by Bloomberg is an interesting read.
The Financial Stability Board (FSB) created in the aftermath of the Global Financial Crisis announced that the most systematically important lenders must have total loss-absorbing capacity equivalent to at least 16% of risk-weighted assets in 2019, rising to 18% in 2022. A leverage ratio requirement will also be imposed, rising from 6% initially to 6.75%.
Pay attention to the statement that including China's 4 major banks, the banking giants of the world need to raise additional 457B Euros to 1.1T Euros. Excluding the big in China, the amount they need to raise is 107B Euros to 776B Euros. (You can then imagine how much capital the 4 China banks need to raise and appreciate the challenge confronting the Chinese banks).
It is the view of the FSB that 2/3 of the 30 major lenders of the world will need to raise additional capital to meet the new standards.
Link: http://www.bloomberg.com/news/articles/2015-11-09/banking-giants-learn-cost-of-preventing-another-lehman-moment
The Financial Stability Board (FSB) created in the aftermath of the Global Financial Crisis announced that the most systematically important lenders must have total loss-absorbing capacity equivalent to at least 16% of risk-weighted assets in 2019, rising to 18% in 2022. A leverage ratio requirement will also be imposed, rising from 6% initially to 6.75%.
Pay attention to the statement that including China's 4 major banks, the banking giants of the world need to raise additional 457B Euros to 1.1T Euros. Excluding the big in China, the amount they need to raise is 107B Euros to 776B Euros. (You can then imagine how much capital the 4 China banks need to raise and appreciate the challenge confronting the Chinese banks).
It is the view of the FSB that 2/3 of the 30 major lenders of the world will need to raise additional capital to meet the new standards.
Link: http://www.bloomberg.com/news/articles/2015-11-09/banking-giants-learn-cost-of-preventing-another-lehman-moment
Thursday, November 5, 2015
IS ASIA HEADING INTO A DEFLATION?
Is Asia heading into a deflationary economy? This is perhaps the reason why central banks in Asia are on an easing mode to stimulate growth and hence inflation. But the drag seems to continue. Deflation is harder to combat vs inflation. Japan for example has been battling it for 25 years. And now Abenomics, after the initial burst, seems to fall behind the BOJ's targets. Worse still EU countries are displaying similar patterns. Just my opinion of course, but it pays to be mindful about global events taking place.
Chart source: elliotwave.com
Chart source: elliotwave.com
Wednesday, November 4, 2015
LGO UPDATE
LGO reported that the loss of Well 678 could amount to approximately US$4 million. Nevertheless, LGO continues to meet its payment commitments to BNP Paribas as planned.
The company is now looking at several options to bridge the funding gap that the loss has created. This includes the appointment of Wellford Capital Markets LLC and Height Securities to jointly advise on strategic investments int he business. both will be retained for a period of 3 months and will work with the management to define options for longer sustainability, including sourcing strategic investors and the possible refinancing of the existing bank loan.
Operations at Goudron Field will continue with operating costs continuing to be met from production revenue, funds held by LGO and those being released by the bank.
Production in Spain improved to 186 bopd after well cleanout works in the summer. group production currently stands at 896 bopd due to continuing depletion in the field and slowing of work on the Gourdon Sandstone programme.
No doubt the setback had dealt a cruel blow to LGO's ambitions, but with more than 800 million of oil in place, it is just a matter of getting the funding going again to get production moving. I remain cautiously optimistic that LGO will get its act together, and with the eventual increase in oil price int he coming months, this setback will a thing of the past. still investing in UK AIM stocks is a high risk affair and it is important that you do your own due diligence.
My disclosure: I own LGO shares.
A PRECLUDE TO A FINANCIAL STORM TO IN ASIA?
Standard Charted has a strong foothold in Asia, where it has a presence for over a hundred years. Asia has always been a part of Standard Charted's core business.
In Q3, Standard Charted reported a loss of US$139 million due to impairment costs amounting US$1,230 million. The majority of the impairment costs are loan related. That it a hefty write off and perhaps is a signal that all is not well in Asia.
Now, Standard Charted needs to raise additional capital amounting to US$5.1 billion and cut 15,000 jobs globally.
If anything, it goes to show that Asia could register more defaults in coming months, brought on by a strengthening US$, low commodity prices, and asset bubbles.
Read it all here: http://www.bloomberg.com/news/articles/2015-11-04/standard-chartered-s-bad-loans-reveal-cracks-in-asian-economies
In Q3, Standard Charted reported a loss of US$139 million due to impairment costs amounting US$1,230 million. The majority of the impairment costs are loan related. That it a hefty write off and perhaps is a signal that all is not well in Asia.
Now, Standard Charted needs to raise additional capital amounting to US$5.1 billion and cut 15,000 jobs globally.
If anything, it goes to show that Asia could register more defaults in coming months, brought on by a strengthening US$, low commodity prices, and asset bubbles.
Read it all here: http://www.bloomberg.com/news/articles/2015-11-04/standard-chartered-s-bad-loans-reveal-cracks-in-asian-economies
Saturday, October 31, 2015
PPHM SHARES PURCHASE BY EASTERN CAPITAL
PPHM announced that Eastern Capital has purchased 18.5 million shares of PPHM valued at US$1.08 per share. This makes Eastern Capital one of the largest institution investors on board.
This is an important development as it allows PPHM to continue to pursue its many trials involving their lead drug Bavituximab with various collaborators' drugs, especially with AstraZeneca's durvalumab which has now been expanded into a global Phase II study, capitalising on Astrazeneca's global network.
Still, the main driver of PPHM's growth will be the eventual approval of Bavituximab by the FDA.
This is an important development as it allows PPHM to continue to pursue its many trials involving their lead drug Bavituximab with various collaborators' drugs, especially with AstraZeneca's durvalumab which has now been expanded into a global Phase II study, capitalising on Astrazeneca's global network.
Still, the main driver of PPHM's growth will be the eventual approval of Bavituximab by the FDA.
US OIL RIGS COUNT
US oil rigs count dropped further on the week ending 30 October as drillers removed 16 wells from the field, bringing the total of rigs count still in service to 578. This is the ninth consecutive week that the rigs count has dropped.
This provided additional support for oil price which closed higher at US$46.59 per barrel.
US refineries will be coming back on line soon after a period of maintenance and thus would continue their draw down from the stockpiles, which are already at high levels. This could provide additional support to the price of oil in the coming weeks.
Previously, I have mentioned that October could be a day of reckoning for many oil producers as financial institutions review the credit lines offered to the many stricken oil producers. Looks like they have a second lease of life as many had their credit lines maintained and only a small handful had theirs lowered.
This will put some financial institutions at risk further as many of the oil producers are at risk of default. By extending a temporary lifeline until the next review in spring next year is akin to kicking the can down the road.
Perhaps in part, the financial institutions' decision had been driven by the news that US oil production is finally showing signs of slowing down. In part it has dropped by 500,000 bopd since April.
Continuous drop in production could help oil price to stabilise and the much needed impetus to move northwards one again.
This provided additional support for oil price which closed higher at US$46.59 per barrel.
US refineries will be coming back on line soon after a period of maintenance and thus would continue their draw down from the stockpiles, which are already at high levels. This could provide additional support to the price of oil in the coming weeks.
Previously, I have mentioned that October could be a day of reckoning for many oil producers as financial institutions review the credit lines offered to the many stricken oil producers. Looks like they have a second lease of life as many had their credit lines maintained and only a small handful had theirs lowered.
This will put some financial institutions at risk further as many of the oil producers are at risk of default. By extending a temporary lifeline until the next review in spring next year is akin to kicking the can down the road.
Perhaps in part, the financial institutions' decision had been driven by the news that US oil production is finally showing signs of slowing down. In part it has dropped by 500,000 bopd since April.
Continuous drop in production could help oil price to stabilise and the much needed impetus to move northwards one again.
Thursday, October 29, 2015
US GDP TAKEAWAYS
US' Q3 GDP grew 1.5% vs a forecast of 1.6%. This is a sharp contrast from the 3.9% achieved in Q2.
Consumer spending again is the prime driver, delivering 3.2% in growth. Inventories contracted, shaving 1.44% off the GDP.
The robust consumer spending of curse led many to believe that the Federal Reserve will likely raise the interest rates in December.
Herein lies the question: If consumer spending is going to be robust, why the need to cut inventories? Of course, on the other side of the coin, the cut in inventories was viewed as cyclical and should correct itself in the ensuing months.
The anticipation of a rate hike immediately push majority of commodity prices down, due to the strengthening of the US$.
At this juncture, the GDP remains preliminary as there will be revisions later on. My bet is that it will be revised down from 1.5%.
This is because of a string of data released showed some disturbing trends in September:
1) New home sales is down
2) Pending home sales is down
3) US business spending gauge fell
Still the November 6 Jobs Report will give a better indication in the direction of the Federal Reserve.
Should there be an interest rate hike, we could see general weakness and potential recession in emerging markets.
The above is just my opinion. You are encouraged to do your own research.
Consumer spending again is the prime driver, delivering 3.2% in growth. Inventories contracted, shaving 1.44% off the GDP.
The robust consumer spending of curse led many to believe that the Federal Reserve will likely raise the interest rates in December.
Herein lies the question: If consumer spending is going to be robust, why the need to cut inventories? Of course, on the other side of the coin, the cut in inventories was viewed as cyclical and should correct itself in the ensuing months.
The anticipation of a rate hike immediately push majority of commodity prices down, due to the strengthening of the US$.
At this juncture, the GDP remains preliminary as there will be revisions later on. My bet is that it will be revised down from 1.5%.
This is because of a string of data released showed some disturbing trends in September:
1) New home sales is down
2) Pending home sales is down
3) US business spending gauge fell
Still the November 6 Jobs Report will give a better indication in the direction of the Federal Reserve.
Should there be an interest rate hike, we could see general weakness and potential recession in emerging markets.
The above is just my opinion. You are encouraged to do your own research.
Wednesday, October 28, 2015
FOMC: KEY FACTORS WHICH ARE ABOUT TO DO A U-TURN
In the minutes, the FOMC quoted:
"September suggests that economic activity has been expanding at a moderate pace. Household spending and business fixed investment have been increasing at solid rates and housing sector has improved further, however, net exports have been soft "
Household Spending
September Consumer Confidence Index 102.6
October Consumer Confidence Index 97.6 (drop of 5.0 month on month)
September US Retail Sales rose by a mere 0.1% with August revised down as being unchanged instead of a rise of 0.2%.
Business Fixed Investment
On the day of the FOMC meets, Durable Goods contracted 1.2% in September, with August's contraction revised lower to minus 3.0%.
Housing Sector
A day before the FOMC meets, new home sales fell to an annual rate of 468,000 in September, 67,000 below the low-end of estimate and lowest rate since November 2014.
August new home sales was revised down by 33,000.
MBA Mortgage Applications
On the day of the release of the minutes, October purchase applications (for the week ending October 23), slipped 3.0%. while refinancing applications were down 4.0%.
So in a nutshell, based on recent data things are indeed much worse than what the FOMC stated.
How could Household Spending be solid when Retail Sales rose 0.1%? Or when Consumer Confidence declined to 97.6 from 102.6 a month earlier.
How could Business Fixed Investment be solid when Durable Goods fell 1.2% in September?
How could Housing Sector improved further when New Home Sales fell to the lowest in almost a year? How could it when Mortgage applications had also shown declines lately?
These are the same questions that will hound the Federal Reserve. Today's GDP data will give a better indication. Consensus estimate is 1.7% growth, but the widely followed and accurate data at the Atlanta Federal Reserve, shows 0.9%.
One thing for sure, it's going to be a bumpy ride all the way to December. Will the Federal Reserve act to salvage its reputation despite the negative data, or will they admit that the state of the economy does not warrant an interest rate hike as yet.
The above are just my opinion, of course.
"September suggests that economic activity has been expanding at a moderate pace. Household spending and business fixed investment have been increasing at solid rates and housing sector has improved further, however, net exports have been soft "
Household Spending
September Consumer Confidence Index 102.6
October Consumer Confidence Index 97.6 (drop of 5.0 month on month)
September US Retail Sales rose by a mere 0.1% with August revised down as being unchanged instead of a rise of 0.2%.
Business Fixed Investment
On the day of the FOMC meets, Durable Goods contracted 1.2% in September, with August's contraction revised lower to minus 3.0%.
Housing Sector
A day before the FOMC meets, new home sales fell to an annual rate of 468,000 in September, 67,000 below the low-end of estimate and lowest rate since November 2014.
August new home sales was revised down by 33,000.
MBA Mortgage Applications
On the day of the release of the minutes, October purchase applications (for the week ending October 23), slipped 3.0%. while refinancing applications were down 4.0%.
So in a nutshell, based on recent data things are indeed much worse than what the FOMC stated.
How could Household Spending be solid when Retail Sales rose 0.1%? Or when Consumer Confidence declined to 97.6 from 102.6 a month earlier.
How could Business Fixed Investment be solid when Durable Goods fell 1.2% in September?
How could Housing Sector improved further when New Home Sales fell to the lowest in almost a year? How could it when Mortgage applications had also shown declines lately?
These are the same questions that will hound the Federal Reserve. Today's GDP data will give a better indication. Consensus estimate is 1.7% growth, but the widely followed and accurate data at the Atlanta Federal Reserve, shows 0.9%.
One thing for sure, it's going to be a bumpy ride all the way to December. Will the Federal Reserve act to salvage its reputation despite the negative data, or will they admit that the state of the economy does not warrant an interest rate hike as yet.
The above are just my opinion, of course.
NO INTEREST RATE HIKE IN OCTOBER
Well the Federal Reserve had put interest rate on hold, but wording quite strongly that there could be a hike a hike further down the road.
The Federal Reserve has unwittingly painted themselves into a corner. By announcing that there will be a rate hike this year, to not do so, would put the credibility of the Federal Reserve at risk. But global economy indicators are really weak right now, any interest rake hike will push the world into recession.
We have to consider the implications of a rate hike against a backdrop of interest rates and reserve ratios cut by China, and QE in EU and Japan, which have fallen short of expectations. Against a backdrop of falling commodity prices and emerging economies currencies, and falling global trade (with reference to the Baltic Index which have fallen drastically from recent highs) and IMF's forecast of global growth to 3.1% from 3.3%.
Indeed the Federal Reserve is in a tight spot. Likelihood, to salvage whatever reputation they had left, the Federal Reserve will raise interest rate but it will be below market expectations, perhaps? This will be accompanied by a dovish outlook and suggestions that interest rates hike will pause for now.
To do otherwise, the Federal Reserve would push the world into a recession.
I would still prefer gold mining companies as a long term investment, because we could be in a period of having too much liquidity in the market but with limited growth, and of course a potential asset bubble burst in Asia, spiraling into a debt crisis.
For short term trades, I would choose gold, looking for opportunities to short as well as long.
The above is just my opinion. You are encouraged to do your own research.
The Federal Reserve has unwittingly painted themselves into a corner. By announcing that there will be a rate hike this year, to not do so, would put the credibility of the Federal Reserve at risk. But global economy indicators are really weak right now, any interest rake hike will push the world into recession.
We have to consider the implications of a rate hike against a backdrop of interest rates and reserve ratios cut by China, and QE in EU and Japan, which have fallen short of expectations. Against a backdrop of falling commodity prices and emerging economies currencies, and falling global trade (with reference to the Baltic Index which have fallen drastically from recent highs) and IMF's forecast of global growth to 3.1% from 3.3%.
Indeed the Federal Reserve is in a tight spot. Likelihood, to salvage whatever reputation they had left, the Federal Reserve will raise interest rate but it will be below market expectations, perhaps? This will be accompanied by a dovish outlook and suggestions that interest rates hike will pause for now.
To do otherwise, the Federal Reserve would push the world into a recession.
I would still prefer gold mining companies as a long term investment, because we could be in a period of having too much liquidity in the market but with limited growth, and of course a potential asset bubble burst in Asia, spiraling into a debt crisis.
For short term trades, I would choose gold, looking for opportunities to short as well as long.
The above is just my opinion. You are encouraged to do your own research.
Sunday, October 25, 2015
AN ECONOMIST VIEW ON WHY THE FEDERAL RESERVE WILL NOT RAISE INTEREST RATES
According to Dr Michael Ivanovitch, the US has several alarming indicators which will deter the Federal Reserve from raising any interest rates. Below are excerpts from an article published by CNBC and my own reflection of what they mean.
1) Evidence that a mild contraction of monetary creation (tightening of money supply) earlier this year was reversed in June. Between end of June and the middle of October, the Federal Reserve's monetary base increased by 3.5%.
My opinion: This is a sign that the Federal Reserve is NOT leaning towards a tightening policy
2) Substantial slack still remains in the US labour market. The number of under- employed and unemployed is still 15.8 million. This is an exceptionally high number.
3) No inflation threats, mainly due to very low energy prices. The CPI in September 2015 was flat. With energy prices forecast to remain low well into 2016, inflation (in the US) is not going to happen anytime soon.
On top of that, despite economic growth, wage growth has been minimal. Reflecting on the excess supply of labour, unit labour costs on the first half of the year rose 1.4% from a year earlier, a substantial slowdown from the 2.2% recorded in the first half of 2014, and the average 2.1% for the whole of last year.
My opinion: The Federal Reserve has time and again mentioned that their most important task is to increase jobs and increase wage growth. This is not happening. On top of that, we have a low inflation environment.What is the reason to raise rates when there is no inflationary pressures in the economy? It is akin to shoot into one's foot, because if the Federal Reserve does raise rates, the economy will tank and hiring will fall, therefore defeating their original objectives.
4) Latest surveys show weakening in the service and manufacturing sectors. The industrial production increased a small 0.4% year on year after monthly declines in July and August, and the capacity utilisation rate of 77.5 % is far below the long term average of 80.1%.
5) Slowing lending to consumers by banks. Despite the sharp increase in excess reserves in the banking sector, bank lending to consumers slowed to an annual growth rate of 5%. Was it due to poor demand by consumers? Apparently not. Non-bank lending to consumers actually rose 8% year on year.
My opinion: Now why are banks not lending? In any economic environment, once lending by banks has slowed, it means that the economic picture is less than rosy.
4) An interest rate increase would induce capital flows into the US, causing the US$ to rise and weaken US trade. The US$ 12% trade-weighted increase YTD has taken its toll on US foreign trade. In the first 8 months of this year the trade deficit came in at US$500.1B, a 3% increase from the previous year. This could cause a serious drag on the US economy.
The US trade deficit with Europe in the first 8 months of the year rose 8% as Europe goods become cheaper due to the drop in the Euro's value and the rising US$ made US made goods more expensive.
US trade deficit with Asia is even worse, reflecting a 15% increase.
My opinion: So at this juncture it becomes highly unlikely that the Federal Reserve would raise interest rates, not when there are so many negative factors about the US economy.
My opinion: What are your investment options? US and global equities have more legs to move higher and I will continue to invest in companies which have high growth potential, and companies which pay high dividends, but I will also build a defensive portfolio consisting of REITs (high dividends lower risks) and gold mining companies (No matter how good are equities, one day the music will stop playing and the market will crash, gold will be a defensive option, and gold mining companies are the benefactors)
Link: http://www.cnbc.com/2015/10/25/fed-money-market-operations-balance-sheet-show-no-plan-for-rate-hike.html
1) Evidence that a mild contraction of monetary creation (tightening of money supply) earlier this year was reversed in June. Between end of June and the middle of October, the Federal Reserve's monetary base increased by 3.5%.
My opinion: This is a sign that the Federal Reserve is NOT leaning towards a tightening policy
2) Substantial slack still remains in the US labour market. The number of under- employed and unemployed is still 15.8 million. This is an exceptionally high number.
3) No inflation threats, mainly due to very low energy prices. The CPI in September 2015 was flat. With energy prices forecast to remain low well into 2016, inflation (in the US) is not going to happen anytime soon.
On top of that, despite economic growth, wage growth has been minimal. Reflecting on the excess supply of labour, unit labour costs on the first half of the year rose 1.4% from a year earlier, a substantial slowdown from the 2.2% recorded in the first half of 2014, and the average 2.1% for the whole of last year.
My opinion: The Federal Reserve has time and again mentioned that their most important task is to increase jobs and increase wage growth. This is not happening. On top of that, we have a low inflation environment.What is the reason to raise rates when there is no inflationary pressures in the economy? It is akin to shoot into one's foot, because if the Federal Reserve does raise rates, the economy will tank and hiring will fall, therefore defeating their original objectives.
4) Latest surveys show weakening in the service and manufacturing sectors. The industrial production increased a small 0.4% year on year after monthly declines in July and August, and the capacity utilisation rate of 77.5 % is far below the long term average of 80.1%.
5) Slowing lending to consumers by banks. Despite the sharp increase in excess reserves in the banking sector, bank lending to consumers slowed to an annual growth rate of 5%. Was it due to poor demand by consumers? Apparently not. Non-bank lending to consumers actually rose 8% year on year.
My opinion: Now why are banks not lending? In any economic environment, once lending by banks has slowed, it means that the economic picture is less than rosy.
4) An interest rate increase would induce capital flows into the US, causing the US$ to rise and weaken US trade. The US$ 12% trade-weighted increase YTD has taken its toll on US foreign trade. In the first 8 months of this year the trade deficit came in at US$500.1B, a 3% increase from the previous year. This could cause a serious drag on the US economy.
The US trade deficit with Europe in the first 8 months of the year rose 8% as Europe goods become cheaper due to the drop in the Euro's value and the rising US$ made US made goods more expensive.
US trade deficit with Asia is even worse, reflecting a 15% increase.
My opinion: So at this juncture it becomes highly unlikely that the Federal Reserve would raise interest rates, not when there are so many negative factors about the US economy.
My opinion: What are your investment options? US and global equities have more legs to move higher and I will continue to invest in companies which have high growth potential, and companies which pay high dividends, but I will also build a defensive portfolio consisting of REITs (high dividends lower risks) and gold mining companies (No matter how good are equities, one day the music will stop playing and the market will crash, gold will be a defensive option, and gold mining companies are the benefactors)
Link: http://www.cnbc.com/2015/10/25/fed-money-market-operations-balance-sheet-show-no-plan-for-rate-hike.html
Friday, October 23, 2015
DEFLATION OR INFLATION, GOLD WILL SHINE. HERE'S WHY
Here's 2 articles that reinforce my belief that the Federal reserve will not raise interest rates at all.
In the intermittent period, as long as rates remain low, oil price will pick up.
The danger is of curse, there will be asst bubbles and some of these will crash, but the impact will be that the price of gold will go up. Whether deflation or inflation, gold will shine.
First article: http://citizen.co.za/813458/us-growth-is-weak-fed-will-ease-rates-jim-rickards/
Second article: http://www.commoditytrademantra.com/gold-trading-news/how-inflation-could-be-caused-in-15-minutes-simply-raise-gold-prices/
In the intermittent period, as long as rates remain low, oil price will pick up.
The danger is of curse, there will be asst bubbles and some of these will crash, but the impact will be that the price of gold will go up. Whether deflation or inflation, gold will shine.
First article: http://citizen.co.za/813458/us-growth-is-weak-fed-will-ease-rates-jim-rickards/
Second article: http://www.commoditytrademantra.com/gold-trading-news/how-inflation-could-be-caused-in-15-minutes-simply-raise-gold-prices/
US RIGS COUNT
US rigs count dropped by 1 for the week ending 23 October, 2015 to 594, according to Reuters.
No big change, but the end of the report was what makes this important.
Oil production in the US has remained at about 9.1M bopd since September, below the 9.6M bopd reported in April.
So between the two periods, oil production in the US has dropped 500,000 bopd. it will be interesting to see how much more will drop as we progress into 2016.
http://in.reuters.com/article/2015/10/23/usa-oil-rigs-baker-hughes-idINL1N12N1NW20151023
No big change, but the end of the report was what makes this important.
Oil production in the US has remained at about 9.1M bopd since September, below the 9.6M bopd reported in April.
So between the two periods, oil production in the US has dropped 500,000 bopd. it will be interesting to see how much more will drop as we progress into 2016.
http://in.reuters.com/article/2015/10/23/usa-oil-rigs-baker-hughes-idINL1N12N1NW20151023
OIL COMPANIES WRITE DOWN US$6.5B OF ASSETS
The above was reported in Bloomberg today. This is hardly surprising given the fact that the assets are have fallen by more than 50% in value since last year.
Southwester reported a $2.8B impairment in Q3 while Freeport-McMoran posted a charge of US$3.7B.
Will it get worse? Yes, as many US oil and gas companies have yet to report their Q3 earnings.
Southwester reported a $2.8B impairment in Q3 while Freeport-McMoran posted a charge of US$3.7B.
Will it get worse? Yes, as many US oil and gas companies have yet to report their Q3 earnings.
CHINA CUTS INTEREST RATES FOR THE SIXTH TIME SINCE NOVEMBER 2014
China today cuts its interest rate bu 25 basis points to 4.35 percent. This is the sixth time they have cut their interest rates.
In response gold went up more than 1%.
We have Japan and EU which may not meet their inflation target and as such we could see further easing by EU, which Draghi hinted last night, and possibly Japan.
The latest move my China looks likely to push any decision of interest rates hike by the Federal Reserve into 2016.
As I have always said, with so much liquidity but little output to show, we could be pushing ourselves towards a hyperinflation in the the future. Let's hope it will not happen.
In this case, the best hedge will still be gold. My preference however will be gold mining counters. Gold doesn't earn any interests, but at least gold mining companies will pay dividends.
In response gold went up more than 1%.
We have Japan and EU which may not meet their inflation target and as such we could see further easing by EU, which Draghi hinted last night, and possibly Japan.
The latest move my China looks likely to push any decision of interest rates hike by the Federal Reserve into 2016.
As I have always said, with so much liquidity but little output to show, we could be pushing ourselves towards a hyperinflation in the the future. Let's hope it will not happen.
In this case, the best hedge will still be gold. My preference however will be gold mining counters. Gold doesn't earn any interests, but at least gold mining companies will pay dividends.
Thursday, October 22, 2015
US$130 PER BARREL OF OIL IN 2017?
I thought the headline would catch everyone;s attention.
http://www.bloomberg.com/news/videos/2015-10-22/why-crude-oil-prices-may-hit-130-a-barrel-in-2017
http://www.bloomberg.com/news/videos/2015-10-22/why-crude-oil-prices-may-hit-130-a-barrel-in-2017
DISNEY IS A TRADING BUY
With the pre-sale of tickets of Star Wars - The Force Awakens breaking all time records, so much so that websites crashed, the new Star Wars movie will definitely set a record of sorts for itself.
Traffic to online tickets sites have increase as many as 10 times over for AMC theaters and 7 times over at Fandango.
Link: http://www.theverge.com/2015/10/20/9576881/star-wars-the-force-awakens-ticket-sale-records
Despite the shadow of a cloud hanging over Disney's ESPN unit, the expectations of Star Wars ticket sales and merchandise could yield Disney some very huge returns.
I have a trading BUY recommendation for Disney. It still have some legs to retest its US$120 level.
This is just my opinion and it is important that you do your own research.
My disclosure: I do not own shares of Disney.
Traffic to online tickets sites have increase as many as 10 times over for AMC theaters and 7 times over at Fandango.
Link: http://www.theverge.com/2015/10/20/9576881/star-wars-the-force-awakens-ticket-sale-records
Despite the shadow of a cloud hanging over Disney's ESPN unit, the expectations of Star Wars ticket sales and merchandise could yield Disney some very huge returns.
I have a trading BUY recommendation for Disney. It still have some legs to retest its US$120 level.
This is just my opinion and it is important that you do your own research.
My disclosure: I do not own shares of Disney.
ECB DECIDED TO HOLD INTEREST RATE
BOE and ECB have decided to hold their respective interest rates which are already at record lows, and their concerns with the growth trajectory of the global economy.
IMF had earlier revised the growth rate from 3.3% to 3.1%.
China and pretty much of the major Asian economies have been steadily reduced their respective interest rates.
So how about the Federal Reserve? I think any rate hike will likely to be deferred until 2016, provided the global economy recovers and China's economic indicators are showing signs of improvement, which at as today, is still to be questioned.
The above is just my opinion, of course.
IMF had earlier revised the growth rate from 3.3% to 3.1%.
China and pretty much of the major Asian economies have been steadily reduced their respective interest rates.
So how about the Federal Reserve? I think any rate hike will likely to be deferred until 2016, provided the global economy recovers and China's economic indicators are showing signs of improvement, which at as today, is still to be questioned.
The above is just my opinion, of course.
Wednesday, October 21, 2015
LEG UPDATE
LEG announced that it has acquired a 5.5% stake and an option over an additional 4.45% stake in Manas Resources LLP ("Gold Company"), the holder of a licence to explore and mine for gold in Sultan Sary, Narynskaya Oblast, Kyrgyzstan, in exchange for its interests in Manas Minerals LLP, which has coal interests. The option has a nominal exercise price and vests on Gold Company achieving certain milestones.
About the Licence
The area is located in the gold-rich Tien-Shan region of Kyrgyzstan and covers approximately 66 sq km. The southwest corner of the area covered by the Licence, an area of approxiatemly 2 sq km, borders on its southern side the Choloktor gold area which under the Soviet Classification system contains a P3 resource of 15 tonnes of gold. Choloktor in turn is bordered by Buchuk, an area which under the Soviet Classification system contains a C1 resource of 20 tonnes of gold and a P3 resource of 41 tonnes of gold. This area in turn borders the Altyntor area which under the Soviet Classification system contain a C1 and C2 resource of 7 tonnes of gold. The structures in the southwest corner of the Licence are similar to those in the gold contaning areas of Choloktor, Buchuk and Altyntor, and it is believed that the same vein runs through all four areas.
For conversion purposes, 1 tonne = 35,274 oz
The swap in asset is timely as coal price has plummeted while gold price is on an upward momentum. Over the long term this new asset could be worth a lot more to LEG.
My disclosure: I own shares of LEG.
The area is located in the gold-rich Tien-Shan region of Kyrgyzstan and covers approximately 66 sq km. The southwest corner of the area covered by the Licence, an area of approxiatemly 2 sq km, borders on its southern side the Choloktor gold area which under the Soviet Classification system contains a P3 resource of 15 tonnes of gold. Choloktor in turn is bordered by Buchuk, an area which under the Soviet Classification system contains a C1 resource of 20 tonnes of gold and a P3 resource of 41 tonnes of gold. This area in turn borders the Altyntor area which under the Soviet Classification system contain a C1 and C2 resource of 7 tonnes of gold. The structures in the southwest corner of the Licence are similar to those in the gold contaning areas of Choloktor, Buchuk and Altyntor, and it is believed that the same vein runs through all four areas.
For conversion purposes, 1 tonne = 35,274 oz
The swap in asset is timely as coal price has plummeted while gold price is on an upward momentum. Over the long term this new asset could be worth a lot more to LEG.
My disclosure: I own shares of LEG.
Tuesday, October 20, 2015
SETBACK IN LGO
LGO announced that its last well, GY678, encountered a setback when they could not recomplete the well and thus had to seal the well. This is a grave setback as many were hoping that GY678 which encountered 480 ft of net oil pay in the C-Sands could improve the company's oil production greatly.
With this setback shares of LGO plummeted more than 30%.
With almost US$1.9M spent on the well, including a potential liability when the boring equipment got entangled with the pipe (further investigations will be conducted to find out what actually happened), could put LGO in breach of its cash ratios covenants in the BNP loan.
However, management reiterated that LGO will continue with its programme to drill the Goudron Sandstone to continue to generate cash flow, and has enough cash to pay its monthly payment to BNP.
I view this setback gravely as it means derailing some of LGO's plans.
Nevertheless, these are often the risks associated with resource companies and these risks are often high. So it is important that you always do your own research as our tolerance for risks often differs.
My disclosure: I own shares of LGO.
With this setback shares of LGO plummeted more than 30%.
With almost US$1.9M spent on the well, including a potential liability when the boring equipment got entangled with the pipe (further investigations will be conducted to find out what actually happened), could put LGO in breach of its cash ratios covenants in the BNP loan.
However, management reiterated that LGO will continue with its programme to drill the Goudron Sandstone to continue to generate cash flow, and has enough cash to pay its monthly payment to BNP.
I view this setback gravely as it means derailing some of LGO's plans.
Nevertheless, these are often the risks associated with resource companies and these risks are often high. So it is important that you always do your own research as our tolerance for risks often differs.
My disclosure: I own shares of LGO.
TROUBLE BREWING IN CHINA'S BOND RALLY?
More than a week ago, I shared with you a link about China's bond rally.
Now, more investors are pledging their bonds as collateral to buy even more bonds in order to increase their overall profits. The frantic rush to buy bonds could be due to the stock market's crash in the summer which push investors to buy bonds which are considered low risk while providing a steady income, and perhaps driven by the fear of further cuts in interest rate which could make income based savings more and more unattractive. But by pledging the bonds as collateral in order to reinvest the borrowed money only serves to magnify the risk level. Again we can see greed taking precedence over prudence.
The flight of capital into bonds is turning into yet another potential bubble.
Sinosteel has failed to make payment of interest due. How many more companies could face similar default as China is sitting on a US$16T corporate debt. These debts need to be repaid, and in a slowing economy, it just makes the task more difficult. A wave of potential default could cause serious repercussions in an already inflated bond market.
A bond market when it bursts, carries greater ramifications than a stock market crash because it will deter investors from lending money, thus affecting the overall growth of the economy.
Link: http://www.bloomberg.com/news/articles/2015-10-20/china-s-overheated-bond-market-showing-strain-for-local-bankers
Now, more investors are pledging their bonds as collateral to buy even more bonds in order to increase their overall profits. The frantic rush to buy bonds could be due to the stock market's crash in the summer which push investors to buy bonds which are considered low risk while providing a steady income, and perhaps driven by the fear of further cuts in interest rate which could make income based savings more and more unattractive. But by pledging the bonds as collateral in order to reinvest the borrowed money only serves to magnify the risk level. Again we can see greed taking precedence over prudence.
The flight of capital into bonds is turning into yet another potential bubble.
Sinosteel has failed to make payment of interest due. How many more companies could face similar default as China is sitting on a US$16T corporate debt. These debts need to be repaid, and in a slowing economy, it just makes the task more difficult. A wave of potential default could cause serious repercussions in an already inflated bond market.
A bond market when it bursts, carries greater ramifications than a stock market crash because it will deter investors from lending money, thus affecting the overall growth of the economy.
Link: http://www.bloomberg.com/news/articles/2015-10-20/china-s-overheated-bond-market-showing-strain-for-local-bankers
Monday, October 19, 2015
CHINA'S GDP: WHAT'S NEXT?
The GDP shows indication of a gradual change from manufacturing to services driven by consumption. This could see a transition from an export based economy to a consumption based economy.
In line with that, economists are also predicting a new normal in growth for China in that future growth will be in the 6% - 7% range.
The slow growth in manufacturing and fixed asset investment could impact upon commodities driven economies, such as Australia and Brazil.
Most economists believed that China has still some room for stimulus, either by reducing its interest rates and capital reserve ratio to stabilise growth.And herein lies the problem. If China continues to reduce its interest rates it will only serve to make the US$ stronger. Amidst a stronger US$, inflation in the US will be subdued. Earnings from major multi-national corporations will also fall which impact upon their investment in capital goods and less willing to increase the wage of employees. These factors will cause the US economy to slow down as well.
So with slow wage growth, low inflation and a potentially slow down in the US economy, the Federal reserve will unlikely to raise interest rates in the foreseeable future.
The world economy it seems is caught in a vicious circle.
The above are just my opinion.
In line with that, economists are also predicting a new normal in growth for China in that future growth will be in the 6% - 7% range.
The slow growth in manufacturing and fixed asset investment could impact upon commodities driven economies, such as Australia and Brazil.
Most economists believed that China has still some room for stimulus, either by reducing its interest rates and capital reserve ratio to stabilise growth.And herein lies the problem. If China continues to reduce its interest rates it will only serve to make the US$ stronger. Amidst a stronger US$, inflation in the US will be subdued. Earnings from major multi-national corporations will also fall which impact upon their investment in capital goods and less willing to increase the wage of employees. These factors will cause the US economy to slow down as well.
So with slow wage growth, low inflation and a potentially slow down in the US economy, the Federal reserve will unlikely to raise interest rates in the foreseeable future.
The world economy it seems is caught in a vicious circle.
The above are just my opinion.
Sunday, October 18, 2015
CHINA'S GDP ROSE 6.9%
China's GDP rose 6.9% beating a forecast of 6.8%.
However, underneath the gloss, lies some weak data as well:
1) Industrial output rose 5.7% vs a forecast of 6%
2) Fixed asset investment rose 10.3% vs a forecast of 10.8%
3) Secondary industry which includes manufacturing weakened to a 6% expansion
The above were mitigated by growth in the services sector which quickened to 8.4% and retail sales which rose 10.9% vs a forecast of 10.8% .
This goes to show that China's manufacturing sector remains weak and as long as that weakness persists, commodity prices are likely to remain subdued as well.
Fixed assets investment has been falling since reaching a high of more than 30% in 2009.
Source: Bloomberg
Saturday, October 17, 2015
US RIGS COUNT
US rigs count fell by 10 in the week ending 16 October, 2015 to 595. This is the seventh consecutive week that the rigs count have fallen. The news immediately drove the oil price to US$47.26 a barrel.
Elsewhere, shale oil continue to face pressure as reported by Bloomberg:
http://www.oregonlive.com/opinion/index.ssf/2015/10/time_is_running_out_for_americ.html
Elsewhere, shale oil continue to face pressure as reported by Bloomberg:
http://www.oregonlive.com/opinion/index.ssf/2015/10/time_is_running_out_for_americ.html
PPHM, LGO AND UKOG UPDATES
PPHM
PPHM's collaboration with AstraZeneca will include a later second stage trial. The trial will combine PPHM's Bavituximab and AstraZeneca's Durvalumabin a global Phase II study in patients with previously treated squamous or non-squamos non-small cell lung cancer (NSCLC). The randomised Stage II trial will be conducted by PPHM
LGO
LGO recently acquired a 25% stake in Beach oilfield Limited (BOLT) with which LGO already holds an agreement to acquire the deep petroleum rights to all of BOLT's South West Peninsula interests in Trinidad. With this 25% stake, LGO is now able to access an interest in the shallow petroleum rights held by BOLT including the producing Bonasse Oilfield.
UKOG
UKOG has received a conceptual oil development studies from Xodus Group Ltd and Barton Willmore. The studies are based on developing multiple sites across the UKOG's licences, each of which would consist of a conceptual multi-well pad with 12 horizontal production wells delivering 2,500 bopd at peak production. it remains a plan for the time being but it does show that UKOG is looking at ways to maximise production across their licences
My disclosure: I own shares of PPHM, LGO and UKOG
PPHM's collaboration with AstraZeneca will include a later second stage trial. The trial will combine PPHM's Bavituximab and AstraZeneca's Durvalumabin a global Phase II study in patients with previously treated squamous or non-squamos non-small cell lung cancer (NSCLC). The randomised Stage II trial will be conducted by PPHM
LGO
LGO recently acquired a 25% stake in Beach oilfield Limited (BOLT) with which LGO already holds an agreement to acquire the deep petroleum rights to all of BOLT's South West Peninsula interests in Trinidad. With this 25% stake, LGO is now able to access an interest in the shallow petroleum rights held by BOLT including the producing Bonasse Oilfield.
UKOG
UKOG has received a conceptual oil development studies from Xodus Group Ltd and Barton Willmore. The studies are based on developing multiple sites across the UKOG's licences, each of which would consist of a conceptual multi-well pad with 12 horizontal production wells delivering 2,500 bopd at peak production. it remains a plan for the time being but it does show that UKOG is looking at ways to maximise production across their licences
My disclosure: I own shares of PPHM, LGO and UKOG
Tuesday, October 13, 2015
GOLDMAN SACHS: EMERGING MARKETS COULD BE THE THIRD WAVE OF A FINANCIAL CRISIS
Emerging markets are faced with several factors which could lead to a third wave of a financial crisis - according to Goldman Sachs.
This time I am inclined to agree due to the following factors:
1) Collapse of commodity prices
2) Collapse of emerging currencies
3) Assets bubbles in the run up to the aforementioned collapse
4) Household Debt to GDP which is the highest in recent years
5) Household Debt to Disposable Income which is also the highest in recent years, especially Malaysia, Thailand, South Korea and Singapore
Add in all the above with deteriorating GDP growth in many emerging economies, and you will have the perfect storm.
Recently IMF has cut the global growth outlook to 3.1% from 3.3%.
In a global slowdown, one has to ask, how are those countries saddled with huge debts are able to meet the debt repayments. Not only that, servicing debts denominated in US$ has become more expensive due to the depreciation in the value of emerging currencies. With the prospect of the Federal Reserve hiking rates, the cost of refinancing too would have increased in anticipation of such a hike.
If there's anytime for portfolio diversification or increase your cash holding, this is perhaps a time to consider.
Here's the link: http://www.cnbc.com/2015/10/12/is-em-turmoil-the-third-wave-of-the-financial-crisis-goldman-thinks-so.html
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This time I am inclined to agree due to the following factors:
1) Collapse of commodity prices
2) Collapse of emerging currencies
3) Assets bubbles in the run up to the aforementioned collapse
4) Household Debt to GDP which is the highest in recent years
5) Household Debt to Disposable Income which is also the highest in recent years, especially Malaysia, Thailand, South Korea and Singapore
Add in all the above with deteriorating GDP growth in many emerging economies, and you will have the perfect storm.
Recently IMF has cut the global growth outlook to 3.1% from 3.3%.
In a global slowdown, one has to ask, how are those countries saddled with huge debts are able to meet the debt repayments. Not only that, servicing debts denominated in US$ has become more expensive due to the depreciation in the value of emerging currencies. With the prospect of the Federal Reserve hiking rates, the cost of refinancing too would have increased in anticipation of such a hike.
If there's anytime for portfolio diversification or increase your cash holding, this is perhaps a time to consider.
Here's the link: http://www.cnbc.com/2015/10/12/is-em-turmoil-the-third-wave-of-the-financial-crisis-goldman-thinks-so.html
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Monday, October 12, 2015
TAKING A LONG TERM VIEW ON GOLD MINING COMPANIES
I have written about buying gold mining companies recently. But such investments must take a long term view. Gold will always be a hedge against potential crisis or inflation. In the near term, gold price could be trending down or trade within a tight band. But in the longer term, gold could rise owing to these few factors:
1) A potential Asian Debt Crisis originating in China and affecting the whole of Asia
2) A China recession which prevents the Federal Reserve from raising further rates. A China recession can turn into a global recession
3) Amidst QE in Japan and EU, and a low interest rate policy across Asia, the world is awash with liquidity, and this does not allow the Federal Reserve to raise rates consecutively every quarter because this will price US goods out of the market. But the danger, when the market is awash with liquidity and if output continues to lag, coupled with depressed currencies, the world is ripe for a super inflation.
Any of the 3 scenarios could happen. So at least diversify your portfolio into some gold mining companies because in precisely those moments, gold will shine. At the most, 10% - 15% of your portfolio should include gold mining companies.
The above is just my opinion. You are encouraged to do your own research.
Sunday, October 11, 2015
SECOND LINER GOLD MINING COMPANIES TO EXPLORE
Gold is trending up and gold mining companies do look a cheap bargain, many having seen their marketcap reduced by more than 80% form their historic highs.
You can explore ASX listed MML (Medusa Mining) which in 2015 write off more than AUD200M and look to start anew. Low producer from the Philippines. Current price of AUD0.62 vs historic high of AUD8.35
Another is US listed KGC (Kinross Gold) which has US$1B cash at hand. Has recently been upgraded with a target price of US$2.55.
Please do your own research before buying.
I own MML and have intention to buy KGC in the next 24 hours
You can explore ASX listed MML (Medusa Mining) which in 2015 write off more than AUD200M and look to start anew. Low producer from the Philippines. Current price of AUD0.62 vs historic high of AUD8.35
Another is US listed KGC (Kinross Gold) which has US$1B cash at hand. Has recently been upgraded with a target price of US$2.55.
Please do your own research before buying.
I own MML and have intention to buy KGC in the next 24 hours
Friday, October 9, 2015
US RIGS COUNT
US rigs count dropped by 9, pushing the total to 605.
This could possibly lend some support to the oil price next week.
However, investors should also pay heed to the US stockpile report out in the mid week as the stockpile could continue to rise as many refineries go into maintenance mode in autumn. A substantial increase in the stockpile could hamper the upward march of oil price.
This could possibly lend some support to the oil price next week.
However, investors should also pay heed to the US stockpile report out in the mid week as the stockpile could continue to rise as many refineries go into maintenance mode in autumn. A substantial increase in the stockpile could hamper the upward march of oil price.
OUT OF A FRYING PAN AND INTO FIRE?
During the recent equity sell off in China, many investors flocked to the safe haven of bonds, and in the process push up the price of bonds to the highest in six years.This prompted companies to issue bonds to the highest level on record.
In an economy which is showing signs of fatigue and slowing down, revenue and profits are bound to decline. So companies may face difficulties in meeting the interest payments for bonds, more so because they had issued bonds at record pace.
So could this be a case that China, after the collapse of the stock market in July, 2015 could see another bubble forming in the bond market? Is this a case of being out from the frying pan and into the fire?
A bond market crash in China would surely cause a rout in bond markets in emerging markets, and this could spell trouble for many of the emerging economies which are heavily indebted, and where foreign ownership of the bonds are high.
What next is a stock market sell off and a fall in the value of currencies vs the US$.
The world as it is, is watching China. China is the 800 pound gorilla in room and if its economy runs amok, emerging economies will be the collateral damage.
Link: http://www.bloomberg.com/news/articles/2015-10-08/if-you-thought-china-s-equity-bubble-was-scary-check-out-bonds
In an economy which is showing signs of fatigue and slowing down, revenue and profits are bound to decline. So companies may face difficulties in meeting the interest payments for bonds, more so because they had issued bonds at record pace.
So could this be a case that China, after the collapse of the stock market in July, 2015 could see another bubble forming in the bond market? Is this a case of being out from the frying pan and into the fire?
A bond market crash in China would surely cause a rout in bond markets in emerging markets, and this could spell trouble for many of the emerging economies which are heavily indebted, and where foreign ownership of the bonds are high.
What next is a stock market sell off and a fall in the value of currencies vs the US$.
The world as it is, is watching China. China is the 800 pound gorilla in room and if its economy runs amok, emerging economies will be the collateral damage.
Link: http://www.bloomberg.com/news/articles/2015-10-08/if-you-thought-china-s-equity-bubble-was-scary-check-out-bonds
Thursday, October 8, 2015
CHINA'S SILK ROAD INITIATIVE
China may be sidelined in the TPP, but they are undertaking an initiative of their own. The building of a modern silk Road linking China through Central Asia and Russia to Europe is estimated to cost trillions of US$.
Link: http://news.xinhuanet.com/english/2015-03/28/c_134105435.htm
Link: http://news.xinhuanet.com/english/2015-03/28/c_134105435.htm
Tuesday, October 6, 2015
INTERESTING CORRELATION OF OIL BY BNP PARIBAS
Interesting correlation of oil as happened in 1985 and what is happening now. Look at the charts. The similarity is incredible!
http://www.cnbc.com/2015/10/06/the-crude-oil-chart-looks-a-lot-like-1985-bnp-paribas.html
http://www.cnbc.com/2015/10/06/the-crude-oil-chart-looks-a-lot-like-1985-bnp-paribas.html
GOLD IS SHINING NOW. TIME TO BUY GOLD MINING STOCKS
With Japan expecting another QE, EU remains soft and China facing the threat of a hard landing, the Federal Reserve has decided against raising interest rate in the short term. Many expect it to be Q1 2016. Gold is shining now. With many gold mining stocks having had their marketcap reduced by some 80%, now's the time to buy some.
3 stocks you could explore:
ASX listed Newcrest Mining (NCM) and St Barbara (SBM) and US listed Barrick Gold (ABX)
Please do your own research before buying.
My disclosure: I own shares of SBM.
3 stocks you could explore:
ASX listed Newcrest Mining (NCM) and St Barbara (SBM) and US listed Barrick Gold (ABX)
Please do your own research before buying.
My disclosure: I own shares of SBM.
LGO RAISED 1M POUNDS
LGO reported that it has raised 1M Pounds by issuing 111,111,110 new ordinary shares at 0.90 pence a share as working capital to be deployed for drilling purposes at the Goudron Field targeting the Goudron Sandstone. This did not go down well with investors and provide an opportunity for short sellers to pound on the stock.
Nevertheless, it is a step in the right direction to target the Goudron Sandstone which has a more consistent flow rate as demonstrated by Well GY672, very much unlike the C- Sands which has a high depletion in the flow rate.
I think LGO knew of the shortcomings and therefore realigned their strategy. The drill to the C-Sands however are not put to waste as it has provided LGO with invaluable data to plan for a water flood in the future.
My disclosure: I won shares of LGO.
Nevertheless, it is a step in the right direction to target the Goudron Sandstone which has a more consistent flow rate as demonstrated by Well GY672, very much unlike the C- Sands which has a high depletion in the flow rate.
I think LGO knew of the shortcomings and therefore realigned their strategy. The drill to the C-Sands however are not put to waste as it has provided LGO with invaluable data to plan for a water flood in the future.
My disclosure: I won shares of LGO.
Monday, October 5, 2015
LEG SHOT UP 50% IN EARLY TRADE YESTERDAY. HERE'S WHY
LEG shot up 50% in early trade yesterday before settling at 0.107 pence, an increase of 33.13% over its opening price.
LEG reported that its investee company, Virtual Stock (VS) valuation has gone up to 58M Pounds from 25M Pounds a year earlier. With a 7% stake in VS, this puts the value of LEG's stake in VS alone at more than 4M Pounds, higher than its current marketcap of approximately 2M Pounds, and that excluding its other investments.
On top of that, VS reported that Nick Jenkins, the founder of moonpig.com has bought a small stake in VS. Nick has been actively investing in start up businesses after he sold moonpig,com for 120M Pounds. His purchase of a stake in VS is a timely endorsement.
My disclosure: I own shares of LEG.
LEG reported that its investee company, Virtual Stock (VS) valuation has gone up to 58M Pounds from 25M Pounds a year earlier. With a 7% stake in VS, this puts the value of LEG's stake in VS alone at more than 4M Pounds, higher than its current marketcap of approximately 2M Pounds, and that excluding its other investments.
On top of that, VS reported that Nick Jenkins, the founder of moonpig.com has bought a small stake in VS. Nick has been actively investing in start up businesses after he sold moonpig,com for 120M Pounds. His purchase of a stake in VS is a timely endorsement.
My disclosure: I own shares of LEG.
Friday, October 2, 2015
ANOTHER STERLING PERFORMANCE FROM NAGACORP
Nagacorp reported that it January - September revenue increased 47% while its VIP gaming increased 52% from a year ago.
Compared to its peers in Macau, which are experiencing a drop in both revenue and VIp gaming, Nagacorp stands out as a BUY.
My disclosure: I own shares of Nagacorp.
Compared to its peers in Macau, which are experiencing a drop in both revenue and VIp gaming, Nagacorp stands out as a BUY.
My disclosure: I own shares of Nagacorp.
CREDIT SUISSE: MACAU GAMING STOCKS CORRECTION OVERDONE
Credit Suisse reported that the Macau gaming stocks correction is overdone and so far the hotel booking of rooms in the Golden Week has been satisfying.
Macau also reported that its visitorship rose 7.6% on 1 October 2015 compared to a year ago.
Credit Suisse top pick is Sands China.
Many of the Macau casino stocks have inf act fallen almost 70% from their record highs. This could be an opportune time to invest in some bigger names like Sands China, Wynn Macau and Galaxy.
Nevertheless, for some lower risk exposure, Nagacorp is another good alternative as their dividend yield is high. Its 2015 dividend payout is HK$0.3704 and this represents a 7.5% yield based on its current price of HK$4.92.
Moreover, its VIP gaming has gained vs the the fall in Macau casinos.
My disclosure: I own shares of Nagacorp.
Macau also reported that its visitorship rose 7.6% on 1 October 2015 compared to a year ago.
Credit Suisse top pick is Sands China.
Many of the Macau casino stocks have inf act fallen almost 70% from their record highs. This could be an opportune time to invest in some bigger names like Sands China, Wynn Macau and Galaxy.
Nevertheless, for some lower risk exposure, Nagacorp is another good alternative as their dividend yield is high. Its 2015 dividend payout is HK$0.3704 and this represents a 7.5% yield based on its current price of HK$4.92.
Moreover, its VIP gaming has gained vs the the fall in Macau casinos.
My disclosure: I own shares of Nagacorp.
US OIL RIGS COUNT DROPPED TO 614
US oil rigs count dropped by most in recent weeks, falling 26 to 614.
Oil rose in as a result and ended the week at US$45.54 per barrel.
With US jobs falling below expectations on Friday (2 October), many are betting that the Federal Reserve could delay the increase in the interest rate to 2016.
We could see oil price moving upwards into the US$46 - US$47 range next week.
Nevertheless the Federal Reserve could still surprise and initiate a hike in interest rate, but a better gauge will be the Q3 GDP reading.
Oil rose in as a result and ended the week at US$45.54 per barrel.
With US jobs falling below expectations on Friday (2 October), many are betting that the Federal Reserve could delay the increase in the interest rate to 2016.
We could see oil price moving upwards into the US$46 - US$47 range next week.
Nevertheless the Federal Reserve could still surprise and initiate a hike in interest rate, but a better gauge will be the Q3 GDP reading.
MORE SHALE COMPANIES COULD FILE FOR BANKRUPTCY DUE TO FINANCIAL DISTRESS
Oil price has remained in the US$40s per barrel. With mounting debts and low revenue, many shale oil companies could find themselves in financial distress in the next few months due to the following factors:
1) Data from the US Energy information Administration showed that the percentage of debt service vs operating cash flow has increased from 40+% in Q1 2012 to 80+% in Q2 2015. This means that a large chunk of the revenue is used just to service debts. How long could these companies last?
2) Oil price at persistently low levels is not helping either, despite the fact that many producers say that they are improving their efficiency and that they could produce more at lower costs. This is true, but will they ever generate enough cash to pay off the debts and capital invested in field. Most companies use EBIDTA to measure their progress. This is hugely misleading as we now know that the Interest (from debts) is high and so is the Depreciation (investment in oil field and machinery).
3) Financial institutions will be reviewing US shale oil companies from October - November whether to increase, maintain or reduce their credit lines. Some may not meet the new standards due to a shrinking balance sheet.When oil price declines, so too will be the value of the oil fields.
Here's an interesting article from thestreet.com which highlights the number of companies which could face some fianncial challenges ahead.
http://www.thestreet.com/story/13301491/1/how-many-more-oil-gas-companies-will-file-for-bankrptcy.html
1) Data from the US Energy information Administration showed that the percentage of debt service vs operating cash flow has increased from 40+% in Q1 2012 to 80+% in Q2 2015. This means that a large chunk of the revenue is used just to service debts. How long could these companies last?
2) Oil price at persistently low levels is not helping either, despite the fact that many producers say that they are improving their efficiency and that they could produce more at lower costs. This is true, but will they ever generate enough cash to pay off the debts and capital invested in field. Most companies use EBIDTA to measure their progress. This is hugely misleading as we now know that the Interest (from debts) is high and so is the Depreciation (investment in oil field and machinery).
3) Financial institutions will be reviewing US shale oil companies from October - November whether to increase, maintain or reduce their credit lines. Some may not meet the new standards due to a shrinking balance sheet.When oil price declines, so too will be the value of the oil fields.
Here's an interesting article from thestreet.com which highlights the number of companies which could face some fianncial challenges ahead.
http://www.thestreet.com/story/13301491/1/how-many-more-oil-gas-companies-will-file-for-bankrptcy.html
Sunday, September 27, 2015
LGO GOUDRON SANDSTONE UPDATE
LGo announced that its first well to be completed at the Goudron Sandstone, hab een free flowing naturally at 60 bopd for 60 days. This is indeed a good feat considering the fact that the Goudron sandstone is a much shallower reservoir.
With such a consistent flow, LGO will fast track their drilling to the Goudron Sandstone. At least 10 sites have been identified for this purpose which will be carried out by year end.
My disclosure: I own shares of LGO.
With such a consistent flow, LGO will fast track their drilling to the Goudron Sandstone. At least 10 sites have been identified for this purpose which will be carried out by year end.
My disclosure: I own shares of LGO.
Wednesday, September 23, 2015
LEG FY2015 RESULTS
Suffered a loss of 470,00 pounds from its investment vs a profit of 901,000 Pounds in FY2014.
Current Ratio 6.18
Debt to Equity Ratio 0.04
LEG investments into mining and resources based companies have taken a hit in the year due to lower commodity prices.
However there were some good news too, especially where Virtual stock is concerned. LEG has increased its holdings in Virtual Stock to 7.0%. Virtual Stock is moving into the non retail arena having signed a contract with the NHS.
Elsewhere, its investment into Bosques Energeticos is progressing well, having increased it total land from 11 hectares to 18 hectares.
If you can afford a 3 -5 year time line in your investment then this is the share to own. With a price of 0.0008 pence vs a director's option of 0.002 pence and above, the eventual listing of either Virtual Stock and Bosques Energeticos will provide the catalyst for multi-folds gain.
My disclosure: I own shares of LEG.
Current Ratio 6.18
Debt to Equity Ratio 0.04
LEG investments into mining and resources based companies have taken a hit in the year due to lower commodity prices.
However there were some good news too, especially where Virtual stock is concerned. LEG has increased its holdings in Virtual Stock to 7.0%. Virtual Stock is moving into the non retail arena having signed a contract with the NHS.
Elsewhere, its investment into Bosques Energeticos is progressing well, having increased it total land from 11 hectares to 18 hectares.
If you can afford a 3 -5 year time line in your investment then this is the share to own. With a price of 0.0008 pence vs a director's option of 0.002 pence and above, the eventual listing of either Virtual Stock and Bosques Energeticos will provide the catalyst for multi-folds gain.
My disclosure: I own shares of LEG.
REGAL REIT H12015 RESULTS
Revenue increased 4.6%
Business was somewhat affected by the Occupy Hong Kong movement and reduction from mainland Chinese tourists. As a result occupancy dropped to 83.0% during the period vs 92.9% last year.
Profit (including property value gains) -530.8%
Profit (excluding property value gains) 3.6%
You can see the huge difference between profit before and profit after adjustment for property value gains. Always remember that the CORE PROFIT from operations is the MOST important. Property value gains has no impact on the bottom line of the REIT unless it is sold.
Current Ratio 0.57
Gearing 0.36
Distribution of HK$0.0704 for H12015. If we take into consideration of the FY2014 distribution of HK$0.1620 and based on today's closing of HK$1.93, this represents a distribution yield of 8.4%.
However, as its current ratio is weak, I will recommend HOLD until it is improved.
My disclosure: I own shares of Regal REIT.
BOSSINI FY 2015 RESULTS
Revenue down 1.0%
Profit down 9.2%
Current Ratio 2.68
Debt to Equity Ratio 0.43
Cash and Equivalents HK$475M
FY Dividend HK$0.0708 or 10.9% based on current price of HK$0.65 per share
Revenue and Profit are down due to the reduction in visitorship form mainland China to Macau and Hong Kong. Revenue from other regions performed well, mitigating the shortfall in Macau and Hongkong
Nevertheless the company has continued to add on to its cash position, strengthening its overall balance sheet.
At HK$0.65 it is a BUY due to its dividend yield.
My disclosure: I do not own shares of Bossini.
Profit down 9.2%
Current Ratio 2.68
Debt to Equity Ratio 0.43
Cash and Equivalents HK$475M
FY Dividend HK$0.0708 or 10.9% based on current price of HK$0.65 per share
Revenue and Profit are down due to the reduction in visitorship form mainland China to Macau and Hong Kong. Revenue from other regions performed well, mitigating the shortfall in Macau and Hongkong
Nevertheless the company has continued to add on to its cash position, strengthening its overall balance sheet.
At HK$0.65 it is a BUY due to its dividend yield.
My disclosure: I do not own shares of Bossini.
Saturday, September 19, 2015
US OIL RIGS COUNT
Total number of oil rigs in the US declined by 8 to 644 rigs fr the week ending 18 September, 2015.
Oil price declined to US$44.68 per barrel, losing 4.73% on demand fears.
Oil price declined to US$44.68 per barrel, losing 4.73% on demand fears.
LGO UPDATE
In its H1 2015 report, LGO also announced that its application for a licence to drill another 30 wells has been approved. This means at LGO now has 45 well to drill in the Goudron Field.
Friday, September 18, 2015
LGO H1 2015 RESULTS
Revenue increased 105%. 6.610M Pounds in H1 2015 vs 3.230M Pounds in 2014.
Loss widened by 21.0%. 3.540M Pounds 2015 vs 2.925M Pounds in 2014.
Loss mainly due to:
1) Finance charges of 1.327M Pounds in H1 2015 vs 0.148M Pounds in H1 2014, of which 0.730M Pounds was due to the unrealised fair value loss pertaining to the BNP loan facility.
2) Forex loss of 0.848M Pounds in H1 2015 vs 0.406M Pounds in H1 2014.
Excluding these two amounts, Loss was 1.912M Pounds in H1 2015 vs 2.519M Pounds in H1 2014.
EPS of (0.09) Pence in H1 2015 vs (0.11) Pence in H1 2014. The lower loss per share was due to the dilution of shares which negate the impact of a wider Net Loss.
On the plus side, Admin Expenses fell 23.4% from 3.233M Pound sin H1 2014 to 2.475M Pounds in H1 2015. This may signify that LGO is cutting costs in view of the lower oil price.
Current Ratio 1.50. However its Trade Payables were more than its Trade Receivables by a ratio of 2.1 to 1.0. This could impact upon LGO's current cash position.
Debt to Equity Ratio 0.65
Gearing 0.20. I've added in Gearing to further gauge the extent of Borrowings vs the Total Assets.
Important notes:
1) In view of the low oil price environment management to ensure that an optimum management strategy is implemented based on the extensive well testing undertaken.
2) Medium term guidance of 1,500 bopd from 2,000 bopd due to the low oil price.
3) Company has no intention to further draw down the loan facility from BNP as it is not beneficial in a low oil price environment.
4) In Q3, submitted application to extend LGO's licence in the Ayoluengo Field to Spanish authorities.
5) Well GY678 encountered obstruction at 1,800 feet which prevented the well from being completed. Company will assess options to do a side track.
6) In order to provide data on the Goudron Sandstone Well GY672 has been recompleted at the Goudron Sandstone delivering 60 bopd.
7) 10 locations had been identified to commence drilling, targeting the Goudron Sandstone.
Key Targets for H2 201
Loss widened by 21.0%. 3.540M Pounds 2015 vs 2.925M Pounds in 2014.
Loss mainly due to:
1) Finance charges of 1.327M Pounds in H1 2015 vs 0.148M Pounds in H1 2014, of which 0.730M Pounds was due to the unrealised fair value loss pertaining to the BNP loan facility.
2) Forex loss of 0.848M Pounds in H1 2015 vs 0.406M Pounds in H1 2014.
Excluding these two amounts, Loss was 1.912M Pounds in H1 2015 vs 2.519M Pounds in H1 2014.
EPS of (0.09) Pence in H1 2015 vs (0.11) Pence in H1 2014. The lower loss per share was due to the dilution of shares which negate the impact of a wider Net Loss.
On the plus side, Admin Expenses fell 23.4% from 3.233M Pound sin H1 2014 to 2.475M Pounds in H1 2015. This may signify that LGO is cutting costs in view of the lower oil price.
Current Ratio 1.50. However its Trade Payables were more than its Trade Receivables by a ratio of 2.1 to 1.0. This could impact upon LGO's current cash position.
Debt to Equity Ratio 0.65
Gearing 0.20. I've added in Gearing to further gauge the extent of Borrowings vs the Total Assets.
Important notes:
1) In view of the low oil price environment management to ensure that an optimum management strategy is implemented based on the extensive well testing undertaken.
2) Medium term guidance of 1,500 bopd from 2,000 bopd due to the low oil price.
3) Company has no intention to further draw down the loan facility from BNP as it is not beneficial in a low oil price environment.
4) In Q3, submitted application to extend LGO's licence in the Ayoluengo Field to Spanish authorities.
5) Well GY678 encountered obstruction at 1,800 feet which prevented the well from being completed. Company will assess options to do a side track.
6) In order to provide data on the Goudron Sandstone Well GY672 has been recompleted at the Goudron Sandstone delivering 60 bopd.
7) 10 locations had been identified to commence drilling, targeting the Goudron Sandstone.
Key Targets for H2 201
1) Complete and bring on to production all seven 2015 C-sand wells at the Goudron Field.
2) Manage Goudron production for maximum long-term value, by preserving reservoir integrity and developing the necessary infrastructure to facilitate growth as needed.
3) Managing the business with low operating costs to provide a platform for economic growth despite continued low oil price.
4) Progress the Cedros Peninsular interests in Trinidad to ensure medium-term growth is maintained and long-term value is created
5) Maintain the Spanish assets for value in advance of the granting of the extension of the La Lora Concession
6) Seek further opportunities to expand the portfolio within the existing strategy, to provide longer-term diversified growth
LGO's share succumbed to heavy short selling upon the release of the H1 2015 results, mainly because of the obstruction encountered in GY678 where many had placed hope that it would boost production.
In the meantime, it is best to abstain from any purchase or averaging down as it would mean locking in your capital for a longer duration due to the low oil price environment.
My disclosure: I own shares of LGO.
Wednesday, September 16, 2015
US OIL RIGS COUNT FELL FOR THE SECOND CONSECUTIVE WEEK
US oil rigs count continue to fall for the second consecutive week to 652 on the week ending September 11, 2015.
Amidst a low oil price environment, and a looming credit line revision by major banks in the US, we can expect continued pressure on US shale oil companies. We could potentially see several more companies filing for bankruptcy protection.
While the US has overcome several major hurdles in supporting the Iran deal, hardliners in Iran are rallying against the deal.
Link: http://www.bloomberg.com/news/articles/2015-09-16/iran-nuke-feud-shifts-to-tehran-as-hardliners-push-to-sink-deal
Should the hardliners win, then that will throw a spanner in the works where the deal is concerned.
So where will oil be in the coming months?
I still see it in the sub US$50 in the immediate term.
Further support could come in the continued fall in US oil supply and projected decline in production. Production could take a hit in coming months due the following factors:
1) High depletion rate in wells coupled with slowdown in drilling activities (fall in rigs count) will put the brakes on production
2) Financial distress due to overwhelming debt among shale oil companies. Unable to fund further activities due to insufficient funding or bankruptcy
3) Low oil price will continue to discourage producers from expanding their capex. if fact, most have cut their capex for the next 12 months, and reduce their workforce
Despite the above, oil price is unlikely to return to more then US$80 per barrel in 2016 due to the likelihood of China entering into a recession. The next few months will provide indications whether China is heading towards that direction.
Taking all the above into consideration, I would say that oil could hover in the US$50 - US$60 per barrel towards year end.
Amidst a low oil price environment, and a looming credit line revision by major banks in the US, we can expect continued pressure on US shale oil companies. We could potentially see several more companies filing for bankruptcy protection.
While the US has overcome several major hurdles in supporting the Iran deal, hardliners in Iran are rallying against the deal.
Link: http://www.bloomberg.com/news/articles/2015-09-16/iran-nuke-feud-shifts-to-tehran-as-hardliners-push-to-sink-deal
Should the hardliners win, then that will throw a spanner in the works where the deal is concerned.
So where will oil be in the coming months?
I still see it in the sub US$50 in the immediate term.
Further support could come in the continued fall in US oil supply and projected decline in production. Production could take a hit in coming months due the following factors:
1) High depletion rate in wells coupled with slowdown in drilling activities (fall in rigs count) will put the brakes on production
2) Financial distress due to overwhelming debt among shale oil companies. Unable to fund further activities due to insufficient funding or bankruptcy
3) Low oil price will continue to discourage producers from expanding their capex. if fact, most have cut their capex for the next 12 months, and reduce their workforce
Despite the above, oil price is unlikely to return to more then US$80 per barrel in 2016 due to the likelihood of China entering into a recession. The next few months will provide indications whether China is heading towards that direction.
Taking all the above into consideration, I would say that oil could hover in the US$50 - US$60 per barrel towards year end.
WILL CHINA DEVALUE ITS YUAN?
CNBC reported that China could devalue ts Yuan by 15% - 20%. How will it impact on Asia's currencies? Will spark a currency war among Asian countries?
Read it here: http://www.cnbc.com/2015/09/16/why-chinas-yuan-may-be-set-for-15-devaluation.html
Read it here: http://www.cnbc.com/2015/09/16/why-chinas-yuan-may-be-set-for-15-devaluation.html
Thursday, September 10, 2015
PPHM Q1 FY2016 RESULTS
Revenue grew 76.0% vs Q1 FY2015
Loss widened by 6.7% vs Q1 FY2015
EPS stagnant at -US$0.08, same as Q1 FY2015
Current Ratio 2.03
Debt to Equity Ratio 0.40
Key takeaways from Conference Call:
1) Revenue achieved record high in Q1 FY2016.
2) US$42 million in manufacturing back log
3) New manufacturing facility has capacity to generate up to US$40 million in revenue
4) Recruitment for Sunrise Phase III Trial on track to complete by year end 2015
5) Possible first look in of Sunrise Phase III Trial in first half of 2016 and second lookin by mid year 2016
6) Breast Cancer Phase II/III Trial to begin by end of 2015
7) Lung Cancer Phase II Trial combining Bavituximab and BMY's Opdivo to begin by end of 2015
8) Design stage for the trial combining Bavituximab and AZN's Durvalumab
From the look of things, I believe the first few months of 2016 have a telling effect on the Share Price. Things will move very fast from there on.
My disclosure: I won shares of PPHM.
Loss widened by 6.7% vs Q1 FY2015
EPS stagnant at -US$0.08, same as Q1 FY2015
Current Ratio 2.03
Debt to Equity Ratio 0.40
Key takeaways from Conference Call:
1) Revenue achieved record high in Q1 FY2016.
2) US$42 million in manufacturing back log
3) New manufacturing facility has capacity to generate up to US$40 million in revenue
4) Recruitment for Sunrise Phase III Trial on track to complete by year end 2015
5) Possible first look in of Sunrise Phase III Trial in first half of 2016 and second lookin by mid year 2016
6) Breast Cancer Phase II/III Trial to begin by end of 2015
7) Lung Cancer Phase II Trial combining Bavituximab and BMY's Opdivo to begin by end of 2015
8) Design stage for the trial combining Bavituximab and AZN's Durvalumab
From the look of things, I believe the first few months of 2016 have a telling effect on the Share Price. Things will move very fast from there on.
My disclosure: I won shares of PPHM.
US COULD LOSE 500,000 BOPD BY YEAR END
An interesting article by Bloomberg.
This could provide some support to oil price.
http://www.bloomberg.com/news/articles/2015-09-09/u-s-oil-producers-may-lose-500-000-barrels-a-day-on-funding-gap
This could provide some support to oil price.
http://www.bloomberg.com/news/articles/2015-09-09/u-s-oil-producers-may-lose-500-000-barrels-a-day-on-funding-gap
WHAT MATTERS IS THE NET PROFIT PER BARREL OF OIL
We have read in many written article how US shale oil companies are revolutionising the extraction of tight oil plays. Despite the continuing slump in oil price, many of the major shale oil companies touted how they are improving the productivity per rig, the efficiency in drilling techniques which reduce the number of man days, and how technology improved the the overall cost structure.
But are these new found ways improving the net profit per barrel of oil? Are they cash flow positive or negative. Even when oil was trading at more than US$100 many of these companies were hardly generating positive cashflows. So how would they fare at today's oil price?
This article offers an insightful view of how shale oil companies could be in deeper trouble than what the analysts and oil barons say.
Link: http://oilprice.com/Energy/Crude-Oil/The-Biggest-Red-Herring-In-US-Shale.html
But are these new found ways improving the net profit per barrel of oil? Are they cash flow positive or negative. Even when oil was trading at more than US$100 many of these companies were hardly generating positive cashflows. So how would they fare at today's oil price?
This article offers an insightful view of how shale oil companies could be in deeper trouble than what the analysts and oil barons say.
Link: http://oilprice.com/Energy/Crude-Oil/The-Biggest-Red-Herring-In-US-Shale.html
Wednesday, September 9, 2015
LGO DRILLING UPDATE
LGO recently announced that the last of its 2015 development wells, GY678 has reached TD. A ttal of 679 feet of net oil pay was encountered, comprising of 199 feet at the Goudron Sandstones and another 480 feet at the C-Sands.
My disclosure: I own shares of LGO.
My disclosure: I own shares of LGO.
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