Why Buying Cheap Makes All the Difference in the World!

I’m a cheapskate. And no, I’m not afraid to admit it.

When I go grocery shopping, I bring along a plastic coupon holder and use as many clipped ones as I can. I also go online to Publix.com and “clip” the digital ones there every week.

When I buy new clothes, I try to hit up the local outlet mall rather than the regular one. The prices are better, and the quality is just fine. I increase my savings by doing things like signing up for email and text coupons — something that has saved me even more!

When it comes to investments, my approach is no different. If I can get a stock or ETF “on sale,” I love it. And if I can buy stocks at once-in-three-decade depressed valuations … when extreme pessimism is rampant in the mainstream media … and when investors are positioned the most egregiously negative on those stocks than they’ve ever been … I’m like a kid on Christmas morning!

That brings me to one of my favorite sectors on the planet right now: Energy. Yes, energy.

You see, everyone and his sister was puking up energy stocks late last year and earlier this year. You couldn’t give ’em away, with some plunging 60 percent, 70 percent, or more just since last summer!

Crude oil futures got the most oversold, and showed the most extreme downside momentum, ever — even worse than during the 2008-2009 implosion! Oil prices fell the most since the 1986 collapse driven by Saudi Arabia’s decision to flood the market with crude.

The result: Drilling rig activity in the U.S. and Canada collapsed at the fastest rate in history. Energy sector junk bonds plunged in price. Several smaller drillers tumbled into bankruptcy, or got very close to doing so. Predictions of a crisis on the order of the dot-com collapse or the housing market implosion grew widespread.

And you know what I did? I started recommending that my subscribers and my readers buy!

Was I off my rocker? I like to think not. Instead, I like to think it was a chance to grab some once-in-a-lifetime bargains!

Not $5 off a work shirt at Calvin Klein, which I got a while back from a text-based deal.

Not $50 off at Men’s Wearhouse, which I just enjoyed this past weekend as a reward for previous purchases for my stepson.

But an honest-to-goodness mega-discount, the kind you can’t even find on TV shows like Extreme Couponing!

Did I know then that oil prices had bottomed, 100 percent, for always and forever? Do I know that now, a few months of bottoming action later? Of course not!

But what I do know is that buying cheap, cheap, cheap makes all the difference in the world — whether at the grocery store or in the stock market! I hope you joined me in buying energy, and are reaping the benefits now.

After all, many energy stocks are now rallying to multi-month highs as investors anticipate better days ahead. Mega-giants like Royal Dutch Shell (RDS/A, Weiss Ratings: C) are making their biggest deals in more than a decade to take advantage of dirt-cheap valuations. And private equity buyers and corporate buyers are combing through the energy sector wreckage, presaging even more transactions down the road.

One last piece of advice: I don’t think this train has left the station. Not by a long shot. So even if you’ve missed the first leg of the move higher in energy stocks, there could be much, much more room to run if I’m right about where we’re headed! Be sure you watch this space for more guidance on this issue as 2015 unfolds.

Until next time,

Mike

“Jim has
publicly stated that he is looking to get all of his money out of the dollar in
the coming months.”

Do you know
Jim Rogers?

The
legendary investor first went to work on Wall Street with $600 in his pocket in
the late ‘60s. In 1970, he and George Soros founded the Quantum fund: one of
the greatest investment funds in history. 

Between 1970
and 1980, the Quantum fund returned 3,365%, outperforming the S&P 500’s
performance of 47% by an enormous margin. On an annual basis, Rogers and Soros
produced average returns of 38%. Rogers then “retired” with millions in his
bank account at the ripe age of 37…..continue reading until you get to his current recommendations HERE

Oil Trading Alert originally published on Apr 8, 2015, 8:16 AM

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.

The last 2 days were quite encouraging for crude oil bulls as the black gold rallied above 2 declining resistance lines and the volume during yesterday’s upswing was high. Is this enough to make the outlook bullish?

In short, it’s almost (!) bullish. In our opinion, until crude oil moves above the Feb 2015 high, the outlook will not become bullish enough to justify opening long positions in crude oil. Yes, we are considering opening long positions at this time. Here’s why (charts courtesy of http://stockcharts.com):

Larger Image

There’s no significant resistance all the way up until the first of the classic Fibonacci retracement levels, which is much higher than the current crude oil price. Moreover, since the previous move lower was very sharp, we can expect a move back to be sharp as well. Consequently, paying extra attention to the crude oil market in the following days should be worth it.

If the potential size and sharpness of the rally are so high then why are we not opening long positions right away? Because we have not seen a breakout above the Feb 2015 high and consequently the chance of seeing such a rally soon is not very high just yet.

Larger Image

In yesterdays Oil Trading Alert, we wrote the following:

(…) in our opinion, as long as there is o breakout above this key resistance area further rally is questionable and a pullback from here in the coming week should not surprise us.

The above remains up-to-date. The breakouts above the declining resistance lines (marked on the above chart with blue and red) are encouraging, but are not enough, in our view, to make the outlook bullish. We’re close to changing the outlook, though.

Please note that if we don’t see the breakout and the downtrend resumes, the initial (!) downside target will be the red declining support/resistance line (currently around $49.20).

Summing up, although crude oil rallied visibly in the last 2 days and broke above 2 resistance lines, it didn’t move above the most important resistance just yet and consequently, the outlook is not yet bullish enough to justify opening long positions in our view.

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bullish

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. We will keep you – our subscribers – informed should anything change.

Thank you.

OPEC has been the most talked about international organization among investors, analysts and international political lobbies in the last few months.

When OPEC speaks, the world listens in rapt attention as it accounts for nearly 40 % of the world’s total crude output. With its headquarters in Vienna, Austria, one of the mandates of 12- member OPEC is to “ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.” (Source: opec.org).

However, OPEC has been in the line of fire from the western world in light of its stance of not reducing the production levels of its member nations (excluding Iran). Most view this as a strategy to squeeze the American shale production and other non OPEC nations.

All is not well for OPEC

Simply put, the world has too much oil at the moment which has resulted in the reduction of price levels from approximately $100 to $50 a barrel, and OPEC (as well as US shale producers) has a major role to play in this supply glut. With the decline of average annual crude prices, OPEC earned around $730 billion in net oil export revenues in 2014 (Source: EIA), a big decline of 11% from its previous year. The EIA even predicts that OPEC’s net oil exports (excluding Iran) could fall to as low as $380 billion in 2015.

Related: Media Spin On Oil Prices Running Out Of Fuel

With the huge reduction in its revenues and growing discomfort among its members such as Venezuela, Libya and Nigeria over its current production levels, is OPEC really getting weaker?

Image Source: EIA

Iran Nuclear Deal: A warning sign for OPEC?

With announcement of a historic nuclear deal framework between Iran and six global powers: America, France, Britain, China, Russia and Germany on April2, 2015, there is a good possibility that Iranian crude oil exports will increase greatly after June 2015 when the final nuclear deal is signed. Iran is all set to pump close to 300 million barrels of crude into the market, thereby kick starting another potential decline in oil prices.

This might be one of the most crucial junctures for OPEC and it has to consider the possibility of reducing its current production quotas, mostly due to its internal issues of which the cartel has many.

Venezuela’s Woes

Containing some of the largest proven oil and gas reserves in the world, Venezuela is one of the founding members of OPEC. However, the country is reeling under a major economic recession since 2014 with an inflation rate of 68.5% (as on December 2014).

Cheap oil has created a huge financial crisis for Venezuela as its economy is heavily dependent on oil exports and oil revenues constitute about 95% of its total foreign exchange earnings. As per its state run oil company PDVSA, the country loses about $700 million a year with every $1 drop in the international oil price.

Related: Why The Oil Price Collapse Is U.S. Shale’s Fault

For a nation that is suffering from shortage of basic requirements such as food and toilet paper, any further reduction in oil prices would result in a total economic collapse. Therefore, it would be in Venezuela’s interests to reduce its production levels especially after the Iran nuclear deal.

Nigeria’s dilemma

Nigeria is Africa’s largest oil producer and among the top 5 global exporters of LNG. An OPEC member since 1971, Nigeria’s oil and gas sector represents about 75% of its total government revenues and 95% of its total export revenues. The African nation’s economy is heavily dependent on crude oil prices as its foreign exchange reserves (built as a result of net positive oil revenues) have reduced substantially over the past two years.

Much like Venezuela, Nigeria needs international crude prices to be in the range of $90- $100 a barrel which is not possible unless OPEC reduces its supply.

Iraq’s Issues

After Saudi Arabia, Iraq is the biggest crude oil producer in OPEC. It also has the fifth largest proven crude oil reserves in the world. With an increase in its government budget spending, the country requires a stable international oil price of $105 per barrel to achieve its break-even point. The current oil price levels are nowhere near this. Apart from this, issues such as the ongoing ISIS insurgency, western sanctions, heavy economic dependency on oil (more than 90%) and poor infrastructure have added to Iraq’s woes.

Related: Who’s To Blame For The Oil Price Crash?

The OPEC ‘heavyweights’

Apart from being the largest exporter of the total petroleum liquids in the world, Saudi Arabia is also the main driving force behind the cartel’s stubborn supply policy. The Saudis, along with Kuwait and UAE have been defending the decision of not reducing the OPEC production levels in order to retain their global market share. It is interesting to note that even if the oil price remains at the current levels, Saudi Arabia, Kuwait and UAE would have enough cash reserves to remain in the game for several years.

In short, these OPEC heavyweights have little to worry about from the current low oil prices for the time being.

United we stand, divided we fall.

In December 2014, the Energy Information Administration warned OPEC to reduce their production levels. According to the EIA, these cuts would be helpful for OPEC members such as Venezuela, Nigeria, Iraq and Iran as reduced OPEC supply and the corresponding increase in oil price would safeguard their uncertain future economic growth.

Leaving the heavyweights to one side; it is quite evident that OPEC, as a group, has become somewhat weakened. Apart from its falling export revenues and the growth of non OPEC producers, especially US shale production, OPEC now stands divided into two factions. One faction that is being led by Saudi Arabia wants to maintain and even increase its production levels while the other faction consisting of Venezuela, Nigeria, Iran, Iraq and Algeria requires just the opposite for safeguarding their national interests. In fact, the latter requires crude prices to be as high as $100 per barrel in order to balance their falling budgets (Source: IMF).

Last year, Saudi Arabia’s oil minister Ali Al Naimi said “It is not in the interest of OPEC producers to cut their productions, whatever the price is.”

A number of mitigating factors make this year’s June meeting of OPEC more interesting than ever.

By Gaurav Agnihotri for Oilprice.com

More Top Reads From Oilprice.com:

• Saudi Aramco’s Clever Strategy To Scoop Up America’s Best Energy Talent
• Many Big Guns Still Betting On Oil Comeback In 2015
• Oil Rebound May Come Sooner Than Expected

We’re just days past a tentative nuclear agreement with Iran. And already signs are emerging that projects opportunities that could be coming here. 

Such as in the oil and sector. Where Iranian officials said this week they are already eying Western involvement in the domestic sector. 

The head of Iran’s committee to review oil contracts, Mehdi Hosseini, announced Sunday that the government will unveil a new array of contracts in the petroleum sector this September. Hosseini added that the government is specifically looking to investment from U.S. and European firms.

As proof, the government said it will hold an international conference in London to unveil the September oil contracts. Demonstrating exactly who the target audience is for this bid round. 

This obviously signals a major potential opportunity for E&P players. Iran’s oil and gas fields have proven, high-potential geology, and a lack of modern exploration — with foreign-backed investment in the sector having been limited over past decades to “risk service contracts”, where companies aided in development but were prohibited from owning reserves.

That hang-up — along with recent sanctions — led most big firms to pass by Iran’s fields. But the Iranian government has indicated that could all change this year. Suggesting that petroleum contracts will be reworked to offer attractive terms — including ownership of in-ground oil and gas reserves. 

This week’s pro-West announcement from Iran also suggests opportunities could be coming in other resource sectors here. Mining, for example, where Iran holds world-class potential for copper porphyries, lead-zinc deposits and even gold mines. (Just last month, the scholarly journal Ore Geology Reviews dedicated a full volume to new research on Iran’s mineral potential.)

Of course, all of this is contingent on a final deal with the West going through (and holding up). Watch for developments on the political front — if peace looks to be sticking, it may be time to think about adding this nation to our watch list. 

Here’s to going un-rogue,

Dave Forest