Energy & Commodities

An Epic Blowout

Posted by Bob Loukas - The Financial Tap

on Tuesday, 16 December 2014 15:27

The FED’s easy money has encouraged rampant energy speculation and over-investment, resulting in more than $500 billion in new loans and investments in just the past 4 years. And so long as Crude prices stayed comfortably above $90, investments made money and everyone was happy. But once energy prices started falling, the decline quickly became a negative loop-back effect because the very high levels of leverage could not tolerate the move. Whenever asset prices fall in a highly levered market, there is often a sudden lack of liquidity to absorb the speculators’ need to unwind leverage, leading to desperation and fire sales. In the case of energy, the sudden disappearance of “investors” highlights just how speculative the underlying market had become.

It’s not exactly a Black Swan event, since Crude and other assets occasionally move with incredible ferocity. But to a highly levered and speculative population who chose to ignore the risks as being far too improbable to worry about, it’s a situation where debt cannot be offloaded at any reasonable price. At $55 bbl Crude prices, much of the new debt simply does not work, meaning that significant energy company junk bond defaults will occur. Although this is obviously bad for the energy complex, it also has very real implications for broader systemic risk.

The only saving grace may be that it appears that Crude has entered the final, vertical decline of the crash. A bottom in the $50 range is in no way guaranteed, but it is likely that the low will come in the near future. Notice on the below chart that the current move down started from a June top. Since then, we’ve had no better than a Day 3 Cycle top, showing just how extremely Left Translated recent Cycles have been. The chart also shows how relentless the downward move has been, and the 3 distinct channels it has taken. Within each channel, the declines have taken on a steeper, more vertical aspect, to the point that Crude prices are now near free-fall.

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When a market enters into crash mode, there is no way to know where it will bottom. Unlike Crude, the energy producers have, to date, held up relatively well. And recently, they put in a very convincing counter-trend rally at the same time Crude appeared to be finding a bottom. But unless Crude does find a bottom, and quickly, the energy producers will, I believe, be punished with extreme prejudice, as we’ve yet to see “crash-like” selling in many of the names.

 

As is clear on the below chart, Crude was already deep into the timing band for a Low when energy producers rallied, fooling everyone into believing that a new Cycle was already underway. Normally, a sector rally in equities foretells a new Cycle, especially in an oversold, extended asset. In this case, it was just a vicious trap, a setup for the crash we’re seeing now!

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I’ve shown Crude’s sentiment chart a number of times in the past few months, so I know it should be taken lightly when used to discuss Cycle timing. But I’m presenting it again because we now have a situation where sentiment is matching that seen during the massive crash of 2008. There comes a time, even during a bear market, where the market can’t absorb more selling, where it becomes exhausted of sellers. I’m not sure if we’re there yet in Crude, but based on this chart, it’s clearly imminent.

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This crash has been a long time in the making, and has seen 6 consecutive months of lower prices without a single instance of back-to-back weekly gains! As a result, we have record low sentiment levels on the heels of the 2nd fastest rate of change (decline) ever recorded. This is a crash, no way around it. The effects on the industry will be long lasting.

As we can see below, price has entered free-fall. Cycle timing is out the window in this sort of scenario, as price can fall almost indefinitely, technically to zero. There is no way of knowing when it will bottom, but of interest is that the 2008 crash also began with a June top and ended with a December low, a 6 month decline. All that we can say with confidence is that the current move down should be very close to finished.

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Black Gold Loses Glitter

Posted by Peter Schiff - Euro Pacific Capital

on Monday, 15 December 2014 22:43

OilglutThe stunning 40% drop in the price of oil over the past few months has scrambled global economic forecasts, changed the geo-political landscape, and has severely pressured many energy sector investments. Economists are scratching their heads to determine if the drop is good or bad for the economy or whether cheap oil will add to or decrease unemployment, or complicate the global effort to “defeat” deflation. While all of these issues merit detailed discussions, the first question to address is if the steep drop is here to stay and whether energy prices will stay low enough, for long enough, to seriously reshuffle the economic deck. Based on a variety of factors, this is not likely to happen. I believe a series of technical, industrial, and monetary factors will combine to push oil back up to, and potentially beyond, the levels that it has seen over the last few years.

The dominant narrative explaining the current situation is that oil has collapsed largely because the growing mismatch between surging supply and diminishing demand. But there is little evidence to suggest that such conditions exist on the global stage.

According to the data available this month from the International Energy Agency (IEA), global demand for crude oil has increased by .74%. from 2013 to 2014, and is 3.6% higher than the average demand seen over the past five years (2009-2013). The same trend holds true for the United States, where 2014 demand is expected to come in 1.3% higher than 2013 and essentially the same as the average demand over the previous five years. (As an aside, the relative stagnation of U.S. oil demand provides a strong counterpoint to the current belief that the U.S. economy is stronger in 2014 than it has been in recent years).
 
So if the low prices are a function of supply and demand, but demand has not collapsed, then the difference has to be supply. The theory here is that the fracking and shale boom in North America has flooded the world market with unexpected supply, thereby pushing down the price. While it is true that the new drilling techniques have revolutionized energy production in the U.S. and Canada, the increase in production has been mostly negligible on the global stage.
 
Oil production in North America increased a hefty 8.8% from 2013 to 2014, and 17.7% over two years from 2012 to 2014. But outside of North America the story has been quite different. In fact, total global production increased by just .55% between 2012 and 2013 (2014 global data is not yet available). In 2012, North America accounted for just 17.4% of global production, but over the following year contributed 59% to the total increase of global production. So the fracking miracle is, at present, primarily a local phenomenon that has made limited impact on the global stage. In fact, in its most recent data, the IEA estimated that in 3rd Quarter 2014 total world demand exceeded total world supply by only .6%, hardly a figure that suggests an historic glut.
 
So if it’s not supply and demand, what could it be? First, there are technical factors. There was a widespread concern going into 2014 that the recovery would bring with it higher oil prices. This may explain the surge in speculative “long” contracts in crude oil futures seen in 2014. These positions, in which investors sought to make a levered bet on rising oil prices, peaked around July at 4 million contracts, nearly four times as high as 2010. With so much money anticipating an increase, a small pullback in crude could have caused a wave of selling to close out losing positions. If that is the case, in an over-levered market, this could lead to a domino effect that pushes prices far lower than market levels. But as these positions get unwound, markets eventually return to normal. If that happens, we could see a significant rally in oil.
 
The surging dollar is another factor that has pushed down prices. Oil is globally priced in dollars so any increase in the dollar translates directly into a decrease in the price of crude. Over the past few months the dollar has seen a major rally that I suspect has been caused by the widespread, but unfounded, belief that the Federal Reserve will begin to tighten policy in 2015 just as the other major central banks shift into prolonged easing campaigns. When traders realize that this is unlikely to occur, the dollar should sell off and oil should rise.
 
Industrial forces will also come to bear soon. Much of the new North American shale production has been characterized by relatively high extraction costs, large production volumes, and fast depletions. A high amount of capital expenditure is needed to maintain production volumes. If the price of crude stays low, we can expect to see a decrease in capex expenditures from the companies most closely aligned with horizontal drilling and fracking. In fact, such evidence has already come to light. This means that volume decreases will start to bite far sooner than they would in the case of traditional oil extraction.
 
Ordinarily, falling energy prices are a great economic development. Lowering the cost of heating, power, and transportation means consumers and businesses have more money to spend on everything else. But the U.S. economy is now far more vulnerable to energy sector weakness. A substantial portion of high paying jobs that have been created in the last few years have been in energy production. Already the capex slowdown in the Dakotas and Texas is beginning to be felt by energy workers in those areas (12/2/14, The Globe and Mail). If these trends continue, the employment reports that currently drive so much of the economic confidence, will begin to look decidedly weaker.
 
But falling energy will also help hold down consumer prices. And while this may sound like a good thing to anyone with a standard amount of common sense, it is not seen as a good thing by economists who believe that higher inflation is a prerequisite for economic growth. Weakening employment and slowing inflation could quickly entice the Federal Reserve to launch the next round of QE far sooner than anyone currently predicts. This could turn the table on the current dollar rally and help push oil back up.
 
If oil stays low, it may turn out that entire U.S. oil boom was just another Federal Reserve inflated bubble. If it pops, the job losses and debt defaults that would ensue could have a far greater impact on the economy and the credit markets than did the bursting of the Internet bubble back in 2000. For those who think that cheap oil prices will provide a strong enough shock absorber, think again. When the housing bubble burst in 2008, $35 oil did not spare the U.S. economy from recession. Nor did $20 oil keep us out of recession in 2001. Oil producers have raised hundreds of billions of “junk bond” financing that may become vulnerable if oil prices stay low for an extended period. I do not believe the Fed will allow debt defaults that would result to impact the broader economy. They will be inclined to support oil prices just as they have been willing to support other strategically important asset classes.
 

If oil investors overbuilt capacity based overly optimistic price assumptions, which were created by artificially low interest rates and QE, why would similar mistakes made by investors in stocks, real estate, and bonds not be similarly exposed? This could mean that the popping of the oil bubble may be just one of many bubbles that are ready to burst. But given the difficulty of dealing with such a situation, QE 4 may ultimately need to be larger than QE1, 2, and 3 combined!

 
As a major player in oil production, the U.S. stands to gain far less from the current price slump than many of our trading rivals. Saudi Arabia, the dominant producer, has notoriously low production costs and should likely withstand the current slump with little need for structural reform (Saudi Arabia’s geopolitical strategy for cheaper oil was recently examined by John Browne in his recent Euro Pacific column).
 
The primary beneficiaries of the current oil dip are the Asian countries that use lots of oil but produce very little. Thailand, Taiwan, South Korea, India, China and Indonesia all import oil and, therefore, will benefit by varying degrees. Many governments (India, Indonesia, Malaysia) are removing high cost subsidies – so the immediate benefit is not to the consumer, but to government fiscal balances, which will improve greatly.
 
So every silver lining usually comes with a cloud or two. Although the dip in oil prices is currently the biggest thing on the street and the cause for optimism, good times come with a cost, and they are likely to be short-lived. Energy stocks have been unfairly beaten down and could offer long-term value at current price levels.

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Low Oil Prices Fuel Bonanza Increases in Ethanol Stocks

Posted by Chen Lin via The Energy Report

on Monday, 15 December 2014 13:56

verdantfields580Chen Lin was one of the very few who foresaw the collapse in oil prices, so investors are well advised to pay attention to his advice. In this interview with The Energy Report, the author of the What is Chen Buying? What is Chen Selling? newsletter touts the prospects of a few oil companies that can prosper in the downturn, and explains why cheap oil means high profits for U.S. ethanol producers.

The Energy Report: You anticipated the collapse of the price of oil. How did you see this coming when so few others did?

Chen Lin: I was very fortunate. In an interview with The Energy Report last year, I expressed my fear that the price of oil could fall as low as $47 per barrel ($47/bbl). Because I invest in and follow a lot of fracking companies around the U.S. and Canada, I knew how fast North American oil production was increasing. Coincidentally, major Wall Street firms started to agree with my assessments one year later.

 

On Sept. 5, 2014, I alerted my subscribers that I had sold out a lot of energy stocks and reduced a lot of other positions to raise cash. Thanks to these timely sales, I’ve had a good year so far. But it’s been very tough watching oil fall as far and as fast as it has. 

As the oil price is in free fall, many companies with high leverage to the price will likely go under. Investors need to be extra careful in picking beaten-down stocks in the energy sector. My personal view is that the oil price is likely to continue to fall into next year, and possibly won’t find a bottom until next spring. I am watching it closely. It is very important to stay with companies that can survive this downturn, if not benefit from it. 

TER: Angelos Damaskos of Sector Investment Managers Ltd. told The Energy Report that increased North American oil production due to development in the shales has been balanced by decreased oil production elsewhere in the world. Therefore, he argued, there must be another cause for the oil price fall, and suggested significantly reduced buying from China. Do you agree? 

CL: No. China’s oil demand has been increasing, and there’s no way the Chinese government can hide it. China is the second-largest oil importer after the U.S. In fact, China’s oil imports have increased by as much as 50% recently because of the price reduction. China is filling up its strategic reserve. 

North American oil production has increased, so if demand stays constant, the Organization of the Petroleum Exporting Countries (OPEC) would have to reduce production to keep the price stable. 

TER: Since the price has fallen, does this suggest that OPEC has increased production?

CL: Possibly. I can understand Saudi Arabia getting sick of Canada and the U.S. taking its market share and acting accordingly. Partly because of the American military presence in the Gulf region, those countries cannot squeeze U.S. shale production without American permission. 

Another possibility is the U.S. acting to squeeze Vladimir Putin and Russia. The U.S. and the Saudis, acting together in the 1980s, brought the price of oil so low it was a big factor in the collapse of the Soviet Union. I can see the Saudis and the U.S. doing that again. You have Goldman Sachs calling for an oil price crash, and the Saudis are selling aggressively—and selling to the U.S. at much lower price than to Asia and Europe. The West Texas Intermediate (WTI) price is based in the U.S., and Saudi Arabia wants WTI to go down.

TER: About 90% of Saudi Arabia’s revenues come from oil production. How long can the country keep prices down? 

CL: When oil was over $100/bbl, Saudi Arabia built up its cash reserves, so it can easily ride out $80/bbl prices for 2–3 years. The real losers in this price war are oil producers with much higher costs—countries such as Russia and Iran. In November, the Russian ruble was defending 40 to the U.S. dollar; now it’s defending 50. 

TER: Back to China, are you worried or sanguine about the state of the Chinese economy? We hear stories about overleveraging, problems with debt and the banks, and a real estate bubble.

CL: All this is true. China definitely has a property bubble. Bank leverage is definitely high. The situation is not good and getting worse. But the Chinese government has more freedom to take action than the U.S. does, or the countries of the European Union do. 

Ideally, China needs to depreciate its currency to stimulate exports to Japan and Europe, its biggest trading partners. The U.S. would not allow devaluation, however, so China is somewhat stuck. But I believe China can weather this situation for some time. 

TER: Is the “revolution of rising expectations” a threat to China’s stability? People who have long been poor become inured to poverty. When they become a little bit richer, however, they come to expect ever-increasing prosperity. When this doesn’t happen, people can get very angry very quickly. 

CL: That’s a very good point. It’s a possibility. We must keep in mind, however, that the Chinese government retains strong control of the media and other means of popular discontent. Despite the recent problems, the current Chinese regime has been very popular because of its anti-corruption campaign and its moves against the state monopoly. The new regime’s honeymoon isn’t over yet and is likely to continue for the near term.

TER: How long before oil prices again reach $100/bbl? 

CL: It’s hard to say. The lower oil price will decrease production, but not immediately. This will occur in 2–3 years. As I see it, the drop in oil price will actually help the price reach $100/bbl in the future. Many oil companies are now reducing capital expenditures (capexes), so exploration is being curtailed. Fracking companies are reducing their activities. Ultimately, this must lead to higher prices.

TER: Lower oil production will lead to higher oil prices, but lower gold production hasn’t led to higher gold prices. What’s the difference?

CL: We cannot live one day without energy, without oil. Without oil, we cannot drive our cars, get to our jobs, heat our homes. We can, however, live without gold for a few years. Gold is more of a financial instrument than a commodity.

TER: How much damage will oil at less than $70/bbl cause to shale oil and oil sands operations? 

CL: Many companies in these spaces are cutting capexes by 20–30% for next year. Production could be down 20-30% in 2–3 years. 

TER: Shale oil and oil sands operations are, by their nature, very high capex. And shale oil wells don’t produce for long. Could three years of $70/bbl oil kill off shale oil? 

CL: No. I have checked with a lot of companies—some I own, some I follow—and the word is that prices of $50–60/bbl would be needed to kill shale oil.

TER: Now that the Republicans control both houses of Congress, will the Keystone XL Pipeline be approved?

CL: This is one of the top priorities for the Republicans in Congress. Though the recent efforts to approve the pipeline failed, Congress will likely bring it up next year. Keystone approval would be great news for Canada. Canadian oil producers have suffered so much, so I’m glad they would profit the most. The oil sands would benefit hugely as well. 

But this would be a long-term benefit because it will be years before Phase 4 would go into operation. In the near term, what could be a huge problem for the Canadian producers are new rail regulations coming into effect in 2015. This is in reaction to the many shipping accidents of recent years. These regulations will be really tough. They will raise shipping costs and reduce exports. Canadian oil companies are facing more pain before the Keystone starts.

TER: Which oil sands company is your favorite, and why? 

CL: I own Pan Orient Energy Corp. (POE:TSX.V). Its pilot oil sands project is in Alberta, but it also owns many conventional projects in Asia. Pan Orient is my favorite energy play because of its very strong balance sheet. The company just announced a $42.5M asset sale in Thailand. This brings its cash value, plus the other 50% of the Thai project, to CA$2.25 per share. It is trading now at $1.70/share. Beyond that, you get Canada and Indonesia for free. 

Pan Orient plans to sell its Canadian asset. But right now, that asset is valued, for share purposes, at zero. At rock bottom, it’s worth $100M. In Indonesia, Pan Orient’s partner will cover drilling costs for 2015. The company announced the Indonesia deal with Talisman Energy on Nov. 11, so its cash position will go even higher. In addition, Pan Orient will have an experienced partner with major Indonesia presence drilling on its very large concessions; the target is as large as half a billion barrels of oil equivalent. That’s a huge wild card the market didn’t expect. The company is in an ideal situation now because the cash position is there, Canada is producing, Thailand is producing, and the cash flow is covering the expenses. 

TER: Which pure oil play junior is your favorite? 

CL: Mart Resources Inc. (MMT:TSX.V) has been my home run of the past few years. I’ve already received a dividend that was more than my original investment. Mart just announced the new pipeline has started flowing. Once the new pipeline is fully ramped up, we should see the production triple, which will generate huge cash flow. Mart’s production cost is exceedingly low. 

TER: Is Mart seeking aggressively to expand its operations?

CL: It is. Mart is part of a consortium that has just acquired a new Nigerian asset from Royal Dutch Shell Plc (RDS.A:NYSE; RDS.B:NYSE), Total S.A. (TOT:NYSE) and Eni S.p.A. (E:NYSE). The consortium will control 45% of a block producing 30,000 barrels per day (30 Kbbl/d).

TER: Which natural gas juniors do you like? 

CL: I used to own Rex Energy Corp. (REXX:NASDAQ), but not anymore, the main issue being its heavily indebted balance sheet.

TER: Rex Energy is in the Appalachian and Illinois basins. How long before these regions are tapped out? 

CL: They will probably last for quite some time. Right now, prices are low, and producers aren’t generating much cash flow. But we may have a very cold winter, and natural gas stocks could be back in favor. And we might start to export natural gas from the U.S. and Canada as early as next year. That could be very positive in the long run. 

TER: Are we looking at a natural gas price crash due to overabundance?

CL: Some recent finds have been phenomenal, so the price could potentially go even lower. Hopefully, we can build up liquefied natural gas exports soon.

TER: Is there another company you like in this sector?

CL: One I do own is Cub Energy Inc. (KUB:TSX.V), which is drilling in Ukraine. Unfortunately, more than half of its production is in East Ukraine, a conflict area. It is still producing, but it cannot drill more wells. It is, however, getting good results from West Ukraine. Cub is a good, long-term Ukraine gas play. 

TER: The first oil shock was in 1973, 41 years ago. Since then alternative energy has been all the rage. But we remain essentially dependent on oil and gas, four decades later. Do you worry that the 30% decrease in the oil price could cripple alternative energy companies and their projects? 

CL: That depends. Some alternative energy companies will be hurt. One such company I own is Alter NRG Corp. (NRG:TSX; ANRGF:OTCQX). It uses plasma to burn garbage to generate natural gas that’s very clean, with no waste and no pollution. That could be attractive to such highly polluted countries as China and India. Currently, new garbage-burning plants in China generate a lot of resistance, but adopting plasma technology makes it much more attractive. 

Alter NRG has already built a plant in the United Kingdom (U.K.), and is building a second. In an island country like Britain, garbage is a huge problem. There is no room for landfills, so garbage must be shipped outside the country. There’s a high tipping fee, raised from consumers, to pay for collection. The natural gas price in the U.K. is very high as well. The return on investment in Alter NRG’s U.K. operations is very high, even after the fall in energy prices.

TER: Can you explain Alter NRG’s business model? 

CL: The tipping fee alone makes its U.K. projects worthwhile, so the natural gas generated is free. The company can sell the gas or use it to generate electricity, which is sold for a high price. And this is renewable electricity, so it is of premium value. The ash produced by incineration is pure, and can even be used in construction. 

I’ve been to Puerto Rico, another island nation, and I’ve talked to local people and companies that would love technology like Alter NRG’s. The only problem for this company is that it’s a long process from recognition of the technological benefits to government approval and construction. 

TER: Why do you believe the future is so bright for ethanol producers?

CL: In September, ethanol followed oil down in price. But there was a complete rebound and more in October. The conventional wisdom is that ethanol is considered part of gasoline, 10% by law. So when the oil price falls, and the gasoline price falls, the price of ethanol should fall too. That explains the coordinated short attacks on ethanol in the past two months. Shares of Pacific Ethanol Inc. (PEIX:NASDAQ) fell 60%, while the short interests in REX American Resources Corp. (REX:NYSE) more than tripled. I own both these companies, as well as Green Plains Renewable Energy Inc. (GPRE:NASDAQ). 

The conventional wisdom about ethanol has been proved wrong. Lower oil and gas prices encourage more consumption. More gas consumption, by law, requires more ethanol—more ethanol, in fact, than can be produced. According to the Environmental Protection Agency, U.S. plants are running at 930,000–940,000 barrels per day. Maximum daily U.S. ethanol capacity is 925,000 barrels per day. That’s why the ethanol price rebounded sharply in October and is now higher than in the summer, when oil sold at $100/bbl. 

On the supply side, few ethanol plants are coming on line because it is very difficult to get Renewable Identification Number (RIN) permits from the Environmental Protection Agency. So don’t expect any major new plants in the next few years. This issue was discussed in detail during the question-and-answer session of the Great Plains’ recent conference call.

TER: But ethanol share prices are still depressed.

CL: That’s why I’m so excited. The oil index funds are short ethanol, but they don’t understand the situation. Last quarter, Pacific Ethanol beat its earnings estimate with $0.33/share. Its margin has since risen from $0.35/gallon to more than $1/gallon. Imagine how much money it’s making now. The company has some debt, but its cash exceeds that by $30M. The company is now considering a dividend and a share buyback, as is Green Plains.

REX American and Green Plains also boast robust balance sheets and record-high margins. I am bullish on ethanol stocks. 

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TER: The use of ethanol for fuel requires the diversion of agricultural products, which leads to higher food prices. We’ve seen significantly higher food prices in the last few years. Do you think it’s possible that, given the lower prices of oil and gas, politicians might cut the 10% requirement?

CL: Actually, they are looking to increase it to 15%. Thanks to genetic modification, harvests of corn and soybeans are at historic highs, and the commodities are priced at historic lows. That’s another reason why ethanol companies are so profitable. Input costs are at an all-time low, with output prices at an all-time high. 

TER: Do you think ethanol companies are a better bet than oil companies?

CL: I do, especially from now until the end of the year. We have a tax-loss selling season. I see a lot of funds potentially going out of business or facing heavy reduction. Meanwhile, ethanol is booming. 

Earlier, I mentioned the rail-transportation regulations coming into effect in 2015. They will be particularly beneficial for Pacific Ethanol because it is selling ethanol in California, and its price is based on the ethanol from the Corn Belt, in Iowa, which is transported by rail. Shipping costs will jump in 2015, so ethanol margins will increase. 

Again, by law, gasoline must contain at least 10% ethanol, and when shortages occur, the price of ethanol skyrockets. The law is the law. The most recent conference calls of Green Plains and Pacific Ethanol confirmed the coming, strong ethanol price. This is not reflected in share prices yet, which are already bound to increase greatly based on current margins. 

TER: Chen, thank you for your insights.

Chen Lin writes the popular stock newsletter What Is Chen Buying? What Is Chen Selling?, published and distributed by Taylor Hard Money Advisors Inc. While a doctoral candidate in aeronautical engineering at Princeton, Lin found his investment strategies were so profitable that he put his Ph.D. on the back burner. He employs a value-oriented approach and often demonstrates excellent market timing due to his exceptional technical analysis.

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DISCLOSURE: 
1) Kevin Michael Grace conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Cub Energy Inc., Royal Dutch Shell Plc, Mart Resources Inc., Pan Orient Energy Corp. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
3) Chen Lin: I own, or my family owns, shares of the following companies mentioned in this interview: Alter NRG Corp., Cub Energy Inc., Green Plains Renewable Energy Inc., Mart Resources Inc., Pacific Ethanol Inc., Pan Orient Energy Corp. and REX American Resources Corp. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview. 
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent. 
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

 

7 Companies ‘Best Positioned to Deliver in 2015′

Posted by Haywood Securities via Investing News

on Thursday, 11 December 2014 18:08

2015-man-1-300x2002014 hasn’t been the best year for mining companies, and those involved in exploration and development have been having an especially difficult time. Indeed, a recent white paper from SNL Metals & Mining is not out of line in calling the situation a “persistent financing drought.”

However, despite the volatile market, there’s definitely still some silver lining out there. A recent report from Haywood Securities entitled “Down But Not Out — Identifying Opportunities in the Exploration and Development Space” looks at several companies that the firm believes are positioned to do well next year.

Overall, Haywood suggests that “while the [exploration and development] group may be down, it is certainly not out, with many good opportunities remaining.”

….continue reading 7 Companies ‘Best Positioned to Deliver in 2015′ HERE

Oil Plunge Has More to Go!

Posted by Larry Edelson - Commodities, Stocks, Technical Analysis

on Wednesday, 10 December 2014 14:57

The interim bear market in gold and other precious metals that I’ve been tracking for you isn’t the only bear market out there. As I warned quite some time ago, the price of crude oil would also fall substantially, down to below $70 a barrel, and quite possibly lower, before it bottoms.

Since June 19, oil has plunged from $107.44 a barrel to $67.22 as I pen this column, a $40.22 hit, an amazing plunge of more than 37 percent!

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More losses are coming for oil. In fact, take a look at this monthly chart of oil that I showed you at the end of last year, and notice how spot on my forecast has been.

Oil is now hovering just above that first major support level. Once it cracks that, oil will plunge to as low as $40.

That leg down to $40 could begin any moment, or perhaps after a short-term rally.

The crash in oil prices is hard to believe, when there are so many diehard oil bulls out there. Even more so when you consider all the political hot spots around the world that are now causing so much turmoil.

But from a fundamental point of view, oil is not bullish. Global oil inventories are fine now; there is no squeeze in supplies.

Moreover, as we all know, the U.S. now has more energy of its own than it’s ever had.

So what is driving oil prices lower? The answer, in my opinion, is simple.

And no, it’s not some far-fetched market manipulation to bring down Putin and Russia.

Screen Shot 2014-12-10 at 6.35.50 AMWhat’s driving oil lower is the same thing that is driving nearly all commodities lower. It’s called deflation. That’s especially true for Europe. The euro region is in a freefall. Almost every country in Europe is contracting, severely. Unemployment remains sky high, threatening to move even higher.

And all across the globe, rising geo-political tensions and conflict are driving most business people and investors to play it safe, park money in cash, take risk off the table, and hoard and protect their capital and wealth.

That too is deflationary, for all but the U.S. equity markets. So it’s hardly surprising that oil — like gold, silver, copper and so many other commodities — is still in bear–market territory.

But mark my words: a new oil bull market will form from this decline.

How so, when deflation is so strong right now? When there are so many dynamic changes occurring in the oil market, with the U.S. set to become energy independent?

There are three reasons oil will soar again, after it bottoms (in 2015).

First, there’s China. While China is home to oodles of natural gas, its economy is still oil thirsty and will be for a very long time.

In fact, in terms of dependence on oil, the U.S. and China are moving in opposite directions. While the U.S. will soon be energy independent, China will soon be the #1 consumer of oil and almost entirely dependent upon foreign supplies.

Second, there’s incipient global inflation, and a coming end to the dollar reserve system.Europe will crash into a steep deflationary mode in 2015. But it won’t last forever.

At some point in the not–too–distant future, the euro will crash so much that inflation will reappear in Europe, and even here, too.

In addition, the U.S. dollar will eventually lose its reserve currency role, and be supplanted by a new global reserve currency, in electronic form. The dollar’s diminished global role and the uncertainty of a new monetary system and reserve currency is bound to be very bullish down the road for oil prices.

Third is the war cycles. Right now, they are bearish for oil, as they are for gold. But keep in mind that the cycles of war point consistently higher into the year 2020.

That means that rising geo–political tension around the globe is going to accelerate DRAMATICALLY in the months and years ahead, and at some point — also not too far off in the distant future — it IS going to put a firm bid under oil and energy prices.

The question now, though, is how can you play the downside in oil over the next few months, as oil heads toward a major bottom near the $40 level?

Simple: Buy shares in an inverse ETF. My favorite for oil is the ProShares UltraShort DJ–AIG Crude Oil, symbol SCO.

What about energy shares? With very few exceptions, most should trade lower along with oil over the next few months. Then they will become a fantastic buy.

Until next week …

Best wishes,

Larry