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What Investors Need To Know About The US Treasury Cyberattack

Posted by Wayne Duggan

on Monday, 14 December 2020 8:09

U.S. stocks are trading higher despite a successful cyberattack on the U.S. Treasury and the U.S. Commerce Department.

What Happened? On Monday morning, the Trump administration acknowledged there was a security breach at the Treasury.

“We can confirm there has been a breach in one of our bureaus. We have asked CISA and the FBI to investigate, and we cannot comment further at this time,” a White House spokesperson said.

Why It’s Important: President Donald Trump fired top U.S. cybersecurity official Christopher Krebs in November following the election. The hack involved the Microsoft Corporation Office 365 platform, according to Reuters.

Reuters reported the hackers are suspected to work for Russia and have reportedly been monitoring internal emails within the Treasury and Commerce departments. The Russian Embassy in Washington denied the country was involved in the attacks…CLICK for complete article

Safety First – Behind the Scenes of Canada’s 1st Regulated Blockchain Investment Platform

Posted by MoneyTalks Staff Writer

on Friday, 11 December 2020 11:23

On November 25th Canadian regulators quietly approved a first-of-its-kind investment platform that employs distributed ledger technology, better known as blockchain. This application, called Finhaven Private Markets, operated by Finhaven Capital Inc., allows for investors to purchase securities from private issuers directly, without the need for a broker, deal representative or clearing house. And perhaps more importantly, allows for those securities to be privately traded on the platform directly between qualified individual investors.

The potential for this application to revolutionize the securities industry is significant. Traditional capital raise models such as IPOs, RTOs and brokered financings could become as outdated as video games disks and home phones.

But as with every new advance in the financial sector, the potential for bad actors and malfeasance has to be identified, addressed and guarded against. That task has fallen largely on the shoulders of Finhaven’s Chief Compliance Officer Sandra Jakab. Ms. Jakab has worked at the highest compliance levels of Canada’s financial and investment industry, heading up Capital Markets Regulation at the BC Securities Commission for nine years, and at one time being the only woman responsible for managing conduct risk for a major Canadian bank.

“It was a big decision to join the team at Finhaven and leave behind the familiar institutional world,” explained Ms. Jakab. “But how many times in a career do you get a chance to build something brand new, something that could fundamentally impact the Canadian investing landscape.”

Sandra and Finhaven Private Markets worked closely with regulators across the country, especially with the BC Securities Commission that served as Finhaven’s principal regulator, who in turn worked with the Securities Administrators Regulatory Sandbox Committee — a group set up specifically to encourage Canadian innovation and technology advances for the industry. Perhaps not surprisingly, something this new is being held to an incredibly high standard – one far beyond what current Exempt Market participants must employ. While the front end of the system offers simple, safe and secure paperless solutions – behind the scenes, the tracking will be cutting edge.

As Sandra outlined, “the platform initially will be restricted to “accredited” investors who must meet some long-standing criteria for income and/or assets. In addition, we apply proprietary tools that assess investors’ asset concentration, market knowledge and the risk of their current portfolio. This will ensure each investment opportunity offered is a good individual match for our clients. And at the same time, connecting our investment product issuers with a highly qualified group of accredited investors.”

Finhaven is banking that accredited investors will be open to the heightened requirements, as it makes them eligible to trade directly and privately with other equally-eligible investors on the platform.

Every Canadian securities dealer must address the inherent conflict-of-interest between the needs of companies seeking to raise capital, and the investor’s need for transparency and surety. Finhaven Private Markets has taken the addional step of establishing an Outside Advisory Board which will conduct an independent assessment of each investment offering from the perspective of the potential future shareholder. “We’re excited to not only bring new opportunities to Canadian investors, but to do it in a way that increases confidence in the process as well,” said Ms. Jakab.

And now that Finhaven Private Markets has been launched from the “sandbox” it will be fascinating to see if the team can deliver on the promise of blockchain technology in the securities industry.

Schachter’s Eye on Energy – Dec. 9th

Posted by Josef Schachter

on Wednesday, 9 December 2020 13:10

Each week Josef Schachter will give you his insights into global events, price forecasts and the fundamentals of the energy sector. Josef offers a twice monthly Black Gold newsletter covering the general energy market and 27 energy and energy service companies with regular updates. He holds quarterly subscriber webinars and provides Action BUY and SELL Alerts for paid subscribers. Learn more. 

EIA Weekly Data: The EIA data on Wednesday December 9th was very negative. Commercial inventories rose (a record for 2020 of) 15.2Mb versus the assumption of a decline of 1.4Mb on the week.The reason was that US crude and product exports fell a dramatic 1.6Mb/d to 1.83Mb/d (last week exports were 3.46Mb/d). Overall this reflects 11.4Mb of the build. Is this a one time event or is there now such a glut of global oil that US exports are being hurt? Crude prices started this morning at US$46.24/b and have fallen over US$1/b so far today to US$45.21/b at the time of this report (low so far today US$44.95/b). Crude inventories are now 55.3Mb or 12.3% above last year’s level of 447.9Mb. Gasoline inventories rose by 4.2Mb while distillates rose by 5.2Mb, all very bearish for WTI prices. US domestic crude production was flat at 11.1Mb/d on the week but down 1.7Mb/d from 12.8M last year.

Consumption during the Thanksgiving period rose modestly last week. Total usage rose by 67Kb/d to 18.5Mb/d however gasoline consumption fell by 373Kb/d. The bright spot was Jet Fuel Consumption, which rose by 176Kb/d to 1.31Mb/d as more people flew to visit family and friends during the holiday period. Total Demand rose 167Kb/d above last year’s level of 18.4Mb/d.  Gasoline Demand is still down 14.4% from the 8.9Mb/d consumed last year and Jet Fuel remains 17% below demand of 1.58Mb/d last year.

Refinery Runs rose 1.7 points to 79.9% from 78.2% in the prior week but down from 90.6% last year. Total Stocks (excluding the SPR) rose by 19.9Mb and now are 98.2Mb above last year or 7.7% above the 1.28Bb in storage last year. Cushing Oil Inventories fell by 1.4Mb to 58.2Mb and are higher compared to 40.4Mb last year at this time.

Baker Hughes Rig Data: Last week Friday, the Baker Hughes Rig Survey showed an increase in the US rig count. The US rig count rose by three (up 10 rigs in the prior week) to 323 rigs working, but remains down 60% from 799 rigs working a year ago. The US oil rig count rose by five (up 10 rigs last week) to 246 rigs but is down 63% from 663 rigs working last year. The Permian saw an increase of three rigs to 164 rigs working but remains 59% below last year’s level of 400 rigs working. Over US$45/b for WTI seems to be a price point where producers see economic returns from drilling.

Canada saw no change in the rig count last week (up 1 in the prior week) to 102 rigs working. The rig increase now has activity down only 26% from a year ago when 138 rigs were working.. The rig count for oil is now at 40 rigs (up two on the week) and is down 59% from 87 rigs working last year. The natural gas rig count fell by two last week to 62 rigs working but remains up by 22% for the year versus the 51 rigs working last year.

Natural gas prices have drifted lower as warm weather has lowered consumption. AECO is now at $2.10/mcf down over 25% in recent weeks. NYMEX has also retreated and is now at US$2.49/mcf. We expect much higher prices once the depths of winter arrive later this month.

Conclusion: We are now back to crude price levels seen in March 2020 just before the pandemic caused lockdowns of worldwide economies. The positive view of vaccines coming shortly has ignited investor interest in the sector.

Positive issues for higher crude prices:

  • The first vaccine deliveries have started in the UK and should start around the world later this month once approved by the drug authorities. Anyone who wants one in Canada or the US should have it by Q3/21. Today Canada was the third country to approve the Pfizer/BioNTech vaccine.
  • While OPEC has lowered the near term demand forecast for crude oil they see demand rising in 2021 to 96.26Mb/d from 90.01Mb/d in 2020. The forecast for Q4/20 is for consumption of 93.67Mb/d and by Q4/21 is forecast at 97.09Mb/d.
  • Asian demand remains the strongest in the world and is now above last year’s consumption levels.

Negatives issues for lower crude prices:

  • OPEC’s agreement was a disaster as instead of delaying any production increases to Q3/21, they agreed to a production rise in January of 500Kb/d. They also plan to review production quotas monthly (next meeting January 4th) with plans to increase production by the same amount each month if appropriate. Of the January increase the Saudi’s took 125,000 b/d and the Russian 125,000 b/d, leaving a miniscule amount for the remaining members. Cheating is guaranteed to continue as many of the smaller OPEC players are desperate for funds to run their economies.
  • Iraq has signed a multi-billion dollar deal with a Chinese oil company and will receive up front money in exchange for long term oil supplies. Chinese entities have done this regularly with struggling oil producers in Angola, Ecuador, Iran and Venezuela.
  • Germany had record case loads this week and plans to put in more restrictions. The US coastal states are back as Covid hotspots. Canada is tightening up with Alberta imposing its tightest restrictions to date, starting on Sunday December 13th. There are now 15.3M cases (up from 13.8M cases last week) in the US with 288K deaths (272K last week). Worldwide the caseload is 68.3M and deaths near 1.56M. Christmas holiday gatherings will be limited in many places around the world due to the rise in caseloads. Without substantial and effective mitigation measures Dr. Fauci sees the middle of January ‘could get really bad and a really dark time for us’.
  • Libya is getting its production up sharply now that their civil war is over. They are now producing 1.3Mb/d, an impressive feat, up from the October level of 454K/d and they expect to be producing 1.6Mb/d during early 2021. This will mean over a 1.4Mb/d increase in production in just four months as they produced only 155Kb/d in September.

OPEC has been unsuccessful in its meetings on November 30th and December 1st to get an extension of the production cut by up to six months. We had expected them to delay the planned 2.0Mb/d increase in production in January for two quarters, which they hoped would lower the excess stock levels. World-wide crude and product inventories are now 475Mb over the five year average. If they agree to add 500Kb/d in February then crude should breach US$40 and fall to the US$32-36/b area during Q1/21. The next downside near-term support level is US$42.57/b. One will need to keep an eye on crude and product inventory levels to determine how low crude oil prices could fall during the coming months.

Energy and energy service stocks and now very overbought with the S&P Energy Bullish Percent Index at 92%, an outright sell signal for traders. We see significant near-term downside risk. The most vulnerable companies are energy and energy service companies with high debt loads, high operating costs, declining production, current balance sheet debt maturities of some materiality within the next 12 months and those that produce heavier crude barrels. A breach of US$40/b will hit these stocks hard.

Continue to hold cash and remain patient for the next low risk BUY window which may now occur during Q1/21. Traders may want to harvest some of the great gains since the BUY signal triggered in March. OPEC+ production is too high and is rising when it should have been held flat with no cheating.  

Energy Stock Market: The S&P/TSX Energy Index now trades at 93.59. The S&P/TSX Energy Index started the year at 146 so it is down 36% year-to-date and there should be some tax loss activity shortly. The S&P/TSX Energy Index is likely to fall below the low of 61.21 (the low in late October) during Q1/21. A breach of 85 should start this downward trend. In the meantime consolidation continues in the Canadian energy market with players having assets in the same core areas seeing positive reasons for merging. Today’s big merger is an all stock deal.

I will be on BNN’s Commodities show with Andrew Bell next week Wednesday December 16th at 9:00AM MT. The discussion of that day’s EIA report, the outlook for energy commodity prices and stocks are the topics likely to be discussed.

Subscribe to the Schachter Energy Report and receive access to our two monthly reports, all archived Webinars, Action Alerts, TOP PICK recommendations when the next BUY signal occurs, as well as our Quality Scoring System review of the 27 companies that we cover. We go over the markets in much more detail and highlight individual companies in our reports. If you are interested in the energy industry this should be of interest to you.

To get access to our research go to  https://bit.ly/34iKcRt to subscribe.

 

 

 

 

Half-Truths Are Half Lies By Definition

Posted by Michael Lebowitz

on Wednesday, 9 December 2020 11:08

“When one side of a story is heard and often repeated, the human mind becomes impressed with it insensibly” – George Washington

Daughter- Can I go out with friends?

Father- Have you asked your mother?

Daughter- Of course I have.

Father- Okay, have fun.

In the plot above, the daughter only tells her father half of the truth. She fails to disclose that her mother said “no.”

Like the daughter’s craftiness, many markets are surging on narratives built on just one side of a story. For speculators and gamblers, that seems to suffice. For investors aiming to build and preserve long term wealth, we suggest understanding every side of a story.

Of the many tales we hear to justify record equity valuations, low-interest rates are among the more popular. Make no mistake, low interest rates provide benefits to stock prices. However, that is only half of the truth. We now present the other half of the story that few tell.

Opportunity Cost

There is a popular narrative that says stocks should do well simply because bond yields are pitifully low. The basis behind the argument is simple math comparing historical stock returns versus current bond yields. The fact of the matter is that historical average returns and expected stock returns are often quite different.

The calculation of expected returns is primarily a function of the price of an asset. The higher the price paid, the lower your expected returns and vice versa.

As we wrote in “You’ve Got To Ask Yourself One Question. Do You Feel Lucky?” current expected equity returns are near 0, as valuations are extreme. Statistically based expected returns are vastly different than the “we hope for” expected returns spewed by cheerleaders in the financial and social media outlets.

The article presents four popular valuations methods and the expected returns based on the historical relationship between valuations and 10-year forward returns. In each case, the current valuation has a strong statistical correlation with the coming 10 years of returns.

We extend that analysis by comparing those return expectations to yields on Treasury and corporate bonds.

The intersection between the same color vertical and trend line denotes the expected return for the respective valuation method. We show Ten-year U.S. Treasury yields and BBB-rated corporate bond yields with the dotted horizontal lines.

The table below the graph summarizes our findings…CLICK for complete article

Millennials Prefer Bitcoin Over Gold As A Safe Haven Asset

Posted by Alex Kimani

on Wednesday, 9 December 2020 7:10

The investing universe has labeled millennials many things: lazy, entitled, narcissistic among other unflattering terms. They have also been accused of being highly risk-averse, preferring flashy investments like crypto over slow-n-steady ones like stocks and bonds.

While some of those platitudes are plain wrong (many millennial stock picks have been handily trouncing the markets), others appear spot on.

And now a survey has established that an overwhelming majority of millennial investors actually prefer bitcoin over gold as the superior safe haven.

A recent global survey by deVere,  one of the world’s largest independent financial advisory and fintech organisations, has revealed that millennials really do prefer bitcoin to gold as a safe-haven asset.

The revelation comes just a week after the world’s largest cryptocurrency touched an all-time high of $19,864.

Digital gold

In the deVere survey, more than two-thirds (67%) of the 700+ millennial respondents said that they think Bitcoin simply is a better safe haven compared to gold.

According to de Vere: “From Ancient Egypt onwards gold has always had immense value and has long been revered as the ultimate safe-haven. It’s always been a go-to asset in times of political, social and economic uncertainty as it is expected to retain its value or even grow in value when other assets fall, therefore enabling investors to reduce their exposure to losses. But, as this survey reveals, Bitcoin could be dethroned within a generation as millennials and younger investors, who are so-called ‘digital natives’, believe it competes better against gold as a safe-haven asset.” CLICK for complete article