Monthly Archives: April 2013

30th April – Come on NEW, let’s see the mud logs

Originally published on www.shareprophets.com

 

New World Oil and Gas’s latest failed (ahem, sorry, “non-commercial”) attempt at finding oil in Belize has left many wondering at what point does a management team go from being very encouraged about a drill in progress to deciding not to test at all?

This is a question beleaguered investors in New World might find themselves asking repeatedly in the coming months in the light of an unfortunately timed interview given by CEO Bill Kelleher.

To recap on Tuesday April 23rd this written interview with Mr Kelleher was published.  It contained some choice quotes for private investors, but more of this in a moment.

At the same time as the interview was released the share price of New World was in free fall.  The company had issued a deeply discounted placement a month earlier to raise £6.2million at 2p, but by last Tuesday morning the stock opened at 1.65p and closed at 1.55p.  The next day it closed at 1.4p.

This precipitous fall in price might have seemed strange to some.  After all, the company was targeting an “un-risked P50 prospective resource of 113million barrels of oil… and a P50 un-risked Net Present Value of US$2.6billion on a 100% working interest basis”.  News of a potential discovery was expected by the end of April.  So why was the price dropping?

This remains a mystery.

Suddenly on Friday (April 26th) the bombshell was dropped and many private investors were looking down the barrel of yet another failed (again, I’m sorry, my mistake, “non-commercial”) drill for oil on AIM.

To many this can’t have come as much of a shock.  As disappointing as the result was, the chances of success were 1 in 5 at best (according to the Company’s own CPR) so why the disquiet about New World? Continue reading

22nd April 2013 – Sell in May?

So this won’t exactly be the most original blog post I’ve ever written, but I’ve come across several interesting bits of analysis in the last week, which have made me consider shorting the US indices.

In October I asked “why would anyone sell?”

With the Fed propping up markets I thought the chances of a major correction were slim, in spite of increasingly negative sentiment.  Prices had fallen but not dramatically.

Frustratingly between November 14th and November 16th my trading system gave an incredibly strong buy signal on the Dow, which I missed (obviously because it was still in development, but more of that another day).  Since then this index has climbed 2000 points (about 16%) to set an all time nominal high.

Might now be a time to look for a correction?

“Sell in May and go away” is one of the market’s best known truisms and this year could be a profitable trade.

Although it lagged the Dow by a few weeks the S&P500 also recently broke its all time nominal high only to pullback immediately after.  In the intervening period both indices have traded sideways with slight selling usually giving way to slight buying.

 

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It may be a bit early to call this, but there could be a head and shoulders pattern forming, which would be a strong technical indicator for a correction.

And there are other telltale warning signs. Continue reading

15th April 2013 – Planning in response to gold’s capitulation

***UPDATE – I’ve been writing this blog over the course of the morning while doing other things.  As I’ve written gold has continued to plummet.  It has crashed through all major levels of support.

 

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On Friday the price of gold went into meltdown on news that Cyprus was selling its £340million worth of gold to contribute towards its share of its bailout/in.  I bought a very small position at $1500/oz only to see it get wiped out by the close of markets.

I had to make this move as this level was just below a line of major support for gold on my system, but I limited my risk in view of the obvious weakness in the market.

The sharp decline in price strongly suggested that a long squeeze was at play.  There had been a lot of speculation that gold’s support was at about $1,550/oz and this seemed an obvious place to go long.  It is probable this view gave birth to many trading positions, creating the opportunity for a long-squeeze.

This morning the selloff has continued and the price briefly touched $1430/oz. (PLEASE NOTE – Chart taken at roughly 0900 GMT this morning, the price has fallen further since).

Gold’s fall has caused similar declines in silver ($24.40/oz), Palladium ($676/oz) and Platinum ($1452/oz).

There are several valuable lessons in gold’s capitulation.  Continue reading

8th April 2013 – Is the market rally a sure sign of “broken economics”?

Over the weekend I read this excellent piece by Anatole Kaletsky.

It sums up very succinctly the economic challenges facing us all today and is a must read.

Friday’s rally in markets, in response to the immediate sell-off after a very disappointing US jobs’ report, further reveals the growing disconnect between stock market performance and real economic performance.

Wherever I look there are signs that economies are treading water at the moment.  Some immediate examples which spring to mind include;

-        Ongoing turbulence in Europe

-        The Baltic Dry Index continues to struggle

-        Copper looks like it is heading to the bottom of its recent range

-        This interesting analysis from Zerohedge has adjusted the principle of monitoring power usage as an economic indicator (first used to assess the strength/weakness of China) to monitoring fuel usage in the US

All the while, corporate earnings apparently remain robust and the “fundamentals are sound”.  Continue reading

4th April 2013 – Japan opens the floodgates

Well what can I say?

I certainly can’t say I’m surprised.

Concerned, worried, sad…..?

I woke up this morning to headlines that Japan has launched another massive QE barrage on the financial system.  Although not as big as the Americans’ this QE blitz is a lot more flexible, affording the Bank of Japan the opportunity to buy REITS and ETFs.  It’s no wonder the Nikkei has gone bonkers and I expect to surge even higher.  The Yen will likely fall sharply.

After the recent analysis by Kyle Bass, this move looks risky.  Inflation and currency depreciation erode wealth and usually lead to higher interest rates.  Given the enormous weight of Japanese government debt and the vast holdings of said debt by Japanese institutions is the Bank of Japan looking wistfully across the Pacific at the market response to the Fed’s QE.

Defying many expectations, the yield on US Treasuries continues to fall, demand for them is strengthening strong and inflation remains benign.

What is risky about this is that Japan is not America (and who says I don’t have market insight!!!).  Continue reading

3rd April 2013 – Does Gold’s collapse signal optimism or denial?

I’ve just got back from a week in England to see that gold has suddenly collapsed in price.  As of writing it is about $1560/oz.  My position isn’t looking great at the moment, but I have an option so I can ride out the volatility.

I’ve read a lot of recent commentary that the fundamentals for stocks are sound and this latest move in the bull market is built on solid foundations. 

I should have been in this latest stock rally, but for various reasons (not least my system is taking longer than I hoped to build), I’m not.  I have no particular insight how long stocks can keep going higher for, but there is an undeniable shift in mood.

We all seem to have become a bit inured to crises that the threat of the European Sovereign Debt Crisis, Japanese woes, British woes, doggedly high unemployment (and even higher under-employment) and various other headwinds no longer seem to trouble people.

Of course the Fed’s $85billion a month is surely helping a great deal, but more about this another day. Continue reading