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February 17, 2008
Week in Review #7 (2008-02-17) FINAL
The question is, do governments now intervene more than ever in capital markets, or is it just that we notice it more because we have better communication systems and perhaps a little more market savvy in recent years.
Decisions of the UK government to take over Northern Rock and the US decision to stop publishing many important economic data series are dubious ones at best when government is at the same time telling us that markets are private sector driven and transparent.
Are these not the foundations of capital markets that are being removed one brick at a time?
Estimated today because Bernanke’s Fed stopped calculating it, the US money aggregate called M3 continues to grow at an excessive rate, as it does in Europe and Japan. Central bankers everywhere are constantly diluting fiat money at extreme rates in order to maintain narrow forex trading ranges for purposes of optimizing international trade.
The following data is a simulation of M3 as of the past week.
The money supply is growing at an annual rate of change of almost +20 pct, which is the highest rate for at least the past 40 years. Now the monetary base has become the issue. The US M3 has grown to almost $13.5 trillion, up from about $11.5 trillion just one year ago.
To put this into perspective, the M3 has grown more in the past year than all the money that existed when I started in the securities industry at the end of 1980. But, wealth certainly has not grown to anywhere the same degree. What is happening in the US (and abroad) is that government is depreciating the value of money in order to stay on the treadmill they have created by their spending.
The stores of value, being precious metals and art prices, and the controlled prices for consumable commodities such as crude oil, have soared.
This chart for the spot (cash) price of Platinum shows the price skyrocketing from under $1,200 pr oz in early March 2007 to $2,100 this morning.
The price of Crude Oil (West Texas Intermediate $WTIC) almost doubled in ten months from mid-January, from $51 to $100, and is still almost $96 today.
The only US politician who has ever understood this fiat money depreciation issue is Dr. Ron Paul, but because there is a growing percentage of Americans who want to be provided for, rather than make their own way in life, his constituency is quite small.
Interesting is that young people and independents have widely endorsed him, while the political base of America, both Republican and Democrat, has rejected his ideas as being unelectable.
But Mom & Pop understand that they cannot write checks they cannot cash, nor buy assets like homes they cannot afford to pay from income or savings. So, seeing government acting irresponsibly, they too “want theirs”. Let somebody else pay for their “entitlements.”
Unbelievable as it seems, both Republicans and Democrats are driving this mindset, nevertheless allowing it. Apparently, there is no shame in politics. The politicians’ credo is doing whatever you need to do to get elected, or die.
Americans could put a stop to the nonsense of course, if they wanted to. All they need to do is flood the coffers of Dr. Ron Paul – more than the huge amounts the man is already receiving.
Let political contributions be a referendum on the future course of America. Finance the man to run as an Independent to break the spirit of both other party organizations until they change their ways.
As I see it there are fewer than 10 million Americans who control US society with their money and 100 million Americans who have none except for what the federal government transfers to them. There are over 200 million other American adults and their families who have the bulk of the money, who are the ones who are being forced to work harder for less (some call it being marched into slavery) as capital flees the country to build factories and good paying jobs abroad.
These are the people who should be contributing to a Ron Paul campaign – for the principle of it.
Traders are watching the government spending treadmill throw most people aside. They foresee a developing liquidity crisis on a massive scale because simply a barrel of crude oil cannot go $100, $110, $125… or an ounce of platinum $2100, $2200, $2500… without those 200 million productive Americans shutting down, no longer having an ability to take from income or savings the funds they need to afford the most basic necessities like food, shelter, transportation, safety and so forth.
As people walk away from their foreclosed homes by the millions, which is precisely what I forecasted in 2006, a lot of property tax is no longer being paid. Cities then have to pay to tear down those structures. Cities too have to pay inflated costs for everything. Many are on the verge of bankruptcy.
Driving around the supposedly rich city of Toronto yesterday, the place is snowbound. It hasn’t snowed much for ten days, so where are the snow removal machines? People now think the City is bankrupt.
To maintain a balanced budget, taxes would have to increase by +25 pct, but people cannot afford it. Politicians can only get elected and re-elected by promising to cut taxes, which they cannot do without cutting services, printing money or borrowing it, because the People can no longer pay for it.
What kind of life is this? I thought Canada and the US were rich?
Smart traders are waiting for the massive liquidity crunch that must happen to bring the spending back into line with the savings and income needed to pay for it, with commodity prices under control.
I hardly think that the S&P 500 at 1350 or the DJIA at 12348 or Nasdaq Composite at 2322 can stand up to the pressures of “the price of a barrel of crude at $100, $110, $125… or an ounce of platinum at $2100, $2200, $2500…”
Remember, prices are merely bids. The liquidity crunch happens when bids are withdrawn, as we saw starting in 2005 as house prices reached a very high level.
To parody the dim-witted TV advertising that runs day and night for one of Canada’s largest banks, “We are not as rich as we think we are.” In fact, a lot of us in six months are going to be that much poorer.
I wonder if that bank will refrain from margin calls.
Global Economics Review
US Economic Calendar for next week.
It is important to review economics reports published this past week on the US economy that continues to worsen. As I say, the positive news is now infrequent.
Whether the case is negative or very slow real economic growth, the fact is that global inflation is now in the 3- and 4-pct range by even the most positively-biased calculations, so investment returns from dividends and short-term debt instruments and money market funds is clearly negative. Moreover, as equity prices are falling, the total returns from most stocks are negative. In summary, wealth is being destroyed by the trillions, month after month. One of the reasons is that the economy is in a downswing.
Along with many weekly reports, the big three monthly reports that arrived this week were all negative, as follows:
US Consumer Spending for January, which covers 2/3 of the GDP.
US Industrial Production for January, which accounts for 20-pct of the US GDP.
US International Trade Balance (exports minus imports) for December, which shows how much consumer and industrial capital is flowing out of the US every month.
So much for last week. Let’s look ahead.
US Consumer Price Index for January, which is a key measure of inflation.
US new housing starts for January, the trend of which points to rising or falling demand for furniture, home furnishings and appliances.
Minutes of the previous FOMC meeting.
Industry and Cara 100 “Impulse” Review
Applied weekly to major industry groups, the “impulse system”, based on the excellent work of Dr. Alex Elder, gives a sense of market internals.
“Jock” reports:
THIS WEEK closed with 3 GREEN industries (mining) and 4 RED’s, compared to last week's 1 green and 18 Red.This week’s “market tenor” of 1 net RED was just the same as two weeks ago.
25 industries rose in price, only 6 declined.
27 Cara100's were GREEN and 22 were RED. (Last week's count was 13 to 52.)
Ticker Name Score
-5wksScore
-4wksScore
-3wksScore
-2wksScore
-1wksScore
-0wksABB ABB Ltd. -2 -2 -2 +0 -2 -2 ABV COMP DE BEBA AM ADS +2 -2 -2 +2 +2 +2 ABX Barrick Gold Corp. +2 +0 +2 +2 +0 +0 ADBE Adobe Systems Inc. -2 -2 -2 -2 -2 +0 AET Aetna Inc. +2 +0 -2 -2 -2 -2 AMAT Applied Materials Inc. -2 +0 +0 +2 +0 +2 ATVI Activision Inc. +0 +0 +0 +0 +0 +0 BA Boeing Co. -2 -2 -2 +0 +0 +2 BBBY Bed Bath & Beyond Inc. -2 -2 +0 +2 +0 +0 BBD Banco Bradesco S.A. +0 -2 -2 -2 -2 +0 BC Brunswick Corp. -2 -2 +0 +2 +0 +0 BDK Black & Decker Corp. -2 -2 +0 +0 +0 +0 BHP BHP Billiton Ltd. -2 -2 -2 +2 -2 +2 BMY Bristol-Myers Squibb Co. +0 -2 -2 -2 -2 +0 CCJ Cameco Corp. +0 -2 -2 -2 -2 +0 CCL Carnival Corp. -2 -2 +0 +2 -2 +0 CEO CNOOC Ltd. +2 -2 -2 -2 -2 +0 CHA China Telecom Corp. Ltd. +2 +0 -2 -2 -2 +2 CHL China Mobile Limited +0 -2 -2 -2 -2 +0 CHRW CH Robinson Worldwide Inc. -2 -2 +0 +2 +2 +2 COST Costco Wholesale Corp. +0 -2 -2 +2 -2 -2 CSCO Cisco Systems, Inc. -2 -2 -2 +0 -2 +0 CTSH Cognizant Technology Solutions Corp. -2 -2 -2 +0 +0 +2 CVX Chevron Corp. +0 -2 -2 -2 -2 +0 DB Deutsche Bank AG -2 -2 -2 -2 -2 -2 DELL Dell Inc. -2 -2 -2 +0 +0 +0 DEO Diageo plc -2 -2 -2 +0 +0 +2 DIS Walt Disney Co. -2 -2 -2 +0 +2 +2 DOW Dow Chemical Co. -2 -2 +0 +2 +0 +0 DNA Genentech Inc. +0 +0 -2 +0 +0 +2 ECA EnCana Corp. +0 -2 -2 +2 +2 +2 ERJ EMBRAER - Empresa Brasileira de Aeronáutica S.A. +2 -2 -2 +0 -2 +0 ERTS Electronic Arts Inc. -2 -2 -2 -2 -2 +0 EXC Exelon Corp. +2 -2 -2 -2 -2 +2 GE General Electric Co. -2 -2 -2 +0 -2 +0 GFI Gold Fields Ltd. +2 +0 -2 -2 -2 -2 GG Goldcorp Inc. +2 +0 +2 +0 +0 +0 GGB Gerdau S.A. +2 -2 -2 +0 -2 +2 GOL GOL Linhas Aéreas Inteligentes S.A. -2 -2 -2 +0 -2 +0 GOOG Google Inc. -2 -2 -2 -2 -2 -2 GRMN Garmin Ltd. -2 -2 -2 +0 +0 +0 GS Goldman Sachs Group Inc. -2 -2 -2 +2 -2 -2 GSK Glaxosmithkline plc +2 -2 -2 -2 -2 -2 HBC HSBC HLDGS PLC ADS -2 -2 -2 +0 -2 +0 HDB HDFC Bank Ltd. +0 -2 -2 -2 -2 -2 IBKR Interactive Brokers Group, Inc. IBN ICICI Bank Ltd. +2 +0 +0 +0 -2 -2 IMO Imperial Oil Ltd. +0 -2 -2 -2 +2 +2 INFY Infosys Technologies Ltd. +0 -2 -2 +2 +0 +0 INTC Intel Corp. -2 -2 -2 +0 -2 +0 JCP J. C. Penney Company, Inc -2 +0 +0 +2 +2 +2 JNJ Johnson & Johnson +0 +0 -2 -2 -2 -2 KB Kookmin Bank -2 -2 -2 +0 -2 +0 KO Coca-Cola Co. +2 +0 -2 -2 -2 -2 KSS Kohl's Corp. -2 -2 +0 +0 +0 +0 LEH Lehman Brothers Holdings Inc. -2 -2 -2 +2 -2 -2 LLTC Linear Technology Corp. -2 -2 -2 +0 +0 +0 MBT Mobile Telesystems OJSC +0 -2 -2 -2 -2 -2 MFC Manulife Financial Corporation -2 -2 -2 +0 -2 +0 MICC Millicom International Cellular SA -2 -2 -2 +2 -2 +2 NKE Nike Inc. -2 -2 -2 +2 +0 +2 NOK Nokia Corp. -2 -2 -2 +2 -2 +0 NTES Netease.com Inc. -2 -2 -2 -2 -2 -2 NUE Nucor Corp. -2 -2 +0 +2 +2 +2 ORCL Oracle Corp. +0 -2 -2 -2 -2 -2 OXPS optionsXpress Holdings, Inc. +0 -2 -2 -2 -2 -2 PAYX Paychex Inc. -2 -2 +0 +0 +0 +0 PBR PETROLEO BRASILEIRO +0 -2 +0 +2 +0 +0 PDA Perdigao S.A. +2 -2 -2 +0 -2 +2 PG Procter & Gamble Co. +0 -2 -2 -2 -2 +0 PTR PetroChina Co. Ltd. +0 -2 -2 -2 -2 +0 QCOM QUALCOMM Inc. -2 +0 +2 +2 +2 +2 RIO COMPANHIA VALE ADS -2 -2 -2 +2 +0 +2 RIMM Research In Motion Ltd. -2 -2 -2 -2 -2 +0 RY Royal Bank of Canada -2 -2 +0 +2 +2 +0 SBUX Starbucks Corp. +0 +0 +0 +0 +0 +0 SLW Silver Wheaton Corp. +0 -2 +0 -2 -2 -2 SNDK SanDisk Corp. -2 -2 -2 +0 +0 +0 STO StatoilHydro ASA -2 -2 -2 +0 -2 +2 SU Suncor Energy Inc. +0 -2 -2 -2 -2 +0 SWK Stanley Works +0 +0 +0 +2 +0 +2 TCK Teck Cominco Ltd. +0 -2 +0 +0 +0 +0 TEF Telefonica SA +2 -2 -2 -2 -2 -2 TGP Teekay LNG Partners LP. +2 +0 -2 +0 +2 +0 TGT Target Corp. +0 +0 +0 +2 +0 +0 TM Toyota Motor Corp. -2 -2 +0 +2 +2 +2 TOT Total SA +2 -2 -2 -2 -2 -2 TS Tenaris SA -2 -2 -2 +0 +0 +0 TT Trane Inc +0 +0 +0 +0 +0 +0 UBS UBS AG +0 -2 -2 +0 -2 -2 UTX United Technologies Corp. -2 -2 +0 +2 -2 +0 VCP Votorantim Celulose e Papel S.A. -2 -2 -2 +2 +2 +2 VIP Vimpel-Communications +0 -2 -2 +0 -2 +2 WAG Walgreen Co. -2 -2 +0 +0 +0 +0 WBK Westpac Banking Corp. -2 -2 -2 +2 -2 -2 WFMI Whole Foods Market Inc. -2 -2 +0 +2 +0 +0 WHR Whirlpool Corp. -2 -2 +0 +2 +2 +2 WMT Wal-Mart Stores Inc. +2 +0 +0 +2 +0 +0 XOM Exxon Mobil Corp. +0 -2 -2 -2 -2 +0 YHOO Yahoo! Inc. +0 -2 -2 +2 +2 +2 Summary: (+2/-2/other) 18/51/30 0/80/19 3/69/27 33/31/35 14/54/31 28/22/49 Net: (+2)-(-2) -33 -80 -66 +2 -40 +6 ÂAll the major US stock indices rose from RED to NEUTRAL.
The Bombay and Shanghai composite indexes were also RED.
The $USD index was neutral, and the $CRB index closed GREEN.
GOLD stocks stayed neutral, while SILVER stocks stayed RED.
BOTTOM LINE: Last week, the “market tenor” fell from -1 to -17. This week, it rose back to -1. Drugs have been RED for 5 straight weeks.
Jock
NOTE: Alex Elder’s “impulse system” considers both the “inertia” in prices (where prices stand vs. their 26 wk. moving average) and their “momentum” (the rate their 13wk. and 26wk. moving averages are converging or diverging).
When both indicators (EMA and MACD-H) tick up, the reading is “green”; when both decline, it’s “red”. Applied weekly to major industry groups, indices, and their components, a sense of market internals emerges.
US Equity Markets Review
DJIA stockcharts.com chart
This week, for the Dow 30 stocks, 20 were up and 10 down. Despite pullbacks on Thursday and Friday, the DJIA moved from 12181 to 12348.
This week the biggest losers in the Dow 30 continued to be banks and companies that have a huge financial component: AIG -11.9 pct, JPM -5.54 pct and C -3.78 pct.
These are not quite the humungous hits taken by the financial sector in the previous week, but large nonetheless.
The biggest gains on the week were capital-intensive leaders like AA +7.87 pct, BA +6.86 pct, HPQ +6.81 pct, XOM +4.47 pct, IBM +3.70 pct and CAT +3.62 pct.
NASDAQ Composite ino.com chart
NASDAQ Composite stockcharts.com chart
The Nasdaq Composite moved up from 2304.9 to 2321.8. Technology started the week on a very strong note, but cooled out on Thursday and Friday, which took the broad market into a final two day funk.
Several weeks ago I wrote in this space, “Here is the list of the ten highest-weighted non-financial stocks in the Nasdaq Composite. Put them in a watchlist (see Google Finance Portfolio) and watch them like a hawk:
AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY”
I said that the Techs would lead the market one way or the other, and you know which way I was indicating.
Daily RSI-7 for the Nasdaq 100 Big-10
Weekly RSI-7 for the Nasdaq 100 Big-10
Monthly RSI-7 for the Nasdaq 100 Big-10
The US equity market Sector ETF Summary
This week I added charts for the S&P 500 ETF (SPY) as well as inserting SPY into the expanded sector performance tables so that you can see how each sector is doing relative to the industry benchmark. (The server may take a while to update.)
Here’s the SPY Monthly, Weekly and Daily data charts:
SPY Monthly data:
SPY Weekly data:
SPY Daily data:
The tables I will soon show are for eleven GICS Sector Index Funds (ETF’s), including two for Technology, for the ten GICS sectors, but they cover the full spectrum of the US equity market.
As you know, the equity market is up and down like a yo-yo. Two weeks ago, the scoreboard read ten sectors up and zero down. A week ago was the reverse. Then Monday through Wednesday the strong were strong, while Thursday and Friday were not.
Two weeks ago, on the back of a huge rally in the Financials, I wrote, “Volatility means traders must use prudence as in a Bear market, there are many confounding whip-saws.” Since then the Financials (XLF) placed in 10th place out of ten sectors.
Then one week ago XLF plunged -8.25 pct. This week XLF was down -3.76 pct. Even the loss on Friday was -1.15 pct.
With the announcement this weekend that the UK will take control of one of the nation’s largest lending institutions, Northern Rock, it’s abundantly clear that (i) other financial institutions do not have the wherewithal to buy up their own, and (ii) the hidden losses to come in these syndicated mortgage-backed assets, and the industry lawsuits to follow, are massive.
It’s nice to talk about Goldilocks and all, but when you don’t know whether her dowry comes with nothing except a vial of poison, why bother making advances.
In fact, the expression “Not too hot; not too cold; just about right” is the most stupid turn of phrase to come out of the mouths of supposedly intelligent people this decade. I can’t even bear to watch Financial Entertainment TV anymore; based on drivel like that, it’s just not entertaining. It’s even painful to watch.
With the US economy taking hits like a piñata, more corporations have reduced guidance for 2008. But, since many companies seem to be weathering the storm, there is either (i) a rolling bear market occurring today, or (ii) the Bear is headed in a SSE direction rather than due South.
This makes sense as stagflation in the 1970’s took equities through a grinding 1973-74 bearish period and another milder one in 1978. At the end of the decade, however, the liquidity that had to be pumped into the system (similar to today) pushed inflation higher and interest rates soaring.
But in today’s reality, soaring rates in the next two years would cause a run on mortgage foreclosures, evictions, property tear-downs and financial service company failures. So, the interventionists are likely to stay the course with more Northern Rock-type deals to come.
That is not the picture of a capital market ready to snap back to health. Good health will return as and when the dubious assets on the books of banks and investors have been written off to their realistic economic value. The prospects of that, as I say, will take time.
Table 1: Cara ETF List is sorted by price performance Week over Week (W/W), i.e. 1W%N.
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
You can do this table yourself by entering the following string into the Summary window at Billcara2.com and then clicking on the link for Performance. SPY XLE XLB XLI XLY XLP IYH XLF XLK SMH IYZ XLU . You can also add more ETF’s – up to 30 in total.
For a list of components to any ETF, go to the AMEX.com web site, and click on ETF’s.
10 (energy: XLE)
15 (basic materials: XLB)
20 (industrial: XLI)
25 (consumer discretionary: XLY)
30 (consumer staples: XLP)
35 (healthcare: IYH)
40 (financial: XLF)
45 (technology, semiconductor: SMH)
50 (telecom: IYZ)
55 (utilities: XLU)
I shall return in about 24 hours to complete this WIR....
Individual Sector ETF Review
One quick look at the Daily RSI-7 of even the strongest sectors (the inflation-beneficiaries Energy and Basic Materials) shows that values could not cross back above the 70 line, despite trends (MACD) that are still rising. The weakest sectors (Financials in particular) failed to reach the 50-line during the recent rally.
There is nothing in the technical indicators of these charts, across all sectors that show a recovering Bull.
Let’s be honest: the Bull is dead. Goldilocks is dead.
Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)
Here’s the XLE Monthly, Weekly and Daily data charts:
XLE Monthly data:
XLE Weekly data:
XLE Daily data:
The Energy sector ETF (XLE), finally did get pumped by Crude Oil contracts that jumped a further +3.68/bbl (following the +2.81/bbl increase a week ago).
The tells I spoke about a week ago didn’t help at all because out of the blue came word that ChevronTexaco (CVX) was joining the Dow 30. In order to match the indexes, there was huge buying in CVX. Accordingly, XLE this week popped +5.64 pct. Given that Energy is also factored into many of the Basic Materials sector indexes, XLB also popped +4.26 pct. The rest of the US equity market did zip.
A week ago, I wrote, “XOM (-4.9 pct to 81.71) and CVX (-3.9 pct) led Big Oil down.” This week, XOM +4.5 pct and CVX +5.3 pct enjoyed the pop.
The cynic I am, I will now ask the SEC how many of those players knew in advance that CVX was going into the Dow 30 index (DJIA) and deliberately pulled it down (despite higher oil prices) a week ago so that they could profit very nicely this week.
Given the timely nonsense from Chavez in Venezuela re XOM and Big Oil, and the buddy-buddy stuff coming out of Russia-Iran regarding their mutual interest in pricing oil in Russian rubles, is it any wonder why $WTIC jumped to $95.45?
With Crude Oil zeroing in on $100, and supply from Venezuela and Nigeria now being questioned, is it any wonder that the big three of the Canadian oil&gas industry that I follow (IMO +8.7 pct; ECA +7.9 pct; and SU +5.9 pct) are bursting the pipes of futures and equity traders.
As I write about them all the time, these moves are not coincidental. The capital market game is so rigged in the US that traders will one day walk away altogether.
The 200-day Moving Average of $WTIC is up to 80.79, up from 80.07, 79.46, 78.81, and 78.30 over the past four weeks. The 50-day MA is now back up to 92.20, up from 91.74, after being at 92.55, 92.69 and 93.21 the previous weeks.
So the short-term MA has kicked it back into gear, for what is a very high-risk buy. I call it “very high risk” because a few exogenous events like Chavez, the Putin group talking to Iranian leaders, and some rebel fighting in Nigeria, are not sufficient to hold global oil prices so high when economic demand is falling, and alternative sources getting cheaper and also cozier with environmentalists by the day.
Here now is the next big issue for traders to dwell on in the Energy sector. Like the major gold producers, Big Oil is not replacing reserves as quickly as being used for production. These companies have been spending the capital instead to buy back shares and boost dividends.
Everybody wants to get “theirs” today. Not enough planning is being done for tomorrow.
(Dow Jones)--Citing the loss of Venezuelan oil reserves, Exxon Mobil Corp. (XOM) Friday became the latest oil major to fall short of 100% reserve replacement in 2007, posting a 76% reserve replacement for the year.The Irving, Texas oil giant said it replaced 1.2 billion oil-equivalent barrels in 2007, compared with production of about 1.6 billion barrels, a ratio of 76%. The result is the latest sign of the growing challenge the private oil majors face in replacing production.
Despite failing to replace production for the first time in recent memory in 2007, Exxon, which has generally outperformed the other oil giants on leading metrics, can point to some caveats that are likely to resonate with leading investors.
"Even 76% is a pretty good show compared to its peers," said Lysle Brinker, vice president at John S. Herold's Equity Research in Connecticut. "Exxon's diversity of resources and technological and operational acumen (are) behind its success."
Exxon shares closed at $85.37, down 18 cents, on Friday, a bad day for many petroleum equities.
Points to Extenuating Circumstances
Exxon said its 2007 ratio would have reached 107% if it had still included reserves from Venezuela. Exxon announced it was leaving Venezuela last summer after rejecting a change in fiscal terms amid a nationalization of heavy oil assets. The company recently launched a spate of legal challenges to try to force Venezuela to compensate Exxon for its loss of assets.
Exxon also pointed to the effects of a U.S. securities rule that requires oil companies to use year-end prices in its reserve calculation. Oil prices traded above $90 a barrel at the end of 2007, but many leading energy experts believe long-term prices won't be that high. Higher oil prices tend to equate to somewhat lower oil reserves for larger oil companies, due to their effect on production-sharing contracts with foreign governments and national oil companies.
Excluding the year-end price rule, Exxon said it would have replaced 101% of its reserves in 2007, "assuming the pricing basis the Corporation uses to make investment decisions," Exxon said in a news release.
An Exxon spokesman declined to disclose Exxon's long-term pricing assumption.
"We don't release the pricing assumptions," said Exxon spokesman Alan Jeffers.
"They're proprietary."Jeffers said Exxon strongly supports a recent move by the U.S. Securities and Exchange Commission to review its reserves booking rules. The review could lead to a change in the year-end pricing rule.
Exxon's disclosure Friday marks the latest weak reserves replacement figure for an oil major.
Chevron Corp.'s (CVX) executive warned analysts on Feb. 1 that the company replaced just 10-15% of its reserves in 2007. Royal Dutch Shell (RDSA) also has hinted at bad results, raising suggestions that reserves replacement will come in well below 100%. But BP PLC (BP) said it replaced 120% of its output in 2007.
BP management state that 2007 was a huge success, but inventory and long-term debt has sky-rocketed and profits before taxes from continuing operations is down close to -10 pct in absolute dollars (which is masked on a per share basis by the huge share buybacks), and working capital declined by almost -15 pct. Their internal accounting now prices oil at $60/bbl, up from $40. So what am I missing here? Why the hype from BP?
Sounds like Crystallex repricing their resource base and putting out news releases exclaiming a huge increase in resources. Not! In the case of Crystallex, that sure didn’t help their share price, did it?
These people must take traders for idiots?
In 20 or 30 years, if I’m around that long, we’ll all be using alt energy anyway.
I have really had it with this nonsense from commodity-price sensitive companies trying to dupe the public that their shares are attractive on the basis of improved operations and finances. It’s mostly a bad joke. What these companies have going for them is government that continues to spend but not tax, which means they print money, and, with abnormally low interest rates, the resultant increase in commodity prices makes them look “richer than they really are”. (LOL Scotiabank). It also helps to spend the shareholders’ capital by needless share buybacks (instead of increasing reserves and other important metrics in a meaningful way) and paying incredible premiums to market in buying control of competitors, thereby building in oligopoly-based price controls.
But don’t get me started. In the wrap-up, I tell you, I plan my own version of “fatwa” by moving toward a focus on supporting a healthier global ecology.
Table 2: Senior oil & gas equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Oil & Gas Exploration & Production -Canada
Sector 15 (basic materials: IYM, XLB, IGE and VAW)
Here’s the XLB Monthly, Weekly and Daily data charts:
XLB Monthly data:
XLB Weekly data:
XLB Daily data:
Basic Materials (XLB +4.26 pct W/W) made a killing from Monday through Wednesday.
But, like the Energizer Bunny, some prices didn’t pull back as the week came to an end.
This week it became apparent to everybody that there is a commodity bubble in platinum. By Friday’s close, the RSI-7 moved up to 91.69 for the Daily and 96.96 for the Weekly price series data. When was the last time you saw a Weekly RSI-7 for anything at 97? Can’t last.
With the Point & Figure chart, there is a price objective, for now at least, of 2180 !!
When the Daily RSI-7 drops below 70, a low-risk, potentially high-reward trade will be to put on long puts on the platinum futures.
In addition, with the price now at 2100, a straddle may be another good play, closing out the call at the perceived top and adding more puts at that point.
XLB was supported by some good moves in steel. GGB jumped +1.5 pct and NUE +9.2 pct.
One of the few losers was Teck-Cominco (TCK -2.7 pct W/W), which dropped -1.8 pct on Friday.
Table 3: Senior metals and steel equities:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Sector 20 (industrial: IYJ, XLI, VIS, and IYT)
Here’s the XLI Monthly, Weekly and Daily data charts:
XLI Monthly data:
XLI Weekly data:
XLI Daily data:
Table 4: Senior capital goods makers and transportation:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
XLI (Industrials) gained +1.54 pct W/W after dropping -1.23 pct on Friday, closing at 37.00. That didn’t make up for the loss of -4.44 pct from 37.85 the prior week.
The big sector loser this week was ABB again (-3.6 pct W/W after losing -4.6 pct on Friday. A week earlier, ABB plunged -9.8 pct. The Chairman fired the CEO, but says he didn’t. The games people play. But do they fool smart traders?
Aircraft manufacturers this week had a good one with BA +6.9 pct and ERJ +5.4 pct. I guess that traders are factoring in another round of central bank rate cuts, which will make it easier for these capital-intensive manufacturers to roll over their debt at lower rates, that is if they can find a banker whose got any money.
Brother, can you spare a dime?
That got me thinking that what the world really needs is a virtual credit union, a debt bank banked by gold.
Sector 25 (consumer discretionary: XLY, IYC and VCR)
Here’s the XLY Monthly, Weekly and Daily data charts:
XLY Monthly data:
XLY Weekly data:
XLY Daily data:
Consumer Discretionary (XLY) gained +1.20 pct W/W to 32.06, but most of the consumer discretionary stocks I monitor went down on Friday. XLY was at 32.80 two weeks ago.
I wrote five weeks ago in the WIR, “I can’t see US shoppers returning to the stores and malls until the gasoline price drops at the fuel pump. Right now, they are tapped out according to the credit card companies.”
Politics aside, the Crude Oil price lifted +6.49/bbl over the past two weeks, and traders feel that’s a negative for consumers. Also, the data on consumer spending is looking bad.
A week ago, CCL (-8.9 pct) plunged, and this week it recovered a little ground (+3.0 pct) as the winner in this sector. Over two weeks, that’s no Obama.
A week ago I wrote, “CCL operates 3,000-passenger cruise ships. The deals to Nassau are really sweet.” I guess traders are wondering why there are any deals in what is supposed to be peak season.
Table 5: Senior consumer discretionary equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Sector 30 (consumer staples: XLP, VDC, RTH and IYK)
Here's the XLP Monthly, Weekly and Daily data charts:
XLP Monthly data:
XLP Weekly data:
XLP Daily data:
Table 6: Senior consumer staples equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |