Wednesday, September 2, 2015

Gazprom's Earnings Continue to Soar

 If weak gas and oil prices were supposed to devastate the industry, Gazprom (OGZPY) is one of the last companies to hear about it, as it has been producing great earnings. And with a P/E ratio of about 5, it is a great value play.

There have been two major catalysts behind Gazprom's great year. The most important has been the shrinking value of the ruble, and second, was the decision by Russia to lower export taxes earlier in 2015. That combination has driven nice results for the natural gas and oil giant.

In its latest quarter it generated $4.75 billion in net profit, a gain of 29 percent year-over-year. It also enjoyed an annual growth rate of 50 percent in the first half.

Investors need to understand that even in the midst of a low-price or depressed commodity market, there is more than one way for a company to make money. Those able to identify them, as in the case of Gazprom, will get in before prices are bid up.

The reason why Gazprom has been doing so well is its costs mostly are domestic, which means they're traded in rubles, while its sale are primarily in the U.S. dollar and euro. The difference in value between them is what is driving Gazprom's success.

Add to that its continual strong performance in Europe, which represents approximately 56 percent of its export business, and the deals with China which will be a serious revenue and earnings source for many years, and you can see why Gazprom should continue to surprise to the upside.

As for the ruble, it's under pressure from low gas prices, but when it moves up again, it will take the ruble with it. That means, unless the ruble really soars in response to a rise in gas prices, margin and earnings should continue to do very well.

In the meantime, it's good entry point for Gazprom, and if you believe there is more room for gas prices to drop, it'll get even better. But as it is, this is a great time to think seriously about taking a position in Gazprom, as risk/reward is aligned nicely.

Tuesday, August 25, 2015

China Loading Up On Depressed Commodities

While the demand for commodities in China without a doubt has been weak, that doesn't mean China isn't a buyer in this market, because it is.

What must be understood is the demand now isn't domestic or for exports, but from the fact the prices have fallen so much, China, as it has done historically, is buying up the resources at bargain prices.

When measured by customs data, there are at least 21 commodities China has increased imports in by over 20 percent in July, according to Reuters.

Agricultural imports were especially strong, "with wheat up 158 percent, barley by 67.9 percent, corn by 1,184 percent, cassava by 28.5 percent, rice by 78.2 percent, soy oil by 25.8 percent, palm oil by 53.3 percent, natural rubber by 70.1 percent and sugar by 72.7 percent."

Crude oil imports jumped 29.3 percent in July.

Metals were also strongly represented. Molybdenum imports climbed 139.8 percent; uranium was up 227 percent; zinc ores up 84.5 percent, and silver up 63.3 percent, among others.

Among major commodities, copper ore and concentrates increased 7.2 percent, and iron ore imports were up a modest 4.4 percent.

What was also interesting in this was China's decision to increase imports at a time its currency was extremely weak. While low prices were definitely a part of the impetus, a declining yuan also had to play a part. If the currency loses more value, the cost of imports would rise even if commodity prices remained stable.

It looks like China was pressed into acquiring the depressed commodities before its currency weakened further. Or course China knows what its policy is going to be, and it's possibly a nod to further debasing of its currency after it buys the commodities it wants at low prices.

Thursday, August 20, 2015

Gold and Silver May Be About to Launch into Orbit

A lot of gold investors have been scratching their heads over the inability of the precious metal to gain traction during a period of time when many underlying fundamentals should have supported the price of the yellow metal.

I don't think that's going to be the case for too long, as the underlying cracks in the global economy are starting to reveal themselves, as Asia is getting economically crushed, led by weakness in China, as well as Japan.

The U.S. has enjoyed a prolonged period of smoke and mirrors with its economy, which in light of the global slowdown, will soon be exposed as well.

This is preparing for a resurgence in the price of silver and gold, and those positioned to take advantage of that, could have one of the most explosive period of growth in this sector they've ever had.

As the stock market showed today, investors are very fearful of the bull market, which anything negative sends them scurrying to the sidelines, as bargain hunters scoop up their shares.

We're only just beginning to see this major correction and early stages of the next recession, and the combination of the deflating of the bull market and economic weakness ensures gold and silver are going to enjoy a long and profitable upswing.

I'm already in with my investments. It's now time to look seriously at allocating capital to the two precious metals before prices really take off.

Thursday, August 6, 2015

An Opportunity Of A Lifetime For Some Oil Investors

Headlines like the one screaming the oil crash has caused losses to date of about $1.3 trillion, should be ignored by those that weren't affected by the disaster, as it has brought about opportunities rarely seen in one's investing lifetime.

The demand for oil is never going to go away, and the price it is now at won't remain at that low level for a long period of time. Producers will simply cut back until the price starts to rise to a level that is profitable to them. That of course has already happened, and it will take time until the effect of it works its way through the market.

read more

Tuesday, August 4, 2015

U.S. Economy Failing to Meet Expectations

As has been the case for the last ten years or so, the U.S. economy continues to grow at a rate that has failed to meet expectations. The recently released numbers from the Commerce Department show GDP growth is at only 2.3 percent, significantly below the expected 3 percent being looked for.

It has been a full decade since the last time the GDP has grown above a 3 percent rate, making it the weakest recovery in about 70 years. Economic growth hasn't surpassed the 3 percent mark since 2005, according to the Commerce Department.

more on U.S. economy

Why U.S. Dollar Will Remain Strong in the Near Term

There has been some confusion among those interested in the U.S. monetary policy and why the U.S. dollar has remained strong even as the Federal Reserve created enormous amounts of money out of thin air. Under normal conditions that would have put downward pressure on the value of the greenback.

Since economics are no longer operating under normal conditions, neither will the usual performance of the U.S. dollar; and it hasn't.

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Friday, July 24, 2015

Turquoise Hill Will Be A Long-Term Winner

At a time when it appears there is nothing to stop the disintegration of the commodity bear market, my outlook for Turquoise Hill (NYSE:TRQ) remains strong.

My reasoning is I believe commodities are closing in on their lows in general, and are likely to begin a rebound in the not-too-distant future. But even if there is more downside to come for an extended period of time (meaning about a year or so), I don't see it having a negative impact on those holding a position in Turquoise Hill for the long term. That's because of the timing of the completion of the second phase construction at its flagship property Oyu Tolgoi.

Another reason is gold is going to get a hefty rebound once it bottoms out, and that is the second-most important metal at Oyu Tolgoi, behind Copper. Rounding out the top three is silver.

read more on Turquoise Hill

Monday, July 13, 2015

Janet Yellen Speaks Out of Both Sides of Her Mouth

I'll have to say I wasn't disappointed in the talk given by Federal Reserve Chairwoman Janet Yellen, as my expectations were appropriately low, and I wasn't surprised by the lack of anything new and some of the weasel words used to provide cover in case economic conditions in the second half are such that the Fed doesn't raise interest rates as Yellen has been leaning towards and most others expect.

Here's the wording she used to cover her actions if they end up different than she has signaled to the market:

"But I want to emphasize that the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step ..." she said, referring to the probability of raising interest rates.

read more ...

Monday, July 6, 2015

U.S. Workforce Participation Rate Will Remain At Low Level

The release of the latest report on the U.S. job market was underwhelming, and reinforces the thesis that the workforce participation rate in the country won't return to the levels enjoyed in 2007, when it stood at 66 percent.

Data show the number of Americans who have a job or are seeking a job has dropped to a 38-year low of 62.6 percent, down from 62.9 percent last year.

Growth rates confirm this trend is worsening, as job participation growth in 2007 was 1.1 percent, while in 2014 it shrunk to only 0.3 percent.

As for the number of jobs added to the economy last month, the final numbers show nonfarm payrolls were up 223,000 in June, which resulted in a drop in the unemployment rate from 5.5 percent in May to 5.3 percent in June.

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