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Late-Cycle Commodity Surge Under Way

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Posted by Frank Barbera - Financial Sense

on Thursday, 19 April 2018 07:08

According to the Game Plan for Late-Cycle Investing, as the economy moves towards its latter stages, commodities tend to outperform equities and other asset classes. Frank Barbera—market technician & portfolio manager believes we're likely in that process right now & if Gold pushes through $1,365 the first push up will take it to $1,480 to $1,525 - R. Zurrer for Money Talks

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Volatility Is a Return to Normal

Stock market volatility has picked up this year, though in percentage terms this really just a return to historical norms, Barbera explained.

The real anomaly occurred over the last 2 years where the market was moving straight up in parabolic fashion before culminating in a blow-off top late-January.

“Think of this more as a return to normal than anything else,” Barbera said. “Comparatively speaking, it is a rise in volatility, but at least so far we really haven't seen the stock market averages breakdown below major key levels.”

Possible Topping Process

One disquieting point is that after the big break we saw in early February, we swung from very high momentum to deep oversold conditions without anything in between, Barbera noted.

“We had this abrupt break in the market,” he said. “That's very historically unusual. Usually, when you have high momentum, you'll get a pullback, getting a push to new highs or maybe two pushes to new highs before you get a decent-sized break, and this just flipped on a dime.”

westpac-risk-aversion-index

Larger Chart - Source: Bloomberg, Financial Sense Wealth Management



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Energy & Commodities

Control of battery resources is key to EV leadership

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Posted by The Japan Times

on Wednesday, 18 April 2018 05:31

p8-Funabashi-a-20180410-870x580This article examines who is likely to come out on top in the manufacture of Lithium-ion batteries. Currently dominated by China with 60% of the Global market, with Panasonic and Tesla having together built a huge factory in Reno, Nevada, known as the Gigafactory - R. Zurrer for Money Talk

In 1991, Sony released the world’s first lithium-ion battery, which is now a central component of electric vehicles, plug-in hybrid vehicles (PHVs), and hybrid vehicles (HVs). Up until just a few years ago, Japanese companies commanded over half of the global market for lithium-ion batteries. Today, however, Chinese companies control 60 percent of the global market. Japanese companies now have fallen down to a market share of little more than 20 percent, while South Korea’s share is less than 10 percent.

There are about 200 battery manufacturers operating in China. This crowded field is led by Contemporary Amperex Technology (CATL) and BYD Auto.



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Energy & Commodities

The White-Hot Metal

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Posted by Sean Broderick - The Edelson Institute

on Wednesday, 11 April 2018 07:21

One quick look at the long term Uranium price chart below highlights Uranium is a very long way from its high in 2007, and it certainly isn't trending upward. That said, this analyst has found that Uranium stocks are bucking the Uranium metal trend significanly, and are rising from a very sold out low. That, this analyst believes, means "we’re looking at a big, cyclical move in uranium prices" - R. Zurrer for Money Talks

uxc graph u3o8

The White-Hot Metal

Have you noticed what’s happening in uranium lately? Not the metal, which continues to snooze. The miners. They are ramping up. Take a look at this chart …

sc

Why is This Happening?

On the demand side …

Global nuclear capacity is ramping up. In fact, it should double to at least 58 gigawatts by 2020-’21, then up to 150 gigawatts by 2030, and much more by 2050. That’s according to a new research report by the World Nuclear Association.

The same report says that China — which has 36 nuclear power reactors in operation — is building 21 new atomic power plants. They’ll all need to be fueled up. Nuclear plants take three times as much uranium at start-up as they normally use in a year.

Japan shut down all its atomic reactors after the Fukushima earthquake/tidal wave caused three of them to melt down. That country recently started bringing its nuclear plants back online. It’s preparing for the eighth restart right now … out of 43.

This is important because one of the things suppressing the uranium price was Japan selling its nuclear stockpiles from shut-down plants into the market. Now, it will have to stock up again.

On the supply side …



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Energy & Commodities

Disaster Hits Canada’s Oil Sands

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Posted by Nick Cunningham - Oilrice.com

on Tuesday, 10 April 2018 06:55

transmountainPoliticians terrified of environmentalists and in favor of anti-business politicial philosophies consider that the $47 billion in government revenue that would have come from the Kinder Morgan pipeline just isn't that important. Tell that to the people that were going to do the 800,000 man hours of work on the project - R. Zurrer for Money Talks

Kinder Morgan said it would halt nearly all work on a pipeline project that is crucial to the entire Canadian oil sands industry, representing a huge blow to Alberta’s efforts to move oil to market.

Kinder Morgan’s Trans Mountain Expansion is the largest, and one of the very few, pipeline projects that has a chance of reaching completion. Alberta’s oil sands producers have been desperate for new outlets to take their oil out of the country, and the decade-plus Keystone XL saga is the perfect illustration of the industry’s woes.

Keystone XL is still facing an uncertain future, and with several other major oil pipeline projects already shelved, there has been extra emphasis on the successful outcome of the Trans Mountain Expansion. That is exactly why Canada’s federal government, including Prime Minister Justin Trudeau, has gone to bat for the project.

But, despite federal approval, Trans Mountain still faces a variety of obstacles that have bedeviled the project for some time. It appears that opposition from First Nations, environmental groups, local communities affected by the route, and the provincial government in British Columbia have forced Kinder Morgan to throw in the towel, at least for now.

Kinder Morgan said on Sunday that it suspended most work on the $5.8 billion Trans Mountain Expansion.

Environmental groups hailed the announcement. “The writing is on the wall, and even Kinder Morgan can read it. Investors should note that the opposition to this project is strong, deep and gets bigger by the day,” said Mike Hudema, climate campaigner with Greenpeace Canada, according to Reuters. Related: Russia Wants To Drop Dollar For Oil Payments

Kinder Morgan’s CEO Steve Kean said the project would be scrapped unless the legal challenges could be resolved by May 31. The announcement sparked a sense of panic among various Canadian politicians. “We are determined to find a solution. With all our partners, we continue to consider all available options. As our Prime Minister has said, this pipeline will be built,” Canada’s Federal Natural Resources Minister Jim Carr said in a statement.

Alberta’s Premier Rachel Notley, not surprisingly, sounded more alarmed. She took to Twitter to not only lash out at British Columbia, but also vow that her province would push the pipeline, even if it meant taking a public stake in the project.

However, Kinder Morgan actually didn’t sound all that optimistic, despite heavy support from Ottawa and Alberta.

“We will be judicious in our use of shareholder funds. In keeping with that commitment, we have determined that in the current environment, we will not put KML shareholders at risk on the remaining project spend,” Kean said in a statement. Kinder Morgan Canada said the project faces “unquantifiable risk,” noting the threats made by the BC government to kill the project. The company had already spent over C$1 billion preparing the project but hadn’t yet commenced construction. The beginning of construction would mean spending would jump to $200 to $300 million per month, a level of spending that the company says is too risky given the uncertainty.

“The fact remains that a substantial portion of the Project must be constructed through British Columbia, and since the change in government in June 2017, that government has been clear and public in its intention to use 'every tool in the toolbox' to stop the Project,” Kinder Morgan Canada’s Keane said in a statement. “The uncertainty created by BC has not been resolved but instead has escalated into an inter-governmental dispute.”

Kinder Morgan Canada saw its share price fall by 10 percent on the news during midday trading on Monday. Related: Continuously Rising Energy Costs Will Cripple The Economy

“This is not good. I think the key point is it shows a lack of confidence in our political and regulatory system,” said Tim Pickering, president of Auspice Capital in Calgary, told Reuters.

Western Canada Select (WCS) has traded at a steep discount relative to WTI, at times widening to as much as $30 per barrel. With WCS prices wallowing in the mid-$30s per barrel, heavy oil producers are missing out on some C$30 to C$40 million per day in revenues, according to Reuters.

The pipeline is critical for Canada’s oil sands. The IEA has forecasted that Canadian oil production already began to exceed takeaway capacity last year, and the pipeline shortage could last for several more years even if Trans Mountain Expansion moves forward. But, if Trans Mountain is killed off, that would be nearly 600,000 bpd of capacity that won’t come online. That raises questions about when and if the bottleneck will ever be addressed. That threatens to prevent new capacity from coming online in the years ahead.

“If we cannot reach agreement by May 31st, it is difficult to conceive of any scenario in which we would proceed with the Project,” Kinder Morgan Canada said in a statement.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:

 

 



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Energy & Commodities

MARKET MELTDOWN CONTINUES: Gold & Silver Prices Begin To Disconnect

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Posted by Steve St. Angelo - SRSRocco Report

on Tuesday, 03 April 2018 06:22

While everything else has been getting smashed down, Gold and Silver were two of the few assets that were up within the overall carnage. This analyst makes the case that this is the result as investors begin to switch from building wealth to protecting wealth - R. Zurrer for Money Talks

MARKET MELTDOWN CONTINUES: Gold & Silver Prices Begin To Disconnect

As the BLOOD continues to run on Wall Street, gold and silver were the few assets trading in the green today.  As I have mentioned in past articles and interviews, investors need to get used to this sort of trading activity.  Even though the Dow Jones Index ended off its lows of the day, it shed another 458 points while the Nasdaq declined 190 points and the S&P fell 60.

As the broader markets sold off, the gold price increased $15 while silver jumped by $0.25.  However, if we look at these markets during their peak of trading, the contrast is even more remarkable:

Peak-Market-Trading-Apr2-2018

At the lows of the day, the Dow Jones Index fell 730 points or 3%, while the S&P 500 fell 3.2% and the Nasdaq declined by 3.8%.  Also, as I expected, the oil price fell along with the broader markets by dropping 2.7%.  If individuals believe the oil price will continue towards $100, due to supply and demand fundamentals put forth by some energy analysts, you may want to consider one of the largest Commercial Net Short positions in history.  Currently, the Commercial Net Short position is 738,000 contacts.  When the oil price was trading at a low of $30 at the beginning of 2016, the Commercial Net Short position was only 180,000 contracts.

Furthermore, if we agree that supply and demand forces are impacting the oil price to a certain degree, does anyone truly believe oil demand won’t fall when the stock market drops by 50+%???  I forecast that as market meltdown continues, the oil price will decline as oil demand falls faster than supply.

Now, when the markets were at their lows today, gold at its peak was up $20 while silver increased by $0.44.  Of course, this type of trading activity won’t happen all the time, and we could see a selloff in all assets some days.  But, once the Dow Jones Index falls below 19,000, investors will likely start to move into gold and silver in a much bigger way.

If we look at the following stocks and indexes from the peaks set in 2018, clearly, there’s a long way to go before the bottom is in:



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