I’ve stated that if and when I get back in on the long side of equities, the Canadian banks are likely to be among my first stock selections. I love getting long the Loonie here as I see parity in next two years. Watch video
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Oh Canada!
Posted by
at 9:35 AM on Tuesday, February 24th, 2009
Hi Peter
What do you buy to get long the CDN dollar?
Regards
Alan
I would love to make some canadian investments but right now I am stuggling with oils. I bought oil ETF’s DXO and OIL recently when oil was 33-38/bbl and have been hammered on both up and down days. Does anybody understand whats going on or what a lady should do?
Hi Jess,
First of all, What was the purpose of “lady” to invest in oil ETF at first place? Is it very short term-trading purpose, then just get in-get out asap you see profit/loss(4-10% range). If “lady” has 6-8 months of time frame, why “lady” is so worried anout this ups and downs?
Cheers,
Oil comments – This is where the OPEC cuts from January should be seen at the loading dock because it takes about 60 days for arrival. Last week, Oil inventories were down slightly. Inventory figures are generally released Wednesday at 10:30 A.M. E.S.T. and that should influence prices for a good while.
Mexico’s Cantarell Oil field, the second largest in the World (At one time) saw production fall 10% in January ‘09. Year over year, production is down 38%. In about a year, Mexico will no longer be an Oil exporter. At a sustained price below $35.00 per barrel, Canada will lose 865,000 B.P.D. and below $30.00 a further 865,000 B.P.D.
Based upon an audit of the 800 largest Oil fields in the World, the depletion rate of existing reserves is 9.1% per annum before new additions. The depletion rate after new exploration / development is near 6% per annum. The estimated worldwide reserve capacity is 6%.
Right now, Worldwide production capacity is about 80 Million barrels per day. After depletion and additions, reserves and production capacity are decreasing at least 4 Million barrels per day each year going forward, and that may be a best case scenario. So every quarter the World is losing 1 Million barrels per day production capacity. They call this phenomenon ‘Peak Oil’.
Yes, industrial production has decreased sharply, impacting Oil & Natural Gas demand, but the real story is the supply destruction and probability that one day when the World requires an increase of production there will surprisingly be no spare capacity due to depletion.
These exchange traded funds are at a disadvantage with Oil in Cantango and they’re best suited for backwardation. It works this way….. Let’s say that you buy 100 shares of an ETF that contains 100 barrels of Oil. Because Oil is in Cantango in outer months, when the futures contract expires it will roll over into an outer month that is at a higher cost than the expiring month. Therefore, there are fewer barrels of Oil contained in the new contract and therefore a lower price is reflected in the ETF. Did I express that properly folks?
So it does seem that Oil should be supported in this price range, ($33.00 to $50.00) but that doesn’t mean it’s ready to advance again. For my interest, I hope to buy and sell DXO at the lower end of the range looking to sell for a gain at the upper range. Of course there is no assurance that this price range can continue nor does any of this tell you where prices may go for the short – intermediate term.
Peter
what trades did you make today?
sorry for asking such a personal question
reply if you are comfortable doing so
IS MARKET DIRECTION PRE DETERMINED BASED UPON CHARTS & INDICATORS ?
Absolutely not ! Many times we’ll see chart configurations or indicators develop in a way that suggests a movement up or down and surprisingly the market will do something different and / or the chart configuration turns into something else. That’s because news and developments shape market direction and charts / indicators have little use by themselves. Fundamentals drive charts and indicators.
But here’s the point….. Some technical analysts might suppose that the past several months have been a basing pattern while others may see a Symmetrical Triangle which could either be a continuation or reversal pattern. So the market is undecided but there is definitely a downward bias based upon indicators trending down.
For a while the indicators that I follow seemed trendless because the market was digesting developments but it definitely did not like the “Stimulus Bill” and changed direction downward again when it was apparent the stimulus bill would be passed and the contents became known.
So right now, there’s still a chance that we could turn this into a base and arrest the decline at least temporarily. It’s going to depend upon developments and I would offer opinion that if Obama presents higher taxes upon individuals and businesses and / or a tax upon stock transactions, the markets won’t take that well.
Drawing conclusions upon the position of the indicators, we have two perhaps three weeks before the market changes direction again with an upward bias. It’s all in the hands of the politicians whether they’re going to send the market lower or turn this consolidation period into a base. So let’s see what Obama will do for the markets and don’t be blaming predecessors if the markets move lower upon his tax proposals.
Perhaps the point is that Obama inherited a bum market, but his policies are definitely shaping market direction and depth of the decline.
Hi Jess,
SGGroup nicely explained the issue with Contango in the oil ETFs. There is another issue with the leveraged ones (DXO, UCO and HOU.TO,) which is a problem with all the leveraged products. They ONLY reflect their respective sectors on a DAILY BASIS. So they are perfect for day traders.
Because they are rejigged every day, they are not suitable for longer time frames.
Generally speaking, the longer the time frame, the worse they perform. Sometimes the performance is downright bizarre. For example, the non-leveraged gold miners XGD.TO is down 14% for a one year period. The leveraged HGU.TO is down 61%. So there is a terrible penalty for being wrong. But what if you were right, and bought the leveraged bear fund HGD.TO? Surprise!!! You’d be down $82%!!!!
While this is an extreme case, there are many similar examples among the various leveraged pairs in many time frames, My observation is that volatility and trading ranges kill these things, or more correctly, your portfolio. Aside from daytrading, the leveraged ETFs only work if there is a strong trend in your favor.
What should a lady do? Stay out of leveraged ETFs until there is a clear trend, and jump out as soon as the trend breaks. For anything you currently own, you can wait for a bounce, but at least put a stop loss just below the 52 week lows. Better to be down 50% than 99%.
Barron’s article on oil – think it is bottoming:
THE ENERGY INFORMATION AGENCY’S data stream of Product Supplied is a proxy for U.S. crude-oil demand.
The current data suggests that U.S. crude oil demand is possibly in the process of bottoming, which if true, would be a great positive for energy commodity prices and energy stocks.
This apparent bottoming in demand has been accompanied by a decline in U.S. product inventories over the past four-five weeks, indicating this is not an inventory adjustment phenomenon.
Product Supplied is a proxy for US consumption of crude oil and approximates demand.
We monitor this metric closely because it may be the first signal of the start of stabilization of crude oil demand and, ultimately, a recovery in worldwide crude-oil consumption. In the past, the US has been the first area to have oil consumption turn down or up during recessions or recoveries, generally leading the world.
The four-week and seven-week moving averages for U.S. Products Supplied are above the 200-day moving average. The 200-day moving average also suggests we may be nearing a bottom in that series.
We recognize that this recession is in the early part of running its course. However, the many times in the past when the price of crude oil increased dramatically prior to recessions, prices generally stayed at a relatively high level. This time has been markedly different.
The price of crude oil is down over $100 per barrel versus the peak price experienced at mid-year 2008 and, as such, is actually quite cheap in consumers’ minds and in fact.
The recent Product Supplied data suggest an upturn in the four-week, seven-week and 200-day moving averages. Because [there have been] some prior false starts, this is not to say that it is time to definitively call the bottom, but at a minimum, investors should monitor this particular data stream very closely.
If this is, in fact, the bottom in U.S. demand for crude oil, it is an indication that the markets believe OPEC’s production quota cuts and near-term OPEC compliance to those cuts are sufficient to restore supply-demand balance. This would result in an increase in crude-oil prices which, in turn, could drag North American natural gas prices up with them. Most importantly, the energy stocks would react very positively.
Our recommendation is for investors, at a minimum, to decide which energy equities to own before this apparent turnaround in U.S. crude-oil demand confirms itself. Our stock recommendations should help in this matter.
Thank you, Klauss & Susan
I recall the average holding period for HBP’s Double ETF’s is 3 days. HOU’s volume is very high, at one point over 54 million shares/day, indicating lots of trading action. The EIA’s forecast for average oil price is $40.00 for 2009. When CL (U.S. Oil future) roll’s, the price of oil has been coming back to about $40.00 recently, give or take a dollar. The contango in Oil is narrowing and last weeks inventory numbers are indicating U.S. supply is shrinking a bit, probably because the refiners have finished converting over to produce gasoline for the summer driving season. The only thing that would cause oil prices to go higher, in my opinion, is an economic recovery or political unrest. A safer way to play oil, shorter term, is to own a few good Canadian oil Income trusts and get paid 10% + while you wait. You could also hedge the capital side with the HOD. This trade has worked out well over the last few months.
indicie teck analysis from bnn..ouch…the markets better hold
http://watch.bnn.ca/clip143277#clip143277
WHERE IS THIS HAPPENING ? …. Red China, Russia or The United States Of America ?
“Senior FCC staff working for acting Federal Communications Commissioner Michael Copps held meetings last week with policy and legislative advisers to House Energy and Commerce Committee Chairman Henry Waxman to discuss ways the committee can create openings for the FCC to put in place a form of the ‘Fairness Doctrine’ without actually calling it such.”
In case you were thinking that attempts by liberals to reinstate the “Fairness Doctrine” were simply aimed at conservative talk radio… THINK AGAIN.
It’s actually much worse than we initially thought!
Now, according to the above report by The American Spectator, the House Energy and Commerce Committee, under the leadership of far-left Congressman Henry Waxman, is talking about imposing Fairness Doctrine-type regulations on all forms of media… including the Internet!
According to the article in The American Spectator:
“Waxman is also interested, say sources, in looking at how the Internet is being used for content and free speech purposes. … Do four stations in one region carry Rush Limbaugh, and nothing else during the same time slot? Does one heavily trafficked Internet site present one side of an issue and not link to sites that present alternative views? These are some of the questions the chairman is thinking about right now, and we are going to have an FCC that will finally have the people in place to answer them.”
Other devices to muzzle criticism are under consideration as well.
“One idea Waxman’s committee staff is looking at is a congressionally mandated policy that would require all TV and radio stations to have in place ‘advisory boards’ that would act as watchdogs to ensure ‘community needs and opinions’ are given fair treatment. Reports from those advisory boards would be used for license renewals and summaries would be reviewed at least annually by FCC staff.”
The ‘Fairness Doctrine’ and online monitoring has been the Center for American Progress, a liberal think tank, which has published studies pressing for the Fairness Doctrine, as well as the radical MoveOn.org, which has been speaking to committee staff about policies that would allow them to use their five to six million person database to mobilize complaints against radio, TV or online entities they perceive to be limiting free speech or limiting opinion.”
So there you have it. If supporters of these totalitarian regulations get their way, you only will be able to read, watch or listen to content dictated by the likes of MoveOn.org.
Excerpted from a February 16th 2009 article in The American Spectator.
Everything Mr. Harper said in that interview was the truth (especially the part about our taxes being higher). Things are certainly slowing down here in Canada, but it’s not like in the U.S. – people are not loosing their homes. There’s no need for bank bail-outs and certainly no talk of bank failures. Kudlow pointed out that the TSX is way down this year – but I think what will make the difference going forward is that the TSX is very heavily weighted in Oil, Canadian banks, and to a lesser degree, precious and base metals. So, as the commodities recover, so should the TSX.
Hi Peter, Is the uptrend in Gold and Silver over in near term? If not, up to what level do you expect correction and by March is there any possibility of making all time new high in Gold?
regards,
anil
You folks are going to enjoy the Doug Casey interview I post below. He likes long gold, long oil, long agriculture and short bonds……seems in line with our fearless leader, Mr. Peter G
http://www.investorvillage.com/smbd.asp?mb=144&mn=18384&pt=msg&mid=6753593
In order to formulate my own thoughts on the present and future, I try to incorporate as many “legitimate” diverse views as possible… thus my following of Peter’s blog.
For those interested in another pragmatic (in my opinion) assessment of where we may be headed, I suggest reading the following Globe and Mail interview with Niall Ferguson. The interview is ominously titled ‘There will be blood’.
In it, the Harvard economic historian discusses how the current mess may evolve. Believe it or not, he thinks the US and Canada may do better than most.
FWIW
http://business.theglobeandmail.com/servlet/story/RTGAM.20090223.wferguson0223/BNStory/crashandrecovery/home?cid=al_gam_mostview
Hello,
What about IStocks? What are the pros and cons between this and buying physical gold? I hear there are fees as high as 10% on buying golf from my Canadian bank.
Thanks,
Keven
Sorry , not ” golf” … “gold”!
Kevin,
Regarding the difference between paper gold (iShares) and physical, put simply, paper gold is a “promise” that you own that “share” of gold versus “knowing” you actually have it in your hand / pocket / safe deposit box etc.
Paper gold is cheap to hold (ie. no safe deposit box fees) and easy to buy/sell. Physical gold can be cumbersome to move/store and can’t be sold as quickly/easily.
As for hearing Canadian banks are charging up to 10% commissions, why not give them a call a check for yourself. As for where to start, I believe ScotiaBank deals the most in bullion of the big five. You can get started here:
http://www.scotiamocatta.com/products/investment.htm
Aside from a bank, dealers like Kitco and Border Gold are also an option.
For those inquisitive minds who have an appetite to decipher the obtuse you might enjoy the article below dealing with the unexplained distortions in the oil ETF’s using USO as the illustration. The challenge is to take the article in put it in simple language even i could understand! Enjoy……susan
http://ftalphaville.ft.com/blog/2009/02/24/52836/the-united-states-oil-fund-mystery/
Susan:
Quick translation. USO is messing up the normal oil markets. Experienced futures traders can make free money off the mess. Buyers of USO and other oil ETFs lose.
Thank you Klaus! I got the jist of that but your easy to understand explanation makes much more sense. I think you should have edited this article – thanks for doing that for me.
Susan: You’re welcome, lol.
[...] interview caused Peter Grandich, our US residing Chief Commentator to blog Oh Canada! and call for a $CDN at par with the [...]
Thanks to all who share info on Canadian bank accounts.