OPEC meeting in Vienna on thursday

OPEC is having a very important meeting on thursday and that can move the oil markets. The 12-member group is bickering over who should cut oil output, and by how much in order to pump up the prices. The meeting in Vienna is the groups most watched session in many years.

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The U.S oil shale revolution is a game changer. (Read my article titled; American shale revolution – from January 27, 2014). The oil supply have increased and the oil prices is declining, and that have opened up the market. Countries that once had to submit to OPEC`s prices can now look for other suppliers. The oil king is about to lose.

China has for a long time been at the mercy of OPEC for twenty years, and the economic giant imports about 7 million barrels of oil per day, while the U.S imports about 8 million barrels of oil per day.

China`s demand for oil will continue to increase as its population is growing and so are the demand for oil-related items such as cars, plane traffic and motorcycles. As the U.S oil shale production makes the country more self-reliant, China has become more important to OPEC.

OPEC has a monopoly on the market and China pay about 10% more for the oil than the market price. As the oil prices plunge, many other suppliers in other countries will vie to undercut that monopoly. OPEC is slowly losing its second biggest customer as China now can pursue oil from countries outside of OPEC such as Brazil, Venezuela, Colombia and some countries in Africa.

This is just the beginning. China bought a lot of oil from Colombia this year, and China Petroleum and Chemical Corp (SNP) processed oil from Brazil`s Ostra field for the first time earlier this year. OPEC`s shipment to China fell 11% and the average cost per barrel was 10% lower.

China`s oil production and oil refining companies will benefit from the changing import sources. They`re already bumping up their refining capacity and shooting for a 20% increase in the next 5 years, and there`s a little doubt that China will purchase more crude oil from Russia as the West deepens their economic sanctions. The sanctions on Russia have led to increase China`s purchases from its communist brethren by about 60% in September.

WTIC

The energy sector is the worst performing sector in the S&P 500 this year, but the shift started years ago, so what we see today should not be a surprise for some one. It started in 2008 when Crude oil peaked at $147 a barrel, but the oil price have plummeted to about $73 a barrel now.

The energy sector has been the leading sector since 2000, but today its the worst performing sector beaten by the health care sector. I talked about the health care sector at the beginning of this year and I said I expected that sector to be a great investment opportunity.

Read my article from January 8, 2014, titled; Health-care bull. I told you to keep an eye on the health-care sector. I also said that the oil price is a risky bet, and that the oil price can plunge and Opec can face huge problems.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Airbnb IPO

Sharing economy has become very popular and companies like Uber and Airbnb has caused a paradigm shift in the travel business, and Airbnb are now planning to go public. That can happen as soon as next year.

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The privately owned company Airbnb is founded in 2008 by Brian Chesky (CEO), Joe Gebbia and Nathan Blecharczyk. The firm is headquartered in San Francisco, California.

Airbnb is a website for people to rent out lodging. Users of the site must register and create a personal online profile before using the site. Every property is associated with a host whose profile includes recommendations by other users, reviews by previous guests, as well as a response rating and private messaging system.

Airbnb have just completed its latest round of fundraising, giving it a valuation of more than $10 billion. The company serves 1 million guests each month, with over 800,000 listings in more than 190 countries.

As of July 2011, the company had raised $119,8 million in venture funding from different partners. In April 2014, Airbnb closed on an investment of $450 million by TPG Capital at a valuation of approximately $10 billion.

Revenue is expected to reach as much as $1 billion in 2015, and that`s a big jump from $250 million in 2013. Airbnb could be the worlds second largest «hotel» company if it surpasses Starwood and Marriott, trailing only Hilton. It`s already bigger than Wyndham and Hyatt hotel chains with their valuation of $10 billion.

Airbnb is growing. In May 2011, they acquired a German competitor, Accoleo. That`s their fist international Airbnb office in Hamburg. In October same year, they established its second international office in London.

In 2012, they opened six more offices in cities like Paris, Milan, Barcelona, Moscow, Sao Paulo and Copenhagen. Their European headquarters would be located in Dublin. In 2012, they said they had focus on Australia, the second largest Airbnb market behind the United States, as well as Thailand and Indonesia.

They have earlier announced its strategy to move more aggressively into the Asian market with the launch of their newest headquarers in Singapore. The company`s goal is to acquire an additional 2 million properties within the continent.

I have earlier talked about Uber and their challenges. Some people say their business is illegal and so is it about Airbnb. Other people say their business model has raised legal concerns. Especially in New York, where state Attorney General Eric Schnederman launched a probe into the business. He suggest that more than half of Airbnb`s New York listings could be illegal.

Airbnb still belive in their business model and continue to work on an IPO.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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High-yield bonds vs the stock market

High-yield bonds became very popular in the 1980`s and is better known as junk bonds, and that is an interesting investment which is widely used for corporate takeovers. It became popular because high-yield bonds outperformed traditional bonds on average.

30 years earlier (1950`s), high-yield bonds were fallen angels. Companies that had issued bonds when they were healthy was falling on hard times, and high-yield investors were buying bonds in turnarounds.

High-yield bonds were financed unproven businesses in the 1980`s, and was issued for speculation, and now those bonds are issued by highly leveraged companies. High-yield bonds on the market today is with a high degree of variety, and they trend with the stock market, but can act like bonds other times.

To show this, I have printed out iShares iBoxx $ High Yield Corporate Bond (HYG) with SPDR S&P 500 (SPY).

Chart

The Yield line is inverted. If yields on corporate bonds rise, then stock prices will fall, and in times when money leaves corporate bonds, it can flight to safety, which sometimes could be Treasuries. That money would also leave stocks. That means stocks can go up in periods of flat or rising yields. The key to this anomaly is risk.

This has happened before. During periods of rising risk appetite among investors. We saw it in 1998, the dot-com boom and during the subprime boom. Two of them were the building of bubbles, but all of them correlated with times when the investors hunger for risk rose.

It happens because money leaves bonds during periods of risk appetite and goes into stocks, which means stocks don`t fall when corporate bonds yields rise. The stock market is booming because investors aren`t afraid to take reasonable risks. The money flows into stocks, not Treasuries. Yields are 50% greater compared to 10-year Treasuries.

HYG is not acting like stocks but it`s not acting like a bond investment either. SPY is moving higher while HYG is declining. It was a correlation before 2011, but after that it all changed. The above should be on every investors mind. Many investors said the rally in junk-rated bonds is in a bubble or close to one, and HYG ETF and the SPX should be in the forefront of Equity Traders minds.

Some say that high-yield isn`t an good opportunity anymore. Watch out for this chart and look out for RS of HYG to SPY for signals of a market top. Look out for HYG outperformance. Weakness in equities is often preceded by a loss of momentum in credit markets. HYG need to stabilize. If not, equities will tumble. The disconnect between stocks and bonds probably means more pain ahead. Will the junk bond bubble burst, or stocks tumble? I`m exited about the end of the trading year. China cut the rate today, and the U.S markets are all up.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Bentley expect a new record year in 2014

Bentley Motors Limited is a British luxury automaker, founded by Horace Millner Bentley 18 January 1919. Bentley is now a wholly owned subsidiary of the German Volksvagen AG. Bentley started the brand in Crecklewood (near London) and was acquired by Rolls-Royce in 1931.

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(Picture: Bentley  Continental GT V8 2014)

Bentley Motors Limited is the direct successor of Rolls-Royce Motors, which Volksvagen AG purchased in 1998. The rights to use the Rolls-Royce name and logo is still owned by Rolls-Royce Holdings plc, which is later licensed to BMW AG. They paid £40m for the license.

Volkswagen AG`s principal activity is the design, engineering, manufacturing and distribution of luxury automobiles sold under the Bentley marque, and the Bentley cars are largely hand-built in Zwickay, Germany.

As you probably know, Europe is in trouble and many of the economical reports doesn`t look good, but despite that, Bentley is not effected, and expect a new record year in 2014. Bentley`s biggest market is USA and the second biggest is China. despite the recession in Japan, Bentley is not effected by that either. So, Bentley has a stable market.

The luxury segment is good no matter what happens in the stock market or the economy at all. Rich people will always have money, so they will still buy luxury products like Bentley. Cheaper oil price will probably help the middle class and boost the car sale in that segment, but the luxury segment will still go strong. Rich people do not care about the oil and gas price. But in 1929 during the Wall Street Crash, Bentley saw the demand for its expensive products declining by the Great depression.

Porche have had a massive hit with their big SUV, and Bentely is out with a brand new SUV next year, and the price is $200,000. The test version of the brand new SUV is already on the road, and Bentley know that 95% of their customer already have a SUV in their garage, so they expect to enlarge their customer group.

The new SUV can boost Bentley`s sales by 50% to 70%, so the effect will be enormous for the firm. They produced 10,000 cars last year and expect to sell about 6000 to 7000 examples of their new SUV annually once the production is fully ramped up.

The new SUV sits on the same platform underpinning the third-generation Porche Cayenne, as well as Audi Q7 and Volksvagen Touareg. Lamborghini will spin the production version of is Urus SUV concept off the same architecture.

Bentley`s former boss Wolfgang Durheimer pushed hard for the development of diesel models, so it looks likely that there will be a compression-ignition version, but a plug-in-hybrid will follow shortly afterward as the first part of Bentley`s stated ambition to configure 90% of its cars as plug-ins by the end of the decade. What a competition on the SUV market next year.

Tesla will release their new SUV next year. In competition with Audi Q7, Lamborghini Urus, Porche Cayenne Turbo S, Land Rover Range Rover V-8 Supercharger and Rolls-Royce future SUV. But what is important to the customers? gasoline driven cars, hybrid or battery?

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Home Depot earnings report tomorrow morning

Home Depot (HD) is a do-it-yourself home improvement retailer. The firm operates The Home Depot stores, which are a full-service, warehouse-style stores. HD stores serve three primary customer groups; do-it-yourself (D-I-Y) customers, do-it-for-me (D-I-F-M) customers and professional customers.

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In February 2013, HD acquired Measurecomp LLC and HD components LLC. About one year later, in January 2014, HD acquired Blinds.com.

It`s only a few companies left to reveal their earnings this time, and tomorrow morning Home Depot (HD) will report their latest earnings. Last time HD reported earnings they had an earnings growth of 23%, but this time it is estimated an earnings growth of «only» 21%.

That will be down two ticks, but that`snot bad, because a 21% boost to the bottom line will be the second best quarter last year. The growth seems to continue, as the retailer has seen some solid growth on the bottom line over the past two years.

HD reported a sales growth of 3% and 6% in the first two quarters, and this growth is expected to decline to 5%. Analysts consensus is expecting $1,13 in earnings per share. Revenue is $20,500 billion YoY.

When HD reports positive earnings report Q3 like the one we will see tomorrow, it usually boost the stock price. It is expected to see similar things to happen and HD will continue to lead the industry.

Some analysts belive that the industrial retail sales companies like HD will lose market shares against the online sales. It will simply kill the market sector, but despite that, it is expected to see solid earnings report from HD tomorrow morning. Positive news for HD tomorrow is good news for long perspective investors. The stock is up 19% YTD, and 17% last three months.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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