The Last Time We Saw This, Investors Doubled Their Money in Six Months

By Justin Spittler

Gold couldn’t catch a bid in December 2015. It was down more than 30%, and trading at the lowest price in nearly six years. Gold stocks, which are leveraged to the price of gold, were doing even worse. The average gold stock was 80% off its highs. Most investors wanted nothing to do with gold. But not Doug Casey. Doug knew gold would rebound. It was only a matter of time. He even told Kitco, one of the world’s biggest gold and silver retailers, on December 18, 2015, that he was buying gold hand over fist:

My opinion is if it’s not the bottom, it’s close enough to the bottom. So, I have to be an aggressive buyer of both gold and silver at this point.

Doug’s timing was nearly perfect.…
The day before, gold bottomed. It went on to gain 30% over the next six months. The average gold stock more than doubled in value over the same period.

I’m telling this story because an opportunity just like this is shaping up before our eyes. Only this time, it’s in the energy market.

Energy stocks have been beaten to a pulp.…
You can see what I mean below. It shows how the Energy Select Sector SPDR ETF (XLE) has done since the start of the year. This fund invests in 36 major U.S. energy companies, including Exxon Mobil and Chevron. You can see that XLE is down 13% this year. That makes energy stocks the worst-performing sector in the S&P 500.

Energy stocks are now off to “one of the worst beginnings to the year ever,” according to Morgan Stanley. As if that weren’t enough to scare away most investors, look at the ugly chart below. It compares the performance of XLE with the SPDR S&P 500 ETF (SPY), which tracks the S&P 500. When the line is rising, energy stocks are doing better than the broad market. When it’s falling, energy stocks are underperforming the S&P 500.

Energy stocks have been lagging the broad market for nearly a decade.…
As a result, energy stocks now make up just 5.9% of the S&P 500. That’s half of what the sector’s weighting was in 2011. Not only that, the 36 energy stocks that make up XLE are now worth less than the combined value of Apple and Alphabet, the parent company of Google.

Situations like this don’t last forever.…
Eventually, the pendulum swings the other way. The trick is knowing when that will happen. That’s obviously easier said than done. Plus, you have to understand that markets rarely change direction on a dime. Instead, they usually go through a bottoming process that can take weeks or longer. And it looks like energy stocks may have begun that process.

Energy stocks took off last week.…
XLE jumped 2.5% on Friday. That was the biggest one-day jump in energy stocks since last November. This week, XLE is up another 1.4%. Now, it would be easy to dismiss this as “noise.” But if energy stocks keep rallying, XLE could “break out.” The chart below shows the performance of XLE over the last 12 months. You can see that it’s been in a downtrend since late 2016.

You can see that XLE hasn’t broken out of its downtrend yet. But it could do that sooner than most investors think.

Energy companies are starting to make money again.…
Revenues for energy companies in the S&P 500 surged 34% during the first quarter of 2017. That was more than quadruple the S&P 500’s 7.6% jump in revenues. Wall Street now expects U.S energy companies to post an 18% rise in revenues when the second quarter is all said and done. Not only that, analysts expect the sector to report a more than 400% spike in second-quarter profits. For perspective, second quarter profits for the rest of the S&P 500 are expected to rise just 3.7%.

Once “the market” figures this out, watch out.…
Energy stocks are going to skyrocket just like gold stocks did in early 2016. Keep in mind, the bottoming process could take weeks or even months. So, wait for energy stocks to “carve a bottom” before diving in. That’s when stocks stop falling, trade in a tight range for a period of time, and then start heading higher. Stocks that carve a bottom often keep soaring. Just look at what GDX did after it carved a bottom early last year.

By waiting for energy stocks to carve a bottom, you’ll greatly limit your downside…without giving up a chance at big returns. I'll let you know when the time is right to invest in the energy sector. In the meantime, keep an eye on XLE and other energy funds like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Once they carve out bottoms, it will be a good time to buy.

The article The Last Time We Saw This, Investors Doubled Their Money in Six Months was originally published at caseyresearch.com.

The Time of Maximum Pessimism Is the Best Time to Buy

By Nick Giambruno

“The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”—Sir John Templeton


As you may have heard, Doug Casey and I traveled to Cyprus in search of crisis driven bargains… and we found them. This has been previously outlined in the articles here and in our specific investment picks in Crisis Investing in Cyprus.

Speaking of those picks, we outlined eight companies on the Cyprus Stock Exchange that we thought were fundamentally sound, but unjustly beaten down by the crisis. And thus far they have performed exactly as we thought they would.

The eight stocks that Doug and I identified are all up since the publication of Crisis Investing in Cyprus. Two of them have more than doubled, including one that’s up 335%ⁱ.

While those returns are nothing to bat an eye at, we believe there is still a lot more room for upside, and that it’s not too late to get in.

The top three catalysts for an economic recovery are still at the very earliest stages of being played out. And if the returns to date on our picks are any indication, we expect them to go much higher once these catalysts are fully under way.

Additionally, for the vast majority of people, there is still an aura of “maximum pessimism” surrounding Cyprus, which is what makes it an excellent contrarian investment. However, it’s clear this sentiment—and the current buying opportunity—won’t last forever.

Here are the three main catalysts to watch for.

Catalyst #1 Elimination of Capital Controls

Cyprus was the first eurozone country to implement official capital controls (but probably not the last). The restrictions put in place during the crisis are still there, though they are being gradually eased.

The first step toward the relaxation of capital controls occurred last week, and it’s possible that they will be fully lifted later this year. While it remains to be seen whether that will actually happen, there has been tangible progress in that direction.

Additionally, Cyprus has been meeting and exceeding its benchmarks set by the Troika (the IMF, the European Commission, and the European Central Bank), including the privatization of inefficient state-run enterprises and quickly enacting reforms, such as cutting government spending. This progress and the gradual relaxation of the capital controls are reasons for guarded optimism.

A couple of points to clarify about the capital controls:

First, they do not apply to new money brought into Cyprus (nor the capital gains and income generated from that money). That money can be taken out of the country without restriction. Second, the bank deposit confiscation only applied to cash balances above the guaranteed amount of €100,000 at the two troubled banks, Laiki Bank and Bank of Cyprus. Relatively sound institutions were not affected. Also, there was no forced selling or conversion of securities held in brokerage accounts. All of the brokers whom we met with held the majority of their cash in institutions outside of the country for additional protection.

Of course, the government could always come up with a new edict or decree, but we view that as unlikely at the moment, since they’re actively encouraging new investments in the island.

Catalyst #2 Offshore Gas Bonanza

In 2011 there was a discovery of a massive gas field about 100 miles south of Cyprus. The resources there are estimated to be worth tens of billions of dollars (not insignificant for a country with a $23 billion GDP)—and are enough to turn Cyprus into an energy exporter. Though it could be a number of years before these resources are monetized, it gives Cypriots a lot to look forward to over the intermediate term.

 

 

Catalyst #3 Relisting of the Bank of Cyprus

Previously the Bank of Cyprus and Laiki Bank accounted for a large chunk of the volume traded on the Cyprus Stock Exchange. Laiki Bank is now defunct, with its good parts having been folded into a restructured Bank of Cyprus—whose shares have been suspended from the stock exchange.
The restructured Bank of Cyprus is expected to start trading again sometime midyear, which will be an important catalyst in rejuvenating the stock market.

This is not to say the Bank of Cyprus is completely out of the woods. Far from it. While it has restored its capital base following the bail-in, it still has major issues with non-performing loans (NPLs).

That said, the Bank of Cyprus is the cornerstone of the Cypriot financial system, which is a major pillar of the Cypriot economy, and it has the backing of the Troika. The IMF believes that, despite the NPLs, the bank will be able to maintain an adequate capital base through at least 2016.

Owning a country’s premier bank—especially after it’s been chastised by a near-death experience—can be a profitable speculation.

It’s Not Too Late to Snatch These Bargains

While our eight investment picks are all up since the publication of Crisis Investing in Cyprus, including two of which that have more than doubled (including one that is up 335%ⁱ), that doesn’t mean it’s too late to get in.

The fact that we’re still at the very early stages of these three catalysts, combined with the continued “maximum pessimism” sentiment tells us that there’s still a lot more upside potential.

With features that make it a popular tourist and retirement destination combined with the potential economic boon from exploiting the offshore gas reserves, the Cypriot economy has a good chance to recover over the medium term.

When you weigh it all together, it’s clear that now is the time to start deploying speculative capital.
In order to invest on the Cyprus Stock Exchange, you’ll need a local brokerage account. Our preferred Cypriot broker can open accounts remotely for online trading, with no minimum balance requirements, and they still accept American clients.

This is information that you won’t find anywhere else. And there’s nobody better to guide you through it all than legendary crisis investor Doug Casey.

You can find out more about Crisis Investing in Cyprus by clicking here.
ⁱReturns denominated in euro terms from 11/6/2013 through 3/4/14

The article The Time of Maximum Pessimism Is the Best Time to Buy was originally published at International Man.

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Is it Buy Time for Halliburton? Wait for it.....wait for it....

Today we are going to be analyzing the stock of Halliburton Company (NYSE:HAL). On January 27th, a new red monthly Trade Triangle appeared, the first in 12 months for the stock. This indicates a significant technical development and changes the outlook and direction of Halliburton.

Today's in depth analysis is not to say the stock is going to collapse and go out of business, but rather we are noting a confluence of certain technical indicators that do not paint a positive picture for this stock.

There is an old adage in trading and it says "they slide faster than they glide." Translated that means stocks go down a lot faster than they go up.

What Does This Company Do?

Halliburton Company provides a range of services and products for the exploration, development, and production of oil and natural gas to oil and gas companies worldwide.

Chart Legend & Technical Picture (Black Numbers)

1. Classic long term trend line
2. Neckline of a Head and Shoulders Top
3. Head and Shoulders Top
4. Break below the 14 month trend line and Head and Shoulders Neckline
5. Fibonacci retracement levels
6. RSI divergence with price action below 50.

All of the Trade Triangles are red and negative.

To summarize, I expect the current downtrend in Halliburton Company (NYSE:HAL) to continue unless I see otherwise with the Trade Triangle technology.

If we are correct in our analysis, we could potentially see Halliburton move down to the following Fibonacci retracement levels:

38.2% @ $46.13
50% @ $43.00
61.8% @ $39.86

The 61.8% Fibonacci level of $39.86 nicely matches the Head and Shoulders target zone of $40.00. These two measurements confirm one another and make a strong case for this stock trading down to the $40 level in the next few months.


Click here to sample our "Trade Triangle Technology"

Sterne Agee Selects its Four Favorite Oil Services Stocks

Sterne Agee believes non conventional and deepwater drilling will rise steadily during the next few years, and it encourages investors to have exposure to both trends via the highest quality names and in companies with specific catalysts.

The firm thinks WTI crude prices will remain in a fairly stable $85-$95 range over the next two years, rig growth will rise slightly in 2014 and accelerate in 2015, and deepwater drilling visibility will remain strong for several years.

The firm's favorites are Halliburton (HAL), Schlumberger (SLB) and Oceaneering (OII), with Tetra Technologies (TTI) the top pick among sector small caps.


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Per Wullf to succeed Fredrik Halvorsen as Chief Executive Officer at SeaDrill SDRL

The Board of Seadrill has today announced that Per Wullf will succeed Fredrik Halvorsen as Chief Executive Officer of Seadrill Management Limited. Mr. Halvorsen has decided to leave Seadrill to join Ubon Partners, a technology venture.

Mr. Wullf has worked for Seadrill since February 2009 as Executive Vice President and Chief Operating Officer. Prior to Seadrill, he held several senior positions in Maersk, most recently as Managing Director of Maersk Contractors in Norway. He has 33 years of experience in the drilling industry, including 17 years in international and offshore operations.

John Fredriksen, Chairman of the Board of Directors said, "The Board would like to express its thanks to Fredrik Halvorsen for his contribution to the Fredriksen group of companies since he joined us in 2010. His track record of managing organizational change brought a much needed skillset to our businesses, including the successful transition of Seadrill Management from Norway to London this year. Mr. Halvorsen will leave the Company at the end of July, and we wish him all the best in the technology venture.

"Since joining Seadrill in 2009, Mr. Wullf's focus on operational performance during a period of phenomenal growth has allowed Seadrill to establish a track record of delivering safe and efficient operations for its customers. He has established strong relationships and an excellent reputation among our major customers and vendors.

"In his new position, Mr. Wullf will retain a strong focus on the operational performance of the fleet, and for the time being will also retain his position as the Company's Chief Operating Officer. Some functions which have previously been a part of the CEO's responsibilities such as investor presentations, corporate transactions, and financing will to a large extent be assumed by the CFO Rune Magnus Lundetrae and the CAO Rob Hingley-Wilson. This is being done in order for Mr. Wullf to maintain maximum focus on Seadrill's expansion and operation.

"The Board, including myself, will continue to be very actively involved in the strategic development of the Company as well as monitoring the Company's operation. With his strong track record, Mr. Wullf is a natural choice for the Board to ensure a smooth transition and bring Seadrill to the next level. Together with the support of his first class team and the industry's most modern equipment, we look forward to continued success and growth."

Seadrill has a versatile fleet comprising of 62 units, including newbuilds under construction. The fleet operates across five continents supported by over 7,500 employees worldwide.


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Baker Hughes Announces March 2013 Rig Counts

Baker Hughes Incorporated (NYSE:BHI) announced today that the international rig count for March 2013 was 1,268, down 7 from the 1,275 counted in February 2013, and up 76 from the 1,192 counted in March 2012. The international offshore rig count for March 2013 was 316, down 7 from the 323 counted in February 2013 and up 13 from the 303 counted in March 2012.

The average U.S. rig count for March 2013 was 1,756, down 6 from the 1,762 counted in February 2013 and down 223 from the 1,979 counted in March 2012. The average Canadian rig count for March 2013 was 464, down 178 from the 642 counted in February 2013 and down 28 from the 492 counted in March 2012.

The worldwide rig count for March 2013 was 3,488, down 191 from the 3,679 counted in February 2013 and down 175 from the 3,663 counted in March 2012.

Here is the March 2013 Rotary Rig Counts by country worldwide


The 2 Energy Sectors You Should Invest in This Year

 

5 Reasons Natural Gas Is Poised for Upside

From Bill Powers and Keith Schaefer....

This last week before Labor Day marked the 2009 low for natural gas prices. Both the natural gas price and natural gas stocks had a big run through to January 2010, creating great wealth for investors. Could that happen again this year? How real is the seasonal trade in natural gas? And how does the natural gas market compare this year over last?

This chart, published by www.rigzone.com (they have one of the best daily free e-letters in the industry) shows how well the big seasonal trade worked last year, and how it has fared for the last 10 years.
Looking at this year, 2010, we have on the positive side:
Storage is Trending Lower:
The EIA reported that for the week ended August 27, 2010 working gas in storage was 3,106 billion cubic feet (bcf), only 54 bcf larger than the prior week. U.S. storage is now 208 bcf less than last year at this time and 169 bcf above the 5-year average.
More importantly, storage injections have been below the 5-year average for 11 consecutive weeks and this trend is set to continue. Gas storage could end the refill season on November 1st at approximately 3,500 bcf. This level of storage heading into the winter heating season supports substantially higher natural gas prices.
2. Demand Continues to Strengthen:
According to the EIA demand for the first 6 months of 2010 was approximately 4.3% greater than the first 6 months of 2009.
Given the strong prices for coal this year, many utilities have stepped up their purchases of gas to run their usage of their natural gas fired power plant fleet.
Additionally, despite the weak economy in the U.S., industrial demand for natural gas has is higher this year compared to 2009.
Also, as we head into the winter heating season, demand for natural gas always picks up and should we have another cold winter storage could be drawn down very quickly.

3. Oil/Gas Ratio is Bullish:
While oil and gas on an energy equivalent basis should trade at a 6:1, the two commodities currently trade at approximately 19:1. Many natural gas focused exploration and production companies have turned their attention away from natural gas and towards oil. Chesapeake Energy (NYSE:CHK), the most active driller of shale gas wells in the U.S., has dramatically reduced its natural drilling in favor of a dozen new oil focused projects. Other companies have pursued similar paths.

4. Production Starting to Roll Over:
Monthly U.S. natural gas production which showed production fell 1.2% from May 2010 to June 2010, Due to falling production in the Gulf of Mexico, which accounts for nearly 11% of U.S. production, and several big producing states like Texas, Wyoming and New Mexico, overall U.S. production is headed downward for at least the next two years. Production growth from shale plays can no longer offset declines from the Gulf of Mexico and conventional areas.

5. Pressure Pumping Chokepoint: Due to increased demand for fracture stimulation services from the nearly dozen unconventional oil and gas plays currently under development in the U.S. and Canada, many operators are now having to wait weeks and even months for fracturing services. Once gas prices pick up and operators step up the pace of natural gas directed drilling, limited availability of fracture stimulation services will keep U.S. gas production from reversing its recently begun downtrend.

6. The forward curve for natural gas prices is much lower this year, which is to say the futures price for gas in 2011-2014 are lower than they were last year, this is bullish because it means producers can’t hedge big profits. It has also helped create the huge negative sentiment around natural gas prices, which we believe to be bullish.

On the negative side:
1. Producers are still being forced to drill to keep/earn land leases

2. Which is causing a continuing high rig count

3. And to pay for all this in the face of low cash flow, several large natural gas producers have formed joint ventures with big international companies, oftentimes National Oil Companies (NOC). This is BIG free money for these cash starved producers, and gives them the ability to keep drilling in the face of low prices.

4. Producers are now choking back production on prolific horizontal wells, reducing the steep (and highly publicized) decline rate of production in shale gas plays

5. Increased LNG capacity in both eastern Canada and the eastern US (though Liquid Natural Gas has been a non-factor in the North American market this year, and supply has been soaked up by Japan, Taiwan and China).

6. ETF (UNG-NYSE) buying continues to support prices. If low prices are the cure for low prices, investor buying in natural gas ETFs doesn’t help.

One of the last points for investors to consider, and this is neither bullish nor bearish, is that large commodity producers should not be relied upon as great gurus of their own pricing. In the last decade, some of the largest uranium, copper and gold producers, were caught completely by surprise when their commodity price spiked upwards, and were saddled with highly unprofitable hedges for years, at great cost to their shareholders.

The market will tell us within 60 days or less if the large seasonal run in natural gas prices will happen this year. We will be watching very closely.

With the fundamentals for natural gas greatly improved over the last couple of months and investment sentiment towards the commodity and gas weighted equities very negative, contrarian investors may consider getting positioned for a sharp rebound in gas prices.


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Dan Dicker: Avoid Oil Drillers

Dan Dicker, senior contributor for The Street .Com, says despite the fact that he's buying some energy stocks he's avoiding oil drillers for now. Follow Dan on Twitter at Dan Dicker.



Just click here for your FREE trend analysis of crude oil ETF USO

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Atilla's "Reinforcing Gravity of Price Time Continuum"

As most of my regular readers know I am staying near term bearish on the whole oil and nat gas sector, I still see 58 before 100. And from time to time I like to share the work of some of my favorite bears, don't worry when we are in a bull market I will share the work of my favorite bulls.

Here is a couple of current charts reflecting the work of one of my favorite bears Atilla at the xtrenders website. Check it out and please feel free to leave a comment and our readers know what you are thinking.

$OSX - Oil and Gas Drillers / Monthly


$XOI - Oil Index
Due to the short history of Oil Index ($XOI), I prefer to analyze one of its major and historical component, Exxon. / monthly


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Gas May Drop From Seven Year Low to $2, Options Show

Natural gas futures are poised to fall further after trading at the lowest in seven years in New York as stockpiles grew to a record for this time of year, according to options data and analysts. The cleaner burning fuel, down 56 percent this year, may plunge another 20 percent to below $2 per million British thermal units as new liquefied natural gas supplies come on stream, said Tony Regan, a consultant for Singapore based Tri-Zen International. Trading of bearish options on the U.S. Natural Gas Fund rose to a record as investors bet that the exchange traded fund tracking gas futures will keep tumbling.....Read entire article

Halliburton to Drill 170 Chicontepec Wells for $169MM

Oilfield services giant Halliburton Co. has won a $169 million contract to drill 170 wells Mexico's Chicontepec region, its first major project in the area, Petroleos Mexicanos said Thursday. Pemex, as the state oil company is known, has also awarded four contracts for about 140 wells each to local drillers, expanding its pool of suppliers for the expensive project. The new contracts underscore Pemex's efforts to accelerate spending and stabilize falling oil production, down by a fifth since peaking in 2004......Complete Story

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