Category: INO.com Contributors

Oil Outlook For 2020 Appears Challenging For Saudi Aramco

Posted on by Robert Boslego

The OPEC ministers are scheduled to meet December 5th in Geneva. Their non-OPEC partners will join them December 6th. As of this writing, reports are that Russia and Saudi Arabia are not yet pushing for deeper cuts in 2020 are likely to call for full compliance by all OPEC+ participants and extend the existing quotas scheduled to end in March through June.

However, developments in non-OPEC countries may require deeper cuts to prevent glut conditions. And a couple of surprises within OPEC may doom the group’s efforts. Saudi Aramco is promising a dividend payment to IPO shareholders in proportion to a $75 billion dividend for all Aramco shareholders and will pay the new shareholders their due regardless if it is unable to pay the government its share of the dividend in full. Therefore, the Kingdom may be faced with a major financial challenge in 2020.

U.S. Supply

Higher production forecasts for the U.S. are coming under increased scrutiny and are subject to a wide variety of opinions. The base case of the Energy Dept. is a rise of 1.0 million barrels in crude production from 12.29 to 13.29 million barrels per day. It also projects an increase of 680,000 barrels per day in petroleum liquids, mainly NGLs.

oil

The International Energy Agency (IEA) is projecting a US increase in crude production of 1.2 million. But Goldman Sachs revised its forecast down to 600,000 b/d. And HIS Markit is even lower at 440,000 b/d. Continue reading "Oil Outlook For 2020 Appears Challenging For Saudi Aramco" →

Ignorance Is Bliss

Posted on by George Yacik

Are the financial markets not paying attention? Or is that a good thing?

I keep asking myself those questions while I watch the major U.S. stock market indexes soar to new heights on a regular basis, while bond prices retreat – and yields rise – after hitting crisis levels early in the year.

The markets are saying: everything is just fine. The economy is humming along, consumers are spending, everyone who wants one can get a job, but just in case, the Federal Reserve is keeping interest rates low and monetary policy accommodative. How can things possibly get any better?

But are we getting a little too comfortable?

Stock prices are rising, and bond prices are falling even as the main Democrat presidential hopefuls try to top one another with the most profligate government giveaways they can think up – Medicare for All, free college tuition, student loan forgiveness, free health care for illegal aliens, reparations for slavery, you name it – while their peers in the House are trying desperately to drive President Trump from the White House, so they don’t have to face him on Election Day next year.

To say that there is a huge disconnect between the political world and the financial world is a huge understatement.

At some point, will investors look over this depressing – and rather scary – landscape and take their chips off the table? Or do they really believe that all of this silliness will eventually blow over and Trump – whom the financial markets seem to like, or at least are comfortable with – will arise victorious after the impeachment witch hunt plays itself out and the current field of Democrat presidential wannabes thins out? Continue reading "Ignorance Is Bliss" →

Today vs. 2012; Different This Time For Gold

Posted on by Gary Tanashian

Gold bugs will remember 2012 as the last year of hope that gold was still in its bull cycle as it managed to hold key support around 1550 into year-end. It should not be lost on us that here into year-end 2019 gold’s new bull cycle has risen to, and logically halted at, the very same former support that is now important resistance to a new bull market.

We anticipated this resistance in the summer, and although the up-turning Semi cycle of 2013 was logical to gold’s demise 7 years ago, that is no longer the case as Semiconductor leadership takes a new leg up in 2019. Why? Well, let’s explore just a few of the differences between then and now.

gold

Difference #1: The Yield Curve

The post-crisis era into 2012 was “inflation all the way baby!” as so well stated by my friend, the late Jonathan Auerbach back in Q4 2008. It was monetary fire hoses all day every day and policy makers didn’t care who knew it. There was a major systemic meltdown of the previous inflation in play and of course, our heroes at the Fed fought that realized risk with more of what created it in the first place, balls-out inflationary policy.

The crowning achievement – and gold killer – of post-crisis policy was 2011’s Operation Twist and its stated mission of controlling the yield curve, as Twist’s agenda to buy long-term Treasury bonds and sell short-term Treasury bonds was the very essence of a flattener. That cannot be disputed. Bernanke kicked off the great flattening and gold was done for years to come. Continue reading "Today vs. 2012; Different This Time For Gold" →

Weekly Futures Recap With Mike Seery

Posted on by Mike Seery

Sugar Futures

Sugar futures in the March contract settled last Friday in New York at 12.73 a pound while currently trading at 12.74 unchanged for the trading week, continuing it's extremely low volatility.

I have been recommending two bullish positions with an average price of 12.67, and if you took that trade, continue to place the stop loss under the 10-day low, which now stands at 12.46. For Monday's trade, that will be raised to 12.51 as the chart structure is outstanding at the current time because prices have been stuck in the mud.

Sugar is still trading slightly above its 20 and 100-day moving average as the trend remains higher as we need some fresh news to dictate short-term price action as the Brazilian Real has hit a 4 year low against the U.S dollar as that has a negative influence on prices.

The next major level of resistance stands at the 13.00 area. I will be looking at adding more contracts at that level because the stop-loss is so tight; therefore, the risk/reward is in your favor, so stay long.

TREND: HIGHER
CHART STRUCTURE: EXCELLENT
VOLATILITY: LOW

Orange Juice Futures

Orange juice futures in the January contract settled last Friday at 100.50 while currently trading at 99.00 down about 150 points for the week as prices are still stuck in a tight four-week consolidation. Continue reading "Weekly Futures Recap With Mike Seery" →

CVS Health and Walgreens Finally Breaking Out

Posted on by Noah Kiedrowski

CVS Health (CVS) and Walgreens Boots Alliance (WBA) have broken out recently due to a pair of better than expected quarters and speculation of being taken private, respectively. These stocks have been beaten down for years with CVS and Walgreens plummeting by 54% ($113 to $52) and 49% ($97 to $49), respectively, from their multi-year highs. Over $110 billion in combined market capitalization had been erased from these two companies. As of late, CVS has broken out to the mid $70s, and Walgreens has demonstrated strength into the low $60s, well of their respective lows.

The single-payer narrative being pushed by presidential frontrunners and the Amazon threat via its acquisitions of PillPack/Whole Foods potentially displacing traditional pharmacies weighed heavily on these companies. Additionally, drug pricing pressures are eroding margins and limiting margin expansion over time along with the secular decline in the physical storefront retail space is hindering foot traffic and same-store sales growth. The culmination of all the aforementioned factors resulted in CVS Health and Walgreens Boots Alliance being pressured in many different directions. With threats coming from all angles, these two pharmaceutical supply chain heavyweights are not only surviving but competing and reviving their dominance in the marketplace.

CVS’ Recent Rise

CVS is fresh off back-to-back quarters that have beat analysts’ expectations while generating large amounts of free cash flow, paying down debt and returning value to shareholders. To further boost long-term growth prospects, restore growth, and fend off potential competition, CVS acquired Aetna. This creates the first through-in-through healthcare company, combining CVS's pharmacies and PBM platform with Aetna's insurance business. The new CVS combines its existing pharmacy benefits manager (PBM) and retail pharmacies with the second-largest diversified healthcare company. This is a bold and hefty price tag to pay yet necessary to compete in the increasingly competitive healthcare space, changing marketplace conditions and political backdrop with drug pricing pressures. CVS is making a defensive yet necessary acquisition before it can go back on the offensive moving into the future. The acquisition will provide CVS with more scale to negotiate for better prices for the prescription drugs it sells through its PBM business. Continue reading "CVS Health and Walgreens Finally Breaking Out" →