Category: INO.com Contributors

Natural Gas Opportunity For Savvy Investors

Posted on by Matt Thalman

On August 31st, Russia's state-owned energy company, Gazprom, stopped the flow of natural gas in the Nord Stream 1 pipeline. The pipeline ran from Russia to Germany and was scheduled to be discontinued from August 31st until September 3rd. But September 3rd came and went, and the pipeline remained shut down.

At first, an oil leak was reported, causing the pipeline to remain shut down. But then, it was evident that the shutdown was in retaliation to the sanctions the West had implemented against Russia due to the war in Ukraine.

Many experts predict the economic pain in Europe will increase as the cold weather sets in across the continent. Some have gone as far as to say that the economic pain will be felt in both the coming winter and next winter, 2023-2024. Some are even saying that energy rationing will be required to ensure everyone has enough natural gas for heating.

However, many in Europe have been planning for this to occur for some time. Russia had reduced the pipeline operating volume to just 20% of what it could provide.

This was far less than what Europe comfortably needed to make it through winter. Thus, the European Union and other entities have been working on replacing the lost volume through other means. So while the pipeline shutdown is not ideal, it was predicted to happen at some point this winter.

Many are saying Russia is attempting to weaponize its gas supply to hurt the EU and other nations in an attempt to have Western countries drop or reduce sanctions against Russia.

At this time, there is no sign that either the EU or Russia will bend to the will of the other, and it is likely that we will continue to see elevated oil and gas prices in Europe. Thus, comes the opportunity for savvy investors.

I want to note that I am not condoning an attempt to profit from someone else's pain and suffering. I want to point out the high likelihood that natural gas prices will likely increase this winter as the EU finds ways to replace the gas they acquired through the Nord Stream 1 pipeline.

With that all said, let's look at a few of the options you have if you want to invest with the idea that gas prices will rise this winter. Continue reading "Natural Gas Opportunity For Savvy Investors" →

After The Student Loan Bailout

Posted on by George Yacik

Should President Biden's recent pay-for-votes forgiveness of student loans make you nervous if you own government-guaranteed securities?

Although it seems highly unlikely, the student loan giveaway could create a slippery slope that leads next to mortgage forgiveness for veterans or some other protected or politically favored class, or some other form of federal debt relief. 

In that event, what would happen to so-called government-guaranteed securities backed by VA mortgages if the president declared that some or all of those loans were forgiven? Why not FHA loans, that are made to many of the same people who have student loans, i.e., those who supposedly have trouble paying back their loans or getting them in the first place because they have marginal credit or can’t afford a large down payment.

It wasn’t very long ago that Fannie Mae and Freddie Mac, the twin secondary mortgage agencies, failed and were taken over by the government, leaving equity investors with shares worth next to nothing (both are currently trading at about 50 cents a share on the pink sheets).

Before they went bust during the global financial crisis, it was widely assumed that Fannie and Freddie were backed by the full faith and credit of the U.S. government, which turned out not to be the case (as that great legal scholar Felix Unger reminds us).

Assuredly, mortgages backed by the VA and FHA are different animals than those issued by Fannie and Freddie, but that doesn’t mean they’re invulnerable (they historically have high default rates). With interest rates on mortgages now north of 5% and a recession possibly looming, how long will it be before pressure grows on Biden to give the weakest homeowners a break?

Now it doesn't seem so far-fetched, does it? Today student loans, tomorrow home mortgages. How far do we want to take this? 

In the past we've heard some people say we should weaponize Treasury securities against our foreign adversaries, such as the Chinese, who own so much of our debt. Does this now become a little less of a fantasy and more of a possibility, as our relationship with Beijing continues to deteriorate and the president is in such a forgiving mood?

The actual dollar cost of Biden’s student loan giveaway has yet to be calculated, but it’s safe to say it’s a lot more than he and his defenders claim. Some analysts say the total cost will be about $1 trillion, which certainly seems reasonable. It could certainly add up to a lot more, if and when those saps who are still repaying their loans wake up and realize that they have indeed been duped and demand forgiveness, too, or simply stop paying. Continue reading "After The Student Loan Bailout" →

Buying Opportunity For These Two Gold Miners

Posted on by Taylor Dart

While the S&P-500 (SPY) has taken a beating over the past month, leaving the index 18% from its highs, the damage inflicted has been tame relative to the shellacking we’ve seen in the Gold Miners Index (GDX).

Not only has the GDX’s decline been double that of the S&P-500, but the most recent drop is one of the worst in a decade in terms of velocity. This is because the GDX was down 44% in just 95 trading days last Friday, translating to an annualized decline of 79%.

Daily Sentiment Index Data

(Source: Daily Sentiment Index Data, Author’s Chart)

This decline, coupled with muted 10-year returns since the peak of the last bull market cycle (2011), and lifeless 2-year returns since the August 2020 peak, has led to despair in the sector, with many investors not even interested in looking at their portfolios if they hold precious metals stocks.

I believe this has bred conditions for a violent rally to the upside, especially with sentiment for gold (GLD) sitting at its lowest levels in 18 months, as most investors have also given up on the metal.

In this update, we’ll look at two high-quality miners that have been thrown out with the proverbial bathwater:

Agnico Eagle Mines (AEM)

Agnico Eagle Mines (AEM) is the world’s 3rd largest gold producer, on track to produce ~3.3 million ounces of gold in 2022 from more than ten mines globally. Continue reading "Buying Opportunity For These Two Gold Miners" →

Bears Smashed Silver, Is Gold Next?

Posted on by Aibek Burabayev

Last month I was wondering “Is It A Trap?” for the top precious metals, referring to the short term bounce that we have been observing.

Bears have smashed the silver price badly below the former valley. Hence, I would start the update with its monthly chart below.

Silver Futures Monthly

Source: TradingView

Silver futures topped around the $21 mark the same day the previous update was posted in the middle of August and then it dropped like a rock to the downside.

The price already drills down the largest Volume Profile (orange) support as it entered the $16-$18 range. The peak volume was registered at the $17 level in the monthly chart. Below $16 the support weakens and further down below $14 there is a volume support gap.

I built the black downtrend with a red mid-channel in this big chart above. We could visually distinguish the first drop (large left red down arrow) from 2011 to 2015. The following huge corrective structure emerged during 2015-2021. Now the market could build the second leg down. The mid-channel support is located at $13.5, right below the above mentioned lower volume area.

We can mark the lower supports for the future. The Flash-Crash valley is at $11.6 fortified with the all-in sustaining costs located at $10.9. The valley of the distant 1991 at $3.5 is the next possible support.

Bulls should push the price outside of the downtrend beyond $27 to turn the tables. Continue reading "Bears Smashed Silver, Is Gold Next?" →

Chart Spotlight: Dollar General (DG)

Posted on by Ian Cooper

Investors may want to keep an eye on discount retailers, like Dollar General (DG).

For one, the latest pullback may be a great buy opportunity.

If you take a look at this chart, you’ll notice that Williams’ %R, Fast Stochastics, and RSI are all starting to pivot well off oversold conditions. With patience, I’d like to see the Dollar General stock retest $260 resistance, near-term from $241.65 support.

DG Chart With Trade Triangles

Source: MarketClub

Two, while other major retailers take a hit with inflation, Dollar General is rising because of inflation. In fact, we can see that with the company’s recent earnings report.
 
Not only did Dollar General report second quarter EPS of $2.98, which was better than the expected $2.94 a share, sales were up to $9.4 billion, same-store sales were up 4.6% as compared to expectations for 3.9%. The company even increased its same-store sales forecast to a range of 4% to 4.5% for the fiscal year, from a prior call for 3% to 3.5%.

Three, wealthier people are now shopping at dollar stores because of inflation.

According to Business Insider, Todd Vasos, CEO of Dollar General, said on a call with analysts that the store saw a rise in higher-income households shopping there, "which we believe reflects more consumers choosing Dollar General as they seek value." Continue reading "Chart Spotlight: Dollar General (DG)" →