Money and Investing Thoughts

Oil is over $100 a barrel and it is starting to feel like 2008 again, only without the jobs. Interesting video.

The following is reprinted with permission from oilprice.com

Oil Market Summary for 04/12/2010 to 04/16/2010

Oil prices plunged on Friday after the U.S. Securities and Exchange Commission charged Goldman Sachs with fraud in its marketing of certain subprime mortgage securities, amid a general sell-off in financial and commodity markets.

The allegations against one of the biggest market makers in virtually every markets dampened speculation heading into the weekend. Much like the volcanic eruption in Iceland spewed a cloud of dust over northern Europe that grounded all air travel, the SEC charge cast a pall over financial markets.

The May contract for West Texas Intermediate, which expires next week, settled down $2.27 or 2.7% at $83.24 after briefly dipping below $83 in the wake of the SEC announcement. The benchmark contract settled at $84.92 a week earlier.

Goldman Sachs had no immediate comment. Prices had been drifting lower in equities and other markets prior to the announcement, but fell sharply afterwards, led by a plunge of more than 10% in Goldman shares.

Some analysts speculated that prices could rebound on Monday once the dust has settled, but market participants remained uncertain about the long-term impact of the SEC charge on Goldman’s business and on that of other major banks.

In the past, Goldman has rejected charges of misleading investors when it sold securities that it subsequently shorted in its own trading, asserting that that is the role of a market maker. Goldman is one of the biggest participants in the energy futures markets.

Oil prices started the week soft, but firmed up after Wednesday’s inventory report from the U.S. Energy Information Administration, which showed a small decline in crude inventories after 10 successive weeks of increases.

An unexpected decline in April consumer sentiment reported on Friday, however, led to new doubts about the strength of the economic recovery and depressed prices. The market had been expecting a reading of 75 after 73.6 in the previous month, but instead the index came in at 69.5.

The inventory report on Wednesday pushed oil prices up 2.1%, to $85.84. But the monthly outlook from OPEC released the same day actually revised its forecast for 2010 demand for OPEC oil downward by 135,000 barrels a day from the previous month, to 28.8 million barrels a day. The group’s expectation for the overall growth in oil consumption also trails that of other analysts.

By. Darrell Delamaide for Oilprice.com who offer detailed analysis on Crude oil, Geopolitics, Gold and most other commodities.  They also provide free political and economic intelligence to help investors gain a greater understanding of world events and the impact they have on certain regions and sectors. Visit: http://www.oilprice.com

Note: This article is reprinted here with permission from oilprice.com. Tim

Oil Market Summary 03/08/2010 to 03/12/2010

Crude oil prices tread water for the week as uncertainty about demand continued to weigh on the market. Prices were down slightly on the week, with the benchmark West Texas Intermediate settling on Friday at $81.24 a barrel, compared with $81.50 a week ago.

Not even relatively bullish forecasts for oil demand, such as the International Energy Agency’s report on Friday raising its forecast by 70,000 barrels a day for 2010, or the decline in the dollar could propel oil prices forward.

One analyst even predicted crude oil prices dipping below $60 a barrel in the second half of the year. Ronald-Peter Stöferle, a raw materials analyst at Austria’s Erste Bank, said that oil is relatively expensive by historical standards, and current prices are not justified by demand.

Moreover, Stöferle notes, OPEC seems to prefer a price between $70 and $80 a barrel to keep unconventional sources such as shale oil and oil sands, or alternative energy sources like solar and wind, from becoming economically competitive.

In any case, this analyst expects oil prices could rise further in the first half of this year, even hitting $100 a barrel, but will average only $72 a barrel over the second half due to weak demand and other factors. In particular, he thinks too many hopes are pinned on growth in China’s economy. “We are critical of the blind trust in the Chinese economy as recovery and growth engine,” Stöferle said, adding that China cannot be a “messiah for the global economy.”

The IEA’s forecast for an increase of 1.6 million barrels a day in crude oil demand this year to 86.6 million barrels a day was quickly eclipsed by another report on Friday. The University of Michigan consumer sentiment index, which declined in March to 72.5 from 73.6 in February, indicated that consumers remain uncertain about the future. Analysts had expected a small increase for the month.

The euro gained ground against the dollar, rising above $1.37. The dollar, already weak, declined further after reports that San Francisco Federal Reserve Bank president Janet Yellen, considered a “dove” on interest rates, will be nominated as vice chairman of the Fed. This would increase the likelihood of U.S. rates remaining low.

By: Darrell Delamaide of OilPrice.com
Source: http://www.oilprice.com/article-crude-prices-stagnate-amid-doubts-about-global-demand.html

In October, 2008 when the world was going to end as far at the stock market goes I wrote an article for another website discussing 5 large cap stocks. My hypothesis is that these companies are so well run and know so much about their markets that they will continue to grow their earnings. The last two earnings periods and now the current on continue to provide proof of my hypothesis. Since the other website is no longer paying me for articles I will share my thoughts on these 5 excellent companies here.

As we roll into the 2nd quarter earnings season, several of the 5 have reported earnings already. The list:

Apple, Inc. (AAPL: 459.68 +4.56 +1.00%) Today Apple reported earnings that were 15% higher than the same quarter last year. The $1.35 per share net beat the estimates by 18¢. Apple just keeps making products people want to buy and they get premium prices for them.

The Coca Cola Company (KO: 68.08 +0.25 +0.37%) Coke is a monster when it comes to selling their products around the world. Earlier this week the company reported profits 43% higher than a year earlier. Coke earned 88¢ per share compared to 61¢ for Q2, 2008 and 65¢ in the first quarter of 2008. 80% of the company’s sales are outside of the U.S. and think about how much Coke products Americans drink.

Google, Inc. (GOOG: 596.33 +11.22 +1.92%) continues to grow profits despite the economic slowdown everywhere. For the 2nd quarter Google had revenues 3% higher than an year earlier (remember the 2nd quarter of 2008, GOOG was $580 per share). Net income increased by 74¢ to $4.66 per share.

IBM Corp. (IBM: 193.64 +2.11 +1.10%) had reinvented itself from a hardware company to a service contract provider. Revenues and earning move steadily upward. As one headline put it, “IBM is a Profit Machine“.  2nd quarter earnings of $2.32 per share beat the estimates by 15% and were 18% higher than a year earlier.

McDonald’s Corp. (MCD: 100.01 +1.39 +1.41%) reports earnings tomorrow (Thursday) and the estimate is 97¢ per share compared to earnings of 86¢ a year ago and 82¢ in the 1st quarter of 2009. Let us see how they do.

These companies continue to grow their businesses and surprise the experts. Take a look at what the market did to their stock prices in November and March. Walmart (WMT: 62.03 +0.09 +0.15%) is another company close to making the list. I like to research and own small cap stocks, but these companies will treat long term investors well and we can all learn from the success of superior business plans put into action.

Capital Link Shipping, a New York based investor relations and advisory firm, this week announced the launching of a set of indices to track the different classes of shipping stocks. Here is a listing of the new indices:

• Capital Link Maritime Index
• Capital Link Tanker Index
• Capital Link Drybulk Index
• Capital Link Container Index
• Capital Link LNG/LPG Index
• Capital Link Mixed Fleet Index
• Capital Link MLP Index

The components of the indices all trade on the U.S. stock exchanges. Component values in the indices will be market cap weighted and updated at the end of each trading day.

I think these indices will be a great tool for investors. Until this development the most used source of shipping information were the Baltic indices. These are shipping cost trackers and their results on the Baltic exchange do not always translate to shipping stock values.

Investors and financial commentators have a tendency to lump all shipping stocks together and it is a nice feature to see the breakdown of the sector into smaller sectors. What happens in the tanker business may be completely different than the factors affecting dry bulk or containers. Now you can see how the different sub-sectors are faring.

If like I am, you are interested in income stocks please note the MLP Index. While most off the indexes listed above are in negative territory for 2009, The CL MLP index is up 29% for the first half of 2009.

I will close with some good links about the indices:

• Closing values: www.maritimeindices.com
• Index components
• Capital Link Shipping