Stock Market News & Stocks to Watch from StraightStocks » Persian Gulf

Northrop Wins Military Contract – Analyst Blog

Zacks Market Commentaries — Tue, 24 Nov 2009 19:11:54 +0000

Northrop Grumman Corp. (NOC) was awarded a $302.9 million fixed price incentive fee contract for five RQ-4 Global Hawk high-altitude, long-endurance (HALE) unmanned aircraft systems (UAS), by the U.S. Air Force. Earlier, the U.S. Air Force granted RQ-4 Global HALE with a military Airworthiness Certification (AWC), a significant milestone in the life of the aircraft system and a step on the path to routine unmanned flight within the United States.

Under the Lot 7 production contract, the company will build two Block 30 systems and three Block 40 systems for the Aeronautical Systems Group at Wright Patterson AFB in Dayton, Ohio. The award also includes a ground station consisting of a launch and recovery element and a mission control element, plus two additional sensor suites that will be retrofitted into previous production aircraft. The contract runs through 2011.

The company will deliver in 2010 the two Block 30 aircraft equipped with the Enhanced Integrated Sensor Suite (EISS) that provides electro-optical/infrared and synthetic aperture radar imaging capabilities. These aircraft will also be retrofitted to incorporate the production Airborne Signals Intelligence Payload.

The HALE UAS, Global Hawk can soar at altitudes of more than 60,000 feet for more than 32 hours and send near-real-time reconnaissance imagery and signals intelligence data to air, ground, and sea forces. It can fly three times as long and operates at a fraction of the cost per flight hour of its manned counterpart. Compared to other similar UAS, a single Global Hawk collects the same information as 18 smaller medium-altitude UAS.

Global Hawks are currently flown in four locations across the globe: Beale Air Force Base in Northern California, Edwards Air Force Base in Southern California, Patuxent River Naval Air Station in Maryland, and a forward operating location in support of Overseas Contingency Operations in the Persian Gulf.

Read the full analyst report on "NOC"
Zacks Investment Research

Energy Blast – Nov 6, 2009

Robert Amsterdam — Fri, 06 Nov 2009 09:52:32 +0000

Apparently U.N. inspectors have found 'nothing to be worried about' upon their first examination of the formerly clandestine uranium enrichment site in Qom in Iran. 'The [Obama] administration must consider whether it makes sense to grant the regime two more...

Capital Growth Systems, Inc. (CGSY.OB) Subsidiary Debuts Telecom Tariff Pricing Information System

QualityStocks — Thu, 22 Oct 2009 15:21:01 +0000

World leader in the telecom information and logistics sector, Global Capacity, Inc. (GC) announced this morning the launch of a new, global tariff pricing system, GCPrice. GCPrice will give direct access to GC’s massive database of prices and logistical information, allowing customers to scope and range telecom tariffs for Leased Line and Ethernet services in a [...]

Prince Alwaleed Remains Richest Saudi

Michael E. Brisky — Sat, 29 Aug 2009 17:01:00 +0000

As an investor I've always been interested in, Prince Alwaleed carries an interesting story. His Citigroup investment has been well documented, first as a wild success, and then, well we all know what happened to Citigroup in 2008. I read his biography and reviewed it awhile back (a href="http://briskycapital.blogspot.com/2007/11/book-review-alwaleed-by-riz-khan.html"Click here to read review and purchase book/a).br /br /Today, I found a a href="http://www.bloomberg.com/apps/news?pid=20601087amp;sid=aGiKNISJrIkc"piece from Bloomberg /agiving us an update on how he has survived the recession. So far, it looks like he's done well:br /br /br /blockquotepAug. 29 (Bloomberg) -- Prince Alwaleed bin Talal, Citigroup Inc.’s largestbr /individual investor, was ranked the richest Saudi national by Arabian Business,br /even after losing 4.6 percent of his personal wealth in the past year.br /br /Alwaleed’s assets are valued at $16.3 billion, compared with $17.1 billionbr /last year, the Dubai-based magazine said today in its 2009 Saudi Rich List,br /citing the accounts of Kingdom Holding Co., the prince’s investment company.br /br /The global credit crisis, lower oil prices and a decline in demand for crude have hurt investment and energy companies operating in Saudi Arabia. Kingdom Holding’s second-quarter profit slumped 83 percent as returns on Alwaleed’s investments in stock markets and hotels fell.br /br /“Today, some of his more ambitious investments are showing the strain ofbr /the global economic slowdown,” Arabian Business said. “The depreciation in valuebr /of his 5 percent stake in Citigroup, for example, has been well-documented.”br /Citigroup lost 73 percent of its value in the past 12 months as investmentbr /losses eroded its capital.br /br /Alwaleed, nephew of the late King Fahd bin Abdulaziz al- Saud, stands outbr /among more than 2,000 Saudi princes because he has made money. After earning abr /bachelor’s degree from Menlo College near San Francisco, he returned to thebr /Persian Gulf and parlayed an inheritance of less than $1 million into a billion-br /dollar fortune in the 1980s, mostly through real-estate investments, accordingbr /to Riz Khan’s biography “Alwaleed: Businessman, Billionaire, Prince”(Williambr /Morrow, 2005).br /br /Apple, Time Warnerbr /The prince, 54, built his fortune by investing in brand- name companies he considered undervalued, including Apple Inc., News Corp. and Time Warner Inc. Forbes magazine estimated he was worth $13.3 billion in March, ranking him 22nd among the world’s billionaires. This year, Alwaleed’s investments haven’t kept pace with the Saudi benchmark. Shares of Riyadh-based Kingdom Holding have declined 4.3 percent. The Tadawul All-Share Index, the largest market in the Middle East by market value, has gained 19 percent.br //ppKingdom Holding’s assets are valued at $7.26 billion, while the Prince owns $3.18 billion of real estate and $1.56 billion of media assets such as LBC and Rotana Holding, Arabian Business said, citing his financial accounts. Alwaleed’s other major assets, including an Airbus A380, are valued at $1.7 billion.br /br /The value of the prince’s cash remains confidential, the magazine said, adding that “we are assured it has not changed significantly since we were allowed to see the verified total figure in December.”br //p/blockquotediv class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/819581243324579563-110738121857279604?l=briskycapital.blogspot.com'//div

What Would Borat Do?

Chris Mayer — Wed, 22 Jul 2009 16:13:46 +0000

p class="MsoNormal"Kazakhstan was once a nation of nomads wandering vast steppes. They herded cattle, goats and camels. On the country’s western edge lies the Caspian Sea. Towns grew up along the shore there, hauling in catches of sturgeon and black caviar./p p class="MsoNormal"But otherwise, Kazakhstan was an empty desert. Even in the days of the old Silk Road, traders would skirt Kazakhstan’s southern border rather than try to cross that hell of a desert. It was remote. Desolate. The Soviets used parts of the northeast to test nuclear weapons./p p class="MsoNormal"The Aral Sea, site of one of the greatest environmental disasters ever, is in Kazakhstan. A century ago, carp, perch, caviar-bloated sturgeon and much more filled the Aral Sea. Fisherman hauled hundreds of tons of#8230;/p

Bahrain’s sukuk is priced low, but will be absorbed nonetheless notes manager

Jason G. Wulterkens — Wed, 10 Jun 2009 01:12:13 +0000

According to Mohieddine Kronfol (pictured left), managing director of Algebra Capital, a Dubai-based investment firm, pricing of Bahrain’s $750m, five-year sovereign sukuk (Islamic bond) issue–which is being managed by Calyon S.A., Deutsche Bank and HSBC and is expected to yield somewhere 340-350 basis points above similar maturity U.S. Treasuries–is on the “low end of expectations” [...]

Who’s Foolin’ Who?

Contrarian Profits — Mon, 08 Jun 2009 17:12:30 +0000

pJobs Jamboree gets a lift#8230; The real numbers#8230; The dollar comes back with vengeance! RBNZ to meet this week#8230;br / And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Marvelous Monday to you! You know the Jobs Jamboree data that printed on Friday, and created some HUGE euphoria among the media types that love to just #8220;read the news#8221; and not actually do the research to report it? Yes#8230; It was a very good number, on the outside#8230; Not that losing 345,000 jobs in a month is a good thing, but it is far better than the near 700,000 jobs lost a couple of months ago./p pSo#8230; I#8217;ve got that to talk about today#8230; And the rebound by the dollar that has taken the euro to the 1.38#8230;/p

The Price of Oil

Contrarian Profits — Fri, 15 May 2009 19:52:12 +0000

pHow did it get here, and where is it going? What a difference a year makes. While March lions and April showers were at work in 2008, so were these factors in the U.S. and global economies: /p ul liThe Dow Jones Industrial Average remained steady above 12,000./li /ul ul liThe leading indicator of existing home sales was down over 21% from the previous year, and the official unemployment rate was just beginning its upward creep by crossing the 5% mark./li /ul ul liThe first official admissions of the “R” word. In early April 2008, the International Monetary Fund (IMF) declared a 25% chance of a global recession, and Federal Reserve Chairman Ben Bernanke told Congress that gross domestic product “could even contract slightly.”/li /ul ul liThe novelty of bailouts began.#8230;/li/ul

Lebanon grew 9% in 2008, experienced 46% jump in capital inflows

Jason G. Wulterkens — Sun, 26 Apr 2009 17:44:15 +0000

How come? The Economist explains: The ironic truth is that the country’s double curse, of chaotic internal politics and being located in a nasty neighbourhood, are proving helpful for a change. For one thing, they have made Lebanese bankers unusually wary and resourceful. Four years ago, for instance, the Banque du Liban’s (central bank) stern and [...]

Ukraine, Pakistan to receive more largesse

Jason G. Wulterkens — Mon, 20 Apr 2009 04:55:15 +0000

Per the Financial Times, under a soon-to-be-unfrozen IMF plan, “Kiev will use half of a second $2.8bn (€2.1bn, £1.9bn) tranche to service its budget deficit. The rest will be directed towards traditional currency stabilisation and balance of payment needs.” Bonds markets reacted well to the news; Ukraine’s 6.58% dollar bonds due 2016 rose on Friday, [...]

Have the Tanker’s Stopped Tanking?

Chris Mayer — Tue, 24 Mar 2009 21:32:45 +0000

pThe stocks of oil tanker companies are cheap…very, very cheap. But before moving into the heart of this investment observation, let’s gain a sliver of insight about the value of shipping itself./p p class="MsoNormal"The dividends of the old spice trade, for example, financed much of the architectural splendor of Venice, Italy. If you stroll the Piazza San Marco, a complex pattern of Istrian stone plays out beneath your feet. Nearby, grand palazzos and public squares show off a dazzling array of tall columns, carved marble, impressive domes and spires./p p class="MsoNormal"As William Bernstein tells us in his fascinating book, A Splendid Exchange, Venice’s dazzling look was built up “largely on profits from pepper, cinnamon, nutmeg, mace and clove.” Spices then were what oil is#8230;/p

It’s Not Too Late to Buy Gold

Byron King — Tue, 03 Mar 2009 14:37:51 +0000

pIt#8217;s a recession but Byron King tells us that it is not too late for gold investing. He has been encouraging gold bugs for over ten years now. Here he explains why owning gold and silver is the safest way to weather out this economic storm. /p pThis from Byron:/p blockquotepAsset classes go up and down. Precious metals are, of course, another asset class. They move with the economic tides. In the past 30 years, gold has rocketed up and plummeted down./p pAt several points in the past 30 years, things were so bad that gold sellers were like the proverbial Maytag repairman. They led lives of quiet desperation about which no one cared. Because like the late Rodney Dangerfield, gold got no#8230;/p/blockquote

CDS market in Dubai reflects growing concern over Abu Dhabi’s role (or lack thereof)

Jason G. Wulterkens — Fri, 06 Feb 2009 23:47:39 +0000

Credit-default swaps (CDS) associated with the Dubai Holding Commercial Operations Group LLC, a firm owned by Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum, rose 90 basis points yesterday, part of a record, growing trend in the cost of insuring against losses on debt sold by Dubai companies on speculation that Abu Dhabi, the richest of [...]

The Current Bubble – Analyst Blog

Dirk Van Dijk — Mon, 08 Dec 2008 12:52:13 +0000

Here is a great investment for you -- one where the price has zoomed to unheard-of levels in recent months, yet for which the natural heavy buyers have all the reason in the world, both from a desire and an ability-to-buy point of view, to stop buying. Furthermore, it is known that the supply of this investment will expand next year at a rate that has rarely been matched in history. As an added kicker, you know with certainty that cash flows from this investment will never go up. Sound good?

So what is this fabulous gem of an investment? Why, good old-fashioned treasury securites. Lock your money up for 10 years and get the princely return of 2.72% -- heck if you are willing to lock in for 30 years you can get 3.15% today. Those rates are down from 3.78% just last month on the 10-year and 4.26% on the 30-year. Just sit back and think about how long that is. Ten years ago, the country was obsessing about Monica Lewinsky. Thirty years ago, the Shah was sitting on the throne of Iran.

Yes, it is true that you are certain to get your nominal investment back when the bond expires, and there is no default risk. But will those nominal dollars be worth anything near what they are worth today? It is true that the current problem is deflation, not inflation. It is, however, exceedingly unlikely that deflation will last more than a year or two, let alone 10 or 30 years.

The Federal Reserve is actively trying to create inflation as we speak to offset and put a halt to the deflation. They do so by, in effect, turning on the printing presses. There is little doubt in my mind that they will eventually succeed. Given the inherent lags in monetary policy, and the incomplete data that the Fed must work with, the odds of them "succeeding too well" and setting off a round of very high inflation are exceedingly high.

The Federal government is going to run record deficits both this year, and most likely next, not only in nominal terms, but as a percent of GDP. With an economy this weak, that is actually a good thing. If it didn't, the economy would fall into a depression, not merely a very long and nasty recession.

In other words, the supply of T-notes is going up...BIG TIME. Still, with their own economy weakening, will the Chinese and the Japanese continue to buy our bonds at anything like the pace they have been in recent years? Will the petro states of the Persian Gulf continue to buy with oil prices in the $40's? How can they? So if demand is not coming from them, where will it come from?

I would avoid T-notes and bonds. Corporate and municipal debt looks like a much better bet at these levels. Also, there are many companies that are likely to not only maintain, but grow their dividends over the next few years that offer yields higher than are available on treasuries.

Consider some of the big drug companies as alternative sources of income investments. For example Pfizer Inc. (PFE, 7.7% yield), Merck & Co. (MRK, 5.7%) and Bristol Myers-Squibb (BMY, 5.8%).

Energy oriented MLP's are another area to consider, for example we like Enterprise Products Partners (EPD, 10.5%) and Natural Resource Partners (NRP, 14.9%).

Read the full analyst report on PFE

Read the full analyst report on MRK

Read the full analyst report on BMY

Read the full analyst report on EPD

Read the full analyst report on NRP

"MRK" Free Stock Analysis: Buy? Sell? Hold?
"PFE" Free Stock Analysis: Buy? Sell? Hold?
"BMY" Free Stock Analysis: Buy? Sell? Hold?
"EPD" Free Stock Analysis: Buy? Sell? Hold?
"NRP" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Can the Mega-Rally Hold?

Contrarian Profits — Thu, 30 Oct 2008 14:16:52 +0000

Stocks stage huge rally, but will it hold? Key levels to watch, and some historic perspective… Libor continues to ease; famous Wall Street CEO explains why credit still isn’t flowing… John Williams on the “true cost” of the U.S. financial crisis, with charts to prove it… Byron King with an “exploding” foreign resource market…. Plus, a stinging critique of I.O.U.S.A., and one thing you must do before voting Nov. 4.

The Dow logged its second best one-day point gain, 889 points, in its even more storied history yesterday:

Percentage wise, at 10.8%, the rally ranks sixth. The S&P and Nasdaq trundled alongside the old lady like puppies.

After finding a new “credit crisis” low on Monday, traders on Wall Street snapped back…

Sovereign Wealth Funds Under Threat From Tumbling Crude

Irwin Greenstein — Wed, 29 Oct 2008 17:43:36 +0000

The plummeting price of oil could cause another source of capital to dry up: the Sovereign Wealth Funds (SWFs) of the Persian Gulf. This could be another blow for global credit markets, says Irwin Greenstein. These oil-rich funds fueled with petrodollars invested trillions over the past few years, notably with high-profile infusions of billions in CitiGroup, Carlyle Group, Merrill Lynch and the Nasdaq Stock Market.

Now with oil down more than 50% from near $150 a barrel in July, the Persian Gulf is beginning to suffer from its own credit squeeze.

The bottom line is that world credit markets could suffer, further crippling the economy and the banking industry.

Persian Gulf SWFs control huge amounts of money. The combined funds of the United…

Gulf States Feel the Pain

Contrarian Profits — Mon, 27 Oct 2008 12:03:15 +0000

Kuwait, Saudi Arabia and even the mighty Dubai are getting dragged down by the global economic turmoil. “The global financial storm rolled across the Persian Gulf on Sunday,” reports the WSJ, “as Kuwait’s central bank guaranteed bank deposits and cobbled together a hasty bailout for one of the country’s largest banks.”

– Saudi Arabia, meanwhile, has announced it will pour $2.3 billion in loans to low-income borrowers.

– There are also signs of trouble in boom town Dubai. The WSJ reports that real-estate brokers there say they are seeing signs of “price weakness” there. We can only presume this is real-estate broker speak for “Nobody’s buying.”

– Over the weekend, “Dr. Doom,” aka New York University economics professor Nouriel Roubini, told The…

Dubai Developer Going For World Record With Newly Planned Kilometer-Tall Tower

Contrarian Profits — Wed, 08 Oct 2008 13:56:11 +0000

Dubai luxury developer Nakheel PJSC on Sunday unveiled plans for a tower that will stand a full kilometer (3,280 feet) in height, beating the world record that’s already held by the booming city-state.

Sultan Ahmed Bin Sulayem, chairman of Dubai World, a holding company that holds a stake in Nakheel, said the project would be “one of a kind,” the Emirati news agency WAM reported.

Located along the southern coast of the Persian Gulf on the Arabian Peninsula, Dubai is one of the seven emirates and is the most populous city of the United Arab Emirates (UAE).

The new tower project is actually part of an entire town development – known as the Nakheel Harbour & Tower project – that will cover 665 acres, and that will include “a tower which could reach one kilometer in height,” Sulayem said when the announcement was made. The multibillion-dollar development will be home to more than 55,000 people and will serve as the workplace for another 45,000. The target date for completion is 2020.

“There is nothing like it in Dubai,” Sulayem said. “Nakheel Harbour & Tower is located in the heart of ‘new Dubai’, where we have focused on creating a true community, a location for living, working, relaxing and entertaining, for art and culture. All of this is concentrated in one area."

The world’s tallest building – the yet-to-be-completed Burj Dubai tower reached a height of 2,257 feet (688 meters) at the start of September and is still growing, according to developers Emaar Properties PJSC. It now boasts 160 stories, the highest skyscraper in the world, Emaar said. Construction began on Sept. 21, 2004 and is expected to be completed and ready for occupation in September 2009.

The total budget for the Burj Dubai project is about $4.1 billion. The tower is part of a development known as the new “Downtown Dubai,” a development that’s estimated to cost $20 billion.

Nakheel is best known for constructing man-made islands that, when finished, will add more than 600 miles of coastline to Dubai. The first island, shaped like a palm tree and called Palm Jumeirah, will be home to private villas, mansions, luxury apartment towers, and a 60-story Trump hotel. Nakheel is also constructing two other palm-shaped islands, a 300-island archipelago called The World (shaped to mimic the continents), and more than a dozen other large-scale developments across Dubai. All of these developments are being populated with hotels, restaurants, and shopping malls that it will also manage.

Source: Dubai Developer Nakheel Going For World Record With Newly Planned Kilometer-Tall Tower

Dubai Developer Nakheel Going For World Record With Newly Planned Kilometer-Tall Tower

Money Morning — Wed, 08 Oct 2008 13:42:13 +0000

Dubai Developer Nakheel Going For World Record With Newly Planned Kilometer-Tall Tower By William Patalon III Executive Editor Money Morning/The Money Map Report Dubai luxury developer Nakheel... Money Morning is here to help investors profit han...

Mexico: The next Failed State?

Sean Maher — Thu, 04 Sep 2008 18:26:00 +0000

As equities commence the dramatic Autumn slump I've been anticipating in recent weeks, it is uninspiring to witness the standard of political debate in the US Presidential election. It seems neither candidate is aware, or at least willing to articulate, the tectonic shifts taking place in global financial power which threaten to severely limit the room for manoeuvre of any future administration, not only economically, but diplomatically and militarily as well. We hear references to Iran and Russia as geopolitical challenges, but nobody is talking yet about a bigger threat right on America's doorstep, the potential implosion of the Mexican state. There are two pressing issues that are putting intolerable stresses on the Mexican economy and society; the first is the huge escalation in drug related violence and corruption, as US support for the Colombian war on drugs has displaced Cartel activity into Mexico, now the primary base for cocaine shipments in the region. The revenues involved are estimated by the DEA to have reached over $40bn a year (or about 25% of all official exports), financing very effective private armies, and rampant high level corruption. In recent months, ever more daring assassinations have included high ranking policemen and District Attorneys, including the head of the Federal police in May (equivalent to killing the head of the FBI). Criminal kidnappings have reached epidemic proportions and now threaten much of the urban middle class, and law enforcement bodies are so thoroughly corrupted that they are often complicit in these crimes. The second crisis relates to collapsing oil production and hence state revenue; the biggest Mexican oil field, Canterell, where production is now down 37% in a year and down 50% from its 2004 peak, equivalent to 1.2m barrels a day. For US energy security this is a full blown emergency; this field was a 'Supergiant', as big as the four largest discovered in US Gulf waters combined and Mexico is currently the third largest oil exporter to the US, after Saudi and Canada. Amazingly, Mexican production fell 10% and oil exports dropped over 16% in the first 7 mths of 2008. The faster decline in exports reflects soaring domestic demand. Canterell may be down to just 600k b/d with a couple of years, with devastating implications for Mexican tax revenues; 40% of all revenues are generated by oil, and Pemex, the state oil monopoly, pays an effective 61% tax rate. The company has been plundered by politicians for decades, and the resulting underinvestment is now proving disastrous, exacerbated by the fact that foreign companies with superior technology and experience have been barred by statute from involvement. Some economists estimate that Mexico will run out of oil within just 7 years, implying a near halving of the tax base just as hugely wealthy criminal warlords step up their challenge to Federal authority. Oil exports will certainly have dried up on that timeframe. The balance of resources between the government and criminal groups will deteriorate rapidly in coming years, and the US may face a de facto criminalised narco-state as a neighbour with violence spilling across its Southern borders. Other implications would include a massive surge in illegal immigration from the current estimated 450,000 a year as impoverished Mexicans flee both declining living standards and rampant lawlessness, and the US losing energy security by becoming even more dependent on oil shipped huge distances from the Persian Gulf and West Africa. Ironically the success of US policies to support the Colombian government now threaten to undermine the strategically far more important Mexican one, a classic case of the law of unintended consequences in action. It will take more that that fancy new border fence or oil drilling in Alaska to address the looming crisis that will almost inevitably explode by the end of the new President's first term.

The Most Important Fact to Know About Oil Investing

Graham Summers — Wed, 03 Sep 2008 10:42:27 +0000

Sep 3rd, 2008: Beware any oil analyst who's certain

My Investing Journey: Hurricane Katrina

DanielXX — Mon, 01 Sep 2008 14:33:00 +0000

(P.S: Sorry for any disturbances the advertisements above may have caused you)
If late-2004 and early-2005 are remembered for the corporate debacles of CAO, Citiraya and ACCS, the later part of 2005 will be remembered for the attention that centered on oil and refining. The catalyst was Hurricane Katrina, which was the worst-ever storm to hit the Gulf of Mexico and caused extensive damage to the refining facilities in the region, exposing the deep global capacity crunch in refining capacity.

Katrina formed over the Bahamas in late August 2005 and due to the unpreparedness of the authorities, caused severe destruction along the Gulf of Mexico coast from central Florida to Texas in the form of a Category 5 storm, with the most severe loss of life and property damage occurring in New Orleans. Of more interest to oil traders was the damage to the oil production/refining infrastructure in the most important offshore oil production area of the US, where numerous oil platforms were destroyed and refineries were forced to close; approximately half of the Gulf's oil production was shut over the subsequent 6-month period.

Oil prices making new highs had been the talk of town throughout 2005, but Hurricane Katrina brought into focus the glaring global tightness of refining capacity. Simple and complex refining margins spiked up several dollars per barrel after Katrina which bloated the profits of refineries across the world for 2H05.

Allied to this tale is the story of SPC. The story is told in my writeup on "Bull stock: SPC". Struggling with razor-thin margins and stagnating revenues in its refining business in the late 1990s when oil prices were in the pits, it was a massive beneficiary of the burgeoning demand for petroleum products after 2003 that translated in steadily rising refining margins from 2004 onwards. Net profits for SPC jumped an astonishing fourfold from S$60M in 2003 to S$250M in 2004, and within the year 2004 alone the stock shot up from 1.50 to 4. Remember that 2004 was a relatively tame, mildly bullish year, so this was a meteoric rise, reflecting the rewards that can be reaped when the investor recognises a single trend and bets on it.

Unfortunately, I did not see the trend, and so missed out on the bulk of the gains. There was plenty of talk online about this though, but I only read through the threads after the bulk of the price gains were done. Nonetheless, I got into the stock in early 2005 at $4 because of what I felt was an under-recognised strength of SPC: its being a complex refinery which meant it could handle heavy sour grades from the Persian Gulf countries, which were in abundant supply, while simpler refineries in other countries could only handle the more expensive sweet light grades. You can really learn a lot through good analyst reports especially those that cover an industry on the whole; typically such reports have less of a "sales" agenda compared to reports on individual companies: I learnt all the facts from several such reports on the refining industry before parlaying my bets in early 2005.

The stock did relatively well throughout 2005 but really spiked up post-Katrina when it shot from the high 4s to $6, when the tightness in refining capacity was revealed in its entirety and Singapore complex refining margins shot from US$5/barrel to US$15/barrel. In fact, it had been tight throughout 2005, with US and Asian refineries operating at above 90% capacity. Katrina was merely the catalyst that pushed it over the edge by knocking out spare capacity (and then some). The dramatic reaction of refining spreads is a manifestation of how prices for commodities can surge when demand just slightly tips over the thin margin previously existing between it and supply capacity.

It also is an example of the moral dilemma that often surfaces when one invests in stocks whose potential price catalyst could be some disaster that exposes the deficiencies in the industry and brings market attention to the particular niche that the stock serves. Offhand, I can remember stocks that benefited from such phenomenae such as Medtecs (which sells gloves, facial masks and medical consumables) during SARS and defence stocks during the US-Iraq war. Some might even see the glee that short-sellers exhibit in every new bite of bad news hitting the US banks currently as an example of such morbid moral ambiguity. How does one reconcile one's morals with one's market position?

I reckon the crux lies in whether one is actively hoping that a disaster will happen which he perceives will benefit his stock as a consequence. For SPC I had never bought in with such hopes so I never suffered any guilt pangs when Katrina struck and had a positive uplifting effect on prices of refining stocks across the board. However, I have seen people who, for example, bought Medtecs after the SARS crisis blew over and then hinted that SARS might come again, with the subtle hope that it WOULD indeed strike again. That is contemptible behaviour which is akin to building your happiness on public misfortune. On the other hand, it does not mean that the investor/trader cannot position himself in a fundamental trend which he feels is going to persist, even though this trend might be generally detrimental to society. The investor/trader might be betting on the inevitability of a development, and there is nothing morally wrong about that. Or he might be hedging his portfolio, which is even less reprehensible. But once he crosses the line between dispassionate betting based on return/risk/odds calculations to an active desire that something bad will actually happen to humanity, he will have lost the essence of being a human being in itself. Never put money above your own humanity.

For the record, I eventually sold SPC at the end of 2005 at about $5, when the stock retraced its steps back from $6 and I found other better stocks to switch to. I had also come to the view that the continually rising oil prices would not be good for refiners, because although in the early stages they reflected strong end product demand which basically pulled the entire supply chain (including refining margins) along, high crude prices in fact constituted high raw material prices for refiners which would actually harm their margins eventually if end product demand stagnated (see my writeup on refining margins). Ultimately, of course, SPC would reach $8-9 in 2007-8. But that would be more due to hopes for its upstream segment plus a bull market for commodities --- another thing altogether.

Katrina was the precursor to the annual August/September hand-wringing over potential hurricane impact on oil prices/refining capacity ever since, and the world have had scares now and then over approaching cyclones in the Gulf of Mexico, with the latest one being Gustav (which has turned out to be a mouse). In my view, the fact that people have worked themselves into a frenzy already guarantees that these storms will never again likely have the same impact as Katrina, because they will have prepared themselves to handle any crisis emanating from these storms (eg. shut down facilities, evacuated the coast). A bit like the stock market, where selldowns lead the real event, whether it does eventually transpire or not.

WWA Group Inc. (WWAG.OB) is “One to Watch”

QualityStocks — Fri, 22 Aug 2008 18:35:48 +0000

World Wide Auctioneers Group Inc (WWAG.OB) engages in the trading and auctioning of transportation and industrial equipment worldwide. WWA holds fully unreserved auctions mainly for consigned equipment, with no minimum bids, seller bids, or reserve prices, assuring buyers and sellers that their equipment is traded at fair market value. A list of auctioned items [...]

MARKET COMMENT August 11, 2008 Yeah, I’m one bad dude!

David Fry — Tue, 12 Aug 2008 00:49:51 +0000

MARKET COMMENT August 11, 2008 Yeah, I’m one bad dude! What passes for normal reactions always seems to surprise. You would think with Russia’s ongoing attack on Georgia plus a US naval strike force arriving in the Persian Gulf oil prices and gold would rise since supplies and stability are threatened. But no; evidently market action now revolves around the dollar rally and is blind to everything else.

MARKET COMMENT August 11, 2008 Yeah, I am one bad dude!

David Fry — Mon, 11 Aug 2008 22:18:34 +0000

Weekend Edition

Thomas Keller — Mon, 21 Jul 2008 19:44:04 +0000

The Best of The S&A Digest You’ll be happy you own gold and silver once you read this: “Sovereign wealth funds,” foreign government investment pools, are dumping the dollar. One big fund in the Persian Gulf has cut its dollar-denominated holdings from more than 80% a year ago to less than 60%. China’s State [...]