Investment Contrarians

Europe


Oil Prices to Reach $80/Barrel?

By for Investment Contrarians | Dec 11, 2013

Oil PricesOil prices are heading higher on the chart with the cash West Texas Intermediate (WTI) crude rallying back toward the $100.00 level after threatening to test $90.00.

Steady economic signs in the United States, China, and Japan—the three largest economies in the world—along with some muted growth in the eurozone and Europe are adding some spark to the oil futures… But hold on; doesn’t the buying seem somewhat premature?

I’d say so, as I believe oil prices may have limited upside unless something dramatic surfaces in the Middle East that impacts OPEC oil.

The Organization of the Petroleum Exporting Countries (OPEC) has also come out and said it would maintain its current daily production quota and not cut supply in order to add support to oil prices.

I doubt we will see $130.00-per-barrel oil prices anytime soon—unless, of course, tensions escalate in the Middle East and a war breaks out across a wider region that would impact the flow of OPEC oil. The current nuclear agreement in Iran has also added some stability to the region.

And the futures market for oil supports my view, too. A look at the oil futures actually shows expectations for oil prices should decline back towards $92.00 by the end of 2014, drop below $90.00 in 2015, and continue downward to $80.00 by 2018. The December 2022 futures contract points to $78.00-per-barrel oil.

The chart of WTI oil below shows the downward channel and recent breakout, which I doubt will have much holding power as it nears the $100.00 level.

Light Crude Oil Chart

Chart courtesy of www.StockCharts.com

Now while the prospects over the next eight years don’t … Read More


ECB Calling U.S. Out on Its QE Mistakes

By for Investment Contrarians | Nov 22, 2013

U.S. Out on Its QE MistakesRecently, European Central Bank (ECB) policymaker Jens Weidmann said the strategy of printing money was not the solution to the eurozone crisis. (Source: Carrel, P., “Printing money not the way out of crisis: ECB’s Weidmann,” Yahoo! Finance, November 20, 2013.) Ya, no joke!

Of course, Weidmann was not referring to the Federal Reserve, but to thoughts from within the ECB that perhaps buying assets was another tool to use. He may as well be talking about the Federal Reserve’s quantitative easing strategy, though. I’m sure he’s been looking at the Federal Reserve’s massive money printing and its overall ineffectiveness; he’s likely studying the U.S. situation and realizing that the act of simply printing money is not the end-all for achieving success in rebuilding an economy.

There’s that old saying that you learn from other people’s mistakes—that’s what we have here.

The Federal Reserve continues to balk at stopping the money printing. Current Federal Reserve Chairman Ben Bernanke expressed his disappointment in the recent jobs market readings in a recent speech, saying there were insufficient reasons to stop the quantitative easing.

Five years of quantitative easing by the Federal Reserve and, while it clearly helped the country from a much deeper recession and breakdown, the benefits are stalling.

So I say to Weidmann, fight against the use of quantitative easing via printing money in the eurozone, as it will simply cost the eurozone hundreds of billions of euros and would likely do very little for the economy. The already historically record-low interest rates in the eurozone will suffice.

The same thing should be the case on this side of the Atlantic. … Read More


How America Could Benefit from the Government Shutdown

By for Investment Contrarians | Oct 2, 2013

 Goverment-ShutdownA fiasco is brewing out there. Unable to reach a compromise on Obamacare, the House failed to reach a resolution regarding the budget. Now the government has begun to shut down some of its non-essential services due to the lack of funds and the approaching debt ceiling deadline on October 17.

I know the stock market recently traded at record-highs, but in my view, so what? Over the past decades, I have seen multiple tops and bottoms, and I still feel the stock market could be at a multiyear top. As I discussed in my last commentary regarding the fragility of the S&P 500 chart, I see downside vulnerability. I do not feel the stock market is deserving of these levels.

With the shutdown of some services, the reporting of some key official economic data including the non-farm payrolls on Friday could be delayed. This would translate into immense stock market uncertainties regarding the U.S. economy, especially in light of the next Federal Reserve and what it plans to do with its bond purchases when it meets next on October 29–30.

Could you imagine trying to trade or invest in the stock market without any indication or certainty of how the economy is doing?

It would simply be stressful and would test the patience of the stock market.

Yet at the same time, the government shutdown could also be just what the doctor ordered for the long-term health of America. The reality is that the government is broke and merely spinning its wheel, printing money. This strategy, as I have said on numerous occasions, cannot stay in place: it needs … Read More


How America Is Shooting Itself in the Foot When It Comes to Government Debt

By for Investment Contrarians | Sep 16, 2013

Government DebtAmerica’s total government debt is rapidly approaching $17.0 trillion. While the budget deficit has dropped over the past year, it’s still in the hundreds of billions of dollars.

This doesn’t even include unfunded government debt liabilities, but let’s stick with just the massive $17.0 trillion government debt.

What some investors might not be aware of is that we are, yet again, embarking on another round of bickering by our so-called leaders in Washington. It now appears that House Republicans, specifically members of the Tea Party caucus, have caused a bill, which would allow the government to spend after September 30, to be cancelled—a move that could lead to a government shutdown.

Officially, America will run out of money at the end of September, unless the U.S. government debt ceiling is raised—yet again.

The big hurdle is the new healthcare plan, the Affordable Care Act. There has been much heated debate over this new healthcare initiative, with both small and large business owners worried about the impact the new regulations will have on the bottom line. With the budget deficit continuing to add to our nation’s government debt levels, the last thing we need is the politicians in Washington putting up additional hurdles considering our relatively weak economic recovery.

Unfortunately, investors will begin to see more bickering among politicians at the federal level, as each side tries to gain favor from the nation’s voters. While both sides talk about doing what’s best for America, they seem to be forgetting that actions speak louder than words. Frankly, regardless of who’s in power, it appears the U.S. is incapable of not running a … Read More


Are the Auto Stocks a Buy Now?

By for Investment Contrarians | Sep 6, 2013

Are the Auto Stocks a Buy NowWhen it comes to buying stocks, it’s important to know how each market sector is performing globally. Because we live in an internationally interconnected world, the events in one economic area can certainly affect a strategy when it comes to buying stocks.

One market sector that has been on fire in America is car sales. We all know that the low-interest-rate environment is now creating an extremely strong automotive market sector, driving the stock of many carmakers significantly higher.

However, not all parts of the globe have been strong contributors to this market sector, causing some investors to hesitate when it comes to buying stocks. It’s always difficult buying stocks with potential headwinds on the horizon; however, if the coast is all clear, then buying stocks at that point is usually too late.

One stock that I’ve discussed before is Ford Motor Company (NYSE/F). It’s clear that investors have been buying stocks in the automotive market sector, as Ford’s stock price has appreciated quite significantly.

One dark cloud over the entire automotive market sector, however, has been Europe. Europe’s economy has been weak, and most investors buying stocks in the automotive market sector have essentially written off the eurozone.

However, things might be changing within that region. The latest data from Markit Economics shows that the overall eurozone Purchasing Managers’ Index (PMI) for August reveals the second consecutive month of expansion, now the fastest growth rate in two years, although still very weak. (Source: Markit Economics, September 4, 2013.)

And according to the German Association of the Automotive Industry (VDA), in July, Western Europe saw an increase of four percent … Read More