Investment Contrarians


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

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

Why America May Be Fabricating Its Jobs Numbers

By for Investment Contrarians | Nov 21, 2013

Fabricating Its Jobs NumbersMany accuse China of manipulating its economic data to fit what the market wants to see, yet this kind of behavior doesn’t appear to be isolated to China. It even occurs here—if you believe what the New York Post reported in a recent editorial. If it were true, to be honest, I wouldn’t be that surprised.

According to the article, there are allegations that the Census Bureau fabricated jobs market data reflected in the non-farm payrolls reading in 2010 and that this continues to occur. (CNBC, “Faked data may have boosted 2012 job reports: NY Post,” CNBC web site, November 19, 2013.)

But whether there may or may not be manipulated data within the monthly jobs market reading, I’m not here to determine that. All I can say on the matter is that how the jobs market data is reported and what is reported has always been suspect to me.

The government tells us there are about 11.3 million Americans unemployed in the jobs market, representing an unemployment rate of 7.3% in October. Now think about it; what does the reference “unemployed” really mean? The government seems to let you think it implies the number of individuals looking for work in the jobs market—but that’s not the case.

There are millions of workers not included in the unemployed numbers because they have dropped out of the workforce or have given up looking for work four weeks prior to the report. The problem is these people should still be considered unemployed regardless of the criteria used by the U.S. Department of Labor. But we all know that the number of unemployed … Read More

What the New Record-Low ECB Interest Rate Means for U.S. Investors

By for Investment Contrarians | Nov 12, 2013

Record-Low ECB Interest RateOf all the central banks around the world, the European Central Bank (ECB) has rarely surprised markets by making monetary policy adjustments without some hints to the market first.

But this is exactly what happened last week when the ECB lowered its benchmark interest rate to a record-low 0.25% in hopes to spur economic growth. (Source: European Central Bank, November 7, 2013.)

This monetary policy change is a much bigger deal than many people realize.

First of all, as I just discussed last week, many investors have been expecting economic growth to finally emerge within the eurozone. This change in monetary policy by the ECB just validates what I’ve been saying for some time: that economic growth is nowhere in sight.

This is not news. How many years has it been since the Great Recession, and where can you find true, fundamentally strong economic growth?

All I see are central banks trying to outdo each other with easier and easier monetary policy (money printing).

With the ECB benchmark interest rate now at 0.25%, how much more ammunition does the bank have left? Does anyone really believe that a quarter-point drop in interest rates will revive economic growth for the region? I certainly don’t.

But this goes beyond just the eurozone. What the ECB is doing with monetary policy is more than simply printing money; it’s trying to lower the euro currency. And while the central bank isn’t explicitly stating that this is its plan, in my opinion, it is still a significant consideration.

Look at what the Japanese central bank has done. Japan has enacted one of the largest monetary … Read More

Economic “Growth” in Eurozone a Hoax?

By for Investment Contrarians | Nov 8, 2013

Eurozone a HoaxMost readers, I’m sure, are aware of how weak the eurozone has been over the past few years. That area has had essentially no economic growth at all for quite some time.

But now, eager to find any investment opportunity, some investors are looking at the eurozone as a value play, hoping for a turnaround and a possible acceleration in economic growth. These thoughts of investing in the eurozone, however, are based primarily on hope. As I said, there are no signs of economic growth emerging at all. But you don’t have to take my word for it…

Recently, the European Commission issued its forecasts and, well, the news wasn’t good.

According to the European Commission, real gross domestic product (GDP) growth in the eurozone on an annual basis this year will be -0.4%—meaning contraction. For 2014, estimates are for a mere 1.1% growth, and in 2015, that number only increases to 1.7%. (Source: “Autumn 2013 Economic Forecast,” European Commission, November 5, 2013.)

I’m sure this isn’t breaking news to my readers: another year, another weak level of poor economic growth in the eurozone.

What’s interesting, however, is how the European Commission calculated its estimates. According to the European Commission, economic growth in the region will be a result of “resuming private consumption growth and the rebound in gross fixed capital formation.” (Source: Ibid.)

Capital formation I can understand; money can easily move to areas that offer the best opportunity. However, expecting private consumption to drive growth in this region surprises me.

If you think America is having a tough time with unemployment, you obviously haven’t been to the eurozone … Read More

What Caterpillar’s Big Drop in Earnings Means for the General Stock Market

By for Investment Contrarians | Oct 28, 2013

General Stock MarketWith the S&P 500 hovering around its all-time highs, I think it’s quite interesting to read some of the latest corporate earnings reports and get a sense of what’s really happening in the global economy.

One of the most international companies within the S&P 500 is Caterpillar Inc. (NYSE/CAT). The firm recently released its third-quarter 2013 corporate earnings report, in which the firm poured some cold water on expectations. Revenue during the quarter was down 18% year-over-year, and corporate earnings were down 44% year-over-year. (Source: Caterpillar Inc., October 23, 2013.)

That’s not even the worst part. The company also brought down guidance for both revenue and corporate earnings for the foreseeable future.

In its corporate earnings release, Caterpillar cites several issues that it’s worried about, including uncertainty regarding U.S. fiscal and monetary policy, the health of economic regions globally (including the eurozone and China), and a lack of demand from customers.

Because revenue and corporate earnings growth is questionable, the company is taking the only smart action it can—reducing its own cost base. Obviously, no company can force a customer to buy their product, but it can keep its operations as lean as possible. To that end, the firm has cut 13,000 jobs globally over the past year, reduced pay and incentives, and initiated the “implementation of general austerity measures across the company.”

Considering Caterpillar is a large firm within the S&P 500 and it has its fingers on the pulse of the global economy, do any of these comments give you hope or confidence that either the domestic or international economies are about to surge upward in growth? Not … Read More