Weekend Dec 29, 2017
Trump suggests Post Office raise rates
Jeff Bezos owns the Washington Post which released the Billy Bush recording. Trump dislikes Bezos and his company.
Friday the WSJ reported that 5 of the Top 20 largest world firms are outsourcing or workplace solutions firms. Two observations. Federal regulations have made employees often to oexpensive to hire. Second there is literally not enough specialists to go around.
Tom McClellan identifies the bottom of the gold cycle
Note the Fibonacci relationship of three years up and five years down. The move in gold is just beginning.
Confidence grows that a commodity rally is in its early stages.
GSCI
The index has broken above all three of the shorter MAs. As assault on the weekly 200 bar MA is now underway. And notice how the three MAs have converged as
price has broken through to the upside.
Early Warnings from the DJIA
The three blue tend lines have taken on a parabolic look. Traders have held onto gains into the new tax years which is understandable. But now we have a PMO cross over to the downside in the lower panel. CCI at top has been over done for the last three months. As noted last week, the INDU is some 2,500 points above the 200 day MA. Put in perspective, 2,500 points iw where the Dow was priced in 1986! Back then CNBC was FNN. During the last hour Friday the Dow dropped 100 points.
Agriculture
This looks like bottoming action. And we have a buy signal developing in the PMO at bottom. Two of the MAs have come together. Emerging markets are commodity exporters. This explains how emerging markets did even better than the US last year.
DNOW
http://www.distributionnow.com/
NOW Inc. distributes energy and industrial products in the United States, Canada, and internationally. It offers consumable maintenance, repair, and operating supplies; and pipes, valves, fittings, flanges, gaskets, fasteners, electrical products, instrumentations, artificial lift solutions, power transmission products, production process equipment, pumps, paint and coatings, mill tools, safety supplies, and spare parts, as well as provides application systems and parts integration, optimization solutions, and after-sales support services. The company also provides supply chain management solutions that include procurement, inventory and warehouse management, logistics, point of issue technology, project management, business process, and performance metrics reporting. It offers its products under the DistributionNOW and Wilson Export brand names. The company serves customers in the upstream, midstream, and downstream sectors of the energy industry, including drilling contractors, well servicing companies, independent and national oil and gas companies, midstream operators, and refineries, as well as petrochemical, chemical, utilities, and other downstream energy processors; and industrial and manufacturing companies. NOW Inc. is headquartered in Houston, Texas.
This is the kind of set-up we are looking for at the start of a commodity boom. DNOW is literally trading at book value of $11.. It has about a dollar a share in cash, too much debt, but a current ration of 2.72. So we at least have a well managed balance sheet. Sure it could go lower but buying companies which are well positioned for book value is how investing works.
UNG Natural Gas
UNG jumped 11% this past week. Coal is out, natural gas is in for both power generation, utilities, and heavy trucks. This is a play on the price of natural gas, not natural gas companies. Again, lots of potential here.
Copper JJC
Copper is referred to as Dr. Copper regarding the economy. This is another encouraging chart which has turned bullish.
Materials and Metals
XMA.TO
XME is in the top panel.XMA.TO trades on the Toronto Exchange. XMA.TO has four gold mines in the top ten while XME has none. But I like the potential upside for XMA.TO better.
SLV is a play on the price of silver. SIL is an ETF of silver miners.
Wave One was about six months in 2016. Wave Two has corrected in the year and a half since. Again the MAs are coming together.
US Dollar versus GSCI at top
Long story short, if the US Dollar falls, commodities priced in dollars should rise in value. One could endlessly speculate WHY the US Dollar is falling but that is not our charge here, merely recognizing the fall is. The move from 75 to 100 re traces about half the entire fall from 120. Now price has tried and failed to hold the break out blue line. PMO has turned down at bottom. I would hazard a guess which is that doubling the US debt outstanding with nothing to show for it is a problem. Now interest rates are rising along with the debt load. And Chinese strength adds to the mix.
It is easy to see the inverse relation of USD and GTX.
Drillers
| Drillers | |||
| Company | Symbol | Price/Book | Current Value |
| Noble | NE | 0.21 | $4.52 |
| Ensco | ESV | 0.22 | $5.91 |
| Sedco | Rig | 0.33 | $10.68 |
| Parker | PKD | 0.43 | $1.00 |
| Independence Contract | ICD | 0.63 | $3.98 |
| Diamond Offshore | DO | 0.67 | $18.59 |
| Helmrich Payne | HP | 1.69 | $64.64 |
The first five are all trading below book value. Yes Noble is trading for 21% of its book value RIG is trading for 33% of its BV and that is AFTER taking a one billion dollar write down. As the first five are all trading below five dollars, those would be my preference. Think of this is a sort of long term option with no expiration date on energy services.
Our last few posts have been about the transition form tech investing back to inflation investing, think 1976 all over again.
That is where we see this going.
Social Mood
The Left still does not understand why or how Trump won.
But then neither do the Republicans.
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