The Market Perspective

New Highs on Stocks, A Big Buy in NS

Thanksgiving Weekend Nov 30 2019

I am tracking two more positive events for an energy bottom. 

Billl Greehey, Chair of Nustar, purchased $15 M of NS a week ago. As a former President of Valero and founder of Nustar, I believe he knows what he is doing.  This re enforces the idea of a low in energy prices here.

See article page B 1 Friday Nov 29 WS

Mineral Rights Offer High Yield Investments

Mentioned are

Viper Energy Partners VNOM spin off from Diamond Back

Kimbell Royalty partners - Raymond James says it is grossly unvervalued

Crude oil sold off sharply down over $2 Friday but it was a very light volume day with shortened hours of trading.

 

Energy Shares Hold Gains

Weekend Nov 22 2019

See or previous post which is our weekly news paper column.

See Friday WSJ last two pages for articles on oil price, Bears May be Wrong.

Here is a table of various energy, energy trust, and Master Limited partnerships  with prices and yields.

Those sky high yields are not misprints but as noted above check all this out for yourself.

As noted, SLB was the best performing stock on the NYSE this past Wednesday.  As the largest energy service in the world, makes sense it would move first. Several energy trusts made v shaped bottoms this week on their two hour charts. I think this is a rare opportunity to buy high yields at 2009 panic low prices.

NS and GEL are master limited partnerships. The more conservative bet is Alerian which is  an ETF of several MLPs.  Here are the holdings.

 

All of these are well run and so this is a way to diversify across the entire MLP segment.

Tanger Outlet Mall owns numerous such facilities including the one in San Marcos, TX where I used to live.

Trust me you cannot find a parking spot on Saturday afternoon. There are plenty of  Mexican license plates of well to do  Mexican citizens here to shop. I suspect SKT has been beaten  down due to Amazon concerns.

 

Alerian AMLP

It is certainly possible AMLP could drop back to the 2016 low. So one might put i a ladder of orders at 50 cent intervals al the  way to six dollars just in case. This is a monthly chart. But the price only stayed at six or less than two weeks.  In  case this happens again the ladder idea would grab the lower prices if hit.

 

Stocks Correcting, Energy Coming Alive

Friday Nov 22 2019

Energy Starts to Shine, Stocks Rest

 

Wile most S & P sectors posted losses, shares of energy companies gained 1.6% as US crude rose 2.8%.

 

Oil Bears Might B3 Wrong

WSJ Today Nov 22 2019

 

The last few weeks we have predicted an important low in energy prices. Energy has been the most out of favor sector in the S & P this year. When all the fund managers are chasing tech stocks, there are no bids for energy, and so energy shares even more than the price of crude. We have noted similarities with other major lows in energy prices.

 

• Shares of major players are heavily discounted, Conoco Phillips down from 77 to 57
• Weaker firms with too much debt go into bankruptcy such as Sanchez Energy and Weatherford International
• Firms face delisting while trading under a dollar a share such as Abraxas
• The media reports not only lots of problems but that the trend will likely continue for years
• Major players pull out of what appeared to be good projects just months ago, Carlyle pulls out of a planned export terminal in Corpus Christi

 

Clues abound this week that the prediction for a major low in this time frame is correct.   Wednesday Schlumberger, the largest energy service firm in the world, was the best performing stock on the NYSE, up from $36.23 intra-day.   The smart money is buying Ironwood Energy Partners II is looking to acquire two crude oil pipeline systems in the Eagle Ford Shale.

Oil royalty trusts have been hit hard with many now paying 9% dividends. Right here in the backyard is Permian Basin Royalty PBT. PBT is trading at $3.70 and paying a 9% dividend. In April-May 2018 it traded for $9.   PBT began operations in 1980.

 

Marshall Adkins, head of energy investment at Raymond James suggests supplies are much tighter than most observers believe.

 

We favor accumulating beaten down energy service and energy trusts.   Master Limited Partnerships MLP have had a tough time. The best choice here is Alerian MLP AMLP. This is an ETF of multiple MLPs. Caution the 2016 low was $6 but that lasted only two months.

 

As always, general suggestions may not be appropriate for any individual. Do your due diligence and wade don’t jump into the pool, accumulate slowly.

 

The overall stock market is digesting recent gains. Expect year end tax selling to move the market sideways to down into mid-December. Then we look for a rally into March, 2020.

Stocks Hit New Highs,Energy Appears to be Forming a Bottom

 

Weekend Nov 17, 219

See the article in Friday WSJ that interest rates are no longer inverted. Here the purple ten year rate is above the black one year rate. This suggests we may have seen the final low in rates.And that higher commodity prices lie ahead, ie energy.

 

A new high in XLF for banks re enforces this idea, banks make more money with higher interest rates.

Bullish percent in energy is above 50%, a positive sign, MAs  are rising, also positive.

The MAs need to onverge

and price needs to vault above all the MAs.

 

SLB is the strongest of the energy service stocks. Looks like some accumulation via PMO but we need higher highs and lows.

GSCI

The saucer shaped bottom is a positive and it took several months to form, ie thee market had plenty of time to go lower.

 

Silver

 

Looks like silver is finding support at its  125 day  MA, note MACD has corrected. Gold looks the same.

Let's watch carefully.

Okay here are the ones to really watch for a bottom and then advance.

Tanger Outlet Centers SKT

A 12.9 P/E and a 8.78% dividend, more shoppers than parking places on the weekend.

Alerian Master Limited Partnerships ETF

After several failures to rise above its MAs, AMLP could hit a new low here. This is a collection of Master Limited Partnership and it is losing money but paying a whopping 21.85% dividend, Again, watch closely.

Permian Basin Royalty PBT

The worry here are years of lower highs, ie still in a downtrend.

Paying a gigantic 21% dividend and trading at 76% of book value. Watch closely.

See recent posts which include a table of Trusts and dividends.  I do not own a one of them and want to see some reversals first.

Stocks are on a Dow Theory buy signal with Industrials and Transports both confirming each other.

Social mood is coming undone world wide, see  Hong Kong, Venezuela (subject of the new Jack Ryan season 2 on Amazon), Argentina and oh well just pick a place.  Apparently we will get to the Nov elections before this mmatters.

Stay alert.

XLE Mounting Comeback

Monday Nov 11 2019

XLE appears to be mounting acome back.

CHK is going down the drain, another sign of a forthcoming bttom Firms which took on too much debt in the previous boom disappear or take Chap 11

during bear market periods, CHK will probably take Chap 11  BK.

We think the stage is still set for a major low in energy prices by end of month November.

Markets at ew Highs, Oil Nearing a Significant Low

Weekend Nov 9, 2019

The DJIA new high has been confirmed by a  new high in the Transports.

Outsiide the US, emerging markets are coming back from a long correction.

I think the result oof this will be stronger oil prices with the expectation of another year world growth.

WTIC

OIl prices are converging on the end of a triangle.  The MAs are converging which happens prior to a change in trend. I believe the result will be higher oil prices.

As noted in our weekly column previously osted, CHK issued a going concern  warning. The firm will likely end in Chapter 11 re organization.

XES Energy Service

Keep the big picture in mind here. XES is lower than  at the worst of the  2009 financial crisis.

Mood Generates New Highs in Stocks and Scandals

Friday Nov 8 2019

Friday November 8, 2019

Another week, another few scandals emerge.

 

Mattel and its 145 year external auditor, PwC, hid accounting issues. The firm is under investigation.

 

Under Armour is under investigation for its revenue recognition practices.

 

McDonald’s CEO resigns over ‘an inappropriate relationship’ with a staffer.

 

If it were not enough to have riots from Moscow to Hong Kong to Santiago, , now we have fights breaking out at Popeye’s over a chicken sandwich.

 

This news prompted a headline in my Professor Elam weblog, Can’t Anyone Behave? (Scandals are a product of hyper social mood at market highs. Participants case aside behavior norms and take an anything goes stance.)

 

Finally a private equity group proposes to take Walgreens private. If so this would be the biggest private equity deal ever at $70 billion.   Social Mood is inclusive at market highs where most mergers and take-overs occur. With the DJIA at 27,600 it is fitting the biggest deal ever is proposed.

 

All of this has the stock market surpassing that pesky 26,400 DJIA level and moving today to 27,600 more or less.

 

Let’s consider stocks first.   Thee SPX set a new high at 3,093.   Ten-year Treasury yields are re testing their September high at 1.9%. While Trump has been scolding the FED for not lowering rates (why with a strong economy asks the Chinese), this looks like a 40-year low in rates to me.   In Dow Theory terms, Transports hit a new high at 11,163.

 

At the same time, defensive sectors of utilities and gold are pulling back. This is more confirmation of an industrial advance.

 

Emerging Markets fell throughout 2018. Now EEM, the emerging market ETF is nearing a break to the upside at 44. Again this reflects world market strength.

 

Regular readers will remember we have been calling for a low in oil prices recorded in August and October.   As I write this morning, crude oil is down 75 cent at $56.40. We look for a pullback in to mid to late November. That would create what chartists call a fourth higher low. The moving averages on the crude oil price chart are converging. This happens prior to a change in trend. All of this supports our view that given renewed industrial strength around the world, pil prices will be moving up. This of course is the opposite of what the mainstream media has been reporting, with slowdowns in energy markets across the board.

 

The bear market in energy service has done its job of clearing out the weak sisters who took on too much debt and lacked cash to sustain themselves. This past week beleaguered Chesapeake issued a going concern statement. This means CHK cannot pay its bills for the next year. Weatherford is in bankruptcy. Eagle Ford stocks are either at discount or below book value.

 

Keep your cash ready, an important low in energy shares is at hand.

 

Shake Shack

Wed Nov 6, 2019

Shack Shake Shares Dive on Sales Results

Recent events at SHAK support the idea that social mood moves stock prices.

SHAK has traded over 100 price earnings ration

Compare that to industry leaders

MCD        23

JACK        17

WEN        33

SHAK operates about 200 restaurants but is valued at $4 billion about the same as Wendys. Wendys operates 6,711 restaurants.

WEN

JACK 2,200 Restaurants

 

Stocks Peaking, Energy to Bottom Later in Nov

Wed nov 6, 2019

XLE Energy ETF

Energy bottomed in August an  October. This assets up a final low on the uptrending blue line later this month.

We are thinking this will be a major opportunity for a low risk entry into energy markets.

Stock markets overall despite the outburst of positive headlines are a few hundred points over resistance at  DJIA 26,400.

Stocks are likely making a first high now and then a secondary in various indices mid month, then look for a bit of pullback.

 

 

Energy Scores Big to Start November

Weekend Nov 3 2019

 

name	symbol	yield
Alerian mlp	AM:P	843
Canadian Nat Resources	CNQ	4.49
Mesa Royalty	MTR	12.45
MVO Oil Trust	MVO	16.43
Permian Basin	PBT	10.91
BP Prudhoe Bay	BPT	28

 

 

See my latest weekly newspaper column  in the previous post.   Above is a list of Master Limited Partnerships with their current dividend yields. No those are not typos, the prices are so low that has driven the yields so high.  All but CNQ are in single digits.  The most conservative approach is Alerian, 73% of holdings are in ten different MLPs.

PBT has been around since 1980.

Here is a monthly chart all the way back to the $140 price of oil and then its crash levels.AS you can see the price is now close to the 2009 and 2016 crash level. This pretty well sums up why I think this is a likely low.

xes

Okay the monthly chart has not turned up yet but..

Halliburton

The August low was followed by two inside m months.

Abraxas AXAS

AXAS is actually making money, trading at a 1.2. P/E, trading at 34% of book value. It closed up nearly 10% Friday.

Transocean is in trouble.

it may be that drilling comes back in time to save it but let's avoid it for now.

ACWX NOn US Equities

After a near two year correction, foreign markets are making a comeback.This also supports the idea that oil prices are ready to advance.

Well we could go on but I like energy as it has been the laggard and now is coming back. Tech stocks have been on a tear but are too high priced for me.

 Bellweather Apache APA makes 9 % move Friday