Becoming a success investor is not rocket science but it does take some intelligence along with setting out a plan of action. Below are Five of Stocks on Wall Street’s Rules to Becoming a Successful Investor:
1. Invest without emotions. Use your head not your heart. Emotions get in the way of logic, make a plan that will let you be accountable and disciplined. Don’t get overcomplicated with your plan either. It can be a simple trading strategy with simple rules. Like Warren Buffet always has said, “you don’t need to be a genius to make good money investing.”
2. Don’t set your expectations too high, be realistic. Don’t expect to make $1,000 off a $2,500 investment in six months time. While it is always doable, don’t count on it. Set realistic expectations and then be happy when you exceed them.
3. Don’t think a trade is always going to recover; sometimes it’s the smarter move to take a small loss now instead of taking a large loss later.
4. Don’t always think a good company is going to make you good money. You make money from the company’s performance. Sometimes good companies will struggle and the stock can go down whereas sometimes-bad companies stocks will soar.
5. End of day do your own research and be comfortable with the trade before you make it. Don’t make a trade solely on what someone else says, do your own analysis and if you agree with their investment idea then be confident and make the trade.
We are always hear to help you with any of your investment questions or needs. Two programs we now offer are Free Portfolio Reviews where we will overlook your investments, let you know what we think about each position, inform you on whether or not you have a balanced portfolio, & give you a detailed report on our findings.
Also if you don’t invest at all we do comprehensive Free Brokerage Account Setup’s where we will get you setup with the right brokerage account that fits your personal financial needs along with giving you an investment plan to help you reach financial freedom.
Recently we were thinking about movies with some kind of financial lesson. The financial side of making films has always intrigued us. Historically the Oscars have always been proof that the biggest budget doesn’t always give the best ROI. In 2010, the lowest grossing Oscar winning film in history – The Hurt Locker – beat out the highest grossing picture in history – Avatar.
Here’s my list of the top 10 movies ever made that have a financial lesson inside of them.
1. Boiler Room (2000) – A college dropout gets a job and enjoys fast success at a brokerage house selling phony stock. However, the job turns out not be as legit as it sounds. This film is mix of Wall Street and Glengarry Glen Ross thrown in. Although there’s no character here that can compare to Michael Douglas’ Gordon Gekko.
Lesson: Great morality lesson dealing with the desire to get rich quick, regardless of the consequences.
2. Wall Street (1987) – “Greed, for lack of a better word, is good”. This line by ruthless corporate raider, Gordon Gekko, summed up the business ethics of the 1980s, when greed, corruption and the predatory nature of the financial world was at its most conspicuous. The film charts the ascent of a young, ambitious stockbroker who’s taken under Gekko’s wing and struggles with whether it’s better to have money or integrity. Gekko is the embodiment of corporate malfeasance, but also portrayed as a business guru. His glamor and power probably inspired a lot of young men to enter investment banking over the last two decades. As Gekko said, “It’s all about bucks, kid. The rest is conversation.”
Lesson: Greed is good. What’s worth doing is worth doing for money. Lunch is for wimps. If you need a friend, buy a dog. So goes the wisdom of Gordon Gekko, ruthless investor, legendary financier – and the star of one of the best movies ever made about money. This film also provides a great backdrop to the landscape that led to the financial crisis of 2008.
3. Glengarry Glen Ross (1992) – Times are tough. This is the ultimate real estate high pressure sales environment film where making money is the bottom line. A desperate group of Chicago investment property real estate salesmen suffer in a down market, a sales contest is launched and anyone who fails loses his job.
Now that the property bubble has burst, some real estate offices may soon seem a little bit more “Glengarry”. There’s no room for losers, only ‘closers’ will get the good sales leads. Some regarded this film as a critique of the impact of Reaganomics.
Lesson: Too much pressure to succeed can boil over into tragedy with unforeseen consequences.
With the upcoming premiere of the film “Wall Street – Money Never Sleeps” it got me thinking about movies with some kind of financial lesson. The financial side of making filmshasalways intrigued me. This year’s Oscars were yet again proof that the biggest budget doesn’t always give the best ROI. In 2010, the lowest grossing Oscar winning film in history – The Hurt Locker – beat out the highest grossing picture in history – Avatar.
Here’s my list of the top 10 movies ever made that have a financial lesson inside of them.
4. Maxed Out. Hard times. Easy Credit. The Era of Predatory Lending (2006) – This documentary shows how the modern financial industry really works. It explores America’s love with credit and leveraged debt and tells us why the poor are getting poorer and the rich getting richer. When Hurricane Katrina ravaged America’s coast, it revealed that America was far from the world’s wealthiest nation. It also highlighted America’s crumbling beneath a staggering burden of individual and government debt. Maxed Out shows how predatory lending was out of control, including credit cards pumped to college kids who had no income. This is a great movie. It’ll make you feel different about your money.
Lesson: It delivers a great lesson on how to borrow and shows why you don’t want to live on credit. Credit is the devil. Do you know anyone who got into trouble because they didn’t borrow too much money? Maxed Out paints a picture of a national nightmare which is all too real for most of us – out of control spending and an irrational use of credit.
5. Enron: The Smartest Guys in the Room (2005) – Before Bernie Madoff, there were Ken Lay and Jeff Skilling who ran the Houston energy firm that was going to reinvent how energy was going to be done in America. Enron was highly profitable, had a great amount of cash flow and earnings and the stock price soared. Its executives cashed out options worth millions and told employees their best 401K option was Enron stock. Thousands lost all their retirement savings because they put all their bets on one company. Took Enron 16 yrs to from 10b assets to 65b assets, but it took them 24 days to go bankrupt. It won the Academy Award for best documentary.
Lessons: Have a financial plan, have a discipline. If you have a stock that looks too good to be true and it just keeps going up, up, up, it’s probably too good to be true. Diversify, Diversify, Diversify. Don’t put all your eggs into one basket.
6. Working Girl (1988) – Melanie Griffith plays Tess McGill. Endearing 80s film. Ultimately she takes a job as a secretary but she wants to rise in investment world. Wants to rise to power, combines her business degree from night school w/ her street smart acumen & pulls of a mega-merger. Total fantasy. Prince charming happy ending w/ Harrison Ford. “I have a head for business and a body for sex.”, says Melanie Griffith’s character. Go back to night school, go back & get a degree. Go get educated, you’ll get leverage. No one can take your education away from you.
Lessons: Your education, your smarts can’t be wiped out in a recession. Your earning power is rooted in your skills, in your education. Provides an entertaining reminder that if you have something to offer your co. & they don’t seem too interested, then take your skills elsewhere. If you are a super powerful earner at one job, you can make yourself a super powerful earner anywhere.
7. Treasure of the Sierra Madre. 1948. Classic western cautionary tale about how not to launch a venture. If you took everything that Howard Dobbs & Kutan did in this movie: “Get rich quickly without a credible business plan.” “Badges, we don’t need no stinking badges.” Don’t swing blindly, don’t come up w/ a get rich quick scheme, don’t do a pyramid scheme, don’t sell products from your house to your friends or recruit your friends.
Lesson: In life, as in baseball, you’re gonna strike out. You don’t want to strike out blindly while your pursuing a huge home run. You gotta know your business, know your partners, know where you are in all of this.
8. Mr. Blanding Builds His Dream House (1948) – Was remade into The Money Pit, starring Tom Hanks & Shelly Long. Owning a home ain’t cheap. It can turn into a massively expensive ordeal. Home is really a money pit. Owning a home comes w/ a lot of responsibility, gotta have credit, gotta have a down payment, pay your bills, maintain the home, gotta know the risks up front. It’s expensive. You gotta know the worse case scenarios, all the risks, the downside.
Lesson: Shows how the American dream of owning a home can go terribly wrong. Home ownership is not for everybody and shouldn’t be promoted as such by the government.
9. Confessions Of A Shopaholic (2009) – About a chic who’s struggling with a debilitating obsession with shopping and has 12 maxed out credit cards. She unintentionally lands a job as a financial journalist and falls for a wealthy entrepreneur. Don’t buy a $400 watch because it quickly depreciates to nothing. I will buy a $4,000 Rolex – nothing less than a Rolex — because it can still be sold 10 yrs after you buy it for what you paid for it. You use credit to buy things of value: an education, a car to get you to work, (I prefer to buy 2-yr old used cars because it loses half its value up front when you drive it off the lot, but you can still get 50-60,000 miles out of it.)
Lesson: Only use credit for things that have value. Pay cash for everything else.
10. Brewster’s Millions (1985) – The ultimate spending spree is something that most of us have daydreamt about at some time. A minor league baseball player, Montgomery Brewster, (Richard Pryor) has to waste $30m in 30s days in order to inherit $300m; however, he’s not allowed to tell anyone about the $300m deal.
Lesson: How corruptible too much money can be and how difficult it can be to use it responsibly.
Hedge Fund titan Jon Paulson pulled off the greatest trade of all time in 2007, raking in a cool $15 billion in his bet against subprime mortgages - according to the International Business Times who ranked the top ten greatest trades of all-time. Some were brilliant masterminds, others were just plain lucky.
The Top Ten Greatest Trades of All-Time
1. John Paulson’s bet against sub prime mortgages made him $15 billion in 2007
2. Jesse Livermore’s call on the Crash of 1929 (a legendary trader featured in the popular book, Reminiscences of a Stock Operator).
3. John Templeton’s foray into Japan in the 1960s (a true investment pioneer, Templeton foresaw the rise of Japan after World War II and profited hugely from it).
4. George Soros’ breaking of the Bank of England in 1992 (Soros made $1 billion).
5. Paul Tudor Jones’ shorting of Black Monday in October 1987 (he predicted the crash, bet a bundle & tripled his money as the market crashed 22% in one day).
6. Andrew Hall’s $100 oil prediction (with oil trading at $30 per barrel in 2003, Hall bet prices would rise to $100 in 5 years; they did and he took home a personal paycheck of $100 million in 2008).
7. David Tepper’s 2009 bet on financials (as the market hit its low in early 2009, Tepper bought financial services stocks & his fund earned $7 billion that year ($4 billion of that went to Tepper).
8. Jim Chanos’ prescient shorts (his sharp analysis led him to predict the demise of Enron, WorldCom, and other firms, and he is known as the best short-seller in the world).
9. Jim Rogers’ early call on commodities (he was bullish on commodities back in the 1990s & has been riding them to great profits ever since).
10. Louis Bacon’s geopolitical play (he correctly predicted that Saddam Hussein would invade Kuwait in 1990 & profited handsomely by going long on oil & shorting stocks, which helped his fund return 86% that year).
Most of these trades were ‘global macro’ plays where huge, concentrated bets were made by analyzing fundamental economic/business conditions. These investors excelled at turning a great observation about the world into a great investing idea. But, while these make the headlines, you never hear about the other investors who made a big call and missed, and ended up out of business.
It’s almost impossible for regular investor folks to make a ‘big score’ like these traders. Rather than trying to throw a touchdown pass on every play and make a big score like these traders, the smarter game plan is to focus on trying to get consistent first downs. Do your homework, watch market/sector developments, don’t chase stocks up or down. Do that, and the score may take care of itself.
Source: International Business Times
Shares of the iShares MSCI Turkey Investable Market Index Fund (NYSE: TUR) has soared throughout 2013 and has even hit its 52-week highs trading at $77.38. Turkey as a whole has been experiencing robust growth as the Borsa Istanbul National 100 has surged to its highest levels in the past 25 years. We have been huge supporters of TUR dating back to August 8th, 2011 when we issued our first ‘BUY’ rating for the ETF in our article ‘iShares Turkey ETF (TUR) Poised for Success‘. Since then, TUR has appreciated +69.67% over the past 22 months.
What Attracts Investors to TUR
Investors looking to play the Turkish markets have few options. iShares MSCI Turkey Investable Market ETF (TUR) originally launched in 2008 is the only option avaliable to investors seeking a pure play exposure in the Turkish equity space. TUR is also the only ETF with dedicated Turkish exposure. The banking sector also plays a prominent role in the investable market in Turkey and TUR has a high concentration of financials in its portfolio.
What To Expect Going Forward
When it comes to Turkey, it has been the talk of a higher sovereign debt rating that has been lifting TUR, the lone ETF devoted exclusively to the country. Turkey, which has been engaged in a multi-decade conflict with Kurdish militants in the Southeast part of the country, is working to end the conflict. The government there is in negotiations with Abdullah Ocalan, the jailed leader of the Kurdistan Workers’ Party or PKK, in a bid to end the bloodshed.
Just last month, Moody’s Investors reported that Turkey’s ongoing efforts to bring an end to the conflict could be a positive credit step. Fitch Ratings upgraded Turkey’s long-term foreign currency Issuer Default Rating (IDR) to BBB- from BB+ back in November and the Long-term local currency IDR to BBB from BB, this is huge news as it’s giving Turkey its first investment grade ratings in nearly two DECADES.
This has been great news for investors as the speculation of a possible credit rating upgrade has lifted Turkish banks shares. TUR is heavily centered on the Turkish financial sector with 51.9% of its holdings in financial services stocks, quadruple its next largest sector weight, industrials.
Turkey’s economy has some good signs heading their way. Beyond this falling inflation rate, investors should note that Turkey has seen a plunging growth rate as well.
Turkey has good medium-term growth prospects and a diverse economy. The nation’s debt-to-GDP ratio stands at 39.9%, much lower than the debt-to-GDP ratio of many developed economies. On top of this, the country has a low employment rate, government reforms, strong, solid banking system, and improved credit rating. Adding all these solid growth factors together and Turkey could prove to be a great investment market in Europe for years to come.
If you have any further questions on either TUR, Turkey’s economy or any investment at all don’t hesitatet to contact us at all by emailing us at jameshartje@StocksonWallStreet.com or Follow our Contact Form
Also make sure to tune in later this week for our long-term outlook on TUR along with more detailed analysis on both Turkey and other emerging markets.
If you haven’t booked your summer plans yet, brace yourself. There’s actually good news this year, for a change. Airfares to many popular U.S. destinations have dropped. This is according to the Wall Street Journal who earlier this week posted an insightful article detailing the best places to fly this summer. WSJ added an entertaining graphic as well which you can see below:
As for the airline industry, as many of you know Stocks on Wall Street has been very bullish the past two years. Most specifically when it comes to the five airline stocks we hold:
Allegiant Travel (NASDAQ: ALGT)
Boeing (NYSE: BA)
Delta Air Lines (NYSE: DAL)
Southwest Airlines (NYSE: LUV)
UAL Corp (NYSE: UAL)
For those of you who haven’t read any of our past articles on the airline industry, simply click on the links below:
Going forward, we think that the airline industry might have seen it’s best days. We will be going into more detail about our thoughts in our article next week so make sure to tune into SWS throughout the week to find out more!
Source: The Wall Street Journal
Mark Cuban went onto CNBC to discuss the current state of the markets and Cuban responded by saying ’I rarely invest in stocks as there are no new names, new energy or new opportunities in stocks because of a lack of trust in the market.’ Does Cuban have a valid point with his call on the markets lack of new products, names, or opportunities?
Here are three of the biggest risks and threats to your financial future and your wealth today. Also read for advice on how you can exert more control over each one and enjoy more of what’s yours.
Risk #1: Currency Fluctuation. The U.S. dollar has taken a real beating this past year and is expected to stay down over the long term. Having all of your assets in U.S. dollars (or any single currency) is not sound financial planning. You don’t have a diversified portfolio if all your assets are in one currency. By going offshore and holding portions of your assets in other currencies, you are truly diversifying and protecting yourself from the ups and downs of one currency.
Investing in currencies on your own, without an ETF, can be difficult. Most retail investors are better off with currency ETFs (exchange-traded funds) which track a single foreign currency or basket of currencies by using foreign cash deposits or futures contracts. Currency ETF’s allow investors to speculate in the currency market without the risk of investing directly in currencies and without entering the forex market. Some of the most popular currency ETFs are offered by Wisdom Tree Dreyfus, Rydex, PowerShares, Market Vector and Barclays. But you need to do your homework before diving in.
Risk #2: Rising Taxes. Beginning Jan. 1, 2013, all American citizens will experience significant tax increases, many in the form of hidden taxes and fees. At the same time, U.S. citizens with foreign bank accounts may pay a withholding tax of 30% on transfers of funds to and from these accounts (a provision of the recently amended and little-known HIRE Act). So, if you run your own business, it makes great sense right now to think about moving your business to a more tax-friendly environment offshore. Or, you could stay in the U.S. and keep an account offshore where it is free of U.S. tax obligations.
The key point is that, whatever you’re going to do, you should do it as soon as possible and well in advance of 2013.
Risk #3: Litigation. The U.S. is a litigious society; a new litigation suit is filed every 17 seconds. This may or may not affect everybody. But, if you’re a doctor, for example, or someone with a high profile who’s more susceptible to being sued, then you understand the increased risk. In this case, the best solution is to protect your assets by moving them offshore. Your offshore assets will be outside the realm of U.S. judgment and, therefore, far more difficult for creditors to get at. This should not be confused with the fact that U.S. citizens and green card holders will continue to be taxed on their worldwide income, no matter where they reside or hold their assets. Income tax is unavoidable other than legitimate tax reduction strategies. However, you can minimize litigation risk to your assets by going offshore.
Back on July 2nd, Stocks on Wall Street released an article on Rex Energy (NASDAQ: REXX) recommending the stock as a ‘BUY’ and signaling to investors to purchase shares at the price of $11.62. Due to overall strong performance and increased optimism around both Rex Energy and the growing region they drill in we decided to upgrade our position and offer some new changes and updated guidance on Rex.
How Has Rex Energy Actually Performed?
Since our recommendation REXX has performed exceptionally well soaring over 39% in a 9-month period all the way to $16.11. At its peak, shares hit $17.33 a total yield of well over 50%. After further examining REXX’s financial statements we are still optimistic especially since overall numbers have improved, better positioning the company for the long-run. Below are some five reasons to continue to be bullish on Rex.
Five Reasons to Continue to Be Bullish on Rex Energy
- REXX’s PEG Ratio improved substantially rising from 0.96 back in July 2012 to currently 0.51. This is direct proof that management’s overall strategy and efficiency have been very effective positioning the company for a strong year going forward.
- The company has beat earnings estimates the last two quarters and as a result consensus earnings estimates for 2013 and 2014 have increased.
- Three initial test results from the Utica prove to be hugely successful and big wins for Rex indicating the liquid-rich area is even more prosperous than they originally projected.
- As a result of all the positive feedback, strong numbers, & overall consistent performance analysts across the board have raised their price target for REXX from $16 to well over $19 a share while continuing to maintain an ‘Outperform” rating on the stock. Overall 82% of the analysts watching the stock have issued a ‘BUY’ rating or higher.
- Like we have mentioned before REXX continues to be a logical acquisition candidate for a bigger player. Why? It’s due to the fact that REXX is a small cap company worth a little over $1B however their robust production, growth and valuable set of assets make them a very desirable company in the eyes of the big players.
What Risk Factors to Account For
REXX is not immune to everything and if there is a weakness it’s the concern in their liquidity going forward especially if gas prices were to fall much lower. Investors shouldn’t be all to concerned however as we continue to see management effectively combatting this issue and in the past they have always found ways to keep production fully up and running so we have no reason to doubt that they would stop such efficient business practices now. In addition, Rex still has various assets for sale, which have helped provide a safety net if liquidity issues were to ever arises. After examining the books, it looks like REXX is in a much better financial situation now then it was just 9-months ago which is a good indicator going forward. When we first recommend Rex, the company had about three years of liquidity before they would have had to start cutting back on their drilling program or finding other sources of cash. Today’s current rate shows Rex has well over four years worth of liquidity, an optimistic sign for investors and further proof of management’s effectiveness.
Increased Spending Followed By Increased Expectations
Going forward expect Rex to continue to perform exceptionally well as they increase the amount of capital they’re spending on production, which in return should deliver much higher revenue numbers. When talking about the successful recent tests and the future potential in the region Rex’s CEO, Tom Stabley, said, “that the company believes the past results demonstrate the huge opportunity that exists for continued superior well performance in this region going forward.” Stabley used these tests as a key reasoning behind the company’s huge capital spending program. Rex isn’t the only one increasing their spending either as both Gulfport and Magnum Hunter Resources are following suit and spending a large portion of their 2013 capital budget on the play. With such a huge increase in capital spending, expectations are very high, as hopefully the move will prove it’s worth generating significant liquids-rich growth for all three companies.
Overall Long-Term Outlook
Overall, we continue to be very Bullish about Rex Energy anticipating huge liquids growth production coming from the Utica shale. As a result we expect REXX shares to continue to outperform their peers and as a result we are raising our original 12-month price target from $18.50 to $20 per share, a total net yield of 72% on the year and an additional 32% from the current stock price.
The Long Lost Oracle the Documentary Trader an Insight into the Life Investment Strategy of Paul Tudor Jones
Take a good hour, relax, & watch The Documentary Trader: An Insight into the Life & Investment Strategy of Paul Tudor Jones. It will be one of the most enlightenting & educating things you can learn from. Words cannot even describe how much it will help improve your investing repertoire. If you call yourself a trader or investor & don’t know who Paul Tudor Jones is then you have a serious problem. For the rest of you, here is a brief little bio to give some background on what both myself & Stocks on Wall Street consider to be one of the greatest fund managers/traders of all-time & a mentor we have long studied & used to implement our own trading strategies. Just in our article the other day, “The Top Ten Greatest Trades of All-Time” we mentioned Paul Tudor Jones as he came in #5 on the list for his infamous call of Black Monday on October 1987 when he predicted the crash, shorted the markets by betting a bundle & tripled his money as the market tanked 22%. That’s just one of the many great achievements this man has accomplished throughout his career, the bio below followed by his documentary will give you the true insight to his greatness.
Paul Tudor Jones II
Paul Tudor Jones II is the founder of Tudor Investment Corporation, a multi-billion dollar hedge fund. He is worth an estimated $6.3 billion in 2009 and was ranked by Forbes in March 2007 as the 369th richest person in the world. In 1976 he started working on the trading floorsas a clerk and then became a broker for E.F. Hutton. In 1980 he went strictly on his own for two and a half profitable years, before he “really got bored.” He then applied to the Harvard Business School, he was accepted, and packed to go when the idea occurred to him that: “this is crazy, because for what I’m doing here, they’re not going to teach me anything. To be a trader, this skill set is not something that they teach in business school.”
He consulted his cousin, William Dunavant Jr., for advice. Dunavant, whose Dunavant Enterprises is one of the world’s largest cotton merchants, sent Jones down to New Orleans to talk with commodity broker Eli Tullis, who hired and then mentored him in trading cotton futures at the New York Cotton Exchange. During his time working for Eli, Jones was quoted saying:
“He was the toughest son of a bitch I ever knew. He taught me that trading is very competitive and you have to be able to handle getting your butt kicked. No matter how you cut it, there are enormous emotional ups and downs involved.”
In 1980, Paul Tudor Jones founded Tudor Investment Corporation which is today a leading asset management firm headquartered in Greenwich, Connecticut. The Tudor Group, which consists of Tudor Investment Corporation and its affiliates, is involved in active trading, investing and research in the global equity, venture capital, debt, currency, and commodities markets. They manage around roughly $18 billion dollars in capital.
One of Jones’ earliest and major successes was predicting Black Monday in 1987, tripling his money during the event due to large short positions.
Jones uses a global macro strategy when trading in some of his funds. If you want to see this strategy it can be seen in the 1987 film “TRADER: The Documentary”. The film shows Mr. Jones as a young man predicting the 1987 crash using methods similar to market forecaster Robert Pretcher. This video is absolutely thrilling because of the amount of detail it gives into how he trades and manages risk.
The video used to sell for hundreds of dollars as competitors/enthusiast viewed it as the Holy Grail into Jones trading strategy. It has been banned from circulation; only original copies exist. It was original shown on public television in November 1987, however very few copies exist. Those that do are hoarded by traders who watch the hour-long movie in the hope of gleaning possible trading tips from Jones. According to Michael Glyn, the video’s director, Jones requested in the 1990s that the documentary be removed from circulation. Jones in fact, even went as far as purchasing what he thought were all the remanining copies of the docunemnaty but he was unfortuantely unaware of the power of the internet & how quick something can virally spread.
Still as it is there are very few websites that have the original version of ‘Trader’ so luckily for you, Stocks on Wall Street was able to get our hands on the original for you all to enjoy. How we found it, don’t ask but to re-emphasize the main point, EVERYONE NEEDS TO MUST WATCH THIS VIDEO ASAP. If you have any aspirations of becoming successful in the world of trading one day then you must watch this video. If you have work in the morning- you shouldn’t go until you’ve watched this; it’s your mom’s birthday tonight? – Not until you’ve watched this video; you’re tired and need sleep? – You don’t sleep until you’ve watched this. I hope we emphasized the importance and the value this video has. Don’t take for granted how much longer it will be live as Jones is still on his witchhunt to take it down across the web. So share with your collegaues, family, and friends heck even all your social media buddies as this is one of the greatest gifts you can send them. To watch the video simply follow the link below, enjoy!
With all the scandals coming from the banking sector over the course of the past few years, the average consumer has lost faith in their bank. This is not just the big banks we’re talking about, it trickles all the way down to your local bank and credit union. The big question left is have you lost trust in your bank? If so do you believe this is something that can be changed or forever will banks be viewed as greedy corporations not looking out for the best interest of their customers? Please share your thoughts below or on our Facebook Fan Page or our Twitter Page.
(Below is a poll illustrating the levels at which people distrust their bank)
Source: The Financial Brand
Although copper prices hit a one-month low this week, we believe the broader global trend bodes well for copper prices to rebound through the remainder of 2013. The convergence of emerging market demand, a global boom in infrastructure development and a constraint on new supplies of copper will pus copper prices higher.
Prices will be influenced by demand from China and emerging markets, economic activity in the U.S. and other industrialized countries and especially a renewed international and U.S. push to rebuild global infrastructure.
Limited New Supplies of Copper
A major factor will be the timing of new supplies of copper and production levels of mines and copper smelters. Companies that have a high leverage to copper prices will benefit immensely from the potential demand for the metal in the developing markets. We believe that a slowdown in developing new copper supplies presents a major investment opportunity. Copper mining stocks that are well positioned to capitalize on this slowdown and poised to quickly develop new supplies of copper supplies represent a significant investment opportunity.
Temporary Weakness, but Strong Outlook.
Weaker-than-expected U.S. housing construction data and worries about China’s real estate market fueled concerns about future demand for copper. China accounts for 40% of global copper usage. And real estate construction is a major drive of copper demand. This week’s $3.63 per pound price on the Comex division of the New York Mercantile Exchange is the lowest traded price since Jan. 17.
Traders still see positive signs in the U.S. housing report, however. Compared with a year ago, new U.S. home sales were up 23.6%. Investors follow construction data closely for clues about future demand for copper. Analysts at Goldman Sachs said in a report, “The ongoing structural recovery in U.S. housing activity is set to be an important contributor to global copper demand growth (as well as market sentiment) in 2013, and should be a bullish drive of copper prices.” Goldman reiterated its forecast for copper prices to reach $4.08 per pound within the next six months.
Talk that China might introduce new restrictions for its property market also drove copper prices lower. Some local Chinese governments set limits on mortgage lending to dampen speculation as property prices in major Chinese cities rose for the first time since 2011.
Copper Prices Correlate Strongly to Economic Outlooks
Copper ranks third after iron and aluminum in terms of consumption of industrial metals. It is particularly important for infrastructure development. Construction comprises the single largest market for copper, followed by electronics, transportation, industrial machinery and consumer products. We witnessed record high prices for copper from 2006 to 2008 as growing demand from emerging economies and, in particular, China powered a surge in prices and very low inventory levels. Then prices dipped in December 2007 to a low of $1.26 per pound due to the U.S. financial market crisis, concerns about the global economy and reduced consumption. However, Copper prices bounced back to an average of $4.00 per pound in 2011 and averaged $3.61 per pound in 2012 – a drop of 10% from 2011. This drop reflected concerns about China’s slowdown, the European sovereign debt crisis and a sluggish U.S. economy.
The drop in price has hurt the results of major copper producers like Freeport-McMoRan Copper & Gold (NYSE:FCX), Southern Copper (NYSE:SCCO) and Newmont Mining (NYSE:NEM) – all of which suffered in 2012.
Long-term Bullish View on Copper
Nevertheless, in spite of its volatility, we have a long-term bullish view on copper. Our perspective is supported by copper’s widespread use in construction, limited supplies from existing mines and especially the absence of major new development projects.
Zack’s Industry Outlook (Feb. 14, 2013) stated that all signs point to a recovery in copper prices driven, in part, by accelerated production among Chinese manufacturers. Morgan Stanley predicts copper prices will rise 7.6% in 2013 to $3.88 per pound or $8,554 per metric ton (MT), up from $7,952 in 2012. HSBC’s chief economist, Hongbin Qu, said last week that, “Despite the still tepid external demand, the domestic-driven restocking process is likely to add steam to China’s ongoing recovery in the coming months.” And Bloomberg reported that the forecast for rising copper prices is based on anticipated demand increases from China, the U.S. and even Europe.
Global Infrastructure Investments will drive Copper Higher
The push to expand global infrastructure is a key indicator in our belief that copper prices will continue to push higher through the remainder of 2013. Consider these key indicators driving global infrastructure investments:
Emerging Markets. Growth in the emerging markets, particularly China and India, was a major driver of copper demand over the last few years. However, of late, demand in China has slowed down. China’s recent $150 billion infrastructure stimulus has helped improve the sentiment somewhat and holds promise for the metals and mining industry going forward, as we note below. This global economic slowdown is the biggest headwind for the metals space overall at present. Nevertheless, the long-term picture remains a lot more promising as the emerging market economies are expected to get back in shape with the help of expected fiscal and monetary stimuli.
China’s Infrastructure Expansion. China’s economy is beginning to rebound even though the pace of the recovery will be slower than previous periods. China’s new leadership recently announced fresh stimulus measures that will likely bolster demand for copper. Although Chinese exports remain weak, the good news is that home prices and homes sales in China are rebounding. The new Chinese leadership has reiterated its support for a conventional mix of proactive fiscal policy and many analysts believe they will be successful in boosting growth from +7.8% in 2012 to +8.0% in 2013 and +8.3% in 2014. The implication for the construction market is that growth will continue. The stabilization in investment since mid-2012 has prevented China’s slip toward a feared hard landing, supported by a V-shaped recovery in infrastructure, which hit a trough with a -4% contraction in the first two months of 2012, but is now increasing by nearly +15% year-on-year.
The main construction driver in China will continue to be infrastructure. Although the heyday of growth for China’s construction market may be over, the sheer size of the market will keep it among the most attractive in the world for the foreseeable future. China’s new leaders are pushing a new type of urbanization that has major implications for the construction sector and, in turn, for copper prices. In particular, their “intelligent city drive” which relies on modern information technologies such as telecommunications and cloud computing, will involved the building of intelligent systems serving a wide range of sectors from public security, healthcare, transportation and the power grid.
Group 20 Global Infrastructure Push. A hot topic this week in Moscow at the The Group of 20 agenda is an issue that has long affect emerging markets’ economic growth plans: weak infrastructure. India has called for better infrastructure funding. Russia has made investment financing a priority on how to kick-start global growth. In emerging Asia, much-needed infrastructure projects fall through as a result of funding problems. The World Bank estimates that countries in the East Asia Pacific region need $400 billion of investment in infrastructure annually, while South Asia needs around $200 billion. Infrastructure spending will remain a key issue throughout 2013. This focus on construction will only serve to drive global demand for co copper.
Obama’s “Fix it First” Policy. President Obama’s recent State of the Union plan to repair the nation’s ailing infrastructure should not be overlooked. His “fix it first” policy calls for investing $50 billion in transportation infrastructure. Obama also called for the creation of a National Infrastructure Bank to bring public and private financing together to plan projects. Coupled with the U.S. housing recovery we touched on earlier, we believe the U.S. will certainly contribute to what we believe will be a growing demand for copper in 2013.
Bottom Line: The bottom line here is that the global push to rebuild infrastructure will almost certainly create a knock-on effect that will drive the prices of industrial metals higher. Copper promises to be at the forefront of that trend.
Supply Constraints will Drive Demand Higher.
Copper prices will be heavily influenced by the timing of new supplies of copper and the production levels of mines and copper smelters. Companies that have a high leverage to copper prices will benefit immensely from the potential demand for the metal in the developing markets. Cost inflation in the sector is also expected to be a headwind for metal and mining companies over the next several years, driven by a number of factors such as labor, energy, ore grades, currencies, supply constraints and taxes. Plus, global economic uncertainties, softening commodity prices and higher input costs are increasing the pressure on company margins.
To counter all this, mining and metals companies must constantly review their portfolios to identify underperforming assets and shut down or divest high cost and non-core assets. Industry consolidation, automation technology, owner-operated mines and investment in energy assets are some of the steps that companies can take to offset to the impact of rising costs.
Production drops for World’s Largest Copper Company.
Expanding copper mining production continues to be a challenge for Chile’s Codelco, the largest copper producing company in the world. Codelco (the National Copper Corporation of Chile) is the Chilean state-owned copper mining company, formed in 1976 from the foreign-owned copper companies that were nationalized in 1971. Codelco produced 1.66 million tons in 2007 – 11% of the world total. It controls about 20% the total global copper reserves. They recently reported that their own production dropped in 2012 to the lowest level in four years. And figures from the last monthly newsletter issued by Cochilco (Chilean Copper Commission) show that the state-owned copper company produced a 5.1% less copper in 2012 if compared against 2011. According to CEO, Thomas Keller, Codelco’s 2012 production was down primarily due to “dwindling ore grades” in all its deposits. BHP executive, Peter Beaven, recently told an industry gathering in Santiago, “Mining in Chile is at a turning point as the industry requires large expenditures just to maintain throughput.”
Copper miners across the globe continue to expand production. Grupo Mexico (OTC Pink: GMBXF) plans to spend $2 billion on its mining division this year, a portion of which will go towards the company’s Buenavista mine in Northern Mexico. The company wants to produce 1.4 million metric tons of copper per year by 2015, Reuters reported. BHP Billiton (NYSE:BHP) expects its copper production to increase in 2013 and 2014 by a 10% compound annual rate, largely driven by its Escondida mine in Chile, which is on track to increase its production by 20%.
10 Biggest Copper-Producing Countries
(000 metric tons)
10 Biggest Copper Producers
(000 metric tons)
|1. Codelco (Chile)||1,757|
|2. Freeport-McMorRan (USA)||1,441|
|3. BHP Billiton (Australia)||1,135|
|4. Xstrata (Switzerland)||907|
|5. Rio Tinto (UK/Australia)||701|
|6. Anglo American (UK)||645|
|7. Grupo Mexico (Mexico)||598|
|8. Glencore Intl. (Switzerland)||542|
|9. Southern Copper (USA)||487|
|10. KGHM Polska (Poland)||426|
Freeport-McMoRan’s (NYSE: FCX) fourth-quarter net income rose 16%, to $743 million, as sales in the previous year were depressed by labor disruptions in Indonesia. The company aims to grow its annual copper production to over 5 billion pounds per year in 2015 from 3.66 billion pounds in 2012, and expects its $20-billion acquisition of Plains Exploration & Production (NYSE:PXP) and McMoRan Exploration (NYSE:MMR) to close in the second quarter of this year. Union workers at two of Southern Copper’s (NYSE:SCCO) properties in Peru may go on strike if they don’t reach an agreement with the company within 15 days, Fox Business reported, citing a union leader.
Back to copper, the metal is essential for modern living. It delivers electricity and clean water into our homes and cities and makes an important contribution to sustainable development. More than that, it is essential for life itself. Copper is interwoven with the story of humanity’s progress. It has crucial role in our homes, in transportation, as well as in infrastructure and in our industries is omnipresent.
Economically, copper consumption is closely associated with industrial production, and therefore, tends to follow economic cycles. During an expansion, demand for copper tends to increase, thereby driving up the price. As a result, copper prices are volatile and cyclical. Swingplane Ventures has seen some analysts pick up as one research firm just issued a $10 target price on Swingplane Ventures. The firm said that a due diligence property evaluation suggests there is a significant opportunity to further develop the mineral potential of the property and dramatically increase the current level of production. The company intends to evaluate potential to: 1) increase the current level of production and 2) undertake construction of a processing facility to maximize recovery of economic grades of copper concentrate.
Notably, in early January, First Quantum Minerals, a $9 billion mining company, made an offer of $5.1 billion to purchase Inmet Mining which holds a very coveted copper mine in Panama. Inmet Mining, a company with a prized copper mine has almost doubled in market valuation this past year alone. Swingplane Ventures operates in the copper market in Chile, located in South America. This part of the world has been proven to possess extremely profitable copper mines as seen by First Quantum’s offer for Inmet. After further due diligence and research, we are upgrading the stock to $11.50 with a possibly buyout looming.
There have been some worries surrounding copper because of the short-term macroeconomic concerns regarding the US and Europe. However, the fundamentals are still excellent for copper: as Asia represents over 60% of world demand with China by itself at 39% and could reach 45% in 5 years. Southern Copper forecasts that China and Emerging Markets countries will continue growing, albeit at a lesser pace, but still showing substantial gains. The company also notes that limited production upside and falling grades will result in a deficit copper market going forward.
Now, we take a closer look into a recent news item for the metal signifying of some larger trends. The fundamentals for copper are clearly improving as the world’s copper usage and demand for copper is picking up. Friday, was a prime example of that as copper futures rose the most in a week as China’s trade expanded more than forecast, and car sales jumped to a record in the Asian nation, the world’s biggest consumer of industrial metals. In January, exports from China surged 25% and imports climbed 29% from a year earlier, both topping projections by economists in Bloomberg surveys, government data showed today. Sales of passenger vehicles surged 49%, a state-backed trade group said. A 6 month price chart of copper follows.
Knowing that we are not the only ones bullish on the metal has given us more confidence in our own thesis. This fact was demonstrated this week when Kevin Puil, the Malcolm Gissen & Associates portfolio manager, went through his bullish thesis on Seeking Alpha. Puil said “The fundamentals for copper remain highly favorable and I continue to see secular demand for most commodities, copper in particular. Industrialization and urbanization, especially in the BRIC [Brazil, Russia, India, China] countries, is not about to stop, and this continues to put pressure on copper miners, who struggle to keep up with demand. Supply growth has slowed due to lower grades, higher costs and political unrest. In addition, the new projects and mine expansions that were scheduled to come on-line haven’t materialized, and if they do, it will not be in a timely fashion. Quite frankly, I think you could see copper peak above $4 a pound [$4/lb] this year…”
The decline in output that Puil discussed is already being seen in the financial markets as Teck Resources (TCK), Canada’s largest diversified miner, may consider acquisitions in copper mining to help offset an expected decline in the company’s output of the metal.
(HBM) is a Canadian integrated mining company with operations, development properties and exploration activities across the Americas principally focused on the discovery, reduction and marketing of base and precious metals. The company’s objective is to create sustainable value through increased commodity exposure on a per share basis by growing long-life deposits in high-quality and mining-friendly jurisdictions. HudBay is a strong stock with great analyst coverage. Of the five analysts currently covering HBM, all five have buy ratings or higher.
Southern Copper (SCCO) is one of the largest integrated copper producers in the world, and has the largest copper reserves of the industry. The company produces copper, molybdenum, zinc, lead, coal and silver. SCCO is 81.3% owned by Grupo Mexico, a Mexican company listed on the Mexican Stock Exchange. The remaining 18.7% ownership interest is held by the international investment community. All of its mining, smelting and refining facilities are located in Peru and Mexico, and the company conducts exploration activities in those countries and Chile. Southern Copper has performed quite well recently with shares soaring more than 23% over the course of the past three months.
China’s Jiangxi Copper (SSE:600362) and Japan’s Pan Pacific Copper said mining companies will pay “at least 10% more in fees” to process copper this year, China Daily reported. And Chinese mining companies have invested more than $1 billion in copper. Newmont Mining (NYSE:NEM) expects gold and copper production in 2013 of approximately 4.8 million to 5.1 million ounces and between 150 and 170 million pounds, respectively. The company plans to spend up to $2.3 billion on various projects this year. Sierra Metals (TSXV:SMT) announced that in 2012 its copper production rose 51%, to 15.9 million pounds, from the year before. For 2013, it expects copper production of up to 23.1 million pounds.
Bullish Stance on Copper
Notwithstanding the current volatility in prices, we have a long-term bullish stance on copper, supported by its widespread use, limited supplies from existing mines and the absence of significant new development projects. Prices will be influenced by demand from China and emerging markets, economic activity in the U.S. and other industrialized countries, the timing of new supplies of copper and production levels of mines and copper smelters. Companies that have a high leverage to copper prices will benefit immensely from the potential demand for the metal in the developing markets.
On today’s great occasion we would like to celebrate the 4th official birthday of Stocks on Wall Street. It was just four years ago that we started out as a small blogspot.com site and to see how far we have grown since I have no doubt that the sky is the limit for this company and team of people. Lets enjoy this day and celebrate and then get back to work to continue offering a better product to our readers day-by-day.
- James Hartje, President & Founder