Crude oil is bottoming

29 July 2017

Dear Fellow Investor

I spoke with my analyst Friday and we concluded that crude oil is bottoming. Sentiment among the investing public is extremely negative and bearish.

As far as I know, none of the local investment houses are recommending oil shares

Ezra, a large oil services firm in Singapore just declared bankruptcy.  Some local highly geared oil companies are facing insolvency.

Hedge funds/ retailers are holding a historically high net short position in crude oil.

The news could not be worse.

When the majority of the crowd believes the market will go down, usually the opposite will happen.

Disruption is moving into the oil rig business to squeeze more profit.

In the last 3 months commercial traders have been covering their massive short positions according to the CFTC report ( The CFTC is the commodity futures trading commission in Chicago and traders must report their positions every week.)

Commercials are the strong hands of any market as they are producers and consumers.

Petronas and Exxon are commercial traders. They know more than the retailers and hedge funds as they are the strong hands.

I am looking for opportunities in this sector and if they meet my value investing criteria I will allocate some of our cash reserves.

The risk reward profile of some of these companies is favorable.

Money is moving out of the over hyped tech shares into value. The PEG ratio which measures price divided by earnings growth is a good way to know if it is safe to buy.

For example Alibaba has a PE of 58 but its growth is 30 % year on year so that indicates Alibaba is too expensive.

On the other hand the PE of Apple is 16 but it is growing at 27 % a year so it is safe to buy Apple.  We need a PEG ratio of less than one before buying.

To support the bullish case for crude oil, rig counts in the shale oil space are picking up. The Saudi oil giant Aramco is planning an IPO. And they will do all they can to boost the oil price.

IPOs are like that. The underwriters will do all in their power to boost the price of their offering before listing. 

Once listed, the insiders will sell to the uninformed greedy sheep and the price goes down.

Invest well and grow your wealth,

 Bill

From Ed Steer's gold and silver report

 Today’s ‘critter’ is the Arctic hare, a creature that I’ve very familiar with, having seen countless numbers in the high Canadian Arctic when I was a resident there for almost eight years.  These are large animals.  They can found singly, or in small groups of up to a dozen animals.  I have photos buried in my slide collection that I took from a helicopter where there were literally hundreds in a group.  In the very high Arctic, like the other animals up there, they had no fear at all of humans, as they’d never been hunted.  It’s easy to get within a few feet of them.  No telephoto lens required!