Week 51 of 2014
Bouncy bouncy castles. It’s not a casino out there – it’s a fairground. DOW down from 17800’s to 17200 in a matter of days only then to bounce back to 17800’s a few days later. Oil dips below $54 on crude only then to test $60 48hrs later. It’s bonkers. Too many autobots, black box instruments – you name it, the hedge funds are playing it. I’m not it matters any more what the equity or company is doing business wise – they could be horses on a track or dogs waiting in the traps. There’s nothing wrong with a bit of volatility, the markets like it best when there are some sizable swings. But recently (last 3 months) we’ve seen the DOW dip from 17800 to test 15800 and then again 17800 to 17200 and back. It’s like getting 3 or 4 years index % performance in a week! Unfortunately it doesn’t look like these rollercoaster days are the exception – they are now becoming the norm. Investors are leaving the markets in their droves as the animal or beast that it has become is now so out of control that it’s virtually impossible to make any informed investment decisions on a fundamental stock specific basis. There are opportunities of course but it takes an animal to know an animal. Not all are cut out for these casino like gyrations. A recent media agency cited the wild swings in the Oil price as being down to ‘short covering’. If that is the case, then what is the real market price for Oil when you strip out these casino style bets? Should the Oil price be something that is shorted or played with by Hedge funds? Surely a commodity that is so important to the world should be based on pure supply and demand rather than speculators out to make a quid via shorting. Where would the Oil price be today if shorting was banned on Oil? The counter argument to shorting is that it drives liquidity. That’s nonsense and doesn’t wash. Bit like the excuse with regard to Bankers bonuses. Apparently if they don’t get the large bonuses then they’ll (the apparent ‘talent’) go elsewhere. Well – let them go. Give the opportunity of jobs to a new level/type of person – one that is not driven by ridiculously high bonuses. Perhaps then, the wild speculation will cease and the casino may return to looking more like the market of old? Markets adjust and liquidity is just fine without shorting. The swings in price might be a lot less too – that won’t please many but perhaps this valuable black gold is not something that should be played with or available to abuse? Billions of dollars of projects are being shelved at present, jobs lost and oil focused companies slaughtered. It’s fair to say that consolidation is often helpful and can support stability in the future, but this needs to come from ‘market supply/demand’ not from shorting or manipulating Oil prices for a period of time.
Whether the current oil crisis is short term or longer term, one thing is sure… as each project is shelved, that supply in the future is parked or gone. The lower oil price only serves to ironically boost the oil price in the future. OPEC are not the only ones involved. US and Russia have both increased output of late. Both should reduce output at the same time as OPEC rather than expect OPEC to carry the can. A global effort is required – it’s not just about a cartel.
The reality is… supply and demand are at odds presently, but not perhaps as poor as the Oil price suggests. Remove shorting and prevent Hedge funds from abusing the commodity and you will then get a feel for the proper market price. That’s not going happen anytime soon, but something needs to be done as the future looks very uncertain if the manipulators involved are able to influence the price so easily.
A virtual portfolio has been set up using the 2013 final trading day close figures as a starting point and £1000 has been invested in each stock. This does not include buying fees or stamp duty and is purely intended to be used as a benchmark or summary for each week. Two newspaper top ten picks for 2014 have been included to help monitor/compare against.
Week 51 stock picks performance review:
There’s 2.5 trading days left next week and then another 2.5 trading days the following week before the FULL and final results for 2014 are in. With trading likely to be on the thin side, stocks could see further rises as the usual autobots and general casino that is the market goes on holiday early.
It’s going to take a huge transformation in the Telegraph’s top picks to give the Independent picks any last minute scares. The latter looks set for another win – making it 3 on the trot. Despite the mini bounce across a few commodity picks, the sharehub’s commodity Hotlist looks set for the wooden spoon again. Commodities have not been liked by the market for over 4 years now and if bearish cycles take between 5 to 6 years on average, then it might not be too long before the Commodity Hotlist is topping charts again.
With many commodities beaten up and at low levels, investors are spoilt for choice when it comes to undervalued stocks. But some will perform and recover faster than others and some may not survive lower priced oil periods if protracted.
2015 is a new year and the sharehub will be issuing new stock picks ready for Jan 2nd open.
Current standings / Week 51 Results
1. The Independent’s Top Ten 2014 +2.90% (Weekly gain of 1.37%)
2. The Telegraph’s Top Ten 2014 -4.49% (Weekly gain of 2.40%)
3. TheShareHub’s 2014 B-List -27.80% (Weekly gain of 4.74%)
4. TheShareHub’s 2014 Hotlist -49.57% (Weekly gain of 2.74%)