With the DOW 30 pinging around like some fruit machine, it is clear for all to see that this market resembles more of a casino then ever before. It’s ludicrous. How can the DOW be down 400pts and then up a net 1200pts a day later. A 5% move on a major indice used to be par for the course a few years ago but that was based on a 12 month trading performance, not 12 hours. And that’s the problem investors face today. It’s an ever changing market but one which seems more and more like a day traders dream. Many stocks are struggling to make recovery moves simply because the short term money is being played in 10% ranges. The small cap commodity sector continues to suffer due to the lack of II investment. Brexit and US/China trade wars are certainly two strong reasons for many longer term investors to remain on the sidelines. There are more unknowns out there today than there were at the start of year which saw the DOW wobble from 26500 all the way down to 23000 levels. The only saving grace near term is that Christmas Santa Rally period is upon us and both of the biggest issues out there have been kicked down the road until late Jan or Feb 2019. Gives all those involved a nice festive period off and perhaps allows the bots a break too?
Last week OPEC finally agreed to deliver solid cuts across production including Non-OPEC Russia. The latter cut by double the market expected rate and when coupled with Canadian cuts, the true number is nearer 1.5mbopd being sliced from supply. PoO had been driven down to $50pb WTI based on Mr Trumps’s 1mbopd prefered cut. It’s quite a surprise to see PoO still trading near $52pb after Friday’s blockbuster reveal. PoO should be trading nearer $60pb based on those cuts but with the market overly weighted to siding with Mr Trump, the chances are most funds are still heavily short Oil. Those kind of positions take a while to unwind in an orderly fashion and sometimes it can take just two days trading before the herd starts to gather speed. PoO has little attraction to the downside based on % returns from $50pb. Anything in the $40’s would surely be short lived as those funds close out fast. Going long at $50pb range would seem to make more sense as the pop that comes from shorts covering is normally quite violent and fast. Keep an eye on PoO over the coming days as the ‘pop’ has yet to happen and is long overdue. Stocks like Tullow and Premier Oil tend to be more sensitive to PoO due to higher production volumes and debt positions which need servicing. That said, Premier Oil updated market last week highlighting impressive 30% Oil hedges on production which has yet to be rewarded. All seems well with PMO but looking at the share price it would be hard to see. Same could be said of Amerisur Resources. An exploration strike on CPO-5 block with Indico-1 well looks huge. Flow rates have yet to be released but if they are anything like the Mariposa-1 well, they could be in excess of 4600bopd. Amerisur is one of many stocks out there that has been hit heavily by the poor sentiment in the Oil&Gas sector. But the difference with AMER and other stocks is that AMER are debt free, cash rich and a low cost producer. With a fully funded active exploration programme in 2019, it’s not likely to disappoint the investor that likes solid fundamentals with some exciting exploration thrown in on top.
Investing or should I say… ‘Trading’ in 2019 is likely to be tougher than 2018. Many are calling a bear market and most see moderate growth at best. Much hangs on US/China trade deals as since these stalled, global growth has also stalled. Fix one and you might fix the other. More on what to do in 2019 next week. For the moment the focus is on 2018 performances and thus far, TheShareHub is out-performing the newspaper experts picks. There’s still a chance TheShareHub picks can tickle over the line into positive ground and if PoO edges back to $65pb on Brent, then it could be another positive year for the picks.
As for Brexit, Tory’s and the EU. All are unfortunately in a position of not wanting to act in the interest of the UK. The Tory’s always seem to capitulate through self interest. Too many wannabies that think they can do better but in all cases more focused on their careers than the man or women on the street. Prime Minister May will surely be voted out this evening. Not through her mistakes but through personal agendas within the Tory party. The best thing for Mrs May is to be voted out. Give the lady a much deserved rest and break from the brat pack. She must be knackered? She deserves great respect. As for the new boy that comes in, well, his days are numbered too so it doesn’t really matter who comes in because Labour will undoubtedly be winning the next election with a huge margin. No stand required – no preference given. Just a view of what will inevitably unfold. The Tory’s picked up after Mr Brown’s mess and now it ooks like Labour will be coming in to manage the Brexit mess. But first, we’ll have a completely unneccessary phase of Tory leadership battle which has nothing to do with Brexit and everything to do with ego’s. What would the world be like without Politicians? Now there’s a thought…
Week 49 Summary: