As mentioned a while ago. The idea that the US tech firms are a better and safer option than Chinese firms is a little hypocritical especially after several scandals of late involving US companies. What is even more concerning is that these tech firms are answerable to US government policy. So in effect, Google, Facebook, Apple and others are all US government controlled. Does that mean that they share all data with the US government too… when asked? Facebook and others are extremely keen to demonstrate that they are independent of the US Government as that’s seriously not a ‘cool’ association to have for young folk. Who wants big daddy watching you? The truth is, it’s inescapable. The Huawei issue is not so much about security issues but more about US protectionism which has been rife before and more recently since Mr Trump’s ‘America First’ policy. Maybe it’s about time the ‘globe’ began protecting itself against US domination. Stop shopping on Amazon until they pay their fair share of taxes to the countries they trade in. Stop buying Apple phones for security reasons. Stop using Google search.. the list goes on. For the rest of the globe, perhaps it’s time to put ‘America Last’?
Week 20 was another choppy affair as US/China issues roll on like some predictable soap opera. It’s beginning to look like the Chinese will be smarter to just sit this out until November 2020. By that time, Trump’s number should be up and the Chinese can begin negotiating with the new US president. Not long to wait, 15 months will fly by and Mr Trump knows it which is the main reason why he’s upping the volume level. For the markets, it’s frustrating. Another 15 months of this and recessions will be upon us… globally. They might be shortlived or a blip, but enough to get the Algo bots in a spin and we all know how that can end up when the black boxes go into overdrive. So at present there is a cautious feel out there. Throw in Brexit unknowns and Iranian issues into the mix and it’s not a great backdrop at all. All this leads to a weaker commodity outlook as global recession fears nearly always result in a slice in commodity values. From Miners to Oil&Gas stocks, it’s a bit like being stuck in the mud at the moment. M&A is alive but there’s not much of it across the mid tier and smallcaps. It’s a big boys playground with OXY/ Anadarko size deals. Barrick Gold/Rangold tied the knot late last year. Then Newmont and Goldcorp, followed by PanAmerican and Tahoe. It’s merger mania out their in the big miners sector. But imagine if that level of merger activity was to sweep across the small caps or mid tier players. Tie ups like Tullow & Premier Oil? Amerisur Resources and Gran Tierra? Hummingbird and Endeavour. Some of these would be more like takeover deals than mergers but the point is… are investors better off with having a plethora of stocks to choose from or would the market place be more interesting with fewer stocks, lower staff levels, fewer board members, fewer remuneration awards etc. Institutional investors which have been leaving the commodity sector in numbers might well be buyers again if consolidation took place. Many stocks out there are fragile on their own but if combined with a like for like business, could flourish and grow faster through enhanced size/reduced debt/cash flows etc. Sometimes, offering investors fewer choices but higher quality investment opportunities can actually drive a more fluid and active market place. Combining businesses really can deliver better opportunities for all involved. Of course it doesn’t suit all – poor performing management teams will be given P-45’s. This would make for a refreshing change from BoD’s which have been around too long, delivered very little but have nice fat pensions and bonus share pools built up for themselves. In Premier league terms, if a team finishes bottom, the net result is usually a managerial sacking. For many AIM listed senior Directors, if they finish bottom, they just issue more shares and go again rewarding themselves like nothing has happened, completely blind to the share price destruction of previous months or years. AIM and the mid tier of companies could easily be reduced by 50%+ and the market would be fine. In fact, it would be much much leaner and better for it.
Week 20 Review: The Independent remains top but has lost some steam of late. TheShareHUB picks are struggling to gain momentum in this risk off market as commodities continue to be shunned across the board. The irony is, where O&G stocks are concerned, the backdrop to Oil looks strong especially after OPEC’s stable supply management plans and more recently sanctions on Iran. It’s global recession fears that are doing the damage near term and until Trump/China kiss and make up, it’s hard to see the market shifting its stance. Frustrating times ahead for all involved.
Another turbulent week passes with Mr Trump tweeting his way out of a China deal. There is an art to doing business with the Chinese and number one on the importance list is always do it in a way that ensures no one loses face. They don’t like public debates and prefer more honorable ways of getting deals done behind closed doors and not wide open in the media eye. Mr Trump sees things differently and his latest tweet round looks guaranteed to set back trade discussions by at least 6 months. It therefore comes as no surprise that the Chinese are already looking beyond Trump and to the next US President to form new relationships and no doubt a new trade deal. At the current rate, any successful Trump trade deal with the Chinese is likely to go the same way as Obama Healthcare. The moment Trump loses the US November 2020 Election, the chinese will be renegotiating with the next president hours later. There’s always a chance that Mr Trump gets re-elected but I think at this stage the Chinese are already beginning to hedge their bets wisely. This trade war is very different to the EU and UK Brexit talks but the end goal strategy of trying to reach an agreement is similarly based on ‘stretching out timeframes’. Keeping the clock ticking over is undoubtedly an under-rated success tool. Mrs May has run down the clock during the first 3 months of 2019 and more recently the last 2 months with pointless Labour discussions. The reality is – Mrs May is continuing the same delay tactics that she used with the EU and the EU have nothing to do with what’s going on at present. What’s she got to lose? Nothing, as she’s out the door in a matter of weeks anyway. In a situation like this, it is a wonder why she is still being allowed to run the show. Someone that has nothing to lose really should not be in charge of Brexit discussions. That said, none of the other conservative leaders look like they could do any better. Same goes for Labour and so on. These are intelligent people afterall. Which begs the question over whether they are all being completely ignorant purely to ensure that the only outcome possible is to….Put it back to the people to decide. Well, the facts are the ‘people’ decided nearly 3 years ago. It’s the politicians that have not delivered it. And that’s a poor show for democracy. The people voted. It’s the job of MP’s to deliver it. Get on with it, there is no mandate to put it back to the people.
Moving on… the surprise of the last few weeks has to be the continual ‘BUILDS’ in the US Oil Production & Inventory reports. It wasn’t that long ago that Mr Trump was asking the Saudi’s and OPEC to pump more oil to get oil prices down. The Saudi’s simple reposte was that the Oil Market is rebalancing and they are sticking to their plans. Well done them, as data is far from supporting Mr Trump’s view that we are short on supplies. Quite the opposite, we seem to be still drowning in the stuff and that is despite huge volumes being wiped out of the supply chain by Libya, Venezuela and Iran. Just imagine where we would be now if those countries were still producing at previous levels. As mentioned before on TheShareHUB, US EIA numbers seem to be a bit flaky. Unreliable would be the best description. Thus far OPEC have stuck to their quota agreement, they know what’s required to get a balanced market but for some reason, even OPEC can’t quite get there. It’s as if there is a never ending supply flooding the market that has yet to be identified. Or – it’s Oil traders creating ‘virtual’ trading pools and trading in stocks that do not exist now but may exist in the future. Mmm… that’s a recipe for a disaster if true. The biggest mystery of all is how US production continues to rise at a pace despite the rig count dropping to levels last seen some 2 years ago. Rigs mean ‘activity’. If activity is dropping, why are Oil supplies rising? It’s a puzzle that will no doubt become clearer as the year drifts along. But for the moment, OPEC are completely in their rights to stick to their plan. In fact, some might say, they should extend cuts/quotas into 2020.
Week 19 Review:
Oil focused stocks are drifting along with no clear direction and mirroring the current impasse of Crude/Brent prices. Whilst the drop has been moderate with $4pb to $5pb being shed, many equities have traded much lower. PMO is trading back at 88p after testing 108p not long ago. Tullow down from 250p to 215p. These are 15% to 20% declines. That’s significant and disconnected to Oil prices. At present the market really doesn’t like Commodities. Miners are no different. SOLG has announced a number of great news releases yet the share price does not react. After several debt/cash raises SXX looks top heavy and sp progress is likely to be slow now they are carrying many more shares in issue. Hummingbird Resources continues to under perform due to poor business performance but also compounded by a large II exiting. Capital Group sold 3% of their 12% holding, leaving a worrying 9%+ left. Fortunately, African Sustainable Fund picked up most of these shares but it’s these II swap transactions that keep prices depressed. Same has occurred on Amerisur Resources. Santander has been buying in while other II’s continue to reduce. A few weeks back Petra Diamond had a situation whereby Blackrock sold out a huge 15% holding and the price was walked down deliberately to get the last block trade away. After the II deals were completed, the price jumped by 50% from 17p to 26p. The reality is, getting elephants through small doors is 99% very damaging. II’s exit stocks for many reasons some often have nothing to do with the stocks performance. Many funds have rules for holding stocks which are of a certain value. When they fall below that level, they have to sell out. Some have a rotation policy. Some have a timeline/deadline rule. Retail investors often match share price performance to the company performance and are puzzled when they do not correlate. The truth is… sometime the market has to do its thing and that’s match buyers with sellers. A price needs to be agreed and then the trade completes. It’s that simple. Stocks that generate good news and deliver decent liquidity/volumes tend to outperform their sector even with heavy II sellers. If you have one of the latter, then you really need plenty of buyers to soak up that loose stock if you want to head higher. And there is no better tonic than ‘good news’ to bring in buyers.
Role on week 20… and some good news all round is much needed by the ShareHUB picks which in week 19 scraped back into the black. The Independent picks still looking good even after Trump’s tweetville. Don’t expect a China Trade solution anytime soon and don’t expect Trump to stop tweeting either. It’s a whole new ballgame out there for investors.
Mr Trump’s twitter account is beginning to resemble an old school US B-52 bomber dropping napalm like tweets into the market without much concern for the carnage that follows. Markets were enjoying a nice millpond period ahead of what should have been heathly China trade talks. But as mentioned a week or more ago, the Algo’s and Bots prefer volatility which is why ‘events’ like those seen over the last few days occur. The connection between politics and markets has been there for decades. But never before has a US president tweeted with clear intentions to move prices. A couple of weeks ago, Trump was at it again with OPEC. Prices were $75pb (Brent) and doing fine based on market metrics and then comes along a strawberry blonde B-52 style tweet and Oil was down to support levels in days. It’s becoming something that is fairly easy to predict. The difficulty is guessing when. All this does is incentivise short term trading rather then longer term investing. Investors are hopping around, fearful of the next killer tweet. Positions are closed going into weekends which is probably why there is a clear trend of late (particularly on commodities) of seeing prices rise strongly on a Friday afternoon or the opposite and collapsing. Whether driven higher by shorts closing or lower by longs closing or shorts opening, the market is beginning to resemble a 4 day trading week. It’s good for trading houses and brokers which all ‘need’ volume and activity to thrive. What the market (brokers) don’t like are the investors that buy and hold. Which is probably why many brokers now penalise such investors through higher fees and reward the more frequent gambling style traders with free trades when going over a certain volume of transactions. It’s not good and it’s creating an equity trading backdrop which feels like it is going no where fast despite good news flowing from many stocks. Frustrating for the ‘value-hunting’ investors who seek cheap stocks and expect them to rise once the good news flows, only to see them choked at every corner by short term traders. There’s no doubt about it, it’s tough out there at present and with US president ‘tweeting’ without restraint, it’s likely to continue for sometime.
Week 18 Review:
Not a good week for commodity focused stocks. That said, TheShareHUB picks underperformed due to dilutive funding rounds with SXX and some poor performances from HUM, AMER and CERP. The best recovery stock for the week was PDL which has recovered well after Blackrock’s hefty selling period ended but is still off by -40% for the year. The top picks need some good news to get back into positive ground and with the drilling season fast approaching, some much needed catalysts are not far away now. The Independent continues to perform well and the Guardian picks are still in the mix. Long way to go.
Another weird ‘sideways’ week for stocks with wider non specific issues taking the headlines such as the ‘leaks’ from a highly confidential UK cabinet meeting. The irony of all this is that the very meeting that resulted in the leak was about the trustworthiness of the Chinese Mobile manufacturer Huawei and their involvement in the UK’s 5G network.
Not many people know this… but… Huawei is the world’s largest telecoms equipment firm and last year it overtook Apple to become the world’s second-largest smartphone seller behind Samsung. So why wouldn’t the UK seek to appoint the world’s leading telecoms equipment firm? There has for sometime been a smear campaign against Chinese brands. It seems to be coming from the US who are clearly against the idea of anyone using telecoms equipment that is not under US control. So the crux of this comes down to who would you rather be ‘controlled’ by? The US or China? Well, neither would be the best answer but I think the UK lost its ability to ‘control’ things when they agreed to the sell off of British technology greats like ARM holdings and Imagination Technologies to foreign owners. Today, the US has a grip in everything that the now and next generation does from Facebook to Google to Apple to Intel to Amazon… the list goes on. So when a chinese brand comes into the picture and starts creating waves, the US throws its toys out of the pram. The question about Huawei should be turned around and applied to all US Tech Brands. Are they trustworthy? Recently, The Data Protection Commissioner has told a US Senate Committee that her office has reason to believe that US technology firms may have breached the European Union’s new data protection rules. Facebook not long ago admitted to data breaches on over 600million passwords. Huawei (to my knowledge) have not had such breaches. Infact, everything points to Huawei being the brand to trust. Perhaps it’s those out there that are more fearful of competition that want to keep up some old cold war communist attitude fear going which has no place in the world that we live in today. Should we be fearful of tech companies? Absolutely. But don’t for one moment trust a US company over a Chinese company. There really is no basis today to trust one more than the other. Bring back typewriters, old fashioned pens, do away with facebook and live life without being tracked and targeted? Well you can try… but ‘they’ really don’t want you too!
In terms of the UK ‘leaks’ apparently by the Defence Secretary. Well – isn’t that the same as Wikileaks? And where is Mr Assange? Behind bars? If this was the middle ages (often it resembles that period more and more these days particularly around Westminister) it would be ‘off with his head’ time.
Moving on (before TheShareHUB gets mysteriously shut down) week 17 delivered more of the same with no real moves worthy of comment. Petra Diamonds continues its recent bounce and is beginning to look in better shape after seeing what looks like the back of Blackrock. Amerisur continues to frustrate as drill plans progress at a snails pace largely due to ONGC (Indian operator). There’s nothing wrong with getting pads ready for drilling, but Sol-1 (the next well) was ready back in Dec 2018 including all permits. The well must be close to spudding now as Calao-1 drill ended over 6 weeks ago. Get on with it! Also in the news was AMER’s recent farm-in partner Occidental (OXY) throwing the cash and shares around in a whopping $55billion bid for Anadarko. It’s good to see M&A back in the limelight and Anadarko has certainly drawn in some key players. First Chevron wanted in. Then Occidental trumped the deal and then Mr Buffet (not known for taking risks) waded in with a 20% stake interest (via $10billion investment). Everyone seems to want a slice of Anadarko which begs the question why doesn’t Anadarko just continue to go it alone. It’s clear that the business is attractive why else would predators be all over it? Occidental looks nailed on to succeed and with Buffet by their side, they have a strong backer. Amazing to think that this huge US commodity company sought out little olde Amerisur Resources when acquiring key acreage in Colombia. Amerisur must be sitting on something pretty interesting for OXY to pay $93m just for the priviledge to explore it (and a 50% stake of course). The market seems to disagree with OXY and is thoroughly disinterested in Amerisur shares with the stock trading at 12.75p just 2p above where it was prior to Indico-1 5.4kbopd flow test news.
Finally, news that the Saudi’s did not discuss oil supplies with Mr Trump is another embarrassment for the President. Mr Trump really ought to stay clear of trying to push OPEC around. Instead, he should concentrate on getting US production data vetted and analysed correctly. The numbers that have been coming out of the US for the last 12 months just don’t stack up. Rig counts are dropping and not rising yet production is apparently rising to all time highs. Builds are appearing when Draws are expected. If it’s not OPEC, then who’s fiddling with the numbers? And why? It might not be too long before the market shows signs of rebalacing but in the meantime, the US production figures suggest that there is still a glut out there. Why would the Saudi’s produce more? Get the US numbers correct and the picture might be very different. If it’s oil traders that are spoofing their way through trading supplies, heaven help us all, if or when, the real picture is revealed. We could have PoO at $100pb again in no time. Historically, it wasn’t that long ago that Oil prices were in the high $130’s so $100pb is nothing to get worked up about… unless you are Mr Trump and you want to turn the screw on Iran.
Week 17 – Status
The Independent maintains control at the top. All picks doing well but week 17 was like a carbon copy of week 16 which confirms the overall markets sideways action.
A disappointing week for TheShareHub top ten picks. Thus far, updates from Petra Diamonds, Hummingbird Resources, W Resources and more recently Columbus Energy Resources have all been well below expectations. Not surprisingly, each stock has been treated to the normal heavy handed market treatment. PDL has improved of late after proving that bigger stones can be found using the current mining strategy. If they continue to deliver some whoppers the market might begin to wake up and buy back into their recovery story. At 19p, the share price is off 17p lows but a fair distance away from the 50p+ seen last year. HUM’s update was nothing short of ‘awful’. Yanfolila began life on time and on budget. Since first gold pour, it’s been downhill and downhill fast. Problems with resources, grades, infrastructure (bridges), mine stability and local artisinal workers have all led to HUM’s decline. Poor management decisions have not helped either. HUM will be praying the ‘wet’ raining season is kind this year as last year was horrific. It could take a few quarters yet before recovery signs are seen. And finally onto, CERP. The company delivered an update which investors had been waiting some 6 months for. News on the SWP drill arrived but disappointedly looks considerably watered down. Big prospects and deep wells now look more like shallow/mid prospects and a single well at best. Production is down from 1000bopd to roughly 650bopd. That was a shocker and there’s no way the CEO can dress that failure up despite trying too! Mr Koot is beginning to lose some shine but for now Schroders seem to be keeping the faith with him. The next update is likely to be around M&A with a possible transaction taking place in South America. It’s unclear how this will be funded and investors are beginning to tire of the constant share placings and subsequent dilution.
Following on the dilution theme, W Resources seems to be intent on issuing shares like confetti. The CEO continues to dilute smaller investors and is showing no signs of letting up. Business progress has been slower than expected and investors are being penalised for managements inability to deliver the project on time and on budget. Harsh but fair. There’s no sugar coating performances or news here on TheShareHUB. Unlike other blogs, TheShareHUB is not paid or ‘lunched’ in return for spinning glorious/favourable reports or articles. If it’s bad, it’s bad. If it’s good it’s good. There are plenty of catalysts / news drivers coming in the future which can drive share prices higher across TheShareHUB picks so lets hope we have got all the bad news out there now and can look forward to some improved updates across the top picks list. Near term, Amerisur Resources looks the most likely stock to make a significant move providing the drill bit delivers the goods of course. Watch out for SOL-1 spud news which looks likely for next week based on previous Indico-1 well/rig preparations.
Week 16 – Review:
The Independent newspaper picks continue to perform well bolstered by major Indices performances. Commodities have been slow to adjust to the bullish Oil market and Gold’s recent wobbles on lower risk backdrop has not helped either. Slowing global growth fears continue to hold many O&G and Miners back. There are plenty of reasons to see the DOW top off and return back to 24k levels and not many bullish catalysts to see higher highs. The Algo bots make more money from volatility and it’s heading towards that period where if major Indices can’t push higher, then may as well push them lower and go again? That’s been the theme over the last 12months. Sell in May? That’s one to ponder.
A decent week for The newspaper and ShareHUB picks. Markets are inches from all time highs and we are only just into Q2. The mood music has changed significantly since the darker days of Q4 2018. A lack of interest rate rises (forecasted) from the Fed Reserve have certainly helped as has progress on China / US trade wars albeit ‘verbal’. US elections are still some 18months off but it’s already pretty apparent that Mr Trump’s tweeting appears to have been culled or watered down. Next he’ll be slimming down Boris style?
The next 3 months should be fairly active for the markets before the usual summer lull period kicks in. For commodity focussed stocks, the summer months tend to be the best time to get the drill bit out (depends what part of the world you are in of course) and that normally bodes well for investors looking for exposure to high risk reward opportunities. From the ShareHUB picks, PetroMatad is set for an exciting exploration phase beginning in July with Heron-1 and Red Deer-1 wells. Amerisur Resources should have one or two wells in play on the CPO-5 licence (30% interest). CERP should be approaching drilling in the SWP region although an update/RNS is expected later today (PM) so clear guidance should be forthcoming. With Oil prices looking firm, the high debted plays like PMO, ENQ and Tullow are looking less risky and more attractive by the day. Earnings from all 3 have been impressive and defied a market that seems overly pessimistic on the sector. It could be that low hanging fruit with less risk (eg FTSE100) is where the funds prefer to be for now, as growth rates have been impressive in 2019 as witnessed by the newspaper picks which are both showing heathly gains and notoriously aligned towards bluechip picks. Overall, markets are surprisingly quiet in terms of volatility. Which means one thing…watch out for the next shake coming as the Algos/black boxes make more money from volatility than they do from mill pond ripple free markets.