Carbon Taxes and OPEC

By |2016-11-17T16:03:03-04:00December 14th, 2015|Categories: Global Market Update|Tags: , , , |

Are worries about climate change destroying OPEC? Source: Last week OPEC died. Nigerian oil minister Ibe Kachikwu announced that OPEC would abandon its nominal target of 30 million barrels per day. Instead, every country would set its own target. Saudi Arabia will continue to pump around 10 ½ MMBD—close to a record. Iran won’t accept any curbs until after they restore their oil shipments. A cartel is supposed to limit supply in order to [...]

Pump and Dump?

By |2016-11-17T16:11:05-04:00August 26th, 2015|Categories: Global Market Update|Tags: , , |

Why do the Saudis keep pumping oil?   Saudi Arabia’s “Empty Quarter.” Photo: Nepenthes. Source: Wikipedia Oil prices are down over 50% from a year ago. They’re at a six-year lows, and apart from the Financial Crisis, the last time we saw crude below $40 was in 2004. If prices stay this low, gasoline should cost less than $2 per gallon soon. Basic economics teaches that when prices fall, producers adjust by reducing their output. After all, [...]

Slipping on Oil?

By |2016-11-17T16:11:13-04:00August 21st, 2015|Categories: Global Market Update|Tags: , , |

Are oil prices close to a bottom? Source: US Department of Energy A year ago oil prices had just started falling. Many thought that the pullback was temporary. Now the price of crude oil has plunged almost 60%, and producers are still pumping as much oil as possible—Saudi Arabia, Iraq, Russia, US shale drillers. It seems like they’re playing a global game of chicken, daring one another to cut production first. And with a deal pending to [...]

Is Chevron Cheap?

By |2016-12-01T15:44:44-04:00August 6th, 2015|Categories: Technical Perspective|Tags: , , |

The performance of energy stocks is clearly related to the price of oil. The attached chart, based on thirty years of data, compares the price of Chevron (relative to the broad market) with the inflation-adjusted price of crude oil. Based on this data set, Chevron will outperform the market if oil prices increase from here. If oil trades lower, Chevron has roughly equal odds of beating the market. From an options perspective, then, we have a reasonably-attractive [...]

Toward a Better Understanding of Emerging Markets

By |2016-11-17T16:21:10-04:00April 23rd, 2015|Categories: Contested Spaces|Tags: , , |

How Did We Come to Be? The conventional account of the current financial industry’s concern with what are referred to as the Emerging Markets begins in the Cold War at the World Bank Group. The World Bank was founded after the Second World War as an umbrella organization to “end extreme poverty and promote shared prosperity” by making leveraged loans to countries ravaged by war and to countries whose poverty could be attributed to other reasons (usually [...]

Choppy Seas

By |2016-11-17T16:23:25-04:00March 23rd, 2015|Categories: Global Market Update|Tags: , , |

Image Source: iPaintingsForSale What’s wrong with the market? So far this year, the market has been struggling. Up 300 one day, down 300 the next, it can’t seem to get its sea-legs. If you watch too closely, the volatility will make you sick. What’s wrong? Two words: the dollar, and oil. A strong dollar may help American tourists plan European vacations, but it’s tough on folks who earn cash overseas. Overall, earnings expectations for companies that earn [...]

Transocean’s Vision: Short or Long Term? Depends on Your Interests.

By |2016-11-17T16:26:06-04:00February 20th, 2015|Categories: Money Basics|Tags: , , , |

As oil prices dropped recently many have predicted the end of drillers such as TransOcean (RIG). The company has certainly experienced its share of disappointments. From the Gulf experience with BP to the CEO being charged with a lack of vision for the future as he was shown the door by the Board of Directors. By the way, this is the same CEO that was commended for leading the company through the Deepwater Horizon disaster. CEO vision [...]

Are Lower Oil Prices Good for Everyone?

By |2016-11-17T16:27:12-04:00February 7th, 2015|Categories: UI Journal|Tags: , , , |

January 2015 sure started off with many mood swings. Thank you low oil prices. In December oil prices were still heading down but did not bottom out until January. Lower oil prices have a negative impact on corporate profits mainly in the energy and multinational companies. This triggers the U.S. dollar to strengthen which makes the U.S. products more expensive and less favorable to foreigners. The chart below shows the divergence between U.S. Dollar Index (yellow line) [...]

Are Energy Stocks Undervalued

By |2016-11-17T16:27:22-04:00February 6th, 2015|Categories: UI Journal|Tags: , , |

Energy stocks have tumbled along with crude oil. But have they reached the bargain basement? This depends on one’s outlook for the price of crude. The performance of energy stocks relative to the broad market is well correlated with the underlying commodity. The charts below illustrate the historic relationship since 1984, a period with many ups and downs. We note that today’s investors have done a reasonable job of discounting the pair. The energy sector seems fairly [...]

From Russia, With Love

By |2016-11-17T16:28:19-04:00January 29th, 2015|Categories: Global Market Update|Tags: , , , |

Is Russia on the brink? Image Source: Jeremy Nichol Ever since oil prices collapsed folks have wondered when Russia would follow. After all, falling oil prices have led to a fall in the Ruble. In 1998, the Ruble’s collapse caused a financial crisis. Isn’tanother one just around the corner? Well, this isn’t your father’s Russia. Back then Russia was running twin fiscal and current account deficits. They had to borrow just to keep their economy going. When [...]