This week’s USDJPY rally was the largest one week rally since July. 103.85 may prove tough to penetrate so look for a dip next week.
Imagine walking into a casino and taking a seat at the nearest roulette table. You set down a 0 bill, receive four green chips, and proceed to stack them all on red. If the ball lands on a red number, you instantly double your money. If not, you lose it all and walk away with nothing.
The croupier gives the wheel a spin, lets the ball fly, and waves his hand over the table to signal no more bets. The adrenaline starts pumping as you watch the ball bounce from slot to slot, finally settling on… 20 black.
Your chips are unceremoniously scooped up. That was fast.
#-ad_banner-#But wait. This is no ordinary roulette wheel. The dealer decides to reimburse you for your play and gives you back. Emboldened, you pocket the chips and lay down another Ben Franklin on the table for a second spin. This time Lady Luck smiles on you.
The ball lands on 5 red. The dealer doubles your bet and pushes 0 toward you. But once again, he gives you an extra bonus just for playing.
The laws of mathematics say this is a "can't-lose" proposition. Guess wrong, and you still get 40% of your money refunded. Guess right, and you're entitled to an extra 40% bonus on top of any winnings. Pretty soon you'll be asking the pit boss for permission to raise the table limit to ,000 per hand, or 0,000.
That's what the Cook Inlet Recovery Act "loophole" is offering investors in oil and gas right now.
The investment world hasn't yet caught on to the Cook Inlet Recovery Act yet, which is why now is the perfect time to tell you about it. Simply put, it may be one of the easiest tools we can use to secure big gains and high yields over the next few years…
Passed to stimulate production and tap into Southeast Alaska's abundant energy resources, the architects of the Cook Inlet Recovery Act are aiming to boost the availability of critical natural gas supplies during the harsh Alaskan winters.
You see, as with any sort of business venture, oil and gas companies prospecting for hydrocarbons involves an element of risk. Some holes are bountiful. Others are dry. You win some. You lose some. And there are high stakes. Drilling and completion costs in places such as the Bakken Shale in North Dakota (where demand for fracking crews is fierce) can run more than million per well.
Even small independent producers have to spend huge amounts of cash to explore and develop their properties. Magnum Hunter's (NYSE: MHR) upstream spending budget has totaled 2 million through the first half of 2013. Kodiak Oil & Gas (NYSE: KOG), which has seven rigs running, spent 8 million last quarter alone.
Whether these companies find oil or not, that money is gone.
But the Cook Inlet Recovery Act has changed that for any company in this Alaskan oil-rich area.
This is a place where explorers can spend freely knowing that they'll recoup 40% of whatever capital expenditures are made. Guaranteed.
So if a company invests 0 million for exploration and development, it gets back million in the same year those expenses are incurred. And if that wasn't generous enough, there's a second component.
For any well that turns out to be a dud and isn't economic to operate, the state will throw in an additional 25% credit (technically a tax-loss carry-forward). When combined with the initial 40%, that means 65 cents of every dollar spent will come back to the company.
Not only do these incentives eliminate most of the risk, they let producers exploit abundant energy reserves and send the state of Alaska a bill for roughly half the cost.
And the crazy part is, Cook Inlet is a proven hunting ground. It relinquished 227,000 barrels of oil per day at its peak and still contains hundreds of millions more up for grabs. In fact, the latest U.S. Geological Survey study estimates the potential remaining haul at 600 million barrels of oil and 19 trillion cubic feet of gas.
I know of no other place in North America where this one-of-a-kind opportunity exists.
But harvesting that oil won't be cheap. To raise capital, one company operating in this space recently issued preferred shares that carry a rich yield of 10.1%, and that's just part of the reason that I recently recommended it to my High-Yield Investing readers.
Bottom line, with the Cook Inlet Recovery Act "loophole," companies can take on a lot more risk — and reap more reward — with a lot more safety. You'll be hearing a lot more about this area in the coming months — and you'll want to consider companies operating in this space for your portfolio.
22nd Century Group, Inc. (OTCQB:XXII)
today announced that the Company received approval to list its common stock on the NYSE MKT. Trading on the NYSE MKT is expected to commence on Tuesday, March 11, 2014 under the Company’s current symbol, XXII. In connection with this NYSE MKT listing, 22nd Century Group will cease trading on the OTCBB and OTCQB….[Read More Here]
22nd Century is a Buffalo based firm and aside from trying to find value looking at metrics of growth or debt sensitivity will make you nuts. XXII has it’s Alpha inside of it’s technology, the same technology that was verified when British American Tobacco signed a business/re-licensing agreement.
I’ll cover more over the weekend. In the meantime, I’m takign today off and going shooting and riding out at my families land with a buddy. Enjoy NFP and Twitter Hate, at least I won’t be there to add more to the disintegration of Twitter’s effort to bring us together.
US Dollar warns of a nascent trend change after prices broke key chart support. The SPX 500 continues to grind higher, setting another upside record.
One of my favorite stocks for the next Internet boom has recently come under a short-attack. Investors are betting an impressive billion that the stock price will tumble, while more than 11.8 million shares of this company are borrowed and sold short.
#-ad_banner-#But this isn't one of your fly-by-night tech companies with no earnings. This billion behemoth made almost .9 billion in earnings last year, and I think a bubble is forming that could send shares higher.
It's one of the most hated stocks on a shorted basis and I'm buying more.
Bubbles Can Form On The Short-Side As Well
High short interest in a company is usually reserved for small startups or financial train wrecks, companies that post little in the way of profits and trade at exaggerated price multiples. Risks are high in these stocks and investors on both the short- and long-side are looking at big moves if their theses plays out.
But short attacks can hit other companies as well and sometimes the selling can build on its own momentum. Increased short selling can drive the share price down, which seemingly validates the reason to be short. Others jump on the bandwagon because they figure that many investors cannot be wrong.
Understand that an investor creates a short position by borrowing and then selling the stock. To cover the position, they must later buy the stock. Even if there was an initial reason to be bearish on the stock, a bubble can form on the short-side as negative sentiment feeds on itself and the amount of borrowed shares grows. When the stock doesn't fall, or when positive news is released, all these borrowers can end up supporting the price or even driving it higher as they rush in to buy back the shares.
When a bubble forms on the short-side, I like to look for a strong outlook that will eventually send the shorts running for the exit, and few have a stronger outlook than a company I wrote about last November.
Are you ready for the next Internet boom?
In case you missed the previous article, we could be looking at another Internet boom within the next couple of years. This one will be based on an explosive increase in bandwidth and storage needs. Google (Nasdaq: GOOG) will be coming out with its Google Glass product this year and, for better or worse, will give people the ability to record and post Web videos of just about every waking second of their lives.
|EMC Corp. has led the market in worldwide external storage since 2008 and has even been gaining market share over the past four years.|
Combine this with the increasing data needs from smartphone usage and you create a huge demand for information storage and infrastructure.
EMC Corp. (NYSE: EMC) has led the market in worldwide external storage since 2008 and has even been gaining market share over the past four years. Beyond storage, the company also owns 80% of VMware (NYSE: VMW), the leader in cloud virtualization, one of the fastest growing segments of information technology.
I posted my previous report covering EMC on Nov. 19, after the shares tumbled ahead of a disappointing third-quarter report that was largely expected. Shares are more than 12% higher since the article, but I am still a buyer and increased my position on Feb. 27.
Not only is the company's long-term outlook intact, but now I think a short-bubble has built in EMC and will either burst, sending shares zooming higher, or will at least support the share price until the demand for infrastructure and storage rebounds.
Short interest in the company has more than doubled in the past four months and it is now the second most shorted stock after AT&T (NYSE: T). Short-term investors have piled on as the company's core business slows but the long-term potential through cloud services and data management remain intact. Investors are betting almost billion that the shares will fall, nearly 7.5% of the market capitalization. Short bets increased by 11.8 million shares as the stock fell 11% in the late-January market sell-off but have since recovered near 52-week highs.
What is amazing is that even as this massive short interest has been building since October, shares have not been under that much pressure. The stock slumped in late January with the rest of the market but is up more than 13% since October.
The company beat fourth-quarter estimates but provided guidance below expectations on slower growth in the core infrastructure segment. A restructuring plan was also announced, which spooked the market enough to send shares down almost 3% on the news.
Since weak guidance and the need for a restructuring plan only sent shares down 3%, it doesn't sound like the kind of weakness that will make all those short positions profitable, and I think many of the shorts will be forced to close out their positions when the idea fails to make them any money.
Not everyone hates the stock. Hedge fund guru David Einhorn just disclosed a million stake in the company, established in the fourth quarter. More than 82% of the shares outstanding are owned by mutual funds and institutional investors, including Appaloosa Management and Citadel Advisors.
My target price remains at .85 on .05 per share in 2014 earnings, but I would bump my buy-under price to on the strong upside potential from short positions clearing out. The high short interest doesn't necessarily add anything to the long-term outlook, but it does add some near-term support and could be a catalyst for a strong upside pop on any positive news.
Risks to Consider: Investor sentiment can trump strong earnings and outlook for an extended period and it looks like the market loves to hate EMC. Investors should be ready to stay invested even as pundits cry to get out. The upside catalysts are there, it's only a matter of time.
Action to Take –> EMC is in one of the best industries for future growth as more business services switch to the cloud and Internet traffic increases. Shares should perform well over the next couple of years while the high short interest adds a catalyst that could send prices up quickly.
Submitted by Francisco Toro via the Caracas Chronicles blog,
Say you come into Venezuela with just and an eye for business. Just how much money can you turn that bill into using tried-and-true, being-used-right-now scams? With a bit of gumption the answer to that is…5K or so. Really. Here’s how.
First, take your crisp new dollar bill to a black market currency dealer and buy yourself Bs.85.
Did you make sure to get travel insurance before you trip?
Now go to a doctor and buy yourself Bs.85 worth of medical attention. Any pretext will do. Don’t forget to get a receipt, though: your insurance company back home will reimburse your 85 bolivar claim at the official rate, giving you back for every 6 bolivars and 30 cents you spent.
So after one doctor’s visit, your has already turned into .50. Not too bad.
But we’re just getting going here. Needless to say your next step is to take your .50 right back to the currency tout and buy yourself 1,150 bolivars.
Next, take your 1,150 bolivars to any reputable Caracas jeweller. There, you can get about 5.7 grams of 18-karat gold for that. As it turns out, back stateside those 5.7 grams of gold are worth 2.29.
Your Caracas black market dollar dealer will be expecting your call by now: the 2.29 you netted for the gold buys you 15,495 bolivars.
This is fun, isn’t it?
But maybe you’re getting a bit impatient at this point. Sure, a 18,290% profit with no risk and for doing no real work isn’t too bad, but let’s say you want to make some real money.
For that, you need to go to a market with genuinely grotesque price differential. And in a petrostate like Venezuela, that can only mean one thing: gasoline.
At Venezuela’s ludicrous price of 0.097 bolivars per liter, the 15,495 bolivars currently burning a hole in your pocket can buy 159,742 liters of unleaded gas. That’s 42,200 gallons or so.
The next step is to load your gas into a tanker truck and drive it out to Colombia, where each and every one of your 42,200 gallons will sell for US.14.
By the time it’s all said and done, that clean, crisp bill you came into Venezuela with has turned into US4,905.
That’s a seventeen million percent profit margin for doing basically nothing.
This isn’t just some thought exercise, it’s the central reality of the Venezuelan economy today.
The catch, of course, is that the viability of each of these scams depends first and foremost on having official protection from some regime-connected power broker. You can’t smuggle gasoline out of the country without a National Guard officer (or 10) taking a cut. You can’t load much gold into a northbound plane without paying off an airport guard. Any attempt to buy a substantial number of official rate dollars is going to depend on some regime official – probably wearing olive green -giving his go-ahead.
As the protests mount on the streets, it’s important not to lose sight of this: it’s these rackets those guys are protecting.
And their willingness to use violence to protect them is roughly proportional to the profit margins involved.
Mid-March look extremely important for the yellow metal…
I recently put a hole through the knee of my favorite pair of blue jeans. I can't say I was too surprised. I think I've had them for more than five years.
Out of curiosity, I surfed online to investigate the latest styles. I was tickled to see pants tapered at the ankle are all the rage, much like the 1980s fashion. Less than 10 years ago, flared leg pants were in, mimicking the bell-bottoms of the 1960s.
I don't try to keep up with the latest trend. Buying something that ends up at the bottom of my closet within a year's time goes against my frugal nature.
#-ad_banner-#And some trends just don't suit my needs. For instance, how would I even begin to wear tapered-leg pants with cowboy boots? My worn-out jeans will eventually be replaced by an identical pair of Levi's boot-cut jeans — a classic that has suited me for decades.
The stock market is a little like the fashion world. There are always competing tensions between form and function. And this year, both forces got their due.
Take for instance Clorox (NYSE: CLX). Normally, the consumer staples company is a stable holding. It's considered to be a slow and steady grower. I'm sure most day traders would view it as downright boring. But since I notified readers of The Daily Paycheck, my premium income investing newsletter, that we would purchase Clorox on February 19 of last year, it's been anything but boring.
Stable dividend stocks like Clorox were the fashionable darlings of the market when Treasury yields were historically low. After all, why settle for a 1.8% yield from a 10-year Treasury when you could get a 3% from a stalwart equity? But when the Federal Reserve signaled in May that it might let long-term interest rates rise, steady dividend payers dropped out of favor. For about a few months they were less fashionable than shoulder pads. Now that the Fed wants to leave rates low — and the economy still appears to be fragile — dividend payers are back in vogue.
In the television series "Project Runway," host Heidi Klum is famous for her catchphrase: "In fashion, one day you're in, and the next day you're out." But when it comes to investing, I'm in it for the long haul. I don't want the latest fad. I want what lasts.
That's why I'm telling my Daily Paycheck readers how to survive today's fickle market by following a few simple tips, which I'll share with you today…
1. Find your classics. Ignore hotshot fund managers and Wall Street pundits. Find investments that are suitable for your needs. In The Daily Paycheck, my classics are securities with good fundamentals and dependable and/or growing dividends.
2. Buy more when your classics are out of style. Wall Street might tell you to avoid out-of-favor securities. But when prices drop on classic dividend payers, the yields rise. These are the times I get out my shopping list. For me, this is the equivalent of finding my Levi's on sale. At a good clearance price, I'll buy more than one pair.
3. Wait or start small when your classics are in style. Because market fashion is fickle, you might just want to wait for a better price point if your classic is in vogue. Or you can do something I often do in my Daily Paycheck portfolio: Start with a small stake in your classic, and buy more when and if prices drop.
4. Reinvest dividends. This is perhaps my best weapon for a fickle market. When one of my classic holdings is trading at a fashionably high price, my reinvested dividends buy fewer shares at slightly lower yields. When my classic holdings are out of favor, my reinvested dividends buy more shares at higher yields.
If you can follow these simple tips, you'll be well on your way to navigating the market's short-term noise and creating an income-generating portfolio that stands the test of time. To get the most out of your portfolio, however, I recommend readers follow these tips while using my Dividend Trifecta strategy.
Simply put, the Dividend Trifecta is a three-part strategy that effectively multiplies the income earned on every dollar you invest. So far, we've found that it's 43% safer than most "traditional" income strategies and it's helped me earn over ,000 in dividend checks since 2010. To learn more about how you can use this simple strategy, click here.
While the world is convinced that Putin’s Tuesday press conference was an admission of blinking to the west, the reality is anything but that, and hours ago Crimea’s parliament voted to join Russia on Thursday and its Moscow-backed government set a referendum within 10 days on the decision in what Reuters said is a “a dramatic escalation of the crisis over the Ukrainian Black Sea peninsula.” To be sure, the Crimea – which has an ethnic Russian majority – affiliation to Moscow as opposed to Kiev is well-known, yet still the sudden acceleration of moves to bring Crimea formally under Moscow’s rule came as European Union leaders gathered for an emergency summit to seek ways to pressure Russia to back down and accept mediation. And now all Putin has to do is sit back and say the people have spoken and without spilling a drop of blood has effectively split the country in two parts, with the entire east of Ukraine, where pro-Russian sentiment also runs high – sure to follow Crimea. Just as we said from the very beginning.
The Crimean parliament voted unanimously “to enter into the Russian Federation with the rights of a subject of the Russian Federation”. The vice premier of Crimea, home to Russia’s Black Sea military base in Sevastopol, said a referendum on the status would take place on March 16. The announcement, which diplomats said could not have been made without Russian President Vladimir Putin’s approval, raised the stakes in the most serious east-west confrontation since the end of the Cold War.
Far from seeking a diplomatic way out, Putin appears to have chosen to create facts on the ground before the West can agree on more than token action against him.
EU leaders had been set to warn but not sanction Russia over its military intervention after Moscow rebuffed Western diplomatic efforts to persuade it to pull forces in Crimea, with a population of about 2 million, back to their bases. It was not immediately clear what impact the Crimean moves would have.
European Commission President Jose Manuel Barroso said in a Twitter message: “We stand by a united and inclusive #Ukraine.”
French President Francois Hollande told reporters on arrival at the summit: “There will be the strongest possible pressure on Russia to begin lowering the tension and in the pressure there is, of course, eventual recourse to sanctions.”
To be sure, the new Kiev government – which may or may not have killed its own citizens in order to rise to power while blaming the atrocities on Yanukovich as described yesterday - has responded in kind to how Putin views them, and declared the referendum illegal and opened a criminal investigation against Crimean Prime Minister Sergei Askyonov, who was appointed by the region’s parliament last week. The Ukrainian government does not recognise his authority or that of the parliament. Still, it is by now far too late for Kiev to enforce its will in Crimea.
In the meantime, and confirming that Putin has all the cards, EU leaders had been set to warn but not sanction Russia over its military intervention in Ukraine after Moscow rebuffed Western diplomatic efforts to persuade it to pull forces in Crimea back to their bases. According to EU sources the leaders gathered in Brussels delayed the discussion on sanctions to Russia to a new meeting in two weeks. As we stated yesterday, due to stern German industrial lobby objection, Europe will never implement full blown sanctions and at best will stick to some optical wristslap which has no real adverse impact on Russia.
But back to the Crimea, where a parliament official said voters will be asked two questions: should Crimea be part of the Russian Federation and should Crimea return to an earlier constitution (1992) that gave the region more autonomy?
“If there weren’t constant threats from the current illegal Ukrainian authorities, maybe we would have taken a different path,” deputy parliament speaker Sergei Tsekov told reporters outside the parliament building in Crimea’s main city of Simferopol.
“I think there was an annexation of Crimea by Ukraine, if we are going to call things by their name. Because of this mood and feeling we took the decision to join Russia. I think we will feel much more comfortable there.”
All the while, Europe is engaged in idiotic meetings and summits, spearheaded by John Kerry, who was quick to point out how constructive the meeting has been. Perhaps it would have been more so if Russia had participated:
Russian Foreign Minister Sergei Lavrov refused to meet his new Ukrainian counterpart or to launch a “contact group” to seek a solution to the crisis at talks in Paris on Wednesday despite arm-twisting by U.S. Secretary of State John Kerry and European colleagues. The two men will meet again in Rome on Thursday.
Tension was high in Crimea after a senior United Nations envoy was surrounded by a pro-Russian crowd, threatened and forced to get back on his plane and leave the country on Wednesday.
The EU summit in Brussels seemed unlikely to adopt more than symbolic measures against Europe’s biggest gas supplier, because neither industrial powerhouse Germany nor financial centre Britain is keen to start down that road.
The short, informal EU summit will mostly be dedicated to displaying support for Ukraine’s new pro-Western government, represented by Prime Minister Arseny Yatseniuk, who will attend even though Kiev is neither an EU member nor a recognised candidate for membership.
After meeting European Parliament President Martin Schulz, Yatseniuk appealed to Russia to respond to mediation efforts.
After a day of high-stakes diplomacy in Paris on Wednesday, Lavrov refused to talk to Ukrainian Foreign Minister Andriy Deshchitsya, whose new government is not recognised by Moscow.
As he left the French Foreign Ministry, Lavrov was asked if he had met his Ukrainian counterpart. “Who is that?” the Russian minister asked.
He stuck to Putin’s line – ridiculed by the West – that Moscow does not command the troops without national insignia which have taken control of Crimea, besieging Ukrainian forces, and hence cannot order them back to bases.
Kerry said afterwards he had never expected to get Lavrov and Deshchitsya into the same room right away, but diplomats said France and Germany had tried to achieve that.
Western diplomats said there was still hope that once Lavrov had reported back to Putin, Russia would accept the idea of a “contact group” involving both Moscow and Kiev as well as the United States and European powers to seek a solution.
Keep hoping. In the meantime, with each passing day, Putin consolidates his new territory even as the west dithers, Europe is unable to obtain the bailout loans it has promised Ukraine, and Kerry keeps talking.
The US Dollar continues to consolidate in a familiar range while the SPX 500 may be readying to turn lower amid signs of ebbing upside momentum.