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  • Why It's A Mistake To Hold Cash In This Market [View article]
    "Why it's a mistake to hold cash in this market"

    What a foolish statement to make!
    Dec 12 05:40 AM | 53 Likes Like |Link to Comment
  • Why A Stock Market Crash Is Imminent [View article]
    Crimea is a non-issue.

    The people have spoken, they've voted almost 100% to join Russia. We in the West cannot defy the will of the people and we don't have a leg to stand on with regard to punishing Russia. Yeah, Western leaders will huff and puff but ultimately there's nothing they can do.

    Nothing to see here, move along.
    Mar 17 07:21 AM | 15 Likes Like |Link to Comment
  • 4 Beaten-Down Dividend Stocks For 2014 [View article]
    There may well be a dead cat bounce for dividend stocks during the first half of 2014. However, the picture thereafter is not attractive. Yes, the Fed is probably on track for keeping interest rates low during 2014 but that's not the case for 2015 when tightening moves center stage with the Fed and of course with the media. This creates the spectacle that during the second half of 2014 dividend stocks perform similar to long bonds i.e. poorly - in anticipation of higher interest rates ahead. Therefore, holding dividend stocks during the second half of 2014 is a high probability way to lose money.
    Dec 30 06:24 AM | 15 Likes Like |Link to Comment
  • Is The U.S. Bankrupt? [View article]
    Good work. Well done.
    Dec 20 11:01 AM | 11 Likes Like |Link to Comment
  • Kodiak Oil Is An Outstanding Growth Stock Opportunity [View article]
    KOG has many positives. I own it sometimes.

    Aside from the positives, the very high and ongoing balance sheet leverage is keeping a lot of investors on the sidelines. Total debt is now at about $1.7 billion and with the company's capex requirement running at about $750 million - which is greater than the cash flows being generated by the business - the debt picture is set to get worse instead of improving. This situation cannot continue and something must give. Most probably the company will issue more equity. This dilution threat is already overhanging the stock in my view and it will only become more pronounced as the balance sheet leverage worsens. For that reason I'd like to see management clear up the balance sheet soon.

    Kodiak has an enterprise value of $4.2 billion, not cheap.

    Stock markets have been unusually strong in 2013 and we are overdue a decent pull-back.

    If we get a market pull-back in September because of likely taper actions by the Fed Res and because of an ongoing slowdown in China, that pull-back would also hit oil prices and all of this would hurt highly leveraged oil stocks like KOG. I'd buy KOG only after such a correction. Otherwise, given that the stock isn't cheap and considering the risks that come with highly leveraged balance sheets, I'd leave it on the watch list. With all the risks out there, there's no need to be a hero.
    Jul 29 03:55 AM | 11 Likes Like |Link to Comment
  • S&P 500: On Track to Reach a 20-Year Low [View article]
    Given that P/E ratios this past 30 years were substantially boosted by ballooning credit I think it would be much more interesting, and relevant, to see how today's P/E ratio of circa 15 compares against periods when credit was shrinking. Today's P/E is well above that average.

    Second, given that we face below par growth for the next several years - in the 'new normal' - one should expect P/E ratios to contract to reflect the below par economic and profit performance that we will get from markets for the next number of years.

    Third, during times of economic slowdown stock markets contract 'in anticipation' thus giving below par P/E ratios.

    These are three reason why markets today should support P/E ratios far below the long-term average - and not just P/E ratios that are lower than those of the past 30 bubble years.

    I believe that the market might be reasonably well supported during the next few weeks as we enjoy a good Q2 earnings season. But once the Q2 earnings season draws to a close, by which time investors start to take money off the table in the face of a slowing economy, there is only one message that investors need to know - look out below!
    Jul 2 10:07 AM | 9 Likes Like |Link to Comment
  • The Marie Antoinette Rule [View article]
    Poor auld Marie Antoinette get's a bad rap. She never did say 'let them eat cake' but the phrase was attributed to her by the revolutionary spin-doctors.

    Plus ca change je suppose.
    Feb 12 03:21 AM | 8 Likes Like |Link to Comment
  • The Market's Annual Seasonality Is A Real Concern This Year [View article]
    "This year the Fed is tapering back stimulus, and will have it back down to $35 billion in May."

    I don't think this $35bn in May statement is quite correct. Assuming the Fed continue to taper by $10 billion at each meeting, the net amount of QE each month becomes; Dec'13 $75bn, Jan'14 $65bn, Mar'14 $55bn, Apr'14 $45bn, Jun'14 $35bn, Jul'14 $25bn, Sep'14 $15bn and the general thinking is that the final $15bn will be wiped out in the October meeting. Refer to confirmation yesterday by Dallas Fed member Richard Fisher.

    There are no Fed meetings in Feb, May, Aug and Nov and the $10bn reduction doesn't occur without a Fed meeting.

    That aside, 2014 does indeed look scary. I believe the best way to play this year is to stay in cash, buy dips and sell again on moderate upticks until the fall when one buys for a good year-end rally.

    Thanks for your articles, they are very well appreciated.
    Apr 5 08:42 AM | 7 Likes Like |Link to Comment
  • Halcon Resources: The Eagle Ford Asset Sale Is A Drop In The Ocean Of Its Debt [View article]
    A word or two about the Sanchez low-ball figures: Of the 43k acres acquired only 15k is held by production. The remaining 28k acres is scattered in small lots of which leases expire for 18k acres in 2013. Additionally, the seller, Hess, is consolidating their efforts and their Eagle Ford acreage, at only 43k acres, is below their threshold of interest. Essentially Hess was virtually a forced seller of scattered-lot assets with a high % of expiring eases.

    To get any realistic valuation of any possible asset sales by HK it is essential to first look properly at recent transactions so as to eliminate any exceptional circumstances such as those that existed for Sanchez & Hess. Otherwise we end up simply comparing apples to oranges and defeating our own arguments.

    I concur that the days of achieving huge prices for acreage are gone for now. However, a salesman with a well established reputation who sells good assets will certainly obtain a good price.

    Having said this, the Halcon story is about production growth, not about some relatively minor asset sale.

    Halcon's production guidance for 2013 has it on track to breach the 100,000 Boed threshold by early 2015. At that level, Halcon will surely be sold for a very attractive price. Continental now has production of about 100,000 Boed, it has - right now in today's more moderated valuation environment - a market cap of $14.5 billion and an EV of $18 billion. By contrast, Halcon today has a market cap of $2.4 billion and an EV of $4.5 billion. Assuming Halcon hits the 100,000 Boed level in two years time, that leaves a very very big valuation gap for Halcon shareholders.

    Focus on what is most important - production - not on the small stuff.
    Apr 28 10:27 AM | 7 Likes Like |Link to Comment
  • Northern Oil & Gas: Play The Massive Production Ramp Up In The Bakken [View article]
    One additional factor:

    NOG has an inventory of about 800 wells it can drill. During 2012 the company plans to drill 44 net wells, which means that NOG has a drilling inventory of 18 years.

    This 18-year inventory is way above the industry average, it gives NOG very long term visibility and ensures the company will not need to issue new shares to buy more acres i.e. no shareholder dilution threat.
    Apr 2 07:03 AM | 7 Likes Like |Link to Comment
  • Is Another Recession Ahead? [View article]
    Government spending contributed 0.86% to the 1.6% GDP growth recorded in Q2. Without the 0.86% government spending boost, U.S. GDP would have grown by just 0.74%.

    Going forward the help from stimulus becomes weaker and weaker. And this at a time when housing has again started weakening......
    Aug 30 12:12 PM | 7 Likes Like |Link to Comment
  • The Market Will Have a Good Run Over the Next Two Months [View article]
    James, just a couple of days ago the S&P 500 was trading on a 12-month trailing p/e ratio of 17, not 12 as you stated. This 17 p/e is above the long-term average of 15. Furthermore, during sustained periods of low growth such as that we now face, p/e ratios normally contract. For sure the market is overvalued given the weak outlook, the only question is "by how much"?

    I do not think there will be a crash, but I do believe the S&P index will move lower in the short term, especially into late September & early October when we will have negative pre-announcements because of the slowing economy, more weak jobs reports, and a new round of sovereign debt worries caused by low global growth concerns.

    That late Sept / early Oct low point should indeed be a good short-term buying opportunity.

    Longer term we are in for an extended period of range trading - largely in line with Ryan Pollack's remarks above but I expect lower lows. Buy and Hold is dead, at least for now.

    If interested, here is fuller explanation of the situation together with ways to make money out out of it.
    Aug 22 10:00 AM | 7 Likes Like |Link to Comment
  • Foreclosure Friday: The Top 1 Percent Stick It to the Banks [View article]
    The opening commentary on home loans +-$1m is eye-popping. It gives substantial credence to Meredith Whitney's comments yesterday.

    Keep up the good work Phil, and Phil's team.
    Jul 9 11:30 AM | 7 Likes Like |Link to Comment
  • Halcón Resources: Why Is The Stock Down Again? [View article]
    Thanks for this thorough and insightful review.

    I found the earnings release and the conference call a little disturbing - more in reading between the lines rather than what they said outright. For me you summed it up in this one sentence from your article:

    "Halcón will likely divest some of the assets that just six months ago were presented as important building blocks in the company's growth strategy."

    Fingers crossed for signs of positive developments.
    Nov 6 10:36 AM | 6 Likes Like |Link to Comment
  • Halcón - Attractive Entry Point [View article]
    Well Jack people are entitled to their own views and far be it for me to try and change them, that's what makes a market.

    HK is a big picture story, it's not about one particular well and it's certainly not a static view with nothing changing from Q2 2013. Management have laid out their multi-year strategy and at this juncture I see no significant reason why it shouldn't succeed given their proven track record, their impressive operational improvements already being delivered in Bakken/TF, their early work it the Utica and El Halcon and their progress in putting together a portfolio of large acreage plays.

    Realistically, without any hint of optimism, the solid rise in production which has gone from 18.5k boed in Q4 2012 to 35k currently is bound to continue given the pace of drilling and the improvements being delivered. The question of hitting 100k Boed is only a question of time. If they hit 40k Boed by end 2013 they may reach 60k Boed by end 2014 - this is the one to watch I'd say. Sure they might also miss by a quarter or two but, big picture, that hardly matters.

    Also, I think it's a given that HK will acquire more acreage but, considering their good liquidity position through end 2014, not to mention bank line redeterminations and proceeds from sale of 4,500 non core Boed, then this is far from being a deal breaker.

    The shale revolution, in terms of efficiency, down spacing and development of plays is far from done and virtually all decent players in the space should see large increases in production and sales in the coming years. So, from that base alone, HK should be ok. Put on top of that the fact that the team has proven credibility and that the company already has a pretty good and growing footprints, and that they now finally have good liquidity, then the chances of them growing production strongly in the next 2-3 years is high.

    And let's not forget the output problems being encountered by conventional producers like XOM or Shell. When they're looking to buy oil shale producers, they will only focus on producers that have significant economies of scale. They won't be interested in small beer. As conventional production continues to diminish over the next few years the attractiveness of players such as HK will only be improved.

    Will HK encounter snags along the way, yes. Will it be a straight line to a quick sale, no. But in my view they should get there just fine.
    Aug 14 04:58 AM | 6 Likes Like |Link to Comment