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Charles Armstrong

 
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  • How To Play The Oil Market With Commodity ETFs [View article]
    Hey,

    I don't know if anyone is keeping tabs on this article, but just wanted to mention that the correlation between the two oils appears to have evaporated in the intervening months. I wrote about this more recently here:
    http://seekingalpha.co...
    Nov 29, 2013. 07:38 PM | Likes Like |Link to Comment
  • 10 Ways To Invest In A Global Wine Shortage [View article]
    Thanks for your comment GoodGulf; I don't know much about ATI, but if they're a specialty steel maker, that sounds like a good idea. Stainless is definitely the steel of choice for winemakers; wish I'd thought of that earlier.

    Thanks!
    Nov 26, 2013. 04:54 PM | Likes Like |Link to Comment
  • 10 Ways To Invest In A Global Wine Shortage [View article]
    Good point alphaman, but I would counter that a lot of these ideas rely on of ripple effects; with farm land and equipment, for example, demand from the wine industry creates a supply shortage for all participants. That is, all things being equal, demand from one segment ought to affect the prices that all segments pay. But still, you're right, if the company or industry is large enough, ramped up wine production may not affect overall business.

    That said, I would add that for several of the companies listed, (the wine companies come to mind, as do the small commercial banks in wine country) a change in demand for wine should have a very strong affect on operations.

    I suppose it's largely a question of reference: for many investors, the question may be: "will a wine shortage negatively impact my investment" vs "will a wine shortage by the primary driver for my investment". It all depends on what you're trying to do.

    Regardless, thanks for your comments.
    Nov 26, 2013. 04:51 PM | Likes Like |Link to Comment
  • 10 Ways To Invest In A Global Wine Shortage [View article]
    Thanks for your comments Loon-a-tick, interesting stuff. Out of curiosity, in your experience and observation, what kinds of wine are starting to catch on in the $15 to $20 you mention. Are these domestic wines, South American Wines, US Wines, Old World wines, etc. etc. Not a super pressing question, just generally curious.

    Thanks also for your kind words. So glad you enjoyed the article.
    Nov 26, 2013. 04:39 PM | Likes Like |Link to Comment
  • 10 Ways To Invest In A Global Wine Shortage [View article]
    Thanks for your comment RS_Gray. Your thoughts bring to mind a few questions:
    1) How is white oak processed, and where is the abundance? I don't know much about forestry in general but I do know that when new home construction goes up, softwood lumber prices tend to shoot up due as much to production as to net supply. That is, it takes sawmills awhile to get up and running to meet demand, meaning a dearth of supply in logs, despite a relative abundance of pine and fir trees, causing softwood prices to go up significantly. Is white oak production similar? How is it different?
    2) How correlated are white and red oak prices? Do they operate as completely distinct commodities, or could a run on one potentially affect the other?
    3) You say "wine consumption in parts of the old world seems to be dropping rather precipitously..." how does that compare to the burgeoning demand in China and the States? That is, how much do they offset each other?

    I'd love to know your thoughts. Thanks!
    Nov 26, 2013. 04:35 PM | 1 Like Like |Link to Comment
  • There's No Global Wine Shortage [View article]
    From this article, Felix writes:
    <quote>
    But if you look closely at the Morgan Stanley report, it starts to look less like a dispassionate analysis of supply and demand dynamics in the wine world, and more like an aggressively-argued attempt to put forward one particular investment thesis as strongly as possible. What’s more, the investment thesis is not, particularly, based on the existence of any present or future wine shortage; it’s simply trying to present the idea that demand for Australian wine exports is likely to rise, and to justify the fact that a company called Treasury Wine Estates is the bank’s “top Australian consumer pick”. (The report was written by Morgan Stanley Australia.)
    </endquote>

    So, who knows what MS's position is vis-a-vis Tresaury Wine Estates, but the whole point of the original article seems to be using the idea of a global wine shortage as a buy recommendation for this company.
    Nov 25, 2013. 03:09 AM | 1 Like Like |Link to Comment
  • There's No Global Wine Shortage [View article]
    Great, great article! Very shocking that analysts at a big bank would behave in an ethically dubious fashion purely to pump their own investment ideas. What's the world coming to!

    But seriously, I used some of your research in my recent, admittedly, click-bait-titled piece "10 Ways to Invest In a Global Wine Shortage". (http://seekingalpha.co...)

    Note that I used the indefinite article "a", rather than the definite article "the". That is, I agree with your assessment, but was still interested in the thought experiment of how a shortage would affect the broader economy.

    Keep up the great work!
    Nov 22, 2013. 09:16 PM | Likes Like |Link to Comment
  • Professional Oil Investors Crushed By Duplicitous Nature Of Oil, Mathematical Ignorance [View article]
    Fascinating information TimeOnTarget, thank you so much for sharing. If I'm reading you right, I believe you're saying that the domestic price of gasoline, in total, tends to follow the most expensive refined product regardless of where the crude was initially sourced from; so, if it cost you $3 to buy your crude and refine your product, and $1 to refine mine, I will still set my price in accordance with yours, meaning even bigger margins for the cheaper (read: WTI-refined) gas.

    Is that accurate? If so, I would wonder how the RBOB Gasoline Futures contract (aka New York Harbor Gasoline) relates to the price of Brent vs WTI. If what you're saying is true, I suspect it might be a very strong correlation.
    Nov 20, 2013. 02:50 PM | Likes Like |Link to Comment
  • Professional Oil Investors Crushed By Duplicitous Nature Of Oil, Mathematical Ignorance [View article]
    Thanks for your comments. You're right, the "coldwar mindset" comment is more about my market political leanings than it is a statement of fact. Good thing SA doesn't much distinguish between journalism and commentary :-)

    I understand the arguments for keeping resources local, and actually agreed with them for the most part while we were such major importers, but as our domestic supply grows, I tend to be of the mind that export restrictions should be lifted, and wrote an article last year arguing just that (http://bit.ly/1h1rzDb)

    I should probably stop myself now, this comments section is admittedly not the place to have this argument. If you end up writing an article on the subject arguing the other side, I'd love to read it.

    Oh, also, thanks for the catch on the ticker typo; I've submitted the correction to the editors.
    Nov 19, 2013. 06:20 PM | 2 Likes Like |Link to Comment
  • Professional Oil Investors Crushed By Duplicitous Nature Of Oil, Mathematical Ignorance [View article]
    Thanks for your comment TimeOnTarget. You're absolutely right, not being an oil industry insider (or as I like to say: "oil man") I did not anticipate this kind of change. Back in March I noted that the correlation was diminishing somewhat, but certainly had no idea it was dithering to nothing.

    But even absent a lack of knowledge of the correlation, the more shocking thing to me is that the traders went long WTI and short Brent, despite years of decreasing oil demand and ever increasing supply here in the States.
    Nov 19, 2013. 05:54 PM | 3 Likes Like |Link to Comment
  • How To Play The Oil Market With Commodity ETFs [View article]
    Thanks Toastypro. Glad you liked the article and thanks for sharing that link to Motley.

    There are, it seems, a lot of folks just waking up to the idea that commodities ETFs are absolutely terrible. Don't know if any of that content was inspired by this article, but its good news nonetheless if the message is getting out there.

    Thanks again for your comment.
    Apr 23, 2013. 03:31 PM | Likes Like |Link to Comment
  • United States Oil ETF Is A Sucker's Bet [View article]
    For someone who doesn't trade commodities futures, contango can be a bit confusing. I wrote about this very issue recently:
    http://seekingalpha.co...

    The crux of the matter is that in order for a commodity to be useful, it has to be used up. As such, commodities futures have delivery dates throughout the year. Those contracts set to be delivered sooner tend to be priced lower than those set to be delivered a few months out (the premium is for storage of the good). Since USO just holds the front month contract, every month it is buying a more expensive oil contract, and selling a less expensive contract (buy high, sell low). This causes a loss of money even when oil is performing well.
    Apr 22, 2013. 04:45 PM | 1 Like Like |Link to Comment
  • United States Oil ETF Is A Sucker's Bet [View article]
    Good article. I write extensively about how USO, and most other commodities ETFs, are terrible for just the reason you mention.

    However, I should say that on the rare occasion when a commodity is in backwardation rather than contango, an ETF holding the front-month future would actually receive a benefit from the roll yield.

    Interestingly, Brent Crude (the British standard) has been in contango for the last twelve months, meaning that BNO (the ETF that tracks the Brent price) has given its investors a long-term bonus.

    I wrote a longer piece of analysis on just this very issue a couple weeks back:
    http://seekingalpha.co...

    I would be interested in your thoughts.
    Apr 22, 2013. 04:25 PM | 1 Like Like |Link to Comment
  • How To Play The Oil Market With Commodity ETFs [View article]
    Thanks blueice, I'm glad you liked the article. As you can probably guess, I concur wholeheartedly on your sentiment regarding USO.
    Apr 11, 2013. 04:50 PM | 1 Like Like |Link to Comment
  • How To Play The Oil Market With Commodity ETFs [View article]
    Brad,

    Probably not a bad strategy, though one thing I'd be aware of, when you say "hold USL while in backwardation" - unfortunately, WTI is rarely, if ever, in backwardation. The fact that Brent has been in backwardation so long is very anomalous and was the inspiration for my writing this piece.

    As for OILZ, I know very little about it, but just looking at it briefly it appears to be quite illiquid (due mostly to its low volume, I'd guess). You seem to know what you're talking about though, so I doubt you need to hear me say: "be careful".

    Regardless, thanks for your comments.
    Apr 11, 2013. 04:48 PM | Likes Like |Link to Comment
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