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Thomas Streater

 
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  • Sinopec: Are Acquisitions An Ample Tonic? [View article]
    China's energy policy is gradually moving towards a market economy. Meanwhile, China Development Bank plays a very important role in financing energy projects, giving the Chinese super majors a distinct advantage in M&A and capex. SNP along with PTR are currently absolutely vital for supplying China with oil & gas products as between them they own and operate the vast majority of energy infrastructure.

    If you believe China will overtake the US in terms of size of the economy (and remember that for most of history China has had the largest economy in the world) then it makes sense that the super majors of China (PTR, SNP and CEO) should have a combined market cap larger than the super majors of the US (XOM, CVX and COP). I would bet that this would happen as soon as within the next ten years. A quick calculation using Yahoo! Finance market cap data shows the three Chinese majors are valued at $435B while the three US majors are valued at $700B.

    I imagine Mr Chanos is short iron ore / steel and maybe copper stocks that have exposure to China (perhaps the big three iron ore miners VALE, BHP and RIO?) because energy is continuously consumed and Chinese demand is generally rising along with GDP/capita, a natural development.

    As for pollution, natural gas is the obvious beneficiary sub-sector. Plays on this theme would include Hong Kong listed Kunlun Energy, Australian duo Woodside and Santos, and RDS.A / RDS.B, a super major with a leading natural gas portfolio in Asia including China.

    In the second half of this year, I plan to write about China's energy ADRs: PTR, SNP, CEO, SHI, YZC and HNP.
    Mar 9, 2013. 12:48 PM | 2 Likes Like |Link to Comment
  • ADP Reports Sharply Slower Job Growth In April [View article]
    For what it's worth... I just ran a linear regression on ADP and NFP using August 2007 thru July 2012 (60 months).

    The equation is: NFP = 1.0364 * ADP - 3.011
    With R Square of 0.90.

    The R Square using data since January 2001 (139 months) is 0.86.
    The equation there is: NFP = 0.9993 * ADP + 9.2275
    Aug 22, 2012. 04:13 AM | Likes Like |Link to Comment
  • Platinum Vs. Gold [View instapost]
    Thanks for your comments.

    I'm not bullish any manufacturing in Europe, but Chinese car manufacturing is still going strong and other Chinese industry will pick up after the government hand over once policy uncertainty clears a bit. Chinese growth could ramp up sooner as there is definitely room for policy easing, which would support gold too no doubt. I just think this is a good, medium term, risk reward trade as globally it's only Europe that is very weak. If oil prices keep rising (I'm bullish) there will be incentive to buy new more fuel efficient cars too. If things get bad in the economy, another cash-for-clunkers is another policy action we might see again. Additionally, South Africa issues give this trade extra upside risk, I think.
    Aug 14, 2012. 02:19 PM | Likes Like |Link to Comment
  • Tesla Motors: Automaker Or Graphic Novel? [View article]
    Thanks for your answers. The "Iron Man" thing is really not relevant though.

    Tesla as an investment play is all about hydrocarbon prices!
    Jun 17, 2012. 03:13 PM | 1 Like Like |Link to Comment
  • Tesla Motors: Automaker Or Graphic Novel? [View article]
    I happen to be bullish Tesla Motors.

    I have less interest in the technical analysis (even though your chart looks bullish to me) than the fact that Musk is incredibly smart, passionate and has a solid business track record (he's a billionaire and only still in his early 40s).

    Also Tesla has several years R&D advantage in electric cars over competitors. Compare this to Detroit who are seemingly in bed with big oil. I lost all respect for Ford and GM when they were downgraded to junk status a few years back during the midst of a huge credit bubble. Even worse, Ford's Alan Mulally, in an interview a few years ago, didn't even know who Angela Merkel was. Doesn't Ford sell a few cars in Germany?

    Anyway, John, can I ask three questions?

    1) What is your prediction for real spot oil, natural gas and coal prices ten years forward?

    2) Did you invest in Microsoft, Apple or Google in their early days? (Of course this question suffers from selection bias!)

    3) From your experience, can I ask about "Donald Sadoway: The missing link to renewable energy" and is it relevant, if not why not? http://bit.ly/GRAenc

    It's good to have different opinions, that's what makes a market!

    Thanks very much
    Jun 17, 2012. 04:07 AM | 2 Likes Like |Link to Comment
  • Is A Low-Volatility Portfolio The Key To Investment Return? [View article]
    Many of the best fund managers will say the key to success is capital preservation. It sounds obvious but it’s not so easy to pull off. Volatility on its own, in the traditional sense of standard deviation is a bit misleading or pointless because who would not want upside volatility? That’s why the Sortino ratio is better than the Sharpe ratio. Brevan Howard, one of the best risk managers out there, has exchange listed funds BG Global and BH Macro that demonstrate this fairly well. By managing risk very well, you are replicating call option payoffs. Of course, this assumes you have the discipline to cut your losses and run with your winners, a skill not frequent in human nature.

    Then the other strategy is at the other extreme. It says, if you do your homework so well, that you know that if you are patient you will come out ahead and then you can take advantage of volatility by adding to positions at better prices. Again, this assumes that you’ve done your homework so well that you are right in the end and you can stomach the drawdowns. It assumes that are able to wait, and have the liquidity, for your fundamentals to play out, which can often take much longer than you expect.

    Both strategies I think suggest relatively concentrated portfolios where you understand the risks you are taking.
    Jun 15, 2012. 07:18 AM | 1 Like Like |Link to Comment
  • China Southern Airlines Maintains Altitude [View article]
    Thanks for this article, it makes some very good points. However, there is one thing that I think is quite important that wasn't mentioned: Foreign Exchange. In 2011 it made up 45% of Net Income. From the most recent ZNH 20-F:

    "The airline industry is generally characterized by a high degree of operating leverage. In addition, due to high fixed costs, the expenses relating to the operation of any flight do not vary proportionately with the number of passengers carried, while revenues generated from a flight are directly related to the number of passengers carried and the fare structure of such flight. Accordingly, a decrease in revenues could result in a disproportionately higher decrease in net income. Moreover, as the Group has substantial obligations denominated in foreign currencies, its results of operations are significantly affected by fluctuations in foreign exchange rates, particularly by fluctuations in the Renminbi-U.S. dollar exchange rate. Net exchange gain increased by RMB1,009 million, from RMB1,746 million in 2010 to RMB2,755 million in 2011 mainly attributable to the exchange gain arising from retranslation and settlement of bank and other loans balances and finance lease obligations denominated in U.S. dollars, as a result of the significant appreciation of Renminbi against U.S. dollar in 2011."
    Jun 9, 2012. 02:43 PM | 1 Like Like |Link to Comment
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