Jay-Dawg, CDA

Santander Starts Selling Its Brazilian Jewel

Santander no longer has operations in Venezuela. They were forced to sell it to the government.

Are Oil ETFs Showing Us How Natural Gas ETFs Will Trade?

If you invest in a natural gas ETF in Canada or the USA has no impact. You do not get a canadian currency exposure by investing in GAS.TO, since the index it tracks (NGX Canadian Natural Gas Index) is influenced by the movement of the canadian currency vs the american dollar. If Natural gas rises by 3% and the canadian currency appreciates by 3%, GAS.TO should be more or less unchanged. You will get a 3% translation return since your holdings are in Canadian dollars, but it only compensates for the 3% underperformance of the ETF (because UNG would be UP 3%).

This is basic knowledge man, you should know this...

Stanford: Criminal Charges Almost Certain

If you ask me jail is not enough for these thieves...

First of all, they steal from hard-working people. In this case, 8 billion dollars would be the direct losses to investors. I mean what kind of conscience do you have to have to do things like that?!

Second, they jeopardize the trust in our financial system that is so essential to the functioning of our economy. The damage relative to this is difficult to assess, but could be much worse than the direct losses. After the collapse of banks, the Madoff ponzi scheme and now Allen Stanford, how many people have permanently lost all faith in their financial institutions? Trust is very hard to regain, so let's hope there are not too many other such scandals announced in the near future.

I would love it if they were REALLY EXCESSIVE in the punishment they give these greedy, emotionless, incompetent miscreants. Instead of closing Guantanamo, simply change its vocation to a white-collar penitentiary. Now let me tell you, THAT might discourage the next low-life wanting to steal from innocent investors!

Of course, I'm exagerating, but you get my point. These guys need to pay big time; tis will send a message that WE DON'T TOLERATE THIS ANYMORE!

Jay

Suncor Begins a Climb in Oil Volumes

The current daily quote of 35$ is for West Texas Intermediate, the type of crude that is delivered at Cushing, Oklahoma. The price of WTI is normally higher than Brent crude, but now it stands about 10$ below it, because of huge excess supply at Cushing.

There is no pipeline linking Cushing to big markets in the North US and Canada, so this 35$ oil is not available. Therefore, the price barometer for Canadian oil is Brent Crude, not WTI. Of course, there is a discount because Canadian oil is a lot heavier than Brent, but still, the price they sell the oil for is a lot higher than 35$US.

Also, the strong US dollar has a net positive effect on the company, as its costs are mostly in Canadian dollars (they do however have a large quantity of debt in USD).

Jay

Disclaimer: I own shares of Suncor

8 Possible Targets for Exxon's Cash

I think your evaluation of Encana's balance sheet is wrong.

First of all, Encana has 8.755 billions $US in long term debt with an average remaining term of 14 years. Their principal repayments are 250 million in 2009 and 200 million in 2010, which is very minor relative to cash flow. EnCana targets a debt to capitalization ratio between 30 and 40 percent. At December 31, 2008, the company's debt to capitalization ratio was only 28 percent, below their target! We can say Encana's balance sheet is very strong relative to its peers.

Second, Encana has hedged 2/3 of its natural gas production at 9,13 $ per thousand cubic feet (nat gas is trading at 4,16$ as of today) through October 2009, so we can expect superior cash flows at least through Q3 2009. This gives them a lot of flexibility when it comes to managing their business through this crisis.

Overall, they have a solid, low-cost business with a conservative risk profile, unlike what your analysis says... I don't think Exxon has any interest in Encana (Exxon is already a big player in the Syncrude project), but get your facts right!

Jay

Disclaimer: I do not own Encana (though I might consider prurchasing at 36$ US/share). However, I own shares of Suncor.

All information for Encana's most recent quarter: finance.yahoo.com/news...

8 Possible Targets for Exxon's Cash

I agree that Exxon might take advantage of the current situation to make a big move if they feel they can get a better yield than by simply buying back a boatload of shares.

However, I strongly disagree with your 1% probability that they enter into a joint venture with a foreign government. The reason is that Exxon Mobil looks at its business as a portfolio. They can diversify away most of its political risk by adding businesses in different geographical regions. Exxon is also a heavyweight with ample resources and technology, so trying to expropriate their assets would not be as easy as it sounds. Remember that Exxon Mobil has a bigger market cap than the GDP of many if not most African nations...

On top of it all, pretty much every single oil-dependent nation's budget is suffering greatly from the drop in oil prices, so they might be looking to add some easy cash by joining forces with Exxon.

Bottom line is it'll be interesting to see what Exxon does; that will most probably determine the strategy of the other top dogs (Shell, BP, etc.). A big acquisition on their part would probably trigger a wave of consolidation in the industry.

Jay

Don't Short the Fed Yet

You write:

Even with the new stimulus package and the plethora of financial stability programs du jour, the government will only have spent 40% of GDP.

I'm sorry... ONLY 40% of GDP?! Only?!

I'll have to disagree with the article... I just don't think there is that much upside potential to owning treasuries. Rates are at historic lows, and pretty much the only thing that could lower them even more is monetizing the debt (printing money to buy back long term treasuries). If that happens I'm guessing you would be better off owning gold than treasuries... At least gold would protect you from the inflation that would result from such actions.

Jay

Barron's Plan to Save the Economy - For Just $200B?

I'm sorry, but how can this be fair? That creates the biggest moral hazard possible. All hard-working Americans that saved money, were prudent and bought houses they could afford would get nothing at all, whereas those who took big risks with mortgages they couldn't afford (no matter whose fault it is) would instantly get a huge subsidy from the government.

I just don't think it's fair. It will encourage more reckless behavior in the future.

There will be no easy solution to this. The underlying economic problem (low savings rate, overconsumption, massive debt) has not even been addressed at all. To my opinion, all tools should be put forth in order to put America back on track for sustainable long term economic growth, no matter its implications on the short term. Or else we are just delaying the shipwreck...

Jay

Stop Trying to Jump-Start the Consumer - Barron's Interview

Amen!

I believe politicians genuinely want to solve the economic problems that we are facing, however it seems they are unwilling to sacrifice economic growth, employment, asset prices, etc., as that would materially harm their approval ratings. Unfortunately, it is impossible to do both. In order to set off a new cycle of economic growth and prosperity, we will all have to make sacrifices and tighten our belts for a while, or else things will get worse before they get any better.

Bottom line is banks, businesses and consumers have unhealthy balance sheets that need to be improved. Deleveraging is the only thing that will achieve this. No trust between these economic agents will exist without it. I doubt any government intervention to "thaw" the credit markets will have any positive long lasting impacts on the economy.

Jay

Geithner's False Assumption - Rebuilding Securitization Market Is Good for Economy

It's sad to see that politicians, no matter from which party, just don't seem to get it.

George W. Bush, back in 2001-2002, went on national television many times encouraging Americans to go out and spend, saying it was the patriotic thing to do. Now, Barack O'Bama seems to be doing exactly the same mistake: encouraging consumers to borrow and spend instead of businesses.

Mr. Schiff is 100% correct when he states that it is generally businesses, not consumers, that create value by borrowing. Businesses are the best in selecting projects with positive NPVs, whereas consumers are not (maybe buying a 60" plasma TV on credit was not such a good investment after all!).

Of course, higher consumption leads to greater incentives for companies to innovate and better respond to to consumers' needs, but the reasoning is upside down... It's supposed to be innovation from companies, fueled by a strong local savings rate, that lead to higher demand. If borrowing occurs mainly at the consumer or governmental levels, businesses are simply crowded out can no longer invest.

Jay

Oil: Despite Decline, A 'Must-Have' Profit Play

I agree with this article. Investing in oil effectively hedges your "natural position" in oil. Indeed, almost everything we buy has oil as part of its cost, directly or indirectly. Directly, the easiest examples are your car, bus passes and anything made of plastic. Indirectly, everything that needs transportation (every tangible good, basically) will cost more if the price of oil goes up.

So investing in oil will smooth out your exposure to oil. I tend to think like most people that the price of oil is going up in the long term. Even if it doesn't, there will be great opportunities to make money anyways. Every decade or so some geopolitical event happens (war, for example) that makes the price of oil temporarily skyrocket. By owning secure sources of oil through stock of petroleum companies in Alberta or the US, you are set to profit from such unfortunate events.

Jay

Disclaimer: I own shares of Suncor (SU)

Not All Aaa Sovereign Debt Equally Safe - Moody's

I'm kind of wondering... If the US has all its outstanding debt in US dollars, can you tell me how it can have a default risk at all? As far as I know, if ever they can't pay their debts by collecting taxes and/or cutting expenditures, they can simply monetize the debt by printing money and paying back their debt with it.

Foreign investors have a risk of getting paid back with a weak US dollar, but no risk of not being paid at all...

Jay

$800 Billion: Too Much? Too Little? Yes.

It's sad to see someone's political views get in the way of helpful economic analysis... It's not a question of whose fault it is, but rather how to fix the problem we are facing now. Once it is solved we can analyze with hindsight our past actions and learn from them.

If politicians (I view the author of this article as a politician, not an economist) just stopped perpetually blaming their predecessors for the current state of the country and started proposing ideas, we'd be in better shape.

Jay

The Economy: How to Tell When It's Improving

I actually checked and it's 1% month to month, but still, don't expect 12% annual growth in retail sales lol...

Let's hope it keeps growing though, although I'm not believing it...

The Economy: How to Tell When It's Improving

HAHAHA you have no idea what you are talking about Good News Economist!!

You say:

Retail UP 1% in January --> that's 12% annualized

Sorry to say, but retail sales is year-over-year, so it's 1% growth, not 12%... Also, 2 weeks of data does not make a trend. Expect retail sales and the housing market to continue to show weakness in the coming months...

Jay


On Feb 13 12:48 PM Good News Economist wrote:

> Rick,
>
> I enjoyed the article but have to disagree with your analysis of
> what is actually happening right now...