Monday, January 26, 2015

Big Precious Metals Miners - Long Term Supports Are Working

In the beginning of November last year I placed a chart showing the technical situation of big precious metals miners (link). After nearly three months those miners' prices are still above their strong long-term supports. Please, have a look at the chart below:

Although the shares are above their supports, they are not in a bull market yet. But, similarly to gold, the risk of investing in the whole PM sector is today at the lowest levels in history.

Friday, January 23, 2015

Today Oil Is Extremely Undervalued Against Gold - Expect A Violent Oil Price Appreciation

Please, look at the chart below:

Looking at the chart "Oil against gold" we could easily spot that these days the oil is extremely undervalued against gold. Due to the assumption that gold, as the ultimate currency, expresses the real value of everything, I could put a thesis that the price of oil is at its cheapest levles since 1983.
If the pattern repeats itself, expect the price of oil to start going higher.

Tuesday, January 20, 2015

Every Time Oil Goes Down So Does The U.S. Dollar

I think it should not be a surprise that every time oil prices fall, some time after that the U.S. dollar follows oil. In my opinion this is just a simple play between supply and demand.

Why? Well, oil is a world commodity. If you want to buy it you have to have the U.S. dollars. When the price of oil drops you need less dollars then before. Let me do some basic math: since June 2014 the oil prices had dropped around $60 per barrel. The world demand is around 90 million barrels a day so it means that today the world daily needs are $5.4 billion  lower than just six months ago. On a yearly basis it is around $2 trillions. As you see, the demand for the U.S. dollars should be much lower due to lower oil prices. In effect, the dollar should go down some time after oil prices had fallen.

Let us check it on the chart:

Yellow ranges show the time span between the beginnings of the major oil prices corrections and the beginnings of the dollar downturns.

As you see, generally it had been taking 7 to 20 months since the beginning of the oil prices correction to the start of the dollar downturn. I think that due to the fact that more and more countries try to buy oil using other currencies than dollars, the U.S. currency should correct faster than before. Today we are in the seventh month of the oil bear market so expect the falling dollar any time soon.

Saturday, January 17, 2015

Gold Has Probably Printed Its Bottom

Most recently we have been observing some positive signs in the gold market. Please, look at the first chart:

I do not have the slightest idea where gold is going to but it seems, looking at the second chart, that gold has printed its bottom in the beginning of November 2014. The break-out below the support at around $1,200 was probably a false movement with many shorts caught in a bear trap.

What is more, GLD, the biggest world's ETF investing in gold bullion, recorded the weekly inflow of 742 thousand ounces of gold - it has been the biggest weekly inflow since November 2011 when gold was topping.

                                                            source: Simple Digressions and SPDR Gold Shares

And one more thing. Generally, gold falls when USD goes up and vice versa. But since the beginning of December 2014 both gold and usd have been appreciating. This occurrence confirms the power of the last up-leg in gold.

The US dollar index is approaching its resistance at around 66. Commercials, big market makers, currently have the highest net short position at greenback - this is a sign of a late bull market in that currency.

                          source: U.S. Commodity Futures Trading Commision and Simple Digressions

Summary - in my opinion, the gold market has printed its cyclical bottom. Now, the problem is whether gold is starting a new bull leg or not. As you know, I am rather not trying to predict what the market is going to do - I leave this subject for showmen. But looking at the charts above, I guess the risk of investing in gold has fallen substantially.

Friday, January 16, 2015

Short Recapitulation Of the World Equity Markets

It is good to look at the world markets regularly. For someone investing in the U.S. it may be obvious that we are in the long bull market in equities. But it is not the case when looking at other markets.
Please, look at the chart below:

The first chart (upper window) evidences the price action of emerging markets. Well, these markets have done practically nothing since 2010.

S&P 500 and the majority of other U.S. indices are in their up trends (with some exceptions as Russell 2000 and NYSE, which are currently in trading ranges).

The old, good Europe has been in a trading range since 2014.

And the world (without the U.S. market)  - it seems that now the world is in a correction mode or maybe it is starting something more serious (going south).

Summarizing - apart from the U.S., most world equities are not in their up trends. What is more - it is not anything new.

Thursday, January 15, 2015

It Seems That The Swiss Central Bank Uses A Technical Analysis

Well, it is quite funny but it really looks like Swiss central bankers look at the charts and take their decisions when charts say so....

Look at the chart below:

Each time the Swiss Frank was approaching the green trend line the Swiss Bank strengthened the Swiss currency. The today's big move is just a repetition of previous patterns.

Wednesday, January 14, 2015

Navios Maritime Acquisition - Economic Results Are Quite Different From Accounting Ones

The company

Navios Maritime Acquisition (ticker: NYSE: NNA) is an owner and operator of tanker vessels. The company transports petroleum products, bulk liquid chemicals and crude oil. At the end of the third quarter 2014 it owned eight LR1 vessels, seventeen MR2 tankers, four chemical / product tankers and seven VLCC tankers.  For those looking for more info about NNA, please, refer to my article on the Seeking Alpha website.

In this post I would like to focus on a few economic aspects of NNA's operations.

Financial measures

The table below shows three basic measures, distinctive of shipping industry:
  • time charter equivalent per day
  • costs per vessel per day
  • netback
Simply put, time charter equivalent per day is the amount of money the vessel earns daily - generally, it is a market measure, which means that a shipping company is not able to impose its own time charter rates.

Costs per vessel comprise all expenses the shipping company bears daily per each vessel it owns (operating, financial and other expenses).

Netback is the difference between the above described measures - it shows whether the company earns money on its vessels or it does not.

After many years of negative netbacks, finally in the third quarter 2014 NNA recorded the positive netback. Of course we cannot be sure that Navios would be a profitable company from now on but...well,  at least we notice something positive after many years of troubles.

Another thing. Since 2010 (the year when NNA started its operations) the company has been incurring losses. The main reasons for that were:

- low spot (and charter) rates recorded in the industry (table below)

- high management fees paid by NNA to its fleet manager - these fees are fixed and when there are low rates in the industry, the company is being hard hit by management fees (but when charter rates are high we observe the positive effects of the operating leverage with management fees weighing less and less)

- development expenses - NNA is relatively a new company so building its fleet took some time. Today, having 36 vessels in the water and 5 newbuildings contracted, NNA is operating on a much larger scale.
Economic income (noplat)

To prove that the company is developing properly, please, look at the table below:

The table shows the economic income and net income (loss). Due to reasons described above, NNA has been accumulating net losses since the start of its operations. But the business of the company has been developing quite aggressively - since 2011 the company has accumulated nearly $200 million of noplat (economic income).

Cash flow from operations

What is more, the company has been consistently increasing its cash flow from operations  - the table below pictures it:

During three quarters of 2014, NNA's cash flow has been higher than that generated in 2012 and 2013.

Share prices action

The company is prized by the market - since October 2014 NNA shares have been appreciating quite aggressively - please, look at the chart below:


Finally, after many years of building its fleet during unfavorable market conditions, Navios Maritime Acquisition seems to be going out of troubles. Despite accounting losses, the company has been accumulating quite a high economic income (noplat). This, together with a bigger fleet of new and modern vessels, should, in my opinion, favor this company against its peers.