Friday, November 29, 2013

Chart of the Month

History repeats. Let us look at these two charts. One shows Dow Jones Industrial Average and another one shows Dow Jones Transportation Average.


Quite impressive.

Monday, November 25, 2013

Uranium - something big in the making ?

Gold bugs are still waiting for "their" time. Although fundamentals are strongly pro gold bugs the prices of the metal are very disappointing. Simply, for the time being, Mr Market does not care about fundamentals.

The same thing has been observed in the uranium market. For many years, the uranium bugs have been claiming that the only direction for uranium prices is "UP".

To name just a few arguments:
  • DEMAND - despite of the Fukushima event the world is condemned to uranium as an energy source - "green" energy is  just a gadget and is not able to provide the world with enough energy, therefore many countries, especially China, are still developing their nuclear energy projects;
  • SUPPLY - at the end of 2013 the so called "megatons for megawatts" program is scheduled to expire - this is one of the main uranium bugs' arguments.

Unfortunately for the uranium bugs Mr Market just ignored these thoughtful arguments and headed for the South.
But today it seems the situation is ripe for a change. Let us look at the chart:

U.TO is a chart of Uranium Participation Corp. - sort of a fund investing in uranium oxide (U3O8)which is a fuel for the nuclear plants. As you can see, in short and long term, the price of U3O8 seems to be bottoming. What is more, the relative strength of U3O8 against S&P 500 is growing.
I do not claim we see the trend change (a little bit too early for that) but there is something to keep our eye on.

Thursday, November 21, 2013

Big undervaluation of gold against U.S. monetary base

As everyone knows, there is no gold standard anymore. It means that central banks may carry their monetary policy without any restraints. But the invisible hand of the market is still active. Let us look at the chart below:

The chart shows the U.S. monetary base and gold prices.  Although officially there is no gold standard anymore, it can be easily spotted that gold prices follow the monetary base. In reality, due to market forces, the gold standard is, magically, still intact.
What is more, there are periods when gold prices are behind the monetary base. In such a period we can say that gold is undervalued against the monetary base. And such a period is a right time to own gold.
The first such a period was between 2000 - 2003, when the big bull run on gold started.
The second period was between the end of 2008 and the beginning of 2009 at the end of the big correction of gold prices.
And the third period

Summarizing, it seems that presently it is a good time to own gold (as was the case in the first and second period).

Sunday, November 17, 2013

Knightsbridge Tankers Limited (VLCCF) - shipping company with sustained high dividends

Though this company has a word "tankers" in its name, these days it has nothing to do with the tanker sectors. Presently Knightsbridge's fleet comprises four Capesize dry bulk carriers. What is more, most recently, the company has concluded two contracts for building two Capesize vessels additionally.
Another very important event in the company's history was a new shares offering which brought $51 million in cash. In my opinion this offering has stabilised the financial situation of the company, which operates on a very fragile dry bulk sector.

This week Knightsbridge has published its quaterly report. Just a few numbers:

                                                                             source: Simple Digressions

As you can see, the results improve with Capesize spot rates going up.
But the most important thing is that the company's high dividend yield (presently 9.0%) seems to be sustainable. The new offering, stabilising the company's fundamental situation, is another beneficial factor supporting that thesis.

Now let us look at the chart:


Currently, after announcing the new offering, we observe the strong price correction. The inflection point seems to be around $8.5 - $9.0 where many shares have changed hands. See another chart below:


Wednesday, November 13, 2013

U.S. equity markets - divergencies, weak broad market but...still up.

For perma-bears this is really tough time. In spite of the many divergences and weakening market internals new tops have been printed.
Example of weakening market internals:

                                                                       source: Simple Digresssions

As you can see, it looks really very bad. Less and less equities participate in the march up.

On the other hand, we have another confirmation in the Dow Theory:


I think we are going again to the first stage of a late bull market - divergences are seen but the bull is still intact.

Finally, the up-dated chart of Microsoft after the quaterly results: