EWC

Not Doom and Gloom – But Just Cautious…

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You wouldn’t know it on the basis of the strong US market action January 26, but it wasn’t all quiet in overnight trading. Local markets in China (FXI) took another hit, with Shanghai and Shenzhen exchanges experiencing declines to the magnitude of 6%-7%+ on the session. Though some optimistically dismiss the local China markets as irrelevant, the implications on weakened Chinese banks, other Asian nations via trade, and interconnected financial institutions from Standard Charted to HSBC (HSBC) and even Citigroup (C) are material, in our view, and we’re paying close attention. Some may even say that China stocks represent less than 15% of household financial assets in the country — certainly not enough to cause a global calamity… Or is … Read more

Excited About Putting Cash to Work…Eventually

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Investors are fretting over a lot of things as of late. China (FXI) announced January 19 that fourth-quarter GDP fell to 6.8%, with many noting that the measure was a 25-year low. Even if you believe that number, which may be a stretch in light of collapsing local stock markets in Shanghai and Shenzhen, the outlook can’t be much better. Steel mills across the country are reeling, and while published housing numbers don’t look that bad, we have a difficult time believing the Chinese banks are in good shape. HSBC (HSBC), Standard Chartered, and Citigroup (C) remain most exposed to what we would describe to be the growing likelihood of a contagion from weakening commodity-dependent sectors in the country. Intel … Read more

ICYMI: 5 Concerns About Impending Rate Hikes

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The first Fed rate hike in nearly a decade came and went December 16, putting an environment of ZIRP (zero interest rate policy) to an end, a policy that grew out of the Financial Crisis and the depths of the Great Recession late last decade. The Fed had paused plans to hike the federal funds rate for much of 2015 as a result, in our view, of getting a more informed read on the potential implications of emerging market developments–namely dislocations in the local Chinese equity markets (FXI) and recessionary conditions in Brazil (EWZ)–and the stock market crash (SPY) in the US in August that sent equities of some of the most well-known stocks including Apple (AAPL) and General Electric … Read more

Same Stories Prevail at Walmart and Target

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When consumers think of retail, Walmart (WMT) and Target (TGT) are probably two of the biggest companies that come to mind. After all, the two big box retail giants have taken the US by storm throughout much of the 1990s and 2000s. But the shift to e-commerce with the proliferation of Amazon (AMZN) and eBay (EBAY) coupled with broad-based consumer backlash with respect to worker wages and credit card breaches, respectively, have created a whirlwind of negative public perception at the two giants as of late. Will worker unrest and Target’s failed attempt to expand beyond the borders of the US mark the generational stock price peaks at the two giants, respectively? Are both past their prime? The likelihood of … Read more

Talking Technicals: The “Golden Triangle of Destiny”

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The markets recently reminded me of a Sesame Street episode that my little boy loves to watch, involving Minnesota Mel, Texas Telly, and the Golden Triangle of Destiny! If you’ve missed that episode, here it is. It’s a good one. A so-named “Golden Triangle of Destiny” is now developing in the S&P 500 (SPY) – i.e. a “symmetrical triangle pattern” forming in advance of the Federal Reserve meeting September 17. Chart readers will tell you that such a pattern signals a dampening of volatility as the market bounces between the upper (resistance) and lower (support) bounds as the day of the Fed meeting nears. We frankly can’t wait for the news. The suspense is near-unbearable, and the repercussions are far-reaching. … Read more

Things Are So Bad They’re Actually Good?

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Brazil’s (EWZ) economy, nearly 60% of South America’s (ILF) gross continental output, entered into technical recession following the second consecutive quarter of GDP declines, the latest reading a fall of nearly 2%. Economic data assessing the health of Brazil’s largest South American trade partner, Argentina (ARGT), remains “flawed”, according to the International Monetary Fund, which believes the country will only grow marginally in 2015 and remain stagnant in 2016. Including contributions from Venezuela, which is dealing with near-hyperinflation, the combined gross national product of the three struggling countries accounts for approximately three-fourths of South America’s entire economy. Though less than half the size of Brazil’s, Canada’s (EWC) economy has also fallen into recession during the first half of the year, … Read more

Historic Oil Deal Reached

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Image Source: Chevron Corporation (CVX) – March 2020 Security Analyst Meeting Presentation By Callum Turcan Over the Easter holiday weekend, members from the Organization of Petroleum Exporting Countries (‘OPEC’), non-OPEC members that are part of the OPEC+ group (countries that in the recent past have joined forces with OPEC to curtail global oil supplies in a formal manner), and non-OPEC members outside of the OPEC+ group such as Brazil (EWZ), Canada (EWC), and the United States (SPY) came to an agreement to cut their collective oil output by north of 10 million barrels per day. Global oil and other raw energy resource prices (USO, BNO) have been simply demolished year-to-date due to a combination of demand destruction from the ongoing … Read more

Our Thoughts on Chevron Buying Noble Energy

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Image Shown: An overview of Chevron Corporation’s all-stock acquisition of Noble Energy Inc that was announced in July 2020. Image Source: Chevron Corporation – July 2020 Noble Energy Acquisition Presentation By Callum Turcan On July 20, Chevron Corporation (CVX) announced it was acquiring Noble Energy Inc (NBL) through a $5.0 billion all-stock transaction, or $13.0 billion when factoring in net debt and the book value of non-controlling interests. Shareholders of Noble Energy will receive approximately 0.12 share of Chevron for each share of Noble Energy. At the time the deal was announced, shareholders of NBL were receiving a ~12% premium based on the ten-day average closing stock prices. Chevron intends to issue ~58 million shares to cover the deal, keeping … Read more

US Oil Majors

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The supply and demand imbalance of crude oil has been one of the most talked about market factors in 2015 as prices continue their downward trajectory. Unfortunately, the predictability of crude oil prices continues to fall as well. One of the the most important factors in the global supply of crude oil looking to 2016 is the developing situation in Iran. The country had indicated that it would increase its production of oil immediately following the lifting of economic sanctions from the US and EU by 500,000 barrels a day, and then potentially double that increase in the following months. While this still may be the most likely scenario, there could still be challenges to do the deal’s implementation. Some … Read more

Nutrien Benefiting from the Strong Global Farm Economy, Shares Yield ~2.5%

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Image Source: Nutrien Limited – 2020 Annual Report Executive Summary: Nutrien Limited is benefiting from the strong global farm economy. The company sells tens of millions of metric tons of potash, nitrogen, and phosphate products every year, which are key ingredients used in the production of fertilizer. With geopolitical tensions building in Eastern Europe, Nutrien is preparing to bring idle potash production capacity in Canada back online while steadily expanding its nitrogen production capabilities. Nutrien is a great free cash flow generator with a promising growth outlook, though its net debt load is rather large. The firm is focusing on deleveraging activities in the near term, which we appreciate. Shares of NTR yield ~2.5% as of this writing, and we think … Read more