December Confessions #3 December 31, 2008
Posted by Ali in analysis, kuwait.Tags: December Confessions, kuwait, Oil, OPEC
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During December the market confessed three important facts. The first is that the Kuwait Investment Authority (KIA) will not provide the optimism needed to restore confidence in the market. The second is that investment banks will fail in succession amid the greatest government intervention since souk almanakh. Finally that oil prices will no longer be controlled by the oil cartel, OPEC.
OPEC Versus Oil
A positive relationship between, long-term oil and the Kuwait Stock Exchange (KSE), has existed for decades. In the 1970’s the KSE rallied with the sharp increase in oil prices. Early in the 1980’s the market crashed when oil prices fell. Later in 1997, the price of oil fell below $10/barrel sending the market spiraling. Thus it should not be surprising to see the KSE collapse in 2008 considering the massive decline in oil prices from $147 to below $40.
Since oil determines Kuwait’s fiscal policy the higher oil prices translate into higher income generated by the government. The higher income results in greater government expenditures thus a bigger fiscal policy. (more…)
81.3% Correlation! December 26, 2008
Posted by Aziz in analysis, kuwait.Tags: KSE, Oil
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The chart above plots two interesting highly correlated assets if I may say, the Kuwaiti Stock Exchange (White line) and the price of the NYMEX Crude Oil (Orange line). the reason I chose the period between 2006 and 2008 is to show how they behave in a bull, bear market and at reversal points.
Got Oil? December 25, 2008
Posted by Aziz in analysis.Tags: NYMEX, Oil, OPEC
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I walked into the office thinking about the post i’m working on which is related to oil, so I open the daily monitor to look at the futures and there goes NYMEX Crude trading at $35.35 (-9.31%) from yesterday’s trading. Oil has lost 78% of it’s july 2008 highs.
- OPEC cuts oil production and will cut it even further(in my opinion) but that didn’t help.
- We still can’t see the light at the end of the tunnel (economy wise) which means nothing will increase the demand for oil.
Kuwaiti Oil Down $2.60 December 24, 2008
Posted by mylastresort in analysis, kuwait.Tags: kuwait, Oil, OPEC
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The Kuwaiti price for oil fell another $2.60 to end the day at $32.73 accordingto the Kuwait Petroleum Corporation (KPC). A global decline in the demand for oil has decreased prices substantially since July.
The price of a Kuwaiti barrel reached its highest level this summer to $135 before its downward spiral. Short term expectations are that oil prices will reach $20/barrel within the next couple of months. The oil cartel, OPEC, has recently announced more cuts in production while prices continue to decline.
Kuwait posts budget surplus September 1, 2008
Posted by mylastresort in analysis, sovereign funds.Tags: economy, inflation, Kuwait Investment, Oil, politics, Surplus
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Higher oil revenues helped boost Kuwait to a preliminary surplus of KD 3.8 bil ($14.22 bil) in the first quarter of its 2008/09 fiscal year. Oil revenues for the first 3 months was KD 6.29 bil compared with a forecast KD 11.65 bil for the fiscal year which starts in April 1. Kuwait’s budget was based on a conservative oil price estimate of $50 per barrel.
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Kuwaiti parliament approved a budget with a record expenditure of KD 19 bil dinars (despite warnings by the central bank to contain spending to tackle record inflation)
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Kuwait invests 10% of its revenues in a fund for future generations
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A surplus means Kuwait Investment Authority (Kuwait’s sovereign fund) has more funds to spend on foreign investments
Actions speak louder than words July 2, 2008
Posted by mylastresort in analysis.Tags: commodities, investment, Oil, Short
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Based on my previous post Coming Soon: “A massive decline in oil” I would like to announce that oil prices are too high and that i have begun my endevour of shorting oil until the $99 mark.
—– UPDATE 21/07/08
I shorted Crude Oil @ $144.50 and covered @ $129.3 for a total profit of roughly 10.5%
(Prices are approximated since I was using an ETF for my trading strategy)
Coming soon: “A Massive decline in oil prices” June 29, 2008
Posted by mylastresort in analysis, sovereign funds.Tags: analysis, Crude Oil, Decline, Decline in Oil, Energy, Finance, Futures, investment, Low, Margin Requirements, Oil, Prediction, Record Level, speculation, Speculators
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An emergency meeting by OPEC, a decision to raise output, rumors of prices well above $170, and news agencies covering the latest developments of oil prices all the while I am thinking of shorting! The price of oil, I beleive, will continue crawling at a steady pace upward and it might reach the levels predicted by the big investment firms and generate another 20% in the next couple of months. Again yes, I want to short oil. I am not contradicting myself!
I could do as most have done and follow the trend and be satisfied with the 20% return. On the other hand, if the market price declines we could see well above a 40% decline in prices. A closer look at the price of oil shows a decline in the making. I will explain my thoughts in the following points:
First, lets dissect the price of oil. Today, if oil is trading at $140, 29% ($40.60) of the price is composed of actual physical oil receivers, the remaining 71% ($99.40) are speculators in the market purely betting to make profits and then rolling over their positions never receiving the oil traded.
Second, oil is traded on the futures market. To trade crude in the market all you need to pay is a margin requirement of $10,000 for every 1000 barrels of crude oil (worth $140,000). Oil is sold in lots of 1000 on the exchange. The margin requirements for the exchange may change (and do change) periodically depending on market volatility. (Crude oil futures margin requirements have changed from $8000/1000 lots to $10,000/1000 lots four weeks ago)
Third, all investment portfolios are diversified in such a way that percentages are dedicated to sectors regardless of the amounts of dollars invested. For instance a hedge fund manager (major players in the market) running a $1,000,000,000 portfolio beleives that oil prices will increase therefore designates 20% of his portfolio to oil futures and the remaining to different sectors. They purchase oil until they satisfy the requirements of the 20%. An initial payment of $200,000,000 is needed to purchase the 20,000 lots required. (Equivalent to buying $2,800,000,000 worth of oil!)
My prediction is that the margin requirements of crude oil futures will (drastically and without warning) increase from $10,000/1000 lots to $20,000/1000 lots (even more) forcing speculators to sell half their holdings to meet margin requirements and new funds to purchase half the amounts they are purchasing today, leading to a 50% drop in the 71% ($99.40) of the price of oil taking it back down to atleast $90.30 [price including physical buyers of oil] instantaneously!
Waiting for the decline will pay more than the rise will, therefore I am going to start selling at $155 (approximate & may change) and cover once the price reaches $90.30.
Future of Airline Industry June 3, 2008
Posted by mylastresort in analysis.Tags: Air, AirlinesGiovanni Bisignani, Aviation, CEO, Director General, Forecast, Future, IATA, International Air Transport Association, losses, Oil, Transportation
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The International Air Transport Association (IATA) has stated that a significant decline in global airline profitability, or even losses, look inevitable for 2008 due to the increasing cost of transportation.
“For every dollar that the price of fuel increases, our costs go up by US$1.6 billion… The skyrocketing price of oil has eaten these gains and left the industry in the red again. Oil prices at US$130 a barrel are changing the game for everyone. The situation is grim.”- Giovanni Bisignani, CEO & Director General at IATA
The aircraft which had been ordered at the peak of the air transport economic cycle were due to be delivered while the industry’s costs were dominated by the price of fuel.
“Airlines are struggling for survival and massive changes are needed. Governments must stop crazy taxation, change the rules of the game and fix the infrastructure. Labour must understand that jobs disappear if costs don’t come down.”- Giovanni Bisignani, CEO & Director General at IATA
Some facts:
- Forecast losses of $2.3 billion for 2008 were based on an average oil price of $106.5 per barrel.
- If oil prices continue to trade at $135 per barrel then aviation losses would reach $6.1 billion.
- 24 airlines failed in the past 6 months.
My experience in US Markets, again… May 22, 2008
Posted by mylastresort in analysis.Tags: ETF, Gold, Investments, Me, Oil, Personal, Portfolio, stock markets, Stocks
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Its about time for me to re-enter the US markets again. This time im going for mid-to-long term holdings, here’s what im researching now:
- Gold ETF’s (1 year)
- Oil ETF’s (6 months – 1 year)
- Health care sector: Elderly care and anti-aging (1 – 2 years)
- Pharmaceuticals: Dependent on FDA approval (6 months – 2 years)
- Real Estate ETF’s (1 – 2 years)
Im looking at several market recommendations none of which are substantial enough to list. Once i am set on a strategy and I have my pool of stocks ready I will post them online for others to track changes to my portfolio.
