Wednesday, November 5, 2014

Don't Trust the Stock Market Rebound

The stock market rebound continued last week.
The S&P 500 has now recovered everything it lost during the first two weeks of October. And it is back to trading at all-time highs.
But I'm still skeptical the market correction is over...
Take a look at this chart of the S&P 500...
The S&P rallied to a new all-time high on Friday. It has plowed through every resistance level.  (more)

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Is US Shale Oil a Ponzi Scheme at $75 per Barrel? / By Marin Katusa / Nov 04, 2014
This was a question my dear friend and mentor Rick Rule of Sprott asked the Energy Panel at the New Orleans Investment Conference.
A good question, I think, because there’s a lot of misinformation in the media about shale, and for many years in these missives I have been trying to bring the facts to light.
For example, on August 6, 2013, in an article titled “The Coming Shale Writedowns,” I wrote:
Not all shales are equal. Some shales are deeper than others; and some are dry gas, while others are gas with liquids. In North America, billions of dollars have gone into developing all types of shale formations to extract as much natural gas, natural-gas liquids, and oil as possible. ….
Remember, not all shale formations are the same, similar to how not all gold deposits are the same.
The growth of US and Canadian oil production from shale has been very impressive. To put it in context, the graph below, using data from the US Energy Information Administration (EIA), shows how important it’s been for the two countries.

However, the oil price has averaged US$87.50 per barrel since 2009, which fueled the exploration and production of many shale formations.
I’m a big believer in technology, and it’s been advancing in the oil patch at an extraordinary rate—such that today’s unconventional extraction methods will be considered conventional tomorrow.
So back to the question: is shale oil a Ponzi scheme at $75 per barrel?
My answer is no. Though there are some shale formations that don’t work at such a low oil price, there are formations—and specific sections within those shale formations—that are very profitable even at $75/bbl.
The best companies in the field use advanced technologies to unlock the oil from the shale and increase their margins, and that’s where the growth seen in the above chart comes from.
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Top Stock Picks for November

We asked our best analysts to share their favourite stocks this month. Here are their top ideas.
Joseph Solitro: Canadian National Railway Company (TSX: CNR)(NYSE: CNI)
Canadian National Railway Company (TSX: CNR)(NYSE:CNI) operates one of the largest rail networks in North America and growing demand for its services has led to significant financial growth in 2014. In fact, in its most recent quarterly release on October 21, earnings per share increased 20.9% and revenue increased 15.6% compared to the same period a year ago.
Strong earnings reports like this have led to Canadian National’s stock price rising more than 25% in 2014, but it still trades at less than 19 times forward earnings estimates, making it a great value play at current levels.
In addition to the upside potential its stock offers, Canadian National pays out a very healthy 1.3% dividend and it has been actively repurchasing its shares, leading to over $1.7 billion in capital returned to shareholders in 2014. This shows that the company is fully dedicated to maximizing shareholder value.  (more)

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ETF of Canadian Dividends: Dividend 15 Split Corp. (TSX: DFN)

A tangible expression of this culture is Dividend 15 Split Corp. (TSX: DFN), which is a Canadian mutual fund that was created for the sole purpose of paying its shareholders a steady distribution by harnessing the dividend-paying power of Canadian companies.
It’s like an American closed-end mutual fund in that it mainly invests in 15 high-quality, high-yielding Canadian stocks. It then passes the dividends it receives from those stocks and any capital gains it locks in to its shareholders.
The ETF currently pays 9 cents per share per month, which provides a current yield of 10.2%.
Managed by Quadravest Capital Management, the fund’s holdings at any given time won’t deviate much from a fixed list of companies, though it doesn’t really disclose its investment process.  (more)

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Natural Gas Prices are Going Higher (So are these “Super Shift” Opportunities)

While everybody is focused on oil, natural gas prices are moving in a very different direction.
As of this afternoon, natural gas prices at Henry Hub stood at $4.15 per 1,000 cubic feet (or million BTUs). Since last Thursday, the price of natural gas has jumped by 13.7%.
Located in Erath, Louisiana, Henry Hub serves as the official delivery location for futures contracts on the NYMEX. It serves the same function that Cushing, OK does for crude. (more)
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