Going forward, we remain positive on the outlook for oil prices. In September 2009, our oil Research team raised its 2010E-2011E oil price forecasts to US$90/bbl and US$110/bbl, respectively, on higher oil demand projections due to upward revisions to our global GDP forecasts and tangible signs of US/OECD demand stabilization.
Higher oil prices are positive for biodiesel demand and also increase the breakeven at which CPO biodiesel is viable for production outside government mandates (which stipulate a blending requirement irrespective of price). For example, we estimate that at current CPO prices biodiesel is viable if prices stay above US$61/bbl (based on export to Europe). Meanwhile, our 2010E-2011E CPO price assumptions of US$850 and US$950, respectively, imply biodiesel breakeven oil prices of US$75/bbl and US$88/bbl, respectively, (export to Europe), which is conservative relative
to our oil price forecasts of US$90/bbl and US$110/bbl for 2010E-2011E.
(Source: Golman Sachs)
Showing posts with label Investment News. Show all posts
Showing posts with label Investment News. Show all posts
Friday, January 8, 2010
Monday, January 4, 2010
Inflation may be coming. Time to look for a hedge!
Inflation may be coming. Time to look for a hedge.
By Whitney Tilson and John Heins
Sunday, January 3, 2010; G03
Inflation may be subdued today, but the debate over inflation is anything but tame. Pessimists, such as hedge-fund manager Julian Robertson of Tiger Management, say rampant inflation is a looming threat. "I ask anyone to give me an example of an economy beefed up by huge amounts of fiscal and monetary stimulus that did not inflate tremendously when the economy improved," he recently told us.
Optimists such as David Herro, co-manager of the Oakmark International fund, disagree. "The global economy is soft, and there's excess capacity, so I believe inflation is still preventable," Herro says.
The debate over gold, considered an excellent inflation hedge by some, is equally lively. Top investors, such as Paulson & Co.'s John Paulson and Greenlight Capital's David Einhorn, placed big bets on gold in 2009. Einhorn explained his rationale at the recent Value Investing Congress: "Gold does well when monetary and fiscal policies are poor and does poorly when they appear sensible. Prospectively, gold should do fine unless our leaders implement much greater fiscal and monetary restraint than appears likely."
At the same conference, Bill Ackman of Pershing Square Capital Management said he avoids gold because it is "a greater-fool investment." In other words, making money on the yellow metal is less a function of a rise in its fundamental value and more a function of finding someone who is willing to pay you more for it. Tiger's Robertson describes his aversion to gold similarly: "It's less a supply-demand situation and more a psychological one -- better a psychiatrist to invest in gold than me."
Because inflation hasn't afflicted America in some 30 years, it's worth reviewing what rising prices might mean for stock investors. In a 1977 article on the subject in Fortune, Warren Buffett went to great lengths to disabuse shareholders of the notion that they could skate through inflationary times unscathed. He wrote that companies have little ability to improve returns on capital when inflation is high, so investors aren't willing to pay as much for each dollar of corporate earnings. The subpar 5.2 percent annualized return for the Standard & Poor's 500-stock index from 1973 through the end of 1981, a span during which inflation rates often hit double digits, provides ample support for that argument (adjusted for inflation, stock returns were negative).
We'd love for policymakers to successfully reignite the U.S. economy without also rekindling inflation. The more prudent course, however, is to assume that all won't go smoothly.
What do we recommend? We respect many of those who advocate gold, but, like Ackman and Robertson, we believe it's too difficult to assign a value to the metal. Instead, we prefer high-quality companies with significant foreign exposure and the ability to raise prices. Both Microsoft and Pfizer recently reported better-than-expected earnings that signal the resiliency of each company's business. In Microsoft's case, those results don't yet reflect the launch of its Windows 7 operating system, which we think will result in much better profits than analysts expect.
You can also hedge against rising inflation by investing in businesses tied to natural resources, from crude oil to agricultural commodities. One favorite in this category is Contango Oil & Gas, which explores for energy mostly in the Gulf of Mexico.
More adventurous investors who think that higher inflation will lead to higher interest rates can bet against long-term U.S. Treasury securities through options and various exchange-traded funds (bond prices generally fall when rates rise). For example, we've shorted iShares Barclays 20+ Year Treasury Bond ETF, which is designed to gain value when yields fall and Treasury-bond prices rise. If inflation rises rapidly and rates follow suit, Treasury bonds will perform poorly.
By Whitney Tilson and John Heins
Sunday, January 3, 2010; G03
Inflation may be subdued today, but the debate over inflation is anything but tame. Pessimists, such as hedge-fund manager Julian Robertson of Tiger Management, say rampant inflation is a looming threat. "I ask anyone to give me an example of an economy beefed up by huge amounts of fiscal and monetary stimulus that did not inflate tremendously when the economy improved," he recently told us.
Optimists such as David Herro, co-manager of the Oakmark International fund, disagree. "The global economy is soft, and there's excess capacity, so I believe inflation is still preventable," Herro says.
The debate over gold, considered an excellent inflation hedge by some, is equally lively. Top investors, such as Paulson & Co.'s John Paulson and Greenlight Capital's David Einhorn, placed big bets on gold in 2009. Einhorn explained his rationale at the recent Value Investing Congress: "Gold does well when monetary and fiscal policies are poor and does poorly when they appear sensible. Prospectively, gold should do fine unless our leaders implement much greater fiscal and monetary restraint than appears likely."
At the same conference, Bill Ackman of Pershing Square Capital Management said he avoids gold because it is "a greater-fool investment." In other words, making money on the yellow metal is less a function of a rise in its fundamental value and more a function of finding someone who is willing to pay you more for it. Tiger's Robertson describes his aversion to gold similarly: "It's less a supply-demand situation and more a psychological one -- better a psychiatrist to invest in gold than me."
Because inflation hasn't afflicted America in some 30 years, it's worth reviewing what rising prices might mean for stock investors. In a 1977 article on the subject in Fortune, Warren Buffett went to great lengths to disabuse shareholders of the notion that they could skate through inflationary times unscathed. He wrote that companies have little ability to improve returns on capital when inflation is high, so investors aren't willing to pay as much for each dollar of corporate earnings. The subpar 5.2 percent annualized return for the Standard & Poor's 500-stock index from 1973 through the end of 1981, a span during which inflation rates often hit double digits, provides ample support for that argument (adjusted for inflation, stock returns were negative).
We'd love for policymakers to successfully reignite the U.S. economy without also rekindling inflation. The more prudent course, however, is to assume that all won't go smoothly.
What do we recommend? We respect many of those who advocate gold, but, like Ackman and Robertson, we believe it's too difficult to assign a value to the metal. Instead, we prefer high-quality companies with significant foreign exposure and the ability to raise prices. Both Microsoft and Pfizer recently reported better-than-expected earnings that signal the resiliency of each company's business. In Microsoft's case, those results don't yet reflect the launch of its Windows 7 operating system, which we think will result in much better profits than analysts expect.
You can also hedge against rising inflation by investing in businesses tied to natural resources, from crude oil to agricultural commodities. One favorite in this category is Contango Oil & Gas, which explores for energy mostly in the Gulf of Mexico.
More adventurous investors who think that higher inflation will lead to higher interest rates can bet against long-term U.S. Treasury securities through options and various exchange-traded funds (bond prices generally fall when rates rise). For example, we've shorted iShares Barclays 20+ Year Treasury Bond ETF, which is designed to gain value when yields fall and Treasury-bond prices rise. If inflation rises rapidly and rates follow suit, Treasury bonds will perform poorly.
Friday, December 11, 2009
Nestle replaces Parkson in FBM KLCI
Nestle will replace Parkson Holdings in the FBM KLCI in the FTSE FBM KLCI following the semi-annual review approved by the FTSE Bursa Malaysia Index Advisory Committee yesterday. In a joint statement yesterday, PTSE group and Bursa Malaysia said that the change would take effect from 21 Dec, and the next review would take place in June 2010.
(Source: Financial Daily)
(Source: Financial Daily)
Thursday, December 10, 2009
Upheaval continues at TCW
NEW YORK (MarketWatch) -- Asset management giant TCW Group is facing trouble on several fronts after firing its chief investment officer Jeffrey Gundlach last week.
Source:
http://www.marketwatch.com/story/bond-fund-manager-tcw-hit-with-redemptions-2009-12-09
Source:
http://www.marketwatch.com/story/bond-fund-manager-tcw-hit-with-redemptions-2009-12-09
Monday, November 23, 2009
US Dollar Forecasters
“The most accurate dollar forecasters predict the world’s reserve currency will continue sliding even when the Federal Reserve begins to raise interest rates, which policymakers say is an 'extended period' away.”
"Historically, the dollar usually doesn’t start rising on a sustained basis until 12 months after the Fed starts to lift rates."
"Historically, the dollar usually doesn’t start rising on a sustained basis until 12 months after the Fed starts to lift rates."
(Source: The Edge Malaysia
PPB records 3Q09 net profit of RM595m
The group recorded 3Q09 net profit of RM595m, up 188% yoy. The higher profit was largely due to increased contribution of RM943m from its associate, Wilmar, and improved operating results from its sugar operations.
Friday, November 20, 2009
CIMB Thai rises further
BANGKOK: CIMB Thai Bank Pcl surged by a record yesterday on speculation its Malaysian parent will delist its shares, prompting the Thai exchange to urge investors to “be careful” in trading the stock.
The shares jumped by the 30% daily limit to close at 3.90 baht (40 sen), the best performer in the benchmark SET Index, which dropped 1%. The stock has more than doubled in three days and closed at its highest level since Sept 26, 2003.
(Source : Bloomberg)
Wednesday, November 18, 2009
Malaysia’s gross domestic product (GDP) may rise to 6% by 2012
Malaysia’s gross domestic product (GDP) may rise to 6% by 2012, driven by Government reforms and as the global economy continues to recover, a World Bank economist said. The Government expects the GDP to expand 3% in 2010, against a forecast of 4.1% by the World Bank. It also sees the economy shrinking 3% this year, less than an earlier forecast of a contraction of 4% to 5%. World Bank senior economist Philip Schellekens said the 6% growth was achievable as reforms have encouraged more private sector articipation and greater productivity. (StarBiz)
Thursday, November 5, 2009
Global - Oil rises above USD80 after unexpected decline in US supplies -> Hyperinflation coming?
Crude oil closed above USD80 a barrel after a government report showed that US inventories unexpectedly dropped as imports declined to a two-month low. Stockpiles of crude fell 3.94m barrels to 335.9m last week. A 1.5m-barrel increase was forecast. Oil also advanced as equities gained and a weaker US dollar bolstered the appeal of commodities as an alternative investment. Crude oil for December delivery rose 80 cents (1%) to settle at USD80.40 a barrel at 3:04 pm on the NYME. It was the highest close since 23 Oct. Prices are up 80% this year. (Bloomberg)
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