Tag Archives: US

The Shale Gas Boom…Is It Just Hot Air?

The shale gas boom is about to explode, literally! As you may be aware, new technology now enables us to access shale gas by hydraulic fracturing, or fracking as it is more commonly known. Fracking involves blasting a high-pressure mixture of water, sand and chemicals at dense shale rocks to split them apart and release the tiny bubbles of methane trapped within. Although fracking has been persistently in the news, not least because it has been associated with alleged instances of water contamination in the US, it does not appear to have hampered the shale gas boom…

This week, the International Energy Agency, the world’s most respected energy body, predicted that the shale gas boom will boost US manufacturing and jobs until at least 2035, reinforcing America’s economic edge over Asia and Europe for the next two decades. It added that shale would continue to fuel the American economy even after the US starts ramping up exports, despite fears that selling the cheap gas to overseas customers would erode the country’s competitive advantage. These are unfounded fears, it seems…

Big winners will be energy-intensive industrial firms who are able to access cheap gas, most of which are, and will continue to be, in America. PricewaterhouseCoopers estimates that US chemicals firms have already grown capacity by a third and US petrochemical companies are blowing away their European competition. One such company, Dow Chemical has seen its net income rise by a third and earnings per share grow by 13.1% since last year. Companies that transport shale oil and gas around the US, like Kinder Morgan who owns 180 terminals and 37,000 miles of pipelines, are also perfectly placed to profit from the energy boom. Recent results show that quarterly profits were up by 80% on a year ago.

The shale gas industry is undoubtedly booming, with enough evidence to suggest that this is a new energy revolution and by no means hot air!

MasterCard Profits Rise As Card Holders Spend, Spend, Spend!

There are nearly 2 billion MasterCards out in the world and card holders are spending. MasterCard reported net income of $879 million up 14% from the same period last year. Earnings per share were $7.27, beating the consensus estimate of $6.94 a share. Sales were up 16% to $2.2 billion as purchase and dollar volume rose 14% and 15% respectively. MasterCard holders completed 10 billion card transactions and spent more than $1 trillion this quarter. Credit card users spent $590 billion in 6.3 billion transactions. Debit card users spend $454 billion in 5.4 billion transactions. The transaction growth is due in part to the companies efforts to make it even easier to use your MasterCard. CEO Ajay Banga explains, “In the quarter, we partnered with technology companies and merchants to develop standards and solutions that ensure safer and more secure transactions and we launched services like Simplify Commerce, our developer-friendly solution which allows merchants to begin accepting mobile and e-Commerce payments, regardless of brand, in a matter of minutes. The quarter was characterised by accelerating volumes across the globe, a notable pickup in U.S. credit metrics and significant acceleration in processed transaction growth. American Express may famously tell their customers “Don’t Leave Home Without It”…quite clearly in Mastercard’s case, none of them do!

Top Tweet Of The Day? Twitter, As IPO Pegs Valuation At $11 billion

Seeking to avoid a repeat of Facebook’s much-maligned public debut, Twitter revealed more modest ambitions, saying its initial offering would raise up to $1.6 billion (987.8 GPB) and value the company at up to about $11 billion. The valuation was more conservative than the $15 billion some analysts had expected for the social media phenomenon, potentially attracting investors who might consider the money-losing company’s listing price a better deal, with room to rise. Twitter had signalled for weeks it would price its IPO modestly to avoid the sort of stock plummet that spoiled Facebook’s coming-out party. Twitter’s offering will be the most high-profile Internet IPO since Facebook’s May 2012 debut, when the social network giant’s shares fell below their offering price and did not recover until a year later. Still, the modest pricing doesn’t obscure questions about Twitter’s profitability. At a roughly $11 billion valuation, Twitter would be worth more than Yelp Inc and AOL Inc combined. Facebook’s market value is now $128 billion. Twitter may be treading more carefully than Facebook did, but there’s still plenty to tweet about!

US Job Growth: September report may be last clean gauge of the job market…

U.S. job growth is likely to have picked up a touch in September, suggesting the economy enjoyed rising momentum before an acrimonious budget fight in Washington took some of the wind out of its sails. Non-farm payrolls are expected to have increased by 180,000 workers, a step up from August’s gain of 169,000, according to a Reuters survey of economists. The unemployment rate is seen having held steady at a near five-year low of 7.3 percent. The Labor Department releases its closely watched monthly employment report today, more than two weeks later than originally scheduled because of the partial shutdown of the federal government earlier this month. The data regularly sets the tone for global financial markets. Economists, however, said the shutdown has lessened its importance, with officials at the Federal Reserve likely to hold off any decision on scaling back the U.S. central bank’s bond buying until the extent of the economic damage from the budget fight is clearer. The September report may be the last clean gauge of the job market before most short-term effects or longer-run damage from the budget battles hit U.S. employers and households. Meanwhile, the US economy ‘drifts on’ as the Fed is likely to hold off on scaling back economic stimulus until next year.

Manufacturing Rallies?

The recent index rally in the US has inspired many to applaud FED chairman Ben Bernanke for his pro-market fiscal policies. Peter Schiff, the CEO of Euro Pacific Capital points out in his recent article that market performance “is now almost completely correlated to Fed activism”. Indeed, market rallies, as with S&P 500 and Dow Jones, tell us more about investor confidence and very little about actual economic health of country and the companies listed in these indexes. Schiff argues that all recent market rallies are preceded by fresh stimulants from the FED and thus the markets fall when the stimulus tab runs dry.

For the investor, it’s imperative to know which variables to look at before investing. If Schiff is correct, markets will surge after Bernanke’s next decision to stimulate the economy. In other words, a case can be made that the rallies we are currently witnessing are largely artificial. Stock-investing is a powerful and historically efficient tool to boost the economy, but if Schiff is right, the only this investors are boosting is a big fat bubble - wholly dependent on the government’s economic policies.

Dow, S&P hit record highs

The two major US indexes closed on a record high on Tuesday, largely spurred by positive developments in the health care sector. The Dow closed at 14.662 and S&P 500 hit a record high of 1.570. The Dow has experienced a Phoenix-like ascendance from the ashes, but some investors worry that the market rally is simply a sign of the coming storm. Many also speculate that the strongly performing indices are not indicative of a healthy economy and that the two entities operate on a different set of rules. Nevertheless, the US economy has shown signs of improvement, although the recovery has been slower than any previous post-recession recovery.

The Land of The Rising Stocks

The weaker yen coupled with positive job numbers from the US spurred Asian stocks to a highest close since August 2011. Moreover, the U.S. jobs data indicates that the world’s most dynamic economy is beginning to show real momentum.

Haruhiko Kuroda, candidate for the BOJ governorship and an advocate of quantitative easing is looking to buy derivatives if confirmed. Kuroda’s aim is to bring the inflation down to 2 per cent, a level unseen since the early 90’s. However, Kuroda’s, perhaps slightly premature, words are music to investors’ ears who are looking to cash in on the stocks rallies in Japan and the US.

Many analysts are expecting Japanese stocks to keep rising in the coming months.

Blowing Bubbles

In 2008 the bubble burst and the greatest economy in the world found itself completely exposed. Unlike what the so-called experts and late-night comedians tell us, financial greed did not cause the meltdown. On the contrary, the political aspirations of vote-seeking politicians forced private banks to kowtow to demands that would give loans to low-income families who in turn were unable to repay the loans. Politicians are often ill-informed about the dynamics of the marketplace and seldom understand how the economy works.

Today we are witnessing a similar trend. Instead of letting companies that are deemed too-big-to-fail to actually fail, politicians are concocting a twisted reality which may eventually come and haunt them. Fortunately for politicians, accountability in a 24/7 news cycle is a fleeting concept and reality usually ends up hurting the middle-class.

Only if the New York Times or the Washington Post deem it worthy to pursue a story, accountability becomes a relevant concept. Nowadays, the nature of American politics demands that the onus of politics is on campaigning, not governing, therefore rhetoric has largely substituted substance.

As the recent New Yorker cartoon satirically reminds us, when a politician opens with a forceful “let me be clear”, what he really means is to say “let me be vague”.

In other words, nothing has changed since 2008. Politicians pushing banks to give cheap loans to poor families are now pushing the government to spend more on social programs and other government gimmicks. It might be overly cynical to suggest that government can only do harm, but if the laws of supply and demand were in place, there would be no need for government to interfere and thus construe the marketplace.

Once again positive numbers articulated by the hopeful Fed chair, Ben Bernanke have fooled many into thinking that we are on the right path. Perhaps we are, but to wish for a different outcome compared to 2008, the policies must be different. Doing the same thing over and over again whilst expecting a different result, is the working definition of madness.

Indeed, it seems that in the US the only economic plan appears to be for Bernanke and his buddies to produce another bubble and hope it will end better than the one before. In Bernanke We Trust?

Stocks Fall Following FED Powwow

U.S. stocks dropped abruptly on Wednesday, declining from previous highs, following minutes from the FED’s latest meeting which typified conflicting opinions over continuous stimulus efforts. The Dow Jones fell 108.13 points, or 0.8 percent to 13,927.54, with Caterpillar took a hit following news that the worldwide maker of building and mining tools announced that its global sales decreased in the first quarter. After a 12-year high on Tuesday, the Nasdaq slid 49.19 points, or 1.5 percent, to 3,164.41 while Gold fell 1.6 percent to lower than $1,600 an ounce, stressed by the FOMC minutes and dollar’s heft. With individual stock changes, Boeing shot 0.2 percent one day following promises by engineers who accepted the plane manufacturer’s deal thus deflating a labour disagreement.