Monthly Archives: November 2014

The Importance of Russia

Two graphs that show how important Russia is for the commodities markets (Graph 1: example Oil Market; Russia #1) but also as a market for western (european) producers of machines, tech and so on (Graph 2: fall in exports to Russia from Germany; over EUR 4bn turnover less vs 2013 in 2014!).

The Worlds Largest Oil Producers 2014

German Exports To Russia Fall 2014

Crude Oil Graphs 2014 – Market Crude Prices; World Oil Supply; OPEC Crude Oil Supply, World Oil Demand

market-crude-prices-iea world-oil-supply-iea opec-crude-oil-supply-graph-iea world-oil-demand-ieamarket-crude-spreads-graph-iea Retirements of nuclear power capacity

  • Oil fell for a third month straight in September with Brent breaking through $90/bbl in October, on abundant supply, slowing demand growth and a strong US dollar. Brent prices have fallen by over 20% since June, when turmoil in Iraq lifted prices to $116/bbl, and were last at a near four-year low of $88.70/bbl. NYMEX WTI was at $85.20/bbl.
  • The forecast of global oil demand for 2014 has been revised 0.2 mb/d lower since last month’s Report, to 92.4 mb/d,on reduced expectations of economic growth and the weak recent trend. Annual demand growth is now projected at 0.7 mb/d in 2014, rising tentatively to 1.1 mb/d in 2015, as the macroeconomic backdrop improves.
  • Global supply rose by almost 910 kb/d in September to 93.8 mb/d, on higher OPEC and non-OPEC output. Compared with a year earlier, total supply stood 2.8 mb/d higher, as OPEC supply swung back to growth and amplified robust non-OPEC supply gains of 2.1 mb/d. Non-OPEC supply growth is expected to average 1.3 mb/d 2015.
  • OPEC crude oil output surged to a 13-month high in September, led by Libya’s continued recovery and higher Iraqi flows. Production rose 415 kb/d from August to 30.66 mb/d. A weaker demand outlook cut the ‘call on OPEC crude and stock change’ by 200 kb/d for 2015 to 29.3 mb/d. The ‘call’ declines seasonally by 1.5 mb/d from 4Q14 to 1Q15.
  • Global refinery crude demand hit new highs in August, near 79 mb/d, with OECD runs leading the uptick. The onset of seasonal plant maintenance sees runs fall through October, taking global crude runs to 77.5 mb/d in 4Q14 from 78.1 mb/d in 3Q14, with year-on-year growth rising over the same period to 1.4 mb/d from 0.9 mb/d.
  • OECD commercial total oil inventories built by 37.7 mb over August, to 2 698 mb, narrowing the five-year-average deficit to 38.1 mb, from 67.1 mb one month earlier. Preliminary data indicate that inventories rose counter-seasonally by 14.0 mb over September, led by a steep 11.7 mb build in middle distillates.

source: iea

 

The Worlds largest Oil Producers

 

Technical View – November 14th 2014 – Moving Average Convergence/Divergence

The graphs below are just to give the reader an idea of what some macro factors and commodities like gold are looking like and what an indicator like the Moving Average Convergence/Divergence (MACD) is doing on german running yield.

MACD positive divergence is said to be a precursor for countertrend moves, according to technical analysts (see running yield graph below and this article on the MACD positive divergence topic here).  Also below are the year on year chart of Gold (USD, New York Spot Price) and the deposit rate of the ECB (8-year graph).

german-running-yield-macd

 

ecb-deposit-rate-2006-2014-historic-graph gold-price-2014-spot-price-new-york-in-USD

Technical View – November 13th 2014

Some interesting graphs; 5DMA, Optimism Survey, VIX, Tsy yield. These are of course only relevant if you are not on a multi year investment plan (which incidentally is the advice most people should adhere to) and are momentum driven (5DMA could be rolling over) for example or are interested in market psychology (VIX, sentiment).

13112014_graph_1 13112014_graph_2 13112014_graph_3 13112014_graph_4

Single Factor Strategies – Example Dividend Strategy Mandate

If a client wishes to entrust me with a Single Factor Strategy – Dividend mandate the first step would be to choose a current dividend yield and market(s) he would like to target. I would then analyse the current dividend yield, the historic dividend yield and then compile a portfolio, taking into account his investment horizon, diversification aspects, liquidity requirements and market cap. Periodic reviews would then follow, either at the date of the AGM and or the publication of financial results.

In the graph below an example for how the selection process would work if the client had a target dividend yield of 3%. All those companies above the threshold (red line) would be in the pot of possible inclusions. The arrows depict which companies are improving the dividend versus 2013.

Single-factor-mandates-swiss-equities-graph-dividend-1Also see this post for other Single Factor Strategies I can implement for you.

 

Goldbach Media: from IFRS to Swiss GAAP FER

Another SIX listed company moving to Swiss GAAP FER from the notoriously inflexible and expensive IFRS (loved by auditors $$$). Previous examples from the third quarter 2013 were Meyer Burger and Burkhalter Holding and in the first quarter 2014 Kaba (see links at bottom of post).


Goldbach Group changes over to Domestic Standard on 8 December 2014

Küsnacht-Zürich, 10.11.2014. On 7 November 2014, SIX Swiss Exchange
approved the petition of Goldbach Group AG to change over to the Domestic
Standard on 8 December 2014, under the condition that all obligations of
public disclosure are met.

From 8 December 2014, the 6,010,920 registered shares, each with a nominal
value of CHF 1.25, of Goldbach Group AG, headquartered in Küsnacht-Zürich
(ticker symbol: GBMN), will be traded for the first time with the Domestic
Standard of the SIX Swiss Exchange. The last day of trading with the Main
Standard will be 5 December 2014.

The change in standards (segment change) is associated with the transition
from the current International Financial Reporting Standards (IFRS) to the
Swiss GAAP FER standard and will apply retroactively from the 2014 fiscal
year.

Switching accounting practice from IFRS to Swiss GAAP FER will mainly lead
to adjustments where company mergers are involved (treatment of goodwill
and immaterial assets from acquisitions), the treatment of cumulative
foreign currency differences in equity, and the calculation of benefit
liabilities. The switch will have a positive influence on turnover for
2014, as a reclassification of the cumulative exchange differences recorded
as equity with regard to the sale of a foreign subsidiary is no longer
required. The balance will be reduced due to the new treatment of goodwill
and the lower benefit liabilities. Accounting equity will be lower due to
the new treatment of goodwill, and current balance sheet risks will be
reduced. A detailed reconciliation account for the switch from IFRS to
Swiss GAAP FER will be included in the 2014 Annual Report.


Goldbach Group has been quoted in the main segment of the SIX Swiss
Exchange since June 15th, 2007 (Valor 487094, ISIN CH0004870942, ticker
symbol: GBMN).

Further information: www.goldbachgroup.com oder www.goldbach.com


Other examples: Kaba KABNMeyer Burger MBTN / Burkhalter Holding BKRN

Investing for the Long Term – Equities are the way to go

This graph is important in my eyes as it shows that over the long term you will nearly always make more than 4% p.a. if invested in equities, the probability of not achieving the hurdle rate of 4% is close to zero, as shown by the turquoise line. It also shows that the probability of not achieving 4% p.a. with bonds is close to 100% over the long term as shown by the bright red line. People investing in “safe” bonds (or cash for that matter) will always underperform people investing in equities over the long term.

probability-hurdle-ratesThe x-axis (horizontal) shows the time horizon. The y-axis (vertical) shows the probability in percentage terms.