The Morning Call
10/9/20
The
Market
Technical
Crude surges after
an OPEC official says that the worst is over in the oil market.
https://www.zerohedge.com/energy/crude-futures-spike-opec-comments-worst-over-oil-market
As we all know, the recession has taken a toll on
energy demands. Plus, the economy is
unquestionably moving away from fossil fuels as its primary energy source. So, the bad news is out there for all to
see. OPEC is now saying that the worst
is over. But keep in mind that (1) these
guys have a long history of lying and (2) if the economy stumbles, then so will
oil demand. With that said, I don’t know
how much more bad news can be discounted in oil company stocks.
As an illustration,
this is a 10 year chart of Exxon, one of my holdings that I added to recently, showing
just how much punishment it has endured.
To give you an idea of the order of magnitude of its stock price
decline: the horizonal green line marks a 50% decline in its stock price from its high. The yellow horizonal line is the same
percentage decline off XOM’s most recent high as occurred in the 2009 selloff
from its 2008 high.
Of course, there
is a reason for investor selling. In
addition, to the macroeconomic factors mentioned above, its dividend ($3.48/share)
is not covered by earnings (2020 -$.40/ share; 2021 +$1.75/share)---though it
is by cash flow (2020-$4.30; 2021 $6.60).
And the stock yields 9.9%. And
for whatever it is worth, management has vowed to not cut the dividend.
As a contrary opinionist,
this is too tempting to me not to have a position. But to be clear, this stock is not for little
old ladies in tennis shoes. Any purchase
should be small relative to the overall size of one’s portfolio and done with
the knowledge that a dividend cut would result in further downside.
Fundamental
Headlines
The
Economy
US
International
August Japanese
household spending rose 1.7% versus predictions of +3.2%; cash earnings fell
1.3% versus -0.9%.
The August UK
trade balance was +L1.4 billion versus estimates of +L0.6 ; industrial
production was up 0.3% versus up 2.5%; GDP was up 2.1% versus +4.6%.
The September
Chinese Caixin services PMI came in at 54.8 versus forecasts of 53.0; the
composite PMI was 54.5 versus 54.0.
Other
Some analysis of the house’s antitrust report
aimed at big tech.
The
Fed
Fed bond buying activity has been nil for two
months.
https://www.zerohedge.com/markets/second-straight-month-fed-bought-zero-bond-etfs
The
coronavirus
Excessive risk aversion.
Pelosi
decides not to support independent airline bailout bill.
https://www.zerohedge.com/political/mnuchin-reportedly-floated-idea-restarting-stimulus-talks
China
US ag exports to China finally starting to
increase.
News on Stocks in Our Portfolios
Bitcoin
jumps after Square investment.
https://www.zerohedge.com/crypto/bitcoin-jumps-after-square-investment
What
I am reading today
Habits in times of turmoil.
https://www.morningstar.com/articles/974013/investing-habits-in-times-of-turmoil
Using
physics to create cooling systems without using electricity.
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
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