Peak oil or trough oil?

Friday, 17 November 2017
Melbourne, Australia
By Kris Sayce

  • Bitcoin’s quick rebound
  • Forget bitcoin…
  • Tiny stocks
  • Booting out the ‘tyre-kickers’!

Peak oil or trough oil?

No, we’re not referring to the world’s oil reserves. We’re referring to where the world is in terms of the oil price.

Right now, West Texas Intermediate crude is in the mid-US$50s per barrel. Brent crude, the European benchmark, is in the low US$60s per barrel.

The price has double since it hit a multi-year low in early 2015.

The question is whether the price has much further to go as demand increases, or whether this is the peak as demand slumps.

We don’t know for sure.

But we do know a couple of things. The first is that even though oil is the dominant energy commodity today, it has only been so for less than 100 years.

Before Colonel Edwin Drake struck oil at Titusville, Pennsylvania in 1859, and before the Spindletop discovery in 1901, coal was the dominant energy source.

And it still was for decades after the first major oil discoveries.

So while it’s easy to think that oil has always helped drive innovation and progress, that’s not necessarily true.

After all, it didn’t have anything to do with the Industrial Revolution.

It didn’t have anything to do with the huge growth in the Victorian era, or the expansion of the railroads in the US during the 19th Century.

Those were two of the biggest economic growth spurts in history. And they were both during the ‘Age of Coal’.

Of course, much of the progress during the 20th Century was due to oil. There’s no question about that. But just because oil has been the dominant force for 100 years, doesn’t mean it will be for the next 100 years.

And if the history of innovation is any guide, each new source of energy will have a shorter period of dominance.

Think back. There have been three great ages of energy. The first was wood. That was the longest. It created heat and energy for primitive people for thousands of years.

That was until coal came onto the scene. Then it dominated…for hundreds of years. Nothing else could beat it. It became even more dominant with the introduction of steam engines.

But as oil supplies grew, and engineering adapted, oil replaced coal as the dominant global energy source.

So, as we look ahead, what’s next? Solar? Wind? Fuel cells? Nuclear? Something else?

Or will oil buck the trend? Maybe oil’s days aren’t yet numbered.

We guess it depends on to whom you speak. If we were to ask Norway’s sovereign wealth fund, it would seem that oil’s days are indeed numbered.

As Bloomberg reports:

The $1 trillion fund that Norway has amassed pumping oil and gas over the past two decades wants out of petroleum stocks.

Norway, which relies on oil and gas for about a fifth of economic output, would be less vulnerable to declining crude prices without its fund investing in the industry, the central bank said Thursday. The divestment would mark the second major step in scrubbing the world’s biggest wealth fund of climate risk, after it sold most of its coal stocks.

For the record, Norway is Western Europe’s biggest oil producer.

When the biggest of anything says that it wants to stop investing in the thing it produces…that usually isn’t a good sign.

You could argue it makes sense. You could argue that Norway is hedging its bets, by diversifying. Fair enough.

Or you could argue that the age of oil is coming to a close.

Or, you could argue that low interest rates have caused investors to plough cash into alternative energy industries, which don’t have a hope of survival once interest rates rise.

For example, Tesla Inc [NASDAQ:TSLA] launched its new Model 3 to much fanfare…and yet has only succeeded so far in producing six cars per day.

In total, it has produced just 440 of the cars since the launch. If that’s what it’s able to achieve when interest rates are so heavily in its favour…we wonder how little it will achieve when interest rates are a percentage point or two higher.

So rather than the end of the age of oil, we wonder instead, if perhaps these events are an indication that the oil market and oil price could be readying for another tremendous boom.

We’ll keep thinking about it, and let you know what we come up with…

Markets

Overnight, the Dow Jones Industrial Average gained 187.08 points, or 0.8%.

The S&P 500 added 21.02 points, or 0.82%.

In Europe, the Euro Stoxx 50 index ended the day up 19.08 points, or 0.54%. Meanwhile, the FTSE 100 gained 0.19%, and Germany’s DAX index closed up by 0.55%.

In Asian markets, Japan’s Nikkei 225 index is up 53.73 points, or 0.24%. China’s CSI 300 is down 0.14%.

In Australia, the S&P/ASX 200 is up 18.89 points, or 0.32%.

On the commodities markets, West Texas Intermediate crude oil is US$55.31 per barrel. Brent crude is US$61.22 per barrel.

Gold is trading for US$1,282.91 (AU$1,690.04) per troy ounce. Silver is US$17.10 (AU$22.53) per troy ounce.

The Aussie dollar is worth 75.89 US cents.

Bitcoin is US$7,968.30.

Bitcoin’s quick rebound

There’s no keeping it down. Over the weekend, the bitcoin price slumped. It fell below US$5,600.

Last weekend? So long ago! Today, it’s US$7,968.30.



chart image

Source: Bloomberg
Click to enlarge

At the current price, it’s at a new all-time record high. It’s up 40% over the past month. Heck, it’s up 40% over the past six days.

What does this all mean?

We concede that we have no idea. All we know is that less than a year ago, one of our resident cryptocurrency experts, Sam Volkering, said that bitcoin was on the way to US$10,000.

We laughed. We laugh no more. US$10,000 is within reach.

And yet, according to Sam, bitcoin isn’t even the best crypto that crappy old dollars can buy. Sam says there are many other more exciting opportunities.

You can find details on his latest best bet here.

Forget bitcoin…

Is bitcoin in a bubble?

Take a deep breath. Close your eyes for 10 seconds…and then consider the chart below:



chart image

Source: Bloomberg
Click to enlarge

It’s the bitcoin price chart going back to 2010. It has gained a ridiculous, unbelievable, but actually true, 13,198,819%.

That’s over a 13 million percent return.

What can beat that? Nothing, surely.

Well, one thing may have given it a good run, and that’s the painting, Salvator Mundi (Saviour of the World), allegedly painted by Leonardo da Vinci.

It sold in New York overnight, for a world record US$400 million (or US$450 million if you include the auction house premium).

Considering the earliest recorded sale of the painting was around US$135 in 1958, which means the painting has appreciated in value by 296,296,196%.

That’s a 296 million percent gain.

If bitcoin is a bubble, perhaps fine art is a bubble too.

Either way, we’re pretty sure low interest rates have something to do with it.

Tiny stocks

It’s not too late to check out and register for the ‘Project 100-to-1 Summit’. It starts Sunday.

What’s it about? Simple: it’s about what I call ‘tiny stocks’. Check this out:



chart image

Source: CMC Markets Stockbroking
Click to enlarge

This is a snapshot of the biggest movers on the ASX today.

Two of these little beauties have gained 300%…in just a few hours. Another is up 100%.

Two more have gains above 60%. Three others have gained 50% or more.

And two ‘laggards’ have clocked up a 40%-plus gain.

Extraordinary. While all the talk everywhere else is about bitcoin and cryptos, it’s easy to forget that there are exciting ‘tiny stocks’ on the ASX that are racking up crypto-like gains.

300% in a day. As good a speculation as bitcoin may be, we’re not sure that it has done that anytime recently.

Anyway, unlike cryptos, you don’t have to set up any other account to trade these ‘tiny stocks’. If you have a brokerage account already open, you can start trading ‘tiny stocks’ right away.

But don’t do so yet. First, check out the ‘Project 100-to-1 Summit’. It starts Sunday, and it’s FREE. You can register here.

Booting out the ‘tyre-kickers’!

Since Port Phillip Publishing launched in Australia in 2005, and since we offered our first subscription service in 2006, we have offered 30-day refunds.

This remains for our lower priced entry-level services.

We believe the refund period is important for these services, as it helps with building trust in us…knowing that if the service isn’t what you expected, you can get your money back. That’s as long as you contact us within the refund period.

That’s usually 30 days.

When we launched our first premium trading service in 2008, we also included a refund period. The rationale was different. Premium investment and trading services are more expensive.

They typically cost $1,000 or more per year. We know that’s a lot of money, so we wanted to give folks a chance to subscribe, try the service, and make sure it’s for them.

If it isn’t, we would provide a refund. Again, if the refund request came within 30 days of subscribing for the service (sometimes, we have offered 60 day and six-month refund periods).

Unfortunately, it has become clear that some folks have abused that generosity. Knowing that we offer the refund, some folks subscribe, get and download everything, including the stock research, and then demand their money back.

For the genuine folks, I haven’t had a problem with that. But there are a significant number who do this systematically, and on a regular basis — subscribing to and then cancelling the same service several times per year.

As a result, we are phasing out the refund periods for our premium level services. Note, this won’t affect you if you’re currently covered by a refund period.

But over the next few months, as we launch new premium trading services and premium investment advisories, you’ll notice a new ‘No Refunds’ policy.

Naturally, that won’t interfere with consumer protection laws, such as if technical issues prevent you from accessing the service, and that technical issue is our fault. Or we’re unable to deliver the service in the way promised.

But it will impact those who subscribe and then cancel for the heck of it. Soon, for them, no refunds will apply — regardless of the threats they make!

I know that may be a little frustrating if you genuinely would like to try a service before fully committing to it. But, unfortunately, this is something we have to do in order to protect those customers who are genuinely committed to the service.

It can be frustrating to subscribe in the hope of buying a specific stock, only for ‘free-riders’ to come in, get all the research for free, contribute to pumping up the price of the stock, and then demand a refund.

Put simply: it’s not fair. And soon, that won’t happen anymore.

As publisher, I’m only interested in making sure we have serious investors join our premium level services. Serious investors, those who have thought about the service, should know whether something is for them before they commit to it.

They know the potential. They know the risks. They’ve taken the time to read and understand everything that has been outlined in the sales promotion.

This new policy will help folks like that.

On the other hand, the tyre-kickers and time-wasters…well, I know they won’t like it. I know they’ll kick up a fuss. No doubt they’ll claim they weren’t aware when they call or email to demand a refund.

But tough. This is the only way we can stamp out the behaviour that creates problems for genuine subscribers.

Anyway, I just wanted to mention this now, so that you’re aware. Our promotions will always be clear about the refund policy. And we will phase this in for each premium service over the next few months.

Thanks for your understanding of this necessary policy change.

Cheers,
Kris