Petrobras Q1 2011 Record Profits

It ´s worth to take a look to the Petrobras results realeased in 13^th of May because it depicts a picture of future oil consumption in brazil. I cast no doubt that Petrobras will achieve its plans to double crude output by 2020. Even with subsidies to gas and diesel in the Brazilian market Petrobras managed to report the biggest income in its history so that depicts to things:

Energy consumption is growing steadily in Brazil and I think it is only 2 to 4 years away from displace Canada and Germany in energy consumption.

Second: Even with subsidies , Petrobras is a growing and very profitable business.

*this article or any of the previous or following ones does not constitutes any investment advice or suggestion.

Yahoo Shares Plunge! 20% in 3 days

Yahoo Shares plunged heavily in the three last days of trading because alibaba transferred the property of Alipay (China´s biggest electronic payment system) into a company where Alibaba´s CEO is the biggest stockholder, thus taking control of the company. This news made yahoo shares tumble 20 % in 3 days.

I think that is an overreaction of the market , this plunge means that the market values Yahoo´s share in Alipay in 20% of yahoo´s value . M eaning that AliPay is worth more than Yahoo as a whole? I don’t think so.

*this article or any of the previous or following ones does not constitutes any investment advice or suggestion. Disclosure : I do not hold currently shares of Yahoo .

Big Oil Tax Breakes? Fair or not Fair?

In the last weeks Americans have been complaining about gas prices (it´s around $4 dollars a gallon) and today the CEOs of big Oil companies appear in front of the U.S. Senate to justify 21 Billion dollars in tax breaks over the next 10 years, Is it Fair? Does the poor American consumer is abused from the Big Oil companies? I don´t think so and here is why:

In the early 1900´s exploring and extracting oil was a very profitable business in terms of invested capital (about 70% ROE) , nowadays is only about 6% . Oil is everyday harder to find, much of the new discoveries are in ultra deep water which carries a big risk (remember Macondo? BP´s Spill?) The demand for oil is growing and it will continue to do in the following years.

So in result the ones that comply about gas prices I have a solution: don’t use gas, buy a bicycle, skooter , electric car or what you can afford. The demand for something is only controlled by price and we are running out of oil. Peak Oil will happen between 3 to 8 years.

*this article or any of the previous or following ones does not constitutes any investment advice or suggestion.

Raj Rajaratnam found guilty on 14 counts: Risking what you have for what you don’t need!

It is a pitty that people try to make money the easy way in insider trading when they have it all! Take for instance Rajaratnam, a Billionaire which had one of the biggest hedge funds in wall street and all the money you could have or spend.

Now Rajaratnam faces up to 20 years in prison on each securities fraud count, investing is a very beautiful job, it will never be profitable to jeopardize your freedom for some extra cash in the pocket, especially when you have one billion. It was Rajaratnam worst valuation mistake ever.

Knowledge = Money

I have a general belief that it does not matter what you studied, what you do in life (physicist, waiter, lawyer) if you read and have a keen sense of logic you could do a lot of money in the market. Invest in what you know, in what you are familiar with , you don’t need a bacherlors degree or an MBA, just to understand the basics of accounting and make a logic analysis in something that you know about.

I will give you some sites that could be useful to start your own research in stocks, bonds , futures with articles and news related to them. The sites that I use are :

http://finance.yahoo.com/

http://www.bloomberg.com/

http://www.bloomberg.com/

http://www.google.com/finance

Make a good research and Have Fun!

Monsieur Trichet……

I really think that Mr Trichet should have some media management course. Every time he speaks to the media, he makes the euro tumble. On the contrary, Mr. Bernanke (although he makes the dow and s&p slump frequently) says the right things in the right time . European Union is facing growing inflationary pressures but I would prefer to pay the price of inflation in order to have real GDP growth.

If the European Union raises interest rates aggressively that could impose a economic slowdown in the zone. The picture is quite complicated, I wouldn’t want to be Monsieur Trichet because you have the big boys (Germany and France) growing at steady figures and the other boys (PIGS ) that are literally broke . If they continue raising interest rates that could really worsen the PIGS situation.

Oil Plunge? Go Out?

The 5^th of May of 2011 the crude oil WTI (west texas intermediate) almost plunged 10% which for some pundits is a precedent of a commodity bubble burst start. I strongly disagree that oil will keep falling too much I think that the floor in oil is 94 Dls a barrel . I see this 15% setback as a huge buying opportunity, due to the following reasons:

1.- After memorial day starts the U.S. driving season and as Japan comes back to normal the demand for oil and gasoline will rise.

2.-the prospects for the 4^th quarter are that Demand will outpace supply in the world, Chinese crude imports increased 11% for the quarter, growth demand for oil remains intact for the rest of the year and the only way of controlling oil demand is with price (so far..)

It has a high probability that emerging economies will demand more crude than forecasted by the end of the year and my oil crude model says that supply will be very thight for 2012.

*this article or any of the previous or following ones does not constitutes any investment advice or suggestion.

Silver and Gold illusion?

Silver has plunged from 50 dollars an ounce to 36 seven dollars an ounce, it is time to sell? I don’t think so? It is time to buy , yes I think so . I think the floor in the silver is at 35 dls an ounce (who cares what I think?, please don’t care because probably i´m wrong). QE2 (Quantitative Easing 2) has fueled a commodity rise and it will end in June but as the Fed signaled that it will commit liquidity to the market for an extended period of time , I think that inflation is not temporary and as markets endure in recovery mode metals will rise another time.

There is an important psychological factor in silver and gold ; security , investors regard it as a weath preservation vehicle, I think that there are better ways to preserve wealth than gold and silver (Fat dividend yields in good quality stocks).

If the U.S. does not keeps its fiscal policy tight in the next years , the silver could rise , even up to 100-150 Dls range. I am more bullish in silver than in gold because the industrial uses expanded heavily in the previous years and compared to gold is 1/32th it´s price, being a substitute. I think it should trade in the long term at least at 1/16^th .

*this article or any of the previous or following ones does not constitutes any investment advice or suggestion.

The New Economic Destination

A lot of Pundits attribute the good response of the U.S. economy to the monetary expansion (post bail out era) and the various fiscal stimulus . I do not agree with that conventional wisdom . In my humble opinion Mr Bernanke did the right thing but the good reaction of the industrialized economies is because of the extraordinary performance of emerging economies which increased the global aggregate demand for resources, products and services.

The last decade emerging markets economic policy favored the exporting sector , creating huge surpluses in the trade balance and huge current account surplus, and thus modifying the world financial landscape, now the so called poor countries are cash rich and finance the so called rich companies. I don’t like to forecast but the logic policy response from the emerging markets its now to support their consumers and look to endogenous growth, making their markets more independent (Brazil ‘s case). The before mentioned will revert the trend of trade imbalances in the world because at one point emerging countries will not like to continue financing the rich and on the other hand it is not sustainable.

The new economic destination is a picture were the rich are not that rich and the poor are less poor , with a lot of ups and downs but guiding to a new secular destination of global growth , higher inflation , no more cheap Asian labor and surging commodity prices….

U.S Fiscal Status …. Oh Myyyy …

The U.S. has accumulated huge deficits and somebody has to pay the bill, I do believe the first “payer” will be the long term U.S. government bonds, in other words I think that interest rates will rise.

I think in the following fashion: as the U.S has accumulated more than 14 Trillion of deficits (currently almost at par from the GDP) and as company that leverages more and more , the risk of default increases, therefore the rates should increase.

The Quantitative Easing 2 will end in June and I honestly think that demand for U.S. Debt (T-notes, T-bill, T-bons) will decrease . Today the U.S. outlook was changed from stable to negative, 5 years ago was unimaginable, now is a reality , we are living in a world were the poor saved the rich….. One for a change.

Unless the U.S. Budget shrinks (diminishing the role in the economy) debts will increase and the value of the dollar will continue eroding (as I stated 2 years ago in my dumping dollars article, being right so far). So if you are relying in the U.S. dollar I would be all in , maybe not in at all (in fixed income)

Disclosure : I currently hold short positions in U.S. Debt or synthetics of U.S. Debt

*this article or any of the previous or following ones does not constitutes any investment advice or suggestion.