Currency Analysis Report 11/14/19 – The Kiwi Surprises Everyone

The Reserve Bank of New Zealand has already cut interests rate three times this year with the most recent cut being in August.  Back in August the Bank of New Zealand cut rates by 50 basis points.  The drastic cut shocked the Markets because the Markets were only a 25 basis point reduction.  At that time, Reserve Bank Governor Adrian Orr hinted at further easing by any means necessary in order to hit their inflation rate targets.

Twelve out of 15 analysts polled by Reuters expected the Reserve Bank of New Zealand (RBNZ) would cut rates to 0.75% this week from the current 1%.  However, nobody saw it coming yesterday evening.

The New Zealand dollar surged Wednesday after the country’s central bank defied expectations for an interest rate cut, and left policy unchanged. The kiwi dollar NZDUSD, +1.2954% jumped 1.1% to 0.6402 U.S. cents. In a statement, the Reserve Bank of New Zealand said at it was leaving the Official Cash Rate at 1% as economic developments since August “do not warrant a change to the already stimulatory monetary policy setting at this time.”

Expectations had widely been calling for a cut of 25 basis points, said Ipek Ozkardeskaya, senior market analyst at London Capital Group, in a note to clients.

Source

The RBNZ left the door ajar for further policy easing saying it was “prepared to act” if required. The central bank’s own projections imply a 50/50 chance of a cut next year.

So where is the Kiwi headed next, lets go to the charts?

Monthly Chart (Curve Time Frame) – monthly supply is 0.7600 and monthly demand is 0.6300

Weekly Chart (Trend Time Frame) – the trend is still down.

Daily Chart (Entry Time Frame) – the chart suggests you can’t consider going long until price closes above 0.6450.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Look For Roku To Benefit From The Streaming Wars

Microsoft licenses its operating systems to manufacturers of computers back in the day. Today, the name Microsoft is synonymous with PCs and laptops. Just like Microsoft is synonymous with PCs and laptops, Roku is synonymous with smart TVs.

Roku was founded in 2002 is taking advantage of the cord cutting trend. According to Roku’s most recent shareholders’ letter, “roughly 50% of U.S. cord cutters are Roku customers.

Roku offers an easy way to access all the top streaming services. Roku estimates that more than a third of all smart TVs sold in the U.S. have Roku’s operating system built in. The list right now includes TCL, Insignia, Sharp, Hisense, Hitachi, RCA and Philips. Roku’s free channel has also secured a partnership with Samsung.

Image result for streaming wars

Source Image

Roku is well-positioned for the streaming war. As the streaming war rages between Netflix NFLX, Amazon AMZN, Disney DIS and others and more people spend more time streaming their favorite shows on more services, Roku makes more money. So no matter which streaming service comes out on top, Roku should benefit.

It’s the reason why Roku was up as much as 400% this year at one point. In just under a year, Roku went from a small/mid cap stock to a large-cap. The firm’s sales growth has been accelerating with year-over-year growth of more than 50% for the past 3 quarters. In addition, Roku just reported its 8th straight top and bottom-line earnings beat. However, on the news the stock sold off. Wall Street will tell you their valuation got to rich, but a month ago I talked about where the chart suggested the Sellers were.

Is Roku’s Reign Over???

Although I thought the weekly demand would have been a better buy, price reacted to the monthly demand at $95. Thus, the chart suggests price will rise to the daily supply at $148.

It’s not a coincident, price sold off at the daily supply at $148, the news just served as a catalysts. Just another example of why the Markets are not random.

So where does Roku go from here?

Highlighting how well the company is monetizing its platform, Roku’s average revenue per user over the trailing 12 months is 40% higher than Netflix’s most expensive streaming plan. What’s particularly surprising, however, is that current trends indicate there’s still plenty of upside left for this metric to move even higher.

In Roku’s third-quarter update, management said its ARPU was $22.58. With 32.3 million active accounts (1.7 million of which were added in Q3 alone), this robust ARPU has helped Roku deliver $633 million in trailing-12-month platform revenue.

While Roku does benefit from subscriptions to third-party streaming services on its platform, advertising is the company’s most important growth driver. In fact, monetized ad inventory on its platform more than doubled year over year in Q3 — a trend that has been consistent with recent quarters.

Looking ahead, Roku believes this is just the beginning when it comes to advertising spending on its platform. Only 3% of TV advertising budgets are currently spent on connected TV, yet connected TV accounts for 29% of U.S. viewing, Roku’s general manager of platform business, Scott Rosenberg, noted in Roku’s third-quarter earnings call, citing research firm Magna Global.

Source

Thus, the chart suggests to go long at the daily demand at $107 and ride price back to the daily supply at $148.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Rental Price Growth Gets Cut in Half From A Year Ago

Rental prices have seen aggressive growth over the past five years, but the gas tank may finally be getting low with prices over the past year growing half as much as recent years.

Raising Rents as an Investment Strategy May Get Difficult

A lot of this is market dependent and growth could certainly kick up again, but the rates have been steadily strong prior to this year so it’s worth keeping an eye on this data going forward and adjusting strategy if needed.

Nationwide Rate

As a whole rental prices increased 1.4% year over year, according to apartmentlist.com data, while the month over month change for October was 0.1%.

Picking Growing Markets Is Important

Many real estate investors in recent years, especially those doing large multifamily deals have used a strategy of acquiring under performing properties, sprucing them up and raising rents as units are turned over.

Then, with the cap rate higher due to the increased rents they can refinance out of an original loan and pull a good chunk of equity or just sell outright for a profit.

It is a solid strategy, but we can’t just blindly assume higher rents will be supported indefinitely.  Capital improvements will help attract higher rents, but in the end the market dictates the ultimate cap regardless of how nice a place is.

This is why it is imperative to pick strong growing markets.  That doesn’t just mean in rental prices, it means a growing population with increasing job opportunities.

That will help provide the market growth needed, but will also hold up the best if we hit a period of stagnation in the future.

Growing vs. Shrinking

Here is a glimpse at some states with the best and worst year over year growth.

  • Arizona: 3.5% growth
  • North Dakota: 2.9% growth
  • North Carolina: 2.7% growth
  • Nevada: 2.6% growth
  • Delaware: 2.4% growth

Rental prices falling:

  • West Virginia: -0.8% growth
  • Louisiana: -0.6% growth
  • Alaska: -0.3% growth
No Red Flags, but Pay Mind

As you can see there are some leaders and some laggards of the 1.4% national average.

The good news is we still have growth in rental prices, the bad news is growth has slowed a considerable amount over the past year.

Again, it is data worth watching, especially for those with the business model of aggressively raising rents on new projects as growth projections may not keep pace compared to recent years.

Barrick Gold Still On The Prowl

Barrick Gold Corporation explores for and develops mineral properties. The company primarily explores for gold, copper, and silver deposits.

According to Oilprice.com Barrick Gold Corp is one of most promising gold miners in 2020. Barrick Gold made headlines earlier this year when they attempted to acquire Newmont Mining which would of created the world’s largest gold producer. Barrick wanted Newmont Mining because of their adjoining assets in Nevada.

Needless to say, Barrick eventually pulled its $18 billion offer for Newmont Mining Corp and agreed to form a joint venture in Nevada with Newmont Mining.

The world’s second largest gold producer reported earnings yesterday and said it would be at the top end of its production targets for the year and the lower end of cost estimates.

Thanks to the rise in gold prices over the last year and gold production increasing to 1.31 million ounces from 1.15 million ounces over the last 12 months, profits rose to $264 million, or 15 cents per share, in the quarter ended Sept. 30, from $89 million, or 8 cents per share, a year earlier. 

And if that news wasn’t good enough, Barrick also announced that its Board of Directors declared a dividend for the third quarter of 2019 of $0.05 per share, a 25% increase on the previous quarter’s dividend.

Although the Newmont Mining deal didn’t materialize, Barrick’s late founder Peter Munk vision of building the world’s largest gold producer remains on the table.  The latest talk on the Street is now combining with Freeport-McMoran.

Freeport-McMoRan (NYSE: FCX) engages in the mining of mineral properties in the United States, Indonesia, Peru, and Chile. The company primarily explores for copper, gold, molybdenum, silver, and other metals, as well as oil and gas.

Barrick Gold Corp.’s chief said there’s a logic to combining with Freeport-McMoran Inc. as a way to expand into copper, but isn’t committing to any deals yet.

A tie-up with Freeport could bolster Barrick’s U.S. presence, where it already operates gold mines in Nevada, said Chief Executive Officer Mark Bristow, who cautioned that it’s not something currently being considered.

“Everyone has been fingered as a potential suitor of Freeport,” said Bristow, when asked if he was interested in a combination. “There’s a bit of work for us to do before we can get our head around broadening our scope.”

Source

In general, the mining stocks do better than gold when the price of the metal rallies.  Although gold prices have pulled back, I think it’s just part of any normal uptrend, in the cause of gold, a longer term uptrend that started in late 2018.

So where is the price of Barrick headed next, lets go to the charts go to long on the pull back to the weekly demand at $15.30 with a target right before the weekly supply zone.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Natural Gas Analysis Report 11/6/19 – Yep The Bottom Is In

The last time I talked about natural gas was two months ago,

Natural Gas Analysis Report 9/5/19 – A Bottom Has Been Put In

There was this huge base at $2.00 on the monthly chart going back 18 years.  In September, I noticed a monthly hammer candle had formed in August.  If you are aware of the common candle stick patterns, a hammer candle usually occurs at the bottom of a down trend.  However, what confirmed the end of the downtrend was on the daily chart, price has formed a demand zone, on top of a demand zone.  I call a zone on top of a zone, a level on level and is one of the most powerful formation when trading supply and demand zones.   Thus, the chart suggest to go long a pull back to the daily demand levels and go long with a target at $2.700.

Please note, there are typically two seasons for the U.S. gas market: Summer (April-Oct) and Winter (November-March). Gas is injected into the ground in Summer and gas is withdrawn in Winter to meet demand that rises well above production.  Please note, today is November 6th.

Natural gas prices surged higher on Monday climbing nearly 4% after rising 5.25% for the week. Short-covering by funds should continue. The weather is expected to remain cooler than normal through most of the eastern portion of the United States over the next 6-10 and 8-14 days.

Hedge fund traders reduced some of their short position in futures and options and added to longs, but remain exposed to a short-squeeze. According to the most recent commitment of trader’s report released for the date ending October 29, 2019 managed money reduced short position in futures and options by 21.5K contracts while increasing long positions in futures and options by 11K contracts. The current net short position at 299K contracts is nearly 3X the open interest that is short futures and options, providing the backdrop for a short-squeeze.

Source

Overall, the Smart Money is still net short natural gas, but are being forced to recover the positions due to being short squeezed.  In this case, the short squeeze is occurring because of the excess in demand for the contract and lack of sellers.  Since price has moved up rapidly, the short sellers are covering to preserve some of their gains and/or cap their losses, resulting in additional buying, which is causing price to move higher.

So where are prices headed next, the chart suggests price is heading to the weekly supply at $3.100.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Another Sub Prime Auto Lender Setting Up For A Short

Yesterday, I wrote a post about Santander Consumer,

Santander Consumer Is Setting Up For A Short Position

Santander Consumer is one of the largest subprime auto lenders in the market. Delinquencies for auto loans in general, including both prime and subprime, have reached their highest levels this year since 2011.

Santander Consumer had $26.3 billion of subprime auto loans as of June 30 that it either owned, or bundled into bonds, According to a report from S&P Global Ratings, Santander Consumer has more than $25 billion in subprime auto loans which is almost 50% of the company’s total managed loans.

Today, I want to introduce another auto lender, Credit Acceptance Corporation

Credit Acceptance Corporation provides financing programs, and related products and services to independent and franchised automobile dealers in the United States. The company advances money to dealers in exchange for the right to service the underlying consumer loans; and buys the consumer loans from the dealers and keeps various amounts collected from the consumers.

Don Foss is known as the pioneer of the subprime auto loan market.  Back in the days, General Motors and Ford would only lend money to folks with good credit.  So Don started selling cars on credit to people with shaky finances.  Don was charging customers crazy high interest rates and could because nobody else was issuing loans to this particular population with bad credit. So in 1972, Foss founded Credit Acceptance (CACC) to handle financing and debt collection for his used car business. Today, CACC is a major player in the U.S. subprime auto loan market and its market cap is a little under $8 billion.

Credit Acceptance Corporation’s CACC third-quarter 2019 earnings of $8.73 per share missed the Zacks Consensus Estimate of $9.13. However, the bottom line was up 12.6% year over year. 

Provision for credit losses increased 37.9% from the year-ago quarter to $19.3 million. Moreover, allowance for credit losses at the end of the third quarter was $509.1 million, up from $461.9 million as of Dec 31, 2018.

Credit Acceptance is well poised for growth in revenues, given the continued rise in consumer loans. However, persistently increasing expenses and deteriorating asset quality are near-term concerns.

Source

So as the economy slows, companies hire less and layoff more, customers’ confidence decline, the more sub-prime auto loans default.  And when this chain reaction fully materializes, CACC’s stock will crash. 

At the moment, there is a nice band of support/resistance at the $450 level.

However, because this band of support/resistance was breached last month, the chart suggests to short price at the weekly supply at $460.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Santander Consumer Is Setting Up For A Short Position

Santander Consumer USA
Holdings Inc., a specialized consumer finance company, provides vehicle finance
and third-party servicing in the United States. Its products and services
include retail installment contracts and vehicle leases, as well as dealer
loans for inventory, construction, real estate, working capital, and revolving
lines of credit.

The company also offers
financial products and services related to recreational and marine vehicles;
originates vehicle loans through a Web-based direct lending program; purchases
vehicle retail installment contracts from other lenders; and services
automobile, and recreational and marine vehicle portfolios for other lenders.

Santander Consumer (SC)
reported earnings this past week and their quarterly earnings of $0.67 per
share beat Wall Street estimates of $0.66 per share. This compares to earnings
of $0.64 per share a year ago.  Over the
last four quarters, the company has surpassed consensus EPS estimates three
times.  But don’t let the numbers fool
you.

Santander Consumer is one of the largest subprime auto lenders in the market. Delinquencies for auto loans in general, including both prime and subprime, have reached their highest levels this year since 2011.

Image result for banks sell mortgages as loans to wall street great recession cdo

Source Image

Prior to the Great Recession, banks were approving just about any applicant regardless of their income or ability to pay the mortgage.  The banks didn’t care as they just packaged the loans as CDOs and sold them to Wall Street.  All kinds of debt were repackaged and resold as collateralized debt obligations. As housing prices declined, many homeowners found they could no longer pay their mortgage resulting in mass defaults.

Santander Consumer does
the same thing today.  The package these
auto loans and sell them to bond investors. 
But in Santander Consumer’s case, if the debt can’t be paid back Santander
Consumer is often obliged to buy the loans back, which ends up being a loss on
their books.

Santander Consumer had
$26.3 billion of subprime auto loans as of June 30 that it either owned, or
bundled into bonds, According to a report from S&P Global Ratings, Santander
Consumer has more than $25 billion in subprime auto loans which is almost 50%
of the company’s total managed loans.

Are you thinking what I’m thinking…the stock is setting up for a short. Based on the monthly chart, the chart is suggesting two targets.

With the first testing being the level at $23.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Ag Analysis Report 11/2/19 – How Did The Trade War Affect Cotton Prices???

Cotton has been used in textile production for 1000s of years and used in providing thousands of products like apparel, but even gunpowder. The US, India and China produce over 65% of cotton used by citizens of the world. A bale of cotton weighs about 500 lbs and can produce over 1000 T-shirts. Harvesting cotton begins in July until late November and is grown in about 15 states such as, but not limited to North Carolina, South Carolina, Tennessee and Virginia. 

Image result for cotton grown in us map

Georgia produces about
20% of cotton in the US, which is also its leading crop. The climate and
environment in Georgia facilitate the high-quality cotton growth which textile
mills worldwide desire.

In 2018, President Trump
put tariffs on Chinese goods coming into the United States earlier this year,
and the Chinese retaliated. The US is the top producer and exporter of soybeans
with China purchasing about 25% of what the US produces U.S. annual soybean
crop.  China is the largest importer of
soybeans in the world.  However, China
has canceled all shipment of beans from the U.S. causing the prices in the
soybean futures market to drop to the lowest price in a decade.

So what did farmers do, at least those located in the Southeast region of the US, they planted more and more cotton?

Recently on AgDay TV, Tyne Morgan spoke with David Hudson, an economist at Texas Tech University, about the trade war’s impact on cotton.

He says increased acres are part of that equation.

“As soybean prices fell more acres shifted over to cotton in year two and so now we’re seeing the effects in year two of this pretty substantial drop in cotton price,” says Hudson. “That is a trade effect, but it’s a delayed effect.”

Hudson even the strong MFP payments for cotton won’t be enough to offset falling prices in 2019.

“We’re talking about nearly a 40% decline in prices, year over year,” says Hudson.

Source

So where is the price of cotton going next, the chart suggests to short at the monthly supply at $67.50.

There is a monthly demand down at $43.

But the chart suggests your first target should be at major/resistance band at $57.50.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Salute To Leon Howard aka “The Wallstreet Trapper”

Leon Howard aka “The Wallstreet Trapper” was born and raised in New Orleans. At the age of 9 he saw his mother get shot right before his eyes.  At the age of 16, he went to prison for 10 years for attempted murder and armed robbery.  But it was in jail that he met a white who told him black people are playing the wrong game.  You see the white guy was in jail for embezzling millions of dollars from his job.  But what he told Leon is wealthy people don’t trade time for money.  Think about that for a second, wealthy people don’t trade time for money.  Another way of saying this, in the famous words of Warren Buffett, “if you don’t find a way to make money while you sleep, you will work until you die.”

Image result for jail

It was during this conversation that the white guy told Leon about the stock market.  And for the rest of his time in jail, he read every book he could about the stock market, how banks work, etc.  And before the other prisoners would get up to watch TV, he would get up before them and turn the channel to CNBC.  And then a fellow prisoner, who read the USA Today, would give Leon the financial section every day.

The slang word trap has numerous definitions, but is mostly used to refer to any place where drugs are being exchanged. A trap can be anywhere, it can be an open spot where cops don’t frequent or a house which dealers typically refer to as a trap house.

Image result for wall street trapper

Leon defines “Trap” as “a state or condition of a people being financially trapped, unable to find the path to financial freedom no matter how many jobs or side hustles worked.”

And so when he got out of jail his mission and targeted market was the people he knew on the streets because he knew the game they were playing and wanted to expose them to a different game. Leon committed to showing Black America a very different hustle, moving “From The Trap To Wall Street” one stock share at a time.

He’s a smart dude, because he is conquering Wall Street, but because he knows how to break down the financial literacy in a language that’s digestible.  He tells people, you may possess the clothes on your back or the call you drive, but you don’t really own it because you don’t have any stake in the company.  Do you remember how I talked about wealthy people don’t trade time for money.  Leon is very big on that.   So I want to salute Leo by sharing with you an article I read on Motley Fool about 3 stocks that pay dividends every months.

Pembina Pipeline (NYSE:PBA) currently pays its shareholders a dividend yield of just over 5% per year. While the Canadian company may offer some volatility for U.S. investors, given that its payouts are in Canadian dollars, it’s still one of the better dividend stocks in the oil and gas industry.

Strong free cash flow during the year also came in at more than CA$1 billion, although that was still below the CA$1.2 billion paid out in 2018.  Even so, the company has been increasing its dividend payments. Five years ago, the stock was paying CA$0.145 every month; that figure is now up to CA$0.20. That’s a 38% jump, averaging a compound annual growth rate of 6.6%.

Apple Hospitality REIT (NYSE:APLE) operates in a much more stable industry, and its portfolio of 235 hotels gives investors a great opportunity to benefit from the tourism industry. With many upscale rooms in 34 states across the country, Apple Hospitality has a diverse cross-section of properties that includes big names like Hilton and Marriott.

The stock pays investors a dividend yield of 7.3%. Although the company isn’t one that investors have come to expect dividend increases from, with that high of a yield, shareholders would probably be happy if it were to simply remain intact.

LTC Properties (NYSE:LTC) is another REIT that investors in search of cash flow can add to their portfolios. With a focus on healthcare — in particular, senior living facilities providing long-term care, thus the name LTC — LTC has a much safer mix of properties in its portfolio than Apple Hospitality.

Like Pembina, LTC has increased its payouts over the years, although they haven’t been nearly as significant. From monthly payments of $0.17 five years ago, they’ve grown to $0.19 today, for a much more modest increase of 12%, which comes in at a CAGR of just 2.2%.

However, with a solid yield and a payout ratio that’s below 100%, LTC could be a great option for long-term investors.

These are just three of many well run companies that offer dividends on a monthly, quarterly, semi-annual and annual basis  Dividends are really no different than interest earned on bonds…now look at me, now I’m sounding like “The Wallstreet Trapper.”

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Garmin Is Just Like Madonna – Part 2

I first experience with Garmin was probably with my first job out of college. I went on a business trip, had to rent a car and noticed this big bulky looking portable screen.  I recognized the name “Garmin” right away due to my venture into becoming rich through the stock market, specifically through tech stocks (no, I’m not rich yet).  And so I was eager to test it out.  I remember the map on the screen being very crisp and this dot moving along a green road and every turn I made, the street would reappear on the screen.  It was a pretty cool device.   That was probably my first and last time using a Garmin as in the years that would eventually come, I would have no need for the device.  To be honest, I completely forgot about Garmin until eight months ago, when I questioned why/how were they still in business. 

I first wrote about Garmin eight months ago,

Garmin Is Just Like Madonna 

Garmin, the maker of full-featured GPS navigation systems that take the doubt out of driving as you make your commute or vacation.  However, with the introduction of smart phones and navigation apps, I was sure Garmin was going out of business.  But just like Madonna, who has been in the business for almost 30 years mastered the art of reinventing herself.  And that’s exactly what Garmin did.  Garmin got into the activity tracking and smartwatch business.

And when they crushed earnings for the fourth quarter of 2018, despite the stock at the time rising more than 15%, the charts were suggesting there was more room to grow…by a lot.

This image has an empty alt attribute; its file name is image-99-1024x491.png

However, there were a couple of speed bumps in the way in the form of daily supply zones.  Since that time price did react to the first one in April and pulled back about $8.

But this is a company that can’t be stopped at the moment.   On Wednesday, Garmin reported third quarter earnings. Not only did the company smash earnings estimates again, but raised their full year guidance. 

Staying true to their core competencies, Garmin has been working in the lab on a product for about 10 years that’s going to compliment the personal air vehicles era called Autoland. Autoland is the first soon-to-be certified automatic landing system that will control and land a plane, by itself, in the event of an emergency.  I know, we don’t even have mass self-driving cars yet, so their first market for this product will be commercial aircraft market.

“The technology will translate across a lot of areas of aviation,” Straub said. “It will be interesting to see how it responds to the nascent urban air mobility environment, where there’s electric vertical takeoff and landing and where autonomy is a big part of what they want to do.”

Pemble said Garmin always has viewed the company in the long term and envisions its autonomous technologies in many segments, such as commercial, the government and the military — markets where Garmin already has traction.

“What we’ve done all throughout our history is approach an opportunity step by step, proving our capability and collecting wins, while building upon those successes,” Pemble said.

Source

I was one who doubted Garmin with the invention of Smart Phones, but now I realize I can never count out Garmin due to their DNA, which is the idea of persistence. The chart suggests the next target is the daily supply at $103.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.