Tag Archive | "Jyske Bank"

Investing Spurts


Here are three steps to multi currency profits.   Seek value.  Cut losses.  Take profits.

Quotes from three great value investors support this thought.

Be fearful when others are greedy, and greedy when others are fearful.” Warren Buffett

“In the short run, the market is a voting machine, but in the long run it is a weighing machine.” Ben Graham

We don’t have to be smarter than the rest. We have to be more disciplined than the rest.” Charlie Munger

We do not have to be brilliant to preserve our wealth.  When it comes to investing, discipline can make you smarter than the smartest man in the world.

sir issac newton

Sir Isaac Newton is widely regarded as one of the most influential scientists of all time.  His role was key in the scientific revolution.

His book “Mathematical Principles of Natural Philosophy” laid the foundations for mechanics.

He supplied a foundation to optics.

He helped develop modern calculus.

Newton formulated the laws of motion and gravitation and confirmed the heliocentric model of the cosmos.

Newton built the first practical reflecting telescope.

His theories about color and cooling and the speed of sound were spring boards in physics.

In math, Newton contributed to the study of power series, the binomial theorem to non-integer exponents, and a method for approximating the roots of a function.

He is said to have been the greatest genius who ever lived!

But Sir Issac Newton also lost his shirt in the stock market.  His comment was “I can calculate the motions of the heavenly bodies but not the madness of the people.

Sir Issac forgot the intelligence in seeking value. He ignored the fact that buying and selling discipline is more important than being smart.

Use math, not emotion to protect your wealth.

There are time tested mathematical systems that can help you know when to take profits that maximizes gains and minimizes loss.

These systems help you seek value but also create disciplined exit strategies because one of the toughest decisions most of us have is to know when to sell a rising or falling share.

Human nature makes it harder to let winners run, than to cut loses.

Let’s look at a real time example of how purposeful investing strategies can increase profit.  In this real example, in 2002 Merri and I invested in Jyske Bank shares.  We were visiting the bank with a group of readers.  We had been in Copenhagen for several days and took the group out to the bank’s headquarters in the small charming village of Silkeborg.  We visited the CEO (who has been a friend for many years) in his new modest offices, saw the bank’s new currency trading room and visited with the Jyske Invest Fund Managers.  What impressed us was the conservative and balanced thinking throughout the bank.  There were no staff limos or corporate jets.  The CEO’s office was small with walls of glass so staff could see him at work.  The bank worked for and talked about the long term view.

TFC Corp

Jyske Bank share price since September 2002.

We invested in Jyske shares at DKK96.50 on 2nd September 2002. We sold half in April 2006 at DKK352.50.  The share price of the remaining shares we hold have never dropped below our purchase price.  Today the share price is over DKK300 again.

Could I have done better with a mathematical system?  I asked Dr. Richard Smith, CEO of Tradestops.com,  who has a PhD in mathematics and is one of the experts we use in our system, to see how his trailing stops strategy would have increased my profit.

It turns out I could have done better.  Much better.   Here is the chart of the trailing stops that his strategy would have given me had I been using it.

magci calculator

Click on image to enlarge.

Let’s look at three scenarios to show the difference in profit between using simple buy and hold with no stops, my system of taking back the original investment and the Trailing Stops strategy.  For simplicity sake, I am not including dollar to Danish kroner fluctuations.  The forex fluctuations would make a difference if calculated in US dollars performance but we’ll analyze that element of the invest in another message.

Scenario #1: DKK100,000 becomes worth DKK350,158.  Profit is DKK241,880 in 15 years.  In this scenario we assume a DKK100,000 investment.  The investment is at DKK96.50 so 1036 shares were purchased.  The assumption in this scenario is that all the shares have been held.  The price of today’s quote (April 23, 2015) is DKK330.  The value is DKK341,880 on DKK100,000 invested.

Scenario #2: DKK100,000 becomes worth DKK357,679. Profit is DKK247,840 in 15 years.  Assume again, DKK100,000 investment.  1036 shares were purchased at DKK96.50.  In this scenario, (what I actually did), 285 shares when the price reached DKK352.50.  This returned my original investment appx. DKK100,000.  The remaining 751 shares at 330 (4/22/2015 price) are still held so are worth DKK 247,840.  This represents a total profit of  247,840.  This is a little better than keeping all the shares,  except the shares sold in 2006 created new opportunity potential for nine years so this scenario is actually much better than the numbers appear.

Scenario #3: DKK 100,000 becomes worth DKK1,156,069.  Profit is DKK1,056,069 in 15 years.  As in the other two scenarios there was a DKK100,000 investment.  1036 shares were purchased at DKK96.50.

Dr. Smith, backtracked to and see what the system would have done would with this share.

Richard sent the exact dates with buy and sell numbers:

Exit @ 325.50 on 6/13/2006.  All the shares are sold bringing in DKK337,218.

Buy @ 321.98 on 10/9/2006.  The DKK337,218 buys 1047 shares.

Exit @ 404 on 6/8/2007.   This sale grosses DKK422,988

Buy @ 118.5 on 3/20/2009.  The DKK422,988 buys 3,569 shares

Exit @ 170 on 8/10/2011. This sale grosses DKK606,730

Buy @ 173.40 on 2/1/2012.  The DKK606,730 buys 3,499 shares

Still in @ 330.4 on 4/22/2015. The share value at this time is DKK1,156,069.

Wow, what a difference if one followed and used the trailing stops.  The trailing stops and re buy signals increase the investment by 11 times versus 3.5 times in the other scenario.

The Jyske shares have a volatility quotient at this time of 15.5% so would create a sell signal at around DKK287 at this time.

These scenarios are based on approximations and do not include trading costs, management fees, etc. so the real money in the bank would not be exactly this amount.  For our analytical purposes this study suggests that trailing stops help us protect the successes we gain in spurts.

This type of math creates great discipline so you know not to sell too soon and give away profit but, also know not to hold too long and give away returns already made.

 

These scenarios are based on approximations and do not include trading costs, management fees, etc. so the real money in the bank would not be exactly this amount.  For our analytical purposes this study suggests that trailing stops help us protect the successes we gain in spurts.  To learn more, click on the link below.

Gary

Lean more about the Magic Calculator here.

Gary

 

 

Equity Shift Nearer


The equity market shifts that value analysis have predicted may be starting to steamroll a bit.  This process will be helped by negative return European bonds.   Last week in the Wall Street Journal article, “European bond markets go down the rabbit hole” said:  Europe is no stranger to the avant-garde, the experimental and the absurd.  But until now, they have largely been the preserve of the arts. Now the financial world—and in particular the bond market—is increasingly challenging fundamental tenets of investing.  Take last week as an example. Switzerland became the first sovereign to issue a 10-year bond carrying a negative yield, raising 232.5 million Swiss francs ($237.2 million) with investors paying for the privilege of lending.  And German yields continued to grind deeper into negative territory: yields on eight-year bonds briefly dipped below zero, while the two-year yield stands at minus 0.277%.

There are some good points about European banking however, such as getting to visit great cities and great institutions like the Austrian cafes.

austrian banking

Cafe Lantmann Vienna, one of our favorite cafes.  More on this in a minute.

ENR Asset Management’s  April 2015 Market Outlook shows some additional reason why European shares offer good value and more immediate opportunity now.  The Outlook said:  “The first quarter (Q1) proved challenging for global equities. After outpacing bonds the first two months of the year, the MSCI World Index struggled the latter half of March as earnings, fears, soft U.S. economic data, Middle East tensions and interest rate uncertainty drove investors out of risk assets.

“The S&P 500 Index, red- hot over the past several years, has succumbed to more volatility and trails Europe, our prime regional recommendation heading into 2015, logged its strongest quarter in local currency terms since 2008; in dollar terms, European equities edged-out the S&P 500 Index, Over the past eighteen months, U.S. investor sentiment has remained overly exuberant, pointing to a major sell-off or an imminent correction.

“The worldwide sell-off in late March should come as no surprise. Investors should continue to purchase high quality dividend-paying global multi- nationals on any intermittent decline. The land-scape for earnings has shifted to Europe in 2015 largely because of a weak EURO and the European Central Bank’s (ECB) asset purchase program. Investors should focus on building new and existing positions in euro-zone large-caps and small-caps.

“Over the last few months we’ve made the case that European investors would gradually shift out of fixed-income securities and into stocks amid ultra-low interest rates. Europe has been the prime beneficiary of this asset allocation shift supported by an assertive ECB. Roughly 50% of the euro-zone bond market now yields a negative rate of interest on sovereign debt up to five years in some markets, including Germany.

“The U.S. Dollar Index hit a fresh 12-year high earlier in Month but has since started a modest correction. According to Wisdom Tree, European smaller companies sell at 16.8 times trailing earnings and filed about 3.5% in dividends. That’s better value than the S&P 600 Index, which has already recorded substantial profits since the financial crisis low six years ago and trades at lofty levels.

“Also, European small-caps should post better than earnings this year compared to larger companies.

“Why we like European Small-Caps now:

* Dividends are more than three times greater compared to U.S. small-caps

* U.K. small-caps have trailed other smaller company indices

* The ECB’s new QE program will boost liquidity

* Institutional investors have yet to pile into European small-caps

“We’re big fans of Wisdom Tree. The ETF (exchange- traded-fund) sponsor and manager is a value and income-based ETF specialist, focusing mainly on sectors of the global market that offer deep value, dividends or a combination of both.

“Historical studies also clearly point to value investing clearly outpacing growth strategies over time.”

The entire April 2015 ENR market Outlook is at enrassetmanagement.com

Our reports over the past year (and Merri’s and my personal investments) have focused on this European equity value.  For decades, I used three banks and brokers to execute long term value opportunities like this.  Jyske Bank (Copenhagen), Smith Williamson (London) and Valartis, (Vienna).

Regretfully last year, Smith Williamson stopped accepting US residents.  Now I regret that Jyske Bank has also announced that they will stop serving US customers this July.

I transferred my Smith and Williamson London account to a local (U.S) community bank that has the ability to buy and sell and hold overseas equities and bonds.  I have transferred my Jyske account holdings to Valartis Bank AG.

The roots of Valartis Bank AG (Austria) go back to 1890 when it opened for business in Vienna. The bank remained privately owned until 1966 when it was purchased by Nicholas Deak who changed the name to Bankhaus Deak. I began banking with Bankhaus Deak in the early 1980s and over the years watched several new owners change the name several times.  In 1988 Royal Trust Bank of Canada became the owner and the Bank became Royal Trust Bank Vienna.  The name changed again in 1995 when Anglo Irish Bank of Ireland purchased the bank.

In 2008 the Valartis Group AG., a publicly traded Swiss holding company, purchased the bank, and Anglo Irish Bank (Austria) AG was renamed Valartis Bank (Austria) AG.   The staff  during this entire time has remained truly multicultural, speaking 22 different languages.

London, Copenhagen and Vienna are three of Merri’s and my favorite European cities and we’ll deeply miss the banking connection and our banking friends in London and Copenhagen, but we are happy that Vienna is still offering to serve US clients.

The pleasures of Vienna go beyond banking.  Volartis Bank in Vienna bank is located just around the corner from Cafe Landtmann a Viennese institution since 1873. Merri and I always enjoy a sidewalk Grosser Brauner with Apple Strudel mit Schlag.  We are in good company there!  Landtmann has hosted regulars over the years such as: Peter Altenberg, Sigmund Freud, Gustav Mahler, Max Reinhardt, Marlene Dietrich, Romy Schneider, Burt Lancaster, Hans Moser, the Dutch Queen Juliane and Sir Paul McCartney.

For more information about how to use ENR Asset Management to bank with Valartis Bank in Vienna contact Thomas Fischer at Thomas@enrasset.com

There are always things we do not know, but one of the safest ways to gain profit and avoid loss is to follow value, which at this time is in European shares.

Gary

(1) WSJ.com European bond markets go down the rabbit hole

 

Contrarian Risk


The nature of value investing is to be contrary.  Markets rise and fall, long term, guided by forces of nature.  Markets jump up and down, short term, based on the human whims of fear and greed.  Hot markets are almost always overbought and severely corrected markets are almost always oversold.  This makes contrarian investing really simple.  All you need to do is what most investors are not.  Right?

Nothing in investing is ever simple.  Doing whatever the majority of the market is not doing may expose you to good value stocks, but this process also reveals troubled companies.  Good value selectivity is also required to create an effective contrarian strategy.  Contrarian investors need tactics that weed out the dogs from the good value.

erci roseman

Eric Roseman manages the ENR Global Contrarian Income Account.

The Contrarian Value Income account buys distressed global, dividend-paying equities at near low prices.

The margin of safety the fund seeks is low price, low debt,  high cash-flow, strong global brands and strong management.

The fund’s managers look for ‘event-driven’ change; spinoffs and macro catalysts that lead to change and revaluation.  For example shares in oil companies are being revalued now.

The fund only invests in stocks that pay dividends, have growth greater than inflation and are near or at 52-week low prices.

The fund diversifies currencies for profit potential and to reduce risk.  During the 2008 financial crisis when the Morgan Stanley Capital Index (MSCI) World Index was down 42%, the MSCI Europe Africa Far East (EAFE) down 44% and the S&P 500 Index down 40%, the ENR Contrarian Global Fund only fell 10.5%.

To help you develop your own plan that can take advantage of falling share prices and a strong greenback, we are sharing access to five ENR International Investing Conference Calls by Eric Roseman and Thomas Fischer of ENR Asset Management.  The conference calls were conducted January 12 and 13, 2015.  They are available to hear by phone for 30 days.  Each call reviews a different type of portfolio management.

You, as a Gary Scott reader, can listen in free until the recordings expire.   Last Saturday  we began by looking at a low risk portfolio strategy.

Today we are sharing a Global Contrarian Income strategy.

Eric Roseman and Thomas Fischer are my investment advisers at ENR Asset Management.  ENR is the access route to an investment account with Jyske Bank.  Merri and I are sponsoring two Multi Currency Asset Allocation seminars with ENR so you can meet Eric and Thomas.

You are invited to meet them first via these conference calls.   Join in at no cost as a Gary Scott reader.

Call 905-694-9451  or 1-800-408-3053 and use the  Global Contrarian Income passcode: 622419947 #

Click below to see the Power Point Presentation.  This is an excellent review and handy to have available as you listen to the Global Contrarian Income call.

enr contrarian

Contrarian Income (JAN 13 2015)

Links to the Low Risk, Medium Risk and Dynamic Risk portfolios are at

www.garyascott.com/2015/01/21/40502.html

Warren Buffet clarified the purpose of  being contrary when he stated that it is incorrect thinking to believe that buying a business or stock is an intelligent purchase simply because it is unpopular.  A contrarian approach is just as foolish as a follow-the-crowd strategy if it is not applied with thought.  Being contrary exposes you to stocks that are more likely to have value. Combine a contrary attitude with a good value plan and your chances for safety and profit grow.

Gary

 

Medium Risk in High Risk Times


There is great opportunity in medium risk portfolios during high risk times.  This last week Merri and I received 100 fresh Ecuadorian Roses.

ECUADOR ROSES

We took them to Mount Dora and decorated the seminar room at the Lakeside Inn where we had a full house for our Super Thinking + Spanish course.

GARY SCOTT

While conducting the course, a lot happened in Switzerland, Russia and Ecuador.   Many readers sent email like this: Gary,  What did you think of what happened with Putin yesterday and the Swiss stock market today?  Yowza!

My reply was that while doing seminars I am focused on helping the attendees rather than what’s in the news. I was was not even aware of events until the morning after.

Fortunately, these short term blips do not impact my investing plan.  In fact unexpected changes have been expected for several months.  See why I expected change and wrote in October 2014 why there should be a correction in equity markets.

Evidence strongly suggests that we are in the final stages of long term bear market and we believe that markets are looking for a reason for the market to fall for one more serious correction in this bear. My expectation is that we’ll see one final correction in the market before the next long term bull begins.  Events in Switzerland or in Russia are related to low oil prices may be triggers that cause stocks to drop in price.  However, these events are not the reason for the contraction.

Also in October 2014 we looked at why and how we should expect a strong USA dollar now.

Ignore short terms ups and downs.  Create a long term strategy that seeks value regardless of short term volatility.

To help you develop your own plan that takes advantage of falling share prices and a strong greenback, we are sharing access to five ENR International Investing conference calls by Eric Roseman and Thomas Fischer of ENR Asset Management.  The calls were recorded last week.  Each call reviews of different types of portfolio and as a Gary Scott reader, you can listen in free.   Last Saturday  we began by looking at a low risk portfolio strategy.

Today we are sharing a medium risk strategy.

Eric Roseman and Thomas Fischer are my investment advisers at ENR Asset Management. ENR is the access route to an investment account with Jyske Bank.  Merri and I are sponsoring two Multi Currency Asset Allocation seminars with ENR so you can meet Eric and Thomas.

You are invited to meet them first via these conference calls.   Join in at no cost as a Gary Scott reader.

Call 905-694-9451  or 1-800-408-3053 and use the  Viking Medium Risk Portfolio Pass code: 696122198 #

Click here to see the Power Point Presentation as you listen to the 30 minute conference call.

Screen shot 2015-01-18 at 8.38.22 AM

Viking MEDIUM Risk (JAN 12 2015)

You can also tune into the Low Risk Conference call click here.

See how to Order Fresh Ecuador Valentine Roses here

Gary

Low Risk Investing View


The first rule of value investing is to reduce risk.  You are invited to join Eric Roseman CEO of ENR Asset Management and Thomas Fischer in an Asset Allocation conference call at no charge.

Jyske-bank

Gary Scott meeting staff at Jyske Bank’s Silkeborg headquarters.

Over the next two weeks we’ll share access to five conference calls.  Each call reviews of different types of portfolio and as a Gary Scott reader, you can listen in free.  Today I begin with the low risk portfolio for two reasons.

The first reason is Warren Buffet’s rules #1 and 2 of  value investing: The first rule is not to lose. The second rule is not to forget the first rule.

The second reason is that you have to take extra care that your banker or investment adviser is really looking after your interests.

Last week’s Wall Street Journal article “Forex probe finds new signs of potential wrong doing” says:  Banks and traders that figured the worst was over in the foreign-exchange scandal are facing an unpleasant surprise.  Investigations into attempted manipulation of the vast currencies markets have uncovered new signs of potential wrongdoing, sparking a fresh round of firings by Wall Street banks and snaring new financial institutions.  J.P. Morgan Chase & Co. and Citigroup Inc., which settled some U.S. and British investigations last year, both recently have fired or suspended foreign-exchange employees based in part on materials turned up by a continuing U.S. Justice Department investigation, according to people familiar with the matter. J.P. Morgan on Wednesday set aside an additional $990 million to pay for investigations and other legal expenses, while its chief executive complained about being “under assault” from regulators.

The recent post at this site “The Optimistic Cynic” explains how most of the big banks and brokers have been actually creating bad products to sell to customers so they can bet against what they advise. The root of this problem is that most big financial institutions pay bonuses based on the institution’s, not the client’s,  profits.  This creates a conflict of interest between the employees and the investors they serve.  That article outlines how Jyske Bank is different and does not pay bonuses to employees.

Eric Roseman and Thomas Fischer are my investment advisers at ENR Asset Management. ENR is the access route to an investment account with Jyske Bank.  Merri and I are sponsoring two Multi Currency Asset Allocation seminars with ENR so you can meet Eric and Thomas.

You are invited to meet them first via these conference calls.   Join in at no cost as a Gary Scott reader.

Call 905-694-9451  or 1-800-408-3053 and use the  Viking Low Risk Portfolio Pass code: 185911912 #

Click here to see the Power Point Presentation as you listen to the 30 minute conference call.

Low Risk PPT

Jyske Bank ADV EXTRA (JAN 13 2015)

This conference call can help you better follow the first rule of value investing which is to reduce risk.

Gary

Meet Eric Roseman and Thomas Fischer in Mount Dora.

(1) Wall Street Journal Forex probe finds new signs of potential wrongdoing

Asset Allocation Conference Call


You are invited to join Eric Roseman CEO of ENR Asset Management and Thomas Fischer in an Asset Allocation conference call at no charge.

My investment adviser, ENR Asset Management, Inc. provides its clients with an annual investment outlook and strategy.  This year because we are sponsoring two Multi Currency Asset Allocation seminars with ENR, you are invited to join in at no cost as a Gary Scott reader.

Eric and Thomas Fischer will discuss stocks, bonds, commodities and currencies for 2015 along with our macro outlook.

Eric writes:  Although 2014 has been another good year for U.S. stocks, overseas equities have mostly posted losses when measured in dollars. It is our view that a strong American dollar will generate a significant earnings boost for European multinationals at the expense of U.S. large-caps next year. The dollar is also likely to delay the Fed’s tightening as it gains strength and curbs inflation. We are over-weighted in Europe and believe next year will witness a reversal of U.S. market leadership amid high valuation multiples, possibly higher rates and slowing GDP, if oil prices don’t recover to offset shale cash-flow bottlenecks and production cutbacks. In this environment, the Fed won’t be in a hurry to hike interest rates.  The European Central Bank, on the other hand, will be forced to become much more assertive as it starts purchasing sovereign bonds as it seeks to influence euro-zone interbank lending and corporate borrowing. The ECB needs to stimulate inflation.  
 
Click below for the Power-Point presentation that relates to the Advisory Extra call which takes place at 10:30 am EST Tuesday January 13th.  Keep this presentation handy for the conference call.

Jyske Bank Global Investor Call Power Point (January 13, 2015 – 10:30)

There are five other calls each should last approximately 30 minutes.

If you wish to have the  Power-Point presentation for any or all of the other sessions email Thomas Fischer this weekend at Thomas@enrasset.com

Call schedule:

Monday, January 12, 2015
9am EST: Low Risk Investor

10.30am EST: Medium Risk Investor

11.30am EST: High Risk Investor

Tuesday, January 13, 2015

9am EST: Dynamic Leveraged Risk Investor

10:30 EST: Global Investor

1.30pm EST: Global Contrarian Income

You may access ENR’s  toll-free Bell Canada dial-in conference call on the relevant presentation date:

RESERVATIONLESS SERVICE (Eastern Standard Time)

Moderator name:                                  Eric Roseman
Toll-free Dial-in number:                    1 866-500-7810
Local dial-in number:                           514-736-8031
Global toll-free dial-in number:         800-0160-8093
Conference ID:                                       8660995

If you have any questions contact Thomas Fischer this weekend at Thomas@enrasset.com

Gary

The Optimistic Cynic


I am an optimistic cynic because every problem creates an opportunity.   Our motto “The sun always shines somewhere” was shared in my first book “Passport to International Profit” which Merri and I published in the 1970s.  Spotting problems and the value they create has been our main occupation since.

dark pool

The book “Dark Pools” By Scott Patterson shows why the big financial institutions are stealing from you.  Patterson is author of the New York Times best-selling book, “The Quants”. and a staff reporter for The Wall Street Journal, where he writes about the government’s regulation of the financial industry.

Dark Pools explains a problem created by high-speed traders, called high-frequency traders that has been spreading across Wall Street.  These traders jump in and out of stocks in microseconds (millionths of a second). These and dark pools which are sub-markets that mask buy and sell orders from public view, allow insiders to skim spreads off each stock order.

Learn more about “Dark Pools” by Scott Patterson at Amazon.com

Recently a book on the same subject, “Flash Boys – A Wall Street Revolt” was recommended in a message at this site entitledFlash Boys”  The book looks at the huge problem of how most of the Big Banks and Wall Street brokers systematically rip off their customers again and again.  The book shows the advice that many financial advisers and institutions give is designed to make them, not you or me, financially secure.

If you have ever trusted a big bank’s investment advice, reading these books can make you really cynical.  However this is also a story of great honor, integrity and good versus bad.  Flash Boys tells how honorable traders on Wall Street gave up secure, seven figure incomes and took a huge risk, earning much less, to form IEX, a dark pool that operates in a more transparent and straightforward manner.  The pool has introduced strategies to ensure trustworthiness.  This gamble has paid off.  IEX has grown steadily and at times has had more volume than AMEX.  By November 2014, average daily volume was over 100 million shares a day.

flash boys

Learn about the book Flash Boys at Amazon.com

“Flash Boys” and “Dark Pools” give us a glimpse of human nature, how systems are always abused by some and how there are also always some honorable people who fight the abuse. One prime problem on Wall Street is that the reward system is short term and slights the customer.  Employees are paid bonuses based on the creation of short term profits for the bank, not the bank’s customers.

A CNN Money article (1) says that the bonuses paid to bankers on Wall Street in 2014 was over $27 Billion.

This is a global problem.  For example a BBC article (2) says that in 2013 some bank’s paid their senior or risk-taking staff over $3 million each on average and that this type of employee earned on average almost 50 times average annual pay in Britain.

The root of this problem is that these bonuses are based on the bank’s profits for the year and the bonuses have nothing to do with the  customer’s success.

The sun always shines somewhere and by looking for the people who prefer the good.  Looking for integrity may seem simplistic but can often pay great rewards.  An rewarding example is Merri’s and my position as customers and shareholders of Jyske Bank for so many years.  From the first day we visited Jyske more than two decades ago, I liked the idea that Jyske’s management looked beyond the short term bottom line.   Their core foundation is based on treating three stakeholders as equal, the shareholders, the customers and the staff through a chain of value.

Jyske

Jyske’s chain of value at at jyskebankinfo/Ourfoundations

Part of Jyske’s policy includes paying good salaries, providing good staff benefits but avoiding all bonuses.  This avoids any potential conflict between the staff and the customers.

In 2002 Merri and I invested in shares.  We were visiting the bank with a group of readers.  We had been in Copenhagen for several days and took the group out to the bank’s headquarters in the small charming village of Silkeborg.  We visited the CEO (who has been a friend for many years) in his new modest offices, saw the bank’s new currency trading room and visited with the Jyske Invest Fund Managers.  What impressed us was the conservative and balanced thinking throughout the bank.  There were no staff limos or corporate jets.  The CEO’s office was small with walls of glass so staff could see him at work.  The bank worked for and talked about the long term view.

We invested in Jyske shares at DKK 96.50 on 2nd September 2002 and sold a portion in April 2006 at DKK 352.50.  The share price of the remaining shares we hold (including in 2008) has never dropped below our purchase price.  Today are over DKK300 again.   The strong US dollar makes an investment in Jyske Bank attractive.

Learn more about the share price and finances of Jyske Bank

US investors can open Jyske accounts with the assistance of ENR Asset Management.

Get more information from Thomas Fischer at Thomas@enrasset.com

Non US investors can get more information about opening a Jyske Bank account here.

There are dark forces all around us.  They have always been but their existence can create fear. That fear creates opportunity when you look for businesses that have integrity and long term strategic thinking.

Gary

(1) CNN article Big Wall Street bonuses are back

(2) BBC article on bank staff bonuses

Oil Opportunity


In 2015 two items will be in the news again and again,  Russia and the price of oil.  Each presents some fabulous opportunity as distortions created by fear create extra value.

oil chart

Chart “How much does it cost to produce crude oil and natural gas?  (From US Energy Information Administration (1))

As the 2015 news unfolds, there are three factors about oil and Russia, plus many other countries, to keep in mind.

#1: The price of oil versus uplift cost in the various oil producing countries.

#2: The price of oil.

#3:  The price of oil for oil producing countries to balance their budget.  This is a really important point because oil extraction when oil is selling at 60 dollars a barrel can be profitable in many countries (such as Russia), but not create sufficient revenue in countries where the political process and government are financed by oil sales.

For example Ecuador, OPEC’s smallest producer needs about an $80 dollar a barrel oil price to balance its fiscal 2015 budget.  Ecuador has crude-oil reserves of 8.8 billion barrels and crude-oil production of a half million barrels a day which is a tiny 0.6% of total world production and 1.7% of OPEC’s production.

Russia, as shown below produces oil at about $8 a barrel overall, but needs a crude price of $100 to balance the nation’s budget.   Price of oil compared to production costs is less important than price of oil compared to budget deficits.   Keep this in mind as plunging oil prices create contrasts and distortions that equate to value and opportunity.

oil chart

Chart from Economist “Black Gold Deficits” (1) Click on image to enlarge.

Here are some definitions you’ll want to know in the year ahead.   This will help all of us to understand the news.

#1: Lifting costs are the costs of oil and gas wells and related equipment and facilities to bring oil and gas to the surface.

#2: Finding costs are exploring for and developing reserves of oil and gas and the costs to buy or lease oil and gas reserves.

#3:  Upstream cost (also called Capex) and it is the total cost to produce crude oil and natural gas including lifting and finding costs.

#4:  A brownfield is an oil or gas field that has proven production.

#5: A greenfield project is a completely undeveloped area of possible production.

#6: BOE is Barrel of Oil Equivalent.

We can see how opportunity will develop in an article “These countries are getting killed by cheap oil by Jesse Solomon” (2)  Bolds are mine in all the excerpts below.

Here is an excerpt:  The price is not right for many oil rich nations. That’s bad news for Iran, Nigeria, Venezuela, Russia, and Saudi Arabia, among others. They need the black stuff to trade at far loftier levels in order to balance their budgets.

Iran’s budget, for example, is built on oil at $135 dollars per barrel, according to data from Deutsche Bank and Thomson Reuters compiled by DoubleLine Capital.  Russia has oil budgeted at $100, while Saudi Arabia will break even at $95 per barrel.

OPEC’s idea is to try to knock out U.S. shale producers by driving prices lower than they can afford.  That way Saudi Arabia, the cartel’s biggest exporter, can keep its market share in the U.S.  But the damage to its fellow oil exporters could be severe.  In Russia, for example, the ruble is plummeting.  Iraq is already having trouble fighting ISIS, and lower oil prices won’t help.  Libya is in chaos. Venezuela’s economy, already on life support, depends on oil for 95 percent of its export revenue. 

An Analysis by EY (Ernst Young) US upstream cost prices and the unconventional treadmill (4) say:  As was reported in our US reserves studies, US upstream oil and gas spending has been increasing rapidly with the onset of the so-called “shale” or “unconventional revolution,” beginning in the middle of the last decade.  We can also use the related reported data to estimate costs on a full-cycle basis, noting that notional full-cycle costs have surged (along with global oil prices) from an average of around US$20 per barrel of oil equivalent (boe) before 2004 to more than US$60 per BOE as of 2013.  As shown in Figure 1, apart from the distortions related to the global financial collapse in 2009, notional full-cycle costs have averaged over US$60 per BOE since 2008.

oil chart

Chart of US costs from EY Analysis.

The Bakken Magazine (5) says:  The evolving Bakken story has just added a new, utterly complex twist. Crude prices—economically advantageous for the shale oil industry in the past five years—have fallen. Few, if any, can predict when the price bottom will be reached or what falling crude prices will mean to the Bakken shale play.  And, although many have tried, few, if any, can offer an acceptable prediction on what falling crude prices will mean to the Bakken shale play.

Gazprombank Research Department writes in Oil and Gas Weekly (6) says:   Lifting costs and upstream capex of Russian oil companies vs international peers:

Russian oil and gas companies the production of oil in Russia remains cheaper.  Thus, average lifting costs per BOE $5.8 /boe for Russian oil and gas companies over the past three years, while lifting costs averaged $9.9 BOE.

The same is true for upstream capex per BOE. 2013 the average ratio for Russian oil companies stood at $ 7.6 /BOE, which is less than one quarter the level of Developed Market majors ($34.5/BOE) and less than one third the level of Emerging Market oil companies  ($25.5/BOE).

The reasons are much higher rates of onshore production at brownfields in the overall production structure.  As the depletion of currently producing major fields continues in Russia lifting costs and upstream capex increases at approximately the same rates as globally.

oil chart

Oil cost chart from Gazprom Oil & Gas Weekly

How to take advantage of the situation.  One way is to cash in on fear.  An example comes in a recommendation from Eric Roseman at ENR Asset Management.  Here is an excerpt of a note that Eric sent me: Gary, This is a special bulletin that deserves your full attention.  With crude oil prices crashing more than 40% since June, the entire energy-related infrastructure, including oil drilling, exploration and development, has been threatened.  The entire energy space has plunged since November with the latest leg falling off a cliff this month as oil continues its relentless decline, now at $55/barrel this morning for West Texas crude and $59 for Brent oil — compounded by a financial crisis in Russia as the ruble tanks.  Crude oil now trades at its lowest price since 2009.  The market fears a sustained price war where OPEC, led by Saudi Arabia, refuses to cut production while American shale producers flood the market at the same time.  This game of ‘chicken’ will end badly for the shale sector, if oil continues to slide.  I think Saudi Arabia is trying to put the American shale companies out of business.  Already, bond prices for shale companies – responsible for about 20% of all high-yield debt financing over the last four years – are suffering from big redemptions from investors as cash-flow continues to threaten operations for the most marginal producers.  We now foresee a wave of defaults by the most leveraged U.S. shale companies with oil prices at these low levels.

Although the bear market in oil is bad news for energy investors, it’s very bullish for refiners, or companies that refine and sell gasoline, diesel and other distillate fuels.

One of the sector’s true mavens is Tom O’Malley, who has spent more than 30 years in the business specializing in taking troubled refiners and turning their economic fortunes around. He’s made millions for his investors.

Today, Mr. O’Malley is the CEO of small-cap company, PBF Energy (NYSE-PBF). The company went public about three years ago and trades 35% below its all-time high and 20% off its 52-week high.  The stock trades at just 6.3 times trailing earnings, 1.37 times book-value and yields 4.6% in annual dividends.  This is a great value-and-growth story.  With crude oil prices in the basement, growth investors should be accumulating a well-managed company like PBR Energy now.

My advice is to buy PBF Energy at market at Jyske Bank and place a 20% stop-loss on your entry price.  This is the best time since the financial crisis in 2008-2009 to buy refiners.

I will provide an in-depth analysis of PBR Energy in the January issue of Advisory Extra.  Regards, Eric

oil chart

PBF Energy Two Year chart at www.finance.yahoo.com

Click here for the ENR Asset Managers

For more information contact Thomas Fischer at Thomas@enrasset.com

Reaction to oil prices may reflect political rather than market concerns.  These reactions may be illogical and as the Bakken Magazine article stated: Although many have tried, few, if any, can offer an acceptable prediction on what falling crude prices will mean.  This creates fertile ground for distortions that create value opportunity.  We’ll watch for these situations and share what we find.

Gary

(1) HUS Energy Department – How Much Does it Cost to produce Oil and Gas

(2) Black Gold Deficits – The Economist

(3) These countries are getting killed by cheap oil by Jesse Solomon

(4) Upstream costs prices and the unconventional treadmill

(5) The Bakken Magazine

(6) www.gazprombank.ru OIL AND GAS WEEKLY

Euro Banking News


Three reasons to consider banking at Jyske Bank to protect your wealth.

The first reason? Recent European banking stress test shows that most European banks are in fair enough shape.

The second reason is the fact that European shares are selling at a much better price than US shares. The Morgan Stanley US Share Index shows US shares trading at 2.72 times book value while European shares are trading at 1.8 times book value. This means that good value is more likely to be found in European bank shares than in the USA.

One of my core portfolio holdings for over a decade has been shares in Jyske Bank.

jyske Bank

Jyske Bank Share chart. (Click on image to enlarge.)

In 2002 I was conducting a seminar at Jyske’s headquarters in Silkeborg, Denmark. We had always been impressed by Jyske’s staff. The company had permeated the attitude amongst its people so they are super committed to giving good and unique customer service. I have been a client and have worked with the bank for over a decade and my experience has been that of great efficiency.

We were so impressed on the tour that in the middle of the presentation I borrowed Thomas Fischer’s cell phone and immediately bought Jyske shares at DKK 96.50 on 2nd September 2002.

The performance was so stellar that I sold a portion in April 2006 at DKK 352.50. Our profit was 265.28% in Danish kroner terms. But at the date of purchase the USD-DKK rate was 754 and dropped to 612 meaning that we gained another 18.8% in US dollars on the currency appreciation.

I held the remaining shares through the 2007 global equity market crash.

Jyske Bank

Jyske Bank share price 2006 to 2014. (Click on image to enlarge).

Though the shares have not returned to their 352 kroner per share level, I expect they will.

The third reason I like banking at Jyske and holding Jyske Bank shares. A Reuters’ announcement after the recent European bank stress test says: “Jyske Bank doubles nine-month profit, passes stress test”.

The article says: Jyske Bank said it had doubled pre-tax profit in the first nine months of this year to 3.4 billion Danish crowns ($579 million) from 1.7 billion crowns in the same period a year ago.

In addition the article pointed out that Jyske passed the stress test with a Capital Equity Tier 1 ratio of 13.6 percent, almost three times the minimum 5.5 percent threshold.

Gary

(1) Reuters article on Jyske Bank’s 2014 results

It’s Bull that It’s a Bear


The next big 17 year bull market is almost here.

We are just back from sharing a great weekend in Quebec with readers and our friends at ENR Asset Management and Jyske Bank.  Delegates at our annual October International Investing Seminar were warned that the US market was ready to correct but that most investors have their expectations turned upside down.

The thundering herd believes that the last year has been a bull market. They think that a bear is on the way.   Delegates learned that this is not the case and that the upcoming correction could offer equity deals of a lifetime.

We had three days of intense talks in Montreal, then headed north on the train through the countryside to Quebec City.

We rode through woodlots and past streams between…

autumn colors

rich grain fields and farmland.

autumn colors

There we enjoyed the sense of Quebec’s last 400+ years of history.

quebec

We walked and walked and walked through Old Quebec City and cruised the St. Lawrence River.

quebec

We talked a lot about what has happened to North America and mankind’s lessons learned over this time.

Thinking about history is vital to investing.  As Sir Winston Churchill said: “Those who fail to learn from history are doomed to repeat it.”

One short term slice of history that represented a main theme in the seminar was the repetition of 17 year cycles in the Dow Jones Industrial Index.

We looked at these cycles and one reader kindly charted the cycle so we can see how steady this history has been in the past.

dow chart

Click on Dow chart to enlarge.

History suggests that this correction is just one of several in the current 17 year bear sideways market and that the next Golden Era bull market should start in about three years.

We have to survive this correction, but those who wisely see downturns at this time as periods of great opportunity might be like the few who arrived along the St. Lawrence four centuries ago and said Wow! What an opportunity!

Lighten your weighting in equities now.  Take profits.  Be ready to begin accumulating.

Next course looks at  how to earn and save and get ready for the next bull through self publishing.  See details of this course here.

We’ll review more details of the Montreal seminar in upcoming posts, but the message here is to get ready!  A time of truly great opportunity is ahead. We should start preparing how for the bull ahead.

Gary