Good News For Oil and Resource Investors.
My wife and I recently had our second baby.
Little bubs is thriving.
But six weeks in, the sleep deprivation is really catching up with us!
It’s a big step going from one child to two – definitely more than twice the work! (How my parents raised five of us is beyond me.)
This lack of sleep means double-checking my mental checklist twice to avoid stuff ups. I use checklists religiously for everything. Particularly for keeping my finger on the pulse of the market, analysing stocks, and watching the myriad of data that is released each day. It’s a big market and following it all needs some organisation.
But I use checklists for everything else as well. As a sleep-deprived parent they are more essential than ever at home.
Just yesterday in the supermarket car park, in the chaos of getting our travelling circus into the car, this half-asleep dad failed to notice our two year old had the car keys.
As he hit the remote lock button – thus locking himself in the car – I could feel the blood drain from my face.
And with my face pressed to the window, I pleaded with him to press it again so it would unlock the car.
Negotiating with a two year old is tricky at the best of times. I tried miming pressing the button. He thought this was a great game, started laughing and waved back. As he waved, the keys left his hand, and flew into the foot well.
Standing in the car park with bags of shopping, all our kids’ stuff – and thankfully our six-week-old baby – my wife and I ran through our options. The spares were over a two-hour drive away. So … what to do?
Option 1 – Panic
Option 2 – Smash the window
Option 3 -Take a deep breath, use my head, and phone RACV.
After doing option 1, thinking about option 2, logic stepped in and we went for option 3.
Lucky for us, RACV has a policy of getting their nearest mechanic to drop his job and come straight to you. So just 15 minutes later, a very helpful RACV mechanic arrived. The car was quickly opened, our boy was fine, and the traveling circus was on its way home again.
On the ride home, my wife asked how come I can always be up-to-the-minute with the markets, and keep picking the next commodity moves; yet could somehow manage to let my own son lock himself in the car?!
It’s all down to the checklists! I’m constantly working through lists to make sure I haven’t missed anything important in the market.
Even when I’m exhausted, I’m normally trawling through online newspapers, newsletters, data releases and bulletins.
I’ve got research coming at me from financial contacts all over the world, and it’s one of the things I love most about the job.
And the fact is those late-night feeds are also a great time for sifting through it all, and watching the European and US markets in real time!
An important part of last week’s checklist was China’s Purchasing Managers Index (PMI).
The PMI gives us a good idea of which direction China’s economic growth is heading. It’s been all eyes on China recently as the markets worry about it slowing down.
And right about the time I was trying in vain to get my son to unlock the car, China announced its best PMI in a year. After creeping up for the last few months from contraction territory (sub-50), slightly into expansion territory (above-50), it has now just bounced from 51 to 53.
I was expecting it to rise, as China’s electricity demand has increased, and this is a good sign that industry is picking up again.
This is good news for resource investors, as this jump in PMI is a fair sign that China is not slowing down. Not for now at least. This should see commodity prices have a good bounce, taking resource stock prices with it. The whole market is up 0.6% this morning, and Diggers and Drillers stocks are up 1.2% as I write.
The other set of data that caught my eye yesterday – after we all arrived back at home safely – was a chart showing Saudi oil production for 40 years.
The Saudis are the biggest oil exporters in the world.
They are forever saying that they can step into the market and provide an extra few million barrels a day to make up a shortfall from Iran or anywhere else. But take a look at this chart…
Saudi oil production has never been above 10 million barrels a day in the last 40 years. And now the Saudis are promising 12.5 million barrels a day (red line). They’re dreaming.
Click here to enlarge
Oil prices are soaring right now, and Saudi Arabia is trying to talk the prices DOWN because they don’t want the world to look for alternatives because oil has risen too much. The Saudi Oil Mininster, Ali-Naimi, was actually telling the Financial Times that oil prices were too high.
The Saudis can talk all they want, but the facts are the facts. The supply is not keeping up with demand, and the world will continue to face higher oil prices.
I’ve been tipping oil stocks recently for Diggers and Drillers readers. The first is up 60% in two months, and the second has just got going and is up 25% in six weeks. This is a very hot area of the market right now and we’re just starting to scratch the service with these recommendations.
I have a checklist of things to watch in the market, and oil is right near the top of the list. This list is evolving all the time, and I like the look of other commodities for later in the year. Particularly copper, especially since China’s data last weekend.
The checklists I use for the rest of my life obviously need to be updated too.
And keeping the car keys away from our two year old will go right to the top of the list!
Dr. Alex Cowie
Editor, Diggers & Drillers
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