Tag Archives: Investment

An Economic Plan Worth Considering

We’ve heard so far a number of economic plans from a number of the GOP Presidential candidates. Some very solid and detailed, others barely scratching the surface.

 

Given my 30 year experience on Wall Street, I thought I’d share some of my personal thoughts against the plans we’ve heard so far and maybe compare notes.

 

I believe the first thing to be done is to abolish the Federal Reserve. It is owned by and operated for the benefit of the biggest banks in the world. Its sole purpose has been to enrich the few at the expense of the many through its insidious use of inflation and debt issuance. It has been around for less than 100 years and has debased the USD by 96%. The U.S. Treasury has the authority to issue the currency of the country. It did so from 1789 until 1913.

 

The 2nd thing to do would be to have the Securities Exchange Commission be an essential part of the corrections needed on Wall Street because Wall Street’s business ethics are frankly at the lowest they have ever been and Wall Street simply cannot be trusted to manage its business properly anymore. $34 trillion in wealth destruction since 2008 & bankers from major institutions still haven’t been held responsible for financial crash. Insanity at its best.

Oil Geopolitics and Iran

There has been much fuss lately as to the huge impact a deal with Iran will have on oil prices globally.

I personally see the near-term impact on oil markets likely to be far less significant than most oil analysts predict, despite Iran’s large natural gas and oil reserves.

The bottom line is that a deal with Iran would likely add only about 500,000 barrels/day to the 90-million-barrel daily oil market over the next 12 months. This would be a non-trivial amount, but clearly not a “game changer”.

The baseline is for prices to return to about $70 for a barrel of Brent Crude in 2016. Additional supply from Iran would knock roughly $5/barrel off expectations – or less than one quarter of a standard deviation. Said another way, additional Iranian output could move prices lower, but many other factors, such as changes in global GDP or the return of Libyan oil, could prove more meaningful over the next year. What’s more, recent trading suggests the market has already priced in much of this risk.

Over the longer term, I believe an increase in Iranian output could be for sure significant. With investment and time, Iran could meet a greater share of global demand for oil and liquefied natural gas (LNG). It also could ship natural gas to Europe via pipeline, challenging Russia’s dominance.

The details of the contracts Iran signs with international oil companies will be telling. Depending on the terms offered to Western companies, other oil producing nations – Iraq, in particular – could feel the pressure. Increased competition for investment would be a material signal that lower prices will endure longer.

I still though believe that the key factor in the global geopolitical game of oil will be China not Iran.

China is today the second largest importer of oil in the world and its appetite for oil is all but insatiable, growing at 8 percent a year. They decided to go with cars instead of sticking with mass transit. Plus, factories that produce cars can easily be converted to military needs. I believe within twenty years they’ll have more cars than the U.S. and that same year they’ll be importing just as much oil as we do. So here’s the deal. They don’t have it. Want to guess where they get it from? Iran. They signed a deal saying if Iran would give them lots of oil, China in return would block any American effort to get the United Nations Security Council to do anything significant about its nuclear program. They’ve been doing a lot of deals with each other ever since. Oh yeah, these two countries are very cozy indeed. Anyway, China gets most of its oil from Iran. And they don’t just need oil—they need “cheap oil” because they sell the least expensive gasoline in the world. I think that’s to keep everybody happy driving all those new cars.

Bottom Line: Iran’s agreement with major world powers to curtail its nuclear program in exchange for the lifting of economic sanctions opens up the world’s fourth-largest oil reserves, second-largest natural gas reserves and an 80 million population to multinationals. But the strict, decades-old U.S. restrictions on doing business with Tehran, which predate the nuclear crisis and relate to other concerns such as terrorism support and human rights abuses, will remain in place.

What will be particularly difficult for American companies is if they are the only ones that are prohibited whereas the rest of the world will be trading. Problematic because every time you’re at a disadvantage relative to your foreign counterparts, you lose market share.

Going for your Gut feeling – Yes or No?

I have often asked myself this question and I am sure the same applies to you.

 
My view on this is that you should go with your gut feeling when you have a threshold level of relevant experience.

 
In my opinion, gut calls are usually very little if any helpful when it comes to looking at deals or similar investment opportunities requiring quantitative analysis and much more important but still not enough when it comes to picking or relying on people.

 
It is a fact that when I am looking at deals, I always look at the hard cold numbers. I rarely rely on gut feelings. Why? Let’s say for example you don’t know much about investing, and you’re debating whether to buy shares in Google or Amazon at the current stock price, your gut reaction whether to pull the trigger is almost certainly meaningless.

 

For More: Going for your gut feeling – Yes or No?

Thank You.

Defense Industry Develop Creative Strategies And Business Models

Though the defense industry has to sooner than later develop creative strategies and business models or risk catastrophic failure, we at Blackhawk Partners believe that despite a challenging environment, strong fundamentals in the defense and most importantly cyber security industry and unmanned aviation continue to offer some highly attractive investment opportunities.

We believe the industry’s fate largely depends on Pentagon’s decisions on how it will modernize U.S. forces to confront future threats. In its Cold War heyday, the Pentagon was the leading developer of cutting-edge technology and still commands the world’s most advanced military force. But at the same time, it has created self-defeating mechanisms that quash innovation and fail to capitalize on available opportunities. The United States is still way ahead of competitors in areas such as fighter aircraft and submarines. But there are segments of the weapons market such as ballistic missiles and cruise missiles where other people are doing quite well compared to us.

Continue Reading: On the Challenges and Opportunities We See in the Defense Industry

How can we Avoid another 2007-2008 type Financial Crisis in the Future?

Financial Crisis

The financial system may well have recovered more quickly if the bailouts hadn’t happened, but the suffering in the meantime would most likely have been unacceptable

The financial system may well have recovered more quickly if the bailouts hadn’t happened, but the suffering in the meantime would most likely have been unacceptable. Everyone who had savings would have seen them wiped out and a great many businesses would have ceased trading because they depend on credit for their cash flow, resulting in mass unemployment. Military coups in previously stable democratic countries could not have been ruled out and the prospect of extreme left or right wing groups taking control would have been a real possibility. The global economy was able to absorb localized banking collapses such as that in Iceland or of Lehman Brothers, but the human cost of a wider collapse would have been far worse.

The bailouts have been “successful” in the sense that some stability has returned, but they have not solved the underlying problem. Despite commitments in some areas to split up retail and investment banking and to improve capital ratios, the moral hazard remains because banks know they are too big to fail and will be bailed out again should the need arise. Only a total, irreversible disengagement of government from the financial sector could resolve this, and that is politically unrealistic. The main issue remains that the real cost of the bailouts is that they have reinforced the promise which was the root cause of the problem, that governments are there to rescue the banks when they fail.

Continuous Reading: How can we avoid another 2007-2008 type Financial Crisis in the Future?

Thank you

Ziad K Abdelnour – Military Strike in Syria will be a Game Changer

In this podcast, Wall St for Main St interviewed Ziad K Abdelnour on potential military strike in Syria and how it will effect the Federal Reserve monetary policy, the price of oil, gold and silver and the overall economy. Also, Wall St for Main St touched on the subject of the ongoing protest for higher wages in the U.S and across the globe.