Will Oil Worth 200$ By Next Year?

Absolutely not. Why? Because there is no reason it should bull like that! Okay, some freaks said last year oil would trade at 100$ this year... Everybody thought it was impossible but it did pass the 100$, and now the same freaks are telling the world oil will trade at 200$ by next year.
First, to catch why it won't go to 200$,you have to understand something:
OIL HAS NOTHING TO DO WITH DOLLARS!

If you make two simple equations, you find out that in one year, oil has gone up 82.6% while usd index has fallen of only 10.9%! Also, oil ascension has started in the early january 2007 while USD index did not move an inch in 2007 Q1... Of course, U.S dollar accounts for a little of oil prices. Only a few bucks...

No, what happened with oil is that last year, when investors heard that on the street, people weren't able to pay they credits and that banks used to sell those credits to companies for about decades, well those investors started to panic...
They sold a lot of equities to buy, instead, commodities. Now, we used to say that oil has increased a lot more than other commodities, but that's not true: if we only look at a bushel of corn, it cost went from 3.20$ in the beginning of february 2007 to 6.27$ today! That's a growth of 94% per year, more than oil's 82.6%!



So traders sold their equities smelling big losses for companies with credit losses.
But did you see 2008Q1 balance sheets of companies who had commercial papers? They reduced a lot their stocks -except for American Internation Group (AIG:NYSE), which I recommend you to sell- and find some way to do better the next quarter (leading the march Citigroup (C:NYSE) which sold 20% of its non-core assets and it is ready to fight back). So now traders have start again buying companies stocks, and I'm pretty sure their "oil mania" will now stop.

In conclusion, like the Financial Times was saying, flirting with crude oil options won't cost you a lot: For december futures at 200$, you will only pay 0.70$ per option. Maybe it worths the risk, but think about it: If it only cost 0.70$, it's maybe because... traders do not believe it will go 200$, with the reasons I explained you!

AIG Sucks

Are you asking why AIG stock is crawling under its october 1998 level, when it was growing on NYSE? Well... Did you read AIG (NYSE:AIG) first quarter 10-Q form? IT'S A MESS, A DISASTER!!!! This company has come today with a $7.8B loss for the beginning of 2008, comparatively with earnings of $4.3B last year, at the same period!
The company lost $8.9B EBIT in its financial sector due to strong investments in commercial papers, in fact we could compare them with BearSterns officials, a BUNCH OF PEE-WEES!!

Do not buy this stock, even if it lost a lot, especially today with a 8.77% loss, I don't think it will recover and will maybe go deeper than the $40 you would pay now.

McDonald Perfect Growth

When I've look at McDonald (NYSE:MCD)recent numbers, I was so astonished! Same store sales jumped 2% in United States and 6.5% in Europe!
Should we care about a growth of 2% in U.S?
Absolutely not! With a dollar that lose its value day after day, do we really need to focus our sales in America? I think that the strength of MCD is for this company to be everywhere around the globe. And that means benefiting from strong markets!
If we continue in the same logics, it appears that MCD has its majors expenses in u.s $ and its revenues in foreign currencies. What a perfect business model!

Even if the cost of beef will be higher eventually, due to Asia's big appetite for meat, McDonald's won't be hurt so much: Did you remember when the company diversified its menus in the early 2000? Well, it was to short-circuit the rise in demand problem.

Finally, MCD is still one of the best secure stock to buy for a low-risk investment. But before moving on a position, do your own homework!

Can someone shows door to Yang?

Have you heard about it? I was making a cappuccino for a customer when a good client came to me and said: " Hey Laurent, have you read about Microsoft's Yahoo! bid? "
Okay... First of all, it's not over, except if Microsoft (NASDAQ:MSFT)want to send a really bad message to its investors: When you do a public offer with a high amount of cash, what people understand of it's that you need this acquisition... And if you come back a second time with, after being rejected, a really higher price, people will start thinking that you need really badly the partnership to beat the market.

Microsoft has some really good managers, and I don't think they will let Yahoo (NASDAQ:YHOO)! win the game. But as Ballmer said, Microsoft won't go hostile and ask Yahoo'investors for their votes.
So what should we be apprehending?

What's next ?

What I think is that Yhoo'investors aren't flirting with Yang decision and they will show him the exit door at their annual congress: In fact, if you had shares in yahoo and hoped that direction would accept the best deal they ever had and will have for you, well today you're pissed off because monday, your shares will crawl under the 20$ and you won't see a 36$ offer ever again.
Then, with a new leader on Yahoo's board, Microsoft will post an other offer and Yahoo will be theirs.

What we need to understand is that Msft needs Yhoo so badly, after Google (NASDAQ:GOOG)many attemps to reach Microsoft earning cow: businesses adapted programs. Msft needs to do the same with Goog, meaning they have to be a solid alternative on internet ads market (actually Google is alone with 60% of the market).

My position: Hold yhoo, be patient and by next year you'll see the stock explosing: If the stock does not good, Yang will be fired and Microsoft will buy your stocks back.

Exxon was so wrong!

Hey people, you got to watch your moves, because I know what you think: " Oh, the u.s economy is becoming stronger, the employment report showed that we avoided THE recession everybody was fearing, so I should sell my oil stocks.

WAIT A MINUTE!!! Are you telling me that oil depends on u.s dollar? Wow, that's a really narcissic evaluation of the situation, like if around the world they care about u.s economy! Did you know that most of the trades are now in euro?

No, if u.s dollar has something to do with recent oil pike, it is only for a few dollars in the price. And I can agree with that; today, as the employment report was released and showed that job are still good in U.S, the oil curve went down. A little.

But the real thing is all about offer/demand across the world, especially in Asia.

Do you remember when ExxonMobil (XOM : NYSE), the number one oil & gas company, used to tell everybody, four or five months ago, that it wasn't an oil scarceness we were living, but only a speculation game on oil based on dollar's weakness, when every companies where telling an other scenario?

Well, ExxonMobil came with poor result last quarter, due to the fact they didn't expect not be able to find more oil in the ground. The stock didn't meet the expectations, with a timid 5% general growth, while peers companies made their stocks grew about 10-15%!

So now, open your ears and listen to uncle Laurent: OIL DOESN'T GIVE A S*** ABOUT U.S DOLLAR! Wow, that was relieving!
No, seriously don't sell your oil stocks: China still needs a lot of oil, and will buy oil as soon as it leaves the well.

Now, if you want to make a home-run on commodities, you will buy Husky Energy (HSE : TOR), that has always good financial results and sell CHEAP NATURAL GAS, the best alternative to oil, and Suncor Energy (SU : TOR, a company that surfs on sands oil: They recently invested 20.6B$ to extend their production to 200 000 barrels a day. That's a good thing, because I think that if something really bad happens in Eastern countries and oil transportation is threatened in those countries, United States will turn on Canada's oil tap.

Have a good day,
Laurent Tremblay