• 1 hour Nigeria Files Suit Against JPMorgan Over Oil Field Sale
  • 8 hours Chinese Oil Ships Found Violating UN Sanctions On North Korea
  • 13 hours Oil Slick From Iranian Tanker Explosion Is Now The Size Of Paris
  • 17 hours Nigeria Approves Petroleum Industry Bill After 17 Long Years
  • 19 hours Venezuelan Output Drops To 28-Year Low In 2017
  • 21 hours OPEC Revises Up Non-OPEC Production Estimates For 2018
  • 1 day Iraq Ready To Sign Deal With BP For Kirkuk Fields
  • 1 day Kinder Morgan Delays Trans Mountain Launch Again
  • 1 day Shell Inks Another Solar Deal
  • 2 days API Reports Seventh Large Crude Draw In Seven Weeks
  • 2 days Maduro’s Advisors Recommend Selling Petro At Steep 60% Discount
  • 2 days EIA: Shale Oil Output To Rise By 1.8 Million Bpd Through Q1 2019
  • 2 days IEA: Don’t Expect Much Oil From Arctic National Wildlife Refuge Before 2030
  • 2 days Minister Says Norway Must Prepare For Arctic Oil Race With Russia
  • 2 days Eight Years Late—UK Hinkley Point C To Be In Service By 2025
  • 2 days Sunk Iranian Oil Tanker Leave Behind Two Slicks
  • 2 days Saudi Arabia Shuns UBS, BofA As Aramco IPO Coordinators
  • 2 days WCS-WTI Spread Narrows As Exports-By-Rail Pick Up
  • 3 days Norway Grants Record 75 New Offshore Exploration Leases
  • 3 days China’s Growing Appetite For Renewables
  • 3 days Chevron To Resume Drilling In Kurdistan
  • 3 days India Boosts Oil, Gas Resource Estimate Ahead Of Bidding Round
  • 3 days India’s Reliance Boosts Export Refinery Capacity By 30%
  • 3 days Nigeria Among Worst Performers In Electricity Supply
  • 3 days ELN Attacks Another Colombian Pipeline As Ceasefire Ceases
  • 4 days Shell Buys 43.8% Stake In Silicon Ranch Solar
  • 4 days Saudis To Award Nuclear Power Contracts In December
  • 4 days Shell Approves Its First North Sea Oil Project In Six Years
  • 4 days China Unlikely To Maintain Record Oil Product Exports
  • 4 days Australia Solar Power Additions Hit Record In 2017
  • 4 days Morocco Prepares $4.6B Gas Project Tender
  • 4 days Iranian Oil Tanker Sinks After Second Explosion
  • 7 days Russia To Discuss Possible Exit From OPEC Deal
  • 7 days Iranian Oil Tanker Drifts Into Japanese Waters As Fires Rage On
  • 7 days Kenya Cuts Share Of Oil Revenues To Local Communities
  • 7 days IEA: $65-70 Oil Could Cause Surge In U.S. Shale Production
  • 7 days Russia’s Lukoil May Sell 20% In Oil Trader Litasco
  • 7 days Falling Chinese Oil Imports Weigh On Prices
  • 7 days Shell Considers Buying Dutch Green Energy Supplier
  • 8 days Wind And Solar Prices Continue To Fall
Alt Text

World Bank To Cut Off Oil & Gas Funding

In accordance with the Paris…

Alt Text

How To Spot Top E&P Stocks In 2018

As sentiment in oil markets…

Alt Text

The Best Places In The World To Mine Bitcoin

As Chinese bitcoin miners face…

Dave Zgodzinski

Dave Zgodzinski

Dave Zgodzinski is the editor of the Green Miner newsletter and thegreenminer.com web site.  The Green Miner is dedicated to searching out valuable investments in…

More Info

Will we see a Big Sell-Off in the Coming Weeks?

Will we see a Big Sell-Off in the Coming Weeks?

I had a neighbour who had a method for market timing. It was physical.

She told me that she knew it was time to sell a stock when she got a tingling in her fingers.

In the past couple of weeks, somebody out there has been letting their fingers click the sell button.

Maybe it’s the time of year. There is a seasonality to the markets. A time to buy and a time to harvest. September has often been a selling time for stock markets.

Seasonality can vary by sector. August, when the yellow summer sun is high and the living is easy, has traditionally been a strong month for gold. This year was no exception, and gold and silver made a nice upward turnaround last month. Even if it looks lousy in July, gold likes to trade up in August.

Oil and gas stocks have price seasonality, as do some tech stocks. Seasonality can be related to holiday buying. Some seasonality, in brewery stocks for instance, is related to weather.

For some reason this looks like harvest season for the dividend paying stocks.

Combine Harvester
The Harvest

High dividend paying stocks have been winners. After the shock and paralysis of late 2008/early 2009, it became obvious that savers were going to be squeezed. Central banks have pushed down rates to try and revive economies. Bond interest and interest on CD’s are a pittance. Savers can’t live on the proceeds of their savings and they have had to look to riskier bets to make their capital go to work and bring in some kind of pay cheque. This trend is being accentuated by the surge of retiring baby boomers that are looking to their portfolios, instead of their kids, to support them.

High quality dividend paying stocks have been the obvious alternative to low paying bonds and CD’s. And in the past few years, utilities, REITS and other high dividend paying stocks have been great investments as the multitudes turned to them for revenue.

As the economic crisis drags on, central banks have graduated from the occasional toke of quantitative easing, to talk of hard core “unlimited” bond buying. The story of addiction is always the same. The illusion of this particular drug is that interest rates will stay low forever. Central banks will always buy bonds and that will always keep rates down and give time for every country’s economy to heal.

That is the hallucination.

Utility stocks were a big bargain in 2008/2009 when all stocks were sold indiscriminately. The yields were great. But increasing dividends sometimes don’t go up at the same rate as stock prices. If stock prices outpace dividend increases, yields decrease. After a good run, the stocks aren’t as much of a bargain in terms of yield.

In recent months I have written about a few high dividend paying renewable energy producers. Northland Power and Innergex Renewable Energy have done well. Transalta has done badly. Iberdrola, the Spanish utility with international operations and lots of renewable power generation, has chosen recently to conserve capital by paying stock dividends instead of cash. The stock has turned higher in the past few trading sessions.

Besides Transalta, which has had a string of troubles, the other companies are doing well in a tough environment. But there may be pressure on all stocks if there is a general sell-off in the weeks to come.

There are plenty of triggers that can start the process. Europe, China, US politics, it’s the same wall of worries that the market has been climbing for months. None of these problems is resolved. What’s more, US dividend tax rates are slated to increase big time in January unless the government decides to act and change some of the legislation of the “fiscal cliff.” This looming tax increase could be the big reason that sellers of US utilities are taking profits now rather than waiting for the November election. There is no talk (yet) of dividend tax increases in Canada.

Dow Jones Utility Index
Dow Jones Utility Index 52 Week Chart: Source - Bigcharts.com

But there may be something else at play – a cyclical shift. There is some inflation already baked in the cake because of the summer drought in the US. Food prices will be rising in the next few months and CPI numbers will likely move up with them.

But the Fed may go ahead and buy more bonds even if inflation perks up. A sputtering economy, weak employment numbers, a Republican President who wants to fire the Chairman - there are plenty of reasons for more QE. “Go on, man, have another hit.”

Maybe the Fed Open Market Committee meeting this week will not approve further easing for the moment. That alone could trigger a market sell-off. But down the road, the chances are that easing will continue even if inflation begins to revive. The debts are just too big and this is the mechanism to forgive them. The revival in gold and silver prices is pointing to that likelihood.

If there is a general stock market sell-off in the weeks to come, the key following a drop will be to see which stocks are hit the least, and which stocks lead when it comes back. Will a switch to higher inflation begin to show?

Renewable energy should do well in an inflationary cycle. Input costs to produce power from fossil fuels go up – higher fuel and transportation costs. But sunlight and the wind are free and will remain so for the forseeable future. So inflation may help renewable electricity close the gap with power produced from burning fossil fuels.

In the long run power producers have lots of infrastructure that will go up in value in an inflationary environment. And the value of electricity as a commodity will rise as it's used more and more for transportation. That's worth remembering if it's selling time in the weeks to come.

By. Dave Zgodzinski




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News