Using Veritas to Construct the "Per…

29-04-2017 Hits:85837 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:80052 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:79912 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:84394 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:80932 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:83172 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:54186 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:82315 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:82157 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:82029 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:88072 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:85935 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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The recent oil shipping research that I released was actually quite timely. What appears to be adverse price movement (as can be said with the financial cos. research as well) is actually an opportunity. Be sure to attain positions in small increments. I will elaborate below, but first lets peruse this news item born from the bullish comments of Frontline's CEO.

From Bloomberg:

Oil traders are seeking as many as 10 supertankers to store crude, potentially taking the amount hoarded at sea to almost five days of European Union demand, according to Frontline Ltd., the largest owner of the vessels.

About 25 of the carriers, each able to hold about 2 million barrels of crude, were already hired for storage. There are enquiries for 5 to 10 more, Jens Martin Jensen, Singapore-based interim chief executive officer of the company’s management unit, said by phone today. Traders are storing crude to take advantage of higher prices for supply in the future.

Thirty-five supertankers represent about 7 percent of the global fleet of very large crude carriers, according to data from London-based Drewry Shipping Consultants Ltd. Storing oil in tankers may buoy rental rates that fell by a record 78 percent last year as slower economic growth sapped demand for energy.

“I’ve never before seen storage demand on this scale,” said Didier Labat, a Paris-based shipbroker at Barry Rogliano Salles who has worked in tanker markets for about 20 years.

Commodities prices fell the most in five decades last year, with crude dropping more than $100 from the peak of $147.27 a barrel in July, as simultaneous recessions hit the U.S., Europe and Japan. Oil demand in 2008 fell for the first time since 1983, according to the Paris-based International Energy Agency.

Traders are seeking to lease ships for three to nine months, Jensen said. Crude oil for December delivery traded at $61.90 a barrel as of 10:49 a.m. in London, $13.66 more than the February contract. Oil companies and traders may be able to profit from storing the oil, assuming shipping, insurance and financing costs are covered.

...

Iran, the second-largest member of the Organization of Petroleum Exporting Countries after Saudi Arabia, idled as many as 15 of its biggest ships in May to store crude oil. That contributed to three consecutive months of higher rental rates for ships.

The cost of delivering Middle East oil to Asia, the world’s busiest route for supertankers, rose yesterday for the first time since Dec. 5, according to the Baltic Exchange in London.

Forward freight agreements advanced. The derivatives are used by traders to bet on the future price of hauling Saudi Arabian cargoes to Japan, an industry benchmark.

The contracts traded at about 46 Worldscale points for the fourth quarter, according to prices from Oslo-based broker Imarex ASA as of 10:34 a.m. London time. They closed at 45 yesterday.

...

Worldscale points are a percentage of a nominal rate for more than 320,000 specific routes. They give owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch.

Frontline, based in Bermuda, has advanced 13 percent in Oslo trading this year. The five-member Bloomberg Tanker Index has gained 12 percent...

To contact the reporter on this story: Alaric Nightingale in London at Anightingal1@bloomberg.net

and this just crossing the wires as I type this article:

"US Crude Oil Inventories Rose 6.68 Million Barrels Last Week", hmmm! Methinks there may be some softening still, in these markets.

Now, what does this mean to my susbscribers? Well....

Frontline has been hired for floating storage for up to 50 mn barrels of oil, or roughly 20 to 25 oil supertankers over the past two months. There has been a recently surge in bookings for Very Large Crude Carriers (VLCC), which carries 2 mn barrels of oil, to store crude oil for future delivery owing to the oil market's contango structure wherein traders can buy oil and store it and simultaneously enter a forward sell contract.  We believe that this arbitrage trading would not be sustainable once the spread between current spot and future prices normalizes to historical levels. We have computed historical Contango (Backwardation) for 1 month, 2 month, 3 month and 12 month oil price futures. The present contango for oil prices is highest since 2000. At present the 2 month, 3 month and 12 month oil futures are trading at a premium (discount) of $4.55, $6.76 and $14.51, respectively against average premium (discount) of $0.18, $0.21 and -$0.84, respectively, since 2000.

 (click the graph to enlarge to print quality)

image001.png

 

According to International Energy Agency, the cost of storage in VLCCs is around 90 cents a barrel per month and an additional 30 cents a barrel or more to cover capital costs, insurance and other costs. We have determined the possible arbitrage opportunity taking into consideration the above storage cost assuming that a trader buys oil at spot and stores oil for specific duration and simultaneously enters a short futures contract. Due to high contango in the futures contract there has been an arbitrage opportunity for an investor particularly in the month of December.

As a result many players (Royal Dutch Shell PLC, BP PLC, and Koch Industries) had booked VLCC for storage in December to exploit this trading opportunity. As premium in the future market normalizes due to market forces (in fact the premium in 3 month future contract has already declined from $13.3 as of December 22, 2008 to $6.7 as of January 6, 2008),  speculative demand of vessels for storage purpose will ease. (We have already built in high capacity utilization rates for FRO in our model with net capacity utilization of 98% for own fleet vessels and 96.2% fir Managed fleet vessels for 4Q2008) Also we regard this news as negative for Frontline, since it reinforces our view that the company is finding it difficult to charter ships on voyages, in a markets already plagued by lower freight rates, and is resorting to short term demand fulfillment.

image003.png

I welcome my subscribers to revisit the Frontline analysis as well as download the oil price arbitrage spreadsheet that accompanies this article. Professional subscribers should take particular notice of the macro argument made in the thesis.

pdf Oil Price Arbitrage Addendum (Excel 2003) 2009-01-07 09:55:07 1.31 Mb

pdf  Frontline Investment Summary - Retail 2008-12-18 14:13:16 363.84 Kb

pdf  Frontline investment highlights - Pro 2008-12-18 14:16:07 473.47 Kb