Monday, December 19, 2016

Hard for oil price to exceed $50 under Trump’s presidency

USA has a large reserve of shale oil in federal lands.

President Obama is not opened to the drilling of shale oil in federal land, but Trump is.

It makes business sense because by renting out or leasing out the land for drilling of shale oil, the government gets income.

It gets direct income by the rental or leasing of the land.

It gets indirect income by taxing the businesses and employees involved.

With the increased income and the low oil price, US can fund a lot of infrastructure works in the country.

It makes a lot of sense to keep oil price low, so the cost of transportation can be kept low.

In this way, a lot of jobs are created in the economy. 

The people, especially the laborers, will be glad of the low oil price, and the number of high paying jobs available in fracking operations and construction.

The breakeven cost for shale oil operators vary from well to well.  Apparently some operators are profitable as long as oil price is above $25.

However, by keeping oil price below $50 and above $40, a number of shale oil operators will be profitable.

The US government can lower the production cost by leasing out large tracts of federal lands to a few large operators.

In view of the strengthening of US dollar, and the resolve of Trump to gain energy independence, it is hard to see how oil price can stay above $50 despite OPEC countries cutting back on production.

The only way for oil price to break above $50 is for a major disaster to happen in fracking operations.

Other than that, it is apparent that fracking operations will produce massive volume of oil for the consumption of US and the world.

I think for the foreseeable future, it is best to stay away from the investment of traditional oil and gas giants.

For Singapore companies in the oil and gas industries, they will have a difficult period of another 4 years.

I sure am glad that I do not hold shares of Keppel Corporation, and Sembcorp Marine.

I do not see how they can get more orders for oil rigs when oil price is kept low.

Tuesday, December 13, 2016

The greed for money creates many superstitions

I guess there are many superstitions in different cultures, especially about money.

The greed for money creates many superstitions.

The older generation in my place, especially the Chinese, believes that you must not give away your rice cooker, pots and pans to others.

If you give away the rice cooker, pots and pans away to others, you are giving them a way to make a living, and you will become poorer.

There are many superstitions about winnings in casinos too.

For example, they will advise you to buy sweets that kids love. 

They believe that children ghosts live in the casino, and they will stop you from winning unless you give them sweets to eat.

I doubt they are right or that they are experts.  They definitely are not billionaires or millionaires.

Despite all their beliefs and adherence to the superstitious beliefs, they are not rich.

Monday, December 12, 2016

The meaning of risk in financial term

The meaning of risk in financial term is a bit different from the way we use it in normal life.

Even though there are many different aspects of risk in financial terms, we are talking about the risk in relation to the return of an investment.

When we say risk in finance, we are talking about mathematics.

That means you can use a formula to calculate the risk factor.  This is known as standard deviation. 

The risk factor starts from using a risk free factor.  In financial term, risk free asset refers to the government bond guaranteed by the government. 

The return is low because it is assumed that government will not default on payment.

That is why when you talk to an investor about risk, you have to define on the risk that you are talking. 

There are so many different types of risks involved, such as currency risk, sovereign risk, inflation risk, credit risk and others.

Thursday, December 1, 2016

I want my investment income more than earned income

My investment goal is very simple.

I want my investment income more than my earned income.

I have stopped going for quick capital gain, since after I make a profit, I have to think about reinvesting the profit.

I focus now on dividend income, passive income, and other investments that will bring regular income.

Even though my saving account still pays interest, the interest is too little to be of use.

Now that I have a very clear investment goal, I have to find ways to reach the goal.

At the moment, my investment income is way below my earned income.

I can never reach financial freedom if I have to rely on my earned income.