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|Gold||-$7.80 to $1,202.80|
|Crude Oil||-$3.06 to $50.92|
Royal Dutch Shell (RDS/A, Weiss Ratings: C) just gave you 70 billion NEW reasons to love energy stocks!
The oil and gas giant said it would buy BG Group (BRGYY, Weiss Ratings: C) in a historic deal worth $70 billion in cash and stock. The transaction ties together RDS’ traditional properties with BG’s large oil and liquefied natural gas (LNG) operations. The combined company will have facilities and oil and gas fields that span the globe, from Brazil to Africa to Australia.
How significant is this deal? It’s the second-largest energy sector deal EVER! It harkens back to the late-1990s deal-making frenzy, which includes BP (BP, Weiss Ratings: C-) buying Amoco, Exxon (XOM, Weiss Ratings: C) buying Mobil, and Chevron (CVX, Weiss Ratings: C) snapping up Texaco.
|The Royal Dutch Shell deal is the second-largest ever in the energy sector.|
What’s more, it validates everything I’ve been saying here in Money and Markets (and my paid services). Specifically …
Remember how I said that energy investments were irresistible over the past couple of months?
And how they represented the best bargains in three decades, and that you should take advantage of them?
Now, you have one of the biggest energy players on the planet … shelling out the most money in several years … buying up huge gas and oil reserves … despite still-low energy prices. Why would Shell do that? Simple …
We are at or close to a bottom in the energy market!
Now is the time to add reserves and production capacity on the cheap!
And there is no freaking way this will be the last deal in the energy patch, either!
Or as Dennis Cassidy, a consultant at AlixPartners, told Bloomberg:
“Any and all combinations are now on the table and this will absolutely be a trigger event, both for strategic companies and private equity.”
|“U.S. oil futures still need to close above $54 or so to confirm the bottom I’ve been expecting and forecasting.”|
I’ve seen several of the energy companies I’ve been recommending in my trading and investing services take off like a rocket over the past several days, courtesy of oil’s recent rebound. I’m watching some of them surge even more in the wake of this transformative deal.
U.S. oil futures still need to close above $54 or so to confirm the bottom I’ve been expecting and forecasting. They didn’t get much help today from Energy Information Administration data today showing another large, 10.9 million barrel build in U.S. inventories.
But rig counts continue to plunge, as do forecasts of future U.S. production capacity. That should bring down inventories later on, a likely reason why energy stocks are doing much better than the commodity itself. Some are trading at the highest level in four, five, or even six months.
I can’t give you specific names here, as that wouldn’t be fair to my paying Safe Money subscribers. But you can consider broad-based ETFs like the Energy Select Sector SPDR Fund (XLE) and the iShares U.S. Oil & Gas Exploration & Production ETF (IEO).
Now it’s your turn to give feedback. Does it make sense to follow Shell’s lead and buy up oil and gas producers, distributors, and refiners? And should you focus on foreign or domestic players? Large or small?
Or do you think this is a desperation move by a blundering energy giant that doesn’t know what else to do with its money? Are you still worried we’ll see $20- or $30-a-barrel oil? Or do you think Shell’s move is signaling the bottom is already behind us?
Let me know over at the Money and Markets website! There could be lots of profits to be had, and your fellow investors will no doubt appreciate your insights as well as mine.
|Our Readers Speak|
With Rand Paul throwing his hat into the 2016 presidential election ring, many of you weighed in with your thoughts on his politics and his chances.
Reader Dave said: “I really don’t see any other candidate that I relate to more than Rand Paul. It would be nice to have a president that believes in the constitution. However, I can’t trust my instincts as I thought Obama was going to be a good president.
“As it turned out, he is one of the worst. He also thought he was elected a king who doesn’t have to abide by the constitution. I also wouldn’t trust Hillary with my laundry.”
Reader H.C.B. said: “Ted Cruz would put the United States on ‘Cruz Control.’ Rand Paul would do some surgery and try to tread our sick body politic. As it stands, he probably only will have some token support outside his home state of Kentucky. Younger folks with libertarian leanings would be my best guess.
“Most Republicans won’t vote for him (They did not support his father Ron Paul, either). His views are not traditionally conservative enough, particularly regarding a strong defense and foreign affairs.”
Reader Jim added: “Ron Paul is the only elected politician that has tried to tell us the truth about Washington going on twenty years now. Rand has followed suit, more or less. But I think he is a decent and honorable man that will be chewed up and spit out by the media (an arm of the DNC).”
Finally, Reader Dan said: “In 2012, Iowa voted for Ron Paul all the way to the national convention. In my view, Rand is less idealistic than his father and a little more realistic and practical. If he can hang on to the highly engaged Ron Paul supporters and bring in more independents, he could win. It will be a tough fight with the establishment (loser) Republicans to get there.”
I appreciate the feedback. Rand definitely seems more mainstream than his father, and that increases his chances in the general election. But the fight for the Republican nomination is going to be a real slugfest between now and then, so we’ll have to see if he can handle the pressure.
As for the other topics that have been grabbing investor attention, Reader Lorne shared this opinion on oil prices and the Iran-U.S. negotiations:
“The Saudis obviously want oil pricing to remain low or even lower as it would minimize the benefit to Iran when the administration stupidly agrees to remove the sanctions. It ranks that the U.S. foreign policy is so muddled and twisted. It makes you want to root for the other side, though I can’t be sure who they are anymore.”
And Reader Ted W. offered a slightly different perspective on currency wars and interest rates. His view: “As a non-resident of the U.S., but a long time student of international financial markets … and having worked in senior roles in financial institutions in Europe, Latin America, Australia as well as the U.S. … I find it ironic that somehow other countries have ‘started a currency war’ by trying to reduce the value of their currencies. They’re just using the same tools used by U.S. authorities to gain a competitive advantage in international markets since the global financial crisis.
“Viewed from the outside, the U.S. has led the world into the worst financial markets crisis in our global history, and now complains when the rest of the world fights back. Most who work in the industry know that when U.S. interest rates rise, the problems it will generate in the bond markets will make 2008 look like a teddy bears’ picnic.”
Thanks for the comments! We are clearly in a global environment where no one wants an expensive currency. But everyone can’t cheapen at the same time – and the U.S. Fed looks to me to have drawn a line in the sand with regards to dollar appreciation.
Some currencies like the Russian ruble and Canadian dollar are breaking out or getting close, after months on end of pain. That could be a sign a bigger dollar reversal against majors like the euro is brewing. We shall see! And as always, don’t forget to share your comments on these matters at the website.
|Other Developments of the Day|
What is the Apple (AAPL, Weiss Ratings: A+) Watch like? Is it worth the price? The New York Times reviewed the product today, saying it has a steeper learning curve than other Apple products and that it may not appeal to the broad market right away. But once he got the hang of it, the reviewer was happy with what it did. Here’s another Bloomberg review that concludes: “You’ll want one, but you don’t need one.”
Meanwhile, Tesla Motors (TSLA, Weiss Ratings: D+) is trying to re-capture some of its magic and mojo by revamping its Model S car. Out goes the original $71,000, 60-kilowatt-hour battery model; in comes the $75,000 version with a 70-kilowatt-hour battery. The company is trying to hit a target of 55,000 car sales for 2015.
Generic drugmaker Mylan (MYL) has offered to buy Perrigo Co. PLC (PRGO) for $29 billion, making it the biggest pharmaceutical deal of the year and creating a generic medicine powerhouse. MYL will pay $205 per share representing a 24.2 percent premium. Shares of both companies were up sharply today. Abbott Laboratories (ABT) shareholders smiled too, as the company owns 15.4 percent of Mylan’s shares.
Looking to ask the IRS a last minute question or two before you have to file your taxes? Better be patient! The Washington Post reports that budget cutbacks have made it very difficult to get help in person, with waits of several hours not uncommon.
Roughly 60 percent of callers to the IRS’ help line also get hung up on without speaking to someone. Gubmint customer service at its finest, right?
An Afghan soldier shot three U.S. soldiers, killing one, in the city of Jalalabad. That underscores the still-present risk to our forces in hotspots around the world, even as troop levels have been drawn down.
Comments on these stories or others I didn’t recap? Then hit up the website and share ’em!
Until next time,