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The New Bull Market

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And GE:



My initial delve into the fundamentals:

Receivables:....................................Payables.....................Inventories
2015: 144 days and 39%................42 days.......................27 days and 7.5%
2016: 129 days and 35%................43 days.......................26 days & 7.3%
2017: 125 day and 34%..................46 days.......................27 days & 7.4%
2018: 109 days and 29%................51 days.......................21 days & 5.8%
2019: 103 days and 28%................61 days.......................20 days & 5.5%
2020 Q1: 204 days and 225%........65 days.......................26 days & 29%
2020 Q2: 211 days and 230%........69 days........................31 days & 34%

The trends in Receivables, Payables and Inventories were all improving from 2015. This is probably a significant deterioration from the days of Jack Welch. Clearly in 2020, to date, everything blew out again.

The blowout in 2020 should not be unexpected. In fact it would have been highly suspicious and a red flag if it had not.

Takeaway: given the horrible numbers in 2020, it might be safe to bet that as conditions improve in the economies world wide, so GE will continue its gradual trend of improvement and that this current price (period) is the low, assuming (always dangerous) that the metrics across the financial statements are consistent with the above numbers.

And the US economy is picking up:



jog on
duc
 
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Having a look at the VIX:



So we open lower, trade a little lower and look for support and a bounce from mid-morning into the close. That scenario plays out if the resistance line on the VIX holds. If it fails, then obviously the sell-off will continue into the close.

My 'feeling' is that it holds and we trade higher into the close.



Both of these charts reflect the breadth of the market and indicate strength in a broad market bounce.

Which is supported via:



Which can be compared to the situation earlier in the day.


jog on
duc
 
So the VIX broke through that 1'st resistance point:



I haven't extended the line, but it will (with a higher probability) turn back down at contact. This (could mean) a late(r) day rally, although for the day we will be negative.

And the updated bigger picture:



jog on
duc
 
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Rotation continues:





Oil News:

Friday, September 18th, 2020

Oil rebounded above $40 at the end of the week after EIA data showed a drawdown in oil storage and Hurricane Sally forced offshore platforms offline.

Oil up on OPEC+ meeting. Oil gained more ground after the Saudi oil minister warned speculators gambling in the market. To short-sellers betting on a slide in prices, he said: “Make my day.” He added that OPEC+ will actively and pre-emptively manage the market. The group also pressured laggards to increase their compliance.

Goldman: $49 by year-end. Goldman Sachs sees Brent rising to $49 per barrel before the end of the year. “We estimate that the oil market remains in deficit with speculative positioning now at too low levels,” Goldman Sachs said.

Biden: “Fracking has to continue.” Democratic Presidential candidate Joe Biden once again reiterated support for fracking in a CNN town hall event in Pennsylvania on Thursday. “Fracking has to continue because we need a transition,” Biden said. “We're going to get to net-zero emissions by 2050, and we'll get to net-zero power emissions by 2035. But there's no rationale to eliminate, right now, fracking.”

Haftar to lift blockade. The head of the Libyan National Army, General Khalifa Haftar, said he would lift the blockade on Libyan oil exports after reaching an agreement with the country’s deputy prime minister. The impact is unclear, however, as the National Oil Co. previously denounced the negotiations.

Pemex expects a drastic drop in oil exports. Pemex expects oil exports to fall sharply over the next three years due to declining production and the need to supply a new $8 billion refinery. Heavy Maya crude exports could fall by as much as 70 percent between 2021 and 2023.

Magnolia LNG asks for five more years to build. Magnolia LNG, a proposed gas export terminal in Louisiana, asked FERC for five more years to build its project, citing poor market conditions. Its original permit expires in 2021.

Pipeline operators hurting on low demand. The shale production crash has spilled over to the midstream sector, which was caught between falling oil production and pipeline utilization from the upstream and crumbling demand for fuels in the downstream.

Trump admin considers $300 million for refiners. The Trump administration is looking at dishing out $300 million in aid to refiners who were denied an exemption on ethanol blending requirements.

EQT bids $750 million for Chevron’s Appalachian assets. EQT (NYSE: EQT) has bid $750 million for Chevron’s (NYSE: CVX) Appalachian assets, part of an acquisition that Chevron originally spent $4.3 billion to obtain. EQT, already the nation’s largest natural gas producer, would significantly expand its presence if the deal is successful.

Diesel stockpiles cap oil prices. Even as crude stocks decline, diesel inventories continue to increase, rising to a record high for this time of year. Diesel cracks fell to their lowest level since 2010. The weakening margin is the “worst possible scenario for refiners,” Bob Yawger, director of the futures division at Mizuho Securities USA, wrote in a note.

U.S. business group backs carbon pricing. The Business Roundtable, a grouping of CEOs from some of the biggest U.S. companies, announced support for “market-based emissions reduction policy.” The announcement is notable because the group has actively opposed such a policy track for years.

China considers clean energy acceleration. China is considering stepping up its clean energy deployment as part of its next five-year plan that begins in 2021. One option includes bringing forward its 20 percent renewable energy target from 2030 to potentially 2025.

Shell files offshore drilling plans in Alaska. Shell Offshore Inc. has submitted plans to plans to drill for oil in the waters along the National Petroleum Reserve-Alaska in the coming years.

Pennsylvania moves to join RGGI. The Pennsylvania Environmental Quality Board (EQB) voted 13-6 to launch a formal rulemaking process to join the Regional Greenhouse Gas Initiative (RGGI), a carbon cap-and-trade program among 10 Northeast and Mid-Atlantic states.

Ventura Co. curbs drilling with greater setbacks. Ventura County, California voted to increase drilling setbacks to 2,500 feet for new oil wells near schools. It also triples the setback distances from homes to 1,500 feet. The vote also curtailed flaring. Ventura county is home to some of the largest sources of oil production in California.

Dakota Access safe through 2020. After initially ordered to shut down, the Dakota Access Pipeline will likely remain online at least through the end of the year under a new court schedule.

Shell shuts Gulf of Mexico platform. Hurricane Sally passed through the Gulf, but another storm looms. Royal Dutch Shell (NYSE: RDS.A) said it shut down production at some of its facilities with more tropical storms heading towards the Gulf of Mexico.

FERC opens door for more renewables. The Federal Energy Regulatory Commission voted 2-1 to remove market barriers for rooftop solar and other distributed energy resources. The order allows distributed energy resources to participate in regional wholesale energy markets.

Natural gas prices plunge. Natural gas prices plunged this week, including a 10 percent one-day sell-off. Goldman Sachs pointed to congestion in storage as we near the end of injection season. But the crash could be brief. “Ultimately, however, we believe the high inventories to end this injection season are still not sufficient to derail next year’s bullish gas fundamentals,” Goldman Sachs said in a note.


jog on
duc
 
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The resistance line on the VIX seems (now) to have held:



Which just goes to show why intra-day trading can be tough.

Overall market:



The resilience of the Financials is an important signal for the market going forward. Increased confidence in the financials is increased confidence in the economy going forward.

The bigger investment banks are looking at a new revenue stream also:



The current IPO craze is driving this. If it takes off (which it will) IPOs will become highly risky as far higher numbers of insiders looking to flip early shares will be involved. It will be interesting to see how this works out for the IPO space. As for JPM, they will charge (I'm sure) grossly inflated fees.

jog on
duc
 
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Energy is the only sector that ended the week in the green.


Running it out to a month looks very different:


With materials & industrials being the only sectors of any significant positivity.

The inflection/resistance point was obviously on the 8th, and that's where they both bounced from vs everything else continuing trend (unless you count energy in the last week).

Meanwhile, zoom continues to be my wonderchild. So have fedex & UPS. I opened a position in john deere today, have an order in for snowflake at $220. We'll see if it hits it monday.


The democrats have come down to 2.2 trillion stimulus package. Still hasn't broken the logjam though.
 
RBG has died. Conservative lockdown of the supreme court for decades now.
 
Continuing the analysis of GE. First and foremost we would want to confirm that GE is not manipulating their Financial Statements. It is never 100% certain, but generally you can get a good idea (quickly) by employing a financial (calculator) model and run all the numbers through it.



So while GE doesn't pass with resounding confidence, nevertheless, it does pass.

The next quantitative screen that we can use, can test for the likelihood of bankruptcy.



Not a good outcome. So this is a single year: 2019. We now look at an earlier year: is 2019 an improvement or a decline?

In 2018:



We are improving.

Now looking forward, using Quarterly numbers:



So we are still in dangerous territory. I'll run the numbers again at the next quarterly reporting season.

Technically:



So fundamentally very weak, but, essentially a turnaround story (if it survives/works) with upside potential. The key now is to identify the catalyst for this potential turnaround. I'm assuming there is one as a fund just dumped several hundred million dollars into it. Now I just need to have a dig around in the financials to identify it.

Some positives: in this environment of low interest rates, GE will (if needed) be able to re-finance debt going forward. Bad loans in its finance division, can be bailed out. The aerospace division will pick-up as the economy re-opens. In short, it has probably made it through the worst period and the operating environment should improve moving forward. We'll see.






jog on
duc
 
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After Jack Welch left; GE never really was the same. Just goes to show that one man can make all the difference.
 


A mild negative correlation exists between the DJIA and VIX looking at the weekly close over 5 years:

 
I suspect a fund is going to be privy to information that retail traders are not.

It's reliant on selling jet engines, and aviation is toast. Turning the screws on that further, rolls royce looks like it's going to raise enough capital to well & truly ride this thing out: https://www.bloomberg.com/news/arti...ks-with-sovereign-wealth-funds-for-bgp2-5b-ft

Which means it can't even benefit from its competition going bust like the big oil companies have managed to do.
 


1. I would agree with that, but hardly news to the majority that trade here.

2. Here I disagree. Why would that business simply go to zero on a transitory event such as COVID?

3. It doesn't require them to go bust, although that would have been potentially increased business for them. Secondly, this statement isn't even consistent with your statement in [2]. If aviation is 'toast', it is irrelevant whether RR go bust or not.

jog on
duc
 
Ok, it wasn't literal. I'll be more specific:

Aviation is never going to return to its previous levels on account of the rise of the ability to do everything by distance now, and even once coronavirus is over, will remain far below what it ever was. In the meantime, it will remain a shadow of its former levels, meaning that GE won't even have a monopoly or stranglehold on the little that remains, it'll be fighting RR for scraps.

Long story short, it's not even going to have most of a little, it's going to have to fight for its marketshare of even that.
 
RR are holding more in cash at the moment than their current market cap. Also RR aren't just in the civil aviation game; they're in defence, power-systems, nuclear, data labs and analytics, and artificial intelligence.
 

1. If you follow the media, which clearly you do, you'll already know that 'distance' is pretty unpopular. What started as a novelty, has already worn off. Therefore I suspect your assertion (above) will prove to be incorrect. Second, there are many things that cannot be done by 'distance': sporting events, holidays, deliveries, etc.

2. At the moment, yes, levels are far lower. The whole point of investing is to consider the probabilities going forward. Is the current depressed price likely to (a) remain and if so why, or (b) is there a possibility of improvement and if so, by how much? If you wait for the improvement or a guaranteed outcome, then the price you pay has already moved.

2(a). Really? How do you know? One might sell t'other and consolidate.

3. Maybe yes, maybe no. That competition has been there for some time. Nothing new there. What at the current valuation are you paying for this business? Is that over/under priced? What are you paying for the rest of GE's businesses at the current price?

jog on
duc
 
1. I'll bet you a very pretty penny that we don't see the same numbers return to the offices. Many, many companies have decided that this "forced trial" that we're currently in has proven to be very very successful

2. They'll remain so. Do you follow airlines? I was actually briefly a pilot years ago (long story) and I can tell you that business travel is VERY profitable, and it's business travel that's going to remain in the doldrums most of all.

2a. No way the powers that be would ever allow a merger of any kind. Forget it.

3. I think the current price is still overvalued. I presume you took a look at GE's statements and saw what is (was) the most profitable? Jet engines are their golden goose, and that goose is currently moribund. Combine that with its mountain of debt and I can only assume that the wealth fund you referenced knows something that the rest of us don't because aviation profitability is going to remain absolutely f**ked for a long, LONG time yet.
 


1. And that number could be any number > 1 and < infinity. Which says absolutely nothing.

2. What, if any, correlation is there between [1] above and business travel?

2(a) Never say never in this environment, where unemployment etc is a political issue.

3. Which implies that you have valued it. What then are your valuations?

3(a) I'm sure they do. You keep repeating the above assertion. Simply repeating it without any evidence does not make it more true, it simply underscores how subjective your analysis is.

jog on
duc
 
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