Murray Math Lines 03.01.2014 (AUD/USD, EUR/JPY, SILVER)

Article By

Analysis for January 3rd, 2014


Australian Dollar is still being corrected; price broke daily Super Trend and may not start new descending movement. However, if price isn’t able to stay above daily Super trend for a long time, pair may start falling down again. Bears are also supported by Wolfe wave.

At H1 chart, price is moving inside “overbought zone”; Super Trends have already formed “bullish cross”. If pair breaks Super Trend downwards, I’ll increase my long positions with target at new minimums.


EUR/JPY us starting new correction. Price broke the 8/8 level, and Super Trends formed “bearish cross”. Most likely, in the nearest future pair will continue falling down towards the 6/8 level.

At H1 chart, price is already moving above the 3/8 level and may continue falling down towards the 0/8 one. Right now, market is being corrected and I’ve decided to open short-term sell order. If price rebounds from H1 Super Trend, market will continue falling down.


Silver rebounded from the 0/8 level and right now is already moving near the 4/8 level. Possibly, price may try to test the 5/8 level during the day. If price rebounds from it and stays below Super Trends, instrument may start new descending movement.

At H1 chart, price rebounded from the 8/8 level several times. Possibly, Silver may enter “overbought zone” during the day, but if price isn’t able to stay inside it, bears may return to the market.

RoboForex Analytical Department

Article By

Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.



WTI Crude Trades Close to Lowest Level on Fed-Taper Fears

By HY Markets Forex Blog

WTI crude traded close to its lowest level in a month, as market participants continue to speculate that the Federal Reserve (Fed) will begin to scale-back its monthly bond purchases this year, after signs of improvement in the world largest economy.

Futures were flat after yesterday’s 3% drop, the biggest fall since Nov, 2012. Investors are focused on how quick the Federal Reserve would begin to scale-back on its bond purchases after a string of data released yesterday revealed the US jobless claims declined, while the manufacturing climbed. According to analysts, US crude stockpiles dropped for the fourth time in a row in five weeks.

“It’s a reaction by the market to the surge in the U.S. dollar due to the tapering expectation that really caused WTI to plunge” yesterday, said Victor Shum, IHS Energy Insight’s Vice President.“Weaker currencies for consuming countries make oil look expensive, that’s why there is an inverse relationship between the move in the U.S. dollar and moves in oil futures,” he added.

West Texas Intermediate for February delivery came in at $95.31 per barrel on the New York Mercantile Exchange at the time of writing. It declined $2.98 to 95.44% a barrel yesterday, the lowest since December 2.

While the European benchmark Brent crude climbed by 0.1% to $107.93 a barrel on the ICE Futures Europe exchange, the crude was at a premium of $12.62 to WTI.

WTI Crude – US Economy

The Labour Department posted the US jobless claims which showed a drop by 2,000 to 339,000 last week. The US Manufacturing expanded in December; the Institute for Supply Management’s factory index came in at 57.

The Federal Reserve’s Chairman Ben S. Bernanke confirmed the Fed would begin to scale-back its bond purchases this year because of the progress and improved outlook in the job market. The Fed will reduce its monthly bond purchases from $85 billion to $75 billion, starting this month.


Win a luxurious trip to the Maldives & up to $30,000 cash for trading with us!

Visit for details 

The post WTI Crude Trades Close to Lowest Level on Fed-Taper Fears appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

USD/JPY: Yen Climbs From Five-Year Low

By HY Markets Forex Blog

The yen rose against the greenback on the last day of the trading week, as the US dollar dropped from its five-year high in spite of the string of positive data released from the world’s largest economy.

The Japanese yen edged 0.46% higher at 104.31 yen at the time of writing. The yen was poised ending the first week of the year, rising as much as 0.9% against the US dollar at the time of writing.

The EUR/JPY currency pair was seen lower, as the Japanese yen rose 0.58% higher to ¥142.38 against the euro. The session opened at around ¥143.30, the yen dropped to ¥142.07 later during the day.

Last year the Japanese yen dropped by 24.6% against the US dollar, marking its largest annual drop since 1979 and worst annual performer among its peers.

Japan’s Prime Minister Shinzo Abe started to follow the ‘three arrows policy’ targeted at reviving and sustaining the economic growth of the country.

Japan is expected to increase its sales tax from 5% to 8% by April and to 10% by next year. The central bank are predicted to ease its monetary policy further, as market analysts forecast the nation’s yen will decline throughout 2014.

USD/JPY – US Dollar

A string of data’s were released from the world’s largest economy, from the US jobless claims which revealed a better-than-expected results and the Manufacturing Purchasing Mangers’ Index (PMI), which expanded in December for the seventh consecutive month in a row.

The data’s was driven by the outlook that the Federal Reserve (Fed) would begin to taper its $75 billion monthly bond purchases this year.


Visit   to find out more about our products and start trading today with only $50 using the latest trading technology today.

The post USD/JPY: Yen Climbs From Five-Year Low appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

Friday Charts: Rebalancing Acts, Billionaires in the Prairies and the Toughest Question for 2014

By Rebalancing Acts, Billionaires in the Prairies and the Toughest Question for 2014

Why use lots of words when a handful of pictures will suffice?

That’s the philosophy I embrace each Friday when I share a few graphics to put important economic and investing news into perspective for you.

So, like a wrecking ball (sans Miley Cyrus), here comes the first edition of 2014′s Friday Charts

The Bull Gets Gored… or Not

Remember when everyone feared that a Fed taper would abruptly end the bull market?

Well, the Fed announced a taper in December… and stocks kept hitting new highs.

And remember when everyone feared that interest rates rising above 3% again would put a stop to runaway stock prices?

Not so much…

In the final week of 2013, 10-Year Treasury yields hit a two-and-a-half-year high at 3.02%. Yet stocks maintained their upward momentum…

“The market loves to prove people wrong,” says Bespoke Investment Group. Indeed!

So, loyal readers, let’s conduct a little experiment, shall we?

I present to you the toughest question for 2014: What do you think will finally gore this bull market?

Submit your best guess to us here. (I just hope you’re ready to be proven wrong.)

Billionaires Flocking to the Prairie

Who needs Swiss bank accounts when we have South Dakotan dynasty trusts?

You see, according to Bloomberg, in the past four years, the amount of money sheltered from the long arm of the IRS in the state tripled to $121 billion.

“We have a tax haven in our midst,” says Edward McCaffery, a professor at the University of Southern California’s Gould School of Law.

You think?

If borrowing costs for the federal government keep rising, which they will, it’s only a matter of time before Sioux Falls becomes the hot topic in Washington, D.C.

Enough with the observations, though. It’s time for an opportunity…

No College Degree Required

We all know that betting on dropouts pays off. Think Bill Gates with Microsoft (MSFT) and the late Steve Jobs with Apple (AAPL).

Now, here’s a new twist on the phenomenon, courtesy of Ryan Detrick at Schaeffer’s Investment Research.

In 2013, the 11 stocks that were dropped from the all-tech index, the Nasdaq, ended up schooling the new entrants. More specifically, they rallied an average of 56.8% – a full 22 percentage points more than the companies added to the index.

What’s more impressive is that only one of the dropouts, BlackBerry Limited (BBRY), fell in price for the year.

If this trend rings true in 2014, too, the latest stocks to get the boot from the Nasdaq – Fossil Group (FOSL), Microchip Technology (MCHP), Nuance Communications (NUAN), Sears Holdings (SHLD) and DENTSPLY International (XRAY) – could be big winners this year.

Fundamentally speaking, I think Sears is a sucker’s bet. However, I think Nuance could easily double (hint, hint).

If you’re reluctant to follow my lead, follow a billionaire’s, instead. Carl Icahn recently upped his stake in Nuance by almost $725,000.

Tech & Innovation Daily’s Chief Technology Analyst, Marty Biancuzzo, loves the company, too. As he pointed out last month, “Nuance possesses one of the most robust intellectual property portfolios around, with nearly 1,500 U.S. patents and another 348 patent applications.”

That’s it for today. Before you go, though, don’t forget to tell us when you think this bull market will finally end by going here.

Ahead of the tape,

Louis Basenese

P.S. In case you didn’t get the memo, we’re on Twitter. Follow me @LouBasenese.

The post Friday Charts: Rebalancing Acts, Billionaires in the Prairies and the Toughest Question for 2014 appeared first on Wall Street Daily.

Article By

Original Article: Friday Charts: Rebalancing Acts, Billionaires in the Prairies and the Toughest Question for 2014

Follow the M&A Money to Small- and Mid-Cap Cardiovascular Medtechs: Jason Mills

Source: George S. Mack of The Life Sciences Report (1/2/14)

Some investors’ eyes glaze over at the mention of medical devices. But it’s time to wake up and focus on the stunning growth opportunities in small- and mid-cap cardiovascular medtech. Canaccord Genuity Managing Director Jason Mills covers companies on the front lines of innovation and in sectors where the trifecta of revenue, margins and reimbursement is achieving biotechlike levels. In this interview with The Life Sciences Report, Mills opens the new year with a discussion of the cardiovascular medtech industry and mentions companies that are probable acquisition candidates.

The Life Sciences Report: As the very first person interviewed in 2014 for The Life Sciences Report, your coverage looks to be very timely.

Jason Mills: It’s an honor to be first in 2014. I’m hopeful that it’s going to be a great year.

TLSR: You focus on the cardiovascular industry. What distinguishes cardiovascular from other industries inside medtech?

JM: In cardiovascular medtech, you are primarily dealing with the gold standard of randomized, controlled clinical studies, which offer the best clinical evidence that a medical device company can attain. Cardiovascular devices are also reimbursed at a higher rate because of the cost of the chronic conditions that they target. In addition, the U.S. Food and Drug Administration (FDA), by and large, requires premarket approval (PMA) applications because the products are often unique. In other areas of medtech, devices may be approved under a 510(k) premarket notification pathway or a supplementary approval pathway, which require less time and less clinical study. I should say that not every cardiovascular device requires a PMA, but the biggest market opportunities do, in most cases.

TLSR: Can you elaborate on the approval process in your coverage universe? If a company has, for example, a left ventricular assist device (LVAD) that it is marketing for infants, and it is miniaturizing that device, would that require a PMA, or could it go through a shorter 510(k) pathway?

JM: If a company is miniaturizing an LVAD, it is essentially changing that device. That’s happened quite a bit in this industry, where innovation has been fast and furious over the last seven to 10 years. BothThoratec Corp. (THOR:NASDAQ) and HeartWare Inc. (HTWR:NASDAQ) are coming out with some fantastic medical technology in mechanical circulatory support. These companies are looking to make their pumps smaller, less invasive to implant and more durable over time, with fewer adverse events.

Whether in infants or adults, miniaturization of pumps is a trend. Miniaturization is not only moving forward in the cardiovascular sector—it’s the trend throughout medtech in general, because the surgery required to implant smaller devices is less invasive. Minimally invasive surgery is a major trend as well, and will continue to be. Both trends are certainly apropos to LVADs.

On the other hand, if a company is seeking approval for a device that’s already on the market and is being used in a specific patient population, the FDA may not require a full-blown investigational device exemption (IDE) clinical trial and PMA for a different patient population. But the agency may require some sort of clinical data.

Pathways to approval for miniature devices are similar to those for any medical device designed to be implanted in the body. If an LVAD is significantly or materially different in the way that it is configured, or the way it moves blood, it will probably require an IDE and randomized clinical studies.

TLSR: Small-cap cardiovascular medtechs have significantly outperformed large-cap cardiovascular medtechs over the past year. Can the risks of the smaller caps be justified to attain these higher returns?

JM: Yes. I believe the risk—if we call it risk—in the small-cap cardiovascular medtech group is justified. I have a greater affinity for growth companies, and the group I focus on is composed of small- and mid-cap medical device stocks. Growth, by and large, resides within the small- and mid-cap sector. That’s true across the board, in cardiovascular medtech as well as in diabetic or orthopedic medtech, which my Canaccord partner, Bill Plovanic, covers very well. I believe the risk is justified, and that appreciation is going to continue.

TLSR: How do growth rates compare between the small- and mid-caps and the large caps?

JM: The median topline growth rate among large-cap companies—those that have a $7 billion ($7B) market cap or more—is at 4%. The median growth rate in mid-cap companies, those at $1–7B in market cap, is about 7%. The median growth rate in all the small caps—those under $1.5B—is more than 10%. When you look at a sample of the best in small-cap medtech, you’re looking at 40% growth—and there are only about 10 companies in medtech in general, including in diagnostics, growing the topline more than 20%. Revenue growth and gross margin expansion are key factors to consider when valuing a medical device company and, especially, a small- to mid-cap medical device company.

TLSR: Why do you believe that growth and share-price appreciation are going to continue in the small- and mid-cap space?

JM: Money goes where growth is in medical devices. The primary reason large-cap medtech companies don’t have small-cap-type growth is that, over the last 20 years, the larger caps have acquired or developed devices in sectors that have been penetrated at significantly higher rates than newer sectors. The newer growth sectors include transcatheter aortic valves, mechanical circulatory support, renal denervation and transcatheter mitral valves, which are coming down the pike. Other growth sectors include abdominal aortic aneurysm (AAA), fluorescent imaging and atrial fibrillation (AF). Innovation in these areas is in small-cap companies. What you have is a dichotomy between large players that need growth and small companies that have it.

TLSR: With such low growth in the large-cap medtechs, they surely must be thinking about acquiring growth. Is that where you’re going with your theme?

JM: The overriding theme in medtech over the next five years will be merger and acquisition (M&A). Medtechs will consolidate. The large-cap guys need growth, and I don’t think they will develop it quickly enough internally. Large caps are going to look more and more to external sources, acquiring the growth that they need to drive share price appreciation over time via acquisition.

TLSR: You and I last spoke in April 2012. You said there was deep value in medtech for investors. You were right, and congratulations on that. Have we already seen the bulk of that move in small- and mid-cap cardiovascular medtech in 2013, or is more left?

JM: There are still good stocks to buy, which will appreciate over time, but it’s going to be less of a group move. That said, investors should look at companies with the best growth profiles, coupled with the best gross margin profiles. If you’re seeing consistently strong or accelerating topline growth, and consistently strong or expanding gross margins, those stocks have the best chance of appreciating from today’s levels, which are up quite nicely over the last two to three years. We’re still not at the peak medtech valuations we saw prior to the financial crisis. I’m not suggesting we’ll get back there, but it’s entirely possible that multiple expansion in medtech will continue. And if we do see consolidation in this space, valuable assets will become fewer and farther between.

TLSR: Cardiovascular medicine has been very successful, both on the drug side and the medtech side, and it has been an excellent model of how to employ preventive medicine, including diet, exercise and the use of statins and antihypertensives. Interventional therapies and the new advancements in electrophysiology have helped patients greatly, and they are living longer. What should investors be looking at in this growing market?

JM: Heart patients and older patients are living in an age of significant transformation and advancement in medical devices. Many will use these devices and technologies over the course of the next 10–20 years. A case in point is transcatheter aortic valves. As patients age, their aortic valves calcify and don’t work very well. That is a leading indicator on the heart failure continuum: If the heart valves aren’t working and the heart is not pumping blood efficiently, that’s essentially the definition of heart failure. The advent of transcatheter aortic valves, used when patients are either too frail, too sick or too old to have a full-blown sternotomy and open-heart surgery, means these patients can now derive benefit from a new aortic valve via a minimally invasive catheter-based technology.

TLSR: Jason, would you address minimally invasive, transcatheter mitral valve technology?

JM: That’s coming down the pike. Edwards Lifesciences Corp. (EW:NYSE) and Medtronic Inc. (MDT:NYSE) are spending millions of dollars over the next five years on development of a transcatheter mitral valve. I believe it will be developed—and it will be a dramatic paradigm change in the treatment of mitral valve disease, which is one of the most frequently diagnosed heart problems in the world and more prevalent than aortic valve disease.

Transcatheter device technology has gotten more durable, and the devices are less invasive to implant. You must have both of those features to accommodate older patient populations. I believe that, going forward, we shall see transformational, paradigm-changing medical devices achieve good success in big markets.

TLSR: Jason, talk to me about further innovation and where we are seeing it. What about mechanical circulatory support, for instance?

JM: We shall continue to see improvements in circulatory support, as well as penetration into the end-stage heart-failure patient market for mechanical circulatory support. In my estimation, less than 10% of the patient population can benefit from those devices. On the heart-failure continuum, there is more development and innovation in treatment of class III heart failure using pumps or medical devices.

One example is the non-blood contacting device called the C-Pulse Heart Assist System, from Sunshine Heart Inc. (SSH:NASDAQ). HeartWare just acquired a company, CircuLite Inc., which has a miniaturized pump for class III heart failure patients. Many class III patients have aortic valve and mitral valve disease, with transcatheter valve technologies available or in development for both of those conditions.

TLSR: Sunshine Heart’s C-Pulse is approved in Europe, but is in pivotal clinical trials in the U.S. You obviously like the company, because you have a $14.75 price target on it. What’s the value proposition?

JM: At the end of the day, if C-Pulse proves to be an efficacious therapy for class III heart failure patients, the value proposition would be tremendous. The company’s risk profile is higher than that of other medical device companies because we haven’t seen as much data for this device, as we have for other potentially paradigm-changing medical devices. But the risk-reward, in my view, is favorable. If this device, in the clinical trial that Sunshine Heart is running here in the U.S., meets its endpoint, the market opportunity for the C-Pulse will be three or four times bigger than the market opportunity for class IV-targeted LVAD technology.

One of the reasons HeartWare bought CircuLite is that CircuLite essentially targeted the same patient population as Sunshine Heart. That acquisition validated the Sunshine Heart’s market opportunity. Sunshine Heart has a long way to go, and must prove that its device has a definitive impact on cardiac output. Early feasibility data suggests that it might, but the data isn’t definitive. However, if the device proves efficacious, the opportunity for this company, with only a $167 million ($167M) market cap, is tremendous.

TLSR: Another area?

JM: I think there will be more innovation on the atrial fibrillation (AF) side. Atrial fibrillation—both persistent and paroxysmal AF—is one of the most undertreated chronic conditions in the world. I cover a company, AtriCure Inc. (ATRC:NASDAQ), that’s doing a lot of training, education and product development in AF, which is a huge market.

TLSR: AtriCure reached your target price of $16 in a hurry. Could you address the value proposition there?

JM: The AF market is significantly underpenetrated. AtriCure is the only medical device company with an FDA approval to treat AF surgically, which has been proven to be the best treatment for chronic AF, otherwise known as longstanding persistent atrial fibrillation.

The market is a multibillion-dollar opportunity. With the only FDA approval in that indication, AtriCure has been able to go out and train physicians to do this procedure the same way across the board, which is resulting in better clinical outcomes. The company also has a product to treat concomitant left atrial appendage (LAA) condition, which dovetails nicely with its surgical ablation platform for AF. LAA is a culprit in stroke, and there are a lot of links between AF and stroke.

AtriCure is also spending money on clinical trials to address other patient populations. I think the company has a significantly strong value proposition. If I had to rank companies that have the highest probability of being acquired, AtriCure would be at the top of the list.

TLSR: Is there another area you’d like to mention?

JM: Investors should pay attention to developments in the treatment of peripheral artery disease (PAD). We are seeing a number of interventions to treat blockages in the legs, growing at or just below 10%. PAD is a chronic problem that affects patients’ quality of life, and is related to amputations. For patients who have an amputation, the five-year survival rate is very poor. I cover Spectranetics (SPNC:NASDAQ), which is developing innovative technologies there.

TLSR: Can you address developments in the aneurysm sector?

JM: There is a lot of room for device improvement and continued expansion of devices to treat both thoracic and abdominal aortic aneurysms. That market is growing and should benefit from demographics, as aneurysms are more prevalent in older age groups. Endologix Inc. (ELGX:NASDAQ)and some private companies are doing great work in that field. It could be interesting for investors.

TLSR: Endologix has a $1.1B market cap. Could you address the value proposition there?

JM: The company’s growth profile is among the best in medtech. Given aging demographics, AAA will continue to see growth, on the order of at least 5% a year in our estimation. Endologix has two potential paradigm-changing devices, and its gross margin profile is also among the best in medtech. Its management team is very strong as well. I think that Endologix has a bright future, whether as an independent company or as part of a larger organization.

TLSR: Back on Dec. 3, the company announced it was going to offer $75M in convertible senior notes plus an $11.25M greenshoe. It didn’t want to leave any money on the table. There seemed to be no specific reason for raising the money. Can you comment on that?

JM: Capital is very important in sustaining the growth of small-cap companies. Endologix has some very expensive clinical trials upcoming, so I don’t think the financing was a bad move. It doesn’t need the money right now, but I can’t say that the environment for raising capital is going to get significantly better. If the company believes it’s going to be independent for the next five years, we may look back two years from now and say it was a brilliant move.

TLSR: Can you discuss innovation in imaging?

JM: Interesting developments are occurring in the imaging market, whether it be cardiovascular imaging or general surgery imaging—giving the physician a better perspective prior to surgery, intraoperatively (during surgery), and postoperatively.

Advances in intraoperative imaging are changing the way surgeries are done, allowing them to be minimally invasive and completed more quickly. I cover a company called Novadaq Technologies Inc. (NVDQ:NASDAQ), which has technology in fluorescent imaging that demonstrates not only the ability to drive better clinical outcomes, but is also saving costs for hospitals because there are fewer complications after surgeries. The number of repeat operations is down where Novadaq’s fluorescent technology is being utilized.

TLSR: I’m noting a company called Vascular Solutions Inc. (VASC:NASDAQ) in your coverage.

JM: Vascular Solutions is doing fantastic work, participating in niche markets in cardiovascular and radiological medical devices to help interventional cardiologists and radiologists do better interventional procedures.

TLSR: You made a note in a report on Vascular Solutions back on Dec. 9 indicating that the company had gotten an early Christmas present in an injunction to prohibit Boston Scientific Corp. (BSX:NYSE)from using its technology. Protecting intellectual property (IP) is a persistent problem in medtech. What is going to be the upshot of this?

JM: This IP issue is subject to a trial that is set to commence sometime in H1/15. But this injunction is very important and positive for Vascular Solutions—and, frankly, for the whole industry. When you have a patent on an innovation that has clearly augmented the ability of a physician to deliver care to a patient, and it’s unique, it deserves patent protection. That’s one of the critical pillars on which our country is built.

It is gratifying to see a court of law uphold IP that has traveled the appropriate pathway to patents. I say this because a lot of innovation in medtech happens at small, entrepreneurial companies. This injunction is an indication that the large players aren’t going to be allowed to copy technologies developed by smaller companies, which happens all the time. If we continue to see this trend, it will dovetail nicely with my theme, which is that over the next five years you’ll see massive M&A in medtech, to the extent we haven’t seen in 30 years. If, in fact, large companies can’t copy the innovation of smaller companies, their only option is to buy the smaller companies. That’s the way our country and our sector should work.

TLSR: Jason, it’s such a pleasure speaking with you. I wish you a happy new year.

JM: You too George, and thanks for spending time with me.

Jason Mills is managing director at Canaccord Genuity. He joined Canaccord from First Albany Capital, where he was managing director and senior analyst covering the medical devices sector, with a specific focus on the areas of cardiovascular disease, ophthalmology and sleep disorders. Mills previously served as a vice president and senior research analyst with Thomas Weisel Partners, where he covered companies in the ophthalmology and sports medicine/arthroscopy sectors. Mills holds a master’s degree in sports administration from Ohio University and a bachelor’s degree in economics from Yale University.

Want to read more Life Sciences Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.


1) George S. Mack conducted this interview for The Life Sciences Report and provides services to The Life Sciences Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services.

3) Jason Mills: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Spectranetics, Sunshine Heart Inc., Vascular Solutions Inc. To view full disclosures, click here. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.

5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.

6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise – The Life Sciences Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part..

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Life Sciences Report. These logos are trademarks and are the property of the individual companies.

101 Second St., Suite 110

Petaluma, CA 94952

Tel.: (707) 981-8204

Fax: (707) 981-8998

Email: [email protected]




Japanese Candlesticks Analysis 03.01.2014 (EUR/USD, USD/JPY)

Article By

Analysis for January 3rd, 2014


H4 chart of EUR/USD shows descending movement, which is indicated by Shooting Star pattern. Three Line Break chart and Heiken Ashi candlesticks confirm bearish tendency.

H1 chart of EUR/USD shows bullish pullback, which is confirmed by Hammer pattern and Heiken Ashi candlesticks. Three Line Break chart indicates descending movement.


H4 chart of USD/JPY shows descending correction, which is indicated by Tweezers and Evening Star patterns. New upper Window is closed by the price. Three Line Break chart and Heiken Ashi candlesticks confirm that correction continues.

H1 chart of USD/JPY shows resistance from closest Window, which was closed by the price after Tweezers pattern. Three Line Break chart and Heiken Ashi candlesticks confirm descending movement.

RoboForex Analytical Department

Article By

Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.



Speculation Surrounding Fed Tapering Crucial

By HY Markets Forex Blog

Those who trade forex might benefit from knowing that the AUD/USD declined on Dec. 30, extending its recent losses as global market participants responded to speculation surrounding the tapering of the Federal Reserve. 

The AUD/USD recorded its tenth weekly drop in a row on Dec. 27, according to Bloomberg. This period of consecutive losses was the longest since the previous system of controlling exchange rates was eliminated in 1983. So far in 2013, the Australian dollar has depreciated 15 percent, which has put the emerging market currency on track to record its most severe annual drop since 2008.

Speculation surrounding Fed tapering crucial
The latest decline in the value of the Aussie was attributed to increased hopes that the Fed will continue to roll back its bond purchases amid data pointing to strength in the U.S. economy, the media outlet reported.

Another factor that has helped to support the perception that economic conditions in the United States are improving is the fact that on Dec. 27, the yields on U.S. Treasury Bonds finished the trading session above 3 percent, according to The Wall Street Journal.

The yield on these bonds closed at 3.004 percent, which was their highest since July 2011, the media outlet reported. Traders recently told the news source that the increase that U.S. interest rates enjoyed on that day helped put downward pressure on the Aussie and pushed the greenback higher.

Before those involved in forex trading had a chance to respond to the latest batch of evidence that the U.S. economy is improving, the Fed announced earlier this month that starting in January, it will reduce its regimen of monthly asset purchases to $75 billion worth of debt-based securities. This decision was announced at the conclusion of a two-day meeting of the Federal Open Market Committee on Dec. 18.

On the following day, the results of a Bloomberg poll were released, which contained a prediction that the bond purchases will be reduced by $10 billion at each of the coming seven meetings of Fed policymakers.

The timeline that will be used for gradually reducing these transactions has been the subject of much speculation, and the pace that is harnessed for winding down the purchases could have a substantial impact on the value of the U.S. dollar relative to other currencies.

“The big theme has been Fed tapering,” Janu Chan, who works for St. George Bank Ltd. in Sydney as an economist, told the news source. “With that set to continue into 2014, we’ll expect the Aussie to come under some further pressure over the next year.”

Several experts provide bearish predictions for Aussie
Chan is not the only market expert who has provided bearish predictions for the Australian dollar, as several analysts have become more pessimistic about the future prospects of the currency, according to CNBC.

“We are looking for further losses in the Australian dollar next year but its sell-off against the greenback should be gradual and limited to 85 cents,” Kathy Lien, managing director at BK Asset Management, told the media outlet. “There are a significant amount of macro factors that should drive the Australian dollar lower next year, but we do not see a material slide beyond 85 cents.”

It was recently forecast by Stephen Miller, a BlackRock money manager in Sydney, that the currency of the Asian Pacific nation will move closer to $0.80, The Sydney Morning Herald reported.

“The Aussie will go lower,” Miller told the news source. “Once it gets to 80 cents, you start thinking the Aussie is worth a look from the long side, but I wouldn’t be trying to trade it from the long side before US80¢ [cents].”

Impact of RBA policy
One factor that could serve to help push the AUD/USD lower is the policy actions of the Reserve Bank of Australia, which has cut its benchmark rate by 225 basis points since November 2011, the media outlet reported. The nation’s central bank has reduced its key rate by 50 points in 2013 alone.

The RBA has indicated its desire for more robust economic growth, and has publicly declared that it wants to devalue the currency of the Asian Pacific nation, according to CNBC. Earlier in December, Glenn Stevens, governor of the RBA, told The Australian Financial Review that he wanted the Aussie to move closer to $0.85.

Those who trade forex might benefit from knowing about the recent sharp drop in the AUD/USD, as well as the predictions made by market experts that the currency pair will continue to decline.

The post Speculation Surrounding Fed Tapering Crucial appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

The Billionaires’ Secret to Beating the Market


New year, same stories.

Just as we were settling in yesterday evening for a recap on the day’s market action, the following headline flashed up on our screen:

Stocks dip after hitting fresh peak: Chinese markets hit by disappointing manufacturing data

European stocks were down over 1%.


Can’t we have just one day of normal trading where the market doesn’t fret and fluster about China or central bankers? We guess that’s too much to ask.

But it shouldn’t be. It really is a crying shame that governments and central banks have manipulated the market so much. Their actions have driven away investors.

And if investors can’t or won’t invest in stocks it means they’re missing out on what we believe is the greatest wealth-building mechanism on the planet…

We’ll ask you a question: How many successful business men or women (and we mean billionaire-sized successful) have you come across over the past five years who have said they’ve given up on business because things are too hard?

Not many, we’d wager. That’s because for the most part they see running a business as a challenge. If an obstacle gets in their way they instantly look for a way to get around it.

Yet that’s not always true of the average investor. For some of them, when an obstacle appears they use it as an excuse to give up. So as the various investing obstacles have appeared over the past five years, many investors have thrown in the towel, claiming it’s all too hard.

In doing so they’ve missed out on a spectacular chance to grow their wealth. But while the average investor may have sat on the sidelines, the world’s richest business people have faced the challenges head on, and for the most part come out well ahead.

Be in the Investing Business

If you’re a regular Money Morning reader you’ll know we keep a close eye on the Bloomberg Billionaires index. The name is self-descriptive. It tracks the changing fortunes of the world’s richest people.

According to the report from Bloomberg News:

The richest people on the planet got even richer in 2013, adding $524 billion to their collective net worth, according to the Bloomberg Billionaires Index, a daily ranking of the world’s 300 wealthiest individuals.

The aggregate net worth of the world’s top billionaires stood at $3.7 trillion at the market close on Dec. 31, according to the ranking. The biggest gains came in the technology industry, which soared 28 percent during the year. Of the 300 people who appeared on the final ranking of 2013, only 70 registered a net loss for the 12-month period.

We’re almost prepared to bet our bottom dollar that even the 70 billionaires who lost money in 2013 won’t give up on trying to make money in 2014. That’s the nature of truly successful people. They don’t let a setback or adverse circumstances get the better of them. Instead, they fight and seek new strategies to win.

They understand that taking risks is all part of the game.

So the key to being a successful investor isn’t to think of yourself as an investor at all. Rather, you should think of yourself as a businessperson running a business.

If you think about investing like a businessperson you’ll start to think like a businessperson. That will help you adapt to the changing market, just like a businessperson.

Did You Beat the Billionaires in 2013?

Note the quote from the Bloomberg News article again. It says ‘The biggest gains came in the technology industry…

We figured 2013 would be a great year for technology stocks. That’s why in late 2012 we decided to found and launch a technology focused investment service. We called it Revolutionary Tech Investor.

Like any business venture it didn’t happen overnight. By the time we hired the staff and got it up and running it was May. That means we missed the first five months of the year. Even so that didn’t stop our stable of tech and biotech stocks achieving an average return of 22.7% over the past seven months.

That beats the S&P/ASX 200 and on an annualised basis (38.9%) it beats the average wealth gain of some of the world’s richest people.

As you can probably imagine, our only regret is that we didn’t launch Revolutionary Tech Investor sooner. But we’ll continue to back tech stocks this year in what could be an even bigger year for returns.

The point is we spotted an opportunity in the market and acted as quickly as possible to help investors profit from it.

But that’s just one example of adapting to get the most out of the market. In 2012 we also recognised that low interest rates were coming to Australia, so we told Australian Small-Cap Investigator subscribers to make the most of it. We showed them how to buy into high yielding small-cap dividend paying stocks.

It was good advice as interest rates fell. We maintain the same advice today.

In fairness, it was the extension of a theme we had banged on about since 2011 right here in Money Morning. We’ve insisted that investors have at least 20% of their wealth in dividend stocks.

That may sound like obvious and uninspiring advice today. But if you think back to that time, most folks were running scared from the market, selling everything they could, as they feared an economic collapse in Europe and the US.

What Would a Successful Businessperson Do in This Market?

The point is, we’ve learned to adapt our investing style over the past five years, just as a successful businessman or woman learns to adapt their business to a changing market.

Some of our critics have accused us of being a flip-flop and lacking principles as we adapt our strategy. They can think that if they want to, it doesn’t worry us. Those are the people who are probably still 100% in cash or 100% in gold, who failed to grasp the importance of the changing market.

Meanwhile the investors who embraced change and bought into tech and biotech stocks last year should now be sitting on a 104.9% gain on our 3D printing stock tip and a 61.4% gain in just two months on our stem cell stock tip.

Our advice to you is simple. Don’t think of yourself as someone who buys and sells shares, a buyer or seller of gold, or even a buyer or seller of property. Think of yourself as a successful businessman or woman. Then think about what other successful businessmen or women would do in this crazy market.

We know one thing for sure: they wouldn’t throw in the towel and sulk on the sidelines waiting for things to improve. They would take the proverbial bull by the horns and make the best deal they could in the circumstances.

If you want any chance of building your wealth today, that’s the attitude you need to adopt. Do it now and we’re certain you’ll have a successful year in 2014 – you may even outperform the billionaires in the Billionaires Index!


Special Report: 574 Years in the Making

Join Money Morning on Google+


Seismic Technology: The next chapter in US energy


When people think of computer and IT companies, names like Intel, Microsoft, IBM and Apple are usually the first that spring to mind. Companies, in other words, that specialise in computers, software and consumer electronics.

The reach of computer technology, however, is far greater and more transformational. It has come to touch everything we do. Rapid improvements in computer processing capacity, thanks to the ongoing fulfilment of Moore’s law, mean the things we are doing keep getting better.

We’ve seen this sort of transformation of the US economy before. Waves of new general-purpose technologies have historically grown the US economy and improved the standard of living for its citizens.

Take rail transportation as an example. In 1850, before this technology was widespread, US gross domestic product was smaller than that of Italy. Then came the railroads, connecting the vast continent and making it possible for the US to become an industrial, urban nation. This disruptive technological change made the US the world’s top manufacturer and largest economy by 1900. The adoption of electrification and automobiles would continue the trend into the new century.

These technologies gave the US economy muscles. Now, with the computer and information technology revolution, it is growing brains. Furthermore, this revolution still has a long way to run. While the physical economy still dwarfs the digital one, that will change over the next 20 years.

As I often like to point out, one of the much overlooked areas where this is happening is biomedical research. This year’s Nobel Prize in chemistry was awarded to three researchers, Martin Karplus, Michael Levitt and Arieh Warshel, ‘for the development of multiscale models for complex chemical systems‘. Instead of using balls and sticks to model molecules, chemists are now able to do so using fast computer models.

And of course, no chemical system is more complex than human biology. This sort of modelling, made possible by computer technology, means that software is replacing wetware. We can now create computer models as silicon-based stand-ins for biology. Using these algorithms for cells and tissues, we are discovering new ways to treat disease. High-performance computers are making possible higher rates of drug discovery that haven’t been possible in the past.

Health care, of course, is a huge chunk of the US economy, accounting for some one-sixth of the nation’s GDP, but it isn’t the only area that is being disrupted in this way. Energy also makes up a large share, and it too is being transformed by computational tech.

We are in the midst of an energy revolution, although it has been a long time in the making.

New computer tech, along with sensors and networks, has made it possible to extract oil and gas where it wasn’t possible before. Back in 1979, exploratory drilling turned up a productive well only once in every seven tries. By the 1980s, however, new computing tech made it possible to perform seismic surveys and model what things look like underground. The number of unproductive holes drilled into the ground fell sharply.

But things really got going in the 2000s in the US, where for decades, oil and gas production had been in decline.

As you know, new tech called fracking began to be used to make previously unproductive deposits viable, as well as bring old tapped-out fields back into production.

Also known as hydrofracking, this method of oil extraction uses high-pressure fluid to fracture oil-bearing formations underground, releasing their valuable hydrocarbon content. But fracking depends on the latest in sensing and computing technology.

Since 2008, US production has enjoyed a sharp upswing. In fact, the International Energy Agency is now projecting that the US could become the world’s largest oil producer in the next two years, surpassing Russia and even Saudi Arabia.

All of this is being driven by technology. There’s plenty of money to be made in oil itself, of course, but there is also the tech making it possible.

Computer-assisted oil and gas production relies on sound propagated underground in order to learn about the subterranean environment. Seismic sensors, also called geophones, are used to detect vibrations in the ground generated by special ground-vibrating equipment. The data are then used to build an underground 3-D map.

The seismic maps are critical for tapping previously unavailable resources. In many shale formations, for example, the oil- and gas-bearing layer might be only 200 feet thick but reside a mile underground. When the vertical well is drilled, it must be precisely located in order for horizontal shafts to branch out. Enhanced recovery techniques, which allow for greater production from aging fields, also require the use of sensing tech.

The sensors aren’t only helpful for finding oil in the ground; they are also used to draw a map while a well is hydrofracked. In hydrofracking, fluids are pumped into the well at high pressure, fracturing the rock. Particulate matter, such as sand, is injected along with the fluid to hold the fractures open. The fracturing itself is like a seismic event, and is detectable using seismic equipment, which can be used to determine the location and extent of the fractures.

There are also environmental reasons for good detection tech. Aquifers can be located near oil- and gas-bearing formations, and improper fracturing can cause leaks into the groundwater. Good sensing technology can be used to monitor and control the process, protecting this natural resource.

In short, the energy industry will have to make a major shift in seismic technology.

Conventional seismic sensing equipment uses cables run deep underground to the sensors. This is expensive, and cabling can cost millions for a single location. Deploying cabled systems is also a time-consuming and high-maintenance proposition. The rough environment of drilling sites isn’t friendly to equipment.

That’s why what the world needs now is new seismic sensing equipment.

Ad lucrum per scientia (toward wealth through science),

Ray Blanco
Contributing Editor, Money Morning

Ed Note: Seismic Technology: The Next Chapter in US Energy was originally published in The Daily Reckoning US.

Join Money Morning on Google+


Matt Badiali’s Insider Tips from the Energy Fronts in Kurdistan and Tuscaloosa

Source: JT Long of The Energy Report (1/2/14)

How can investors get exposure to the hottest new oil and gas plays without getting burned by conflict premiums abroad or regulatory hurdles in North America? Fresh off three months of travelling the globe, S&A Resource Report Editor Matt Badiali shares his insights with The Energy Report readers on how to go where no one else wants to be and make a lot of money doing it.

The Energy Report: You spent the last three months traveling and logging your discoveries with your S&A Resource Report. What are the major fundamental shifts that have caused the current downturn in natural resources?

Matt Badiali: Oil prices are up and have been staying relatively high, higher than I thought they would, honestly. But there has just been destruction in precious metals, base metals, coal and uranium. There are two factors impacting the prices. The global economy is still in shambles. That hurts demand for natural resources.

And there has been a cooling of China’s growth. It is still growing like crazy; it’s just not growing at the rate we have seen in the past. That’s a function, in part, of the size of that economy. It is just enormous. It can’t sustain a double-figure growth rate. So we still see demand there, just not as great as it was.

That reality has pushed down the prices of commodities, which in turn have made the commodity companies less profitable, and in some cases in the gold space, borderline money losers. Investors have pulled out of that market.

We also have a bull market in the Standard & Poor’s 500. Investors are fickle. They want to go where they’re going to make money. Right now, a lot of the money has moved into the big blue chips.

TER: Let’s focus on the bright spot, oil and gas. You visited the Kurdistan region of Iraq. Can you describe to me what it was like to travel there? How were you treated? Did you feel safe?

MB: This was one of the most highly anticipated trips I have ever taken. I woke up in the middle of the night a few times in preparation for this trip. The Western media makes Iraq sound like a live fire zone and that wasn’t the case at all. Kurdistan is the northern region of Iraq. It touches Iran, Syria and Turkey. It’s an independent, autonomous region within the country run by the Kurds. I flew in to the capital city, Erbil, or “Arbil,” through Germany and I flew out through Dubai.

I was shocked. It’s the Middle East. I expected desert, camels and burkas, but it’s not like that. It’s high desert; it reminded me a lot of Colorado and Nevada. I saw lots of wheat fields. The people were wonderful. The women wore traditional or Western-style clothes.

Prior to my arrival, Kurdistan had not had a bombing six years. About three weeks before I went, the city was the victim of a bomb attack against its security apparatus. That put the whole country on alert. There were a lot of checkpoints in and outside the city.

Just to get into my hotel, guards checked the car inside and out and underneath with a mirror. Inside the gate they passed my bags through an airport scanner. To go into the actual hotel, I had to go through a metal detector and a pat down. Then I was in this wonderful, Western-style hotel. I had wireless Internet, all the modern conveniences, excellent food. I was surprised.

The money that has poured into Kurdistan because of oil and gas is astonishing. They call it Little Dubai. Everywhere we looked, we saw massive infrastructure projects. Major companies are building there.Exxon Mobil Corp. (XOM:NYSE) is building a multi-story headquarters there. Marriott had a gigantic new hotel project there. Hilton has two properties going in. All the oil service companies are there. I visited the Family Mall and short of the metal detector to get inside, you might as well be in Cincinnati. I felt like I could have been in the US.

TER: Is there a premium price for doing business there?

MB: You do have to pay a price for security. Inside the city, it’s very safe. Outside the city, it’s a little different. I didn’t know what to expect, so I hired a security team. Each car came with two guards armed with AK-47s. That may have been overkill for some areas. And some places I wanted to go, like Kirkuk, they said it wasn’t safe even with security.

That added security has to impact the bottom line for companies to work there. For example, a typical well pad in Texas includes a trailer and a guard to keep wanderers out. But in Iraq, you build a compound and employ armed guards. Plus, the stakes are also higher in the Middle East because there is a lot more oil on each site. A well drilled on one of these Iraqi fields flowed 42 thousand barrels a day (42 Mbbl/d). Compared to 300 barrels per day (bbl/d), which is the typical output of a Texas Eagle Ford well, at $100/barrel (bbl)—that’s $4.2 million (4.2M) worth of oil every day.

TER: Is production back to the level it was before the 2003 invasion?

MB: No, and progress is slow. When Chevron Corp. (CVX:NYSE) and Exxon Mobil came in to southern Iraq to help bring the giant oil fields back online for Baghdad, they found navigating the red tape was impossible. There is also a lot of friction between the Iraqi Arabs and the Kurds so getting the oil out of Kurdistan is a challenge.

source: Wikipedia Commons

It looks like there is an agreement now to ship it out through Turkey, but it is a political balancing act. I believe we’re going to see a lot of oil coming out through Turkey within the next six years. The plan is to have 2 million barrels oil per day (MMbbl/d) going from Kurdistan out through Turkey by 2019.

TER: Is it mainly the juniors that are working on these projects or is this a job for the majors? Who’s actually taking advantage of the opportunities there?

MB: The juniors were the first movers. This area opened up not long after the war ended. A couple of Canadians led the way, ShaMaran Petroleum (SNM:TSX), WesternZagros Resources Ltd. (WZR:TSX.V) and Heritage Oil Corp. (HOC:TSX; HOIL:LSE).

Those companies made the initial discoveries. The problem is that a discovery is a science project until you can actually get the stuff to market. That’s been the hard part. In fact, one of the fields in operation now uses 700 trucks/day because there’s currently no pipeline.

The majors have started to quietly move in. There has been a lot of resistance and some false promises from Baghdad. Chevron and Total S.A. (TOT:NYSE) are in Kurdistan now with all the other big companies. The attraction for the majors is that this is a part of the world where you can make a discovery that can materially replace reserves for even the biggest companies.

The attraction for the Kurds is that the major oil companies will develop these fields the best. They have experience in the region; they know how to get the job done and they have clout. The little guys may be technically solid, but it’s going to take more than solid technique here to get all this stuff done.

So the answer is both. The juniors are in there now. The majors are moving in, and the majors are probably going to consolidate this area within the next two years.

TER: I know you visited some juniors. What’s an example of a junior that’s operating in the area?

MB: WesternZagros has a couple of big exploration blocks in the Kurdamir region of Kurdistan. I had a chance to meet with their geologists and members of the team. These people are well informed and technically savvy.

They put together a great information session, which they allowed me to attend. The lead lecture was provided by an energy analyst who worked in the Bush White House and was a diplomat prior to jumping over to the private sector and working for the Kurds. He presented an excellent summary of the many influences affecting the oil and gas industry in Kurdistan.

I was very impressed by WesternZagros. The company is educated on the region, which is critical to success. Companies have to be sensitive to the religious and political differences between the Kurds and the Arabs. The two groups are distinctly different. The Kurdish population is split and isolated due to the arbitrary boundaries drawn after World War II. These boundaries left isolated pockets of Kurds separated in three different countries.

TER: Understanding that balancing act is probably key for WesternZagros to be able to operate successfully in the area.

MB: Absolutely. And it’s important for WesternZagros’ investors to understand, too. Investors boarded a bus—not an armored bus because this area really is very civilized—and went to look at the property for themselves. WesternZagros’ leases are in the southeast part of Kurdistan, on trend with the giant Kirkuk oil field, which up until the discovery of Ghawar in Saudi Arabia, was the largest in the world. The oil is lighter and sweeter, which makes it more valuable.

The company has two production sharing contracts that are about 500,000 acres. It was the fourth international company to come into Kurdistan, so this company was an early mover. The company is fairly small. It has almost 5 billion barrels oil equivalent (Bboe) of prospective oil. It’s an interesting little play. When the rollup happens, WesternZagros will be included in that group, absolutely.

TER: If Iraq and Iran increase production in 2014, what impact could that have on the Organization of the Petroleum Exporting Countries (OPEC) and oil prices?

MB: OPEC has decided it is going to hold total production steady, so it won’t have a big impact on oil prices, but everyone else in OPEC has to produce less oil to do that and accommodate a new stream of 1 MMbbl/d. The one good thing for OPEC members is that Libya is still offline and probably not coming back for a long time. That means there will be room to accommodate more crude oil.

What will probably happen is that OPEC members will cheat, so they’ll have their quota and some extra tankers will fill up “accidentally.” We may see more oil on the market than the official totals. We’ll have to wait and see if the demand can sop up that leakage.

The U.S. is importing a lot less oil from OPEC, but the majority of OPEC’s oil was going to Asia anyway. So the big question will be: What’s going to happen to China’s demand? All indications are that the Chinese are in love with automobiles, which means the demand for oil will be there. We shouldn’t see too much of a decline in oil prices.

TER: Let’s switch to North America, where the controversy is about fracking. Some communities have proposed bans, including Colorado, where you visited recently. As a trained geologist, please give us your perspective on the safety profile for fracking.

MB: Fracking is only controversial because people don’t understand it. It’s been completely misrepresented. Fracking is not new. We’ve been fracturing rocks in oil wells since the 1940s. Back then, they used “torpedoes”—little metal gizmos filled with nitroglycerin they dropped down vertical oil wells and then ran like crazy. It would hit the bottom and blow up. We have been trying to crack rocks to release oil for 70 years.

The true revolution isn’t due to fracking, but rather to technology.

The computer revolution that allowed us to have cellphones that are more powerful than desktops we had 10 years ago also had a dramatic affect on oil exploration. It allows us to drill a mile and a half down and a mile and a half sideways and end up at a spot the size of a coffee can. You can pick your point now. That’s tremendous. We could never do that before.

Shale beds are the source of the all the oil we have found so far. It is like a carpet soaked full of oil and gas. Drilling conventional oil fields is simply tapping the lucky spots in the rock. Places that happen to trap the oil as it moved out of the shale. Thanks to the computer revolution, we can move from trapped oil to the source of the oil itself.

There is still a massive amount of oil and gas in the source rocks—the shale. However, the layers are thin, relatively speaking, so you have to be precise. Our ability to crack these rocks in very precise increments and produce them unlocked the potential we are benefitting from today.

Fracking is the one component of the shale revolution that people are afraid of. And they shouldn’t be afraid. The techniques are safe, when done correctly.

We don’t use nitroglycerine anymore. Now we typically use a combination of water and guar gum, a food additive. It is very safe. The wells that are tapping shale are not near drinking water aquifers, in fact they are about a mile below the aquifers, for the most part. Some are deeper.

Simple economics (water seeping into a well would make pumping too expensive) and strict laws ensure fracking will not mix petroleum with water sources. In addition to distance, safety precautions include casing the wells with solid steel tubes to prevent anything inside the well from getting out. If there is an accident, it is due to human error, not fracking. If you don’t cement the casing in right, or you damage the casing and don’t fix it, or you spill frack water into a creek—those things cause problems.

There are also laws and safety precautions around how the fracking water is treated once it is pumped out. If that spills, it’s no different from a gas station, it can leak dangerous chemicals into the ground. That is why there is an entire industry built around cleaning up spills.

At the heart of the “fracking controversy” is a large part of the population that would like renewable energy to be the only source of energy in the U.S. They want to make biofuels. They want to use wind and solar energy, and that’s it.

In a period when we believed that oil supplies were running out and natural gas supplies were running out, there was a lot of political clout thrown at alternative energy as a national security issue. We had to import our oil from OPEC, and natural gas from Qatar, and it was scary. It was going to be expensive, and we were going to be beholden to foreign governments, and it was just a terrible, awful, scary thing.

Now, instead of buying natural gas from Qatar for $14/thousand cubic feet (Mcf), it is available domestically for $1.80/Mcf because there’s so much of it. In fact, we stopped drilling in lots of places because economically it didn’t make sense. Cheap natural gas kills the ability of renewable energy to compete.

It can work, but we’re going to pay double or triple our current electric bills. The alternative energy faction doesn’t want cheap hydrocarbons to continue to produce electricity because it hurts their cause, but it helps electricity users, private citizens and businesses.

TER: We’ve heard about problems with faster-than-expected decline rates in some shale wells. Can you explain how shale well development and life cycle is different from those of conventional wells?

MB: There is a big decline rate. There absolutely is. Initial production will be the most oil or gas produced from a shale well in its lifetime. It’s a pretty exponential decline, and then it flattens out. The thing that we don’t have good data on right now is how long these wells will last because we just haven’t been doing it long enough.

The oil supply in the shale wells is different from the oil in a conventional well. Conventional wells tap a reservoir. You can think of it like a glass of iced tea, where the tea moves around the ice cubes. A conventional well is like putting a straw in and sucking the iced tea out. If you put two straws in it will lower the iced tea in the glass a lot faster.

With a shale well, you aren’t dealing with a reservoir. The reason we have to crack the rocks is that the shale is a dense rock saturated with oil. Each shale well is its own glass of iced tea. That means you can put shale wells close together and they don’t sip from the same glass. That means the volume of oil you can get out of a shale layer is much larger than you would get out of a conventional oil field.

We’re seeing that with the Bakken. The Bakken is the big giant oil shale up in North Dakota that no one believed would ever produce oil. The original by the U.S. Geological Survey (USGS) estimation was for 151 MMbbl oil total. They were so wrong. The production rates just keep going up. Since 2008, the Bakken has produced 450 MMbbl oil. That’s three times the initial estimate.

It defies all the arguments that rapid declines in shale wells are going to bust this trend. I look at this and I see the innovation equivalent of the Internet for energy. Cheap energy is the best possible thing that ever happened to North America and to the U.S. People need to understand just how transformative cheap energy really is to their lives.

TER: Also, not all shale is alike. How much of the success of a well is based on geology and the type of oil and gas in the resource versus location, the ability to move that resource to consumers? How much is just good management?

MB: You hit the nail on the head. You need several things. You need the right rocks. There have been some colossal failures in shale plays. There have been some false starts. SandRidge Energy Inc. (SD:NYSE) raised a lot of money to develop the Mississippian (which is actually in Oklahoma). And it made promises about production rates, but the rocks it drilled initially turned out to be better than the rest of the trend play. So the company couldn’t fulfill the promises because there just wasn’t enough oil. The geologists didn’t have the technical understanding of the rocks they should have had before they borrowed all that money. SandRidge imploded and the stock was demolished. Having the right rocks is critical.

Takeaway capacity is also critical. There was a time when companies were sitting on hundreds of wells that had been drilled but not completed because they didn’t have pipeline capacity to get the stuff out. I’m sure you’ve heard what’s happening up in the Bakken Formation where they’re hauling oil by rail.

These days, it’s as hard politically to get a pipeline permit as it is to actually build one. There is the whole Not In My Backyard (NIMBY) factor. People like the idea of domestic oil production, but they don’t want an oil pipeline anywhere near their houses. So they’re putting it on railcar. It’s twice as expensive to move oil by rail as it is to put it in a pipeline and nowhere near as safe. But it is expedient and sometimes the only option. I think we’re going to see a lot more rail because you just can’t get pipelines permitted.

TER: Is that more of a problem in Canada than in the Midwest?

MB: I think it’s equal. I think there’s going to be more political pressure for Canada to build some big pipelines. Historically, all of Canada’s pipelines pointed south because the world’s largest consumer of oil and gas is in the US.

Now the U.S. is importing less because it produces its own higher-quality crude. That makes the new market for Canada’s oil either Europe or Asia. However, it has to build a pipeline across the country or get the Keystone Pipeline through the middle of the U.S. to the ports in Houston.

It is a no-brainer in my opinion. We should let Canadian crude oil come to our ports. Cheap energy could be an enormous boost for both our economies. We’re already seeing it. BMW relocated a plant to the U.S. An Egyptian fertilizer company is building a plant in Iowa. A gas-to-liquids plant is going to Louisiana in a parish where the unemployment rate was ridiculous. This is the sort of thing that can happen when you have cheap, abundant energy. I’m a huge fan.

But because it is so difficult to get oil to market, places in the Bakken are selling crude at a discount to West Texas Intermediate (WTI). Canada’s crude oil is trading at massive discounts. It’s hard for oil companies to make money when they can’t get it to the markets that have the demand.

TER: Let’s talk about some of these places. According to the Fraser Report, nine of the 10 best places to invest in oil and gas exploration worldwide are in North America, the top three being Oklahoma, Mississippi and Saskatchewan. I understand that the Tuscaloosa Marine Shale in Mississippi and Alabama is one of your favorites. How does it compare with the other shale resources?

MB: It’s new, so it’s really an unknown commodity right now. What we’ve seen in each of the shale plays is that the first-moving companies figure out the peculiar combination of the best rocks and the best development techniques. For example, Continental Resources Inc. (CLR:NYSE) is the Bakken company. It has been one of the most amazing success stories in the shale plays, period. Coming out of 2009, Continental was a $14 stock. It touched $121/share in October of this year because of production growth out of the Bakken shale. The company has done the work and found the best way to drill the Bakken, and the numbers prove it. Continental has a tremendous story. Several other companies have done the same thing in their own particular shales.

Sanchez Energy Corp. (SN:NYSE) is another great example. Sanchez ownership has been active in the Eagle Ford and now it is bringing that expertise to the Tuscaloosa Marine Shale in Mississippi and Louisiana. The Tuscaloosa Marine Shale is an analog to the Eagle Ford. When the sea level was higher, it was part of the basin. That means it has great basics—the right rocks, with the right combination of organic carbon and thickness. It should be an ideal place to use understanding of shale to develop a new region.

A few small companies operate there. Lots of infrastructure is already in place. I think it will do very well.

TER: Compared to Continental, does a company like Sanchez have more upward room to grow?

MB: Yes, it’s a scale thing. Continental is a $19 billion (B) company. It takes a lot of new oil production to generate material growth for Continental. Sanchez, on the other hand, is fairly small. It just had its initial public offering. It’s a $1B company, so it has lots of room to run. It doesn’t take anywhere near as much oil production for a company like Sanchez to grow. Companies like Sanchez that are hungry, smart and run by great operators will really benefit as production increases.

TER: You mentioned the Eagle Ford Shale. I’ve heard that production targets estimate tripling production there in 20 years. Who is going to be the beneficiary of all of that growth?

MB: A lot of companies are down there nowadays. When Eagle Ford initially opened up, nobody thought it extended more than a couple of counties in southeastern Texas. Now, it extends under the border of Mexico and it’s moving north toward Houston. This play just continues to get bigger. The problem is none of the companies there are cheap anymore. I do like the companies that are going to be transporting that oil out of the Eagle Ford, the pipeline plays. There are some interesting plays in logistics.

TER: Any other insights for investors preparing for 2014?

MB: I’m going to give you an insider tip. The secret to investing in commodities is to look at what people hate. Go to the places where people think you are nuts.

For instance, I like coal because it’s cheap. Coal mines are going out of business left and right, but there are companies in the space making a lot of money. I told my readers to buy Peabody Energy Corp. (BTU:NYSE). Peabody is basically the Exxon Mobil of the coal space. It has operations in the least expensive district in the U.S., the Powder River basin. It owns the world’s largest coal mine and it produces coal in Australia that gets sent to Asia.

In the U.S., coal was just destroyed by low natural gas prices. But in the rest of the world, coal is in high demand. Japan is shifting to coal from nuclear. Germany is doing the same. China burns an enormous amount of coal. The Chinese government is shutting down several coal mines a week because they aren’t safe.

That means investors who are willing to hold their nose and invest where other people aren’t investing can buy the biggest player in the space for really cheap. Then you can send me a thank you note next year.

TER: Thank you.

Matt Badiali is the editor of the S&A Resource Report, a monthly investment advisory that focuses on natural resources, including silver, uranium, copper, natural gas, oil, water and gold. He is a regular contributor to Growth Stock Wire, a free pre-market briefing on the day’s most profitable trading opportunities. Badiali has experience as a hydrologist, geologist and consultant to the oil industry. He holds a Master’s degree in geology from Florida Atlantic University.

Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.


1) JT Long conducted this interview for The Energy Report and provides services to The Energy Reportas an employee. She or her family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Energy Report:WesternZagros. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Matt Badiali: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.

5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.

6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise – The Energy Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Energy Report. These logos are trademarks and are the property of the individual companies.

101 Second St., Suite 110

Petaluma, CA 94952

Tel.: (707) 981-8204

Fax: (707) 981-8998

Email: [email protected]