BPT and Gabriel Daoud Jr.

I’ve commenced the Royalty Trust Research tonight and noticed a strange move in the BP Prudhoe Bay Royalty Trust (BPT) today.

Such a strange move, that I’m putting $3,000 in BPT immediately at market open.

This royalty trust dropped 10% today on news that JPMorgan Chase analysts have set a target price of $40/share. But looking at the background of the analyst, Gabriel Daoud Jr., making such a stunningly low valuation reveals he only has a few years experience in Oil & Gas research.

 

Gabriel Daoud Jr

 

I’m amazed how someone with 5 years experience can significantly move the market. I’m also amazed Chase would allow someone with 5 years experience to make market moving reports like this.

I wouldn’t be surprised if there’s more going on behind closed doors…hire someone to make irrational comments on a stock, wait for the swift drop in price, and a more attractive buy-in price is created…or simply make money exercising options as the price drops.

The price movement of BPT is directly correlated with WTI. With oil prices significantly down all week, I see a temporary turnaround the next few days. I’d like to keep at least $2,000 in BPT as part of the long term royalty trust holding strategy I’ll be starting soon.

Sell: GE at $25.84

Profit: $63.69
2.1% return    Sold 120 shares of General Electric (GE) at $25.84/share.

The market has hit another record high and GE moved up significantly today. I grabbed the last dividend while holding 245 shares and now it’s time to take some money out of GE temporarily. The unrealized gain in remaining shares I have are currently at $400.
S&P500 February 2015Oil is up today after hitting near $49/barrel yesterday.
Crude Oil February 25 2015

Sell: RAD at $8.34

Profit: $2,202.67
19% return    Sold 1670 shares of Rite Aid Corp. (RAD) at $8.34/share.

RiteAid_EnvisionRX_Purchase

RAD is up 10% this morning after announcing the $2 billion purchase of EnvisionRX, a pharmacy management company. I sold today so I could hold onto the new $2,000 record for the biggest gain on a stock in the ScottStocks portfolio, but I’ll be back in RAD soon. The company is continuing to move forward at a good pace; keeping shareholders happy.

Oil prices are down again today, it’s almost time to buy…
WTI_Crude_Oil_Prices_February_11_2015

The New Tax: Shared Responsibility Payment

I took it upon myself to sort through the new 1040 requirements for the Affordable Care Act; commonly referred to as Obamacare. Scary, I know.
With Jonathan Gruber stating Congress only passed Obamacare because of its ‘lack of transparency‘, crafty politicians have kept themselves employed by overhauling the healthcare system and further complicating my 1040 filing.

Fortunately, I already have healthcare coverage and simply check the ‘Full-year coverage’ box on line 61 and I’m done. If you’re covered and your accountant is charging $100 extra to check this new healthcare box, find a new accountant!

For those not covered as of January 1, 2014 , there are a ‘few’ exemptions to keep you from making the ‘shared responsibility payment’ for not having healthcare coverage:

  • Your annual health insurance premiums are more than 8% of your household income (so if you make less than ~$22,500/year, you’re probably exempt).
  • You have a gap in coverage for less than 3 consecutive months.
  • Other various reasons you could be exempt: member of Indian Tribe,  member of a religious sect, in prison, you’re on a nice long vacation out of the country, you’re homeless, you don’t pay your electricity/water bill, your wife/husband is violent, your family member recently died, your house burns to the ground or is flooded, you filed bankruptcy recently. You can read the ‘hardship exemptions’ here.

Chief_Justice_Roberts

If you’re not exempt, you’re fined. Or in Chief Justice Roberts words, taxed:

“The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”

I’d say it is Roberts’ role to protect taxpayers from scheming politicians. He was the deciding factor in the 5-4 vote to pass Obamacare. So Roberts can be blamed for the thousands of new IRS agents hired to force the Obamacare tax upon us.

The sly politicians aren’t calling it a tax or penalty though; it’s a “shared responsibility payment“. This payment is either a percentage of your income or flat dollar amount, whichever is greater. For each month you aren’t covered, you pay 1/12th of the annual payment. This annual payment is either 1% of your income or $95/per adult and $47.50/per child (with a max payment of $285). If your income is $1,000,000 you don’t pay a $10,000(1%) fine, the payment is capped at the average cost for a healthcare plan, which is ~$150/month. So the max fine for an individual would be ~$1,800.

The IRS has some great examples to show you how to pay your fine/tax/shared responsibility payment
Shared_Responsibility_Payment_Examples

If you want to read more about exemptions, visit the IRS website here.
If you want to read more about calculating your tax/fine, visit this IRS link.

Good luck figuring out the rest of your 1040!

Buy: LUV at $44

 southwestairlines

Purchased 115 shares of Southwest Airlines Co. (LUV) at $44.00/share. Total cost: $5,067.92.

I had the opportunity to talk with a fellow trader who watches the market daily. She has made a significant amount of money holding on to Southwest Airlines the past couple years and suggested I buy some LUV. She mentioned analysts have a target price set at $60/share. Looking at the next couple weeks, I see oil prices going down, which should boost airline stocks. If Southwest stays above $44, I plan on holding LUV long term.

I was scrambling to buy this morning and messed up the market order to purchase shares at $43.80. I missed out on 20 cents, but I’m looking forward to seeing where Southwest Airlines takes me in the future.

WTI is down this morning…
Crude_Oil_February_2015

Keep Calm and Continue Watching WTI

I had to hold back from buying in to rising oil prices currently at $52/barrel this morning.
Crude_Oil_Prices_February_2015I planned on buying energy stocks when prices hit $45/barrel and I’m sticking with that price point(or near it). To reassure myself that I wasn’t missing the bottoming out of oil, I took a look at the last time prices were in free-fall. While supply & demand is the driving force for today’s oil prices, the 2008 housing bubble shows a good example of how long oil remained at its low.
Housing_Bubble_WTI_PricesWithin 1 month, the price goes from $30/barrel to nearly $50; then drops back to $35/barrel. The following month shows another rise and fall back to $35/barrel.

For a broader view of 2008 West Texas Intermediate prices…
Housing_Bubble_WTI_Prices_2008
And for a look at today’s mini oil glut…
Housing_Bubble_WTI_Prices_2014

This afternoon crude oil prices have continued to rise. Perhaps I’ve missed the lowest price this year…I might need to set my buy-in price at $48/barrel.
Crude_Oil_Prices_February_2015_afternoon

GE and The Current Price of Oil

GE announces Q4 results tomorrow morning…and I’m a little worried.

The company has been transitioning from a focus on Finance (think: GE Capital) to Infrastructure; which includes GE Oil & Gas. With the market’s recent focus on oil prices, I believe the Oil & Gas platform will be a main focus for investors tomorrow. Even if they haven’t been directly affected by falling oil prices yet, contract backlog is sure to be lower than it was last quarter and future outlook for Oil & Gas will be grim.

GE

Just a few months ago many people thought we hit bottom at $80/barrel; now we’re close to $45/barrel. How much lower will we go? Rig counts are down and low gas prices can already be seen at the pump. With gas prices this low, finding a cheap plane ticket and taking a nice vacation sounds like a great plan right now. Filling up my tank and going on a long road trip would also be a brilliant idea. More consumers will be jumping on the “gas is cheap, why not” mentality. I don’t think we’ve hit the bottom yet, but we’re getting close. A significant shift in supply & demand is nearing as the U.S. produces less oil and consumers use more gas (70% of oil is used for transportation). The U.S. doubling production since 2012 and increasing the world oil supply is the only reason oil prices are low today.

US_oil_productionYou can play with the government oil charts here.

OPEC has assured us they won’t cut production; forcing the U.S. to abandon its precious domestic shale plays. This display of power from foreign countries is only made possible by the easy access to oil under their soil. It costs much more to frack oil out of American shale than to drill for it in the Middle East.
Let’s take a look at some average breakeven costs:

Saudi Arabia: $5 to $10 per barrel

Utica Shale (West Virginia, Ohio, Pennsylvania, New York): 
$75 per barrel
Tuscaloosa Marine Shale (Louisiana & Mississippi):
$70 to $90 per barrel
Niobrara Chalk (Colorado , Kansas, Wyoming): $60 to $70 per barrel
Bakken Shale (North Dakota, Montana, Canada): $70 per barrel
Mississippian Lime (Oklahoma & Kansas): $75 per barrel
Anadarko Basin (Texas to Kansas): $60 to $80 per barrel
Eagle Ford Shale (Texas): $50 to $60 per barrel

The oil shale economics clearly doesn’t work with prices at $45/barrel, hence the swift drop in Baker Hughes’ rig count:
Baker Hughes Rig CountI’ve been considering dollar-cost averaging into royalty trusts as oil moves lower.
My guess for the bottom: $35 to $45 per barrel.
If oil stays steadily below $45, I’m buying in.

Sell: S at $4.20

Loss: $134.84   2.7% loss    Sold 1162 shares of Sprint (S) at $4.20/share.

I decided to pull money out of Sprint (its made me nervous since the day I bought it) and focus on moving in to royalty trusts. The Secretary General of OPEC has the energy markets climbing today after suggesting oil prices will remain low for 1 more month before rebounding. I was planning on buying in to energy in a month, so he might be on to something.

The last few seconds of the interview are the most important…