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Kris Sayce’s Money Weekend Market Digest: 02 February 2013


Written on 02 February 2013 by MoneyMorning

Kris Sayce’s Money Weekend Market Digest: 02 February 2013

ENERGY


The shale gas boom has transformed the US economy. By 2030, integrated energy giant BP says the US will be energy independent and even a net exporter of energy.

But it’s not just the US where the shale story is taking off. We’ve followed the shale gas story on the Aussie market for the past two years in Australian Small-Cap Investigator. And the whole thing is now kicking off in earnest in the UK. In our Australian Small-Cap Investigator weekly update on Wednesday we referenced an article in the Register:


‘The government has given the go-ahead for further exploration of the UK’s shale gas reserves. Independent surveys suggest these reserves may yield more energy for the nation than North Sea oil.’

That’s a pretty big claim. But hold on there. Don’t write off North Sea oil just yet. PennEnergy reported this week:


‘Britain’s estimates of untapped resources in the North Sea have increased, leading to the approval of more offshore projects for 2013…

‘The source reported British Secretary of State for Energy and Climate Change, Ed Davey, announced the country could meet 70 percent of oil and gas demands until 2040 by exploring new offshore developments.’

Add together the resources from shale and North Sea oil and the UK could soon become energy independent again. So much for the claim that it will be an economic disaster if the UK leaves the European Union.

GOLD


It won’t surprise you to know that we work in an office full of gold bugs. Heck, we’re fond of gold too…although we don’t consider ourselves a gold bug.

Our old pal Dan Denning sent a chart around the office yesterday. It shows the ratio of gold to the S&P 500 index:

Source: StockCharts.com


With the recent stock rally and the steady gold price, the S&P 500 is now nearing a ratio of 1:1. The high gold price and low stocks means the ratio has been low since 2008. But is it possible that we’ll see a breakout? Dan has overlaid a 200-day moving average (blue line). To our eye it looks as though that line is about to turn upwards.

That could be good news for stocks. If investors believe the economic recovery has arrived it could serve to push stocks even higher while the gold price stays relatively flat or even falls.

TECHNOLOGY


Earlier this week we placed a link on our Google+ page to what we can only describe as an extraordinary story. Yes, we know, people bandy around the word ‘extraordinary’ too much these days. But, this really is extraordinary. Here’s a clip from the article in the Wall Street Journal:


‘Scientists have stored audio and text on fragments of DNA and then retrieved them with near-perfect fidelity – a technique that eventually may provide a way to handle the overwhelming data of the digital age.

‘The scientists encoded in DNA – the recipe of life – an audio clip of Martin Luther King Jr.’s “I have a Dream” speech, a photograph, a copy of Francis Crick and James Watson’s famous “double helix” scientific paper on DNA from 1953 and Shakespeare’s 154 sonnets. They later were able to retrieve them with 99.99% accuracy.’

You can read the whole article here.

Those two paragraphs don’t do this technology justice. It’s mind blowing to think of the possibilities. And if you think this is pie-in-the-sky stuff with no commercial purpose, the scientist in charge of the project says that using DNA to store data could be economically viable within 10 years.

HEALTH


Eat more wild fish.

Or, grab a handful of Astaxanthin. According to Silicon Republic, Astaxanthin ‘has an antioxidant effect of 550 times that of vitamin E.’

Astaxanthin occurs naturally in fish. It’s the element in wild fish that gives it the pinkish colour. However, due to fish farming where Astaxanthin is absent, humans don’t get the benefit of this natural antioxidant.

Irish company Algae Health has received €1 million from AB Seed Fund to finance a project to produce Astaxanthin for sale to the consumer market as a supplement.

The article states:


‘Algae Health was set up in late 2009 and, following three years of R&D, developed its proprietary cultivation technology (patent pending). This technology enables the optimal control of the cultivation conditions, maximising yield, and allowing the process to happen at a far lower cost than traditional methods.’

We don’t know for sure, but we assume this is similar to spirulina. On a recent episode of Doomsday Preppers, a prepper (someone preparing to survive a specific catastrophic event) was cultivating spirulina as an emergency food source.

However, according to Wikipedia:


‘The U.S. National Library of Medicine stated that spirulina was no better than milk or meat as a protein source, and was approximately 30 times more expensive per gram.’

Arguably, cultivating spirulina in fish tanks is less labour intensive than rearing cattle for meat and milk. And you only need a vial of spirulina in order to cultivate a new supply. That makes it easier for preppers to transport, too.

But anyway, it just goes to show you that there’s always a lot happening in the health industry. It’s not just about cancer cures and diabetes treatments. It’s also about alternative medicines and treatments. If scientists can get these to work they can have just as important an impact on someone’s life as the drugs created by the big pharmaceutical companies.

MINING


It still pays to be in mining.

According to Australian Mining:


‘Despite falling commodity prices wiping close to $1 billion from Gina Rinehart’s fortune, new estimates show the mining magnate easily remains Australia’s richest person.’

The Forbes rich list values Ms Rinehart’s wealth at $16 billion.

Meanwhile, even though Fortescue Metals [ASX: FMG] chairman Andrew Forrest’s wealth dropped $480 million last year, he still has $4.6 billion to his name.

But the mining industry hasn’t been kind to everyone. As Australian Mining reports:


‘Nathan Tinkler was one of the hardest hit, with his position falling off the rich-list entirely after coming in at number 26 in 2011.

‘In 2011 Tinkler’s fortune was estimated to be worth around $800 million, but he is now being pursued by a range of creditors who claim he owes around $700 million.’

The Nathan Tinkler story appears to be a classic example of why we advise investors against over-borrowing. Using leverage is great when the market is going your way; it can magnify your returns. But it’s not so great when the market turns against you.

Use leverage, but use it carefully.

Cheers,
Kris

From the Archives…

Why the News Could Get Worse for Apple Shareholders
25-01-2013 – Kris Sayce

How to Play the EU Referendum for Profit
24-01-2013 – Kris Sayce

Here’s Why I’m Proudly Bullish About China’s Economy
23-01-2013 – Dr. Alex Cowie

How to Find Stocks for Troubled Times: Keep Scalable Businesses in Mind
22-01-2013 – Nick Hubble

Why It’s Still Not time to Buy the Japanese Stock Market
21-01-2013 – Murray Dawes



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