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Newsletter week 46

Long term sustainable price of crude

In the short run, as we detailed in our previous letter, it is primarily
short term supply and demand factors that set the price of oil. With
OPEC having increased its production and US production remaining
high, it is unlikely that oil will rise materially (above 80 dollars per
barrel) in the short term. However, in the long run, it is very likely
that oil will trade materially higher than today, because of several
The most important factor regards the marginal cost of producing
oil globally. FPA Capital Fund defined the marginal cost of production as the total cost to find and extract the last barrel of oil from
the ground to satisfy the demand for that last barrel. FPA Capital
Fund believes that the marginal cost of producing crude is around
80 dollars per barrel. The exact cost is hard to pinpoint and opinions
differ on the matter, but it is probable that it is substantially higher
than today.
The second factor is that crude is a depleting resource. In 2008 the
global decline rate in crude production was estimated at 4,5-6,7%.
The decline rate seems minor, but small changes in supply and de-

mand can create huge fluctuations in the price of crude. To uphold

the current production rate, crude exploration and production companies have counteracted the decline rate of their oil wells by developing new resources. Instead of investing in new resources, E&P
companies have opted to drastically cut their capex (capital expenditure) and in the fourth quarter of 2014, global upstream capex fell
by 12%. Baker Hughes recently reported that there were 787 active
US rigs last month, which can be compared to 1929 rigs a year ago.
It is likely that the marginal cost of producing crude (80 dollars) will
put unprofitable companies out of business and put a floor under
long term crude prices - unless the cost of delivering that last barrel
changes. The depletion of oil wells and the collapse in capex will decrease supply in the long run and these factors combined will make
crude prices increase to sustainable levels, absent a material decrease
in demand.

LINC is kindly sponsored by

Sweden at the mercy of global growth.
The position for Swedish export is twofold. On one hand, the export will grow
as a result of better international economic conditions. On the other hand,
Swedish competitiveness has deteriorated over time and Sweden is losing
market share according to the Swedish
Enterprises economic forecast. The
Swedish economy is now recovering
from a prolonged recession. Growth is
expected to be 3.3 and 3.2 percent in
2015 and 2016. For the most part, development is still driven by domestic
demand owing to the highly expansionary monetary policy throughout the
forecast period. Another contributing
factor is that the growth in Europe and
the US are expected to increase, which
benefits export driven economies like
Sweden. However, there are some concerns about the recovery. There is a
clear downside risk for emerging economies. In addition, companies in the
entrepreneurial panel of Swedish Enterprise has become increasingly negative since the labor market conditions
influence households to save more money. The industrial unions new requirement of 2.8 percent wage increase
and one-year contracts would hit the
competitiveness and lead to higher
unemployment and exclusion instead
of more jobs. What we need is a significant slowdown of wage growth com-

pared with the agreement that we are

still inside, and industrial unions requirement means no downshift said Peter Jeppsson, Vice President of Swedish
Enterprise. As a result of an attenuation the competitiveness of enterprises
would strengthen and allow for more
investments in business.
Positive U.S Job Growth Bolster Global
U.S. Stocks ended little changed on Friday, with a rise in financials countered
by a slide in utilities and other sectors.
The strong U.S. jobs report on Friday is
increasing the probability that FED will
soon raise interest rates. The three major American indexes posted a positive
week for the sixth week in a row. The
rise in the financial sector was fundamentally driven by the Jobs report, as
banks tend to benefit from ginger borrowing rates. JPMorgan, Bank of American and Citigroup each climbed over
3 per cent. The rate- sensitive utilities
sector took a major hit and dropped
3.6 per cent. European stock markets
reacted as Wall Street and gained from
the strong U.S. Job report. Especially
export-oriented stocks lead the way as
the strong report lifted the dollar. The
export-heavy German DAX rose 0.765
per cent and thereby outperforming
the FTSEurofirst 300, which was up 0.15
per cent. Chinas stocks surged for the

third consecutive session on Friday.

The CSI300 index of the largest listed
companies in Shanghai and Shenzhen
rose 2.4 per cent and ended the week
up 7.3. The impressive gain this week is
explained by an upcoming trading connect scheme between Hong Kong and
Shenzhen stock markets that could potentially boost transaction volume for
stocks. Investor also inspired by comments from President Xi Jingping regarding economic growth and radical reforms in state-owned enterprises over
the next five years
Low demand for German industry makes its mark on industrial commodities.
Thursdays trade in the commodity
market was characterized by red numbers. Copper saw the sharpest decline,
falling by 2,4 per cent, making it the
biggest drop in six weeks for the red
metal. The drop was characterized by
newly released data from the German
manufacturing industry and its demand
for copper, or more correctly, lack thereof. The demand from the German
manufacturing industry is quite low
at the moment and this consequently
affects the commodity market. This situation isnt expected to change in the
coming six months, an opinion shared
by Bill O`Neill, partner at Logic Advisors. In an interview with Bloomberg
News, O`Neill claimed that there is a lot

of evidence that suggests that demand

will be kept low. American oil production remained stagnant at last weeks
high levels. According to Bloomberg
news, American oil storage increased
for the sixth week in row. This increase
of excess supply in combination with a
strong dollar, are the two main reasons
oil traded lower this week, resulting in
a 0,7 per cent drop for the Brent oil and
a 2,3 per cent drop in the WTI- oil respectively.
Bonds and Forex
Strong jobs number might trigger the
Fed to hike
After two months of slow job growth
and modest inflation expectations for
the U.S economy, a December rate hike
was looking less and less likely. Then
came Friday, and the report of better
than expected October job figures. As
reported by The Guardian, the figures
smashed expectations. 271,000 new
jobs were created in October, 80,000
more than expected. Notable was the
2.4 percent increase in wage growth/
year, up from 2.2 percent last month.
With that, the likelihood of a December
lift-off has increased significantly. The
futures market is now signalling a 70%
chance of a hike in December. The dollar rose on the report, as one would expect, leaving the EUR/USD below $1.08
and the USD/YEN at 123. The yield of
the U.S ten year bond rose all week and
finished the week after a strong Friday,

at 2.33%. Although far from a mainstream currency, it looks as if Bitcoin may

be going through a renaissance. After
a long uneventful period, the price of
the digital asset has almost doubled in
the last few weeks on the back of high
trading volume. This is after an EU-tax
ruling made it free from VAT-tax, coupled by positive media-coverage in major media outlets including The Economists. Some have also speculated that
Chinese investors are using Bitcoin as a
way to circumvent Chinas capital controls, with costumers on Chinese exchanges consistently and willingly paying a premium during the rally.
Japan: Foreign Exchange Reserves OCT
Germany: Balance of Trade SEP
Greece: Industrial Production YoY SEP
Japan: Bank Lending YoY NOV
Euro Area: Ecofin Meeting
China: Inflation Rate YoY OCT and PPI
Norway: Core Inflation Rate MoM OCT
China: Fixed Asset Investment YoY SEP,
Industrial Production YoY OCT and Retail Sales YoY OCT
Great Britain: Unemployment Rate SEP
Japan: Foreign Bond Investment 7/NOV
and Stock Investment by Foreigners 7/

Germany: Inflation Rate YoY Final OCT

Euro Area: Industrial Production YoY
Sweden: Inflation Rate YoY OCT
United States: Fed Yellen Speech
United States: Fed Fischer Speech
Euro Area: Balance of Trade SEP, GDP
Growth Rate QoQ Flash Q3 and GDP
Growth Rate YoY Flash Q3
United States: Core PPI YoY OCT, Retail
Sales YoY OCT and Business Inventories
SPOT PRICES and one week change
1526,49 +1,80%
5 147,12 +1,86%
S&P 500
2 099,20 +0,96%
DAX 30
10 988,03 +1,27%
19 265,60 +0,95%
22 867,33 +1,00%
Gold spot
1087,85 -4,73%
Crude Oil (Brent) 48,21 -1,79%
8,72 +2,25%
1,07 -2,35%
Tomas Nyln
David Ingman
Carl Dalerstedt
Mark Thiongo
Matilda Andersson
Emma Egnell
Olof Svanemur
Carl Brecht
Daniel Rosengren

Rolln and Schrling doubles down on

Next Biometrics Group
Greenbridge Partners, the investment
fund owned by Hexagon CEO Ola Rolln
and Melker Schrling from Melker
Schrling AB, has increased their stake
in Next Biometrics. Their additional
purchase of 950,000
stocks comes just weeks after their initial investment. Greenbridge now owns
20 percent of the Norwegian sensor
company, and since their initial investment the stock is up by 180 percent.
Since both Ola and Melker have incredible track records, expectations are now
even higher on the sensor company.
Minesto sees potential for its alternative energy source
In the wake of Minestos IPO on November 9, CEO Anders Jansson is optimistic about the future of marine energy.
Marine power could be an important
future export for the Swedish Economy according to Jansson who believes
the upcoming Paris climate meeting
on November 30 will result in a new
climate deal which will utilize marine
energy. Sweden currently has 53 msek
budgeted for the renewable energy
source between 2015-2018. Compared
to a country like Wales which is spending 20 times that amount for a population of 3 million, Anders Jansson sees
a huge growth potential in Sweden for
the energy source.

Anoto issues equity to acquire competitor

Anoto Group AB is issuing a rights equity offerings of 74 MSEK to Carnegie, per
a special agreement to finance their
acquisition of one of its main competitors, Livescribe. The offering is set to
a price of 1,31 SEK per share and will
have a dilutive effect of approximately
5,9 percent on the total share value.
Fingerprint announcement spells trouble for Precise
Precise Biometrics took a major hit
last week when Fingerprint Cards announced that they are trying to create
their own security-algorithms. According to Precise CEO Hkan Persson, this
was something that they were already
aware of. Persson doesnt try to hide
the fact that this has major implications for the company. Fingerprint is a
very important customer for us at the
moment, but we have contracts with
other companies as well, including Cypress, JP Sensor and Synaptics. Precise
stock sold off on the news, but this was
probably not the last thing we heard
about Fingerprints algorithms, putting
a damper on sentiment for Precise in
the near future.

Heliospectra receives their first order

on their newly launched product
Heliospectra is a manufacturer of grow
lights for indoor growing of plants. Last
week it received its first order on the
Heliospectra Light bar V101. The product launched in August, is a LED grow
light, optimized for horticulture. The
order comes from a major European
greenhouse grower and is worth 1.8
MSEK. The demand for LED lights for
horticulture is expected to grow between 20 and 30 percent until the year
2020 according to a report by global
market research and consulting firm,
Thomas Bengtsson increases significantly his ownership in Cleantech Invest
Thomas Bengtsson the Vice Chairman
of the board of directors of Cleantech
Invest has acquired 428 144 Cleantech
Invest A-shares from Incap Oyj. The
acquired shares represent over 2%
of Cleantech Invest Oyj outstanding
shares. After this share purchase Thomas Bengtsson will be the companys 9:th
largest shareholder with 2.5% ownership.

OMXS30 has been in a downward secondary trend lately.

There are good signs at the present that the secondary
trend may have turn to a positive trend again. The index
has formed an inverted head and shoulder formation,
combined with a strong increase in MACD from very low
levels. This is a sign that optimism its on the way back to
the market again. We see good opportunities for OMXS30
to test the resistance at 1600 in the near future. We recommend a Stop loss in the short run should be placed
just below 1500 and in the longer term around 1400. We
are technically positive to OMXS30.

Invisio Communications has been very strong lately.

The trend is steeply upward and the trend channel looks
strong. The ADX indicator confirms this as well. We have
also seen an increase in volume combined with the increase in the stock price which which provide strength
to the new valuation. We have seen a smaller rebound
from 67.8 SEK. We have got a hammer formation in Candlesticks while the share price is approaching the 20 days
moving average. Therefore, we consider it likely that the
stock may turn up again for another test of the resistance at 67.8 SEK. MACD remains strong but is approaching
its signal line and we should pay attention to a fall in the
stock if it breaks through. We recommend a stop loss
around 48 SEK. We are technically positive to Invisio Communications in the short and long term.

Nexam Chemical has previously been in an aggressive

downtrend. The stock formed a double bottom formation
with a preceded high volume breakout which indicates
that the buyers are back. It hit 14.6 SEK but could not go
further due to many considering the stock was expensive
at these levels. It currently trades in a tight uptrend. The
stock is currently oversold while the MACD line is closing
in on the signal line from beneath which is to be considered a strong buy-signal. A stop loss could be placed at
10.5 SEK where the 50-day moving average could provide
a strong support line. We are technically positive to the
stock in the short term as well as in the middle-long term.
In the long term, we are neutral to the stock since a new
primary trend has not been established yet.

NOTE was previously in a rather undramatic downtrend.

It went through the ceiling of the trend channel which indicated a less steep downtrend or a trend reversal. The
volume as well as the stock price went thereafter through
the roof which indicated that the buyers were back. The
sellers took over the stock once it hit levels above 12 SEK
which many consider being too expensive, and created a
double top formation with an accompanied high volume
outbreak. Since then the stock has gone back to its previous undramatic stock pattern. RSI shows that the stock
is somewhat overbought whilst the MACD line is close to
the signal line from above which could trigger a sell-signal. Stop loss could be placed below 9.65 SEK. In the short
term we are technically negative to the stock, in the middle-long and the long-term we are technically positive to
the stock.

Kabe was previously trading in an aggressive downtrend.

It went through the ceiling of the trend channel with accompanied high volume which signalized a trend reversal.
Since then the stock has been trading in a rectangle formation. The stock created a Marabozu candlestick recently
which is a bullish candlestick, with no tail on the downside or the upside showing that the buyers are extremely
aggressive. This led the stock going through the roof of
the rectangle formation. However, the subsequent volume
was very low which indicates a false breakout. The stock
has positive momentum but the RSI shows that the stock
is heavily overbought. A tight stop loss could be placed beneath the breakout level at 110 SEK which is now a strong
support line. We are somewhat negative to the stock in
the short term, positive in the middle-long term and technically negative in the long-term perspective.

Lammhults Design Group B has since January this year

been traded in a slightly downward trend. Both the RSI and
the MACD is rising which may help to reverse the long-term
trend to positive again. To confirm that the trend is positive again, we want to see the future stock prices above the
resistance at 42 SEK. When we check the candlesticks, we
can see that the buyers have taken back the command at
the downs and that buyers also are strong in upturns. This
shows strength in the stock and in particular to the support at 35 SEK. The volume has recently been rather low
this brings some weakness to the technical interpretation.
In the current situation we recommend a stop loss around
33 SEK. We are technically neutral in the short term and
and slightly negative in the long term.