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Royal Dutch Shell

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arbusers
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Re: Royal Dutch Shell

Wed Mar 25, 2020 3:42 pm

In my initial analysis of Royal Dutch Shell, I gave the reasons why someone should be a buyer. Who ever followed my advise enjoyed profits of approximately 30% within 2 days. Not bad I would say.
I suggested you keep the stock for a long period of time for a number of reasons.

In my today’s memo, I suggested you should now sell the shares. You might wonder what changed during these days?

Before anything else, I must stress that absolutely nobody knows what is going to happen with the disease or the economy. I m no exception. But what we could do, is calculate some risks and then see what is the risk/reward ratio. If we have a 60% chance to win, we bet some money and if we have 70% we bet some more.

During these 2 days, we had 2 very important factors playing out. The 1st is the US stimulus program of 2 trillion USD. The 2nd, it was Trump’s administration not to lock the country down, announcing April 12th as a deadline when the US economy should be fully open for business.

Let’s examine these 2 factors.

It is encouraging that central bankers and politics used their weapons from the very start. It seems they learned their lessons from the 2008 crisis. That was the only positive. Stimulus programs can not be used forever. You can’t eject 10% of GDP every now and then. If we continue injecting this amount of cash we will end up like Zimbabwe or Argentina, where the cost of paper is bigger than the nominal value.
Stimulus programs should be used in combination with the fight of the virus. If we don’t fight the virus, the stimulus money will be burnt. Markets will not stabilize unless the virus is contained.

The US decided not to lock the country. There are some restrictions in the US as we speak but they are very much relaxed. Relaxed restrictions are not fighting the virus. The idea of re-opening the US economy in a couple of weeks from now makes absolutely no sense. In 5-10 days from now, the US will learn the hard way (just like the UK) that a serious lockdown is needed. The US will face mayhem in 5-10 days from now. The practice has shown that 2-week lockdowns do not work. We have seen China being locked for 2 months before being able to breathe a little. Italy is in a 4 weeks quarantine, and still, no significant results are into show.
I believe the US will be forced by reality to go to total lockdown and this will have tremendous negative results on top of the recession that we are already in. It will be the tsunami after the earthquake.

There is a scandal in the US, where 4 senators sold their stock portfolios after a closed-door coronavirus briefing. This took place at the end of February. I can only speculate that the WH has a perfect picture of what the situation is and what the dangers are, but decided to gamble. This gamble will not be a winner. Today's media are also reporting a meeting Trump had with a small number of selected fund managers. It seems to me these managers were able to influence Trump, more than doctors and scientists.

Some people say that China is recovering. That is a total lie. I believe that what we see from China since February the 24th is a Potemkin village and doctored figures. We do not know the real situation in China. It is not a devastation, but it is not a full recovery either.

At the same time, we know that China will be the first to recover from the virus, but it will not recover financially. The reason is that they will not be able to sell their goods in the usual importers, US and Europe, because the importers will be in quarantines.
As you understand we are talking for a recession that will go to the Q3 if played wisely. In the end, it is the vaccine that will green-light the new bull market.

To sum up, I believe we have more South than North, and the risk-reward ratio is not allowing me to be exposed.

Yes, Royal Dutch is a great company. Yes, they keep the investor happy with the dividends. Yes, the numbers are good. But they can’t fight a megatherium like this. That is why I believe we can buy them again in lower prices than today.

Many thanks for reading and for the vote of confidence.
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Re: Royal Dutch Shell

Wed Mar 25, 2020 4:12 pm

I agree with the above, but there is a white horse you could be forgetting.  There could be a working virus blocker (not a vaccine) amongst the hundreds of hospital tests being conducted right now.  A lot of them show much promise.  Once a virus blocker is found that can help fight the virus in very sick people showing a lot of symptoms, it will be put into mass production very quickly and lockdowns will come to an end.  This could signify the biggest bull day for stocks in a very long time.  This can be a few weeks away, but it could also never be found.

I have faith and believe science will prevail, but could obviously be very wrong.
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Re: Royal Dutch Shell

Wed Mar 25, 2020 5:16 pm

It will be a huge test of Trump's presidency fighting the coronavirus. He's not going to be able to nuke the virus or build a wall around it which are his favourite tactics, so it will be hugely interesting to see how he gets along. I think America is set for a rocky time in the months ahead.
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Re: Royal Dutch Shell

Wed Mar 25, 2020 5:28 pm

@Alfa1234
I am not an expert in medicine. I can't really comment. This is adding uncertainty to anyone's calculations. That is why I say:
arbusers wrote: absolutely nobody knows what is going to happen with the disease or the economy.
@DPG
I can't stop my self from commenting that his last rival for the presidency was the one that openly declared nuclear war as a solution to some of America's problems. Thankfully, the US electorate saved the world from that.
I believe Trump will lose the bet in the short term unless someone enlightens him more in the next couple-three days.
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Re: Royal Dutch Shell

Wed Mar 25, 2020 5:30 pm

I would like to add one more comment about Royal Dutch Shell. In the 2008 crisis, the energy sector was the first to bottom in 2008, while the rest of the market bottomed in 2009. The energy sector is sending signals long before others.
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Re: Royal Dutch Shell

Wed Mar 25, 2020 10:12 pm

I was looking on Energy companies from SP500 and i saw all of them losing 50-90% of their value in the last 80 days.
Maybe could be some other opportunities there.

The 3 reasons could apply as well for those companies.

For example, if Exxon mobil lost the 30 points, it will be the minimum in 23 years, exactly like Dutch.
And, US did the same as UK with coronavirus.
Last edited by CharlieSheen99 on Wed Mar 25, 2020 10:16 pm, edited 1 time in total.
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Re: Royal Dutch Shell

Thu Mar 26, 2020 1:17 pm

For me, the biggest opportunities in oil sector is tanker stocks. Here is why they maybe be 5x baggers from here:

1) oil price is very cheap and most of the nations trying to build inventory(US and China does). So they must hire tankers for the transportation.
2) shale oil in US is dead with these prices. Their cost of production is somewhere is $35-40 per barrel i think
3) tankers must comply with 2020 regulations about climate change. In order to do that, the older fleets must either scrapped or install a filter in order to reduce CO2 emissions.So some of the tankers will go to scrappers, reducing the supply.
4) Oil tanker companies were in multi year bear market and no bank was lending them, because they are in oil industry, no one is building new ships.(no new supply for the near future)
5) Because all of these, tanker rates have skyrocketed. This will create a huge cash flow to these companies.
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Re: Royal Dutch Shell

Sat Mar 28, 2020 2:18 am

geetz wrote:
DPG wrote:
Yes Royal Dutch Shell is bound to recover to an extent as they are a huge company and can take the short term impact of the virus.

Which platform do all you guys use to trade shares?
Personally, I use Interactive Brokers.
There are many brokers to choose from, it all depends on factors like your location, instruments you are looking for, fees, markets etc.
Talking about IB can't say a bad word about them, none significant issues in a while. Might be confusing for beginners, but you get used to it quickly.
Guys,keep up the detailed stock posts,as i believe there are a lot who interested,especially these days.If you could,tell to us if you have difficutlies during registration of this broker.And how you made your first deposit.
Believe to yourself is the secret to success.
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Re: Royal Dutch Shell

Sun Mar 29, 2020 11:29 am

gamblehappier wrote:
geetz wrote:
DPG wrote:
Yes Royal Dutch Shell is bound to recover to an extent as they are a huge company and can take the short term impact of the virus.

Which platform do all you guys use to trade shares?
Personally, I use Interactive Brokers.
There are many brokers to choose from, it all depends on factors like your location, instruments you are looking for, fees, markets etc.
Talking about IB can't say a bad word about them, none significant issues in a while. Might be confusing for beginners, but you get used to it quickly.
Guys,keep up the detailed stock posts,as i believe there are a lot who interested,especially these days.If you could,tell to us if you have difficutlies during registration of this broker.And how you made your first deposit.
The registration I would compare with most of the bookies as they asked ID + proof of address. later I had to fill in some default regulatory forms to start trading. It took a while but nothing ridiculous. I am happy with this broker and my first deposit was via SEPA transfer which I keep using until now.
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Re: Royal Dutch Shell

Mon Mar 30, 2020 3:03 am

CharlieSheen99 wrote: For example, if Exxon mobil lost the 30 points, it will be the minimum in 23 years, exactly like Dutch.
And, US did the same as UK with coronavirus.
Exxon Mobil is at the price level of year 2004.
Royal Dutch is damaged more than its American competitors and there is a reason for that. The reason is these companies are considered of national interest in the US and they have a safety net from the state. They will never go under.
Europe, on the other hand, is slow to react and national interests are weakest. In RDSA there are 2 national interests to be combined, even though the Dutch hold a bigger share than the British.
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Re: Royal Dutch Shell

Mon Mar 30, 2020 8:30 am

It seems the market is in a classic dead cat bounce pattern now, with continued drops to be expected.
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Re: Royal Dutch Shell

Mon Mar 30, 2020 9:33 am

Alfa1234 wrote: It seems the market is in a classic dead cat bounce pattern now, with continued drops to be expected.
To me, the market looks very sneaky at this point. There are various Elliot wave countings and they all have a good justification to materialize. The recent rally looks indeed a sacker's rally. The bad thing with these rallies is you never know when they are finished. Some times they can lure even the most disciplined investor.

Specifically for RDSA (Shell) there are a couple of comments I must say.
As previously said, the energy sector is the first to react when we jump from Bear to Bull. That is why we must have an open eye in these companies.
There are rumors about China coming back to normality etc. This is absolutely a lie because we don't see demand for oil, we don't see the price of oil bouncing back. On the contrary, we see it going down to teens. This is a good indication of a recession. We are at the end of a cycle that lasted 11 years and we can assume the recession will not be a flash one. It is not just Q1 and we are done as many believe. We will go deep to Q2-3 etc.
If it wasn't Covid-19, it would be something else.
At the same time, we haven't seen any capitulation signs in the market. We have seen a river fall during March, but the magnitude of events is an indicator there is another river fall to come. There is a feeling that we are in front of events happening once per 100 years or once per 4 generations.
RDSA is an excellent company to buy. I like it a lot but I would like it even more at prices below 10.
We are keeping an eye here.
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Re: Royal Dutch Shell

Thu Apr 02, 2020 9:17 am

You might have noticed that Royal Dutch Shell is one of the best performing European companies.
It is always a sad feeling to see that you could have made much more by keeping a share, instead of selling it early. This feeling was in my mind during these last days.
But at the same time, thoughts must prevail against feelings, and the thought I have is simple. Better safe than sorry.
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Re: Royal Dutch Shell

Thu Apr 02, 2020 9:28 am

+55% from my buying price so far...thanks a lot.  ;D
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Re: Royal Dutch Shell

Thu Apr 02, 2020 9:46 am

Congrats Alfa1234.
Do you have any exit plan, or are you gonna keep it in the long run?

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