Thank You Veterans, Generosity, and Helping Those in Need

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Thank You Veterans, Generosity, and Helping Those in Need

            One of the key concepts that I finished my introduction blog with was to always remember, the greatest gift we can give others is to become the strongest version of ourselves and teach others how to do the same, while always finding the time to give back to those in need. We all have different paths in life with many different levels of challenges and adversity to overcome. With that said we will always have times of complete vulnerability where we need help from others.

          Today is a special day where we get the chance to give thanks to the veterans who have served our country. This is something we should do more often, not just on one day of the year. We often times get so caught up in our daily lives that we forget that we live in the best country in the world. One of the key reasons as to why this is possible is because of the many men and women who have sacrificed their lives to serve our country. Many of our veterans and there families are left with lifetime wounds both mentally and emotionally (PTSD), as well as physically. I find it disheartening at times that we do not do enough for our veterans especially since they protect one of the greatest treasures that our country was founded upon, our freedom. Many look at homeless people and say well they made a choice to be that way or they could choose to get a job if they wanted.

Did you know that 1 in 7 homeless adults are veterans?

            Do you think that these men and women said to us, if you want your freedom go sacrifice your life on your own? No they did not. They sacrificed their lives, their families lives to protect our freedom so that we could continue to live in the best country in the world, the USA. They saw that as a country we needed them. Yet when they come back are we willing to help them when they are in need?

 

            When I was in graduate school studying for my MBA, I was helping teach classes with one of my mentor’s (a Veteran) who had dealt with having throat cancer multiple times in his life. I remember receiving a phone call from the head of the financial education department that he was admitted for another round of therapy and would like me to teach both his undergraduate and graduate courses. I recall looking at my schedule of more than a full-time graduate course load and working for Citigroup, wondering how this was possible. These courses meant everything to my mentor and due to the nature of the timing (3 days prior to the start of the semester) they were faced with the possibility of being cancelled. Not only would this have crushed the spirits of my mentor who was facing a health crisis but many students would have not been able to graduate. I had taught both of these courses (Financial Markets and Institutions and Commercial Banking) concurrently with him for quite some time but having to teach them on my own would be different.

       A key principle I have always lived my life by which is the words bolded above. In this case my mentor was vulnerable and in need. Many times we fall into different levels of Maslow’s famous hierarchy of needs depending on our current life circumstances. If you’re not familiar see below.

 

            My mentor’s heath (physiological) was failing him and teaching was his life’s purpose. Many who have faced difficult times in their life know how important your life’s purpose is during these times be it your (kids, family, career etc.) as it gives you hope of better days ahead. I gladly accepted this challenge knowing I could not only be of service to others but to feel this need in such a vulnerable time.

            Many of you may be wondering why I am bringing this up on a financial blog. The reason is that I believe that giving to those in need (when your able) is as important to your growth as an individual and long term financial success. I give away much of time, knowledge and expertise for free both here at Grey Trading School and as well on Stocktwits. In life it is important to always have a bigger picture or a bigger purpose in mind, whatever you choose that to be. Personally I choose to use some of financial profits to give back to those in need.

            I have been busy as of late planning our (My twin brother and I) fourth annual “Magical Birthday’s” celebration. This will be the fourth year where we use our birthday as a time to give to those in need. We purchase winter coats and hand them out to the homeless. The vision is to be able to warm the hearts and bodies of the homeless during the most difficult part of the year. We have met so many veterans over the 3 years doing this who have been broken by war and truly need assistance. Many of them need to know that someone cares the same way they bravely protected our country, we need to step up and help.  Here is a video from year one (3 years ago) of us handing out coats to the homeless on our birthday. 

     I personally don’t want any recognition and yet I do want to inspire and facilitate more of this vision in the world. This is why I bring it up as part of creating financial abundance is shifting our mindset towards helping others in my opinion. If any of my work has at all helped you and you feel moved to help us, we truly appreciate it.

       I hope that not only will you be moved to donate towards this cause but if not able to will at some point follow suit with actions of your own. I believe our world must be changed from within, as what we focus on is ultimately what we create. There are no donations too small of $1, $20, $100 etc. or too big. Whatever resonates within your heart, we thank you, as do the people who will be affected by gracious and heart-warming generosity.

Please visit our website here or click the button below if you're interested in donating and helping the homeless, many of which are the brave men and women who selflessly served to protect our freedom. I think it's time we help them. The videos below are from the last 3 years of doing Magical Birthay's.

 

If you missed my most recent published article on ORIG you can see it here or click the image below.

Remember as I always say:

"The greatest gift we can give others is to become the strongest version of ourselves and teach others how to do the same, while always finding the time to give back to those in need."

All the Best,

Happy Veterans Day! Thank you to All who have served this great country!

Wesley Kress, MBA - 32 Prosperity

 

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OCEAN RIG (ORIG) Brief Introduction and link to Officially Published article on Seeking Alpha

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OCEAN RIG (ORIG) Brief Introduction and link to Officially Published article on Seeking Alpha

 

         I will be giving a brief introduction to Ocean Rig (ORIG) and the segment of the oil industry it specializes in. The reason for doing this is that it is important to understand the different market and business dynamics at play with different investments in the oil market. I will then provide a link at the end of this blog to the official article that is published on Seeking Alpha.

        The oil industry is vast with many different areas to invest in. The oil industry can be broken into the following segments: upstream, downstream, midstream, and service and supply companies. Upstream consists of exploration, development and production of crude oil or natural gas. Many of you are familiar with my work on Energy XXI (EXXI), a small independent E&P company focused in the upstream portion of the industry. For those who are not, you can read my article here I will be discussing a brief preview of theinternational offshore drilling contractor industry dynamics that provide oilfield services for deepwater offshore oil and gas exploration.

         It’s important to realize that EXXI and ORIG are in two different areas of the market. One is an E&P company involved in the upstream business (EXXI), while the other is an offshore drilling contractor involved in providing oilfield services via their rigs (drillships and semi-submersibles). Also, EXXI is involved in the exploration and production in the shallow waters of the Gulf of Mexico. In contrast, ORIG contracts rigs to E&P companies interested in exploration and production in the offshore deepwater business. ORIG’s customers are actually E&P companies that are interested in exploring for oil in deepwaters. See below for a picture of their current customers for which they provide their state of the art modern day fleet of rigs consisting of drillships and semi-submersibles.

Source: ORIG Investor Presentation (page 7)

 

Please see page 66 below regarding how deepwater differs from shallow water on a CAPEX basis:

Source: Green Light Capital (page 66)

 

         The reason to understand this key distinction is that ORIG’s ability to receive contracts in the future will be dependent upon a greater appreciation in the price of oil. Otherwise there is little incentive for companies to increase their CAPEX budgets for deepwater oil exploration.

         I will be giving an overview of the offshore drilling industry so people can have an understanding of this area. Offshore drilling rigs consist of different offshore drilling units such as the semi-submersible platform, jack up rig, oil platform, submersible drilling rig and drillships. ORIG specializes in the ultra-deepwater and harsh-enviroment segment of the offshore drilling industry and provides a modern fleet, all built after 2011 of 11 drillships (3 of which are under construction) and 2 semi-sumersible which can withstand very harsh environments. The 2 semi-submersible rigs were built in 2001 and 2002. Please see an incredible video on the Eirik Raude below.

         I will be sharing some of Link77’s (from Grey School) in depth understanding of the offshore drilling industry. The offshore drilling industry contracts that make up ORIG’s primary business model consist of contracts that are anywhere from 12 months to five years. Both sides in one of these agreements need to hedge in some way. Indebted drillers need to get their equipment working (stock price, income numbers, employee retention, not to mention the astronomical cost to stack or stand-by a rig). E&P’s want the lowest dayrate and the least amount of carrying time charged back to them (it’s common in the industry for customers to pay a reduced dayrate while a rig is in for inspection, moving to location, etc.). In today’s low oil price environment, many of those costs can be negotiated down, or even out completely, because drillers are so desperate to have rigs working under contract.

         The situation that will manifest as oil climbs, is that more contracts will be tendered, and offshore drillers such as ORIG will be pushing hard to get this premium iron working. They will push so hard that the dayrates quoted will equal those of lesser rigs. Anyone involved in awarding contracts will chose the higher spec rig, as that will hedge them against rising oil prices and, more importantly, their own eventual drilling budget increase.

         So lower class/depth rating, older rigs are not even going to be in consideration, hence the popularity of companies scrapping rigs that were still making them good money only a few months ago. The standby, upkeep, and certification renewals on rigs are extremely high cost. Regulations have increased over the years and it is prohibitive to hold a rig through a survey without some contract income to offset the high costs of getting the rig up to all codes (remember, these are oceangoing vessels not just drilling rigs). Drillers used to get the E&P to help upgrade their rigs as well. When demand was high, a rig rated for 4,000 ft. could be upgraded to 6,000 ft. with the operator footing the bill because they would not want to wait for a deeper water capable rig to come available.

         Simply put, E&Ps are looking to get the best rig for the lowest rate with longest term while demand is low. ORIG possesses a competitive advantage having a majority of their fleet comprised of modern day drillships as a drillships ability to save time moving (mobility) between oilfields worldwide is far faster than semi-submersible drilling units. In fact, it takes 20 days (drillship) vs. 70 days (semi-submersible) to move from the Gulf of Mexico to the Offshore Angola. The drillships also command a much higher day rate for their contracts. Reference

 

A breakdown of ORIG’s modern day Ultra-deepwater premium assets.

 

Source: ORIG Investor Presentation (page 5)
 

     The above is just a brief introduction to ORIG and the offshore industry. My officially published article can be found on Seeking Alpha here or clicking the image below.

All the best,

Wesley Kress - 32Prosperity




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Welcome: Introduction to 32Prosperity - Wesley Kress Blog

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Welcome: Introduction to 32Prosperity - Wesley Kress Blog

This is my first official post of what will hopefully be many here at Grey Trading School. I will be discussing my background and as well as my purpose for writing for Grey Trading School. I have been passionate about investing and health since I was 8 years old. I believe that these are two of the areas that cause the most suffering for people. The reason I am a big believer in education is this is the only way for people to empower themselves with the knowledge and skills to prevent falling victim to what the “financial system” and “health system” are creating due to conflicts of interest. Financial markets are very vast and having delved into many different areas such as fixed income analysis (bonds), equity analysis (stocks), derivatives (options & futures), portfolio analysis (allocation of bonds and equities or other financial instruments), trading technical analysis (short –term), among many others, this blog will be focused on covering individual stocks with accompanying industry outlooks. I will be solely focusing on financial analysis and strategy’s related to longer time horizons 1-3 years, specifically value investing. My value investing strategy is looking at equities that are in “hated” or “distressed” sectors. I state the above as it is key to always know your time horizon and as well as your strategy as the rules to your strategy is vastly different when those things change.

I am a deeply passionate individual that is helping to lead and inspire a new generation of entrepreneurs, investors, business people, and health minded individuals to become empowered and live their best lives without compromising their integrity. I received my MBA from the University of New Mexico with a dual concentration in Finance and Accounting. I have taught finance courses (Financial Markets and Institutions and Commercial Banking) at both the graduate and undergraduate level at the University of New Mexico and have 5 years of experience in the corporate world. I am a self motivated individual who has self studied many different forms of self-development, business, investing, leadership, and integrative medicine from a very young age. I believe the greatest gift we can give others is to become the strongest version of ourselves and teach others how to do the same, while always finding the time to give back to those in need.

The Anderson Business school at UNM offers a unique investment program of which I was fortunate to take part of. Everyone knows that investing and trading without using real money only takes you so far. The program allowed us to manage $5.2 million (comprised of fixed income, equity analysis, and portfolio analysis) during my program of which I did both as an undergraduate and as a graduate. Currently the program is only managing an equity only portfolio of $2 million. This was a unique education opportunity that greatly aided me in learning how to perform very in depth analysis. A couple of my reports are online here on Wells Fargo and JP Morgan. I also created an investment thesis filled with research on Mobility and Cyber Security during my time helping to manage the $5.2 million. I received a dual concentration during my MBA of both finance and accounting as the ability to analyze 10-K, 10-Q’s, 8-K’s, and all other SEC financial filing’s is the only way to be able to analyze companies sufficiently.

I remember picking up my first investment book and forever being captivated not by the money but rather the freedom of what investing early could allow for. Time is essential and a key component which can not be overemphasized. I had always known this from all my reading and studying about investing but when I was watching a special presentation in high school it was the first time it hit me square in the “gut”. I had long remembered the many narratives from the books of nearly every author, “if only I would have known about investing earlier or started younger”. The presentation was accompanied with an informational pamphlet, which gave an example that created a lasting impression. Please see the example here: If I could save $36,000 by the time I was age 30 and never contributed another dime, I would have more money than if I started saving at age 31 and contributed $140,000 (assuming $4,000 a year contributions until age 55). This was why one of the smartest people that ever lived said “Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t … pays it.” – Albert Einstein.

Grey Trading School was created to bring top experts from many different areas. The founders have compiled many different experts that have superior expertise and knowledge in the world of technical analysis for short term trading. In a world of traders, I will always recommend allocating a portion of your portfolio towards longer term (1-3 years’ time horizon) as time is one of the biggest advantages in financial markets. I personally allocate 70% of my portfolio towards longer term investments and 30% towards shorter term investments. A key to understand in the world of financial markets and investing, there are no strict hard rules. I mean what is ideal for one individual based on (age, capital, risk tolerance, goals, etc.) will be different for another and thus ‘context’ is key.

During and after the financial crisis I spent endless months analyzing the financial sector and individual banks. I was concurrently teaching classes at the university on Financial Markets and Institutions and Commercial Banking while still helping to manage the $5.2 million Portfolio in our Investment Program. Anyone who understands banks much less the large ones that are really huge financial institutions, understands that this sector regardless of how much you know is probably the most difficult to accurately value. I always state the biggest risk in distressed value investing is information risk. The risk that there is information that “you don’t know you don’t know” which changes all your underlying assumptions in your analysis. Banks are loaded with off balance sheet derivatives that make it nearly impossible to give an accurate valuation. Not to mention the top six banks are so large that they control over 66% of all banking assets in the United States, how’s that for “Too Big to Fail”.

My willingness to continually contribute to these investments during this time allowed for out sized returns that I could have never achieved otherwise, part of the reason I am a big believer in value investing. During this time nearly every analyst had sell ratings on every bank and financial institution I was analyzing. In fact, many of my students thought I was bit insane for investing in all of them. Lots of fear during this time not only paralyzed many but prevented them from taking advantage of what was truly a gift. It wasn’t until much of these banks were trading much higher did I see many analysts come out and put “buy” ratings. Was this really the ideal time to be buying after the companies were up 100’s% from their lows? Yes, maybe an 8% return is great for an individual with a large portfolio but for younger individuals or those who need to have larger returns to have any shot at building a sufficient retirement nest egg it makes little sense. No one is good at picking bottoms thus averaging in or continual contributions (every paycheck is how you get around this). Value investing has the potential to provide outsized returns in ways that other forms of longer term investing have difficulty matching. Some may view this as a “risky” strategy, if you want to know my views on risk please see this paper by Howard Marks here.

I see this same opportunity in the energy sector and why I have been spending endless hours doing research. Over the last 11 months I have been head deep with analysis of many different energy companies (Upstream, Downstream, and Midstream). I have focused mainly on upstream and midstream as they have been beaten up the most and allow for the greatest outsized returns with patience. Some of my favorites are - EXXI, DNR, GTE, MEMP, MCEP, ORIG, BXE, and TGA. Myself and a few people I work with scanned the whole industry based on different metrics to narrow the list then started diving into management, strategy, competitive analysis, etc. Valuation was key but if you look at a name like ORIG its valuation is insanely off (you literally can buy it for forward earnings with a PE of just 1, but the CEO has and will continue to be a sore thumb – more on this in my next post and why I am long now anyway at the $2.00 price). I looked into shale names but really decided to steer clear as I felt there were high quality MLP’s and small to mid cap E&P (non-shale) that didn’t have what I see as a distinct disadvantage of full cost Capex expense headwinds going to hit once things start to turnaround due to heavy decline rates (momentum for shale is what I liken to leveraged finance: it works both ways it just so happens we haven’t lived though the down momentum, yet. it will happen though). A great presentation was done by Einhorn about Shale (tight oil) here, earlier in the year.

Many are familiar with my work with EXXI (Energy XXI) which is more speculative and risky than many of the names listed above. With that said EXXI has what I believe to be a unique opportunity based on my research. They have a world class management team currently in place and a very intriguing set of circumstances. This was not the case before with the prior CFO. I am big on management and aligned incentives as they are the ones steering the wheel and thus directing the company. For those who haven’t had a chance to read my article on the company please see here: Taking A Look At Energy XXI: A Study In Effective Crisis Management.

I want to thank everyone for reading and I look forward to providing you with the best possible analysis here at Grey Trading School. Also, remember you will be able to get your individual questions addressed one on one in on our live interactive platform currently supported by Slack. I plan on sharing books for those interested in learning more about fundamental analysis and value investing in future posts as well. Stay tuned and always remember “the greatest gift we can give others is to become the strongest version of ourselves and teach others how to do the same, while always finding the time to give back to those in need.

 

All the Best,

 

Wesley Kress – 32Prosperity

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