Newsletter week 46

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 factors. The most important factor regards the marginal cost of producing oil globally. FPA Capital Fund defined the marginal cost of produc-tion 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 com-panies have counteracted the decline rate of their oil wells by deve-loping new resources. Instead of investing in new resources, E&P companies have opted to drastically cut their capex (capital expen-diture) 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 de-crease supply in the long run and these factors combined will make crude prices increase to sustainable levels, absent a material decrease in demand.

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Long term sustainable price of crude

SWEDENSweden at the mercy of global growth.The position for Swedish export is two-fold. On one hand, the export will grow as a result of better international eco-nomic conditions. On the other hand, Swedish competitiveness has deterio-rated 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, de-velopment is still driven by domestic demand owing to the highly expansio-nary 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 con-cerns about the recovery. There is a clear downside risk for emerging eco-nomies. In addition, companies in the entrepreneurial panel of Swedish En-terprise has become increasingly nega-tive since the labor market conditions influence households to save more mo-ney. The industrial unions new requi-rement 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 signi-ficant slowdown of wage growth com-

pared with the agreement that we are still inside, and industrial unions requi-rement means no downshift said Pe-ter Jeppsson, Vice President of Swedish Enterprise. As a result of an attenua-tion the competitiveness of enterprises would strengthen and allow for more investments in business.

StocksPositive U.S Job Growth Bolster Global Stockmarkets U.S. Stocks ended little changed on Fri-day, 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 ma-jor American indexes posted a positive week for the sixth week in a row. The rise in the financial sector was funda-mentally driven by the Jobs report, as banks tend to benefit from ginger bor-rowing rates. JPMorgan, Bank of Ame-rican 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 con-nect scheme between Hong Kong and Shenzhen stock markets that could po-tentially boost transaction volume for stocks. Investor also inspired by com-ments from President Xi Jingping regar-ding economic growth and radical re-forms in state-owned enterprises over the next five years

CommoditiesLow demand for German industry ma-kes its mark on industrial commodities.Thursdays trade in the commodity market was characterized by red num-bers. 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 the-reof. The demand from the German manufacturing industry is quite low at the moment and this consequently affects the commodity market. This si-tuation isnt expected to change in the coming six months, an opinion shared by Bill O`Neill, partner at Logic Advi-sors. 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 produc-tion 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 res-pectively. Bonds and Forex Strong jobs number might trigger the Fed to hikeAfter 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 dol-lar rose on the report, as one would ex-pect, 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 mainstre-am 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, coup-led by positive media-coverage in ma-jor media outlets including The Econo-mists. Some have also speculated that Chinese investors are using Bitcoin as a way to circumvent Chinas capital con-trols, with costumers on Chinese ex-changes consistently and willingly pay-ing a premium during the rally.MACRO EVENTS WEEK 46Monday: Japan: Foreign Exchange Reserves OCTGermany: Balance of Trade SEPGreece: Industrial Production YoY SEPTuesday:Japan: Bank Lending YoY NOVEuro Area: Ecofin MeetingChina: Inflation Rate YoY OCT and PPI YoY OCTNorway: Core Inflation Rate MoM OCTWednesday: China: Fixed Asset Investment YoY SEP, Industrial Production YoY OCT and Re-tail Sales YoY OCTGreat Britain: Unemployment Rate SEPThursday: Japan: Foreign Bond Investment 7/NOV and Stock Investment by Foreigners 7/NOV

Germany: Inflation Rate YoY Final OCTEuro Area: Industrial Production YoY SEPSweden: Inflation Rate YoY OCTUnited States: Fed Yellen Speech

Friday: United States: Fed Fischer SpeechEuro Area: Balance of Trade SEP, GDP Growth Rate QoQ Flash Q3 and GDP Growth Rate YoY Flash Q3United States: Core PPI YoY OCT, Retail Sales YoY OCT and Business Inventories MoM SEP

SPOT PRICES and one week change OMXS30 1526,49 +1,80%NASDAQ 100 5 147,12 +1,86%S&P 500 2 099,20 +0,96%DAX 30 10 988,03 +1,27%NIKKEI 19 265,60 +0,95%HANG SENG 22 867,33 +1,00%Gold spot 1087,85 -4,73%Crude Oil (Brent) 48,21 -1,79%USD/SEK 8,72 +2,25%EUR/USD 1,07 -2,35%

WRITERSTomas NylnDavid IngmanCarl DalerstedtMark ThiongoMatilda AnderssonEmma EgnellOlof SvanemurCarl BrechtDaniel Rosengren

Rolln and Schrling doubles down on Next Biometrics GroupGreenbridge 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 ini-tial investment. Greenbridge now owns 20 percent of the Norwegian sensor company, and since their initial invest-ment the stock is up by 180 percent. Since both Ola and Melker have incredi-ble track records, expectations are now even higher on the sensor company.

Minesto sees potential for its alterna-tive energy sourceIn the wake of Minestos IPO on Novem-ber 9, CEO Anders Jansson is optimis-tic about the future of marine energy. Marine power could be an important future export for the Swedish Econo-my 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 spend-ing 20 times that amount for a popula-tion of 3 million, Anders Jansson sees a huge growth potential in Sweden for the energy source.

Anoto issues equity to acquire compet-itorAnoto Group AB is issuing a rights equi-ty offerings of 74 MSEK to Carnegie, per a special agreement to finance their acquisition of one of its main compet-itors, 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 trou-ble for PrecisePrecise Biometrics took a major hit last week when Fingerprint Cards an-nounced that they are trying to create their own security-algorithms. Accord-ing 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 implica-tions for the company. Fingerprint is a very important customer for us at the moment, but we have contracts with other companies as well, including Cy-press, 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 productHeliospectra 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 prod-uct 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 be-tween 20 and 30 percent until the year 2020 according to a report by global market research and consulting firm, Marketandmarkets.

Thomas Bengtsson increases signifi-cantly his ownership in Cleantech InvestThomas 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 Thom-as Bengtsson will be the companys 9:th largest shareholder with 2.5% owner-ship.

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 in-crease 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 Cand-lesticks 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 resistan-ce 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 Com-munications in the short and long term.

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 re-commend 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.

NOTE was previously in a rather undramatic downtrend. It went through the ceiling of the trend channel which in-dicated 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 pre-vious 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-sig-nal. Stop loss could be placed below 9.65 SEK. In the short term we are technically negative to the stock, in the midd-le-long and the long-term we are technically positive to the stock.

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 consi-dered 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.

Kabe was previously trading in an aggressive downtrend. It went through the ceiling of the trend channel with ac-companied high volume which signalized a trend reversal. Since then the stock has been trading in a rectangle forma-tion. The stock created a Marabozu candlestick recently which is a bullish candlestick, with no tail on the down-side 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 be-neath 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 tech-nically 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 positi-ve 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 sup-port 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.