New Donations Made to Shriners' and NEIU

Because of the hard work of KDK Fund (dividends), KDK Options (option trades), and Bullied Comics (1st edition customer purchases), KeaneVCC has been able to make donations to both Shriners Hospital of Chicago and Northeastern Illinois University's College of Business and Management. The donation to NEIU was made through the Goodwin Challenge (see here).

Being able to contribute to the areas of health care and education is very important to KeaneVCC.

** This blog is used for opinions and ideas and should not be used as a direction to act without doing your due diligence.**

Week of June 18-24 (Bullied Comics, KDK Fund, KDK Options, more)

The following items happened with KeaneVCC and its partners.

KeaneVCC

- Increased exposure to idea that war is prevailing option for oil price rise including CNBC and John Kilduff. The story link is here.

KDK Fund

- Ford shares end the week at $11.08. Expectation is to be adding to position in the next 3 weeks.Visit kdkfund.blogspot.com or www.facebook.com/kdkfund for more.

KDK Options

- BAC straddle is still going ton. Another stress test result is due next Wednesday. Currently looking for another trade.Visit kdkoptions.blogspot.com or www.facebook.com/kdkoptions for more.

Bullied Comics

- New pic sent out on facebook (link here). Don't forget to go to this link (here) to purchase your copy of Book 1! Proceeds go to help anti-bullying campaigns.

Philanthropy Idea

by Michael Keane

There are many reasons to give and be philanthropic. Maybe it is ingrained in you as a personal habit. Maybe you don't have access to being philanthropic during your work days. Maybe there is a cause close to you as a person because of family and friends.

Recently, Jeff Bezos sent a tweet requesting ideas on how to improve philanthropy. My thinking is that a shift in how value is shown to donors could be improved. This post is my response to his request. 

Way back when, a researcher named Dr. John Landers was able to garner some funding to fight ALS through the Water Bucket Challenge (Washington Post story here). He was able to find a gene breakthrough and received some major news coverage and extra funding for it. The link to our blog post about is here. There is also the X Prize series where there is a monetary and other material value prizes awarded to winners of challenges. It seems that this is an area where philanthropy could benefit. It needs to happen more.

Some issues with this include the unspoken secrecy that goes on with philanthropy. Organizations are regularly very protective of their funding and bypass certain opportunities in order to keep that funding stable. This seems to be short sighted. Also, patience in terms of success in finding cures or alleviating issues is required and sometimes tough to digest in the short term. There is a lot of little failures before the big success and that can take a toll on those who give.

That is why promotion of successful processes within the philanthropic community is so important. It will keep the focus going and create new opportunities when that success in funding a philanthropic adventure is created.

So the idea is this. Promote successes through action. Actions include social media posts, news media, etc. Drive down in the promotion to include as many as possible who spent time and resources contributing to the success (donors, organizers, researchers, etc.). The more the merrier. Focus the messaging on unsuccessful research should be formulated as learning experiences, not failure. Sometimes learning that something doesn't works saves resources and time in the end.

More promotions should equal more success.

Thank you! 

Good luck to all!

CNBC Interview Supporting Oil War Thesis

The following CNBC Closing Bell interview between John Kilduff of Again Capital and Kelly Evans shows that the thesis on tensions being the only major catalyst for a rise in oil prices is growing in popularity.

The link to our story is here.

The link to the CNBC interview is here.

** Please due your due diligence. These are opinions and should not be acted on without your own research.**

Oil's Coming Transition from Autos

by Michael Keane

It seems as if the car industry is moving off of oil, thereby creating a great question. What are the plans for the major companies? One guess is that they (the major ones) just squeeze out the smaller companies through market capitalization moves and let the next generation deal with the issue in a more head on way. Another way is to create a global situation where war hurts supply while driving up demand in the short term and let the next generation deal with the issue in a more head on way once peace is around again. A third option is to be pivot to the coming rocket industry while still supplying the current need in the car industry.

The first two options are classic and will end in general failure for the company and their investors (who is probably anyone holding a retirement account of any kind). We have seen both options used in the past. We can even see them being used right now in different industries. In terms of the war choice, the Iraqi war can be considered such a war. It brought oil prices up around $100 per barrel, for the price to crash back into the 30’s and 40’s when peace has a greater global hold.

The rocket industry is growing at a very high rate. New companies and new technologies at existing rocket companies are driving this industry forward. SpaceX continues to innovate and increase the number of flights to space. International flights are becoming more common.

There was shift in the oil refining industry 100 years ago that is important to look back on. Most oil was refined into kerosene back then for lighting purposes. That was the key revenue driver. But when electricity came to be found as an alternative, what were oil companies to do? The ones that were led by innovators like Rockefeller did not whine and cry. They did not put all their productive energy into trying to inhibit the electric industry’s ability to innovate the lighting space (although some energy was placed there). No, they researched and found autos to be their next big client. The oil industry today needs to take the same approach when it comes to electric vehicles. They are not going away. Move on to the next opportunity. It looks like rockets.

The oil industry is at a pivot point. The transition from autos being the heavy client to another entity being the heavy client looks more likely each day. The question is will the transition be peaceful or bloody.

WAR (and nothing short of it) Will Raise Oil

Six months ago, OPEC and some non-OPEC oil producing countries agreed to cut production in order to raise the price of a barrel of oil. The main reason for this is that in just 8 short years, the price of oil has fallen from $130 per barrel to now just under $50 per barrel . But six months into the process, oil producing countries and companies are starting to figure out just how tough this endeavor will be. Countries and companies alike have shut down production to their economic limits and have found that this has not raised the price of oil enough to their satisfaction. The continued pressure on the price of oil is both a supply and demand issue. Some of the problem can be attributed to more oil having access to get to the market. Also, the demand algorithm around the world for oil is changing with sustainable sources grabbing an increasing larger part of the market.  

Not 10-15 years ago, the world was of the opinion that the oil supply would likely be used up in a couple of generations. Prices were over $100 per barrel for more than a few years. Is anyone familiar with Hubbert’s theory of “Peak Oil”? This first gained major traction in the 1970’s and again in the 2000’s as the price of oil reached over $100 per barrel. The main issue that constricted the supply of oil were the wars in Iraq and Afghanistan. It removed them from the marketplace. Also restrictions on Iran also left their oil generally off the market. Now that both Iraq’s and Iran’s oil is back on the market, prices are falling. Also, when the market was riding $100 per barrel, the US market has increased production with the Dakota Bakken fields now reaching the market. Now, without conflict removing oil from the market, and increased oil production capabilities with shale in the US and around the world, oil will likely continue to have a high supply.

While demand has still increased, it has increased at a slower rate than expected. The reason is mainly that the demand has been stunted by the growth of renewable sources of energy. It is getting hit with vehicles on a growing macro level. I touched on this in an earlier post (here). This success has spawned new technologies in other industries to find out new non-oil ways of manufacturing.  

This all leads to the reason behind the post. The only likely action that will successfully bring back the price of oil to higher than $50-60 per barrel is war. War between countries creates a situation that restricts supply and kicks up demand. It is not a coincidence that the price of oil dropped considerably as military operations in the country slowed down starting in 2008. Supply increased and demand from the US military declined. Most of the big oil producing countries (Russia, Saudi Arabia, Iraq, Iran, Kuwait, etc.). are dependant on oil for their GDP growth. While there are areas of the United States that are dependant on oil, the country as a whole is diversified enough to handle the downturn in prices. These countries should be watched carefully over their behaviors in order to raise the price of oil. One important lens that needs to be used when analyzing certain countries actions is the “price of oil” lens. If these production cuts don’t raise the price, watch out for the bombs.  

Why Tech Will Buy an Automaker

by Michael Keane

As the struggle and innovations continue to develop in the driverless car industry, the idea that a tech company will buy an automaker is becoming more and more real.  A few things come to mind in forming this idea. The first one that comes to mind is company valuation and cash balances. Many tech companies that are involved in the automotive space are sitting on a lot of cash.  The second area that indicates the probability of this idea is that there are already partnerships and smaller deals between the tech companies and the automotive companies. Another area that brings this idea to fruition is finding the answer to the question of “What does the future look like in the space and who is best capable to lead this move into the future.

If you look at the tech sector and the automotive sector in terms of valuation, you will see that it is entirely possible for a deal to happen. The following chart gives a quick snapshot of valuations of different tech companies involved in the auto space as well as a few automakers. You can see the cash balances and valuations of the tech companies actually put them in a favorable spot to make a bid. Tesla’s market cap and Ford’s is now basically equal.

Company	Valuation	Cash on Hand	Amount Invested in Auto
Alphabet	$600 Billion	$86 Billion	New Company named Waymo
Intel	$167 Billion	$5.5 Billion	Just made a bid for Mobileye
Apple	$753 Billion	$21 Billion	Undisclosed Amount in Software
Tesla	$45 Billion	$3.5 Billion	Full Electric Car Company
Ford	$47 Billion	$16 Billion	Auto Company
Fiat Chrysler	$21 Billion	$18 Billion	Auto Company
GM	$51 Billion	$14.5 Billion	Auto Company

Large partnerships are starting to abound between the two industries. Recently, Intel made a bid for Mobileye. Ford has been in partnerships with Alphabet. GM purchased Cruise Automation for more than $1 Billion dollars last year and has a partnership with Lyft. Mercedes Benz recently reached an agreement with Uber with regards to a driverless car. With all this smoke around, the likelihood of a purchase continues to get stronger and stronger.  

While in the past, someone might not associate tech with cars, today you just can’t get away from the connection. Driverless eco friendly vehicles are the future. Big companies are putting large fortunes in play to make this happens. There will be some hiccups and disasters for sure. But don’t be surprised if you wake up one morning, pick up your phone (instead of the tv), and find that a car company has been purchased by a tech company.

**Disclosure - KDK Fund, a client of KeaneVCC, owns shares of Ford. KDK Options, another client of KeaneVCC, owns an April spread options trade on Microsoft. **