oil tanker

A major development has happened this week, as a US Judge ruled in favor of a Canadian hedge fund, Crystallex in what appears to be the most significant news coming from Venezuela and its failing oil industry. The judge ruled that New York City based Tenor Capital Management (who basically bought the lawsuit from Crystallex), has the right to get $1.5 billion in US dollars as a settlement for Venezuela seizing a gold mine from Crystallex.

Lawsuits as an asset class

ALSO READ: Cloudera can take your portfolio to the clouds

Think of it this way… You need help paying bills because someone rear ended your car, broke your foot, and you can’t work. The credit card companies don’t care that you’ll be getting a settlement from the car accident, they want their money now, and bills add up. You need to find a way to pay the bills and not go bankrupt, so you find someone willing you lend you they money based on the fact that you WILL be getting a settlement. That is exactly what happened in this case, with Tenor Capital buying the firm or “bailing it out” and paying its bills, in exchange for the company turning over all future assets or “income” from the lawsuit.

Seizing assets from Venezuela

Looking at the overall picture, how do you think a goldmine lawsuit from a canadian company, bought by a New York investment firm, involving the Venezuelan goverment could change your everyday life? It could, and in a big way. The assets at the center of the lawsuit are owned by PDVSA, and cover three US based refineries, 48 oil terminals in New Jersey, pipelines, and not to mention, over 14,000 Citgo branded franchise gas stations.

The judge in the case ruled that Federal Marshals can seize the US based assets and auction them off to help pay the debt, or Tenor Capital could have just paid $70 million for almost $2 billion in oil and gas assets.


Get Up To $1,000 in Free Stock with Robinhood--the Commission-Free Brokerage!

Open a new account and receive one free stock valued at up to $500! Then, once your account is open, get more free stocks (value from $5 to $500) for each friend, family, person you refer! USE THIS LINK to get started with Robinhood!

So where does this leave the consumer? Day to day gas station operations will most likely remain unchanged, (seriously, no one is coming to seize a convenience store and prevent you from getting food off the roller). Impacts will be felt by franchise gas stations possibly not being able to get refined gas because of gas purchase agreements.

The US – Venezuela relationship

Right now, full 2017 numbers show the US importing 7% of our oil from Venezuela, making it a top 5 producer for the US, but constant devaluing of the Bolivar AND another $2 billion lawsuit and possible asset seizure from ConocoPhillips ($COP), means that there could shortly be no way to get Venezuelan oil.

What happens next

Oil prices will most likely fluctuate, with oil producers and energy tracking ETF’s taking an immediate hit. If you are looking to play the Oil and Gas ETF market, take a look at ProShares UltraShort Bloomberg Crude Oil ETF, ticker $SCO. This is a way to play the commodities market without having to directly own the commodity itself. The short aspect of this inverse ETF means that as the price of oil goes down, the ETF value goes up.

Crude is currently sitting at $67.61 per barrel, and $SCO is sitting at $16.17 a share. If crude falls, the ETF will go up, and buying options is a great way to even further leverage this impending seizure.

Buying 20 MAR 2020 $30 CALL options for $1.55 an option, and getting 10 contracts, brings your entry cost to $1,550. If oil crashes from market volatility, and the $SCO ETF hits $32.50 by 5 JAN 2020, you can liquidate your position selling your $30 call for $4.62 an option, bringing your profit on the trade to $3,070 (198% profit).

There is the VERY real possibility that this seizure can happen in the coming days or weeks, and if that happens, money will print itself. Those same 10 contracts with a $30 strike price, hitting $32.50 by 9 JAN 2019, would bring you an incredible 481% return, or a $7,450 in profit.



The markets have dropped over 30% since their highs just a few weeks ago because of the Coronavirus, but we are starting to see more signs that this might be a PERFECT BUYING OPPORTUNITY:

#1. HOT Fool Picks in Spite of Crash. Here is why we love the Motley Fool--On Thursday, March 19, 2020 they recommended Zoom Video (Ticker ZM) when it was at $124. Today, March 23 it closed at $160, that's up 29% in 3 days! But that's not all, they also recommended it October 3, 2019 when it was at $77 so that is up 108% since they picked it back in October, in spite of the market crashing 30%. Other recent picks are TSLA, NFLX and TTD which are all UP since they were picked!

#2. Stock Prices Are Down 30%.  This is a good thing! If you are thinking of buying stocks, now's your chance to get quality companies at much more affordable prices. This offers a very attractive entry point, because stocks are ON SALE and you can now buy quality stocks for 30% less than you would have paid for them in February.

#3. More Articles Are Starting To Recommend Buying. As we are nearing the bottom of this drop, we are starting to see more articles like this: BlackRock is suggesting we may be at a "once in a lifetime opportunity", Morgan Stanley says to start buying, and Warren Buffet has a stock pile of cash and rumors are he is starting to buy.

#4. Dollar Cost Averaging Works! Since nobody knows where the bottom will be exactly, smart investors continue to invest a fixed dollar amount in the market each month. This is called Dollar Cost Averaging. That way, when the markets are down you are buying more shares of your favorite stocks at cheaper prices. This helps drive down your average cost and increase your profits when the stock market moves back up.

If you need recommendations for stocks to buy now, keep in mind that the Motley Fool Stock Advisor beat the market by over 30% the last 4 years, and they are currently recommending that NOW IS THE TIME to start buying some of those quality stocks that should make up the foundation of your portfolio. The Motley Fool Stock Advisor service is recommending at least 15 stocks that you should plan on holding for the next 3 to 5 years. So, if you need investing ideas, it is a PERFECT time to consider the best stock newsletter over the last 4 years--The Motley Fool Stock Advisor

Normally it is priced at $199 per year but they are currently offering it for just $99/year if you click this link

P.S. this offer is still backed by their 30-day money back guarantee.
P.S.S. Still skeptical? Read this complete Motley Fool Review.

Previous articleCloudera can take your portfolio to the clouds
Next articleLimoneria won’t leave you with a pucker face