Tuesday, September 25, 2012

Nat Gas is the future

I firmly believe that over the next few years the world, and this country in particular, will make a huge shift toward the use of natural gas as a transportation fuel. The recent declines in the price of OIL in the U.S. has been the result of the lack of world demand as a result of the Euro slowdown, the China slackening, and the increased output of the bituminous oil coming out of Canada. The economics of shale oil are dependant largely on a high price for oil. And world demand will continue to grow for oil. In this country meanwhile, the advances in "fracking" as a nat. gas recovery technology has reduced the price of natural gas dramatically while supply has skyrocketed. Estimates of useable natural gas in the ground have gone up dramatically as well. I think it will only be a matter of time before we switch on a large scale to the use of nat gas as transportation fuel and the price will change accordingly. With this in mind I have been looking for opportunities to trade and invest in NG.

Looking at the UNG chart it looks like NG may be set for another rise. Trading...

And from a longer term perspective a look at some nat gas operators are interesting. Particularly if they pay dividends... Here is a chart of Pengrowth Energy Trust... A recent lowering of the dividend has brought the price down as well. The decline in the dividend has co-incided with the recent decline in NG prices. If NG prices are set to rise it seems that the expectation for a rise in the dividend could cause a rise in the price of the shares of PGH. This would be the best of both worlds. An 8% dividend and a rise in share price...... Time will tell of course.


Monday, September 24, 2012

Wage inflation in the works?

One of the causes of real inflation is rising wages. Much of American labor has been outsourced to China over the last decade. So the U.S. has had a period of low inflation indirectly. This is the result of our currency being held artificially strong by the actions of the Chinese govt. and other governments, in Asia in particular. Their buying of U.S. dollars as they flow into their countries and then printing their local currency while loaning the US dollars back to the U.S. govt by buying U.S. Treasurys has kept the U.S. dollar strong while interest rates have stayed low. This is an artificial situation that cannot last forever.
There is news out of China today of a riot at a Foxconn plant. Foxconn is the large producer of electronic equipment that supplies the likes of Apple. There have been problems at their plants with the labor force in the recent past.
The recent slowdown in China is likely to exacerbate the tensions between production and labor. The Chinese govt. at some point will have to allow their currency to rise and in effect give their workers a pay raise by the increased purchasing power of their money. There may even be a push for actual higher wages in order to placate a workforce that increasingly sees the rest of the world prospering as they stagnate.
This will spur inflation across the globe. The same forces that worked for disinflation over the years will reverse and inflation will be the export of the chinese and asian economys. This will be a long term occurrance and will be combatted by the labor and investment in Africa and other places. But asia is established and will not turn over their supremacy in production willingly.
These trends, combined with the recent liquidity that is in the world will have the potential to create a highly inflationary trend that may be hard to reverse.
These developments, that have been in the making for years, are the reason for the strength in gold and the resources that has resurfaced lately.
Here is the news out of China:


Control risk

Thursday, September 13, 2012

We have liftoff

The U.S. Federal reserve continues to print money.
The stock market continues higher.

We have yet to clear all time highs in the indexes. But we are getting a run at them....

Small Caps are the closest.

We have cleared the tower.

and a memory here:


control risk

Saturday, September 8, 2012

Market/price similarities

I have written in the past about the power of triple tops.  In essence, by the time the price makes it to an old high for the third or fourth time it usually goes higher because there is no reason for the price to be that high unless it IS going higher. Kapish?

Here are a couple charts. One is a weekly of the silver price of SLV. The other a more current weekly chart of the Russell Smallcaps IWM.

The way the price moves up and out of a triple top is often dramatic. The price essentially has to find a new normal range and the initial move is usually to the top of the next range.

Given all the bad news in the world economies nowdays it seems hard to believe that the stock markets could go much higher. And maybe they won't. But I have learned over the years that all markets are pretty much the same. They are all quoted in money. And it is money that is being traded/invested. And money is a commodity that is used to place a value on other things. When the supply of any commodity is increased the price goes down, particularly when demand is low.
The central banks of the world are INTENT on making more money available to the world. This should drive the value of money down. This will be reflected in the price of other things going up. Stocks are things. As is gold, silver, oil, timber, land, houses etc.....
Until interest rates rise enough to stifle or constrict the amount of money being created the economy should see inflation.
So despite all of the bad news it is possible for the stock markets to go on a sustained run higher. The same way gold and silver have done over the last few years.
The charts:

And awhile back I featured the chart of GASL. Pointing out what appeared to be accumulation and a bottoming pattern. I mentioned the way that the SLV and GLD charts looked similar in shape. The breakouts have happened in GLD/SLV. And it looks like GASL is getting ready to join the fray...

Control risk,

This just in!
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Tuesday, September 4, 2012


Here is an intraday chart of the Russell Smallcaps as  represented by the ETF IWM:

Small Cap stocks in the U.S. have been the laggards. I wonder what is up. Maybe some inside information about what may be said at the Democratic Convention. Maybe Europe....
Will we ever know.....

Later at 1215 PST....
CNBC attributes the market rally to a tweet by PIMCO's Bill Gross predicting reflation in the Eurozone...

Did a govt. agency do something right????!

Old news to those who watch. But I don't see this covered on FoX noise...

DJ UPDATE: N.Y. Fed Ends AIG Maiden Lane Chapter With $6.6 Billion Profit

(Adds details and background, starting in sixth paragraph.)

By Al Yoon and Erik Holm

The Federal Reserve Bank of New York on Thursday profitably closed the book on its crisis-era seizure of American International Group Inc.'s (AIG) most toxic assets, selling the last of the complex securities that have evolved from being Exhibit A of the financial crisis into one of the hottest buys around.
The New York Fed announced a profit of about $6.6 billion from selling the second of two portfolios of mortgage-related assets taken on during the controversial 2008 bailout of AIG. Gains from the portfolio, known as Maiden Lane III, added to the $2.85 billion in gains registered earlier this year after the New York Fed exhausted sales of similar, but less complex, bonds from another AIG-related vehicle.
The New York Fed since April has been selling off about $47 billion in face value of complex mortgage assets from Maiden Lane III, which in late 2008 paid about 47 cents on the dollar to acquire securities insured by a unit of AIG. Proceeds from earlier auctions resulted in the full paydown of a $24 billion loan the New York Fed provided to purchase the assets in the portfolio. With that obligation satisfied and a $5 billion equity contribution from AIG repaid, the insurer is entitled to one-third of the proceeds from the latest sale.
The net gain of about $6.6 billion includes $737 million of accrued interest from the New York Fed's loan to Maiden Lane III, the regional Federal Reserve bank said in a statement.
AIG can put the proceeds toward repurchases of its shares from the U.S. Treasury Department, which still owns a 53% stake in the company as a result of its participation in AIG's $182.3 billion bailout. AIG has spent $8 billion buying back stock from Treasury this year and said it hopes to use funds raised from the Maiden Lane III sale and other asset dispositions to further reduce the government's stake.
Helping the latest sales of Maiden Lane III assets was a tailwind of demand for risky assets as investors have been on the hunt for higher returns, in contrast to headwinds in 2011 as investors fled to safe havens. Signs of stability in commercial and residential real estate have also led such investors as Metacapital Management L.P. to raise money for purchases of such assets this year.
An auction of 21 collateralized debt obligations with a total face value of some $3 billion on Thursday capped the Maiden Lane III sales, which have been a key source of supply for institutional investors. The number of private-label mortgage-backed securities outstanding, especially those backed by home loans, has dropped since 2008 as new issues haven't kept up with loans that have defaulted or been paid down.
The market for the so-called nonagency mortgage bonds--which haven't been backed by U.S. entities like Fannie Mae--is shrinking by as much as $180 billion a year, providing strong technical support, said Chandrajit Bhattacharya, a strategist at Credit Suisse, whose traders were among the biggest winners at Maiden Lane II and Maiden Lane III sales. Signs of "light at the end of the tunnel" in the housing market have further fueled the rally, Mr. Bhattacharya said.
The demand for yield has shrunk returns on subprime residential mortgage-backed securities to less than 7% this month from nearly 9% in June, Credit Suisse data show. The RMBS yield decline has led many buyers to the CDOs, once scorned for their role in disguising risks that helped trigger the worst financial crisis since the 1930s.
Some Maiden Lane assets "were an attractive opportunity because they carry higher yields due to their complexity and more limited liquidity," said Jonathan Lieberman, head of residential and consumer loans at Angelo, Gordon & Co, which bought at Maiden Lane III sales.
Among the companies that found the yields attractive was AIG. Chief Financial Officer David Herzog said earlier this month that the insurer participated in a "vast majority" of the Maiden Lane III auctions and bought securities with a market value of $7.1 billion. The average yield of the bonds AIG purchased was 9.7%, according to a company presentation.
The sales were conducted by BlackRock Inc. (BLK).
A $19.5 billion loan for the Maiden Lane II portfolio of RMBS once held by an AIG unit paid off as that debt was sold in February. Sales from the Maiden Lane portfolio used for J.P. Morgan's Bear Stearns purchase resulted in repayment of a $28.8 billion loan in June.

-Write to Al Yoon at albert.yoon@dowjones.com and Erik Holm at erik.holm@dowjones.com
--Serena Ng contributed to this article.

(END) Dow Jones Newswires
August 23, 2012 13:19 ET (17:19 GMT)
Copyright (c) 2012 Dow Jones & Company, Inc.- - 01 19 PM EDT 08-23-12