Three Macro Musings

Three upcoming investment themes for discussion:

• Policy shift into natural gas by Congress may become more likely with a return to even mediocre US growth and rising oil prices. Also as the dollar drops, oil becomes less affordable and a domestic solution is needed (priced in dollars and produced 100% in America). With massive budget deficits, huge natural gas discoveries in the US driving prices down, and an urge by Congress to "create new jobs", this may be a policy action whose time has come. The economic and national security reasons for this action might make investments in this area start to pay off. A bill to provide for infrastructure for a conversion of the US trucking fleet to natural gas should start to get a lot more support. As that shows success, a follow on to convert the auto fleet may be possible. Autos and trucks account for 70% of all US oil imports. Natural gas is the one solution that can solve our oil problem. Huge discoveries in North America and elsewhere make a transition to natural gas for trucks, and then eventually cars, a much more viable solution for our oil dependence. At some point as oil starts to rise and the disparity between the two increases, I think we'll see much greater investment in natural gas. Investment wise this one can look at plays that own natural gas in the US, as well as exploration, and more speculative bets like Clean Energy Fuels (CLNE) and Westport (WPRT) which makes engines that use natural gas.
• China is due for a hiccup. Lots of stories leaking out about increases in bad debt. Does this mean I think China is due for a huge drop? No, but there are macro problems with excessive lending and an imbalanced currency. Through this crisis we have had the Chinese currency fixed to the dollar. As the dollar drops, this kills Europe and Japan. The Chinese either have to start to revalue higher, or pressure on the ECB and the Japanese will become politically untenable. You can't have a fixed rate regime in the world's third largest economy with major imbalances created (again). Something's got to give. If Warren Buffett wants to buy a railroad, I like Australian plays better than US plays.
• Health Care. Stocks were up on elections. Don't bet against a bill here. Use today's uptick to get out. I prefer to stay out of the sector--but I know quite a few hedge funds that go in whenever hype is high, then go short when hype is low. I prefer to stay clear of musical chairs for a song that I am fairly sure I know will end badly for the insurers.

Disclosure: Author is long APC, DVN, CHK, WPRT, CLNE and looking for more as a long term play.

Comments

[DLB40:]

Sorry that you aren't long FSYS. They knocked the cover off the ball this quarter. My 3 largest positions are FSYS, CLNE, and WPRT. Pay close attention to Ford and GM. (Not to buy their stock) I read recently somewhere that they are slowly starting to offer LNG on a select few of their pickups. I think only for fleet or corporate customers. If anyone has more info on that in particular. Let's hear from you.

Nov 05 09:52 AM

[koolsool:]

The switch of policy to encourage the use of natural gas for transportation & to substitute natural gas for coal in electricity generation would give the American economy a huge boost. The jobs & business it would create converting truck fleets, car fleets & building out infrastructure for more storage, fueling stations, fueling station conversions & pipelines would go a long way in turning the economy around. It would almost be a patriotic thing to do. I wonder if our leaders are patriotic. Or is the foreign oil & coal lobby influence too strong??

Nov 05 11:22 AM