So it appears that we have an official deal to bail out Greece with some pretty strict requirements on both the country itself and private creditors. It appears that private creditors will extend debt repayments out over 30 years, assume lower interest rates and take the upfront losses. As for Greece they will be forced into further austerity measures, which if history is any indication, which will probably not all be met. This is probably why the rest of the European Union wanted all of the extra concessions and was unable to make a deal as quickly as markets had hoped.
Even with the deal, markets around the world at this time are down for the most part. Asia had some bright spots with the Shanghai Composite up 0.75%, Australian Stock Exchange up 0.82%, New Zealand up 0.66% and the Hang Seng up 0.25%. Losers in Asia were the Nikkei 225 which was down 0.23% and Taiwan down 0.42% with Seoul down ever so slightly. European markets are lower led by Greece which is down over 2%, the DAX down 0.79%, the CAC 40 down 0.67% and other markets in Europe all red except Stockholm which is actually up marginally.
This is now behind us, and markets can now focus on other world events, and if this weekend is any indication the world's eyes are upon the Persian Gulf. It seems that the major powers have told Israel to hold off on an attack with Iran and will seek further economic sanctions by actually cutting off payments to Iran via the Society for Worldwide Interbank Financial Telecommunication - otherwise known as SWIFT. This is forcing oil up today, and we are at multi-month highs.
We are still long oil and will remain so. There is likely something that will happen in the Gulf, and with a worldwide clandestine war raging between Israel and its allies against Iran we are inclined to believe that news will push oil up (for those not following world news, there was the downed US drone in Iran, Israel killing Iranian nuclear scientists around the world and in Iran - see article here - and of course, the most recent Iranian retaliation attacks on Israeli diplomats). A bombing of Iran is not out of the question, but we believe less likely after the Israelis were told to back off.
If Iran gets bombed oil markets will rise, if Iran gets the bomb oil markets will also rise - so long-term this knowledge, paired with the belief that the world economy is improving, leads us to be long oil. Kodiak Oil & Gas (KOG) has remained strong, however, had some issues when attempting to take out $10/share. We will watch the stock as it remains near this level and see if it can hold today - assuming it is able to trade positive. Gulfport Energy (GPOR) is a trade which we actually have on in the portfolios and it continues to push forward, having closed last week at $36.77.
We are not long natural gas but neither are we short. Our inclination is to be short as North American markets are faced with an ever-growing glut of dry natural gas and a demand curve which looks more like a straight line than anything remotely close to the exponential growth curve in supply. Until pipelines or LNG terminals are built to transport the stuff or new consumption methods devised we are staying away from the space.
If one wants to play natural gas, we would recommend doing so via MLPs with considerable oil exposure such as EV Energy Partners, LP (EVEP) which is a company in our portfolios at this time. They have purchased more dry gas exposure lately, but will also greatly increase oil exposure once their Utica deal is complete. Truly it is a play on oil, with a natural gas kicker should prices turn.
One could play the bounces in the area, but for long-term bets we would refrain from using the UNG ETF as it is a fool's game long-term at this time due to the market being in contango. Which, while on the topic, indicates to us that we are not yet at rock bottom because the bulls are still running around in the market and have not been run off to set the actual bottom. Once backwardation sets in on the natural gas futures we will be interested as the spot will be trading higher than the longer dated contracts. That would be closer to a bottom than we are currently in, and that is some time away.
Gold is stonger this morning, unaffected by Europe and carrying over gains from Friday. Markets were up marginally on Monday, and are up a few dollars today. The same can be said of silver. We still hold silver and gold both, but significantly more silver and all of our precious metal exposure is via physical means and not easily tradeable securities.
Uranium equities have been flexing their muscles lately, and even lethargic Cameco (CCJ) has been perking up. Canadian issues have performed better, with Uranium One once again catching out eye. The stock has been green for a week it seems, rising even when peers were not. That is strength in absolute terms, and strength worth looking into. For American investors we would remain traders in Uranerz Energy (URZ) and Ur-Energy (URG), defaulting to Uranerz simply because of its history with day traders.
We continue to see commodity prices creep higher, and food deals being struck. We think grains rise over the next year, and one must seriously look at potash and fertilizers. The best way to play this area is Potash Corp of Saskatchewan (POT) followed by Mosaic (MOS). As we have stated before, investors will have to wait for the negotiations to start over exports between CANPOTEX and its customers for the fireworks to begin but nevertheless this is a trade for the next 12-18 months assuming the world economic recovery does not slow down or cease.