Markets globally are up strongly this morning. Asia and Europe are higher on news that the Greek bond swap is happening and should have an announcement by 1 PM EST with a closing at 3 PM EST. This is also helping US futures at this time, which are up across the board. Also in the headlines is a report from the Wall Street Journal which says that QE3 may not be off the table
Kodiak Oil & Gas (KOG) was up strongly yesterday, and since our being stopped out of that position was before the market correction we are still sitting on cash on that recommendation. We are probably a day late on reentry of this trade, but the market seems to dictate it. Entry at or around $9.50/share appears reasonable to start a trade/medium-term hold.
We really like what Chesapeake (CHK) is doing in relation to buying up royalties on natural gas with KKR. We are still bearish natural gas, but on the surface we see this as another niche the company is developing which could help them further lower their cost of production if they were to do this on their own wells. If we are wrong and natural gas prices move up, the play will look that much better and further leverage up the company's earnings. So although we are bearish on natural gas prices, with this new venture we are a bit more bullish on Chesapeake. It seems backwards logically, but in the long-run we see it making them an even more ferocious competitor.
Gold & Silver
Precious metals are rallying, and gold and silver both are showing strength. It is about time after the serious hits they have taken over the past few days, but gold has rallied above the $1700/ounce level and appears to be holding and silver is now over the $34/ounce level and holding so this is very good news indeed. We like where gold find itself, but we would really like to see silver on the correct side of $35/ounce, rather than where it is now.
So we really blew it yesterday in the analysis and for that we apologize. We probably will not be buying Freeport-McMoRan (FCX) until we do indeed know what Indonesia is doing with their mine ownership rules. Two articles are located here and here. A deal will be reached, but we question at what price, so we will watch the stock and only make a move on a serious move downwards from these levels. One never knows how these deals will turn out, and we have been involved and watched from afar as mining companies have had projects taken from them via Asian nationalization. This should be interesting to watch and see how it is all resolved.
As we have stated before, US farmers are expected to harvest their largest crop ever. Bloomberg is reporting this morning that droughts in South America will deplete corn stockpiles to their lowest levels in five years just before this harvest, and that this should lead to bullish trading activity (see story here). What is bullish for grains is bullish for the potash producers because farmers have more money to invest in fertilizers and more incentive not to rotate crops as quickly. If you are willing to spend the money, rotating crops is not a necessity in the short-term so we expect this to be bullish news for potash moving forward. We remain bullish on Potash Corp of Saskatchewan (POT) as our pure play and Agrium (AGU) as our diversified farming play.