Friday was a mixed day for commodities and today should be a lower day for equities with ties to commodities. We are building our cash position right now, waiting for the moment to move back into the space and get some good entry points at the same time. Natural gas price continue lower, much as we have been predicting for some time, while oil and natural gas liquids prices have remained much stronger in comparison.
Oil & Natural Gas
Last Friday Kodiak Oil & Gas (KOG) rallied and finished strongly for the week. That was just after we had stated it was in, "serious buying territory." As we stated to start today's article we are on the sidelines right now, but from time to time we place short-term trades, and to play the economic news going forward, we will probably use Kodiak in the coming days. It will most likely be a trade to last a day or two and it is dependent upon the price action going forward. We would rather play the oil heavy plays than the gas heavy plays as there is just too much bad news in the natural gas sector right now.
Chesapeake (CHK) will disclose in more detail going forward the CEO's debt associated with his stakes in the company's wells. This will appease some, but does not impact the company moving forward in any meaningful way. The same problems exist today as existed Friday, and in the months before that - that is the reality and disclosure of personal debt will not solve cash flow issues the company currently faces. That is what is truly important at this point, so we shall continue to look forward to further asset sales and joint ventures to bridge this gap and help the company get to cash flow positive in the next few years.
Copper
Over the weekend an Indonesian mining policy maker, an important one at that, died after a mountaineering accident. Widjajono Partowidagdo was the Vice Minister for Energy and Minerals and there is no telling what impact this will have on the government's efforts to move forward and take more of the profits from their mining industry, and most notably Freeport-McMoRan (FCX). He was an important player in the process and we will have to wait for more news to see just how this will affect the process, and Freeport's prospects moving forward.
Uranium
Cameco (CCJ) is one investors need to watch due to what is going on in France. Yes there are other players with more exposure to France, but being one of the largest miners in the world Cameco has a large stake in what goes on there during these elections. If Sarkozy loses the election, nuclear power in that country could very well be scaled back, and so too shall the uranium refining capabilities and research. Anytime a market leader may voluntarily end its reign as market leader, there are serious issues - and unfortunately that may be the case if President Sarkozy cannot pull of what now seems unlikely.
Potash
This sector has been a major disappointment this year, however we read an interesting article this weekend discussing the price of agricultural land here in the US and if prices for the top agricultural land remain as strong as they have been, then demand for fertilizers should remain high as well. One simply has to hope that farmers plan on planting large quantities of corn as that is the largest use of potash. We are not buyers here of Potash Corp of Saskatchewan (POT), but would hold any positions currently in one's portfolio.
