Larry Bellehumeur's  Instablog

Seems like a decade ago that Natural Gas hit its highs in 2008.  Natural Gas closed at an unbelievably low price of just over $3.  With the Winter heating season not starting up again for another few months, Nat Gas seems destined to fall below $3, barring some miraculous event.

How bad is the current situation for Natural Gas?  Here are some grim stats:

1) The summer time is generally a time when Natural Gas inventories climb, but this is worse than normal.  
This makes sense, if you look at why.  Nat Gas wells continue to produce their normal rates, regardless of the season. Most Natural Gas is used for one of 3 reasons:

First, thanks to the few people who wrote kind notes asking "Where have you been?"  I didn't realize that it has been about 2 months since my last report.  Between starting a new Business Venture, summer vacations and trying to enjoy the few warm weeks that Calgary gives each year, writing has been put on the back burner!

About 3 months ago, I was advised by a long-term friend to take a look at BHP Billiton as "the best single way to play the Resource space".  He further went on to talk about the dynamic growth that they had experienced, and how brilliant the management was.  Upon taking a closer look at it, he had some good points.

First, the breadth of BHP's business is impressive, as it covers just about all key aspects of the Resource world:

I just finished reading a book called "Game Over" by Dr. Stephen Leeb, and I am not sure what to make of it.  The basis of the book, at least how I have read it, is that there is going to be a pressing demand for resources (Oil, Natural Gas and all sorts of Mining products) that will push the price of these products to points that will force inflation like conditions as there was in the 1970's (if not much worse).  His theory goes further on to say that unlike the 1970s (where most of the demand for oil was caused by Political conditions), this spike in prices is one that is more of a permanent nature as the spike is more due to a lack of supply caused by a scarcity of the materials and/or the ability to extract the materials at a rate to meet the demand.  

Because of this expected spike in Commodity prices, and the lack of choices available to the US Fed to control inflation (as it cannot risk further damage to the Housing market with the rise of Interest rates, nor can the US "Debt-ridden" consumer tolerate a spike in rates on their personal debt), Leeb contends that the Fed would rather tolerate High inflation (or maybe even Hyper-Inflation) rather than risk the chance of deflation.

Is it possible to have your cake, and really eat it too? Can you really find a stock that offers very “visible” earnings, yet with some decent upside? I think so, and here are two of them…..