Michael B. Krause

UNG Hasn't Changed the Laws of Natural Gas Supply and Demand

Buy low and be patient? This is short term trading vehicle with serious contango effects. If you believe in high nat gas prices, buy a producer.


On Aug 13 08:48 AM Steve20423 wrote:

> Classic buy low and be patient. I keep buying as much UNG as I can
> below 13. It's reaaly easy for many oil burners to convert to Gas.
> If you expect to make a quick buck day trading this probably won"t
> work so well unless of course we have one good storm. Last time
> I checked we're in Hurricane season.

UNG Hasn't Changed the Laws of Natural Gas Supply and Demand

Contrarian to himself.... Probably will work, just because it is the opposite of what makes sense to him.

Feb10 gas is already 5.71. If front month did nothing, UNG would still be in the mid-12s as gas prices had recovered more than 50%. Strong contango is hard to fight. The bright side: if storage fills up and price can't go any lower even after producers are forced to shut in production, maybe that'll catalyze a big move up? Maybe, maybe not. Flip a coin.

Unemployment Data: Nothing to Cheer About

The bright side to this is that this is one group that does not already have mortgages to pay (generally).


On Jun 05 10:54 AM frosty wrote:

> Many of this year's 2MM college graduates have hit the street looking
> and immediately joined the 9.4%. The rest will hit the street over
> the next 4 months. Even if fewer and fewer jobs are uncreated, more
> and more people will be seeking alpha (bad pun isn't it?). This is
> not good news, it's a tragedy.

Is This U.S. Dollar Move the Real Thing?

A weak dollar would create an export driven economy. It is not an export driven economy right now because the dollar has been historically so strong. Send the dollar to 3.00/euro and I guarantee you there would be plenty of demand for everything manufactured in the US.

Is This U.S. Dollar Move the Real Thing?

This isn't an 'enthusiastic endorsement'. I am merely stating the facts that if the Fed is to advocate the current capital holders retain their power position, then inflation is the way to do it. To enable creative destruction (ie Fisher's WSJ interview this weekend) as an alternative, then there will be a power shift within society. Nothing the Fed nor treasury has done supports Fisher's view.

Furthermore, the impact of doing no monetary stimulus on real output is disastrous as well. We will see layoffs and unemployment of epic proportions if we do not both monetarily and fiscally stimulate. Look to early Great Depression for evidence.

On May 23 09:28 PM altaman wrote:

> Your enthusiastic endorsement of quantitative easing and high inflation
> shows your total lack of concern for the disasterous effects these
> insidious policies will have on millions of innocent americans of
> all ages and wealth levels. Have you no shame sir?

Long Term Treasury Yields Likely to Rise, Pressuring Dollar Lower

Everyone likes to be clever and say US treasury yields are going to the sky (and thus the US government is headed towards bankruptcy). Thus the massive interest in this piece.

Any article saying to buy treasury bonds right now is uninteresting, unjustified, and generally doesn't have much popular appeal.

Interesting.

Positioning for Reflation

Remember the credit-created portion of money supply is not made of available credit, it is used credit. The whole crux of the measurement problem is that the effective credit multiplier has dropped, and conventional metrics can't really tell you how far it has fallen. It is clear if you look at M2 money that the destruction of credit money does not show through these aggregates, otherwise you would see a sharp negative spike down (I believe it is still approximately positive y/y, even if you factor out monetary base growth).

If the Fed's knew how much money had been precisely destroyed, this whole problem could be easily solved by printing and filling in the hole directly (capitalizing the banks). Instead, they are creating programs that are the equivalent of a blind man stumbling around in a china shop. Eventually, they will get it right (and even go past). Since these financial markets have self-reinforcing mechanisms, I imagine that once the trend reverses, it will reverse euphorically, and we will get large one time moves in inflation rates. Those won't be sustainable - we may get 10-20% annual inflation rates for a year or three, but eventually the move will subside. Rate of money creation is just important as actual amount created. If they achieve their goal, they can just subside the rate. The difficulty here is the lag time between all of these behaviors.

Remember, if the Fed achieves an upward revaluation of houses by altering the fundamentals (by changing the long term cost of capital), banks presently insolvent are sitting on a gold mine.

All I can say is this: imagine the credit multiplier is not 10x right now, but 5x. Simultaneously the money base doubled (and will soon have tripled). At the moment, the short run (1 year), we're barely keeping our head above water preventing deflation. In the long run (2 years out), as the supply of liquidated homes clears, we are left with the same monetary base and the fed unable to mop a majority of that liquidity up (since it primarily made up of long term MBS, treasuries, and CDOs traded for treasuries in early Fed programs). The new money base will be 3-4T while the multiplier will recover from 5x to 10x, lets say. Suddenly real aggregate money supply has the means to double once credit starts moving. By the time the recovery starts, it will probably be a lot more difficult to position.

Bank Nationalization and the TARP

Or the flip side: At this rate, you won't be able to buy a box of saltines at .50 because your stocks will continue depreciating, tax revenues will collapse resulting in a repeal of any government income you might consider yourself entitled, and your pension will be worthless because all of the corporate debt it invested in went bad.

Barrick Gold Nails the Hedge

The 9.5m ounces sold at under or near production cost are an obvious penalty, but you have to realize ABX has hedged crude buying (big input cost) at $90 for this year. It would make them no sense to deliver those hedges right now. I think Aaron is buying time for when he can get production cost closer to the value of the hedges (and take advantage of crude at $40) ... maybe 2 years out? Then it makes sense to deliver.

The company has 125m ounces of reserves, and this hedge basically penalizes under 10% of the reserve as a wash with 0% profit possibility. With respect to the other 90%, they can capitalize on spot gold.

Since the market has known about this forward for a long time, it is not an issue and has already been well priced into the stock. (basically, with the hedge we're talking about 500-600m in forgone revenues per year for the next 10 years assuming gold were to average 900/oz over that period). But if gold went to $2k/oz, ABX's revenues on the unhedged portfolio would still more than double. Holding all other input costs constant (unrealistic), gross profit would move from $3b/yr to $12+ b/yr.. Quadruple in earnings, quadruple in stock price.

You get the idea why people like miners.

It's Not a Credit Crunch, It's a Deflation

Take a look at this link. I propose a "national refinance bank" to refi -everything-.

scriabinop23.blogspot....

We're all thinking along the same lines.

It's Not a Credit Crunch, It's a Deflation

Good points. The availability of credit is a key input to price level, particularly of larger capital assets (real estate being one of them). The better the Fed reflates the credit sensitive sectors' assets, the more precisely the problem is solved.

Here I outline some ways to do it.

scriabinop23.blogspot....

Buy Treasuries for a Trade

For a hedge against variable rate debt. I stand to benefit much more if rates fall.

Six Companies Poised to Gain from a Natural Gas Auto Mandate

Look up breeder reactors. Very little actual waste. Also, look up vitrification. Waste is not an issue.

Six Companies Poised to Gain from a Natural Gas Auto Mandate

Actually, y/y natural gas production and consumption is relatively unchanged. Demand is down a little bit, but it appears producers have shut in a bit of production to compensate for what could potentially be in the market.

Natural gas' cost of production does not enable it to be anywhere as efficient as nuclear power.

Like I always say, the solution is simple: We need to build 100-200 nuclear power plants, spend 500B to subsidize all/most new cars purchased as electric or plugin hybrid cars (and give trade-in incentives to move the fleet over). These nuclear plants need to be breeder reactors that can make best use of fuel. We can use all of the to-be unemployed troops now positioned in Iraq to set up property security around this new infrastructure.

This would stop the status quo and get us into the new paradigm effectively. If you like this idea, write a letter to Obama and suggest it. This is the only way to affect change.

A Curious Call from Societe Generale

I actually read the report today. His methodology isn't exactly what I'd consider bullet proof. He outlines the put/call ratio and MACD as his technical support, then makes the leap of faith between lower electrical consumption being abnormal resulting in government anarchy and rapid yuan devaluation. This guy's analysis is crackpot. I'm wondering how he holds his job.