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  • The Japanification Of Europe [View article]
    Why didn't you say so? Kidding.

    Enjoyed both articles - esp. your excellent summary from the last article (pasted below).

    However, I think it's important to be selective - try to guess the most likely trends, then target the expression of those trends and not be afraid to have a more concentrated portfolio. In the end, the 'diversified' portfolio may not even do what you think since most assets will rise and fall together.

    I looked for something still undervalued - the price of 2018/19 U.S. natgas - undervalued in terms of marginal cost of production; undervalued in terms of U.S. vs. World prices; undervalued in terms of natgas vs. other energy - and went long it. Then since I am using leverage, hedged with what I thought was the best short candidate: EUR/USD.

    Only two assets, but guessing it is a more 'resilient' portfolio than one filled with stock and stock etfs. Prefer staying power over 'diversified' any day. Now just waiting for gravity to do its work on natgas (work off the excess investment; ramp demand sources). The mkt will not wait 'til 2019 to adjust.


    So, we summarize the reason for being bearish on the euro:

    Much of the eurozone is mired in low to negative growth and inflation
    Even German growth is decelerating
    Low or negative growth and/or inflation ravages public finances
    The growth differential with the US is growing
    The Russia crisis is likely to exacerbate this
    US monetary policy is tightening
    Eurozone monetary policy is likely to be loosening
    The dollar gains in times of international crisis

    The funny thing is, betting against the euro would actually help the eurozone, at least somewhat.
    Aug 24 04:53 PM | Likes Like |Link to Comment
  • The Japanification Of Europe [View article]
    Not a stock market enthusiast given 5 years into a QE-driven bull market. EWG, EWJ, SPY....just alphabet soup. Have no idea if going up or down so why make a significant wager on it?

    However, looking at the two USD-forex pairs related to this article:

    I chose to short the Euro because it acts as a HEDGE to my long positions (long 2018/19 natgas futures). If there is a significant pull back (esp. if liquidity related), the USD and Yen will be two of the few assets that likely go up in price. Short EUR/USD is hedge; not so sure with USD/JPY...unless Japan is the source of the next calamity.

    In the more likely event we just putz along, the USD should increase in value relative to the Euro for all the reasons discussed above and: less onerous demographics, productivity, energy sector (and related mfg under construction), more-capitalistic, more open...

    One of the biggest risk to short Euro is the 'weaker' econs leaving and making the Euro stronger. As Prof. Pettis explained in his paper and comments - that ain't gonna happen anytime soon given German bank balance sheets. (others have addressed this as well - this is just a really good paper on where the EU is now...which is, how in the heck can the Euro not go down??)

    The ECB/Germany will acquiesce to the demands for looser policy....that old if you owe the bank $100 vs owing $100 million catch. ;)

    ------------ Pettis article link:

    Some Things To Consider If Spain Leaves The Euro
    Michael Pettis
    Seeking Alpha
    May. 26, 2014

    Aug 24 04:03 PM | Likes Like |Link to Comment
  • Natural Gas: 2019 Is The 'Sweet Spot' [View article]
    I don't follow the short-term issues closely, though I am following the updates on the possible continuation of the Polar Vortex this winter...but who really knows.

    I don't think I can compete with the large institutions in the near term as they are bigger, smarter and faster. The short-term price of natgas is highly dependent on the weather and the actions of CEOs whose agendas may not be to sell natgas at a profit. The weather and 'illogical' people are things I prefer not to bet on.

    Many of the producers are in deep debt, cash flow negative; yet resistant to cutting money losing production because the revenues do cover variable costs, or because the CEO is afraid analysts will issue a 'sell' if they do not continue to grow.

    Not a lot of hedge funds purchasing futures contracts in 2018/19. If you look at the E&P MLP transactions, they are not selling (hedging) much either. Not sure how a hedge fund could establish a significant position. Of course, they cannot have too large a position given the position limits currently being discussed at the CFTC. Perhaps most importantly, hedge funds HAVE to perform every quarter or year...two years max or their investors walk.

    This are some of the advantages an individual investor has and it may be wise to use them. I believe given the issues detailed in the above article that it won't take 2 years for 2019 natgas to make the move from $4.45 to the $6 range. It's not real exciting to watch...until it is.
    Aug 19 05:29 PM | 2 Likes Like |Link to Comment
  • What Will Linn Energy Gain From The Most Recent Asset Purchase? [View article]

    I don't have LINE's numbers specifically for Barnett, but do overall and for the industry and they are very telling.

    E&P MLPs are designed for conservative income-oriented shareholders. As such, hedging is integral to their business plan. They typically 70% to 100% of production for three to five years.

    If anyone is willing to part with long-term production at these prices, it is the E&P MLPS...and they are not.

    Now, look at Linn Energy's – May 2014 presentation - Slide 19

    100% of expected natural gas production hedged thru 2017
    then drops to 1/4th in 2018… presumably near zero in 2019?

    ---- note - this next section includes oil...but same trend. No doubt, the % always drops in the out years, but 1 - 5% in 4 years?

    Slide 20 shows Linn vs. peers and vs E&Ps for BOTH oil & gas -

    Linn Energy

    2014 – 100% hedged
    2015 – 89%
    2016 – 85%
    2017 – 67%
    2018 – 12%

    C-Corp Peers (CLR, FST, XEC, KWK, NFX, PXD, RRC, SWN, WLL

    2014 – 47% hedged
    2015 – 20%
    2016 – 4%
    2017 – 1%
    2018 – 1%


    2014 – 73% hedged
    2015 – 52%
    2016 – 37%
    2017 – 21%
    2018 – 5%
    Aug 18 02:15 PM | 1 Like Like |Link to Comment
  • Natural Gas: Why It Will Keep Declining [View article]

    I think when tradewithjoy is writing "we see..." he/she is referring an internal dialogue or a discussion with a kid brother or something.

    People have requested more info, explanations, links to research...but all the poster does is repeat the same made-up, ultra-bullish price projections.

    Well, I guess in this case they at least gave a reason - though it only showed a lack of understanding.
    Aug 17 09:25 AM | 1 Like Like |Link to Comment
  • Natural Gas Is Far Oversold, Expect A Rebound Soon... What's A Good Play? [View article]

    These are my notes on the LNG export schedule (again, i think it is crazy to export vs. sub natgas in transportation fleet with a small natgas tank added to our CURRENT cars to enbable them to run the first 60 miles each day on natgas). Anyway, back to our present course...

    2016: Sabine Pass 2.76 bcf/d (trains 5&6 in 2018 add 1.4 more = 4.16) (FERC approved)
    2017: Cove Pt 0.77 bcf/d
    2018: Freeport 1.8 bcf/d (FERC approved 7/31/14)
    2019: Lake Charles 2 bcf/d
    2019: Cameron by Sempra 1.7 bcf/d (FERC approved)
    2019: Jordan Cove 1.2 bcf/d

    Total: 11.63 bcf/d…plus 4 to mexico = ~ 15 bcf/day

    (note: the current pipes into Mexico are like the equivalent of a fully functional LNG export terminal already, and will be double that by 2019; actually they are better in that is much lower transport/process cost)

    --------- More importantly...

    ...and from a wider viewpoint, PIRA consulting is tracking the ramping of total demand - in their latest blurb below, they state demand is ramping right on (their) schedule - which is twice as fast as the EIA.

    Ziff Energy, another consulting group I just posted about, indicates current full-cycle natgas costs are $6...that's with sweetspot of Marcellus helping bring down the avg.

    As posted, several times before, Wolf Mackenzie says these Marcellus sweetspots are gone by 2020.

    PIRA, WolfMac, Ziff - there are ALL oil & gas industry pubs...and this is before we get to what will happen to the US dollar vs. real assets - esp. food and energy over the next 5 years.


    U.S. Awash in Potential Natural Gas Supply

    PIRA’s long-term gas production forecasts are grounded in external assessments of technically recoverable resources (NYSE:TRR). The EIA appears to be extraordinarily conservative in its recently published estimates of shale gas TRRs, and has taken a similarly cautious approach with respect to its projections of U.S. medium-term gas demand and supply growth. PIRA sees Lower 48 production growing twice as fast as the EIA between 2013 and 2019, led initially by associated and wet non-associated production gains. Toward the end of the decade, a rising call on supply led by the industrial sector and LNG exports likely will require contributions from higher cost sources of production. MORE….

    ('More' means you need to be a client or pay $20K for the full report.)
    Aug 16 07:55 PM | Likes Like |Link to Comment
  • Natural Gas Is Far Oversold, Expect A Rebound Soon... What's A Good Play? [View article]
    Good stuff, Aricool. Great to hear it those kinda numbers from the CEO of EOG.

    It's understandable that all the shale-is-lowcost-forever group does not accept even (updated) findings from Hughes, Berman and others that could be classified as anti-fracking/enviro sources. Would think 2 times about rejecting Hughes work. He absolutely nailed the Monterrey write down - about a year ahead of the official EIA writedown. Did any SA pundit have any prescient views on the Monterrey shale? It was to be such a huge addition to production, they had to comment, right? Whether to parrot the industry or denote skepticism, they must have had something to say.

    Anyway, posting again something from a energy consulting company who I assume makes their money selling research to the industry and its investors. It's difficult to understand why they might inflate full cycle costs. Hoping one of the shale-gas-cheap-forever members will enlighten us.

    In the event there is no answer, will repost something similar on the next macro-oriented shale gas SA story.

    Again, I have no idea regarding the weather or when the effects of the shale gold rush will be worked thru - all I can reasonably bet on is that by late 2018/19 - the full cycle costs of the marginal MCF and ramping demand sources will make the current $4.40 price on Oct/19s look like a gift horse...and it won't take til 2019 for the mkt to adjust to that.


    Ziff Energy: $6 life-cycle cost for natgas

    “I see that as activity for LNG,” said Bill Gwozd, senior vice-president for gas services at Calgary-based consultant Ziff Energy.

    Gwozd noted that the “life-cycle cost” for drilling a new well (the amount required to drill and maintain a well until it’s finished production) adds up to $6 per gigajoule of gas. However, North American prices remain below that level. On Wednesday, the spot price for gas sold through the AECO Hub in Alberta settled at $4.25 a gigajoule.

    --- source:
    Aug 16 05:08 PM | Likes Like |Link to Comment
  • Natural Gas Is Far Oversold, Expect A Rebound Soon... What's A Good Play? [View article]

    Random thoughts? Conspiracy theory? If you review the interchange to which you are replying you’ll figure out someone was cornered on their statements and then resorted to personal attacks, and then when pressed a 2nd time, took their ball and went off.

    You also wrote, “ the short lived spike in near term NG from earlier this year was completely ignored in forward pricing in your out year guesstimate range”

    So a cold winter in 2013 does not affect pricing in 2019?

    Who would have thought? What compels you to make this contribution to the board?

    Did you know shale was porous?

    Anyway, all this valuable data out there to which you refer (furnished for your very own personal enrichment from people that have nothing to sell you) has led an incisive person like yourself to some conclusions that differ from mine

    There are INDUSTRY (not anti-fracking/enviro) sources that differ from your story line of cheap natgas for years – I am as tired of referencing them as you are of ignoring them.

    There are E&P CEOs out there saying they need $5+ NOW (that’s $5.52 in 5 years with just 2% inflation per year in costs associated with fracking, disposal, water…) to pursue dry natgas – and they are STILL are not using full cycle costs – as they are correctly writing off costs or categorizing them as sunk, etc.

    In a few years, natgas will be priced ABOVE the full-cycle costs of the marginal producer. It will NOT be priced by some efficient producer who made a good land purchase/lease in the Marcellus. Why do you keep discussing the cheapest producers when others discuss HH pricing?

    PIRA and other have demand ramping by over 18 bcf/day by 2019. They foresee spikes in prices because supply will not always be smooth and price does not necessarily equal marginal costs + 10%.

    I am betting that 2019 natgas will not be priced a $4.50 at that point – as it is right now (again, that’s the equivalent of about $4 in today’s terms). I prefer that bet over your E&Ps company bets due to rising rates, creative writing in financial statements, and the history of oil, gas, mining…development of taking the best results and generalizing them across geography…and in perpetuity.
    Aug 9 10:43 PM | 2 Likes Like |Link to Comment
  • Natural Gas Is Far Oversold, Expect A Rebound Soon... What's A Good Play? [View article]

    Accusing me of condescension!? You are too funny! Here are some of your quotes to me - this is what I responded to:

    “I struggle to derive much value from your…responses”

    “What real value do you think they bring”

    “Where are your….contributions?”

    = Translation: you are not intelligent enough to understand anything of value about this industry/your posts are worthless.


    Last time we had an interchange, I complimented you telling you that I realized that people respected your work on company research, but that I had no interest in it - just focused on industry/macro issues.

    This time, I responded directly to your attacks, and used a bit a sarcasm and (perhaps) humor - but not sure my negativity came close to yours. Think I was more insulting your pride than intelligence. Anyway, I'll take your well wishes with a smile and hope you ignore everything I write/any research I post - and that we never need to exchange another word or idea.

    Good luck in Craig-land.
    Aug 8 10:40 PM | Likes Like |Link to Comment
  • Natural Gas Is Far Oversold, Expect A Rebound Soon... What's A Good Play? [View article]

    Wow, you just got on Craig's s-list! :) In addition to all the trends working against his company recs, why bother with a stock when the asset itself presents such a value??

    When you are the last to know the company-specific info; when your interests really are not #1 regardless of the what the corp bylaws say.

    I think the bylaws should be rewritten after what we just saw in RE, banking, and empire, get bonus, get promoted...oh yeah, and increase shareholder's equity. These guys and girls do the same thing over and over.

    Not sure how much longer the general mkt will stay levitated on QE and interest rates with one way to go. Stocks - especially ones with capital intensive budgets and neg cash flow should trend down with rising interest rates....but those same rising rates could help LT futures.

    In addition to the above, when you buy into a company stock, you are essentially buying the whole futures strip - all there production - for both oil and gas (plus the ngl's of course). The thing that is outta whack is natgas, and there are some demand sources that are ramping to address that, and it's pretty easy to guess (see the PIRA links). Plus, natgas is 'pulling' on oil and other forms of energy like gravity. So why invest in oil too (which also something you do when you buy most E&Ps).

    Enjoy reading your posts as well. The author below seem have found the same strategy you're using..but for crude.



    Challenges of a backwardated crude forward market

    Keith Barnett, Asset Risk Management, Houston
    July 18, 2014
    Aug 8 06:48 PM | Likes Like |Link to Comment
  • Natural Gas Is Far Oversold, Expect A Rebound Soon... What's A Good Play? [View article]

    I don’t analyze the companies – why would I given the trends in motion.

    As for the ‘quality’ of my posts, most every posts links to sources that are the cause of my observations. I go out of my way to source from pro-fracking/pro-LNG export/pro-O&G sources – including the post to which your respond…so you seem to have bit of a problem with reality.

    What’s so cool about SA is you can click on my the ‘Comments’ hyperlink right under my name and see that you are just spouting NGLs.

    Let’s start with the post to which you just replied. What is your beef?

    That E&P are not deferring large tax burdens? (want the source?)
    That US E&Ps are not taking on onerous debt? (want….
    That they are almost all negative cash flow? “
    That they don’t have high depletion rates? “

    …and the source I linked was to a newsletter by the CEO of an E&P!

    If you have no objections to the above, then you are the one that seems to have a (emotional?) issues.

    Are you holding SWN, EOG, RRC…these past few months? Perhaps that’s the cause of this outburst.

    All the sources that I link to document the trends I write about in my posts. I read the SA macro related articles/posts on energy so I’m aware of what’s been posted on SA – and I try to just post new info. So even if the reader thinks I am full of it, at least there’s a link to something related to natgas.

    The trends made me conclude the best energy investment is late 2018/19 natgas and to hedge it with long dollar positions vs. other various other currencies (was the Yen, but now Euro) to counter what I am guessing will be the continued strength of the USD (the denominator in my natgas long).

    Speaking of industry sources, what do you think of Jen Snyder’s comment about the sweetspots in the Marcellus being exhausted by 2020? She’s an MIT grad with 20 years experience in natgas, and head of research for Wood Mackenzie for NA shale assets….she probably a card-carrying member of Greenpeace so I wouldn’t trust her. ;)

    I think you’re fishing in the wrong pond, Sr. Craig. Let’s watch and see what happens.
    Aug 8 06:28 PM | Likes Like |Link to Comment
  • Natural Gas Is Far Oversold, Expect A Rebound Soon... What's A Good Play? [View article]
    Excellent exchange, Aricool. Way to stay on subject.

    Guessing they will do the usual: ignore, joke, say they don't have the time, explain how cash flow and retained earnings don't matter because of all the capital assets that can deplete by 60% in year one; 90% by 3 years...and for which have very optimistic assumptions on depleting rates 3+ years out based on conventional well statistics......and for assets which they wrote off 50 to 100% of the investment in year one - which means they deferred some large tax bills....all the while as the gradually move from the most economic parts of the play to the least.

    What's so funny about this is all the discussion about buying this stock or that. If an E&P loses money year after year (actually loses, not 'financially') then it is worth ZERO. Actually, less than zero, and these companies are trading for 10s/100s of millions, billions in mkt cap.

    So...either their product prices have to rise for them to earn the valuation they ALREADY have.

    Since natgas prices are not going up anytime soon (given the empire-building CEOs, greedy banksters and ignorant investors) the best place to invest in energy (other than 'picks and shovels which may be fairly valued) is where I have been writing about ad I wont repeat.

    ---- ps

    To Aricool's point on retained earnings....something I posted earlier in the week - coming from WITHIN the industry no less - as an investors in a US E&P, you don't 'effectively' own very much due to all the debt:

    --- from Aug. 4

    Interesting comments out today from the CEO of Peyto in his August Newsletter (see pg. 1, column 2). Basically, US producers get to exaggerate their assets and unless energy prices increase, the banks/lenders "own" all the assets (though it would take a default for the transfer to occur).

    Basically, E&P shareholders own nothing (5%?) but the HOPE someone buys their shares from them at a higher price and/or energy prices go up.
    Aug 8 11:40 AM | 2 Likes Like |Link to Comment
  • Natural Gas: Why It Will Keep Declining [View article]

    "The 10% is income you could get while NG stays in a small range before it goes up."

    Given where stock/home/etc. prices are and what it took to get them there (QE, financial repression, ) - guessing MINUS 10% is just as likely as +10% over the next couple years.

    "I don't see $6/mmbtu NG for 2+ yrs. If it does other than dead of a bad winter, it's time to buy futures."

    This statement makes me think your are referring to UNG, or the current natgas contract. I could care less. Better off in a casino in Vegas and more fun.

    I am referring to the price of natgas in teh 2019 futures market - see here...scroll down for 2019 pricing:;catandsubcat=Energy|P...


    The price of natgas in 2019 has little or nothing to do with a harsh winter in 2013 or 14 or 15....

    It has everything to do with the large megatrends in motion - which you and many others have alluded to.

    The point I have been trying to make (and you have as well on many occasions) is that the supply and demand fundamentals will be different in 4 or 5 years...hence, one would assume the pricing would different.

    But you know what, it is not!

    My previous posts on this article and others suggest some reasons for it, as well as provide many links that refer to costs, supply, regulatory issues....and usually from industry sources rather than anti-fracking/enviro sources that have an even more compelling story.

    I did order the book you referenced. It was only $6 on amzn in paperback. More because I enjoy learning history - like how the industry likes to trumpet the best results, generalize them to the entire play and make optimistic revolution, after energy revolution, after...
    Aug 6 10:35 PM | Likes Like |Link to Comment
  • Natural Gas: Why It Will Keep Declining [View article]

    "giving up 10% or so over the next 2 yrs to hit it big later"

    Giving up 10% because you think it's likely 2019 prices will fall further and provide a better entry point?

    Guess that is what makes a market. I look at where I can park my money in a time where most everything is expensive (bid up by QE and abnormally low int rates) and in what is most likely to be a stagflationary enviro for years to come in which food and energy prices outperform - but which does not translate to stock prices outperforming due to the effect of interest rates.

    We all realize too much natgas right now. Most of us realize prices are unrealistic; full cycle costs are higher than price and there are many trends in motion which will increase those costs - perhaps substantially.

    As you know, the price of 2014 natgas should have little to do with the 2019 price...but it likely does. Lower prices put more strain on producers and they sell land, leases and future production - some pledged to banks - in order to keep producing more. Also, there are many that want the perception of low natgas prices for years to come and so little volume in the long term contracts that it would not take much for the industry to keep prices in 2018, 19, 20...low. (obviously, speculation on my part, but stranger things have happened ;) ....and how many billions are riding on regulations, laws, US-based plant locations, export policy, other govt support?

    $4.50 for Oct 2019 natgas (assuming CONSERVATIVELY 2% annual dollar devaluation vs. energy over the next 5 years) = $4.08 in present terms.

    That's where I want to hold my wealth - not gold - not the stock market - it all starts with energy - and there is no better deal out there than natgas.

    Assuming you can time when the aforementioned selling pressure will subside; or when buyers (who need to perform for their clients within a year; 2 years max) will step in is a guessing game I don't want to play.

    Why would you when a move to $6 would be a 33% gain from $4.50? I am guessing that will occur within 6 months to 2 years, and you use leverage all the more. Risk of leverage is obviously the downside, but guessing another shale 'gold rush' on the back of the one we are still working thru not likely.

    PIRA out today pushing their new report on how natgas demand will skyrocket by 2019. (see below)

    By the way, I monitor the 2019 contracts daily. The Open Interest was just 300 some contracts 2 weeks back. Now it is over 2,000. Not a big number, but someone is starting to accumulate, and that is just from Nymex/CME. The OTC mkt for LT futures is much larger.




    U.S. Industrial Gas Boom Heating Up

    Structural changes that could lead to an unprecedented increase in the call on U.S. gas supply have become more visible of late. Underpinned by a decisive global competitive price advantage, PIRA foresees a gas-intensive U.S. industrial renaissance, together with LNG exports, cross-border pipeline exports to Mexico and emergence of gas for transportation fuel, contributing to a ~18 BCF/D increase Lower 48 gas production by 2019. North American gas buyers and sellers alike will face unique challenges in the pursuit of opportunities in such a game-changing environment largely underpinned by LNG export projects and the industrial sector, which will be led by the chemical industry. This report highlights recent commitments to support gas-intensive manufacturing that will be heavily concentrated in the U.S. Gulf Coast region.
    Aug 6 01:37 PM | Likes Like |Link to Comment
  • Natural Gas: Why It Will Keep Declining [View article]

    Where are you getting all your figures from?

    On associated gas producing most new NG - look at this chart -

    On tight NG peaking 2022 - based on what data? I keep quoting Jen Snyder of WoodMac stating Marcellus sweetspots gone by 2020 (ref below). David Hughes has a faster timeline. If those sweetspots are gone before 2020, not sure how production keeps ramping...unless ng much higher.


    Probably the thing I disagree most with in your statement is buy oil now and natgas future in a year or two....because why? Because the writing that is on the wall now will become apparent to everyone, and the pricing opportunities that exist now will be available two years in the future??

    That is a ridiculous statement.

    Late 2019 natgas can be locked in for $4.50 RIGHT NOW. Given drillers are not covering full costs, that they are selling future production (like 2019 natgas) to obtain loans/increase borrowing bases; that drillers are loaded with debt...given the best areas of the plays are getting worked off...given the demand sources ramping...given interest rates having one way to go...and the US$ vs. energy/food having one way to go........not sure why you would wait.

    ------------------- Jen Snyder is a an MIT grad with 20 years experience in natgas and is head of research for WoodMac for NA shale assets.

    "…Nevertheless, Wood Mackenzie sees some limits to the resource. For example, gas production in the Marcellus Formation, which extends across New York State, Pennsylvania and West Virginia, has soared despite relatively low gas prices, driven in large part by especially prolific wells in northeastern Pennsylvania. But there are only so many wells to drill in that core area of the state. “In our view, by 2020, that inventory of wells will be exhausted,” Snyder says. (Jen Snyder)
    Aug 6 10:13 AM | Likes Like |Link to Comment