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UNDER CONSTRUCTION NG: Long-term bull, short-term BEAN-O Redux



In all seriousness, this may have something of interest to you, so feel free. Just keep in mind that this is just a scratchpad right now.

Hmm. Maybe I can find a convenient way to do this off-line. I hadn't recognized the potential confusion until Freya was kind enough to point it out to me. As soon as I get time, I'll try to find some appropriate software that will let me emulate what happens here. Then this entry will disappear until it is ready.

In my first foray into exposing myself to public ridicule by having the hubris to publish my n00b assessments of the near-term outlook on natural gas here, I talked about the near-term bearish outlook I have and why.

To recap that previous article, I'm bearish at this time due to:

  1. current fundamentals of supply and demand,
  2. a milder hurricane season forecast (reduced risk of disruption),
  3. a weak(ening) economy,
  4. reduced consumer spending,
  5. an administration "green" program that emphasizes liquefied coal and seldom mentions NG,
  6. a strengthening dollar (temporarily?) driving commodity prices down (at this point, a "one day wonder" 6/3 only - WHOOPS! Dollar up again Fri. 6/5 with similar results),
  7. chart analysis.

My recommendation was for long-term investors, who may be driven by emotional support of "green" investments, to avoid NG at this time unless they treated it as a trade and possessed strong self-discipline, if they couldn't keep their emotions in check. I also suggested the use of options if they must get in now.

As I stated there, I am long-term bullish on natural gas and stated I would discuss my reasons after more research and organization of my thoughts.

  1. Long-term economic recovery (google for forecast "economic recovery 2009" only turned up 506,000 english pages, so it was "Slim Pickins" (no relation to the cowboy actor). I selected the first few I saw that appeared to be non-country-specific for reading and to try and determine a most likely scenario.

    - Consensus Forecast: Economic Recovery Dr. Bill Conerly
    - CNN Money: UCLA Anderson School of Management Forecast
    - An ISM Survey of Purchasing Managers
    - IMF Survey Magazine, IMF Research
    - Ken Jepson Report on Economic Conference on

    I also tried to keep my personal biases out of the picture - one of the biggest risks when trying to make assessments based on the research of others and you enter with a pre-conceived notion.

    My conclusion from reading the above? To be determined after reading.
  2. Supply, Infrastructure: availability of North American NG fueling stations.
  3. Businesses/services use in transportation already on the rise.
    - General
      International Association for Natural Gs Vehicles
      Michael Fitzsimmons' "Westport Innovations: A Growing Natural Gas Engine Business"
    - Port authorities
    - Mass transit
    - Taxi fleets
    - Shuttle
    - Waste and recycling fleets
    - Long-haul (Class 8) trucking
    - Parcel Delivery Services
    - Fertilizer & other product manufacturing (thanks to one eye for reminding me of this)
  4. Stationary heating, cooling, power, manufacturing applications.
    - Industrial uses:
    - High-rise buildings in high-density population areas
    - Data center conventional/UPS replacement applications
    - Residential heating
  5. Utilities, mandated "green" portfolios.
  6. Availability of proven viable NG personal vehicles.
  7. Depletion of crude oil resources: ever more expensive.
  8. Entries of "majors" into the NG industry.
  9. Legislative, The "Pickens Plan": creating political will to "do the right thing".
  10. Some other thoughts by other folks

Ok. Now the "heavy lifting" begins. I hope I can do it in a couple weeks or so. Lots to look at.

Using UNG may not be the best way to invest/trade NG. One needs to consider FuturesTrader's Comments in an article by Jim Letourneau: "Natural Gas ETF Jumps on No News - Turning Point. Do keep in mind that if you are trading in a tax-deferred account, some of the tax implications do not apply.

Disclosure: long Capstone Microturbines (CPST), have been in and will get back into Clean Energy Fuels (CLNE) when the price and time looks right, no position in NG at this time, will be trading in and out as promising opportunities arise, plan to eventually be long as an investor.