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Canuck Economist

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  • Nat Gas Prices Stall After Inventory Withdrawal, Could Test $4 If Cold Snap Eats Into Surplus [View article]
    Dear "wake up people", you might consider taking your paranoia to the psychiatric hospital. Time to stop beating up on the underpaid and overworked people who are there serving you in spite of the garbage you throw at them! Look up what King Juan Carlos said to Mr. Chavez at their historic meeting - my gift to you!
    Jan 25 03:41 PM | Likes Like |Link to Comment
  • Analysts warn that with the economy so fragile and pricing competition fierce it will hard for restaurants to pass on the higher wholesale beef prices that are forecast down to consumers. Though quick-service chains will toy with their menus (more chicken) and try to use forward purchase contracts to lower costs, the impact of last year's drought could take a few seasons to reverse. [View news story]
    What kind of report is this. What analysts warn about what fragile economy? I am an economist and I can tell you that we normally know months after the fact that the economy is good. The economy has been showing signs of strength and the papers today tell us that we are close to declaring that we are in a secular bull market! OK, maybe I will say...analysts warn us that we are now in a secular bull market, that employment is improving and that businesses are starting to invest rather than hoard or distribute their cash. Since central banks have raised their inflationary targets analysts indicate that it will make it easier for restaurants to pass their costs along so we need to start looking at restaurants as good investment opportunities. How about that?
    Jan 22 11:51 PM | Likes Like |Link to Comment
  • Why Chipotle Is Starting To Get Pricey Again [View article]
    Dear team: although there is some value in your analysis, I am afraid that it is like driving by looking at the rear-view mirror. I am long on CMG because it has lots of growth potential and have been generating lots of cash flow to grow the business. They have an edge over others in the quality of their food - I look for quality in everything I buy including the stock market. Perhaps you are right in terms of short term trading but if one is investing for the long-term, the recent drop in price represents the best buying opportunity in the next two years.
    Having said the above, I will look for other analyses you have done and future posts; we will let results reveal how you stack up to your competitor analysts over the next little bit. I will store your analysis and we will look at it after CMG reports for the year.
    Jan 10 08:46 PM | Likes Like |Link to Comment
  • Chipotle (CMG) gets a lift from Miller Tabak with a solid upgrade to a Buy rating and fresh $360 price target. The investment firm makes the stock its top restaurant pick for 2013 on its thesis that higher menu prices and a rollout of a soft corn tortilla will be major drivers for improved Chipotle traffic and margins this year. CMG inactive premarket, but a mini-rally could be on tap with another firm taking the anti-Einhorn side of the CMG trade. [View news story]
    I like your comments CHM. I used this pause to get back in. I love the food and I love the stock. I made a huge mistake when I got out at $50!

    I am a burrito guy! What you get for $8 bucks is worth substantially more than anything I can get by going to its competitors - and no cheap ingredients! good value for money.

    I am back in. Thank you Mr. Einhorn! I will start following your calls from here on - who knows what other opportunities you will develop for me.
    Jan 6 05:22 PM | Likes Like |Link to Comment
  • Based On Today's Trading Behavior, Natural Gas Could Be Headed Toward A Bear Market [View article]
    for a good summary of the situation, I suggest a fairly extensive article written in Calgary for the Globe and Mail published on December 31, 2012, just 5 days ago, I quote a small section of the article below.

    "The natural gas market has been under pressure from a long-lasting glut, with inventory levels in the United States hovering well above five-year averages. In previous cycles, prices would typically rebound as companies pulled back on production, leading to a draw down on inventories and, eventually, tighter supplies.

    That dynamic no longer holds true. Energy companies have once again shifted away from natural gas production, but still face a supply problem perpetuated by their new strategy. Although gas prices are in the basement, oil prices remain relatively buoyant, with the number of rigs drilling for oil rising over the last year, in contrast to the marked decline in natural-gas rigs. Energy firms are also focusing on so-called liquids-rich natural gas plays, which produce more valuable products like condensate, butane, and propane.

    However, production companies still take natural gas out of the ground when they extract these pricier commodities."

    My view is that there is an incentive to keep producing and connecting the many yet to be connected wells because the economics are driven in part by gas liquids. A second reason is that a lot of companies need the cash so they can continue drilling programs, in order to meet drilling requirement of leases- that will maintain their ownership rights. As long as the revenues are less than variable costs they will continue to do this. They do no see themselves losing exploration and development costs in the long-term because they foresee the day when they will export gas out of the US and or Canada - which will bring the price of gas well above $5 - without even a recovery in economic activity in North America a reinforcing trend already underway. The time to start investing in Natural Gas companies will be in late 2014 but I do not expect we will see a great winter this year; a repeat of last year's dismal gas price performance has a high probability.
    Jan 5 08:49 PM | 1 Like Like |Link to Comment
  • As natural gas prices are on track for a gain after a volatile year, the U.S. Natural Gas ETF (UNG) is down 25% YTD and more than 90% since mid-2008. But hope springs eternal, as Charles Freeman says he’s betting on UNG to back his bullish thesis on natural gas. The transportation industry is on the cusp of considering LNG-powered trucks, and lower prices mean nat gas is "rapidly replacing coal as the 'go-to' fuel for power generation." [View news story]
    Yes, hopes spring eternal. on the positive side: Yes eventually exports - from Canada would also help. Yes eventually some fleets will switch to natural gas but not too likely in the next two months.

    On the negative side: heating oil prices could come down as production of fracked oil reserves continue to increase in the US and elsewhere. According to the EIA, the stocks of natural gas in storage are at an all time high for the period and temperatures have not been particularly cold. In addition, if the Republicans continue with their intransigence on the fiscal front, we are likely to see further production and job losses and lower natural gas demand.

    On balance, I do no see a positive outlook for gas in the next two plus months. Mr. Market is likely to say sell before it says buy. Disclosure: I am on the short side.
    Dec 27 10:13 PM | Likes Like |Link to Comment
  • Peter Schiff: Dollar Collapse Before Obama's Out [View article]
    When I read your collective comments, including Mr. Schiff's, I see a sick country. One in which the spirit of compromise and cooperation is gone! Bunch of politically polarized populace - me me me! The dollar will reflect this. Pity to see the decline of such a magnificent country. If you are looking for someone to blame, dont blame Obama; dont blame Congress; look in the mirror!
    Nov 15 07:40 PM | 3 Likes Like |Link to Comment
  • T. Boone Pickens sees natural gas prices rising to $4.50 or $5 in the next year and perhaps $6 by 2015, and suggests two energy favorites: National Oilwell Varco (NOV), due to its huge shale opportunity for development with support remaining for oil domestically and internationally, and Pioneer Natural Resources (PXD), pointing to its 900K acres of assets, particularly in the Permian basin. [View news story]
    Two comments: First, k2caliguy, you need to think this more clearly. You say "producers will curb supply to increase demand" this does not lead to clear thinking! producers can curb supply to increase prices yes - but they can only do that through collusion and govts will and should go after you if you engage in collusion. Without collusion, the guy that cuts back is worse off and the guy that does not is better off - not a workable situation. Normally the kind of oversupply situation we are seeing is corrected one of two ways: first, the less efficient producers to drop out of the market (usually done by going broke). The second avenue is through an expansion of domestic markets through increased sales resulting from lower prices (and long term adjustments in capacity to use the excess gas), or an expansion in exports which at the moment is limited by policy in US or export capacity (also currently the case in both the US and Canada). In the long term, we are likely to see a combination of the last kind of solutions. However, in the short-term we are limited to North American supply and demand. and I suspect weather driven winter heating demand will likely dictate the short term direction of prices. At writing time, the temperatures have been above normal....should this trend continue, I expect you would make some money selling gas short.

    Ronwagn is correct in his obervation that coal establishes an upward limit (combined with regulatory off-coal moves). However, in the short-term we are in a natural gas oversupply situation so the upper bound established by coal is not in play. If you are trying to make some money in the stock market, I would argue that you need to consider the short-term trends (excess gas supplies), because as John Manyard Keynes wisely pointed out, "in the long-run we are all dead". On the positive side, govt seems to be promoting a switch to natural gas, particularly for electricity generation.

    In a couple of years, when (and IF) the regulatory situation changes to allow gas exports and the capacity to export lines-up, we will see a quick rebalancing of (world) markets and North American natural gas prices will increase. However, this will take a minimum of a couple of years in my opinion - and that may be optimistic.
    Nov 11 02:26 PM | Likes Like |Link to Comment
  • UNG: Closing Out The Fall Bear Trade [View article]
    I agree with the caveat is super important - with storage a record levels and a warmer than normal winter, we can expect some pressure on price for the next three months. Forecast has just been announced as warmer than normal.

    On the comments on 8 dollar gas, I do not forsee any chance of higher prices until some significant exports start to take place and although there is some capacity for exports in the US, it is subject to regulatory approval which is not likely politically in US and capacity for exports from Canada are not likely to even start for at least three more years (we are likely to get mired down on approvals for oil exports - fed politically aggressive approach looks on very shaky ground here). I have a bearish view for winter prices: much better probability we will see gas at 3 or below than gas at 4. But, keep an eye on the weather!
    Nov 10 06:35 AM | 1 Like Like |Link to Comment
  • T. Boone Pickens sees natural gas prices rising to $4.50 or $5 in the next year and perhaps $6 by 2015, and suggests two energy favorites: National Oilwell Varco (NOV), due to its huge shale opportunity for development with support remaining for oil domestically and internationally, and Pioneer Natural Resources (PXD), pointing to its 900K acres of assets, particularly in the Permian basin. [View news story]
    ronwagn, you are right, Pickens is a salesman of natural gas. I also believe that natural gas has a better future than now (includng possible exports of gas out of North America) and that it is a very positive story - but it takes time and money to switch. For example, in Canada, they are only now taking about reversing the gas pipeline from Sable Island to Eastern United states and bringing gas from Pennsylvania (expensive reserves in Sable would be shut-down). So the question is when are prices going to stop coming down? It is all about supply and demand at a point in time which is now - I believe North-American natural gas prices cannot be sustained at below 4 dollars in the long term but they certainly can go below in the short term. With record levels of gas in storage it is difficult to argue that we have a shortage and that prices are going up. As it is, the price of December Natural Gas dropped by 12 percent in the past two weeks and is lower than at the beginning of October. Remember last years heating season.
    Nov 4 03:41 PM | Likes Like |Link to Comment
  • NatGas Hits 1-Year High Despite Mild Temps, First Cold Snap Will Send Prices Above $4 [View article]
    I also forgot to comment on prices, the main article did not include the price drop of last Friday. So prices are down 12percent over the last two weeks and lower than they started in October. I thought readers should be up to date. This does not mean prices might go up now; they might also come down, particularly being at an all time high natural gas stock levels. This is what makes a market!
    Nov 3 06:24 PM | 1 Like Like |Link to Comment
  • NatGas Hits 1-Year High Despite Mild Temps, First Cold Snap Will Send Prices Above $4 [View article]
    Please Watmann! if you had looked at the facts yourself, you would see that natural gas storage, according to the EIA's natural gas storage report published on November 1st, storage is "136 Bcf higher than last year at this time and 259 Bcf above the 5-year average of 3,649 Bcf". This is "rather than being down 90 percent" as you state in your post. You will also note from the same report, that "at 3,908 Bcf, total working gas is above the 5-year historical range"; which is a nice way to say that the amount of gas in storage is at an all time high!. I will leave it up to you to draw any conclusions from the information, but just in case, at this time of the year the storage continues to go up for at least a month; and I may also point out that you may also get mild weather - which would lead to the steep price declines you saw last winter. The recent coastal floods of New York and Venice don't give me comfort in terms of long term weather.
    Check the Storage report at: http://1.usa.gov/ofCrGW.
    Nov 3 05:55 PM | Likes Like |Link to Comment
  • T. Boone Pickens sees natural gas prices rising to $4.50 or $5 in the next year and perhaps $6 by 2015, and suggests two energy favorites: National Oilwell Varco (NOV), due to its huge shale opportunity for development with support remaining for oil domestically and internationally, and Pioneer Natural Resources (PXD), pointing to its 900K acres of assets, particularly in the Permian basin. [View news story]
    Typical Booster! Facts: Natural Gas storage hit record levels earlier than previous seasons, with the strong possibility of continued milder than normal weather we risk a repeat of last year's plunge in gas prices to nearer to 2 dollars. O yeah! Mr. Picken's does not have any interest in talking up the price of gas now, does he (my sarcasm). I would stay away from natural gas until after this February.
    Nov 2 11:28 AM | Likes Like |Link to Comment
  • Why QE3 Can't Work: Understanding The Liquidity Trap [View article]
    An economist with over 30 years experience in industry and government.
    Sep 17 02:13 PM | Likes Like |Link to Comment
  • Why QE3 Can't Work: Understanding The Liquidity Trap [View article]
    two things. First, inflation would be an outcome if the FED was just pumping straight money and that would encourage companies to move it of the books through investment or dividends for fear of the inflation tax. Second, the Fed is not just pumping money they are focused on mortgages for which there is a demand and in a market that has experienced low liquidity given the higher risk of this investment resulting from previous history - it helps repair a wounded industry and it avoids liquidity trap concerns of giving the money to investment intermediaries.

    This is good because it rescues the Americans that want to buy or refinance houses so it helps US citizens as directly as possible rather than focus on subsidizing a few companies (rewarding bad behaviour) as was done in original round. It also avoids further direct subsidies of ginny and fannie. The impact on other stocks is indirect.

    Not sure why the author does not seem to understand how the money is being delivered. I thought it seemed clear from the release.
    Sep 17 02:11 PM | 3 Likes Like |Link to Comment
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