Abe Mishima

Thursday Outlook: Commodities, Global Markets

UNG hit an intraday 52-week low for the second time this year. It looks like a 3rd 52-week low will be made in the next week, and if a 4th one is made, then this ETF is history. In spite of this, the volume is there and traders are still buying. Don Dion is signaling DUMP, DUMP, DUMP, as though Mr. Smarty Pants is doing us a favor. I won't be dumb enough to go out on a limb and predict how this is going to resolve itself. A NAV that is 10-12% below share price is not going to curry favor, but what's the big deal? At the gambling table, you pay a premium to play the game. UNG's long term fate could be as follows. CFTC tells all commodity etf's to limit the number of contracts they can hold. The LP redeems some shares at NAV and the longs take a short term hit. UNG rewrites its charter to trade in short and long term ng positions. That one move could remove the overhead and volatility of month-to-month rollovers. Bingo, that's the reason to stay in the fund. Wishful thinking? Yes. But most investing is based on a certain degree of faith.

Today in Commodities: The Commodity Train Is Leaving the Station

David: NGAS is not an etf. "NGAS Resources, Inc., is an independent exploration and production company focused on unconventional natural gas plays in the eastern United States, principally in the southern portion of the Appalachian Basin."

Matt and others: End users of natural gas have been burned before. First, homeowners who switched to NG during the oil embargo, found themselves paying more for energy when heating oil prices fell. Electric companies are aware of the old swicheroo effect as well. Now the industry is trying to sucker in users with stories of massive new NG finds. Plentiful energy for 100 years. Be patriotic, buy natural gas! Yada, yada. We need a change of tack. Index your product to oil and coal, i.e., by BTU. Sign 10 year contracts, both assuring supply and competitive pricing. This is why people hate commodities. Buyers always have the feeling of being ripped off by the suppliers.

Wednesday Outlook: Commodities, Global Markets

David, I look forward to your comments after an ugly extended trading session on July 2, where the traders kept taking down many stocks, including big oil, gas, and commodities. The fear of being long has seized investors again. IYR, an ETF I have been watching, got slapped on the face today. I just can't get myself to push the buy button on this one. As for EFA, if you just close your eyes and buy it, it will produce double digit gains by 2010. But that is just my intuition. Every good card player has to have a sense of intuition and timing. And be blessed with (lady) luck. POT was a rollercoaster on Thursdays. Where it stops, nobody knows.

5 Reasons to Avoid the Gold Rush

Is gold a hedge or an investment? If one sees it as hedge, then at what point does one cash out, unless one plans on holding to perpetuity (a dumb decision, since gold will decline off any top). If it is an investment, then how much profit can one make, optimally trading in the metal? In neither case do I see the ROI being what I could make day trading securities. If inflation rises above 10%, gold will increase by what amount? 15%? Maybe. Who cares? I'll find ways to make money that don't involve tying up money.

One of the posters tried to make an analogy between houses and gold. He failed to allocate the costs properly. If you had X amount of dollars to invest in gold or real property (say you could buy it outright), then real property can either serve as a home or a rental. Subtract off that savings, after property taxes, insurance and maintenance. Guess who wins? Real property. OK, you don't always win with real property, because if you buy any asset, gold, houses, paintings or whatever, at the wrong time, you can lose a fortune. To me, buying gold at $1000/oz, when I could buy it at $810/oz at some future point, is the danger of investing in gold. No one ever bothers explaining this to newbie investors. That is the rub, bubba. You call that a safe asset? LOL.

Friday Outlook: Commodities, Global Markets

David, I can see why you are the #1 most followed writer on seekingalpha. Your analysis of each chart is succinct and to the point. As I try to understand what happened to the markets in the past year, I find Fareed Zakaria's article in the most recent issue of Newsweek magazine the most enlightening. We let a bunch of cowboys and speculators nearly destroy our banking system and economy. We had something that worked (or sort of worked) for decades, thanks to the Glass-Steagall act. Now we have to regulate risk. But we should go further than requiring "skin in the game." Anyone in a position of power, whether in government or finance, who makes a life wrecking decision has to pay in lost earnings, higher taxes, or reduced benefits. Examples: Congress should suffer a reduction in pension for the Iraq fiasco. Angelo Mozillo should be fined heavily for actively promoting/marketing subprime mortgages. The trouble with society is that there is no accountability.

Anyway, not to sound overly moral, I have skin in the UNG game, not because I believe that NG prices will go up, but because I sense that the price of UNG is being actively manipulated by hedge funds, and I feel I can piggyback on their moves. Known as trading what I see. The smartest members on Yahoo message boards have been trying to figure out the NG market for weeks. There is nothing divine or esoteric about natural gas. It is a commoditiy and as such it is and always will be subject to manipulation. UNG just throws in rollovers, swaps, and exchange traded volatility into the equation. Everyone and his uncle is in on the action.

China Concerns, Crashing Currencies and the Future of Gold Purchases

Gold is as artificial as currency. Unlike paper money, gold is fairly illiquid. Want a demonstration? Put two kilotons up for sale on the open market, and see the price plummet to $500/oz. The author indicated that the retail demand fell when the price went above $750/oz. With extraction costs amounting to $400/oz, what is the impetus for increasing supply? If not for jewelry and electronic plating, what use does gold have? Gold bugs have got to stop being enamored by this shiny asset. In a Great Depression, gold is no more valuable than a loaf of bread. As a hard asset, the utility is less than land (another finite, tangible asset). With value so dependent on "perception", all that glitters is not goog.

A $1Million Wager for Gold Bears

His bet is written like an options contract, namely a call. He has nearly 3 years to exercise it. So, I would not bet against him. As long as the central banks do not unload the asset, and no new major disoveries are made, he is safe. We will probably experience hyperinflation, once the world realizes how worthless American currency is.