Gigem77

Option Trader Friday Outlook: Is the Dollar Going UUP?

Untrusting:
10 years ago GE was a 60 dollar stock. 5 years ago it was 36 bucks. Today it is 15 bucks and change. During that time, gold has run from 255 to 1100. So your GE example shows how gold beat a blue chip stock over 1, 5 and 10 year periods. There have been no stock splits since 2000 and the dividends have varied from 10 cents to 31 cents, in no way compensating for the devastating drop in price.

The same thing is true of the dow, the nasdaq or the amex. Over the past 1, 5 and 10 years gold has outperformed by a large margin. GE is priced where it was in 1997 showing that buy and hold investors like you are getting killed. I bet you still own Oracle from 80.

Option Trader Friday Outlook: Is the Dollar Going UUP?

"but the price of gold collapses like quite the house of cards as soon as anyone tries to unload their shiny bits of metal." This is hyperbole without any evidence. .

The eurobanks have been selling 500 tonnes a year for at least a decade and the price of gold has risen 400% over that time frame. The IMF just sold 200 tonnes to India and the price of gold went higher.

The rest of the piece can be likewise shredded.


Meanwhile, the dollar shorts are covering fast and the DXY is less than 100 pips above the year's low. www.reuters.com/articl...

Will Windows 7 Resurrect IT Spending?

IT shops won't rush to v7 until the second service pack is released and possibly not then. Microsoft has a history of writing bloated, buggy code with unpleasant surprises for the first round of upgraders. The first step will be to setup a lab environment and test every app for compatibility and to find the bugs.
Company budgets are in recession mode and not likely to upgrade unless the new version gives a clear cut advantage.

And where is the loosening in the credit markets? That is quite a stretch. Read something by Meredith Whitney and get back to us.

How Much Natural Gas Remains in the USA?

Southwestern Energy (NYSE:SWN) has 71% of its proved reserves in the Fayetteville Shale in Arkansas. This shale is considered one of the more mature ones in North America, although still a high growth area.

The company has improved its initial production rate on wells here from 1.261 million cubic feet per day in 2007, to 3.611 million in the second quarter of 2009. It has done this with longer laterals on multi stage hydraulic fracturing operations. Southwestern Energy has seen its finding and development costs fall from $2.55 per Mcfe in 2007 to $1.53 per Mcfe in 2008.

Similar finding costs have been reported for gas in the various shales. It is economical way below 5 bucks, even assuming the need for total costs to = 3x finding costs.

CHK CEO Aubrey McClendon has said that they will increase drilling and production at 2 to 3x finding costs .

XTO just hedged 55% of their 2010 natgas production at 7.49 per mcf. I think that is a great bit of hedging.

Undiscovered resources are those deposits that have not been pinpointed, but are generally expected to exist based on geologic conditions. They are not just creating a wild guess. Drill down on your links a bit further next time.

Opportunities for Both Shorts and Longs in Natural Gas

Ari is wrong on several points. Natgas is not fungible like oil. US export capacity is quite small and other sources exist closer to Asia. So demand in India has no impact on US natgas prices or supplies.

US consumption is still running about 4bcf per day less than during the same period last year. Industrial demand is responsible for this drop. The mounting job losses tell us that demand is not returning. The inventory replacement bounce in GDP is temporary.

The UNG is issuing more shares. They began on September 28th.

Pressure in the pipelines and storage facilities is so high that operational flow orders have been and are being issued to stop the producers from compressing more gas into the system. The rig count is increasing from the summer lows. There are hundreds of wells that have been drilled but await completion. So the supply overhang is not just from storage, but also from curtailed production. This means that winter draws will be smaller. We will exit winter with more gas in storage than last year and begin this cycle again. When will industrial demand rebound?

Residential and Commercial heating demand during the winter are not enough to compensate for the loss of industrial demand. We need petrochemical plants, car factories and refineries to reopen or increase capacity utilization and that is not happening yet.

Nothing the politicians have done so far is helping natgas. If they would convert the government's fleets of vehicles to use CNG, that would help. Heating oil prices are low and inventories are above the high end of the average range. All of this is good news for consumers this winter.

So the best hope for the natgas bulls is that speculators will run the price higher and that there will be sharp short covering rallies like the ones seen this year. That is a trading environment for the nimble. It is not time yet, imo, for longer term investors to put money to work here.

Shares of producers like UPL, XTO and CHK are tracking the broad market, not the natgas price. So they are quite overbought and will fall with the SPX when it corrects. Their 7-9 dollar hedges are dropping off the books. So earnings will show some real hits over the next few quarters.

Natural Gas: An Energy Resource Whose Time Has Come

GAZ and HNU.TO are also natgas etfs. Most of the natgas E&P companies do NOT pay good dividends. Companies like APA and LINE have significant oil production that has helped weather this weak period for natgas prices. LINE operates like a royalty trust. The royalty trusts pay decent dividends and the Canadian royalty trusts (PGH, PWE, ERF etc) have some tax issues that must be considered.

If you like natgas as a transportation fuel, then consider CLNE, Boone Pickens entry into the space.

Inventories May Have Dropped, But Crude Oil Prices Still Constrained by Natural Gas Oversupply

Where can heating oil be replaced by natural gas? Residential users can make the conversion, but where is the evidence that they are doing so this year?

Distillates include diesel as well as heating oil. Diesel demand is greatly reduced by the recession. That is the main reason for the builds in storage.

LK is right, oil is fungible and natgas is not. I add to that, that while the futures were moving higher on speculation, spot prices fell. intelligencepress.com/.../

Has the Dollar Hit a Major Bottom?

Since this article was written on 17-August the dollar has tanked from over 79 to a new yearly low of 76.46. Gold has risen from 930 to 1011. Silver ran from 14 to 17. The S&P 500 has risen from 975 to 1048. Prechter is wrong again. Everybody who took his advice and bought the dollar, shorted gold and shorted stocks, has lost money.

How to Trade Natural Gas, Crude Oil and Gold ETF Funds

UNG is issuing more shares per their late Friday announcement. Their share price fell to 10 bucks in the after hours. The 2-3 day short covering rally is over. The spot natgas price at the Henry Hub went below 2 bucks last week, rallied a bit this week and then dropped Friday. It will be below 2 again soon.
The UNG rollover process takes about 4 days during the last 2 weeks of the contract. The October contract terminates in 2 weeks on the 25th. They will close roughly 20% of the front month futures contracts. Who will buy? Storage is already over 90% full with another 10-12 weeks left in the injection season. Demand in September is the lowest of the year.

Oil Supply: As Russian Production Tops Out, World Supply Will Continue to Slip

OPEC has spare capcity of 6 million bpd. Iraq has untapped reserves with the potential to add another 3-4 million bpd. World demand is still below the highs set last year. www.tradersnarrative.c... The US increased total annual production last year when BP brought their "Thunderhorse" platform online. Supply has far outstripped demand.

The futures markets are dominated by large speculative players like GS, MS and JPM. Hedge funds and oil companies vie with each other for tankers to store crude as part of their trading strategy. GS is the largest trader in the oil futures market. They neither produce nor consume oil. CFTC head Ginsler is correct in seeking to limit the large speculators.

Rough Times Ahead for Natural Gas

UNG is a flawed vehicle. It trades at a premium to the NAV. UNG announced yesterday after the close that they were issuing more shares. That may not be enough to eliminate the premium, but the price dropped after hours to 10 bucks. The October natgas contract terminates trading on Friday, September 25th. "UNG’s investment strategy is to close out its positions and ‘‘roll’’ from the near month contract to expire to the next month contract during a four-day period beginning two weeks from expiration of the contract.” How many contracts will they close into the biggest glut of natgas in the last 20 years? Don't let the 2-3 day short covering rallies fool you into thinking the low is in place. Canadian natgas is projected to go below a dollar before winter and the US spot price for natgas is easily headed below 2 bucks.

Four Keys to Gold’s Next Move

Gold as a trade has had a good run and the COT data shows a near term top. But from a macro view gold is insurance. www.youtube.com/watch?...

Nibbling on Natural Gas, Concerned about Atlas Pipeline Partners

Natgas storage stats for 5 years by week americanoilman.homeste...

Spot natgas prices around the country intelligencepress.com/.../
Natgas is under 2.50 out west and will fall further as storage fills. Watch the pipeline and storage operators for OFOs, Operational Flow Orders, forcing curtailment. The injections to storage will diminish, not because supply is diminished but because pipeline and storage pressure is high. It is way too early to get bulled up on natgas.

Has the Dollar Hit a Major Bottom?

Prechter was bearish on stocks through the 90's, ouch! He was wrong about gold in 2001, 2002 and 2003 and still is. He was wrong about interest rates in 2004, clinging to the notion that falling stock prices would cause higher rates when in fact just the opposite happens. Is it so hard to imagine that he is wrong now about the dollar and deflation?

Frank Holmes: China Is the 800 Pound Gorilla of Commodities Demand

It was not a good day for the gold miners either.