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The Smartest Guy I Know, at What He Knows

|Includes: The United States Natural Gas ETF, LP (UNG)
The market performed a perfect Friday belly flop.  Without any good or bad news, no bullish pronouncement or scandal we drifted back and forth to close down by the smallest of margin.  Volume was light except in the few short squeezes that are fun to watch.  CIT and AIG have caught fire, trading approx. four and seven times normal volume.
I had a nice visit today with a new subscriber.  M.W. lives in Cape Cod and is witness to the spectacle for the last Kennedy brother.  We talked politics, markets and rockets.  M.W. is retired from service in our nation’s space program.  He was a rocket scientist working on fuels, some of which are still used today.
I mention this because it is amazing and humbling the people I get acquainted with through
I commented in Wednesday’s letter that I left early to help with my brother’s farm.  I only reveled this because sometimes I don’t know if the letters are as lucent as I would like, and time constraints do not change deadlines.
In mentioning my brother the farmer, I commented that he is “one of the smartest guys I know, at what he knows.”  I repeat it again today, because after writing it, I paused and thought how much absolute truth there was in that statement.  Each of us has an area, a sphere in which we operate secure in our knowledge and experience.  In business, I have been able to transfer experience from one to another.
Investing and trading stocks is different.  The very qualities that may make you an excellent businessman can kill your portfolio.  The market does not pause to welcome you to the game; there is no latitude for your opinion.
Remember someone sold the security you just bought.  He was convinced to sell at the price you were willing to pay.  Conversely, when you sell, the buyer believes he is making an incredible deal at the price you are asking.  The other side of the trade may be a hedge fund, mutual fund, individual, or computer.
I went to our high school’s football scrimmage last night; our youngest daughter is a cheerleader.  I was talking to an acquaintance who sold his business last year.  He told me he was going to start trading. I asked him if he knew the statistics for new online investors and traders.  I cannot remember the source, and am unable to verify the accuracy, but I told Jim that 80% of all new online investors lose money in the stock market.  It is a dangerous playground to learn your trade.
With malice toward none, the market gives and takes.
We are presently bullish on the natural gas, as it gets cheaper and cheaper.  I picked the chart below out of the quarterly report for Norse Energy highlighted yesterday.  This chart shows what happens to natural gas production if exploration slows and you do not replace the reserves.  I thought it illustrated perfectly how future production will fall because of the present low price has slowed exploration.  This is occurring; just as a recovering economy will increase demand.
Natural Gas Decline
Special notes on the graphic: "
Pause in drilling during first half of second quarter"--"Drilled only two horizontal Herkimer wells in Q2."
Disclosure: Long UNG