Natural Gas, Ready to Explode?
Research for Online Investors

by John Dalt

4/22/09

Thank goodness OH! Bama has given his minions their marching orders.  At his first cabinet meeting, he told his deputies to come back in two months with ways to save $100 million dollars.  The saliva is flowing; handwringing can be heard up and down the halls of numerous government buildings.  The bureaucrats have already come up with some great ideas to cut their budgets to the bone.  They are going to buy office supplies in bulk and the veteran’s department agreed to teleconference.   Let us see $100 million savings out of a $4 trillion dollar budget.

4,000,000,000,000.00 / 100,000,000 = 0.000025

If they could do this four hundred times, they would actually get to 1% savings. Amazing. Since the budget has doubled in the last six months, they have a way to go. I am reminded of taking my teenage daughters shopping. They exclaimed how much they were making for me, by saving so much.

Industrial users account for 29% of natural gas use.  Large industrial customers are slowing with the economy, natural gas is down 38% this year, and futures have fallen to the lowest price in six years.  As a predictor of economic growth, this does not bode well.

The price of natural gas is now so low that it is unprofitable for some producers to continue producing from high production cost wells.  They can “shut in” the gas, and wait on higher prices. There is an oversupply because of the success of all the shale gas fields in Texas, Arkansas, Colorado, Wyoming, and Pennsylvania.  Natural gas is a national resource that burns clean, which should make all but the most radical environmentalist happy.  You may want to look at opening a position in natural gas, you can use UNG, the natural gas ETF, it tracks the price of domestic natural gas using futures contracts.  Summer is traditionally a low use time for gas, but with any increased use in electrical generation and recovery in manufacturing the price will respond.  The current price has Armageddon baked into it.

Natural gas can offset crude oil in many applications.  The country can replace crude imports with domestic natural gas.  We do import natural gas from Canada, but who would you rather import energy from, good ‘ol stable Canada or the Potentates that control crude oil around the world?  Many conversations about wind power, solar and other alternative energy sources ignore this fact:  transportation runs on oil, not electricity.  These alternatives will replace coal, not crude oil.  Coal is mined in the U.S.; the environmentalists do not like the carbon dioxide it emits.  We are still held hostage to foreign suppliers of crude oil, unless we address the fuel for transportation.   This is where the Pickens Plan makes so much sense.  I stumbled across a great interview Charlie Rose did with Michael Crichton, he was a medical doctor as well as famous author.

If you have some time to kill, there are multiple videos of Crichton concerning global warning.  It is amazing how the left ignores anyone who disagrees with them.  Crichton has some great insights into Gore and compares environmentalism to a religion for some people.

Turbo Tim Geithner appeared this morning at the Economic Club. The hard work of “fixing” all the problems he inherited continues, but wait a minute. Geithner was head of the New York Federal Reserve Bank when all of this started.

MCD reported earnings this morning; they beat expectations, with same store sales increasing over 3%. FCX missed earnings expectations of $0.13 a share, reporting $0.11 on revenue plunging 54% year-over-year. Both companies lost in the general market selloff that occurred in the last hour of trading.

Analyst Meredith Whitney appeared on Bloomberg Monday calling bank first quarter earnings “The Great White Wash.” She explains some of the shenanigans the banks used to sugar coat their statements. She explains it better than I can, you can watch here interview here.

David Kellermann, CFO of Freddy Mac, committed suicide overnight. The SEC is investigating accounting irregularities at Freddie Mac.  Mr. Kellermann, as CFO would have been involved in answering questions.  There were no accusations of wrongdoing on his part, nor denials.

GM announced it would not be able to make $1 billion dollars in bond payments due June 1  Why would anyone own this stock?

Congress is negotiating how to push through a carbon tax on every aspect of our economy.  Everything you buy, that requires energy, will increase in price.  But Oh! Bama promised not to raise taxes on anyone making under $250,000 a year......

What kind of country are we leaving our kids, and debts?

We closed another trade today in the SwingTrader, that makes three this month with an average profit of over 10%, and there are more coming. 

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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