Talking stocks, trading, and investing in general

[idfnl]

And more bank downgrades

 

[Concordia]



Purchased CHK on 1/12/2012 @ $22.20
It finished today @ $22.28

This is an interesting one. A huge cash crunch right now, which will doubtless benefit some private lenders. Apparently most of the bank-sourced project finance in this area comes from a handful of European banks who have other things to worry about now. So there's some money to be made by other financiers.

On the other hand, I just read some interesting articles interviewing Mason Hawkins and a few of the other big investors in CHK. There's no way that natural gas won't be higher in a couple of years, at least relative to coal and oil. And with their back of the envelope calculations, that could mean a 5x return on CHK for the patient.

 

[yjeezle]

do you have an article for higher natural gas prices?

 

[RWDouty]



This is an interesting one. A huge cash crunch right now, which will doubtless benefit some private lenders. Apparently most of the bank-sourced project finance in this area comes from a handful of European banks who have other things to worry about now. So there's some money to be made by other financiers.
On the other hand, I just read some interesting articles interviewing Mason Hawkins and a few of the other big investors in CHK. There's no way that natural gas won't be higher in a couple of years, at least relative to coal and oil. And with their back of the envelope calculations, that could mean a 5x return on CHK for the patient.

I'd be slightly cautious about the long-run profitability of US natural gas suppliers. Their success hinges upon the irrationality of Arab countries. The fact of the matter is that oil production in Saudi Arabia has a marginal cost of only $5, including shipment. If countries in the middle east sense that natural gas producers are cutting into profitability of their substitutabile goods, then they can just drive out those businesses by temporarily driving down prices. And because us/Canadian natural gas production has a significantly higher marginal cost in comparison to the oligopoly in the middle east, the viability of successfully competing with a price decline is compromised. We can only hope that saudi Arabia and the likes act irrationally, which isn't too far fetched of any idea.

 

[RWDouty]



summer 2008 was great for most ppl, especially if they were long raw materials/short financial/hy. lehman fell in fall.
summer 2009 was great too as qe ends in march and hft liquidity trap hits in may/june. 
summer 2010 is not that bad, especially after david tepper's cnbc balls to the wall net long call in august.

only summer 2011 was bad.  but there was still a dead cat bounce all-in rally over the last 10 days of june.

Market timing is futile. Attempting to discern seasonal of yearly trends almost always backfires. Real estate, for example, was seen as a stable investment for almost the past hundred years... Look what happens. Speculation is the downfall of the investment community; no matter what economists say, their predictions are most always guesses based on questionable assumptions of past trends and comparable analysis. In my view, we should invest in companies and industries based in microeconomic conditions and not the irrationality of day to day macroeconomic news stories. Whether your a traditional value, GARP, or momentum growth investor, success begins
with an understanding of companies and industries. Why do you think both sell side and buy side groups have analysts focus on specific industries?

 

[SkinnyGoomba]

Mind you, I make no changes, just bracing myself for what could be a rough couple of months if 2nd qrt earnings really suck and/or Europe gets worse or the us economy continues to worsen.

Chagall simply likes to suggest tht everything I say is slightly incorrect, which may be true....yes if you were short financials in 2008 the summer was good for you...great logic.

About natty gas, I think over the long term it will come back in line with a more normal price relative to oil. Exxon seems to think it will be a good market to be in, they bought XTO in 2009.

 

[javyn]

Yeah over long term it will come back, buy why not wait until the supply dries up and the rig count starts rising again? Rig count in the US is near 10 year lows at around 650, and I don't see that changing soon. Especially since so much gas is being released while fracking for oil that they can't even store so they are just flaring the **** off.

If you want in energy, I'd get into tools and services, otherwise avoid. That's just me though.

I've always had luck jumping into NOV after it's been beat down. Got extra lucky a few years ago and even hit the split.

 

[Concordia]



I'd be slightly cautious about the long-run profitability of US natural gas suppliers. Their success hinges upon the irrationality of Arab countries. The fact of the matter is that oil production in Saudi Arabia has a marginal cost of only $5, including shipment. If countries in the middle east sense that natural gas producers are cutting into profitability of their substitutabile goods, then they can just drive out those businesses by temporarily driving down prices. And because us/Canadian natural gas production has a significantly higher marginal cost in comparison to the oligopoly in the middle east, the viability of successfully competing with a price decline is compromised. We can only hope that saudi Arabia and the likes act irrationally, which isn't too far fetched of any idea.

Oil certainly could go below $10-- it's happened before.

The case for higher NG prices (and those who benefit) has to do with cost of production in the US, which is somewhere between $3-4. Also, a lot of the recent oversupply that's driven prices down has come from drilling that companies need to do to hold onto their suddenly useful leases. The fracking has been good for some things, but has created a lot of temporary imbalances as everyone adjusts. Once those initial wells slow down (and if we get more normal winters), we're likely to see supplies shrink a bit and prices go north of $4.

On the demand side, as aging, expensive, coal plants close down, there will be a lot of power generators that will probably prefer gas to other sources of BTUs.

There's more than one way to play that development, but it's a big story that will be unfolding to someone's advantage. I don't own CHK myself, but I will be looking on with interest.

 

[chogall]

Market timing is futile. Attempting to discern seasonal of yearly trends almost always backfires. Real estate, for example, was seen as a stable investment for almost the past hundred years... Look what happens. Speculation is the downfall of the investment community; no matter what economists say, their predictions are most always guesses based on questionable assumptions of past trends and comparable analysis. In my view, we should invest in companies and industries based in microeconomic conditions and not the irrationality of day to day macroeconomic news stories. Whether your a traditional value, GARP, or momentum growth investor, success begins
with an understanding of companies and industries. Why do you think both sell side and buy side groups have analysts focus on specific industries?

There's market timing and there's reading of announced QE/OT/LTRO/ZIRP/Inflation Target monetary policies. The former requires trading acumen, the latter requires reading a few well published notes by different central banks.

Most industry fundamentals is deeply impacted by monetary and fiscal policy.

p.s., leave those 'value' investing for the secular bull market and closet PE fund managers like Buffett/Ackman/Lampert. But if you are a lucky sperm and can afford to get board seats, by all means become an 'value' investor.

p.s.s., and both sell/buy side have strategists sitting on top of analysts, ya?

SG, just stating facts, and I do know some funds that profited from short fin/long commodities since 07. Subprime first made major headline in Shanghai crash of early 2007.

 

[chogall]

Oil certainly could go below $10-- it's happened before.
The case for higher NG prices (and those who benefit) has to do with cost of production in the US, which is somewhere between $3-4. Also, a lot of the recent oversupply that's driven prices down has come from drilling that companies need to do to hold onto their suddenly useful leases. The fracking has been good for some things, but has created a lot of temporary imbalances as everyone adjusts. Once those initial wells slow down (and if we get more normal winters), we're likely to see supplies shrink a bit and prices go north of $4.
On the demand side, as aging, expensive, coal plants close down, there will be a lot of power generators that will probably prefer gas to other sources of BTUs.
There's more than one way to play that development, but it's a big story that will be unfolding to someone's advantage. I don't own CHK myself, but I will be looking on with interest.

and gold could go below $40 -- it's happened before.

but no, with all these loose monetary policies going on, they will not let oil go back to below $10. fed mandate is for price stability, and there's no price stability in oil going below $10.

 

[SkinnyGoomba]

Heading toward te negative this am...

 

[NameBack]

And June was looking so promising there for a while...

 

[Concordia]

Not that I take trading (or long-term investing) advice from economists, but here's another way to start the week off well:

http://www.nytimes.com/2012/06/25/opinion/krugman-the-great-abdication.html?hp

The Great Abdication
By PAUL KRUGMAN
Published: June 24, 2012

Among economists who know their history, the mere mention of certain years evokes shivers. For example, three years ago Christina Romer, then the head of President Obama’s Council of Economic Advisers, warned politicians not to re-enact 1937 — the year F.D.R. shifted, far too soon, from fiscal stimulus to austerity, plunging the recovering economy back into recession. Unfortunately, this advice was ignored.

But now I’m hearing more and more about an even more fateful year. Suddenly normally calm economists are talking about 1931, the year everything fell apart.

It started with a banking crisis in a small European country (Austria)...

 

[chogall]

And June was looking so promising there for a while...

the last 2 weeks of june of 2011 were nothing but strong close in positive territory, and it turned out to be a dead cat bounce until the liquidity tsunami.

 

[SkinnyGoomba]

Yes that turned out to be quite exciting.

One year has passed and we're all of about 500 points higher than this time last year on the Dow....