Commodity Investor Q&A
With Matt Badiali
June 03, 2009
Q&A update: A few weeks ago, I warned you to watch your trailing stops on natural gas...
These massive natural gas discoveries mean we will have a glut of supply on our hands, so don't count on a return to high natural gas prices. In the short-term, I'm not sure how high UNG could go. If you own it, keep an eye on your trailing stops and don't be afraid to take profits.
The United States Natural Gas Fund (UNG), which tracks natural gas prices, hit a high of $17.46 on May 12. By May 22, it was under $14. I hope you took some profits on the way down.
When natural gas hit its low, my colleague Jeff Clark called it the "second chance" trade of 2009. Just a week or so later, UNG is up 14%. It could spike even higher from here, but I'm skeptical...
Commercial and industrial uses of natural gas consumed 46% of the supply in 2008. As more factories close, demand for natural gas will continue to fall.
And now, we have supply of natural gas at $3 per feet, or mcf (market prices are about $4 per mcf)... Qatar is shipping in "wet gas," a mixture of gasoline and natural gas. Gasoline prices are so high, Qatar can afford to "throw away" the natural gas at $3. That sets a low floor for natural gas prices and could mean big trouble for our domestic producers.
Both these things together – a slumping economy and a new low-price supplier – put a strong headwind against natural gas prices. Unless natural gas falls under $3 per mcf, I'm on the sidelines.
Q: Gold and silver prices are on a tear, is it too late to buy? – J.S.
A: No, it's not too late. But investors should buy mining companies rather than bullion right now.
A couple of our recent essays have covered this idea in detail. (Brian Hunt took on silver miners on Monday, and Porter Stansberry covered gold miners in DailyWealth.) It's worth your time to read both essays, but here's the crux of the matter...
While bullion is a good store of wealth, mining companies make better investments during bull markets. In the last big run in gold prices, from 2005 to 2007, the miners (measured by the AMEX Gold Bug Index) rose 120%. They outperformed bullion by 34%.
Investors are beginning to fear inflation, and metal prices are rising fast. That's pushing the stocks of gold miners higher. The situation reminds me of oil in 2006...
Investors made hundreds of percent buying solid oil companies. Giants like Petrobras exploded up hundreds of percent, on reserves that weren't going to be produced in decades. Share prices rose on sheer euphoria.
The same is now happening in precious metals. That's why I told S&A Oil Report readers to buy Silver Standard (SSRI) back in March. The company holds 6.6 million ounces of gold resources and over 1 billion ounces of silver resources. It's perfectly suited to take advantage of the situation I described above. Readers are up 88% so far, with much more to come.
Good investing,
Matt
P.S. Later today, I'm going to tell Oil Report readers about another company prepared to profit off the precious-metal tailwind. This tiny silver miner produces 4 million ounces per year and is woefully underpriced.
I'll be disappointed if we just double our money in this company. Click here to learn more about the Oil Report. |
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Lumber prices jumped 5% yesterday... wood prices are up 30% in two weeks but still undercutting coal. |
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Silver bull market boosts Silver Standard... the silver miner is up 40% since May 1. |
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Chico's makes another 52-week high... the women's retailer is up 160% since Christmas. |
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Earnings today... Collective Brands, Toll Brothers, Williams Sonoma. |
|
Last |
Change |
52-Wk |
| S&P 500 |
942.87 |
+2.58% |
-32.67% |
| Oil (USO) |
37.43 |
+2.83% |
-63.68% |
| Gold (GLD) |
95.73 |
-0.49% |
+9.47% |
| Silver (SLV) |
15.35 |
-0.78% |
-7.93% |
| U.S. Dollar |
87.95 |
+0.16% |
+19.30% |
| Euro |
1.43 |
+0.80% |
-8.18% |
| VIX |
30.04 |
+3.87% |
+68.48% |
| HUI |
387.89 |
+0.00% |
-8.04% |
| 10-Year Yield |
3.72% |
0 |
-0.31 |
|
| Company |
Sym |
Industry |
Force Protection |
FRPT |
autos |
SolarWinds |
SWI |
software |
Rackspace |
RAX |
networks |
VistaPrint |
VPRT |
printing |
NuStar Energy |
NS |
pipelines |
Schering Plough |
SGP |
Big Pharma |
Williams Pipeline |
WMZ |
pipelines |
Coeur d'Alene |
CDE |
mining |
World Fuel |
INT |
fuel storage |
Data Domain |
DDUP |
data storage |
Macrovision |
MVSN |
software |
Shanda |
SNDA |
online games |
AngloGold |
AU |
mining |
SXC Health |
SXCI |
software |
Pegasystems |
PEGA |
software |
Duncan Energy |
DEP |
pipelines |
Starent |
STAR |
networks |
Tellabs |
TLAB |
telecom |
URS |
URS |
construction |
HDFC Bank |
HDB |
bank |
ICU Medical |
ICUI |
medical devices |
Texas Roadhouse |
TXRH |
restaurants |
Seabridge |
SA |
gold |
Riverbed Tech |
RVBD |
networks |
Chico's |
CHS |
clothing |
Eldorado Gold |
EGO |
mining |
Pepsi Bottling |
PBG |
soft drinks |
National Presto |
NPK |
appliances |
AsiaInfo |
ASIA |
software |
Trian |
TUX |
acquisitions |
Arris Group |
ARRS |
telecom |
Changyou |
CYOU |
online games |
IAMGOLD |
IAG |
mining |
Gold Fields |
GFI |
mining |
ArcSight |
ARST |
software |
STEC |
STEC |
data storage |
Cubic |
CUB |
defense |
Carter's |
CRI |
baby clothes |
Palm |
PALM |
cell phones |
PepsiAmericas |
PAS |
soft drinks |
Mead Johnson |
MJN |
baby formula |
Central Garden |
CENT |
lawn & garden |
Neutral Tandem |
TNDM |
telecom |
Suburban |
SPH |
propane |
3Com |
COMS |
networks |
Metavante |
MV |
bank services |
Randgold |
GOLD |
mining |
|
| Company |
Sym |
Industry |
KeyCorp |
KEY |
bank |
OSI Pharma |
OSIP |
biotech |
|
|
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