The U.S. recession has curbed demand for natural gas while supply has continued to increase. The obvious result has been a fall in prices. Currently, natural gas inventories are plentiful, but they will not remain so permanently. Lower natural gas futures have already caused a significant supply response. The Baker Hughes natural gas rig count is down to 665 from a high of 1606 last August. A lower rig count means less new natural gas supply. Add to that the natural decline in production in existing wells and when demand returns, there is the potential for a spike in natural gas prices. Baker … [Read more...]
Savers are Terrified
July 17, 2009 Despite pockets of strength, the bear market in stocks staggers on, eyeing, with an increasing daily concern, the RPM’s (Radical Progressive Movement) sweeping program of socialism and quasi central government nationalization. The stock market hated the Bush-fronted neo-con disaster, and rightfully, is even more scared of the “Chicago Cabal.” At mid-year, the Dow Industrials are down 4.8%, the Transports are down 9.9%, and the Utilities are down 4.4%. It’s a negative clean sweep for the blue-chip industries despite misleading strength in the more speculative market sectors. … [Read more...]
Your Tax Dollars at Work
July 10, 2009 From 1995 through 2006, corn subsidies in the U.S. totaled $56.2 billion, and this spring farmers seeded the second largest amount of land with corn in more than 60 years. According to the WSJ, “The Obama administration is pushing a big expansion in ethanol, including a mandate to increase the share of the corn-based fuel required in gasoline from 10% to 15%. Apparently, no one in the administration has read a pair of new studies, one from its own EPA, that exposes ethanol as a bad deal for consumers with little environmental benefit.” Corn is a killer and darn few Americans … [Read more...]
A 0.01% Money Market Yield
July 3, 2009 I just checked the yield on my money market fund. How does 0.01% sound to you? Sounds to me like the mid term GPA average for the Delta House gang back at Dean Wormer’s fictional Faber College. You’re getting less than 0.5% from 3 and 6 month treasuries and bank CDs. And you know that it is my forecast that the U.S. dollar is going to crater versus the Swiss franc and the Canadian dollar. Moreover, the yield on the Dow is less than 3.5% isn’t it? Savers are in a darn tough spot. And conditions will worsen due to ongoing mismanagement at the White House, Treasury and Fed. And now … [Read more...]
Your Retirement Future Today and Tomorrow
Have you looked at interest rates lately? 3-month T-Bills are at 0.20%, 3-month CDs 0.38%, money markets 1.29%, 5 year CDs 2.62% and 10-year Treasury bonds are at 3.68%. Compare this to the near peak of the tech bubble ten years ago when the 10-year Treasury was at 6.02%. $1 million in a 10-year Treasury Note paid $60,000 annually. Today it pays $37,000 or 40% less. In retirement your ability to understand income and values are paramount to your investment success. Thinking in terms of 10 year periods allows your portfolio time to breath. And in terms of values, think about each asset class … [Read more...]
The Blue-Chip Triad
June 25, 2009 The Dow Utilities are down 5.0% YTD. The Dow Industrials are down 5.4%. And the cherry on the cake of the 2009 bear market in blue chip stocks is the 11.7% decline in the Dow Transports. The blue-chip triad reflects a number of serious concerns: (1) complete and total incompetence in Washington; (2) the worst world wide economy since the 30’s depression; (3) North Korea, Iran, Afghanistan, Iraq; (4) the prelude to a nasty run up in U.S. interest rates and inflation; (5) at a 3.4% yield (Dow 30) blue chip stocks simply do not offer compelling value. Gold is up YTD, reflecting the … [Read more...]
A Saucer-Like Bottom in Housing
June 16, 2009 As an inference reading based futurist, my goal is to target unfolding trends and the catalysts to effect change. Areas of interest include terrorism, politics, currencies, government, world financial markets, and economies. Most immediately, I think the 17% jump in May housing construction in concert with May’s increase in building permits augers well for a saucer-like bottom in housing. Home builders were definitely less confident in June than they were in the spring. Mortgage rates have been rising and there remains a nasty overhang of unsold homes. As such, the U.S. has now … [Read more...]
One of the Best Leading Economic Indicators
June 12, 2009 The stock market is one of the best leading economic indicators. And investment grade U.S. stocks continue in a Bear market. (1) Dow Jones Industrials, down 0.1% (2) Dow Jones Transportations, down 5.6% (3) Dow Jones Utilities, down 7.6%. By contrast many International Indices are soaring (1) Brazil up 42% (2) Canada up 17% (3) Hong Kong up 26% (4) Japan up 11% and (5) Singapore up 32%. Moreover with a 25 p/e (based on 2009 estimates) and only a 3.3% yield the Blue Chip Dow Industrials simply do not offer compelling value. It is true that the speculative NASDAQ index is up 16% … [Read more...]
Fundamentals vs. Sentiment
Stocks are assets. The true value of any asset is simply the discounted value of all future cash flows. This holds true for stocks, bonds, property, natural resources, and even collectibles. To calculate the value of an asset you simply estimate all future cash flows and discount them at an appropriate rate. When you go through this exercise for a company you quickly realize that the value of any individual year's worth of cash flows accounts for a relatively small portion of that company's value. The majority of a company's value is determined by adding up discounted cash flows far into the … [Read more...]
Default Risk Among the Many Concerns with Annuities
The recent turmoil in the equity and credit markets has created angst and panic among investors. Emotionally charged investment decisions are being made without consideration to the long-term consequences. The insurance industry thrives in this type of environment. They offer neatly packaged products with bells and whistles that befuddle even the most experienced investors. The opportunities offered appear too good to be true and they are. A popular product with investors is variable annuities because they offer guarantees. The truth is, they are expensive and are anything but risk free. … [Read more...]