Goldbugs, TA and Stragglers

I do believe the safe route to profit from the gold exploration cycle is Franco-Nevada.  FNV has a deep portfolio of royalty rights and the cash to invest in additional juniors prospects at favorable prices.  Junior Gold Exploration at Zeal.  Seven arguments for gold stocks:  Casey Research.

Fed heads Lockhart and Dudley are open to more easing.  As for Friday’s face ripper, I have not even tried to understand the European news:  Sober Look.  What I do know is policy makers will actively choose to debase or society will default.  Bill gross seems to be thinking inflate or default at Pimco.  More irreverent is Jim Willie.

Bottom calling:  The CRB Just Formed A Final Three Year Cycle LowToby Connor.  Treasury’s vs CRB:  Stockcharts.  I see The Classic Failed Breakdown Trap in copper too:  Stock Sage.  Transports look good:  All Star Charts.  Long term price/earnings ratio:  Chart of the Day.

Meanwhile, US Global Trade Forecast to Grow 4.7 Percent at JOC.  And this decade will be the most innovative in history at VB.

Energy Eleven

Hello Brent contango at FT Alphaville.

“…the U.S. will drastically reduce its reliance on important oil, in particular from the Middle East…China’s story is precisely the opposite.”  WSJ

Details on yesterday’s petroleum inventories:  Hard Asset Investor.  Crude triangle pattern at Nifty Charts.

“Western Canada Select – a blend of heavy oil sands crude and conventional oil…” is now under $40 at MiningHigh Yield Canadian Oil And Gas Dividend Cuts Are Looming at Seeking Alpha.

“Obama appointee wades into oil export debate before it begins” at Platts.

Tillerson:  “Losing our shirts’ on natty at Marketwatch.  Note the export comments at the end…

U.S. tiptoes toward exporting a gas bounty at the Financial Post.

Meanwhile, the natural gas stocks were up almost 4% yesterday.  In a reversal:  Signals Lining Up to Buy Natural Gas at Dragonfly Capital.

Be very, very careful with liquids and NGL’s:  WSJ  (Google the title to read the whole article.)

China Meme, Good and Bad

Independent Stock Analysis considers the industrialization of China a major investment theme.  Materials and metals, of course, are how we play it:  Dramatic copper demand growth expected from China, India, Brazil at Mineweb.

Rising China is a Misnomer…and Other Actionable Takeaways from Frank Holmes.

Chinese investing stateside:  Fortune.  Understanding China’s one child policy:  Economist.

Investors must always be vigilant against their biases.  China’s economic fortune sure has been taking a beating in the financial media.  Thus we consider the bear case:

Dr. Copper says watch out below at Sober Look.  And more at Kimble Charting Solutions.  A technical look at FCX:  ChessNwine.

We know from observing the industrialization of that nations iron ore is the first material to peak in usage intensity.  Iron ore has been a whipping boy lately, being priced at 6 month lows.  Yet, Iron ore hits 5-week high as China continues to forge steel near record pace at Mining.  You can be sure they know this too, but Rio Tinto takes next steps in its iron ore development plans at Rio Tinto.

Chinese Data Mask Depth of Slowdown, Executives Say from the New York Times.

The Macroeconomics of Chinese Kleptocracy at Bronte Capital and a follow up.

Vale and Goldcorp by John Tumazos.

Oil and a lot of Gas

We arrive at our desks to weak prices, even with Almost 23% Of Gulf Of Mexico’s Oil-And-Gas Output Cut By StormIB Times.  Natty will remain depressed withdrawal season begins next fall, while oil needs help from the a ‘Saudi Arabia committed to oil supply stability’The News Tribe

These notes from last week’s oil supply and demand symposium might be the best thing we read all week:  World of Wall Street.

Perhaps to much opinion, but some worthwhile tidbits and interesting charts:  Energy and Capital.

Looking at Encana’s investor day presentation, Understanding the Big PictureHaynesville Play.

Rig count -5 (+16 oil and -21 gas) at Haynesville Play.  In their Energy Stat of the Week, Raymond James calls for a 25% reduction in the rig count.  WOW.  Raymond James

On the Marcellus and natural gas:  “Canadian imports into the northeast will probably end in two years (2014), and flip around to a net export position.  Midcontinent flows into the Northeast will probably end a year later(2015).”  RBN Energy

No wonder then, Natural Gas is Not Breaking HigherDragonfly CapitalGazprom Biggest Loser as Shale Gas Upends World Markets at Bloomberg.

About Chesapeake’s new Chairman:  Fuel FixWith CEO Out, What’s Next For Forest Oil?  Wall Street Journal.

Alberta scours the globe for workers:  Financial Post.

MAP: How Oil Flows In And Out Of Every Country In The WorldBusiness Insider.

Commodity Complex and Big Picture

I would like to point out the left side of this chart represents multi-generational lows in real terms:  Commodity Prices vs Long Term Average from BespokeImpact of Commodity Prices on the Consumer:  Bespoke.  I am not in the Club of Rome ‘limits to growth’ school of thought: Grantham’s Resource Limitations pieces from last year are more like it:  Guru Focus.

Meanwhile, U.S. Stocks Tumble as Commodities Enter Bear Market at BloombergCommodities Make the QE2 Round-Trip at Pragmatic Capitalism.

S&P 500 technical analysis:  All Star Charts.  Just a reminder of our secular bear market:  ChessNwine.

Off topic a bit but interesting:  The Risk Of Being A Shipping Magnate at Forbes.  Foreign direct investment chart.

Goldbug Central

Gold Stock Valuations at Zeal.

Note the deflationary period in Weimar marks relating to gold:  Casey Research.

About this gold consolidation since last August:  Kimble Charting Solutions.  A forty year silver chart with its recent consolidation:  Kimble Charting Solutions.  Platinum to gold ratio:  Bespoke.

The credit bubble, of course, drives the fantastic gold fundamentals.  Prior to the financial crisis, housing was the largest driver.  I continue to observe decent low middle income housing being in shortage, mortgage rates being suppressed and McMansion pricing pressure.  The housing market is not so bad out there, let’s check in:

  • He chronicled the housing bubble, now a February explanation of the two bottoms:  Calculated Risk.
  • So Housing is Local…  at Value Plays
  • Fannie Mae expects some GDP growth from housing, finallyHousingwire
  • US housing: shadow supply meets shadow demand:  Sober Look

Since the financial crises, debt sponsored by sovereigns has been driving the credit bubble bus.  Here is a chart of the disasters in the West:  Chart of the Day.  (Note how much runway China has in front of themselves.)

Oil & Gas Dozen

Oil, coal and solar in China at Bloomberg.  Oil demand in India:  Reuters.

North American spot crude oil benchmarks likely diverging due to bottlenecks from the EIA.

“Vast fortunes await those willing to quickly claim Canada’s still-unknown troves of tight oil reserves, though it may cost them a small fortune first.”  Financial Post  Drug tests coming to the oil sands this fall at Mining.

Oil and stock market divergence:  Sober Look.

A month old, but Investing in the Eagle Ford Shale Oil Play from Oil and Gas Investments.

I’m not sure posting this is a good idea:  Oil and the CRB Approaching a Final Bottom.  Gold Scents

Statoil: Natural Gas to be Fuel of the FutureRigzoneLNG seen viable fuel for heavy-duty trucks at Oil and Gas Journal.

Oil and natural gas ratio:  Bespoke.

A fascinating look at Chesapeake’s MLP sale:  MLP Guy.

Precious Fix

Ridiculousness continues:  Multi-trillion plan to save the eurozone being prepared at The Telegraph.  State pensions will be papered over imo:  Financial Sense.

Fleckenstein – Fed Takes Half Step, Will Be Forced to Act Again at King World NewsA visible slowdown in global economic activity at Sober Look.

Prepare for the Pivot Point in the Gold Exploration Cycle The Gold Report.  If so, Franco-Nevada would be the bluest of blue chips with their perpetual call option upside.  The occasional junior would explode, senior producers would do fine, SLW and RGLD would be good, but FNV would be best.  If the thesis is correct.

The trader goldbugs love to hate, Dennis Gartman:  “Buy Miners, Not the Metal” at Money News.  Today doesn’t look so good, but are Gold Miners Poised to Rally?  Stock Sage.

But which way?  Gold and Silver on the Verge of Something Huge! – Are You Ready?  Safe Haven

Energy!

Oil Extends Decline as Inventories Reach Most Since 1990 at Bloomberg.  Left unmentioned was gasoline and distillate inventories in the lower limit of the average range…

E&Y Study: O&G Companies Focus on Drillbit Growth in 2011 from Rigzone.

From ND governor urges speedy, safe pipeline building:  “More than one-third of the natural gas produced during oil drilling in North Dakota is burned off as a byproduct of the state’s escalating oil production, state statistics show.”  CNBC.  Bakken returns and pipeline constraints:  Petroleum News.

Ghawar was supposed to have puked by now:  Oil Drum.  As for Peak Oil, an undulating plateau looks right to me:  Financial Sense.

Fracking:  Truthland vs Gasland from Haynesville Play.

“Looks to me like we might have a bottom on our hands in the crude oil market.”  All Star Charts

Equities Rally Without Oil from Bespoke.

How Real Is Shale?

About yesterday’s mess in the patch:  Barrons.  UBS went the other way, with less analysis:  Reuters.

“Valero could stop importing light, sweet crude to its Gulf Coast refineries as soon as 2013 and fully rely on U.S. production,”  Fuel Fix.

Rail shipments of oil up 36% this year:  Globe and Mail.  Thus the strengths in the rails:  ChessNwine.

Part III on Bakken crude pricing:  RBN Energy.  Brent-WTI spread at Bespoke.

Commentary on OPEC’s meeting last week:  FT Alphaville.

The Duvernay shale is a colossal oil and gas play in Canada:  Mining

At last, a bottom in Natural Gas:  “I believe strongly that the low at 1.902 will not be seen again in my trading lifetime.”  Peter Brandt

Haynesville rig count at Haynesville Play.

Energy Dozen

Oil Trades Near Eight-Month Low Before OPEC Meeting from Bloomberg

Oil production change by country in 2011.  Economist

A summery of the IEA’s latest Oil Market Report:  IEA  EIA Lowers Oil Price Estimate, Posts Gulf Hurricane Shut-in Estimates at Rig Zone.

It’s still too early to say if this is a trend, but for the first time in four years, stocks and oil are headed in different directions:  Crossing Wall Street.

Energy input costs viewed as permanent change consumption behavior, changes viewed as temporary do not.  Economist

Fears of global oil scarcity overblown: BP report at Globe and Mail

The Marcellus Changes Everything: Gas Flows, Transport Contracts, Basis at RBN Energy

Shale boom to fuel 1.5 million jobs by 2015, study says at Fuel Fix

Off topic:  Meanwhile bureaucrats live in fantasy land:  Oil Price.  And “Truthland: The Factual Alternative to “Gasland” via Mark Perry.  If you cow tow you can be exempted from Iranian oil sanctions, while China wields to big a stick to be pushed around.  Business Week

Easy Easing?

Endless QE? $6 trillion and counting  Reuters

Easing Seems Likely, But of What Form?  Financial Sense

One British central banker say bond buying should be expanded:  Bank of England should buy company loans at Reuters.

Re-reading Bernanke’s playbook:  Business Insider

A United States Representative to Congress “has offered his own $804 billion jobs plan that calls on the federal government  to hire the nation’s 15 million unemployed Americans for jobs paying roughly  $40,000 each, and bail out all the states and cities facing budget crises.”  You can’t make this stuff up.  It is dated from last fall, but it is real.  And if the credit bubble is going to be debased, it’s only the beginning.  Fox News

Have a Golden Plan from ChessNwine.  Gold technical analysis from last week:  Decision Point

Energy Bonanza

Expect the Bakken boys to report stellar Q2 numbers:  “April…was the largest year-over-year increase in the state’s history at 73.5%…) via Mark Perry.  Also, The Bakken Buck Starts Here – Bakken Crude Pricing – Part II at RBN Energy.

Lower oil prices will crimp industry spending by Peter Tertzakian in the Globe and Mail.

Notes from a Pickens interview on CNBC:  Million Dollar Way.

Sad news for peak oil disciples in the Financial Post.

In Canada, Oil and gas juniors adjust, but still get no respect from Financial Post.

Blackstone CEO: Now is the Time for Long-Term Energy Investments at Oil Price.

Oil Prices Could See a Major Shift in Direction in the Near Future from Oil Price.

Exxon Mobil’s Tillerson:  “There is huge shale potential in shale rocks in West Siberia…The exploration work will take years to establish if the reserves are commercially viable…”  Fox Business

This editorial alludes to higher US production and lower imports leading to a lower risk premium inherent in the price of oil.  Washington Examiner

The Coal Waterfall Still Searching for a Bottom by ChessNwine.  Taking a look at coal royalty name Natural Resource Partners might be worthwhile:  Seeking Alpha.

This is as important for natural gas as it is for coal:  “My analysis indicated approximately 41.1 GW of capacity, or about 17% of existing capacity, is vulnerable to retirement by 2020, 90% of this by 2015.”  Doyle Trading Consultants.

The World’s Biggest Natural Gas Powerhouses; cool stuff at Business Insider.

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Oil and Gas

OPEC maintained quotas yesterday.  “The U.S. shale boom is starting to sap demand from their most important customer. OPEC members are also consuming more of their own product, leaving less to export…The euro zone accounts for a mere 12 per cent of global oil demand…”  Globe and Mail

China oil imports:  Zero Hedge.

Danial Yergin makes the New York Times.

The 13 new things Barclays learned from its oil sands tour at the Financial Post.

Crude oil at an important place in a huge asymmetrical triangle:  Kimble Charting Solutions.

Under the Weather – Cooling Degree Days, Natural Gas Storage and PriceRBN Energy.

U.S. dry natural gas production growth levels off following decline in natural gas pricesEIA

Goldbug Saturday Morning Coffee

All roads in Europe lead to gold:  Chris Martenson.  Bernanke and the data disappointed the goldbugs at Global Macro Monitor, but Gold reversed higher on Friday at Daily Gold.

Have Gold, Silver, and Mining Stocks Bottomed?  Minyanville

“Under this scenario, the Fed would work in conjunction with Congress to stimulate demand by getting cash in the hands of households. This can be done through tax cuts, or as Milton Friedman famously suggested, a “helicopter drop” of money. Bernanke explains: “A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman’s famous “helicopter drop” of money.”  Street Insider

You will be shocked at a comparison of gold, stock and treasury returns over the past two years:  Ritholtz  Gold chart for 200 hundred years:  Chart Store.  Long term dollar chart at Kimble Charting.

Adam Hamilton thinks the dollar is in trouble at Zeal.  The Dow:Gold ratio is headed to a 1:1 ratio, the path with be interesting.  Safe Haven

Goldbugs!

Gigantic pennant:  JSmineset.  An inverse head and shoulders breakout from Porter Stansberry.  Official breakout via Jeff Clark.

European weakness (Sober Look) will begat money printing.  Easing options from Zerohedge.  But will policy makers put water in the sink faster than it is draining?

The relationship between gold lease rates and gold price from Sober Look.

Don Coxe from a King World News audio interview.  Listening to a great big picture thinker like Coxe on a weekly basis can become stale, however, this interview has some great stuff.  Remember Coxe is not a classic goldbug.

It’s been five hours since pulling up to my desk, and I still am miffed by the idea Greece leaving the Euro became acceptable by both investment banks and the financial press today.  Not gradually.  Today.  Bloomberg

Is now the time to rent gold miners?

Goldbug Bottom Calling

“Presently, the gold stocks put in a great weekly reversal, at the 50% retracement after declining in nine of the past 11 weeks.”  Nice piece by Jordan Roy-Byrne at Minyanville.

“Major Long-Term Bottoms forming in Gold and Commodities” by Toby Connor

“Gold Stock Capitulation” by Adam Hamilton at Zeal.  Hat tip couplover at Investor Village.

Ben Davies, Eric Sprott, Louise Yamada and more at King World News.

The other side:  “Throwing the Kitchen Sink at Mark Twain’s Liars” by chessNwine.

 

Goldbugs!

The mainstream media and blogosphere occasionally seem to begin to understand gold.  Ed Yardeni at Business Insider:  “More broadly, gold is a hedge against reckless fiscal and monetary policies.”  Then he continues:  “The dramatic appreciation in the price of gold may be limiting its upside from here since it has already discounted a great deal of that recklessness.”

Discounted the recklessness?  Gold bottomed at a depressed price of $250 at the end of a two decade bear market.  Since then the credit bubble has grown immensely.  The Fed induced housing bubble was only the largest part, now dwarfed by government debt.  ZIRP?  TARP’s, TALF’s and a myriad of other acronyms?  Does anyone else think the student loan bubble gets monetized this decade?  QE1, QE2, Operation Twist, now talk of seeming expectations of QE3 soon enough.  Does QE to infinity sound funny to the non-goldbugs anymore?  Rather than suggest gold has discounted anything, consider gold could be more fundamentally undervalued now than at any time since Nixon closed the gold window!

Meanwhile, everything depends on money printing.  Gross and Goldman expect it.  Citi’s Buiter begs for it.

Yesterday the gold stocks held the key outside reversal we noted Wednesday.  Humble Student of the Markets on the same thought.  But did Gold break a huge trend line at Chart of the Day?

Kinross, gold producers vow to fight back as shares tumble despite rising prices.  Globe and Mail

Anyone have any thoughts on Kinross?  5X cash flow, $1.7 billion in cash and building Tasiast.  Or is Franco-Nevada through their royalty the best Tasiast play?  Kinross

I wrote an article on an alternative investment strategy to bonds.  The push-back from the mainstream is striking to me.  Seeking Alpha  Meanwhile, the goldbug community is sure to strut with glee over the JPM news.  Make it a good day!

Smorgasbord

Marathon Oil adds to their Eagle Ford assets with an acquisition of 17,000 net acres in the liquids-rich core of the Eagle Ford shale play for $767 million.  My math makes it $44,118 an acre, which would need to be adjusted for production of 7,000 BOE on April 1 (how flush? anything behind the pipe?).  Scale and deep pockets (time value!) give the large E&P’s advantage.  Reuters

The higher price deck and horizontal drilling made wrong both the cornucopians and fears of the Hubbert’s Peak crowd.  I smell an undulating plateau.  A detailed discussion of the future of oil production:  Financial Sense

Scroll down for the China, Workhorse of the global Economy part.  Frank Holmes

Ominous chart patters (day or two old) at Global Macro and Peter Brandt

Off-topic:  The great realtor rip-off from The Economist