Precious Positioning

Long-Term Technical Outlook for Gold & Silver at Daily Gold.

Gold’s performance in stock bear markets:  Zeal.

China and India account for half of world wide gold demand:  Frank Holmes.  So could “China’s problems be gold’s problems” at The Atlantic?

Re-monetization of gold speculation:  Does China Plan a Gold-backed Renminbi? at Gold Silver Worlds.

Franco-Nevada’s $1 billion precious metal stream financing with Inment leaves me underwhelmed.  I know it’s a good deal.  However, when it’s looked at as FNV blowing out their entire cash hoard or as consuming all the company’s free cash flow for the next three years, my favorite precious metal play may be dead money relative to the sector over this time.  FNV management acknowledged this deal does not the have the optionality upside typical for them.  Perhaps operating mining company stocks may receive some valuation catch up.  Maybe the play is to trade in FNV for Silver Wheaton and wait for their share prices to converge…

…Silver breakout looks at Nifty Chart Patterns.  SLV breaking out:  Kimble Charting Solutions.  Gold finds itself near the end of a flag:  Kimble Charting Solutions.

Enjoy this Rick Rule interview over your lunch:  King World News.

Giddy on Coal

This weekend everyone was excited over the coal stocks.  The charts finally turned and started to improve:  ACI, CLD and a chart-fest at FINVIZGot Coal? When “Less Bad” Starts To Work at Upsidetrader garnered a lot of attention.  I was told Dan Fitzpatrick is high on coal.  Am I too cautious in my patience?

First, note the S&P 500 closed last week above 1400, with the cyclicals actually leading (Alhambra).  Conversely, denial in the commodity sector?  Market Anthropology

The ISA thesis continues to be to wait on natural gas.  Looks like “U.S. natural gas prices must average in the $2.50 to $3.00 range”  through shoulder season at Raymond James.  Well productivity, associated gas production and the well-count backlog continue to keep natural gas supply high.  Look for a turn later this year in the best natty supply read you will find: RBN Energy.

Until natural gas normalizes:  “We are moving into an environment where coal-fired power plants are only partially base loaded and many are only loaded in an intermediate and peaking basis.”  SNL

Long term, ISA is in the super-cycle camp too.  Japan is energy short (Washington Post).  But not right now.  Sinking coal prices force major job cuts in Australia at Mining.

US thermal coal is the play, not coking coal.  The China slowdown needs to end to turn around steel production (WSJ).  This Motley Fool essay unintentionally shows Alpha Natural (ANR) to be in big trouble if met coal holds steady or heads lower.

In the second quarter James River (JRCC) slashed capex to $5 million more than operating cash flow, and it was spun as positive (Barron’s).  Ignored was interest expense being at over half cashflow alone.  Who are they kidding?  When the thermal market does turn, the capital starved players will lose out to the strong.

Saturday Gold Bugs

One hundred twenty pages of gold fundamentals and charts:  Erste Research.

It’ll all be papered over, including Japan’s problems:  Sober Look.  The government debt maturity outlook has deteriorated significantly over the last two years:  Acting Man.  The Fed’s zero interest rate policy is theft from savers:  Sober Look.

Did the multi-decade bond bull market just end?  All Star Charts

Mexico hit a new record in gold production in 2011 (Mining).

Key descending triangle in gold at Kimble Charting Solutions.  Weekly Gold:HUI at StocktwitsGOLD close to confirming breakout to all-time highs at Market Trend Forecast.  But, can a breakout of these coils be trusted?  Peter Brandt

Fed Day Gold Bugs

“Here’s a nice round-up of opinions from the analyst community on whether or not there will be QE3 this week.”  Consensus: No QE3 This Week at Pragmatic Capitalism.

Arguments for holding gold:  Campbell Harvey.

Another:  “I don’t see a huge social cost to having a three or four percent rather than a two percent inflation rate.”  Fool.  Marginal Revolution.

“For all the hype over recent tech initial public offerings, did you know that investors have lost more money in Groupon and Facebook than the entire assets in all of the gold funds?”  Frank Holmes

How rare are 1 million+ ounce gold deposits at Visual Capitalist.

Will a Bear Market in Stocks Hurt Gold Stocks?  Daily Gold

Decision time for gold continues to linger:  All Star Charts.

Silver resistance levels at Nifty Charts.  Sprott is buying 7 million ounces:  Mining.

Waiting for Coal

“The number one reason people get out of the game is because they have suffered a portfolio loss that exceeds what they can live with. The number 2 reason people get out of the game is because they can’t stand the volatility (ups and downs) and uncertainty during a crisis.”  See It Market

I would like to urge a patience with coal.  I know the Internet is populated coal bulls who see marvelous opportunity in the small sector.  Depressed valuations meet the industrialization of the third world.  I am all over it.  But slow down.  China needs to regain momentum for the emerging market story.  Met coal could be rolling over.  And U.S. natural gas production needs to decline meaningfully, of which there has been no sign.

Natural gas well completions are headed in the right direction (OGJ).  Yet still more time is needed.  Gas production has been held up by associated production (Me at SA), but Natural gas liquids hit dry patch as prices sink (Fuel Fix) is a good thing.  Bakken natural gas production figures to be big (Dickinson Press).

How’s that Natural Gas Rally Coming Along?  All Star Charts

If the children of my dear friends in the Philippines are to enjoy a better life, then this chart is accurate:  API.

The long term super-cycle side of the coal meme continues to take a beating with current conditions.  “China’s power generation sector consumed 916.89 million mt of coal over January-June, up 1.5% year on year, a report by Beijing-based Dexin Yongming Consultation showed Friday.”  Platts

Arch Coal (ACI) reported second quarter results and held their conference call this morning.  The financial leverage stands out:  First half interest expense was $150.5 million against EBITDA of $361 million.  Whow!  But their next maturity is not until 2016.  ACI is higher by 19%, back to Tuesday’s price level.

Shale Underestimated

Despite yesterday’s EIA oil report showing an increase in inventory, the price reversed higher.  Bloomberg  New oil sands development requires a very high oil price:  Financial Post.

“A new study says North Dakota’s oil production could jump more than threefold by 2025 to more than 2 million barrels a day.”  (Dickinson Press)  “Production there averages around 800,000 barrels per day.”  (Oil Price)  Meanwhile, “Eagle Ford crude production is close to 600 MB/d.”  (RBN Energy)  That gets us to 1.4 million barrels per day between only the Bakken and Eagle Ford and heading higher.  The shale story is being underestimated!

“Oil integrateds/refiners are set to report later this week…Equity Analysts have paired back expectations not only for the balance of 2012 but for 2013 as well.”  AMP 2012

“In the past 20 days, 40 of 43 stocks energy stocks have outperformed relative to the S&P 500, making it one of the best performing sectors.”  Who knew?  Street Insider

A map showing IEA country strategic oil reserves:  Business Insider.

Why is natural gas supply still high?  Think productivity!  Newfield (NFX) has long since stopped drilling dry gas wells, but gas associated with oil production kept their second quarter natural gas rate at 440 mmcf/d, similar to their first quarter of 447 mmcf/d.  Meanwhile, Encana is North America’s largest natural gas producer and had .5 bcf/d of ng shut-in in the second quarter.  Sounds like the gas markets needs a bunch more time

Is Natural Gas Going To $4.00?  Not before winter!  But enjoy the chart-fest:  Globe Trend Capital.

S&P 500 chart technically ‘looking blurry’:  ChartologyCommodities reaching a “Counter Trend Peak” and about to fall once again?  Deflation trend going to continue?  Kimble Charting Solutions.

Here at Independent Stock Analysis we inform and educate.  Perhaps you find ISA a great productivity tool.  You are a big boys.  I don’t shout at you do something.  What you won’t find here:  Anatomy of A Vancouver / OTC  Penny (PAID) Stock Promotion.

Golden Money

Gold up $32 as QE3 drumbeat grows louder at Mining.  Now they are talking ‘open-ended’ QE:  Economist.  Monetary madness in the Wall Street Journal at Economic Policy Journal.

Anatomy of Future Gold & Silver Bubble at Daily Gold.

Is GLD safe?  Precious Metals ETF Alchemy GLD – the new CDO in disguise? from Hinde Capital.

Corrections in gold since the beginning of the bull market:  Gold Money.

Gold Gearing to BreakoutDragonflyThe Golden TriangleRobert Sinn.  Gold implied volatility by Robert Sinn.  Gold next to other asset classes from Gold Money.  Oil and gold seasonality at Zero Hedge.

Macro Peek

“The number of Chinese online was already huge, and it’s soared over the past year by more than 50 million thanks to an upsurge in mobile Internet access.”  CNET  “…800 million to 1 billion new consumers around the world will enter the middle class this decade…”  Peter Pham.

“Cash Flow per shares over the past 5 and 10 years has grown at the rate of 5.5% per year and 24.2% per year, respectively. Book Value per share is up nicely over the past 5 and 10 years with growth at 15% and 16% per year, respectively.”  SP Brunner

Increasing the inflation target could lead to a super-boom in hard assets while bonds would get crushed.  WSJ

The credit bubble may have begun a blow-off top.  Leadership has narrowed to US Treasury’s and German Bunds, and investment grade corporates (Bespoke).  The Swiss 5-year has gone negative (Sober Look).  Meanwhile, spreads are rising (Bespoke).  Note “bond prices in free fall” at Reuters.

The financial crisis was entered with government and corporate balance sheets in good shape, while the consumer was a wreck.  The next crisis will occur with business and the improved consumer (Housing Views) much better off than governments.

Highlights of Ray Dalio’s Q2 Bridgewater letter:  Business Insider.  Essential facts about the Federal budget:  WSJ.  Richard Russell bullish on housing at Financial Sense.  Chart-fest by Peter Brandt.

Home CRB Bull Market

“The U.S. economy is downshifting, even as the housing sector is finally showing signs of life.”  WSJ  Optimism from the Economist.  Housing supply is tight with with inventory is down 24.4% year over year (Calculated Risk).  More color:  Marketwatch.

Builder confidence has rebounded (Carp Diem) and the stocks have had a party (Bespoke).  Thoughts from some fellows at the New York Fed.  Shadow inventory improvement from Economic Musings.  The anecdotal stories never end:  Sacramento, Michigan and Chicago are strong.  San Antonio prices are at new all-time highs.

Housing picking up would help Dr. Copper, which has been hanging around $3.50 a pound (Mining).  These prices are not enough to spur supply (FT).  Yet they’ve made balance sheets strong (SA).  Copper chartology.

Jeff Saut at KWN:  “I expect notional world GDP growth going forward to be somewhere around the 4% level.”  If he’s even close, think commodities as represented by the CRB at RitholtzCommodity Prices Will Continue to Ratchet Up by Greg Harmon.  Corn at $12.50 is possible by Peter Brandt.

A Euro rebound is bullish as are these black candlesticks.  The S&P 500 is right at resistance.

Precious Metal Gold Bugs

Note this chart of credit adjusted gold from Real Return Investing at Ritholtz.  This piece might be the most worthwhile read of the week.

UBS warns of possible hyperinflation:  Zero Hedge

“On Thursday, gold futures recorded a negative 12-month return for the first time since July 2009. This is a rare occurrence over the past decade, happening on only 118 trading days, or just 4.5% of the time.”  WSJ

“If we tabulate a 33% increase in valuations, a 100% increase in margins and a 32% increase in production, it yields share price growth of 250%. This equates to HUI 1400 in 2014.”  (I reversed the bold numbers-JJ)  Daily Gold

Meanwhile, the gold miners are still stuck in the mud:  Market Anthropology.

Gold Stocks are due for a “Bounce!”  Is a 30-year under-performance long enough? at Kimble Charting Solutions.  The gold price direction:  Peter Brandt.

Rick Rule on the tightness in the physical silver market:  King World News.

Is Silver about to rally 10%? at Kimble Charting Solutions.  This silver chart is the largest symmetrical triangle I have ever seen:  Nifty Charts.

Europe Runs Over the Platinum Price at WSJ.

Oil & Gas

Crude Trades Near Seven-Week High on Iran Tensions, Stimulus Speculation at BloombergFragile, but Comfortable, Oil Market Expected at Oil Price.

Chinese crude imports at nine-month low at CGES.  What happens to price if and when imports re-accelerate?

Natural gas supply remains stubbornly high at the EIA, but look at the Haynesville rig count for a clue to the future:  Haynesville Play.

Do US LNG Export Schemes Make Sense?  RBN Energy.  “…Obama administration, which is struggling to decide whether – and how much – the U.S. should share the bounty with foreign countries.”  Fuel Fix

More on Japan and the spot LNG market:  Energy Tribune.

Frac sand prosperity:  Mark Perry

CRB and WTI technical analysis:  Robert Sinn.  Pretty much all the producers are very undervalued under decent oil and gas pricing regimes.  MHR’s reserve report at Benzinga.

Growing Oil

Oil Trades near One-Week High on Bets China Will Boost Economy at Bloomberg.

U.S., Canada to drive 2013 non-OPEC oil supply gains at Fuel Fix.  But this is getting carried away:  “the US should collaborate with Canada and Mexico to not only fulfill domestic needs but make North America the world’s largest energy supplier” at AOL Energy.

IEA sees modest oil demand increase in 2013 at the Oil and Gas Journal.

“The European Union’s ban on Iranian oil has pushed up the price of similar types of low-quality oil as buyers scrabble for alternative supplies, while the price of higher quality oil has fallen.”  WSJ

“With oil output down 26 percent since 2004, Pemex may try to court investment and expertise from the oil majors.”  Business Week

An unconventional bonanza (Economist).  “Shale gas is giving a big boost to America’s economy” (Economist)  “…fracking causes little mess or disruption”  (Economist)

“…net imports of natural gas into the United States fell 25 percent in 2011”  EIA

“ExxonMobil expects considerable renewable energy growth over the next 30 years, primarily for power generation and mostly from wind.”  AOL Energy

The CRB is The Most Important Chart for Friday at Stock SageWhile This Is The China Chart To Watch at All Star Charts.  Meanwhile, the dollar does not seem to matter:  Kimble Charting Solutions.

Saturday Goldbugs

QE3 sounds unlikely at this month’s Fed meeting:  WSJ

It’ll be papered over alert:  The Social Security Trust Fund projects average yields for their Treasury’s of 4%, while rolling them over at a bit over 1%.  Bruce Krasting

Devaluing the Pound Isn’t a Solution, It’s Default yet they’ll do so anyway:  Bloomberg.

“The economy created just 80,000 jobs in June… 85,000 workers left the workforce entirely to enroll in the Social Security Disability Insurance program…”  WOW!  IBD

Why GoldMises

Gold mining stocks opportunity at Forbes.

Ginormous gold mining info graph:  Visual Capitalist

Nevada: The Next American Gold Rush at Visual Capitalist

Chartology: Gold Price Near Important Resistance at See It Market.

Chartology: Silver Bounces Off Critical Support also at See It Market.

More Gas than Oil

Oil Rebounds in New York on Global Stimulus Speculation, Iran at Bloomberg.  The especially weak ISM manufacturing data yesterday was bullish, in a perverse way, because of a pavlovian market participant response to central bank easiness expectations.  It starts Thursday with the ECB at Business Insider.  Depressed commodity prices clear the path (Bespoke).  Stock futures are flat this morning, but commodities are higher, perhaps as currency substitutes and not on their fundy’s alone (Globe and Mail).

The Canadian rig count collapses into fall and spring and rebounds into summer and winter based on the ability to travel and drill in remote areas.  This summer isn’t not seeing much of a return to drilling, based on priceEnergy Digger.

It’s not a btu short world.  However, worldwide crude production will not meaningfully go higher:  Russ Koesterich.  A bear case for oil:  Econmatters.

Scroll down for the huge natural gas supply and demand slide show:  Zman’s Energy Brain

Natural gas liquids at Econbrowser.  NGL’s and propane:  RBN Energy.

Worthwhile Marcellus information is in this article, once the reader gets past some political ideologies:  Examiner.

XLE chart by ChessNwine.

Energy to start your week

“…oil futures posted their biggest quarterly declines since the fourth quarter of 2008…while (of Friday) U.S. crude jumped by more than $7…the fourth-largest daily gains in dollar terms since the contracts were launched.”  Globe and Mail

“But if oil prices resume their recent slides, Bill Herbert, co-head of research for Simmons & Company said the excited spending on expensive shale play developments will likely taper off.”  Fuel Fix

Directly related are Eagle Ford well starts:  EIA.

Details on the Mississippi Lime have been hard to find to this point:  E&P.

U.S. April 2012 crude production was down 5% from March, yet up 10% over April 2011:  EIA.

Booming production and declining demand means U.S. net petroleum imports were down 15% April over AprilEIA.

U.S. NGL production also up 10% April over April.  Be careful!:  EIA

U.S. Rig Count: -7 (all Gas Rigs) to 1,959 at Haynesville Play.

This heat sure is helping burn off the excess natty in storage, meanwhile Cities That Wouldn’t Exist Without Air Conditioning at Atlantic Cities.

Canada’s natural gas dreams closer to reality after Petronas moves at the Financial Post.

No Energy Yet in the Energy SectorDragonfly.

Earnings, Meet Cliff: Energy’s Contribution to S&P 500 Earnings Is Plummeting, the Raymond James Energy Stat of the Week.

I was published at Seeking Alpha:  Forest Oil: A Speculative Idea.