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Posts Tagged ‘ Natural Gas ’

Oct 11

Livestock and Hogs

Filed under Stocks

Although our Agriculture ETF is doing well and will continue to do well, the much hyped about Natural gas trade is heading further south and look set to continue its death spiral. We have realised that ETF is a flawed vehicle to invest in Natural Gas. Every blog has recognised that gas is low and cannot remain low forever, so we see people continue buying Natural Gas ETFs. Problem is, gas is not transportable (yes it can be liquified but thats under the ticker Liquid Gas, NOT NG). So gas per se is not storable - thus subjected to huge contangos which is gradually eroding its value. In hindsight, its the perfect short, especially using the leveraged NG ETF. We are looking for other commodities where ETFs are a flawed vehicle to invest in - if you find one, let us know - we will short it with you. With gas ETF at all time low, we are not keen to short it here.

We are buying some Hogs and Livestock ETFs here. Costs of feeds are going to rocket with the huge rally in grain, corn, etc. This will invariably result in higher prices in livestock and hogs. Price of livestock will be = cost of feed + profit margin. So if cost of feed go up, price goes up. At the moment, the price of livestock and lean hogs are NOT going up with the rest of the soft commodities. Question is, and this goes back to Natural gas, are ETFs a flawed instrument to invest in hogs and livestock? Are there huge contangos? Can they be stored/deliverable? If investors can take delivery and store the commodity, the extent of the contango will be self limiting. This is not the case with NG. We think livestock and lean hogs can be shipped in containers.

1000 Livestock ETF 3.88

2000 lean hogs ETF 1.13

These are intentionally very small initial positions since its a “knee jerk” purchase after a huge rise in wheat/soy/corn prices (always a bad move). USD is also very weak, so any rise in the USD may result in a pullback in all commodities.

All entries filed under this archive

Incubation Period
no responses - Posted 10.20.09
We have fired most of our bullets establishing both naked and hedged positions (hopefully) without breaking Rule #1 ie Do NOT overleverage. It is time to wait for this rally to boil over. It will, and this is probably the easy part. The real problem begins when the market has pulled ...continue
Natural Gas: 5 Reasons to Hold Your Positions
no responses - Posted 09.11.09
Natural Gas October contract went up >10% overnight, going from 2.80 to 3.25. Natural Gas ETF just opened for trading and is up 6.7%. We received a call from a fellow colleague who has been loading up on Gas since our first post with an average entry price of $0.56 ...continue
Marc Faber Bullish on Natural Gas
no responses - Posted 09.03.09
The November price remains in a significant contango: October contracts are trading 7.2% down for the day at 2.50 whilst November Natural Gas contracts are 3.70. (This is an equivalent in oil terms = $50 vs $74). We saw from last month that this contango need not correct on expiry ...continue
Natural Gas 7 Year Low
no responses - Posted 08.20.09
Natural Gas hit 2977 (2.977) - a 7-year low. The average price of gas was 2.98 in July 2002. We bought 10000 more units of Natural Gas ETFs at 0.55. There is clear manipulation in play: whilst the September contracts are down almost 3%, the ETFs are up and the ...continue
ASX200 Technical Analysis
no responses - Posted 07.15.09
Any chance of the ASX 200 breaking out on two consecutive days? It would be unprecedented in 8 years of data - so we would say its unlikely but not impossible. Most break outs have occurred during this bear market - as they say the biggest rallies occur in bear ...continue
Natural Gas Report 2008 by EIA
no responses - Posted 07.14.09
Natural Gas Year-In-Review 2008 Released: April 2009 Next Release: April 2010 This report provides an overview of the natural gas industry and markets in 2008 with special focus on the first complete set of supply and disposition data for 2008 from the Energy Information Administration (EIA). All data for 2008 should ...continue

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