If Mark Twain were alive, he would probably look at this week’s headlines and the reaction from the markets, shrug his shoulders, and say “told you so.”
On the face of it, there was some very good news. Several major banks showed impressive earning reports. Today’s unemployment figures were the best in several months. The stock market has been climbing all week.
Unfortunately, most of these statistics are smoke and mirrors. The major banks are showing good earnings because they have been allowed to write their books in a way that minimizes the real effect of the toxic assets they still own…which, we are told, are now to be referred to as “legacy” assets…and the unemployment figures largely reflect the complex effect of furloughs and rolling layoffs, particularly in the massive auto industry.
Natural gas, on the other hand, might be reaching its “real” price for the first time in months. This means that while Wall Street has been heading up, NYMEX has been heading down. It is interesting to note that the protracted slide of the past few weeks coincides with the SEC investigation into the United States Natural Gas Fund EFT. Basically, the fund is oversubscribed, and when it applied to be allowed to sell more shares, the SEC said “no” and decided to take a closer look at how, precicely, the fund operates. Meanwhile, it can’t buy new contracts. During this time, the NYMEX price has dropped closer to the level predicted earlier in the year.
As you can well imagine, we will watch the outcome of the SEC’s action, and the market reaction, with a keen interest.
Meanwhile, depending on which statistics you choose to believe, today’s storage report was either right on target or well shy of expectations, as predicted injection levels varied from 89 to 106 Bcf (the actual injection was 90 Bcf). Storage levels appear to finally be responding to the massive shutdown of drilling and production…the natural gas rig counts is down to 672, less than half of the high of 1,606 in September of last year…and this is putting a damper on the record injection levels.
The NYMEX is, as we write this, choosing to believe the higher prediction, which makes today’s injection a call to buy. We are seeing an “injection bump” of about 10% at the moment. We have tracked these before, and will report on how well this rally holds up over the week. If you have been keeping track of posts over the past few months, you can guess what we’re thinking here at Cost Containment Intl. Our goal is to build an energy plan based on the big picture. We know a statistic when we see one.