We’ve been thinking this week about lessons learned from the recent financial meltdown. But first, the NYMEX.
Another week, another storage report just slightly below expectation, another market jump. Last week, shortly after the newsletter went out, NYMEX decided that a weekly report 2 Bcf under projection was a bad sign, and sunk by almost 15% by end of day. Today, a nearly identical report is kicking NYMEX back up about 15%. It is difficult to put your faith in one indicator when that indicator refuses, week after week, to give you a definite sign one way or the other.
Meanwhile, the recession is over. At least, that’s what Newsweek magazine said, though president Obama took a moment out of his schedule to state his disagreement. But overall, this marked the second straight week with good signs. Housing sales, and even housing prices, are up. Banks are posting gains…somewhat inflated gains, as we’ve mentioned in previous weeks, but gains nonetheless. The stock market is resurgent.
So now is as good a moment as any to look ahead to better times and a stronger economy and ask: what have we learned from the mistakes we made leading up to the economic meltdown?
Not much, it seems. People are still buying houses with 100% financing. People are still buying more house than they need. Financial institutions are rushing to pay off their TARP money so they can go back to paying out bonuses that are only marginally tied to job performance. Congress seems determined to pass a health care bill that won’t substantially change a health care system that everyone agrees is a boat anchor on the economy.
And people are pouring money into what many are beginning to think will be the next bubble. ETFs.
Right now, people can’t get enough of them, just as they couldn’t get enough of mortgage backed securities two years ago. Buy-in is low. Profit potential, compared to investment, is high. And there’s no danger, because this time, everyone will get out before the bubble bursts.
At Cost Containment Intl., we’re big fans of the open market. Competitive markets allow us to negotiate the best prices and grab you the best savings. But open markets must be fair markets, and open markets must be truthful markets. EFTs make their money on month-to-month turnover of the NYMEX, not the natural give and take of natural gas supply and demand. When profit is decoupled from actual value, markets start leaking truth. We already did it with homes. Now we’re poised to do it with energy.
A few people, however, appear to have learned a few lessons, and they happen to work on the SEC and other trading commissions. In stark contrast to their minimally invasive approach over the past decade, regulator agencies appear to be moving to set limits on the new energy funds, beginning with United States Natural Gas Fund, which has made frequent appearances in this newsletter over the past few weeks. The fund has been making noises that it might even decrease its position in NYMEX natural gas based its current restrictions and the threat of future restrictions.
We’re keeping a close eye on these developments. You should as well. You might just learn a few things.