Friday, September 17, 2010

Casey's Energy Guru: Today's Hottest Energy Plays

L: Today, we turn to one of the more interesting – and colorful – characters on our team, Marin Katusa. Marin’s bio neglects to mention that he is also the lead singer of a rock band called Era Flair. Why should investors listen to a guy who wears leather pants and plays an electric guitar? Because he’s a bloody genius, that’s why – and he’s dialed into these markets like no one else. So, Marin, what’s hot and how do you make money on energy today?

Marin: First, you have to realize that the energy sector is different from the metals and mining you focus on, Louis. Anywhere in the world, the copper you mine is just copper, and the gold you refine is gold. But take coal as an example. It’s not just coal – there are many different types: premium metallurgical coal; semi-hard coking coal; semi-soft coking coal; and even among the thermal coals – the cheap stuff you burn to make electricity – there are different categories that produce different amounts of ash, among other variables.

So, just because you have a coal deposit, that doesn’t mean you have a buyer who can use your coal. (more)

10 ETFs Every Advisor Should Know (But Most Have Never Heard Of)

As the ETF industry has expanded at a breakneck pace in recent years, keeping track of all the products out there has become no easy task. There are now well more than 1,000 exchange-traded products included in the ETF Screener, and many of those have hit the market in the last two to three years.

As ETFs have attracted billions of dollars in cash inflows, it has primarily been the well-established, plain vanilla products that have demonstrated the most impressive growth. Part of that is no doubt because many of the new funds launched in recent years have been targeted in on very specific corners of the investable universe or utilized advanced screening methodologies to select individual holdings, making them useless to investors with a long-term focus. But some of the more recent additions to the ETF lineup include products that should be considered as “building blocks” of long-term, buy-and-hold portfolios.

Below, we profile ten ETFs that should be on the radar screen of every financial advisor out there, but that most money managers have probably never heard of. These ETFs aren’t necessarily “buys” in the current environment, and some of them may be completely inappropriate for certain clients and return objectives. But the unique exposure offered by these funds can’t be found anywhere else, and could be valuable additions to any advisor’s toolkit: (more)

The next phase of the crisis is munipal debt

"To disrupt our services because we can't make a bond payment would just be unconscionable. And as a leader I couldn't do it." So explained Linda Thompson, the mayor of Harrisburg, Pennsylvania. She was explaining the city's refusal to repay part ($3.29 million) of the $288 million it owes for an incinerator it bought. The total obligation for the incinerator comes to roughly $6,000 per citizen of the city. It is a debt that can't be repaid and should have never been lent.

Unless you happen to live in Harrisburg, you probably didn't see this item in your local paper. And you probably wonder why we'd lead with it in the Digest. After all, why should the impending bankruptcy of a small Pennsylvania city matter to you? (more)

Sprott Raises Capital To Buy Another 6 Tons ($250 Million Worth) Of Gold

The wholesale demand for physical gold continues without reprieve, as the Sprott Physical Gold Trust (PHYS) has just announced it will sell another 22 million units. Use of proceeds: "The Trust will use the net proceeds of this offering to acquire London Good Delivery physical gold bullion in accordance with its objective and subject to the investment and operating restrictions described in the Preliminary Base Prep Prospectus." Somehow we are confident that Sprott, when determining the pent up demand for this trust, is fully aware that gold is not very edible, if at all.

Sprott Physical Gold IIROC Wire

Home Price / Family Income Ratio: Overpricing of Median Home

Was Stagflation in ‘79 Really Hyperinflation?

gonzalo lira,
If my best friend is the truth, then my next best friend is history.

I’ve been writing about the possibility of hyperinflation, if there is ever a run on Treasury bonds. My argument has been, Treasuries are the New & Improved Toxic Assets, a termite-riddled house waiting to collapse. If and when there is a run on them, money will flow to a safe haven, which I am predicting will be commodities. As a byproduct of this sell off in Treasuries and buy up of commodities, consumer prices will rise catastrophically in a hyperinflationary event—and the dollar will be left dead on the highway like roadkill.

This scenario got me thinking about the last time there was a panicked run-up in commodities: The stagflation of the 1970’s in the United States, specifically the period 1979–1983. Oil nearly doubled in price, gold and silver went hyperbolic. Gas shortages were rampant—the situation almost got to the point where the government considered rationing gasoline. In fact, ration cards were printed—that’s how bad things got. (more)

Greenspan’s Warning on Gold

Alan Greenspan spoke at the Council on Foreign Relations earlier today, and what was his advice? That central bankers should be doing what these columns, among others, have been rattling on about, namely that they should be paying attention to gold. “Fiat money has no place to go but gold,” the former Fed chairman said at the Council, according to economist David Malpass, who quotes Mr. Greenspan in one of Mr. Malpass’ emails on the political economy. Mr. Malpass writes that the former chairman of the Federal Reserve’s board of governors was responding to a question in respect of why gold was hitting new highs.

Mr. Greenspan replied that he’d thought a lot about gold prices over the years and decided the supply and demand explanations treating gold like other commodities “simply don’t pan out,” as Mr. Malpass characterized Mr. Greenspan. “He’d concluded that gold is simply different,” Mr. Malpass wrote. At one point Mr. Greenspan spoke of how, during World War II, the Allies going into North Africa found gold was insisted on in the payment of bribes.* Said the former Fed chairman: “If all currencies are moving up or down together, the question is: relative to what? Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it.” (more)

Today in Commodities: Tipping Point

A number of markets appear to be reaching their tipping point; indices, metals, agriculture and currencies all fit that bill.

There's been a correction in Crude back to the trend line and 20 day MA, as predicted in recent posts. We think bulls will dig in their heels and prices should bounce from here; aggressive traders should buy this dip. Those that have multiple longs from lower levels in Crude, heating oil or RBOB were advised to lighten up exiting 1/3 of their position. Natural gas has made its way to higher ground the last 5 sessions. Even in the face of a bearish inventory report, an impressive reversal lifting prices back above the 20 day MA. Buy November futures and November call spreads.

The last 4 days the S&P trading range has been 15 points and in our opinion this is a consolidation before prices roll over. The same resistance level that capped rallies in August appears to be capping prices once again. Clients have continued to gain bearish exposure in the ES via November options. (more)

Stocks stay in tight range on mixed data

(Reuters) - U.S. stocks were little changed on Thursday as mixed economic data and a cautious forecast from economic bellwether FedEx kept the market locked in its recent tight trading range.

Shares in FedEx Corp (FDX.N) fell 3.7 percent to $82.72 after the company, seen as a proxy for economic demand because of the wide swath of industries it serves, forecast quarterly profit below Wall Street's expectations and warned the recovery may slow.

A drop in initial jobless benefit claims to a two-month low in the most recent week was not enough to lift stocks, while a gauge of business activity in the U.S. Mid-Atlantic region showed a contraction for a second straight month in September.

The S&P 500 has settled into a range between support at its 200-day moving average around 1,115 and resistance around 1,130. Attempts to pierce 1,130 have been thwarted several times since June, including this week. (more)

Chart of the Day