Active Hurricane Season Could Spike Energy Prices

PRNewswire, today, wrote:

Serious flooding interrupted rail traffic in the Midwest last month disrupting agricultural, crude oil, ethanol, and coal shipments according to a recent analysis published by Morningstar Five-Star fund manager Joseph R. Dancy, Adjunct Professor of Law at Southern Methodist University and manager of the LSGI Venture Fund L.P.

"The impact of the Midwest floods on the global agricultural and energy markets will be much larger than expected," according to Joseph Dancy. "We think the extent of these impacts will become quite evident and will be reflected in the markets -- especially in profitable public companies in the small cap sector."

In addition to the floods in the Midwest, Dancy notes the Atlantic hurricane season started in earnest on July 1st. "It should be an active hurricane season; 2008 marked the first time in history we had three tropical storms active on the same day in the Atlantic -- Bertha, Cristobal, and Dolly. July 2008 already ranks fifth all time for the number of named July storms, and Bertha is the longest-lived July hurricane on record. So numerous records are already falling in the first inning of the 2008 hurricane season," added Dancy.

Dancy notes the tropical storm activity is significant because roughly 25% of the crude oil and 18% of natural gas produced in the U.S. comes from Gulf of Mexico waters and roughly one-third of the nation's refining capacity is also located on the Gulf coast. "Any interruption of Gulf of Mexico energy supplies would have a serious impact on the markets."

"We find profitable small firms in the energy and agricultural sector attractive in this market environment including Natural Gas Services Group NGS, Art's Way Manufacturing ARTW, and Crimson Exploration Inc.," noted Dancy.

Sidoti & Co. upgraded Natural Gas Services (NGS) from Neutral to Buy on July 8. As shown by the Technical Charts below, NGS price is currently supported by SMA 100 on Daily chart. While the Weekly chart shows NGS Price is currently supported by SMA 50. The Momentum Indicators also show oversold condition.


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Paul Tudor Jones Commented on Oil Bubble

Paul Tudor Jones is one of many hedge fund legends who recently did a number of short interviews on July 16, in Alpha Magazine; his comments on the energy markets were noteworthy:

Is the price of oil high for fundamental reasons, or are hedge fund managers and Wall Street driving it up?

It’s a very bullish supply-and-demand situation, and the peak oil theory is probably correct. But the run-up in prices is now bringing in an enormous amount of speculative, nontraditional capital such as pension funds and university endowments — principally through index products.

Commodities have been the worst-performing asset class behind stocks, bonds and real estate for the past 200 years, but Wall Street doesn’t highlight that long history when selling commodity index instruments today. Instead, it shows a chart of the bull market of the past 12 years to rationalize why some pensioner should be long cattle futures in the derivatives markets as part of a basket.

I am sure they were using similar logic about tulips three centuries ago. Oil is a huge mania, and it’s going to end badly. We’ve seen it play out hundreds of times over the centuries, and this is no different. It’s just the nature of a rip-roaring bull market. Fundamentals might be good for the first third or first 50 or 60 percent of a move, but the last third of a great bull market is typically a blow-off, whereas the mania runs wild and prices go parabolic.

While the rest of Wall Street counted its losses on Black Monday, 1987 market crash, Mr. Jones, at age 32, had predicted market will crash and returned 200 percent for his investors that year and drew a payday of an estimated $100 million for the year, an almost unheard-of sum at the time.

Bloomberg on June 3, wrote that Billionaire investor George Soros said the record oil prices weighing on the economy are the result of a "bubble" caused by speculation from index funds and a tight balance between supply and demand.


"The bubble is superimposed on an upward trend in oil prices that has a strong foundation in reality,'' Soros said in testimony before the Senate Committee on Commerce, Science and Transportation. "The rise in oil prices aggravates the prospects for a recession."

According to Forbes on July 16, Soros finally shorted oil at $137 a barrel and put on a long position in gold; he expects to see gold hold its ground even if oil continues to decline. In fact, the gold bug clique believes in a consistent 10-to-1 ratio for gold and oil. It holds that either gold will rise to 10 times a barrel of oil ($1,350 an ounce) or oil will fall to $96 a barrel–one-tenth the present market price of gold. Croesus was told Tuesday that statistics spanning many decades support, on average, this 10-to-1 ratio.


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1. Other Short Ideas are Petrochina(PTR) and Whirlpool Corporation(WHR)
2. Hedge Your Funds in Gold Stocks

Please Note!
This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.