I Refuse to Invest In Something Like That!

Coal is awful. When the black rock burns it pollutes,
spewing metric tons of carbon dioxide in the atmosphere every day. Most investors will tell you it’s a dead
resource: “we’re moving towards renewables,” they’ll say. Coal is an anachronism; a blight. It’s an atrociously dirty energy source that
will soon be relegated to the same place we put lead paint, asbestos insulation,
and shoe-store foot x-rays – buried deep down in the ground.

In the news this week alone,
there are two stories about coal miners trapped in mines – one coal mine in China, and one in West Virginia. There’s also a story about a coal tanker that
ran aground on Australia’s Great Barrier Reef. My point is that coal is largely hated.

Not by me, of course. I like having a warm house during cold
winters. I like air conditioning in the
summer. I like cheap goods produced so
cheaply, in part, thanks to inexpensive and plentiful coal. I also like the idea of buying stock in
companies that mine such a cheap, hated commodity.

The Oil Fallacy

Oil is holding above $86 a barrel. And yet analysts still cling to the notion that oil should be driven by the U.S. economy.   

 

Here’s a quote from a report from Frankfurt’s Commerzbank:  We think that the oil price increase is only of temporary nature, since it is driven by liquidity rather than by fundamental factors…The recent increase in correlation between oil prices and equity markets, which has now reached unprecedentedly high levels underscores our view.   

 

I’m not sure how Commerzbank comes to the conclusion that oil prices are somehow not connected to fundamentals, but, instead, are connected to the stock market. But this stance is highly suspect. 

Will You Buy At the Bottom?

Yesterday
the Wall Street Journal reported that the Energy Department will be making
sweeping changes to how it reports natural gas production in the United States. In short, the Energy Information
Administration (EIA) – the data-gathering offshoot of the Energy Department –
believes that it might be over-reporting production of natural gas.

Independent analyst Ben Dell
with global wealth management firm Sanford C. Bernstein says
the EIA might over-report by as much as 12%.

That’s extremely good news
for shareholders of natural gas companies. Even better news is that it’s not too late to become a shareholder.

Why You Should Buy Natural Gas Right Now

Last Thursday, April 1, I talked about how inexpensive natural gas was getting. If you bought natural gas last week, it was the equivalent of buying gasoline for 48 cents a gallon.  Prices had to go up. 

It’s good to know I wasn’t alone in my proclamation, as both
the Daily Profit editor, Ian Wyatt and Trademaster Daily Stock Alerts editor Jason Cimpl noticed
the same trend. Ian is my boss and CEO
of Wyatt Research – as well as one of the best fundamental analysts I’ve ever
met or worked with. Jason is a
wunderkind technical analyst and is frequently one step ahead of the
market. They don’t always agree, just
because they have different time-lines and different investment philosophies –
so when they do agree, it’s a good idea to take notice.

And in Friday trading, gas prices bounced off their 6 months lows.

Oil Pushes Higher

Few numbers have been released with as much fanfare and anticipation as last Friday’s Nonfarm Payrolls number. Is it any wonder that the number was pretty good? Are we surprised that economists across the board are hailing the addition of 162,000 jobs in March as definitive evidence that the economic recovery is picking up steam? 

Employment increased at the fastest rate since March 2007. And it wasn’t all Census workers, either. Government hiring accounted for 39,000 workers. That means private companies hired 123,000 people. 

Employment numbers will continue to look good, as Census hiring will continue into June. But we’re going to need to see continued solid growth from private sector employment.

Are We the World’s Dumbest People?

You probably remember when gasoline cost 48 cents a
gallon. It was in 1974 – not so long
ago, really.

Inflation adjusted for 2009 dollars, gas was never that
cheap though. It bottomed in 1999 at
about $1.40.

So I realize it sounds too good to be true to suggest that
you can buy gas for 48 cents today. With
most of us paying close to $3/gallon it’s just a ridiculous claim.

And of course, there is a catch. Consider it a small April Fools day
hoax.

Biotech Buyouts

I can imagine that a few people were waiting for President Obama to follow up his declaration that he was opening up the East Coast shelf for oil drilling with a hearty “April Fools!” but he didn’t.  

 

It’s for real.   

 

The decision to open up the East Coast shelf is sure to anger some people. Former Florida governor Jeb Bush was adamantly opposed to drilling off of Florida’s coast, even when his brother George pondered the idea. He felt that oil drilling might spoil Florida’s beaches and impact tourism.   

 

I don’t know how current governor Charlie Crist feels about offshore drilling, but there will be plenty of vocal opposition. Imagine the irony as both environmentalists and conservative politicians lambaste Obama for this decision to open up oil drilling! 

Biotech Buyouts

They say March comes in like a lion and goes out like a lamb. We’ll see about that. March started with a strong rally that’s added +50 points, or 4.4% to the S&P 500. That’s as good a monthly performance as you’ll find. Perhaps too good…   

 

Stocks have come so far, some are now wondering, what’s left? And after today’s ADP Employer Services employment report showed that private companies cut payrolls by 23,000 in March. That’s a far cry from the gain of 40,000 economists were expecting from this report. And it raises the fear that Friday’s release of the Labor Department’s Nonfarm Payroll report will come in far short of the expected 190,000 jobs growth.  

 

Of course, the government’s report will include census workers, so it’s likely to better than the ADP report. But still, the market is left waiting for jobs growth. 

Two Words and Two Charts That Can Make You Rich

When you have a trend that
continually manifests itself over a period of many years, in many different
markets, you can make low-risk investments when that trend is outside of its
normal range. There are about as many
mean-reversion trends as there are commodities, and I’ll examine many of them
as they become relevant, but for now, I’m going to focus on one of the easiest
to understand and potentially most profitable.

I’m talking about the
gold-silver ratio. The modern mean (ever
since the 1870s when the U.S.
government de-monetized silver and went to the gold standard) has been a ratio
of 55.

So, in modern history, it’s
taken 55 ounces of silver to buy one ounce of gold. Before that, the ratio was much lower – in the
16 range. That’s much closer to the
ratio of silver to gold in the earth’s crust – and as I’ll discuss in a minute,
it could revert to that ratio again.

The Two Kinds of Gold Investments

If you want to get rich from gold, the physical
bars and coins won’t ever do that for you. Physical gold is great as a store of value. That’s all. The best we can realistically hope for is that it will stay one step
ahead of inflation, and protect our principle. Physical gold has never, ever paid a dividend. There’s no compound interest. No cash-flow.

If you want to get rich, you have to stick your neck out a
little and buy stock in small gold companies. It’s said that only one gold venture in a thousand will ever get any
gold out of the ground – so it’s vitally important to buy the best of
breed. A junior gold company that can
actually mine gold and bring it to market can multiply gold’s gains many times
over.

Unfortunately, most junior gold companies go belly
up. And even worse: most of the
geologists and marketers in the junior gold business are glorified con-artists. They might not have any gold at all, but they
hope they can bump up the share price and sell their shares for a huge
payday. Or they’ll hope to cherry pick
some drilling results and sell their stake to a bigger mining outfit before
anyone’s the wiser. Mark Twain famously
said, “A gold mine is a hole in the ground with a liar standing next to it.”