Market tops and bottoms are always a popular topic of conversation. There are a number of theories about how to forecast key turning points in advance, but, in reality, those theories rarely work. While it does seem like an exercise in futility to forecast the day and price of tops and bottoms, there is valuable information to learn from studying the general nature of market turning points. This knowledge will help us understand what to look for and how to react to the market as it develops rather than provide a false sense of comfort about what we… Read More

Market tops and bottoms are always a popular topic of conversation. There are a number of theories about how to forecast key turning points in advance, but, in reality, those theories rarely work. While it does seem like an exercise in futility to forecast the day and price of tops and bottoms, there is valuable information to learn from studying the general nature of market turning points. This knowledge will help us understand what to look for and how to react to the market as it develops rather than provide a false sense of comfort about what we should see. In the stock market, we tend to see tops build slowly and bottoms appear unexpectedly. This can be seen in the chart below, which shows the 2007 market top on the left and the March 2009 bottom on the right. SPDR S&P 500 ETF (NYSE: SPY) built a top slowly, over a period of several months. The bottom, on the other hand, came unexpectedly and was greeted with disbelief.#-ad_banner-# This pattern has been seen at other significant stock market turning points. The bottom that occurred in 2002 was also unexpected and sudden, while the top in… Read More

As we’ve written before here at StreetAuthority, when gold was discovered in the American West over a century and a half ago, many of the people who ultimately got rich were the ones who sold tools and goods to the miners. (Think Levi Strauss, who made his fortune not from gold but from the blue jeans he supplied to prospectors.)#-ad_banner-#​ These days, a different type of commodities rush is here — U.S. natural gas production. Prices across the globe are up to four times higher for natural gas compared with… Read More

As we’ve written before here at StreetAuthority, when gold was discovered in the American West over a century and a half ago, many of the people who ultimately got rich were the ones who sold tools and goods to the miners. (Think Levi Strauss, who made his fortune not from gold but from the blue jeans he supplied to prospectors.)#-ad_banner-#​ These days, a different type of commodities rush is here — U.S. natural gas production. Prices across the globe are up to four times higher for natural gas compared with domestic prices, and that disparity is primed to fuel an export boom over the next several years. While the explorers and producers might do well, it will again be the companies that sell transportation and equipment that make the big money — with much less risk. Explorers Are Already Positioning Despite the still historically low prices in natural gas, explorers are buying up fields and positioning for the boom. Atlas Resource Partners (NYSE: ARP) completed its $733 million acquisition of natural gas assets in the Arkoma Basin of Oklahoma from EP Energy earlier this year. Last year, total global… Read More

In today’s energy market, investors often try to distinguish between oil plays and natural gas plays, but the distinction is often moot — most of today’s wells produce a healthy amount of both. The key to finding winning investments is to focus on the relative productivity of a firm’s well. #-ad_banner-#Let’s focus first on natural gas (we’ll shift the discussion to oil in a moment). The natural gas market appears to have settled into long-term equilibrium. You’ll surely see short-term spikes in prices when the weather gets especially cold (as increasingly appears to be the case… Read More

In today’s energy market, investors often try to distinguish between oil plays and natural gas plays, but the distinction is often moot — most of today’s wells produce a healthy amount of both. The key to finding winning investments is to focus on the relative productivity of a firm’s well. #-ad_banner-#Let’s focus first on natural gas (we’ll shift the discussion to oil in a moment). The natural gas market appears to have settled into long-term equilibrium. You’ll surely see short-term spikes in prices when the weather gets especially cold (as increasingly appears to be the case this winter). But unless we have strongly overestimated that amount of untapped oil and gas remaining in our shale regions, then supply increases will be the likely result of any upward move in natural gas prices.  As a result, gas prices may move into the $4 to $4.25 per thousand cubic feet (Mcf) area, but much more upside than that is unlikely. In fact, the natural gas futures market doesn’t anticipate a move up above the $4.50 mark until January 2019. To be sure, gas prices in the $3.50 to $4.50 range explain why share prices of many… Read More

This month, the International Energy Agency released the 2013 version of its annual World Energy Outlook. Not surprisingly, the horizontal oil boom that has given birth to an oil production renaissance in the United States played center stage in the report.   However, some of what the IEA had to say about the U.S. horizontal boom may have caught some people by surprise.#-ad_banner-# The IEA sees the horizontal boom making the U.S. the world’s largest oil producer by 2015. No surprise there — the media is all over that story. But the IEA… Read More

This month, the International Energy Agency released the 2013 version of its annual World Energy Outlook. Not surprisingly, the horizontal oil boom that has given birth to an oil production renaissance in the United States played center stage in the report.   However, some of what the IEA had to say about the U.S. horizontal boom may have caught some people by surprise.#-ad_banner-# The IEA sees the horizontal boom making the U.S. the world’s largest oil producer by 2015. No surprise there — the media is all over that story. But the IEA also said that the horizontal oil boom will peak by the year 2020. (But it’s only just begun!) After 2020, the IEA sees American production hitting a brief plateau before heading back into permanent decline. That doesn’t sound like an oil boom — in the grand scheme of things, it’s barely a blip on the long-term radar. I don’t entirely agree with this view from the IEA, which I think massively underestimates the entrepreneurial spirit of the energy industry.  After all, the renaissance in U.S. oil production wasn’t led by supermajors like Exxon (NYSE: XOM) and Chevron (NYSE: CVX) —… Read More

What can a 90 year-old woman from Nebraska teach us about finding profit opportunities in today’s downtrodden mining sector? Let me tell you a story. In 1983, Mrs. Rose Blumkin — nonagenarian proprietor of Nebraska Furniture Mart — was approached by a local investment fund manager who was interested in putting money into her family’s business. After talking with “Mrs. B” and observing her Herculean managerial style about the store, the buyer handed her a check for $55 million. No audit of the books, check of inventory, or verification of property titles. He saw all the qualities he liked in… Read More

What can a 90 year-old woman from Nebraska teach us about finding profit opportunities in today’s downtrodden mining sector? Let me tell you a story. In 1983, Mrs. Rose Blumkin — nonagenarian proprietor of Nebraska Furniture Mart — was approached by a local investment fund manager who was interested in putting money into her family’s business. After talking with “Mrs. B” and observing her Herculean managerial style about the store, the buyer handed her a check for $55 million. No audit of the books, check of inventory, or verification of property titles. He saw all the qualities he liked in Mrs. B — and was willing to pay a lot based on a few key observations and a handshake. That man was Warren Buffett. I’ve learned a lot by studying his examples, like the one above, and applying them to natural resources investing.  This “be like Warren” message is an important one for my Junior Resource Advisor readers. That’s because investing in mining — and particularly its highest-potential-return sub-sector, exploration and development — is radically different from conventional investing. #-ad_banner-#Unlike banks or manufacturers, mineral exploration and development companies have no revenue or cash flow. I’ve sat in meetings with Wall… Read More

Dividend investors crave predictability. Once they lock onto payment streams, they don’t want to hear about any interruptions. And if a company dares to withhold a quarterly dividend payout, then many investors simply head to the exits. I discussed this phenomenon recently with regard to Carl Icahn and his big stake in CVR Refining (NYSE: CVRR).#-ad_banner-# As I noted earlier this month, CVR had a big hiccup with its third-quarter dividend, but it appears positioned to pay out $3 or $4 per unit in dividends next year. Shares trading around $22 don’t begin to reflect that potential income. Amazingly, a… Read More

Dividend investors crave predictability. Once they lock onto payment streams, they don’t want to hear about any interruptions. And if a company dares to withhold a quarterly dividend payout, then many investors simply head to the exits. I discussed this phenomenon recently with regard to Carl Icahn and his big stake in CVR Refining (NYSE: CVRR).#-ad_banner-# As I noted earlier this month, CVR had a big hiccup with its third-quarter dividend, but it appears positioned to pay out $3 or $4 per unit in dividends next year. Shares trading around $22 don’t begin to reflect that potential income. Amazingly, a virtually identical scenario has just played out with another oil refiner. And the setup is every bit as compelling. A series of technical problems at a key refinery led to a sharp drop in output for Alon USA Partners (NYSE: ALDW), the master limited partnership (MLP) of Alon Energy (NYSE: ALJ). In fact, the quarterly production was so weak that Alon USA Partners didn’t simply make less money — it lost money. And though investors were bracing for a smaller than usual dividend, they got nothing. Shares of ALDW, which traded up toward the $30 mark in the spring, are… Read More

Arbitrage is a financial concept that’s been around since the dawn of the time. Simply put, engaging in arbitrage means buying an asset in one location where it’s cheap, then immediately turning around and selling it in a place where it commands a higher price. With globalization and international trade continuing to play a larger role in today’s economy, arbitrage opportunities are getting harder to find… and even when you do spot them, chances are they won’t last long. Yet despite the rarity of these occurrences, this is exactly the kind of opportunity we’re seeing in today’s natural gas market…… Read More

Arbitrage is a financial concept that’s been around since the dawn of the time. Simply put, engaging in arbitrage means buying an asset in one location where it’s cheap, then immediately turning around and selling it in a place where it commands a higher price. With globalization and international trade continuing to play a larger role in today’s economy, arbitrage opportunities are getting harder to find… and even when you do spot them, chances are they won’t last long. Yet despite the rarity of these occurrences, this is exactly the kind of opportunity we’re seeing in today’s natural gas market… #-ad_banner-# Dave Forest – StreetAuthority’s resident commodities expert and Chief Investment Strategist for Junior Resource Advisor — is so excited about this opportunity that he recently dedicated an entire issue of his premium newsletter to covering it. Said Dave in his November issue of Junior Resource Advisor: The current situation in natural gas markets is unique. As I write these words, U.S. and Canadian natural gas sells for a paltry $3.50 per thousand cubic feet (Mcf). And yet just across the Pacific in markets such as Japan and Korea, gas is going for nearly $16 — as measured by… Read More

Pairs trading, once mainly a strategy for institutions, became possible for individuals with the advent of the Internet, thus giving all traders access to a wealth of real-time information and online brokerages.#-ad_banner-# It is a market-neutral strategy that takes advantage of a certain imbalance in the stocks, funds, bonds, commodities or currencies in focus. In other words, it does not depend on the broader market making a directional move. Pairs trading involves a long position and a short position in a pair of highly correlated assets, and the strategy is thought to lower risk because it creates a natural hedge. Read More

Pairs trading, once mainly a strategy for institutions, became possible for individuals with the advent of the Internet, thus giving all traders access to a wealth of real-time information and online brokerages.#-ad_banner-# It is a market-neutral strategy that takes advantage of a certain imbalance in the stocks, funds, bonds, commodities or currencies in focus. In other words, it does not depend on the broader market making a directional move. Pairs trading involves a long position and a short position in a pair of highly correlated assets, and the strategy is thought to lower risk because it creates a natural hedge. Traditionally, investors would look for two stocks in the same sector, preferably in the same subsector, that showed good positive correlation. Therefore, if the two stocks were to diverge, a pairs trader would buy the stock of the underperforming company and sell short the stock of the outperforming company. The trade would be profitable if the spread between the two stocks narrowed (that is, the stocks’ prices again moved closer together). Looked at this way, pairs trades are simply market bets on a mean-reversion move. Another pairs trading strategy is to bet on the continued outperformance of one stock versus… Read More

Here at StreetAuthority, we’re constantly on the lookout for stocks worthy of our Top 10 Stocks advisory — and a stock doesn’t attain that status by accident. One energy company in particular is a perennial Top 10 Stocks favorite. I profiled this company two years ago, calling it “the safest oil stock to buy.” The results since then haven’t been bad at all. Including dividends, investors who held shares of ConocoPhillips (NYSE: COP) enjoyed a compound annual growth rate of 31.8%, handily outperforming the S&P 500 Index’s rate of 27.3%. One might think that COP’s chart indicates its run is… Read More

Here at StreetAuthority, we’re constantly on the lookout for stocks worthy of our Top 10 Stocks advisory — and a stock doesn’t attain that status by accident. One energy company in particular is a perennial Top 10 Stocks favorite. I profiled this company two years ago, calling it “the safest oil stock to buy.” The results since then haven’t been bad at all. Including dividends, investors who held shares of ConocoPhillips (NYSE: COP) enjoyed a compound annual growth rate of 31.8%, handily outperforming the S&P 500 Index’s rate of 27.3%. One might think that COP’s chart indicates its run is done. Quite the contrary. Still The Safest Hands down, ConocoPhillips’ proven reserves are in some of the most accessible — both physically and politically — on the planet. At the end of last year, 78% of its proven reserves (oil or gas known to be in the ground in areas the company drills) were in North America or Western Europe. Now, “safe oil” is also expensive oil. More hospitable and developed countries mean political stability but more regulation. That’s the trade-off for uninterrupted flow. (There’s still money to be made on cheaper, less safe oil, such as… Read More

“Water, water everywhere, nor any drop to drink.” This line from Samuel Taylor Coleridge’s poem “The Rime of the Ancient Mariner” is apropos not only for those lost at sea but for the Earth in general. The Earth is indeed the “water planet,” with more than 70% of its surface covered with the liquid. However, more than 97% of this water is unusable salt water, meaning freshwater accounts for less than 3% of the world’s supply. Of that total, more than 70% is frozen, resulting in a very limited supply of usable freshwater. Only 0.007% of all of Earth’s water… Read More

“Water, water everywhere, nor any drop to drink.” This line from Samuel Taylor Coleridge’s poem “The Rime of the Ancient Mariner” is apropos not only for those lost at sea but for the Earth in general. The Earth is indeed the “water planet,” with more than 70% of its surface covered with the liquid. However, more than 97% of this water is unusable salt water, meaning freshwater accounts for less than 3% of the world’s supply. Of that total, more than 70% is frozen, resulting in a very limited supply of usable freshwater. Only 0.007% of all of Earth’s water is available for human use. Fortunately, the hydrological cycle constantly renews the supply through rain and snow. Despite the cycle, droughts, inadequate supplies and arid climates render many regions unfit for human use. Some of these regions are otherwise ideal except for their lack of usable water.#-ad_banner-# Fortunately, science has developed a solution: desalination. This water treatment method removes the salt from ocean water, turning it into fresh water. Techniques such as reverse osmosis and multi-stage flash distillation have made desalination economically viable in many regions. As the… Read More