Buying into natural gas’s bright future
By Bill Carrigan
Investments Columnist
A few weeks ago I used this space to say that when it comes to analysis of the capital markets, “to know and not act — is to not know.”
The knowing part is I believe we have a new long term bull market in natural gas.
Our chart this week is the weekly closes of NYMEX natural gas spanning about three and one half years. Note the nasty 14-month bear from the mid 2008 peak of over $13 to the lows of under $3 posted in September 2009. Note the subsequent rally from the September 2009 lows followed by another decline to the lows posted in October 2010.
This is important technically because the higher October low simply means the price of natural gas is no longer going down.
I could suggest some fundamental reasons to support the technical argument such as natural gas accounting for about a quarter of U.S. electricity generation with power demand tending to rise along with air conditioning use during the summer. Pile supply issues of a new Atlantic hurricane season and the controversy over hydraulic fracturing relating to shale extraction methods.
The acting part is I am not to sure how to profit from my analysis.
My problem is how to acquire the ownership of natural gas. Do I use the futures markets or just buy one of those gassy exchange traded funds (ETFS)?
The futures market has some issues. That is because unlike a stock certificate, a bond or a hard commodity like gold or silver, how does one take physical delivery of 10,000 million British thermal units of natural gas? Of course I could also buy the front contract month and upon expiry roll into the next front month. But then again I could acquire an ETF that will do the work for me.
(Rest of article linked below)