The Secret To Trading Natural Gas
The Dynamic Wealth Report
June 10, 2009
The Secret KKR Discovered... And How They're Making Millions
When I was an investment banker, we were constantly meeting with company
management. The pre-meeting ritual was always the same. We’d look at
recent news, brush up on management bios, and review recent performance. Of
course, we’d also look at the market action of the company stock.
Sometimes the company’s performance was great… strong revenue, growing
earnings, and a climbing stock price.
Other times it was ugly. We’d jokingly yell at the stock chart, “Pull-up,
Pull-up!” Like a pilot flying a plane into the ground, poor company
fundamentals always led to a falling stock price.
What trader wants to get in front of a falling stock?
Nobody does. As they say on the trading floor, “Don’t try to catch a
falling knife. You’ll only end up bloodied.”
Natural gas is a perfect example.
Just look at the chart. Natural gas ran up to over $13 about a year ago.
Now it’s trading for less than $4. The reason for the nosedive is
simple.
-------------Sponsor-------------
Where Can You Turn $300 Into $1.3 Million Right Now?
Our own small-company specialist, Robert Morris, has found a
way to 'sniff out' tiny penny stocks on the verge of a major breakout. And
the timing for this has never been better.
You see, the system takes advantage of an obscure SEC regulation that
sends penny stock prices through the roof.
We've seen some stocks gain 852%... 5,450%... even 17,496% in no time
flat.
Click here
for the details...
-----------------------------------
The recession is absolutely crushing demand.
Some of the biggest consumers of natural gas are utilities. They burn
natural gas to generate electricity for their customers. Here’s the
problem. As demand for electricity falls (due to the recession),
utilities buy less natural gas.
I’m sure you’re thinking the same thing I am… “Who would be crazy enough
to buy natural gas right now?”
It turns out some of the savviest investors in the world.
Just look at a recent investment by Kohlberg, Kravis & Roberts (KKR). If
you don’t know, KKR is one of the largest private equity firms in the
world. They practically invented the leveraged buyout… and they’ve made
billions of dollars for their investors.
Just a few days ago, KKR announced it is investing $350 million into East
Resources, a privately held company focusing on natural gas exploration.
The company owns the exploration rights to more than 1.2 million acres.
It’s all potential natural gas bearing land.
Why would KKR make that kind of commitment?
Why would they invest $350 million?
What do they know that we don’t?
I had to dig for the information, but it’s all there in black and white.
KKR discovered something interesting. Demand for natural gas can change
very quickly. Right now demand is down, and so are the prices.
Supply is a little more difficult to predict. You can’t just flip a
switch and expect more natural gas to show up. You need to drill for it…
and drilling takes time.
What’s more interesting is the fall off in new wells. How’s this for a
bit of secret information… Just a few months ago, there were more than
1,600 drilling rigs in operation.
Today, the number is less than 700.
Think about what happens when demand returns. Consumers will be
demanding natural gas, but most of the drilling rigs will be sitting on
the sidelines. It will take a good bit of time to move the rigs back
into the field and get them operational… not to mention the time it
actually takes to drill these wells.
I think the fall off in drilling will lead to a spike in natural gas
prices when demand returns.
And higher prices mean bigger profits for KKRs latest investment. Take a
page from the KKR playbook and add a quality natural gas producer to
your portfolio.
One that I like is Chesapeake Energy (CHK). The company owns outright, or
has an interest in, more than 41 thousand oil and natural gas wells. They
have more than 12 trillion cubic feet of proven reserves. It makes them
one of the larger players in the industry.
***Editor’s Note: Our small-cap expert, Robert Morris, has done it
again. His latest penny stock pick surged over 30%-- in less than
six
hours! Click here to read the FREE report that details exactly how he
did it…
• Oil (Over $70 a barrel)
The run in energy prices continues. Oil is trading over $70 a barrel for
the first time in months. Since oil touches so many parts of our life,
the impact of high oil prices will be inflation.
Print
Page
Bookmark Us
Home | Whitelist Us |
Terms of Use |
Privacy Policy |
Contact Us | Security |
Site Map