Natural Gas Rig Count Slightly Up

Found an update on the US natural gas rig count via Reuters.

• The number of rigs drilling for natural gas in the United States unexpectedly rose again, the second gain in seven months, according to a report on Thursday by oil services firm Baker Hughes in Houston.
• The report showed U.S. gas drilling rigs edged up 1 to 688 this week, still 851 rigs, or 55 percent, below the same week last year, when there were 1,539 gas rigs operating.
• Tighter access to credit and a 70 percent slide in natural gas prices to about $3.50 per mmBtu, after peaking above $13 last July, have forced many producers to scale back drilling operations.
• But, with the natural gas drilling rig count below 700, most analysts expect to see year-on-year output declines soon, which should help tighten the overall supply-demand balance.

This hits on the important short-term factors for gas. Supply is still elevated, and while the rig count went up by one this week, it is substantially down from last year in efforts to balance supply and demand. For gas prices, this could be more uncertainty, but likely some bouncing around at these levels until demand picks back up.

Here's a link to the Baker Hughes US rig report from 7/2/09. (pdf).

I've been picking up shares of UNG lately, so I'll continue to update on this situation.

Emerging Market Bubble Re-Inflating?

Interesting story out from Bloomberg this morning. The emerging market trade is hotter than ever as money has been flooding into countries like China, India, etc.

• Developing countries’ share of worldwide equity value climbed to a record as the fastest- growing economies lured investors amid the first global recession since World War II.
• The 22 nations classified as “emerging” by index provider MSCI Inc. comprise 24 percent of world market capitalization, up from 18 percent at the start of this year, the highest proportion since Bloomberg began compiling the data in 2003. China shares surpassed $3 trillion yesterday for the first time since August, from $1.8 trillion at the end of 2008.
• “Everyone is trying to jump on that bandwagon,” said Nicholas Field, who helps manage about $11 billion in emerging- market stocks at Schroders Plc in London. “There are projects in emerging markets in which I can make more money than I can in the West at the moment.”
  

I see some trouble here. Investors seem to be relying heavily on the Chinese Stimulus as a driver for new economic growth. Although it may be better focused than the U.S. version, its not necessarily going to be a silver bullet. Investors still fall into that trap that says, "The U.S. and Europe are weak, so I'll just put my money in emerging markets." It can be profitable to move a portion of assets there, but we shouldn't get carried away. Emerging markets like China still depend heavily on trade and if most of the U.S. is still in trouble, it will lag on emerging markets. Also, if the U.S. markets dip back in and re-test lows, its unlikely emerging markets will be unaffected.

The only emerging market-related equities I own is a Africa and Middle East fund (which is actually considered more frontier market than emerging market), and I own some shares of ABB, which has significant exposure to emerging markets, but by no means are a direct play.

I understand the allure of these markets, and with ETFs, its easier than ever to invest in them. I'm not saying stay away, but rather be aware that these markets can form bubbles just like any of the others we've seen (commodities, mortgages, emerging markets in 07-08).

Update: Been Buying UNG

Bought some more natural gas (UNG) today. I almost filled an order at the close, but didn't quite get a fill around 13.00. But I made four purchases this week between 13.35 and 13.97, and have a pretty good sized position (for me). The 52 week low is around 12.70 I believe, and I'd buy a little more if I can get some in that range. It's tough to say what it will do in the near term, but mid-range, I think I'll be happy owning this one.

Slow day otherwise. The market sold off on that worse than expected (who's expectations?) jobs report, but not much else to report.

I've been in the camp expecting the rally to lose steam and it has. Summer trading often comes with lighter volume and less hype surrounding the market. I expect to see more pressure on stocks until there is more clear evidence of economic strength. Earnings could provide this, but it seems hard to do without the consumer. I'll continue to pick away at various stocks if the prices continue to fall.

We'll hit it hard again next week.

Disclosure: Long UNG

Interesting Point of View: Free Bernie Madoff

I always check out the Ludwig von Mises Institute from time to time, as they always have some interesting viewpoints. Interesting piece today called Free Bernie Madoff.

Here are a couple of quotes. Click here to read the whole article.

His life is already ruined. He is a pauper. He will never again do business. From the innovative genius whose information technology in the 1960s became the basis of NASDAQ, he rose to the heights and fell to the depths where he will stay this way until death. He won't be able to be seen in public for the rest of his life without encountering scorn and derision from everyone around him.

What, then, precisely, is the point of jailing him? He is no direct threat to anyone. Society would not be safer because he is in the slammer. He is not going to rob people or beat people up. He might write a book and donate the funds to charity or make some restitution to his victims. I, for one, would like to read that book.

So let us ask the unaskable: Just how unusually evil were Madoff's actions? Not that unusual. In fact, the whole notion of paying off past investors with the funds of present investors is at the very core of the Social Security system. At least Madoff sought the consent of his investors who let him care for their money based on their own volition. And at least he didn't attempt to defend himself with the claim that he was conducting wise public policy.

Something to think about. Especially that last quote.

Not Suprised by Jobs Report

US employers cut 422,000 jobs in June vs. the expected number of 322,000. Unemployment has now reached 9.5%. 10% which many thought was unheard of, is now almost guaranteed. These numbers weren't surprising to me. The problem with the rising market and the thought of "green shoots", was that it priced into the market not only a bottom, but some type of recovery for later this year. There are still too many uncertainties to say this recession is over and we're going to see a strong economy ahead. I've been saying all along, you can't move forward without the consumer. The employment data is the best indicator (in my opinion) of the health of the consumer. The government can try to spin the statistics however they like, and CNBC can run with any glimmer of hope, but the bottom line is that its just going to take more time...

More to come as we have an interesting end to this week.