Month: February 2013

London Gold Market Report
from Ben Traynor
BullionVault
Friday 8 February 2013, 07:30 EST

WHOLESALE MARKET gold prices hovered just above $1670 per ounce Friday morning, virtually unchanged over 24 hours despite some sharp moves yesterday as the Euro fell following the European Central Bank’s monetary policy decision.

“This sideways price action is characteristic of a market lacking direction, commitment or inspiration,” says a note from technical analysts at bullion bank Scotia Mocatta.

“We would like to think the market is building a base for another move back toward $1800, but we will not shift bullish from current neutral until the market closes back above $1700. A break below $1650 would shift us bearish looking for $1500.”

Heading into the weekend, gold looked to be headed for a second straight weekly gain by Friday lunchtime in London, although it was only a few Dollars up on last week’s close.

Silver by contrast was down 0.8% on the week, trading around $31.50 an ounce this morning.

Stock markets edge higher Friday, along with industrial commodities, while US Treasuries gave up early gains.

Dealers in India reported Friday that higher local gold prices were weakening demand after the Rupee fell to a one-week low against the Dollar.

“We had some deals yesterday night after the Euro came down along with gold, but [today] there has not been any movement,” one dealer at a state-run bullion importing bank told newswire Reuters today.

“If the Rupee appreciates, we may see good gold demand.”

“Pre-holiday buying” ahead of next week’s Chinese Lunar New Year has helped push gold higher this week, according to one Hong Kong-based dealer.

“But it’s pretty quiet on our side,” the dealer adds.

“Let’s see what people think about gold after the holiday.”

China’s trade surplus narrowed slightly last month, but was larger than the consensus forecast among analysts after both exports and imports grew more strongly than expected, official data published Friday show.

Chinese consumer price inflation meantime fell to 2.0%, down from 2.5% in December.

Earlier this week, the China Gold Association reported that China was the world’s biggest gold producer for the sixth year running last year, producing 403 tonnes, an 11.7% annual increase.

On the currency markets, the Euro traded just above $1.34 against the Dollar this morning, following yesterday’s 1.5% drop that coincided with European Central Bank president Mario Draghi’s press conference, following the ECB’s decision to leave its interest rate on hold at a record low 0.75%.

Draghi argued that the Euro’s appreciation in recent months was “a sign of the return of confidence” in the single currency. The ECB president however highlighted “heightened credit risk” and “weakness in credit demand” towards the end of last year.

Draghi also argued that inflation expectations “remain firmly anchored” in the Eurozone, interpreted by several commentators as increasing the likelihood the ECb could cut interest rates at a future meeting.

“We suspect the Euro tailwinds have abated markedly after Draghi,” says a note from Citi this morning.

“Investors will be mindful of the fact that further excessive currency appreciation could trigger an ECB response before long. In addition, with risks in the periphery on the rise again, the Euro could become more vulnerable than before.”

“Exchange rate comments can be successful for as long as they’re thought to be credible,” points out Chris Scicluna, head of economic research at Daiwa Capital Markets Europe.

“I’m not overly convinced that the ECB will get to a position where it will think about easing policy to offset the exchange rate.”

Gold in Euros touched a two-week high at €40,413 per kilo yesterday, and by Friday lunchtime in London was up 1.9% for the week.

Elsewhere in Europe, leaders meeting at the European Summit in Brussels Friday agreed to cut the European Union’s budget from €994 billion in the current cycle to €960 billion for the period 2014-2020 – down from the €1.047 trillion initially proposed.

The Japanese Yen meantime has “weakened more than we intended” since last September, Japan’s finance minister Taro Aso said Friday.

Against the Dollar, the Yen has fallen from 78 to 90 in less than six months, accelerating its rate of decline after the election of Shinzo Abe as prime minister in December. Since Abe’s election, the Bank of Japan has doubled its inflation target, with the BOJ’s current governor due to step down next month.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Source: ForexYard

Comments from ECB President Draghi yesterday, in which he stated that euro-zone economic growth may slow down, resulted in the euro tumbling against most of its main currency rivals. Draghi’s comments also had a negative impact on gold prices, which fell more than $14 an ounce during afternoon trading. Today, the main piece of economic news is likely to be the US Trade Balance figure, set to be released at 13:30 GMT. A worse than expected figure could result in dollar losses before markets close for the week.

Economic News

USD – Risk Aversion Boosts Safe-Haven Dollar

The US dollar advanced against several of its higher-yielding currency rivals during afternoon trading yesterday, following comments from the ECB President which caused investors to shift their funds to safe-haven currencies. The USD/CHF gained close to 60 pips following the ECB press conference, eventually reaching as high as 0.9143. Against the Canadian dollar, the greenback some 26 pips to trade as high as 0.9967.

Turning to today, dollar traders will want to pay close attention to the US Trade Balance figure, set to be released at 13:30 GMT. Analysts expect the indicator to come in at -45.8B, slightly better than last month’s -48.7B. If today’s news comes in above the forecasted level, the greenback could extend yesterday’s bullish trend before markets close for the weekend.

EUR – Draghi Comments Cause Euro to Turn Bearish

The euro took significant losses against virtually all of its main currency rivals during afternoon trading yesterday, following comments from ECB President Draghi, in which he said that euro-zone economic growth may slow down. The EUR/USD fell more than 140 pips following Draghi’s comments, eventually reaching as low as 1.3428 before bouncing back to the 1.3450 level. Against the British pound, the common-currency lost more than 100 pips during European trading, eventually reaching as low as 0.8554.

Today, traders will want to pay attention to any announcements related to euro-zone growth prospects coming out of the EU Economic Summit, scheduled to take place throughout the day. A positive announcement from EU officials may help the euro bounce back before markets close for the week. Meanwhile, if the US Trade Balance figure comes in below expectations, the euro could recover some of yesterday’s losses against the US dollar.

Gold – Gold Prices Tumble after ECB Press Conference

The price of gold dropped by more than $14 an ounce during afternoon trading yesterday, following comments from ECB President Draghi, which caused investors to shift their funds back to the safe-haven US dollar. After reaching as low as $1662.84, the precious metal was able to bounce back ot the $1665 level by the end of European trading.

Today, gold traders will want to pay attention to the US Trade Balance figure. If the figure comes in below the expected level, the dollar could reverse some of its gains from yesterday, which would boost gold prices before markets close for the weekend.

Crude Oil – Crude Oil Prices Remain Stable despite Risk Aversion

The price of crude oil remained relatively stable throughout European trading yesterday, despite risk aversion in the marketplace due to comments from the ECB President related to the euro-zone economic recovery. The commodity spent most of the day fluctuation between $96.49 and $96.91 a barrel.

As markets get ready to close for the weekend, crude oil traders will want to pay attention to the US Trade Balance figure, set to be released at 13:30 GMT. A better than expected figure may be taken as evidence that demand for oil in the US has increased, which could boost prices during afternoon trading.

Technical News

EUR/USD

The weekly chart’s Slow Stochastic is close to forming a bearish cross, indicating that a downward correction could occur in the near future. Additionally, the same chart’s Relative Strength Index has crossed into overbought territory. Opening long positions may be the smart choice for this pair.

GBP/USD

The Williams Percent Range on the weekly chart has fallen into oversold territory, indicating that an upward correction could occur in the near future. Furthermore, the MACD/OsMA on the daily chart appears close to forming a bullish cross. Traders may want to open long positions.

USD/JPY

The Relative Strength Index on the weekly chart has cross into overbought territory, indicating that a downward correction could occur in the coming days. This theory is supported by the Slow Stochastic on the same chart, which has formed a bearish cross. Opening short positions may be the smart choice for this pair.

USD/CHF

While the weekly chart’s Williams Percent Range has crossed over into oversold territory, most other long-term technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.

The Wild Card

AUD/CHF

A bullish cross on the daily chart’s Slow Stochastic is signaling that this pair could see upward movement in the near future. Additionally, the Williams Percent Range on the same chart has fallen into oversold territory. Opening long positions may be the smart choice for forex traders today.

Forex Market Analysis provided by ForexYard.

© ForexYard

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By www.CentralBankNews.info Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.

By The Sizemore Letter

2013 had one of the best Januaries in recent history, only to hit a rough patch in the first week of February.  Though the markets were due for a breather, events in Europe were the trigger.

The two European countries most likely to cause the next phase of eurocrisis—Italy and Spain—both had potentially destabilizing political developments.  In Italy, former prime minister (and current billionaire playboy) Silvio Berlusconi—the man most responsible for Italy’s financial malaise—has been gaining in the polls by making promises to roll back some of the economic reforms pushed through by Mario Monti’s government.  These would be the same economic reforms that calmed the bond market and helped to restore confidence in Italy.

And in Spain, Prime Minister Mariano Rajoy has been implicated in a corruption scandal that threatens his government…at the same time that Catalonia is agitating for independence.

At this point, Sizemore Capital sees this as a mild correction in the midst of a bull market that likely has several years left to run.  But it  may get choppy for a few weeks.

Sizemore Capital made several portfolio moves in January and early February.  In the Dividend Growth Portfolio, we sold our position in Spirit Realty Capital (NYSE:$SRC) following the announcement that it was to be acquired by Cole Credit Property Trust II,  a non-traded REIT.  Given the legal uncertainty facing the acquisition (there are multiple lawsuits from disgruntled shareholders), taking our profits seemed the more prudent course of action.

Abbott Labs (NYSE:$ABT) divested its pharmaceutical business as a separate stock—AbbVie (NYSE:$ABBV).  Sizemore Capital is attracted to Abbott for its collection of stable businesses in nutrition, medical devices and over-the-counter drugs, but the pharmaceutical spinoff was a bad fit for the Dividend Growth Portfolio.  We sold our shares of AbbVie and reinvested the proceeds in additional shares of Abbott.

Finally, to round out our REIT exposure, we added a position to Healthcare Trust of America (NYSE:$HTA), a REIT specializing in medical office buildings.  Sizemore Capital is attracted to HTA’s medical property portfolio, as it is supported by strong demographic trends and should actually benefit from ObamaCare.

Sizemore Capital also made minor adjustments to the Tactical ETF Portfolio.  We reduced our exposure to Africa via the Market Vectors Africa Index ETF (NYSE:$AFK) and invested the proceeds in the iShares FTSE China 25 Index Fund (NYSE: $FXI).   Additionally, we slightly reduced our exposure to U.S. large cap dividend payers via the Wisdom Tree Large Cap Dividend ETF (NYSE:$DLN) and initiated a new position in the iShares MSCI France ETF (NYSE:$EWQ).

This is consistent with Sizemore Capital’s view that Europe and China represent better bargains for investors at current prices.

We made one addition to the Sizemore Investment Letter Portfolio, initiating a position in the tech start-up fund GSV Capital (NYSE:$GSVC).  After the drubbing Facebook (Nasdaq:$FB) took in 2012, we expect a rebound in “Web 2.0” stocks, and GSV is uniquely positioned to benefit.

And finally, we replaced our bond index exposure in the Strategic Growth Allocation with active management in the form of the Pimco Total Return Bond ETF (NYSE:$BOND). For a full explanation, please see Sizemore Capital shifts to active bond allocation.

SUBSCRIBE to Sizemore Insights via e-mail today.

The post Sizemore Capital February 2013 Model Commentary appeared first on Sizemore Insights.

USDJPY stays within a upward price channel on 4-hour chart, and remains in uptrend from 88.06. Support is located at the lower line of the channel, as long as the channel support holds, the uptrend could be expected to continue after a minor consolidation, and next target would be at 95.00 area. On the downside, a clear break below the channel support will indicate that consolidation of the longer term uptrend from 79.07 (Nov 9, 2012 low) is underway, then deeper decline to 91.00 area to complete the consolidation could be seen.

Daily Forex Forecast

By MoneyMorning.com.au

It’s either the best time in the past year to buy stocks…or the worst.

If you take a straw poll of my colleagues you’ll probably get half screaming it’s a buy, and the other half screaming it’s a sell.

By now you’ve probably figured out which side we’re on. We’re banking on continued low interest rates helping to drive stocks higher.

After all, the old theory goes that ‘stocks rise as interest rates fall’. So why should this time be any different?

Well, there’s one indicator to look at that’s either a spanner in the works to our rising stocks stance, or proof that it’s a great time for stock investors. Let’s look at that now…

When you buy any investment you should always have two questions in mind:

• How much could I make?
• How much could I lose?

It’s not difficult. In fact, we’d say those two simple questions are at the centre of investing.

It’s something we keep in mind when we publish our monthly issue of Australian Small-Cap Investigator. We always point out that investors could make spectacular gains – because that’s the potential with small-cap stocks.

But we also always point out that if things don’t go right, investors could lose everything they’ve invested in that particular stock – because that’s the potential with small-cap stocks.

Fortunately, in most other types of investing, things aren’t so black and white. It’s not a double or nothing deal.

Even so, you should still ask the same questions. Let’s put it another way. Let’s say you think a stock could rise 2% this year and it won’t pay a dividend.

Even if you think there’s a zero chance the stock will fall (which would be reason enough for your editor to stay away from the stock; if someone claims it’s impossible for it to fall, odds are it will fall), it’s still a bad investment.

Why? Because you can get a better return with less risk just by keeping your money in a savings account.

OK. It’s an extreme example, but we think you get the point. Again, we’re not saying that you should always look for the best returns. What we’re saying is that you should look for the best returns relative to the risk you’re taking.

Trouble is it’s pretty darn hard to anticipate the amount of risk built into a stock price. All you can do is make your best guess.

Stocks at Lowest Volatility Since 2007

For instance, as you’ve seen, stock prices have gone bonkers since last November. So, does that mean investors have factored in all the risks so that if nothing bad happens stock prices will go higher?

Or does it mean that investors have underestimated the risks so if something bad happens, it will take investors unawares and stock prices will fall?

That’s the thing, you can never know for certain. But what you can do is keep an eye on a couple of key indicators. They aren’t a perfect early-warning system, but they’re pretty close to it.

Perhaps you’ve heard of the VIX Index, also known as the S&P 500 Volatility Index. Without going into the nuts and bolts, it’s a measure of the volatility of exchange traded options on the US S&P 500 Index.

In short, when volatility increases, options prices tend to increase too. So it gives you a good chance to compare one timeframe against another.

If we look at the VIX today, you’ll see that volatility is about as low as it was in January 2007:

That was when volatility started to pick up after remaining subdued for three years. It’s not just in the US where volatility is at all-time lows.

The S&P/ASX 200 Volatility Index is at the lowest point in five years. And has been relatively low since the last half of last year, when stocks started to pick up:

Now, do you see the problem? Does low volatility mean that volatility is about to increase…potentially meaning that stocks will fall?

Maybe. But you could have said the same thing in 2005 when the VIX reached a similar level. If you had sold then you would have missed out on two years of extra gains.

We’re Still a Buyer in This Stock Market

So, what use is the VIX? Well, we look at is as an early-warning system. You should use it as an indication for what lies ahead. But you shouldn’t use it as a signal to buy or sell – as we’ve shown, high volatility can sometimes coincide with rising stocks, and sometimes with falling stocks.

That’s because the VIX measures volatility of the index, not the direction of the index. The reason the VIX tends to be higher when the index falls is because stocks tend to fall quicker than they rise (that’s another old saying, ‘stocks go up the stairs but down the elevator’).

All that said, where do we stand? We stand in exactly the same spot. We’re bullish on stocks – especially small-caps – because we believe the market has mostly oversold them.

And we’re bullish on a few blue chips – such as the five we mentioned yesterday – because they’re still beaten-down from previous high points.

But as always, despite our bullish view, we’ve still got one eye on the chance that we’re wrong. That’s why we recommend using an asset allocation model so you can spread your wealth across various asset classes (dividend-paying stocks, small-caps, gold, and cash).

Bottom line: we still like stocks, even at these high prices, and we’ll keep buying them…but with a bit more caution than before. Remember, while the VIX reaching a low point could mean stocks are about to fall…with low interest rates, the current stock rally could have plenty further to run yet.

Cheers,
Kris

From the Port Phillip Publishing Library

Special Report: How to Hunt Down 2013′s Biggest Stock Market Winners

Daily Reckoning: Japan’s Spring Offensive Against the Yen

Money Morning: Are These 5 Blue-Chip Stocks Still a Good Buy?

Pursuit of Happiness: Exchange Traded Options: A Way to Boost Your Retirement Income

Australian Small-Cap Investigator:How to Make Money From Small-Cap Stocks

By MoneyMorning.com.au

The financial world was shocked by a demand from Germany’s Bundesbank to repatriate a large portion of its gold reserves held abroad. By 2020, Germany wants 50% of its total gold reserves back in Frankfurt – including 300 tons from the Federal Reserve.

The Bundesbank’s announcement comes just three months after the Fed refused to submit to an audit of its holdings on Germany’s behalf. One cannot help but wonder if the refusal triggered the demand.

Either way, Germany appears to be waking up to a reality for which central banks around the world have been preparing: the US dollar is no longer the world’s safe-haven asset and the US government is no longer a trustworthy banker for foreign nations.

It looks like their fears are well-grounded, given the Fed’s seeming inability to return what is legally Germany’s gold in a timely manner. Germany is a developed and powerful nation with the second largest gold reserves in the world. If they can’t rely on Washington to keep its promises, who can?

Where is Germany’s Gold?

The impact of Germany’s repatriation on the US dollar revolves around an unanswered question: why will it take seven years to complete the transfer?

The popular explanation is that the Fed has already rehypothecated all of its gold holdings in the name of other countries. That is, the same mound of bullion is earmarked as collateral for a host of different lenders.

Since the Fed depends on a fractional-reserve banking system for its very existence, it would not come as a surprise that it has become a fractional-reserve bank itself. If so, then perhaps Germany politely asked for a seven-year timeline in order to allow the Fed to save face, and to prevent other depositors from clamoring for their own gold back — a ‘run’ on the Fed.

Now, the Fed can always print more dollars and buy gold on the open market to make up for any shortfall, but such a move could substantially increase the price of gold. The last thing the Fed needs is another gold price spike reminding the world of the US dollar’s decline.

Speculation Aside

None of these theories are substantiated, but no matter how you slice it, Germany’s request for its gold does not bode well for the future of the US dollar. In fact, the Bundesbank’s official statements are all you need to confirm the Germans’ waning faith in the US.

Last October, after the Bundesbank had requested an audit of its Fed holdings, Executive Board Member Carl-Ludwig Thiele was asked in an interview why the bank kept so much of Germany’s gold overseas. His response emphasized the importance of the US dollar as the world’s reserve currency:

 ‘Gold stored in your home safe is not immediately available as collateral in case you need foreign currency. Take, for instance, the key role that the US dollar plays as a reserve currency in the global financial system. The gold held with the New York Fed can, in a crisis, be pledged with the Federal Reserve Bank as collateral against US dollar-denominated liquidity.’

Thiele’s statement can lead us to only one conclusion: by keeping fewer reserves in the US, Germany foresees less future need for ‘US dollar-denominated liquidity’.

History Repeats

The whole situation mirrors the late 1960s, during a period that led up to the “Nixon Shock”. Back then, the world was on the Bretton Woods System — an attempt on the part of Western central bankers to pin the dollar to gold at a fixed rate, while still allowing the metal to trade privately as a commodity.

This led to a gap between the market price of gold as a commodity and the official price available from the Treasury. As the true value of gold separated further and further from its official rate, the world began to realize the system was unsustainable, and many suspected the US was not serious about maintaining a strong dollar.

West Germany moved first on these fears by redeeming its US dollar reserves for gold, followed by France, Switzerland, and others. This eventually culminated in Nixon ‘closing the gold window’ in 1971 by ending any link between the US dollar and gold. This “Nixon Shock” spurred chronic inflation throughout the ’70s and a concurrent rally in gold.

Perhaps the entire international community is thinking back to the ’60s, because Germany isn’t the only country maneuvering away from the US dollar today. The Netherlands and Azerbaijan are also discussing repatriating their foreign gold holdings.

And every month, we hear about central banks increasing gold reserves. The latest are Russia and Kazakhstan, but in the last year, countries from Brazil to Turkey have been adding to their gold holdings in order to diversify away from fiat currency reserves.

And don’t forget China. Once the biggest purchaser of US bonds, it is now a net seller of Treasuries, while simultaneously gobbling up gold. Some sources even claim that China has unofficially surpassed Germany as the second largest holder of gold in the world.

Unlike the ’60s, today there is no official gold window to close. There will be no reported “shock” indicator of a dollar flight. This demand by Germany may be the closest indicator we’re going to get. Placing blame where it’s due, let’s call it the “Bernanke Shock.”

It Takes One to Know One

In last month’s Gold Letter, I wrote about the three pillars supporting the US Treasury’s persistently low interest rates: the Fed, domestic investors, and foreign central banks — led by Japan.

I examined how Japan’s plans to radically devalue the yen may undermine that country’s ability to continue buying Treasuries, which could cause the other pillars to become unstable as well.

While private investors and even the Fed might be deluding themselves into believing US bonds are still a viable investment, Germany’s repatriation news makes it clear that foreign governments are no longer buying the propaganda. And why should they? If anyone should appreciate the real constraints the US government is facing, it is other governments.

Our sovereign creditors know that Ben Bernanke and Barack Obama are just regular men in fancy suits. They know the Fed isn’t harboring some ingenious plan for raising interest rates while successfully selling back its worthless mortgage and government securities.

Instead, the Fed is like a drug addict making any excuse to get its next fix. [See Bernanke’s tell-all interview with Oprah where he confesses to economic doping!]

US investors should be as shocked as the Bundesbank about the Fed’s deception. While we cannot redeem our dollars for gold with the Fed, we can still buy gold with them in the open market.

As more investors and governments choose to save in precious metals, the US dollar’s value will go into steeper and steeper decline — thereby driving more investors into metals. That’s when the virtuous circle upon which the dollar has coasted for a generation will quickly turn vicious.

Peter Schiff
Contributing Writer, Money Morning

Publisher’s Note: Peter Schiff is CEO of Euro Pacific Precious Metals.

From the Archives…

Make Sure You’ve Updated Your ‘Stock Insurance’ Policy
1-02-2013 – Kris Sayce

Here’s Why We’re Still Buying This Stock Market
31-01-2013 – Kris Sayce

Revealed: Inside the Mind of a Share Trader
30-01-2013 – Murray Dawes

Buy Silver – the War Against the China Bears Begins
29-01-2013 – Dr. Alex Cowie

China’s Economy: Enter or Exit the Dragon?
26-01-2013 – Callum Newman

By www.CentralBankNews.info     Peru’s central bank kept its policy rate steady at 4.25 percent, saying inflation is expected to converge toward the bank’s 2.0 percent mid-point target in coming months, reflecting improved supply of food and economic activity that is close to its potential during a time of weak global output.
    The Central Reserve Bank of Peru (BCRP), which has held rates steady since April 2011, also said the country’s economy had stabilized around its sustainable, long-term level of activity although sectors that depend on external markets remain weak.
   Peru’s inflation rate rose to 2.87 percent in January, up from December’s 2.65 percent, still within the central bank’s target range of 1.0-3.0 percent.
    Peru’s Gross Domestic Product rose by an annual rate of 6.5 percent in the third quarter of 2012, up from 6.3 percent in the second quarter.
    At its previous meeting in January, the central bank also said it expects inflation to converge toward its 2.0 percent target. 

    www.CentralBankNews.info

By www.CentralBankNews.info

By OilPrice.com

Aubrey McClendon is gone – or at least he’s on his way out from Chesapeake energy (CHK). But the destruction of the natural gas market, where he was the ringleader in the shale gas land grab and cratering well price, is his real legacy, and not likely to be recovered from anytime soon. While Aubrey will now go into a very wealthy retirement, he leaves behind a decimated market and a long road to making natural gas a true transition fuel to energy independence and a renewable future.

The market failed us, failed all of us as a nation – because it couldn’t prevent McClendon and Chesapeake from poking holes randomly through Texas and Western Pennsylvania in search of shale gas and ultimately flooding the market with it, cratering the price and its profitability. And it is margins and profitability that make markets work.

And while McClendon made himself the best paid CEO in the nation, he assured us that our necessary and important transition to natural gas would be made much more difficult, if not impossible: you just cannot support innovation without profits. It is not just “cheap gas” that is the answer to spurring economic growth, grow manufacturing and sell natural gas as a transport fuel or even as an export fuel here in the US – it is margins and it is profits.

And Chesapeake destroyed that for everyone in the gas game (and destroyed themselves too), with forced development of leases, multiple joint ventures with foreign oil companies, over leverage, over production and destruction of shareholder value to the benefit of the CEO. Natural gas is no longer a good business to be in, there are too many players, too many wells and no ready demand sources to soak up the surplus. We are further away from a natural gas future, a cleaner, greener and more independent future, and we have Aubrey McClendon to thank.

So, good riddance to the “Bernie Ebbers of Energy” – but where does that leave us in natural gas? We have a surplus not likely to end anytime soon and a price that will languish well under “excitement” levels for those that explore and produce. Without that excitement, you’ll not see any incentive to fundamentally move any closer to a natural gas future, either as a transport or as a further supplement into the electrical grid. It may be counterintuitive but true: cheap gas hasn’t done anything to promote gas. Recent proposals to convert LNG import terminals into export plants are a bizarre market reaction to a natural gas BUST – and a silly solution to what really is a US natural resource bonanza.

But that legacy is what we’re saddled with now, and makes practically everything in the natural gas space difficult to invest in. I haven’t recommended a natural gas company (save for EnCana at an opportune low) and won’t until the numbers in the market can generate some excitement again. I have no interest in E+P in natural gas, or even transport and do not believe in much in the projected export business, save for Cheniere (LNG), the lone working export terminal here in the US.

For 2013 at least and perhaps through 2014 as well, natural gas will greatly underperform almost everyone in the rest of the energy sector – and that’s the unfortunate legacy of Aubrey McClendon.

Source: http://oilprice.com/Energy/Natural-Gas/Aubrey-McClendon-and-the-Destruction-of-the-Natural-Gas-Market.html

By. Dan Dicker of Oilprice.com

This report is part of Oilprice.com’s premium publication Oil & Energy Insider . Oil & Energy Insider gives subscribers an information advantage when investing, trading or doing business in the energy sectors. Successful investors, hedge funds and senior executives, have access to high level intelligence and power in ways that you, as an individual investor, are locked out of (the game is and never has been fair.) Let us help you level the playing field by using our network of traders, intelligence assets and high level partnerships to ensure you are making the right investment decisions.

To find out more on how you can get a legal inside advantage in the energy markets please take a moment to visit: http://oilprice.com/premium