Month: July 2011

July 21 (Bloomberg) — Tomo Kinoshita, deputy head of Asia economics for Nomura Holdings Inc. in Hong Kong, talks about China’s economy and currency policy. Kinoshita speaks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)

Over the past week and more, we’ve been talking about crude oil, crude oil and crude oil.

And for good reason. Oil prices jumped above $97 a barrel in after-hours trading on Friday. This industry is so important — and so riddled with corruption and greed — that Sandy Franks and I wrote a book about it, Barbarians of Oil.

But while we’ve been talking about crude oil, natural gas has quietly crept back onto the investment scene. In fact, natural gas prices climbed six out of the past seven trading days.

So we’re asking, “Is natural gas a good investment right now?”

There are certainly a lot of news stories that say yes… Most of them involve China.

China wants to double its methane gas production by 2015. This form of natural gas comes from coal beds, andPetroChina (PTR:NYSE) says the country has enough to meet 30% of its power needs.

But right now, China relies on crude oil and coal for its power needs. That’s expensive and dangerous. China’s the second biggest user of oil in the world, with imports skyrocketing. In the coal industry, small, unregulated mines kill thousands of people every year.

That’s why China is desperate for natural gas.

The problem is, China fell short of its production target last year. It wanted to produce 10 billion cubic meters, but finished with only 8.6 billion.

There’s real doubt that China can meet its goal of producing 21 billion cubic meters a year by 2015. China needs international projects to add to the mix.

China is investing billions in natural gas.

According to David Hurd, oil and gas analyst for Deutsche Bank, China invested $10 billion in unconventional gas deals between August 2010 and February 2011. Things like shale gas…

One of the biggest deals was with Canada’s Encana Corp. (ECA:NYSE).

Here’s a little background.

In February 2011, PetroChina agreed to pay $5.4 billion for a 50% stake in natural gas deposits in Western Canada. These deposits are owned by Encana, and they are shale gas — the most difficult type of natural gas deposit to tap.

China was very interested in this deal because it wanted to learn better ways of extracting shale gas. It could then use these methods to tackle its coal-bed methane deposits.

It hooked up with the right company. Encana is considered one of the best in the business…

But suddenly, on June 22, Encana announced the $5.4 billion deal was over. The two companies couldn’t agree on key points about the deposits. Encana is now looking for another company to partner with.

China has lost out on 255 million cubic feet of natural gas a day, or 7.22 million cubic meters. That deal would have boosted China’s natural gas production by 2.64 billion cubic meters a year… a jump of 30% over 2010’s production!

But even though this massive deal fell through, there are still a lot of deals going on right now.

The latest news comes from Shell (RDS.A:NYSE). Shell could partner up with China National Petroleum Corp. (PTR’s parent company), Korea Gas Corp., and Mitsubishi Corp. (MBI:XETRA MSBHY.PK) to build a liquefied natural gas (LNG) facility in British Columbia.

Shell has a pretty close relationship with China National Petroleum Corp. In November 2010, these companies signed an agreement for “integrated cooperation.” This would allow more collaboration between the two companies on oil and gas projects in Canada, and coal-bed methane project in China.

But that’s not all…

Shell signed a “shareholders agreement” with China National Petroleum Corp. in late June. The agreement was for a 50-50 joint venture “meant to accelerate large-scale development of shale gas, tight gas and coal bed methane through the standardization and automation of drilling,” according to LNG World News.

In all, deals between China and Western Canada could get even hotter, and the rest of Asia isn’t about to be left out in the cold. Progress Energy Resources Corp. (PRQ:TSX) inked a $1.07 billion deal with Malaysia’s Petronas.

Even more interesting, though, are U.S. companies making deals with Canadian companies. EOG Resources (EOG:NYSE), Encana and Apache (APA:NYSE) are the companies behind Kitimat LNG. This project is working its way through government review right now.

What you need to know is this: There is huge potential in natural gas investments… even more when you throw China into the mix.

Look for a lot more deals to come in this industry. The players could be from China and other Asian countries (like Japan, Korea and Malaysia), or even places like Australia.

In fact, one of Australia’s biggest companies just agreed to buy out an American natural gas producer.

New Growth Investor editor Zach Scheidt was all over this acquisition, and recently wrote me to say:

In “The Energy Titans of Growth” I recommended a purchase of Petrohawk (HK:NYSE) because of the company’s ample reserves.

You see, the company is sitting on 3.4 Tcfe (Trillion cubic feet) of proven reserves.

Of course, proven reserves are only part of the company’s actual asset base. A significant amount of acreage has yet to be fully analyzed and documented. These acres are listed as “resource potential” — and will likely be converted to proven reserves as the company continues to expand its drilling program.

At the time the report was issued, HK was trading near $27 per share. The stock has been volatile due to a very uncertain energy market. But HK’s reserves have never been in question.

Today, HK is trading 62% higher (overnight) because BHP Billiton (BHP:NYSE) agreed to acquire the company for $38.75 per share. BHP made the acquisition because of HK’s tremendous reserves. In this transaction, HK provides the gas assets that BHP so desperately needs, and BHP provides the drilling infrastructure and financing to quickly ramp production and increase profits.

It’s a win-win situation. HK shareholders get a 62% windfall, and BHP shareholders now have a tremendous gas asset that could pay dividends for years to come.

It seems as though companies with spending money are trying to snap up as much natural gas as they can.

And that means the natural gas industry is a very worthy investment right now.

Written by Sara Nunnally for Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.

July 21 (Bloomberg) — Todd Elmer, head of Group-of-10 currency strategy for Asia ex-Japan at Citigroup Inc., talks about the outlook for the euro and the dollar. He also discusses currencies in emerging markets. Elmer speaks from Singapore with Owen Thomas on Bloomberg Television’s “First Look.”

By Ulli G. Niemann

How do you make your investment decisions and where do you get your information? If you’re like most of the people I know, you look to the experts.

That’s fine, however it’s important to be aware that for every expert, there’s an opinion and for every opinion there’s an expert. I have a friend who says that opinions are like noses: everyone has one but you wouldn’t live in anyone else’s nose!

Around the first of the year, along with the New Year’s resolutions, come the New Year predictions for what will be hot and what will not. As if that isn’t enough to produce a massive case of information indigestion, now we have the cable financial shows with pretty much the opinion of the hour.

What this is producing is a frenzy of buy and sell activity for stocks in general, and now for mutual funds as well. I don’t think this approach serves either the investors in particular or the funds in general.

The big problem with this for mutual fund investors is that all the experts are recommending different funds. It might be one thing if experts had a solid basis for their perspective. If they did, then you would think their recommendations would line up and they’d all be touting the same thing.

But they don’t and they aren’t. Oh sure, each one of them can make a good case for their pick. But so can the next “expert.” And usually both of them won’t be right (if either of them is). So, where’s the value in this for you? Beats me.

Another problem with this approach is that many experts recommend different funds at different times, and, in an effort to be in the hot fund, investors keep moving from fund to fund.

In the same breath, the experts are telling us to invest for the long term. Well, I can’t figure out how to do both: be in the latest hot fund, and hold what I’ve got for the long haul.

The downside of all of this for the funds is that sometimes a fund touted as the hot one to be in attracts so much investment attention (i.e., money) that it grows beyond its original intention. At that point, it loses its direction and the very thing that made it strong is sacrificed. And guess what happens to the performance?

So, in the midst of all the hawking and hype for this fund or that, what’s an investor to do to make intelligent choices?

For myself and my clients I use a trend tracking methodology, which identifies long-term trends in various markets. I research funds for stability and reliability as well as current performance. Then, when our trend indicator signals a Buy, we select our mutual funds based on momentum figures for various time periods to arrive at the most promising fund(s) to use for this cycle.

This gives us a head start and sometimes, weeks after we’ve bought a fund, I see it written up in financial papers as being one of the best performers.

Does this approach always put us in the number one fund? Maybe not. But we are almost always in funds that are doing very, very well. And do we get in at the bottom and out at the very top? Again, maybe not.

However, I can tell you that, using this methodology, my clients and I followed the sell signal we got in October, 2000, and were safely invested in solid money markets when the stock market crashed and burned.

Is this approach for you? It depends on how much adrenaline rush you like when you watch your investments. Personally, I fulfill my thrill quotient with other things in life and enjoy sleeping at night when it comes to my investments.

© Ulli G. Niemann

July 21 (Bloomberg) — Marchel Alexandrovich, an economist at Jefferies International, discusses the possible introduction of a common euro-zone bond. He speaks to Maryam Nemazee on Bloomberg Television’s “The Pulse.”

The ZEW confidence reading on economic expectations in Switzerland highlighted a sharp decline in market sentiment for the next six months. The Swiss franc (CHF), a rapidly strengthening currency due to its safe-haven status, was seen trading hesitantly today after the ZEW published a report showing expectations plummeting.

Switzerland’s economy has weathered the financial storm moderately well, with relatively few economic difficulties since 2007. Whether this sharp downturn in economic outlook will carry a lasting effect on the CHF is yet to be seen. It appears though that investor flights to safety will continue to aid the Swissie as global market turmoil persists.

Read more forex trading news on our forex blog.

As the EU Economic Summit gets underway, traders appear leery about the value of the region’s staple currency, the euro (EUR). A choppy and chaotic market has reigned over traders today as a series of reports on flash manufacturing and services reveal stagnant growth in both sectors.

The data releases have generated mild scorn as investors who entered mid-week with growing optimism returned to a pessimistic stance and fled back into safe-haven assets. The EUR was seen plummeting against the US dollar (USD), but had sporadic upticks throughout the day as volatility intensified.

Read more forex trading news on our forex blog.

July 21 (Bloomberg) — Bloomberg’s Adam Haynes reports on the challenge of providing sufficient workers to fuel India’s expanding technology industry. Demand for Tata Consultancy Services Ltd.’s outsourcing services is so robust the information-technology company hired 70,000 workers last fiscal year and plans to add 60,000 more this year. (Source: Bloomberg)

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.