| MARKET ROUNDUP | |
| Dow | -53.72 to 18,232.02 |
| S&P 500 | -4.75 to 2,126.07 |
| Nasdaq | -1.42 to 5,089.36 |
| 10-YR Yield | +0.03 to 2.22% |
| Gold | +$0.90 to $1,205 |
| Crude Oil | -$0.88 to $59.80 |
The energy torch is being passed – from coal to gas!
Two stories this week make that abundantly clear. And as an investor, it opens up all kinds of new opportunities!
First, the Wall Street Journal reported today that Murray Energy Corp. will let 1,800 workers go at nine separate mines in West Virginia and Ohio. The firm has spent billions of dollars over the past few years to buy up weaker competitors. But now the debt that funded those acquisitions is bearing down on the country’s third-largest coal miner.
What’s more, Murray’s move follows layoffs at Alpha Natural Resources (ANR), two bankruptcy filings in two years at Patriot Coal Corp., and turmoil at Arch Coal(ACI). ANR and ACI now trade for less than a buck, versus more than ten bucks a few years ago.
Second, in a little-noticed item on Tuesday, the nation’s largest U.S. power company announced a $1.1 billion spending plan. Duke Energy (DUK) said it would shutter a 376-megawatt, coal-burning power plant in western North Carolina. It will simultaneously spend $750 million to build a gleaming new 650-megawatt plant that burns natural gas instead. Another $320 million in spending will be required to upgrade transmission networks in the region.
The shift isn’t just happening in the foothills of North Carolina and the coal seams of Appalachia. Power companies nationwide shut or switched over roughly 4,100 megawatts of coal generation last year. That’s on track to more than quadruple to 22,100 this year, according to Thomson Reuters, as a result of regulatory pressure and environmental concerns.
| “All kinds of new markets for U.S. gas will be opened up.” |
Coal now produces only 40% of the country’s energy, compared with almost 50% several years ago. Meanwhile, electricity producers are expected to consume 13% more nat gas this year than in 2014. Those gains should only get larger as more and more producers make the switch.
There’s been a lot of talk about a glut of gas in this country. That’s why the fuel’s price recently sank to around $2.50 per million British Thermal Units (BTUs) from around $4.50 this time last year.
But nat gas rig activity is now plumbing all-time lows. Demand from power companies is picking up. Plus, several natural gas pipeline, liquefaction, and export facilities are in the planning, permitting, and construction process right now. As those facilities come on line in the next few years, it’ll open up all kinds of new markets for U.S. gas.
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| Are natural gas profits in the pipeline? |
Result: I think the prospects for gas production, processing, shipping, and export companies are getting better by the day. Even better, they still remain dirt cheap because of all the ridiculous skepticism on Wall Street about energy prices.
So you might want to give investments like the First Trust ISE-Revere Natural Gas Index Fund (FCG) or the Market Vectors Unconventional Oil & Gas ETF (FRAK) a look.
In the meantime, let me know your thoughts. What do you think is driving the great torch passing? What does it mean for coal and natural gas pricing and stocks over the longer term?
Do you have any favorites in this sector, or are you looking to get involved? Anything that can derail the shift in your view? Here’s the link to the Money and Markets website where you can weigh in.
| Our Readers Speak |
What can be done to clean up the banking sector, and make it so bad behavior and billions in fines aren’t going to haunt us until the end of time? Several investors shared their thoughts on the website overnight.
Reader Lionel L. said: “The Feds get all the fines. The ones that got ripped off don’t get a cent for their losses. An individual can’t take on the big banks, with their millionaire lawyers who will stall and stall until the individual is financially wiped out.
“The Feds should reimburse the individuals from the fines they take in. Maybe Congress has to pass a law to that effect. The trouble is that Congressional members will get paid off not to pass such a law.”
Reader Aatal said: “Unless someone at the top in these banks and financial institutions goes to jail, nothing is going to change. It seems like they make $20 billion with these kinds of things, pay fines of $6 billion – that’s still $14 billion in profits. They will do it over and over again. Who wouldn’t?”
In response, Reader Lauren said: “Trouble is, the feds and the TBTF institutions are one and the same. The greatest threat to American freedom, the American way of life, and financial independence is the federal government. And that’s both Democrats and Republicans.
“The feds regulate you and me. But when it comes to themselves or their partners in legalized crime, they simply create smokescreen diversions to keep the public from seeing things for what they really are.”
Finally, Reader Books said: “Where there’s money and power, there’s bound to be crookedness. Herein lies the problem: The younger generation doesn’t have future pensions, and must save for their future. The present retirees must save and invest, hopefully in something safe to stay alive for the next 20 or more years.
“It seems the banks are crooked, the interest rates low, the stock market can’t be trusted, the bond market is wavering – what the heck are average people to do? If possible, have your house paid off by retirement. At least you’ll have a roof over your head, as long as you can pay the ever-rising property taxes.”
Thanks for all the comments. It is amazing to me that we haven’t seen more perp walks, more execs booted out of office, and other real pressure applied given all the shenanigans of late. But maybe it shouldn’t be, given how many government officials look forward to cushy, well-paid jobs in finance after they put in their few years of civil service!
Please do continue to share your thoughts on this important topic over at the website, which you can access here if you haven’t already.
| Other Developments of the Day |
ISIS is consolidating its hold on the Syrian city of Palmyra and Iraqi city of Ramadi, executing enemies and prompting tens of thousands of residents to flee. The conquests are just the latest example of how our Middle East policy is in shambles, and failing to produce results.
It notes that tighter lending standards at large, regulated banks have driven many companies to seek out financing from loan funds and non-regulated lending companies. Those “direct lending” funds and “business development companies” use bank credit lines and institutional investor money to finance their loans, rather than more stable depositor funds.
That means they could see their financing dry up in a hurry in a future financial crisis. Or in other words, the seeds of the next crisis have been sown by regulations designed to prevent a recurrence of the last one.
A few examples: Twerking, hacktivist, ridic, hashtag, cazh and newb. Fortunately, I have 9-year-old and 12-year-old daughters, as well as a 16-year-old stepson. That should give me a leg up on the competition!
Want to comment on these stories? Or others I didn’t cover? Then head on over to the website here and add your thoughts today!
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 29 comments }
What about AMLP – great div and play on gas
BALDERDASH!
BALDERDASH!
Some analysts believe we are actually in a new Greater Depression. Why would the Fed want to raise interest rates, which would be inflationary, and tend to kill any gains in employment and economic activity under such conditions? Wooly headed theorists in action, playing games with people’s lives.
Raising interest rates stops inflation and is therefore a deflationary action. That is why the Fed needs to see inflation before it raises interest rates. Otherwise we could be in for a repeat of the Fed’s disastrous interest rate raise in 1936 that wiped out any recovery and extended the Great Depression.
You state more natural gas is being used.
Not wanting the risk of the price of NG, then buy the pipelines who charge for the amount of NG transported regardless of price.
KMI is the best and financially secure pipeline company that pays a huge dividend.
In the event of rising interest rates won’t pipeline MLPs such as KMI, which are primarily dividend plays, be adversely effected much the same as utility stocks?
I am new at buying or investing in funds and stocks I ask you how much do I need to buy or invest in this KMI minimum purchase for me to start out?
Thank You
I need a reply before I spend.
I agree that the future for Natgas looks bright. First, at $2.50 natgas is selling for less than drilling cost. This will only lead to less production and higher prices. Secondly, the LNG exporting industry is due to start in 2016 which will push prices higher. That said I would not be too negative on coal. It is dead money for now but could represent a tremendous opportunity. Higher gas prices only mean higher cost to produce energy. At $5-$6 gas it suddenly makes coal a cheaper alternative even with scrubbers that will clean up its carbon footprint. Coal is not going away. It is a major source of energy not only in this country, but worldwide. I am patiently waiting for a bottom to be reached and a trend change to begin.
if our mid-East policy is in shambles, what was it before? Isn’t that what set up the situation we have now? Bush insisted that the Iraq army be disbanded. It was. They got really upset because they had no employment. Viola! ISIS. Good work, Bush, Chenhey ,and all the other draft dodgers who took us to war with total ignorance of Mid-East religious But, of course, it is Obama’s fault. He inherited such a wonderful plan to turn a grateful nation to democracy and Christianity.
regarding the banks – I completely agree that the executives need to go to jail, no excuse that they don’t. and, I agree with Elizabeth Warren – repeal the Reagan era deregs that led to all of this. People have not become more honest over the centuries.
regarding natural gas – it is cleaner, easier to use than coal – we need to be not only making power, but powering our trucks and cars on natural gas, which is renewable is small quantities.
regarding the ME Рbest that could be done given the mess Bush/Chenny left us. They should be in jail. Regardless, we should build a fence around the area and walk away, come back in 300 years and see what is left, including Israel in that mess Рwe have shed enough American blood for that Apartite r̩gime РAmerica should not be in the business of promoting a religious state for anyone, be they Muslims, Jews or anyone else.
Be careful tkniag medical advice from Yahoo Answers.Some of the answers to your last question were bizarre, especially the one about masturbation causing torsion of the testis.One testis larger than the other may be a result of mumps, but you should seek proper medical advice about this in your case.Sperm count tests involve examining a fresh semen sample. They are not expensive as tests go, but obviously require some privacy to produce. Talk to your doctor about this.
The single biggest growth opportunity for natural gas is with vehicles. Not only is the raw commodity, equivalent to gasoline (same BTU heat value) sell for less than $.40/gal., it is much cleaner than gasoline or diesel. Although over 18 million NGVs exist throughout the world, the US is just beginning to catch up with major fleets purchasing dedicated natural gas vehicles like AT&T with 8,000, Frito-Lay with 1800 and UPS purchasing another 1400 all in the last year. 60% of all of our refuse trucks and 30% of all our transit buses are built with dedicated natural gas engines. Since US has more natural gas than any other country in the world and 63% of our homes have a natural gas line coming into the home already, it is just a matter of time before natural gas starts replacing foreign oil. Four vehicle manufactures already offer vehicle platforms with natural gas for sale here in the US. The biggest threat is the oil companies to allowing another fuel to disrupt its monopoly, but how long will they be able to keep this a secret with such low prices and abundant domestic supply for over hundred years. One of the best plays is with Williams (WMB) especially when they complete the pipeline from the Marcellus shale deposit to the Northeast consumer market.
Another boost coming f or nat gas is the trucking industry converting to this cheaper and cleaner fuel. Of course an infrastructure has to be in place at every truck stop for refueling but it is coming. Westport [WPRT] is a company I have been watching for some time and I think it may be time to get a position . The stock has been beaten down but the company seems to be turning the corner.
The play on coal is not over yet. Consolidation will happen. There is tech to stop coal pollution. Plenty of countries still will use coal, like China & India. U.S. will still use coal for many years to come. Nat Gas will be used by cars & trucks.
I don’t think our foreign policy is failing at all. This outcome is exactly what the US wanted all along. To destablize the region and throw it into continuing and uncontroled conflict. This is the outcome that I saw coming immediately with the outsting of Sadam Husein in Iraq! Yes, Sadam was a tyrant, but he was holding everything together. Now the whole area it is completely torn apart and will contiue to be for a long time! Great for arms dealers!!
How come there are no Muslims on Star Trek? Because it’s set in the future!
Mike: Won’t you please stop referring to your boy as a “stepson”? That phrase is so Victorian and demeaning in these times that it makes you look like a super jerk, and deservedly so I my view. If you feel compelled to mention your family in your posts, which I find way out of order in the first place since they are in no way a part of your job as a financial commentator, at least please have the good taste and decency to drop the use of that pejorative term for his sake alone, if for no other. Give the kid a break — his role is hard enough, given your continuous use of that onerous word.
I appreciate that Mike mentions his family….shame on you for belting him with your personal bias…what he calls his family is his business. Most step children have ties to their biological parent and thus do not call their step parents Dad or Mom. Mike, your articles, thoughts, opinions, facts and allowing comments is why I keep coming back. Carry on. Great job.
Regarding our foreign policy – Your comment that our foreign policy is in shambles is nothing more than a right wing talking point that has no basis in reality. The president has refused to allow another American soldier to die for an Iraqi government that refuses to make any moves to bring all sides of that society into government. He has called upon governments in that area to become involved themselves and we have seen Egypt and Jordan join the fight against Isis. Now we need Saudi Arabia, which has the fourth largest military in the world, and which is ostensibly the ultimate target of Isis and A Queda, to actually step up and join the battle. This is an intelligent foreign policy that doesn’t waste American lives. I believe the American people don’t want to send their sons and daughters into this any more and the only ones who do seem to be the usual GOP war mongers and those who are against every single thing our president does no matter the facts.
That anyone could conclude that current US policy in the Middle East is prudent and in any way successful is simply ignoring the facts. Surely the purpose of our policy has not been to see the entire region burst into flames with a maniacal group like ISIS running rampant. Their success is proof of our failure. If chaos was our goal then Obama is a success. The right wingers had more or less stabilized the situation that Obama inherited only to see the Left destroy years of hard fought progress with one destructive decision after another. I do not hear anyone in their right mind calling for ground troops. No one wants to fight for the same ground twice. The criticism is about an incompetent US president snatching defeat from the jaws of victory all for domestic political reasons. He and his entire foreign policy team are the worst we have ever had. Everything he has done domestically and overseas has been an unmitigated disaster, yet to my amazement their are still those that would defend his ” accomplishments”.
Over my many years I have seen the following booms and busts, some several times:
stock market, bond market, gold, silver, oil, gas, coal, uranium, real estate (commercial, farmland and residential), commodities, and interest rates.
What will happen is everyone will set up for using the cheap gas, pushing demand beyond supply. Once it passes $3-$4 range coal starts being cheaper. When cars and plants start competing for fuel who will win? Who will have to curtail operations? Who will be able to go to an alternative?
Exactly….problems to come.
When you think about it, that’s got to be the right anrsew.
Mike, I am curious to know what happened to your Noble Energy recommendation in your April alert. I believe you recommended increasing holdings in this stock to 90 shares in that alert. I took your advice and now stand over $800 in the red. What has caused this stock to perform so poorly since you recommended it and do you still stand by that recommendation?
i am familiar with combustion engineering variables…power plant boilers are designed for specific fuels, such as coal, oil, natural gas…coal has the most problems with emissions…
sulphur dioxides and trioxides…add the hydrogen ion and you get acid…,think acid rain !!!
it takes years to permit a nuclear plant…the future is natural gas…totally !!!
NG does offer potential and should see some higher prices as we move into Aug Sep. I like HGT at this time under 4.75. Div increases will follow the price of gas and company appears to me at least to be financially sound! Potential 6-7.00 with div increases forth coming as NG prices move higher.
Larry what is your opinion?
I mean’t Mike, what is your opinion? Thank you!
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