From what I can posit, this would be the analogy that I'd use:
There's the Nat Gas train. It's moving down the tracks quite nicely; hard to tell if it's at constant speed or accelerating though. Nevertheless, by using charting techniques, its performance is okay, if not good, you might be saying. Stepping back a little (i.e. the apparent macro view) there's a problem down the line that I believe I see. Not sure exactly where (i.e. 2009, 2010, 2011 --when the hedges come off), but that problem is a bandwagon of nat gas trains that look like they are converging. The Eastern USA states are loaded with shale plays. And of course the usual suspects OK, TX, ND, Canada. There's even talk now of California nat gas fields to be developed from fracking technology.
Maybe a lot of the potential won't be developed. There's the environmental concern (e.g. the new drilling techniques do or don't cause earthquakes), gov't regs and taxes, plus there's nimby.
We make our bets from what we believe we see and within our risk tolerances. For me, I'm reducing my natural gas stocks on the presumption that gas will be extracted, but low gas prices from so many nat gas companies and their fields will make these companies poor investments. For me, my new monies into the sector will go to the companies that supply the infrastructure to get the gas to consumers. |
