To-NO MASS-O re: ["It's hard to see how they can lose, held long term."]
Hard to see ?
...since most of you rode the OSX/oilpatch stocks off the cliff from OSX 123 on June 5th to OSX 58 within 90-odd days...I'd call that "LOSING" - if quote/unquote - "held longterm."
The minute you guys refer to, look upon and begin to buy & hold - "CYCLICAL STOCKS" like they were LT growth stocks... is when you get your heads handed to you... as you just did.
These are volatile - TRADING VEHICLES" - as are all cyclicals.
Cyclicals are a contrarians - contrarian play....they are NOT longterm buy & hold - "can't lose in the longterm" plays.... you guys did lose and lose big; because you got mesmerized by the fundamentals, the sentiment, commodity prices etc...
I'll repeat:
THEY'RE CYCLICALS - STUPID !
1. They are NOT for the longterm
2. You can (and did) lose...and lose big & fast.
3. You have to sell them - when they are most loved amd buy them when they are most hated - period.
4. ie: Gold stock of late:
If you don't get flamed by 95% of the mo-rons on SI when you buy... you're too late.
5. ie: Oil stocks/Nat Gas plays of late:
If you don't get flamed by 98% of the mo-rons on SI when you sell - you're also too late.
6. It really is - just that simple !
;)
...oh; and PS:
re: [" I am waiting to see if there is any real reason for the spike in NG and if it may continue "]
Quit holdin' your breath & read this post stolen from the "HOT" SI SD thread (VBG)~
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"Indigestion
Daniel Fisher, Forbes Magazine, 10.29.01
All those new natural gas-fired electric plants mean more gas demand, right? Maybe not.
For natural gas bulls, there was never a surer sign of good times to come than the order book at General Electric Corp. Backlogs in GE's Power Systems group almost tripled to $25 billion in the late 1990s as scores of utilities and freestanding power producers ordered natural gas turbines to supply the nation's growing appetite for electricity. Gas demand had to go up as all those shiny new turbines were connected to the grid.
Ah, but there was a flaw in that argument--one that is becoming glaringly clear as the price of gas plunges below $2 per million Btu at the wellhead from as high as $10 last year. (A million Btu of gas equals just about 1,000 cubic feet.) Those new gas plants were supposed to steal business from pollution-spewing coal units, which still supply half the nation's electricity. But in a painstaking study of 788 power plants that supply the bulk of U.S. electricity, Charles Studness, president of Studness Research, found quite the opposite could happen.
Studness determined that 79% of the "new" electricity supplied to the grid over the past five years came from existing plants, mostly coal-fired units. And there's plenty more where that came from. Studness figures existing coal plants have the potential to increase output by 50 million megawatt-hours a year for the next five years, representing about half the expected 2.5%-a-year increase in demand.
Coal's advantage over gas: It's cheap. Utilities paid an average of $1.20 per million Btu for coal last year, compared with $4.30 for gas (delivered). Even with depressed gas prices, many coal plants are still cheaper to operate. So while those new turbines being installed by Calpine (nyse: CPN - news - people) and other independent power producers, (see table, below) will burn a lot of gas, they will do it mostly at the expense of older gas plants that burn half again as much.
Addressing a Burning Issue
If natural gas prices stay down or merely remain volatile it will help companies that burn, trade or store gas and hurt those that sell it or provide equipment to the industry. Overleveraged gas producers and service companies could have trouble making it through the downturn.
WINNERS: Sales*($bil) Remarks
Calpine $4.6 Its gas power plants won't compete with coal for years
Chesapeake Energy 0.9 Hedged gas production through December 2003
Dynegy 43.4 Owns gas, coal power plants; stores, trades gas.
Peabody Energy 2.7 World's largest coal company
LOSERS:
Devon Energy 3.3 Gas-heavy; $8 billion in debt
General Electric 129.5 Sells gas turbines
Pioneer Natural Resources 1.0 $1.5 billion in debt; 53% of production is gas
Transocean SedcoForex 1.9 $4 billion in debt; heavy gas-drilling exposure
*Latest 12 months. Source: Market Guide via FactSet Research Systems.
"It's not our game to compete with coal or nuclear," says Ron A. Walter, senior vice president of San Jose, Calif.-based Calpine, which plans over the next few years to build gas-fired plants totaling 31,500 megawatts. "It's our game to displace older gas."
Combined-cycle gas turbines, which use hot exhaust gases from one turbine to generate steam to turn a second one, can transform 6,800 Btu of gas into a kilowatt-hour of electricity, enough to light one lightbulb for ten hours. The oldest gas plants burn as much as 13,000 Btu, and the national average is 10,500. Substitute enough new plants for old, and U.S. gas consumption, currently 62 billion cubic feet a day, could drop by as much as 1 billion cubic feet a day.
That scenario sounds unlikely to Stephen Bergstrom, president of Houston-based Dynegy, an energy-trading firm that also owns both coal- and gas-fired power plants. Dynegy's 35-year-old coal plants are "huge capital hogs," Bergstrom says, that cost ten times as much to maintain as modern gas units. Throw in the cost of scrubbers and other required pollution controls, and many smaller coal plants will have to be shut down, Bergstrom says.
But coal-plant owners can be ingenious. Witness Midwest Generation, a nonregulated subsidiary of Edison International that bought six coal plants from troubled Commonwealth Edison of Chicago in 1999. By changing operating procedures and burning a higher grade of coal, Midwest boosted output from the 40-year-old plants 12% last year--while reducing emissions. John Long, vice president and chief technical officer of the Midwest Generation unit, thinks he can coax another 15% increase out of those aging boilers over the next five years without running afoul of environmental rules.
Long term, the bullish scenario still holds: Gas will displace coal. In the meantime, gas producers have a lot of bonds to retire"
>>end of article<< |
