AEC and CLP are ramping.

BAS is ramping.

RGR is making the turn.

Alright, so silver is getting crushed. But I can live with that. It’s a buying opportunity if I’ve ever seen one.

My Christmas rally is here. Santa Clause has delivered.

Ho Ho Ho

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BAS executives gave a press release this morning containing select operational data from November. Here’s the quick recap; drilling projects for natural gas are real weak and demand for their services was kicked in the teeth in November.

BAS is off more than 7% before the open.

They are now forecasting an even deeper slowdown in the first quarter of 2013.

Now let me tell you how December is going to go. Worse than November, leaving expectations for the first quarter of 2013 even lower than they are now.

But at these prices, BAS remains cheap. And as companies go, it’s flush with cash in a sea of dying competitors.

I expect drilling for natural gas to pick up in 2013, provided we continue to witness natural gas prices holding onto recent gains (no double dipping into the $2 spot prices again, if you please).

That will lead to a second half spaz run in BAS shares, assuming all goes roughly according to plan.

The North America energy revolution is underway. It has not stopped. It has merely been delayed in wait for better pricing.

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Despite the market weakness, natural gas futures continue marching steadily higher. Considering the above average warm weather in most of the country (first cold wave seems ready to set in this week), and it would seem that the shortage of storage space has been worked through in one way or another.

This was the very thing I was interested in betting on when I took a position in BAS. I was too afraid to bet directly on the price of natural gas for fear that this warm weather would be the stake driven through the heart of natural gas.

If prices continue to shore up, it will become increasingly more feasible to drill for natural gas again. Accordingly, I expect activity to pick up in the fracking services – weakness in fracking was the primary driver behind BAS’ most recent earnings trouble.

I remain unconvinced on the need for panic. But every day we do not rally herds us closer to a wash out. It has been too long since we had a flood of fear drowning us. My intention is to sit on my 20% cash position and watch things closely, rather than give in to that same that has hindered us for so long.

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Hail iBankCoin! And its immutable record – CADAVERA VERO INNUMERA

I have to be honest. I half expected another micro-blood bath this morning; not necessarily for the markets, but for me personally.

Late Friday, the Obama Administration was so generous to announce that they know damn well Obama doesn’t have to worry about another election. They communicated this through the medium of shutting down 1.6 million acres of federal land slated to be opened for gas/oil drilling.

I don’t know if there are even any hydrocarbons to be had on this land. I don’t care. That’s not the point.

This was a clear shot across the bow of the oil industry.

I shuddered as I curled up into a ball, just anticipating the shelling I was set to receive this morning.

Instead, BAS is up almost 5%. Evidently, having your industry in the crosshairs of environmental/religious extremists who have no care for humanity or the consequences of their actions is a really good thing.

Who knew?

I am trying to take these developments with a grain of salt. I expect a punt, politically, on the issues of the fiscal cliff at home and EU debt across the Atlantic. Then I expect the merriest freaking Christmas we’ve had in 5 years – because we can.

Therefore, I am resolved to wait out a little longer for a bottom to form. I have some targets (assuming each selloff has become more muted than the prior) relating to both equities and bonds. If we cut through those ranges, I will begin to rethink things, and will raise more cash at that time.

For the moment, I’m 20% cash, holding AEC, CLP, CCJ, BAS, and physical silver. YTD gains have been hammered, down from 20% to just under 5%.

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It’s so fortunate that the markets are back open finally. Some of us were starting to lose our minds.

I’m getting lit up in BAS. The entire position is being crushed. My losses stand at about 22% from my first purchase. Net losses are lower from averaging in.

That’s what happens when you push into distressed positions. Most of the time, you’re early, and get treated to another 20-30% of downside. You have to know you’re where you’re supposed to be, because if you’re wrong, there’s no coming back.

But the rewards can be tantalizing when you’re right. I laid out my reasoning for a huge resurgence in BAS’ stock price mid to late next year at the earliest. Sooner if speculative money gets interested in natural gas prices reflating.

I offer a hat tip to Po Pimp, who told me I was early to the trade. This one’s to you, sir.

Meanwhile, not all is bad. CCJ is running much higher, in a way that makes me think somebody talked. They’re supposed to be issuing earnings today.

AEC is flat and CLP is getting a nice bid from some positive spin off their earnings release last week. The irony that CLP is more expensive than AEC, while CLP continues to receive more hype, is not lost on me.

And silver is back above $32.

But I have no cash, in large part because I’m betting that the world can be just as irrational this year as it was last year. Or the year before that. There is no buffer between me and a drawdown, and only limited ability to buy in if we get a big selloff.

Hearing market commentators launch into explanations of the dangers coming out of Europe, or developing economies; my exact position this time last year before the huge run; is aggravating.

If this is the year that facts matter, so help me, I will be pissed.

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BAS is off 4% this morning on earnings which were, in my opinion, both very bad and very well known. After reviewing the case, I broke my own rule and increased the position by 25% around $10.80, slipping into the old habit of borrowing money to bet on prosperity.

But just a few percent so not too badly…

This isn’t some kind of shock here, like with Apple. We’ve known the entire gas well service sector was sucking wind for 8 months now.

BAS took the hits and issued more bad guidance, but that’s no reason to take them at their word and sell – because the stock is dirt cheap.

Please, come in further and I’ll get out of this chair and show you.

You see, the troubles in BAS have been industry wide. The management of BAS admits personally that they were suckered into the surge in demand for gas drilling. And at that time, so were dozens of new competitors who entered the market trying to get a slice of the pie.

And right around that same time, natural gas prices went into a total tail spin, forcing well owners to curtail spending and leaving all these new business out to dry.

The results have been predictable, really. The companies all slammed into a barrier as hard as these stone walls you see around you.

Thus, utilization rates for the services firms have been plunging, and in order to try and stay in business, margins have come under intensive pressure.

The company has planned for more of this sort of action in guidance, for the fourth quarter of 2012, and the first quarter of 2013.

But, here’s where I’m intrigued in continuing to buy and hold BAS.

For starters, I think that the energy revolution here in the US is just getting started. I think politicians on both sides of the aisle are going to foster this growth for a myriad of reasons, and I think alternative energy sources, like nuclear or oil, are pricey enough to keep the natural gas revolution humming.

So the trend and development is intact.

And, when I was looking through the space, what I noticed was that BAS’ peers are really total garbage. I had to LOOK to find a company that had any cash on their books. BAS has enough to run their operations on no revenue for a third of a year. So BAS has the chickenpox, but these new competitors aren’t quite up with their antibody game, if you follow 14th century disease proliferation references.

So lots of BAS’ competition, which has really been putting the stress on their profit margins, is about to go away, in my opinion.

Which brings us finally to natural gas prices. They’ve been going up.

Now, I don’t know if the natural gas pricing recovery is legitimate, or if it’s merely a product of some speculators who haven’t been respectful of the storage issues that were causing the problems. But I do know higher natural gas prices can’t hurt to coax some money back into well exploration and development.

So, I see a situation where BAS has caught a cold, and for that the markets are pricing in $0.16 quarters for eternity.

As I look out this window, I can see clear skies on the horizon. I think this ship turns back around sometime next year – maybe the year after that.

And in the meantime, BAS will just have to bide their time by buying out some key competition and watching the others go under.

If BAS can manage to average $0.25 a quarter over the next year or so, the immediate issues notwithstanding, this company is going to $18. I think that’s reasonable. They’ve already made more than that in the first 9 months of 2012. This is a rut, not a canyon.

Now get the door while I put on my coat. I’m out for the day.

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