I’m sitting here, sipping gently on a warm cup of coffee, with liberal amounts of cream, and yearning for a nice everything bagel with plain cream cheese. The morning air was brisk and my drive to work was like floating in a cold spring. The crisp flavors and turnings of Fall are upon us in Michigan. The leaves will begin to fad to auburn soon, and the apple orchards will begin pressing cider.
If you have never visited our orchards to taste a sweet apple straight from the branch, or a glass of rich cider accompanying a fresh baked donut, covered in nuts; my friend! You have not lived.
I’m not going to pretend like I’m a meteorologist, over here. I pale in knowledge of weather, and think longingly for the differential models of Dr. Cane (Veritas) to visit us again.
I do, however, know how to read an almanac. And I do so every year, looking for an idea of the coming weather patterns and if there’s a good trade to be made along the supply line. For instance, in October of 2009 (my God, has it already been two years?) I realized it was going to be an exceptionally cold winter.
Following this train of thought, I engaged in a strategic purchase of a gas distribution company, PNY, which was right in the center of the coldest part of the country, scalping a quick run up in prices.
So this morning, Michigan’s cool breathe stirring my memory, I picked up my almanac and flipped through to the weather predictions page.
What I read suggests that this winter is going to be rather mild. If that is the case, then there won’t be much opportunity for extreme weather events to drive up prices in any part of the country.
I’m turned off to the winter trade this year, based on what I’ve read. If one were the gambling sort, he or she could perhaps bet against natural gas, as a mild winter is sure to see huge buildups of supply along with nasty levels of depreciation for companies who deal in the energy source, as I am told it is quite tricky (and subsequently, expensive) to store.
I will not be joining you, sadly. This is not my cup of tea.
And speaking of tea…that sounds much better than refilling my now depleted cup of coffee. I am going to fetch up a nice pot of Earl Gray, with its sour pitch of aromatic bergamot wafting to my senses. I’m a summer spirit at heart, but I do enjoy that certain mellowness of Fall, for a spell.
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Indeud. While enjoying the autumn festivities, I enjoy adding quality rum to my cider.
if you are really looking into this trade look at shorting NKA. Based on their financial statements they need the summer vs winter storage spreads to be $0.95 just to break even (long term storage spreads are $0.50). They are being propped up short term as people are buying MLPs due to their yield (current NKA yield is 12%). The company is running out of cash and issuing more stock and taking on debt to finance the distribution.
Sounds like you’ve done some homework here. Good work, and thanks for highlighting it. If you go through with shorting NKA, I hope it works out for you.
Please feel free to drop by and boast of your winnings or lament your losses anytime.
I think I’m going to just leave natural gas alone here, though. I’m tied up elsewhere. If I thought I was spying a surge in natural gas demand, I might have moved, but what I read mostly reinforced that I should just stay away.
I have been short since $20….. trading sub $12 right now. The majority of their assets are in Alberta which is extremely overbuilt (they withdraw 50% or less out of their gas caverns during a cold winter). Alberta is a supply hub not a demand centre. There is a long way for this thing to go still. I just don’t understand why anyone would own it. If you were bullish the spreads you can put them on very easily…. seems like a very low delta option these retail investors are buying for a massive premium.
If you look at their balance sheet 1/3 of their assets are goodwill and intangible assets (they value their contracts at close to $200M). They have never adjusted the value of their storage caverns since they purchased them from Encana. The spreads have contracted from $1.50 to $0.50 and due to FASB rules they get away with misleading the investors.
Damn, nice work. Just watch for the general buy out offer; I’ve gotten burned on that in the past (STU).
RRisky, can you link to the financial statements you’re referring to re the spreads?
How are they losing money?
I don’t understand. Thanks
I think you eat to much fat. Put 2% milk, no cream in your coffey and eat fruits instead.
So that I can die healthy? Haha, thanks, but I’d rather enjoy my palet.
Mr. Cain,
Are you still long the dollar? I am and in size.
I reduced my long dollar exposure, both by making a purchase of CCJ, and also by covering half of my UCO short. Plus, I shorted TMF yesterday, which is mostly the opposite of a long dollar/depreciation play.
I still have some long dollar exposure, and I think there’s a good chance the USD rallies against like currencies (euro especially).
But at this point with the central banks of the world uniting to save the EU, I am fairly sure that a massive collapse where the USD would appreciate by 2-3 fold is off the table.
Thanks.
I with you on satisfying the palet. Life is too short to not enjoy it when you can. However, I think moderation is a good idea if done in moderation.
(Notes H50’s betrayal for later use)
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hehe that s good one. But before dying, you can be sick 10-15 years before if you don’t take care. Then you have BIG regrets… People never think about that… The more you take care of you, chances are for the morbidity periode to be way shorter…
Anyway, take care!
Thanks, Jean-Paul. Have a good weekend yourself.
Same brisk drive this morning. It was indeed, colder than a witches titty this morning.
Fug… better get these MI deals going before the frost is on the apple.
Be just my luck to fugging around up there in the sub-zero Michigan chill.
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Love Michigan this time of year…picked up my first batch of cider just the other day.