Macro Musings
Three upcoming investment themes for discussion:
- Policy shift into natural gas by Congress may become more likely with a return to even mediocre US growth and rising oil prices. Also as the dollar drops, oil becomes less affordable and a domestic solution is need (priced in dollars and produced 100% in America). With massive budget deficits, huge natural gas discoveries in the US driving prices down, and an urge by Congress to "create new jobs", this maybe a policy action whose time has come. The economic and national security reasons for this action might make investments in this area start to pay off. A bill to provide for infrastructure for a conversion of the US trucking fleet to natural gas should start to get a lot more support. As that shows success a follow on to convert the auto fleet may be possible. Autos and trucks account for 70% of all US oil imports. Natural gas is the one solution that can solve our oil problem than a Huge discoveries in North American and elsewhere make a transition to natural gas for trucks, and then eventually cars a much more viable solution for our oil dependence. At some point as oil starts to rise and the disparity between the two increases I think we'll see much greater investment in natural gas. Investment wise this one can look at plays that own natural gas in the US, as well as exploration, and more speculatively bets like CLNE and Westport (WPRT) which makes engines that use natural gas. For disclosure, long APC, DVN, CHK, WPRT, CLNE, UPDATE(FSYS) and looking for more as a long term play.
- China is due for a hiccup. Lots of stories leaking out about increases in bad debt. . Does this mean I think China is due for a huge drop? No but there are macro problems with excessive lending and an imbalanced currency. Through this crisis we have had the Chinese currency fixed to the dollar As the dollar drops, this kills Europe and Japan. The Chinese either have to start to revalue higher, or pressure on the ECB and the Japanese will become politically untenable. You can't have a fixed rate regine in the world's thrird largest economy with major imbalances created (again). Something's got to give. If Warren Buffet wants to buy a railroad, I like Australian plays better than US plays.
- Health Care. Stocks were up on elections last night. Don't bet against a bill here. Use todays uptick to get out. I prefer to stay out of the sector--but I know quite a few hedge funds that go in whenever hype is high, then go short when hype is low. I prefer to stay clear of musical chairs for a song that I am fairly sure I know will end badly for the insurers.
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