1. War Room 31 July 2012
Commodities Schizophrenia
2. War Room
•Monthly macro discussion
•Using tools in context
•Update on HiddenLevers Features
•Your feedback welcome
3. Commodities Schizophrenia
I. Nat Gas + Coal: A Tale of Two
Electricities
II. Oil Prices – Mid-year Pulse Check
III. Agricultural Commodities = Winner!
IV. Scenarios
4. NATURAL GAS + COAL:
A TALE OF TWO ELECTRICITIES
HiddenLevers
5. Nat Gas + Coal: A Tale of Two Electricities
Nat Gas overtaking coal in 2012 as biggest resource for electricity generation
source: US Energy Information Administration
6. Patriot Coal Takedown – Taste of Things to Come?
Coal demand declines in 2012:
• Competition from nat gas
• Milder weather in US
• Weaker industrial demand
(China + Europe)
• Tougher environmental rules
• Wind + solar getting cheaper
• Oversupply from bad planning
PCX Coal ETFs
7. Natural Gas + Coal – Carnage in both camps
Neither Coal Miners nor Natural Gas Drillers have been good investments
source: HiddenLevers
8. Nat Gas Opportunity – Utilities, not Drillers
Gas and Electric companies rock
- lower prices for Nat Gas + Coal
- Usually offer a nice yield
Source: HiddenLevers
10. Oil Prices – Iran + Europe tug of war
2012 – strange days for oil prices
Jan – Feb
• Rhetoric from Iran + US + Israel drives
prices to 110usd
• Election year in all three countries
Mar – Apr
• Banks make ridiculous upside calls on oil
• Oil fades as saber rattling fades
May – Jun
• Oil crashes – Euro dies, US Dollar lives
• Europe is a way bigger deal than Iran
July
• US decoupling in tact – sluggishly
improving econ data
• Oil + USD rising together
• Rhetoric returns – Romney in Israel
• Trading on QE expectations
78usd
Source: HiddenLevers
11. Oil Prices – HiddenLevers gets it right in Jan 2012
slide from Jan 2012 War Room – Got Oil?
18. Climate Change: Will We Adapt?
Guidance
1. Agro commodities prices skyrocket due to decreased
supply and increased global population
2. CPI rises with food prices, and consumer confidence
is negatively impacted
3. GDP growth could slow to standstill, based on
subpar legacy infrastructure
4. DOD budget rises to cope with rise in global conflicts
over resources
Guidance
1. Agro commodities prices rise, but less quickly
2. Manageable CPI rise, consumer confidence not
heavily affected
3. GDP growth rises due to investments in
infrastructure and durable goods
Both Scenarios:
1. Agricultural Commodities rising
2. CPI rising - inflation