February 4, 2008

1) China had its largest up day in history yesterday at +9%. It is up 20% from the recent low 9 trading days ago.

2) Exxon reported profits of $11.7 billion on the quarter and $45 billion on the year, the largest annual profit in US history. Amazing. The broader energy industry accounted for 40% of all US profits in 2007.

3) Bush announced his 2008-2009 federal budget proposal of $3.1 trillion, the largest in history. Military spending increases , while health and education get cut. It's his way of saying "screw you" to the current crop of republican candidates, who will have a tough time selling this package to the electorate.

4) Legal insider trading reached an all time high in the last two weeks. The biggest has been in ETrade (ETFC) which saw multiple buyers. The stock has fallen from $25 to $4.

5) Barton Biggs has just published a new book called Wealth, War, and Wisdom about the financial markets. It gives one a great historical perspective and now that we are all in search of a market bottom is a must read.


Natural gas ($NATGAS) has been the orphan of the energy complex, lagging crude, heating oil and distillates. It is now historically cheap compared to the others. Virtually all of the new power plants being built in the US for the next 20 years will be gas fired. Imports will remain at a trickle due to the high cost of LNG liquifaction facilities. Many major gas fields are becoming depleted and with most of the country now having been explored there are no big replacements coming on line. Natural Gas is also environmentally friendly, producing only steam and CO2 as byproducts. Natural gas is a strong buy here at $7.80 with a summer target of $12, and $15-$20 if a major hurricane hits the gulf. Take a look at the chart below. It is about to break out to the upside, dragged kicking and screaming by crude.