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WTC Ramps, LNG to Follow?

Written By Christian DeHaemer

Posted November 21, 2011

Common wisdom would tell you that we are still in the market aftermath of the great Greenspan bubbles of the past fifteen years.

It was a time when the price of housing went off the rails in the United States due to extreme liquidity, exemplified with falling interest rates and free loans from despicable mortgage brokers…

How, then, do you explain this chart?

It would seem that the rest of the world wanted to live in overpriced McMansion cul-de-sac developments just like the boys from Las Vegas.

global nov 18

There are several things I find interesting about this chart.

The first is that by comparison, the U.S. isn’t that bad. And from what I’m hearing about Australia, America is a lot closer to the bottom than they are Down Under.

It was reported today that mortgage delinquencies are at their lowest levels since the fourth quarter of 2008 at 7.99%. They were at ten percent; four to five percent is about normal.

Secondly, I’d like to point out the flatline that is Japan.

If you know your history, you’ll remember that in 1990 — before the Japanese real estate bubble popped — one square block of Tokyo was worth more than all of California.

Japan circa 1990 is the poster child of real estate debacles. On this chart, it looks rather modest. Though in Japan, prices have been falling for 20 years.

Oil Hits $102 — Don’t Cross the Streams!

The price of West Texas Crude hit $102 last week.

The price of WTC jumped because a company called Enbridge is going to purchase ConocoPhillips’ stake in the Seaway Pipeline, which runs from the Gulf of Mexico to Cushing, Oklahoma.

Cushing is where all the big refineries are. It is being flooded with crude from North Dakota.

But the interesting news is that Enbridge will reverse the flow of oil so that it goes away from the glut in Cushing and flows toward the Gulf…

This plan will move 150,000 barrels a day in Q2 2012 and 400,000 bbl/day by 2013.

This is a direct repose to Obama’s job-killing delay on the Keystone XL Pipeline.

spread nov 18
The upshot of all of this is that Cushing oil can now get a global price.

Brent crude priced in London has been at $120 a barrel. The spread between WTC and Brent was higher than $25 just last month. Now it has returned to historical norms below $10 — where it will likely remain — unless…

Bunker Buster

The Air Force has taken delivery of a new 30,000-pound bomb capable of penetrating targets buried 200 feet underground.

The Air Force is saying it is for use against hardened targets such as North Korea, and can be dropped by a stealth bomber. But it is obvious that this new conventional bomb — which is six times bigger than its last bunker buster — is meant to intimidate the Iranians.

Flush With Gas

In case you haven’t noticed, the United States is now flush with natural gas.

Gas in the U.S. is running around $4/MMBTu. The same gas in Japan is around $18.

And a new report by A.T. Kearney says that due to Germany closing its nuclear power plants, it expects European gas prices to rise 30 to 60 percent a year until 2015. This sets up an arbitrage possibility…

Bloomberg is reporting LNG tanker day rates are now over $112,000, and utilization rates are above 95%. The price has tripled from $42,000 a year ago.

The LNG fleet contains 355 ships with 65 on order.

UNG, the natural gas ETF, has been falling for four years now — from $120 to under $8:

ung nov 18

Someday, it might bounce…

But I’m not buying until I see a double bottom or an uptrend or some sign that it’s not a falling knife.

Until then, you are better off buying the companies that make LNG terminals (like CBI) or the tanker companies, like Golar LNG, which has tripled this year to $42.09.

All the best,

chris sig

Christian DeHaemer
Editor, Wealth Daily