Commodity Market Update with Andy Hecht

Weekly Commodity Show with Andy Hecht

Natural Gas: It’s Go Time

Summary

History says Buy.

This energy commodity was the first to yack.

The King is dead, long live the new King.

All the bearish news is in the price.

A historically volatile market — watch out.

Last Monday, when all hell was breaking loose in markets around the world and crude oil plunged to the lowest level in over six and a half years at $37.75 per barrel, natural gas really tried to follow. The price got down to $2.641 per mmbtu and no one would have been surprised if it traded below support on the weekly chart at $2.4430, the April 2015 continuous contract lows. Support on the active month NYMEX October futures contract at $2.6380 even held, and the energy commodity stayed within the trading range. By Friday, as oil recovered in violent fashion to close a volatile week almost 20% higher than the lows on Monday, natural gas quietly closed at $2.724 per mmbtu.

Commodity Producers – Warren Buffett Doesn’t Peddle Dividends

Summary

Last week’s piece explained the issue.

Transocean and Seadrill have suspended dividends.

More cuts are on the horizon.

BHP makes a mistake.

Commodity stocks will not make a bottom until the dividends turn to retained earnings.

Dividends in the commodity sector are like a lethal drug that will destroy shareholders in the great bear market for raw material prices. Commodity producers and related companies need to take a Buffettesque approach to managing their business and shareholder dividend policies.

The volatility in all assets classes last week reached a crescendo as a combination of a slowdown in China and a supply war in crude oil clashed to create a cascade of selling early in the week. Crude oil made new lows at $37.75 per barrel on the active-month NYMEX futures contract. The Dow Jones Industrial Average plunged more than 1000 points last Monday, and copper made new multi-year lows at just over $2.20 per pound. Gold rallied to almost $1170 per ounce on the fear factor. Things looked bleak. Later in the week, the price of silver plummeted below the $14.10 support level and traded at the lowest level since August 2009 at $13.95 per ounce on Wednesday, which was COMEX expiration day for silver options. The Chinese government supported the local equity market on Thursday and cut interest rates once again during the week, lifting prices. As Chinese stocks rose, so did other asset prices around the world. The price of gold could not make it through $1170 and backed off $50. Oil staged an impressive rally on Thursday, closing almost $4 or over 10% higher than the previous session, copper rallied by over 13 cents and silver came back to the $14.50 level.

Richard Sandor To Receive Honor From WFE

richardsandor

Richard Sandor

The World Federation of Exchanges (WFE) announced today that the recipient of the WFE Award for Excellence this year will be Dr. Richard Sandor, chairman and CEO of Environmental Financial Products LLC (EFP). Dr. Sandor was selected for this Award in recognition of his work at the epicenter of environmental and financial markets for more than four decades.

“In 1992, Dr. Sandor was honored by the City of Chicago for his contribution to the creation of financial futures and his recognition as the ‘father of financial futures.'”

“The WFE chose to honor Dr. Richard Sandor with the WFE Award for Excellence for his momentous innovations in financial futures and environmental financial products,” said Hüseyin Erkan, Secretary General of the WFE. “The work he completed at the Chicago Board of Trade forty years ago was a turning point in the financial world. Dr. Sandor’s contributions to the financial and environmental markets have been instrumental in the development of the industry.”

It seems the WFE is just catching up with what you and I have known about Doc for a while.

Doc and I did a podcast back on June 13 regarding his new book Good Derivatives.

I wrote Richard Sandor: A Legend In Financial Innovation in April 24 for Huffington Post.

And here is a video I did with him in May of 2011 at the Milken Institute’s Global Conference.

We should be thankful for all he’s done for our industry when you consider the likes of Jon Corzine (MF Global), Phillip Bennett (Refco), and Russell Wasendorf (PFG Best). He’s someone that anyone in the commodities space can look up to with great pride and admiration and want to emulate. I know I do.