My Analysis Confirmed, Climate Gate, Nat Gas Breaks Out, Birchcliff
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I follow analyst Ed Dowd and he recently did an interview on USAWatchdog.com. He confirmed observations I have made and been commenting on for months.
Dowd says, “We had 10% deficit to GDP during the Great Financial Crisis (2008 – 2009) when we actually had a crisis. We had 8% deficit to GDP during this election year. You have to ask yourself, what was the crisis?"
"The crisis was to get the Biden Administration (and Kamala) re-elected. So, they went on binge spending. “
He commented that they hired government employees to add to job numbers and padded the actual reported numbers by 1.25 million. A huge and unprecedented difference between the reported estimates and reality. As I have commented, we have had data manipulation like never before.
Dowd - “We are thinking it was 10 million to 15 million illegal immigrants that came in the last four years. The majority came in the last two years. That stimulated the economy and raised the velocity of money as those people were given money.
All the NGO’s that facilitated the illegal immigration also got money, and that stimulated the economy.”
Dowd concluded - This deficit added $2 trillion, and that was unproductive assets.
Trump policies will reverse this short term juice that could not continue anyway. Dowd also agrees with me that bond markets have had enough of the spending, so bond markets are revolting, as I have shown with bond interest rates rising despite the Fed cutting rates. He also concludes that the Fed and markets have made bad decisions based on this flawed data.
As I said, no Santa Clause rally this year and January could set the market pace for 2025 that does not look good.
Today Chicago PMI fell more than expected to 36.9 in December from 40.2 in November, missing the 42.7 consensus, according to data from the Institute for Supply Management. This spells very weak manufacturing in the Chicago Region
Better news was pending homes sales in the U.S. grew for the fourth straight month in November to return to the highest level since early 2023, the National Association of Realtors said Monday. The NAR’s index of pending sales increased by 2.2% last month to reach an index level of 79, the greatest since February of last year. Economists were expecting a smaller 0.7% increase. Most likely buyers are coming to grips that rates won't fall so much so might as well wade in now.
Natural Gas Breaks Out
Besides markets tanking again today, the biggest development was an upside breakout in Natural Gas prices to almost 2 year highs. This is a chart of the spot or cash market. The most active Comex contract, March is up to a high of $3.36 today from under $3.00 on Friday.
Natural Gas prices have suffered from lower residential and commercial demand during the heating months of the year because of a couple of above normal temperatures in the past two winters.
Forget about the climate change narrative that weather will keep getting warmer. Once you realize that this narrative is all about increasing taxes (carbon tax) and wealth distribution it makes more sense.
As I commented many times, there is absolutely zero evidence that carbon emissions cause climate change. I am not saying there is no climate change, there is and we have gone through many climate cycles on earth over the centuries. These cycles or climate change are caused by changes with the sun and earths changing orbits and tilt of the planet towards the sun. Ocean currents, cloud cover and volcanoes. All this climate change they harp about is not based on science but climate computer models that cannot even successfully test backwards in history. Another thing I was surprised to learn is mostly all and maybe everyone of these models does not even factor in cloud cover. The models are based on clear skies all the time. Anyone with solar panels could easily discover their output drops when clouds block the sun. And clouds are the weather!!!!!!
Back in January 2024, I commented on this massive volcano, Hunga Tonga that exploded in January 2022. I believe and so do many scientists that it could be the main cause of higher temperatures this past year or so. What is unique is that this volcano was under the ocean about the perfect amount to spew a massive amount of water vapour into the atmosphere.
This was unprecedented and estimates were enough water vapour was spewed into the stratosphere to fill more that 58,000 Olympic-size swimming pools “We’ve never seen anything like it,” said Luis Millán, an atmospheric scientist at NASA’s Jet Propulsion Laboratory in Southern California. He led a new study examining the amount of water vapour that the Tonga volcano injected into the stratosphere, the layer of the atmosphere between about 8 and 33 miles (12 and 53 kilometers) above Earth’s surface.
The study calculated that it added 10% to the total water vapour in the stratosphere and could take years to dissipate. Hello warmer climate and good bye climategate.
Many scientists predicted this water vapour from this massive volcano could add to warmer temperatures for 2 or 3 years and 3 years are up next month. Also add in another known weather pattern the El Nino is now switching to the La Nina.
The 2023–2024 El Niño was regarded as the fifth-most powerful El Niño–Southern Oscillation event in recorded history, resulting in numerous patterns and weather events across the globe. La Niña is a natural climate pattern that influences global weather marked by cooler than average ocean temperatures in the equatorial Pacific. The effects on weather are most pronounced during the winter months in the Northern Hemisphere and have a much weaker influence in the summer.
Last winter was the warmest on record for the Lower 48 because it was dominated by La Niña’s counterpart El Niño. We are most likely headed for a more normal winter with a La Nina and perhaps an unusual cold one. Another factor is the coldest and strongest polar vortex in 10 years. A stronger vortex is more likely to stay put in the North, but if it does break and move south it could result in one of the coldest winters for many years, with storms like the Blizzard of 2015.
Another bullish factor becoming more predominant for Natural Gas is the growing demand for electrical generation driven by this crazy data centre build out.
For the very first time, on 28 August 2023, the United States met more than of half of its electricity demand from natural gas. It encapsulated a summer during which gas-fired electricity generation grew dramatically. In just the past two years, its share of the power mix rose from 40 to 45 percent for the summer months of July and August.
U.S. natural gas consumption grew by 1% to reach a new annual high of 89.4 billion cubic feet per day (Bcf/d) in 2023, according to EIA's Natural Gas Annual, and continued growing in the first nine months of 2024. The 1% increase in natural gas consumption in 2023 was driven by a 6.7% (2.2 Bcf/d) increase in consumption in the electric power sector, the largest natural gas consuming sector. The natural gas consumption trends observed in 2023 largely continued in 2024 through September, EIA said.
In 2023/24 low demand for winter heating helped contain gas prices and that may not be the case for 2025. It is also important to realize the price connection between gas and oil because if they get way out of sync you can see more adoption for the cheap alternative which is now Natural Gas
You will see many oil&gas companies use six times which is an equivalent energy content basis, where a barrel of oil is roughly six times that of a million BTUs of natural gas.
When you consider the complexity of handling natural gas, oil prices have have historically swung between 10-20 times natural gas prices. When gas prices bottomed earlier this year that multiple was way over 40.
Liquefied Natural Gas (LNG) is a mostly new growing market in just the last few years. We have growing demand for this in Europe and trucking fleets in China are embracing cleaner-burning LNG for fuel, a trend neighbouring India wants to emulate.
In conclusion, the bottom is in for North American natural gas and a new up trend is underway. My favourite Natural Gas stock is:
Birchcliff Energy - - - TSX:BIR - - - - Recent Price - $5.30
We have been buying this stock for over a year in attempt of a bottom fish, and I believe we have that now. The stock pays a $0.40 annual dividend so a very nice yield of 7.5% that we can collect waiting for gas prices and the stock to go higher.
This year Birchcliff delayed drilling of 11 wells to bring into production during Q4 this year in anticipation of higher gas prices. It appears that is turning out to be a very good decision.
They had solid quarterly average production of 75,403 boe/d in Q3 2024 which was 83% natural gas and 9% natural gas liquids.
Q3 2024 report Chris Carlsen, President and Chief Executive Officer of Birchcliff. said
“Our strategy for 2025 builds off of the operational momentum we have built in 2024, maintaining our strong focus on capital efficiency improvements and driving down costs. Birchcliff’s 2025 F&D capital expenditures will be strategically deployed throughout the year, with a program designed to remain flexible in response to commodity price volatility. Based on our preliminary budgeting process and current commodity price outlook, we are targeting annual F&D capital expenditures of $260 million to $300 million and annual average production of 76,000 to 79,000 boe/d in 2025. We remain focused on prioritizing our strong balance sheet and financial position, while balancing the continued profitable development of our world-class Montney asset base and shareholder returns. We are continuing to evolve our plans for 2025 and expect to announce the details of our formal 2025 capital budget on January 22, 2025.”
Birchcliff paid much higher dividends when gas prices were higher and I expect those days to come back. As well the Toronto Stock Exchange has accepted Birchcliff Energy Ltd.'s notice of intention to make a normal course issuer bid (NCIB). The NCIB allows Birchcliff to purchase up to 13,489,975 common shares, representing 5 per cent of its 269,799,514 common shares outstanding as at Nov. 14, 2024.
Birchcliff is a Canadian producer but they send most of their gas outside the Canadian AECO hub so they get much better prices, especially since 2021.
The chart is very interesting with a double bottom and ready to break above the upper part of the down trend channel. First resistance around $5.55.
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