crypto thoughts and the market ?3

13:06 08-Sep-21

One more quick update to say that my notes below should have also referenced Brazilian tumult as a possible reason for NFE weakness.  To my knowledge, the company has not yet formalized gas supply for its terminals there.  The pandemic situation has improved dramatically, though.

Since yesterday's update, American natural gas has rocketed above $4.90, with European and Asian prices also rising to new record highs.  The resulting electricity prices are prompting backlash in Europe, with huge potential for the situation to get worse, yet GLNG and NFE remain depressed.  The broader market outlook is one explanation; I find it telling that Bitcoin and Ethereum have failed to rebound today, and the SEC isn't helping.  The coup in Guinea might also be a concern for Golar's Tortue project.  However, the most likely explanation is simply Wall St. ignorance. 

A severely dated, backward looking article, published today by CME of course, is evidence of this.  It only references the American Henry Hub price and ignores the European TTF and Asian JKM indexes, as well as current events.  Similarly, Schlumberger's collaboration to scale up nickel-hydrogen batteries for renewable generation sounds appealing, if not exactly cutting edge, but its presentation this morning only vaguely references projected industry investment levels from 2030 to 2040.  It can call its flight from the American fracking market "high grading" but its profitability still hasn't fully recovered from pre-pandemic levels and revenue is still down more 30%, with no real recovery in sight. 

I predict that the decline of American onshore oil production there will make gas production there more limited and/or expensive, especially in light of challenges in Washington.  I doubt the U.S. will actually default on its debt, but I also doubt that renewable generation can be scaled up quickly enough.  Assuming the market remains in a holding pattern while all this gets resolved, I'll also have time to look at Lumen's presentation on Monday.  Again though, a change in messaging from the Fed on the 22nd could bring dramatic volatility.

On 9/7/21 1:01 PM, Esekla wrote:

There's little news and less momentum today while we wait on Washington.  I see the trading as emblematic of the inefficiency that is Wall St. as it catches up on last week's data.  Orbital believes that Ida will result in an unquantified positive impact to its bottom line for this quarter and possibly beyond.  I believe that dramatic market movement and the possibility of selling more stock to fund staffing make it an unattractive investment.

The most interesting point on the news front is El Salvador becoming the first (and quite possibly last) nation to accept Bitcoin as legal tender.  I'm not surprised at the implementation hiccups, and even if those are overcome, I think the move would be a victim of its own success sooner or later.  As a programmer, my understanding of the scalability of the Bitcoin transaction process gives it no chance of filling general global currency role that I suggested when things first began to fall apart.  Bitcoin is down 8%, which is not too big a move yet by its standards, but the far more flexible and interesting Ether is down 14%.  I continue to think:

• that American crypto ETFs are a near term event
• that crypto currencies mostly represent a crash catalyst
• that market neutral trading firms & brokerages like VIRT and BGCP and the safest investment on such volatility.

The only other items of note are the pricing of natural gas, which has pulled back below $4.60 after topping above $4.70 in America, whereas the initial currency reaction to Jackson Hole reversed pretty quickly almost to €/$1.188 and is only now starting to moderate.  In the face of such movements, my natural gas picks (GLNG, NFE/GMLPF and XBC/XEBEF) also get my vote of confidence in an otherwise dangerous market.