Flight to Safety = Treasuries… and Natural Gas?

Last year we wondered if natural gas was becoming a “flight to quality” play; rising on days when traditional “risk” assets were decidedly down,  in a sort of Japanese Yen sort of market setup where investors thought something along the lines of “well, it can’t go any lower!”

And with natural gas ahead by 2% to 3% today while stocks and other “risk on” assets are down (Disclaimer: past performance is not necessarily indicative of future results), natural gas’s curious price action on down days continues:

Chart courtesy Finviz.com.

Of course, natural gas has acted like anything but a “flight to safety” play since its lows in April,  gaining about 70% since that time and rising right alongside the stock market. That is – until today.  Are there algos out there programmed to start buying Natural Gas when S&P futures drop by more than a certain amount, or are we just seeing patterns where none exist? Who knows, but our guess is that you’ll be hearing a lot more about natural gas moving forward. The US is awash in it – and as Daniel Yergin opined the other day in the WSJ,  it will be an economic, environmental, and political issue for years to come:

…The energy revolution will add an estimated $62 billion to federal and state revenues this year.

But the energy revolution is having other effects that get less attention… The growth of shale gas will save the U.S. from spending $100 billion a year on imported LNG, which was the likely prospect five years ago.

There is also a geopolitical dimension. The increase in U.S. oil production since 2008 is equivalent to almost 80% of what was Iran’s export level before the imposition of sanctions on the Tehran regime. Without the additional oil coming from the surge in U.S. oil output, the Iranian oil sanctions could not have worked as well as they have.

Domestically, growing natural gas supplies provide a foundation for a manufacturing renaissance, at least for industries for which energy is an important feedstock or where energy costs are significant. Chemical companies have been leaving the U.S. for years in the search for lower-cost countries in which to operate. Now they are planning to invest billions of dollars in new factories in this country because of inexpensive and relatively stable natural gas prices. The price of natural gas, which averaged $2.66 per thousand cubic feet in the first nine months of this year, is less than half of what it was five years ago.

This holds out a tantalizing prospect that the U.S. could regain market share among the world’s manufacturing exporters…”

Related:

Natural gas has been marching to the beat of its own drum

Return of the Widowmaker

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Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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