Coming into July, we were riding the Natural Gas high like we had a straight shot to the moon, especially off big shale announcements like Chesapeake (CHK)’s Haynesville Shale venture. Sure, nothing goes vertical forever and we all knew natural gas would have to “correct” for a while. However, for us at-home mom-and-pop non-commodities traders, a lot of the time it felt like we’re just riding this straight shot to the moon blind.

Thankfully, veteran commodity trader Joe Terranova on CNBC’s Fast Money had a simple rule of thumb to offer: June Highs, July Lows. Does it always work? Of course not! Market’s aren’t that easy! But I did a little check and found this rule of thumb is a good one any of us with natural gas exposure to keep close to heart. I used charts from the Federal Energy Regulatory Commission’s Natural Gas Market info- one of my favorite research tools I’ve collected at my SuckingLess.com website.

As you can see, other than the out-of-norm Katrina event in 2005, July natural gas prices have generally been lower than June prices. This weakness seems to persist from July into early or mid august. While natural gas prices in the following December-Januarys are usually higher than the July-August weakness, there are a few years where Natural Gas prices just keep sliding the rest of the year. I suppose Natural Gas prices still depend on the weather and how much of it is used, so it still has that random factor that we should all be aware of.  Personally, I think selling some Natural gas, whether taking partial or full positions off, seems like a smart thing to do given historical trends suggest July will be lower than June. Sure, you might miss another “Katrina” spike, but that feels more like rolling the dice.  Because I didn’t want to be completely out natural gas in case we get the hurricane spike, I’ve kept 25% of my HAL position, but bought USO puts against it.

However, this year, Natural Gas prices have been on a steady climb alongside crude oil’s climb, natural gas looking much less volatile than in the past. Natural gas isn’t a direct replacement of crude oil, but there are various users of energy who can switch between the two. When crude oil gets too expensive, they would switch to natural gas, thus increasing natural gas’s demand and raising it’s prices alongside crude. Jim Cramer offers a separate rule of thumb: Natural Gas prices trade at roughly 1/6 the price of crude oil. So, at the moment, either crude oil is too expensive or natural gas is too cheap

Also, I have offered the analysis of the trend to use much more natural gas for electrical power generation by utilities around the world. This should decrease some of the volatility in natural gas prices as demand becomes more consistent to produce consistent electrical power. Still, we need to do something about our limited storage capacities!

Remember, beyond just owning the companies, dig just slightly deeper into the businesses the companies are in. That’s why I started SuckingLess.com, to collect the most relevant industry magazines and information useful to investors.

SuckinLess.com Research Resources Used:

• FERC Natural Gas Markets: U.S. Government Data, Analysis, and Reports
• Platts: Professional Energy and Metals Information (Prices, Data, Maps, Events, Magazines, Reports)
• Power Engineering Magazine: Power Generation Industry Magazine

**Disclosure: I am long of CHK, HAL, and USO puts as of this post**

Badger meter is popping a nice 9% today on strong Q2 earnings. Compared to Q2 of 2007, Q2 2008 sales are up 20.1%, net earnings up 28.8%, and EPS up 26.3%. These results are in the face of what appeared to be a challenging environment for utility and industrial component suppliers. Chicago Bridge & Iron (CBI) confirmed the decrease in utility and local municipal spending (local municipalities have been hit by the credit crisis and the decrease in tax revenues due to rising foreclosures). However, Badger Meter showed us that water utilities are still buying the small infrastructure components such as meters and valves, even as larger projects such as those Chicago Bridge & Iron is involved in are being scrapped. This is another reminder of the big sea change I’ve been concerned with for a while: U.S. infrastructure is deteriorating fast and must be replaced and upgraded. If new big projects such as new utility stations or pipelines have to be canceled, that puts even more pressure on the existing system, requiring advanced technology such as Badger Meter’s AMR (Automatic meter reading) technology to make the existing system more efficient and reliable. Badger Meter also mentioned strength in precision valves and flow sensors due to the continued demand in the petroleum industry.

Also, Badger Meter’s recent acquisition of an automatic metering infrastructure (AMI) system is looking good. Watch for accelerating growth in this product line.

The majority of Badger’s sales are domestic, which is where the weakness concerns have been.  International infrastructure should still be strong across the board.  So if Badger can find strength in the U.S. domestic market, this is a good omen for both Flowserve (FLS) and SPX Corp (SPW), who are leaders in flow technology.

More on Badger Meter:

• Automatic Meter Reading (AMR) Technology
• Business Wire: Badger Meter Reports Record Second Quarter Results

Additional Water Utility Resources featured on SuckingLess.com Research Tools

• WaterWorld Magazine: Water and Wastewater Industry Magazine
• Industrial WaterWorld Magazine: Industrial Water and Wastewater Industry Magazine
• SuckingLess Utility Research Resources

**Disclosure: I own shares of FLS and SPW as of this post**

The bounce by the financials from the depths of hell last week was definitely a sigh of relief. The “less abysmal” earnings from first Wells Fargo (WFC) [that stagecoach really can run!], JP Morgan (JPM), and US Bancorp (USB) told us the sweeping assumption that all banks are gonners was premature. Well, premature at least for now. Regardless of which side of the argument talking heads take on picking the bottom in financials, most (if not all) would agree that housing needs to bottom if the banks want to be out of the woods. When will housing bottom? Citigroup Chairman Win Bischoff offers his opinion in this Reuters report. Remember, however, Citigroup hasn’t exactly been on the right side of the trade on this whole housing crisis, as made evident by it’s shares dropping from the $50’s to being a teenager.

“LONDON (Reuters) - Citigroup chairman Win Bischoff has warned that house prices in Britain and the United States are likely to keep falling for another two years.

The chairman of one of the world’s most powerful banks told the BBC in an interview that he expects it will take two years for the markets to stabilise.

He also said he expected the credit crunch could continue through until 2009.

Bischoff told the BBC that there would be redundancies at the bank, which employs 12,000 people in Britain, and warned that some of them would be compulsory.

No further details were released of the interview which is due to be broadcast later on Saturday on the BBC News Channel (Reporting by Paul Majendie, Editing by Jon Boyle)”

Full Article: House prices could fall for two years

Suggested SuckingLess.com Research Resource:

• The Mortgage Lender Implode-O-Meter: Tracking the Housing Finance Breakdown
• Annaly CEO Michael Farrell Financial Market Commentaries

ABB finally made the move I’d hope they make! In this A.D.D. market only able to focus on 2 things: financials and oil, great things are happening at individual companies and not even registering on the radar. ABB acquires U.S. transformer company Kuhlman Electric Corporation. This is one of the sweetspots (of the limited investable opportunities) for the power grid upgrade and buildout. I own SPX Corp (SPW) exactly for their transformer business, SPX Corp’s fastest growing business:

“Our Industrial Products and Services segment had revenues of $966.4, $836.7 and $716.0 in 2007, 2006 and 2005, respectively. Of the segment’s 2007 revenue, approximately 44% was from the sale of power transformers into the US transmission and distribution market.” ~SPX Corp’s 2007 10-K

One of my very first blog post dealt with the twin drivers for the power grid infrastructure suppliers: U.S. power grid outdated by some 30 yrs, always using near capacity and a system shock away from massive destructive blackouts. The complementary driver: BRIC (and then some..Mid East especially, no one talks about Saudi Arabia building 4 Dubai like cities….) countries building whole CITIES, of which the power grid is the foundation.

The problem with investing on this theme was Read the rest of this entry »