If there is one thing that I have learnt over the last 25 years in trading it is that: almost everything good that happens in the market requires the passage of time. It kind of remains me of a series of cheese adverts that ran in New Zealand in the late 80s/early 90s.
Yes the greatest asset that one can have in the markets is time and deep pockets. I didn’t know it at the time but there was so much meaning in this advert, perhaps it is only with the passage of time that one appreciates it.
The other thing I have learnt is that real wealth is made by investing in fat tails or outlier events. If there is one fat tail that is somewhat obvious in today’s markets it is Natural Gas. The level of bearish commentary on Natural Gas has reached what can only be described as epidemic proportions! Confirming the intensity of bearish sentiment is the cost of put to call options which now stands at 1.4x.
We have noted that Natural Gas futures have fallen by 37% over the last 5 weeks which is the most that it has fallen over a 5 week period since it was listed some 19 years ago. It seems clear to us that Natural Gas futures are now engaged in a speculative blow off. Yes Natural Gas may well go lower over the coming days, but we think the time to invest is now. Our pockets are deep and we have time on our side.
