Why I bought natural gas yesterday

Most raw material producers and mines have either gone out of business, or have shut down capacity, due to an overshoot on pricing to the low side--they were losing money with every production dollar they were spending. Mines and drills are expensive to shut down, and even more expensive to start back up--plus they take time.

In other words, due to cash concerns, these raw material producers are shutting down capacity when they should precisely be increasing capacity when prices are low. Because when the recovery occurs, there will be a time lag for them to start up production. This lag creates pricing bubbles, as too many dollars chase too few goods.

Natural gas prices bottomed out last week, so I bought into a natural gas mutual fund yesterday. If natural gas prices double by next year (winter season), this will triple or quadruple. I purchased some natural gas pipelines for the dividend income last quarter, but I just didn't have time to research individual companies in the sector, so I used an IRA account which specifically caters to no-load mutual funds.

Anyway, since natural gas prices are so low, more fleet vehicles are being converted. We'll have rallies and declines along the way, and I'm not trying to time the moves, but at these levels, I found the trade attractive. As our economy attempts to transition away from oil and coal toward renewable energy, the movement is real, but this weaning process may take years and even decades. Meanwhile, natural gas is a stopgap solution, as it is not renewable, but it is the least offensive to our environment.

But the overriding reason why I targeted natural gas last week is because natural gas CEO's were even more bearish than many investors. Think about it: these guys are supposed to be the biggest cheerleaders for their industry and their respective companies, yet they were joining the doom and gloom crowd. My contrarian antenna was triggered. So I waited for a confirmation move up and jumped in yesterday. I could be early, but if you look at the charts, I'm buying near the bottom--no one can time a bottom or top perfectly. But if you buy right, you can still capture the majority of the move.

So I really am pulling for Obama, cheering for a recovery, even if it is muted and inconsistent, as a high debt load and high taxes dampen any chance of a meaningful economic recovery. At the end of the day, we're all dead anyway.