Einhorn goes long natural gas
Greenlight Capital's just-released Q1 letter to investors, Einhorn revealed that he's placed a macro bet on seeing natural gas prices increase. That Einhorn was somewhat bullish on natural gas wasn't new information for us. He previously discussed his bullish view on natural gas in connection with his underperforming position in shares of Consol Energy (NYSE:CNX).
But now we've learned that Einhorn has made an investment directly tied to natural gas prices. As you probably know, there's a futures market for oil and gas prices, where you can trade the commodities. Einhorn purchased the 2017 and 2018 natural gas calendar strip prices at average prices of $2.71 and $2.84 per million BTUs, respectively. If natural gas prices are above those levels, Einhorn is going to make money on this trade.
In his investor letter, Einhorn explained why he took this macro position. His belief rests on the following points:
Natural gas prices aren't high enough to justify drilling, except in the very best locations.
The industry has responded by dramatically reducing drilling activity.
As existing wells deplete, supplies should fall. The high cost of liquefying and transporting natural gas limits competition to North American sources. Excess inventory is only a couple percent in terms of annual production, which has already begun to decline.
Einhorn believes that normal weather combined with the lower production that he expects will lead to a natural gas shortage within a year
Einhorn is an idiot... I would short NatGas and Chesapeake Energy--they will both tank because this will be the coldest summer on record especially in Mexico where imports will fall to all time low. LNG will also crash.
So says Swami, the best stock picker in the world.
SELL CHK BEFORE THE BANKRUPTCY NEWS HITS. THE STOCK IS GOING TO $0.50 CENTS BY WEEKS END.
