Wilbur Ross says coal in secular bear market and will not rebound this time-- He like Nat Gas and especiaslly XCO-- A Big Haynesville Dry Gas play
Wilbur Ross: Energy Downturn Different This Time
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Investing in energy has been a cyclical endeavor. But that may be changing, at least on some fronts.
If you put money to work in any stock that’s somehow pegged to coal, billionaire investor Wilbur Ross suggests rethinking your thesis.
“The current downturn is secular,” he says. “In the past it's been cyclical but not now. The last time coal traded at these levels the industry turned higher but I don’t think that happens this time.”
In a live interview on CNBC’s Fast Money Wilbur explains that cheaper nat gas, a mild winter and new EPA rules have changed the game. He doesn't see how coal prices can rebound enough to generate a meaningful rally in the sector.
US demand for coal is at a 24-year low and inventories are continuing to build as the global economy slows, he reminds. Already the environment is taking its toll. On Monday July 9th Patriot Coal filed for bankruptcy protection. And he doesn't see the picture getting brighter until demand from China recovers.
But in addition to coal producers, Ross also has concerns about derivative trades.
“Some railroads have large dependency on coal, too,” and that could be a problem from their bottom line. However don’t paint all railroads with one brush, “Others do a big business hauling nat gas, ethanol and other liquids.”
In other words, you have to play the railroads very carefully, now.
And if you’re wondering if this is a short-selling opportunity, Ross tells us there are better trades. In these kinds of situations he says the best thing to do move onto the next thing. And one of his next things is nat gas - he's a buyer of Exco Resources
[XCO 7.01 
0.01 (+0.14%) 
]
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“The EPA has clearly made a decision that’s quite antithetical for coal in the way of new rules they’re imposing on power plants.” And coal’s loss should be a gain for nat gas.
Posted by CNBC's Lee Brodie
Views: 359
Replies to This Discussion
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Permalink Reply by JHH on
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Mr Ross is a smart man.... and i was encouraged when he bought a BIG chunk of EXCO stock... but the share price has gone from $19 to $7. Does anyone expect positive change anytime soon?
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Permalink Reply by JHH on
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One more note. I hear they're burning off Nat. Gas in South Texas... much like they did in the old-old days as a waste product.
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Permalink Reply by adubu on
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JHH-- too some degree when well first comes on line they can flare it, but there are restriction for short time only by Texas RRC and EPA. I am not sure of time they have to put it in a pipeline maybe some of the Professional oil/gas members can update the law for us.
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Permalink Reply by adubu on
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JHH--Wilbur purchase about 13% when Doug Miller CEO had a bid to take XCO private at 18.50 a share last year but could not get the about $4B need. Wilbur, Boone Pickens, and other were part of plan deal at the time. Boon T has sold his share out since deal went south. Wilbur had option to purchase up to 20% and has in last few months increased from the 13% but I am unsure of present % ownership he has.
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