There's Always a Bull Market Somewhere


11 months ago by LuoZhen

Many investors are caught up in the euphoria of the stock market. Meme stocks, options buying by retail investors, cryptocurrency and now the NFT craze are all signs of a speculative peak in activity. How long it lasts is anyone’s guess, but it has all the hallmarks of a bubble. I think this one will go down in history alongside tulips. 1929 and the South Sea Bubble, but even a less historic bust will bring mass bankruptcies of companies and investors, with more than a few people going to prison or being banned from the financial industry.

The obvious trade is to wait for the turn in the market and become an aggressive short-seller, but most investors are bad traders. For most people, going to cash is the best choice. There are also uncorrelated assets and some that move counter-cyclical with stocks. Among these are natural gas and by extension, fertilizer and agricultural commodities.

Here is a chart of Southwest Energy (SWN). It bottomed in 1999 and rallied through the bear market of the early 2000s.
Natural gas is a local commodity mainly transported by pipelines. Unlike oil, which has a global price, natural gas can vary greatly between regions. The U.S. has relatively cheap gas compared to Europe and East Asia. It also is a highly volatile in price. Although less correlated, the relationship between natural gas and oil is a bit like silver to gold.

Natural gas is an input for creating some types of fertilizer. When both energy and food prices are rising, [when the climate cools](, demand for natural gas pops.

Even though I expect a bear market is coming, I am not bearish on these sectors. They could sell off in the panic waves of a bear market, but history says they will hold up well as long as the fundamentals remain positive.

Do your own research. Here are some symbols to help get started.

Natural gas stocks: SWN, AR, RRC
Fertilizer stocks: MOS, NTR, UAN, IPI