By
Tom Dyson, publisher, The Palm Beach Letter
Wednesday, August 5, 2009
I hate lotteries...
Governments use lotteries to generate revenue. So I think of the state lottery as a tax. I expect to lose money, and I'll be supporting the government's spending plans at the same time. Not an attractive investment for my money.
But what if I told you there's a four-week period every year when the probabilities of hitting the jackpot rise five or 10 times above normal? Instead of expecting a loss on your lottery ticket, you can almost count on a win. You'd buy all the lottery tickets you could afford, right?
I've found a lottery that works like this. And the four-week period begins at the end of next week...
The government defines the Atlantic hurricane season as June 1 through November 30: 97% of all hurricanes occur during these months.
Here's the thing... although the official hurricane season lasts from June through November, the vast majorityof hurricanes in the United States occur in a much smaller window.
For example, according to the Atlantic Oceanographic and Meteorological Laboratory, 78% of the tropical storms, 87% of the minor hurricanes, and 96% of the major hurricanes occur between August and October.
And around half of all hurricanes occur in the four weeks from mid-August to mid-September.
Source: Atlantic Oceanographic and Meteorological Laboratory
To bet on a hurricane, you buy natural gas. Thousands of drilling companies are looking for gas in the Gulf of Mexico... and the world's largest collection of natural gas storage, processing, and transportation infrastructure sits on the Gulf Coast between Texas and Louisiana.
Any time a hurricane forms in the Atlantic, traders get nervous it'll interfere with America's supply of natural gas and they bid its price up. If a hurricane actually strikes the Gulf Coast, gas prices could soar 50% or a 100% in a month.
Hurricane Andrew, for example, formed off the coast of Africa on August 14, 1992. It pushed gas prices from $1.85 to $2.80 by the end of September... a 51% gain.
Hurricane Katrina formed over the Bahamas on August 23, 2005. Hurricane Rita formed two weeks later. Together, they sent gas prices from $7.50 to over $15 by October...
Right now, you can buy an incredibly cheap "ticket" for that jackpot. There's a glut of natural gas. A string of huge discoveries collided with a collapse in demand. A surplus resulted. According to the most recent inventory report, storage supplies are close to their all-time highs.
The glut has forced the price of natural gas below $4, close to seven-year lows. With the current low prices, you're unlikely to lose money buying natural gas... especially if you use a stop loss.
But if a hurricane should smack the Gulf Coast with a direct hit, for example, you could make 50% or 100% on your money in a matter of weeks.
It's time to play the natural gas lottery. The "one click" way to buy natural gas is through the United States Natural Gas Fund (UNG). Having fallen 75% in the last 12 months, it made a bottom four weeks ago and has just started rising. For even greater leverage, you can buy out-of-the-money UNG call options.
Prices are low and the peak hurricane season is almost here. You've got almost nothing to lose by making this bet. Even the threat of a hurricane will send natural gas prices, and your profits, soaring.
Last week, without a bit of fanfare, one of the world's most explosive asset classes "broke out" to a fresh nine-month high.
Longtime DailyWealth readers know we see small resource stocks in the same light as biotech stocks. Both sectors offer the incredible promise of billion-dollar discoveries. The cancer cures and miracle drugs of the biotech world are the giant oil fields and rich gold veins of the resource world. And both biotech stocks and small resource stocks enter huge booms and busts. Trade 'em the right way, and you'll make a fortune.
We track the general trend in small resource stocks with the Toronto Venture Exchange Index. This is the "Dow Industrials of small resource companies." Last year, as folks fled from anything related to commodities and risk, the Venture suffered a stupendous 75% fall in just months.
But as you can see from today's chart, the Venture is quietly "marching" to new highs. We encourage you to keep this index on your watch list. If the nominal price of commodities continues to climb (as we saw with copper yesterday), small resource companies have the legitimate potential to shoot hundreds of percent in a short time.
How to Exploit Your Biggest Investment Advantage By Dr. Steve SjuggerudTuesday, August 4, 2009
Most people believe the saying "it takes money to make money." But it's not true... The biggest "mispricings" occur in the little stuff, where a big investor won't bother.
My Friend Can't Wait to Default on His Mortgage By Tom DysonMonday, August 3, 2009
He'll be rid of his debt. Plus, he'll get six months "free rent" before the bank kicks him out. The foreclosure will ruin his credit, but it doesn't matter. The blemish disappears from his record in less than 10 years.
It's Time to Buy a House By Dr. Steve SjuggerudFriday, July 31, 2009
Today's "unfair deals" – where you can buy at 25% below market price or lower – won't last. As of this week, the home price index is up for the first time since July 2006. So you've got to get those "lowball" bids in.
China's New Gold Rush By Matt BadialiThursday, July 30, 2009
While these mining regions have been open to foreign exploration for more than a decade, most of China's enormous wealth of metal is still in the ground.
