Disclaimer: John Rodgers owns RRC and MSB in his Covestor Resource and Commodity model.
July 30, 2010: As the summer drags on, I continue to become more pessimistic with regard to the short-term. July seemed to represent a technical bounce from oversold levels and anticipation of positive earnings. The end of summer and early fall will provide ample time for the market to pull back once again. The fundamental picture remains very uncertain with unemployment levels high, durable goods orders down, and inflationary pressures at bay. With interest rates at lows and the US deficit at record levels, there does not seem to be traditional Keynesian options available to the US Gov’t to stimulate the economy. It appears that good old fashion, Alfred Marshall neoclassical economics will need to play out over the next year or so. I remain very cautious and plan to stay in a holding pattern until I see signs of recovery. I do not plan to make any meaningful trades over the next month.
During July, I added Range Resources (RRC) which is a natural gas producer that holds substantial assets in the Marcellus shale formation. They have managed to hold steady during the month of July in spite of low natural gas prices with the help of collar contracts that hedge a portion of their production. I believe they own some nice assets that should prove valuable once natural gas returns to normal levels, which I believe could take some time. Additionally, there was decent appreciation on Mesabi Trust (MSB) during July as a result of higher iron ore prices and volumes. They also increased the distribution to $.80 per unit as of July 30, 2010.
