Thought of the Week

1. This commentary is not intended as investment advice or an investment recommendation. It is solely the opinion or our investment managers
at the time of writing. Nothing in the commentary should be construed as a solicitation to buy or sell securities. Past performance is no
indication of future performance. Liquid securities, such as those held within DIAS portfolios, can fall in value. Global Financial Private
Capital is an SEC Registered Investment Adviser.
Thought for the Week (241):
Natural Gas Update
Approximately one year ago, we introduced Natural Gas as an investment theme that we felt would provide our portfolios with periodic outperformance over the next ten years. We announced it with the following:
Once in a Decade
Another way to define a successful Portfolio Manager is someone who has:
 One Decent idea every One year
 One Good idea every Three years and
 One Great idea every Ten years
The goal of writing about Natural Gas was to bring to light a topic that we would be tracking and looking to invest in without a specific short-term timescale. Natural Gas is an efficient fuel for power generation, a better feedstock for fertilizer production and a cleaner alternative for many vehicles. It is price competitive and consumed in an environmentally benign manner.
By calling Natural Gas our ten year idea, we were not suggesting that we would jump straight in and always have an investment in Natural Gas - every investment theme rotates between periods of “overbought” (demand drives prices artificially high) and “oversold” (lack of demand drives prices artificially low).
Nor were we proposing that we would limit our investment to Natural Gas as a commodity – there could be many diverse ways to benefit from its rising popularity.
So let’s have a look and see how this long-term idea has started to develop.
Progress on Natural Gas
 At a time when the U.S. is experiencing large budget and trade deficits, while suffering from lack of direction in its energy policy, we are also ramping up Natural Gas exports. Cheniere Energy is building an export terminal in Houston, TX and a consortium led by Royal Dutch and Kinder Morgan is doing the same in Savannah, GA. Even with the continued debate over fracking, it’s hard to see the government or individual states ignoring the potential of Natural Gas to help ease the problems stated above.
 Forbes Magazine recently announced: U.S. Natural Gas Exports Poised for Takeoff.1 In this article they used the phrase gone into hyper-drive to describe the demand for Liquid Natural Gas (LNG). The key consumers are electric generation, transportation and industrial feedstock. Between August and November of 2012, an additional 16.5Tcf (Trillion cubic feet) of export
1 Forbes Magazine: Nov. 8th, 2012.

2. This commentary is not intended as investment advice or an investment recommendation. It is solely the opinion or our investment managers
at the time of writing. Nothing in the commentary should be construed as a solicitation to buy or sell securities. Past performance is no
indication of future performance. Liquid securities, such as those held within DIAS portfolios, can fall in value. Global Financial Private
Capital is an SEC Registered Investment Adviser.
Definition of Fracking The slang term for hydraulic fracturing, Fracking refers to the procedure of creating fractures in rocks and rock formations by injecting fluid into cracks to force them further open. The larger fissures allow more oil and gas to flow out of the formation and into the wellbore, from where it can be extracted. Opponents of Fracking cite potential environmental effects including contamination of water and risks to air quality.
requests were received. This is over 60% of the total demand of 26Tcf in 2012. Hyper-growth indeed!
 Where there is active drilling, there’s generally a booming economy which leads to job creation. We estimate that a Natural Gas industry working somewhere near its potential utilization may create 2 to 3 million new jobs. Employment may rise in companies that make pipes, hose, pumps, valves and so on. Nearby restaurants, shops, grocery stores, etc. would also benefit from the expansion of Natural Gas infrastructure.
 Natural Gas would be the ultimate clean bridge to eventual renewable resources. Utility companies are converting coal and nuclear power plants to Natural Gas. We expect the pace to
increase.
 AT&T has budgeted $565 million for 2013 & 2014 to
buy new vehicles that run on Natural Gas.
 Waste Management will have 1,700 vehicles
running on Natural Gas in 18 months’ time and 31
Natural gas fuelling stations around the country.
 UPS plans to run 5,000 vehicles on Natural Gas
with G.M. and Ford producing them. FedEx is also
testing LNG fuelled trucks. G.M. expects to sell over
10,000 Natural Gas delivery vans in 2013.
 Indian and Chinese demand and imports are
expected to rise fivefold over the next five years.
Summary
We are still in the first year of a 10-year investment theme; so we don’t expect excessive returns in the immediate future.
There are a number of headwinds: Environmental concerns over fracking and Government energy policy being the main two. We expect these to recede with time, especially as individual states see the potential of embracing Natural Gas production and consumption.
With nine years left to prove our Natural Gas theory, we feel increasingly confident it may fuel investment performance.