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Marin Katusa: Get—and Stay—Ahead of the Herd

By: The Energy Report and Marin Katusa

-- Posted Thursday, September 10 2009 | Digg This ArticleDigg It! | Discuss This Article - Comments:

Back for another enlightening interview with The Energy Report, Marin Katusa, Chief Investment Strategist for Casey Research's Energy Division, shares some timely investing strategies for the ever-changing energy markets. Ultra-bullish on uranium, Marin foresees a great shakeout in the sector. "The key is being with just the right select players," he says. The seasoned strategist also covers oil, natural gas, coalbed methane (CBM) and geothermal, emphatically encouraging investors to get—and stay—ahead of the herd.

TER: Marin, can you give us your thoughts about natural gas in the U.S., both short term and long term. Thumbs up or thumbs down?

MK: Short term, thumbs down. There is a paradigm shift between the ratio of natural gas to oil. Historically, the ratio is 10:1, right now we're over 25:1. Those who are shorting oil and going long natural gas in the short term will lose that bet. We're at an all-time high with supply of natural gas. It's surprising how many storage facilities came back on-line, and people did not calculate these into their numbers. Unless there's an extremely cold winter, it's going to be a tough go for the next six months for natural gas in North America. When it comes to natural gas, I am more bullish on the coalbed methane (CBM) potential in Asia.

TER: What about oil, and in particular, the oil sands? I think you're covering that at the Casey Conference that's coming up in Denver. (Casey Research Energy & Special Situations Conference, Sept. 18-20, Westin Tabor Center, Denver, Colorado)

MK: There's a big story coming up—we'll be writing about it and I'll be talking about it in Denver. When oil is over $100, you have everyone in the oil patch bringing in money, exploring and drilling, producing and creating valuation, but oil at $80 is a different story. Oil right now is around $68.00; that's the WTI spot. Brent spot is a couple of dollars lower differential, which is interesting because the Brent is a little bit better. A lot of these juniors can't even make money at $68 oil.

Basically, in our report we have talked about how existing oil production works at $40 oil in the Canadian oil sands. Anything new to come on-line will need about $65 to $70 oil to make it work in the oil sands.

TER: Are there certain areas that you think are more conducive to successful oil investing?

MK: Joe Hung, one of our Research Analysts, and I have broken down the royalty scheme for oil for every oil-producing country in the world, and we're coming out with a ranking of where you want to be in oil. You want to be investing your dollars in the best royalty rates. For example, in Canada there's a huge, huge difference between Alberta and Saskatchewan. Saskatchewan's got a very ugly royalty system compared to Alberta, which has a decent royalty structure at lower oil costs. That's something very important for people to understand—the royalty rates in the jurisdiction of where your company lies.

For example, some of the best oil in the world comes from Libya. However, the royalty rates in the price just don't work. They just don't work for a junior company, and royalty rates are up to 92% to 93% in certain parts of the world, like Libya. So, you have to be very careful when you suddenly start talking about production costs and all, and consider what the actual cost of that oil is. That's important to understand, and it's something we're going to be talking about at the energy conference.

TER: The last time we spoke we spoke a lot about nuclear. What's your thinking is now on that?

MK: I think you're seeing a great shakeout, a consolidation. You have to get ahead of the herd, and you have to understand herd mentality. In North America, you want to stick with the top geologists who've been doing this for a long time. I'm ultra-bullish on uranium, and the key is being with just the right select players. In the U.S., it's who's going to consolidate developed assets.

TER: Can you explain the Casey Free Ride List to our readers?

MK: The "Casey Free Ride Formula" is about mitigating risk. Holding junior stocks for free is a no-brainer way for our subscribers to have big gains. Doug Casey is a strong believer in mitigating risk exposure; therefore, always take your initial investment off the table when you have the chance, and then the rest is playing with the house's money, so it's a bonus. Own these stocks for free; you're guaranteed to win.

Doug Casey's close friend Rick Rule has a saying, "you only make money when you sell," and it's very important in our newsletter to guide our subscribers about when to sell and make profits because this is a very, very risky sector, especially when you get into the juniors. It's easy for someone to tell you when to buy, but the key is when you sell, so that is something we spend a lot of time on in the Casey Energy Report. In giving guidance to our subscribers, our portfolio is doing fantastically. Now, with that said, we also have our losers. We're not perfect. We don't pretend to be perfect. But our returns are ahead of the index.

TER: The last sector I want to talk about is geothermal. Can you kind of give us a summary of geothermal?

MK: Sure, the geothermal world changed this past summer. We've been reporting on the geothermal sector for a long time. I think you will you see the rush in geothermal such as you see in lithium and rare earths right now. It's still early in the geothermal game, but it will be a very big bubble. It really is the cheapest source of "green energy" in the world. We're not in the bubble mania yet, but it will be within five years.

TER: Can you give me an overview of what is going to be presented at the conference?

MK: We're going to having a section on all the different energies—uranium, oil in Canada and North America, off-shore oil, oil in Africa, natural gas in North America, natural gas in Europe, and then geothermal, all the different alternative energies. We're also going to be having a section on rare earths and one on potash. And then after every keynote speaker someone from our faculty will come up and give the best three picks on how to play this sector.

TER: Do you think your speakers will be in tandem on their energy viewpoints or would you expect some divergence?

MK: You never know what will happen. About three years ago I was on one of the panels and I strongly disagreed with one of the other well-respected individuals. One thing we can expect is that they're going to be 100% honest in their insights and their wisdom. And just being around those types of people is worth the price itself—you learn a lot hanging around proven veterans in the industry.

TER: Great. Marin, any closing remarks?

MK: The key is you have to be patient; don't rush to buy; avoid the herd; you make your money when you sell. So make sure you always take your profits when you have one. So, reduce your risk.

TER: That is definitely a Casey approach. So, thanks a lot for your time.

Marin Katusa is Chief Investment Strategist for Casey Research's Energy Division, also serving as senior editor of Casey Energy Opportunities (CEO) and Casey Energy Confidential. Marin, who earned his Bachelor of Science degree from the University of British Columbia, obtained a degree in education and went on to pursue a successful teaching career before his attention shifted to analyzing and investing in junior resource companies. In addition, Marin participates in the Vancouver Angel Forum (whose members evaluate early-seed investment opportunities), manages a portfolio of international real estate projects and serves on the Copper Mountain Mining Corporation Board of Directors.

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-- Posted Thursday, September 10 2009 | Digg This ArticleDigg It! | Discuss This Article - Comments:

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