Wilbur Ross: Bad Times Ending for Nat Gas, Just Starting for Bonds
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Wilbur Ross, chairman and founder of WL Ross & Co., became one of the world's richest men by venturing in where few others dared to tread.
After the dot.com bubble burst in 2000, Ross made big investments -- and ultimately big money -- in down and out U.S. steel companies Bethlehem Steel and LTV, as well as Appalachian coal mines and textile makers like Burlington Industries.
After the 2008 financial crisis, Ross bet heavily on banks, including Bank of Ireland and U.K.'s Northern Rock, as well as a handful of relatively small U.S. banks like Cascade (CACB), Sun Bancorp (SNBC) and First Michigan, which is now Talmer Bank & Trust. As a group, those investments have paid off handsomely as well.
Ross doesn't like the term "vulture" investing or "bottom feeding" to describe what he does, although "distressed investing" certainly fits the bill.
Today, he sees "opportunity in marine transport of petroleum and petroleum products," via a 2011 investment in Diamond S Shipping, which has a fleet of 30 refined product vessels and 10 more under construction.
While Diamond S is a bet on charter prices for shipping, Ross also made a bet on commodities via a big investment in Exco Resources (XCO), an independent exploration company with shale gas assets.
"We were a little early in that but will continue to be doing more in shale gas," he says.
Like many, Ross sees the opportunity for U.S. natural gas to be a bigger portion of our energy supply and a potential export bonanza.
"Natural gas doesn't give cancer, it's A very useful product, very cheap per Btu -- much less than oil, and is less pollutive than oil or coal," he says.
But unlike many others, Ross hasn't been betting on natural gas prices, which have tumbled from $14 in 2005 to around $2 today. Natural gas faces continued headwinds in the near-term," he says, namely excess supply after an unusually warm winter.
"There may be a little more downward blip but I think the worst part has got to be over," Ross says.
The worst may be over for natural gas, but Ross thinks the bad times are just beginning for U.S. Treasuries. "Over a 24 to 36 month period, we'll see the really big bubble was in 10-year Treasuries," he says, suggesting the end of quantitative easing and less fear among international investors will be its undoing.
Other people have made similar calls about Treasuries in recent years. Few of them a track record of success anywhere near this Wall Street legend.
Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com.
