There's something about Henry Hub....

Two weeks ago, Berkshire Hathaway bought 50% of the Cove Point LNG plant in Maryland from Dominion for $3 billion, valuing its increased 75% share (subject to completion) at $4.5 billion.

A couple of days later a colleague of mine sent me a message on something else, saying:

Mike, I haven’t seen a macro environment like this before. I am looking for a historically similar time period and all I can think of is pre-WW1 and maybe the 1980s?

Let me just say that I was in the same boat, but as I was studying the natural gas chart after the Cove Point announcement, I had noticed a rhyme in history.

Here’s my message back:

“Not sure Nivtej, but what I did notice yesterday after seeing Buffet's LNG purchase was that the current Henry Hub LNG spot price cycle is almost a carbon copy of what happened after the tech wreck in 2000/2001.

Check out this chart 👇👇👇

In 2000, Henry Hub NG spot peak was $8.90 per million BTU (mmBtu) and the cyclical low in 2001 was $2.19.

The numbers today are the same. Peak was in August 2022 at $8.81mmBtu and on July 6, $2.18.

Not calling the low, just saying the set-up is the same.

History almost never repeats, but it often rhymes - and Buffet went &@!!’$ deep!”

So, my message today is not M&A related, and I’m also not saying that the recent November correction in equities was a tech wreck - because it wasn’t.

What I wanted to say is that while history almost never repeats, it often rhymes, and Berkshire’s triple down trade is a reminder of repositioning at or close to all-time lows, ahead of a secular uptrend.

Winston Churchill said it best:

“Kites rise highest against the wind - not with it.”

See you in the wind.

Mike

Next Level Corporate Advisory is a leading Australian M&A, capital and corporate development advisor with a dealmaking track record spanning three decades. We help family, private and publicly owned companies build and realise value in their businesses, assets and investments.

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