WALL STREET SECTION

Have you ever wondered why the volume in both derivatives and structured problems has been growing exponentially over the last 5 years?

A significant proportion obviously comes from the banks own-account trading. But more importantly traditional companies are have been getting into the act trying to make a fast buck.

And this has never been more evident than in the natural Gas sector right now.

• We've just been studying some quarterly reports of medium to larger size natural gas producers
• Looks like many have got themselves into trouble with derivatives
• Seems like the old way of doing business, ie using them to hedge production has been thrown out of the window
• Now futures, options and everything in between are being used to drum up extra profits but in many cases the bet has failed

So next time you want to buy a natural gas stock ask yourself if that's what you're actually investing in. To us many of these firms now look like energy trading companies who as something on the side get involved in Natural Gas exploration and production.

PS. This whole argument is relevant to most sectors on Wall Street, think you're buying a Engineering firm? Maybe, but maybe it's nothing more than a financing company playing the credit markets.....