Why CHK is a sell?

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Chesepeake Energy CHK logo

Macro environment
This morning on my way to work, I found the regular unleaded gas is sold for $2.88 at Shell station near my home. The oil is coming down, amid the slow down of US economy, the No. 1 consumer of the light sweet crude: American consumes 25% of world crude production. Natural gas price is closely tied to the oil price. The Pickens plan, which calls for natural gas powered cars, to reduce the importing of foreign oil, has not gotten too much traction. Neither presidential candiate mentioned much natural gas as a part of the energy solution. The natual gas car is unlikely to happen at least in Detroit, because the car makers financial problems, and the consumers got squzzeed.

The margin call
Again I would not take the margin call of CEO at its face value. The analysis goes like this:

1) If the CEO REALLY sold its stock at margin call, for a company made its name from hedging natural gas production (derivatives trading), it’s like a high school math teacher can not solve primary school math problem. It’s possible, but unlikely.

2) If the CEO sold its stock intentionaly, but publicly declares he sold it out of margin call. He is lying. Again I would not trust him.

It’s more or less like the Bill Clinton 1998, either way his reputation will be tarnished, and people will doubt his judgement for a long long time.

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