Grantham’s comment, from his Q4 Letter:
At the opposite end of the resource spectrum to record-priced Iowa farmland is natural gas. Natural gas is, for most purposes like home heating and electric utility plants, a better and cleaner fuel than oil or coal, but is for technical reasons in distress: there have been several recent decades in which the BTU equivalent price for natural gas did, at least for a second, reach parity with oil. But now it is at just 14% of BTU equivalency, the lowest in almost 50 years. Everyone who has a brain should be thinking of how to make money on this in the longer term.
Buffett’s comments, from the February 27th transcript:
BECKY: Does the price of oil make since given that economic recovery? Or is this something where people are just a little too worried about what's happening in the Middle East? Or is this a situation where you have speculators playing in the commodities markets again?
BUFFETT: You know, I've got no position in oil, so I don't — I don't really have a view. The one thing that's extraordinary in oil, which we've never seen and which has probably caused some people to go broke, is you have this — you have 100-plus dollar oil, $108 oil the other day, whatever it was, with $2.50 for natural gas.
BUFFETT: Nothing like that's ever existed, and I mean, the BTU equivalent, you know, people say that can't happen. So people that have gone long natural gas and short oil are really feeling the pain. I wouldn't be surprised if even the unwinding of some of those positions could cause some of what goes on in both markets, but this is — this is extraordinary. I mean, and you would've said it couldn't happen, but that's like saying before Long-Term Capital Management, you know, you couldn't have had 30-year Treasurys and 29 1/2-year Treasurys with 30 basis point spread. You never — you want to be very careful in markets saying something can't happen.
BECKY: In your annual letter, you actually said that you had guessed wrong on where natural gas prices were going to be headed and that was one of the issues that you wish you had done.
BUFFETT: Did I ever? Yeah. Yeah. Like a billion dollars worth plus.