02
Aug

Fantastic Friday – Two Big Favorites Beat and Guide Higher!

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Subscription Watch: 8 days left until the discount window closes.

A Brief Recap of Yesterday's Action:

  • (OII): Great numbers, great conference call. EVERY ANALYST will be raising numbers for 2007. They've got to feel a lot better about bolstering their '08 numbers as well based on the long term favorable fundamentals set before this company. Stock closed up 7% on the day yesterday and I'll likely cash out of my position. I failed to sell my position near the top of the minute chart twice and still hold my August $60 calls now bid $2.20, up 175% in two weeks.

This was also a perfect reason why we follow the adage "always sell the initial excitement." I could have hit the bid at 9:35 for $2.20 and reloaded after stock holders took easy profits. Note to self: Get one more tattoo on the back of your trigger hand. SELL THE INITIAL EXCITEMENT!

  • At 9:02 est I said: post #16 Forgot to mention CHK reports after the close. I’m in longer dated options there (jan-08s) and I’d bet they have a very upbeat call. Don’t see a miss as likely. If you’re not in, the gas number may give you an op to get in lower
  • Scoops Response at 3:02 est: Re post # 16 in @.60 out @.90. Many Thanks
  • The (VLO) Trade- Nice contrasting move in the refining sector. (VLO) ended up 1.2% while the smaller names traded lower for most of the day and many closed lower despite the second late day of DJIA rallying. Maybe, just maybe, my thesis is coalescing …maybe the bathwater panic is over and we’re looking at valuations and fundamentals. Puts remain in place on (TSO), (FTO), and (WNR)
  • Gas Storage: 77 Bcf. High to me but generally in line with consensus. September gas tumbled a quarter to close at $6.10. The response was delayed if it was to storage and I think it honestly had more to do with the continuation of relatively benign tropical forecasts than to the storage number (see more details on gas below)
  • SWN: Great Opening, Lousy Close. The stock has great fundamentals, monster growth, and a good hedge position but a strong mor,ing rally was met with day long selling as natural gas slid.

Earnings We Care About Today: (AKA Knock Cover Off Ball Day!)

  • (CHK) Top and Bottom Line Beats Which Is Not Surprising Given That They Pretty Much Alway Beat. Raising 2007 and 2008 Production Guidance While Keeping Cost Guidance In Check Is The Real News Here.
  • $0.71A (ex items) vs $0.65E. CFPS of $2.09 is impressive and above estimates.
  • Revenues of $2.1 billion smoked the consensus revenue estimate of $1.6 billion.
  • Production grew 19% YoY and 9% seqwuentially to 1.868 Bcfe per day which was well above the top end of guidance of 1.736 to 1.780 Bcfepd.
  • They are now the third largest producer of natural gas in the U.S., up from 6th just last quarter. They surpassed Devon and Chevron in a single quarter. In Devon's defense, they opted to produce more NGL's during the quarter, otherwise it would have been closer to a tie.
  • 2007 YoY Production Guidance Raised from 14 to 18% to 18 to 22%. Part of this is the West Texas deal with (APC) announced last month but the majority is drill bit performance.
  • 2008 production guidance raised as well from 10 to 14% growth to 14 to 18% (and not that this is growth over a bigger 2007 base).
  • Operating costs came in at or below guidance on a per Mcfe basis and cost guidance sees no creep through year end.
  • Reserves reach 10.0 Tcfe as of June 30, 2007 with 416% all in reserve replacement in the first half. Backing out acquisitions yields organic reserves replacement of 352%.
  • Cheap, cheap, cheap. With the stock trading at $35 and a fully diluted share count of 515 million shares you're talking about an $18 billion company. To be exceedingly simple minded, just annualizing the quarter's operating cash yields $4.3 billion meaning the stock is trading at less than 4.2x current run cash flow.
  • Operational Update: Too long to go into here as they're the busiest driller in the industry.
  • They're also selling some Appalachian assets for $600+ milliion. Maximize value and sell to accelerate that drilling program everywhere else. Nice.
  • Fortis has got to be feeling great about the downgrade last week. Maybe this will be enough to get Goldman Socks into gear and out of neutral...probably not.
  • Conference Call: 9 am est.

Put the top line growth they're talking about on those numbers and the valuation gets on the stupid side of cheap. And that's before we even talk about asset value.

  • (EOG) Another Big Beat and Guidance Increase.
    • Reported $1.17 vs expectations of $1.04.
    • 2007 Production guidance raised from 10 to 11.5%.
      • Strong results in the Bakken field of N Dakota.
      • Wetter gas in recently drilled western Barnett Shales wells yielding higher natural gas liquids production.
    • Conference Call: 10 am est. As usual, EOG's press release provides a glimpse of a few trees but little forest. The call will hopefully provide that kind of bigger picture meat.
    • I'll be interseted to hear updates on the S. Tx horizontal play and on their work in the Uinta where the gas saturation is massive: 250 Bcf per section! That beats the pants off any old shale play!!
    • While they have a longer than average reserve life and are given the high, organic nature of their growth they deserve a higher multiple than their peers. The simple annualized math leads us back to a current multiple to CF of 6.4x which is by no means excessive.

Holdings Watch

CALLS:

  • (CHK) Added August $35s for an average of $0.77. Last bid $0.80. We also continue to hold the Jan 08 $37.50s.

PUTS: No Action.

Natural Gas Report Review: 77 Bcf Injection.

Storage as of July 27, 2007: 2,840 Bcf (updated August 2, 2007).

Max storage for this week in history: 2,775 Bcf (2006).

We are now 65 Bcf (2%) higher than year ago levels.

We are now 17% (422 Bcf) above the 5 year average which includes 2006's record levels (see third chart below).

Looking Ahead:

My God... It's Full Gas ~ Dave Bowman if he saw the projected gas storage levels which as you can see from the following table appear monolithically high.

gas-table-080207.jpg

As you can see in the table, average injections from now through the end of the traditionial injection season get us to "high" levels of storage. Even the minimum level of injections, which occured last year and is therefore in both the 3 and 10 year scenarios gets us to a lofty 3.5 Tcf which by historic standards is more than "full".

The record short interest on the part of the non-commercials will be supportive of prices but apparently only once covering is induced by either sharply lower injections or a storm.

Where we are now:

 

gas-graphs-080207.jpg

This week's heat, the first real summer heat of the um, summer should get injections down towards the half century mark but it will need to last and the long range forecast at present remain mixed.

weather-080207.jpg

Odds & Ends

Analyst Watch: I'll add this in comments in the morning.

98 Responses to “Fantastic Friday – Two Big Favorites Beat and Guide Higher!”

  1. 1
    zman Says:

    Analyst Watch:

    OII price target goes from 61 to 72 at RBC
    RDC from 35 to 48 at RBC
    PTEN 30 to 20. ouch.

    comments on asset sale at NFX in a few. nice.

  2. 2
    zman Says:

    NFX

    Cherokee Basin (Ok) coalbed methane sale to Constellation.

    Well they’ve been saying for months select domestic packages would be would be divested.

    $5.25/mcf (based on $128 million for 45 Bcfe) when most stuff is selling mid $2. It’s only a 10,000 Mcfgpd of production at present so on a price to cash flow basis it must far exceed NFX’s multiple unless that area is just much cheaper to run than I think. Certainly frees mid-continent team from drilling a lot of wells each so more focus on the Woodford.

    Constellation, the purchaser must see a lot of potential.

    Nice portfolio highgrading move, good value maximization of an asset that’s not impactful…overall positive deal

  3. 3
    zman Says:

    Canadian oil co worker killed in Uganda during raid.

    Thunderstorm activity is heating up in that wave that just passed Barbados

  4. 4
    redjack Says:

    Z…how about that IOC? Really amazing how the mo players will lock onto a stock with questionable fundamentals.

  5. 5
    zman Says:

    redjack,

    Not that I sleep that much anyway but that would kill it for me. lol. there’s no news there … there should have been wells news by now. even if its just an update, still drilling, stuck tool, what have you. But to issue press releases implying that everything is going to be all right when you know they have to do an offering to stay in business…well, I gotta say everything really needs to be alright in that case.

    The thing about mo money is, they don’t know the fundamentals or anything beyond a chart and ticker in an amazing number of cases. Not people like Louis Navalier, I’m talking about the lemmings behind him.

  6. 6
    el_vogel Says:

    Good morning Z,

    I see HK is going to report in a few days – how do you think they’ll fare?

  7. 7
    Larry H Says:

    Listening to the CHK Call. These guys have to be the best operators in the business. Incredible growth and hedging program. Any weakness there and I will be adding to an already outsized position.

  8. 8
    Brian08 Says:

    Z thanks for the advice on selling on the initial pop in the morning…Made out nicely on those CHK calls from late yesterday…

  9. 9
    zman Says:

    El – I’ll have an update on them out Monday with thoughts on that but right now I thinking ok on numbers, good report, good growth…potential for incr guidance but they really don’t need it.

  10. 10
    scoop006 Says:

    Z-Is NFX open for trading today?

  11. 11
    zman Says:

    CHK calling going well

    EOG sell off is a little unjustified.

  12. 12
    Lije Says:

    Scoop their chain came up about 30 seconds ago. That was wierd though

  13. 13
    codydog Says:

    Colorado State cuts ’07 hurricane forecast by 2 storms; still sees very active ’07 hurricane season – DJ

  14. 14
    zman Says:

    NFX – the delay was related to #2 above. People like it, takes a little while for the specialist to sort through more than the usual balance of orders.

    thanks Cody.

  15. 15
    zman Says:

    EOG WAS a steal. Still like it here, call in 15 – could run into it and go positive which would give you a nice pop

  16. 16
    JoshS Says:

    CHK said the operational part of their earnings was based on a hedged price of $7.97 for natural gas. Can anyone forecast how that number might change going forward?

  17. 17
    zman Says:

    Josh,

    Their hedge schedule hasn’t changed much but it rises in the future with a little less hedge in 08 but its at $8 and $9 levels. They’ll add to this opportunistically.

  18. 18
    zman Says:

    OII – there’s what happens when every analyst that follows a company has to raise estimates. LOL

  19. 19
    zman Says:

    OII coming out of half here.

  20. 20
    zman Says:

    TRADE: OII out half up about 460% in 2 weeks.

  21. 21
    codydog Says:

    CHK says S.E. Oklahoma would be flat to uneconomic for drilling if Henry Hub gas was $5.50-$6

  22. 22
    zman Says:

    Mark Papa at EOG

    Less pessimistic about N American natural gas growth. Thinks up by 1.5%

    They’re going to hedge more 2008 gas.

    Those are huge statements for these guys. They’re saying they’re not pessimistic on gas prices but thing they’re getting punished for not being hedged much.

    Q7A coming

  23. 23
    zman Says:

    refiners getting crushed again.

  24. 24
    codydog Says:

    maybe Amaranth delivered big earnings and volatility to NG, and as NG prices hesitate as no massive buyer around, these guys will hedge and kill NG for a few years – its a bad sign, imho

  25. 25
    zman Says:

    Cody,

    that’s what I’ve been saying about these shales, you get below $6 and the LATE ENRTRANTS are toast. They’re very economic for NFX at those levels b/c they were early to the play 9Woodford). This is supportive of gas prices. That’s a “shut ins coming” shot across the bow.

    The gas situation is mild weather combined with the Barnett which is the industry’s best dream/worst nightmare

  26. 26
    zman Says:

    Broader market playing heck with the energy stocks again today.

    Hey Nicky, got any broader market TA?

  27. 27
    El Diablo Says:

    cnbc just deployed my “run on the bank” call.

    Next call: forget fundamentals, just watch USD/JPY. That’s what causes the ‘run on the bank’ and the leverage reduction. Today’s drop is the biggest seen yet. If this continues, liquidity will come out of everything, including crude.

  28. 28
    zman Says:

    EL D – still waiting on those comments to improve my site

  29. 29
    Sambone Says:

    99L – Going into high shear at the moment, BUT if it can get south of Cuba, shear is 5-10, and then could become something. Still watching GOMEX
    http://www.ssd.noaa.gov/goes/east/carb/loop-rb.html

  30. 30
    MMarkkk Says:

    Z – I think when folks look at shale well economics, they ignore the cost to get in and look simply at the cost to drill/complete/produce. The cost to enter is “sunk” and doesn’t come into play when deciding to drill/no drill.

    Having said that, the SE OK wells are $5MM each and even ignoring land/entry costs, $5.50/mcf will challenge them!!

    The shut in decision will really be one of deciding to produce gas at $5 or wait a year and produce it at $7…maybe. Kind of arbitrage play of sorts.

  31. 31
    El Diablo Says:

    It was one specific suggestion, controversial at that, and requires some explaining. Got tied up with the market and haven’t had time to spell it out…

  32. 32
    zman Says:

    Go CHK Go

    Morning Mark – did you get my email the other day? May have been block by spam filters.

    Everybody please put my email: zmanalpha@gmail.com on your white or safe list. Usually this can be accomplished by adding the address to your address book.

    Re shale: by “people” are you referring to the company’s themselves or the folks that watch them. I had a sit down with a private, large player in the Fayetteville whose been there forever and they said the land costs were forcing some to sell out at a loss to bigger players after the initial pop, especially in non sweet spot wells. Are you saying the company will drill with all in costs underwater? Just want to be clear on that.

  33. 33
    zman Says:

    El D – now you’re just teasing me.

  34. 34
    Stephen Says:

    Z, I joined you on CHK last night, and man, is it holding up well in the face of the broader market, this could really fly when the rest of the market picks up.

  35. 35
    codydog Says:

    nicky–where are you getting that from on spx?

  36. 36
    andy Says:

    z–u ever reply to me re txco stuff i sent u?? just sold nfx 45 aug puts at .45
    sambone–my kids looked at map of gom u posted and bolted for beach to surf 2 days ago. am in sarasota no hurricane, but good surf!!

  37. 37
    zman Says:

    Andy – no – it didn’t look pressing so it’s in the weekend reading file. Will do a blurb in the weekend wrap on Sunday.

  38. 38
    Big H Says:

    Hi gang~

    I been on summer vacation, and it better then the markets in Augest!(lol)

    Zman- congrats on all these great postions you have chosen and the DD on them!

    QUESTION:

    I have not traded DOW or S&P options in a long time and would like to, bit am not sure how, Z- or someone can you give me the symbols on a way to buy dow and s7p options? I know about the ETF’s ) DIA and SPY) but am sure their is another that covers the SP500 and Indursties? THANKS ALL!

  39. 39
    andy Says:

    nicky—can u see the gulf??/ enjoy your info

  40. 40
    zman Says:

    CLR creeping back up.

    Hey H,

    man you got me there, way out of my realm, although I hedge the personal account someitmes with the DIA and qaud q’s. the spx has a list of etfs to play like the sle and xlf, just google it.

    CHK just flying but not falling in love with those aug calls as they could fall victim to the same market malaise crap NFX and SWN are suffering under. Great earnings and after that day, no one cares with this lousy tape.

  41. 41
    zman Says:

    That NFX news and the market’s reaction is what I’m worried about. That was a great sale for them, small $ but the point is they’re executing. But people are running for the exits on DJIA. Looking roll the NFX position to later months next week. SWN as well.

  42. 42
    codydog Says:

    if GS or JPM follow BSC’s conference calls with positive statements, this mkt will fly as massive short covering kicks in

  43. 43
    Big H Says:

    I been looking at LEH calls as well as GS, but missed the morning dips…so I flat, but like LEH !

    Hey not to be nosiee, but what happened to the guy buying deep?

  44. 44
    Big H Says:

    I toed into some shit, I know oils week, but tickled some OIH AUG 175 Calls, small postion~

  45. 45
    Big H Says:

    Nicky….How You B?

    whats gas oil and HO doing today?

  46. 46
    zman Says:

    Gang, I have to step away for 30 or so.

    Nicky you have the floor. Charts posted to your tab. Format is little rough but we’ll get it ironed out!

  47. 47
    Big H Says:

    Thanks, Nicky- Its been fun being, you know what they say about not missing much..well that what happened with me and I plan on being away more this month!

    However I have checked in on and off and read up on what you have to say, and its been pretty spot on…

  48. 48
    MMarkkk Says:

    Z – didn’t get email but I’ll check the spam filter folder.

    By people I meant the major players, everyone from SWN, NFX, Devon, and up. These guys don’t worry about sunk costs in drill/no drill decisions. They do look at land costs in the decision to enter a play or expand a play. The big cost that has hampered drilling is rig costs, pumping costs and labor costs. Also, water supply and water disposal.

    NFX and EOG are killing me. I may have to roll those calls over to later months as well. I thought EOG would rock today after those results. Yes, they had some noise on hedges but that’s just noise. Their operations results were great. Must be the market.

  49. 49
    jimbo Says:

    What’s the outlook on GSF/RIG?

  50. 50
    Sambone Says:

    Andy – Glad to help your babies out.
    Jimbo – I got stopped out of RIG today. First support at 94, and second at 88. If it gets below 90, I’m back in.

  51. 51
    james Says:

    Any opinions and/or trades on the OIH at these levels? ditto for XLE?

  52. 52
    Big H Says:

    I have one! ( not that you should listen to it or put any belief into it) but here she blows…

    OIH their she blows…..xle ditto!

    ( see my earlier post i brought some OIH AUg 75 calls, Just sold them ! that should say something-I think some more downside next week)

    now how about TSO 47.50 calls, AUG,,,into earnings….itsnay on it huh?

  53. 53
    zman Says:

    Mark – I hear ya. I was thinking more produce/not produce than drill not drill. Here ya NFX an EOG. Me too and SWN which was great earlier but broad bringing it all down. This could happen to CHK once the halo of good earning were off after the number increases on Monday so I’ll be quick to cash Monday or Tuesday on my close dated options.

    Refiners continue to get popped (3 puts (FTO), (WNR), (TSO), 1 call there (VLO))

    Agree with Sambone re RIG

    James it’s up to the broader market and nat gas which is focused on the weather. I don’t see any reason to jump on much anything. If they hold up 170 should be the low, the majority of this weighted injex is kicking butt.

  54. 54
    zman Says:

    Come on NFX, CHK and SWN re rallying.

  55. 55
    Big H Says:

    Anyone feel like walking away from their PC’s today after the last few sessions..? and comming back next week?

  56. 56
    Sambone Says:

    Andy – Book mark this site for your surfers in Florida. You can do different things with it.
    http://wavcis.csi.lsu.edu/forecasts/forecasts.asp?modelspec=temperature

  57. 57
    codydog Says:

    BSC call not reassuring anyone….

  58. 58
    Popeye Says:

    169 did not last long for the OIH.

  59. 59
    jonnynav Says:

    Last weather forecast for the oil industry:
    GULF OF MEXICO:
    Shower and thunderstorm activity over the northeastern Gulf of Mexico has decreased significantly over the past few hours. This activity was being produced by a low pressure surface trough draped over most of the coastal
    region of the northern Gulf. Most of the activity is over land at this time, and tropical development is not immediately expected. No other significant
    activity is noted in the Gulf of Mexico or the Bay of Campeche at this time.

    CARIBBEAN SEA:
    A tropical wave and associated low pressure area over the eastern Caribbean Sea, along 71W, is moving westward at 15 to 20 mph. Thunderstorm activity had decreased significantly overnight, but new thunderstorm development has been noted this morning. This activity, although strong, has become even
    more unorganized than previously noted. An Air Force recon aircraft may
    still investigate the region on Friday, but tropical development is
    looking
    more unlikely over the next 24 hours. WWT will continue to monitor
    this
    area closely. A second tropical wave is noted along 81W, south of 19N,
    and
    is moving westward at 15 to 20 mph. Only isolated showers and
    thunderstorms
    are associated with this wave, and no development is expected at this
    time.

    ATLANTIC OCEAN:
    A tropical wave is noted along 35W, south of 18N, and moving westward
    at
    20mph. Development is not expected at this time as upper-level winds
    remain
    unfavorable. Another wave is located in the central Atlantic, along
    49W,
    south of 18N, and is moving westward at 15 to 20mph. Most thunderstorm
    activity remains west of this wave, along the ITCZ, and development is
    not
    expected.
    A stationary front remains over the western Atlantic from near Bermuda
    westward to off the Carolina coast. This stalled system may allow low
    pressure centers to form along it as it sits over the open waters, but
    tropical development is not immediately expected.

    Elsewhere, tropical storm formation is not expected through Sunday.

  60. 60
    zman Says:

    re oih – yes right along with the Dow and S&P. Nicky, did you see the tab?

  61. 61
    zman Says:

    wow refiners down another 5%ish and RBOB still holding above $2

  62. 62
    codydog Says:

    Fed will flood the mkt with cash and then move fed funds down to ‘mkt levels’ – if bsc, gs etc are forced to mark to mkt these loans, they’ll take huge hits and impair their capital –

  63. 63
    Joe Says:

    Z et al – anyone buying VLO or waiting to see what Monday brings?

  64. 64
    rammastr Says:

    This can’t be good:!

    NEW YORK (Reuters) – Bond market turmoil sending investors fleeing from risk may be a worse predicament than the 1980s stock market fall and Internet bubble burst, Bear Stearns Chief Financial Officer Sam Molinaro said on Friday.

    “These times are pretty significant in the fixed income market,” Molinaro said on a conference call with analysts. “It’s as been as bad as I’ve seen it in 22 years. The fixed income market environment we’ve seen in the last eight weeks has been pretty extreme.”

  65. 65
    Big H Says:

    I could have told you that OIH comples would test the 160’s on monday….and i knew it yesterday! …..you know oil has bumpppered up for no good reason even with runs moving higher it was more spec then demand, take that with earnings and the share prices how they ran…you know and knew it was time to take profits and sell , and that dose never end in one or two days….they have to get some more off the books while their still at theses prices!!!

  66. 66
    Denise Says:

    From Doug Kass -short hedge fd
    El Capitan Bellows the Truth
    8/3/2007 3:00 PM EDT
    The reason I get apolpletic when sentiment or gut feel or whatever is the reasoning behind buying the dips — especially in financials — is that Jim “El Capitan” Cramer just told the truth in his CNBC interview with Erin Burnett.
    It was the single best interview I have ever seen on the station.

    And so did Bear Stearns’ (BSC) CFO tell the truth on the conference call. I just got off.

    He said that the fixed-income makets have seized up and are in the worst condition he has seen in over 20 years.

    Yes, the markets can rally.

    No, the fundamentals don’t support a sustainable rally.

  67. 67
    Big H Says:

    Zman- I hate to ask now, but what calls you got in VLO?

  68. 68
    zman Says:

    Big H= big with the hindsight.

    They’re 70s and worthless. Be honest, you don’t hate asking but for a little perspective the FTO, TSO, and WNR puts more than offset.

  69. 69
    Big H Says:

    Z- I know your other calls more then make up for the small VLO call, I was just asking- and I agree I think its still gonna move up, and am looking at the calls now—as far as hindsight – It was not just something I been think for a while…and was to scared to place the bet and nuy the puts even through the markets were say to, that OIH was going much lower…HEY DAMM STOCKS HAD HUGE RUNS, and er- you think that they were just gonna sit their and do nuthin….say it ain’t so!

  70. 70
    Denise Says:

    Nicky,
    Just passing along the possible why’s
    we are selling off.

  71. 71
    Sambone Says:

    Nicky – I frankly can’t stand Cramer. That guy is a perma Bull. If BSC is right, we’re in for a world of hurt, including the oil patch.

  72. 72
    Big H Says:

    OK Z……I am buying some LEH AUG 60’s and TSo 47.50’Aug

    TSO HX @1.30 and

    LES HL @ 1.65

  73. 73
    zman Says:

    Sambone – agreed.

    Cracks continue to suffer and I think it’s too early to bottom fish the refiners, especially with all this extraneous noise.

  74. 74
    zman Says:

    H – GLTY

  75. 75
    Denise Says:

    Sounds like most of you hate Cramer but this is his latest column-well worth reading-
    8/3/2007 3:11 PM EDT

    Over and over I hear that the subprime issue can be contained. I hear that it will blow over and that the woes are overdone.

    Holy cow, are these people making any phone calls to find out what’s going on behind the scenes? Are they totally clueless? I sit here and make call after call to people and when I am not collecting their resumes, what I am hearing is so dreadful that I don’t even want to repeat it.

    Understand, I have no skin in the game. In fact, I am looking for a house so the housing prices are going my way!

    But you need to know that in the last two weeks, all fixed income has simply shut down. You can’t even sell commercial paper, and that stuff’s like tap water, the way it flows. The rest of the market can rally, we can have short squeezes, but the money is pouring out of everything everywhere and flowing into cash and Treasuries. The mortgage market has disappeared overnight. Overnight!

    I see these ads for home-equity loans and mortgages and I laugh. The companies can’t possibly get you one because there is no way that anyone will give them the money to do so. These homebuilders are dead right now. Moribund.

    Gee, I wish I knew some Fed governors and presidents. I wish I knew the chairman. I wish I had a better relationship with the Treasury. Because someone has to do something. Some one has to let Fannie Mae (FNM) help — the regulators won’t even let them do that.

    I don’t know if any of these complacent hopefuls has a clue what’s really happening.

    This weekend, the fund of funds members are going to take out every dime they have with hedge funds that lever any kind of bonds. In the next 10 days, I believe a dozen hedge funds of some reknown will fold!

    But they drone on that all is good. I am totally on board that we could get a rally in my disaster portfolio of long-dated assets with no credit risk.

    However, I want to reiterate that things are collapsing in fixed income. Without the discount window being opened, without the fed fund rates being cut, you are going to have major bank failures and homebuilding failures in weeks, not months. Maybe even days.

    I have to tell our readers that — and I speak to everyone — even as I am actually being cautious in my words. Cautious!

    You must understand this stuff. I must get it through your head how bad it is behind the scenes in the credit markets.

    There. Let it never be said that I held back on this issue and didn’t tell you what I am hearing and in the not-for-quotation business world.

    At the time of publication, Cramer was long Fannie Mae.

  76. 76
    Sambone Says:

    Cramer’s speech reminds me of the “Wicked Witch” from Wizard of Oz, when Dorothy threw the water on her. “I’m melting, I’m melting”!
    This is the same guy that said Ben Graham’s way of investing in the market was old school, that it was a new economy (March 2000) The Intelligent investor, preface.

  77. 77
    Sambone Says:

    If this thing is going to turn around, it will happen soon as it has for the past two days. Otherwise, it will be ugly Monday IMO.

  78. 78
    Big H Says:

    TRADE………

    SFB HN at 3.00 AUG

    Thats SPY AUG 144.000. calls

  79. 79
    zman Says:

    Sambone,

    I think we need the ugly Monday morning and an intraday turn.

  80. 80
    zman Says:

    Here’s some irony:

    IOC up 13% – which doesn’t have well news has less than 4 months of cash
    CHK now up only 2% despite beat and upped guide
    OII trying to dip to red
    EOG down 4% despite beat and upped

  81. 81
    Sambone Says:

    3:13 PM

    Nymex Crude Ends Below $75; US Equities Concern

    By Roshanak Taghavi
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude-oil futures closed well below $76 a barrel Friday, driven down by concern that further falls in U.S. equities could stunt demand for oil, as well as by a new forecast that the upcoming hurricane season may not be as active as initially expected.

    “This crude market seems to be glued at the hip to the stock market these days,” said Jim Ritterbusch of Ritterbusch and Associates in Galena, Ill. The lack of a rally “is an indication to me that this market is becoming heavy. When it can’t rally on a Friday in August, that’s kind of a tip-off that we’re going lower.”

    The front-month September light, sweet crude contract on the New York Mercantile Exchange ended down $1.47, or 1.91%, at $75.39 a barrel. Brent crude on the ICE futures exchange was down $1.06 at $74.70 a barrel.

    Final settlement prices weren’t in yet.

    U.S. economic data released Friday showed employment growth slowed and the jobless rate increased last month, falling short of Wall Street expectations and indicating that job losses in manufacturing, construction and government had offset healthy gains in many services industries.

    The Dow Jones Industrial Average slumped last week on worse-than-expected new home sales data and fears about credit markets seizing up. That plunge in equities has had traders concerned that it could be a sign of slower U.S. economic growth, which could effect crude oil demand. Slowing U.S. employment growth has added to this.

    “We’ve seen in the past couple of weeks, that it (weaker stock market) seems to affect the commodity markets as well,” said Mike Zarembski, senior commodities analyst at optionsXpress in Chicago. “Crude oil has been heavily long-positioned by some of the funds and large speculators. Anytime they need some liquidation here, it seems that crude takes a tumble.”

    Long positions are futures bets that prices will gain.

    Front-month September reformulated gasoline blendstock, or RBOB, was 1.04 cents, or 0.51%, lower at $2.0258 a gallon.

    September heating oil was down by 3.66 cents, or 1.76%, to $2.0380 a gallon.

    Anxiety about the onset of the hurricane season, which is generally between mid-August and October, abated somewhat after Colorado State University weather experts said Friday that the probability of an intense hurricane making landfall in the Gulf Coast region has fallen by 5 percentage points to 44%, and is 30% in the long-term.

    Traders have been anxious about hurricanes for much of the summer since fierce storms that enter the Gulf of Mexico can be a threat to the region’s hydrocarbon production. The Gulf Coast area stretches from the Florida Panhandle to Brownsville, Texas, and houses many of the nation’s oil refineries.

    “The market was already teetering a little bit and the hurricane forecast just stuck it’s foot out and tripped the market,” said Tim Evans, an energy analyst at Citigroup in New York.

    “I think this is a kind of a further indication that people have become nervous. People have been realizing that the market was overextended on the upside, and so they’re finally starting to take some of the bearish possibilities seriously,” Evans said.

  82. 82
    Sambone Says:

    I’m gone, have a good weekend!

  83. 83
    codydog Says:

    The important part of what cramer said was fund of fund, eg, money allocators, are going to pull money from anyone margining debt. Thats very, very significant comment as it means all credit is being yanked away in days.

    Heres briefing traders energy comment —

    The worst performing sector of the day is NOT the financials. Incredibly it’s energy – off over 3% and skidding into the close. Because of US policies growth is raging the world over, but don’t kid yourself. The US is still over 30% of world GDP. If we catch a cold the energy patch will get pneumonia. And what of the significance of demand from China? In the years 2004-06 just the total growth alone of the US economy exceeded the entire value of the Chinese economy. We grew an entire China in only three years. That underscores just how criticial a piece of the world economic equation the US remains. If the market is going down it’s time to abandon ship on the energy patch I think

  84. 84
    zman Says:

    Thanks Sambone, have a great one.

    Well that’s one week we can round file under “see ya, don’t come back”

    This is exactly what I can’t stand about the PB’s they interview on CNBC….Their buil, bull, bull until the market starts correcting, then they bring out the folks to tell you I told you so.

    Later guys and gals. I was concerned about a Monday gap and seeing that we were saved by the bell I’m no less concerned now so I went into the weekend with a mix of smacked around E&P calls, some big up refiner puts and one big down refiner call and some oil service that is highly mixed.

    Beer thirty – later and thanks everybody for another chatty, info filled week. You guys definitely improve my trading, I hope some of that goes the other way. Hard to tell on weeks like this!!!

    If you have any company research requests drop em here and I’ll try to tackle in blurbs this weekend. See ya!

  85. 85
    zman Says:

    Just saw Cody’s energy patch note:

    definitely agree with the US cold thing although deepwater service, if it gets hit on that kind of service will be a huge buy since the contracts are very long term and will stay high prices through even a short recession.

  86. 86
    Big H Says:

    dammm that was ugly!……I brought more s&ps at 2.65 average 2.75…just brouht somr at 3 so i was able to grab enough to average lower! see what happens over the weekend!

  87. 87
    Lije Says:

    I could personally do without Cramer’s constant yelling and the TV show Mad Money, but I agree with Denise that his recent columns are worth reading. Here is a link that my father sent me. It explains the interplay between hedge funds and mortgage companies on a very basic level and provides some commentary on the duration of a possible bear mkt.

    http://www.thestreet.com/s/the-lie-that-will-kill-hedge-funds/markets/activetraderupdate/10372191.html?puc=_tscana

  88. 88
    rammastr Says:

    Thank you zman. Until the emotions go away, the technicals do not mean much.

  89. 89
    D Says:

    Nicky spx close 1433 ah up to 1437
    thoughts on Mon and beyond?

  90. 90
    Big H Says:

    Nicky…….last price 25.00 down -23.20 (48.13%) for the 1440 calls….the spx closed 14333.06 -39.14 (2.66%)

  91. 91
    Free Online Dating Says:

    Free Online Dating

    I couldn’t understand some parts of this article, but it sounds interesting

  92. 92
    munchie Says:

    dorms

    classic scorched earth

  93. 93
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