11
Jan

T.G.I.F.

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What an ugly start to the new year this has been.  Today looks like more of the same as Merrill and Amex take writedowns and Countrywide gets a bailout from B of A. In energy land, the tea leaves continue to look promising. None of the companies I track are like to take a ceiling test write down of any size with their 4Q reports and with one commodity near nominal all time highs and another trading well above its 52 week lows and solidly 300%+ over where it started the decade you'd think all lights would be green for the producers. Especially with moderating service cost inflation. And for the most part you would be right. Several E&P names are within 5 to 10% of their all time highs while valuations remain rock bottom. But a tide flowing out to see can ground all boats and as such, we appear to be mired in sideways trading through 4Q reports which don't begin in earnest until month's end. So my game plan is currently take a hit and run approach to E&P, a cautious eye to service as that group has gone back to trading in step with the broad market, short the refiners on the weak fundamentals and study up for 4Q and other plays.

Commodity Watch:

  • Crude Oil tumbled $1.96 to $93.71 as economic worries weighed on prices for a second day. This morning oil is trading off another $0.15 as the broad markets look to be seeking a new 2008 low at the open on, you guessed it, further economic worry. 
  • Alaska production set to fall another 4% in 2008. The state expects production from the North Slope to fall to 701,000 bopd this year from 731,000 bopd last year. That's not a lot of oil until you consider that Alaskan production peaked at 2 mm bopd in 1988 and has been sliding ever since while demand, well, demand just keeps on growing. In case you haven't looked at it in a while total U.S. production just can't get out of the cellar and has little hope of a meaningful recovery until 2009 when BP's oft-delayed Crazy Thunderhorse deepwater development comes on stream (although by then it will largely only be offsetting declines).
  • Natural Gas rallied $0.16 to close at $8.259 on an essentially "in line" storage report. Please click here to see last night's review of the storage numbers and current near term thoughts on gas. This morning gas is trading up another $0.05 to $0.10. Sounds like a bit of a short squeeze is going on but I suspect if will have run out of steam by the end of next week.

gas-table-011008.jpg


Holdings Watch: No action

Multiple Update Focus: Drybulks.

drybulk-multiple-011008.jpg

Key Takeaways:

1) Obviously, the stocks have been pounded. The worst punishment has been delegated to those operators with a higher percentage of their business in the spot market like (DRYS).

2) Estimates are, for the most part UP slightly. As such, the group has seen some drastic multiple contraction. The group was not expensive in the first place. Just to pick on (DRYS) again which was trading a little over a month ago at a paltry 5.4x 2008 EPS, the stock has seen its estimates tweaked higher slightly and its multiple fall to firesale levels of 3.2x. 

3) Cheap for a reason. One of my favorite phrases but in this case does it apply? Honestly the jury is out:

  • Rising day rates led to a continual string of upward earnings revisions. Revisions have been fewer and further between since the Capesize, Panamax, and Supramax charts began to show signs of weakness (again, on economic slowdown fears).

bulk-rates-011008.jpgclick to expand rate charts.

  • Chinese Iron Ore Demand (a chief source of business for the drybulks) Is Growing Rapidly. Iron ore and coal ships are expected to increased by 70+% and over 100% between 2007 levels and 2010.
  • Tanker Conversions. May produce an excess of capacity but the last numbers I saw may now be high with the economic uncertainty that has invaded the market. 

4) So what to do? I came close in comments to a technical short on DRYS last Monday (man I wish I had pulled the trigger). But as far shorting goes on fundamentals, I think that time is pretty much past, not that they can't get worse if the estimates start to turn but the beatings have been so extensive and short interest has crept higher all the while so its possible a squeeze is coming. I'll be doing a little more work on global commodity transportation directionality before jumping long either. From a technical perspective I will not attempt to catch a falling knife here. I want to see them find and hold a level for a month at least to trust any kind of positive move unless we get good, solid, catalytic news. 

Odds & Ends

Analyst Watch: (ATW) and (DO) go from Buy to Neutral at Oppenheimer, (RRC) initiated at Buy at Jefco with a $65 PT.

86 Responses to “T.G.I.F.”

  1. 1
    Sambone Says:

    8:43 am EST

    Nymex Crude Down Amid Economy Worry

    DOW JONES NEWSWIRES
    From MARKET TALK:
    [Dow Jones] Nymex crude trades down more than 50c, paring earlier losses, as traders ponder the effects of an economic slowdown on oil demand. Providing some support for prices was a fire on an oil tanker in Nigeria, which a Nigerian militant group said it started with an explosive device. Nymex Feb crude -52c at $93.19/bbl. (greg.meyer@dowjones.com)

    Reported earlier:
    LONDON — ICE Brent crude futures traded over $1 higher in early London trade on reports of a fire on an oil tanker in the Nigerian city of Port Harcourt.

    ICE Brent crude prices surged over $93 a barrel following the news of the fire, that followed reports of two loud explosions. Prices edged lower, however, when it emerged that the ship was berthed in a cargo area of the port and not at the port’s oil export terminal.

    At 0836 GMT, the front-month February Brent contract on London’s ICE futures exchange was up 82c at $93.04 a barrel.

    The front-month February light, sweet, crude contract on the New York Mercantile Exchange was trading 74c higher at $94.45 a barrel.

    The ICE’s gasoil contract for February delivery was up $4.25 at $808.75 a metric ton, while Nymex gasoline for February delivery was up 120 points at 237.21 cents a gallon.

    —By Nick Heath; Dow Jones Newswires

  2. 2
    zman Says:

    What an ugly market. Big drops in energy on next to nothing volume.

    DO and RIG getting hit early again. DO had another valuation downgrade.

  3. 3
    zman Says:

    Thanks Sam, missed the tanker fire, … those MEND dudes are not kidding around. They are already sick of the new government and they are making good on their promises to accelerate mischief.

  4. 4
    Sambone Says:

    Z – I was thinking this morning (Dangerous) and this overall market/economy reminds me of the Japanese market from years ago. High flying real estate then banks would not foreclose, etc. It took years for that market to recover. Your thoughts?

  5. 5
    scoop006 Says:

    ANY NEWS ON DRYS

  6. 6
    zman Says:

    SUN – take a look at the daily chart, 3 more bucks and she really gets whacked. Speaking of whackings, the refiners are getting disproportinately whacked this morning.

  7. 7
    zman Says:

    Sam – it is uncanny. I think things are a little different now as those guys got to 0% on their funds rate and we have a ways to go. Also, I just don’t see us stagnating that long, the world is more U.S. market centric than at the time it was Nikkei centric. What scares me is a capitulatory last shoe drop that kills everything, regardless of valuation or sector. If we go from “investing mode” to “speculation mode” to “preservation of capital mode” then things will be very ugly. I think the keys are inflation which the fed is not giving to shiny nickels worth of notice too, jobs, and the trade deficit (which is pretty bad now given the $). I think the signal will be another Long Term Capital style event.

  8. 8
    TTupp Says:

    and i like it

  9. 9
    TTupp Says:

    gona dd on vlo if we stay on the other side of 60.60

  10. 10
    zman Says:

    Scoop – Nothing I see. Saw mention there was a business week article but I have not seen it.

    T – TSO management look like chumps for putting that poison pill in place that queered the Tracinda deal now, lol.

    T – my though on SUN is that with the high current utilization/make for distillate and growing inventories and warm weather that they are truly getting spanked NY harbor cracks. I don’t want to be in them for earnings as they had the only region (northeast) to see positive cracks YoY but the look ahead at present is not pretty.

  11. 11
    Sambone Says:

    9:49 am EST

    Nymex Crude Down Amid Economy Worries

    By GREGORY MEYER
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures were down modestly Friday as traders weighed the risks of slower economic growth against emerging threats to oil supply.

    Light, sweet crude for February delivery was recently down 60 cents, or 0.6%, at $93.11 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange was off 81 cents at $91.41 a barrel.

    Traders were digesting a Nigerian militant group’s announcement Friday that it detonated a remote explosive device and started a fire on an oil tanker at Port Harcourt, a major oil export terminal in Nigeria.

    The Movement for the Emancipation of the Niger Delta, or MEND, claimed responsibility for the attack in Africa’s top oil exporting nation and said it would continue its assaults against energy installations and the Nigerian military.

    Yet the group’s statement failed to have an lasting impact on crude prices, which maintained downward momentum for the third day in a row on mounting concerns that an economic slowdown in the U.S., the world’s leading oil consumer, could hurt oil demand.

    Stephen Schork, editor of the energy markets newsletter the Schork Report in Villanova, Pa., said the Nigeria attack follows other headlines that would appear to unsettle the oil supply. These include this week’s naval standoff between the U.S. and Iran in the Strait of Hormuz, the gateway to oil exports from the Persian Gulf.

    “With all this bullish news, all the market has done is sold off,” Schork said.

    Oil futures took a tumble Thursday after Federal Reserve Chairman Ben Bernanke identified “more pronounced” risks to the U.S. economy. That followed a prediction of a recession this year from economists at Goldman Sachs. In a note to clients Friday, the investment bank’s commodities analysts revised their forecast for 2008 U.S. oil demand growth downward by 150,000 barrels a day.

    “We expect U.S. oil demand growth to contract by 50,000 barrels a day on average in 2008,” Goldman’s analysts said.

    Goldman left unchanged its prediction that benchmark West Texas Intermediate crude, which trades on the Nymex, will average $95 a barrel this year and reach $105 a barrel a year from now. The analysts said oil demand in industrialized countries, steady output quotas from members of the Organization of Petroleum Exporting Countries and industry cost escalation will remain supportive of prices.

    Front-month Nymex crude futures reached an intraday high of $100.09 a barrel last week, but have yet to settle above $100 a barrel. Despite this week’s selloff, some analysts say that target is still within reach, especially with U.S. crude-oil stocks at their lowest levels since October 2004.

    “Overall, we remain reluctant to rule out another run at record highs because of the exceptionally low level of crude supply,” said Jim Ritterbusch, president of Galena, Ill.-based energy trading consultant Ritterbusch and Associates. “In other words, the crude market may be proceeding through a consolidation phase as it recharges for another run at the $100 mark or above.”

    Front-month February reformulated gasoline blendstock, or RBOB, was down 3.03 cents, or 1.3% to $2.3298 a gallon. February heating oil fell 61 points, or 0.2%, to $2.5512 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  12. 12
    Sambone Says:

    Part I

    Drivers To Feel Pinch Of Gasoline Prices

    By DAVID BIRD
    A DOW JONES NEWSWIRES COLUMN

    NEW YORK — On the heels of $100-a-barrel crude oil, brace yourself for record-high gasoline prices when the peak season approaches, bringing with it a demand increase estimated at half a million barrels a day.

    Some analysts fear that a fresh jump in pump prices could help dump the economy into a recession.

    Current prices of $3.109 a gallon nationwide for regular gasoline — the most ever in January — will zoom to $3.194 in March, according to U.S. government forecasts. That will top the record high for any month of $3.146 a gallon set last May.

    By the Memorial Day kick-off of the driving season, prices are predicted to surge to $3.454 a gallon, an all-time record level even when adjusted for inflation.

    The culprit is lingering high crude-oil prices, said Tancred Lidderdale, an analyst at the federal Energy Information Administration.

    Although crude oil prices have been on the march for months, they stormed past the $80 mark in mid-September, when gasoline was heading into a post-summer seasonal downturn, with demand dropping around 400,000 barrels a day, or about 4.3% from the summer peak, limiting price increases.

    While crude oil futures prices have dropped about 7% from the record $100.09 a barrel hit Jan. 3, they average near $96.75 so far this year. That’s about 75%, or more than $40 a barrel, above prices this time last year.

    The EIA’s forecast is based on a January average crude oil price of $94 and a first-quarter average of $92, a softening from current levels.

    That’s little comfort to motorists, who so far have only slightly reduced their appetite for gasoline, despite prices that are now 80 cents a gallon above a year ago, analysts said.

    Consumers have been “faring better than expected,” in the face of high gasoline prices, said David Wyss, senior economist at ratings agency Standard & Poor’s. Because gasoline prices tend to ebb and flow according to seasonal demand, drivers tend to ride out the peaks, he said.

    The Spring Bump
    “But there has to be a limit to how much we can spend at the gas pump without it impacting spending elsewhere,” Wyss said. What that tipping point is, he said, isn’t clear.

    Crude oil prices account for about 68% of the cost of gasoline, and prices typically rise in the spring, as seasonal demand and the cost of making summer-grade fuel both increase.

    James Hamilton, economics professor at the University of California, San Diego, is concerned that the typical “spring bump could be particularly noticeable this year” if crude prices remain above $95 a barrel, he said.

    Due to changing fuel specifications and high crude prices, gasoline prices have posted an average increase over the past five years of 22%, EIA data show. With an expected record average price of $3.14 a gallon in 2008, the cumulative gain since 2002 will be 133%, or $1.80 a gallon.

  13. 13
    Sambone Says:

    Part II

    “It’s conceivable that the spring increase, in concert with concerns about house prices and employment, will finally induce some pretty sudden adjustments in consumer spending, in which case it could be a factor contributing to an economic recession in 2008,” Hamilton said.

    Federal Reserve Chairman Ben Bernanke said Thursday that the U.S. will most likely skirt a recession this year, but still experience a period of slow growth.

    The Wall Street Journal reported Wednesday that in the face of recession fears, the White House is considering tax rebates for individuals to encourage spending and tax breaks for businesses to encourage investment, citing people familiar with the matter. The economic stimulus package is expected to be prepared before President George W. Bush’s Jan. 28 State of the Union Address.

    Short of crude-oil prices coming down, there’s little on the horizon that will provide relief at the pump.

    Although 2008 is a presidential election year, neither the president nor vice president is a candidate, perhaps diminishing the odds for a dramatic move.

    Bush, currently on a Mideast trip, is expected to touch on high oil prices in talks with the king of Saudi Arabia, the world’s biggest oil exporter.

    SPR Won’t Be Tapped
    But the president has rejected the notion of tapping the 697-million-barrel Strategic Petroleum Reserve to bring down oil prices. In the 2000 presidential election, candidate Bush criticized a move by the administration of then-President Bill Clinton to loan oil from the reserve to refiners to provide relief from high heating-oil prices.

    Instead, the Energy Department is proceeding with plans to shift 13 million barrels of crude oil into the reserve by the end of July, by accepting oil, rather than cash, as royalty payments for drilling on government leases.

    “There’s not a lot they can do,” said S&P’s Wyss. “Crude oil prices are set in the world market.” The economist said he expects crude oil prices to come down to $75 a barrel by mid-year, but he’s “not betting a lot on it.”

    Fundamentally, the crude oil price is too high and not sustainable, Wyss said, “but that doesn’t mean it’s going to come down tomorrow or this year.”

    EIA expects crude prices to fall to an average of $87.25 a barrel in the April-to-September period, and sees the May record-high price as the peak for the year, and indeed through 2009.

    Gasoline prices are expected to average a summer-season record $3.295 a gallon, up 12.3% from the April-September 2007 driving season. But by September, prices will be down about 43 cents a gallon from the May record, but, at around $3.02 a gallon, will still be 22 cents a gallon above the year-earlier price.

    Data in the EIA’s Short-Term Energy Outlook, released Tuesday, shows gasoline demand in the fourth quarter of 2007 was unchanged from a year earlier. That marks the first time gasoline demand didn’t rise year-on-year in any quarter since the fourth quarter of 2000.

    Tim Evans, energy analyst at Citigroup in New York, said the political response to high oil prices already was made, when Congress passed the energy bill in December, which mandates use of renewable fuels and new vehicle efficiency standards.

    The bill “would not have been pushed through so quickly with oil at $70,” he said.

    Evans said he doesn’t expect any further steps, such as tapping the SPR, or returning to a 55-mile-per-hour national speed limit.

    “Politicians may talk about high energy prices between now and Election Day (Nov. 4), but it will be 2009 before any new policy is set and possibly much longer before it would actually take hold,” he said. “The oil market has been left largely to its own devices so far, and I would expect that to remain the case.”

    (David Bird is senior energy correspondent for Dow Jones Newswires.)

    —By David Bird, Dow Jones Newswires

  14. 14
    TTupp Says:

    sold dry calls into todays rally

  15. 15
    zman Says:

    $3.19 in March for gasoline? That is a lame government forecast. These guys are constantly behind the 8 ball.

  16. 16
    TTupp Says:

    let see if sun holds 60.69

  17. 17
    zman Says:

    Re: limit to gasoline price and its impact on other spending. Well, we pretty much have to have gasoline. You can cut back a little but unless it just becomes outlandish people won’t stop driving. I’d be Starbucks takes the hit

  18. 18
    Sambone Says:

    Nigerian Group MEND Raises Alarms With Tanker Blast

    LONDON — A well-known Nigerian militant group said Friday it detonated a remote explosive device that caused a fire on a tanker and said it got help carrying out the attack from people in the energy industry and Nigeria’s intelligence services.

    The attack signals a sharp escalation in violence against the energy industry in Nigeria by the Movement for the Emancipation of the Niger Delta, which has waged a two-year campaign in Nigeria’s crude-producing region to rest more control of the area’s oil resources.

    MEND’s claim, if true, that it got help from militants working for oil companies and from Nigeria’s military and secret service would raise a huge problem for companies like Royal Dutch Shell PLC (RDSB.LN), Exxon Mobil Corp. (XOM) and other firms in operating in Nigeria, the world’s 11th biggest oil producer. MEND made its claims to the media in a statement.

    A Lloyds Marine Intelligence Unit official told Dow Jones Newswires that the vessel is a small chemical tanker owned by Arion Shipping, which confirmed the information with Lloyds. Arion is based in Piraeus, Greece.

    The front-month February light, sweet, crude contract on the New York Mercantile Exchange traded down about 50 cents at $93.14 at 1330 GMT after rising early Friday on the Nigeria blast. Price fell on concerns about the health of the U.S. economy.

    A militant group comprised of various factions and thugs, MEND recently warned of new attacks against the energy sector after peace talks with the government broke down following about a seven-month lull in assaults against energy infrastructure and employees.

    “MEND salutes the patriotic agents and also use this opportunity to commend our friends inside the military and secret service for valuable information and resources,” the group said in its statement.

    The group said its “‘Freelance Freedom Fighters” working inside the oil industry” detonated the device that caused the fire on the tanker in Port Harcourt, Nigeria’s oil capital in southern Nigeria.

    MEND said it would continue its assaults against energy installations and the Nigerian military.

    MEND’s statement to the media came through an e-mail account to Jomo Gbomo, whose past accounts of MEND” actions have proven accurate. Gbomo’s accounts of MEND’s activities have strengthened Gbomo’s claim to being part of the group’s inner circle.

    Gbomo is a pseudonym and the real identity of Gbomo is unknown. Henry Okah, who was arrested in Angola last year on suspicion of arms trafficking, is widely believed to have been Gbomo. It is unknown whether other persons using the pseudonym to continue communicating with the press.

    (Angela Henshall in London contributed to this report.)

    —By Spencer Swartz, Dow Jones Newswires

  19. 19
    zman Says:

    T: might also want to look at FSLR again, they were up on conference presentation this morning but have given it all back…sounds like the drybulks all over again to me.

  20. 20
    Nicky Says:

    Morning all.

    Samborne re Japan – did you see Goldman said yesterday they saw Japan already back in recession. Did they ever come out of recession I ask myself?

    Warning flag is up:

    RBOB took out the key level of 23179 and distillates was almost there too. It is a strong indication that the move up of 1 of 5 is done.

  21. 21
    bill Says:

    on dry sector..rates are down but should spring back ie the “silver lining”

    From Tradwinds>

    The Baltic Capesize Index showed an alarming downturn on Thursday with one broker saying Brazil was at the centre of the slump.

    The closure of Itaguai terminal is said to be central to the capesize decline.
    A number of factors in the South American country are seen to be contributing to the sector’s travails after it experienced what is thought to be a record single-day index decline.

    Chief amongst them is the closure of the Itaguai iron ore terminal in the Port of Sepetiba in order for repairs to be carried out following a collision between a bulker and a structure at the terminal in December.

    The 150,700-dwt Nordstar (built 1983) damaged equipment at a pier in the terminal and, although the terminal soon resumed operations, authorities decided to shut it for repair work on 7 January. It is expected to be closed for 20 days from that date which the London broking source estimates translates into about 15 lost capesize cargoes.

    The broker also mentioned a rumour doing the rounds that another terminal near Vitoria could be about to shut for a week while there are also stories that cargo supplies at Brazilian ports have been scaled back.

    All of these perceived problems are causing a “headache for prompt shipments”, the source said, meaning many owners are having to accept poor rates.

    There is a silver lining, however, to the dark clouds for bulker shipping, the source claims. With iron ore cargoes looking set to increase in value by 30% at the end of the current contract at the end of March, a rush of fixtures is expected before this which could boost rates. The broker noted that some time last year the taps on iron ore cargoes were temporarily turned off sending the market plummeting but were soon turned back on which saw the market surge again.

    Also, although there are a number of vessels slated to come out of the yards and on to the market this year, the broker believes the number “is going to be nowhere near the demand for them.” Consequently, although the dry-bulk market appears in the doldrums at present, “it is bound to come back again,” the broking source contends.

    Significantly the broker sees the average rates in the bulker market still being maintained above figures from a year ago leading to the contention that “these are still the good times.”

  22. 22
    TTupp Says:

    nat upped today at ubs

  23. 23
    Nicky Says:

    What are the Fed waiting for then – they said they were ready to act yesterday so why don’t they get on with it? I personally don’t think it will make any difference long term if they cut rates to zero but not sure why they aren’t doing it right away.

  24. 24
    zman Says:

    Sam – oil is starting to rally a little on that …

    Bill – good to see you … any thoughts for Scoop on DRYS today… I saw little news, just think its a bounce but maybe its a rumored piece in BW.

    Energy trying to go green despite the DJIA.

  25. 25
    zman Says:

    Nicky – re RBOB – yeah looks like its finally breaking down on the last couple of weeks of negative storage news (big builds). Taking a much worse hit than oil. If utilization remains 90+% for the next three weeks before the Spring switch to gasoline make happens we should see more big builds in gasoline stocks – not pretty with oil this high.

  26. 26
    Sambone Says:

    This is sick!!!!!

    Countrywide’s Mozilo Entitled To $115 Mln Severance -Report

    DOW JONES NEWSWIRES

    Countrywide Financial Corp. (CFC) founder Angelo Mozilo is entitled to $115 million in severance-related pay if his troubled company is acquired by Bank of America Corp. (BAC), The Los Angeles Times, citing regulatory filings, reported Friday.

    The newspaper said free rides on the company jet are also included in Mozilo’s departure deal, and the company will pick up his country club bills until 2011.

    Neither Mozilo nor Countrywide officials returned calls for comment, The L.A. Times said.

    Bank of America Friday agreed to buy Countrywide in a $4 billion all-stock deal. The L.A. Times said if the takeover is completed, Mozilo could potentially stay on with the company. But compensation experts say he could probably make more money by leaving, since Bank of America is unlikely to pay Mozilo more than its own chief executive, Kenneth Lewis.

    Lewis earned $27.9 million in 2007, according to regulatory filings. Mozilo earned $48.1 million last year, the L.A. Times reported.

    If Mozilo is fired or resigns voluntarily, his employment contract guarantees him three times his base salary, plus a cash payment equal to three times the amount of whichever is greater: his average bonus over the last two years or his bonus from the previous year, according to the L.A. Times, which it said would add up to $87.9 million.

    In addition, Mozilo has two pensions that his severance pact gives him the right to receive as a lump sum upon his departure. Those pensions were worth $24 million as of December 2006, the last time the company was required to report their value.

    Finally, Mozilo would be eligible for accelerated payment of stock options and stock grants if the buyout goes through. Those are worth at least $3 million at current market prices, estimated Richard Ferlauto, director of pension and benefits policy at the American Federation of State, County and Municipal Employees.

    Altogether, according to the L.A. Times, the severance package is potentially worth $115 million.

  27. 27
    zman Says:

    Remember when Mozilo got ticked over an analyst saying CFC might go bankrupt? Guess Mozilo was right about that being preposterous, lol. He knew about his parachute all along.

  28. 28
    freeflow Says:

    VLO and SUN puts still a good trade now Z?

  29. 29
    zman Says:

    FF – between now and earnings (late Jan) I don’t expect much improvement. Best to pick em off on an up day as you know. That could in fact be today as crude is still sneaking up on being green while the market is in the funk.

    Just read a pretty good piece Denise sent me by a good trade at the Street (sounds like an oxymoron but in this case his credentials are solid). He was saying to bottom fish the group as of 1/4/08. He’s a little early (obviously given the recent pounding) but his thinking is solid.

    I see no reason to get back long the group until the day of the announcements: read the PR, listen to the call and then decide. Cracks are not compelling here and though the author points to summer cracks that are compelling which would indicate a change is coming, that may take some time and as I indicated above, we could see some more big builds in gasoline stocks which are starting to become the more important product again.

    I think the maintenance season will be an extensive and extended one this spring. Again, cracks aren’t compelling so if you ran one of these facilities and had been putting off maintenance projects since Katrina due to the need to get product to market (as many of these sites have been) then now is the perfect opportunity to get some things fixed, squeezing supply and sending cracks up. That starts at about the same time as 4Q numbers come out.

  30. 30
    apbd Says:

    My mother told me to go into banking. I didn’t listen.
    apbd

  31. 31
    Denise Says:

    Still long and wrong but another reason to hold your nose and buy
    40% BEARS in aai survey-alltime recoed high(recoerd only going back to 93 but)
    hmmmm…
    send me a email and will send refiner piece-if you want sknitch@earthlink.net
    notice mer positive on bad news

  32. 32
    Denise Says:

    sorry spelling challenged
    record of course

  33. 33
    bill Says:

    Dry stocks still rolling

    The Baltic Dry Index (BDI) suffered its biggest single day decline since 1989 Friday as the market continued to soften but bulker owners’ share prices appear to be holding firm.

    Dry shipping stocks are currently the best performing on TradeWinds Shipping Index, with dry bulk owners boasting an overall gain of 3.69% despite the BDI dropping a massive 384 points today.

    By contrast listed tanker companies are showing an overall climb of 0.48%, with cruise and ferry operators a collective gain of only 0.16%.

    US-listed bulker owners are the best performing at the time of writing with George Economou’s DryShips leading the field with shares showing a 5.43% rise to trade at $62.87 each.

    Diana Shipping ($26.00 per share), Excel Maritime Carriers ($31.98 per share) and OceanFreight ($17.76 per share) were also on the up, with their respective stock showing gains of 4.38%, 4.34% and 4.29% at the time of writing.

    z– i still like drys and im still in it

  34. 34
    bill Says:

    re drys

    they will still do 5 bucks for q4 and probably close to the same # for q1.

    they will still be the most profitable dry bulker and rates ( albeit much lower) are still double y-o-y

  35. 35
    bill Says:

    panamax rates

    do you see a problem with this chart?

    http://www.ssyonline.com/_datas/Tempimages/164444.png

  36. 36
    zman Says:

    FSLR reversing the morning gains while YGE moves higher.

    Hear ya Bill … I’m looking for a U-shaped bottom and won’t trust any V-shaped one unless there is solid, catalytic news.

  37. 37
    bill Says:

    Despite some softening in freight rates towards the year-end, the dry freight market ended 2007 far above the levels seen this time last year.

    On the last trading day of the year (24 December), the Baltic Exchange Dry Index stood at 9,143 points, more than double the year-ago reading of 4,397 points. The BEDI averaged 7,071 points during 2007, almost 4,000 points higher than the 2006 average.

    The 4 Capesize TCs finished the year at $157,128/day, up 132% on the end of 2006, while the Panamax 4 TCs closed at $66,716/day, marking a year-on-year rise of 94%. The average of the 5 Supramax TCs ended 2007 at $60,828/day, twice the end-2006 level.

    The BPI, BSI and BHSI all peaked at the end of October, with the average of the 4 Panamax TCs climbing to $94,977/day. The 4 Capesize TCs did not reach their all-time high until November 15, when average earnings reached $194,115/day. This was powered by massive gains on fronthaul voyage earnings, which surged to $253,792/day in mid-November.

  38. 38
    zman Says:

    Bill – forgive me but what are fronthaul voyage earnings?

  39. 39
    bill Says:

    there are alot of cheap stocks out there.

    one of my favorites is tops– a tanker company expanding into dry bulk

    I attended their road show and the ceo presented a slide showing nav at 7.04 per share.

    Most tanker stocks are trading at a premium to nav and tops is at a measly 3.12 per share.

    i dont see much down side risks although i expect them to report a 20 cent q4 loss

  40. 40
    bill Says:

    the front haul is the first leg of a voyage.

    ie (austrailia to china importing coal.)

    The ship then returns back (backhaul) to austrailia at a cheaper rate

  41. 41
    kaman Says:

    re: #39….Tops = TOPT?

  42. 42
    Sambone Says:

    11:13 am EST

    Nymex Crude Pares Loss After Gold Rally

    By GREGORY MEYER
    Of DOW JONES NEWSWIRES

    From MARKET TALK:
    [Dow Jones] Nymex crude trims losses, briefly crossing into positive territory, as traders reconsider two days of losses, ponder a tanker fire linked to militants in Nigeria and gold reaches $900 an ounce. “That’s pretty big psychologically,” Michael Cambria of Eagle Futures says of gold’s $900.10 peak. “That could be pulling some of the bulls back into crude.” Nymex Feb crude -24c at $93.47/bbl. (greg.meyer@dowjones.com)

  43. 43
    Sambone Says:

    Soaring Oil Price Widens US Trade Deficit In Nov

    By JEFF BATER
    Of DOW JONES NEWSWIRES

    WASHINGTON — A record oil price widened the U.S. trade deficit in November to its biggest in 14 months, signaling trade gave just a token boost to the economy at the end of 2007.

    US Import Prices Post Record “07 Gain; Prices From China Climb

    US November Trade Gap Widens To $63.12B As Oil Prices Soar

    The U.S. deficit in international trade of goods and services surged by 9.3% to $63.12 billion from October’s $57.77 billion, the Commerce Department said Friday.

    Trade is a component of the economy, but it’s unlikely there will be much support from the sector during the quarter that ended Dec. 31, analysts say.

    “The net foreign trade add to Q4 GDP growth will be substantially blunted,” said Ken Mayland, who runs an economic consulting firm.

    In the third quarter, gross domestic product grew a stunning 4.9%; of that, the trade component of GDP contributed a sizable 1.38 percentage points. But available fourth-quarter data show the trade deficit widening in October and in November. The $63.12 billion deficit during November was the largest since $64.15 billion in September 2005.

    “Based on these numbers and our December forecasts, we think trade will make a minimal contribution to Q4 growth, which looks likely to be in 1.5-to-2% range,” High Frequency Economics analyst Ian Shepherdson said.

    The November trade deficit exceeded Wall Street expectations. The median estimate of eight economists surveyed by Dow Jones Newswires was a $59.75 billion shortfall.

    “Our own GDP forecast for Q4 has international trade adding about 0.5 (percentage point) to overall growth in the span, and therefore today’s data points to downside risk to our estimate of about 2.5% real GDP growth in the quarter,” MFR Inc. analyst Joshua Shapiro said.

    The U.S. in November paid a lot more for crude oil imports, with the value of purchases rising to $24.17 billion from October’s $22.92 billion. The volume of oil bought from overseas actually fell, sinking to 303.41 million barrels from 316.18 million. But the average price per barrel soared, rising by a record $7.16 to $79.65, also a high, the Commerce Department reported.

    “The trade balance deteriorated sharply in November, primarily, but not exclusively, because of soaring oil prices,” Insight Economics analyst Steven Wood said. “Despite this month’s sharp deterioration, on a trend basis exports have been growing more strongly than imports.”

    U.S. exports in November climbed 0.4% to $142.31 billion from $141.68 billion. Sales abroad of autos and parts increased $467 million. Sales of industrial supplies rose $193 million. Food, feed, and beverages went up by $427 million. Capital goods, including airplanes, tumbled $903 million. Consumer goods exports fell by $115 million.

    “Exports are booming because of the ongoing strength in the global economy combined with a weakening dollar,” Wood added.

    U.S. Trade Representative Susan C. Schwab said opening markets and growing trade helps the U.S. “Such trade expansion raises U.S. productivity, generates income growth, and increases the number of higher paying U.S. jobs,” she said. “Ninety-five% of world consumers are outside our borders. Global, regional and bilateral trade agreements help assure that these consumers will increasingly buy products and services made in America.”

    U.S. imports in November increased by 3.0% to $205.43 billion from $199.45 billion. Oil played a big part, but consumer goods imports also rose, up $796 million. Purchases of foreign-made capital goods such as telecommunications equipment increased $162 million. Food and feed imports rose $172 million. Auto and related parts imports climbed by $134 million.

    “My expectation is that export growth will pick up from Q4’s sluggish pace, fueled by foreign growth and great competitiveness (a cheap dollar),” Ken Mayland said. “Meanwhile, import growth should remain in the dumps due to lackluster consumer spending, as much what the consumer buys is imported.”

    A separate, Labor Department report on the economy Friday showed U.S. import prices made the largest calendar-year increase on record during 2007.

    The 10.9% surge was way above the 2.5% gain registered in 2006.

    For December, import prices were unchanged, after rising 3.3% in November. Petroleum import prices fell 0.6% last month compared to November — yet were 50.1% higher on the year.

    Excluding petroleum, import prices rose 0.3% in December and were up 2.9% on the year, the largest calendar-year increase since 2004.

    “Outside of the energy complex, imported goods inflation remains moderate, but is still putting modest upward pressure on both producer and consumer prices,” Insight’s Wood said.

    The government releases more closely watched U.S. producer and consumer price data next week.

    (Brian Blackstone contributed to this story).

    —By Jeff Bater, Dow Jones Newswires

  44. 44
    ram Says:

    Final chapter in my rental home that went through foreclosure: Finally a rep from the mortgage co. knocks on the door to see who’s there (bank has not been paid a dime since May, 2007). Realizing there are renters, they offer “cash for Keys” to get the house ready to list. They, Chase MTG., had no interest in me paying rent or buying. The cash was enough to pay for movers, cover the next rental, and add a healthy cash infushion for little ram’s college fund. If this is the rule, then banks are bleeding heavier than my worst scenario!

  45. 45
    Sambone Says:

    Ram – You wouldn’t know that watching todays action in the Financials. MER will write off 15 Billion and it’s up almost 5%. Go figure.

  46. 46
    zman Says:

    Ram – that’s just ugly.

  47. 47
    zman Says:

    Nat gas starting to fall out of bed a little

  48. 48
    zman Says:

    FF – nevermind the earlier comment about the refiners maybe going positive later today…just don’t see it happening. Besides these charts look horrible, no news could turn the group except for an acquisition and we’re not to levels that someone is going to make a play yet. If VLO goes through $60 that could be the last nail in a another $5 drop shaped coffin

  49. 49
    zman Says:

    TSO chart has rarely looked worse to me.

    VLO – To find a close lower than here ($60.30) you have to go back to the high $40s in Jan-07.

    SUN same story, but last close below current level ($61.50) is $57 and then nothing for a lot of space.

  50. 50
    bill Says:

    39

    yes topt changed its name from top tankers to top ships and the symbol changes as well to TOPS from TOPT

  51. 51
    zman Says:

    Sam – guess they thought MER could be worse than a mere $15B. Of course, we know it will be but today, hey, what’s $15 B anyway these days? Chump change, right?

  52. 52
    Sambone Says:

    MER = 20% value gone, and the stock is up. Makes sense to me! I guess the crowd thinks it’s all over now. JPM is gonna buy WM. Hmmm, smells like Paulson is working the phones.

  53. 53
    zman Says:

    ZTRADE: FLSR Jan $200 Puts for $3.00 (again, pretty risky trade)

  54. 54
    Sambone Says:

    US Crude Demand Growth To Contract In ’08 — Goldman

    Dow Jones Newswires

    LONDON — Goldman Sachs expects U.S. crude oil growth to contract by 50,000 barrels a day in 2008, a result of slowing U.S. economic growth.

    “We expect U.S. oil demand growth to contract by 50,000 barrels a day on average in 2008, 150,000 barrels a day below our prior forecast,” it said Friday.

    The bank had previously forecast U.S. oil demand growth would expand by 100,000 barrels a day in 2008.

    But despite slowing demand growth in the U.S., oil demand growth elsewhere is likely to keep oil prices supported in 2008, it said, and the bank maintained its average 2008 WTI crude oil price forecast at $95 a barrel.

    “Although the increased concerns about the economy raise the risk of a significant price decline due to investor liquidation, we believe that on a fundamental basis prices will remain well supported,” Goldman said.

    Oil demand growth in Organization of Economic Co-operation and Development countries is expected to grow by 250,000 barrels a day in 2008, Goldman said, while world oil demand as a whole is expected to grow at its fastest pace since 2004 “as the OECD returns to normal winter weather and the non-OECD countries remain a strong engine of oil demand growth.”

    Supportive of prices, the Organization of Petroleum Exporting Countries is likely to forego a decision to increase supply levels given lower potential demand associated with a U.S. economic downturn, Goldman said. OPEC is next due to meet Feb. 1 in Vienna.

    Meanwhile an escalation in oil industry costs continues to support longer-dated crude prices amid talk of a recession, Goldman said.

    “This ongoing structural support for oil prices will likely continue to provide support to prices in the face of the forecasted U.S. economic recession,” it said.

    Economists at the investment bank Wednesday predicted the U.S will experience a brief recession in 2008, as the U.S. housing slump and credit market turmoil spills over into the broader economy.

    —By Nick Heath, Dow Jones Newswires

  55. 55
    freeflow Says:

    VLO is teetering on 60…

  56. 56
    Denise Says:

    I have been pondering the forward e in Drys. Notice quite a lot of action in the options. Can anyone shed some light on what might be going on? The Jan 70’s 65’s calls and Jan 55 put’s

  57. 57
    Nicky Says:

    not quite sure how they are going to stop the bleeding today…

  58. 58
    Nicky Says:

    but spx has support at 1398 – 1400

  59. 59
    Nicky Says:

    SPX looking much stronger than the Dow which looks awful thanks to American Express. The divergence may be a good sign although this needs to turn around and fast.

  60. 60
    Nicky Says:

    CNBC reported earlier that the market is now pricing in a .75 cut by the end of January and that they think we will get a cut before then.

  61. 61
    Sambone Says:

    I’m short somewhat, but I’m going real short if the S&P closes below 1364.

  62. 62
    Sambone Says:

    Wow, check out DBA today.

  63. 63
    zman Says:

    Back from lunch with a hedge fund transportation analyst.

    Observations: drybulk sell off is way overdone. Thinks these explode as soon as China iron ore negotiations are done which likely before Chinese NY, Feb 8.

    Liked DRYS and has well over $20 earnings for 2008 which is over the Street, was closer to $30 before rates dipped.

    Likes FREE – a handymax co.

  64. 64
    Denise Says:

    Interesting to listen to Canadian Business news while waiting to hear D Kass go over his top 10 suprises for 2008.
    Wish CNBC was more like it-they actually let the guests have time to speak and finish a thought(of course it is energy heavy and biased-everyone on Z’s site should enjoy)
    For those of you that want to get to Mr K he is at the end around minute 35
    http://broadband.bnn.ca/bnn/?id=2223&vid=26235

  65. 65
    Nicky Says:

    Its tricky here as we are oversold but one can also argue that crashes often come when the market is oversold. It feels like the market is standing on the edge of an abyss.

  66. 66
    zman Says:

    Big options volume in CHK FEB again with the stock up (both puts and calls)

  67. 67
    zman Says:

    FSLR back into the teens with YGE up. Me like to see the high multiple stocks take it on the chin here and not the simple wholesale slaughter of the group.

  68. 68
    zman Says:

    Sambone – got notice of #54 from you at lunch and about dropped my drink. Mixed message of U.S. contracting while the world is growing at “fastest pace since 2004” Hmmmmm. Could it be that the OPEC countries are going to increase their own consumption that much or is this just a private signal to sell and the fact that they didn’t lower the target for the year was a means of not having it happen before clients could ease out?

  69. 69
    scoop006 Says:

    Z Can you explain what is going on with PBR calls

  70. 70
    zman Says:

    Scoop – how do you mean?

  71. 71
    scoop006 Says:

    Volume of deep in the money calls.

  72. 72
    zman Says:

    Sorry, had my front month set to Feb so I missed those Jan’s. Wow! Somebody taking big bet it rallies next week. I’d bet half the volume is sold to pay for it.

    Check out the refiners – ouch … lol.

  73. 73
    Sambone Says:

    3:19 pm EST

    Nymex Crude Undercut By Economy Concerns

    By GREGORY MEYER
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures slid to their lowest close in three weeks Friday as traders looked past supply threats to focus on looming softness in demand.

    Light, sweet crude for February delivery fell $1.02, or 1.1%, to settle at $92.69 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange dropped $1.10 to $91.12 a barrel. The Brent settlement price wasn’t immediately available.

    The market responded numbly to a Nigerian rebel group’s statements it received the help of people in the energy industry and Nigeria’s intelligence services in planting an explosive device that the group claimed led to a fire on a tanker in the oil exporting center of Port Harcourt.

    Reports of Turkish artillery fire inside oil-producer Iraq, part of an ongoing campaign against Kurdish rebels operating there, also did little to hold up prices.

    Instead traders worried over the implications of slowing demand for oil in the U.S., which consumes a nearly a quarter of world oil supply, as a parade of economists suggest an economic slowdown or a recession is imminent.

    “If anything, the market’s failure to rally on events like the tanker attack, or the prospect of future interest rate cuts to forestall an economic downturn, helps underscore the extent to which the market has turned bearish,” Citigroup energy analyst Tim Evans said in a client note.

    Federal Reserve Chairman Ben Bernanke said Thursday he saw “more pronounced” risks to the economy, though he doesn’t expect a recession, and signaled he’s open to aggressive interest-rate cuts. On Friday some of his remarks were echoed by Fed Governor Frederic Mishkin, who said the Fed needs to act in a “timely, decisive and flexible” manner in response to financial shocks.

    Economic fears also sank U.S. equities, with the Dow Jones Industrial Average down triple digits.

    Despite this week’s retreat, front-month Nymex crude is trading 79% higher than a year ago. Several analysts have recently reiterated that oil in 2008 will top last year’s prices.

    In a report Friday, Deutsche Bank chief energy economist Adam Sieminski revised his 2008 average price forecast for West Texas Intermediate crude up $5 to $85 a barrel.

    “One key factor that offers compelling new evidence that out longer-term energy price forecasts need to be revised higher is rapidly increasing finding and development costs,” Sieminski said, referring to the costs of discovering and exploiting oil reserves.

    Sieminski said declines in oil prices have historically followed lower demand for oil products such as gasoline or diesel, improvements in seismic and drilling technology and better access to petroleum reserves.

    “A repeat of this confluence of events is certainly possible, but seems improbable over the course of the next few years,” Sieminski said, partly because oil demand growth is flourishing in Asia and the Middle East and thus less susceptible to downturns in the West.

    Goldman Sachs on Friday revised its forecast for 2008 U.S. oil demand growth downward by 150,000 barrels a day. But the investment bank’s commodities analysts left unchanged a prediction that benchmark West Texas Intermediate crude will average $95 a barrel and reach $105 a barrel a year from now.

    The analysts said oil demand in industrialized countries, steady output quotas from members of the Organization of Petroleum Exporting Countries and industry cost escalation will remain supportive of prices.

    OPEC is next expected to discuss its output levels at a meeting Feb. 1.

    Front-month February heating oil fell 2.14 cents, or 0.8%, to settle at $2.5359 a gallon. February reformulated gasoline blendstock, or RBOB, dropped 3.98 cents, or 1.7%, to $2.3203 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  74. 74
    ram Says:

    I wish the FED will act so I don’t see another “Fed to act decisively to counter turmoil” banner on websites!

  75. 75
    Denise Says:

    Ram-Paulson was on Bloomberg about 40 minutes ago saying time was of essence for stimulus package
    This leads me to believe a cut soon

  76. 76
    zman Says:

    ZTRADE: Out VLO $65 Jan puts for $5.50, up 67% in two days. I’ll short them again after the rate cut and with February strikes.

    Will hold the SUN puts through the weekend.

  77. 77
    zman Says:

    CFTC shows slight cover in natural gas and a slight sale by the longs as well…net, net we remain very short.

  78. 78
    Sambone Says:

    Tini time!!!

  79. 79
    zman Says:

    Beer Thirty!!!

    Can they cut rates on the weekend? If I don’t chat with you over the weekend have a great one!

  80. 80
    ram Says:

    Thank you Denise.

  81. 81
    Nicky Says:

    I am not sure I have ever seen them cut at a weekend Z. But if Asia is down hard on Sunday night and it looks to be opening up like a bloodbath on Monday it may happen. If they are going to do it it better be soon or else they are pretty closed to the next meeting anyway.

  82. 82
    zman Says:

    Nicky – I was sort kidding but I agree with you, they will need to do it very soon. Maybe before the open monday if Asia is knifing lower. Ben not going to sleep much this weekend but that’s ok since he’s been asleep at the wheel for so long.

  83. 83
    Nicky Says:

    LOL Z – I am kind of surprised it didn’t happen today. There was talk that he may wait to see next week’s inflation numbers. That said yesterdays speech from him I read as they were going to get super aggressive with rate cuts so what are they waiting for??? There is a Bradley turn Monday afternoon……

  84. 84
    TTupp Says:

    this is hilarious. remember last week when i said how all we needed for fslr to get wood shedded was a motley fool article? just like what broke drys? well here it is hahhaa. this is great……… spill the blood!

    http://www.fool.com/investing/value/2008/01/03/avoid-these-awful-stocks-in-2008.aspx

  85. 85
    aaatest Says:

    T – that is the most non-sensical logic I’ve seen the truly motley fool employ. Comparing them to Intel is dumb, comparing them to their peers, which they best in terms of efficiency, is absent from the story. But, since I’m short due to their big run up and valuation I’ll laugh all the way to the bank on this. We should coin a term for when they do a hatchet job piece like this like “they’ve been motleyed” or “they’ve been dry shipped!” LOL. Gad I doubled down here Friday.

  86. 86
    TTupp Says:

    actually i agree with the logic, but only with respect to the idea that they all manufacture something that is becoming commoditized.

    in fact they do not have any clear durable copetitive advantage (only vague ones), thus not justifying the outrageous multiple. there are ways of having a better company through smarter management doing things like locking in cheap polysilicon for a few years or finding more efficient ways to manufacture wafers ect, but the story stops there. they will only be dominant until the next company comes along and switches production to a lower labour cost country, and threfore becomes the next company to win all contracts. (forgive my spelling im using crap MS internet explorer). imho lol

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