19
Sep

Fed Up Friday

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Green day in the offing:

  1. Resolution Trust style fix is in the works to buy mortgage backed securities and de-leverage the financial institutions. 
  2. Treasury to guarantee money market funds, This is essentially designed to forestall a "run on the bank" that we saw the beginnings of yesterday after one fund "broke the buck" earlier this week. Press conference at 10 EST.
  3. The SEC has placed a temporary ban of short selling of 799 financial institutions through October 2. The SEC is also looking into bringing back the uptick rule and forcing institutions to verify that securities have indeed been borrowed prior to selling short (to eliminate naked shorting).  The short's life is getting more difficult. See a list of energy sector short interest below.

Some impacts of the above include

sharply rising index futures and world stock markets (Russia closed up 20% yesterday...maybe they should only be open 1 day a week),

falling gold (it's now being dumped as a source of funds for re-entry into the equity markets),

rising financial sector stocks across the board (duh) as the biggest short squeeze in the history of market kind begins,

a jump in the dollar as the yen which had been seen as the "safe currency" over the last few days is now abandoned,

higher oil (hmmm, that must be geo-political given the dollar move and oh yes, the fact that oil has fallen out of bed and perhaps the moves taken by the Fed/Treasury/Congress overnight will lead to an ecnomic recovery (don't laugh) over the medium horizon which would mean "demand construction".

Oil also may be up due to the anemic energy bill being touted in the halls of Congress which will do little to get the U.S. "off foreign oil" but will serve as talking point for Congressional leaders on the Sunday morning shows.

Finally, energy stocks are trading higher as well. Not as much as the financials but hey, its still ok to short our group and if you look at the attitude of Congress even encouraged. Keep it up Nancy and you'll be a) walking and b) in the dark (ok more in the dark). As she said earlier this week, there is incentive to drill if oil is over $35...she just didn't say where (Saudi, Iran etc).

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stocks We Care About Today
  4. Natural Gas Weekly Storage Review
  5. Odds & Ends

Holdings Watch: The Wiki Holdings tab is updated

  • (DIG) - Exited the DIG $66 September Calls (DHBIN) for $3, up 58%.
  • (HK) - Added the HK $22.50 September Calls (HKIX) for $0.50.

Commodity Watch:

Crude oil rose $0.72 to close at $97.88. Early in the day crude topped $101 briefly but could not hold onto the century mark as the dollar began to rally. This morning oil is rising back above $100 as Shell indicates earnings are going to take a hit after further hostilities in the past week.

  • Nigeria Watch: Nigeria claims up to 150,000 bopd have been shuttered by renewed hostilities with MEND in the last 6 days. MEND claimed to have blown up another pipeline (Cawthorne Channel) in the Rivers state on Thursday, a claim operator Shell has not yet confirmed. 
  • Refinery Watch: Exxon is on the tape saying its 349,000 bopd Beaumont, Tx refinery sustained "some water damage". You heard it here first on Sunday (thanks Bleemus!). And I quote:

Friend who works at XOM Beaumont refinery said “was under 8 feet of salt water, probably be shut down for months”.~ Bleemus

This is a big refinery and these kind of things can skew products vs crude in the region and beyond through completion of repairs because despite all the slack demand (and moreover, all the talk of slack of demand), capacity for refined products remains extremely tight in the U.S.. No details for repair and restart were available at the time of posting.

Natural Gas fell $0.29 to close at $7.62 after the EIA reported a bigger than expected injection to gas storage. I have been thinking gas is trying to bottom out in the $7.00 to $7.50 level. After a couple of days of flight to commodities due to financial market fears gas had run too far for the fundamental/sentiment related weight that burdens it at the present time. See the storage review below.

Ike Damage Update and Impact:

  • 49 platforms destroyed...still does not add up to a lot of production (13,000 bopd and 84 MMcfgpd)
  • Still Shuttered Production as of Wednesday
    • Oil: 93% shuttered
    • Gas: 78% shuttered

 

Stuff We Care About Today:

PQ Announces Minimal Ike Impact. (PQ) announced a minor amount of damage to one platform and indicated that 2/3rds of its offshore production is offline and the timing of reestablishing production will be contingent upon the ability of third parties (pipelines and processing) to get back in business. You are going to see a lot of Gulf Coast players miss top line and  volume numbers by a small amount in the third quarter and my sense is that the producers will be granted a "get out of jail free" pass for this meaning the Street generally does not hold the storm related miss against the stocks unless it has ongoing impacts.

Short Squeeze? Just a quick list of short interest in the energy sectors:

 

Natural Gas Storage Report Review: In a nutshell, the EIA reported an injection of 65 Bcf, I was at 67 and the Street was at 61 Bcf. Gas did not like the number however I think gas storage levels will take a backseat to fears of a gas glut and then winter weather in coming weeks so that even better than expected numbers will likely be met with a muted price response.

As you can see from the following table, average injections from current storage levels to the end of the traditional storage season would yield peak storage of 3.3 Tcf (trillion cubic feet) which would be somewhat bullish. Add one or two Bcfgpd due to the higher production to reflect the incremental YoY net change in supply and you can see peak storage gets to 3.4 Tcf using the average number and 3.5 Tcf if we see maximum historic injections plus another 2 Bcfgpd. 3.5 Tcf would definitely put a cap on prices until we see some extreme cold take an extended stay in gthe U.S.

 

Odds & Ends

Analyst Watch: (SD) started at UBS at Buy, (MUR) upped to Neutral at UBS,

 

 

114 Responses to “Fed Up Friday”

  1. 1
    Sambone Says:

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Crude prices climbed more than $2in tune with a rebound
    across European equity markets Friday, after measures designed to help contain
    the recent turmoil in financial markets boosted sentiment.
    Reports that the U.S. government is considering creating a mechanism to take
    bad assets off the balance sheets of financial companies, alongside a temporary
    ban on the short selling of financial stocks implemented by U.S. and U.K.
    regulators, helped a rally in financial stocks, the source of much of the
    turbulence in recent weeks.
    “The ban on short-selling plus (U.S. Treasury Secretary) Paulson indicating
    that they are looking at a plan to take toxic waste from the banks is helping
    sentiment,” said Olivier Jakob, managing director of Swiss consultancy
    Petromatrix. “Banks also have strong commodity exposure. The risk of banks
    collapsing is much lower today.”
    At 1125 GMT, the front-month November Brent contract on London’s ICE futures
    exchange was up $2.20 at $97.39 a barrel. The front-month October light,
    sweet, crude contract on the New York Mercantile Exchange was trading $2.32
    higher at $100.20 a barrel.
    The ICE’s gasoil contract for October delivery was up $15.75 at $915.75 a
    metric ton, while Nymex gasoline for October delivery was up 365 points at
    251.89 cents a gallon. “In the last couple of days many were very skeptical
    of the outlook for the global economy but now, when the U.S. says ‘OK, let’s do
    anything to hold up the financial system’ maybe people think it’s not going to
    get that much worse, maybe the economy is not going into recession globally,
    and that will support global oil demand,” said Andy Sommer, analyst at HSH
    Nordbank in Hamburg.
    Soldering hopes that further financial market unrest may be avoided, the U.S.
    Securities and Exchange Commission announced an emergency action early Friday
    to temporarily prohibit short selling in 799 financial company stocks. The
    latter followed similar action by the U.K.’s Financial Services Authority
    Thursday.
    Meanwhile, U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman
    Ben Bernanke are expected to work with congressional leaders through the
    weekend on a plan to tackle the issue of illiquid assets on bank balance
    sheets, the problem at the root of financial markets’ concerns.
    Despite crude’s initial reaction higher Friday, some urged continuing caution,
    suggesting that volatility across all markets is likely to continue,
    particularly while the latter plans’ details are finalized.
    “We would therefore resist buying any commodities for the time being,
    especially on any ‘feel-good’ bounce emanating from equities, since the markets
    are still in too fragile a state to allow rallies to hold,” said Edward Meir,
    analyst at MF Global in New York.
    Market participants eyed a fresh climb in the U.S. dollar Friday as a
    potential source of downwards pressure on crude prices. Strengthening in the
    greenback against most major currencies has helped suppress crude prices and
    remains a risk of further such pressure.
    “Buying oil on the equity rebound needs to be weighted against the climb in
    the dollar,” said Petromatrix’s Jakob.
    Turbulence in financial markets has overshadowed and largely muffled the oil
    price impact of new attacks this week by Nigerian militants on the country’s
    oil producing and logistics infrastructure.
    Nigeria’s main militant group, the Movement for Emancipation of the Niger
    Delta, late Thursday said it had bombed a Shell-operated crude pipeline at the
    Elem-Kalabari Cawthorne Channel axis in Rivers state, one of Nigeria’s main
    oil-producing states. The attack was the latest in a series of blasts since
    Sunday.
    Nigerian Oil Minister Odein Ajumogobia said Thursday the attacks earlier this
    week have shut around 100,000 barrels a day in crude production.
    Despite the disruption to supply in Nigeria, coupled with that interrupted due
    to hurricane activity in the Gulf of Mexico, the oil markets remain preoccupied
    by the turmoil in the financial markets, some said.
    “The energy market is still well supported by solid fundamentals, despite
    slowing demand growth for oil and its products on the back of waning global
    growth this year. However, the dust on the financial markets needs to settle
    before investors start paying closer attention to supply and demand basics,”
    said Andrey Kryuchenkov, analyst at Sucden Research in London.
    -By Nick Heath; Dow Jones Newswires (Spencer Swartz in London contributed to this item)

    Dow Jones Newswires
    09-19-08 0750ET

  2. 2
    Sambone Says:

    Sept 19 (Reuters) – Oil companies continued work on Friday to revive U.S.
    oil and refining production in the wake of Hurricane Ike, which hit the Houston
    energy hub Sept. 13.
    The following outlines the impact of Ike and the leftover effects of
    Hurricane Gustav on the energy sector:
    ***************************HIGHLIGHTS*************************
    CUMULATIVE IMPACT OF GUSTAV AND IKE
    *24.20 mln barrels of crude oil cut
    *120.84 bln cubic feet of natural gas cut
    *42.07 mln barrels of refining cut (counting only plants completely shut)
    HEADLINES:
    *Exxon says Beaumont, Tex refinery has water damage
    *Ike destroyed 49 GOM production platforms – MMS
    *Shell fixing Mars, Ursa, W. Delta 143, Cognac
    *Shell’s Eugene Island 397 gas platform toppled
    *Devon DVN: Platforms damaged, some output restored
    *Targa Resources: Some gas plants off four, five weeks
    ***********************CRUDE OIL, NATURAL GAS********************
    HEADLINES:
    *93 pct U.S. Gulf’s 1.3 million barrels per day crude output shut
    Thursday, down from 95.9 Wednesday, MMS says.
    *77.6 pct of Gulf’s 7.4 billion cubic feet per day natural gas output
    shut Thursday, from 82.3 pct Wednesday.
    ******************************REFINING****************************
    HEADLINES:
    *11 of 16 refineries still shut, 17 pct of US capacity
    *13 refineries, 21.8 pct capacity, restarting or at reduced rates
    REFINERIES SHUT: (Texas, Ike-caused unless otherwise noted):
    *BP 467,700 Texas City
    *Calcasieu 78,000 Lake Charles
    *Exxon Mobil 349,000 bpd Beaumont WATER DAMAGE
    *Lyondell 270,600 bpd Houston NEARING RESTART
    *Marathon Texas City MRO 76,000 POWER RESTORED
    *Motiva 285,000 bpd Port Arthur
    *Pasadena Refining 100,000 bpd
    *Total 232,000 bpd Port Arthur
    *Valero 325,000 bpd Port Arthur
    *Valero 245,000 bpd Texas City NEARING RESTART
    *Valero 130,000 bpd Houston NEARING RESTART
    RESTARTING OR AT REDUCED RATE (Texas unless otherwise noted)
    *Alon 80,000 bpd Krotz Springs, Louisiana REDUCED
    *Citgo 300,000 bpd Corpus Christi refinery RESTARTED (DOE)
    *Citgo 430,000 bpd Lake Charles, Louisiana RESTARTED
    *ConocoPhillips COP 300,000 bpd Sweeny IN RESTART n
    *Exxon Mobil 503,000 bpd Baton Rouge, La IN RESTART
    *Exxon Mobil Baytown 567,000 IN RESTART n
    *ConocoPhillips 280,000 bpd Lake Charles IN RESTART
    *ConocoPhillips 247,000 bpd Alliance IN RESTART
    *Placid 56,000 bpd Port Allen RESTARTED nN05310572
    *Shell-Pemex 332,000 bpd Deer Park IN RESTART
    *Valero 100,000 bpd Three Rivers REDUCED
    *Valero 90,000 bpd Ardmore, Oklahoma REDUCED
    *Valero 195,000 bpd Memphis, Tennessee REDUCED
    BACKGROUND:
    *On Sept 15, 24.6 pct U.S. capacity shut down due Gustav or Ike
    ********************ELECTRIC POWER IMPACT*************************
    *Feds: 2.4 million without power in Texas, 5 other states – DOE
    *Transmission restored to Houston refinery row
    **********************PORTS, WATERWAYS****************************
    HEADLINES:
    *164 ships wait to enter Houston, Galveston, TX City
    *Houston channel open during day most of its length
    *Freeport partly open; Beaumont-PA, Lake Charles limited
    *LOOP at full rates to customers
    *********************PIPELINES, GAS PLANTS************************
    HEADLINES:
    *Henry Hub lifts force majeure
    *Destin pipeline: Levels OK for normal ops at gas plant
    *Enbridge: Ike caused no big pipeline damage
    *7,700-mile Gulf South pipeline lifts shipper limits
    *Shell: Capline at scheduled rates
    *TEPPCO pipelines at 70 percent
    *Enterprise Products EPD restarts major pipelines
    *Explorer shipping refined products
    *Magellan some damage, partially back
    *Seaway crude line restarts
    *15 U.S. nat gas plants shut, down from 19; 7.31 Bcf
    *9 U.S. gas plants capable of restart when power back
    *14 U.S. nat gas plants at normal or reduced rates
    PIPELINES, OTHER FACILITIES SHUT
    *SPR Bryan Mound, Big Hill, Tex; Hackberry, La,
    *Shell Houston-to-Houma crude line
    *Centennial Pipeline products line
    *Longhorn Pipeline products line
    *Portions of Marathon Pipeline system onshore, offshore Gulf Coast
    *Enbridge EEP: Four pipelines force majeure
    REDUCED RATES
    *Plantation pipeline at reduced rates
    *Colonial restarts distillate line after Ike, mogas down
    (Reporting by Bruce Nichols, Erwin Seba; Editing by Richard Valdmanis)

    Fri Sep 19 12:32:38 2008 -GMT

  3. 3
    BirdsofpreyRcool Says:

    z – most excellent commentary this morning. thank you!

    especially like your adding the energy short list. at the end of the day yesterday, we (think we) saw programmed buying of names on the SHO list. i would expect that to continue.

  4. 4
    Nicky Says:

    Morning all.

    Broader market panned out almost to perfection yesterday (was everyone puking as wave v looked liking it was taking us into the abyss yesterday?). I had cited 3 levels on the downside for the spx to find support, 1153, 1134 and 1120 – the middle one did it exactly. On the Dow I had said 10583, 10650 and we hit 10488 so I clearly need to brush up on being more accurate there!

    Cycles were expected to bottom between 19th and 22nd September plus or minus a day. So yesterday was in the time frame and then I said expect a huge rally (so far so good). First cycle high is due 1st October – again plus or minus a day -interestingly the short selling rule comes off on the 2nd October. 1270 spx looks like a possibility today and then expect a correction to the 1220 – 30 area.

    Slightly further out – a more important top is due end of October time.

    Oil – two days since I have commented on this and quite a lot of movement in between. I had thought it looked bullish when at 98, last comment I made was that it would then pullback to 96 – went just below – and then we went up to 101.60 before seeing a retracement. The move up from the 90 area does not look particularly bullish to me – more of a sideways consolidation although I was looking for a rally which we are seeing.

    Gold – wow!
    Went higher than I thought although did intitially pull back from the 893 fib area that I mentioned. Throw that out of the window and lets head for 922 in a heartbeat. As everyone can see gold is nuts right now and whilst the overall direction is panning out right one can be out by 50 points! I actually think the top is in again and we have seen i down to 825 area overnight and now are retracing that in ii up. Possibly could get back to 890 area. Interesting to me that gold is going back up as I write – why do we need a safe haven now all is right with the world?!?!?! That said if this count is correct and we do not take out yesterdays highs then I am expecting a sharp move back to the downside shortly.

  5. 5
    Dman Says:

    It tells you something about this era that the phrase “toxic waste” is being used in news reports without any need to explain that the nature of this “waste” is financial. Someone beaming down from 10 years ago would think that all the bank offices are having asbestos removal issues or something & would be somewhat puzzled that the world economy was in danger because of it.

    As for banning shorts. If you were holding a lot of financial stock & you thought the only reason it wasn’t going down was the gubmint had banned shorting, what would you do? Or put it another way, would you sell today or maybe wait for Monday to sell? I just find it hard to believe this kind of market wrangling can work long-term. Maybe it just buys time for the more substantive measures (nationalization of most of the finance sector?) to kick in…

  6. 6
    kaman Says:

    Nicky- thanks for ST views on gold

  7. 7
    zman Says:

    Yes thanks Nicky.

    DO quoted up $10. Most everything up 5%+, HK among them so it looks like I get bailed out of the $22.50 trade from yesterday with a nice gain. It will be interesting to see what kind of staying power the group will have.

    Oil now up $4 which is pretty interesting considering the move in the dollar. Could be thoughts that this is the inflection point for the U.S. economy. I’m not saying it is but traders love that sort of stuff.

  8. 8
    zman Says:

    EOG and CLR my best thoughts for strong runs if oil stays triple digits. No hedges beyond 2008 for EOG for oil as they increase the oil % in their production profile. CLR has no hedges.

  9. 9
    tater Says:

    Thanks Nicky lots of nice work there! Thanks Zman nice extra effort as well! You seem to be crushing the street with your injection/withdrawal numbers.

  10. 10
    zman Says:

    Tater – Not so much really, got luck on that one but on the whole I have been a bit too aggressive or gas supply has been a bit stronger than expected. I think gas prices will remain in the this area for awhile until the Street (both sides of it) get a better handle on production growth next year.

  11. 11
    zman Says:

    Dollar up but backing off. Maybe all those new US government obligations are not so good for it after all. Oil now up $5

  12. 12
    bill Says:

    Read something today that company that sold futures to hedge their production might have problems collecting from counter-parties ie if lehman was on the other side

    comments?

  13. 13
    bill Says:

    pva up 32 % lol

  14. 14
    zman Says:

    Bill – it is a concern. I’ve seen some Street research saying it may hit some companies but did not see who. They said risk was pretty limited among the E&Ps (commericals) and that it was more likely going to be on the speculators (non-commercials).

  15. 15
    zman Says:

    HK up 15%, lololol.

  16. 16
    Sambone Says:

    Mother of all short squeezes today. I now think that we have a better than 50% chance of a crash going forward.

  17. 17
    antrimshale74 Says:

    Any ideas on what is going on with CVI?

  18. 18
    zman Says:

    Word of caution. Lots of games being played early today in options land. Intrinsic on those HKIX is over $2 and the bid is $1.15. Careful.

  19. 19
    Eagle Says:

    Agreed Sam. The Feds keep filling up the balloon. It has to pop sooner or later.

  20. 20
    zman Says:

    ZTRADE: Out HK $22.50 calls for $2.25, up 350%.

  21. 21
    Dman Says:

    #18 agreed. Lots of dodgy option prices now.

  22. 22
    bill Says:

    clr up 25 %

  23. 23
    antrimshale74 Says:

    CVR Energy (CVI) – cut in half at the open and down about 15% now. I cannot find any news. How in the heck can anybody be down in this market? Perhaps they still haven’t resolved their cash flow needs.

  24. 24
    Garyinhou Says:

    clr just blew up

  25. 25
    bill Says:

    kwk up 20 %

    i had written options at 25 that were going for pennies looks like my stock will get called away, now

  26. 26
    tater Says:

    Anybody want to see the definition of a short covering rally take a look at Delta Pet DPTR, bottom of page 3

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882&cmd=show%5Bs150804312%5D&disp=O

    But I guess everything looks like that this morning

  27. 27
    QUARRYMAN Says:

    UMMM…. VMC touched 100! hanging around 89 now.

    Can I have a woo-hoo for the QUARRY stocks!

    Q

  28. 28
    Sambone Says:

    Market having a hard time with orders because of volume. I wouldn’t trust most quotes at this time. If your buying or selling use limits.

  29. 29
    zman Says:

    Nice call Q! Need some comps for that one as its well away from my beaten path.

  30. 30
    zman Says:

    Energy group peaked and still back off, below open now.

  31. 31
    zman Says:

    Sam – absolutely. Option spreads are atrocious if anyone is wondering why I’m not playing, that’s part of it, Sam’s comment earlier about the market is part of it, and the euphoria will need a morning rest and re-launch into the afternoon. Things like GDP and GMXR and TI which have those high short interest %’s are wide open on spreads, just about impossible to make a buck right now. Thinking about the CLR pretty hard in here though after a surge to $45 and now pulled back to $39. Dollar is going lower and crude is still over $102.

  32. 32
    tater Says:

    This whole thing is going to fall of its own weight as the short covering ends and then we see the huge lack of real buying. Who wants to buy into a market that was just up huge and is now falling?
    I have to ask, isn’t that what people here are thinking? At what nice price can I sell?

  33. 33
    bill Says:

    nfx a high of 61 is that right?

  34. 34
    tomdavis12 Says:

    Z: Ever follow LINE. Largest stockholder was Lehman. Had to blow out all their position yesterday @ $14. Very good yield.

  35. 35
    zman Says:

    NFX high was $69 back in May/June

  36. 36
    Dman Says:

    If shorting is banned in financials, can you still buy puts? How does the market maker offset their exposure when they sell you a put?

  37. 37
    zman Says:

    Tom – No sorry. I’ve heard of them but that’s about it.

    Dman – I would say yes you can and they will rip the spread accordingly. The short ban only goes to Oct 2 with extensions possible there after. So the shorts will lick their wounds and then reshort less higher then.

  38. 38
    occam Says:

    LINE is Linn Energy, an MLP. Got hit yesterday due to a $68 million counterparty loss on hedges with Lehman.

  39. 39
    bill Says:

    nfx hit hi of 61 today now 38!

  40. 40
    Fred Says:

    Sam – “Paulson indicating that they are looking at a plan to take toxic waste from the banks is helping”

    No incentive for the bank holders to even look at it? It’s all toxic! In which case it snowballs over = crash.

  41. 41
    tater Says:

    I think I have the answer to why Paulson is not answering questions. He is such a superstar that we couldn’t possibly attain a sufficient intellectual level so as to ascertain a question worthy of his time.
    Either that, or he is such an obvious dbag that even the Bush administration knows that too much air time will result in a McCain defeat.
    Good luck today. Time for me to go find my quiet place.

  42. 42
    Sambone Says:

    D – I am assuming (You should never assume) that the Financial puts are gone til Oct 3rd. What a mess.

  43. 43
    zman Says:

    Bill – I show a high of 48 today and that was likely a bad trade.

    Very fast market although option spreads are trying to contract. For last of the month day trades I am only looking at things like COP where spreads are tight anyway the stock is very beaten down. A nimble trader playing the September $75’s can do very well today.

    Also thinking about DUG in here which is down 9% today as you would expect. Oil is off by half earlier levels and a fall back through $100 would send the group retreating most likely. Just thinking for now.

  44. 44
    QUARRYMAN Says:

    I guess a short ETF like DUG can work since it doesn’t short financials. But, what about SKF the short side of XLF financial ETF?

  45. 45
    zman Says:

    WILDZTRADE: XOM September $80 Calls for average cost of $0.58 with the stock at about $79.70. Obviously highly risky and it depends on one last hurrah out of the Dow today. This one has nothing to do with investing and everything to do with playing the euphoria over today’s market news.

  46. 46
    Sambone Says:

    Q – SKF is halted.

  47. 47
    kyleandy Says:

    whats the latest on crack spreads?? long some TSO options and trying to decide whether to sell or exercise. are they still in position to take advantage of their competitors problems?/

  48. 48
    zman Says:

    Cracks off highs this week but definite improvement over 2Q. Estimates should be coming up in general. They are cheap to the other guys on a number of metrics and if people were in a mood to buy a refiner (and they are not), they are well below book value with a large inventory of product on hand which is not fully valued in the stock. This is kind of a Fall to Winter play and I’m pretty averse to the group in 2009 as their is A LOT of capacity on the int’l market coming on line later in the year. Can’t quantify how much b/c I have not tallied it but it is mucho.

  49. 49
    Sambone Says:

    From a blog I follow;

    I am having a hard time keeping up with all of the bailouts and special facilities created for dealing with this crisis. Am I missing any?

    – Bear Stearns
    – Economic Stimulus progam
    – Housing Bailout Program
    – Fannie & Freddie
    – AIG
    – No Short selling rules
    – Fed liquidity programs (Term Lending facility, Term Auction facility)
    – Money Market fund insurance program
    – New RTC type program

    If you are a fan of irony, consider this: The conservative movement has utterly hated FDR, and his New Deal programs like Medicaid, Social Security, FDIC, Fannie Mae (1938), and the SEC for nearly 80 years. And for the past 8 years, a conservative was in the White House, with a very conservative agenda. For something like 16 of the past 18 years, the conservative dominated GOP has controlled Congress. Those are the facts.

    We now see that the grand experiment of deregulation has ended, and ended badly. The deregulation movement is now an historical footnote, just another interest group, and once in power they turned into socialists. Indeed, judging by the actions of the conservatives in power, and not the empty rhetoric that comes out of think tanks, the conservative movement has effectively turned the United States into a massive Socialist state, an appendage of Communist Russia, China and Venezuala.

  50. 50
    Eagle Says:

    Calling Bush a conservative is akin to beer goggles at 2am on a Sat night. However, have to agree on the once in power comment…absolute power corupts absolutely..

  51. 51
    zman Says:

    DUG down 10% now, oi still backing off, up $1.50. Hmmmm.

  52. 52
    Nicky Says:

    Samb – crash starting after the election I think. This is typical action in an election year. Soooo much at stake.
    But all they are doing is papering over the cracks – they are not dealing with the root of the problem
    But this to me is a C wave rally in wave 2 and they can go further than anyone thinks and defy gravity for a bit. I am still thinking between 12 and 12500 for the Dow and 1340 for the SPX.
    Then we could be looking at the short of the century if the Dow is going sub 8000. That’s if there is anything left we are allowed to short by then!

  53. 53
    zman Says:

    Nicky, you’re not drinking Paulson’s coolaid. For shame. I am quite certain that you will always be allowed to short energy.

  54. 54
    zman Says:

    ZTRADE: September HK $25 calls sold for $0.15, down 83%. This is the second half of the shares sold last week for and 83% gain.

  55. 55
    zman Says:

    ZTRADE: Out XOM Sep 80 calls for $0.65, up a whopping 12% but the market looks tired now.

  56. 56
    Nicky Says:

    I was just forwarded this (looks about right and not the first time I have seen it suggested that the Fed will end up being nationalized):
    on ‘CDS’ – credit default swaps. This one has hardly kicked off
    yet, but it’s enormous. What will eventually happen, I suspect, is that the
    Fed, yes the Fed, will end up being nationalized like AIG, because it won’t
    be able to cope with the bad collateral it has already taken on and won’t be
    able to call in the loans it has made on the back of it. This new
    institution will end up taking it over. Then the burden of all the bad debt
    will fall where it belongs: on everyone. The poor old taxpayer will have to
    fund it. Taxes will have to rise, and that will cause a world-wide economic
    depression

  57. 57
    Nicky Says:

    sorry missed the first bit off

    http://www.moneyandmarkets.com/Issues.aspx?I-Have-Seen-the-Enemy-and-He-is-
    CDS-2279> on ‘CDS’ – credit default swaps.

  58. 58
    ram Says:

    ZMAN – NOV will be a major part of near term parts replacement besides existing backlog. Are you warming up to a trade again?

  59. 59
    zman Says:

    Hello Ram. Agreed. Not today though. Up 11% it leads the service stocks. Pinning setting in. Will wait for next week or just pre earnings.

  60. 60
    ram Says:

    O.K. Thank you.

  61. 61
    Sambone Says:

    LONDON, Sept 19 (Reuters) – A U.S. bill to curb speculation
    in the oil markets could be too restrictive and reduce
    liquidity, a spokeswoman for the IntercontinentalExchange
    ICE said on Friday.
    “We think that the house bill goes too far in terms of
    restricting trading activity, reducing liquidity and weakening
    price discovery,” spokeswoman Sarah Stashak said.
    On Thursday, the U.S. House of Representatives passed a bill
    aimed at preventing excessive speculation in oil, which included
    measures that would affect exchanges outside the United States.
    The ICE Futures Exchange, owned by the
    InterncontinentalExchange, is regulated by Britain’s Financial
    Services Authority.
    U.S. politicians have launched a whole raft of bills aimed
    at reining in speculation in the oil markets. Many of them blame
    speculators for driving oil to record peaks this year of nearly
    $150 a barrel.
    However, a report from the U.S. Commodities Futures Trading
    Commission in July found that rising oil prices were largely due
    to fundamental supply and demand factors.
    The U.S. House bill would require foreign derivatives
    exchanges to adopt reporting standards and position limits
    similar to those already in the United States.
    These requirements include providing information on traders’
    positions in the market — so-called commitments of traders.
    “The additional requirements placed on foreign (exchanges)
    are redundant and unnecessary,” spokeswoman Stashak said. “ICE
    has already signalled its intent to comply with U.S.-style
    futures regulations for its WTI (U.S. crude oil) contract.”
    The U.S. futures market regulator earlier this year extended
    its reporting rules to the ICE’s U.S. crude oil contract.
    The ICE is ready to begin implementing these requirements in
    October, Stashak said.
    The U.S. House bill would only apply to the ICE’s U.S. crude
    oil contract and would not affect the ICE’s Brent crude oil,
    gasoil, European emissions, British natural gas and power
    contracts, she said.
    (Reporting by Jane Merriman; editing by Karen Foster)

    Fri Sep 19 16:01:09 2008 -GMT

  62. 62
    Sambone Says:

    WASHINGTON, Sept 19 (Reuters) – Ten oil refineries in Texas
    and Louisiana with 2.351 million barrels per day in refining
    capacity remained shut on Friday because of Hurricane Ike, the
    Energy Department said.
    However, 10 oil refineries with a total capacity of 1.962
    million bpd were back to normal, the department said in its
    latest hurricane update.
    Separately, the department said nine natural gas processing
    plants along the Gulf Coast with a capacity of 5.23 billion
    cubic feet of gas a day remained shut due to both Hurricanes
    Ike and Gustav.
    Nineteen gas plants with a total capacity of 7.20 billion
    cubic feet a day were operating at reduced or normal levels,
    and 10 gas plants with 5.03 billion cubic feet a day in
    capacity can restart once electricity and gas flows resume, the
    department said.
    (Reporting by Tom Doggett; Editing by David Gregorio)

    Fri Sep 19 16:05:56 2008 -GMT

  63. 63
    mahout Says:

    Sambone,

    #49 Great rant. Hope you feel better.

    The anguish that the government has unconscionably partly caused and partly just allowed to develop is mind shattering to me, a conservative. We have been betrayed.

    I could add this new “Socialist state” (or “Communist” if you wish to call it that) is not even an “enlightened one” such as China which has really embraced free enterprise. They control the economy but also let free capitalism flourish to their own great benefit. Our government is basically the enemy of big business. Never mind that EVERY big business started small and got big by serving its customers well and thereby served to grow the economy, raise the standard of living and expand the tax base.

    At least they (the government) don’t own our industries and companies yet. But I heard one elected Rep. say she is in favor of the government taking over the Oil industry. When energy prices get high again, which they will. It’s inevitable. I think a movement for nationalization will develop.

    The problem with our Congress, our Government agencies, our Administration and all of D.C. is that they are mostly lawyers. And these lawyers know nothing!, except how to take sides on either side of a question and how to get elected, or appointed to fat paying jobs with little real oversight. These in D.C. are not commited to our basic freedom and free enterprise system. They are self serving people feeding off of other peoples productivity. I heard that there are 60,000 lawyers inside the Beltway. When was the last time we had a Congressman or Senator who could rightfully be called a Statesman! Arthur Vandenberg was the last one IMO. (I know there are good lawyers. Not all lawyers are the damaging kind we have in D.C. I have a number of friends who are lawyers).

    Nevertheless, we still have to keep managing our investments. What are you buying these days, my friend? I am looking very covetously at GMXR, NFX, CHK, HK and RIG and have already started buying after I cleared out some non-energy stuff to raise cash.

    How’s that for a rant? I feel better already.

  64. 64
    ram Says:

    ZMAN – You now can get a nickle for those SEPT TSO’s.

  65. 65
    zman Says:

    Thanks.

  66. 66
    Sambone Says:

    Mahout, like the rant, dude!

    My concern is the now so called “Free market”. I don’t believe it is free and orderly anymore. Shorting/hedging was not repealed even in the dark 1930’s, but here we are.

    Been buying WB preferred D under $10.00 lately. Buying more COSWF, PBR, RIG, GLD in the past week. Short term I’m bearish on oil, Bullish intermediate and long term. I have been selling other stuff into this rally today.

    Once I can short the financials again, I will. We are in a short squeeze currently.

  67. 67
    Sambone Says:

    Uncle Phil

    http://www.321energy.com/reports/flynn/current.html

  68. 68
    mahout Says:

    Z,

    I have had good success over the years with APA. I’m curious about how you see it. You don’t seem to comment on it very much. Is it not of much interest to you?

  69. 69
    zman Says:

    APA – smart guys, a bit arrogant but I would be too if I were them, lots of moving parts on the international scene which I don’t feel like keeping up with.

  70. 70
    zman Says:

    ZTRADE: DUG $40 Calls (DUGJN) taken for $2.25 to provide a little downside protection for next week in case this is a one day love affair with the Fed/Treasury/SEC. I did them on the mid as the spreads are still very wide and it took some time to execute. DUG is off 12% today.

  71. 71
    zman Says:

    #70: Those were Octobers.

    Nicky – that’s depressing.

  72. 72
    mahout Says:

    Sambone,

    You are so right about the free market not being free or orderly. Dark pools, predatory hedge funds, Sovereign Wealth funds, no transparency to some major market moving things and events, constant lying out of CEO’s mouths, things coming out of left field (did anybody get the number of that truck), misguided regulations, lack of needed Regulations all make it tougher than it ought to be.

    Thanks much for the names and comments.

  73. 73
    jsaun14 Says:

    Z (or others) –

    On the DUGS, is the dollar weakening helping oil or is it that the bailout might get the econonmy back to the middle of the road and help oil consumption?

    I was thinking that the more liabilities the goverment assumes, the less the folks with the big bucks want to be in the USD at these yields. As such, a barrel starts to move like gold. Hence, I’d be bullish oil.

    Help me see the bigger picture,
    JS

  74. 74
    zman Says:

    ok, one last one.

    ZTRADE: Added HK $30 October calls for $1.09 average cost.

  75. 75
    Sambone Says:

    Hmmm, CNBS reporting that GE wants to be included on no short list. I suspect that they will ban all short selling next week, and also ‘Talk about flying blind”!

  76. 76
    zman Says:

    movie time Sam?

  77. 77
    zman Says:

    Here’s one for you. Not sure if this is from a movie or from Paulson:

    “Here’s the deal I’m the best there is. Plain and simple. I wake up in the morning and I piss excellence.”

  78. 78
    Alhambra Says:

    shake and bake

  79. 79
    Wyoming Says:

    Talladega Nights?

  80. 80
    zman Says:

    UBS says oilsands projects need pricey crude:

    http://www.reuters.com/article/marketsNews/idUSN1937928920080919

  81. 81
    Wyoming Says:

    His name was Robert Paulson!

  82. 82
    zman Says:

    Sam,

    No way they expand the no short rule. Too many real reasons to use as hedge.

  83. 83
    zman Says:

    Just got a notice from my broker that you cannot by uncovered puts on the 799 stocks.

  84. 84
    Sambone Says:

    Z – I beg to differ. All bets are off the table. Look at what they have done overnight. Options market in disarray, etc. My Hedgie buddies are raising cash.

    Here is an example of whats going on; Let’s say you run a 13/30 fund/hedge fund. You had determined that banks were the one to hedge, so 1/2 of your hedge was short the banks. Well today you either hold (Get raped) or cover (Short squeeze). So now your out, what else to you hedge with, Retail?, Gold? Good hedge? Bad hedge? Your not sure. So in most cases you know the govenment will either let the no short list expire on Oct 2nd, or will keep it going until after the election. So your in a catch 22. Most cases you’ll sell some or all your long postions and just go to cash until the market settles down.

  85. 85
    Sambone Says:

    #83 – Naked calls the same way on the 799.

  86. 86
    kyleandy Says:

    doug kass on cnbc now

  87. 87
    Sambone Says:

    #84 – Should be 130/30, not 13/30

  88. 88
    zman Says:

    Sam – I just don’t see them canceling out short selling in the non financials. They hate energy so no luck there. And no where else could you justify voiding the potential for a capital death spiral. So I don’t see it.

  89. 89
    Sambone Says:

    Z – That’s what makes a market.

  90. 90
    zman Says:

    Wow, oil into the close. Up $5.50+ again.

    Hear ya Sam and I appreciate the your position.

  91. 91
    Wyoming Says:

    Sam / Z,

    Do you see Monday being a margin call calamity?

  92. 92
    Wyoming Says:

    BTW – Fight Club, Robert Paulson was the Meat Loaf Character.

  93. 93
    zman Says:

    Oil up $6.50+.

  94. 94
    zman Says:

    Have tried to buy CLR several times today, just got too cute and they are not playing mids well.

    Wyoming – for some people today is death so I would guess so.

  95. 95
    zman Says:

    Wow, even my October RIG and OII’s are waking up now. And TSO $20 Octs working again too.

    HK tapping on $25…big jumps but not really after the pummeling these have taken.

  96. 96
    Dman Says:

    #83 – makes sense. Not much point telling hedgies they can’t short but they can load up with puts. But it looks like the gubmint left it to the market makers/brokers to decide they couldn’t wear the risk of writing naked puts. My broker hasn’t said anything so I’m tempted to try buying some puts just to see if I get an error message or something.

    How the options and futures markets are supposed to function without shorting is a mystery to me. All of the assumptions and models (eg option pricing) depend on the market players being able to go long or short to enforce arbitrage.

    At a more practical level, according to a TSCM piece today, the public (on average) tends to buy puts and sell calls against their holdings. So the market makers end up net long (buying calls & selling puts). They can’t sustain that flow unless they can short against it.

  97. 97
    zman Says:

    Hear ya Dman. Not sure the powers that be have thought those issues through.

    Nice to see HK outperforming today vs the group. Makes up for the under yesterday which was a fund selling…nice timing on their part. I saw rumors of a deal, of a Lehman problem etc but today would suggest all unfounded and just that fund that wanted out and potential a short helping to hold them down.

  98. 98
    zman Says:

    Ok, I’m declaring beerthirty early. Nice day outside, pinning action in the market underway. Everybody have a great weekend. I’ll be traveling to Austin this weekend so the weekend post will either be out tonight or combined with the Monday post.

  99. 99
    Eagle Says:

    Unless I am reading the SEC Order incorrectly, I believe it exempts market makers from the ban.

  100. 100
    Sambone Says:

    Headlines?

    *U.S. TREASURY TO INSURE GOOD WEATHER ALL WEEKEND

    *FEDERAL RESERVE TO INSURE PERSONAL HAPPINESS

    *U.S. TREASURY TO REPAIR TOM BRADY’S DAMAGED KNEE

    *CONGRESS TO GUARANTEE HAPPY DAYS ARE HERE AGAIN

  101. 101
    md Says:

    No Shorts Allowed

    Funny, they haven’t put a ban on CDO’s and CDS. But considering that equity markets are up today the crisis is over and no one will have to call in their CDO’s. The Feds can sell their 79.9% share in AIG and double their money. Not bad for a weeks work.

  102. 102
    Fred Says:

    Eagle – Could you please post a link so we can see what you’re saying.

  103. 103
    Eagle Says:

    LOL Sam. While they are at it, see if they do something about my Buckeye’s fall on hard times.

  104. 104
    Eagle Says:

    http://www.sec.gov/rules/other/2008/34-58592.pdf

  105. 105
    Eagle Says:

    Fred, Most of the exception language is on page 3.

  106. 106
    VTZ Says:

    TSX is up over 720 points on commodities plus others across the board.

  107. 107
    Fred Says:

    Eagle – Welcome to the United Socialist States Republic (USSR). Thanks!

  108. 108
    jsaun14 Says:

    Sam –

    How about:

    *MERRILL AND LEHMAN GET MULLIGAN

  109. 109
    Sambone Says:

    Tini time

  110. 110
    doc Says:

    Why hasn’t natural gas price soared with so much production shut in like with katrina?

  111. 111
    Dman Says:

    Thanks Eagle. glad someone actually read the document. So then the question is, why no puts allowed if the MMs can short against them?

  112. 112
    Dman Says:

    Just saw an article on TSCM saying some SEC staff are now suggesting an amendment that will specifically allow options market makers to be exempted.

  113. 113
    zman Says:

    Doc – With Katrina there was a lasting, in many cases, permanent disruption of production from the Gulf. The platforms that were destroyed by Katrina/Rita/Wilma were on average larger and in deeper water. Lots of things got broken on the seabed including pipelines. Many largescale projects like Thunderhorse (then Crazyhorse) got delayed for years. This time around we are losing, at least so far, what looks like a marginal and small piece of production, just 13,000 bopd out of 1.3 mm bopd producing and of the bigger platforms like MadDog, the damage was limited to things like the drilling package and not the production part of the spar. So it won’t prevent them from turning the wells back on.

  114. 114
    crysball Says:

    Chesapeake Energy Corporation Provides Operational and Financial Update
    Monday September 22, 4:01 pm ET
    Company Reduces Drilling Capital Expenditure Budget through 2010 by Approximately $3 Billion and Expects Approximately $2 Billion of Excess Cash Generation in 2009 and 2010 to Be Directed Primarily to Debt Reduction
    Lower Capex and Asset and VPP Sales Lead to Lower Production Growth Forecasts for 2008 of 18% from 21% and for 2009 and 2010 of 16% from 19%
    Company Closes Fayetteville Shale Joint Venture Transaction with BP America; Discussions Progress on Marcellus Shale Joint Venture; Company Resumes Plans to Sell a $1 Billion Minority Interest in its Midstream Business
    Company Provides Hedging Update; Substantial Decline in Natural Gas and Oil Prices Has Led to an Approximate $6 Billion Favorable Mark-to-Market Change in the Company’s Hedging Positions Since June 30, 2008
    Company Completes Three New Haynesville Shale Wells in September with Average per Well Initial Production Rates Exceeding 10 MMcfe per Day

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