Wednesday = Time For A Green Day

121 thoughts on “Wednesday = Time For A Green Day”

1. Mimster – saw your comment last night, anytime. I will be taking a look at the upstream MLPs shortly for an update.

   Oil up $2.30 and climbing. You do have to wonder how reliable that Chinese data is.

2. BDI +50 2084

3. Elduque – thanks for pointing that out. The dry bulkers really didn’t run yesterday and got hammered Monday as I recall. Those China numbers will benefit the BDI directly. Favorite name there is DSX.

4. Mim – will also be looking at reserve valuations and debt for tomorrow’s piece for the mid cap and small cap E&Ps we track. Very tempted by PQ hitting another 52 week low at $2.34, asset value is higher.

5. Before anything else, let me post Technical Trader’s comments for today… first time he has weighed in with an opinion in a while.

   9:35am most common time for HOD, 10:10 and 10:15 second most common times for HOD. 11:25 is most common time for low of the AM with 1:45pm being the most common time for LOD

   So, basically, sell the open. However, the risk to this technical recommendation is that the mrkt will continue to be headline-driven… more on that next…

6. CNBC Watch — a lot of testimonies from officials on the budget… Peter R. Orszag speaks to the Senate budget committee Wed 3/4 (9:30amET), Geithner speaks to the Senate Wed 3/4 (10amET)

7. White House/Treasury Housing Watch — will be publishing the specific guidelines on mortgage modifications today (who is eligible for modification and how specifically will their mortgages be modified), but Bloomberg suggests in an article that only the most neediest homeowners will be considered for the program (the article implies the plan will be a bit more limited in scope that maybe is expected by the market); on cramdown, talks are still ongoing in Congress that could limit when a judge could adjust mortgage terms (only as a last resort); the House is still hoping to have a cramdown vote on Thurs (the Senate, where this will be a much tougher issue to get done, isn’t expected to take up cramdown until later in Mar).

8. Credit Market Indices trading all over the map this morning. Indicative of 1) cluelessness, and 2) technical rebalancing of indices vs underlying members. Only thing for sure, spreads remain at “oh-sh*t” levels for Investment Grade and at the Nov lows for High Yield.

   IG 241

   HY 69.125 (after trading as low as 68.5)

9. Peabody Coal (BTU) is on fire… guess it has to do with the optimism over Chinese demand coming back?

10. Natural Gas Falls on Speculation Supplies to Stay Above Average
    2009-03-04 14:41:23.519 GMT

    By Reg Curren
    March 4 (Bloomberg) — Natural gas fell in New York on speculation slowing demand from factories and power plants will keep stockpiles above average levels.
    Inventories last week probably dropped 95 billion cubic feet, the median of five analyst estimates compiled by Bloomberg.
    The average decline for the week is 121 billion, according to the Energy Department, whose next report is due tomorrow. Supplies in last week’s report were 12 percent above the five-year average.
    “People are going to be a little cautious in front of the storage number,” said Tom Orr, research director at Weeden & Co. in Greenwich, Connecticut. “No one is very excited about a turn in prospects for gas. The outlook for the economy is very bleak and that 2009 will be a struggle.”
    Natural gas for April delivery fell 6.9 cents, or 1.6 percent, to $4.213 per million British thermal units at 9:20 a.m. on the New York Mercantile Exchange. Gas futures have declined 25 percent this year.
    The recession began reducing demand for gas last year, as manufacturers accelerated factory shutdowns. Industrial users account for 29 percent of gas consumption.
    Companies shed 697,000 jobs in the U.S. in February as the recession’s grip tightened, ADP Employer Services said. The drop in the report, a survey based on payroll data, was larger than economists forecast and followed a revised cut of 614,000 for the prior month.

11. Stocks Rise Around the World; Commodities Gain, Treasuries Fall
    2009-03-04 14:15:57.648 GMT

    By Adam Haigh
    March 4 (Bloomberg) — Stocks rose around the world, commodity prices rallied and Treasuries fell on speculation China will broaden efforts to boost growth in the world’s third-largest economy. The Shanghai Composite Index jumped the most in four months.
    BHP Billiton Ltd. and Alcoa Inc. added more than 6 percent as copper and aluminum climbed on optimism metals consumption in China will increase. Aluminum Corp. of China Ltd. surged 9 percent as a former statistics chief said China’s Premier Wen Jiabao will announce a new stimulus package tomorrow. Volkswagen AG, the biggest overseas carmaker in China, gained 4.6 percent.
    The MSCI World Index added 0.7 percent to 710.12 at 2:09 p.m. in London. The deepening global recession, a third government rescue for Citigroup Inc. and dividend cuts at companies from General Electric Co. to JPMorgan Chase & Co. have sent the of 23 developed countries to a 23 percent drop this year, the worst start since the gauge was created in 1970.
    “The Chinese are about to come up with another huge fiscal push,” said Philip Manduca, who oversees $1 billion as head of investments at ECU Group in London. “They are going to pump an enormous amount of money in. This will help in the long term,”
    he said in a Bloomberg Television interview.

    Treasuries, Yen

    Treasuries fell, extending the worst losses in five years, while the yen slipped as the rally in stocks curbed demand for assets perceived as safe. The yield on the 10-year Treasury note rose 11 basis points to 2.98 percent, according to BGCantor Market Data. The yen traded as low as 99.49 per dollar, the weakest since Nov. 5.
    Futures on the Standard & Poor’s 500 Index rose 2.4 percent.
    The gauge closed below 700 for the first time since October 1996 yesterday after Federal Reserve Chairman Ben S. Bernanke said the banking system still hasn’t stabilized.
    Steve Leuthold, whose Grizzly Short Fund returned 74 percent last year betting against U.S. stocks, said today that now is the time to purchase equities because the economy isn’t headed for a major contraction.
    Europe’s Dow Jones Stoxx 600 Index climbed 2.3 percent, rebounding from the lowest level since 1996. Zurich Financial Services AG climbed after JPMorgan said Switzerland’s biggest insurer’s “solvency position is strong.”
    The MSCI Asia Pacific Index rose 0.6 percent as China’s Jiangxi Copper Co. and Japan’s Seven & I Holdings Co. advanced.
    Wen will announce a new stimulus package tomorrow, adding to a 4 trillion yuan ($585 billion) spending plan, former Statistics Bureau head Li Deshui said today, without elaborating.
    The Shanghai Composite Index jumped 6.1 percent, the biggest gain since Nov. 10, when it climbed 7.2 percent after the government announced its 4 trillion yuan plan. China’s rally helped send the MSCI Emerging Markets Index 2.2 percent higher.

    BHP, Rio

    Companies whose profits are most tied to economic growth led Europe’s advance, with gauges of basic-resource producers, construction shares and automakers climbing more than 4 percent.
    BHP Billiton, the world’s largest mining company, added 8.4 percent to 1,125 pence in London. Rio Tinto Group, the third biggest, gained 8.1 percent to 1,750 pence. Xstrata Plc, the largest exporter of coal used by power plants, rallied 11 percent to 368.75 pence.
    Copper futures advanced in Shanghai and London on optimism metals consumption in China may pick up as government stimulus packages take effect. Nickel gained 2.3 percent in London, climbing with aluminum, zinc and lead.
    Alcoa, the largest U.S. aluminum producer, added 6 percent to $5.86 in New York pre-market trading.
    Volkswagen climbed 4.6 percent to 199.72 euros, trimming its
    2009 drop to 20 percent.
    Vinci SA, the world’s largest construction company, surged
    9.4 percent to 27.20 euros after reporting that full-year profit increased 9.4 percent, helped by its building division.

    Standard Chartered

    Standard Chartered Plc gained 8.5 percent to 683.5 pence.
    UBS raised its recommendation to “buy” from “neutral”
    following “robust” earnings reported yesterday.
    France Telecom SA gained 1.6 percent to 17.69 euros after Europe’s third-largest phone company raised its full-year dividend to 1.40 euros a share from 1.30 euros paid for 2007.
    Annual gross operating profit, a measure comparable to earnings before interest, tax, depreciation and amortization, rose 2.8 percent to 19.4 billion euros ($24.3 billion). Analysts had predicted 19.1 billion euros.

    European Earnings

    Earnings for 244 companies in the Stoxx 600 that have reported earnings since Jan. 12 have dropped 91 percent, according to Bloomberg data. That compares to a 58 percent contraction in profit for the 465 companies that have reported results in the S&P 500 during the same period.
    The MSCI World is valued at 10.4 times the earnings of its 1,680 companies, less than half this decade’s average ratio of 21.6, data compiled by Bloomberg show.
    Zurich Financial gained 5.5 percent to 159.9 Swiss francs as the insurer was raised to “overweight” at JPMorgan.
    “Zurich is now our top pick for three reasons: cost cutting, uplift to operating profit from reinsurance earnings, and strong non-life,” the bank wrote in a report.
    In Shanghai, Aluminum Corp. jumped 9 percent to 9.61 yuan and Jiangxi Copper Co. surged 10 percent to 16.73 yuan.
    China’s Purchasing Manager’s Index, a manufacturing gauge, climbed for a third month. Output and new orders expanded for the first time in five months, signaling that government stimulus is taking effect. A recovery in the first half is “very likely,”
    central bank Vice Governor Su Ning said yesterday.

    Bank of Japan

    Seven & I Holdings, Japan’s largest retailer, climbed 2.9 percent to 2,100 yen in Tokyo. Bank of Japan board member Miyako Suda said today the central bank should signal that it’s prepared to take “bold” measures to counter the recession. Japan’s lower house of parliament approved a bill that will free up about 5 trillion yen ($50 billion) for economic stimulus.
    Holcim Ltd. slid 1.6 percent to 35.14 Swiss francs. The world’s second-biggest cement maker said fourth-quarter profit fell 54 percent as it booked 300 million francs ($254 million) in costs to close factories as it combats slumping demand.
    Adecco SA slumped 8 percent to 31.16 francs. The world’s largest supplier of temporary workers reported a fourth-quarter loss as it wrote down the value of goodwill on its Tuja acquisition in Germany and assets in the U.K.
    European stocks and U.S. futures maintained gains after ADP Employer Services said companies in the U.S. cut an estimated 697,000 workers in February, indicating the recession is intensifying. The drop was worse than the average economist estimate of 630,000 job losses in a Bloomberg survey.

12. Tristone raised GDP to outperfrom. Wonder how they feel about GMXR?

13. Good morning all.

    Personally I think the Chinese recovery is a load of baloney. I have heard it said that the huge fiscal stimulus given to their banks has been used to buy shares and therefore has rallied their stock market. This is not a recovery but an illusion.

14. BTU 4Q and outlook were very strong. It has fallen with everything else but also a recent drop in coal prices (last two weeks) has sapped it. China moving back on up is very good news for them. The move this morning is strong for all the coals as ACI is up an equal amount % wise but when they start to sort the wheat from the chaff later today or tomorrow I think BTU will be the one that continues to run.

15. Nicky – I would point to anecdotal evidence from the aforementioned 4Q call from BTU that showed a pickup in steel production, iron imports and coal imports as their infrastructure projects re-ignite. I would agree that buying shares is not stimulus but there is strong evidence that infrastructure products are going out the door there.

16. FSLR catching more of that bounce.

17. Comment from a CDS Trading Desk… insight into the confusion gripping the Institutional Trading Desks —

    “Today feels like a typical trap for shorts. People will fade this rally like they always do. Wonder if today’s surprise may be that we actually close tighter on the day. We are all so used to fading every rally that we “can’t possibly” rally. I think you are not supposed to fade it. Looking at GE stock scares me a little, but think it’s OK to buy some risk for a trade… Especially some Index. Singles are all weaker, but Index protection feels overbought here. Dealers feel short in Index risk…”

18. Head Trader — “take your 9 SPX pts and call it a day”

    He is in the “fade the rally” mode.

19. Noted overnight that Moody’s kept HK at Negative rating following their $400 mm equity deal. Just no pleasing some ratings folks.

20. And now for something more uplifting —

    March 4 (Bloomberg) — Steve Leuthold, whose Grizzly Short Fund returned 74 percent last year betting against U.S. stocks, said now is the time to purchase equities because the economy isn’t headed for a major contraction.

    “These comparisons people make with the Great Depression are totally out of touch with reality, and pretty stupid,” Leuthold told Bloomberg Television in an interview today. “We’ve been in much worse, much more panicked and more scary situations in the U.S.”

    The economy isn’t as bad as it was in 1974, when stocks began rebounding, he added. The Standard & Poor’s 500 Index will surge to at least 1,000 in 2009, Leuthold said. That would represent a gain of 44 percent from yesterday’s 12-year low of 696.33.

    Because a rally is likely, investors shouldn’t buy his Grizzly Short Fund, Leuthold said. It has returned 26 percent in 2009.

21. ISM Non-Manufacturing Index at 41.6 vs 41.0 expd and 42.9 last month.

22. BOP – I think a lot of the S&P move will depend on what oil does in 30 minutes. If you get a draw instead of a build on crude due to another low imports number then you should see a short covering rally in the majors and large cap E&Ps that could propel a doubling of the gain on the S&P as it acts as a confidence booster for other parts of the index. I don’t think that a $4 rally in oil will “kill the market back” at these levels.

23. z — good point. So, wait 30 minutes for some headline-induced direction.

24. Credit Market all over the place this morning. Can’t seem to find a direction.

    Of course, that sort of thing also happens when you are at — or near — a bottom. Lots of vol…

25. copper futures, fcx, pcu up very strong today as well-a two day trend!!!

26. BOP – not saying it will turn out that and it will be disappointing for oil if the imports number recovers to something like 10 mm bopd from below 9 but the API has been lining up with EIA at least directionally for some time and they showed a drawdown on crude stocks.

    Sane, question for you. In the imports number you showed last night, is that year over year or a week to week decline they are portraying? Thanks.

27. Choices posted this last night on “the war on coal” and it is worth a read. I really don’t get the concept of an engineered rebate targeting a region of the country.

    http://www.newsweek.com/id/187424

28. Z – re 15 – so the chinese government are throwing some money at infrastructure to try and get things moving similar to the proposals by our government. Doesn’t mean its going to work and there are literally millions of Chinese being made unemployed (I realize there are billions of them!) and tens of thousands of factories closing down.

    I still think its a false dawn.

29. 15 minutes to Oil inventories and the stocks and oil itself are so far not fading the rally. Normally by this time of day, they’d shrinking back in fear of a surging crude storage number. Looks like the China news, believe it or not, is giving the group a little more spine than normal.

    Nicky – I’m not saying the numbers aren’t baloney, China if anyone, can’t create baloney with the stroke of a pen and now they could even do it in the name of the greater good as many think that getting the Chinese economy on firmer footing is the first step in a broader global economy. So would they / could they fake the numbers? Sure, I think so and they have played them trickily before. But there are signs of a real, if potentially not sustainable upturn in infrastructure and not just in spending, but in actual smelting, forging etc.

30. Nicky, there was some Chinese money spent on shares (some time ago if I recall). Predictably, that had no effect. But the more recent, larger Chinese stimulus is all about massive infrastructure spending. That is what is moving copper prices. Doesn’t mean that China is all systems go – they are being hard hit by decline in global demand for their exports – but it does mean that their stimulus is real. Also (and here is a novelty) they actually have the money to pay for it!! I guess someone ended up with all the money and it just happened to be China. Who woulda thunk that actually making stuff pays off??

31. I was typing while you were typing that so I didn’t have the benefit of 28 in hand when I wrote 29. Agree with all that and not saying its sustainable but think they are getting some things moving because they can. Steel and coal inventories got very low last year and the rebuild there can make a very nice year for someone like a BTU in the U.S.

32. Dman – right. The next trick will be getting their exports to level out.

33. re 26

    week to week decline

34. Thanks much sane.

35. Just before the report:

    Oil up $3 at 44.62

36. crude down 0.7 mm barrels
    gasoline up 0.2 mm barrels
    distillate up 1.7 mm barrels (bearish for heating oil, diesel)

    as I wrote in the post on distillates:
    Distillates: This may prove the weak link in today’s report as production has been running high, demand has been less robust and the API number showed a build. This time of year, distillate begins to take a back seat to oil but a large build would not go unnoticed by heating oil prices and therefore not by crude.

37. Gasoline demand picked up to 9.2 mm bpd, easing up into Spring. I think this is more bullish for gasoline prices and therefore crude than the slight unexpected build in gasoline stocks into today’s report.

38. Cushing oil storage fell from 34.5 to 34.0 mm barrels

    Imports inched back up to 9 mm bopd, still below last year and average for this time of year for a third week.

    Oil holding up $3.

39. Z, I am a subscriber to Accuweather and Bastardi is predicting a return to cold weather, similar to your prediction this morning, after a brief warm up.. Given how cold it has been in Chicago and in the East this week I think we could get in the 1.5T range for year ending storage. I am out of my mind on this? Since this would make a climb back to full storage to tough slog….Your insights are always appreciated. Thanks Bill

40. Head Trader pointing out that “the pit is slow, but those that are there are looking to run the buy stops, so might get a pop”

    just passing comments along

41. Bill ~

    I’m thinking 1.6 Tcf for trough storage but 1.5 Tcf could be done easily. From either level, we should have little difficulty getting back to full storage unless we transition from a cold March to a very Warm April / May and a hot summer since Industrial demand and Electrical demand are so depressed at present.

    Production should start exhibiting year over year declines with the February number and more solidly in the second quarter. December may have been flat with November but it was still up 2.4 Bcfgpd (4%) from December 2007 levels. I think the trajectory of supply along with a continuously depressed rig count that will be supportive of prices, taking some precedence over absolute storage levels. Storage and price have at times a decent correlation but more often than not, it is production that is the better predictor of price direction. At current storage levels for this time of year in the past I can point to gas prices that are easily double those we are seeing right now. But then we were not in a steep recession and we had not undergone a recent rapid growth in supply. On the flip side, we had not seen anything like the tumbling down of rigs we have had.

42. Interesting Oil Strategy comments —

    As we’ve been talking about for awhile, an unusual set of circumstances has raised serious questions about WTI-Cushing’s status as a benchmark for global crude prices. Today, if you look at another major pricing point in Dubai, you will see that futures market has moved from a contango into a backwardated structure, which is usually a bullish sign, and a potential signal that OPEC cuts are beginning to make an impact. Below is an article from Bloomberg, with the accompanying chart, as well as an announcement from Platts that they are going to launch a new sour crude marker for US markets since the sweet market is “troubled”. Further, if you didn’t see it, the CFTC announced last week it has begun an investigation into the USO crude oil “ETF”, which is unquestionably distorting U.S. crude markets. However, the last time the CFTC did anything right was never, so it’s pretty doubtful anything comes out of their “investigation”.

    Dubai Oil Backwardation Shows OPEC Cuts Working: Chart of Day

    By Christian Schmollinger and Lee Miller

    March 4 (Bloomberg) — The price of Dubai crude oil for immediate delivery, a Persian Gulf benchmark for Asia, has moved higher than later-dated supplies, indicating that OPEC output cuts are starting to work.

    The price curve over the next four months for Dubai crude oil has shifted from contango into backwardation as the Organization of Petroleum Exporting Countries has reduced supplies. The group, which produces about 40 percent of the world’s oil, agreed on Dec. 17 to the second cut of their output in order to halt the decline in the crude price from a record in July.

    Dubai for delivery in April was at $41.57 a barrel today, higher than the May price of $40.91 a barrel, according to data from PVM Oil Associates. The situation where prompt commodity prices are more expensive than later-dated level is called backwardation. The opposite structure is known as a contango.

    “Any time the market structure flips from contango to backwardation then there is usually something major going on,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “It’s the producer cuts that really started following through and the threats of more cuts.

    The Dubai price was the first that really started responding when OPEC starting cutting.”

    OPEC cut output by 2.7 percent in February as producers tried to stem price declines, a Bloomberg News survey showed.

    Production from the 12-member group averaged 27.775 million barrels a day last month, down 770,000 from January, according to the survey of oil companies, producers and analysts.

    The group has reduced its output by 13 percent from the October production level after agreeing the first round of cuts on Oct. 24.

    “The last thing OPEC wants to see is excess inventories and the market going into the contango structure,” said Kornafel.

    “With backwardation the most natural state of the market, it’s also the most positive state for OPEC and the producers.”

43. BOP – thanks for passing them and please keep doing so. Oil stocks strengthened after the report, if oil only treaded water. One less thing for the E&Ps to worry about on the oil price standpoint. When you look at where utilization is, in the low 80%s and you look at where gasoline consumption is (UP 2% now on the 4 week average relative to year ago levels) from year ago levels, and then you look at imports, holding at just under average levels for the season, and then you look at the high level of OPEC compliance, you have to think that the impact of further cuts, should they be adhered to would put upward pressure on oil prices as refiners gear up for what is so far not looking to be fall out of bed gasoline demand.

44. Have y’all checked out PQ ? $2.15

    Z – what is the skinny here ?

45. Pack – had mentioned them in earlier comments. Nothing new on them since the quarter comments…they are in survival mode, I don’t think they go under, but they continue to make new lows daily and buck the group. I saw UBS reiterate a buy here last week with a $6.50 target. I’m looking at buying and holding more PQ common but have not made up my mind yet. Will do a model on them.

    SWN approaching $30, up $2, HK acting like it wants to make a move on the $17.50 deal price. Only thing holding these back today is the distillate inventory build which reflected poorly on natural gas. Oil may drag that NG price positive on the day shortly as we take a shot at $45 crude.

46. does the current (last 3 weeks) level of imports reflect the full impact of the OPEC cuts?

    Kass is adding to his comments saying yesterday was the bottom

47. http://www.stockhouse.com/Community-News/2009/March/4/Oil-could-have-an-imminent-traders–rally

48. Gaam – good question, very hard to tell. If they OPEC cut 4 mm bopd in recent months and U.S. imports have now fallen back about 1 mm bopd over three weeks I’d say it’s close to the U.S. share of the cuts probably at around 8 to 8.5 mm bopd. See the chart at the top of the post noting that the U.S. gets a lot more oil from non-OPEC sources than most people think.

49. Gaamblor – do those comments regarding the bottom from Kass refer to the broader market.

    If so I don’t think so. We could see a decent wave iv rally but it will only alievate the oversold conditions and then roll over again.

    Gold now down for the eight day in a row.

50. Oil dragging NG toward green. Latest number I see for tomorrow is for a 95 Bcf withdrawal. That looks a little high to my modeling but this is the squishy beginning of the shoulder season and stranger things have happened. Next Thursday’s number will undoubtedly be bigger than tomorrow’s most likely heading back into triple digits. The one after that, according to the forecasts I’ve seen would probably be of similar size.

51. re 49 yes broad market, kass has no comment on oil that i know of, though he did cover an XOM short recently

52. NG doing its best to go green. The gassy stocks are seeing a little profit taking now as the market back from its highs. I think on the next up turn once gas is green you see CHK, HK move a little better. Big cap E&P soaring now, albeit from pretty depressed levels. EOG really shining, no news just up crude which gets the Bakken closer to working. Same move seen at Bakken players CLR and WLL,

53. Oklahoma attorney general investigating Canadian oil dumping allegations.

54. Morning,
    This is worth a read by Steve Leuthhold
    (Grizzly short fund)
    Hmmmm

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aoOD10XZvOPE&refer=home

55. Hey BOP, do I get to take credit for #22 now, lol?

56. bop – tech trader has been really good until today. any updates from him?

57. kyleandy… i’ll check. but, it’s unusual for Tech Trader to change directions in mid day. Basically, he plots the expected outcome in the morning, with the caveat that “headlines” can mess everything up.

    but, let me get back to you.

58. kyleandy — Tech Trader took his 9 pts rally off the SPX this morning and went home. Typically, he is only looking for the “best trade” of the day for a few points. He saw that as “sell the rally” this morning. So, no colour for the rest of the day.

    Head Trader points out that Geithner’s testimony means all bets are off, with respect to which way he can move the market.

59. Sorry BOP missed your earlier post pointing out the “Grizzly Call”

60. z — re#22… i always give credit, where credit is due. Nice call!

61. Denise — no worries. Some things are worth repeating.

62. BOP – I was just kidding ya because it actually came out to about the double on the S&P gain on the day I was talking about. Just got lucky. When does Tim speak?

63. Things could be worse:

    http://news.yahoo.com/s/ap/20090304/ap_on_re_us/asteroid_close_call

64. From a sell-side note this morning… just a nice “reminder” list.

    With oil prices up today, a lot of the oily-stocks are up a lot [as] there aren’t that many domestic oil producers truly leveraged to OIL…since the U.S. has become much more a GAS business. (we produce twice as much gas on a barrel equivalent basis).

    WLL Whiting (North Dakota Bakken and Permian Basin, waterfloods and CO2 floods)
    BRY Berry (heavy oil in California)
    PXP Plains (heavy and light oil in California)
    WRES Warren (light waterflood oil in Southern California)
    DNR Denbury (Southeast US CO2 floods)
    ARD Arena (Permian basin waterfloods)
    CLR Continental (Bakken)
    EAC Encore Acquisition (Rockies oil, including Bakken)

    That’s about it.

65. hmmm… according to the note i got this morning, Geithner was supposed to be testifying at 10am EST. Didn’t see the usual headlines scroll by, tho.

66. Thanks, I see he’s testifying now.

67. yep… Timmy is over and out for today. His testimony got lost in the noise. Started at 10am … was still going on at 12:05

68. sorry… started typing one thing (over and out)… then saw his comments continuing. So, he’s still speaking.

69. Gordon Brown speaking before Joint Session of Congress overshadowed Tim-he in the name of the Queen granted honorary knighthood to Ted Kennedy.

70. Tim repeating that the recession is deepening, not really addressing a senator’s question about banks who have received funds pulling back from lending, from businesses that are in good shape and have done everything right in terms of timely payments, low balances etc.

71. OT-Help is on the way-heh. Rumor mills alive with speculation that Larry Kudlow will challenge Dodd in Conn Senate race.

72. I’m not the biggest fan of Kudlow but I’d pay real money to see him ask questions at one of these testimonies.

73. Midday Overview

    · Equities (finally) melt up around the globe today…SPX near session highs +14pts and testing the big 715 level. Our equity desk says the rally is mainly being fueled by short covering/hedge fund buying (dearth of institutional demand); however, in a change from yesterday, rallies are not bringing out a ton of institutional supply or fresh shorts (allowing the melt-up to push higher). USD is getting hit as investors feel more comfortable wading out into riskier assets (equities, etc); note the dollar is the “new yen” for many and lately has been under pressure if equities mount any meaningful rally (our FX desk seeing buyers of AUD/USD and EUR/USD). Commodities and energy stocks are very strong on the day (coal stocks are some of the best performing stocks in the whole market); tech also continues to have a decent bid to it. After some brief profit taking around 10amET, SP cash bounced off the ~700 level mid-morning and rallied higher due to: 1) GE issued statement dispelling capital/credit concerns; 2) Geithner tells Congress that the bad bank will be launching within the next couple weeks. On a technical basis, people are thinking SP500 futures have to overtake 715 and hold before this move higher has any legs/credence to it…we sit right below that level midday.

    · Washington update: the White House/Treasury published the specific mortgage modification guidelines this morning and banks are due to start the process soon of scrubbing their portfolio and extending offers to eligible customers (WFC put out a release today saying it supports the plan and will work to adopt it). The bank stress tests are ongoing (although the market would like some more clarity on this front, inc whether a ~4%+ TCE is now the new minimum) and Geithner told Congress today that the “bad bank” will be kicking off in the next couple wks. Yesterday, we learned that TALF fundings will start Mar 25 (for applications due in by Mar 17).

    · China stocks surged 6% today after a bunch of pos. headlines: the country’s official PMI increased for a third straight month while there is speculation the gov’t will announce additional stimulus measures at its Congress tomorrow. Chinese equities closed up ~6% on the day.

    · Eastern Europe remains a worry…does a bailout process exist?: Yesterday, Eu officials officials said a process exists to bail out failing/failed members – “It is clear that there are serious problems in certain countries. If a crisis emerges in one eurozone country, there is a solution before visiting the IMF. We are equipped intellectually, politically and economically to face this crisis scenario. It’s not clever to tell you in public. But the solution exists,” (Joaquin Almunia, the economics commissioner) – London Telegraph. This morning, Italy’s Unicredit says its Eastern European loan portfolios are performing fine and that actual conditions are better than has been described in the press of late. A group of E European countries today called on investors not to lump the whole region together as one – The exposure of western banks in eastern Europe is often “simplified and misleading and could have negative implications for banks operating in these countries,” regulators in the Czech Republic, Poland, Romania, Slovakia, Bulgaria and Hungary said in a statement today (Bloomberg).

    · Treasuries weaker today due to slightly improved sentiment around US equities and ahead of a potential $60B funding announcement tomorrow (the funding is being announced for auctions scheduled for next week).

74. re: Kudlow rumor… it sure would be great to have a Republican with actual speaking skills around.

75. I’m a little surprised the gasoline demand numbers, up on both the 4 week average and the week vs year ago and week to week for a little over a month now isn’t getting a little better pop out of gasoline now. If you look at the oil chart, we’ve erased the losses from Monday with today and yesterday’s gains. Looks very bottomy.

76. Z – agree. It would also be good to see the back of some of these Senators like Dodd, Frank who have played a big part in all this by refusing to regulate Freddie and Fannie when the property market was on fire and now continually refusing to accept any blame and point to the Republicans continually. These guys should have been run off the face of this earth. Instead they are still running the show. Its madness.

77. Bob Pisani making a good point about the jobs numbers for Friday. He said the numbers have been coming in hot to the estimates for awhile now and so traders in the equity and commodity pits have built in a X factor now, so if the number is 650,000 expected loss, traders will bump their threshhold to 700,000, so a number in between is seen as a positive as it represents a tightening of reality vs economists estimates.

78. I will say this, you may agree with Tim or disagree with Tim and his budget, but he is doing a better job now being clear about things than he did with his plan to have a plan 3 weeks ago. I’ve heard a few bobbly answers but for the most part he is more clear now than before. That assurance that he’s on the case may may be small comfort if he can’t pitch the sub $250K income level tax increases. Grassly pointing out their tax increases and there are tax increases…

79. Z: Is it safe to say that the poor performance of GMXR can be attributed to a perception that they need to raise capital?

80. I think the jury is still out on Tim. A couple of factors, however, are working here. As Volker pointed out, the senior staff levels at the higher positions in Treasury are virtually empty-Tim’s confirmations were held up because of his very stupid tax problems so his backup at Treasury is very weak now as it was under Paulson. On the other hand, he is closely aligned with Summers and I’m not sure that is a good thing.

    Finally, it would be a good thing if Congress would let him do some work and not simply force prepare and do the testimonies. When the plans are in place, then go after him. The piecemeal approach as we all know is not working.

81. anyone hear why Gulf of Mexico producers weak? ME and WTI?

82. Tom – No. I know that thought is in the market place. That is why their drilling schedule is weighted toward the back half of 2009. If you look at the 25 well program, well over half will be drilled in 3Q and 4Q when gas prices are expected to be higher. If prices are not higher at the time the budget gets whacked back as do the number of wells. At current guidance they are expected to see 84% growth which represents best in class levels among the small caps.

    More important than raw growth however (and who wants growth at these gas prices anyway?) is the reserve growth that they really did not experience in 2008. Remember they booked 1 H.S. well and to PUD locations in their reserve report as they transitioned the company. This year they could boost reserves by a number above 40% based on the current drilling schedule.

    I think the perception that prices will stay low for longer is hurting them along with the fact that people think their IPs are too low. There first three Haynesville completions in E. Texas were a lot bigger than those seen by CHK in NW Louisiana where you’d expect bigger IPs. IPs are pretty worthless as they aren’t apples to apples and especially for such a small sample of wells. The reserves they are looking at are still very similar to the CHK expected 6.5 Bcfe EUR and that’s what should determine value for the stock. I’m biding my time for an entry closer to April when they will have 3 more H.S. completions to talk about.

83. Choices – good points

    Nifkin – no but the offshore guys suffer from higher decline rates by definition, especially in the shallow water. While a resource player on shore playing the shales can scale back and still have plenty of cash flow due to the long reserve life nature of the wells (15 to 30 years), the pain of low prices for the Shelf players is more pronounces as they might have a reserve life or RP (reserves/production) of 3 to 5 years. Activity dries up and so do they. You have several of them considering bankruptcy now and that will act like an anchor for their peers.

84. z – re GMXR excellent summary thks

85. BOP, are you still showing a consensus 95 Bcf withdrawal number for storage tomorrow? Anyone?

86. Kyle – I could go on and on but why beat a dead gas stock. I think it improves with time first, then more with higher prices later this year.

87. Bloomberg’s consesus for tomorrow’s draw is 96 Bs

88. Thanks BOP – Hmmm. Looks a tad high to me. Increased imports alone would account for that much of a change. Will look for other causes that might make it high. Do you have that on a high, low basis, or by analyst or just the consensus?

89. Z, could you someday possibly write up a mini tutorial on how to approach reading these numbers crude/natural gas(or doing analysis/comparison)?
    Have you had a chance to write that tutorial on how you trade options (I think I remember you saying something…)

90. I didn’t do anything about it other than continue to hold my calls in NFX but they are outperforming again today, and I continue to think that this is a function of the expectation that CHK’s mid-continent gas production curtailments do nothing but help them.

91. File under “Very Disturbing”… This article, by a bloomberg “financial” writer, shows an almost stunning misunderstanding of the bankruptcy process. While, at the same time, loudly calls for more of our money (“taxpayer money”) to be poured into the blackhole of leverage. MEMO to these types of financial writer idiots — there is not enough money in the entire WORLD to plug the black hole of what was borrowed. Not when DEflation is the prevailing wind direction.

    They would do us all a favor if they would take a minute to 1) understand what a bankruptcy is (hint: almost never the end of operations of a company) and 2) stop yelling for “govt bailouts” of the private sector.

    Sorry… but this stuff just needs to be said.

    Private Equity Needs Fixing Before It’s Too Late: Matthew Lynn
    2009-03-04 00:00:00.0 GMT

    Commentary by Matthew Lynn
    March 4 (Bloomberg) — Bankers, regulators and politicians are behind the curve. They are like workers rushing to clear up a car crash armed only with aspirin and Band-Aids: too late on the scene, and not able to do much when they get there.
    The next phase of the credit crunch, and quite possibly the ugliest as well, is plain to see. The leveraged-buyout funds have loaded up too many companies with too much debt at the wrong prices. They are like planes still in the air with no fuel left in their tanks. Crashes are inevitable.
    Private equity needs to be fixed now, with refinancing, stress tests, and government stakes if necessary. There is no point waiting until it is too late.
    The pain is evident in the shares of the publicly listed funds. Blackstone Group LP, the world’s largest quoted private- equity firm, has slumped to about $5 from more than $30 in 2007.
    Last week, it reported a fourth-quarter loss of $827.1 million.
    In the U.K., 3i Group Plc has dropped to less than 2 pounds from 11 pounds in late 2007. Shares in Candover Investments Plc are close to 2 pounds after trading at more than 22 pounds last year. The company said the value of its assets halved last year.
    In response, it has scrapped the dividend and said it will cut jobs. Meanwhile, KKR & Co. said this week the value of investments in its publicly traded buyout fund fell 32 percent in the fourth quarter.

    Signs of Trouble

    Six months ago, the slumping share prices of many banks were sending clear signs of trouble ahead. Buyout funds are emitting the same distress signals now. Worse, that is just what we can see. Most private-equity investments are exactly that:
    private. We have no way of knowing what the whole picture looks like. It is hard to believe there won’t be a lot more pain, just as there was in the banking industry.
    There is no big mystery about that. Private equity was partly about re-invigorating tired and lazy management. In fairness, it often did that job a lot better than many critics gave it credit for. It was still mostly about re-engineering balance sheets so they supported more debt. With loans evaporating fast, a lot of companies will run into trouble.
    Typically, buyout funds liked to purchase big companies in solid industries, the kind that employ lots of people. It doesn’t matter that much when a few bankers lose their bonuses. If businesses controlled by buyout funds collapse, tens of thousands of people will be thrown out of work.

    Cash in Bank

    First, the buyout funds need to start restructuring their deals now. There is no point waiting until the last minute. If this is the deepest recession since the 1930s, only businesses with rock-solid balance sheets will pull through. They are going to need cash in the bank. And they will have to be in strong enough financial shape to borrow more if necessary. Not many private equity-owned companies fall into that category. They need to start working on that immediately.
    Next, the regulators have to stress test every major private-equity deal of the past three years. Buyout firms bought a lot of companies at the top of the market. In many cases, the bondholders will have to swap debt for equity, and that equity is probably going to fall in value, sometimes sharply. That is just tough. The bondholders will lose money anyway. They might as well not take businesses down with them. But the regulators need to knock heads together now so they accept that.
    Lastly, governments in the U.S., the U.K. and elsewhere may need to step in. Where there are problems restructuring debt into equity, there may be no alternative to government stakes in businesses, even if only for a short period. The state may end up owning shares in some odd-looking enterprises. Yet even six months ago we wouldn’t have thought such a situation was possible with many big banks. It is better than doing nothing.
    We hear a lot of rhetoric from governments around the world about what they are doing to cope with the crisis. Unless they are willing to get ahead of the curve, it is mostly just hot air.
    Fixing the private-equity bust is the place they should start.

92. Wonder how the HK 22 mm share offering is going? Scheduled to close today. Since this is a liquid stock with 40 mm shares traded below the $17.50 offering price since the announcement 2/26 (AMC), why would a purchaser want to be locked in at $17.5, when they could have bought plenty on Monday in the 15’s?. Perhaps it will be re-priced below $17? Just anticipating some volatility in the stock price coming AMC and tomorrow.

93. Bossman – sure, what would you like the tutorial to cover? By that I mean, there are expectations and then there’s history and then there is the actual number in comparison to both. I look at that and the trend of activities in term of production and demand and try to put all that in context with where inventories are. So I guess I’m looking for a little more about what you are looking for, but I’d be happy to write the tutorial.

    The options stuff is around here somewhere, gotta dust it off and get it on the site. Will make an effort to find and do this March.

94. Bob – it was a spot secondary, done the next day at $17.50. No road show, just announced and done within a day. Today was just the settlement day meaning the shares from the deal will be in your account today had you bought them on the deal.

95. Z-Thanks

96. Bob – the thing I’d be interested in finding out is how well subscribed was the deal. Did everyone get their full allocation or do they have position fill out business to follow it up. I would suspect the market put the kibosh on a lot of follow on business there. I suspect the stock will relatively muted until it gets back above the deal price. If I’m wrong about the storage number tomorrow and we get a bigger draw that could do the trick. Gas is just biding its time today for those numbers.

97. Nothing surprising in Beige Book unless you still expected a mid year recovery in the economy.

98. NG going green on the day

99. Oil zooming higher into close, up 3.80

100. Pretty classic bear market rally underway. I note that the energy sector led it higher than stalled as the broader indexes put on the second half of their move. That too as classic. Leadership in these rallies is squishy, rotational on an intra-day basis.

101. DJIA and S&P500 up 3+%

     XOI and XNG up 6%, OIH up 7.5%

     Crude up 8.5%
     NG up just under 1%

102. Z, thanks, I’ll think about more what I don’t know/can’t find answers researching and let you know.

103. just hit the tape — Mark-to-market hearing tentatively set for March 12th.

     House Financial Services Subcommittee.

104. Thanks BOP, stocks not quite at HOD despite the indexes being at HOD. Huge, silly moves on some things here. This is the rally we all saw coming, what do you think, another day, maybe even into the weekend before the selling starts?

105. BOP-One would think financial shorts will cover in anticipation of a change?

106. I could write for an hour and tell you how silly it is to have mark to mark accounting in times when the only mkt is stupidly low.

     This rule if changed could right the ship.

107. What’s not moving today? Some of the MLPS,

     LINE flat, BBEP flat to down, the rest are small so small change looks like a big move.

108. Denise — #105 I would think so. The shorts have made a boatload of money. Why take the chance. Ring the register and wait for stocks to run up again. That way, shorts can reposition at higher levels.

109. Z-re Line-what could be the downside?
     I am long line and will always remember when BPT had that break in their pipeline.
     Stock was decemated

     To me LINE seems like a bond being so hedged

110. Z – true that some of the moves are silly, but then what do we call the moves that got us here?

     There used to be a political party in Britain called the “Monster Raving Loony Party”

     http://en.wikipedia.org/wiki/Official_Monster_Raving_Loony_Party

     I guess we’ve been in the Monster Raving Loony Market for a while now…

111. AOG (Act of God) is the only thing I can think of that blows that story up (meaning the yield) at this point. Second thought They will underperform with a big rally in crude or gas relative to other E&Ps but they will still move up and you get paid (nicely to wait). If a commodity price rally looks sustainable they can always monetize out year hedges, ramp drilling and/or acquire beaten down assets and increase their coverage over their distribution with the higher resulting cash flow.

112. Dman – I should have been specific re silly, was looking at the OIH which is almost flat on the year with earnings that have been just thrashed.

113. Been working on a lot of year end, where are we now stuff in E&Ps, will have for the morning. This will be the small and mids we know and love or love to hate.

114. DJ reports Wall Street is finding a way to salvage some of the toxic debt that torpedoed the financial industry. Wall Street banks this year have significantly ramped up efforts to repackage once-unwanted mortgage bonds to make them more enticing to investors. The bonds are stripped of risky loans, and presented to institutional investors with new triple-A ratings. That repackaging could translate to some surprising trading gains for banks such as Goldman Sachs Group (GS), Morgan Stanley (MS) and JPMorgan Chase (JPM) when they report earnings next month. If successful, the strategy could grow in popularity as the credit market opens up. “You’ll see a surprise in trading books,” said Ajay Rajadhyaksha, head of U.S. fixed income and securitized products research at Barclays Capital. The reincarnation of these mortgage-backed securities takes place as issuers repackage these bonds into two new bonds. They take the form of a senior bond with greater credit protection and a subordinate bond with the same credit support as the underlying bond… With lower-quality loans jettisoned, even if it makes up only 10% of the security, the value of the remaining bond would be enhanced. Buyers are typically willing to pay as high as 40 cents on the dollar for double-A rated bonds.

115. That’s very interesting BOP thanks for posting it.

116. bulk carriers crazy today, some up 40-50%; of course, that is from a level after Monday which was extreme for some; not to get too excited, however, they could be off 40-50% tomorrow.

117. I’m catching up re:BBEP comments from Tues: looked at co. a few months ago and concluded engineering/geologic backgrounds of mgt. was very specific, yet they made a big acq. (for debt) in a totally unrelated geology. As I remember their problems started almost immediately. I threw file away.

118. some weekend reading material about pinning action in google

     http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1337350

119. Thanks everyone for your thoughts on BBEP. I cannot wait for the upcoming MLP piece. I guess it’s time to start buying more LINE. I do still have some ATN, EVEP, LGCY and unfortunately for me AHD and APL.

     I am looking forward to your piece on the mid cap and small cap E&Ps. I am getting the drift the time to start to buy common might be in April. GMXR, GDP and HK are on my short list. Though I keep mulling over EOG.

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