T.G.I.F.

97 thoughts on “T.G.I.F.”

1. Listless, slightly green open for energy, oil up over $51 as we get a little bounce as the May contract goes off the boards next week.

   CHK holding up well for a stock that will see numbers fall. Its a temporary reduction and the analyst crowd is likely to look through it. So far gas is not responding (or not much) to their curtailment with gas down 2 pennies in an oil up a buck plus market.

2. HK doing its part.

3. Tudor comment this morning on CHK: in a nutshell, doesn’t change their view on the stock (note it’s now up with the rest of the names) but it does take approximately 75 Bcf out of the market if shut in through the third quarter.

4. If you get the Tudor morning call, their thoughts on the OSX are in line with mine as they refer to their call (short) as “ice cold and wandering in the wilderness”. Me too.

5. A little late…. but some pre-mrkt open comments —

   · SP futures rallied off overnight lows; up 2pts post GE/C earnings (>10pts off lows)

   · Euro Stoxx also trades to session highs +1.4%

   · HY12 opens +1/4p to 75.75/76; IG12 opens 1bp tighter to 172/174

   · USD acting well +0.5%; EUR/JPY continues to roll over dn another 1%

   · US tsys up small across the curve; 10yr at 2.82%

   · Crude continues to gravitate towards $50/bbl – data out today shows China’s crude oil processing rose for the first time in five month..

   · Base Metals are mostly lower: aluminum, copper and nickel all off ~1.5% (China’s Mar refined copper output fell 0.2% on the month, up 5.2% Y/y)..

   · Spot Gold continues to fall sharply, trading at $869/oz (dn over twenty bucks since y’day)

   · Baltic Dry Index rose to its highest this month to close 4.6% higher at 1604.The jump in rates to hire panamax vessels that haul iron ore and grains was the main cause behind the increase. Our desk said that fundamentally there was no big driver for the move and we may see a drop by mid-2009 because of constricted raw material demand and expected global economic contraction.

   · Coal swaps traded a touch higher on the back of crude and physical demand.

6. Thanks Bop.

7. Today’s Top Stories & Catalysts

   · C reports, but focus is on exchange offer update: EPS beats; revs better; a few items helped them, inc. a benefit from recent accounting rule changes. The big news is related to the exchange offer: ie, they did NOT re-affirm the exchange ratio. Also, they said they will now wait to launch until results of stress test are out (which at the very least delays the offer another 2 weeks). See press release on this: http://www.citigroup.com/citi/press/2009/090417b.htm

   · C also mentioned cautiously in the NY Post; “fears that Citi will come in dead last of 19 banks.” NY Post

   · Banks: the Treasury may retain a grip on banks even if they refund their TARP investments via warrants – The government will continue to hold warrants, attached to every capital injection it has made, even after any share buybacks, Treasury officials said. Bloomberg

   · Pershing’s Ackman to take aim at banks; plans to begin a media blitz urging bank bondholders to exchange their debt for equity; argues that large banks “effectively insolvent”. NYT

   · More signs of eco stabilization overnight: Japan´s consumer sentiment rose to a five-month high in March, China´s crude-oil processing rose for the first time in five months. Japan unveiled share price emergency plan.

   · ECB facing internal split: Jean-Claude Trichet is facing the biggest split on the European Central Bank’s Governing Council in his six years as president. Months after other central banks cut their key interest rates close to zero and started pumping money into their economies, the ECB’s 22-member council is still divided over whether to follow suit. Bloomberg

   · Commercial real estate: Fed could tweak TALF terms to make the program more attractive to commercial real estate investors. WSJ

   · State Street says institutional investors are returning to equities; Institutional investors are participating in a broad-based recovery in equities with the United States leading the way and the euro zone lagging – Reuters

   · Ireland credit rating fears: Moody’s said Ireland’s prized ‘AAA’ rating may be cut to mid-to-high Aa range if it concludes that the country will emerge from the crisis with “relatively weak growth prospects and a much higher debt burden” Reuters

   · China: Cautious comments from Premier Wen receiving some attention this morning; speaking at a cabinet executive meeting on Thurs he said “However, we must also be clear-headed and understand that grounds for the country’s economic recovery are not solid enough yet, as circumstances both at home and abroad remain grim.” Xinhua

   · MGM: Carl Icahn and Oaktree, both of which have bought large amounts of MGM debt of late, are pushing for the company to restructure in bankruptcy; An MGM Mirage spokesman said the company “and its advisers remain engaged in constructive discussions with its lenders.” Icahn and Oaktree aren’t working together and their strategies aren’t yet clear – WSJ

   · Autos update: GM/Chrysler could get ~$5.5B combined aid; decision could come next week – The Obama auto task force is preparing to loan General Motors Corp. about $5 billion in additional federal short-term aid, and Chrysler LLC $500 million, an Obama administration official familiar with the matter said Thursday. Detroit News

   · Credit market trends: HG bonds tightened 11bp yesterday with strength across both Financial and non-Financial sectors. On the same day there were two defaults in CDX HY and the prior day two other CDX HY credits missed coupon. While the timing of the strong HG bond rally and uptick in HY defaults is coincidental what it reflects is a growing appreciation among investors that there are opportunities in certain companies and asset classes as the recession moves through its lifecycle and the credit contraction approaches is two year anniversary this summer. HG bond spreads are now at 487bp, 60bp tighter on the month but still very wide from an historical perspective and wide versus other investment grade asset classes.

   · Zac Efron and ’17 Again’ expected to rule box office this weekend. LA Times

8. Catalysts to Watch

   · GM will give an update on its restructuring Fri @ 10:15amET (CNBC)

   · Eco #s for Fri: U of Michigan Confidence #s

   · Fed speakers Fri: Hoenig (8:30amET) and Bernanke (12:30pmET). A bunch of Fed officials will be speaking at an event this weekend in Nashville (inc. Volcker, Kohn, Dudley, Stern)

   · Following companies reported Fri morning: GE (CC 8:30amET), C (CC 8:30amET), BBT (CC 11amET), FHN (CC 9amET), MAT (CC 8:30amET)

   · US Treasury says to host meetings of G7 and G20 finance ministers on Apr 24

   · White House – another bank exec meeting – The White House is planning a meeting this Thurs with 14 executives at banks with large credit card divisions – Reuters

   · Stress tests – the Fed to release stress test results for individual banks on May 4…..the announcement on that day will also include plans to raise capital to the extent such a move is needed. Fed to release around Apr 24 the specific stress tests/criteria, etc (i.e. how each bank is being tested). CNBC

   · IMF says toxic debts could spiral to US$4T – The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21 – London Times

   · German Government To Decide On “Bad Bank” April 21; Finance Minister Peer Steinbrueck would prefer the creation of several “bad banks” instead of one large bank for the entire sector (DJ)

   · Carbon Emissions – The U.S. Environmental Protection Agency is expected to issue its “endangerment finding” on carbon dioxide emissions by April 16. This will obligate the EPA to come up with standards for coal-fired power plants soon.

9. BDI +78 1682

10. HK trade at breakeven with the stock up 60 cents and acting like its getting set up for next week. May get pinned to the 22.50 strike.

11. hey, z …. didn’t you do a high risk trade yesterday? was it for HK? saw the memo… can’t recall the exact contents. Anyway, with one of those types of trades (that expires at EOD), how do you usually play them?

12. wow. Pretty surprisingly positive. Michigan Consumer Conf in… 61.9 vs 58.5 exp’d. Credit Desk’s jaw banging the floor. They are shocked at the 6-handle.

13. BOP – yes, I think it was Ram about a year ago that referred to those as “WildZ’s”. That’s high risk, last minute stuff, obviously a stock I like and have been on top of in recent days. Not a lot of money but a goodly number of contracts. This is the HK 22.50s expiring tomorrow. Quarryman occassionally asks me for one of these close to expiry and this is my one along with the EOG $60s. How to play, watch like hawk relative to group. Went from 20 cent bid (33% profit) to 10 cent bid (33% loss) while I typed this.

14. Z-I note that your strategy on options seems to be near term calls and puts-do you ever consider writing naked calls/puts farther out in expectation of a move one way or another-obviously, the gain is limited to the premium but on some volitile stocks, it is not too bad.

    Just trying to learn more because my track record on buying puts and calls really sucks to coin a phrase.

    Thanks.

15. Looking at the daily chart on HK, the clear breakout level is 22.47 (now at 22.46).

    Tater says the line in the sand is still 22.65 here:
    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882&cmd=show%5Bs159509724%5D&disp=P

16. Choices. I don’t do naked. I do write covered calls on stock positions (this month I will lose most of my SD common position). I have played with long term long options (LEAPS) in the past and found them to be largely a bad bet for me. There is an implicit psychological feeling of safety implied by the further out strikes that is, to coin a phrase, a suckers bet. The high premium in the longer dated options is there for just that reason.

17. Interesting. Lots of little E&Ps surging (SD, even GMXR). Have to think its something to do with Aubrey’s announcement. Gas may not be buying it but investors look to be at least early. Also note the muted response from HAL and company. One would have to think that reduced production translates into a willingness to drill less wells for the meantime, not the opposite. And with that all of the associated services get delayed and all the more price pressured.

18. Checked in with Head Trader to see if he had any colour commentary…. here’s the short version —

    Options expiry day = very jumpy trading.

    Think mkrt will close lower than open.

    Need to hold 856 on SPX to preserve 6-week rally.

    That was about it. He never actively trades on options expiry day. Too unpredictable.

19. Thanks BOP, sounds about right. Volumes are pathetic despite pretty big % moves.

20. NG going just barely positive.

21. Lots of GM headlines hitting the tape… not a lot of useful info tho.

22. NG up a dime. Hellllooo Aubrey.

23. Feels like summer. Pinning action in full swing. Doing some filing and will shut up for now but here if anyone wants anything.

24. ZMAN – Were you thinking one last surge today?

25. Ram – yes, but I’m beginning to think it’s wishful thinking, missed my first and possibly only shot on those HKs. Thought now is get out at 10 cents or 15 on the next rally and put that $ in the Mays with the ones I hold already. Could still see some end of day positioning into HK but volumes there and everywhere energy look light to me, not a lot of people paying attention. If the market goes up we might get HK back to that strike.

26. Nicky – good call on gold yesterday and last few times you’ve commented on it.

27. Thought experiment:

    Let’s say that we recognize that buying an out of the money option months out is typically a fools bet as the time premium is excessive.

    However, since the time premium degredation is predictable we decide to buy it, not to hold for very long but just to get us past one month’s pinning action at the Max Pain point or just because we think we have a sound thesis but it’s going to take a few days longer to materialize.

    If we are buying the longer dated with a short term proposed exit strategy then the value lost to time decay is insignificant and if we have figured wrong the speculation is toast anyway.

    I’m saying this lookin at OSX which appears to be in mild breakout mode to the upside and HAL which I’m still expecting to pull back significantly, but apparently not today : )

    Thoughts?

28. Thanks. When I lived in Raleigh years ago, I recalled that some years did not have a spring – winter to summer. Could an early summer support NG?

29. Jay – that’s a fair statement. I was thinking of the buying and holding of LEAPS and I was thinking of the spreads on them often being wide. When you look at index options, they are generally even wider. I think you can accomplish the same thing with the same amount of money by going out two to three months instead of a year and sticking closer to the current price on your strike (just holding fewer contracts).

30. Ram – yes. However, as the forecast stands now they see a mild summer and a less active hurricane season. Neither may happen but until we get heat and storms the sentiment is likely to be unfavorable from the weather department. Thankfully, weather is not the only thing guiding gas prices. The fact that most gas producing basins are not economic now, that we have a busted rig count, falling gas production in the U.S. and Canada, and an expected economic recovery (don’t throw rocks at me anyone but I think before year end certain parts of the industrial and gas consuming economy mount a modest resurgence) all play into the mix on the bull side while the fear of LNG weighs on the bear side.

    But to get back to your question, there is variance from year to year in the electrical side with April swinging as much as 2+ Bcfgpd (see chart in today’s post on electricity). Part of that variance is early heat driving AC load, part of it is offline nukes with a greater coincidence of turnarounds for refueling and/or maintenance resulting in gas being the fuel with availability to fill the void. Hydro also plays into the equation. More snow = more melt water = more spring power from dams and vice versa.

31. Someone seems to want to goose HK.

32. In reference to my “target of opportunity” style comment from yesterday. I think that’s where we are right now. I also see: oil traveling with the equity markets for the medium term with limited upside (say 60 to 65 by year end). It will continue to be difficult to establish trends in the stocks. Oil service earnings will continue to fall. E&P CFPS numbers will come down to the extent they are exposed to natural gas and not hedged. With this in mind, I own things like LINE which are hedged and offer a nice yield, I own CHK and HK common, I did own SD but after tomorrow that will be mostly called away. I plan to own more of the things on the long term tab as the year goes by.

33. For S emailed in ? about the oih holdings:

    http://finance.yahoo.com/q/hl?s=OIH

34. HAL on Monday, NBR announce on Tuesday, contemplating May puts on both now.

    Watching the EOG and HK Aprils for an exit.

35. Another way to play a recovery in natural gas: FCG

    Take a look at the holdings list:
    http://finance.yahoo.com/q/hl?s=FCG

36. z

    when you get a chance can you look at pxp

    -paid of bank loan
    – have puts to protect downside
    – upside open
    – 60 % oil gas hedged at 10
    -own 20 % of chk haynesville
    – trading below book after billion pv10 write off when oil was in the 30’s

37. EPA on the tape on carbon dioxide regulation, looks major change.

    Re PXP. Have looked in past when they signed on with CHK. At the time I thougt “what a good deal for CHK”. Since then PXP requested an out on that deal. I will have another look as since then I’ve largely ignored them.

38. CHK; I guess market liked that news ?

39. Pack – see comment 3 above, but yes. Natural gas especially liked it. Last time they did this the reaction was more muted and really short lived. I think the open endedness of it with regard to the new wells is pretty significant.

40. re 35 that’s an interesting ETF, wonder how they came up with those weightings seem a bit odd.

41. Re 35, 40:

    been following FCG for a while now. Link to all holdings and weightings as of yesterday:

    http://www.ftportfolios.com/Retail/etf/ETFholdings.aspx?Ticker=FCG

42. John – I don’t know nor have I read up on it so not any kind of endorsement from me, just throwing it out there as food for thought. The weightings could simply be initial positions that have migrated with the large changes we’ve seen in the names since the initial entries (like maybe they all started out at 5%).

43. Thanks much Bob.

44. GMXR – up 15%, too little too late for my $10s but will get my $7.50s off the deck soon.

45. FCG re weights quarterly. Theorectically the ones on the top of the list have outperformed, and the ones on the bottom have underperformed. 1 month return on KWK is 66%, SD is 60%, WTI is 50%. At the bottom of the list, EOG is down 5%. Overall FCG is up 21% for the month

46. Thanks Bob. That’s a better list of names than is in the XNG (Amex gas index).

47. …and it has options too I see although its fairly new and as such not widely traded. Hmmmm.

48. HK at the $22.50 strike.

49. can’t seem to break strike, MM wont let meeee

50. Ram – I hear ya, watching level II on options, you can probably split the bid / ask now on those, seems to be a lot of shares going off at 22.50 even.

51. ZTRADE:

    Out GMXR April $7.50 calls for $0.25, down 44%.

52. Dear CHK

    thanks for that

    regards,

    me & GMXR

53. PQ – through $3 BOP, know you bought in here, think that goes higher over the course of the year.

54. Dman – too true. Anybody got a movie quote. For the life of me I can’t come up with one today. Brain half asleep, very nice outside, considering smoking a brisket and some ribs.

55. Dman – to add to that, the guy has been a victim of his own success, glad to see he sees that, not the curtailment so much as the go forward, he gets it. I will watch every minute of his testimony before congress this fall.

56. If I was close, I would invite myself.

57. Dear CHK,

    now remember: NO MARGIN BUYING. OK??

    regards,

    me

58. And you’d be invited. Of course, the last time I made a public appearance only Wyoming showed up. I did buy him a beer though.

59. Dman – you should come up with a top 10 for them. I personally think margin buying should be disclosed by management in all cases. I think Aubrey has sworn it off. Also, he should be able to start buying stock again soon. Same for Floyd at HK.

60. Any clues why FSLR/SPWRA red today?

61. Check out the pin job on HK

62. Apparently GMXR can not be tamed like HK or EOG. Is there news on GMXR?

63. I got a movie quote, may be too easy:

    “Gets down to what it’s all about, doesn’t it. Making the wrong move at the right time.”

64. Dman – no, its slight so I’d call it noise, has been up on the Sempra/FSLR news.

    Ram – No news, could be warm thoughts about their redetermination having to be next week or by end of month. I still say they get redetermined flat, not down. Operations update probably not til mid May.

    Jat – good one for today, can’t place it and refuse to google that kind of thing.

65. Fair warning HK April $22.50 calls, stock at 22.55. Will try for 20 cents or breakeven.

66. “Don’t call me Shirley!”

67. That’s from Airplane! ?

68. ram – the GMXR chart had got to a point where it needed to go somewhere – another leg down or some recovery. It is one of the few NG stocks that was near its lows. So the CHK event provided a test: does the market really believe the bear case on GMXR?

    Also, 20% of the float was short:
    http://shortsqueeze.com/?symbol=gmxr&submit=Short+Quote%99

    (that’s a lot, right?)

69. Yes, that’s a lot. HK doing its best to drift higher here.

70. Has anyone had difficulty logging on in the past couple of days?

71. ZTRADE:

    Out remaining EOG $60 April calls for $0.35, down 40%.

72. No login problems.

    VTZ if you’re there: what do you think of Petrobank (Toronto: PBG) ?

73. Crazy spike down in crude futures

74. rigs down another 47

75. Yep, and not just the front month, lots of weirdness on expiration.

    Thanks bill, forgot to check.

76. Baker Hughes rig count:

    gas rigs down 30 to 790 vs 1,461 one year ago

    oil up 1 rig

    horizontal down 11 to 399 vs 502 one year ago

    Ok rigs down to 91 vs 214 one year ago
    Texas rigs down to 384 from 883

77. I’ll give a strong hint; it’s poker related, and it’s an older movie than “Airplane.”

    Doesn’t seem like the rig count is really affecting them today, just moving with broader market. I’m sure we bottom shortly, I just don’t know why we spring back at the same rate we did in previous cycles. I guess I’ll go reread the Tudor “why we’ve been wrong” note again.

78. Z-do you have a count on Canadian rigs, ie the change. I still have PDS and it is acting fairly well lately.

    Thanks.

79. Canada

    down 9 rigs to 74 from 96 a year ago. Should ramp seasonally soon but 74 is a pretty darn low number for even this time of year.

80. S&P futs just took out high of year at 871. Interesting to see if they turn now.

81. drybulks are strong today

82. I’m working my way through the May puts on HAL and just wondering how anyone else’s thought process is coming along..

    Good, Bad, Marginally Attractive?

    JR

83. JR – I’ve probably said enough there so I’ll keep quiet. The group has been on fire, earnings are Monday HAL and WFT and then everyone else within 2 weeks. Just as a point of reference, I covered my NBR puts with the stock below $10 a week ago, now at $15.14. That is a big move.

84. HK looks like one last run for the day, going to retreat and add to the Mays.

85. Took a walk and took HALQP – May 17.5. Either I’m right or there is a yet unidentified Great Driver of Human Behavior, “Lust For Financial Humiliation” or somesuch.

86. Here ya Jay. I also think we’ve established max pain for HK is 22.50 on the dot. I’m going to come out best flat, worst zero, wasting the last hour watching a tick chart. That is really not my game but its slow.

87. zman,do you know what time monday HAL reports?tks

88. Today’s action aside, there’s probably a 50/50 chance HK does an ops update next week. They have a habit of doing updates before earnings, especially 1Q earnings. They speak at IPAA next Tuesday. The chart is at the top of a range, looks like breakout is imminent.

89. Before the open, call at 9ET.

90. I believe we are near Nicky’s short term top, S&P 870 to 880.

91. Last ZTRADES of the week:

    Out HK for $0.05, down 67%.

    Also added HAL May $16 puts for $0.43.

92. Added 20 of those HALs.

93. beerthirty

94. “That is really not my game but its slow.”

    Sounds like what the motto used to be for some service companies around here…

    “We may not be good but we’re slow!”

    Z-When/if you have the chance/inclination, could you walk me through your thought process in choosing the $16 HAL puts in lieu of the $17.5’s – math, intuition, et al?

    Many thanks and have a great weekend.

    JR

95. http://www.rigzone.com/news/article.asp?a_id=75200&twit=1

96. Re 94 – will do.

    Re 95 – nice.

97. chk update.

    rolled some of my covered calls forward.
    let most of the shares go (called away at 20 + call premiums).

    did not want to chase the options premiums higher; busy enough day dealing with other positions.

    hope we get a pullback to get back in the name.

    this market needs to take a powder anyway.

    good weekend all….

This site uses Akismet to reduce spam. Learn how your comment data is processed.