Tuesday Morning – Time For A Breather

A Pirate By Another Name Watch: Ecuadoran President Correa wants to "the world" to pay him $5.2 billion not to drill in the Yasuni Biosphere Reserve and National Park.

  • Correa says this amount compensate Ecuador not only for potential lost revenues adding that "Calculating the tonnes of carbon that we will avoid sending into the atmosphere, because we are not going to drill for oil in Yasuni, we consider that ... we could or should receive close to $5.195 billion dollars,"
  • I'm thinking of drilling in my backyard, however, I have 3 dogs who might find such drilling to be an inconvenience. Would someone please send me a check so that I can maintain the biodiversity of the yard while still feeding my hounds? They, like Correa, like to eat well, so send a big check. 


In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today
  5. Odds & Ends

Holdings Watch:

  • $10KP - $40,700 /  45% Cash / The Wiki Holdings Tab is updated.
  • WRES - $10KP trade - Added 500 shares at $2.34.
  • WRES - $10KP trade - Added 20 August $2.50 Calls for $0.50. I continue to hold the November $2.50 calls here as well.

Commodity Watch

Crude oil moved up $2.27 to close at $68.58 yesterday with a weaker dollar and surging equity market. The dollar is weaker yet again this morning but crude is trading off slightly, close to the $68 level on profit taking.

  • Early Read On Oil Inventories (from the Reuters and Platts survey): Crude seen down 1.5 to 2.0 mm barrels, both gasoline and distillates expected to see slight builds.
  • OPEC Watch: Hasan Qabazard, director of research division at the Organization of the Petroleum Exporting Countries ~ "Prices could still weaken again, this rally is driven by funds rather than fundamentals." He also added:

    • global oil stocks are 200 mm barrels above average
    • another 130 mm barrels is in offshore "tanker storage"
    • and long term oil prices need to be in the $70 to $80 range to encourage adequate investment

Natural Gas slammed 10% higher closing up $0.41 at $4.25 yesterday. This morning gas is trading down a dime with sluggish oil.

  • Imports Watch: Up 0.2 Bcfgpd from last week and down 0.8 Bcfgpd from last year.
    • Canada came in at 5.7 Bcfgpd: Weak. Still holding the low end of any range you want to pick, down 1.3 Bcfgpd from last year at this time.
    • LNG was 1.5 Bcfgpd last week: Just Not That Strong. Flat with last week and up 0.5 Bcfgpd from the comp week in 2008. 5 months into the year and so far the "LNG gas tsunami" is a no-show. I am sure it will arrive but I don't think it will be as big as many think it will be.


  • Tropics Watch: The new thing in storms - Pop Ups. We saw a few of these last year, that suddenly materialized near the U.S. coast instead of coming across the Atlantic from Africa. See Joe Bastardi's take here.

Crack Spread Update


Margins are strengthening. I would like to see another week of improved gasoline demand before I dip a toe back into the refiners. That and a pullback for oil.

Stuff We Care About Today

(PXD) RBC Presentation Today: No changes in the slides on their site, first Eagle Ford well still listed as completing. It is not apparent whether the presentation this afternoon will be webcast but no change to the presentation and no press release as of yet may bring the stock in a bit. That's a bit silly as the company is a lot more than a one well pony but there may now be a little hype in the stock for the E.F.S.

Speaking today at RBC: (all times EST)

  • 10:50 AM AXC.CN PNM SD SFY

Odds & Ends

Analyst Watch:

  • (CRZO) cut to Hold by Natixis
  • (ASTI) cut to Neutral at Merriman

171 Responses to “Tuesday Morning – Time For A Breather”

  1. 1
    BirdsofpreyRcool Says:

    “Pirate by another name watch”… that was a HOOT. Did your dogs help you write that?? Funny stuff, z.

    Checking with HeadTrader now.

    Credit en fuego again this morning.

    IG 128 bps

    HY 84 1/2

  2. 2
    BirdsofpreyRcool Says:

    TechTrader and HeadTrader on different sides of the fence for today.

    TechTrader = sell/short the morning rally with 60/40 odds. Odds increase a little if we have a gap down.

    HeadTrader = still feel like we can buy pullbacks… personally, he likes the tech space.

    There you have it. We shall see…

  3. 3
    zman Says:

    Thanks BOP. Wishy-washy open plus dearth of news in the energy space.

    On Correa, saw reserve figures in that park that put the price tag per barrel above $5,700 but that’s gotta be a mis print … or he’s just crazy.

  4. 4
    zman Says:

    CNBC commenting that the BDI has been up 21 straight days.

  5. 5
    zman Says:

    E&P stocks off harder than the market, up double it yesterday so that’s to be expected. Volumes are very light even as opening period volumes go.

  6. 6
    BirdsofpreyRcool Says:

    A lot has been said about this May being like last May, which was the high for the year. Two things are very different this time.

    Positive = credit market improving, at an increasingly rapid pace (hence, treasury yields are backing up; which is normal and not necessarily an indication of inflation fears).

    Negative = uncertainty eminating from Washington DC with an unprecidented intrusion into the private sector.

    Health Care and Cap and Trade. Those are H-U-G-E issues. Imagine, govt bureaucrats, crawling over every aspect of your business to “determine your carbon footprint.” Will make SarBox look like Pee Wee Baseball vs the Big Leagues.

    So, it’s different, this June.

  7. 7
    BirdsofpreyRcool Says:

    Pending Home Sales MoM for April due at 10am. Could set the near-term direction.

    Also, vehicle sales for May trickle in throughout the day.

  8. 8
    zman Says:

    BOP – agreed, plus have to admit the market is probably a bit ahead of itself.

    I may take a look at entering OII on a pullback. Good story, improves with higher oil, also seasonally strong. One man’s hurricane damage is another man’s inspection and repair bill.

  9. 9
    1520sbroad Says:

    z – a follow up from yesterday found a good site for carbon trading info:


    goes pretty indepth into the registration of offsets and trading

  10. 10
    West Says:

    it looks like KOG is ready to break above resistance and move towards 1.50 next level of major resistance. Maybe Tater Trader could have a look & shed some lite .THX; On the bakken acq yesterday it seems that these were all related to the same trade where one partner sold their interest & the other wi partners bought their interest.

  11. 11
    BirdsofpreyRcool Says:

    wow. Pending Home Sales were expected to be up 0.5%. They came in up 6.7%. wow.

  12. 12
    BirdsofpreyRcool Says:

    West — do you think NOG sold some of it’s acreage? I need to plot the locations on a Bakken map. But, doesn’t look to be in the hi-rent neighborhood.

    That said, Frank L. at GEOI is a very savvy asset buyer. VERY savvy. He has the smarts to walk away from any deal that won’t make GEOI a solid return. So, given his name on the marquee, I would guess it’s a good acqtn for the parties involved on the buying side.

  13. 13
    zman Says:

    re 11 – thanks for highlighting that. I used to play other non-hydrocarbon related things, like forest products. In my experience, at inflections in the cycle, where you start to see demand pickup, things will be lumpy and bumpy, not linear. However, if you get a pickup in permits and subsequent jump in starts, stocks like WY will launch. Goes double if we get a spinner on Florida, the Gulf or the East Coast. That stock is just coming off its lows on a weekly chart.

  14. 14
    kyleandy Says:

    bop – according to press release NOG acquired acreage.

  15. 15
    tater Says:

    KOG added

  16. 16
    zman Says:


    EOG – Added EOG June $75 Calls for $3.10 with the stock at $74.7, off almost 3%. Just repositioning for sideways to slightly upward move in oil and a gravitation towards names in the E&P space that are either oilier or are getting oilier.

  17. 17
    zman Says:

    Re 16 – that was 5 calls of the EOGFO

  18. 18
    BirdsofpreyRcool Says:

    z — yes. In Nature and in Markets, volatility increases at significant changing points. It is the least “smooth” market action… but, it is also an indicator in itself.

    The recession is behind us. Only question is what is the recovery going to look like?

  19. 19
    zman Says:

    Re 18. I’m not so sure there won’t be a double dip. Some things don’t look right to me or are just not picking up yet. I wonder at the consumers ability to spend over the summer months and into the fall. I think we may see some pent up demand hit retail, get everyone in stock land all a flutter, and then woops, where’d they go, stores empty, shelves full.

  20. 20
    West Says:

    This is my understanding of the situation. Windsor Bakken,LLC sold their interest in the approximately 60k ac that they had put together back in 2007. GEOI bought a 20% interest in this prospect for 2.5 mil back in 9/2007. They also committed 1 mil to drill 11 wells. This is all gleaned from O&G Investor & other news sources. The Windsor Bakken wells lie on ac held by NOG. So I don’t think NOG sold anything but instead added to their wi in these acreage blocks. From what I can find Slawson Exploration( a private co) will be operator and has been drlg in the Williston basin for 25 years and uses latest drlg and comp techniques. I will add if I can get more specific.

  21. 21
    West Says:

    thx tater ,gave u a vote while i was there

  22. 22
    zman Says:

    TexW – If I have IP plus pressures, choke sizes, and lateral lengths and a few dozen wells in one area of a play and then a halve dozen with similar parameters in another part of the play (with IPs less than half) would that be enough for you to tell me something about the character of the wells. I don’t have all the data to plug into a reserve equation but I have those pieces plus por and perm.

  23. 23
    zman Says:

    Refining watch: seeing another bout of unplanned maintenance, probably strong indications for gasoline and therefore higher crude.

    Crude just turned positive on the day.

  24. 24
    zman Says:

    Help from the crew watch:

    I’m looking into getting a netbook. The last time I asked for help on finding a good laptop I got lots of good advice and then proceeded to ignore it and go for the flashy, giant screen 15 pound Toshiba Satellite. Ugh. I describe that one as pretty but dumb.

    Anyway, want a netbook so I can travel light. Needs to run office and firefox but that’s about it. Thomson is a beast so not asking that of it but maybe a web based trading platform as well.


  25. 25
    zman Says:

    More on refiners: HOC and TSO on the tape in last 24 hours with deals. Stocks holding up well post announcement and now people are thinking that the strong ones will pick off some cheap assets.

  26. 26
    VTZ Says:


  27. 27
    kiaora Says:

    Z…I’ve been using an OQO for aprox one year and it’s great on the go. Has a verizon card in it so you can use it anywhere.

  28. 28
    VTZ Says:


  29. 29
    zman Says:

    So I should forget that $300 acer? At heart, I am a cheap bastard.

  30. 30
    zman Says:

    Ok, V, thanks, just saw the S series.

    OQO looks nice, pricey though

  31. 31
    kiaora Says:

    one trade

  32. 32
    VTZ Says:


    You could get one of those netbooks although I don’t have a lot of faith that they’ll be good at surfing multiple webpages with auto-update on your webtrader.

    I’d rather see you go with something better with a 10″ screen if you want real functionality.

  33. 33
    zman Says:

    K – lol, I suppose you have a point.

    V – something like the S10 and maybe add an extra gig of ram?

  34. 34
    VTZ Says:

    Yeah, the 1 GB will kill you for surfing with multiple webpages open. I’ve had a crappy laptop before and compared to a good one I, personally, would just pay up for performance/quality.

  35. 35
    kyleandy Says:

    z – dont knock the $350 acer. am typing this on it. its worked perfect for over a year!!!!!!

  36. 36
    zman Says:

    Thanks Kyle. Just found VTZ’s s10 lenovo for the same price … guess I can live with pink, right?

    Watch the stocks is like watching paint dry today. Very little news and the RBC presentations are closed to the web for the most part.

    Oil off 25 cents which is nothing after the 6 day run it had. Dollar getting whacked again so if that stays off expect oil to mount a resurgence into the close, equity market willing.

    NG off 8 cents but again, up 41 cents yesterday so that’s not much of a pullback.

    There’s a low on the south side of the Caribbean but it looks pretty disorganized so no catalyst there for awhile. Watched a piece with Joe Bastardi last night talking about the rise of the pop-up hurricane, interesting, scary.

  37. 37
    zman Says:

    Bulk shipping webinar on Thursday here:


  38. 38
    VTZ Says:

    Since nobody is talkative today:

    tater/Nicky- can you guys comment on the reverse head and shoulders pattern in gold for me? Yes or no? and from a technical perspective if it pulls back on the neckline is the pattern still valid? That’s the sort of move I’m looking for.

  39. 39
    VTZ Says:

    Also… ~78.30 is the drop dead resistance on the dollar index… failure will not be pretty.

  40. 40
    zman Says:

    Agreed V. I’ll shoot Nicky an email.

    Well, at least I got the title of the post right today.

  41. 41
    VTZ Says:

    Another thought, most people perceive a breakdown in the USD to be a negative for the S&P and as such believe that a rollover in the dollar will leade to a rollover in the S&P.

    But, priced in any currency/commodity other than USD the index has become cheaper relative to other markets when it stays flat and foreign invesment could boost the index as the dollar falls. This is why commodities and the S&P have been trading together lately?

  42. 42
    RMD Says:

    BOP: re; GEOI in #12:
    GEOI is under the St.’s radar, I suppose due to small float. A quick look at the 10-K shows Frank L has bot, started and sold a few cos, just as they started buying acres in the Paradox Basin in ’08 then sold them shortly thereafter. Co. seems to have reverse-merged with Chandler Energy who got 10.6mm shares and is now down to 1.6mm. Valuation per proved reserves normal at $2.00mcfe. Looks like a big acquisition in 5/08 through a partnership maybe not the best timing, then sold stock and wts on 6/5/08 at what looks like a big discount, though it saved the balance sheet. Any further thoughts would be welcome, such as he’s a good buyer, how are they as operators?
    Quality of their acres/areas? etc. Thanks.

  43. 43
    zman Says:

    RMD – do you have an in at RBC?

  44. 44
    RMD Says:

    a small in. Old in retired.

  45. 45
    zman Says:

    RMD – ok, just trying to see if I can get a login for their presentation. I got one yesterday but it does not work. They speak at 1:55.

    Thanks for the help on the netbook. I think I’m going with the Lenovo.

    Back at ya with this: Sennheiser – gotta say, about 2 months in with their wireless headphones. Fantastic.

  46. 46
    zman Says:

    Gary – just realized I forgot to post those job listings on the wrap. Are they still good, if so I will post them now.

  47. 47
    zman Says:


    PXD – Added (10) July $30 Calls (PXDGF) for $2.10 with the stock at $29.12.

  48. 48
    BirdsofpreyRcool Says:

    RMD — I met with Frank last summer. He is an accountant by background… but his first job at Arthur Anderson was auditing a pipeline back in the 70’s. He liked the energy biz so much, he hung around. He has indeed started, built, and sold a number of energy companies. He has the backing of the Vlasic (pickle) fortune, so he has access to deep pockets. He is also parterned with GE Capital on a number of JVs where GEOI gets the asset free and clear upon certain payout targets.

    GEOI is somewhat complicated as they are involved in a number of different plays through a number of different ownership structures. Last summer, he said that GEOI operated 80% of their properties. That is pretty high, for a little squirt of a company…. but allows them to control their capex.

    Frank has been able to grow reserves and his balance sheet and bank support through a difficult time. The man really knows how to manage for cash flow too…. and he will NOT overpay for an acqtn. I know he looked at a number of different properties in the Bakken over the last year. He walked away from most of them. But, I also know that the Williston Basin is a main focus area for the company.

    Other than low float, little street coverage, small size, and somewhat complicated partnership/JV structure, it’s a great stock to own. I’ve owned it in the past… but, it was just too much of a red-headed stepchild… didn’t go up with the rest of the energy boys but went down when they did.

    At some point, the Vlasic Family Trust will probably sell 1 to 1.3mm shares of their 5+mm share ownership. That would help float. At that point, the stock becomes a lot more attractive.

    Can’t say enough good about Frank, tho. He’s a straight shooter and the hardest working guy in the biz. Just as he has in the past, i believe he will grow GEOI and sell at the right time for a great price.

  49. 49
    BirdsofpreyRcool Says:

    RMD — let me amend my statement about the GE JVs… the way it was explained is that GEOI will buy the producing asset with GE’s backing for a 2% ownership + annual management fee. After GE achieves a ROR of 11%, the ownership of the JV goes from 2 to 36% for GEOI. At some point, I think GEOI either sells the asset, or buys it out completely… but that is a less-well-defined tail (at least, to my undertanding of it).

  50. 50
    zman Says:

    Tater – your SP500 943 level indeed proving to be troublesome.

  51. 51
    RMD Says:

    Thank you; excellent perspective on GEOI. I will file it away in the “keep an eye on this one” file.

  52. 52
    zman Says:

    Speaking of pop ups


    Water still too cool to expect much but interesting how this just kind of came into being.


  53. 53
    kyleandy Says:

    z – last link not work

  54. 54
    zman Says:

    Relistened to the last PXD call, no change in thinking.

    Kyle – its probably because I zoomed on it before copying the link. That link for sea surface temps is on the weather tab.


  55. 55
    zman Says:

    Market stuck in neutral ahead of oil numbers, adp jobs

  56. 56
    zman Says:

    BOP – nice call on the DPTR the other day. I couldn’t get up to speed in time to nab before that rally.

  57. 57
    zman Says:

    GDP up 6+% today on well news. Glad to see well news matter again.


    Note the well is on the less prolific (so far) Texas side of the Haynesville
    * 9 MM/d IP
    * 24/64 choke which is comparable to many of the big wells HK and others have talked about around Caddo in NW LA
    * 3,100 foot lateral – about average to a little short for recent wells
    * 4,375 psi – much lower pressure than the 7,500 psi overpressured wells you see in the Louisiana section.

    TexW – Is that enough information for you to raise an eyebrow on the IP or not?

  58. 58
    BirdsofpreyRcool Says:

    Ford just announced that they are upping production for 3Q by 10%.

  59. 59
    zman Says:

    Gotta compete with Chinese Hummers

  60. 60
    BirdsofpreyRcool Says:

    Chinese ain’t gonna cap their growth in carbon… buying Hummer is a slap in the face, just to prove it.

  61. 61
    Nicky Says:

    Good afternoon all.

    $ can move lower – its not terminal! Very oversold and many other currencies massively overbought. I looked at chart again and nothing to say we can’t move lower to mid 77’s or mid 76 but we are oversold so this can stop anytime. Sentiment is also way too overbearish. Its ripe to turn….

    Will look at gold VTZ

  62. 62
    Nicky Says:

    VTZ yes I can see your inverse head and shoulders and yes I am expecting metals to move a bit higher.

  63. 63
    VTZ Says:

    So if it moves up to the neckline of the pattern and pulls back to my 967 or 930 level does the inverse head and shoulders still suggest a breakout or does the pullback void the pattern?

  64. 64
    Nicky Says:

    That would be too much of a pullback and negate the pattern if I am looking at the right inverse h and s.

  65. 65
    West Says:

    z, newbie question? # 56 how would i go back & find those comments on dptr. Is this possible?

  66. 66
    bill Says:


    i remember when the eco-terrorist were burning hummers at dealers lots

    i guess they won-

    those cars are outlawed in favor of the 2 seater golf carts

    i for one will not be driving the 2 seaters

    which means that old suvs and minivans will go up value

  67. 67
    zman Says:

    West – couple of ways. If it is in comments, if you remember the date you can go to that post using the calendar above. If it is in a post (which this one was not) you can use the search bar at upper left. You can also just ask me and I’ll dig it up.

  68. 68
    VTZ Says:

    March to July 08 shoulder, Aug to jan 09 head, Feb 09 to now 10 shoulder.

  69. 69
    tater Says:

    S&P still working on the 200EMA level. That is an area that is thought to lead to sideways trading. As such, I am contemplating that gap left behind around 920.

    VTZ –
    Personally, I think that gold is tired here. Helene Meisler keeps talking about that inverse head and shoulders and I’m like WTF???
    I know she has a column and all, and I find her to be extremely gifted, but I’ve never heard of an inverse H&S at any place other than a bottom. For the time period that she is analyzing, I find the concept to from out in left field.

  70. 70
    West Says:


  71. 71
    zman Says:

    West – Ask away, this is the slow season.

    Gary – getting ready to punt those KWK 12.50s, just milking it here and still pretty far out of the money, that option is pretty collapsible in my view.

  72. 72
    VTZ Says:

    Got it… I’m not a technical guy so I’m just asking my kindergarten level technical questions.

  73. 73
    Nicky Says:

    VTZ – that wasn’t the one I was looking at. Will take another look but you know that like Tater I think gold is tired.

    Tater any thoughts on USD?

  74. 74
    tater Says:

    The reason that I am so adamant about the H&S idea is that chart patterns manifest because of trader/mass psychology. It’s not the other way around. The psychology behind a H&S pattern, whether it be inverse (for a bottom and therefore occurring after a downtrend) or regular (for a top and therefore occurring after an uptrend) is specific to the trend that precedes it.

    And quit sand bagging VTZ 🙂 You know a heck of a lot more than you let on. I’d like to see more of your ideas if you don’t mind. Seems to me like you’ve been making a bit of money this year!

  75. 75
    tater Says:

    USD thoughts? Why yes, I was out of wet wipes changing the little guy just a short time ago, and well…

  76. 76
    zman Says:

    Canada likes HK


  77. 77
    VTZ Says:

    Well I got pillaged last year so I smartened up. I don’t mind, tater. I’ll post some of my holdings/will-be-holdings/ideas tonight. Keep in mind I have lots of Canadian names.

  78. 78
    tater Says:

    $USD monthly and weekly added (daily just doesn’t help me much)


    I don’t really have any comments on the dollar, other than I believe it to be the most manipulated trade on the planet. Real live back room cloak and dagger stuff. Not so much conspiracy idea, as much as that seems to be the working definition of a floating currency. It is what everybody in the room says it is. The ultimate Emperor’s New Clothes. Therefore, that goes for gold too.

  79. 79
    tater Says:

    Aren’t we at war with you guys?

  80. 80
    Nicky Says:

    That horrendous J Kilduff caught my ear on CNBC earlier (I have now turned it off!) – super bullish on oil so he is obviously long. All the fast money guys recommending closing oil longs here now and waiting for a pullback. Even Joe Terranova who said many in now who were too late to the party and its cruising for a fall. Seems like they want to see $70 first though.

  81. 81
    zman Says:

    Nicky – saw a story this morning entitled “1,000 S&P or $100 oil, which one first?”

    That’s just nutty.

  82. 82
    VTZ Says:

    Economic war… Buy American BS.

  83. 83
    Nicky Says:

    SPX at 1000 first I think.

  84. 84
    Nicky Says:

    7 up days in a row on oil so I was very wrong about a fall today.

  85. 85
    tater Says:

    Love the line about GM = Government Motors. Wonder how long before we line everybody up in kindergarten and make them recite how much they need to buy from the glorious State.

  86. 86
    Nicky Says:

    Thanks Tater. I have been watching the sterling and euro dollar move the last few weeks. Sterling is incredible – its so overbought and relentless 200 point plus moves day after day. It is gonna end in tears too.

  87. 87
    Nicky Says:

    Z – what are expectations for inventories?

  88. 88
    zman Says:

    crude down 1.5
    gaso up 0.7
    dist up 1.05

  89. 89
    Nicky Says:

    Aaaagh was that their idea of a down day???? Please!

    thanks Z

  90. 90
    TEXWS6 Says:

    RE #22: We should be able to come up with something.

  91. 91
    BirdsofpreyRcool Says:

    must read!

    Stocks will still be volatile (as they don’t really get all that has transacted in the credit market over the last 2 yrs), but the credit crisis is over. Even the Credit Bears can’t get it going again. Credit once again is a foundation, on which the stock market valuations can build. We no longer have to talk about the bond market on a daily basis. And that is a good thing.


  92. 92
    Nicky Says:

    Okay BOP so whats the catalyst for the next big leg down in the market starting later this year or early next?

  93. 93
    BirdsofpreyRcool Says:

    Leg down… In stocks? Credit? The economy? Materials? Oil?

    If it wasn’t for the uncertainty generated by our own Govt, it would be like March 2003 again…. when we climbed out of the last recession. The recession is over… only, this time around, housing is not going to explode. As a matter of fact, house prices will probably continue to fall for a while. But, unless/until our own Govt does something to crater our economy, we should see a creep back to “normal.” Problem is… i’m not exactly sure what “normal” looks like.

    (We’re all driving golf carts and signing up to see our Doctor in a year or two?)

  94. 94
    West Says:

    does anyone here follow WLL, whiting petroleum ? U cannot hardly trade the options because of the spreads. Just wondering

  95. 95
    Nicky Says:

    I am struggling with seeing this recession as over. As the Fed didn’t even see this coming I have no faith in the fact they are going to steer us out of this. History proves you can’t inflate your way out of recession. We are likely look at something much worse ahead.

  96. 96
    zman Says:

    I do follow WLL, not as closely as some of the other Bakkens like CLR, EOG. They’ve had a lot of success, give great presentations and have been on a tear of late but the option spreads, like you say, stink.

  97. 97
    zman Says:

    TEXW – thanks much.

  98. 98
    BirdsofpreyRcool Says:

    The Fed can only make it easier to access capital. It’s the general level of activity in the economy which drags us out of recession. Last time, it was the War Machine (and all the spending that went along with it) and then the ATM of housing re-fis and 2nd loans. This time, the level of activity has fallen to the point where it will fall no further. So, headed up from here.

    Hey…. NO WAY is this a V-shaped recovery. And I don’t even know what this economy is going to look like, exactly. The way it’s going, we are all going to directly work for the Govt (as opposed to indirectly, which we do now). Also, I said from the start that there are a lot of jobs that went away, permanently. We may be back to more of a one job/household economy. But, we are NOT headed for a depression.

    I could be wrong. But, never underestimate the predictive power of the bond market. It told us we were in trouble, long before Bernanke and Friends (and Barney and Nancy and Chris and GWB) recognized it. The bond market is telling us that the main war is over. There will be clean-up battles. But, the massive carnage is behind us.

  99. 99
    zman Says:

    Nicky – me too. I understood it to be over when Lehman raised money. At least that’s what Bartoromo was yelling. But then Lehman and Bear went away…and Maria got very quiet.

  100. 100
    West Says:

    z, not to get personal but do u buy some stocks in a longer term acct such as eog and have a separate acct that u trade options with ?

  101. 101
    Nicky Says:

    God somebody light a candle under the dollar and lets get these markets moving. This is tedious!

  102. 102
    kyleandy Says:

    bop – i’m with nicky. no signs of recession over down here. my business terrible, all my unemployed friends still unemployed only housing salea are at deep discount. zero new builds, golf courses all losing memberships. stores still empty

  103. 103
    Nicky Says:

    BOP is there anything to say the credit markets maybe forecasting better times ahead but only short term? By that I mean six months or so out. I only ask that as I fully expect equities to have a reasonable year and the charts I am looking will point to everything looking ‘rosy’ for a while.

  104. 104
    BirdsofpreyRcool Says:

    nicky, kyleandy — I don’t want to sound like an out of control cheerleader as housing prices will continue to go down, jobs will continue to be lost, more Ch 11s teeing up… for 4-6 months. No argument. But, we are not headed for a depression and the economy will improve from here. Just not a V-shape recovery. But, a recovery, nonetheless.

    Credit Market says so. Until that changes, I won’t bet against it.

  105. 105
    VTZ Says:

    Wasn’t it the credit market that got caught off guard and started all this?

  106. 106
    BirdsofpreyRcool Says:

    What you see, depends on where you sit. If you’re the Gov of California, it don’t look so hot. If you’re a blue collar worker at Ford, you’re glad you still have a job… and will be picking up more hours starting in the 3rd quarter.

    The Credit Market has been in a contraction/recession for almost 2 full years. Much longer than stocks. Credit went ka-boom first. Credit will recover first. It will just take a while for the rest of the economy to “feel” it.

  107. 107
    Nicky Says:

    Oops I probably should say that the end game is near with this rally and before a decent correction starts. Still like the 956 spx area for a top.

  108. 108
    zman Says:

    BOP – question for you on relationship between various high yield instruments. Have you seen them move up all together historically. Like high yield bonds moving with high dividend paying equities?

  109. 109
    zman Says:

    PXD well into their RBC presentation. Must be nothing new outta them on the E.F.S. well. Should be any day now but these things have a way of taking longer than you’d think after hearing a CEO comment on them.

  110. 110
    scottjasonm Says:

    Do any of you play the USD? (Nicky?) Any favorite ETFs to trade options on? Just curious…

  111. 111
    BirdsofpreyRcool Says:

    VTZ — the credit mrkt did not get caught off guard. Go back and look at the yield curve from March of 2007… over 2 yrs ago. The curve was inverted. Told you “something bad” was going to happen. Of course, the yield curve spent a good amount of time inverted since about summer of 2006… longest I have ever seen an inverted yield curve persist. But, bond people knew this was coming. They didn’t predict the depth (Lehman going poof) or collateral affect on the consumer (which made GM go poof… or was, at least, the last straw for GM), but the bond mrkt knew when the music stopped, it would be ugly.

    Problem was, they kept dancing until the music stopped. No one wanted to sit down early and miss all those fees.

    When we look back at this, it will be Fannie and Freddie (and their enablers) and Moody’s and S&P (rating agencies) who allowed the music to play, several years past curfew.

  112. 112
    BirdsofpreyRcool Says:

    z — #108. The high yield bond mrkt is the most technically-driven market in the world. It responds to one thing and one thing only in a rally. Money flows. And when people are comfortable enough to start putting money to work in corporate and high yield bonds, spreads tighten… and suck in more money. No correlation to dividend-paying stocks. Entirely different herd of investors, chasing corporate/junk bonds. But, a good year for high yield is usually a GREAT year for stocks.

  113. 113
    Nicky Says:

    Interesting thought (not my own) that ECB may cause a surprise at their Thursday meeting as with the huge run up in the euro in the last two weeks they are under pressure to announce quantitative easing. He was recommending shorting the euro. I agree but admit it could run a bit higher. Looks extremely vertical here however!

  114. 114
    BirdsofpreyRcool Says:

    caveat to 112 — there can be a 6-month lag between junk rallies and stock market performance.

    Also, the Govt is still the 8,000 lb Gorilla in the room. And he has a firm grip on that gatling gun. So, the GGG could still blow the party up, before it gets it’s groove going.

  115. 115
    Nicky Says:

    Scott I am very closely watching the USD – you will see from things I said earlier today I believe we are very close to a low. Can’t help with ETF’s however.

  116. 116
    West Says:

    z, I spoke with a pxd man here in the permian basin & he said that they were not drlg anything here right now . They have always drilled thru the slow times even in the 80s and late 90s. Just kinda struck me as odd, he did say he thought it was to beat down the service cos prices. Maybe the wolfberry is playing second fiddle to the other plays.

  117. 117
    cargocult Says:

    BOP- if the credit market is the first to recover how do we gain from this recovery? How do we play it?

  118. 118
    zman Says:

    Thanks West, they’ve got very little going on due to low prices (except workovers), hope to get some wells drilled with higher oil. Gas activity at a standstill too, at least in S. Texas (Edwards) until they see $6 gas. I’m just playing their Eagle Ford angle now for a quickish trade. The name has always been cheap but they are getting away from some of the things that caused that including some very poor hedges last year.

  119. 119
    zman Says:

    Thanks for the highyield comments, as always BOP.

    Was wondering if that correlation was driving LINE higher. I think it could also be funds exiting money market and using the MLPs as a bank for the yield as they have been known to do. Why get paid a little to wait when you can get paid a lot, lol.

  120. 120
    BirdsofpreyRcool Says:

    cargocult — historically, you buy early cyclicals. Materials, energy, equipment, transportation. In this case, you have the added demand for hard assets coming from the developing world. So, shipping, oil, grains, lumber, industrial metals, chemicals… and find companies with manageable levels of debt on their balance sheet, who have made it through the lows. You don’t necessarily want the guys with the pristine balance sheets… some debt gives a turbo-boost to equity, in a recovery. However, there are still a lot of industries with excess capacity (like housing), so have to watch out for that. Also, a steep yield curve can be a soothing balm for banks… they make good money, loaning to qualified borrowers, in a steep yield curve environment.

    All this said, Friday’s Non-Farm number could be ugly. It would be foolish to say it’s straight up from here. But, the Credit Crisis appears to be over. That gives us a foundation. The foundation we have been lacking for two full years now. That is a huge positive… and will allow other parts of the market to start to heal.

    Sheesh. I really don’t mean to sound like a Cheerleader on Mountain Dew… but, the credit market got us into this fine mess… and the credit market is getting us out of it.

    Unless the GGG starts to shoot capitalists on sight.

  121. 121
    ram Says:

    ZMAN – Were there postings from Gart?

  122. 122
    BirdsofpreyRcool Says:

    Also, i would really hate for the mrkt to go straight up from here… i’m still lurking in the weeds for another swat at KOG before the end of June… heh, heh, heh.

  123. 123
    ram Says:

    Sorry Gary – apparentlt t and y are yo close.

  124. 124
    zman Says:

    Ram – there were, waiting to here back from him, if they are still valid I will put in tomorrow’s post.

  125. 125
    zman Says:


    Would someone be so kind as to post the API numbers when you see them? Thx

  126. 126
    bill Says:

    tudor up’d gdp this morning

  127. 127
    West Says:

    bop what your swat $ on kog? tbd

  128. 128
    BirdsofpreyRcool Says:

    The High Yield CDS index was just quoted at 85, up 7/8 for the day. It has been up 1-2 points every day, for the last week. I think HY at 85 and IG in the 120s is where I said we needed to get, to put a foundation under this economy. We are there.

    IG 123 -7bps

    HY 85 +7/8 points

  129. 129
    BirdsofpreyRcool Says:

    West — LOL…. “swat $”…. love it.

    It WAS 1.03. It is now 1.08. But, the key will be to grab it before it gazelles away at the “end of June” announcement.

  130. 130
    zman Says:

    NFX on the tape with 2 deepwater discoveries.

  131. 131
    Nicky Says:

    BOP re 128 – if that is the case then why is the US dollar so weak? That is pricing in rip roaring inflation.

  132. 132
    BirdsofpreyRcool Says:

    Nicky – supply. there are a lot of dollars out there right now. but, in order to have inflation, you have to have tight capacity. don’t see tight capacity in many areas (can’t even think of one, right now).


  133. 133
    zman Says:

    Interns #1 and #2


  134. 134
    Nicky Says:

    I don’t disagree as I don’t see an inflation problem any time soon either. That said the flight from the $ I would consider to be somewhat worrying for the US.

  135. 135
    zman Says:

    VLO says to report net loss, stock down 7% AH. Better cracks, weaker volumes. Street saw a 2Q at positive $0.69. VLO says looking for 50 cent loss.

    I continue to avoid the indie refining group.

  136. 136
    zman Says:

    Dman – just saw a CNBC headline:

    “U.S. to give tax credits to companies making black liquor” – that’s the forest products group.

  137. 137
    jat Says:


    Utilization DOWN 1% from 84 to 83
    Imports up 154 from 8874 to 9028

    Crude inventories down 828

  138. 138
    zman Says:

    Thanks Jat, did you see the gasoline and distillate numbers?

  139. 139
    zman Says:

    Much bigger than expected build in distillates at 3.4 mm barrels, much smaller than expected build in gasoline at +99,000 barrels.

    Oil came off a little in after market.

  140. 140
    isleworth Says:

    Very cute interns there Z!!!!

  141. 141
    zman Says:

    Thanks. Just waiting for them to be able to 10 key.

  142. 142
    bill Says:

    Capes cracked 100,000 per day

    10% of the fleet is bottle necked in china

    RATES for a capesize vessel broke the $100,000 per day barrier, with Italian trader Coeclerici one of a raft of charterers paying a six-figure sum to secure tonnage in the Atlantic basin.

    Coeclerici chartered the 2003-built 175,775 dwt China Steel Responsibility at a rate of up to $105,000 per day to load coal from the Colombian port of Bolivar …

  143. 143
    bill Says:

    but the tanker market stinks now


  144. 144
    zman Says:

    Thanks for keeping us posted Bill, plan to get long on the next big market pull back.

  145. 145
    RMD Says:

    tuning in late to BOP and Nicky in #91-92:
    seems to me the stock bottoms of Nov. and March were discounting credit being unavailable at any price and stocks/bonds pricing in Chp’t 11 risk. Gov’t programs said: we are not sure what to do but we know, for sure, we have to get the credit markets functioning again, starting with commercial paper and working out the maturity curve.
    #91 says it has worked all the way to the equity markets and even they are working, albeit at lower prices vs. 6/08, just like the bond market is working but at higher yields reflecting the new lending standards which are now more like the old ones they forgot to adhere to.
    Stocks keep going up cause they are cheap because they over-discounted bankruptcy and investors own too much cash during an advancing market. They do not need a growing economy, they just need the lower discount rate on risk for a while.
    #92 can happen when cash is all invested and the reduced bankruptcy risk is priced into stocks/bonds. No, I do not know where that is.
    End of rant.

  146. 146
    VTZ Says:

    tater – I don’t have time to put together something coherent tonight. I’ll put something together Friday on my day off.

  147. 147
    zman Says:

    VTZ- thanks, looking forward to it.

  148. 148
    BirdsofpreyRcool Says:

    RMD — if you’re still around… thanks for the interpretation. Yes. The Credit Crisis is over. Not to say that everything is suddently “all right.” And — just perhaps — we have a relapse (i don’t think so, but i didn’t pay up for the expensive crystal ball), but it is not the Armegeddon Scenario i feared. And thank goodnes… would hate to actually attempt to bribe tater for space in his cave with shot gun shells and a can of beans. That said, we got damn close.

    We will be adjusting to a New Normal (whatever that is)… but it won’t look like the last 15 years. In some ways, that is good. On weekends, I see more families at the local parks than I used to…. more kids riding bikes… or, maybe I’m just imagining it. But it seems like some older, cheaper, simplier methods are creeping back in. For example, cookbook sales have moved up dramatically, over the last year… more home-cooked meals, perhaps? Maybe the kids don’t automatically get a car when they turn 16… maybe they will mow lawns to get that car. Who knows? Some change is good.

    But, we need a functioning banking, commercial paper, credit, and corporate bond market to enjoy even the simplist trappings of a normal economy. We have that back… about 80% of it, anyway. Some of the remaining 20% will take longer, some will never return (you will have to look up “Leveraged SIVs” in the hisory books)… but, it’s not all bad. The fear of everything, everyone, everywhere going Chapter 11 is past. Let’s figure out what the future looks like.

    Rant over.

  149. 149
    RMD Says:

    At some point the markets will over- discount a recovery (which should be very slow and long with high savings rates-remember that concept?- and high interest rates to get people to save again. Maybe that is the correction that Nicky is worried about because at that point we can all worry about how far into the tank it will go “this time”. it will have its own set of Chpt11s, and headline bad news. Enough cheerfulness for the night.
    Opps, 1 more: I wonder about a market where the largest vol. trader is the 2X or 3X synthetic financial bull/bear substitute. Call me old fashioned, but somehow I like the thought that what I own has sales and (hopefully more) earnings.

  150. 150
    zman Says:

    Good last 3 rants. Hear you guys on that. I certainly agree the energy sector, in many cases overly discounted doom and gloom. Hedges, no hedges. Didn’t really matter. Historic trading ranges were busted on TEV/ EBITDA, P/CF, leaving people scraping up NAV numbers despite the fact that there were no buyers. This led to further irrational declines. I know, I know, I’m a polyanna. But the reawakening of credit and the modest, and I do mean modest recovery in oil has begun to lead analysts back away from the darkness of the NAV path and towards the cash margin break even analysis leverage path. Through this, the stocks can suddenly become “cheap”(er) even as they gain in share price.

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    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Tuesday Morning – Time For A Breather

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    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Tuesday Morning – Time For A Breather

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