12
Oct

Monday Morning And All Is Green

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Sentiment Watch: All eyes on earnings this week. And economic data. And the height of the market.

The week starts off slow with little new data to view Monday, adds in a couple of Dow component earnings on Tuesday before a deluge of data from both earnings and the economy hit mid week.  The market appears set to move up into the data and new 2009 highs look to be on tap. Last week was so strong based in large part on the better than expected performance of (AA) that I've included a small table of pertinent, to the markets if not to energy, reporting companies as a reference along with my usual look at the coming week's eco data. Note that oil inventories are delayed a day due to the Columbus day holiday today. I plan to continue raising cash as the markets move higher in the early part of this week with the occasional repositioning into longer dated calls as well later in the week, depending on market sentiment at that time. 

The Week Ahead:

  • Monday 10/12: Columbus Day Holiday, stock market open, bond market closed, no data release scheduled
  • Tuesday 10/13: No eco data release scheduled
  • Wednesday 10/14:

    • Retail Sales for September (-2.3% forecasts vs last months Clunkers boosted 2.7% gain),
    • ex Autos Sales (forecast 0.3% vs 1.1% last month),
    • FOMC minutes (this will be highly scrutinized for signs of an end to the easing, don't hold your breath that it is soon)
    • CHK analyst day.
  • Thursday 10/15:

    • Natural Gas Inventories (10:30 am EST),
    • Oil Inventories (11:00 am EST),
    • Jobless claims (forecast of 510K vs 521K last week which was smaller than expected)
    • Empire State Index
    • Philly Fed (October forecast 12.1 vs 14.1 last month)
  • Friday 10/16:

    • Industrial Production (September forecast 0.4% vs 0.8% last month)
    • Capacity Utilization (Sept forecast 69.8% vs 69.6% last month)
    • Consumer Sentiment (Oct forecast of 72 vs 73.5% last read)

The Mostly Non Energy Earnings Calendar This Week

The energy earnings season doesn't kick off until Friday with (HAL) but I'll be dropping paragraphs about what I am expecting from out most trafficked names this season into each post this week and archiving them on the Calendar tab. We'll also have the energy earnings calendar for the season a little later this week.



In Today's Post:

  • Holdings Watch
  • Commodity  Watch
  • Stuff We Care About Today
  • Odds & Ends

Holdings Watch:

  • $10KP II:
    • $27,800
    • 62% Cash
  • Current Holdings Tab is updated.
  • The $10KP II Spreadsheet Tab is updated.
  • The ZLT Tab is updated.

 

Commodity  Watch:

Crude oil rose 2.6% last week to close at $71.77. The 12 month crude strip is now trading at $74.75. This morning crude is trading up over a buck to the $73 level as cold air grips much of the country and the dollar edges slightly lower. 

  • Very Cold Air Watch: I normally track CDDs in the summer and HDDs (heating degree days) in the winter. I do this mainly for the gas demand side of things. This week I note also the verly large jump in oil home heating degree days which should prompt some pretty immediate responses in terms of distillate demand:

    • Two weeks ago oil weighted HDDs were: 52
    • Last week (which will help determine the distillate demand in this Thursday's report: also 52, 
    • This week's forecast: 123 (more than double the prior week means very very cold air) vs
      • normal of 87
      • last year's reading of only 51 last year

Natural gas closed up 1.1% last week at $4.77 in fairly volatile trading.  The 12 month strip is now trading at $5.87.  This morning gas is trading about about a dime.

  • Bitter Weather Watch: It's getting colder with more of the country see early season snow. In the northern Rockies, Plains and Western Canada, cold records are being shattered by as much as 10 degrees with temps 20 to 30 degree below normal (lots of fun to drill those Bakken wells in). Cooling Degree Days (CDDs) compared to gas storage injections:

    • Week Before Last: 42 HDDs
    • Last Week: Much cooler than expected at 61 gas-home-heating weighted HDDs vs
      • a previous forecast of 53
      • Normal for this week of 52
      • and last year's 50 HDDs
    • This Week's Forecast: Even colder. Forecast of 83 HDDs vs
      • Normal of 65
      • and last year's reading of only 43
      • This is exactly what the demand doctor ordered.  
  • Tropics Watch: Not much to see, a few tropical waves but little that has hope of organizing due to shear. The Tropical Storm that was Henri is now a disorganized cloud pile heading west.

Stuff We Care About Today

Game Plan For The Week Watch:

  • I'll be looking to raise cash in the early part of the week into market related strength
  • I have a loose list of names I'll be long over earnings this reporting season which is quite a bit shorter than the number of conference calls I'll be on. Always the case but the recent run will make me decidedly more choosy as to who I own going into numbers. 
  • In the next two weeks the Stuff section will contain company specific thoughts on what I expect to / would like to see out of the highly trafficked names around here on their earnings reports and calls.

Saudi Aramco Announces $0.5 B Work To Be Done On Ghawar

  • Ghawar: the biggest oil field in the world
  • 5 year turnkey project (rigs, services, you name it). Sounds like the contract would go to one bidder with an eye towards reducing costs; to be awarded mid November
  • Known bidders are: BHP, HAL, Sinopec, SLB, and WFT. 

CNOOC To Bid For Jubilee Stake Vs Exxon

  • Exxon has already bid $4B for Kosmos Energy's 23.5% in the deepwater discovery off Ghana
  • CNOOC (the Chinese National Offshore Oil Corporation) plans to enter a joint bid with the government of Ghana to compete against Exxon for the Kosmos stake.
  • APC also has a 23.5% interest in the project.
  • APC  current TEV is $42.8 B so muiltiple $4+ billion bids coming in for an equal share in Jubiliee (which is though to be a massive multi billion barrel field) shouldn't escape the market's notice.

Odds & Ends

Analyst Watch:

  • (WFT) - Morgan Stanley cuts target from $55 to $50.
  • and raises (BHI) target from $90 to $99.
  • (CAM) target raised at HSBC from $36 to $42.
  • (APC) - cut to Neutral "on valuation" at SunTrust.
  • (OXY) cut to Hold at Citi.

Interesting Reading Watch:

 

152 Responses to “Monday Morning And All Is Green”

  1. 1
    TEXWS6 Says:

    Nice, early posts make my day. Thanks Z!

  2. 2
    zman Says:

    Tex – anytime I can do them early I will, not a lot of sector news out today so I went ahead and published.

    Stifel – starts XCO and PVA with Buy

  3. 3
    zman Says:

    Crude up 1.70+ at 73.50 on small decline in dollar, ups in the equity futures. Cold weather driving a 2% up in HO futures.

    NG up almost 3%, should see smaller injection this week and much smaller number next week as demand is kicking up for home, commercial, and industrial heating. We’ve been running the heat in the south all weekend.

  4. 4
    zman Says:

    Stifel starting FST at Buy.
    Tudor starting SGY at Accumulate.

  5. 5
    Jerome Blank Says:

    Crude futures go back on a P&F buy signal on a print of $74

  6. 6
    oklahoma Says:

    APC-downgraded by Robinson Humphrey form Buy to Neutral.
    http://www.cnbc.com/id/33276547

  7. 7
    zman Says:

    Ok- that RobbieHump downgrade is a valuation call, probably not going to draw a lot of sellers unless the market rolls over. I have to admit though that they are moving towards the upper end of their ranges for forward P/CF and TEV/EBITDA

  8. 8
    BirdsofpreyRcool Says:

    TechTrader is calling for a 60/40 LONG trade today. Keep in mind, he is usually done and out of the mrkt by noon.

    HeadTrader says he feel “like a million dollars” this Monday morning… “all green and wrinkled” (he gets up a 3am during the week, Monday’s are tough). HT says he “ain’t holding his breath” for a rally… as it’s gonna be slooooooooooow.

    Briefing notes that if today closes green — Such a start would put the S&P 500 on track for its sixth straight gain, which has not yet happened this year.

  9. 9
    zman Says:

    Thanks BOP. Hear him on the slow day concept, opening rally then sideways, maybe a stronger close, but no guidance from the stay at home bond market.

    Watching several names where opening indications put them at new 2009 highs. I’ll be raising cash as they put those in today and tomorrow.

  10. 10
    oklahoma Says:

    RE-7 Probably true and wishful thinking on my part …just looking for a little sell off and decent entry point

  11. 11
    zman Says:

    Headline made me laugh:

    http://www.marketwatch.com/story/obama-fails-to-win-nobel-prize-in-economics-2009-10-12

  12. 12
    zman Says:

    OK – I’m thinking a red day soon, big gap to fill there (like about $5). Otherwise I won’t be playing for earnings.

  13. 13
    zman Says:

    Nicky – any thoughts on levels for the broad market? Everyone late last week was talking 1,100 SP and 10,000 DJIA like they are a given.

  14. 14
    West Says:

    Bakken Report: XTO recently requested and recieved permission to expand the Heart Butte Field to 35,200 acres and will allow horizontal wells to be drilled on 320-, 640-, or 1280- acres. The new outline can be seen on the NDIC site map…….https://www.dmr.nd.gov/OaGIMS/viewer.htm…… XTO has proposed drilling 18 horizontal tests within this new designated field outline. This area also includes most of KOG’s northern acreage including wells # 3,4,5 and 6. KOG will be moving the Unit rig back west of the Missouri River as soon as they finish drilling their most southeasterly test the # 9. Viewing page 10 of KOG’s current presentation their are no proposed locations on the acreage operated by XTO. The thought is XTO will employee a different rig for their program with their initial spud possibly this year or early next year. Questar (STR) has just staked a bakken horizontal test well in 6-149n-92w , 1 mile north of the lateral terminus of KOG’s # 4, their best well to date . STR has 80,000 net acres in this area most located under Lake Sakakawea.(http://files.shareholder.com/downloads/STR/744941959x0x317698/cfd63d3e-382b-4562-89e3-2f0809a78a91/Barclays_9_09_09_3.pdf) … page 15. They currently have 2 rigs running on their prospects on the east side of the Lake. Most of their planned wells will be horizontals that have a lateral terminus under the Lake. Slide 15 on the above link shows proposed locations on both sides of Lake along shoreline. Their first wellMHA 1-18H-150-90 ,IP Test Date: 1/31/2009 Pool: BAKKEN IP Oil: 880 IP MCF: 415 IP Water: 2130
    Pool: BAKKEN Cum Oil: 52750 Cum MCF Gas: 33013 Cum Water: 8902 . So they are defintely encouraged by what they have seen……………………………………………………………………The bigger move in this area by the better financied major minors says that the smaller companies will be targets for takeouts to consolidate their positions in what is going to be the largest oil play in the lower 48 states. Most of the larger E&P cos are trying to increase their % oil production of total production and most of the other big plays are gas prone shale plays. Subash Chandra , Jefferies & Co. recently said, ” We are in the first inning of what will be one of the largest oil discoveries in North America. We’re probably talking billions of barrels of recoverable oil that can come out of this play. There are legitimately 1000’s of locations that Wall Street has yet to get its hands around.We are not draining draining the Three Forks with a Bakken well…so we pretty much double these locations over time.” This from Unconventional Gas Center article 10-2 -2009……….KOG will probably be taken out here in the next 6 months and the price is highly dependent on the results of wells # 7,8 and 9. Since this area represents approximately 1/3rd of their acreage the IPs of these wells will be very significant in determining stock value. Recent comments by Lynn Peterson make me think that wells 7&8 look good comparable to their other wells as far as drilling shows and data. Unfortunately nothing is concrete until completions are finished and oil is following into the tanks. I had been looking for pull back in stock price but the whole group has moved up without much pullback. . Unless there is some other news KOG should trade with the general market. The chart pattern looks like a consolidation before the next up move. It should be noted that unfavorable results from any of these new wells could be a body blow to the stock price……………Drilling activity is picking up across the entire basin with the rig count in North Dakota part at 51, with WLL@ 7-, EOG @ 5, XTO @ 3, CLR @ 3, BEXP @ 2 and KOG @ 1. Mountrail Co. remains the most active with 19 rigs turning right followed by Dunn Co. with 12. Look for some well completion from WLL shortly that should be really good wells with at least 1 3FKS well that offsets BEXP big ip well.If we get a pull back get your list ready because it may not dip very far down. Happy Hunting.

  15. 15
    zman Says:

    HK through the 25.81 which was the last high going back to before their secondary. Sites set on low $26s now.

    Something is wrong with the SP quote, stalled at 1075.06. Hmmm.

  16. 16
    zman Says:

    HK at 26. Jerome, any new thoughts on the PF there?

  17. 17
    Jerome Blank Says:

    So far crude oil futures finding support at their intraday R2 piviot point level, $73.50, trading above VWAP and Value area all morning, really trying to go back on a buy signal at $74, is there enough to reach escape velocity..

  18. 18
    Nicky Says:

    Morning all.

    Kicking off with some home truths not that the world is listening.

    http://www.theatlantic.com/doc/200905/imf-advice#

    (Foreword)
    by Simon Johnson
    The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

  19. 19
    1520sbroad Says:

    Z – do you see any news on GMXR – or is this just some short cover on the moves in gas/cold weather etc.?

    From the grain world – corn crop this year is likely going to be wet. Farmers have to heat it to get the moisture content down to acceptable elevator delivery levels. Propane and gas use likely to be heavier than normal for this application.

  20. 20
    oklahoma Says:

    HDY firming with good volume, reflecting xom and cnooc recent moves?

  21. 21
    Jerome Blank Says:

    HK is now on a buy signal with its print of $26, and has broken out of intermediate term trendline daily resistance, 6 times was a charm…you could see it building on the P&F chart, ascending P&F triangle, consistently higher lows, stepping up to resistance, like a boiling pot with the lid on…love this chart

  22. 22
    Nicky Says:

    Philips supposed to be the catalyst for this move up this morning. Total BS as their profits have come from accounting shenanigans, their sales are down 11% and they are forecasting difficult times ahead. We are supposed to think that is bullish.

  23. 23
    zman Says:

    1520 – Don’t see anything, gas refusing to fall, strong group, big short position, makes for a squeeze.

    OK – yeah, there’s going to be speculation that they don’t ever get to drill that well in 2011 as they will be owned by the Chinese.

    Jerome – muchas gracias

  24. 24
    zman Says:

    ZTRADE:

    HK – Sold (20), which is all, of the HK $25 October Calls (HKJE) for $1.35, up 228% with the stock at $26.20. I continue to hold 80 of the HK $26 calls here.

  25. 25
    Jerome Blank Says:

    Note about HK…although it is now on a buy signal, there is significant resistance to get thru at $27…so possibility of a short term pullback at $27, which could be a good entry

  26. 26
    BirdsofpreyRcool Says:

    z — your faith in HK paid off. Nice trade.

  27. 27
    zman Says:

    NFX broke through $47 to hits 2009 high, name still cheap but I will punch out of my calls very soon (today or tomorrow) as I look to get back in later in the month for earnings.

  28. 28
    zman Says:

    Thanks Jerome, I’ll be history before it gets there unless it’s a morning gap tomorrow… I may still be gone. Will look for red days in the market to reposition.

    Thanks BOP.

  29. 29
    bloodystupidjohnson Says:

    Z, nice play on those HKJP you bought Fri. I thought you had a touch of the sun when you did it, but it came up aces. Bravo!

  30. 30
    Nicky Says:

    Z – levels. So many possibilities. But 1080 is resistance still on spx, then 1094, 1102, 1109,1113,1123.

    I am beginning to think this is never going down which likely means we are close to a top. Oil finally making its move which was a missing part as I said Friday.

  31. 31
    Nicky Says:

    This is interesting but makes very little difference right now:

    On an operating (“scrubbed”) basis, the trailing P/E multiple on the S&P 500 has expanded a massive 10 points from the March lows, to stand at 27.6x.

    While we will not belabour the point, when all the write-downs are included, the trailing P/E on “reported” earnings just widened to its highest levels in recorded history of nearly 140x, which is three times the levels prevailing during the height of the tech bubble.”

  32. 32
    Nicky Says:

    What we also need to look for here is a POSITIVE correlation with the dollar. It doesn’t matter which way ie they can both be moving up or down. But this positive correlation typically corresponds with major tops and bottoms.

  33. 33
    zman Says:

    Anyone else having trouble with their S&P quote?

    Thanks for the levels Nicky.

  34. 34
    BirdsofpreyRcool Says:

    yep. SPX stuck at 1075.06

  35. 35
    Nicky Says:

    Yes Z there is an issue at the CBOE

  36. 36
    Popeye Says:

    1075.06 and does not seem to be changing.

  37. 37
    zman Says:

    Tyler Morning Telegraph citing strong results from 2 E. Tx Haynesville/Bossier wells (in the 15 to 16 MM/d IP range), probably the reason for the move in GMXR.

    Thanks RE S&P. How annoying.

  38. 38
    zman Says:

    CNBC talking cost cutting not working this quarter. No kidding. On the financials you should see more than that as we look back on the last few months and think about the number of debt and equity deals. Pretty much everyone did one or both and several names in the energy space did multiple debt deals in the last 3 months. JPM up first this week should be telling, they did a lot just in the energy space. GS after that widely expected to be strong.

  39. 39
    zman Says:

    Host having trouble again, apologies for any slow or failure to open refreshes.

    Please bookmark this site as we will be monitoring both:

    http://zmanbackup.wordpress.com/

  40. 40
    1520sbroad Says:

    #37 – thanks – gain was a little outsized compared to others so i figured there was something out there.

  41. 41
    Jerome Blank Says:

    KOG breaking out of its consolidation triangle, KOG goes back into x’s on a print of $2.75

  42. 42
    BirdsofpreyRcool Says:

    west — thank you for #14. Agreed, the results from wells 7,8,&9 will be key to pinning a valuation on the entire acreage block. Also, hearing that XTO will start drilling on their JV acreage (as operator) in the 1Q10. But, XTO is also cognizant of KOG’s cash position, so working closely with KOG’s schedule. At one point, for one month (March, i think), KOG plans to support 3 wells, simultaneously drilling… Unit rigs 1&2 overlap for a month + XTO will be drilling. Will make for an exciting 1Q!

  43. 43
    zman Says:

    WLL also on the list of stocks hitting 2009 highs.

    CFPS
    2009: $8.15 = 7.6x
    2010: $12.30 = 5.0x (still pretty inexpensive)

    I will be taking profits either today or tomorrow and repositioning later here on a red day.

  44. 44
    zman Says:

    Yes West, thanks, just had a chance to go back and read 14

  45. 45
    choices Says:

    #18-Thanks, Nicky-Johnson is a savvy guy-he was on Bill Moyers Friday eve-said it is too late for financial reform-opportunity has passed.

  46. 46
    choices Says:

    volumes seem to be very low in the energy sector-stks seem tired.

  47. 47
    BirdsofpreyRcool Says:

    It’s all about “relative value.” No one puts an absolute price tag on a stock or a market… it’s all about trade offs and comparisons. The bond mrkt is saying the stock market is “cheap” on a relative value basis.

    Today’s must-read —

    http://www.capmarkets.com/ViewFile.asp?ID1=315594&ID2=336051661&ssid=2&directory=11608&bm=0&filename=We_re_More_Off-Base_Than_We_Thought_10-12-09.pdf

  48. 48
    zman Says:

    ZTRADE:

    NFX – Sold 15 of 20 NFX October $45 calls (NFXJI) for $1.95, up 63%. Still raising a little cash.

  49. 49
    Jerome Blank Says:

    KOG prints $2.75…back into X’s

  50. 50
    BirdsofpreyRcool Says:

    Jerome — once again you pegged it… there it goes.

  51. 51
    Nicky Says:

    BOP = re 47 = I just don’t see how the stock market can be thought of as cheap.

  52. 52
    Nicky Says:

    Metals are still in v up as is oil. I am still looking for silver at 18.30 – 60 on this run, gold in the 1080’s (1100), oil $75.

  53. 53
    BirdsofpreyRcool Says:

    Nicky — I totally understand your skepticism. Totally. But the fact is that the credit markets point to a higher stock market. Credit availability and investor willingness to put money into bonds will support “equity-friendly” moves by companies. What is holding back this cycle (and job creation) is complete uncertainty over govt policy and their associated costs to small businesses.

    This uncertainty, along with stock market skepticism will keep stocks volatile.

    NOT SAYING it’s all smooth sailing and straight up from here. But, we are in the early stages of the next credit cycle. This cycle will run for years.

  54. 54
    bloodystupidjohnson Says:

    From Colin Twiggs: the RJ/CRB Commodities index found support at 250 and is now rallying to test 270. A breakout would confirm a primary advance to 300.

  55. 55
    reefguy Says:

    PQ- borrowing base reduced from $130MM to $100MM and their stock rises 10%. I think this is in play.

  56. 56
    BirdsofpreyRcool Says:

    reef — how much does PQ have drawn?

  57. 57
    jiveyjr Says:

    BOP/Nicky to borrow from a trader much more successful than me…this in all likelihood is just a “massive liquidity driven rally” like we had 1998-2000…many doubt it to have basis in fundies but it is a big rally nonetheless. He thinks one has to be careful and vigilant ; but to be too steadfast in dogma not to play is likely a vert costly mistake

  58. 58
    zman Says:

    My best guess is that a strong close today begets a strong open tomorrow, maybe some trepidation going into those Dow component earnings post close but JPM should do pretty well and they have been working to rein in estimates. My plan is to be pretty light going into Wednesday. We get NG inventories on Thursday first and then oil and both should be more positive than last week. Distillates should see a good pickup as people who have been putting off HO purchases start to regret that as record cold hits.

    On NG, we have a cold north/hot southeast mix which is very good for demand this time of year and will (ok, shouldn’t say will but it very much should improve) next week’s number. That could lead traders to conclude that LAST Thursday’s gas number was the last of the big injections for the season and that the injection season will end as it should on Halloween and not drag out. Still depends on weather but I like what I see at this juncture.

  59. 59
    zman Says:

    PQ – Sold my $1 cost stock back in the $5s. Story is a little more interesting now with a pickup in non-operated F.S. activity but I agree, think it is in play. XTO or even SWN as a buy makes sense. Longshot would be NFX.

  60. 60
    bloodystupidjohnson Says:

    Z, when are you going to start rotating into the Nov contracts?

  61. 61
    BirdsofpreyRcool Says:

    jiveyjr — #57… Wish I could be that eloquent. I agree with your statement.

  62. 62
    jiveyjr Says:

    thx BOP

  63. 63
    zman Says:

    BOP – re 56:

    As of June 30, 2009 the Company had $130 million of borrowings outstanding under (and no letters of credit issued pursuant to) the Credit Agreement.

  64. 64
    zman Says:

    BSJ – I’m taking more than my usual amount of time doing that. Earnings aren’t for another 2 weeks for most of my names if not longer. I figure the market has one to as much as five fall-out-of-bed days sometime during the next couple of weeks when some big name I could really care less about proves they don’t know how to properly guide the Street.

  65. 65
    zman Says:

    The more I think about a NFX for PQ deal the more it makes some sense. Easy to make that deal accretive on a CFPS and Reserves per share basis. PQ is more cash constrained but they have good property overlap and it would solidify positions in the Woodford which NFX likes more than many, give them a good position E. Tx Haynesville which is heating up and add to their Gulf Coast (they might even monetize that with the deal). Interesting, I’d probably a buyer on the ensuing M&A weakness.

  66. 66
    BirdsofpreyRcool Says:

    rats — wrote a comment about PQ debt but got thrown off when i tried to submit. will try to recreate…

  67. 67
    choices Says:

    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6299291/Energy-crisis-is-postponed-as-new-gas-rescues-the-world.html

    NG article

  68. 68
    bloodystupidjohnson Says:

    Have you thought about buying puts on some of the oil service names? They have risen as much as the E&P’s, but they have more head winds, and I don’t think they are cheap. I can see one of the oil service names really disappointing the analysis.

  69. 69
    zman Says:

    Re 66 – On phone with my site host now.

  70. 70
    BirdsofpreyRcool Says:

    PQ is in an interesting spot, with respect to their balance sheet. PQ can’t afford to “do nothing” here. They will either try to raise equity or add sub-debt.

    But, here’s the thing with the sub-debt. PQ currently has $150mm of high yield bonds out, with a Caa1/B- rating. These bonds are unsecured, but they have a negative pledge covenant… meaning, PQ can’t issue secured debt, layered between the bank and current unsecured. Maybe PQ tries to issue more unsecured debt… but I doubt it. Any issue less than at least $200mm is not really do-able.

    So, here’s what I think PQ might be doing… the 10 3/8s debt is currently callable at 105.19. It is conceivable that PQ comes to market with a #200 – 250mm debt offering, calls the existing bonds at a premium, and pays down the bank debt. It totally depends on the outlook for PQ’s cash flow in 2010. If the quality of the assets is good, and if PQ’s drilling program will allow it to be CF positive next year, they just might be able to pull it off. In which case, it would make the 10 3/8 bonds a buy, with the expectation that they are taken out before the end of the year at 105.19.

    If PQ is bought, the bonds have a 101 put option. Unless the asset value does not cover the bonds in the event of a BK, seems like the 10 3/8s are a pretty good buy here.

    Just a few fixed income thoughts, on a day the fixed income mrkts are closed…

  71. 71
    Nicky Says:

    # 57. I agree too. But it will work until it doesn’t! And remember what happened in 2000 because this is not based on fundamentals.

  72. 72
    BirdsofpreyRcool Says:

    [that hash mark should be a $ mark, of course]

  73. 73
    Popeye Says:

    bloodystupidjohnson, from someone who has learned the hard way, service as a way of rising in the face of fundamentals.

  74. 74
    VTZ Says:

    Re 57, 71, and fall-out-of-bed days: It’s funny because the market has stayed long up long enough that it makes me want to hop back in at support but that’s usually when it happens.

    This rally really is one of the most hated rallies of all time.

  75. 75
    BirdsofpreyRcool Says:

    Trace shows the last trade on the PQ 10 3/8ths at $98.85… currently callable at $105.19.

    Interesting.

  76. 76
    zman Says:

    Hear ya there V

    Thanks Bop, interesting indeed. GMXR probably also in play. Is it snowing near you yet?

  77. 77
    BirdsofpreyRcool Says:

    z — ha. No. Not yet… but getting pretty darn close.

  78. 78
    jiveyjr Says:

    re: 57,71 I can never understand the psychology…I was far too cautious as all this unfolded…never dreamed people would bid junk names off the bottom like they did after the losses sustained last Fall

  79. 79
    VTZ Says:

    It’s been snowing here for a week and a bit.

  80. 80
    zman Says:

    V – Hopefully it is piling up on the heads of those greenpeace types.

  81. 81
    zman Says:

    CHK drifting up into their analyst day on Wednesday. It will be interesting to see if they have some new plays to discuss and if doing so boosts the stock. Here’s to hoping they have not found yet another big shale to tap.

  82. 82
    VTZ Says:

    We should have just left them hanging out there locked to whatever they wanted. It would have been even funnier if the governments announced Shell’s CO2 storage project $ the same day they were protesting.

    Anecdotally, this is the first Thanksgiving we’ve had snow in a long time.

  83. 83
    zman Says:

    Anyone see a comment on ROSE anywhere, one of the very few red stocks on my screen?

    V – yeah, you gotta like the headlines that talk of shattered cold records in Western Canada and Wyoming, Dakotas. Good thing they changed the name to Climate Change.

  84. 84
    Nicky Says:

    We have a heatwave in Florida. Weather more like July than October.

  85. 85
    zman Says:

    Nicky – yeah, that’s good for gas demand which is what I was talking about in 58. Had friends at the U2 concert in Tampa over the weekend, said it was like a sauna.

  86. 86
    Nicky Says:

    Sure is but due to cool finally at the weekend.

  87. 87
    zman Says:

    Getting back that Pritchard article, will comment in a bit.

  88. 88
    Nicky Says:

    VTZ re 74 – one of the most hated rallies – I wonder if that is because so few people have been on board. Everyone waiting for the pullback that has never materialized. But volume has been light and getting lighter all the way up.

  89. 89
    VTZ Says:

    Fully agree Nicky – It’s a combination of the lack of fundamentals, poor ownership and all the ‘chasing’ that’s going on. Anybody who invests any new money n the broad market along the whole way must have felt like they were chasing at least a little.

  90. 90
    BirdsofpreyRcool Says:

    Interesting stat —

    SP500 has never been cheaper for European investors – b/c of the falling dollar, for a European investor, the average cost for a dollar of U.S. profits stands at 13.6 euros, the lowest level ever relative to global equities and a discount that investors in America have never enjoyed, data compiled by Bloomberg show. Bloomberg

  91. 91
    zman Says:

    Jerome – here’s another fun one for ya, OII, they report next week, lot to prove on the go forward given the run but they may just pull off a bottom and top line beat this quarter.

  92. 92
    zman Says:

    Early Read on Inventories Watch:

    Crude UP 800 K barrels
    Gasoline UP 1.5 mm barrels
    Distillates DOWN 275K barrels – I bet this creeps lower into Thursday’s report.

    Thanks for sending me these BOP.

  93. 93
    zman Says:

    Host is switching us to a new faster server, hopefully tonight. In case there are any problems we will be on the backup site as well.

  94. 94
    Jerome Blank Says:

    Re: #91, OII, wow… another nasty bear trap, reversing back into x’s with a nice bullish engulfing pattern on 10/5 with add’l support at the daily 50 day SMA…although currently on a short term sell signal from the print breaking $55, OII ripped back into x’s…from here OII finds tough resistance above the $60 range…OII goes back on a fresh buy signal on a print of $61.

  95. 95
    Nicky Says:

    BOP – re 90. That is interesting but what happpens if the dollar puts in a low and starts to move up?

  96. 96
    Nicky Says:

    Terranova thinks oil goes above 75.

  97. 97
    zman Says:

    Nicky – he’s so a mo-mo schmo. It may. I don’t see it as a particular failure at this point though if we just hold this range north of $65.

  98. 98
    zman Says:

    And I recall about two weeks ago him saying he was “flat to oil” and said he thought you should stay away from it… that was in the mid $60s

  99. 99
    Nicky Says:

    http://www.zerohedge.com/article/dutch-dsb-bank-nationalized-after-bank-run-clients

    http://www.zerohedge.com/article/more-european-turmoil-romanian-government-set-topple-tuesday-country-faces-financial-crisis

  100. 100
    BirdsofpreyRcool Says:

    The dollar putting in a low and starting up is usually taken as an indication that money traders think the underlying economy is gaining traction. So, perhaps the baton is passed from relative value buyers in Europe to relative buyers in the U.S.

    Just posting some data I hope we will all find useful in our search for making money in this market.

    Keep in mind, this mrkt crash was due to too much leverage, stupid-easy credit, and completely and utterly mis-rated bonds and mispriced risk. So, if credit was the culprit in turning the direction to DOWN in the stock market, one has to look to the credit market for what direction it is pointing now.

  101. 101
    jiveyjr Says:

    VIX has been rising since 11:00 Eastern…I’ve been lightening up a little along with it

  102. 102
    jiveyjr Says:

    not that I doubt the “rally” mind you

  103. 103
    zman Says:

    Jivey – Not that I “doubt the rally” either but it comes at a good time to pick off some once upon a time worthless calls for a nice pile of cheddar. This is why I’m going to be slower than normal with the roll forward. E&P is still not expensive but it has had a good run, and rolling here seems a bit hasty to me, especially as we are without an energy centered catalyst until Friday (HAL) and next week (also mostly service).

  104. 104
    BirdsofpreyRcool Says:

    Isn’t October supposed to be the Scariest Month in the market? It sure was last year! Although, November and February weren’t a barrel of laughs either.

    I’m not a cheerleader for this market. That said, I can see why it’s going up and want to ride the train… while it lasts.

  105. 105
    Nicky Says:

    BOP – but the rally is just due to the fact that we have printed truckloads of dollars. Seriously where are you seeing signs of a recovery – unemployment still rising, foreclosures still rising. The only people making money are the banks as we are no doubt about to find out this week. The only recovery is in the stock market which now too is starting to look like a bubble.

    Please don’t misunderstand me as I love the data you post and please carry on posting it. But are the markets distorting the facts? I don’t know the answer but all I can tell you is that the charts are pointing to a much lower stock market a year or so out even if we are at higher levels between now and then.

  106. 106
    jiveyjr Says:

    Economic Cycle Research Institute has been saying that the economic recovery is stronger than perceived for a good while…

  107. 107
    zman Says:

    Jivey – yeah, I thought the story was interesting but I don’t vouch for it. It does say their track record is very good.

    Ok, Please BOOKMARK THE BACKUP SITE:

    http://zmanbackup.wordpress.com

    THE TECH TYPES ARE GOING TO MAKE SOME CHANGES EITHER THIS AFTERNOON OR THIS EVENING WHICH I AM TOLD MAY RESULT IN THE SITE BEING DOWN FOR SOME AMOUNT OF HOURS. I WILL POST HERE, IF POSSIBLE TOMORROW AND, IF NEEDED, ON THE BACKUP SITE. APOLOGIES FOR THE INCONVENIENCE BUT I AM ASSURED THE NEW SERVER IS MUCH MORE RELIABLE/SPEEDY. THANKS.

  108. 108
    Nicky Says:

    Jiv – right now we have a consumer less recovery. I was in Home Depot and Lowes and the weekend – both totally empty. The malls are empty. They hope that if they can talk this up for long enough the consumer will step back up. But this time the consumer is not being fooled.

  109. 109
    BirdsofpreyRcool Says:

    Nicky — your charting is a complete Black Box to me… so it’s a huge help to hear your thoughts and projections and targets there.

    With respect to the bond/stock market, the best information is found in the strategy musings of Brian Reynolds and Michael Johnson. That is why I will continue to post them.

    At the beginning of this whole downturn, I said that a lot of jobs would be going away and never coming back. We might be still headed for a 1 breadwinner per household economic model. Not quite that severe, but “full employment” in the future is going to look a lot different than it did in the past. Unless we all end up working for the govt, that is (but that is a different topic).

    It’s like having simultaneous deflation (in housing and jobs) along with inflation (in energy and food and cost of healthcare). You can have several things going on at the same time…

    Investing is a relative value exercise. Money poured into fixed income, because bond spreads became just TOO compelling (once we got over the fear of “we-are-all-gonna-die-and-nationalize-the-banks”). Now that bonds have seen a massive move in appreciation, stocks look cheap by comparison. Eventually, this will stabilize the economy and the hiring will come back… albeit at lower levels.

  110. 110
    zman Says:

    Looking for market moving data before the close tomorrow. Not seeing much. We have no eco data. I guess a Fed Governor could babble about something at a speech somewhere but nothing official. On earnings, the most important thing I see is Domino’s Pizza pre opening tomorrow and that is not important. So what am I missing as far as data points before we get JNJ and INTC after the Tuesday close?

  111. 111
    zman Says:

    With 110 in mind I stick by my earlier thought that we drift higher into tomorrow’s close.

  112. 112
    BirdsofpreyRcool Says:

    Catalysts to Watch This Week

    · Investors will be focused on the kick off to the Q3 earnings season (20% of the DJIA will be reporting earnings next week).

    · Reports for week 1 will be dominated by tech and financials. In tech land, there will be a slew of semis (INTC, AMD, XLNX, ALTR, CY, FCS, ASML, and others), as well as the first major enterprise firm (IBM), and internet company (GOOG). In financials, there will be only a few names, but they are some of the industry’s largest (JPM starts things off on Wed, GS/C come Thurs morning, and BAC/GE are Fri before the bell). There will also be some important health care companies (JNJ on Tues, ABT on Wed, and BAX on Thurs – in the wake of the STJ warning this week, investors will be watching closely to see how these other med tech companies report). There aren’t many earnings from big industrials (other than GE on Friday), transports (although CSX is Thurs night), energy, telecoms, staples, media, or discretionary companies – they will come later in Oct and early Nov.

    · Also important for the financials – the nation’s credit card companies will be reporting their Sept master trust figures on Thurs Oct 15.

    · It’s a fairly quiet week in economics, with the highlight in US being the first round of October releases (the Empire Manufacturing & Philadelphia Fed Survey). Other important releases in the US will be Retail Sales and the FOMC Meeting Minutes. Not too much out overseas outside of Eurozone ZEW survey, EBC Monthly Report, BoJ Monthly Report and Swiss Retail sales.

    · Away from earnings and economics, investors will be watching Washington, where the Senate Finance Committee is due to vote on its health care bill Tues and a vote may take place to extend unemployment benefits (there may be action taken to extend the homebuyers tax credit as well).

  113. 113
    zman Says:

    Thanks BOP, that’s what I thought. So unless something happens overnight to spike the dollar, most catalysts are still a day or two away as of tomorrow morning. A solid close today should, all other things being equal, beget that good open tomorrow.

  114. 114
    zman Says:

    By the way, volumes in E&P land still very light, especially names like HK. So yeah, we have breakouts but in a pretty thin market.

  115. 115
    Jerome Blank Says:

    Zman…are you still bidding SD Nov $15 calls at .45?

  116. 116
    zman Says:

    Jerome – No, I think I have time to wait for the red days there as well.

  117. 117
    zman Says:

    ATW = Wow chart.

    ATPG = deal forgiven.

  118. 118
    zman Says:

    TSO and the refining group in general popping up in here on strength in heating oil first, and then gasoline. If that makes another run and the TSO $16s come alive I will punt at first opportunity.

  119. 119
    reefguy Says:

    BOP- any thoughts on who holds those PQ bonds?

  120. 120
    BirdsofpreyRcool Says:

    reef — looks like Mackay Shields HY fund holds almost 15% (and they are a smart shop). For the most part, looks like funds and a smattering of insurance companies hold about 45-50% of the issue. But those are only the guys who file with the SEC.

    However, with the exception of Mackay Shields, doesn’t look like there is concentrated ownership.

  121. 121
    zman Says:

    Nasdaq negative, SP at LOD, market at least momentarily out of steam.

  122. 122
    BirdsofpreyRcool Says:

    HeadTrader — “the mrkt is bored…”

  123. 123
    BirdsofpreyRcool Says:

    HeadTrader had an account tell him that “apparently a quant fund is taking profits.”

  124. 124
    jiveyjr Says:

    I took a little more KOG and WRES today…in this afternoon pullback

  125. 125
    Nicky Says:

    BOP re #109.

    In all honesty despite the fact the bears (me included!) think this rally is overdone, it actually isn’t!. At tops and bottoms we normally see a reversion to the 40 month moving average which right now stands at 1240 (and declining). If I combine EW and cycles what I think we are actually looking at is that we are currently in 1 of 5 of C (most think this is actually the end of C) and that once this wave tops we will head down for a decent correction for wave 2 into November. Wave 1 up does look almost complete is and running on borrowed time and is unlikely to make it past the early 1100’s imo. Wave 2 should take us down to 950 – 960 spx and be very fast. Interestingly if it goes back to that level it would be retesting the neckline of the inverted head and shoulders pattern which is also normally seen. Once wave 2 is down then we kick off a powerful wave 3 rally to the upside into the Spring which I think should test the 1200 spx level. After that armageddon!

  126. 126
    Nicky Says:

    Sorry lots of bad spelling in the above post! wave 2 is done it should say and not down!

  127. 127
    Dman Says:

    Nicky, just wanna point out that any US company that can do so is frantically trying to shift emphasis from the US market to all those sexy emerging markets etc etc. So it is actually possible for the US stock market to advance while the US consumer is retreating… or in hibernation, as seems to be the case.

  128. 128
    BirdsofpreyRcool Says:

    Nicky — thank you. A ton of useful info! Markets do not go up in straight lines, so I expect this to correct at some point (and given the nervousness, I would expect that correction to be fairly rapid). Your levels and timing make sense and seem to correspond to some of the calls by the fundamentalists. Including Brian Reynolds, who expects corrections to be severe.

    So I guess either one takes profits on the way up, or resigns oneself to the volatility of a more buy-and-hold strategy in a mrkt that should continue up and to the right in the longer run.

  129. 129
    zman Says:

    Fair warning, site may be inaccessible at any point from now through day’s end for a few hours. I will be on the backupsite should this one go down.

  130. 130
    zman Says:

    > 80% of economists believe recession is over:

    http://news.yahoo.com/s/ap/20091012/ap_on_bi_ge/us_economic_recovery

  131. 131
    ram Says:

    Is the site still up?

  132. 132
    zman Says:

    Ram – when it goes down you won’t be able to refresh and see much of anything beyond a white screen with the words failure to connect to database or some such.

  133. 133
    bondbuddha Says:

    site is working here in Houston even though office closed, damn paperwork

  134. 134
    zman Says:

    Scroll down, energy on left, green than much of the market,

    http://finviz.com/map3d.ashx

    still thinking tomorrow will be another opportunity to cash tickets higher than here.

  135. 135
    elijahwc Says:

    Fun & Photos Time:
    http://www.energyindustryphotos.com/eagle_ford_shale__formation_of_s.htm

  136. 136
    Dman Says:

    re # 135

    I like the oil consumption gadget at top left.

  137. 137
    Dman Says:

    Double top at SPX 1080?

  138. 138
    zman Says:

    Imports last week:

    LNG up 0.1 Bcfgpd from the prior week to 1.2 Bcfgpd. This is 0.5 Bcfgpd higher than last year.

    Canada drops 1.0 Bcfgpd from last week to 6.7 Bcfgpd, which is also down 1.1 Bcfgpd from last week. So big storage up there but cold pulls gas away from export to the U.S.

  139. 139
    RMD Says:

    Is Stifel’s upgrade what is powering FST today; do they have that much omph in raising target to 3o (matching H. Weil’s upgrade and target?

  140. 140
    zman Says:

    Beerthirty

  141. 141
    Nicky Says:

    6 up days in a row and heaven knows how many gaps now

  142. 142
    BirdsofpreyRcool Says:

    really looking forward to bank earnings out this week… BAC closed at HOD.

  143. 143
    BirdsofpreyRcool Says:

    Interesting…

    Finance Whizzes Born, Not Made, With Genes Doling Out Dopamine
    2009-10-12 19:00:00.1 GMT

    By Rob Waters
    Oct. 12 (Bloomberg) — Some people make snap decisions.
    They learn quickly from mistakes. These coveted talents of the successful stock trader may come to some people through genetic good fortune, according to a study by German neuroscientists.
    Researchers at the Max Planck Institute for Human Development in Berlin had volunteers play a complex brain-game to test the power of their genes. The participants were picked because each had two copies of one version or another of a gene that influences action of the brain chemical dopamine.
    One group — those with two copies of the gene variant called VAL — excelled at a multiple-choice game that rewarded them for spotting winners and shifting direction when winners turned to losers. They outscored those with rival genes, the study found. The experiment is part of a growing field known as neuro-economics that studies how brain biology influences economic attitudes and decision-making.
    “In my science-fiction view of the future, if you’re applying for a job as a trader, you might be wired up and asked to undergo a series of trading exercises,” said Andrew Lo, a finance professor at MIT Sloan School of Management in Cambridge, Massachusetts who was not involved in the study.
    “Based on your responses, you might be deemed appropriate or inappropriate for the position.”

    Technology Patent

    Lo, director of the MIT laboratory for financial engineering, is developing such technology and has applied for a patent on a system that measures physiological responses such as sweat and heart rate “in order to predict predisposition toward optimal trading behavior” and “develop insights into an individual’s trading ability,” he said.
    Today’s study may provide researchers with new insights into the relationship between genes, the physiological responses Lo has been studying and trading potential, Lo said. The results may make it feasible one day for elite job candidates to be gene-tested before being hired, he said in an Oct. 9 telephone interview.
    The Berlin research was led by Hauke Heekeren, who heads a research unit called the Neurocognition of Decision Making Group at the Planck institute. The team collected the DNA of 1,000 volunteers in and around Berlin, mostly students ages 20 to 30.
    From this large sample, they chose 13 who had two copies of the VAL gene and 13 with two copies of an alternative gene called MET. Each of these two groups represents about one quarter of the general population, or one half combined.
    Representatives of the other half of the population, which has one copy of each gene variant, weren’t included in the experiment.

    MET vs. VAL

    Previous research had found that people with two copies of the MET gene perform better on executive function tests that measure complex skills using memory and attention, Heekeren said in an Oct. 8 telephone interview.
    “It was always emphasized that they were smarter,” he said. “There were the smart METs and the somewhat dumber VALs.”
    These genes help control an enzyme called COMT that in turn influences the breakdown of dopamine and its distribution to two different areas of the brain. Dopamine is known to be important to the evolutionarily modern brain region called the prefrontal cortex that controls complex executive processes and moral decision-making, Heekeren said. It also seems critical to the function of a more primitive part of the brain called the ventral striatum, a sort of greed center that learns by reaping rewards and recognizing errors, he said.

    Bonus Incentive

    Motivated by the 15-euro ($22) pay and 10-euro bonus they could earn for strong performance, each of the 26 volunteers lay flat inside an imaging machine while they played the game from their backs as Heekeren and his team monitored activity levels in their brains.
    The game rewarded contestants with points for discerning patterns and making the best choice from several options. After a while, the patterns changed and subjects scored highest when they could quickly adjust to outcomes that didn’t match their expectations, Heekeren said.
    “You can compare it to a stock market,” he said.
    “There’s one item that’s best and 80 percent of the time it will pay off the most. But 20 percent of the time, it won’t.”
    If a player chose the best answer seven times in a row, “then we assumed with reasonable certainty that you have actually learned which item is best and we change it,” Heekeren said. “It’s like a stock market crash.”

    VALs Outperformed

    People who possessed two copies of the VAL variant outperformed those with the MET variation by 5 to 10 percent, Heekeren said.
    Richard Peterson, a Los Angeles psychiatrist and managing director of MarketPsych LLC, a consulting firm specializing in finance and clinical psychology, said the study measured traits that may not accurately predict traders’ success.
    “Traders learn from the market what works and doesn’t work but once you’ve identified that you can’t be too flexible,” he said in an Oct. 9 telephone interview. “A lot of the best traders are stubborn iconoclasts who are willing to challenge conventional wisdom, identify an edge and stick to it. The noise of the world doesn’t deter them from their inner convictions.
    You don’t want to blow in the wind.”
    Peterson, author of the 2007 book, “Inside the Investor’s Brain” (Wiley, 416 pages, $60) said the skills demonstrated by the volunteers with two copies of the VAL gene might make good short-term traders because of their well-timed adjustments.

    ‘Sweet Spot’

    “This might help people find their sweet spot more rapidly,” he said. “It’s a first step to unraveling what makes people good traders and why some are good short-term traders while others might fare better at long-term investing.”
    It could also have a dark side, like the one depicted in Columbia Pictures’ 1997 Academy Award-nominated film “Gattaca,”
    said MIT’s Lo. In that film, Ethan Hawke and Uma Thurman live in a future where babies are designed for their genes and everyone’s genetic patterns are known to the state and employers. Those deemed genetically superior get elite positions; the rest are consigned to low-end jobs.
    “Genetic job counseling is a kind and gentle way of describing the implications of these findings,” said Lo. “A more ominous and nefarious interpretation of the future would be genetic screening by potential employers.”

  144. 144
    Dman Says:

    #143 “Genetic job counseling”. We sure do live in the age of the euphemism.

  145. 145
    bondbuddha Says:

    Bakersfield, Calif.-based Tricor Ten Section Hub LLC reports non-binding open season for its planned gas-storage project has drawn significant oversubscription. VP Chris Kunzi says, “The results of the open season dramatically highlight the need for additional storage capacity in the western U.S.”

  146. 146
    BirdsofpreyRcool Says:

    The jobs outlook continues to look dim… Baken Hughes to cut another 62 jobs in Houston. ugh

    http://houston.bizjournals.com/houston/stories/2009/10/12/daily4.html?ed=2009-10-12&ana=e_du_pub

  147. 147
    zman Says:

    Check, check, check. Site still active at 7:30 pm EST.

    $10KP II at $31,300
    77% Cash

  148. 148
    RMD Says:

    comment on Phibro from ok sources was not the clout of the good old days; in those days a good % of profits came from one person (who I suppose is now gone).

  149. 149
    zman Says:

    RMD – As far as I know he’s still there, he took a piece of the pie instead of his payout for last year.

  150. 150
    zman Says:

    check, check, check.

    Site may go down again tonight. Please bookmark:

    http://zmanbackup.wordpress.com

    If this site is down in the morning then the Tuesday post will show up over at the backup site.

  151. 151
    ram Says:

    Don’t notice any difference. Maybe no effect on a BB.

  152. 152
    zman Says:

    Thanks for checking Ram, Tuesday post will be up shortly.

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