14
Oct

Wednesday Morning And The Crowd Goes Wild

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Housekeeping Watch: We get the EIA Oil Inventory report tomorrow, not today, due to the Columbus Day holiday.

Market Sentiment:  Results from the first big names in Tech, Transports, and Financials all better than expected ... and the crowd goes wilder. That sizzling sound you are hear is not bacon this morning but shorts in the frying pan.

  • INTC reported strong results after the close last night, importantly with better than expected top line growth and with strong top line guidance for the fourth quarter.
  • CSX reported better than expected results and commented that "The third quarter reinforces our view that the worst of the recession is likely behind us".
  • JPM reported before the open, big bottom line beat there as well.
  • Retail Sales will be out before the open
  • FOMC minutes will be out this afternoon
  • IBM, GOOG, GS reporting tomorrow but for now, the market will be targeting those big round numbers of Dow 10,000 (probably slice through that on the open) and S&P500 1,100.


In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stuff We Care About Today - CHK, RRC, WRES, FSLR, and Conf Calls with CSX (8:30am), Chaparell (11 am), and LSTR (trucking) (5 pm). (all times EST)
  4. Odds & Ends

Holdings Watch:

  • $10KP II:

    • $32,700
    • 86% Cash
    • The $10KP II Current Holdings Tab is updated.
    • The $10KP II Spread Sheet Tab is updated.

 

  • Yesterday's Trades:
    • Added (20) of the HK $26 October calls (HKJP) for $0.20 (easily on the mid) with the stock down 2.7% at 25.13 on a weak market, weak group day. This is obviously I high, high risk trade.
    • Sold 100 (all including the previous calls bought in the previous bullet) of the HK $26 Calls for $0.55, up 128% to my average cost.
  • SWN – Added (5) November $47 Calls (TKQKU) for $2.00 with the stock at $45.30. Playing for a gas bounce, earnings, potential positives from CHK’s analyst call tomorrow. Will be selling the remaining $45 calls soonish.

Commodity Watch:

Crude oil rose $0.88 to close at $74.15 yesterday, after hitting a intraday high of $74.55. The 2009 high on the November contract is $75.89 (set in early August) and this recent strength comes as the dollar falls to new lows. We get API inventories after the close today and EIA inventories tomorrow. This morning crude is trading about a buck, just over $75.

  • Early Read On Oil Inventories:
    • Crude: UP 1.15 mm barrels
    • Gasoline: UP 1.0 mm
    • Distillates: DOWN 0.2 mm
  • Saudi Watch: The other day I noted Saudi Arabia is getting ready to accepted bids on about $500 mm of work on Ghawar from outside service contractors (HAL, SLB, WFT, etc). Today they announced they will start the first CO2 flood on the field, beginning in 2013. Starting an enhanced oil recovery program on a field is usually done to boost volumes from a more mature field where production is declining. Ghawar is certainly mature but is also massive, the world's largest oil field, and best available estimates are that it still produces a little over half of Saudi's current production. The Saudi's, ever careful with their position as the largest producer (or at least the country with the highest deliverability), were quick to add “It’s worth mentioning that Saudi Arabia does not need to produce oil through enhanced oil recovery at production scale for decades to come,” Bin Salman Al-Saud said in a Bloomberg report. “This is a key focus area in our carbon management technology road map.” Hmmm. 
  • From Russia With Not So Much Love Watch: Russia indicated it was unwilling to join others in further sanctions against Iran should Iran fail to prove its nuclear program is peaceful. What a shock ... gotta protect the Rodina's business interests.

Natural gas tumbled 29 cents to close at $4.59 yesterday. Search me for a reason. The forecast continues to show cooler than normal in the short and intermediate term so I'm chalking it up to noise and profit taking. Last week I wrote that I expect increased volatility in gas prices as we approach the end of the injection season and that applies to the down days as well as the up. This morning gas is trading flattish.



Stuff We Care About Today

CHK Updates Guidance, Hosts Analyst Meeting Today

  • Production Guidance Shifting Slightly Higher
    • 2009: Goes from a range of 4 to 5% growth to a range of 5% to 6%
    • 2010: Goes from a range of 7 to 8% growth to a range of 8% to 10%
    • 2011: Upped to a range of 12 to 14%
  • Cash Generation Assumptions Dip

    • All years drop from past projection - presumably due to a combination of accelerated drilling activity, lower gas price assumptions, and potentially due to lower future JV expectations and VPP placements.
  • Quick Take On The Slides: I'll have this after the open.
  • CHK will web host their meeting today from 9:00am to 4:30pm EST.

RRC Pre Announces 3Q Guidance Beat; Updates Operations

  • 3Q Production of 437 MMcfepd, up 18 MMcfepd from 2Q09 after adjusting for 15 MMcfepd of asset sales. This is up 13% YoY. This is ahead of guidance and the umpteenth quarter (27th actually) of sequential volume growth from these guys.
  • 15 rigs running, up from 14 in August but still down by half of year ago levels.
  • Marcellus production is now > 80 MMcfepd and is expected to come in at the upper end of the previously stated 90 to 100 MMcfepd year end exit rate range.
  • Barnett results continue to impress with production now ~ 130 MMcfepd
  • RRC has about 45% of its expected 2010 production hedged at about $5.50.
  • Valuation: at the high end of the E&P group at 12.6x 2010 expected CFPS. Granted, the 2010 numbers probably walk up, but much of their premium is coming from their large acreage position in the Marcellus.

WRES - Updates Operations, Cuts Full Year Guidance

  • 3Q Production will be sequentially flat at 2.4 Bcfe (58% oil). This is in the middle of the previously disclosed guidance range for the quarter.

    • Oil production was down 5% sequentially
    • Gas production up 9% sequentially (they fraced a few wells in their Atlantic Rim play)
  • FY2009 Guidance Cut 5%. A bit odd, 4Q numbers look in line for oil but gas is expected to fall off their recent ramp due to inactivity. 
  • Capital budget remains constrained with no gas well drilling planned for the remainder of the year.
  • Stock will likely take a hit today and possibly for the next week or two since it has little to no Street coverage.
  • Current production is not what I own the stock for. Instead, I am holding out for approval for further drilling in California and upward reserve revisions at year and the higher cash flows from more elevated prices over the next couple of years.
  • Right now the story is in "hunker down, nothing to see here mode". If it falls back into the mid $2s I'll look at adding a bit but not before I see their borrowing base affirmation (they were largely drawn as of mid year). 

 

 

FSLR Additional Commentary on Germany Subsidies

  • Germany has been trimming their feed-in tarfiff (subsidy) for solar projects. 
  • It looks like 2010 subsidies will fall 15%, instead of the expected 10%.
  • This will be a major topic on the earings call.
  • Waiting and watching.

SPWRA - will get to it in the Thursday, post still bird dogging something.

Conference Call Watch:

  • CSX Call at 8:30 am EST (might be worth a quick listen for implications for the coals).
  • Chaparell Conference Call - Just getting ready for their IPO. Call at 11:00 am EST.
  • LSTR Conference Call - Looking for commentary on 4Q transportation sector upturn. Call is at 5 pm EST.

Odds & Ends

Analyst Watch:

  • Will add later ...

Oh Great! Wait, Where's Mine?!?! Watch: Talk of extending and possibly expanding the first time home buyers tax credit.

Best of luck to Charlie Davies

 

203 Responses to “Wednesday Morning And The Crowd Goes Wild”

  1. 1
    zman Says:

    Analyst Watch:

    HK – Keybanc starts them at Buy with a $35 target.

  2. 2
    zman Says:

    Analyst Watch:

    KWK raised to Buy at Cannacord.

  3. 3
    ram Says:

    Are you thinking about HK on a pause?

  4. 4
    zman Says:

    Just going through the October slides for CHK before the new slides for today’s meeting come out.

    They are obviously hell bent on increasing drilling activity to get acreage into HBP status, especially in the Haynesville.

    Slide 7 shows the top 20 U.S. natural gas producers, I’d note that by Q4 and maybe by Q3 that HK will be on this list.

    Back to CHK:
    They have 12 Tcfe of proved reserves booked. They show another 62 Tcfe of risked, unbooked reserves, primarily from their big 4 shales.

  5. 5
    zman Says:

    Morning Ram. Feeling a bit aggressive this morning there and in a couple of other names. Looking at Novembers on HK either in a $28 or a $30 strike, I may take a third to a half of a full position out of the gate depending on how they open. I prefer the $28s but it’ll depend on how rich things are. I’d bet the market runs hard, pauses and runs hard today with GOOG, IBM, GS tonight or tomorrow.

  6. 6
    zman Says:

    CHK – early Oct presentation continued:

    Some random stuff: Barnett shale now produces 70% of all shale gas in the U.S.

    Fayetteville is #2

    Haynesville is adding quickly,

    Marcellus may be biggest shale play by 2020

    They Fayetteville slide shows the old small wells so there should be some wow type comments over their longer lateral wells today which should be positive for SWN, HK, XTO, and PQ.

    In non shale plays, they could talk about their best Granite Wash wells to date: good for names like NFX, FST. They note that the Granite Wash play is currently their highest return play.

  7. 7
    zman Says:

    Natural gas profit taking day two. Down 6 cents early.

  8. 8
    zman Says:

    http://media.corporate-ir.net/media_files/nys/CHK/presentations/2009.IAM.Slides.Final.pdf

    192 pages, comments to follow.

  9. 9
    zman Says:

    CHK slides comment #1

    CHK’s non shale production declined 16% in ’08, and will decline 29% (ex divestitures) in 2009.

    85% of U.S. gas production is non-shale. This is along with severely curtailed rig counts is how I get to comments about U.S. gas declines being inevitable.

  10. 10
    BirdsofpreyRcool Says:

    Good morning… glad to see ram all bright-eyed and bushy-tailed this early. Rallies are beautiful things.

    Haven’t seen numbers this positive in the pre-open futures market for a while… Also, credit en fuego.

    IG 97 1/5

    HY 94 5/8 Wow!!!

    Haven’t heard the official stance of TT and HT, but HT’s “HUGE” last afternoon seems to have spilled over into this morning’s action. Trading desk watching their C position in pre… and smiling.

  11. 11
    BirdsofpreyRcool Says:

    In the “less negative” category…

    Advance Retail Sales for Sept came in at -1.5% vs -2.1% exp’d.

    Less autos & gas, it was UP 0.5% vs 0.2% exp’d.

  12. 12
    zman Says:

    NFX on the tape joining HESS in the Marcellus, 140,000 acres with NFX operating and 50% working interest. Terms not disclosed, says ops there in remainder of this year won’t bump 2009 capex. This is a bit surprising to me, not in a bad way, but surprising.

  13. 13
    BirdsofpreyRcool Says:

    The wildfire in credit continues to burn up the shorts….

    IG 97

    HY 94 3/4… up one full point!

  14. 14
    zman Says:

    Have CSX call on in the background, listening for comments on volume.

  15. 15
    zman Says:

    CHK slide comments #2

    Bossier Shale – (e. Texas) – now largest holder with 175K net acres; first hz well 9.4 mm/d, 2nd well drilling. Thinking EURs are 3.5 to 7.5 vs H.S at 6.5 Bcfe avg.

  16. 16
    BirdsofpreyRcool Says:

    Headline — “U.S. Deeply Commited to Solving Climate Change.”

    I was watching Nova last night… about migratory patterns of early man vs. changes in the ice shields that covered all of Canada and about 1/3 of the US 18,000 yrs ago. If Clovis Man knew about those massive climate changes, my guess is he would have stopped driving his GM Suburban a few decades earlier. lol

  17. 17
    BirdsofpreyRcool Says:

    TPH out with an update… based on relative value, they are saying —

    Buy (in order of % upside) SD, HK, GMXR, KWK, CHK, NBL, and XTO… also, likely APC and APA (but still working the models there for international upside/optionality)

    Downgraded (in no particular order) CRZO, GDP, NFX, RRC, and AREX

  18. 18
    zman Says:

    CHK slide comments #3

    Fayetteville:

    CHK says they have a 8.5 mm/d IP well, good scouting on Reef’s part!

  19. 19
    zman Says:

    BOP – thanks. Saw Crusader out with a pr saying they excluded some Texas Panhandle properties from the SD buy. I’d like to know more about that as SD could be giving up some upside if that’s Granite Wash. Checking into it.

  20. 20
    zman Says:

    NFX – liking the Marcellus if opening indications mean anything (47.95 bid vs 46.63 last), this will give me a good exit on the remaining Oct 45s and on a pause I’m likely to go ahead and roll to Novembers.

  21. 21
    zman Says:

    Reef – see Fayetteville shale slide 72 from CHK presentation, see Faulkner cnty

  22. 22
    zman Says:

    CHK call starting now.

  23. 23
    zman Says:

    CHK notes

    Aubrey saying they plan to hedge longer term, 4 to 5 years but notes that they are lightly hedged in 2010 and will tell why they think it would be a mistake to be hedged at $5.50 to $6.00 for 2010 at lunch…sounds like a macro gas speech is on the way. Note those comments above regarding conventional gas production declines.

  24. 24
    BirdsofpreyRcool Says:

    The Crusader PR… saying SD buying the EQUITY of Crusader out of BK… so, it’s not an Asset Purchase. That would imply that it is SD who decided they did not want the Whittenburg Basin Assets. But, I would like that confirmed.

  25. 25
    Nicky Says:

    Good morning and all is right with the world as the dollar continues to get decimated. CNBC consumed with Dow 10k – let’s get it over with. A quick reality check and look at Intel’s results from a year ago.

    Meanwhile v up is in full force. SPX has resistance at 1094, 1096.7, 1102, 1112, 1121.

    Oil has room to run it seems as it has underperformed the rest of the commodity market. We need to get through 75 and then we could see some of the higher targets – 76.90, 78.30.

  26. 26
    zman Says:

    CHK is going to do Q&A’s after each segment. Haynesville Shale discussion starting now.

  27. 27
    zman Says:

    Group on fire. NFX a little hotter than the rest on their Marcellus.

    CHK call going well.

  28. 28
    zman Says:

    ZTRADE:

    WLL – Added (5) WLL Nov $65 calls (WLLKM) for $2.40. I’ll be punting the remaining Oct. $60 calls here in the near future.

  29. 29
    zman Says:

    CHK down a buck. People don’t like the reduced free cash flow estimates.

  30. 30
    bill Says:

    chk falling like a rock

    maybe people expected them to build cash like they promised

  31. 31
    Dman Says:

    Did Aubrey say something? CHK -3%

  32. 32
    bill Says:

    lol, we said the same thing

  33. 33
    zman Says:

    ZTRADE:

    SWN – Sold the last (15) SWN October $45 calls for $1.25, up 245%, with the stock at $46. I may add to the November position started yesterday in a little while.

  34. 34
    Dman Says:

    Oops, shoulda updated before posting. I’m sure Aubrey *is* building cash: his own. Not that I’m cynical after the margin fiasco. Oh no, I’m not bitter, not me!

  35. 35
    zman Says:

    Bill – you nailed it.

  36. 36
    baylor3217 Says:

    Market behaving funny on all this good news

  37. 37
    Nicky Says:

    Baylor – distribution

  38. 38
    BirdsofpreyRcool Says:

    HeadTrader pointing out that while the “news is good,” it still needs to pull cash into the market. So, equity investors sitting on their hands.

    Debt investors not so ambivalent, however.

  39. 39
    zman Says:

    ZTRADE

    HK – Added (10) HK $28 November calls for $1.34 with the stock at $27.15.

  40. 40
    Dman Says:

    Did we enter a time warp or something? My screen looks frozen. Oh wait, the dollar rallied 0.01%

  41. 41
    zman Says:

    D – The entire market is listening to a geology lesson on the Marcellus. Moving in geologic time now.

  42. 42
    bill Says:

    I just had another thought on chk.. they converted a ton of conv debt into equity, maybe those holders are selling into todays briefing

    Im impressed at their progress, closing in on 1/2 bcf per day of production.

    NG is down 10 cents today

  43. 43
    bloodystupidjohnson Says:

    Does anyone think that the current drag on CHK will bring down the group on a short term basis, or is this just company specific?

  44. 44
    zman Says:

    They produce about 2.2 Bcfgpd.

    BSJ – Jury out on that. I doubt it has much impact on the group relative to what the S&P does. So GOOG, GS, IBM are more important to the group for the near term, lol.

  45. 45
    reefguy Says:

    ioc – up $4.67 MS is raising theit target above $65…

  46. 46
    zman Says:

    ZTRADE:

    NFX – Added (5) November $50 Calls, (NFXKJ) for $1.60 with the stock at $47.50. Will punt the last of the October calls soon.

  47. 47
    BirdsofpreyRcool Says:

    Looking at that (way-cool) 3D Heat Map… seems like CHK is in a special category of DOWN, all by itself. Call it the Aubrey Cred Affect, at work again.

    Love that idiosyncratic risk! And Aubrey is nothing, if not idiosyncratic.

  48. 48
    zman Says:

    Thanks for the headsup Ram

    LINE – RJ raising target to $30, reit Strong Buy.

  49. 49
    zman Says:

    Interesting stat re water usage in the Marcellus.

    Frac job takes 4 to 5 mm gallons

    NYC uses 4 mm gallons in 5 minutes.

  50. 50
    zman Says:

    48 – meant Reef. Good headsup also on the big CHK well, they haven’t gotten to it yet but I think they’ll get to say its the biggest well in the play to date.

  51. 51
    zman Says:

    Anyone know if Kass is adding more puts in here?

  52. 52
    reefguy Says:

    CHK presentation- One of the finest tutorials on the Big Four Shales I have every seen. Thank you to them for helping independents like me.

  53. 53
    Alhambra Says:

    Hate to bring depressing news on a green day, but maybe it’s due to the fact that it’s raining in LA.

    check this out – the government’s budget deficit for FY 2009 (which ended Sept. 30) was $1.4 trillion, which was about a trillion dollars higher than last year (which was already bad) and the highest as a % of GDP since 1945 (when there was a world war just ending).

    http://cbo.gov/ftpdocs/106xx/doc10640/10-2009-MBR.pdf

  54. 54
    PackMan Says:

    BOP; IMO the market is dominated by HFT, short covering and momo. Money isn’t and won’t be pulled in. Maybe a few bozos chasing performance or benchmarks.

    Which is why these rallies have been on such sucky volume.

    Liquid Net CEO just on CNBC says HFT = 60% of volume.

  55. 55
    zman Says:

    Alahambra – I hear ya. Depressing. I’m actually considering selling my house to my 6 year old daughter to capture the $8K first time home buyer credit (which may go up to $15K soon). I figure she’ll be paying it off for the rest of her life anyway so the least we can do is capture the Pv.

  56. 56
    PackMan Says:

    talking about equity mkt; not debt mkt.

  57. 57
    zman Says:

    Nicky – you’re about to get your wish re 10,000.

    CHK starting the Fayetteville Shale section of their presentation.

  58. 58
    zman Says:

    ROSE at $17. Holding common, don’t like the way the options trade. May take a small call position going into earnings.

  59. 59
    Nicky Says:

    SPX and NAZ looking a lot weaker than the Dow. Oil not going with this either. Metals out of steam? Dollar looks close..

  60. 60
    BirdsofpreyRcool Says:

    I appreciate your comments, PackMan. But I will add that I have never seen a bond market rally without (eventually) pulling stocks with it.

    Also, I will point out that bond risk jumped up sharply, in August 2007… a little over a year before the stock market collapsed and about 2 months before the stock market peaked.

  61. 61
    BirdsofpreyRcool Says:

    z — do you know if the CHK presentation is archived? thx

  62. 62
    zman Says:

    Right here:

    http://www.chk.com/Investors/Pages/Presentations.aspx

  63. 63
    BirdsofpreyRcool Says:

    thanks, z

  64. 64
    zman Says:

    Nicky – oil has numbers tonight and tomorrow to get through, lot of trepidation with it at the high end of the range.

  65. 65
    Nicky Says:

    Things are getting better? Really?

    http://www.nytimes.com/2009/10/14/business/economy/14income.html?_r=2

  66. 66
    Nicky Says:

    Yep Z – I don’t think oil is going higher without the indices and vice versa.

  67. 67
    bloodystupidjohnson Says:

    Bought some CHK Nov 30, looking for a bounce or maybe my head handed to me.

  68. 68
    zman Says:

    BSJ – So far so good re call details. Everything slowly improving on costs, recoveries. The stock had run into the meeting and Bill makes a good point on the coverts. I honestly think analysts say “ugh” whenever they see one of the gassy and especially lightly hedged E&Ps talk about reduced FCF.

  69. 69
    baylor3217 Says:

    Zman – I set up the Twitter to send me text message sun you tweeter. I have never received one though. I’m on AT&T. Are others having this issue as well?

  70. 70
    zman Says:

    Baylor I just sent a twitter. I see it on my screen now.

  71. 71
    rseidman Says:

    It’s on my screen! For the record, it’s great that you post on Twitter.

  72. 72
    zman Says:

    SP at HOD at 1087. Nicky, where do you have next resistance.

  73. 73
    zman Says:

    RS – yep, happy to be a twidiot.

  74. 74
    Nicky Says:

    1089, 1094

  75. 75
    PackMan Says:

    BOP – I hear ya’.

    You have been very right for some time.

  76. 76
    bloodystupidjohnson Says:

    I want to thank everyone for keeping out of HAL puts. I was very tempted to buy the NOV 28 puts, but you all convinced me to look elsewhere. Thank you.

  77. 77
    PackMan Says:

    speaking of Twitter, if any of you care what I might impulsively say, you can find me at CapCube.

  78. 78
    zman Says:

    CHK – Fayetteville

    Regarding the 8.5 MM/d well
    NW to SE – cross unit well, 6,800 foot lateral. Larger frac with 25% more sand.

  79. 79
    zman Says:

    Thanks Nicky

  80. 80
    BirdsofpreyRcool Says:

    PackMan #75 — Just want us all to make money. That is the GOAL. Just trying to keep my eye on the ball. Thank you.

  81. 81
    zman Says:

    BSJ – I’m still mulling puts there but will likely wait for the call…they are notorious silver lining folks. If I wanted to be long in the space it would still be SLB despite the premium (expensive for a reason like HAL is cheap for a reason).

  82. 82
    zman Says:

    Call starts back up at 12 EST. I’ll listen as I think they are going to talk gas macro. Will listen to the replay of Chaparrel some other time.

  83. 83
    cargocult Says:

    I own BPT as a proxy for oil. Is this correct thinking?

  84. 84
    PackMan Says:

    BOP – 100% agree. Your comments are invaluable. Mine, not so much !

  85. 85
    zman Says:

    Cargo – I know they roughly track each other but I don’t keep track of that one.

  86. 86
    reefguy Says:

    78- That would be the Reva Deen in 7N8W surface in section 1 of White County. They did it for $3.2MM

  87. 87
    zman Says:

    “Anonymity is like a warm blanket” or so the fellas at WRES must think today.

  88. 88
    BirdsofpreyRcool Says:

    ahhhhhhhhhh, PackMan. I don’t agree with #84!

  89. 89
    zman Says:

    Reef – Should put under $1 all in F&D. I was looking at SWN acreage map, they have more fairway and north of fairway acreage, this thing is pretty south. I don’t have a recent map of HK as they stopped putting it in their annual and their presentations. I think XTO is in the area though. Not clear from them if this was a sweetspot, didn’t really sound like it as much as it did a longer lateral with a good completion. This would be good news for all of them SWN, CHK, HK, XTO and PQ and a handful of privates like Stephens.

  90. 90
    PackMan Says:

    The problem I have in this market, is that there is almost nothing that I want to own long; and certainly not chase.

  91. 91
    bondbuddha Says:

    Thank goodness for this site, my mortgage bond market is so tight and boring!

  92. 92
    Nicky Says:

    Packman I love listening to your thoughts as you echo everything I am thinking.

  93. 93
    BirdsofpreyRcool Says:

    BB — nice to know what your bond mrkt expertise is… also nice to know that we have almost zero overlap in knowledge base there.

    So, would love to hear any insights you have on the mortgage bond mrkt… anytime!

  94. 94
    cargocult Says:

    This in the NYT’s
    Saudi Arabia is trying to enlist other oil-producing countries to support a provocative idea: if wealthy countries reduce their oil consumption to combat global warming, they should pay compensation to oil producers.

  95. 95
    ram Says:

    ZMAN – Are you thinking about the near the money and the at the money (APC and WLL) unloading in this strength? Site is super slow today.

    Nicky – Gann turn today?

  96. 96
    Nicky Says:

    Semis well off their earlier highs – institutions selling into this big time by the looks of things.

  97. 97
    reefguy Says:

    Fay-sweet spot. 3 of the four best CHK ip’s are in white county, out of conventional sweet spot. All are on the edge of getting towards a little overpressuring?? Quachita Frontal zone is about four or five miles due south. Stuctural deep gets deeper as it moves south under that first thrust.

  98. 98
    zman Says:

    CHK Call back on, talking hedges, then gas macro.

  99. 99
    Nicky Says:

    Ram there is a turn due 13/14 – can’t remember if it is Gann.

  100. 100
    zman Says:

    Ram – yes.

    Thanks Reef, makes sense.

  101. 101
    bondbuddha Says:

    BOP, I trade Inverse CMO’s so not sure as to relevance here, but we continue to see very high prices and very tight inventories out there. Tough to fill client orders!

  102. 102
    BirdsofpreyRcool Says:

    Just checked in with HeadTrader… he points out that a rally emboldens the individual investor and that large institutionals are not price sensitive… they get money in, they buy stock.

    Now, hedge funds may sell this rally. But they will be eager to get back in on tomorrow’s EPS reports. Not only banks reporting, but GOOG and IBM as well.

    HT says he doesn’t know many PMs who want to be underinvested if the mrkt hits a 52 wk high.

    Just a few thoughts.

  103. 103
    zman Says:

    We have a Bios page at upper left. If anyone wants to submit one Petra looks pretty bored. zmanadmin@gmail.com

  104. 104
    BirdsofpreyRcool Says:

    BB — i know what a CMO is (obviously), but how does an inverse CMO work? Is it like IOs are to POs?

  105. 105
    zman Says:

    CHK Gas Macro

    45% of the company is in decline (this is the conventional production)

    They are saying the 914 results tend to trail. They see production in decline now.

    They think the peak to bottom sometime in 2010 or 2011 is 7 Bcfgpd. That’s off a 60 Bcfgpd peak at ye 2008. That’s like losing Canada’s contribution.

  106. 106
    Nicky Says:

    Is it GS tomorrow – if so I think GS will have a down day and the market will follow. IBM will likely beat – they always do – I see they got an upgrade to 136 this morning.

    From what I am reading the results so far are showing a recovery in China not here. I suspect the post earnings rally in these stocks will be very short lived. AA has already given back all of its gains.

  107. 107
    BirdsofpreyRcool Says:

    Cross-Asset Class Strategist just sent me this… LunchTime Laughs…

    http://media.mtvnservices.com/video/player.swf?uri=mgid:cms:mvideo:cmt.com:40319&group=music&type=error&ref=None&geo=US

  108. 108
    bondbuddha Says:

    Inverse Floating rate CMO’s are tied to One month LIBOR and their structure formula’s. There are IO’s, PO’s and whole bonds. We trade all three. We use only Freddie, Frannie and Ginnie for the principal protection. With the drop in LIBOR rates over the last two years our coupons have soared and concurrently market valuations.

  109. 109
    baylor3217 Says:

    Zman re 70 are you saying you received a text MSG fo that teeet? I’m trying to set up where I can get txt MSG on my iPhone. Anyone hqvingluck with that?

  110. 110
    BirdsofpreyRcool Says:

    So, iCMO traders are doing the Happy Dance, along with PO traders?

  111. 111
    zman Says:

    Aubrey making a good point to the analysts that none of them talk to companies that are in decline outside of maybe talking to a major. He points out that the capital constrained private independents, of which there are some 10,000, are in decline and that they talk to them all the time.

  112. 112
    zman Says:

    Baylor – no, just on a tab on my browser. We have had limited success sending email to text, especially with regard to ATT.

  113. 113
    Nicky Says:

    The obvious corruption is plain sickening:

    http://www.bloomberg.com/apps/news?pid=20601087&sid=abo3Zo0ifzJg

  114. 114
    Jay Says:

    Re 94. Might I suggest they just charge more for oil : )

  115. 115
    zman Says:

    Jay – exactly.

  116. 116
    zman Says:

    Aubrey covering all the TBP talking points on NG demand for transportation.

    And by the way, he doesn’t see a wave of LNG flooding the U.S. now. We saw this fear in 2002/03 and it didn’t happen then and he doesn’t see it happening now. He does see rising Chinese demand which we’ve seen some indications of recently with some rerouted LNG tankers moving away from Europe and NAM to China.

  117. 117
    bondbuddha Says:

    BOP,
    Our clients are doing the happy dance! We are having trouble finding value in this current market.

  118. 118
    BirdsofpreyRcool Says:

    BB — what about buying the PQ 10 3/8ths due 5/12. Unless i miss my bet, they will be called before the next step down in call premium.

  119. 119
    BirdsofpreyRcool Says:

    ‘course, the bonds aren’t rated AAA… like the Frans and Freds of the world.

  120. 120
    kyleandy Says:

    bop – what cusip # on those PQ Bonds?

  121. 121
    PackMan Says:

    92 Nicky — you made me smile !

    95 reef; 99 Nicky … can you explain the Gann reference ? Is this Gann angles ? Does anyone follow this ?

    I ask b/c I know a guy who follows this stuff and claims to have done an analysis suggesting a pretty significant downturn should have started already. I know little about it and never hear folks talking about using it.

  122. 122
    BirdsofpreyRcool Says:

    PQ 10 3/8 due 5/12, callable at 105.19, quoted on Trace at 98.85

    cusip 71674PAB6

  123. 123
    PackMan Says:

    Nicky 106; I was gonna note the same thing about AA earlier. They gave up their earnings gain w/in 1 day.

    INTC gain not particularly spectacular either.

  124. 124
    bondbuddha Says:

    Don’t trade many corp’s, not enough YTB in em. 🙂

  125. 125
    Nicky Says:

    Packman – plenty do use it normally in conjunction with other ta. Its complex as you can see:

    http://www.acrotec.com/gann/gannsq.html

  126. 126
    Nicky Says:

    FOMC minutes at 2pm

  127. 127
    zman Says:

    Aubrey addressing a question about the recent bump up in gas drilling activity. Saying they are already well on their way to their target so not a lot left from them in rig upside. Says same of peers. Says that CHK will be the most aggressive in bringing back rigs of anyone (they are in 1 of every 7 wells drilled now as an operator and again, are approaching what they see as a natural ceiling for their needs). Makes my point that CHK, HK etc are drilling enough to get acreage into HBP and little more than that and avoiding drilling in the conventional. Aubrey is making my points better than I do but he’s better paid to do it. Says you are seeing others hedge as the back of the curve came up, they are waiting as they are front loaded on what hedges they do have and reiterates there is no way 700, 800, or 900 rigs will keep gas production from declining next year.

  128. 128
    zman Says:

    Who’s who of E&P analysts asking questions of CHK. Which means they are all there paying attention to the meeting and not the rest of the names or this morning’s stories, like NFX. When this happens the first call note gets relegated to a junior to write a short placemarker of a note that says, we like it and we are reviewing next years numbers. Should see more commentary on that tomorrow morning. Same may go for RRC.

  129. 129
    zman Says:

    Nicky – Are you thinking GS is going to miss? If so can I get your basic reasoning? Deal activity was very strong during the quarter, not sure about trading. But if the Street’s coverage of JPM is an indication of the standard deviation between expected and actual results then GS could beat by a mile. Just curious as to your earlier comment.

  130. 130
    zman Says:

    9999.54

  131. 131
    bill Says:

    aubrey seems defensive

  132. 132
    zman Says:

    Bill – It has to be exasperating to get asked the same lame question about VPPs over and over. Some of the questions regarding asset sales remind me of congressman asking the treasury secretary about the economy.

  133. 133
    zman Says:

    Aubrey – “increasing that oil % (of the company) is near the top of the list” … of things to get done.

  134. 134
    1520sbroad Says:

    10000.22 – and the CNBC talking heads go wild…

  135. 135
    PackMan Says:

    10001.58 Its magic

  136. 136
    bill Says:

    10,000 there it is

  137. 137
    VTZ Says:

    CNBC is funny… I feel stupider listening to it on the drive to work but I can’t help myself.

  138. 138
    zman Says:

    Hear ya V, it’s the fascination with the abomination.

  139. 139
    apbd Says:

    RE: DK.
    No enthusiasm over INTC, JPM or Dow 10,000.
    apbd

  140. 140
    Nicky Says:

    Z – not at all. I expect GS to beat – they always do. But at the same time this is totally priced in and everyone knows it. I suspect we could see a 10 – 20 dollar price drop in GS by the end of the day tomorrow. Historically they only ever rally a tiny amount on their earnings announcement.

  141. 141
    zman Says:

    Oh. Ok thanks much.

  142. 142
    VTZ Says:

    Nicky et al, I’m reading Murphy’s Technical Analysis book, is there anything else I should read? I’m sure there’s lots, but I’d probably only read a strong recommendation.

  143. 143
    Nicky Says:

    The CNBC coverage of Dow 10k is truly pathetic. Why don’t they listen to what they are saying? To me if they realized what they should be saying is that we have lost a decade.

  144. 144
    zman Says:

    I’m again looking for a bigger withdrawal than the Street average on distillates tomorrow. Street’s not looking for any reduction in utilization which may happen but is more likely to drop off a bit, given the recent pronouncements and the time of year. Distillate demand is on a growth track from here and the Street’s flattish expectation seems overly conservative.

  145. 145
    choices Says:

    #144- Z, does this or will this have any significant impact on the refiners?

    Thanks

  146. 146
    zman Says:

    FOMC minutes out – market does not not seem to care.

    Choices – I was thinking of it more as a support mechanism for crude. It might help them…something needs to, no play from me there right now. My TSO calls will go away worthless and I’m not reloading there or SUN or VLO. Group stuck in penalty box.

  147. 147
    Nicky Says:

    An analyst on CNBC saying that with the Dow over 10k everyone is going to feel much better off – please! Has he not noticed the dollar.

  148. 148
    zman Says:

    V – SU just keeps bumping up.

  149. 149
    VTZ Says:

    Nicky – In your view can dollar fall to 72 before finding support or is that too far?

  150. 150
    jat Says:

    Just got back from CHK. Here’s my value add. They gave us all gigantic real leather duffel bags with CHK branded footballs, bottle openers, beer cozys, hats, umbrellas, and golf balls. It is a little ridiculous. Maybe I’ll go out and buy some CHK stock. Could probably buy 10-15 shares at least with the money they just wasted on this swag.

  151. 151
    zman Says:

    Nicky – well at least the exporters will do well. I wonder if the #1 export for the U.S. is still movies?

  152. 152
    VTZ Says:

    Yeah SU and COS have had really nice runs. CNQ as well.

  153. 153
    zman Says:

    Nice score Jat. Ocean gave us GPS units back when they had just hit the market.

  154. 154
    zman Says:

    Site Watch:

    The site has not yet been transferred to the new server. This may occur at any time meaning the main site may be down for as much as 2 days as things are repointed. If this occurs the posts will be up on the backup site here:

    http://zmanbackup.wordpress.com/

  155. 155
    Nicky Says:

    VTZ – sure its possible as wave v can extend. Its getting difficult counting the waves down here for the dollar. Next level I am watching is 74.50 which is major support.

  156. 156
    choices Says:

    IOC is very strong today, up 10+%, believe someone a day or so mentioned it -any comments, Z.

    Thanks.

  157. 157
    zman Says:

    Oil closing over $75.
    NG closing down another 15 cents at 4.44.

  158. 158
    zman Says:

    Morgan Stanley took their target to $65 on IOC.

  159. 159
    Nicky Says:

    That said VTZ – we suddenly saw a dollar reversal….

  160. 160
    VTZ Says:

    RE 148: Suncor is one of the most actives today on the TSX so this breakout to a new 52 week high (In CAD) is with volume and it’s a strong move.

  161. 161
    bloodystupidjohnson Says:

    Elimate the first half hour or so and the market along with stocks followed here have just treaded water. It really has been a very boring day. I will be interested in how the last hour is going to be.

  162. 162
    Nicky Says:

    euro is definetly starting to move lower. somethings up….

  163. 163
    zman Says:

    CHK – Eagle Ford

    50,000 net acres
    first well Q4
    will add another 50 to 100K acres

  164. 164
    VTZ Says:

    Nicky – On a large scale, we retraced 38.2% from the 2001 high in the dollar to the 2008 low. and are now moving lower again. On a bounce, the highest I can see it going is the 81-82 range in order to bounce off resistance and I would consider that an extreme bounce.

    Do you agree?

  165. 165
    zman Says:

    Rally in a bunch of names as we enter the last hour. DJIA back to 10K, SP at new HOD. Looks like GS in the morning, plus some eco data, then IBM and GOOG after the close tomorrow.

  166. 166
    VTZ Says:

    Another 38.2% retrace would bring us up to 81. That seems to me like a nice place to reverse?

  167. 167
    BirdsofpreyRcool Says:

    C and GS in the morning. But also PII, HOG, and WGO… so will get some consumer info too.

  168. 168
    zman Says:

    Market = wow. Where’s my champagne? Just kidding Nicky.

    Site slowness should be gone in 24 hours. We transferred domains and servers at my host and it will take that long to repopulate across the internet. Don’t blame me, blame Al Gore, he created it.

  169. 169
    Popeye Says:

    Is the SII guy in here today?

  170. 170
    ram Says:

    Gore is also associated with uncomfortable horror scenes.

  171. 171
    zman Says:

    BOP – I gotta stop you on using WGO as a benchmark. The used market on those fell out of bed and I would not be surprised if the Administration outlaws them entirely, lol.

    Harley used to make bomb casings which I bet would be a good hedge right now, what else does WGO make?

  172. 172
    zman Says:

    Oh, you’re third was Polaris. You suckered me on that one. Ha, ha, very funny. Not used to you telling jokes.

  173. 173
    zman Says:

    It’s raining Gnomes in Florida.

    I may just pull the plug on the remaining October WLL and NFX calls.

  174. 174
    zman Says:

    Eli – your call re market direction from 9/30 was right.

  175. 175
    BirdsofpreyRcool Says:

    uuuuuuhhhhh…. i wasn’t kidding. HeadTrader sent me the following a couple of weeks ago. He pointed it out again today.

    http://www.usatoday.com/money/economy/2009-09-28-sales-recreational-vehicles_N.htm

    But, enough about that… you don’t think i’m funny… at least once in a while?? waaaaaaaaaaaaaaaaaaaahhhhhhhhh.

  176. 176
    zman Says:

    ZTRADE

    NFX – Sold the remaining October $45 calls for $2.80, up 151%. I continue to hold the Novembers taken this morning and plan to add more to the position probably next week.

  177. 177
    zman Says:

    Thanks for 175.

  178. 178
    zman Says:

    We get API after the close, I continue to think distillates will show a bigger than expected draw down, maybe not in API but in EIA which is really the one the market seems to be paying more attention to these days.

    I’m going to hold my remaining WLL Octobers through to the morning.

  179. 179
    BirdsofpreyRcool Says:

    FAS at HOD… C and GS have a lot riding on their shoulders.

  180. 180
    oklahoma Says:

    BOP-great call on the financials HIG, WFC rolling on…enjoying the ride.

  181. 181
    BirdsofpreyRcool Says:

    thanks, oklahoma. I still have my “C” ticket… and riding with it.

  182. 182
    zman Says:

    Beerthirty. Would someone post API when it hits? Thanks.

  183. 183
    Nicky Says:

    Market Rumour from FT Alpahville:
    Goldman to report $6.00 vs $4.24
    http://ftalphaville.ft.com/blog/2009/10/14/7780

  184. 184
    BirdsofpreyRcool Says:

    Remember when GS hit $47.41 and we all thought Buffet was crazy? Seems like a lifetime ago…

  185. 185
    BirdsofpreyRcool Says:

    (make that “Buffett”)

  186. 186
    elijahwc Says:

    Z-Gram (but from a different Z, Marty Zweig), “don’t fight the Tape and don’t fight the FED.” 1986

  187. 187
    Nicky Says:

    Buffet actually bought at between 110 and 120. He was way too early.

  188. 188
    BirdsofpreyRcool Says:

    Nicky — yep. I recall… that’s why we thought he was nuts at $47.41. But, who’s laughing now?

  189. 189
    Nicky Says:

    BREAKING NEWS ON CNBS

    SPECIAL REPORT 7pm DOW 10K

    I am not kidding either.

    The Dow first hit 10,000 on March 29, 1999, ten-and-a-half years ago! So if you bought and held back then you would have made nothing.

    I doubt CNBC will spin it that way however.

  190. 190
    BirdsofpreyRcool Says:

    API numbers

    crude -172k
    gasoline -2658k
    distillate +219k

  191. 191
    zman Says:

    Thanks BOP, are being taken as bullish in the aftermarket. Still think we see a draw on distillates tomorrow.

  192. 192
    Nicky Says:

    Yes BOP I meant to add it turned out to be an okay call. Let’s hope he sells however. If he takes a buy and hold strategy this time he is unlikely to live to see the recovery next time.

  193. 193
    BirdsofpreyRcool Says:

    End of Day OVERVIEW

    · Stocks end strong and at their highs (Dow up through 10K; sp ends up 18.8 points to 1092); volumes picked up this afternoon but didn’t really explode higher. Color from the desk – not a ton of real money buying on the strength (a lot of it traders, esp. in the financials), but also not a lot of real money selling either. Longs for the most part are keeping a wary eye on elevating equities and remain skeptical, but are standing pat w/their exposures (and recalling back to how they felt the same skepticism about sp 1K and other milestones that have been blown through on the upside). Earnings have been coming in very strong, but keep in mind that we are only a very small % of the way through the calendar Q3 reporting season, the early reports are skewed towards best-in-class companies, and expectations have just become that much higher for everyone else in the weeks ahead.

    · The DJIA took out the psychologically important 10,000 level this afternoon (and importantly held it into the close); however, 1100 on SP futures remains the big level to get through on the upside: there is a large open interest at that level and also represents the down-trend line from 10/07 highs. We continue to see some anticipatory hedging/buying as we creep up to that level, while bears are trying to take a short-term stand to prevent an upside spike through that level.

    · Equity Sectors – the sp500 financials finish up 3.43% (technically its best single day % climb since back in Jul although there have been a bunch of 3%+ days in the last few weeks). Within financials, the REITs were up >4% and were the best major group. The industrials ended >2% (helped in large part by the transports, which closed up nearly 4% after CSX). Materials finished up >2% (metals stocks traded well on demand optimism and dollar weakness). Tech, health care, discretionary, and energy all end up >1%. Telecom services finish fractionally in the red and just can’t seem to attract much interest on the buy side (worries about wireless pricing pressure, among other things, weighing on this group).

    · FX – the dollar trades poorly all day and gets hit further on back of the FOMC minutes (which were seen as dovish); the DXY finishes off 0.66%. The sp500 climbed 1.75% in US$ but was up 1.3% in Euros.

    · Corp credit held a strong bid all session, though it didn’t really participate in the post-FOMC equity rally in the afternoon; HY13 went out up ~1pt (roughly where it was midday) while IG13 tightened ~4bps.

  194. 194
    Nicky Says:

    Volume is very average for an opex week. Maybe this is telling us something. Mom and Pop sure have no money to buy stocks.

  195. 195
    zman Says:

    Got what I wanted out of the CHK call, good stuff on reserve rule changes impacts too, will summarize in tomorrow’s post. CHK’s call turned out to be much better from SWN than for CHK, nothing operational in there for the red CHK day, just the free cash flow reduction which makes analysts say “ugh”. Interesting that with leadership positions in the 4 big shales they are going after Eagle Ford acreage as well … further validation for HK, good also for SM, PXD, ROSE. They will drive prices up so probably best for HK who already is very big there.

  196. 196
    Nicky Says:

    Today the DJI actually had a NEGATIVE money flow!
    http://online.wsj.com/mdc/public/page/2_3022-mf

  197. 197
    zman Says:

    November crude hit 75.94 just a minute ago. For those of you playing along at home that is a new 2009 high.

  198. 198
    zman Says:

    Fantastic U.S. / Costa Rica game on

  199. 199
    ram Says:

    Was the 75 print a breakout for P&F?

  200. 200
    zman Says:

    Jerome wrote this in yesterday’s comments:

    “Crude Oil printed a qaudruple top P&F buy signal with the print of $74 today. Crude is now back on a buy signal. Price obj at this point is $90, but the obj can change depending on price action.”

  201. 201
    ram Says:

    Thank you. Here’s hoping to getting out of some more Octobers.

  202. 202
    zman Says:

    The TSOs are toast. The BEXP and SDs are most probably toast.

    APC will be punted opportunistically for either a small gain or a mid sized loss. Small gain if GS beats and runs the market or jobless claims duck under 500K.

    That leaves the October WLLs which will likely move with oil and can come off now for a 50% gain.

    Either way, at this point, my October exposure is less than 7% of total.

  203. 203
    VTZ Says:

    Nicky – I know this is a late post so I’ll reiterate tomorrow, but I think we will move to 72 on the dollar index based on the after hours action and recent moves.

    I don’t think the USD will not find support even at technical support this time. I think major support (74.50?) will break. Primarily because the selling pressure is too large and the carry trade will flush the dollar down the toilet.

    Once the long bond fails, the move to much lower levels is in the cards and everyone knows that day is coming.

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