24
Mar

Hump Day Bullets

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Still on my Gulf Coast rig inspection tour. Some very brief bullets ...

 

  • LINE Deal Thoughts: Not bad. 
    • $330 mm for Antrim Shale assets with current production of 30 MMcfepd; reserves of > 266 Bcf announced Monday evening,
    • Cheap on both a price per produced Mcf and $ per proved reserve basis
    • LINE priced a 15 mm unit deal, upped from an original 12 at $25 Tuesday night to help pay for this and is doing a $500 mm  debt deal to help pay down the revolver.
    • Nutshell: Big question would be "Why add gas now?" My thought would be the asset is low decline and cheap and while management here has oft stated that gas prices will remain weak in the medium term (3 to 5 years) they have an excellent record of buying low and monetizing high all the while growing their distribution. I don't expect this deal to allow them to immediately grow that distribution but adding low cost production at a low price will  be critical in growing it down the road. In the meantime, LINE remains well hedged and I continue to be a holder.
  • AEZ's first well was indeed a good one, more details later but this is in sort of no man's land, relatively undrilled north and east of Rough Rider .... this is where BEXP has been adding acreage in recent weeks. BEXP should have another operations update either next week or the following week. AEZ's second well may be completed in time for the 1Q earnings release and a third well will spud shortly.
  • WLL - continues to be the cheap Bakken name.
  • Inventories today: Street's looking for:
    • Crude: UP 1.2 mm barrels
    • Gasoline: DOWN 1.1 mm barrels
    • Distillates: DOWN 700,000 barrels
    • After the bell, API reported a big crude build but big product draw downs last night Gasoline will increasingly drive crude prices from now through Labor Day.
  • Other Thoughts:
    • CNBC can best be described as giddy when only observed for 5 minutes a day.  Up markets are good for ratings I guess.
    • My thanks to Louis Reard, inventor of the bikini.
    • Love In Watch: Thanks also go to BOP.  By popular request a "Got Bakken?"  shirt is hers for the taking. Thanks also to Nicky, JB, and you all for keeping me decidedly informed when I'm not supposed to be and to Otterbox, for keeping the Iphone dry in the ocean. 
    • Variety is the spice of life unless you are talking about Weaponized Chili

 

133 Responses to “Hump Day Bullets”

  1. 1
    bill Says:

    http://investor.plainsxp.com/phoenix.zhtml?c=132091&p=irol-SECText&TEXT=aHR0cDovL2NjYm4uMTBrd2l6YXJkLmNvbS94bWwvZmlsaW5nLnhtbD9yZXBvPXRlbmsmaXBhZ2U9Njg1MDE0MiZhdHRhY2g9T04mc1hCUkw9MQ%3d%3d

    pxp raising 300 m

  2. 2
    BirdsofpreyRcool Says:

    Game of the Season is NOT College Basketball… it’s “Sovereign Whack-A-Mole” !!

    Portugal got whacked upside the head with a downgrade by Fitch this morning to AA-… I happen to really like Fitch. To my knowledge, they are NOT publicly-traded or owned by a publicly-traded parent. So, maybe a bit more professionally-driven? (Take THAT, Moody’s and S&P). Anyway, equity futures markets no likee-likee downgrade.

    For anyone who has ever been to Portugal, they know that 1) It’s pretty. 2) It has some nice beaches in the South. 3) They make Port wine. 4) Columbus went to sailing school there in the 1400s. 4) Population 10 million. (Greece population 10.6mm) Bottom line = Not much There there in Portugal.

    TED a little wider over the last few days with LIBOR rates (finally) ticking up about 3 whole basis points (from 0.25% to 0.28%) and a slight rally in US Treasuries this morning. Our friend TED is standing tall at 14.3 bps. WOWOWOW. This was close to 300.0 bps at the bottom of the FEAR ABYSS.

    But, that is the concern du jour. We have now officially put the P and the G of the PIIGS Club into play. Expect more Moles to stick their heads up over the coming months.

  3. 3
    BirdsofpreyRcool Says:

    bill — after going thru MMR’s presentation and recent 10-K last night, methinks they have the debt capacity to raise some cash in the high yield market too. Wouldn’t be surprised if they are closely watching PXP’s reception and then attempt to access the debt mrkt themselves. They should be able to raise $250-400mm without paying more than 9%, i would think. And that would be a whole lot less dilutive than issuing equity (and/or selling down the Ultra-Deep play to a deep-pockeet partner prior to a production test at Davy). Just some thoughts.

  4. 4
    BirdsofpreyRcool Says:

    Wonder if Fitch will be the first one to whack the US AAA debt rating. Hmmmmm…..

  5. 5
    zman Says:

    But BOP. Geithner said the U.S. would NOT lose it’s AAA rating. He promised, lol.

  6. 6
    BirdsofpreyRcool Says:

    TechTrader totally non-commital today with a brave 50/50 call on the market.

    HeadTrader is ready to have more fun. He thinks the mrkt sells off, you then buy, then the mrkt goes up. He thinks you always use weakness to buy right now. [Caveat = he is totally bummed about the one-way direction of the mrkt recently (up). With no volatility, he can’t do his sexy trading thing.]

  7. 7
    bill Says:

    4- that would be funny as the govt is looking at moodys for not issuing accurate ratings

  8. 8
    bill Says:

    tph says chk will be cutting back drilling– says to watch name

  9. 9
    BirdsofpreyRcool Says:

    z — #5 riiiiiiiiiiight.

    Here’s the scenario… I think Congress kicked the “doctor fix” (which i totally disagree with to begin with, but i digress) down the road from March to Sept this year. This is the source of something like $230mm of the “SAVINGS” that the Obamacare plan was passed on. But Congress has NEVER implimented the “doctor fix” in years past. Never. Don’t expect that again here. So, one of the Biggest Lies of ObamaCare will be exposed for what it is… just prior to the Novemeber elections. Then Fitch (God bless ’em) comes out and puts the US on it’s Watch List for a downgrade.

    Then see what happens…

  10. 10
    zman Says:

    Hear ya BOP and thanks again, T-shirt, mug etc all yours. Gotta go hold Paleo 101 on the beach.

  11. 11
    BirdsofpreyRcool Says:

    File Under “Sharp Elbow to Competitor’s Rib Cage” heading.

    From a MadisonWms note this am…

    DVN CEO Larry Nichols presenting at industry conference states that he sees Davy Jones well never getting to production; Davy Jones – MMR expects to flow test the well by YE’10; rig will be moved over to Davy Jones #2 well in ~2 weeks to spud the well(2.5 miles away), will test similar sections up-dip & deeper potential; Blackbeard East spud ~2 weeks ago, drilling below 4500’; Lafitte to spud this summer; submitted apparent high bid on 17 of 19 blocks on the GOM Shelf

  12. 12
    tomdavis12 Says:

    BOP: Did Nichols offer an explaination as to why DJ will never get to production? Congrats on the tshirt.

  13. 13
    elduque Says:

    BDI has been dropping fairly sharply for the last week.

  14. 14
    tomdavis12 Says:

    BOP: Goldman cut targets on many independent power producers ETR, EXC, NRG, ORA, RRI.

  15. 15
    bill Says:

    >DVN CEO Larry Nichols presenting at industry conference states that he sees Davy Jones well never getting to production; Davy Jones

    what??

  16. 16
    BirdsofpreyRcool Says:

    tomdavis — this is not the first time I’ve heard Nichols trash the DJ well. It’s just the first time i’ve heard it in public. He thinks the sands are tight. I am guessing that is the reason anyway. It’s based on similar sands encountered in an onshore well. I don’t know why he is being so open with his opinions. Basically, he is calling JimBob a liar in front of an industry/investor audience. Clearly, bad blood between those two.

    But that is why MMR NEEDS to get a production test at DJ… and why I don’t think they get a deep-pocket partner prior to that.

  17. 17
    elijahwc Says:

    FWIIW CVX-for-DVN rumor going around

  18. 18
    elduque Says:

    The volume on CHK has been rising. Daily averge is about 13 million. The last 4 days have been double that.

  19. 19
    elduque Says:

    Re DJ – I guess that is why EXXI is a better play given that it trading about where it should without DJ.

    BOP- What does 70 dollar oil do for your valuation on EXXI?

  20. 20
    BirdsofpreyRcool Says:

    elduque — psychologicially, $70 oil would push EXXI’s price down. In reality, EXXI has hedged about 80% of this year’s oil production at close to $80. So, stock would fall, bonds won’t budge, cash flow still covers capex.

  21. 21
    tomdavis12 Says:

    BOP: Any news from the dinner circuit?

  22. 22
    BirdsofpreyRcool Says:

    waiting for the call-back as i type… particulary interested in hearing the full back-story to the Nichols comments. wow-sters.

  23. 23
    andy Says:

    bop – what time EXXI present? wonder if somebody will tell Schiller about what NICHOLS said?

  24. 24
    BirdsofpreyRcool Says:

    Deep Thoughts… Everyone hates nat gas. Everyone loves oil. Hedge funds going long oily names and shoring nat gassy names. Heading into summer. Warm summer expected? Industrial production ticking up? CHK decides to lay down some rigs and cut back production. Summer rally in nat gas. Hedge Funds run for the door. HK to $28.

  25. 25
    BirdsofpreyRcool Says:

    andy — i think the Nichols comments are the Talk of New Orleans right now. Think there is just about ZERO chance that Schiller (who openly worships at the Altar of JimBob) lets that comment just lie there like a wriggling worm on the driveway after a heavy rain.

  26. 26
    BirdsofpreyRcool Says:

    Think EXXI is just before noon… but will double check.

  27. 27
    john11 Says:

    Nice visual Bop, lol. EXXI speaks at 2:15 est.

  28. 28
    Nicky Says:

    re # 9
    They were the “first” credit rating agency to slash the credit worthiness on mortgage related securities in 2008, and were the hardest (most conservative) raters throughout the end of 2008… they may be the “first” to downgrade American debt in the fall of 2010. How can they not downgrade U.S. Treasuries when the numbers as a percent of GDP are worse here than Portugal and Greece, and Obama/Democrats are promising to spend even more beyond our means in 2011 than 2010, which was higher than 2009, which was higher than 2008, which was higher than 2007, which was higher than… If you count the Freddie and Fannie $5 trillion in mortgage related backstops the American taxpayer is on the hook for, and looking at Obama’s 10-year rosy forecast the U.S. is in the WORST shape of tackling the exploding debt problem in the industrialized world… Needing between 50%-80% of the new debt issuance to be covered by overseas investors.

  29. 29
    BirdsofpreyRcool Says:

    john11 — thank you for posting the EXXI presentation time.

  30. 30
    andy Says:

    bop – re wriggling worm your guy going to EXXI also?

  31. 31
    BirdsofpreyRcool Says:

    Nicky #28 — extremely well-said.

  32. 32
    BirdsofpreyRcool Says:

    andy — he doesn’t have to. He and Schiller hang out together…

  33. 33
    zman Says:

    Just checking in.

    Re Nichols comment … much like Bob Simpson in attacking the competition. Spoken very much like a man with onshore gas and lots of it and a company he is obviously trying to fob off as he heads into the sunset, again, like Simpson and CHK. “Don’t you go and find too much gas while I’m looking to sell my company”. Tight comment would make sense as a worry but I very much doubt Nichols has any actual knowledge on the well.

    Re natural gas comment. Yep pretty much what I’m thinking. Gas bottoms during shoulder season and rallies on heat, high coal prices, increased threat of hurricanes, slipping production (plus some curtailments) and a stagnant rig count.

  34. 34
    BirdsofpreyRcool Says:

    DOE numbers

    Crude UP 7.245mm
    Gasoline DOWN 2.715mm
    Distillate DOWN 2.422mm

  35. 35
    BirdsofpreyRcool Says:

    z — heard Bob Simpson literally crossed the street to beg XOM to buy XTO out. Sharp Elbows are the last refuge of a pathetic CEO, imho.

  36. 36
    Nicky Says:

    Oil wanting to hold onto 80 by the looks of things.

    Indices -ugh!

    I am still thinking this is a wave iv that is going to play out as an abc correction. If this is the case then we are in b and it should go no further than 1176.

    If this is not the case then likely we are in wave v – possible target would be 1189.

  37. 37
    Nicky Says:

    USD appears close to completing this wave up between 82 and 83. Should see a wave ii bounce for gold then too.

  38. 38
    elduque Says:

    Z you are not supposed to be checking in.

    We are almost surviving without you.

  39. 39
    RMD Says:

    CHK: I’m musing about what CHK would be worth if split up. My quickie valuation gets a max. value by putting the conventional production into an MLP and the shaleco sold at XTO-like prices: $66.
    Here is the math so you can substitute your own #s. Data is mostly from slides 8 and 12 of CHK update 3/10.
    Shaleco reserves (6 shales +Granite& Colony Washes) 8,370b x $3 (XTO value)= $25.1B
    Conventional reserves 6,230b into an MLP: production/d is 920m x $20,000/d= $18.4B.
    Without allocating the $13B of debt as this just musing, $25.1=18.4= 43.5B or $66/share.
    There are all kinds of assumptions here, largest being would someone pay $3/m for Shaleco with all the JVs, but SWN and NBL sell above $4/m. I think CHK has hinted about the MLP structure before. No, I don’t think CHK is going to $66 this week!

  40. 40
    VTZ Says:

    I think gold is setting up for another major run.

  41. 41
    BirdsofpreyRcool Says:

    From a chart perspective, if one was thinking about going long the nat gas kids, who looks better? HK, CHK, RRC?

  42. 42
    Nicky Says:

    Support is at 1166 and then 1161. If its a c wave it should finish below 1152.

  43. 43
    RMD Says:

    Someone in New Orleans said Nichol’s comment related to CAM being unable to build a tool able to withstand the pressure at DJ.

  44. 44
    BirdsofpreyRcool Says:

    Thanks, RMD. I have heard that CAM rumor before. About a month ago, from a conf in Denver.

    In response, we have been told that MMR is planning on ordering a 20kpsi wellhead that they say is within current technology and can be built largely with “parts off the shelf.” There is some specialized engineering and fabrication involved, but MMR has dismissed that comment as untrue.

    That said, sure would like to see that spelled out in an official, public PR. Thanks for filling in the blanks there!

  45. 45
    BirdsofpreyRcool Says:

    Follow on thought… if the CAM comment was remotely true, anyone invested in PBR for the pre-salt play better sell now. Apparently, techology can’t advance to meet new challenges.

    What a stupid comment for Nichols to repeat.

  46. 46
    cargocult Says:

    BOP-OK I’ll admit I do not have the economic sophistication you have but please explain something to me. Why all the Obama bashing when for 8 years the Bush admin set-up this whole economic catastrophe. Where were all the complaints when Bush’s man from GS was screwing up?

    To begin with Bush inherited a surplus and a balanced budget from Clinton. Bush enacted a huge tax cut then overspent, and started 2 wars which are never good for business because war is like a tax. They let wall street and GS invent exotic b.s. making themselves richer than G-d, inflating real estate prices that exploded in their faces just as they were leaving office. The effect was to remove huge amounts of capital from the system and banks were faced with failure since their capital just evaporated. We were faced with the greatest threat to our economic system since the great depression.

    So Obama’s guy from GS has pumped huge amounts of capital(blood) into an anemic economy to replace the bank losses so we can stand up again without fainting. Now the same folks who overspent for the prior 8 years have somehow got religion and are calling for paying down debt, lowering taxes even more, cutting support to those who have the least, rewarding those who have the most(the same bankers), and in general doing what they do best which is nothing. The only part of the Constitution they understand is “provide for the common defense”. No mention about “promote the general welfare”. It might help if they read the entire document.

    In a crisis it seems prudent that we raise money from those who have it, cut spending on foreign wars which is almost like burning money because it allocates capital to the means of destruction rather than production, create incentives for domestic manufacturing and job growth, reinvest in our crumbling infrastructure, and help keep alive those who have the least and suffer the most in times like these.

    What do you think?

    By the way, I appreciate all your efforts, good humor, and amazing insight regarding Exxi etc.

  47. 47
    Nicky Says:

    If the 1164 – 66 area holds then we may just be seeing a wave iv dip ahead of more upside.

    If the above numbers fail then we should be in the low 1150’s quickly.

  48. 48
    BirdsofpreyRcool Says:

    cargo — you give me a lot of ground to try to cover. I won’t attempt that on this board, except to say that the day Bush approved a Steel Tariff right after he was elected, I knew we were in trouble. So, I will not be cornered into defending his policies.

    That said, BHO is GWB bad policy on steroids.

    The financial crisis could NOT have been made possible without 1) the “implicit” govt guarantee of Agency Debt combined with 2) a policy push to get everyone a house (whether they could afford it or not) and 3) non-existant lending standards (made possible by point #1 and facilitated by a corrupt sub-group at the rating agencies), and 4) the repeal of Glass-Steagall (which occured under Clinton). Combine all that with a growing trade deficit with China at the same time (we bought their stuff, they got our dollars, they used our dollars to buy our US treasuries… “hey, Greenspan, what was so ‘conumdrum’ about that??”).

    Several Republicans tried to get that Fan/Fred Gravy Train shut down. But ran firmly into 1) Dodd/Frank resistance and 2) who really wants to be the bad guy at the party and take away the punchbowl?

    Govt does NOT “create jobs.” Govt can only allow the conditions to exist for the private sector to create jobs. In order to do that, govt needs to stand back. Anything else is taking money from the productive segment of society/economy in order to prop up the unproductive segment. Our country thrived because of the people and our private sector. NOT because our Govt made “all the right decisions.” Au contraire.

    That is the Big Picture. The rest is just a Side Show.

  49. 49
    Jerome Blank Says:

    Re: #41 BOP what time frame?

  50. 50
    BirdsofpreyRcool Says:

    JB — well, if i think there might be a race to undo the “short natty gas kids / long oily kids” trade starting here soon, which horse would you pick to win that race?

  51. 51
    tomdavis12 Says:

    BOP: Summary of NE presentation @ HW yesterday. Pemex tenders allowed company to not address situation in their slides like they did in Jan. 7.6B backlog. Nothing new there. $1.00/sh dividend this year. They were questioned about ESV rig sales. Would they sell at those prices. They answered no way. Since ESV has good cash on balance sheet, that became the big question. Why did they sell? I have been encouraged to talk my book with NE. Not my personality. I know not a popular name in Z-land.

  52. 52
    Nicky Says:

    Cargo – I think the problems go back way beyond Bush – the economic disaster we have now likely started back in the Clinton era although granted it doesn’t look that way. Not that I am defending Bush either I hasten to add.
    I remember hearing Greenspan say that human dictates we will see this over and over – as it is the human greed factor which leads to these cycles.
    As for now. What I most dislike about this government is that it rewards failure. The latest news today by BOA that they are now going to write down capital on mortgages. It’s just more of the same moral hazard.

  53. 53
    jiveyjr Says:

    when you discuss political views in a public forum you will always wind up urniating on someone else’s values who sees the world differently than you do

    let’s all let Z have a nice vacation and not breakout into philisophical fisticuffs while he’s gone

  54. 54
    AAA Says:

    BOP,

    Re 48, bravo. You saved me a lot of typing. Most everyone this side of Karl Rove will concede that Bush was not a very good president. That said, a lot of his worst excesses on spending were defensive measures taken to preempt democrat political attacks.

    It is very depressing that apparently intelligent people just blindly accept the idea that the proper role of government is to make life “fair” ,”spread the wealth” and take from one group to subsidize another (who just happen to be the ones that vote for them).

  55. 55
    BirdsofpreyRcool Says:

    Well said, Nicky.

    The thing about “rewarding failure.” That doesn’t happen in a vaccum. It’s not a one-sided trade. When you underwrite (or reward or transfer assets to) failure, you make “success” pay for it.

    Success is what employs people and grows economies, makes people want to study hard in school and go to work every morning. Success makes the sun shine and birds sing.

    Rewarding failure is like shoving more shit on mushrooms… they thrive and multiply.

  56. 56
    john11 Says:

    I wonder what ATPG is saying about Telemark in its talk at HW right now.

  57. 57
    guru Says:

    cargocult:

    You summarized accurately the BS that has been so well orchestrated by CNBC, FOX and all the Wall street types who benefited so hugely from the Bush era of “feed the greed of the rich at the expense of the rest”.

    With one or 2 exceptions, none of the developed economies on the planet have a healthcare system that depends on corporate employment for provision of one’s healthcare. You lose your job and you are quite likely to lose your health insurance. You have a serious sickness and very likely your insurance will be terminated. And the present system is also one of the costliest system in the world. These are the facts and nothing is done until now when Obamacare legislation is passed to correct this problem. But listening to FOX you would think that Armageddon is here!!!

    If my memory serves me right, it was the same media and the Republicans who lambasted Clinton’s tax increases on the wealthy in 1994 as the “economy killer” tax. Instead what followed was the biggest streak of 6 years of economic prosperity this nation ever saw and we went from a deficit of $600B (legacy of George Bush Sr) to a surplus of 440B in 2000. It is quite likely that history will repeat itself again!!!

    Well said cargocult

  58. 58
    BirdsofpreyRcool Says:

    jivey — i so SO look forward to the day when politics do not so mightly intersect with the economy and investing.

    It’s like the bond/credit market… when it is functioning properly, no one has to talk (or care) about it other than the people who play in that sandbox. It just quietly supports the entire global economy and allows the tail of the dog, we call stocks, to wag.

    When the govt is functioning properly, there is no need to bring it up.

  59. 59
    Jerome Blank Says:

    #50, BOP, of the three choices, only RRC is currently on a P&F buy signal, and RRC is right on trendline support…all three have similar technical structures, breaking support and currently in the process of retesting underside trendline resistance…gun to head, I’d say RRC, CHK HK in order of preference…RRC is on support and is very easy to manage here…

  60. 60
    BirdsofpreyRcool Says:

    JB — thanks. Funny thing, i was talking about the nat-gas unwinding trade to a HF friend. He was the one who threw in RRC. Said it had a great chart. I wanted your confirmation on that. I think your charting is just The Bomb. Thanks!

  61. 61
    andy Says:

    john – good question. would love to know answer. stock strong last 2 days.

  62. 62
    BirdsofpreyRcool Says:

    MIDDAY OVERVIEW

    Markets Update – stocks pullback from Tues’ new highs, weighed down by renewed sovereign worries (Portugal) and some cautious headlines out of a Fed official (Fed’s Hoenig said its “highly unlikely that US banks have recognized all their financial losses…loan performance continues to deteriorate”). On the whole though, despite the neg. headlines, there isn’t really aggressive selling today. Flows remain very quiet. There is still interest in buying stocks on pullbacks – weakness viewed as an oppy to expand long exposure (but buyers aren’t chasing on the upside). Most interesting activity occurring outside of equities today – TSYs very weak and 2yr yields are up ~8bp on the day to 1.06% (the first time they have been north of 1% since early Jan). Meanwhile, the dollar/DXY is up 1%+ on the day and at the highest level since May (while all the focus is on Portugal and the dollar being strong b/c of a safety trade, the market indicators suggest the trade today could driven by expectations for Fed tightening/brighter eco outlook).

    Equity Sectors – the financials are eking out small gains on the day (off their highs and about flat) as the banks see some buy interest (BAC is up 2% and one of the best acting large banks). In addition to the banks, capital goods stocks extend their rally – the sp500 capital goods index is up ~13% YTD and is the 3rd best performing group in the market (behind banks, which are up close to 20%, and autos, which are up ~28%). Leading cap goods on the upside today: JEC, GE, FLR, HON, BA, UTX, PCAR, CMI. Tech is trading about inline w/the sp500, although the SOX dips ~1% and underperforms (PLD stocks XLNX and ALTR are weakest). Health care falls 0.8% and the group lags (GENZ dips ~5% after this morning’s regulatory update). Retailers are off >1% and underperforming (this space has been lagging for two sessions now). Staples, utilities, and telecoms are all dwn ~0.7-0.9% (within telecoms, S is an outperformer w/a 5% rally). The homebuilders are up 1% today despite the sluggish new home sales as LEN’s earnings prompts buying. Transports getting hit today, off ~1% (rails for sale – NSC, NSX, and UNP are the weakest rails). On the upside in transports, DAL and CAL both outperform.

    Best Performing sp500 stocks: S, LEN, GNW, ADBE, CLF, KEY, MEE, JEC, BAC, CME

    Weakest performing: JBL, GENZ, IPG, THC, XLNX, NYT, ADM, SRCL, ALTR, ADI

    Commodities: Commodities are trading lower in the face of the strong dollar. Crude inventories rising 7.25M vs. expected 1.65 million barrels [Bloomberg] caused an initial sell –off, but crude rebounded shortly after; it’s trading near $80.70, down ~1.5%. Natural Gas has come of its highs and is trading near $4.10, down ~0.6%. Gold has weakened heading into the afternoon and is trading near its lows around ~$1091, down around ~1.1%. Copper has come off its lows a bit, but is still down ~0.95%

    FX: USD (DXY) has strengthened throughout the morning, and is trading near its highs around $81.75, up ~1.1%. The dollar has also rallied vs. the Euro/Pound/Yen trading near is highs against each, up ~1.1%, ~0.9% and 1.6% respectively. The Euro has come off its overnight lows vs. the Yen and has traded flat during the morning, up ~0.5%. Aiding the buck today? the Portugal news and continued Greece uncertainties are certainly helping, although if it was really a “flight to quality trade”, than Treasuries wouldn’t be as weak as they are. Instead, the sell-off in 2s and the dollar rally is signaling more a Fed tightening trade (some of the items sparking this: Hoenig, the lone dissenter to the last two FOMC decisions, is on the tape this morning; also there are rising expectations ahead of next Fri’s 4/2 BLS report – the St is now in print @ 200K but some think this could head higher). The Euro is weak despite a bunch of decent eco readings out (the strong #s could actually be weighing on the euro if the market thinks that the Eurozone economy is picking up but sovereign concerns will keep the ECB easier for longer).

    Corp. Credit: Corp. Credit continues to be mixed. IG 14 is out 1 ¾ of a pt while HY is in line with equities, losing 9/32 of a pt.

    Treasuries: Treasuries are weaker across the board today. The 2s and 10s have sold off (yielding 1.06% and 3.76%, respectively). The 2 -10 years spread relatively unchanged at 270bps. All eyes are on the 5yr auction @ 1pmET today.

  63. 63
    tomdavis12 Says:

    BOP: S&P came out with a BB- rating on the PXP 300M 2020 notes. Corporate rating BB. Can this part of the turd fly?

  64. 64
    BirdsofpreyRcool Says:

    tomdavis — those bonds will price with a 7-handle. So yes, some aerodymanically-challenged objects can fly.

    Debt is all about cash flow, size and diversity of production base, and quality of assets. Equity is all about “what are you gonna do for me tomorrow?”

  65. 65
    guru Says:

    Ref 48:

    There are some inaccuracies in your explanation about the credit crisis causes, especially numbers 1 ad 2. Those are the explanations given by individuals like Kudlow types who choose to ignore the facts.

    The failure resulted from a flawed securitization process which was never monitored by the Greenspan Federal Reserve. Securitization industry (about 40% of the size of the loans originated by the banks) has evaporated. This included all the investment banks such as Lehman , Bear Stearns etc. So were European banks who were big players in CDOs such as RBS, UBS, etc.

    If the securitization was fixed such that an institution which originated the loan was required by law to keep at least 20% of the loan, none of the problem loans would have come about.

    Why not reduce the leverage that GS/MS/JPM are allowed especially now when they have access to the Fed’s discount window?

    Just my 2C worth, especially when I read a constant chatter about liar loans by borrowers but no mention of liar loans peddled around the globe. There is plenty of blame to go around for all the problems that we see following the collapse of the credit bubble.

  66. 66
    BirdsofpreyRcool Says:

    That’s why i like the debt market. Less emotional. More clinical. “So, can you make the payment or not? If you can, I will leave you alone to do your own thing. Thank you.”

  67. 67
    BirdsofpreyRcool Says:

    guru — they could only securitize the worst of that stuff b/c it was backed by Fan and Fred. I don’t get my facts from Kudlow. I have lived in the bond market for the last 20 years. But I also agree with some of your statements. Came down to agency issues. If you got paid to originate the shit, but could shovel it 100% over the the next guy… well, gosh darn, you just shoveled faster and deeper into that shit pile.

    It’s that pesky “moral hazard” thingy again.

  68. 68
    Nicky Says:

    weak results from the 5 yr auction…

  69. 69
    elduque Says:

    It might be worthwhile considering the yield on the 10 year as it starts to compete for the attention of all those people screaming for yield. Should put pressure on MLP’s and REITS.

  70. 70
    elduque Says:

    RE Politics.

    It should be called polarization. How about if we want to spend some time on the board (which I am not advocating) talking politics, We need to find at least one thing positive when we are rebutting an individuals opinion.

  71. 71
    ilikericky Says:

    RE #68 Nicky can you provide a link if possible or tell where I can get more info…thx

  72. 72
    BirdsofpreyRcool Says:

    The when issued 5-yr treasury was trading at 2.57% before the auction. The auction cleared at 2.605%. That means there was less demand for the 5-yr notes than the mrkt anticipated. Hence, it was deemed a weak auction.

  73. 73
    elduque Says:

    10 yr. trading at 3.829 which is 4.10% higher in yield

  74. 74
    BirdsofpreyRcool Says:

    However, URE, the 2x DJ RealEstate ETF is still positive. That is one of the most sensitive “stocks” to treasury yields. So, mrkt will shrug off the auction. Just traders looking for anything to put some volatility into this mrkt and make their lives more interesting.

  75. 75
    BirdsofpreyRcool Says:

    At some point, all this treasury issuance just has to have an impact. Can’t see how we can dodge that bullet much longer. Part of it is just being a one-eyed man in the land of the blind. For now.

  76. 76
    BirdsofpreyRcool Says:

    TAT — one i don’t follow, but z does, is having a very nice day. Any reason for that?

  77. 77
    elijahwc Says:

    Throwing a name in the hat for the paired long Natty, short Oily names trade: GDP. Chartwise GDP is attempting to break to a new 6yr low. The only things shrinking faster than the share price are balance sheet and drilling budget as noted by Southcoast this am (attached below). It has been my experience that these dogs (GDP may be added to the kennel)have price moves that are multiples of quality names. Of course the have to survive first.

    My choice of weapons is GDP’s 5.375%($2.6875) CUMULATIVE Convertible Pfd, Symbol GDPAN/Cusip 382410603, trading by appointment @36.875 vs the common @16.95. Hence a 25% discount to par with a 7.3% rent check. Conversion ratio of 1.5946 means that at $31 on the common, you recover all the discount, get a potential 15-20% additional premium, and collect all the rent in between. After 31 on the common returns go ballistic.

    Capital One Southcoast: GDP:E&P Meeting Takeaways GDP:

    New info: We met with GDP management yesterday, and it seems the company has identified the drilling projects it would cut this year if gas prices stay in the $4 range (mentioned they
    could reduce the current $255MM CAPEX budget by $50MM and still grow production by 10%-15% this year). If the CAPEX is reduced (and we think that is likely), it would probably include cutting by half the planned 7 net Cotton Valley horizontals this year. 2010 proved
    reserves growth could be 40%+ based solely on drilling 23 net Haynesville.
    Catalysts: Currently completing 7 N LA Haynesville wells, so we should get a steady stream of new well results by the time of 1Q earnings in May. HK is completing a Haynesville horizontal in SC Nacogdoches County that is ~5-10 miles from GDP acreage, so this well will
    likely be a good data point sizing up the quality of this area of the Haynesville. GDP plans to spud its 1st horizontal Haynesville well in Nacogdoches in May with well results expected in September. We currently assign $2 of value to GDP’s 22K net acres in the Angelina Trend based on 5.5 Bcfe wells using 50% of the acreage, but it’s unlikely the company is getting any
    credit for this area now. Our take: GDP valuation looks very attractive, assuming even modest improvement in gas
    prices (23% upside at $5.75 long-term gas). At $6.00 gas long-term, we see 48% upside and that coupled with the strong balance sheet, no funding gap for at least the next year (since the
    borrowing base should expand along with the reserve adds), and the southern E Texas Haynesville and Bossier potential make GDP a solid choice for investors looking for a small-cap gas-levered name.

  78. 78
    BirdsofpreyRcool Says:

    elijah — good one. I see that GDP also has some convert debt that trades around the same yield. Am I seeing that right? If so, why not do the bonds vs pref’ds? (note: my bloomberg connection is squirrely today, so got logged off before looking up the deets on the bonds and have to run out for a bit now.)

  79. 79
    BirdsofpreyRcool Says:

    OK… looking at the bonds. GDP has some 5.0% converts due 9/27 trading around 90c on the dollar. Convert price slightly higher at $34.658, but also trading around 7.60% yield and senior to the preferreds… what do you think??

  80. 80
    Nicky Says:

    re # 71 – I was listening to CNBC at the time who were reporting on it.

  81. 81
    Nicky Says:

    VTZ – I have support for gold at 1080?

  82. 82
    BirdsofpreyRcool Says:

    Short Gas Targets — surprisingly, not HK. MMR and GDP right up there, tho.

    Turns out, a lot of people listening to (and believing) that CAM-comment.

  83. 83
    elijahwc Says:

    BOP – I think I’m talking my book…opps. Actually and as you know if GDP is at risk (and I don’t think it really is) then you are on point going for the seniors. Ironically, that issue was a second lien refi and repay of sr loan facility and here we are again. Oh well. I live for the leverage, want the lower strike, and the heat generated by the over 1 ratio (1.59x). As this is a bet geared to absolute price movement, it will generate a greater return than the 5’s of 27….right?

  84. 84
    VTZ Says:

    You have strong support at 1080.

  85. 85
    VTZ Says:

    and again at 1040 and 1034

  86. 86
    VTZ Says:

    …And as usual you have the VTZ guarantee that gold will never be south of 1000 again.

  87. 87
    PackMan Says:

    48 – well done BOP.

  88. 88
    PackMan Says:

    EXXI taking it on the chin post presentation ?

  89. 89
    ram Says:

    Sice this is an energy site, I would like to go out on a long limb and ask for more price info. on CIGX. (If workers at the producing site were not smoking, then the energy company could be more efficient – it’s a stretch)

  90. 90
    PackMan Says:

    Clinton era; I don’t know why everyone thinks the economy was so great. It was just a bubble; one that exploded in 2000 during Clinton’s presidency.

    And Bob Rubin, his Treasury Secretary courtesy of GS, is perhaps the most responsible treasury secretary for bad policy and this whole GSE disaster; and then went on to sit on Citi’s board as guru du jour. Took in $100 M + of board level compensation (for what ?) and watched while Citi imploded; did nothing other than try to evade any responsibility (much in the way you hear Fat Barney on TV doing it everyday).

    That guy should be prosecuted.

  91. 91
    PackMan Says:

    guru; sorry but your comments on securitization don’t make any sense to me.

    Even if the banks didn’t keep the bottom 20% of the loans, there are other parties who did (parties that buy non-investment grade tranches and non-rated tranches; and also act as special servicers).

    These buyers / investors were very smart and well capitalized. Smarter than the banks that underwrote the loans to begin with (and some did also retain “1st loss” pieces).

    And it didn’t matter. Loans went bad b/c everyone got greedy and too agressive. Forcing banks to retain pieces would not have mattered IMO.

    There are simply no facts to support your assertion.

  92. 92
    Nicky Says:

    re #86 – VTZ – I love your confidence!

    re# 90 – well said!

    Indices – sell off (really can’t call it that!) looks corrective. I expect the 1160 -63 area to hold. Only a move below 1152 would change the short term stance.

  93. 93
    bill Says:

    46 >Why all the Obama bashing when for 8 years the Bush admin set-up this whole economic catastrophe.

    EVERYTHING WAS FINE WITH BUSH UNTIL SEPT 2008
    when the market woke to see obama the socialist up by 8 points in the polls. The market being fowrad looking sold off

    all obamas fault.

    When the cats away the mice will play, lol

  94. 94
    bill Says:

    >I think the problems go back way beyond Bush –

    good point carter let the ayatolah into iran.. 35 years later a nut job is trying to get a nuclear weapon and talks like a nazi regarding israel

  95. 95
    BirdsofpreyRcool Says:

    ram — here’s the deal on CIGX. If it works out the way i think it could, the stock is worth something north of $100. If it is a complete bomb, it’s worth zero. Put a 10% chance of things working out and a 90% chance of things going bust (heck, put a 5% chance of success…). That is how to look at these situations. A call option that you will let run. Either it hits big, or expires at zero. It’s a “bet”… but an educated one. Not a shot in the dark, mo-mo, charting investment. It’s just that the mo-mo, shot in the dark, traders have the bit in their teeth right now are are running it hard. Oh, and there is a dedicated short community on the other side here too. So that only serves to add fuel to the fire.

  96. 96
    ram Says:

    O.K. A WILDBOP trade. I got in a little at 2.14 yesterday thinking it might get into the 2.06 to 2.10 to add more. So here we are at 2.54. I would like to add more knowing the risk. I was hoping the mo-mo guys would relax for a couple of hours.

  97. 97
    BirdsofpreyRcool Says:

    ram — that’s FUNNY. A WILDBOP trade. That is what it is. Until we get some more fundamental info out. Then it will de-risk (or risk) some more.

  98. 98
    BirdsofpreyRcool Says:

    Favor anyone…. can someone see if there is a retail brokerage out there that will quote the GCP 5s of 29? CUSIP 382410AC2. Thank you in advance!!

  99. 99
    PackMan Says:

    BOP; you realize with CIGX thats like $15 Billion market cap.

  100. 100
    BirdsofpreyRcool Says:

    15x multiple of EPS, yes. Pretty crazy stuff, eh? Might take 2 yrs…

  101. 101
    BirdsofpreyRcool Says:

    using 140mm FD shares…

  102. 102
    BirdsofpreyRcool Says:

    (i know i sound insane now… so i will just shut up)

  103. 103
    PackMan Says:

    lol…

  104. 104
    ratberto Says:

    Any comments on Bill Gross’s “Rocking-Horse Winner” column?

    http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/Rocking-Horse+Winner+April+2010+IO.htm

  105. 105
    PackMan Says:

    This is ridiculous; same crapola every afternoon to keep things propped up.

  106. 106
    tomdavis12 Says:

    BOP: No inventory to your Cusip here

  107. 107
    BirdsofpreyRcool Says:

    CUSIP 382 410 AC2… ??

  108. 108
    milepost_43 Says:

    TGA…worth a look….very long June and Sept calls here….looks like fracing is going to be a big “F..ing” deal as our VP would say…

    http://finance.yahoo.com/news/TransGlobe-Energy-Corporation-iw-4291284404.html?x=0&.v=1

    Operations and Exploration UPDATE

    In February 2010, the Company successfully fracture stimulated the Arta #9 well in the Nukhul formation. The Arta #9 vertical well is currently producing 210 Bopd and appears to have reached a stabilized production rate. Arta #9 was previously producing 25 Bopd prior to the stimulation.

    Following the success of Arta #9, the Company successfully fracture stimulated three additional vertical wells (Arta #2, Arta #4 and Arta #8) in the past week. The wells have been placed on production and the early production rates indicate they will stabilize at similar rates to Arta #9 (approximately 200 Bopd per well).

    A multi-staged fracture stimulation program is being designed for the Arta #12 horizontal well drilled in 2009. The stimulation program is expected to be completed in late April/early May, subject to the availability of multi-stage packer equipment.

    Mar 11,2010 09 review and operations
    https://amazon.e-mediait.com:8443/sitepreview/http/trans-globe.com/news/index.php?id=aHR0cDovL2NucnAubWFya2V0d2lyZS5jb20vY2xpZW50L3RyYW5zLWdsb2JlL3JlbGVhc2VfeG1sLmpzcD95ZWFyPTIwMTAmYWN0aW9uRm9yPTExMzAxMTQmcmVsZWFzZVNlcT0y

  109. 109
    BirdsofpreyRcool Says:

    oh. got it. no inventory. not “no CUSIP by that name.” thank you.

  110. 110
    occam Says:

    re 24 – which are the oily names the HFs like for a paired trade?

  111. 111
    tomdavis12 Says:

    BOP: I have had good luck finding retail bond markets at the Fidelity website.

  112. 112
    BirdsofpreyRcool Says:

    occam — Good question. i can’t answer that. Would guess a lot of the Bakken Boys. But I have only had conversations in generalities with the players involved. They happened to mention 2 of the targeted shorts (MMR and GDP) but did not say who the oily longs were.

  113. 113
    BirdsofpreyRcool Says:

    tomdavis — good info. Thank you.

  114. 114
    occam Says:

    re CIGX

    Stocks in this space are a special kind of crap shoot, even with very good names involved. The range of things that can go wrong is far higher than, say, a wildcat well. Would you like to bet on individual wells, even with good seismic?

    As an example, a drug recently dropped out of Phase III clinical trials because 1 patient out of several hundred developed encaphalitis (swelling of the brain) just as the trial was winding up. Stopped the trial dead in its tracks, causing loss of hundreds of millions, and maybe a restart of Phase III in a couple of years if they figure out why the encaphalitis happened.

    If you like these, here is one much closer to reality, in which the Phase III results appear to be successful but not yet fully priced into the stock: Dendrion (DNDN).

  115. 115
    BirdsofpreyRcool Says:

    occam — that’s just it… CIGX is not a pharma. It’s overseen by the FDA as a “nutriceutical.” Like an herbal (echinecia [sp?] or st. john’s wort… that kinda of stuff) or a cigarette or the nicotine patch. It will have pharma applications. But not for this first round of marketing.

    And I do know DNDN… and the very controversial CVM. And i would not throw out those names on this board (altho my mom owns DNDN, so i have NOTHING against them and agree with the potential there). CIGX is like a tobacco product. Only you don’t smoke it and it doesn’t give you lung cancer.

  116. 116
    BirdsofpreyRcool Says:

    occam — agreed on Phase III drug testing. Too much can go wrong. People who invest in biotech/pharma own a basket of names. Most don’t work. Only one or two has to.

    This is not that. No Phase I, II, III testing for its use as a smoking cessation, weight control, and other “off label” applications.

    But, it’s had a nice run. I never argue with someone who takes chips off the table. Again, just threw out a name i know well, on a slooow Friday. cheers!

  117. 117
    elijahwc Says:

    BOP Thomson & Trace shows the GDP 5’s (PETE.GC / 382410AC2)of 10/29 trading three pieces of institution size between 90.012 and 91.25 today. I bet since the deal was only done last Sept?? and only <200m that its pretty much owned by a very few inst's. I called the SB Cvt desk but its 4:15 EST so guess what that means. I'll recheck tommorrow.

  118. 118
    BirdsofpreyRcool Says:

    elijah — thank you. saw those trades on TRACE. Apparently, your good idea is catching on!

  119. 119
    elijahwc Says:

    BOP – The Senior’s are your better risk adjusted improvement for those that “appreciate the return of Capital” to my doggie flea bitten and risker GDPAN. Interestly GDPAN which sometimes go days without a print traded well today. I bid it light at 36.50 and did not land any.

  120. 120
    BirdsofpreyRcool Says:

    End of Day Overview:

    SPX: 1167, down 0.55%; NASDAQ: 2398, down 0.68%; Russell 2000, down 0.96%

    Market Update – another excruciatingly slow and quiet session in equities. Prices pull back small after setting record highs on Tues (for this rally), but the dip was shallow and didn’t have a lot of force/conviction behind it. Reasons being cited for the equity weakness: the Portugal downgrade (futures were off only a couple points before the Portugal news hit at 6amET this morning) and then later in the session the poor 5yr auction. There remains a reservoir of buy demand on pullbacks and stocks continue to have a tough time making any progress on the downside. Buyers aren’t chasing (esp. today) and are very price sensitive. Shorts continue to look to cover and aren’t putting on fresh exposures; longs are sticking w/their existing positions. Really not a lot of volume behind the selling pressure today (more the buyers stepping off to the sidelines). Most interesting activity occurring outside stocks as TSYs see a steep decline (see broader TSY update below) and the dollar sees a strong rally (its actually pretty remarkable that stocks were as quiet as they were given the huge moves occurring in these other asset classes). Bottom Line – bears/sellers had plenty of fodder today (TSYs, Portugal, etc), just as they did on Mon (HC and Greece), but couldn’t produce a meaningful down day. Despite the neg. close, the activity today being viewed as a victory for the bulls.

    Equity Sectors – the one group that saw meaningful buy interest for most of the session were the large banks (BAC ends up close to 3% and makes meaningful technical progress on the upside). Regional banks also see buyers (the banks are up 22% YTD and remain the market’s best performing group). Most other major groups ends lower – tech, health care, industrials, discretionary, staples, energy, utilities all end off ~0.5-0.7%. Big story in techs was the pullback in comm. ICs (esp. the PLDs) on inventory worries (JBL) and neg. China telco capex results (SOX ends off 2% and is one of the market’s weakest groups). SP500 telecom end dwn ~1% (VZ/T both weak while S ticks up ~3%). Media stocks outperform (TWX up ~2% on the day while VIA, DIS, and NWS all see buyers). The transport stocks end off >1% as the rails come for sale (airlines outperform within transports). The builders acted well today on back of LEN’s earnings.

  121. 121
    bill Says:

    its amazing how fast pxp raised 300 m

    good rate too

    HOUSTON, March 24, 2010 /PRNewswire via COMTEX/ — Plains Exploration & Production Company (NYSE: PXP) today announced that it has priced an underwritten public offering of $300 million of 7 5/8% Senior Notes due 2020. The notes are being sold to the public at par. PXP intends to use the net proceeds of the offering to repay indebtedness under its senior revolving credit facility and for general corporate purposes.

  122. 122
    elijahwc Says:

    TAT – Inst Hldrs Comment

    Wm Smith & Co.: Highlighting recent shareholder activity

    Catalyst: On 7/2/09 MSD Capital (Michael Dell) filed an original SC 13G on TransAtlantic Petroleum (AMEX: TAT; Not Covered) and disclosed total holdings of 13,064,000 shares or 5.2% total ownership. The stock price has increased from approximately $1.71 on the date of filing to $3.22, a price increase of roughly 88% (SEC Filings).

    – On 2/16/10, FMR LLC (Fidelity) filed an original SC 13G on TAT and disclosed total holdings of 19,673,851 shares or 6.6% total ownership. Since the date of filing, the stock has increased roughly 15% (SEC Filings).

    – On 2/8/10, MSD Capital filed an amended 13G disclosing 15,900,000 shares or 5.2% (as of 1/28/10), an increase of more than 2.8 million shares since the Firm’s initial filing and 1.36 million shares greater than MSD’s most recent 13F (Filed on 2/16/10) (SEC Filings).

    – Company Description: TransAtlantic Petroleum Ltd. engages in the exploration, development, and production of crude oil and natural gas in Morocco, Romania, and Turkey. The Company holds interests in six exploration licenses in southeastern Turkey; three exploration permits in Morocco consisting of two Guercif permits and one Tselfat permit; and three production licenses in Romania. It also focuses on the provision of oilfield and contract drilling services in Morocco and Turkey. The Company was founded in 1985 and is based in Calgary, Canada (Capital IQ). …

  123. 123
    BirdsofpreyRcool Says:

    GDP just announced that Looney resigned as CFO.

    Have to say, I feel a bit better about the company now. Who wants to invest in a company with their financial operations managed under a guy named “Looney”?

  124. 124
    elijahwc Says:

    Saw it – right on cue. Also promoting incompetance from within, hense the name becomes of greater interest!

  125. 125
    BirdsofpreyRcool Says:

    He is “leaving to pursue other business” but sticking around to “consult” to the company for 6 months??? Now they are scaring me a little…

  126. 126
    bill Says:

    123 bop you are sooo funny

    That was a good one!

  127. 127
    BirdsofpreyRcool Says:

    BedTime Market Strategist… Good read!

    Treasury Bear.

    They gave us the “Minsky Moment.” Its sequel was “Shaking Hands with the Government,” followed by “the New Normal.” As you may know, these are Pimco’s pithy phrases used to describe the investing world as they view it. The first two were notably accurate narratives of what was occurring and how investors should respond. The jury remains out on “The New Normal” since it is a longer term prognostication. Why are we focusing on the etymology employed at Pimco? Unbeknownst to us, in his March commentary, Bill Gross unveiled the latest catch phrase, “Unicredit Bond Market.” Gross explained that “If core sovereigns such as the U.S., Germany, U.K., and Japan ‘absorb’ more and more credit risk, then the credit spreads and yields of these sovereigns should look more and more like the markets that they guarantee.” Anyone who has been paying attention in any financial market the past two days will recognize that this trend, which has been developing around the globe over the past several months, has come home to roost in the United States as the 10 year swap spread has inverted.

    You obviously don’t need us to tell you to read Bill Gross’ essays, but they do play a role in today’s trading action. Today, Gross followed up on the “Unicredit” theme. Following the 8 am EDT release of Gross’ commentary, the yield on 10 year Treasuries jumped 10 basis points as bonds sold off over the next hour. The selling continued throughout the day as a better than expected Durable Goods Report and a weak 5 year auction in the afternoon fueled the weakness. By the session’s close, the 10 year yield was on the cusp of a major technical breakout. It is hard to expect the largest bond fund manager in the world to say he is outright bearish on Treasuries, but Gross went on television this afternoon and stated he expected stocks to outperform bonds over the next three months. This was an attention getter because part of Pimco’s “New Normal” view of the world was that stocks were on a “Sugar High” in 2009.

    In his note this morning, Gross listed the three criteria necessary for a nation to navigate the “structural headwinds” facing global markets today. When speaking specifically about the United States, he stated “But remember – my three conditions just suggest that a country can get out of a debt crisis by creating more debt – they don’t assert that the bonds will be a good investment.” He followed with “U.S. bonds may simply be a ‘less poor’ choice of alternatives.” From an outsider’s perspective, that might be interpreted as bearish a statement on Treasuries as one can expect from the largest bond investor in the world. We also believe that Gross does not love stocks so much, but just that he is bearish on bonds. Gross did spell it out, “Rates face a future bear market as central banks eventually normalize QE policies and 0% yields if global reflation is successful.”

    There is heightened investor uncertainty about the inversion of the 10 year swap spread. Unchartered territory puts investors on edge. In the near term, it has been attributed to hedgers using treasuries for all of the corporate issuances coming to market. We have also noted the strong demand for corporate paper has helped to push those yields down. Longer term, Pimco’s “Unicredit Bond Market” will likely be with us for some time. The good thing is this is not a total surprise, at least it wasn’t to Gross.

    We interpret these events as one of an increased belief in the recovery. For over a year, we have argued that Large Cap Corporate America was the healthiest and most liquid area of the economy, superior to the Government or Consumers. As belief in the recovery increases, the flight to quality bid in Treasuries slowly diminishes and Pimco’s “Unicredit” world emerges. Investors have every reason to have more confidence in a Warren Buffett or a Steve Ballmer. All of this being said, in order for the bond bear market to emerge and the rise in rates to be sustainable, the economic data needs to be there, or that flight to quality bid will re-emerge.

  128. 128
    Dman Says:

    BOP #25 – such poetry !

  129. 129
    Dman Says:

    BOP #102 – I like it when you get crazy. $100 for cigx. Wow. My little starter position might just become a call option. Didn’t get a chance to add to it, so might just hang on grimly.

    But speaking of calls. Isn’t it a bit odd that a company had options trading when it had never exceeded $1 ? Or am I missing something?

  130. 130
    Jerome Blank Says:

    A few updates and comments to the charts…

    MMR- retesting lower channel trendline resistance, becasue MMR is now on a P&F sell signal, it needs to get to $16 to perfect the “Bear trap”…if it rolls before that, and breaks below the $14.50 lows, as much as I hate to say it, I would not give it too much wiggle room down there as the probability increases for further downside…

    NOG-nice ascending triangle, really looks good….
    SU
    WRES
    XEC

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

  131. 131
    BirdsofpreyRcool Says:

    Dman — you’re missing a bit of history with CIGX (ticker used to be STSI). It ran up in the past over $5 (several times) on the whole nonsense with the lawsuit against RJReynolds. The latest jury-rigged decision is currently on appeal and there could be some legal announcements about where it stands over the next couple of months. However, that is no longer the central story. Star has spent years, developing several tobacco-based products that have some pretty interesting applications. And b/c it is tobacco based (and tobacco is already approved, but regulated, by the FDA) it is not the same thing as getting a new pharma product to market. It falls into the “nutraceutical” category. Similar to “herbal” suppliments.

    Anyway, pull up the latest 10-K and read the first few paragraphs. That does a good job of laying it out. The stock could do heaven-knows-what between now and when Star announces the distribution agreement with inVentiv. It’s got a dedicated short following that has made money in the past… and it’s fallen into the clutches of the mo-mo day traders and chat board pumpers. Please do not confuse my mentioning CIGX with that crowd. We travel in different herds entirely.

  132. 132
    BirdsofpreyRcool Says:

    Jerome — thank you for highlighting MMR. The Bears are ALL OVER this one. Problem is, there may not be enough positive news and/or a fairly long news-dry-period to fight back. That all plays into the Bear Argument, tho. So, any suprise to the upside could result in a violent reaction.

    I think MMR’s falling and gassy (75%) production in 2010 + need for additional capital to execute their Ultra-Deep schedule gives the Bears a lot of meat to chew on in the near term. In the longer term, MMR will trend higher. Schiller is still saying that there will be a production test at Davy Jones in calendar 2010 and they will be selling hydrocarbons from that well in 2011. (Apparently, he — and JimBob — went apoplectic when he heard about Nichols’ comment at HW.)

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    Alyse Lesesne Says:

    FREE CASHAPP DEBIT CARD

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