Wrap – Week Ended 4/16/10 (In Progress)

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8 Responses to “Wrap – Week Ended 4/16/10 (In Progress)”

  1. 1
    skimo Says:

    Is this of any interest to the board?

  2. 2
    zman Says:

    Skimo – yes, been watching the rumors there for awhile on who was going to buy them. HK was bandied about as the buyer of this Bakken player so much that they came out at Howard Weil and flatly denied it.

    They are an encap company, one of many that will eventually come public and I plan on taking a look at the numbers when they do.


  3. 3
    Jerome Blank Says:

    A number of interesting technical developments…first, $bpener remains in bear confirmed status, despite $bpmate, the S&P materials bullish percent going bull confirmed on 4/15…still trying to sort out if this is a “canary in the coalmine” or just late to get in the game… the other major broad market bullish percents, $bpnya and $bpspx, remain bull confirmed…obviously next week’s market movement via GS related fallout will play into how well things hold up…with that backdrop, dialing down there are a few very interesting developments on some of the names we track…

    KWK has a great looking chart, a low risk entry near $13.50 puts KWK right on 200 day SMA and P&F trendline support…very easy to manage…I’m interested to hear from our options experts (ZMAN) on any thoughts related to taking an option trade next week…this is also an good opportunity to take a look at another stock CRZO, which has a very similar technical setup, but is more difficult to manage because of the P&F technical structure…I have comments on both charts…

    added a KOG weekly…KOG testing long term resistance here…I’m prepared to to take a bit of short term heat here especially if the mkt continues to move lower next week, but the chart still looks great, from here KOG holds its current buy signal until a print of $3.25…but I see this as a big buy opportubity if it gets there…

    WLL prints a P&F sell signal at $82, but this has the making of one big bear trap…it’s a hold to it at least breaks channel line support at $80…that’s probably a low rsik buy opportunity…


  4. 4
    zman Says:

    JB – thanks for all the charts, will address KWK in the Monday post.

  5. 5
    RMD Says:

    MMR at 10:00 EST on Mon.

  6. 6
    BirdsofpreyRcool Says:

    BedTime Market Strategist

    The Court of Public Opinion.

    So much for the “quiet calm” we mentioned on Thursday night. The SEC’s announcement that it was filing fraud charges against Goldman Sachs* rocked the markets on Friday. The bigger concern for markets and investors is whether this is a one-off case or whether it opened Pandora’s box of lawsuits against all large banks. Equally important is whether or not the case is being used as a political tool by the Administration to advance its agenda or pave the way for Financial Regulatory reform. There is a repetitive pattern emerging in 2010. Every time that a meeting between the Administration and bank executives goes poorly, the Administration starts throwing rapid fire jabs about the banks’ lobbying efforts and then follows with a surprise left hook, like the Volcker rule. The SEC is an independent agency so this should not be the case, but it is hard to believe the timing of the events is mere coincidence. In addition, there could not be a more politically palpable target. With the exception of the exonerated Bear Stearns hedge fund managers, these are the only charges of note to come from an environment rife with fraud.

    In one respect, it does not matter what the eventual outcome of this case will be. The simple act of filing the charges is a political coup for the Administration. Financial Regulation will likely be passed before a verdict is reached in this case. A settlement seems unlikely given the high profile nature of the case. It is interesting to see how institutional investors who regularly trafficked in these products and collateral managers whose job description was to analyze and value such products are painted as victims. One has to expect that there are instances of this scenario streetwide. The question for investors is whether there is more to come near term or does the SEC want to score a big win before lining up additional cases. The best case scenario for resolution is something similar to that of the analyst scandals of 1999-2002. The problem is that the court of public opinion is far more outraged today than it was back then. On the other hand, back then, the victims were mom and pops. In this case, the victims are professional investors who should have had the wherewithal and the acumen to make better decisions.

    If a CDO is synthetic, isn’t it implied that someone is short?

    As we have noted time and time again, we are advocates for Financial Regulatory reform, especially in the world of derivatives. It was a game that every player: bankers, brokers, ratings agencies, insurers and collateral managers, thoroughly enjoyed as the cash poured in. It is somewhat frustrating to watch a situation where parties enthusiastically choose to participate in a game with no rules as long as everyone is winning, but when the losses pile up and the game is over, the losers are portrayed as victims. The SEC’s Complaint raises several questions that go beyond one firm or its employee’s conduct, and relate to how the game with no rules was played.

    An S&P 500 future is a synthetic version of the S&P 500 index itself. The underlying securities are not exchanged, only the cash values are. Any institutional investor knows that for one person to be long an S&P future, another person needs to be short it. The same is true for a synthetic CDO. Selling a synthetic CDO is like shorting a stock and the only way for the seller to make money on that trade is for the underlying obligations to go down. One would expect an institutional investor in the credit markets, such as a bank, to have this most basic understanding of the investment it is making.

    The biggest problem in this situation appears to be one of disclosure. The problem is that on Wall Street, the lack of disclosure appears to be standard operating procedure in the game with no rules. On the flip side, client confidentiality is of the utmost importance and a top priority. In the course of normal everyday trading, one side of a transaction is never entitled to information about the other side, such as that party’s identity, motives or intentions. In this case, the court will decide what is appropriate, but generally this is the land of caveat emptor. There are two sides to every transaction and usually both believe they will be winners, which obviously, cannot be the case. This is why every investor, first and foremost, is responsible to do his own due diligence.

    One of the “victims” of this alleged fraud is IKB, a bank. If any institution should know how to analyze credit, it’s a bank. Even worse is that IKB is one of these serial carry-traders who purchased these types of instruments for the Structured Investment Vehicles and floated paper in the Asset Backed Commercial Paper market against them borrowing short and lending long (see chart). Those are the institutions that truly put the system at risk.

    Finally, in this scenario, the “independent” third party portfolio selection agent claimed to be unsure of the client’s intentions. It should not matter what the related party’s views or intentions are, whether long or short. The fact is the agent’s very job description is to be unbiased and independent. Instead, just like the ratings agencies, the collateral managers saw the profits that loomed rather than performing the task at hand. If ACA had simply performed its task of comprehensively and independently evaluating the underlying RMBS, the deal would not have happened. It is hard to believe they did not know the intentions for the pool when the higher quality subprime RMBS were replaced. In addition, if AAA ratings were not handed out to everyone who applied, this deal (like so many others) would not have been done.

    As long as profits and share prices rose, the game was all good. It is remarkable that the people who played high stakes games with other people’s money and lost are being portrayed as unwitting victims in a game they helped create and a system in which they were totally complicit and profited from until it did them in.

  7. 7
    zman Says:

    ZCAT and ZIM updated:


  8. 8
    zman Says:

    SSN on the tape with a well update on the Gene 1-22H well. Very good rate. Post clean up and after a workover to remove a sand plug the production rate moved up to 2,936 BOEpd. Should move the stock back towards and possibly above the recent highs tomorrow. This would indicate good things also for AEX and BEXP.

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