Tuesday Morning Pause



Market Sentiment Watch: Busy, busy, busy. The market is still concerned about Greece, "financial reform", and Goldman's testimony today. In earnings, Ford and 3M topped estimates and 3M is saying positive things about their outlook. In energy land things are just heating up for 1Q and we have a number of operations updates out  (NFX, SSN, STR, XEC) in advance of earnings along with the first refiner to report of the season.

  • Ecodata Watch:  We get consumer confidence figures at 10 am EST, forecast is 53.5, last read was 52.5.

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today –  Earnings Watch: (VLO), STR ops update, NFX ops update, SSN advises on Niobrara plans.
  5. Odds & Ends

Holdings Watch:

  • ZCAT (Zman Catalyst portfolio):

    • $12,200
    • 44% Cash
    • The Holdings Tab Is Updated for the Quick View portion.
    • Yesterday’s Trades:

      • WLL - Sold the May $75 call for $12.60, up 30%.

      • WLL - Added (5) May $90 calls for $2.15 with the stock at $87.30. Earnings later this week. 

  • ZIM (Zman Inefficient Markets portfolio)
    • $24,300
    • 83% Cash
    • The Holdings Tab Is Updated.
    • Yesterday’s Trades:
      • None

Commodity Watch

Crude oil fell $0.92 to close at $84.20 yesterday, pressured by a stronger dollar. This morning crude is trading off $0.75 to $1.

  • Early Read On Oil Inventories:
    • Crude:  UP 1.0 mm barrels
    • Gasoline: UP 0.5 mm barrels
    • Distillates: UP 1.25 mm barrels
  • OPEC Watch: Saudi Arabia has close to 4 mm bopd of spare capacity currently. This should be pretty well understood but I think the Kingdom is mentioning this now because they want to rein in oil prices until later in the year.

Natural gas tread water yesterday closing at 4.26 in boring trading. Gas continues to be range bound with the first chance for break of the recent range (though I somewhat doubt it will happen) coming with revisions to supply figures from the EIA this Thursday.  This morning gas is trading off 6 cents.

  • Imports Watch: 8.06 Bcfgdp, up 0.6 Bcfgpd from last year.

    • Canada: 7.0 Bcfgpd, up 0.9 Bcfgpd from last year. Part of the recent rebound in volumes headed south is attributable to a number of wells that were shut in when prices hit their lows last Fall and which are now 
    • LNG: 1.06 Bcfgpd, still running low to year ago and many industry expert estimates. China has said they plan to double their imports of LNG over the next 12 to 18 months.
  • Very Early Read on Natural Gas Inventories: The Street is looking for a 70 Bcf injection.

Crack Spread Update


Key Takeaways:

  1. Margins continue to improve seasonally
  2. Demand is picking up at a good pace considering unemployment
  3. Expectations for 1Q earnings season are set very low. Misses are likely to be already priced into the stocks
  4. Light-heavy differentials have improved, this favors the upgraded refining assets of VLO which can handle the lower grade crudes and take advantage of the wide spread relative to the competition that is forced to pay up for lighter, sweeter crude.
  5. Note that in the Gulf Coast and Mid-continent regions, VLO's backyard, cracks are outperforming year ago levels. This is due in part to a surplus of crude at Cushing. 
  6. VLO earnings today, if that stock moves up on the basis of their outlook, look for FTO, like a mini-VLO and able to take advantage of heavier crudes as well, to move up as well.




Stuff We Care About Today

VLO Reports Better Than Expected 1Q10 Results; Provides Upbeat Tone

The 1Q10 Numbers:

  • EPS of ($0.18) vs ($0.28) expected


  • "Industry refining margins and sour crude discounts expanded in the first quarter from the low levels experienced in the fourth quarter"
  • Maintenance during the quarter kept them from capturing much of the impact of that first bullet point
  • Were it not for maintenance EPS would have been 24 cents higher.
  • Their Retail segment had its best quarter ever while Ethanol had its second best.
  • "the second quarter looks much better considering those refineries are back on line"
  • "we expect to be profitable in April as well as the entire second quarter"
  • "looking at the rest of the year, we are cautiously optimistic about our business"

Nutshell: Sounds like the things in the Crack Spread section today are helping to boost the outlook which until this press release has remained rather dire.

Conference Call: Today, 11 am EST.

Newfield Updates Operations; Big Bakken Wells

  • Capex Shifts Toward More Oily Focus
  • Guidance - expected to come in at the upper end of the previous range (so over 10% YoY). Notably, domestic oil production is now expected to grow 20% with total company oil production forecast up 9%. These are still beatable numbers.
  • A Few Highlights From Their Play Updates:

    • Uinta Basin:

      • record oil production of 19,900 Bopd gross today vs 17,000 bopd at year end.
      • They now guiding towards growth of 20% this year vs a prior 15% due to drilling efficiencies. 
    • Bakken: wells getting bigger

      • 4 wells announced with IPs ranging from 1,300 to 3,568 BOEpd; 2 of the wells were in the over 3,000 BOEpd camp, one Three Forks, one Bakken. NFX has not been releasing results this high. Look for more details on this on the call on Wednesday morning.
      • 400,000 net acres,
    • Southern Alberta Bakken:

      • spud first well this week.
      • 224,000 net acres, up slightly from last check.
      • Sees same 4 horizons as ROSE does as potential targets (Lodgepole, m. Bakken, Three Forks, Nisku)
    • Granite Wash:

      • A pair of 8 mile step outs to Stiles Ranch were drilled with good effect (12.3 and 15 MM/d IP)
      • Plans to maintain a 4 rig program as this is one of your most active
    • Woodford:

      • Slowing the pace of development due to low natural gas prices. Rigs will fall from 8 now to 4 to 5 by mid year.
      • Still expected to grow ~ 20% this year but they may defer completions in 2H10.
    • Eagle Ford:

      • Nothing new.
  • Nutshell: Pretty positive, especially the larger Bakken rates that take them out of "also ran" status as well as the spudding of their first north Montana well. They report after the close today and are probably good for a slight production beat and better than expected CFPS. Valuation here remains inexpensive with NFX trading at 5.1x 2010. The Street as usual has 2011 CFPS below that of the current year for these guys but given the repeatable nature of the plays and the extension of their earlier decision to get oilier  that number is likely to continue to rise as 2010 progresses.  I own the common in the ZLT and may play off the reiterated oil focus in the ZIM today. 

SSN Lays Out Niobrara Plans:

  • Has an interested party on the hook to farm out part of its 40,800 net acre Niobrara position for a "substantial premium"
  • Plans to re-enter the previously uneconomic London Flats horizontal well drilled in 2006 using new completion techniques used in the Bakken. Timing still up in the air on this.
  • They also planning a new well following the re-entry.
  • Their position is just north of EOG's acreage in the play and this press release is obviously designed to garner more attention for this new "hot play", especially since they have a much more sizable position and therefore leverage to the play than they do in the Bakken.


STR Updates Operations; Bumps Up Guidance


  • Production Guidance Increased:
    • Goes from a range of 210 to 215 Bcfe ...
    • ... To a range of 212 to 217 Bcfe, or 12 to 15% YoY growth.

Area Operations Update:

  • Haynesville:
    • acreage up 4% to 48K net acres,
    • No really big Kahuna wells in the update as the company has instituted restricted choke production (like HK) to aid in the ultimate recovery
    • production continues to ramp rapidly, now > 180 MMcfepd gross.
  • Woodford: 29K net acres, 1 new well, no suprises
  • Granite Wash: acreage up 12% to 25,900 net acres, 1 new well came in at a good rate considering mechanical difficulties. 
  • Bakken: 80,000 net acres. 3 long lateral wells awaiting completion in early May (will add to Catalyst List).

Nutshell: This isn't one of the names I follow closely, and other than listening to their call for the last couple of quarters I rarely pay attention to them. The spin off of the E&P segment puts it in the more interesting category. STR should release numbers for 1Q10 after the close today.


XEC Operations Update

  • 1Q production of 584.5 MMcfepd (67% gas), above guidance 560 to 575 MMcfepd.

    • up 25% sequentially
    • and up 20% YoY
    • attributable to Gulf Coast, Permian, and Woodford drilling.
  • Gulf Coast - Jefferson County, TX

    • see press release for three additional wells that continue a string of sizable discoveries here.
  • Nutshell: This calls into question past 2010 guidance of 540 to 575 MMcfepd as drilling results continue to beat expectations. Earnings not out until May 7th but the stock should move higher on this news and perhaps into that release.

Other Stuff:

  • EIA natural gas supply survey methodology changes:


Odds & Ends

Analyst Watch:

  • NFX - FBR ups target by $9 to $72, stays Outperform.

175 Responses to “Tuesday Morning Pause”

  1. 1
    zman Says:

    VLO section added. Stronger quarter, upbeat tone, shares moving up in pre market, I may play it in the ZIM.

    Also actionable today are NFX and XEC.

  2. 2
    zman Says:

    VLO called up slightly, interesting chart for JB to look at when he has time. I’m likely to play in the ZIM as it has been compressed for awhile and its options trade like water. If it pops at the open I may take a small piece of the less well traveled FTO.

    SSN called 90 cent bid.

  3. 3
    zman Says:

    Heard Cramer touted SLB after the close yesterday driving the stock over $73. This morning it trades off with everything. His calls remain fresh as long as sushi in death valley.

  4. 4
    Nicky Says:

    Good morning.

    If the SPX moves below 1210.90 then wave iii of v is likely complete at yesterday’s 1219.80 which was .20 below the lower end of my target area for wave iii. Wave iv should find support at the 1200/1205 area before again moving higher in wave v. There is further support at 1195.

    If 1195 goes then likely we are looking at a different count which would have us in wave C down to around the 1175 area in an expanded flat which was a possibility I put out last week. It is not my preferred count however.

  5. 5
    zman Says:

    Morning and thanks much Nicky. Good market calling of late.

  6. 6
    zman Says:

    Case Shiller home prices putting a little more pressure on futures:


    Consumer confidence could still turn things at 10 am EST.

  7. 7
    Jerome Blank Says:

    VLO..very interesting daily chart, mid range in a bullish fairly lengthy ascending triangle…support and resistance match up well with the P&F chart, resistance at $21, support at $19, this one could really break higher if it gets above $21…


  8. 8
    zman Says:

    JB – agreed re break higher. Street expectations were pretty much that they’d miss and keep their heads lowered on the outlook. Wrong on both accounts.

  9. 9
    zman Says:

    SSN facing another high volume day. Also an interesting chart, what I call a tightening flat or triangle following a breakout. As they come down to the point of the triangle on the right side of the chart, on decreasing volume, those usually break one way or the other on the next catalytic news. If no catalyst then usually they succumb to profit taking. In this case we have a string of catalysts that should help to move it higher, all other things (oil and market) being equal.

  10. 10
    nifkin Says:

    MCF announced today that its Dude
    prospect (Matagorda Island 617) and Paisano prospect (Vermillion 155) are both

  11. 11
    zman Says:

    … dry

  12. 12
    nifkin Says:

    MCF announced today that its Dude prospect (Matagorda Island 617) and Paisano prospect (Vermillion 155) are both dry holes. We are currently drilling ahead on our Eloise South prospect (Eugene sland 10) and completing our Nautilus well (Ship Shoal 263), which is expected to begin production by June 30, 2010 at a previously announced estimated rate
    f 20 million cubic feet equivalent per day (“Mmcfed”), net to Contango.
    The Company’s on-shore drilling program with its joint venture partner,
    atara Oil & Gas LLC, is currently producing at a rate of approximately 3.2
    mcfed, net to Contango, from five wells. Three additional wells have been
    ogged and are waiting to be fracture stimulated while another two wells are
    rilling ahead. To date we have invested approximately $12.7 million in this
    rilling program. Based on results to date, and using our current received gas
    rice of $3.30 per thousand cubic feet equivalent, we are on target to earn our
    rojected cash-on-cash pre-tax 15% rate of return.
    Our current off-shore production is approximately 81 Mmcfed, net to Contango.
    e have no debt, approximately $80.0 million in net cash and cash equivalents

  13. 13
    BirdsofpreyRcool Says:

    TechTrader is 65/35 SHORT for today’s trading pleasure.

    HeadTrader says “watch financials” and he would buy names OTHER than financials on any weakness today.

  14. 14
    zman Says:

    I think Dude being dry calls into question their concept for a couple of other prospects: “His Dudeness” and “El Dudorino” but am not positive that’s the case. May take puts depending on the open.

  15. 15
    zman Says:

    Thanks BOP.

  16. 16
    BirdsofpreyRcool Says:

    F… initial reaction to PR was weaker stock… conf call started 1/2 hr ago… stock moving up now. After a strong run lately, too.

  17. 17
    zman Says:

    West – congrats on the recent XEC calls, very nice update today.

  18. 18
    BirdsofpreyRcool Says:

    F down now… strap in… it’s going to be a bumpy ride today.

  19. 19
    Jerome Blank Says:

    #9 SSN… added a 30 min chart perspective…


  20. 20
    zman Says:

    Thanks much JB.

  21. 21
    zman Says:

    Weak open across the board, even VLO red, watching closely. Suspect NFX press release was discounted by the run it’s had the last couple of days. Still may buy it a little later today.

  22. 22
    BirdsofpreyRcool Says:

    Cash-Schiller saying tha thousing has clearly hit bottom

    GS and BAC green

  23. 23
    Jerome Blank Says:

    VLO, those May 20 calls might be tempting today…?

  24. 24
    BirdsofpreyRcool Says:

    Case-Schiller, that is

  25. 25
    zman Says:

    JB … or the $21’s

  26. 26
    zman Says:


    VLO – Added (40) May $21 calls for $0.36 with the stock at $20.02. See site for comments on earnings. Conference call at 11 am EST. I may buy another set if it weakens after consumer data.

  27. 27
    zman Says:

    JB – thanks for the charts on SSN, what are your thoughts there?

  28. 28
    jat Says:


    what’re your thoughts on NFX opex?

  29. 29
    zman Says:

    Jat – LOE? or Capex?

  30. 30
    jiveyjr Says:

    slow learner..but I bought SSN at $.81

  31. 31
    jat Says:

    meant LOEs. we don’t get those till the call, right?

  32. 32
    Jerome Blank Says:

    Re#27 SSN, thinking that SSN likely finds support here at the 30 min topside trendline retest…this would be a place to consider long trys with stops below the 200 period at about .76…

  33. 33
    zman Says:

    Analyst Watch:

    Opco ups EOG target from $110 to $130.

    Jat – right. Should be in guidance, maybe a touch to the high side of mid on what they refer to as recurring LOE (excludes workovers which can be lumpy from quarter to quarter). I bet they take guidance for it slightly higher for 2010 as they get oilier which makes sense.

  34. 34
    zman Says:

    JB – OK, thanks much.

  35. 35
    zman Says:

    MCF – stinks to have 2 dry holes. But it’s solid of Peak to put them at the top of the press release. MMR could learn from that honesty.

  36. 36
    john11 Says:

    My JB voting phrase seemed particularly apt today…”scandals noise”.
    Thanks as always JB.

  37. 37
    zman Says:

    Consumer confidence at 57.9 vs exp. of 53.5. Big number.

  38. 38
    Jerome Blank Says:

    RRC is another stock that really looks good here…pulled off topside triangle resistance,but I’m thinking it may hold that confluence of SMA support just below, then make a break out of the triangle…good open interest, but not much vol on the options, it seems….

  39. 39
    Jerome Blank Says:

    RE: #36, john, thank you…

  40. 40
    jat Says:

    33 right, exactly what I’m thinking.

  41. 41
    jat Says:

    To continue the thought process, everyone is is love with the gas to oil shift story, as they well should be, and yet they’re all going to be quite laggy in terms of calibrating LOE effects as a result. Not that that derails the story, but I’m unconvinced that enough investors are thinking about it.

  42. 42
    tomdavis12 Says:

    Z: Yesterday UBS took their 2010 S&P earnings numbers from $83 to $90 and 2011 from $92 to $100. I believe this is the high water mark for the street.

  43. 43
    bondbuddha Says:

    thanks for charts JB, voted

  44. 44
    Jerome Blank Says:

    RE: #43, bondbuddha…thank you

  45. 45
    zman Says:

    Jat – It will be more of a problem for some than others. I’m working on it.

    Tom – thanks much, gee, that doesn’t sound expensive on a forward basis. 12x 2011??

  46. 46
    zman Says:

    Things to watch today list creeping in the right directions: MCF down, VLO, NFX, XEC all up now though VLO is barely so with 35 minutes to go before the call.

    ECA popping nicely, still holding the $32 calls in the ZIM but not for long.

    SLB off with the market and a bit of post earnings profit taking. Not concerned and thinking that it will have a run through the recent high in the near term.

  47. 47
    bill Says:

    14, MCF means write offs for 2 dry holes..maybe 30 m

    If i was peak id take them in the last qtr and get all the bad news out in 1 qtr

    Insiders were dumping at 55

    id stay away and buy when and if it goes below 50

  48. 48
    zman Says:

    Bill – thanks, kind of thinking same range, maybe a bit higher. Dry holes happen. It’s part of the game. Doesn’t change my thinking on them in the slightest but it will curb enthusiasm for the name probably until at least Eloise South comes in for them.

  49. 49
    zman Says:

    VLO picking up nicely now with 15 minutes to go to the call.

  50. 50
    zman Says:

    VLO call starting now:


  51. 51
    zman Says:

    VLO notes: for the most part they read the press release. Q&A already started.

  52. 52
    zman Says:

    VLO – not hearing clear commentary on the sustainability of the wide margins, sounds like it may stay open for awhile but can’t tell/didn’t say how long.

    Definitely a more optimistic approach to this call. Better cost control, more projects underway to get costs down further. Analysts sound pleased. Stock should do well post call at this rate as long as the market doesn’t fall apart which is looking like a big if at this point.

  53. 53
    zman Says:

    Demand: farm demand, railroad demand strong, trucking is lacking.

    High prices are a restraint on gasoline but volumes are picking up with the economy.

    “We expect to be profitable for the year” … which is good as the Street is at $0.85 for 2010 but there are several analysts down around break even so they may start lifting estimates post call.

  54. 54
    zman Says:

    S&P cuts Portugal, Greek debt ratings.

  55. 55
    zman Says:

    You have to wonder at the market’s reaction to things it already knows. Did we really need S&P to downgrade Portugal and Greece to know they were in trouble? Sheesh.

  56. 56
    zman Says:

    VLO – seeing strong demand for distillates from S. America and Europe.

  57. 57
    VTZ Says:

    RE 55 – Yeah I was just going to say something similar and add that it never ceases to amaze me how Portugal and Greece debt ratings manage to trash north american energy equity prices.

  58. 58
    VTZ Says:

    We all know how good the ratings agencies are… it’s not like they are ever behind the ball or anything.

  59. 59
    zman Says:

    LOL re 58. Between them and CNBC looking like CSPAN with a bunch of politicians grandstanding the market is in a tough spot today.

  60. 60
    VTZ Says:

    I can’t wait for the complementary parade of “dollar strength” bulls on CNBC and articles on Bloomberg.

  61. 61
    zman Says:

    GS executives doing a lousy job of “acquitting” themselves in congressional testimony.

  62. 62
    Nicky Says:

    Interesting reaction from gold to the downgrade. Unless I am mistake last few times they tried to panic the market with this news gold sold off too.

  63. 63
    zman Says:

    Nicky – I noticed that as well. I guess we are in your alternate count now given the break of 1195.

  64. 64
    Nicky Says:

    Bernanke’s comments should be far more of a reality check to the market than the Greece news.

  65. 65
    VTZ Says:

    Gold is up on the day and resisting a +0.70 move on the Dollar Index.

    News regarding no bailout has generally been bearish but news regarding more countries been insolvent has generally been bullish in terms of immediate reactions.

  66. 66
    VTZ Says:

    RE 65 – My comments were in reference to being bearish and bullish for gold price.

  67. 67
    Nicky Says:

    re # 63. Alternative is a possibility although we could still be looking at iv c here- if that is the case we should be near the end of the drop.

  68. 68
    zman Says:

    Nicky – has Ben said something new? His comment that “the federal budget appears set to remain on an unsustainable path.” isn’t really new news.

  69. 69
    zman Says:

    VLO call still ongoing, getting down into minutia, stock coming off with market, have not heard any comments to inspire selling.

  70. 70
    Nicky Says:

    Another possibility is that this is a wave ii pullback, hence the depth of the pullback and what follows will be a very bullish wave iii up.

  71. 71
    baylor3217 Says:

    That gs testimony must not be going well. Precipitous drop in the market.

  72. 72
    zman Says:

    Baylor – it’s more the move by S&P to downgrade Greece and Portugal.

  73. 73
    Nicky Says:

    Ben basically said on the current deficit spending course we are on, interest rates on the long-end will skyrocket and Treasury prices will plummet.

    Maybe the market is reacting to that….

  74. 74
    zman Says:

    VLO call over, stock at 20.08, hit 20.58 during the call.

  75. 75
    zman Says:

    Nicky – do you have a link to his comments? Thanks.

  76. 76
    zman Says:

    Found this:

    “But given the significant costs and risks associated with a rapidly rising federal debt, our nation should soon put in place a credible plan for reducing deficits to sustainable levels over time,” he said.

    Lacking such a plan could bring higher long-term interest rates, putting the economy’s recovery at risk, Mr. Bernanke warned.

    I do think he has said all of that before. Kind of Econ 101.

  77. 77
    Nicky Says:

    I know its totally off topic on this board but the Nikkei futures are being marked down over 300 from last nights close.

  78. 78
    zman Says:


    Added (40) more VLO May $21 Calls for $0.39 with the stock at $19.92 as the stock pulls back following what I thought to be a fairly positive 1Q conference call during a very weak tape.

  79. 79
    Nicky Says:

    re 76 – he is starting to cover himself methinks. There is no way this doesn’t end disastrously and the only question that will remain when the history books are written is whether he or Greenspan were responsible.

  80. 80
    RMD Says:

    Remember CRDN’s ceramic bearing which speeded Hz drilling? on conf. call they said that is promising but slow, though we will need a “category” for it eventually; “when you shift from hard carbide steel to ceramic, good things happen”. Near term O&G story is sucker rod pumps (sand wears out ceramic valve), tools for logging (SLB), new product used in the EEC to screen & filter proppant and sand (ruins offshore pumps).

  81. 81
    zman Says:

    Nicky – That’s not too far off topic, Hang Seng probably going to get whacked as well and that’s been a leader. I think we close higher than here.

  82. 82
    Jerome Blank Says:

    The 20 period daily SPX SMA is at 1195.50…the SPX does not appear to have closed below the 20 day SMA since late February…

  83. 83
    Nicky Says:

    re# 65 – gold chart looks super bullish to me – it should surge.
    That said I am still struggling to remember gold going up on any bad Greece news which is why it is better to forget the fundamentals here and follow the chart.

  84. 84
    zman Says:

    Thanks JB.

  85. 85
    Nicky Says:

    Nikkei fall looks overdone Z.

  86. 86
    VTZ Says:

    RE 83 – The “bad Greece news” you are referring to is in general any discussion of a bailout, without an outcome because that means that the USD is going up. Vice versa, is that in general any time there has been some resolution, ie bailout approval talks, the euro has rallied.

    What I was getting at is that on days, where countries have been concretely downgraded or new fears have been brought up, gold has in general been countertrend and rallied with the USD.

  87. 87
    bill Says:

    Show trial to shift blame from Congress to Goldman causing the US equity markets to crater.

    i wish these guys would just go on another junket or investigate steroid use in baseball.

  88. 88
    bill Says:

    71..the politicians are experts at shifting blame

  89. 89
    Nicky Says:

    The USD looks ready to roll over to me. Probably completely wrong!

  90. 90
    zman Says:

    V – that makes sense. Fear out there is that these are the first two sov-debt dominoes. Should at least be good for gold. Listening to VLO you can hear demand picking up from almost all quarters. Europe wants U.S. diesel due to rising demand. Latin America wants it due to problems with refiners in Chile (quake) and Vz. Demand is improving down there as well. U.S. trucking demand has not come back yet, that’s the one big hole that has driven distillate inventories so high in the U.S. That will sort itself out. Gasoline demand on the other hand is holding up quite well.

    Bill – re 87: you and 87% of the American public, lol.

  91. 91
    bill Says:

    If you think the GOm spill is bad,

    the pirates over in Somalia are threatening to blow up a vlcc

    Also, radical Somali group al Shabaab closing in on pirate stronghold where three hijacked ships are held to join the fun.

    Maybe our president can go over there and tell them he is a Muslim and cut the crap.

  92. 92
    choices Says:

    JB-thanks again for excellent charts-shows a lot of work on a regular basis.


  93. 93
    zman Says:

    XEC continuing perform well in the face of the market. My sense is that the news out today, which was better than most expected, would, under normal market circumstances, result in the name moving up as they approach early May earnings. Not going to play, again, due to the market but may quickly revisit when the market sorts itself out. I need to do some homework on what those zone in the Texas wells are.

  94. 94
    elijahwc Says:


    Somali Pirates Disclose They Are A Subsidiary Of Goldman Sachs


  95. 95
    BirdsofpreyRcool Says:

    had to step out… missed the most excellent, foresighted move by S&P on Greece and Portugal. Those guys are stunning, in their ability to drive looking in the rear view mirror.

    That said, people saying that with the downgrade to junk, Greek debt is no longer eligible as collateral at the ECB… so, that is why the euro (and mrkt) are down.

  96. 96
    zman Says:

    BOP – I wonder if the move forces Germany’s hand in allowing the early draw by Greece. It seems like that’s the case if they want to hold the euro zone together. Maybe they don’t.

  97. 97
    Jerome Blank Says:

    #92 choices…I appreciate that…thanks much…

  98. 98
    BirdsofpreyRcool Says:

    From a NYC trading desk…

    Investors continue to weigh two opposing trends. On the one hand is growing evidence that a robust rebound is taking hold. The economic numbers continue to point in the right direction, w/today’s consumer confidence and Richmond Fed readings being the latest examples. The Q1 earnings season has come in much better than even heightened expectations. Three of the most important “signaling” sectors (i.e. those groups that send some of the most accurate signals about the health of the broader economy) have all seen very strong numbers (consumer discretionary, industrials, and financials). Not only are earnings exceeding plan, but sales also are outpacing expectations and guidance is better too. Companies increasingly are making shareholder friendly moves (see IBM’s dividend and buyback hike today and the LZ dividend increase on the tape today). However, countering these positives are growing negatives out of: 1) Europe and 2) Washington. As the Q1 earnings season winds down (and especially as the systemically important companies/sectors wrap up their reports), the market’s attention is turning back to the developments in DC and the rapid deterioration in European credit markets.

  99. 99
    zman Says:

    98 – very well written.

  100. 100
    BirdsofpreyRcool Says:


    Europe – spreads across the board were wider in Europe over night and this was mild overhang for US equities in the morning; however, stocks really started to break lower as S&P came out and downgraded both Greece and Portugal. Greece was cut to junk, which is raising significant worries about the ability of Greek banks to use GGBs at the ECB collateral window. Contagion is becoming a very real concern as the focus spreads from Greece to other countries. Investors are still waiting to hear specifics on the EU/IMF aid package while Germany shows signs of dragging its feat. A Reuters article has revealed that EU/IMF talks w/Greece could wrap up by May 2, w/Eurozone leaders talking May 4 and then a vote by Euronations taking place on May 10 (this timetable would accommodate Greece’s May 19 debt payment). CDS spreads continue to explode wider – Greece is out 66bp to 800, Portugal is out 34 to 342, Ireland is out 20 to 213, Spain is out 16 to 191, Italy is out 9 to 148 (quotes as of 11:40amET). Of the ~50 countries listed on Bloomberg (under SOVR), Greece is #3 on the list when ranked by widest CDS (behind only Venezuela and Argentina).

  101. 101
    zman Says:

    A senator just blamed GS for the recession in no uncertain terms.

  102. 102
    zman Says:

    FWIW, GS doing a much better job of answering questions in their favor at the moment. You can watch the stock tick in response. It’s hypnotic. And a waste of my time.

    VLO coming back nicely.

  103. 103
    BirdsofpreyRcool Says:

    #101 — i should be ROTFLMAO over that. GS WISHES they had that much POWER. But, we are busily handing more and more of our economy and decisions to the bozos in Govt… and we expect them to watch out for us? I should be laughing harder now. (But the joke’s on us.)

  104. 104
    zman Says:

    I propose that all senators on these panels pass an undergrad level money and banking course, biz law, and the series 7. This is pathetic.

  105. 105
    BirdsofpreyRcool Says:

    And yet… we want them to use their brains and crystal balls to detect “systemic risk” in the system before it happens. Sheesh. They couldn’t even stop the 100% TRAIN WRECK that is Fannie and Freddie.

  106. 106
    skimo Says:

    105 Time Out- may I suggest that not only did they not stop FANNIE and Freddie failures but actually caused them with Frank/Dodd et al’s putrid policy making.

  107. 107
    BirdsofpreyRcool Says:

    skimo — #106. Totally. The irony is exquisite… if it wasn’t for the fact that most Americans are bamboozled by that little tidbit.

  108. 108
    isleworth Says:

    I agree wholeheartedly Z re #104. The senators ignorance on these RMBS securities and surrounding issues is very frightening!!!!!

  109. 109
    Jerome Blank Says:

    SPX pulling back above the 20 day SMA…

  110. 110
    zman Says:

    OK, the guy on CNBC right now is scaring me in terms of his lack of knowledge. “How did you know housing prices were going down, because of subprime?” There is a subject and a verb in there but beyond that the sentence is barely English.

    Hour to go in NYMEX, crude drifting with the S&P, down $1.55 now. Noting that the yield plays, both MLP and royalty trusts continue to largely ignore the market action on the down days.

  111. 111
    zman Says:

    NG holding even despite all the hubbub, eying data revisions on Thursday. You can see a link to the revision methodology in the post and about those 20+ pages I would have to agree that the model will be improved. Also, EIA says that they are now going to release revised data for all of 2009, after having previously stated that they would only revise the 2010 data and wait on 2009. Therefore, I will have the normal monthly slide show on Friday, along with a before and after comparison of the 2009 changes. EIA has also stated the changes will be small, but in this report there is no talk about size that I see so the market will bide its time until we find out. EOG thinks the revisions should be around 2.5 Bcfgpd which would be significant.

  112. 112
    baylor3217 Says:

    Thoughts on wll with today’s pullback heading info earnings?

  113. 113
    VTZ Says:

    BOP – Not to turn this into politics but…

    Do you believe that the banks have any accountability whatsoever for what has happened?
    Do you think it’s the fault of uncomplicated investors (in congress) for not stopping what they did not even know was going on?
    At the heart of it, did congress loan out money that they could not reasonably expect to get back and then hand that risk off to others expecting no consequence?

    Granted, we can all agree that the govt encouraged home ownership too much.

    That being said, the banks already have the government by the balls which is the same reason that anytime there any sort of attempt to reign in Wall Street nonsense, we don’t hear the end of it until it goes away. The public doesn’t have the balls to demand change because they see their stocks/401(k)s sell off anytime there is any discussion whatsoever about fixing it.

    I’m sorry, but instant gratification isn’t going to work forever. Even when you hear about raising rates, people are like “Woah, woah, woah. We can’t take away the candy jar”.

    Apparently the economy is in the most stupendous period of growth in the past 50 years but we can’t withstand even a token rate increase… makes sense.

    Also high on the making sense list: we just caused a huge amount of damage to the global finance system by making an industry out of offloading risk that we knew was bad around the world, and we used messes of OTC derivatives to make is as convoluted as possible BUT don’t change the system, it’s fine how it is.

    Time out to anyone who thinks the system isn’t broken or that the banks should have more free reign than they do now.

  114. 114
    tomdavis12 Says:

    Z: Is the .63 dividend from LINE as you would expect? Thanks.

  115. 115
    zman Says:

    WLL – The pullback has everything to do with the market and nothing to do with the stock. See catalyst list tab for thoughts there and the WIOWIO from April 21.


  116. 116
    zman Says:

    Tom – the distribution is unchanged as expected. They don’t have the coverage ratio to expect an increase and have said as much.

  117. 117
    RMD Says:

    Suddenly I’m not liking the inside selling recently from MCF.

  118. 118
    BirdsofpreyRcool Says:

    VTZ — we agree on a lot… but we disagree on a lot too. I’ve seen both sides (working for banks, working for the govt). Believe me, the govt and what it does (and doesn’t do) scares me a thousand times more than any bank.

  119. 119
    VTZ Says:

    Well fine then, we can both agree that the US is broken as a whole.

  120. 120
    BirdsofpreyRcool Says:

    VTZ — as a whole? No way.

  121. 121
    VTZ Says:

    (except for small business and people who produce tangible goods)

  122. 122
    BirdsofpreyRcool Says:

    There are still a few One-Eyed Men in the land of the Blind. We remain a member of that club.

    Could be worse… we could be Greece, or Mexico, or Iceland. I still believe in the “specialness” of the U.S. Even if others in power do not.

  123. 123
    Jerome Blank Says:

    MCF…has an interesting daily and P&F chart…you can see the stong zone of support at the $50 level, long term trendline, 200 day SMA and P&F support…


  124. 124
    zman Says:

    JB – RRC taking a hit, but reports tonight and that one is generally a crowd pleaser. Always a record high on production, good chance of a beat, 50/50 odds of an upgrade to guidance but it’s probably early in the year for that. Look for more exemplary Marcellus producers in the pr.

  125. 125
    BirdsofpreyRcool Says:

    Rat-a-tack-tat. Stuck my toe in the TAT water this afternoon. I think the “I did it before and I will do it again” sales pitch of the Chairman, N. Malone #3, is a tad optomistic on his timeline, but I think he pulls it off eventually. Like, over the next 3 yrs. Tucking a few shares into the BOP LT portfolio makes me follow the situation much more closely.

  126. 126
    zman Says:

    I KNEW I would get you, lol.

  127. 127
    Jerome Blank Says:

    RE: #124, RRC, might bite on this one…holding in that zone of SMA support we were looking at this morning…what are your thoughts on the options?

  128. 128
    BirdsofpreyRcool Says:

    It’s the Energy Political Environment in Turkey. It’s not like drilling off the coast of Africa… Turkey lets you make $$ and keep HBP acreage. That will probably change with time. But for now, it’s a great place to find and produce… in areas that already have proved production. That said, the stock is valued on a heck of a future… not on current operations (like, ahem, E21). But, i think N. Malone pulls it off. So, yes. You got me.

  129. 129
    zman Says:

    I’m not playing but I’d probably take the $52.50s if I were. I don’t see them saying anything out of the ordinary, their pr’s are virtually cut and paste from quarter to quarter as they are more of a manufacturing operation than most E&Ps.

  130. 130
    BirdsofpreyRcool Says:

    Also, the Services Biz that N. Malone is building within his E&P operations could be worth as much — at some point — as TAT’s production. Like it when a company has several embedded call options… more than one way to go up.

  131. 131
    zman Says:

    BOP – yep. 20% tax rate, 8% royalty, and $9+ gas thanks to the Rodina next door. And there is still size exploration potential to be tested later this year.

  132. 132
    BirdsofpreyRcool Says:

    1/8th royalty, i think…

  133. 133
    Jerome Blank Says:

    RE: #129, Zman, thank you…

    TAT holding the lower daily channel trendline, a classic buy spot, especially for swing trades….

  134. 134
    BirdsofpreyRcool Says:

    … but i know you know that… you just got all excited, thinking about all that production and nat gas sales (priced at $8/mcf), right?

  135. 135
    BirdsofpreyRcool Says:

    JB — thank you! Will toddle over and vote now.

  136. 136
    zman Says:

    BOP – my bad, 12.5%.

  137. 137
    zman Says:

    re 134. $9/Mcf. While we’re correcting each other, LOL.

  138. 138
    BirdsofpreyRcool Says:

    HK getting smacked upside the head with the Ugly Stick again today. That Bird attracts more swats than a mosquito at an A.D.D. convention.

  139. 139
    Jerome Blank Says:

    RE: #135, BOP-thank you…

  140. 140
    BirdsofpreyRcool Says:

    #137 — there ya go… even more reasons to take TAT out on a Date.

  141. 141
    zman Says:

    Re TAT upside. Wondering on timing of foldbelt test, the first in a series of analogues to production in nearby Iraq. I can’t pin them down on timing, nor if this is Taq Taq type stuff like the Kurds have. I think it is, but am not sure. Have you come across anything on that?

  142. 142
    BirdsofpreyRcool Says:

    Think timelines have been streeeeetched. All that stuff (wildcatting, fraccing, services) will happen… but, get the sense they are still struggling to put the right Senior People on the ground there in Turkey and line up enough equipment and crews. It ain’t West Texas. N. Malone has figured that out… but, taking more time than he thought (and doesn’t it always, these days??)

  143. 143
    BirdsofpreyRcool Says:

    That said, TAT did allude to being close to “done” with their land grab. Think that suggests an acreage announcement some time soon.

    Caveat = TAT will issue more equity at some point. So, may be able to buy more at a better price some time soon.

  144. 144
    zman Says:

    RMD – does Peak have a sale plan in place. Last I checked, the 7 employees there and directors have a large position in the company, about 21%.

    BOP – OK, thanks.

    BOP – is Dan Rice at Black Rock?

  145. 145
    BirdsofpreyRcool Says:

    Dan Rice is at BlackRock in Boston, yes.

  146. 146
    zman Says:

    Thanks. Dan is very smart and I may have mentioned I did some work for him from time to time in the past, back when I had a real job. Blackrock is the largest institutional holder of MCF.

  147. 147
    BirdsofpreyRcool Says:

    Keeley and TCW are also among the largest institutional holders. I wouldn’t put those guys out to pasture either.

  148. 148
    zman Says:


    Ugly market.

  149. 149
    BirdsofpreyRcool Says:

    yep… the BOP LT Portfolio is taking body blows today. And it hurts. ouch.

  150. 150
    BirdsofpreyRcool Says:

    But, if you don’t get days like these, you can’t buy TAT at 3.73… so, just have to keep repeating “no pain, no gain.” But, no doubt, it hurts.

  151. 151
    RMD Says:

    144 I think MCF may have a slaes plan in place, which would dilute my pain–slightly.

  152. 152
    zman Says:

    Re MCF – considering an entry for Thursday. Would like to get through the open for obvious reasons and the natural gas revisions.

  153. 153
    zman Says:

    Solace for the ZCAT … may is one of those longer than normal expiry months:


  154. 154
    zman Says:

    The Senate Energy and Natural Resources Committe will meet May 6 to discuss issues surrounding US offshore oil exploration, including the Deepwater Horizon disaster.

  155. 155
    zman Says:


    Added a final (20) calls of the VLO May $21’s for $0.41 with the stock at $19.96 and the market at its lows of the day.

  156. 156
    zman Says:


  157. 157
    BirdsofpreyRcool Says:

    After Market Wrap-Up

    Market Update – the sp500 ends off 2.3% to 1183; we finish pretty much at the lows (low today was 1181); R2K finishes off 2.38% and Nazz was off 2.04%. The SP500 suffers its worst % decline since Feb 5 (on that day, the sp dropped 3.1%) and closed below its 20day MA for the first time since back in mid-Feb. All major near-term technical levels were sliced right through (1196 20day, 1194, and then 1190) and we closed pretty much at the lows. Conditions in the corp credit market were even worse, w/IG widening out an astounding 7 ¼ on the day (on a % basis, IG was out ~6.5% on the day – a comparable decline in the sp500 would be ~80 points vs. the actual fall of 28 points). The two big catalysts for the move lower: 1) the deteriorating situation in Europe (see below); 2) growing worries about Washington and changes that could be enacted on the legislative front. The desk today was remarkably quiet given the action, as most traders were intently focused on the Senate Goldman hearings. Despite the very weak close, there wasn’t a lot of panicked selling pressure. There was a very strict buyers strike, which meant there was no support as we fell today, but the larger long onlys weren’t big sellers today (although there def. was an uptick of long liquidations today). Shorts becoming a bit more comfortable laying out exposure, esp. in groups like the financials and materials, but are still on the cautious side and are quick to cover. Given all the major risk asset markets around the world, US equities were among the best performing (the main European equity indices fell 3.67% and US corp credit was very weak) and were “followers” today (i.e. we were led by Europe and than a very weak corp credit close) vs. leading. Interestingly, GS shares traded in the green for most of the session and ended the day up ~0.6% (of all the sp500 financial stocks, GS was the only one to close in the green). For most of the last couple weeks, as the problems in Europe and Washington were brewing, investors were focused on the very strong earnings reports hitting the tape for Q1 – this helped drive stocks higher. However, we are coming to the end of Q1 and “better than expected” is no longer impressing (see the trading in F, X, and DD today, both of which “beat” St print expectations). The decline today can really be dated back to Fri 4/16, when the charges against Goldman were first levied by the SEC – many are viewing today’s action a continuation of selling from that day.

  158. 158
    Dman Says:

    BOP – here’s what I can’t understand about your debate with VTZ. You keep talking about the govt and GS as though they are separate entities. They aren’t. You know that top GS alumni have been running the show in both the current and previous admin. I don’t mean they decide who comes to the White House Easter Egg Hunt, but they do decide policy on matters that neither GWB nor BHO know much about, such as derivatives regulations, trillion dollar bailouts etc.

    Now I don’t mean that GS alone holds sole ownership of washington. There are other shareholders, such as the defence industrials etc.

    But fundamentally, given the money flows between Wall St and Washington, it just doesn’t make sense to consider them separately.

    The bankers and politicians have complementary skill sets. The bankers know how to invent fantastically complicated ways to fleece the public. The politicians can barely do basic arithmetic let alone understand derivatives. But they do know how to puff and preen on TV and sell the whole fiasco to taxpayers even as they steal their money and give it directly to GS.

    So it’s a match made in heaven really.

  159. 159
    BirdsofpreyRcool Says:

    Dman — Crony Capitalism at work. And if Goldman has it’s way, the Congress will tie the hands of the little banks and make it harder for them to do biz. This bill is all about that.

    You want to decrease risk in the financial system? Just up the reserve requirements for banks engaging in market-based business. And list most CDS on an exchange (like exchanged traded swaps). You can still have a private market for non-exchange traded CDS, but it would be much smaller.

    Did SarBox prevent fraud? Or, did it just layer another (heavy) burden, mainly on the small guys and drive business overseas… heavy-handed financial “regulation” will do the same. By the way, we already have some of the most heavily-regulated Financial Services in the World. The tools were already in place to prevent the meltdown. But, that is not what Fannie, Freddie, Dodd, Frank, Angelo, GS, or others wanted. “Gotta keep dancing while the music is playing,” said then Citi-CEO. Everyone (including the foxes charged with watching the hen house) wanted the music to continue.

    I resent abdicating even more money and power to politicians, just because they tell us they will watch over us little people. HA.

    Frankly, the number 1 cause behind the whole market meltdown is the massive trade imbalance in the US. We import container-loads of stuff, and export container-loads of US Dollars. Those dollars have to be “invested” somewhere. They flowed back into our markets, making Mr. Greenspan’s head spin (“The Conundrum”), the CEO’s of Fan and Fred rich, the money flow into the campaign coffers, subprime borrowers achieve the American Dream, homeowners got to use their homes as ATMs and buy fishing boats and 3rd cars, banks packaged everything up and sold it to entities with US dollar to invest.

    Does anyone honestly believe the banks are solely to “blame” here?

  160. 160
    Dman Says:

    BOP – you are right that the excessive role of finance in the economy is a symptom, not the cause. The trade imbalance is the cause, but who was in favor of that? The “big” corporate sector “convinced” (= “paid for”) Washington to allow offshoring of most of the real economy. The recipients of that largess (multinational CEOs and third world countries) fully intend to keep the spoils, thanks very much.

  161. 161
    zman Says:

    SU on the tape talking about 130,000 bopd Montreal refinery rocked by blasts.

  162. 162
    BirdsofpreyRcool Says:

    Bashing the banks on the head and layering on more regs and taxes and power in the hands of Idiot Senators (and those are the “smart” guys on the Finance Committee!!) is not the answer. Just forces more business either offshore, underground, into the ground, or never gets off the ground. Why people think more govt is the “answer” is beyond me. It only drives up costs and takes from what is productive to support what is non-productive…. including (first and foremost) itself. For every $1 collected by “govt,” only about 10c actually makes it into the hand of who it was intended for. The other 90c goes to support more govt. sheesh.

  163. 163
    zman Says:

    NFX on the tape with above mid point volumes and slightly above consensus bottom line. Details in the morning post, but nothing to add from an operational perspective as they spilled the beans on that last night.

  164. 164
    Nicky Says:

    Anyone got the API numbers?

  165. 165
    zman Says:


    Crude: Up 5.3 mm barrels – with imports off nearly 0.5 mm bopd. This makes as little sense as usual.

    Gasoline: DOWN 658K barrels

    Distillates: DOWN 1.369 mm barrels

  166. 166
    Nicky Says:

    Thanks Z.

    Was this in line with expectations?

  167. 167
    BirdsofpreyRcool Says:

    Excerp from Early Note by BedTime Mrkt Strategist Today

    The Exit Strategy.

    The warm up for the exit strategy has been the Fed’s “normalization” policy during Q1 of this year. This consisted of the wind down, or scheduling the wind down of the remaining emergency programs, and restoring the Discount Rate to a spread above the Fed Funds rate. Currently, only 50 basis points of that traditional 100 basis point spread has been restored. We expect the FOMC will raise the Discount Rate the additional 50 basis points at tomorrow’s meeting, restoring the spread.

    The Exit Strategy has been outlined by Chairman Bernanke on several occasions, the most recent of which was Congressional testimony a month ago. During that testimony, the Chairman invoked the E&E language in combination with the qualifiers but then followed with “In due course, however, as the expansion matures, the Federal Reserve will need to begin to tighten monetary conditions to prevent the development of inflationary pressures.”

    The big question has always been which will occur first: the shrinking the Fed’s balance sheet, thus reducing the QE liquidity (in the form of Bank Reserves) in the system, or tightening by raising the Interest Rate on Excess Reserves in combination with the Fed Funds target rate. The Chairman has repeatedly discussed temporarily draining liquidity using reverse-repos and term deposits (CDs for banks) as measures to drain liquidity from the system by tying up those excess reserves. Since both measures are temporary, when the agreements mature, the Fed can roll them or if weakness materialized in the system, return the liquidity to the system. If all goes well, the FOMC than can focus on permanently draining liquidity.

    The act of raising the Interest Rate on Excess Reserves (IOER) will offer an attractive and safe alternative for banks, keeping those funds at the Fed as opposed to lending them out. The approach will also raise interest rates broadly throughout the economy, which is something we are all very confident the FOMC is not prepared to do yet. In addition, $1 Trillion (up from a pre-crisis level of almost zero) of excess reserves still sit at the Fed despite the current low interest rates. Evidently, there is not too much of a need to entice institutions to keep the cash at the Fed.

    The final measure the Fed has highlighted is asset sales, selling the MBS the Fed has purchased as part of the QE program back into the market place. Throughout the crisis, this was generally portrayed as unlikely in the near term. The Fed Chairman generally tried to convey the message that the Fed could hold those securities as long as necessary, and would do so as long as the economy remained weak. Selling the assets into the market will mean a permanent reduction in the liquidity in the system, and may potentially drive mortgage rates higher, thus endangering the nascent housing recovery.

    The best technical breakdown of how the market should watch the exit strategy came from the Fed’s trading chief, Brian Sack, in a speech early last month titled, “Preparing for a Smooth (Eventual) Exit.” Sack discussed a passive reduction in the Fed’s balance sheet, referencing Chairman Bernanke’s February testimony. “In his February 10 testimony, Chairman Bernanke described a possible approach for managing the size of the balance sheet. In particular, he indicated that he does not currently anticipate that the Fed will sell any of its asset holdings until the economic recovery is more firmly established and policy tightening has gotten underway. Until that time, the portfolio would shrink only through asset redemptions. Chairman Bernanke noted that the Fed’s holdings of agency debt and MBS are being allowed to roll off the balance sheet, without reinvestment, as those securities mature or are prepaid, and that the FOMC may choose to redeem some of its holdings of Treasury securities in the future, as well.” Sack noted that $140 Billion in Treasuries and $200 billion of MBS and Agency Debt would runoff or mature by the end of 2011, equivalent to 14.5% of the Fed’s current balance sheet. He also offered the following interpretation of the Fed Chairman’s statement regarding asset sales, “That, in my view, is a crucial message for the markets. It should limit any reversal of the portfolio balance effects described earlier, effectively putting reductions in asset holdings in the background for now as a policy instrument.” Recently, the media has been reporting that asset sales are becoming an important topic of discussion among FOMC members. We suspect that the pressure to make sales is emanating from the Regional Bank Presidents, who, as we noted earlier, are not driving policy.

    One measure we have pegged as a key indicator that the Fed will need to quickly ramp up its exit strategy is M2 growth, which is the sign that those excess reserves are turning into money supply. Following the initial jump in M2 at the start of QE, the rate of year over year growth has continually slowed. Although they have been offset by policy for the time being, the chart indicates the latent deflationary risks remain real.


    Retrospectively, all of the qualifiers the FOMC identified appear tame. Excess Reserves remain tethered to the Fed despite the exceptionally low interest rates. M2 is barely growing year over year. One other aspect we should note is the currently stalled Financial Regulatory Reform Bill, which moderates the Fed’s 13-3 emergency powers. Essentially, once the Fed begins a permanent unwind of its balance sheet, it may not have the flexibility to bring it back up should the need arise. The combination of these factors reinforces the current dovish stance the FOMC has taken and the slow unwind as described by Sack. The conversation does not end there, because the Fed must also look prospectively.

    In the March meeting minutes released earlier this month, the FOMC removed the 6 month calendar expectation from E&E that FOMC members previously indicated. One could argue, that a indicate a shift in language has commenced. The simple fact is that the data warrants some type of language adjustment. The two key areas of weakness the FOMC members have highlighted during this recovery have been housing and employment. The most recent data on both fronts has shown early signs of light. One month‘s data certainly does not make a trend, but revisions in both cases have been upwards and forward estimates are also in the positive direction. With economic data ramping up, the Fed can afford the luxury of shifting gear with words, especially since they do not have to follow through with action anytime soon. Since the Chairman has been so adamantly dovish recently, we cannot say that we know E&E will be altered or gone tomorrow (although it should be), but, at a minimum, we expect a baby step towards tighter language.

  168. 168
    zman Says:

    Not really. Street is looking for:

    Crude: up 1.05 mm barrel (but I was thinking it could be a small draw since imports are bouncing like a yo-yo at present and were up strongly in the prior period and often reverse or partially reverse a move like that in the following week).

    Gasoline: up 0.8 mm barrels.

    Distillates: up 1.5 mm barrels.

  169. 169
    zman Says:

    Anyone have a good shipping ETF, SEA just said it will be shut down.

  170. 170
    Nicky Says:

    Z – any of the data effected by the airlines being grounded?

  171. 171
    Dman Says:

    “Claymore believes there is significant interest in the marketplace for a shipping ETF and that investors are seeking exposure to the shipping industry. Accordingly, we filed a registration statement for a successor product, Claymore Shipping ETF, which will track the same index as the Fund and trade under the same ticker symbol – SEA.”


    Don’t know when the new SEA opens.

  172. 172
    BirdsofpreyRcool Says:

    BedTime Market Strategist

    Portuguese Smoke and a Greece Fire.

    As usual, the ratings agencies are at the top of their game. Shortly after 11am, S&P downgraded the sovereign debt rating of Portugal two notches from A+ to A-. S&P explained, “Fiscal and economic structural weaknesses in our view leave the Republic of Portugal in a comparably weak position to address the significant deterioration in its public finances and expected lackluster economic growth prospects over the medium term.” Approximately a half hour later, S&P cut Greece’s sovereign debt rating to BB+ from BBB+ (Junk) and assigned a recovery rating of 4 to Greek debt issues, indicating 30%-50% recovery expectations for debt holders in the event of a debt restructuring or payment default. The back to back headlines shocked the markets, creating a swoon in equities and a flight to quality in Treasuries and the Dollar. The S&P 500 almost immediately dropped to the 1185 support level from earlier in the month. Trading volumes were the second heaviest of the past year and the Vix spiked up as investors sought to reduce risk. At the same time, trading desks focused on the Senate’s Permanent Subcommittee on Investigations hearing. The obvious key driver of trading action this week is the headline risks that are coming to fruition. The S&P 500 has rallied 17% since the February low, evidently, the market needs to consolidate and Europe and the Senate hearings provide as good a reason as any for investors to commence profit taking. In addition, the spike in the Vix is likely a sign that the market still has some bouncing around to do.

    Fedwatch Cliff Notes.

    This morning, we published a Note highlighting the FOMC meeting tomorrow. We expect the FOMC to continue with the normalization process of increasing the spread between the Discount Rate and the Fed Funds Rate to 100 basis points. The Fed’s qualifiers justifying the “exceptionally and extended” (E&E) language are “low rates of resource utilization, subdued inflation trends, and stable inflation expectations.” As it stands now, all of the qualifiers remain fairly benign. That being said, we expect important improvements in these metrics over the coming months. This may very well be the last time they appear weak enough to keep the FOMC thinking the status quo going into a meeting.

    In the March meeting minutes released earlier this month, the FOMC removed the 6 month calendar expectation from E&E that FOMC members previously provided. One could argue that move indicates a shift in language has commenced. The simple fact is that the data warrants some type of language adjustment. The two key areas of weakness the FOMC members have highlighted during this recovery have been housing and employment. The most recent data on both fronts has shown early signs of light. One month’s data certainly does not make a trend, but revisions in both cases have been upwards and forward estimates are also in the positive direction. With economic data ramping up, the Fed can afford the luxury of shifting gear with words, especially since they do not have to follow through with action anytime soon. Since the Chairman has been so adamantly dovish recently, we cannot say that we know E&E will be altered or gone tomorrow (although it should be), but, at a minimum, we expect a baby step towards tighter language.

  173. 173
    mimster90 Says:

    Line coverage ratio is up to 1.26 from 1.14.

    Jerome voted!

  174. 174
    Jerome Blank Says:

    RE: #173, mimster…thanks much….

  175. 175
    proxy solicitation agent Says:

    Corporate Proxy Solicitation Companies Act

    Tuesday Morning Pause | Zman

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