26
Aug

Thursday -Oil Review and Natural Gas Preview Plus

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Market Sentiment Watch: Summer is winding down and volatility has come only at the hands of data. Investors seem less focused on selling now and they've been less than focused on buying for quite some time. I will continue to play the hit and run market where I see a few opportunities from time to time and avoid buying for potential catalytic news until the last possible moment until I see a change in the mood of the market. 

Housekeeping Watch: Yesterday I added something that I've been mulling for awhile and I plan to do most mornings, the Front and Center Watch. I write the daily post partly the night before and partly the morning that it is posted. Some of it is in the here and now but much of it takes a longer term perspective.  So while I may write about crack spreads on Tuesday's they aren't generally foremost on my mind from a trading perspective. What goes in the Front and Center Watch is. The Front and Center Watch will be early in the day's comment section and will focus on things that could move immediately or things that I've been thinking about and am considering trading that day. It will be short and to the point and bullety in format and some days it will be empty or nearly so. It will often but not always be tied back to items in the post and will be sort of a crib sheet for the day.  

 

Ecodata Watch:

  • Jobless claims came in at 473,000 vs 490,000 expected. No doubt cause for an equity celebration after the run we've had of late but I would expect it to be limited in that a) it's just "one sort of better" data points (and that's generous) in a sea of bad ones and 2) we get a GDP revision tomorrow which should be sharply lower than the original number. 

In today's post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Inventory Preview
  4. Stuff  We Care About Today – Enercom comments.
  5. Odds & Ends

Holdings Watch: ZCAT (Zman Catalyst portfolio):

  • $5,200
  • 100% Cash
  • Yesterday’s Trades: None

ZIM (Zman Inefficient Markets portfolio)

  • $4,400
  • 16% Cash - should be back to over 50% by the end of today.
  • Yesterday’s Trades:

    • MMR – Added (25) of the September $14 calls for $0.46 with the stock at $13.05. Plan to add more if the economic data due out at 10 am EST brings the market it. Feedback from Enercom presentation continues to be positive in the wake of their presentation Tuesday. A little riskier trade, also to be quick.

    • MMR - Added (50) MMR $15 calls for $0.18 with the stock at $12.65 in the wake of weak economic data. A bit higher risk than the last trade or yesterday’s but lots of leverage to a potential move higher in the name.

Commodity Watch Crude oil sagged following the EIA report (see below) but then rallied (it's just been off too many days in a row and was due a bounce) ending up $0.89 to close at $72.52 yesterday. This morning crude is trading up nicely this morning. As with the market, I would not really trust the move however since I think we remain range bound we could probably bounce back above $75 fairly easily which would provide some confidence to the E&P group.

  • China Watch: PTR says it wants to strengthen its relationships with Venezuela, Iraq, and Kazakhstan to tap "new sources of oil". Ironically, PetroChina, in addition to carving out agreements around the globe to procure the oil China needs, is in cooperative talks with BP to refine the oil.
  • Suggested Reading Watch:  Twilight in the Dessert by Matt Simmons - Great read or reread. Good history of Saudi Arabia, scary thoughts on the near term direction of their production and what that means for prices. Should be especially scary if you are the world's large consumer of oil, only make a quarter of what you need, and feel compelled to restrict your own ability to produce the stuff.  

Natural gas closed below $4 at $3.87 for the first time since May. Recall that gas was tapping $5 just 3 weeks ago. This morning gas is trading up slightly. Today's storage report should allow gas to retake $4 unless it is well above Consensus expectations as we have fallen too far, too fast.

  • Tropics Watch:
    • TD 7 became Tropical Storm Earl. Tracking for Florida or the east coast and expected to grow to at least a Cat 2 storm before landfall. It is early in the track so at this point there is a wide range of potential targets including a complete miss as we are seeing with Danielle now.

 

Natural Gas Preview:  The part of the injection season where we see smallish inputs to storage is winding down with the waning summer heat. From here on out, look for injections to grow until we are close to Halloween barring storm related disruptions. If we take the five year average injections for the rest of the season (about 11 more weeks) we come to the following range which is not catastrophic for gas prices. If you want to add 2 Bcfgpd (which is close to the year over year supply surplus that adds about 150 Bcf to the totals which still is mostly not terrible as I don't believe the max case is likely this year.

My number for today: 34 Bcf

  • Last Week: 27 Bcf Injection
  • Last Year: 53 Bcf Injection
  • 5 Year Average: 66 Bcf Injection
  • 10 year Hi:100 Bcf Injection
  • 10 year Low: 38 Bcf Injection

The Street is looking for 38 Bcf

Oil Inventory Review


ZComment: Inventories are in full bloat mode. Gasoline should start rolling over soon but crude is likely to build into the fall and distillates into early winter. Refiners have simply made too much product over the summer and as a result product prices are likely to move lower as winter approaches. My sense is that for the next few months, crude will be range bound from $65 to $80.

Crude

Gasoline

Distillate

Stuff  We Care About Today


Today From Enercom

Link to the webcasts:

     

  • CXPO - 10:50 am EST. Eagle Ford, Bossier Sands and the DJ Basin (I have not seen if they are in Niobrara or not but I'd guess they will mention it). I said I would not touch these guys until they were below $2.50 and we're at $2.26.
  • QEP- 11:15 am EST. First time to listen to these guys at a conference as a standalone name after spinning out of Questar.
  • TLM - 11:40 - Hard to believe they have not been gobbled up and one of the few Canadians I follow.
  • APC - 12:05 - Don't expect to hear about Macondo stuff. Do expect to hear a lot about offshore Africa (Jubilee and offset blocks have near term catalytic potential) 
  • BRY - 12:30. Oil play, might receive more attention this fall with weak gas prices.
  • NOG - 1:45 - Great 2Q results, unlikely to hear much new here since they are non-operated and don't often control the timing of new information but at one OGIS meeting I recall them giving out good tidbits on upcoming wells.  I own this one in the ZLT and some calls at present in the ZIM.
  •  

  • LINE - 12:20. Listening for clues as to the timing of their next distribution hike. I continue to own the name in the ZLT.

 


Other Stuff:

  • The comp pages for the Bakken players and for the gassy names from yesterday's post will be deposited under the metrics tab at upper left for future reference.
  • I'll have a fresh Catalyst List with some additions from Enercom gleanings out next Monday.
  • ATPG presentation yesterday is worth a listen. I think they get a bigger bounce just prior to the end of the moratorium in November. I had thought the moratorium would end sooner as signaled by the White House several weeks ago but Salazar has now shown those signals to be a Red Herring. Anyway, ATPG is confounded over the lack of differentiation between the type of drilling they do, developmental, where you already have a good deal about pressure and other reservoir characteristics and the type BP was doing, exploratory, where things are more risky, and, with the aid of a string of bad decisions, are more likely to lead to a dangerous situations. They are working with the feds to demonstrate the improved safety features of their latest efforts including mud line rams in addition to the ones on the BOP. They have a number of end of year catalysts and given the beat down, are going to find a place on my more immediate market watch.

Odds & Ends

Analyst Watch:

  • All quiet on the analyst front.

Interesting Reading Watch:

78 Responses to “Thursday -Oil Review and Natural Gas Preview Plus”

  1. 1
    bill Says:

    mmr looks to open 25 cents higher
    tidz has a 1.25 % orr i in bbe up .25 c
    pxp not even a ripple- last ccall ceo said plans to sell some gom properties , timing uncertain

  2. 2
    zman Says:

    Bill  – PXP has trouble catching I break. I wonder if it was not the late entry into the Haynesville.

  3. 3
    BirdsofpreyRcool Says:

    Good morning.
     
    Nat gas under $4 sure doesn't make me look like a genius, on those buys last Friday.  That said, I got good stocks at good prices.  And I am willing to hold.  This market continues to be brutal, swinging first one way, then the other.  And the media can march out anyone to take either side.  So, no one feels they have a clear picture.  But TED is sub-15bps this morning.  This is a ecomonic slowdown (double-dip?  maybe… don't think so, tho)… but NOT a financial crisis.  That said, we had a feeling that this summer would be a tough time to make money.  And we were all right.  Pretty much every professional investor/trader is not sitting on the beach (or at enercom).  With light volumes, so easy for the program traders to push the mrkt either direction….

  4. 4
    zman Says:

    Welcome back BOP!

  5. 5
    BirdsofpreyRcool Says:

    MMR/EXXI up in pre, again today.  Was there anything "new" in their comments?  We had heard that "BBHill" was a "monster"… but was anything said about DJ#2?  Anything about timing there?

  6. 6
    BirdsofpreyRcool Says:

    z — thanks!  good to be back.

  7. 7
    zman Says:

    Front and Center Watch:

    MMR for obvious reasons as I had two quick trades on yesterday that I went into the close with on, about 2x what I wanted to hold into the close so I got lucky today with the unemployment number.

    GST – presented last night, will listen to the replay early as I had to miss it but have been told by some smart types I should pay more attention to it. So that'll be the first call of the day for me before the live ones hit.

    HAL – BP stuff on CSPAN2 in the background. Thinking HAL could run again, they've acquitted themselves well over the last two days.

    NOG calls – probably a double down for me, great quarter, talking today at Enercom

     

     

  8. 8
    zman Says:

    BOP – from some wrap up comments yesterday:

    Blackbeard East. As of yesterday they had just crossed the salt weld at about 21,000 feet. They immediately were into 3 hydrocarbon bearing zones in the Miocene down to , will see 10,000 feet of section down to 29,500′ in this well. If 25% sand, that’s 2,500′ of sand. This is 10,000 feet shallower than seen at Blackbeard east so lower heat, pressure than in that wellbore.

  9. 9
    BirdsofpreyRcool Says:

    z — "F&C" = good idea. 
     
    and thx for the GST reminder.  I'll circle back to listen to that one too. 

  10. 10
    BirdsofpreyRcool Says:

    z — thanks for the DJ#2 update.  Had heard they were sub-salt, and drilling was "going easier" (indicating porosity), but didn't get any details.  good stuff.

  11. 11
    zman Says:

    Request in with Nicky on resistance levels for the S&P.

    JB – any thoughts there? Thanks again for your comments last night that are repeated here:

    #69, eld, KOG, $$2.50-$2.60, I added at $2.53, missed that spike down at 10:30
    #74, Eli, SD, watching…agree, very oversold, still no material bullish divergence on the MACD or RSI vs. Price, also like to see a bit more vol at the lows, I'll may join you on a higher low bounce…
    ATPG chart looks interesting from a bullish perspoective, developing channel….updated charts…
    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

    re ATPG: RE: #99, Zman, I will check it out, thank you…I did look at the presentation posted by john at #44, very interesting….from a technical perspective, really nice daily hammer close at the bottom channel line, topside channel line resistance corresponds with P&F trendline resistace at $14.50, thinking if the stars align, this might be an upside target, any thoughts on the options, look a bit thin?

    RE: #100 ATPG, actually the options look fairly liquid, thinking the Sept, $12.5, delta @ .33 might be a good choice…

    MMR, looks fantastic, I was waiting for MMR to retest the 200 day, a bit closer to $12, should have bought that darn pullback today to $12.40, but it ran without me again…great trade, it's up quite a bit in afterhours it appears, still have my full load of EXXI, hopefully it will share in the love, EXXI also looks great… SSN, is in a daily chart bull flag, lite vol, may get a chance to add on some of the misses depending on how the mkt reacts tomorrow, for folks lookng to get into CIGX, the hammer near the 200 day SMA looks very promising today on not bad vol

    next resistance at the P&F trendline $14-$14.49…

  12. 12
    BirdsofpreyRcool Says:

    CIGX stock action is a good reminder of what can happen when the shorts are rabid.  The shorts have the stock in their teeth and are shaking it pretty hard.  That said, if CigRx sales show any indication of strength after the 90-day limited rollout, shorts are just fat, dry logs, piled high for a nice bonfire.  I'm not worried (unless product is a bust… and it's not).  But stock price action = leaves a Big Hole in my P&L.

  13. 13
    zman Says:

    JB – voted, thanks again.

  14. 14
    zman Says:

    EXXI breaching $19, MMR up a 3rd day in a row which in this market … probably won't last. Time for me to take some profits there.

     

  15. 15
    BirdsofpreyRcool Says:

    Interesting… short interest in MMR is pretty low (on a recent historical basis), but pretty high for EXXI.  Would have thought the opposite.  Anyway, that means MMR buys are real longs… but at some point, EXXI new buying should also be augmented by short-covering…. i would think, anyway.
     
    Great trades on MMR, z! 

  16. 16
    zman Says:

    ZTRADE – ZIM – MMR

    Sold half of the $15 September calls (25) for $0.48, up 154% since entry yesterday. I continue to own the rest of this position and the $14s.

  17. 17
    zman Says:

    Re 15. Good points and thanks much.

  18. 18
    zman Says:

    Emailed in from Nicky:

    I think we could drop back to 1047 but then I expect a move towards 1090 next week.

    CSPAN2 stuff pretty basic early this morning, going to listen to that GST call now.

    NG up 2 pennies with 30 minutes until storage

  19. 19
    zman Says:

    MMR flopping about at $14.

  20. 20
    BirdsofpreyRcool Says:

    I think a few fat, dry (short) logs are starting to jump onto the EXXI bonfire.  Stock keeps scooting… which is HIGHLY IRRITATING to shorts.  heh heh heh

  21. 21
    Jerome Blank Says:

    RE: #13 Zman, thank you…

  22. 22
    zman Says:

    Had to stop the GST and listen for a minute to CSPAN

    Coast Guard: 21 centralizers costs more than 6 centralizers?

    BP: I would assume so

    CG: But without knowing the cost of a centralizer you would say they cost more

    BP: OK, but it would be insignificant in cost.

    The Coast Guard guy should probably focus on the time to install more vs the cost of the item.

    HAL clearly wanted more of them and BP over rode that plan.

     

  23. 23
    zman Says:

    JB, no, thank you. The technical read a couple of nights back was integral to my decision to run in on these. Wow, the half I didn't sell is now up 227% and the $14s are more than a double now.

    Even EOG up today. I really despise the all or none natural of the current market.

  24. 24
    isleworth Says:

    Z- what is your thought on impact of low natty on LINE distributions?

  25. 25
    zman Says:

    Isle – not a factor until 2013 as they are almost 100% hedged. They have done a good job of acquiring and hedging out the acquired volumes immediately so if they bolt on another property set and can't do that at better than $5 as would be the case right now, then I think they would have to steal the property or they would just not do it.

  26. 26
    zman Says:

    OK, going to listen to GST now.

  27. 27
    bill Says:

    +40

  28. 28
    isleworth Says:

    tks Z. Just also saw this guy's analysis on LINE http://seekingalpha.com/article/220972-linn-energy-a-risky-bet?source=yahoo

  29. 29
    zman Says:

    40 Bcf

    Puts YoY storage comp at 6.1% low and 6.2% high to the 5 year.

    NG up a penny. Largely discounted number.

  30. 30
    zman Says:

    GST Notes:

    ECA – lower Bossier well IP in the 20 to 30 day range in E. Tx. EOG has a couple of 30+ in the area.  GST has an AMI (area of mutual interest) agreement with ECA in the area and 3D over it.

    All of the wells there have stacked pays, so when they come up hole and recomplete they are seeing IPs of 18 to 20 mm/d

    They are seeing a bit longer timelines on fraccing, only like certain crews, pretty standard,

    120+ Bossier locations remaining.

    $5.50 gas, 52% IRR for the lower Bossier and 20% IRR on the middle Bossier wells (tell us what they are at $4!)

    Glen Rose – shallow formation (same acreage) – evaluation well #1, will spud second well in 60 days. Have had multiple Glen Rose shows (oil) on their way down to their Lower Bossier targets.

    Eagle Ford – just to the northeast of their wells, there was an EFS completion that has produced an avg 50 bopd for 18 months and there have been a number of completions in the area with IPs of 300 to 900 bopd.

    They spud their first EFS well in next 2 weeks, expect results in Oct/Nov

    Marcellus – 35,000 net acres concentrated in 3 areas, acquired since late 2007, tried to get in the overpressued fairway, in the liquid rich portion of the play.

    1st well 120 m/d and 100 bocp

    2nd well will spud in Oct or Dec depending on rig availability

    This should be a big piece of their valuation, doing a little poking around to see what acreage in their counties is worth.
     

    Still working up a background piece here.

     

     

     

  31. 31
    bill Says:

    bdi was down today and yesterday and based on early trading will be down tomorrow

  32. 32
    elijahwc Says:

    JB voted for you re:SD     and bought more this am on the basis of SD not having a single fundie or techie going for it but still starting to erode higher.  Onward & upward to $6.50.
    On MMR did I detect an unfilled gap measuring from 14.70 to 15.50 just north of here?

  33. 33
    zman Says:

    Bill -s till watching BALT – thought it was off to the races but this market and I guess the BDI, reeled it back in.

  34. 34
    zman Says:

    CXPO call delayed, don't care about Gastem.

  35. 35
    zman Says:

    WSJ reporting 3 drones shot down last week attempting to hit the new Iranian reactor were, in fact, Iranian.

  36. 36
    VTZ Says:

    Is Gastem talking Utica?

  37. 37
    zman Says:

    V – I didn't listen, heard something about islands.

    CXPO about to start … barely interested in them either.

  38. 38
    bill Says:

    Id suggest staying away from Balt until the secondary happens which is early sept by 9/9. They want to raise 110 m +- so that means 10 m more shares on top of the 22.5 m currently outstanding.
    I dont see how they get to 40 cents per share with 33 m outstanding. I think they will keep the divy at 16 cents for the next 2 qtrs and 64 cents a year and that doesn't support a price north of 11 but that being said it could be a good trader buying the dips and watching the rates.
    My model shows divy of 21 cents for q4 and .16 for q3 with current rates and extra shares so if rates hold maybe take it up 2 cents per qtr
    65 % of their revenues comes from the smaller sizes and those sizes are doing better than capes currently

  39. 39
    zman Says:

    Thanks Bill

  40. 40
    redjack Says:

    Thanks Bill also..

  41. 41
    zman Says:

     CXPO – completing their Haynesville wells at a restricted rate. Saying they learned their lesson with the big Cardell well that they drilled with DVN.

  42. 42
    zman Says:

    CXPO – hopes to drill a well in the Niobrara next year. Interested in JVs or a sale, acreage is near one of NBL's Gemini well which is the one people talk about as having produced 60,000 barrels in 60 days.

    CXPO has 10,000 acres south of the Gemini well which itself is just south of EOG's Jake well.

  43. 43
    Jerome Blank Says:

    #32 Eli, thank you,I appreciate the vote, MMR, thinking first resistance at P&F trendline, $14-$14.49

  44. 44
    zman Says:

    QEP saying they are choking back their Haynesville wells.

  45. 45
    zman Says:

    QEP – one stop shop for all your E&P needs. From Haynesville to Granite Wash to Willston to Woodford to Pinedale to Uinta. All onshore. Need to work them up and include them with the Large Caps on the Orange Charts.

  46. 46
    zman Says:

    S&P red. Crude up a buck. NG off 6 cents.

  47. 47
    zman Says:

    My dad took a fall and is at the ER, out for a bit.

  48. 48
    john11 Says:

    Real sorry to hear that Z….best wishes to him.

  49. 49
    BirdsofpreyRcool Says:

    MIDDAY OVERVIEW
    ·         Market Update – US stocks aren’t seeing much follow-through from Wed’s late-day sprint to the upside; there was never a ton of “real” money buying on the move higher yesterday (just short covering for the most part and that is starting to peter out).  The jobless claims number this morning was the first piece of good eco news in several days and was worth a few handles on the sp, but the strength was sold into (will take several weeks of better #s to help labor sentiment and keep in mind the Aug BLS release is next Fri).  In terms of other news, the tape remains very quiet and people are all focused on Bernanke tomorrow.  The MBA did release its Q2 mortgage study this morning and revealed mixed trends – total delinquencies saw the largest decline since the mortgage crisis started but 1-month delinquencies actually ticked up (a potential neg. leading indicator).  On the int’l front, there was a story in a Spanish paper talking about how the country’s VAT collection methods may be illegal (which could force it to disgorge the tax back to payers although the country’s finance minister just said it may lose only 200M in revs, not the EU5B feared) and the WSJ ran an article about how Chinese banks are cutting back lending to local government projects.  The bottom line on this tape – volumes/attendance are pretty thin, owing both to the summer holidays and just the general sense of confusion among investors.  There was some covering yesterday, but that is largely over, and now not many people are doing much in front of Bernanke tomorrow.  The tape remains susceptible to swings in either direction w/sometimes only pretty dubious headlines being required (like Ford’s comment yesterday about Aug sales being “good” helping prompt the late-day rally). 
    ·         Equity Sectors – on Wed, the rally was led by tech and discretionary while the other historical “beta” groups lagged (banks, industrials, materials).  Today, tech is seeing some profit taking while materials, industrials, and the banks lead the market higher.  The banks are up ~1% on the day but are still off 2% for this week and are down 10% for Aug (so seeing a bit of a bounce, w/some citing the MBA #s, but really just shorts covering and taking profits).  The industrials are up 60bp, w/buying in some of the aerospace stocks (BA, GR), machinery (ROK, TXT), and rails (CSX, UNP).  The housing index is dwn 1% and giving back some of yesterday’s outperformance (profit taking on Wed’s bounce).  Within the materials, chemicals are leading (DOW, EMN) and some copper plays too (FCX up ~2% on reports that China could cut back production).  The steels though are still heady (X and AKS remain in the red).  Health care is back for sale today following a brief and shallow bounce on Wed (recall on Tues it was one of the weakest groups in the market after MDT) – dental plays (PDCO earnings) and biotechs are weighing on health care.  Consumer staples are up ~50bp (Dieago’s results weighing a bit) – DF, MO, K, CL, etc, are all laggards. 
    ·         Best performing sp500 stocks: MWW, TDC, S, MI, GT, DOW, RHT, GNW, HOT
    ·         Weakest: PDCO, JDSU, CELG, SNDK, GILD, DHI, MEE, BIIB, RL, URBN
    ·         Commodities:  Crude Oil has continued its move higher from yesterday and has added another ~1.3% today. Natural Gas sold off following EIA Natural Gas Storage Change coming in at a bigger build than expected, though has bounced back and is dn. ~0.5%. Natural Gas is posting a loss for the 7th session in a row. Gold is flattish while Copper is trading near its highs, up ~3%.
    ·         FX: USD (DXY) has come off its lows and is approaching $83, dn. almost ~0.4% on the day. The euro & the pound have both come off their highs, though still up ~0.3% and ~0.6% respectively (some headlines about the Spanish VAT hit the euro but not by much). The yen has come off its highs of the day and is flattish. Regarding the stimulus package, the Democratic Party of Japan asked the central bank of Japan to “speedily take further steps” (Bloomberg)
    ·         Corp. Credit: Corp Credit is mixed with IG 14 coming off its highs, tightening 1/2bps while HY 14 is dn. 1/16 of a pt.
    ·         Treasuries: Treasuries have posted small gains ahead of the $27B 7 yr auction today – the 2s are yielding 0.52% and the 10s are yielding 2.523%; the 2-10 spread is yielding 2.003%. The Fed announced today that they bought $1.415B worth of Treasuries that mature between 2021 – 2039.  We will get the last auction of the week at 1pmET. 
    ·         Europe:  Europe bounced back today and outperformed the SP500; the Euro Stoxx finished up ~0.6%. The Spanish IBEX was one of the strongest indices after their Q2 GDP was upwardly revised (DJ); best performing stocks in Spain included: Abengoa, Acciona, Mapfre, and Gamesa. The German DAX posted one of the more modest gains within Europe. 

  50. 50
    choices Says:

    Bullish
    20.7
    down 9.4

     
    Neutral
    29.8
    up 2.4

     

    Bearish
     

     49.5 (up 7)
     
     

    Hope this posts but BOP posted in early July (after the flush) that one of the strategists she follows uses the AAII sentiment indicators (above) as a contrary indicator-at that time, the ratio of bulls/bulls+bears was 26.8% and a modest bounce ensued (the strategist commented that this was one of the better sentiment indicators out there) today, the ratio is 29.5%-not earth shattering b but nevertheless does not seem to argue for the collapse that many are looking for into Oct.
    Strong FWIW-thanks BOP for sharing that in early July.

  51. 51
    BirdsofpreyRcool Says:

    bill — thanks for posting that.  Meant to post something HeadTrader sent me this morning… on the same topic —
     
    AAII poll of individual investors has only 21% bulls this morning, which is close to a 5 year low. According to Sentimentrader.com the percentage of bulls has only been 21% or lower 48 times in history. Three months later the market was up 47 times out of 48 occurrences. In the short run the results are not as strong but beyone a month or so the odds really start to favor the bulls That is not a bad track record and bodes well for an end of the year rally.

  52. 52
    BirdsofpreyRcool Says:

    of course, i should add that i've already downed 3 CigRx today** (they taste good)… so not feeling overly-worried about things. 
     
    ** finally got my 3-box order y'day.  Packaging is pretty cool.

  53. 53
    choices Says:

    #51,62-BOP, I have to ask-how many CIGRx-heh

  54. 54
    choices Says:

    #51,52 vice 51,62

  55. 55
    BirdsofpreyRcool Says:

    choices — only 3… downed over 2 hrs.  Keeps the appetite at bay too. 
     
    These things can't hurt you either.  The official tally for the mice was that they gave 'em the equivalent of 100 packs (20 tablets each pack) a day and there was no evidence of toxicity.
     
    However,  mice started doing crossword puzzles in ink after that test….

  56. 56
    BirdsofpreyRcool Says:

    Sent to me from a very smart, global-macro fund manager
    —————————————————————————————
     
    The Fed Can Create Money, Not Confidence
    Inflation—or stagflation—remains the more serious danger than deflation.
    MORE IN OPINION »
    By GEORGE MELLOAN

    A report by the Federal Reserve Bank of New York last week showed that consumers are having difficulty climbing out of the debt hole they dug for themselves before the credit bubble began to deflate in late 2007. The report gives support to the fears of those asset managers and economists who believe the U.S. is facing deflation.

    Bill Gross, manager of the $239 billion Pimco bond fund, is one. His evidence is that the Consumer Price Index (CPI), annualized over the last two years, has fallen slightly.

    Since deflation, in simple monetarist terms, means too little money chasing too many goods, with a consequent fall in prices, the remedy should be easy. Can't the Federal Reserve create as much money as it wants with just a few key strokes? Well, there are some things money can't buy. In political circumstances like today's, one of them is public confidence.

    In fact, the Fed has been fighting deflation for nearly two years. It began pumping new money into the economy after the September 2008 stock market crash to restore liquidity in the financial system. It has kept the pumps running by maintaining a near-zero interest rate target. Its net purchases—with newly created dollars—of government and government-agency bonds have totaled some $1.4 trillion, expanding its balance sheet to $2.3 trillion. As the Fed pumped out new money, member bank reserves ballooned and now exceed $1 trillion. That means a vast amount of money is on deposit in Fed accounts, ready to be flooded into the economy if loan demand increases.

    So what's the problem? Here it is best to depart from monetarist terminology, with its heavy emphasis on the magical powers of the central bank. Those magical powers are highly overrated, as almost anyone who has ever run a central bank will likely tell you. The Fed can flood the banks with liquidity in an effort to stimulate economic growth (if it is willing to run the very serious risk of inflation). But that will not necessarily stimulate a demand for this money.

    What's missing in these times is a strong desire among businesses and consumers to take on new debt, low rates notwithstanding. Corporations can't even decide what to do with all the surpluses their businesses are generating; they are sitting on vast amounts of cash even though it is earning them minimal investment returns. Because business's "animal spirits" are suppressed by caution, private-sector hiring is weak, which means the unemployment rate is likely to remain high. As the New York Fed report shows, householders on balance are struggling to pay off the debts piled up during the 2003-2007 credit binge and are building up savings. Consumer spending is relatively flat.

    The key word here is "uncertainty." The Obama administration and Congress have dumped a huge load of highly dubious new legislation on Americans, much of it unread even by the legislators who voted for it. ObamaCare is an attempted federal takeover of a vast and complex industry. No one really knows how much chaos the financial sector "reform" act will generate. Hyperactive zealots in federal bureaucracies such as the Environmental Protection Agency have been unleashed to do silly things like attempt to reduce the planet's supply of carbon dioxide.

    A massively expensive federal "stimulus" program failed to stimulate for the easily predictable reason that the money the government spends on its political projects robs the rest of the economy of resources. Opinion polls show that the soaring federal deficit is of major concern to voters, as it should be.

    State and local governments are, on the whole, in terrible financial shape, which means that they will likely be shedding employees and adding to the ranks of the unemployed. The only remedy the Democrats have for cutting the deficit is higher taxes, which in a weak economy likely would be counterproductive.

    As a rotating member of the Federal Open Market Committee, Dallas Fed President Richard W. Fisher helps guide national monetary policy. He addressed the uncertainty issue in a recent speech to the San Antonio Chamber of Commerce.

    The prevailing sentiment among business leaders he surveys monthly, Mr. Fisher said, is that "the politicians and officials who craft and enforce the rules are doing so in a capricious manner that makes long-term planning difficult, if not impossible. They are increasingly distressed by the lack of consistent direction coming from Washington. . . . So they are calling time-outs and heading for the sidelines while they wait for the referees to settle the rules of the game."

    He added that no amount of further monetary accommodation can offset the retarding effect of heightened uncertainty. Indeed, it would make matters even worse if the private sector concludes that the Fed has become "politically pliable and is prone to substitute such accommodation for fiscal discipline." Who would ever think that?

    Getting back to Mr. Gross and his fears of deflation, it should be noted that he stacked the deck in referring to a two-year average, since that includes the brief period after the 2008 crash when the CPI fell. The index began climbing sharply at midyear 2009 and was showing nearly 3% inflation by the end of the year. A 0.3% rise in July still signals rising prices.

    Since U.S. prices correlate inversely with the dollar's international purchasing power, and since the massive U.S. budget deficit puts downward pressure on the dollar in international markets, inflation surely remains a more serious danger than deflation.

    But deflation and inflation predictions could both be right in a sense, if you aren't too fussy about strict definitions. In the late 1970s, the last time Americans suffered from manic interventionism from Washington, we had "stagflation," a combination of minimal economic growth and double-digit inflation. It wasn't pretty.

    Stagflation was cured by a set of policies that reversed the Keynesian nostrums then in vogue and that are again the core basis for federal economic policy. In the early 1980s, the Fed tightened money, tax rates were cut, economic regulation was pared sharply and an effort was made to curb nondefense spending. It worked quite well, producing 25 years of economic growth. It will be much harder to repair today's damage, but the need to make another try is becoming urgent.

    Mr. Melloan, a former columnist and deputy editor of the Journal editorial page, is author of "The Great Money Binge: Spending Our Way to Socialism" (Simon & Schuster, 2009).
     

  57. 57
    choices Says:

    BOP-if EOG continues down its merry path to my portfolio's destruction, I may be forced to try and exceed that count. what was I mumbling to myself a few months ago, sell in May and go away-…right

  58. 58
    BirdsofpreyRcool Says:

    choices — so tough to call… last yr, "sell in may" didn't work.  This yr it did.  Maybe the surpise this year will be that October is a GOOD month.
     
    Hear ya on EOG.  I have it in a family-member's portfolio…. at a much higher price.

  59. 59
    cargocult Says:

    Must be in the air, I was just going to ask if anyone had something positive to say about EOG?

  60. 60
    BirdsofpreyRcool Says:

    cargo — the energy analyst at SunTrust has nice things to say about EOG.  He came out y'day with a "buy" recommendation and a PT of $162. 
     
    Thing is, stocks are cheap.  But until we get some consistant policy direction out of Washington, money continues to flee stocks and sit on the sidelines, earning nothing.

  61. 61
    cargocult Says:

    Speaking of cheap. WHX pays over .70 quarterly and is under $19. What's the bad news there?

  62. 62
    VTZ Says:

    Are stocks cheap or are bonds expensive?
     
    And what earnings forecast for 2011 are stocks cheap on?

  63. 63
    VTZ Says:

    I guess stocks are cheap if you believe 94$ in operating earnings next year which is the current estimate and considering the 2.1% yield.

  64. 64
    BirdsofpreyRcool Says:

    VTX — tough to argue with you, when the Market declines day after day.   Catching falling knives is tough on your hands… and i've got the bloody palms to prove it.
     
    The credit market is providing the support.  The stock market is just busy, looking at other things.

  65. 65
    BirdsofpreyRcool Says:

    oops… the X and Z keys are waaay too close together, it seems.  Sorry, VTZ.

  66. 66
    regale Says:

    Re No. 55:  How "at bay" is that appetite?  I long for the good-ole'-outlawed-ephedra-stack (lotsa ephedra, some caffeine, a little aspirin) days.  That REALLY worked.  Thanks.

  67. 67
    RMD Says:

    Did anyone listen to AREX yesterday?  I'd like to hear your reaction to it.

  68. 68
    BirdsofpreyRcool Says:

    regale…. not like that… no rush.  Just appetite gone.  Like smoking a cigarette (which i did, off and on, in college… most people did back then).  Frankly, i think Star plans to up the active ingredient and roll out a diet supplement next.  Don't know the schedule on that yet, tho.  Really just need to let inVentiv do their thing for 90 days, then report back.  That makes it a beginning of November time frame.  Didn't think the stock would crash on "no news."  But don't think the price action "means" anything either.  Just reacting to a sh*tty mrkt and a lot of shorts piling on.

  69. 69
    BirdsofpreyRcool Says:

    I need to go listen to the MMR presentation too.  Sounds like we are potentially in for a stream of news, coming out of BBHill and BBEast over the next coupla weeks, given where they are in those two wells.  That could keep the stock on an upward trajectory.
     
    EXXI is in BBEast and DJ#2 and Lafitte (which should be permitted in next 2-3 weeks), but not in BBHill.  Just as a reminder.  And I own EXXI, but not MMR anymore. 

  70. 70
    blackgold39 Says:

    re 22 – Z, the centralizer issue should not even be the focus of the questioning.  Well control and casing design, pure and simple.  Centralizer talk is just an effect of people taking their eyes off the ball..

  71. 71
    elijahwc Says:

    Ladenburg, Thalmann & Co. Inc  Enercom Conference Color:
    attended Days 1 and 2 of the annual Enercom conference in Denver on Monday and Tuesday 8/23 – 8/24/2010. Our summary observations are as follows:

    Attendance is the highest we have seen in our 5 years of coming to Enercom, with buy-side attendance way up. Industry attendance is up, at least partly because some sessions have been dual-tracked for the first time, buy-side attendance appears up noticeably, and sell-side attendance seems up a bit compared to last year.
    We would describe the mood at the conference as watchful but not grim. The mood is far better than a year ago, when the industry was in the throes of the credit crisis. Not surprisingly, this year, consistent with commodity prices, things are fairly upbeat for oil-focused companies, and very subdued for natural-gas focused ones unless they have burgeoning liquids or oil plays they can shift the discussion toward.
    Most intriguing stories we heard included Whiting (WLL-$84.41-NR), McMoRan (MMR-$13.27-BUY), Continental (CLR-$39.82-BUY), and Rosetta (ROSE-$19.38-NR). Whiting and Continental represent compelling scale in the Bakken Shale, in our view. McMoRan announced a big step forward in validating that prolific deep gas formations are much shallower than the industry expects. And, we were introduced to Rosetta’s take on the Southern Alberta Basin Bakken play.
    One thing has not changed: the Bakken is still a big draw; but the Eagle Ford has broadly supplanted last year’s Haynesville fascination. The most-discussed Haynesville data point was the movement of rigs and completion resources out of the play.
    Negatively, the frac crew shortage in all 3 plays is increasingly a wild card. For each company dependent on these new plays that spoke, we heard rationalizations of varying credibility for why this industry-wide problem will not be so bad. There seems to be some expectation that weaker 2H10 production, if it emerges, will be forgiven if reserve growth and per-well performance continues to strengthen, especially in the Bakken and oily part of the Eagle Ford. The CF impact is being glossed over, in our opinion.
    That being said, no one appears worried about their credit lines. That problem has clearly receded in everyone’s mind, from what we have heard. Cabot (COG-$27.97-NR), mentioned that compared to 18 months ago, its banks are willing to entertain 5-year agreements for renewing its revolver, when in 2009 no term longer than 3 years was at all up for discussion.
    It’s a good time to talk about new oily plays. Investors are hungry to hear about what could succeed the Bakken in the industry’s imagination. In some of these plays, management teams appear to be fairly oozing confidence about what they can accomplish with current technology and a $70/bbl oil price.
    But, conversely, we detect that the smaller cap longtime acquire-and-exploit companies are having a tough time strategically. Even as they eye natural gas legacy plays that could be priced in a way to make entry attractive, the fierce competition for anything oily is making the going tough for these players that are naturally conservative with their capital. …"

  72. 72
    DrLink Says:

    BOP Re #55      I received my CIGRX  two days ago and I'm giving to people I know who smoke to see the results. I took one and not sure I felt anything, but I have never smoked. My only comment is that I would have put a brochure or flyer in the box, thanking the customer and including an order form for more or a rebate if forwarded to others. I also noticed that there is no directions / recommended intake/ maximum dose etc. on the box or dispenser. You say mice can take hundreds but the average consumer does not know how many he can take at once..etc.

  73. 73
    BirdsofpreyRcool Says:

    DrLink — I had to try two, the first time, to feel anything.  It's just a calming effect.  Try it 20 mins before lunch, however, and see if it suppresses your appetite. 
     
    There are SO MANY ways that they could be marketing the product better.  But, we are less than a month into the RollOut Stage… so, I'm giving them the benefit of being smart people. 
     
    You're right about the "dosage."  You're supposed to take one, whenever you feel the urge to smoke.  So that doesn't exactly define what one should do.  I had 3 today, over a 2 hour period.  If nothing else, maybe I've staved off mental decline for another day!

  74. 74
    BirdsofpreyRcool Says:

    U.S. Asset Managers: Weekly Fund Flows: Equity Redemptions Increase As Market Turns Lower
     
    26 August 2010
     
    U.S. Asset Managers
    Weekly Fund Flows: Equity Redemptions Increase As Market Turns Lower
     
    Kenneth B. Worthington, CFA (1-212) 622-6613
    kenneth.b.worthington@jpmorgan.com (AC)
    Timothy Shea (1-212) 622-5707 timothy.j.shea@jpmorgan.com
     
     
    EPFR released mutual fund flow data for the week ended August 25, 2010.
     
    * Total equity fund flows (excluding ETFs) were negative, with outflows of
    $1.9 bn, compared to $334 mm of outflows last week. Domestic equity funds saw
    $1.3 bn of redemptions compared to $432 mm of redemptions in the prior week.
    International and Global equity funds lost $668 mm of assets compared to inflows of $98 mm in the prior week.
     
    * Taxable bond funds saw inflows, gaining $2.1 bn after $1.9 bn of inflows
    last week. Long-term municipal bond funds saw inflows of $665mm, compared to
    $783 mm of inflows in the prior week. High Yield funds saw $165 mm of inflows compared to $124 mm of inflows last week.
     
    * In terms of sectors, Utilities was the strongest sector with $1 mm of
    redemptions. Healthcare flows were the weakest, with $45 mm of outflows.
     
    * Money funds saw outflows, loosing $271 mm compared to $3.0 bn of inflows
    the week before.
     
    * Asset managers' returns last week were negative, down 2.13% on average.
    The SandP 500 was down 3.55%. Cohen and Steers (+9.09%) is performing the best so far in 3Q, followed by Lazard (+7.94%). J.P.Morgan Funds is performing the worst (+2.00%).

  75. 75
    zman Says:

    Thanks John and email well wishers. Dad's OK, just looks like mom got the best of him again.

    Glad to see MMR/EXXI extended their runs

    What got into GDP last couple of days, see the Southcoast Downgrade, that wouldn't make a lot of sense for the rally

    Re WHX – what's wrong, just oil and gas prices most likely, that and the few guys who do follow it, think it is only 3 seem to downgrade it when it misses their numbers AND when it beats their numbers. They are very hung up on the fact that it will be out of volumes to produce in 5 or so years.  Maybe RMD is right on the pricing of bonds relative to yield instruments. But I like the 12 to 13% yield I'll get over the next year, maybe two and I do still think crude will be higher (and natural gas too) in 12 months.

  76. 76
    mimster90 Says:

    WB BOP
    some of our favorite names should all go up tomorrow. I just put in orders to make some small buys.

  77. 77
    mimster90 Says:

    I think I posted several weeks ago, using numbers from their filings, at current rate of drawdown that WHX has 4 years of oil left.

  78. 78
    BirdsofpreyRcool Says:

     
    Thanks, Mimster!  Hope so… could use some of my lost cred back…
     
     
    Meanwhile, from BedTime Market Strategist, comes this….
     
    A Solid Setup.
    Today was one of those days that, despite the loss on the scoreboard (and we recognize the P&L hits do truly hurt), was far more constructive than most sessions during August.  We suspect today’s Initial Jobless Claims report provided some preliminary credence to our theory that the August seasonal adjustments are a head fake in the data, creating the impression that the trend is reversing to the upside.  The Non Seasonally Adjusted number was 380,900, a new lowest reading in just under 2 years and slightly below the NSA claims number that was registered the week prior to Lehman’s failure.  We reiterate that these are not good numbers, but they are a far cry from the trend reversal of new rising claims, which is how the seasonally adjusted data is being misinterpreted.  Remember, next week should also be a tough week.  If our theory proves correct, we will know by mid to late September when the downtrend should appear to resume. 
     
    The other interesting development today was on the sentiment front.  AAII Sentiment as we calculate it (Bulls/(Bulls + Bears)) was 29.54% in buy signal territory.  It is not as good as the reading registered last month, but good enough to rank it 4th best in the last two years following November 6, 2009’s reading of 28.57%, July 9, 2010’s 26.84% and the two decade low registered March 6, 2009 at 21.21%.  The Hindenburg Omen made it to the front of our Yahoo! News page. A six basis point increase in the quarterly report of the Mortgage Bankers Association’s 30 day delinquencies was covered in the media as if the second sub-prime crisis was again upon us.  Besides the fact that it was 6 basis points, it is coming primarily from failed modifications.  We get monthly snapshots from Lender Processing Services and Bloomberg so there are no shocking revelations in the MBA report, which overall exhibited improvements.  Meanwhile, positive stories seem to get missed, such as Moody’s asserting yesterday that credit card losses have peaked even if Unemployment rises to 10%.  In addition, Moody’s noted that “Falling charge-offs led to excess spread widening by 57 basis points to 10.44% in July, breaking the 10% level for the first time in the 20-plus year history of Moody's Credit Card Index.”  This is the good type of spread widening.  It represents the profits banks make on a card program.
     
    There are only two things we feel like we are missing going into tomorrow’s GDP report: Volume and a 30+ reading on the Vix.  The ideal setup for tomorrow would come from the result of an ugly Q2 GDP revision tomorrow.  Every hour, a tenth of one percent comes off the market’s expectations of tomorrow’s revision.  It is hard to remember the last time the market was so enamored with a backward looking number.  We recognize a large downward revision will influence estimates for the balance of 2010 and the forecasts for 2011, but we did sell off on most of the weak initial inputs as the data was reported in the past few months.  Nonetheless, any ugliness or sloppiness tomorrow morning  should prove to be a buying opportunity.
     
    At 10 am, the Fed Chairman will move back to center stage.  It will be his first speech since August 2nd.  Since then, the Fed has been a source of confusion.  We don’t expect QE2 to be announced, and as a matter of fact over the past month, the Fed finally witnessed some pick up in M2 growth in what was essentially a non-QE environment (Chart 1).   What we believe the Fed Chairman needs to do is explain where he sees the recovery headed taking into account the soft data over the past two months.  Then he needs to explain how the Replacement Purchases will be enough to get the recovery back on track and finally allude to plans B & C should Replacement Purchases fail to be sufficient.  We suspect the Chairman will also highlight some positives out there, such as the M2 growth accelerating, C&I loans modestly upticking, banks easing lending standards, etc.  Finally, by the end of the day, we believe a month long process of confusion created by the Fed will finally give way to one of the things the markets appreciate the most, “clarity.” 

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