Just checking the prevailing fear factor.
My accounts are up robustly today---makes me edgey. I like a nice slow climb myself.
Wondering if anyone is selling here---or just basking in the glow of the paper profits?
I have one account that just today revisitied its Oct. high. It's taken from end Oct. to now to rebuild that thing to its Oct. glory zenith of a 50% gain.
Yep-- if I could rewind- I would have pulled the chips in that acct. & gone on a 6 mos.
GH-- I hold WTI, too--thought it would be up a bit more here today--but no complaints with the
recent run. Any thoguhts on it?
Your Right,I do not like Greedy Bob and his Crony overpaid BOD.
However I do not let that influence my Investment decisions. XTO still in my Top 10 although I sold some yesterday. Interesting to compare CHK and XTO.
I am playing Golf with a real oil Guy tommorrow. Real Oil Guys owns Wells directly like Todd. He believes we are headed to dramatic correction.
Immelt (GE) says we are in bad times,but Poor Guy has lost credability
Peter, don't own XTO so don't follow it closely but it may be the best of class. Simpson has definitely done a spectacular job, and he is a finance guy. Whatever he gets, he is probably worth it, and that is from a person who thinks most CEOs are not worth their compensation. We are in a circle here, the Fed lowers again, the dollar drops, oil goes up, the trade deficit increases, the dollar drops, oil goes up.... As for XTO falling, it tells me there are lots of momentum players. Am concerned about the same phenom with the others.
I can't believe the continued uptrend here.
SLB missed earnings & it's up 15 points in short
order. Any logical reason? Guess I'll have to listen to that cc call.
GH is one who has taken some chips off the table here- right GH? Any thoughts from your neck of NJ?
Mr.Market does seem manic here.
I sold my trading energy positions a while ago---but now the idea of selling some slugs of our core positions is dancing at the edges of my mind.
I remember waking up one a.m. to WFT at 53. Not a good morning. Who knows where a pullback would take these prices. But yes, I'm edgey & fearful with these big run-ups that can see 15-25% run downs.
My energy trading chum who has fought
this entire uptrend here & lost ( ie: he was short SLB going into earnings- OUCH)told me yesterday that his JP Morgan guy told him that the last of his short guys had capitulated & had covered their positions.
To my friend, this was a good sign that things were finally going to sell off.
One way to play this is through the ETFS.
You could look at DUG--- or put on a DUG/USO
hedge. ( hedging neither my forte nor preference).
Below text from the opening of a block trader's
newsletter called, Block Traders' Oil & Gold Monitor. They see prices coming down here ,
think DUG/USO looks like a valid arbitrage they say.
But they see some names that could appreciate from here. Their recs for 3 mos. out 5% appreciation minimum are:
see some of their comments below. I tried posting the graph, but can't get it to copy- must be encoded.
Who Says They Don’t Ring A Bell?
Usually we lead off with the Crude Oil forecasts inferred from the self-protective actions of hedgers on the NYMEX. With Crude prices at record highs, that would seem like a most logical start.
But we believe most of our readers are stock investors, not commodity players. That makes what is likely to happen to stock prices the first order of business. And what we see is alarming.
The volume stock market liquidity-providers are hedging their necessary position risks in ways that foretell declining oil stock prices. Their records on such outlooks in the past are pretty good, so pay attention.
Here are some examples of their recent sensitivities as to what is likely for groups of energy stocks.
This index contains 11 of the largest integrated oils, all of which are in our BigOils grouping. Each vertical line is a weekly forecast, made at the time, of the range of likely prices for the index in the near future, compared to the current price cross-hatch. Colors suggest appropriate traffic signals.
We have these forecasts every day, and have used a once a week interval to provide the two year span.
This is a real picture of history, not a marketing fantasy “I wish I’d said that” after-the-fact back-cast.
Park- This is a bold move but if you consider the news flow, it's understandable, and I can't find a clue in the data that we are topping other than sentiment, subjective ones, the daily front page articles, everyone recommending gas, the belief that the global growth will never end.... One of my best indicators is a friend who was a contrary indicator in the tech bubble. I remember back when the Nasdaq hit 5000 and he was up 80% for year, with leveraged ETFs and he rode it all the way down. Three weeks ago, he decided to add margin for the first time since then for more energy investments. He bought more CHK, and others, at $45 three weeks ago so this far, it looks great. Also, a couple of months ago, he thought gas would sell off this shoulder season. Thanks for your ideas. What happens when Boone's $125 target is reached in a couple of days. It's tough to sell when the fundamentals look so good for the short term. I remember riding my Qualcom from $5 to $200 before I sold at much lower prices. These are difficult times for long term investors, when you want a position long term but you suspect it is overdone short term.
Park wants to check the fear factor. I don't know about the rest of you, but I find it a lot easier to be fearful when everyone else is greedy, than to be greedy when everyone else is fearful. I think people are more wary than greedy about now, and it isn't hard to sell.
Then there was some question about the price of pork and chickens. Don Coxe has a theory that Wal Mart uses food as a loss leader to get people into the stores, and this is one reason meat and poultry are available to the prices mentioned here. I suspect hedging by the producers has something to do with a $4.00 pork roast.
Peter mentions gas at $3.13 a gallon. That would have them lined up around the block here in Western Colorado. Diesel was $4.00 and regular $3.36 tonight.
Nice to hear from you. Also pleasant to have some walks down memory lane. I find the present to be stimulating and immensely troubling at the same time. I know we will muddle through it, as Hugh often argues, but the headlines are not friendly to the many. On the front page of the Times this AM, for example one reads that world food prices have risen 45% since 2006 and that, in another article, inflation adjusted earnings in the US have fallen for the 6th consecutive month.
Partially, I think that these high commodity prices are a bubble caused by speculative money flowing in but significantly I think that it is not a bubble but rather a simple response to the rich getting richer. In other words, we're innefficiently turning food into fuel in one corner of the globe or inneficiently turning food like soybeans into food for hogs in another to have better standards of living for the most well off among us. And, we need more and more bridges and dams and apartment buildings and the giant cranes and tractors that it takes to build them.
Hugh's $8.50 gasoline would be the right idea here, I think, if we had properly laid the groundwork for the number over time. But we didn't so it's no use to cry over spilled milk. LNG drops another 10% this AM and UK natural gas front month continues to rise into the shoulder season.
Publicus, I live in Germany and just returned from a two week trip inside the country. During the trip, gasoline cost us around US $8.50 per gallon and traffic everywhere was very, very heavy. Of course, we often travel by train.
"But the massive declines at the Ladyfern Reservoir in Canada may have had as much to do with it. "
Actually, I would claim that Ladyfern was the cause of both the crash in price, and then the crash in production. We had a recovery in NG prices and then Ladyfern production swelled inventories, crushing pricing. When the soda straw sucked dry, you had teetering cashflow... I suspect few "energy investors" remember when most E&Ps were leveraged to the max and needed production hedges to get bank loans.
Regarding the Barnett, 2 major MLP pipeline companies in the region have stated off the record that they believe Barnett production will peak around 2014-2015.
Also, they think the next Barnett will be in the Appalacian region, but it will likely take sustainable $9-10 gas prices before it really happens.
Peter, One problem with researching gas shale resources in the US is some resources have two different names, e.g., Michigan=Antrim.
A partial listing is:
Antrim=Michigan, Arkoma, Bakken, Barnett, Cane Creek, Green River, Ohio, Lewis and Mancos, McClure, Monterey, New Albany, Niobrara, Palo-Duro and Woodford.
There is a lot of variety in thickness and gas content, but, I think, most have production potential and the number of square miles is massive. Hugh
"God, I hope this isn't " second time shame on me"
That's sort of the opposite of the oilman's prayer which could be rendered "God, please give me one more boom and I promise I won't screw it up this time." Ten years from now, if things continue as they have, there will only be a dozen or so of us out here who will remember that there ever was an oilman's prayer. Oddly, though, I'm trying to think through how that actually works. This may take some time (the thinking through that is).
Sandgrey is a very reliable poster and a smart guy. He runs a financial consulting business in Chicago and I sometimes communicate with him privately. The article you quoted is accurate and raises some interesting ideas. What caused the US to actually increase production modestly? Restricting the idea to the Barnett Shale is a trifle limited, I think. What about the Rockies, for example? I'd say that the root cause was a combination of an historical peak of rigs drilling horizontally for natural gas with pricing consistently above $6 coupled with improved frac and other technology designed to exploit unconventional plays and the development of infrastructure connecting those unconventional plays to the US pipeline system (Kern River, Rex, etc).
Please note that the rig count, which was half this number 5 years ago, is also indicating very low on the idea because in the intervening 5 year period the industry has probably nearly doubled the efficiency of drilling--i.e., wells are now drilled and completed in half the time in many plays.
The remarkable thing is what? That all of that spectacular energy and intelligence expended by the assortment of oil field trash has managed to increase production by 7%!!! One thing to think about: the Barnett Shale is clearly part of the issue on production increases. When does it peak? When does it begin to decline? What is the next Barnett Shale?
I'm not sure that there is a next one @ $8 natural gas although there might be a next one at higher numbers.
A little history. There are many who think that the winter of 2002-03 began the modern era of natural gas pricing in the US by driving down winter storage to near empty. Certainly that winter did have the effect of producing a dramatic change in the income structure of most all US e & ps. But the massive declines at the Ladyfern Reservoir in Canada may have had as much to do with it.
Could we increase US natural gas production by another 7%? It is possible, but I doubt it.