If I wasn't working now, WAW, I'd probably be doing the trading thing as you are. It seems like the range is 85 to 96 and you short at 96 and go long in the high 80s. I have heard the Squid traders will get long some XOM or other oil company options and then bid up the price of oil. (Remember that one drunk English trader got oil prices up $2 in six hours.) They then cover their options and let oil fall again. Wash rinse repeat. So RG is right that supply and demand doesn't matter... for now.
Back in roaring 2000 when unemployment was 2% in Dallas, one nursing home I worked with had to quit drug testing because they couldn't find any workers not on something. Well, it is like that in the West Texas oil fields now. There is so much work, so much money, and so few workers, companies have had to let the meth heads work again.
One of my patients got scared off working an oil rig because of meth head incompetence. I had to evaluate someone who had damage due to H2S gas on an oil rig, and he was lucky to live and then this same patient told me he had H2S gas exposure as well. He would have died if not for a buddy of his who gave him a mask. Those oil rigs are a rough place to work, and it is even rougher when the people working them are stoned.
Back in ancient times, leaders in Central America believed that if they threw virgins into volcanoes, it would satisfy the God in the volcano and spare the rest of the tribe from an eruption. Of course, that had nothing to do with the eruptions, but you have to wonder what was said by the leaders after such an eruption occurred. "Could you imagine how bad things would have been if we didn't throw in the virgin?" or they could take the Paul Krugman route and say, "we didn't throw in enough virgins."
The only difference between those tribal leaders and climate "scientists" today is the invention of the PhD degree, which stands for piled higher and deeper. Their predictive ability was the same: awful.
Maybe we should go retro and consult those ancient leaders and conduct a study to see if we can reverse global warming by throwing PhD climatologists into volcanoes.
No, homerunguy, you are right. They don't need to import more gasoline, but Brazil is importing ethanol from the U.S. Look it up! So who is the moron?
The latest jaw dropping number from the EIA was barrels of total petroleum products in storage. The oil bears were waaaay off on the projections, and the amount of oil products in storage surged by a staggering 12.4 million barrels. This is by far the largest one week increased that I had ever seen.
Now oil usually moves on the oil storage number, but it didn't today. Bloomberg has said the recent move up in oil is due to the ECB contemplating a cut in interest rates. That is probably why PBR has moved up recently. So once more the central banks and not supply and demand are dictating price moves.
When you have the ECB printing like it is, and you have the PIIGS bonds yielding what they are, I am not sure why anyone would give a rat's behind about lower interest rates in Europe, but this is just one more example of the Greenspan put, the completely false religious belief that central banks can keep prices high forever.
Eventually, supply and demand will matter with regards to price, but today was just one more day showing that central banks trump supply and demand.
Jesus, Wins, can't you see data manipulation?
This bozo cuts the U.S. production graph off in May 2012. He says production is at 6.3 mbpd is "flat", Since May 2012, it is up to 7.2 million BPD, an unfathomable 21% increase.
#$%$ kind of BS is this guy pushing? Why not go out to March 2013 with his table and graphs?
As for impending doom in the Bakken, production has gone from around 200,000 bpd in 2009 to 800,000 bpd today, and this dope wants to talk about... depletion?
This article is pure fiction, and I am sure it is getting plenty of play on the Oil Dumb.
"No dough, no drilling---or a lot less, simple as that.
Money going to alternative types of drilling to (oil or other jurisdictions) .... or just to keep the balance sheet from being over extended."
Nope, it is way more complicated than that.
Try this headline in google: US Shale Industry Set for a Second Boom with Waterflood Technology
"Waterfloods start 1-2 years after drilling the well, in a time window producers call “secondary recovery.” (Drilling is primary recovery.) Waterfloods are cheap to try and cheap to run (with most operations costing just $5-10 per barrel!), and now the industry is seeing that they are sometimes doubling reserves from a well."
So make sure you and your oil Dumb buddies shoot this one down now too, but a patient of mine was already telling me about it. Waterfloods are catching on big time.
What caused PBR to go up in 2007 was the hype of the massive presalt fields. No one knows really how much said fields would cost per barrel to produce. The guesses were between $20 and $40 per barrel, but they were just guesses.
Since then, the unthinkable happened, and U.S. production has soared. The U.S. was producing just 5 million bpd of oil, and it is now up to 7.2 million BPD, and the EIA is projecting we get up to 8.5 million BPD by the end of 2014. Brazil and PBR were hoping to go from around 2 mbpd to 4 mbpd by 2020. In reality, according to the EIA, Brazil's production is down from Q1 2012. Production has gone from 2.4 mbpd to 2.33 mbpd last quarter.
But to me, that is not the big issue. Iran had its oil sales cut from much of the world because the Fed restricted low interest loans to anyone buying crude. Iran has seen production fall from 3.6 to 2.8 million BPD, and that nearly one million BPD in crude has not been counted in EIA's surplus capacity.
The jaw dropped though is Saudi production. From Q1 2012 to Q1 2013, production has fallen from 10 MBPD to 9 MBPD. The two largest OPEC producers then have cut or have seen production cut by a total of nearly 2 million BPD.
As of now, spare OPEC capacity is estimated at 2.8 mbpd, but that does not include Iran. With Iran, it goes North of 3.5 million BPD at least. We saw this much spare capacity in 2010 during the recession but also back in 2002 when oil was $20 a barrel.
Seeing as how oil is still America's #1 import, falling oil should mean a stronger dollar, which is bad for PBR. On top of that, falling oil will make the presalt fields one of the most costly and inefficient follies of all time. We haven't even hit the falling dollar and oil prices that I have anticipated and PBR is down to $15+ a share. Once we do see these events, PBR will be half of what it is today.
"That said, I don't really see folks "holding" on to money." That hasn't happened yet, RG. The Fed has done it all it could to cause inflation to fight deflation and so far, it has worked in some ways. The problem is what happens when you flood the system with money, as the Fed has done, fundamentals don't matter. So you see people flock to NG as they have done recently just because it is cheap. Supply and demand don't matter, and we no longer have markets. We have casinos, and some of the players have an unlimited credit line because of the Fed.
I saw some headlines on oil this week. Iran was griping about Brent going under $100, and that something must be done. OPEC said it would cut production if need be, and the media pointed to China as the engine that would push oil demand higher. How long have we been hearing that drivel?
To me, the really interesting data is beneath the surface. I have chronicled that Iran has had its production cut from 3.6 to 2.8 million bpd, and that the left over 0.8 mbpd was not included into OPEC's surplus capacity. To me though, there is an even bigger story. And RG, I am going to give it its own thread. I will say this though. The only reason for oil to be is the central banks. Period.
Pretty cool place that Stockhouse is. Anyway, wins, we are seeing the dollar up today and stocks falling. The goal of the Fed has been to devalue the dollar and push people out of it. Once people see that stocks can fall and that the central banks put can fail, they will move back into cash and hold on for dear life to said dollars.
Of course, at that point, we will see Cyprus style raids on bank accounts and more government confiscation.
The latest in Obama's bird brained economic policy was limiting the total amount one can save in an IRA to $3 million per a WSJ article.
I read it after you posted it WAW. Stockman pretty much nails everything wrong with the economy. Krugman's response may have been more instructive. He goes into name calling mode, "It's cranky old man stuff. the kind of thing you get from IBD, Rush Limbaugh, and Zero Hedge." Krugman is not an economist. He is a member of Obama's PR staff who happens to have an economics degree. Krugman's pathetic response pretty much shows how on target Stockman was.
RG, today is probably a good day to answer it. Deflation is due to a lack of demand and people holding onto their cash waiting for prices to fall. You have supply of money and supply and demand for goods and services. If demand for goods falls low enough, then it can be more important than a rising amount of cash. Excessive cash only works to stimulate demand if people spend it. If people sit on the increased amount of cash, and that happens when prices fall, then increasing cash supply does not cause inflation.
Uncle Ben didn't drop cash from helicopters. He probably wishes he could. He gave it to banks who held onto it not wanting to make risky loans.
What we have been seeing lately is #$%$an going even more crazy than the fed has. Why gold has fallen likely has to do with #$%$anese bonds. As #$%$ bonds go up in yield and down in price, margin calls occurred, and there was likely liquidation of gold and oil to pay for said calls.
Cash will be king again soon. This is the worst asset bubble in history and just a small decrease in price sends margin calls a flying. Once these calls hit, people have no choice but to get out of said assets and back into cash.
I don't think the great asset meltdown starts now. This was like a small tidal wave before the great tsunami, but it is coming. The logic of this rally, printing money to pay our bills, has been so stupid I want to puke. This is the fakest rally of all time, a rally born out of fed central planning and Washington pols. That we look to Washington and Uncle Ben versus ourselves to repair the economy is stupid to the nth degree.
"He then said that all assets are artificially bubbled the trick is finding out which ones are less bubbled."
LOL. Why invest in a bubbled asset? Why not pick out the most bubbled asset and go short? Keep half your portfolio in cash and the other half short and wait it out. That is what I tried to do.
"He points out that financial assets, stocks, bonds, and other assets are priced to the point where minor movements could eliminate a year's worth of income."
I think that a year's worth of income is way underestimating the risk. You got bonds selling for $2 on the dollar with 2,3% yields. I could see people losing 10,20 even 50 years of income if bond prices go down.
Gross is worried about inflation, and I am not. All this money printing and the inflationistas were worried inflation would soar, and it didn't. He is making a big mistake here. All this money printing was done to create asset inflation, and it has. The big issue with QE failing then is not inflation but asset deflation.
"Don't fight the fed" is a favorite catch phrase in the media and on this board. I go along with it when the fed is lowering interest rates from 8% to 2%, but when it is just printing money and handing it for free to banks, then I will fight it.
Musk was a symptom of this phenomenon. On the one hand, he would say "stimulus works" and then say "we had to get off the crack". Well, how do you do that?
It does not take a genius to see that letting anyone, even people with horrible credit, get a loan to buy a house will cause housing prices to go up. But how do prices go higher once you have given the losers/liars all the loans they want? Prices have nowhere to go but down.
We are at that point now. What do you do for an encore if you are the fed and you have given out billions per month? How do asset prices go up from here? They can't. There is nothing else the fed can do.
"So you don't like bonds overall anymore doc? Cash and shorts?"
As far as investing overall, I am in cash and shorts. I have been holding cash waiting for the correction and then my divorce hit, and my cash position took a bit of a hit.
As for routine investing, there is some yield to be had now buying a house and using it as a rental property. In Dallas, you can buy a house and lease it out for more than the mortgage payments.
I would like to tell people it is a great time to do a business. There is no greater yield out there than starting your own business right now sort of as I have done. The big problem though is that if you start up a lucrative business, a bank or large corporation that borrows at 0% can come into that area and crush you like a cockroach. My buddy in the timber business can't compete with the banks buying up all the timber land and inflating the prices.
But if you really want yield right now, you had best look in the mirror and get to work.
So I bought them in the $500 to $700 range and sold most around $700. Do you know where they are selling now? They are close to par, $980. So you tell me: did I sell too soon? Was I "wrong"?
With bonds, you can put things in proper perspective. The market is saying Venezuela has a 2% risk of default. IMO the risk is as close to 100% as you can get on anything. Once oil prices reflect true supply and demand, and eventually they will, Venezuela is toast.
And if you think Venezuela is bad, check out the rest of the bond market where there are tons and tons of bonds selling for way above par. You tell me what you call it when people are paying $1500 for an IOU that can be redeemed for $1000. I call it a bubble, the biggest bubble in history and this fact, this type of pricing in the bond market is unprecedented.
As for being "right", I direct you back to the best investing book ever written, Reminsces of the Stock Operator, "And right here let me say one thing: After spending many
years in Wall Street and after making and losing millions of
dollars I want to tell you this: It never was my thinking that
made the big money for me. It always was my sitting. Got that?
My sitting tight! It is no trick at all to be right on the
market. You always find lots of early bulls in bull markets and
early bears in bear markets. "
That you scold me for saying that holding my positions/sitting is all in the manner of "I told you so" just shows how amatuerish you really are. I want to make money not brag to others about my doing so.
"The smartest guy on the board went from a fact based analyst to someone with a grudge holding to a wrong opinon for 4 years while waiting desperately for the redeeming event which will let him say "I told you so".
LOL. Musk, I used you as a foil for the Democratic leaning talking heads who keep going on about how great everything is. There was nothing there to take personally but you did. You use the term 4 years, which just so happens to correspond with Obama's time in office. Don't pretend you haven't been a card carrying Democratic schill. For the record, I have given a fair amount of guff to Ilap for his partisanship.
As for being "wrong", short term the market is a voting machine whose prices are as a fickle as a woman picking out what shoes to wear. When PBR in 2007 and AAPL in 2012 became "fashionable" picks, it was time to get out of them. I am extremely cynical of anyone who is always "right" in the short term.
To me then the only question is being "right" in the long term requires studying numbers. No one is a fundamentalist anymore and with good reason. Fundamentalists have been crushed by the market rally, and as we have seen with JPM, corporate America is allowed to lie about the numbers.
But if you look deep enough, you can see the truth. One of my picks that others commented about as my having balls of steel was the buying of Venezuelan bonds. More on next post.
Another Taibbi jewel, "A general point about the rest of the hearing, what it's all about and what its significance is. What we're getting in this report is a rare insight of how an Too-Big-To-Fail bank sees itself and its accounting. We're seeing how they actually come up with the numbers that get spit out to the rest of us as shiny, seemingly objectively-arrived-at profit and revenue statements every quarter. What we find out from this hearing and from the research that spurred it into existence is that the accounting procedures at a bank like Chase, particularly with regard to derivatives, are closer to being an exercise in creative writing than real accounting. This giant mountain of a company is made up of a core of optimistic assumptions, almost kid-like fantasies, and in some cases, outright lies. It's really incredible."
"But as we've already seen at this bank, where the losses from just one portfolio can be calculated as $700 million in one person's eyes and $1.2 billion in the eyes of another, the whole process is highly subjective. Anyway: in this email, Hagan lays out a number of different methodologies he could potentially use to determine the bank's regulatory capital."
So here we have the core issue with "record corporate profits". Corporations are allowed to lie about what they are.
And another jewel, "Ladies and gentlemen, welcome to federal financial oversight! The chief examiner of one of America's largest depository institutions -- largest federally-insured depository institutions -- has what is in essence a $100 billion hedge fund made up of insanely complicated exacta bets on inscrtuable synthetic credit derivatives, and he doesn't think it's high risk."
So here we have the real economy. A bank that is allowed to make up numbers. A government regulator who allows them to do so and when the entire ponzi scheme falls apart, you just let the banks/corporations steal from the citizens. It is private gains, public losses just like we had befor
Musk was kind of cocky calling everyone who questioned the rebounding economy as Chicken Little. When I mentioned Europe failing, he scoffed and said "when is it going to happen?", when is Europe and the European banks going to fail? He made it sound as if it never would.
Well, the first big #$%$ in the armor happened this weekend. The EU has basically looted the bank accounts of every person in Cyrpus. They are stealing 6.75% on people with less than 100,000 Euros and taking 9.9% if you have more than 100,000 Euros. This is a chilling proposition.
Basically, the banks have decided that if they need your money that they can take it. The favorite mechanism for banks to steal, debasing the currency, hasn't worked as they needed it to. If you think this can't happen in the U.S., think again. Take a look at Jon Corzine. Here is a guy who stole $1 billion from his clients at MF Global and not only is he still free and walking around last week, he is still allowed to trade futures. That is right. Not only has he not been tossed in jail, he can still trade in the market and swindle his customers.
As for Musk's contention that we are at record profits, you need look no further than the Senate Hearings on JPM Chase. This is from Matt Taibbi who was live blogging it, First off there is this, "In September of 2009, the Commodity Futures Trading Commission nailed Chase for co-mingling $725 million of its own money with $9.6 billion in customer money, essentially the same activity we saw in the Corzine/MF Global scandal. Chase, incredibly, was allowed to settle for $300,000 in that case." So once more, we see that banks think that they have the right to steal from their customers. More on next post.
Oh, sure, it will be implemented. It gives the government too much power for it not to be implemented. The U.S. is for all intents and purposes fascist now. Forcing Americans to buy a private product is proof of it. As of now, there is no teeth in forcing Americans to buy insurance. There are no liens ETC, but forcing people to buy insurance, a private product, is fascist. Toss in the mandatory ruling in my divorce, that I had to buy private health insurance for my son, and we have had pseudo-Obama care all along.
Just so you know, WAW, every effing week I do these designated doctor exams where people with insurance are in a fight with insurance companies over necessary services. What I am saying then is health care does not equal health insurance. I see people who have three herniated discs and were given some pain pills and six sessions of therapy, and they still are in pain, and the insurers want to close out cases. I have seen cases where insurers approve NO treatment outside of pills.
Obamacare is supposed to make it such that insurers have to pay 85% of all money they take in on health care claims. Of course, that amount is dependent on government bureaucrats doing their job. If you just look at what has gone recently in the Senate hearings on JPM Chase, you can see what a farce that is.