Cardboard
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Posts posted by Cardboard
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Manipulation may be a strong word but, there is something going on with USO, UWTI, DWTI and the futures markets. My belief is that large players push up or down one instrument with a relatively small sum to rake in large profits in another.
Often I wake up at 5 in the morning and take a look at the oil futures. Then for some reasons at right around 8 am, I observe almost daily a plunge in WTI from the earlier level or reaching the lowest price level before the 9:30 am stock market open. Futures trade 24 hours a day so that seems strange to me.
I also pointed out previously what seems to happen right before 2:30 pm or the NYMEX close in the U.S.: a sharp down move right before the close as we saw yesterday. Often, that move would occur and the price would remain stuck at that level until the close with very little variation. Kind of similar to what people have long complained about or stock call/put options being manipulated at expiration where the stock price would mysteriously move to a certain level making a lot of options worthless or less expensive to close for market makers.
Oil has a current fundamental problem, no doubt about it. However, when volumes transacted on the futures market exceed what is being transacted in the real world, you may start to see some strange behaviour. The banks have been accused and found guilty of manipulating almost every contract: FX, interest rates, copper, why would they not do it with oil? With fear rampant, exaggerating moves to the downside with all these instruments might have been easy and profitable.
Cardboard
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That is absolutely correct Frommi. You have gold up 5%, BAC down 7%, treasuries skyrocketing, etc.
Not long ago, there were people on this board salivating at BAC around $15. Now that it is at $11, they take a pass... The value just evaporated or what?
I wonder if this is not the final play in this 35+ year decline in interest rates. Back then, people could not see an end to climbing interest rates: 15%, 20%, 30%, the sky was the limit. Similarly today, they can't see an end to declining interest rates: 2%, 1%, 0%, - 10% ?
Who would or is making the bet of higher interest rates? Everybody is on one side of the boat.
I really have no idea what would change that trend that has been with us for so long and for most all of our adult life but, you can tell that people are accepting the notion of a very large deviation from normal, an outlier and that this won't change.
Cardboard
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Is there still a point to discuss the EIA report?
It was about as positive as you could imagine for NA oil fundamentals. Last night API reported a build of 2.4 million barrels. Today, the EIA reported a 0.8 million draw and all this against expectations of a 3.2 million build by analysts.
A draw for this time of the year is uncommon with demand for gasoline being lower. We also didn't see big builds in products and refinery input was down somewhat. We saw on the other hand a large drop in imports. Where are going these 1 to 2 million barrels per day of global oil surplus always proudly mentioned by the IEA?
Finally, the EIA did its job, or could no longer deny the size of the truth, and reported a decline of 30,000 barrels/day for Lower 48 States. That is after reporting for two weeks in a row zero change for that production. Then they keep on saying in other reports that field production is declining anywhere between 90,000 to 110,000 b/d per month. What a joke!
Oil spiked on the news only to head back down afterwards. What seems crazy is that NA fundamentals are obviously tightening while elsewhere we cannot say as much with Iran starting to export and large producers refusing to cut. At this very moment, Brent is up 2.2% while WTI is down 0.2% (from 2:30 pm close).
Now if you look at USO, it is down 2.2%. This does not add up to the 0.2% decline and what happened between 2:30 pm and 4:00 pm but, that is how it goes with spot price not matching the futures that they use. That is also ultra convenient for the trading and manipulation of UWTI and DWTI.
You also had daily weakness in the SPY matching the timing for weakness in crude. So maybe this can all be explained by correlation?
Sooner or later major trouble will brew up worldwide. I think that Nigeria, Angola, Venezuela and Algeria are close to the breaking point. They all have very bad economic problems and some are fighting extremists. Then you have Russia, Saudi Arabia, Irak and others bleeding cash heavily. Depending on how this unfolds, I can see a global crisis severely hurting the banking system (sale of financial assets and 1998 style defaults) or some major oil supply disruption which would cause oil to spike to a decent level stopping the contagion or going too high and causing a worldwide recession.
Somebody better find a way to put some equilibrium into this oil market very soon before it is too late.
Cardboard
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Right Grey and how is your Amazon pick doing by the way? Any fear that it may go to $100 a share?
Think it is crazy? I would say that anything is possible under a depression scenario.
It is easy to tell someone's else mistakes using hindsight.
Cardboard
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We are possibly entering the 3rd, 50%+ bear market in just 16 years. This is unheard of or based on my limited knowledge of history.
While this person may have had bad picks, bad strategy, weak research or whatever, I doubt that this is the entire story.
When Warren Buffett says that America's best days lie ahead, he pisses me off. Is he a cheerleader, a liar?
I think that not only he was lucky to be born in the U.S. as he says but, he was also even more lucky to be born at the time he was.
There is no way IMO that the U.S. will ever experience again the kind of growth rate in GDP that it once did. Maybe this is due to demographics or that people have their basic needs mostly covered but, you can tell that something feels wrong.
Cardboard
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Did I say that I was in favour of the various tax breaks that exist?
No! That is another form of punishing one to helping another and have some middle man somewhere to manage that and take a cut.
When oil & gas got expensive that is when you started to see all kinds of energy related ideas emerge. Am I opposed to that? No!
This is not government intervention. That is human ingenuity at work to solve problems. Is it government that made Einstein a genius, Tesla to develop AC motors, Bell to develop the phone, Galileo to look at the sky?
And who am I to try to convince a bunch of socialists of the benefits of freedom when a man like Buffett himself can understand the concept of frictional cost in money management but, cannot understand that same concept magnified by 100 times in government via corruption and mismanagement? Unless he does and appreciate the benefits of being plugged in?
Cardboard
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Good ideas get funded by themselves and do not require government imposing taxes. They are profitable on their own and do not require subsidies.
Canada has a lot of taxes on its gasoline. Is it any greener? No SUV's and pickups on the road?
Cardboard
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BXE comes to mind.
There are many others that are cheap or trading well below these transaction metrics in Canada. While they are not separating between core and non-core assets, any transaction would likely be done at higher metrics than the whole.
Cardboard
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I had mentioned previously that Obama would propose some gasoline tax in 2016 well, here it is in a different form:
http://www.cnbc.com/2016/02/04/white-house-wants-10-per-barrel-fee-on-oil.html
This guy should write a book once out of office: "How to put on a path of destruction the largest economy in the world."
Cardboard
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Despite the terrible start for energy this year, some deals are still being completed and at high metrics.
On January 11, Enerplus announced a deal to sell assets under two transactions and the large one got completed today at almost $39,000 per boe/d being 97% natural gas:
http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aERF-2343961&symbol=ERF®ion=C
While deal metrics have come down since early 2015, they have not collapsed in the same fashion as share prices. One must conclude that industry executives and financiers are approaching deals with a long term view using much different prices that what is currently presented on the spot market.
Cardboard
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Continental Resources released today their capex budget for 2016:
http://www.stockwatch.com/News/Item.aspx?bid=U-prDA07719-U%3aCLR-20160126&symbol=CLR®ion=U
These guys have some of the highest netbacks in the shale industry, yet they too are cutting and are forecasting that production will decline 14% from the average of Q1 2016 to the average of Q4 2016. I would expect stories like that to be common theme this year.
Cardboard
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I think what is "killing" these fund managers who have been long term outperformers can be summarized as follows:
1- Size: Outperformance attracts too much capital at exactly the wrong time (contributions and asset returns).
2- Concentration: Normally helps returns but, one mistake and you are really in trouble.
3- Complacency: Once you start to think it is easy, you are really prone to make mistakes. That is really when you should fear.
4- Lack of flexibility: If you can buy anything, your chances to find bargains increase even when asset prices tend to be high. Some pockets can be depressed. You have to keep hunting.
5- Not being hungry enough: Young fund managers will sacrifice everything to get returns. Once you are wealthy, you will want to enjoy life and will turn fewer rocks or you may have people working for you not doing it as well as you or not as effective.
By the way, you don't have to be a fund manager for this to happen to you. I had done 25 to 30% a year for 15 years only to be down now over 50% from the peak. So I have lived it fully over the past 1 1/2 years. The return to the basics has been hard. I guess that I will see the peak again someday but, my long term outperformance has taken a massive hit.
Now, I can only imagine if I had redemptions and a team working for me to deal with on how harder it would have been.
Regarding how much money one truly needs. If you have developed some talent to do stock picking and finding good investments, then I think it is your duty to continue and try to put it to good use in the end for society. It is also fun to have success and being right once in a while. Greatest satisfaction IMO and worth more than all the toys and gadgets from wealth.
If you have maxed out your abilities and/or need more time in your life, then yes indexing would make sense.
Cardboard
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It will take some time for new Iranian oil to make it to markets:
http://www.reuters.com/article/us-oil-iran-exports-idUSKCN0UZ1VI
Cardboard
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TBE.DB
Another debenture not for the faith of heart either! No kidding!
Actually just found this:
http://boereport.com/tag/twin-butte-energy/
If you scroll down to the bottom of that report, it appears that the entire operation is for sale based on the acreage amount: both heavy and medium oil.
The medium oil production at Provost or just over half the company should sell for a good price. The other half at Lloydminster which is heavy will sell for less. However, keep in mind that with the advent of horizontal drilling, heavy oil in that area has turned economic even at low oil prices: cost per well is low, little sand in the oil and lower royalties on horizontal drilling vs conventional.
For the heavy oil portion it is the same story as for Gear Energy wells. They also have $700+ millions of tax loss carryforwards which must have some value.
Cardboard
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Well, I can't find positives in either report. Maybe that oil was just too beaten up and now it is still going up?
Troublesome to see inventories still climbing including products. Maybe that the rate is less than expected considering the global glut and time of year for gasoline and distillates? Actually distillates were down 1 million barrels or likely in-line with more normal winter conditions picking up.
What annoys me more is this tiny decline of 3,000 barrels/day for Lower 48 States production. Maybe that Cramer is right about Shell but, when I compare to the entire Alaskan production of 532,000 barrels/day that seems way too big again for one operation in the Gulf.
I don't know anymore.
Cardboard
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http://finance.yahoo.com/news/long-positions-fall-cftc-commitment-125847594.html
Short positions are highest in last 10 years.
Cramer this morning talked about Royal Dutch Shell projects in the Gulf of Mexico that could almost entirely offset declines from U.S. shale oil in 2016. I knew that Gulf production did offset a lot in 2015 but, I have to do more research about 2016. Seems hard to believe on the surface that new production from one company in the Gulf could offset nearly 800,000 barrels/day or 9% of total U.S. production.
Cardboard
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"People having NO cash, NO gold or silver are making a mistake. Having some is a very prudent insurance & hedge."
Silver is the same problem. Easier to do small transactions but, who knows if it is not fake? I have heard so many real stories on how people got screwed with their gold and silver it is not funny. And if you want to pay a small premium on silver, you need to buy the 1,000 ounces bar that is accepted by the exchanges. That is 75 pounds!
I think that food, energy and ammo would be more important under the scenarios you seem to be protecting against. I would also say that living in a large city is the worst place to be under such scenarios.
Cardboard
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Peter Schiff said that a long time ago ;)
Cardboard
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What to watch:
- API inventory report tonight around 5 pm. You can get the summary on Marketwatch.com.
- EIA weekly status report tomorrow at 11 am. From EIA website.
Everything has been delayed one day this week due to the Holiday on Monday.
IMO, the API inventory numbers will set the tone for tomorrow's trading. Not only for oil but, the stock market since I sense that investors are worried about a U.S. recession. Lower inventories would help indicate normal consumption of energy. So gasoline inventories and distillates will also matter.
Lower 48 States production level will also be very important tomorrow. The EIA has to clean up its act at some point here. They have stated that U.S. shale oil production is coming down 100,000 barrels/month. However, it has not been reflected in their weekly status report. A reconciliation has to occur one way or the other.
Cardboard
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One problem with gold and silver is that they do not always hold their value vs cash. It depends on when/what price you bought them.
There is also a desire to create them with other means than traditional mining which can render them less valuable in the future: fusion, nanotech, mining asteroids. It all sounds crazy but, technology is advancing so fast than in 10 years it may be reality.
Finally, who is going to accept it from you and at what price? If you want to pay close to spot and avoid collectible type items, you need to buy bars. The most convenient I have seen for gold is the ounce bar from recognized refiners: easy to store, very small, very low premium to spot and large value or $1,100 U.S. per ounce.
However, if you want to exchange it for something, you still need to exchange it for cash first since no plumber, waitress or stripper will accept it! It is also too big of an amount for small transactions. Finally, you will also need to take it yourself to a recognized dealer and avoid being stolen. Since we are worried people here, would you rely on UPS or some other shipping means and then rely on the honesty of the dealer to say it was good gold and to send you a valid cheque?
Cardboard
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My 2 cents is that the occurrences of not being able to rely on electronic means are rare. However, I always do carry some cash, a couple hundred dollars for convenience and just in case. I also have two credit cards in case my main one gets blocked for some reasons.
To tell you the truth, there will be a solar coronal mass ejection hitting the Earth someday like it happened in 1859. This has the potential to destroy a lot of our electronic devices. It could be major and stop all electric utilities from functioning. The problem is that we don't know the timing and how it would impact us: small inconvenience or major, a week to fix or a collapse of society?
So should I sell all my stocks, bonds, etc. and keep all my money in a safe at home to protect from such event that is almost certain to occur in the future? Or should I keep only a month or two worth of spending?
So it seems that I am not carrying enough cash to protect myself but, how much is too much is really up for debate.
Cardboard
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Dumping what in addition to their so called 500,000 barrels/day additional? The condensates that they hold in vessels since months and that nobody wants?
Regarding your vision for the Middle East, it is all wrong IMO. Assad will likely be replaced but, by another Shiite and in agreement with Moscow and Teheran. Saudi Arabia and UAE will not be able to get themselves out of Yemen with a win. That is their Vietnam war and the funding from Iran will not stop. They just received necessary funding or 100's of billions to pursue their expansionist plan. It is very likely that they will fund discord in Bahrain next and then Eastern Saudi Arabia.
Expecting that a religious war that has been going on for centuries will suddenly stop after just what happened between the two countries that want to expand their way of thinking is delusional.
Cardboard
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Even Goldman Sachs who was the big bear is saying that late 2016 should be the start of a bull market for oil. Their forecast for H1 2016 is an average of $40. Better start soon...
Cardboard
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I don't know if I will benefit at all long term with my E&P's. Nobody is making money at these prices. Lifting costs are below current prices but, that means nothing long term since it costs a lot more than that to maintain production. I mentioned PWT, BXE and TBE.DB before. They may not make it...
Small caps in the Alberta service sector look a lot more safe and still ultra cheap IMO.
Cardboard
Ray Dalio on the Future of Monetary Policy
in General Discussion
Posted
"However, the things that happened in January and February were exactly the things I bet on which obviously doesn't mean that it couldn't have been pure luck. The good timing was probably largely luck. I went net short equities and really long treasuries when it became clear that the Fed would actually begin to raise rates (my thinking was that this had to be the straw to break the camel's back)."
This sums up the problem in terms of investing or "betting" based on marco. If the market had just stayed flat for another year, then your returns would have been meager if not negative: you are paying huge premiums with puts.
The problem with this Kondratieff winter as advocated by Dalio is that it is nearly un-actionnable. Investing is about laying money now to harvest more in the future. I have yet to find an instrument allowing a long term negative posture with low cost and especially when one advocates for single digit returns, then these costs are highly detrimental.
While I agree with demographic and debt being a problem, I also believe that humans have always found solutions to move forward. If there is no other solution than World War III or some massive debt repudiation leading to social chaos, then your best investment is not puts and treasuries but, guns, ammo, bunkers and dry food.
I also believe that if you dig really hard that you will find value and stocks going up in any market. If you manage a billion dollar portfolio that may not be possible but, for the common mortals out on this website, I do believe that the really smart ones (not me) will make multiple times with unknown, special situations than betting on where the wind will blow.
Cardboard