Friday, August 22, 2008

Sitting this one out

I am not long Oil the commodity (but I am long the equities).  

I thought we had put in a bottom at $112 and now, well... I must not be that sure, or I would be long. I am having a great deal of difficulty with this, and when you can't get your arms around something in the markets, it is best not to guess.

I am also STUNNED by how well the broader U.S. equity market has held up considering Fannie & Freddie about to go down and our major corporations are out pandering themselves for capital from the sovereign wealth funds.

Jeffrey Brown recently said that it might be a "race to the bottom between the U.S. economy and Oil imports" (that was not the exact quote, but close enough).  I believe that there might be some wisdom in that thought, and accordingly I am going to take another week off and wait for more data.

The EIA Nat Gas production data DEFINITELY does not coincide with the Texas Railroad Commission's data, as "DownSouth" from the so eloquently, and brilliantly, pointed out recently (and I checked, he is correct in the discrepancy).  The EIA consistently adjusts their production numbers after the fact... At the moment it would appear that we are "neither here nor there".

Yesterday's spike and today's crash in Oil leave me with no "warm and fuzzy feeling" about a bottom OR a top.  The inventory data, prior to wednesday argued for a bottom, and then over 9 million barrels shows up in the crude numbers.  Weakening U.S. demand would normally be absorbed elsewhere on the globe, as with the addition of 70 million new members of the human race each year to feed and supply it has been rather difficult to have a global decline in aggregate production, but maybe weakness in the entire OECD will overwhelm that for several quarters.  

Or maybe I just had the filings in my teeth rattled by the inventory numbers, yesterdays rally, today's decline to have any confidence in picking a direction in the short term.

Either way, I am going to keep my chips off the table for a couple of days.

Good Luck,

Mentatt (at) yahoo (dot) com


Anonymous said...

(From the bureaucrat):

As a professional trader like yourself, it might not be easy to see a paralysis geling amongst the public at large. I know that stocks are traded in large amounts by investment managers, and they move prices, but the average person, who is somewhat involved in owning all that stock, really is frozen. I am frozen. We have to wait for the election(s) to be over (not that it matters), and the idea of substantial amounts of our wealth being "imaginary" is a lot to digest. So, we freeze. We stop spending so much. We sell nothing (I haven't sold a stock this year at all), and we go into this "living coma" waiting for more news that everything is ok. The easy 5% of oil has been removed from our consumption, and now we face the very tough job of cutting the remaining 95%. Even the Titantic sat above the water a while before it quickly dived to its death below. This time it isn't market fundamentals. It is "shock psychology."

Greg T. Jeffers said...

I was speaking about the Oil futures market. The equity market is far stronger than I would have thought possible, given the shear volume of bad news. Often, when markets stop going down on bad news, that's your bottom.

Still, it is the end of summer, and the decision makers are scarce on the big Wall Street desks.

When in doubt, I try to do nothing as far as new positions, and keep reviewing the data as it comes in.

There are a lot of moving parts here.

That is not to say that I won't miss something. It is just that, at this moment, I don't feel I have an advantage and that I would be simply "flipping a coin".

I am going to wait until I have more info and data.

tweell said...

There is significant manipulation going on. Silver is way down, but I can't buy any for the spot price. ???

Greg T. Jeffers said...

I don't believe there is any manipulation in the Silver market WHATSOEVER. Buy a front month futures contract, when it expires, ask for delivery. Your 5000 ounces will be at your doorstep the next day.

The fact that it is hard to buy several ounces or to 1000 ounces does not mean that the folks that consume millions of ounces, electronics and jewelry are having difficulty procuring the stuff.

Don't fall for that shit from the Gold and Silver folks. When the metals are heading up, all is right with the world; when they decline in price, it is the big bad government/corporations/boogeyman of the day.

BTW, by way of disclosure. I own no commodity Oil. I have over 20% of my assets in Silver and Gold. You gotta buy stuff when it gets killed. Even if you already owned it and you hate it. That is how markets work.

Good Luck!

Anonymous said...

What is it with these conspiracy nuts? Everyone knows the markets are FREE and INDEPENDENT. The Government is watching out for the slightest hint of manipulation and the SEC comes down hard on all those miscreants who 'cross the line'.

I can't think of a SINGLE INSTANCE where the U.S. Government lied about such important things as the functioning of the FREE MARKET.

Anyone who thinks there is manipulation in the FREE MARKET must not be playing with a full deck.

Nuts like that probably believe the CIA smuggled cocaine into L.A., and spies on American Citizens in their homes!

Anonymous said...

Well, let's not go overboard. The Bush Administration sued the states to prevent them from getting involved in the subprime mortgage thing until it was too late. There are some higher-ups in government that will use their soft power (and restraining govt. employees who enforce laws twisted by creep businessmen is soft power -- the easiest way is just not hiring any department employees at all). So is there manipulation? Yes, I think there has been on that front. But in a multi-billion dollar worldwide market for anything? I doubt it.