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 TheOilDrum.com 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.
Mentatt (at) yahoo (dot) com
Posted by The Short Story Man at 11:44 AM