I’m working on some general oil stuff, all contributions about shenanigans in the energy market would be appreciated.
Questions for Congress as they reconvene:
Why is a country that consumes 20Mb of oil a day and supposedly had "supply issues" and a shortage of refineries EXPORTING 1.5M barrels a day of refined products OUT of the country? That’s adding 7.5% to our total "demand" AND taking up 7.5% of our "tight" US refining capacity in order to flip the barrels for a quick buck in foreign countries while using 10Mb a week from our current crude inventory and removing 10Mb a week from our refined products inventories.
Why is it that, since Congress ordered Bush to stop filling the SPR on May 17th, he has added 3.2M barrels to the SPR? That is more than double the rate at which oil was added in the 5 weeks BEFORE he was told to stop. It’s interesting that an article in Platts, in which the DOE said they would stop filling the SPR on May 16th, has been removed (thank you Google Cache for saving everything!). At the time "Megan Barnett, a DOE spokeswoman, said deliveries to the SPR could actually stop earlier than the July 1 date should Congress and the Bush administration reach an agreement on the SPR measures passed this week. "The department will work to the maximum extent to defer deliveries to the SPR and comply with the law," she said."
We all know the classic image of peak oil. This graph of U.S. production says it all:
The peak oil community is obsessively focused on images like this. Peak graphs are presented for every country, like a slide show, and after viewing the whole series, you’re damn lucky if your eyeballs haven’t turned white and coagulated from raw anxiety.
But that’s just one side of the story. Today I’d like to show you a different series of peak oil graphs — the ugly stepsisters who don’t seem to get any attention. These are the graphs of peak oil consumption. Figures and images come from EIA country profiles. Take a deep breath, and fasten your seatbelt for a rude awakening to the realities of "peak oil".
Figure 2: Japan Oil Consumption Has Been Declining Since 1996
As you can see, "peak oil" occurred in 1996 in Japan — 12 years ago — and was an entirely demand-driven phenomenon.
Figure 3: Israel Oil Consumption Has Been Declining Since 2001
Wooh baby, that’ll turn your hair white… Israel "went over the cliff" in 2001, and is now down 16% from it’s peak level.
Figure 4: Germany Oil Consumption Has Been Declining Since 1998
The decline of Denmark has an interesting dual-peak structure. It’s down 34% from its primary peak in 1980, and 20% from its secondary peak in 1996:
Italy peaked in 1995 and is now down 14%:
Savinar says a 10-15% drop will put your economy in the hospital — shatter the economy and reduce the population to poverty. Apparently Italy didn’t get the memo.
Sweden hit its final peak in 1996:
It’s such a shame because these graphs hold the important clues about peak oil. Yet they get almost none of the airplay. The fact that oil production will peak is just a truism — a statement of basic logic. The fact that a country can reduce it’s oil consumption without duress is like a miracle… something to really think about and learn from.
Interesting site for those following the oil saga, called "Peak Oil Debunked," written by JD in Japan.
Amusing disclaimer: "Debunking peak oil hype with facts and figures, and exposing the agendas behind peak oil. DISCLAIMER FOR IDIOTS: This site officially accepts that oil is finite, and will peak someday."
A number of high-profile economists, like Paul Krugman, have recently been making the argument that trading in oil futures can’t really influence the price of physical oil because it doesn’t remove any oil from the market. Here’s a classic statement of this argument by Jon Birger, a staff writer from Fortune:
Here’s a suggestion: The next time a Congressional committee wants to hold a hearing on how "speculators" are driving up oil prices, each committee member should first be required to demonstrate – preferably in their opening remarks – a basic understanding of the mechanics of futures trading.
Even better, they should be required to explain in detail how it is that investors who never take delivery of a single barrel of crude – and thus never remove a drop of oil from the open market – are causing record high oil prices.
I will now provide that explanation, and in the process show that both Krugman and Birger are grossly misinformed about the way physical crude is actually priced in the global oil market.
Most crude oil is traded based on long-term contracts, and the prices in those contracts are set by a system known as "formula pricing". In this system, the price of delivered crude is set by adding a premium to, or subtracting a discount from, certain benchmark or marker crudes, namely: West Texas Intermediate (WTI), Brent and Dubai-Oman. Generally, WTI is used as the benchmark for oil sold to North America, Brent for oil sold to Europe and Africa, and Dubai-Oman for Gulf crude sold in the Asia-Pacific market (Source1, Source2).
Originally, the benchmark prices were spot prices, but over time problems began to arise due to the depletion of the benchmark crudes:
In the early stages of the current oil pricing system which emerged in the period 1986-88, crude oil was priced off the spot market quotations of these benchmarks (namely dated Brent, spot WTI and Dubai) as assessed by oil reporting agencies such as Platts and Petroleum
Commentary, courtesy of Mish, on our misguided ethanol policies and the (presumably) unintended consequences. Mish’s article refers to the article in The Guardian mentioned a couple days ago, and also brings to our attention the financial distress of a number of ethanol plants. — Ilene
The U.S. ethanol industry is in trouble and can expect to see a rash of bankruptcies and dismantling of at least some production, according to a specialist who helps companies in distress.
Alex Moglia, president of Moglia Advisors based in the Chicago area, said he knows of at least 16 ethanol companies that are filing for bankruptcy, and there will be at least two to three times that number filing within the next year.
The weakness of the U.S. dollar makes it possible for foreign investors to acquire ethanol plants "at a deep discount," he said.
"They can buy as low as 20 or 30 cents on the dollar," Moglia said. "That should scare the hell out of anyone in the biofuels industry. I’ve worked with plants that are incomplete, others that can’t offer profitably so they’ve all shut down. This will shake out most of small- and mid-sized players. Larger players will survive because they have buying power."
More ethanol producers will continue to file bankruptcy, he said, because of high feedstock costs and a "limited upside flexibility in terms of how much you can sell ethanol for."
"The demand for ethanol is not there," Moglia said. "The same thing happening to ethanol is happening in the biodiesel business. It will be the Wal-Mart-ization of the ethanol industry. It’s just a mess."
Peiffer said many ethanol plants are and will be folding because "the business model
All around us signals are transmitted and received each day. Within those signals valuable information is intertwined with spurious content. As a result, receiving devices have filters built in to discern the ’signal’ from the ‘noise’. High Signal to Noise ratios convey A LOT of information while low Signal to Noise ratios convey very little information! Indeed, when the noise levels increase above threshold levels, signals may be corrupted entirely, resulting in no information at the receiving end.
But what has this to do with the stock market? As traders, we are receiving information each day that we must learn to process and indeed we must learn to filter some of it out. This is an enormously challenging task because our natural inclination is to apply bias to the information we receive. For example, if we are bullish on a stock and an analyst disseminates a report that aligns with our views, our opinions are more likely to strengthen. In order to achieve our objective of trading without bias, we must recognize that history is laden with examples of the stock market confounding expectations.
In the 1970s, few envisioned that commodity prices would elevate to the degree they did or that bond yields would rise up to 15% by 1981 or that bond yields would decline to around 3% in 2003 or that a protracted equity bull market would ensue. Few expected that almost two deacdes after the Japanese market reached its peak, it would still be down 60% from its highs. Few recognized in 2000 that commodity prices were at historic lows while China and India were emerging rapidly.
Recognizing that the opinions you hear from others originate from a place of vested interest means critically analyzing comments becomes imperative. For example, just a couple of months ago, Lehman’s CEO announced that "the worst is behind us". It is evident from the chart below that the worst had certainly not been priced into the stock yet!
Clearly a delineation between expressed views and market action took place in all previous examples. The insurmountable challenge most traders encounter when confronted with such a delineation is their own attempt to justify the action. Why did Lehman go down? Why did bond yields surge? Why did commodity prices soar? Why has the Japanese market not recovered? A lot of calories may be wasted in striving to justify market action. The reason they are wasted is not because it…
In all the excitement this week I skimped on some fundamental/economic stories to focus more on the market and transactions. So we have some catching up to do.
I said long ago as the economy weakens the last things to go would be teenagers and their Abercrombie (ANF) $100 jeans, and video games/gadgets. Well it appears all we have left now are the video games/gadgets. You know Americans are "pooring" when they won’t even splurge on their kids. (Note to Bloomberg reporters – $50 jeans? What Abercrombie store did you not visit to file your report?) (Note to Wall Street pundits – what will it take for you to admit we are in recession?)
The financial pressures of adults are finally catching up with American teenagers. Since summer jobs dried up, gasoline prices topped $4 a gallon and parents ran out of spare cash, teens have had to cool it on spending for clothes.
“I’ve had to cut down on a bunch of stuff because I don’t like spending my own money,” said 14-year-old Haley McClelland from Waldwick, New Jersey, who was shopping at the nearby Paramus Park mall. She said her parents are “more careful” about what they give her.
Teens like Haley are among the last American consumers to cut back. Even as adults trimmed purchases, the kids managed to prop up revenue for Abercrombie & Fitch Co. and American Eagle Outfitters Inc. because of handouts from parents and part-time jobs, said Adrienne Tennant, an analyst at Friedman, Billings, Ramsey & Co. in Arlington, Virginia.
Retailers dependent on that group are feeling the pinch. First-quarter net income at American Eagle plunged 44 percent because of discounting, and the retailer may post its first annual profit drop in five years. Same-store sales have fallen for the past two quarters. At Gap Inc.‘s Old Navy chain, sales in May were off 25 percent from
I did an Index Round-Up way back on December 31st, he year where I said the following:
"Although the Dow, Nasdaq and the NYSE are well up since (my August review), we’ve lost ground on the Transports, S&P and SOX so our mission for January is clear – will the top three come down or will the bottom three come up (the Russell is our tiebreaker)." Obviously, our leaders have turned down to meet the bad boys, all off about 15% EXCEPT the transports, who surprisingly are up slightly for the year.
I also noted: "It will only take the smallest bit of bad news to push us to retest the 2007 lows around 12,500 whch is how I agree, yet disagree with Stuart Freeman (BusinessWeek’s market forecast winner of ‘07) as he sees the Dow bottoming in the summer in the low 12,000’s but I see it going lower now and topping in the summer, perhaps close to 15,000 but we both see the year ending around 14,500." Well, so far I’m right about it going lower than 12,000 in the first half - but can I still be right about us turning it around in the summer?
MSFT did not spur a tech rally with Vista and the SOX are not leading us out of trouble and our OPEC friends have not helped us get the price of oil down (I’ve given up even thinking that the administration will do anything) and, of course, there has been no turnaround in the financials (quite the opposite) due to a similar lack of action to address the foreclosure crisis, which marches on and on and on and on…
It doesn’t sound at all good does it and, if I were a foreign investor, I wouldn’t touch this banana republic with a 10-foot pole – and they didn’t! Foreigners have been panicking out of US equities since last fall and have driven the Dow back to it’s post 9/11 lows at 7,200. No, I’m not on another investing planet, on the left is a chart from Seeking Alpha of the Dow adjusted for Euros since 2001 – not a pretty picture is it?
Excerpt: "The Guardian has a leaked copy of a World Bank study that finds biofuels to be the biggest culprit in global food price increases. This finding will not only feed calls to scrap biofuels (save perhaps those derived from sugar) but may lead to a recognition that resource challenges cannot be pursued in isolation. In particular, food, water, and energy scarcity are interconnected problems and need to be addressed on an integrated basis. It also disputes the claim that increased consumption of meat in developing economies played a significant role in food price inflation.
A potentially inflammatory element is that the report was completed in April and allegedly deep-sixed so as not to discomfit President Bush.
Biofuels have forced global food prices up by 75% – far more than previously estimated – according to a confidential World Bank report obtained by the Guardian.
The damning unpublished assessment is based on the most detailed analysis of the crisis so far, carried out by an internationally-respected economist at global financial body.
The figure emphatically contradicts the US government’s claims that plant-derived fuels contribute less than 3% to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil….
The news comes at a critical point in the world’s negotiations on biofuels policy. Leaders of the G8 industrialised countries meet next week in Hokkaido, Japan, where they will discuss the food crisis and come under intense lobbying from campaigners calling for a moratorium on the use of plant-derived fuels.
It will also put pressure on the British government, which is due to release its own report on the impact of biofuels, the Gallagher Report. The Guardian has previously reported that the British study will state that plant fuels have played a "significant" part in pushing up food prices to record levels. Although it was expected last week, the report has still not been released.
"Political leaders seem intent on suppressing and ignoring the strong evidence that biofuels are a major factor in recent food price rises," said Robert Bailey, policy adviser at Oxfam. "It is imperative that we have the full
That was another superb month! Profit since June 8th is 57R or 172% for 3% risk per trade.
We are up 570% in the first 3 1/2 months of the virtual portfolio, without compounding. All trades were posted live in the comments and in the virtual portfolio and were simple calls or puts.
During the month we closed 31 trades. 21 (68%) of them were winning trades and 10 (32%) were losses.
Total wins were 65.18R
Total losses were 8.18R
Average win was 3.1R
Average loss was 0.82R
Expectancy is (68%X3.1R)-(32%X0.82R)=1.84R
This means that on average we should expect on each trade a profit of 1.84R.
We increased our expectancy compared to the previous months, and we did it while having more losers. That was our goal and we should be very pleased with this. 68% winning rate is a better reflection of what we should expect (we had a 90% winning rate in the previous months), but we still improved results because we let our winners run longer. Average win was 3.1R compared to 2R in previous months. That’s thanks to some very good trades with puts where stocks (retailers and COF mainly) kept falling day after day and we stayed with the trades. A very good run with CCJ as well.
Our biggest loss was 1.62R on GS, which is OK. Kept most other ones around or below 1R.
CLF was the one trade where a very nice profit that turned into a loss. But thankfully we only had 1/3 left when the stock dropped significantly and we got a nice exit on Thursday.
I want to thank everyone who has been participating in the comments. We have a great group going, focused on making money and exchanging some great ideas.
I am especially very happy to see so many of you making money and trading successfully in such a difficult market.
Over the weekend, we mocked the WSJ for glorifying the US "wage recovery" by focusing on the "scarcity" of waiter and bartender jobs ("there is fierce competition" for restaurant workers the WSJ said), a concept well-explored on these pages: we have shown repeatedly that soaring number of waiters and bartenders have been the "backbone", so to say, of the US job recovery in recent years (alongside energy workers but th...
People in California complain their flooring is making them sick. The complaints have one source in common, Lumber Liquidators laminate flooring from China with toxic levels of Formaldehyde, up to 20 times the maximum amount in one test. US manufactured flooring does not have the same defects.
Summary: The Sentier Research monthly median household income data series is now available for January. The nominal median household income was down $49 month-over-month but up $1,672 year-over-year. That's a -0.1% MoM loss but a 3.2% YoY gain. Adjusted for inflation, the numbers were up $321 MoM and $1773 YoY. The real numbers equate to a 0.6% monthly increase and a 3.4% yearly increase, thanks to -0.68% MoM drop in the Consumer Price Index.
In real dollar terms, the median annual income is 4.6% lower ($2,600) than its interim high in January 2008 but well off its low in August 2011.
Background on Sentier Research
The traditional source of household income data is the Census Bureau, which publishes annual household income data in mid-September for ...
Despite low trading volume, a strong dollar, mixed economic and earnings reports, paralyzing weather conditions throughout much of the U.S., and ominous global news events, stocks continue to march ever higher. The world remains on edge about potential Black Swan events from the likes of Russia, Greece, or ISIS (or lone wolf extremists). Moreover, the economic recovery of the U.S. may be feeling the pull of the proverbial ball-and-chain from the rest of the world’s economies. Nevertheless, awash in investable cash, global investors see few choices better than U.S. equities.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then ...
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
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Chris Kimble's chart for KOL shows a recently beaten down ETF struggling to pull itself up from the ashes. As the chart shows, KOL has recently drifted down to levels not seen since the financial crisis of 2008-9.
Bouncing or recovering with energy in general, coal prices appear to have stabilized in the short-term. Reflecting coal prices, KOL has traded between $13.45 and $19.75 during the past year. Bouncing from lows, KOL traded around 2% higher yesterday from $14.26 to $14.48 on high volume. It traded another 3.6% higher in after hours to $15, possibly related to ...
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
PSW Members - well, what a year for biotechs! The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down! The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months. What could go wrong?
Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.
Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies. A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...
Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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