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Terrible Tuesday Wrap-Up

Oh dear!

I find it mildly amusing that there is a huge headline in the WSJ reading: "Murdoch Wins His Bid for Dow Jones" on the same day we find ourselves on the brink of a stock market apocalypse.

What no one found mildly amusing was the movement of the market today, which pretty much sucked.  Fortunately my morning sermon, "Be led not into temptation" was followed by most of the members and we enjoyed yet another profitable disaster as I called the top at 10:22 with: "XOM cannot get it together, nor can BA, CME pulling back, FDX treading water, SHLD not buying consumer confidence (or is real estate falling off a cliff?) and the DIA $135 puts at $2 are my put of choice at the moment. If the Dow can’t hold 13,450, I’ll grab the $134 puts a little early because $77.55 is a lot of money for oil, even in Euros…"

We also got great, but sad, news as our OLED's are being taken away from us for $12 a share, this is one of the few actual stocks we buy on a regular basis.  Back on Dec. 30th this great small company was one of the only straight stocks I picked as a set-up for the new year:

  • "OLED – the old rule on them is buy them on the 10th of the month (arbitrary) whenever they are under $6 and sell half whenever they get to $7, we’ve owned this stock for over a year that way and it’s one of the few proper stock positions I maintain.
  • "This stock will one day be at $25 but that day may be a very long time from now as the very cool technology is still in development but I’m betting they will be a winner in this field.
  • We did do a full dump in October when they topped out at $7.50 after having gone scary low on us but we came back in on 11/10 at $5.75 with another shot on the 10th of this month and a sale of 1/2 yesterday at $7 that reduced the basis to $4.50. Next time I buy at $6 I’ll be in for $5.25…"

The doom and gloom mood of the day did not stop us from buying more AAPL as it hit the bargain basement price of $130 but and we will be following them down with rolls on our October calls if they continue to be marked down

The energy sector continued to collapse despite a new record high at the NYMEX where the crooks have jacked up the price by pretending they are going to have 360M barrels delivered to Cushing OK in September but they will, of course, cancel all but 30M barrels by the 22nd, as they have for the past 3 months in a row so their compadres on CNBC can then tell you how there is a shortage of oil in Cushing.  There are currently more than 30M barrels scheduled for delivery every month through July '08 with over 500M barrels scheduled for deliver in the next 3 months (40Mb a week) yet only 7M of those barrels – that you are being charged for – will actually be delivered. 

Where is Congress?  These greedy, selfish, amoral bastards are destroying our economy.  Perhaps now, as it finally hits our wallets, people will take a minute to forward this to other people.  Until we stand up and put a stop to this blatant market manipulation we will remain at the mercy of the oil interests!

Really Mr. Congressman, how hard is this to understand.  Traders at the NYMEX bid oil up $1.38 by trading 189,456,000 contracts worth of oil for September delivery.  That cost is passed on to us, the consumers as the "spot" price and affects our goods and services.  Come settlement date (8/21) no more than 40M of these barrels will be accepted for delivery as the contracts are moved to October, November and later months so they can play this game again, as they have for 3 straight years of artificial shortages

 

This nation consumes 20M barrels of oil per day.  At $78 a barrel that's over $1.5Bn per day for the oil industry but that's before they mark it up and sell it to you for $3 per gallon.  With 42 gallons in a barrel the driving consumer is paying $126 a barrel for gasoline – think about that next time some jackass spokesman from the energy company tries to tell you that oil prices are still reasonable.  Where does that extra $48 per barrel go?  That's called the "crack spread" because the profits are like crack to the refiners while the consumers are forced to live like crack addicts in order to be able to afford to fill up their tanks!

The financial press, the largest of which is owned by GE, who make Billions of dollars building long-term energy projects that are based on projected high oil prices – reports the oil inventory in Cushing (where the NYMEX barrels are delivered) as if that's the whole energy story even though there is more oil AND natural gas in inventory than at any time in our nation's history.  You people are holding up the merger of Whole Foods and Wild Oats because you are worried about pricing yet you let this slide?

As Capital One asks in their commercials Mr. Congressman – "What's in your wallet?"  I bet it's oil money!

Back on July 10th I warned you that the "Goldilocks" economy had 3 bears: "Well, I don’t know about you but I’m losing faith, despite Larry Kudlow using the term Goldilocks a dozen times this evening, as if saying it would make it so.  Just remember, the story is about Goldilocks AND three bears - today was just a quick visit from Baby Bear (inflation).  Momma Bear is earnings and you don’t even want to be in the room if Poppa Bear (the end of the Yen carry trade) shows up!"  I am very concerned about Poppa Bear right now!

We had yet another BSC hedge fund blow up this evening as their "Asset-Backed Securities Fund" has suspended investor redemptions "and expects losses in July."  So we should be in store for more fun and nonsense in the morning!

Please, really, send this to other people.  We need to start a national dialog about what's going on in the oil pits because it is NOT necessary for American consumers to pay $413Bn a year for gasoline – and that's just 1/2 of oil's usage.  A trillion dollars a year sucked out of consumer's wallets to feed big oil and we do nothing? 

As President Bush himself said in 2002: ""Doing nothing about that serious threat is not an option."

 

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  1. Another great one Phil.

    Anybody have a master link to representatives email addresses? Some PIRG must have it.


  2. Don’t forget you have to send the free site or the Email alert or they can’t read it but, really – it would be nice for them to have their boxes flooded with these things (I’ve spoken to some who actually appreciate having something to forward around to staff and such).


  3. iPhone firmware update released; takes about 5 minutes to install via iTunes.

    Great examples of Apple’s penchant for making things easy to use…and more kudos to Apple if this update is to address various (i.e. Safari) vulnerabilities found by a security researcher who is presenting a technical paper at the Black Hat conference this week.

    Phil, how do you decide whether to DD or roll the Octs 140s?


  4. OOPS

    UPDATE 1-LandAmerica posts lower 2nd-qtr earnings
    Reuters – July 31, 2007 8:06 PM ET

    Related Quotes
    Symbol Last Chg
    LFG Trade 76.59 0.00
    Real time quote.

    (Adds company comment, details of dividend increase)

    NEW YORK, July 31 (Reuters) – LandAmerica Financial Group Inc (LFG) said on Tuesday net income fell in the second quarter as residential mortgage originations decreased.

    The real estate insurer said net earnings were $7.9 million or 42 cents a share, down from $35.6 million or $2.06 a share in the year-earlier quarter.

    The company also raised its dividend by 8 cents, or 36 percent, to 30 cents a share, payable on Sept. 14 to shareholders of record Aug. 31.

    Total residential mortgage originations decreased by $20 million, or 2.7 percent, in the second quarter from the year earlier, the company said.

    “The residential real estate market is experiencing the largest volume decline in nearly 20 years,” said Chief Executive Theodore Chandler Jr. However, he said it did not change prospects for long-term favorable demand. (Reporting by Ed Leefeldt)


  5. FWIW, Moody’s MCO reported strong 2nd Q results, beat WS guidance, etc. Outlook for year is unchanged for EPS growth; rev growth to lower end of prior ranges. Continues to buy back stock, added a new $2 B repurchase authorization on top of 500 M or so left from existing one. Expects declines in one revenue segment only, rating residential loans (no surprise).

    You can read it all here.

    http://finance.myway.com/jsp/nw/nwdt_ge.jsp?news_id=cmt-213b4726&feed=cmt&date=20070801

    It may not matter much in the current market environment, at least until sentiment changes, but the results were very good.

    NEW YORK, Aug 01, 2007 (BUSINESS WIRE) — Moody’s Corporation (MCO) today announced results for the second quarter of 2007.

    Summary of Results for Second Quarter 2007

    Moody’s reported revenue of $646.1 million for the three months ended June 30, 2007, an increase of 26% from $511.4 million for the same quarter of 2006. Operating income for the quarter was $363.7 million and rose 26% from $289.1 million for the same period of last year. Diluted earnings per share were $0.95 and included $0.19 benefit from the resolution of certain legacy tax matters. Excluding the legacy tax effects in both periods, diluted earnings per share were $0.76 in 2007 versus $0.58 in 2006, or a 31% increase.

    Raymond McDaniel, Moody’s Chairman and Chief Executive Officer, commented, “Moody’s delivered strong double-digit revenue growth for the second quarter of 2007 across almost all lines of business and geographies. Moody’s strong results for the first half of 2007, together with the diversity of our business around the world, indicates that our results for the full year 2007 will reach mid-teens percent growth in revenue and low- to mid-teens percent growth in diluted earnings per share — despite recent concerns about the U.S. housing and high yield markets. The revenue growth expectation is consistent with the lower end of the range from our previous guidance and our EPS outlook is unchanged.”

    Second Quarter Revenue

    Revenue at Moody’s Investors Service for the second quarter of 2007 was $608.2 million, an increase of 28% from the prior year period. Foreign currency translation positively impacted operating results, mainly due to the weakness of the U.S. dollar relative to the euro and the British pound, increasing revenue and operating income growth by approximately 190 basis points.

    Ratings revenue totaled $530.2 million in the quarter, rising 28% from a year ago. Research revenue of $78 million was 26% higher than in the second quarter of 2006. Within the ratings business, global structured finance revenue totaled $273.4 million for the second quarter of 2007, an increase of 26% from a year earlier. U.S. structured finance revenue rose 21%, with very strong growth from rating commercial mortgage-backed securities and credit derivatives, somewhat offset by a 10% decline from rating residential mortgage-backed securities. International structured finance revenue rose 38%, benefiting from strength across all asset classes including exceptional growth from the commercial mortgage-backed securities and credit derivatives areas of the business.

    Phil, at these levels you should consider an LTP leap position.


  6. http://action.citizen.org/campaign.jsp?campaign_KEY=5146 If you go to this web page and enter your address, it will automatically send a message to your representative.


  7. The BSC fund is no blow up. Its an unleveraged fund and have suspended withdrawals (only 50 M). Any losses in that fund will likely be modest. It doesn’t look good from the headlines, but it really is no big deal. There are some big hedge fund blowups out there that are much more serious (not BSC).

    BSC had another fund that just made 400 M on the sale of a denim jeans company, but that doesn’t get reported with the same dire headlines.

    Net net BSC should be ahead of the game, but the optics are not good (and the fear is “what else is gonna happen next ?”.


  8. Two Zman posts up. SWN earnings wrap last night and the daily.

    Strong reports out of SWN, DVN, RIG.
    EIA realizes barrels of oil, gasoline, and distillate don’t add up and they (at least through May) they’ve OVERESTIMATED demand.
    IOC news but not the news I was looking for…this looks fishy and I’m not playing the bounce
    A review of GTRE for a reader yesterday, maybe Greg?


  9. Phil, educate me on the 190 million contracts. I thought that a contract is between a seller of a barrel of oil and a buyer of a barrel. The contract provides that the buyer will buy a barrel of oil for 78 bucks, with delivery on 8/21. Doesn’t the seller of the oil have to deliver that barrel to the buyer on 8/21, and doesn’t the buyer have to accept delivery and pay the seller the 78 bucks?

    jazz


  10. Morning all
    Leaving for 10 days without a PC /newspapers and a bullish view after reaching 14,000 was not the right thing to do and as a result have to make up 60% of my portefolio. Hope to read some better news soon whilst i am backtracking the past several days of battering! Have a good day all!


  11. Great starting considering where we were earlier this morning. Sell into initial strength?


  12. Yea that was quick on the market.

    Picked up a bunch of BWLD Aug 40s at $0.25 hoping for somewhat of a nice bounce.