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Friday, March 31, 2023


Friday – The Good, the Bad and the GDP

Clearly there are people who will do anything for money.

In the classic movie, "The Good, the Bad and the Ugly," the characters all lie, cheat, steal and kill as they chase after a chache of government gold.  They all kill, they all try to kill each other and the only character trait they all share is they will all do anything for money.   We are lucky enough to have a modern version of that, with our own government supplying GOLDman Sachs and other bad market manipulators with TARP money, which they are using to, not to lend money to the good citizens of the US but rather to prop up the commodities market, stealing Billions of dollars from the very people they claimed they were going to help.

Since the November bail-out, consumer lending had gone down, home foreclosures have gone up, unemployment has gone up, housing has gone down yet the CRB has gone up 25%, led by oil, which is up 88% at $66 this morning.  $66 oil is a noose around the neck of this economy as the it was cheaper oil that helped us begin to recover as it stayed around $40 from November through the beginning of March.  On a per barrel basis alone, that was $500M a day LESS than we are paying now but, despite the fact that oil is still 54% in price from this time last year, gasoline has gone up so fast that it's only down 23% from the prices that knocked the wheels out from our economy.  Including refined products, that extra $26 a barrel is costing US consumers $1Bn a day, $365Bn a year or 1/2 of the TARP money going straight out of our economy and back to the countries that fund terrorism through the very ugly hands of GS (who are partners in ICE) and other TARP recipients who have funded and coordinated this commodity "rally," screwing the American people over with our own tax dollars.

Aside from the very obvious upgrades by the TARP-sponsored Financial houses of anything and everything that even smells like oil and the GE-sponsored 24/7 pump-fest on CNBC, we now have Goldman Sachs this morning telling the sheeple specifically to: "sell Petrobras October $34 put options for $1.95 because a U.S. economic recovery and lower petrochemical supplies will limit declines in the price of oil."  What Goldman does not mention is that they were one of the "large speculators"  that increased their net long positions in commodities 300% since they got their TARP money.  This is just BRILLIANT – take OUR money and invest it in commodities, then pull out all the stops to run oil up 88% where these leveraged investment can pay off 10:1 and then give us our money back early at virtually no cost while keeping the 900% gains for themselves – BRILLIANT!

This is the exact same nonsense pulled by GS and company back when they were flush with cash and they drained the American public dry last year, as is documented here in "What Is Really Going On With The Price Of Crude Oil?"  Of course this strategy blew up in their face and we had to bail them out when it collapsed, but not before the American people were forced to spend over $4Bn a day for petroleum products last summer – that's $800Bn we'll never see again – enough money to employ 16M US citizens with $50,000 jobs or enough to pay 12 Arab Sheiks and 1,000 Wall Street bonuses.  Guess what they chose and guess what they are choosing again?  It was also enough money to destabilize the balance of trade, throw this country into massive debt, crash the housing market and (in the one positive outcome) finally threw the Republicans out of power.  Are the Democrats about to prove that they are no better?  Can the same nonsense really go on less than one year after we "learned our lesson"?

Even the Libya's Oil Minister believes there is no fundamental support for these prices, saying: "Prices are moving because the speculators are back.  Fundamentals do not tally with psychology."  That is certainly backed up by this week's Petroleum Status Report, which had the very interesting statement: "Total products supplied over the last four-week period has averaged nearly 18.3 million barrels per day, down by 7.3 percent compared to the similar period last year."  That's right, the US Oil Cartel produced 1.5M barrrels LESS per day than last year, creating a 10.5Mb product deficit on the busiest week of the year.  Not only that but imports were down 650,000 barrels a day, shorting the US another 4.5Mb of oil for the week.  This data is for the week that ended Friday, May 22nd – a week when massive amounts of fuel are transferred to retail gas stations who get ready for the biggest driving weekend of the year and despite having the head start of a 15Mb shortfall in supply, the total drawdown of product was just 5.4Mb for the week.  Imagine how much oil we'd be swimming in if we didn't EXPORT over 1.8Mb PER DAY (12.6Mb/week):

4-Week Avg U.S. Total Crude Oil and Petroleum Products Exports  (Thousand Barrels per Day)

And this nation is, in fact, swimming in oil, despite the fact that speculators like GS are paying to store oil in tankers offshore and around the world in order to create the impression there is more demand than there is in this slumping global economy.  We discussed this obscene practice before but it has gotten so out of hand that it now threatens to destabilize the global oil markets and Iraqi Oil Minister (hey, wasn't that supposed to be OUR oil?), Hussain (no relation?) al-Shahristani said last week: "We don't think it's a wise economic decision to produce oil from secure underground fields and then pay to store it in floating tankers.  Future generations can benefit from it better than we can, if we don't need it."  The suppliers KNOW they are selling us more oil than we need and they KNOW the speculators are sitting on it, the only people who don't seem to know what's going on here is the Obama administration and the American people who are being conned out of 16M jobs worth of money again by the same bastards we had to bail out when their last con game got busted.

That is how, using our bail-out money, the price of oil has been driven up 88% in 6 months and it will go up another 88% if this Administration is going to act as deaf, dumb and blind as the last Administration while the American people are robbed blind with over $600Bn global consumer dollars being sucked out of the economy with every $10 increase in the price of crude.  We are at a 25-year high in petroleum storage in the US and we have 139M barrels more in storage than last year – an average increase of nearly 3M barrels a WEEK despite OPEC's 29Mb/week production cut.  Reuters reports that there is a "floating oil lake" that "is now so big that it is likely to keep a lid on prices for some time" as the volume of oil stored at sea has risen to record levels.

Reuters points out that the last time floating oil stock levels were anywhere near these levels was in the early 1990s after the first Gulf war. Tanks were drained then into a rising market and traders and analysts say only a rise in demand will clear the stocks now.  But there is little chance of a quick recovery in oil use as the world faces its worst recession since World War Two, and the massive floating oil inventory is now haunting the market, an extra source of supply at a time when demand is extremely weak. "Out of the market and off balance sheet, everyone knows about this oil but is trying not to think about it," said Simon Wardell, director of oil research at IHS Global Insight.  "It is deferred supply, an almost ethereal source of oil waiting offshore. As long as it is unused, it is effectively acting as a support for the market, but at some point it will reappear so it is acting as a ceiling on oil prices."

Of course, there are other players besides Goldman Sachs reaping huge cash rewards as they put the screws to the good people of the United States.  BP's trading operations reported that Q1 "trading profit was about $500 million higher than what we would consider the normal range of quarterly volatility.”  VLO reported $150M in "profits related to trading,"  RDS.A's CFO, Peter Voser was proud to report: "We have used some working capital actually to drive trading during the first quarter, and to a certain extent also into the second quarter" and HES said: "winning bets by its trading desk during the first quarter helped cushion the blow from $5 million in weekly losses on oil and natural-gas production, the company’s traders generated a $19 million profit in the January-to-March period."  MRO, the fourth-largest U.S. oil company, also benefited from the trade: “A very small amount of crude was put in tankage for contango purposes,”  said SVP, Garry Peiffer.  In contrast, Chevron Corp., the second-largest U.S. oil company said a scale-back in trading contributed to a 99 percent drop in its U.S. oil and natural-gas profits. Chevron reduced its use of derivative contracts such as futures contracts and swaps to lock in margins by an undisclosed amount during the first quarter, spokesman Jim Aleveras said during a conference call with investors and analysts.

So Pete Rose is banned from baseball for life for betting on games but we not only reward the energy producers that bet the energy prices charged to US Citizens will go higher but we punish the ones who choose not to participate.  This is a rigged system and only government action will ever change it.  What's really sad here is that all of these bastards are just skimming profits off the barrels and those come in from overseas so it costs the citizens of the United States close to $1Tn of hard earned cash that literally goes up in smoke in order for the Big Oil/Big Broker Cartel to make $100Bn.  It's not an efficient system – it would be much cheaper for us if we just hand them their money or perhaps start lobbying for real change to stop this madness.   I am making this article free so feel free to send it to whoever you can – this is a serious issue that needs to be addressed before it's too late to save us.

We'll find out shortly to what extent the GDP supports any of the 88% rise in oil prices since Q4.  I don't suppose we'll have an 88% rise in GDP – in fact, they are expecting a 5.5% decline but that would be a 0.6% improvement from the preliminary reading of -6.1% so the global markets are partying in anticipation of this blessed event.  Oh here it is:  Down 5.7%!  That's a little disappointing but I think there has been such a massive effort to get the markets up this month that I can't imagine they'll let it go on the last day but there is NO WAY I would go into this weekend bullish.  It is likely we zig-zag into a finish around 8,412 on the Dow and 908 on the S&P and I'm not expecting the kind of wild moves that we got yesterday. 

As with yesterday though, absolutely anything can happen and we remain mainly in cash but I will be scaling into yesterday's oil shorts, painful though it may be.  We expect a top at $70 (100% up from $35) and a 20% pullback to $63 so scaling in at $63 (yesterday), $66 (today) and $70 is the plan we are following.  If we ultimately get blown out and take a 20-25% loss on this round (if oil flies through $70 and we stop out), then the plan is to wait for $100 and try again!  Can the oil markets once again remain irrational longer than the nation can remain solvent?  We will find out this summer for sure

Meanwhile the dollar is being crushed, falling to $1.41.5 to the Euro and $161.5 to the Pound and back to 95.5 Yen in one horrible morning's trading.  Of course currency speculation is not much different than commodity speculation and when you are a big investment bank and can control both at the same time – well that is just a home run play!  Gold is flying up to $980 and oil is hitting our $66 target this morning.  Just in case you thought your stocks were doing well, here is the performance of the S&P priced in barrels of oil.  Depressing isn't it?  In fact, if you are well indexed to the S&P, your holdings buy 33% less oil today than they did on Jan 1st.  For many Arab nations, of course, they see the opposite as they have gained 33% against us in the first half of the year.  Priced in gold, the S&P is only down 15% this year, but in a very ugly downtrend and in Euros we're only down 8% so yay, I guess…

Asian markets were up about 1.5% this morning (China was still closed) led, of course, by commodity stocks as well as Japan enacting an EXTRA $143Bn stimulus planIndia's GDP came in at 5.8% vs. 5% expected and I'll be doing a global overview this weekend so we'll save that discussion.   Europe is also up 1.5% ahead of our open but the DAX did not take our GDP well and turned sharply down off 5,000 (9am) so we'll have to see how things play out over there.  Europe is also being led higher by energy stocks, which are also leading the US indexes with 12% gains on the month, accounting for 100% of the 3% gains the indexes have put up – it would be a real shame if they do sell off so please be careful out there!


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Phil : National Review/Cap – It’s crap.  There are you happy?
Just what I expected you would say …..

Dear Leader sez:   "You anti-socialist bloodsucker! "    
That was my Kim Random Insult Generator speaking , but it could well have been Obama !

The real pump job today wasn’t at the end of stock market, it was at the (long) end of the treasury market. Really doubt that move was simply caused by agency bond buyers suddenly desperate to hedge off interest rate risk.

Phil – OK, TBT…I am a bit unnerved on this trade so feedback will help
so on the one hand, the move seems not to be grounded in any fundamentals, and at least that makes sense…however, the shares are expensive and thus, I have a ton of $ tied up in them and now off $3/share – although, I am covered, the unrealized profit on the june callers has only  eased about 1/2 of the drop so far…
I can live with the 5% today, what I am concerned about is how fast this moved and the potential for another 6-7 points down
where do I go with this – I am outside of my comfort zone on this trade, given the bizarre movement and before I close this out, I wanted to see if feedback from you or others on a repair makes sense…Sssume my time horizin does NOT account for owning this longer than July
thks in advance

this move eod made our PPT discussions from last evening apropos, huh

Hey Phil congrats for making it on to Zero Hedge today … .good publicity for PSW.

phil – ur right, it was bad move and from a percentage loss standpoint, it will not violate the 2% rule (or at least I will not let it get there)…I actually had a range of moves either way in mind and the reason I chose the cov call trade…in any event,  i get the point – it’s just the size of the positon and the irrational move in something I thought I had a good "sense" – yes, famous last words…
position: cost basis now about $55 on400 shares covered with 4 June 57 for about $1.80…the trade was about the premium in June and I did not expect to be called away and would be fine rolling to July, but if I did get called away  fine…i justs did not want to turn this into a long-term play, which is what I think you are saying by collecting the premium.?
As Buffet has said, the best way to get out of a hole is to stop digging, so that is my thinking now –
thanks – I will stay calm for a few days and see where this goes after some of the nonsense stops at long end of curve – will check in with you on  it next week

i’m in at about $53.20 after callers…
good stuff, phil thanks again…
in addition to trade talk, getting a huge  of value from the discussion and the screening of the blogs – to me, that is almost worth the price of admission…surely, you already know this –

My perception is that ZHedge has become a popular read in the Hedge Fund community for digging into and exposing unusual and controversial info.
As to whether he (whoever he is, you might know, I don’t) is more popular than you/PSW, that I don’t know.  You probably cater to somewhat different audiences w/ some overlap.

Threw on a small WFC short after hours on general principal …. striking back at the blatant manipulation into the close.
I’ll show those bastards what I think of their little game …

SPY – The manipulation continues after hours.  It took 260,000 shares for SPY to plunged from 92.56 to 92.3.   Then it took 15k shares to move it back up to 92.37.  In the regular hours, 21M shares were needed to move SPY by $1.1.  Someone can’t wait to cash in.  Our "ronald" would have had fun with his strategy.

phil- you’re the man…enjoy the kids and weekend

Watching Meeting of the Minds on CNBC right now.  Pretty interesting stuff.  The CEO of Blackrock is on there and talks like he’s speaking for the Administration.  I’d be afraid to know how much he really is.

"1.500/Brianna – How can you trust a chart based on a move like this though?   They were red until 3pm then up 2% from there."
The idea of trust in trading is an interesting concept.  Trust in the markets doesn’t exist only possibilities.  Thus all I can do as a trader is trade what I see and what I think it portends.  Thus what I see in the NQs is a double bottom and firm price action.  I see several leading stocks trying to put in higher bottoms (i.e. apple).  I see the NQ’s suddenly leading the market higher as was the case for this entire move up and after lagging it last week.  All bull confirmations.  Does this mean were going to 1500 next week?  No one knows though I would rank higher bottoms and double bottoms among the more reliable price patterns so the probability that we’re going there is higher than a failure though I certainly am not going to rule that out.  Markets LOVE to poke through old highs at week’s end only to turn around for good the next week.  We need price action for indication of a failure though and right now it isn’t there. 
I don’t think it’s coincidence this price pattern projects to an area of the chart of stiff resistance (1483-1532).  This firm price action we’re seeing (i.e. market willing to take out old highs) indicates we will go there earlier rather than later but that could change.  We need price action to tell us that though.  The EXACT same bullshit happened last year around the same time and we know how that ended.  My feeling is we’re near the end of this run just like we were last year this time.  There’s  a possibility we could in a flurry run up to around 1500 then come back down to 1350 and lower.  Actually that would be quite an easy trade because there is NFW this market is going past 1500-1538 given how hard it has had to work to get through 1430’s.  The assessment that this is a bear market rally is correct IMHO.  Markets aren’t going to let stupid bulls of the hook that easy.  The question is timing.  Right now however 1483 in the NQ is like a magnet because we’re that close.  Besides the higher we go the more $$$ the JPMorgans and Cs and GS can make putting out shorts at higher prices for the inevitable plunge down.  They have probably done the math and know where they have to take the market in this rally to make X dollars on the way back down.  That wouldn’t surprise me in the slightest.  


I was channel surfing on the AM dial this afternoon and came across Michael Savage, someone has sent him the following editorial from Pravda. He read it on air and it got my attention for a minute.
Well, here I sit tonight catching up on my reading and there’s Tom Burger’s artical, ‘Trouble with our Banking System’, and I’m thinking in the back of my head this sounds fimilar, then I go to Savages’ site and read the Pravda editorial that was published a month ago and all I want to do is buy gold. :o)
Long story short, I though you might enjoy the read from Russia and might wish to share with the others.
Have a great weekend,

Great work Phil i feel like a proud son!! Not to imply your an old man 🙂

Interesting article in the WashingtonPost today about where the Fed got its authority to backstop investment houses.  Prior to this law, they could only backstop banks.  It wasy way back in 1991.  Sen Chris Dodd introduced the bill upon the request of GS and other firms.  What a friggin suprise.  They wanted it for a safety net after the 1987 crash of Drexel Burnam.  No one really knew the impact of it at the time.  Today we know it’s in the trillions of dollars.  Some might say it makes sense because we have it for banks.  Only problem is, banks are highly regulated to protect the Fed from paying out.  Investment houses are not.  Therein lies the problem.  Today, the Fed seems intent on digging a bigger and bigger hole for itself.  Accepting everything from CDSs to baseball cards for collateral from banks or bank holding companies in exchange for cold hard cash.  And no way to actually get them to lend it.  Instead, they can just go out and play in the equity markets with it.  Brilliant.

brianma I agree with your assessment of the possible situation.

Interesting read on Investment banks, Matt
Here is something interesting – bearish – from barron’s…It is a Q&A with the guy who runs Eliot Wave International, Robert Prechter…Essentially, he is pointing out, the best investment approach in his eyes, is safety first because another storm is coming
"Elliot Wave Guru Sees Dark Days Ahead"
Here is what i thought was the best line:   "Cash has been good. Today you can buy twice the house, twice the stock shares and twice the gasoline that you could a short while ago."

This is why the Pound is gaining on the dollar,
"The International Monetary Fund estimates that gross U.S. debt will reach 97.5 percent of the country’s GDP in 2010, versus 72.7 percent of GDP for the United Kingdom."
That’s an unfriggin believable statistic.  We’re hosed.

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