3.7 C
New York
Thursday, December 1, 2022


Friday Fizzle – Second Down Week out of Three Winds Down

RUT WEEKLYOnce more unto the breach.  

We've seen this movie before – that top channel on the Russell has been upbreakable AND very profitable as we pick our Futures shorts off that 1,050 line.  Russell Futures (/TF) are very highly leveraged and pay $100 per point, per contract so – when we find a nice support/resistance line to play off – we milk it for all it's worth! 

Oil (/CL) is also a party at $10 per PENNY, per contract and we played that short at $105 off of Wednesday's inventories and caught that ride all the way down to $102.50 yesterday and this morning it bounced back to $104.50 – because the NYMEX pump crew must LOVE giving us money every day!  

Actually, it's their job to lose money pumping oil and our trading is just a small drop in their global bucket where their scheme is to mis-price oil as high as possible to set the rate paid by 300M US citizens for each barrel that's used to heat your home, provide elctricity or fuel for crops or the trucks that deliver them and 100 other ways they screw you out of every nickel.  I show you this every month and I'll show it to you again – they are FAKING orders for 261M barrels in September (1,000 barrels per contract) and they will cancel about 90% of them over the next 10 days.

Click for
Current Session Prior Day Opt's
Open High Low Last Time Set Chg Vol Set Op Int
Sep'13 103.87 104.82 103.70 103.85 07:40
Aug 09


0.45 37828 103.40 261479 Call Put
Oct'13 103.16 104.18 103.06 103.29 07:40
Aug 09


0.42 8165 102.87 220312 Call Put
Nov'13 101.86 102.88 101.86 101.99 07:40
Aug 09


0.24 4732 101.75 137975 Call Put
Dec'13 100.60 101.50 100.51 100.73 07:40
Aug 09


0.20 5272 100.53 205578 Call Put
Dec'14 91.27 92.00 91.27 91.59 07:43
Aug 09


-0.11 1277 91.70 227419 Call Put

Note that a barrel of oil next December is only $91.70.  In what scenario of real demand do things get 12% cheaper a year later.  That's almost 1% a month between now and next year so, once again, we can buy Dec 2014 barrels for $91.70 and short sell Sept barrels for $103.40.  If oil goes down, the Sept barrels will fall faster than Dec 2014 and we'll make 1,000 x the price difference per barrel.  If oil goes higher – we roll our contracts to the next month (current cost .53 but it will be less than .25 closer to expiration) and we'll pocket the net difference in 2014 x 1,000. 

How much does it cost to do this?  Just $7,250 in margin to control $100,000 worth of oil.  If everyone reading this column did this and forced the NYMEX traders to accept their September deliveries, the US would be flooded with oil and prices would plunge for the rest of the year.  

In fact, if we really want to wreck the system, all we have to do is pre-short November and short September and refuse to cash out and prices will plunge.  If you want to short oil individually, the Futures contracts (/CL) are "just" but, if you're not doing the spread, you want to keep very tight stops at that $104 line (.10 or less) and then just reload at $105 (if it gets there) or try $104 again – keeping in mind it is $10 per penny per contract that you lose or gain!  Do you know who could easily do this?  Barack Obama!  He's got 800M barrels (worth $80Bn, that Bush paid $100Bn for) just sitting in a strategic petroleum reserve – he can well afford drop 100M barrels or so on the NYMEX crooks!  

But come on, at least half of you are good Conservatives who don't need the Government to fix market theivery so why don't we all chip in and simply accept their fake offers to buy oil for $104 a barrel in September and then watch them sweat as we refuse to let them cancel the orders into the Aug 20th expiration.  

Last time I made a call for this kind of action was June 1st of 2011, using essentially the same logic in essentially the same conditions at essentially the same price ($103 per barrel) and there were 376,000 barrels of oil scheduled for July delivery with the contracts closing on the 21st but it only took 10 days for oil to drop to $100 – up $3,000 per contact for a nice $1,129,860,000 in potential profits off our 376,000 short contracts – a very nice ROI!  We re-shorted at $101 that day and caught the next ride all the way down to $90 for another $11,000 per barrel profit or $4.136 BILLION in 10 days.  

Florida GOP Lawmakers Live For Big Oil ImageSo our President can actually make a hole in the National Debt by following through with my plan but, of course, Congress would never let him touch the SPR for something as mundane as making oil cheaper for the American people – so it's up to we, the people, to do our share, and this month there's "only" 261,000 fake contracts and it would only take about half of that number to make this plan work.  

I'm going to tweet this article out and I suggest you do the same because, frankly, I don't care if readers short the barrels or Obama shorts them or Bill Gates does or China does – there's Billions to be made and it provides a valuable public service when the NYMEX criminals begin to realize that people aren't willing to let them buy back their fake orders anymore and they'll be forced to accept delivery of actual oil for a change!  

Speaking of fake economic activity – this will knock your socks off:  China's record imports of 80.5M tons of iron ore may have had NOTHING to do with any actual demand for metal.   Like our US oil inventories, China's warehouses are bursting with steel, with 225,000 tons of it piled up in warehouses.  It's so abundunt over there that 40 out of 86 steel mills are operating at a loss in China.  Why would China be acting so crazy, then?  

One answer might be that Chinese steelmakers are keeping their furnaces going not to build more skyscrapers, but quite simply as proof that they’re busy so they can keep lines of credit open with banks, as Reuters reports—probably to avoid defaulting on existing loans.

That story should sound familiar: It’s been happening in other industries all over China. The economy is slowing, crimping cash-flow and leaving companies without funds to cover bad debts taken on during the infrastructure boom. The government has told banks they must curb lending to steelmakers (link in Chinese), but this is too little, too late, given that the average debt-to-assets ratio of the 86 biggest steel companies has already climbed to 70% for H1 2013—and some companies’ are as high as 80%.

Société Générale’s Wei Yao noted today, the import boom could signal “reviving [of] commodity financing as a way of coping with domestic liquidity squeezes.” In other words, the cash crunch in May and Junemeant steel companies started using iron ore as loan collateral once again.  Why would they do that? Because you can get a lot more credit for a pile of iron ore than the pile is actually worth, and then you can go speculate with that capital on, say, real estate.  I highly reccommend the whole, detailed article in Quartz.  

So we have fake steel demand in China and fake oil demand in the US driving a tremendous p/e multiple expansion in stocks as everyone makes their forecasts based on the fake demand.  In fact, of the 19% rise in the S&P (year to date), 16% of it has come from multiple expansion, NOT an expansion in actual earnings.  The P/E multiple, defined as the ratio of price to trailing 12-month earnings, has been the main driver of the rally in U.S. equities over the past two years. The S&P 500 index has increased by over 34 percent since the beginning of 2011, of which 28 percent has come from multiple expansion.   

During the same period, growth in corporate earnings has slowed. The trailing 12-month earnings for S&P 500 companies rose 2.4 percent in 2012 and another 2.5 percent for the first seven months of this year, registering the slowest earnings growth in non-recession years since 1998. Without renewed earnings growth, a continued rally in stocks driven by multiple expansion may be not sustainable.

We're already short USO ($37) and long SCO ($31 – the ultra-short oil ETF) from back at $107 and we discussed cashing out yesterday at $102.50 and avoiding the bounce but we decided we're too close to the end of August trading and oil could make a $5 down move at any time – and we'd hate to miss it.  From $104 – our immediate Futures target (/CL) is $102.50 but, for the purposes of our longer-term oil shorts – we'd like to see $98.50 before the September cycle winds down.  

Have a great weekend, 

– Phil



Notify of
Inline Feedbacks
View all comments

Curing blind children in India – really great article from July 2013 issue of SA:


if you don't have SA, can find it as a podcast from the AIRS-LA "Science Selections" podcasts.

Looks like the 50 DMA will come in play soon with the Dow. That 1680 line seems to be support for the S&P and the same with 3650 in the NASDAQ. Now 1050 looks like resistance for the Russell. The wider index (NYSE) seems to be going mostly sideways since mid-July.

STJ/Economic Calender~Hi, I am wondering did you forget to change the date? 🙂

Some outsider thinking on TSLA from my Sunday readings

Tesla Motors: Just the Beginning or Overvalued?


Fellow Investor,

Tesla Motors (TSLA) has shot off like a, well, race car. The stock is up 350% so far this year, with the latest pop coming on Thursday when it jumped another 14% after a strong earnings report. So the question is whether this is just the beginning for TSLA, or is it overvalued and on the verge of losing some of its luster?

I’ve always been a fan of the company. In fact, I did something I don’t usually do and recommended it in my GameChangers service shortly after it went public in 2010. We made a quick profit on it, gaining nearly 30% in about three weeks, and we sold because some of the big automakers were making more rumblings at that time about electric cars, and Tesla’s CEO was being talked about in the media as someone who might have been unrealistic in his expectations.

The Tesla story has been a game-changing one through and through. Back in 2010, it was the only company of its kind to not only produce a commercial, federally compliant highway-capable electronic vehicle, but to do so with style. It single-handedly changed the image of electronic cars, which once were seen as clunky motorized Yugos, into iconic “made in America” objects of aspiration.

Fast forward to 2013 and news flow has been quite positive, with several catalysts driving the stock higher. For starters, there’s the company’s new battery swap technology. Car owners can pull into a Tesla changing station and swap out their old battery for a new one in a minute in a half, and they don’t even have to get out of the car. That’s quicker than filling a regular gas tank, and much faster than the 30 minutes it takes to recharge the battery in Tesla’s cars.

Secondly, TSLA’s automobiles aren’t just flashy and fuel-efficient, they’re safe. Let’s be honest, it doesn’t matter how cool a car is if it’s not safe; people will eventually stop buying. Very aware of this fact, management created a car that could hold its own in any type of collision. The National Highway Traffic Safety Administration (NHTSA) gave the Tesla Model S its top five-star rating for each safety category—front-end crash, side crash and rollover crash. For an automotive company without years of vehicle designs and safety measures to fall back on, this rating is quite an accomplishment.

And that brings us back to CEO Elon Musk. He has really rounded into form as the company’s CEO in recent years, and I now look at him as almost like a young Steve Jobs. He is not only the co-founder of Tesla, he’s also the head of product design, so TSLA’s success is very much because of its CEO. Musk is on the cutting edge of technology, innovation and style. As they say in hockey (I’m a big fan), he “sees where the puck is going.”

I love to invest in and follow these kinds of innovative companies that change the way we live and thrive. These are the kinds of companies I recommend in my GameChangers service, and while we don’t own TSLA at the moment, it’s on my watch list. It not only innovates, it executes well and is run smartly by a fantastic CEO who has a clear vision and is more than capable of keeping TSLA moving in the right direction.

Given that TSLA has been a momentum favorite this year, risk is higher that some of the air could come out of it quickly. I would be reluctant to jump on for the ride at these prices, but I’m watching it closely and recommend you do the same. If the stock pulls back in the coming months, which are typically weak ones for the market, we may get the right opportunity to jump in for the next move higher.



Hilary Kramer

Dates / Invest – Indeed… All good now!

Stj, thanks!!

Sweet, /YG up almost 16. I guess it shouldn't be any FU moments for any gold related equitities. lol 

I mean on Monday at least! 🙂

phil, evening……

per your note the tsla positions

jan14……sht 20 165 calls rolled 2x from 125…

jan 15 sht 4 95 puts and 5 115 puts

jan 15 sht 5 125 calls

jan 15 sht 10 150 calls

jan 15 30x 140-180 bcs.

as of now it shows the jan4 165 can be rolled to jan5 250 at even if the situation warranted as we get close to jan4

so that said could that be considered the hedge or should i be selling more puts i.e in the 100 area…..tks

Stay Connected


Latest Articles

Would love your thoughts, please comment.x