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phil
March 21st, 2016 at 6:22 am

Good morning and happy Spring Solstice!

Things are mixed, generally flat this morning with Shanghai posting a nice 2.15% gain (margin lending requirements were eased), back over 3,000 but no one else seems to care and the Nikkei Futures fell all the way back to 16,600 again, though the market was closed for a holiday.

China Revives Support for Margin Trading That Fueled Boom-Bust. China’s policy makers are loosening controls on margin lending in the stock market. China Securities Finance Corp., the state-backed agency that provides funding to brokerages for margin trading, will restart offering loans to securities firms for periods ranging from 7 days to 182 days, according to a statement posted on its website Friday. The agency will cut interest rates on the debt to as low as 3 percent, it said. China’s offshore equity-index futures rose.

China Has a $590 Billion Problem With Unpaid Bills. Not since 1999 have China’s companies had so much trouble getting customers to actually pay for what they’ve bought. It now takes about 83 days for the typical Chinese firm to collect cash for completed sales, almost twice as long as emerging-market peers. As payment delays spread from the industrial sector to technology and consumer companies, accounts receivable at the nation’s public firms have swelled by 23 percent over the past two years to about $590 billion, exceeding the annual economic output of Taiwan. 

China's Central Bank Chief Sounds Warning Over Rising Debt

Don't Take The Public For Fools!": China Hides Millions Of Layoffs, Jails Miners Protesting Unpaid Wages

All The Latest Chinese News In Just 7 Bullets



Oil is down from $42.50 back to $40.62 but today is expiration day, so possibly that's to blame for the weakness with 28,000 April contracts still open as of Friday's close and 558,000 already stuffed into May and, just like that, we're back over 900,000,000 FAKE!!! barrel orders in the front-three months! 

Click for Chart	Current Session								Prior Day		Opt's
	Open	High	Low	Last	Time	Set	Chg	Vol	Set	Op Int
Apr'16	39.06	39.28	38.61	38.75	05:00 Mar 21	–	-0.69	919	39.44	28255	Call Put
May'16	41.07	41.14	40.41	40.56	05:00 Mar 21	–	-0.58	37586	41.14	558980	Call Put
Jun'16	41.93	42.06	41.33	41.49	05:00 Mar 21	–	-0.56	4901	42.05	239199	Call Put
Jul'16	42.51	42.69	41.95	42.11	05:00 Mar 21	–	-0.57	1308	42.68	105229	Call Put
Aug'16	43.07	43.12	42.47	42.58	05:00 Mar 21	–	-0.53	431	43.11	74695	Call Put
Sep'16	43.27	43.46	42.85	42.94	05:00 Mar 21	–	-0.52	507	43.46	102423	Call Put
Oct'16	43.68	43.68	43.10	43.10	05:00 Mar 21	–	-0.61	177	43.71	50378	Call Put
Nov'16	43.50	43.53	43.40	43.40	05:00 Mar 21	–	-0.54	110	43.94	36174	Call Put
Dec'16	44.04	44.17	43.46	43.63	05:00 Mar 21	–	-0.53	1357	44.16	189769	Call Put
Jan'17	44.13	44.13	43.86	43.86	05:00 Mar 21	–	-0.50	21	44.36	28800	Call Put

So, in retrospect, it's easy to see how oil went higher, the barrel-count of FAKE!!! demand went up 100,000 last month and is back to dangerously high levels that put a ton of downward pressure on oil, should there be even a hint of bad news.  On the other hand, it's almost summer so I wouldn't count on the downside too much.  Remember, we're riding out our CVX short calls on the premise that they would pull back this week.

March 17th, 2016 at 11:38 am | (Unlocked) | Permalink 

CVX/Entropy – Well oil just poped to $41 (/CLK6) and it's even with Brent on this meeting BS and next week is rollover so I'd rather see what happens next week.  

March 17th, 2016 at 2:34 pm | (Unlocked) | Permalink

VLO – Why only 13 short puts?  Oh well, it all worked out great.  So now we have the Jan $55/70 bull call spread and nothing sold.   $65-70 is a fair range but we could go lower if oil pulls back.  Let's sell 13 June $65 calls for $3.60 ($4,680) to match out the short puts and we'll put a stop on the short puts at $3.50.  

Craigs asked me if I think the bias is up or down from $41 but there's really no evidence to suggest $41 is support and we haven't really tested $40 from above so I'd look for that today and $37.50 shouldn't be surprising on a good sell-off and that's PROBABLY the range that will form up into Easter/Spring Break – $37.50-$42.50, which means $41 is right in the middle and not a good place to make bets.  



Oil Extends Drop as Dollar Stabilizes While Asian Stocks Advance. Crude oil fell, extending declines below $40 a barrel as the dollar reasserted itself following last week’s selloff and data showed the first increase this year in the U.S. rig count. Most Asian stocks climbed with markets in Japan closed for a holiday. West Texas Intermediate oil neared $39, extending losses from Friday that knocked the Bloomberg Commodity Index from a three-month high. The New Zealand dollar weakened with the Canadian and South African currencies, while the Korean won snapped a two-day advance after the greenback halted a slump on Friday that was sparked by the Federal Reserve paring its interest-rate outlook for 2016.

OPEC kingpin Saudi Arabia and non-OPEC producers led by Russia will meet in Qatar on April 17 to further the initiative that could result in the first global oil supply deal in 15 years. (They’ll mouth a bullish policy which then they’ll secretly start cheating.) U.S. crude inventories hit a fifth straight week of record highs last week but the build of 1.3 million barrels was less than half of forecasts.



Seriously?  Now they STOP hedging???  IDIOTS!!!   Airlines Pull Back on Hedging Fuel Costs. Reappraisal of costly strategy comes after some carriers get burned by low oil prices. After decades of spending billions of dollars to hedge against rising fuel costs, more airlines, including some of the world’s largest, are backing off after getting burned by low oil prices.

Duh!  Fed's Lacker – Inflation will rise after oil price bottoms

Another False Oil Price Rally: Crossing A Boundary



Oil sector bankruptcies will not trigger a recession


• In a note Friday, Michelle Meyer, U.S. economist at BofAML, says it's not likely a wave of oil bankruptcies would lead the U.S. economy into recession:
• ""It is important to note that if defaults rise due to non-macro events – which means without being triggered by a recession – there seems to be somewhat limited feedback into the economy."
• Meyer says high-yield bond defaults could hit 6% this year. Still… "If we assume the companies who default are average size, this would mean that 600K workers are vulnerable. However, many bankruptcies result in restructuring rather than the demise of the company, suggesting a portion of the workforce would likely be retained. For argument’s sake, let’s say half of the workers in companies going through bankruptcy proceedings become unemployed over the course of a year. This would result in 25K job cuts a month. As we have seen in the energy sector, a lot of these layoffs may already be happening so the incremental layoffs would presumably be less than 25K per month. This is clearly just illustrative and assumes that bankruptcies are narrow and do not spread to the broader economy."
• Further, Meyer is not seeing signs that oil-sector fears are leading to a broader tightening in credit markets: "While it is still early, there is little evidence of bank credit tightening thus far. "