Monday, June 23, 2008

Market Recap 06/23/08

Thanks for cruising by to read. Posted daily, just after the close. If you appreciate the effort, don't forget to rec. As always, crossposted on Enjoi

I'm robbing a couple great Bloomberg articles for the energy segments below (Crude Oil Falls on Saudi Production Pledge, Saudi Arabia Boosts Oil Supply). I know it's a lot to read and I hope I don't get off on a useless tangent, because I'm taking the leash off today. If you're not into rants and energy just skip to the "Dollar" section now. Lastly I want to offer an un-apology for covering oil so hard. Energy and tension will unfortunately dominate the markets until writedowns and housing take over again. Sure I could talk about the coming writedowns, but then I'd be forecasting and you wouldn't believe me anyway. :-P

There has been a lot of chirping lately on the blogs about oil speculation and price. I'm simply not going into the logic of why this is absurd, again. I apologize if you bought this excuse from OPEC, the politicians, Ahmadinejad and the like. I'm not going to preach. I just want you to think about WHO is using this reason and WHY.
If you are short oil and hanging your hopes on speculation alone, I would advise you to think. Otherwise high oil will most likely continue taking your money in the market and out as it has for the last 5 years. If you have the heart, go put a red thumb on USO and put a comment below stating as such and I'll see you in a few quarters. Wait...this just in...

Blame the Speculators! - "The number of outstanding crude futures contracts in New York fell to the lowest in almost 14 months last week as commercial traders and institutional investors exited the oil market." Comments: spooked them out of the market. Where's my $100 oil beeeoooootch!?!? Oh...Oh sorry...there goes YOUR thesis. Maybe Ahmadinejad will come on CNBC and give you some new investment ideas.

"Analyts" say gas could drop $2 if congress acts - Well cool, I'll buy some $100 oil puts with the money I get from selling you a bridge.

Saudi Oil Production - Will be increased by 200K brls to 9.2M brls. per day. Saudis: "prepared and willing to produce additional barrels of crude above and beyond the 9.7 million" AND "The kingdom will also increase its daily production capacity to 12.5 million barrels by the end of next year. " Comments: As a believer of peak oil, I call B.S. on that last number, so mark your calendar. The better they get at pumping it, the quicker they'll drain it. Some say this increase will do nothing but create backlogs for the refiners. To put it in perspective. 1. If we (U.S.) consumed ALL of the Saudi's daily oil, it would only cover half of what we use. 2. The increase is only ~0.25% of daily global consumption. Expect an appropriate price drop. Get it?

OIL Dollars - Unfortunately many are also getting confused about oil trading in dollars. "Well, since oil has risen X and dollar has fallen Y then we're paying X+Y more. NO! Oil is priced in dollars, so the price is the price. If oil was priced in gold, this logic would start to work. Until then, STOP USING IT. The dollar is up today, oil is up today. There goes your thesis.
Will oil trade in inverse to supply as we all learned in 101? We'll see, but even the president of OPEC says "I don't think so." Ballsy huh? It's interesting that Saudi Arabia is going against what OPEC wants...and Libya is shooting off at the mouth about a decrease. Please...take it while you can get it boys. I'm not sure how much oil the Saudis have, but I think once they saw U.S. consumption decrease, they came to Jesus. I'm still long-term long on oil and energy and looking for chop soon.

Dollar - I think the dollar may become the hot issue again. The dollar index was still hovering around the 73 support level pre-market and seems to be bobbling between 73-74. This level is only ~2% off the historic lows. If the economic numbers keep turning up less rosy, foreign investors may begin to smell blood. I simply can't imagine what the feds next move could be, but if the dollar keeps moving up on talk, talk is all they have to do, for now.

Gold - Futures down 2% on no news (dollar up).

Solar - MIT prototype solar dish tested "inexpensive aluminum tubing and strips of mirror, concentrates sunlight by a factor of 1,000--creating heat so intense it could melt a bar of steel." Comments: Check out the videos and pics. Maybe I'm high, but commercialization of this simple concept could be a game changer for rural emerging economies.

Bond insurers seek to cut $125 billion in guarantees - Comments: Hmmm...I wonder if they're worried about their liability increasing? Nah, it must be something else. Like...

The Washington Post is reporting on a "New [Old] Crisis Threatens Healthy Banks" - It seems "Late payments on home-equity loans are at a record high. The delinquency rates on loans for cars, small businesses and construction are spiking to levels not seen in a decade or more." Comments: Yet we still spent our tax money on retail. So, you can either remember that adage about never going against the consumer, or bank on the irrationality of the consumer. The choice is yours.

Citi to cut up to 10% of Investment Banking Staff

Goldman may also cut up to 10% of Investment Banking Staff - Comments: Bad year for the bankers huh? Oh well, I'm looking for a sailboat on the cheap.

P.S. and Off Topic - The Fool asked me to apply to write for them a couple months ago. I applied and was officially denied today. I'm not upset, but a little disappointed. I may consider summarizing here and commercializing my personal blog. Also...Epic Weekend. Good Friends, Fried turkeys, Turkish women, BBQ, kegs, band, country women, beach, desert, pools, hot tubs,! "Just another Sh$tty day in paradise"

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