Monday, April 28, 2008

Odds and Ends

I see we have OPEC now coming and telling us oil could hit $200/bbl and there's nothing they can do. Some hi-lights of the article include;

Opec’s president on Monday warned oil prices could hit $200 a barrel and there would be little the cartel could do to help.

The comments made by Chakib Khelil, Algeria’s energy minister, came as oil prices hit a historic peak close to $120 a barrel, putting further pressure on global economies.

His remarks suggest Algeria wants Opec to continue to resist calls by US and European leaders for the cartel to pump more oil to help ease prices. But Mr Khelil blamed record oil prices on the weak dollar and global political insecurity.

Of course there's nothing OPEC can do, their fields are in decline. And aaaah those reserves, those unaudited take our word for it reserves. Everyone keeps blaming it on the dollar and while that is part of the story it is no way THE story. Regular readers know well what I believe is THE story.......Peak oil. But ssssssh don't tell anyone, and above all don't discuss it with anyone cause it's a secret.

In the arena of privatising profits and socializing losses we get news out of Britain that the bank bail outs are to be kept secret. Just like the Fed here will not tell anyone what is being pledged as collateral at the discount window, for fear of upsetting markets according to Steve Liesman of pom pom TV. You wonder why there is no clarity in the financials, why the books are cooked and the lies rampant. Then look no further than those charged with policing the henhouse. Pathetic, truly pathetic.

Not enough for you, then try this on for size, thanks to Barry Ritholz of The Big Picture for noting it. Corporate debt ratings bought and paid for. Gotta love the new version of capitalism, but lets bash the Russians and Chinese since they are so corrupt.

Speaking of pom pom TV, I caught a few minutes of Kudlow tonight and all the chatter of rate cuts vs pausing by the Fed. Vince Farrell who never met a market that wasn't bullish was his ususal bullish self. Everywhere and always bullish. My problem with people like Mr. Farrell is everything is everywhere and always bullish. Higher oil prices, the consumer is fine, he can afford it, bullish for stocks. Lower oil prices, great for companies lowering input costs, bullish for stocks. Weaker dollar, great for exporters, bullish for stocks. Stronger dollar, great for the economy push oil prices down, bullish for stocks.

In Mr. Farrell's world nothing is bad for stocks. Not mortgage defaults spreading to Alt-A, not increasing leverage at investment banks, not mark to fantasy level 3 asset growth at banks, not rising credit card and auto loan delinquencies, not superficial one time asset sales padding earnings growth. I would like someone to ask him if a nuke going off would be bearish for stocks or bullish.

I keep hearing over and over that the market is a discounting mechanism. I agree, but you can't have it both ways. Energy, precious metals, currency markets are they not discounting mechanisms as well? So it begs the question, what are they discounting? Please tell me, because from where I sit prices on these commodities do not bode well for the consumer.

Also those so quick to call commodities a bubble, where were you when the Nasdaq was north of 5000? Cheerleading it all the way up! Like I have said before that's a good bubble, a politically acceptable bubble, but wheat, rice, crude, gasoline, those are bad bubbles. The kind where pitchforks and torches come out.

This is not the ramblings of a frustrated bear as some may think. There is plenty of which I am bullish on. Gold, Silver, Crude, Nat Gas, Gasoline, Heating oil, but as much as I like these I am cognizant of the fact that in the credit destructive, leverage reducing environment we are in everything is vulnerable. Margin clerks can be ruthless and spare no one.

Good Speculating to you all.

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 2 units US Gasoline Fund ticker UGA @ $51.25 stop at $54.34
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $12.64
Long 1 unit Frontier Oil ticker FTO @ $27.90 stop at $24.64
Short 2 units Daimler AG ticker DAI @ $86.20 stops at $82.48/$81.38
Short 2 units Darden ticker DRI @ $34.55 stop at $37.18
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $21.14

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