Bull & Jim P - great posts !
... Bull got my attention(he allways does, allways has, allways will - smart man; I was just tweaking him a bit) when he went to cash & pulled in his horns. As it turned out - he was right on the volatility and the risk that existed in the overall market.
Given the real risk potential - it was a rational move and it very, very easily could have been a brilliant move - as if the NAZ fell through 2800ish - the entire market - everything, would have went down with it. We may have had a bit of luck here as buyers whistled by the graveyard in unison back into one more "buy the dip" play on the Nasdq blow off and it worked.
Jim P - expressed a very eloquent outlook for what the realistic expectation of the Oilpatch "should be" - given the fundamentals as "we" see them.
.... but ~
We have to acknowledge that there is a powerfull, well funded, very influential, deeply entrenched group on the Street that despises the cylicals (the Kudlowites & NOESIS coven)and the Oilpatch specifically; one has to allways be on the defensive in the oilpatch imho.
Looking back at the nature of the crash of 1998 in the OSX stocks - where companies like PXD went from $40 to $5, FGH from $45 to $5, FLC from $35 to $5 etc; one has to be ever-vigilant for early warning signs that may signal that all is not as it seems.
When I saw crude oil declining sub $25 along with greater than anticipated storage builds (albeit this is build season)along with the Oil Majors & Integrateds producing market leading earnings performance and not getting rewarded, but actually getting sold off - it got my attention.
For a brief moment - looked & felt like the deja vu of 1998... and we are not completely out of the danger zone yet - as the resistance levels in the OSX and the non-participating Majors signal some substantial doubt still existing on the sustainbility of crude prices and present earnings momenteum.
The Oil Majors in particular disturbed me. If there was EVER a time for them to be THE safe haven for Big Money and their flight to safety - it was now. But - wrooooooong - they produced phenomenal earnings performance, blew thru analysts estimates and just died on the vine... ? Some like TX today - sold off to near 52 week lows !?!?!? - the same levels as when we had $1.80 Nat Gas & $16 Oil and miniscule earnings ?
Perhaps all we are seeing is a "wall of worry" that is doing nothing more than further compressing the "Coiled Spring" for a phenomenal breakout yet to come ?
Walls of Worry are a "good thing" in that the great runs usually don't occur without them. In fact; I think the Nasdq blow off here was a Wall of Worry in "action" - and that the NASDQ merely "herked & jerked" and bucked off the pretender.com's from the real players in a historic technology revolution that still is the growth darling of the entire market and may just be one of the great phenomena's and wealth creators of our lifetime.
Maybe having a large factor of the Market not quit yet believing in the sustainability of both Crude prices and the present earnings momenteum is the best thing that could happen here ?
Given the solid global growth & demand outlook prior to this recent OPEC incease in production; the price of crude and the prospects for the Oilpatch in general looked "bulletproof." - but, in April to May of 1998 it looked very similar.
With the lessons learned on Crude Prices during 1998 - the major one being that sometimes the fundamentals numbers of supply & demand don't matter; if the crude futures traders & the Media Spin-doctors decide that Crude should go lower - momenteum rules and it will... we should allways heed those warning flags imho.
We were and still "are" in a transition; coming from "bulletproof" in the pre-OPEC quota increases to the post-OPEC - "prove the sustainability" mode presently.
The "prove it is sustainable" camp is asking:
Will OPEC cheat ? - they allways have, if not now with historically high prices - when ?
Will that small increase in production be enough to drive crude prices down to more historical norms of $18ish, or will OPEC be able to micro-manage their proposed price bands of $22ish ?
Can OPEC, or anyone micro-manage Crude and keep it from reverting to its historic norm - which is much lower than present prices; or was the infastructure of the Oilpatch damanged to a degree that has set up a multi-year Oil Boom - perhaps the likes that has not been seen before ?
Will the Oil Majors pull in their reigns and continue to cut costs and take a conservative stance to cap ex spending, or will they with another 1-2 quarters of earnings like we've just seem them ring up; open up the pursestrings for an expansion of which the likes we've never seen ?
... don't know the answers yet; but - the next 3-5 weeks are very, very important. During this time we will know the answers to the following:
- Will OPEC comply to present quota's ?
- Will the seasonal build level off and will we start seeing draws ?
- Will Futures Traders support Crude at $25ish ?
- Will the present Cap Ex spending trickle down by 2H 2000 to light the fire under the OSX stocks ?
- Will the E&P & Integrated's get the valuation multiple expansion that their present earnings & commodity prices signal they should, or will the market make the bet on commodities reverting to the mean & OPEC cheating ?
- Will the Oil Majors participate - RD reports next week, maybe that will help ?
- Was this NASDQ recovery just a head-fake, setting up the Big Bang collapse yet to come - triggering a total market meltdown ?
- Will Greenspan take his foot off the brake, will he "ease" merely another .25 basis points - which is allready completely priced & factored into the market, or will he hit us between the eyes with a .50 basis point hike ?
...We shall see
Right now - I know I am sleeping very, very well; having taken some nice tech profits off the table; maintaining just a moderate core tech position with tight "mental stops" and sitting with leverage only in TX at near a 52 week low coming off of tremendous earnings, along with having 40% of my entire Oilpatch position in laggards - but, former Oilpatch All Stars - PGO & CXIPY - with longtime core positions in ESV FLC HAL, TX P UCL making of the bulk of my portfolio et al...
The post market reaction to the Governments Press Conference concerning Microsoft is a positive... a Nasdq run thru 4000 could be a jump-start catalyst for the entire market if Mr. Greenjeans doesn't decide to play Grinch for too much longer.
Going to be one hell of an interesting couple of weeks coming up.... buckle up ~
What's Conoco's motto ?
... THINK BIG ~ MOVE FAST ! |
