mamis via fleckenstein comments from today
just fyi from fleck's 6/28 rap. the quoted info is justin mamis' comments on osx stocks from this morning.
Justin Energized I get a lot of e-mail questions about my views on energy, so I thought that I would pass along some comments from Justin Mamis. This morning, he had an interesting take on what happened to the energy stocks, and how speculation in general has affected that area. It is a nuts-and-bolts description of how hot money seems to flit from one group to the next, with price being driven only by the latest concept. I like to call it "moving the Jello around the plate." Here are his thoughts:
Fleeing 'In Your Face Inventory' "Consider how many experienced money managers have continued to insist that earnings in the OSX [oil service] sector in particular were going to be so terrific that the stocks simply had to do well. Let us suppose, in theory, that those professionals hold 70% or 75% of the shares in that expectation, while the speculative public had been holding, say, 20% (and the 'long-term investor' public the balance). Yesterday's intensifying collapse in those energy stocks was clearly linked to the 'in your face' inventory build-up numbers for gas, and distillates, and crude, too, causing the crude futures to further collapse. The speculators therefore flee, proving that they were, in their superficial inexperience, speculating directly on the price of crude and the high price of gasoline, rather than on year-ahead earnings or the high rate of rigs at work. Earnings-oriented professionals being already fully invested in this sector, there are no bidders into the falling prices from their accounts, meaning that the fleeing speculators dominate the market . . . and will continue to dominate, abetted now by late-coming, inexperienced hedge fund managers selling short. We can't exactly fault the latter, because the daily charts we post do still seem quite negative, and with considerable further room to fall -- just to point out how late such shorting is relative to the broad tops in those stocks that had been forming." |
