re: Interesting angle on Oil weakness & Refco
Message 21810840
From: CommanderCricket 10/20/2005 2:44:38 PM
of 51920
Hate the show but this is a very interesting article of RFX and the energy markets
Spigot to Turn Off on Oils' Selling
By James J. Cramer
10/20/2005 13:54
"Refco announces that it is almost done liquidating its oil positions and it urges you to buy the tag-ends when they are put on tomorrow."
OK, now there's a headline you are never going to see. In fact, there's a headline that will never see the light of day to anyone. When a company liquidates, the only guys who know when the liquidation is over are the liquidators.
Yet, it is our job, as people trying to understand the seemingly random movements of stocks, to try to ratiocinate, to try to induct, what's really going on.
We have all watched this intense selloff in oils and have been befuddled, as we take out levels that make no sense, given the crude and the inventories. Sure, the crude's been falling, and surely the inventories are higher than one might have thought. But in the vast scheme of things, we are not in an oil glut , and we are not in a position to believe, when Shell RD is suspected to have made a $65 bid for EnCana ECA -- thanks Globe and Mail -- that the oil companies think we are in glut mode.
So what can account for the selloff, a selloff that has been seemingly inexorable? To me, that means liquidations are going on. My liquidation sources -- my people whom I speak to off line -- tell me that one major account is behind all of the selling and that the guy handling the selloff, Goldman Sachs GS , knows this very well.
I don't know when the selling could end, but I have to believe it is tied to expiration and to the need to get it done before expiration, which is tomorrow.
Believe me, it's not the environment in which I would want to plunge on the long side if I didn't have an edge, because the futures aren't going your way. But I have to believe that this liquidation will not go on beyond tomorrow's expiration.
I also believe that many people who follow these stocks know exactly what I know and they are all waiting for it to end before they reiterate their buys.
What should you do?
I think you start buying now, the obvious ones, or the Energy Spyders XLE and the Oil Service Index (OSX) if you can't play individual stocks.
Use November calls, 5 points deep in the money, with some out-of-the monies for extra firepower put on now into the weakness.
I know that people want to know the Refco RFXCQ headline. But trust me, the closest you are going to get to the truth is this article.
Nothing beyond it. Because the people who really know are going to make this money themselves.
Oh, another interesting idea: Goldman Sachs calls, but that's just because I like how their quarter's shaping up. Nice coincidence! |
