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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: quehubo who wrote (33644)	7/17/2004 2:47:46 PM
From: profile_14	Read Replies (1) \| Respond to of 206121

Que, I was flat. I made gains trading nimbly on some shares with size but cut my losses on July XLE options on Tuesday with the pullback that began last week. Friday at the close I bought XNG August 260 puts for 9.8. We'll see how that turns out. I sold my PBR also Friday afternoon at 29.21 after getting in at 24.8 just a few weeks ago. I was tempted to by OIH puts but I am waiting to see if this truly breaks out on volume above 75. What caused me to buy XNG puts was the article I read on Bloomberg that said 18 supertankers had been contracted to bring oil into the US directly from Saudi Arabia in August. That with the additional shipments that are in transit now will likely begin to erode the bullish case a bit, which is what is holding up the price of natural gas -- hence my puts. Natural gas injections have also been bearish for the last two weeks. With crude testing the recent June highs I suspect oil will pull back to the mid thirties and along with it, the sector as earnings are released (buy on the rumor, sell on the news). That does not change the bullish theme for energy, but provides perhaps an incentive to take some profits. Add to that the wet weather around most major metropolitan centers and you get less gas fired consumption despite some nuclear capacity being down. Either way, gas storage is not an issue, IMHO. I really do not think that weather has been against energy bulls at all. We have had a very average summer. It was hotter in the beginning and now it is average. It is more than last year, but then again, it was an abnormal year. I think the next few weeks will provide a direction for the overall market, which should trend up with some easing of commodity prices. I honestly think that people are focusing too much on the second derivative of the growth curve. By that I mean that the first derivative is the slope of the curve and the second is its rate of change. The bottom line is that the slope is positive and although there has been deceleration, it continues to be positive. The real risk is inflation, which most people do not regard as a threat. Credit risk is not even mentioned in any analysts' report for a financial services company. It is as if there is no risk. Although the CPI is published and shows inflation to be tame, it is a flawed measure. For many years, it has excluded the cost of housing, using only rents and not the cost of the property. How does the cost of education, medicine, etc., the things that make folks feel like it is hard to get ahead, ever get reflected. I laugh every time I see that number come out. With Fed Funds at 1.25% and the reported inflation running at 3.3%+, there is an easy 2% that the Fed can raise rates to bring the excess liquidity, the tripling of M-3 over the last 10 years at a rate of 8% CAGR, into check. With the currency continuing to weaken, the Fed might well be forced to raise interest rates to maintain interest rate parity and confidence in the USD economy. But the Fed does not want to pop the asset bubble because it cannot lower rates anymore, so we are left with stagflation. Prices will rise and so will rates, but economic growth will be hampered by diminished activity, static wages, deficit spending, and higher energy costs. Just like every cycle, it is always an unexpected event that derails the train, so I try to think of what may come about and adjust for that, while taking gains inbetween. The effect of the unwinding of liquidity will have a very significant effect on the entire market, probably much larger than anyone has anticipated, IMVHO. Moreover, couple that with the likely attempt of another terrorist event in the USA prior to the elections, I think the bear case is favorable. While energy prices might initially spike, I believe the aftermath of such events will have a drastic effect on marginal consumption, promptly creating capacity. One thing that no one has mentioned either is the effect of filling up the SPR. Raymond James says it is at 95% of capacity. Sooner rather than later, that production will hit consumer inventories and not the SPR, probably at a time when incremental production is coming on shore and we get closer to a potential terrorist strike. Personally, I am betting on a nice move for FLEX next week. Pull a chart for it for 2 years and look at the slow stochastics and RSI and see what happens to the stock each time it gets this extended. Their earnings were scheduled for July 28, but they upped the release for Monday probably to squelch the shorts and reverse the price action. They did say earlier that they had a pretty good quarter, but the market did not believe them. That is pretty much what I have done. So now I am long FLEX and short the XNG through puts. What are your thoughts? How about you, what have you been toying with? Best regards,

To: quehubo who wrote (33644)	7/17/2004 2:47:57 PM
From: profile_14	Respond to of 206121

Que, I was flat. I made gains trading nimbly on some shares with size but cut my losses on July options on Tuesday. Friday at the close I bought XNG August 260 puts for 9.8. We'll see how that turns out. I sold my PBR also Friday afternoon at 29.21 after getting in at 24.8 just a few weeks ago. I was tempted to by OIH puts but I am waiting to see if this truly breaks out on volume above 75. What caused me to buy XNG puts was the article I read on Bloomberg that said 18 supertankers had been contracted to bring oil into the US directly from Saudi Arabia in August. That with the additional shipments that are in transit now will likely begin to erode the bullish case a bit, which is what is holding up the price of natural gas -- hence my puts. With crude testing the recent June highs I suspect oil will pull back to the mid thirties and along with it, the sector as earnings are released (buy on the rumor, sell on the news). That does not change the bullish theme for energy, but provides perhaps an incentive to take some profits. Add to that the wet weather around most major metropolitan centers and you get less gas fired consumption despite some nuclear capacity being down. Either way, gas storage is not an issue, IMHO. I really do not think that weather has been against energy bulls at all. We have had a very average summer. It was hotter in the beginning and now it is average. It is less than last year, but then again, it was very hot last year. I think the next few weeks will provide a direction for the overall market, which should trend up with some easing of commodity prices. I honestly think that people are focusing too much on the second derivative of the growth curve. By that I mean that the first derivative is the slope of the curve and the second is its rate of change. The bottom line is that the slope is positive and although there has been deceleration, it continues to be positive. The real risk is inflation, which most people do not regard as a threat. Credit risk is not even mentioned in any analysts' report for a financial services company. It is as if there is no risk. Although the CPI is published and shows inflation to be tame, it is a flawed measure. For many years, it has excluded the cost of housing, using only rents and not the cost of the property. How does the cost of education, medicine, etc., the things that make folks feel like it is hard to get ahead, ever get reflected. I laugh every time I see that number come out. With Fed Funds at 1.25% and the reported inflation running at 3.3%+, there is an easy 2% that the Fed can raise rates to bring the excess liquidity, the tripling of M-3 over the last 10 years at a rate of 8% CAGR, into check. With the currency continuing to weaken, the Fed might well be forced to raise interest rates to maintain interest rate parity and confidence in the USD economy. Just like every cycle, it is always an unexpected event that derails the train, so I try to think of what may come about and adjust for that, while taking gains inbetween. The effect of the unwinding of liquidity will have a very significant effect on the entire market, probably much larger than anyone has anticipated, IMVHO. Moreover, couple that with the likely attempt of another terrorist event in the USA prior to the elections, I think the bear case is favorable. While energy prices might initially spike, I believe the aftermath of such events will have a drastic effect on marginal consumption, promptly creating capacity. One thing that no one has mentioned either is the effect of filling up the SPR. Raymond James says it is at 95% of capacity. Sooner rather than later, that production will hit consumer inventories and not the SPR, probably at a time when incremental production is coming on shore and we get closer to a potential terrorist strike. Personally, I am betting on a nice move for FLEX next week. Pull a chart for it for 2 years and look at the slow stochastics and RSI and see what happens to the stock each time it gets this extended. Their earnings were scheduled for July 28, but they upped the release for Monday probably to squelch the shorts and reverse the price action. They did say earlier that they had a pretty good quarter, but the market did not believe them. That is pretty much what I have done. So now I am long FLEX and short the XNG through puts. What are your thoughts? How about you, what have you been toying with? Best regards,