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Lot of craziness in energy trading
Old 12-16-2014, 12:25 AM   #1
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Lot of craziness in energy trading

https://finance.yahoo.com/video/t-bo...014100777.html

I always like to hear what Boone has to say, on any topic. Neal Cavuto is in too big a hurry to ever shut up and let Pickens come to the fullness of his point. Pickens is smart enough to realize that these Persian Gulf monarchs are sitting on a barrel of dynamite. Some "spokesman" for one of the smaller rich oil producers today predicted that even if oil price went to $40, OPEX would not cut.

Isn't this like saying that OPEC does not exist? Isn't the sole purpose of a cartel to keep prices higher than they otherwise would ordinarily be? That's one issue. The other is that while the Saudi royal family and Kuwait and Qatar and UAE produce a lot of oil relative to their populations, they essentially keep ISIS and Iran and other much larger and militarily powerful regimes of their turf thanks to paying off many client states like Egypt, and also having the US air power in their pocket. This gets complicated fast. I would be way over my pay grade to try to guess how all these pressures are balanced, but for sure this whole thing has lot more in common with poker than anything else I can think of. No way are any of them saying what they believe to be likely, they are saying what they believe advances their negotiating position. Like the German minister said a couple years ago, when things get serious you have to lie.

Pickens thinks that oil returns to $90 or more within 12-18 months. I surely don't know, but I put more trust in what he says than the Economist, which recently prophesied $50 Brent.

The other thing which for the most part we do have the information to interpret is that companies that are almost 100% in the natural gas business are also falling fast. How much sense does this make? IMO, none. If I look at a chart of Nymex gas futures, prices are overall higher in 2014 than in 2013. And we are currently ~100% above the NG Nymex low below $2 in 2012.

Part of what is going on is that people are crazy.

Ha
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Old 12-16-2014, 06:26 AM   #2
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Pickens on earlier interviews on CNBC scoffed at reports that oil would drop below 70 dollars, at the time oil had just broken 80 and he was quite confident on this coming on twice to state that, he has not been on CNBC since. I thought he looked shell shocked myself and incapable of believing what is going on , here is one of those CNBC interviews wherDon't panic over oil: T. Boone Pickens
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Old 12-16-2014, 07:00 AM   #3
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Yesterday I exchanged one third of my Vanguard Retirement 2025 fund to Vanguard Energy Fund Admiral in my IRA account.

I'd put more into Vanguard Energy in my taxable account but I'd have to sell other funds to do so and don't want to incur any additional CG.

Point is I'm in it for the long haul and believe that Santa gave us a present this year, it hasn't been a rally but in fact a great buying opportunity.
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Old 12-16-2014, 07:03 AM   #4
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There is more going on than just over supply. Unless OPEC, Russia and other countries have been pumping a lot more oil. Other economies are slowing. There is more conservation going on in the US, but I doubt that there is in China, India and other countries.

Russia just bumped up interest rates to 17%, because their Ruble is getting weak. In the USA, the Fed wants to make our dollar even stronger even though inflation is tame. It will kill exports and probably jobs. It will make oil even cheaper.

We need a weaker dollar to compete with countries that use forced labor and destroy the environment. We cannot compete with all of the regulations and high labor costs here in the US

Increased demand will raise oil prices, or a lower supply will do the same. It's that simple.

BTW, Dennis Gartman says $30 a barrel is coming.
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Lot of craziness in energy trading
Old 12-16-2014, 09:58 AM   #5
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Lot of craziness in energy trading

Ha, your point about Cavuto cutting him off in the interview really resonated with me. It is even worse on CNBC. I want to hear the "experts" opinion, not the Teleprompter readers opinion. At times it resembles going to a basketball game and the officials assuming they are the stars of the game.


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Old 12-16-2014, 10:32 AM   #6
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Even if we get a very low price on oil, I don't believe it will stay there. A lot of folks making predictions act as if it goes to the bottom and stays there. Well it never works out that way.

And a lot of the crazy trading right now is speculators dumping their investments indiscriminately, so you get side effects that "don't make sense" like natural gas being hurt. I think this is exacerbated by it being the end of the year. It will be interesting to see how much of this reverses in January.

Eventually the "pros" get done selling, and things settle down and rebound somewhat.

Don't mention Gartman. Whether he is correct on this, he reversed himself on so many predictions I'm embarrassed for him. But does he shut up? No!
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Old 12-16-2014, 10:35 AM   #7
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IMO the current drop is a sub-rosa agreement designed to put pressure on Russia.
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Old 12-16-2014, 10:45 AM   #8
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At times it resembles going to a basketball game and the officials assuming they are the stars of the game.


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Or worse yet, the announcers assuming they are the stars of the game.
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Old 12-16-2014, 10:51 AM   #9
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Or worse yet, the announcers assuming they are the stars of the game.
I think this is really true! No humility, no attempt to really learn from guests as they already know it all, very little investigative reporting. More interested in spouting off the spin du jour.

A major reason I quit watching the financial press entirely.
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Old 12-16-2014, 10:58 AM   #10
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About buying more energy stocks, I would say it's not yet time. Looking back in recent history, we have seen prices running to the truly absurd, and we are not there yet. I still remember shaking my head in 2009, filling up with gas at less than $2/gal. How could gasoline be cheaper than some bottled water?

I am not saying that gas will get that cheap again, but then a lot of ridiculous things have happened. We have seen that in house prices too, and the crazy thing is that it keeps repeating. People seem to have shorter and shorter memory. So, I think I will wait until the impossible happens to deploy what I have left in cash.
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Old 12-16-2014, 11:06 AM   #11
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If folks are buying, then capitulation hasn't happened yet.
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Old 12-16-2014, 11:39 AM   #12
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I am not saying that gas will get that cheap again, but then a lot of ridiculous things have happened. We have seen that in house prices too, and the crazy thing is that it keeps repeating. People seem to have shorter and shorter memory. So, I think I will wait until the impossible happens to deploy what I have left in cash.
+1

I believe you are correct. While we may not see $5 a gallon gasoline in the next few years, I can't help but think that this is temporary and gasoline will be back in the $3+ range within 12 months.

Side note: Remember when people were crying the the oil companies could charge whatever they wanted because 'we have to have it'? I wonder where they are now.
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Old 12-16-2014, 11:43 AM   #13
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If folks are buying, then capitulation hasn't happened yet.
Not quite. It takes equal number of shares sold as bought, otherwise there would not be transactions. What varies is the eagerness on each side.

Ha
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Old 12-16-2014, 11:44 AM   #14
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Yes, why not wait until early next year to see how things settle out?

The last big oil price drop (2008) lasted 20 weeks. This one has been 24 so far. It might be close to the end, but what's the hurry?

I do think that part of the very recent higher volatility is end of year repositioning.
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Old 12-16-2014, 11:49 AM   #15
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Oh, and I forgot to add that I have plenty of energy stocks already. And I have learned to be careful about keeping buying while something is dropping.
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Old 12-16-2014, 12:13 PM   #16
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Oh, and I forgot to add that I have plenty of energy stocks already. And I have learned to be careful about keeping buying while something is dropping.
I was staring at a limit order for VDE last night and this same thought came into my head. I've done this before, better not this time. I already have enough energy and do not want to be overweight. Besides, I already got unlucky at the top, why try to get unlucky in the middle ??

When I started driving at 16, back in 1996 gas was about $1.80 - $2/gallon, I do find it hard to believe we are dialing back that far but I am not the one to ask advice from heh.

Oil and junk bonds seem to be the only thing people want to talk about these days.
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Old 12-16-2014, 12:28 PM   #17
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Hmm - two of the last five DRIP stocks left are Chevron and National Fuel Gas so let them keep compounding - in 25 yrs I can have gold handles on my casket.

A few good stocks(5% of portfolio) and football keep the hormones happy.

Saint's beat the Bears last night.

heh heh heh - and all this means? I haven't a clue let alone a theory.

? Is this the same Mr Pickens who has expressed some interesting thoughts on water rights and wind energy via long distance transmission lines over the years?
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Old 12-16-2014, 02:34 PM   #18
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IMO the current drop is a sub-rosa agreement designed to put pressure on Russia.
And perhaps ISIS? Their revenue is from oil. They have threatened Saudi Arabia. I don't think it is lost on them that ISIS will be hurt by low oil prices.

I am also buying. Not too worried about exact timing. Fact is there is a sale and I'm buying.
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Old 12-16-2014, 02:52 PM   #19
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I just came back from a run to Home Depot. On the way, saw that Sam's Club had gas at $2.17/gal. Then, just now check gasbuddy-dot-com, and see that Costco's price is $2.15. Is the end near?

Darn, I want to take my motorhome for a spin, which I have to do every so often anyway to exercise it, and fill up its 55-gal tank. But even with that big tank, it's still $20 gain at most to hold it for a while, then the gas goes stale. And it is not easy to get gas out of it to put in my cars. And it will be another 6 months at least, before I can go on another RV trek.

Bad, bad timing...
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Old 12-16-2014, 03:01 PM   #20
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Side note: Remember when people were crying the the oil companies could charge whatever they wanted because 'we have to have it'? I wonder where they are now.
They are the same people upset when gas stations raise their prices immediately when there's a local gas shortage and price increase. "They still have the fuel in their tanks that they bought at the low price, they are gouging us!" But today, with oil down, I'm sure they expect to get the lower gasoline price immediately, and will shop at the station that has it. Funny.
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