Higher Gasoline Prices? Pah!

A government report indicated that gasoline consumption in the U.S. was down about 5% last month from a year ago.

Case in point:

I have three vehicles: a Ford F-150 4×4 pick up, a Toyota Camry hybrid, and a Toyota 4-Runner (V8). Both the truck and the SUV use egregious amount of gasoline. But in my efforts to go “green” I have been conducting a little experiment for the past month. I wanted to see how much gas I could save by just driving the speed limit.

Normally, I drive 5 – 10 mph over the speed limit. I also bust out of the blocks like Kyle Petty (not gay Jeff Gordon). Driving this way has cost me beaucoup bucks over the years, including the speeding tickets.

For example, my Camry hybrid, which I bought last July, is rated at 40 mpg. On the days that I have to commute to the office, I have to drive about 45 miles through mountainous terrain, up and down hills. It normally takes about an hour. Low and behold, by simply going the speed limit and coasting downhill, I’m now averaging 46 mpg. That’s a 15% increase in fuel efficiency. That is also the equivalent of a 15% reduction in consumption.

The 4-Runner is even better. Here is a vehicle that gets me 20 mpg on a good day, with a tail-wind. Normally, in my wasteful short-sightedness, I’m accustomed to driving “banshee from hell”-style. But since I’ve reformed my ways, driving the speed limit and coasting downhill in neutral (yes, you can do that), I’m getting 25 mpg—- in a V8 SUV, no less! Do the math. Thats 25% more efficiency, or a 25% reduction in consumption. 

(We won’t discuss the pickup since it doesn’t get driven except during hunting season or hauling my three dogs to the lake.)

Think about it. At what point does Joey Gas Guzzling Americano start to change his driving habits? $4 gas? $5 gas? $6 gas?

I’ll tell you. He’s already changing. He’s driving slow, like an old man, and saving money. In fact, I guess I’m driving like an old man too. Here we all are on the morning commute, driving in the right lane like a procession to an AARP Convention. No more assholes blowing by you in the BMW going 95 mph. No sir, they’re all getting dirty looks and getting cut off.

So, the conclusion of the matter is this: if people across this great land would simply drive more conservatively and go the speed limit. Gas prices would come down. Demand for oil would slacken. People would be able to buy that flat screen HD TV, or LULU yoga tights. Whatever.

Also, consider this: If people didn’t take it upon themselves to slowdown, all the government would have to do is decrease the speed limit by 5 – 10 mph on the highways, and the problem of high gas prices would be solved. But, then again, that’s just too simple a solution.

 

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Land-based driller, trading at 1.15x book value. Cheap and in the right energy industry: oil field services. Short interest is almost 10%. Eight days to cover, based on average daily trading volume.

 Disclaimer: This information is not intended to be used as the primary basis of investment decisions.  Because of individual investors requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. Consult your financial advisor prior to taking any actions. The information and opinions contained here are those of the author and are not necessarily the same as those of iBankCoin, its principals or its affiliates. The author has a position in the stock. Trade at your own risk.

 

 

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Based out of Enid, OK, this stock has been showing outstanding relative strength in its peer group.

CLR owns significant acreage in the Bakken shale play of ND and MT, which represents about 28% of their present value of proved reserves. 

[[CLR]] came public May 1 of last year, offering 29,500,000 shares at $15. Insiders and 5% owners hold over 82% of the stock. The company has been in existence since 1967.

As of 2007 year end, the company had estimated proved reserves of 134.6 MMBOE and estimated proved developed reserves of 101.2 MMBOE.  The total proved reserves of oil were 104.1 MMBOE and total proved reserves of natty were 182.8 Bcf. At current market prices ($123/bbl and $12/MCF gas) that works out to $12.8 B oil and $2.2 B gas. This doesn’t include the estimated proved reserves figure. The company has a market cap of $11 B.

CLR holds interests in over 1,300 wells, 87% of which are oil wells. Total net undeveloped acres was still over 730,000 acres. They operate mainly in the Rocky Mountain, Mid Continent and Gulf Coast regions.

I bought this stock last month at $51.90 for my Alpha portfolio of stocks. With it’s continuing development, I think it’s headed to over $80 before the year is out.

Disclaimer: This information is not intended to be used as the primary basis of investment decisions.  Because of individual investors requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. Consult your financial advisor prior to taking any actions. The information and opinions contained here are those of the author and are not necessarily the same as those of iBankCoin, its principals or its affiliates. The author has a position in the stock. Trade at your own risk.

 

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“Bank stocks have never been so cheap, and their core profit generators (deposit growth, loan growth, spreads and net interest income) remain intact and will, in the fullness of time, turn more positively.”

                  —Doug Kass

This one is hard to resist. Kass is way too early.

Go long the banks now? Have you received death threats from Hank Paulson and “The Bearded One”?

In case some of you may be thinking, “maybe Kass is right…”, consider this….

Presently, we have an instance where the bearish consensus is correct in avoiding the bank stocks. The biggest issue I have with the Kass thesis is the juggernaut of credit deterioration facing the banking industry over the next one to two years. With the slowing economy, the credit problems are spreading to the commercial real estate and leveraged loans markets, i.e., “the next shoe to drop”. These are the markets that the banks have been counting on to help mitigate the earnings massacre. In addition, loan loss reserves are woefully inadequate. 

If you haven’t seen it, there are some great articles highlighted in “The Big Picture” of some analysts opinions of the housing industry and banking. 

Pertinent to the Kass thesis, RBC Capital Markets Banking Analyst, Gerard Cassidy presents an excellent case, citing:

” 5 Reasons Why Bank Stocks Have Not Bottomed

1) Bank Stock Valuations Are Still Excessive:
• Current stock valuations of the Top 50 banks relative to historical valuations, remain expensive — even with the recent poor performance.

• The Top 50 banks’ forward 12-month P/E ratio stands at 13.2x, which is roughly one standard deviation above the mean (25-year avg of 10.9x).

• During the trough of the last two bank stock bear markets, 1990-91 and 2000-01, P/E ratios for the top 50 banks declined to 5.7x and 10.1x, respectively.

2) Recessionary Forces Will Lead To Bigger Credit Quality Problems:
• In prior recessionary periods, credit problems typically followed as a result of the weakening economy. We believe the U.S. economy is currently facing recessionary pressures that will only worsen extending into 2009.

3) Exposure to Riskiest Loan Areas Remains Extreme:
• Construction, Commercial Real Estate (CRE) and leveraged loans have provided steady growth over the past few years. Commercial loans outstanding for the US banking industry grew 64% from 2004 to 2007 due to demand from the syndicated loan market, in our opinion. As the economy weakens further in 2008, the underlying fundamental strength in commercial real estate and industrial America will soften leading to higher defaults in poorly underwritten CRE and leveraged loans.

4) Loan Loss Reserves Are Too Low:
• Bank management teams will often claim loan loss reserve adequacy only to boost reserves in subsequent quarters. We have adopted the Eyles Test (ET) for loan loss reserve strength. Banks should build and maintain reserves that will ensure survival during the down leg of the credit cycle.

5) Credit Problems Are Not Likely To Peak Until 2009:
• Given our belief that CRE, construction and leveraged loan portfolios have significant room to weaken in 2008, we believe credit problems will not reach their peak until sometime 2009.”

Unless we see fundamentally positive changes to the economy, improving loan performance and a drop in commodity prices, particularly crude oil, WE COULD SEE OVER 100 BANK FAILURES OCCUR BEFORE THE FAT LADY SINGS.

Finally, ignore any death threats from The PPT to buy the bank stocks.

That is all.

Note: I will be in meetings all Wednesday and most of Thursday, so I may not post again until later in the week.

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Lately, the stock has gone too parabolic for me.

I still have 1/2 of the original a position with an 8.58 basis.

I will consider buying back if near term support of 13 holds. Otherwise, a break below 12 would trigger closing out position, as the stock could go back down to an 8 handle with falling oil prices.

 

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