The Last Time Crack Spreads Were This High…

VLO was trading at

Stiff intraday reversal reattached the cocks of those who are short. Today’s dip gave them life, something to look forward to. Within my holdings, I saw 1%+ dips in my refiners, even though crack spreads were up 2.2%. However, for the most part, I was green, with gains in X, FORM, DAL and OXY closing flat. Oh, and my TER was down. Basically, today was a circle jerk type of day. It’s the sort of day that you just sit around, thinking of stuff to do and end up shooting yourself out of a cannon for fun.

Railroads were strong, as well as steel. But again, everything sort of drifted away into the bell, like a hooker in a police car.

Bottom line: we’re back at it tomorrow with new and eventful shit to discuss. Perhaps the middle east will get sucked into a giant vortex, bringing world peace to the world stage. Who knows? For now, I am sticking with a long refiners/long airlines thesis, until it loses its utility or novelty.

I added to my DAL position.

Enough of the pussy talk, there is coin to be made. Crack spreads are sprinting higher this morning, up more than 3% to $23.68. More importantly, WNR has an edge. Do you know what said edge is?

Let us begin.

Domestic refiners make their money from a multitude of spreads, one of which is gas—another Brent/WTI. WNR has their refineries in New Mexico, El Paso, Texas and Virginia. They are within delightful proximity to Cushings, Ok aka where the glut supply of WTI  is stored.  As the world burns, it is my belief the spread between WTI and Brent will widen. As it widens, the executive management team over at WNR will sit back, over a nice tall glass of scotch, and enjoy the ride. Profits will soar. The company will do $7 billion in revenues this year and yet only 35% of the shares are owned by institutions.

How does that stack up to the other refiners? Let’s have a look.

HOC: 99%

TSO: 89%

FTO: 83% (acquired by HOC)

MRO: 81%

HES: 80%

VLO: 76%

SUN: 73%

CVI: 60%

WNR: 35%

Does that make sense? Of course not. Furthermore, with WNR‘s earnings set to explode, thanks to widening spreads, coupled with an industry high 25% of shares sold share, I reckon the perfect short squeeze is about to occur. If you are managing money and need exposure to the refiners, you cannot ignore WNR, especially with a FPE of 9 and 35% institutional ownership. Just my two cents.

Aside from the refiners, I like the airlines for a hedge and I am warming up to the idea of beaten down large caps.

More on that later.