The big hatted Texans and oil sheiks in the middle east are defecating all over themselves this weekend, as the bottom drops out of their stupid commodity. If we didn’t own any oil stocks, we’d all hate oil, no?
Personally, and I can say this without reservation, I’d sacrifice 5% of my portfolio, in order to completely bankrupt those scoundrels, bedeviled self-imposed gate keepers of capitalism. I understand that the drop in commodities goes against everything you hold dear. You felt rather emphatic about inflation and the subsequent destruction of the dollar. I told you from the get go, this was wrong and inflation is nonexistent. Just because the Fed is creating a trillion dollars inside of a walled fortress, that doesn’t mean the plebs on the outside get to benefit.
Dig it?
The more I think about the oil storm to come, the more I fear it. These companies are fucking levered to the hilt and represent a large contingent of our market, similar to the banks in ’08. I doubt there will be much systemic contagion, since bond holders will most likely be made whole and equity holders caught fondling themselves. Nonetheless, as the price of crude falls, there will be repercussions, bank on that.
The good news is oil and gas stocks have 100’s of billions in cash reserves. The bad news is they have 100’s of billions in debt, based upon metrics that depend on expensive crude. Expect credit downgrades and frenzied capital raises, if the price falls into the $50’s.
Once you dig through the rubble, you will find companies who saw this coming and prepared for it. For example, FANG went from 4% to 56% hedged through 2015, executing this last month. On the other hand, CLR removed all hedges and now are completely exposed to fuckery on a grande scale.
In other news, retail sales will do just fine; ignore the early headlines. People are shopping online, skirting the lines at the mall. Last I read, online sales were up 8% year over year.
Here’s a tune for all of you oil players out there.
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So fracking sand stocks are going to the land of the nil or will they be acquired at a much lower price?
I don’t have a strong opinion yet.
Fracking sand stocks is a good buy at these oversold levels.
Why may you ask?
The answer is that new drilling will slow, on average it costs $12+Million to drill a new well, but “Re-Fracking” an existing well less than 3-4 years old costs about $1M so you do the math. What we are likely to see now is a “Re-Fracking” boom which when you consider takes about 6 million pounds of sand per well, it is easy to understand where these sand frac stocks will benefit.
Additionally, I think going into next year the price of oil will recover from a bottom of $40-55.
Do you really believe the World Cartel will want sub $95 per barrel…
Can you please share the outlook for BABA, GPRO towards end of year? does oil affect $BABA?
BABA is a giant company. Cheap oil benefits them.
Nobody knows how low it can go, but you remember the days it went to 40 from 140.
Yes many energy producers are levered big time and not hedged – you can see effect on corporate / junk bonds already as exposure is too great , what is next who knows.. defaults are possible .. this might become another form of credit crises and also might cause significant damage to some countries, I think next week is important to see how this shock will get absorbed… Cannot buy it yet, but I would love too.
I’ll make a prediction that this will be short lived. The simple fact of the matter is that Russia is totally and irrevocably screwed with prices at these levels. Putin will be facing enormous pressure to sustain social welfare programs at home and the money to keep things afloat in the homeland is evaporating before his very eyes. (he is already closing hospitals and “demoting” doctors to attendant status to avoid paying them.)
He will not like this, the Russian people will not like this and something will have to give before social unrest gets the best of him.You can bet your bottom dollar that being the megalomaniac that he is, it will not be him. He will start a shooting war somewhere rather than relinquish power. In his estimation, a war which will spike prices and possibly gain him some real estate is a win/win situation. I have great faith in the simmering evilness of this man to act in a manner that benefits him at the expense of others.
He will see this as something which has to happen in the near future. That is; before the current US commander in Chief leaves office.
You really think Putin cares about social programs?
I think putting western competition out of business is more important for him 🙂
It is actually more complicated with Russia as they do not sell oil in $US for the most part.. Euro is falling with price of oil and they get paid in yuan when they sell to China.
Their budget is based on higher price but their budget is not in $US either so as their economic minister indicated today due to fall of the rubble (all time low) which coincides with fall of oil their national budget is pretty much unaffected.
http://rt.com/business/209787-russia-economy-collapse-oil/
so where is he going to attack? north dakota? western canada? venezuela? turn on it’s only oil producing ally Iran? All of this talk about people “putting shale out of business” is ridiculous. the US doesn’t export oil and it’s a world market. if marginal US production were truly the problem, brent-wti spread would be at $20 right now. they aren’t crashing the price of their product by 40% to eliminate a few million barrels of US production. that’s idiotic. the oil market is telling you there’s a massive slowdown coming – but those who think WTI/shale production can move Brent $40 are the only ones who don’t see it coming. emerging markets are totally fucked. all of these big cap dividend plays that people have been buying and driving SPX higher – where is all the growth? those same emerging markets that are now fucked because of oil. and no member of opec has zero incentive to not produce at full capacity and “make it up on volume”. their prior quota did nothing but take oil from $105 to $65 – why hold back at all now?
Disagree: (that) it portends a slowdown coming. It’s been bounced off of low 90s dozens of times the last few years. This is more than just a suggestive slowdown. It was not bounced, let drop, &forced further
Agree: didnt even think about that. US production being somewhat negligible to start a price war over. I fell for that one… Youre right doesn’t make much sense. brilliant
And… PUTIN
It’s a putin provocation. If you add other events this year there is clearly some move to try to provoke him. And make him look evil at the very least.
If this oil thing is aimed at him, don’t be Evil Putin Propagandized. He is being goaded, &earmarked. (If) it’s aimed at him
Every barrel of shale oil production that gets shut in is a barrel that has to be bought from someone else. Saudi Arabia wants to be that someone else.
PUTIN (peace be upon him), if he does any invading would be to invade his neighbors with oil that is easier to access than his own in Mother Russia.
Where he attacks/invades/whatever is of less importance than the simple fact that he does. Period. His intent will be just to create a ruckus of enough import to cause crude prices to spike. Not so much to annex territory. So far the Ukraine does not seem to have that effect………
It’s a little like the opening chapters of Red Storm Rising only the reason for instigating a conflict is not to gain oil itself but rather to gain an acceptable price for what he has.
http://finance.yahoo.com/news/thousands-rally-moscow-against-health-care-cuts-121040510.html
Whom would you like to bankrupt the most? Big hatted Texans, or the greasy sheiks? I can’t even make up my mind on this one…
http://i.imgur.com/Q0Omf5r.jpg
p.s. that catawampus bow tie of ol’ Frank’s leads me to believe he would have blown a 2.0 in that vid.
QE worked!
Brick and mortar should be ripping right now. The low gasoline price helping anything but maybe the check into cash biz is a myth. Prepare for the bust.
Why did copper, silver and natty also get ebola on friday? This looks like global growth death.
being in the camp that was expecting OPEC not to reduce production (plus knowing their history of not reducing production even though when they announce they will), the ensuing low volume panic on Wall Street and 10% drop in WTI on Friday and the pinball effect on all oil related stocks was quite shocking to me. Not quite sure what the reaction will be on Monday as quite a few entities and individuals may be needing to raise cash or cover margin calls. But I saw it as an opportunity to move back in some old favorite positions. Caught and bought Friday’s insane lows in GLNG (Dec 3 ex-divy date) and PWR. Also dipped my toe in oil (via the ETN ‘OIL’) to start a long position. Prolly not the bottom yet but I will buy as it goes down. Will add again at 60 if we get there. Love the opportunity to finally get long oil again. As to CNBC’s commentary that the shopper’s didn’t seem to be out this past week – I think they are completely wrong. From an anecdotal standpoint the outlets and restaurants where I live (Destin, FL) were as crowded as I’ve seen them since the crash. Expect online shopping to be out the roof as well. Opened a position in KORS last week – up almost 3% but I intend to hold it until the end of the year (unless I don’t). Agree that quality retailers (low, middle and high end) will kick it during the holidays, albeit on lower margins. My only concern is Friday’s oil blowout and the short term repercussions, although with the improving economy and gift to the consumers (gas under $2.50 a gallon on Monday?) I see it as a buying opportunity, although I am keeping lots of dry powder in the event we see panic early next week. Am giddy at the thought of such.
With the crashing of oil there must be a trade. Short BID TIF anything ultra luxury? Too bad ‘Triple Elvis’ is not a borrow. Classic cars should be doomed as well.
Cheaper oil is a god send to all consumers around the world. It will help with added purchasing power. It may cause some trouble in the US oil space, but net net it’s a godsend.
Does anyone have a resource to see which companies have oil hedges and which do not?
PDCE is 86% hedged through 2016
Resource like that doesn’t exist, you have to do DD company by company..
Find a page similar to this and study http://www.pennwest.com/investors/hedging
Retail spending down 11.3% from last year Thurs-Sunday.
But but but gas prices. Who the fuck spends like no tomorrow because gas prices go down? Did you? Did anyone you know?
Mr Partridge Didn’t I see you bought TC last week?
Gold is gonna get fucked up.