We just broke $125 p/b…..The next break to look for is $122….

As repoted on Bloomberg:

Congress Pursues $80 Oil With Trading Limits, Disclosure Rules

By Daniel Whitten

July 23 (Bloomberg) — Congress may outlaw elements of oil futures trading that lawmakers found distorted demand and contributed to the 69 percent surge in prices in the past year.

U.S. legislators are considering limits on the number of oil contracts an investor can hold and may increase disclosure requirements. Speculators such as Goldman Sachs Group Inc. use the practices to bet on price swings, which may drive up prices, though they have no intention of taking delivery of underlying goods, lawmakers say.

Proposals being debated this week in the Senate would bring prices more in line with demand, proponents say. Excluding the effect of speculation, oil would be around $80 a barrel, 38 percent lower than yesterday’s price, according to Jesus Reyes Heroles, the chief executive officer of Petroleos Mexicanos. Critics say restrictions may interfere with the functioning of a $4 trillion annual market for crude oil.

“Americans are being taken advantage of not only by OPEC but by speculators right here in our own country,” says Senator Ted Stevens, an Alaska Republican, referring to the Organization of Petroleum Exporting Countries. “Historically, this has not been a bad problem. Only recently has speculation reached these unsustainable levels.”

Investor control of contracts to buy crude oil in New York almost doubled in April from five years earlier as prices climbed, according to the Commodity Futures Trading Commission. Increased energy costs have slowed the economy, reduced consumer buying power and angered voters.

Oil, Futures Decline

Crude oil for August delivery fell $3.09, or 2.4 percent, to settle at $127.95 a barrel yesterday on the New York Mercantile Exchange. The number of outstanding crude oil futures in New York fell to the lowest in 17 months as the Senate began considering legislation to limit speculation in oil markets.

Republicans in the Senate may allow a vote on limits as soon as tomorrow, according to Alaska Republican Senator Lisa Murkowski. The House plans a vote before members start a monthlong break in August. President George W. Bush has signaled he will consider any resulting legislation.

At least 15 proposals are circulating in Congress. Measures proposed by Democratic Senate Leader Harry Reid of Nevada and his Republican counterpart, Mitch McConnell of Kentucky, would expand the CFTC’s enforcement staff and give it access to data for identifying over-the-counter traders and those making U.S.- based transactions on overseas exchanges.

Other proposals would require that oil traders report their holdings, eliminating large, untraceable purchases by individuals. Capping the number of contracts held by an investor would prevent small groups from pushing prices higher or lower, says Representative Bart Stupak, a Michigan Democrat.

Voter Anger

Lawmakers, who normally avoid major initiatives in an election year, are moving to curb oil trading as higher costs anger voters, says Kevin Madden, the former media strategist for one-time Massachusetts Governor Mitt Romney’s Republican presidential campaign. Congress got a 14 percent job-approval rating in a Gallup survey last week, the lowest in the poll’s 34-year history, partly because of gasoline prices.

“It’s one of those issues that is motivating people to vote up or down on their local legislator,” Madden says. “Members are looking to go home and give voters some sort of legislative option.”

Goldman Says `Unwarranted’

Goldman Sachs and oil traders say a poorly designed measure won’t reduce prices and may remove investment options that serve as a hedge against inflation. Speculators buy contracts to take on price risks that oil producers won’t want or aren’t allowed to accept. Oil companies use futures to hedge against price drops, says Craig Pirrong, head of the University of Houston’s Global Energy Management Institute.

In a June 29 report, Goldman, Wall Street’s most profitable bank, argued that the idea higher prices are part of a speculative bubble is “unwarranted.” The New York-based firm declined to comment through spokesman Michael Duvally.

The price reflects demand from China and India, not manipulation or excessive speculation, says William Adams, a managing director at JKV Global in Chicago, a trader of energy, grains and metals.

“Thinking that you can legislate a position in the market or that you can legislate a direction of the market would be true manipulation,” Adams says.

Acting CFTC Chairman Walter Lukken says he has seen no evidence of the type of excessive speculation or manipulation lawmakers are targeting.

Trade Groups

Trade groups are pressing Congress for restrictions. Nineteen organizations, including the Air Transport Association and the Consumer Federation of America, wrote Congress June 11 urging “meaningful reforms.”

Four signers — the Associated Builders and Contractors, the Teamsters Union, the Air Line Pilots Association and American Trucking Associations — gave $4 million combined this year to candidates for federal office. The combined amount would be the second-largest among contributors to federal candidates.

“Sophisticated paper speculators who never intend to use the oil are driving up costs for consumers and making huge profits with little to no risk,” the groups wrote. On June 6, when oil gained $10.75 a barrel, 22 barrels of oil were bought on paper for every barrel consumed, they said.

Reyes Heroles, the CEO of Mexico City-based Pemex, the third-largest importer to the U.S., said in a July 21 interview that he agreed with analysts who have estimated the price of a barrel of oil would be close to $80 excluding the effect of speculation.

Congressional Probes

The House and Senate have held at least two dozen hearings on speculation since early June, taking testimony from airline and trucking executives, exchange officials and regulators, and conducted at least three oil-price inquiries.

Chief executive officers of 12 U.S. air carriers including Delta Air Lines Inc.’s Richard Anderson, AMR Corp.’s Gerard Arpey and UAL Corp.’s Glenn Tilton said in a letter to customers on July 9 that “normal market forces are being dangerously amplified by poorly regulated market speculation.”

Lawmakers point to data from the CFTC, the federal commodities regulator, showing that speculators controlled 71 percent of contracts to buy crude oil on the New York Mercantile Exchange in April, up from 37 percent five years earlier. Oil reached a record $147.27 a barrel on July 11.

McCain’s `Reckless Speculation’

At least three Republicans — Stevens and Maine Senators Susan Collins, and Olympia Snowe — signed on to proposals backed by Democrats to limit speculation. McConnell has proposed meeting Democratic demands partway by increasing oil-market oversight.

Tony Fratto, a spokesman for Bush, won’t rule out that the president may sign legislation to curb speculation, while cautioning that Congress should avoid being “too prescriptive with market regulation.” Increasing domestic oil production is “the most important thing we can do” to signal that supply will rise to meet demand, he says.

Democratic presidential candidate Senator Barack Obama of Illinois on June 22 proposed an increase in government oversight of energy markets, a requirement that oil futures be traded on regulated exchanges, development of rules for overseas markets and federal investigations into any questionable trades.

Republican candidate John McCain, a Senator from Arizona, called June 25 for immediate steps to stop “reckless speculation” in oil futures. McCain said he would impose new regulations to assure the integrity of the markets and didn’t give details.

To contact the reporter on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net

Last Updated: July 23, 2008 00:02 EDT

Since the SEC rule was announced naked short sells without a locate are to be banned on 19 stocks.

A recent article in the NY Times, suggests that his will help the financials from getting unfairly crushed.

According to everything thing I have read a move was lobbied by a trillion dollar fund to exclude market makers from the process.

More importantly, as shorts are covered we are seeing buying as well in the sector. This allows for firms and market makers to have positions in house where a locate is not necessarily needed since the shares are on hand.

The 19 stocks selected were never deemed to be hard to borrow in the first place, so in effect this is really a net capitalization rule. If not implemented it would put the 19 stocks into a position to raise more capital. Raising capital has become harder as of late as the liquidity crunch unfolds new layers of losses.

IMO this new rule only provides more breathing room for the financials, but also new opportunity to go short the correct way. By having naked shorts cover we have gotten an incredible squeeze along with pundits on the idiot box stating once again a bottom has been reached.

Effectively, as the naked shorts get covered along with early speculative buyers firms and market makers get to rebuild long positions and have the position to short against with out a locate. What happens when those speculative longs and value positions get trimmed for profits? Well it would seem that you arise in a naked short once again.

So has anything really changed other than an opportunity to re short a troubled sector within the market place?

Also investors seeking to buy on the cheap may not get their dream price since this move is “clearing the field” of short positions. Short positions are a self regulating effect of the market place. So with less short positions out there pressure has been relieved robbing investors of prices they deem to good to pass up.

No matter what rule is put in place garbage will always find its way into the bin. As well the blame game continues siting mortgage lenders as the problem, but the banks were also involved. Uncle Sam himself should look to his behavior in this debacle instead of placing blame elsewhere. Rumor is not creating instability, fundamentals are creating instability.

http://online.wsj.com/public/article/SB121641296022866029.html?mod=2_1569_leftbox    *Must Read*

by GW

Profits in a bear trap rally can disappear quick. I could sell some EME for 10%, but I will hedge EME buys with SRS. Pair trade~ market neutral.

GW buys SRS @ $85.64

GW buys EME @ $27.85

Potentially buying into HK & CHK…I missed the low prints, but I feel the opportunity will arise again.

Just as a side note HOC is valued at $45-50 per share by a good friend of mine who is a graduate of Columbia with an MBA and 22 years in the biz for analysis and running $….

I’m still holding off on new or adds to the refining sector.

Still looking for S&P to hold 1281 today. Let us see what the Beige Book brings later today.

So yesterday was a lesson for those who are perma x.

Despite all the negativity bears had their asses handed to them like a jerk with beer muscles.

We opened with prospects of the dollar getting crushed along with any hopes for decent earnings getting extinguished like a moth to the flame.

Then suddenly the dollar corrects. It does not matter that it closed flat on its index, but rather that it did not get crushed.

Keep your eye on the dollar as your guide. How many times do I have to tell you this?

This sent oil down from its morning pop and then Dolly Dagger lost the energy to blow anything important away.

This really smacked oil down along with equities going higher on oils demise. Well not a demise, but continued correction. 

This gives hopes that the FED will have more room to wiggle and perhaps increase the chance of rate hikes. This implies help to credit spreads getting better and perhaps improving our over all liquidity crunch and economic outlook. As usual, this is a nice attempt of applying logic where it should not be for the moment.

At any rate, today is a new story to be written. The dollar is at a one month high and oil is down over 1%.

We have oil and gasoline inventories today. Some how I feel the numbers will be bearish. Secondly and most importantly we have the Beige book. But one can argue we already know the problems in the economy.

As for earnings: Well there was a lot of beats after the close and this morning~ (ISRG: 330.49 +17.94%) (RJF: 29.58 +0.41%) (TESS: 13.71 +11.83%) (AKS: 48.82 -0.77%) (UMB: 0.00 N/A) (BKR: 28.89 +4.07%) (VOCS: 33.63 +3.32%) (MRH: 15.95 +1.53%) (NSC: 70.0799 +6.68%) (PFE: 19.00 +3.54%) (WYE: 45.60 +2.06%) (PEP: 67.76 +2.37%) (CBBO: 7.21 +18.78%) (PM: 51.44 -1.17%) (MCD: 59.5744 -0.91%) (EMC: 14.13 +13.40%) (COP: 81.97 -2.78%)

As for misses the most interesting was~ (WM: 4.88 -16.15%) (WTNY: 19.47 +2.47%) (FTBK: 11.22 -1.58%) (LLTC: 30.91 -4.75%) (MBHI: 7.01 +9.53%) (TRMK: 18.00 -4.31%) (SEAB: 12.435 -13.16%) (ETFC: 3.42 -15.56%) (NVR: 579.56 +0.20%) (COST: 63.28 -12.11%) (GSK: 48.46 -0.19%)

So far on the S&P 140 companies have reported with 90 beating the street and 50 either in line or missing.

The futures are indicating a higher open. Europe and Asia are rallying off of the dollar oil issue.

I currently have no shorts on, but I will become more market neutral as we see the S&P get closer to 1300-1325. Today’s hurtle is 1281 S&P.

While earnings are getting some excited about the future, companies like (COST: 63.28 -12.11%) remind us of input costs in regards to high energy prices. Over the longer term if oil does not get smacked below and stay below $100 p/b then almost every company will have EPS pressure. Somehow I do not believe this will happen.

I will begin to get short over the next couple of days to weeks by getting long SRS and shorting  COF, NLY, HRB, & RF. While I think the absolute short term top is 1325 S&P, this market has surprised everyone many times.

As always I will build into the positions.

GLT

by GW

Wow! What an impressive rally today. I still do not know what stocks really took us higher.

Bernanke’s testimony told us last week that “dollar intervention should be done rarely” but that it “may be justified in disorderly times.”

Despite, major earnings pressure and bad guidance the bulls have turned in a win today. With Wachovia’s horrible q and the American Express guidance, it is clear that the financials have poor prospects for earnings growth.

These two companies sent the dollar reeling this morning with fears of another meltdown. By early morning trade for no reason the dollar reversed course and oil and gold went down south.

I’m not calling a bottom with the myriad of problems abound, but today’s action does suggest either more strength in the markets than investors anticipate or that the PPT has serious power. I would like to believe the former rather than the latter.

Everything aside arguments can be made for value or destruction. I would rather look towards value and protect against destruction. This means forget about the financials until you have seen a death warmed over flat line in the charts.

Buy value plays over time and hedge your bets with shorts when you feel the market tops out. Today I refrained from GLD and SRS as hedges and so far so good. For me the top is 1280 S&P…If we manage to get above this then 1300-1325 would be tops and I will definitely take on massive shorts.

http://www.marketoracle.co.uk/Article5500.html

by GW

On the idiot box today, someone mentioned that if oil continues its slide that alternative energy companies may fall by the way side too.

This is exactly the behavior that got us here in the first place!

I know there are a lot of people who read everything on this site as well as others. It is your job after reading stories to keep the stories or ideas alive.

You must pay attention and consistently get yourselves and others to constantly e-mail and write your constituents about the importance of keeping alternative energy alive.

Someone on the idiot box has been reading “GW’s” stories since there has been numerous references to themes and at times even direct quotes. The latest was regarding “frozen seniors.”

More importantly, it was said that during Nixon’s times and the oil embargo that we could become energy independent within 4 years or so.

Today, with drilling people are saying 10 years. I still do not understand this since we went to the moon in 9 years after JFK’s speech.

So, to reiterate; no matter how low oil goes we need to consistently remind our government that energy independence is of vital importance to our long term economic survival.

While currency debasement is a cuase for higher energy prices, global growth and a up and coming middle class will continue to put upward pressure on energy and other commodity prices in the future.

Lets try to get this one right, preventative medicine never hurt anyone. Arguing and bickering about which way to go will only hurt us.

T-Bone Pickens seems to be leading a charge that we all should get behind.

Despite all the negativity there are often stocks that do the opposite of the market.

For instance, all the market negativity got to me this morning and I scaled out of some (SNHY: 39.51 -2.73%).

While I still hold, my last piece here I am amazed at this companies movement.

I have also noticed the same thing with EME and SY…something I have been accumulating.

If you have the time to watch every tick you will realize that the Dark Pools are accumulating the refiners here. With oil down huge refiners should be racing higher, yet they are not. Also I have seen 15k share buys go buy on the tape with hardly an uptick in TSO and VLO. HOC and FTO are doing better since they have smaller floats.

 A small amount of shares drive the stocks down and true accumulation seems to move them incrementally higher. A sign to me that positions have not been fully aquired.

Of course there is no magical answer to finding ideas, but strange activity can alert you to good and bad plays.

I bought more EME today @ $26.82 and SY @ $30.61….I held off so far on GLD and SRS….still looking for my oil and gas plays for cheaper than we have offered today.

GLT

by GW

Wow, we were set for a major pitfall this morning and then the market reverses itself back to flat line. Now going positive on the DOW. A magic trick brought to you by GE.

We of course will not know till the close what is really occurring.

Oil is the key driver here for equities showing resilience,’cause nothing else is keeping this market off 200+

Here I go again, with the Sybil bipolar shit; I’m buying EME and SY today with a hedge in GLD and possibly SRS.

I did sell another 1/3 of SNHY this morning….see the low - $37.24…that was me, but I booked a 16% profit. I will hold the last piece for earnings on August 5th.

It is okay to loose $500 million over at IMB; with the FDIC predicting a few hundred IMB’s where will this leave us?

Paulson is pitching this morning; after Wachovia, Apple, Home Depot, Texas Instruments, American Express…..

Hey are you noticing a trend here…Icons going down.

GE has a surprise to prop the DOW up today with a $8 billion deal for mid east growth. Abu  Dhabi and Mubadala will invest monies and own up to 10% of GE buying stock at free will in the open market.

No doubt another safety net of the Global Plunge Protection Team’s wide reach. Thank you for your protection I feel much better.

I thought we were living in America…What about U.S. growth?

I’m not asking for a New Deal here, but lets get this growth started in this country. As much socialism that is being applied to save this country; so should it be used to spur on growth.

Not to complain, but we could get people to work in and on reservoirs, hydro electric plants, solar farms, a nuclear power plant, coal to liquid conversion plants, natural gas fueling stations, etc.

Are we going to rebuild this country by sending people to work at SBUX or WMT?

“A strong dollar is important for our nations interest”- Paulson- he is increasing confidence in our economy.

Why do all these talking heads start stuttering when asked a question?

Alright enough bull: I’m getting nervous here so I will buy gold, foreign currencies, income generators, and go short just about anything while maintaining 60-70% cash.

I still think oil is down for the count until mid to late winter baring any serious hurricanes. So I’m looking at DUG again, and to buy my favorites 5-10% cheaper…HK, PVA, CVX, XOM, & CHK. USO and UNG I feel could be bought cheaper than 5-10%….maybe 15-20% if were lucky.

Key levels to look for are 1251, 1244, &1239 S&P. If we break these levels on a closing basis then I feel we test 1200 again. I’m telling you this market is starting to make me bipolar.

GLT

by GW

More socialistic intervention may spell trouble for oil and gold.

http://www.marketoracle.co.uk/Article5500.html

Fact: Worker productivity has grown 76% over the last 8 years while real wages adjusted for currency debasement (inflation) has fallen 2%.