Oil is bouncing nicely. God, almighty, take it back above $70.
But for oil and energy names it was too little too late. I am already at my 20% loss limit, getting carved up by those same energy names and down another 5% today. Oil did the trick; you don’t have energy services companies cut 50% in a single, short holiday trading session and not have follow through.
The margin calls are flooding in. If you were out in front of me, there is a very good chance you are already dead. If you’re alongside me, make no mistake I am afraid. It is only through sheer force of will that I haven’t buckled yet, watching a +25% year twist into a -20% year in the span of a quarter. Actually, I am not watching it too closely.
If oil can prove to have bottomed, we will correct sharply higher. I have been through pages upon pages of research reports, and all calls for further downside predicate on price action, whereas all fundamentals predicate on a return to higher pricing. However, if the oil price should be prolonged from recovery, the situation shall become most dire. For now, hedging and reality, I pray, show up in time.
As for those of you on the Twitter, talking about how obvious this move in oil was and how your service just absolutely nailed this move…choke.
I have the list of traders I follow that actually called this collapse, or at least have been on it from September. My name used to be there, but has since been scratched off. The list has dwindled to a small select number. You are probably not on it.
There was nothing easy about this move. Nor was it obvious in any way. It has spun far past rational into erratic. It has destroyed fortunes in the blink of an eye. It is deceptive by its very nature.
I implore you, if you follow such a person, making half-ass lazy references to such a move as this, to “fire” them. They are a dark voice in your mind, that will lead you to ruin. This move was hard; very hard. It was painful and emotionally draining. I may appear calm, but that is an illusion, spun from proof reading everything before I post. In fact, in the moment, I am nervous and weary.
Demeaning this truth with cheap talk is insulting. There is no method on Earth that could have absolutely caught the extent of this decline. People I know with barely a toe in the sector have lost 5%, just because. If you were diversified but enthusiastic, you’re down 10%. And if you were anyone actually invested in the US fracking boom, you lost 20-40%, inside of 3 months.
But if you can talk about that without batting an eye, you aren’t invested at all. And I know it.
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By sheer luck, I reduced my position in HCLP last week off the nice run it had from $40 to $48. But this recent fall still stings.
And, I’m invested in ESV (now 30% off my cost basis).
Thank you for being transparent, Mr. CT. Here’s to better days ahead.
down 4% in two days in a well diversified
portfolio and I don’t know if it’s over yet
The problem with this kind of drop is that, even if you had let go half your holdings and kept them off, with sublime timing, you’ve still watched your winnings get cut in half. That is the best you could be doing right now.
If you were unlucky enough to be holding the wrong thing, you’re even worse than that. I mean, BAS from $29 to (now) $8?? ARE YOU FUCKING KIDDING ME?
You can’t risk manage something like that.
Not sure I agree here, Cain. You can absolutely risk manage a move like that. In fact, doing nothing from $29 to $8 is a complete opposite of “management”. Not trying to talk shit because I’ve done it too. Just want to make a point that a lot can be done.
But there you are wrong. I did quite a lot from $29 to $8. Namely, selling half the position near $29.
What I am referring to is that, as of Wednesday, Nov 26, I was -5% for the year. And when I woke up on Friday, Nov 28, I was -15% for the year, all quite instantaneously. By the end of Monday, December 1, I was -20% for the year.
You cannot rationally prepare for that kind of drop on the back of such a stupid announcement. That can hit you anywhere, anytime.
yes, nothing can be done about gap-downs. What I was trying to say is that there was opportunity to do something in October in the mid teens. Obviously hindsight is 20/20. Needless to say, you did not have a stop in place. Trading with no stops is akin to thinking that stocks get more attractive as they go down… very dangerous.
BAS to 8 – nuts
Unbelievable day. Tried some MILL when they released that news of them hedging more than 90% of their production at over 90 bucks/bbl. Silly me. Dropped like a rock anyway.
I got clipped for 3.5% a few weeks ago as I had too much oil. Luckily I dumped those names and went into midstream plays with heavy hedging. Amazingly enough all those hedges have been burned off – hopefully we’re done for a while.
One recent example a pipeline – I put on 9% of hedging and that disappeared in 2 days! This is a pipeline that gets paid in volume not oil price,
We’re past the names individually. The damage has been so extensive, we’re now at the part where everything starts getting sold to meet the margin calls. Retail had way to much exposure to this sector; weak money, all in.
One big advantage I’ve been using is trading up in quality on previously pricy names since the baby is being thrown out with the bathwater.
This is the correct strategy. Sure, everyone feels great about themself when they pick an obscure no name stock that quadruples in three months but for everyone of those there are a dozen ATPGs, GMXRs and ENDs.
Most of us are better off using wholesale panics like this to load up on the likes of CVX, RDS, XOM, etc. I have the ATPG blow up to learn from.
Po Pimp returns
Basic’s 2019 bonds are now trading at 15 under par … 12.5% yield to maturity.
Perhaps they can be on the Winter edition of the investment report?
There is a mathematical filter being used to locate dividend stocks in the report. I feel that sidestepping that rudimentary process to advice readers to buy debt in a sensitive position I already own may be…dubious.
Cain, can you please clarify why NADL has chosen to focus their fleet on harsh drilling environments? What is the reason for specializing in this niche? Is it cheaper to get oil, is the market less competitive, are the yields greater? Just really dont understand why they would focus on specifically harsh, more difficult extraction areas. Thanks
It’s just their area of expertise. If you have oil under the sea, they can get it out.
Deep sea is one of the most expensive. I’m not interested at all in the name following the oil plunge and the Rosneft deal caving.
CT, could BAS be a potential buyout once things settle down a bit? It seems possible with lower oil, some of the smaller guys could get bought up in these periods of overselling/fear. I’m trying to see any light at the end of the tunnel
I honestly haven’t seen any sign that their business has slowed as of yet. Maybe it comes. They have a revolving credit line good for about 4 months of solid work. And they’ll be quick to idle and conserve cash. They are in the same place they were at back the first time this happened, then from natural gas.
Thanks Caine for the posts these past few days. I guess misery loves company but it helps to see how you work through this. Its been an education.
I thought the rosneft deal was uncertain , not caving. Isn’t nasl incorporates in Norway? They’re not part of eu, couldn’t NADL defy sanctions? Thanks Cain!
Here’s the situation:
NADL without Rosneft: almost worthless
NADL with Rosneft: $10 a share
I took a gamble, but I’m not sticking around, trusting a Russian promising spring.
Look what happened to Napoleon, gambling on fair Russian weather…
BAS Webcast 12/3/14
http://wsw.com/webcast/cowen20/bas/
There is much more blood to be spilled before the bear is content and satisfied.
When he is sated…. that is the time to buy. Oil stocks were due for a correction and I believe it is about over. Time will tell how long it will take to reverse but there will always be a need for crude until the day fusion becomes viable. So long term foreseeable future,oil and related stocks will trend up significantly. There is much political stink behind the current meltdown. Players in the world oil market are conducting themselves in unusual ways. Enough to surmise “back room” deals/agreements are being struck. The target being Mr Putin and his grandiose visions of world domination….
(laughter) I think we’re past referring to what is happening in the oil markets as a mere “correction.”
Why would fusion ever negate the need for crude oil, I wonder?