Paying Lip Service To Rate Hikes

1,175 views

The Fed are “unlikely to hike rates in June”, according to the people who’s sole decision it is to hike rates in June.

Is it supposed to make me comfortable that people with absolute discretion to make a decision talk about themselves from a probabilistic, 3rd party frame of reference? If I walked around these halls muttering “Cain is unlikely to stab someone today”, I imagine I would get admitted.

We’re at the point where we talk about rate hikes because that’s what we’re supposed to do. That’s professional of us, to pretend like we earnestly believe that rates are at any point in the foreseeable future set to rise. It’s professional courtesy, you see.

What’s not professional (and maybe just rude) is to state the obvious; rates aren’t going higher and the Federal Reserve isn’t in control of the ball anymore. It’s not just that they won’t raise rates. They cannot raise them.

Not being able to do something so simple as raise interest rates from the lowest they have ever been is disconcerting. It’s not comfortable to admit.

So a few times a year we get together and in very serious voices hold loud talks concerning whether the big rate hike is imminent. But that day isn’t coming anytime soon and deep down, each of us knows that.

And if, it should perchance, that a major correction should hit us in this state of affairs, all confidence in the Federal Reserve would be completely broken, they would become the butt of jokes, and major change would rip through the system.

I Seem To Be Experiencing A Correction

761 views

Welcome back and how I did miss you all while I was away. My 9th floor office had that cold air of abandon wafting through it for the better part of forty-five minutes, before the warmth of the hearth drove it out.

The recent days have brought a correction in my positions, with BAS diving back below $10, HCLP testing $30, and some others also wallowing. It is hard for me to read too much into this, at the moment. The EURUSD is running back to test 1.10 and bonds are rallying again. At hand is the question of whether we are to retest the lows of the damage or will find support.

But for me this question is superficial in a sense. BAS in particular was up a great sum and so though we have corrected significantly, it’s nothing I wouldn’t expect from a distressed asset. My positions are derived from non-technical details mostly so while it’s difficult to watch this sort of thing play out, it’s not material.

The summer months are upon us now.

A Break From Vacation

1,411 views

Hello all and good morning. Welcome to the 9th floor, where Cain Hammond Thaler has returned for a few hours in this dreary rainy afternoon to work through some paperwork, before gathering his coat and hat and heading out the door again.

The big news for the 9th Floor out last week was earnings out of HCLP and ALDW.

HCLP took a hit on news that they offered some concessions to customers, who are all hurting from low oil prices and desperate to get their operating costs down. It’s unclear what the value of those concessions are to me, at this point, but the trade off here is that for momentary pricing concession, HCLP got customers to lock into greater volumes and contract durations. Provided those customers survive (and HCLP is obviously betting that they will), HCLP is sitting on a pretty payoff down the line.

Outside of that, HCLP also entered into a partnership to develop an energy rail hub in the Permian and DJ basins. Does this sound like a company prepared for US fracking to dry up? HCLP is betting directly that we’ll be back to good times in the US oil market by the second half of this year.

ALDW announced a solid earnings beat, with earnings per share rising to $0.39 per share, up from just $0.01 per share from the same quarter in 2014. Income available to shareholders rose to $0.30 per share, up from $0.06 year over year.

ALDW is benefitting greatly from the lower WTI prices. This company is the hedge to my positioning, should I prove dreadfully wrong. If oil prices keep spiraling lower, ALDW should help keep my head above water as their operations outpace from cheap input costs.

The beauty about ALDW is that yes they are doing great because WTI prices are way down, but when I looked through their books I liked them so much I would have bought them even if it wasn’t.

That’s all for now friends. I shall see you later this week (turns the light off).

I’m On Vacation

1,130 views

I didn’t realize I was on vacation; it sort of sneaked up on me.

May brought the turn of the weather in Michigan, and it is just so beautiful out that I cannot bring myself to sit in front of a computer. So I am out of work until next Friday and spent the entire day doing some gardening around the house.

Gardening is one of those activities that calms me down. It’s back burning work and tires you out. You’re under the sun with fresh air bending around you. Much superior to any time spent in a stuffy office, where the air circulation was modeled after a submarine.

I’ve been keeping a soft eye on the markets and generally speaking here is my position: foreign sovereign bonds have inverted themselves sharply from showing severe distress to a much more favorable normalcy. Paying countries to hold onto your money is terrible practice and a bad omen. The EURUSD has also been acting favorably, staging a rally off the lows. These things could be suggesting a bought of good data out of Europe finally, which is being priced in by markets (or not). For the moment, they have led a strong rebound in oil and have helped reverse the oil glut which has been building in the US.

The oil build we’ve been seeing has two components. The first component is what you might call global demand for oil, which is in question following weak data out of China, Europe, South America, North America…okay why am I writing this?…the whole planet Earth.

But the second component is much more localized. An uncompetitive dollar has actually acted to erect a trade wall around the US, which is in a sense trapping our oil products domestically. This has led to weak demand for US industrials and so our oil is pooling.

Global demand will still weigh down things, but if the second point is corrected, then global demand notwithstanding you could still see the US oil glut correct itself very quickly.

A spate of oil inventory draw downs and good news for US oil names is not then directly dependent on strong growth numbers around the globe. That would obviously help but adjustments to the dollar could serve much the same purpose.

That’s more or less why US oil names have rallied so hard recently.

For my part I am hunkered down and will be avoiding making transactions. But I like what I’m seeing in terms of the EURUSD and bonds.

Something to be cautious about however; you could also argue that low bond yields have forced pensioners and fixed income positions to take on additional risk by chasing stock prices for dividends to supplement yield. In that sense, stocks are rigged with a weak element that could quickly cascade. Positive bond yields are good, but too much yield is bad. If yields run too high, I wouldn’t be at all surprised if it sparked a significant correction.

For the moment, the negative yield environment was a pretty recent phenomenon, so let’s not get ahead of ourselves. But we do need to see bonds set a floor at some point in the not too distant future or my optimism could turn dark in a hurry.

BAS Exhibits Classic 100% Upside Reversal

1,741 views

In December, for like two days, I sold out of BAS. I was done.

And then I was right back in again. I think now I can finally give a small sigh of relief. I mean, my chest is still tight, but at least BAS is a +50% winner for me again (my cost average is somewhere in the $7 range).

I’m sticking around in these names for longer yet. I understand that you do not believe. But I have this strange conspiracy theory ringing in my ears.

That this is all just one big gigantic attempt to fuck retail investors and make off with their toys.

One day, we’re all going to wake up and it will be like oil was never in trouble. The Saudi’s will flip a switch, toast to their good friends in Iran (who will perhaps be sunbathing with Exxon Mobile executives) and everything will be ’90’s summer fun again.

It doesn’t make sense, I know. I don’t have any proof, or evidence, or even anything that looks like “sanity”. But it’s going to happen, mark my words.

Anyway, I’m +16% for the year, sort of 1/3rd-ish of the way out of the hole I made in 2014.

Will Somebody – Please – Put A Stop To All The Law Firms

1,154 views

Will you look at the AEC headlines on Yahoo?

Following the buyout offer for the company, every shark and his brother is trying to get in on the feeding frenzy.

There is bound to be a comment section retort that “well, this is the job of law firms, to weed out the bad deals.”

Shareholders just got bought out for a 20% premium above market, and I have followed AEC long enough to know they are getting a great deal on this.

You and I both know, somewhere in the back of our minds, that this is not about protecting shareholders. There will be a time and a place for that discussion, and it is not now.

This is about blackmailing a corporation by pigeon holing them into a godless court system we have erected, whereby they can have two very unsatisfactory choices: 1) spend years jumping over capricious judicial hurdles or 2) pay off the law degrees.

The tasteless recourse is to pay the law firms, even when there is no real fair claim in play, just to tidy things up. Tell, what is more dangerous to shareholders; a couple percent on buyout offers orchestrated by people you can theoretically fire and overrule, or an environment where any jackass over the bar can hold you up for vast sums of money on a whim?

I am sorry if I’m mistaken, as I don’t follow the legal landscape very closely for reasons best described as “contempt”, but I don’t remember it always being this bad. It was just one or two suits, a few years ago.

Now, a board of directors can barely do anything without having eight class-actions stuffed down their throats.

I’ll take the MBA’s over the Juris Doctor’s, thank you. Someone needs to get this under control.

Paying Lip Service To Rate Hikes

1,175 views

The Fed are “unlikely to hike rates in June”, according to the people who’s sole decision it is to hike rates in June.

Is it supposed to make me comfortable that people with absolute discretion to make a decision talk about themselves from a probabilistic, 3rd party frame of reference? If I walked around these halls muttering “Cain is unlikely to stab someone today”, I imagine I would get admitted.

We’re at the point where we talk about rate hikes because that’s what we’re supposed to do. That’s professional of us, to pretend like we earnestly believe that rates are at any point in the foreseeable future set to rise. It’s professional courtesy, you see.

What’s not professional (and maybe just rude) is to state the obvious; rates aren’t going higher and the Federal Reserve isn’t in control of the ball anymore. It’s not just that they won’t raise rates. They cannot raise them.

Not being able to do something so simple as raise interest rates from the lowest they have ever been is disconcerting. It’s not comfortable to admit.

So a few times a year we get together and in very serious voices hold loud talks concerning whether the big rate hike is imminent. But that day isn’t coming anytime soon and deep down, each of us knows that.

And if, it should perchance, that a major correction should hit us in this state of affairs, all confidence in the Federal Reserve would be completely broken, they would become the butt of jokes, and major change would rip through the system.

I Seem To Be Experiencing A Correction

761 views

Welcome back and how I did miss you all while I was away. My 9th floor office had that cold air of abandon wafting through it for the better part of forty-five minutes, before the warmth of the hearth drove it out.

The recent days have brought a correction in my positions, with BAS diving back below $10, HCLP testing $30, and some others also wallowing. It is hard for me to read too much into this, at the moment. The EURUSD is running back to test 1.10 and bonds are rallying again. At hand is the question of whether we are to retest the lows of the damage or will find support.

But for me this question is superficial in a sense. BAS in particular was up a great sum and so though we have corrected significantly, it’s nothing I wouldn’t expect from a distressed asset. My positions are derived from non-technical details mostly so while it’s difficult to watch this sort of thing play out, it’s not material.

The summer months are upon us now.

A Break From Vacation

1,411 views

Hello all and good morning. Welcome to the 9th floor, where Cain Hammond Thaler has returned for a few hours in this dreary rainy afternoon to work through some paperwork, before gathering his coat and hat and heading out the door again.

The big news for the 9th Floor out last week was earnings out of HCLP and ALDW.

HCLP took a hit on news that they offered some concessions to customers, who are all hurting from low oil prices and desperate to get their operating costs down. It’s unclear what the value of those concessions are to me, at this point, but the trade off here is that for momentary pricing concession, HCLP got customers to lock into greater volumes and contract durations. Provided those customers survive (and HCLP is obviously betting that they will), HCLP is sitting on a pretty payoff down the line.

Outside of that, HCLP also entered into a partnership to develop an energy rail hub in the Permian and DJ basins. Does this sound like a company prepared for US fracking to dry up? HCLP is betting directly that we’ll be back to good times in the US oil market by the second half of this year.

ALDW announced a solid earnings beat, with earnings per share rising to $0.39 per share, up from just $0.01 per share from the same quarter in 2014. Income available to shareholders rose to $0.30 per share, up from $0.06 year over year.

ALDW is benefitting greatly from the lower WTI prices. This company is the hedge to my positioning, should I prove dreadfully wrong. If oil prices keep spiraling lower, ALDW should help keep my head above water as their operations outpace from cheap input costs.

The beauty about ALDW is that yes they are doing great because WTI prices are way down, but when I looked through their books I liked them so much I would have bought them even if it wasn’t.

That’s all for now friends. I shall see you later this week (turns the light off).

I’m On Vacation

1,130 views

I didn’t realize I was on vacation; it sort of sneaked up on me.

May brought the turn of the weather in Michigan, and it is just so beautiful out that I cannot bring myself to sit in front of a computer. So I am out of work until next Friday and spent the entire day doing some gardening around the house.

Gardening is one of those activities that calms me down. It’s back burning work and tires you out. You’re under the sun with fresh air bending around you. Much superior to any time spent in a stuffy office, where the air circulation was modeled after a submarine.

I’ve been keeping a soft eye on the markets and generally speaking here is my position: foreign sovereign bonds have inverted themselves sharply from showing severe distress to a much more favorable normalcy. Paying countries to hold onto your money is terrible practice and a bad omen. The EURUSD has also been acting favorably, staging a rally off the lows. These things could be suggesting a bought of good data out of Europe finally, which is being priced in by markets (or not). For the moment, they have led a strong rebound in oil and have helped reverse the oil glut which has been building in the US.

The oil build we’ve been seeing has two components. The first component is what you might call global demand for oil, which is in question following weak data out of China, Europe, South America, North America…okay why am I writing this?…the whole planet Earth.

But the second component is much more localized. An uncompetitive dollar has actually acted to erect a trade wall around the US, which is in a sense trapping our oil products domestically. This has led to weak demand for US industrials and so our oil is pooling.

Global demand will still weigh down things, but if the second point is corrected, then global demand notwithstanding you could still see the US oil glut correct itself very quickly.

A spate of oil inventory draw downs and good news for US oil names is not then directly dependent on strong growth numbers around the globe. That would obviously help but adjustments to the dollar could serve much the same purpose.

That’s more or less why US oil names have rallied so hard recently.

For my part I am hunkered down and will be avoiding making transactions. But I like what I’m seeing in terms of the EURUSD and bonds.

Something to be cautious about however; you could also argue that low bond yields have forced pensioners and fixed income positions to take on additional risk by chasing stock prices for dividends to supplement yield. In that sense, stocks are rigged with a weak element that could quickly cascade. Positive bond yields are good, but too much yield is bad. If yields run too high, I wouldn’t be at all surprised if it sparked a significant correction.

For the moment, the negative yield environment was a pretty recent phenomenon, so let’s not get ahead of ourselves. But we do need to see bonds set a floor at some point in the not too distant future or my optimism could turn dark in a hurry.

BAS Exhibits Classic 100% Upside Reversal

1,741 views

In December, for like two days, I sold out of BAS. I was done.

And then I was right back in again. I think now I can finally give a small sigh of relief. I mean, my chest is still tight, but at least BAS is a +50% winner for me again (my cost average is somewhere in the $7 range).

I’m sticking around in these names for longer yet. I understand that you do not believe. But I have this strange conspiracy theory ringing in my ears.

That this is all just one big gigantic attempt to fuck retail investors and make off with their toys.

One day, we’re all going to wake up and it will be like oil was never in trouble. The Saudi’s will flip a switch, toast to their good friends in Iran (who will perhaps be sunbathing with Exxon Mobile executives) and everything will be ’90’s summer fun again.

It doesn’t make sense, I know. I don’t have any proof, or evidence, or even anything that looks like “sanity”. But it’s going to happen, mark my words.

Anyway, I’m +16% for the year, sort of 1/3rd-ish of the way out of the hole I made in 2014.

Will Somebody – Please – Put A Stop To All The Law Firms

1,154 views

Will you look at the AEC headlines on Yahoo?

Following the buyout offer for the company, every shark and his brother is trying to get in on the feeding frenzy.

There is bound to be a comment section retort that “well, this is the job of law firms, to weed out the bad deals.”

Shareholders just got bought out for a 20% premium above market, and I have followed AEC long enough to know they are getting a great deal on this.

You and I both know, somewhere in the back of our minds, that this is not about protecting shareholders. There will be a time and a place for that discussion, and it is not now.

This is about blackmailing a corporation by pigeon holing them into a godless court system we have erected, whereby they can have two very unsatisfactory choices: 1) spend years jumping over capricious judicial hurdles or 2) pay off the law degrees.

The tasteless recourse is to pay the law firms, even when there is no real fair claim in play, just to tidy things up. Tell, what is more dangerous to shareholders; a couple percent on buyout offers orchestrated by people you can theoretically fire and overrule, or an environment where any jackass over the bar can hold you up for vast sums of money on a whim?

I am sorry if I’m mistaken, as I don’t follow the legal landscape very closely for reasons best described as “contempt”, but I don’t remember it always being this bad. It was just one or two suits, a few years ago.

Now, a board of directors can barely do anything without having eight class-actions stuffed down their throats.

I’ll take the MBA’s over the Juris Doctor’s, thank you. Someone needs to get this under control.

Previous Posts by Mr. Cain Thaler