Finishing the day, I’d like to remind you that sometimes things can get extremely out of hand – by a factor of 6 beyond anything you ever thought possible.

Resting in my office from a busy day, I’m finally sitting down to catch up on some pieces and finding my breath.

$ERY, after all, just smashed through all moving averages, and is now on the high side of the range, inside of a single session. ERY is basically a trade against gasoline and to a lesser extent, oil. Does that feel like “normal” behavior to you.

The plush leather of my chair beneath me radiates heat from the sunlight leaking in. And the cold air of the 9th floor office mingles with differentials of warmer current from the dry, ninety degree heat from outside.

There were an expansive multitude who were counting on more easing. I warned you incessantly that this was not such a straightforward issue. I cannot help you now.

Far below, I see the many talentless hedge fund managers caught long commodities beyond their capacity to handle.

The margin calls are about to begin.

Comments »

What a wonderful weekend surprise, I received. Just read for yourself.

TOKYO — Japanese Prime Minister Yoshihiko Noda on Saturday ordered the restart of two nuclear reactors, a move that returns Japan to atomic power but also runs counter to public concern about its dangers.

The central government’s decision clears the way for western Japan’s Kansai Electric Power Co. to refire a pair of units at the Ohi plant, whose four reactors — like others in the country — were idled after last year’s Fukushima Daiichi nuclear accident.

Although engineers will need several weeks to power up Ohi reactors 3 and 4, Noda’s announcement formally breaks the stalemate in a months-long debate about Japan’s short-term energy plan. A majority here argued that the earthquake-prone country should back away from nuclear power because of safety concerns. But Noda and his powerful lieutenants argued that Japan’s economy would wither if the country remained nuclear-free and short on energy.

The restart at Ohi could open the door for reactors to come back online elsewhere in the country, and Noda has said that the government will make judgments “on individual cases,” based on safety.

“We are determined to make further efforts to restore people’s trust in nuclear policy and safety regulations,” he said Saturday, according to the Kyodo news agency.

It would seem the rumors of nuclear energy’s demise were greatly exaggerated. The Japanese, residents of ground zero to one of the worst nuclear disasters of all time, have counted the beans, weighed the risks, and still decided that a life without nuclear is not a life that can be lived.

Much of this is the short term push of the moment. If Japan had not begun to restart at least some of their reactors, their island nation would have been plunged into darkness. The fear stricken populace, the majority of which are against this restart, may say they don’t want nuclear energy. But believe me, they would have hated the rolling blackouts more.

It was a necessary step to ignore the will of the people and get those plants back up and running.

Now, perhaps nuclear energy will still be driven from Japan, in a slower, more manageable and adaptable process; but I doubt it.

Once these plants are up and running, given a few years of disaster free time to clear the air, the majority of Japan will sink back into a comfortable indifference to nuclear power – and by then, it goes without saying that the nuclear power industry will have fully recovered from the shock of the Fukushima disaster.

Unfortunately for those of you who are ardently anti-nuclear, and are pushing Japan to shut down, it isn’t much of an option. As an isolated country, the required logistics to keep other kinds of power plants up and running are inauspicious. Remember it’s not just a coal plant. It’s a coal plant, plus the shipping industry across ocean waters. It’s not just a gas plant. It’s a gas plant with no possibility of constructing pipelines to carry fuel. And if you’re worried about getting that delivery of gas on time, or at a reasonable price, the storage infrastructure required to carry excess reserves to weather price spikes or shortages would be immense – Japan isn’t exactly renowned for its wide open country and blessings of free space.

Nuclear just makes sense for Japan, provided they reassess the risks and take extra precautions. The effects of logistic errors on the delivery of power in a nuclear setting are negligible. None of the other power generation methods provide the kind of stable energy needed to sustain modern technology, without also opening the country up to undo influence from trade of fuel, or risk of supply disruption.

Expect Germany to cave next, probably in the next 3 years, as the debt crisis continues to force them to abandon expensive alternative energy methods, leaving them the false choice of continuing with nuclear, or switching fully over to oil, gas, or coal – which thanks to the euro’s troubles, are all about to get much more expensive in Europe.

My CCJ position is on the cusp of victory.

Comments »

I came closer than I care to admit, in the final fifteen minutes of trading, to selling my entire ERY position, going to massive cash, and calling it that.

So close, yet I just can’t do it. The prospects of brutal selloffs in energy names are just too tantalizing to give up on.

The contraction in Europe is not stopping this weekend. Their problem is far too immense for that. No, this is not a simple issue of them simply rebranding themselves, fools.

They have daunting sums of debt all coming due at this exact moment. That’s what’s really dragging them back into the abyss. Not fucking confidence…

Nothing they do now will change that.

Pardon me, but you do not simply absorb twice your outstanding monetary supply over a one year time span, without there being some fucking repercussions.

Hyperinflation is certainly a possible outcome here, so I wouldn’t bet against the commodities outright, just now. Particularly if the Europeans are organizing themselves, they may steal up to do something desperate. Eventually, the commodities will collapse from this, from sheer demand destruction, but they can double in price between then and now on nothing but fear and fleeing hot money.

Rather, I’m focusing on the suppliers of refined products with ERY. If defaults shock the region, or they simply try to print away their problems – either road leads to further economic contraction. If you don’t like that, go back in time and bitch smack the idiots who set the world up for this.

I don’t care, though. So don’t complain to me about it.

But in order to placate my mind a little, and lock in some more of these recent gains, I raised my APC position to full size, for $64.06 a share. I love the company, and even if it sells off, I can be at peace owning it. It will complement the ERY shares nicely, forming a sort of partial hedge.

Best case scenario for me is a brutal selloff that lets me unwind the ERY shares for much higher, while leaving me owning everything I want, with cash to strategically add.

Comments »

I’m adding a little more commodity exposure going into the weekend, mostly to offset my ERY position. Same concept as APC. I like my chances for another bleedout next week, because I have ZERO faith in the European Union.

Also, I really like silver prices at these levels. Long term, silver is a screaming buy, for a myriad of reasons, not overlooking our own debt problems here at home and the fact that I have ZERO faith in about 2/3’s of the US Government.

I’m actually looking to expand my holding of physical silver, but if I were to do that I’d need even lower prices; somewhere between $25 to $26 an ounce. If we get another liquidation (perhaps of some arrogant hedge fund type?) I would be compelled to make the most of the situation.

Thus, this purchase is mostly for lower exposure just in case something extroardinarily reinflationary hits over the next 48 hours.

In the event I’m right and we run lower on Monday, I’ll be well on my way to taking profits in ERY. And, at such a point that selling began to become overpowering, and intervention on behalf of markets looks inevitable, I will be selling SLV, creating a loss, and rolling over funding, plus some extra, into AGQ – a 2X product. Plus that purchase of physical we talked about.

These are precarious times. Be safe.

Comments »

Issue forth and spay them. Let none go unpunished. Into the close, their cheerful demands of sugar will be met on the receiving end of a sharp instrument, piercing their naked breast.

ERY going green for the day.

Commodities and idiot, untalented hedge fund managers over allotted to them being pushed to the point of desperation.

Kill them all, until Bernanke is forced to intervene in two weeks.

Two…LONG…weeks…

Comments »

Those were some great numbers we got this afternoon. Manufacturing contraction seems to be the accepted normal now, whereas just a month ago it was an unthinkable possibility.

Up until the very end of last week, crude oil was way ahead of these realities. It foretold all of this, through the massive inventory builds we were getting week after week after week. In fact, the truth is probably much worse, because off balance sheet storage means that the contraction could have been occurring well before those signs leaked into the mainstream.

Appropriately, then, crude oil has been greatly underperforming oil byproducts. It was assumed that all was well in the broad economy, despite crude’s slackening (actually, I would say people were beginning to price in outperformance by select manufacturing because of lower crude prices…until today that is).

Nowhere can this be seen more clearly than in the comparison of UCO, SCO, ERY, and ERX. Compare UCO to ERX, or SCO to ERY, and you will see a consistent picture; these two pairs have actually been performing almost perfectly correlated over the last few months.

But if we are experiencing economic/manufacturing led contraction, then that should not be the case.

The distinction between oil and gas should come directly from their fundamental qualities – oil can be stored indefinitely while gasoline is only good for a short time before its molecules break down into simpler, non-combustible forms.

Gasoline, depending on whether or not it’s treated, can last from anywhere between one year at max, to as short as 30 days.

This is the sole reason I have been resisting calls by pundits that gasoline prices may not reverse along with oil – the brunt of their argument seems to rest on gasoline stocks being at historical lows not seen in almost two decades.

However, when you look at gasoline demand, that tightening supply makes perfect sense. If you don’t use the gasoline, you lose the gasoline. Thus, the lowering stockpiles are probably a perfectly rationale response to slowing demand. And yes, if we are slowing, gasoline prices will be contracting sharply ALONG WITH SUPPLY.

Ergo, in an environment of demand destruction, I would expect products like ERY and ERX, which are more correlated to the price of fuel, to see generalized MULTIPLES of whatever UCO or SCO are doing. ERY should be going up twice as fast as SCO, etcetera.

Case in point, that is exactly what happened last year when we rushed lower.

Today, I’m starting to see more of that – while SCO is (or was, earlier) up, ERY is absolutely running.

That was one of the reasons I sold SCO, rather than ERY. Even though I missed out on another 7-8% last Friday from SCO, I really should be seeing significantly more gains from the energy short.

Comments »