Uranium spot price is now back above $40. Price for uranium fuel has not been this high in years.

No joke, the recovery is now.

Long CCJ.

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The oil market is in the middle of another sharp leg lower. This is going to jolt the players and be painful. Today will not be fun for me. I’m going to have to grin and bear it and distract myself with a bag of popcorn and the spectacle of fifty million hardcore Democrats breaking down live on public access television tonight.

The impetus for the announcement might be, allegedly, a December price cut by Saudi Arabia to US markets.

This is the key takeaway here:

Top global exporter Saudi Arabia increased its December official selling prices (OSPs), relative to benchmarks, to Asia and Europe on Monday, but lowered prices to the United States, a smaller export market.

Which is to say that Saudi Arabia actually raised prices in December.

Guys, come on. Saudi Arabia’s oil market is Europe and Asia, almost entirely. They don’t sell diddly in the United States. Our oil comes from South America and Canada. You can easily check this via public records – the EIA, I believe it was, keeps detailed records about global oil sales, including by country of origin and destination.

If Saudi Arabia is lowering prices on little to no volume sold, then Saudi Arabia is not lowering prices.

In practice, this leg lower probably has less to do with Saudi Arabia and more to do with what is to be expected in a correction like this. This is not the first time I’ve been in a position that bleeds out, to see a moment of stability followed by more sharp bleeding.

APC comes to mind back when that oil well blew in the Gulf. Uranium prices did the same thing. And shares of gun manufacturers after Sandy Hook.

You get a big blowup, some tepid stability, then another collapse.

The second collapse is usually the best buying point. Usually…

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The market intelligentsia on Twitter is in quite the state of excitement, narrating this late day move lower in WTI to death.

Yes, it is true that WTI is down today. But Brent is holding up fairly well. The most consequential relationship here with the most force behind it is the WTI-Brent spread, not the price per barrel of WTI or Brent exactly.

The WTI-Brent spread exists for stronger logical reasons, whereas the price per barrel of either has historically been prone to large 20% swings played out every few years.

The WTI-Brent spread was over $10 just this past 12 months. What we are seeing, following this major blowout of oil, is constructive so long as the WTI-Brent spread reestablishes itself. So long as the spread is being repaired that is indication of a healing market. I view the EURUSD and European economics as being instrumental in this blowout in the first place.

The confluence of events of European growth disappointments, EURUSD weakness, and Saudi Arabia oil announcements being construed as evidence of consumer weakness (read EU) all led us to where we are. Much of the fear about the oversupplied oil market rested on EU failure to grow and absorb excess. The IMF report set off the panic.

In a sense, it was Brent that dragged down WTI in the first place, as the spot difference between the two evaporated completely.

The WTI-Brent spread reestablishing itself is therefore wholly healthy. This is the first step to a recovery in the price of oil. The spread reestablishing marks a bottom and begins the process of rebidding oil back to the $100 mark. The temporary lull in pricing will also do wonders to ease off global consumers.

For the moment, we cannot say that WTI is selling off further do to economics, rather than traders making bets that the WTI-Brent spread will reestablish itself. From the point of view of a trader, betting on the spread reestablishing is a much safer, much surer bet than outright gambles in commodity price direction.

This is accomplished by buying Brent and selling WTI. Expect fluctuations in both prices in the immediate term. But so long as the spread widens, consider it a blessing and sign of bottoming.

The current state of oil and energy names is a rare opportunity. I am a buyer, with two hands.

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I deployed 2.5% of my account to buy BAS at $12.61.

I put another 2% of my account into HCLP for $47.18.

I put another 3% of my account into VOC for $9.83.

Small margin balance. I am not just commenting when I say I am betting on oil. What we are experience in the oil market is not at all unusual. What is unusual is the sheer lengths that people have taken to sell oil stocks, with almost no evidence, other than a little correction in oil prices, that they are right.

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Okay, I’ve read the report from BAS and can comfortably say that those who are pressing BAS shares lower are mentally unhinged.

Today – October 24, 2014 – a prospective investor could purchase shares of BAS for about $13.60. BAS just reported earnings of $0.24 a share, up from $0.06 last quarter. At a current book value of just under $7; and even playing coy and considering BAS earnings of $0.15 a quarter from here forward; BAS is priced with a risk threshold of just 11 years.

At the most recent earnings of $0.24, that threshold drops to a theoretical breakeven point of just under 7 years.

BAS is priced perfectly reasonably, and that gets you exposure to a company that grew revenues an additional 10% in the last three months. Year over year, BAS is growing at a more than 20% clip.

BAS hit these numbers without even factoring in additional operation capacity that is being brought online later this year. Consider for example completion and remedial services, where as of September 30, 2014, Basic had roughly 413,000 HHP up from approximately 351,000 HHP at the end of the previous quarter and 292,000 HHP as of September 30, 2013 – that’s a 42% increase in capacity.

But oil prices are going to render that excess capacity worthless, right? Actually I defer to the CEO on this subject:

“We have not seen a reduction of activity by our customers due to the recent decline in oil prices, and none have indicated reductions in their 2015 growth plans. Early indications of these capital spending programs look to be slightly higher than 2014 levels. We will monitor utilization rates closely and should we see any meaningful pullback, we will react quickly as we have historically.”

So to recap; BAS is a company growing at a rate that makes it the envy of the party, which even excluding any additional growth is moderately priced, down 9% today because people are concerned, mind you, that maybe the industry might slow down (of which there is no indication whatsoever that BAS would be hurt disproportionately or even that that is happening).

Let me put this all into perspective for you. You could go out today and buy shares of BAS for the same price that you could get them last year when the company was losing $0.17 per share per quarter. The market is giving BAS no premium whatsoever for going from an unprofitable company, to a profitable one.

Jesus! – (punches a brick wall in his office) I hate it when the market does dumb shit like this!

I have just mentally budgeted an additional 10% of my asset allocation solely for the purchase of BAS shares until such time as I shall be either satisfied, or badly wounded.

Today, my account stands about 95% long. I am willing to take it to 105% on margin exclusively for the acquisition of BAS shares, not counting on any other purchases I might elect to make or future sales.

First buy order comes at $12.

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I sold off some of my NADL position for $5.96. I had added these shares on 10/15 for $5.43. This locks in a quick 9.8% gain on a small position sizing. It brings my cash position to 5%.

I’m sitting pretty here. So far, I dodged sizable losses by going to 45% cash in August. I also bought what looks like it could be the bottom in the oil and gas space, on margin to 115% of my account. I’ve since sold this bounce down to a 95% long position.

Plenty of my recent purchases are underwater, but I have a healthy profit margin baked into many of them as a whole. I also am closing back in on 10% gains for the year again with lots of room from the highs.

My expectation remains for more volatility and a small pullback ahead. I wouldn’t be surprised if this gets labeled a stock market crash after everything – that fits well with the frequency of market crashes in the US (albeit resting on a small data sample).

As for the oil and gas sector (of which I have a majority of my assets invested at this time) I think we’re near the end of the correction with perhaps room for one last shakeout.

If we crash lower, I will consider adding on margin again. But it will be a slow decision given I am basically fully invested.

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