I Seem To Be Experiencing A Correction

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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.

BAS Exhibits Classic 100% Upside Reversal

1,718 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.

Basic Energy Services (BAS) Didn’t Really Lose Much Money

1,196 views

BAS is up 12% right now following their earnings report. They lost a ton of money on paper and the market isn’t falling for it.

Basically, despite idling equipment and firing 20% of personnel, BAS wrote off more in depreciation than the same quarter a year ago. But properly stored and idle equipment isn’t really depreciating, is it? So there was about $20 million there over my fair guess for what the company’s actual depreciation probably looks like, best estimate. Then they wrote off another $5 million or so in non-cash items tucked into expenses for employee retention and such.

You pull out the write downs and the company lost may $0.19 per share, compared to a gain (after one time items) of $0.11 per share in Q4 of 2014.

Let’s look big picture here; the company saw revenues plummet 35%. I mean, Completion and Remedial Services alone plunged 45%. All of that cost me $0.19? (Cue crude jerking motion of the arm)

I don’t care. We’re fine here. Management knows what they are doing. The company just renegotiated their credit facility, lowering the issue amount by $50 million to $250 million outstanding in order to strip some undesirable covenants, but adding an accordion feature that can get them to +$50 million or $350 million total if it’s an emergency. They have headcounts under total control, and they are defending market share vigorously. They’ll get cash flows to balance in the next 6 months and we go forward from there.

I’m not worried about BAS. BAS’ competition should be panicked.

What A Wonderful Day

771 views

I am 70% long, and this is what my day looked like:

BAS +12.61%
CCJ +7.56%
HCLP +3.42%
ALDW +1.99%
VOC +1.76%
TIS +1.48%
OMAB +0.70%

It’s difficult to scoff at a day like that.

Yes I am still down from 2014. I have no desire to hide behind spin. 2014 was a horrible year. But as I said to those of you asking why I was still hanging around BAS, it was because BAS had 100% of upside…at least. And now here we are, closing in on $10 from $5.

I like all on the list. I’ve carefully vetted these positions and wouldn’t it be something if it was these same positions that ultimately redeemed me? I’m not wedded to the thought (for fear it will kill me) but it’s certainly quite possible.

Tumultuous Action In Oil Names

1,563 views

The inventory build in oil was about three times greater than what the market was expecting. Oil prices slid fast throughout the day and the sector by and large reversed the recent move. But going into the final hour of trading, there does seem to be some minor strength ticking up. BAS notably was flat just about an hour ago and could tread water some more.

My guess: oil returns sub $50 for a spell and weak players get slapped around some more until someone finally closes shop. The inventory builds are big but the overall market imbalance is much less so, in the grand scheme of things. US inventory is building rapidly but only partially due to overproduction. Recent currency moves have contributed to the problem by trapping US crude with uncompetitive manufacturing and refinery businesses behind an export barrier, which is why oil companies are banging the drum so loudly on crude export rules. My guess is that at least half the build is probably from dollar strength pricing US competition out of foreign goods markets.

There is no reason to think the Fed will just sit by while the US economy slides into a recession. They’ll have to defend the dollar at some point (or what do you call intentionally making it weaker anyway?). But in the meantime, things could get rough. Oil majors are only halfheartedly looking to fix the problem; they’d really like to gobble up all the small competition for pennies on the dollar first to keep their proven reserves stacked. So yeah this could get worse before it gets better.

Still, I’m thinking now is a perfectly good time to start building positions in known survivors. The majors themselves are cheap, given how huge they are and that they aren’t going anywhere. Everything that made oil majors a crappy investment when they had a premium attached makes them the perfect choice now that they’re going for no premium. If you pick the right foreign oil major, you can even get paid in non-dollars and – God help us when the Fed finally delivers a weaker dollar – make a second strong killing on the exchange back into the US.

It’s Shocking Because It’s Normal

1,694 views

Today BAS was up 4.5%. I’d normally be elated by this kind of action, but I am not.

Because last Wednesday BAS was 20% lower. And the week before that BAS was where it is today. And the week before that BAS was 20% lower.

In fact I’d say generally speaking that watching a stock ratchet between $5 and $8 is a generally tempestuous experience that does things to mans sanity. Dark things. Quiet things.

Dark, quiet things.

I want those dark things to be done to oil short sellers now. He says to himself, slowly rocking in his 9th floor prison.

I Seem To Be Experiencing A Correction

704 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.

BAS Exhibits Classic 100% Upside Reversal

1,718 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.

Basic Energy Services (BAS) Didn’t Really Lose Much Money

1,196 views

BAS is up 12% right now following their earnings report. They lost a ton of money on paper and the market isn’t falling for it.

Basically, despite idling equipment and firing 20% of personnel, BAS wrote off more in depreciation than the same quarter a year ago. But properly stored and idle equipment isn’t really depreciating, is it? So there was about $20 million there over my fair guess for what the company’s actual depreciation probably looks like, best estimate. Then they wrote off another $5 million or so in non-cash items tucked into expenses for employee retention and such.

You pull out the write downs and the company lost may $0.19 per share, compared to a gain (after one time items) of $0.11 per share in Q4 of 2014.

Let’s look big picture here; the company saw revenues plummet 35%. I mean, Completion and Remedial Services alone plunged 45%. All of that cost me $0.19? (Cue crude jerking motion of the arm)

I don’t care. We’re fine here. Management knows what they are doing. The company just renegotiated their credit facility, lowering the issue amount by $50 million to $250 million outstanding in order to strip some undesirable covenants, but adding an accordion feature that can get them to +$50 million or $350 million total if it’s an emergency. They have headcounts under total control, and they are defending market share vigorously. They’ll get cash flows to balance in the next 6 months and we go forward from there.

I’m not worried about BAS. BAS’ competition should be panicked.

What A Wonderful Day

771 views

I am 70% long, and this is what my day looked like:

BAS +12.61%
CCJ +7.56%
HCLP +3.42%
ALDW +1.99%
VOC +1.76%
TIS +1.48%
OMAB +0.70%

It’s difficult to scoff at a day like that.

Yes I am still down from 2014. I have no desire to hide behind spin. 2014 was a horrible year. But as I said to those of you asking why I was still hanging around BAS, it was because BAS had 100% of upside…at least. And now here we are, closing in on $10 from $5.

I like all on the list. I’ve carefully vetted these positions and wouldn’t it be something if it was these same positions that ultimately redeemed me? I’m not wedded to the thought (for fear it will kill me) but it’s certainly quite possible.

Tumultuous Action In Oil Names

1,563 views

The inventory build in oil was about three times greater than what the market was expecting. Oil prices slid fast throughout the day and the sector by and large reversed the recent move. But going into the final hour of trading, there does seem to be some minor strength ticking up. BAS notably was flat just about an hour ago and could tread water some more.

My guess: oil returns sub $50 for a spell and weak players get slapped around some more until someone finally closes shop. The inventory builds are big but the overall market imbalance is much less so, in the grand scheme of things. US inventory is building rapidly but only partially due to overproduction. Recent currency moves have contributed to the problem by trapping US crude with uncompetitive manufacturing and refinery businesses behind an export barrier, which is why oil companies are banging the drum so loudly on crude export rules. My guess is that at least half the build is probably from dollar strength pricing US competition out of foreign goods markets.

There is no reason to think the Fed will just sit by while the US economy slides into a recession. They’ll have to defend the dollar at some point (or what do you call intentionally making it weaker anyway?). But in the meantime, things could get rough. Oil majors are only halfheartedly looking to fix the problem; they’d really like to gobble up all the small competition for pennies on the dollar first to keep their proven reserves stacked. So yeah this could get worse before it gets better.

Still, I’m thinking now is a perfectly good time to start building positions in known survivors. The majors themselves are cheap, given how huge they are and that they aren’t going anywhere. Everything that made oil majors a crappy investment when they had a premium attached makes them the perfect choice now that they’re going for no premium. If you pick the right foreign oil major, you can even get paid in non-dollars and – God help us when the Fed finally delivers a weaker dollar – make a second strong killing on the exchange back into the US.

It’s Shocking Because It’s Normal

1,694 views

Today BAS was up 4.5%. I’d normally be elated by this kind of action, but I am not.

Because last Wednesday BAS was 20% lower. And the week before that BAS was where it is today. And the week before that BAS was 20% lower.

In fact I’d say generally speaking that watching a stock ratchet between $5 and $8 is a generally tempestuous experience that does things to mans sanity. Dark things. Quiet things.

Dark, quiet things.

I want those dark things to be done to oil short sellers now. He says to himself, slowly rocking in his 9th floor prison.

Previous Posts by Mr. Cain Thaler