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Tag Archives: oil

HCLP Benefits From Fracking Sand Attention

If you missed it, the Wall Street Journal came out today with a centerpiece on fracking sand. This is great exposure to the space.

If you’ve been paying attention, I took a position in the partnership HCLP this summer for $24-26, with some adds and trading around the position since then. They sell exactly this sand to well services companies.

A few recent big developments with HCLP include a settlement with Baker Hughes and inclusive six year supply agreement that helped send it to the $32 price it’s at today. Other developments include an almost million share issuance from a parent/sibling company (non-dilutive).

The share price has come under downward pressure (from the million share issuance); however, this exposure is exactly what’s needed to get more money flowing into the position. The partnership is expensive and small, but I love the positioning and think it’s in exactly the right place for major growth over the next decade.

Another position similar to HCLP (and Chuck Bennett honorable mention) is SLCA. They specialize in a similar alternative to the fracking sand HCLP offers.

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Biding My Time

Waiting for an oil market correction is a lot like watching toddlers playing with toys from the next age category up. The pieces are all there, and they’re having the time of their lives, but they sure as hell have no clue where anything goes.

Italian numbers were just abhorrent this morning. And the long assumed 8% growth rate of China has been humiliated. European recovery and Chinese domination were all cornerstones of the global growth theory. They have since been shattered, but like Wile E. Coyote, the market hasn’t quite worked out that things have changed.

The oil inventory number that got everyone excited last week can be explained away as a one off. Moving inventories around and offloading them to storage facilities. But there’s no doubt that oil demand continues to fall. ISM numbers, manufacturing, foreign economic GDP…it’s all telling the same story. There have been only a handoff of positive reads, and they’re being put on a pedestal, when they should be put under scrutiny.

I’ve seen this plenty of times before now. Oil prices stay elevated, ignoring the bad news, assuming that sooner or later something good will come along to set it all straight again. And the market ignored the news for months.

Then it implodes.

The losses never last long; just a few months. But the moves are fast and gargantuan.

So sit back and enjoy the game for a while. Play it if you want. I’m content to spend nine tenths of the time waiting for that one special moment when all the real money gets made. It’s coming – like gravity.

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My Hedges Are Failing Me

Per the course, some dipshit(s) is loading up on oil going into the teeth of the summer slowdown, keeping steady pressure on the contracts. Who exactly it is that thinks buying crude oil while inventories are undergoing surprise builds and PMI is missing expectations, I cannot say. All I know is that this is cliché.

The market is rolling over and some genius is trying to strip down my shield and use it for a wake board on a lake somewhere.

The euro is also hitting pressure around that 1.3 area. Look, Europe is inevitably at the heart of this slowdown. Their unemployment and economy issues are what is derailing China. Japan is front and center, but Europe is always lurking in the background.

If we slow down, there is zero chance that the euro can hold this strength.

On the positive side, CLP shook off analyst downgrades and lawyer harassment and rallied more today; mostly because it’s a good deal.

I don’t know what it is about the bar exam that turns people into sociopaths – I don’t want to know. The truth is, I actually hope these law firms piling on fiduciary inquiries succeed in getting MAA to pump up the offer, just to seal the deal. But when it’s all said and done, the lawyers pushing this harassment of CLP’s management should seek professional help.

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Crude Oil Implosion Right On Schedule

The old rules of thumb about the oil markets have been turned on their heads. If it escaped your attention, for the last few years, wisdom that summer carries with it higher prices from more demand have been great…if your goal is to lose money.

Because what has actually been happening is each year, the summer brings with it renewed fears about the sustainability of the recovery, and as the winter optimism from holiday activity slumps, something – maybe speculative buyers in the oil markets, maybe something more complicated than that – slackens and all of a sudden, we get this big rush of inventory that floods our storage centers.

And anyone caught calling plays from their grandfathers old book goes long oil at exactly the worst possible time.

The thing is, for whatever reason, it always seems to get bought towards the end of summer, right when the rule of thumb dictates that oil demand should be falling. Maybe it’s all part of a game. Maybe there’s some reason for it I just don’t understand – I guess having selloffs in the winter months are always more dangerous; what happens if something important, like heating, gets disrupted?

I may not know why this is happening, but I don’t need to be an oil industry expert to know what my eyes are telling me.

SCO is spiking up 5% today, and oil inventories are building quickly. For the moment, everything is just peachy in the markets – actually, in the same day I’m up 5% shorting oil, the rest of my holdings are all largely green.

But it won’t last. We are on the cusp of a nasty selloff that will bring some humanity back to investing and some shame back to the arrogant.

And it will be treated as the end of the world. Or at least until the fall, when buyers likely step back in, claiming “no way that happens ever again…”

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