Major Oil Producers Closing Out the Quarter +7.5%, as WTI Prints $37

Throw seasonality out the window when half the industry is scheduled (British annunciation) to go by the wayside. Listen to me, these companies are going down. Their main source of income is maligned each and every day by sordid people. There is a war to crush marginal suppliers and to bankrupt the weak. For all of the talk about impending doom in the oil patch, the raw commodity getting halved over the past nine months, the components of the major oil index are up 7.5% for 2016. Moreover, the smaller capped, highly debt-burdened names, are up more than 35% since February. There aren’t any budget reductions or financial rejiggering that will save these small companies.

They are going out.

Instead of handling this in the streets and selling short small cap sticks of dynamite, I am short the majors, via XLE. Stocks like XOM, CVX and SLB have boomed in 2016, due to a misconception that because they are large and likely to survive–they are good. Since when has the bar been this low, and the onus of only surviving, been good enough for successful investing? This is preposterous.

In my estimation, both oil and oil related stocks will go back to the February lows. The 6-10% returns that are widespread amongst the oil majors will be needled, rescinded and then crushed.

In spite of the 35% rally in energy related equities since February, there is still over $200 billion in distressed debt, defined by companies whose debt/eq levels are greater than 5. Just behind that, looking at the debt of companies whose debt/eq ratios are between 2 & 5, the level of doom swells to $447 billion.

In all, there is a storm brewing that can annihilate the market place and wreak havoc upon those being ‘sophisticatedly invested’, like morons, in the high yield space.

I’ve been writing here since 2007 and before that on my blogspot locale since 2005. I rarely maintain a short bias and always default to a bullish demeanor. Many have accused me of being permanently bullish, a term that I wore with a badge of honor. Yes, like so many others, I too called the 2008 crash. The only difference between them and me is I have proof to back it up. Go seek out my archives.

While some of you lament of the somber tone that I’ve put forth since 2016 had begun, this is my position and it’s one that I will not waiver from. Either I save a great many of you from the dangers that lie ahead, or you ignore me and go about your business like you always had had done before. There isn’t a hesitant bone in my body or a scenario that could alter my opinion. This will happen– and when it does–I will reign over you like a madman atop a mountain of bones, shooting cannons of fire unto those without shelter–crushing my enemies and reducing their flaccid Bernie Sanders like frames into dust.