Out all of the hedge; it was a nice bounce.

No more games in the oil sphere for a while.

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I have a hedge position in SCO, which is up nicely from $27.36 where I purchased it. I will be dropping it on Monday and not looking back. I don’t much care for trading positions based on global events. It’s a messy business, and rarely works out. But this is an exception.

Iran’s behavior has simply changed too much to be ignored. First by acknowledging the holocaust, now having a conversation with the President. It was a subtle shift at first, but it is very noticeable.

You must understand, the president of Iran operates beneath the Ayatollah. The same people have headed Iran since 1980. Supreme Leader Khamenei himself served as president of Iran from 1981 until 1989.

So, pretending that Iran has suddenly completely changed their whole outlook on life is stupid.

Which makes one ask, why is Iranian posture changing? Have incentives correspondingly changed, somehow? Perhaps we’ve finally broken their less charismatic personality traits with our sanctions?

Look, it was just four short years ago that I watched the Basij, with clear backing from the IRG, firing shots into crowds of protesters, running down students on the backs of motorcycles, and generally beating the hell out of anyone who opposed the Iranian government. These protests didn’t look that disruptive. The people who attended weren’t violent, or trying to declare a state of anarchy, or generally doing anything a reasonable person would consider unethical. They were just protesting. And this lot, directly supported by Iran, road in and just slaughtered everybody they could.

Also, we’ve been sanctioning Iran literally since the inception of its current form in 1979. We’ve upped those sanctions continuous, notably in 1992, 1995, 1996, 2001, and 2010, while the EU and international community got more involved in 2010 and 2012. So you’ll forgive me if I don’t think Iran has cracked under sanctions.

But this sudden shift in behavior is attention getting. And so I don’t want exposure to the short side of oil.

There are many reason Iran could be cooling off their rhetoric. Yes, a general outreach for peace with their neighbors is such a reason. Unfortunately, their immediate intention to set off a nuclear test warhead is another.

Iran cannot test a bomb in the middle of calling for the extermination of two UN members. While such foul language may be merely unnerving in normal circumstances (and good for riling up nationalism behind their government), if Iran were to succeed in setting off a bomb while shrieking for the eradication of the United States and Israel, the resulting emotions would be nothing short of panic. War-inducing, perhaps…

If they want to test a warhead, they need to put in the time to convince the rest of the world that they really aren’t as batshit crazy as they’ve been pretending, and can really be trusted not to ruin everything.

You can talk crazy while you build a Bomb. But you have to talk sane when you detonate it.

I can’t see the future. For all I know, this sudden, unexpected shift with Iran is exactly what the good men and women of the US Press thinks it is. But if you any experience with the track record of the US Press Corps, whether their first impression of major events (like the Arab Spring), judgement of character (such figures as John Edwards comes to mind), or general literacy of the complex (I can’t think of a piece on Obamacare this year not riddled with errors)…and it starts to actually make it worse that the press thinks this communication between Iran and the West is so cut and dry for the good.

These are not the lot with which you would want to run with first impressions…

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I bought a little SCO for $27.36

This oil market is just too fat to ignore. It’s a self correcting problem.

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Have a quick look at the graph on this site. I haven’t audited any of the numbers, but if the author has done his homework, it fortells fairly clearly what oil longs have to expect.

For the moment, all of my short exposure is being pesteringly resilient; most probably because I am counting on those positions to even out my account. So of course, oil is holding up here, the euro is trying to push higher, and TSLA recovered a $3 move.

There’s no reason for any of those things other than that they hurt Cain Hammond Thaler. The market is trying to harm me, because that is the only consolation anyone in these positions will ultimately have…if they can shake me out.

But I have the patience of sheet rock. You will not win.

Current positions by size (greatest to least)

Cash – 27%
CCJ – 18%
CLP – 8%
AEC – 8%
SCO – 8%
EUO – 8%
Silver – 8%
BAS – 7%
RGR – 7%
January 2014 TSLA 35 Puts – 1-2%

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If there’s one thing you can count on lately, it’s for the oil market to make exactly the wrong decision going into summer. It’s almost a joke, really. To whichever analysts are sitting at office right now, prepping that liability report explaining why they loaded up on oil contracts going into the summer for the third year in a row, I have the following advice.

For the moment, just carve out any data sets you may have from before 2009. They aren’t worth the bits they’re stored on.

The entire move testing $100 has been shut down. The only remaining question is, do we hit $88, $85, or $79?

The worst hedge of all time, SCO, came through for me after all.

In other news, one of the Greek political parties has decided to nix the union that has held the country together with a government body. This is of course impeccable timing on the part of the Greeks, as there just wasn’t anything else we may have been worried about at this exact moment.

Today, I will be enjoying a fine chicken breast seasoned with fresh thyme from my garden, set out on the veranda, to celebrate the unstemming slaughter.

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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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