Oil Soap Opera

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.

I upped my stake in CCJ, placing an additional 5% of my account in shares, for $17.30.

Yes I am down a demeaning 3%+ today, thank you for asking.

(Whispers sadistically)…WHO SAID THAT!?

(Eyes nervously twitching in all directions)

(Nervously laughs)…why, what else would I be on Tim Cook day?

What else would I be…?

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Alright, upon externalizing my inner crazy, I feel better now. Today’s drawdown in everything I own, more or less, is most likely the mark of death touching the “SUPER SMART MONEY FUND MANAGERS”, liquidating them.

This action will most likely persist for several weeks more, with small and sharp bounces being met by fervent selling, as the “MOST INTELLIGENT PEOPLE YOU’VE EVER MET” continue to scale out of their late entry, money losing trades.

The 2014 blast off in names like HCLP was being driven in large sum by over allocation on the part of these hedge fund savants, blessings to humanity that they are. That is increasingly clear now. They conveniently showed up way after good entry could be had, provided those of us who actually have original ideas excellent opportunity to step out the door, hyped the crap out of these positions to people with 5 minute attention spans via cable networking, and are now immolating in a pyre.

Accordingly, the “ULTIMATE EXAMPLES OF HUMAN BEINGS ON EARTH” turned lit pieces of coal must be allowed to burn down before we can have some resolution to this little debacle. It is a most excellent buying opportunity to grab some great oil and gas companies…provided you still have both your arms.

As an extra thought, there is a lesson in all of this.

The hedge fund model is dead for the foreseeable future. Which is idiotic. The hedge fund model, on the face of it, makes complete sense. Hedge funds are supposed to be smaller, more versatile structures filled to the brim with excess money that comes from calmer and more financially secure sources. Fundamentally, the hedge fund world should persistently have an edge, free from jittery clients and hamstrung investment options.

In the beginning, that’s the way things were. Cue the copycats and mimics.

I have a long held theory, a secret point of view draped in conjecture: that the plights of the world can in many cases be seen best through the lens of the disappointing children of greater men and women. Mediocrity born behind the wheel; usually reserved for those who’ve demonstrated aptitude for actually handling it.

Everybody loves their children. Everybody wants to help their children succeed. And the result is the bastard sons of senators and business tycoons getting their start up funds seeded with doomed money; setting out into the world to be driven off a cliff or into a brick wall.

This is, in my imagination, the body of invisible and unseen forces currently bleeding all over my positions.

So the hedge fund mythos is dead. Heracles’ killed the Nemean Lion, but he couldn’t survive 6,000 posers dressing up like him and smashing his reputation to shit. Nice work, everyone. The whole concept will have to lie dead for a while, until this period gets smoothed over.

In the meantime, if you’re looking to trust a lucky sperm cell, have a close friend work off onto a four leaf clover – you’ll lose less money walking behind that.

I added more HCLP for $44.48. Turmoil continues to roll through the oil and gas sector, and weak hands get strewn about.

As the saying goes, you can’t make an omelet without scrambling a few eggs.

But o’ the joy that broke this afternoon! What delicious delight, scattering my sour mood to the sound of obsessed cackling laughter. One of my designs now comes to pass.

For years I have sat on CCJ, waiting patiently, unmoving. Made of stone, I was.

Now, no more waiting, it would seem. The gargoyle springs to life; the golem lives.

Japan has begun restarting the nuclear fleet at long last!

See the results for your own eyes.

You would think I’d be in a good mood, presently up more than 1% with seven out of eight stocks green. But my mood is sullen and sulky and dark.

BAS has me in a silent furry, washing over the walls of the room. The cat finally could not stand my presence, which seemed to put her on edge; her tail swishing her way to light side steps about me while she dared whether or not to approach. Finally, caution got the better of her and she briskly toed out the door.

I want to hurt the people hurting BAS. I want them to suffer a long, drawn out demise. I want it to be humiliating.

It’s not enough for me to win, anymore. This selloff was so spectacularly stupid, I want those across the table from me to lose. We’re past the grounds for accepting victory. I want to salt the earth of the conquered, burn the heritage landmarks to ashes, then shoot the first born.

I don’t just want a massive victory. Now I also want it to be brutal.