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John Gilluly  

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  • Don't Rely On Your Emotions To Trade The Oil Patch [View article]
    Oil to gold ratio rose to 28.6 bbls per oz of gold at the close today. Anything could happen, but we are closing-in on the all-time record spikes of 1986, 88, and 89 when oil was $10/bbl.

    "Invest" on the basis of a few ephemeral spikes - that lasted brief moments in time during the last 10,000 days - or the other 9,900 days (99% of the previous 29 years) - when the ratio of crude to gold was lower than it is now?
    Jan 23, 2015. 05:40 PM | Likes Like |Link to Comment
  • Emerging Markets At 5-Year Lows Are A Blue-Light Special [View article]
    It's a month later and EDC ($24.51, +25%) and BRZU ($9.16, +25%) are rocking.
    Jan 21, 2015. 04:32 PM | Likes Like |Link to Comment
  • Oil Stocks: Buy Low (Now), Sell High (Later) [View article]
    "By the time it looks good, you're too late." (Helene Meisler,

    That is why so few buy low and sell high. It's human nature to work with what you are given, rather than with what you "might" be given. Thus risk/reward is chosen according to each person's tolerance of probability.

    I think this particular article is accurate, and speaks in simple layman's terms about what is transpiring in the oil patch. One can't know all there is to know about a subject - especially oil (which is why NO oil analyst has called a bottom); but one can know enough to dollar-cost average-in at extremes in valuation (like now).
    Jan 21, 2015. 04:18 PM | 1 Like Like |Link to Comment
  • Oil Stocks: Buy Low (Now), Sell High (Later) [View article]
    Superb article Hawkinvest. I couldn't have said it better.

    Yesterday you could buy 28 barrels of oil with a single oz of gold. The last time was 2008, and that just for a single day (like yesterday). Readings of 26-28 barrels per oz of gold have marked the tops of the last 3 great surges; and then the market turned. (See:

    The only other times in the modern period (1945-2015) where you could buy more barrels of oil per oz of gold were the crazy oil years of 1986 and 1988, when oil was priced in the $10-$15/bbl range.


    The oil stocks have been putting in lower lows for about a week. Not a day goes by where there is not a major oil producer announcing Capex and labor cuts for 2015. Yesterday it was Baker Hughes, before that Schlumberger, today it's Total and ENT.

    All this supply destruction - combined with the slight rise in demand which cheap oil will create via automobile purchases (US & Emerging market auto sales for SUVs are booming) - will put a floor under crude. By March, the rally should be in full swing.

    My two favorites are:

    1) ARP - for the dividend that will likely NOT be cut because of the company's superb oil and gas hedges for 2015-2017. (See:

    2) GASL. 3x leveraged play on blue-chip E&P producers.
    Jan 21, 2015. 01:56 PM | 3 Likes Like |Link to Comment
  • It's Time To Buy The Oil Panic Of 2014 [View article]
    Average Price of all UWTI trades is $4.25, UGAZ is $4.49, UCO is $10.26.
    Jan 17, 2015. 12:30 PM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Oil is now down $4.84 in a single morning session of 5 hours (-9.5% since the pre-open, -4.2% since the open). I just read that oil is selling in North Dakota for under $30/bbl.

    Yesterday's flash in the pan was truly an anomaly and nothing has changed in the relentless downturn story. One might wonder how an international commodity - that's used to the tune of 91 ML/bbl a day (-$445.5 ML loss today) - could lose that much value in a single session, let alone a half-session, but this is the current situation today. The commodity will probably turn when there is not a single person left standing. The best time to revisit this will likely be in March.
    Jan 15, 2015. 02:04 PM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Yesterday's rally may have been just one more head fake. A two-day 16% rally in crude, followed by an 8% drop from the pre-open today. All the oversupply news (it is virtually ubiquitous) again makes it seem like the $30s are an inevitable prospect.
    Jan 15, 2015. 12:23 PM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Sudden rally today - out of nowhere it seems. Strange things can happen, but if you look at charts like this ( and this ( you can see just how RARE an event we have just experienced.

    The despair in my comment yesterday probably signaled the bottom, because these things end with the sign over the door that reads, "Abandon all hope, ye (oil investors) who enter here." I have not experienced something so relentless and one-sided, ever. By January 13th, there were only a few 20 minute periods during the day when oil would go up a little before it inevitably turned down. There has been weeks, months of this one-sided action.

    But if gold is a measure of true value, then yesterday was the day that gold valued oil at the same ratio it had at almost every other bottom. Apparently we are now at an 80 year inventory high for crude. And drillers are going to keep drilling? There have been hundreds of negative pieces on oil. Not one positive that I can remember.

    BTw..I added more today at 2.67 and at the close at 2.87. When the market opened today, I was wondering how low GASL would go if oil hit Goldman's figure of $41 ($2.20) and if it matched the 2008 low, then we would probably break $2.00 on the downside. I didn't consider what it would do if it went to zero, but the last time I had these thoughts were about the banks in 2009. Next time you get paranoid about GASL, look up the components in the FCG Revere Index ( These are the best of the best in E&P companies.

    What a slide since summer! From the $60 to $2s. That's a 98% drop.
    Jan 14, 2015. 07:28 PM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Straight-up and straight-down seems to be oil's way, so maybe GASL will work for this one. I really like the names in the FCG index and most of them are hedged.
    Jan 14, 2015. 07:13 PM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    I noticed also that the yield on the 30 year treasury and on European and Japanese long-dated bonds are also approaching 10 year - if not all-time - lows in yield.
    Jan 13, 2015. 01:26 PM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    I would like to add a few things this morning.

    1) The purchases of GASL have continued, even down to the $2.70 mark: and BNO, down to $19. For some reason SA is not publishing my updates to this article anymore. Can't say I blame them. Oil is like a bottomless pit.

    2) The technical superlatives that have occurred on the negative side now equal some of the worst that have ever hit the commodity. For example, this morning at $44.20/bbl, you could buy almost 28 barrels of oil with an ounce of gold. That's 7 more barrels than you could buy with that same ounce in December, a month ago. There has been only one brief window in the 70-year history of modern oil where you could buy more oil with an ounce of gold - 1987. That's going all the way back to WWII.

    Also, the Oil/Gold ratio hit 0.0357 this morning, slightly lower than the other low-water marks of the last 30 years: the financial crisis, the Clinton Impeachment scandal, and the mini-bear market of 1994. Again, you have to go back to the 1980s to find valuations like this.

    You might ask, "WHY does gold matter?" Because it's real money that can't be funny-monied. You plop that gold bar down at any time in history and it will buy what it will buy, and its value will not be questioned. Gold is golden when it comes to valuation.

    3) But then again. has any of this mattered? No. It has not. Maybe I am just sensing my own tiredness, but the volumes of trading in oil stocks seem to have fallen off today, as if no one is willing to step in again, and have their head handed to them (again), by a purchase that will INEVITABLY turn to a loss within a matter of minutes, hours, or a day or so. Oil has dropped 20% in just the first two weeks of January.

    That is probably why it is best to just put this trade on automatic, keep it small (maybe 50 to a 100 shares at a time), and wait it out til this interminably long cycle has run its course. I am really discouraged, and frankly, I can't see what government or economy anywhere on earth benefits by ruthlessly throwing-away a non-renewable fuel resource at prices below what it takes to produce it. It is the height of hubris and fool-hardiness on a global scale. The conservationists of the 1970s and 80s must be gnashing their teeth that after so much work and political action to raise people's awareness of global warming that it has come down to this: we now have a license to exploit oil resources at an unheard-of amount, and will be doing so for the foreseeable future,
    Jan 13, 2015. 12:45 PM | 1 Like Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Blue ice - thank you! Best link I have received in a long time.

    Take a look at this chart:

    I like charts because they graph previous sentiments at previous prices. 0.36 on the chart in the link is $44-45/bbl crude. We hit $47.16/bbl on Friday. Two or three more bucks down from here - after a $60 drop already - is a 3% to 5% margin of error.

    Lastly, draw a trendline through the lows of this chart:
    Jan 11, 2015. 04:05 PM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    "Safety" on the investment highway is entirely-based on what you are driving and when something occurs. The more steel, the safer you are before an accident.

    But after a big "highway" accident - and after everything has been cleared away - all the cars drive will drive away - beginning (of course) from a standstill - at a different pace (units of distance traveled per unit of time).

    For our analogy, the Big trucks (majors) lumber out slowly and steadily; and you will surely get to your destination safely and well-protected in that big truck. But you will get there twice as fast in a small to mid cap car. And in a leveraged fund? You will get there at Ferrari-speed.

    TIME carries all the muscle. How much happens in what space of time. And there is an odd corollary to this too: by the "time" it looks good, you're too late.

    That is why I dollar-cost average at the beginning point (and we are into this trade a full month now), based on my view of the fundamentals and technical patterns I see repeating.

    Since the "when", the TIME is all-important (in terms of productivity $), my first consideration is to get that to work for me instead of against me.

    I would say the entire human endeavor is based on what we do with TIME - the currency we have been given in this life, and it is the single most important thing in investing too.

    Long-term? I don't know about that one. But production ($) per unit of TIME - I can wrap my head around that one easily. And if we are to drive away from this once-in-a-blue-moon oil debacle, I want to be in the first car and the fastest car heading onto an extremely uncrowded highway.

    That's GASL, or something like LINE, NDRO, GDP, CRK, UPL, or MEMP. The value of BNO is it tells you how far you have to go before you get "there".
    Jan 10, 2015. 11:27 AM | 1 Like Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Saw this new article today. *See ( MOST of the GASL stocks are mentioned and their December/January performance is included (e.g., Apache, Matador, Stone, Devon, etc).
    Jan 8, 2015. 10:48 PM | Likes Like |Link to Comment
  • It's Time To Buy The Oil Panic Of 2014 [View article]
    See these 2 articles:,

    And check out this page on the LINE website: While on that page, click on "Is LINN Energy a Master Limited Partnership (MLP) or a corporation?" You will notice that it has a unique tax-deferred status as a neo-MLP, which is perfect for investors in a taxable account.

    In sum, there were financial questions (that had suddenly surrounded the company) "fixed" by a quick liquidating of assets to raise cash and pay down debt.

    They also announced a 50% reduction in the dividend. Up until Dec 1, the dividend was not a problem. It had a been a reasonable 10% or so. But when the stock was cut in half, and then by another third, it was prudent they took action, which they did.

    Remember, all this rapid card-shuffling took place in a matter of weeks. They also - in the near term only (2015) - have outsourced the financing of their new drilling projects to a hedge fund in exchange for 15% of the profits.

    So on several fronts, they slashed their costs, raised cash, out-sourced the financing of near term drilling, and kept enough cash in their profile to take advantage of "stressed-asset sale" opportunities with other small oil producers if such assets became available in a fire sale.

    Going forward? The stock is now near financial-crisis lows; oil has gone down 10% since January 1 and yet LINE is up 10% in the same time frame. As an investor, I get a rock-solid distribution of 10c/share per month (that I can reinvest in LINE shares); a likely capital gain in the next year or two, and yes, if profits return - an increase in the distribution.

    That's a lot to like, and I think investors feel the downside is limited and the upside is substantial. On a technical basis, it made a perfect double bottom (almost to the penny) last week, and traded the most shares in the company's history on that day, in which it rose almost 30% off its lows in a single day.

    I've watched LINE and NDRO carefully. Thus far, they have not been affected by the new Jan 1 downturn in crude oil. Another one to look at is BBG (down 7% today) which has one of the most complete hedge-books in the industry. Almost all of its production is hedged at $90. At $9.19, it would be a great ticker to sell puts on.
    Jan 8, 2015. 08:15 AM | Likes Like |Link to Comment