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John Gilluly  

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  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    I am willing to ride this out and follow the parameters of the trade. I have figured out that it is useless to average up. If we go back down into the $3s, I may add some more. I have to see how the stocks fare relative to the price of oil; how well they are holding up.

    Hardly a day goes by without another company suspending drilling in 2015. All of these factors will "meet-up at the pass" come March, and we should have increased demand in the Spring coincident with a drop in production. It's the timing that no one can figure out.

    Also, if a company like Linn Energy (LINE) has 60% of ALL its 2015 and 2016 oil production hedged at $90+/bbl; why wouldn't they keep producing? At this point, it's actually the hedges of the North American drillers that's probably keeping the supply/demand balance out of whack.

    I hope the counter-parties to these hedges don't end up like mortgage insurance in 2008-09. LINE energy could make $1.29BL in Q4 alone off their hedges. There IS another side to this debacle. The GASL ETF is a who's who of North American drillers. I trust they will figure it out.
    Dec 31, 2014. 08:42 AM | 1 Like Like |Link to Comment
  • How To Identify The Bottom Of The Oil Market [View article]
    In the last week of the previous year/first month of the new year, the volatility of the OVX paired with the price of WTIC crude has peaked or bottomed (2009, 2010, 2011, 2014).


    Could we be at that juncture here as well, with one day to go?
    Dec 30, 2014. 06:43 PM | Likes Like |Link to Comment
  • The Most Consistent Risk/Reward Speculation That I Have Ever Found [View article]

    This ratio chart might indicate a good time to begin the EDC/EDX short trade.


    The last time would have been mid-December '14.

    The previous points were Oct '11, May '12, June and Sept '13, Jan and April '14. All clearly visible on the chart on a trendline of higher lows.
    Dec 30, 2014. 04:39 PM | Likes Like |Link to Comment
  • Has The Market Called A Bottom For Crude At $54 BBL? [View article]
    At the moment, I plan on buying and holding til $10-$12, but there is some decay in these funds - sometimes substantially so, depending on the volatility. (See:
    Dec 22, 2014. 02:25 AM | Likes Like |Link to Comment
  • Has The Market Called A Bottom For Crude At $54 BBL? [View article]
    Thank you for your comments, and your valuable insights over the last 5 days. Yes, I think your selling the puts on CL is likely what professionals would do at this point. The stocks have already rallied 10-15% in just a few days. CL has not. So selling the puts is an obvious choice.

    In this way, if the oil market is slated to go down again another leg from here - those who believe that will need to "prove" it to you and your puts. Also, how long can the price of oil be "kept down" at these levels?

    So there is time-decay afoot here as well, which works for your selling of the puts. 90% of options expire worthless, that's a strong statistic in your favor.
    Dec 21, 2014. 04:34 PM | 1 Like Like |Link to Comment
  • Has The Market Called A Bottom For Crude At $54 BBL? [View article]
    I fully agree that electricity and nat gas will be for transportation and power in the 21st century what oil was for industrialized society in the 19th and 20 centuries.

    The problem with alternative energy for transportation comes down to one key issue: price. It needs to pencil-out cost-wise to achieve widespread adoption.

    But as it stands now, I would need to pay $5,000 to $7,000 MORE for a comparable electric car and drive it LOTS of miles, in order to make up for the money I will save by buying a low-cost - but very fuel-efficient - gas-powered car. And every two years or so, the gas standards seem to improve. The way we are going, 50 mpg will be the norm by 2020.

    Regarding the recent, sudden drop in gas prices; I think it will be a bonanza for new car sales.
    Dec 21, 2014. 04:35 AM | Likes Like |Link to Comment
  • Has The Market Called A Bottom For Crude At $54 BBL? [View article]
    Fritz, From Bespoke. View:
    Dec 21, 2014. 01:49 AM | Likes Like |Link to Comment
  • Has The Market Called A Bottom For Crude At $54 BBL? [View article]
    I didn't think about that exegesis with the song. It's true what you say. For all that knowledge, all that experience, the "gambler" still hadn't been profitable, and that's why he had to bum the singer's last swallow and a cigarette, because he didn't have one himself (couldn't afford $ it?). It's one thing to know something; it's another to profit from that experience. Thank you for your comments.

    However, if Oil is going to drop ANOTHER 20% from here (of course, anything could happen), someone is going to have to tell me why, and it needs to be something more than "because that's what it always does".
    Dec 20, 2014. 04:37 PM | Likes Like |Link to Comment
  • Has The Market Called A Bottom For Crude At $54 BBL? [View article]
    A stop-loss for the whole pile at $11.38 and you wouldn't have to worry about UCO again. I have NEVER seen it this low. The only problem with stops down at these volatile levels, however, is you can be taken out of a position you want to stay in by some wild swing down from left field.

    I like to begin at the extremes (like this trade), and then put a stop in once I am out of the woods.

    Dec 20, 2014. 02:28 AM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]

    That's turned out to be a stellar trade $3.26 (Dec 15) + $2.06 = $5.32 on Dec 19, 2014 (63%). Put a stop-loss in at say yesterday's low - $4.20 - and you will never have to look at it (or worry about it) again.

    I read my Lowry's report tonight. The panic surrounding the oil sector had created a 90% down day on December 10th for the NYSE and it was followed by a 90% upside day on December 17th. That was the Day GASL advanced 25%, before giving it all up the afternoon of the 18th.

    According to Lowrys, this is bear-market-bottoming action, except in our particular case, it was Emerging markets and oil (take a look at EDC and BRZU), not the general market.

    If we have a bear market bottom in Crude Oil (-50% is serious stuff), then we could be in for a great Spring. The out-sized gaps-down since Black Friday are a tell-tale sign of a bear market bottom. Investors literally puked these stocks up in panic. I know I did early Tuesday morning with part of my GASL. I thought we were going into a chasm all the way down to $45/bbl. But then it stopped. And that was when the trend reversal began, at 6:45 AM (PST) on Tuesday, November 16th.

    If you read the last article I wrote about $54/bbl oil, the oil stocks have gone up up (Dec 15-19) even as crude stayed down near $54. That's the market saying the sell-off had gone too far.
    Dec 20, 2014. 02:02 AM | Likes Like |Link to Comment
  • It's Time To Buy The Oil Panic Of 2014 [View article]
    That's great. If you set your stop at at where you bought it, you will likely never lose money on that. $11.20 is only about 75 cents from its all-time low of a few days ago. Don't worry about the gold correlation. I used gold to represent a "store of value" with reference to oil. We used to have a "gold standard" in this country.
    Dec 19, 2014. 07:17 PM | Likes Like |Link to Comment
  • It's Time To Buy The Oil Panic Of 2014 [View article]

    See "Risky Business on Wall Street", Time, April 11, 1994 (
    Dec 19, 2014. 02:20 PM | Likes Like |Link to Comment
  • Has The Market Called A Bottom For Crude At $54 BBL? [View article]

    That makes perfect sense. I think that's what Paul Sankey was alluding to in the Bloomberg Interview I linked to in my article. After I listened to him and James Chanos last night, that was the last piece of the puzzle for me, and I levered up the longs. The stock action at $54/bbl has intrigued me. If we hold at $54, I think the safe money will come in and support the stock prices for a trend reversal.

    I like GASL because it's full of the biggest midcap drillers and E&P companies. Have to be careful with GASL though. I have had four 25% days in the last 10 days because of the way traders are hammering oil and natgas companies one day and piling into them the next. One minute you're on your way to financial heaven, and the next minute the pilot is screaming "Mayday...Mayday!" into the airplane's PA system.

    Once the coast is clear, I think a V-bottom is in the works, and will continue all the way up to the summer driving season. The last 10 days have been the wildest ride I can remember in years. Like being shot at in a WW I trench.

    Of course, this last October was no picnic either. If this works out like I think it could work out (the way October, 2014 worked out), GASL under $5 could be a very profitable trade indeed.
    Dec 19, 2014. 01:09 PM | 2 Likes Like |Link to Comment
  • Gafisa: One Of The Cheapest Stocks In The World [View article]
    With inflation approaching 8%, the rise in the value of the land will pay for the distributed cost of the loan. Why use their cash when they can borrow money for free? On the other hand, their cash is "losing value" if it just sits there on the books.

    The American builders were widely criticized (and punished by investors) when they ramped up debt at the bottom of the housing crisis in 2011. Two years later they looked like geniuses. Banks were literally throwing money at them by 2013.

    The public builders kept their cash and decided to use borrowed money at extremely low rates (due to the Fed's ZIRP policy) to build out their communities. If memory serves me well, MDC did a convertible loan in 2013 for over $200ML at 0.25%! The US housing recovery of 2012-2015 has been built-out almost entirely from borrowed money at 5 to 6%. The builders have 21% profit margins so the low rates have truly become a win-win for the builders. The banks have done their part too by only approving loans for saints. There is a lot to be said for the judicious use of credit.


    It must be interesting doing business in a high-inflation society like Brazil. There would be the constant temptation to be the early-bird. Every time someone cancels a contract, you sell it to the next guy for 50 basis points higher.

    Quite the opposite of a deflationary spiral in which it ALWAYS pays to wait. I think that's why central bankers and economists are so afraid of a "deflationary mindset", once it sets in (like in Japan).
    Dec 19, 2014. 12:38 PM | Likes Like |Link to Comment
  • It's Time To Buy The Oil Panic Of 2014 [View article]
    In March of that year there was a mini-panic over the Fed's rapid raising of interest rates. It was the second time that computer-driven programs had hammered the market down. It even made the cover of time magazine.
    Dec 19, 2014. 09:21 AM | Likes Like |Link to Comment