Philip Davis

Options Trader: Friday Outlook

Oh Muzie, you got me! Per capita consumption is a fairly tale wovern by people who want to fool you into thinkng that businesses only consume oil because they make stuff that is used by the population in some warped way of trying to shake your pre-conceptions.

Options Trader: Wednesday Outlook

That is scary Bill!

The Oil Shortage, and Other Fairy Tales

Yes farmers do make money from wheat speculation but it's only an accident that the commodity producers make money in a speculative frenzy. Meanwhile we enrich places like Iran to the tune of $400M a day which Bush himself claims they are using to fund terrorism.

Sadly, it won't be the "evil speculators" that are wiped out, it will be all the average people and pension funds that are being herded into the next "sure thing" investment like sheep to the slaughter right at the top of the market.

Don't forget Goldman Sachs made over $6.5Bn in 2006 and 2007 SHORTING housing after spending the first half of 2005 upgrading the builders. Funny how they caught the turn just right but forgot to mention it to anyone until it showed up.

Why complain? Because people are being robbed and I care, because this country is being destroyed by the greedy who prey on the fear of the people to make them accept these abuses without making "unpatriotic" or "anti-capitalist" complaints.

As Hermann Goering said: "It is the leaders of the country who determine policy, and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger."

This oil bubble is war profiteering plain and simple, the people of this country have been led to believe that the world is an evil place and problems cannot be solved through diplomacy and the constant state of war allows oil interests and defense contractors to make hundreds of billion more dollars each year than they did before their man got elected. I'm sure it's all just a happy coincidence for them...

The Oil Shortage, and Other Fairy Tales

Lot's of great comments here, I love it when we can have a nice, civil exchange of ideas. CBubble, that is great stuff. I just answered a person on another post as to HOW the price of oil is manipulated and I'll print it here to so excuse the length but this is why the whole thing can fall apart MUCH faster than you think. The housing and .com bubbles were de-centralized events and they fell apart in a de-centralized fashion but the scam going on at the NYMEX that has driven the price of oil up from $30 to $130 a barrel in 5 year can be unwound with the stroke of a pen if they change the regs:

I don't know a good site for tracking NYMEX contract volume from open to close but there is currently an "open interest" on the NYMEX for 378,974 contracts, representing 1,000 barrels each, that is the "demand" for July.

At the peak of June trading there were close to 450,000 open contracts but the NYMEX allows traders to "roll" open contracts to longer months WITHOUT PENALTY and by the close of the June contracts, less than 30,000 contracts (30M barrels) were actually finalized for delivery. The other 420M barrels that were, at some point, contracted to be delivered in June, were "rolled" into July, August, Sept.. contracts.

You can track this nonsense here on a daily basis:

futures.tradingcharts....

Notice how there are 378,974 barrels "ordered" for July and 91,509 for Aug and 94,177 for Sept and 49,177 for Oct. I will tell you for a fact, right now, that on June 24th (close of July trading) there will be LESS than 40,000 contracts accepted for delivery. All but 40M of the now 378M barrels that could be delivered to the US PER THE EXISTING CONTRACTS will be cancelled by these evil manipulative bastards in oder to create an artificial shortage of oil each month while driving up the apparent demand for the next month by rolling the contracts forward.

That's how the scam works.

Also, note that the "front month" contracts, the one they print on CNBC etc. rose $1.38 today but longer contracts were negative, with the Dec 2015 contracts that they couldn't stop talking about and pointing to just 2 days ago when they crossed $140, have quickly and quietly dropped to $132.77 just 48 hours later.


futures.tradingcharts....

It's very easy for the oil apologists to point to all sorts of abberant statistics to try to confuse you. China demand is a classic example - it's up 40% in the past 5 years. What they don't tell you is that that 40% was a rise from 5Mbd to 7Mbd but Chinese production went from 1.6Mbd to 4.1Mbd during the same amount of time causing them to import 500Kbd LESS than they did in 2003.

No, it's much better to scare you by saying 40% even though that 40% is about how much fuel we would save in America if we simply inflated our tires properly (10% x 20Mbd).


Mark Twain said "There are three types of lies: Lies, damn lies and statistics." Always be wary of people who throw them around without letting you take a look at the sources for yourself. It's hard to pick up in the text on Seeking Alpha but I try very hard to have links to all my stats. When CNBC shows you the Dec 2015 contract one day to "prove a point" and then doesn't show it again, you need to be suspicious.

Just ponder that those 378,974 contracts were traded on the NYMEX today 425,099 times. That's a churn rate of 115%! The net change in price was 1% and the net change in open interest was less than 1%. What would you think of a stock or option contract where the entire float turned over in one day? This is what goes on EVERY SINGLE DAY at the NYMEX.

425,099,000 barrels of oil were traded today, readily available to any trader who wants them delivered in July, with another 136,725,000 August barrels traded and another 73,297,000 September delivery contracts written yet in not one of those months will more than 42M barrels ever be delivered because that is the transfer capacity at Cushing, OK.

So the ENTIRE thing is a joke. People are ordering barrels they don't want with contracts written for a place that will never accept delivery AND, if anything actually happens to disrupt supply, there is a loophole called "Force Majeure" which allows the contracts to be cancelled by the shipper due to "supply distruptions" so they are not even buying insurance.

The only thing they are insuring is that they will bleed you dry by forcing you to pay $130 a barrel for something that has a global average production cost of $42 a barrel. This is nothing less than the single largest con in human history and your "reliable sources" are a government that was elected thanks to hundreds of millions of Petrodollars of campaign contributions and a media that is owned by companies that either are energy companies or accept millions of dollars from energy companies.

The 30M barrels of oil that were actually accepted for delivery in July set someone back $4Bn, that sounds like a lot until you realize that that $4Bn locked in a price increase of $25 a barrel during the month of May x 85Mb a day worldwide or $65Bn bonus dollars paid to the same people who are churning oil contracts in the pits.

What if you had 15 shares of IBM at $100 and the price of the last trade on June 24th will set the price you can sell IBM for in July. What if you could buy that last contract for $150 and that would let you sell the ones you are already holding for $150. You would spend $50 extra for a single contract but would collect $50 more on the 15 you have for a net profit of $7,450!

Would you do it? Do you know anyone who would? Do you think no one would?

That's how the NYMEX works. Those 30M barrels that are "accepted" at the contract close determine the price of the 85M barrels PER day that are delivered for the 31 days of May. That's 2,635 barrels over 30 or 1/87th.

This is how you are being ripped off, this is how the manipulation operates, this is the only reason that oil is over $70. There is no shortage, there is no great demand, there is just a greedy cadre of immoral people who manipulate a system that costs the American people $500Bn a year (the premium we're paying over $70) just so they can skim a few million for themselves.

Have a happy Memorial Day weekend folks!

Oil: Feed the Machine, America - You Have No Choice!

Cheesecake for sure!

In fact we're waiting for an entry on CAKE but, next time you're in town I'll join you for a slice at the Brooklyn Diner!

- Phil

Oil: Feed the Machine, America - You Have No Choice!

Thanks Saul - and no, I'm not replying to you so don't worry!

I have lots of respect for political leaders but not all politicians are leaders. You put me in a bad spot because I just promised Raciner I would be nice so I'm not going to talk about Bush other than to say that you have to be a "Blue-stater" to understand how dumbfounded we are that he IS our President (AGAIN!). Having gone through the Nixon years, I can respect the office but not the man - had he stepped down first, Spiro Agnew would have been labeled POTUS while under indictment... At some point you have to have the right not to blindly wave the flag at anyone who jumps into the chair! (see no Bush bashing!).

Do Americans hate Iranians becuse of their table manners or is it because of their chosen representative? When there is little cultural integration, people tend to judge a people on what they know about their leaders. Did American citizens change from being admired (or at least tolerated) in the 80s and 90s to reviled as a people in the 2000s becuase we forgot to brush our teeth or becuse we allowed our country to be taken down a path that has garnered the resentment of half the planet?

"All that is necessary, for evil to triumph is for good men to do nothing." And that's a quote, I'm not saying Bush is evil per se, but I'm sure many a toxic regime has risen as intellectuals such as yourself debated the merits of respecting the process as that process inexorably ground them into dust!

For the love of "Moshe, Jesus, Muhammad and Cheesecake" I do have to say something when my own country's policies seem to eschew "turn the other cheek" and "love thy neighbor" in favor of some the most warlike passages of the Koran:

"Slay them wherever you find them...Idolatry is worse than carnage...Fight against them until idolatry is no more and God's religion reigns supreme." (Surah 2:190-)

"Fighting is obligatory for you, much as you dislike it." (Surah 2:216)

"Seek out your enemies relentlessly." (Surah 4:103-)

"...make war on the leaders of unbelief...Make war on them: God will chastise them at your hands and humble them. He will grant you victory over them..." (Surah 9:12-)

"Prophet make war on the unbelievers and the hypocrites and deal rigorously with them. Hell shall be their home." (Surah 9:73)

I shall not stand by and do nothing while acts are being commited in my name that I object to. It is the duty of the citizens of a democracy to stand and fight for what they believe in. The pendulum is swinging back fast, the left side of this country is energized in a way I haven't seen since the 70s and a change is coming - I would suggest you plan your long-term investments accordingly!

www.crooksandliars.com.../

Have a good weekend,

- Phil

Oil: Feed the Machine, America - You Have No Choice!

Say are you the same Greg Pinelli who also attacked Eddy Elfenbein when he pointed out crude was falling on 1/5 with this comment:

Greg Pinelli wrote on Fri Jan 5th @ 9:13 pm
"Is this kind of comment or analysis supposed to be helpful? All of us have things to do..if weather is your best shot then stop clogging this site...First, this is OLD news...then, it hardly gives us a basis for analyzing the future...."

Or maybe it was you who criticized Dan Cary that day when he said the energy markets were turning bearish (as crude was dropping towards $55) and some guy with your name said:

Greg Pinelli wrote on Fri Jan 5th @ 10:33 pm
"When I hear things such as the "fundamentals are bearish" it's hard to imagine the speaker understands what bearish..or fundamentals mean. There has been a very temporary blue sky period for oil supply...a period of perfect weather, subdued geopolitical threat, and few wanting to focus on the very poor oil/gas supply fundamentals..Those real "fundamentals" speak to reserves being used 3 times faster than discoveries are made...and a group of suppliers ready, willing and able to stiff their contractual partners or disrupt chains of supply for an indefinite period."

Or perhaps you're the Greg Pinelli who Criticized David Taylor (3 times!) on Dec 14th when he said crude prices may still fall (then at $64):

Greg Pinelli wrote on Thu Dec 14th @ 3:45 pm
"11 milion barrels a month is...give or take...about 3% of monthly imports ...hardly a "marked" decline given that Nov-March is not exactly the peak driving season. There are other strong drivers of the oil (oil equivalent) price besides US demand. Those days are forever over...as is $40 oil. "Punters" who think that price is a coming attraction had better get ready to look at some very ugly losses.
The last couple of months will be looked at by Spring as having been a quiet, eye of the storm period where the unsuspecting and over optimistic were lulled into putting their investment heads on the block. Oil will be well over $70 by April...and if there are ANY geopolitical surprises look for $85."

You were motivated enough to follow that one up a week later with:

Greg Pinelli wrote on Wed Dec 20th @ 10:01 pm
"Well Andrew...It's Dec 20th and still no defence of your column...a poorly analyzed piece of fluff so your picture..I think..might hit some investment blog..somewhere...Plea... Alpha Readers...don't follow this nonsense...you WILL lose money hand over Andrew...."

Perhaps it was you that said of Kur Wulff's 1/17 analysis of Gazprom where you said:

Greg Pinelli wrote on Wed Jan 17th @ 11:07 pm
"This is precisely the kind of irresponsible and shoddy recommendation that needs to be challenged..Why would you invest in Gazprom when you could invest in any number of honest companies in market respectful countries that one day Russia will be begging to help them develop the assets they have grossly mismanaged or ignored???"

While I admire your attempts to put your fingers (and toes it seems) into as many holes in the dyke as possible, the end of that story is the boy drowned when all the surplus oil flooded the market and he was dragged under by the weight of his own positions.

======================...

Raciner - as to Bush bashing, I really have tried to be nice to him since he blew the last elections and ended a decade of Republican rule while scoring lower approval rating than Nixon... but then he goes and does something like this and I just get so annoyed!

Anyway, I apologize and I will try not to be mean to Bush for the next 23 months, especially as he just pulled a coup and took over the government while we weren't looking:

pressesc.com/011698108...

Oil: Feed the Machine, America - You Have No Choice!

Thanks! That's a good one, I did forget taxes...