Global crude oil inventories have been high, in addition, an estimated 125 million barrels of crude oil and fuels are held in unconventional (eg floating) storage around the world. Normally, only a negligible quantity is held in such storage. With such high stockpiles, global demand has been expectedly weak, reportedly falling by 1.6% and 1.7% in July and August 2009 respectively while showing an annual decline rate (in countries making up 70% of world demand) of 2%.

OOK Advisors announced the launch of its second exchange-traded fund on Wednesday as the TXF Large Companies Exchange-Traded Fund (TXF) began trading on the NYSE Arca Exchange. The new fund will track the SPADE Texas Index, a benchmark designed to measure the performance of the largest companies headquartered in the state. The index is up about 30% year-to-date, and has outperformed broader market indexes in recent years.

The Texas Index includes about 85 stocks that represent 90% of the market capitalization of companies headquartered in Texas. Not surprisingly, energy companies have a big allocation in the portfolio, including firms such as ConocoPhillips (COP) (5.5%), Exxon Mobil (XOM) (5.0%), and Schlumberger (SLB) (5.3%). But there is a lot more to the index and the ETF than just energy firms. Other holdings include Southwest Airlines (LUV), Burlington Northern (BNI), Whole Foods (WFMI), AT&T (T), Dell (DELL), and DR Horton (DHI).

By Patrick Watson

Following last week’s launch of an Oklahoma-focused ETF (OOK), yesterday (11/4/2009) the same firm introduced its Texas version. TXF Large Companies ETF (TXF) is the second offering from OOK Advisors.

Stocks of the U.S. Integrated Oil group, made up of four buy-recommendations, ConocoPhillips (COP), Marathon Oil (MRO), Chevron (CVX) and ExxonMobil (XOM), have the lowest median McDep Ratio (0.75) among the six industry groups in our coverage (range 0.75-0.94). McDep Ratios for the lagging group have begun to pull out of a three-year slump (see chart below).

In the context that lower McDep Ratio stocks should return more than higher McDep stocks, CVX has outperformed XOM over three years and MRO has underperformed during the same period. In contrast, COP has retained its lowest McDep Ratio position throughout the period. MRO and COP declined much more than XOM and CVX during last year’s weak market and thus may have extra potential with market values advancing again. CVX’s stronger relative performance has been helped by its highest concentration on oil (70%).

by David Gibbs

Reported Thursday Morning: Conoco Phillips (COP)

COP reported earnings of $1.00 before the bell, beating estimates by $.06.

Tuesday night I spent commercial time doing my annual piggy bank "roll up."

Yup, I am one of those people who dump their spare change into a large glass piggy bank and once a year pull it out and roll up the coins. As I was rolling up the coins, it dawned on me how non-precious they have become. The pennies are no longer significantly copper, the "nickels" aren't nickel, or the dimes silver. I am sure someone out there knows (and cares) about the exact composition of the coins being minted today, but I don't want to dwell on that. The point is that U.S. coinage is "cheap." It's like they are made in China (wink, wink). Anyhow, I decided it was time to trade in fake money for real money. Ron Paul would be proud of me.

ConocoPhillips (COP) earned $1.00 per share during the third quarter of 2009, down sharply from $3.40 in the same period of 2008. The latest results surpassed the expectations of many analysts, but we were disappointed. Our target for Conoco's Net Income in the latest quarter was $1.17 per share.

Since the shares fell almost 3% in value after the results were released, other investors must also have thought Conoco's earnings would be higher.

The ConocoPhilips (COP) quarterly earnings conference call was noteworthy for a couple of different reasons. First, the company seems to be taking logical steps to address its debt issues in light of new realities. Although several oil analysts suggested COP would sell off its Lukoil (LUKOF) stake, company executives took any potential Lukoil divestitures off the table:

Paul Sankey: Great. And then, if I could just clarify an early question. We are saying that you will not be selling out of any of the Lukoil state? Thanks, I will leave it there. Thank you.

Jim Mulva (CEO): Well, what I said is, we will maintain our strategic relationship with Lukoil.

Q3 2009 Earnings Call

October 28, 2009 11:00 a.m. ET

• GMAC needs third lifeline. GMAC Financial Services and the Treasury are reportedly in advanced talks to prop up the auto-lender with its third helping of taxpayer money, making it the first of the stress-tested banks to need additional government capital. Treasury will likely inject another $2.8-5.6B into GMAC in exchange for preferred shares, bringing its total investment in GMAC thus far to $15.3-18.1B, for which it currently owns 35.4% of the firm. Sources say the FDIC has also agreed to backstop another $2.9B of GMAC's debt to facilitate day-to-day lending. The government's willingness to deepen taxpayer exposure to GMAC reflects the troubled lender's importance to the revival of the auto industry.
• Consumer confidence dips. A lower-than-expected consumer confidence reading sent a chill through markets Tuesday. Conference Board's index came in at 47.7, down from 53.4 a month ago, and lower than consensus estimates of 53.2. A plunge in expectations (65.7 vs. 73.3 in Sept.) led the way down. "Consumers' assessment of present-day conditions has grown less favorable, with labor market conditions playing a major role in this grimmer assessment," the group said, noting its Present Situation Index is now at a 26-year low. Analysts struggled to find an obvious explanation for the decline, but noted the drop didn't bode well for recovery hopes.
• Risk appetite withers. State Street's investor confidence index fell 10 points to 108.4, the lowest since April, with the most pronounced decline seen among North American investors (-12.8 to 101.1). European investors were also much more subdued (-9.3 to 101.8), but confidence rose among Asian investors, albeit to a level that still trails the U.S. and Europe (+2.4 to 95.3). "Institutional investors have paused to take stock," index co-developer Ken Froot said. "While the U.S. earnings season has been relatively robust so far, the number of positive surprises that have been observed in employment, retail sales, manufacturing and trade figures has diminished considerably, and this may be influencing investor risk appetite."
• Easing Hilton's towering debt load. Sources say Blackstone (BX) is in talks with lenders to shave about $5B off Hilton Worldwide's $20B debt load. Specifically, Blackstone is considering coughing up another $800M in equity to buy back debt at a discount (on top of its $5.6B original investment), and would like to extend debt maturing in 2013 to 2016. With capital markets reopening over the past six months, private-equity firms are using a variety of schemes (exchange offers, repurchases, tender offers) to refinance and extend the maturities on highly-leveraged debt taken on during the heyday, staving off default.
• Panel backs hedge-fund clampdown. The House Financial Services Committee overwhelmingly passed a bill that would require advisers to hedge funds, private equity and offshore funds to register with regulators, bringing some transparency to the loosely-policed industry. The bill, however, exempts venture capital funds and funds with less than $150M - which SEC chief Mary Schapiro warned "could come back to haunt investors in later years."
• Tackling too-big-to-fail. Rep. Barney Frank unveiled legislation to monitor and dissolve systemically critical financial institutions. Under the proposal, costs for taking over and euthanizing a failed bank would be paid for by shareholders and bondholders, with taxpayers temporarily covering the overflow until an assessment is rendered against the failed bank's surviving peers. A council of regulators - including the FDIC, Treasury, Fed and SEC - would be in charge of monitoring the conglomerates and invoking a wind-down if necessary.
• That's a good czar. While so-called pay czar Kenneth Feinberg's new rules for TARP backed firms cut compensation by about half, they also boosted base salaries by 14% to an average of $438K/year after executives complained, according to an analysis in today's WSJ. The move appears to contradict Feinberg's stated goal of tying pay to long-term performance, and "deepens the confusion and skepticism" surrounding the types of pay systems the government is promoting.
• Ford shows why it's #1. Consumer Reports' much-awaited yearly car reliability survey held few surprises, with foreign automakers dominating its top-10 list, and domestic brands prominently featured on its least-reliable tally. Scion took top spot, followed by Honda (HMC), Toyota (TM) and Infiniti (NSANY). Ford (F), at #10, was the only U.S. carmaker to make the grade. Least reliable brands were Chrysler, Cadillac, Dodge and Jeep. Media reports yesterday claimed Fiat models will drive Chrysler's turnaround efforts, but with new cars not due until 2012, it's unclear whether Chrysler has enough staying power in its balance sheet.
• Ruiz pegged as AMD insider. Sources say former AMD (AMD) CEO Hector Ruiz is the insider government officials have identified as providing nonpublic information to Galleon's insider trading scheme. Prosecutors released fragments of recorded conversations between an unnamed AMD executive and a Galleon employee in which they allegedly discuss the timing of the spinoff of AMD’s plants before the deal was announced in Sept. 2008. Ruiz hasn’t been charged, and prosecutors don’t say he profited from insider trading.
• Gloom on economy spreads. Americans are growing increasingly pessimistic about the economy after a mild upswing in September, according to WSJ/NBC's monthly poll released Wednesday. For the first time during the Obama presidency, a majority of those polled now see the country as being on the wrong track. Fifty-eight percent think the economic slide still has a ways to go, up from 52% in September, while only 29% think we've hit bottom, down from 35%.
• Mortgage apps drop for second straight week. Mortgage applications fell another 12.3% following a 13.7% drop last week, even as the average rate for 30-year mortgages inched down to 5.04% from 5.07% a week ago. Refinancing was 16.2% lower.
• Ford picks Geely. Ford (F) selected a group led by China's Geely as the preferred bidder for its Volvo unit, a senior Geely executive said. Geely and Ford will now enter into exclusive negotiations over Volvo.

Earnings: Wed. Before Open

• ArcelorMittal (MT): Q3 income of $1.59B vs. consensus of $1.78B. Sees Q4 income of $2-2.4B. "We have seen the first signs of recovery in Q3... We should continue to see further gradual improvement through 2010, although the operating environment remains challenging." Shares -0.8% premarket. (PR)
• Ashland (ASH): FQ4 EPS of $0.96 beats by $0.06. Revenue of $2.11B (-4.6%) in-line. "Demand appears to be showing some signs of growth in many end markets." (PR)
• BorgWarner (BWA): Q3 EPS of $0.15 beats by $0.05. Revenue of $1.03B (-22%) in-line. "We continue to be cautiously optimistic about Q4." (PR)
• ConocoPhillips (COP): Q3 EPS of $1.00 beats by $0.06. Shares -0.1% premarket. (PR)
• Enterprise Products Partners L.P. (EPD): Q3 EPS of $0.36 misses by $0.06. Revenue of $4.6B (-27%) vs. $4.73B. (PR)
• CenterPoint Energy (CNP): Q3 EPS of $0.31 misses by $0.01. Revenue of $1.58B (-37.3%) in-line. (PR)
• Coca-Cola Enterprises (CCE): Q3 EPS of $0.51 beats by $0.05. Revenue of $5.57B (-3%) vs. $5.71B. (PR)
• General Dynamics (GD): Q3 EPS of $1.48 beats by $0.08. Revenue of $7.72B (+8.1%) in-line. (PR)
• Goodyear Tire & Rubber (GT): Q3 EPS of $0.45 beats by $0.05. Revenue of $4.38B (-15.2%) in-line. Shares +1.8% premarket. (PR)
• Hess (HES): Q3 EPS of $1.05 vs. consensus of $0.55. Revenue of $7.27B vs. $7.75B. Shares +1.8% premarket. (PR)
• Jones Apparel Group (JNY): Q3 EPS of $0.46 beats by $0.19. Revenue of $856M (-11.3%) vs. $867M. "We are cautiously optimistic that the holiday season will generate better financial results across the industry." Shares -13.8% premarket. (PR)
• International Paper (IP): Q3 EPS of $0.37 beats by $0.13. Revenue of $5.92B (-13.1%) in-line. "At the end of Q3, we began to see some modest improvements in demand in some segments of our paper and packaging businesses." Shares +3.8% premarket. (PR)
• Lazard (LAZ): Q3 EPS of $0.41 beats by $0.04. Revenue of $431M (-1.3%) vs. $400M. Believes corporate defaults will remain at high levels, on a more global scale than during the last cycle, and therefore expects that its restructuring business will continue to be very active. (PR)
• Level 3 Communications (LVLT): Q3 EPS of -$0.10 in-line. Revenue of $916M (-14.4%) vs. $926M. Shares -4.4% premarket. (PR)
• MeadWestvaco (MWV): Q3 EPS of $0.50 beats by $0.23. Revenue of $1.63B (-10.2%) in-line. "Given continued global economic uncertainty, future results are difficult to predict." (PR)
• Newell Rubbermaid (NWL): Q3 EPS of $0.38 beats by $0.03. Revenue of $1.45B (-17.7%) in-line. (PR)
• New York Community Bancorp (NYB): Q3 EPS of $0.26 in-line. "Although certain economic data suggests that the recession has ended, the Metro New York region we serve continues to be under duress." (PR)
• Nexen (NXY): Q3 EPS of C$0.23 beats by C$0.08. Revenue of C$1.1B (-50.4%) vs. $924M. Shares -0.1% premarket. (PR)
• Nomura (NMR): Q2 net income of ¥27.7B ($303M) vs. consensus of ¥11.5B. Revenue of ¥355B vs. ¥258B last year. Resumes ¥4/share dividend. (Bloomberg)
• Owens Corning (OC): Q3 EPS of $0.61 beats by $0.22. Revenue of $1.35B (-17.2%) in-line. On track to surpass $160M in cost savings this year. Shares +1.5% premarket. (PR)
• Praxair (PX): Q3 EPS of $1.02 beats by $0.02. Revenue of $2.29B (-19.8%) in-line. "Business conditions stabilized globally during the quarter... The strongest pick-up was in Asia and South America, where government stimulus programs have increased domestic demand and industrial production." (PR)
• Qwest Communications International (Q): Q3 EPS of $0.09 beats by $0.02. Revenue of $3.05B (-9.6%) in-line. Shares +3.5% premarket. (PR)
• SAP AG (SAP): Q3 net income of €435M vs. consensus of €454M. Sales of €2.51B vs. €2.63B. "While we are seeing signs of stabilization in the general environment, the market remains difficult. Q3 software and software-related service revenues came in lower than we expected mainly because of a particularly challenging environment in the emerging markets and Japan." Shares -7.6% premarket. (PR)
• Southern Company (SO): Q3 EPS of $0.99 beats by $0.01. Revenue of $4.68B (-13.8%) vs. $5.5B. (PR)
• SPX Corp. (SPW): Q3 EPS of $ beats by $. Revenue of $1.17B (-20.8%) in line. Sees full-year EPS of $3.80-4.00 vs. $3.96 consensus. "The global economic environment remains difficult and continues to impact our performance. Although some macroeconomic trends appear to be pointing toward a recovery, we expect our recovery to lag the broader economy." (PR)
• United Microelectronics (UMC): Q3 EPS of $0.08 beats by $0.04. Revenue of $853M (+11.1%) vs. $809M. (PR)
• WellPoint (WLP): Q3 EPS of $1.78 beats by $0.40. Revenue of $15.21B (+784%) in-line. Medical enrollment fell 1.5M to 35.3M, primarily due to the recession and a rise in unemployment. Shares -14.3% premarket. (PR)
• Wyndham (WYN): Q3 EPS of $0.58 beats by $0.02. Revenue of $1.02B (-17.1%) in-line. Shares +1% premarket. (PR)

Earnings: Tue. After Close

• Ace (ACE): Q3 EPS of $2.07 beats by $0.10. Revenue of $3.39B (-6%) vs. $3.33B. Expects meaningfully stronger revenue growth in Q4. Shares +2.3% AH. (PR)
• Amkor Technology (AMKR): Q3 EPS of $0.12 misses by $0.07. Revenue of $616M (-14%) vs. $604M. Sees Q4 EPS of $0.17-0.23 vs. $0.16. Shares -1.5% AH. (PR)
• Apollo Group (APOL): FQ4 EPS of $1.06 beats by $0.02. Revenue of $1.08B (+30%) vs. $1.03B. Announces an informal SEC inquiry into revenue recognition practices. Shares -19.8% AH. (PR)
• Boston Properties (BXP): Q3 FFO of $1.13 beats by $0.03. Revenue of $359M (+6%) vs. $353M. Sees Q4 FFO of $1.04-1.06 vs. $1.09. (PR)
• Century Aluminum Company (CENX): Q3 EPS of $0.45. Revenue of $229M (-59%) vs. $225M. Results impacted by $55.6M net after-tax benefit related to contract replacement. Shares +3.8% AH. (PR)
• Cephalon (CEPH): Q3 EPS of $1.62 beats by $0.21. Revenue of $549M (+10%) vs. $559M. Sees full-year sales of $2.125B-2.175B vs. $2.22B. Shares +1.4% AH. (PR)
• Chicago Bridge & Iron (CBI): Q3 EPS of $0.42 beats by $0.03. Revenue of $1B (-38%) vs. $1.1B. Shares +5.4% AH. (PR)
• Dreamworks Animation (DWA): Q3 EPS of $0.23 beats by $0.07. Revenue of $135M (-10.6%) vs. $129M. Shares +0.4% AH. (PR)
• E*TRADE Financial (ETFC): Q3 EPS of -$0.05 beats by $0.01. At-risk delinquencies declined by 10% and provision for loan losses decreased by $57M to $347M. Shares +0.6% AH. (PR)
• Fiserv (FISV): Q3 EPS of $0.92 in-line. Revenue of $992M (-5%) vs. $1.05B. Shares -2.6% AH. (PR)
• Harris (HRS): FQ1 EPS of $0.83 beats by $0.06. Revenue of $1.2B (-3%) in-line. Shares +5.4% AH. (PR)
• Illumina (ILMN): Q3 EPS of $0.17 misses by $0.03. Revenue of $158M (+5%) vs. $167M. Shares -14.8% AH. (PR)
• Integrated Device Technology (IDTI): FQ2 EPS of $0.07 beats by $0.05. Revenue of $140M (-30%) vs. $131M. Shares +4.2% AH. (PR)
• Massey Energy Company (MEE): Q3 EPS of $0.19 beats by $0.01. Revenue of $642M (-16%) vs. $677M. Shares -7.4% AH. (PR)
• McKesson (MCK): FQ2 EPS of $1.11 beats by $0.09. Revenue of $27.1B (+1.9%) vs. $26.75B. Sees full-year EPS of $4.45-4.60 vs. consensus of $4.29. Shares +1.9% AH. (PR)
• Molex (MOLX): FQ1 EPS of $0.18 beats by $0.03. Revenue of $674M (-20%) vs. $661M. Sees Q2 EPS of $0.11-0.15 vs. $0.19, including pretax restructuring charge of about $0.07 after tax. Shares -1% AH. (PR)
• Nalco Company (NLC): Q3 EPS of $0.20 misses by $0.05. Revenue of $957M (-14%) vs. $961M. (PR)
• Norfolk Southern (NSC): Q3 EPS of $0.81 beats by $0.03. Revenue of $2.1B (-29%) in-line. Shares +1.8% AH. (PR)
• Panera Bread Company (PNRA): Q3 EPS of $0.61 beats by $0.03. Revenue of $335M (+6%) vs. $334M. Same-store sales increased 3.3%. Sees Q4 EPS of $0.85-0.87 vs. $0.85, and full-year EPS of $3.05-3.15 vs. $3.04. Shares +5.2% AH. (PR)
• Pharmaceutical Product Development (PPDI): Q3 EPS of $0.32 in-line. Revenue of $341M (-13%) vs. $334M. Sees full-year EPS of $1.38-1.40 vs. $1.34, on revenue of $1.29B-1.32B vs. $1.34B. Shares +0.2% AH. (PR)
• RF Micro Devices (RFMD): FQ2 EPS of $0.13 beats by $0.04. Revenue of $255M (-6%) vs. $234M. Shares +7.1% AH. (PR)
• ValueClick (VCLK): Q3 EPS of $0.15 beats by $0.01. Revenue of $130M (-12.1%) vs. $129M. Sees Q4 EPS of $0.15-0.16 vs. consensus of $0.17 on revenue of $128-138M vs. $142M. Shares +1.8% AH. (PR)
• Visa (V): FQ4 EPS of $0.74 beats by $0.02. Revenue of $1.9B (+10%) vs. $1.8B. Sees 2010 revenue growth at lower end of 11-15% range. Sees 2011 growth of more than 20%. Shares +1.9% AH. (PR)

Today's Markets

Overseas markets moved lower Wednesday and futures are under pressure.

Before we get to these two reports, we will get little preview of what we might see out of XOM and CVX. Two lesser known and smaller companies in terms of market capitalization will report before the market opens on Wednesday.

In my latest two blog posts Monday and Wednesday, I listed some stocks which I would be willing to go long by selling the puts right before the stock reported earnings. Keep in mind these are companies which I believed would have a positive reaction to the earnings, however if the stock moved sideways on the number this strategy would still likely return a gain the following day. This is because I am taking advantage of the increased levels of implied volatility factored into the option premium before earnings. If you missed them, be sure to check out Monday's blog post here, and Wednesday's here. So far this earnings season, the overall results have been very positive, even on eBay (EBAY), which sold off nearly 10% after earnings; I was able to purchase back the puts options (closed the position) for a $4 per contract gain the following day. The best results are of course when has a very positive reaction to the report and pops. My best trades so far this earnings season include the trades indicated in the two previous blog posts on the following companies:

• Google (GOOG)
• Apple (AAPL)
• Caterpillar (CAT)
• Texas Instruments (TXN)
• SanDisk (SNDK)
• Walter Energy (WLT)
• Yahoo! (YHOO)
• Amazon (AMZN)
• Microsoft (MSFT)

The put options sold on the stocks above were quickly closed within 2 hours after market open following the earnings report (some for as low as $1 per option contract). In most of the cases, the call options purchased were also sold the following day, but I continue to hold both the Google and Apple call options. In this post, I will lay out some trades for Tuesday and Wednesday (October: 27 and 28).

The title of this article is of course borrowed from the brilliant book of the same name written in 1841 by Charles Mackay. The book deals with 3 “delusions”: "National Delusions", "Peculiar Follies", and "Philosophical Delusions". While dealing with The Crusades, alchemy, witch-hunts and other follies, the parts that interest us most today are the economic bubbles he discussed -- in 1841 -- and the national delusions he chronicled.

Mackay devoted a chapter each to the Dutch tulip mania of the early seventeenth century, the South Sea Company bubble of 1711–1720, and the Mississippi Company bubble of 1719–1720.

Kopin Tan recently wrote an article in Barron’s entitled “Get Ready for the Oil Age to End”. The article cites Paul Sankey’s opinion that electric and hybrid vehicles are game changers and the decline in U.S. gasoline demand as backing up the title’s claim. Further, the article states that competition from natural gas will also crimp oil demand. The overall tone of the article suggests that mankind is moving away from oil, and therefore the age of oil will be over sooner rather than later.

Poppycock!