Submitted by Phil of Phil's Stock World
In the classic movie, "The Good, the Bad and the Ugly," the characters all lie, cheat, steal and kill as they chase after a chache of government gold. They all kill, they all try to kill each other and the only character trait they all share is that will all do anything for money. We are lucky enough to have a modern version of that, with our own government supplying GOLDman Sachs and other bad market manipulators with TARP money, which they are using to, not to lend money to the good citizens of the US but rather to prop up the commodities market, stealing Billions of dollars from the very people they claimed they were going to help.
Since the November bail-out, consumer lending had gone down, home foreclosures have gone up, unemployment has gone up, housing has gone down yet the CRB has gone up 25%, led by oil, which is up 88% at $66 this morning. $66 oil is a noose around the neck of this economy as the it was cheaper oil that helped us begin to recover as it stayed around $40 from November through the beginning of March. On a per barrel basis alone, that was $500M a day LESS than we are paying now but, despite the fact that oil is still 54% in price from this time last year, gasoline has gone up so fast that it’s only down 23% from the prices that knocked the wheels out from our economy. Including refined products, that extra $26 a barrel is costing US consumers $1Bn a day, $365Bn a year or 1/2 of the TARP money going straight out of our economy and back to the countries that fund terrorism through the very ugly hands of GS (who are partners in ICE) and other TARP recipients who have funded and coordinated this commodity "rally," screwing the American people over with our own tax dollars.
Even the Libya’s Oil Minister believes there is no fundamental support for these prices, saying: "Prices are moving because the speculators are back. Fundamentals do not tally with psychology." That is certainly backed up by this week’s Petroleum Status Report, which had the very interesting statement: "Total products supplied over the last four-week period has averaged nearly 18.3 million barrels per day, down by 7.3 percent compared to the similar period last year." That’s right, the US Oil Cartel produced 1.5M barrrels LESS per day than last year, creating a 10.5Mb product deficit on the busiest week of the year. Not only that but imports were down 650,000 barrels a day, shorting the US another 4.5Mb of oil for the week. This data is for the week that ended Friday, May 22nd - a week when massive amounts of fuel are transferred to retail gas stations who get ready for the biggest driving weekend of the year and despite having the head start of a 15Mb shortfall in supply, the total drawdown of product was just 5.4Mb for the week. Imagine how much oil we’d be swimming in if we didn’t EXPORT over 1.8Mb PER DAY (12.6Mb/week):
And this nation is, in fact, swimming in oil, despite the fact that speculators like GS are paying to store oil in tankers offshore and around the world in order to create the impression there is more demand than there is in this slumping global economy. We discussed this obscene practice before but it has gotten so out of hand that it now threatens to destabilize the global oil markets and Iraqi Oil Minister (hey, wasn’t that supposed to be OUR oil?), Hussain (no relation?) al-Shahristani said last week: "We don’t think it’s a wise economic decision to produce oil from secure underground fields and then pay to store it in floating tankers. Future generations can benefit from it better than we can, if we don’t need it." The suppliers KNOW they are selling us more oil than we need and they KNOW the speculators are sitting on it, the only people who don’t seem to know what’s going on here is the Obama administration and the American people who are being conned out of 16M jobs worth of money again by the same bastards we had to bail out when their last con game got busted.
Reuters points out that the last time floating oil stock levels were anywhere near these levels was in the early 1990s after the first Gulf war. Tanks were drained then into a rising market and traders and analysts say only a rise in demand will clear the stocks now. But there is little chance of a quick recovery in oil use as the world faces its worst recession since World War Two, and the massive floating oil inventory is now haunting the market, an extra source of supply at a time when demand is extremely weak. "Out of the market and off balance sheet, everyone knows about this oil but is trying not to think about it," said Simon Wardell, director of oil research at IHS Global Insight. "It is deferred supply, an almost ethereal source of oil waiting offshore. As long as it is unused, it is effectively acting as a support for the market, but at some point it will reappear so it is acting as a ceiling on oil prices."
We’ll find out shortly to what extent the GDP supports any of the 88% rise in oil prices since Q4. I don’t suppose we’ll have an 88% rise in GDP - in fact, they are expecting a 5.5% decline but that would be a 0.6% improvement from the preliminary reading of -6.1% so the global markets are partying in anticipation of this blessed event. Oh here it is: Down 5.7%! That’s a little disappointing but I think there has been such a massive effort to get the markets up this month that I can’t imagine they’ll let it go on the last day but there is NO WAY I would go into this weekend bullish. It is likely we zig-zag into a finish around 8,412 on the Dow and 908 on the S&P and I’m not expecting the kind of wild moves that we got yesterday.
As with yesterday though, absolutely anything can happen and we remain mainly in cash but I will be scaling into yesterday’s oil shorts, painful though it may be. We expect a top at $70 (100% up from $35) and a 20% pullback to $63 so scaling in at $63 (yesterday), $66 (today) and $70 is the plan we are following. If we ultimately get blown out and take a 20-25% loss on this round (if oil flies through $70 and we stop out), then the plan is to wait for $100 and try again! Can the oil markets once again remain irrational longer than the nation can remain solvent? We will find out this summer for sure…
Asian markets were up about 1.5% this morning (China was still closed) led, of course, by commodity stocks as well as Japan enacting an EXTRA $143Bn stimulus plan. India’s GDP came in at 5.8% vs. 5% expected and I’ll be doing a global overview this weekend so we’ll save that discussion. Europe is also up 1.5% ahead of our open but the DAX did not take our GDP well and turned sharply down off 5,000 (9am) so we’ll have to see how things play out over there. Europe is also being led higher by energy stocks, which are also leading the US indexes with 12% gains on the month, accounting for 100% of the 3% gains the indexes have put up - it would be a real shame if they do sell off so please be careful out there!
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