COVERING VLO SHORTS (I HATE STUPID STOCKS) AND A SERIOUS NOTE THAT OIL MAY BE BOTTOMING NOW
I covered my 2000 share short on Valero (VLO-NYSE) Friday at $66.85, a gain of $2.55 on the first 1000 and 75 cents on the other 1000.
I am so mad at this stock. Doesn’t it know when to go down?
Yes it did go down to $63.05 one day last week, and I almost covered RIGHT there—at the low—to grab some easy money.
I called it right there–so now that stock OWES me about $3.50/share in lost profits, and I WILL get it.
Doesn’t this stock KNOW that when Gulf Coast crack spreads go down 10% like they did on Thursday, it’s supposed to go down 10% too—instead of going up 4%?
Instead of trading on fundamentals, it’s trading like a Dow-related stock–on up days. The Dow was up Thursday (for once) and VLO jumps up, even as its fundamentals were falling apart that day.
Then, when the market falls apart like it did on Friday, the stock barely moved, as the Market sees it as the last bastion of energy it wants to own. When the last bid goes into the energy sector, it will probably be for VLO. When that stock only went down a bit on Friday, covering was the safe choice.
But I mean really, is the stock stupid? Doesn’t this stock KNOW that there have been huge increases in gasoline inventories and other products in the US in the last two weeks?
And doesn’t this stock KNOW its refineries use a lot of heavy oil, and with Canadian heavy oil getting as low as $8/barrel (that’s not a typo–eight) that a lot of production will soon get shut in and those big discounts—from which it profits mightily—will be much reduced?
Doesn’t this stock KNOW that ethanol margins are basically zero—maybe 3 cents a gallon, and will be lucky to not be a drag on Q1 earnings?
I KNOW I’m right. I know it. I hate stocks that have a mind of their own. This stock is wrong, and it’s acting like a…a…a petulant child.
So what if Warren Buffett is buying refineries—like Phillips 66. What’s he done lately? I’ll tell you—his share price at Berkshire Hathaway is all the way down to $190,000! Pfft!
It’s a good thing I at least made a small profit, so when I tell my spouse she won’t be mad. I tell my spouse ALL my trades. I think complete honesty is always the best policy with her.
So there are lots of lessons for subscribers with this trade…
The most important one is…if you have ever felt any of the emotions I just wrote down in this satire while investing/trading, you should leave stocks alone for a week and find a market mentor. (I really did cover my shorts though.)
A SIGN THAT OIL IS BOTTOMING?
Now something a little more serious…oil imports into the US are increasing dramatically as US oil inventories are declining–about 8 million barrels in the last four weeks. Imports are up from 6.88 million bopd in November to 7.42 million in December.
If imports are up 540,000 bopd, and inventories are declining by an average (8.1 M /28 days) 289,000 bopd, that has to mean that US production is falling much faster than anyone thinks.
Now, do I think US oil production has fallen 829,000 bopd in the last month? No. BUT, pretty much everyone agrees that the weekly production number out of the EIA on Wednesday mornings is the least reliable number they put out…JUST SAYIN’. We could be seeing a lot of production being shut-in.
The time to get bullish–at least from $29/b–could be much closer than we think. And while the Middle East can make up for that quickly, the drop in US production–borne out by increasing inventory draws in the coming weeks perhaps?–should get the WTI market excited. A non-levered bullish oil ETF trade may be nigh…I will be using HOU on the TSX.
I’m in Chicago this week so you may not hear from me. You deserve a break.
TWO transcripts will be posted in the Members Centre on Monday–
- My 45 minute chat with Tom Hulsebosch of West Monroe Partners in Chicago on the Smart Grid and Internet of Things
- Our subscriber webinar with Cortex CEO Joel He told us that payback for customers sometimes happens in TWO WEEKS.
(Just FYI, the Pine Cliff transcript is there too and the Q&A session with CEO Phil Hodge had some great information)
Also, you will be seeing a bullish report go out from my Corporate Bulletin on Lithium X Energy Corp (LIX-TSXv) this week. I am long and it is not an OGIB portfolio stock. They are a corporate client and they have my goodwill in the market. Few men in the resource sector have built and sold as many juniors for as much money as Lithium X Executive Chairman Paul Matysek.
SUBSCRIBER SUMMIT MARCH 5 TORONTO
LASTLY--don’t forget to register and book hotel if necessary for our Subscriber Investment Summit on Saturday March 5 in Toronto.
One of our confirmed speakers is Zach George of FrontFour
Capital. Zach is one of the more high profile buy-side funds who are vocal in asking for management teams to stay focused on shareholder value, and continually want to confirm high quality governance from boards of directors.
Front Four made their views known was involved in Renegade Petroleum, Legacy Oil and Gas and Rock Energy. A successful hedge fund manager in his own right, Zach is the son of former long-time Suncor CEO Rick George.
Here’s the link to sign up: http://torontosis2016.eventbrite.com/?aff=OGIB