Monday, February 28, 2011

Mid East Certainty (there's only one certainty right now)

While I'm not complaining, it's been sometime since my last post. Given the market's love of certainty, I thought I should finally chime in.

Sick or otherwise, I'm continuing to key the energy sector and the crude oil commodity - buying oil as dictators fall (or on rumors of their fall) and selling oil as chaos escalates. I sold oil Wednesday and Thursday, into the turmoil, but turned around and started scaling in again by later Thursday; as rumors of Gadhafi's death helped to knock prices down a quick 5%.

Mubarak's fall generated similar buying opportunities (2 or 3 in fact).

CNBC's Rolodex is getting quite a workout lately. By last Thursday they ran a story calling for $220/barrel oil, as emotions peaked, only to bring on analysts calling for $70 and then $60 then next day, Friday; as the price came in. Put me down then as a seller of $200 oil; a same-day buyer if I can get it down to 60.

And today, CNBC has flown an ace reporter out to Cushing Oklahoma, to discuss the current glut of US crude oil (the same story repeated several times throughout the day). There is plenty of oil out here. Oil should not be trading where it is right now. The price is sure to drop. Etc., etc., etc.

Give them a couple days. CNBC $220 oil might be topped before this week is through.

Seriously, uncertainty in the Mid-East has ratcheted-up the risk-premium in energy. This you know well. But while CNBC heads think oil will fall as Gadhafi falls (they're beginning to sense this), I would argue that Gadhafi's downfall is about the only certainty we can count on right now. The same was true during the second-half of the Mubarak drama. Outside of how and when he was going down, Mubarak's end was a certainty. Now, take Gadhafi out and what are we left with? Uncertainty. Pump your fists in triumph as he falls and allow 20-30 seconds for good feelings; then let the questions begin again.

I've got orders open now and I'm looking only to add to oil positions (and re-load oil futures) the moment Gadhafi falls. If he's immortal for 3 or 4 rumored deaths, I'll buy each along the way.

At least until this stops working.

Follow @Centrifugal to fade trades in real time

Total Position: Currently 1.27-1 net-short, 82% invested

Currently Long (according to size): ARUN (8.2%), DBO-Oil ETF (8%); OXY (8%); APKT (5.3%); LULU (5.2%); OTEX (5.1%)

Currently Short: Russell 2000 index via long-TWM, 15%; AAPL (reloaded today, 15%); FDX (reloaded friday 7.9%); DISH (reloaded friday, 5%)
...currently weighting TWM at 1.5 x's instead of 2 x's on net-long calculation.

Futures: no current position (in and out of May crude oil long, for several weeks now).

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