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  • What I think this means :
    1. -40 negative front end futures price was largely margin selling but on top of this there is no demand for delivery.
    2. If this persists for a few months, it is bad for oil producers and the HY debt complex.
    3. The supply destruction, particularly if Russian supplies are shuttered due to prolonged low price will mean higher oil prices than otherwise in 1-2 years.

    I am nibbling on some oil producer ETF’s but waiting for the 3 and 6 month out futures to flatten and the contango to get wrung out.

    There is also a large open interest in USO from people who have mistakenly thought it is a good way to play low spot. This needs to be wrung out. USO roll forward the near contract from 2 weeks before expiry so I think this may be targeted next time.

    I would guess a narrative builds and at the bottom it will seem like there is no end in sight. I don’t think we are quite there yet, but maybe we are !?


    Comment


    • Only way I can see shale surviving is if Trump introduces a $20/barrell tariff on imported oil.

      There has been a lot of lending in the shale space that will need to be written down.

      I would also be surprised if there is not an EM crisis in the next 3 months.

      The Omani Rial must be under a lot of pressure. Also the Jordanian peg and if either break SAR/USD could be at risk.

      Comment


      • My brother bought BP stock right after the Gulf of Mexico oil spill. He looked so smart for a while, I kept telling him to sell it and put that $ In VTSAX, now I tell him to TLH by selling and buying another (exon, chevron) but he just looks at it drop. Surgeons picking single stocks, like ducks in a oil barrel.

        Comment


        • Originally posted by Lordosis View Post

          Is it really though this time? So much of the reduced use is artificial and because of the shelter in place orders. I am sure it is correlated but maybe not as bad as it would seem.
          100%. It doesnt matter if the demand restriction is artificial or real, the end result is the same that no one is buying/using oil. Gas prices from the 90s, very real. And artificial due to outside factors can quickly morph into actual, and most likely will as it is going to be slow to get back to normal.

          In the end takeaway is it doesnt matter, demand destruction is powerful and here, one country stopping cant even pretend to make a dent.

          Comment


          • Pure speculation. The Saudi/US political-defense negotiations will control the supply problem.
            The consumption will simply need to work it’s way out. This will pass. The question is when.

            Comment


            • [QUOTE=Dont_know_mind;n200186]

              I looked at the curve yesterday and have been thinking about it a bit.


              I was looking at what Buffett has actually been doing since Covid-19 became an issue, from what I can gather he has:
              1. Issued 1B in Euro denominated bonds @ 0% interest
              2. Issued 1B in Yen denominated bonds @ 0% interest
              3. Sold some airline stocks

              Whoever gets out of this cycle with no losses is a winner. I guess that is what Buffet is doing, preserving his billions.

              Comment


              • It might be time to change the title to how high can we go? With each passing day I continue to shake my head but remind myself this is similar to when the .com and housing bubble were in full swing. At some point it becomes rather disorienting and yet I have to believe, as I did then that what we are seeing is smoke and mirrors, a shell game that can not and will not last forever.

                Comment


                • Ok, I just calculated how much stimulus my business entities are likely to be eligible for.

                  I have revised my thoughts.
                  The stimulus is very substantial.
                  I capitulate any short term bearishness.

                  I hate to say it, but I think we may revisit new highs.
                  I allocated 30% (300k) of my cash to 50% currency hedged EM efts and 50% domestic index ETF’s in the last 2 days/
                  I plan to allocate another 40% (400k) cash next week, mainly in currency hedged EM ETF’s.
                  I will leave 30% in cash.

                  We may revisit new lows, but I tend to think new highs will occur first. I don’t want to be the last to be allocating cash from the sidelines. I think the probability of me having to capitulate from cash increased significantly. If I have to capitulate, I would rather do it earlier.

                  I still tend to think this is all BS and that SP500 will revisit 999 at some stage. But with negative real rates and nothing on the horizon that I see not priced in to derail EM, I am getting out of cash.

                  EM indexes are good value from what I can see (I could be wrong though).

                  I am not employing any leverage but am deploying 70% of my cash. If things roll over and crater, then I am ok with that too.

                  It just dawned on me how massive the stimulus is this week. FOMO, JBTFD, TINA etc.

                  I might be last in before the shoe falls, I might be a contrarian indicator ! Maybe I am buying the relative high for the next 10 years etc
                  Last edited by Dont_know_mind; 04-24-2020, 05:23 AM.

                  Comment


                  • Originally posted by Dont_know_mind View Post
                    Ok, I just calculated how much stimulus my business entities are likely to be eligible for.

                    I have revised my thoughts.
                    The stimulus is very substantial.
                    I capitulate any short term bearishness.

                    I hate to say it, but I think we may revisit new highs.
                    I allocated 30% (300k) of my cash to 50% currency hedged EM efts and 50% domestic index ETF’s in the last 2 days/
                    I plan to allocate another 40% (400k) cash next week, mainly in currency hedged EM ETF’s.
                    I will leave 30% in cash.

                    We may revisit new lows, but I tend to think new highs will occur first. I don’t want to be the last to be allocating cash from the sidelines. I think the probability of me having to capitulate from cash increased significantly. If I have to capitulate, I would rather do it earlier.

                    I still tend to think this is all BS and that SP500 will revisit 999 at some stage. But with negative real rates and nothing on the horizon that I see not priced in to derail EM, I am getting out of cash.

                    EM indexes are good value from what I can see (I could be wrong though).

                    I am not employing any leverage but am deploying 70% of my cash. If things roll over and crater, then I am ok with that too.

                    It just dawned on me how massive the stimulus is this week. FOMO, JBTFD, TINA etc.

                    I might be last in before the shoe falls, I might be a contrarian indicator ! Maybe I am buying the relative high for the next 10 years etc
                    I'm in the opposite boat. I'm fully invested in equities and bonds and haven't touched an investment this year. I watched the market crater and held on. Now that it's recovered somewhat, I think there's plenty of bad news yet to come. I was thinking of taking maybe 20% of my retirement accounts and putting them to cash while this plays out long term. I've never done something like that before. While I might miss some upside I might also miss some downside. I realize that no one, self included, KNOWS what is going to happen, but if I think about this with common sense, and what I can see to be true, spending has gone to basically nothing. We're not out stimulating the economy in my household, despite holding on to our paychecks. I think it's likely that we'll decline in a more gradual manner for some months to come here. All the stimulus money is good and will keep people from losing everything, but it's not sustainable forever and the money needs to come from somewhere.

                    Comment


                    • Originally posted by tallone View Post

                      I'm in the opposite boat. I'm fully invested in equities and bonds and haven't touched an investment this year. I watched the market crater and held on. Now that it's recovered somewhat, I think there's plenty of bad news yet to come. I was thinking of taking maybe 20% of my retirement accounts and putting them to cash while this plays out long term. I've never done something like that before. While I might miss some upside I might also miss some downside. I realize that no one, self included, KNOWS what is going to happen, but if I think about this with common sense, and what I can see to be true, spending has gone to basically nothing. We're not out stimulating the economy in my household, despite holding on to our paychecks. I think it's likely that we'll decline in a more gradual manner for some months to come here. All the stimulus money is good and will keep people from losing everything, but it's not sustainable forever and the money needs to come from somewhere.
                      Just a reminder. It MAY be a very very smart move. But then again behavioral finance reactions usually lead to bad decisions. Changing AA base on the market is the wrong reason. Changing it because of your own risk profile (ability and tolerance) is the best choice. Maybe you learned something about tolerance. Now would be a bad time to make that move. 20% to cash is a pretty big change. Do you plan on that for the next 10 years? Just saying.

                      Comment


                      • There is no exit plan. None.
                        But this was also the case in 2009.
                        It’s concerning, but so is watching the POTUS ramble about injecting disinfectant and UV light recently.

                        What Tim said about gradual AA movements is true.

                        In reality I am moving from an AA of 90% risk assets to 97% risk assets (deploying 70% of cash, which was 10% of my AA).

                        I spend 99% of my time thinking about that 10% to distract me from thinking about doing anything with the other 90%. But I make 99% of my return from the other 90% which has remained the same since 2007.

                        Comment


                        • Buffett has bought nothing but sold some of his airline stocks
                          He says he want to preserve his investors wealth
                          he will know when to but we will not to much after the fact

                          Comment


                          • I'm still tempted to sell my TSM funds that are in taxable and see what gives. I can not believe this giant debacle isn't going to tank the economy even if only for a quarter or two.

                            Comment


                            • Originally posted by StateOfMyHead View Post
                              I'm still tempted to sell my TSM funds that are in taxable and see what gives. I can not believe this giant debacle isn't going to tank the economy even if only for a quarter or two.
                              You nailed it. Congratulations. Even for a quarter or two. But what is your plan if it's longer? Or shorter? What is the university education system and grants and researchers no longer are clamoring for "free college for all"? The incoming class has substantial doubt. All the empire building may be damaged as well. Tenured Prof's being terminated?

                              https://www.aacrao.org/docs/default-...rsn=ba0d35f7_4

                              Comment


                              • Everyone, and I mean everyone, seems to think there will be a re-testing of the bottom from March, but if everyone knows that to be the case, then isn't the current market pricing that in? Does that even make sense?

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