It Might be Time to Lighten Up

[frankq]

I think today's action may be telling us something. While I believe the economy is improving, there are a couple of variables in play here in my opinion. As always, I log my actions:

1. Oil prices exceeded $100.00/bbl. This has been my personal "yellow alert" number. While I believe world events are temporary and supplies have not been affected, I also believe speculators are driving the prices up again and the market does not like this.

2. The markets have enjoyed a nice run. There is significant profit at these levels and I believe the market is looking for a reason to take some profit. A correction is due. Since we got the best economic news in quite a while, and markets basically ignored this, I see it as a sell signal.

3. I believe the magic number for oil is $110/bbl. before we see a significant move to the downside.

Given the above, I have reduced my market exposure to less than 50%. I have not sold my GLD shares. I think there will be an opportunity to rebuy at lower levels and better values.

Then again......I could be wrong.......

[sangria]

Definitely some profit taking, but hard to make a call on the oil. Jubak makes an interesting point in today's article that Libya's oil is sweet crude, much cheaper to refine, and while other countries are willing to increase pumping their crude to make up for the slack, it costs much more money to refine. Not sure where that all leads to.

[neohguy]

Thanks for the update frank. You have provided these in the past and I appreciate it when posters do that, whether a correct call or not. It's much better than listening to someone that claims they've timed the market perfectly in the rear view mirror.

[Deleted]

This year WTI has moved to an unusual discount to the rest of the US crude oil markets and that the real price of crude oil in the US, on the basis of Light Louisiana Sweet in the US Gulf Coast, is already close to or above $120/bbl. The fact that WTI is at a deep discount to US Gulf Coast crude oil might not send the average American consumer in panic mode on a news headline basis, but the price of gasoline he buys to fill his car is based on $120/bbl crude oil, not $102/bbl. Based on current prices, it's estimated that the average retail US gasoline prices should next week be close to $3.60/gal.”

[comokate]

Mar 4, 2011 15:41:32 GMT -5 frankq said:

I think today's action may be telling us something. While I believe the economy is improving, there are a couple of variables in play here in my opinion. As always, I log my actions:

1. Oil prices exceeded $100.00/bbl. This has been my personal "yellow alert" number. While I believe world events are temporary and supplies have not been affected, I also believe speculators are driving the prices up again and the market does not like this.

2. The markets have enjoyed a nice run. There is significant profit at these levels and I believe the market is looking for a reason to take some profit. A correction is due. Since we got the best economic news in quite a while, and markets basically ignored this, I see it as a sell signal.

3. I believe the magic number for oil is $110/bbl. before we see a significant move to the downside.

Given the above, I have reduced my market exposure to less than 50%. I have not sold my GLD shares. I think there will be an opportunity to rebuy at lower levels and better values.

Then again......I could be wrong.......

I think your reasoning is sound-

[usaone]

All depends on Qaddafi. Before Libya oil was $84 a barrel and falling.

[neohguy]

It's a lot of other things besides oil. Frankq is in a similar business as mine and I think he can attest to the surge in prices for things we use in our trade. The charge is being led by tbtf business like UPS, Fedex, Honeywell, ITT, etc. It started happening before Libya.

[Virgil Showlion]

An interesting thesis, Frank. Some of the ZH contributors have been crowing about huge margin squeezes lately. The problem is only exacerbated by rising fuel costs. There's reason to believe that these factors are going to take a heavy toll on the profits companies are still enjoying from 2010 layoffs.

Granted, this is all "fundamentalism".

Let us not forget that POMO means "a guaranteed buyer at any price".

[kman]

One cruse missile and solid intel on Qaddafi's location= lower oil prices. I think they're going to whack him.

Little rebalancing Q? Event driven markets these days keep you nimble.

[domeasingold]

So what happened to Iraqi oil?

[Virgil Showlion]

So what happened to Iraqi oil?

Right next to the WMDs.

[frankq]

Thanks for the positive feedback. Oil is now over $105. My concerns are not as much the potential Mid East outcome as it is the speculation in the oil markets. Justified or not, there is fear in the market at a level that triggers my radar. We'll see. Sometimes, it's better to be lucky than good!

[Deleted]

Profit taking....and stop losses are your friend

I am buying soft commodities (DBA etf)

Everything else is in hold mode....i have been looking for a 5-10% correction for a while now

[frankq]

Mar 4, 2011 17:01:18 GMT -5 kman said:

One cruse missile and solid intel on Qaddafi's location= lower oil prices. I think they're going to whack him.

Little rebalancing Q? Event driven markets these days keep you nimble.

Yeah, you could say that. Long term I think we go up. Too much on the table right now, and on top of that our fearless leaders might just force a government shutdown to drive their points home with each other. Higher fuel will impact profits in the coming quarter and stock prices could reflect that. I'm sitting on nice gains. Just figured I'd take some and buy back in later at a discount. At least, that's the plan.......

[frankq]

I like the DBA play, I just don't know if the price is right. I need to do more research.

[Steady As She Goes]

Based on current prices, it's estimated that the average retail US gasoline prices should next week be close to $3.60/gal.

NEXT WEEK ?!?!?!?!

Come to Southern California .... it's already $.30 PAST that

[frankq]

Mar 4, 2011 17:53:02 GMT -5 @wxyz said:

Personally, I never try to time the market. It is a losing game.

You're right. But that voice in my head............

[Aman A.K.A. Ahamburger]

That would defiantly add to the upward pressure.. Nice tip F"T"I!

[tyfighter3]

In my opinion Hedge funds have no business in the oil pits just because of what FTI said in post #20. Gold is one thing, you can store a lot of it in one little room, but oil is a deferent Beast.

[frankq]

Mar 5, 2011 1:52:14 GMT -5 tyfighter3 said:

In my opinion Hedge funds have no business in the oil pits just because of what FTI said in post #20. Gold is one thing, you can store a lot of it in one little room, but oil is a deferent Beast.

Right. We saw this before with these guys. Right now oil is the driving force for the markets, not gold or the falling dollar. Oil. This may last a week or two, or it could go longer, who knows. My opinion is that producing countries don't want oil too high because it will force everyone else to accelerate work on alternatives, or make it more cost effective to use more of their own sources which may be more expensive to produce or refine. Oil is all that they have and they need to keep it moving. The coming week should be interesting. We'll to see if the market starts a pattern of closing down on Fridays and hesitating to go long the weekend. I still think the market is looking for reasons to correct, and then better buying opportunities will present themselves.

[vl]

Has anyone heard the one about the hedge funds who had to take physical delivery of their oil and stored it as hedge against future higher prices and contractually lost its right because of a contractual deficiencies and then had to go out in the markets a replace it causing a huge spike in the prices we are seeing?

Read more: notmsnmoney.proboards.com/index.cgi?board=moneytalk&action=display&thread=4311#ixzz1FjPv4svM

Yes, we talked about this a while ago. MS has a few parked tankers of it. I believe the stacks in the Indiana refinery are full of unprocessed crude- hedged as well. The problem is- hedged means they are expecting customer interest down the line. At $3.60 and no juice in paychecks, pickups owners are shelling out $140 a fill-up. That would translate to cross-town logistics as well. There simply isn't enough cash flow left to accommodate the ensuing price push.
This would take us back to the onset of our differences. You can have inflation but if there isn't any cash flow, whatever price is on the item is irrelevant. A sub-economy will kick-in and compromise all of this or we will have fantastic pressure to collapse the financial sector participants. Hoarded money is the core problem on nearly every front now.

[frankq]

With oil passing $107 this morning, it looks to me that we are in for a rough ride for a while. I continue to feel that $110 is the threshhold number for oil, and if/when we hit it, the Dow could break through 12,000. I just can't see much resistance right now with oil and gasoline this high. The Mid East seems to be stalemating to a point right now too, so who knows how long this crap will last. I'm starting to feel pretty good about the call.

[tyfighter3]

To early to tell yet.

[frankq]

Happily, the stuff I kept held it's own.

T- down maybe 2 cents at last look
EXC - up 75 cents
RAI - looks to be finishing even
GLD - up about 36 cents

My cost basis in F is under 2 bucks so who cares!
I haven't checked mutual funds, but I'm less than 50% of last Thursday's holdings with the rest in cash. Time to make a shopping list. We'll see what develops as the days go by. We had quite the trading day today. Oil was all over the place.

[GuestDriftr]

I totally agree with your reasonig Q, but I am not going to try and time anything. I'm leaving the portfolio alone with the only exception being that I have stopped buying stock quarterly with the dividends that have been coming in. I too expect and actually hope for a nice correction in the 10-20% range. If I knew for certain it was coming, I'd sell now and buy back in when the stocks drop the 10%. The fact is I don't though, so I'll hold them during the dip, buy more in June(ish) hopefully after the 'sell in May' is done for this year.

Still undecided on what to do with our bonus and tax refund money that'll we'll be receiving later this month. Tax refund was much bigger than I like, but I had some pretty large 3xETF day trading gains in '09 that were followed by pretty large day-trading losses in '10 so I had our withholdings all messed up for'10.

Do I lock it up at around 3.5% for 10 years in Treasuries, save it to buy a bunch more stock in June, buy the silver I had initially set it aside for in my head, or use some of it to upgrade our cabin on the disney cruise we're taing next March to concierge? I'd give them all about the same % chance of happening at this point.

[frankq]

Driftr,

I have to agree. I don't know that I'm thinking timing so much in the sense of making money as I am with minimizing any potential damage inflicted by speculators. I'm still in for about 50% and my highest div stuff is still in play. By the looks of things today I might have been a little fast on the draw, but I'm willing to see how things shake out. In the words of Frank Sinatra "You only live once, and once is enough if you do it right", go for the upgrade!

[verrip1]

Frankq:

Your concerns are well founded if you follow the concepts of secular markets and cyclical markets within. In that concept, one can look at recent market tops and say that the current, two year, bullish cycle within the secular bear is reaching its top. Ergo a good time to take profits and see if the secular cycle will be broken.

However, in that cycle the S&P 500 will have to go a lot cyclically higher to prove it is breaking through the secular high such that there is demonstration of a new secular bull market. That is still not here yet.

Caution at interim highs is extremely appropriate. However, once that ceiling is broken, Katie bar the door.

[verrip1]

Not disagreeing FTI, just saying there are times for caution. Each of us applies their view of caution to their own portfolio. There are times, I think, where capital preservation should temporarily take the lead over portfolio growth until one feels more confident in the continuation of the growth side via performance, not by expectation of the growth side.

[frankq]

So Kadaffi is bombing oil fields and the price of oil is ...dropping? WTF. Looks like we're finding some price stability between 100-105/bbl. Looks like tomorrow might be a good time to consider adding to positions for me.

[frankq]

Mar 10, 2011 7:17:50 GMT -5 frankq said:

So Kadaffi is bombing oil fields and the price of oil is ...dropping? WTF. Looks like we're finding some price stability between 100-105/bbl. Looks like tomorrow might be a good time to consider adding to positions for me.

But then again......I think I'll just let things settle out a bit. LOL !