Saturday, December 25, 2010
Why oil services stocks are outperforming oil producer stocks
The share prices of oil service companies have outperformed the share prices of large-cap oil and gas companies’ common shares since the broader stock market indexes started to move higher at the start of September. The unit price of the Oil Service Holders (OIH-NYSE, $138.52) exchange traded fund (ETF) has increased about 39% since September 1, compared to a 34% price increase for units of the Energy Select Sector SPDR Fund (XLE-NYSE, $67.22) ETF. Interestingly, oil prices have only increased about 21% in the same time frame, which is almost identical to the move experienced by the S&P 500 Index.There are several other ETFs that track the shares of oil and gas producers and services companies, although those other ETFs do not experience the same magnitude of trading volume as the XLE and OIH ETFs.
The XLE ETF tracks the shares of U.S. large-cap oil and gas companies with recent trading volume about 10 to 20 million units per day. This ETF has a heavy weighting of Exxon Mobil Corp. (XOM-NYSE, $72.80), which significantly influences the direction of the ETF. Since XOM has lagged the XLE ETF during the last several months the recent influence has been a drag on the ETF’s performance.
The OIH ETF tracks the Philadelphia Oil Services Index (OSX, 242.22), which is comprised of the shares of U.S. large-cap oil and gas service companies. Recent trading volume is about 4 to 5 million units per day. This ETF includes oil and gas service companies such as Schlumberger Ltd. (SLB-NYSE, $82.81), Halliburton Co. (HAL-NYSE, $40.41) and Baker Hughes, Inc. (BHI-NYSE, $56.76), which have all outperformed the OIH ETF since Sept. 1. (more)
Ted Butler: A CFTC Show Stopper
For all those who watched the historic CFTC meeting December 16th on position limits, no, your eyes didn’t deceive you – the meeting ended strangely and abruptly. No vote was taken on the staff’s proposal and you should be scratching your head at what actually transpired. As strange as the sudden adjournment to the most important meeting in CFTC history might be, there was a wealth of knowledge and confirmation to be drawn from it. This meeting was perhaps the most significant and positive development towards ending the long-term silver manipulation that I have witnessed in my 25 year involvement. Silver investors should come away from this meeting with a strong conviction of how things will turn out.
I know there are deep differences between the five commissioners on the matter of position limits, even though such limits are now mandated by law. I know that the CME Group (COMEX and NYMEX) is pulling out all stops to prevent, delay and water down any position limits that may be enacted. But I also know that there is one glaring truth that accounts for the dissention and turmoil revealed at the meeting. This is all about silver and its manipulation. If it weren’t for silver, this meeting and the issue of position limits would be a non-event. There is no current concentration problem in any other commodity.
Because of the fact that silver has been manipulated in price and position limits would terminate that manipulation, the CME and JPMorgan want to derail any move towards these limits. Keep this fact in mind, as it is the central issue. When it comes to market regulation and silver the CME Group does not do the right thing. They are only interested in their bottom line and the devil with everyone else. However, the CME is designated as a self-regulatory organization by law, which means they have special responsibilities as a front line defense against market wrongdoing. (more)
Friday, December 24, 2010
Down Argentine Way
There are many ominous parallels between Argentina and the U.S. and the question often asked is can America avoid the economic consequences that Argentina suffered from a fascist government combined with government debt and currency collapse? I believe the answer is likely NO!
"There are a lot of ways to ruin an economy. Argentina has experimented with most of them. It has devalued its currency, and revalued it. It has pegged it, and then knocked down the peg. It has regulated, controlled, inspected, taxed and confiscated. Following the 2001 crisis, earnings fell by 30% – with half the nation slipping below the official poverty line. What is remarkable is that the Argentine economy has survived at all." ~ Bill Bonner
Down Argentine Way was the 1940 film that made a star of Betty Grable, who played an attractive young woman on vacation who fell in love with a wealthy racehorse owner. The storyline actually reflected a common occurrence during the 25 years prior to the film debut.
In the early 20th century, "as rich as an Argentine" was a common expression, often used in connection with poor British aristocrats attempting to marry off their daughters to wealthy Argentinians. Argentina was indeed a wealthy nation; for example, we all know about Harrods Department Store in London. Few realize that during this period of Argentine prosperity, Harrods also ran a store in Buenos Aires. (more)
Oil Prices Will Reach $100 a Barrel, Libya's National Oil Chairman Says
Oil prices will climb to $100 a barrel, Shokri Ghanem, chairman of Libya’s National Oil Corp., said, as Arab oil ministers and officials gather in Cairo for a weekend meeting.
Ghanem told reporters that market conditions will determine whether OPEC decides to increase production quotas next year, without specifying a timeframe. Libya’s top oil official is in the Egyptian capital to attend a Dec. 25 meeting of the Organization of Arab Petroleum Exporting Countries.
“Oil will reach $100” a barrel, he said.
OAPEC, seven of whose members are also part of the Organization of Petroleum Exporting Countries, was established in 1968 to foster the development of the petroleum industry in member states as part of an economic integration plan among Arab countries.
OPEC, which accounts for 40 percent of global oil supply, decided at its last meeting in Quito, Ecuador, on Dec. 11 to maintain its production target of 24.845 million barrels a day, set in 2008. OPEC’s next formal meeting is scheduled for June 2011. (more)
Dunkin’ Procurement Chief Urges Limits on Coffee: Chart of Day
The chief of procurement for Dunkin’ Donuts Inc. outlets urged the top U.S. commodity regulator to limit speculation in raw materials like sugar, wheat and coffee as Arabica beans rose to a 13-year high.
The CHART OF THE DAY shows coffee prices and net-long positions held by managed money including hedge funds, commodity trading advisers and commodity pools, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. Long positions are bets that prices will rise.
“Something as simple as a good cup of coffee at a fair price is under threat today because of intense pressure by hedge funds and other speculators,” said Ed O’Rourke, chief procurement officer for Dunkin’ Donuts National DCP LLC, a franchise-owned cooperative that handles purchasing and distribution to more than 6,000 Dunkin’ Donuts and Baskin Robbins outlets nationwide, in a Dec. 14 letter to the CFTC.
The commission last week postponed a vote to propose limits on the number of commodity contracts one firm could own. Coffee rose 69 percent this year as stockpiles monitored by ICE Futures U.S. plunged 45 percent. Net-long positions held by managed money increased 79 percent this year. (more)