Not only does Japan not seem to care about the 30% increase in the price of energy since mid February (or the earthquakes or the radioactive wasteland that 10% of their country is becoming) but the Dow Transports are flying high as well. I guess they must be transporting oil instead of burning it! Why not, they have a movie now about a rabbit that poops candy so I guess we can all believe that airplanes poop oil when they take off…
Yesterday afternoon, Dave Fry asked "Where are the dip buyers" for the EWJ but they came in droves last night, despite the oil, most likely encouraged by the weaker Yen (good for exporters) even though that makes the oil relatively even MORE expensive. Even worse, Japan buys Brent Crude, note West Texas, so they are paying $10 more than we are per barrel already. Priced in Yen, Brent Crude is up 24% since March 15th.
Hey, what inflation, right? We knew the fix was in yesterday when the S&P was slammed up to close at 1,333.50 after failing that line earlier in the day. As you can see from the chart – it’s the same old pattern, jack up the indexes in low-volume (especially in very low-volume pre-market trading), reel in the suckers and then the big boys dump into the retailers all day long. Once the retail bag-holders replace enough of the Banksters in equity holdings, it will be time once again to pull the plug and remove another 1/3 of the wealth of the Middle Class – or whatever is left of them after the last round of asset theft.
Despite the fact that the indexes moved up and down 1% a day, the VIX remains at a ridiculously complacent 17 (we are long the VIX at 16.50) which is perfect for a fund that is dumping because if I have 1,000 shares of IBM at $165 and I have a $20 profit from $145, I can buy 10,000 April $170 puts for $5.80 and dump all my shares at market price and even if IBM tumbles all the way to $150, I still get to collect $170 from the sucker who sold me the puts so I lock in $19.20 of my $20 gains prior to selling. That’s the beauty of a low Vix in a sky-high market for the people who got in ahead of you – they really can’t lose…
In fact, if I want to be really evil, I can sell some other sucker 10,000 May $165 calls for $3.60 along with the puts I buy and then when I crash IBM, I make money on both ends at once. If you want to see what that looks like, check out the synchronized sell-off of our MoMo stocks (as noted yesterday) and compare that to the options action of the last few days. Somebody made a boat-load of money yanking the markets around!
Notice that well-trained dip buyers already came in to reinflate the MoMos which is one of the ways the manipulators get away with this scam. As long as they get out ahead of the market top, no one is going to file a complaint on their actions if the stock recovers in the next day or two.
Without a complaint – it’s just business as usual, just like it is at the NYMEX where we now have 632M barrels worth of contracts scheduled for delivery between now and July to a facility that has, at most, the capacity to handle 46M barrels a month. Cushing is, in fact, full at the moment and would have trouble processing 6M extra barrels, let alone 600M barrels but that doesn’t matter to NYMEX traders, who flipped 465M barrels worth of contracts in yesterday’s trading alone in the most expensive circle-jerk in the history of the planet Earth.
These barrels CANNOT be delivered, these contacts are BOGUS and do nothing but manipulate the price of oil that US and Global citizens consume every day by creating false demand (over 6Bn barrels traded on the NYMEX alone in March for a country that consumed only 540M barrels for the month) and causing trading fees of about .50 per contract that, by themselves, add $10 per barrel to the cost of oil that is consumed in the US.
So, at $10 per barrel (ignoring the overall price scam) – every day the NYMEX is allowed to continue to function this way costs the American public $180M Dollars or $65Bn a year yet the regulatory oversight of energy trading at less than $1Bn per year is one of the key items on the Republicans budget chopping block. Don’t write to Congress, don’t sent this article to your friends, don’t do anything other than pay $75 a tank for gas, sucker – the top 1% thanks you for your complacency.
That is the truly great thing about the energy scam, if you rip off 1,000 people for $50Bn over 30 years like Madoff, you go to jail – but if you rip off 300M people for $65Bn PER YEAR, you are invited to the White House and asked to be one of Obama’s "Economic Advisers" (see"Goldman’s Global Oil Scam Passes the 50 Madoff Mark"). That’s how things work when you live in a Corporate Kleptocracy – the best thieves are celebrated by the Government. Madoff’s mistake was he took money from people in the top 1% – that’s a big no-no!
I’m not expecting you to believe what I am saying. No one believed me in May of 2008, when I said: "We need a break in the POO (Price of Oil) in order to get the markets back on track and we are dangerously close to crashing the economy." Oil was $130 a barrel then but things were different at the time as the World’s largest individual purchaser of oil in 2008 was – George W. Bush – who was spending $85M US Dollars a week buying $130/barrel oil to fill up the Strategic Petroleum Reserve. That’s not even counting the two wars that were, at the time, consuming another 1 Million barrels of oil per day (we have 3 wars now!).
Despite the $135 per barrel price tag, gasoline was "only" $3.65 a gallon on May 22nd, 2008 – Americans weren’t as stupid back then but two more years of watching "The Biggest Loser" have lopped off enough IQ points to get us to pay whatever they tell us. Of course, at the time, 18M more people had jobs and 24M less people were on food stamps and, of course, GWB had, just like his Saudi Buddies did last week – showered his people with Billions of Dollars in order to get them to stop complaining and keep the monarchy alive.
In fact, this time is REALLY different as, rather than giving away $165Bn in stimulus as they did in 2008, this Congress wants to CUT $66Bn (probably $66.6Bn to make their master happy) in spending – including all programs relating to energy research and conservation but NOT tax subsidies paid to energy companies – those are supposed to go UP, even as leasing and drilling fees are being reduced. So let’s not say they aren’t trying things differently this time. They say they are making progress on the budget but Republican Senator Jim DeMint, of South Carolina, tweeted last night: "Dems to force shutdown & stop troop funding unless taxpayers forced to fund abortions in DC" – so we can see the level of maturity being exercised by our "leaders" in this discussion.
A little earlier in May of 2008 (8th), I had made the following comment that I remembered because I was about to say virtually the same thing this morning when I thought (didn’t I say this already?):
Today’s "rally" was stupid, I said so all day. Even though we closed a full 16 points above my morning target of 12,850, I got very bearish during the day as oil looked poised to test $125 with CNBC running a day-long pump-fest, trotting out every oil bull on the planet to tell us how $200 oil would somehow be great for investors.
Are these guys on crack? I’m not sure, but I will say it again and again: There is not enough money on the planet earth to pay for $200 oil without taking that extra $3Tn OUT of the revenues of other industries. If you couple that with a conservative $2Tn worth of food inflation (caused by oil), then you are talking about a global depression where the only companies that survive are the oil companies.
Of course that’s ridiculous as one would thing that wiping out every disposable penny on the planet would hurt the demand for oil and drive down prices – but that’s not what energy traders believe! They are buying July $150 futures contracts in bulk!!! Forget the fact that we need a war with Iran to justify $150 crude (word is Bush is working very hard on this as we speak) – I am telling you the market cannot handle $125.
I love the archives – such a time-saver.. So I was "right" but I was very early as oil didn’t top out until July (at $140) and didn’t break back below $120 until August but then it fell to $35 so those of us who stuck with the plan and rolled our oil puts along were pretty happy on the whole – despite a frustrating Summer.