Crude is plentiful, but capacity for turning curde into gasoline is not. Take a look at gas crack spreads (what refiners are paid to turn oil into gasoline). Based on May futures prices, refiners are getting $22/barrel to turn crude into gas.

It's good enough for Warren Buffett.

Thanks for mentioning that, Eric. I keep reading your posts and thinking, "Silver was $2 back then?"

I'd definitely be up for it.

That sounds about right. I lurked for quite a while before posting. It's surprising how many people are still around from the IF days.

Yes, and adding "dot com" to a company's name does not increase its intrinsic value. Also, if the company you've invested in has no profits, depends on constant capital infusions to stay afloat and just paid $2 million for a 30 second Super Bowl ad, you might want to consider selling your shares.

You're welcome.

IF = Investors Forecast. It was a site that went under in 2000 (along with a lot of other dot coms). Beyond the chat room aspect, it was supposed to prove a theory: that the mean one week price predictions from thousands of investors would accurately predict the price of that security. It's an offshoot of efficient market hypothesis could be fairly true, but the way they tested it was flawed. Basically, every week you submitted predictions for the next week's closing price for a number of stocks and indices. If you were the closest to the actual closing price, you got a check for some modest amount. I won once, but I forget the amount. Nick won quite a few times. Anyway, every week they would hype the fact that "our community guessed the closing price for (IBM, GE, APPL, F, Dow 30, S&P 500, etc) to within 0.15% of the actual closing price!" The problem was that there was little consistency in the results (IF only mentioned the stocks that we were close on, not the ones we missed by a mile and the stocks we were close on changed all the time). From a business model standpoint, they just couldn't attract enough sponsors. Had their thesis been proven accurate, they might have been able to leverage that success into paid membership or better sponsorship, but it didn't happen. The last few months they were sponsored by Earthlink. I mentioned a few times that this wasn't a good sign. Next thing we know, they shut down and we had to go Raging Bull.
Regarding the IF days, I have mixed feelings. This was back in heady tech boom days and a lot of the posts were from daytraders essentially gambling on the gyrations of RMBS, AMZN, VRSN, GLW, YHOO, MU, QCOM, etc. While there were solid technical traders on the site, most were way out of their league. These people were risk seekers with a long bias who did great in 1998 and 1999, but got crushed in 2000. Then there was the fraud. I won't go into details, but there was one individual who lied about his trades/profits in order to build a following. Overall, it was a good site and the core posters migrated to Raging Bull before the technical problems drove us here.

Longer. I've been posting since 1999.

Possibly, but I wouldn't cover any shorts today if I believed in them yesterday. It's one thing if you cover because your limits trigger after a stock gaps. It's another thing if you cover just because you can't stomach the short term swings. If I was able to, I'd be shorting the indexes today. Unfortunately, I can't, so all I can do is sell my short term trading positions.

Holding out a little longer on GE. Want to get back into it sub-33.

I think 3 months from now you'll be very happy to have earned a 1.2% return vs. letting it ride in the market.

That's my opinion. BTW, I got my time frames mixed up in the previous example. Prompt month is May (CLK6). The current USO mix would be CLK6/CLM6. On the 20th, CLK6 expires and the new mix would be CLM6/CLN6. Other than that, the example is accurate.

Have you been talking to T. Boone?

The desk has been talking about USO for quite a while. Desk chatter mostly concerns the exact composition/arbitrage opportunities. From a small investor perspective, the index has a lot of drawbacks. Basically, it makes money in two ways: price appreciation and rolls. Price appreciation is simple: oil goes up, you make money and vice versa. The rolls are counterintuitive. In a contango market (prices for futures increase the farther you go out), the roll hurts you. Allow me to explain, if the index is supposed to be 50% of the current month and 50% of the next month and it's today, the index is 50% CLJ6 (Crude April 2006 Futures) and 50% CLK6 (Crude May 2006 Futures). In one week, CLJ6 expires. By that time, the index will have to roll out of CLJ6 into CLM6 (June 2006 Futures) in order to maintain it's 50/50 blend. If CLJ6 is 70 and CLM6 is 75, you lose $5 on every barrel rolled because you're replacing cheaper futures with more expensive futures. CLM6 would have to rally $5 just for you to break even (not including transaction costs). The index would make the most money in a rallying backwardated market. This would mean that futures prices decrease the farther you go out, but within each month prices increased. That would be a very screwy market. You would get crushed in a contango market where prompt month prices declined. This type of market would imply fears over short term supply shortages that aren't materializing that month. Personal opinion, this is not a great investment for the average investor.

Yeah, and Doyle Brunson has been getting lucky in poker for the past 50 years.

Nice trades, Al. Nice to see you haven't lost your touch.

I just received an email from Nick. He wanted me to let people know that he may not be posting for a few days since his mother passed away recently.

That chart is a fantastic example of why you don't want to blindly buy a security just because it's massively oversold. Sometimes people dump positions for a very good reason.

I agree that invading Iran would be a mistake, but I don't believe Bush will do that. I do believe that his administration is seriously considering a tactical strike to eliminate Iran's nuclear capabilities.

Not it's sunny with a few clouds. Very wierd.

Yeah, all board alright. It's up a staggering 33% from 3 cents to 4 cents. It's always nice when you can buy 1000 shares of stock for less than a steak dinner.

There's a blizzard in NYC at the moment. Nevermind that it's April and the temperature was in the 50s this morning. It's coming down pretty heavy too.

I suspect their earning potential in non-aviation roles is pretty limited. I have no idea what the job market is like for pilots (military, civil aviation, commercial freight, etc), but I'm guessing it's not great. There has be some reason why pilots aren't leaving Delta in droves. I have mixed feelings on the subject. On the one hand I wonder how pilots were ever paid nearly 1/4 million dollars a year plus generous pensions and on the other hand I feel bad for a guy who structured his life around that salary and now faces the prospect of severely reduced salary/pension.
There was an article in the NYTimes recently about job retraining for airline mechanics. Basically, these guys had salaries between $40k and $75k, their plant was shut down and now they're going through retraining to find jobs that pay $28k-$40k. That's really demoralizing for a guy to go from comfortably supporting his family to barely making ends meet.
I think the best thing for the airline industry to do is consolidate, cut back on flights and eliminate direct flights on low frequency routes. Renegotiating salaries and lowering overhead is great, but doesn't mean anything until they do the rest.

I'm not friend of unions, but the pilots may not be off base here. It's easy to say that pilots are making $150k and they can stomach a pay cut, but you could say that about a lot of non-union professions (banking, trading, etc). Also, think of it from their point of view. They were making about 230k in 2004, now they're making $157k and they're being asked to accept $128k. Yes, it's still a lot of money, but that's a very painful pay cut to take in two years with no end in sight. It comes down to whether the pilots believe that the new contract will actually keep the company from going bankrupt. If they're looking at it objectively, they should compare the value of their current contract vs. their new contract discounted by the likelihood of bankruptcy (and the lower pension associated with it) under both scenarios. In addition, they have to factor in their employment options if the company goes under today vs. 5 years from now. Emotionally, the pilots probably feel pretty jerked around at this point. The first time the payroll cuts were proposed/accepted, they were told that this would be enough to keep the companies afloat. That wasn't the case. It could even be the case that the pilots wouldn't have accepted the first round of cuts if they had known other cuts would come later. Plus, what if they can make more at FedEx or another airline? What if the only reason they haven't switched companies is their pensions? If that's the case and the pilots don't believe that accepting the new contract will save the company, why accept it? What if they honestly believe that management is too inept to save the airline? What I'm getting at is that it may be in their best interests to strike.

I attended a hedge fund conference last week. It was interesting to hear people's opinions on various market segments. All in all, I wouldn't want to be a long only retail investor at the moment.

I usually stay very closed mouth about any internal (firm) comments on the market, but I'll make an exception in this case:

"investor inflow today is pronounced,.......scramble for exposure has hit levels that are very NASDAQ like"

In other words, money is flying into the market today and it reminds people of the fast money flowing into tech a while back. Now what I find interesting about this is that I strongly suspect that this is fast money, which does not bode well for the rally.

Judging by the cab rides I've taken, I'd say there are holes that big on every street.

I'll be adding to my Diversified Intl fund position today. I whittled it down to next to nothing over the past few weeks and will be building it back up as we decline. I expect today's closing price to be approximately 1.5% lower than what I sold it for a week ago.

Don't know if this is on CNBC yet, but the rumor mill around here is buzzing that GOOG is being added to the S&P. Looking at the aftermarket action, I think people already know.

Bonus pay: I think there's a disconnect between corporate tax and personal tax. My tax documents reflect payments received within the calendar year which means my bonus (paid on 1/31 of each year) falls into next year's taxable income. None of this really matters for what we're talking about, though. From the 401k side, it results in a disproportionately large chunk of our contributions hitting in late Jan/early Feb. Approximately 1/3 of my contributions for the year hit my account in January.

My pessimism: Dollar, a little. Minimum payments, very much so. For those people who piled up debt on relatively low interest adjustable APR credit cards and financed home purchase with ARMs, they're in for a rude awakening. The morons who allowed their state legislatures to revise homestead bankruptcy laws are going to find out why banks were willing to issue loans for 150% home equity loans. They're also going to discover that paying 2% of thier principal on top of 1-2% monthly interest on credit card debt is awfully damn difficult when your ARM payment just went up, too. I'm mostly pessimistic because I see a disconnect between equity prices and fundamentals. I'm not talking about anything the likes of 1999, just a little out of whack.

Gold: I can't really comment on gold. I'm one of those people that doesn't understand the value of "precious" metals. To me, copper and aluminum are precious metals. Of course, I wish I had jumped on the Eric/precious metals train back in 2001. Oh well. : (

China: I'm not that worried about China. They're maintaining policies that will have dire consequences for their economy/stabilty in the future. The government is paranoid about keeping the population happy/gainfully employed that they've allowed absolutely irresponsible investment in capacity: cement, steel, real estate, etc. They're setting themselves up for a massive recession. Yes, I wish that China had more respect for international copyright laws and that the US still retained more of its manufacturing base, but that's done. Looking forward, my fear is that China doesn't reign in their economy and trades several minor recessions for a full blown depression. All they need to do is look at the US during the late 1800s. Sometimes rapid industrialization isn't all its cracked up to be.

Global warming: I used to work for Shell Oil which should give you an idea where I stand on that. Insurance companies were over capitalized heading for several years prior to the recent spate of hurricanes. Now, that's difficult to reconcile with the doomsday global warming theories out there. Yes, the Gulf is warming which lengthens the hurricane season / increases the serverity, but I'm willing to believe that these are seasonal phenomena. I recall all the talk of El Nino and that pattern didn't last for long.

Ah, I remember the good old days when I could short anything I wanted. Good ole' 1999 when every overpriced POS stock I shorted kept going up relentlessly. Good times, good times.

Interesting. Call me a pessimist, but I think the euphoria will be very short lived.

Doorman tips are the best contrarian signal known to man.

I'm glad Eric mentioned the money flows last night. The more I think about it, the more it makes sense that liquidity could be propping up the market. I wish I had data on tax returns, but my gut instinct is that people getting refunds file much sooner than people owing money. That would suggest that tax related money flows (last minute IRA contributions and refund fueled investing) should dry up within the next month. I also wonder to what extent people need to sell positions to pay for taxes. That's probably a small percentage of the investing public and it would most likely affect money markets rather than equities.

I wish I could post the graph I have showing P/E, Earnings and S&P price from 1871 to current. We're near the top of the normal range (10-20 P/E). What's more interesting the fluctuation in P/E especially around changes in business cycles.

The funny thing is that the market isn't that overpriced by historical stardards. I just happen to believe that fundamentals are deteriorating and a correction is in the very near future.

So is damnation.

Dow 11,300 again. I really wonder why traders are buying.

Fortunately, Elmer Fudd is on the WB's payroll, not Disney's.