Anybody Buying Yet? Where’s the Bottom?

[SAJ-99]

SA and Russia IMHO are much better able to play this game of chick then we are; a state owned company can ride out years of poor returns a lot public companies cannot.

It is not collusion, in fact OPEC is actually based on a US model, the Texas Railroad Commission, which has enforced quotas and prorated production in the past. Most notably after the 1930s oil boom up until the 1950s.

The commission is already set to meet to discuss enforcing quotas. (The Oklahoma Corporation Commission has similar powers)

"The state has not imposed production limits since 1972, but has the authority to do so, said Sitton.
“For 90 years someone has been setting the price of oil in the world,” he said, referring to Texas in the 1930s and later to the role of the Organization of the Petroleum Exporting Countries. “I don’t see why we can’t at least be part of the discussion right now.”

Oil pipeline, producer standoff prompts new call for Texas shale curbs

As a weekend standoff over oil shipments emerged between Texas pipeline operators and shale producers, a state energy regulator has renewed his controversial call for mandated cuts to address a growing crude glut.

www.reuters.com

Not true at all, we do it all the time. If you have a pad of producing wells, and an adjacent operator is going to frack their wells you typically shut in all wells within a specific, geology dependent distance. This allows the well to build up pressure and will protect them from taking a "frac hit", if you don't do this it's possible to have your well killed by those fracking operations. I would say at any given time we have half a dozen wells shut-in for these reasons.

Now if your shutting in all your wells for 2 years... yeah that's different. That being said decline curves on well are steep enough that for most larger operators just laying down their rigs for 6 months well probably have the desired effect.

Agree that TRC can regulate production in Texas, but outside the state borders is where that ends. They have zero (debatable in court, I guess) control over any drop of oil that crosses state lines. The structure of TRC and OPEC has been challenged (as least complained about, if that counts) for years as anti-competitive, sometimes by the big producers, sometimes by small producers. Any decision by the people sitting in the meeting at the WH on Friday could be challenged as Anti-trust, if anyone really cared. I doubt anyone does.

I should have qualified "shutting down wells as expensive" as an argument oil drillers make. I have never really been much of a believer. It's not like the well gets capped, but I assume there is cost in either moving crews and equipment or letting them sit idle. With a capped well there is probably a lot of environmental/regulatory cost too. Regardless, there is too much incentive to pump at almost any price if the alternative is a default.

 

[schmalts]

With over 1.5 trillion in private equity sitting side lined there are lots of balls to be put into the game. Swing for the fences

And that is the reason you can see fund managers commenting on how they predict a DOW of 15-18K again. They are trying to make a crash to buy back in. will it work or happen?? Get Vikingsguys crystal ball.

 

[VikingsGuy]

Well if and when do do get one, be sure to let me know, I will pay a hefty sum to borrow it.....

You’re the high quality glass guy, figured you would have one first

 

[Deleted member 28227]

Agree that TRC can regulate production in Texas, but outside the state borders is where that ends. They have zero (debatable in court, I guess) control over any drop of oil that crosses state lines. The structure of TRC and OPEC has been challenged (as least complained about, if that counts) for years as anti-competitive, sometimes by the big producers, sometimes by small producers. Any decision by the people sitting in the meeting at the WH on Friday could be challenged as Anti-trust, if anyone really cared. I doubt anyone does.

I should have qualified "shutting down wells as expensive" as an argument oil drillers make. I have never really been much of a believer. It's not like the well gets capped, but I assume there is cost in either moving crews and equipment or letting them sit idle. With a capped well there is probably a lot of environmental/regulatory cost too. Regardless, there is too much incentive to pump at almost any price if the alternative is a default.

lots of variability. I think TX, NM, OK, CO, CA, and ND could work together and prorate oil if the need was there... not sure that's what the public market wants or needs. Personally I kind of thing we should just let those who overspent fail.

Yeah I agree you don't plugging a well, which costs ~20-50k and takes some time, you are just shutting it off. I would have to actually look through reports but I know for a fact we have shut off wells for 90 days and I haven't heard of any costs other than revenue losses. Part of the issue is you have volume contracts to meet with penalties... some harsh enough that companies will essentially pay to have someone take their oil and gas. I know of at least one instance where a company was pay -.50 a MCF for gas.

There are also a lot of companies with hedges in place, some of the more prescient CEOs out there have 80-90% of there volumes for 2020 hedged back at $55-60 oil and 2.80 gas... so for them the current price doesn't matter much. Then on the other hand you have companies with no hedges that are totally screwed... CDEV.

My experience in 10 years working at shale companies is that at least with shale, you will never shut in horizontal wells because of pricing, but you will lay down rigs. You are seeing this play out now, take Oklahoma. 120 rigs in March of 2017, 28 rigs currently, and going down to 8-10 rigs by the end of the month. (Vertical wells are different, those definitely get shut in during bad pricing)

As a rule of thumb a company producing 30,000 BOE/day needs to run ~2 rigs continuously to keep production steady. There are economies of scale with big companies doing pad drilling, but the point I'm trying to make is that if Marathon/EOG/Oxi says they are going to cut over half their rigs, that means they are cutting their production by a lot.

 

[SAJ-99]

As a rule of thumb a company producing 30,000 BOE/day needs to run ~2 rigs continuously to keep production steady. There are economies of scale with big companies doing pad drilling, but the point I'm trying to make is that if Marathon/EOG/Oxi says they are going to cut over half their rigs, that means they are cutting their production by a lot.

Good info. Thank. In the past, the big guys survive because of the strength of their balance sheets. If the same happens this time, Russia And SA will be perfectly happy. But they will do this again at some point in the future. Without a reopening of the economy, some of the big guys may even be in trouble. Demand is horrible. WTI pricing curve is still only $37 into 2022. They can only suck on that hedging teat for so long before it runs dry.

 

[Sytes]

Massive spike for CPU chip processors / semiconductors today... Not a good sign as this is extreme volatility for an area still lacking operations and stagnant inventory.

Shorts are placed on MU... 12.6%+ for day demands a correction... Well, my $$$ demands a correction to pay my lunch $.

 

[VikingsGuy]

Economics Reminder:

The First Law of Economics: For every economist, there exists an equal and opposite economist.

The Second Law of Economics: Usually they're both wrong.

 

[Sytes]

My stock group has a "humor blog about how we, @ our whooping 2-10k individual account activity level, are able to change the market with our individual actions alone.

Sometimes it gives and sometimes it taketh away. Haha!

I had 2 call Jan '22 for DAL and 1 for Jan '21. Sold as it dropped 3 days in a row, thankfully at a slow rate though either way, red ink is -$.

Took that $ and bounced it over to MU short, caught it close to the top @ about +11.5%... <I thought, nice catch> no way will it play another massive day... Can it? Haha! Futures right now suggest this may be the case.

Last Wednesday I was able to pocket another $2.5k off my working 5. This week my, how to be a trillionaire is looking to follow the U.S. debt view. Haha!

T'is life of playing the market. Maybe back to option straddles while I lick my wounds today.

 

[schmalts]

Futures are up... this is crazy. i hope it gets up high enough for me to get the hell out into nice safe retirement funds soon. Once the DOW hits 25k I am OUT... Would like some advice if it would get there to the best place to make safe $$. I need to find a better adviser, all the ones I talked with suck, and can't answer simple questions.

 

[VikingsGuy]

Futures are up... this is crazy. i hope it gets up high enough for me to get the hell out into nice safe retirement funds soon. Once the DOW hits 25k I am OUT... Would like some advice if it would get there to the best place to make safe $$. I need to find a better adviser, all the ones I talked with suck, and can't answer simple questions.

Not an advisor, but I like low cost Vanguard Inflation-Protected Securities Fund Institutional Shares (VIPIX) - unless the US govt defaults it is pretty safe. Of course govt bond markets have their downsides too.

 

[SAJ-99]

Futures are up... this is crazy. i hope it gets up high enough for me to get the hell out into nice safe retirement funds soon. Once the DOW hits 25k I am OUT... Would like some advice if it would get there to the best place to make safe $$. I need to find a better adviser, all the ones I talked with suck, and can't answer simple questions.

I think a lot of people are thinking the same thing as you. First, there is no such think as safe $$$. Vikingsguy's suggestion is only going to let you earn the rate of inflation (CPI) plus a small real rate. So maybe 2.5%, but it is safe. LQD is an investment grade bond ETF, but you can look at a one-month chart and see the risk. All you know is the fed is buying. You are only going to get a return if you take risk. Even previous discussions on this board about high-yield CDs have risk. The bank just doesn't let you pull your money out or show the mark-to-market loss so you just have to sit on it. Even then, you weren't getting much in yield. At least spreads have gapped out a little, so corporate credit yields are higher. The bottom line, diversify. And don't use a fin advisor that charges you too much, if at all. That will save you some money. FAs are like Real estate agents - easy to get the license so most of them suck. The "best" ones are those that sound smart, but they have losses like everyone else because they all use the same models.

 

[Matt Dworak]

I guess I'm both buying and selling. Yesterday I converted a traditional IRA yesterday to a ROTH, figured this was a pretty good time.

Have no idea where the bottom is but in my uneducated opinion at least we're starting to see the light at the end of the tunnel (Italy & China). A lot of very intelligent folks posting here so I'm way out of my league, but from my standpoint fear drives the market more than anything (or fear of the unknown) and it's starting to feel like the unknown factor is slowing down.

My wife is a structural engineer here in Northern Colorado. She's been super busy writing new proposals, anything from new custom homes, commercial projects, additions, etc. to the point where she's more concerned about keeping up that anything else. Not sure if our local economy is skewing my view of our national economy (I'm sure it is to a certain extent) but I'm pretty optimistic that once the stay at home orders are lifted things will be going crazy here.

 

[VikingsGuy]

I think a lot of people are thinking the same thing as you. First, there is no such think as safe $$$. Vikingsguy's suggestion is only going to let you earn the rate of inflation (CPI) plus a small real rate. So maybe 2.5%, but it is safe. LQD is an investment grade bond ETF, but you can look at a one-month chart and see the risk. All you know is the fed is buying. You are only going to get a return if you take risk. Even previous discussions on this board about high-yield CDs have risk. The bank just doesn't let you pull your money out or show the mark-to-market loss so you just have to sit on it. Even then, you weren't getting much in yield. At least spreads have gapped out a little, so corporate credit yields are higher. The bottom line, diversify. And don't use a fin advisor that charges you too much, if at all. That will save you some money. FAs are like Real estate agents - easy to get the license so most of them suck. The "best" ones are those that sound smart, but they have losses like everyone else because they all use the same models.

Just for clarification's sake, I thought schmalts was looking for a short term parking lot before re-entering after a dip. Also, the specific fund I referenced is actually only for institutional (large company 401k's etc) but there are similar funds out there for routine use. Prime accounts also are good for this. But as noted, these are not for seeking gains.

 

[SAJ-99]

Just for clarification's sake, I thought schmalts was looking for a short term parking lot before re-entering after a dip. Also, the specific fund I referenced is actually only for institutional (large company 401k's etc) but there are similar funds out there for routine use. Prime accounts also are good for this. But as noted, these are not for seeking gains.

Be careful you don't buy a load mutual fund. I like ETFs because of the liquidity. Vanguard has a short term TIPs (VTIP). The biggest TIPs etf is ishares TIP. Ticket BIL is 3-6mo Tbills, but with the Fed going to zero, you won't earn anything anymore. It obviously was better when Fed Funds was 1.75%.

 

[schmalts]

Just for clarification's sake, I thought schmalts was looking for a short term parking lot before re-entering after a dip. Also, the specific fund I referenced is actually only for institutional (large company 401k's etc) but there are similar funds out there for routine use. Prime accounts also are good for this. But as noted, these are not for seeking gains.

What I am looking at is this. If the DOW gets to 25K, that is my own set bogey number to say I am happy with that $ amount in my funds that I feel I can retire or partially retire in 2 years. Meaning I was REALLY happy when the dow was at 29K but still will be happy with what my portfolio will look like at 25K. If it gets there I will be happy to transfer to say.. 5-6% returns with risk, but minimal risk. If it was up to my wife we would just be in cash, but she doesn't understand the market, or finances in general. I know there is target year based mutual funds, and right now those are on my list but would welcome other options. The markets may or may not get there, and I am hinging on when I can retire because of this. Again... I wish i had 10 years to go and this would not even be something I would have to look at. I hear about some of these funds or CD's that specialize in loans or something like that, I was wondering about some of that.
BTW, Hertz popped up good today! getting out of the red maybe!

 

[schmalts]

And I will add why advisers suck, when they read to you off the script they read everyone and tell you that you need X amount to retire and I tell them "no i need less" and quiz them if they even bothered to look at the fact 50% of my portfolio is in Roth and if they took that into account. You get the pause on the phone. And then they say I need a billion for health care and I ask them if they realize that if I draw on Roth my taxable income can stay low enough to get the cheapest exchange rate and I get the silence again..... Really?? WTF

 

[Trial153]

Some hopeful credit signs around, I like adding proven long value postions even on the soft bottom

 

[SAJ-99]

What I am looking at is this. If the DOW gets to 25K, that is my own set bogey number to say I am happy with that $ amount in my funds that I feel I can retire or partially retire in 2 years. Meaning I was REALLY happy when the dow was at 29K but still will be happy with what my portfolio will look like at 25K. If it gets there I will be happy to transfer to say.. 5-6% returns with risk, but minimal risk. If it was up to my wife we would just be in cash, but she doesn't understand the market, or finances in general. I know there is target year based mutual funds, and right now those are on my list but would welcome other options. The markets may or may not get there, and I am hinging on when I can retire because of this. Again... I wish i had 10 years to go and this would not even be something I would have to look at. I hear about some of these funds or CD's that specialize in loans or something like that, I was wondering about some of that.
BTW, Hertz popped up good today! getting out of the red maybe!

I am not a individual FA, so I don't know the minutia of the tax rules, but everyone talked about it on the another thread so I will leave that alone.
I dealt with large pension manager, but we can play this out for fun. They need like 6.75-7.25% for meet liabilities.

You: I have two years to retirement. I want 5-6% returns with risk, but minimal risk
Me: Don't we all.?
You: What do you mean?
Me: What is your definition of "minimal"? I assume you are not a fan of equities if they drop 10% in a day. You can buy a two year Treasury to yield 0.3%, Apple bond AA+ rated to yield 0.80%. Two year CD will get you about 1.3%. Some Revenue Muni bonds will bring you 1.5%. I can get you 2-2.25% on Mortgage backed (FNMA, GNMA, etc), but you take on duration and convexity risk plus the recently announced forebearance requests went up 2000%, so the market is a little "in flux" right now. So 5-6% is wishful thinking. Basically impossible without equities. You can build a hedged equity portfolio own the S&P at $273, but an at the money hedge (270 strike) for June 2021 is $28 (10%). You get all the upside and very little downside over the next year, but it cost you 10%.
You: WTF! You suck!

 

[VikingsGuy]

What I am looking at is this. If the DOW gets to 25K, that is my own set bogey number to say I am happy with that $ amount in my funds that I feel I can retire or partially retire in 2 years. Meaning I was REALLY happy when the dow was at 29K but still will be happy with what my portfolio will look like at 25K. If it gets there I will be happy to transfer to say.. 5-6% returns with risk, but minimal risk. If it was up to my wife we would just be in cash, but she doesn't understand the market, or finances in general. I know there is target year based mutual funds, and right now those are on my list but would welcome other options. The markets may or may not get there, and I am hinging on when I can retire because of this. Again... I wish i had 10 years to go and this would not even be something I would have to look at. I hear about some of these funds or CD's that specialize in loans or something like that, I was wondering about some of that.
BTW, Hertz popped up good today! getting out of the red maybe!

I am not aware of a slam dunk little risk guaranteed 6% return fund (after fees, costs and taxes) tool with liquidity and that's open to the individual investor. Not saying they don't exist, but if they do I would love the introduction. Retirement these days is a 25 year thing - you will need equities to get the return for that length of retirement, but can't afford to be taking funds out for several years of a dip. For that you can look at your retirement burn-rate and have a rolling set aside of "cash" for the coming 12 months, very low risk inflation protected funds for the next 2-3 years, moderate risk basket of bonds and dividend earning stocks for year 3-6 and then the rest in typical equities/bonds at maybe 75/25 ratio. The first two give you a buffer from having to sell at down periods. On a long bull run you can siphon off some of the gains from the fourth to refill the first three. Not saying this is magic, as there is no such thing that I have found, but it gives you some balance and keeps a person from too much "market timing" behavior that studies show rarely work out over time.

 

[NEWHunter]

Similar to what @SAJ-99 and @VikingsGuy said - getting 5-6% with limited risk is awful tough. You’ll likely need a fair amount in equities to get there. And I agree that most of those professionals aren’t worth it.