Friday, November 12, 2010

Bookkeeping: Closing Powershares Ultra Crude Oil (UCO) as Crude Falls Back Below $87 & Eastman Chemical (EMN)

My intent behind buying Powershares Ultra Crude Oil (UCO) was a continued breakout over the $87 level.  That continued yesterday but has reversed overnight with the Chinese news.  Hence the reason for the purchase is (at least temporarily) moot.  So I'm reversing out of the trade for a 3% loss.  I'll return if we return to the path of $100 crude and $3.40 gas.

(Chart of USO which reflects crude oil more real time, then the chart lower on the page which is 1 day delayed)

(a break over $87 was a move to new yearly highs, but for now we have reversed that)

According to David Rosenberg, net speculative contracts on crude oil are in excess of anything we saw in 2008 ... at crude oil $130-$150.... translation: thank you Ben Bernanke for herding speculators into risk assets!  Another "success"!  Seriously - how does this guy keep his job? He is waging war on the the lower and middle class under his misguided economic theories.


Fun fact: For every 1 cent increase in gas prices, it costs the U.S. consumer $1.46 Billion annually.  Hence 10 cents = $14.6B annually.  Hence if Bernanke causes 30 cents of gasoline increase with his reindeer games he has washed out the entire 'wealth effect' (using the Doug Kass methodology) of roughly $45 Billion.  But it gets better.... of course the dispersion of the offset is regressive on the poor, working class, and middle class - i.e. the positive effects in stocks goes to the top 10% while the negative effects get spread among the whole society and hence impact the lower part of the economic totem pole in much larger scale.  

Or as Bernanke says: "We all are winners in my regime".  I was really hoping for $4 gas for Christmas so I hope POMO forever (and ever) can get us back to the path of crude $100+.  For now, we have to wait for such gifts.


I also closed Eastman Chemical (EMN) with about a 1.5% loss - huge run... has stalled out lately, lots of gaps below, and with risk introduced to the market I want to be dealing mostly with 'the best of charts'.  Still should be ok as long as it holds $75 but I'm in a more conservative frame of mind with a market that needs to correct with some vigor at some point.

No position


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