Friday, July 31, 2009

More On "The Less Bad Is Good" Mantra.......

The perfect fit to yesterdays post But Still Better Than Expected........ ....

Paßt wie die Faust aufs Auge zum gestrigen Post But Still Better Than Expected........


Refining, the weakest link in the recovery Stephen Schork via FT Alphaville

Demand, not only for gasoline, but for other major products markets as well, is going the wrong way, i.e. from the top left to the bottom right on the charts. Thus, Big Oil is straining under the weight of poor margins.

It is now hard to reconcile these earnings reports, demand was lousy in the second quarter (and it not any better today). Yet, this market was being fed a fantastic lie back then… the less bad is good mantra.

Thus, whereas spot crude oil on the NYMEX finished the first quarter just below $50 a barrel (49.66) it finished the second quarter just below $70 (69.89). Crude oil rallied 40 percent as profits at the world’s largest oil companies were tumbling.


Because this market wanted to ignore the obvious and lull itself to sleep with silly pseudo-intellectual catchphrases… green shoots, crocuses, mustard seeds and this season’s rookie of the year… the second derivative.

Thus, while we were led to believe that demand for oil was rising in the second quarter, hence the justification for that 40 percent surge on the NYMEX, we now have the balance sheets from Exxon, Shell et al. that prove it was a lie.

Look at the screenshot of headlines we pasted on the top of today’s report. Profits for Big Oil are down as demand is at generational lows.

However, look at the very first headline, the NYMEX was higher esterday because “… corporate earnings boost confidence…”


According to this one article, demand for oil and therefore profits for oil companies are down, but the NYMEX rallied yesterday because Motorola (mobile phone maker) had a smaller than projected loss and Calphalon (cookware) and Paper Mate (writing instruments) had better than expected profits

. Bloomberg screenshot headlines

You really cannot make this up......

Das ist so absurd das man sich unweigerlich fragt ob wir schon wieder den 1. April haben.... :-)

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Blogger jmf said...

Another nice rant.......

Karl Denninger

Three months of in-your-face falsehoods by the mainstream media have just been destroyed in seconds with one data release. The facts are irrefutable; the only remaining question is this: when will we see something approaching balance and honest reporting from the so-called media outlets?

Those "green shoots" were either marijuana plants (and were being smoked by the media) or worse, they have been running around with cans of green spray paint, "colorizing" the dead brown weeds, then pointing at them and screaming "green shoots!"

6:42 AM  
Blogger jmf said...

Living in a commodities oxymoron FT Alphaville

It appears it’s not just oil that’s defying supply and demand fundamentals, with prices rising in the face of growing inventories.

7:34 AM  
Blogger L. S. Allen said...

Do you think that the crashing demand - induced of course by the credit bubble collapse - can also lead to a supply crash?

Falling demand causes producers to cut current supply while simultaneously reducing future spending on exploration, production and capital equipment, further deteriorating the supply side of the equation.

I agree with you that supply and demand are currently out of whack in many markets, oil included. From a long-term perspective (5-10 years) I think the supply side of the equation is often over-looked, to the detriment of investors.

Luke - fellow iTuplier.

1:49 PM  
Blogger jmf said...

Moin Luke,

" From a long-term perspective (5-10 years) I think the supply side of the equation is often over-looked"

I agree 100 percent.

Rosenberg had a very good piece where he pointed out that after every crash in the oil market the recent low was significantly higher than the prior bottoms.

Same is true for the majority of other commodities. This trend will continue.

9:23 PM  
Blogger jjooey said...

This comment has been removed by the author.

4:29 PM  
Blogger jjooey said...

Meinen Glückwunsch zur Erwähnung auf Barry's Big Picture!


4:32 PM  
Blogger jmf said...

Moin Jjooey,

danke für den Hinweis :-)

8:48 PM  
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