And it's this behavior, boys and girls, that led me to write, on another EIA report day back in March:
...It's action like this that makes the agricultural futures attractive at the moment.That was at $34.83 up 43 cents.
Today, despite the continuing inventory overhang, the front futures are at $44.21 up 17 cents.
The current market leaves the geriatric set only two options for survival.
1) Withdrawal from activity until one has a countertrend opportunity orOn the latter point, if you'll indulge a brief diversion before we come back to today's EIA numbers, here's our March 2012 post, "Transports, Small Caps Hit New Highs" (Quick! Hire a kid!):
2) Adaptation to the current, apparently irrational, go-go mentality.
...There's an interesting dichotomy developing in the markets, one that we've seen before.
The old pros are cautious, befuddled and a bit scared. Folks with less than a decade at the market are making money.
Adam Smith noted it in the 'sixties bull market (The Money Game):
There is one wonderful chapter where the consummate pragmatic speculator, the Great Winfield, is lamenting his performance problems in a wildly speculative bull market.
“My boy,” said the Great Winfield over the phone. “Our trouble is that we are too old for this market. The best players in this kind of a market have not passed their twenty-ninth birthdays. Come on over and I will show you my solution.”So Adam Smith goes over and finds three new faces in the Great Winfield’s office.
My solution to the current market,” the Great Winfield said. “Kids. This is a kids’ market. This is Billy the Kid, Johnny the Kid, and Sheldon the Kid.” The three Kids stood up without taking their eyes from the moving tape, shook hands, and called me “sir” respectfully.
“Aren’t they cute?” the Great Winfield asked. “Aren’t they fuzzy? Look at them, like teddy bears. It’s their market. I have taken them on for the duration.”Winfield then describes how much money Billy the Kid is making in computer leasing stocks like Leasco Data Processing and Randolph Computer that he has heavily leveraged with bank borrowing....
And the really spooky bit, for me anyway, SHALE:
...Sheldon the Kid waved his hand for recognition.And today's EIA report via ZeroHedge:
“This one will really take you back,” said the Great Winfield. “Sheldon’s Western Oil Shale has gone from three to thirty.”
“Sir!” said Sheldon. “The Western United States is sitting on a pool of oil five times as big as all the known reserves in the world – shale oil. Technology is coming along fast. When it comes, Equity Oil can earn seven hundred and fifty dollars a share.
It’s selling at twenty-four dollars. The first commercial underground nuclear test is coming up. The possibilities are so big no one can comprehend them.”
“Shale oil! Shale oil!” said the Great Winfield. “Takes you way back, doesn’t it. I bet you can barely remember it.”
“The shale oil play,” I said dreaming. “My old MG TC. A blond girl, tan from the summer sun, in the Hamptons, beer on the beach, ‘Unchained Melody,’ the little bar in the Village.”
“See? See?” said the Great Winfield. “The flow of the seasons. Life begins again. It’s marvelous. It’s like having a son! My boys! My Kids!”
The Great Winfield had made his point. Memory can get in the way of such a jolly market, that malaise that comes with the instantly gone, flickering feeling of déjà vu. We have all been here before.
“The strength of my kids is that they are too young to remember anything bad, and they are making so much money they feel invincible,” said the Great Winfield.
“Now you know and I know that one day the orchestra will stop playing and the wind will rattle through the broken window panes, and the anticipation of this freezes us. All of these kids but one will be broke, and that one will be the multi-millionaire, the Arthur Rock of the new generation. There is always one, and maybe we will find him.”...MORE
Following last night's surprise inventory draw (1.1m via API), WTI soared above the week's high holding $45 into this morning's DOE data which was dramatically different. Instead of a draw,DOE reported a bigger-than-expected 2.00m build along with a major build at Cushing and Gasoline stocks also rose. Despite a small drop in production, WTI prices are plunging, erasing the hope-driven API ramp.API
- Crude -1.1m (+1.75m exp)
- Cushing +1.9m
- Gasoline -400k
- Distillates -1.02m
- Crude +2.00m (+1.75m exp)
- Cushing +1.746m
- Gasoline +1.61m
The biggest build at Cushing since Dec (after the pipeline delay ends) and surprisingly large build overall...
- Distillates -1.70m
Production fell modestly on the week...down 13 of 14 weeks
...MORE, including a couple nice gasoline charts that should give the kids pause.
Here's the EIA's Weekly Petroleum Status Report.