For Investors Only

Trading at 52-week highs on Thursday during the week Iraq fell: APA, BP, Baytex, CLR, CP, CHK, COP, CPG, DVN, EOG, ECA, HAL, HK, HES, MRO, MPO, OXY, PXD, SN, SLB, WLL.

Economy: Reuters is reporting:

U.S. business inventories recorded their biggest increase in six months in April and picked up excluding automobiles, supporting expectations of a sharp rebound in growth in the second quarter. [Comment: I honestly don't get it, and the comments at the linked site suggest the same. I don't see how rising inventories are a sign of an improving economy. It makes sense that rising inventories improve the GDP if the rising inventories are in anticipation of rising sales, but if inventories simply build up in warehouses -- well, the good news: inflation will stay down.]

Early morning trading. Let's see what the oil companies are doing as oil starts to spike --

• XOM: up almost 1%
• COP: up over 1%; trading at a new 52-week high
• CVX: up a bit
• CHK: up over 2.5%; trading at a new high
• CLR: up over 1.5%; trading at a new high; and this is on top of some big gains earlier
• WLL: up over 1.6%; trading at a new high; and this is on top of a new high yesterday
• OAS: up 2.5%
• KOG: up over 2.6%
• HES: up over 1%; at a new high
• SD: up almost 3%
• TPLM: down about a percent
• UNP: down a buck
• GDP: up over 3% (only because it's in the news; I really don't follow GDP)

Disclaimer: this is not an investment site; do not make any investment decisions based on what you read here or what you think you may have read here.

Short term: oil company shares may surge in early trading, but could pull back significantly if they follow the general market which is currently trending down. Some folks may start locking in their profits. Shorts are going to be squeezed "big time."

The Bakken companies may or may not do all that well with the surge in oil prices because many of them are hedged. If they can't get to market what they promise to bring to market, they have to buy oil on the spot market and right now it's very, very expensive. The majors won't have that problem. Mineral owners will do well regardless.

The best news for oil bulls: yesterday $105.30 was the ceiling for "speculators." We've broken through that ceiling. Today will determine the "new norm" or the new trading range for oil. The longer the drama in Iraq lasts and/or if Baghdad falls to Syria/Iran/ISIS/Russia, the price of oil will continue to move up. Without North American shale, the price would have surged by now; the "Bakken success" has helped minimize volatility in the price of oil. Had the Keystone XL North been in place that would have been even better for US energy security, but that's water under the bridge.

By the way, this is surprising: the market is down (except for energy) and TGT is up. The company, yesterday, announced it is increasing its dividend by 21%.

Iraq "Drama" Catches US Off-Guard -- WSJ; Obama's Katrina

Déjà vu all over again, from a comment sent in to the New York Times:

In 1975 as the North Vietnamese Army was storming towards Saigon, US air support was withheld. And what the NVA thought would be a 1-2 year fight was over. The South Vietnamese Army (ARVN) mostly laid down their weapons and walked away. This was after 10 years, thousands of US lives, and billions of US dollars. I spent 1967 and 1968 in Vietnam with the US Army, believing that we were doing something important.

"Those who cannot remember the past are condemned to repeat it." -- Santayana

"Only the dead have seen the end of war." -- Santayana

"Chuck, you've got it. I'm going golfing. Call me when it's over." -- President Obama

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Look at the war video at the link. Wow, when you look at those vehicles driving down the road -- those are high-tech vehicles -- this is not simply some rag-tag army. This is a professional army. There is no question that Iran/Syria is behind this, but the real question is this: how much are the Russians/Putin doing? This army is moving faster than the US Army did in 2003. 
 
The Wall Street Journal is reporting that the US was caught off-guard with regard to the "drama" in Iraq:

The quickly unfolding drama prompted a White House meeting Wednesday of top policy makers and military leaders who were caught off guard by the swift collapse of Iraqi security forces, officials acknowledged.

State Department and Pentagon officials have long warned about ISIS's desire to create an Islamic state based in the Sunni-dominated parts of Iraq and Syria. Now, current and former officials say Washington's options for helping the Iraqi army fight back are limited—both because the threat in Iraq is so entrenched and because the U.S. hasn't invested in building up moderate allies on the Syrian side of the border.

U.S. military leaders said they had thought that Iraqi security forces' efforts would be enough to slow ISIS's advance. But those assumptions were proven wrong when Iraqi troops largely abandoned their posts. 

I spent several years in the Mideast. Troops "largely" abandoning their posts does not surprise me. It's hard to believe it surprised Chuck Hagel. LOL. Shoot, even top leaders in Washington (DC) abandoned their posts on the night Beghazi fell. It's in their nature.

I can't decide.



Or,



The only question is whether Russia/Syria/Iran/ISIS stop short of Baghdad (ala George I) or move on to take Baghdad (ala George II).

I think Mr Obama sees his legacy being written this weekend. It will be on his mind, I'm sure, when he takes a selfie at SRIR. My hunch: he cancels his trip to North Dakota.  

The Trend Is Not Your Friend -- Weekly Jobs Report

Boiler plate: US jobless claims ________________ this past week holding ___________ this year’s average and signaling sustained progress in the labor market.

For the past two years that has been the opening line, or a variation thereof, of every weekly jobs report, no matter how bad. Today, I cannot make this up, the lead paragraph in Bloomberg:

Applications for unemployment benefits in the U.S. rose to 317,000 last week, holding below this year’s average and signaling sustained progress in the labor market.

Applications for unemployment benefits rose -- during the summer in perfectly good weather when road construction is at its highest -- and Bloomberg says that signals sustained progress in the labor market. Really?

The boiler plate is interesting but what I enjoy most is the spin. The increase wasn't all that much; in fact it's a non-story.

Except.

The big story what not mentioned. It wasn't the "number" that was important, it was the direction of the move that analysts predicted (or had hoped), and Bloomberg cleverly tried to hide that.

If the new number is 317, 000, a jump of 4,000, means that the previous number (revised, of course) was 313,000. Now the next line in the Bloomberg story:

The median forecast of 52 economists surveyed by Bloomberg called for 310,000.

Claims have averaged around 324,000 so far in 2014. 

Analysts expected a decrease in the overall number from 313,000 to 310,000. In fact, the number did not decrease; it went up (as "increase").

The most important figure by Bloomberg's own admission is the four-week average. If it's a good number it is at the top of the story. If it's a bad number, it's buried. (The order is reversed under a Republican administration.) So at the very bottom of this report that signals the American job market is only getting stronger, we have this, and again, I cannot make this up:

The four-week average of claims, a less-volatile measure than the weekly figure, climbed to 315,250 from 310,500 in the prior week. 

That's a pretty healthy climb when this week's report was a measly increase of 4,000. That tells me the trend is not your friend.

********************************

In anticipation of the president's "not-open-to-the-public-photo-op-trip" to one of the most remote Indian reservations in America:

Cherokee Nation, Paul Revere and the Raiders

Half Breed, Cher

Active Rigs In North Dakota Down Significantly -- June 12, 2014; Worldwide, 4 Million BOPD Just Went Off-Line

Active rigs:

	6/12/2014	06/12/2013	06/12/2012	06/12/2011	06/12/2010
Active Rigs	187	187	211	169	125

RBN Energy: final installment on pipeline takeaway in the Marcellus/Utica.

The Wall Street Journal

Iraq. Hope and change.

Iraqi forces exchange blame over failures. Hmmm., sounds like Washington (DC).

Lawyers race GM to find black boxes.

Trainwreck: many of the nonprofit insurers falling short of goals; viability threatened. Perhaps more on this later in a stand-alone post. For now:

Many of the nonprofit health-insurance cooperatives created by the Affordable Care Act have enrolled far fewer people than they had hoped, according to figures obtained by a Republican-led House committee, calling into question their viability.

Fourteen of the 23 co-ops reported to the panel that, as of April 1 or later, they had enrolled significantly fewer people than they had projected for 2014 when they obtained $2 billion in federal loans from a fund created under the health law.

The shortfalls create steeper obstacles for the plans to succeed and repay the loans. Health-insurance co-ops are nonprofit insurance entities governed by their members. They were included in the 2010 health law as an alternative to creating a government-run insurance plan, which was championed by some liberal Democrats. The co-ops were designed to give consumers an alternative to traditional plans and inject competition into the law's new online insurance marketplaces, putting pressure on established plans to offer lower premiums.

Cantor's loss: immigration reform placed on a back burner.

Hagel says US had to move quickly on the swap. It will be interesting how fast Obama moves to throw Chuck under the bus. The swap completed. On to Baghdad.

Colorado and fracking. Oil companies ready to "walk."

The VA debacle? Now the FBI investigates. Jail time for appointment clerks, the minimum wage folks, for keeping two sets of books?

A Federal appeals court: cops need warrants to track cellphones.

Aubrey McClendon starts his comeback.

Detroit's appetite for aluminum grows. Don sent me a story on this some time ago: watch Ford pick-up trucks and aluminum.

Emirates cancels entire 70-plane Airbus order.  This story is two days old, but I keep forgetting to post it. This is a huge story. Do you know Boeing's ticker symbol?

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.

Overheard on the street: OPEC production ceiling hurting majors. A paradox. 

Now, with Libya and Iraq in crisis again and U.S. talks with Iran looking dicey, OPEC's job is a lot easier as it its latest get-together wraps up; the group Wednesday agreed to maintain current production quotas.

OPEC did so as production of about 3.5 million barrels per day is offline world-wide due to disruptions, according to Citigroup. That is the highest in years and equivalent to Brazil and the U.K. shutting down production. Brent crude oil is at about $110 a barrel, roughly where it started the year.

I assume the 3.5 million is low-balling what might actually be closer to 4 million.

The Los Angeles Times

Flashback: the O.J. trial -- the glove was the key.  If any doubt, watch the movie, "L.A. Confidential."

All Along The Watch Tower, Continued

Finally, the proxy for the civil war in Iraq is in. I was surprised by how long it took for the oil futures market to respond. But finally, I see, oil is up nearly 2% in overnight futures.

I used to say there were two things driving any market: fear and greed. I forgot about the third leg of investment sentiment: reality. The reality is that oil exports from Iraq will be affected by the civil war.

It is interesting that the Dow futures are green. It will be interesting to see if that lasts.

A little over a decade ago we had "shock and awe." Baghdad fell on April 9, 2003.

Fast forward, we now have "hope and change." Seriously. This was the sub-headline in the Los Angeles Times regarding the president's decision not to support the Iraqi democratically-elected government:

The militants roll past the major northern city of Mosul and into Tikrit. U.S. officials are hopeful that the fall of Mosul will galvanize the Iraqi government.

So, we have hope. And by the end of the weekend we will have change. If nothing else, the Sunnis (the peaceful ones now control much of the north). I can't make this up. The Los Angeles Times actually spelled out the Obama Doctrine when it comes to a shooting war: hope.

In the end, it will be determined that Obama made the right choice. The Americans don't want to go back into Iraq. It is what it is. It was what it was. Oh, the places you will go. Green eggs and ham? Ask the cat in the hat.

On June 10, 2014, I posted my thoughts on the global energy picture. To the best of my knowledge, and re-reading the post, there was nothing in there about a shooting war (except perhaps, peripherally, the Russian-Ukraine event) but nothing about the Mideast imploding. It was about the global energy picture without a shooting war in the mideast.

If this "thing" in Iraq goes as it appears to go, once the sand settles, I may have to add a fifth center of gravity: IranSyriaIraq. Which leads us to Saudi Arabia. One word: terrified.