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Sunday, September 14, 2008

A Game Of Wall Street Pacman

Update: See CR's summary thread - AIG is asking for fed help? End update

Everybody tries to gobble up the good stuff while avoiding the ghosts. Lehman is the ghost, and Greenspan is making a cameo appearance.

So, Merrill sidles up to BofA, jumps in BofA's lap and does a dance, gets taken home. Yes, it's not dignified, but it is a roof over ML's head and three squares a day.

Or perhaps this is a remake of "Night of the Living Undead"? There's still AIG, WaMu, and a host of other Undead lurching crazily around the Street, hunting for live blood. The thirst, the thirst.

The funny part? This is all moving so fast that no one really knows what their own assets are worth, much less the assets owned by others.

In the meantime, crude continues to fall, but grains are being bid up a bit due to harvest worries. Crude is being released from the SPR to counteract hurricane effects. Heating oil futures are dropping. Now we get to wait and see the outcome of the destruction of so much credit. By the end of 2009, it's possible that crude might be trading at $50, maybe even lower.

Someone decent should grab those Boeing union heads, explain the facts of life, and get them to settle fast. Very soon those Arab plane orders will start to be cancelled.

Comments:
BoA buying merrill for 38 eh

guess that explains some insider trades a couple of weeks ago.

http://freundinvesting.com/2008/08/02/significant-insider-buys-merrill-lynch-xl-capital/
 
How wouild oil be released from the SPR? where would it go and how would it get there? Refineries and pipelines are shut down.
 
Jindal had asked for that after Gustav. It really just assures the refineries that they will get low-cost oil and prevents a speculative runup.
 
Bret, those purchases were over a month ago. No one's ever going to prove anything....

It's a career in and of itself reading ML SEC filings. I did find some of those currency deals interesting. I think they did this because they knew they were next in the barrel.
 
Oh, I forgot - the other action taken was that rules specifying certain types of gas were suspended. That does help ease the supply problem.

According to last week's report, total gas inventories were only 3.5% below those of a year ago, and the lower usage means that is not a crisis by any means. According to EIA, demand over the last month was down 2.1% from a year ago. Overall oil consumption has been down 4.5%.

But conventional was quite low. There appeared to be an oversupply of reformulated. Blending components were up 14.7% compared to last year. Refinery utilization rates this August were running about 3% below last year's rates.

Globally, there appears to be something of a gasoline glut, and there was for part of the fall last year. Diesel usage has shot up way past gasoline in some of the Asian countries, and the word was this last August that Asian refineries were seeing their gas margins falling. Certainly the poor oil tanker rents for Sept Asian shipments would suggest that this is true.
 
See also this article.

Crude can be trucked in when the ports are down.
 
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