Ruppert: Empire will break down

He's been right most of the time. Michael Ruppert talked in Vermont last month about the global economy. He comes across like a doomsayer, but nothing is really shocking. The takeaway? Bullish on oil and gold. Bearish on financials, China real estate. 


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Energy is future currency, part 2

4:07 am Hawaii

Ah yes, the quiet of early morn. Dark skies, cool air and a lady on CNBC worried that the rest of the Earth couldn't hold the February lows. A technical analyst. I wonder if she's long or short the market, or neither. They should disclose that stuff and keep us entertained.

A good, fun time was had by all last night as old friends reunited. I had my fill and the result was an earlier than usual nighty-night time. But that also knocked me out through premarket despite the blare of my alarm clock. My small position in AAPL is slightly under water (263.34) now, but was north of 266 in premarket — during the first hour (7-8 am Eastern) when peons like me can't trade. After 2 am, when I could've traded (but was happily asleep), AAPL dropped below 266 and opened at 265.15.

Not surprising after yesterday's gains. Oil (USO) is flat, though BP is up 1.3% (38.19) somehow despite another drawback in the Deepwater Horizon disaster. Financials are flat, though C is up 2.5% (4.02). GS is down nearly 1% (143.62). Dollar is up fractionally (UUP 25.39) and the Euro is down a bit (FXE 121.77).

Last resort?

The nuclear option is upon us, or at least US. Bombing a leak like the one below the Deepwater Horizon in the Gulf might be a necessity. The Russians did it five times in similar scenarios. Four times the action worked, all with "small" nuclear bombs.

Spooky times, indeed, when a nuke is a solution to repair a problem caused by humans. Mother Nature cannot possibly have a good response. But what must be done will be done.

For now, British Petroleum is going to try another method, but really, there's proabably no way to stop this gusher other than the nuke. Isn't it odd and fascinating that we are getting toxic by air (Iceland volcano that I cannot pronounce or spell) and sea (man-made disaster)? The images are somewhat similar, really.

Looking ahead

Long weekend ahead and some planning is never a bad idea. Let the ideas churn.

Among the potential plays next week in a market that will be skittish (scaredy cat) at best or possibly cataclysmic (worsening of current crisis/crises or addition of new trouble spot), two stand out: Apple and British Petroleum. Apple's momentum is to the upside thanks to the iPad, which was just launched in Japan to hordes of customers, and the soon-to-be-released iPhone G4. The run from last week's low of 231 has been large for AAPL, which closed at 257 today. With a year-high of 272, AAPL has some room to play with, and if June brings some stability to the market — end of quarter can bring increased inflow that left after the Flash Crash ($9 billion left the market) — it could be the right play.

BP has no solution in sight. They've had vast success over the years with pioneering technology, but eventually, Mother Nature just said no. Now, with BP down to 43 after bouncing from 40 to 45 earlier in the week, where do shares go now? I'm not familiar with shorting individual stocks, but inverse oil/energy ETNs have worked. DUG (ProShares UltraShort Oil & Gas) closed up 4.1% at 69.08 today on decent volume (1.7 million shares). SCO (ProShares UltraShort Crude Oil 2x) rose 1.65% to 15.36.

On April 26, DUG was at 51.71. SCO was at 11.56. BP was 59.91 then, and closed today at 43.07.

Is there still room for gains in DUG and SCO? At this point, with BP a long way from any kind of reliable solution, of course. But most of the "easy" money has been made on the short side, clearly. There are at least two reasons, though, to believe this is far fro over and DUG and SCO are potentially decent plays.

1. Both BP and the White House underestimated — or publicly lowballed — the amount of crude bleeding out. The number may be as large as 19 million gallons per day, far higher than the earlier estimations of 5 or 12 million. This is relatively new info released in the past 24 hours. That impact is not fully felt in the stock of BP just yet.

2. BP has lost nearly $1 billion so far. If this problem isn't rectified for another month, or two, or three ... revenues continue to shrink and costs continue to spiral out of orbit. Worst-case scenario is BP is reduced to shambles and is bought out by another oil conglomerate. Best case is they find a temporary solution, or establish a relief well — the latter won't be ready until August at the earliest.

Whatever the scenario, the market is leaning on BP like never before.

Apple is what I know far, far better, and that's where I'll dip in and out. But as oil proves to be a multi-layered death trap for the US economy, I might try some SCO and DUG now and then. Just not today, and probably not next week.

[Update: Apple launched its iPad in London, too, to much mass indulgence.]

"Industrial Apple" wallpaper art by Stratification.

#17 CNOOC

Oil and China. Joined at the brain.


Pattern of lower lows and lower highs ended recently. I still think Big Brother won't let CNOOC lose.

UGA could score touchdowns

Any acronym that reads "UGA" is a bit unsettling for Hawaii football fans. After all, it was just seven weeks ago when Georgia (UGA) walloped our Warriors in the Sugar Bowl. But I'm getting over it, and UGA has a new meaning for me. UGA is the first gasoline ETF and began trading on Tuesday.

For us in the islands, where a gallon of gas goes for $3.36 (7-Eleven), any opportunity to join 'em if we can't beat 'em makes cents to me.

Top 25: #18 CNOOC Ltd.

OK, Nigeria is threatening to cut the supply to the U.S. Big boys threatening to cut supply if and when crude falls to $80 per barrel. So how did CNOOC slip 3.6% yesterday? CEO is getting real close to its 200-day SMA. That would be really cheap.

Top 25: #17 CNOOC Ltd.

CEO 145.29 +2.97 (+2.1%)
50-day SMA: 165.53 | 100-day SMA: 168.06 | 200-day SMA: 136.28
Like PetroChina, CNOOC Ltd. benefits from China's insatiable appetite for crude oil. Like PTR, CEO has the firm backing of the state.

No. 19 CNOOC: To heaven and hell

PetroChina is the undisputed king of crude oil in China, but CNOOC is its baby brother, the one specializing in off-shore drilling. Both have the backing and protection of the Chinese government. It doesn't get much safer than that. That being said, CNOOC's stock (CEO) has been on a hellacious roller-coaster ride.


















I touted CEO when it was in the 90s, and again in the 110s, with a P/E of just 11. Then it dropped back to the 90s and I missed my chance. I had no idea the price of crude was going to approach 100, no idea that CEO was going for a ride above 210. Holy crap.

CEO is trading below its 50-day SMA, but only those with brass balls will step in here. Can crude make a run at 100? I think so, but without faith to back my belief, I will not act in accordance.

Pupule's Top 25 (Dec. 25)

Is Chinese energy in play?

Worth examining?

CEO 190, -8% for the day, down 13% from its all-time high (218). Trading below its 10-day SMA (200).
PTR 222, -13% for the day, down 16.5% from its all-time high (266). Trading below its 10-day SMA (249).
YGE 35.50, -2.3% for the day, down 9.5% from its all-time high (39.20). Trading slightly above its 10-day SMA (34.40).
STP 56.61, -0.7% for the day, down 9% from its all-time high (62.18). Trading above its 10-day SMA (55.56).

Too early for cheap buys?

DJ -366 (-2.6%)
NASDAQ -74 (-2.6%)
S&P 500 -39 (-2.5%)

AAPL 170.80 -2.70 (-1.9%)
Apple reports on Monday. My favorite, an A grade stock. If they can thump the estimates and raise guidance, AAPL becomes an A+ stock. Still trading above its 10-day SMA (168).

VMW 97.74 -3.81 (-3.75%)
VMware reports on Wednesday. May sell off on good or bad news because of the run from 50 since August. I'm late to this stock, but I understand the strength it has in its industry — its dominant stance. Currently an A- grade stock and it's trading below its 10-day SMA (101). Big run, decent pullback, hugely popular. That means it won't stay down long. Very tempting.

BIDU 314.75 -5.25 (-1.6%)
Baidu reports on Thursday. Google's upswing since yesterday's earnings report could (should?) have a mirror effect on Baidu, right? Why would it have a positive effect on earnings rather than today? (Maybe the selloff was just too strong and broad.) I'm split on that notion. Nevertheless, BIDU has a shrewd CEO in Robin Li, and I don't see him disappointing the street as long as he's got Big Red backing the Co up.

Baidu is trading below its 10-day SMA (320), which sounds preposterous considering this was at 161 on August 16. (The 50-day SMA is a bit more reasonable at 254.) Tempting here, also.

Looking back, I should've sold Blue Nile and China Digital TV when I had nice profits. I bought NILE at 80, it ran to 106, and now is back at 81. I bought STV at 29, 32 (and 51). It ran to 55. Now it's back to 39. Some positions are holds. Other positions are trades. These two should've been trades.

NILE is trading below its 10- and 50-day SMAs, but I hesitate to add more here. Even if I disagree with the downgrade (Citigroup) and even if I don't pay mind to the insider selling, the market is less than pleased. Can't fight the trend, can't add more here. I'm holding my little position.

STV is a long-term hold, but I would've profited by selling half my position high. The pullback for a recent IPO is almost destined. But I will hold on here.

Amazon is taking up space in the portfolio. I got in at 89, which is where it remains today. Though today's selloff hit tech and retail hard, AMZN lost just 10¢. The stock moves drastically only on earnings. The astronomical P/E keeps the stock on a leash for most of the quarter. I may get out of AMZN to raise a little more cash. OK, scratch that. I just realized that Amazon reports on Tuesday. Very interesting.

This isn't exactly a bargain sale here, but I've become severely underweight in two of my favorites, Crocs and Nintendo. Haven't sold a share. Just gotten heavy with other stocks. This pullback is an opportunity to fill up on CROX and NTDOY.PK, or perhaps to just wait until Monday. My Friday buys have been stellar in the past few months. Hmm...

Crocs is a relative bargain here at 65.99, well below its 10-day SMA (68). Q2 earnings were reported on August 14, and if Q3 comes out three months later, that would give us longs a Nov. 14 target. That's 26 days away. Too early to add more?

Nintendo (70.80) is milking the Wii and DS and everything it owns for all it can — but without emptying the whole sack. No question in my mind that the Co will deliberately ration the Wii as long as demand is huge. Remember, Nintendo was kicked to the curb, particularly by U.S. shareholders, for a few years there. The Co remembers this and isn't just tight with the product overseas, but is also overly discerning with its shares in Tokyo. (Investors there can only buy in bundles of 100 shares, and that comes out to about $41,000. Talk about an illiquid market in stock 7974.)

Today's pullback brings Nintendo's stateside pink sheets below the 10-day SMA (72), but I'll wait. The recent run above 70, all the way to 75, needs time to digest in this new box/trading range. I'm loathe to buy it high as I've done before.

Is it just me or was Maria Bartiromo a lot more hyper today on the trading floor? Luv Maria but when the market is on a major selloff, it's like watching a skittish cat trying to run across a busy freeway. When she's back at the desk, Maria is back to her calm self. Time to pick up some lululemon pants and hit the yoga workouts, Money Honey.

Oil hit $90/barrel today, then pulled back to 88.60. Guy Adami on Fast Money thinks the next $8-10 is downward. Dennis Gartman said crude should be at $75, and added that gold will fall if we are in a recession, as Julian Robertson said on CNBC today. If oil is due for a pullback, that will exacerbate the declines for PTR and CEO. I still want CEO, but I want it cheap. It won't get back to 92, but I will still be picky.

The Magic Words

My fixation on China oil hasn't really been an accurate view. The patch is really China energy. Whether it is oil or nat gas, solar or even ethanol, the largest nation in the world will need all the energy it can acquire. With crude hitting another all-time high of $89 per barrel, here is a quick look at energy stocks in China this morning.

Suntech Power (STP) $44.93 +3.09 (7.4%)
Yingli Green Energy (YGE) $31.97 +0.44 (1.4%)
PetroChina (PTR) $261.75 +31.63 (13.6%)
CNOOC Ltd. (CEO) $193.30 +12.79 (7.1%)

There is much more, of course, but these four stocks — two solar-oriented and two in oil/nat gas — have been killing bears and shorts mercilessly. I still lament my inability to buy CEO at 92 two months ago, when it had a P/E of 11 and I was harping on and on about its greatness.

China energy. Two magical words.

Grand poobah PetroChina still rising

Heheh ... PetroChina is a true pimp. Monopoly was never this easy for China's oil giants. With oil now above $87 a barrel, there is no end in sight. It's like watching a home run that keeps rising.

Pupule says: Wait, wait, wait. Even as Turkey and Iraq seem intent on war, wait for a dip. At 236, PTR has no support near these levels.

A rare Monday down day

So much for fears over the People's National Congress in China. While Chinese stocks held ground and some even soared to new highs — unexpectedly in the eyes of some concerned investors and traders — it was the U.S. market that folded a bit. The Dow Jones fell 108 points (0.77%), Nasdaq dropped 25 points (0.91%) and S&P 500 dipped 13 points (0.84%). The Dow fell under 14,000 to 13,984. Was it Citigroup's dismal earnings report? Possibly, but the Co had already warned about lower earnings. Was it crude oil, which finished the day above $86 a barrel? Not really. The market has gained significantly on oil's up days in the past few weeks.

Maybe it's just a little more fear and profit-taking than usual. More financials will report this week. But with Yahoo (Tuesday), eBay (Wednesday) and Google (Thursday) reporting this week, the Nasdaq will have some volatility. I'm not expecting much from the first two, though Yahoo's earnings from Asia could be significant. How soon will eBay penetrate the Chinese market? I won't be holding my breath. Google failed to meet expectations last quarter, but their game plan is sound. Spending on R&D and new hires as they expand in China is acceptable in my book. The G-phone is a bonus.

China held up, which still sounds a bit surprising. Just a little. New Oriental Education and Technology (EDU) launched to a new high after announcing earnings before the open. EDU closed on Friday above 66, opened today at 71 and closed at 75. That was a nice response to the PNC's first day. Nearly all the Chinese stocks that I watch are virtually the only greenies on my lists. CMED is at 42 (after hours). FMCN is up 1.7% to 59.15. CHL is up 1.9% to 88.80.

China and oil continue to be a glorious combination. PTR is up 9.2% to 236 and CEO is up 5.7% to 188 (after a mid-day high of 192). CEO was at 92 on subprime meltdown day (August 16). The stock was up big in premarket on less than 10,000 shares, triggered by crude oil's gain. I think.

CHL is up 1.9% to 88.80. STV was surprisingly positive, now at 50.15 (up 2.1%).

No, China wasn't perfect. BIDU dropped 2.7% to 314. SINA and YGE were down. Even Macao plays LVS and WYNN were down.

Note to self: don't fight the trends. Oil rules. China energy and pollution are going to be Quarry Logic fixtures for decades to come. The Chinese middle class will not be deprived.

Players and the House are one and the same

One of the better summaries of the Chinese oil industry. Not a comprehensive history, but a nice breakdown of CNOOC Ltd. (CEO), PetroChina (PTR) and Sinopec (SNP) by Randy Kirk.

CNOOC Limited: Future Oil Supermajor

Bohai Bay in Northern China is CNOOC's largest production area currently, and, over the near term, is the Company's highest priority development area. The area has significant potential, as in March, 2007, PetroChina discovered 7.3 Billion Barrels of Oil equivalent in Bohai Bay, the largest discovery in China over the last 30 years. Note that this discovery was the result of significant exploration activity by PetroChina, as development costs for the exploratory wells totaled $780M for PetroChina.

(Note also PetroChina's stock moved up 12% with the announcement of the discovery in 3/07). CNOOC has stated that it has several prospects for Bohai Bay going forward, and the majority of CNOOC’s 2007 and 2008 exploration and production budgets have been earmarked for Bohai Bay.

In other words, the Chinese government will split up the goodies to keep all three of its oil kings to remain competitive on a global (market cap) scale. Oh, how I wish I'd bought CNOOC back at 92 two months ago. In the face of a big down day in the market today, CEO closed up 2.3% to 170. PTR was up 3% to 193.

CNOOC: The 'other' Baidu

I pumped my tank full during an all-too-rare stop at Costco in Iwilei over the weekend. At $2.98 per gallon, I was happy to get the lowest price on Oahu. I was also happy to get a $1.50 hot dog and soda deal a few minutes later. Neither the constant use of gasoline nor the consumption of hot dogs and soda are any good for our bodies and the ecosystem. But there I was, getting a good deal all the way around before driving off to cover a football game 25 miles away.

Gotta get it cheap, no escaping that. But as gas prices come down, I can't help but expect $4 per gallon in the near future. Crude oil prices hit $83 per barrel today, and with production declining (supposedly) in the Middle East, we're at the mercy of producers, refiners and everyone in between. So, if we can't beat 'em, why not just join 'em?

I remember pounding the keyboards for CNOOC Ltd. (CEO) over the past few months. Again and again, I ranted and raved about the great future of this Co. I vividly recall writing about the stock (CEO) being a steal in the 90s, 100s, and in the 110s recently. The P/E hovered at 11 for the longest time. Not the best of breed in China — that would be PetroChina — but with 1.3 billion residents and a major increase in auto sales and gasoline demand, CEO is a prime best-of-all-worlds kind of stock. Not just being in China and being an oil/natural gas Co, but having the protection of its government.

And yet, I didn't buy a single share.

So CEO ran from 92 (subprime sludge low) to 155, pulled back today to 148 and is completely not fit for purchase, technically. But I think Goldman Sachs is right. Oil will hit $100 a barrel sooner than later, and GS could be right about a $135 price. (I don't even want to imagine the possibility of $200 per barrel.) Does the average man or woman have any way to fight back against these exhobitant gas prices?

A part of me wants to say, "Yes. If we can't beat 'em, join 'em! Buy all the CNOOC and PetroChina and Exxon and ladee-dah oil stocks that you can!" I mean, CNOOC ran up 60% since August 16, so there were many opportunities ... if you had dry powder. As gas prices rise in the coming weeks, I'll be more peeved and more eager to buy some CEO for the first time.

Coming soon, $200 for a share of CNOOC Ltd. Who woulda thunk it? CNOOC is the other Baidu.

Do not touch when hot

It's preposterous if you're out and prosperous if you're in. Chinese stocks are on fire, partly because of the slowing U.S. economy, as well as the insatiable appetites of traders who can't resists the lure of the Middle Kingdom.

In a way, I can't blame them. So much growth is ahead in China, and the protectionist government is something to behold. They even banned Boeing from selling planes to Chinese companies, which is a just one reason why China's airline stocks are among the very best performers year-to-date.

With tomorrow's Fed meeting ahead, Baidu is on fire. But so is Focus Media, an advertising company that ran into trouble a few months back and still hasn't reported Q2 earnings. The ADRs slumped to 35, but have gained ground recently and traded at 46 today. Would this ever happen with an American stock? Up 30% on a two-month earnings delay?

Preposterous, but if you own FMCN, you're smiling.

The ultimate "safe" stock in the current environment has to be CNOOC Ltd. (CEO), my favorite oil and natural gas Co in the world. How much safer can a growth stock get? Oil hit a new mark today (well over $80 per barrel). The Co is based in China, but exploring off shore in places like Indonesia. Put the ingredients together and it's easy to see how the ADRs went from a low of 92 (August 16) to today's 133.

I pounded the table hard, hard, hard for CEO when it traded below its 13- and 50-day MA. And yet, I didn't buy a share. If and when oil prices drop, I'll be watching the chart closely again. Of all Chinese stocks, I tend to think that the government's protectionism applies more so to oil companies than any other given the geopolitical climate. The U.S. owes China, China owns the U.S. indirectly thanks to our consumer spending addiction, and the Chinese will sell their oil to anyone, regardless of politics.

I still won't buy any China ADRs unless the technicals are sound and/or there is a compelling catalyst. Watching is best here.

Positive news for CNOOC

Bullish news for CNOOC (CEO) today.

Bloomberg: Cnooc Parent to Expand Huizhou Oil Refinery by Two-Thirds

Meanwhile, Shanghai reports that nat gas is in favor, petro no so much.

Shanghai Daily: Policy on natural gas streamlined

Pretty cool news for CNOOC longs. Intriguing for those of us who are still on the sideline.

China, oil and changing geopolitical times

Given my utter adulation of Cnooc (CEO), China's No. 2 oil and natural gas corporation, this piece offers some balanced perspective. Gal Luft of the Institute for the Analysis of Global Security explores the impact of China's accelerating need for oil.

Fueling the dragon: China's race into the oil market

Here's an excerpt:

In the Western Hemisphere China concluded oil and gas deals with Argentina, Brazil, Peru, and Ecuador. But its main country of interest is Venezuela, U.S.' fourth largest oil supplier. A series of oil agreements signed in early 2005 allow Chinese companies to explore for oil and gas and set up refineries in Venezuela. Chinese state-owned oil companies have also begun seeking ambitious oil deals in Canada, the top petroleum supplier to the U.S. China’s continued penetration into the Western Hemisphere could have profound economic and political implications for the U.S. Considering the fact that both U.S.’ and Mexico’s domestic crude production are falling, the U.S. cannot afford to lose chunks of the crude produced by the two countries that together supply a third of its oil imports. With less oil available to the American market the U.S. will be forced to seek this oil elsewhere, primarily in the Middle East, hence becoming more dependent on this tumultuous region.

Luft's piece touches on the battle between China and Japan for potential oil/gas turf beneath the East China Sea. Things are not comfy there right now, I'd say.

Here's a series of solid pieces and threads that include Cnooc's attempt to buy Unocal in 2005. More insightful and resourceful than the average stock message board.

PekingDuck.org: America's paranoia over China's bid for Unocal