From NJ.com
by Jeff May and Tom Johnson/The Star-Ledger
Sunday June 29, 2008, 12:01 AM
Eric Bolling settles into his desk and glances at the computer screen.
"Holy crap," the 45-year-old commodities trader murmurs.
It is Thursday morning and the New York Mercantile Exchange has opened a few minutes earlier at 9 a.m., and the price of crude oil is already up $4, to $138 a barrel.
Bolling, an ex-minor league third baseman who lives in central Jersey, reaches for his phone.
"Vin, it's R.B.I.," he says, using his nickname. "We have to buy 20 of crude," -- jargon for executing a trade for 20,000 barrels.
"Wow," he says after hanging up. "We're going to see an all-time record today."
He is dead on: A few hours later, crude hits $140 a barrel, continuing a dizzying ascent that has dragged down stocks and put a dent in Americans' wallets.
Oil is a complex business. It starts with exploration and drilling and leads to refiners who turn it into products such as gasoline. Then, it's pumped into trucks and shipped to the local filling station on the corner. The price is affected by countless, interlocking factors: the value of the dollar, politics, pipeline explosions, surging demands from China and the huge bets traders make every day from London to Dubai to New York.
On Thursday alone, Libya threatened to cut production from its fields, the president of OPEC estimated crude could soon reach as high as $170 per barrel, and U.S. lawmakers took steps to curb excessive speculation.
Amid all of this, one thing is certain: Oil's historic march is changing the lives of everyday people -- from traders like Bolling to 17-year-old Brittany Dippold and the car she chooses to buy and John Brackett and the number of passengers his party boat carries.
Here's the story of how the global business of oil hit home in New Jersey over the course of a single day.
3:30 A.M.: THE DAY BEGINSÂBolling's alarm clock goes off before dawn and, after getting ready, he drives into Manhattan to appear on the Fox Business Network's "Money for Breakfast" show, which airs at 7 a.m. These days, his schedule puts him on air more often than in the pits at the exchange, but it hasn't checked his appetite for trading.
Once one of the biggest individual traders of oil and energy futures on Nymex -- at his peak, he says, he accounted for 5 percent of the daily trading -- he has scaled back. Much of his money is now invested in shares of energy companies. A good amount of the consummate trader's money is now in cash.
"It's too dangerous to make a big bet on oil futures," says Bolling, who labored in the Pittsburgh Pirates' minor league system before a torn rotator cuff forced him to search for a new career. "If I had the same stake as I had two or three years ago, I could be wiped out in a day."
After seeing the rise in crude shortly after 9 a.m., Bolling calls his clerk at the Nymex and hedges his bets by buying 2,000 ounces of gold at $913 an ounce.
10:30 A.M.: THE LIMO DRIVERÂWith the average price of gas in New Jersey running $3.986, Gene Goobic no longer calculates trips in miles. Goobic, the manager of Short Hills Limousine and Van Services, uses gallons as his measuring stick.
Newark Liberty International Airport is exactly 1.4 gallons of gas away from the company's headquarters in Millburn, for example, using the service's Lincoln Navigator, he said.
On this morning, Goobic picks up a family of four in Short Hills for a trip to Newark airport. The limo service, shelling out $2,600 a week for gas, has started charging passengers a 15 percent surcharge to help cover costs.
"We have to pick up the slack," Goobic says. "If we don't, we're going to lose a lot of money. We have to stay above water."
To make matters worse, he says, a lot of his corporate clients are capping how much they're willing to pay.
"So if a guy calls me up and says my company is only letting us pay $71, sometimes we have to bite the bullet," he says. "Do we lose the $10 bucks or do we lose the customer? If a person or company uses us a lot, we'll give them a little break. I'm just hoping prices don't go up any more."
11:00 A.M.: 'BURNING GAS'Sam Abolata is on his fifth and, he says, his last Hummer.
The owner of Mia Sorella restaurant in Manville says he's now paying more for gas than the lease payment of his 2007 Hummer H2 SUT. The daily commute from his home in Flemington is easily costing him $40 a day, he says, as he prepared to open for lunch at 11 a.m.
"Even when the car's parked, it feels like it's burning gas," he says. "Maybe I should buy a gas station."
He's trying to sell the Hummer, but there aren't a lot of takers. Later in the day, a survey by the Civil Society Institute and Opinion Research notes three out of four Americans expect gas to cost $5 a gallon by Labor Day.
So what will Abolata's next vehicle be?
"Maybe a bicycle," he said.
11:10:'NO-NO'Deborah Fineman, president of Mitchell-Supreme Fuel in Orange, scans a computer screen to see the latest Nymex quotes. These days she watches prices "all day, every day."
Prices were up 14 cents -- and climbing -- an hour after OPEC president Chakib Khelil told a French TV station crude will likely rise to between $150 and $170 a barrel this summer.
"It used to be, in the summer, you'd buy futures contracts and try to establish prices for your customers," says Fineman, a lawyer who bought the company in a 1988 leveraged buyout with her husband, John Bozik. "The problem is the market has gone against historical trends."
Higher prices have put the squeeze on Mitchell-Supreme, which ships millions of gallons of fuel oil a year to homeowners and apartments in northern and central New Jersey.
Heating oil is up 55 cents a gallon this year, which translates into a 76 percent increase since January, she says. Many residential customers, whipsawed by the twin threat of recession and inflation, can't afford to fill their tanks.
"We go to fill up and the homeowner says, 'No, no,' because they figure the price is going to come down," says Fineman, adding Mitchell-Supreme's profit margins have slipped 10 percent over the past year. "So instead of going to the house twice, you have to go three, four or five times. You can't pass on the entire price increase to our customers because they can't afford to pay their bills."
NOON: ANOTHER WILD DAYBolling munches on a turkey wrap at a restaurant next door to the exchange. When someone remarks how relaxed he seems, he picks up his phone and calls his clerk: "Hi, it's R.B.I. What's crude doing? How about gold?" He nods, reassured, and says neither has moved since he bought them a few hours earlier.
Bolling learned the hard way of not paying close attention to his trades. Six years ago, he took the morning off to read to his son's preschool class. At the time, he had a big bet that natural gas prices would fall. But the night before had turned unexpectedly frigid. Gas futures were soaring.
As he sat in the class reading, Bolling was bombarded with text messages: "Where are you? You have to get here." He began to sweat, but finished reading the book. The teacher asked the class: "Any questions?" Twenty-five hands went up, he recalled, but he stayed and answered every one.
When he left, his son looked up and told him, "Dad, it was great."
By the time he got back to work, he was down $2.1 million, he recalls.
1:00 P.M.: MISSING THE TORN SHIRTBolling enters the Mercantile Exchange a little before 1 p.m., shaking hands with most of the people he passes. He never wears a tie -- not even to his own wedding -- and always wears mismatched socks, a superstition from his days playing baseball.
He began trading at the exchange in 1986 and quickly fell in love with the competitiveness, confusion and chaos of the pits.
"I love trading," he says ruefully, noting the exchange floor has changed since electronic trading began in 2006. About 80 percent of trades are made on computer screens.
"I miss it, coming out with a wet shirt, a torn shirt, but it's not there anymore," he says.
Upstairs in his 12th floor office with drop-dead views of the Statue of Liberty, Liberty State Park and Jersey City Gold Coast, he picks up the phone and rolls over some natural gas contracts for July into August so he doesn't actually have to take delivery.
"Okay, dude," he says once the deal is done. "Perfect."
2:05 P.M.: THE PARTY BOAT CAPTAINÂJohn Brackett said he spends two hours a day tracking commodity prices. That didn't used to be in the job description of a party boat captain.
Since 1980, he has operated the Queen Mary, a 75-foot fishing boat that sails out of Point Pleasant Beach. Brackett, who usually heads out to sea at 7:30 a.m., so customers can catch runs of bluefish and striped bass, returns to dock shortly after 2 p.m.
The diesel fuel he uses has jumped 50 percent in price, and he says he knows why.
"They are not just building buildings over in China, they are building whole cities, and because of that they need diesel to run their trucks, trains and all of their heavy equipment," he says.
To save fuel, Brackett doesn't open up the Queen Mary's engines as much as he used to. But there's another bigger problem.
"What affects me is when people are coming from Allentown, Pa., and they have to drive 120 miles," he says. "If they get 20 miles to a gallon, that means it costs them $8 more than last year to make the trip. The disposable income is not there."
2:20 P.M.: CLOSING OUT THE DAYOnly 10 minutes remain until the close of regular trading at Nymex.
Bolling has only made three trades so far, a far cry from his days in the trading pit, when he would have made more than 200 transactions by this time. These days, it's the big banks and hedge funds who move the price of energy.
"The trends are much bigger and deeper than they were before," he says.
5:00 P.M.: A RUN ON SMART CARSRay Catena's Edison dealership is packed with Mercedes, Porsches and Aston Martins. But his Smart showroom is the busiest area on the lot.
The dealership has sold more than 250 of the Mercedes-Benz-made Smart cars -- which start at around $11,600 -- since they first started arriving Jan. 18. On this day, he's got 10 left. They probably won't last the week, sales manager Leigh Farrell says.
Brittany Dippold, meanwhile, is one very happy 17-year-old.
Her father, Anthony Dippold, is closing the deal on a Smart car convertible for her.
Why the Smart car?
"Four dollars a gallon," he says. "And this car gets around 40 miles to the gallon."
The car was actually Brittany's choice. After shopping and researching, she was pushing for a used Audi TT. But when she saw the Smart car and its three-cylinder, 70 horsepower engine, she simply "fell in love with it," her father says.
The deal clincher: she's going to be paying for the gas.
POSTSCRIPTThe oil rally didn't stop Thursday.
The price of crude touched $142.99 a barrel Friday, up more than $8 in just 48 hours. Analysts' predictions of $150 -- which months ago seemed outlandish -- may be just days away.
Staff writers Sam Ali, George E. Jordan, Joseph R. Perone and Ian T. Shearn contributed to this report.
Monday, June 30, 2008
Over a barrel: A day that shows how the global business of oil hits home in NJ
Profit on Offshore Drillers
From thestreet.com 6/30/08
Editor's note: This is part III in a series on oil. Let me just say that this has been an interesting two weeks with this column.
First, I wrote about the emerging problem with the oil supply and potential fixes. I suggested that after talking to big ocean driller Transocean (RIG - Cramer's Take - Stockpickr) that we should begin the process to push Congress to lift the moratoria on Outer Continental Shelf (OCS) drilling.
After doing some painstaking due diligence, I found out that we may achieve oil independence in as little as a year, and as long as six years, depending on the location, depth and prior infrastructure.
Next, I took the position a step further. I contacted other drillers including another major offshore driller, Diamond Offshore (DO - Cramer's Take - Stockpickr). Officers there confirmed the information I had developed during my discussions with Transocean. I have gone on record saying that I believe that these time frames are realistic and attainable.
Since those two columns ran, I have been bombarded with email requesting more information.
Last week, I had the good fortune to interview both Sarah Palin, the Republican governor of Alaska and Ed Rendell, the Democratic governor of Pennsylvania. Both are very important in the world of oil.
Palin came out very much in favor of drilling the OCS and her state's own Arctic National Wildlife Refuge (ANWR) territory in an effort to reduce our dependence on foreign oil. She agreed that the oil reserves of ANWR are in the 10 billion-barrel range. She recognizes the need for that oil if we are ever going to reduce our reliance on foreign producers.....
Rest of Article
Friday, June 27, 2008
Thursday, June 26, 2008
Wednesday, June 25, 2008
How to Solve the Oil Crisis
From thestreet.com 6/25/08
Oil is $130-something per barrel, and gasoline is over $4 per gallon. I am paying more for everything from milk to electricity to airline tickets. FedEx(FDX - Cramer's Take - Stockpickr) and UPS(UPS - Cramer's Take - Stockpickr) aren't delivering ... earnings. Retail stocks are getting hit because people aren't buying stuff with gas at $4.
And Starbucks cannot sell a $4 latte for the same reason. This is what happens when the world's most ravenous (for oil) country has no clearly defined energy policy. These are just a few of the results of a lack of national awareness of the problem and the potential solutions.
Barron's pointed out that the average U.S. consumer uses 25 barrels of oil per year. In China, that number is two barrels and in India it's less than a single barrel. The perception is that the growth in oil demand in those emerging countries will pick up and they will use more and more oil. True, we will need more oil.
What's the problem?
The world has been running out of oil?
The world has run out of "easy oil"?
The world is going to run out of accessible oil?
False, false and false.
We have billions upon billions of barrels and gas equivalents of oil available to the world. In fact, we have billions upon billions available to us in the U.S. We have an estimated 18 billion barrels off the Outer Continental Shelf.
Certain people in Congress would have us believe that those barrels are 10-plus years away from our refiners' cracking towers. That's just not true. I told you about the conversations I had with Transocean(RIG - Cramer's Take - Stockpickr) officers and their time frames for that oil in the last column. I have since confirmed that opinion with other big-time ocean drillers, and the picture remains as clear as it was last week.....
Rest of Article
Monday, June 23, 2008
Emerging Solutions for the Oil Crisis
From thestreet.com
When the market is acting crazy and I need to clear my head, I get out and run or power walk. After 4-6 miles, my mind usually becomes much clearer and I can focus on the issue, trade, or whatever.
I'm in LA right now, trying to make sense of the oil market. I have done two 10 mile jaunts on back-to-back days. When I left home last Thursday, crude oil had just dropped $4.75 on word that China had raised fuel prices (by reducing subsidies) to most drivers.
Speaking on TV last week, I had suggested that we should lift the drilling moratorium in the Alaska National Wildlife refuge (ANWR) and the Outer Continental Shelf (OCS) off of the off the U.S. coast. Noting these potentially huge reserves, the pension funds, hedgies and other speculative interests might bail on a maturing bull run in oil. Selling on top of selling might break the bull market's back and send prices south for now.
A Congressman followed my segment and suggested that drilling wouldn't help for 10 years or more. I know this is absolutely untrue, so I called Transocean (RIG - Cramer's Take - Stockpickr), the biggest driller in the world. An officer of the company told me that depending on the location of the drilling, oil could be realized in as little as a year.
Ultra-deepwater fields might produce in 3-5 years. For the most remote locations, without any prior infrastructure support, that barrel may require a 4-6 year window. I suggested 8 years and he said that he could not envision a situation where it would require more than 6 years to bring a barrel out of the ocean floor. .........
Saturday, June 21, 2008
Thursday, June 19, 2008
Wednesday, June 18, 2008
Charge Ahead With Mastercard
From thestreet.com
"Fill, Cash, Regular." Those words are becoming more difficult for me to say to the gas station attendant for a fill-up. I would gladly pump my own gas to save a few cents per gallon of liquid gold, but the law requires someone else to do it for me in New Jersey.
After spending the first few years of my post-baseball career working for Mobil Oil as a marketing representative, I learned that the added octane of premium blends is not worth the higher price. So I use "regular" unleaded. My only exception: when premium gas (not mid-grade) is within five or six cents per gallon higher than regular unleaded.
I just hate the fact that I leased a Range Rover Sport that guzzles gas the way my nine year-old swigs Gatorade. I am in the service station at least once a week. At a combined 10 miles per gallon, a 20-gallon tank, a 20-mile commute to Manhattan and a weekend at the beach, I spend entirely too much time at the gas station. So I'd rather "Fill" rather than come back sooner than necessary.
Now, the interesting part: "Cash." Who carries this kind of cash around anymore? I am absolutely bewildered when the attendant asks me for payment. It's like 80 bucks! "Are you kidding?" I never, ever used a credit card for gas. I always paid cash. Not anymore. I now use the old plastic.
We have been used to dropping $20 or $30 in the gas station, but now we are approaching a C-Note for gas- just wild! That makes the decision to use plastic easier.....
Rest Of Article
Tuesday, June 17, 2008
Monday, June 16, 2008
After Lehman Call, Bet on GS, JPM
From thestreet.com 6/16/08
Always split aces and eights when playing blackjack.
You always split aces because you are getting two hands that theoretically can hit 21 on the next card. You split them into two strong hands, and therefore, you get more money on the table in a strong position. Besides, leaving two aces gives you a two or twelve, neither of which is a good start to a hand. If given the chance, wouldn't you double your bet knowing that your first card was going to be an ace? Sure you would and should.
Now for the eights. You always split eights for a couple of reasons. First of all, sitting with a sixteen against any card the dealer is showing is bad. It gets worse if the dealer has a 9, 10, 11 showing. You will lose about $53 for every hundred you bet by playing a hand of 16. When you split 16 into two hands of eight, you decrease that value of the combined loss to around $43 per hundred dollars bet, even though you put more money on the table. Where splitting the aces is an attempt to win more, splitting eights is an attempt to lose less. It is actually a defensive bet. If you plan to play blackjack, play by "the book," or the way you have the best odds of walking away a winner.
By the time this column is published, Lehman(LEH - Cramer's Take - Stockpickr) will have reported its quarterly numbers. We are all expecting that massive $2.8 billion loss. They were kind enough to surprise us with that last week instead of surprising us with it Monday. Let's hope Mr. Fuld and company have no more tricks up those very long, loose sleeves............
Rest Of Article
Friday, June 13, 2008
Buy WMT, BJ and COST in Bulk
From thestreet.com
It was my wife's birthday, and we were going to celebrate by going out to a nice dinner. We had planned on a steakhouse we both love. Then I got word that my pal Cody Willard was going to have to miss the taping of his show Happy Hour.
Being that I have spent my share of time in various bars and restaurants, I seem to be the logical choice to sit in for him. I have co-hosted that show with the lovely and very talented Rebecca Gomez in the past but never did it rock like it did Wednesday night.
We had an amazing guest list including Billionaire real estate developer and media mogul Mort Zuckerman, John McCain's senior economic advisor Douglas Holtz-Eakin and last but not least Geraldo talking about the "scumbag" hedge fund manager who may have faked his own suicide to avoid a 20-year prison term. As a host, I couldn't ask for more.
There was a common theme that ran through the show: the sense that the economy is not yet ready to make a solid turn for the better. Mort Zuckerman told me that he thought housing and house prices are not yet ready to firm. He would not put a time frame on when the housing sector may rebound even though I pressed him on it three times. He is that good.
Mort also postulated that the U.S. consumer will feel the pinch or sting or bloodbath of weaker home values as he tries to borrow against a sliding equity balance in their home. That may signal tough times ahead for the consumer, who, as of today, was showing no signs of relenting yet. I heard it on the radio again Thursday: "the U.S. consumer refuses to die." ...................
Rest of Article
Wednesday, June 11, 2008
Ag Stocks Mirror Oils
from thestreet.com 6/11/08
What a lifetime as a trader does to one's mind!
Tomatoes are tainted, what does that mean? There must be a trade there somewhere. What do people replace the tomato with? Onions perhaps? Is there a way to trade from the long onion position? Or maybe I should be buying Heinz(HNZ - Cramer's Take - Stockpickr). Ketchup is made from tomatoes, but I just can't see me ordering a turkey on rye with lettuce and ketchup. If you spend enough time trading, you realize that regular events in daily life somehow translate into trades.
Two and a half years ago I was in the mall with my son Eric Chase. It was February so the big holiday sales push had faded into memory. Eric grabbed me and dragged me into GameStop(GME - Cramer's Take - Stockpickr). He had to try out the newest games and see if there was a used game trade for himself.
What I saw was a trade. There were three lines filled with people buying games -- both new and used. I couldn't wait to get into GameStop stock. I went to the air with the call. The others looked at me like I was crazy. I told the story about how my 7-year old turned me onto a great looking retail operation. So, as soon as my restrictions were lifted, I bought GME.
To make a long story less long, two weeks later, GME guided positively for the upcoming first quarter and full-year. That stock went to $25 from $18 in a shot -- 38% in a couple of stress free weeks.....
Rest of Article
Monday, June 9, 2008
Head for the Exits on Integrated Oil
From thestreet.com
Head for the Exits on Integrated Oil
Everyone around me is asking one question about the oil shock we experienced last week: "What did I miss?"
Let me walk you through the week. The crude oil market was continuing a path lower for much of the time. For the first time in literally months, it was better to sell oil rallies than to buy the dips. That translates into a good environment for the shorts -- and I was one of them. I was very comfortable Monday and Tuesday. I was short crude oil on several platforms, and I was short futures and long UltraShort Oil & Gas ProShares(DUG - Cramer's Take - Stockpickr), the inverse of the oil price.
Nothing goes straight up or down, but when I sell a small "pawn" (short) as a test of the market's strength and it comes back intact, I get the notion that the short is the right position. And it was on Wednesday.
Then Thursday happened. It was a historic day. After trading on both sides of unchanged in the morning, the European Central Bank President Jean Claude Trichet threw everyone for a loss. He did what most expected and announced a "no change" to ECB interest rate policy. Then he did the unimaginable -- he opined that the next move for the ECB would likely be to raise their already lofty interest rates.
Most in the trading world thought, and rightly so, that the ECB should be looking to lower rates in order to stimulate a recessing Euro zone -- ask France, Germany and England how they feel about a rate hike anytime soon.....
Rest of Article
Friday, June 6, 2008
Wednesday, June 4, 2008
Ask Eric
* I'm setting up an interview with Eric and am willing to work in any intelligent questions Fans may have.
Email Questions to: Questions For Eric
Going UUP for a Currency Trade 6/4/08
From thestreet.com
I spent the first 20 years of my life playing baseball. I started with Little League and Babe Ruth Baseball, then High School ball and College as well. My career culminated with a two-year stint in the Pittsburgh Pirates organization.
After tearing my rotator cuff, I was tossed into the real world with a thud. I spent the next 20 years trading on the floor of the New York Mercantile Exchange(NMX - Cramer's Take - Stockpickr). That culminated with a high-stress book and about five years on their Board of Directors.
Then I was asked to do a TV show for traders at the end of the trading session. We were going to sit around and have a cup of coffee and talk about what just went down. I got the bug and decided to give TV a try. Career re-invention number three!
That show we developed became "Fast Money" on CNBC. There was only one problem: we taped that show from 6:30 PM through 8:00 PM on most nights. I would get home at around 9:00 PM every night. My seven year-old son would wait up for me until I got home. He would have tears in his eyes every night. I was torn.
I loved the ego gratification that came with being on television. Being recognized in the mall or at a restaurant was cool. But, it was crushing my son. We are so close, I had to make a decisions and I did. I promised him that if the show stayed at that hour, I would leave. I try never to break a promise. I left the show..........
Rest Of Article
Tuesday, June 3, 2008
Monday, June 2, 2008
Covanta Turns Garbage Into Gold 6/2
from thestreet.com
It is Sunday as I write this, contemplating everything from my deck with a 24-ounce coffee and my dog bugging me to throw him a ball. He really is cool, playful and not too pushy. He seems to know when to play and when to chill-out and watch for people, surfers, dogs or garbage men. That's right, he goes ballistic when a garbage truck pulls up and hauls off the trash.
About two years ago I pitched an idea for a "Dirty Trade" segment on "Fast Money." I was watching a company perform pretty well and found its business wildly fascinating. The story had Bolling written all over it. It had an energy tie-in. It had dirt. It had a commodity-like feel, and best of all, it was making money!
On a Friday afternoon in July, with the temperature running above 90 degrees for the last eight or nine days, I showed up at Covanta Industries(CVA - Cramer's Take - Stockpickr) in the heart of industrial Newark, N.J. The boss met us and gave us a tour of the facility. I was given a peek at the massive combustion chamber, which is basically an incinerator that burns trash at around 2000 degrees.
So I was now very interested in this company and needed to see the whole process, from start to finish. We went down a few floors to the trash holding area. It felt like a huge, stinky, smelly, slobbering pig was slapped onto my face......
Rest of Article
