STOP TRADING

Check it out. Leading the oil stocks lately, the refiners. This is a chart of VLO and if you check a chart of FTO another big refiner, you will see that they both bottomed around mid February and have been climbing steadily since.

Our guy, the King of Stop Trading had this to say on his realmoney site on February 16, 2006:


"Ah, I see, here we go: the hobgoblin of consistency. Perhaps I changed my tune because four weeks ago, Valero was making a ton of money refining gasoline, and in the last four weeks, refining margins have completely and totally collapsed.

I mean like completely and totally. Like just disappeared. And you wondered why for many years refiners had the lowest multiples of any business except steel. Margins can collapse in a heartbeat. I am sure Valero is losing money on every gallon of oil it sells in California.
In these situations, earnings that might have been $10 go to $4. A stock that sold at 5 times earnings now sells at 12 times earnings. All that garbage about the refinery shortage and "no new refinery in 27 years" doesn't buy you a warm bucket of spit.

Of course, refiners are different from integrateds, which are different from drillers, which are different from drilling equipment companies. But the group still will trade monolithically off news in those, so accept the fact that the rough sledding will continue, particularly the more revenue they get from refining as a percentage of the whole.

Oh, and emailers: It's a tough game. Get used to it. I am not a joker, it's just that some businesses are funny in their own ways, especially refining."

Both FTO and VLO bottomed in mid February. One could not have gotten this more wrong. Trust me, he is a big time joker.