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Saturday, December 20, 2014

Charts $xom

Chanos has a short thesis XOM. The simple argument: so goes oil, xom will follow. (Given 90% of revenue is tied to oil.) Referencing the 2009 decline.

A 10yr look suggests Chanos is kinda right, at least directionally.

My issue is that the movements aren't well correlated. My bigger issue is any refence to an illiquid-nonfunctioning 2009 market, and apply it to a functioning, liquid market of today. This is the kind of market that appreciates yield, and may prevent exaggerated moves based on short-term market fluctuations of a commodity. We may not see similar patterns from 2009-2011. 

Also, in 2009 xom made a $41B play on US natural gas. Their Alaska LNG terminal should be active in 2015, allowing xom to play the great-arbitrage. (Think this is already happening in Papua New Guinea terminal.)  

If Russia keeps being assholes, oil will probably keep getting pressured. But if they play ball, global economies will demand more oil, recover (maybe towards 70) quicker and the thesis will be a muted one. 

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