Alaron Energy Comment

CHICAGO - Jul 14/08 - SNS -- Following is the energy futures comment from Alaron Trading Corp.

Indy Mac aren't you coming back? Indy Mac is now Indy Mac Federal bank after the Feds stepped in late Friday to take over the failed bank that was put under after a run on the bank. The only thing we have to fear is fear itself or more bank failures but when is comes to oil, it does not quite know what to fear.

Should we fear bank failures or the Fannie and Freddie Bailouts or should we be more fearful that supply is running out. Today  will be the financials that take center stage as oil is being used as a currency of last resort as fears swirl around the dollar and the stability of the US banking system. Once again over the weekend the financial markets have changed forever. The US treasury has had  to step back in for  Fannie May and Freddie Mac because they are too big to fail or is it they are failing because they are too big.

Oil surged to  new all time highs on Friday on fears of Nigeria and fears about Iran and fears about Fannie and Freddie. There was a lot to be fearful of. Treasury Secretary Hank Paulson said in a statement that Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies. Their support for the housing market is particularly important as we work through the current housing correction.

GSE (Government Sponsored Entities) debt is held by financial institutions around the world. Its continued strength is important to maintaining confidence and stability in our financial system and our financial markets, therefore we must take steps to address the current situation as we move to a stronger regulatory structure. In recent days, I have consulted with the Federal Reserve, OFHEO, and the SEC, Congressional leaders of both parties and with the two companies to develop a three-part plan for immediate action. The President has asked me to work with Congress to act on this plan immediately.  

First, as a liquidity backstop, the plan includes a temporary increase in the line of credit the GSEs have with treasury. Treasury would determine the terms and conditions for accessing the line of credit and the amount to be drawn.

Second, to ensure the GSE's have access to sufficient capital to continue to serve their mission, the plan includes temporary authority for the  Treasury to purchase equity in either of the two GSEs if needed. Use of either the line of credit or the equity investment would carry terms and conditions necessary to protect the taxpayer.

Third, to protect the financial from systemic risk going forward, the plan strengthens the GSE regulatory reform legislation currently moving through Congress by giving the Federal Reserve a consultative role in the new GSE regulator's process for setting capital requirements and other prudential standards. The statement seemed to calm the markets yet report that a five day oil strike in Brazil may keep the market on edge.

Don't you be on edge! Sign up for the Phil Flynn Energy blast. If you do you can also get signed up for your free trial of alaronenergies.com also call me to open your trading account at 800-935-6487 and ask for Phil Flynn!. And see me on the new and exciting Fox Business News.

We're long  August crude  from apprx  14000 -  stop 13800.

Stopped on short  August RBOB  from apprx 35500  at apprx 36000.  Sell August RBOB at 37500 -  stop 37800.

Buy August heating oil at 40000 - stop 39700.

Buy August natural gas at 1140 - stop 1120.

Have a GREAT day!      

Phil Flynn

Alaron Research Team

800.563.9510

pflynn@alaron.com

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