Wednesday, May 27, 2020

We're Not Out Of The Woods Yet -- May 27, 2020

API weekly crude oil inventory data:
  • expectations: a draw of 2.5 million bbls
  • actual: a whopping inventory build of almost 9 million bbls
  • EIA data will be out tomorrow
Chevron announces job cuts of up to 15% -- Bloomberg;

Russia plans to start easing oil production cuts after the end of June --Bloomberg;
 
Europe's gas glut could hit global LNG market hard -- op-ed over at oilprice.com;

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On The Other Hand

Crude oil, Morgan Stanley, link here:
  • global demand to get back to 97 million bopd by the end of the year
  • forecasts $40 oil by the end of the year
  • would be good for US shale; won't do a thing for Saudi;
Ukraine okays US LNG, Reuters, link here.

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Dam Failure in Michigan

Link here.

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Futures

Despite all that bad news (and maybe a little bit of good news), major market indices are surprisingly good.

At the moment, 9:56 p.m. CT, May 27, 2020:
  • Dow: up almost 200 points
  • NASDAQ: up 15 points
  • S&P: up 11 points
All this after several great days for the market. 

Disclaimer: this is not an investment site.  Do not make any investment, financial, career, travel, job, or relationship decisions based on what you read here or think you may have read here. 

Sweden? We Have A (Wuhan Flu) Problem -- May 27, 2020

This is really quite fascinating.

New deaths, yesterday, link here.
  • #10 Sweden, 95 new deaths overnight; of the 215 countries tracked worldwide, Sweden comes in at #10; compare the number of new deaths in Sweden (95) with the number of new deaths in Spain (1)
  • #60 Denmark, two new deaths, yesterday;
  • #68 Spain, one new death -- compare that with Sweden, with 95 new deaths, yesterday
  • #72 Finland, one new death;
  • #91 Norway, NO new deaths; compared to 95 new deaths in same time period;
Total deaths:
  • with 4,220 total deaths, Sweden ranks #16 in the world
  • Norway: #52, with 235 total deaths
  • 4,220 / 235 = 18-fold more deaths in Sweden than Norway;
St Greta? Crickets.

On a per capita basis, one wonders if Sweden is now starting to look like Brazil? Just asking?

Three New Permits -- May 27, 2020

Updates

Later, 7:48 p.m. CT: I accidentally "rejected" a comment. Once rejected, it's impossible to retrieve and post it from the individual who sent it. Fortunately the comment is not lost, and I have re-posted it under my name in the comments.

Original Post 
Corona virus (this is all difficult for millennial journalists to report and/or comprehend, see below*):
  • headlines today: more cases. Well, of course, there are more cases. Testing is increasing across the nation
    • what will be interesting is if the number of new cases or the rate of increase actually decreases despite increased testing -- now that would get my attention
    • headlines like that suggest to me that journalists misunderstood the concept of or the reason for "flattening the curve"
  • new wrinkle I've not see anyone discuss: best commonly used metric, although it, too, has significant problems: deaths per capita (deaths per million population)
    • the denominator was fixed from the beginning; e.g., statistics for Michigan assumed a population of 10 million for the state of Michigan; that remains fixed. On the day Michigan recorded its first corona-virus-related death, the death rate was 1 / 10 million or 0.1 per million
    • now, however, every new death is added to previous total but denominator (population of Michigan does not change)
    • so, if Michigan now has 550 total deaths, the death rate will be 500 / 10 million
  • when the death rate of Michigan hits 1,000 (as I'm sure it will, then the death rate will be 1,000 / 10 million (or double what it is now, which, of course, is inaccurate)
  • I could be wrong on this; it seems this would be an obvious error that needs to be managed but right now, that's how I'm reading it
* It is my impression that math is difficult for millennial journalists: this one video provides a great example: a millennial generation that is mathematically challenged; the interviewee is a member of the NYT editorial board, in other words, she represents the "cream of the crop":
Re-posting: by the way, Brian Williams could claim he knew this all along, simply stringing his guest out -- he, the straight man; she, the comedienne.

Really Bad Math, Brian Williams.
I never get tired of watching this 
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Back to the Bakken

Active rigs:

$32.215/27/202005/27/201905/27/201805/27/201705/27/2016
Active Rigs1165655029

Three new permits, #37599 - 37601, inclusive --
  • Operator: Whiting
  • Field: Sanish (Mountrail)
  • Comments: 
    • Whiting has permits for three Littlefield  wells in lot 1 section 2-152-92, Sanish oil field, all 300' FEL and all about 360' FNL
    • it appears these wells will run in a southeasterly direction, "among" the the very good Whiting Lacey wells;
That was all.

Notes From All Over -- The Late Afternoon Edition -- May 27, 2020

First things first: SpaceX scheduled to lift off at 4:33 p.m. ET. First manned launch from Cape Canaveral in about a decade (?): private enterprise; tourism. Live on most cable news networks, I would suppose. I'm watching it on Fox, Neil Cavuto. Yeah, the guy that warned President Trump that hydroxychloroquine would kill the president. 4:19 p.m. ET: mission "scrubbed." Lightning and weather in the immediate area.

Cuomo to White House: "we" need more money. I wonder if the president asked about Amazon?

Boeing: lays off almost 7,000 employees; on track to lay off 16,000 in total.

When is the panic over? When the market says it's over.


Reminder: tonight, the fourth night in a row of NASCAR! Whoo-hoo.

May 27, 2020:
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Wuhan Flu: Michigan

Population: 10 million.

Corona virus stats here.

As of May 26, 2020:
  • total deaths: 5,334
  • population: 10 million
  • if no new deaths, case fatality rate = 5,334 / 10 million = 0.05%.
At the moment, the CDC is suggesting the case fatality rate for Wuhan flu should come in at about 0.3% to 0.5%.
  • 0.3% of 10 million = 30,000 total deaths
  • 0.5% of 10 million = 50,000 total deaths
Note: I often make simple arithmetic mistakes.

If this ciphering is correct, the CDC has a huge problem on its hands.

50,000 deaths due to season flu in the US / 350 million people in the US = 50,000 / 350,000,000 = 0.01%. Link here.

Using Duct Tape To Meet "Code" Requiements For Sophia's Polly Pocket Structures -- May 27, 2020

Wow, I love this "technology."

Per a reader's suggestion:


EVs -- The Harsh Reality -- May 27, 2020

If you have time to read only one report on EVs today, the KPMG report would be the one. The report will download on your desktop as a pdf, but it might be hard to find. In the last paragraph at this link the pdf link is buried:
In our paper we discuss how automakers can adjust EV plans to conform to the near-term reality of the market.
We do not dispute that a long-term shift to electric drivetrains is under way.
Like other industry analysts, we expect that barriers to EV sales could fall away in the 2030s.
To prepare, automakers of all kinds need to build the capabilities now to design, manufacture and sell EVs.
But if the cost of learning includes launching dozens of models that can never break even, the benefits of EVs may be pushed farther into the future.
First, many companies won’t take that risk and might rethink EVs altogether. And those that push on now and suffer the financial consequences may no longer be in shape to contribute to the advancement of EVs and compete in the mass market when it does materialize. Only by finding a profitable route into the EV market now can automakers make their contribution to mitigating climate change in 2050.
Wow, reading that closely and reading in between the lines suggests that the Chinese auto manufacturers who generally don't respect patents (at least that's the worldview of many) could do very, very well by simply waiting and stealing the technology in 2030. 

The URL for this link: https://advisory.kpmg.us/articles/2020/ev-plan-b.html -- will download as a pdf.

Re-posting.

KPMG warned against an EV glut in early 2020 and that was before the corona virus pandemic. One can get to the full KPMG report. The report has a copyright date of 2020, but the exact date of publication was not provided, as far as I can tell. Because they provide 2019 data and do not mention the corona virus, it appears this report was released near the end of January, 2020.

It's a great report, and recommended reading. In fact, I will re-post the links in a stand-alone post to make it easier to access.

This caught my attention, page 6 of 14, exhibit 2, from the report:
Based on our analysis of battery, fuel, and other costs, we conclude that ICE vehicles will make more economic sense than EVs for personal use for many years to come.
This assumes no unforeseen breakthrough that dramatically and suddenly reduces battery costs and no radical changes in U.S. policy to switch consumers to electric cars.
As a result, we anticipate that EVs will remain a small factor in U.S. personal-use auto sales into the next decade, if not longer.
We estimate that in 2030 total EV sales will be 1.1 million to 1.8 million or about 7 to 12 percent of the market for personal-use vehicles.
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Putting All Those Amazon Boxes To Good Use

Sophia and I are having a blast using old Amazon boxes to make structures for her "Polly Pocket" dolls. The first thing we made was a house with attached garage.

She drew the plan on the box and then I cut out the doors, windows, garage doors, etc. We used screws, bolts and nuts, and hooks (for hanging pictures) as door knobs, etc, for the structures.

Sophia painted the structures and used other media to decorate the "buildings."

Here is an example of the Polly Pocket VW van pulling out of the garage. It should be noted that the VW van is powered by a conventional internal combustion engine.


Based on the number of Amazon boxes stacking up around her house, we should be able to re-construct a suburb of Dallas, TX, or if we really want to go wild, a model of NYC.

By the way, the white strip of paper down the side of the garage in the photo above: a temporary stairway to the roof where Polly Pocket can sunbathe, practicing social distancing, of course.

EVs -- May 27, 2020

The big question is how long "mainstream" automobile manufacturers will be able to "hide" their EV losses in the footnotes of their quarterly and annual reports. My hunch: there are some tough questions being asked in the boardrooms of automobile manufacturers around the world.

First, costly EVs confront a harsh corona virus reality --
At a factory near Germany’s border with the Czech Republic, Volkswagen AG’s ambitious strategy to become the global leader in electric vehicles is coming up against the reality of manufacturing during a pandemic.

The Zwickau assembly lines, which produce the soon-to-be released ID.3 electric hatchback, are the centerpiece of a plan by the world’s biggest automaker to spend 33 billion euros ($36 billion) by 2024 developing and building EVs. At the site, where an East German automaker built the diminutive Trabant during the Cold War, VW eventually wants to churn out as many as 330,000 cars annually. That would make Zwickau one of Europe’s largest electric-car factories—and help the company overtake Tesla Inc. in selling next-generation vehicles.

But Covid-19 is putting VW’s and other automakers’ electric ambitions at risk. The economic crisis triggered by the pandemic has pushed the auto industry, among others, to near-collapse, emptying showrooms and shutting factories. As job losses mount, big-ticket purchases are firmly out of reach—in the U.S., where Tesla is cutting prices, more than 36 million people have filed for unemployment since mid-March. Also, the plunge in oil prices is making gasoline-powered vehicles more attractive, and some cash-strapped governments are less able to offer subsidies to promote new technologies.
Second, Tesla cuts prices across their entire lineup. Model 3 now starts at $37,990. We must be getting close to break-even costs for Tesla. Graphic:

The global pandemic and the lockdowns put in place to slow down the propagation of the coronavirus have ravaged the economy of most countries and the auto industry has been particularly affected.
In response, Tesla, who has rarely suffered from demand problems, has decided to reduce prices across its entire lineup of electric vehicles.
For Model 3, its cheapest and most popular car, it results in a $2,000 price cut across all powertrain options.
KPMG warned against an EV glut in early 2020 and that was before the corona virus pandemic. One can get to the full KPMG report. The report has a copyright date of 2020, but the exact date of publication was not provided, as far as I can tell. Because they provide 2019 data and do not mention the corona virus, it appears this report was released near the end of January, 2020.

It's a great report, and recommended reading. In fact, I will re-post the links in a stand-alone post to make it easier to access.

This caught my attention, page 6 of 14, exhibit 2, from the report:
Based on our analysis of battery, fuel, and other costs, we conclude that ICE vehicles will make more economic sense than EVs for personal use for many years to come.
This assumes no unforeseen breakthrough that dramatically and suddenly reduces battery costs and no radical changes in U.S. policy to switch consumers to electric cars.
As a result, we anticipate that EVs will remain a small factor in U.S. personal-use auto sales into the next decade, if not longer.
We estimate that in 2030 total EV sales will be 1.1 million to 1.8 million or about 7 to 12 percent of the market for personal-use vehicles.

No Bakken Wells Coming Off Confidential List Today Were Reported As Completed -- May 27, 2020

Scandinavia and Wuhan flu, for those keeping track, new deaths/new cases "yesterday":
#10 Sweden: 96 / 597 -- looks like this country never flattened the curve;  may be experiencing second wave;
#49 Finland: 4 / 29
#91 Denmark: 0 / 41
#95 Norway: 0 / 19
Norway coronavirus:
  • total number of deaths: 235 as of yesterday
Sweden coronavirus:
  • number of new deaths, yesterday: 96

Look at those numbers again. Staggering (note: number of cases is about the worse way to measure the crisis, but it's a favorite of mainstream media analysts.
  • Sweden reported almost 600 new cases yesterday.
  • Norway, meanwhile, reported less than twenty new cases yesterday. 
  • in fact, Sweden reported almost 5x as many new deaths (96) as number of new cases reported by Norway (19) -- is that possible; may need to be fact-checked by The Washington Post;
  • To put Sweden's numbers in perspective, the following US states reported fewer new cases yesterday than Sweden:
    • Georgia (583)
    • Ohio (540)
    • Maryland (535)
    • Florida (509)
    • PA (494)
    • CT (430)
    • MA (422)
    • NJ (413)
    • NC (398)
    • Louisiana, a "hot zone" (259)
    • Michigan (223)
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Back to Energy

OPEC Basket: $28.06
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Back to the Bakken

Active rigs:


$33.895/27/202005/27/201905/27/201805/27/201705/27/2016
Active Rigs1465655029

Four wells coming off confidential list today -- Wednesday, May 27, 2020: 89 for the month; 139 for the quarter, 366 for the year:
  • 36961, drl/drl, WPX, Meadowlark 6-34HQL, Heart Butte, t--; cum --;
  • 36472, drl/drl, Slawson, Periscope Federal 4-10-7TFH, Big Bend, t--; cum --;
  • 36210, drl/drl, XTO, FBIR Baker 34X-25C, Heart Butte, t--; cum --;
  • 33841, drl/drl, Crescent Point Energy, CPEUSC Tami 5-8-5-157N-99W TFH, Lone Tree Lake, t--; cum --;
RBN Energy: US liquefaction capacity growing, even as utilization declines.
Progress for the second wave of U.S. LNG export projects, which already had begun slowing in the latter half of 2019, has come to a near standstill this year, with several developers delaying final investment decisions (FIDs). The economics for U.S. LNG exports have evaporated in recent weeks, and for the first time in the four years or so since the Lower 48 began exporting LNG, cargo cancellations have become a regular part of the U.S. gas market’s vernacular. International prices are signaling that oversupply conditions will linger for a while, likely well after COVID’s impacts on demand ease. Nevertheless, projects that are already under construction are pushing forward, including the last of the first-wave expansions and two facilities from the second wave of proposed projects. There’s also one more second-wave development that could take FID this year.

It wasn’t long ago that rampant growth in U.S. LNG exports this decade was practically a foregone conclusion. With the first wave of U.S. liquefaction capacity additions either operational or well on their way there, the last couple of years brought a cascade of announcements for still more U.S. LNG export capacity — the so-called second wave. This included nearly two dozen projects totaling 235 MMtpa (~35 Bcf/d) of liquefaction capacity, primarily along the Gulf Coast. Not all of those were expected to make it across the finish line, of course, but all indications were that several would materialize in this decade and most of those by mid-decade even. At this time last year, industry warnings of a global LNG oversupply in the mid-term were beginning to rise, but a frenzy of regulatory approvals and commercial activity suggested a slew of FIDs were imminent and that 2019 would be a watershed year for many of these second-wave projects. It’s safe to say that fervor (and the capital behind it) is dead. It began to fizzle out in the latter half of 2019 as a global gas supply glut worsened — largely a result of project completions and growing exports from the U.S. and Australia, though other factors like the U.S.-China trade war and high European storage levels exacerbated it as well. And any remaining optimism has since been squashed by the COVID crisis, which crushed global demand after lockdowns began in February 2020, and the oil price collapse, which has made oil-indexed LNG prices overseas much more competitive against U.S. LNG, almost all of which is priced off the Henry Hub gas benchmark price.

Notes From All Over, Early Morning Edition -- May 27, 2020

This is really quite amazing. When the Saudis tried this in 2014, it took them two years to finally throw in the towel. The current debacle is not over, and it could still deteriorate further, but the tea leaves suggest Saudi (and Russia) flinched less than four months into this ill-thought-out attempt to destroy US shale. From Rigzone: "The market has escaped a collapse."

Not all will agree -- especially several contributors over at oilprice but it certainly feels that "we've" been through the worst. But as noted, the valkyrie Brünnhilde has not yet sung.

And get this, who would have thought: the first recorded use of the phrase first appeared in ... drum roll .. The Dallas Morning News, March 10, 1976. LOL.

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Natural Gas

It is literally impossible to keep up. Moments after posting the long, rambling blog on natural gas, this headline from Rigzone: FERC greenlights Alaskk LNG project. This is a huge deal. Data points:
  • the project
    • North Slope, Alaska
    • Alaska LNG Project
    • AGDC receives FERC authorization to proceed; to construct and operate the project
    • Alaska Gasline Development Corp
    • Nikiski, an industrial town on Alaska's Kenai Peninsula
    • 20 million metric tons per annum (MMTPA) for export
    • 807-mile-long, 42-inch-diameter pipeline
    • 3.9 billion cubic feet per day (650,000 boepd?)
    • a gas treatment plant in Prudhoe Bay
    • two additional gas pipelines
  • project cost not provided at the Rigzone article, but here it is, at the project's homepage:
    • projected to cost between $45 billion and $65 billion 
    • joint venture, partners:
      ExxonMobil
    • ConocoPhilliops
    • BP
    • TransCanada
    • the state of Alaska
    • the project will "earn massive revenues for the state"
    • 9,000 to 15,000 construction jobs
    • 1,000 permanent employees
    • it looks like projected completion date is about 2026
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Futures

I've been following the futures all night, starting at 6:00 p.m. ET. Initially, Dow futures were down 68 points, but that quickly changed, moved into the green, and through the night all three major indices continued to climb.

A few hours before the open:
  • S&P: up 23 points; up about 3/4ths of a percnet
  • NASDAQ: up 72 points; up about 3/4th of a percent
  • Dow: up another staggering 230 points; up about 0.95
Disclaimer: this is not an investment site.  Do not make any investment, financial, career, travel, job, or relationship decisions based on what you read here or think you may have read here.

For those folks who want to invest in the market, the next round of "Nancy Pelosi" stimulus checks can't arrive soon enough. What a great country.

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AAPL

Investing headlines:
  • AAPL: offers attractive returns in a valuation-agnostic world, SeekingAlpha, yesterday
  • Hedge funds are betting on AAPL, Yahoo!Finance, three days ago
  • Will AAPL hit all-time highs soon? TheStreet, yesterday
  • The Gates Foundation bought half a million AAPL shares last quarter, 9to5Mac, yesterday
  • Apple stock tests alternative buy, joins fellow FAANG, Investor's Business Daily, yesterday
  • Is Apple stock a buy? Motley Fool, three days ago
  • AAPL: not too high, very reasonable, SeekingAlpha, four days ago
  • 68% of Buffett's portfolio in these four stocks, Motley Fool, yesterday;
Berkshire Hathaway, link here:
  • AAPL: $80 billion; more than 40% of Buffett's portfolio repeat: more than 40% of the total portfolio
  • BofA: $22 billion
  • Coca-Cola: $18 billion; Berkshire Hathaway now nets a yield based on its original cost basis of almost 51%;
  • AMEX: $14 billion
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The Shadows

A BBC documentary:


European Natural Gas: Dutch-German Flows At Record highs -- May 27, 2020

Updates

May 28, 2020: Natural gas prices cratering.
  • pricing:
    • HH: Henry Hub, US pricing
    • JKM: Asia pricing
    • TTF: Netherlands pricing 

Original Post
 
The blog concentrates on US shale crude oil. I've never understood natural gas very well, but, wow, there's a lot going on in natural gas, just as in the crude oil sector.

Without question, when the history is written, the tectonic changes in global energy that occurred in 2020 will certainly merit a chapter of its own.

Some odds and ends.

From ArgusMedia, data points:
  • natural gas flows from Holland to Germany are hitting monthly highs, due to:
    • German nuclear power plant maintenance; and, 
    • incredibly inexpensive natural gas
  • Dutch discount on natural gas is widest in a decade
  • last year, same month (May): the Netherlands was a net importer of natural gas from Germany
  • and get this: German imports increased even as Dutch power demand rose
  • see Groningen at this link; or search "Groningen" on the blog
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Groningen

Output at Europe's giant Groningen gas field plunges in December, 2019, dents Dutch stocks -- S&P Global Platts, January 15, 2020, link here.
  • Dutch gas stocks fall below 2018 levels; well below the European average
  • a production cap has been put in place to prevent earthquakes linked to gas extraction at Groningen and the Dutch government plans to phase out gas extraction at the field completely by mid-2022.
  • the rapid decline in production of gas from Groningen will continue to make the Netherlands increasingly dependent on LNG and pipeline gas imports from Norway and Russia
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For The Archives

This is old news but I was not interested in it at the time. But juxtaposed with this, posted a few days ago, makes it very topical:
Natural gas -- who would have thought? Oil plays with major impact on natural gas. This is very, very interesting. Anyone paying attention saw it coming but I haven't seen many analysts talking about it until now, but the monthly EIA dashboards foreshadowed it all.


At the linked article:
  • Shell is exiting natural gas play in Pennsylvania
    • Swepi LP, E&P arm of Netherlands-based Royal Dutch Shelll
    • selling its Pennsylvania assets to National Fuel gas Co for $541 million
    • 450,000 acres in northern PA, along with 350 wells
      • $541 million / 450,000 acres = $1200 / acre
    • in the dry gas area that does not produce ethane
    • Shell looking for ethane to turn into plastic at its petrochemical plan under construction in Potter, PA
      • the new Pennsylvania Petrochemicals Complex
      • 6,000 construction jobs; 600 permanent employees
  • and that connects the Bakken dot -- remember all those Bakken stories about ethane rejection?
    • Shell burst onto the Appalachian scene in 2020 with a blockbuster acquisition of Marshall-based East Resources
    • $4.7 billion deal
    • ushered in a wave of megadeals that brought the world's majors to Pennsylvania
  • many are now leaving
  • Chevron is looking to sell its Appalachian portfolio; 890,000 acres in the Marcellus and Utica 
  • Pennsylvania, West Virginia and Ohio
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Very Familiar?

Chris Stapleton's Tennessee Whiskey and Etta James' I'd Rather Go Blind.

Tennessee Whiskey, Chris Stapleton

From wiki:
American singer-songwriter Chris Stapleton recorded an R&B-influenced cover of the song for his debut studio album Traveller released in 2015.bStapleton first sang his version on the spur of the moment while the band were playing during a soundcheck before a show in Charlottesville, Virginia.
Now Etta James:

I'd Rather Go Blind, Etta James

I've posted the Etta James song numerous times on the blog. See Tell Mama / FAME, Muscle Shoals, Alabama at wiki.
I love the ease of finding / playing music with all the new technology (iTunes; Alexa, etc) but I do have to admit when listening to Etta James after midnight, I do miss the days of the vinyl LP. There's something to be said for a library of cardboard slips, with the great cover art, and the liner notes inside.
If I had had all the money in the world, I would have built a huge house with one huge room dedicated to hanging all those great album covers. For one list of the top 50 greatest album covers, link here. See if your favorite album cover made the list. Mine did not. Having said that, it would be impossible to limit the list to fifty.
One section of one wall would have been devoted to the Blondie album covers. I still have four of them stored away somewhere.
Long ago, in a faraway place, in a previous life, a wonderful woman, well before I ever heard of Etta James, but it's Etta James that transports me back to that time and place. Pretty amazing.

Professional Bull Riders Championship -- Sioux Falls, SD -- First Professional Sports League To Announce Event With Fans -- May 27, 2020

From Yahoo!Sports:
PBR will host the event from July 10-12, 2020, at the Sanford Denny Premier Center in Sioux Falls, South Dakota. The venue can hold up to 12,000 fans, however organizers will only sell about 4,200 tickets. They will also provide face coverings for all fans, space seats 4 to 6 feet apart and control the flow of people entering and exiting the arena, among other safety measures.
The reader who sent me this was pretty sure the first professional sports league to bring back fans since the beginning of the pandemic would be the rodeo. The reader was right. Amazing.