Commentary -- Week 38: September 13, 2020 - September 19, 2020

Of all the top stories posted for this last week, I think this story is the biggest international story: 

Turkey gets unprecedented downgrade, crisis warning from Moody's. Key word: unprecedented. Link here.

There is nothing in the tea leaves to suggest that things will improve in Turkey in my investing lifetime. I now add Turkey to the shortlist of countries that will join Venezuela in the international race to the bottom:

• Venezuela
• Saudi Arabia
• Mexico
• Turkey
• Cuba

I've added Cuba to the list: after the death of Fidel Castro there was a window of opportunity to reverse direction but their leadership failed them.

Iran is not on that list because of most of their problems are secondarily a result of President Trump's policies. With a change in administration, Iran could yet reverse course. 

Greece? I have no idea how Greece is doing but the country has not been in the news much.

EVs: there seems to be a huge disconnect when it comes to EVs. 

There has now been another major poll/survey released suggesting that consumers are not all that enamored with EVs yet.

On the other hand, we see story after story of start-ups and legacy automobile manufacturers racing to get their "halo" EVs to market.

At the end of the day, the startups are looking at making money on regulatory credits; while, legacy automobile manufacturers are getting tired of paying guys like Elon Musk for those same regulatory credits. It will only accelerate under a Biden administration. Legacy manufacturers must have done "back-of-the-envelope" calculations to figure out they can sell EVs at a loss, but make money on the regulatory-credits side of the ledger. 

The timing is very interesting.

The "2020 pandemic" has given the legacy  manufacturers a window of opportunity. They weren't going to get their "halo" cars to market until 2021 at the earliest -- thus ceding a huge advantage to Tesla, but the "2020 pandemic" has certainly put stress on Tesla, giving its competitors a bit of an opportunity. When the "2020 pandemic"  and the fallout ends in 2021 (Trump), 2023 (Biden), 2025 (de Blasio), or 2033 (Fauci), the legacy auto manufacturers will be ready to go.

Before it's all over, #1 EV manufacturer? That's easy: Volkswagen.

In the big scheme of things, it doesn't matter. The earth comes to an end in 2030 (AOC).

Most fascinating: the EV niche?

• high-end, luxury sedans?
• mid-range (price), family sedans:
• utilitarian, cheap (think AMC Gremlins), millennials' alternatives to mass transit?
• urban pick-ups?
• rural pick-ups?
• fleets: US Post Office; FedEx; Amazon: UPS?
• new homeowners?
• existing homeowners?
• apartment dwellers?

Signs that the "2020 pandemic" is coming to an end:

• Biden breaking social distancing rules to whisper in Anderson Cooper's left ear (or to smell his hair); subconsciously he's not worried; politically he has to play the game;
  
• Biden backtracking on masks; ditto
  
• Big 10 football flip-flop; no longer worried about player safety; it's all about the Benjamins
  
• United Airlines adds a Denver-Williston flight at a time when airlines are cutting their routes
• most incredible: NYC mayor and NY governor and US senior senator from New York so incredibly scared of the virus, they are willing to shut down the city for a full year; see next item
• the stories regarding the railroads the past two weeks: buyouts; backlog at the Los Angeles/Long Beach ports; rail volumes;

Covid-19: NYC mayor and NY governor and US senior senator from New York so incredibly scared of the virus, they are willing to shut down the city for a full year. This year, 2020 - 2021 is set. 

One of the things I learned while serving in the military for thirty years and a day is that there was a reason the federal government's fiscal year was not the same as the calendar year.

The calendar year is January through December. But the federal government's fiscal year is October 1 through September 30.  That is the same calendar mothers use. It's all about the school year.

Parents are set this year: thy have settled into their school districts and they aren't going to move mid-year. If there is any chance at all -- any chance at all -- that the New York triumvirate (Schumer - Cuomo - de Blasio) fail to move NYC back to pre-Covid conditions, many (most?) of those folks who have left NYC will not return.

More likely, more will leave. And they are not going to move to New Jersey which has recently increased their state income taxes. Where will they move? Young families with children will move to upstate NY and Connecticut. Working families without children and retirees will move to Florida. Bottom line: watch the NYC tea leaves next June, 2021, to see which way the wind is blowing. 

My hunch: a lot of big companies spending a lot of money renting business space in NYC will use the rest of this year to decide whether it makes sense to move back to NYC or not. We will start seeing those decisions that were made following the 2021 presidential inauguration speech. 

Forest fires on the west coast: there is so much in this bag of worms that it's a fool's errand to even think about discussing it. As soon as anyone mentions "global warming" in the discussion, I either quit listening or quit reading and move on. Two things that have to be accepted:

• forest management (graze it, log it, or watch it burn); even Govenor Newsom has said that publicly;
  
• transmission lines: geographical locations of electric utility power plants
• nuclear reactors along the Pacific coast: transmission lines to major urban centers (Seattle, Portland, San Francisco, Los Angeles, San Diego) -- transmission lines went through no forests
• wind and solar farms in the east of these western states, and in the valleys -- transmission lines went through hundreds of miles of forests and grassland

And we move on.

Price of oil: the sweet spot -- I've said this for years -- for the US, the sweet spot is $51 to $54. And we're not even close yet. Does anyone really think WTI could move from $40 to $50/bbl by the end of the year?

• Headwinds:
• Covid-19: still uncertain
• gasoline demand turned down this past week; no longer a "v-recovery for gasoline demand"
• driving season for the year is over
• Tailwinds? One:
• Saudi jawboning higher prices.

Future of the Bakken? No idea. 

My Michelob weekend: starting summer of 2025.