Tuesday, February 23, 2021

Commentary -- February 23, 2021

Not-ready-for-prime-time. Will be edited once Sophia finishes with her schoolwork. 

Is there a disconnect here? The "surging" price of oil would suggest this would be the very time that the future of EVs would look even better and share prices of companies like Tesla should be surging in response.

The paradox: the price of oil is surging; folks are talking about oil demand exceeding supply by the end of the year; more and more EVs coming on line, we have most-friendly EV administration in the White House; crude oil and propane pipelines are being shut down, and yet, EV companies are coming under huge pressure. This should be the moment for EVs to shine. What's going on?

Commentary: GE was a high-flying stock once upon a time. I'm not sure what the tipping point was but certainly buying Alstom was in the mix. Running through the headlines this morning, I'm seeing things that suggest we may see the same thing happen to GM. But GM won't be alone. 

These are four items that got my attention over the past ten days:

  • the Texas Deep Freeze revealing the Achilles' heel of renewable energy;
  • NASDAQ plummeting over last few days; e.g., TSLA shares dropping like a rock;
  • the price of oil; projections for oil demand by the end of the year;
  • Daimler's rollout of a 250-mile range 18-EV-wheeler;
  • Warren Buffett's views about high-capital intensive industries;

Here those data points are in graphic form or video.

Texas deep freeze:

NASDAQ plummeting as interest rates trend higher but still at relative record lows. Like so many things, the headlines give traders a reason for selling even if the facts don't fit the story.

Analysts see $70 - $75 oil by this summer / end of year (2021).

Daimler EV truck:

Yes, the BWM video is a few years old, but batteries haven't improved all that much over time, and as batteries have improved over the years, the realities of rare earth metals are becoming more concerning. The biggest concern? China holds four aces in this poker hand.

Finally, this:

  • Warren Buffett's views on capital intensive industries. Link here

Some legacy industrial companies with an incredible history (think GE) are betting the farm on EVs (think Ford).

For me the tipping point came during the recent unfavorable event in Texas, the "Four-Day Deep Freeze"; seeing the range of the Daimler Cascadia; seeing the $50,000 BWM golf cart; and, no indications that anyone is addressing the issue of rare earth metals.

Bottom line:

  • Texas deep freeze revealed the Achilles heel of renewable energy: the Achilles heel: capital intensive and surprises [China]);
  • ordinary Americans cannot afford EVs; at the end of the day, EVs are luxury vehicles;
  • long haul truckers won't buy EV trucks if the range is 250 miles;
  • some legacy manufacturing companies are betting the farm on EVs

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