Saturday, November 20, 2021

Clearing Out The In-Box -- November 20, 2021

Carnage: I was off line most of the day -- taking the day off. When I got back online tonight, based on tweets over at twitter I thought the world had come to an end with regard to WTI, Brent. 

I did not check share prices of any of the oil companies, save one, but it sounds like share prices across the sector plummeted. The only oil company I checked fell five percent but that was against a backdrop of a huge jump over the past few months.

But at $76-WTI we're still $20 / bbl above breakeven in many cases. Whether we are or aren't can be debated, but there are a lot of dynamics here. 

First, for the consumer, didn't "everyone" agree that the price of gasoline was getting a bit excessive? The divergence between the price of crude oil and the price of gasoline at the pump seems to be widening, in line with retail prices in all sectors, although Brandon thinks there is collusion to raise gasoline price, despite the fact that gasoline is a dollar/gallon more expensive in California than in its neighbor, Arizona.

Second, blaming this all on Austria / Covid seems to be a bit overdone. I understand the concerns folks have for the global economy, but I can't imagine another lock down even remotely close to what it was in 2020.

Third, most interesting, and this seems to be the growing consensus. If this is accurate, it will be interesting to see how it plays out. The consensus, it seems, is that for several years now there has been under-investment in crude oil exploration. Those in the West thought it would start to become quite apparent in 2022, whereas OPEC+ argued that supply / demand would start to balance out as early as 1Q22. At the same time, many in the West thought Brandon's energy policies would continue to hold back US production going forward. Talk of releasing oil from the SPR certainly risked that: if Brandon was going to release oil from the SPR it does not seem to behoove US oil companies to increase CAPEX when oil prices would be dropping. The end result: OPEC's prediction that supply / demand would  balance in 2022 is less likely to happen.

So, 2022, we're back to where we always seem to be, wondering whether crude oil will trend toward $100 or trend toward $50. I don't care for this "analyst," but he did post something of value today that speaks to all of this.

Bottom line for me: on so many levels, what happened today was good for everyone.

Let's see how far the price of gasoline falls. 

I've been saying this for quite some time -- the gap between the investing class and the non-investing class is widening faster than ever: see this link over at twitter. They call it “the massive chasm between the credentialed laptop class and the working-class.” 

NASDAQ: wow, wow, wow. NASDAQ surged and hit another all-time record today. I had no idea. Again, based on tweets over at twitter I thought the world had come to an end. I haven't checked yet, let's see what the chips did today:

  • QCOM: down 0.7% today after setting all-time highs earlier in the week; five days ago, it was trading at $170; today, trading at $185, up 11% over the past five days;
  • AMD: up slightly today; over five days, up 5%;
  • XLNX: actually rose a bit today; but, wow, talk about volatility; over the past five days, up less than 2%; will the AMD-XLNX deal ever close? I'm beginning to have my doubts;
  • AAPL: up 1.7% today; for five days, up 6.7%. 

AAPL: is getting more and more interesting every day. How does one value this company any more in light of Tesla, Rivian and Lucid, and in light of AMD, XLNX, and Qualcomm? Apple, Inc.:

  • a smartphone company?
  • a chip company?
  • a future Tesla or Rivian?

Covid-19: this is getting very interesting again, with what's going on in Austria. It's obvious no one has any idea how this will play out. I can watch this over and over and over. What's the plural of doofus?

Covid-19: for the archives. The origin story. This won't change any minds, but it's important. I guess. If nothing else, it's another data point.

Austria: Austria? Just two days ago, we were getting all those reports that Asia was opening up again, they had gotten through the most recent surge and things were getting back to normal. China, Vietnam (think Nike), Malaysia -- the front end of the supply chain challenges. 

Austria? Exactly what is Austria contributing to the global economy? Vienna sausages? Tortes? Bavarian chocolate cake? Beer? Traders make money on volatility and it looks like traders may have purposely scared investors to cause that volatility.

Speaking of which, what did the VIX do today? Up 2% -- that sounds bad but at 18, it's so low if it gets any lower they will have to re-adjust the y axis (see this graphic and set the filter to one year). It's even more dramatic at five years.

Calendar: next week is a wash; no matter what the market does next week, everyone will say it is due to less trading as we head into the five-day holiday. 

Speaking of which, this is getting very, very interesting. When I was in high school, decades ago, we got Thursday off for Thanksgiving. That was it. I was well out of high school when students were getting Thanksgiving Friday off, also. But then, folks started taking off on Wednesday to get home in time for Thanksgiving, and/or to go skiing in Colorado. Now, it seems to be the norm that Thanksgiving break is a full week. 
But look at this! In our school district, the administration and the teachers have essentially written off Friday (the week before Thanksgiving) for the high school students. Everyone is leaving early for Texas football playoffs; soccer tournaments; volleyball tournaments; and/or to go skiing in Colorado. 
We now have an eleven-day holiday for Thanksgiving.

British Columbia: speaking of a "wash," oh, boy. Did BC ever get hit hard with global warming rain. See the video at this link

Oh-oh, the road to New England: two stories -- more Russian tankers will be off-loading fossil fuel the winter for Boston, Massachusetts. 

When that was announced this past week, it was such a non-story -- everyone knew it was going to happen -- I didn't even bother posting it. 

Now, today, FERC announces that it will reduce the ROE rate to keep two (?) natural gas plants in Massachusetts afloat. I guess they're having trouble passing on the costs of natural gas to their consumers and/or demand destruction is taking a heavy toll -- or winter just isn't that cold yet. One wonders if natural gas pipelines from Pennsylvania might have helped. Just saying.

The Fed: That pretty much clears out my inbox for the day. I assume the big story Monday will be Brandon's announcement regarding the "new" Fed chairperson. 

Brandon said the announcement would be made in about four days, about three days ago, but I doubt he would make such a momentous announcement on the weekend. 
Most likely, in the normal way things are done, we could expect a news conference on Monday with the announcement, but this administration, like the previous administration, is anything but normal. If we don't have the announcement Monday, it simply means the two factions in his White House are still squabbling. Me? I'm betting on a change in who sits in the Fed chief's chair. If I'm correct, expect the Dow to plunge on Monday, about 10:35 a.m.

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