Pages

Saturday, June 17, 2023

PGA US Open -- Third Round -- June 17, 2023

Locator: 44968PGA.
Locator: 44968SCOTUS.

This is really turning into quite a tournament. Probably one of the better golf tournaments I've seen in a long, long time.

*********************
College Loans

Update here (nothing new).

I've lost the bubble on this, but if I understand this correctly, there are two college loan issues:

  • interest payments on existing federal loans pause / to resume
  • federal loan forgiveness, $10,000 (federal loan) to $20,000 (Pell grant)

Known: interest on loans:

  • interest payments on federal loans will resume in October, 2023
  • interest starts to accrue again in September, 2023

Still unknown: full loan/partial loan forgiveness:

  • US Supreme Court decision within next month or so
  • to decide whether a presidential executive order to grant loan forgiveness is constitutional
    • the "betting" is that the US House of Representatives holds the strings to the purse, not the president,
      • if so, the President cannot unilaterally cancel federal loans

Regarding interest payments on existing loans:

  • first link: Insider: June 15, 2023: interest starts to accrue again in September, 2023; "first" payments begin again, Octobdr, 2023.
  • second link, Forbes: May 15, 2023: at that time, still not know when interest payments would resume.

Regarding loan forgiveness, $10,000 to $20,000, US Supreme Court case

  • one link, Newsweek: June 15, 2023
    • it's a political issue
    • it's a money issue
    • it's a "fairness" issue
    • if it's a constitutional issue -- it was not addressed at the Newsweek link, except in passing.
  • for me, it seems fairly straightforward.

How many affected:

  • 20 million students would have their loans erased in their entirety;
  • 20 million students would have their loans lowered.

Random Update -- Heat Advisories -- Texas -- ERCOT? No Problems -- June 17, 2023

Locator: 44967TX.

All that talk about "grid problems." Oh, give me a break. Holding up nicely. Lots of sun; lots of wind.

Combined, wind and solar providing 20K MW of electricity.

NE ISO: 13K demand -- total -- natural gas, oil, coal, nuclear, wind, sun, trash. All of the above, 13K.

Texas: “just” wind and solar -- 20K. And "building" more each year.

Inflation: Who's To Blame And Why It's Important To Know That -- The Nation -- June 17, 2023

Locator: 44966INFL.

Updates

Later, 12:32 p.m. CDT: as the fog lifts, as the dust settles it is obvious the one major driver of inflation in the US is not government spending, nor wage inflation, but rather:

  • too much money chasing too few goods.

Both conditions (too much money, and too few goods) flow directly from the Covid pandemic and associated lockdowns -- see graphics below.

If one cannot see that, now that the fog is lifting and the dust is settling, one is simply not paying attention. Period. Dot.

Now, if that's accurate, and, of course, it is, is raising interest rates or raising the cost of borrowed money the answer to inflation?

Let's look at the second half  (in bold) of "too much money chasing too few goods."

Suppliers are working as fast as they can to meet demand. Raising interest rates hurt the ability of suppliers to increase supply. Raising rates in this environment is ... crazy and counterproductive if one is concerned about the supply chain.

Now let's look at the first part, again in bold: too much money chasing too few goods."
This is a wash. I could write a long, long blog on how increasing interest rates would simply make inflation worse but at the end of the day, it's probably a wash.

If one is really concerned about "too much money," there's a simple fix: raise federal income taxes on everybody, and not just by a little bit but by a lot. So, if anyone tells me there's too much money, I'll reply, individuals and corporations are not paying enough in taxes ... or maybe better yet, increase social security and Medicare withholding by a huge amount but in a progressive matter. 

Folks who argue with that last point do not understand that increasing interest rates and / or inflation itself is (a form of) taxation.

Minor point but I bet everyone focuses on this, the least important point / comment: those who say increased government spending causes inflation: I don't buy it. The government tends not to buy the same things that individual consumers buy. In other words, the government is not chasing too few goods. Look at the federal government budget: what percent is non-military, non-mandatory, completely discretionary?

Original Post

Today, a new writer for the Atlantic looks at who is to blame for inflation and why it matters to know. Link here.

Bottom line: the new writer says current inflation is largely to do with "greedflation." I don't disagree. That's also my premise. 

However, having said that,  I don't like that word “greedflation” because it suggests something "negative" on the part of American corporations. In addition, "greedflation" encompasses a lot of "inflationary" categories, not just greed. In fact, in general, “greed” is an entirely wrong word to use in an academic study of economics, except as a stepping-off point for discussion.

Business can raise prices only if Americans are willing to accept higher prices. There is almost nothing in the US economy in which Americans cannot "cut back," if prices get too high. Poor grammar but I think you know what I mean. Don't take that premise about “cutting back” out of context.

Bottom line, blaming this wave of inflation on "greedflation" is wrong. A much better way to say it, but it's not a catchy word / phrase: inflation is due, in this case, to what the consumer is willing to pay. Don't take that out of context, but if one needs any supporting evidence, look at my two favorite charts which reveal just how much money Americans have to spend. Lots. And they’re willing to spend it. Exhibit A: it’s being reported that the lines at Disney World (Florida) are as long as ever.

It's still back to "too much money chasing too few goods." Remember, the supply change shortages are still with us. We have not fully recovered from the Covid pandemic. That is just one of many reasons for supply chain challenges. Port closures on the west coast are another reason.

Previously posted.

Locator: 44943B.

Updates

Later, 10:20 a.m. CDT: two additional thoughts while biking.

First: has inflation in the past two years affected your lifestyle, your quality of life, or your standard of living. If the answer is "yes" to any of the three:

  • you are not doing something correctly;
  • you do not live in Texas;
  • or both.

Second: I forgot to mention in the big expenses below. Except for those living in one of handful of states, state income tax far exceeds any "federal" inflation concerns for the audience to which this blog is addressed. Texas, where I reside: no state income tax.

Original Post

Inflation? Bloomberg's chart of the day: gold. Link here. I'm certainly getting mixed messages here.


Inflation: fairly superficial but excellent summary and explanation.  The third wave.

  • first wave: "demand-led," primary in durable goods
    • Covid-19;
    • shortage of chips (computer, not potato);
    • logistics (west coast ports, truck-drive shortage); and,
    • that was it
    • now: durable goods -- outright deflation [where not to invest]
  • second wave: "supply-led,"
    • the energy shock coming out of the war in Ukraine
    • if you don't understand this, you are not alone, neither do I
    • I think it's a stretch; writer needed three points
  • third wave: "greedflation" -- wow, wow, wow -- we discussed this quite awhile ago and is part of the reason the "inflation" story has not concerned me much (at all?).
    • within a reasonable range, "inflation" is "good" for investors (don't take that out of context)
      • when running from a bear in the woods, you don't have to outrun the bear; you only have to outrun the others trying to outrun the bear
    • "greedflation": the analyst considers this an unusual profit-led inflation story;
    • profit-led inflation occurs when consumer-facing companies toward the end of the supply chain persuade shoppers to accept price hikes by pointing to plausible explanations -- such as historically-elevated inflation -- LOL -- 
      • exactly what we mentioned on the blog some months ago [think new auto sales and grocers]
      • compare costs at your local regional grocer with those of Walmart
      • Target: markets a "better" shopping experience (but not for LGBTQ any more -- but that's another story for another time

"Greedflation":

The true reason for these elevated prices could have more to do with expanding margins and keeping investor sentiment high than with increased input costs.
"It's using excuses," Donovan said. "It's using a cover."
************************
What Wasn't Mentioned


US debt / US spending (which, by the way, I don't accept as a significant cause of inflation nor do a lot of economists including Nobel laureates -- in other words, I'm in good company.

Government policies mandating expensive alternative energy sources. Huge, unnecessary cost as far as I'm concerned but

Automakers: jacking up prices on ICEs to cover huge costs of EVs.

Grocers: most recent inflation number, 5%. A loaf of bread that cost me 99 cents last year should cost me $1.05 this year. In fact, I'm paying $1.49 for that same loaf of bread at Target or regional grocer. Walmart at $1.29 or thereabouts. One can do the math.

Cereal makers: 50% margins on corn flakes.

Rotisserie chicken:

  • Costco: $4.99.
  • Regional grocer: $9.99.

****************************
Inflation Vs The Real World

Personal net worth: "everyone" seems to worry about inflation impacting quality of life, standard of living, investment returns, whatever.

Don't take this out of context, but within a reasonable range inflation has little impact compared to other factors:

First, inflation is only a factor if you buy inflated goods

  • Example: the cost of US stamps and the cost of mailing packages has surged. For me, it could "break the bank." But, my overall postage has come to almost $0.00 -- e-mail has replaced mail. And I "never" mail packages any more -- Amazon does it for me -- and one can get true free mailing from Amazon without paying for Amazon prime.

Second, high cost items. In general:

  • state income taxes in most states (added later)
  • twenty years ago, I was paying college tuition: one, a private college; another, out-of-state tuition -- huge expenses; I don't have those any more
  • a new car every three years? Nope.
  • a McMansion? Nope.
  • a boat? Nope.
  • an RV that is seldom (if ever used after the first six months)? Nope.
  • swimming pool maintenance? Nope.
  • unexpected need for new air conditioner? Nope.
  • need for cruises, Disney vacations? Nope.

Break, break: a family of four could forego this year's Disney vacation and with one stroke, offset all other inflation "stuff" this year.

Second, more high cost items. Family, personal.

  • "big family"
  • divorce
  • medical care, inconsequential: age 65 -- Medicare; supplement paid by prior employer
  • not working, no job, temporary / permanent:
    • redundant, laid off;
    • medical condition;
    • lack of skills, education
    • drug addiction

Second, more high cost items. Telecommunication, entertainment.

  • way more "smart phone" than you need
  • way more cable, streaming than you need
  • way more computer than one needs: buy Chrome, not Apple

Break, break: cancel all subscription-streaming this year. That will more than offset all the rest of one's inflation for the year.

Third, transportation costs.

  • I'm retired, so daily driving almost unnecessary
  • warm-weather, dry state, urban, in good health: can bike almost anywhere.

Fourth, utilities: inconsequential.

  • small footprint
  • warm weather, highly competitive sector

Fifth, offset --

  • for savers and investors: getting higher return on savings, investments
  • best example: dividend-paying utilities, others need to increase dividends to compete with bank rates

So, yes, I get it. Inflation. 

But the country has much bigger problems than this focus on inflation by the mainstream media -- it gets tedious. One needs to ask why the mainstream media focuses on inflation. I have thoughts on that, also, but time to move on. The market opens in fifteen minutes and I haven't even gotten to Bud yet -- another non-story -- but a great opportunity for savvy investors. Which I am not. LOL.

PetroShale Inc Exits North Dakota Bakken -- June 17, 2023

Locator: 44965B.

PetroShale has some incredible locations in the North Dakota Bakken, link here.

I completely missed this one, link here:

Lucero Energy Corp. closed on June 15 the divestiture of non-operated North Dakota Bakken/Three Forks play assets for cash consideration of US$104.6 million (CAD$140.2 million).

Lucero, based in Calgary, Canada and formerly known as PetroShale Inc., did not disclose the buyer. The company described the transaction as being with “an arm’s length purchaser,” according to a press release.

The divested assets have 153 drilling locations. Production is expected to average 2,300 boe/d in 2023 (80% light oil and NGL). Evaluated by Lucero’s independent reserves evaluator Netherland, Sewell and Associates Inc., the assets include total proved reserves of 15 MMboe and total proved and probable reserves of 20.2 MMboe at Dec. 31, 2022.

At closing, Lucero had no debt and more than CAD$40MM of working capital. The company’s senior secured credit facility was revised to US$160MM.

$105 million / 2,300 boepd = $46,000 / boepd  -- at the very high end for ND Bakken. 

$105 million / 15 MMboe proved = $7 / boe.

$105 million / 20.2 MMboe proved + probable = $5.20 / boe.

To see the PetroShale locations in the North Dakota Bakken, link here.

“Arms length purchaser”: the fact that had to said, suggests to me that arm was very short. Sounds like the Sheffields in the Permian. This time next year we will know the buyer and we may know much sooner. Follow the NDIC hearing dockets and the daily activity reports.

Personal Investing For The Archives -- Nothing About The Bakken -- June 17, 2023

Locator: 44964INV.

Updates

June 19, 2023: Shell -- ESG and this crazy push for renewable energy by an oil company is coming to an end -- but for me, too little too late. COP was the first major to publicly state that it would stick with what it knows best (posted long ago). Today, from social media, Shell: 

Meanwhile, COP: a much more investor-friendly dividend and no foreign taxes.

Original Post 

The one chart that supports my view that it's time for some investors to pivot or at least look at oil differently. As Warren Buffett would say, know why you have something in your portfolio.



For the archives, for Sophia, and for the executor.

Personal trading.

I am gradually re-balancing my portfolio -- cutting my investments in oil E&P (cutting majors, upstream; keeping all midstream), ultimately cutting my exposure to fossil energy and moving to something else. That "something else" is yet to be determined.

The first step is to re-balance the majors.

The decision was made after Shell announced it was also changing course:

  • back to an emphasis on production; and,
  • back to an emphasis on shareholder returns.

I don't own any Shell and even with the 15% hike in future dividends announced by Shell, there are still better opportunities with US companies -- particularly when considering foreign tax issues.

I believe I own shares in five or six majors or "near-majors" (or what I would consider "majors" or "near-majors").

Monday the markets are closed but Tuesday (or thereabouts) I will sell shares in all of those majors except for one: COP. There may be an exception or two once I re-check tax consequences and/or current dividends vs original investment, but those exceptions will be trivial.

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

All my posts are done quickly: there will be content and typographical errors. If anything on any of my posts is important to you, go to the source. If/when I find typographical / content errors, I will correct them

Again, all my posts are done quickly. There will be typographical and content errors in all my posts. If any of my posts are important to you, go to the source

***********************
What A Joke

Link here.

The graphic without my doodles:

The graphic with my doodles, down arrows not followed by recession:

The graphic with my doodles, up arrows followed by recession:


Up arrows followed by a recession. 

Down arrows followed by a recession.

Five Key Stories -- Yahoo!Finance -- June 17, 2023

Locator: 44963ECON.

Link here to get to additional links:

Link here.

Amazon Screenshots Taken Last Night, June 17, 2023

Locator: 44962INFL.

Item, $50, dimensions:  14 x 6.6 x 2.7 inches  (package dimensions)

Item, $15, dimensions: 14.17x5.55x12.72 inch (size of rack when put together).

My wife ordered this rack for paints for Sophia in her art room. It is absolutely perfect. I thought about ordering the same set for kitchen spice rack to replace the one we have. I didn't ask my wife for the Amazon URL, I simply searched for the same item.

I came across the $50-item first and knew my wife would never spend $50 for a small Chinese metal rack. Further searching, but it took quite a bit of time, and had to refresh the Amazon search several times before I found the "brand name" rack fro $15.

Inflation? Deflation?

These are both identical items. The dimensions differ slightly -- one is the dimensions of the actual product; the other is the package when the item is shipped flat (unassembled). 

************************
The Sailing Page

Sophia completed her two-week sailing course yesterday. This was her second summer taking sailing lessons. It's incredible how well she did.

I'm "hunched down" so that I don't get hit by the boom.

ERCOT: Random Update -- 10:16 A.M. -- Saturday -- June 17, 2023

Locator: 44961TX.

ERCOT holding up very, very well. Folks were worried this hot spell would create significant problems.

Max power production capability vastly exceeds demand today ...

... despite fact that wind "comes" at the wrong time.

Combined wind and solar power adds about 10K to 20K ... if baseline without wind / solar is 70, then 20/70 = 29% and 20 / 90 = 22%. Not trivial. And the fuel source is all free and will never run out.