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Friday, July 28, 2023

Week 30: July 23, 2023 -- July 29, 2023

Locator: 45241TOP.

Top story:

  • the Fed raises rates as expected, 25 basis points; many expect this to be last rate hike in this cycle
  • inflation has never fallen so fast; Fed can't explain it
  • the DOW: thirteen-day rally stopped for one day, then huge gain across the board on Friday
  • Bidenomics: a "Goldilocks" economy?
  • soft landing; no recession; 

Top international non-energy story:

  • Russian-Ukraine war continues but it seems "no one" knows.
    • Prigozhin -- in Belarus; Ukraine now has a new worry, from the north
    • 1917-style stalemate?

Top international energy story:

  • Saudi Arabia will extend production cut into August

Top national non-energy story:

  • US Senate minority leader suffers stroke on national television (?)
  • Ford now losing billions on EVs; "embraces" hybrids.

Top national energy story:

  • SCOTUS: Mountain Valley Pipeline -- okay to drill
  • WTI finally closes above $80 -- but it doesn't feel "satisfying"
  • record heat, nationally, continues
    • Texas grid holds: easily.
Focus on fracking: most recent edition. Commentary here.

Top North Dakota non-energy story:


Top North Dakota energy story:


Geoff Simon's top North Dakota energy stories:

Bakken economy:

Commentary:

Entertainment: Barbie; Oppenheimer; set records;

Is The House Of Cards Starting To Fall? Is Toyota Right? July 28, 2023

Locator: 45240EVS.

This tells me folks aren't buying EVs and they're not buying them because of the "range issue."

Link here.

From earlier:

 The link.


Unmitigated disaster (and it's only going to get worse) when the emperor realizes he has no clothes. One day after spectacular earnings:

From last night on the blog:

**************
EVS

I want to make sure I’m clear on this. I write a lot about EVs and I’m investing in Daimler Trucking which  is very much an EV investment, just as folks who invest in, let’s say, GM, are also investing in EVs.

However, I am 100% sure “this” is not going to end well.

“This”: EVs.

I still think EVs are an unmitigated disaster on every level and it’s just a matter of time before it becomes obvious to all.

There are so many aspects when I say “on every level” I may start a series on why “this” is such an unmitigated disaster. But it seems to be such a waste of time. Sort of like preaching to the choir.

Instead, I’ll probably re-post this periodically just to make sure folks know where I stand on this.

Good, finally got that posted.

I Think It's Time To Start My Series: "Unmitigated Disaster" -- July 28, 2023

Locator: 45239EVS.

Breaking now: cargo ship near the Netherlands with 3700 vehicles in transport on fire. This is the second such event of which I'm aware.


**************
EVS

I want to make sure I’m clear on this. I write a lot about EVs and I’m investing in Daimler Trucking which  is very much an EV investment, just as folks who invest in, let’s say, GM, are also investing in EVs.

However, I am 100% sure “this” is not going to end well.

“This”: EVs.

I still think EVs are an unmitigated disaster on every level and it’s just a matter of time before it becomes obvious to all.

There are so many aspects when I say “on every level” I may start a series on why “this” is such an unmitigated disaster. But it seems to be such a waste of time. Sort of like preaching to the choir.

Instead, I’ll probably re-post this periodically just to make sure folks know where I stand on this.

Good, finally got that posted.

WTI Holds Above $80; No New Oil & Gas Permits; Five DUCs Reported As Completed -- July 28, 2023

Locator: 45238B.

Active rigs: 40.

WTI: $80.58.

One new permit, #40085, a SWD permit:
  • Operator: KODA Resources.
  • Field: Daneville (Divide)
Five producing wells (DUCs) were reported as completed:
  • 37985, 968, CLR, Charolais South Federal 16-10HSL1
  • 38119, 2,185, CLR, Flint Chips Federal 2-5HSL, 
  • 38121, 1,994, CLR, Flint Chips Federal 3-5HSL, 
  • 37699, 0, BR, Ole 5-1-29TFH
  • 37700, 0, BR, Ole 6-1-29MBH,
Dry hole:
  • 32362, dry hole, CLR, Bohmbach Federal 8-26H2: only the surface well segment was drilled.  The well will either be abandoned or converted to a SWD well.

Intel -- July 28, 2023

Locator: 45238TECH.

The link.

Do you remember when you were a kid and spent hours looking at "Can You Find It" in the "Hidden Objects" or whatever it was called in "Highlights Magazine"?

Fast forward.

Do the same thing with this headline:

How many "things" can you find concerning with that announcement?

5G vs 6G update.

AI Is Not A Bubble -- July 28, 2023

Locator: 45237AI.

The link.

Link here

The dot.com bubble: everybody was creating a webpage selling vaporware. There were no moats. 

The AI revolution:
  • selling real products to real customers;
  • products are expensive and have high margins;
  • products are in heavy demand across all sectors, all companies;
    • cybersecurity is so far behind, that sector will keep AI going for decades;
    • EVs desperate for AI products;
  • there are huge moats:
    • shortage of skilled workers;
    • incredibly expensive to begin a new company;
    • products are very, very sophisticated;
  • the US government is supporting it with huge financial incentives:
    • IRA (inflation reduction act)
    • CHIPS (re-shoring)
  • the list goes on
Exhibit A:

Holy Mackerel! Is Anyone Paying Attention? GDP -- 3Q23 -- 3.5% -- GDPNow

Locator: 45236ECON.

The link.


*****************************
Inflation: Grocery

Beef: relentless.

Chicken, romaine lettuce coming down nicely.

Pork: in a "trading" range.

FRED

5G Vs 6G -- Update -- July 28, 2023

Locator: 45235TECH.

Screenshot:

Trouble In Paradise? Or Good News? July 28, 2023

Locator: 45234AAPL.

Apple slashing prices. Link here.

Two story lines.

First: the new MacBook Air not selling as fast as expected. Rumors. Needs to be confirmed.

Second: Apple needs to move a lot of inventory to make room for "autumn tsunami" of new products.

Either way, "to reason why" matters not for consumers or investors." Just go with the flow.

How In The World Did Inflation Fall So Fast? July 28, 2023

Locator: 45233ECON.
Updates

Others are now asking the same question. I've been asking it for quite some time. With regard to this question, I've been impressed with the lack of intellectual curiosity. I think JPow gets it. Almost no one else did.


Recent good news on inflation has ignited a debate over how much central banks’ interest-rate increases are responsible.

The answer matters for where inflation and interest rates are headed. The Federal Reserve and the European Central Bank in the past week lifted their benchmark interest rates to 22-year highs and left the door open to additional increases.

If higher rates weren’t responsible for the progress on inflation to date, that suggests central banks may be able to lower them before a painful recession sets in.

Central banks generally see their influence on inflation coming through higher rates damping the demand for goods, services and workers, which leads to higher unemployment. That in turn puts downward pressure on prices and wages.

Only the second part of that sequence has occurred. Inflation fell to 3% in the U.S. in June, according to the Fed’s preferred gauge, the personal-consumption expenditures price index, down from 7% one year earlier. Yet the unemployment rate, at 3.6% in June, has held steady for the past year.

In the eurozone, inflation declined to 5.5% in June, the lowest level in nearly 18 months, and unemployment has drifted to the lowest in more than 25 years.

There are competing explanations for this.

One camp argues that inflation has been mostly driven by supply shocks that are going away on their own—much as a postwar surge in the late 1940s unwound by itself. The ripple effects gave the illusion of broader, more persistent price increases.

Take the auto market. Sellers weren’t able to meet pent-up demand two years ago, leading to huge price increases, which in turn spawned higher prices later on for car repairs and auto insurance.

Similarly, a surge in household formation during the pandemic sent up housing prices and rents.

The first camp attributes most of the recent decline in inflation to the ebbing of these one-time supply disruptions, not rate increases, which are supposed to work through the labor market. “It’s calling into question a lot of the old assumptions,” said Lindsay Owens, executive director at the Groundwork Collaborative, a liberal think tank.
Much more at the link.
Original Post

Locator: 45233ECON.

Tag: supply, demand, sunglasses.


And it would have fallen even faster had it not been for "greedflation." Which, by the way, continues, particularly in the EV sector. Having said that, this is not so much "greedflation" as simply doing what it takes to avoid bankruptcy.

Pumped -- Part 17 -- Holy Mackerel -- July 28, 2023

Scroll through the Business Insider, CNBC, and Yahoo!Finance websites and see a gazillion stories on Intel (INTC), Roku, GE, F, Shark Tank, etc., and not one story on AAPL (Apple, Inc):

Whatever.

Earlier:

Apple's new products.

Quick: name five new products with high margins being introduced by your favorite company.

Quick: name five Apple suppliers.

Link here.

Reality Sucks -- Part 2 -- July 28, 2023

 The link.



Unmitigated disaster (and it's only going to get worse) when the emperor realizes he has no clothes. One day after spectacular earnings:

From last night on the blog:

**************
EVS

I want to make sure I’m clear on this. I write a lot about EVs and I’m investing in Daimler Trucking which  is very much an EV investment, just as folks who invest in, let’s say, GM, are also investing in EVs.

However, I am 100% sure “this” is not going to end well.

“This”: EVs.

I still think EVs are an unmitigated disaster on every level and it’s just a matter of time before it becomes obvious to all.

There are so many aspects when I say “on every level” I may start a series on why “this” is such an unmitigated disaster. But it seems to be such a waste of time. Sort of like preaching to the choir.

Instead, I’ll probably re-post this periodically just to make sure folks know where I stand on this.

Good, finally got that posted.

Let's Just Say We're Pumped -- July 28, 2023

Now: one year -- from $181 to $466 / share.

Earlier today:

From earlier in the month:

And, no, this is not a bubble.

MM "Face Plants" Boarding Plane Earlier This Week; Has Stroke At Press Conference; Televised Live -- July 28, 2023

US Senate: business as usual. Not addressing the elephant in the room -- or should we say turtle, but continue to rant about things that don't matter.

Meanwhile, the same complain about the president's mental faculties.

And this is what he, Mr Biden, would talk about if he knew it was happening:


Futures, 15 minutes before market opens. The top three are in my bucket list. #5, Netflix, has always been a favorite. Our oldest granddaughter who knows something about everything, and everything about some things, swears by Spotify:


Why?

WTI: Can It Hold $80? One Well Coming Off Confidential List Today -- July 28, 2023

Locator: 45232B.

The cherry on top to an incredible week:


Futures, 15 minutes before market opens. The top three are in my bucket list. #5, Netflix, has always been a favorite. Our oldest granddaughter who knows something about everything, and everything about some things, swears by Spotify:


Why?

Futures:
  • AAPL: up $2.00 / share; trading at $195.23.
  • Can this possibly be better for equity investors: even the "red" is "green" for equity investors.

California crisis: we've talked about this several times. Now this, link here.


**********************
Back to the Bakken

WTI: $80.14.

Monday, July 31, 2023: 94 for the month; 202 for the quarter, 457 for the year 
39474, conf, Ovintiv USA, Newman 150-97-21-16-2H,
39158, conf, CLR, Kiefel 5-36H,

Sunday, July 30, 2023: 92 for the month; 200 for the quarter, 455 for the year
39338, conf, Petro-Hunt, Mongoose 149-102-8C-5-4H,
38686, conf, Hess, GO-Ron Viall-156-98-2513H-1,  

Saturday, July 29, 2023: 90 for the month; 198 for the quarter, 453 for the year
39339, conf, Petro-Hunt, Arsenal Federal 149-102-17B-20-4H,
39159, conf, CLR, Kiefel 6-36H,
38948, conf, Hess, BW-Rolfson-151-98-2116H-15,

Friday, July 28, 2023: 87 for the month; 195 for the quarter, 450 for the year
39475 conf, Ovintiv USA, Newman 150-97-21-16-15H,

RBN Energy: will a RIN price crash make a mess in the renewable diesel market? Part 2.

U.S. production of hydrogenated renewable diesel (RD), made from soybean oil and animal fats like used cooking oil, is growing faster than expected. That may sound like good news for the renewable fuels industry, but it comes with the fear that the rapid growth might trigger a sudden crash of Renewable Identification Number (RIN) prices that — if it happens — would rock the market. In today’s RBN blog, we have a go at describing what that might look like.

Hydrogenated RD is a type of biomass-based diesel being made today in refinery units previously used to make petroleum diesel and gasoline. It has quickly overtaken the other type of biomass-based diesel — FAME biodiesel — in market share. (FAME biodiesel is produced by reacting triglycerides with methanol to make oxygen-containing fuel molecules called fatty acid methyl ester, or FAME.) In fact, RD’s rapid growth may soon bring the U.S. total biomass-based diesel supply beyond the mandated levels set by the Environmental Protection Agency (EPA). At that stage, the EPA can declare mission accomplished and move on to something else, right? Wrong. Because if those targets are surpassed, the RIN credit, which functions as the primary subsidy supporting the growth, would theoretically disappear (although market forces could prevent that from actually occurring). That’s like taking the training wheels off a bike — the rider might crash.

To make sense of what might happen to the biodiesel market were the training wheels to come off, the essential first step is to understand how the RIN functions in the fuels market. The RIN credit system is complex, as we covered in our blog series. Fortunately, for today’s purposes, we can bypass all the regulatory lingo, detailed charts and tables, because we only need to know one fundamental feature of the RIN: it is not merely a tax, like a sales tax, or a subsidy, like a tax credit. It is both a tax and a subsidy. When a refiner buys a RIN, which is like paying a tax on the petroleum fuel they produce, that payment ends up subsidizing production of the applicable biofuel that would otherwise be uneconomical.

Pumped -- Part 21 -- July 28, 2023

From Bloomberg's energy newsletter, July 28, 2023:


For the record, Williston Basin's non-Bakken oil tends to be sour.

Pumped -- Part 20 -- July 28, 2023

From Laura Hurst, Bloomberg News, Blooomberg Daily 

Europe’s biggest oil companies made it clear this week they’ll go the distance to close the valuation gap with their US peers.

Declining commodity prices have slashed their profits from the dizzying records of 2022, but the companies aren’t allowing that to be a distraction. Shell Plc, TotalEnergies SE, Equinor ASA and Repsol SA are pledging to keep the shareholder payouts high.

Shell alone has so far committed to repurchasing at least $12.5 billion of stock this year. That compares with Chevron Corp.’s own buyback range of $10 billion to $20 billion.

While earnings have declined in the latest quarter, they still remain relatively high for the Europeans. That gives them some room to keep shareholders happy.

In the depths of the pandemic, Shell, BP Plc, Equinor and Italy’s Eni SpA all cut their dividends substantially. And the markets punished them for it.That stands in contrast with Chevron and Exxon Mobil Corp., which stuck to their payouts throughout.

A key pillar for Shell in regaining that lost ground is pivoting the company back toward its traditional oil and gas business. Just last month, Chief Executive Officer Wael Sawan laid out his plans to investors in the New York Stock Exchange: reduce expenditures but devote a greater share of spending to fossil fuels.

He also used the stage to announce a 15% increase in the dividend. Then, he followed through Thursday by saying that share repurchases in the second half of the year will be, at the minimum, slightly higher than the previous guidance of $5 billion.

Sawan has also promised “ruthlessness” on spending and investing in new projects, particularly in offshore wind, where inflationary pressures have already started to kill off developments.

By reining in the low-carbon business, he’s risking the wrath of environmentalists. Already, a top UK fund manager questioned the strategy, and the Church of England Pensions Board dumped the company’s shares.

The market, too, has been cool so far. The gap between the price-to-earnings ratios of Exxon and Chevron has widened in comparison with Shell and BP.

It highlights the scale of the challenge facing Sawan and his counterparts in Europe’s oil majors. While tight spending, a refocusing of priorities and healthy returns certainly won’t hurt, closing that valuation gap with the US may be a massively difficult undertaking.

Pumped -- Part 18 -- July 28, 2023

The link.


By the way, Liz Soonders is on vacation. She returns early Auugust.

Pumped -- Part 16 -- July 28, 2023

Link here

I have very few "selections" / "choices" in my "Big Pharma bucket. AbbVie is one of them.



Pumped -- Part 15 -- July 28, 2023

Futures, one day after market pulled back suddenly; two days after record-tying 13-day rally.





Pumped -- Part 14 -- July 28, 2023

What historically happens when stocks soar through July?

The bulls keep running.