The Fog Is Beginning To Clear -- Tectonic Shifts -- April 21, 2024

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The fog begins to clear. Tectonic shifts:

• geopolitical
• EVs
• renewable energy
• Mideast
• Covid
• reproductive "health"
• (China)
  

Putin, China, the US, Europe, global politics: except for its nuclear weapons, 

Russia never was much of a threat, but let's assume it was a big threat to the West. Yesterday. Fast forward to today: Putin is bleeding Russia's future. That seems important. This was posted about a year ago. A nice reminder after yesterday's US House vote to send more military aid to both Israel and Ukraine. The link.

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Fuel of the future? 

Natural gas. And oil. Two big developments this past week: 

Updates

April 22, 2024: link here.

April 22, 2024: link here.

Original Post

• California refiners are now importing the dirtiest oil in North America -- with the completion of the Trans Mountain pipeline; and, even more noteworthy,
• TC Energy gets FERC approval for another pipeline bringing Canadian natural gas to the US west coast, specifically northern California, link here.

That second story is, in some ways, even more "delicious" than the Trans Mountain oil pipeline story. 

FERC had been asked by environmentalists and the attorneys general of Washington and Oregon to reassess its initial October 2023 approval of the project. The project has cleared required environmental reviews and was deemed necessary by FERC. The 2.7-bcfd GTN Xpress delivers Canadian-sourced natural gas from Washington through Idaho and Oregon to northern California. 

When the two big energy stories for the week are about natural gas AND heavy oil headed toward California, one can say the faux environmentalists have lost. To paraphrase Walter Cronkite, when you've lost California, you've lost the energy story.

The Biden administration can continue to put federal land off-limits to oil exploration but that won't stop the fossil fuel industry. 

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EVs

Updates

April 22, 2024: link here.

Original Post

EVs will be the wave of the future, but that future is a long way off and not in my investing horizon. Every time you read another EV story, it's bad news. Even China, for all the press, it's all hyperbole. It was reported that Tesla lowered its prices again this past week ... well, let’s put bullets to this. Tesla:

• lowered its prices again:
• announced no new vehicles:
• said it was scrapping plans to bring an inexpensive EV to market; and,
• most incredulous, said it was now pivoting to robotaxis.

Why is that incredulous? Because back in 2018 or 2020 or whenever, Elon Musk said "all" of his EVs would be robotaxis -- it was just software. What he said: we don't need to make a "new" EV -- all our EVs are "robotaxi-capable.”

So, what does it mean to convert from introducing a new, low-priced vehicle to robotaxis. It means Elon Musk is pivoting to what is most lucrative: software. 

Elon Musk is masterful at everything he does -- especially manufacturing. But these days it's all about margins, and tech is all about margins.

Manufacturing: really low margins, high CAPEX. 

EVs, Tesla: I wrote the above yesterday, Saturday. Since then, overnight, two more stories.

When you lose your base, you've lost the war. Again, paraphrasing Walter Cronkite. Link here.

From the linked article:

The proportion of Democrats buying Tesla vehicles fell by more than 60%, according to car buyers surveyed in October and November. 

Tesla has since made up ground with blue buyers, the research shows. But the dramatic drop highlights the risk hanging over Tesla with an increasingly political chief executive, at a time when electric-car makers are already struggling to appeal to many Republican buyers. 

The fall contraction coincided with Musk’s being increasingly vocal about illegal immigration, amplifying a tweet promoting antisemitic vitriol and publicly attacking Disney over his contention that the entertainment company had become too woke. (Musk has called the troublesome tweet foolish, and the Mouse House CEO has defended its positions while saying it needs to stay focused on entertainment.)

In many ways, Musk was sounding a lot like Donald Trump, embracing billionaire populism, and less like the green hero he was once celebrated as. 

XOM overtakes TSLA in market cap: link here.

Last week, cutting prices is not a sign of strength. Link here.

Tesla delivered about 387,000 units in the first quarter, down almost 9% year over year and below the lowest Wall Street estimates by about 20,000 units. 

After the disappointing first-quarter result, estimates for second-quarter deliveries were reduced to 472,000 units from 510,000, according to FactSet, up only 1% from the 466,000 units in the second quarter of 2023.

Model 3 pricing didn’t change. The base Model 3 still starts at about $39,000.

Mideast:

It speaks volumes that Iran did not escalate after Israel's response this past week.

In the big scheme of things, we didn't get much reporting / analysis what Israel achieved. 

Israel does a good job keeping secrets. 

But this is the best analysis I've come across.

Iran did not escalate for one simple reason: Israel demonstrated that it could hit Iran's nuclear facilities. 

Israel to Iran: attack again, and we will "take out" your nuclear facilities. 

What did Israel do to be able to make this statement? 

It is being reported that Israel "took out" the entire air defense of Iran's nuclear facilities.

By attacking Israel direclty, Iran gave Israel the opportunity it had sought for years: to take out Iran's air defenses around its nuclear facilities. Important? You might say so. Look at the lead story from yesterday's WSJ:  

Israel will commit suicide if it "turns out" Bibi prematurely.

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Tectonic Shifts

Putin is bleeding Russia dry.

Fossil fuel demand will continue to increase as the popularity of Greta declines.

Israel demonstrates it can take out Iran's nuclear facilities.

EVs: it's going to be a long, long slog. 

Covid: lessons learned, biogenetics and Big Pharma, economic and public health impact.

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EVs

Years ago I was part of a two-week "strategic-thinking" seminar in which a top-level Chrysler CEO participated. 

He was talking about the success of the Chrysler minivan.

In all the company's research, in addition to the revolutionary sliding door on the driver's side / street side of the van, the accessory minivan buyers were most interested in: the number of cup holders. True story.

Fast forward to EVs.

• driving range;
• type of charging receptacle (not whether charging stations are available -- they generally are not) but the type of charging receptacle (Tesla vs the US standard)
• from February 12, 2024 -- that's just a couple months ago -- after decades of marketing EVs, we're still trying to solve the charging problem

Most amazing, there's a third component about which buyers don't know much but is critical nonetheless:

• size of wheels (apparently 19-inch are the gold standard)

The size of wheels, not the number of cup holders.

Yeah, that, too, is tectonic.

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Covid

I'm still waiting for the 900-page book that covers the impact of the lockdown -- and everything else about Covid.

This is why I keep "flu" and Covid at the top of my list of links. 

The most interesting thing about the CDC link for the graph below? The fact that the CDC is no longer tracking Covid. It only tracks "seasonal flu" and to some extent "influenza-like illnesses" which would also include Covid.

Whatever happened to all those highly infectious Covid variants? Strange, huh? Update, here.

This past week: the most interesting graph. It's interactive. Spend some time looking at it. 

I've never seen anything like this, and I followed CDC "influenza" statistics religiously for 30 years while in the USAF when "seasonal flu" epidemics / pandemics were of major concern for America's military security.

NOTE: the vaccine - 

Chart of Covid-19 infections, link here:

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Reproductive "Health"

Being played out now.

Too early to tell if this is a tectonic shift and if it is, when and what its impact will be.

Early signs suggest this will be the beginning of the end of the GOP as the "silent majority" knew it. 

Millennials, GenXers, and the i-generations aren't buying what the "vocal" GOP minority is selling. Book-banning is so 1939. Abortion debate? Back to 1864.

Most thought this debate had been pretty much settled in 1960 and then "finally" settled in 1973. 

2022 was the new Arizona 1864.

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China

I don't see any tectonic shift vis a vis China. Yet. But if there is a Chinese tectonic shift, it will be in technology, specifically semiconductor chips and censorship. US tech companies could be big losers. A pivot to India and Indonesia.