Investing -- Idle Rambling -- March 10, 2022

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. 

From MarketWatch, twelve dividend stocks paying at least 3.5% that are well-suited for high inflation. These companies are expected to produce rapid growth for sales and earnings, and have high dividend yields well-covered by cash flow.

The twelve.

Oil and gas:

• Equitrans Midstream (ETRN)
• Devon Energy (DVN)
• Pioneer Natural Resources (PXD)
• Phillips 66
• XOM

Real estate:

• EPR Properties
• Realty Income Corp (O)
  

Home Building:

• MDC Holdings (MDC)

Other:

• Merck & Co
• VF Corp
• Huntington Bancshares
• Cracker Barrel Old Country

*************************************
Free Cash Flow

This was perhaps the most interesting item I read all day.

Wall Street's 2022 free cash flow estimate for AAPL is the same as combining the free cash flow for the following:

• XOM
• CVX
• COP
• PXD
• FANG
• DVN
• MRO
• OVV
• OXY
• HES
• APA

AAPL's net cash is $80 billion vs the other eleven companies with new debt of 177 billion.

What wasn't said:

• the list of eleven oil companies are trading at/near their 52-week highs due to a most peculiar set of events that most feel is not sustainable;
• AAPL is well off its 52-week high, as folks rotate out of tech and into energy, particularly oil. 

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. 

Hoping They Release 260 Million Barrels Of Oil From The SPR -- March 10, 2022

I can hardly wait to see the reaction of politicos and mainstream media tomorrow morning.

Previously posted:

A reader suggested I check in on Steven Hayward over at PowerLine together. 

Shortly after that was posted, this was released by Senators Markey and Heinrich:  

This legislation would also provide relief to Americans by advancing the direct the near-term sale of the more than 260 million barrels of oil by 2023 that are in the Strategic Petroleum Reserve.

Holy mackerel! Folks get excited when 50 million bbls of oil is released from the SPR. I wonder what they will think when five times that amount is released.

I think this is fascinating.

I'm not going to go through it again, it gets tedious, but a release of oil from SPR is generally followed by an increase in the price of oil.

Note: I am not suggesting any direct cause and effect between releasing oil from the SPR and an increase in the price of oil. All I'm saying is that in general, when oil is released from the SPR, the price of oil goes up, not down.

I am really, really hoping they go ahead with this sale. I would like to see if my hunch is correct: that the release of crude oil from the SPR will be followed by an increase in the price of oil if nothing else is done. Again, I'm not implying a direct cause and effect. Just saying there will be an increase in the price of oil.

A Lot Of "Free Advertising" For EVs Coming Out Of The White House -- How Are They Doing? March 10, 2022

I track EVs here.

From an earlier post:

It appears the White House, via the press secretary, is telling Americans:

• it's going to get worse ...
• it's going to stay worse for a long time ...
• cardigan sweaters won't work this time ... 
  
• the high price of gasoline is due to Russia invading Ukraine ...
• the answer to the high price of oil is more renewable energy ...
• to transition to renewable energy we need Saudi Arabia to produce more oil ...
• until Saudi Arabia produces more oil, we need to release more crude oil from the SPR ...
• those folks driving Teslas do not have to worry about the high price of gasoline ...

So, I was curious. With all this "free advertising" I was curious how the EVs were doing. But instead of looking at Tesla, I looked at the other three first: RIVN, LCID, and RIDE.

Today:

• RIVN: down over 6%; down almost $3; closed at $41 vs 52-week high of $180;
• LCID: down over 4%; down over $1; closed at $24 vs 52-week high of $58;
• RIDE: flat today; closed at $2.34 vs 52-week high of $18;

And then this story from Bloomberg: Rivian's $117 billion wipeout has turned some into skeptics -- Wall Street’s embrace of Rivian Automotive Inc., last year’s electric-vehicle startup darling, is waning already as the company has lost about $117 billion in market value in just four months.

Analysts are paring back their expectations for this once-hyped stock ahead of Rivian’s fourth-quarter results, which are due after the market close on Thursday. At least four analysts have lowered their price targets this month by an average of 40%.

So, I was curious. Are these three "different" than Tesla?

So, let's check TSLA.

TSLA closed down 2.4%; closed down $21; closed at $838;

• after hours, closed down another 0.75%, down another $6.
• TSLA's 52-week high is $1,243.

So, all this "free advertising" and incredibly high gasoline prices, investors are very, very skeptical about EVs, not just the newest, smallest startup. 

My hunch: high commodity prices are going to mess with margins for these EV manufacturers.

I'm Just A Spectator -- This Is Going To Be Fascinating -- March 10, 2022

IN DRAFT.

For the record, I've pretty much quit reading any "energy" story with a headline that begins....

• what you need to know about high prices (oil and any other commodity) .....
• why it costs to much to fill your gas tank ...
• what the president needs to do to bring down the price of crude oil ...
• here's how Biden could bring oil prices down ....

I personally think this is fascinating. It appears the White House, via the press secretary is telling Americans:

• it's going to get worse ...
• it's going to stay worse for a long time ...
• cardigan sweaters won't work this time ... 
  
• the high price of gasoline is due to Russia invading Ukraine ...
• the answer to the high price of oil is more renewable energy ...
• to transition to renewable energy we need Saudi Arabia to produce more oil ...
• until Saudi Arabia produces more oil, we need to release more crude oil from the SPR ...
• those folks driving Teslas do not have to worry about the high price of gasoline ...

So, I'm a spectator. It will be absolutely fascinating. The minority party needs to sit back and let the majority party solve this problem. 

You know, President Johnson knew it was "over" when Walter Cronkite "broke" with US policy on Vietnam. I don't think we're quite there, but give it another two weeks, maybe four weeks, and there will be very few local news stations that will not be reporting the price of gasoline as the lead story. It may already be  happening for all I know. When that happens, it's all over.

For two years, "we" did everything remotely -- due to Covid. It looks like the fastest way to bring down the price of gasoline is to quit using the part needed for transporation. Go back to doing as much as possible remotely. 

Again, US shale has 9,000 permitted locations to drill according to the White House.

• There are 765 active rigs -- unidentified source; some will say more, some less, but it's in that ballpark.
• 9,000 / 765 = 12 wells.
•  One rig can drill two wells / month.
• That works out to a six-month inventory.
• This is March. Six months from now it's September, and it's over. 

Let the majority party sort this out. 

It is pretty amazing. There really is enough oil but somewhere along the line someone made the wrong decision:

• in Canada,
• in Mexico,
• in Venezuela.

Speaking of Canada, I have not seen one story about Just-In Trudeau in the last several weeks, if it's already been that long.

US Crude Oil, Petroleum In Storage -- March 10, 2022

IN DRAFT

A reader suggested I check in on Steven Hayward over at PowerLine together. 

Shortly after that was posted, this was released by Senators Markey and Heinrich:  

This legislation would also provide relief to Americans by advancing the direct the near-term sale of the more than 260 million barrels of oil by 2023 that are in the Strategic Petroleum Reserve. The sale of these barrels has already been mandated by law and are available to be deployed for the Strategic Petroleum Reserve’s stated purpose of helping protect American consumers from economic damage due to energy supply disruption. This would create a significant financial return for the American taxpayer, guard against short-term oil price spikes, and adhere to our statutory mandates.

It's important to note I'm not taking "sides" on this one. My "beef" is with folks not presenting the full picture. Right now most folks are only presenting the drop in crude oil in US inventory over the past few months. Some show only the crude oil in the SPR; some show "petroleum inventories" excluding the SPR. Some show only "crude oil" and others include "all petroleum products." They note it in the graphics but don't point it out, explaining the importance of what they chose to post.

There is also no analysis of oil / petroleum products in SPRs around the world.

Most of the graphics, as noted above, show only the last pew months which includes some record high inventories. See the third graph below which is non-SPR crude oil in commercial storage measured in number of days of storage which I think is very helpful in putting things into perspective. 

There are two huge data points that no one seems to talk about:
pre-2007-pre-shale and post-2007-post-shale; huge difference; and,
the amount of pipeline and storage that has been added, especially along the Texas coast 

Although some say we're quickly depleting the DUC inventory, that may or may not be true, but whatever DUC inventory is left is something we did not have prior to the shale revolution (DUCs). 

So, lots of variables.

Generally speaking, the president if releasing oil from the SPR in increments of 50 million bbls over one to two months

Link here. 

Link here.

Link here.