Ramblings On Investing In General -- August 31, 2021

Market: the market had a huge day yesterday. Today is the last day (and last trading day) of the third quarter. One would expect a huge sell-off as fund managers lock in their third-quarter profits. But so far that hasn't happened. 

My favorite chart, US money market fund monitor, link here. These folks are earning zero percent on their money. They are also ignoring the recent $1 trillion infrastructure bill already passed and the $3.5 trillion social infrastructure bill working its way through the US Congress.

Hold that thought.

Today, from The WSJ: Fidelity wants to add 9,000 jobs by year-end. Move to meet investing demand will boost company's workforce to more than 60,000. 

Of course, this is in addition to all the independent financial advisors who use Fidelity as "their platform" to invest clients' funds.

From the linked article:

Fidelity’s hiring spree is its third in the past year, when millions of new investors flocked to brokerages like Fidelity, Charles Schwab Corp. and Robinhood Markets Inc. Including the latest push, Fidelity’s total workforce is expected to grow more than 22% this year, to over 60,000 employees.

Drawn to the market’s rally, individual investors have changed the fortunes of the brokerage industry. 

The no-commission stock trades and low-fee investment funds now offered by many firms have brought in plenty of new clients. They also have thinned money managers’ profit margins and forced them to compete on price. Traditional products, like stock- and bond-picking mutual funds, have been leaking client money.

There's some disagreement which of the three was the first to introduce commission-free trades: Fidelity, Schwab, or a third firm (whose name I've forgotten). 

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Not Ready For Prime Time

Now back to that investing article I linked some days ago: "84% of retirees are making this RMD mistake."

Link here. 

Pet peeve.

I very much enjoy informative articles on investing but when a writer categorically suggests "84% of retirees are making a mistake with regard to their RMDs" it rankles me. 

In this case, the premise of the "financial advisor" is this: if one takes only the minimum of the RMDs from one's retiree accounts, most retirees (84%?) will leave a lot of money in their retirement accounts at time of death.

Well, la de da.

Maybe, that's their goal, or maybe there are other reasons.

The advice of this writer might hold some water now with the US market doing so well, but if the market collapses and/or if fund managers manage their funds poorly, that advice may be wrong.

Retirees' biggest fear is their "retirement money running out" before they die, and that's why they may be taking the minimum required. I would assume intelligent folks would take out as much money as they need/want, while at the same time taking into consideration how long they might live and whether the market might collapse.

However, the bigger issue is this: the writer implies, or states outright, that folks are only taking the minimum required. What study is that based on? This would be incredibly difficult data to come by. 

 But I digress.

Many folks with retirement accounts and RMDs don't need the money in the first place. For many, it was wonderful when no RMDs were required in 2020 due to Covid-19 (which made no sense, by the way) and it was even more wonderful when the age was moved from 70 1/2 to 72 years of age when RMDs are first required. That was huge and although it looks like it is not going to happen, there were many in Congress who were hoping to advance that age ever further, to age 74 years of age, or even 75 years of age.

If one doesn't need the money, the worst thing to do is take money out of a tax-deferred account. That was the first thing I thought of when reading this article -- and suggests to me that the writer is incredibly naive. If one needs cash, and all things being equal, wouldn't it be better to take money out of a non-tax-deferred account. In fact, if dividends are being automatically reinvested in a non-tax-deferred account, perhaps it would be best to take out those dividends first if one needs cash. They are taxable, regardless.

Suppose I have two accounts side-by-side, one is a tax-deferred-retirement account, the other is a simple brokerage account, taxable, with dividends automatically reinvested.

Suppose I don't need the cash. Perhaps my pension, social security, my spouse's social security, other sources of income, are more than adequate.

Wouldn't it be great if I could substitute / replace the RMDs as required by current law from the tax-deferred account with an identical withdrawal from the non-tax-deferred account. 

If the taxes paid to the IRS were identical, why would the IRS care whether the fungible cash came from one account or the other?

As it is, because of the RMD rules, I won't touch the simple brokerage account -- I will let it grow (hopefully) and leave it to my heirs who will benefit from the stepped-up value rule (unless that changes).

Obviously the writer of this article is much smarter than I so I must be missing something. But for the life of me I would wonder why I would be advised to take more money than necessary from a tax-deferred account. 

My hunch: Congress knew this also, and that's why they established RMDs.

Safer, Less Expensive, Than Aspirin? -- And Actually Therapeutic Against Covid-19? August 31, 2021

I've mentioned this drug on the blog some time ago but I've avoided the subject because I never understood how an anti-parasitic could "fight" a virus.

We're talking about Ivermectin.

So, after a year of avoiding talking about it, I finally looked up its "proposed" mechanism of action that allows it to fight the Covid-19 virus. 

Link here. This comes from our own NIH.gov. Published 2020.

Intro:

Ivermectin ... is a macrocyclic lactone with a broad-spectrum antiparasitic pharmacological activity.

It is the safest and most effective semi-synthetic derivative of the entire class of avermectins, discovered in 1975 by Professor Satoshi Ōmura as fermentation products of the actinomycete bacterium Streptomyces avermitilis ... 

Its main pharmacodynamics is to bind some channel proteins for chlorine controlled by glutamate, typical of specific classes of invertebrates, causing a greater permeability to this electrolyte: all this causes a hyperpolarization of the cell membrane, blocking inhibitory neurotransmission in neurons and myocytes, resulting in paralysis and death. 

Commercialized since 1981, its low cost, its high efficacy and safety, and the marked tropism for helminths (therefore with an almost zero impact on the biochemistry of human beings) have led to its inclusion in the twenty-first World Health Organization's List of Essential Medicines (World Health Organization 2019).

Then this:

Regarding its role as an antiviral agent, its efficacy has been demonstrated on several viruses, both in vitro and in vivo. 

Among the many mechanisms by which it performs its function, the most consolidated one sees ivermectin as an inhibitor of nuclear transport mediated by the importin α/β1 heterodimer, responsible for the translocation of various viral species proteins (HIV-1, SV40), indispensable for their replication. 

This inhibition appears to affect a considerable number of RNA viruses, such as Dengue Virus 1-4, West Nile Virus, Venezuelan Equine Encephalitis Virus, and Influenza. 

In addition, ivermectin has been shown to be effective against the Pseudorabies virus (PRV, with a DNA-based genome), both in vitro and in vivo, using the same mechanism. 

Caly [has] recently shown that the drug also inhibits the replication of the SARS-CoV-2 virus in vitro, however not clarifying how it occurs. 

Since the causative agent of COVID-19 is an RNA virus, it can be reasonably expected an interference with the same proteins and the same molecular processes described above. 

And, then:

However, ivermectin could prove to be a powerful antiviral, therefore also useful for a possible treatment of the new coronavirus associated syndrome, even from a new perspective. 

This could happen assuming its role as an ionophore agent, only hinted in the recent past but never fully described. 

Ionophores are molecules that typically have a hydrophilic pocket which constitutes a specific binding site for one or more ions (usually cations), while its external surface is hydrophobic, allowing the complex thus formed to cross the cell membranes, affecting the hydro-electrolyte balance. 

These chemical species have historically been used to study the mitochondrial respiratory chain and ATP synthesis in eukaryotes (in this case also known as decoupling agents, such as 2, 4-dinitrophenol), and their antibiotic activity has long been appreciated. It is also hypothesized their role as antiviral drugs and anticancer chemotherapeutic agents. Thinking of the structure of two of the most important ionophores, monensin A and valinomycin, respectively a polyether and a depsipeptide antibiotic, it is clear that they internally present many oxygen atoms (with related free electron doublets), indispensable for binding cations and transporting them through phospholipidic bilayers.

In Africa, this drug is given -- liberally -- to treat river blindness. 

From a reader:

So, here's why the case numbers are so low in that belt of Africa.  Guess what is widely distributed to treat river blindness.  And this chart is from the World Health Organization.

Numbers are from Johns Hopkins.

The audacity of "regulators" to force vaccination using EUA vaccines with less than one year's experience, while refusing to allow physicians to prescribe one of the safest drugs ever. And cheapest. To actually treat a deadly virus. 

How about a controlled study? Allow use of ivermectin in Florida but not in California.

Tribes Ask For Extension -- DAPL Update -- August 31, 2021

Re-posting:

Tribes ask for six-month extension: the US Army Corps of Engineers has decided to extend its timeframe for completing a court-ordered environmental study on the DAPL, according to information posted on the federal agency's Dakota Access project page. Link here.  Link to Williston Herald. 

According to court records, the Corps had been asked by tribes to extend the schedule by six months, and the federal agency said then it was considering granting the request. The decision will put publication of the Dakota Access pipeline’s final EIS somewhere around September of next year.

The outcome of the study will be a deciding factor in whether the U.S. Army Corps of Engineers reissues the easement for the Lake Oahe crossing, which was revoked last year.

Judge James Boasberg ruled that due to its controversial nature, NEPA required the Corps to complete the longer Environmental Impact Statement instead of the shorter Environmental Assessment when evaluating the pipeline’s easement to cross 90 feet below Lake Oahe.

Flashback: NASDAQ 100 / S&P 500 -- Update -- August 31, 2021

ZeroHedge a year ago. NASDAQ 100 / S&P 500 = 3.30

Nope, we did not peak? But pretty close. Today:

15,233 / 4,521 = 3.37

On another note, the S&P 500 has 328 all-time highs since the start of 2013. This is one more than the epic run from 1989 - 2000 in which the S&P 500 hit 327 all-time highs. Link here. Tea leaves suggest the current run is not yet over.

For 2021, to date: 53 record highs recorded. Link here.

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Europe, energy: unstoppable, natural gas, electricity and CO2 prices in Europe are setting new highs today, August 30, 2021. Triple-digit electricity prices are becoming common across Europe. Spanish day-ahead electricity prices are soaring. See next item.

Europe, energy: another day, another price increase for European power and natural gas. UK natural gas surges to an all-time high, traing above the equivalent of $17 per mBtu.

Meanwhile in Spain, the poster child for renewable energy, day-ahead electricity prices surge above $156 per MWh. And this is before winter arrives. Link here. 

Got coal? Rising energy prices send German inflation to 13-year high. Link to Tsvetana Paraskova.

No Wells Coming Off The Confidential List -- August 31, 2021

Feelin' good: think about it. Resident Biden can say he was first US president ever (fact check, please) to govern a US when not at war somewhere in the world. Well, I guess we sort of have that Korean War that has not formally ended (fact check, please). Last US flight out of Kabul was August 30, 2021, a day ahead of the deadline.

Prediction: next week, Wednesday, September 8, 2021 -- there will not be one mention of Afghanistan on ABC Nightly News with David Muir. If I'm wrong, I'm wrong by a week or so. We seldom heard about Afghanistan when there WAS a US presence in that country.

Well, that was fast: Pemex says it has restored all of the 420,000 bopd of oil production that was taken off line by the fire. Link here.

Apple, Inc.: acquires classical music service Primephone, will fold it into Apple Music. Link here.

Ten-year treasury: yield is up a bit today, and now at a negative 0.394%. In other words, if you are buying these bonds, you are paying the government about half-a-percent to hold that money for a year. One more thing: that's the German ten-year bond.

Ten-year treasury: in the US, the TYT is paying 1.28%. Up until yesterday, the yield had been increasing ever so slowly suggesting a move toward 1.4%. Today, back below 1.3%.

Shale operators: switching from DUCs to drilling. Link to ArgusMedia. 

US shale producers remain determined to restrain spending until oil market fundamentals strengthen, despite record cash generation so far this year.

But tight oil output is now rising, as well productivity gains deliver more supply from less investment. "We can do what we once had to do with 10 rigs with eight now in the Midland basin," Diamondback Energy chief financial officer Kaes Van't Hof says. "We're decreasing the number of rigs and crews we need to execute this year's capital plan," and "slightly increasing our Permian oil production guidance, which should not be taken as a conscious decision to grow", the firm's chief executive Travis Stice says.

Output from the seven major shale formations covered by the EIA's monthly Drilling Productivity Report (DPR) is accelerating as production from new wells exceeds legacy declines from existing wells (see graph). DPR-7 output rose by nearly 17,000 b/d in July and is expected to grow by over 31,000 b/d in August and nearly 48,000 b/d in September, the latest EIA report says. Most of the increase is from the Permian basin in Texas and New Mexico, where output rose by nearly 48,000 b/d in July, but net decline rates are also slowing across other shale regions.

Much of the output growth from new wells comes from a huge surplus of drilled-but-uncompleted (DUC) wells that accumulated in 2019 before the Covid-19 pandemic struck, as operators drilled more wells than they brought on stream. Drilling and completion activity slumped to barely a quarter of pre-pandemic levels by July last year after oil prices collapsed. But completions were the first to recover, rising to 80pc of pre-pandemic levels by last month, compared with just 50pc for wells drilled (see graph).

Shale firms completed 60pc more wells than they drilled over the past 12 months as they drew heavily on their DUC well inventory to keep spending in check. Bringing DUC wells on stream costs about 60pc of the expenditure that was required for drilling and completing new wells in 2020, consultants Rystad Energy say. But most of the DUC well surplus has been used up and firms are now drilling more wells to offset legacy declines. Rig counts are rising faster than completion crews (frac spreads) as the balance of activity tilts back to drilling new wells in the second half of this year. The number of US onshore rigs drilling for oil is up by 13pc from the end of May, oil service firm Baker Hughes says, compared with a 4pc increase in frac spreads logged by industry monitor Primary Vision (see graph).

Most of the bigger companies remain cautious about growing output. "We have no intention of adding incremental barrels... until demand-side fundamentals improve and it becomes evident that Opec+ spare capacity is effectively absorbed by world markets," Devon Energy chief executive Rick Muncrief says.

Much, much more at the link. 

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Back to the Bakken

Tribes ask for six-month extension: the US Army Corps of Engineers has decided to extend its timeframe for completing a court-ordered environmental study on the DAPL, according to information posted on the federal agency's Dakota Access project page. Link here.  Link to Williston Herald. 

According to court records, the Corps had been asked by tribes to extend the schedule by six months, and the federal agency said then it was considering granting the request. The decision will put publication of the Dakota Access pipeline’s final EIS somewhere around September of next year.

The outcome of the study will be a deciding factor in whether the U.S. Army Corps of Engineers reissues the easement for the Lake Oahe crossing, which was revoked last year.

Judge James Boasberg ruled that due to its controversial nature, NEPA required the Corps to complete the longer Environmental Impact Statement instead of the shorter Environmental Assessment when evaluating the pipeline’s easement to cross 90 feet below Lake Oahe.

Active rigs: current tally posted COB on daily activity report. 

	8/31/2021	08/31/2020	08/31/2019	08/31/2018	08/31/2017
Active Rigs	24*	10	64	63	55

No wells coming off the confidential list today.

RBN Energy: the liquefaction train ramp-up process and timelines.

The year-on-year gain in U.S. LNG feedgas demand has been the single biggest factor behind the soaring natural gas prices and storage shortfall this year. And there is more of that demand on the horizon. Cheniere Energy’s Sabine Pass Train 6 and Venture Global’s new Calcasieu Pass facility are due to start service in the first half of 2022. However, feedgas volume is likely to ramp up ahead of the new year as both projects progress through the commissioning phase and aim to export their first commissioning cargoes before the end of the year. How soon could that incremental feedgas demand show up? Getting a handle on the timing requires an understanding of how a liquefaction plant works and the various steps of the commissioning process. Today, we start a short series on what’s involved when bringing a liquefaction plant online and what that can tell us about the timing of incremental feedgas flows this fall/winter.

Turning back to the topic of today’s blog — the commissioning stages and timing of new feedgas demand this fall — when we last discussed the process of starting up new liquefaction trains back in 2019, LNG feedgas deliveries were just topping 5 Bcf/d, but there was no less than 30 million metric tons per annum (MMtpa), equivalent to ~4 Bcf/d of liquefaction capacity, that was scheduled to come online over the course of that year. There’s nowhere near that amount of liquefaction due online in the next few months or even in the next couple of years. Nevertheless, feedgas requirements of LNG export facilities have been just as big a driver of the Lower 48 gas market this year as they were back then and will continue to be closely watched heading into this winter.