A Rolling Expansion -- Barron's -- Someone Must Be Reading The Blog -- June 22, 2023

Locator: 45011ECON.

I'm ending my blogging for the morning. I have to digest all the news that's been reported in the past couple of hours.

The most important article to read today:

• Barron's, link here. Archived.
  
• I have the whole article; it's currently behind a paywall.
• will provide data points from this article later today.
• agree, 1000%; see my notes posted earlier.

A Rolling Expansion -- Barron's -- Someone Must Be Reading The Blog -- June 22, 2023

Locator: 45010ECON.

I'm ending my blogging for the morning. I have to digest all the news that's been reported in the past couple of hours.

The most important article to read today:

• Barron's, link here. Archived.
  
• I have the whole article; it's currently behind a paywall.
• will provide data points from this article later today.
• agree, 1000%; see my notes posted earlier: 

************************
What Can I Say?

Link here.

I assume the next quote will be:  “There are three kinds of lies: lies, damned lies, and statistics.” 

And then there are graphs.

 

15%!! I had forgotten that it got that bad. And note:

• the duration; and,
• the area under the curve -- the Carter administration.
• something Americans had never seen / experienced in their lifetime except during short period in WWII when inflation was not exactly the nation's #1 concern.

One president leaves office one day, and the next day inflation jumps to 10%. And so it goes. The Carter timeline and the Carter graphic -- completely different than the current timeline and current graphic. 

And yet that is still the meme.

Eggs? $1.19 / dozen at Target.

We just renewed our lease. The increase was inconsequential -- on a monthly basis less than what I spend at Starbucks monthly.

Weekly EIA Petroleum Report -- June 22, 2023

Locator: 45009WTI.

Weekly EIA petroleum report:

• US crude oil inventories decreased by a remarkable 3.8 million bbls and yet the price of WTI fell significantly after the report:
• US crude oil inventories, at 463.3 million bbls, are at the country's five-year average, which is concerning considering two of these past five years were greatly "negatively" impacted by a global economy shutdown;
• refiners are having trouble keeping up despite operating at 93.1% of capacity;
• gasoline production decreased last week, despite nice profit margins for refiners
• distillate production did increase (good news) but distillate inventories barely budged and remain 14% below the five-year average -- explains why price of diesel is near that of gasoline;
  
• propane inventories: at an unbelievable 27% above the five-year average but who cares, until harvesting, which will begin soon in the south, followed later in the midwest;
  
• airlines, one bright spot: jet fuel product supplied was up 3.1% compared with same foour-week period last year.

WTI:

• drops 4.3% after the report (JPow is scaring investors; any means necessary to bring down inflation)
• drops $3.12 / bbls (holy mackerel; is anyone paying attention?)
• now below $70; at $69.41

Saudi Arabia: in a panic.

Back To The Bakken -- June 22, 2023

Locator: 45008B.

WTI: $69.82.

Monday, June 26, 2023: 37 for the month; 145 for the quarter, 400 for the year
None.

Sunday, June 25, 2023: 37 for the month; 145 for the quarter, 400 for the year
None.

Saturday, June 24, 2023: 37 for the month; 145 for the quarter, 400 for the year
None.

Friday, June 23, 2023: 37 for the month; 145 for the quarter, 400 for the year
None.

Thursday, June 22, 2023: 37 for the month; 145 for the quarter, 400 for the year
None

RBN Energy: Corpus Christi Channel dredging is poised to boost oil export economics.

A long-planned ship-channel deepening and widening project in Corpus Christi Bay is in its last innings and is about to start having a real impact. Later this summer, a 7-foot-deeper channel at Ingleside will enable terminals there to load additional barrels into VLCCs, assuming they’ve dredged their berths to match the deeper channel. Deepening the channel to 54 feet (from the old 47 feet) also will enable terminals that have deepened their berths to fully load 1-MMbbl Suezmaxes, up from the 800-850 Mbbl that can be loaded now. Crude oil export economics in South Texas will get another boost in late 2024 when the fourth and final portion of the $680 million dredging project is completed. In today’s RBN blog, we discuss the dredging project, its steady progress, and its impact on the “battle for barrels” among Corpus, the Houston area and a quartet of proposed offshore terminals.

Rambling Thoughts On Where The Economy Stands And How Investors Should See The Situation -- June 22, 2023

If the market turns green today …

Locator: 45007ECON. 

I was delayed in blogging this morning for a variety of reasons. 

I'll get to the Bakken in a few minutes, but after going through the usual business sites, political sites, etc., earlier this morning, these are my thoughts on investing and the US economy.

Three overriding points:

• the US is in an incredibly good place;
• stay-flation, not stagflation.
• expect a very, very scary summer.

Expanding on these thoughts:

• the US is in an incredibly good place in terms of an expansive economy and full employment.
• JPow and the Fed will have more success in bringing the stock market down (bad news?) than in any success in bringing down inflation.
• if the Fed wants to "destroy" the stock market, they just need to keep doing what they're doing;
• hawkish talk
• raising rates
• my hunch: four more hikes this year, not two -- or at least credible threats to raise four more times.
• inflation will get worse before it gets better
• the market will really, really scare investors in August, and perhaps as early as July as the "bottom" appears to fall out of the market, going well below the "floor" most investors can handle emotionally or psychologically;
• once the market starts to fall, it will seem to go into free fall
• first, NASDAQ, then the Dow;
  
• the market's downward move will be at odds with an expanding economy
• the downward move will be driven by computer algorithms and misplaced emotions by humans
  
• once the downward move begins, talking heads on CNBC will continue "to talk the market down"
• it may or may not be a recession but for investors it will feel like a recession
  
• recovery of the stock market won't be in the cards for months
• the autumn of discontent
• stay-flation: not stagflation
• by the "true" definition of the word, this will not be stagflation:
• stagflation has three components including high (=10%) unemployment
• the other two components: contracting economy (negative GDP); high inlation
• in other words, inflation is just one of the three components of stagflation
• high unemployment is the big driver for government action in the EU and UK
  
• high unemployment does not carry the same weight in the US
• for the US, "inflation" drives government action
  
• this won't be "stagflation": this will be "stay-flation" -- one component: unrelenting inflation
  
• expanding economy
• unremitting inflation with a reset to a new normal (4% to 5%)
• low unemployment
• as usual, things will be made worse by "the government's" action, rather than by inaction
• just as with Covid-19: the government's response made things much worse than they would have been had the government stepped back a bit, rather than going the full Monty to stop the pandemic which was pretty much impossible regardless what the government did
• likewise, the harder JPow and the Fed try to reach the 2% inflation target, the worse they will make things
• folks will ask whether a hard landing (or worse) was worth it to get to 4% inflation as the new norm, once politicians / Americans see the impossibility of 2% inflation when the Fed is acting alone.
• the Fed acting alone, cannot get inflation to 2%
• too much money chasing too few goods
• too few goods: supply chain woes
• supply chain woes will be aggravated by the Fed raising rates
• pilots will understand this analogy: a flat spin --> is made worse by (inaccurate) pilot input --> fatal flat spin
• US economy is on fire, doing great; too many folks (e.g., JPow and the Fed) see a risk of the US economy going into the equivalent of a flat spin, and with by injecting inappropriate actions (i.e., "pilot error") will put the economy into a "flat spin" (hard landing)
• my hunch: there are Nobel laureates out there strongly advising JPow and the Fed to back off, let the economy take care of itself.
  

For investors:

• huge buying opportunities between now and end of September as the market resets
• long-term: investors will do just fine as long as they stay the course.