"Focus On Fracking" -- Coming Up Next -- March 20, 2022

WTI:

• up over 3% now; 10:17 p.m. CT
• up $3.30 / bbl
• now at $108.00 / bbl
• it feels real this time

Gasoline in our neighborhood tonight:

• regular unleaded: $3.99 / gallon
• diesel: $4.89 / gallon

EVs: we've talked about this so many times, and have been talking about it for years, I have no sympathy. None whatsoever. 

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Good Night

I'm absolutely exhausted -- mentally. I can't do any more tonight.

I must have twenty-three more data points, articles that need to be linked, replies to readers, but I just can't do it. 

So, I'm going to sign off for the night. E-mail and comments will have to wait until tomorrow. Sorry.

But there is just too much happening. To see the price of oil rising like it is tonight is simply too much, overwhelming, too many story lines. I don't think folks in Washington (DC) know how to deal with this. 

If that's accurate -- that folks in Washington (DC) don't know to deal with this -- this is very, very scary.

The mainstream media is not helping. I think most egregious reporting / analysis this week was ABC News telling us that US Congress did not vote themselves a 21% pay raise in the middle of the night. In fact, they did, and I posted my reason a couple of days ago. Even The Bismarck Tribune tried to tell us that US Congress did not vote themselves a 21% pay raise this past week.

 It is amazing that Saudi Arabia won't take telephone calls from President Biden and that the UAE and Saudi Arabia would not meet with the US Secretary of State. Amazing. 

So, I'm beat. But I'll be back tomorrow. 

Meanwhile, watch for this week's edition of "Focus on Fracking" later tonight. Just to make sure folks know: I have nothing to do with "Focus on Fracking." It's posted by someone completely unrelated to my blog, but must have started blogging about the same time I did. He knows so much more about the oil sector than I do, and follows it much more closely than I do -- way more than I could ever do. His weekly notes are incredible, for all the detail.

Oil Is Surging Again -- March 20, 2022

Not ready for prime time. This is really poorly written; I am unable to articulate what I'm thinking. I couldn't do it under best of circumstances but I'm distracted by:

• March Madness
• NIT: granddaughter's college team -- Vanderbilt, #4 -- beat #1 Dayton in overtime and advances;
  
• granddaughter's soccer tournament in Phoenix this weekend;
• they lost this evening's game
• Olivia got a yellow card but coach was proud of her; she prevented a breakaway goal
  
• NASCAR;
• beautiful, beautiful weather
• I'm watching women's basketball: #1 Stanford is destroying #8 Kansas, absolutely destroying Kansas; with five minutes to play in regulation time, Stanford is winning 80 to 48;
• books I want to read;
• too many great movies to watch: the new MacBeth on Apple TV; the old Midnight in Paris on Hulu;
• this MacBeth is incredibly interesting;
• Joel Coen movie; Frances McDormand as Lady MacBeth; Denzel Washington as Macbeth.
  
• and all the blogging that needs to be done.

A week ago -- or whenever it was -- when WTI surged almost $10 overnight -- on a Sunday night -- it didn't feel real; it felt very, very surreal. I don't think anyone thought it was "good."

Tonight I see WTI is up almost 3%; up $3.15; and trading at $107.80. Likewise, Brent is up almost 3% and trading at $111.10.

But this time, it feels very, very real.  

Several immediate thoughts:

• the Ukraine-Russian war is not driving the price of oil, except for the sanctions; there is a distinction; I'm too tired to explain what I'm trying to say;
• "inflation" is not driving the price of oil at this point; again, I'm too tired to explain, expand; some folks get it; in the big scheme of things, the price of gasoline is "disconnected" from inflation, either the price of oil causing inflation or inflation driving the price of oil higher.
  
• the "myth" of spare capacity is not a myth
• if this is true, and I think it is, it is the greatest of ironies that just as "we" hit "peak production" in the Mideast, is the exact time that the current administration decided to cut production in the US, as did the Canadians (one word: pipelines)
  
• Saudi Arabia is not taking phone calls from Joe Biden; UAE and Saudi Arabia refused to meet with the US Secretary of State; mainstream media is missing the tectonic changes in the world order
• it seems that a lot of folks are still underestimating the global economy following the pandemic lock down;
• there's a lot of talk about "demand destruction" and a lot of talk about how the price of airline tickets will stymie travel. I don't think so. The high price of Disney theme parks seems not to be cutting down on park attendance. If there's enough money for Disney theme parks, there's more than enough money for gasoline and airline tickets. If a $500 plane ticket now costs $650, folks will find a way of saving $150 somewhere else, or saving less or investing less; it will be interesting to see which industries or sectors are hit hardest by inflation.

Disney Theme Park Prices -- Outrageously Expensive? March 20, 2022

Earlier today I said I was going to write three essays today, the third being an essay on the price of visiting Disney theme parks. 

This came up when a reader sent me a link to an article how expensive it would be for a family to visit a Disney theme park this year. 

I no longer have a dog in that fight. I have visited Disneyland not less than a dozen times over the years. I was never disappointed. 

Whether it's expensive or not is in the eye of the beholder. 

I know I could not afford to go this year if I had a family of four or six (spouse plus three or four children).

However, having said that, when Disney can price the experience at the rate they do, and yet the parks are still filled shoulder-to-shoulder, it tells me one thing: there's a lot of money out there. A lot of money.

Many Folks Have No Idea How Much Money Will Be Pulled Out Of Traditional IRAs Over The Next Quarter Century And Beyond -- March 20, 2022

From The WSJ over the weekend: 

Older Americans, flush with housing and stock portfolio wealth, poised to revive spending this year. Consumers are 65 and older are boosting their spending as Omicron fades.

If you link to this article, two things:

• age 65 is an important milestone, an important demographic, but 72 is a much more important milestone, a much more important demographic than 65 when it comes to personal finances; and,
• the majority of folks responding to this article do not buy the thesis of this article. 

Why 72?

This article targets the very wealthy, based on the comments the article received.

But there's a subset just below the very wealthy: the new wealthy or new wealthy with a FOMO, a YOLO, and a nothing-to-lose attitude. 

Two things not mentioned in the article:

• by age 72, everyone who is eligible for social security will be taking it; the wealthy generally wait until social security benefits max out and that's at age 70 for most, not age 65; and,
• RMDs: this is the "killer." I don't think the "new wealthy" or "near wealthy" really understand how much money they will be withdrawing from their traditional IRAs every year once they reach age 72; 
• most interesting and I think this is a bigger story than most folks realize: inherited IRAs after 2020 have no annual RMDs but the traditional IRAs must be completely depleted within ten years. 
• many beneficiaries will not withdraw any of that money until the last moment
  

Yes, much of that money that is withdrawn will be re-invested, but a lot of folks are going to spend a bit of that money on traveling or hobbies. 

Berkshire Hathaway: This Isn't Supposed To Happen -- A Closer Look -- March 20, 2022

Note: Op-ed. How I see things. If this is important to you, go to the source.

I'm not sure if BRK-B hit new all-time 52-week highs three consecutive days last week or not. 

If I'm reading the Yahoo!Finance site correctly, BRK-B hit new all-time 52-week highs last week, Wednesday, Thursday, and Friday. BRK-B closed at 52-week all-time highs on Wednesday and Thursday, but on Friday, after hitting a 52-week all-time high for the third consecutive day dropped back at the end of the day to close at $342.41, down from the intra-day high of $346.87. 

BRK-B is a value stock; it's not supposed to be moving this high this quickly. 

So, what's going on.

Most folks are focused on:

• Charlie Munger: killing it! And,
• Warren Buffett: killing it!

Prior to the weekend, the big stories that were moving BRK-B:

• China, reversing course, said it would support the market and re-opened Shenzeng, which made Charlie Munger's bet on Alibaba look brilliant.

• Meanwhile, excitement in the oil patch, especially OXY, made Buffett look like a genius.

But there's a third story It broke over the weekend.

Although the stories are conflicting, it sounds like Canadian Pacific has locked out the union. If not, the union sounds like it's not having its workers report to work on Monday.

West of the Mississippi, or thereabouts, there are three -- and only three major railroads:

• BNSF: wholly owned by Warren Buffett's Berkshire Hathaway
• UNP; and,
• CP with its partnership with KSU (more on that later). 

It's worth repeating: Rail transport comprised only 9% of Berkshire's total revenue, but it generated over 25% of total EBT.

From an earlier post:

Buffett:

• BNSF? Best buy ever? How Berkshire Hathaway makes money, Investopedia; 
• BNSF Railway Berkshire's freight rail transportation business operates one of the largest systems in North America. BNSF Railway ships coal as well as consumer, industrial, and agricultural products.
• BNSF Railway's revenue fell 11.3% in 2020 to $20.9 billion as EBT fell 6.3% to $6.8 billion. Rail transport comprised only 9% of Berkshire's total revenue, but it generated over 25% of total EBT.
  

When the media reports BRK's stock portfolio, they generally do not include the companies Warren owns outright. Look at BNSF:

On another note, AAPL, comprising 43% of BRK's entire equity portfolio is trading at recent lows. Once AAPL gets back on track, BRK is going to look even better.

So, bottom line, hitting on all cylinders, BRK:

• the China story, thumbs up;
• oil and OXY, thumbs up;
• Apple and AAPL, thumbs up; and,
• now, CN could face work stoppages, benefiting UNP and BNSF.

I'm looking for UNP and BRK-B having another good week.

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The CP-KSU Merger

Now, back to the CP-KSU merger. 

It's gonna happen but it's not over yet.

Shareholders voted to approve the merger and to the best of my knowledge, the KSU shareholders already got their $90 / KSU share and their CP shares. 

The final regulator to approve the deal says CP has supplied all necessary paperwork.

UNP is contesting but I doubt it will go anywhere. 

The procedural schedule is here. 

Only date of interest too most folks: July 1, 2022.

Final briefs are due July 1, 2022.

I assume the final regulator, thee Surface Transportation Board, will announces its decision on or before December 31, 2022.