Russia and Saudis Rack up Billions from Bet on Oil Cuts
The Wall Street Journal
The million barrel per day cut engineered by Russia and Saudi has produced the desired effect, and confirmed our prediction of higher prices from the $70 level. So much for making Prince Salman a pariah, thanks Team Biden.
The Permian Basin is literally the most active oil field in the U.S. The rig count has fallen 12% to 314 since the end of April. Pre-pandemic, Exxon was operating 65 rigs, now just 17 in the Basin. The energy industry is under more pressure to return funds via stock buy backs and dividends to shareholders than to do more fracking.
West Texas Crude is see-sawing back and forth across the $90 level. It is not much of a guess to say that $100 lies ahead, at least for Brent.
Our prediction for lower stock and higher oil prices has worked well. The guess at a pause for interest rate increases, well not in the last two weeks. The thirty-year bond is up over a full point Friday morning. Municipal bond funds also seem looking for a bottom after quite a fall the last two months.
Mortgage rates have zoomed to 7.3%. No surprise, home prices have ceased rising; sales are in decline. The same is true for shares of homebuilders.
While inflation has been making headlines, expect deflation, falling prices, to emerge as the new trend. In the last two years, the Thirty-year bond has fallen in price from 170 to 115. Conversely short term interest rates have risen from half a percent to 5.56%.
Your brokerage firm can buy three-month Treasury Bills at near no cost. This maximizes your returns while insulating you from stock market jitters. And if rates continue increasing, you get to re-set in three months.
Congress, our national asylum for the incompetent (thanks Mark Twain), is only proficient at attacking one another. The Federal Government will shut down Saturday night if nothing else is done.
The Republicans begin an impeachment inquiry. Donald Trump is guilty of inflating real estate values. Well, who has not done that from Evergrande and Country Garden in China to most any office building in the U.S.?
Problems abound. Migrants flood across what used to be our southern border. New York City cannot cope with the influx of a few thousand. Smash and grab thefts are causing store closings. The number of births to single mothers has now risen to 50%. Fentanyl deaths are 100,000 per year. Higher interest rates will take more and more of the Federal Budget. The UAW is striking more plants of the Big Three.
The move from positive to negative social mood leads to a bear market.
