Meet Etibar Eyyub, oil trader from Azerbaijan who founded Nord Axis in Hong Kong nine days before the Russian invasion of Ukraine. Nord Axis partners with Coral’s founder, Tahir Garayev. The two find buyers for Russian oil all over the world. The transactions route through various shell companies across the mid-East. The result is that despite so called sanctions by the U.S. on Russia, a steady stream of income flows to Rosneft, Russia’s main oil producer.
Only the U.S. State Department seems surprised. Mr. Putin knew the West would impose all sorts of sanctions against his invasion. He constructed a conduit to sell Russian oil when he would most need the revenue. One has to wonder how James Bond author Ian Fleming would have 007 deployed to countries unknown to his readers in the 1950s and 1960s.
West Texas Intermediate has not traded over $80 since last November.
The percent of S&P energy firms in bullish chart position hovers around 50%. Last week I suggested the attraction of Apache which has fallen from $45 to then $31-32. Today it is on sale for $30.15. This is deflationary not inflationary.
Speaking of deflation, have readers checked on the latest Chinese ghost city videos? Evergrande, the largest China developer, is no more. A Hong Kong court ordered its final liquidation leaving thousands of unfinished multi-story buildings. Elsewhere unfinished mini-mansions form entire ghost neighborhoods.
And then there is Nvidia (NVDA). This maker of chips for Artificial Intelligence is the latest mania. To be fair, it does make money, lots of it. Revenue for its data center chips is five times what it was a year ago. Market cap now approaches $2 trillion. NVDA has soared from $675 to $802 in the last three days. Investors are buying call options with a $1,300 strike price, requiring a share price of that level to exercise. That translates to a $3 trillion valuation.
But the headlines are incorrect. Nvidia Shares Ignite Markets Across the Globe. This is backwards. Rather it is frothy social mood towards stocks that has launched prices higher. Short term this has been happening since last October 30. Now the price of NVDA has gone vertical thanks to investor mania for tech stocks. Markets in vertical position, further analysis not possible one might say, at least for a top tick in NVDA.
It is not the start of a new bull market. Rather we are entering that final period of October 1929, 1987, March 2000, and summer 2007. Teenagers are investing, households have own their largest share of stocks ever. Margin debt, borrowing to buy stocks, is at record highs. As a finishing flourish, the U.S. is back on the moon, first time since the 1970s.
Seasonally the fall rally lasts through tax day, April 15. I expect this one extends into May and June. We will re-evaluate then. Until then party like Spuds MacKenzie is back again.
