ELAM: Rates hit new highs

Our prediction of higher oil prices from the $70 level worked well. Crude exceeded $90 this week. It is looking a bit toppy now and energy stocks are hitting new highs.

Unleaded gasoline futures for November have crept to $2.57, about $3.50 at the pump. This trend remains in place.

Natural gas futures have risen from $2.10 last April to $2.84 as winter approaches. I expect prices to continue to rise. The vagaries of the Biden energy policies are not encouraging exploration. Wind projects are being cancelled. So we have the worst of all worlds, higher prices and a renewed dependency on sources outside the U.S. Welcome to Bidenomics.

Has anyone noticed Team Biden is supporting both sides in the Ukraine conflict? Every few weeks he sends Blinken and another billion dollars or so to Ukraine. This is enough to prolong but not win the war. Meanwhile, he continues his war on fossil fuels. This has helped Putin a great deal, another $20 rise will buy lots of howitzer shells. How about picking one side or the other, eh President Biden?

Our prediction of a bond rally, lower rates has not worked as well, at least not this week. The FED announced only one more rate hike. Their predictions are dubious at best. Recall the one regarding transitory inflation as well as keeping rates too low, too long. The market had different ideas and immediately dropped the value of the thirty-year bond 200 basis points. This is a gap lower and a spike down to a new recent low. Three month Treasury bills were near zero yield at January 2022. They just hit a new high of 5.3% after 21 months of rally. The long bond needs a close over 119 basis December to reverse trend. It is now trading at 116.21.

The seven FANG stocks are disguising the bear market which is still over 34,000 for the DJIA. Here are two more clues. High end furniture retailer Louis Shanks, around since 1945, is shutting its doors. I would expect that after a big fall in the market but it is occurring now. The remaining stores are in Austin and San Antonio.

Cullen Frost Bank (CFR) makes millions of dollars in profit and has raised the dividend. Still it has lost 45% of market value in the last year, that is a bear market. Amazon is down 6% this week, NFLX down 3%, GOOGL 4%, MSFT down 3%, and Technology XLK about 3%. Look for a short rally the next couple of weeks.