Drill me a well next week. It isn’t going to happen. You just can’t get the stuff to do it.
Jamie Small, CEO Element Petroleum III
The price of oil fell from year 2014 at $100 to less than $20 in 2020 and now back to $100. Supply chain woes have resulted in shortages of everything from drill pipe to computer chips. Annual production in 2014 was 20% higher than what is now being produced. The market volatility has everyone in the oil patch cautious, how long will triple digit prices last this time?
Let’s go big picture for an analysis.
The Reuters CRB Index tracks 28 commodity prices. 33% of them are petroleum related. Like so many indexes, it bottomed in March 2020 at a value of 100. It has tripled since to 300. It is now overbought and has completed a short-term terminal pattern. My best guess is that as inflation news hits the general media front pages, we will have a pullback in prices. 220 looks like a logical spot.
Crude oil has also completed a five-wave pattern vaulting from $10 to $130 in the same time frame. Since the February top, West Texas Intermediate has been stair-stepping down marking lower highs. Support has been around $95. A logical pullback would be to the $80-85 area.
Volatility is back in the stock market. The Volatility Index VIX has soared from 18 to 32-38 and back no less than seven times since November. Our position is that the major stock indexes all topped between November 2021 and January this year. The drops in the popular social media and streaming stocks support this view. Cathie Woods’ ARKK fund is the poster child for the decline. It hit $160 in February 2021 and now trades at $49. It is literally a fund of companies not making any net profit.
Team Biden and the FED have injected trillions of dollars into the economy resulting in 8.5% inflation. Add the pullout in Afghanistan and the open border mess, and well, what train wreck is next? Looking to grab some votes from younger college graduates while facing approval numbers around 35%, we’ll forgive some of the $1.8 trillion in college loan debt.
No doubt this will receive the same ‘do it now think of the consequences later’ as other undertakings. The announcement will be in two weeks. Here are a few questions.
- Will loan forgiveness result in 1099 income for the amount erased?
- What of those who paid their loans back?
- What about those in the pipeline now borrowing? Did their loan become a grant?
- Will a Republican House move to cap total individual student debt?
- Unlimited borrowing has allowed universities to endlessly raise tuition and fees. Will this start a final day of reckoning? Will higher ed finally face a cap on their prices?
Stay tuned, untangling the college debt fiasco will be quite a can of worms.
