SharperDingaan

'Energy Independence' just means reduced price volatility. A business environment that is predictable enough to enable investment in long-term infrastructure, that's it. The benefit being that when you really need that oil/gas, you have some. It's a put on the downside, there's a cost to do that, and 'we the people' pay it because its the most practical solution. As has already been pointed out, the issue isn't just supply, it's the massive inventory. The smartest solution is to just shut everything in for 3 months, pay people to stay home, and meet the demand from inventory. In the West, with Corona everywhere, we are already paying people to stay home - and for months. The ME and Russia is not going to shut-in unless forced, the NA tariff wall is just the club. There will be shut-in production in NA as well, but we'll just get the higher tariff price, and the business stability to permit the mega-projects to go forward. Everybody benefits. Sure there's lots of screaming. So do your kids, when you take away the TV. SD

Keep in mind too, that the price behind the tariff can be periodically changed as well. Most would be OK with a minimum price enabling NA security of supply, and world price for anything above that. SD

Everyone, together, either cuts back 10-15M bbl/d (& maintains it), or a NA tariff goes up. The US may accept some cut-back, but not a lot, as they have the tarif wall to fall back on. Muscular negotiation. SD

Trump just puts the tariff up, and then talks. The opening ante is a 12.5 million bbl/d cut, for a couple of months. Don't care how you do it. SD

10 MBOPD OPEC + Russia cut isn't going to happen. That is around the same amount Saudi Arabia typically produces! They both have covid-19. Shut in almost entirely for 2-3 months, and sell from storage. SD

The number being discussed is 15M bbl/day ... and this is before Fridays WH oil major discussion. WCP +23% SD

If you take out NA demand you also have to take out NA supply. US won't be exporting anything at 20 bucks a barrel. so I'm not sure if the price would collapse. US would just disappear from both the supply and demand side. I do realize I'm oversimplifying because certain refineries are geared towards certain types of crude. But big picture, I don't follow that the global Brent price has to collapse in a US tariff scenario. Big picture is China, India, and EU on the consumption side. Russia, ME, Others on the supply. Storage is full. Demand has collapsed, so either supply cuts back < demand, or the margins go to zero. SA/Russia unlikely to cooperate, so EU/Brent production shuts in. EU joins the NA tariff wall, that is now 40% of consumption. EU/Brent production restarts, and stability. SA/Russia fight it out for the remaining demand. US/EU protection looks the other way, and just maintains its arms agreements. How long do you think those SA facilities remain in one piece, should rivals and neighbours gang up? And when selling replacement weapons is just good business? NA also doesn't have to produce the oil that it dumps. It just sells ME paper oil at today's prices, and closes out by taking tomorrows spot rate physical delivery at the specialized on-shore refineries. And it's not even 'dumping' because NA didn't produce it ;D SD

Just to throw some things out ... The WH meeting with the heads of the oil majors, is no different to when Bernanke met with the heads of US banks. It's 'here's what we're going to do' ... not a discussion. Our own thoughts are tariffs by the end of April. It's probably the opening round of muscular 'negotiation'. Do versus talk, and stability until the economy is back to what it was. 12 months+ People are being paid to stay home anyway, with $QE, so most realized 2nd order effects will be external. The game changer is India. Covid-19 is now starting to bite, and much of their in-sourced production is reversing. As China did, their oil consumption is going to collapse. China's consumption isn't going back to what it was, while NA/Europe is dealing with Covid. Take out NA consumption, and the external price must drop like a brick. But nice and cosy, 'inside' the tarif wall. No point to storage, and this strands whatever external storage is already there, if the external price is going lower. And it WILL go lower - as nothing prevents the NA block from dumping into the external market. Swing production is a bitch. Allow the EU into the circle, and the US/Europe can leave the ME. Done being policeman, and don't need to, as we're now largely self-sufficient. And for a very long time. So, gentlemen .... let's negotiate. SD

That's the one. Other interesting bits ... If the Coronavirus has taught us anything, it’s that supply chains essential to life in America should not be outsourced. Move energy and pharmaceuticals and all other essentials back home. We’re safer that way. You’ll be creating homegrown jobs and we won’t have to kiss anyone’s backside. Not mentioned is the shale industry bail-out being discussed. The domestic o/g supply chain will be controlled by the majors, via bankruptcy buy-outs funded through QE dollars. Leases pass into more disciplined hands, and the oil gets bled off responsibly - to leave the underlying gas fields. SD

Would you buy in anticipation of such a tariff, SD? Already have. Not to talk the book but look at WCP, IPL, MTL, etc. on the TSX. WCP has cut its dividend 50%, cut its capex spend, pays monthly, and has a cash yield of 17%+. Tariff wall goes up, the dividend gets restored, and its 35%. Nothing else happens and you double your money in 2 yrs. SD

The US, Canada, and Mexico make up roughly 24% of global oil consumption. The EU is another 15%. Net the two regions together, and they are largely self-sufficient in the supply of oil/gas. Most folks expect the emergence of a tariff wall around these regions within the next few months. Most likely a NA tariff first at around USD 62 WTI. EU to join later at a pegged Brent-WTI spread. We end up with a cartel of supply (Opec+), plus a cartel of demand (The West). Game changer. We live in interesting times. SD

Just so that it might inspire others ... My partners and I have done very well swing-trading the markets. So far we're up roughly 3x YTD, on a little skill, and mostly luck. Comes normality again, the cash yield on our FI portfolio will be beyond stupid. I have partnership involvement in 2 businesses, a craft brewery. and a small blockchain IT shop. We haven't laid off anyone in either of the businesses, but we have temporarily converted everyone onto an hourly pay, and cut back hours by around 50%. We have applied for wage subsidy assistance, and partners contribute their pay as seed money towards a monthly 'hardship fund', that employees can contribute to as well. Every 2-weeks, we have an employee draw, and the winner decides who gets the money. The brewery still makes a little beer, but our main product today is hand sanitizer, with a >60% alcohol content. We only have 3 coders, and have taken a similar approach. We continue to pay what we can, but in today's world, our coders now apply their skills wherever they see their best fit. Partners give guidance, but the coders run with it. Comes normality again, we return to routine business. We have done a few other things as well, but prefer to remain anonymous. The takeaway is that this is the time to 'walk the talk'. Reputations are being built, and comes the 'new normal', today's investments will come back to you many times over. Your biggest assets are your brains, your employees, and change. Now is the time to blow the barn doors open, grab change by the cohones, and squeeze! Good luck SD

Our credit-card and cash spend, across all family units, is similar. Down 50-75%. We're just not eating out, buying entertainment, or just buying things period. Subscription services pretty much cost the same every month, no matter how much you use them. Volume levels are down everywhere, but there is still a lot of work going around the essential services. Supply chain, trucking, packaging, farming, etc. Nobody can work 24/7, food still has to move, we still have to pack it, farm migrant labour is still required, etc. Lot more people doing daily 2 hr hikes just for the exercise and mental sanitation. Starting to notice the improved fitness, and a couple of pounds come off the waste line! SD

'Greed is good, greed works ....' Courtesy of the Capitalist Pig! SD

A great many small to medium sized business owners are in denial. They can see their businesses collapsing, have frozen, and it is costing them their life's work. Paying the minimum wage (or less) just buys you minimum effort, it does NOT give you the right to infect an employee with a virus. Your service staff just vote with their feet, and if this is your business, you go under. Collapse. Of course there are always those on minimum wage, (or less), with little choice but to accept the virus risk. But if you want them, you now better pay up, as a great many other employers are paying their front-line staff an extra 15%+, in addition to providing protective gear. And if you're a bar, or a restaurant, you're a high risk employer ....... the market is telling you to temporarily shut down, and if you refuse to listen, the market will do it permanently. Collapse. Many of these businesses are bedrock republican supporters, so the push for a rapid restart and an end to income support, is hardly surprising. Bribe your politician to 'do something', or collapse; how many you kill in the process really doesn't matter. Fortunately. enough other people disagree, to stall the process. We saw the same denial around the 2007 mortgage crises. Authority (banking infrastructure) insisting that people wouldn't default (refusing reality) because it wasn't in their interests. The resultant implosion produced the GFC. SD

For those who know squat. TTEN on the TSX If you think you can do better than this basket, for the same risk, then good on you. SD

Some observations ..... Ask your neighbours how much time they spend listening to the media/news these days?, have they cut down the amount of time? and why? Most folks aren't listening more than an hour/day, and because it's too negative. It is widespread, and it is an active changing of the channel. People moving on. Most people use spreadsheets to substitute for experience. You have a brain for a reason, it is time tested, highly adaptable, and it works extremely well in changing conditions. You exist because many, many prior ancestors used their brains to avoid getting killed before passing on their genes. So if someone is reaching for spreadsheets, versus brains ...... what does that really tell you? An economic restart, the day after Easter isn't going to happen. It is little more than distractive false hope, and Pablum for the masses. You can't make people do business. You can't shut down media coverage, the 'death cafe' jokes, the pictures from the ICU's and the morgues. C'mon 'granny killer' show us how this economy versus a few deaths thing works, by DEMONSTRATING it! If Bo Jo, and Trudeau can do it, why can't you? SD

Sounds like to me that it was well worth it for the "opposition party" to have pushed back and revised this. The money is just funded through a 3rd party, that relends to the Trump organization. Smart language would have required that the loans be convertible into majority ownership of the underlying credit, against covenant based triggers. Miss a payment, the assets go to the state, and the remaining loans re-rate enough to permit a repo State owns both the assets and the debt. Elegant. SD

It is foolish to believe that the economy can be saved by descending into something worse than a 2nd world country with hundred thousand if not millions dying. It makes no sense and is more than foolish thinking. There isn't going to be an early restart, and the economy is NOT going to suddenly 'snap back' to what it was, What happens when we see images of the people on respirators, the medical staff collapsing, the full medical and cruise ships, the empty closets of supplies, the trucks removing bodies .... in NY, SF, LA, etc. Messaging that 'Covid-19 is no worse than vehicle fatalities' - is not going to drown out the images and calls of 'granny killer'. Economy versus 'granny killer', which message wins ?? It is much more likely that Trump RE is being pushed to collapse, within weeks/months at best. Push through an economic re-start, and maybe they recover; Trump loses the presidency but keeps the empire. Continue as is, and Trump loses BOTH the presidency AND the empire. When business people see their businesses collapsing - they typically do stupid things. Is that not EXACTLY what we are seeing here? Floating trial zeppelin balloons. SD

Wuhan essentially went from early January through to early March. Crash and burn, but done in 2 months. Canada is talking 3-4 months. Essentially early March through to early June. Slower, but more manageable. Add 2-3 months to hire up and get the N/A-China supply chains flowing again - we're 'done' early September. You can still get Covid-19, but odds are there will be a ventilator for you. Mortality risk does not go away. Until then, it's swing-trade time. Buy the 1,000 point drop, resell on the bounce, holding periods < 1 week. It's only 'buy and hold' if you don't get the bounce ... so only buy/sell quality, and the more mania the better. Keep taking gains off the table, pay off all your debt, or just sit in cash. Heresy, or gambling to many. but so be it. We have no problem with ruthlessly exploiting Mr Markets daily gyrations. We'd far rather, just give 10% of the growing cash heap to the people who really need it. Different strokes SD

No reason to buy until we see 1) either a curve flattening, or 2) an oil deal. The news hasn't started reporting yet on the thousands unable to cope, the suicides, the domestic violence, collapsing medical staff, or those losing their businesses. It will really go ballistic when the military medics/field hospitals, and the body removals start being reported on. SD

I see the same thing but I don't understand it. How can bond funds and stocks sell of at the same time? One thing is clear, the jig is up for the central banks. We used to own some of those bond funds ;) After recent events, there is more downside than upside to continued ownership. Cash is far preferable. There is zero incentive to buy an equity until it is known whether curve flattening is working. Results should be out in about 2-3 weeks. And if the collective stream of bids progressively dry up .... equity prices should fall a lot further. Hence, happy to wait. SD

Think about this the other way If you had naked puts on some of these companies, your gains are currently so big; that there is a real possibility that counter-parties are not going to be able to make good on them. And in many industries, if you are a wise C-suite manager; you WILL have naked puts on the major competitors in your industry. If you manage to keep your company afloat, via a combination of laying off people and cutting back - how are you going to deal with the fortune you've just made? Can't exactly spend it, even if you had to send friends in low places around to collect :( SD

As at 8:10 EST Dow Futures are down 821 points, largely offsetting yesterdays gains. To most people it's pretty clear that monetary policy is done. We need different execution, and leadership. Not even lower rates. Lenders are just being rationale; the credits are such utter sh1te, that it's far better to just let them collapse. Lend nothing further, cut losses, and try to recover as much as possible on the dollars already lent. CB execution would go a lot further, if they simply bought up the material portion of junk bond issues at cents in the dollar, and swapped the debt into majority equity positions. The reduced debt re-rating the remaining bonds high enough to permit open market operations. The majority equity positions enabling industry consolidation. Maximum employment, with minimum intervention. US Shale is the main source of US junk, and it is collapsing. Airlines, and hotels/casinos are about to join them. Contagion. That combined debt is so large, primarily junk, and so spread around, that you cant be sure if your banking counter-party is still going to be there. So the prudent thing is not to lend, rendering monetary policy ineffective. It's time leadership stepped up to the plate. SD

1.5K/month isn't enough, you'll need closer to 5K/month, and to every working person in the US for 6 months+. Sure, some will not need the money. Just tax it back from income at a 100% tax rate, for all incomes between X & Y. It's extraordinary times, and its called leadership. SD