Sweet

Behind paywall. The title seems to suggest fracking was ‘wasteful and unnecessary (had to google the word). Why does he think that?

Interesting Minseok - thanks

It’s not even $100 oil, the world coped well with oil hovering at that level for a period of 4-5 years. It’s two other issues which are the bigger problem: 1. The price of products which very recently traded at $200 barrel of oil equivalent. 2. US dollar strength. Oil could sit quite comfortably at $100 if 1 + 2 were not a problem.

I don’t think there will be a shift in attitude, I said should there be a shift in attitude. I think some manager like Fink of Blackrock have a common sense approach to O&G so I still think it’s possible. I would prefer buy backs at these levels for most companies. Oil stocks are not expensive in a forward basis. Companies really weren’t in a position to buy back shares in 2020. I think the easy gains have been made in the sector, I would not open a position at these levels either but nor would I sell if you had a position.

Agree it won’t be a 1:1 correlation. If break even if $40 and WTI is $50 = $10 income per barrel. If oil doubles and goes to $100 your income has increased by 500%. Problem is oil stocks don’t reflect that change. I believe historic correlations have broken down for oil and gas stocks because so many don’t want to buy them. Should there be a shift in attitudes multiples could expand without any oil price increase. Likewise share buybacks can do the same.

Our understanding of history’s temperature records are based on proxy measurements which can be impacted by any number of things. We date those indirect temperature measurements using carbon dating which can be out by many thousands of years. By contrast modern climate data is a composition of real-time measurements of just about every aspect of weather imaginable. There is a major mismatch in both the directness of data but more importantly the resolution of data. One is indirect that at best can be placed within a few thousand years the other is effectively an live data stream of a comparatively small period in the Earth’s life. That poses a serious problem for the claim that weather is changing today like never before in our history. Quite simply we don’t have the data to say. Thats not to say man-made activity doesn’t cause warming. Anyone who thinks CO2 doesn’t have a warming effect is a loon. However does a change from 0.02% of CO2 in the atmosphere to 0.04% cause catastrophic climate change? I doubt it.

In the UK the office of national statistics was claiming that climate change was driving up violent crime.

really funny

That is a realistic scenario. However worth noting that the these moves are very influenced by financial markets. The physical market is still displaying large deficits - I’ve explained what I mean by deficits before. It’s not the average price that is putting off investors but the enormous swings. Many energy stocks are down nearly 40% in one month, what generalist wants to invest in that? It’s got more volatility than some crypto. I see some oil watchers on Twitter questioning the usefulness of financial markets because of these swings - both up and down. I’ve not seen any solutions though.

This is why generalists stay away from energy. Some names are trading below November levels now.

Since 2014, but what about before that period. Cathie seems to buy hype and stories.

Performance of energy stocks this last month have been woeful. A little more than three weeks ago the broad sector was up nearly 70% for the year. It was an unsustainable move that was sure to correct. Today it is up 25% having given up most of its gain these past three weeks.

Many of those criticisms were justified then and are still justified. However in the US stock market optimism has been handsomely rewarded in the long run, and its a lesson some people will never get. Even now I people predicting on Twitter a recession incoming WORSE (kid you not) than covid and 08 combined. It's important to separate out who is complaining and for what reason. The perma-pessimists, the likes of zerohedge, Hussman, Schiff crowd are making their money from sounding the alarm... nearly... all... the... dam... time. Others just have it in their DNA. On the other hand there are just mom and pop savers, uneducated in stocks, and only know interest from bank accounts. And I gotta say, they have been screwed whilst we investors got our ass saved and generous multiple expansion. I am worried that the historic low rates the past 15 years, and the massive printing money, will lead to underperformance in the next decade, but where else would you be if not stocks? NFTs, a shitcoins?

Investors got something for nothing. The whole financial system was bailed out, interest rates were set at zero, and we had huge amounts of QE. Remember the taper trantrum? Fed tried to wind down purchases, the market get wobbly and suddenly its called off. The Fed should not have been so willing to intervene just because stocks were falling.

Greg, what is it you don't understand? If the Fed raised the interest rates massively because inflation couldn't stay under control, I guarantee that all of us investors would be pissed. Can you try a bit of empathy please? Heck you don't even need empathy, just invert. Nobody is saying that savers are entitled a return, likewise Gregmal and Sweet the stock market investors are not entitled a return in the market either. This cuts both ways. It's not just savers, it's pension funds in bonds, its old people who coming to the end of their life who would prefer the stability of a bond than the volatility of stocks. They are perfectly entitled to complain, and when the shoe is on the other foot, and the Fed has to step on the economy for one reason or another, I've no doubt you would be pissy as well (as would I).

Yeh it wasn’t a tightrope, it was a wrecking ball. There was no reason for rates to be as low as they were for so long, or for QE to occur for so long.

CPI numbers are a joke, everyone with eyes can see massive shrinkage in products over time. Not only have products increased in price, they are about 2 times smaller over the course of 15 years. Regarding the Fed, wasn’t Volcker considered one of the greatest chairman’s of all time? The priority ought to be currency stability otherwise all your wealth and purchasing power goes down the toilet anyway. If the central banks have to tighten to preserve the purchasing power of the currency I’m for that even if it causes a recession. Longer term it is good for everyone. Regarding those ‘bitter losers’ i.e. savers, they have a right to be annoyed, because they’ve been fucked for over a decade. Fed policy has been too loose and interest rates too low for too long. The economy has been on welfare and it’s time to get off, and if it causes havoc in the stock market for a period of time it’s something I accept.

I don't use technical analysis much, and I don't hold much stock in it's predictive power. But I keep an eye on it, because lots of trading around key areas is often a sign of a move coming. Right now price action looks terrible, there is a lot of action around lows. Buyers are finding ample sellers at these prices and the price is just flat - that's what gives the 'flag' appearance.

I heard this before but it’s not accurate. There is a deficit. If there was no deficit inventories would not be falling. Supply and production are different and either one can be in a deficit. The current deficit is in oil production, not the supply of oil to the market. There is enough supply only because there are large strategic and commercial oil inventories that are being drained. But there is not enough oil production to keep oil inventory levels steady.

It’s very unlikely oil goes back to $60 in the short term. The deficit appears to be quite large. Even factoring in a recession, some pundits continue to see oil drawing. However I agree with the premise that if energy drops so will inflation a lot.

Depends what you mean by value. I think perhaps you mean productive… or something else? I’d say across society, and on many metrics, the most valuable people are mothers and fathers. By and large unpaid work but vital to society.

thanks for summary - I had not read it

I think you have said it, some of the parabolic moves cannot last and will have a swift correction. Doesn't really mean anything about the long term trend IMO for commodity related equities. Price stability would be far better for investors than these wild swings which just puts people off, especially anyone managing their beta LOL.

I would much rather have many commercial banks allocating capital than central banks. Commercial bank: A contained balance sheet with the risk of bankruptcy or shareholders getting wiped out if they make bad loans = more prudent allocation of capital. vs A central bank making decisions with no consequences for themselves if they get it wrong because they can just create more money. That to me ensures less prudent allocation, and a huge systemic currency risk for everyone.