Posted August 25, 2023
By Matt Insley
Oil’s Hateful Six
To start the morning, perceptive reader Jason S. writes: “The first thing that came to mind when I read your issue about auto-loan delinquency and its relationship to employment and the economy: If these folks still have their jobs and have simply given back their cars, maybe that frees up their car payments for other purposes, and the only things that take a hit are their credit scores and the institution that gave them the loan in the first place.
“This would imply that delinquency can be caused artificially (monkeying with interest rates and stimulus) in addition to the traditional causes (recession and unemployment). It's still likely a good correlation of the latter under normal circumstances, but we're not in Kansas anymore.
“On the other hand, many of the delinquents giving back their cars probably need the car to get to work, so maybe we'll get reverse causation?”
Like I said up top, perceptive.
“Couldn't agree more,” Douglas G. continues. “I watched the farm bankruptcies of the 1980s. Things get to the point of no return.”
Finally, Stephen H. snarks: “No need to worry about auto-loan defaults. Biden will just forgive those debts too. Anything to buy votes.”
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Your Rundown for Friday, August 18, 2023...
“Is there a less fashionable investment these days than oil companies?” wonders Paradigm’s income-investing authority Zach Scheidt.
“Probably not,” he adds.
“They’re just like tobacco companies, according to the mainstream media. They both kill people — one by lung cancer — one by climate catastrophe or whatever. Just look at the wildfires raging in Hawaii and around the world, for example.
“From what I can tell, there’s no conclusive science to support it,” Zach says. “And I’ve asked…
“But political pressure has made it increasingly difficult for energy companies to produce oil due to ESG investing. As a result, we're now confronting supply shortages,” he says.
Making matters worse, just about 48 hours ago during a summit in Johannesburg, the bloc of countries known as BRICS (Brazil, Russia, India, China and South Africa) accepted six new members.
We’ll list them in alphabetical order: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates.
What now? Here’s one in-your-face implication…
The newly expanded BRICS now incorporates six of the top 10 oil producers — Russia, Saudi Arabia, China, Brazil, Iran and UAE — comprising 43% of the world’s oil production.
I hate to state the obvious… but what do these six countries have in common? (Okay, five. For now, we’ll leave Brazil off the list.)
They all hate the United States.
Sure, some are more quiet about it than others. (We’re looking at you, our “ally” in the Middle East, Saudi Arabia.)
To my way of thinking, then, the BRICS+ — or should we just go ahead and call it the new OPEC? — could really inflict maximum damage on the U.S. by choking oil exports because, God knows, American oil companies are having a tough time investing capital to tap new oil supplies.
At any rate, it’s gonna “hurt when you fill up your gas tank or heat your home,” says Zach. “But it's great news for oil and gas investors.
“Unsurprisingly, crude oil has been trending higher over the past month,” he says. “Given today's strength in the energy market, investors can take advantage.”
Today, Zach draws our attention to the Energy Select Sector SPDR Fund (XLE) — still a simple way for investors to take advantage of impressive energy-stock breakouts.
Market Rundown for Friday, Aug. 18, 2023
The S&P 500 is 0.50% to 4,340.
Oil is up 1.66% to $80.36 for a barrel of WTI.
Gold’s down 0.15% to $1,913.80 per ounce (Kitco’s price).
And Bitcoin is up 0.50% to $26,170.
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