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Friday, March 29, 2024

Which Way Wednesday – Oil Hits $90 and All is Well (get it? Well!)

Sorry about that headline.  

But really, $90 a barrel is $4/gallon at the pump in even the cheapest states and we're back to paying $100 for a tank of gas.  If OPEC is trying to convince consumers to go electric, they are doing a hell of a job.  The price of oil is up 50% since their December meeting and, since they are a cartel that seeks to maximize profits for it's members (like the Federal Reserve) – OPEC is doing a wonderful job of making something out of nothing.   

Of course, food and energy costs are excluded from most measures of inflation because they are "volatile", which I believe is Italian for "things you don't have to pay for."  For those of us living in reality, however, food and energy costs are the worst offenders and if those are rising out of control and we just got a crappy Consumer Confidence Report – what is the sentiment going to be next month as things get worse, not better?  

The Fed didn't say they won't cut rates – the Fed said they would be "data-dependent" and $90 oil is a big red flag on the field telling them they'd better cut hard and fast.  Of coure, when that's the case, you can always BS the data – like this note from the USDA's recent price projections for 2022:

Food price increases are expected to be between 20-year averages and the rapid increases observed during the pandemic. In 2022, food-at-home prices are predicted to increase between 1.5 and 2.5 percent, and food-away-from-home prices are predicted to increase between 3.5 and 4.5 percent. Price increases for food away from home are expected to exceed historical averages but be at or below the inflation rate in 2021. Upward pressures on meat prices are expected to ease in the latter half of 2022. Price increases are expected to more closely align with 20-year averages for most other food groups.

You don't need me to tell you that's nonsense because you KNOW that's nonsense.  We have not even BEGUN to get price increases from restaurants because, at the moment, they are happy if we just show up.  Supermarkets are also slow to raise prices but the earnings reports are showing they are suffering from margin squeezes and HAVE to raise prices very soon – and it won't be 1.5-2.5%!   For example: 

Meanwhile, the ADP Jobs Report this morning shows a LOSS of 301,000 jobs in January and that is vs 225,000 jobs that were expected to be added by Leading Economorons.  This is something I warned you about yesterday (both the lack of jobs and the idiocy of economists) and that is a catastrophic number if it is confirmed in the Non-Farm Payroll Report on Friday.  

Traders may ignore the ADP but they can't ignore the NFP so be very careful out there – let's take any sign of weakness very seriously.  Since yesterday, the Dow and the S&P 500 went all green on our Bounce Chart but the Russell and the Nasdaq are still very red and not even close to their weak bounce lines.  Those are the broader indexes – the S&P is, by definition, 500 of the most successful companies on Earth and the Dow is just a bunch of nonsense selected by the Wall Street Journal to sell newspapers.  

  • Dow  36,000 to 34,200 has bounce lines of 34,560 (weak) and 34,920 (strong) 
  • S&P 4,700 to 4,465 has bounce lines of 4,512 (weak) and 4,559 (strong) 
  • Nasdaq 16,500 to 15,675 has bounce lines of 15,840 (weak) and 16,005 (strong) 
  • Russell 2,400 to 2,080 has bounce lines of 2,144 (weak) and 2,208 (strong)
   

We went over our Short-Term Portfolio in yesterday's Live Member Chat Room and we have been playing for the bounce (that's why we have bounce charts!) but ANY additional red on the chart above and we will be adding some more hedges and we'll be adding more anyway ahead of Friday's Non-Farm Payroll Report.  It would be foolish not to – our Long-Term Portfolio (LTP) is back to $2.3M, now down just $50,000 below it's pre-correction high.  We've added a couple of new, long positions and adjusted some others but I still don't feel good about jumping back in too quickly.

January has been a rough ride for almost everything.  In fact, the only standouts were our two major cartels – Oil and Banking – they had a great month.  So great, in fact, that Bankster salaries are up 23% – now THAT is how you keep up with inflation!  

Oh, and don't worry – "only" 424,077 new cases of Covid yesterday but it's "mild" Covid, so "only" 2,636 people died (for reference, 2,996 people died on 9/11 and, for some reason, we cared back then).  As usual, the US is a World Leader in deaths per capita – roughly 50% higher than our nearest competitors.  With numbers like that, you would think they are not even trying to kill off their own citizens!   As Donald Trump Jr may have said at this weekend's rally – If you can't get it done with Covid – get your kid an assault rifle!  

 

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