At Berkshire’s virtual annual meeting recently, Warren Buffett mused that their cash hoard of $135BN didn’t seem that much. Stanley Druckenmiller said, “The risk-reward for equity is maybe as bad as I’ve seen it in my career.” The New Yorker thinks stock investors have lost their minds. To not be bearish is to be insensitive […]
One of the few pleasant surprises of recent weeks is that business for the major pipelines remains solid. Now that 1Q earnings season is complete, we have revised guidance from all the companies in the broad-based American Energy Independence Index. Caution was evident throughout on earnings calls, as one company after another described the impact […]
For a graphic picture of how the restaurant business has shut down, it’s hard to beat the OpenTable chart below. For several weeks, U.S. dinner reservations on their system have run at 100% below normal (i.e. there were none). What portion of this sector survives depends on the pace at which we re-open, combined with […]
Energy has rebound strongly from the market’s low on March 23rd. The S&P Energy ETF (XLE) is up 64%, matching the broad-based American Energy Independence Index (AEITR) and handily beating the S&P500 which is up 31%%. Although the YTD figures still show the energy sector down over 35%, quarterly earnings reports continue to provide plenty […]
Ever since the 2008 financial crisis ushered in permanently low interest rates, perhaps the biggest question in finance has been why long term rates remain so low (see Real Returns On Bonds Are Gone). On Monday, the U.S. Treasury announced plans to issue $2.99 trillion in marketable debt this quarter, and $4.5 trillion this fiscal […]
Earnings season for big pipeline companies has continued to be encouraging. Enterprise Products (EPD) reported results largely as expected and lowered 2020 growth spending by $1BN. The reductions in capex have been welcomed by investors who have long complained about the level of reinvestment by energy companies. Any reductions in EBITDA have been matched by […]
Most companies get a free pass today on cutting their dividend. So far this month nine S&P500 companies have suspended their dividend, with another half dozen making reductions. Goldman Sachs expects S&P500 dividends to be reduced by 25%. Energy has been hit as much as any sector. Pipeline stocks have fallen hard, with the broad-based […]
Monday was the day crude oil futures traded as low as negative $41 per barrel. As with the 1987 stock market crash, Monday’s participants will recall that date for the rest of their lives, the way I do October 19, 1987. Shortage of oil storage is the problem – nobody is going anywhere, so we’re […]
As the world’s economy has stopped moving, demand for transportation fuel has collapsed. The latest weekly report from the U.S. Energy Information Administration (EIA) presents the statistical reality in our country. Gasoline supplies are down 46% from a year ago. Kerosene (jet fuel) is down 72%. Nobody has anywhere to go. Interestingly, propane supplies are […]
Yesterday the Texas Rail Road Commission (RRC) began their public hearings via Zoom on a request from some oil companies that they limit oil production (“proration”) to avoid unnecessary waste (see Navigating the Collapsing Oil Market). On the surface, it seems a pretty straightforward question. The pandemic has crushed oil demand, which is estimated to […]
