August 7, 2023

Oil Prices Surge to 4-Month Highs After Saudi, Russia Output Cuts

📰 News Organizations

  • Oil Prices Surge to 4-Month Highs After Saudi, Russia Output Cuts. Oil prices surged Monday to their highest since mid-April, following an attack on a key Russian oil export hub and extended production cuts by OPEC kingpin Saudi Arabia and Russia.

  • Berkshire Operating Earnings Rise on Strength of Insurance Units. Berkshire posted $10.04 billion in second-quarter operating profit. The profit from insurance underwriting increased by 74%, helping Berkshire post operating profit that surpassed its $9.28 billion haul from the same period last year.

  • Google Wins Limits to Antitrust Claims at Trial Over Search Deals. In a ruling unsealed Friday, US District Judge Amit Mehta said the state attorneys general couldn’t show that Google’s search results harmed rivals like Yelp Inc. and Expedia Group Inc. The decision eliminates a sizable claim against Google.

  • Travel Earnings Show Consumers Still Splurge on Foreign Trips. The reports from Airbnb Inc., Expedia Group Inc., and Booking Holdings Inc. had a common trend: higher prices — from flights to hotels and short-term rentals — and a preference for European or Asian vacations.

  • Meta’s Threads Will Soon Have Search And Web Functions. Meta CEO Mark Zuckerberg said in a Threads post that search and web features will be coming in the next few weeks. This comes as more advertisers and creators feel that Threads needs additional features to become an important service.

  • PayPal Stock Falls As Analyst Raises Concern Over Apple Pay. PayPal Holdings’ stock has been having a hard week, and now Evercore ISI analysts are less upbeat about the outlook, partly because of competition from Apple Pay taking more market share. Braintree growth is also impacting margins.

🐦 Twitter

  • Treasuries broke a 4-day losing streak Friday, rallying on weaker-than-expected jobs data. But the trend is still down, as it's inflation and supply that are driving bond prices lower, not economic growth or jobs. Once stock traders figure this out, the Stock Market should tank, says Peter Schiff. Source.

  • The median house payment in the US is now at $2,605/month. This is up 19% compared to 2022 and the most expense median payment of all time. Even more worrisome, the median house payment now is up a MASSIVE 67% from 2021 and 79% from 2020. Buying a home has become a luxury. Source.

  • Over the last week, traders bought $4 billion worth of stocks through options and sold $7.5 billion worth of volatility. This is the largest order imbalance ever recorded to the bullish side. Source.

  • Total jobs in the US increased 2.2% over the last year, the lowest YoY growth rate since March 2021. Labor market is slowly moving back to normal. Source.

  • Private clients were net sellers of stocks for a second straight week in the five days through Aug. 2, while bond purchases were the strongest since October in the past two weeks: BofA. Source.

Investor sentiment is a pendulum that swings back and forth between extreme optimism and extreme pessimism and never sits still. Every individual stock has its own little pendulum. You see it especially in microcaps - the sentiment shifts. You just have to wait patiently.

Ian Cassel

📓 Online Publications

  • The Impact of 7% Mortgage Rates. Bill McBride says the recent surge in rates started in June, and if there is an impact on sales from higher mortgage rates, it will likely impact closed sales in the August through October timeframe.

  • New Listings Continue to Free Fall. Fresh listings just hitting the market tumbled 17% for the week ending July 29 compared with last year. And active inventory (a combination of both old and new listings) also took a dip, with the total number of homes for sale behind last year’s levels by 9%.

  • Americans Are Building New Companies At A Faster Pace. There were more than 5 million new business applications in 2022, as the US economy teeters on the edge of a recession after the Fed increased interest rates at the fastest pace in history.

  • Lockheed Martin to Build World's Most Powerful Laser Cannon. The Pentagon will likely seek to arm all six military branches -- that's Army, Air Force, Navy, Marine Corps, Coast Guard, and Space Force -- with high-powered laser weapon systems of the sort Lockheed is working to build.

🎧 Podcasts

  • Yield Curve is Steepening. Jared Dillian says the yield curve's recent steepening after a year of inversion raises concerns about a potential mild recession. The yield curve inversion theory suggests that when the curve starts steepening again and becomes uninverted, it may indicate the onset of a recession. Source(5:46)

  • Bank of England Raises Interest Rates by 0.25 Percentage Points. The quarter-percentage-point hike makes its 14th straight for the BoE. Inflation in the UK is still standing at 7.9 percent in the latest reading from June. That’s still high and way above the Bank of England’s 2 percent target. Source(1:37)

  • Investors Not Worried About Fitch Rating. There was a little bit of a pullback in stocks but the bond market didn’t really know what to do with it. If the market was seriously worried about the downgrade in US debt, they would buy US debt but that didn't happen. Source(4:02)

  • Unfavorable Risk-Reward for Mega Cap Equities. The risk-reward for owning public equities, particularly mega caps, is unfavorable at present, as the market is sensitive to potential yield spikes that were previously deemed unlikely. Doubts about avoiding a recession after significant monetary and fiscal expansion have also made owning 10-year notes less appealing. Source(1:58)