Some Random Thoughts on 10-18-2022

Let's see if I can get through a post without any charts or graphs.

I had previously mentioned the likelihood of heating costs being a shock in late January or February. Maybe next month, as this current cold snap might be a wakeup call. Of course, the bills won't come before the election.

I hear rumblings of another SPR release. Seeing as the current release is scheduled to end at the end of the month and the election is 8 days later... I doubt it happens. Got to save some ammunition for 2024.

Uh oh... I feel a chart coming on...

Click to Enlarge

I do recall a couple of releases, such as 30M barrels for late 2021 and the 1M barrel per day release starting on May 1st and ending on October 31st. The latter indicating another 40M barrels to go and the ending number at 370M barrels. Somehow the numbers aren't adding up. When they say 14M, do they really mean 20M? About half of the SPR will have been drained in 2 years. It should all be gone by 2024. 

Somehow the crude oil inventory of the U.S. is 12M barrels higher than this time last year, with crude prices less than 1% higher. The gasoline inventory is 12M barrels lighter than this time last year, with gasoline prices 16.4% higher. So is it a crude problem or a refining problem? 

The American people are easily misled and manipulated, so crazy statements will not called out by anyone and certainly not our press. If the TRUTH were a woman, our nation's press (and politicians) would be called misogynists, for their mistreatment, disregard and abuse of the truth.

In any case, the American people have an abundance of gullibility, for the politicians to exploit. 

I don't really know who is going to win, but I am becoming sick of those January 6th hearings and they would end if the republicans take the house. Then I will become sick of the Hunter Biden hearings for 2 years. That's about the only change I can see happening.

Is there anyone out there... that is worth a damn?

A Conundrum On Inflation and Recession.

I'm not the brightest bulb and may be seeing things wrong, but... the Just in Case inventory surplus may be coming to an end.

To clarify... we had all sorts of supply chain issues, which were originally shortages of goods, due to parts, etc. THEN the supply chain issues became a snarled supply chain which caused shortages AND was exacerbated by companies ordering heavy to ensure arrival of supply to meet demand. This is Just In Case inventory control. 

The reduction in inventories allowed companies to pocket some hefty profits and pep up stocks. Everything from reduction of Oil and oil product inventories to freezers, etc. I even noticed my local Walmart pulled in those shipping containers all over their back lot.  

Now companies, such as Walmart and Target are talking about reduced profits, due to excess inventory. Oops! Certain major companies that supply all those retail stores with products (excluding food) are now beginning to cancel components to make their products... from their suppliers.

Understand the mantra is how the consumer's spending habits are changing. Seriously, how many TVs and Freezers, etc. can people buy for stimulus money they were given. 

As these companies slow their ordering to reduce inventory... a potential recession is looming. Meaning their inventory is no where near where it should be. Should be a buyers market at some point... just not yet. Again, this will not really impact food... as we still gotta eat. 

So these companies that had slowly began reducing inventory will now need to speed up. With interest rates sharply climbing, financing the debt to hold excessive inventory climbs as well. Not a good scenario to be in. Think GM in 2008, with their excessive inventory wish mushroomed and sales slumped to where they could not pay vendors.

Which brings me to the other part of this diatribe. How many zombie companies are about to be flushed out of the system?

The consumer, which is solely holding the economy together, will at some point overcome the euphoria of post covid and slow down the spending. My guess is a reduction will begin around fall, with an uptick for the holidays... and then the gloom of January will hit us.

Let's hope those companies have shed their excess inventories by then. Or as I think of it.. the time of steep discounts.

At some point, this may also impact the workforce, as it is not difficult to foresee it finally rebalancing and all those help wanted signs being stored away.

It will be a difficult time, as energy costs may linger and food is certainly not going to go down. I would expect the overall inflation rate to slide.

I probably should stop reading the hysterical headlines and let my brilliant leaders tell me how I should think and feel.