Let's Talk Energy, or Lack Thereof!

 

It seems everyone is fixated on the high price of gasoline. I have no idea what was expected, when everyone was shouting "hell yeah", stopping imports of Ruskie oil is a small price to pay. 

As I have stated earlier... this seems to fit the definition of "virtue signaling". A lot of chatter, without really meaning it.

As Europe tries to wean themselves off Russian Crude... someone get to make it up. Since the start of the Ukraine invasion, our exports of Crude and Petroleum products has exceeded our imports by an average of 1 million barrels per day. The U.S. based inventories across the spectrum is still below levels seen over the past 5 years in late May.

Do not expect the above to slow any time soon and be mindful of the upside potential in prices. As I had mentioned previously... we are soon entering Hurricane and Tropical Storm season for the Atlantic. With over 50% of our refining capacity along the Gulf Coast... anything more than a slight breeze could really inflate prices at the pump. 

Now for Natural Gas... the prices of natural gas have not hit an all time high in the U.S. but there is clearly upward pressure here, while LNG exports are affecting and easing the prices of natural gas in Europe. Fortunately for us, there is limited infrastructure for processing LNG for export, LNG container ships and offloading facilities in Europe. But there are big bucks to be made, so expect the limitations to fade in the next few years.

In any case, the Natural Gas market will weigh heavily on the inflation readings going forward. It does impact a wide variety of industries. 

Thar's Gold in Them Thar Hills!!

Photo from Bank of England

(Another one from the old dustbin, trotted out due to rumors of Russia adopting the Gold Standard).

Gold is a subject that strikes me as something confusing. I get it was a valuable medium of exchange in days of yore, but I am unable to understand the fascination that certain "gold bugs" currently have with the precious metal. Again, I am not an expert on much of anything.

I wonder about some of the claims about a so-called gold standard, such as...

A gold standard controls inflation. It does not. Like anything else, if the gold supply increases, the likelihood of price increases occurs. When it decreases, it reverses that process. One should look no further than two periods in global history.

When the Spaniards found large amount of gold in the new world, the supply of gold became such that prices increased. When those prices increased to the point of outstripping the cost of mining gold, the supply dwindled, and the prices began to fall. From the early 1700s to early 1800s, the average inflation was thought to be around 1%. That sounds really good and a great argument for a gold standard, but the various decades of that period show large bouts of inflation, followed by large bouts of deflation.

We can even look at our nation's history (U.S.) and see a similar pattern when discussing some type of precious metal standard. There were also serious bouts of inflation/deflation. Demand of goods seems to be the main determinant of the price, not some fixation on gold/silver.

When we talk about the importance of a "gold" standard, what are we advocating. We were on the "gold" standard when the Great Depression hit and previous recessions/depressions.

Are we talking about having each dollar of currency, 100% backed by gold? We have about $1.7T in currency and coin in circulation, so that 261,498,926.241 troy ounces of gold held by the U.S. government, indicates the gold should be about $6,500, compared to the current price of $1,287.30 per troy ounce.

Clearly, we would need to remove about $1.37T currency and coin from the system. Of course, we live in a fractional reserve system, as nearly every other country on earth, so the M1, which is the most liquid form of assets would also need to be reduced by $2.9T and the M2 by about $11.6 trillion. We are talking MASSIVE DEFLATION throughout the economy.

As for the days of the gold standard, such as the period leading up to the great depression, the gold standard required that 60% of the money supply be backed by gold. Not sure if that was M1 or M2 or even currency and coins. In any case, it would create a real problem if depositors ran to the bank with coins and currency... demanding gold and/or silver in exchange. Oh wait... it did.

One area where the gold standard could be considered beneficial, would be in foreign trade. If we had transferred gold to balance our trade deficits, the resultant inflation, would have rebalanced the trade. Of course, we would be paying a lot more for things made in the USA, instead of saving money by buying foreign products.

It is a fun exercise to talk about a gold standard but be very wary of such a thing happening. It may not be quite the pie in the sky, that is being promoted by those "gold bugs".

Of course, if I had a lot of gold and wanted to make a profit by selling... I might attempt to use any manner of tactics to inflate that price. Eventually, one of those tactics might work.

P.S. The U.S. does have a gold standard, and it is something around $42 1/3. Don't try to use that number to avoid the taxman. It's been tried and failed. Of course, you could convert those ounces of gold to that dollar figure, but it is not a very wise investment, imo.

The Expert Disagrees With My Way of Thinking. Let's Trash the Scum!!

 

via GIPHY

This is what it has become... My expert is perfect and yours is an idiot. Geesh!

Never-mind the specific wheres (yes plural), but I have observed that any "expert" is being vigorously questioned and ridiculed, depending on the audience belief. If the left presents an "expert", the right immediately piles on the ridicule and if the right presents an "expert", the left goes ballistic.

What is weird is some of these "experts" were in vogue for the opposite groups in just a few months past. How many times have you observed someone being completely ridiculed as being someone not worthy of listening to... and then a few months later being quoted as a reliable person?

The old "enemy of my enemy is my friend". In this case the "former enemy and no friend of mine that tells nothing but lies, is now an enemy of another of my enemies and is therefore now my friend and must be trusted in every utterance about another of my enemy, until such point that former enemy/ new friend says something negative about one of my friends that isn't true and therefore now has no credibility and tells lies about everything and anyone that believes those lies is an idiot".

I'm sure there is a simple phrase to describe this, but I am at a loss. In any case, the definition of "expert" is now called into question in a similar manner, all based on which network they appear. 

Which begs the question... are the networks picking these experts based on the network's worldview and political philosophy?

The thing about experts is they tend to speak above my intellectual level and therefore the message becomes confusing when they differ ever so slightly or even completely. Particularly when each claim their ideas are based on science. I firmly believe that science is the "search for fact". So, it is entirely plausible that both are correct and I am misinterpreting the message.

The frustration is a matter for a later topic.

Weather or Not! Why Not!

3 times this past week, the notion of a tropical storm or hurricane has popped up on a certain weather forecasting model. It was the only model to indicate this potential and subsequent models did not reflect any such movements.

For the record this one and only model indicated a storm likely moving across the Florida panhandle on the 24th. A day later... nothing. A couple of days later, the indication was a storm likely moving over New Orleans on the 29th. Then nothing. Today it shows a strong disturbance just south of Cuba. Tomorrow will likely show nothing. Only one model has shown anything... all others nothing.

I am NOT forecasting a hurricane or a tropical storm in the near future... or even one at all. My point is about how 50% of the USA petroleum refining capacity is along the Gulf Coast, as well as LNG terminals.

Current inventories of crude and the various petroleum products are below the seasonal range of normal inventory. A gander at the weekly report from the EIA.gov quickly indicates the dilemma we are in. To clarify what below the seasonal range actually means... lowest of the past 5 years, based on this time of year.

We've had massive storms in the past, but were able to weather the storm, due to sufficient inventories. It would not take much of a storm to skyrocket prices from current levels. The potential for a tropical storm along the Gulf Coast, is not an unreasonable forecast for sometime this summer. 

That is my point, weather you like it or not. 

Hoarding Update and Other Random Things.

It has been over two years since hoarding became my mantra and quite frankly… I am getting rather sick of it. 

Outside of a few perishable items, my grocery purchases are now limited. It has become time to reduce the inventory. Not of stuff I might use, but stuff that “seemed” intriguing or stuff that might be used once upon a time… before hasn’t done anything but collect dust. 

Cannellini Beans; smooth Jif peanut butter; kidney beans; chickpeas, canned pinto beans (other than Lucks); single cans of other stuff that remain from failed taste tests. All this was due to one of those food drives. Like most Americans, my generosity is limited to stuff I don't want or need. More on that later.

Don’t get me wrong, I will not starve to death. I am experiencing a strong case of food boredom. On the bright side, I am saving money on the old grocery budget, but somehow this only seems to increase my curbside/takeout/delivery expenses. Even those are starting to wear thin.

As inflation is all the rage… allow me to dive into that barrel of outrage. It was not long ago, I was led to believe everyone was okay with gasoline costing more, if we were to reduce our imports of Russian energy. The we, are the many individuals on the many social media outlets I frequent saying... "Let’s support Ukraine!!!"

Now we have these same individuals screaming about the price of gasoline. It makes it hard to believe anyone about anything. Sacrificing for the cause is merely an illusion in modern America... and elsewhere, if people are telling the truth about their locations. I people really wanted to send a message... it would be use less, but that ain't the American way. I may be biased, as I drive an average of 20 miles per week.

It seems that everything is politicized and is being used to further divide. 

Retail Trade Report for April 2022

 

The Census Bureau has released the April 2022 Advance Retail And Food Services Estimates. (The graph is roughly adjusted for inflation, while the report and following summary are not adjusted for inflation. 

Advance estimates of U.S. retail and food services sales for April 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $677.7 billion, an increase of 0.9 percent (±0.5 percent) from the previous month, and 8.2 percent (±0.7 percent) above April 2021. 

Total sales for the February 2022 through April 2022 period were up 10.8 percent (±0.7 percent) from the same period a year ago. The February 2022 to March 2022 percent change was revised from up 0.7 percent (±0.5 percent) to up 1.4 percent (±0.3 percent).

Retail trade sales were up 0.7 percent (±0.4 percent) from March 2022, and up 6.7 percent (±0.7 percent) above last year. Gasoline stations were up 36.9 percent (±1.8 percent) from April 2021, while food services and drinking places were up 19.8 percent (±4.4 percent) from last year.

The winners are Motor vehicle & parts dealers, up 2.17% MoM; Non-store retailers (which include Mail Order and Electronic Shopping), up 2.15%; and  Food services & drinking places, up 2.0%. (All not adjusted for inflation.)

Of the $6.063B increase from March... those figures above account for $7.309B of that $6.063B. Which would indicate all the rest lost -$1.246B, but Gasoline Stations were down -$1.734B, leaving all the rest to divvy up the remaining $488M, not adjusted for inflation.

All in all, a slight improvement, although I fail to see how the auto sector can continue the upward trend. I suspect borrowing heavily is once again in vogue and wonder at what point in time... increased interest rates will stifle this enthusiasm.

I guess only time will tell. 

Jury Trials

Cornell Research

(Another one from the old dustbin)

It has always intrigued me, as to the thinking of jurors in any type of trial. This began back in my teens when someone I knew was murdered. The "perp" told a group of us, that he was going to find "that person" and beat him to death. He did.

He was charged with 1st degree murder or whatever it was called back then. Yet, he was acquitted. That puzzled me for a very long time, but after observing a few trials... it became clear. It is not really about the evidence or the crime, but the believability that the defendant could do such a thing and jury bias. Oh, you think because everyone including the jurors say they are not biased... they are telling the truth.

In this case, the defendant came from a fine upstanding family in the community and the victim was a known troublemaker. So, when the victim broke a beer bottle to defend himself, the defendant was able to plead self-defense, even though he had initiated the contact and made the threats.

Similar cases over the years, indicate that jurors place "feelings" and societal norms into the deliberations. 

Another case in point. A few years back, a young woman was charged with 1st degree homicide for the death of her infant. 1st Degree meaning she deliberately and willfully set about to kill her child. That charge, plus others, guaranteed a sentence of no less than 37 years, if convicted.

It is very difficult for society to accept the notion that a mother would deliberately kill their own child, let alone should be punished with such a lengthy sentence... thus the bar for reasonable doubt was so much different than it would be, if the defendant had been an ugly black man. Yes, race plays a part, as society's preconceived notions are in play. Just as in famous people, etc.

If the young woman had been charged with some form of manslaughter, with a 5~10-year sentence... I contend a conviction would have been made. Those options were not on the table. Just as in the original example, I suspect this was the intent.

Whether it be Marin/Zimmerman or any other case at play... the results seem conclusive, regarding where the bar is set for "reasonable" doubt. Jurors might think they are not biased, but deep down that bar gets set differently.

It's just the way it is, imo.