Making Hay Monday – September 23rd, 2024
Making Hay Monday
High-level macro-market insights, actionable economic forecasts, and plenty of friendly candor to give you a fighting chance in the day’s financial fray.
Charts of the Week
In many Western countries, renewable energy policies are placing a heavy burden on their populations, especially the lower-income cohorts. In the U.S., California and the Northeast are vivid examples of that intensifying energy poverty. Meanwhile, China is building coal plants at a dizzying rate. It is also the world’s leader in EV deployment, but the reality is that these are heavily powered by coal which still produces the majority of China’s electricity. However, coal-based power is now down to about 53% of the total, a significant reduction from a decade ago when over 70% of electricity production came from coal. This is due to the rapid growth of solar electricity generation and, increasingly, nuclear power. Despite that, China’s overall coal consumption continues to rise, as does its share of the global total. Of course, this means increasing emissions, including of the most noxious variety such as sulfur dioxide and black carbon.
Felder
One of the more reliable forewarnings of a looming stock market correction has been when the Hindenburg Omen surges to a high level. These occur when the market is extended to the upside but a large number of stocks are making new lows. The above chart is from my good friend Jesse Felder who recently joined another pal of mine, Adam Taggart, on the latter’s Thoughtful Money show. (It’s a highly informative listen and we’ve included a link to it at the end of this Making Hay Monday edition.) This visual is also consistent with a factoid Schwab’s chief investment strategist Liz Ann Sonders relayed a couple of weeks ago: the average NASDAQ stock is now down over 40% from its 52-week high. That’s not the stuff dreams are made of… at least for the consensus on Wall Street that sees no bear market – or, even, a correction – anywhere on the horizon. Yet, as you can see above, major spikes in the Hindenburg Omen, and this one definitely qualifies, have consistently led to precisely those events.
Evergreen Compatibility Survey
“With no new investment, global oil supplies would fall by more than 15 million barrels per day in the first year alone. At that rate, oil supplies would fall from 100 million barrels per day to less than 30 million.” -Exxon Mobil
“The Last Two Times The Fed Led Off With A Half-Point Cut Were 2001 And 2007…not Exactly The Best Precedent To Follow.” -Michael Gayed
Hello, Embarrassment, My Old Friend
Embarrassment is a condition you simply have to accept when you write an investment newsletter. Team Haymaker is no exception in that regard. A case in point was the edition we sent to our readers’ inboxes two weeks ago today.
In that issue, we made the case that oil was a buy. At that point, it was trading around $69/barrel based on the current, or spot, market for West Texas Intermediate (WTI). The very next day it tumbled to almost $65, a drop of nearly 6%. That’s a serious correction, to use a euphemism for “drubbing”, particularly over a mere 24 hours. It also left oil close to 20% below where we had suggested doing some profit-taking back in June (i.e., no blushing required over that one).
However, we did recommend dollar-cost-averaging into the weakness. But, frankly, we had no idea that you would need to do so the following day. However, that’s what the aged Haymaker did in his personal accounts, adding 2000 barrels of crude along with the purchase of three different bombed out shares of oil and gas producers.
That same day, I listened to CNBC’s most famous talking head.
Shutterstock
In the past, he’s shown a repeated tendency to “hate on” oil at important troughs. September 10th was no exception. He declared that the stars were aligned for oil to head lower. He capped off his dismissive views with the declaration that “there’s no demand”. Yet, as you can see below, the reality is quite different, once again courtesy of the diligent energy analytics team at Raymond James. (By the way, Marshall Adkins, the senior member of that group, will be joining us for our next webinar, tentatively scheduled for October 16th.)…
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IMPORTANT DISCLOSURES
This material has been distributed solely for informational and educational purposes only and is not a solicitation or an offer to buy any security or to participate in any trading strategy. All material presented is compiled from sources believed to be reliable, but accuracy, adequacy, or completeness cannot be guaranteed, and David Hay makes no representation as to its accuracy, adequacy, or completeness.
The information herein is based on David Hay’s beliefs, as well as certain assumptions regarding future events based on information available to David Hay on a formal and informal basis as of the date of this publication. The material may include projections or other forward-looking statements regarding future events, targets or expectations. Past performance is no guarantee of future results. There is no guarantee that any opinions, forecasts, projections, risk assumptions, or commentary discussed herein will be realized or that an investment strategy will be successful. Actual experience may not reflect all of these opinions, forecasts, projections, risk assumptions, or commentary.
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