Yesterday I was able to buy unleaded 88 for my SUV for $2.35/gallon–getting a fill up for $35 bucks or so is sure less painful than the $50 fill ups of only a couple of weeks ago. Also helps consumer confidence – although there are always reasons for ‘negative nebobs’ to be negative – just a wide divergence in attitudes on the economy. I look around and say ‘things are pretty good?’ – others look around and say ‘this economy sucks’. Seems to me we have had these disagreements for decades and decades and there is no reason to think things will change.
So I’m looking at the futures markets – how can there be so little volatility in markets? In the olden days (1980’s and 1990’s) the talking heads always referred to this very tight trading range as building ‘tension on the tape’ and of course implying tension will eventually break with a severe move one way or the other. I don’t know – this has been going on for a long time this year and I don’t see drastic moves in either direction, but one never sees the drastic moves, because they will be caused by ‘black swans’ and by definition it can’t be predicted.
Equity futures are darned near flat again this morning and traded very flat yesterday. The 10 year treasury is at 3.91% right now (6 a.m. central) – tight, tight range – waiting for a reason to move up or down. Yesterday the only economic release we had was ‘home builder sentiment’ – as you might expect with lower interest rates the number was slightly improved. Today we have housing starts and building permit data being released – forecasts are looking flattish and I wouldn’t expect anything market moving.
I did no buying or selling yesterday. I noted that on Friday I had part of a GTC buy order execute on Gladstone Land 5% term preferred (LANDM) and there remains an order outstanding for more. I cancelled 2 orders on 2 Connecticut Power and Light $50 issues–they ran away from my GTC orders so I just cancelled them for now–we’ll see if I want to enter new orders for some illiquid issues. Still trying to decide on a mREIT preferred purchase and waiting also waiting on the new issue from Midcap Financial 8% baby bond (MFICL) which has not started trading. Likely I will by a dab of this one to add to the 2 BDC securities I currently own–thinking a basket of 3-4 issues is better than any single BDC holding.
Well let’s get going – see what excitement the day has in store for us (or more likely just a nice quiet day).
Here in northern NV, 87 oct is still $3.99 – always running high, but- a few wks ago was 4.59- merry xmas for the ‘huge’ drop š
Wow – here in SE MD, 87 octane has been hovering $2.99-$3.19 for a while. MD taxes it more as, when I go to work in VA, I can get it about 15c cheaper per gallon.
When I went CA in early Nov, regular gas was $5-$5.50/gallon!
Gas prices have always been volatile. Too many factors involved to predict where it will go next though gotta believe upside for prices is bigger than the downside from here. I traded UGA for awhile if you want to make money on rising prices or just hedge against your gas bill.
For my entire investing career the background has always been that the Red Sea and Persian Gulf choke points have the potential spike oil prices if shipping in these chokepoints is challenged. Well for the first time since the mid 80s (as far as I can recall) these choke points are clearly under attack beyond the odd “pirate” incident. Shipping is being re-routed and US Naval assets are being attacked. Even with this backdrop oil prices are staying flat and trading at the bottom of the trading range.
Global crude markets are just very well supplied with lots of Russian, Iranian and other sanctioned crude grades supplying India and China. All this while US Shale in locations like the Permian are at record production levels.
Octane Levels… If you notice there is a formula articulating octane level calculation on gasoline pumps (at least in the US). This formula and reporting is different between the two geographies.
To confirm I asked ChatGPT and this is the answer that I got.
The difference in octane ratings between Europe and America is due to the different methods used to measure fuel quality. In Europe, gasoline quality is measured using the Research Octane Number (RON) test, while in America, the Anti-Knock Index (AKI) test is used. The AKI test is an average of the RON and the Motor Octane Number (MON) tests, which are both used to measure fuel quality in America. The RON test is more commonly used in Europe and other parts of the world, and it typically results in higher octane ratings than the AKI test used in America1.
According to a source, American 90-octane fuel would be the same as European 95 octane fuel2. This is because of the 8 to 10 point difference of RON over MON, which causes the octane rating shown on American fuel to be approximately 5 points lower than the rating shown in Europe for the same fuel2
So no – the don’t get higher octane gasoline in the EU.
Thanks for this post, August; I had no idea that octane calculation methods differed US-to-Europe…
For those inclined to take more risk, it is probably not a bad time to look at energy stocks which are out of favor. Not the easy money of 2021 though. Quite a volatile sector. too, If a 5% FDIC-insured CD brings serenity and a 5 cent drop in an IG preferred is unsettling, a 5% one-day drop in crude may be very unnerving. On the other hand, there’s a yin and yang balance if you think of energy prices balancing your SUV fill up and winter nat gas heating bill.
Some of the stocks in annual “best for 2024” pick lists ( e,g. Doug Kass today) are based on geopolitical “what ifs…” The linked MW article has a map of the current flashpoints in the Middle East and discusses oil and shipping risks.
Attacks in the Red Sea add to global shipping woes
https://www.marketwatch.com/story/attacks-in-the-red-sea-add-to-global-shipping-woes-d117ccf4?mod=home-page
JMO. DYODD.
Kass seems to like OXY XOM and CVX. If have some XOM and have had OXY common and current have OXY BB+ notes. I also own BRK which has a 27% interest in OXY. I personally prefer XOM over CVX, but can see both sides of it.
XOM is in the process of swallowing and acquisition of PXD (Permian Basin pure play) and CVX is in the process of swallowing an acquisition of HES (interesting JV with XOM in Guyana). I had a decent allocation of HES and sold it on the news. XOM and CVX are both stock swap deals which *may* have FTC approval issues due to concentrations in key basins. I think there is deal risk. Anyway if one wants to buy XOM and CVX it might be most efficient to buy the PXD or HESS and maybe sell OTM calls as a partial hedge. There is FTC related downside risk on this names, however.
OXY is well known to be a Buffet play and are also in the throws of a acquisition. They just have a lot of balance sheet gymnastics going on. They are still cleaning up their balance sheet from the Anadarko acquisition (Buffet rather famously has about $10B in their preferred which pays an 8% coupon and has a nifty 10% fee for retiring principal!). OXY have just made a $12B offer on Crownrock which is a private E&P firm focused in the Permian. I have an allocation to OXY BB+ notes which I feel are really not BB+ due to Buffet’s 27% ownership of the common. Because of their balance sheet they are not distributing the kind of cash to investors that a DVN, FANG or PR are. FANG are PR are pure plays on the Permian DVN has considerable Permian assets, but is also more of a Multi Basin play. I own all of these three names and have for a few years for what it is worth.
All of these companies need higher oil (and gas) prices to move higher in any significant way.
The action is in the Permian IMO.
Permian is hot and probably the best place to be if you are looking for take-over action. HES/CVX seems to be the pick of the moment. (Barrons, Kass, Goldman) However, IMHO there is still a risk of a war breaking out in South America with Venezuela eyeing HES’s properties. Any battle will be lopsided. The PD of a mid-sized US city has more personnel and better equipment than Guyana. Plus, there is no longer any world cavalry to ride to the rescue of the invaded. The only risk to Venezuela is a strong reprimand e-mail from the UN. Oddly, I think this makes Hess’s domestic pipeline unit more valuable.
I’m not a flipper or options trader, more a long term holder, income and value, so I’d probably say that something like an Enbridge would be a good add for the watch list of the Average Joe preferred investor around here. Or Marathon if seeking an unloved stock with domestic assets.
JMO. DYODD.
Sure thing Bear, but Guyana war risk applies to both CVX and XOM… A big part of the investment thesis for XOM is Guyana. HES exited by selling to CVX.
Better off with domestic assets – like the Permian.
Doug Kass certainly isn’t shy making predictions. Fascinating reading. I’ve never followed him so I don’t know his accuracy rate.
“Predictions” is actually a misnomer. If you read his explanations from prior years, he says his lists are actually a list of possible surprises, unexpected and contrarian events that most Wall Street investors haven’t factored into their risk calculations. Things to think about and maybe hedge against.
Here’s this years list. A little tamer than average, maybe because he’s trying to emulate Bryon Wien, who had his own lists. The only one that caught my interest was on the bonus list: a flash crash triggered by Zero Day Options. Its always the new stuff that causes the problems because some trader makes a mistake and the computer algos follow. (Remember the young trader working the overnight desk for an Asian broker, who keyed in a wrong sale, tried to fix it, then fell asleep with his head pushing on the zero key, causing a market panic and near collapse of the Japanese bond market.)
Doug Kass’s 10 Surprises for 2024
https://smarts.thestreet.com/all-smarts/doug-kasss-10-surprises-for-2024
Agreed. Predictions wasn’t the right word. Much better ” possible surprises, unexpected and contrarian events that most Wall Street investors havenāt factored into their risk calculations.”
If you don’t mind wild and woolly and a bulletin board listing–but also very solid yield–take a look at Unit Corp., UNTC.
They are about 50/50 o&g production and drilling, emerged from bankruptcy during the pandemic, and seem to be extraordinarily focused on shareholder returns.
They currently trade at around $67, will be throwing off a special dividend of twenty bucks in a few weeks, and have a $2.50/quarter regular dividend that is supported by cash flow.
I own some, but do your own due diligence of course. The main knock on them, which is reasonable, is that their fields ARE declining and it’s very possible the drilling business is about to get worse.
I drive a diesel truck š
MFICL is trading. Opened at $25.13
RandyK–just got it at $25.14 on Fido.
What broker? Not seeing it at Etrade.
Landlord–don’t see it at eTrade, got mine on Fido.
got it on schwab
strange – showed shares available at 25.14, but my orders wouldn’t fill. I ended up putting them in at 25.16, and they filled at 25.14.
Natural Gas down a lot too, we heat/water heat/cook w NG and our bill which is on the ‘budget’ plan which spreads out annual projected use/cost over 12mo is down 55% from last year. So gasoline down, NG down..oh and the headline grabbing ‘eggs’ are cheap again. Paid 7.99/lb for some beautiful Porterhouse steaks at the grocer last week, coffee on sale for 6.99 a ‘tub’ (remember when the cans were 3lb tho! lol). Keeping the heat on should be a little easier for those on tight budgets. Mom and my Medicare plans both went down in 2024. While my auto ins is up, our homeowners went down w coverage up for ‘replacement’ cost inflation on the home and contents. Falling prices don’t make for good headlines, do they???
$7.87 will buy you a gallon of unleaded 95 here in good ol’ The Netherlands
$7.55 in Italy.
Jos I noticed when I was in Austria at a gas station the octane was a lot higher than it is here in the states. Don’t think we could get the octane you’re getting unless we went to the local airport and bought aviation fuel.
95 is defacto standard
See August’s post above (https://innovativeincomeinvestor.com/im-loving-gasoline-prices/comment-page-1/#comment-106380) about varying octane calculations.