It was interesting listening to the energy price discussion on CNBC today. Hard to deny that if/when China reopens that the demand for energy will soar... What I was unaware of until Navellier pointed it out in today's email is Biden is as crooked as Xi in manipulating GDP with national resources... He sold a good percentage of our oil safety margin to the Chinese to get gas prices down for the election!
Leon Cooperman, who voted for Biden then said he actually voted against Trump, was all over Biden for idiotic energy policies such as demanding they invest profits into more production after his campaign promise to put them out of business.
BTW, I believe Navellier has a long history of gaining assets to manage for a fee by selling what people want. I remember in late 1999 and 2000 urging subs and friends to take some profits in tech stocks. One friend who retired and was living on money from selling his telecom company was with Navellier and wouldn't have any of it... So now that Navellier is hot on energy... time to worry, perhaps because a 2023 recession will crash demand again?
11-1-22: Recent GDP “Growth” Is Mostly SPR Oil Exports – A Campaign Ploy
by Louis Navellier
November 1, 2022
The Commerce Department shocked many economists (and certainly pleased the Biden Administration) on Thursday when they announced the preliminary estimate for third-quarter GDP growth at a 2.6% annual pace following negative growth in the first two quarters. What I find most amazing is that virtually all of the third-quarter GDP growth was attributable to a lower trade deficit that added 2.77% to GDP growth, and most of that came from higher petroleum exports, due largely to one million barrels per day being released from the Strategic Petroleum Reserve (SPR), which, as its name implies, is only to be used for national emergencies, not to lower the price of gasoline at the pump right before a mid-term election.
So, this bloated GDP figure is mostly an artificial number ginned up to get gas prices down before an election. Without the reduced trade deficit, due largely to oil exports, GDP growth would be close to zero.
Speaking of the SPR, the Biden Administration offered to begin refilling the SPR when (if) crude oil prices fall to between $67 and $72 per barrel. That may never happen if demand increases at the current rate. The SPR can hold 714 million barrels of crude oil, but the SPR now stands at just 405 million barrels, a 38-year low. Furthermore, the Biden Administration’s criticism of the crude oil industry’s desire to return any excess profits to its shareholders via dividends has raised the public’s mistrust level with Big Energy.
This kind of bias against fossil fuels in favor of ESG once drove energy stocks down to less than 2% of the S&P 500’s capitalization a year ago. Now, energy stocks are the best performing sector and have risen to approximately 6% of the S&P 500. In two to three years, I expect energy stocks will soar to 30% of the S&P 500 and appreciate 100% per year for the next couple of years! Why am I so bullish? Primarily because the strategy of releasing those million barrels per day from the SPR cannot continue much longer and crude oil demand will likely pick up in the spring, so $120 per barrel crude oil is possible next spring.
Just two years ago, fossil fuels represented 80% of worldwide energy production, and that was thought to be too high, hence the push to “green” or “clean” energy. That has backfired. This year, due largely to the surging demand for coal in China, Europe, Indonesia, India, and the U.S., fossil fuels are expected to rise to 84% of worldwide energy production. Europe has proven that ESG polices are an expensive failure, since it just causes electricity prices to soar! These misguided policies are pushing Europe into recession.
Europe is already in recession. S&P Global’s composite purchasing managers index (PMI) for eurozone nations declined to 47.1 in October, down from 48.1 in September. This is the fourth consecutive month the index has been below 50, signaling contraction. Fuel rationing is very possible this winter in Europe if it becomes too cold, so the eurozone PMI could fall further in winter months. These recession fears are causing government bond yields in Europe to decline, which should help U.S. yields to moderate as well.
America is Not in Recession Yet – Just a Recession in Confidence
The Conference Board announced on Tuesday that its consumer confidence index declined sharply to 102.5 in October, down from 107.8 in September. The components of the consumer confidence index were not very encouraging: The “present situation” component declined to 138.9 in October (down from 150.2 in September) and the “expectations” component slipped to 78.1 in October (down from 79.5 in September). The big (11+ point) drop in the present situation component bodes poorly for fourth-quarter GDP growth, so an economic deceleration is likely underway, but not yet a measurable recession.
One reason that consumers may be so moody is that home prices are declining. The S&P CoreLogic Case-Shiller National Home Price index declined 1.1% in August, the second straight monthly decline. The Case-Shiller index is still up 13% in the past 12 months. However, some previously hot housing markets have cooled off: San Francisco home prices declined 4.3% in August, while Seattle prices slipped 3.9%. In the past 12 months, median home prices have risen 8.4% to $384,800 according to the National Association of Home Builders, but high mortgage rates near 7% are expected to hinder future price gains.
The Commerce Department on Wednesday announced that new home sales have declined 17.6% in the past 12 months. Interestingly, the median price of new homes sold in September rose to $470,600, up from $436,800 in August, so it appears that the more expensive single-family homes are selling more than multi-family homes. In the past 12 months, new home prices have risen 13.9%. Mortgage applications have fallen 42% in the latest week, so it seems that home sales volume is expected to slow due to higher rates.
In summary, consumers remain resilient, consumer confidence has been consistently waning, and higher interest rates are hindering home sales as well as other interest rate-sensitive parts of the U.S. economy.
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