Yesterday we learned that Exxon (XOM) is in talks with Tesla, Ford, and Volkswagen about supplying lithium. If that headline caught you off guard, here is the back story. Earlier this year, XOM bought the drilling rights for 120k acres of land in the Smackover formation, as shown below. The purpose is not shale oil, […]
In last week’s Commentary, Doves Versus Hawks, we stated: “There appear to be two camps emerging, the doves and the hawks, with differing opinions on what to do next. We think this battle will become more pronounced over the coming months. Therefore, understanding the dove’s and the hawk’s points of view is critical to forecasting […]
Ten and 30-year U.S. Treasury bond yields rose sharply, with their yields piercing 4%. The driver was a change in the Bank of Japan’s (BOJ) monetary policy. The BOJ adjusted how they manage yields, aka yield curve control (YCC). They will now conduct YCC via “flexible” operations. Before the flexible stance, the BOJ had a […]
Remember PacWest? Following the demise of Silicon Valley, Silvergate, and Signature banks in March, PacWest Bank was on the ropes. Many investors feared it would be the next domino to fall and other larger regional banks may follow, thus worsening the banking crisis. PacWest shares hit a low price of $2.48 on May 4th, well […]
Over the last thirty years, the Fed has relied on lower interest rates to pump the economy when it slowed. Lower rates helped wide swaths of the economy. But quite often, the most immediate benefit was from the housing market. Lower rates made housing more affordable, thus increasing the ability for potential buyers to buy […]
“Despite the slowing recovery in tourism in the region overall, one contact highlighted that May was the strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx of guests for the Taylor Swift concerts in the city,” The quote is courtesy of the Philadelphia Fed’s […]
The recent New York Fed Credit Access Survey report shows consumer borrowing is becoming more difficult. As we have been discussing for a few months, the fallout of the March regional banking crisis and the inverted yield curve is causing banks to tighten lending standards. The Fed report is based on a survey taken every […]
Albert Edwards of Societe Generale wrote a thought-provoking piece based on the graph below. He asks, “What on earth is going on?” In other words, why are corporate interest expenses as a percent of profits falling as interest rates soar? Albert surmises that many companies borrowed heavily in 2020-2021 at very low-interest rates, and the […]
On July 24th, the Nasdaq 100 will reduce the weightings of its top seven holdings to try to better balance the top-heavy market cap-weighted index. At the same time, the rebalance will increase the weighting of many other smaller Nasdaq 100 stocks. We suspect that the large index funds will adjust their holdings appropriately in […]