German politicians demand a return to nuclear power. Energy transition failed. AIA Weekly 12-9-23

Transcript of Weekly Report

One of the subscribers has been transcribing the weekly videos. I will upload them here so people can read them if so inclined.

Hey guys, John Polomny here, Actionable Intelligence. Today is Saturday, December 9th, and this is the Weekly Market Update. Before we get started, just a couple of housekeeping items. After much deliberation and thought and some suggestions, I'm probably going to move the newsletter, well not probably, I am going to move the newsletter on to Substack. That will be the paid newsletter.

Transition to Substack

Now it's going to take me a month or 2 to go through everything. I have to wrap up some things here in December but then I'll have a period of time where I'm going to be free where I'll be able to do that. I think it'll be easier for the subscribers, it'll be easier for me and I think it's from what I've heard from other content creators, it's just a better platform because things are starting to get unruly. I spend a lot of time just doing subscriber issues about payments and emails and all this stuff. So, I think things will work better via Substack.

I also probably will be shutting down my website actionableintelligencealert.com. I'll probably just, I'll have a free portion on the Substack and pretty much all of my content will go through there and obviously the YouTube videos. So it's going to take me a while to do that because again, I'm a one man band, but look forward to that. And hopefully that will make things a lot easier for folks.

Okay, let's go ahead and get into it.

Disclaimer and Insights

The disclaimer, anything that you hear or see on this podcast or video is not to be taken as investment advice. I'm not a licensed financial advisor. I cannot give you personalized financial advice. This is for informational purposes only. Please do your own due diligence. It's your money. It's your responsibility.

Someone else to follow on Twitter I think is pretty good, @EconBurger, got some charts from them this week. Again, I don't necessarily just go out and look for charts that confirm my bias, but this was basically came through Jesse Felder's weekly email. And this discussion around this vibe session, The chart here shows no recession, but recession-esque income growth.

Income Discrepancy

And then you see the real personal income per capita, 12-month moving average, and then real personal income, excluding transfers. And so what the gist of this is, is that okay maybe the official statistics are not showing a recession but people have a feeling that you know they're in a recession and that's kind of what my a little bit of. I think this is a good description because this is kind of what I think is going on. I mean, I'll get into like the weekly job thing here in a little bit, but you know, Recall 1 thing, recessions are declared after the fact, after they happen, right? Economists go back and say, oh, okay, now that we have all the revised data, because the data when it first comes out, what people forget is that it typically gets revised months later. They're continually doing revisions.

So, when you get the October unemployment report, for example, I mean, they're doing revisions from, you know, months ago that nobody pays attention to inside of that. So a lot of these things are done by surveys or things around assumptions around things like the birth-death model. And so what's really going on in real life? How do people actually feel? I mean, if the economy is so great, why is personal income going down? Why do people feel like something's not right? Why is Bidenomics failing?

And I'm not just picking on Mr. Biden, he just happens to be the president. He's, you know, very low, his approval ratings are very low. If everything's so wonderful and we have all this growth and employment's so great and everybody feels really super optimistic, why are people, you know, why do you see that type of data?

Economic Perceptions vs Reality

So, again, when you get into these arguments or discussions, you can make the case for anything. My case is very simple. The historical narrative is simple. I believe that cycles still exist, the business cycle still exists, and that when the Federal Reserve has raised rates at the quickest rate of change that they've done in 40 years, raising rates up to 5.25 on the Fed funds, and has been doing $100 billion, give or take, a month in quantitative tightening. At some point, that's going to be a problem for the economy. I don't agree that the business cycle has been conquered. If you take liquidity out of this over-levered economy, the US, it's going to have a problem.

Now, the problem is people just ignore the lag effect. I kind of try to use the analogy or the metaphor, whatever you want to call it, of a boa constrictor. It's just slowly squeezing you. Then when you exhale, then it squeezes, it tightens a little bit more. So that's what the connotative tightening's doing. So slowly but surely removing liquidity. And recall that because rates were raised very quickly, the full effect of all the raises have not made it fully into the economy. That's still happening.

And I think that's what we're seeing. It's a slow process because I think myself and other folks that were, you know, I thought we were, you know, there were parts of the economy I think that are already in recession, it goes without saying, manufacturing for example. But, you know, I think the fiscal spending, the giveaways, all this stuff, that's all ended now. And so I think the excess savings, the free money, the abatements on rent and student loans, that's all went away now. So now it's time to pay the piper.

And I think we're heading for a big problem now. And again, I'm interested in hearing from people, what is the engine of growth going forward? You're pushing against history. When you raise rates, when you tighten liquidity, to acknowledge that the United States economy is a very indebted economy. It cannot, I don't believe that it can function. And I have no data to prove this, but when you had 0 rates for over a decade and all of a sudden you have Fed funds at 5 and a quarter and mortgages at 7 whatever percent and all these other issues and all this really high levels of debt, How are these marginal people at the margin and businesses or individuals at the margin, how are they going to overcome that? I don't think they will.

Lingering Economic Challenges

And I just think that, again, it's just a slow process of strangulation that will manifest itself in some type of train wreck in the economy, which I've talked about many times before. So here's another graph from this, at EconBurger via Jesse Felder. I, well, want his weekly email. This is the financial situation relative to a year ago. So do people think they're better off or worse off relative to a year ago. Well, look what's happening to the worst. It's spiking and the people that feel they're better off than a year ago is going down. These are the type of things that I'm looking at. This is why if you think that you're worse off than you were a year ago, are you more apt to go buy a new house or a car or appliances or what have you?

If you had an abatement on your student loans and now all of a sudden you're having to repay them and the average repayment is $300 a month, $325 a month, whatever it was, whatever we reported a couple of weeks ago. That's money you can't spend going out with your friends or buying stuff or what have you. This stuff in isolation doesn't necessarily push the economy into recession, but cumulatively it's the straw that broke the camel's back. And people, this goes back to that whole vibe session, You know, people don't, maybe can't put their finger on what's wrong, maybe they still have a job or, but something's not right. They don't feel, they don't feel good about what's going on in a financial situation.

So here's new orders falling. You see the trend after the pandemic. We had big ramp ups as we fixed the supply chain, and that's happened now over the last couple of years. And now we're moving into month over month, new orders falling, and year over year is now negative. So that's not positive. And so again, for somebody that's bullish on the economy, they'll say, well, John, GDP was like 4.5% last quarter. But as we've shown or talked about in this, many recessions have big spurts of GDP right before you go into recession. That's again looking in the rearview mirror. What's happening now, coincidentally right now, and what is anticipated to happen in the future. That's what matters.

Understanding the Job Market and Inflation

This is another, I don't know how to pronounce this, Kobeesee, I mean this is a really good folks to follow on Twitter also. Now this is talking about the jobs report. So US economy adds 199,000 jobs November above expectations of 180. The unemployment rate fell to 3.7, below expectations of 3.9. This means that the U. S. Economy has now added jobs for 35 consecutive months. Can the Fed really pivot right now? No, there's not going to be a Fed pivot again in my view until 1 of 2 things happens. The inflation rate is below the 2% target comfortably below it. It's not going to be rates are not going to be cut the day after there's a two-handle on the inflation rate.

Or the other thing will be something breaks hard in the economy and that gives air cover to the Fed to come in and print money. So there won't be a pivot until 1 of those 2 things happen. So, that's likely not to happen until we get into 2024. And as a matter of fact, the CME Fed prediction chart was showing prior to this jobs report something like a 50 or 60 percent chance by a Fed rate cut by March of next year. Now that's dropped and we're not looking until something happening until May of next year, which is fine.

Again, we are worldwide in a new liquidity cycle, liquidity creation cycle as I've demonstrated as more and more central banks are cutting rates now that have raised them. All of the OECD countries which relate to the table for the most part of raising rates are now in pause and that pause is always going to be a precursor to cuts and re-liquification.

Monetary Policy and Its Impacts

So this is the 1, So all of this stuff can be distilled down to 1 thing. When do I swing this 20-pound hammer that I have, which is my only tool, to kill flies in my house, drive nails, what have you? That's the only thing the Fed has, right? Raising and lowering the Fed funds rate for the most part, and printing money. And so these blunt instruments, you know, are not going to be pulled out until they absolutely have to be. But they will be. And we see the economies deteriorating all around in the major countries around the world, developed countries, and it's a matter of time. I would suggest even possibly that the EU would cut before the Fed does. The EU is further along in a recession already.

And so again, that's, you know, this is what happens, right? So you get this and everybody says no we're not gonna have a Fed pivot. Rates go back up. We had a big bond rally over the last month. People were anticipating Fed rate cuts. Now this news reversed it. But the inevitable is going to happen because the QT doesn't stop. The days that tick by, more and more of the previous rate increases exert even more pressure on the economy. And so it's just inevitable what's going to happen. Again, I'm happy to have the discussion about what is the driver for economic growth in a situation where liquidity rates are very high in an over leveraged economy and liquidity is being contracted in the United States. I'm happy to have that discussion. I don't see it. I'm willing to be convinced but that's what's you know that they want a recession, they want higher unemployment, they want to see the stock market come down reasonably, not out of control, they want to see house prices start coming down. That's going to give them the air cover they need for the next cycle of liquidity. Again, I believe the business cycle is still intact.

So here's a good chart we got. Again Apollo, they show up a lot on these Twitter feeds. It says October data shows weakness in retail sales after student loan payments restarted. Now this is just 1 month. You see the line, student loan payments resume and retail sales go down. So We'll see if this continues. We'll see if this is a combination of that and just general weakness or people's running out of excess savings, free money being turned off, what have you. We don't know, but this is an interesting thing to see. You know, there was some debate about how much this would exert on the actual economy. I'm not saying this is the only factor, but it is interesting that this correlation is there. It doesn't mean this is the full cause.

Okay, let's talk about uranium. Justin Hune, Uranium Insider, reached out to me like late last week. And we jumped on a call yesterday afternoon. I thought it was pretty good. I mean, he gets interviewed quite a bit. I tried to ask him some questions that he doesn't normally get asked. We tried to delve into some things to kind of focus on the same supply-demand issues that are really driving the market. We talked a little bit about, you know, the what came out of the climate conference in Dubai about the commitment to triple nuclear capacity.

The Promise and Challenges of Nuclear Power

You know, This thing is not actionable right now. But again, what I've suggested in the past is this is the confirmation of something that I was talking about even back to the initial, 1 of the first interviews I ever did on YouTube, which was probably 4 or 5 years ago now, with Malcolm Rawlingson, when we talked about where we would end up. And everything now is basically coming up aces like that. The fact that basically the climate hysteria is dying, ESG has peaked, The climate scam ripoff with renewables is coming to an end. And we're seeing the reemergence, as was predicted, of nuclear power. If people are actually concerned about carbon emissions, then you have to be an advocate for nuclear power. And we're seeing that now. That's what I think is the main thing to take away over that conference, is that people have come out and basically just said, okay, nuclear is fully endorsed as a methodology to deal with carbon emissions, okay, to be in the mix as far as, and in a big way, with the climate change, what have you, plans to mitigate it, whatever.

So, I feel pretty good about that. We'll see. But again, the uranium price is up again. It's just relentless. This is so reminding me of the last bull market where week after week you would just see the price of uranium go up. Sometimes it would be 50 cents, sometimes it would be a couple bucks. It was just relentless week after week after week. And again, that wasn't even a situation, folks, where we had the kind of supply-demand imbalances we have now. I mean, the supply-demand imbalances that we have now are just, they did not exist during the last bull market. And so, again, I'm very bullish on uranium. I think it can go much higher. But I am hesitant to, I want to be a responsible person. I don't want to sit here and say, well, I think uranium could go to $500 a pound or something, you know, making wild predictions so I can get clicks on YouTube. I do think it's going to exceed the all-time high of the previous cycle, inflation adjusted. So is $200 a pound out of the question? No. But no 1 can know the future. We just know that the circumstances and facts that led us to overweight in uranium still exist and continue to get better and better. I mean, the facts just get better and better.

1 of the things Justin and I talked about in the interview, which I'll put a link to in the show notes if you haven't already seen it, is, you know, we're seeing a lot of announcements for new plants, commitments to do this, small modular reactors, all these very, very super positive things on the demand side. Yes, they'll take years to play out, but they are there. But what about on the supply side? We just saw, I think, recently some ISL mine here in Texas turn on. I can't remember the name of it, but where are the big investments? Where are the big commitments? Where's the big news about all of the supply that's supposed to come on? As a matter of fact, we actually are... one of the things we talked about is KazAtomProm's difficulties in raising its production and some of the issues they have. Not only that, just talking about how difficult it is to mine any material and especially uranium. Permitting issues, financing issues, labor issues, supply issues, just geological things that you run into. Any, you know, as I stated on the interview, and I say this in jest, but it's like somebody else that was in mining told me, he said, you know, it's pretty typical, you know, everybody on the projects involved with the projects trying to wreck the project. Now that's not literally, but it's just like you're always going to have problems, right, that no one's ever going to meet their deadline and meet it, you know, at the cost that they thought. And so that's what we're seeing.

So that's where, you know, eventually the price has to rise, as we've said before. This is my statement around price rises. The price will go up to a sufficient level to draw the necessary capital in to close the supply-demand imbalance. Now, I have no idea what that price is. In the context of that situation of Economics 101 supply-demand curves playing out, there is the potential for a super spike if in fact we get some exogenous event that really brings a lot of attention or really shocks the market. And then You can see a ton of money come in.

Uranium Market Dynamics and Investment Strategy

So again, the problem with the uranium market is to get the big money, it's such a small market relative to other markets. It's hard for, you may be a big pension fund or whatever, hedge fund, multi-billionaire. I mean, Berkshire Hathaway is not going to enter into the uranium market because it's just too small to matter. You could explain the supply-demand deficit to Buffett and he would probably agree with you after you he saw the facts, but I can't do anything there. But this is the advantage that we have. We can still play there, right? Because inevitably that spot price is going to keep going up.

So my advice is simple, as it has been for a couple years now. This is a bull market, and in bull markets you should look to hold what you have and buy on dips. And then reevaluate facts as they come in to see if you're near the end of the bull market, in the middle of the bull market, wherever you think you're at, and evaluate that in the context of your personal financial situation, your risk tolerance, and what you're trying to achieve with this particular speculation slash investment. So I think I've got a couple more slides here on uranium. Let's see.

Oh, yeah, I wanted to talk about House Resolution 1042, dubbed the Prohibiting Russian Uranium Imports Act. This is legislation that I believe is made out of committee is going to be voted on next week. I'll put a link to the legislation. It's 7 pages. You can read it. Basically, what it says is it's to prohibit the importation into the United States of unirradiated low-enriched uranium that is produced in the Russian Federation and for other purposes. Basically I just took a couple blurbs out there. It will take effect 90 days after it passes if in fact it passes and what I saw in there I wouldn't say this is going to be the catalyst for a big spike although you never know. Basically inside the legislation, the Energy Secretary has the authority to authorize waivers. And so we'll see what this really does, what effect it has. It could just be, you know, we're mad at Russia because we're loose because the Empire is losing their war in Ukraine so you know we're going to try to squeeze Russia any way we can whether this actually does anything I don't know the other thing just and I talked about is just when I've talked about this before when it goes to uranium we should even be in this situation folks The lack of leadership in this country that I've talked about and the things that they focus on, because they're not there for your benefit or for anybody's benefit except for their own, to allow the nuclear industry in the United States to atrophy over the last 40 years to the point where we have to pass legislation or we have to do stupid stuff like have 20% of the electricity in the United States, base load electricity, be produced by nuclear power and yet we don't mine any virtually 0 amounts of uranium in the United States. And I think the United States needs 40 million pounds a year or something like this and we, you know, virtually mine nothing. And that's a national security issue. So all these previous administrations going back 40 years have been negligent. Not to mention the fact that the capital ships in our fleet, in our submarine fleet, in our deterrent fleet, in our carrier battle group fleet of the carriers are nuclear powered. This makes no sense, but this is what they do. Nothing gets fixed up there. Nothing's addressed until it becomes a crisis. If this does anything, maybe it'll bring attention to the fact that of the incompetence of the management of this, basically what I consider energy security being a national security issue. If you're going to have 20% of your power base load electricity be supplied by foreigners, then that's not smart, okay? Especially somebody that you have declared an arch enemy and that you want to you know be in a war with whether it's a proxy or a direct conflict. So anyway we'll see how this goes and we'll see if it has any effect. I don't think it'll have the effect that everybody some people are saying but you never know You never know what's going to be the catalyst, right? Start mixing different things like mixing chemicals randomly and then all of a sudden you blow up the lab. So this is what I find interesting. I kind of chuckle. I mean, I don't always get things right, but I get things right, I think, when I think more longer term, because what I try to look at is human psychology, what motivates people, why they do the things they do. 1 of the things that I have really been good at in my life, and I'm not good at a lot of things, but I am good at some things, and 1 of the things is reading people, reading their motivations, understanding qui bono, going back to Munger's statement of Show me the incentive and I'll tell you the outcome. Even when I was a union bargaining agent or president, I would always try to look at the other person in negotiations, look at what the other person is trying to accomplish or what their motivation is in this particular dispute or discussion. 1 of the things that I said a long time ago is that the energy transition in Germany was stupid. It made no sense. It wasn't going to work, and it didn't, and then compounded by the dumb idea of shutting off these perfectly good, well-run reactors in Germany, which was another dumb idea.

The Implications of Prohibiting Russian Uranium Imports Act

I've been saying more recently that eventually I suggest that the political pressure will rise to the point where I feel that, or I would bet that in the end the Germans will turn the reactors back on. Because you have no choice, folks. We won the argument on this, and it's just obstinance now and political ideology that keeps it from happening, but that seems to be changing. In this article, which I'll put a link to, Title of Germany, union of the CDU, basically the Christian Democratic Union. I can't remember how these parties, these are basically center-right, center-party, center-right parties, want return to nuclear power. Leading Union and FDP politicians want Germany to return to nuclear power. They argue that this would be the answer to the country's budget crisis and the weakening condition of German industry. The Frankfurter, I can't pronounce this paper, Portal reported on Saturday.

Changing Tides in Energy Policy

The politicians are demanding that recently shut down reactors be restarted and that preparations be made to build modern small reactors. Kind of like they're doing in Poland, they just announced a huge plan to build all these small modular reactors. As Jens Spahn of the CDU described the shutdown of Germany's latest reactors, quote, in the middle of an energy crisis as a serious traffic light error. Quote, it is very urgent to restart nuclear power plants, unquote, Saxony's prime minister said. The quote, energy transition has failed and must be restarted, must be started anew, unquote, he noted in comments to this newspaper. So there you have it, folks. You can read the article for yourself. The political pressure is building. It's obvious that the zeitgeist has changed towards nuclear power.

I can recall, as Justin and I were talking yesterday, back when I was one of the few, I wouldn't say first, but I don't want to give myself that much credit, one of the few people advocating for nuclear power and saying that uranium had great prospects, I was called a fool, an idiot, I don't know what I'm talking about, nuclear is a dying industry, yada yada yada, and I understood it as a physics and math problem. I worked in the renewable business, I've built thousands of megawatts of wind and solar projects and I know I having done that and operated them by the way I was a plant manager for 3 years it simply isn't going to scale it's not you're not going to run They have a place in an energy mix, but they cannot be the main drivers because of the intermittency. It's that simple. You have to have base load. And, I understood that early and that was the advantage that I had. I took in then the math and there was many days when I was running that plant that I had was 400 megawatt plant where we sat there for 234 days and nothing happened because no wind was blowing. I mean, that's crazy. You can't run a modern society like that. So eventually, you will either get on board with nuclear or you will be poor. This errors were compounded by letting the United States run their foreign policy and blowing up their cheap gas from Russia and now they're really in a jackpot there and you know again, this can be repaired it can be fixed, but it will take a political landslide change in thinking and But I think it will happen these things you know stupidity can only go on for so long and ridiculous ideology can go on so long until people become frustrated. Once they become cold, poor, and hungry, your views seem to change rather quickly. So we'll see. I think that eventually this is what will happen, and I think that would be the cherry on top of the whole change in zeitgeist towards nuclear power.

I wanted to point this out from the weekly US Global Investors report that I get. They send out weekly. I like their little charts, they're pretty cool, little graphics, little iron ore thing here. Anyways, iron ore continues to do well despite Beijing's attempts to weaken it. You see the price of iron ore, this is just since the summer, but I don't look at a long-term chart here, but I'm just pointing this out, you know, when people say, well, we're headed for a worldwide recession, you know, different countries are in different, you know, I don't think we're synchronized for a recession. I think some countries are doing well. Some countries are in recession. Monetary policy is starting to shift around the world, as I've pointed out many times, and we'll see what happens. Again, you're going to have cross-currents and volatility because things are not synced up, but I found this interesting anyway. Here's an article from the Wall Street Journal. This is the title, Climate Enthusiasm Hits the Political Wall as voters face the cost. This is another thing that I talked about with Malcolm Rawlington 5 years ago when I asked him what would be, what would be the catalyst for people to change their views on this and it was always going to be when the voters have to face the cost. Now being 5 years early, you know, I would rather be early than late. But again, the zeitgeist has changed. So here's some snippets from the article. This is regarding the recent climate conference in Dubai. The truth teller in chief is the event's host, Sultan Al-Jubeir. He's become a figure of hate on the eco-left since letting slip that he's a net 0 skeptic. There is no science out there or no scenario out there that says that the phase-out of fossil fuels is what's going to achieve 1.5 degrees Celsius.

He's talking about limiting the increase in global warming. He said of the climate industry's goal global temperature target during a virtual event last month he warned that attempting to wean the world off fossil fuels would quote take the world back into caves unquote. The net 0 apostles say the political leader and head of the state oil company in a major petroleum producing country never should have been invited to host COP 28. But then someone has to drill the oil that powers the private jets that ferry the big wigs to these confabs. This is not my writing. This is the Wall Street Journal. So, you know, they're an establishment paper. They're an establishment media outlet, and they're basically talking like I talk. This is interesting to me. This should tell you that we're on the downward slope of the whole ESG thing. The whole thing's coming apart like a cheap suit.

Public Sentiment on Climate Initiatives

Going on here with the blurb, the bigger embarrassment for the climate left is that voters agree with Mr. Jabbar. If you haven't paid much attention to COP 28 this week, perhaps you've read about the collapse of the net 0 agenda around the world. We've been pointing it out here, actionable intelligence alert for years. It simply isn't going to work because of math and science. And most people were not the average person, the average Joe out there, and Jane wasn't going to get it until the costs hit them. And once the costs hit them, they're not going to, they don't want to pay for it.

I've had multiple conversations. When I was a plant manager, I used to have to give civic speeches and discussions with various groups, concerned citizens, elderly people, what have you. I had to go out and talk with these people. And most people, you know, I was very forthright. I didn't run the propaganda. I just said people would say to me, well, why are we building these things? This doesn't seem like this is going to work because of the cost. And I say, well, your argument is not with me. It's with the politicians in DC and in Austin. Again, I'm just a cog in the wheel. I don't make, I'm not a policymaker. And so again, if I've said many times, if someone wants to pay me handsomely to build refrigerators and freezers in Antarctica, I'm happy to do it because no one's elevated me to be the, you know, climate change czar or the, you know, head of the Department of Energy or the President of the United States or the Speaker of the House of the Texas Legislature. I'm a construction manager slash project manager, and if you want me to build a nuclear plant, okay, if you want me to build a cogen, I'll build that. If you want me to build windmills, I'll build that, as long as you pay me. I'm in this to make money, not do policy. And so policy now, people see the cost, they see that they don't want to pay it. When I would go to these, talk with these groups, people would say, well, what about the cost? And I would say, well, are you willing to, in order to do this ambiguous, cloudy goal of lowering temperatures or holding temperatures to a 1.5 degrees Celsius, are you willing to have your power costs double or triple? And no one agreed with that. There would always be an agent provocateur that would show up with some kind of hippie clothes on and beads and start asking me provocative questions. But again, a lot of it was rhetoric. When you get down to the facts, the facts don't support any of this. And so that's why people are waking up because people, you know, as long as we still have elections, we don't have dictatorships yet in the West, but as long as we have elections and people can vote these idiots out, that's what they're going to do. As soon as the cost, I always understood that once the cost hit people, they were going to say enough of this. And so that's what we've seen.

So oil prices and these OPEC cuts, this is interesting because I think people get confused that it's not really bullish for oil when OPEC plus is constantly talking about cutting production and the price goes down anyways. I wouldn't take that as bullish in the short to intermediate term. Again, I've kind of given up on trying to predict the oil price. There's just too many moving parts. There's too much going on. The financialization that goes on as far as bets that are put on in the futures market.

Rethinking Energy Policies and Costs

I don't subscribe to conspiracy theories or manipulation but you know in the end yes true supply and demand drives the price but in the short term liquidity and sentiment can drive it. So one of the things I see here is like this chart from Bloomberg, two-thirds of newly announced supply cuts won't remove any extra barrels. So if you look at this chart, it says, you know, in black, it's cuts announced before May 23 and already extended to the end of 2024. Okay. And then you have unilateral Saudi cut from March of 2023. And then you just have, these are the actual additional cuts that were actually announced by Iraq, UAE, Kuwait, Kazakhstan. You don't see Russia announcing anything new. You don't see Saudi. And so you have these, they're not, they're still cuts, but they're not, I think, what people think they are. You just are carrying through cuts that were previously made. And the fact that oil prices are down on that, I mean, you have to respect the oil price. You have to respect prices in the market in the short and medium term.

Now again, the underinvestment, you know, I think once the liquidity cycle gets going and a lot of money is printed and economies, we're talking about recessions in the majority of the largest economies in the world. Of course, at the margin, the price of the barrels is set. If demand is off a little bit and supply is a little bit higher than we thought, then yes, you're going to have a weaker oil price. I mean, do I think it goes to 40? Well, maybe in a hard landing, but I don't think anybody's forecasting that.

The Long-Term Outlook for Oil

But again, the relentless increase in oil demand will continue over time. We've had at the margin with weakening economies around the world, especially in the US, Canada, Western Europe, you know, places like that. We do have continued growth though in the emerging markets, which over time will suck up whatever doesn't get burned in the West, but in the short term anything can happen with prices. And so again, I still am bullish in the long term, but in the short to medium term anything can happen. And so you have to be careful when you own actual oil producing stocks.

This is why I like offshore services, because it doesn't really matter too much. Yes, the oil price does matter on those companies' business prospects, because if the oil price went down to 40 and stayed there, well, that would change, you know, the amount of final investment decisions that went forward and things like that in capital spending. But again, that could happen in the short term, but in the longer term, the reserve life indexes of these majors is going down. They have to invest. They have to start finding more reserves. And so, if you're $50, $60, $70, $80 a barrel, I don't think they're going to, you know, they have a longer time frame than, you know, the next 3 months, which traders and speculators have.

This is why I'm more attuned into the offshore services, because there just simply isn't enough supply there to absorb what I think is going to be increased capital spending.

Bullish non-gold, this is one of the reasons. Two years in a row where central banks are going to buy, have bought, or will buy over a thousand tons of gold. Interesting, that's one of the things I think that's helped propel the gold price higher. In last month's newsletter I did put out the first pick for my gold picks. I don't think that things are just going to immediately go up until we really see the liquidity cycle in the U. S. Turn. I mean, gold is making already all-time highs in many, many other currencies besides the dollar. We need to see rate cuts here. We need to see a new liquidity cycle here to really, I think, push gold higher. And that's coming, without a doubt, one way or another. And so I think trying to time it exactly is probably not the best idea. I wanted to take advantage, I think, of as we get closer to the end of the year in tax law selling, I think there's going to be some bargains out there. And so I think getting on board for what I think in 2024 will be the possibility of the beginning of a couple, few year bull market in gold. But we shall see.

A Cautious Approach to Gold Investments

Again, you're just forecasting things and gold's very hard to, as I've said before, I've had trouble in the past, hit and miss. I've made some money and lost some money, probably net even on gold stocks. So I'm a little bit apprehensive. The first gold stock I put in there was kind of my cornerstone. It's a producer. It pays about a 4, over a 4% dividend. It has some growth prospects. It does have some hair on it, but I've owned the thing off and on for the last 10 years and I've done well with it. Getting into the juniors is where you start getting yourself in trouble, but you pay your money, you take your chances. But I think a lot of things are aligning for a higher gold price over time or at least the next couple years.

This is a tweet from Lynn Alden. I enjoy the work that this person does. This is one of the things I've kind of noticed, like people aren't really paying attention to Bitcoin. You know, I think it was like up above 42, $43,000. And if you remember, I don't have it in the portfolio, but I've got a few shares here and there of some Bitcoin miners which have started to wake up. And what I'm saying here is this Bitcoin correlates with various liquidity indicators more closely than any other asset I track. And I've heard other people say that it seems to be that I'm not saying that you know I'm gonna get all the Bitcoin guys now coming out but I mean this thing's really driven by liquidity it's a really speculative instrument in my view at least. And so when you have tightening liquidity, this thing doesn't do as well. But now that liquidity is changing, this orange chart is global M2, not just the U. S. , global money supply that you see is, since about the spring or early summer, has went positive, which I've been talking about. This is kind of consistent with what I was seeing in global central bank actions where we're going from net tightening to net loosening, more central banks loosening policy than tightening it. So this is what we're seeing. And so we're in the beginning of a new liquidity cycle in my view. And when the bigger central banks come on board, like the US and the EU, what does that do? And this is in the context of what the, of this halving, however you pronounce it, that has in the past led to cyclical bull markets in the price of Bitcoin. So something to watch. I'm not saying you should buy Bitcoin. I think some of the miners are interesting just because a lot of them were blown out 90, 95%. That's why I kind of picked a couple of them. I didn't want to put them into the portfolio because that is really speculative. That's really going out on a limb. But I think that this is an interesting correlation, if you will. And I don't think anybody, well, most people haven't caught on to the fact that global liquidity is starting to increase now.

Adapting Work Models Post-pandemic

I thought this was interesting in the context of another guy following Canada who's been, he kind of bottom ticked the real estate, some of the real estate investment trusts or whatever, units, whatever they call them in Canada. And one of the things that was being talked about was that this whole work from home phenomenon was starting to dissipate and that, you know, people were coming, going to be forced to come back to the office, whether they liked it or not, it may be a modified work from home where you're, you can be out of the office one or two days a week.

But I've even seen that in other companies that you're seeing that being foisted where people just work from home all the time. Or now you're seeing that, you know, this chart shows, it's from indeed.com, which is kind of like a job posting board thing. It says, postings are more resilient in sectors most likely to be in person. And you see this blue chart, which is the amount of people that are working highly remotely, has been a steady decline. Medium remote and low remote. Low remote's pretty much stayed there. So, yes, I don't think it's going to be... You need to be in the office five days a week and half a day on Saturday, but you're going to have to come back to three, four days a week back to the office. And this kind of indicates that this high remote has basically went back to pre-pandemic levels. Most companies are just not going to let you sit at home in your pajamas because you know they just... There's been different people say different things about how productive people will be. I don't know. I don't know how productive for people in the office. I see when I would go to offices, I've worked pretty much remote my whole career, well in the last ten years at least, just because construction and project management requires a lot of travel to different sites.

But what I typically have seen when I go travel back to the office is, you know, people do their work, but what are they really, how productive, who, you're there, but what are you doing? You know, a lot of jibber jabbing, wandering around to other people's cubicles, you know, I know that the management seems to think, And I really don't have any facts on this. You know, well, people can collaborate easier. There's a lot of ideas that are going to get generated. Well, I hear people talking about football games and what they're going to do on the weekend. But anyway, this seems to be the trend. And I found it interesting because this particular person on Twitter that I follow basically bottom picked. You're starting to see a turnaround now in some of these office REITs in Canada. So interesting concept. Another thing, I don't know if it will continue, I'm not suggesting, but I just think it was an interesting concept. This will also require people to drive more, right? Commute. So what's that do to gasoline demand if it returns to pre-COVID levels?

Alright, guys, that's it for this week. Again, my main theme is, you know, I'm not fixated on the economy. I think there's things you can buy. I'm very bullish on emerging markets. That seems to be working. Many, several emerging markets are outperforming and I think they will continue. As I've said before, and I said it, I wrote a big article in my last newsletter in the December issue, talking about the cyclicality of how these emerging markets move opposite of like the developed markets in the US in particular and these things usually are in 8 to 10 year trends and when I take that against something like GMOs forward projected returns where they're projecting net negative returns for stocks in the US over the next 7 years but outsized returns in emerging markets. It's just a matter of, you know, overvaluation versus undervaluations. It's what it basically comes down to in mean reversion. So that's my view. Again, if you're interested in learning more about this type of things, you know, consider a subscription to the newsletter. Again, I will be moving it to Substack, but if you sign up now, you still, I'll take care of all that. Don't worry about it. You'll come in under the old program that I have and we'll just, as we slowly but surely, transition to Substack. So that's it for this week. We'll talk to you next week. Thanks a lot.