- Biden’s return to reason (energy policy)
- Jim Rickards: “Oil and gas are the lifeblood of economies”
- A short-term energy wild card
- (Gold) Central banks can’t get enough
- A kooky Easter idea that’s a real “spud”… Golden (and silvery) sentiments are well-founded… The revolution has been scheduled… And more!
“Perhaps someone in the Biden administration has finally brought rational thinking back to energy policy,” surmises Paradigm’s Jim Rickards.
For some time now, Jim’s been calling attention to what he labels the “Green New Scam” — a push for renewable energy that’s led to one insane spectacle after another. Our favorite so far is California nudging drivers into electric vehicles… and then limiting the hours they can charge those vehicles because the electric grid can’t handle the load.
But the times seem to be a-changin’…
For starters, “on March 13, the Biden administration approved the controversial Willow Project in Alaska,” Jim says.
“This $8 billion drilling project on Alaska’s North Slope had drawn fierce opposition from climate alarmists who say it will ‘speed up the climate warming breakdown.’
“The ConocoPhillips Willow project will be one of the largest of its kind on U.S. soil, involving drilling for oil and gas at three sites for multiple decades on the 23-million-acre National Petroleum Reserve, which is owned by the federal government and is the largest tract of undisturbed public land in the U.S.”
And then there’s this: “The Biden administration is now auctioning off more than 73 million acres of waters in the Gulf of Mexico to offshore oil and gas drilling,” Jim continues.
“It could be the first Gulf of Mexico lease sale under the Biden administration that actually results in new drilling after previous auctions were embroiled in legal challenges and delays.”
So what gives? Perhaps the administration is coming to the realization that “despite the climate change investment scam going on, oil and gas are the lifeblood of economies. They are not going anywhere anytime soon,” Jim suspects.
“Renewable energy sources like solar and wind will be part of the energy mix, as will hydropower and geothermal, where available. Nuclear reactors are another option, though objections to nuclear power are even more strident than objections to hydroelectric.
“In the end, however, it will become clear to everyone that oil and gas are not going away. They are too important, have too many embedded structural advantages and have huge economies of scale.
“Once politicians and the media become more aware of the real science of climate change, they will distance themselves from the false science of climate alarmists. Then the oil and gas industries will regain their footing.”
You think oil and gas companies are profitable now? Just wait until the dialogue in Washington shifts back toward reality.
“The debate between lower or higher oil prices will be resolved in favor of the latter,” Jim says. “Oil companies will prosper in this environment not only because of new output or higher volumes but because of much higher prices on existing levels of production.
“The greens can’t repeal the laws of physics, and the Davos crowd can’t repeal the law of supply and demand. Oil prices are headed higher, especially in light of the recent OPEC production cuts.”
How to invest? “We feel the smartest thing to do is invest in a mixture of companies developing carbon-based and renewable energy sources.” You can find Jim’s latest presentation on this strategy right here.
Before we move on to other matters, a short-term energy wild card: There were a couple of eye-openers yesterday in the Energy Department’s weekly oil inventory numbers.
First, inventories of finished gasoline and distillates (diesel, jet fuel) remain below the five-year average.
Second, U.S. refineries are operating at only 89.6% capacity right now. Much of that is because of routine maintenance and the usual switch this time of year from winter gasoline blends to summer blends… but the point is that just one refinery accident could send gas prices shooting higher. As it is, the national average is up 15 cents a gallon over the last month.
On a quiet day in the markets, the number that stands out to us is the yield on a 10-year Treasury note.
It’s at a seven-month low of 3.28% — down huge from its recent peak of just over 4% on March 2. Typically, a move of that magnitude reflects fear of a financial crisis or a recession or both.
But there’s no such fear reflected in recent stock market action. The S&P 500 slipped back below 4,100 yesterday and the Nasdaq below 12,000… but they’re still on the high end of their trading ranges going back to last fall. (Both indexes, along with the Dow, are microscopically in the red at last check today.)
Who’s right, the bond market or the stock market?
The next big economic number that could tip the scales one way or the other is the March jobs report due tomorrow. But with the stock market closed for Good Friday, the reaction won’t be apparent until Monday. (We have a special edition of The 5 coming your way tomorrow, by the way.)
In the commodity complex, crude is ruler-flat at $80.61 a barrel and copper continues to hold the line on $4.00 a pound. Gold is down but still over $2,000; silver is down but still less than 20 cents away from $25.
Central banks around the world keep stacking gold: So far this year, they’ve been buying at the fastest clip in over a decade.
“On a year-to-date basis,” says a report from the World Gold Council, “central banks have reported net purchases of 125 [metric tons]. This is the strongest start to a year back to at least 2010.”
The year 2010 is a good starting point because that’s the year central banks became net buyers of gold.
Top buyers lately include Russia — which just updated its figures for the first time in a year. The Russian central bank added 31 metric tons as it continues to diversify its foreign exchange reserves out of dollars — which it can’t access after Washington froze those dollar reserves. Meanwhile, China has added 102 metric tons over the last four months.
Ill omen: Small- and midsize business bankruptcies now top the levels of the early COVID panic in 2020.
That’s according to figures from UBS — whose analysts blame the jump on rising interest rates, persistent inflation and slowing economic growth. The biggest impact so far is on the real estate business.
Important point: UBS’ figures do not yet account for the last month and all the trouble that’s emerged in the regional and community banks — which hold 40% of loans to small and midsize businesses. Now as those banks pull back on lending, their business customers face a potential credit crunch.
UBS says the sector that’s most likely to feel the squeeze next is health care.
Go figure: As Easter approaches, the potato industry hopes to capitalize on the still-high price of eggs.
Yes, egg prices are down substantially compared with the start of 2023… but they’re still up more than 50% compared with a year ago.
Sometime around January, the interwebz exploded with memes about cost-conscious “Easter potatoes”… so of course, the potato industry’s marketing board Potatoes USA saw an opportunity.
“The group provided tips on painting and is asking people who try Easter potatoes to use hashtag #easterpotatoes on social media and tag @PotatoGoodness on Facebook or Instagram,” according to the Axios site.
Bonus, according to Potatoes USA’s Bonnie Johnson: “What’s fun as we tried this, the food-safe food dye only breaks through a little bit of a layer of the skin of a potato. So when you do slice them up, they’re just spectacularly beautiful.”
Hmmm… pass.
“I will contain my enthusiasm until gold goes past $2,500 and keeps moving, and silver blows through the $36 benchmark and likewise keeps going,” says a follow-up email from the reader who feared an end-of-quarter smackdown last week — which did not materialize.
“On that topic I saw a recent mention in The 5 that for the Midas metal to match the high in January 1980 allowing for 40-plus years of inflation and currency debasement since then, it would be over $3,600/ounce.
“By implication that means silver would need to reach approximately $211/ounce in the next run, in order to match its all-time high back in the dog days of stagflation. Yowsa….
“One last question while we’re here: I’ve seen many analysts say that for the precious metals to reach those levels, the prices of everything else would likewise skyrocket. However, since many other prices already have gone up significantly, could it also be a case of the PMs simply catching up if they do run much further and higher this time?”
The 5: Maybe. But even if they don’t, the point is that over time, precious metals preserve your purchasing power in a way cash simply cannot — even if cash instruments like T-bills pay over 4% right now.
“I always appreciate your insight,” writes a reader following up on our latest exploration of “de-dollarization.”
“I have been following this topic since about 2013 or 2014… this new conspiracy theory or plan to take out the U.S. dollar seems to have gained serious momentum in the past year. Though it is true that it may take decades, if in fact a plan exists for many countries to stop using the USD (‘Operation Sandman,’ despite being difficult to imagine how this would work) should we not be warned and taking action as a country?
“While this may be just internet chatter, the president of Kenya on March 26 said, ‘I am giving you free advice that those of you who are holding dollars, you certainly might go into losses. You better do what you must do because this market is going to be different in a couple of weeks.’
“Some say he was predicting downfall of USD. Others say this was taken out of context and was referring to lack of availability of USD as Kenya would be importing oil on credit with other currencies.
“Nonetheless, it is concerning that many countries are executing on plans to basically freeze out the USD. OPEC just announced production cuts that were a complete surprise to the United States government… more indication of foreign alliances intentionally keeping Biden in the dark.
“I guess I’ll go buy more gold!”
The 5: Yeah, near as we can tell, the mainstream fact-checkers actually got it right for once: The Kenyan president’s remarks came in the context of a localized dispute over how oil importers would get paid.
So put that one in the same bucket as the bogus quotation attributed to White House press secretary Karine Jean-Pierre.
Having followed the issue as long as you have, your editor is both intrigued and a little disturbed by the sudden surge of people who appear to actively hope that de-dollarization will be an event — i.e., the fanciful “Operation Sandman” — and not, as we assert here, a process.
Perhaps it’s the accumulated stress from three years of lockdowns, inflation, online censorship and the threat of nuclear war. Can’t we get this damn Fourth Turning over with already? Burn it all down!
In any event, your golden sentiments are well-founded. Silver too, says colleague Sean Ring in today’s Morning Reckoning. How can it not, over time, reclaim the $50 level it reached in 1980 and 2011?
“And if you’ve got room left,” he adds, “a bit of Bitcoin can also help you avoid inflation. For Bitcoin, you’re not swinging for the fences. Just a bit of protection. And remember, it’s Bitcoin. No ****coins!
“You’ve got time, but the sooner you act the better.”
Words to the wise…
Best regards,
Dave Gonigam
The 5 Min. Forecast
