- Verdict from fact checker: SPR drain verified
- Born in 1975… Manipulated ever since
- But the “Biden bleed” is next-level
- Alan Knuckman: The market’s “very meaningful momentum sign”
- The dollar’s surprising defender… The end of The 5 (and the next chapter)… Thanks to our founding editor… And more!
A funny thing happened earlier this year when a Republican congressmember from Texas issued this tweet…
One of the annoying mainstream “fact checking” sites decided to put that first claim to the test.
The verdict from PolitiFact: True.
“Luttrell’s statistic checks out,” says its analysis. “So, why are there fewer barrels of reserve crude oil? In March [2022], U.S. President Joe Biden announced a directive to release 1 million barrels of crude oil per day on average for six months, totaling 180 million barrels. The White House news release said the Biden administration’s record release of oil was intended to lower rising energy costs as Russia’s invasion of Ukraine disrupted supply.”
That’s a neutral, down-the-middle description of what happened.
“Biden is treating the Strategic Petroleum Reserve like a pile of chips in a poker game against Republicans instead of a treasured national resource,” says Paradigm’s own Jim Rickards.
“It’s a continuation of political oil price manipulation begun in early 2022 in an effort to manipulate the midterm elections in favor of Democrats.”
Obviously that’s a less neutral interpretation. This week, Jim recorded an exposé at his home in New England blowing the lid off the next step Biden intends to take with the SPR.
There’s nothing neutral about anything Jim says… but the facts absolutely back him up.
Begin with a little history: “The SPR was created in 1975,” Jim says, “in response to the Arab oil embargo aimed at the United States because of its support for Israel in the October 1973 Yom Kippur War.
“By March 1974, the price of oil had spiked 300% from $3.00 per barrel to $12.00 per barrel and the U.S. was thrown into a severe recession.”
And so the feds began filling up salt caverns in Louisiana and Texas with a rainy-day reserve of crude in case of national emergency. “The capacity of the SPR was set at 714 million barrels, the largest publicly known emergency supply in the world.”
The Big Hill complex in Winnie, Texas — one of four aboveground facilities supporting the SPR
“The SPR held 300 million barrels in 1983, but that amount grew steadily in the 1980s and 1990s. By 2010, the SPR actually reached its peak capacity of over 700 million barrels and held that level through 2016. Slight drawdowns occurred from 2017–2020, but the SPR was still near capacity at 600 million barrels when Joe Biden was inaugurated in January 2021.
“From there the amount of oil in the SPR collapsed,” says Jim.
To be sure, other presidents have messed around with the SPR for political purposes. “The SPR has been regularly toyed with to affect oil prices over the years, and its impact has at times been substantial,” wrote oil-industry journalist James Norman in his 2008 book The Oil Card. Reagan, Clinton, both Bushes — they all did it.
But “the Biden bleed” was next-level stuff…
“On March 31, 2022,” Jim explains, “President Biden announced the SPR would be reduced by 1 million barrels per day for the next 180 days. It’s no coincidence that the announced drawdown ran through Sept. 30, 2022, just weeks before the midterm election.”
In fact, the bleed continued past Election Day until New Year’s Day, leveling off at 372 million barrels. Then the bleed resumed last month, bringing the total down to 358 million.
The last time it was this low was late September 1983 — when Billy Joel topped the charts with “Tell Her About It,” and Michael Keaton was the big box-office draw in Mr. Mom.
Of course, from an electoral politics standpoint, Biden’s gambit worked like a dream.
“Inflation,” says Jim, “fell from 9.1% in June to 7.1% on Election Day and the national average price of regular gasoline fell from $5.02 per gallon on June 14, 2022, to $3.54 per gallon by November 2022, a 30% drop just in time for the midterms.
“Biden’s Democrats held the Senate and came close to holding the House of Representatives in what was supposed to be a ‘red wave’ election.”
Sure, there were other factors contributing to the GOP’s underperformance. But the Biden bleed looms large.
So what’s next — with the 2024 presidential election, God help us all, less than 18 months away?
Well, that’s the surprising twist in Jim’s exposé. Suffice to say here that more than $200 billion in payments are at stake — and the next crucial date in this ongoing saga is next Wednesday, May 31.
You’ll want to prepare — and position yourself for profit — before then. Give Jim’s latest video a look before you get too tied up with your holiday weekend activities. It’ll be a real eye-opener.
To the markets — which are shrugging off a growing likelihood the Federal Reserve will keep raising short-term interest rates next month.
The Commerce Department is out this morning with its reading of “core PCE” — the Fed’s favored measure of inflation. By this indicator, inflation ticked higher in April to 4.7%. Literally no one among dozens of Wall Street economists polled by Econoday saw that coming.
The number has been stubbornly mired between 4.6-4.7% for five straight months. Inflation is no longer slowing, and it’s still nowhere near the Fed’s 2% target.
Thus, the futures market now assigns a 59% probability the Fed will jack up the fed funds rate at its next meeting on June 14 by another quarter-percentage point — to 5.5%. So much for the much-ballyhooed “pause.”
(And if the job market stays hot, the probability will rise even more. We’ll get those numbers a week from today.)
Still, Wall Street is in rally mode — with all the major U.S. indexes up at least 1% on the day. At 12,869, the Nasdaq is at a nine-month high.
Looking at the charts, Paradigm trading authority Alan Knuckman says everything’s moving in the right direction — “higher lows in the S&P, in the Dow, in the Nasdaq and also in the [small-cap] Russell index, which is a very powerful momentum sign for the upside.”
Meanwhile, volatility as measured by the VIX is climbing down. “We’ve seen lower highs in the VIX,” Alan tells readers of The Profit Wire. “We were at 35 in October. We saw that bank issue in March. We were at 25, and now [even] with the debt ceiling unresolved, we’re sitting about the 20 level, but we’ve seen a series of lower highs, which is still a downward momentum trend.”
Conceivably, Wall Street’s ebullience today can be attributed to a rising likelihood the debt-ceiling farce will be resolved soon.
Members of the House have already gone home for Memorial Day weekend… but it appears the White House and House GOP leaders are coming to terms on a two-year agreement that will trim the slender portion of the budget called “nondefense discretionary” spending. The military, health care, Social Security and of course interest on the debt would remain untouched.
Absent a deal, Treasury Secretary Janet Yellen still says Uncle Sam will be unable to pay all his bills come next Thursday.
But with word of a deal, the VIX is in retreat today — back under the 18 level, in fact.
Elsewhere, gold is trying to climb back from another beatdown — up eight bucks to $1,949. Silver’s back above $23. Copper has rallied to $3.66 and crude is up nearly a buck to $72.70.
There’s one more economic number of note today and there’s nothing recessionary about it: Durable goods orders jumped 1.1% in April, in contrast with expectations for a 1.1% decline. And for once, the number is not skewed by orders for aircraft or military hardware: The “core capital goods” figure is up even stronger, 1.4%. Machinery and computer orders were especially brisk.
Go figure: Gen Z might be putting up the last line of defense against “Biden bucks.”
“A staggering 69% of Gen Z is using cash more now than they did 12 months ago — more than Gen X (47%) or the baby boomers (37%),” according to the New York Post, citing recent figures from the Credit Karma firm.
Seems younger Americans are discovering the whole cash-stuffing or envelope-stuffing approach to budgeting, popularized long ago by the personal finance guru Dave Ramsey.
“The cash-reliant budgeting tactic directs people to divide their money into different categorized envelopes and only spend from the designated stash. Any leftover cash then goes into savings.”
The hashtag #cashstuffing has had 1.1 billion views on TikTok. “I love doing it. It just really has helped me save,” says Stephanie Garcia, who’s racked up 322,400 TikTok followers with her weekly cash-stuffing videos. “When you leave money in your account, you swipe your debit card and you don’t really realize how much money you’re spending because it’s not something tangible.”
Interesting. Last summer we took note of a similar phenomenon in the U.K.: “People are going back to cash to keep tighter control on their spending as living costs soar,” said the BBC.
All very encouraging — especially if it’s the younger set taking the lead. More cash usage, more resistance to a central bank digital currency. (Who says we’re all doom-and-gloom around here?)
So about the note I sent out earlier this morning…
We are indeed winding down an era today; after exactly 16 years, one month and one day, this is the final edition of The 5 Min. Forecast.
But a new era begins next week with the launch of Paradigm Pressroom’s 5 Bullets. We’ve re-imagined our “daily synopsis” e-letter for a new cohort of readers — even as we’re retaining the features and the “feel” you’re accustomed to.
We’ve put a lot of thought and care into it, and I hope you like what you see when you open the first edition on Tuesday morning after the Memorial Day holiday.
In the meantime, whether you came aboard just this week… or whether you’ve been with us from the beginning… or anywhere in between… I thank you for your engaged and informed readership.
Before we close this chapter, I’ll extend a thank you as well to The 5’s founding editor, Addison Wiggin.
Addison gave me a small role in The 5 from day one in 2007. By 2010 he decided I had the right knowledge base and skill set to begin collaborating with him daily. By 2012–13 he stepped away to tend to other aspects of running a publishing business and The 5 became more or less my baby. It’s been a pretty good second act for a washed-up TV news producer, and he made it all possible.
As you might know, Addison has moved on to a new set of ventures — a podcast/YouTube interview series and a model-portfolio service, among other things — all under the moniker The Wiggin Sessions.
Just as important, he’s out with a third edition of his No. 1 business bestseller The Demise of the Dollar — and not a moment too soon, when even the Reuters newswire is cranking out articles with headlines like “The End of King Dollar?”
Jim Rickards wrote the foreword to the new edition — fully updated through the COVID money-printing extravaganza and its inflationary aftermath. You can (and should) get your copy right now at this link.
Next year, Addison plans to issue revised and updated editions of the two books he co-authored with Bill Bonner — Financial Reckoning Day and Empire of Debt. The latter of those two volumes was and is foundational to the outlook I bring to my daily musings — and will remain so as I move into this new era.
And with that, I’ll sign off this final edition of The 5. We’ll take a break on Monday for the Memorial Day holiday while the markets are closed, and start firing our 5 Bullets on Tuesday. Catch you then!
Have a good weekend,
Best regards,
Dave Gonigam
The 5 Min. Forecast
