Well hot on the heels of last week’s blog celebrating some of our recent client successes I find myself staring blankly at my monitor wondering what on earth I can write about this week, which is traditionally the last slow week before the chaos of the holiday season is upon us as I navigate in quick succession American Thanksgiving (it’s all about the football to me), a milestone birthday for my lovely wife, a variety of work related holiday gatherings, my dad’s birthday, Christmas and a much needed escape to the desert for New Year’s.
Roll into that the need to actually do some “work” and you can see it is going to be a busy time. That doesn’t mean I am going to take my eye off the ball as it regards the blog, no sirree! It’s just that some weeks I am going to be forced to mail it in or, to be honest, just be less verbose and/or treat everyone to a bunch of listicles (stop it, I know what you just did).
Fortunately, my electrical permit conflict with the city has been resolved. Last weekend I put up what we in the house have decided to call a barrier. And the city came by and said it was good. So at last I have my permit. Three years to the day after taking delivery of my hot tub. I guess I can finally use it now. Who am I kidding, I’ve been using it daily! It remains to be seen whether the barrier is a permanent one – what say you?
At any rate, aside from my chaotic personal and work life, there is A LOT going on in the outside world and it is necessary to keep on top of some of these “things” as we come to the end of 2023 because they all matter (to varying degrees to different people) and will shape what our world looks like in 2024 and beyond. Some of these are “really important” and some are less so. But they are all top of mind to me, so I’m going to make them top of mind to you.
10 things I am following closely and so should you.
Oil Prices
This is an evergreen inclusion on any list, especially one being published in a blog called “Crude Observations”. Look. I’m ready to give up on oil prices. They make no sense. They make no sense when they run too hot and they sure as poop make no sense when they crater by 20% over a week and half for no seemingly good reason except that Walmart says sales may slow, someone misreads the EIA/IEA reports on oil demand and some clever algo saw that there was an OPEC+ meeting coming up and decided to short oil and challenge OPEC to cut again. To me that’s a bad bet, but it’s not my money.
Regardless, energy is the economy and whither the price of oil thither the fortunes of many, including yours truly who is fully leveraged into the world’s most hated (and needed) commodity.
A dropping price of oil is good for our inflation battle even if it is falling because of recession fears. On the other hand, a rising price of oil can be a signal of a growing economy and demand or a fear of shortages (see WW3 below).
My own personal view is that a price of oil below $70 is unsupported by the supply/demand picture and the price won’t be able to stay there. Similarly, $90 is too high given the spare capacity on the sidelines in OPEC.
That means $80 is where it should be. All else is noise.
World War Three
The world is awash in conflict and in this social media driven and ethnic diaspora world we live in, it doesn’t matter where you live, the pressure is on to take sides. I am not here to pass judgement on the current conflicts raging across the world – I have my convictions and thoughts. They are unwavering. What I will just say is that the conduct of war, its length and sheer opportunism is what raises the risk of contagion and can easily see what you hope to be isolated crises spilling over into much broader and deadlier conflagrations. Joe Biden said a while back in some off the cuff comments that every generation or so there is a sequence of events that shake the world order and put the world on a different path. This is one of those moments in time and we need to watch closely what is happening lest things spiral out of control. I hope our leaders are up to the task… Ugh.
Trump Trials and Tribulations
Not only entertaining to watch, the next 12 months of Trumpworld are going to be critical to our lives in ways we can’t possibly begin to predict. From his many indictments and pending trials to his bizarre and, to be honest, quite terrifying dalliances with the language of mid-century European fascism, we are on one of the craziest rides imaginable.
I’m no fan of Trump. He is a narcissistic distraction from as well as an object example of so much that is ailing western civilization. He’s crass, a bully and is interested in only one thing. Donald Trump. The sooner he goes away (and it doesn’t have to be jail – just retire to Florida like a good New Yorker), the sooner the US can begin to heal.
In the meantime, we have the sideshow of a spineless Republican party devoid of alternatives being run over by an increasingly unhinged and presently unchallengeable presidential candidate who stands a pretty good chance of needing to campaign from jail. But it is coming to a head. Watch out.
Biden Stumbles and Bumbles
Speaking of old… Was I speaking of old? I don’t know. I forget. Yeah, I agree. Joe Biden is probably too old. But he’s the only one who has proven he can beat Trump. Does anyone really think now is the time to switch horses? To who? Hillary? Michelle Obama? The two actual challengers no one has heard of? Kamala? Nah. Joe Biden is a centrist democrat who has not been dragged too far to the left (sorry Joe Manchin, not a thing) who now has a legislative track record that any president in history would kill for and has beaten Trump at every turn.
OK, so let me tell you now how that’s bad for his reelection prospects… Just kidding – that’s what the media does.
Admittedly though, his age works against him, because it’s really the biggest criticism. So he needs to be basically kept in a cryo-chamber until election season starts for the Democrats to win. Assuming the electorate continues to sleepwalk.
Inflation
Inflation. Transitory since 2001, our friend inflation continues to wreak havoc with people’s pocketbooks. Fortunately, central banks have dropped the hammer on consumers with interest rate hikes and may in fact have orchestrated a soft-landing. Don’t get too excited – energy prices have done a lot of the heavy lifting and the plane has no landing gear.
But… the more inflation comes down without a recession, the better Biden’s reelection prospects.
Interest Rates
Inflations ugly cousin, interest rates have been one of the stories of the year. In Canada the effect of relentless interest rate increases will be felt in the “great mortgage reset of 2024-25” when something like a third of all fixed rate mortgages come up for renewal and the sticker shock will be massive. This may finally reset the home affordability issue if the impact on homeowners and borrowers is even 15% as bad as it appears it might be.
That said, I am of the belief that a soft-landing and easing inflation will allow central banks to provide some relief and that the US Fed and the Central Bank of Canada will be able to start lowering rates sometime around Q2 2024 – just in time for the US election. For Joe Biden that is luck of the Irish – he couldn’t have planned it any better.
Trudeau Watch
Look, I don’t want to do it but someone has to. Much like Trump the narcissist who won’t go away, Canada has Trudeau the narcissist who won’t go away. All politicians have a best before date. Few actually notice it and ultimately leave office as the equivalent of the furry strawberries in the fridge that you bought last week because they seemed so fresh. I think of Canada’s political situation relative to the Christmas mandarin orange box. At the top it looks fine, but you are nervous – it smells a bit ripe but you never know. Hungry, you reach in to grab one and without fail you feel a softer one and accidentally puncture it with your finger leading to you just chucking not only the offending orange and all that are near it but the whole box (and maybe your hand) out into the garbage. Trudeau is the rot. The adjoining oranges are Jagmeet Singh and his wilfully blind cabinet and the rest of the box is the rest of the Liberal party.
The Liberal party is on an epic slide and it is their leader who is dragging them down. They know it. He knows it. But they still put him out on the shelves. Rotten.
Watch what Trudeau does and Jagmeet doesn’t do. We aren’t scheduled to have an election until 2025 but that feels … unlikely. Trudeau is cooked.
Stock Valuations
Not a lot to say here. Aside from the 7 deadly sins of the S&P 500 and oil and gas stocks, the market feels fairly valued. As earnings reports continue to come out and show muted results for the tech flyers and oil and gas companies continue to yield more than money market funds it is inevitable that a massive re-rate is going to occur. I don’t pretend to know anything, let alone everything but the last time I checked, a company that is paying an 8% dividend yield should draw at least as much love from fund managers as one that is valued at 15 times revenue. All things being equal as they say.
What to watch? Earnings reports from tech companies – not necessarily the ones that produce the products, rather the ones that use the products. What are their orders doing? Watch X for Elon white supremacist and anti-semitic retweets that drive advertisers away and recognize that the rebound will be to Tesla. Do you want to buy a car from a white supremacist antisemitic narcissist? Didn’t think so.
Is a crash coming? You tell me.
Ch-ch-ch-china
China is the big economic wild card. Will their economy continue to grow at absurd rates? (it won’t) Is the property crash in China real? (it is) Is China a dictatorship? (duh) Will they invade Taiwan? (not in the 5 year plan). Will there be a rapprochement with the US? (they need the money). Will China’s economic issues affect its energy and oil consumption? (counter-intutitively, no!). So many questions. Such cryptic answers.
China matters. To all markets. The meetings to the side of Xi and Biden at the APEC conference this past week told me two things. China needs the US more than it needs Russia. And they think Biden is going to win in 2024. The rest is just hot air. Watch what China does for the rest of the year.
Swift-Kelce Staying Power (what will be their first fight?)
I know everyone is sick of it. Travis Kelce, the best tight end in the NFL, maybe in football history, has been carrying on a brief fling with some pop star who has a following of some kind. It’s an interesting in-season dalliance that is more of a distraction than anything else. It’s cute that he invites her to the family box for games but in all reality isn’t the bigger story in the NFL that the New York Jets have lost yet another QB and once-promising season…
OK fine. Travis is dating Taylor. It’s a big, big deal. And maybe a marketing scam.
You know what? I don’t care.
In a world where all the above crap is weighing on the soul of the world, it’s OK to just sit back and let people be people. I have no opinion on this.
The only thing you need to know is that Taylor Swift was born in Reading Pennsylvania. A mere 40 miles from Lincoln Financial Field in Philadelphia.
So, she’s an Eagles fan and this whole Travis thing is a way for her to get close to her true love, Eagles centre and Kelce sibling Jason.
THIS is what you need to watch unfold for the rest of the year.
Count on it!
PS – Nothing about Alberta to watch sorry. It’s all too predictable.
