Here’s the weekly rundown
Weekly Summary:
Good news is good news, right?
In case you missed it, the market rallied this week! Yet you never would’ve guessed it on Monday when all three major indexes coughed up losses (S&P -1%, Dow -1%, Nasdaq -2.5%).
What made Monday’s start confusing is that late Friday of last week we got news of Merk and Ridgeback Biotherapeutics’ oral antiviral treatment which could reduce the risk of death from Covid by 50%. It would seem that with such news we could finally be putting the troublesome, never ending, waning days of Covid behind us or at least the conversation around booster shot #1, #2, #3… ?
If Covid is still the major issue to the economy causing offshoot problems all over the place then this should be good news. We should see a rally in the indexes and pressure on the Covid vaccine makers… but that’s not entirely how it played out.
Shares of Covid vaccine maker Moderna did drop 13% and trended lower throughout the week but indexes teeter-tottered between posting gains and losses. The implication..the stock market has tuned out Covid talk like a student tuns out their 7th period teacher.
Now that doesn’t mean Covid isn’t a factor or something to keep an eye on, it simply means Covid itself isn’t holding companies back. Likely, the real catalysts for a slightly higher market this week was a combination of “no news is good news”, we’ve already priced in much of the current inflation/supply chain worries, and somehow congress figured out how to not overdraft their funny money.
Eye on Energy
?Black gold. You know what’s been one of the best industries to have had money invested in this year? Oil producers.
- Marathon Oil (MRO) +132% YTD
- Diamondback (FANG) +123% YTD
- Occidental (OXY) +92% YTD
- Exxon (XOM) +49% YT
But why have oil producers done so well this year after last year where we saw the financial price of oil trade negative?
To piece this together we need to look at a few things.
First, for the last several years oil has been demonized as the industry destroying the planet by the media and politicians.
This led many institutional investors (big money) to shy away from deploying cash into these companies given the rise of environmental, social, and governance (ESG) investing. With decreasing institutional interest, oil producers started to trade at a discount to fair value.
Second, when Covid forced most of the world’s economy to close demand for oil plummeted, taking the share prices of these oil producers with it.
Finally, when economies reopened, oil demand roared back pulling up the price of oil. What’s different though is that oil companies aren’t drilling new wells as they had in the past when oil prices went high enough to justify it.
The result, WTI oil is hovering around $80/barrel, a high we haven’t seen since 2014.
Should I invest in oil producers now? What’s supporting the valuation of these oil producers is high oil prices. Since oil is already made a large run it’s difficult to picture significant upside as a result of establishing a new position in these companies.
Energy Prices This Week:
- WTI Oil $79.36/barrel
- Nat Gas Natty Gas $5.83
- Gasoline Prices National Average Price of Gas $3.24
The Major Headlines:
Windows 11 Release
? You’ve been upgraded for free! This week Microsoft released its newest operating system Windows 11 which is the first Windows update since 2015. What’s new? Users of the Windows 11 operating system may get a taste of a Mac layout. The new OS appears to be very similar to the layout of a Mac with app icons located on a lower “Doc” style bar. – See Article
When Facebook Stops Working
What would you do if your platform that serves 3 billion people decided to take a day off? That’s the situation Mark Zuckerberg found himself in Monday when Facebook, Instagram, and WhatsApp suffered major outages for six hours. – See Article
WeWork Finally Going Public?
Let’s go public, wait no, wait yes.. Two years ago, WeWork,a shared office space real estate company backed by Soft Bank, planned an IPO valuing the company at $47 billion. WeWork however never went public as it quickly became apparent investors would be unwilling to pay such a lofty price for a real estate company losing billions of dollars. Now, WeWork plans to merge with a special purpose acquisition company SPAC already listed on public exchanges. The new value of WeWork is $9 billion. – See Article
My Taxi Has No Human Driver
? No driver, no problem. Self-Driving car developers Waymo (owned by Google) and Cruise were granted permits by the California DMV to carry passengers, well, kind of. Waymo and Cruise are allowed to carry passengers only in San Francisco and must stay under their respective seep limits (65 mph & 30 mph).
Neither company can charge money for this taxi service of course because, well, California bureaucrats want you to apply for a different permit for that. – See Article
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