Month: September 2024

Yesterday we said that the latest consumer credit numbers, which saw a bizarre surge in credit card debt as consumers – their savings now depleted and at record low levels – now have to charge their credit card for every day staples, were the “last hurrah” for consumption in the US.

It didn’t take long to get confirmation, when first JPMorgan shocked the market when its president Daniel Pinto warned that the bank will not hit its (or the Wall Street consensus) previous Net Interest Income target, sending the stock plunging the most since June 2020…

… which however was followed by a far more dramatic crash in the shares of Ally Financial, which plunged as much as 18%, their biggest one-day drop since March 2020, after the auto lender’s management presented at the Barclays 22nd Annual Global Financial Services Conference.

What sent the stock crashing is CFO Russ Hutchinson warning about weaker credit and net interest income trends quarter-to-date relative to expectations; specifically Hutchingson said that in July and August, they saw auto delinquencies soar a whopping 20 basis points compared to their expectation, while net charge offs (NCOs) were up ~10 bps compared to their expectations.

Confirming that the pain is mostly linked to the firm’s retail auto loan book, Hutchinson said that borrowers have shown signs of vulnerability throughout the year and August US jobs data underscored those stresses.

“Over the course of the quarter, our credit challenges have intensified,” Hutchinson said on Tuesday. “Our borrower is struggling with high inflation and cost of living and now, more recently, a weakening employment picture.”

He also said that the firm may experience some underperformance, he said, adding that Ally will evaluate reserves to cover bad loans and increase them if needed. Needless to say, the sudden confirmation that the bottom is falling out of auto loans is something the market was apparently unaware of, and confirms that US consumer are once again picking and choosing on which accounts to default first.

Hutchinson said the firm will focus more on capital and expenses moving forward, though is not updating its guidance at this time.

Commenting on the announcement, KBW analyst Sanjay Sakhrani said that management pointed to weaker credit trends quarter-to-date compared to expectations

“Clearly the guide was disappointing and begs the question if this is ALLY-specific or a canary in the coal mine,” he writes.  “We still think the stock remains a compelling longer-term opportunity with rates on the decline, but concede this revision is not a good look,” he noted, sidestepping commentary on how those who bought the stock per his reco ahead of today’s 18% plunge must feel.

RBC analyst Jon Arfstrom, who also has an “outperform” rating on the crashing company, wrote that “while these are manageable increases relative to the prior guidance, we believe the relatively quick increase in the NCO and delinquency direction is something that investors will question”

Ally’s announcement sparked a stock liquidation frenzy among all consumer-facing card issuers, including Bread Financial -9.7%, Synchrony Financial -8.6%, Capital One Financial -6.9% and Discover Financial Services -6.9%.

BMW AG shares tumbled in Germany on Tuesday after the company slashed its annual outlook due to a faulty braking system from supplier Continental AG, impacting as many as 1.5 million vehicles, which will only drive costs higher for the carmaker. 

“The delivery stops for vehicles that are not already in customers hands will have a negative worldwide sales effect in the second half of the year. The Integrated Braking System-related technical actions impact over 1.5 million vehicles and result in additional warranty costs in a high three-digit million amount in the third quarter,” BMW wrote in a press release. 

As a result, BMW adjusted the guidance for the 2024 financial year:

• A slight decrease in deliveries versus previous year (previously: slight increase).
• An EBIT margin for 2024 in a corridor from 6% to 7% (previously: 8% to 10%).
• Return on Capital Employed (RoCE) between 11% and 13% (previously: 15% to 20%).

In markets, investors dumped BMW shares in Germany, down 9% to around the mid-point of the 70 euro handle. 

BMW also pointed out headwinds have been gathering across the global automotive segment. It said, “Parallel to this effect, the ongoing muted demand in China is affecting sales volumes. Despite government stimulus measures, consumer sentiment remains weak.” 

More on the situation from Bloomberg Intelligence: 

“BMW’s 2024 auto Ebit margin guidance cut to 6-7% from 8-10% means at least a 20% reduction to consensus auto Ebit. Only half of that is attributable to higher warranty costs from a faulty Continental braking system, and the balance relating to negative pricing, especially in China amid waning demand impacting automakers and suppliers alike. BMW’s rising inventory follows VW’s overcapacity woes and sets a negative 2H tone with EU sales 15% below a 2019 peak and sluggish EV demand.” 

And Goldman’s take…

FY24 auto margin now seen at 6-7% – Today (September 10th) BMW took down its FY24 outlook and now expects an automotive EBIT margin of 6-7% vs. 8-10% previously (Visible Alpha Consensus Data 8.3%, GSe 8.7%). The cut to guidance is attributed to an issue with a braking system that has led BMW to stop sale of certain models globally and incremental warranty provisions, in the high 3 digit million amount during 3Q. In addition, BMW notes ongoing muted demand in China negatively impacting volumes.

Potential cut of €2.76bn to cons FY group EBIT – Taking the information at hand, we believe that cons group EBIT for BMW may be subject to negative revisions in the magnitude of 13% to 23%. At the mid-point, we see a potential negative revision of €2.74bn in the automotive segment and c.€30mn in motorcycles. We are surprised by the magnitude of BMW’s warning having noted management’s confidence at 2Q results on 1st August. We remain Neutral rated.

With a broader view here of the global automotive space, the MSCI World Automobiles Index has stalled since peaking in 2021. 

A lower interest rate environment will certainly help the industry. 

Authored by James Ricjards via DailyReckoning.com,

Few events will affect investors more than the U.S. presidential election. The playing out of the campaign between now and Nov. 5 will obviously have an impact on markets as one side surges and the other side falters and vice versa.

But the impact won’t last for two months. It’ll last for four years and beyond because the two candidates — Trump and Harris — offer radically different policies.

It’s easy to get caught up in the daily rituals of name-calling, competing policy positions, endorsements, money and the rest of the campaign process. That matters, but not as much as getting to the core of what’s going on and who will actually win.

For that we need a larger frame that steps back from the headlines and looks at the critical campaign dynamics.

The campaign is a race between what we call the Kamala Narrative and the Kamala Reality. Since Joe Biden dropped out of the race on July 21 in what can only be described as a coup d’etat and quickly endorsed Kamala Harris for the nomination, we have been bathed in a media and political tsunami of pro-Kamala propaganda.

The Kamala Propaganda

It’s as if Kamala hadn’t been vice president for the past 3½ years and we’re suddenly being introduced to her for the first time as someone with new ideas and no responsibility for the disastrous administration of which she has been a part.

Not only are we expected to believe there’s a new Kamala on the scene, but this race will also play out much faster than the election calendar would indicate. Only about 35% of Americans vote on Election Day. The other 65% vote at various times beginning this week and lasting until Election Day. Most of the votes will be cast with drop-off ballots (gathered in a process called ballot harvesting and dumped into drop boxes with no accountability). In effect, the election will be over by mid-October.

Since the Kamala “honeymoon” lasted from July 21 through Aug. 22 (the official end of the Democratic National Convention) and since the election will be over by, say, Oct. 15, it means the real election season is only about 41 days between now and then.

Based on the Harris hagiography and the compressed calendar, the Democrats’ strategy becomes clear. The goal is to maintain the Kamala Narrative until mid-October before the Kamala Reality has time to catch up.

Can they do it? Possibly yes. And that should give all investors deep cause for concern. Let’s look at the narrative and the reality and then assess the Trump campaign’s ability to pop Kamala’s bubble before it’s too late.

The narrative is that Harris is “young,” “energetic,” “joyful” and represents the passing of the torch to a new generation of Democrats. The polls show a narrowing race, the media is almost uniformly in thrall and Harris supposedly will bring Blacks, younger people and independent women home to the Democratic ticket. Harris has put the swing states back in play and has several paths to victory.

The New Kid in Town?

Harris is also the “new” candidate. The media portray her as having nothing to do with the Afghanistan humiliation (although she claimed to be the “last person in the room” when the decisions were made) and the border collapse (although she was universally acknowledged as the “border czar”).

Forget all of her failures. In fact, don’t even talk about them. She’s the new kid on the block with a lot to offer and the avatar of a brighter future ahead.

The reality could not be more different. In reality, Harris is a radical progressive who will easily be manipulated by the Obama wing of the party with Susan Rice and Eric Holder filling in the policy blanks.

She’s a failed border czar who allowed 10 million illegal immigrants (many with criminal records, diseases and terrorist connections) to cross the border with no accountability, screening or tracking. She has no other foreign policy experience except for showing up at photo ops at some summit conferences.

The few policies that have been articulated by Harris include corporate tax increases, price controls and continued support for the Green New Scam. Price controls always cause shortages, higher prices and black-market sales.

The Green New Scam will keep energy prices for everyday Americans higher than needed. Corporate tax increases will hurt stock valuations. These Harris policies will slow the economy and hurt stock prices.

Harris cannot hold a press conference or speak extemporaneously except in the most juvenile way that ends up with nonsensical repetition. Kamala’s VP choice Tim Walz is even worse. He’s a hard-shell radical with close ties to Communist China. Even his own family dislikes him and endorses Trump.

All the Democrats really have to offer is more abortions, more war in Ukraine and relentless Trump bashing.

The Trump Dilemma

The election boils down to whether the Trump campaign can make the reality clear and pop the narrative bubble in the next seven weeks. The issue for the Harris campaign is whether she can sustain the narrative and run out the clock before reality intrudes.

On the one hand, Trump should stick to his issues (immigration, inflation, energy production, lower taxes and less regulation). Still, how does he do that in the face of a media blackout and Democrat lies about their real positions (such as Kamala’s claims she will stop inflation and control the border, etc.)? How does Trump pop the Harris narrative without name-calling and anger?

The endorsement of Trump by Robert F. Kennedy Jr. will help in some key swing states. The RFK bump may only be about two percentage points, but that’s a huge help in races where the polls show Trump and Harris within one percentage point of each other.

Trump also has a huge advertising budget, and his VP selection of J.D. Vance is a boost. Vance is even younger than Harris and helps to offset Harris’ presumed edge with younger voters. Vance’s continual availability to the press makes a stark contrast with Harris’ new basement strategy.

The best approach for Trump may be ridicule. It’s extremely powerful and works better than name-calling. Making Harris out to be a ridiculous figure with no policy success, no substance and not very bright may be the most effective technique for popping the narrative bubble.

It has the added advantage of actually being true.

The Dems’ Doomsday Plan

If Trump can win the election with 270 or more Electoral College votes, the fight won’t be over. The Democrats have another lawfare trick up their sleeves.

Even if Trump wins more than 270 Electoral College votes, Democrats could retake the House of Representatives. On Jan. 6, 2025, the new Democrat-controlled House could pass a resolution that Trump is an “insurrectionist” and disqualify his electoral votes under Section 3 of the 14th Amendment.

Kamala would not have 270 electoral votes needed to win. This would throw the election of the president to the House of Representatives voting as state delegations, not as individuals. Under the XII Amendment (1804), only Kamala Harris could receive votes for president assuming Trump was disqualified and no other candidate won any electors at all.

J.D. Vance would suffer no insurrectionist disqualification. So the result could be Kamala Harris as president and J.D. Vance as vice president (similar to Jefferson and Burr in 1801).

Another possibility is that the Republican-controlled state delegations in the House could boycott the presidential vote in which case a quorum would be lacking. In that case, the vice president (J.D. Vance) “shall act as president” under the XII Amendment. This is not a far-fetched scenario. Democrats led by Jamie Raskin have already set the wheels in motion.

Trump has 41 days to flip the narrative on Kamala Harris. If he does, the Democrats have a doomsday plan they will unveil on Jan. 6, 2025, to disqualify Trump.

Put on your crash helmets. The election is far from over and far from certain.

Tropical Storm Francine churned off the Texas Gulf Coast early Tuesday with sustained winds of 65 mph. The storm is expected to strengthen into a hurricane later today as it traverses northeast toward the Gulf Coast and becomes a looming threat for dozens of offshore oil and gas platforms and inland refineries.

“The storm is starting to get its act together,” AccuWeather hurricane expert Alex Dasilva told USA Today, adding that warm waters across the Gulf served as “rocket fuel” for the storm. 

The latest weather models expect Francine to strengthen into a category two system tomorrow afternoon or evening and make landfall on the Louisiana coast. 

On Monday, Chevron, Exxon Mobil, and Shell announced workers at offshore rigs in the storm’s path were being evacuated and drilling activities suspended.  

Goldman’s Robert Quinn provided a helpful breakdown of what’s happening in energy markets ahead of the storm’s landfall in an area home to a bulk of America’s energy complex, including refining.

Product markets strengthened on September 9th due to the looming threat of Francine. The tropical storm threatened to become a hurricane by September 10th and barreled towards the Gulf Coast, forcing some oil drillers to halt production. RBOB Gasoline registered a sizeable open interest gain: $1.1bn, the 2nd largest 1 day jump in 2024. Given the locality of OI increases, a combination of outright and short-dated spread buying probably transpired. The general low stock environment plus underwhelming financial positioning prompted the influx from discretionary strategies. That said, the price reversal barely dented the current negative trend. Thus CTA shorts are not yet vulnerable.

Here are Quinn’s highlights:

• Product markets strengthened on September 9th due to the looming threat of Francine. The tropical storm threatened to become a hurricane by September 10th and barreled towards the Gulf Coast, forcing some oil drillers to halt production. October RBOB Gasoline and Diesel contracts closed +1.3% and +1.2% respectively. Front calendar spreads tightened, with October-November RBOB recovering off its record low.

• RBOB Gasoline registered a sizeable open interest gain. Aggregate open interest surged $1.1bn, marking the 2nd largest 1 day jump in 2024.

• Given the locality of OI increases, a combination of outright and short-dated spread buying probably transpired. November (+$675mm) and December (+$300mm) led. October declined a modest -$125m, considering the presence of index roll activity.

• The general low stock environment plus underwhelming financial positioning prompted the influx from discretionary strategies. Per Goldman Sachs Investment Research, Gasoline inventory across the globe resides at the bottom end of the 5 year range. Furthermore, as of the last Commitment of Traders update on September 3rd, combined Managed Money, Other, and Non-Reportable net RBOB Gasoline length sat just above the multi-year min.

• That said, the price reversal barely dented the current negative trend. Thus CTA shorts are not yet vulnerable. According to GS Futures Strategists’ Modelled Funds analysis, a move of ~11% is necessary to turn any of the 3 momentum thresholds.

Quinn’s chart pack.

RBOB Gasoline October-November Calendar Spread

RBOB Gasoline 1 Day Aggregate Open Interest Change ($ notional)

RBOB Gasoline Inventories

RBOB Gasoline Managed Money, Other, and Non-Reportable Net Positioning vs Price

RBOB Gasoline Momentum Signals

While WTI futures have slid in recent weeks due to China and US slowdown fears, prices have found a temporary bottom around $68/bbl handle ahead of the storm’s landfall. 

Energy traders have all eyes on the Louisiana area. 

The stock of the largest US bank is tumbling this morning after Daniel Pinto, JPMorgan’s president, said that analysts were too optimistic in projecting next year’s expenses and net interest income, sending the shares down more than 6%, and tumbling to 1 month lows..

The current NII estimate of $89.5 billion is “not very reasonable” given interest-rate expectations, Pinto said at the Barclays annual financial services conference Tuesday. The figure “will be lower,” he said, which is surprising because the bank’s own latest outlook just two months ago forecast $91 billion in net interest income.

Pinto also said third-quarter investment-banking fees could rise 15%, while markets revenue could rise 2% — both also below what analysts had been anticipating.

Pinto’s comments follow similar downbeat guidance from Goldman Sachs CEO David Solomon who warned yesterday that his firm’s third-quarter trading revenue could fall 10%.

As Bloomberg notes, Pinto has been sole president of JPMorgan for almost three years, and CEO Jamie Dimon has repeatedly said Pinto is ready to take over in case of an emergency or accelerated handoff. Earlier this year, Pinto ceded day-to-day control of the firm’s Wall Street operations to Jenn Piepszak and Troy Rohrbaugh as part of a shakeup to add to the experience of other potential CEO candidates.

Authored by Mike Shedlock via MishTalk.com,

The latest New York Times / Siena College poll is a doozie. It has Trump in the lead. Let’s discuss why.

Image created by X’s Grok based on image description provided by Mish.

Trump Slightly Ahead

The New York Times reports Trump and Harris Neck and Neck After Summer Upheaval, Times/Siena Poll Finds.

The survey finds that Donald J. Trump is retaining his support and that, on the eve of the debate, voters are unsure they know enough about where Kamala Harris stands.

Support for Harris Stalls

Nate Cohen comments on the poll in his take New Poll Suggests Harris’s Support Has Stalled After a Euphoric August. That’s a free link.

Is Kamala Harris’s surge beginning to ebb?

That’s the question raised by this morning’s New York Times/Siena College poll, which finds Donald J. Trump narrowly ahead of her among likely voters nationwide, 48 percent to 47 percent.

To me, the result is a bit surprising. It’s the first lead for Mr. Trump in a major nonpartisan national survey in about a month. As a result, it’s worth being at least a little cautious about these findings, as there isn’t much confirmation from other polls.

There’s no way to know whether the Times/Siena poll is too favorable for Mr. Trump. We never know whether the polls are “right” until the votes are counted.

But the poll nonetheless finds that he has significant advantages in this election — and they might just be enough to put him over the top.

He’s more popular than before. Overall, 46 percent of likely voters say they have a favorable view of the former president. That’s down a tick from our last national poll, when 47 percent had a favorable view, but it still makes him more popular than he was in 2016 or 2020.

He has an advantage on the issues. We asked voters a two-part question. First, what’s the most important issue to your vote? Second, do you think Ms. Harris or Mr. Trump is better on that issue? By that measure, Mr. Trump has a five-point lead on the issue that matters most to voters, whatever that may be for them.

He occupies the center. A near majority of voters say Mr. Trump is “not too far” to the left or right on the issues, while only around one-third say he’s “too far to the right.” Nearly half of voters, in contrast, say Ms. Harris is too far to the left; only 41 percent say she’s “not too far either way.”

He’s seen as the change candidate in a nation that wants change. While President Biden’s departure from the race lifted the spirits of many Democrats, the national mood still isn’t great. An overwhelming majority of voters still say that the economy is poor and that the nation is heading in the wrong direction. And a clear majority — 61 percent — of voters say they want the next president to bring a “major change” from Mr. Biden, compared with 34 percent who want “minor change” and 3 percent who don’t want change.

Only 40 percent of likely voters said Ms. Harris represented “change,” while 55 percent said she represented “more of the same.” Mr. Trump, in contrast, was seen as representing “change” by 61 percent of voters, while only 34 percent said he was “more of the same.”

The Mistakes of 2019 Could Cost Harris the Election

Nate Silver comments The Mistakes of 2019 Could Cost Harris the Election

Ordinarily, I wouldn’t think it’s worth it to write a story based on a single poll. But this one merits an exception.

The exceptions were:

1. NYT/Siena is our second-highest-rated pollster.

2. The poll has a large sample size: 1,695 likely voters.

3. The poll is very recent, fully post-Labor Day and having completed its field work on Friday.

4. The poll provides trendlines for comparison: the numbers are just a bit worse for Harris than the previous NYT/Siena national survey in July and considerably worse for her than a series of battleground state polls the Times conducted in early August.

5. The NYT/Siena poll tends to singularly drive the media conversation about the race, given the poll’s well-deserved reputation for accuracy and the Times’s outsized influence in the media.

This morning’s NYT/Siena poll contained a pair of questions on whether voters think Harris is too liberal/progressive and whether Trump is too conservative. The numbers were lopsided in Trump’s favor. Only 32 percent of voters said Trump was too conservative, while 47 said Harris was too liberal. The demographics on this question are about what you might expect. Harris is faring poorly among white voters without college degrees, rural voters, and older voters: the types of voters who are plentiful in Blue Wall states like Pennsylvania.

Democratic messaging often suffers from the sheer abundance of potential attack lines on Trump, causing voters to tune out. The aforementioned whiny progressive media critics don’t seem to understand that elevating every minor controversy surrounding Trump only reduces the signal-to-noise ratio and makes them look like the boy who constantly cried wolf.

The last paragraph is interesting. Trump makes the same mistake.

Trump needs to stick to the inflation, housing, immigration, and education indoctrination. He just can’t do it.

Harris Will Be More Like California

Harris is attempting to run a generic campaign, pretending to be middle, yet promising everything to everyone.

She want to restrict immigration while supporting it. She promises to allow more fracking while attempting to placate the Greens.

California is a disaster, but everything she espouses translates to “more California” solutions.

Trump’s idea to bring in revenue via tariffs, is economic madness. But Harris can’t easily attack that because she wants more tariffs and a crackdown on China as well.

Anybody but Biden

The big surge for Harris was nothing more than a grateful mirage of “Anybody but Biden”.

The huge initial lead of Trump was the same thing.

So we had unsustainable surges first in one direction, then the other.

Trump vs Harris

Biden is out to pasture. Had Democrats had an open convention It would have neither been Biden nor Harris.

From here on out, Harris more than Trump needs to prove she has moved toward the center. It will be difficult at best for her to pull that off.

August 24: Vote for Harris if You Want Radical Racial Indoctrination of Your Kids

August 16: Kamala Harris and Her Free Money, More Inflation Now Proposals (MIN)

More Inflation and More Indoctrination

That’s the winning message for Trump, if he can just stick with it.

Oil just had its worst week in almost a year, and the new week is starting off just as bad amid concerns about oversupply and lack of demand by China, which now appears willing to risk a middle-class revolution – as employment tumbles and consumer confidence has never been lower – rather than stimulate the economy.

Brent tumbled ~10% last week even after OPEC+ postponed its supply hike by two months (amusingly it would have tumbled even more had OPEC+ not delayed its supply hike). Still, given plans to revive 2.2m b/d over the course of a year remain in place, the delay means they are simply kicking the can down the road. And then on Tuesday, it dumped another 2%, sliding below $70 for the first time since 2021, as part of oil’s now daily 10am slam, and as hedge funds are convinced there will be a soft-landing everywhere, certainly in chatbots, except in commodities where the hard-landing will somehow surpass the global financial crisis.

And even though commercial stockpiles tumbled to 2024 lows, market watchers – at least those who have no idea of what is actually taking place in the market – see stockpiles “building” through year-end and into 2025, according to Bloomberg, which forgot to turn off sarcasm mode.

Meanwhile, production has been on the rise stateside, muting OPEC+ efforts to restrain supply, but that’s only to keep up with demand which – and one wouldn’t know this from looking at the price – is also steady and rising. Macquarie sees record US output of 13.9m b/d in 2024, with rigs in the Permian and Bakken basins producing more efficiently. Baker Hughes data show crude rigs have been edging up since their July lows.

It’s hard to fight this bearish mood — in a market that has failed to push higher in a sustained manner despite geopolitical tensions, a testament that demand woes overshadow other drivers.

As the latest sign of weak demand, Saudi Arabia cut pricing of its flagship crude grade for its main market in Asia next month.
The silver lining: hedge funds have once again restarted slashing bullish oil bets, with net longs tumbling to a record low. Usually this marks the bottom.

As energy expert John Kemp writes, hedge funds and other money managers sold the equivalent of 117 million barrels in the six most important futures and options contracts over the seven days ending on September 3.

The combined position was reduced to just 93 million barrels, the lowest for at least a decade. Fund managers were sellers across the board, including NYMEX and ICE WTI (-66 million barrels), Brent (-38 million), European gas oil (-9 million), U.S. diesel (-3 million) and U.S. gasoline (-1 million).

Negative sentiment extended to refined fuels, with extremely bearish positions across gasoline and especially in diesel and other middle distillates.

Funds had sold middle distillates in seven of the most recent nine weeks, slashing their position by 123 million barrels since the start of July. 

Bearishness across all crude and fuels contracts showed investors bracing for a further deceleration in consumption growth, amid signs of a downturn in manufacturing across the United States, Europe and China.

The most recent positions were reported two days before Saudi Arabia and its OPEC⁺ allies announced on September 5 that they would postpone scheduled output increases for two months.

Prior to the announcement, positioning had become extremely stretched on the downside, creating conditions for a sharp price rebound if and when fund managers trim bearish short positions and start to rebuild bullish long ones.

For the moment, however, sentiment has remained very negative, with investors focused on the threat of an industrial downturn pushing prices down even more. Even the OPEC⁺ announcement failed to arrest the downtrend as traders interpreted it as confirming the deteriorating consumption outlook.

Inflation-adjusted front-month WTI prices have slumped to an average of $69 per barrel so far in September, the lowest since early 2021, when the coronavirus pandemic was still raging, with real gas prices nearing record lows as the Harris/Biden oil trading desk does everything in its power to slam commodity prices as low as possible ahead of the election.

 

Authored by Leslie Eastman via LegalInsurrection.com,

Legal Insurrection readers may recall the report about Chevron’s California operations.

Chevron had been headquartered in California for over 140 years, giving it strong roots in this state. However, the toxic policies of California’s lawmakers and regulators have killed those roots.

The fossil fuel giant will relocate to Texas.

Sacramento sees gasoline firms and petroleum refineries as cash cows that will always agree to be milked despite being made into a climate villain and accused of corporate greed.

So, to resolve the state’s serious energy challenges, California Gov. Gavin Newsom called for a special session Saturday after the Assembly rebuffed his efforts to pass an energy package before a critical deadline passed.

Newsom’s plan mandates that the state’s oil companies create gasoline stockpiles.

California Governor Gavin Newsom plans to propose legislation requiring oil companies in the most-populous US state to amass stockpiles of gasoline and other fuels to prevent supply shortages and price spikes during refinery outages.

Such reserves would shield Californians who already pay some of the highest pump prices in the nation from the sort of run-ups seen in 2022 and 2023, said Tai Milder, a Newsom appointee who leads the state’s Division of Petroleum Market Oversight. If such a measure had been in place, it would have saved consumers as much as $650 million last year alone, he said.

The governor’s plan signals an intensification of Newsom’s long-running battle against the fossil-fuel industry and comes less than two weeks after Chevron Corp. announced plans to shift corporate headquarters to Texas after 145 years in the Golden State. In recent years, retail gasoline prices in the state surged to $6 a gallon, spikes the Newsom administration blamed on a shortage of backup supplies when refiners reduced operations to perform repairs.

“Price spikes at the pump are profit spikes for Big Oil,” Newsom said in an email. “Refiners should be required to plan ahead and backfill supplies to keep prices stable, instead of playing games to earn even more profits. By making refiners act responsibly and maintain a gas reserve, Californians would save money at the pump every year.”

Inflation is hurting the average Californian. However, gasoline is still a good value for money, especially compared to the inflation rate for food.

Compared to September, fuel price inflation is broadly unchanged for 2023, but lowered from 5.8% to 3.2% in 2024. Our food price inflation forecast for 2023 remains high at 10.6%. The forecast for 2024 is slightly higher at 5.5%. pic.twitter.com/35KQTDHtUK

— BILALSTECH (@BILALS_TECH) November 23, 2023

Newsom’s proposals will likely do nothing more than drive the closure of even more refineries and firms that support the fossil fuel industry. That may be his objective, but unless a lot more of those Generation IV nuclear reactors start appearing or lithium battery fires stop erupting, it is going to be increasingly difficult to sustain the California lifestyle that Democrats from this state tout.

The petroleum industry has pushed back, saying the mandate would hurt consumers.

The Western States Petroleum Association said the bill would punish refiners into withholding supplies and hurting consumers.

“Governor Newsom’s refinery supply mandate will create artificial shortages of fuel in California, Arizona, and Nevada by forcing refiners to withhold fuels from the market. Lawmakers who vote for this mandate will be voting to increase gas costs for their constituents,” said Catherine Reheis-Boyd, CEO of the Western States Petroleum Association.

If Newsom and the state legislature did anything to help consumers, it was surely purely coincidental.

SpaceX’s Polaris Dawn mission launched at 0524 ET atop a Falcon 9 rocket from Launch Complex 39A at NASA’s Kennedy Space Center in Florida. The five-day mission is historic because it will be the first spacewalk carried out by an all-civilian crew. 

The Polaris Dawn launch was initially planned for late August but postponed due to a “ground-side helium leak” and then delayed further due to weather-related issues off the coast of South Florida. 

At 0524 ET, SpaceX posted on X, “Liftoff of Polaris Dawn!” 

Liftoff of Polaris Dawn! pic.twitter.com/hAti2arueX

— SpaceX (@SpaceX) September 10, 2024

More flight status (everything going to plan):

Main engine cutoff and stage separation confirmed. Second stage engine burn underway

— SpaceX (@SpaceX) September 10, 2024

Falcon 9’s first stage booster has landed on the Just Read the Instructions droneship

— SpaceX (@SpaceX) September 10, 2024

Dragon has separated from Falcon 9’s second stage pic.twitter.com/m0FZ0HVn4k

— SpaceX (@SpaceX) September 10, 2024

The Polaris Dawn crew is now in Zero-G! https://t.co/6ckVZ3TpKR

— SpaceX (@SpaceX) September 10, 2024

The @PolarisProgram astronaut mission is headed for an altitude 3 times higher than the Space Station, the furthest that humans have been from Earth in over half a century! pic.twitter.com/lYgsA5vMGk

— Elon Musk (@elonmusk) September 10, 2024

The five-day mission isn’t headed for the International Space Station – that’s so last decade. Instead, it’s heading 870 miles above Earth, about three times higher than the space station.

While in space, billionaire entrepreneur Jared Isaacman, founder and CEO of the payment processing company Shift4; retired Air Force Lt. Col. Scott “Kidd” Poteet; and SpaceX engineers Sarah Gillis and Anna Menon will conduct a series of tests, including the first commercial spacewalk with next-generation spacesuits and the use of a new communication system via Starlink. This will be the highest orbital altitude humans have reached since the Apollo moon mission in 1972.

Here are the four major milestones the Polaris Dawn’s four-person crew will attempt:

1. Flying higher than any previous Dragon mission to date and reaching the highest Earth orbit ever flown while moving through portions of the Van Allen radiation belt at an orbital altitude of 190 x 1,400 kilometers (870 miles) from Earth’s surface – or more than three times higher than the International Space Station. This will be the highest altitude of any human spaceflight mission in more than a half-century since the Apollo program;

2. Attempting the first-ever commercial spacewalk. This will take place at an elliptical orbit of 190 x 700 kilometers (435 miles) above Earth in newly developed SpaceX EVA spacesuits. During the spacewalk, the crew will conduct a series of tests that will provide necessary data that will allow SpaceX teams to produce and scale for future long-duration missions. The crew worked with SpaceX engineers throughout suit development, testing various iterations for mobility and performance (along with mobility aids and systems procedures), and conducted operations inside vacuum chambers to validate pre-breathe protocols and the readiness of the EVA suit;

3. Testing laser-based satellite communication using optical links between the Dragon spacecraft and Starlink satellites, revolutionizing the speed and quality of space communications;

4. Conducting nearly 40 experiments for critical scientific research designed to advance our knowledge of human health both on Earth and during future long-duration space flights

If successful, Polaris Dawn will ensure that Elon Musk’s SpaceX continues to dominate the space race as he sets his sights on Mars. 

Authored by Daniel Lacalle,

«The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring temporary prosperity; both bring permanent ruin. But both are the refuge of political and economic opportunists.” 

– Ernest Hemingway

The United States federal debt has soared to $35.3 trillion. In less than a year, the federal government has increased its debt by $1.9 trillion. This occurred during years of record tax revenues and economic growth.

If the current administration remains in power, the Treasury’s own estimates predict an additional $16 trillion increase in debt by 2034, without accounting for any recession or slowdown in tax receipts. According to the CBO, the Kamala Harris economic plan would add another $1.9 to $2,2 trillion to the national debt.

The Harris campaign has not even bothered to discuss a plan to balance the budget. She just said that “efficiency” and the old fallacy of taxes to the rich would pay for the increase in spending—two things that have proven to do nothing to the ballooning debt and that do not even start to scratch the already unsustainable $2 trillion deficit.

This reckless increase in debt is happening in a growth period. However, if we adjust for government debt accumulation, 2021 to 2024 were the worst years of growth adjusted for debt since the thirties.

In a recent article, Claudia Sahm stated that you should not worry about debt.

“Debt is neither inherently good nor bad. As such, the question is not what’s the right level of borrowing, but rather what’s the economic return on the borrowing or the societal goals it advances.”

She continues to say that “the government can easily service its debt because of its unlimited taxing authority and ability to issue more U.S. Treasury securities to repay maturing securities”

(“The US debt is now $34 trillion. Don’t worry. Seriously”. January16, 2024).

Now you must worry. A lot.

Let us start with the benign idea of “economic return on borrowing and societal goals.”

The evidence from the United States indicates that the economic return is extremely low. Entitlement spending has not strengthened the economic growth path, and debt continues to rise faster than GDP. It is true that debt is not inherently bad, but unproductive borrowing is. It is a massive transfer of wealth from the productive sector to the bloated bureaucratic state. Furthermore, the societal goals cannot be unlimited. The government must administer and not just add expenditures to previous expenditures, particularly when there is no realistic analysis of the success or failure of government programs. The idea that a particular government program is beneficial is not enough to add it to the budget without reducing other expenses. Not even a benign view of government spending as Sahm’s can justify that every government expenditure item today is essential. Furthermore, we must always understand that governments do not give money for free. They tax the productive sector and borrow, which means printing a currency that is constantly losing purchasing power. Therefore, the government is not advancing societal goals by borrowing without control; it is implementing a profoundly regressive policy that creates a dependent subclass and makes it increasingly difficult for the middle class to thrive.

It is false that the government has “unlimited” taxing authority and the ability to issue more debt, i.e., print money. The government has economic, fiscal, and inflationary limits. Economic because constantly increasing taxation leads to stagnation and more debt; fiscal because expenditures are consolidated and annualized, while tax receipts are cyclical; and inflationary because the constant issuance of new currency, which is what happens when more debt is issued, leads to the loss of confidence in the currency and the erosion of its purchasing power. If what Sahm and Kelton state were true, the euro area and Japan would be examples of high growth and economic strength, but they are examples of stagnation, high debt, and rising social discontent.

The government does not set taxes to fund its incessant spending habits. Taxes should be set according to the economic reality of an economy. The fallacy of taxes to the rich and corporations does not even address the ballooning deficit and erodes economic growth and productive investment.

When someone tells you not to worry about record debt, you should be extremely concerned. When they say that the government has unlimited resources, they mean that you will pay by becoming poorer with more taxes, more inflation, lower growth, or all three at the same time.

When they tell you that $35 trillion of debt is peanuts compared with $142 trillion of American wealth, they are saying that the government will be pleased to absorb the wealth of the economy. You will pay.

When they tell you that tax cuts are the problem, it comes from the perspective that the private sector is an ATM at the disposal of governments. Tax cuts do not reduce revenues, just as tax hikes do not raise them forever. Tax cuts adjust the taxable base to the real economy in order to encourage more investment and growth. Tax cuts are not a loss for the government; they are a win for the economy. It is simply a return of funds to those who have earned them. The idea that funds are better in the hands of the government than in the pockets of those who earned them is confiscatory. It is ludicrous to think that the government knows better than the private sector where and how to spend money. Additionally, it is insane to believe that the government will not squander the funds and bloat the administrative costs. Furthermore, it is foolish to assume that corporations and the affluent will hoard unused funds. There is no such thing as idle money. Capital markets and the private banking sector invest all of their earnings in a productive economy. If Sahm is concerned about economic returns and social advancements, she should advocate for the private sector to retain a larger portion of the earned money, as they will allocate it to the most advantageous investments.

Inflation is a form of default in which the government transfers its imbalances to those who receive their salaries in currency. This is the most regressive form of taxation, primarily affecting the poorest. When governments ignore the real demand for the money they issue, confidence in the currency disappears. Developing countries do not issue debt in foreign currency because they are stupid, but because there is no international demand for their local currency.

Economists like Sahm and Kelton assume that the US dollar will have eternal and unlimited demand, and, as such, the US government can export inflation to the rest of the world through the loss of the purchasing power of the currency it issues. However, global central banks are reducing their holdings of US dollars (US treasuries). International demand is declining, and the limits I mentioned before are already evident.

The US is showing its economic limit, as evidenced by the significant slowdown despite a record deficit and government so-called stimulus. The US is also demonstrating its fiscal limits as the government persists in raising taxes, resulting in significantly lower tax receipts than anticipated and an interest expense bill that has escalated to $3 billion daily. Additionally, a 20% increase in inflation over the previous four years, a 30% increase in the price of basic groceries, and persistent inflation—exemplified by the ongoing decline in the purchasing power of the US dollar—make the inflationary limit clear.

What Harris is doing as vice president and intends to continue doing if she becomes president is to continuously test the patience of the world and national citizens when it comes to accepting a constantly depreciated purchasing power of the currency.

Saying that nothing will happen if debt continues to rise and deficits continue to drive government policy is, literally, like saying that an alcoholic should drink more vodka because cirrhosis has not killed him yet.

The US dollar is the credit of the US economy. If the US government loses its credibility, domestic agents will begin to reduce their use of the US dollar, while international agents will decline the currency due to its constant fiscal excess and its tendency to push the limits of global patience. Thinking that the US dollar will never lose its reserve currency status is simply reckless and ignores history.

Harris is threatening the US dollar, and you should be very concerned when someone says that the government has unlimited taxation and printing resources. It means it has unlimited ways of making you poorer.