In his podcast addressing the markets today, Louis Navellier offered the following commentary.
Artificially High Yields
The financial markets seem convinced that there will be a federal government shutdown. The truth of the matter is these budget battles are a big game of chicken, so if the deficit ceiling is not lifted, a 30-day continuing resolution is the most likely scenario.
Even if there is a federal government shutdown, the interest payments on Treasury debt and Social Security payments are expected to continue since it would be political suicide to miss those payments. I anticipate that Treasury bond yields will finally moderate when the deficit ceiling is lifted, but in the meantime, the budget battles are contributing to artificially high Treasury yields.
Interestingly, if Congress does not pass a stopgap funding measure this weekend, such as a 30-day continuing resolution, essential workers like TSA, air traffic control and customs would stay on the job. However, the Commerce Department and Labor Department funding would dry up, so economic data would cease to be released. This would obviously interfere with the economic data that the Fed is monitoring.
In the past, similar partial federal government shutdowns have suspended funding for the federal courts, the FTC, the SEC and other federal agencies. Typically, these federal workers are reinstated within two weeks, with full backpay, so again the deficit ceiling is largely just political theater.
Crude: Higher for Longer
Multiple energy stocks are now reasserting their market leadership after gasoline prices in August rose 10.5% in the CPI and a whopping 20% in the PPI. This is due to an acute inventory decline. Furthermore, there is a diesel shortage again, especially in Europe, so the U.S. is exporting more distillates (i.e., diesel, heating oil, jet fuel, etc.), which is causing the trade deficit to decline and boost GDP growth. Naturally, since gasoline prices are high, Joe Biden’s popularity is plunging in the polls. Saudi Arabia is controlling crude oil prices and appears to be striving to defeat President Biden.
Specifically, candidate Joe Biden said that he found “very little social redeeming value in the present government in Saudi Arabia” and promised that, as President, he would make the Saudi government an international “pariah.” Furthermore, if that was not insulting enough, candidate Biden then went on to insult the entire Saudi Royal Family.
So I think it is obvious that Saudi Arabia is keeping crude oil prices high to help defeat Joe Biden in the 2024 Presidential race. With $4 gasoline prices ($6 per gallon in California) and soon the be 4% unemployment from an 11-month manufacturing recession, it should not be surprising that Joe Biden is almost 10% behind candidate Donald Trump in a recent ABC News/Washington Post poll.
Due to food and energy inflation, consumers are not happy. The war against fossil fuels is failing, especially against natural gas, since in America, we are blessed to have the cheapest natural gas in the world. More pipeline projects are now reemerging as natural gas prices meander higher.
This is a good time to remind you that natural gas prices are very sensitive to the weather and ideally like hot miserable summers (for peaker power plants) and very cold winters (for heating). Last November, natural gas prices plunged 50%, due to a disruption at a big LNG port as well as unusually warm weather in the Northeast. This winter is forecasted to be much colder for both Europe and North America due to an El Nino weather pattern, which bodes well for higher natural gas prices.
Presidential election years are typically good for the stock market since the leading candidates promise everything and anything, which helps to boost consumer confidence. Joe Biden’s reelection pitch is supposed to be launched in Super Bowl ads, while candidate Donald Trump clearly wants to restore lower gasoline prices, shore up the U.S. southern border, and end the war in Ukraine.
Powerful foreign influence from Saudi Arabia is expected to influence the 2024 Presidential election since they are effectively controlling gasoline prices. Russian Foreign Minister, Sergey Lavrov, wants to settle the Ukraine war on “the battlefield” due to waning support for Ukraine among NATO nations.
Russia is also being increasingly isolated and Foreign Minister, Sergey Lavrov, recently said “No matter what they say, they (the United States) control this (Ukraine) war” and added, “They supply weapons, ammunition, intelligence data, data from satellites, they are waging a war against us.”
All the money going to Ukraine has become a contentious issue, especially after Poland abruptly ceased all military aid to rebuild the Polish military readiness. I should add that Poland has been leading a ban on Ukrainian wheat to protect its farmers, so tensions between the two countries remain high. However, Poland may be increasingly worried that Russia will invade if Ukrainian defenses fail.
All this international chaos is expected to keep crude oil prices high. Furthermore, Joe Biden is going to have to defend spending billions to fund the war in Ukraine, while disaster relief in Maui and East Palestine, Ohio, is widely believed to be lacking. Since some Ukrainian generals have bought villas in Spain and are driving fancy sports cars, there is also a big concern that there are some serious leaks with the aid to Ukraine.
Invest in Hot Spots
Amidst this chaos, plus ongoing labor unrest in the U.S. with the UAW being the biggest of several strikes this year, American consumers remain grumpy, but continue to spend up a storm as their credit card bills grow to record levels. However, due to a strong U.S. dollar, the price of imported goods should continue to decline as falling EV prices have demonstrated, because the U.S. has been importing deflation from China.
As a result of a lot of chaos and distractions, our best defense remains a strong offense of fundamentally superior stocks. In addition to all the refinery and energy stocks, I am also recommending (1) the best AI stocks, (2) the drug companies profiting from the booming demand for weight loss medication, (3) the strong demand for cruising/travel demand, (4) a potato shortage, and (5) resurging semiconductor demand. In other words, stay invested in the best economic hot spots with improving sales and exploding earnings.
The earnings environment is poised to steadily improve in the next four quarters. There is no doubt that a strong U.S. dollar may hinder the earnings of some big multi-international companies since approximately half of the S&P 500’s revenue is outside of America. The growth stocks I am recommending are not expected to be inversely impacted by a strong U.S. dollar. Furthermore, due to positive analyst earnings revisions in recent months, I am expecting another round of big earnings surprises! In other words, we remain “locked and loaded” for another earnings announcement season.
Coffee Beans: Grazing on Weed
A flock of sheep found their way into a greenhouse in Greece and ate more than 600 pounds of marijuana plants being cultivated for medical use. Source: UPI. See the full story here.
