The tide is changing. The fear of the Fed raising rates is no longer causing the market to panic sell. The market seems to have accepted that higher rates are coming, and when they do, the world will not fall apart. It is, as some say, now “baked into the cake.” All you have to do is look at market reaction when the monthly US employment report came out on Friday to see that the fear is gone. Yes, the panic seems to be going out with the tide.
- The deep disconnect between the oil futures and physical markets looks similar to the events of June 2014 when the physical market weakness became a precursor for a futures price crash.
Now, try as they might, the oil bulls cannot seem to push past and hold the $60 line for crude oil. It must be frustrating as each time they find a catalyst to spark the price move those darn fundamentals get in the way.
- Data from OPEC and the International Energy Agency show the world is still pumping 1.5 million barrels per day more crude than it consumes.
Even with the oil producing countries gathering soon to discuss the overall price with OPEC, and many will be pushing for production cuts, there might just be precious little anyone can do to stop the fate of oil. You see, no matter that the world is moving into driving season – the time when oil inventories get a big draw down, which then allows the speculators to push the price up – the crude supply glut will take some time to balance because it is whopping.
- U.S. crude inventories fell almost 4 million barrels last week, their first weekly decline since January, but crude stockpiles still stand at a discouragingly-high 487 million barrels.
The math alone suggests fighting for dwindling market share is the best option left for the countries that depend on oil revenue to survive. So, this summer, expect the speculators to capitalize on the rise in demand, but keep in mind, come this fall, and just about every season thereafter, the tide that is renewable energy will rise and the tide that is oil will recede. No finger in the dike will stop this now.
- The numbers are impressive. In the first few days of reservations since the battery announcement on April 30, Tesla took orders worth roughly $800 million in potential revenue, according to figures compiled by Bloomberg Business.
Now those are potential orders, true, as the battery is yet to be actually produced, but it does suggest a swell of demand for something long needed.
- Cheap electricity storage is something utilities have pursued for years with little success—a product that has the potential to bolster the power grid and increase the spread of solar power.
The spread of solar power is the aim of Tesla, I suspect, because as electricity becomes cheaper, and Tesla produces less-expensive electric cars with greater range, the whole package comes together.
- The Tesla Model S is about to get a smaller, cheaper sibling! The Tesla Model E will be 20 percent smaller than the Model S, will have a range over 200 miles, and will retail for around $35,000 when it launches in 2016.
Now factor back in the Tesla battery, a device that now makes solar charging stations available at night …
What if solar charging stations become commercially viable? For example, maybe some entrepreneurial folks between New York and Los Angeles will set some up to make money selling cheap electricity to folks going cross country in their electric cars. Or maybe, the major motel chains will pick up on the idea and build the price of a charge into the rate, or maybe, industrious folks will buy a solar panel or two to charge a battery that will cheaply charge their electric car while they are sleeping, or better yet, buy a whole rooftop system because they can now use solar power day and night.
The point is the oil market sees this coming, as does the overall market, and that means the bears win with oil and the bulls win with the transformation in energy. The latter points to a better future for the US consumer, which points to a stronger US economy, which points to a market wanting to go up, something like we are seeing these days …
- For more than 200 years, economists have debated the concept of “technological unemployment,” and today’s radical digitalization of the economy has reignited concerns that robots and automation could lead to widespread job destruction at a time that new industries are not emerging quickly.
The folks whose job it is in any era to tell us how bad technology is for the worker are at it again in this era. Understand, these harbingers of doom have been saying the same thing since the wheel was invented. True, that simple device put a lot of slaves out of work, but it also gave rise to carts, wagons, trains, planes, and automobiles, which, well, gave rise to Tesla, which brings me to the ridiculous idea that “new industries are not emerging quickly.”
So, if Tesla took $800-million worth of orders for a 200-pound, energy-storage unit that cost upwards of $3500, how long do you think it will be before companies X,Y, and Z come out with a 100-pound battery costing $2500, and then a 50 pounder costing $1500. You get the picture, but, just in case, don’t blink. You might miss the emergence of this new industry.
P.S. For tomorrow, think about another myth – the millennial generation is adrift and not interested in investing in the market. Yup, debunk time continues.
Trade in the day; invest in your life …
