According to the Energy Information Administration, nearly half of U.S. households that warm their homes with mainly natural gas can expect to spend an average of 30% more on their bills compared with last year.
Brent and WTIC have both increased over 60% this year.
A Winter of Giant Gas Bills is Coming, Thursday’s WSJ
Since mid-2020, natural gas prices have soared form under $2 to near $6 mbtu. Gee, this going green is really getting expensive.
There are several reasons. In burst of “we are green” mood, back-up coal fired plants were closed around the world. An over reliance on solar and wind failed as wind slowed in Great Britain. Team Biden has been on the regulation warpath against conventional energy since Inauguration Day. This discourages new exploration. And bingo here we are with gasoline prices at $3-5.
Crude oil is both a commodity (useful) and an opportunity for financial speculation. So prices may well go triple digit again. We learned yesterday that the annualized Producer Price index is up 89.28% from a year ago. Fed Chair Powell’s forecast of transitory inflation is not holding up well. President Biden delights in blaming others for problems. It seems a safe bet he will hang the inflation number on Powell and appoint a new Fed Chair. And besides, Trump appointed him, so like Keystone Pipeline, reason enough to cancel.
There is always a mix of social mood and it unfolds in fractal form, higher and lower levels. But overall mood is wildly positive. Here are some examples.
1. The stock market is 35x its high of 1966.
2. Entire sections of the WSJ are devoted to lauding the most successful “wealth advisors.”
3. The real estate Mansion section of the WSJ is a fat 14 pages long. The latest wrinkle is not a second home, but a couple that has two primary residences in Idaho and Virginia.
4. People are quitting jobs in record numbers. Some 4.3 M workers have vanished. Between the Dems promised social welfare and the belief another job will be easy to find, this represents optimism.
5. Morgan Stanley makes big money advising on mergers. Mergers are a positive mood phenomenon reflecting inclusion.
6. Demand for the junkiest bonds, collateralized loan obligations CLOs is at record levels with $131 B sold this year.
This is typical of a market top mood, think September 1987 or March 2000 or fall 2007. In fact, the previous list is a warning not assuring signal. I am preparing a presentation on how Credit Suisse lost over $5 billion this year on a single customer, Bill Hwang. How many more Bill Hwangs are out there I wonder?
And the price patterns look eerily like 1987. Despite the current rally, the indexes are not at new highs, and the Transports do not confirm even the recent highs.
Exercise caution amid these warning signs.
