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Friday Thoughts

This morning, after finishing her breakfast, Clara asked us what day it was because she’s said she couldn’t keep track. I thought about that later, and I agree. I can’t hardly keep track of what day it is, or what’s going on in the world. The thing that’s bothering me the most is that I don’t know who to trust. The national media has destroyed any credibility that they had left over the last several years. No politician is trustworthy. It’s times like this that I find comfort in reading the Bible and knowing that this is all part of a larger plan that I will never be able to comprehend. 

I mentioned last week that there were several oil tankers at sea with Russian oil on board and no buyers. It was reported that night that Shell agreed to buy the oil at a record discount of $28.50 less than market prices. On Tuesday, British dock workers said that they were refusing to unload the oil if it headed to a British dock. That same day, Shell issued a public apology for buying Russian oil and said it would no longer do so. Russia still has a market for their oil - China. But it still gives a huge blow to the global oil market when the country that produces 17% of the global market is effectively cut out of much of that market. 

That’s why we saw crude oil prices hit a record high of $133 a barrel on Tuesday. The good news is that prices fell Wednesday and Thursday, albeit to a still very high price at over $100 a barrel. 

Of even more concern for rising costs is all of the other things made with oil. Anything plastic requires petroleum to be made. Also: fiberglass, dyes, paint, and fertilizer. The cost to manufacture hundreds of thousands of products goes up when the price of oil goes up. So, manufacturers who have been dealing with labor and supply chain issues, are now also confronted with even more price increases in raw material costs. 

I do try to look for the good in every situation. In this case, I think that it will force us to be more efficient in our use of various products. I’ve already seen several people post that their summer plans have been changed due to gas prices. I’ve talked to a number of people who had been considering electric vehicles over the past several months and I expect that interest to firmly grow. (Some think it’s an orchestrated move up in gas prices to push people to EV’s, but I think that’s a bridge too far.) I expect businesses to push for ways to improve efficiency and minimize waste. These are good things, and they often get pushed aside for maximizing of production when materials are plentiful and costs are low. 

I also think that this will help accelerate the worlds diversification of energy sources. The world has had a number of primary energy sources over the decades of industrialized time. Early on it was something as simple as a water wheel. We had whale oil and coal. Then kerosene and finally gasoline around 1910. So, we’ve only really relied heavily on gas and diesel for a little over 100 years of our existence. We all know about the growth of solar and wind generation. There are also efforts to generated energy from the tides and waves, along with thermal energy from deep underground. 

While many of these “clean” energy sources may not be enough to create a base load of daily energy, perhaps the combination of them will help cut our reliance on petroleum. At least, I suspect that there are many people who will be working extra hard at making that happen in the near future. 

While there is much to be concerned about in the world today, there’s also a lot to be excited about. Challenges and challenging times bring innovation. Companies like Dell computers, Microsoft, and Apple were founded in the late 70’s and early 80’s by guys working in their garage (or dorm room for Dell) during times similar to this - high inflation and economic uncertainty. 

What is the next innovation being worked on in a garage or basement? We probably won’t know for a few years, but I bet it will be exciting. Yesterday, the U.S. National Highway Traffic Safety Administration issued a new set of safety rules for automobiles that now eliminates the need for a steering wheel or pedals for truly autonomous vehicles. They expect this to open up the research possibilities in that field. Maybe, in a few years, we just hail a car with our phone, it stops by in a few minutes to take you where you need to go, then goes and gets the next person?

My point is that in every bad situation, good comes too. Try not to get too down or scared by the news. It will be okay. 

It looks like bad weather this weekend along the East coast. We’re being told bad storms with strong winds here in Sumter early tomorrow morning, then a hard freeze tomorrow night. I hope my blooming plants around the house fair alright. 

Stay safe and have a great weekend. 

The views stated in this letter are not necessarily the opinion of First Allied Securities, Inc. and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.  Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.  Past performance does not guarantee future results.