Quite a while ago — back when Saturday Night Live was still funny — most of us looked at Gilda Radnor as one of our favorite players. When she was diagnosed with cancer, we were saddened but also inspired by her never-failing sense of humor throughout it all. She even wrote a book called “It’s Always Something” – a popular tagline from one of her recurring skits.

Many events of this year have caused me, on several occasions, consternation. But then the harsher thoughts are mollified as I then think of Gilda’s phrase and the strong funny lady whose words they were.

I don’t have to remind you that the economic roller coaster of the last two years may have been initiated by Covid19 but was made substantially worse by inconsistent policies of governments: state, local, national, and international. In countless ways the damage caused by policy was greater than that caused directly by the virus. Perhaps I should be more generous and say something like ‘Well, that’s nobody’s fault because such things can only be seen and judged in hindsight. “Yeah, I don’t believe that either.

A case in point is the lingering supply-chain problem. Obviously, it causes frustration for consumers who want to buy things but find a vacancy on the familiar shelf spot where the thing usually is. Multiply that a few million times and the drag on the overall economy comes into tighter focus.

A key piece of the supply chain puzzle is found in the labor force. Once again, the culprit can be traced, directly or indirectly to Covid. Some folks were ill and could not go to work. Many more were afraid to go to work because of the sense of danger ‘out there’. Schools offered up myriad of attendance policies, some changing week to week. The impact on working moms was yuuuge. These are only a couple of examples of things that made planning and managing every business very tricky. Despite all this, corporate earnings reports have been very good – a testament to American management skills.

Now, you may be wondering why I have made this the subject of today’s eLetter. Especially if you, like most of us, have been optimistic about the end of the Covid era finally being in sight. However, it may be too early to write up the post-mortem on the dreaded Coronavirus. Today, there seems to be a new outbreak in Europe. Austria has announced a new lockdown and government-forced vaccine use. By the time you read this Germany may have followed. Obviously, none of this is good.

What we must hope for is that we have learned a few things about dealing with widespread things like Covid. If the virus is not yet defeated, let’s keep our fingers crossed that we can make better decisions about dealing with it this time around. If we can, then we will at least restrict how the disease affects things it shouldn’t. There will always be problems to deal with. We need to get a lot better at not compounding those problems when they arise. After all, ‘It’s always something.’

Ron’s Market Minute: Past the Peak Inflation Pain?

The stories about high inflation are everywhere, especially after the current VERY strong inflation report. (And I filled my car’s gas tank yesterday- sticker shock!) As the price increases spread to more ‘everyday’ products I think it is causing us to wonder about the ‘transitory’ nature of the situation. And yet, there is no historic parallel to guide forecasts regarding pandemic re-openings. Perhaps there are forces afoot that may yet tame inflation and allow the Fed to rethink those potential interest rate hikes in 2022. 

As the gas prices affect all of us, let’s have a look at oil output in the Permian Basin. See the graph. Currently oil output in the Permian (the largest shale-oil production area) is projected by the Dept of Energy to reach a whopping record 4.95 million barrels per day next month, surpassing the current record set in March of 2020. By the way, that’s happening as the global oil output recovers as well. Remember Econ 101- as the supply of a product increases the price generally decreases.

The Permian is an important part of the global oil market. Its output exceeds that of every OPEC member except for Saudi Arabia, making it an important swing producer. Its continuing growth is a part of the reason why oil market watchers, (especially the International Energy Agency), are beginning to talk about oil supply surpassing demand in 2022. 

OPEC is more aggressive in its projections. Secretary-General Barkindo said that crude output could exceed demand starting in December!! The current rally for oil and gas futures stalled a few weeks ago, though prices have not (yet) fallen enough to provide relief at the pump.  Meanwhile, this week natural gas futures prices are down 23% from a high in early October, a time when news reports were touting painfully expensive winter fuel heating bills. 

I note that this morning our technical charts are continuing to show a decrease in the prices of energy investments. As always, the crystal ball is hazy when it comes to the future, but PERHAPS one of the largest inflation-affected areas- gas and oil- have peaked. 

How soon inflation cools from the current high levels is important for markets. Quick cooling should likely keep the Fed on hold for longer, while elevated readings like last week could force the Fed into action.  We’ll see. 

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk


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