China Concerns Cloud Retail Earnings Week

Published August 15, 2022

The following is an amended form of the Aug. 15 Daily Contrarian. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack.

Some bad economic news out of China has weighed on risk sentiment overnight. The country’s central bank responded with a surprise rate cut. The impact is mostly limited to commodities so far, with WTI crude oil down 4% and copper off 2% in early Monday trading.

Starting tomorrow (Tuesday), the big box retailers will report earnings, with the likes of Walmart (WMT) and Home Depot (HD) up first. Wednesday we’ll get Lowe’s (LOW), Target (TGT), and TJX (TJX).

Oil Prices Will Rise to $200/Barrel: Salem Abraham (Szn 4, Ep 19)

Published July 18, 2022

Salem Abraham of Abraham Trading Co. joins the podcast to discuss his bullish outlook for oil, predicated on supply issues and under-investment.

Content Highlights

The shift to renewable energy is real, even in the Texas panhandle. But the transition is still in the very early stages. Oil and gas are still needed — so are investments in infrastructure (4:13);
Worldwide drilling has yet to recover to pre-Covid levels. This will lead to $200/barrel oil and $10 gasoline prices (7:07);
“I think we end up with stagflation,” but even that will not solve the supply issues (8:50);
Natural gas “is still a great investment” (14:14);
The benefits of green hydrogen (16:31);
There are more pipelines than popularly believed in the U.S. and they are actually more precarious than transmission lines (19:52);
Background on the guest (29:36);
Liquid alternatives and the need for better diversification (31:37);
The Federal Reserve has to regain credibility after the ‘transitory’ talk. The Fed will blink, eventually… (36:02);
Unrelated: Notre Dame will not join the Big 10 for football, says the alumnus (39:49).

More Information on the Guest

Twitter: @SalemAbraham;
Website: AbrahamTrading.com.

Quick Highlights From Our YouTube Channel

Transcript

The Coming Credit Crunch and Death of Unicorns: Leo Schmidt (Szn 4, Ep 11)

Published April 18, 2022

Leo Schmidt of River Eddy Capital Management rejoins the podcast to discuss the coming credit crunch, its impact on stock market sectors, and where to invest to protect one’s portfolio.

Content Highlights

So-called “unicorn” companies, or the darlings of the VC crowd, and others that cannot generate cashflow, will face a tough reckoning (3:17);
Undermining this is “a complete change of psychology” in terms of velocity of money (6:27);
What if the Fed reverses course? It’s not so simple (8:52);
Oil is a short: “Oil is the ultimate liquid commodity” but there is a place for pipeline stocks… (11:38);
What stocks can thrive in this type of environment? Look first to medical company spin-offs (19:13);
Another area to look: Business development companies, or BDCs. This is a risky part of the market but there is at least one BDC making first-lien loans, which are the safest part of the capital structure… (26:23);
Quick epilogue on China’s latest Covid lockdown. There are ways to play the move away from supply chain issues that result (35:58);