Stretch Run
Generally, the week after the Thanksgiving holiday is considered the stretch run for equity markets. Portfolio managers look back during the week and try and figure out how it all went so wrong. There are always excuses and there are always attempts at putting foam on the dumpster fire of their investments. Good luck listening to that nonsense.
Fact of the matter is, this year was a war. Most years it is just a battle. No, 2022 was a war. Investors fought: The end (sort of) of the Covid pandemic. The war in Ukraine that started on February 24th. Oil shock after oil shock. Continued inflation and last but not least, a Federal Reserve that was playing catchup (never a good thing). Oh yeah, we are staring a possible recession in the face as well.
Yet, at this writing the S&P is only down 16.43%. Considering all the things that were on investors plates, I think that is a remarkable feat in and of itself. No one would blame any investor or portfolio manager if he/she bailed early on this market. Some did for sure but who could blame them?
As I have said over and over again, I like simple. The trials and tribulations of the equity markets were unfortunately anything but simple. I like to compartmentalize and that is a solid strategy when things aren't as complex as they have been this year. Individually, because of this complexity, I tried to keep to one sector that seemed to benefit most from the Tsunami of crap investors were dealing with. Energy. Yes, energy.
The sector that was beaten like a red-headed step child when this administration came in and is having one of the greatest up yours moments of all time. Hey, Larry Fink said that fossil fuels are bad and we don't want our investors to invest in them. Joe Biden said we will be carbon neutral in 5 years (come on, someone had to know that was stupid). Every liberal left wing progressive fought against anything that had to do with oil or gas in this country and they watched as the price of gas skyrocketed to over 6 dollars a gallon in some places. This was going to be the cost of moving the country from fossil fuel dependent to something else.
The problem with moving away from fossil fuels (which this country has in abundance) to that "something else" is that these Carbon Communists don't really have a viable alternative. They have ideas but they don't have a sustainable plan to get us there in the time frame they are talking about.
Yes, electric cars and trucks will be our future, I have no doubt but by 2030? I will bet my family fortune that we will not be 1/3 of the way there by 2030. It is not only the energy companies that will try and slow that down, it is the sheer impossibility of transforming an economy that was built over 200 years on the rich supply of oil to an economy that will rely on the sun, the wind, possibly on some fuel source yet invented. The sheer magnitude of the task is truly incomprehensible.
Let's not forget the fact that natural gas will still be needed to power millions of homes when the sun isn't shining or the wind isn't blowing. In addition, unless there is a new form of battery storage, this will all be a for naught. Oh wait, how do we get the power from where it is generated to where it is used without losing a substantial amount of it on the way? The electric grid isn't prepared either.
They have all of these answers but if you dig inside a little, every answer is fragile.
Let's do a quick explanation of how unsteady their solutions are.
There is a solar farm in Arizona that takes up 2,000 acres of desert land. That solar farm produces energy for 25,000 homes. At night, because their is no energy being produced via the sun, the homes tap into their local power grid. Which uses natural gas to supply power for 300,000 home in Southern Arizona. The green thinkers then ask the question "What happens to the excess power the solar farm produces?" Good question, It is Arizona, it is 107 degrees in the shade for 5 months of the year. It get used keeping homes cooled. What about the other 7 months? Well, they try and store it to be used in the evening but by 1 in the morning, the homes have used up the stored power and draw from the local grid. That is 25,000 homes, in the US we have 156,000,000 individual homes and roughly 95,000,000 apartments, along with factories, office building, waste treatment plants, etc. My point is, it will be impossible to convert this country into solar dependent. Period.
Not to mention the environmental impact of covering millions of acres of land with solar panels. Wait, you say, what if every home had a solar roof and generated their own electricity. That is a great idea! Who will pay for it? How long do you think that will take to install? Where are we getting it from? More importantly, where will the power be generated when we have 15 straight cloudy days?
Forget it. I love the idea too but the reality is much different. We need fossil fuels. We are the cleanest producer of fossil fuels in the World. Yet we are forced to import from some of the nastiest countries in the World. Countries that treat their people like slaves. Where human rights do not even exist. But that is okay.
As you all know, I have less and less respect for the left. This is my number one problem with the left right now. The hypocrisy of this idea.
I do not buy their hatred of the energy industry. I am not naive however, I do know the energy industry has a spotty record over the years but what industry provides such high paying jobs to pretty much anyone who wants to work hard? None. Oh wait, I said work hard, maybe thats why the progressives dislike the industry so much.