Natural Gas May Keep on Rising
(September 2020)
Natural gas is red hot and rising (no pun intended ha), and just completed its largest ever monthly gain. August saw natural gas prices rise an eye-opening 51%. Despite inventories being 81% higher than last year, natural gas has been gaining because of increased demand. California, which is facing wildfires and blackouts, has had very high natural gas needs, driving up prices. The Energy Information Administration says that natural gas demand for power generation has been surging, with July seeing is largest ever single month increase for that purpose. That said, overall national demand in July was down because of decreased economic activity. Total supply has been cut significantly since pre-COVID, but inventories remain high.
FINSUM + Magnifi: Biden Admin Planning A Big New Regulatory Push
April 16, 2021
The Biden admin is tackling some of the changes made during Trump's administration, particularly to environmental social governance, fair lending, and consumer protection rules. The administration will not allow a set of measures that disincentivize ESG factors by shareholder voting restrictions. They have also reinstated the Consumer Financial Protection Bureau’s ability to seek monetary penalties for abusive practices and expanded the Equal Credit Opportunity Act to gender and sexual orientation protection. Finally, the administration reinforced the SEC’s ability to investigate and subpoena companies and individuals for investigation. These measures are just some of the ways the new administration is changing the regulatory landscape.
FINSUM + Magnifi: Chinese Economic Data and Opec Demand Report Lift Oil Prices
April 16, 2021
China is one of the biggest importers of crude oil and good news on trade reports boosted the oil futures market. Imports in U.S. dollars rose in March by 38.1% from the prior year which was well above estimates. Additionally OPEC forecasts a 100,000 barrel a day increase in its oil demand projections for 2021. It expects it to climb to 96.5 million barrels per day by the end of the year. The upward revisions all come despite the slowing of the vaccine rollout from Johnson and Johnson. OPEC sees reopening and strong growth in OECD countries in Q2 and Q3 driving the oil demand. Oil was over $60 a barrel in futures markets.
FINSUM + Magnifi: This Sector is at Huge Risk from Biden’s Tax Plan
April 13, 2021
Treasury Secretary Janet Yellen released bits of the Biden administration's Future Tax plan which is linked to the $2.3 trillion infrastructure proposal. Titled “Made in America”, the plan eliminates many subsidies for fossil fuel companies and introduces a host of incentives for alternative energy. The treasury estimates that the fossil fuel measures will save $35 billion over the next decade. Such measures are the elimination of the drilling costs reduction, which on its own is estimated to generate $13 billion in the same decade. Additionally, the bill extends the investment tax credit for green energy and incentivizes sustainable aviation fuel. Finally, the bill raises the corporate tax rate from 21% to 28%.
FINSUM + Magnifi: Pay Attention to This Big Bear Market Warning Sign
April 8, 2021
The stock market has been on one of the most historic recoveries in market history, but hedge funds are holding off on their buying. New data shows that hedge funds have some of the lowest levels of their positions in cyclical markets (energy, finance, tech) in the last decade, but instead are heavy on resilient industries such as healthcare and consumer staples. Hedge funds might be suspicious of how normal the economy will look as vaccines roll out, or that the benefits of the stimulus packages will be short-lived.
FINSUM + Magnifi: Forget WFH, Here is the Next Asset Class to Jump
(March 2021)
The onset of the pandemic had weak demand for about every good in the U.S. except toilet paper. The traditional energy sector is the basis for so much of the economy that this, in turn, caused a huge oversupply, so much so that oil prices dipped into the negative. Pent-up demand and smaller supply put the traditional energy sector in a good place for a comeback as OPEC members have slowed production. As the economy opens back up, oil and gas will benefit from returning commutes, travel plans, and all the goods circulating the economy as well. Energy ETFs like the SPDR fund XLE, which has holdings of exclusively U.S. energy companies—with its largest holdings being among Exxon Mobil, Chevron, and ConocoPhillips—are in a bullish position to rally from the reopening. VanEck Vectors Oil Services (OIH) SPDR’s Oil and Gas Production ETF (XOP) also hold a collection of major oil and gas companies.
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FINSUM + Magnifi: Here's How ESG Flows Really Work
(February 2021)
When the average investor conceptualizes an ESG investment they are picturing diverting funds to a growing new wind energy company or a carbon-neutral delivery service. The reality is that technology companies comprise a bulk of ESG investment, and not because they are green in an intuitive sense but because they have little need to pollute. Here is an example of how that plays out: Asia captured 83.33% of emerging market ESG investment because of its heavy tech weighting. Taiwan Semiconductor Manufacturing, Tencent, and Samsung are the big tech companies generating returns for Asian EM ETFs over other regions.
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FINSUM + Magnifi: How to Capitalize on the US Energy Crisis
(February 2021)
The polar vortex sweeping across the south has left many American’s without energy, but investors are not as powerless in their response to this weather phenomenon. For those who were scared of the volatility in oil prices, electrical equipment suppliers may be on the move. The vortex has exposed electrical grids in deep need of investment. This market was already in a relatively good position as the economy picked back up boosting demand for electrical services. The nation’s expanding alternative energy sector also amplifies electrical suppliers as the intricacies of renewables complement their growth. John Inch, an analyst for Gordon Haskett looks to Eaton (ETN) to capitalize on the older U.S. electrical Grid. Other investors are turning to Quanta Services (PWR) and MasTec (MTZ) to capitalize on the energy crisis. Both stocks exceeded early-week price targets.
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