The Sun Has Riz

Soaring temperatures prompt the president to declare war... on energy independence

(Terry's Texas Rangers Memorial Statue and Austin’s Capitol Dome. Source: Getty Images)

Joel Bowman, checking in today from Austin, Texas...

“The sun has riz, the sun has set, and here we is in Texas yet.”

~ Old hobo saying

We’re on the road today, dear reader, headed west from the Lone Star State’s largest city, Houston, toward her quaint capital, Austin. It’s a fine day for a road trip... even as the sun beats down mercilessly overhead. The mercury will rise to 103 degrees Fahrenheit by high noon. 

Happily, we are not making the journey in a horse-drawn wagon. Or riding the rails. Or traipsing it on foot, with or without a ball and chain around our ankle. 

Instead, we drive a modern automobile... with an internal combustion engine capable of producing the power of 300 horses (give or take a few old Jacks and Rubys). Our ride gets 25/miles to the gallon on the broad, open highways; 19 in the city. It’s comfortable, easy going. And most importantly, we’re not likely to fall from our saddle, landing face down in the dirt, dazed and confused with heat exhaustion. 

Moreover, in an embarrassment of riches that is none of our own making, we enjoy air conditioning, regular pitstops for beef jerky, iced coffee and bottled water, plentiful, potable and transported to the middle of nowhere from some far off natural spring. The station attendants are friendly, loquacious, and wish us well on our journey. And when we mount our ride once more, a cheerful soundtrack spurs us on toward the horizon...

You see I've been through the desert on a horse with no name
It felt good to be out of the rain
In the desert you can't remember your name
'Cause there ain't no one for to give you no pain
La la la la la la...

(Granted, our view from the window was of the piney woods blending into hill country... with nary a desert in site).

Such are the myriad pleasures, amenities and conveniences afforded us in the modern world. The industrial revolution, aided in no small part by cheap, plentiful, energy-dense oil, catapulted man into an age that would have been unrecognizable to all but the wealthiest kings and sultans of bygone eras. 

The Gift Horse’s Mouth

What does Modern Man do, having been gifted this incredible bounty? Does he pause, even for a moment, to consider how difficult his life might be without... oh, say... fertilizer for his crops, fuel for his jet planes, grease for his factories, even buttons for his shirt? And what about his medicines? Petrochemicals are used to manufacture his analgesics, antihistamines, antibiotics, antibacterials. Even his solar panels depend upon petroleum-based resins and plastic components in their photovoltaic cells. 

Any “gee, thanks for that” or “isn’t this pleasant, not freezing to death or frying alive”? Nah...

As of Friday, President Joe Biden had stopped short of declaring a full blown “climate emergency,” but signaled to democratic lawmakers that, in the absence of congressional support, he would forge ahead on his own. From the Associated Press:

Washington (AP): [A Climate Emergency declaration] would allow Biden to redirect spending to accelerate renewable energy such as wind and solar power and speed the nation’s transition away from fossil fuels such as coal, oil and natural gas. The declaration also could be used as a legal basis to block oil and gas drilling or other projects, although such actions would likely be challenged in court by energy companies or Republican-led states. 

Meanwhile, the administration has moved to block oil and gas production on federal lands - where a quarter of American oil is produced – and introduced a five year offshore lease plan that would effectively block offshore drilling in the Pacific and Atlantic oceans. 

Even on private land, the regulatory landscape is hardly conducive to free-flowing energy independence. From RealClearEnergy:

The Environmental Protection Agency (EPA) lacks the authority to ban fracking, but is considering regulating America’s most productive and cost effective oil field into irrelevance. The Permian Basin in Texas and New Mexico accounts for 40% of America’s oil production and 15% of its natural gas production. Undeterred by the Supreme Court’s recent rebuke of its industry-remaking regulations, the EPA is contemplating using ozone standards to force Texas and New Mexico to curb oil drilling, potentially jeopardizing 25% of America’s gasoline supply. 

And yet even if the administration encouraged more domestic drilling (in contrast to the president’s repeated calls for OPEC to pump more oil), that oil must be refined to turn it into gasoline and diesel fuel. However, in the face of increasing renewable fuel mandates, gasoline and diesel refining capacity in the United States has been declining for years, as many refineries are either closing or converting to biofuel refineries.

American workers/voters/drivers who wish to raise the question of energy independence – and $5 per gallon gas prices – with their elected president will have to catch him when he’s not off fist-pumping the Saudi Crown Prince or sending delegations to Venezuela to make hat-in-hand requests.

“Please, Mr. Maduro... can we have some more?” 

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Meanwhile, markets in the US appear to be in somewhat of a holding pattern... with the airport on fire down below.

Bonner Private Research Investment Director, Tom Dyson, delivered a message of caution to members in his July Report, which was published this past week. Here, a choice snippet...

We’re in a very tricky, policy-driven market and I encourage readers to stand aside and watch governments duke it out from behind the ropes. For new readers, by ‘policy’ I mean a deliberate effort by the United States to use the dollar as a weapon. 

In practical terms, this means holding mostly physical gold, energy and cash. And it means avoiding the major stock market averages. We think the Dow Jones Industrials, the S&P 500, and the Nasdaq still have a long way to fall in terms of gold.

Major reset coming

Am I being overly cautious? Maybe. But I think a major reset might be coming… a global event… a meltfest. And I want to be ready for it. If there were one chart to express the bearish view, it would have to be this one. The blue line is household net worth. The red line is GDP.

Source: US Federal Reserve

They should stick to each other, as they used to. They started diverging when then-Federal Reserve Chairman Alan Greenspan began blowing bubbles. In short, Greenspan, Ben Bernanke, Janet Yellen, and Jerome Powell went on to cause an epic 30-year wealth inflation. 

Whenever they stop inflating, the blue line tries to close the gap. That's what's about to happen. That's “inflate or die” in one picture. Bull market returns are one hell of a drug... and now we're about to get one hell of a hangover...

Avoid ‘the Big Loss’

So I’d rather be too cautious than not cautious enough. Remember, our main goal (for the moment) at Bonner Private Research is to help you avoid ‘the big loss.’ A 20% bear market is one thing. A ‘draw down’ of 50% to 70% is a whole different animal. It can take years to recover from that kind of loss to your retirement. 

That’s why, in this game, the first order is survival. And then the second order is patience. Big “all-in” opportunities come around every five years or so. Like gold in 2002. Or stocks in 2009. Or bitcoin in 2012. Or energy in 2020. 

The next big “global event” – if I’m right – will be a deflationary meltdown. At which point we’ll buy raw materials, shipping, precious metals and other assets that will do well as the Fed re-inflates.  

If I’m wrong, we lose a little. But if I’m right, we make a life changing profit…

If you aren’t yet enjoying the many benefits of Bonner Private Research membership, including twice-weekly market notes from Tom Dyson and Dan Denning, plus monthly reports, in-depth briefings, a dedicated stock watchlist and private Zoom calls with Bill Bonner’s own network of money managers and analysts, you might consider joining the team today.

Market conditions are challenging, to say the least. Failing to properly prepare is, as the old saying goes, preparing to fail. Discover what Bonner Private Research can do to help you protect your wealth, here…

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And now for Bill Bonner’s missives from the past week...

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And that’s all from us today. Check in again tomorrow, when we’ll be back with your regular Sunday Session. In the meantime, we’re off to explore the Texan capital… starting with the hotel pool.

Until tomorrow...

Cheers,

Joel Bowman