In his podcast addressing the markets today, Louis Navellier offered the following commentary.
The mega cap technology stocks continue to lead the overall stock market and the seven largest technology stocks, namely Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Meta (NASDAQ:META), Microsoft (NASDAQ:MSFT), Netflix (NASDAQ:NFLX), Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA), now account for 24.7% of the capitalization weighting in the S&P 500 and 53.156% of the NASDAQ 100.
At least three of these stocks, namely Alphabet (Google), Microsoft and Nvidia, are prospering from the artificial intelligence/ChatGPT craze. Nvidia will announce its first-quarter results soon and its guidance will likely be more important than its actual first-quarter results.
The G7 meeting in Japan will be interesting this week. Germany is in disagreement with Britain and France over support for natural gas.
In fact, Germany has strived to label natural gas as “green.” In North America, we do not know what to do with all the natural gas that we have, which is why in North Dakota natural gas in their crude oil fields is “flared,” since there are no pipelines to transport natural gas.
So if California, New York, Britain and France succeed in curtailing natural gas usage, the excess natural gas will be increasingly flared and burned anyway.
I remain perplexed by the seemingly growing war against natural gas, especially since natural gas will be needed to make the hydrogen that the green folks are calling for as the fuel of the future. Currently, green hydrogen is cost-prohibitive.
Futile Carbon Capture
Speaking of carbon emissions, Alberta is burning as are boreal forests in Russia from thunderstorms. In Alberta alone, over 1 million acres have burned this year and caused 30,000 people to relocate.
The annual wildfires in Alberta often disrupt crude oil and natural gas production and 320,000 barrels per day of oil equivalent representing 3.7% of Alberta’s production were offline last week. The boreal forests in Alberta and Russia have ground characterized by peat, which is next to impossible to put out until snow falls on the forest floor.
As a result of an early start to the boreal forest fire season this year, 2023 will likely set the record for carbon emissions. Naturally, the G7 has no plan to squelch these seasonal forest fires, so the green police literally cannot see the forest through the trees.
ScienceAdvances published a study last year forecasting that the annual boreal forest fires in the Northern Hemisphere could release 12 gigatons of carbon dioxide per year into the atmosphere. Historically, forest fires have accounted for approximately 25% of global carbon emissions.
By comparison, the International Energy Agency said that carbon dioxide emissions from energy and industry globally hit a record of 36.8 gigatons in 2022 due to China, India and other emerging economies.
So for everybody worried about carbon dioxide emissions, which were not originally named in the Clean Air Act, the real problems are natural forest fires from thunderstorms as well as fossil fuels, especially coal, in emerging economies.
As a result, I am not sure the G7 or COP28 cannot do much to impact global carbon emissions. Naturally, I should add that a super volcano could also erupt and boost carbon emissions, so there is virtually nothing that mankind can do about it, other than to maybe tap into geothermal energy for electricity generation.
The Wall Street Journal had a great article about “carbon capture.” There is only one commercial power plant in North America, namely the Boundary Dam Power Station Unit 3 in Saskatchewan, Alberta, which is a coal-fired power plant that is fitted with a $1.1 billion carbon-capture system.
SaskPower said the benefits of operating a coal-fired power plant utilizing carbon capture are becoming less apparent, which is raising doubts about the Biden Administration’s goal of achieving carbon dioxide-free electricity by 2035.
The oil industry has been experimenting with carbon capture technology to recover more oil from existing wells, which is where much of SaskPower’s carbon dioxide is piped 36 miles to extract more crude oil from geological formations.
The only commercial-scale carbon capture plant in the U.S. was the Petra Nova coal-fired plant in Texas which closed after operating for three years in 2020.
Even if carbon capture can be perfected, the next corundum is, will it be profitable where there are no producing oil fields? As a result, the Biden Administration’s goal of shifting to hydrogen or carbon capture for electricity generation to eliminate carbon dioxide emissions looks futile.
Debt Ceiling: Sooner Than Later
California has historically become a boom/bust state for tax collections, since approximately 3,000 people pay the vast majority of the state’s taxes, especially from capital gains. As a result, California has gone from a surplus a couple of years ago to a big deficit nowadays.
Increasingly, the federal government has become more dependent on capital gains for tax revenue, but due to lackluster stock and real estate markets, it appears that the federal government’s debt ceiling deadline may occur sooner than later.
Interestingly, the Biden Administration canceled a second meeting with congressional leaders last Friday to debate lifting the debt ceiling. Officially, this delay will allow the White House and congressional staff more time to prepare for negotiations over the budget cuts that the Republican-led House of Representatives is demanding.
If a deal is not reached by June 1st, pension payments for federal retirees can be postponed and provide lawmakers more time to hammer out details. A partial government shutdown is also possible, which has happened in the past, but that is expected to be the last resort.
Treasury Secretary Janet Yellen in a Bloomberg interview said “If Congress fails to do that, it really impairs our credit rating. We have to default on some obligation, whether it’s Treasuries or payments to Social Security recipients.”
In Japan for a meeting of G7 finance ministers, Treasury Secretary Yellen said that the Biden Administration and congressional Republicans are making some progress in their budget negotiations. Specifically, Yellen said “I’m hopeful. I think the negotiations are very active. I’m told they have found some areas of agreement.”
In the wake of a cancelation of a meeting with congressional leaders, the Biden Administration is now trying to put a good spin on the budget negotiations, so the U.S. does not embarrass itself on the world stage. Apparently, our elected leaders can be shamed into doing their jobs, especially on an international stage like the G7.
CATL’s LFP Battery Patent Expires
The patent on China’s CATL’s iron-phosphate (LFP) battery has expired, so the big South Korean battery manufacturers, namely LG Energy Solution, Samsung SDI and SK On are all now developing LFP batteries that utilize no expensive cobalt, nickel or magnesium.
The advantage of LPF batteries is that they can be 100% charged, do not catch on fire and are cheaper. The disadvantage of LFP batteries is that they are heavier and lose range in cold climates.
Currently, LFP batteries are being used in cheaper electric vehicles (EVs) as well as energy storage (e.g., powerwalls). SK On so far has a head start on LFP batteries compared to its South Korean rivals. Since SK On has a big battery plant in Georgia to supply predominately Ford and VW Group, its LFP batteries could help make EVs more affordable.
Chinese consumers prefer LFP batteries and due to a glut of EVs in China, price wars have broken out, with BYD being the big winner. The other Chinese EV companies are now looking at exporting their EVs, since selling in China has become less profitable.
Longer-term, the threat of Chinese EVs with cheaper LFP batteries being exported to Europe and North America are expected to make domestic EV manufacturers nervous. Chinese EV sales rose 26% in the first quarter, while overall Chinese vehicle sales actually contracted 6.7%, so EVs now account for approximately 27% of China’s domestic vehicle sales.
Influential Retail
On Tuesday, the Commerce Department will announce retail sales for April. The U.S. consumer remains the driving force behind U.S. economic growth. Typically, consumer spending picks up in the spring and summer months, but spending on higher-priced durable goods, like appliances have been waning.
Currently, economists are expecting a 0.7% increase in April retail sales. Coincidently, the Atlanta Fed will update its second-quarter GDP estimate after the April retail sales report, since it is so influential.
Coffee Beans: Great Gathering of Kyles
A city named Kyle in Texas is calling on namesakes from around the world to help it break a record… for the largest gathering of Kyles, pitting them against the current record holders – Ivan. In 2017, a total of 2,325 Ivans gathered in the Bosnian town of Kupreski Kosci to claim the crown. Source: Sky News. See the full story here.
