In his podcast addressing the markets today, Louis Navellier offered the following commentary.
If you wish to listen to this commentary, please click here.
Energy Chaos In EU
British Prime Minister Truss resigned on Thursday, after only 44 days, since she was not able to deliver on the mandate that she was elected to implement. Obviously, Truss’ Conservative Party is in chaos and they do not want to declare an election, since the Labor Party would crush them from all the chaos.
Q3 2022 hedge fund letters, conferences and more
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At the heart of Britain’s immediate problem is that many citizens cannot pay their electric bills. Prime Minister Truss wanted to approve of fracking to boost domestic energy production, but she ran into massive opposition. It is very hard to manage any economy without reasonable energy costs, so the chaos in Britain is expected to persist until electricity costs decline.
I should add that France is facing massive labor strikes and protests over electricity costs and workers are demanding higher wages. The drought curtailed France’s nuclear industry as river levels dropped, so France became an energy importer when it has been traditionally an energy exporter.
France’s national grid operator warned that prolonged strikes have delayed restarting some nuclear reactors that could have “heavy consequences” this winter. Train service has been curtailed due to strikes and gasoline/diesel shortages are growing due to strikes at refineries.
These protests are being led by the opposition party to French President Emmanuel Macron, so an eventual resolution to France’s national strikes and protests may still be weeks away.
SPR Will Remain Depleted
President Joe Biden will address the nation to announce another big release from the Strategic Petroleum Reserve (SPR) that will persist through December in a desperate attempt to manipulate crude oil prices just ahead of the mid-term elections.
Representatives of Biden Administration have also signaled that they will start refilling the SPR when crude oil hits $70 per barrel. The truth of the matter is the Biden Administration is running out of ways to manipulate crude oil prices as they drain the SPR to 1980 levels.
Energy markets like to look ahead and (1) strong seasonal demand in the spring, (2) Europe is still striving to shore up its 2023 energy supplies and (3) a resurgence in China as well as other major economies will put more upward pressure on crude oil demand.
As a result, I do not expect that crude oil will hit $70 per barrel, so the SPR will remain depleted due to the Biden Administration’s mismanagement.
So far, companies in the S&P 500 have announced sales that are 1.1% higher than analyst estimates and earnings that are 5.7% higher than analyst estimates.
Musk Influence Waning
Former flagship Netflix Inc (NASDAQ:NFLX) resurged on new subscribers and positive guidance. Another former flagship, Tesla Inc (NASDAQ:TSLA) posted strong third-quarter earnings results, but Tesla’s third-quarter sales were slightly below expectations and its fourth-quarter sales will miss previously optimistic forecasts.
This caused Elon Musk to intervene and promised a very strong fourth quarter for Tesla, but Musk’s influence seems to be waning. Essentially, the current leadership of the stock market remains in disarray. Frankly, I am looking forward to how the stock market will respond to the energy stocks' record third-quarter results in the upcoming weeks.
No Rate Hikes After December?
The Commerce Department on Wednesday announced that new housing starts in September declined 8.1% to an annual pace of 1.439 million, which was below economists’ consensus estimate of a 1.475 million annual pace.
Multi-family homes were hit the hardest and declined 13%, while single-family home starts slipped 4.7% in September to an 870,000 annual pace. In the 12 months, housing starts have declined 7.7%.
Although high mortgage rates have impeded housing starts, building permits surprisingly rose 1.4% in September to a 1.564 million annual pace. So if there is some interest rate relief in 2023, housing starts could firm up.
The Labor Department on Thursday announced that weekly unemployment claims in the latest week declined to 214,000, down from a revised 226,000 in the previous week. Continuing unemployment claims in the latest week rose to 1.385 million compared to a revised 1.364 million in the previous week. Overall, the labor market is not expected to influence Fed policy.
Speaking of the Fed, the new Beige Book survey was released on Wednesday for its upcoming Federal Open Market Committee (FOMC) meeting in early November. The Beige Book survey noted that businesses have “growing concerns about weakening demand.”
Furthermore, the Beige Book survey cited that all of its 12 districts reporting declining activity cited “slowing or weak demand attributed to higher interest rates, inflation, and supply disruptions.” These dovish comments in the Beige Book survey are indicative that the Fed will likely stop raising key interest rates after its December FOMC meeting.
Coffee Beans
A power outage that affected 1,953 customers in Oregon was blamed on a single culprit: a squirrel. Last month, a squirrel was also blamed for about 10,000 customers in Virginia losing power in September when it came into contact with substation equipment. Source: UPI. See the full story here.
