S Market Briefing For Thursday, June 23, 2022

Glaring missteps by a Fed staying behind the curve for far too long before this year, set the stage. Now their zeal to curb inflation with 'their' power, risks toppling the stage further.


I say it thusly having believed we've already been in 'recession' for some time, and that by the time it is officially proclaimed, it will be past prime time to re-enter the market more optimistically.

Nevertheless none of it has been or is urgent, and typically the later Summer remains doldrums at best, or disastrous 'conceivably'. But so many see S&P valuations as so 'difficult', that one ponders whether most price cuts for stocks are behind. The answer varies, and depends on sector. For instance, for Oils, most gains are behind, not declines. For Semiconductors it's mixed, and for a slew of Retail stocks (like big-box stores), more downside is still feasible.

As to initiatives such as 'suspending Federal gas taxes', they might indeed be just a 'little bit of relief' (Biden's words, not mine), while suspending state gas taxes (such as in California) would make more of a dent.

The President referred to our 'strong economic recovery', true, but hindsight in a sense, as is any benefit from the stimulus subsidies, which contributed a lot to the inflationary condition that preceded the war and parts of Oil's rise. While we want to see the record domestic Oil production, we dispute the benefits of a continued release from the SPR (Strategic Petroleum Reserve). Rather any temporary increase in drilling deductibles or depletion allowance credits would help, although good luck getting anything like that approved. (Won't happen.)

We'll see if Chevron (CVX) keeps their tough clear-cut thinking on the table during a meeting with President Biden on Thursday, as hopefully President Biden will not persist trying to shift the entire blame to Putin, to the oil companies, greed or anything else. Unless he at least includes his Administration's intentional or politically-motivated (Green Deal) pressure that ignores the decades transition to true-reliance on alternative energy sources. During the President's talk, he again blamed Oil price rises on Putin. Sorry, it was already up 50% pre-war.


The market shrugged-off a sell-off, led by Oil and perhaps Asia currency issues.

During the President's talk, he did talk about new mass-transit facilities, and that's fine. Agree in the long-term. The only problem was ascribing the heart of the problem to a despised brutal autocrat, whereas that exacerbated the inflationary situations, for both food and fuel, but one can't ignore the profligate spending that got us to the situation, as well as the Fed standing way too far behind the curve too.

Want something new to worry about? Per the always scandalous tabloids of London, there's newly detected polio in both East and North London. First time in decades (since the 1980's), so we'll see if there's much too it. The Sun (a Murdoch paper) linked it to immigrants from Pakistan or Nigeria, but they really do not know at this point. Interesting time: pestilence, war and famine..

So, Biden's proposals of suspending Oil taxes won't help consumers much, but will blow a hole in the Highway Trust Fund, creating more need for greater Debt, which is just what the Fed's presumed to be trying to diminish. It implies that politicians haven't learned, and will do everything but live within means.

Personally I'm more concerned about 'refining capacity'. One of the big diesel fuel refiners (Pennsylvania) had a fire and remains shutdown, while the huge LNG facility (Texas) had an explosion (accidental?) and remains offline too. In this case the 'shots' taken at the oil companies is an allegation not holding lots of water, while I'm not a normal fan of huge oil versus independents, a reality in this situation is that the Ukraine situation tacks-on another buck a gallon at retail (roughly), but we were in a tight situation before.

Relieving gas taxes for now seems a limited (or partially lame) solution for the tight situation. What you need to do is increase (not deplete) the SPR, since it is early in Hurricane Season, and more capacity might be knocked-offline if a single major hurricane strikes the Texas-Louisiana coast, as is often possible.

By the way Congressional support for cutting Federal Gas Taxes is limited, in Democrat circles too. Putting the blame squarely in Putin's lap isn't resonating widely, and that's even as most Americans do attribute much of the recent rise in retail prices of oil products, and food, to the 'war' the wannabe Czar started. I stated this before: a more candid spreading of the causal factors, including in the case of food the drought and weather extremes, and simply demand as was rising before the war too. Also there is likely going to be an 'electric grid' problem this Summer (Texas is especially worried about that), and that's one more challenge that gov'ment hasn't adequately addressed, and likely won't.


The rebound structure persists, the only morning shakeout was an unexpected likely response to Asia, rather than a Fed Chairman testimony pre-release of a slightly hawkish text, since S&P futures were down hours earlier.

The testimony and the President's comments both relate to recession fears, at the same time neither leader will acknowledge we're already in a recession or the impact the 'excess' stimulus had on inflation which predated Putin's war.

This is an excerpt from Gene Inger's Daily Briefing, which typically includes one or two videos as well as more charts and analyses. You can subscribe for  more

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