The Investment Thread

[UpandIn]

On 9/22/2022 at 5:11 PM, LouisEly said:

Not everyone who puts a property on the market has to sell.  Sometimes it's a "make me move" number.

Especially, as he said, if it's an investment property. If you're making money on it, you can put it up on the market and leave it there for a while. I imagine that'd be very frustrating if you are looking for a house, but you're going to get hit on taxes, you've put in a whole lot of sweat equity, you've dealt with...unpleasant tenants. 

[Fear The Chorizo]

The Fed is definitely going to have to rethink its rate hike if oil goes north of $110 a barrel.

The only way it won't is if the global economy craters despite all the artificial propping up that is already happening.  I saw where some European countries are printing out money to reimburse businesses who can't make enough money to survive selling the goods/services that have had price controls implemented to try and curb inflation on the consumer end.

If what you mean is the Fed should increase the monthly rate hikes as oil starts inevitably surging this fall (at a time of year when it typically drops, by the way), than I'd agree with you.  At some point there needs to be an acute correction in either domestic energy policy and refining capacity to dramatically increase supply, or significant rate hikes that dramatically drive down demand to get things back to a sustainable and less volatile point.  Most likely both need to happen but unfortunately neither probably will anytime soon, making the problem bigger and more painful to dig out of whenever these changes finally do get implemented.  It isn't just for gas and diesel to fuel vehicles and transport goods, btw...it's all the other goods and materials that require oil as a raw material to produce. 

 

[homer]

14 hours ago, nate82 said:

The $4 gas prices were nice while they lasted. Should see an increase at the pump around December with OPEC now deciding to cut production.

Probably will see gas prices around $5-6 as an average starting in December.  The Fed is definitely going to have to rethink its rate hike if oil goes north of $110 a barrel.

Depends where you live. Great Lakes probably won't be impacted by the OPEC thing.

 

 

[owbc]

OPEC did not vote to directly cut production, they cut the production cap by 2 million barrels/day which still leaves current production 1 million barrels/day short of the cap. It was more of a symbolic vote than something that will actually move the needle too much. 

The Russian oil is still making it to market and probably will continue to do so. 

 

[Fear The Chorizo]

45 minutes ago, owbc said:

OPEC did not vote to directly cut production, they cut the production cap by 2 million barrels/day which still leaves current production 1 million barrels/day short of the cap. It was more of a symbolic vote than something that will actually move the needle too much. 

The Russian oil is still making it to market and probably will continue to do so. 

 

So is the million or so barrels a day being siphoned out of the strategic petroleum reserve that kept prices from going much higher earlier this year - that looks to continue at least until early November when the election ends and the reserve is down to a pretty precarious level and is no longer an option to keep drawing from.  This has been going on for ~6 months already, and there hasn't been anything proactive done to improve supply and prevent another price jump when it has to stop and the reserve actually needs to be replenished (putting even more strain on worldwide demand).  Having OPEC state they are reducing the cap on their production is a shock to the market, maybe not immediately spiking oil prices everywhere but inevitably it will.

Yesterday's announcement of pulling another 10 million barrels of oil from the reserve into November would put us right at November 10th or 11th on the calendar - ironic to nobody I would hope.

The biggest problem with OPECs production cap is it's too low to satisfy global demand when non-member countries are not producing close to the levels they're capable of.  Combine that with the fact the US currently has sanctions on several prominent members, any sort of OPEC-wide production cap decrease stings.  It's more complex, because limited refining capacity is also a huge factor in this (countries could pump like crazy and refineries wouldn't come close to matching an increased output of finished petro products even if they wanted to).

I don't think oil prices will go insanely high, because the global recession is going to do a decent job of squashing demand - which is a really sucky way for gas prices to stagnate between $4-$5 a gallon indefinitely.

[owbc]

The purpose of the strategic reserve is to buy low and sell high, so I don't have a problem with it. 

I do think we've made some terrible strategic decisions in this country when it comes to handing the transition between fossil fuels and renewables. We haven't been as dumb as Germany at least, but we haven't ramped up renewables and EVs fast enough to compensate for dwindling investment in oil production. 

Personally I'm happy that I don't buy much gas anymore, because I agree that the price is probably never going below $4-$5 again except maybe in this nasty recession which is now inevitable. 

 

[GAME05]

Biden has also lifted a bunch of sanctions against Venezuela, so we'll be buying their oil soon enough. I'm sure we can still expect a spike in prices, but maybe not a terribly drastic one.

[nate82]

1 hour ago, GAME05 said:

Biden has also lifted a bunch of sanctions against Venezuela, so we'll be buying their oil soon enough. I'm sure we can still expect a spike in prices, but maybe not a terribly drastic one.

The oil would actually have to get here which has been a problem with Venezuela.  Lots and lots of leaks.  If you are an environmentalist you would rather have the oil extracted here than in Venezuela.

Basically if there is a leak in Venezuela it doesn’t get repaired it just leaks.  As long as there is some oil coming in they are not going to shut it down.

Venezuela is basically an environmental disaster at this point.

[Fear The Chorizo]

1 hour ago, GAME05 said:

Biden has also lifted a bunch of sanctions against Venezuela, so we'll be buying their oil soon enough. I'm sure we can still expect a spike in prices, but maybe not a terribly drastic one.

Not that Venezuela did anything to deserve getting sanctions lifted, but maybe it shaves 25 cents a gallon off at the pump for a few more weeks...SMH

Also, Venezuela and Russia are among the heaviest polluters when extracting oil due to both poor system controls (venezuela) and having oil that is dirtier/nastier to refine (russia).  Its just sad things have gotten to where they are when there is a much better option domestically.

[homer]

The Keystone pipeline that was axed would not have been online until 2023 and many oil companies cut production on their own accord when demand fell off a cliff during the pandemic. I think the Venezuela thing was allowing Chevron to up their production.

[Fear The Chorizo]

1 hour ago, homer said:

The Keystone pipeline that was axed would not have been online until 2023 and many oil companies cut production on their own accord when demand fell off a cliff during the pandemic. I think the Venezuela thing was allowing Chevron to up their production.

2023 is 2 months away, so it'd be pretty nice having Keystone as an option to help with increased domestic demand right about now without leaning on OPEC, to be sure.

And yes, oil companies cut production on their own when demand was intentionally squashed 2.5 years ago due to COVID, and many drilling operations actually went under because of it.  In March of 2020 when domestic demand cratered, there was a proposal to buy and add almost 80 million barrels of oil to the strategic petroleum reserve to bring it to its storage capacity when oil was hovering around $35/barrel and the reserve had about 635 million barrels stored.  That proposal was blocked by Congress stating it was a $3B bailout to oil and drilling companies.  That amount of oil would cost about $7.5 billion to buy now and add to a reserve that's headed below 400 million barrels for the first time since 1984, if it hasn't already dropped below that point.  Demand has been steadily growing since then, but domestic producers really haven't been able to react to it and frankly have zero incentive to do so.  Oil and drilling companies have also been hamstrung in search of financing to conduct exploration or bring new wells online for the past 20 or so months.

[homer]

Presidents can't really impact gas prices. People have been blaming the president for spikes in gas prices since GW Bush.  They can't cause them to spike and they certainly can't cause them to drop five weeks or so before midterms (I guess they could if they waged war on Canada). Gas prices are very complex mechanisms and vary greatly from region to region and state to state. A lot of gas price fluctuations in the US are tied to refinery issues or non issues and state taxes/regulations.

We actually are producing a LOT of oil right now and even with Covid we produced a LOT of oil - more in 2020 and 2021 than 2018:

https://www.eia.gov/outlooks/steo/report/us_oil.php

• U.S. crude oil production in our forecast averages 11.8 million barrels per day (b/d) in 2022 and 12.6 million b/d in 2023, which would set a record for the most U.S. crude oil production during a year. The current record is 12.3 million b/d, set in 2019.

We produce enough domestic oil to meet all our consumption needs but we are unable to refine all of it hence why we export so much. It has very little to do with environmental policy or lack of drilling.

Quote

Most of the oil produced in the U.S. fields in Texas, Oklahoma, and elsewhere is light and sweet, compared to what comes from the Middle East and Russia. The problem is that for many years, imported oil met most of the U.S.’s energy needs, so a large percentage of the refining capacity here is geared towards dealing with oil that is heavier and less sweet than the kind produced here.

https://www.nasdaq.com/articles/america-produces-enough-oil-to-meet-its-needs-so-why-do-we-import-crude

Had we thought about it 30 or 40 years ago we probably could have built a bunch of new refineries but that didn't happen and it was because of a lack of foresight from both parties....or because having other countries rely on us for oil gave us some kind of leverage.

[MrTPlush]

On 9/23/2022 at 9:21 PM, wallus said:

Unless you own another place or have one lined up "make me move" in this market is pretty risky.

I wouldn't call it risky. You can get all the offers in the world and not have to accept them. If someone sends in a crazy good offer, you can then just go try to find a house at that point. Pretty much no realtor is going to contractually obligate you to accepting a list price+ offer. 

Though if you are going to go such a route it is best to let your realtor know so you don't tick them off and make them feel like they are wasting their time. 

[GAME05]

Along with Keystone, Biden also halted leases for exploration and drilling on federal land and stopped much of the environmentally sensitive drilling in Alaska. Certainly the results of that take two years, but gas prices are speculative and not based on immediate supply, so a president does effect prices. The EPA has become harder to work with for oil companies, plus when an incoming president says "We're going to get rid of fossil fuels" and "We're going to phase out fossil fuels" that effects investment and prices. 

My biggest beef with politicians of all sorts is they tout their country going greener, but from what I've seen they don't so much replace existing generation with alternatives, but rather they just have some other country make the mess for them. 

[owbc]

1 hour ago, GAME05 said:

Along with Keystone, Biden also halted leases for exploration and drilling on federal land and stopped much of the environmentally sensitive drilling in Alaska. Certainly the results of that take two years, but gas prices are speculative and not based on immediate supply, so a president does effect prices. The EPA has become harder to work with for oil companies, plus when an incoming president says "We're going to get rid of fossil fuels" and "We're going to phase out fossil fuels" that effects investment and prices. 

My biggest beef with politicians of all sorts is they tout their country going greener, but from what I've seen they don't so much replace existing generation with alternatives, but rather they just have some other country make the mess for them. 

Remember, the previous president basically said "drill baby drill" and it still didn't happen. 

Anyway, we did this to ourselves and I have zero sympathy. By "this" I mean that we let global capitalism run free without any concern to the consequences. I could list a dozen examples but the most obvious one is that when vehicles got more efficient we took all of that efficiency and turned it into massively large trucks and SUVs at a time when gas prices were relatively cheap. We did it because it was "what consumers wanted". Now consumers want low gas prices for their huge vehicles and the gas prices will never be low again because the price is set on the global market and every country in the world is trying to get cheap oil.

Nobody wants to invest in more drilling or refinement--again, the ship has sailed. You can't retrofit refineries for cleaner energy like they did with coal power plants. Meanwhile, the price of lithium is going to soar and there is a huge amount of money to be made investing in mining and processing EV battery components.

We'll be thanking ourselves times a million in a decade that we took a hit right now and finally gave EVs the kick they needed to take off. And from the consumer perspective it's a pretty obvious decision to buy a fuel efficient vehicle or an EV at this time. I saw that regular gas was back to $5.50 this morning and I laughed as I drove by the gas station in my EV. 

I didn't even have to mention "climate change" for the above to be true, but once the climate impacts start getting really bad in the 2030s-40s the push for green energy is only going to be more massive than it currently is. 

[nate82]

5 hours ago, owbc said:

Anyway, we did this to ourselves and I have zero sympathy. By "this" I mean that we let global capitalism run free without any concern to the consequences. I could list a dozen examples but the most obvious one is that when vehicles got more efficient we took all of that efficiency and turned it into massively large trucks and SUVs at a time when gas prices were relatively cheap. We did it because it was "what consumers wanted". Now consumers want low gas prices for their huge vehicles and the gas prices will never be low again because the price is set on the global market and every country in the world is trying to get cheap oil.

You are getting consumerism and capitalism mixed up.  Capitalism has nothing to do with "what consumers wanted".  That is consumerism it is basically the definition of consumerism.  

Well obviously everyone wants to get cheap oil no one wants expensive oil.  

5 hours ago, owbc said:

Nobody wants to invest in more drilling or refinement--again, the ship has sailed. You can't retrofit refineries for cleaner energy like they did with coal power plants. Meanwhile, the price of lithium is going to soar and there is a huge amount of money to be made investing in mining and processing EV battery components.

It is not that no one wants to invest in more drilling or refinement it is that it is very prohibitive to do so.  All of the large banks in the US will not finance any company for more drilling or refinement.  The large banks won't fund any alternative fossil fuels which includes methane and other natural gas.  Methane and other natural gasses would be a better option over diesel.  This would then replace the heavy machinery and long distance semi-trucks.  

The US financial industry and government is stuck in this green energy for everything but they can't see one inch past their noses due to only seeing one way to get to an outcome.  Also forget nuclear which at least one country is doing that correctly in France.  The US already outpaces nearly every country in green energy (solar and wind).  If you look at France's energy production you will see the majority of it comes from nuclear and the rest from everything else.  France actually has a rather low solar and wind output.  

5 hours ago, owbc said:

We'll be thanking ourselves times a million in a decade that we took a hit right now and finally gave EVs the kick they needed to take off. And from the consumer perspective it's a pretty obvious decision to buy a fuel efficient vehicle or an EV at this time. I saw that regular gas was back to $5.50 this morning and I laughed as I drove by the gas station in my EV. 

I don't believe we will be it is just replacing one problem with another.  The kicking the can down the road a bit further.  The batteries will have a shelf life on them and once that shelf life is hit what do you do with the batteries?  Car accidents are still really high in the US.  What happens to the batteries when they are damaged?  You have to replace those batteries along with the car.  

While the batteries can be recycled only about 5% can be fully recycled which feels like a real waste.  The process to recycle the batteries is also extremely hard.  Getting 5% back in recycling sounds like you are going to create more pollution than you will be saving.  It also looks to be very costly to recycle these batteries which means there won't be many companies doing this as the benefit will just not be there.  That means these factories will be over seas where environmental standards will be very relaxed.  Probably India, Pakistan or Venezuela sound like perfect homes for these recycling plants to operate.  There are basically no environmental protections in these countries.  I am going to assume these batteries are going to be buried somewhere or thrown into the ocean.  

Any benefit that will be gained from going to EV is going to be destroyed by the batteries that the EV's run on.  

I am not sure why people hate having more than one option to solve a problem.  Having a mixture of cars, trucks and other vehicles running on a mixture of different things will help the environment out more.  Methane and hydrogen need to be looked into more in powering vehicles but both get very little attention.  It is just EV's or nothing when it should be a combination of all these options.  Just like in investing it is never a good idea to place everything into one thing spread it out and you will decrease your risk.  

[wallus]

10 hours ago, MrTPlush said:

I wouldn't call it risky. You can get all the offers in the world and not have to accept them. If someone sends in a crazy good offer, you can then just go try to find a house at that point. Pretty much no realtor is going to contractually obligate you to accepting a list price+ offer. 

Though if you are going to go such a route it is best to let your realtor know so you don't tick them off and make them feel like they are wasting their time. 

Using that logic, everyone should just have their house listed all of the time. Why not right?

[MrTPlush]

2 hours ago, wallus said:

Using that logic, everyone should just have their house listed all of the time. Why not right?

I mean…no. If you have zero interest in moving why would you? You could offer me 20% over the value of my house and I wouldn’t sell it to you. Maybe for 50% over I might. I think ‘make me move’ is kind of dumb…not sure it really works nor is it anywhere near common.

Not sure what it has to do with your comment though. You said it was risky in this market unless you had a place lined up already. I just don’t really think that is the case.

[wallus]

10 hours ago, MrTPlush said:

I mean…no. If you have zero interest in moving why would you? You could offer me 20% over the value of my house and I wouldn’t sell it to you. Maybe for 50% over I might. I think ‘make me move’ is kind of dumb…not sure it really works nor is it anywhere near common.

Not sure what it has to do with your comment though. You said it was risky in this market unless you had a place lined up already. I just don’t really think that is the case.

Uh no, there is risk because there are only so many buyers in this area with the kind of money that would buy your very expensive house. You say no after having it on the market for over 6 months to an offer that is at ask or over ask, you won't get that buyer again.  That buyer will move on or just build their own house and say go pound sand. There is absolutely risk and saying otherwise is not understanding the basics of buying and selling.

Yes I said you would need another place lined up because you need somewhere to live if you sell your only house. I mean you could live in a hotel for a while but that would be pretty dumb.

[MrTPlush]

15 minutes ago, wallus said:

Uh no, there is risk because there are only so many buyers in this area with the kind of money that would buy your very expensive house. You say no after having it on the market for over 6 months to an offer that is at ask or over ask, you won't get that buyer again.  That buyer will move on or just build their own house and say go pound sand. There is absolutely risk and saying otherwise is not understanding the basics of buying and selling.

Yes I said you would need another place lined up because you need somewhere to live if you sell your only house. I mean you could live in a hotel for a while but that would be pretty dumb.

So where is the risk? The buyer is gone, so what? Buyers come and go. You could scare them off for life and it won't matter. If you don't care if you move or not...it really doesn't mean much. You just stay home, problem solved. The only issue I could see is if you sit your house on the market for 6 months not caring if you move and then all of a sudden you have to move for some unexpected reason. Then your house recently failed to sell for half a year in a hot market and it is going to make people assume there are a bunch of issues with it. Though, even then, I can't imagine it being a huge hurdle once your realtor explains it to prospective buyers agents. 

Real risk is buying a house while still owning one and the purchase isn't contingent on your current house selling. That is a true mess and I have seen it play out a few times around me the last few years. People think their house will easily sell for what they expect and something quirky about the house makes it difficult. 

The entire concept is kind of dumb though. The odds someone "makes you move" is just not likely at all and not worth the hassle. Not sure where such a thing would happen...but probably not Wisconsin.

[wallus]

8 minutes ago, MrTPlush said:

So where is the risk? The buyer is gone, so what? Buyers come and go. You could scare them off for life and it won't matter. If you don't care if you move or not...it really doesn't mean much. You just stay home, problem solved. The only issue I could see is if you sit your house on the market for 6 months not caring if you move and then all of a sudden you have to move for some unexpected reason. Then your house recently failed to sell for half a year in a hot market and it is going to make people assume there are a bunch of issues with it. Though, even then, I can't imagine it being a huge hurdle once your realtor explains it to prospective buyers agents. 

Real risk is buying a house while still owning one and the purchase isn't contingent on your current house selling. That is a true mess and I have seen it play out a few times around me the last few years. People think their house will easily sell for what they expect and something quirky about the house makes it difficult. 

Opportunity Cost is the Risk. 

Not sure how your realtor explaining that they weren't seriously interested in selling is going to help sell that house that's been on the market for 6 months because they have to sell now. I hear that and I think I am going to use every piece of leverage to get this house for as low as possible.

[owbc]

20 hours ago, nate82 said:

I don't believe we will be it is just replacing one problem with another.  The kicking the can down the road a bit further.  The batteries will have a shelf life on them and once that shelf life is hit what do you do with the batteries?  Car accidents are still really high in the US.  What happens to the batteries when they are damaged?  You have to replace those batteries along with the car.  

While the batteries can be recycled only about 5% can be fully recycled which feels like a real waste.  The process to recycle the batteries is also extremely hard.  Getting 5% back in recycling sounds like you are going to create more pollution than you will be saving.  It also looks to be very costly to recycle these batteries which means there won't be many companies doing this as the benefit will just not be there.  That means these factories will be over seas where environmental standards will be very relaxed.  Probably India, Pakistan or Venezuela sound like perfect homes for these recycling plants to operate.  There are basically no environmental protections in these countries.  I am going to assume these batteries are going to be buried somewhere or thrown into the ocean.  

Any benefit that will be gained from going to EV is going to be destroyed by the batteries that the EV's run on.  

I am not sure why people hate having more than one option to solve a problem.  Having a mixture of cars, trucks and other vehicles running on a mixture of different things will help the environment out more.  Methane and hydrogen need to be looked into more in powering vehicles but both get very little attention.  It is just EV's or nothing when it should be a combination of all these options.  Just like in investing it is never a good idea to place everything into one thing spread it out and you will decrease your risk.  

The truth is that in order to hit the CO2 emission targets, there needs to be BOTH electrification of the vehicle fleet AND at least a 30% reduction in miles driven. So you're right in that we can't just swap in EVs and call it a day. And I also agree that the battery supply + battery waste are going to become issues, especially as time goes on. 

Methane still releases a ton of CO2 so it will only be useful in limited applications. Hydrogen is intriguing but producing the hydrogen without releasing CO2 is challenging. I would imagine both of those getting used in some settings for trucking/heavy machinery. 

Nuclear...again, I agree that we should be doing way more nuclear than we are right now. But the truth is that right now it's cheaper to do wind and solar than build new nuclear. At least we have delayed closing down some nuclear facilities...that's a small win. 

Otherwise, I don't know what to say. The political dilemma is that we need massive CO2 emissions reductions while not making people feel like the quality of life has been disrupted. So EVs it is. 

In other news, did anyone else see PepsiCo's earnings report? Increased revenue and profit despite a decrease in sales. Sure adds fuel to the argument that inflation is mostly corporate price gouging. 

[nate82]

8 hours ago, owbc said:

Methane still releases a ton of CO2 so it will only be useful in limited applications. Hydrogen is intriguing but producing the hydrogen without releasing CO2 is challenging. I would imagine both of those getting used in some settings for trucking/heavy machinery. 

Methane should be less harmful in the long run than diesel and also should be less expensive and shouldn't hurt the environment as much as drilling for oil.  There is a lot of methane that can be extracted in the US.  The goal is to have as many options as there can be.  I think semi-trucks would be the first ones to convert.  Convert about 20% of the long haul semi-trucks to methane or another cleaner burning source and the environment will be better off.  

The economy will still need to move goods around and while trains would be a better option it would take a lot of money to restructure all of the rail in the US to be electric like most of Europe and Japan.  There hasn't even been an estimate for this yet it will probably be in the 100's of billions of dollars.  I think California is just about to finish or has finished its electric rail and that cost about $5b and I think that is just for commuter train.  The real benefit isn't in a commuter train it is in freight.  

Some estimates have freight trains if the US could convert to electric would be something like saving $94b over a few decades.  I am not sold on that figure and if it only saves $94b that is a huge cost to take under.  I think a conservative estimate would be something like $500b to fully convert all of the US railway to electric.  That would include creating new power plants to help cover this new electrical demand.  So that amount could increase even more but this would be the chance to add some more nuclear facilities.  We are already spending way to much why not just go all in and redo all of the railways in the US and add a few new nuclear facilities while we are at it.  There are a lot of programs that can be gutted to do this and only increase the budget by a small amount.  Basically just stop spending 2x as much as Russia and China combined on the military and that should cover this.  Also just stop sending money to other countries either through aid or military equipment.  

[Fear The Chorizo]

Otherwise, I don't know what to say. The political dilemma is that we need massive CO2 emissions reductions while not making people feel like the quality of life has been disrupted. So EVs it is. 

Until the two most populous countries feel like wanting to play the green energy game it frankly doesn't matter much. China currently has roughly 1,100 coal plants operating with more coming online, and India has 285 with many more in the works.  US currently has about 240 plants and declining, at the moment. 

Huge populations and demand for energy are big factors for all that fossil fuel generating capacity, to be sure....but in the case of China so is the fact it's solidly the manufacturing capital of the world, and that includes most of the components used to actually generate green energy like solar panels, wind turbine components, batteries, etc.  

Transportation does indeed create CO2 emissions, and there are ways to at least keep that total amount constant across an increasing population by constantly improving ICE emissions and getting more EVs and other options on the road - but heavy manufacturing and construction industries lean on fossil fuel energy and will continue to do so longterm.  I think a solid alternative may be to pursue increased nuclear generating capacity for manufacturing hubs.

[MrTPlush]

First you have to make alternative energy to be the cheaper option and convenient. Let's be honest, no one cares about helping the environment if it isn't saving them money...especially on expensive purchases. Spending money (extra than you would otherwise) to help the planet is a niche market. That or to have a status symbol, like a Tesla. 

I own a plug-in hybrid because it gives me 45mpg to work and 999mpg for most everything else. Whether or not it helps the environment is kind of just a bonus if it does that. 

I don't think EV/Hybrids/PHEVs are that expensive, but they are to someone who is considered true middle class or lower. Most of these vehicles are priced up around what a limited trim is. Most manufacturers aren't releasing true base models with hybrid+ capabilities. Of course, now that they fudged the tax credits that really just makes them pretty crappy priced across the board.