Call this bookkeeping to make sure everYone is on the same page.Yesterday and today I made two picks for me Special Report on the 3 energy crises for the NOW stage in this crisis: BEPC and LNG. Here’s what I wrote:
You don’t need the Department of Energy or the Energy Information Administration to tell you we have an energy crisis. (Good thing since they’re shut down with the rest of the Federal government today.) All you need to do is look at your electricity bill. This summer monthly home electric bills jumped in Trenton, New Jersey, for a typical home by $26. In Philadelphia, it increased about $17. And in Columbus, Ohio, it spiked $27. And your monthly bill doesn’t capture the full damage. In California,residential electric rates are up 62% in five years. In Maryland residential rates are up 54% in five years. Most frustratingly–and most importantly for investors–those bills don’t explain the nature of the crisis.
Or more accurately “crises.” Because we’re the middle of three, overlapping and interlocking energy crises. That are playing out on different timeframes that range from NOW to the next 5 to 10 years. It’s that last point that’s critically important for investors. Because to make money–and let’s be clear: like in all crises there’s money to be made investing in these three crises–you’ve got to understand the nature of each crisis and buy into it at the right time. Not so early that you sell in disappointment because your profits haven’t arrived yet. Not so late that all themes tasty profits are gone. This Special Report is about untangling the 3 energy crises, giving you a timeline for investing in each, and then calling out 10 picks you cause to profit from theses crises. Ya, ready?
Today’s video is Is Wall Street ready to write off 2025? I’m seeing a gradual move on Wall Street from “Trump doesn’t mean what he’s saying about tariffs and mass deportations” to “Maybe he is serious.” On Monday, Trump announced 25% tariffs on steel and aluminum with a starting date of March 4, on top of other tariffs already announced. You can see the shift in commentary from big banks like Bank of America and JP Morgan. These companies are now saying that things that will negatively affect growth are happening much more quickly than things that will support the stock prices. New tariffs and economic uncertainty, which has caused the Fed to refrain from cutting interest rates, are happening now and will be hitting the market. Tax cuts and deregulation, which could goose growth, will take longer to implement and we may not feel those positive effects until 2026 or later. Wall Street is basically saying that 2025 will be a year of negative risks, but 2026 may be more of an upside if tax cuts and deregulation do, indeed, happen.
Today’s video is the Fed is between a rock and a hard place. Inflation has been stuck around 2.8% and the Fed would like to get it down to 2%. In January, the Fed paused any movement on interest rates but Wall Street remained hopeful for two cuts in 2025. The March 19 meeting will include a dot plot that will outline whether or not the central bank is thinking about any cuts for 2025. The problem is the Fed doesn’t know where the economy is going. There are too many uncertainties surrounding constantly changing Trump tariffs as well as the expected tax cut bill (which will result in higher yields and a market and economic stimulus). The budget also remains an unanswered question. These uncertainties, with the Fed also under huge political pressure from the Trump administration to make interest rate cuts, catch the Fed between a rock and a hard place and we won’t know how the Fed plans to address its dilemma until March.
In December U.S. economy in December added the most jobs since March and the unemployment rate unexpectedly fell. Nonfarm payrolls increased 256,000, exceeding all but one forecast in a Bloomberg survey of economists. The unemployment rate fell to 4.1%, while average hourly earnings rose 0.3% from November, a Bureau of Labor Statistics report showed Friday. For 2024 as a whole, the economy added 2.2 million jobs—-below the 3 million increase in 2023 but above the 2 million created in 2019. The data almost certainly assured that the Federal Reserve would not cut interest rates at its January 29 meeting. As of 11 a.m. New York time, the yield on the 10-year Treasury had climbed another 5 basis points to 4.74%.
China’s consumer price index rose 0.1% in December from a year earlier, in line with the median forecast of economists surveyed by Bloomberg. Factory deflation extended into a 27th month, though the producer price index recorded a slower drop of 2.3%, the National Bureau of Statistics said Thursday. For the full year, consumer prices only inched up 0.2% from 2023, well short of the 1.1% gain economists had predicted at the beginning of 2024.
In minutes from the Federal Reserve’s December 17-18 meeting released on Wednesday, January 8, Federal Reserve officials clearly decided to move more slowly on cutting interest rates in the quarters ahead. “Participants indicated that the committee was at or near the point at which it would be appropriate to slow the pace of policy easing,” minutes from the Federal Open Market Committee showed. “Many participants suggested that a variety of factors underlined the need for a careful approach to monetary policy decisions over coming quarters.” Please note the reference to “quarters” and not “months.”
The 20-year Treasury bond, a laggard on the government debt curve since its re-introduction in 2020, topped 5% Wednesday for the first time since 2023. The move looks to be fueled by concern that President-elect Donald Trump’s policies on tariffs and tax cuts will lead to wider deficits and rekindle inflation.
The Institute for Supply Management’s index of services advanced 2 points to 54.1 last month. That show of strength in the economy–readings above 50 indicate expansion–was enough to push stocks lower as the markets began to price in a delay in the next interest rate cut from the Federal Reserve until July The measure of prices paid for materials and services rose more than 6 points to 64.4, suggesting that the drop in the inflation rate in the service sector–about 70% of the U.S. economy–might be over.
And on the subject of natural gas.
On Wednesday, January 1 Russian energy company Gazprom said it was no longer sending gas across Ukraine because that country had decided it would not renew a deal allowing Russian gas to transit its territory. The action ends an energy supply route that dates back some 60 years.
About 5% of the supply of Europe’s natural gas flows through Ukraine. Despite the ongoing Russian invasion,Ukraine had continued to allow Russian oil and gas to cross its territory to serve its European neighbors. That generated revenue for Kyiv and Moscow to use in funding that war. This moves comes as the United States is facing a major cold wave that could persist into mid-January
On Monday, December 9, I added Cheniere Energy (LNG) to my Special Report “10 New Stock Ideas for an Old Rally” and added it to my Jubak Picks Portfolio. Here’s what I wrote then:
Today’s Quick Pick is Cheniere Energy, (LNG). Cheniere liquifies natural gas and sells it globally. The stock is up about 32% YTD. The company is about to put seven more units of natural gas production on line, and it looks like they’ll be selling and distributing that gas, as scheduled, by the end of the year. This will mean more revenue from an actual plant producing more LNG, not the idea or a theory that more gas will maybe be put out soon. The incoming Trump Administration will be light on regulation for natural gas and there is rising demand from data centers looking to guarantee their own energy needs. I already own the stock but if I didn’t I’d certainly be adding it to my portfolio right now.
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