August Oil & Main Street Game Theory

The coronavirus phenomena has so many implications and tentacles it is hard to keep track of them all; however, this article offers briefs on the amazing historical significance of recent oil prices and small business’s potential reaction to government “bailouts” which to us seem SO much more important than what currently pervades the news [0: corona! corona! corona!]. While oil and small business are mostly unrelated to each other, we simply touch on both topics together as “oddities of the covid” with the intention to give you some better focus and news than the “infectious disease & toilet paper” news which rules the sensationalistic mainstream media. As the Who would say, enjoy the “odds & sods”:

https://www.youtube.com/watch?v=-yZHveWFvqM

August oil futures…

[1]already made a 48% gain from the bottom, set just weeks ago. While that SOUNDS great, timing massive price swings is incredibly difficult — to borderline impossible. +48% makes for a nice headline, but does disservice to how hard it would be to make a gain anywhere near it. If you were an EXTREMELY gifted trader, you’d be “killing it” to make gain > 20% from oil’s price increase — particularly since you’d have to properly navigate treacherous contangos of futures markets. If you put that 20% goal up against the risks, however, you can understand why we continue to recommend staying FAR away from commodities like oil in such whip-sawed times. But our recommendation goes deeper than that, its rooted in the fact that we are rapidly approaching a time when most of your thoughts should center not around which beleagured financial assets to buy at firesale prices, but around a very important question for our collective generation:

“What is Money?” {Our treatise on the subject is here: sym.re/DgeqAPd [1] }

In deflationary collapses caused by massive money-printings (yes, we said this correctly and we’ll outline this truth in a future article) throughout history, the most important question citizens can ask, for protecting their capital, is written above, for how to obtain and store money. But back to oil…

A +48% gain in weeks; how big is that?

It’s a gain which mirrors the 48% gain the Dow Jones Industrial Average made off the crashed bottom in Nov 1929 thru April 1930. (something which the modern DJIA seems to be attempting as we write)

Spring oil achieved this stupendous gain much much quicker than 1929 stocks tho, and this makes sense [3: why it makes sense] since it correlates with the deeper drop:

2 months drop Oil 2020: (60)%

2 months drop Dow 1929: (48)%

Earlier this year, $forties oil prices would’ve been historically extremely cheap. But now, even with a really nasty front-months contango, $40 oil looks like it won’t be a thing again for quite a long time. We seem to have entered a more permanent LOWER price paradigm for oil. We continue to recommend caution, if not outright blocking, of speculating in oil at the current time — even after 2008 & 2016 oil price bottoms proved to be nice times to get involved with oil. [5: our earlier oil recommendations]

Oil: Tip of Commodities’ Deflationary Reaction to Money Printing

A quick check of other commodity futures shows similar effect. Corn is at a low unprecedented in history (and is a much older market than oil so food-commodity lows are even starker than oil’s).

Suspect this theme occurs in most commodities (more rigor on this in later articles), which is amazing when considering the bubble in wages in 1st world countries equals a massive tailwind for higher commodity prices (but a massive tailwind for commodity-business’s profitability, aka farmers, oil drillers, loans to commodity producers, etc…)

Money printing, when historians and economists look back >50 years of history, SEEMS like an action which leads to hyperinflation ruling the day. And it does! But only LONG term. Remember, economists and historians aren’t investment professionals so accuracy isn’t terribly important; therefore, they forget to account for the EARLY period after a money printing, when it does it’s first damage: A DEFLATIONARY COLLAPSE. We will write a more in-depth article about how money printing leads to massive deflation, in an important future article. But for now, let’s switch topics to a more important item related to the world-governments reactions to COVID-19.

Small Businessman Game-Theory Alive?

Small business loans promised by large governments [6 : “Main Street Lending Program”] pretending to help “Main Street” businessmen (think Gyms, Restaurants, Bars, the Sox Lady, etc…) are a ball and chain at this point. With FANG companies [7] taking over anything not nailed down to actual real estate, it’s much cheaper game-theory-wise to just hand back the keys to your small biz for COVID rather than go into debt with an interest-free loan. What is the loan for? To continue to pay employees and rent while generating no revenues? The small business loans are nothing more than a tax. Don’t pay for COVID now, start paying for our governmental mis-management and massive overreaction next year!

We don’t know if the “leadership” are plain-old fools, or foolish-enough to think “Joe Mainstreetforce Sixpack” are dim. We always like to make bets that Joe is quite crafty and clever — ESPECIALLY when it comes to money. We predict leadership will pay the price for these follies of policy in the future. Not sure WHEN tho. Whether soon or distant, it shouldn’t matter much to investors who own decent-sized stakes in opportunities like BitCoin Satoshi Vision & Snap Inc.

$SNAP is pushing $14 from a low of $8 just weeks ago.

#BSV has already DOUBLED since panicked short-term holders sold it all the way down to ~ $100, a > 75% discount from the January 14th 2020 high.

Oil: Avoid. Tune in much later.

Sox Lady: Still haven’t gone inside, but saving it for a special day!

Support your Small Businesses: If you value your favorite local small business and wish to prevent them from “handing back the keys”, get creative, break curfew (without endangering your elderly) if you must — but FIND A WAY TO GIVE THEM YOUR BUSINESS when they need it most! [8]

******************************************************************

Original first-draft April 13, 2020 by John Pitts

Handcash handle: $JOHNPITTS

Money Button Paymail: Pitts@moneybutton.com

RelayX Paymail: PiZeroOne@relayx.com

Twetch: u/@462 “John Pitts”

Twitter:@EquityDiamonds

CREDITS:

[0] Like Jan Brady’s disgust with too much Marsha, we too are quite tired of the repetitive dramatic puking of largely politicized health-related news seemingly designed the scare the Dickens out of everyone.

[1] We use this website for oil futures prices & charts: https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude.html. We use August oil is used to remove any contango effects from the return percentages — as well as extreme front-month volatility.

[2] Link courtesy of the great sym.re URL shortener service by Gal Buki: sym.re/create

[3] If you’re not familiar with our “Pitts Uncertainty Principle” (named in respectful nod to Heisenburg’s beautiful math pertaining to quantized physical dimensions) Pitts’s Uncertainty Principle of Investing: The more secure you feel about the TIMING of your investment, the more volatile the PRICE will be. The more smarmy you are about the PRICE you paid for an investment, the LESS likely you are to be paid quickly.” https://sym.re/CqFMMYR

[4] DJIA chart 1929–1930: http://www.mybudget360.com/bear-market-rallies-beware-the-siren-call-of-volatile-economic-markets/

[5] Oil of Ohey! March 5, 2020: https://medium.com/@EquityDiamonds/oil-of-oh-hey-f796309c9aa6 Quote: “West Texas Intermediate (“WTI”: our typical barometer for oil prices in the US) is trading between $45–47. While you might not think this is cheap compared to many historical prices, you’d be wrong.”

[6] Been informed by Amazon warehouse employees that it’s “Xmas in the Spring” level of activity at shipping centers. Betting Netflix isn’t doing so bad either — in terms of viewing-hours (not cash flows, those are awful).

[7] : “Main Street Lending Program” https://www.businessinsider.com/federal-reserve-trillions-coronavirus-relief-package-small-businesses-municipal-governments-2020-4 “The central bank extended $600 billion in loans through its Main Street Lending Program to small and medium-sized businesses”

[8] We’ll show you ours, if you show us YOURS in the comments… https://www.lovebirdpa.com http://www.honeyrestaurant.com https://organnons.com

Recommends the BEST equities (“Diamonds”) WHEN they are (“in the Roughage”) at the lowest price to achieve the highest long term gains.

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