Confessions from an Economic Hit Man
“The asset purchases that we're doing are a multiple of the programs that were done during the last crisis” - Fed Chair Jerome Powell
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Markets responded to the blockbuster - the S&P 500 closed up >3%.
WTI and E&P equities closed up 8% & 10%, respectively.
*And F. A. Hayek rolled over in his grave*
We watched the exchange in disbelief:
Scott Pelley: “Fair to say you simply flooded the system with money?”
Jerome Powell: “Yes. We did. That's another way to think about it. We did.”
Pelley: “Where does it come from? Do you just print it?”
Powell: “We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds for other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Reserve banks”
A confession from an economic hit man…
The back & forth of the interview was reminiscent of a serial killer - walking into a police station - and turning himself in.
As if Ed Kemper had an out-of-body experience in Jerome Powell’s seat at the Fed -
“The original purpose was gone. It wasn't serving any physical or real or emotional purpose.”
“Toward the end, I started feeling the folly of the whole damn thing, and at the point of near exhaustion, near collapse, I just said to hell with it and called it all off” - Kemper (response to “why?”)
Powell could’ve said those exact words.
Would’ve fooled us…
Kemper pleaded insanity.
Eventually, Powell will do the same -
The 30,000 foot view of E&P production data is that shale forecasts are not to be blindly trusted.
That’s not to say that all production forecasts are inaccurate, but that enough *are*, at least to warrant further diligence.
If you are taking a closer look…
…what data / assumptions are you using?
A recent conversation shed light on the range of differences between vendors:
Whether you’re an operator, investor, lender, or consultant - you need to own the production forecast.
Overstating it = losing money -
Oil (and oil products) demand appears to be recovering faster than expected - very welcomed news.
Total - learning that it’s better to be lucky than good
Apache gets downgraded
Great commentary on Oasis
OPEC+ cuts update
Brisket hunters be warned
That’s it for today - NASCAR put up huge numbers in its return - catch y’all Friday -