This post originally appeared on April 3, 2023
Market Giving Up Friday’s Gains:
Yesterday, we published a piece concluding that the market may have misinterpreted Friday’s PCE report. The NASDAQ, which is more sensitive to interest rate changes than other major indexes, has given up half of Friday’s gains as of the time of this writing. Please see yesterday’s post (linked above) for DKI analysis.
LVS Coming Back:
Las Vegas Sands ($LVS) is approaching $60 again, a level it hit last month. Before that, the last time the stock was at that price was almost two years ago. There are two pieces of news in the name. Inside Asian Gaming is reporting that March gross gaming revenue in Macau hit a 38-month high in a continued recovery spurred by the government relaxing and eliminating Covid-related travel restrictions. This recovery is one of the key reasons we like the stock.
In addition, the company has indicated that the massive $1 billion expansion of the Marina Bay Sands is on track to be completed by the end of this year. Las Vegas Sands owns one of the two casinos operating in Singapore, a market which is starting to report results approaching pre-pandemic levels.
OPEC Expresses Displeasure with the White House and Cuts Production:
We’ve covered the inconsistent White House energy policy at length in recent months. The Administration wants more oil production, but is trying to limit the incentives and availability for domestic producers to engage in E&P (exploration and production). Instead, they’ve reached out to countries like Iran and Venezuela to try to get them to produce more. This will achieve the opposite of the Administration’s environmental goals as US producers are more careful on such matters.
Last year, the White House asked the Saudis to increase production. Saudi Arabia denied that request. The Saudis have further complicated matters by agreeing to price oil in yuan which marks the beginning of the end for the petrodollar.
In a successful midterm election ploy, the White House sold down the Strategic Petroleum Reserve (SPR) to levels we haven’t seen since the mid-1980s. They said they’d replenish the SPR when oil reached the high $60s/low $70s, but didn’t follow through on that promise. Energy Secretary, Jennifer Granholm, has said that replenishing the SPR would be “difficult” and could take several years. No reason for the “difficulty” was given.
The Saudis and OPEC were displeased at the US breaking its promise to buy more oil, and responded by cutting production by over 1MM barrels a day. Brent crude is up by 6.4% as of this writing eliminating the opportunity for the US Administration to fulfil its promise to address the SPR shortfall around $70 a barrel.
While this is bad news for consumers, it is fantastic news for the huge DKI energy portfolio which is showing big profits today. That portfolio is available to DKI subscribers here.
If you have questions about this subject or report, I’m reachable at IR@DeepKnowledgeInvesting.com.
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