ExxonMobil just released some incredible projections about its wage increases, capital expenditures, and future free cash flows. Daniel and I explain how government policies have given Big Oil the ability to print money… and why oil stocks are rising, even as oil prices are falling.
In other energy news, oil shipping companies are drastically increasing their rates—in part due to the uncertainty surrounding Russian sanctions. Daniel shares a handful of names that will benefit from the situation.
Walmart CEO Doug McMillon recently spoke about the rise in shoplifting the company is seeing… and how it could result in price increases and even store closures. Target says it’s also struggling with the same issue. We discuss how this news could lead to buying opportunities in a few of the biggest retail stocks.
- ExxonMobil’s remarkable projections [2:10]
- How governments are helping create massive profits for Big Oil [6:05]
- The disparity between oil stocks and oil prices [13:00]
- These stocks will benefit from increased shipping rates [16:35]
- What Walmart’s warning means for retail [28:14]
Wall Street Unplugged | 7
Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on Main Street.
Frank Curzio: How’s it going out there? It’s December 8th. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break down headlines and tell you what’s really moving these markets. I was trying to get interviews for Thursday. I had two cancellations, which is not really surprising during this time of year, which is perfectly fine, so I’m going to probably push them to January. I might get one in, really, really good interviews, but I’m going to try to set some up. And I don’t really put people’s feet to the fire here, especially during the holiday season because it is crazy. We’re even crazy here. Everyone’s closing their books, a lot of these guys own their own companies and stuff. So unfortunately, to replace the interview, I have to bring back Daniel Creech. I’m really sorry about that. Daniel, how’s it going man?
Daniel Creech: It’s going well. I knew there was going to be some intro; I wasn’t expecting that. Thank you. You caught me off guard there. It’s going well. Happy Thursday, everybody.
Frank Curzio: Yeah. So listen, we’re in this period after earnings season, and there’s news stories. For me, this is a great time because you really could dig in. During earnings season, there’s so many companies for us, where we cover a lot of companies, and we want to listen to conference calls. I love to do that, I know you love to do that, Daniel, and there’s constant news and just saying, “Hey, did you see that company? Did you see what they reported? And this one’s down 30%.” When you have that little quiet period now, holidays, everyone’s really looking forward to next week. Next week’s going to be really big with the Fed, and again, it’s pretty much I don’t see them doing anything crazy, it looks like a 50 basis point hike. But I didn’t think that we would see anything last week out of Powell, and they didn’t say anything different, and yet, we saw the market pop 4.5%.
Frank Curzio: The Nasdaq popped 4.5%, everyone went into crazy growth stocks again, and then here we are a week later, and we’re right back to normal. So obviously, it’s a market moving event and there’s a lot going on in between, but I feel like right now, there are a couple stories I want to talk about, and one of those is in the sector that you love a lot here is oil within Exxon, where Exxon just came out and said that they’re going to raise salaries by 9% as profits are at record highs. If that’s not enough, they said they’re expanding their share repurchase agreement by $30 billion to $50 billion.
Frank Curzio: They will already distribute by the end of this year $30 billion shareholders, which includes $15 billion dividends, $15 billion share repurchases. They laid out a plan to double earnings and cash by 2027. To double them, that’s only five years. But this year, when you look at the numbers, Daniel, they’re going to generate $60 billion in free cash flow. And I just want to put that in perspective for people because I actually screen for this just to show you how significant that number is. To put it in perspective, that $60 billion, there’s only 120 companies in the S&P 500 with a market cap greater than $60 billion. That’s their free cashflow.
Daniel Creech: 120.
Frank Curzio: 120 out of 500 that have a market cap that’s greater than $60 billion, and they’re generating $60 billion in free cash flow. This is after I pay the bills, this is money-
Daniel Creech: That’s after investing $25 billion in CapEx, to your point. That’s leftover money.
Frank Curzio: That is leftover money. This is incredible, but I want to get your thoughts on it because again, everybody hates the oil. Not everybody, the politicians hate the oil companies. I might rank a little about that in a minute, but this is a company that you were very bullish on for a while now, you’ve been bullish on oil, and how does this impact everything going forward, especially with price caps and everything else? But it seems like the majors are doing pretty fine right now.
Daniel Creech: Yeah, absolutely they are, and Chevron is doing well too. They came out, and said they’re going to do CapEx in the $20-ish billion a year. I think this was a good move by the corporates, Frank, by the suits as they’re referred to sometimes, because they know they are about to get dragged in front of either a House committee or a Senate committee soon because when you’re going to report profits like this during economic uncertainty, political uncertainty, it’s just not a good idea to have a target on your back, and I think this is a way to get out ahead. The other side to that, very quickly if I can give my opinion on this, is this is why capitalism is the absolute best structure. And we’re coming off a period with… We have this high tension between the railroad workers, and they wanted to go on strike, and there were some back and forth, the government had to step in.
Daniel Creech: President Biden had to actually sign a bill into effect that said, “Hey, you can’t strike. Here’s the terms that were previously negotiated on.” It’s great to see companies, in my opinion, reaping rewards like this and then reward employees because they understand you got to give oil companies one good thing. And this is one of the biggest discrepancies and one of the biggest areas I disagree with on politicians, because of the timeline they’re talking. It’s easy to say, “Hey, I’m looking out.” Frank, it’s easy for you to say, “You know what? I want to run this company, and I’m looking out 10 years ahead.” Well, I would argue everybody should do that, but that’s difficult to implement. Oil companies literally have to look 10, 20 years down the road or else you would never invest in a project because it takes billions of dollars if not hundreds of millions of dollars, plus a lot of time to even get up and running.
Daniel Creech: To see them reward their employees is fantastic. I don’t know, did that stand out to you at all? And if you don’t care, it doesn’t matter. I’m just saying raising wages basically above the inflation rate, so they’re going to give everybody eight to 9%-ish unless I read that wrong, I just think that’s amazing, and that’s not going to get much attention out of this story. I think everybody’s going to focus on, and for right reason, the $60 billion free cashflow, the amazing numbers and performance. It’s fantastic, I just hope that when they get dragged in front of the next committee, they point that out about rewarding people because that’s the best way to take care of individuals is through the company standpoint, not because of government body that’s telling you how to run your business.
Frank Curzio: We’re talking about politicians. They don’t give a about anything except themselves, so they just want to drag these people up there. And even though… I love the irony here, where we have a lot of these liberal politicians that did everything they can to cut drilling, no more drill. And that’s a current administration, where I’m quoting Biden here, “No more drilling for oil and gas.” He said going into, and now, not even going into, but he actually said that when he was campaigning last month. He said, “No more drilling,” and we’re like, “Wait a minute, no more drilling.” So, we have enough energy here, and you see what happens to our economy, and we saw that when we became the largest oil producer in the world. We’re not dependent on anyone. That’s why we will always be much more powerful than most places in Asia, especially China. China, they do have their own resources, and again, and coal-
Daniel Creech: But to your point, still the biggest import of oil. They have resources, but they’re still needing everybody else.
Frank Curzio: They still need everybody else, and the fact that we wanted to take that away from the US, and we see it. So, what do you have? You have more of these ESG policies, which the E in environment we talked about here. Push more wind, push more solar, less drilling and less natural gas, less uranium, which those are super clean alternatives, natural gas. So, we need oil and natural gas guys. We need it. Yes, we want to have that, and we want to be able to increase alternatives, but you can’t just shut it off and we’re realizing that. We realized that with electricity issues, even in Texas. We saw in Texas, oil country Texas, so we see it in Texas what happened. So, we start in California obviously, but here’s these politicians where, “No more coal, no more coal.”
Frank Curzio: Again, I get it with the environment, but now we’re all going back to coal, what coal prices are, especially in Europe. But when you decide to implement these policies and then you see supply get squeezed, and you don’t want to blame Russia here because, yes, that war definitely hurt Europe more than us, we have enough oil right here to produce in the US, but again, we don’t have lots of ties to Russia, so it’s easy. Everything is blamed on Russia. If you trip on your sidewalk, then the politicians will blame our Russia these days. You can’t blame it on China, you’re not allowed to because they’re in the pockets. Our politicians, we’re China. We all know that. But now, we have what? We have prices soaring, and they created this environment. Now, you have these companies reporting record profits and you’re getting mad at them? You’re getting pissed off at them?
Frank Curzio: You’re getting off at the oil companies that are gasoline prices are what, more than double where they were? And yes, I get it from the political standpoint, they’re going to be like, “We’re $5,” and whatever. It was $5, and then it’s $3, whatever it is now. Look how cheap they were a few years ago. So, you’re seeing what these policies actually do, but the irony to me is hilarious, how you’re just going to shout out there and say, “Well, now we’re going to punish the oil companies because they’re making too much profits. We’re going to take money away from them,” and here’s Exxon doing the right thing, raising those salaries more than inflation, and same with the Trump tax cuts.
Frank Curzio: A lot of people didn’t agree with them, but once that happened, we had 3 million employees get bonuses because of that. You saw AT&T, you saw Waste Management. There’s dozens of companies that once that happened, they handed checks directly to the people, which is really cool, but that’s bad. That’s terrible. Why? We need more money, this way the politicians can decide how to spend it, and we know how that works. We know checks and balances. A great example of that is the Post Office, how the Post Office is losing money when you have UPS and FedEx having massive profits year-to-year to year.
Daniel Creech: Or, even another reason with the COVID issues, and how who got money and other countries were getting… You just talk about a mess because, to your point, you have no record-keeping, you have no process.
Frank Curzio: There is no process. And just when I see the numbers for Exxon, and I see these guys complain, and you wonder why coal’s getting turned back on, and again, we’re invested in coal, one of our stocks, and really early to that trend. And now Europe, you’ve seen Germany turn to coal. A lot of places turn to coal because they have to. This is significant. We’re talking about heating homes where older people, you’re risking their lives now. This is where we are. And just to not look at the numbers or just shout at the top to say, “No more oil, you’re killing the environment. You’re crazy,” we have to do this at a slow pace. You can’t do it fast. And I know to get in the current administration you have to promise a lot of things, crazy liberals, and it worked because you guys won and I understand.
Frank Curzio: But no one thought that you would follow through a lot of these policies. Usually, politicians say, “Yes, yes, yes,” and lie through their teeth and don’t do it, and for me, I can’t believe that we’re at this stage where we’re saying, “No more drilling.” That makes us incredibly powerful to the rest of the world when we can supply our own resources, and now that we have the technology to do it and a lot of countries still can’t do it, it just amazes me why we won’t unleash that, especially natural gas. What is wrong with natural gas? What is wrong with natural gas? I don’t get it. So, we could be exporting out of it every place. Now we have all these LNG facilities, which were import facilities in 2008 and ’09 to import natural gas. And then, when fracking took off, we were like, “Holy shit, this is amazing.” We had so much natural gas, we were burning it for free. Now, a lot of these have transferred-
Daniel Creech: Hey, we were right. We got one thing wrong; we just got to reverse this.
Frank Curzio: Yeah. They were like, “Oh, wait, wait, wait. We have a good idea here.”
Daniel Creech: Instead of import it, we’ll just ship it.
Frank Curzio: The whole thesis is like, “Oh, we’re going to import. Oh, wait, wait. No, no. Well, since we have this, let’s export. It’s great,” and Cheniere was first to the party there. But for these politicians and grandstanding, it just amazes me because to me, everybody sees everything now because you have YouTube, you have videos, you see what they’re saying. You see on both sides too. Just to see Schumer talk about immigration and just hammer and say, “No immigrants ever should come here,” this is like, seven, eight years ago, and now you see the policy, “Welcome them all in.” It’s just all about getting elected and shit, but we try to talk about this stuff because we have to. And you could be on whatever side you are and you could say, “Well, it’s Russia and Trump is an asshole,” and it’s whatever.
Frank Curzio: I don’t really care what you think about that. I really don’t. What I care about is making you money. That’s why you listen to the podcast. The profits for these oil companies are incredible. I’ve seen oil prices come down and I think it’s going to lead to an opportunity to really purchase these things, especially with the price caps in Russia. And let’s go there because you’ve seen oil take a hit here, coming down, but now, we have news that China’s opening up all at the same time. Everything’s fine in China, which it’s not. We have really good sources that tell us that. Again, they’re shutting down censorship.
Frank Curzio: They’re not opening as quick as people think. I know it’s in the news it is, but you can see how bad it is there. But however, we are catching a bit in oil, we are catching a bit in the markets today because China’s COVID policy finally, “Hey, it’s the flu. It’s a version of the flu, and most people are going to be okay, and we don’t have to shut down everything. You can’t travel anymore.” So that can lead to more demand, which we need when it comes to oil if you’re bullish on it. So, what are your thoughts? Because there are areas that we’ve been covering within oil, but there’s one specific area that’s really booming right now, and they reported earnings. We mentioned it I think a few weeks ago, but I want to follow up.
Daniel Creech: Yeah. Something’s got to give here, Frank, in the oil market. You’re exactly right, we’re going to talk about shipping here in more detail, the shipping stocks, but listen to this from yesterday’s “Wall Street Journal,” Frank. Last month marked the first time since 2006 that the S&P 500 energy sector has traded within 3% of its 12-month high while the price of West Texas Intermediate retreated more than 25% from its one year peak.
Frank Curzio: And what was the first part of that?
Daniel Creech: The first part of that is that it’s the first time since 2006 that the S&P 500 energy sector is trading within 3% of 12 months high while oil is over 25% lower. What does that mean? You have this huge break between oil stocks and oil prices. Now, why is that? Oil prices in the short-term have gone down. They hit 130 after the Russian invasion of Ukraine, now they’re in the 70s-ish. You’ve had a lot to do in between there. You’ve had ups and down production cuts by OPEC and announcements, you’ve had the strategic petroleum reserve release from the Biden administration. You’ve had not a lot, but you’ve had some increase in drilling here in the US, which is good, and then you have other sanctions around the world. To your point, something has to give, I think the risk on the next move in oil is higher than lower, but I’ve been wrong on that.
Daniel Creech: But here’s the crazy thing about investing. You could argue, “Hey, Daniel Creech has been dead wrong on the price of oil in the last three to six months,” yet, I’m still correct on ExxonMobil and Dollar Stock Club. We’re still correct on Arch Coal, obviously it’s different energy. And my point is that the market is always forward-looking, and what’s going on right now is the sanctions that just went into effect this Monday was the cap on seaborne Russian oil. So now, the US and the European Union got together and said, “Listen, basically the Western insurance companies control 90-ish percent of all insurable seaborne traffic.” What is into effect now is that these companies can’t insure a vessel unless they can prove that Russian oil, if it’s Russian oil, that it was purchased for less than $60, their old cap.
Daniel Creech: The irony here is that the $60 is higher than where Russian oil is trading currently, and it’s higher than I believe the three-year average that it’s been trading at, so that’s kind of ironic. In their defense, the politicians are saying, “We don’t want to disrupt the flow of oil, we just want to try to negate Russian making too much money.” Right now in Turkey, even if it’s not Russian oil being carried through straits and different paths, Turkey is holding up, there’s a traffic jam. We joked about this yesterday. As of yesterday, there were 16 to 18 different, depending on who you’re reading, tankers holding equivalent of let’s say 500 to 800,000 barrels or up to 2 million, so very large crude carriers. VLCC carry 2 million, the Suezmax carry 1 million, and then you got these LR2, I’m sorry, I don’t make this up people, follow along with me here that hold 500 to 800,000 barrels.
Daniel Creech: The odd thing about sanctions is just like every other government policy, Frank, A, you got to try to implement them. B, you got to try to enforce them, and then is there any repercussions and or accountability? Oilprice.com, freightwaves.com, Splash 247… That’s a good name for website in my opinion… They’re all talking about this is all basically just honoring your word, so you stop me, and I say, “This is a piece of paper. We bought it for $59, it’s Russian, we’re good,” there’s no port authority. There’s no international agency right there, so it’s all just this murky ways.
Daniel Creech: I say all this because Nordic American Tanker, NAT, we’ve talked about, Ardmore Shipping, ASC, we’ve talked about, Frontline holdings, FRO, they all reported very good earnings. And I’m going to give you some numbers here, Frank, about the irony here as oil prices, remember yearly lows, tensions not all time highs, but let’s just say highs. Nordic American Tanker focuses on they have the Suezmax, so we’re rounding here, each boat carries a million barrels of oil. Frank, in quarter two of this year, they were getting a daily rate of $20,080. That was Q2. In Q3, the most previous recorded earnings was $27,850, so about 38% quarter-to-quarter.
Frank Curzio: Day rates here, guys. That’s the shipping. That’s how much they cost for the ships. Yeah.
Daniel Creech: Year-over-year, just to show you the volatility, so $20,000, $27,000 last two quarters. Go back to last year, that was $7,800 during the second quarter and $5,800 for Q3. That is a volatile environment. It takes Nordic American Tanker-
Frank Curzio: How long are those contracts for?
Daniel Creech: Well, they can be months or years and on the spot rates, so you have time charter rates, which is, “Hey, I’m going to give you this boat for the next two years, and then after one-year, we have an option to increase that,” the spot rate, it depends on voyages at that point. The wild thing here is, Frank, Nordic American Tanker, it’s $8,000 a day for their cost. Well, obviously last year, when you’re at $7,800 and $5,000, you’re losing your butt. Now, you’re at $20,000, $27,000. To the start of fourth quarter, Frank, which we’re currently in, on their conference call they said that 74% of their ships are already booked for this current quarter at $54,000 a day rate-
Frank Curzio: And they were getting $5,000 a year ago.
Daniel Creech: A year ago. They were getting 27. So, in the last three quarters this year, it’s gone from 20 to 27 to now 54. They’re going to double their dividend. Now, the good thing is that-
Frank Curzio: And the dividend, it’s only like 4% now.
Daniel Creech: Right, but they’re variable. So, as you always say, you can’t just go chasing for yield because there’s a lot of oil companies-
Frank Curzio: Percentage of profits, a percentage of whatever, so that could be a dividend and nothing, 5%, 9%, or whatever.
Daniel Creech: Exactly. Because you can say, “Hey, this last quarter this was paying 9%,” but if they have a down earnings and you don’t get anything, obviously, the stock’s going to crater. What I don’t like and why these aren’t buy and hold forever, Frank, you have young kids, these are not stocks you buy and hold and give them when they grow up and get married or whatever because they’re trading vehicles more or less. What I like about this is that very similar to the oil producers, I love John Petrides in your interview a week or so ago, when you guys talked about finding financial religion in the oil patch. Shippers have done essentially the same thing. They’re cutting down their debt, they’re paying down debt.
Daniel Creech: The problem I have, one red flag is with Nordic American Tanker, NAT, and ASC. They do these at the market offerings, which just issues more shares. And what does that do to shareholders, Frank? It dilutes the shareholders. They’ve both come out, both NAT and ASC have come out and said, “Listen, we don’t need to do this for the foreseeable future. The only reason we did that was because last year day rates were so low, we didn’t want to take on additional debt.” I can understand that. They’re all headquartered outside the US for certain reasons. The shipping area, you know this more than I do, Frank, but it’s a gray area. They use a term called shadow fleets.
Frank Curzio: It is a gray area.
Daniel Creech: It’s a shadow industry.
Frank Curzio: These companies, it’s not that-
Daniel Creech: I’m not trying to be rude, but-
Frank Curzio: You can’t believe their numbers, but for me it’s always… It’s a cyclical industry right now.
Daniel Creech: Exactly.
Frank Curzio: And I think even listening to you here, and I was bringing up the chart for Nordic here, and you see the low was 140 and the high was almost $4, and it’s $3 now. It’s actually down 12% yesterday, and it’s up a little bit today. But a lot of people think that’s the cycle, but we might be in the fourth inning of the cycle, where we could easily see a double or triple from here from these things with day rates. So, you’re saying with oil companies, you have to look at oil companies, so what do oil companies do? And they’re really smart. It’s almost like the Walmarts and everybody else. What they do when they have large fleets, some of these large retailers, is they want to lock in oil prices, so go to the futures market.
Frank Curzio: And when you’re locking in those prices, you want to obviously do it at low prices when you’re at Walmart. But a lot of these companies, when oil is trading higher, you’re locking in those prices, so you’re hedging and those hedges could be for a year from now at much, much higher prices. So, what you’re going to see is even oil comes down, and this is one of the reasons why. I remember I spoke at a Stansberry conference one, like a year and a half after they let me go there, and it was funny because I stood there and I think it was like 2014 or something, it was right near the top, and I said, “Anyone that owns any oil company, I don’t care if it’s a major or whatever,” and I knew a lot of people did, I was speaking for another company, and they didn’t mind I was there, I said, “You should tell everything oil right now. Sell everything out of it.”
Frank Curzio: And they were like, “You’re crazy.” I’m like, “Listen, the hedges are about to come off and when they come off, they’re going to have to lock those things in at $34 cheaper.” So now, it’s a different scenario where even though we’re at 70, you’re saying, “How come these oil companies are still staying up?” Well, you know have to look at the hedges. I know there’s companies, I think there’s Continental that never, ever hedges, but some companies do hedge. It could be great or it could be bad. It’s more consistent because I know uranium companies who don’t hedge either. Again, so you’re going to see a higher beta, meaning if oil prices go higher, the companies who are not hedged, you’re going to see those stocks move a lot higher compared to the companies that are hedged and vice versa if it reverses.
Frank Curzio: But right now, even with the hedges in place and you’re looking right now with these companies, you’re locking them in like you said at $50,000, if you’re locking in for a year, the cashflow that’s going to come in for this company, the dividend’s going to be skyrocketing, they’re not issuing any more shares. If this continues into next year, even a few quarters, this thing you look at $5,000 last year, $50,000 now, and you’re still seeing that demand. You look at a sector within the oil market that I feel like not too many people talk about that can really explode from here, and now, you’re getting a discount. Here’s Nordic Tanker, one of the biggest in the industry, that was $4, and now it’s $3. So again, you could look and say, “Oh, it was $1.50, and I missed it, Frank,” but it was recently at $4, now it’s pulled back significantly.
Frank Curzio: But the fundamentals are still there for these guys, and people may be looking at oil, Daniel, and saying. “The oil price is coming down. I want to get out this.” Not necessarily, because we bottom out here and you see oil prices go higher. Again, the industry is in good shape, especially looking at hedges, and you have to look at hedges. And for me, I was able to make I would say a very, very good call, probably one of the top five calls, will oil absolutely collapse? Because I read a 150 page Goldman report, and I did a ton of research on it showing all the companies of the hedges that were coming off, and I was able to actually pinpoint which companies to avoid, which companies buy puts on and which companies were really well-positioned for another year or so, and it mattered.
Frank Curzio: You saw it. It wasn’t like every oil company went higher. It was a very good indicator of how to pick winners and losers in oil industry in the hedging. I understand that if you’re an individual investor and listening to this, you might not have access to it. You could if you Google it just to see, but you could go to the conference calls, and when you see transcripts, and you can get it at Seeking Alpha for free, there’s other places you get it for free, they usually tell you their hedges there every quarter, how much to hedge, and how long to hedge. That’s something to be looking for too as all prices come down because it means those profits can stay relatively high, and you’re going to see these things really beat earnings estimates next quarter because they’re locked in at much higher prices. But again, you have to dig in and do the research and do research in different sectors. But I know you’ve been all over this sector, but this is very interesting to me.
Daniel Creech: Well, it’s just odd because what I’m continuing to think through is you have these day rates that are skyrocketing. That’s impressive, that’s good, but the market’s going to price some of that in. Regular guest and good friend of yours, Frank Holmes from U.S. Global Investors, Frankie wrote an excellent piece just earlier this month on December 2nd. He thinks and is kind of speculating that day rates on different types of oil shippers could hit $200,000 a day next year. Now, they’re are different world. So ASC that we’ve talked about does oil and they do chemical products and things like that, Nordic American Tanker focus is on oil. My point-
Frank Curzio: What was the symbol of the other one?
Daniel Creech: ASC and NAT. FRO is another one.
Frank Curzio: So, this is Ardmore Shipping. Again, if you’re on our YouTube channel, we show charts of this, and it shows you some of the research, we show our capital IQ, and you can see different-
Daniel Creech: Another couple: International Seaways, INSW, and Scorpio Tanker, STNG, are a couple other ones-
Frank Curzio: At the rate of 16 was the high, but now, it’s under 14.
Daniel Creech: And what’s interesting if you’re looking at those, every one of those yesterday sold off hard. Now, why did they sell off? I don’t have a crystal ball, but here’s what went into effect on Monday. We talked about the price cap, we talked about this ship logjam outside of Turkey. Depending on these contracts, if you’re not delivering them on time or there are fees or there are fines, whatever’s going on, some of this, I’ve been checking our Capital IQ systems, I’ve been checking all the companies for SEC filings and press releases, I haven’t seen anything on the tanker jam right now. But Frank, going forward, one of the reasons I’m continually bullish on day rates to continue higher is that as the smoke settles and everybody gets more of their bearings around the newest sanctions in place for Russia, and let’s not forget in February, more sanctions on refined products go into that, that’ll be a whole different world.
Daniel Creech: But right now, there’s so much uncertainty and on these conference calls, the shipping contractors are talking about, “Well, if we have to take different routes to transport from different ports or different areas, that’s going to take longer.” Frank, if you’re a semi driver and you used to do a trip from here to Jacksonville or here to Miami, and now you’re going to start going from here to Cincinnati, Ohio, or here to Maine, that’s a hell of a deal. You’re not going to charge the same amount for that. It’s not going to take you the same amount of time. So, there’s a lot more uncertainty to be unfolded here, however, uncertainty is great for energy markets. Earlier today-
Frank Curzio: That’s true. We always say uncertainty’s terrible, but it’s a very good advantage.
Daniel Creech: It’s terrible for stocks in general, but it’s great for energy markets.
Frank Curzio: It is great for energy.
Daniel Creech: Earlier this morning, Frank, the Keystone Pipeline got shut down because there was a detected leak. Carries 600,000 barrels roughly a day. Guess what? Oil spiked right away, natural gas spiked right away. I’m not saying it’s going to remain there, but my point is that we’ve talked about this in the past. We have such a tight market, meaning supply and demand is so closely knit that any variation is going to cause a lot of volatility. And the main driver here on oil prices remains to be OPEC, and they’re going to do what they have to do to keep Brent, world oil, closer to $90 a barrel. It’s not going to be there 24/7, so don’t say, “Oh, well they just kept quotas on the December 4th at the same as they did last month or whatever.”
Daniel Creech: But my point is that there is so much uncertainty around here, it’s basically like you’re sitting here smoking around a bunch of gasoline and just not anticipating anything. And that’s why A, I want our listeners to not only get some exposure, so yesterday on the down day I bought a little bit of ASC and NAT as well just because I want exposure to this over the next couple months. We can check back in, see if I look brilliant or silly, Frank. But I just want people to understand these are trading assets, these are not buy and hold, but these are a way to capitalize off of a lot of uncertainty and in my opinion, silly political agendas, and that’s what I’m trying to do here for everybody on the podcast.
Frank Curzio: No, that’s cool, that’s cool. Another thing that hit the news story, and we’ll end with this, is Walmart. Walmart came out and said that they’re going to need how much was it? An adjustment to count, and what do they call it?
Daniel Creech: Well, Target uses the term shrinking. I guess that’s-
Frank Curzio: Shrinking. Yeah. Shrinking is a very nice term to say that people are robbing us. People are robbing us at stores and they’re stealing, and now, you’re seeing a lot of companies… You’ve seen Apple stores, Apple’s just so big they probably don’t have to say anything, but it’s getting to the point where Walmart and Target are actually saying this on the conference call. And how much was it? It was an incredibly large number.
Daniel Creech: Target threw out the number of $400 million operating margins and earnings. I don’t know if it was yesterday, it was earlier this week, the Walmart CEO was on CNBC, and I forget which anchor asked him, but it was a great question about some cities have… Because A, to your point, fundamentals matter. When times are good and prices are great and everybody’s flushed with cash, not that you’re okay with getting stolen from, but it’s like the old mafia movie, “Hey, you can’t steal too much. We got to steal too. We know what’s going on.”
Frank Curzio: The skim and the skim, you got to expect it. But we don’t want the skim and the skim.
Daniel Creech: Exactly.
Frank Curzio: It was Casino, right?
Daniel Creech: Well, fundamentals matter, so now they’re pointing it out, and Target’s saying this $400 million mark, the anchor that asked the Walmart about, “Hey, some cities are not enforcing or have very lax standards on shoplifting and it’s hard to prosecute certain people for certain crimes,” the Walmart CEO came out and said flat out, “Yeah. We’re going to store close stores if that doesn’t change and we’re going to have to raise prices.” I know this is going to sound like I don’t have a heart and if I do, it’s black as can be, that’s not the point here. The only good thing is that the way you get policy changes is when it’s economically viable.
Daniel Creech: If people get to the point where you’re scared to go to a Walmart or a Target in the USA, that just shows you how stupid things are. The only good news is that those companies will have the power to get the people in line at the top to say, “Listen, you guys got to do something about this. When you can’t go get groceries because of store hours, shoplifting or crime, that is hopefully when we will get our heads out of our you-know-whats and make a policy to actually prosecute people for theft, robbery, et cetera. It’s not common sense. The good news is that can all be fixed, and it will at some time, just be careful when you’re loading up for your freaking gallon of milk, I guess.
Frank Curzio: Yeah. No, and it’s not just Walmart. That’s lot of money you’re talking about coming right out of the bottom line. So it’s like, “Hey, we have all these products,” and they were giving them free because they got stolen. But when I see this, I think you can look at demographics too because if you are looking at areas like in Florida… And again, I came from New York, I grew up in Newark most of my life, so I don’t know anything about guns, and it’s always a touchy subject depending on what side you’re on. But I do know that never, ever, ever, ever happens here, and it doesn’t happen in Texas and most places because in Florida, they actually get on TV here. And this was just the other day. I should play this clip. This happens a lot though. This is on like, regular news channels. This isn’t like, “Oh, something happened,” this is just everywhere.
Frank Curzio: So, a Florida sheriff got on TV, again, public TV, and he shows this criminal and says how this person had 17 arrests and they arrest him, but they’re going to keep releasing him. It doesn’t matter, they’re going to keep releasing him, he gets out. So, he broke into the house, this person, and the homeowner shot at him and they said, “Listen, we don’t know who shot at him,” because he wasn’t too sure who shot at him, but he goes, “Listen, you’re not in trouble. That’s perfectly fine.” He goes, “We prefer you shoot anyone that breaks into your house. This is what he said on TV, “In fact we have gun safety classes every single Saturday. So if you take it, you’re going to shoot a lot better and save the taxpayers a lot money basically if you kill these people.” So, nobody robs houses here, nobody robs, and people carry guns. It’s different, again, coming from New York it’s really weird. I bought my first gun. I never owned a gun, it’s in my house safe. I don’t carry it around my car or anything, but some people just have 100 guns and are over the top and craziness. Again, you’ve come from… I told this story before-
Daniel Creech: The crazies. Yep.
Frank Curzio: No, what is it, Montana and whatever.
Daniel Creech: Ohio and Montana.
Frank Curzio: Ohio and Montana. When I was shooting this gun, and it was like six feet away, and you would tell me, “That’s how close. That’s what you have to prepare for.” And I’m hitting a little off target just again, I don’t shoot guns. I’m just learning how to shoot guns, and you just take it here, boom, boom, boom, boom, boom, six in the middle. I’m like, “Holy shit. I’m like, “I’m keeping a gun in the office just in case I have any bad stock picks. I’m telling you, Daniel is going to shoot you right between the eyes. It’s Florida.” It was great. Man, some people are just great and me, I’m like all over the place, I’m learning. And I had a great subscriber who helped me buy a gun and actually came here, and then we went there and shot it and stuff like that.
Daniel Creech: Yeah. That guy was awesome.
Frank Curzio: And it’s just funny how the laws are so different, where nobody would ever think about doing that, but if you’re no consequences, and I’ve seen this and you’ve seen videos where even the security people, they’re just like, “Hey, let them take whatever they want, whatever,” and they back off. You can’t even do anything because a lot of times, even when you do something or beat the crap out of somebody, you are going to get brought up on charges in some of these places, which is insane.” The reason we’re talking about this is because it matters. You see a company like Walmart saying. “We’re going to close stores,” is a big deal, but you might have to look at other companies because if they’re robbing Walmarts, they’re robbing other places, that’s going to impact other companies significantly, and it could result in… How do we make money on this?
Frank Curzio: Well, let’s see where they’re going to open the stores. Let’s see which stores they are closing. Obviously, they’re underperforming if they’re giving away their stuff for free because it’s getting stolen, but it’s a trend you have to watch because I never thought I’d see it. You see it in the news here and there, and depending on what side you’re on that they amplify the story or they suppress it, but the bottom line is you’re talking about the largest retailer in the world, $400 million. It’s a big deal, especially in a market right now where profits are getting squeezed and consumers are cutting back. That turns out to be a lot of money.
Frank Curzio: So, you’re seeing the change in demographics, kind of like what we saw at COVID, how more people stay home. They found out ways to make money and how it impacts the economy and how that might impact the economy forever, where we’re still seeing shortage of jobs even though this economy’s terrible because again, a lot of people found ways to make money from working from home because they were forced. So, when you see these demographic changes, it is going to impact companies and it’s something to look out for because I never thought I’d see a Walmart or a Target on a conference call warn about this and saying that it’s impacting them now. That’s how big it is, and be careful out there.
Daniel Creech: That’s a great point, and my takeaway here is that I will look for Target and Walmart in the future to talk specifically about this because I think the opportunity here is a layup. If the stock drops based on… Let’s say Target and Walmart come out and raise those numbers and say, “Hey, theft is getting worse. We’re going to limit store hours,” or whatever, my opinion would be the stock would pull back on that. And I know Target and Walmart aren’t exciting, but we’re trying to make everybody money here. If these pull back based on crime and theft and nervousness, that is a great buying opportunity because it will get fixed. Unless we go down the road of Mad Max, and I haven’t even seen those movies, but they’d look like total chaos and everybody, you can see the trailer and get my point, that would get fixed and that would be a great opportunity to buy boring, well-run companies at-
Frank Curzio: It’s going to suck for the consumer, but here’s how it gets fixed.
Daniel Creech: It will, but-
Frank Curzio: You close all the stores in a lot of the major cities where you’re seeing this; so now, you’re closing those stores, and now you’ve got to raise prices in the ones that are seeing the highest demand and that you’re safe in, which means that your bottom line is going to surge.
Daniel Creech: And eventually, you will get to the point where politicians change rules and protect. You’ll get back to common sense and not let people steal from one another, and you’ll get more of a rule of law and that’ll be great. I don’t think that that’ll last forever, and if they get hit because of that, that would be a good buying opportunity.
Frank Curzio: No, absolutely. Absolutely. Yeah. Definitely a story worth mentioning. I just couldn’t believe that number, and I couldn’t believe Walmart actually came out and said that. So listen, great stuff, Daniel. Really dug into oil, gave you lots of ideas today, like we always do. Let me know what you thought about this podcast though, firstname.lastname@example.org. That’s email@example.com. Daniel, what’s your email?
Daniel Creech: firstname.lastname@example.org.
Frank Curzio: Okay. Cool guys, thank you so much. Really appreciate all the support, and let’s see you guys next week. Take care.
Announcer: Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests, and you should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility.
P.S. Last week in The Dollar Stock Club, I recommended a pick set to benefit from the massive tailwinds in the oil sector…
A fund that gives you instant access to some of the strongest names in the industry…
And the best part: Its current dividend yield is nearly DOUBLE that of the S&P 500.