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What Holiday Shopping Tells Us

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Thanksgiving weekend saw record shopping, but it wasn’t all good … the massive ripple effects of Chinese lockdowns … why Louis Navellier remains very comfortable with his energy bet

Is the glass half-empty or half-full?

Actually, let’s rephrase…

Is the U.S. consumer’s wallet half-empty or half-full?

If we go by the headline Thanksgiving Weekend shopping statistics, it’s half-full.

From NPR this past Saturday:

Black Friday sales raked in a record $9.12 billion from online shoppers this year despite concerns of inflation and higher prices, according to estimates.

The $9.12 billion figure is up from $8.92 billion in 2021 and $9.03 billion the previous year, according to Adobe Analytics. Inflation accounts for some of the increase this year, with people paying more to buy less…

Adobe expects discounts to remain strong throughout the weekend, predicting shoppers will spend another $4.52 billion on Saturday and $4.99 billion on Sunday.

Cyber Monday didn’t disappoint either. Sales came in at a whopping $11.3 billion – that’s 5.8% more than last year.

At face value, this is not a U.S. consumer burdened by inflation. It bodes well for the Fed’s attempts at an economic soft landing.

What about the half-empty perspective?

Back to NPR:

Despite the record online spending this Black Friday, consumers’ concerns about the economy are at the highest level since the Great Recession in 2008-2009.

More than 60% of Americans said the state of the economy was impacting their holiday spending plans, according to the NRF…

Americans are turning to buy now, pay later orders, which allow shoppers to pay through interest-free installments.

Buy now, pay later orders spiked 78% this week compared to the previous week, according to Adobe. Revenue from these orders is also up 81% in the same period.

The above data refer to shopping last week. As to yesterday’s Cyber Monday results, buy-now-pay-later orders were up 85% over last week, with revenues up 88%.

This continues to support our takeaway about the fragile condition of the U.S. consumer. Yes, they’re still spending…but not with disposable income.

One shopper profiled in a USA Today article put it perfectly:

Everything’s going up but your paycheck.

Unfortunately, there’s a limit to how long this debt-fueled spending can continue. Given this, plus the additional economic tightening that’s headed our way thanks to past Fed rate-hikes, we lean toward the “half-empty” camp.

And keep in mind the other aspect of these record shopping sales…

All of this spending is not good for the Fed’s efforts to tamp down inflation. After all, these record retail sales fuel additional inflation, like oxygen fuels a fire.

We’ll see how long the debt-spending can carry us.

Meanwhile, oil continues to ride a rollercoaster based on news coming out of China

China reported more than 40,000 new Covid infections yesterday despite an increasing number of lockdowns throughout the nation.

There are so many parts to this story. There’s the protest angle…

From CNN:

From Shanghai to Beijing, protests have erupted across China in a rare show of dissent against the ruling Communist Party sparked by anger over the country’s increasingly costly zero-Covid policy.

As numbers swelled at demonstrations in multiple major cities over the weekend, so too have the range of grievances voiced – with some calling for greater democracy and freedom…

There’s the Beijing suppression angle:

From BBC News:

China’s censorship machine is going into overdrive to stop people seeing demonstrations happening.

This is not just the case on domestic social media platforms – where protests have been routinely censored for years – but on international platforms like Twitter.

Aggressive attempts are being made by bots and click farms to pump out posts on Twitter about escorts, gambling and porn, amongst other things, to stop people from reading about the protests. 

Then, of course, there’s economic impact angle, specifically on oil prices…

From CNN:

US oil prices have fallen to their lowest level since December 2021 on concerns that protests in China against Covid-19 lockdowns will dent demand…

Global oil prices have fallen about 35% since June as strict coronavirus restrictions in China have kept demand weak, and as some of the world’s major economies have signaled they are heading toward a recession.

CNN published this article yesterday before the price of West Texas Intermediate Crude began a rally.

Today, emotion continues to drive investor behavior. As I write near lunch, oil is up 1.5% on hopes that recent protests will force China to relax its Covid-19 restrictions.

But China isn’t the only influence on oil’s price today.

Oil is getting pushed around by several other influences

First, there are the European Union’s (EU) talks of capping Russian oil prices. But if we really dig in here, this is less worrisome for oil investors than it might first appear.

From Bloomberg:

European Union diplomats suspended talks on capping Russian oil prices, as Poland and the Baltic states objected to a proposal they consider too generous to Moscow…

The bloc has been locked in a fight over how strict the Group of Seven-led price cap should be. Poland and the Baltic nations are outraged at a proposal to cap Russian oil prices at $65 per barrel limit, as the level is above the rates Moscow sells crude now.

Clearly, if Moscow is already content to sell its oil for less than $65 a barrel, a price cap at this level is pointless.

If you’re scratching your head at why the EU would even consider $65 if this is the outcome, here’s Bloomberg explaining:

Countries are being forced to choose between two priorities that are almost impossible to resolve: trying to choke off revenue to Russia and avoiding potentially painful spikes in the oil price that could damage the global economy.

As to the next influence on oil, there’s yesterday’s news that Iraq, OPEC’s second largest oil producer, plans to start increasing oil export capacity.

But like the EU price cap story, this isn’t as bearish as it first appears. The new export capacity won’t fully kick in until 2025.

Then, there’s news that the Biden Administration has granted Chevron a license to resume “limited” oil production in Venezuela easing sanctions that stopped drilling nearly three years ago.

But even here, this won’t have an immediate impact on oil production.

For those details, let’s go to legendary investor Louis Navellier. From yesterday’s Platinum Growth Club Market Update Podcast:

We thought that Chevron would be producing oil pretty quickly, but that’s not the case.

Chevron has to collect over $4 billion in debt that’s owned by the Venezuelan oil company before they even start. That could take two or three years.

They have to repair their equipment. They have to hire worker. They have to install security, and so on.

In the bullish camp, news reports this morning cite rumors that OPEC will consider cutting production in its meeting on December 4th.

In part due to the potential for this production cut, Goldman Sachs expects oil to be back at $110 next year. But frankly, estimates are oil over the place.

While oil prices have been hitting some speedbumps, Louis believes natural gas prices are headed up

Back to his podcast:

The world is under stress right now. We’re very sensitive to weather.

As you may know, in the United States, it’s been very cold… Europe’s now getting colder. The demand for natural gas is rising quickly.

Natural gas is going to be the big energy play here in the winter months.

And what happens as we turn to spring and warmer weather?

Well, Louis says that’s when demand for oil will pick back up. It’s a bit of a one-two punch.

Put it all together and Louis remains very comfortable with his big energy bet. If you’ve followed Louis into some of his energy plays, his advice is to remain patient and don’t get shaken out by headline-based volatility.

Here’s Louis’ bottom-line for energy:

Energy is seasonal. This is the time of year where demand is light for crude oil but strong for natural gas. And as we enter the new year, it’s probably going to get stronger for both natural gas and crude oil.

As to how Louis sees the broad market shaping up as we move into 2023, here’s his quick two cents:

December will not be as strong as October and November were due to tax selling. But December is a seasonally-strong month.

I expect a strong start to the new year, then I expect it to get very narrow, very quickly.

Before we sign off, join Louis tomorrow at noon for a special broadcast called The One Percent Event

For readers less familiar, beyond helming his investment newsletters here at InvestorPlace, Louis manages money for a handful of high-net-worth investors – the “one percent.” In fact, Louis himself is part of this one percent.

As you’d expect, these very wealthy individuals invest differently than regular investors. Louis says they’re “playing a different game.”

Tomorrow, Louis will be discussing their different approach to the markets, and how you can put their strategies to work in your own portfolio.
Here’s Louis describing what he’ll cover:

During the event, you’ll learn…

  • How you’ve been misled by the media to believe there’s no opportunity in today’s market. The One Percent look at the markets differently and are finding massive income opportunities left and right today and in the worst bear markets.
  • One of the chief reasons for the wealth gap… the One Percent earns a huge portion of their income from a unique income source – that the 99% doesn’t know about.
  • How to turn a every $5,000 into $26,650… and every $20,000 into $101,948… in less than a year, without taking on any big risks.

To reserve your seat at this free event, just click here, and we’ll see you tomorrow at noon.

Have a good evening,

Jeff Remsburg