There is a bit in the T.V. sitcom Seinfeld in which Jerry and Elaine riff on the meaning of "bunk" and "debunked." This is a good way to start off about the "debunked conspiracy theory" of the "Wuhan lab leak" after current intelligence, according to the Department of Energy, anyway, examines the most likely cause of the Covid-19 outbreak.
Now, let's re-examine other "conspiracy" theories.
First and foremost is the theory that hydrocarbons are "bunk" and that oil prices are going to go to $20 per barrel, $12 per barrel or whatever ludicrous figure is spouted off this week. On a day in which it is snowing in both New York County and Los Angeles County, let me just put an end to that conspiracy theory with some pure data. I live in the real world and, in the real world we use data to analyze current conditions and to predict future outcomes.
Set this chart from Trading Economics to "6M" and notice how stable Brent crude prices have been thus far in 2023. Yes, the market fluctuates (another bit from another Seinfeld episode) but, honestly, we are living in the low-$80s, and that is just fine for the oil majors. There is no oil company on Earth that is not profitable with crude at $80 per barrel. As evidenced by Chevron's (CVX) share buyback extravaganza ($75 billion authorization in total, pegged today by CVX management at $17.5 billion per year) cash is flowing in the oilpatch. Please do not sell (XOM) and CVX, or any of the other components of my HOAX portfolio ... ever.
Oil prices are only threatened by one thing: supply. A short, sharp shock to supply can send Brent flying toward $120, as it did when Russia's Vladimir Putin invaded Ukraine a little more than a year ago. Honestly, though, the global oil industry is, despite the hysterical efforts of politically correct "ESG" mavens, actually well-capitalized and flexible. There is very, very little risk of an oil supply glut, mainly because China is No. 1 in the world in population, but according to Trading Economics, only No. 6 in oil production, producing about 4 million barrels per day in the most recent month for which data is available, vs. the U.S.' run-rate of 12.4 mmbpd. India, which is neck-and-neck with China for the world's population crown, comes in at No. 26 in the list of oil producing nations.
Demand for oil is steadily growing thanks to emerging markets ... and it always will be. If you try to take Exxon XOM or CVX from me or from HOAX ... there's gonna be a rumble.
But what about electric vehicles? This morning, a day ahead of Tesla's (TSLA) massively-hyped Investor Day, data was published, courtesy of China Merchants Bank International and reported via investing.com, that Tesla's China sales have been running well below fourth-quarter 2022's pace thus far in 2023. According to the data in investing.com's article, Tesla's 2023 weekly sales in China through Sunday are averaging 1,013 cars per day, down from the quoted October and November 2022 run-rate of 1,300 per day.
These data are wonderful, wonderfully nebulous -- China has a web of agencies reporting car sale data and Tesla never reveals unit sales by region -- but they show the path. Nerds know their numbers Stocks are, at their core, numbers.
So, a quick check of one of many nerdy spreadsheets that I have compiled shows that Tesla registered 439,770 cars in China last year. That is from third-party data reported by the excellent site CNEVPost.com. So, that would be an average of 8,457 cars/week, or about 1,200/day. Last week's sales for Tesla were reported by China Merchants Bank International at 10,703 registrations. So, Tesla started very slowly in 2022 in China, has picked up momentum recently, but still lags behind the sales pace of second half of 2022. Also, that same data show roughly 70% of Tesla's deliveries in China are Model Y, as the Model 3 continues to approach its sixth birthday in July.
But, net net, Wall Street, for some reason, expects Tesla to deliver about 1.8 million vehicles in 2023 vs. 1.33 million in 2022. To achieve that, TSLA would need Chinese sales to well exceed last year's 440k, and for all its models to sell well, not just the Model Y.
So, that's how we see the world at my firm Excelsior Capital Partners for commodity companies, like oil producers, supply is key. There has been no supply boom since the Covid slowdowns and Russia is under sanctions and also, reportedly, slowing production.
Green light.
For consumer products companies like Tesla, higher inflation, resulting higher interest rates, and a generally horrible global macro environment make it harder for consumers to afford their products.
Red light.
Don't overthink it. The strained global consumer is not a conspiracy theory to be debunked. That macro backdrop is real, and for consumer products companies, it is not spectacular.
