In every industry there is a wealth of information that is readily accessible to make decisions. We all try to simply the basic decision, but it should be based on a wealth of information. It is up to the decision maker to decide what information is more important and what information is more subjective. A classic case is in the movie the Big Short, the New York traders after going through realms of data and understanding what could go wrong, if something did go wrong. The traders went on a road trip to Florida to visit subdivisions and a strip club where the strippers were buying condos with no downpayment. The traders visited mortgage traders to see how the system was working and investment bankers who was buying and holding the paper. The underlying assumption was the mortgage market was strong and there was an expectation the government would ensure very few mortgages lost money. It was a big if, which is why many did not see it, but the facts were the facts.

In an article by John Kemp of Reuters, what is going on with the oil markets or crude oil. Is the price going up or down?

Commercial stocks of crude and refined products in the advance economies belong to the OCED or Organization for Economic Co-operation amount to 2.761 million barrels at the end of June.

Stocks were down 120 million barrels (-4%) below the 10-year seasonal average and the deficit had widen from 74 million (-3%) at the end of March.

US crude inventories declined in each of the 5 weeks since the end of June by a total of 19 million barrels according to the EIA’s Weekly Status Report.

Typically, US crude inventories decline in July and August as refineries ramp up processing to meet elevated demand for gasoline during the summer months. (People go driving for holidays, did you or your neighbors?) But the seasonal depletion this year was the largest since 2019, and among the largest in the past decade.

Most of the depletion occurred at refineries and tank farms in Texas and Louisiana along the Gulf of Mexico, the most closely integrated with global oil markets.

Hedge funds and other money managers have been increasingly bearish about the outlook for petroleum prices. The primary concern is the deteriorating outlook for the global economy and petroleum consumption.

Purchasing managers surveys and freight data have shown the 1st quarter rebound in manufacturing ran out of momentum in the 2nd and 3rd quarters.

A valid expectation is current prices and positions are consistent with a broad economic deceleration, a mid-cycle slowdown dampening petroleum consumption and halting or reversing the depletion of inventories.

If the slowdown does not happen and depletion continues, prices are primed for a rebound towards higher prices.

Linking to dividend paying stocks, if you worry about commodity prices it is really about supply and demand, if you own a dividend paying stock then you need to ask at what price does the company make money? If the price is higher, profits will be higher, if the price is lower it is best to move to alternatives which would do better with lower commodity prices. All investment decisions in hindsight could be relatively easy to make, it is the homework which helps you pick the winners and to try to avoid the losers. Part of your homework is to look at industry specific publications to see trends.

There are more questions than answers, till the next time – to raising questions.