(Houston)

Many investors may still be shy about buying oil companies. After all, oil had a major fallout jut a few years ago and many factors, like green energy, seem to be playing against the future of oil. Accordingly, most oil companies are playing into this logic by cutting back on spending and boosting sources of alternative energy, but not Exxon. The company is boosting R&D spending and trying to grow its gas and oil output counter to all its rivals. Its logic is that demand for gas and oil is forecasted to grow considerably until 2030 as the world’s middle class surges to 5 bn people (versus 3 bn today). One fund manager comments on Exxon that “We think Exxon’s investment opportunities are world-class and that the best time to invest is when everyone else is retrenching”.

FINSUM: Exxon is trying to keep doing what it does best—produce oil. It is interesting they are taking a different approach to the market, but that means they are probably going to have high beta. If you believe in the strategy, it is an interesting buy.

(Washington)

Ding, dong, the fiduciary rule is dead. As was widely expected, the Department of Labor missed its deadline this week to file for an appeal of the fifth circuit court ruling against its fiduciary rule. That means that the ruling given by the fifth circuit court, which vacated the rule, now stands, leaving the rule is all but dead. However, other bodies, including the AARP and the states of California, New York, and Oregon, have all applied to stand in as defendants in the case. None of these requests have been processed yet.

FINSUM: So it will be very interesting to see whether the fifth circuit court approves these requests, especially considering it was so adamantly against the rule.

(Washington)

Over the last several weeks, the market has gone through various fits of panic over whether a global trade war, sparked by the US, might imperil the global economy. However, over that period, sentiment has generally improved, with most investors now thinking a trade war unlikely. That view may be far off the mark, as two major disagreements are worsening. The first is between the US and Europe, on whom Trump may impose additionally steel tariffs imminently. Europeans have vowed to retaliate. With China, the situation is eve more worrisome, as the country has refused to even respond to Trump’s requests tha it slash $100 bn from its trade surplus with the US and lessen its backing for industrial upgrades.

FINSUM: China seems to feel it is finally big enough to stand up to the US. It is probably correct, which means we may end up in a big standoff with Beijing. Here is the big question though—will that ultimately (e.g. 3-plus years from now) be bad for the US economy?

(Houston)

We tend not to write too much about oil, the reason being our readers don’t seem too interested in it. However, the market has quietly seen a really resurgence over the last year or so, and has risen dramatically from lows in the $20s in 2016 to $75 now. The core reason why is that a booming global economy has pushed up demand for oil (to the tune of 5 million barrels per day), which has largely cleared the glut of oil inventories that had been plaguing the market.

FINSUM: The big question now is whether OPEC maintains the supply cuts. It is worried about higher prices inducing increased production from rivals, but the reality is that Saudi Arabia needs oil prices to stay high right now for several reasons (e.g. IPOing Saudi Aramco, domestic social and economic reforms etc).

(New York)

Investors beware, the market might be losing its nerve. Back and forth markets for most of this year appear to be making investors very wary, as the market is fleeing to cash. Investor holdings in “cash sanctuaries”, which include money market funds, are approaching 2%, the highest level seen in a decade. According to one prominent asset manager “Cash is an asset class once again”. According to Crane’s, “Money funds were on a starvation diet with yields at zero percent … Rate increases have given them a stay of execution”.

FINSUM: Aside from volatility, the other big driver is that yields on money market funds have risen considerable alongside the Fed hikes, making them much more attractive.