If ppl are fascinated with how much they can do on their cellphones, I am still fascinated with:
1) Telephony: we were able to call people on different continents for 150 years now
2) Electricity light bulbs keeping the light after the dark
3) Internal Combustion Engine: we no longer have to use a horse to carry a heavy load

4) Energy: oil developing companies can drill 2 kilometers underwater, then go 1 km deep, then another 0.5 km in the sea salt, then twist the cable and drill another 3 kilometers horizontally and hit a specific oil field with an accuracy of 2-3 feet. That is Technology!
5) Space Travel: we landed a man (he) on the Moon – probably, the biggest hallmark achievement of the 20th century.
6) but let’s go to the mother of all inventions – the Wheel. The wheel was invented in the 4th millennium BC in Lower Mesopotamia (modern-day Iraq) – a major center of innovation and Venture Capital activity back then….

After these and many, many others truly breakthrough revolutionary achievements, looking at the venerated iPhone is like:
“sure, looks sleek, what is the big deal here…”

Judgement aside (they make matters worse for global consumers by tightening output by almost 90K barrels per day), the timing is not a coincidence:
workers always strike when their bargaining power is high!
No oil workers went on strike when oil prices went briefly negative back in the May of 2020.

But now, they have the time on their side to eke out some concessions (details are largely irrelevant).
I.e., tightness in supply breeds further tightness when opportunists try to take advantage of the situation.

Why? Many related reasons to sharpen your edge:

1. Who would dispute that the Fed is a perfect lagging indicator, especially now?!
2. China’s economy cycle is completely different from the rest of the Developed world
3. China is still largely ignored and underinvested in the West
4. China’s economy is comparable to the US, it grows faster.
5. The pace of recovery in China would define the trajectory of global inflation far more clearly than the Fed reactive actions

And we do have some good news:
China Manufacturing PMI has recently turned up overtaking the early 2021 highs

Fully realizing that the Q2 quarter tends to be cyclically profitable for its refinery business (ramping up output into the US driving season),
let’s ballpark Exxon’s profits for 2022 at $80B, and that number would certainly grow as oil is almost certainly would grow up, given supply tightness and the funfolind reopening of China.
How does that profit of $80B compare vs. the $360B market capitalization of XOM?

Wait, 4.5x earnings which are still not even close to being at the peak?
Huge ability to buyback shares, grow dividend, and buy rivals?
This simplistic “analysis” implies that the stock price of XOM could easily go up 3-4x just on the multiple expansion.
BTW Exxon Mobil is still one of the best US companies – extremely well managed.

This upcoming Recession would end the 13 years of reigning supreme by the US technology stocks and would, almost certainly, open the gateways to the era of Emerging Markets and Value stocks.

Algerian midcaps anyone?

Predictably, the Scottish government seeks an independence vote in October 2023.

Obviously, Scotland derives a disproportionate amount of wealth from Crude Oil.

Two fundamental reasons for that:

1. First, well, in theory, companies can increase prices for their products to offset their costs, but only if they have pricing power. Given what we see anecdotally from Peloton, Target, and Walmart – that is not always the case.

2. Secondly and more importantly, even if a company is able to increase prices nominally, they still need to achieve growth in physical units sold (or, just more services). If your volumes are dropping on higher prices, that results in lower leverage of fixed costs and that would eat into margins. In the likely upcoming recession, real volumes would drop.

Historically, Operating Margins contracted substantially during any recession in any country.

It is a HOPE.
And, nothing else.

Everything else points to the structurally higher inflation:
1. Regionalization (nearshoring) – started by Trump, accelerated by Covid and the war in Europe
2. Declining (!) work force makes the idea of sewing shirts for c20 there a passe. 
3. The decade of structural underinvestment in commodities, transportation, logistics and agriculture.

All these structural issues are cutely mislabeled as “temporary supply chain bottlenecks”.

Adorable!

Full stop.

Not the Fed, not the inflation – these are the symptoms, not the underlying drivers of a recession.

So, what 15 years of effectively Zero interest rates in the developed world and this coercive buying of long bonds did?

Overinvestment in unproductive areas: Technology, Crypto, covid-beneficiaries, home food delivery services to name just a few….

Everyone blames supply chain problems, but what do you expect after almost 15 years of a structural neglected and, frankly, vilifying companies producing materials, chemicals, oil, natural gas, logistics, transportation, trucking?

Look at this US Oil rig count being at best at 30% of the historical average.

Does anyone have a chart on the Crypto mining capacity?

US OIL RIG COUNT IS STILL AT 30% OF THE HISTORICAL AVERAGE LEVELS

Not a good time to be a hero, fishing for an illusive bottom (with rare exceptions)…
There are many reasons for the stock market to slide but the key is that the magnitude of the likely earnings erosion is very high…