Good morning. Stocks are little changed to start the day … but as we’ve seen recently things can change at a moment’s notice. We had an inflation report out this morning, which matched expectations, but it comes with an important footnote … for the numbers were put together prior to the bombing of Iran. Presently, a major focus is on oil … and with around 20% of global supply coming through the Strait of Hormuz prices have become increasingly volatile. And what does this mean for the American consumer? Well … we are at the onset of “driving season” and according to AAA Motor Club, gas prices have gone up 11 consecutive days. Ouch. But it is not only drivers feeling a pinch, as jet fuel continues to soar (which is soon expected to show up in airline fares) and, even more worrisome perhaps, it is the start of planting season for American farmers and fertilizer prices are up 25% since the end of February. Long story short … this morning’s inflation number is being seen as nice, but meaningless. It is the next one that should provide a more telling tale. On Bloomberg TV this morning a guest summed up the dilemma faced by traders in an interesting way by exclaiming that traders normally trade on logic … then shifted to trade on tweets … and now find themselves trading based on deleted tweets. Crazy times. One interesting thought on the situation in Iran is how heavily dependent nations are on the flow of oil through the area. In my view, this will certainly cause smart leaders to ramp up movement towards alternative fuels (including renewables) in the attempt to limit damage even if the present situation is resolved … for the risk will remain that it could be repeated. And just crossing the wires (as I type) is the IEA (International Energy Agency) announcement of the release of 400 million barrels of oil from “emergency reserves” … which is sizeable, considering 20 million barrels or so a day pass through the now-closed Strait … but this is obviously welcomed but not permanent … raising the importance of bringing this to resolution in the next few weeks. On a final note, it is sunny, warm and I get to play golf this afternoon for the first time this year … so be prepared for my complaints over the next few days … but I will be keeping my eye on oil as I play … for I fear prices on everything will soon jump … including golf balls … for which I will, no doubt, nearly run out of somewhere around 3 PM. Have a great day, Joseph G. Witthohn, CFA Have any questions? Please contact info@teamemerald.com
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