After huge gains among oil and gas producers, we naturally have to ask whether there is much upside left, and whether we dare hold these names as stocks in general are being thrown overboard. Eric Nuttall of energy specialist fund Ninepoint Partners has updated valuations, with the assumption of $100 oil and NYMEX strip gas pricing. Basically, they remain pretty cheap, especially the smaller names — if oil stays around $100. Recent recessionary forces could affect oil demand, but I am still taking the stance that oil and gas will head higher, not lower, between now and mid-2023.
Oil companies are really not drilling much these days.
We’re seeing the self-destruction of some “algorithmic” stablecoins, most recently including TerraUSD (UST):
I don’t think any of the “algorithmic stablecoins” are going to make it. The troubling thing is that Terra actually had a market cap of $18B+ before the recent disaster. It’s OK to try some experiments, but it would be nice if the failures were not so big and costly. JP Koening has had excellent commentary on what “algorithmic stablecoins” are, and how they won’t work.
JP Koening on Algorithmic Stablecoins at AIER
Tether, the leading USD stablecoin, has come under a lot of criticism recently, but I actually think it is run pretty well, given the constraints faced by its managers. Yes, some of its assets are a little dubious (USD lending with Bitcoin collateral among them), but nevertheless it has assets. Tether has come under selling pressure in the last 24 hours, and I think it will weather this period without any major problems.
Back in 2018, Tether actually had a major selloff event, where the “coins outstanding” fell from about 2.80 billion to 1.65 billion — a decline of 41%. The company bought back its coins, paying USD in trade. The coins’ value quickly recovered.
People are talking about Bitcoin’s recent new lows, but there hasn’t been much discussion about the fact that the Euro is a half-penny away from hitting the lowest levels since December 2002, almost twenty years ago.
John Hussman, in his April 27 note, reminds us where we are in the valuation cycle. The green line here is his estimate of “fair value” for the SP500, and you can see the history of the SP500 compared to this fair value estimate.
Over the past week or two, we seem to have reached more of a consensus that “we are in a bear market now.” This is when the dip-buying stops. I am guessing that major indexes will sell off into mid-June.