Have you gassed up your car lately? Does it seem like gas prices are holding steady? A year ago, West Texas Intermediate oil cost about $80 per barrel. Today it’s below $60. That’s a drop of 25%. The price of gas at the pump has fallen over the same period by about 13%. Nice, but clearly someone in the middle is keeping a little extra.
And why has the price of oil dropped so significantly? The OPEC nations, led by Saudi Arabia, have increased their production of crude oil, with the increased supply leading to lower prices. Lower prices are great for consumers, but less good for producers, and it begs the question of why OPEC+ would behave this way.
My unfounded speculation on this is that the Saudis are always trying to keep the OPEC+ members in line, and one way of punishing countries that won’t cut their production (to keep prices high) is to increase production causing everybody’s profits to fall. The ideal position for a small oil-producing nation to be in is producing extra while everyone else cuts back. The Saudis won’t stand for that.
Hard to believe I didn’t lead with this, but it’s FED WEEK! The Fed Open Market Committee will meet on Tuesday and Wednesday with a rate announcement Wednesday at 2:00, followed by a press conference with Chairman Jerome Powell. For nerds who didn’t get to attend the Berkshire Hathaway annual meeting on Saturday, this is the next best thing. (P.s. 90% odds that will be no rate cut this week. The FOMC is “waiting and seeing” before acting.)
But let’s jump back to Berkshire Hathaway. The annual meeting was shocked, SHOCKED, I tell you, by the announcement from Chairman Warren Buffett that he will step down as Berkshire’s CEO at the end of the year. After all, he’s only 94, and his successor was named in 2021. Buffett says he will stay on as Chairman and will help out if he is needed. So – leaving, but not quite.
Berkshire stock has been so successful under Buffett’s guidance (since 1965) that it could fall in price by 99% and would still outperform the S&P over the same period. One dollar invested in BH at this start of Buffett’s career would be worth $365,000 today. I wish I had thought to do that, but I was still spending my quarters on candy in 1965.
While the April jobs number came in slightly above expectations at a positive 177,000 net new jobs created, and unemployment stayed at 4.2%, the first quarter GDP showed a shrinkage in the economy at an annualized rate of -0.3% (versus an expectation of +0.4%). Overconsumption of imports is to blame, and it is thought by pundits that Americans quickly purchased all kinds of imported goods to try to beat the imposition of tariffs. So – a temporary reaction. But the tariffs ARE coming. Some are even coming today. And the president is busy announcing new tariffs. Like 100% tariff on foreign movies, which he says will help the domestic movie industry. I’m okay with a tariff on weird French films, but don’t be touching my British Hugh Grant and Colin Firth rom-coms. Just don’t.
The Conference Board’s consumer confidence survey fell for the fifth straight month, while the University of Michigan’s consumer sentiment index is down 32% since January. American consumers are worried by what they see as inflationary tariffs, but are perhaps worried even more by what they can’t see coming. Economic surprises are not the fun kind.
Driverless semi trucks are now running regular long-haul routes in Texas, between Houston and Dallas. At first, just one at a time is on the road, according to Aurora, the company behind the trucks. It plans to have more driverless trucks on the road later this year. So far, the company’s semis have successfully driven 1,200 miles. Luckily nowhere near me. At all. I would move.
For the week ending on May 2nd, the Standard & Poor’s 500 finished at 5,686, the Dow Jones Industrial Average at 41,317, and the Nasdaq Composite Index at 17,977. The yield on the ten-year Treasury Note closed at 4.322%. U.S. crude oil cost $57.44 per barrel, N.Y. gold cost $3,319.70 per ounce, and one Euro was worth $1.14.
Elizabeth E. Cook
Partner, Diastole Wealth Management
News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) Reuters, The Associated Press, The Wall Street Journal, The New York Times, The Washington Post, USA Today, Bloomberg, Business Insider, Axios, Yahoo Finance, Morning Brew, MarketWatch, Barron’s, CNN, CNBC, and The Economist. If you have questions, please call us at 203.458.5220, or reply to this email to reach me, Liz Cook.
Have you ever put your coffee cup on the roof of your car and not realized it was there until you took a sharp turn and it flew off? Welcome to the Navy! An F/A-18 Super Hornet fighter jet just fell off the USS Harry S. Truman into the Red Sea in exactly that same manner. The jet had not been fully secured when the aircraft carrier apparently had to take evasive maneuvers to avoid Houthi-fired missiles. The jet, worth $67 million, is now lost at the bottom of the sea. No report on how many cups of coffee were lost.