Welcome to another edition of “Over the Weekend.” This is where I summarize interesting financial and economic content that I read, listened to, or viewed this past week. I also link to the sources so you can check them out “over the weekend.”
To get new editions of “Over the Weekend” delivered to you every Saturday morning, subscribe for free! You’ll also receive financial market research, educational articles, and more.
1. Warren Buffett likes oil stocks too.
Warren Buffett added nearly 8 million more shares of oil giant Occidental Petroleum (OXY) to his Berkshire Hathaway (BRKB) portfolio last week. In total, Buffett now has a 23% stake in OXY, which amounts to around 208 million shares. This week’s purchases were worth nearly $467 million.
With the price of oil falling to its lowest levels since December 2021, it seems Buffett was buying the dip.
Berkshire Hathaway also owns $27 billion in Chevron (CVX) stock.
The recent drop in oil prices and concerns over the U.S. banking system have hurt the entire energy sector. I still remain bullish on the sector long-term, however, and that includes our Blend Portfolio holdings.
While I never like it when one of our portfolios takes a hit, I suppose it’s a little comforting to know that one of the greatest investors in the world has the same outlook that we do.
Source: Investor’s Business Daily
2. Are inflation numbers good, or just less-bad?
Stocks rallied after Tuesday’s CPI report. Inflation rose 0.4% over last month vs. the 0.5% monthly climb that we saw in January.
In other words, inflation still rising…just not as fast.
Whether it’s an economic report or a company’s earnings release, investors love it when numbers go from bad to less-bad. That’s what happened with the CPI.
But let’s not lose sight of the fact that inflation is still 6% higher than last year. That’s way higher than the Fed’s 2% target. Nevertheless, investors chose to focus on the pace of inflation rather than the actual rate.
Source: U.S. Bureau of Labor Statistics Consumer Price Index Summary
3. It’s time to ask for a raise.
The 6% increase in inflation is just the overall number. Many individual categories experienced larger price swings:
- Food +9.5%
- Fuel oil +9.2%
- Electricity +12.9%
- Utility gas service +14.3%
- Used cars -13.6%
- Shelter +8.1%
- Transportation services +14.6%
Here’s the full list of items from the CPI. (Click the table to see a larger version on the BLS website.)
Many financial commentators are claiming that the bear market is over, inflation is under control, and recession fears were overblown. They point to the recent rally in stocks as evidence.
I’m not going to weigh in on whether or not the bear market is over. I will, however, emphatically say this:
The economy is not the stock market, and the stock market is not the economy.
The stock market is disconnected from the everyday reality that most of us face.
I don’t care if stocks are rallying or crashing. Neither outcome changes the fact that on average, everything you need to live your life costs 6% more than it did last year.
Think of what that means in terms of your income.
If you didn’t get a raise this year, you’ve effectively taken a 6% pay cut.
Many companies provide cost of living adjustments (COLA), but check with yours to see if the amount they’re giving you keeps up with the pace of inflation. If not, consider asking for a raise that at least puts your salary on par with the rising costs of goods and services.
4. Another recession indicator?
Each quarter, the Fed surveys banks about their lending practices to large and middle-market firms. For the last year and a half, the percentage of banks reporting tighter loan standards has been climbing. The latest number stands at 44.8%.
The chart below shows how that percentage has changed over time. But also take a look at the vertical shaded areas. Those indicate U.S. recessions.
Notice that when bank lending standards spiked, a recession often followed. (Click the chart to see a larger version on the FRED website.)
When interest rates are high like they are now, banks have less incentive to loan out money. They can simply keep their cash in low-risk accounts and earn a solid yield.
This also means that they can be very picky about which companies get a loan.
When businesses can’t get loans, it’s more difficult for them to grow. And if they’re not growing, they’re not hiring.
That’s one of the reasons why tightening loan standards is a leading indicator of recessions. It’s certainly not a crystal ball, but it is worth monitoring.
5. A simple, repeatable strategy to profit from market volatility.
Making money in the stock market is hard. It’s even more challenging when stocks wildly swing up and down over short periods of time.
But “hard” doesn’t mean impossible. Here’s a strategy that I use to profit during volatile markets:
For an alternate—yet equally profitable approach—check out how our friends at Mystylework.trading profit off volatility.
Don’t Miss the Next “Over the Weekend”
That’s it for this week’s Over the Weekend. If you’re not yet an Antagonist subscriber, don’t miss the next edition. Sign up now for free!
In addition to Over the Weekend, you’ll receive educational articles, investment research, market insights, and more.