Earlier today we reported that for at least 40% of Americans – up from 27% just two years ago – the American Dream is dead and buried and has been replaced with the American nightmare: renting for life.

And here’s why: according to a new survey from Clever Real Estate, a St. Louis-based real estate company, thanks to the galloping housing inflation, the median-priced home in the U.S. now costs $332,494, with NAR and Census Bureau data reporting that the median Existing and New Home sale price has risen to $393,500 and $430,700…

… meaning prospective buyers need an annual income of at least $119,769 to afford it with a 10% down payment.

That’s about $45,000 more than the typical household earns annually ($74,755). Even with a 20% down payment, home buyers would need to earn at least $98,202, still well above the typical salary.

The last year that the median buyer put down 20% was 1989, according to data from the National Association of Realtors (NAR). Today, the median buyer puts down just 15% of a home’s purchase price.

The median U.S. income earner ($74,755) with 10% down could only afford a home that costs $207,529 — 38% less than the current median-priced home.

A median-income family aiming to afford a median-priced home would need a hefty 45% down payment, or mortgage rates would need to drop from the current rate of 7.2% to 4% to make it work.

Even with a savings rate of $1,000 each month, it would take a household five and a half years to amass the $66,500 needed for a 20% down payment on a home priced at the median of $332,494.

As it stands, 61% of Americans find themselves priced out of the market even with a 20% down payment.

The median home is affordable for median earners in just four states (West Virginia, Ohio, Iowa, and Indiana)…

… and only six of the 50 largest metro areas:

1. Pittsburgh, PA
2. Cleveland, OH
3. St. Louis, MO
4. Memphis, TN
5. Indianapolis, IN
6. Birmingham, AL

Unsurprisingly, Los Angeles is the least affordable city, where buyers need an income of a whopping $249,471 to comfortably afford a median-priced home — nearly three times the actual median income of $87,743.

Read the full report at: http://www.listwithclever.com/research/how-much-house-can-i-afford-2024

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

A police officer in Washington was disciplined after violating rules guiding the conduct of undercover law enforcement, according to Washington’s police department.

The investigator “was disciplined for violating general orders relating to undercover operations” during the breach of the U.S. Capitol on Jan. 6, 2021, a spokesperson with the Metropolitan Police Department told The Epoch Times via email.

“The member violated policies and procedures specific to working in an undercover capacity,” the spokesperson added.

In documents the department gave to the Council of the District of Columbia earlier this year, the agency said that an investigator was disciplined because he had “participated in [the] January 6 riot.”

The officer, whose name was not listed but who was described as a white male, was suspended for 10 days for prejudicial conduct, or violation of “orders/directives,” according to the documents.

The document included brief summaries of allegations that were presented to the Internal Affairs Division, according to the spokesperson. “In this specific case, the summary incorrectly characterized the allegations,” the spokesperson added later. “We are unable to provide additional details regarding the discipline served, than what is listed in the document, due to employee privacy laws.”

The Epoch Times has submitted a Freedom of Information Act request to the department for more information surrounding the situation.

The Washington City Paper first reported on the documents.

According to court documents filed in 2023, multiple Metropolitan Police Department officers were working in an undercover capacity around the Capitol on Jan. 6. Video footage and images show the officers joined in the crowd that climbed over barricades and let out chants such as, “Whose house? Our house?”

The government later told defense attorneys that 12 Washington officers with the Electronic Surveillance Unit were undercover on Jan. 6, as well as additional officers from the Narcotics Special Investigation Division. Nicholas Tomasula, one of the officers, said he was tasked with recording what unfolded and nothing else but said he joined in when the crowd was chanting and urged people to “go, go, go” up a flight of stairs at the Capitol.

Another officer, Shane Lamond, was charged in 2023 with obstruction of justice and making false statements after allegedly communicating with the leader of the Proud Boys group.

Former FBI agent John Guandolo has also testified that he was with agents on Jan. 6, and saw other agents among the crowd.

Some defendants, including William Pope, have continued seeking more information about the undercover officers, including their identities, and details have slowly emerged from court filings, witness testimony, and other documents and proceedings.

Man Sentenced

A Florida man, meanwhile, became this week one of the latest Jan. 6 convicts to be sentenced.

U.S. District Court Judge James Boasberg sentenced Isreal Easterday, 23, to 30 months in prison.

The sentence was below the 151 months that prosecutors sought for Mr. Easterday, who was convicted by a jury on nine counts, including assaulting, resisting, or impeding officers using a dangerous weapon, after spraying officers with pepper spray outside the Capitol.

Mr. Easterday carried out the actions as he held a Confederate flag and wore a hat that said he loved then-President Donald Trump, according to court filings.

Prosecutors described Mr. Easterday’s violent conduct, destruction of evidence, and lack of remorse in asking for a lengthy sentence. Defense lawyers said that their client’s conduct was serious but that the case “centers on 20 seconds in which a teenager made the worst decision in his life, is extremely remorseful, and whose conduct did not result in any lasting physical injuries.” They requested a prison sentence of 12 months and one day.

Judge Boasberg, an appointee of former President Barack Obama, said Mr. Easterday’s young age was a factor in diverging so sharply from the recommendation from prosecutors. He said Mr. Easterday, who grew up on a family farm and was homeschooled, “may not have fully appreciated what was going on” at the Capitol, the Associated Press reported.

Mr. Easterday apologized for his actions and told the judge after receiving the sentence that he would not let the judge down.

Judge Boasberg also ordered Mr. Easterday to complete 500 hours of community service and pay $2,000 in restitution.

Former US Congressman Ron Paul has gone completely ham on Speaker Mike Johnson, first – writing in a recent Op-Ed that Johnson has “betrayed liberty and the Constitution” after reauthorizing FISA surveillance but casting the deciding vote that tanked an amendment to require a warrant.

Section 702 authorizes warrantless surveillance of foreign citizens. When the FISA Act was passed, surveillance state boosters promised that 702 warrantless surveillances would never be used against American citizens. However, intelligence agencies have used a loophole in 702, allowing them to subject to warrantless surveillance any American who communicated with a non-US citizen who was a 702 target.

…

Despite the fearmongering by Mike Pompeo and others, as well as the opposition of both President Biden and Speaker Johnson, the amendment failed to pass by only one vote. The amendment would have passed had Speaker Johnson not cast a rare floor vote (speakers usually do not vote on legislation) against the amendment. -Ron Paul

Paul went further this week – calling Johnson out for being a complete sellout and acting, once again, against the interests of Americans.

“Senate Majority Leader Chuck Schumer is reported to have bragged to his colleagues about how easily Speaker Johnson gave Democrats everything they wanted and asked for nothing in return,” Paul noted, adding that Johnson “reached across the aisle, stiffed the Republican majority that elected him speaker, and pushed through a massive gift to the warfare corporate welfare state.” in passing a massive aid package for Ukraine and Israel.

“After the House voted to send another $60 billion to notoriously corrupt Ukraine, members waved Ukrainian flags on the House floor and chanted, ‘Ukraine! Ukraine!’ While I find it distasteful and disgusting, in some ways, it seemed fitting.”

Watch:

Ron Paul Trashes Speaker Mike Johnson in Stunning New Monologue

“Senate Majority Leader Chuck Schumer is reported to have bragged to his colleagues about how easily Speaker Johnson gave Democrats everything they wanted and asked for nothing in return.”

“In the worst example of… pic.twitter.com/aVSTxeTNfs

— The Vigilant Fox 🦊 (@VigilantFox) April 23, 2024

Here’s what Tucker Carlson had to say recently about Johnson…

Tucker Carlson: “Here’s the illusion we fall for time and again. We imagine that evil comes like fully advertised as such, like evil people look like Anton Lavey…Evil is an independent force that exists outside of people, that acts upon people…What vessel do they choose? The… pic.twitter.com/ugF3bMgxcx

— Camus (@newstart_2024) April 21, 2024

Authored by Simon White, Bloomberg macro strategist,

There continues to be scant evidence of inflation hedging in markets despite clear signs price-growth risks are rising.

Inflation remains in focus this week as we get the first quarter’s update for US PCE on Friday. Regardless of one data point, the trend is clearly that inflation has stopped falling, with multiple leading indicators suggesting a recurrence.

It’s not just in the US though. Globally, inflation is resurfacing. Through last year, the Citi Inflation Surprise indices were falling almost everywhere. Year-to-date in 2024, they are now rising in two-thirds of the countries the indices cover.

But that is not being priced in markets. Ven Ram points out that two-year Treasuries would struggle to sell-off on even a sticky core PCE print later this week, and that’s probably true in the nearer term. But even two-year yields are not yet pricing in the likelihood of a proper inflation shock that would require several more hikes from the Federal Reserve. That’s not a base case at the moment, but its probability is still underpriced.

Yields have been rising, and so have gold and silver, but there is a distinct lack of the inflation urgency seen in 2021 and early 2022, when CPI was hitting decade highs and the Federal Reserve had not yet responded with interest rate hikes.

As one sign of the relative complacency, take two ETFs that are designed to hedge inflation, INFL and IVOL.

These saw marked inflows in 2021, but the flows have been muted since the Fed started raising rates in 2022 and have remained so.

There have also been no marked pick-up in flows to ETFs of inflation-linked bonds, such as the TIP ETF.

Similarly shorting interest in Treasuries continues to be minimal. JPMorgan’s Client Treasury Survey is registering a near series-low of outright shorts, while short interest in the TLT long-term UST ETF is low and has barely risen.

There are no inflation alarms ringing. But that could prove to be misguided as inflation shows clear signs of resurfacing.

This is even more so as the structural backdrop, with increasingly coordinated fiscal and monetary policy, is conducive to a secular rise in price growth.

One day after the US sold a record amount of 2 Year paper in a very strong auction, the Treasury has followed that up with a record amount of 5 year paper, this time in a less than impressive sale.

The $70BN in 5Y paper was up $3BN from $67BN last month and was the highest amount on record offered for the tenor. But don’t worry there will be plenty more record auctions in the future: after all, the US has now crossed into the Minsky Moment and it is now issuing debt just to pay the interest on its existing debt.

The auction priced at a thigh yield of 4.659%, up sharply from 4.235% last month and the highest since October’s cycle high of 4.899%. Unlike yesterday’s 2Y auction which stopped through, today’s sale modestly tailed the When Issued 4.655% by 0.4bps.

The Bid to Cover was also weaker than last month, dropping from 2.41 to 2.39, and just below the 2.411 six-auction average.

The internals were also subpar, with Indirects sliding to 65.7% from 70.5% last month, if almost on top of the recent average of 65.4%. And with Directs taking down 19.2%, above the 17.9% recent average, Dealers we left holding 15.0%, just below the recent average of 16.7%.

Overall, this was a mediocre and forgettable auction, and one which accelerated the move higher in bond yields which are now at 4.654%, just shy of session highs.

Cocoa futures in London on Tuesday plunged the most since April 2009, tumbling as much as 8.1%, while prices slid as much as 7.7% in New York. Prices recovered some losses on Wednesday morning. It appears the downdraft was caused by fast-money traders taking profits after a record high of $12,250 per ton was recorded in New York on Friday. 

Cocoa prices faded record highs as “opportunistic fast traders” exit positions to take profits after bearish signals flashed in recent sessions, Tristan Fletcher, chief executive officer at ChAI, a platform that uses AI to analyze commodity markets, told Bloomberg. 

Last week’s catalyst for record-high prices came after data about grindings—where cocoa transforms into butter and powder used in candy—showed that demand destruction has not materialized despite soaring prices. 

Here’s the cocoa grindings data from last week that served as fuel for bulls (via Barchart): 

Cocoa also has support on signs that global cocoa demand remains resilient despite record-high prices. Last Thursday, the National Confectioners Association reported that North American Q1 cocoa grindings rose +9.3% q/q and +3.7 % y/y to 113,683 MT. Also, last Thursday, the Cocoa Association of Asia reported that Q1 Asia cocoa grindings rose +5.1% q/q, although they fell -0.2% y/y to 221,530 MT. In addition, the European Cocoa Association reported that Q1 European cocoa grindings rose +4.7% q/q, although they fell -2.2% y/y to 367,287 MT.

Paul Joules, an analyst at Rabobank, wrote in a note that grindings figures are “an indication that for now demand is holding up despite current pricing,” adding that “demand destruction will come, but clearly it’s taking longer to filter into grind data than the market was anticipating.”

Famed commodity trader Pierre Andurand told Bloomberg via an emailed interview, “We will finish the year with the lowest stocks-to-grinding ratio ever, and potentially run out of inventories late in the year.” He added that cocoa prices “could break $20,000 later this year” based on the thesis of worsening drought and disease ravaging the world’s largest cocoa farms in West Africa.

Paul Torres, a London-based trading and agricultural consultant, said, “I do not foresee prices falling significantly,” adding that prices could range between $8,000 to $10,000. 

Torres noted: “There could be just some easing of the frenetic moves we’ve seen.”

Meanwhile, analysts from JPMorgan recently told clients that cocoa prices in New York could come down to around $6,000 a ton in the medium term, while Citi analysts said a bear market could begin in early 2025.

There is some good news for cocoa supply: Bloomberg quoted Marijn Moesbergen, sourcing lead at Cargill, at the World Cocoa Conference in Brussels on Wednesday as saying cocoa production is expected to bounce back next year as the El Nino effect won’t be in play. 

“The current prices are maybe a bit overshooting. The question indeed is what will be the new equilibrium between this supply issues versus what will be the demand impact going forward,” adding, “That question will be answered in the coming period.” 

The combination of a worsening global supply deficit plus bullish grindings data might only suggest prices have to head higher. 

Authored by Charles Hugh Smith via OfTwoMinds blog,

This is why those who understand these dynamics are getting out, even though the city was their home.

A correspondent who prefers to remain anonymous sent me this account of the “doom loop” that is playing out in many American cities. The correspondent makes the case that the Doom Loop is not limited to specific cities, but is a universal dynamic in all US cities due to the core causes of the Doom Loop: financialization and the multi-decade decay of cities’ core industrial-economic purpose / mission.

I have edited the text slightly, with the correspondent’s approval.

The context of the Doom Loop is the process and politics of this decay are the second-order results of central bank easy money (free fiat). That led to financialization becoming the city’s core function and the subsequent loss of the city’s previous mission. The people living in cities just haven’t gotten the message yet.

As such, there is no reversing the process until the centralization of capital itself is reversed.

The typical media articles on metropolitan “doom loops” make it seem like not every city is headed down the path. Now that financialization does not require a physical presence, every city above a certain size will share the same experience. There will be local variations which impact the trend, such as a potential utility as a large pool of voters (i.e. a vote farm), but the decline is part and parcel of financial ‘virtualization.’

It is inevitable.

Even hosting one of the twelve central reserve banks won’t save you.

The process when a city loses its purpose but persists due to inertia follows this basic pattern:

1. Corporate consolidation costs the city its financial base as Fortune 100 corporations are sold to conglomerates closer to the centers of finance.

This is one more second-order effect of easy money: global corporations can easily finance the acquisition of multi-billion dollar companies.

2. In the past, cities received huge government subsidies for re-development, but none for ongoing maintenance. All the redevelopment projects looked great at first, but with little funding for maintenance, they’ve gone downhill and many are now dangerous.

Today, the only redevelopment is done by the billionaire class who make most of their money from (surprise) finance. Once the billionaire loses interest, it’s gone, too.

I would rather find myself in a developing-world city than an American downtown, at least there would be people around. Many American downtowns are literally apocalyptic.

3. Major league sports are increasingly an exercise in force protection. It’s like going inside a forward firebase in Iraq. People still get shot in the stands from guns fired outside the bubble. Unsurprisingly, some major league teams are exploring space outside the cities despite their stadiums being only 20 years old.

4. When federal agencies build new facilities, they’re essentially fortresses with direct entrance/egress from the highway. They add little to nothing to the surrounding economy.

5. Real estate, sales and personal property taxes in cities are typically the highest within the state. As tax revenues decline, cities’ political leaders increase business taxes and start floating ideas such as taxing non-profit organizations: a financial death spiral indeed. Should taxes increase, organizations and companies have said they will leave.

6. In the industrial economy, the core purposes of cities were derived from advantageous locations and key transportation assets (first water, then rail, then roads, and later aviation). In the information age, those benefits are diminished or gone. As a result of their transportation advantages, cities became manufacturing and warehousing hubs. Those too are diminished or gone.

7. Cities have lost their core economic purpose and are choking on their high legacy costs. The proposed substitute purposes–entertainment and bourgeois lifestyles–are not true substitutes. Fine dining and secure condos with delivery do not replace actual economic functions.

8. Making matters worse, the upper-middle class doesn’t want affordable housing in their enclaves, as it lowers property values. So the workers needed to keep the city functioning can no longer afford to live there. Yes In My Backyard (YIMBY) movements to promote affordable housing are not enough.

9. Much of the politics the media focuses on are a consequence of decline, not a cause, and the net result of all the in-fighting is some version of stasis: all sorts of solutions are proposed, but since none address the core sources of decline or the cities’ high legacy costs, they boil down to rearranging deck chairs on the Titanic.

This is why those who understand these dynamics are getting out, even though the city was their home.

Of related interest:: The Real Estate Nightmare Unfolding in Downtown St. Louis: The office district is empty, with boarded up towers, copper thieves and failing retail–even the Panera outlet shut down. The city is desperately trying to reverse the ‘doom loop.’

*  *  *

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Authored by Michael Lebowitz via RealInvestmentAdvice.com,

Most NFL general managers (GMs) are optimistic and displaying overconfidence today as they prepare for tomorrow’s NFL draft. The draft is a once-a-year opportunity for GMs to acquire talent.

Like investors, GMs often think they are smarter than their competitors, aka the market. Yet, they frequently have similar mindsets and follow the same narratives that drive their competition.   

As we will share, overconfidence and groupthink among football GMs and investors are behavioral flaws that often harm performance. Having the tools and strategies to mitigate our behavioral traits is extremely valuable and can lead you to better returns.

Overconfidence In The NFL

Four of the first five picks in the draft are expected to be quarterbacks. Not only is the quarterback the most important position on the field but this year’s draft is hyped as having several future greats.

Based on data from Warren Sharp, an NFL analyst, most of the quarterbacks taken in the early rounds will be average. His Fox Sports article entitled The success rate of first round QBs makes Lamar Jackson’s case for him, quantifies just how poor the odds are of drafting the next Super Bowl-winning quarterback. 

There have been 38 quarterbacks drafted in the first round since 2011, the year the NFL changed the collective bargaining agreement.

These 38 first-round quarterbacks have made a total of 1,909 starts. Their record? 1034-1035-7.

He claims that of those 38 quarterbacks, only one, Patrick Mahomes, has won a Super Bowl. Furthermore, of the 28 from that group who are no longer on their initial contracts, the average time they were a starter was a mere 3.4 years.

Despite the proven mediocrity of quarterbacks taken in the first round, we have little doubt that overconfidence will be on full display by the GMs drafting quarterbacks with their top picks after they make their selections.

Groupthink In The NFL

This behavioral trait arises when people seeking conformity think and act similarly. Typically, groups reach a consensus opinion without proper evaluation and with minimal alternative viewpoints.

For instance, it is widely accepted that the four quarterbacks likely to go in the top five, Williams, Daniels, Maye, and McCarthy, will be excellent pros. Most NFL analysts offer differences between the quarterbacks but praise the physical and mental traits they believe will make them NFL starts. Very few analysts have poor ratings on any of those four quarterbacks.

Choosing one of the four quarterbacks is comforting. Simply, GMs have cover if their pick is a dud. Who could have known? Every expert thought he would be a superstar!

Investor Overconfidence And Groupthink

Replace players with investment ideas and GMs with investors. The overconfidence and groupthink mentality impacting GM draft day decisions are similar to those investors always face.

We quantified the odds of GMs picking above-average quarterbacks earlier. Per DFA Funds, the odds of an investor outperforming the market are even more daunting.

We saw from the data above that an investor has about a 75% chance of underperforming the market in any given year, which means you have a 25% chance of beating the market in any given year.

The message to take away from that statistic is to leave your confidence at the door!

Regarding groupthink, most investors, like GMs, find comfort in knowing that many other investors are doing the same thing. Market narratives are a form of groupthink. Narratives help explain market movements and trends. Often, a narrative develops after a trend has started. In other words, rightly or wrongly, the narrative is the rationale.

Today, narratives appear to be quicker to form and longer lasting. Maybe the advent of social media has allowed for their quicker dissemination and growth.

Narratives describe the mindset of a group of investors. When you unknowingly invest based on a narrative, you are likely setting yourself up for failure.

Strategies To Combat Behavioral Traits

Appreciating that GMs have a one in three chance of successfully using a precious top-five draft pick on a quarterback or that only a quarter of investors will beat the market, we best have tools to manage our behavioral traits and improve our odds of success.

Zig

Warren Sharp advises GMs to “zig while others zag.”

To zig is to have a contrarian mindset. For instance, it’s important for your portfolio to have popular stocks leading the market higher. But at the same time, understand that confidence can wane quickly, and a new set of stocks will take the throne soon enough. Don’t overstay your welcome in a narrative.

It wasn’t that long ago that the Magnificent Seven stocks were all the rage. Their returns handily beat almost every stock and index. Holding a meaningful subset of the seven stocks was vital to keep up with the broad market indexes. However, the Magnificent Seven’s period of outperformance has either ended or is on pause. But, the narrative still thrives, and whether it’s already happening or will occur shortly, investing in the aged groupthink will catch many investors offside.

Take Profits 

It’s hard to sell when others are buying. Still, when the narrative-driven stocks fall out of favor, the prior profits and reduced position sizes will bolster returns and lessen the risk of underperforming the market.

Appreciating what the market, and not popular narratives, tell you is equally vital. For instance, have you noticed that utilities and energy are the best-performing sectors lately? Those solely holding the Magnificent Seven and neglecting other sectors are falling behind.

The SimpleVisor table below shows the relative performance of the Magnificent Seven stocks and XLU, the utility ETF, versus the S&P 500 over various time frames. Other than NVDA, most of the seven have been underperforming the market as of late. Also, the once poorly performing utility sector has been beating the market for the last 45 days. Selling the Magnificent Seven 45 days ago to buy utilities would go against groupthink, but it was a smart call.

Appreciate Your Options

The GMs with the top five picks have a precious option. Instead of picking a quarterback with limited odds of success, they can trade the pick to another team. In exchange, they might receive multiple high-level draft picks, boosting the odds of success.

Other positions in the NFL draft have much better success rates than quarterbacks. If a GM can set aside their confidence in their ability to pick the right quarterback, they can increase the odds that they could easily land at least two very good players and possibly a pro bowler. Maybe they can even use one of the picks to get a quarterback in the later rounds. Let’s not forget Brock Purdy, the San Francisco quarterback who led the 49ers to the Superbowl, was Mr. Irrelevant, the last person taken in the draft.

Investors have options, too. Many stocks, sectors, and factors will likely outperform the market but do not fit the narrative du jour. While buying what others aren’t may be uncomfortable, it may be more profitable.

The other lesson is to diversify. Putting most of your eggs in one basket can significantly impact your relative performance. You will underperform if you are proven wrong, as is most common.

Let Winners Run

One of the most popular Wall Street sayings is, “Cut your losses short and let your winners run.”

If our chances of beating the market are one in four, doesn’t it make sense to trade your portfolio actively? Many investors do the opposite. Their confidence and the attraction of groupthink keep them in underperforming stocks. At the same time, alternative stocks that are less followed may be the best bets.

It can be appropriate and profitable at times to follow the crowd. However, at all costs, don’t ignore alternative views.

Summary

We risk underperforming the market by falling victim to our natural behavioral traits. Therefore, we owe it to ourselves to entertain and understand alternative views. As odd as it may seem these days, we need to watch FOX News and read the New York Times. We must challenge ourselves to understand better things that may not be comfortable.

Seek out and study the views of others with whom you disagree. By better understanding opposing opinions, you will strengthen your existing views or better recognize flaws in your current logic. Either way, an investment thesis is better for it.

Most importantly, remember that you are only human. The Patrick Mahomes of the investment world are few and far between. At times, overconfidence is a good trait, but it can also be a critical flaw.

Oil prices are drifting lower this morning, despite API reporting a surprise crude inventory draw last night, as hopes that geopolitical tensions are easing (hope is not a strategy) combined with a reduced expectation of economy-juicing rate-cuts are weighing on crude prices.

Supporting the upside, the US Senate, meanwhile, passed tougher measures against Iran in response to its attack on Israel earlier this month, with President Joe Biden saying he’ll sign the legislation into law. But the market is clearly calling Biden’s bluff on this threat as he faces soaring pump prices domestically which will do nothing to help his “but I fixed inflation” narrative into the election…

Source: Bloomberg

However, for now, all eyes are on the official inventory and supply data for any signs of overall tightness, and refined products demand as the summer driving season is fast approaching.

API

• Crude -3.23mm (+500k exp)

• Cushing -898k

• Gasoline -595k (-1.5mm exp)

• Distillates +724k (-1.0mm exp)

DOE

• Crude -6.4mm (+500k exp)

• Cushing -659k

• Gasoline -634k (-1.5mm exp)

• Distillates +1.6mm (-1.0mm exp)

Confirming API’s report, the official data showed crude inventories plunging last week by the most since January. On the product side, it was mixed with gasoline drawing down by distillates building…

Source: Bloomberg

There was a 909k b/d drop in the adjustment factor versus last week, the biggest decline since February, coinciding with the big increase in crude exports. At 257k b/d this week’s balancing measure was pretty small by its own highly volatile standards.

Source: Bloomberg

The Biden admin added 793k barrels to the SPR last week – the largest addition since January… and probably the last!

Source: Bloomberg

Implied gasoline demand fell yet again, nearly slipping back below 2022 seasonal levels for the first time since early March.

The figure typically sees decent growth at this point in the year, yet a post-Spring Break slump appears to have become the norm since 2020.

In comparison to pre-pandemic demand, the figure is at its lowest since 2014.

Source: Bloomberg

US crude production was flat at 13.1mm b/d (near record highs) and we note a very modest rise in rig count trends starting…

Source: Bloomberg

WTI was trading around $83.00 ahead of the API data and jumped back into the green for the day after the crude draw…

The conflict in the Middle East has “undoubtedly exacerbated tensions in an already volatile region,” Stephen Innes, managing partner at SPI Asset Management, told MarketWatch.

“While the recent attacks have been downplayed, the potential for further escalation cannot be entirely dismissed.”

However, “there’s a lesson to be gleaned from this situation, particularly in how swiftly demand responded to higher oil and gasoline prices, as evidenced by the increase in U.S. oil stockpiles,” he said.

Finally, timespreads are signaling tighter conditions, with the gap between Brent’s two nearest contracts widening to $1.05 a barrel in backwardation, a bullish pattern in which the nearer contract trades at a premium to the next in sequence. That compares with 69 cents a week ago.

German security services say they’ve arrested an unprecedented six suspected spies in only the past week, and four of these are believed to have been working for the government of China, while the other two are suspected Russian agents. 

As we reported earlier, the latest case unveiled Tuesday centered on a staffer who worked for a high profile German AfD member of European Parliament. Identified only as Jian G., he had reportedly been a staff member for German MEP Maximilian Krah going back to 2019. “In January 2024 the accused repeatedly shared information about negotiations and decisions in the European Parliament with his intelligence service employer,” the prosecutors office said.

The day prior, Monday, saw three Germany citizens accused of having ties with Chinese intelligence arrested. Their case appears even more serious as it involves accusations that they transported sensitive technology to China which has potential military uses, violating Germany’s export laws. 

One suspect tried to export a specialized laser without permission, alongside two others – a German couple – who also sought to procure advanced technologies which investigators suspect were to help Chinese naval development: 

The couple allegedly set up a research transfer agreement with an unidentified German university, the first step in which was to draw up a study for a Chinese partner on the technology of machine parts that could be used for powerful ship engines, including those in battleships. Thomas R.’s handler at the MSS was behind the Chinese partner and the project was financed by the Chinese state, prosecutors said.

At the time of the arrests, the suspects were in negotiations on further research projects that could be useful for expanding China’s naval combat strength, they added.

Thomas Haldenwang, president of Germany’s domestic intelligence service, said following the detentions: “We initiated these investigations, and once the evidence was clear, we were able to hand this case over to the police and the public prosecutors,” according to told DW.

And head of the Parliamentary Control Committee for the Intelligence Services in the lower house, the Bundestag, said, “We must finally understand that this is a very serious and very real threat to our security.” He added, “We must act quickly and decisively both through criminal prosecution and by uncovering the structures and networks.”

According to more from Germany federal prosecutors: 

One of the suspects, identified only as Thomas R. in line with German privacy laws, was allegedly an agent for an employee of China’s Ministry of State Security and procured information in Germany on “militarily usable innovative technologies” for that person, federal prosecutors said in a statement.

The three suspects had reportedly been working on expanding their research contacts and endeavors reportedly in hopes of procuring further sensitive technologies which might be useful for the Chinese government.

The timing of this significant spy round-up involving China came at an interesting moment – just a week following the three day visit of Chancellor Olaf Scholz to China. It was his second trip there since taking office in 2021. Germany officials have refused to comment on whether he knew of the investigation or how far it had progressed at the time he made this latest trip.

Truly a fascinating coincidence that literally days after Scholtz comes back from a trip to China that was viewed as successful in resetting the relationship, they suddenly find all those Chinese spies in Germany.

Almost as if someone was trying to unset the reset… but here I… https://t.co/VKSGsRf8N7

— Arnaud Bertrand (@RnaudBertrand) April 24, 2024

As for the pair of alleged Russian spies, they are German-Russian citizens who were arrested in Bayreuth, northern Bavaria. They are believed to have been monitoring US Army bases in Germany, particularly ones connected with Pentagon programs to train Ukrainian troops. A BBC report says it went beyond even scouting secretive facilities, but that the spy duo had plans to conduct. Investigators cited “preparing explosive and arson attacks, especially on military and industrial infrastructure. Dieter S is said to have scouted potential targets including US military facilities, taking photos and videos and handing the information to the Russian contact.”