Hello everybody!
CRAZY WEEK
It has been a crazy week in the markets. I can’t wait to read John Mauldin’s newsletter this weekend about the bank situation.
Last Friday, Silicon Valley Bank failed. Two days later, upon announcement of an attempt to raise capital, depositors started withdrawing cash from Signature Bank, causing another bank failure.
Banks receive deposits from customers. Then they invest those deposits in different financial products to generate profits. In general, there are banking-specific regulatory requirements for these kinds of activities.
With respect to the Silicon Valley Bank failure, they investing heavily in federal bonds, for years. Ordinarily, this is a conservative approach.
Contrast a decline in bond prices with rising interest rates and the bank was forced to raise more capital to cover the gap. Customers saw what was happening and made a run on the bank, withdrawing millions in deposits almost overnight.
It’s hard to believe they have the latitude to make those investment decisions either from the bank’s standpoint OR the regulators.
One of my friends, Benjamin Halliburton, said it best in his report. You can access it here. Ben is a very sharp guy and it is worth it to take the time to watch the video. He sums it up very well.
Now, you and I will be paying for this as the Fed prints more money to cover this ONE TRILLION DOLLAR MISTAKE. Now, our Federal Deficit is $32 Trillion instead of $31 Trillion. Oh well………..
So what’s the impact on Oil?
Oil prices decreased about 10% last week. They appear to have hit a bottom around $66 and appeared to bounce back up a bit at the end of the week.
The upside for operators like King is leverage for negotiating services such as rigs and other services we use to drill wells.
What’s the impact of the banking situation on King?
So far, no impact. If anything, we’ve seen more investor partners show up with interest in getting into the current program.
With respect to our bank, we have a strong relationship. They are a private, family-owned business that has been around for more than a century. Their investing approach is conservative and they are in great shape.
Speaking of the Current King Program…
King partners just received their K1s with a write-off of 87% of the their 2022 investment. That is incredible!
Beyond taxes, there are some outstanding results beginning to come in with the current program. If you are not in it, and you are accredited, it’s a good time to have a conversation. You can schedule a Zoom here.
SiriusXM’s Road Dog Trucking asked me to come on for an interview last week!
Gas prices drop, but consumers should brace for pricier summer blend fuel.
Recommended Reads
Petrobras To Gear Up For “Unavoidable” Energy Transition
The Middle East Is Looking To Dominate The Green Hydrogen Market
Alright, that is all for this week. I appreciate all of you that made it here and I look forward to many more.
