• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Fat Tail Daily

Investment Ideas From the Edge of the Bell Curve

  • Menu
    • Commodities
      • Resources and Mining
      • Copper
      • Gold
      • Iron Ore
      • Lithium
      • Silver
      • Graphite
      • Rare Earths
    • Technology
      • AI
      • Bitcoin
      • Cryptocurrency
      • Energy
      • Financial Technology
      • Bio Technology
    • Market Analysis
      • Latest ASX News
      • Dividend Shares
      • ETFs
      • Stocks and Bonds
    • Macro
      • Australian Economy
      • Central Banks
      • World Markets
    • Small Caps
    • More
      • Investment Guides
      • Premium Research
      • Editors
      • About
      • Contact Us
  • Latest
  • Fat Tail Series
  • About Us
Commodities Resources and Mining

Two Markets Doing 180 Degree Turns

Like 0

By Callum Newman, Monday, 01 August 2022

All in all, the current market weakness is a buying opportunity if you’re in for the long term. The short-term time frame is trickier.
  1. Oh my, would you believe this? Just as we all thought oil might head north of US$150 a barrel, part of the sector is doing a 180.

You might notice when you look out the side window of your car, petrol prices are retreating. There’s a reason for this. But is it supply or demand?

Well, it’s probably both. But I suspect it may be more demand softening than supply surging.

PK Verleger is an associate of mine and has covered this space for 50 years.

Data out of the US shows ‘gasoline’ use is down from its previous highs even before COVID. And this is in the peak summer driving period.

This is hitting the refiners between the legs, as Reuters reported the other week:

‘A sudden crash in global gasoline prices in the past two weeks has dented refiners’ profits, pushing up inventories in key trading hubs around the world while looming exports from China and India also add to pressure on growing stockpiles.’

Unfortunately, I don’t have the data for Europe, but one analyst said natural gas prices there are trading for the equivalent of $600 a barrel.

That has to hit demand as discretionary income gets choked.

One wonders if gasoline use will ever breach those old highs in the EU and US.

Data out of California seems to imply a permanent decline because it’s the leading state in terms of electric vehicle (EV) adoption.

Just on that. Another early adopter of electric vehicles is Norway.

Last month, their statistical agency said, ‘electric vehicles now drive more miles annually on average than cars running purely on gasoline or diesel’.

I’m prepared to back the idea that more countries will turn like Norway and California than not in the next five years.

That’s why I view now as a perfect time to accumulate stocks related to the EV transition, like my favourite three.

We just got good news from one of them this morning…and it’s up in trade as I write. Don’t wait!

2) Another statistic release I like to follow is those from the banks each month.

We can see how much credit is going out, and into which sectors. We got the data from APRA last Friday.

The Australian Financial Review (AFR) covered it like this:

‘As banks prepare their earnings updates and the Reserve Bank prepares to once again increase interest rates, more evidence of a slowdown in new mortgage lending to owner-occupiers has emerged.

‘The latest Australian Prudential Regulatory Authority data for June showed lending growth moderated to 0.8 per cent to $10.5 billion for owner-occupiers and 0.7 per cent to $4.8 billion for investors in the last month of the financial year.’

Hmm. Slowdown? OK…yes…0.8% to owner-occupiers may be slowing down, but that figure is much higher than the dog days of 2019.

And get this when it comes to the investors. The AFR says:

‘Investor loans, however, grew by 6.4 per cent month-on-month, the highest since November 2015, as cashed-up landlords get ready for the return of international students and other migrants.’

Hmm. How does the strength in investor lending (and soaring rents) square with those calling for a 15–40% decline in house prices?

In my view, it doesn’t.

It would take a much more substantial subtraction in those credit statistics to have me worried.

But, hey, you don’t have to believe me. The share market can help out here.

For example, REA Group [ASX:REA], which runs realestate.com.au, has rallied more than 20% since June. This wouldn’t happen if the market was still fearful of a property crash.

I’m kind of kicking myself for not buying it for less than $100 when I had the chance. It wasn’t fear that held me back, it was greed. I wanted it cheaper!

Now I think the opportunity may have passed. That’s not to say the market will go up from here. But rarely do you get a second look when a unique opportunity presents.

Ah well! Every day another train leaves the station. To my mind, there’s plenty more bargains around property out there on the market. The previous hammering was prodigious.

But we can see the impetus for a potential rally another way. Interest rate expectations are moderating.

See here from the AFR:

‘Money markets have significantly wound back pricing on the expected peak Reserve Bank of Australia cash rate to 3 per cent, down from as much as 4.5 per cent tipped less than two months ago.’

That doesn’t seem so scary, does it?

3% doesn’t even put the rate at equal to the current rate of inflation.

All in all, the current market weakness is a buying opportunity if you’re in for the long term. The short-term time frame is trickier.

Regards,


Callum Newman Signature

Callum Newman,
Editor, The Daily Reckoning Australia

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

Comments

Subscribe
Notify of
guest
guest
0 Comments
Inline Feedbacks
View all comments
Callum Newman

Callum Newman is a real student of the markets. He’s been studying, writing about, and investing for more than 15 years. Between 2014 and 2016, he was mentored by the preeminent economist and author Phillip J Anderson. In 2015, he created The Newman Show Podcast, tapping into his network of contacts, including investing legend Jim Rogers, plus best-selling authors Jim Rickards, George Friedman, and Richard Maybury. He also launched Money Morning Trader, the popular service profiling the hottest stocks on the ASX each trading day.

Today, he helms the ultra-fast-paced stock trading service Small-Cap Systems and small-cap advisory Australian Small-Cap Investigator.

Callum’s Premium Subscriptions

Publication logo
James Altucher’s Investment Network Australia
Publication logo
Australian Small-Cap Investigator
Publication logo
Small-Cap Systems

Latest Articles

  • America’s next Vietnam begins
    By Callum Newman

    I remember George W Bush on a US carrier declaring ‘Mission Accomplished’ when it came to Iraq in the second Gulf war. That was in 2003. The war was still going in 2011. Iraq became a failed state, instead of a flourishing democracy. The Iranians aren’t stupid.

  • Are we at war with China?
    By Nick Hubble

    Tariffs, fentanyl, the Straits of Hormuz, Canadian steel quotas and the EU admitting “Trump is right” all mean one thing: the West is finally taking on China.

  • Looking for the Catalyst: European Rearmament
    By James Cooper

    Every commodity cycle has a demand catalyst… James Cooper highlights one that few have paid attention to: conflict and military rearming. One of the primary drivers of higher metal prices. Read on to find out why this is important.

Primary Sidebar

Latest Articles

  • America’s next Vietnam begins
  • Are we at war with China?
  • Looking for the Catalyst: European Rearmament
  • An oil price spike is in the offing now
  • The Shopping Revolution No One Saw Coming

Footer

Fat Tail Daily Logo
YouTube
Facebook
x (formally twitter)
LinkedIn

About

Investment ideas from the edge of the bell curve.

Go beyond conventional investing strategies with unique ideas and actionable opportunities. Our expert editors deliver conviction-led insights to guide your financial journey.

Quick Links

Subscribe

About

FAQ

Terms and Conditions

Financial Services Guide

Privacy Policy

Get in Touch

Contact Us

Email: support@fattail.com.au

Phone: 1300 667 481

All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in our reports are forecasts and may not be a reliable indicator of future results. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.

Fat Tail Logo

Fat Tail Daily is brought to you by the team at Fat Tail Investment Research

Copyright © 2025 Fat Tail Daily | ACN: 117 765 009 / ABN: 33 117 765 009 / ASFL: 323 988