Kirk's Market Thoughts: Market Update - Gasoline Nearing Eight Dollars Per Gallon in Menlo Park California

Friday, June 03, 2022

Market Update - Gasoline Nearing Eight Dollars Per Gallon in Menlo Park California

As of Friday's close:

the Nasdaq and Wilshire 2000 small cap indexes remain in bear markets while the S&P 500 has rallied off its bear market low back into "correction" territory while the Dow never reached the 20% down bear market threshold.
Interest rates have come down some but gasoline prices in some parts of California are OVER $7.00 a gallon in the Bay Area and nearly $10 further away!
The stock market, which has rallied a bit off recent bear market (down 21%) lows, is having trouble discounting the future unsure if high inflation will continue and push us into stagflation or a recession or will inflation fall as once hoped which would make current stock prices appear a bargain.
See the video below where former Federal Reserve Chair and current treasury secretary for the Biden administration admits she was wrong in predicting inflation would be transitory.

The most expensive gas in US is at this Mendocino station at nearly $10 a gallon, GasBuddy says:

In Menlo Park, the financial engine of the Silicon Valley found in venture capital offices on Sand Hill Road, prices are nearly $8.00!

On Sand Hill Road in Menlo Park CA

Gas Buddy isn't showing the Menlo Park prices this morning (6/4/22 7:03 AM update) on their price map... Odd because the idea is to show how to save money by driving a bit.

Nobody should be surprised. We as a country voted to "solve Climate Change" by making gasoline expensive compared to electricity. The trouble is natural gas prices are soaring and so are the prices we pay for electricity since most states use natural gas to satisfy the incremental demand for electricity.

California's Governor Newsom says he's doing all he can to avoid gas rationing and power blackouts this summer by keeping our last nuclear power plant online. All this "future demand" adds to current demand causing prices to soar long before Russia invaded Ukraine as this price graph shows.

Fortunately for the rest of the country, gasoline prices are high but not nearly as high as California:

https://gasprices.aaa.com/

Pete Buttigieg, channeling his internal Marie Antoinette says buy an EV (ie the poor can eat cake.)

So, even if everyone follows the Biden Administration's goal to have us switch to EVs, there might not be enough electricity for them and that will push energy prices at home even higher.

Soaring energy prices add cost to just about everything which could push us into a recession. But with all the government stimulus money not spent and perhaps more for infrastructure and other projects plus artificially low interest rates from the Fed, we could see high inflation remain.

Just this week, former Fed Chair and Biden Administration treasury secretary Janet Yellen told an administration friendly CNN that she was WRONG last year about inflation.

"Look, I think I was wrong then about the path inflation would take...."

All this has the stock markets in turmoil.

Interest Rates: After closing the week at 3.12% on May 7, 2022, the 10-year US Treasury Bond fell to 2.74% last week then soared again this week to 2.96% as the bond market can't decide if it fears inflation or a recession more.