Energy Prices, Energy Market, Retail Sales, Options Trading, Apple (AAPL), and Harrison Johnson, CFP®: Estate Planning and Beneficiaries
Energy prices continue to climb as regular gas prices at a national level hit a record $4.523/gallon and diesel prices hit $5.573/gallon. Last month gas prices were at $4.08/gallon and diesel prices were at $5.028/gallon. If we look at last year, gas prices were at $3.045/gallon and diesel prices were at $3.171/gallon. For us lucky CA residents, prices for regular gasoline have topped a record average of over $6/gallon.
You have seen a lot of rhetoric about price gouging from energy companies as the reason for higher gas prices. But realistically, the answer is much simpler and can be understood by supply and demand. To begin oil and gasoline/diesel are different. Oil is used to refine products such as gasoline and diesel and is an input cost. There is a correlation between the two, but oil does not fully account for changes in gas/diesel prices.
Retail sales had a very similar report to last month as the growth was strong, but much of the growth can be attributed to inflation and price increases. The headline number shows April retail sales climbed 0.9% compared to March and were up 8.2% compared to April 2021.
Are the small investors getting smarter or did they get burnt so bad by options trading that they’re now backing away? The most recent data shows at the end of March, small investors made up 26% of total option activity. This was a decline from last year when it hit 30%. The good news for investors is with less option activity this could reduce the volatility in the market. That does not mean it will not continue adjusting downward, but it should mean the swings should not be as brutal if many small investors do not hold options and begin panic selling.
One of the famous investors from the Big Short, Michael Burry, has now turned his attention to Apple and is betting the stock will decline. Burry is utilizing bearish puts to hopefully profit from a decline in Apple's stock. Even with the recent pullback, Apple still trades at over 20x 2023 expected EPS of $6.54. For a company that is now looking at sales and EPS growth in the single digits I would not say this company is a value play. While we do not short or place bets against stocks, I would not be a buyer of Apple at these levels.
Harrison Johnson, CFP®: Estate Planning and Beneficiaries, New information from the IRS, Individual Retirement Account (IRA), Making sure your beneficiary is set up properly.
Other Companies Discussed:
Ready Capital Corp (RC)
Occidental Petroleum Corporation (OXY)
Global X MLP & Energy Infrastructure ETF (MLPX)
Camping World Holdings Inc (CWH)