Building a Desert City Is Expensive

The Saudis search for 'stability'... Rogue oil cuts... Will it matter?... Doc Eifrig's critical stock market update... Another take on cherries... Lyn Alden on the debt-ceiling aftereffects, commodities, and more...

The Saudis have gone rogue...

I (Corey McLaughlin) mentioned a few times recently to pay attention to the oil markets as the latest OPEC+ oil cartel meeting approached – and we saw increasing drama surround it...

Namely, the Saudi energy minister hilariously warned speculative oil bears two weeks ago to "watch out." In my view, he was alluding to likely more production cuts to be announced from the world's largest oil exporter.

Well, the OPEC+ gathering happened in Vienna yesterday... and that's exactly what happened – but with a notable break in ranks.

The 23-nation organization – which produces roughly 40% of the world's crude oil – made no supply changes for the rest of the year. But the top dog, Saudi Arabia, went rogue afterward and said it will cut supply more than it already has been doing...

After the meeting, the Saudi energy kingpins said the country will cut its supply by 1 million barrels per day. According to the Associated Press...

Calling the reduction a "lollipop," Saudi Energy Minister Abdulaziz bin Salman said at a news conference that "we wanted to ice the cake." He said the cut could be extended and that the group "will do whatever is necessary to bring stability to this market."

I'm sure there's some nuance lost in translation here, but the outcome was that oil prices have risen in recent days. Futures contracts for Brent crude, the international benchmark, are up to around $77 per barrel, about 7% higher than just a few days ago.

Apparently, this stability-focused 'group' is a team of one, though...

Saudi Arabia made this decision to cut supply on its own, apart from the other OPEC+ members. The group has typically agreed on joint policy to influence global oil supply and the various countries' interests... like back in April when it announced surprise 1 million barrel-per-day cuts as a group.

What happened yesterday is a sign of discord... One possibility for the standalone Saudi cuts is to make up for what Russia is not doing.

Russia, the second-largest oil producer in OPEC+, apparently hasn't cut its production like it had pledged to the other oil cartel nations earlier this year. Instead, it's seeking to keep making profits from oil to fund its ongoing war in Ukraine.

The United Arab Emirates' oil minister said on Sunday that there are discrepancies between Moscow's reported supply numbers and independent analysis...

Some of the things that we have seen from Russia on a technical basis just [don't] add up from some of the independent sources.

There is some drama... Everyone wants to make money in the here and now, but it sounds like the largest oil exporters outside of the United States can't agree on how to do it.

And that is probably at least one reason why Western financial-media outlets like the Wall Street Journal, Reuters, and Bloomberg weren't granted access to OPEC's post-meeting press conference to ask questions about everything.

But here's the important part to know...

Simply put, to Saudi Arabia, "stability" means higher global oil prices than we've seen for much of the year. Specifically, the Saudis want at least $81 per barrel of crude oil, which the International Monetary Fund has estimated as Saudi Arabia's breakeven level.

This income would let the Saudis build their futuristic desert-city project called Neom, among other government projects... and keep growing their portfolio and influence.

But prices of Brent crude – the international benchmark – have been heading lower and lower since last summer's peak near $125 per barrel. They've fallen almost 50% and have remained below $81 since early May.

The question is whether this Saudi cut alone can make a difference...

Yes, 1 million barrels per day is roughly 1% of global oil supply... But prices have kept falling even after OPEC+ cut roughly 1 million barrels per day in April, given concerns about cooling demand amid a global recession ahead.

This has helped the inflation outlook and led to lower gas prices. But the reality of oil-supply cuts and the possibilities of more could serve as inflation fuel. As we suspected, prices got a short-term jolt today. As I wrote in the May 25 Digest...

Should the market react like it did last time, a very short-term bullish bet on oil prices could work out well, even if the downtrend remains in place in the longer run.

All that said, in the even longer run – and I'm talking beyond the impact of a potential recession – as several of our editors and analysts believe, there are reasons for higher energy prices in the decade ahead. Supply simply hasn't and likely won't keep up with demand.

Moving on, here's a critical update from Doc Eifrig...

Back in March, readers may remember we shared a brand-new message from Stansberry Research senior partner Dr. David "Doc" Eifrig... Doc told listeners about a potential "reversal window" for the markets that has occurred only a handful of times in the past 75 years.

As we wrote in the March 22 Digest, Doc said this upcoming event could be a big opportunity to build wealth – and maybe the last of these reversal instances for people over 50 years old. He was spreading this word because, as we wrote in March...

Prior instances throughout history have seen massive gains, but most everyday investors have missed out... and most will be caught off guard again.

You see, despite all the volatility we've seen lately, "markets have proven resilient." The S&P 500 Index is 12% off its October low – a big signal to Doc. Folks are starting to believe in stocks again.

As Doc told Retirement Millionaire subscribers back then, he was seeing more and more institutional investors putting money back into stocks. As he said...

Higher stock prices have tempted more buyers, pushing prices even higher. And that makes even more folks want to buy. With so much cash sitting on the sidelines, stocks can rocket higher in no time at all.

This story is playing out just as Doc suspected...

The benchmark S&P 500 Index is up roughly 9% since March 22.

But we're not sharing this just to congratulate Doc on a good call. More importantly, it's not too late to make money from this snowball effect – though it could be getting close. As Doc is reminding folks now, this signal he has been talking about has called – with 95% accuracy – the moment to move out of cash following volatile markets.

And since it triggered, a slew of other signals have since kicked in. As Doc says...

Together, they prove everything I've been saying the last few weeks... was dead right.

Doc is worried that millions of people may miss out on the incredible gains that could be ahead, so I wanted to make sure everyone has a chance to hear his message.

In this free video, he lays out everything about this signal, why you won't hear about it many other places, and much more detail – including the place you should seriously consider moving money today. If you haven't been among the nearly 250,000 people to hear Doc's message already, click here to watch or listen to it right now.

One note for Stansberry Alliance members and Doc's existing Retirement Millionaire subscribers: You already have access to all of the details he is sharing right here and can find the latest issue of Doc's signature publication here with his latest thoughts.

Lastly, today, another view from 'cherry land'...

Somehow, after years of writing the Digest, I'm still somehow astonished by the breadth of our subscribers' experiences and these readers' collective reach. I shouldn't be, but I still am – and this is a good thing.

I would have never guessed a comment about a $14.99 container of cherries would spark such a conversation, but here we are...

Stansberry Alliance member Patrick F., another veteran of the California cherry industry, sent in his take the other day. He noted first that the cherry season started about five weeks ago "down around the Bakersfield area."

Patrick is a longtime exporter of cherries and said that while prices are usually high very early in the season, they normally ease by now... but aren't quite yet. As he wrote...

They usually cascade in very swift fashion once the industry gets going, and it's been going gangbusters for a while now. Prices should be down to $4 to $6 per pound, at least here in California, and my local Save Mart has them for $6 per pound, $3 per pound if you have their app.

Beyond that, Patrick said don't blame farmers for any high prices...

What the reader should really know is that because California cherries are so overly regulated at every step from growing to packing, smaller family packing sheds couldn't afford to stay in business, and are gone. Only the big sheds with multitudes of growers are able to survive because they always make money by charging packing fees, and then make a sales commission on top of that.

The grower is at the mercy of market prices less those costs, and hopefully everyone receives a check and not an invoice. Remember that if you're ever inclined to criticize farmers for prices.

We're not going to blame farmers, that's for sure. If anything, this makes me instead long for Jerome Powell, Janet Yellen, or any other long entrenched D.C. politico to go work some land, do their own accounting, and report back about how it goes.

New 52-week highs (as of 6/2/23): Apple (AAPL), Aehr Test Systems (AEHR), Cintas (CTAS), Commvault Systems (CVLT), iShares MSCI Japan Fund (EWJ), Comfort Systems USA (FIX), Innodata (INOD), Ingersoll Rand (IR), Microsoft (MSFT), MasTec (MTZ), OMRON (OMRNY), Palo Alto Networks (PANW), Invesco S&P 500 BuyWrite Fund (PBP), ProShares Ultra QQQ (QLD), ProShares Ultra Technology (ROM), and VMware (VMW).

In today's mailbag, more of your thoughts on a "recession or not"... thoughts on Dan Ferris' Friday Digest... and Gold Stock Analyst editor John Doody's Saturday Masters Series essay... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"I don't know about the U.S., but here in the Land of Oz, Tuesday is normally the 'quietest' day of the business week. I judge that by looking at the empty spaces in shopping centre car parks. We've had eleven rate increases since it started and people are screaming like stuck pigs. I'll believe the increases are having the desired effect when I see empty spaces on a Monday. So far it doesn't even look like happening." – Paid-up subscriber Peter P.

"Love the subscriber comments, smart folks. Some of us are in a recession and the rest will be soon. Nvidia reminds me of shorting Google at $165 and covering at $225. My biggest loss ever. Shorting is for smarter and braver souls. My world since then has been compounding dividends. It has worked out VERY well." – Paid-up subscriber David C.

"I am with you [on the Fed cutting rates] but still a little early... '24 will be the year they cut for the first time if that early. Remember the average FedFunds rate for the last 50 years was 5.44... We lived in maybe smaller houses and instead of two scoops of ice cream we only got one, but we lived at the higher rates then... The dumb bankers had their vaults full of all that free money and instead of just sitting on it they put it, as you said, in long term low rate securities and low rate loans...

"A regional bank with a loan to deposit of over 105% with a capital ratio of 8% or less had better hope the 'big bad wolf' doesn't show up because that is a recipe for disaster. A huff and puff and goodbye." – Stansberry Alliance member John A.

All the best,

Corey McLaughlin
Baltimore, Maryland
June 5, 2023