Jon Bon Jovi said, ‘we’re half way there’

On August 24th, I wrote this note warning of a peak in Natural Gas prices.

Natural Gas peaked at $10.02 on August 23rd

A day later, this note cited a pending decline will affect certain stocks or the stockmarket in general.

Since August 25, the price of Natural Gas is 23% lower and the S&P 500 has declined 10%.

Commensurately, the share price of Oil & Gas companies have generally eased.

Some examples include Woodside and Exxon Mobil falling 9% while Occidental swooned 16%.

In that note, I called a $5 target for Natural Gas.

Well…….3 days ago NG traded down to $7.40.

To channel lyrics from a Bon Jovi song,

‘We’re half way there”.

I’m not sure if I want to insert the other half of that lyric being “Whoa, livin’ on a prayer” as my thesis seems to be based on more than a prayer.

But we are seeing deflationary news being presented right in front of our very eyes.

Gas, Oil and Gas (and derivative products such as Gasoline, Heating Oil and Distillate) prices have been falling for some months. So I remind myself that inflation reports publish lagging data and with the energy complex being both a large weighting of the inflation calculation and the last holdout in a broader decline amongst a host of commodity prices………

I’m amazed that the market pundits are ‘counting’ the rise in prices into their inflation argument but not acknowledging the subsequent decline in those prices as being plausible causes for an abating effect in future inflation readings.

Energy inputs are falling and this will have various positive effects on business and the consumer.

Time will tell.

September 22, 2022

by Rob Zdravevski

rob @karriasset.com.au

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