You're cut off, pal
OPEC turns off the taps
Good morning my baby ducklings. This is your Stock Market Rundown for June 20th, 2023.
TODAY’S TOP STORY: OILING THE GEARS🛢️
Back in April, the cartel that controls most of global oil production had themselves a powwow and resolved to reduce production by just over a million barrels a day.
However—much like that one deadbeat friend who claims he doesn’t have to chip in for the entire bottle-service Belvedere magnum because he “only had one drink”—OPEC members are is prone to defecting.
Folks, it’s time for some game theory. Remember Prisoner’s Dilemma? Defection (i.e. shunning cooperation in favour of bald self-interest) always results in a better payoff than cooperation.
And when it comes to the oil market, defection equals not adhering to voluntary cuts when there are big incentives to keep your drills turning and wells pumping.
Let’s say you’re the Nigerian Minister of Petroleum Resources (work with me here). Why wouldn’t you defect? You enjoy the upside of higher global prices thanks to your sucker peers cutting production, while continuing to get an inflow of sweet, sweet hard currency from piping out thousands of barrels a day!
It’s win-win… until you have to deal with being screamed at by a Saudi prince upset he can’t buy a sixth Porsche Panamera. Awkward.
SO WHAT ELSE IS GOING ON?
Melinda Gates “is urging world leaders to reform the global financial system”. I’m mystified why being Bill Gates’ ex-wife makes her a financial system expert. For the same reason Leonardo DiCaprio is considered a climate change expert, I guess.
Venmo (owned by Paypal is now offering accounts for children ages 13-17, which may help launch business empires for enterprising running shoe flippers and Pokemon card dealers.
gm, G-men. The SEC is cracking down on crypto, slamming it as a “perfect storm of investor risk”. Thanks for finally joining the party, frens! Have these guys been on some sort of extended ayahuasca journey in a remote jungle for the past three years?
Data is showing the Fed’s rate hikes are putting a kibosh on purchasing power. Consumers are still enjoying the savings they built up during panny, but businesses are cutting core capital goods orders. Businesses are the canary in the coal mine of the economy—when they stop chirping, get worried.
That’s it for today, see you for brunch mimosas tomorrow. Yours in capitalism, The Axe