Archive for April, 2022

Memo to Netflix: Password-sharing is a symptom, not the disease.

April 28, 2022

Like cable, you’ve got lots of listings, but relatively few that are worth paying for.
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Last week, Netflix announced that it, in its last quarter, lost 200,000 subscribers when analysts were expecting a gain of more than 2.5 million users.

Whoa, Nellie.

That’s a “statistically significant” miss for sure … not a smaller than expected gain, a loss!

And, the company gloomed that it will lose another 2 million in its current quarter.

Understandably, “the market” was “disappointed” and immediately shaved a cool 1/3 off the Netflix market cap.

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Hate to pile on, but that’s on top off a prior (and bigger) 1/3 drop earlier in the year.

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So, what’s the problem?

NFLX management chalks it up to to password-sharing … to many freeloaders who aren’t paying for the value that they’re getting from the NFLX “product”.

I beg to differ.

I think NFLX has an inflated view of how much continuing value it delivers … and, even if that’s not true, it’s value is eroding by the day.

Let me explain.

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For Elon, now comes the hard part.

April 26, 2022

Will his noble intentions get “trumped”?
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Last week, we asked the question: Will Elon be the dog that caught the bus?

We opined that — of the key assets that Musk is buying — all are a bit problematic.

  • The brand name is polarizing and arguably passé
  • The subscriber base is largely populated by left-leaning media and politicos …  and woke, pro-censorship loyalists who are likely to defect from an open information platform.
  • Ditto for advertisers, many (most?) of which are likely to “go Disney” and run for the hills rather than risk being outed as inadequately woke … or worse than that, being taint-branded as supporting free speech.
  • The hardware infrastructure — computers and communications network — are in place and operation .. but replicable.
  • The softwarethink: message transmission and control algorithms — are up & running … and being managed.
  • The human assets — proficient and mission-dedicated — are the biggest question marks given their zeal for progressive politics and “moderated discourse”

That gets us to Musk’s biggest challenge: Getting the organization aligned with his “open forum” vision … and, operating for (not against) Musk’s goals.

Consider an analogy: Trump’s efforts to mobilize the Federal government to his America First agenda.

Please, let’s stipulate to, but put aside, Trump’s personality issues and focus on his policies.

Trump was actively sabotaged by the enforcement agencies — think: “Intelligence Community”, FBI, IRS — and slow-rolled by the career bureaucrats who make “the system” work (or, not work depending on your perspective).

Remember Chuckie Schumer’s admonition to Trump:

“Let me tell you, you take on the intelligence community, they have six ways from Sunday at getting back at you.” Source

It’s easy to imagine Musk running into similar roadblocks as he tries to shift Twitter 180 degrees from politically moderated  discourse  to an open forum of alternative views.

Twitter has about 7,000 employees that will need to buy into Musk’s vision.

That’s a reach given their numbers, their technical expertise, their access to the algorithms … and, oh yeah, their deeply embedded political leanings.

Getting them on board (or replaced) will be a monumental organizational transformation.

The good news: If anybody can do it, it’s probably Musk.

Go get ‘em, Elon.

What goes around, comes around…

April 25, 2022

The crash & burn of CNN+
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Just in case you missed it…

CNN announced last week:

“CNN+, the streaming service that was hyped as one of the most significant developments in the history of CNN, will shut down on April 30, just one month after it launched.”

A couple of twists to the story…

It’s reported that a former employer of mine, McKinsey, strategy study for CNN.

Specifically, it’s reported that McKinsey forecast that CNN+ would attract 2 million subscribers within 2 years … and 4 million by 2026 when the streamer had its mojo working at full speed.

That forecast struck many pundits as “rosy” since CNN currently gets less than 1 million viewers … free in cable bundles.

The rapid crash & burn is epic.  It’ll be an oft-taught case in b-schools.

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To put things in perspective…

A (former) CNN+ producer preemptively chastised prospective gloaters …

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Ms. Smith was promptly taken to the hoop by SD Gov. Kristi Noem:

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Check and mate!

So you don’t cry too many tears for the CNN+ employees, rest assured that they’ll be getting severance packages that make Biden’s Build Back Better scheme look frugal.

According to CNN:

All CNN+ employees will continue to be paid and receive benefits for the next 90 days to explore opportunities at CNN, CNN Digital and elsewhere in the Warner Bros. Discovery family.

Staffers who aren’t absorbed elsewhere in the company will receive a minimum of six months of severance.

In other words: 21 months pay for 12 month’s works.

In comparison, most of the Keystone workers were sub-contractors who got diddly-squat when Biden abruptly shut down the project.

There’s no record of Ms. Smith tweeting that folks should show compassion for the Keystone workers…

Will Elon be the dog that caught the bus?

April 21, 2022

Good intentions, but what exactly is he buying … and what are chances for success?
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These are the questions that I’d usually pose to my MBA students when we were doing an M&A case in class.

Let’s apply them to Elon Musk’s bid for Twitter.

So far, most the reaction to Musk’s bid for Twitter has been at the philosophical / political level: Will his purchase open the town square for open information exchange … or, open the floodgates for existence-threatening “misinformation”.

I buy that Musk’s goal of open discourse is on the up-and-up, so I’m all for his acquisition.

That said, my questions are at more tactical level:

> What exactly is he buying?

> What are his chances of success if he gets “it”?

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On the first question, the simplistic answer is that he’d be buying control of  “an up and running communications platform”.

OK, but let’s dissect that a bit.

What are the key component parts?

  1. A well recognized, valuable brand name?
  2. An established base of subscribers and advertisers?
  3. An in-place infrastructure of  hardware, software and people?

Which of the above offer enough enough value to justify a $43 billion outlay?

Let’s take them one at a time from a Musk perspective…

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Manchin for President?

April 20, 2022

Conspiracy scenarios to shelve Sleepy Joe.
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This headline caught my eye:

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According to CNBC:

A group of his bipartisan donors have privately said they hope Manchin changes parties and runs for president as a Republican against Biden in 2024.

Some of the donors, who once supported Trump, look at Manchin and his stances against some of his party’s policies as someone who could successfully run in a Republican primary and then possibly defeat Biden.

Hmm.

A couple hurdles: (1) Winning the GOP primary (against, say, Trump or DeSantis) and (2) Facing a more formidable Dem candidate than Old Joe if he was the GOP candidate (though I can’t think of one off the top-of-my mind).

OK, scratch that idea.

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Here’s a quicker path to the Presidency for Manchin:

1. GOP takes the House and Senate in November.

2. Dems throw Harris under the bus … She graciously resigns as VP and takes a cushy position as Ambassador to Slobovia (Note: Would have to promise her that she wouldn’t have to really go there or do any work) … or give her a lifetime appointment as a Federal judge in California (Note: Try to contain the damage there).

3. Biden’s puppeteers cajole him to nominate Manchin to replace Harris as VP … GOP majority Congress approves the pick.

4. Biden gets slapped with the 25th Amendment (Note: odds are good that he wouldn’t have seen that coming in the prior steps)

5. Senator Manchin becomes President Manchin.

6. President Manchin nominates another moderate Dem (again, I can’t think of one off the top of my head) to re-fill his vacated VP slot.

7. Manchin runs against DeSantis in 2024 … best candidate wins.

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OK, there’s no chance of either scenario materializing … but, you gotta give me credit for creativity and admit that it would be fun to watch.

WSJ: The global elite has an unhealthy obsession with climate change.

April 18, 2022

And, the “fixation” has consequences.
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For a long time, I’ve been lukewarm on the climate control hysteria … and recently, I’ve argued that Putin’s nukes pose a more likely (and timely) existential risk than climate change

See: 16 Reasons why I’m lukewarm on climate change and Greater threat to the planet: Putin or climate change?

On cue, the WSJ published a great minds, same track opinion piece:

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Russia’s invasion should be a wake-up call that war is still a serious danger that requires democratic nations’ attention.

Nuclear weapons — not climate change — are posing the biggest risk of literal mutually assured destruction in half a century.

More broadly they opine:

There are many serious threats in the world today.

But most won’t get the attention they deserve until the political classes drop their hyperbole about climate change

It should be treated like what it actually is — only one of the many problems to be solved in the 21st century.

in the world’s poorest countries, the international community’s focus on putting up solar panels coexists with a woeful underinvestment in solutions to massive existing problems.

Beyond the nuclear geopolitical threats are infectious diseases like tuberculosis and malaria that kill millions; malnutrition that afflicts almost a billion people; and more than three billion lack access to any form of reliable energy.

Couldn’t have said it better…

Barely noticed: COVID deaths pass the 1 million mark in U.S.

April 18, 2022

The good news: Daily deaths down to historic flu levels.
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Everybody has covid fatigue and wants to get on with getting on … Inflation, Ukraine, border crisis, and Hunter’s laptop have been stealing the headlines … finally, Fauci seems to be less omnipresent on TV … so it’s understandable if you didn’t notice that U.S. covid-related deaths passed the tragic  1 million milestone in late March.

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From the get-go, I’ve argued that we should all stay focused on the number of Daily New Deaths as the key Covid metric.

See: How will we know when we’ve turned a COVID-19 corner?

So how are we doing on that measure?

For reference, a high flu season averages about 500 deaths per day during the roughly 4 month flu season.

We’re now running at a rate of about 400 daily Covid-related deaths … in line with historic flu death rates.

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My take: We’ve passed a tragic milestone … and while any deaths are too many … we can finally breathe a little easier.

Biden: “Reduced the ruble to rubble”

April 15, 2022

Shades of Bush’s “Mission Accomplished”
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After imposing supposedly draconian sanctions, Biden claimed a quick victory when the the Russian ruble tanked in the financial markets.

Perhaps, a premature end zone dance by the “Big Man”.

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True, immediately after the initial round of sanctions were announced, the ruble — which was trading around 80 rubles per dollar — devalued it to about 150 rubles per dollar.

Example: Before the sanctions, purchasing $100 of dollar-denominated goods would have cost a Russian 80 rubles … soon after the sanctions were announced, those same goods would cost 150 rubles.

Yep, started to look like rubble.

But, not so fast…

After about a month, the ruble is right back where it was pre-sanctions — trading at about 80 rubles per dollar.

How can that be?

Couple of reasons offered up by pundits:

  • Many of the sanctions were announced but haven’t been activated
  • Some large countries aren’t on the sanctions’ bandwagon … think China and India.
  • Putin has gone big time on currency manipulation … e.g. boosting interest rates, restricting bank withdrawals, and…
  • Requiring that oil and gas sales be transacted in rubles

The last point is particularly problematic since countries that are dependent on Russia for oil and gas … are still buying oil and gas from Russia at historically high rates.

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A couple of teaching points:

> Until the U.S. re-ramps domestic oil & gas production — to satisfy domestic & foreign demand — the bad guys will continue to rake in the dollars (err, rubles)

> Putin may be crazy … is certainly evil and ruthless … but he’s not stupid … so he shouldn’t be under-estimated … on the battlefield and in the financial markets.

 

 

Biden channels Meatloaf (again)…

April 14, 2022

He did it again in this week’s Iowa speech

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Shades of the late, great Meatloaf…

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Everybody remembers the Meatloaf classic, right?

The tease:” I would do anything for love”

The punch line”: “But I won’t do that !”

If you need a a refresher or just want to kick back and
listen to an all- time great song, clock here

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click to listen

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Biden (and Psaki) have appropriated a variant of the Meatloaf classic.

Now, every time Joe steps behind the podium, he squints and reads a version of:

Gas prices are high and are going to go higher because of Putin.

I feel your pain and, rest assured, I will use all the tools available to minimize the prices at the pump.

Anything” in Biden-speak includes plays at the margin like temporarily waiving the 18.4 cents per gallon Federal gas tax, releasing some of the strategic oil reserves and diluting gas with corn mash (aka ethanol).

Reading between the lines is the punch line “But I won’t do that.”

What are the won’t-do-thats?

Well, for openers there are:

  • Buildout the Keystone XL pipeline
  • Enable aggressive fracking (again)
  • Re-open drilling in the Alaskan ANWR Region
  • Fast track off-shore licensing
  • Permanently disable the Nord Stream pipelines (both the NS1 that’s in operation and the NS2 that’s awaiting for final approval)

Those are moves that stand a chance of moderating inflation pressures in the U.S., slowing the flow of oil profits to Putin, providing some oil & LNG to Russian-dependent European countries and restoring. U.S. energy independence.

But, of course, Biden “… won’t do that”

The AOC “squad” and the climate control zealots won’t let him.

Too bad…

One chart debunks the “Putin Price Hike” malarkey…

April 13, 2022

Biden is still refusing blame and stiff-arming meaningful corrective actions.
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Yesterday, Biden was in Iowa touting his many accomplishments (huh?) and channeling Bart Simpson to explain inflation. Transcript

  • It’s not my fault … blame Putin
  • I’m doing everything I can to stop it
  • Adding more corn mash to gasoline
  • I’m not joking …

Regarding the “Putin Price Hike”, apparently Biden’s team of crack economic advisers havn’t shown him this chart:

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In the run-up to Joe’s inauguration (i.e. during Trump’s reign), year-over-year inflation was running at or below 1.5%

On inauguration day (January 20, 2021), Biden signed an Executive Order stopping construction of the Keystone XL pipeline … and, in effect, declaring war on the U.S. oil & gas industry.

On March 11, 2021, Biden signed the Democrats-only $1.9 trillion spending bill.

Between inauguration day and unleashing the $1.9 trillion. the inflation rate more than doubled … from 1.5% to 3.5%.

As Joe would say: ”No joke .. I’m not kidding”.

From the passage of the $1.9 trillion until Putin invaded Ukraine (February 24, 2022), the inflation rate more than doubled again … from 3.5% to 8%.

That means that from inauguration day until Putin’s invasion, the inflation rate increased more than 5-fold … from 1.5% to 8%.

Since Putin’s invasion, the inflation rate increased from 8% to 8.5% … that .5 percentage point translates to about a 6% increase in the inflation rate.

Bottom line: Doing some simple math (i.e. not complicating things with compounding and carryover effects), of the 7% increase in the inflation rate since inauguration day (1.5% to 8.5%), Biden gets over 90% of the blame and Putin gets less than 10%.

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Not even the birds that were flying around in the barn where Biden gave his speech bought into his malarkey.

As he was reading from the teleprompter — in a perfect metaphor — a bird literally called BS on him (where the B stands for “bird”, not “bull”).

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click to view the video clip

Some critics have opined that Biden’s presidency is “for the birds” .

Apparently, birds take offense at that notion.

Oh no, not more ethanol…

April 12, 2022

Biden’s energy solutions go from dumb to dumber.
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OK, I’ve got a personal ax to grind in this one.

Instead of encouraging a restoration of U.S. based oil & gas production, Biden has decided to “temporarily” increase the allowable ethanol content in gasoline from 10% to 15%.

Note: “Temporarily” is a synonym for “transient” … as in “transient inflation”.

Ostensibly, the move is intended to stretch U.S. oil supplies by, in effect, diluting the oil content in gas … as a means of curbing inflation at the pumps.

Oil industry execs oppose the move, arguing that it will shave, at most, one thin dime off a gallon of gas … and may have a net zero effect since gas refiners will incur higher costs shifting over to the 15% mix.

Greenies oppose the move since vehicle smog emissions increase as more ethanol is added to the gas blend.

Legal eagles point out that “A three-judge panel on the U.S. Court of Appeals for the District of Columbia Circuit has already ruled that the EPA had improperly reinterpreted legal language in the Clean Air Act long understood as limiting ethanol to 10% of the content of gasoline.” Source

But, Biden administration lawyers say that Biden’s decision is based on a “different authority”.

You know, that wormy “We’ll do as we please with executive orders … and you can try to stop us.”

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And, what’s my beef?

Anybody with a car, a lawn mower or a boat knows that that ethanol literally gums up engines … hurting engine performance and often damaging engines.

I know that firsthand … having spent mucho buckos to “remediate” the ethanol effects on my boat’s engine.

The latter is a well known, wide spread and costly problem as evidenced by the springing up of ethanol-free gas pumps at marinas.

In effect, Biden’s move shift costs from the pumps to repair shops.

That said, I expect Psaki to throw shade for Biden with a variant of her “Boo-hoo your Peloton is trapped in the supply chain” wise crack.

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P.S. Corn farmers love the move to increase the ethanol content in gas.

Why?

It increases the demand for and price of corn.

In economics, it’s called “trading nickels”.

In strategic analysis, it’s called “going for the capillaries instead of the jugular.”

WaPo perplexed by Hunter Biden cover-up … say, what?

April 6, 2022

Paper mulls: Why was the Hunter Biden story buried in the run-up to the 2020 election?
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Duh!

Let’s recap the story…

In October 2020 (i.e. a month before the election), the NY Post broke a story that a laptop belonging to Hunter Biden had surfaced which contained emails and other documentation that Hunter had “earned” millions of dollars by trading on his father’s name and political clout … with the Ukrainians and Chinese.

The story was conveniently ignored or dismissed by Biden-supporting media (i.e. all but the NY Post and Fox) as “Russian misinformation”.

A couple dozen “intelligence officials”  lent credence to the disinformation claim in an open letter …   though many of them admitted they had no evidence of Russian involvement.

So, the story was effectively blacked out … Twitter banned the NY Post and squashed posts that referenced the laptop story … Facebook’s algorithms buried the story.

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But, last month — a year and a half after the NYP’s story broke — the New York Times published an article indicating that they had confirmed that the laptop story was essentially true … and that there was hard evidence that Hunter had been profiting by trading on his father’s position as then-VP.

Holy Smokes, Batman … America’s self-proclaimed newspaper of record says there’s fire under the smoke.

Following the Times’ authentication, the Washington Post apparently felt some need to dig into the story and “discovered” evidence of Hunter’s misdeeds.

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Apparently, those revelations stirred some ethical angst at WaPo … whose editors wrote a mea culpa of sorts:

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A “reckoning”?

The editorial fessed that the essence of the laptop story was true … but, it threw shade, arguing that Joe was oblivious to Hunter’s alleged misdeeds … and, articulated a journalistic dilemma:

The lesson learned from 2016 was evidently to err on the side of setting aside questionable material in the heat of a political campaign.

The lesson learned from 2020 may well be that there’s also a danger of suppressing accurate and relevant stories.

Who could have ever imagined that suppressing accurate and relevant stories might pose a danger?

What kind of danger?

Tilting an election to the media’s candidate of choice? Away from a candidate that they loathed?

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For the record

After the election, Democrats who voted for Biden were polled.

> More than 1/3 (36%) said that they didn’t know about the Hunter laptop and his influence peddling

> Of the “know nothings” about 1 in 8 (12.7%) said that they “would not have voted for Joe Biden had they known this story”.

> Doing the math, that means that 4.6% of all Democrats wouldn’t have voted for Biden if  they were aware of the story

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Remind me: What was Biden’s margin of victory in Arizona, Georgia, Pennsylvania, Wisconsin?

And WaPo — channeling George Costanza — asks: Was it wrong to to bury a story that might have turned an election?

Fail: Obama visits White House to prop Joe…

April 6, 2022

Plan backfires (badly) and cues up the 25th Amendment.
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Yesterday, former President Obama made a triumphant return to the White House … ostensibly to tout ObamaCare … and to boost Biden’s cred and tanking approval numbers.

But, instead of boosting Biden through association, Obama — by just being himself — provided a sharp contrast between an energetic, charismatic, competent leader and, well, Joe Biden.

Here’s a 1-minute video clip the captures the moment.

Warning: Images may be disturbing to some viewers

If ever there was video evidence for the 25th Amendment …

But wait a minute.

Forgot that Joe’s got an insurance policy:

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P.S. Mark yesterday’s date on your calendars as the date that, for all practical purposes, Biden’s presidency ended.

Bloomberg: Biden’s SPR move may be less than it seems … and risky!

April 4, 2022

SPR: Strategic Petroleum Reserve
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I had an interesting experience at the Costco gas pumps on Friday …

Note: I always try to fill-up at Costco since their prices tend to be at least a half-a-buck per gallon cheaper than other local stations.

The guy in the pump next to me — dressed in camo-accented working duds, filling his MAGA-stickered pick-up truck — says to me: “Finally, Biden has done something right.”

I say; “What’s that?”

He says; “Releasing oil from the reserves.”

I say: “Won’t help much.”

He says: “At least it’s something.”

Score one for Joe.

We quick-fill and get on with our days.

The convo prompted me to do some digging…

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First, it helps to put the numbers in perspective…

Biden authorized the release of 1 million barrels per day (BPD) for 180 days.

Total: 180 million barrels of oil coming out of the U.S. SPR.

Is that a little or a lot?

We Americans consume about 20 million barrels of oil per day … so, it’s about a 9-day supply of oil.

Worldwide, oil consumption is just under 100 million barrels per day … so, a million BPD potentially increases the global supply of oil by 1%.

The Strategic Petroleum Reserve — which was conceived in 1975 after the infamously disruptive Arab oil embargo — has a capacity to hold about 725 million barrels of oil.

It’s designed to protect the U.S. energy needs if foreign nasties cut-off our dependent supplies.

From 2000 to 2020, the SPR was essential full to it’s practical capacity … hovering between 600 and 700 million barrels.

Note: It’s not clear to me why the level “hovered” instead of staying fixed near 700 million barrels.

Last fall (i.e pre-Ukraine), Biden released 50 million barrels from the SPR … drawing the inventory level down to about 550 million barrels.

OK, with that as background…

The one certainty is that the SPR will be drawn down to under 400 million barrels … about half of the previously defined “strategic need”.

That means that the tanks will eventually need to be re-filled — increasing future demand for oil … which will likely increase future oil prices during the replenishment period.

Hmm

Or, Team Biden can let the SPR linger with the tanks half-full and hope that there isn’t a catastrophic disruption to oil supplies.

Frame of reference: That would be kinda like allowing our strategic reserve of medical supplies and medicines dwindle and and hope that an epidemic doesn’t happen.

How did that work out?

Bottom line: Net long term effect is just a shifting of 180 million barrels of oil demand down-the-road.

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What about the near-term price effect?

Bloomberg points out that: SPR ”interventions have a spotty record. It’s as common for them to be followed by increases in prices as reductions.”

For example:

Even before Russian tanks rolled into Ukraine in late February, West Texas Intermediate crude increased 18% since Nov. 23, when 50 million barrels were released to calm oil markets.

How can that be?

Bloomberg’s simple answer: The SPR doesn’t produce any oil … it’s just an unusually large pile of inventory, and in commodity markets, shrinking inventories are almost always bullish for prices.

Ouch.

Plus, The Russian oil sanctions may eventually cut oil supply by a million barrels per day if they’re ever really enacted … or non-Russian oil suppliers (think OPEC) may just dial back their production to keep prices high.

Again, the certainty is that the SPR will be drawn down and need to eventually be replenished … the uncertainty is what will happen to gas prices at the pump.

Bloomberg’s conclusion:

The U.S.’s dominance of energy markets could be in jeopardy in a way it hasn’t been since the 1970s.

With Biden’s oil reserve weapon heading toward half-full levels, he risks looking like a naked emperor.

Whatever, I’ll still be pumping at Costco…

Quick: What percentage of the U.S. adult population is Black?

April 1, 2022

The question is a statistical one, not social, politcal or philosophical.
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Recently, YouGov asked people to guess the percentage of American adults who are “members of 43 different groups, including racial and religious groups, as well as other less frequently studied groups, such as pet owners and those who are left-handed”.

And the answer is…

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If you guessed that 40% of American adults are Black, then your answer is close to to poll’s average response (41%).

You’re with the herd, but…

Actually, Blacks are only 12% of the American adult population.

So much for the oft-touted “wisdom of crowds”.

And,  the estimates vary when the queried “crowd” is divided into racial groups:

  • Black Americans estimate that, on average, Black people make up a majority (52%) of the U.S. adult population
  • Non-Black Americans estimate the proportion to be roughly 39%, closer to the real figure of 12%, but still way off

Hmm.

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More generally, YouGov’s survey results conform to a common statistical finding that…

Americans generally over-estimate the size of minority groups and members of the minority groups tend to way overestimate the size of their group.

Conversely, Americans generally under-estimate the size of minority groups

Below are more results from  the YouGov Survey.

Note: A high estimate to actual ratio is an indication of the degree of over-estimation.   An E to A ratio under 1 indicates a case of over-estimation

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