Steven Mnuchin’s Pull Out Game Is Strong; Oil Is Plummeting Just Like Everything Else

The Water Coolest

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THE HEADLINES

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FORTNIGHT

What goes up, must come down. Two weeks ago oil-men were salivating at the thought of $100 per barrel … and now they’re left to wonder, undoubtedly in a southern drawl, how low can it go.

US crude futures fell 11% to a five-week low of $68.47 after hitting its four year high of $76.90 earlier this month. Brent crude didn’t fare much better after falling 9.3% off of its own four year high of $86.74.

What the f*ck happened?

US crude stockpiles were at their highest level over a four week period since 2015, hinting at an oversupplied market and prompting a market-wide sell-off. Because, you know, economics. This comes at about the same time that the US sanctions against the world’s fifth-ranked oil producer, Iran, go into effect (November 4th).

There is also geopolitical tension building between the US and Saudi Arabia related to the “disappearance” of a Washington Post journalist. The Saudis, the defacto fixers of the oil economy, would be tasked with picking up the production shortfall created by Iranian sanctions.

And it certainly doesn’t help that markets are broadly abandoning more risky investments, like black gold, at an alarming rate.

Water Cooler Talking Point: “Buy low, sell high, I guess?”

 

PULLOUT GAME STRONG

President Trump made it clear yesterday that it “certainly looks” like Jamal Khashoggi is dead. And Senator John Kennedy of Louisiana didn’t mince his word: “I don’t think the aliens abducted him. I don’t think he fell through a hole in the space-time continuum.”

oil field

Zbynek Burival / Unsplash


While Saudi Arabia “thoroughly investigates” (read: tampers with evidence) the situation, US Treasury Secretary Steven Mnuchin was the latest headliner to pull out of the Future Investment Initiative Summit aka Davos in the Desert. He joins a who’s who of Wall Street, Silicon Valley, and government including Jamie Dimon and IMF Chief Christine Lagarde.

So why does this matter? One word: oil. Saudi Arabia, the world’s largest oil producer (on barrels per day basis) doesn’t just hold vast supplies of black gold, but acts as “central bank of the oil market” of sorts. The Saudis will be tasked with making up the shortfall created by impending sanctions against Iran. Should President Trump and other nations impose sanctions on the Kingdom related to Khashoggi’s death, it remains to be seen how Riyadh will react.

To a lesser extent, Saudi Arabia is the largest single purchaser of US arms. In fact, they’ve spent three times as much as any other country over the past few years. For what it’s worth, there is some disagreement over the actual amount spent by Saudi Arabia on things that go boom, but US sanctions could have a negative impact on the US defense industry.

Water Cooler Talking Point: “John Kennedy is going to feel like a real putz when Khashoggi shows up claiming he was simply being probed by extraterrestrials for the past two weeks.”

 

MONEY TO SPENDOCYTE

Novartis is tapping its Swiss bank account again (because it’s a Swiss company, not because it’s doing something illegal), this time buying up Endocyte. Endocyte is a US-based maker of radioactive cancer-fighting drugs. Novartis will pay $24 per share, or about $2.1B.

Earlier this year, Novartis announced its purchase of AveXis Inc. for $8.7B. The acquisition sprees is all part of Novartis CEO Vas Narasimhan’s master plan to create a drug-making empire. Like Walter White, but with more money and less Sudafed.

Endocyte is the leading maker of  Lu-PSMA-617, a therapy that has shown signs of helping to treat mid-stage prostate cancer. Shares on Endocyte jumped to $23.48 on news of the purchase, up from $15.56 at close on Wednesday.

Water Cooler Talking Point: “Two words: f*ck cancer.”

 


IN OTHER NEWS

 

  • eBay is officially suing Amazon for using illegal practices to poach its sellers. Bezos’ minions were creating fake accounts and messaging eBay sellers to lure them over to the dark side. There is no dollar value tied to the suit, but the companies did a combined $274B in gross merchandise volume.

 

 

  • Leading up to its IPO, Uber has sold $2B worth of bonds to fund operations. Morgan Stanley initially sought to issue $1.5B, but demand increased the offering. Now if Uber could just figure out how to make money …

 

  • Square is launching a payment terminal to compete with traditional payment processing providers like Verifone and Ingenico Group. The $399 machine also syncs to inventory, creates discounts, and sends invoices. We don’t care how it works, as long as it tells us if we need to insert the chip or slide our card.

 

 

 

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