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00:15Good morning, everyone. Welcome to the Myers Report Fast 15. It is Friday, September 18th,
00:222026. I really can't believe how fast this year is going. With us today is Don Day, who will explain
00:32why climate change can't be credited for both violent weather that does not happen and calm
00:39weather when it does. Isaac is out sick with toddlers and an infant at home and, well, we have
00:47not even gotten into winter, but need I say more for anybody with young kids. Cleaning up on questions
00:56about a sloppy economic environment is our economics chief, Bob Janetsky. In the meantime, on the fuel
01:05shortage, it seems that every time diesel prices tick up another dime, you hear the same explanation.
01:14It's the Iran war. It's the White House. It's Trump. Now, Iran is certainly very real, and it does
01:21matter. But the squeeze you're feeling at the pump did not start in the Persian Gulf, and the president
01:27did not do it to you. We did it to ourselves, or at least our politicians did. They closed refineries
01:34and made it nearly impossible to build new ones. Let's start in California. Last December, Phillips 66
01:42shut its Los Angeles refinery. So 139,000 barrels a day, 600 workers and 300 contractors are all gone.
01:53Four months later, Valero stopped refining at their Benicia plant in the Bay Area. 145,000 barrels a day
02:03of refined fuel. And after nearly 60 years, put these together and California just lost 17% of its
02:12refining base. Nobody chased those companies out with a war. Both pointed at California's regulatory load,
02:22capped off by a new state mandate forcing refiners to store a minimum fuel inventories at their own
02:30expense. Phillips 66 called it the last straw. And here's the kicker. There are almost no pipeline
02:38capacity from the Gulf Coast to the West Coast. So Texas can't backfill California's lost production.
02:47That gap is being filled by tankers hauling imported gasoline at import prices. By the way,
02:55a good pipeline is safer for hauling fuel and is cheaper than a truck or a train. It's that very,
03:05it's that simple. Now here's the part that is embarrassing, that should be embarrassing to
03:09Sacramento. Down near Corpus Christi, a company called DRL refineries is breaking new ground next month
03:18on a $1.2 billion refinery. Its financing, 100% of it, is coming from a San Francisco financial
03:26institution. West Coast money is being chased out of California and is building a refinery the West
03:34Coast wouldn't permit. And even that won't be finished until 2030. This country hasn't built a major
03:42refinery in nearly 50 years. Then there's diesel. And that story runs through Ukraine, not Tehran.
03:50Ukrainian drones have been hitting Russian refineries about once every three days. Russia
03:56was one of the world's biggest diesel suppliers. And that diesel supply is now off the market.
04:01That's why U.S. diesel prices have crossed $6 a gallon last week for the first time. Venezuela won't
04:09rescue us. Their equipment is so badly maintained, it needs replacing, not repairing. And our transportation
04:16sources are warning that diesel could hit $8 per gallon in some places, which is causing talk of
04:23truckers possibly going out on strike on October 1st. So yes, the Gulf War tightens the crude market,
04:30but the war doesn't close a refinery in California. It doesn't close power plants in Illinois.
04:39The president didn't do this. No president can undo it by November. The squeeze was self-induced.
04:45And the way out is the same as the way in, letting refineries get built. Don, now that weather alarmists
04:55are blaming the lack of Atlantic hurricanes on climate change, well, first, have these people,
05:02these people seem to have difficulty being consistent. Why is that? Well, they are consistent.
05:08They're consistent in blaming everything that bad that happens on climate change. So from that
05:14standpoint, it doesn't matter. I mean, they've got this whole narrative so finely tuned that no matter
05:21what happens, it's climate change. And I expect that narrative to go unchanged here for quite a bit
05:26longer. The reason they're saying that maybe climate change is causing less hurricane activity
05:32is just ignorance. It's a well-known, well-established fact that when you get a strong El Nino in the
05:38Pacific, which is what we have right now, that tends to lessen the opportunity for hurricanes in the
05:44Atlantic to form. And that's exactly what we've seen this year. So this was expected. If you remember,
05:49if you rewind, we were predicting a lower than average hurricane season. Yeah, you got to call
05:55that down. Right. But to be honest, to be honest, that was like shooting fish in a barrel. But you
06:01can see that one for you. You can see that. You can see it coming. Now, I will say the
06:06Atlantic still
06:07can produce some activity. In fact, we've got a little system west of the Azores we're watching. So
06:13the hurricane season is far from over. But, you know, we're I think we're on the bees in terms of
06:20the names so far. And to be mid-September and only in the bees on the names of these hurricanes
06:28or
06:28tropical storms mean it's it's been the quietest hurricane start since 2002. So it's been two and a
06:35half decades. Don, I want to ask, what does that strong El Nino mean for the Midwest here for the
06:41winter?
06:41Well, what it means for the winter is that a lot of times the biggest El Nino impacts miss the
06:46Midwest. The impacts tend to be across the southern tier of the United States from California to the
06:52Carolinas, basically along and south of Interstate 70, maybe getting up to about Interstate 80 or so.
07:00For the Midwest, you're likely going to have what I'd call an average winter. I don't see it as cold
07:07as last winter and I see snow not as heavy. That's good. Okay. Okay. What we hear that
07:14Arizona is having floods and the southwest is having more rain than expected. What's going on
07:19there? Well, it's badly needed rain. Arizona, New Mexico, parts of Colorado and Utah have seen some
07:25very heavy rain. We've had some people killed in flash flooding in New Mexico. Those areas are in some
07:32of the areas where the drought has been the most severe. And this is a little bit of El Nino
07:37showing
07:37itself. That part of the country can get very wet in the fall and winter with the developing El Nino,
07:43and that's certainly coming to fruition. Weather-wise, is anything interesting happening
07:48anywhere else in the world? Right now, fairly quiet. We're in that mid-September transition from fall,
07:56from summer to fall, and you can kind of have a fairly quiet pattern. If we don't have any big
08:03hurricanes or tropical storms this time of year, it usually means there's not much going on. But
08:08other than the things we just talked about, the weather across the globe is fairly benign at the
08:13moment. Okay. Bob, Iran uncertainty continues as an issue. Oil prices are now on the $101 per barrel
08:26level, with fuel prices correspondingly up, and the Fed raised their rates by a quarter percent.
08:34Which one do you want to talk about? Well, I'm getting into it. How did the stock markets react?
08:41Okay. Let's go to the stock market. The stock market has just been holding its own. I talk about
08:49this short-term model that I have to try and gauge where things are likely to be over the next
08:55two weeks,
08:55and it doesn't try and forecast based on a development because any developments could occur
09:01in Iraq one way or the other. What it does is it takes the momentum in the market and tries
09:07to gauge
09:08the future movement based on that momentum. Right now, the momentum is totally flat. That is,
09:15there's no indication one way or the other by what's been happening to the market that we are likely to
09:21see either higher or lower prices in the next two weeks. That's what's happened. We've had a flat
09:26market, and it's at a key support area for the market, too. Both the NASDAQ and the S&P 500
09:34have
09:34been floating right at the 50-day moving average, a little above, a little below. When it goes below,
09:41and perhaps goes down another percentage point or two, and it's below that average, it tends to be
09:50associated with a weaker market in the future. But we haven't consistently gone below that point, so we
09:56don't have that sort of signal, nor has it gone up above that 50-day average to any significant extent.
10:02If it does, then things look a lot better. But right at the moment, just kind of a flat market.
10:09So let's talk about the Fed and what the Fed did. Okay, so how did increase rates react? It's a
10:15little more interesting. What's the Fed thinking? The Fed raised the target rate. Now, the Fed has an
10:22artificial target rate. It has nothing to do with markets. It just picks a number out of the blue,
10:27blue. And people think that that means something, and it really doesn't. All it means is that markets
10:34have to adjust to that rate. So it's not a market rate. It's kind of dictated like a...
10:40The Fed picks its target rate without using a formula, a model, nothing?
10:46Absolutely, absolutely. They just vote on where they think the best rate is for market stability.
10:53And then they let the market adjust to that rate. But they don't... Historically,
10:59that short-term rate was the result of the Fed either putting money into the economy or taking
11:05it out of the economy. When it wanted to put money in, the Fed would buy securities. That raises the
11:12prices of securities and lowers the interest rate. So most people think that when they set a lower rate,
11:18that this is stimulative monetary policy. And the headlines all over in the last week,
11:23would the Fed raise this magical rate? So they must be tightening. And the answer is no. If you look
11:30at what the Fed has been doing, they've been buying securities. Now, not much. They've been buying maybe
11:37$5 billion of securities a month for the past three months. Now, what does that mean? I'm not sure.
11:44I don't think $5 billion is enough to really move the market one way or another. But if anything,
11:51they are trying to force interest rates down by these purchases, even though they're very modest.
11:57So here they are trying to force interest rates down, short-term interest rates. But they artificially
12:03tell you, we're setting our target made a quarter percentage point higher.
12:07It doesn't make any sense to me that you have this sort of game that the Fed is playing. But
12:15the
12:15market loves it. Now, if you look at all the headlines, which is why I thought they were going
12:20to raise rates, the market headline is the head of the Fed is now an inflation hawk, because he shifted
12:28that artificial rate by a little bit. So this guy must be really serious about getting inflation under
12:35control. And that's the reason I think they did nothing. If they were really interested in letting
12:43markets work, they wouldn't be buying any securities at this point, even a small, small amount. But I
12:50don't think that small amount really amounts to the hill of beans. I don't know that for sure,
12:54because we don't know how markets would operate if the Fed weren't playing these games.
12:59But basically, when I step back and look at monetary policy in general, I think we're in pretty good
13:05shape. Most of the measures I look at suggest the Fed is putting a moderate amount of money into the
13:11system, maybe 6%, 7%.
13:13On a more practical level, how are corporate profits in the economy, how are they showing up?
13:18The second quarter was actually gangbusters. They are so far ahead of long-term trends that we have a
13:26profit boom of unprecedented proportions going on.
13:31Okay. And our question for the week is, Don, will the WNBA figure out what a woman is? And if
13:40so, when?
13:43You're asking the impossible. They will never do that. If you look at the people who own these WNBA teams,
13:51the owners, they're not of the ilk to do that. They're just writing their own death sentence. The WNBA
13:59in five years, I don't even know if it's going to be around.
14:03Bob, what do you think?
14:04I agree with Don. No one knows what a woman is. So it's just an enigma that we'll never solve.
14:11I bet Bill Clinton does. Maybe we should ask him.
14:15On that note, be well, stay safe, have a good weekend, and God bless America.
14:44God bless America.
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