All eyes will be on this Friday's jobs report, which is expected to come in at less than 200,000. We got PCE that jumped to 4.4% vs. a 3.9% forecast. Core PCE hit 4.7% vs. 4.6% expected.
GDP came in hotter than expected last Thursday at 1.3% vs. 1.1%. Both the GDP price index (deflator) and core PCE prices were revised higher over initial estimates, clocking in at 4.2% and 5.0%, respectively.
As I have been commenting, this inflation is entrenched and will be harder to conquer than what markets are pricing in. I will probably have a market update on Friday and, for now, some focus on the energy sector.
I am closely watching gasoline stocks because low inventories could mean higher prices in this summer's driving season, putting upward pressure on inflation. It is looking that inventory levels are dropping further than last year at this time, which was very low levels. It also appears consumers still have an appetite to travel and spend. Personal spending in April doubled market expectations, rising 0.8% after last month's 0.1% increase.
Adjusted for inflation, real spending came in at 0.5%, which also topped analysts' estimates. What convinces me more so of higher future energy prices is the government's agenda to promote renewable energy at the expense of fossil fuels. The Biden administration used the SPR release to lower prices ahead of the mid-term elections but is likely going to replace some of those reserves to do it over again in the 2024 election.
In the meantime, it could result in higher prices. Since Mr. Biden took office, his administration and its allies have taken over 150 actions deliberately designed to make it harder to produce energy here in America, according to a May 23 Institute for Energy Research (IER) report. You can look at all 150 in the report; here are a couple of examples.
In June 2022, the Interior Department announced that it would reduce fees on renewable projects on federal lands after earlier saying that royalties and rents for oil and gas projects on federal lands would increase by as much as 50%. In August 2022, Biden signed into law the Inflation Reduction Act (IRA), which included new taxes on methane leaks and natural gas extraction, as well as taxes on crude oil and related products. The Act extended biofuel tax credits and instituted a new tax credit for sustainable aviation fuel.
"These biofuel tax credits will encourage existing petroleum refining capacity to convert to biofuels, making it harder for Americans to get the petroleum fuel products they need for transportation and home heating," IER said.
The report highlights that the transition the climate agenda pushes involves "going from a system dominated by liquid hydrocarbons and gaseous hydrocarbons to one dominated by solid minerals and rocks and metals."
But since minerals are less energy dense compared to fossil fuels, "it takes, depending on the machines, somewhere between 1,000 percent and 5,000 percent greater use of minerals to produce the same amount of energy."
"All the mining is done with oil-burning machines, and all the resins to make wind turbine blades are done with hydrocarbons. All the concrete and steel require metallurgical coal, natural gas, and oil. So you don't avoid [fossil fuels], you just use less of them, but then you use a lot more minerals and a lot more mining is required," Mills said.
You might have heard Biden's comments on leasing; they have 9,000 to drill onshore that are already approved. So let me be clear — let me be clear: They are not using them for production now. That's their decision. These are the facts.
"We should be honest about the facts," the president said.
However, this is the lowest percentage of unused leases in at least two decades, IER points out in its report. "In other words, lease utilization is at a multi-decade high." One can always twist numbers around to fit the narrative they want but put in proper perspective; it can look much different.
I have an update on a few stocks involved in this energy transition one way or another.
Reconnaissance Energy TSXV: RECO OTCQX: RECAF
Recent Price $1.25 Entry Price - $0.56
Opinion – buy on weakness, below $1.20
On May 24, Reconnaissance Energy Africa Ltd. (RECAF:OTCMKTS;RECO:TSXV) provided an update on the acquisition of Enhanced Full Tensor Gravity ("eFTG") surveys and 2D seismic acquisition recently conducted in Namibia.
Initial results from the first phase show a high-quality eFTG sub-surface image, with the rift bounding faults and other structural features delineated. In addition, the intra-rift highs and rift floors are well-imaged.
The image also puts into perspective the three stratigraphic wells drilled to date.
The overlaid seismic line shows a high degree of correlation between the eFTG data and the seismic interpretation. In hindsight, from what I interpret, it appears the last well, Makindina was not in the greatest location. RECO says that further processing, modeling, inversion, and integration with the second phase eFTG data should considerably enhance the sub-surface imaging of the whole area, enabling de-risking and greater
precision in selecting locations for the upcoming drilling program.
RECO conducted a second phase eFTG survey of 2814 Km2. The acquisition of this second survey is now complete, with preliminary results expected soon. The total eFTG survey area is ~5,000 km2. With the advantage of this new data, the company is focused on interpreting and integrating all sub-surface data, including well data, 2D seismic, eFTG, and geochemical data, and building an updated risk-weighted prospect portfolio, enabling the development of a systematic drilling program.
This is probably the most widely watched oil and gas exploration program in the world because of its huge potential. As such, it has also attracted the greenies and climate change hit squad but has the backing of the Namibia government, which rightfully believes it is entitled to the riches of its natural resources.
The stock did respond upward to this news, but I believe the bigger move up will start with the drilling of the next well. We have some time to accumulate some cheap stock.
dynaCERT Inc. TSX: DYA OTCQX: DYFSF
Recent Price - $0.26 Entry Price - $0.42
Opinion – buy on pullback
We bought back into dynaCERT Inc. (DYFSF:OTCMKTS;DYA:TSX) in May 2021 after Covid-19 lockdowns closed their production plant, and the stock was hammered down from around $1.00 to our $0.42 buy level.
However, the nonsense lockdowns in Canada continued into 2022, and the stock dropped further to a low of around $0.10 that year. It severely set the company back, as was the case with countless other companies. I believe DYA is back on track to see significant growth.
On May 26, they announced a purchase order for 3,000 HydraGEN™ units destined for Guyana. Further details are below. As a refresher, dynaCERT has the perfect solution to substantially reduce carbon and pollution output when burning fossil fuels.
Independent verified results by the PIT Group in 2017 showed significant decreases in emission levels between baseline and final measurements, of almost half for carbon monoxide (CO), total hydrocarbons (THC), and mono-nitrogen oxides (Nox). This graphic gives an excellent picture of emissions reduction. It is based on the results from the EMITEC tests, and the 2018 MAN TGX Tractor 12.4L used for the tests, which produces 338 kW of power running at 1800 rpm.
The results are from the truck traveling at 100 km/h for 15,000 km per month runs for 150 hours each month.
What is very important with these results is the huge reduction in NOx. Nitrogen oxides are the most relevant for air pollution. These gases contribute to the formation of smog and acid rain, as well as affecting tropospheric ozone. The reduction in particulate matter and unburned hydrocarbons (THC) is also exceptional. The dynaCERT units use distilled water to produce oxygen and hydrogen to introduce into the fuel system.
Basically, their units use AI by tracking a vehicle's performance and the driver's habit to optimize the amount and timing to inject oxygen and/or hydrogen into the fuel system to optimize performance. They currently have 23 patents on their technology. They started off installing units on diesel trucks and are now growing in mining, oil and gas, and diesel power generators.
They have also started a trial on a train locomotive in Portugal. Currently, dynaCERT's production plant can produce eight units per hour. A good dive into the company can be found in this youtube interview at dynaCERT's plant. I believe the company could do much better in North America, but it gets no government support because it does not fit the climate scam narrative, see my April 28 report.
Once you realize that climate change is really a government initiative supported by their green friends to spend more money and distribute more wealth to the elite, you will better understand. DynaCERT very, very significantly reduces pollution in fossil fuel-burning engines, but the climate scam is pushing electric and dissing fossil fuels, so dynaCERT does not fit their narrative.
Regardless, great technology cannot be stopped. DYA announced a purchase order for 3,000 Units of its HydraGEN™ Technology Units designed to reduce fuel consumption and reduce greenhouse gas emissions in diesel engines while tracking and creating future Carbon Credits. The newly announced purchase order of their HydraGEN™ Units in Bristol & Bristol Incorporated, an oil and gas logistics company located in Georgetown, Guyana.
The company has received full payment for an initial 93 HydraGEN™ HG-2 Units for delivery commencing immediately. A further 140 HydraGEN™ Units are expected to be delivered by July 30, 2023, and 750 units to be delivered by September 30, 2023. Further delivery of the remaining units beyond September 30, 2023, are to be mutually agreed upon by both Bristol & Bristol and dynaCERT.
The comments in the news release make some excellent points. Marvin Bristol, President & CEO of Bristol & Bristol, stated, "We are very pleased to have been given the opportunity to deploy dynaCERT's HydraGEN™ Technology in Guyana and surrounding regions. Our country has been responsive to new technologies that reduce carbon emissions and understand the importance of deploying today readily available solutions to reduce pollution. Not only can we benefit from dynaCERT's HydraGEN™ Technology Units designed to reduce fuel consumption and save on diesel costs, but also reduce greenhouse gasses, which is important to all our citizens and visitors."
Jim Payne, President and CEO of dynaCERT, stated, "dynaCERT is very pleased to be featuring our HydraGEN™ Technology to Bristol & Bristol. As new adopters of our technology, Bristol & Bristol are contributing to the worldwide imperatives and their associated local and global efforts to reduce greenhouse gas emissions of diesel engines. Bristol & Bristol have acknowledged that dynaCERT received the Smart Sustainable Company Rating Seal based on the results of rigorous analysis. This honorable distinction of dynaCERT and its HydraGEN™ technology as it applies to the United Nations Sustainable Development Goals and the United Nations Global Compact Principals has been evaluated as "high," the highest global ranking in its category. The extraordinary endorsement of dynaCERT allows its dealers to engage with customers with the assurance that the company's HydraGEN™ technology has a significant contribution to the Sustainable Development Goals of the United Nations."
The stock took a bit of a pop on the news, and I expect it might pull back some, so why do I have a buy on a pullback?
I see resistance levels at $0.30 and $0.40.
Northern Graphite TSXV:NGC OTC:NGPHF-OTCQB
Recent Price - $0.40 Entry Price $0.50
Opinion - buy
Batteries are going to require a lot of graphite, and Northern Graphite Corporation (NGC:TSX.V; NGPHF:OTCQX) is now the only significant graphite-producing company in North America and will become the third largest outside China when its Namibian operations come back online.
Northern started a new drill program at its Lac des Iles ("LDI") property on May 8, which is designed to explore previously untested areas of the property with the objective of extending the life of the mine. Located in Quebec, 180 kilometers northwest of Montreal, the Lac des Iles graphite mine has been in operation for over 20 years and was acquired by Northern in April 2022.
After a detailed review of historical studies and mine plans, the Company identified a number of target zones on the LDI property that include the northern extension of the pit, mineralization on the west side of the pit wall, and numerous electromagnetic conductors, some of which already have encouraging intersections from historical drilling.
The new drill 8,000 meters of drilling seeks to delineate additional mineralization at LDI to increase mine life and production capacity. This can also be helped along with the potential development of the company's Mousseau West deposit, located approximately 80 kilometers away. The stock has just tested 2-year lows and a support level.
This, along with drill news, should be a catalyst for the stock to move back up. There is resistance between $0.44 and $0.52 and I would not chase the stock higher, just try to buy at $0.40 and less.
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Important Disclosures:
1) Ron Struthers wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor/employee. He/she or members of his/her household own securities of: Recon Africa, dynaCERT, and Northern Graphite. His/her company has a financial relationship with the following companies: Northern Graphite is a sponsor of playstocks youtube channel
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All forecasts and recommendations are based on opinion. Markets change direction with consensus beliefs, which may change at any time and without notice. The author/publisher of this publication has taken every precaution to provide the most accurate information possible. The information & data were obtained from sources believed to be reliable, but because the information & data source are beyond the author's control, no representation or guarantee is made that it is complete or accurate. The reader accepts information on the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action. Because of the ever-changing nature of information & statistics the author/publisher strongly encourages the reader to communicate directly with the company and/or with their personal investment adviser to obtain up to date information. Past results are not necessarily indicative of future results. Any statements non-factual in nature constitute only current opinions, which are subject to change. The author/publisher may or may not have a position in the securities and/or options relating thereto, & may make purchases and/or sales of these securities relating thereto from time to time in the open market or otherwise. Neither the information, nor opinions expressed, shall be construed as a solicitation to buy or sell any stock, futures or options contract mentioned herein. The author/publisher of this letter is not a qualified financial adviser & is not acting as such in this publication
