Daily Commentary

MarketMinder’s View: The titular release isn’t insignificant but keep it in perspective. First, the proposal: “The release of 400 million barrels of oil would more than double the agency’s biggest prior release, when IEA member countries in 2022 put 182 million barrels on the market after Russia launched its full-scale invasion of Ukraine, the officials said.” But per the International Energy Agency (IEA), global daily oil consumption is approximately 105 million barrels per day—so the release amounts to around four days’ worth of oil use? That is why we doubt the coordinated move would be fundamentally game-changing. The article concludes with a look at two past precedents: the aforementioned 2022 release and the start of 1991’s Gulf War. 2022’s drawdown of strategic oil reserves did little to quell oil prices, “as traders saw the release as a sign the oil crisis was more serious than they had anticipated.” Some observers view 1991’s action as successful because “IEA members joined in releasing more oil from stockpiles in a plan they had put in place ahead of the invasion. Prices fell more than 20% on the first day of the U.S.-led assault.” But we think this shows how both weren’t fundamental gamechangers. What matters is overall supply and demand for the foreseeable (roughly 3 – 30-month) future—and all the uncertainty weighing on sentiment surrounding that. “IEA members hold 1.2 billion barrels in public stocks, plus another 600 million in mandatory commercial inventories, IEA Executive Director Fatih Birol said Monday. By rough calculation, that is around 124 days worth of lost supply from the Gulf.” Nobody can predict when the conflict will end, but markets are aware of the latest developments—and will likely start moving on from this soon, if they haven’t already begun to. Absent a major, unexpected escalation that disrupts activity more broadly, we doubt global oil shortages are looming. For more, see last week’s commentary, “On the Iran Conflict.”

MarketMinder’s View: Here is a sobering, uncomfortable stat: “Even with financial advisers helping Americans prepare both boomers and heirs for the largest wealth transfer in history, more disputes are arising, data show. Between 2020 and 2024, the number of probate and estate cases entering state courts rose about 32%, based on data from 39 states, according to the independent nonprofit National Center for State Courts.” Now, all this hype about a massive wealth transfer from Boomers to their GenX and Millennial heirs is quite wide of the mark, presuming extravagant lifestyles and late-life health care costs won’t eat a big chunk of Boomers’ fortunes and that they actually will choose to pass their surviving assets to their offspring rather than donate them to a favored cause. Presuming Boomers’ entire current net worth will belong to younger generations in a couple decades is lazy and wrong. But setting all that aside, as the article explains, inheritances are getting increasingly tricky with blended and non-traditional families, which can make it unclear who has the legal right to certain assets. For instance, “Stepchildren are not automatically considered legal heirs unless they are legally adopted, so they must be specifically named in estate planning documents or risk being unintentionally disinherited.” And in some states, if the stepparent outlives the biological, the deceased’s biological children won’t inherit—no matter what their biological parent wanted—unless the stepparent names them in their will. The legal process to distribute the deceased’s assets and settle their debts can be costly both in time and money—not to mention potentially hurt feelings and damaged personal relationships. As the conclusion here counsels, being proactive in updating documents and meeting with family members and loved ones to discuss plans and intentions can go a long way in smoothing out a touchy topic. For more, see Sam Lerner commentary, “Preparing For ‘Sudden Wealth’ Inheritances.”

MarketMinder’s View: With the four-year anniversary of Russia’s invasion of Ukraine and subsequent surge in energy prices due to supply worries fresh in observers’ minds, some wonder how central bankers will react to the conflict in the Middle East (e.g., will the European Central Bank and Bank of England hike interest rates to avoid 2022’s surge in inflation?). While central bankers’ ability to influence growth or energy prices is vastly overrated—we aren’t aware of ECB President Christine Lagarde’s ability to extract natural gas from Germany’s untapped shale reserves or steer oil tankers through the Strait of Hormuz—this article shows how today’s backdrop differs from 2022’s energy crisis. “At the time of Russia’s full-scale invasion of Ukraine, supply chains and labor markets had been massively disrupted by the Covid-19 pandemic and inflationary pressures were already high. In February 2022, the eurozone’s annual rate of inflation stood at 5.9%, then the highest on record. It went on to climb to a peak of 10.6% in October of that year. As the U.S. and Israel launched their attacks on Iran, the eurozone inflation rate stood at 1.9%, just below the ECB’s target.” Now, this piece misses a critical part of the inflation equation—namely, prices surged then as developed economies were working through the pandemic-driven spike in money supply—but we agree things are in better shape than a few years ago, especially on the energy supply front. Keeping a levelheaded perspective amid volatility is key to long-term investing success. For more, see last week’s commentary, “Stay Calm Amid the Middle East Storm.”